Published on August 16, 2013
Your Banking Partner Results Presentation 2Q13
Disclaimer This presentation may contain references and statements representing future expectations, plans of growth and future strategies of BI&P. These references and statements are based on the Bank’s assumptions and analysis and reflect the management’s beliefs, according to their experience, to the economic environment and to predictable market conditions. As there may be various factors out of the Bank’s control, there may be significant differences between the real results and the expectations and declarations herewith eventually anticipated. Those risks and uncertainties include, but are not limited to our ability to perceive the dimension of the Brazilian and global economic aspect, banking development, financial market conditions, competitive, government and technological aspects that may influence both the operations of BI&P as the market and its products. Therefore, we recommend the reading of the documents and financial statements available at the CVM website (www.cvm.gov.br) and at our Investor Relations page in the internet (www.bip.b.br/ir) and the making of your own appraisal. 2
Highlights 3 In May, we concluded the acquisition of Voga with the new investment bank team already integrated with our operations. Announcement of the Merger with Banco Intercap S.A. in June. Expanded Credit Portfolio totaled R$3.2 billion, +5.9% in the quarter and +15.0% in 12 months, 47.6% share of Emerging Companies segment and 51.4% share of Corporate segment. Loans rated between AA and B reached 85.1% of credit portfolio in 2Q13, compared to 81.3% in 1Q13 and 79.2% in 2Q12. We maintained our discipline of building a diversified and top quality portfolio: 98.2% of the loans granted during the quarter were rated between AA and B. Managerial Expense with Allowance for Loan Losses (ALL) in the quarter was 1.1% (annualized) of the expanded credit portfolio. There were no fresh provisions relating to the credit portfolio prior to April 2011 and we still have an additional allowance (not allocated) of R$40.9 million. Income from Services Rendered,+33.9% in 2Q13 and +26.2% in 1H13 in relation to 1H12, totaled R$8.6 million in the quarter and R$15.1 million in 1H13. With the recent integration of the investment banking team, we expect this revenue to continue growing over the coming quarters. Adjusted Revenue from Credit Operations and Agro Bonds (CPR), which reflects the bank’s core business, +14.0% in the quarter, from R$60.7 million in 1Q13 to R$69.3 million in 2Q13. The numbers from 2Q13 were extraordinarily impacted by losses resulting from high market volatility and the effect of the discontinuance of hedge accounting designation, which are not related to credit activities, generating a negative result of R$20.6 million. Considering the conservative risk policy adopted by the Bank, we believe that an adequate remuneration for our capital will come from gains of scale from the credit portfolio and revenues from services as a result of the strategy and structure devised by the current management.
Banco BI&P’s Vision 4 Investment Thesis Our Vision is of being an innovative bank, marked by excellence... In corporate credit for the emerging and corporate companies through a broad range of financial products and services in order to conduct recurring operations among our client base through cross selling in order to meet all their financial needs With a strong investment banking team operating in the growing fixed-income, long-term funding, M&A and structured operations market. Brazil is one of the countries in the world with the highest concentration of banks, with significant demand from companies for quality banking relationships, especially in the segments where we operate. The financial sector is going through an historic turning point, with the emergence of a growing domestic fixed income market where more and more companies will seek long-term funding for their investments. Brazil remains an attractive market for new strategic players from the international financial markets and BI&P will be prepared to position itself as an excellent partner, in line with the history of mergers of our controlling shareholders.
Strategic Restructuring | Step1 Repositioning of the Core Business 5 New appraisal and remuneration structure Work climate surveys conducted Investment in young talents: Trainee Program Human Resources Creation of Business Intelligence Unit and Sales Force tool 85% of the officers replaced Increase of the visit and portfolio volumes per officer Commercial and Credit team integration: new processes Commercial Development of products and derivatives team Launch of new products, notably the derivatives desk Complete integration with the commercial area Target for revenue from services: to account for 23-30% of BI&P’s total revenues in 2-3 years Products and Corporate Finance New head for the area Significant investments in infrastructure and equipment New business intelligence (COGNOS – BI) and CRM (Salesforce.com) platforms in deployment stage Improvements in Control Procedures Pricing of products for clients in domestic and international markets: interest in R$ and US$, futures and options for interest, currencies and commodities, inflation indices and spot FX Management of proprietary positions: domestic and international markets Treasury and Proprietary positions
Strategic Restructuring | Step 2 Focus on strengthening corporate finance activities, gains of scale and diversification of our funding base 6 December 2012 Ceagro joint venture to generate agro bonds (CPR): has already generated assets worth R$220 million for the bank JV to generate assets February 2013 Acquisition of Voga (investment banking), incorporated in May 2013, with 39 ongoing mandates and the distribution team strengthened Acquisition of IB Team March 2013 Additional allowance for loan losses, amounting to R$111 million, for loans granted before April 2011, settling the obligations under the previous credit policy Additional ALL March 2013 Capital increase of R$90 million, subscribed by Warburg Pincus, controlling shareholders and the market Capital Increase June 2013 Acquisition of Banco Intercap, with Afonso Hennel (Grupo Semp Toshiba) and Roberto Resende Barbosa (NovAmerica/Cosan) joining the board of directors and the controlling group Acquisition of Banco Intercap
Acquisition of Banco Intercap Equity and Control Group Incorporation of Equity from June 30, 2013, nearly R$116 million Shareholders of two strong groups will participate on BI&P’s controlling group: Afonso Hennel (Grupo Semp) Roberto de Rezende Barbosa (NovAmerica / Cosan) Credit Portfolio Maturity of nearly 18 months 84.5% of the credit portfolio were classified between AA-B Basel index (without FX exposure) in June 2013: 19.2% 7 10.9% 73.4% 6.9% 8.8%2Q12 AA A B C D - H 84.3%
Association with Banco Intercap Corporate Governance Structure Current practices will be maintained Intercap shareholders will be entitled as 2 members of the Board of Directors Afonso Hennel will be appointed Vice-Chairman of the Board of Directors Afonso Hennel and Roberto de Rezende Barbosa will join the controlling group of Banco BI&P Protection and Indemnification Mechanisms The Agreement sets forth mechanisms for protection and indemnification between Banco BI&P and the Shareholders of Banco Intercap with regard to loan losses and allowance for loan losses (ALL) above certain limits, not cumulative: • Year 1: R$6 million • Year 2: R$4.5 million • Years 3, 4 and 5: R$3 million per year 8
2,759 2,807 2,991 3,068 3,048 3,229 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 R$million Loans and Financing in Real Trade Finance Guarantees Issued (L/G and L/C) Agricultural Bonds (CPR, CDA/WA and CDCA) Private Credit Bonds (PN and Debentures) Expanded Credit Portfolio +5.9% in 2Q13 in credits with higher quality... 9
1,422 1,253 1,200 1,445 1,538 2Q12 3Q12 4Q12 1Q13 2Q13 R$million Emerging Companies 1,334 1,682 1,820 1,567 1,659 2Q12 3Q12 4Q12 1Q13 2Q13 R$million Corporate Client Segmentation ...maintaining the same share between Corporate and Emerging Companies in the credit portfolio... 10 Note: Other Credits includes Consumer Credit Vehicles, Acquired Loans and Non-Operating Asset Sales Financing. Migration of clients from Emerging Companies to Corporate = ~R$200mn as of June 30, 2012 and ~R$260mn as of Sept. 30, 2012 Annual revenues from R$40mn to R$400mn Annual revenues of between R$400mn and R$2bn Average new operations exposure per client | R$ million 2Q13 1Q13 Corporate 9.2 10.8 Emerging Companies 2.2 2.3 47.4% 47.6% 51.4% 51.4% 1.2% 1.0% 1Q13 2Q13 Emerging Companies Corporate Others
Expanded Credit Portfolio Development ...maintaining the focus on higher quality assets... 11 517 687 728 589 773 2Q12 3Q12 4Q12 1Q13 2Q13 R$million New Transactions 3,048 3,229773(510) (76) (6) 1Q13 Amortized Credits Credit Exits Write offs New Operations 2Q13 R$million 98,7% of the new transactions in the last 12 months are classified between AA and B.
Loans 39.1% Credit Assignments 12.5% Confirming 0.7% Discount Receivables 0.4% NCE 1.6% CCE 1.0% CCBI 1.0% Expanded Credit Portfolio ...and increasing the new products share in the portfolio... 12 Loans & Discounts in Real 56% Trade Finance 16% BNDES Onlendings 9% Guarantees Issued 6% Agricultural Bonds 10% Private Credit Bonds 1.1% Other 2% 2Q12 Loans & Discounts in Real 52% Trade Finance 13% BNDES Onlendings 11% Guarantees Issued 6% Agricultural Bonds 15% Private Credit Bonds 1.2% Other 2% 2Q13 Loans 31.5% Credit Assignments 8.8% Confirming 0.0% Discount Receivables 0.3% NCE 5.7% CCE 3.4% CCBI 1.9%
371 529 482 403 250 2Q12 3Q12 4Q12 1Q13 2Q13 R$million Large Corporate Ecosystem * Receivables drawn on Clients Série4 267 307 327 371 478 2Q12 3Q12 4Q12 1Q13 2Q13 R$million Agricultural Bonds CPR Warrant (CDA/WA) CDCA Developing Franchise Value ...in specific niches... 13 60 94 92 90 106 2Q12 3Q12 4Q12 1Q13 2Q13 R$million Fixed Income Bonds Debentures Real Estate Credit Bank Notes * Acquisition and/or assignment of receivables originated by our customers and Transactions with receivables of suppliers drawn on our clients (Confirming). The expertise development in certain niches and structures that create competitive advantages allows profitability increase through fees.
1.3% 1.3% 1.5% 1.6% 1.6% 1.7% 1.8% 2.0% 2.4% 2.9% 3.6% 3.6% 3.6% 4.3% 5.6% 9.9% 12.2% 15.8% 23.3% Commerce - Retail & Wholesale Plastic and rubber Individuals Financial Services Electronics Financial institutions Machinery and Equipments Power Generation & Distribution Education Textile, apparel & Leather Metal Industry Chemical & Pharmaceutical Oil & Biofuel Transportation & Logistics Automotive Other Industry Construction Food & Beverage Agribusiness 2Q13 1.3% 1.8% 2.3% 2.4% 2.5% 2.8% 3.7% 3.7% 4.2% 4.3% 4.6% 5.0% 5.2% 9.7% 11.9% 15.5% 19.0% Electronics Commerce - Retail & Wholesale Financial institutions Power Generation & Distribution Education Textile, apparel & Leather Metal Industry Oil & Biofuel Automotive Pulp & Paper Financial Services Chemical & Pharmaceutical Transportation & Logistics Other Industry Construction Food & Beverage Agribusiness 2Q12 Credit Portfolio ...with relevant exposure in agribusiness... 14 * Other industries with less than 1.4% of share.
Credit Portfolio ...and short term maturity profile maintained. 15 2Q12 2Q13 Top 10 18% 11 - 60 largest 32% 61 - 160 largest 25% Other 25% Client Concentration Top 10 15% 11 - 60 largest 32% 61 - 160 largest 27% Other 26% Client Concentration Up to 90 days 39% 91 to 180 days 19% 181 to 360 days 15% +360 days 27% Maturity Up to 90 days 32% 91 to 180 days 20% 181 to 360 days 16%+360 days 32% Maturity
Credit Portfolio Quality 98.2% of loans granted in the quarter were rated from AA to B 16 Credits rated between D and H totaled R$279,8 million at the end of 2Q13: − R$215.9 million (77% o Credit Portfolio between D and H) in normal payment course; − Only R$63.9 million overdue +60 days; and − 76.6% covered (96.4% in the 2Q13).6% 2% 3% 37% 40% 42% 34% 36% 38% 16% 13% 7% 8% 9% 11% 2Q12 1Q13 2Q13 AA A B C D - H 81.7% 78.2% 76.2% AA 3% AA 2% AA 3% A 42% A 48% A 16% B 38% B 44% B 12% C 7% C 3% C 23%D - H 11% D - H 2% D - H 46% 2Q13 * New Credit Policy: adopted since April 2011. New Credit Policy * Clients Loan Portfolio Previous Credit Policy Clients Loan Portfolio
Operating Performance and Profitability 17 Revenues from Credit Operations and CPR adjusted 2Q13 1Q13 2Q13/1Q13 2Q12 2Q13/2Q12 (A) Revenues from Credit Operations and agro bonds (CPR) 60.0 58.6 2.4% 73.7 -18.6% (B) Recoveries of written-of operations 1.7 4.3 -60.2% 8.9 -80.7% (C) Discounts granted on settled operations (11.0) (6.5) 69.2% (9.5) 15.8% Revenues from Credit Operations and CPR adjusted (A-B-C) 69.3 60.7 14.0% 74.3 -6.9% 5.5% 5.8% 5.3% 5.4% 3.2% 4.8% 4.5% 4.4% 4.1% 4.1% 2Q12 3Q12 4Q12 1Q13 2Q13 Net Interest Margin (NIM) NIM without effects of discontinuance of designation of hedge accounting and discounts * Managerial NIM with Clients * * Includes revenues from agro bonds (CPR)
Credit Portfolio Quality 18 * New Credit Policy: adopted since April 2011. 1 Managerial Expense with Allowance for Loan Losses (ALL) = ALL expenses + Discounts granted upon settlement of loans – Revenues from recovery of loans written off. 6.4% 5.5% 4.5% 8.5% 8.2% 2.6% 1.9% 1.2% 2.2% 2.1% 0.2% 0.3% 0.1% 0.4% 0.5% 2Q12 3Q12 4Q12 1Q13 2Q13 NPL 90 days / Credit Portfolio Clients Previous Credit Policy Total Clients New Credit Policy * 9.0% 7.5% 4.9% 9.4% 10.6% 3.6% 3.1% 1.5% 2.3% 2.6% 0.2% 1.1% 0.4% 0.4% 0.5% 2Q12 3Q12 4Q12 1Q13 2Q13 NPL 60 days / Credit Portfolio Clients Previous Credit Policy Total Clients New Credit Policy * Managerial Expense with Allowance for Loan Losses (ALL) 1 in 2Q13, annualized, was 1.1% of the Expanded Credit Portfolio
Time deposits (CDB) 26% Insured Time Deposits (DPGE) 30% LCA 16% LF and LCI 2% Interbank & Demand Deposits 3% Onlendings 11% Foreign Borrowings 12% 2Q13 2,755 2,936 2,999 3,170 3,142 2Q12 3Q12 4Q12 1Q13 2Q13 R$million in Local Currency in Foreign Currency Funding Product mix helps with cost reduction 19 Time deposits (CDB) 27% Insured Time Deposits (DPGE) 28% LCA 12% LF and LCI 1% Interbank & Demand Deposits 6% Onlendings 10% Foreign Borrowings 16% 2Q12
Operating Performance and Profitability 20 n.r. = not representative 2.4 3.1 3.6 2T12 3T12 4T12 1T13 2T13 R$million Net Profit 1.7 2.2 2.5 2T12 3T12 4T12 1T13 2T13 Return on Average Equity (ROAE) % -91,4 n.r.-20,6 n.r. The numbers from 2Q13 were extraordinarily impacted by losses resulting from: high market volatility; effects of the discontinuance of hedge accounting designation.
582.4 587.6 587.2 498.4 569.6 686.0 2Q12 3Q12 4Q12 1Q13 2Q13 2Q13* R$million Shareholders’ Equity 17.0% 15.8% 14.9% 14.2% 14.6% 16.0% 2Q12 3Q12 4Q12 1Q13 2Q13 2Q13* Basel Index (Tier I) 4.8x 5.1x 5.2x 6.1x 5.7x 5.2x 2Q12 3Q12 4Q12 1Q13 2Q13 2Q13* Leverage Expanded Credit Portfolio/ Equity Capital Structure and Ratings 21 Agency Rating Last Report Standard & Poor’s Global: BB/Negative/ B National: brA+/Negative/brA-1 Aug/13 Moody’s Global: Ba3/Negative/Not Prime National: A2.br/Negative/BR-2 Jul/13 Fitch Ratings National: BBB/Stable/F3 Jul/13 RiskBank Index: 9.92 Low Risk Short Term Jul/13 BI&P+ Intercap BI&P+ Intercap BI&P+ Intercap * Includes the capital increase of R$90,0 million approved by the board of directors on July 19, 2013 and simulates the conclusion of the merger with Banco Intercap.
Challenges 22 Scale up through credit portfolio growth and higher leverageGain of Scale Appropriate mix between Emerging Companies and Corporate segments (50%-50%) Balanced Risk Profile Development of derivatives and products desk and investment banking activities: structuring of fixed income and M&A/financial advisory operations Investment Banking Appropriate ROE (mid-teens): still depends of scale gains/profitability and increasing of fees revenues
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