BANCO SANTANDER BANESPA S.A J · 2007. 8. 30. · Payroll loans and real estate financing were the main highlights in the area of loans to individuals, having accumulated variations

FINANCIAL STATEMENTS

BANCO SANTANDER BANESPA S.A. JUNE 30, 2007

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Banco Santander Banespa S.A. – Consolidated Management Report

Dear shareholders,

We present the Management Report and the

Individual and Consolidated Financial Statements of

Banco Santander Banespa for the first half of 2007,

prepared in accordance with Brazilian accounting

practices, established by Corporate Law, associated

with the standards of the National Monetary Council

(CMN), Central Bank of Brazil (Bacen), and Brazilian

Securities Commission (CVM).

Economic Scenario

In 2007 the Brazilian economy maintained its growth

pace. In the first four months of the year, the retail

sales volume rose by approximately 9.2%

(interannual variation). In its turn, industrial production

rose by a more modest rate, although still significant,

in the first five months of the year: 4.43% (interannual

variation). We should point out the recovery of the

agricultural sector, which had impacts on the pesticide

and agricultural machinery sectors, as well as on the

income of certain regions, notably the south of the

country.

During this period inflation remained at low levels.

Only in June the IPCA presented a slight acceleration

in the accumulated 12-month figure, rising from

3.18% to 3.69%, mainly due to a shock in food prices.

Inflation maintains an upward trend, although we

expect that the IPCA will remain below the 4.5%

target (as in last year). As a result, the continuous

reduction of interest rates tends to create a dynamics

increasingly favorable to consumption, investment,

credit and fund raising.

The favorable economic scenario can also be seen in

other indicators. In addition to the reduction of the

basic interest rate, from 13.25% per year in

December 2006 to 11.5% per year in July 2007 (the

lowest rate since the implementation of the inflation

target regime), the growth of income and employment

levels, the readjustment of the minimum wage, and

the appreciation of Brazilian assets (which indicate

confidence in the country’s future), contribute to

maintain the favorable economic scenario. The

country risk, which reached 280 points in May 2006,

closed June 2007 at 160 points.

The country’s external accounts are also positive, as

a result of the commodity price favorable scenario.

Compared with the same half in 2006, exports rose by

19.9% and imports by 26.6%, resulting in a 5.7%

increase in the trade surplus (US$ 20.7 billion). The

appreciation of the real makes it easier to increase

imports, which helps to contain inflation, lower the

price of imported capital goods and ensure a more

robust growth in real wages.

The macroeconomic environment characterized by

low volatility allowed the continued advance in total

loans, which reached 32% of GDP in May 2007,

having risen 20.2% compared with the same month in

2006. The volume of corporate loans posted a 21.3%

variation in the same comparison, and was even

surpassed by the performance of loans to individuals,

which accumulated an impressive 25.8% increase in

the same period.

Payroll loans and real estate financing were the main

highlights in the area of loans to individuals, having

accumulated variations in their portfolios of 45.8%

and 68.7%, respectively, in relation to the same

month in 2006.

Corporate Restructuring

In August 2006, the Extraordinary Stockholders’

Meeting approved the legal merger of Banco

Santander Brasil S.A. (BSB), Banco Santander S.A.

(BSSA) and Banco do Estado de São Paulo S.A. –

Banespa (Banespa) into Banco Santander Banespa

S.A. (formerly Banco Santander Meridional S.A.). The

stockholders of BSB, BSSA and Banespa (Merged

Entities) received shares issued by Banco Santander

Banespa S.A. and the Merged Entities were wound

up, with Banco Santander Banespa S.A. becoming

the universal successor of the Merged Entities to all

their assets, rights and obligations, and becoming the

lead institution of the financial and non-financial group

with Bacen.

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In December 2006, the legal merger process was

concluded with the approval of the corporate acts by

BACEN and its filing with the Division of Corporations

of São Paulo State. In March 2007, the Brazilian

Securities Commission (CVM) approved the going

public process of Banco Santander Banespa S.A.

Complementing the Bank’s corporate restructuring

process, the Extraordinary Stockholders’ Meeting held

on November 30, 2006 approved the “Agreement of

Merger of Santander Banespa Companhia de

Arrendamento Mercantil into Santander Brasil

Arrendamento Mercantil S.A.", entered into on

November 13, 2006.

On March 30, 2007, the Extraordinary Stockholders’

Meetings of Santander Participações e

Empreendimentos S.A. and Santander Securitizadora

de Créditos Financeiros approved the “Agreement of

Merger of Santander Brasil Participações e

Empreendimentos S.A. into Santander Companhia

Securitizadora de Créditos Financeiros", entered into

on March 29, 2007. On the same date, the change of

its name from Santander Securitizadora de Créditos

Financeiros to Santander Participações e Serviços

S.A. was also approved.

The corporate restructuring aimed to unify the brand,

improve the business strategy focus on customers,

users, business partners and the market, and

streamline operations. From the legal viewpoint, it

simplified the corporate structure, with reduction of

administrative costs, especially those related to legal

and regulatory obligations. From the accounting

standpoint, it allowed the Group to improve its equity

structure.

Change of Corporate Name

On April 30, 2007, the Extraordinary Stockholders’

Meeting approved the change of name from Banco

Santander Banespa S.A. to Banco Santander S.A.,

process approved by Bacen and pending registration

with the Division of Corporations of São Paulo State.

First Half of 2007 Performance

1. Results

As a result of the aforementioned corporate

restructuring and in accordance with prevailing

legislation, the consolidated statement of income for

the six-month period ended June 30, 2007 of Banco

Santander Banespa is being presented comparatively

with the data for the six-month period ended June 30,

2006 of the merging entity and, therefore, the analysis

of income evolution is inadequate.

Santander Banespa ended the first half of 2007 with a

net income of R$965 million. Financial

income/expenses (before expense on allowance for

loan losses) amounted to R$ 4,211 million.

Income from lending and leasing operations totaled

R$3,770 million in the six-month period.

Income from services rendered was R$ 1,800 million

in the first half of 2007, of which R$484 million

referred to lending operation rates, R$318 million to

bank account services, and R$315 million to fund

management services.

Personnel expenses and other administrative

expenses amounted to R$2,291 million in the six-

month period.

The allowance for loan losses represented 4.1% of

the total credit portfolio as of June 30, 2007.

Expenses on allowance for loan losses in the first half

of 2007 totaled R$922 million. Credits classified as

AA to C represented 94.3% of the total credit portfolio

in June 2007

The annualized returns on average stockholders’

equity and average assets were 22.7% and 1.8%,

respectively, in the first half of 2007.

2. Assets and Liabilities

Total consolidated assets grew by 15.6% in relation to

December 31, 2006, totaling R$117,963 million. Of

this total, R$39,691 is represented by lending

operations, R$21,336 million by securities and

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derivatives, mainly federal government securities; and

R$27,301 million by interbank investments.

Santander Banespa had R$722 million in securities

classified as “held-to-maturity securities” and has the

financial capacity and intention to hold them to

maturity.

Lending operations totaled R$39,691 million,

including R$13,974 million in operations with

individuals.

Total funding, including managed funds, reached

R$130,560 million, including R$34,337 million in

deposits and R$52,118 million in managed

investment funds.

Stockholders’ Equity

Stockholders’ equity, as of June 30, 2007, totaled

R$9,960 million, an increase of 24.9% compared with

December 31, 2006, mainly impacted by the net

income of R$965 million. The Basel Agreement ratio,

which is calculated on a consolidated basis and takes

into account the perpetual bonds and subordinated

certificates of bank deposit, reached 16.3%, higher

than the 11% minimum required by Bacen.

On April 25, 2007, the Bank’s Board of Directors and

Executive Board approved the proposal to increase

capital by R$1.5 billion, with the issuance of

9,612,358 thousand shares (5,142,958 thousand

common shares and 4,469,400 thousand preferred

shares).

On June 29, 2007, the Bank’ s Board of Directors and

Executive Board approved the distribution of

dividends, based on the Reserve for Dividend

Equalization, totaling R$522 million (ON R$3.7553 -

PN R$4.1308, in reais per lot of 1,000 shares) and the

payment of interest on capital, calculated in the first

half of 2007, in the amount of R$263 million (ON

R$1.8929 - PN R$2.0822, in reais per lot of 1,000

shares and ON R$1.6089 - PN R$1.7698, net of

income tax, in reais per lot of 1,000 shares), which will

be considered in the calculation of the mandatory

minimum dividend for 2007.

Business Highlights in the First Half of 2007

Santander Banespa closed the first half of 2007

posting positive results and consolidated its image as

a strong and innovative Bank in maintaining the

loyalty of its customers, demonstrated by the increase

in the market share of loan products, specially vehicle

financing, credit card and payroll loans, which

increased 20 bps, 180 bps and 60 bps, respectively,

in twelve months. The Bank also increased its market

share in total unrestricted credit in the same period by

30 bps and 50 bps in investment funds.

Santander Banespa’s business strategy has the

following objectives:

1. Increase the number of customers in the Individual

segment.

2. Improve the program of relationship with São Paulo

State civil servants.

3. Boost the Business (small and medium companies)

and Companies businesses, consolidating these

segments to leverage sustainable growth.

4. Globalize the Wholesale Bank, taking advantage

of the Group’s relationship models abroad.

5. Position the brand so as to reflect the attributes of

the bank’s innovation and growth strategy.

Santander Banespa has a portfolio of 7.8 million

customers in Brazil, is one of the leading financial

institutions in São Paulo State, and has expanded its

operations in Rio de Janeiro State, after the

acquisition of the municipal government’s payroll.

Santander Banespa has a distribution network of

2,042 points of sale and 7,464 ATMs.

Products

For this new phase of expansion, Santander Banespa

has taken an aggressive stance, notably with its

Santander Free (a credit card launched in June 2007,

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free from annual charges for the main card holder and

for five additional users, as long as the main card is

used at least once a month), Santander Light (a credit

card with a low interest rate and up to double the

limit), Santander - Super Casa (a real estate financing

with fixed installments over 20 years) and the Fundos

Multi Retorno, which guarantee Santander Banespa a

leading position in the management of retail multi-

market funds, according to data released by the

National Association of Investment Banks (Anbid).

Rating Agencies

Santander Banespa is rated by international rating

agencies and the rating received reflects the

operating performance and high quality of its

management.

Long Term Short

Term Fitch Ratings Support 3

National Scale

AAA (BRA) F1+(BRA)

Local Currency BBB F3

Foreign Currency BBB- F3

Standard & Poor’s

National Scale brAA+ brA-1

Local Currency BB+ B

Foreign Currency BB+ B

People

For Santander Banespa, its team of professionals is

one of its most valuable assets and its competitive

differential. As of June 30, 2007, the Bank had 22,882

professionals, being fully committed to maintaining an

efficient and dedicated team. For this purpose, the

Bank has internal programs that offer opportunities for

professional growth, specific programs for interns and

Schools that promote continued education,

specifically focused on the need to qualify

professionals in the business.

On June 23, 2007, Banco Santander’s General

Stockholders’ Meeting in Spain approved the

distribution of 100 Santander shares to all the Group’s

employees, in celebration of its anniversary of 150

years, in recognition of the employees’ efforts,

associating them to the organization’s future. The

distribution of shares to employees will be effective on

August 6.

Subsidiaries

Some data from the companies’ balance sheets are

provided below.

As of June 30, 2007, Santander Brasil Arrendamento

Mercantil had total assets of R$3,985 million, R$349

million in leasing operations, and R$505 million in

stockholders’ equity. It reported a net income of R$34

million for the first half of 2007.

As of June 30, 2007, Banespa S.A. Corretora de

Câmbio e Títulos had total assets of R$291 million

and stockholders’ equity of R$81 million. Its net

income for the first half of 2007 was R$28 million.

As of June 30, 2007, Santander Brasil S.A. Corretora

de Títulos e Valores Mobiliários had total assets of

R$372 million and stockholders’ equity of R$105

million. Its net income for the first half of 2007 was

R$11 million.

As of June 30, 2007, Santander Asset Management

Distribuidora de Títulos e Valores Mobiliários Ltda.

had total assets of R$95 million, stockholders’ equity

of R$79 million, and managed funds of R$49.736

million. Its net income for the first half of 2007 was

R$10 million.

Santander S.A. Serviços Técnicos, Administrativos e

de Corretagem de Seguros reported an income of

R$19 million for the first half of 2007. Total assets and

stockholders’ equity reached R$187 million and R$67

million, respectively.

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Social Responsibility

All over the world, the Santander Group’s main focus

is the investment in education, with emphasis on

higher education and academic research, as it

believes that this is the best way to guarantee social

and economic progress. Investments in education are

concentrated in bilateral agreements of the Universia

Network, which includes 985 partnering universities,

in the 11 Ibero-American countries where it is present.

An integrating element of that Network is the

Universia portal, which makes content and service

available to the academic sector, free of charge.

The Brazilian arm of the Network, Universia Brasil

(www.universia.com.br), has experienced constant

growth and consolidated its innovative position with

higher education institutions and young students.

Currently, Universia Brasil has partnership with 245

higher education institutions and has reached 1.9

million registered users and a monthly average of 900

thousand navigators (Source: Nilsen / NetRatings).

Another successful initiative of Santander Banespa is

the Partners in Action Program, which semiannually

selects education projects benefiting children,

teenagers, and college students, always in

partnership with non-governmental organizations in

the south and southest of Brazil. Santander Banespa

also sponsors projects in the areas of culture, health,

community development and sports, among others.

Operating Risks and the Sarbanes-Oxley Act

For Santander Banespa, the system for management

and control of operating risks is a strategic and

competitive factor. Thus, since 2001 it maintains a

structure run by the Vice-presidency of Operating

Risks, a specific and independent corporate area

intended to manage and control operating risks and

achieve internal control system efficiency.

This Vice-presidency contributes and is responsible

for preparing and releasing policies, through the

implementation of procedures, training and

methodologies that are part of this system, allowing

employees to efficiently identify, evaluate, monitor,

manage and control the operating risks identified in

their daily routines and ensure compliance with,

among other issues, the requirements contained in

CMN Resolutions 2554/98 and 3380/06, SUSEP

Circular 249/04 and the Sarbanes-Oxley Act - SOX.

Management, in line with its Corporate Governance

policy, recognizes, participates in and shares the

responsibility for the continued improvement of this

structure in order to ensure the fulfillment of the

defined objectives and provide security and quality to

customers, shareholders and parties related to

Santander Banespa.

This structure, with its methodologies and views,

along with the main results obtained, is commented in

our annual and social reports for 2005 and 2006,

available on the site www.santander.com.br.

In the first half of this year we point out the creation of

the Operating Committee for Operating Risks, which

aims to ensure the implementation of the guidelines

established by the Executive Committee for Operating

Risks, as well as the awarding to Santander, on

February 28, 2007, of the full certification of its

internal control model, in compliance with section 404

of SOX Act, for the year ended December 31, 2006,

in which no material or significant issues were

identified. This certification complements Grupo

Santander Central Hispano’s certification, formalized

in document 20-F filed with the SEC - Securities and

Exchange Commission, on June 29, 2007.

Other Information

It is Santander Banespa’s policy to restrict the

services provided by its independent auditors, so as

to preserve the auditor’s independence and objectivity

in accordance with Brazilian and international

standards. In compliance with CVM Instruction

381/03, the Bank informs that in the first half of 2007 it

did not contract non-audit services from Deloitte

Touche Tohmatsu Auditores Independentes.

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Acknowledgments

The Management of Santander Banespa thanks its

customers and stockholders for their trust and its

employees for their efforts and dedication that have

made the results possible.

São Paulo, July 25, 2007.

Board of Directors

Executive Board

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(Convenience Translation into English from the Original Previously Issued in Portuguese) INDEPENDENT AUDITORS’ REPORT To the Management and Stockholders of Banco Santander Banespa S.A. (formerly Banco Santander Meridional S.A.) São Paulo - SP

1. We have audited the accompanying individual (Bank) and consolidated balance sheets of Banco Santander Banespa S.A. (formerly Banco Santander Meridional S.A.) and subsidiaries (consolidated) as of June 30, 2007 and 2006, and the related statements of income, changes in stockholders’ equity, and changes in financial position for the six-month periods then ended, all expressed in Brazilian reais and prepared under the responsibility of the Bank’s management. Our responsibility is to express an opinion on these financial statements.

2. Our audits were conducted in accordance with auditing standards in Brazil and comprised: (a) planning of the work, taking into consideration the significance of the balances, volume of transactions, and the accounting and internal control systems of the Bank and its subsidiaries; (b) checking, on a test basis, the evidence and records that support the amounts and accounting information disclosed; and (c) evaluating the significant accounting practices and estimates adopted by Management, as well as the presentation of the financial statements taken as a whole.

3. In our opinion, the financial statements referred to in paragraph 1 present fairly, in all material respects, the individual and consolidated financial positions of Banco Santander Banespa S.A. and subsidiaries as of June 30, 2007 and 2006, and the results of their operations, the changes in stockholders’ equity, and the changes in their financial positions for the six-month periods then ended in conformity with Brazilian accounting practices.

4. As mentioned in Note 2, Banco Santander Banespa S.A. is a result of the mergers of Banco Santander Brasil S.A. (BSB), Banco Santander S.A. (BSSA) and Banco do Estado de São Paulo S.A. - BANESPA (Banespa) into Banco Santander Meridional S.A., occurred based on the account balances as of June 30, 2006, approved by the Central Bank of Brazil and the Brazilian Securities Commission (CVM).

5. The accompanying financial statements have been translated into English for the convenience of readers outside Brazil.

São Paulo, July 25, 2007 DELOITTE TOUCHE TOHMATSU Francisco A.M. Sant’Anna Auditores Independentes Engagement Partner

(Convenience Translation into English from the Original Previously Issued in Portuguese)

BANCO SANTANDER BANESPA S.A. (formerly Banco Santander Meridional S.A.)BALANCE SHEETS AS OF JUNE 30, 2007 AND 2006(In thousands of Brazilian reais - R$)

2007 2006 2007 2006

CURRENT ASSETS 84,312,917 2,011,038 83,631,472 2,011,038 Cash 921,849 81,016 922,607 81,016 Interbank investments (Note 5) 26,683,396 37,019 26,655,450 37,019

Money market investments 24,881,625 36,997 24,881,625 36,997 Interbank deposits 1,011,017 22 983,071 22 Foreign currency investments 790,754 - 790,754 -

Securities and Derivatives (Note 6) 15,778,091 156,493 14,545,717 156,493 Own portfolio 7,275,263 5,197 7,398,847 5,197 Subject to resale commitments 1,634,989 69,160 232,085 69,160 Derivatives (Note 34) 2,172,205 20,758 2,170,022 20,758 Linked to Central Bank of Brazil 3,224,236 - 3,224,236 - Privatization certificates 17,938 - 17,938 - Linked to guarantees 1,453,460 61,378 1,502,589 61,378

Interbank accounts (Note 7) 5,446,690 261,981 5,446,690 261,981 Payments and receipts pending settlement 322,732 35,967 322,732 35,967 Restricted deposits: Central Bank of Brazil 5,035,091 216,819 5,035,091 216,819 National Housing System 84,510 6,134 84,510 6,134 Correspondents 4,357 3,061 4,357 3,061

Interbranch accounts 271 98 271 98 Internal transfers of funds 271 98 271 98

Lending operations (Note 8) 19,457,983 1,249,962 19,447,272 1,249,962 Public sector 143,538 2,505 140,934 2,505 Private sector 19,567,004 1,267,901 19,557,989 1,267,901 Allowance for loan losses (252,559) (20,444) (251,651) (20,444)

Leasing operations (Note 8) 13,973 - 212,146 - Private sector 13,973 - 216,053 - Allowance for doubtful lease receivables - - (3,907) -

Other receivables 15,699,809 216,991 16,090,323 216,991 Receivables for guarantees honored 359 - 359 - Foreign exchange portfolio (Note 9) 12,818,810 1,085 12,818,810 1,085 Income receivable 154,041 18,607 157,767 18,607 Trading account (Note 10) 508,114 2,163 851,807 2,163 Tax credits (Note 11) 566,694 48,829 577,825 48,829 Other (Note 12) 1,664,914 147,059 1,696,961 147,059 Allowance for losses on other receivables (Note 8) (13,123) (752) (13,206) (752)

Other assets 310,855 7,478 310,996 7,478 Other assets (Note 13) 192,314 12,197 198,279 12,197 Allowance for valuation (Note 13) (159,371) (12,118) (165,336) (12,118) Prepaid expenses (Note 14) 277,912 7,399 278,053 7,399

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2007 2006 2007 2006

LONG-TERM ASSETS 34,108,967 3,082,719 32,800,401 3,082,719 Interbank investments (Note 5) 645,562 - 645,562 -

Interbank deposits 645,762 - 645,762 - Allowance for losses (200) - (200) -

Securities and derivatives (Note 6) 8,615,698 891,263 6,789,812 891,263 Own portfolio 3,352,919 127,537 3,346,648 127,537 Subject to resale commitments 1,983,013 602,671 161,316 602,671 Derivatives (Note 34) 523,734 - 520,085 - Linked to Central Bank of Brazil 1,220,185 - 1,220,185 - Privatization certificates 49,555 - 49,555 - Linked to guarantees 1,486,292 161,055 1,492,023 161,055

Interbank accounts (Note 7) 62,364 - 62,364 - Restricted deposits: National Housing System 62,364 - 62,364 -

Lending operations (Note 8) 14,978,126 828,917 14,951,139 828,917 Public sector 124,783 8,355 118,274 8,355 Private sector 16,171,401 935,341 16,149,865 935,341 Allowance for loan losses (1,318,058) (114,779) (1,317,000) (114,779)

Leasing operations (Note 8) 7,325 - 145,718 - Private sector 7,325 - 150,510 - Allowance for doubtful lease receivables - - (4,792) -

Other receivables 9,196,943 1,338,924 9,602,803 1,338,924 Receivables for guarantees honored 296 - 296 - Foreign exchange portfolio (Note 9) 2,431,220 - 2,431,220 - Income receivable 11,783 27 11,783 27 Trading account (Note 10) 83 - 83 - Tax credits (Note 11) 2,954,024 436,713 3,067,240 436,713 Other (Note 12) 3,832,452 908,846 4,128,345 908,846 Allowance for losses on other receivables (Note 8) (32,915) (6,662) (36,164) (6,662)

Other assets 602,949 23,615 603,003 23,615 Temporary investments (Note 13) 10,385 - 10,393 - Allowance for losses (Note 13) (647) - (655) - Prepaid expenses (Note 14) 593,211 23,615 593,265 23,615

PERMANENT ASSETS 2,466,439 242,938 1,531,033 242,938 Investments 1,071,110 187,172 133,435 187,172

Investments in affiliates and subsidiaries (Note 16) Domestic 1,042,040 184,468 18,041 184,468 Other investments 45,553 8,455 136,583 8,455 Allowance for losses (16,483) (5,751) (21,189) (5,751)

Property and equipment in use (Note 17) 660,538 26,918 662,679 26,918 Real estate 309,586 15,599 312,509 15,599 Other 1,416,523 48,304 1,417,673 48,304 Accumulated depreciation (1,065,571) (36,985) (1,067,503) (36,985)

Deferred charges (Note 18) 734,791 28,848 734,919 28,848 Organization and expansion costs 1,878,942 61,372 1,879,156 61,372 Accumulated amortization (1,144,151) (32,524) (1,144,237) (32,524)

TOTAL ASSETS 120,888,323 5,336,695 117,962,906 5,336,695

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2007 2006 2007 2006

CURRENT LIABILITIES 81,581,500 2,712,735 80,139,316 2,712,735 Deposits (Note 19.a) 28,316,401 1,451,594 26,519,026 1,451,594

Demand deposits 4,414,618 216,141 4,409,798 216,141 Savings deposits 5,316,335 608,887 5,316,335 608,887 Interbank deposits 2,281,787 150,168 495,449 150,168 Time deposits 16,040,253 463,994 16,034,036 463,994 Other deposits 263,408 12,404 263,408 12,404

Money market funding (Note 19.b) 23,422,773 598,883 23,376,366 598,883 Own portfolio 1,438,507 597,937 1,438,507 597,937 Third parties 21,984,266 946 21,937,859 946

Funds from acceptance and issuance of securities (Note 19.c) 753,841 6,392 753,841 6,392 Securities issued abroad 549,578 - 549,578 - Real estate credit notes 204,263 6,392 204,263 6,392

Interbank accounts (Note 7) 292,141 45,020 292,141 45,020 Payments and receipts pending settlement 291,160 39,269 291,160 39,269 Correspondents 981 5,751 981 5,751

Interbranch accounts 909,983 1,759 909,983 1,759 Third-party funds in transit 905,977 1,659 905,977 1,659 Internal transfers of funds 4,006 100 4,006 100

Borrowings (Note 19.d) 6,770,704 - 6,770,704 - Foreign borrowings 6,770,704 - 6,770,704 -

Domestic onlendings - official institutions (Note 19.d) 1,840,563 100,231 1,840,563 100,231 National Economic and Social Development Bank (BNDES) 1,183,411 31,558 1,183,411 31,558 Federal Savings and Loan Bank (CEF) 15,965 - 15,965 - National Equipment Financing Authority (FINAME) 511,885 68,673 511,885 68,673 Other institutions 129,302 - 129,302 -

Derivatives (Note 34) 2,973,527 39,718 2,973,432 39,718 Derivatives 2,973,527 39,718 2,973,432 39,718

Other payables 16,301,567 469,138 16,703,260 469,138 Collected taxes and other 221,809 41,038 221,809 41,038 Foreign exchange portfolio (Note 9) 11,451,399 1,626 11,451,399 1,626 Social and statutory 820,578 247,710 820,838 247,710 Tax and social security (Note 20) 167,228 43,048 206,885 43,048 Trading account (Note 10) 149,407 1 460,890 1 Subordinated debts (Note 21) 2,328 - 2,328 - Other (Note 22) 3,488,818 135,715 3,539,111 135,715

(Continues)

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2007 2006 2007 2006

LONG-TERM LIABILITIES 29,265,214 1,043,644 27,819,622 1,043,644 Deposits (Note 19.a) 9,589,126 332,133 7,817,952 332,133

Interbank deposits 1,614,037 - 5,135 - Time deposits 7,975,089 332,133 7,812,817 332,133

Money market funding (Note 19.b) 2,372,093 76,483 2,372,093 76,483 Own portfolio 2,372,093 76,483 2,372,093 76,483

Funds from acceptance and issuance of securities (Note 19.c) 877,539 - 877,539 - Securities issued abroad 877,539 - 877,539 -

Borrowings (Note 19.d) 676,834 - 676,834 - Foreign borrowings 676,834 - 676,834 -

Domestic onlendings - official institutions (Note 19.d) 2,543,400 237,975 2,543,400 237,975 National Economic and Social Development Bank (BNDES) 1,478,461 70,185 1,478,461 70,185 Federal Savings and Loan Bank (CEF) 18,776 - 18,776 - National Equipment Financing Authority (FINAME) 1,022,267 167,790 1,022,267 167,790 Other institutions 23,896 - 23,896 -

Derivatives (Note 34) 955,606 - 955,304 - Derivatives 955,606 - 955,304 -

Other payables 12,250,616 397,053 12,576,500 397,053 Foreign exchange portfolio (Note 9) 2,456,454 - 2,456,454 - Tax and social security (Note 20) 3,211,968 121,655 3,510,933 121,655 Trading account (Note 10) 255,329 - 255,329 - Subordinated debts (Note 21) 4,113,912 - 4,113,912 - Other (Note 22) 2,212,953 275,398 2,239,872 275,398

DEFERRED INCOME 44,278 333 44,278 333 Deferred income 44,278 333 44,278 333

MINORITY INTEREST - - 57 -

STOCKHOLDERS' EQUITY 9,997,331 1,579,983 9,959,633 1,579,983 Capital: (Note 24.a) Brazilian residents 168,579 27,241 168,579 27,241 Foreign residents 8,162,869 1,466,346 8,162,869 1,466,346 Capital reserves 25,980 297 25,980 297 Profit reserves 558,371 18,827 558,371 18,827 Adjustment to fair value - securities and derivatives 434,482 20,410 434,482 20,410 Retained earnings (Note 24.e) 647,050 46,862 609,352 46,862 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 120,888,323 5,336,695 117,962,906 5,336,695

The accompanying notes are an integral part of these financial statements.- - - -

11



2007 2006 2007 2006

FINANCIAL INCOME 7,330,341 408,330 7,198,398 408,330 Lending operations 3,734,124 322,102 3,741,872 322,102 Leasing operations 1,306 - 28,398 - Securities transactions 3,291,274 75,628 3,127,363 75,628 Derivatives 119,590 3,106 116,718 3,106 Compulsory investments 184,047 7,494 184,047 7,494

FINANCIAL EXPENSES (4,119,397) (232,631) (3,909,888) (232,631) Funding operations (2,976,344) (141,868) (2,770,959) (141,868) Borrowings and onlendings (46,999) (15,753) (46,999) (15,753) Foreign exchange operations (169,910) (219) (169,910) (219) Allowance for loan losses (Note 8.d) (926,144) (74,791) (922,020) (74,791)

GROSS PROFIT FROM FINANCIAL OPERATIONS 3,210,944 175,699 3,288,510 175,699

OTHER OPERATING (EXPENSES) INCOME (1,971,795) (149,978) (2,031,029) (149,978) Income from services rendered (Note 27) 1,679,135 68,323 1,799,998 68,323 Personnel expenses (Note 28) (904,293) (58,480) (912,846) (58,480) Other administrative expenses (Note 29) (1,352,265) (55,440) (1,378,403) (55,440) Tax expenses (Note 30) (403,173) (25,795) (424,601) (25,795) Investments in affiliates and subsidiaries (Note 16) 110,856 13,213 1,704 13,213 Other operating income (Note 31) 216,060 112,624 242,157 112,624 Other operating expenses (Note 32) (1,318,115) (204,423) (1,359,038) (204,423)

INCOME FROM OPERATIONS 1,239,149 25,721 1,257,481 25,721

NONOPERATING (EXPENSES) INCOME (Note 33) (7,941) (2,282) (2,884) (2,282)

INCOME BEFORE TAXES ON INCOME AND PROFIT SHARING 1,231,208 23,439 1,254,597 23,439

INCOME AND SOCIAL CONTRIBUTION TAXES (Note 36) (124,106) 34,963 (135,738) 34,963 Provision for income tax (148,522) (25,947) (175,631) (25,947) Provision for social contribution tax (60,432) (9,400) (68,881) (9,400) Deferred tax credits 84,848 70,310 108,774 70,310

PROFIT SHARING (149,155) (9,074) (154,321) (9,074)

INCOME BEFORE MINORITY INTEREST 957,947 49,328 964,538 49,328

MINORITY INTEREST - - (2) -

NET INCOME (Note 24.e) 957,947 49,328 964,536 49,328

Number of shares (thousands) 132,768,479 26,521,211 Earnings per thousand shares (R$) 7,22 1,86

The accompanying notes are an integral part of these financial statements.

Bank Consolidated

12



Stock Reserve for

Capital Tax exchange Legal dividend Affiliates and Retained Capital increase incentives memberships reserve equalization Bank subsidiaries earnings Total

BALANCES AS OF DECEMBER 31, 2005 1,493,587 - 177 84 16,361 - 21,103 (7,717) 206,033 1,729,628 Adjustment to fair value - securities and derivatives - - - - - - 6,094 930 - 7,024 Updating of stock exchange memberships - - - 36 - - - - - 36 Supplementary dividends proposed from retained earnings balance - - - - - - - - (206,033) (206,033) Net income - - - - - - - - 49,328 49,328 Legal reserve - - - - 2,466 - - - (2,466) - BALANCES AS OF JUNE 30, 2006 1,493,587 - 177 120 18,827 - 27,197 (6,787) 46,862 1,579,983

BALANCES AS OF DECEMBER 31, 2006 6,831,448 - 21,361 3,386 510,474 375,945 125,622 5,845 145,817 8,019,898 Capital increase (Note 24.a) - 1,500,000 - - - - - - - 1,500,000 Adjustment to fair value - securities and derivatives - - - - - - 308,870 (5,855) - 303,015 Updating of stock exchange memberships - - - 1,233 - - - - - 1,233 Reserve for dividend equalization (Note 24.d) - - - - - 145,817 - - (145,817) - Proposed dividends based on the reserve for dividend equalization (Note 24.b) - - - - - (521,762) - - - (521,762) Net income - - - - - - - - 957,947 957,947 Legal reserve - - - - 47,897 - - - (47,897) - Proposed interest on capital (Note 24.c) - - - - - - - - (263,000) (263,000) BALANCES AS OF JUNE 30, 2007 6,831,448 1,500,000 21,361 4,619 558,371 - 434,492 (10) 647,050 9,997,331


Adjustment to fair value -

derivatives Profit reserves Capital reserves securities and

13



2007 2006 2007 2006

SOURCES OF FUNDS 35,244,972 680,303 35,492,687 680,303 Adjusted net income 1,199,256 92,957 1,311,817 92,957 Net income 957,947 49,328 964,536 49,328 Adjustments to net income:Investments in affiliates and subsidiaries (Note 16) (110,856) (13,213) (1,704) (13,213) Depreciation and amortization (Note 29) 205,262 6,579 205,355 6,579 Goodwill amortization (Note 32) - 50,192 - 50,192 Recognition/(reversal) of allowance for losses on other assets (Note 33) (8,635) 71 (8,915) 71 Recognition of allowance for losses on other investments (10) - (3,003) - Provision for adjustment related to acquisition and development of software (Note 33) 155,548 - 155,548 - Change in deferred income 2,756 78 2,756 78 Funds from stockholders 1,500,000 - 1,500,000 - Capital increase 1,500,000 - 1,500,000 - Adjustment to fair value - securities and derivatives 308,870 6,094 308,870 6,094 Funds from third parties: 32,234,090 581,174 32,369,244 581,174 Increase in liabilities 13,936,931 460,653 13,949,029 460,653 Deposits 2,783,957 - 2,544,594 - Money market funding 184,621 - 273,751 - Funds from acceptance and issuance of securities 196,047 6,392 196,047 6,392 Interbank and interbranch accounts 319,218 36,982 319,218 36,982 Borrowings and onlendings 1,870,860 34,485 1,870,860 34,485 Derivatives 1,917,848 12,987 1,917,658 12,987 Other payables 6,664,380 369,807 6,826,901 369,807 Decrease in assets 18,097,007 104,743 18,327,493 104,743 Interbank investments - 23,170 - 23,170 Securities and derivatives 18,080,692 73,608 18,295,149 73,608 Leasing operations 16,315 - 32,344 - Other receivables - 7,965 - 7,965 Disposal of permanent assets 90,675 424 92,722 424 Assets not in use 57,375 128 57,375 128 Property in use 33,188 296 33,188 296 Investments 112 - 2,159 - Write-off of deferred charges - 670 - 670Dividends received from subsidiaries 98,117 13,365 - 13,365 Interest on capital received from subsidiaries 11,360 1,319 - 1,319 USES OF FUNDS 35,500,848 675,483 35,749,095 675,483 Proposed dividends (Note 24.b) 521,762 206,033 521,762 206,033 Proposed interest on capital (Note 24.c) 263,000 - 263,000 - Additions 146,745 2,779 151,383 2,779 Assets not in use 48,740 194 48,740 194 Property in use 87,430 1,929 87,430 1,929 Investments 10,575 656 15,213 656 Deferred charges 62,023 - 62,026 - Increase in assets 34,507,318 241,452 34,750,924 241,452 Interbank investments 22,003,902 - 21,991,671 - Interbank and interbranch accounts 700,066 33,248 700,066 33,248 Lending operations 1,833,301 201,555 1,838,242 201,555 Other receivables 9,815,463 - 10,066,433 - Other assets 154,586 6,649 154,512 6,649 Decrease in liabilities - 225,219 - 225,219 Deposits - 207,454 - 207,454 Money market funding - 17,765 - 17,765 (DECREASE)/INCREASE IN CASH (255,876) 4,820 (256,408) 4,820 REPRESENTED BYCashBeginning of period 1,177,725 76,196 1,179,015 76,196 End of period 921,849 81,016 922,607 81,016 (DECREASE)/INCREASE IN CASH (255,876) 4,820 (256,408) 4,820


ConsolidatedBank

14


15

BANCO SANTANDER BANESPA S.A. (formerly Banco Santander Meridional S.A.) NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2007 AND 2006 (Amounts in thousands of Brazilian reais - R$, unless otherwise stated)

1. OPERATIONS

Banco Santander Banespa S.A. (formerly Banco Santander Meridional S.A.), controlled by Banco Santander Central Hispano S.A., with headquarters in Spain, is the lead institution of the financial and non-financial group with the Central Bank of Brazil (Bacen), established as a corporation, with main offices at Rua Amador Bueno, 474, Santo Amaro, Sao Paulo, SP, and operates as a multiple service bank, conducting operations such as commercial, foreign exchange, investment, credit and financing and mortgage loan portfolios and, through related entities, insurance, pension plan, capitalization, leasing, asset management, and securities and insurance brokerage operations. Transactions are conducted within the context of a group of financial institutions that operate on an integrated basis in the financial markets.

2. CORPORATE RESTRUCTURING

a) Merger of Banco Santander Brasil S.A., Banco Santander S.A. and Banco do Estado de São Paulo S.A. - BANESPA into Banco Santander Banespa S.A.

The Extraordinary Stockholders' Meting held on August 4, 2006 approved, pursuant to the provisions of article 223, §3, of Law No. 6404/76, the filing of a request for the going public of Banco Santander Meridional S.A. (BSM) with the Brazilian Securities Commission - CVM. On the same date, the change of its name from Banco Santander Meridional S.A. to Banco Santander Banespa S.A. was also approved.

On August 31, 2006, the Extraordinary Stockholders' Meetings of Banco Santander Banespa S.A. (formerly Banco Santander Meridional S.A.), Banco Santander Brasil S.A. (BSB), Banco Santander S.A. (BSSA) and Banco do Estado de São Paulo S.A. - Banespa (Banespa) approved the proposed corporate restructuring under the terms of the “Agreement of Merger of Banco Santander Brasil S.A., Banco Santander S.A., and Banco do Estado de São Paulo SA. - Banespa into Banco Santander Meridional S.A.” (Merger Agreement), declaring the Merger effective. As a consequence, the stockholders of BSB, BSSA and Banespa (Merged Entities) received shares of Banco Santander Banespa S.A. (Merging Entity) and the Merged Entities were wound up, with Banco Santander Banespa S.A. becoming the universal successor of the Merged Entities to all their assets, rights and obligations, and becoming the lead institution of the financial and non-financial group with Bacen.

I - Reasons and Benefits of the Merger

The purpose of the corporate restructuring was to unify the brand, improve the business strategy focus on customers, users, business partners and the market, and streamline operations. From the legal viewpoint, it simplified the corporate structure of the Entities, with reduction of administrative costs, especially those related to legal and regulatory obligations. From the accounting standpoint, it allowed the Group to improve its equity structure.

II - Corporate and Business Acts Prior to the Merger

In the meetings held on July 26, 2006, the Boards of Executive Officers of BSM, BSB, BSSA and Banespa and Banespa’s Board of Directors approved the proposal for corporate restructuring under the terms of the Merger Agreement and its submission to stockholders for approval.

On July 27, 2006, a Significant Event Notice was published in the newspaper Gazeta Mercantil and the São Paulo State Official Gazette, presenting the details of the corporate restructuring.

III - Valuation of Net Equities

Book Value Valuation. The Entities’ net equities were valued at their respective book values, pursuant to valuation reports prepared on July 26, 2006 by the specialized firm Deloitte Touche Tohmatsu Auditores Independentes. These valuations were performed according to a criterion for determination of the Entities’ net equity value, based on the balance sheets as of June 30, 2006, which were duly audited.

Market Value Valuation. In compliance with the provisions of article 264 of Law No. 6,404/76, on July 26, 2006 the Entities’ net equities were valued at their market values by the specialized firm KPMG Corporate


16


Finance Ltda. These valuations were performed according to the same criteria and base date, i.e. June 30, 2006, based on the Entities’ audited financial statements.

The Entities’ management established the share exchange ratios for the mergers, based on the valuations of the Entities’ net equity values.

IV - Equity Changes

The Mergers were made through transfers of net equities of the Merged Entities to the equity of the Merging Entity, based on the audited balance sheets as of June 30, 2006.

The equity changes occurred between the date of the referred balance sheets and the merger date (August 31, 2006) were booked directly in Banco Santander Banespa S.A. (formerly Banco Santander Meridional S.A.). The Merged Entities’ credit and debit balances were transferred to the Merging Entity’s accounting books. There were no unrecorded liabilities or contingent liabilities in BSB, BSSA and Banespa assumed by Banco Santander Banespa S.A., as the legal successor of these Entities.

The Balance Sheets of the Merged Entities as of June 30, 2006 are shown below. In the merger process, investments in subsidiaries and intercompany transactions were eliminated.

BALANCE SHEET BANESPA BSB BSSA

ASSETS

Current and long-term assets 41,986,105 53,809,271 1,420,450Cash 456,874 162,036 709Interbank investments 6,777,415 14,206,601 161,831Securities and derivatives 13,013,663 17,489,296 357,751Lending and leasing operations 10,675,566 13,509,724 634,526Other assets 11,062,587 8,441,614 265,633Permanent assets 1,604,894 772,380 5,049,478TOTAL ASSETS 43,590,999 54,581,651 6,469,928LIABILITIES AND STOCKHOLDERS' EQUITY Current and long-term liabilities 38,407,899 53,295,470 1,908,922Deposits 12,867,360 23,934,277 600,671Money market funding 8,043,984 15,272,960 -Funds from acceptance and issuance of securities 1,666,449 258,673 797,781Domestic borrowings and onlendings 1,758,598 5,389,275 3,353Other payables 14,071,508 8,440,285 507,117Stockholders' equity 5,183,100 1,286,181 4,561,006TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 43,590,999 54,581,651 6,469,928 V - Capital and Stockholders' Equity Increase

As a result of the restructuring, the capital of Banco Santander Banespa S.A. increased by R$5,337,861, from R$1,493,587 to R$6,831,448, and its stockholders' equity increased by R$5,756,950.

VI - Other Relevant Information

In December 2006, the legal merger process was concluded, with the approval of the corporate acts by Bacen and its filing with the São Paulo State Division of Corporations (Jucesp).

In March 2007, the going public process of Banco Santander Banespa S.A. was approved by CVM.


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b) Merger of Santander Banespa Companhia de Arrendamento Mercantil into Santander Brasil Arrendamento Mercantil S.A.

The Extraordinary Stockholders' Meting held on November 30, 2006 approved the “Agreement of Merger of Santander Banespa Companhia de Arrendamento Mercantil into Santander Brasil Arrendamento Mercantil S.A.” (Merger Agreement) entered into on November 13, 2006.

As a result of the merger, the stockholders of Santander Banespa Arrendamento Mercantil (Merged Entity) received shares of Santander Brasil Arrendamento Mercantil S.A. (Merging Entity) and the Merged Entity was wound up and Santander Brasil Arrendamento Mercantil S.A. became the successor to all its assets, rights and obligations.

The purpose of the corporate restructuring was to streamline the Entities’ operations and reduce administrative, operating and financial costs.

On November 15, 2006 a Significant Event Notice was published in the newspaper Gazeta Mercantil and the São Paulo State Official Gazette, presenting the details of the merger occurred on November 14, 2006.

c) Merger of Santander Brasil Participações e Empreendimentos S.A. into Santander Participações e Serviços S.A. (formerly Santander Companhia Securitizadora de Créditos Financeiros)

On March 30, 2007, the Extraordinary Stockholders’ Meetings of Santander Brasil Participações e Empreendimentos S.A. and Santander Companhia Securitizadora de Créditos Financeiros approved the “Agreement of Merger of Santander Brasil Participações e Empreendimentos S.A. into Santander Companhia Securitizadora de Créditos Financeiros" entered into on March 29, 2007. On the same date the change of the name Santander Securitizadora de Créditos Financeiros to Santander Participações e Serviços S.A. was also approved.

As a consequence of the corporate restructuring, the capital of Santander Participações e Serviços S.A. (Merging Entity) was increased from R$269,000 in December 2006 to R$286,473 in March 2007, divided into 496,000 thousand registered common shares without par value.

The purpose of the merger process implementation was to streamline the Entities’ operations and reduce administrative, operating and financial costs.

d) Change of name of Banco Santander Banespa S.A.

The Extraordinary Stockholders’ Meeting held on April 30, 2007 approved the change of the entity’s name to Banco Santander S.A., process approved by Bacen and pending registration with Jucesp.

3. PRESENTATION OF FINANCIAL STATEMENTS

The financial statements of Banco Santander Banespa S.A., which include its foreign branches (Bank) and the consolidated financial statements of the Bank and its subsidiaries indicated in Note 16 (Consolidated), have been prepared in accordance with accounting practices established by Brazilian Corporate Law, and standards established by the National Monetary Council (CMN), Bacen and the CVM.

In the preparation of the consolidated financial statements, equity in subsidiaries, significant balances arising from transactions among domestic branches, foreign branches and subsidiaries, and unrealized profits between these entities have been eliminated. Minority interest is recorded in a separate caption in stockholders’ equity and in the statements of income. The balances stated in the jointly-owned subsidiaries’ balance sheets and statements of income were consolidated in proportion to its interest in the subsidiary’s capital.

The information of the leasing company was reclassified, in order to reflect its financial position in the consolidated statements in conformity with the financial method of accounting for leasing transactions.

The preparation of financial statements requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the


18


financial statements, and the reported amounts of revenues and expenses for the reporting periods. Since Management’s judgment involves making estimates concerning the likelihood of future events, actual amounts could differ from those estimates.

4. SIGNIFICANT ACCOUNTING PRACTICES

a) Results of operations

Determined on the accrual basis of accounting and includes income, charges and monetary or exchange variations earned or incurred through the balance sheet date, on a daily pro rata basis.

b) Current and long-term assets and liabilities

Stated at their realizable or settlement amounts, respectively, and include income, charges and monetary or exchange variations earned or incurred through the balance sheet date, determined on a daily pro rata basis. When applicable, allowances for valuation are recorded to reflect market or realizable values. The allowance for loan losses is based on analyses of outstanding lending operations (past due and current), past experience, future expectations, and specific portfolio risks, as well as on the risk assessment policy of the Bank’s management for recognition of allowances, including requirements under Bacen standards and instructions.

Receivables and payables due within 12 months are recorded in current assets and liabilities, respectively, except for trading securities, which are totally classified in current assets, in conformity with Bacen Circular No. 3,068/01.

c) Securities

Securities are presented in accordance with the following recognition and accounting valuation criteria:

I - Trading securities.

II - Available-for-sale securities.

III - Held-to-maturity securities.

“Trading securities” include securities acquired for the purpose of being actively and frequently traded and “Held-to-maturity securities” include those which the Bank intends to maintain in its portfolio to maturity. “Available-for-sale securities” include those which cannot be classified in categories I and III. Securities classified in categories I and II are stated at cost plus income earned through the balance sheet date, calculated on a daily pro rata basis, and adjusted to fair value, reflecting the increase or decrease arising from this adjustment in:

(1) The related income or expense account, in income for the period, when related to securities classified as “Trading securities”, net of tax effects.

(2) Separate caption in stockholders’ equity, when related to securities classified as “Available-for-sale securities”, net of tax effects. The adjustments to fair value on sale of these securities are transferred to income for the period.

Securities classified as “Held-to-maturity securities” are stated at cost, plus income earned through the balance sheet date, calculated on a daily pro rata basis, and recorded in income for the period; provisions for losses are recognized whenever there are permanent losses on the realizable value of these securities.


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d) Derivatives

Derivatives designated as hedge may be classified as:

I - Market risk hedge.

II - Cash flow hedge.

Derivatives designated as hedge and the respective hedged items are adjusted to fair value, considering the following:

(1) For those classified in category I, the increase or decrease is recorded in income or expense for the period, net of tax effects.

(2) For those classified in category II, the increase or decrease is recorded in a separate caption in stockholders’ equity, net of tax effects.

e) Prepaid expenses

Funds used in advance payments, whose benefits or provision of services will occur in future years, are recorded as “prepaid expenses”, over the term of the respective agreements.

f) Permanent assets

Stated at acquisition cost and include:

f.1) Investments

Adjustments to investments in affiliates and subsidiaries are determined under the equity method of accounting and recorded as investments in affiliates and subsidiaries. Other investments are stated at cost, reduced to fair value, when applicable.

f.2) Property and equipment

Depreciation of property and equipment is determined under the straight-line method at the following annual rates: buildings - 4%, installations, furniture, equipment in use, communication and security systems - 10%, and data processing systems and vehicles - 20%.

f.3) Deferred charges

Costs classified under deferred charges are amortized over a maximum period of 5 years when applicable to the acquisition and development of software, and 10 years for other costs, considering the benefit period of the expense and the terms of rental contracts.

Goodwill on investment acquisition and its respective reduction account, reserve for maintenance of integrity of the merging entity’s stockholders equity, are amortized over a period of up to 10 years, based on the expected future income.

g) Pension plan

The actuarial liabilities related to pension plans are recorded based on an actuarial study made by independent actuaries in accordance with CVM Resolution No. 371.

Expenses related to sponsors’ contributions to the plans are recognized on the accrual basis.


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h) Contingent assets and liabilities and legal obligations

h.1) Contingent assets

Contingent assets are not recorded, except when there are real guarantees or unappealable court decisions, for which a favorable outcome is practically certain. Contingent assets whose likelihood of favorable outcome is probable, when existing, are only disclosed in the financial statements.

h.2) Contingent liabilities

Contingent liabilities are recorded based on the nature, complexity and history of lawsuits, and on the opinion of the in-house and outside legal counsel when the risk of loss on the administrative or judicial proceeding is considered as probable and the amounts can be reasonably determined.

h.3) Legal obligations - tax and social security

Refers to lawsuits challenging the legality or constitutionality of tax obligations that, irrespective of the evaluation of their likelihood of favorable outcome, are fully recognized in the financial statements, except for cases that Management considers, based on experts’ evaluation and the status of the lawsuit, will not produce effects on the balance sheet.

i) Deferred income

Refers to income received before the completion of the term of the obligation that gave rise to it, including non-refundable income, mainly related to guarantees and collaterals provided and credit card annual fees. Deferred income is recorded in income over the term of the respective agreements.

j) Income and social contribution taxes

Income tax is calculated at the rate of 15% plus a 10% surcharge; social contribution tax is calculated at the rate of 9%, after adjustments determined by tax legislation. Deferred tax assets and liabilities are computed basically on certain temporary differences between book and taxable income, tax losses, and adjustments to fair value of securities and derivatives.

As provided for by Bacen Circular No. 3,171 of December 31, 2002, CVM Resolution No. 273, of August 20, 1998, and CVM Instruction No. 371, of June 27, 2002, the Bank’s expected realization of tax credits, as shown in Note 11, is based on the projection of future results and is supported by a technical study.


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5. INTERBANK INVESTMENTS

Bank/ Bank Consolidated Up to From 3 to Over 3 months 12 months 12 months 06/30/2007 06/30/2006 Money market investments 21,308,048 3,573,577 - 24,881,625 36,997Own portfolio 344,385 2,598,660 - 2,943,045 36,051Treasury bills 31,435 - - 31,435 -National Treasury bills - 2,598,660 - 2,598,660 -National Treasury notes 182,053 - - 182,053 36,051Securities issued abroad by the Brazilian government - Eurobonds 130,897 - - 130,897 -Third-party portfolio 20,963,663 974,917 - 21,938,580 946Treasury bills 2,013,768 - - 2,013,768 -National Treasury bills 17,690,416 929,497 - 18,619,913 -National Treasury notes 1,259,479 45,420 - 1,304,899 946Interbank deposits 367,500 643,517 645,762 1,656,779 -Foreign-currency investments 790,754 - - 790,754 22Provision for losses - - (200) (200) -Total 22,466,302 4,217,094 645,562 27,328,958 37,019Current 26,683,396 37,019Long-term 645,562 -

Consolidated Up to From 3 to Over 3 months 12 months 12 months 06/30/2007 Money market investments 21,308,048 3,573,577 - 24,881,625 Own portfolio 390,792 2,598,660 - 2,989,452 Treasury bills 31,435 - - 31,435 National Treasury bills 46,407 2,598,660 - 2,645,067 National Treasury notes 182,053 - - 182,053 Securities issued abroad by the Brazilian government - Eurobonds 130,897 - - 130,897 Third-party portfolio 20,917,256 974,917 - 21,892,173 Treasury bills 2,013,768 - - 2,013,768 National Treasury bills 17,644,009 929,497 - 18,573,506 National Treasury notes 1,259,479 45,420 - 1,304,899Interbank deposits 367,500 615,571 645,762 1,628,833 Foreign-currency investments 790,754 - - 790,754 Provision for losses - - (200) (200)Total 22,466,302 4,189,148 645,562 27,301,012 Current 26,655,450 Long-term 645,562


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6. SECURITIES

Bank/ Bank Consolidated 06/30/2007 06/30/2006 Effect of adjustment to

fair value on Carrying Carrying Categories Cost Income Equity amount amount

Trading securities 11,210,433 282,894 - 11,493,327 95,426Government Securities 8,888,646 138,890 - 9,027,536 55,536Private Securities 2,321,787 144,004 - 2,465,791 39,890Available-for-sale securities 8,874,876 - 607,549 9,482,425 758,330Government Securities 4,732,417 - 454,636 5,187,053 713,795Private Securities 4,142,459 - 152,913 4,295,372 44,535Held-to-maturity securities 722,098 - - 722,098 173,242Government Securities 722,098 - - 722,098 173,242Subtotal 20,807,407 282,894 607,549 21,697,850 1,026,998Derivatives (Assets) 2,556,463 139,476 - 2,695,939 20,758Total 23,363,870 422,370 607,549 24,393,789 1,047,756Current 15,778,091 156,493Long-term 8,615,698 891,263Derivatives (Liabilities) (3,868,508) (60,625) - (3,929,133) (39,718)Current (2,973,527) (39,718)Long-term (955,606) -

Bank Bank/ Consolidated

06/30/2007 06/30/2006

Trading securities Cost


income Carrying amount

Carrying amount

Government Securities 8,888,646 138,890 9,027,536 55,536Brady bonds 40,620 3,738 44,358 -Treasury certificates 38,866 1,384 40,250 -Securitized credit 3,359 (386) 2,973 -National Treasury bills 4,122,934 8,121 4,131,055 -Treasury bills 424,993 (34) 424,959 55,536National Treasury notes - NTN B 2,925,112 81,489 3,006,601 -National Treasury notes - NTN C 272,307 8,982 281,289 -National Treasury notes - NTN D 19,336 (219) 19,117 -National Treasury notes - NTN F 681,452 39,612 721,064 -Agricultural debt securities 79,249 278 79,527 -Global 40 280,418 (4,075) 276,343 -Private Securities 2,321,787 144,004 2,465,791 39,890Shares 330,954 138,916 469,870 -Receivables Investment Fund (4) 437,491 - 437,491 -Debentures 1,528,107 4,333 1,532,440 39,890Eurobonds 25,235 755 25,990 -Total 11,210,433 282,894 11,493,327 95,426


23


Bank Trading securities 06/30/2007

Composition by maturity Without maturity

Up to 3 months

From 3 to 12 months

From 1 to 3 years

Government Securities - 1,513,136 1,747,106 2,802,332Brady bonds - 1,230 - -Treasury certificates - - - -Securitized credit - 1,683 - -National Treasury bills - 1,417,400 1,502,257 1,211,398Treasury bills - 5,618 22,195 316,568National Treasury notes - NTN B - 15,859 8,076 1,243,409National Treasury notes - NTN C - 1,528 170,669 -National Treasury notes - NTN D - 878 - 18,239National Treasury notes - NTN F - 34,219 - 7,429Agricultural debt securities - 26,017 43,908 5,271Global 40 - 8,704 1 18Private Securities 469,870 1,368 54,176 408,735Shares 469,870 - - -Receivables Investment Fund (4) - 323 52,859 343,467Debentures - - 949 40,691Eurobonds - 1,045 368 24,577Total 469,870 1,514,504 1,801,282 3,211,067

Bank Trading securities 06/30/2007

Composition by maturity From 3 to

5 years From 5 to 15

years Over

15 years Government Securities 1,132,270 1,312,188 520,504Brady bonds - - 43,128Treasury certificates - 40,250 -Securitized credit - - 1,290National Treasury bills - - -Treasury bills 80,578 - -National Treasury notes - NTN B 838,357 598,481 302,419National Treasury notes - NTN C - 37,702 71,390National Treasury notes - NTN D - - -National Treasury notes - NTN F 211,202 468,214 -Agricultural debt securities 2,133 2,198 -Global 40 - 165,343 102,277Private Securities 34,069 1,486,777 10,796Shares - - -Receivables Investment Fund (4) - 30,046 10,796Debentures 34,069 1,456,731 -Eurobonds - - -Total 1,166,339 2,798,965 531,300


24



06/30/2007 06/30/2006

Available-for-sale securities Cost


equity Carrying amount

Carrying amount

Government Securities 4,732,417 454,636 5,187,053 713,795National Treasury bonds 2,984 (51) 2,933 -Treasury certificates (1) 52,256 9,786 62,042 -Securitized credit 63,014 1,506 64,520 -National Treasury bills 269,213 954 270,167 -Treasury bills 24,336 2 24,338 -National Treasury notes - NTN A 126,880 (12,211) 114,669 -National Treasury notes - NTN B 1,478,467 51,878 1,530,345 -National Treasury notes - NTN C (2) 482,354 265,125 747,479 60,168National Treasury notes - NTN F 2,057,671 127,234 2,184,905 653,574National Treasury notes - NTN P 88 (17) 71 53Agricultural debt securities 14,830 172 15,002 -Global 40 160,324 10,258 170,582 -Private Securities 4,142,459 152,913 4,295,372 44,535Shares (3) 836,494 115,796 952,290 -Debentures 2,548,447 26,157 2,574,604 44,535Promissory notes 491,830 (29,364) 462,466 -Certificates of real estate receivables - CRI 265,688 40,324 306,012 -Total 8,874,876 607,549 9,482,425 758,330

BankAvailable-for-sale securities 06/30/2007

Composition by maturity Without maturity

Up to 3 months

From 3 to 12 months

From 1 to 3years

Government Securities - 158,002 493,594 1,097,287National Treasury bonds - 1,662 665 606Treasury certificates (1) - - - -Securitized credit - 4,795 10,170 45,698National Treasury bills - - 208,141 62,026Treasury bills - 23,182 1,156 -National Treasury notes - NTN A - - 863 -National Treasury notes - NTN B - 1,331 6,405 353,814National Treasury notes - NTN C (2) - 12,671 441 -National Treasury notes - NTN F - 103,009 259,169 633,447National Treasury notes - NTN P - - - -Agricultural debt securities - 5,843 6,584 1,696Global 40 - 5,509 - -Private Securities 952,290 298,573 190,339 288,547Shares (3) 952,290 - - -Debentures - 9,990 9,529 263,800Promissory notes - 288,583 166,542 7,341Certificates of real estate receivables - CRI - - 14,268 17,406Total 952,290 456,575 683,933 1,385,834


25


Bank Available-for-sale securities 06/30/2007

Composition by maturity From 3 to 5 years

From 5 to 15 years

Over 15 years

Government Securities 378,930 2,135,216 924,024National Treasury bonds - - -Treasury certificates (1) - 62,042 -Securitized credit - 1,175 2,682National Treasury bills - - -Treasury bills - - -National Treasury notes -NTN A - - 113,806National Treasury notes - NTN B 66,422 1,019,659 82,714National Treasury notes - NTN C (2) - 9,545 724,822National Treasury notes - NTN F 311,881 877,399 -National Treasury notes - NTN P - 71 -Agricultural debt securities 627 252 -Global 40 - 165,073 -Private Securities 445,496 2,120,127 -Shares (3) - - -Debentures 445,496 1,845,789 -Promissory notes - - -Certificates of real estate receivables - CRI - 274,338 -Total 824,426 4,255,343 924,024

Bank/ Consolidated

06/30/2007 06/30/2007 06/30/2006 Composition by maturity

Held-to-maturity securities (5)

Cost/ carrying amount

Cost/ carrying amount

Up to 3 months

Over 15 years

Government Securities 722,098 173,242 19,761 702,337National Treasury notes - NTN C (2) 722,098 173,242 19,761 702,337Total 722,098 173,242 19,761 702,337

Consolidated

Effect of adjustment to fair value on 06/30/2007

Categories Cost Income Equity Carrying amount Trading securities 9,905,628 282,893 - 10,188,521Government Securities 8,935,497 138,889 - 9,074,386Private Securities 970,131 144,004 - 1,114,135Available-for-sale securities 7,127,270 - 607,533 7,734,803Government Securities 4,812,779 - 454,620 5,267,399Private Securities 2,314,491 - 152,913 2,467,404Held-to-maturity securities 722,098 - - 722,098Government Securities 722,098 - - 722,098Subtotal 17,754,996 282,893 607,533 18,645,422Derivatives (Assets) 2,555,179 134,928 - 2,690,107Total 20,310,175 417,821 607,533 21,335,529Current 14,545,717 Long-term 6,789,812 Derivatives (Liabilities) (3,868,185) (60,551) - (3,928,736)Current (2,973,432)Long-term (955,304)


26


Consolidated 06/30/2007 Composition by maturity

Trading securities Cost

Adjustment to fair value

- income Carrying amount

Without maturity

Up to 3 months

Government Securities 8,935,497 138,889 9,074,386 - 1,513,136Brady bonds 40,620 3,738 44,358 - 1,230Treasury certificates 38,866 1,384 40,250 - -Securitized credit 3,359 (386) 2,973 - 1,683National Treasury bills 4,122,934 8,121 4,131,055 - 1,417,400Treasury bills 471,844 (35) 471,809 - 5,618National Treasury notes - NTN B 2,925,112 81,489 3,006,601 - 15,859National Treasury notes - NTN C 272,307 8,982 281,289 - 1,528National Treasury notes - NTN D 19,336 (219) 19,117 - 878National Treasury notes - NTN F 681,452 39,612 721,064 - 34,219Agricultural debt securities 79,249 278 79,527 - 26,017Global 40 280,418 (4,075) 276,343 - 8,704Private Securities 970,131 144,004 1,114,135 539,934 1,368Shares 330,954 138,916 469,870 469,870 -Receivables Investment Fund (4) 437,491 - 437,491 - 323Investment Fund Quotas 70,064 - 70,064 70,064 -Debentures 106,387 4,333 110,720 - -Eurobonds 25,235 755 25,990 - 1,045Total 9,905,628 282,893 10,188,521 539,934 1,514,504

Consolidated 06/30/2007

Trading securities From 3 to 12 From 1 to 3 From 3 to 5 From 5 to 15 Over 15 Composition by maturity months years years years years

Government Securities 1,747,106 2,847,222 1,134,230 1,312,188 520,504Brady bonds - - - - 43,128Treasury certificates - - - 40,250 -Securitized credit - - - - 1,290National Treasury bills 1,502,257 1,211,398 - - -Treasury bills 22,195 361,458 82,538 - -National Treasury notes - NTN B 8,076 1,243,409 838,357 598,481 302,419National Treasury notes - NTN C 170,669 - - 37,702 71,390National Treasury notes - NTN D - 18,239 - - -National Treasury notes - NTN F - 7,429 211,202 468,214 -Agricultural debt securities 43,908 5,271 2,133 2,198 -Global 40 1 18 - 165,343 102,277Private Securities 54,176 408,735 34,069 65,057 10,796Shares - - - - -Receivables Investment Fund (4) 52,859 343,467 - 30,046 10,796Investment Fund Quotas - - - - -Debentures 949 40,691 34,069 35,011 -Eurobonds 368 24,577 - - -Total 1,801,282 3,255,957 1,168,299 1,377,245 531,300


27


Consolidated 06/30/2007 Composition by maturity

Available-for-sale securities Cost

Adjustmentto fair value -

equity Carrying amount

Without maturity

Up to 3 months

Government Securities 4,812,779 454,620 5,267,399 - 160,555National Treasury bonds 2,984 (51) 2,933 - 1,662Treasury certificates (1) 52,256 9,786 62,042 - -Securitized credit 63,014 1,506 64,520 - 4,795National Treasury bills 269,213 954 270,167 - -Treasury bills 104,698 (14) 104,684 - 25,735National Treasury notes - NTN A 126,880 (12,211) 114,669 - -National Treasury notes - NTN B 1,478,467 51,878 1,530,345 - 1,331National Treasury notes - NTN C (2) 482,354 265,125 747,479 - 12,671National Treasury notes - NTN F 2,057,671 127,234 2,184,905 - 103,009National Treasury notes - NTN P 88 (17) 71 - -Agricultural debt securities 14,830 172 15,002 - 5,843Global 40 160,324 10,258 170,582 - 5,509Private Securities 2,314,491 152,913 2,467,404 952,290 298,573Shares (3) 836,494 115,796 952,290 952,290 -Debentures 720,479 26,157 746,636 - 9,990Promissory notes 491,830 (29,364) 462,466 - 288,583Certificates of real estate receivables - CRI 265,688 40,324 306,012 - -Total 7,127,270 607,533 7,734,803 952,290 459,128


Available-for-sale securities

Composition by maturity From 3 to12 months

From 1 to 3 years

From 3 to 5 years

From 5 to 15 years

Over 15 years

Government Securities 565,656 1,099,359 382,589 2,135,216 924,024National Treasury bonds 665 606 - - -Treasury certificates (1) - - - 62,042 -Securitized credit 10,170 45,698 - 1,175 2,682National Treasury bills 208,141 62,026 - - -Treasury bills 73,218 2,072 3,659 - -National Treasury notes - NTN A 863 - - - 113,806National Treasury notes - NTN B 6,405 353,814 66,422 1,019,659 82,714National Treasury notes - NTN C (2) 441 - - 9,545 724,822National Treasury notes - NTN F 259,169 633,447 311,881 877,399 -National Treasury notes - NTN P - - - 71 -Agricultural debt securities 6,584 1,696 627 252 -Global 40 - - - 165,073 -Private Securities 190,339 288,547 445,496 292,159 -Shares (3) - - - - -Debentures 9,529 263,800 445,496 17,821 -Promissory notes 166,542 7,341 - - -Certificates of real estate receivables - CRI 14,268 17,406 - 274,338 -Total 755,995 1,387,906 828,085 2,427,375 924,024 (1) The treasury certificates are held in custody of the Clearinghouse for the Custody and Financial Settlement of Securities (Cetip) and are

monetarily adjusted based on the domestic general price index (IGP-DI) plus interest of 12% per year. (2) Monetary adjusted based on the general market price index (IGP-M) plus interest of 12% per year, payable semiannually through

January 1, 2031. (3) Refers principally to shares of CESP - Cia. Energética de São Paulo - R$949,756. (4) Receivables Investment Fund (FIDC) shares are calculated based on the value of the receivables and other financial assets in the

respective portfolios, less the amounts of the respective provisions that take into consideration aspects related to the debtors, their guarantors and the corresponding transaction’s characteristics, according to accounting standards and practices for evaluating credits, and are not adjusted to fair value.

(5) The fair value of Held-to-Maturity Securities, Bank and Consolidated, as of June 30, 2007 is R$1,163,417 (2006 - R$174,273).


28


In accordance with BACEN Circular No. 3068, article 8, of November 8, 2001, Santander Banespa declares to have financial capacity and intention to hold to maturity the securities classified as Held-to-Maturity Securities. In January 2007, due to the transfer of pension benefit obligations, R$3,478,816 of securities classified as held-to maturity securities were transferred to Banesprev - Fundo Banespa de Seguridade Social (Banesprev), and R$573,191 was reclassified to available-for-sale securities (Note 35.a).

The fair value of securities is computed based on the average quotation on organized markets and their estimated cash flows, discounted to present value using the applicable interest rate curves, which are considered representative of the market conditions at the balance sheet date.

The principal interest rate curves are obtained from futures and swap contracts traded on the Commodities and Futures Exchange (BM&F). Adjustments to these curves are made whenever certain points are considered illiquid or when due to unusual reasons they do not fairly represent market conditions.

7. INTERBANK ACCOUNTS

Composed of restricted deposits with BACEN to cover compulsory obligations for demand deposits, savings deposits and time deposits, and of payments and receipts pending settlement, represented by checks and other documents sent to clearinghouses (assets and liabilities).

8. CREDIT PORTFOLIO AND ALLOWANCE FOR LOSSES

a) Composition of credit portfolio

Bank Bank/

Consolidated Consolidated 06/30/2007 06/30/2006 06/30/2007

Lending operations 36,006,726 2,214,102 35,967,062Loans and discounted receivables 17,418,684 1,167,554 17,379,020Financing 14,366,463 550,773 14,366,463Rural, agricultural and industrial financing 2,491,454 307,451 2,491,454Real estate financing 1,619,809 188,324 1,619,809Securities financing 91,617 - 91,617Infrastructure and development financing 18,699 - 18,699Leasing operations 21,298 - 366,563Advances on foreign exchange contracts (1) 1,662,726 - 1,662,726Other receivables (2) 1,688,871 43,442 1,694,261Total 39,379,621 2,257,544 39,690,612Current 22,934,778 1,288,284 23,127,121Long-term 16,444,843 969,260 16,563,491

(1) Classified as a reduction of “Other payables”. (2) Include receivables for guarantees honored, debtors for purchase of assets, notes and credits receivable (basically credit cards

and rural product notes - CPR), income receivable from advances on foreign exchange contracts, and receivables from export contracts.


29


b) Composition of credit portfolio by business sector

Bank Bank/


Private sector 39,111,300 2,246,684 39,431,404Industrial 10,487,833 431,591 10,578,376Commercial 3,657,711 276,179 3,720,927Financial institutions 62,282 35 62,282Services and other 6,824,294 315,290 6,986,819Individuals 13,969,948 727,814 13,973,768Housing 1,617,778 188,324 1,617,778Rural 2,491,454 307,451 2,491,454Public sector 268,321 10,860 259,208Federal 232,002 - 232,002State 4,642 - 4,642Municipal 31,677 10,860 22,564Total 39,379,621 2,257,544 39,690,612

c) Classification of credit portfolio by risk level and respective allowance for loan losses

Bank Balance

Minimum allowance 06/30/2007 06/30/2006

Allowancerequired

Risk level

required (%) Current Past due (1) Total Total 06/30/2007 06/30/2006

AA - 21,710,798 - 21,710,798 825,362 - -A 0.5% 13,685,797 - 13,685,797 1,026,084 68,429 5,130B 1% 227,648 405,855 633,503 62,852 6,336 629C 3% 577,497 496,107 1,073,604 48,534 32,209 1,456D 10% 136,157 318,179 454,336 138,806 45,434 13,881E 30% 31,010 213,856 244,866 25,693 73,460 7,708F 50% 21,483 220,742 242,225 23,694 121,113 11,847G 70% 9,561 206,503 216,064 15,110 151,246 10,577H 100% 58,641 1,059,787 1,118,428 91,409 1,118,428 91,409Total 36,458,592 2,921,029 39,379,621 2,257,544 1,616,655 142,637

Consolidated Balance

Minimumallowance 06/30/2007 06/30/2006

Allowance required

Risk level

required (%) Current

Past due (1) Total Total 06/30/2007 06/30/2006

AA - 21,978,978 - 21,978,978 825,362 - -A 0.5% 13,731,799 - 13,731,799 1,026,084 68,659 5,130B 1% 230,873 412,917 643,790 62,852 6,438 629C 3% 579,354 502,590 1,081,944 48,534 32,459 1,456D 10% 96,537 321,446 417,983 138,806 41,799 13,881E 30% 31,137 214,565 245,702 25,693 73,711 7,708F 50% 21,596 221,791 243,387 23,694 121,694 11,847G 70% 9,561 207,340 216,901 15,110 151,832 10,577H 100% 61,808 1,068,320 1,130,128 91,409 1,130,128 91,409Total 36,741,643 2,948,969 39,690,612 2,257,544 1,626,720 142,637

(1) Includes current and past-due operations.


30


d) Changes in allowance for loan losses

Bank Bank/


Balances as of December 31 1,606,638 106,258 1,622,124Allowances recognized 926,144 74,791 922,020Write-offs (915,895) (38,412) (917,192)Other changes (232) - (232)Balances as of June 30 1,616,655 142,637 1,626,720Current 265,682 21,196 268,764 Long-term 1,350,973 121,441 1,357,956 Recoveries (1) 143,952 1,589 157,254

(1) Recoveries are recorded in Income from Lending and Leasing Operations. Recoveries include a credit assignment without co-obligation, related to operations previously written off to loss, in the amount of R$28,042.

9. FOREIGN EXCHANGE PORTFOLIO

Bank/Consolidated

06/30/2007 06/30/2006Assets Rights to foreign exchange sold 8,349,794 1,098Exchange purchased pending settlement 7,151,600 541Advances in local currency (285,491) (554)Income receivable from advances 26,712 -Term bills in foreign currency 7,415 -Total 15,250,030 1,085Current 12,818,810 1,085Long-term 2,431,220 -Liabilities Exchange sold pending settlement 7,952,206 1,082Foreign exchange purchased 7,654,954 544Advances on foreign exchange contracts (1,714,944) -Liabilities for sales made 15,134 -Payables in foreign currencies 503 -Total 13,907,853 1,626Current 11,451,399 1,626Long-term 2,456,454 -Memorandum accounts Open import credits 345,989 -Confirmed export credits 349,318 -


31


10. TRADING ACCOUNT

Bank Bank/


Assets Stock exchanges - guarantee deposits 335,678 - 335,678Debtors pending settlement 63,303 - 394,461Clearinghouse transactions - - 12,290Transactions pending settlement 109,133 2,107 109,378Other 83 56 83Total 508,197 2,163 851,890Current 508,114 2,163 851,807Long-term 83 - 83Liabilities Creditors for loan of shares 298,319 - 298,319Creditors pending settlement 38,931 - 181,396Transactions pending settlement 66,017 - 77,043Clearinghouse transactions - - 156,268Commissions and brokerage fees payable 1,469 1 3,193Total 404,736 1 716,219Current 149,407 1 460,890 Long-term 255,329 - 255,329

11. TAX CREDITS

a) Nature and origin of recorded tax credits

Bank

Balance as of

12/31/2006 Recognition Realization Balance as of

06/30/2007 Allowance for loan losses 684,131 82,069 (113,191) 653,009Reserve for civil contingencies 67,644 - (783) 66,861Reserve for tax contingencies 422,665 19,756 (2,072) 440,349Reserve for labor contingencies 295,513 78,937 (35,928) 338,522Reserve for maintenance of stockholders’

equity integrity 667,456 - (129,159) 538,297Adjustment to fair value of trading securities

and derivatives 136,893 237,259 - 374,152Accrual for pension plan 887,141 11,023 (802,073) 96,091Other temporary provisions 273,641 273,657 (60,536) 486,762Total tax credits on temporary differences 3,435,084 702,701 (1,143,742) 2,994,043Tax loss carryforwards 247,438 417,749 - 665,187Social contribution tax - Executive Act

No. 2158/2001 703,478 - - 703,478Total tax credits 4,386,000 1,120,450 (1,143,742) 4,362,708Unrecorded tax credits (954,310) - 108,140 (846,170)Subtotal - recorded tax credits 3,431,690 1,120,450 (1,035,602) 3,516,538Adjustment to fair value of available-for-sale

securities 59,261 - (55,081) 4,180Total recorded tax credits, net 3,490,951 1,120,450 (1,090,683) 3,520,718Current 1,231,019 566,694 Long-term 2,259,932 2,954,024


32


Consolidated

Balance as of


06/30/2007 Allowance for loan losses 739,091 85,085 (113,177) 710,999Reserve for civil contingencies 71,118 14 (1,269) 69,863Reserve for tax contingencies 489,444 25,035 (4,992) 509,487Reserve for labor contingencies 310,946 79,060 (36,253) 353,753Reserve for maintenance of stockholders’

equity integrity 667,456 - (129,159) 538,297Adjustment to fair value of trading securities

and derivatives 137,798 237,966 - 375,764Accrual for pension plan 887,141 11,023 (802,073) 96,091Other temporary provisions 294,142 277,898 (63,351) 508,689Total tax credits on temporary differences 3,597,136 716,081 (1,150,274) 3,162,943Tax loss carryforwards 255,179 417,749 (2,354) 670,574Social contribution tax - Executive Act

No. 2158/2001 719,040 - - 719,040Total tax credits 4,571,355 1,133,830 (1,152,628) 4,552,557Unrecorded tax credits (1,039,293) (3,256) 130,822 (911,727)Subtotal - recorded tax credits 3,532,062 1,130,574 (1,021,806) 3,640,830Adjustment to fair value of available-for-sale

securities 59,270 1 (55,085) 4,186Deferred income from derivatives 43 6 - 49Total recorded tax credits, net 3,591,375 1,130,581 (1,076,891) 3,645,065Current 1,246,830 577,825Long-term 2,344,545 3,067,240

Tax credits are recorded pursuant to Bacen rules and adjusted according to their expected realization and respective present value, both indicated below:

b) Expected realization of recorded tax credits

Bank

Year

Temporary differences

IRPJ

Temporarydifferences

CSLL Tax loss

carryforwards CSLL 18% Total Recorded 2007 669,018 232,928 4,692 27,012 933,650 566,6942008 572,845 190,703 242,042 24,624 1,030,214 839,0842009 252,206 75,722 418,453 125,751 872,132 844,5362010 452,956 148,765 - 101,658 703,379 689,5432011 191,076 46,013 - 123,553 360,642 240,4842012 to 2014 76,655 21,812 - 300,880 399,347 336,1972015 to 2016 8,058 1,167 - - 9,225 -2017 to 2019 12,087 1,750 - - 13,837 -2020 to 2021 8,058 1,167 - - 9,225 -After 2021 27,129 3,928 - - 31,057 -Total 2,270,088 723,955 665,187 703,478 4,362,708 3,516,538


33


Consolidated

Year

Temporary differences

IRPJ

Temporary Differences

CSLL Tax loss

carryforwards CSLL 18% Total Recorded 2007 676,769 243,278 5,986 28,093 954,126 577,8252008 585,772 210,705 244,283 26,230 1,066,990 856,6962009 269,940 96,768 420,139 128,718 915,565 861,2282010 498,045 165,306 83 104,642 768,076 753,1702011 198,524 56,025 83 126,993 381,625 252,2302012 to 2014 76,655 21,812 - 304,364 402,831 339,6812015 to 2016 8,058 1,167 - - 9,225 -2017 to 2019 12,087 1,750 - - 13,837 -2020 to 2021 8,058 1,167 - - 9,225 -After 2021 27,129 3,928 - - 31,057 -Total 2,361,037 801,906 670,574 719,040 4,552,557 3,640,830

IRPJ - Corporate income tax CSLL - Social contribution tax

Due to differences between accounting, tax and corporate criteria, expected realization of tax credits should not be taken as indicative of future net income.

The expected realization does not consider the tax credit of the adjustment to fair value of available-for-sale securities and deferred income from derivatives.

c) Present value of deferred tax credits

The present value of total tax credits is R$3,636,842 (06/30/2006 - R$591,287) - Consolidated R$3,793,336 (06/30/2006 - R$591,287) and the present value of recorded tax credits is R$2,930,262 (06/30/2006 - R$402,070) - Consolidated R$3,030,560 (06/30/2006 - R$402,070). The present value was calculated taking into account the expected realization of temporary differences, tax loss carryforwards, and social contribution tax at the rate of 18% (Executive Act No. 2158/2001) and the average funding rate projected for the corresponding periods.

12. OTHER RECEIVABLES - OTHER

Bank Bank/


Receivables from export contracts 354,137 - 354,137Debtors for purchase of assets 79,248 18,342 81,429Salary advances/other 52,717 2,735 53,129Escrow deposits for: Labor claim appeals 1,179,711 229,873 1,212,597 Tax claim appeals 1,026,486 122,559 1,166,819 Other 219,672 68,665 227,786Recoverable taxes 144,353 111,025 277,792Reimbursable payments 193,444 40,583 199,755Tax incentive options 2,173 - 2,187Credit cards 1,042,508 - 1,042,508Rural product notes 146,734 25,100 146,734Receivables 38,877 - 42,086Other receivables 492 - 3,201Contract guarantees - former controlling stockholders

(Note 23.h) 939,767 - 939,767Receivables from affiliates 44,776 362,834 43,012Other debtors 32,271 74,189 32,367Total 5,497,366 1,055,905 5,825,306

Current 1,664,914 147,059 1,696,961Long-term 3,832,452 908,846 4,128,345


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13. OTHER ASSETS

As of June 30, 2007 this balance refers principally to assets not in use, composed of real estate and vehicles received in settlement of liabilities in the amount of R$32,000 (Bank and Consolidated), net of allowance for valuation, and temporary investments in the amount of R$9,738, net of allowance for investment losses.

14. PREPAID EXPENSES

Bank Bank/

Consolidated Consolidated 06/30/2007 06/30/2006 06/30/2007 Exclusivity contracts in provision of banking services (1) 698,341 21,134 698,341Commissions 67,568 7,160 67,568Software license 28,432 - 28,432Foreign funding expenses 14,439 - 14,439Other 62,343 2,720 62,538Total 871,123 31,014 871,318Current 277,912 7,399 278,053Long-term 593,211 23,615 593,265

(1) Refers to commercial partnership agreements with the private and public sectors to assure exclusivity for banking services of payroll credit processing and payroll loans, maintenance of collection portfolio, supplier payment services and other banking services. These agreements are usually effective for 3 to 5 years. As of June 30, 2007, the balance includes the agreement with the Rio de Janeiro Municipal Government in the amount of R$322,774, net of amortization.

15. FOREIGN BRANCHES

As of June 30, 2007, the summary financial position of the Foreign Branches (Grand Cayman and Tokyo), converted at the exchange rate prevailing at the balance sheet date and included in the Bank’s financial statements, is as follows:

Assets 13,932,499Current and long-term assets 13,932,281Cash 67,181Interbank investments 217,029Securities and derivatives 6,739,314Lending operations 3,532,936Leasing operations 21,298Other assets 3,354,523Permanent assets 218Liabilities and stockholders’ equity 13,932,499Current and long-term liabilities 13,492,337Money market funding 678,136Funds from acceptance and issuance of securities 1,413,004Borrowings 5,239,400Subordinated debt 965,427Other liabilities 5,196,370Stockholders' equity 440,162Net loss (2,737)

At the meeting held on October 26, 2006, the Executive Board approved the sale of assets and liabilities of the Tokyo branch to Banco Itaú S.A. for US$1,500 thousand and, provided that certain requirements of the agreement are met one year after the transfer, an additional amount of up to US$7,500 thousand will be received. In December 2006, the assets and liabilities were sold and the premises are under liquidation according to Japanese legislation.


35


16. INVESTMENTS IN AFFILIATES AND SUBSIDIARIES

06/30/2007

Number of shares (in

thousands)

Capital

Stockholder’

equity

Net income (loss)

Common and

quotas (*) Preferred

Financial Sector Santander Brasil Arrendamento

Mercantil S.A. (3) 390,000 504,935 34,066 86,984 -Banespa S.A. Corretora de Câmbio e

Títulos (3 and 6) 23,000 80,776 27,817 6,718,398 6,718,398Santander Brasil S.A. Corretora de

Títulos e Valores Mobiliários (3) 35,000 104,755 11,253 9,201 4,400Santander Distribuidora de Títulos e

Valores Mobiliários Ltda. (3) 6,750 11,299 (115) 11,250 (*) -Santander Asset Management

Distribuidora de Títulos e Valores Mobiliários Ltda. (3 and 4)

64,000 79,132 10,130 64,000 (*) -

Other sectors Santander S.A. Serviços Técnicos,

Administrativos e de Corretagem de Seguros (3 and 5)

15,498 67,367 19,401 50,425,310 -

Norchem Participações e Consultoria S.A. (3) 22,000 45,366 4,046 1,900 -

Norchem Holding e Negócios S.A. (3) 38,910 82,947 7,837 5,789 1,930Santander Participações e Serviços

S.A. (1 and 3) 286,473 144,234 4,351 496,000 -Santander Banespa Administradora de

Consórcios Ltda. (3 and 7) 3,000 3,567 48 3,000 (*) -Agropecuária Tapirapé S.A. (3) 7,900 5,999 203 199,729 384,697 06/30/2007 06/30/2006


36


Ownership

(%)

Equity in affiliates andsubsidiaries

Carrying amount of

investments

Equity in affiliates

and subsidiaries

Carrying amount of

investments Financial Sector 83,151 780,897 13,213 184,468Banco Santander S.A. (2) - - - 13,965 149,567Banco Santander Brasil S.A. (2) - - - (752) 34,901Santander Brasil Arrendamento

Mercantil S.A. (3) 99.99% 34,066 504,935 - -Banespa S.A. Corretora de Câmbio e

Títulos (3 and 6) 99.99% 27,817 80,776 - -Santander Brasil S.A. Corretora de

Títulos e Valores Mobiliários (3) 99.99% 11,253 104,755 - -Santander Distribuidora de Títulos e

Valores Mobiliários Ltda. (3) 99.99% (115) 11,299 - -Santander Asset Management

Distribuidora de Títulos e Valores Mobiliários Ltda. (3 and 4) 99.99% 10,130 79,132 - -

Other sectors 27,705 261,143 - -Santander S.A. Serviços Técnicos,

Administrativos e de Corretagem de Seguros (3 and 5) 99.99% 19,401 67,367 - -

Norchem Participações e Consultoria S.A. (3) 50.00% 2,023 22,683 - -

Norchem Holding e Negócios S.A. (3) 21.75% 1,704 18,041 - -Santander Participações e Serviços

S.A. (1 and 3) 100.00% 4,351 144,234 - -Santander Banespa Administradora

de Consórcio Ltda.(3 and 7) 99.99% 48 3,567 - -Agropecuária Tapirapé S.A. (3) 87.54% 178 5,251 - -Total 110,856 1,042,040 13,213 184,468 (1) Formerly Santander Companhia Securitizadora de Créditos Financeiros, which merged Santander Brasil Participações e

Empreendimentos S.A. (Note 2.c). (2) Entities merged into Banco Santander Banespa S.A. (Note 2.a). (3) Entities that started being controlled by Banco Santander Banespa S.A. beginning June 30, 2006, due to the merger mentioned in Note

2.a. (4) Formerly Santander Banespa Asset Management Distribuidora de Títulos e Valores Mobiliários Ltda. (5) Formerly Banespa S.A. Serviços Técnicos, Administrativos e de Corretagem de Seguros. (6) In process of change of name to Santander S.A. Corretora de Câmbio e Títulos. (7) In process of change of name to Santander Administradora de Consórcios Ltda.

17. PROPERTY AND EQUIPMENT

Bank Bank/

Consolidated 06/30/2007 06/30/2006 Cost Depreciation Net Net

Real estate 309,586 (174,955) 134,631 6,343

Buildings 227,787 (174,955) 52,832 2,794Land 81,799 - 81,799 3,549

Other 1,416,523 (890,616) 525,907 20,575Installations, furniture and equipment 400,229 (185,407) 214,822 8,747Security and communication equipment 153,247 (83,007) 70,240 1,473Data processing equipment 858,297 (619,551) 238,746 10,355Other 4,750 (2,651) 2,099 -

Total 1,726,109 (1,065,571) 660,538 26,918


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Cost Depreciation Net Real estate 312,509 (175,772) 136,737

Buildings 229,786 (175,772) 54,014Land 82,723 - 82,723

Other 1,417,673 (891,731) 525,942Installations, furniture and equipment 401,304 (186,482) 214,822Security and communication equipment 153,295 (83,020) 70,275Data processing equipment 858,297 (619,551) 238,746Other 4,777 (2,678) 2,099

Total 1,730,182 (1,067,503) 662,679

18. DEFERRED CHARGES


06/30/2007 06/30/2006 Cost Amortization Net Net

Goodwill from merger 482,665 (482,665) - -Leasehold improvements 492,777 (189,764) 303,013 17,899Acquisition and Development of Software (1) 793,483 (440,266) 353,217 -Other 110,017 (31,456) 78,561 10,949Total 1,878,942 (1,144,151) 734,791 28,848 Consolidated 06/30/2007 Cost Amortization Net Goodwill from merger 482,665 (482,665) -Leasehold improvements 492,777 (189,764) 303,013Acquisition and Development of Software (1) 793,697 (440,352) 353,345Other 110,017 (31,456) 78,561Total 1,879,156 (1,144,237) 734,919

(1) As a result of the conclusion of the legal merger process and the adoption of the global brand Santander, Management recorded a

provision for residual costs of deferred charges in the amount of R$155,548.

As of June 30, 2007, the goodwill resulting from mergers was R$1,583,227 (06/30/2006 - R$302,140), which was fully offset against the reserve for maintenance of integrity of the merging entity’s stockholders’ equity, and the amount of R$379,875 (06/30/2006 - R$85,455) of amortization expense and the same amount of revenue from reversal of reserve were recorded in income.

19. MONEY MARKET FUNDING AND BORROWINGS AND ONLENDINGS

Bank Bank/

Consolidated

Without maturity

Up to 3 months

From 3 to 12 months

Over 12 months 06/30/2007 06/30/2006

Deposits 10,813,470 7,877,134 9,625,797 9,589,126 37,905,527 1,783,727Money market funding - 22,638,459 784,314 2,372,093 25,794,866 675,366Funds from acceptance and

issuance of securities - 320,620 433,221 877,539 1,631,380 6,392Borrowings and onlendings - 3,576,754 5,034,513 3,220,234 11,831,501 338,206Total 10,813,470 34,412,967 15,877,845 16,058,992 77,163,274 2,803,691Current 61,104,282 2,157,100Long-term 16,058,992 646,591


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Consolidated

Without maturity

Up to 3 months

From 3 to 12 months

Over 12 months 06/30/2007

Deposits 10,808,650 7,856,431 7,853,945 7,817,952 34,336,978Money market funding - 22,592,052 784,314 2,372,093 25,748,459Funds from acceptance and issuance of

securities - 320,620 433,221 877,539 1,631,380Borrowings and onlendings - 3,576,754 5,034,513 3,220,234 11,831,501Total 10,808,650 34,345,857 14,105,993 14,287,818 73,548,318Current 59,260,500Long-term 14,287,818

a) Deposits


Without maturity

Up to 3 months

From 3 to 12 months

Over 12 months 06/30/2007 06/30/2006

Demand deposits 4,414,618 - - - 4,414,618 216,141Savings deposits 5,316,335 - - - 5,316,335 608,887Interbank deposits - 300,254 1,981,533 1,614,037 3,895,824 150,168Time deposits 819,109 7,576,880 7,644,264 7,975,089 24,015,342 796,127Other deposits 263,408 - - - 263,408 12,404Total 10,813,470 7,877,134 9,625,797 9,589,126 37,905,527 1,783,727Current 28,316,401 1,451,594Long-term 9,589,126 332,133

Consolidated

Without maturity

Up to 3 months

From 3 to 12 months


Demand deposits 4,409,798 - - - 4,409,798Savings deposits 5,316,335 - - - 5,316,335Interbank deposits - 279,551 215,898 5,135 500,584Time deposits 819,109 7,576,880 7,638,047 7,812,817 23,846,853Other deposits 263,408 - - - 263,408Total 10,808,650 7,856,431 7,853,945 7,817,952 34,336,978Current 26,519,026Long-term 7,817,952

b) Money market funding

Bank/ Bank Consolidated

Up to 3 months

From 3 to 12 months

Over 12 months 06/30/2007 06/30/2006

Own portfolio 699,613 738,894 2,372,093 3,810,600 674,420Third parties 21,938,846 45,420 - 21,984,266 946Total 22,638,459 784,314 2,372,093 25,794,866 675,366Current 23,422,773 598,883Long-term 2,372,093 76,483 Consolidated

Up to 3months

From 3 to12 months


Own portfolio 699,613 738,894 2,372,093 3,810,600Third parties 21,892,439 45,420 - 21,937,859Total 22,592,052 784,314 2,372,093 25,748,459Current 23,376,366Long-term 2,372,093


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c) Funds from acceptance and issuance of securities

Bank/

Consolidated Issuance Maturity Currency Interest rate 06/30/2007 06/30/2006

Eurobonds July-2005 July-2008 US$ 5.00% 108,403 -Eurobonds April-2005 April-2008 R$ 17.65% 155,186 -Eurobonds June-2007 December-2007 US$ 5.70% 26,218 -Eurobonds (1) November-2005 May-2009 R$ IPCA + 6% 181,961 -Eurobonds (1) April-2006 August-2010 R$ IPCA + 6% 131,391 -Eurobonds (1) December-2005 May-2009 R$ IPCA + 6% 77,557 -Eurobonds (1) February-2006 August-2024 R$ IPCA + 6% 71,259 -Eurobonds (1) January-2006 May-2009 R$ IPCA + 6% 54,588 -Eurobonds (1) May-2006 August-2010 R$ IPCA + 6% 45,720 -Eurobonds (2) March-2006 August-2015 R$ IGPM + 8.15% 25,378 -Eurobonds (2) June-2007 May-2017 R$ FIDC (3) 33,395 -Structured notes March-2007 January-2014 R$ 10.00% 112,305 -Structured notes March-2007 July-2007 R$ 91.00% CDI 85,930 -Structured notes April-2007 July-2007 R$ 93.30% CDI 41,779 -Structured notes April-2007 July-2007 R$ 12.25% 41,376 -Structured notes May-2007 August-2007 R$ 12.50% 39,205 -Structured notes May-2007 September-2007 R$ 12.50% 39,205 -Other 156,261 -Securities issued abroad 1,427,117 -Real estate credit notes 204,263 6,392Total 1,631,380 6,392Current 753,841 6,392Long-term 877,539 -

(1) Indexed Linked Sovereign Notes (2) Indexed Linked Credit Event Notes (3) Indexed Linked FIDC Yield d) Borrowings and onlendings

Bank/

Consolidated

Up to 3 months

From 3 to 12 months

Over 12 months 06/30/2007 06/30/2006

Foreign borrowings 3,187,139 3,583,565 676,834 7,447,538 -

Import and export financing lines 2,863,991 3,313,552 654,967 6,832,510 -Other credit lines 323,148 270,013 21,867 615,028 -

Domestic onlendings 389,615 1,450,948 2,543,400 4,383,963 338,206Total 3,576,754 5,034,513 3,220,234 11,831,501 338,206Current 8,611,267 100,231Long-term 3,220,234 237,975

Export and import financing lines are funds raised from foreign banks, for use in commercial foreign exchange transactions, related to the discounting of export bills and export and import pre-financing, falling due through 2014 and subject to financial charges corresponding to exchange variation plus interest ranging from 0.69% to 10.95% p.a.

Domestic onlendings - official institutions are subject to financial charges corresponding to the Long-Term Interest Rate (TJLP), exchange variation of the BNDES basket of currencies, or US dollar exchange variation, plus interest rate in accordance with the operating policies of the BNDES System.


40


20. TAX AND SOCIAL SECURITY

Tax and social security payables comprise taxes payable and amounts being challenged in the courts.

Bank Bank/


Reserve for tax contingencies (Note 23) 1,850,284 100,521 2,145,707Reserve for tax contingencies - responsibility of former

controlling stockholders (Note 23.h) 607,061 - 607,061Provision for deferred taxes 754,623 21,134 758,165Taxes payable 157,909 7,259 160,882Accrued taxes on income 9,319 35,789 46,003Total 3,379,196 164,703 3,717,818Current 167,228 43,048 206,885Long-term 3,211,968 121,655 3,510,933

Nature and origin of deferred tax liabilities

Bank

Balance as of 12/31/2006 Recognition Realization

Balance as of 06/30/2007

Adjustment to fair value of trading securities and

derivatives 223,354 252,496 - 475,850Adjustment to fair value of available-for-sale

securities 141,556 114,190 (383) 255,363Deferred income from derivatives (1) 82,929 - (59,519) 23,410Total 447,839 366,686 (59,902) 754,623Long-term 447,839 754,623 Consolidated

Balance as of


06/30/2007 Adjustment to fair value of trading securities and

derivatives 223,394 252,546 - 475,940Adjustment to fair value of available-for-sale

securities 144,581 114,190 (3,408) 255,363Deferred income from derivatives (1) 82,929 - (59,519) 23,410Excess depreciation of leased assets 5,169 - (1,717) 3,452Total 456,073 366,736 (64,644) 758,165Long-term 456,073 758,165

(1) Income from derivatives to be taxed on a cash basis, according to Law No. 11,051/04, regulated by Federal Revenue Service (SRF) Regulatory Instruction No. 575/05.

21. SUBORDINATED DEBTS

Consist of securities issued according to National Monetary Council (CMN) Resolution No. 2837/2001, which are used as Level II Reference Equity, for calculating the operating limit.


41


Bank/Consolidated

Issuance Maturity Amount Interest rate 06/30/2007 Perpetual Bonds (1) September-05 Indeterminate US$500 million 8.70% 965,427Subordinated Certificates of

Deposit (2) June-06 July-16 R$1,500 million 105.00% CDI 1,715,100Subordinated Certificates of

Deposit (2) October-06 September-16 R$850 million 104.50% CDI 930,565Subordinated Certificates of

Deposit (2) July-06 to October-06 July-16 R$447 million 104.50% CDI 505,148

Total 4,116,240Current 2,328Long-term 4,113,912

(1) Perpetual bonds issued by Banespa Grand Cayman with quarterly interest payments. These bonds do not have a maturity date or mandatory redemption, although they may, at the discretion of Banco Santander Banespa S.A. and with prior authorization by Bacen, be redeemed in full in December 2010 or on any subsequent interest payment date.

(2) Subordinated certificates of deposit issued by Banco Santander Banespa S.A. with yield paid at the end of the term together with the principal.

22. OTHER PAYABLES - OTHER

Bank Bank/

Consolidated Consolidated 06/30/2007 06/30/2006 06/30/2007Reserve for labor and civil contingencies

(Note 23) 1,251,425 191,148 1,305,054Reserve for contingencies - Responsibility of former controlling

stockholders (Note 23.h) 332,706 - 332,706Pension Plan (Note 35) 476,824 147,926 476,824Credit cards 841,470 - 841,470Sale of right to receipt of future flow of payment orders from

abroad (1) 777,622 - 777,622Payables for acquisition of assets and rights (2) 546,623 - 546,623Accrued liabilities Personnel expenses 344,340 20,181 351,074 Administrative expenses 190,008 1,788 192,097 Other payments 139,132 - 141,582Payables to suppliers 108,925 4,867 110,267Installments payable for exclusivity contracts in provision of

banking services 36,319 2,225 36,319Creditors for unreleased funds 90,974 2,632 90,974FGTS (severance pay fund) for amortization 14,327 915 14,327Other 551,076 39,431 562,044Total 5,701,771 411,113 5,778,983Current 3,488,818 135,715 3,539,111Long-term 2,212,953 275,398 2,239,872

(1) Payable for sale of right to receipt of future flow of payment orders receivable from foreign correspondent banks, in the amount of US$400 million, with charges equivalent to 5.5% p.a., payable semiannually. The principal will be paid in 9 semiannual installments from September 2007 to September 2011.

(2) As of June 30, 2007, refers basically to export note loan operations in the amount of R$499,470.

23. CONTINGENT ASSETS AND LIABILITIES AND LEGAL OBLIGATIONS - TAX AND SOCIAL SECURITY

Banco Santander Banespa S.A. and its subsidiaries are parties to tax, civil and labor lawsuits and administrative proceedings in the normal course of their business.

Reserves were recognized based on the nature, complexity and history of the lawsuits, and the opinion of the in-house and outside legal counsel. Santander Banespa's policy is to accrue the full amount of lawsuits whose likelihood of unfavorable outcome is probable.


42


Legal obligations - tax and social security were fully recognized in the financial statements, except for the cases in which Management considered, based on experts’ evaluation and the status of the lawsuit, will not produce effects on the balance sheet for Santander Banespa’s entities.

Management understands that the recognized reserves are sufficient to cover possible losses on the lawsuits. The adoption of CVM Resolution No. 489, of October 3, 2005, did not produce effects on Santander Banespa's income and stockholders' equity.

a) Contingent assets

In the first six-month period of 2007 no contingent assets were accounted for.

b) Balances of contingent liabilities and legal obligations by nature

Bank Bank/

Consolidated Consolidated 06/30/2007 06/30/2006 06/30/2007 Reserve for tax contingencies (1) 1,850,284 100,521 2,145,707Reserve for labor and civil contingencies (Note 22) 1,251,425 191,148 1,305,054

Reserve for labor contingencies 1,033,090 116,904 1,077,888Reserve for civil contingencies 218,335 74,244 227,166

Total 3,101,709 291,669 3,450,761Long-term 3,101,709 291,669 3,450,761

(1) Classified under the caption "Other payables - tax and social security" (Note 20), includes mainly legal obligations.

c) Changes in contingent liabilities and legal obligations


2007 2006 Tax Labor Civil Tax Labor Civil Balance as of

January 1 1,798,275 906,595 220,637 23,373 121,181 75,992Recognition (1) 64,605 331,681 48,772 77,804 5,965 1,915Reversal of reserve (10,657) - - (249) - -Write-offs due to

payment (1,939) (205,186) (51,074) (407) (10,242) (3,663)Balance as of

June 30 1,850,284 1,033,090 218,335 100,521 116,904 74,244Escrow deposits - other

receivables (2) 578,644 345,254 31,088 Escrow deposits -

securities (2) 13,412 14,954 14,118

Consolidated 2007 Tax Labor Civil Balance as of January 1 2,086,111 951,988 230,856Recognition (1) 78,710 341,788 50,490Reversal of reserve (15,795) (317) (888)Write-offs due to payment (3,319) (215,571) (53,292)Balance as of June 30 2,145,707 1,077,888 227,166Escrow deposits - other receivables (2) 685,794 357,557 31,916Escrow deposits - securities (2) 49,720 14,954 14,491

(1) Includes the accrual for tax contingencies for the period, recorded under "Tax Expenses". (2) Do not include escrow deposits for possible and/or remote contingencies and appeal deposits.


43


d) Legal obligations - tax and social security

Refer to judicial and administrative proceedings involving tax and social security obligations, as described below:

Difference in CSLL (social contribution tax) rate - R$1,153,943 - Consolidated R$1,225,045: challenges the payment of the difference in CSLL rate from 8% to 18% applied to financial institutions, in disagreement with the constitutional principle of equal treatment. A court injunction was obtained. On June 15, 2005, the former Banespa received an unfavorable decision from the lower court. The Bank appealed to the Federal Regional Court and is awaiting decision on the lawsuit.

Deductibility of CSLL from IRPJ (corporate income tax) - R$362,352 - Consolidated R$381,469: seeks deduction of CSLL expense from income tax calculation. A court injunction was obtained. Subsequently, the former Banespa received an unfavorable decision and filed an appeal with the Federal Regional Court, which was received for remanding and supersedeas effects. Concurrently, the Bank filed for suspension of the alleged debt and, on March 29, 2000, the judge authorized the escrow deposit. The lawsuit has not yet been judged by the Court.

Summer Plan (economic stabilization plan) IRPJ/CSLL - R$29,766 - Consolidated - R$78,095: Lawsuit seeking elimination of inflation effects resulting from the Summer Plan in the income and social contribution tax basis. The lower court issued a decision unfavorable to the Bank and, after an appeal was filed, the Federal Regional Court rendered a decision acknowledging the application of the rate of 42.72%. Appeals filed are awaiting judgment.

FGTS (severance pay fund) - R$51,124 - Consolidated R$54,088: Lawsuit claiming the unconstitutionality of charges created by Supplementary Law No. 110/01 equivalent to 10% on the balance of FGTS accounts in the event of dismissal without cause and 0.5% on compensation to employees. The companies were successful in this lawsuit relating to 2001 and, with respect to the other years, are awaiting the conversion into cash of the escrow deposits made.

e) Tax and social security contingencies

Refer to judicial and administrative proceedings related to taxes and social security classified, based on the legal counsel’s opinion, as probable loss risk, for which reserves were recorded. The matters in dispute refer to the following:

ISS (service tax) - Financial Institutions - refers to administrative and judicial proceedings with several municipalities that require the payment of ISS on several revenues from operations that usually do not qualify as service provision. The updated amount involved is R$56,368 - Consolidated R$78,317.

INSS (social security contribution) - refers to administrative and judicial proceedings seeking collection of social security contribution and salary premium for education on amounts that normally are not of a salary nature. The updated amount involved is R$118,053 - Consolidated R$144,677.

f) Labor contingencies

These are lawsuits brought by labor unions and former employees claiming labor rights they understand are due, especially payment for overtime and other labor rights, including retirement benefit lawsuits.

The lawsuits are controlled individually and the reserves are recognized based on previous court decisions and the history of payments made, including settlements, in labor lawsuits and the stage of each lawsuit.

g) Civil contingencies

Refer to lawsuits for indemnity and review of lending agreements.

Lawsuits for indemnity seek indemnity for property damage and/or pain and suffering, relating to the consumer relationship, principally with undue protest, return of checks, inclusion of debtors’ information


44


into the credit restriction master file, elimination of inflation effects in escrow deposit accounts and other matters.

Lawsuits for review refer to challenges of lending agreement clauses by customers.

There are also lawsuits filed by minority stockholders of the former Banco Noroeste against corporate acts in 1998 and 1999. Although there are unfavorable decisions from the lower court, experts believe that the Bank has good chances of overturn of such decisions through the appeals filed with the São Paulo State Court of Justice.

The lawsuits are controlled individually based on the legal counsel’s evaluation of success and classification, taking into consideration the status of each lawsuit, law and previous court decisions.

h) Other lawsuits under the responsibility of former controlling stockholders

Refer to tax, labor and civil lawsuits in the amounts of R$607,061, R$226,354 and R$106,352 - Bank and Consolidated, respectively, recorded under “Other payables - tax and social security” (Note 20) and “Other payables - other” (Note 22) which are the responsibility of the former controlling stockholders of the acquired entities. The lawsuits have guarantees under the agreements signed at the time of the acquisitions in the amount of R$939,767, recorded under “Other receivables - other” (Note 12). These lawsuits have no effects on the balance sheet for the Bank.

i) Contingent liabilities classified as possible loss risk

Refer to judicial and administrative proceedings involving tax, civil and labor matters assessed by the legal counsel as possible loss risk, which were not accounted for. The main lawsuits are:

Deductibility of Expenses on Allowance for Doubtful Receivables- Administrative collection by the Federal Revenue Service in view of the deduction from the IRPJ and CSLL basis of losses on lending operations performed in 1998 and 2000. The Bank is awaiting judgment and understands that the collection is undue since the expenses met the deductibility conditions of Law No. 9430/96 as they referred to definitive losses. The amount involved is R$183,152, Bank and Consolidated.

CPMF (tax on banking transactions) on Customer Operations - in May 2003, the Federal Revenue Service issued an Infraction Notice against Santander Distribuidora de Títulos e Valores Mobiliários Ltda. (Santander DTVM) and another Infraction Notice against the former Banco Santander Brasil S.A., both in the amount of R$290 million. The notices refer to the collection of a CPMF tax credit on transactions conducted by Santander DTVM in the management of its customers’ funds and clearance services provided by the Bank to Santander DTVM, according to the agreement between these two companies, in 2000, 2001 and the first two months of 2002. Both companies consider that the tax treatment adopted was adequate since said transactions were subject to CPMF at zero rate. The Bank is awaiting judgment of the administrative proceedings by the Board of Tax Appeals. The updated amount involved of each of the lawsuits is approximately R$480 million.

Addition to the Price on the Purchase of Shares of Banco do Estado de São Paulo S.A. - Banespa - the former Banco Santander S.A. (former controlling stockholder of Banespa) filed an ordinary action claiming the inexistence of legal relationship before the National Treasury in relation to item 3.1 of the Banespa’s Share Purchase and Sale Agreement. Such item provided for the payment of an addition to the minimum price should Banespa be released from the tax contingency recognized at the time of the privatization upon the setting of the minimum price. The updated amount involved is approximately R$260 million. After an unfavorable lower court decision, the Bank is awaiting a decision on the appeal at the court and understands that the collection is undue since the payment of the tax contingency by Banespa did not qualify under the hypotheses included in the agreement that could generate addition to the price paid.

Semiannual Bonus or Profit Sharing - labor lawsuit relating to the payment of a semiannual bonus or, successively, profit sharing to retired employees from the former Banco do Estado de São Paulo S.A. - Banespa, hired by May 22, 1975. This lawsuit was filed by Banespa’s Retirees Association. The involved amount is not disclosed due to the current stage of the lawsuit and the possibility of affecting its progress.


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24. STOCKHOLDERS’ EQUITY

a) Capital

Fully paid-up capital is composed of 132,768,479 thousand registered shares without par value, of which 9,612,358 thousand refer to the capital increase approved at the Board of Directors’ and Executive Board’s meeting on June 25, 2007, totaling 5,142,958 thousand common shares and 4,469,400 thousand preferred shares, held as follows:

Shares in thousands Common Preferred Total Brazilian residents 498,688 2,048,621 2,547,309Foreign residents 70,537,235 59,683,935 130,221,170Total 71,035,923 61,732,556 132,768,479

b) Dividends

In accordance with the Bank’s bylaws, stockholders are entitled to a minimum dividend equivalent to 25% of net income for the year, adjusted according to legislation, Preferred shares are nonvoting and nonconvertible, but have the same rights and advantages granted to common shares, in addition to priority in the payment of dividends 10% higher than those paid on common shares.

The Executive Board’s and Board of Directors’ meeting held on June 29, 2007 approved the payment of dividends, based on the reserve for dividend equalization in the amount of R$521,762 (ON - registered common shares R$3,7553 - PN - registered preferred shares R$4,1308, in reais per thousand shares).

c) Interest on capital

The Executive Board and Board of Directors’ meeting held on June 29, 2007 approved the payment of interest on capital, calculated in the first half of 2007, in the amount of R$263,000 (ON - registered common shares R$1,8929 - PN - registered preferred shares R$2,0822, in reais per thousand shares and ON - registered common shares R$1,6089 - PN - registered preferred shares R$1,7698, net of income tax, in reais per thousand shares), which will be included in the Bank’s calculation of mandatory minimum dividend for 2007 and that generated a tax benefit of R$89,420.

d) Reserve for dividend equalization

Limited to 50% of capital, this reserve is intended to provide funds for the payment of dividends, including dividends in the form of interest on capital, or advance payments, for purposes of compensation to stockholders.

e) Consolidated stockholders’ equity

The Consolidated Stockholders’ Equity is decreased by R$37,698 of unrealized results and the realization of these results affected net income for the six-month period by R$6,589.

25. OPERATING RATIOS

a) Basel agreement (operating limit)

Brazilian financial institutions are required to maintain stockholders' equity commensurate with their asset exposure risk, weighted by factors varying from 0 to 300%, and ratio of equity to risk-weighted assets of at least 11%. This ratio is determined on a consolidated basis and, as of June 30, 2007 and 2006, Santander Banespa was in compliance with the aforementioned limit, as shown below:


46


Operating assets (1) 06/30/2007 06/30/2006 Risk-weighted assets Reduced risk: 20% 612,822 1,115,289Reduced risk: 50% 3,390,957 2,370,797Normal risk: 100% 63,066,473 45,298,077Risk: 300% 10,000,456 10,620,167Total risk-weighted assets 77,070,708 59,404,330Basel Agreement rate 11% 11%Required stockholders' equity to assets 8,477,778 6,534,476Swap credit risk 394,531 238,272Foreign exchange risk - 361,525Interest rate risk 372,577 577,723Required stockholders’ equity 9,244,886 7,711,996Adjusted stockholders’ equity 9,959,633 7,256,339Tax credit reduction - Resolution CMN 3059 (271,745) (303,952)

Decrease permanent assets - deferred charges, less goodwill (84,162) -Adjustment to fair value of available-for-sale securities (434,482) -

Adjusted stockholders’ equity - TIER I 9,169,244 6,952,387Subordinated debt 4,116,240 2,590,944Adjustment to fair value of available-for-sale securities 434,482 -Adjusted stockholders’ equity - TIER I and TIER II 13,719,966 9,543,331Margin 4,475,080 1,831,335Ratio - TIER I 10.91% 9.92%Ratio – Total 16.32% 13.61%

(1) Index calculated based on the consolidated financial statements of the financial institutions.

b) Fixed assets to equity ratio

Brazilian financial institutions are required to maintain stockholders' equity commensurate with their investments in permanent assets. The fixed assets to equity ratio cannot exceed 50% of stockholders' equity, adjusted pursuant to prevailing regulations. As of June 30, 2007 and 2006, Santander Banespa is in compliance with the aforementioned ratio, with fixed assets to equity ratio of 11.61% and 17.99%, respectively.


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26. RELATED-PARTY TRANSACTIONS

Transactions among the entities of Santander Banespa are carried out under usual market rates and terms, comparable to those applied in transactions with unrelated parties.

The principal transactions and balances are as follows:

Bank 06/30/2007 06/30/2006

Assets (Liabilities)

Income (Expenses)

Assets (Liabilities) Income

(Expenses) Cash 47,567 - - -Banco Santander Central Hispano, S.A. 47,567 - - -Interbank investments 428,797 26,469 36,997 3,692Banco Santander Central Hispano, S.A. 400,851 25,663 - -Banco do Estado de São Paulo S.A. - Banespa - - 36,997 3,414Santander Brasil Arrendamento Mercantil S.A. 27,946 806 - -Other - - - 278Securities and derivatives 3,432,466 432,803 84,079 (1,008)Santander Brasil Arrendamento Mercantil S.A. 3,255,520 187,552 73,427 4,562Banco Santander Central Hispano, S.A. 134 510 - -Santander Benelux, S.A., N.V. 175,000 243,441 - -Santander International Bank 1,812 1,300 - -Banco do Estado de São Paulo S.A. - Banespa - - 4,874 (16,398)Banco Santander Brasil S.A. - - - (7,091)Banco Santander S.A. - - 5,778 17,919Domestic correspondents - - 1,838 -Other - - 1,838 -Dividends and bonuses receivable - - 15,391 -Banco Santander Brasil S.A. - - 2,027 -Banco Santander S.A. - - 13,364 -Trading account 2,502 - - -Banco Santander Central Hispano, S.A. 2,502 - - -Foreign exchange portfolio - assets 1,665,134 - 1,085 -Banco Santander Brasil S.A. - - 1,085 -Banco Santander Central Hispano, S.A. 1,665,134 - - -Receivables from affiliates 44,776 76,570 362,834 11,011Banco Santander Brasil S.A. - - 360,935 -Santander Brasil S.A. Corretora de Títulos e Valores

Mobiliários 1,594 - - -Banco Santander Central Hispano, S.A. 12,452 - - -Santander Seguros S.A. 27,541 68,598 - -Santander Capitalização S.A. 1,518 7,962 - -Other 1,671 10 1,899 11,011Deposits (3,619,441) (203,142) (151,845) (15,590)Santander Brasil Arrendamento Mercantil S.A. (3,380,544) (190,442) - -Banespa S.A. Corretora de Câmbio e Títulos (15,995) (507) - -Santander Participações e Serviços S.A. (3) (133.278) (7,303) - -Santander Brasil Investimentos e Serviços S.A. (46,277) (2,576) - -Santander Asset Management Distribuidora de Títulos e

Valores Mobiliários Ltda. (1) (29.230) (1,876) - -Banco Santander Brasil S.A. - - (150,168) (15,124)Santander Seguros S.A. (1,700) - - -Agropecuária Tapirapé S.A. (3,027) (169) - -Universia Brasil S.A. (1,362) (76) - -Santander S.A. Serviços Técnicos, Administrativos e

de Corretagem de Seguros (2) (2,582) - - -Santander Banespa Administradora de Consórcios

Ltda. (3,466) (193) - -Other (1,980) - (1,677) (466)


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Bank 06/30/2007 06/30/2006

Assets (Liabilities)

Income (Expenses)

Assets (Liabilities) Income

(Expenses) Money market operations (46,407) (4,895) (537,631) (40,202)Santander Brasil S.A. Corretora de Títulos e Valores

Mobiliários (1,632) (2,189) - -Banespa S.A. Corretora de Câmbio e Títulos (29,613) (1,820) - -Santander Distribuidora de Títulos e Valores

Mobiliários Ltda. (15,162) (886) - -Banco Santander Brasil S.A. - - (474,597) (36,743)Banco Santander S.A. - - (63,034) (3,283)Banco do Estado de São Paulo S.A. - Banespa - - - (176)Borrowings and onlendings (1,847,484) (36,662) - -Santander Overseas Bank - Puerto Rico (1,813,568) (36,662) - -Banco Santander Central Hispano, S.A. (19,549) - - -Banco Santander Central Hispano - Hong Kong (3,606) - - -Banco Santander Chile (10,262) - - -Other (499) - - -Derivatives (236,409) (210,904) (23,218) (17,897)Santander Benelux, S.A., N.V. (222,599) (195,884) - -Banco Santander Central Hispano, S.A. (13,413) (13,413) - -Banco Santander S.A. - - (4,900) (1,349)Banco do Estado de São Paulo S.A. - Banespa - - (13,219) (16,597)Banco Santander Brasil S.A. - - (5,099) 49Other (397) (1,607) - -Foreign exchange portfolio - liabilities (1,675,449) - (1,626) -Banco Santander Brasil S.A. - - (1,626) -Banco Santander Central Hispano, S.A. (1,675,449) - - -Domestic correspondents - - (5,751) -Other - - (5,751) -Dividends and bonuses payable (730,517) - (240,459) -Grupo Empresarial Santander, S.L. (730,495) - (240,440) -Santander Seguros S.A. (22) - (19) -Trading account (18) - - -Santander Brasil S.A. Corretora de Títulos e Valores

Mobiliários (18) - - -Payables to affiliates (269) (1,584) (681) -Other (269) (1,584) (681) -Other payables - other (2,605) (9,773) - -Other (2,605) (9,773) - -Recovery of charges and expenses - 9,843 - -Other - 9,843 - -Outside service income - 760 - -Other - 760 - -Outside service expenses - (2,456) - -Other - (2,456) - - (1) Formerly Santander Banespa Asset Management Distribuidora de Títulos e Valores Ltda. (2) Formerly Banespa S.A. Serviços Técnicos, Administrativos e de Corretagem de Seguros. (3) Formerly Santander Companhia Securitizadora de Créditos Financeiros.


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27. INCOME FROM SERVICES RENDERED

Bank Bank/


Income from fund management 297,378 - 314,946Checking account services 317,617 25,333 317,598Lending operations 483,961 18,282 483,961Insurance 165,540 11,011 186,534Credit cards 162,708 - 162,708Receiving services

Collection 65,866 6,507 65,866Bills, taxes and fees 37,852 2,044 37,852

Securities brokerage and placement services 38,620 - 102,666Guarantees provided 35,236 824 35,236Other 74,357 4,322 92,631Total 1,679,135 68,323 1,799,998

28. PERSONNEL EXPENSES

Bank Bank/


Compensation 541,219 37,212 546,029Charges 199,675 11,566 201,592Benefits 148,325 9,512 149,826Training 13,184 171 13,189Other 1,890 19 2,210Total 904,293 58,480 912,846

29. OTHER ADMINISTRATIVE EXPENSES

Bank Bank/


Outside and specialized services 454,697 16,191 469,137Depreciation and amortization 205,262 6,579 205,355Advertising, promotions and publicity 138,271 262 138,741Data processing 92,421 258 92,600Communications 116,413 5,373 120,744Rentals 81,647 5,418 81,567Transportation and travel 64,391 6,235 64,642Security services 50,503 4,367 50,503Asset maintenance and upkeep 39,010 3,194 39,010Utilities 34,811 3,069 34,830Financial system services 28,668 1,908 32,567Materials 15,352 582 15,355Other 30,819 2,004 33,352Total 1,352,265 55,440 1,378,403


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30. TAX EXPENSES

Bank Bank/

Consolidated Consolidated 06/30/2007 06/30/2006 06/30/2007 COFINS (tax on revenue) 243,124 17,200 251,247ISS (service tax) 74,364 3,501 81,113PIS/PASEP (tax on revenue) 39,508 2,795 40,837Other 46,177 2,299 51,404Total 403,173 25,795 424,601

31. OTHER OPERATING INCOME

Bank Bank/


Monetary gain 3,040 6,625 3,118Monetary adjustment of escrow deposits 65,177 8,977 76,399Recovery of charges and expenses 41,580 2,558 39,307Monetary adjustment of recoverable taxes 6,951 77,051 10,249Interest received 8,722 4,487 10,735Dividends and bonuses 11,177 588 11,688Reversal of operating accruals

Tax (Note 23.c) 10,657 249 15,795Labor (Note 23.c) - - 317Civil (Note 23.c) - - 888Other 49,504 2,308 51,071

Other 19,252 9,781 22,590Total 216,060 112,624 242,157

32. OTHER OPERATING EXPENSES

Bank Bank/

Consolidated Consolidated 06/30/2007 06/30/2006 06/30/2007 Interest and updating of actuarial liability 49,268 13,984 49,268Amortization of unrecognized actuarial losses - 8,934 -Operating accruals

Labor (Note 23.c) 331,681 5,965 341,788Tax (Note 23.c) 50,912 77,490 59,346Civil (Note 23.c) 48,772 1,915 50,490Other 211,834 - 213,000

Goodwill amortization (1) - 50,192 -Commissions 53,429 6,327 64,024Legal fees and costs 29,005 798 30,439Amortization of expenses on exclusivity contracts in

provision of banking services (2) 74,216 1,867 74,216Credit cards 40,121 1 40,121Serasa/SPC (credit reporting agency) 22,594 112 22,603Interest on sale of right to receipt of future flow of payment

orders from abroad 21,172 - 21,172Monetary losses 30,317 13,609 30,418CPMF/IOF (taxes on banking transactions) 38,350 1,420 39,724Discounts granted - 6,149 -Brokerage fees 11,892 24 11,892Exchange variation - foreign branch 47,688 - 47,688Allowance for losses 49,552 80 53,552Provision for employees’ shares - 150 years (3) 81,871 - 81,871Other 125,441 15,556 127,426Total 1,318,115 204,423 1,359,038


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(1) In 2006 includes expense on provision for goodwill on the purchase of shares from Banco Santander Brasil S.A., in the amount of R$43,993.

(2) Refers mainly to the amortization of the expenses on the acquisition of payroll credit rights (Note 14). (3) In June 2007, the General Stockholders’ Meeting of Banco Santander, in Spain, approved the distribution of 100 shares to each

employee as part of the celebration of its 150 years.

33. NONOPERATING (EXPENSES) INCOME

Bank Bank/

Consolidated Consolidated 06/30/2007 06/30/2006 06/30/2007 Capital losses (26,225) (2,645) (26,344)Income from rentals 193 89 208Expenses on assets not in use (16,571) (684) (16,751)Recognition/reversal of allowance for losses on other

assets 8,635 (71) 8,915Reversal of allowance for losses on tax incentive

investments 57,769 - 61,257Gain on sale of other investments/tax incentives (1) 121,184 - 117,111Gain on sale of assets 5,847 95 10,120Gains on other investments - - 1,224Other (expenses)/income (2) (158,773) 934 (158,624)Total (7,941) (2,282) (2,884)

(1) In 2007, it includes R$165 million of gain on sale of shares of SERASA, previously recorded in other investments, at cost. (2) As a result of the conclusion of the legal merger process and the adoption of the global brand Santander, Management recorded a

provision for residual costs of deferred charges in the amount of R$155,548.

34. DERIVATIVES

Santander Banespa follows the policy of reducing market risks arising from its operations through derivatives. Market risk management is performed by an independent area, whose practices include the measurement and monitoring of limits formally established by internal committees, portfolio risks, sensitivity to interest rate fluctuations, exchange risk exposure and liquidity gaps, among other practices, providing for the monitoring of risks related to fluctuations in asset prices and interest rates and other factors which may affect Santander Banespa’s portfolio position in the different markets in which it operates.

Market risk is the exposure to interest rates, exchange rates, price of goods, price of shares and other according to the type of product, volume of operations, term and conditions of the agreement and underlying volatility.

Credit risk is the exposure to losses in the event of default by a counterparty. The exposure to credit risk in futures contracts is minimized by daily payment in cash. Swap agreements are subject to credit risks in the event the counterparty is unable or unwilling to fulfill its contractual obligations.

Operating risk is the probability of financial losses resulting from inadequate or failed people, processes and systems or any other adverse market conditions.

The fair value of swaps is computed based on the estimated cash flow, discounted to present value according to the applicable interest rate curves, representative of the market conditions at the balance sheet date. For options, Santander Banespa adopts statistical models that consider the volatility of the asset price and interest rates representative of the market conditions at the balance sheet date.

The principal interest rate curves are obtained from futures and swap contracts traded on the BM&F. Adjustments to these curves are made whenever certain points are considered illiquid or when due to unusual reasons, they do not fairly represent market conditions.


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As of June 30, derivatives were as follows:

Bank Bank/

Consolidated 06/30/2007 06/30/2006 Trades Trades

Swap Asset Liability Net Asset Liability Net CDI (interbank deposit

rates) 24,506,728 12,862,820 11,643,908 1,168,944 791,842 377,102Fixed interest rate - R$ 4,664,795 6,080,602 (1,415,807) 720,377 1,205,740 (485,363)Fixed interest rate -

foreign currency 496,898 820,133 (323,235) - - -Indexed to referential rate

(TR) 1,039,641 1,973,440 (933,799) - - -Indexed to Euro 750,610 747,926 2,684 - 678 (678)Indexed to Dollar -

PTAX 5,874,521 11,827,576 (5,953,055) 135,784 31,131 104,653Indexed to IGPM 5,008,307 4,569,758 438,549 - - -Indexed to LIBOR 992,828 986,899 5,929 77,616 - 77,616Indexed to Yen 109,891 1,472,848 (1,362,957) - 77,010 (77,010)Other indexes 728,329 2,604,801 (1,876,472) - - -Total 44,172,548 43,946,803 225,745 2,102,721 2,106,401 (3,680)Fair value 307,419 (5,792)

Bank Bank/

Consolidated 06/30/2007 06/30/2006

Composition by Trades Trades counterparty Asset Liability Net Asset Liability Net Customers 26,646,080 26,292,139 353,941 198,907 197,964 943Related parties 2,634,539 2,723,151 (88,612) 1,903,814 1,908,437 (4,623)Financial institutions 14,891,929 14,931,513 (39,584) - - -Total 44,172,548 43,946,803 225,745 2,102,721 2,106,401 (3,680) Composition by maturity Up to 3 months 6,127,184 6,120,126 7,058 271,106 271,495 (389)From 3 to 12 months 24,010,026 23,952,800 57,226 72,285 76,845 (4,560)Over 12 months 14,035,338 13,873,877 161,461 1,759,330 1,758,061 1,269Total 44,172,548 43,946,803 225,745 2,102,721 2,106,401 (3,680) Composition by market BM&F 20,520,797 20,545,010 (24,213) - - -Over the counter 23,651,751 23,401,793 249,958 2,102,721 2,106,401 (3,680)Total 44,172,548 43,946,803 225,745 2,102,721 2,106,401 (3,680)

Consolidated 06/30/2007 Trades

Swap Asset Liability Net CDI (interbank deposit rates) 24,498,325 12,505,265 11,993,060Fixed interest rate - R$ 4,314,852 6,076,442 (1,761,590)Fixed interest rate - foreign currency 496,898 820,133 (323,235)Indexed to referential rate (TR) 1,039,641 1,973,440 (933,799)Indexed to Euro 750,610 747,926 2,684Indexed to Dollar - PTAX 5,865,966 11,823,351 (5,957,385)Indexed to IGPM 5,008,307 4,569,758 438,549Indexed to LIBOR 992,828 986,899 5,929Indexed to Yen 109,891 1,472,848 (1,362,957)Other indexes 728,329 2,604,801 (1,876,472)Total 43,805,647 43,580,863 224,784


53



Swap Asset Liability NetFair value 301,984

Composition by counterparty Customers 26,646,080 26,292,139 353,941Related parties 2,267,638 2,357,211 (89,573)Financial institutions 14,891,929 14,931,513 (39,584)Total 43,805,647 43,580,863 224,784


Composition by maturity Asset Liability Net Up to 3 months 6,047,452 6,040,614 6,838From 3 to 12 months 23,856,252 23,799,478 56,774Over 12 months 13,901,943 13,740,771 161,172Total 43,805,647 43,580,863 224,784

Composition by market BM&F 20,520,797 20,545,010 (24,213)Over the counter 23,284,850 23,035,853 248,997Total 43,805,647 43,580,863 224,784

Bank/Consolidated

06/30/2007 06/30/2006 Premium Premium

Options - Dollar Notional Cost Fair value Notional Cost Fair value Call option purchased

position 4,087,542 81,274 57,678 1,229 37 18Put option purchased

position 1,138,537 5,783 18,450 - - -Call option sold position (29,079,482) (708,980) (623,800) (77,158) (2,458) (2,464)Put option sold position (20,050,720) (1,058,395) (1,075,460) (86,225) (5,057) (5,129)Total (43,904,123) (1,680,318) (1,623,132) (162,154) (7,478) (7,575)

Bank/

Consolidated 06/30/2007 06/30/2006Composition by maturity Notional Notional Up to 3 months (5,706,412) (117,282)From 3 to 12 months (24,260,085) (20,872)Over 12 months (13,937,626) (24,000)Total (43,904,123) (162,154)


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Bank/

Consolidated 06/30/2007 Premium

Options - other (1) Notional Cost Fair value Call option purchased position 30,384,466 134,794 90,304Put option purchased position 16,550,313 58,567 93,001Call option sold position (52,634,846) (136,588) 236,536Put option sold position (20,188,641) (90,981) (505,776)Total (25,888,708) (34,208) (85,935)

(1) Includes share options and indexes.

Bank/


Composition by maturity Notional Up to 3 months 964,342From 3 to 12 months (18,232,390)Over 12 months (8,620,660)Total (25,888,708)

Bank/

Consolidated 06/30/2007 06/30/2006Future Contracts Notional NotionalExchange coupon - DDI Asset position 5,364,475 -Liability position (1,421,943) (9,734)Interest rates (DI1 and DIA) Asset position 9,576,469 247,480Liability position (10,773,672) -Dollar (Dol) Asset position 3,573,913 -Liability position (27,375) (19,100)Global 2040 Liability position (106,551) -Global B2037 Liability position (35,430) -Index Asset position 7,509 -Liability position (72,778) -Treasury Bonds Liability position (274,201) -Treasury Notes 10 Asset position 43,639 -Metals Liability position (497) -Total 5,853,558 218,646 Composition by maturity Up to 3 months 7,774,957 (28,834)From 3 to 12 months (1,698,770) 247,480Over 12 months (222,629) -Total 5,853,558 218,646


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The amounts pledged to guarantee BM&F transactions were comprised by federal government securities in the amount of R$2,091,805 (06/30/2006 - R$26,814) - Consolidated R$2,144,562 (06/30/2006 - R$26,814).

Bank Bank/


Assets Swap differentials receivable 1,063,022 20,315 1,057,190Forward purchases receivable 884,447 - 884,447Forward sales receivable 386,794 - 386,794Exercisable option premiums - shares 54,314 - 54,314Exercisable option premiums - transactions pending

settlement 205,119 18 205,119Other derivatives 102,243 425 102,243Total 2,695,939 20,758 2,690,107Current 2,172,205 20,758 2,170,022 Long-term 523,734 - 520,085

Bank Bank/

Consolidated Consolidated 06/30/2007 06/30/2006 06/30/2007 Liabilities Swap differentials payable 755,603 26,107 755,206Forward purchases payable 880,880 - 880,880Option premiums - shares 8,592 - 8,592Option premiums - transactions pending settlement 1,959,908 7,593 1,959,908Other derivatives 324,150 6,018 324,150Total 3,929,133 39,718 3,928,736Current 2,973,527 39,718 2,973,432 Long-term 955,606 - 955,304

35. PENSION PLAN

a) Benefit Plan - Banesprev

I) The Bank and its subsidiaries sponsor Banesprev - Fundo Banespa de Seguridade Social, a private pension fund intended to provide retirement and pension benefits supplementary to those provided by Social Security, as defined in the basic regulations of each plan.

I.a) Defined benefit plans

Plan I

Plan I, fully defrayed by the Bank, covers employees hired on or after May 22, 1975, and those hired by May 22, 1975 who are also entitled to death benefits. As of June 30, 2007, the beneficiaries of this plan are 367 active participants and 10,735 retirees/pensioners.

Plan II

Effective July 27, 1994, when the new text of the Statutes and Basic Regulations of Plan II came into effect, Plan I participants who opted for the new plan began contributing 44.94% of the funding rate established by the actuary for each year. As of June 30, 2007, the beneficiaries of this plan are 5,895 active participants and 6,248 retirees/pensioners.

Pension Plan

In view of the Banespa privatization process, a pension plan was created, managed by Banesprev and offered only to employees hired until May 22, 1975, with effective date January 1, 2000.


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Plan V

Banco Santander Banespa S.A. maintained a pension plan granted to employees transferred to Banco do Estado de São Paulo S.A. - Banespa, hired until May 22, 1975.

On January 12, 2007, the pension plan benefits, established in the Personnel Regulation of Banco do Estado de São Paulo S.A. - Banespa, merged into Banco Santander Banespa S.A. on August 31, 2006, and in Clause 44 of the Collective Labor Agreement - ACT 2004/2006 (Adhesion to the Voluntary Migration to the New Pension Plan Regime) started being paid by Banesprev, a private pension fund. For this purpose, Plan V was created, approved by the Secretariat for Pension Plans (SPC), in accordance with Administrative Rule 879, of January 11, 2007. The Bank transferred to Banesprev the actuarial obligations at present value in the amounts of R$4,019,160 and R$3,598,816 in assets, of which R$3,478,816 in securities and R$120,000 in currency. The obligation balance of R$336,661 is being paid by the Bank in 250 months. As of June 30, 2007, the beneficiaries of this plan are 93 active participants and 13,022 retirees/pensioners.

Based on the independent actuary’s report, the position of the benefit plans is as follows:

Actuarial Assumptions Adopted in the Calculations 2007 Plan V Other Plans Nominal discount rate for actuarial obligations 16.5% 14.4% (1)Expected nominal rate of return on plan assets 16.5% 14.4% (1)Estimated long-term inflation rate 4.0% Estimated nominal salary increase 4.0% Estimated benefit increase rate 4.0% General mortality table AT-2000 Disability table Mercer disability table Expected turnover rate (*) 2.0% Retirement probability 100% when first eligible (1) Except for the Pension Plan, for which the nominal ate of 15.4% was used. (*) 0.1/(Length of service + 1) up to the age of 50 years.

2007 Reconciliation of assets and liabilities Plan V Other plans Fair value of plan assets 3,598,816 3,612,495 Present value of actuarial obligations 4,019,160 3,083,562 Fair value of assets in excess of present value of liabilities (420,344) 528,933 Adjustments for allowed deferrals:

Unrecognized actuarial losses 83,683 46,143 Unrecognized actuarial gains - (433,564)

Net actuarial asset (liability) (1) (336,661) 141,512 Payments in the period 69,580 - Expenses recognized in the period (32,421) 3,200 Contributions made in the period - 11,951 (1) As provided for in article 49. “g” of Resolution CVM 371, the above surplus was not recorded in the financial statements of Banco

Santander Banespa S.A.

I.b) Defined Contribution Plans

Plan III

Plan III covers employees hired on or after May 22, 1975, previously enrolled in Plans I and II. In this plan, contributions are made by both the sponsor and participants.


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Plan IV

Plan IV covers employees hired on or after November 27, 2000, in which the sponsor contributes only to risk benefits and administrative costs.

Contributions made to Plans III and IV amounted to R$624.

b) Benefit Plans - Sanprev

Banco Santander Banespa S.A. sponsors Sanprev - Santander Associação de Previdência, a private pension fund intended to grant benefits supplementary to those provided by Social Security, in accordance with Supplementary Law 109/2001. The benefit plans have the following characteristics:

Sponsors: Banco Santander Banespa S.A., Sanprev - Santander Associação de Previdência, Santander Brasil Arrendamento Mercantil S.A., Santander Brasil S.A. - Corretora de Títulos e Valores Mobiliários, Santander Seguros S.A., Santander Participações e Serviços S.A., Santander Asset Management Distribuidora de Títulos e Valores Mobiliários Ltda., Universia Brasil S.A. and Santander Brasil Investimentos e Serviços S.A.

Types of Plans:

• Plan I was established on September 27, 1979 as a defined benefit plan for employees of plan sponsors, and has been in the process of discontinuance since July 1, 196. As of June 30, 2007, the beneficiaries of this plan are 8 active participants and 133 retirees/pensioners.

• Plan II provides a risk coverage for employees of plan sponsors and is funded exclusively by the sponsors through monthly contributions corresponding to 0.78% (0.77% in 2006) of the total payroll, structured as a defined benefit plan. Monthly contributions are apportioned as follows: 0.28% (0.27% in 2006) for risk benefits and 0.50% (0.50% in 2006) for the administrative program. As of June 30, 2007, the beneficiaries of this plan are 5,346 active participants and 23 retirees/pensioners.

• Plan III provides period-certain annuity and monthly life annuity for employees of contributing sponsors and is structured as a defined contribution plan, whereby contributions are freely made by participants starting at 2% of the contribution salary. As of June 30, 2007, the beneficiaries of this plan are 5,428 active participants and 320 retirees/pensioners.

Financial and Actuarial Methods:

• Plan I - capitalization (supplementary benefits for length of service, supplementary benefits for disability, supplementary benefits for temporary pension and death) and simple coverage method (supplementary benefits for sickness and birth allowance).

• Plan II - capitalization (supplementary benefits for temporary pension, supplementary benefits for disability and death) and simple coverage method (supplementary benefits for sickness and birth allowance.

• Plan III - capitalization (monthly life annuity).


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The result of the independent actuary’s valuation is as follows:

2007 2006 Actuarial assumptions adopted in the calculations Nominal discount rate for actuarial obligations 10.2% 11.1% Expected nominal rate of return on plan assets 10.2% 11.1% Estimated long-term inflation rate 4.0% 4.8% Estimated nominal salary increase 4.0% 5.9% Estimated benefit increase rate 4.0% 4.8% General mortality table AT-2000 AT-2000

Disability table Mercer disability table

Mercer disability table

Expected turnover rate null null

Retirement probability 100% when first eligible 100% when first

eligible 2007 2006 Reconciliation of assets and liabilities Fair value of plan assets 124,600 103,114 Present value of actuarial obligations, by plan: 70,943 73,791

Plan I 60,972 63,257 Plan II 9,971 10,534

Net assets (1) 53,657 29,323 Contributions for the period - Plans II and III (defined

contribution)

1,100 1,158 (1) Pursuant to article 49, item “g”, of CVM Resolution No. 371, the above surplus was not recorded in the financial statements of Banco Santander Banespa S.A.

c) Other

I) Banco Santander Banespa S.A. is the sponsor of pension plans for associated employees, structured as defined benefit plans. As of June 30, 2007, the beneficiaries of this plan are 1 active participant and 1,400 retirees/pensioners.

Result of the independent actuary’s valuation: 2007 2006 Actuarial assumptions adopted in the calculations Nominal discount rate for actuarial obligations

16.5% 17.4% (12% +

inflation) Expected nominal rate of return on plan assets

16.5% 17.4% (12% +

inflation) Estimated long-term inflation rate 4.0% 4.8% Estimated nominal salary increase 4.0% 4.8% Estimated benefit increase rate 4.0% 4.8% General mortality table AT - 2000 AT - 2000 Disability table No applicable No applicable Expected turnover rate 0.0% 0.0% Retirement probability 0.0% 0.0% 2007 2006 Present value of actuarial obligations 169,906 173,524 Adjustments for allowed deferrals:

Unrecognized actuarial gains (13,129) (35,221) Payments in the period (13,566) (13,294) Expenses recognized for the period - Interest on actuarial obligations 12.973 13,984 Amortization of unrecognized actuarial losses - 8,934 Net actuarial liability accrued 156,184 147,927


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II) The Bank contributes to Cabesp - Caixa Beneficente dos Funcionários do Banco do Estado de São Paulo S.A., entity intended to cover healthcare and dental care expenses of employees hired until Banespa privatization in 2000. 2007 Reconciliation of assets and liabilities Fair value of plan assets 2,430,500 Present value of obligations 2,028,008 Net assets 402,492 Contributions for the period 12,346

d) Variable Compensation Program

Expenses in the amount of R$1,896 (2006 - R$55) - Consolidated R$1,942 (2006 - R$55) were recorded on a pro rata basis, in connection with the executive variable compensation program based on the controlling stockholder’s share appreciation, and the compensation can be received from January 15, 2008 to January 15, 2009, provided that certain assumptions are net.

36. INCOME AND SOCIAL CONTRIBUTION TAXES

Bank Bank/Consolidated

06/30/2007 06/30/2006 IRPJ CSLL IRPJ CSLL Income before taxes (IRPJ, CSLL, JCP - interest on

capital) 1,082,053 1,082,053 14,365 14,365Interest on capital (263,000) (263,000) - -Income before taxes (IRPJ and CSLL) 819,053 819,053 14,365 14,365Total IRPJ and CSLL charges at the rates of 25% and

9%, respectively (204,763) (73,715) (3,591) (1,293)Additions (deductions) on IRPJ and CSLL charges 622,690 65,649 (34,007) (12,242)Investments in subsidiaries 27,714 9,977 3,303 1,189Temporarily nondeductible provisions 554,172 37,424 (37,598) (13,535)Reserve for maintenance of integrity of stockholders’

equity 94,970 34,189 21,364 7,691Adjustment to fair value 11,204 4,033 305 109Nondeductible expenses and provisions (26,551) (10,785) (5,345) (1,924)Other additions (deductions) (38,819) (9,189) (16,036) (5,772)Effect of tax loss carryforwards calculation (417,927) 178 11,283 4,060IRPJ/CSLL expense - current - (7,888) (26,315) (9,475)IRPJ/CSLL expense - prior year (203) - - -IRPJ expense - foreign (500) - - -Provision for taxes on deferred amounts (147,819) (52,544) 368 75Adjustment to fair value (185,659) (66,837) 368 133Taxes on deferred results 37,840 14,293 - (58)IRPJ/CSLL expense (148,522) (60,432) (25,947) (9,400)Deferred IRPJ/CSLL tax assets 43,912 40,936 51,917 18,393Temporary differences (130,543) (21,868) 52,590 18,635Adjustment to fair value 174,455 62,804 (673) (242)Recorded IRPJ/CSLL (104,610) (19,496) 25,970 8,993


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Consolidated 06/30/2007 IRPJ CSLLIncome before taxes (IRPJ, CSLL, JCP - interest on

capital) 1,100,276 1,100,276Interest on capital (263,000) (263,000)Unrealized gains (losses) 6,589 6,589Income before taxes (IRPJ and CSLL) 843,865 843,865Total IRPJ and CSLL charges at the rates of 25% and

9%, respectively (210,966) (75,948)Additions (deductions) on IRPJ and CSLL charges 600,102 57,093Investments in subsidiaries 426 153Temporarily nondeductible provisions 551,164 36,333Reserve for maintenance of integrity of stockholders’

equity 94,970 34,189Adjustment to fair value 10,720 3,860Nondeductible expenses and provisions (26,480) (8,976)Other additions (deductions) (30,698) (8,466)Effect of tax loss carryforwards calculation (417,927) 2,532IRPJ/CSLL expense - current (28,791) (16,323)IRPJ/CSLL expense - prior year (203) -IRPJ expense -foreign (500) -Provision for taxes on deferred amounts (146,137) (52,558)Adjustment to fair value (185,695) (66,851)Taxes on deferred results 37,841 14,293Excess depreciation 1,717 -IRPJ/CSLL expense (175,631) (68,881)Deferred IRPJ/CSLL tax asset 61,100 47,674Temporary differences (113,875) (15,317)Adjustment to fair value 174,975 62,991Recorded IRPJ/CSLL (114,531) (21,207)

37. COMBINED FINANCIAL INFORMATION

With the legal merger occurred on August 31, 2006, as mentioned in Note 2, the individual and consolidated financial statements for the six-month period June 30, 2007, including all merged operations of Banco do Estado de São Paulo S.A - Banespa, Banco Santander Brasil S.A. and Banco Santander S.A, are not comparable with the individual and consolidated financial statements of Banco Santander Meridional (merging entity) for the six-month period ended June 30, 2006, since the merged entities were not controlled and, consequently, consolidated by the merging entity at that date.

For adequate comparison, we are presenting the Bank’s combined financial statements and the consolidated combined financial statements (including the subsidiaries of the merged entities) as of June 2006, considering the consolidation of all merged entities, as if the merger had occurred on June 30, 2006.

Such information is presented only for purposes of additional analysis arising from the comparison of balances and transactions and is not intended to represent what might have occurred had the entities been merged into Banco Santander Meridional on June 30, 2006. The information is not intended to present the financial statements of a legal entity separately and is not necessarily indicative of future results. For the preparation of the combined financial information, the following assumptions were adopted:

1. All assets and liabilities of the merged entities were consolidated as of June 30, 2006 and the respective operations and investments existing between these entities were eliminated from the individual combined and consolidated combined balance sheet.

2. Minority interest was recorded in a separate caption in stockholders’ equity in the consolidated balance sheet and statement of income.


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Individual and Consolidated Balance Sheet as of June 30, 2007 and Individual Combined and Consolidated Combined Balance Sheet as of June 30, 2006

Bank Bank Bank Consolidated Bank Combined Consolidated Combined

Balance Sheet 2007 2006 2007 2006 ASSETS Current assets 84,312,917 52,373,329 83,631,472 52,690,492Cash 921,849 700,636 922,607 702,539Interbank investments 26,683,396 6,044,666 26,655,450 6,020,503Securities and derivatives 15,778,091 17,113,904 14,545,717 16,781,193Lending and leasing operations 19,471,956 15,320,742 19,659,418 15,714,978Other assets 21,457,625 13,193,381 21,848,280 13,471,279Long-term assets 34,108,967 32,709,811 32,800,401 31,663,434Interbank investments 645,562 335,619 645,562 335,619Securities and derivatives 8,615,698 13,776,609 6,789,812 12,468,458Lending and leasing operations 14,985,451 11,253,652 15,096,857 11,183,101Other assets 9,862,256 7,343,931 10,268,170 7,676,256Permanent Assets 2,466,439 2,396,353 1,531,033 1,495,489TOTAL ASSETS 120,888,323 87,479,493 117,962,906 85,849,415 LIABILITIES AND

STOCKHOLDERS' EQUITY Current liabilities 81,581,500 52,698,033 80,139,316 52,418,323Deposits 28,316,401 22,343,237 26,519,026 21,873,236Money market funding 23,422,773 14,194,271 23,376,366 14,077,367Funds from acceptance and issuance

of securities 753,841 668,230 753,841 668,230Domestic borrowings and onlendings 8,611,267 4,483,080 8,611,267 4,483,080Other payables 20,477,218 11,009,215 20,878,816 11,316,410Long-term liabilities 29,309,492 27,444,527 27,863,900 26,174,698Deposits 9,589,126 10,085,249 7,817,952 8,446,469Money market funding 2,372,093 1,736,251 2,372,093 1,736,251Funds from acceptance and issuance

of securities 877,539 1,213,012 877,539 1,213,012Domestic borrowings and onlendings 3,220,234 2,678,698 3,220,234 2,678,698Other payables 13,250,500 11,731,317 13,576,082 12,100,268Minority Interest - - 57 56Stockholders' Equity of Controlling

Stockholder (1) 9,997,331 7,336,933 9,959,633 7,256,338TOTAL LIABILITIES AND

STOCKHOLDERS' EQUITY 120,888,323 87,479,493 117,962,906 85,849,415


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Individual and Consolidated Statement of Income for the six-month period Ended June 30, 2007 and Individual Combined and Consolidated Combined Statement of Income for the six-month period Ended June 30, 2006

Bank Bank Consolidated Bank Combined Consolidated Combined 2007 2006 2007 2006

FINANCIAL INCOME 7,330,341 6,851,949 7,198,398 6,781,335Lending operations 3,734,124 3,435,052 3,741,872 3,446,533Leasing operations 1,306 2,943 28,398 46,836Securities transactions 3,291,274 2,712,468 3,127,363 2,588,240Derivatives 119,590 511,690 116,718 509,930Compulsory investments 184,047 189,796 184,047 189,796 FINANCIAL EXPENSES (4,119,397) (4,579,356) (3,909,888) (4,414,778)Funding operations (2,976,344) (3,598,490) (2,770,959) (3,430,945)Borrowings and onlendings (46,999) (216,279) (46,999) (216,279)Foreign exchange operations (169,910) 26,878 (169,910) 26,878Allowance for loan losses (926,144) (791,465) (922,020) (794,432) GROSS PROFIT FROM FINANCIAL

OPERATIONS 3,210,944 2,272,593 3,288,510 2,366,557 OTHER OPERATING (EXPENSES) INCOME (1,971,795) (1,839,487) (2,031,029) (1,876,955)Income from services rendered 1,679,135 1,275,789 1,799,998 1,414,432Personnel expenses (904,293) (927,554) (912,846) (936,715)Other administrative expenses (1,352,265) (1,165,872) (1,378,403) (1,193,414)Tax expenses (403,173) (330,761) (424,601) (355,500)Investments in affiliates and subsidiaries 110,856 97,653 1,704 1,796Other operating income 216,060 333,440 242,157 359,754Other operating expenses (1,318,115) (1,122,182) (1,359,038) (1,167,308) INCOME FROM OPERATIONS 1,239,149 433,106 1,257,481 489,602 NONOPERATING (EXPENSES) INCOME (7,941) (21,881) (2,884) (20,683) INCOME BEFORE TAXES ON INCOME AND

PROFIT SHARING 1,231,208 411,225 1,254,597 468,919 INCOME AND SOCIAL CONTRIBUTION

TAXES (124,106) 190,093 (135,738) 138,821Provision for income tax (148,522) (85,636) (175,631) (126,397)Provision for social contribution tax (60,432) (29,451) (68,881) (43,174)Deferred tax credits 84,848 305,180 108,774 308,392 PROFIT SHARING (149,155) (157,270) (154,321) (160,817) INCOME BEFORE MINORITY INTEREST 957,947 444,048 964,538 446,923 MINORITY INTEREST - - (2) (2) NET INCOME (1) 957,947 444,048 964,536 446,921

(1) The Consolidated Stockholders’ Equity is reduced by unrealized results of R$37,698 (06/30/2006 - R$80,595) and the realization of these results affected net income by R$6,589 (06/30/2006 - R$2,873).


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38. OTHER INFORMATION

a) In Bank and Consolidated, co-responsibility and risks on guarantees provided on behalf of customers, recorded in memorandum accounts, amounted to R$12,562,961 (06/30/2006 - Bank and Consolidated R$115,561).

b) The total net book value of investment funds managed by Santander Banespa is R$52,118,191 and the total net book value of managed investment funds is R$56,068,211.

c) The insurance coverage in effect as of June 30, 2007 covering global bank risks, fire, vehicle and other risks, amounts to R$1,958,149 (06/30/2006 - R$516,407) - Consolidated R$1,971,094 (06/30/2006 - R$516,407).

Bankers’ blanket insurance was contracted for Banco Santander Banespa S.A. with coverage of R$195,276 - Consolidated R$208,221, which can be used separately or jointly, provided that it does not exceed the contracted amount.

d) As of June 30, 2007, restricted operations were as follows:

Bank/Consolidated Assets Income (Liabilities) (Expense)Restricted operations on assets Lending operations 37,102 8,867Liabilities - restricted operations on assets Deposits (37,089) (8,807)Net income 60

There are no default operations or court challenges regarding restricted operations on assets or funds raised to be used in these operations.

e) In compliance with National Monetary Council Resolution No. 3198 of May 27, 2004, Santander Banespa joined the Single Audit Committee through the lead institution Banco Santander Banespa S.A. A summary of this committee’s report is being provided together with the combined financial statements of Santander Banespa.

INVESTOR RELATIONS Rua Amador Bueno, 474 – 4th floor 04752-005 – São Paulo – SP – Brazil Tel.: (55 11) 5538 – 8654 Fax.: (55 11) 5538 – 8361 E-mail: [email protected]

Documents

BANCO SANTANDER BANESPA S.A J · 2007. 8. 30. · Payroll loans and real estate financing were the main highlights in the area of loans to individuals, having accumulated variations