1/15 EARNINGS RELEASE 1st QUARTER 2014 BI&P - Banco Indusval & Partners is a commercial bank with more than 45 years of experience in the financial market, focusing on local and foreign currency, fixed income and corporate finance for companies. BI&P relies on a network of 7 branches and 2 banking service posts strategically located in economically relevant Brazilian regions, besides an offshore branch in Cayman Islands, its brokerage house Guide Investimentos operating at the So Paulo Stock, Commodities and Futures Exchange - BM&FBOVESPA and Serglobal Cereais, acquired in April 2011, which originates agricultural bonds. Highlights Expanded Credit Portfolio totaled R$3.9 billion, up 1.5% in the quarter and 28.8% in relation to March 2013. Loans rated between AA and B corresponded to 90% of the expanded credit portfolio, compared to 81% in March 2013. Of the loans granted in the quarter, 99% were rated between AA and B, reflecting the quality of the credit portfolio being built since April 2011. The Emerging companies and Corporate segments accounted for 43% and 56%, respectively, of the expanded credit portfolio. The managerial expense with allowance for loan losses (ALL) annualized in 1Q14 was 1.10% of the expanded credit portfolio (0.95% in 4Q13), in line with the conservative lending policy adopted by the Bank. Additional allowance remained at R$23.7 million, not yet allocated. Funding totaled R$3.9 billion and Free Cash totaled R$743.2 million at the end of 1Q14, in line with the strategy of loan portfolio growth. Income from services rendered and tariffs totaled R$12.9 million in the quarter, an increase of 29.7% from the previous quarter and 94.1% from 1Q13. The quarterly Result was a loss of R$9.9 million, mainly due to the following: (i) the effect of discontinuance of the designation of hedge accounting, adopted in 2Q12, of operations to protect the cash flow, which continue to be protected by hedge operations, without any cash effect, and (ii) the fact that the investments we made during the restructuring period have still not reached equilibrium point since, given the conservative risk adopted by us, we have still not attained the required scale through growth of the credit portfolio and income from services rendered. IDVL4: R$3.58 per share Closing: May 13, 2014 Outstanding Shares: 88,991,729 Market Cap: R$318.6 million Price/Book Value: 0.48 Conference Call / Webcasts May 14, 2014 In English 10 a.m. (US EST) / 11 a.m. (Braslia) Connections Brasil: +55 11 3193-1001 +55 11 2820-4001 EUA: +1 786 924-6977 Code: Banco BI&P In Portuguese 9 a.m. (US EST) / 10 a.m. (Braslia) Number: +55 11 3193-1001 +55 11 2820-4001 Code: Banco BI&P Website www.bip.b.br/ir Expanded Credit Portfolio totaled R$3.9 billion, up 1.5% in the quarter and 29% in twelve months Income from services rendered and tariffs totaled R$12.9 million, up 30% in the quarter and 94% in twelve months Managerial expense with allowance for loan losses (ALL) annualized in 1Q14 was 1.10% of the expanded credit portfolio, in line with Banco BI&Ps conservative lending policy
3/15 EARNINGS RELEASE 1st Quarter 2014 Macroeconomic Scenario The beginning of the year was marked by high temperatures and scarce rainfall, which affected both the energy sector and some plantations across the country. In the Southeast and Midwest Brazil, water reservoirs reached alarmingly low levels, raising the possibility of energy rationing in the country. With the government actioning the thermal power plants to meet the energy demand, spot market energy prices rose sharply, forcing the government to announce a rescue plan for energy distribution companies. To prevent the countrys public accounts from getting affected, the major portion of the aid will come from the loan contracted by the Electric Energy Trading Chamber (CCEE), a private entity. Despite the governments announcement to cut federal spending by R$44 billion this year and its commitment to achieve a primary surplus of R$99 billion, or 1.9% of GDP, worries about the status of public accounts persist. Initial fiscal results from early this year have raised doubts about the governments ability to meet the target set by it. In this scenario, the rating agency Standard & Poors downgraded the countrys sovereign rating from BBB to BBB-, the lowest level still considered investment grade, based on the argument that Brazils public accounts and economic activity are deteriorating. Note that the drought did not affect the electricity system alone. Several plantations were damaged by inclement weather, pushing up the prices of fresh food items. The consumer price index (IPCA) in March rose higher than economists expectations, and food prices should continue to exert pressure on inflation in the coming months. Expectations regarding inflation have worsened, with a few economists even predicting the IPCA index to end 2014 at above the inflation target of 6.5%. In this scenario, the Central Bank of Brazil continued its monetary tightening policy, raising by one more percentage point the basic interest rate (Selic), which reached 11% p.a. at the end of March. On the positive side, indicators of economic activity at the start of the year positively surprised economists. Industrial production and retail sales registered growth and the Central Banks business activity index signaled economic growth in the beginning of the year. Despite these positive developments, the market maintained its forecast of a slowdown in economic activity over the coming months, with GDP growth in 2014 going below 2%. The foreign exchange market remained highly volatile at the start of the year. In January, the negative exchange flows, combined with the apathy of international markets towards emerging economies, resulted in a stronger U.S. dollar, which went past the R$2.40 mark. In the succeeding months, the inflow of funds into the country, mainly reflecting heightened tensions between Russia and Ukraine and the increase in foreign funding by Brazilian companies, pushed up the Brazilian real, which closed the first quarter at R$2.25. Credit volume in Brazils national financial system grew 13.7% in the first quarter of 2014 to reach R$2.758 trillion. Average term of loans increased from 85.9 months in March 2013 to 103.6 months in December 2014. Credit as a percentage of GDP ended the first quarter at 55.9%, lower than 56.1% at the end of last year, though still remaining above 50%. Default in the individuals segment dropped from 7.6% in the first quarter of 2013 to 6.5%, while corporate default declined from 3.6% to 3.3%. These marginal improvements in default rates are the result of a more selective approach to credit adopted by Brazilian banks. Macroeconomic Data 1Q14 4Q13 1Q13 2013 2014(e) Real GBP Growth (Q/Previous Q) 0.40%(e) 0.70% 0.00% 2.3% 1.80% Inflation (IPCA - IBGE) quarterly change 2.18% 2.04% 1.94% 2.04% 1.80% Inflation (IPCA - IBGE) annual change 6.15% 5.91% 6.59% 5.91% 6.50% FX (US$/R$) quarterly change -4.47% 6.54% -1.26% 15.36% 1.6% Interest Rate (Selic) 11.00% 10.00% 7.25% 10.00% 11.25% e= expected
4/15 EARNINGS RELEASE 1st Quarter 2014 Key Indicators The financial and operating information presented in this report are based on consolidated financials prepared in millions of Real (local currency), according to Brazilian Central Bank rules, except were otherwise stated. Results 1Q14 4Q13 1Q14/4Q13 1Q13 1Q14/1Q13 Loan Operations & Agro Bonds (CPR) adjusted 1 108.8 110.7 -1.7% 60.7 79.2% Effect of recoveries and discounts (0.1) (0.5) -80.7% (2.2) -95.8% Revenues from Securities (w/o agro bonds), Derivatives & FX 28.3 46.5 -39.0% 44.