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F I N A N C I A LS T A T E M E N T S
2 0 1 0SEPTEMBER
2 FINANCIAL STATEMENTSSEPTEMBER 2010
Message from the CEO
The Brazilian economy maintained the strong
activity pace, supported by the decrease in
unemployment rates, and the growth of
payroll and credit. The dynamism of economic
activity, boosted by the heating of domestic
demand, reflected in the generation of jobs,
with the most significant contributions
coming from the processing industry,
commerce, service and civil construction
industries, sectors responsible for the recent
rebound in the labor market.
In the State of Rio Grande do Sul, industrial
production, based on the domestic market
and export of commodities, has motivated
the maintenance of a heated pace of activity,
resulting in a higher level of employment,
rising real incomes and increased volume of
imports. The unemployment rate in the
metropolitan region of Porto Alegre reached
4.1%, in September 2010, the lowest among
the major regions in Brazil, and the average
income of the employed population totaled
R$1,442.7, the third largest, according to IBGE
research.
After a period of budget restrictions,
significant public investments in
infrastructure and aimed at promoting
technological innovations in relevant supply
chains in the State support of Rio Grande do
Sul give basis for promising expectations of
achieving faster growth in the economic
activity in coming years.
Thus, both domestic and regional economic
environments have been extremely
conducive to banking activities. The credit
supply remains strong and stable. The risk is
lower, resulting in lower provisioning
expenses. The rates are reduced and the
maturity of operations stretches, reflecting
trends of greater predictability. Card
transactions, after market regulation in place
in Brazil, should form themselves into
promising mechanism of business expansion.
Banrisul’s net profit of R$511.4 million at the
end of 9M10 is 43.3% higher than the same
period last year, and equivalent to a 19.5%
ROE, with improvement perspectives. Based
on the last quarter’s results only, the
annualized return on average equity is 24.5%.
At the end of September 2010, shareholders’
equity of R$3.7 billion and total assets of
R$32.3 billion increased, respectively, 13.5%
and 13.2% over September 2009. Funds raised
and under management, at R$24.1 billion,
increased 15.5% in twelve months, while
credit assets, equivalent to R$16.2 billion at
end-September 2010, recorded an increase
of 29.6% over the same period, a solid growth
and above the average of the market.
3
Mateus Affonso BandeiraCEO & IRO
Payroll loans to individuals, in an
environment of rising employment and real
wages, constituted an important mechanism
to maximizing yields and preserving the
quality of the credit portfolio. Credit supply
has also extended to companies, a segment
that particularly contributed to the expansion
of loan portfolio last quarter.
Banrisul also maintains a robust, retail
deposit base. Obtained from its large branch
franchise, this low cost funding base is key to
the sustainable growth of assets.
Management efforts, especially in the last six
months, have been focused on improving the
Bank’s operating efficiency. At the end of
September 2010, total administrative
expenses increased only 7.6% in comparison
to the same period in 2009. From 2Q10 to
3Q10, and excluding personnel expenses,
other administrative expenses decreased
2.0%, after the 10,9% reduction registered
from 1Q10 to 2Q10. Hence the cost-income
ratio of 48.5% at the end of the last quarter,
for the first time in Banrisul’s history below
the 50% indicator and in line with the
indicators provided by the large retail banks
in Brazil.
With responsi bi l ity and firmness of
purpose, Banrisul is presently one of the
most important regional public banks in
Brazil, constantly improving businesses,
perfecting control mechanisms to ensure
greater transparency, providing state-of-art
services to add comfort to customers,
fulfi l l ing the role of agent for the
development of Rio Grande do Sul. Above
all, without neglecting the goal of
delivering good results to shareholders.
4
Contents
Message from the CEO ........................................................................................... 2
FINANCIAL STATEMENTSSEPTEMBER 2010
Press Release .............................................................................................................. 10
Management Report .................................................................................................. 16
Economic Scenario .................................................................................................. 17
Consolidated Performance ..................................................................................... 19
Net Income ............................................................................................................. 19
Shareholders’ Equity.............................................................................................. 19
Total Assets ............................................................................................................. 20
Taxes and Contributions ........................................................................................ 20
Operating Performance .......................................................................................... 21
Funds Raised and Under Management ................................................................. 21
Breakdown of Funds Raised and Under Management ......................................... 21
Securities................................................................................................................ 22
Loan Operations ..................................................................................................... 23
Commercial Credit - Individuals ............................................................................ 24
Commercial Credit - Companies............................................................................ 24
Agribusiness ........................................................................................................... 25
Foreign Exchange ................................................................................................... 25
Real Estate Loans ................................................................................................... 25
Long-Term Financing.............................................................................................. 25
Microcredit ............................................................................................................. 26
Products, Services and Channels............................................................................. 26
Banricompras.......................................................................................................... 26
Banrisul’s Correspondent Banks ............................................................................ 26
Virtual Branch – Home and Office Banking ........................................................... 27
Banrifone e Call Center .......................................................................................... 27
Eletronic Bidding.................................................................................................... 27
Credit Cards ............................................................................................................ 27
Insurances, Private Pension and Capitalization.................................................... 28
Banrisul’s Customer Service Network.. ................................................................... 29
Subsidiaries ............................................................................................................ 30
Corporate Governance ........................................................................................... 31
Overview ................................................................................................................ 31
Banrisul’s Corporate Governance Structure .......................................................... 31
Shareholding Structure .......................................................................................... 32
Investor Relations and Communication Policy ..................................................... 32
Interest on Equity and Dividends Distribution Policy .......................................... 33
5
Internal Controls and Compliance .......................................................................... 33
Risk Management .................................................................................................. 34
Basel Ratio .............................................................................................................. 37
Technology Modernization .................................................................................... 38
Public Sector Activities .......................................................................................... 39
Marketing .............................................................................................................. 41
Human Resources .................................................................................................. 42
Corporate Responsability ...................................................................................... 42
Awards................................................................................................................... 44
Acknowledgements ............................................................................................... 46
Index of Graphs
Graph 1: Net Income ................................................................................................... 19
Graph 2: Shareholders’ Equity Growth ....................................................................... 19
Graph 3: Total Assets Growth...................................................................................... 20
Graph 4: Growth of Funds Raised and Under Management ...................................... 21
Graph 5: Breakdown of Funds Raised and Under Management ................................ 22
Graph 6: Securities Growth ......................................................................................... 22
Graph 7: Loan Operations Growth .............................................................................. 23
Graph 8: Commercial Credit Growth – Individuals and Companies .......................... 24
Graph 9: Banricompras ................................................................................................ 26
Graph 10: Shareholding Structure. ............................................................................. 32
Graph 11: Market Value X Shareholders’ Equity ........................................................ 32
Graph 12: Basel Ratio Growth ..................................................................................... 37
Financial Statements ................................................................................................. 47
Balance Sheet ........................................................................................................ 48
Statement of Income ............................................................................................. 52
Cash Flow............................................................................................................... 53
Statement of Value Added ..................................................................................... 54
Statement of Changes on Shareholders’ Equity ..................................................... 55
Notes of Management to the Financial Statement ................................................ 56
Note 01 - Operations .............................................................................................. 57
Note 02 – Presentation of the Financial Statements ........................................... 57
Note 03 – Significant Accounting Practices ........................................................... 59
Note 04 – Interbank Investments .......................................................................... 62
Note 05 – Securities and Derivatives ..................................................................... 62
Note 06 – Restricted Deposits ............................................................................... 64
Note 07 – Loans, Lease Operations and Other Receivables ................................. 65
Note 08 – Other Receivables ................................................................................. 67
Note 09 – Permanent Assets .................................................................................. 68
6 FINANCIAL STATEMENTSSEPTEMBER 2010
Note 10 – Deposits and Money Market Funding ................................................... 69
Note 11 - Borrowings .............................................................................................. 69
Note 12- Onlendings ............................................................................................. 70
Note 13 - Other Payables ....................................................................................... 70
Note 14 – Reserves for Tax, Labor and Civil contingencies ................................... 71
Note 15 – Income from Services Rendered ........................................................... 72
Note 16 – Income from Bank Fees ......................................................................... 73
Note 17 – Other Administrative Expenses ............................................................ 73
Note 18 - Other Operating Income ....................................................................... 73
Note 19 – Other Operating Expenses .................................................................... 74
Note 20 – Shareholders’ Equity - Banrisul ............................................................. 74
Note 21 – Commitments, Guarantees and Other .................................................. 75
Note 22 – Income Tax and Social Contribution...................................................... 76
Note 23 - Fundação Banrisul de Seguridade Social e Cabergs – Caixa de
Assistência dos Empregados do Banco do Estado do Rio Grande do Sul .......... 78
Note 24 – Financial Instruments ............................................................................ 79
Note 25 – Transactions With Related Parties ........................................................ 80
Note 26 – Autorization for Completion of the Financial Statements .................. 85
Report.................................................................................................................... 86
Analysis of Performance ............................................................................................. 88
Banco do Estado do Rio Grande do Sul S.A. ............................................................ 89
Macro-economic Environment and Competitive Market ....................................... 90
National Economy .................................................................................................. 90
Regional Economy.................................................................................................. 91
Banking Industry and Competitive Environment ................................................. 91
Economic and Financial Indicators.......................................................................... 93
Assets and Earning Structure.................................................................................. 94
Financial Performance........................................................................................... 94
Capital Expenditure Policy .................................................................................... 96
Margin Analysis ...................................................................................................... 98
Variations in Interest Income and Expenses: Volumes and Rates ....................... 99
Operational Highlights ............................................................................................ 101
Banrisul’s Stock Market Performance ..................................................................... 102
Evolution of Balance Sheet Accounts ...................................................................... 104
Total Assets ....................................................................................................... 104
Securities................................................................................................................ 105
Interbank and Interbranch Transactions ............................................................... 105
Credit Operations .................................................................................................. 106
Breakdown of Credit by Company Size ................................................................. 106
Breakdown of Credit by Sector .............................................................................. 107
Breakdown of Credit by Portfolio ......................................................................... 107
Commercial Credit ................................................................................................. 109
7
Breakdown of Credit by Rating .............................................................................. 110
Allowance for Loan Losses..................................................................................... 111
Cover Ratio ............................................................................................................. 112
Default Ratio .......................................................................................................... 112
Funds Raised and Under Management .................................................................. 113
Demand Deposits................................................................................................... 113
Savings Accounts.................................................................................................... 113
Time Deposits ........................................................................................................ 113
Assets under Management.................................................................................... 114
Cost of Funding ...................................................................................................... 114
Shareholders’ Equity.............................................................................................. 115
Return on Average Shareholders’ Equity .............................................................. 115
Basel Ratio .............................................................................................................. 116
Pace of Growth ....................................................................................................... 117
Evolution of Income Statement Accounts .............................................................. 118
Net Income ............................................................................................................. 118
Financial Income .................................................................................................... 118
Revenue from Treasury Operations ...................................................................... 119
Revenues from Credit and Leasing Operations .................................................... 119
Revenues from Commercial Credit - Individuals and Companies ....................... 120
Financial Expenses ................................................................................................. 122
Expenses with Market Funding Operations .......................................................... 123
Allowance for Loan Losses..................................................................................... 124
Gross Profit from Financial Intermediation .......................................................... 124
Financial Margin..................................................................................................... 125
Revenue from Services Rendered ......................................................................... 125
Administrative Expenses ....................................................................................... 126
Other Operating Income ........................................................................................ 127
Other Operating Expenses .................................................................................... 128
Economic Indicators ................................................................................................ 129
Leverage Ratio ....................................................................................................... 129
Operating Cost ....................................................................................................... 129
Debt-Equity Ratio................................................................................................... 129
Employee Productivity .......................................................................................... 130
Efficiency Ratio ...................................................................................................... 130
Consolidated Pro Forma Balance Sheet .................................................................. 131
Pro Forma Income Statement ................................................................................. 132
8 FINANCIAL STATEMENTS SEPTEMBER 2010
Index of Graphs
Graph 1: Banrisul PNB stock’s performance vs. Brazilian Stock Market Indexes ...... 102
Graph 2: Financial Volume, Number of Trades and Number of Shares .................... 103
Graph 3: Banrisul´s Stock - Geographic Distribution .................................................. 103 Graph 4: Total Assets ................................................................................................... 104
Graph 5: Composition of Assets ................................................................................. 104
Graph 6: Securities and Liquid Interbank Transaction ............................................... 105
Graph 7: Interbank and Interbranch Transactions ...................................................... 105
Graph 8: Credit Operations ......................................................................................... 106 Graph 9: Commercial Credit Portfolio - Individuals and Companies ........................ 108
Graph 10: Credit Portfolio by Risk Levels ................................................................... 110
Graph 11: Breakdown of Allowance for Loan Losses ................................................. 111
Graph 12: Cover Ratio.................................................................................................. 112
Graph 13: Default Ratio ............................................................................................... 112 Graph 14: Funds Raised and Under Management ...................................................... 113
Graph 15: Cost of Funding as % of Selic Rate ............................................................. 114
Graph 16: Shareholders’ Equity .................................................................................. 115
Graph 17: Return on Average Shareholders’ Equity .................................................. 116
Graph 18: Basel Ratio .................................................................................................. 116 Graph 19: Pace of Growth - Credit and Funding......................................................... 117
Graph 20: Net Income. ................................................................................................ 118
Graph 21: Financial Income ........................................................................................ 119
Graph 22: Revenues from Credit and Leasing Operations......................................... 120
Graph 23: Financial Expenses ..................................................................................... 123
Graph 24: Expenses with Market Funding Operations .............................................. 123 Graph 25: Allowance for Loan Losses ......................................................................... 124
Graph 26: Financial Margin .........................................................................................125
Graph 27: Revenue from Services Rendered ............................................................. 126
Graph 28: Personnel and Other Administrative Expenses ........................................ 127
Graph 29: Other Operating Income ............................................................................ 127 Graph 30: Other Operating Expenses ......................................................................... 128
Graph 31: Leverage Ratio ............................................................................................ 129
Graph 32: Operating Cost............................................................................................ 129
Graph 33: Debt-Equity Ratio ....................................................................................... 129
Graph 34: Employee Productivity ............................................................................... 130 Graph 35: Efficiency Ratio ........................................................................................... 130
9
Index of Tables
Table 01: Competitive Environment ........................................................................... 92
Table 02: Economic and Financial Indicators.............................................................. 93
Table 03: Margin Analysis............................................................................................ 98
Table 04: Variations in Interest Income and Expenses: Volumes and Rates ............. 100
Table 05: Communication and Relationship Efforts ................................................... 102
Table 06: Breakdown of Credit to Companies by Company Size ............................... 106
Table 07: Breakdown of Credit by Sector ................................................................... 107
Table 08: Breakdown of Credit by Portfolio ............................................................... 108
Table 09: Composition of Unmarked Credit - Individuals and Companies ............... 110
Table 10: Balance of Allowance for Losses ................................................................. 112
Table 11: Funding Composition .................................................................................. 114
Table 12: Cost of Funding ............................................................................................ 115
Table 13: Revenues from General Credit - Individuals and Companies .................... 121
Table 14: Monthly Average Commercial Credit Rates – Individuals and Companies 122
Table 15: Consolidated Pro Forma Balance Sheet ...................................................... 131
Table 16: Pro Forma Income Statement ..................................................................... 132
10 FINANCIAL STATEMENTSSEPTEMBER 2010
PressRelease
11
Monday, November 08, 2010 - Earnings Results for the 3rd Quarter of 2010
We report Banrisul’s most relevant numbers for 3Q10 and 9M10. The Analysis of Performance,Management Report, Financial Statements and the Accompanying Notes are available at theBank’s site (www.banrisul.com.br/ir).
Bovespa: BRSR3, BRSR5 , BRSR6
This press release contains forward-looking statements, which not only relate to historic
facts but also reflect the targets and expectations of the Company management. The terms
“anticipate”, “desire”, “expect”, “project”, “plan”, “intend” and similar words are intended to
identify statements that necessarily involve known and unknown risks. Known risks include
uncertainties that are not limited to the price and service war impact, acceptance of services
by the market, service transactions of either the Company or its competitors, regulatory
approval, currency fluctuation, changes in the service mix and other risks described in the
Company’s reports. This Press Release is updated until the present date and Banrisul is not
obliged to update it upon new information and/or future events.
( 1 ) Including Personnel Expenses, Other Administrative Expenses and Other OperatingExpenses
( 2 ) Interest on own capital and dividends paid and/or distributed (before income taxwitholding at source),
( 3 ) Including interbank investments and excluding matched transactions.( 4 ) Net income / average total assets.( 5 ) Net income / average shareholders’ equity.
( 6 ) Efficiency Ratio - 12-month accumulation.Personnel expenses + other administrative expenses/Net financial margin +revenue from services rendered + (other operating income - other operatingexpenses)
( 7 ) Fixed assets/ shareholders’ equity.( 8 ) Default > 60 days / total loans( 9 ) Allowance for loan losses / default > 60 dias
Main Income Statement Accounts - R$ Million 9M10 9M09 3Q10 2Q10 1Q10 4Q09 3Q09 3Q10/ 9M10/
2Q10 9M09
Net Financial Margin 2,128.0 1,873.7 769.7 710.9 647.3 668.7 628.1 8.3% 13.6%
Allowance for Loan Losses Expenses (391.7) (325.9) (111.2) (127.1) (153.5) (96.7) (65.8) -12.5% 20.2%
Gross Profit from Financial Operations 1,736.2 1,547.8 658.5 583.9 493.8 572.0 562.3 12.8% 12.2%
Financial Income 3,531.4 3,185.9 1,298.2 1,165.4 1,067.8 1,076.7 1,045.5 11.4% 10.8%
Financial Expenses 1,795.2 1,638.1 639.7 581.5 574.0 504.7 483.2 10.0% 9.6%
Income from Services Rendered 468.2 427.2 160.9 157.4 149.9 152.1 144.6 2.2% 9.6%
Administrative and Other Operational Expenses (¹) 1,395.8 1,375.7 478.7 457.2 460.0 431.8 462.1 4.7% 1.5%
Other Operation Income 127.8 88.7 39.0 43.1 45.7 55.0 29.1 -9.5% 44.1%
Income from Operations 786.0 552.7 327.0 277.5 181.6 300.6 229.2 17.8% 42.2%
Net Income 511.4 356.8 206.4 183.1 121.9 184.3 146.0 12.7% 43.3%
Used/Distributed Results - R$ Million 9M10 9M09 3Q10 2Q10 1Q10 4Q09 3Q09 3Q10/ 9M10/
2Q10 9M09
Interest on Own Capital - Dividends (²) 172.8 141.8 51.6 71.0 50.2 73.7 46.6 -27.4% 21.9%
Main Balance Sheet Accounts - R$ Million 9M10 9M09 Sep10 Jun10 Mar10 Dec09 Sep09 3Q10 9M10/
2Q10 9M09
Total Assets 32,339.3 28,573.2 32,339.3 31,098.8 29,864.6 29,084.1 28,573.2 4.0% 13.2%
Securities (³) 10,014.1 10,683.3 10,014.1 10,150.4 9,949.1 10,758.6 10,683.3 -1.3% -6.3%
Total Lending 16,237.1 12,528.5 16,237.1 15,442.0 14,765.7 13,414.2 12,528.5 5.1% 29.6%
Allowance for Loan Losses (1,122.7) (1,039.3) (1,122.7) (1,117.5) (1,082.3) (1,016.8) (1,039.3) 0.5% 8.0%
Past Due Loans > 60 days 487.9 478.7 487.9 493.6 512.7 453.1 478.7 -1.1% 1.9%
Funding and Assets under Management 24,095.2 20,855.8 24,095.2 23,163.7 22,368.7 21,902.4 20,855.8 4.0% 15.5%
Shareholders’ Equity 3,746.4 3,299.8 3,746.4 3,590.1 3,480.0 3,408.5 3,299.8 4.4% 13.5%
Reference Equity 3,608.2 3,240.8 3,608.2 3,455.9 3,422.9 3,349.4 3,240.8 4.4% 11.3%
Average Shareholders’ Equity 3,577.4 3,189.5 3,668.2 3,535.1 3,444.2 3,354.1 3,249.0 3.8% 12.2%
Average Total Assets 30,711.7 26,889.3 31,719.1 30,481.7 29,474.4 28,828.7 28,158.3 4.1% 14.2%
Financial Inde x (%) per Year 9M10 9M09 3Q10 2Q10 1Q10 4Q09 3Q09
Return on Total Asse ts 2.1% 1.7% 2.6% 2.4% 1.6% 2.6% 2.1%
Return on Shareholders’ Equity 18.6% 14.7% 23.9% 22.0% 14.8% 23.4% 18.9%
ROAA (p.a.) ( 4) 2.2% 1.8% 2.6% 2.4% 1.7% 2.6% 2.1%
ROAE (p.a.) (5) 19.5% 15.2% 24.5% 22.4% 14.9% 23.9% 19.2%
Efficiency Ratio (6) 48.5% 53.5% 48.5% 50.5% 52.2% 52.0% 53.5%
Basel Ratio 15.4% 18.0% 15.4% 15.7% 16.5% 17.5% 18.0%
Fixed Assets Ratio (7) 4.6% 4.7% 4.6% 4.8% 5.1% 5.0% 4.7%
Default Rate (8) 3.0% 3.8% 3.0% 3.2% 3.5% 3.4% 3.8%
Cover Rate (9) 230.1% 217.1% 230.1% 226.4% 211.1% 224.4% 217.1%
Economic Indicators 9M10 9M09 3Q10 2Q10 1Q10 4Q09 3Q09
Effective Selic Rate (accrued) 7.03% 7.68% 2.62% 2.23% 2.03% 2.10% 2.19%
Foreign Exchange Rate (R$/USD – end of period) 1.69 1.78 1.69 1.80 1.78 1.74 1.78
Foreign Exchange (%) -2.70% -23.92% -5.96% 1.15% 2.29% -2.08% -8.89%
IGP-M (General Market Price Index) 7.90% -1.60% 2.09% 2.84% 2.77% -0.11% -0.37%
IPCA (Extended National Consumer Price Index) 3.60% 3.21% 0.50% 1.00% 2.06% 1.06% 0.63%
12 FINANCIAL STATEMENTSSEPTEMBER 2010
Banrisul’s net income from January to
September 2010 totaled $511.4 million was,
43.3% (R$154.6 million) higher than the
recurring income in same period of 2009. In
3Q10, net income of R$206.4 million was
41.3% (R$ 60.3 million) over 3Q09’s and 12.7%
(R$23.3 million) higher than 2Q10’s net income.
9M10 performance, compared to 9M09,
reflects the increase in credit revenues and
the reduction of other operating expenses,
while negatively affected by reduced
treasury revenues (from lower securities
balance and lower Selic Rate) and by higher
financial expenses (onlendings), operating
expenses and provisions.
Compared to 3Q09, 3Q10 was positively
affected by higher credit and securities
revenues, and negatively by higher market
funding and onlendings expenses. From 2Q10
to 3Q10, higher net income is associated with
higher credit and securities and with lower
provisions and other administrative expenses
(staff costs excluded), reflecting cost cutting
efforts.
Net income in 9M10 represents a 19.5% return
over average shareholders’ equity.
Financial margin in 9M10 was R$2,128.0
million, 13.6% (R$254.3 million) more than
in 9M09. In 3Q10, financial margin, in the
amount of R$769.7 million, increased 22.5%
(R$141.6 million) from 3Q09, and 8.3% (R$58.8
million) from 2Q10. From 9M09 to 9M10,
higher revenues from credit contributed to
increasing the financial margin, while lower
revenues from securities and higher loans and
onlendings expenses affected margins
negatively. The margin expansion from 2Q10
to 3Q10 is due to the increase in revenues
from credit, albeit minimized by higher flow
of funding and onlendings costs, following
the rise of the Selic Rate.
The increase of 20.2% in provision in 9M10
was due mostly to the increase of loan
portfolio by 29.6% over the same period in
2009. The changes in provisions from 3Q09 to
3Q10 are associated with credit growth and
higher write-offs. In the last quarter, the
lower provision cost is due to the reduction
in past due loans over 60 days.
At the end of September 2010, total assets
presented a balance of R$32,339.3 million,
13.2% than in September 2009, 11.2% higher
than December 2009 and 4.0% over June 2010.
The year-on-year and quarter-on-quarter
assets growth came from the expansion of
deposits and the increase in the Reserve Fund
for Judicial Deposits.
Banrisul’s loan portfolio totaled R$16.237
billion in September 2010, exceeding by
29.6% the balance of September 2009, in
21.0% the balance of December 2009 and in
5.1% the balance of June 2010. In the
Individuals segment, commercial credit
(unmarked operations) totaled R$7.218
billion in September 2010, an increase of
40.5% compared to September 2009 and of
4.7% in relation to June 2010. As for the
Companies segment, the balance of R$5.296
billion in September 2010 increased 26.2%
over September last year and 6.7% over June
2010.
9M10 9M09 3Q10 2Q10 1Q10 4Q09 3Q09
Financial Margin 2,128.0 1,873.7 769.7 710.9 647.3 668.7 628.1
Allowance for Loan Losses Expenses (391.7) (325.9) (111.2) (127.1) (153.5) (96.7) (65.8)
Gross Profit from Financial Operations 1,736.2 1,547.8 658.5 583.9 493.8 572.0 562.3
Income from Services Rendered 468.2 427.2 160.9 157.4 149.9 152.1 144.6
Revenue from Credit Operations and Leasing 2,551.6 2,115.4 933.1 850.4 768.0 761.5 710.9
Personnel and Other Administratives Expenses 1,265.4 1,175.8 428.1 414.2 423.1 404.1 410.3
Interest on Own Capital/Dividends 172.8 141.8 51.6 71.0 50.2 73.7 46.6
Consolidated Net Income 511.4 356.8 206.4 183.1 121.9 184.3 146.0
Results R$ Million
13
The increase in the Individuals segment is
driven by payroll loans, which ended
September 2010 with a balance of R$5.347
billion, a year-on-year increase of R$1.631
billion, influenced motivated by the rise of
28.8% on organic payroll loans and of 77.8%
on payroll loans acquired portfolio. In the last
quarter, payroll loans portfolio increased
R$214.0 million.
The default ratio over 60 days in proportion
to total loan portfolio maintained the falling
trend. Past due loans amounting to R$487.9
million in September 2010 contributed to the
NPL of 3.0%, which is 0.8 pp below September
2009’s, 0.4 pp lower than in December 2010
and 0.2 pp lower than in June 2010.
Investments in securities totaled R$10.014
billion at the end of September 2010, volume
6.3% below September, 2009, 6.9% below the
balance of December 2009 and 1.3% below
June 2010. This amount includes liquid
interbank transactions but excludes total
liabilities from matched transactions.
At the end of September 2010, Banrisul’s
shareholders’ equity was R$3.746 billion,
13.5% up on September 2009, 9.9% up on
December 2009 and 4.4% higher than June
2010’s. Basel Ratio reached 15.4% in 3Q10.
The 48.5% cost-income ratio in 3Q10 is the
lowest ever registered at Banrisul, below the
50% indicator and in line with what large retail
banks have presented. The improvement of
the efficiency ratio reflects the decrease of
other operating expenses, the growth of the
financial margin and the increase in banking
fees and in other operating income.
Highlights R$ Million
Sep/10 Jun/10 Mar/10 Dec/09 Sep/09
Total Asse ts 32,339.3 31,098.8 29,864.6 29,084.1 28,573.2
Total Credit Operations 16,237.1 15,442.0 14,765.7 13,414.2 12,528.5
Securities (1) 10,014.1 10,150.4 9,949.1 10,758.6 10,683.3
Funds raised and under management 24,095.2 23,163.7 22,368.7 21,902.4 20,855.8
Shareholders’ Equity 3,746.4 3,590.1 3,480.0 3,408.5 3,299.8
(1) Securities + Interbanck Investiments - Matched Transactions.
Operating cost reached 5.2% in the last twelve
months, influenced by rising assets leveraged
by the growth in credit operations, which
contributed to the absorption of
administrative costs.
From 1Q10 on, cost-control points have beenstrengthened and implemented, goals for
managing corporate costs set, responsibilities
and tasks for commercial and back office areasdefined, all with a view to the effective
reduction of administrative expenses,
measures whose effects, while have a
positive impact on cost efficiency indicators.
The Bank showed steady growth in assets and
liabilities and ended 9M10 with favorable
profitability and solvency indicators, most of
them being above the guidance. The
expansion of credit supply, in line with the
greater dynamism of Brazil’s and Rio Grande
do Sul’ economic activity, was the dominant
strategy. F inancial margin on interest-earning
assets grew, positively influenced by the
increased loan portfolio and the reduction in
the cost of funding, while negatively affected
by lower loan interest rates and by funding
increasing.
14 FINANCIAL STATEMENTSSEPTEMBER 2010
For the last quarter of 2010, Banrisul has opted to maintain its market guidance disclosed at
the end of 1T10.
9M10 9M09 3Q10 2Q10 1Q10 4Q09 3Q09
Financial Margin 2,128.0 1,873.7 769.7 710.9 647.3 668.7 628.1
Gross Profit from Financial Operations 1,736.2 1,547.8 658.5 583.9 493.8 572.0 562.3
Average Profitable Assets(1) 28,004.0 25,135.2 28,457.8 27,550.3 26,995.2 26,301.7 25,157.3
Net Financial Margin (2) 10.3% 10.1% 11.3% 10.7% 9.9% 10.6% 10.4%
Gross Profit from Financial Operations(3) 12.8% 12.7% 9.6% 8.8% 7.5% 9.0% 9.2%
(1) Average Interest-Earning Assets of the Period.(2) Net Financial Margin / Average Profitable Assets (Annualized).(3) Gross Profit from Financial Operations / Average Profitable Assets (Annualized).
Financial Margin R$ Million
Estimate Banrisul 2010 2010 Year -to-Date Performance
(Annualized)
CREDIT PORTFOLIO 22% to 28% 28.9%
Commercial Credit - Individuals 30% to 35% 46.4%
Commercial Credit - Companies 18% to 23% 17.7%
Housing 16% to 20% 16.6%
Provision Cost / Average Credit Portfolio 3% to 4% 3.2%
Allowance for loan Losses / Average Credit Portifolio 7% to 8% 6.9%
FUNDING 13% to 16% 13.6%
Time Deposits 15% to 20% 15.9%
Return on Average Shareholders’ Equity 16% to 19% 19.5%
Efficiency Ratio 49% to 54% 48.5%
Net Financial Margin / Interest-Earning Assets 9% to 10% 10.3%
Highlights
Banrisul is the fourth best Brazilian bank according to the ranking of the As Melhores da
Dinheiro, published by the weekly magazine IstoÉ Dinheiro, from São Paulo. The
institution was also awarded in financial sustainabi lity, social responsibility, human
resources and corporate governance. The Bank was also highlighted in the survey The
500 Largest Companies in Brazil, appearing in the 98th place.
Banrisul is awarded at the Congress of Information Technology for Financial Institutions
organized by the Brazilian Federation of Banks between June 09-11, 2010, having
received five awards in the following categories: Social Management,
Telecommunications Management, Digital Identity, IT Governance and Risk Management,
as well as distinguished with the Best IT Manager award, received by the Vice-President
of the Bank.
Investments in hardware, software and asset maintenance totaled R$143.5 million in
September 2010.
15
Awards
January/2010. Banrisul’s share among the most profitable in the Americas.
March/2010. Banrisul is one of 100 most valuable brands in Brazil.
April/2010 Banrisul is one of the 2,000 largest companies in the world.
Banrisul is one of the most remembered companies by the State’s
population.
Banrisul is one of 500 most valuable brands in global financial sector.
May/2010 Banrisul is one of the largest companies in Rio Grande do Sul.
June/2010 Banrisul is among the most valuable brands in Brazil.
Management at Banrisul receives national IT award.
July/2010 Banrisul’s shares stand out among Latin American banks’.
August/2010 Bank is the fourth best bank in the country.
September/2010 Banrisul is the 10th largest company in the ranking of the 500 largest
companies in the Southern Region.
Banrisul is highlighted in Finance ranking published by Valor 1000.
Porto Alegre, November 08, 2010.
16 FINANCIAL STATEMENTSSEPTEMBER 2010
ManagementReport
WE PRESENT THE MANAGEMENT REPORT AND FINANCIAL STATEMENTS OF BANCO DO
ESTADO DO RIO GRANDE DO SUL S.A. FOR THE NINE MONTHS OF 2010, PREPARED IN
ACCORDANCE WITH THE RULES OF THE BRAZILIAN SECURITIES AND EXCHANGE COMMISSION
(COMISSÃO DE VALORES MOBILIÁRIOS – CVM) AND THE CENTRAL BANK OF BRAZIL.
17
Economic Scenario
From January to September 2010, the economic
scenario was characterized by the preservation of the
heterogenic recovery process of the global economy,
where emerging countries, especially China,
presented vigorous growth, while developed
economies like Europe, USA and Japan showed weak
performances. Government officials responded to
this situation of deteriorating expectations by
withdrawing monetary and fiscal stimulus to emerging countries, and by further injections of
liquidity and quantitative easing in the developed economies. During that period, having
presented moments of euphoria operating under strong assets appreciation and drop in
global risk aversion in the first quarter, and great strain from the European fiscal crisis and the
consequent fear of another recessive environment in the second quarter, financial markets
have taken a more cautious approach, on the outlook of a slower, uneven global economic
recovery in the coming years.
On its turn, Brazil has been presenting a vigorous, robust cycle of economic growth, with
domestic demand as the main growth vector, underpinned by low unemployment rates and
the payroll and credit market expansion. The exchange rate not only reflected the worth of
Brazil’s economy, but also the effects of the US dollar global devaluation and the higher real
domestic interest rate in comparison to other economies. These factors led the exchange
rate to increase in 2.87%, from R$1.74/USD1.00 by the end of 2009 to R$1.69/USD1.00 at the
end of September 2010.
However, as occurred elsewhere in the world throughout the year, the growth rate settled
down and the levels of use of installed capacity and industrial production decompressed,
indicative of a potential pace closer to the projected. Indeed, general price levels have also
suffered some gradual decompression over the months, returning to more comfortable levels,
driving inflation expectations to closer to the inflation target. Accordingly, the IPCA inflation
in the first nine months of 2010 reached 3.60%, largely on account of prices behavior in the
first half of 2010. Moreover, the cooling of administered prices and services prices ultimately
improved the dynamics of inflation, the latter being less dynamic.
Identifying the reduction of real interest rate to neutral levels and the increasing effects of
the monetary policy, the Central Bank of Brazi l estimated that the inflationary scenario, would
gradually return to the targeted path after the risks presented at the beginning of the year,
part from the reversal of a substantial portion of measures introduced during the financial
crisis, part from the perception of a slower global recovery process. Therefore, a cycle of
hikes in the Selic rate, mostly concentrated in the second quarter of 2010, was observed: it
went from 8.75% pa to 10.75% pa, a total adjustment of 200 basis points, steady since
September’s meeting.
18 FINANCIAL STATEMENTSSEPTEMBER 2010
As for the economy of the State of Rio Grande do Sul, the first three quarters of 2010 have
been determined by the consolidation of the recovery of economic activity, supported mainly
by the dynamism of the industry sector Despite a brief accommodation period due to the
withdrawal of tax incentives, the industry returned to an upward recovery trajectory toward
pre-financial crisis levels, pace of activity which is accompanied by all the variables included
on the Industrial Performance Index (IDI-RS) released by the Federation of Industries of Rio
Grande do Sul – FIERGS. With emphasis on sales, industry purchases and employment, the
IDI-RS grew 10.1% from January to August this year. It should be further mentioned that the
level of use of installed capacity in the industry segment remains at a consistent trend, reaching
84.7%, yet still below pre-crisis peak of 88.3%.
On the other hand, Rio Grande do Sul’s exports grew only 4.4% from January to September
this year, with a significant drop in profitability as a result of the appreciation of the Brazilian
Real and of still depressed international prices. Imports have maintained strong growth, high
of 46.7% from January to September 2010, stimulated by the growth of employment and
income levels in a context of booming domestic economic activity. In this scenario, it is
important to note that price indexes behaved well in the first nine months of this year,
ending September and 9M10 with increases of 0.19% and 3.21% in the year, respectively,
based on the Extended National Consumer Price Index – IPCA, calculated for the metropolitan
region of Porto Alegre.
19
Consolidated Performance
Net Income
Banrisul’s net income totaled R$511.4 million from January to September of 2010, R$154.6
million or 43.3% above the recurring result recorded in the same period last year. Higher
credit revenues and lower other operating expenses were positive year-on-year drivers to
the result. Bottom line was negatively impacted by lower treasury revenues, on account of
lower Securities balance and Selic Rate, and higher onlending expenses and loan losses
provisions.
Graph 1: Net Income - R$ Million
Shareholders’ Equity
At the end of September 2010, Banrisul’s shareholders’ equity totaled R$3,746.4 million,
growing 13.5% in twelve months as the result of the incorporation of the net income net of
dividend and interest on equity payments and provisions. Annualized return on average
shareholders’ equity for 2010 reaches 19.5% in 9M10.
Graph 2: Shareholders’ Equity Growth - R$ Million
20 FINANCIAL STATEMENTSSEPTEMBER 2010
Total Assets
Total assets amounted to R$32,339.3 million in September 2010, a 13.2% increase in relation
to the R$28,573.2 million recorded in the same period of 2009 derived from the expansion of
the base of funding and the judicial deposits reserve funds. In the past twelve months, credit
portfolio stands out in the composition of Assets, increasing R$3,708.5 million.
Graph 3: Total Assets Growth - R$ Million
Taxes and Contributions
From January to September 2010, Banrisul collected and provisioned R$380.8 million in taxes
and contributions, while taxes retained and passed through levied directly on financial
intermediation and other payments amounted to R$360.7 million.
21
Operating Performance
Funds Raised and Under Management
Funds Raised and Under Management totaled R$24,095.2 million in September of 2010, up
15.5% or R$3,239.4 million in twelve months
The balance of time deposits reached R$9,533.0 million, an increase of 12.0% or R$1,023.3
million in relation to September 2009. Savings deposits grew 21.1% or R$1,095.5 million,
totaling R$6,295.7 million. Demand deposits increased 25.4% or R$426.8 million in twelve
months and reached R$2,108.9 million. Assets under management amounted to R$6,141.1
million at the end of September of 2010, 13.9% or R$747.6 million over September of 2010.
Graph 4: Growth of Funds Raised and Under Management - R$ Million
Breakdown of Funds Raised and Under Management
Funds raised and under management consist of time deposits, the key funding instrument
for lending, with R$9,530.0 million in September 2010, accounting for 39.6% of the total funding;
assets under management, with R$6,141.1 million, account for 25.5%; savings deposits, with
R$6,295.7 million, account for 26.1%; and demand deposits, with R$2,108.9 million, 8.8%.
22 FINANCIAL STATEMENTSSEPTEMBER 2010
Graph 5: Breakdown of Funds Raised and Under Management - R$ Million
Securities
The balance of investments in securities stood at R$10,014.1 million in September 2010, a
year-on-year reduction of R$669.3 million. This balance includes interbank investments net
of resale and repurchase agreement liabilities. Bank has prioritized the applications in recent
months in credit assets, due to the increased profitability of these assets compared to treasury
operations, Given its comfortable liquid status, Banrisul has sought a larger participation of
credit portfolio to assets, due to the higher profitability of these assets compared to treasury
operations
As confirmed by internal technical studies, Banrisul has a strong financial capacity and intends
to hold securities classified as “held-to-maturity” pursuant to Article 8 of the Central Bank of
Brazil Circular Letter 3,068 of November 8, 2001.
Graph 6: Securities Growth - R$ Million
23
Loan Operations
In September 2010, Banrisul’s loan portfolio totaled
R$16,237.1 million, 29.6% or R$3,708.6 million above
the R$12,528.5 million recorded in the same month
of the previous year. Accounting for 85.8% of such
growth, the commercial credit portfolio increased
from R$9,331.9 million to R$12,514.6 million, rising
34.1% or R$3,182.7 million in twelve months.
In twelve months, the other loan portfolios
performed as follows: rural credit posted an increase of 26.1% or R$244.3 million and amounted
to R$1,180.5 million; long-term financing recorded an increase of 34.5% or R$165.4 million,
reaching R$644.3 million; real estate loans increased 15.3% or R$161.7 million, amounting to
R$1,217.6 million; ACC and ACE contracts (pre- and post-shipment export financing) decreased
8.7% or R$44.6 million, totaling R$470.0 million; leasing fell by 18.3% or R$18.0 million, totaling
R$80.2 million. Public sector loans amounted to R$129.8 million.
At the end of September 2010, credit operations of AA to C ratings, representative of normal
risk according to Resolution 2,682/99 of the Central Bank of Brazil, accounted for 89.4% of the
credit portfolio, with a balance of R$14,516.5 million. Credit operations rated D to G (risk level
1), amounted to R$1,291.6 million, equal to 8.0% of the loan portfolio. Risk level 2, composed
solely by operations rated H that require provisions of 100%, represented 2.6% or
R$428.9 million of the total loan portfolio.
Graph 7: Loan Operations Growth - R$ Million
24 FINANCIAL STATEMENTSSEPTEMBER 2010
Commercial Credit - Individuals
At the end of September 2010, commercial loan operations (non ear-marked credit) to
individuals totaled R$7,218.2 million, accounting for 57.7% of the commercial portfolio and
44.5% of all loan operations. The 40.5% or R$2,081.6 million year-on-year increase was largely
driven by the acquisition of payroll loans from other banks, in which the vendor is co-obliged
in case of defaults.
Own payroll loan portfolio amounted to R$3,311.1 million, 28.8% above the figures recorded
in the same month of 2009. R$1,848.1 million in payroll loans were granted in 299.900 operations
in the first nine months of 2010. The acquisitions of payroll loans from other banks totaled
R$2,036.3 million in September 2010, up 77.8% in twelve months.
Commercial Credit - Companies
Commercial loan operations targeted at companies amounted to R$5,296.4 million in
September 2010, growing 26.2% or R$1,101.1 million year-on-year, accounting for 42.3% of
the commercial portfolio and 32.6% of total loan operations. With a balance of R$3,770.8
million in September, 2010, working capital lines grew 39.3% year-on-year.
Working capital granted to hospitals, clinics and laboratories totaled R$38.5 million in the first
nine months of 2010. In the same period, R$147.0 million were allocated to the education
sector, comprised of universities and educational institutions.
Graph 8: Commercial Credit Growth – Individuals and Companies - R$ Million
25
Agribusiness
In addition to programs already operational funded by BNDES onlendings, the Bank began in
2010 to address financing demands for rural investments under BNDES special programs:
Sustainable Investment Program (PSI); Storage Incentive Program to National Grain Producers
(Cerealista) and Special Rural Credit Program (BNDES PROCER). In the nine-month period, 697
credit applications were granted in accordance to MCR 6.2 (set of rules for rural financing) and
195 in accordance to MCR 6.4 (set of rules for the use of funds from savings into rural financing),
totaling R$17.0 million in 195 credit proposals. Banrisul has also been present in official and
private agricultural fairs.
From January to September 2010, 29,500 operations targeted to agribusiness were granted,
amounting to R$738.1 million, an increase of 32.0% over the same period of 2009. Of that
amount, R$633.7 million were directed to rural production and R$104.5 million to rural
investments. The balance of rural credit portfolio reached R$1,180.5 million in September
2010, 26.1% higher than the same month of 2009.
Foreign Exchange
ACC and ACE (pre- and post-shipment export financing operations) totaled R$470.0 million at
the end of September 2010. From January to September this year, 17,000 export and import
operations were contracted, amounting to US$1,104.0 million, 27.9% over the same period in
2009. Export operations totaled US$542.3 million, while import operations totaled US$561.8
million.
Real Estate Loans
Banrisul’s real estate loan portfolio ended September 2010 at R$1,217.6 million, a year-on-
year increase of 15.3%. Through the Bank’s real estate credit lines, 4,000 operations were
granted in the first nine months of 2010, representing a volume of R$419.8 million. Of this
total, R$108.8 million was allocated to purchase 1,052 previously-owned properties, R$29.9
million to purchase 237 new properties, and R$3.8 million to purchase 65 commercial
properties. As part of the corporate plan, R$195.7 million were invested in 1,863 units, and for
individual home construction, R$25.9 million was invested in 264 homes.
Long-Term Finance
The long-term finance portfolio totaled R$644.3 million in September, 2010, an increase of
34.5% over the R$478.9 million recorded in September, 2009. In the nine months of 2010, 374
long-term loans were approved, totaling R$165.5 million in funds from Finame and BNDES. Of
this total, R$105.1 million were allocated to the industrial sector in 196 operations, R$34.5
million to the public sector in 76 new operations and R$26.0 million to the commerce and
service sectors in 102 operations.
26 FINANCIAL STATEMENTSSEPTEMBER 2010
Microcredit
Microcredit lines aim to facilitate working capital access for micro-companies and SMBs. From
January to September 2010, microcredit grants totaled R$1,001.6 million, 11.7% higher than
the R$896.9 million recorded in the same period of 2009. The most used credit lines were
Banricompras, receivables, with R$457.1 million in 232,000 operations, Promicro, with R$309.7
million in 23,300 operations and Conta Empresarial (business account), with R$229.5 million
in 80,400 operations.
Products, Services and Channels
Banricompras
Graph 9: Banricompras
Financial Transactions - R$ Million Number of Transactions - Million
Banricompras, an electronic payment method available to cardholders of Banrisul’s debit
cards, comprises today 99,600 affiliated establishments. In September, 2010, 50.8 million
transactions were carried out through its network, with a financial turnover of R$3,379.8
million, a year-on-year increase of 15.9% and 25.9%, respectively.
Banrisul developed the INSS Banricompras Card to serve retirees, pensioners and beneficiaries
of Social Security in the State of Rio Grande do Sul. Easy to join and use, cost-free for the
customer, it seeks a closer relationship with that public, who can use the card for withdrawals
and transactions at Banricompras network. Launched in January 2010, the product has issued
approximately 50,000 cards until the September of 2010.
Banrisul’s Correspondent Banks
At the end of September 2010, Banrisul had approximately 2,100 Correspondent Banks, a
flexible customer service alternative that avoids trips to Banrisul branches and extends
business hours, with a financial turnover of R$10,052.3 million in 43.2 million operations, an
increase of 12.9% over September 2009.
27
Virtual Branch – Home and Office Banking
From January to September 2010, 72.5 million operations totaling R$56,649.2 million were
carried out through Agência Virtual Banrisul (Banrisul Virtual Branch), an online service
throughout which clients can perform several banking operations. In relation to the same
period of 2009, the number of transactions grew 23.9%, whereas the financial turnover
decreased by 23.4%.
Banrifone and Call Center
Banrisul’s customers can make all their banking transactions by telephone using services
channels such as Banrifone and Branch Call Center, Via Banrifone, they can obtain account
statements, demand banking services and make transactions. At the Call Center, incoming
phone calls directed to the branches connected to the system are filtered and taken care of
whenever possible, helping front office personnel to more effectively do business.
Until September 2010, Banrifone electronic service had 3.8 million accesses, 440,700 of them
operator assisted, and a financial turnover of R$153.2 million. Over the same period, the
Branch Call Center received 1.1 million personal phone calls, having taken care of 42.4% of
them or a financial turnover of R$13.1 million.
During the third quarter of 2010, Banrisul Consórcio (Consortium) portfolio of products was
added to the Banrifone base, as well as the inclusion of Agência Central (Main Branch) to the
Branch Call Center. For the fourth quarter of 2010, it is planned the migration of the SAC, SOS
and Virtual Agency hotlines, currently outsourced.
Electronic Bidding
From January to September of 2010, Pregão On Line Banrisul (Banrisul Online Bidding website)
hosted 18,200 bidding processes, totaling R$402.6 million, an increase of 18.8% and 54.1%
over the same period last year, respectively. The savings for users of the public sector accounted
for 29.3% compared to the original estimated purchase price.
Banrisul was user of the Bidding service, in 372 events held until September 2010, totaling
R$94.3 million in purchases, which represent savings of 40.3% over the original offered price
to the Bank. The percentage of savings is the difference between the average amounts for
the bid over the lowest bid at the end of each event.
Credit Cards
At the end of September 2010 Banrisul had 283,800 Visa and MasterCard credit cardholders,
with a financial turnover of R$542.8 million in 7.4 million transactions. The average sales
ticket increased by 5.8% year-on-year - 10.9% as for withdrawals.
The card market legislation in Brazil in 2010 demanded the split between credit transaction
28 FINANCIAL STATEMENTSSEPTEMBER 2010
capture, card processing and acquiring services, hitherto an exclusivity of large credit brands,
increasing market competition and bringing transparency as to the rates charged by the
operators, measures that reflected in of networks and POS terminals sharing. The regulatory
measures are conducive to business growth and improving the prospects of widespread use
of the card as a payment and credit instrument.
In August 2010, in line with changing market conditions, it was announced the partnership
between Banrisul and MasterCard t for the capture by Banricompras network of transactions
with Mastercard’s credit and debit cards. Therefore, the approximately 100,000 affiliated
retail outlets to Banricompras network also begin to operate with MasterCard, besides
Banricompras card itself. Thus, MasterCard cardholders have more options to pay for purchases,
particularly in Rio Grande do Sul and Santa Catarina.
This partnership provides for the companies involved (Banrisul and MasterCard) new business
opportunities and increases the number of affiliated stores. For customers, the possibility of
at a single POS, making electronic payment with any of the cards, recognized by their safety
and quality features.
Insurance, Private Pension and Capitalization
Seeking to meet its clients’ needs and in partnership with Icatu Seguros, Icatu Capitalização
and SulAmérica Seguros, Banrisul provides capitalization, insurance and private pension plans
through its branch network. From January to September 2010, more than 88,000 products
were acquired by customers, a 22.5% increase over the same period last year. In the same
period, approximately R$9.5 million were paid out for 7,300 capitalization and insurance
policies hold by customers.
29
Trindade Branch - Florianópolis
Eletronic Sevice Station - Brasília Passo da Areia Branch - Bourbon Shopping - Porto Alegre
Banrisul´s Customer Service Network
Present in 411 cities in Rio
Grande do Sul, which
correspond to 98% of the
population and the State’s GDP,
Banrisul’s customer service
network was comprised of
1,229 service stations
throughout 438 branches, 279
banking service stations and
512 electronic service stations
by September 2010. Of all 438
branches, 398 are located in Rio
Grande do Sul State, 23 in the
state of Santa Catarina, 15 in
other Brazilian states and two branches overseas, in New York and Grand Cayman.
Banrisul opened four new branches from January to September of 2010 , one in Rio Grande do
Sul and three in Santa Catarina, along with six banking service station. For the next months, it
is planned the opening of two new branches, two service stations and one remote banking
service station in Rio Grande do Sul. The expansion plan to Santa Catarina will continue, with
estimated five new branches in the cities of Rio do Sul, Itapema, Blumenau, Joinville and São
José.
30 FINANCIAL STATEMENTSSEPTEMBER 2010
Subsidiaries
Banrisul S.A. Administradora de Consórcios administers groups to purchase real estate,
automobiles and motorcycles. The Company ended September 2010 with 21,180 active groups
and with a loan portfolio of R$537.0 million. Net income from January to September 2010
totaled R$8.5 million. At the end of September 2010, the Comissão de Valores Mobi liários
(CVM – Brazil’s SEC equivalent) approved the delisting of Banrisul Consórcios. The heavy
operating costs associated with the maintenance of public-held company registry and the
notable share in Banco do Estado do Rio Grande do Sul motivated the request filled at CVM
for registry cancellation.
Banrisul S.A. Corretora de Valores Mobiliários e Câmbio From January to September 2010
grew 90.0% over the first nine months of 2009, brokering R$1,315.3 million in the equity
market, 39.0% or R$511.0 million of which via Home Broker. Net income in the period totaled
R$5.1 million.
Banrisul Armazéns Gerais S.A. Operating as grantee on behalf of Receita Federal (the Brazilian
Internal revenue service) for the handling and storage of goods, Banrisul Armazéns Gerais
provides general warehouses and dry port services. The number of customs clearance from
January to September 2010 amounted to 19,420 (16,885 in the same period of 2009). At the
end of September 2010, the Company registered a net income of R$673,500.
Banrisul Serviços Ltda. responsible for Refeisul brand, Banrisul Serviços Ltda. operates in the
southern region of the country in the segments of meal and food vouchers, fuel, gifts, private
label and benefit cards. At the end of September 2010, Banrisul Services network had over
50,000 affiliated establishments to service about 320,000 users. Within the scope of the
Programa de Alimentação ao Trabalhador (PAT, or Workers’ Food Program), Banrisul Serviços
offers PAT benefits to about 30% of total beneficiaries in the state of Rio Grande do Sul At the
end of September 2010, its net profit was R$8.4 million.
99.6% ON70.5% PNA13.0% PNB57.0% Total
0.4% ON29.5% PNA87.0% PNB43.0% Total
State of RioGrande do Sul
OtherShareholders´
Banco do Estadodo Rio Grande do Sul S.A.
Banrisul S.A.Adm. Consórcios
Banrisul S.A.CVMC
Banrisul ArmazénsGerais S.A
Banrisul ServiçosLtda.
99.6% Total 98.7% Total 99.5% Total 99.8% Tot al
31
Corporate Governance
Overview
Since July 2007 listed on BM&F Bovespa SA‘s of Corporate
Governance Level 1, Banrisul fully meets the
requirements of its level of listing and, also requirements
of other levels of corporate governance, in line with best
market practices, on behalf of greater transparency,
fairness and proper accountability, while enhancing
credibility and the interest of investors and customers.
At the end of the third quarter of 2010, eight institutions (sell side) were issuing monitoring
reports on Banrisul.
Banrisul’s Corporate Governance Structure
Banrisul’s corporate governance structure is composed by the Board of Executive Officers and
Committees, Boards of Administration, Fiscal Council and Audit Committee, as described
below.
Board of Executive Officers and Committees: Banrisul’s management is conducted by the
Chief Executive Officer and other Officers, assisted by strategically relevant bodies acting in
the form of committees composed of employees in charge of various areas of the Bank;
Board of Directors: responsible for establishing Banrisul’s general business policies,
including its long-term strategy, it its composed by a minimum of five and a maximum of nine
board members, all of them shareholders, being at least 20% independent shareholders, for
a unified two-year term;
Audit Committee: connected to the Board of Directors, the committee is composed of
three members appointed by the Board, with at least one of them with proven knowledge in
the accounting and auditing areas. The term of office is one year and may be renewed for the
same period upon prior authorization from the Central Bank of Brazil;
Fiscal Council: responsible for the adequacy of management activities with the duties
established by law and by Bylaws, it is composed of five members, one chosen by the
preferred shareholders, and five alternate members for one-year;
32 FINANCIAL STATEMENTSSEPTEMBER 2010
Shareholding Structure
The Rio Grande do Sul State Government, as the majority shareholder, has control over the
election of the Board of Directors and, therefore, over Banrisul’s management and operations.
However, the Bank has a free float above to the minimum of 25% required by Level 1 Corporate
Governance: 42.8% of its total shares are held by shareholders without any connection with
the Institution. Banrisul’s shareholding structure is presented in the following graph.
Graph 10: Shareholding Structure
Investor Relations and Communication Policy
A transparent relationship with clients and investors is built through the disclosure of data
and information to the market, communication that allows broader and more timely
knowledge of the Bank’s business, especially for experts.
Banrisul’s Investor Relations website, available in Portuguese and English, provides clear,
detai led and timely information for the Bank’s shareholders, institutional investors,
individuals, market analysts and other interested stakeholders.
The significance of these events is reflected on Banrisul’s trading volume. At the end of
September 2010, the Bank’s PNB stock (BRSR6) ranked 69th among the 100 most-traded stocks
on BM&F Bovespa (80th in twelve months).
Banrisul’s market value at the end of 9M10, represented by the total number of outstanding
shares multiplied by the closing price of its PNB stock, was 86% higher than shareholders’
equity in the same period.
Graph 11: Market Value X Shareholders’ Equity - R$ Million
33
The table below shows the geographic distribution of shareholders by number and number
of Banrisul’s shares held.
REGION SHAREHOLDERS % SHARES %
BRAZIL 53,906 95.7% 233,737,918 57.2%
LATIN AMERICA AND CENTRAL AMERICA 1,973 3.5% 23,781,279 5.8%
NORTH AMERICA 203 0.4% 46,978,193 11.5%
ASIA 50 0.1% 13,869,416 3.4%
EUROPE 190 0.3% 88,485,605 21.6%
OCEANIA 23 0.0% 2,052,066 0.5%
AFRICA 1 0.0% 70,000 0.0%
TOTAL 56,346 100.00 408,974,477 100.0%
Interest on Equity and Dividends Distribution Policy
Since early 2008, Banrisul has maintained policy of paying interest on equity on a quarterly
basis and, historically, has remunerated its shareholders by paying interest on capital and
dividends above the minimum level required.
From January to September of 2010, and net of Income Tax withheld at source, R$164.5 million
were paid as interest on capital and dividends.
Internal Controls and Compliance
The internal control system is a process established by the Bank’s senior
management involving all hierarchical levels and aimed at ensuring
compliance by monitoring business processes.
Banrisul instituted a method geared towards protecting the Bank’s
resources while complying with laws and regulations in the Bank’s
various departments.
External Regulations
Banrisul has instituted mechanisms for registering and accompanying operational routines
and risk management processes in its various areas, with the goal of effectively monitoring
aspects of its operations as recommended by regulatory bodies and the External Auditors.
The control of processes governed by external regulations, carried out internally by the
Legislation Group, consists of monitoring rules published by regulatory agencies and
representative bodies of the banking sector, such that all the Bank’s areas remain in
compliance.
34 FINANCIAL STATEMENTSSEPTEMBER 2010
Internal Regulations
The Institution has intensified its actions aimed at strengthening the culture and management
of the internal control and compliance system, instituting a specific Regulatory Instruction to
reaffirm the related concepts, basic elements, goals, responsibilities and regulations.
Branch Certification
Implemented by the Bank in 2008, the Branch Certification focuses on customers’ records; by
remote and on site monitoring, these procedures have reinforced the “Know Your Customer”
policy and the importance of the quality and timeliness of clients’ registries.
Money Laundering Prevention - MLP
Based on the institutional money laundering prevention policy, Banrisul established specific
processes and systems seeking to minimize money laundering risk in the various financial
operations under the Bank’s responsibi lity.
New procedures were implemented in compliance with Central Bank of Brazil Circular No.
3461 of July 24, 2009 and Circular Letter No. 3430 of February 11, 2010.
Aiming at the dissemination and awareness of the ‘Know Your Customer” policy and other
matters addressed in current legislation, Banrisul has increased training for employees who
work in activities related to money laundering prevention.
Internal Control Structure
Corporate policies seek to institutionalize control procedures based on regulatory compliance,
training programs focusing on best market practices, and definitions of the Institution’s
standards of ethics and conduct.
Risk Management
The activity of risk management is an essential, strategic tool for any financial institution. The
risks inherent to a company within the banking industry range from those easily identifiable,
like market, liquidity and credit risks, to those not directly identified as such, but also of
extreme importance, like operating or image risks, among others.
The internal regulating bases that guide risk management have, as assumption, to identify
and integrate processes focused on mitigating hazards natural to banking, with continuous
and systematic improvement in policies development, internal control systems and safety
standards, integrated with strategic and market objectives.
The schedule of activities established by Banrisul is as required by the monetary authority in
resolutions and circular letters that inform the tenets of risk management embodied in the
New Basel Capital Accord - Basel II.
The complexity of this process is reinforced at the internal structures of the Bank, in line with
the philosophy of continuous improvement of risks management by means of professional
qualification of employees, investment in systems, processes and internal restructuring in
HO areas, such as the recently inception of the Corporate Risk Management Unit implemented,
good examples of measures taken by Banrisul.
35
Credit Risk
Given the importance of credit assets on the the institution’s total assets, the effective
management of credit risk constitutes a fundamental activity. The capability of the instruments
used to measure risks inherent to each client and structured processes for decision-making
have allowed the institution to safely expand its loan portfolio.
Banrisul’s structure for assessing credit risk is based on the principle of collegiate, technical
decision, when credit limits are set accordingly to decision-making levels established to each
and every branch, as well as to the Management and to Credit and Risk committees and the
HO. This process aims to streamline credit grant based on technically predefined limits that
determine the desirable exposure the institution is willing to work with each client, individual
and company, observing the risk/return ratio.
The continuous, growing implementation of statistical methodologies for risk assessment of
individuals and companies, along with the parameterization of credit policies and business
rules, that combine the optimization of the controls on registry information and a certification
model, enhanced and strengthened internal risk ratings.
The use of Behavior and Credit Score systems made possible the establishment of pre-
approved credit limits to individuals according to risk ratings outputs from the statistical
models, conceptually more appealing when dealing with massive credit. Banrisul’s proprietary
models are in accordance with Central Bank of Brazil Resolution no. 2682, of December .12,
1999.
For the Corporate segment, the Bank has used internal technical studies that assess companies
under the financial, management, marketing and production prisms, with periodic reviews
that also take into account current and prospective economic scenarios, to which Companies
are confronted. The management of exposure to credit risk has as guidelines the selective
and conservative policy of the institution, following strategies set by senior management
and technical areas of the Corporation.
The consolidation of the models to mitigate exposure to credit risk has laid the bases for
modernization of these instruments in the aegis of the principles laid down by Basel II, which
will make possible for the Bank to switch from the standard approach to the intermediate
level, maximizing its capital structure with an even more precise calibration about the risks
embedded in credit transactions.
Towards the end of 2010 and to the year of 2011, improvement actions in various processes
are scheduled, including customer registry and the implementation of electronic and Internet
registration; the statistical risk model for individuals, with the definition of new customer
profiles; statistical risk model for companies; the completion of the project for the
implementation of statistical risk and pre-approved credit limits; rating and risk Centers;
development of new method of calculating designed to micro and small enterprises.
36 FINANCIAL STATEMENTSSEPTEMBER 2010
Market Risk
Market risk arises due to market fluctuations that may cause losses to the Bank. These
oscillations can occur in the prices of financial assets and liabilities or in some variables such
as interest rates, exchange rates, price indexes, among others.
Banrisul monitors market risk through the use of statistical methodologies, Value at Risk
(VaR) and Sensitivity Tests among them, which seek to simulate and determine, within an
interval of confidence, the maximum levels of expected losses over a period of time, both in
normal market conditions and in scenarios of stress and volatility.
Market monitoring reports and daily balances of the Bank’s assets and liabilities portfolios,
along with other operating procedures, allow following, preventing and correcting possible
imbalances, ensuring the soundness of the institution.
Liquidity Risk
Liquidity risk refers to the inability to meet cash needs, in other words, mismatches between
cash flows of assets and liabilities that affect the Institution’s financial ability to obtain funds
to honor its obligations.
Banrisul jointly monitors liquidity and market risks, observing cash flow projections and
possible changes in its structure arising from variations in the macroeconomic scenario that
might affect allocation and fund raising on the market.
With regard to assets, several scenarios projected for credit portfolio growth and financial
instrument settlement are taken into consideration. On the other hand, for liabilities, the
adopted assumptions cover the possibility of early redemption and difficulties in maintaining
the funding structure.
Operating Risk
In accordance with Central Bank of Brazil Resolution nº. 3,380/06, and with Institutional Policy
for the Management of Operational Risk, the administrative structure implemented at Banrisul
is responsible for identifying, assessing, monitoring, controlling and mitigating operational
risks of the Bank, including those resulting from outsourced services.
Thus, in the third quarter of 2010, the mapping of internal processes, operational risk
assessments and the development of action plans to mitigate identified risks continued.
Through the analysis of collected information, the Matrix of Banrisul’s Operating Risk is
generated. The action plans are evaluated and prioritized by decision-makers of the institution
seeking, from the reduction of risk exposure and of potential losses, to inspire greater
confidence in all levels of business.
In order to improve the methodology for assessment and mitigation of operational risks,
Banrisul is tailoring its information to the quantitative modeling of data by establishing a
Data Base of Losses, which provides greater efficiency and assertiveness in dealing with
operational risks incurred.
More information about the structure of operational risk management are available at http:/
/www.banrisul.com.br/Investor Relations/Corporate Governance/Operational Risk
Management Structure.
37
Basel Ratio
The Basel Index is the relation between the Base Equity (Reference Equity – PR) and weighted
risks (Required Reference Equity – PRE), according to current regulations, showing the
company’s solvency. The minimum percent required by the Central Bank of Brazil is 11%,
calculated according to the formula below:
PR* 100IB =
{EPR + [1/F * (Pcam + Pjur + Pcom + Pacs + Popr)]}
In September 2010, Banrisul’s Basel Ratio stood at 15.4%. The reduction in relation to the ratio
as of September 2009 was largely driven by the growth in the Bank’s credit portfolio.
Of the portions that compose PRE, operational risk stands out with a variation resulting from
the change of its multiplication factor, which in September of 2009 was 80% but was increased
to 100% in January of 2010 as established by Central Bank of Brazi l Circular 3,383/08.
Graph 12: Basel Ratio Growth
38 FINANCIAL STATEMENTSSEPTEMBER 2010
Technology Modernization
Banrisul’s investments in hardware, software and asset
maintenance totaled R$143.5 million from January to
September of 2010, and include the acquisition of equipment
and applications which are intended to ensure security in
electronic transactions, compliance with requirements from
external bodies and the education for the safe use of
technological resources, as well as in engineering works and
infrastructure assets.
Banrisul’s technology area unfolds on three fronts -
infrastructure, general systems architecture and information
security, practices that are developed in accordance with the
strategic definitions of governance, risk and compliance of
the institution.
The IT infrastructure projects are aligned with Banrisul assumptions for simplification,
environmental management, business continuity and costs streamlining. Among the projects
implemented from January to September 2010, it is included: contingency and virtualization
of servers, a project that combines features of replication and continuity; reduced energy
costs, heat dissipation and physical space in data centers; the continuity of the automation of
the use of the OPEN SRM Site Recovery Manager; implementation of new storage environment
for Windows, Unix and Linux, with synchronous replication between the sites of the Bank,
consolidating corporate storage technologies on these platforms; and also the acquisition of
Blade Servers to act as a processing base of virtual systems.
As for information security, encryption mechanisms have been defined to be used with the
new Electronic Permit automation system for State Court of Justice, as well as security
mechanisms to allow using Banrisul multiple card for transactions at Banco 24 Horas, besides
the inception of an environment to request, install and sign digital certificates.
The Bank pays particular attention to prevent and combat fraud at ATMs and Internet Banking,
and maintains strategic group for the implementation of actions to ensure the minimization
of losses in such channels.
The Bank is the only Latin American institution that participates in the Board of Advisors of
the PCI (Payment Card Industry), which deals with card payments safety, directly influencing
the definition of rules to be applied worldwide.
From the partnership between Banrisul and MasterCard, the goal is that Banricompras network
fully complies with international safety standards, particularly in transactions with card flags
other than Banricompras that are processed at outsourced companies hired on behalf of
Banrisul as credit and debit card acquirer.
39
The Bank participated in several events during the first nine months of 2010, among which
are: CardWare 2010 (Canada); IV Electronic Crimes Combat Operational Symposium (SP - Brazil);
Websense - Protection of Information in Secure Gateway (RS - Brazil); RSA Conference (USA)
Fraud Prevention in Checks Imaging Clearing Seminar; Banking Security Seminar; CIAB and
CNAB Febraban Meeting (SP - Brazil); PCI board meeting (UK), meeting of the Subcommittee
on Digital Certificate in conjunction with GT (SP - Brazil) ; Pre-2010 CIAB Pre-2010 meeting (SP
- Brazil); CARDS 2010 Security Forum (SP - Brazil) and Forum CIAB 2010.
Banrisul coordinated, yet, the actions for the realization of the 3rd IT International Forum,
which brought together national and international experts, when several presentations
focused on the current and prospects situation in the payment means security were held.
Public Sector Activities
Federal Public Sector
The Bank offers products and services to customers
stimulate federal employees to choose to have Banrisul
as their bank of choice for payroll at. The advantages
include, among other benefit, the extensive branch and
banking correspondent networks, the Banricompras
card, and real estate loans.
Given the faculty to federal civil servants to choose the bank of choice for payment of pension,
several new payroll agreements were signed in 2010, including Federal University - Santa
Maria, Farroupilha Federal Institute, Rio-grandense Federal Institute, State of Rio Grande do
Sul Federal Institute and the Federal Ministry of Finance, as well as payroll loan agreements
with the Regional Labor Court - 4th Region, in the State of Santa Catarina.
National Institute of Social Insurance
Since January 2010, Banrisul has been assigned the bank of choice for the payment of benefits
granted within the state of Rio Grande do Sul for five years. Thus, all the new benefits provided
by Social Security (INSS) in the State are deposited at Banrisul, except for those beneficiaries
or pensioners who opt for another bank. At places outside the State, the beneficiary may
request that their benefits be transferred to Banrisul.
To serve well beneficiaries of Social Security is a major focus of attention for Banrisul, which
makes avai lable to them, among other services: update their address at any of Banrisul’s
branches, without having to go to INSS’ offices; use of Beneficiary ID Card, for discounts at
pharmacies, cinemas, museums and other participating establishments, obtain Social Security
Credit Benefits, free of charge, statements of in all channels of service made available to
Banrisul’s customer , the Statement of, without having to request the document from INSS.
40 FINANCIAL STATEMENTSSEPTEMBER 2010
State Public Sector
For public servants located at agencies and bodies under the the direct administration of the
State of Rio Grande do Sul, the Digital Teacher Program coordinated by the State Department
of Education, structured a financing program that allowed the acquisition of 42,700 notebooks.
Under that program, R$11.3 million were disbursed in the metropolitan region of Porto Alegre,
for the purchase of 7,200 personal computers, completely financed by Banrisul, with
maturities of 24 or 36 months.
Aimed at companies to and to promote the settlement of ICMS (VAT) and state taxes debts
due until December 31, 2009, the State Government created the ICMS Debt Adjustment. The
Bank has provided a specific credit line, with maturities up to 36 months, so customers could
benefit from discounts offered by the Government, so they would not compromise their cash
flow.
For entities under the indirect administration of the State of Rio Grande do Sul, Banrisul has
intensified efforts to deploying technology solutions such as the modernization of suppliers
payments – in use by UERGS (State University of Rio Grande do Sul), DETRAN and Court of
Auditors -, and the procedures towards improving greater security, agility and economy
customers to payroll and the collection of State taxes, in order to provide.
The Bank has developed efforts in order to offer benefits to the servers from entities indirectly
administered by the State of Rio Grande do Sul like payroll loans agreements (CEASA and
real estate financing of (CEASA), both with competitive rates and terms.
Judiciary
Payroll loan agreement was signed with representatives from the Judiciary Branch of the
State of Rio Grande do Sul, allowing all servers and Justices the access to lines of credit with
special rates and terms.
Aiming at qualifying the public sector, Banrisul reformed its Judiciary Branch located in the
Central Forum of Porto Alegre. In the third quarter of 2010, tests with the Automated Electronic
Permit project were started, , which will expedite significantly information related to court
deposits, above all withdrawals ordered by the Justice courts.
Municipal Public Sector
In 2010, products and services for the municipal sector has been a priority, with Banrisul
offering financial solutions aimed at securing and optimizing revenue collection and to
reducing operating costs for municipalities, such as the barcode collection system, the fleet
management solution with the use of Refeisul Fuel Card, and the use of Banrisul Online
Bidding, an electronic system for the management of purchases.
The collection of taxes, fees and other municipal services totaled 3.8 million documents
which amounted to R$705.0 million.
With regard to fundraising, meetings were held with portfolio managers from various
municipal pension funds for advise, guidance and mandatory allocation of their investments,
currently worth at R$1.3 billion.
41
Banrisul participated of local events and of the meeting of AGIP – State Association of Social
Security Institutes, an event with national repercussions which brought together over 500
participants, presenting the performance of its investment funds portfolio tailored to the
municipal sector.
In events organized in partnership with FAMURS - Federation of Associations of Municipalities
of Rio Grande do Sul, fleet management solutions using Refeisul Fuel Card were presented to
municipalities like Santa Maria, Venâncio Aires, Alegrete, Getúlio Vargas, Tapera, Santa Rosa,
Camaquã, Caxias do Sul, Santo Antônio da Patrulha e Novo Hamburgo.
The Digital Teacher campaign available at all cities in the State of Rio Grande do Sul, addressed
teachres from public, municipal schools under the supervision of the Municipal Office for
Education. The program aims to assist in developing new competencies in the education
sector for the twenty-first century, and to be a tool for empowering teachers and students to
a new educational design, to make teaching more attractive through the adaptation of school
contents to the reality of students and to combine efforts between state’s and municipal’s
public representatives to grant access to information and communication technologies.
MarketingBanrisul was notified in September 2010 of investigations initiated upon representation of
the Prosecutor’s Office about alleged irregularities involving one employee located at its
Marketing area, in sponsorship related activities and events related to sponsorship.
The Bank, abiding to its rigorous internal controls and to equally thorough external supervision,
immediately offered technical and legal support to the authorities to help clarify the facts,
expecting that any individual eventually involved be identified and held responsible and
that any losses incurred, compensated to Banrisul.
The Bank’s marketing orientation focuses on meeting the needs of customers and society and
is committed to ensuring the profitability of investors. The event occurred has served,
however, as the basis for implementing a major overhaul of internal control mechanisms,
measures that included the creation of the Marketing Committee, review of contracts and
payment schedules and changes in management tools by establishing metrics to help evaluate
the effectiveness of expenses.
The measures adopted have produced results. Advertising, campaings and marketing
expenses reached R$15.1 million in the third quarter of 2010, 53.5% below the amount recorded
in the same period in 2009 and 50.9% below the second quarter of 2010.
With the adoption of a new marketing policy, the technical and administrative activities
related to the area - strategies proposition, analysis and consolidation, the monitoring of the
strategy implementation, product repositioning and institutional campaigns, among others -
have moved into Banrisul’s management model, established in March 2007. The Marketing
42 FINANCIAL STATEMENTSSEPTEMBER 2010
Committee aligns itself with the nine other committees already structured in the Bank, whose
architecture ensures corporate responsibility and economic rationality to the decision making
process.
The transparency of procedures that has guided the business of the Bank has now acquired
even stricter contours. That is the commitment of the Board of Administration, the Board of
Executive Officers and the Fiscal Committee that manage Banrisul, an 82 year-old institution
recognized for its responsible market role.
Human ResourcesAt the end of 3Q10, Banrisul headcount totaled
9,349 employees and 2,165 trainees. Until
September 2010, 536 new employees were hired
for the position of bank clerk, selected from tender
01/2009-2 held in early 2010,
In nine months, the Bank held 1,588 training
courses, with 18,400 participants. The investment
in professional training totaled R$6.2 million, of
which R$1.1 million was directed to graduating
programs, R$2.6 million to post-graduating
programs and R$934,100 for language courses.
In March 2010, the Continuous Management Program started, aimed at developing and leveling
knowledge and technical skills, employees’ values and attitudes, necessary to address sound
banking practices, as well as improving Banrisul’s competitiveness profile in the regional and
national context of banking market. Jointly designed with Rio Grande do Sul Federal University,
the MBA in Banking Management started in July 2010 with the participation of about 300
employees.
Corporate ResponsibilityBanrisul has distinguished itself not only as a provider of financial services, but also as an
agent of social transformation. Through projects and actions directed towards improving the
welfare of its employees, customers, suppliers, outsourced, society and environment, the
Bank affirms its commitment to promoting sustainable development in the communities
where it operates.
The internal links created by the employees involved in various programs and activities
developed by the Bank in sectors directly related to provide interaction and knowledge
sharing. The goal is to further structure the institutional view of corporate responsibi lity,
43
from the development of a set of strategies that strengthen social, environmental and
organizational integration.
From January to September 2010, there were many projects for job training, education and
social responsibility, improvement of quality of life through educational, cultural, social, and
environmental protection. The investments in this segment amounted to R$31.4 million.
The relationship with the community has been strengthened by projects such as Criança no
Esporte (Children in Sports), Karate Além do Esporte (Karate Beyond Sports), Concertos Banrisul
para a Juventude (Banrisul Concerts for the Youth), Orquestra de Câmara Jovem do RS (Young
Chamber Orchestra of Rio Grande do Sul), Desafio Banrisul (Challenge Banrisul), among others.
The Projeto Pescar Banrisul (Banrisul F ishing Project), aimed at youngsters in situations of
social vulnerability, is in its 7 th class, teaching over 20 students.
As for programs targeting the internal audience, the Programa Voluntariado Banrisul (Banrisul
Volunteer Program) develops and provides to nearly 100 volunteers registered the possibility
to participate in actions and activities in institutions attended by the program. Volunteers
provide two hours a month to share their knowledge and help those in need.
The Bank is also attentive to the issue of accessibility to people with special needs and works
to achieve conditions for the access and use, safely and autonomously, buildings, space and
furniture. This envisions the right to eliminate architectural barriers, to the availability of
communication, physical access, equipment and appropriate programs.
In the socio-environmental arena, the actions of Programa Reciclar Banrisul (Banrisul Recycling
Program) are preceded by sensitization and mobilization activities with the larger goals of
the program: a more just and economically sustainable society. During 2010, among several
other activities, the program strengthened the awareness of the internal audience towards
the consumption and proper disposal of waste and the benefits of relationships with local
partners.
The Projeto Sementes Banrisul (Seed Project) distributed seeds of native trees (adapted to
each biogeographic region of the State of Rio Grande do Sul) and agro-ecological horticulture
to farmers, schools, associations, student groups, agro-ecological fairs and environmentally
linked events, among others.
The Bank has distinguished itself by also attending to the social and environmental issue in
the effectiveness of its business. Credit lines for the generation of sustainable projects such
as: energy efficiency, for example, were created, as well as alternative energy projects like
wind energy and rural credit lines to ensure adequate planting to agribusiness.
In 2010, Banrisul innovated and opened in Porto Alegre its first branch to ever adopt the
standard of sustainability in its physical structure, built valuing sustainable practices such as
use of rainwater, green roof and floor drainage.
44 FINANCIAL STATEMENTSSEPTEMBER 2010
Awards
January/2010. Banrisul’s share among the most profitable in the Americas.
Banrisul’s shares obtained the third best performance in 2009 of the banking sector in Latin
America and the United States, according to a survey by consultancy firm Economática, São
Paulo, with a year-on-year increase of 277.7% and an average daily volume of U$3.429 million.
March/2010. Banrisul is one of 100 most valuable brands in Brazi l.
The Bank appeared for first time in the list of 100 most valuable brands in Brazil. The fifth
edition of the annual top 100 brands survey, prepared by consultancy firm Brand Finance, in
partnership with the magazine The Brander/IAM, indicates the brand value of Banrisul at
R$494 million. The brand rating of the Bank, based on the strength of the brand among its
customers, is “B +”.
April/2010. Banrisul is one of the 2,000 largest companies in the world.
Banrisul climbed 69 positions in the ranking of the 2,000 largest companies in the world from
the previous survey, from 1501 st to 1432 nd place. The list was released by the U.S. publication
Forbes, which specializes in economics, finance and business. In the study, the market value
of Banrisul was valued at US$3.38 billion. The classification accounts for annual sales in U.S.
dollars, profit, assets and market value.
April/2010. Banrisul is one of the most remembered companies by gauchos.
Banrisul is one of the most widely recognized brands by the gauchos (the inhabitants of the
State of Rio Grande do Sul) in the ranking Large Company, according to the Top of Mind 2010
survey, conducted by the magazine Amanhã in partnership with the Segmento Pesquisas.
Banrisul was also featured in the categories Bank , Savings Deposits , Pension, Private Banking,
Efficient Public Company, Company which invests in Culture , Company one would like to work
for in and Internet Marks - Bank segment. The Banricompras was awarded distinction prize in
the category Credit Card and Refeisul in the category Meal Voucher.
April/2010. Banrisul is one of 500 most valuable brands in global financial sector.
Banrisul is one of ten Brazilian financial institutions listed in the ranking of the 500 most
valuable bank brands in the world in 2010. Banrisul’s brand value was estimated at R$494
million, up 32.8% compared to last year’s analysis. The study was prepared by Brand Finance,
multinational consultancy firm specializing in brand management and evaluation, in
partnership with the British magazine The Banker.
May/2010. Banrisul is one of the largest companies in Rio Grande do Sul
Banrisul is the third largest company in Rio Grande do Sul, according to ranking released by
the report Valor Estados - Rio Grande do Sul, by Valor Econômico newspaper, specializing in
economics and finance.
45
June/2010. Banrisul is among the most valuable brands in Brazil.
Banrisul is the 12th most valuable brand in Brazil. The ranking was compiled by Interbrand, a
brand consultancy in the USA. In accordance with the company, the brand value was set at
R$645 million. In a similar study conducted in 2008, in which we evaluate the most valuable
brands in Latin America, Banrisul appeared in 31st position, with a value of R$317 million.
June/2010. IT Management at Banrisul receives national award.
Banrisul received five awards from the E-Finance Award 2010, sponsored by the magazine
Executivos Financeiros, in the areas of security, information technology and social management.
Rubens Bordini, Banrisul’s Vice-President and CIO, responsible for the IT areas of the Bank,
was distinguished with the E-Finance 2010 Executive of the Year special category prize, as Best
IT Manager.
August/2010. Bank is the fourth best bank in the country
The Bank is the fourth best Brazilian bank according to the ranking of the As Melhores da
Dinheiro, published by the weekly magazine IstoÉ Dinheiro, from São Paulo. The institution
was also awarded in financial sustainability, social responsibility, human resources and
corporate governance. The Bank was also highlighted in the survey The 500 Largest Companies
in Brazil, appearing in the 98th place.
September 2010. Banrisul is the 10th Largest company in the ranking of the 500 South
The Bank occupies the 10th place in the Top 500 Southern Region Largest Companies ranking,
prepared by Amanhã Magazine and PricewaterhouseCoopers. In Rio Grande do Sul, Banrisul
is the fourth largest among the 100 largest and stands as a leader with the largest net working
capital. Also in the State, Banrisul is the third company among the 50 largest equities.
September 2010. Banrisul is featured in national ranking.
The Bank was featured in the ranking F inanças of publication Valor 100, published by the
newspaper Valor Econômico. The Bank occupies the 10th position among 100 largest banks in
the country. It was classified also among the 20 largest banks in loans, total deposits,
shareholders’ equity and net income, among other items.
46 FINANCIAL STATEMENTSSEPTEMBER 2010
Acknowledgements
The Bank ended the third quarter of 2010 with a favorable performance, numerous awards
and promising prospects. This is the result of the confidence of our investors, the preference
of our customers and the competence of those working in this institution. To all who are part
of this network of relationships, our thanks.
The Management.
47
FinancialStatements
48 FINANCIAL STATEMENTSSEPTEMBER 2010
Balance SheetSeptember 30, 2010 and 2009(In Thousands of Reais)
Banrisul Banrisul ConsolidatedASSETS 2010 2009 2010 2009
CURRENT........................................................................ 17,900,459 17,678,723 17,979,713 17,746,905
CASH ................................................................................. 396,334 356,730 396,370 356,753
INTERBANK INVESTMENTS (Note 04)........................... 3,804,581 5,742,915 3,822,569 5,762,302
Money Market Investments ..................................... 3,681,978 5,614,159 3,699,966 5,633,546
Interbank Deposits ................................................... 122,603 128,756 122,603 128,756
SECURITIES AND DERIVATIVES (Note 05) .................... 3,463,850 3,209,545 3,467,794 3,217,431
Own Portfolio .............................................................. 1,341,690 919,926 1,345,629 927,807
Linked to Repurchase Commitments ..................... 2,099,078 2,018,682 2,099,078 2,018,682
Derivatives .................................................................. 23,082 15,562 23,082 15,562
Linked to Central Bank of Brazil ............................. - 190,429 - 190,429
Linked to Guarantees ............................................... - 64,946 - 64,946
Privatization Certificates .......................................... - - 5 5
INTERBANK ACCOUNTS .................................................. 2,114,289 1,438,803 2,114,289 1,438,803
Payments and Receipts Pending Settlement ....... 207,024 192,062 207,024 192,062
Restricted Deposits (Note 06) ................................. - -
Central Bank of Brazil ............................................ 1,881,085 1,223,931 1,881,085 1,223,931
Correspondents ....................................................... 26,180 22,810 26,180 22,810
INTERBRANCH ACCOUNTS ............................................. 50,429 50,410 50,429 50,410
Third-party Funds in transit .................................... 1,900 1,252 1,900 1,252
Internal Trans fers of Funds ..................................... 48,529 49,158 48,529 49,158
LOANS (Note 07) ............................................................. 6,967,177 5,800,557 6,967,177 5,800,557
Loans ............................................................................
Public Sector ............................................................ 41,252 31,573 41,252 31,573
Private Sector ........................................................... 7,345,034 6,193,164 7,345,034 6,193,164
Allowance for Loan Losses ....................................... (419,109) (424,180) (419,109) (424,180)
LEASE OPERATIONS (Note 07) ....................................... 37,018 46,726 37,018 46,726
Lease Receivables ....................................................
Public Sector ............................................................ 708 1,218 708 1,218
Private Sector ........................................................... 38,770 47,010 38,770 47,010
Allowance for Doubtful Lease Receivables ......... (2,460) (1,502) (2,460) (1,502)
OTHER RECEIVABLES (Note 08) ..................................... 1,049,599 1,010,275 1,106,648 1,050,904
Foreign Exchange Portfolio ...................................... 436,752 449,968 436,752 449,968
Income Receivable .................................................... 33,232 31,870 32,233 29,830
Trading Accounts ........................................................ - - 3,440 3,354
Specific Credits ........................................................... - - 16 14
Other ............................................................................. 592,072 559,196 647,167 599,656
Allowance for Losses on Other Receivables ....... (12,457) (30,759) (12,960) (31,918)
OTHER ASSETS ................................................................. 17,182 22,762 17,419 23,019
Temporary Investiments ........................................... 232 232 232 232
Allowance for Losses ................................................ - - - -
Other Assets ............................................................... 1,801 5,526 1,943 5,672
Allowance for Valuation .......................................... - (644) - (644)
Prepaid Expenses ...................................................... 15,149 17,648 15,244 17,759
49
Banrisul Banrisul ConsolidatedASSETS (cont´d) 2010 2009 2010 2009
LONG-TERM ASSETS ....................................................... 13,978,819 10,454,879 13,992,928 10,476,915
SECURITIES AND DERIVATIVES (Note 05) .................... 5,006,651 4,114,988 5,009,598 4,117,685Own Portfolio .............................................................. 3,970,901 2,995,974 3,970,901 2,995,974
Linked to Repurchase Commitments ..................... 251,544 455,262 251,544 455,262Derivatives .................................................................. 136,558 130,095 136,558 130,095
Linked to Central Bank of Brazil ............................. 578,581 338,223 578,581 338,223Linked to Guarantees ............................................... 69,067 195,434 72,014 198,131
INTERBANK ACCOUNTS .................................................. 485,813 426,666 485,813 426,666Restricted Deposits (Note 06) ................................. - - - -
National Housing System ..................................... 485,813 426,666 485,813 426,666LENDING OPERATIONS (Notes 07) ............................... 7,632,863 5,121,766 7,632,863 5,121,766
Lending Operations .................................................. - -Public Sector ............................................................ 85,593 78,456 85,593 78,456
Private Sector ........................................................... 8,211,831 5,609,557 8,211,831 5,609,557Allowance for Loan Losses ...................................... (664,561) (566,247) (664,561) (566,247)
LEASING OPERATIONS (Note 07) .................................. 38,633 45,336 38,633 45,336Lease Receivables .................................................... - - - -
Public Sector ............................................................ 2,229 1,504 2,229 1,504Private Sector ........................................................... 41,478 51,233 41,478 51,233
Allowance for Doubtful Lease Receivables ......... (5,074) (7,401) (5,074) (7,401)OTHER RECEIVABLES (Note 08) ..................................... 805,750 734,068 816,912 753,407
Foreing Exchange Portfolio ...................................... 22,764 9,214 22,764 9,214Other ............................................................................. 872,059 812,631 883,221 831,970
Allowance for Losses on Other Receivables ....... (89,073) (87,777) (89,073) (87,777)OTHER ASSETS ................................................................. 9,109 12,055 9,109 12,055
Other Assets ............................................................... 20,142 20,636 20,142 20,636Allowance for Valuation .......................................... (11,936) (8,581) (11,936) (8,581)
Prepaid Expenses ...................................................... 903 - 903 -PERMANENT ASSETS ...................................................... 668,640 631,996 366,707 349,389
INVESTIMENTS ................................................................ 317,944 295,080 7,759 7,995Investments in Domestic Subsidiaries
(Note 02 (c)) .............................................................. 311,039 288,156 - -Other Investiments ................................................... 11,888 11,921 13,214 13,465
Allowance for Losses ................................................ (4,983) (4,997) (5,455) (5,470)PROPERTY AND EQUIPMENT IN USE (Note 09 (a)) ..... 164,138 151,434 171,349 155,899
Real Estate .................................................................. 121,068 119,968 131,330 127,012Other ............................................................................. 461,271 408,307 466,507 413,370
Accumulated Depreciation ...................................... (418,201) (376,841) (426,488) (384,483)INTANGIBLE (Note 09 (b)) ............................................. 186,558 185,482 187,599 185,495
Intangible Assets ...................................................... 360,663 302,570 361,704 302,583Accumulated Amortization ...................................... (174,105) (117,088) (174,105) (117,088)
TOTAL ASSETS................................................................. 32,547,918 28,765,598 32,339,348 28,573,209
50 FINANCIAL STATEMENTSSEPTEMBER 2010
Banrisul Banrisul Consolidated
LIABILITIES AND SHAREHOLDERS’ EQUITY 2010 2009 2010 2009
CURRENT........................................................................ 24,053,677 21,029,304 23,939,721 20,834,834
DEPOSITS (Note 10) ....................................................... 14,735,857 12,315,192 14,603,711 12,134,593
Demand Deposits ...................................................... 2,114,254 2,114,254 2,114,254 2,114,254
Saving Deposits ......................................................... 6,295,708 5,200,180 6,295,708 5,200,180
Interbank Deposits ................................................... 14,652 61,599 14,652 61,599
Time Deposit s ............................................................ 6,309,382 5,358,631 6,182,578 5,182,024
Other Deposits ........................................................... 1,861 8,659 1,861 8,713
MONEY MARKET FUNDING (Note 10) .......................... 2,350,621 2,473,944 2,285,898 2,414,101
Own Portfolio .............................................................. 2,350,621 2,473,944 2,285,898 2,414,101
INTERBANK ACCOUNTS .................................................. 264,506 236,786 264,506 236,786
Receipt and Payment Pending Settlement ........... 264,107 234,582 264,107 234,582
Correspondents .......................................................... 399 2,204 399 2,204
INTERBRANCH ACCOUNT ............................................... 210,541 170,152 210,541 170,152
Third-party Funds in Transit .................................... 210,074 169,562 210,074 169,562
Internal Trans fers of Funds ..................................... 467 590 467 590
BORROWINGS (Note 11) ............................................... 572,272 542,623 572,272 542,623
Domestic Borrowings - Other Institutions ........... - 108,831 - 108,831
Foreign Borrowings ................................................... 572,272 433,792 572,272 433,792
DOMESTIC ONLENDINGS - OFFICIAL INSTITUTIONS
(Note 12) ...................................................................... 281,944 368,098 281,944 368,098
Nacional Treasury ...................................................... 58,510 46,264 58,510 46,264
National Economic and Social Development
Bank (BNDES) ........................................................... 116,793 220,896 116,793 220,896
Federal Savings and Loan Bank (CEF) .................... 4,951 10,206 4,951 10,206
National Equipment Financing Authority (FINAME) 101,690 90,732 101,690 90,732
FOREING ONLENDINGS (Note 12) ............................... 42,222 36,101 42,222 36,101
Foreign Onlendings .................................................. 42,222 36,101 42,222 36,101
DERIVATIVES (Note 05 (d)) ........................................... 19,985 11,331 19,985 11,331
Derivatives .................................................................. 19,985 11,331 19,985 11,331
OTHER PAYABLES (Note 13) ............................................ 5,575,729 4,875,077 5,658,642 4,921,049
Collected Taxes and Other ....................................... 111,978 91,281 111,978 91,281
Foreign Exchanges Portfolio .................................... 42,468 18,645 42,468 18,645
Social and Statutory .................................................. 54,347 23,151 55,655 23,204
Tax and Social Security ............................................. 311,799 235,856 324,851 245,502
Trading Account and Intermediation ..................... - - 3,089 2,579
Financial and Development Funds ....................... 4,395,584 3,895,201 4,395,584 3,895,201
Other ............................................................................. 659,553 610,943 725,017 644,637
51
Banrisul Banrisul Consolidated
LIABILITIES AND SHAREHOLDERS’ EQUITY (cont´d) 2010 2009 2010 2009
LONG-TERM LIABILITIES ................................................. 4,747,857 4,436,531 4,651,484 4,436,994
DEPOSITS (Note 10) ....................................................... 3,447,243 3,327,690 3,350,387 3,327,690
T ime Deposits ............................................................ 3,447,243 3,327,690 3,350,387 3,327,690
BORROWINGS (Note 11) ............................................... 3,223 - 3,223 -
Foreign Borrowings ................................................... 3,223 - 3,223 -
DOMESTIC ONLENDINGS - OFFICIAL INSTITUTIONS
(Note 12) ...................................................................... 709,678 501,385 709,678 501,385
Nacional Treasury ...................................................... 10,807 12,531 10,807 12,531
National Economic and Social Development
Bank (BNDES) ........................................................... 470,739 373,694 470,739 373,694
Federal Savings and Loan Bank (CEF) .................... 32,833 15,971 32,833 15,971
National Equipment Financing Authority (FINAME) 195,299 99,189 195,299 99,189
FOREING ONLENDINGS (Note 12) ............................... 2,540 - 2,540 -
Foreign Onlendings .................................................. 2,540 - 2,540 -
DERIVATIVES (Note 5 (d)) .............................................. 36,520 30,943 36,520 30,943
Derivatives .................................................................. 36,520 30,943 36,520 30,943
OTHER PAYABLES (Note 13) ............................................ 548,653 576,513 549,136 576,976
Tax and Social Security ............................................. 388,981 382,172 388,981 382,172
Other ............................................................................. 159,672 194,341 160,155 194,804
MINORITY INTEREST....................................................... - - 1,759 1,618
SHAREHOLDERS’ EQUITY (Note 20) ............................... 3,746,384 3,299,763 3,746,384 3,299,763
Capital ......................................................................... 2,900,000 2,600,000 2,900,000 2,600,000
Capital Reserves ........................................................ 4,511 6,164 4,511 6,164
Profit Reserves ........................................................... 691,914 598,109 691,914 598,109
Assets valuation adjustment (Note 05 (b)) .......... (4,870) (4,870) (4,870) (4,870)
Accumulated Profits .................................................. 154,829 99,408 154,829 99,408
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY .......... 32,547,918 28,765,598 32,339,348 28,573,209
52 FINANCIAL STATEMENTSSEPTEMBER 2010
Statement of IncomeSeptember 30, 2010 and 2009(In Thousands of Reais)
Banrisu Banrisul Consolidated 2010 2009 2010 2009
FINANCIAL INCOME ........................................................ 3,524,970 3,178,764 3,531,439 3,185,917
Loans ............................................................................... 2,540,312 2,100,200 2,540,312 2,100,204
Lease Operations .......................................................... 11,290 15,159 11,290 15,159
Securities ........................................................................ 786,407 846,925 792,876 854,023
Derivatives ..................................................................... - 23,093 - 23,144
Foreign Exchange .......................................................... 46,718 59,419 46,718 59,419
Compulsory Investments ............................................. 140,243 133,968 140,243 133,968
FINANCIAL EXPENSES ..................................................... 1,807,681 1,650,336 1,795,226 1,638,146
Funding Operations ..................................................... 1,034,024 1,039,464 1,021,405 1,027,064
Borrowings, Assignments and Onlendings ............. 380,966 285,153 380,966 285,153
Derivatives ..................................................................... 1,095 - 1,116 -
Allowance for Loan Losses (Note 07 (d)) ................. 391,596 325,719 391,739 325,929
GROSS PROFIT FROM FINANCIAL OPERATIONS .......... 1,717,289 1,528,428 1,736,213 1,547,771
OTHER OPERATING INCOME (EXPENSES) ....................... (943,710) (987,018) (950,209) (995,065)
Income from Services Rendered (Note 15) .............. 74,554 70,078 111,505 101,498
Bank Fees Income (Note 16) ....................................... 356,682 325,720 356,674 325,720
Equity in Subsidiaries (Note 02 (c))........................... 21,774 16,615 - -
Personnel Expenses ..................................................... (682,229) (665,906) (687,531) (670,776)
Other Administratives Expenses (Note 17) .............. (569,814) (498,765) (577,884) (505,012)
Tax Expenses .................................................................. (145,177) (130,894) (150,324) (135,248)
Other Operating Income (Note 18) ............................ 129,841 91,178 127,774 88,691
Other Operating Expenses (Note 19) ......................... (129,341) (195,044) (130,423) (199,938)
INCOME FROM OPERATIONS ............................................ 773,579 541,410 786,004 552,706
INCOME BEFORE TAXES ON INCOME AND EMPLOYEE
PROFIT SHARING ......................................................... 773,579 541,410 786,004 552,706
INCOME TAX AND SOCIAL CONTRIBUTION (Note 22 (a)) (228,695) (162,120) (240,994) (173,304)
EMPLOYEE PROFIT SHARING .......................................... (33,500) (22,486) (33,500) (22,486)
MINORITY INTEREST....................................................... - - (126) (112)
NET INCOME................................................................... 511,384 356,804 511,384 356,804
Number of Outstanding Shares (Thousands) ......... 408,974 408,974 408,974 -
Earning per Thousand Shares (R$) ............................ 1,250,41 872,44 1,250,41 -
53
Cash FlowSeptember 30, 2010 and 2009(In Thousands of Reais)
Banrisul Banrisul Consolidated 2010 2009 2010 2009
Adjustes to Net Income.......................................................... 1,014,175 779,777 1,038,350 801,355Net Income ............................................................................ 511,384 356,804 511,384 356,804
Adjustment to Net Income:Depreciation and Amortization ..................................... 81,031 67,145 81,572 67,808
Equity in Subsidiaries ..................................................... (21,774) (16,615) - -Provision for Loan Losses ............................................... 391,596 325,719 391,739 325,929
Reserve for Securitization Losses ................................. (3,167) 831 (3,167) 831Reserve for Contingencies .............................................. 79,595 67,763 80,935 72,333
Deferred Income Tax and Social Contribution ........... (24,490) (21,870) (24,113) (22,350)Changes in Assets and Liabilities ........................................... (2,310,119) 472,899 (2,330,544) 453,932
Valuation adjustment to Equity ..................................... 977 5,589 977 5,589(Increase) Decrease in Interbank Deposits ............... 12,119 - 12,119 -
(Increase) Decrease in Securities ................................. (1,060,575) (1,186,791) (1,060,450)(1,188,572)(Increase) Decrease in Derivatives .............................. 1,112 (29,366) 1,112 (29,365)
(Increase) Decrease in Interbank and InterbranchAccounts .......................................................................... (479,385) 134,007 (479,385) 134,007
(Increase) Decrease in Loan Operations .................... (3,110,311) (1,189,862) (3,110,311)(1,189,862)(Increase) Decrease in Lease Operations .................. 12,167 6,975 12,167 6,975
(Increase) Decrease in Other Receivables ................. (211,477) (51,542) (221,451) (60,729)(Increase) Decrease in Other Assets ............................ 19,329 (11,330) 19,329 (11,365)
Increase (Decrease) in Deposits .................................. 1,624,681 1,217,104 1,584,353 1,206,200Increase (Decrease) in Money Market Funding ......... 280,728 183,724 279,401 179,850
Increase (Decrease) in Borrowing ................................ 130,199 78,222 130,199 78,222Increase (Decrease) in Other Liabilities ..................... 470,317 1,316,169 501,396 1,322,982
NET CASH USED IN OPERATING ACTIVITIES ........................... (1,295,944) 1,252,676 (1,292,194) 1,255,287
CASH FLOW PROVIDED BY INVESTING ACTIVITIES
Disposal of Investiments ............................................... 52 76 - 364Disposal of Property and Equipment in Use .............. 109 233 109 236
Acquisition of Investiments ........................................... (16) (117) (1,660) (117)Acquisition of Property and Equipment in use .......... (26,042) (31,749) (29,391) (31,987)
Acquisition of Intangible Assets .................................. (60,340) (21,630) (61,052) (21,630)
NET CASH USED IN INVESTMENT ACTIVITIES ........................ (86,237) (53,187) (91,994) (53,134)
CASH FLOW FROM FINANCING ACTIVITIESInterest on Capital Paid .................................................. (152,620) (141,769) (152,620) (141,769)
Change in Minority Interest ............................................ - - 104 (1,685)
NET CASH USED IN FINANCING ACTIVITIES ........................... (152,620) (141,769) (152,516) (143,454)
NET INCREASE/DECREASE IN CASH AND CASH EQUIVALENTS (1,534,801) 1,057,720 (1,536,704) 1,058,699Cash and Cash Equivalents ............................................ 411,158 373,239 411,220 373,278
Interbank Investments (Note 03(n)) ............................. 5,222,087 4,668,686 5,241,952 4,687,078
CASH AND CASH EQUIVALENT AT THE BEGINNING OF THE
PERIOD ............................................................................ 5,633,245 5,041,925 5,653,172 5,060,356Cash ..................................................................................... 396,334 356,730 396,370 356,753
Interbank Investments (Note 03(n)) ............................. 3,702,110 5,742,915 3,720,098 5,762,302
CASH AND CASH EQUIVALENT AT THE END OF THE PERIOD . 4,098,444 6,099,645 4,116,468 6,119,055
54 FINANCIAL STATEMENTSSEPTEMBER 2010
Statement of Value AddedSeptember 30, 2010 and 2009(In Thousands of Reais)
Banrisul Banrisul Consolidated 2010 2009 2010 2009
INCOME (a) ............................................................................ 3,696,039 3,339,855 3,737,223 3,375,719
Financial Income ................................................................. 3,526,558 3,178,598 3,533,010 3,185,739
Services Rendered and Bank Fees Income .................... 431,236 395,798 468,179 427,218
Allowance for loan losses ................................................. (391,596) (325,719) (391,739) (325,929)
Other ....................................................................................... 129,841 91,178 127,773 88,691
FINANCIAL INTERMEDIATION EXPENSES (b) .......................... 1,417,650 1,324,617 1,405,031 1,312,217
INPUTS ACQUIRED FROM THIRD PARTIES (c) ........................ 581,022 594,781 590,821 606,301
Materials, Energy and other ............................................. 485,707 513,647 493,477 523,635
Third-party Services ............................................................ 95,292 81,300 97,316 82,844
Assets Value Recovery (Loss) ............................................ 23 (166) 27 (178)
GROSS VALUE ADDED (d=a-b-c) ............................................ 1,697,367 1,420,457 1,741,372 1,457,201
DEPRECIATION AND AMORTIZATION (e) ................................ 81,031 67,145 81,572 67,808
NET VALUE ADDED PRODUCED BY THE BANK (f=d-e) ........... 1,616,336 1,353,312 1,659,800 1,389,393
VALUE ADDED RECEIVED IN TRANSFER (g) ........................... 21,774 16,615 - -
Equity in Subsidiaries ........................................................ 21,774 16,615 - -
VALUE ADDED FOR DISTRIBUTION (h=f+g) ........................... 1,638,110 1,369,927 1,659,800 1,389,393
DISTRIBUTION OF VALUE ADDED .......................................... 1,638,110 1,369,927 1,659,800 1,389,393
Personnel ............................................................................ 610,430 588,864 615,494 593,561
Salary ................................................................................... 468,899 452,650 473,107 456,563
Benefits .............................................................................. 105,061 97,663 105,573 98,121
F.G.T.S. .................................................................................. 36,470 38,551 36,814 38,877
Tax Fees and contributions .................................................. 479,171 392,542 496,855 408,253
Federal ............................................................................... 453,963 369,733 469,891 384,009
State .................................................................................... 335 371 341 398
Municipality ....................................................................... 24,873 22,438 26,623 23,846
Third-party capital compensation ....................................... 37,125 31,717 35,941 30,663
Rentals ............................................................................... 37,125 31,717 35,941 30,663
Shareholders’ equity compensation .................................... 511,384 356,804 511,510 356,916
Interest on Capital ........................................................... 152,620 141,769 152,620 141,769
Dividends ........................................................................... 20,159 - 20,159 -
Retained Earnings ............................................................ 338,605 215,035 338,605 215,035
Minority interest ............................................................... - - 126 112
55
Statement of Changes in Shareholders’ EquitySeptember 30, 2010 and 2009(In Thousands of Reais)
Capital Reserves Profit ReservesAdjustment ofMemberships Assets
Capital Certificates in Investments For Valuation Reatined Stock Subsidiary Grants Legal Estatutory Expansion Adjustment Earnings TOTAL
Balance as of January 01, 2009 ......................................... 2,300,000 1,653 4,511 128,314 289,757 364,411 (9,507) - 3,079,139
Capital Increase (Note 20 (a)) ............................................. 300,000 - - - - (300,000) - - -
Adjustment of Memberships Certificates in Subsidiary - - - - - - - - -
Valuation Adjustment t o Equity (Note 05 (b)) ................... - - - - - - 5,589 - 5,589
Net Income ............................................................................ - - - - - - - 356,804 356,804
Allocation of Net Income (Note 20 (b)) .............................. - - - - - - - - -
Recognition of Reserves .................................................... - - - 10,538 52,689 52,400 - (115,627) -
Interest on Capital ............................................................. - - - - - - - (141,769) (141,769)
Balance as of September 30, 2009 ................................... 2,600,000 1,653 4,511 138,852 342,446 116,811 (3,918) 99,408 3,299,763
Balance as of January 01, 2010 ......................................... 2,600,000 1,660 4,511 155,369 425,031 227,738 (5,847) - 3,408,462
Capital Increase (Note 20 (a)) ............................................. 300,000 - - - (72,262) (227,738) - - -
Adjustment of Memberships Certificates in Subsidiary - (1,660) - - - - - - (1,660)
Valuation Adjustment t o Equity (Note 05 (b)) ................... - - - - - - 9 7 7 - 9 7 7
Net Income ............................................................................ - - - - - - - 511,384 511,384
Allocation of Net Income (Note 20 (b)) .............................. - - - - - - - - -
Recognition of Reserves .................................................... - - - 15,250 76,250 92,276 - (183,776) -
Interest on Capital ............................................................. - - - - - - - (152,620) (152,620)
Dividends Accrued ............................................................. - - - - - - - (20,159) (20,159)
Balance as of September 30, 2010 ................................... 2,900,000 - 4,511 170,619 429,019 92,276 (4,870) 154,829 3,746,384
56 FINANCIAL STATEMENTSSEPTEMBER 2010
Notes of theManagement to the
Financial Statements
57
Note of Management to theFinancial Statements
NOTE 01 Operations
Banco do Estado do Rio Grande do Sul S.A. (Banrisul) is a multiple-service bank, operating
commercial, lending, financing and investment, mortgage loan, development, lease and
investment portfolios, including exchange, securities brokerage, and credit card and
consortium management. Transactions are conducted within the context of a group of financial
institutions that operate on an integrated basis in the financial market. Banrisul also operates
as an instrument for the execution of the economic and financial policy of the state of Rio
Grande do Sul, in conformity with the state government’s plans and programs.
NOTE 02 Presentation of the Financial Statements
(a) The individual and consolidated financial statements have been prepared in accordance
with Brazilian accounting practices and standards and instructions from the Central Bank of
Brazil and from the Brazilian Securities and Exchange Commission (CVM), include accounting
practices and estimates concerning the recognition of allowances and determination of assets
that comprise its securities portfolio. Actual results could differ from those estimated.
(b) The Bank’s individual financial statements include operations conducted in Brazil as well
asthe incorporation of its foreign branches (New York and Grand Cayman). Assets, liabilities
and income from foreign branches, before consolidation eliminations, are summarized as
follows:
In Thousands of Reais 2010 2009
ASSETSSecurities ........................................................................................... - 8,924Lending Operations............................................................................ 140,884 149,740
Operations in Brazil ........................................................................ 78,086 81,648Other Lending Operations ............................................................... 62,798 68,092
Other Assets ...................................................................................... 40,392 39,349Total Assets ........................................................................................ 181,276 198,013
LIABILITIESDeposits ............................................................................................. 66,760 79,620
Operations in Brazil ........................................................................ 17,136 22,556Other Deposits ................................................................................. 49,624 57,064
Other Liabilities ................................................................................. 629 1,427Shareholders’ Equity .......................................................................... 113,887 116,966Total Liabilities and Shareholders’ Equity ............................................ 181,276 198,013Statement of Income
Financial Intermediation Income ................................................... 4,448 5,852Financial Intermediation Expenses ................................................ (1,072) (1,266)Other Expenses, Net ......................................................................... (1,562) (1,670)
Net Income for the period................................................................. 1,814 2,916
58 FINANCIAL STATEMENTSSEPTEMBER 2010
The effects of the exchange variation over operations in foreign branches are distributed in
the statement of income according to the nature of corresponding assets and liabilities.
(c) The consolidated financial statements include the accounts of the Bank, its foreign branches
and subsidiaries whose balance of investments, as of September 30, 2010, amounted to
R$311,039 thousand (2009 – R$288,156 thousand), and generated equity gains in subsidiaries
for the nine-month period then ended of R$21,774 thousand (2009 – R$16,615 thousand), and
are presented as follows:
MAIN INFORMATION ON INVESTMENTS IN SUBSIDIARIES:
In Thousands of ReaisBanrisul Banrisul S.A. Banrisul S.A. Banrisul
Armazéns Corretora de Val. Administradora ServiçosGerais S.A. Mob. e Câmbio de Consórcios Ltda. Total
Thousands of Shares
. Common Shares ............................................. 6 9 6 10,000 89,114 - -
. Preferred Shares ........................................... - 19,608 - - -
. Shares ............................................................. - - - 2,780 -
Adjusted Ownership Interest (%) ...................... 99.498 98.693 99.569 99.785 -
Capital ................................................................... 23,750 58,000 116,000 77,975 -
Shareholders’ Equity ........................................... 24,760 67,350 129,496 91,192 -
Net Income ........................................................... 6 7 4 5,125 8,501 8,422 -
Net Amounts Eliminated on
Consolidation (Note 25):
Assets (Liabilities) ...............................................
. As of September 30, 2010 ............................ 1 4 7 (63,855) (127,611) (107,188) (298,507)
. As of September 30, 2009 ............................ (175) (58,937) (115,150) (88,709) (262,971)
Income (Expenses)
. As of September 30, 2010 ............................ (1,087) (2,546) (6,542) 4 9 4 (9,681)
. As of September 30, 2009 ............................ (975) (2,451) (6,565) 4 9 9 (9,492)
Book Value of the Investment
. As of September 30, 2010 ............................ 24,636 66,470 128,937 90,996 311,039
. As of September 30, 2009 ............................ 24,110 59,966 120,427 83,653 288,156
Equity in Subsidiaries
. As of September 30, 2010 ............................ 6 7 0 6,709 8,464 5,931 21,774
. As of September 30, 2009 ............................ 1,149 4,389 8,300 2,777 16,615
The preparation of consolidated financial statements eliminated interests among
consolidated companies, remaining balance and results of transactions. The portions of
income in the period and shareholders’ equity referring to minority shareholders’ interest
have been highlighted.
(d) Financial Lease Operations are stated at present value in the Balance Sheet, and related
income and expenses, which represent the financial result of said operations, are grouped in
Lease Operations in the Statement of Income.
59
NOTE 03 Significant Accounting Practices
(a) Results of operations
Income and expenses are recorded on the accrual basis.
(b) Interbank Investments
Represent funds invested in the interbank market, stated at present value, calculated on
“pro rata die” basis, according to the variation of both the agreed index and the interest rate.
(c) Securities and Derivatives
According to Central Bank of Brazil Circular 3,068 of November 8, 2001 and supplementary
regulation, securities are classified and assessed into three specific categories, in conformity
with the following accounting criteria:
i) Trading Securities – securities acquired for the purposes of being actively and frequently
traded, adjusted to fair value, and realized and unrealized gains or losses recognized in the
statement of income.
ii) Available-for-Sale Securities – Include securities used as part of the strategy to manage
risk of changes in interest rates and which may be traded as a result of these changes, changes
in payment conditions or other factors. These securities are adjusted to fair value, and income
earned is recorded in the statements of income, whereas unrealized gains and losses from
changes in fair value are recorded in a separate shareholders’ equity caption, net of taxes,
where applicable, denominated “Valuation adjustments to equity” unti l they are realized
through sale.
Gains and losses, when realized, are recorded in the statement of income on the trading
date, with a contra entry to a specific shareholders’ equity account, net of taxes, where
applicable.
iii) Held-to-Maturity Securities – Include securities for which Management has the intent and
financial capacity to hold to maturity and are stated at cost plus income earned. Financial
capacity is defined in cash flow projections, disregarding any possible sale of these securities.
Derivatives – Derivatives contracted with other investment operations are recognized based
on income earned and expenses incurred through the balance sheet date in the statement of
income.
(d) Loans, Lease Transactions and Other Receivables
All loans and lease transactions are classified based on Management’s risk assessment, taking
into account the economic scenario, past experience and specific risks related to operations,
debtors and guarantors, pursuant to National Monetary Council (CMN) Resolution 2,682/99,
which requires a periodic analysis of the portfolio and its classification into nine risk levels,
from AA to H. A summary of this classification is presented in Note 07.
Loans and lease transactions are recorded at present value, calculated on a daily pro-rata
basis, based on the agreed index and interest rate, and are adjusted up to the sixtieth day
past-due. Thereafter, income is recognized only when received.
The risk of renegotiated assets are classified in accordance with the criteria established by
National Monetary Counci l (CMN) Resolution 2,682/99, i.e. the rating assigned before the
renegotiation is maintained and renegotiated loans previously written-off against the
allowance and controlled in memorandum accounts are rated level H. Any gains on
renegotiation are recognized as revenue only when actually received.
60 FINANCIAL STATEMENTSSEPTEMBER 2010
(e) Other Receivables – Operations with Credit Cards
Unbilled amounts are represented by receivables from cardholders for transactions in Visa
and MasterCard banners. These amounts are accounted for as Notes and Credits Receivable,
without credit characteristics, and transactions paid in installments when Banrisul is the issuer,
and the outstanding balance of transactions paid by the minimum amount of the bill
(Revolving), are reclassified as Loans.
(f) Allowance for loan losses, for doubtful lease receivables and for losses on other receivables
Recorded in an amount considered sufficient to cover possible considering the risk level
classification of the customer based on periodic assessment of credit quality, and not only on
the minimum percentages required by the National Monetary Council (CMN) Resolution 2,682/
99 when a default event occurs.
As of September 30, 2010, the total amount related to the allowance for loan losses, allowance
for doubtful lease receivables and losses and other receivables, as stated in Note 07, exceeds
the minimum amount required if only the rating of transactions based on the number of past
due days is considered as set forth by National Monetary Resolution 2,682/99. This procedure
has been adopted by Management since its publication to cover possible losses on operations.
(g) Permanent Assets
Permanent assets are stated at acquisition cost, adjusted for inflation through December 31,
1995, considering the following aspects:
• Investments in subsidiaries are accounted for under the equity method, based on financial
statements prepared in compliance with the same accounting practices. Other investments
are stated at acquisition cost and adjusted based on allowances for losses, where applicable;
• Depreciation of property and equipment in use under the straight-line method is based on
the expected economic useful lives of assets considering the minimum rates set annually by
the Central Bank of Brazil, and disclosed in Note 09;
• Intangible Assets consist, basically, of investments whose benefits wi ll occur in the future.
This group is represented by bank services contracts and software acquisition. Amortization is
calculated under the straight line method at the rates stated reported in Note 09; and
• Annually, the bank reviews intangible assets for impairment losses. When identified, losses
are charged to income.
(h) Assets and Liabilities Denominated in Foreign Currency
The assets and liabilities of foreign branches, as well as other assets and liabilities in foreign
currency, were translated at the exchange rate prevailing at balance sheet date.
(i) Deposits, Money Market Funding, Borrowings and Onlendings and Financial and
Development Fund
Stated at collectable amounts plus charges incurred through the balance sheet date,
recognized on a pro rata die basis.
Pursuant to Laws 12,069/04 and 12,585/06 of the Rio Grande do Sul State Government, up to
85% of the escrow deposits made by third parties in the Bank are made available to the state
of Rio Grande do Sul, and the remaining balance is retained at the Bank for allocation to a
fund. Transferred escrow deposits are controlled in a memorandum account and the retained
portion is classified as “Other Payables”, as described in Note 21(a). The charges on the
remaining balance are recorded under the caption Expenses with Borrowings, Assignments
and Onlendings.
61
(j) Reserves for Tax, Labor and Civil Risks
These reserves are recorded based on the legal counsel’s opinion, using models and criteria
which permit obtaining the most adequate measurement, despite the uncertainty about
their period and the final outcome amount. The criterion used according to the nature of the
contingency is as follows:
i) Labor Contingencies – Recognized upon court notification of judicial discussion involving
Banrisul, the risk of loss of which is deemed as probable. Amounts are determined according
to disbursement estimates by our Management, timely revised based on information received
from our legal counsels, adjusted based on the amount of the deposit related to the execution,
when required.
ii) Civil Contingencies – Recognized, upon court notice, and monthly adjusted based on the
intended amount of indemnities, the evidence presented, and the legal counsel’s evaluation
– which considers previous court decisions, factual support, evidence produced in the records
and legal decisions that might be rendered in the lawsuit, for the lawsuit loss risk.
iii) Tax and Social Security Contingencies – Refer basically to taxes whose lawfulness or
constitutionality is being challenged at administrative or judicial level and whose likelihood
of loss is – or has been in previous phases – deemed as probable and are recognized at the full
amount under dispute. For lawsuits with respective escrow deposits, amounts are not updated
except when the Bank is authorized to withdraw the deposits on account of a favorable
outcome of the lawsuit.
(l) Income Tax and Social Contribution
Calculated at the rate of 15% for social contribution tax and 15% (plus a 10% surtax pursuant to
legislation) for income tax on taxable income in the period, adjusted by permanent
differences. Deferred income tax and social contribution were calculated based on the rates
in force on balance sheet date over the temporary additions and recorded under Other
Receivables, as contra entry of Income for the Period.
(m) Post-Employment Benefits
The Bank sponsors a “defined benefit” plan to its employees that has been valued in
compliance with specific legislation. As required by Accouting and Standard (NPC) 26, Issued
by Brazilian Institute of Independent Auditors (Ibracon) and based on an appraisal report
issued by an independent actuary, the Bank reviews the actuarial position of the plan annually,
as discussed in Note 23.
(n) Cash and Cash Equivalents in Cash Flow Statement
Include the balances of cash and cash equivalents and interbank investments, redeemable
within 90 days from the date of investment. These highly-liquid investments, which are
stated at cost plus income earned through the balance sheet dates, have maturities of up to
30 days or no deadline for redemption and are subject to an immaterial risk of change in
value.
62 FINANCIAL STATEMENTSSEPTEMBER 2010
NOTE 04 Interbank Investments
In Thousands of Reais Banrisul Banrisul Consolidated 2010 2009 2010 2009
Money Market Investments .................................................... 3,681,978 5,614,159 3,699,966 5,633,546
Pending Setlement resales - Own Portfolio
Tre asur y Bills - LFT ................................................................ 3,601,979 1,593,413 3,601,979 1,593,413
National T re asury Bills - LTN ............................................... 50,000 96,928 50,000 96,928
National T re asury Notes - NTN ........................................... 29,999 3,923,818 29,999 3,923,818
Other ...................................................................................... - - 17,988 19,387
Interbank Deposits ................................................................... 122,603 128,756 122,603 128,756
Interbank Deposits .................................................................. 119,005 128,756 119,005 128,756
Foreign Currencies Deposits .................................................. 3,598 - 3,598 -
Tot al .......................................................................................... 3,804,581 5,742,915 3,822,569 5,762,302
NOTE 05 Securities and Derivatives
Breakdown of the portfolio of Securities and Derivatives:
In Thousands of Reais Banrisul Banrisul Consolidated 2010 2009 2010 2009
Trading Securities ......................................................................... 2,017,053 1,926,273 2,018,816 1,926,882
Available-for-sale Securities ...................................................... 1,666,709 1,037,169 1,668,890 1,044,446
Held-to-Maturity Securities ........................................................ 4,627,099 4,215,434 4,630,046 4,218,131
Derivatives .................................................................................... 159,640 145,657 159,640 145,657
Tot al .......................................................................................... 8,470,501 7,324,533 8,477,392 7,335,116
Current Assets .......................................................................... 3,463,850 3,209,545 3,467,794 3,217,431
Long-Term Asse ts ...................................................................... 5,006,651 4,114,988 5,009,598 4,117,685
The fair value presented in the chart below were assessed as follows: Treasury Bills that hold
active negotiations are determined based on prices published by the ANBIMA; for shares of
Publicly-held Companies the average price of the last negotiation of the day is used; and for
securities that have no price published, the Bank adopts as basis for calculation of the fair
value, the value obtained by means of internal pricing technique.
(a) Trading Securities
Composed mainly of Federal Government Securities (Treasury Bills - LFT) registered at fair
value.
Breakdown per maturity:
In Thousands of Reais Banrisul Banrisul Consolidated
Acquisition Fair Acquisition FairMaturity Cost Value Cost Value
Up to 3 months .............................................................................. - - 1,763 1,7633 to 12 months .............................................................................. 478,003 478,009 478,003 478,0091 to 3 years .................................................................................... 1,250,020 1,250,050 1,250,020 1,250,0503 to 5 years .................................................................................... 288,983 288,994 288,983 288,994Tot al in 2010 ............................................................................. 2,017,006 2,017,053 2,018,769 2,018,816Tot al in 2009 ............................................................................. 1,926,201 1,926,273 1,926,796 1,926,882
According to the Central Bank of Brazil regulations, these securities are classified in current
assets at their fair value.
63
(b) Available-for-Sale Securities
Breakdown of the Available-for-Sale Securities Portfolio by category per fair value: In Thousands of Reais Banrisul Banrisul Consolidated 2010 2009 2010 2009
Treasur y Bills - LFT ......................................................................... 1,125,532 1,020,679 1,125,532 1,020,679Shares of Publicly-Held Companies ........................................... 14,614 16,490 14,616 16,652Privatization Certificates ............................................................ - - 5 5Fixed Income Fund Shares ........................................................... 5,542 - 7,716 7,110Receivable Investment Funds Shares (*) .................................. 521,021 - 521,021 -Tot al .......................................................................................... 1,666,709 1,037,169 1,668,890 1,044,446
(*) Refers to 100% of the senior shares of the Matone Credit Receivable Investment Fund - Payroll Loans. As the resourcesof the Fund is invested in receivables, the redemption of shares by the Bank depend on the availability of funding, and mayrequire that the Bank to wait until the maturity of such credits (up to 72 months). The remuneration of the fund is 114%of the DI rate,
Breakdown per maturity: In Thousands of Reais Banrisul Banrisul Consolidated
Acquisition Fair Acquisition FairMaturity Cost Value Cost Value
Without maturity ......................................................................... 549,315 541,177 551,496 543,3581 to 3 years .................................................................................... 1,040,764 1,040,772 1,040,764 1,040,7723 to 5 years .................................................................................... 84,749 84,760 84,749 84,760Tot al in 2010 ............................................................................. 1,674,828 1,666,709 1,677,009 1,668,890Tot al in 2009 ............................................................................. 1,043,775 1,037,169 1,051,052 1,044,446
The adjustment to fair value as of September 30, 2010, in the amount of R$8,119 thousand
(2009 – R$6,606 thousand), was recorded under a specific Shareholders’ Equity account, net of
taxes of R$3,249 thousand (2009 – R$2,688 thousand), recorded in “Other Credits”.
(c) Held-to-Maturity Securities
The Portfolio of Held-to-Maturity Securities, by category, stated at cost plus income earned is
as follows: In Thousands of Reais Banrisul Banrisul Consolidated
Restated RestatedAcquisition Fair Acquisition Fair
Cost Value Cost Value
Federal Government SecuritiesTreasury Bills - LFT .................................................................... 4,431,248 4,431,412 4,434,195 4,434,359National Treasur y Bills - NTN .................................................. 7,741 7,918 7,741 7,918 Salary Variation Compensation Fund - CVS ......................... 155,259 115,120 155,259 115,120
Other ............................................................................................... 6 6 6 6Mortgage-Backed Securities - LH ................................................ 30,158 30,158 30,158 30,158Certificate of Real Estate Receivables - CRI ............................. 2,687 2,687 2,687 2,687Tot al in 2010 ............................................................................. 4,627,099 4,587,301 4,630,046 4,590,248Tot al in 2009 ............................................................................. 4,215,434 4,175,698 4,218,131 4,178,395
The maturities of securities are as follows: In Thousands of Reais
Banrisul Banrisul Consolidated 2010 2009 2010 2009
Up to 3 months .............................................................................. 6 1,191 6 1,1913 to 12 months .............................................................................. 882,532 1,250,029 882,532 1,250,0291 to 3 years .................................................................................... 2,035,292 1,138,994 2,035,292 1,138,9943 to 5 years .................................................................................... 1,551,324 541,816 1,554,271 544,5135 to 15 years .................................................................................. 2,686 1,083,973 2,686 1,083,973Over 15 years ................................................................................. 155,259 199,431 155,259 199,431Tot al .......................................................................................... 4,627,099 4,215,434 4,630,046 4,218,131Current Assets .......................................................................... 882,538 1,251,220 882,538 1,251,220Long-Term Asse ts ...................................................................... 3,744,561 2,964,214 3,747,508 2,966,911
As held-to-maturity securities are redeemed, new securities are acquired according to portfolio
requirements and terms available in the market.
64 FINANCIAL STATEMENTSSEPTEMBER 2010
(d) Derivatives
In order to meet its own needs to minimize the effect of changes in the fixed rate, exchange
variation and TR (a managed prime rate), the Bank has conducted swap transactions to
exchange these rates for SELIC (Central Bank overnight rate) variation. Other risks are explained
in Note 24.
Banrisul and Banrisul Consolidated In Thousands of ReaisNotional Up to 3 3 to 12 1 to 3 3 to 5 5 to 15 Over 15
Value months months years years years years 2010 2009
AssetsSELIC + Fixed Rate-FCVS 65,555 - - - 9 21,300 4,603 25,912 23,170SELIC + Fixed Rate 88,974 10,788 12,294 24,588 24,588 61,470 - 133,728 122,487
LiabilitiesTR + Fixed Rate (65,555) (8,504) (10,761) (14,049) (6,835) (10,158) (646) (50,953) (37,779)USD+BID+Fixed Rate (88,974) - (720) (1,314) (1,163) (2,355) - (5,552) (4,495)
Net Adjustment 2,284 8 1 3 9,225 16,599 70,257 3,957 103,135 103,383
The above-mentioned swap transactions have as counterparty the Rio Grande do Sul State
Government and were entered in connection to the assignment of credits of the Salary Variation
Compensation Fund (FCVS) and credit operations with municipal public entities, and will be
settled on the same dates the main operations are received.
Swap and transactions combined therewith are subject to rates equivalent to those prevailing
in the market on the contracting date, since maturity dates are the same and the original
transactions and swap contracts will not be negotiated separately.
As of September 30, 2010, the amounts receivable and amounts payable are as follows:
Banrisul and Banrisul Consolidated In Thousands of Reais
2010 2009
DerivativesAdjustments Receivable - Short Term .......................................................................... 23,082 15,562Adjustments Receivable - Long Term ........................................................................... 136,558 130,095
Adjustments Payable - Short Term ................................................................................ (19,985) (11,331)Adjustments Payable - Long Term ................................................................................. (36,520) (30,943)Net Adjustment ........................................................................................................ 103,135 103,383
As of September 30, 2010, there were no futures or options contracts.
NOTE 06 Restricted Deposits
Banrisul and Banrisul Consolidated In Thousands of Reais
Description Interest Rate 2010 2009
Compulsory Deposits - Brazilian Central Bank. .............................................................. 1,881,085 1,223,931
Demand deposits and other funds .......... None ..................................................... 447,926 222,074
Additional Reserve ...................................... SELIC ..................................................... 26,709 -
Savings deposits .......................................... Savings account ................................. 1,190,599 982,533
Other deposits ............................................. None ..................................................... 26,398 19,324
Other deposits ............................................ TR .......................................................... 189,453 -
Credits with the National Housing System ..................................................................... 485,813 426,666
Acquired portfolio - swap ........................... 17.5% to 26% p.a. (*).............................................. 314,655 285,383
Acquired portfolio ....................................... TR + Interest ........................................ 155,543 126,202
Own portfolio ............................................... TR + Interest ........................................ 15,615 15,081
Correspondents ............................................. None ..................................................... 26,180 22,810
Total ................................................................................................................................ 2,393,078 1,673,407
Current Assets ................................................................................................................ 1,907,265 1,246,741
Long-term Assets ............................................................................................................ 485,813 426,666
(*) Linked to swap transactions as detailed in Note 05 (d).
65
National Housing System - Third-party Portfolio Acquired - From October 2002 to March 2005,
the Bank acquired from the Rio Grande do Sul State Government receivables from the Salary
Variation Compensation Fund (FCVS). As of September 30, 2010, the credits are stated at cost
plus income earned through the balance sheet date, at the amount of R$470,198 thousand
(2009 – R$411,585 thousand). Their face value is R$779,543 thousand (2009 – R$719,926
thousand). These receivables will be converted into CVS securities, pursuant to ratification
and novation processes, and, in spite of no established maturity, their fair values, upon the
issuance of the securities, may differ significantly from the carrying amounts.
National Housing System - Own Portfolio – Refers to credits of the FCVS arising from Banrisul’s
own mortgage loans portfolio that have already been approved by the FCVS’s regulatory
body.
NOTE 07 Loans, Lease Operations and Other Receivables
The tables below show loans, lease and foreign exchange portfolio balances.
(a) Breakdown by Type of Operation and Risk Level:
Banrisul and Banrisul Consolidated In Thousands of ReaisA A A B C D E F G H 2010 2009
Loan and Discounted Receivables ........ 4,135,830 4,101,336 1,650,878 874,744 140,444 168,486 659,880 45,571 325,973 12,103,142 9,119,070
Financing ................................................ 454,163 419,840 115,470 70,752 17,596 18,594 7,167 8,383 13,102 1,125,067 761,818
Rural and Agro-Industrial Financing .... 170,167 396,008 309,604 137,286 43,435 29,390 22,486 17,200 55,561 1,181,137 937,321
Real Estate Financing ............................ 445,610 393,384 205,226 82,672 22,571 19,473 33,030 1,073 14,584 1,217,623 1,055,873
Infrastructure and Development
Financing .............................................. - 56,741 - - - - - - - 56,741 38,668
Total Loans ........................................... 5,205,770 5,367,309 2,281,178 1,165,454 224,046 235,943 722,563 72,227 409,220 15,683,710 11,912,750
Lease Operations ................................... 10,655 27,570 22,064 7,918 3,811 4,669 3,740 232 2,526 83,185 100,965
Advances on Foreign Exchange ............
Contracts (1) ........................................ 86,654 154,837 160,933 18,194 3,288 2,132 3,673 9,191 4,256 443,158 484,785
Other Receivables - Foreign Exchange (2) 1,098 2,506 3,979 379 249 41 5,308 535 12,932 27,027 30,039
Total Banrisul in 2010 .......................... 5,304,177 5,552,222 2,468,154 1,191,945 231,394 242,785 735,284 82,185 428,934 16,237,080
Total Banrisul in 2009 .......................... 3,262,833 4,678,124 1,972,145 892,459 332,179 193,517 738,012 69,861 389,409 12,528,539
(1) Advances on foreign exchange contracts are classified as a reduction of “Other payables - Foreign exchange portfolio”(Note 13).
(2) Other Receivables - Foreign exchange include receivables from foreign exchange contracts and receivables from exportcontracts.
(b) Client Breakdown per Maturity and Risk Levels:
Banrisul and Banrisul Consolidated In Thousands of ReaisA A A B C D E F G H 2010 2009
Falling due (*) .................................... 5,303,720 5,550,224 2,459,127 1,171,425 220,510 228,202 683,301 50,714 262,993 15,930,216 12,186,731
Up to 180 days ................................. 1,539,637 1,703,524 1,104,664 563,545 99,084 105,922 320,566 18,868 68,175 5,523,985 4,661,491
181 to 360 days ............................... 730,757 861,804 406,229 180,271 43,710 41,702 102,611 8,081 43,391 2,418,556 1,883,923
Over 360 days .................................. 3,033,326 2,984,896 948,234 427,609 77,716 80,578 260,124 23,765 151,427 7,987,675 5,641,317
Past-due .............................................. 457 1,998 9,027 20,520 10,884 14,583 51,983 31,471 165,941 306,864 341,808
Up to 180 days ................................. 457 1,998 9,027 20,520 10,884 13,822 47,638 28,255 78,841 211,442 257,589
181 to 360 days ............................... - - - - - 761 4,345 3,216 50,403 58,725 60,920
Over 360 days .................................. - - - - - - - - 36,697 36,697 23,299
Total Banrisul in 2010 .......................... 5,304,177 5,552,222 2,468,154 1,191,945 231,394 242,785 735,284 82,185 428,934 16,237,080
Total Banrisul in 2009 .......................... 3,262,833 4,678,124 1,972,145 892,459 332,179 193,517 738,012 69,861 389,409 12,528,539
(*) Amounts up to 14 days past-due are included in the current.
66 FINANCIAL STATEMENTSSEPTEMBER 2010
(c) Portfolio Breakdown by Business Sector:
Banrisul and Banrisul Consolidated In Thousands of Reais
2010 2009
Municipal Public SectorGovernment - direct and indirect administration .................................................. 110,850 112,751Corporate activity - Other services ........................................................................... 18,932 -
Total Public Sect or .................................................................................................... 129,782 112,751Private sector
Rural ............................................................................................................................... 1,181,137 937,321Industry ......................................................................................................................... 3,376,862 2,740,398Commerce ..................................................................................................................... 1,899,208 1,471,525Services and other ....................................................................................................... 1,312,165 1,133,811Individuals ..................................................................................................................... 7,120,303 5,076,860Housing .......................................................................................................................... 1,217,623 1,055,873
Total Priv ate Sect or .................................................................................................. 16,107,298 12,415,788Total .......................................................................................................................... 16,237,080 12,528,539
(d) Changes in allowances for loan losses, doubtful lease receivables and other receivables:
The changes in allowances for losses on loan, lease and other receivables with loan
characteristics are as follows:
Banrisul and Banrisul Consolidated In Thousands of Reais
2010 2009
Opening balance ...................................................................................................... 1,016,754 970,691
Allowance recorded in the halfyear ......................................................................... 389,751 325,719
Write-offs to memorandum accounts ...................................................................... (283,802) (178,544)
Allowance other loans without credit characteristics .......................................... - (78,563)
Allowance for Loan Losses per risk level .................................................................. 1,122,703 1,039,303
Allowance for loan losses .........................................................................................
Current Assets .............................................................................................................. 419,109 424,180
Long-Term Assets ......................................................................................................... 664,561 566,247
Allowance for doubtful lease receivables
Current Assets .............................................................................................................. 2,460 1,502
Long-Term Assets ......................................................................................................... 5,074 7,401
Allowance for Loan losses for Other Receivables with Loan Characteristics
Current Assets .............................................................................................................. 12,457 30,759
Long-Term Assets ......................................................................................................... 19,042 9,214
Expenses related to allowance for other receivables without loan characteristics, as of
September 30, 2010, amount to R$1,845 thousand.
(e) Breakdown of allowances for loans losses, doubtful lease receivables and other receivables
per risk level:
Banrisul and Banrisul Consolidated In Thousands of Reais Recorded Allowance
Minimum MinimumRisk Loan allowance required by allowance Additional Allowancelevel Portfolio Resolution 2,68 2/99 required (Note 3(f)) Total
AA 5,304,177 0.0% - 10,483 10,483A 5,552,222 0.5% 27,761 11,105 38,866B 2,468,154 1.0% 24,682 12,340 37,022C 1,191,945 3.0% 35,758 23,839 59,597D 231,394 10.0% 23,139 4,628 27,767E 242,785 30.0% 72,835 4,856 77,691F 735,284 50.0% 367,642 14,706 382,348G 82,185 70.0% 57,530 2,465 59,995H 428,934 100.0% 428,934 - 428,934
Total in 2010 16,237,080 1,038,281 84,422 1,122,703Total in 2009 12,528,539 968,477 70,826 1,039,303
67
Loans written off at loss in the nine-month period ended in September 30, 2010 and controlled
based on the adjusted amount until the date of the respective write-off in a memorandum
account amounted to R$283,802 thousand (2009 – R$178,544 thousand).
Recoveries of loans previously written off as loss have been recognized as income from
lending operations and amounted to R$86,648 thousand (2009 – R$42,837 thousand) in the
nine-month period ended in September 30, 2010 net of losses or gains generated from these
recoveries.
NOTE 08 Other Receivables In Thousands of Reais Banrisul Banrisul Consolidated 2010 2009 2010 2009
Foreign Exchange Portfolio ............................................................ 459,516 459,182 459,516 459,182
Pending Setlement exchange purchased ................................... 435,188 441,088 435,188 441,088
Foreign Currency Advances Received ......................................... (126) - (126) -
For eign Exchange and Term Documen ts - Foreign Curr encies . 75 101 75 101
Rights to foreign exchange sold .................................................... 39,814 11,582 39,814 11,582
Advances in local currency ........................................................... (24,910) (6,779) (24,910) (6,779)
Income receivable from advances .............................................. 9,475 13,190 9,475 13,190
Income receivable ......................................................................... 33,232 31,870 32,233 29,830
Dividends and bonuses receivable ............................................. 2,247 2,040 1,248 -
Receivables from services rendered .......................................... 30,687 29,573 30,687 29,573
Other ................................................................................................. 2 9 8 2 5 7 2 9 8 2 5 7
Negociation and intermediation of amounts ................................. - - 3,440 3,354
Negociation and intermediation of amounts ............................ - - 3,440 3,354
Specific Credits ............................................................................... - - 16 14
Specific Credits ............................................................................... - - 16 14
Sundry ............................................................................................. 1,464,131 1,371,827 1,530,388 1,431,626
Advances to Loan Guarantee Fund .............................................. 62,291 81,962 62,291 81,962
Advances to employees ................................................................ 20,035 15,605 20,118 15,670
Advances for payment by our account ........................................ 6 8 0 6 1 2 7,151 6,323
Deferred income tax and social contribution (Note 22(b)) ...... 622,503 616,512 627,693 622,604
Escrow deposits (Note 14) ............................................................ 162,321 147,315 173,851 161,440
Recoverable taxes .......................................................................... 131,899 125,878 138,756 129,682
Reimbursable payments ............................................................... 82,394 72,041 82,950 72,087
Notes and credits receivable(*) ................................................... 241,045 211,047 241,782 212,061
Credit Cards ..................................................................................... 68,922 58,126 68,922 58,126
Other debtors – Domestic ............................................................. 72,041 42,729 106,874 71,671
Allowance for losses on other receivables .................................... (101,530) (118,536) (102,033) (119,695)
Tot al other receivables ................................................................... 1,855,349 1,744,343 1,923,560 1,804,311
Current assets ................................................................................. 1,049,599 1,010,275 1,106,648 1,050,904
Long-term assets ............................................................................ 805,750 734,068 816,912 753,407
(*) Notes and Credit Receivables are described mainly as follows:
a) in the first quarter of 2005, as part of receivables recovery policy, Banrisul received as payment in kind bonds issued t o pay c ourt ordered debts of the Federal Governmentfrom several companies to settle past-due loans of such companies. As of September 30, 2010, these bonds amount to R$86,418 thousand (2009 - R$80,517 thousand). Thesebonds are subject to the variation of the price and interest index.
b) in Other Receivables without credit characteristics, transactions with entities of the Municipal Public Sector were registered in the amount of R$91,763 (R$88,919thousand) related to receivables acquired from the Government of the State of Rio Grande do Sul State Government or its controlled entities.
68 FINANCIAL STATEMENTSSEPTEMBER 2010
NOTE 09 Permanent Assets
(a) Property and equipment
Banrisul In Thousands of ReaisNet Balance Net Balance
Rate Original Cost Depreciation in 2010 in 2009
Property in UseLand and Buildings in Use ............................................ 4 % 121,068 (98,253) 22,815 22,386Other
Furniture and Equipment in inventory ................... - 12,315 - 12,315 9,023Property and Equipment in Progress ..................... - 1 1 4 - 1 1 4 4,358Facilities ..................................................................... 10% 87,594 (75,752) 11,842 11,293Furniture and Equipment in Use ............................. 10% 69,914 (48,983) 20,931 22,283Other
Communication System ....................................... 10% 4,437 (3,847) 5 9 0 5 4 3Data Processing System ....................................... 20% 275,188 (182,582) 92,606 78,262Security System ..................................................... 10% 9,229 (6,623) 2,606 2,769Trans portation S ystem ......................................... 20% 2,480 (2,161) 3 1 9 5 1 7
Total ........................................................................ 582,339 (418,201) 164,138 151,434
Banrisul Consolidated In Thousands of ReaisNet Balance Net Balance
Rate Original Cost Depreciation in 2010 in 2009
Property in UseLand and Buildings in Use ............................................ 4 % 131,330 (102,942) 28,388 25,030Other
Furniture and Equipment in Inventory ................... - 12,315 - 12,315 9,023Property and Equipment in Progress ..................... - 1 1 4 - 1 1 4 5,197Facilities ..................................................................... 10% 88,792 (76,124) 12,668 11,354Furniture and Equipment in Use ............................. 10% 73,127 (51,564) 21,563 23,047Other
Communication System ....................................... 10% 4,438 (3,847) 5 9 1 5 4 3Data Processing System ....................................... 20% 275,947 (183,212) 92,735 78,354 Security System .................................................... 10% 9,229 (6,624) 2,605 2,769Trans portation S ystem ......................................... 20% 2,545 (2,175) 3 7 0 5 8 2
Total ........................................................................ 597,837 (426,488) 171,349 155,899
(b) Intangible Assets In Thousands of Reais Banrisul Banrisul Consolidated
Net Net Net NetOriginal Balance Balance Balance Balance
Rate Cost Amortization in 2010 in 2009 in 2010 in 2009
Intangible AssetsRight from Acquisition of Payroll
operations (*)Public Sector ........................................ 20% 298,285 (140,328) 157,957 168,298 157,957 168,298Private Sector ...................................... 20% 25,777 (5,440) 20,337 9,191 20,337 9,191
Software Acquisition ................................... 20% 35,933 (27,733) 8,200 7,914 8,200 7,927Other .............................................................. - 6 6 8 (604) 64 79 1,105 79Total .......................................................... 360,663 (174,105) 186,558 185,482 187,599 185,495
(*) It refers to agreements entered into with the public sector and private sector entities to ensure the exclusivityin banking services for processing of payroll credit and deductible payroll loans, bill collection portfolio, supplierpayment and other services. Such agreements are effective for five years and are amortized over the agreementperiod. No indications that these assets are impaired were identified.
69
NOTE 10 Deposits and Money Market Funding
Banrisul In Thousands of ReaisWithout Up to 3 to Overmaturity 3 months 12 months 12 months 2010 2009
DepositsDemand deposits (a) ............................... 2,114,254 - - - 2,114,254 1,686,123Savings deposits (a) ................................. 6,295,708 - - - 6,295,708 5,200,180Interbank deposits .................................. - - 14,652 - 14,652 61,599Time deposits (b) ...................................... 7,402 2,166,340 4,135,640 3,447,243 9,756,625 8,686,321Other deposits .......................................... 1,861 - - - 1,861 8,659
Tot al ........................................................... 8,419,225 2,166,340 4,150,292 3,447,243 18,183,100 15,642,882
Current liabilities ...................................... 14,735,857 12,315,192Long-term liabilities .................................. 3,447,243 3,327,690
Money market fundingOwn Portfolio ............................................ - 2,350,621 - - 2,350,621 2,473,944
Tot al ........................................................... - 2,350,621 - - 2,350,621 2,473,944
Banrisul Consolidated In Thousands of ReaisWithout Up to 3 to Overmaturity 3 months 12 months 12 months 2010 2009
DepositsDemand deposits (a) ............................... 2,108,912 - - - 2,108,912 1,682,077Savings deposits (a) ................................. 6,295,708 - - - 6,295,708 5,200,180Interbank deposits .................................. - - 14,652 - 14,652 61,599Time deposits (b) ...................................... 7,402 2,039,536 4,135,640 3,350,387 9,532,965 8,509,714Other deposits .......................................... 1,861 - - - 1,861 8,713
Total .......................................................... 8,413,883 2,039,536 4,150,292 3,350,387 17,954,098 15,462,283
Current liabilities ...................................... 14,603,711 12,134,593Long-term liabilities .................................. 3,350,387 3,327,690
Money market fundingOwn Portfolio ............................................ - 2,285,898 - - 2,285,898 2,414,101
Tot al ........................................................... - 2,285,898 - - 2,285,898 2,414,101
(a) Cla ssified without specified maturity as they do not consider the historical average turno ver.
(b) Consider the maturities set for each investment.
Time deposits are made by the Bank’s customers, with floating or fixed charges equivalent to
76% and 24% of the total portfolio, respectively. The average funding rate for floating-rate
deposits corresponds to 96.85% (2009 – 96.96%) of the CDI variation, and for fixed-rate deposits,
to 8.44% (2009 – 9.14%) p.a.
Funding through money market purchase and sale commitments operations – own portfolio
–, conducted with financial institutions, has an average funding rate of 100% of the CDI variation.
NOTE 11 Borrowings
Foreign Borrowings: represented by funds obtained from foreign banks to be used in foreign
exchange commercial transactions subject to the variation of the corresponding currencies
plus annual interest rates from 2.0% to 7.76% (2009 – 1.79 % to 9.00%) with maximum term of
1,100 days (2009 – 360 days).
70 FINANCIAL STATEMENTSSEPTEMBER 2010
NOTE 12 Onlendings
Banrisul and Banrisul Consolidated In Thousands of ReaisDomestic Onlendings
Official Institutions Foreingn Onlendings Total
2010 2009 2010 2009 2010 2009
Up to 90 days ................................................ 252,579 248,791 26,318 9,624 278,897 258,41591 to 360 days .............................................. 29,365 119,307 15,904 26,477 45,269 145,7841 to 3 years ................................................... 314,712 216,712 1,814 - 316,526 216,7123 to 5 years ................................................... 174,747 131,384 7 2 6 - 175,473 131,384Over 5 years .................................................. 220,219 153,289 - - 220,219 153,289Total ........................................................... 991,622 869,483 44,762 36,101 1,036,384 905,584
Current liabilities ...................................... 281,944 368,098 42,222 36,101 324,166 404,199Long-term liabilities .................................. 709,678 501,385 2,540 - 712,218 501,385
Internal funds for onlending refer basically to funds from Official Institutions (BNDES – NationalBank for Economic and Social Development, FINAME – National Equipment Financing Authorityand Caixa Econômica Federal – Federal Savings and Loan Bank). These liabilities mature on amonthly basis through July 2023, and are subject to interest of 0.90% to 8.00% (2009 – 0.90% to3.50%) p.a., plus variation of the indexes (TJLP, U.S. dollar and Currency Basket) for floating-rate operations and up to 11.00% (2009 – 11.00%) p.a. for fixed-rate operations. Funds aretransferred to customers on the same terms and with the same funding rates, plus commissionon financial intermediation. These funds are collateralized by the same guarantees receivedfor the related loans.
NOTE 13 Other Payables In Thousands of Reais Banrisul Banrisul Consolidated 2010 2009 2010 2009
Collected taxes and other ................................................................ 111,978 91,281 111,978 91,281Receipt of federal taxes ................................................................... 111,710 91,175 111,710 91,175Other .................................................................................................... 2 6 8 1 0 6 2 6 8 1 0 6
Foreign exchange portfolio .............................................................. 42,468 18,645 42,468 18,645Pending Settlement exchange sold ................................................ 38,759 11,474 38,759 11,474Foreign exchange purchased ........................................................... 446,867 491,953 446,867 491,953Advances on foreign exchange contracts (Note 07 (a)) ............... (443,158) (484,785) (443,158) (484,785)Other .................................................................................................... - 3 - 3
Social and statutory .......................................................................... 54,347 23,151 55,655 23,204Dividends and bonuses payable ..................................................... 20,814 6 6 5 22,122 7 1 8Bonuses and profit sharing payable .............................................. 33,533 22,486 33,533 22,486
Taxes and social security ................................................................... 700,780 618,028 713,832 627,674Taxe s and contributions payable .................................................... 48,529 43,788 49,500 44,667Reserve for taxes and social contribution ..................................... 252,308 183,676 262,953 191,015Reserve for deferred taxes and contributions (Note 22 (b2)) ..... 10,962 8,392 10,962 8,423Reserve for tax contingencies (Note 14 (b)) .................................. 388,981 382,172 390,417 383,569
Trading and intermedia tion of securities ......................................... - - 3,089 2,579Trading and intermediation of securitie s ...................................... - - 3,089 2,579
Financial and development funds .................................................... 4,395,584 3,895,201 4,395,584 3,895,201Payables for financial and development funds (Note 21 (a)) ..... 4,376,184 3,874,263 4,376,184 3,874,263Other .................................................................................................... 19,400 20,938 19,400 20,938
Sundry ............................................................................................... 819,225 805,284 885,172 839,441Ca shier ’s check .................................................................................. 1,092 9 3 2 1,092 9 3 2Creditors for unreleased funds ....................................................... 48,609 39,162 48,799 39,357Payables for acquisition of assets and rights ............................... 2,121 2,105 2,208 2,206Liabilities under government agreements ................................... 22,944 15,873 22,944 15,873Accrued vacation and related charges .......................................... 207,483 193,699 200,824 169,437Actuarial deficit of Fundação Banrisul (Note 23) ......................... 61,236 58,891 61,236 58,891Reserve for labor contingencies (Note 14(b)) ............................... 109,274 97,514 123,098 114,033Brazilian Central Bank fines on foreign exchange transactions (Note 14 (b)) ............................................................... 114,229 110,154 114,229 110,154Reserve for social security contingencies ..................................... 18,783 18,783 18,783 18,783Reserve for securitization losses (*) .............................................. 4,262 12,884 4,262 12,884Reserve for civil risk (Note 14 (b)) ................................................... 9,686 5,438 9,686 5,438Reserve for debts assumed with Grupo de Empresas SeguradorasBrasileiras (GESB) arising from Companhia União de Seguros Gerais . 7,334 7,697 7,334 7,697FGTS (Severance Pay Fund) for amortization ................................ 3,221 2,704 3,221 2,704Sundry creditors – Domestic ........................................................... 76,481 84,108 134,061 124,926Card transactions payable .............................................................. 57,655 45,941 57,655 45,941Other .................................................................................................... 74,815 109,399 75,740 110,185
Total Other Payable s ......................................................................... 6,124,382 5,451,590 6,207,778 5,498,025Current Liabilities ............................................................................ 5,575,729 4,875,077 5,658,642 4,921,049Long-Term Liabi lities ........................................................................ 548,653 576,513 549,136 576,976
(*) The management of the Bank maintains provision for co-obligation of securitized receivable s with the National Treasur y,in the amount of R$42,779 thousand (2009 – R$51,293 thousand), controlled in a memorandum account, which are theresponsibility of agricultural borrowers.
71
NOTE 14 Reserves for Contingent Assets and Contingent Liabilities
In the normal course of their activities, Banrisul and its subsidiaries are party to tax, labor and
civil lawsuits at the judicial and administrative levels.
The provisions were calculated based on the opinion of the legal counselors, based on the
best measurement models and benchmarks available, despite the inherent uncertainty as to
the outcome. Banrisul records a reserve in the total amounts involved in lawsuits that have
been assessed as probable loss.
Management believes that the reserves are sufficient to cover any losses arising from lawsuits.
(a) Contingent Assets
As of September 30, 2010 there were no contingent assets recognized.
(b) Changes in Provisions for Contingent AssetsBanrisul In Thousands of Reais
Tax Labor Civil Other Total
Initial Balance at 12/31/2009 386,006 96,599 7,200 111,105 600,910
Recognition and Inflation Adjustment ......... 12,592 61,115 2,764 3,124 79,595
Payment ............................................................ (9,617) (48,440) (278) - (58,335)
Closing Balance at 09/30/2010 ..................... 388,981 109,274 9,686 114,229 622,170
Guaranteed Deposits (Note 8) ...................... 18,557 99,319 44,445 - 162,321
Banrisul Consolidated In Thousands of Reais Tax Labor Civil Other Total
Initial Balance at 12/31/2009 387,410 111,571 7,200 111,105 617,286
Recognition and Inflation Adjustment ......... 12,624 62,422 2,764 3,124 80,934
Payment ............................................................ (9,617) (50,895) (278) - (60,790)
Closing Balance a t 09/30/2010 ..................... 390,417 123,098 9,686 114,229 637,430
Garanteed Deposits (Note 8) ......................... 19,993 108,060 45,798 - 173,851
(c) Tax Contingencies
Provisions for tax contingencies relate primarily to liabilities related to taxes whose legality
or constitutionality is being challenged at the administrative or judicial levels, whose
likelihood of loss is or has been considered as probable and are recognized at the full amont
under dispute.
For lawsuits collateralized by escrow deposits, the amounts involved are not adjusted for
inflation. When legal permits are issued as a result of a favorable outcome, the amounts are
adjusted for inflation and withdrawn.
The main legal claims are:
i) Income tax and social contribution on the deduction of expenses arising from the settlement
of the actuarial deficit of the Banrisul Foundation, questioned by the Federal Revenue Service
for the period from 1998 to 2005 and from R$388,981 thousand. The Bank, through its legal
counsel, has been addressing the matter in court and prudently recorded provisions for
contingencies in the amount of the probable loss and
ii) Social security tax notification related to social security amounts collected on payments
that refer neither to salary nor to education allowance in the amount of R$18,783 thousand.
72 FINANCIAL STATEMENTSSEPTEMBER 2010
(d) Labor Contingencies
Refer to lawsuits filed by unions and former employees claiming labor rights, in particular the
payment of overtime and other labor rights.
Recognized for labor claims filed against Banrisul when a court notification is received and
the likelihood loss is considered as probable. The reserve is calculated according to the
disbursement estimated by our management, timely reviewed based on data received from
our legal advisors, and adjusted to the escrow deposit when required . Of the aforementioned
reserve, R$83,515 thousand (consolidated - R$91,557 thousand) has been deposited in a escrow
amount. Additionally, R$15,804 thousand was required related to escrow deposits for the
appeals.
There are labor claims whose reserve for contingency is not recorded in the books and whose
likelihood of loss is considered as possible, according to their nature, in the approximate
amount of R$44,000 thousand.
(e) Civil Contingencies
Lawsuits for damages refer to compensation for property damage and/or pain and suffering,
related to consumption relationships, in particular, matters relating to credit cards, consumer
credit, checking accounts, banking collection and loans.
Recognized when a court notification is received and adjusted monthly according to the
amount of compensation claimed, evidence presented and the evaluation of legal advisors,
taking on account jurisprudence, opinions issued, evidence produced in the records and
judgments that may be rendered in the lawsuit, regarding the risk of losing the claim.
There is also R$44,445 thousand in deposited in escrow accounts related to claims whose
likelihood of loss is assessed by our legal advisors as possible and remote, for which there is
no reserve recorded in the books.
(f) Others
On September 29, 2000, Banrisul received an assessment notice from the Central Bank of
Brazil in connection with administrative proceedings filed by that authority related to
supposed irregularities in foreign exchange transactions between 1987 and 1989. In an appeal
decision at the administrative level, Banrisul was required to pay a fine equivalent to 100% of
the amount of the supposedly irregular transactions. This decision is being challenged in
court by Management, which, on a conservative basis and in compliance with BACEN
requirements, recorded a reserve for this contingency.
NOTE 15 Income from Services Rendered In Thousands of Reais Banrisul Banrisul Consolidated 2010 2009 2010 2009
Funds Management ........................................................................ 42,304 40,132 47,389 43,995
Collection of Debt Instruments ..................................................... 31,593 29,255 31,862 29,261
Income from Refeisul ..................................................................... - - 15,723 12,369
Income from Group Financing Management Fee ....................... - - 8,660 8,139
Income from Brokerage of Operations ......................................... - - 3,396 2,930
Other Income .................................................................................... 6 5 7 6 9 1 4,475 4,804
Total ............................................................................................ 74,554 70,078 111,505 101,498
73
NOTE 16 Income from Bank Fees
In Thousands of Reais Banrisul Banrisul Consolidated 2010 2009 2010 2009
Banricompras ................................................................................... 61,611 49,985 61,611 49,985
Check Returns .................................................................................. 13,730 15,152 13,730 15,152
Checking Account Debits ................................................................ 15,976 14,833 15,976 14,833
Collection Services .......................................................................... 44,960 41,709 44,960 41,709
Transactions with Checks ............................................................... 10,647 9,144 10,647 9,144
Bank Fees from Checking Accounts ............................................... 178,577 167,390 178,577 167,390
Credit Card ........................................................................................ 9,143 8,390 9,143 8,390
Other Income from Fees ................................................................. 22,038 19,117 22,030 19,117
Tot al ............................................................................................ 356,682 325,720 356,674 325,720
From the income amount of R$356,682 thousand for nine-month period ended September
30, 2010, R$174,352 thousand (2009 – R$172,646 thousand) arise from operations with
individuals and R$182,330 thousand (2009 – R$153,074 thousand) from operations with legal
entities.
NOTE 17 Other Administrative Expenses
In Thousands of Reais Banrisul Banrisul Consolidated 2010 2009 2010 2009
Data Proce ssing and Telecommunication ................................... 114,553 106,968 118,032 109,439
Security and Money Transportation ............................................. 60,103 55,662 60,103 55,662
Amortization and Depreciation .................................................... 81,031 67,145 81,572 67,808
Rentals .............................................................................................. 40,425 34,477 39,241 33,422
Supplies ............................................................................................. 19,039 14,973 19,077 15,009
Outside Services .............................................................................. 95,292 81,300 97,316 82,844
Advertising, Promotions and Publicity (*) .................................... 85,313 71,816 86,177 72,378
Maintenance .................................................................................... 18,666 14,085 18,830 14,318
Water, Electricity and Gas ............................................................. 14,552 12,816 14,707 12,952
Financial System Services .............................................................. 14,652 12,650 15,352 13,067
Other .................................................................................................. 26,188 26,873 27,477 28,113
Tot al ............................................................................................ 569,814 498,765 577,884 505,012
(*) Comprises mainly institutional advertising of R$34,160 thousand (2009 - R$38,013 thousand) and sponsorship of sportevents and clubs of R$43,663 thousand (2009 - R$27,650 thousand).
NOTE 18 Other Operating Income In Thousands of Reais Banrisul Banrisul Consolidated 2010 2009 2010 2009
Recovery of Charges and Expenses ............................................... 36,380 35,244 33,184 31,557
Reversal of Operating Reserves for:
- Reserve for Securitization Losses (Note 13)
- Other Assets ............................................................................... 3,167 - 3,167 -
Other Taxes ....................................................................................... 1,791 4,114 1,791 4,114
Commission on Capitalization Certificates ................................. 61 42 61 42
Interbank Fees ................................................................................. 1,379 2,153 1,379 2,153
Foreign exchange adjustment ....................................................... 15,881 15,670 15,881 15,670
Credit Notes Receivable ................................................................. 7,972 4,410 7,972 4,410
Reserve Fund - Escrow Deposit - Law 12,069 .............................. 11,507 11,902 11,507 11,902
Insurance - Commission and Placement Administration Fee .. 2,374 1,750 2,374 1,750
Other Operating Income ................................................................. 49,329 15,893 50,458 17,093
Tot al ............................................................................................ 129,841 91,178 127,774 88,691
74 FINANCIAL STATEMENTSSEPTEMBER 2010
NOTE 19 Other Operating Expenses In Thousands of Reais Banrisul Banrisul Consolidated 2010 2009 2010 2009
Discount Granted from Renegotiations ....................................... 5,081 3,886 5,081 3,886
Reserves for Labor Provisions (Note 14 (b)) ................................ 61,115 46,140 62,422 50,710
Provision for Properties - Assets not in use ................................ 3,283 7 2 3 3,283 7 2 3
Provision for Securitization Losses .............................................. - 8 3 1 - 8 3 1
Provision for Civil Lawsuits (Note 14 (b)) ..................................... 2,764 20 2,764 20
Collection of Federal Taxes ............................................................ 1,621 1,358 1,621 1,358
Inflation Adjustment of Re serve for Tax Conting encies
(Social Contribution / Income Tax) - (Note 14 (b)) ................... 12,592 14,753 12,624 14,753
Lawsuits Indemnifications ............................................................ 5,999 3,189 5,999 3,189
Inflation Adjustment of Brazilian Central Bank fines on
Foreign Exchange (Note 14 (b)) ....................................................... 3,124 3,661 3,124 3,661
Inflation Adjustment of Actuarial Deficit of
Fundação Banrisul (Note 23) ..................................................... 6,599 1,454 6,599 1,454
Overdraft Accounts and Banricompras Premiável ..................... 7 0 4 7 7 0 7 0 4 7 7 0
Provision for Debts Assumed with GESB ...................................... 9 5 1 4 2 9 9 5 1 4 2 9
Banrisul Foundation - Actuarial Liabilities pursuant
Ibracon NPC 26 ............................................................................. - 21,597 - 21,597
Exchange Adjustment - Foreign Branches .................................... 3,109 35,849 3,109 35,849
Lawsuits ............................................................................................ 5,435 4,474 5,435 4,474
Cards .................................................................................................. 3,007 2,938 3,007 2,938
Other Operating Expenses (*) ......................................................... 13,957 52,972 13,700 53,296
Total ............................................................................................ 129,341 195,044 130,423 199,938
(*) In September 30, 2009, the amount of R$39,124 thousand refers mainly to the payment of mandatory allocation ofsavings deposits from prior years.
NOTE 20 Shareholders´ Equity - Banrisul
(a) Capital
Fully subscribed paid-up capital as of September 30, 2010 is R$2,900,000 thousand and it is
represented by 408,974 thousand shares without par value as follows:
ON PNA PNB Total
Amount % Amount % Amount % Amount %
Rio Grande do Sul State ................................. 204,199,859 99.59 2,721,484 73.55 26,086,957 13.03 233,008,300 56.97
Fundação Banrisul de Seguridade Social
(pension plan) .......................................... 449,054 0.22 158,983 4.30 - 0.00 608,037 0.15
Social Security Institute of
Rio Grande do Sul State ............................ 44,934 0.02 168,612 4.56 - 0.00 213,546 0.05
Market ........................................................... 349,527 0.17 651,006 17.59 174,144,061 86.97 175,144,594 42.83
Total ............................................................ 205,043,374 100 .00 3,700,085 100.00 200,231,018 100.00 408,974,477 100.00
The Extraordinary Shareholders’ Meeting held on April 30, 2010 approved a capital increase
by using the earnings reserve in the amount of R$300,000 thousand, with no issuance of new
shares, already homologated by BACEN.
Preferred shares do not carry voting rights and are entitled to the following payments:
Class A Preferred Shares:
i) Priority to receive a non-cumulative, preferred fixed dividend of six percent (6%) p.a.,
calculated over the quotient resulting from the division of capital by the number of shares
composing it;
75
ii) Right to take part, after the payment to Class B Common and Preferred Shares of a dividend
equal to that paid to those shares, in the distribution of any other dividends or bonuses in
cash distributed by the Bank, under equal conditions with Class B Common and Preferred
Shares, adding ten percent (10%) over the amount paid to those shares;
iii) Interest in capital increases deriving from the capitalization of reserves, under equal
conditions of Class B Common and Preferred Shares and
iv) Priority in capital reimbursement, without premium.
Class B Preferred Shares:
i) Interest in capital increases deriving from the capitalization of reserves, under equal
conditions of Class A Common and Preferred Shares and
ii) Priority in capital reimbursement, without premium.
(b) Allocation of Income
Net Income for the year, adjusted in accordance with Law 6,404/76, will have the following
allocations: (i) 5% to the Legal Reserve, which will not exceed 20% of Capital, (ii) 25% to the
Statutory Reserve, and (iii) mandatory minimum dividends up to the limit of 25% of adjusted
net income. The remaining net income will be allocated as decided in the Shareholders´
Meeting.
The Statutory Reserve is intended to ensure funds for investments in the information
technology area, and is limited to 70% of paid-up capital.
In April 30,2010, the Ordinary and Extraordinary Shareholders’ Meeting ratified and approved
the proposal for the distribution of additional dividends for 2009 and 2010 respectively,
equivalent to 15% of the Adjusted Net Income, totaling 40%.
The pay-out policy adopted by Banrisul aims to pay interest on capital in the maximum
calculated in accordance with prevailing legislation, whith are included net of whithholding
income tax in the calculation of mandatory dividends for the fiscal year, as stated in our by-
Laws.
As permitted by Law no. 9,249/95, Banrisul’s management paid interest on capital in the
amount of R$144,306 thousand net referring to the period from January to September 2010,
to be credited to dividends, net of withholding income tax.
The payment of this interest on capital resulted in a tax benefit for the Bank in the amount of
R$61,048 thousand (2009 – R$56,707 thousand) (Note 22).
NOTE 21 Commitments, Guarantees and Other
(a) On April 22, 2004, State Law 12,069, amended by Law 12,585 of August 29, 2006, was
approved, under which the Bank must make available, when required, to Rio Grande do Sul
State up to 85% of the escrow deposits made by third parties with the Bank (except for those
in which the litigant is a municipality). The remaining amount not available is recorded in a
reserve fund to ensure the refund of said escrow deposits. As of September 30, 2010, the
amount of escrow deposits made by third parties with the Bank, adjusted through the balance
sheet date by the TR (managed prime rate) variation plus interest of 6.17% p.a., totaled
R$6,419,184 thousand (2009 – R$5,917,263 thousand), of which R$2,043,000 thousand (2009 –
R$2,043,000 thousand) was transferred to the State upon its request and written off from the
76 FINANCIAL STATEMENTSSEPTEMBER 2010
respective equity accounts. The remaining balance, which makes up the aforementioned
fund managed by Banrisul, is recorded in Other Payables - Financial and Development Funds
(Note 13).
(b) Sureties and guarantees granted to customers amount to R$538,738 thousand (2009 –
R$530,303 thousand), and are subject to financial charges and backed by the beneficiaries’
sureties.
(c) The Bank is responsible for the custody of 430,441 thousand securities of customers (2009
– 341,868 thousand).
(d) The Bank has co-obligations in import credits in the amount of R$60,515 thousand (2009 –
R$38,981 thousand).
(e) The Bank manages various funds and portfolios, which have the following net assets:
In Thousands of Reais Banrisul Banrisul Consolidated 2010 2009 2010 2009
Investment funds (*) ........................................................................ 5,368,942 4,698,279 5,385,461 4,853,461Investment funds in investment fund quotas ............................ 114,167 72,757 255,614 72,757Fund to Guarantee the Liquidity of Rio Grande do Sul State Debt Securities ................................................................... 980,891 1,570,081 980,891 1,570,081Managed portfolios ......................................................................... 483,982 417,326 499,148 431,828Credit Rights Investment Fund ...................................................... - 35,335 - 35,335Investment Clubs ............................................................................ - - 855 140Total ............................................................................................ 6,947,982 6,793,778 7,121,969 6,963,602
(*) The investments fund portfolios consist basically of fixed-rate and variable rate government bonds, and their carryingamounts already reflect mark-to-market adjustments at the balance sheet date.
(f) The subsidiary Banrisul S.A. Administradora de Consórcios is responsible for the
management of 113 consortium groups (105 in 2009, September), distributed among real
estate, motorcycles, vehicles and tractors, gathering 21,180 active consortium members
(19,852 in 2009, September).
(g) The Bank rents properties, manly used for branches, based on standard contracts which
may be cancelled as its own criterion and include the right to opt for renewal and adjustment
clauses, classified as operating lease. Total future minimum payments of not-cancelable rent
as of September 30, 2010 is R$105,809 thousand, of which R$32,535 thousand matures in up to
one year, R$60,318 thousand from one to five years and R$12,956 thousand over five years.
Payments for operating leases, recognized as expenses for the period, were R$37,125 thousand.
NOTE 22 Income Tax and Social Contribution
(a) Conciliation of Expenses/Revenue with Income Tax and Social Contribution
In Thousands of Reais Banrisul Banrisul Consolidated 2010 2009 2010 2009
Income for the Period before Taxes and Pr ofit Sharing ............. 773,579 541,410 786,004 552,706Income Tax on Profit - Rate 25% ..................................................... (193,395) (135,353) (196,501) (138,177)Social Contribution on Profit - Rate 9% ........................................ - - (956) (738)Social Contribution on Profit - Rate 15% ...................................... (116,037) (81,212) (116,307) (81,675)Total Income Tax and Social Contribution
calculated at Effective Rate .................................................... (309,432) (216,565) (313,764) (220,590)Adjustment of Fine on Foreign Exchange Operations ................ (1,250) (1,464) (1,250) (1,464)Profit Sharing .................................................................................... 13,400 8,994 13,400 8,994Interest on Capital .......................................................................... 61,048 56,707 61,048 56,707Equity in Subsidiaries and Foreing Exchange Adjustment
on Branches .................................................................................. 8,192 6,527 (1,244) (14,339)
Other Additions, Net of Exclusions ................................................ (653) (16,319) 8 1 6 (2,612)
Total Income Tax and Social Contribution .................................. (228,695) (162,120) (240,994) (173,304)
77
(b) Deferred Income Tax and Social Contribution
In September 2010, the Bank had Deferred Income Tax and Social Contribution Credits on
temporary differences as follows:
(b1) Tax credits
Tax credit balances, by origin and disbursements made, are as follows:
Banrisul In Thousands of ReaisBalance on Balance on
12/31 /2009 Recognition Realization 09/30 /2010
Allowance for loan losses .............................................................. 432,370 159,412 142,779 449,003
Reserve for labor contingencies ................................................... 38,640 24,446 19,376 43,710
Reserve for tax contingencies ....................................................... 70,059 8,995 3,958 75,096
Other temporary provisions .......................................................... 56,967 1,759 4,009 54,717
Tot al tax credit s on temporary diff erences................................ 598,036 194,612 170,122 622,526
Unrecorded credits ......................................................................... (23) - - (23)
Tot al tax credits recorded .......................................................... 598,013 194,612 170,122 622,503
Deferred tax liabilities ................................................................... (9,409) (1,619) (66) (10,962)
Tax credit s, net of deferred liabilities ........................................ 588,604 192,993 170,056 611,541
Banrisul Consolidated In Thousands of Reais
Balance on Balance on12/31 /2009 Recognition Realization 09/30 /2010
Allowance for loan losses .............................................................. 432,370 159,412 142,779 449,003
Reserve for labor contingencies ................................................... 43,730 24,890 20,208 48,412
Reserve for tax contingencies ....................................................... 70,536 9,006 3,958 75,584
Other temporary provisions .......................................................... 56,967 1,759 4,009 54,717
Tot al tax credit s on temporary diff erences................................ 603,603 195,067 170,954 627,716
Unrecorded credits ......................................................................... (23) - - (23)
Tot al tax credits recorded .......................................................... 603,580 195,067 170,954 627,693
Deferred tax liabilities ................................................................... (9,440) (1,621) (99) (10,962)
Tax credit s, net of deferred liabilities ........................................ 594,140 193,446 170,855 616,731
Expected realization of these receivables are as follows: In Thousands of Reais Banrisul Banrisul Consolidated Tempor ary Diferences
Year Income Tax Social Contribution Total Total Recorded Total Recorded
2010 19,893 11,936 31,829 31,829 31,9472011 132,663 79,598 212,261 212,261 212,7312012 101,285 60,771 162,056 162,056 162,5262013 83,370 50,022 133,392 133,392 134,3512014 38,750 23,250 62,000 62,000 62,4702015 to 2017 12,594 7,556 20,150 20,150 21,5602018 to 2020 5 0 9 306 8 1 5 8 1 5 2,108After 2020 15 8 23 - -Total on 09/30/2010 389,079 233,447 622,526 622,503 627,693Total on 09/30/2009 385,335 231,200 616,535 616,512 622,604
The total consolidated present value of tax credits is R$492,397 thousand, calculated based
on the expected realization of temporary differences at average funding rate projected for
the corresponding periods.
(b2) Deferred Tax Liabilities
The balance of the Reserve for Deferred Taxes and Contributions is represented by: In Thousands of Reais Banrisul Banrisul Consolidated 2010 2009 2010 2009
Excess Depreciation ........................................................................ (10,954) (8,316) (10,954) (8,316)
Available for Sale Securities .......................................................... (8) (10) (8) (10)
Adjustment to Fair Value of Trading Securities ........................... - (66) - (97)
Tot al ............................................................................................ (10,962) (8,392) (10,962) (8,423)
78 FINANCIAL STATEMENTSSEPTEMBER 2010
NOTE 23 Fundação Banrisul de Seguridade Social e Cabergs - Caixa deAssistência dos Empregados do Banco do Estado do Rio Grande do Sul
Banrisul is the main sponsor of Fundação Banrisul de Seguridade Social (“Fundação Banrisul”),
which is mainly engaged in supplementing the benefits covered and provided by the Social
Security to the employees of the Bank, Banrisul Serviços, and Cabergs, and carrying out social
security programs promoted by its sponsors.
On July 6, 2009, a new retirement benefit plan named Banrisulprev was approved and has
been offered to non members of the Benefit Plan I since then. This new variable contribution
benefit plan became effective in November 2009. As a result of the implementation of this
new plan, new members are no longer allowed to join the Benefit Plan I.
To attain its objectives, Fundação Banrisul receives monthly contributions from its sponsors
and participants, which are calculated based on the monthly compensation of employees and
their beneficiaries. The Bank’s contribution amount of R$9,192 thousand (2009 - R$7,867
thousand) for the year, which, as of September 30, 2010, corresponds to 3.51% (2009 – 3.63%)
of the monthly payroll of employees’ contribution salaries, was recorded in operating
expenses.
Benefit Plan I - In the defined benefit type, Benefit Plan I provides retirement and survivorship
benefits, sick pay, inmate pension, funeral allowance and annual bonus.
The active participant’s normal contribution corresponds to the monthly amount equivalent
to the result of the application of the following fees:
a) Fixed general percentage of 3% applicable to the contribution salary;
b) First additional percentage of 2% applicable to the contribution salary surplus (if any) on
half of the highest Social Security benefit salary; and
c) Second additional percentage of 7% applicable to the contribution salary surplus (if any) on
the highest Social Security benefit salary.
Banrisul’s remaining portion of the contracted debt related to this plan in the amount of
R$61,236 thousand as of September 30, 2010 (2009 – R$58,891 thousand) is recorded in Other
Payables (Note 13). In addition to this deficit, Banrisul pays interest of 6% per year with final
maturity in 2028, which is monthly adjusted based on the General Price Index – Domestic
Availability (IGP-DI).
Banrisulprev - In the variable contribution type, Banrisulprev provides benefits with defined
contribution characteristics, such as regular retirement, early retirement and funeral
allowance, and benefits with defined benefit characteristics, such as disability retirement,
proportional benefits, sick pays, annual bonus, minimum benefit and survivorship benefit.
The participant ’s normal contribution is comprised of three portions:
a) Basic portion: 1% on the contribution salary;
b) Additional portion: may vary from 1% to 7.5% on the contribution salary portion that exceeds
9 reference units; and
c) Variable portion: percentage applied on the contribution salary annually established by the
actuary to cover 50% of the costs of risk benefits and the plan’s administrative expenses.
79
In addition to the regular contribution, the participant may opt to make a contribution not
lower than one reference unit and not paid by the sponsor.
The Bank’s contributions are equal to the participants’ normal contributions.
Medical and dental care - Banrisul offers medical and dental care to its employees and
Fundação Banrisul’s retirees through Cabergs.
As of December 31, 2009, the actuarial appraisal of post-employment benefits related to
defined benefits, Banrisulprev and health care granted to its employees was as follows:
In Thousands of ReaisBenefit Banrisulprev Medical and
Plan I Plan dental care Total
Present obligation of actuarial obligations ................................ (2,301,202) (669) (107,882) (2,409,753)
Fair value of Fundação Banrisul’s asse ts ..................................... 2,491,893 1 0 3 92,989 2,584,985
Gains /Losses and cost of unrecognized services ...................... 111,681 5 6 6 25,033 137,280
Actuarial assets (liabilities) ........................................................ 302,372 - 10,140 312,512
The main actuarial assumptions used as December 31, 2009 are as follows:
Discount rate: 11.40% p.a.
Expected return rate of pension plans’ assets:
Defined benefit plan: 12.36% p.a.
Variable contribution plan: 12.39% p.a.
Medical and dental care: 10.58% p.a.
Future salary increase rate: 6.59% p.a.
Increase in average costs: 7.64% p.a.
Inflation: 4.50% p.a.
Mortality table: AT – 2000.
NOTE 24 Financial Instruments
The main risks related to financial instruments are credit risks, market risks and liquidity
risks, as follows:
Credit risk: it is the possibility of the Bank incurring losses related to the nonperformance of
a loan or financial obligation by the counterparty.
Credit risk management is carried out through statistical models that allow continuous
improvement of the credit granting process. Banrisul continuously performs adherence tests
per period, monitoring credit portfolio shifts, customer and sector concentration and default
levels.
Market risk: it is directly related to the fluctuation of prices and rates, that is, to the fluctuation
of the stock exchange, interest rate market and foreign exchange inside and outside Brazil
that affects the prices of the assets and liabilities negotiated in the market.
Liquidity risk: it is related to a mismatch between the cash flows of assets and liabilities,
affecting the institution’s financial capacity to obtain funds to honor its obligations.
The purpose of market and liquidity risk politicizes is to mitigate possible losses resulting
from fluctuations in market price, currency and asset and liability interest rates and from cash
flow mismatches. The Bank may use, among other choices, derivatives.
80 FINANCIAL STATEMENTSSEPTEMBER 2010
Banrisul has not contracted operations known as “target forward swap” or any other leveraged
derivative because its policies do not provide for operations whose objective is not to hedge
its assets and liability positions.
Except for the “swap” agreements referred to in Note 5(d), Banrisul has deemed its exposures
to the risks mentioned above as reasonable and has not contracted new operations involving
Derivative Financial Instruments.
Sensitivity analysis - Although swap operations in the Bank’s portfolio and underlying
transactions are subject to floating rates equivalent to those prevailing in the market, in
compliance with CVM Resolution 475/08, the possible impacts on cash flows and on gains
compared to the market for similar transactions are shown below.
The impacts of financial exposures of the Banking portfolio (especially for interest rate and
foreign exchange factors) shown in the following chart is not necessarily and indication of
potential loss for the Bank, since these operations are funded by deposits, which are a natural
hedge for possible interest rate fluctuations. The Bank’s intention is to hold these operations
to maturity and use them to hedge transactions conducted with customers.
The chart below shows the possible impacts of derivatives (Banking portfolio) exposures on
cash flows and hedged instruments as of September 30, 2010, under three different scenarios
(sensitivity analysis):
In Thousands of Reais
Risk Factors Scenarios 1 2 3
Derivatives - Swap
Exposures subject to interest rate variations .................... (149,591) (170,013) (190,902)
Exposures subject to foreign exchange variations ............. (29,073) (31,630) (35,372)
Hedged Financial Instrument (1)
Exposures subject to interest rate variations .................... 160,262 218,294 308,738
Exposures subject to foreign exchange variations ............. 41,195 45,455 51,152
Net Value ................................................................................. 22,793 62,106 133,616
(1) Adjusting a financial instrument consists of obtaining the gains that fixed-rate securities will have above market rates,considering the scenarios.
Scenario 1: based on market information (BM&FBovespa, Anbima, etc) a 50 base-point stress
test was applied on foreign exchange variation and interest rate.
Scenario 2: a 25% stress test was applied to the respective price curves (interest rate, foreign
exchange) based on the market as of September 30, 2010; the main risk refers to a downturn
scenario for interest rates and an upward trend in foreign exchange rate.
Scenario 3: a 50% stress test was applied to the respective price curves (interest rate and,
foreign exchange rate) based on the market as of September 30, 2010; the main risk refers to
a downturn scenario for interest rates and an upward trend in foreign exchange rate.
NOTE 25 Transactions with Related Parties
Banrisul’s commercial relations with the Rio Grande do Sul State Government and its
subsidiaries, Companhia Estadual de Energia Elétrica (CEEE), Companhia Rio-Grandense de
Saneamento (CORSAN), Companhia de Gás do Rio Grande do Sul (SULGÁS), Centrais de
Abastecimento do Rio Grande do Sul S.A. (CEASA), Companhia Estadual de Silos e Armazéns
(CESA), Companhia Rio-Grandense de Artes Gráficas (CORAG), Companhia Rio-Grandense de
81
Mineração (CRM) and Companhia de Processamento de Dados do Estado do Rio Grande do Sul
(PROCERGS), are described below:
Rio Grande do Sul State Government - On June 29, 2007, Cooperation Agreement 1959/2007
was entered into between Banrisul and Rio Grande do Sul State Government, under which
Banrisul will provide to the Government, on an exclusive basis and for a five-year period,
banking services related to the payment of active and inactive servants, lifetime and special
pensioners of the Executive Branch (Direct Administration), and pension plan pensioners
(Social Security of the Rio Grande do Sul State – IPERGS) and the Government gives the Bank
the right to grant payroll loans. In view of the reciprocity of services provided, under this
Agreement Banrisul releases the Rio Grande do Sul State Government from costs related to
the provision of banking services, such as the collection of revenue and state taxes, debt to
bank account, FGTS (severance pay fund) statement and mortgage loan collection services.
The Bank also provides services related to the financial transfers made by the government
departments of amounts related to social programs and updates information related to inactive
servants and holders of special or lifetime pension plans of the Direct Administration. These
services are not paid.
The Bank also pays the suppliers of the Public Finance System and processes changes related
to the Cash Management Integrated System (SIAC), which is responsible for centralizing in
one bank account the cash and cash equivalents of the Direct and Indirect State Administration
and its subsidiaries. These services are not paid.
The Bank provides other services to foundations and government agencies, such as payment
services through payment forms and the supply of meal and fuel tickets. For the nine-month
period ended September 30, 2010, these services generated fees in the amount of R$6,830
thousand. The Bank offers a solution for the management of e-commerce through the Compras
Pregão On Line portal. This service is not paid.
The Bank purchased FCVS credit rights, as described in Note 06, and receivables assignment
agreements in the amount of R$498,577 thousand. These receivables were purchased with
negative goodwill and their index was changed to Selic through a swap agreement, as described
in Note 05.
For the nine-month period ended September 30, 2010, the Bank’s lease agreements on the
State Government’s properties generated expenses in the amount of R$851,000.
Also, the Bank has with the State Government an agreement whereby the State Government
assigned 13 employees from the dissolved Caixa Econômica Estadual to the Bank and received
9 employees to work in Government departments and foundations. These employee-related
costs are refunded by the parties.
Companhia Estadual de Energia Elétrica (CEEE) - The Bank is responsible for the provision of
banking services related to personnel payment, including payroll loan operations. The
payment of consumption accounts issued by CEEE and the supply of meal and fuel tickets is
also the responsibility of the Bank, which for the nine-month period ended September 30,
2010 was paid R$2,715,000 to perform these services. The Bank offers a solution for the
management of e-commerce through the Pregão On Line portal.
Companhia Riograndense de Saneamento (CORSAN) - The Bank is responsible for the
provision of banking services related to the payment of personnel, including payroll loan
operations. The payment of consumption accounts issued by Corsan and the supply of meal
and fuel tickets is also the responsibility of the Bank, which for the nine-month period ended
82 FINANCIAL STATEMENTSSEPTEMBER 2010
September 30, 2010 was paid R$2,926,000 to perform these services. The Bank offers a solutions
fot the management of e-commerce through the Pregão On Line portal.
The Bank intermediates the implementation of the financial flow expected from the
agreements entered into by this company and the National Bank for Economic and Social
Development (BNDES). There are no guarantees pledged and/or compensation related to
these operations.
SULGÁS, CEASA, CESA, CORAG, CRM and PROCERGS - The Bank is responsible for the provision
of banking services related to the payment of personnel and has an agreement with SULGÁS,
CEASA and CESA for payroll loan operations. Services related to the e-payment issued by
these Companies and the supply of meal and fuel tickets is also the responsibility of the
Bank, which for the nine-month period ended September 30, 2010 was paid R$217,000 to
perform these services. The Bank offers a solution for the management of e-commerce
through the Pregão On Line portal.
SULGÁS has investments whose yield is indexed to the CDI variation. The Bank intermediates
the implementation of the financial flow expected from the agreements entered into by this
company and the National Bank for Economic and Social Development (BNDES). There are no
guarantees pledged and/or compensation related to these operations.
CaixaRS Agência de Fomento - The Bank is responsible for the provision of banking services
related to the payment of personnel, including payroll loan operations. The e-payment
services and the supply of meal and fuel tickets is also the responsibility of the Bank, which
for the nine-month period ended September 30, 2010 was paid R$46,000 to perform these
services. The Bank also manages purchases through the Compras Pregão On Line portal.
Based on the Bank’s employee assignment agreement, 8 (eight) employees were assigned.
These employee-related costs are refunded by the parties.
Banco Regional de Desenvolvimento do Extremo Sul (BRDE) - The Bank is responsible for the
provision of banking services related to the payment of personnel, including payroll loan
operations to employees allocated in the Rio Grande do Sul State and is responsible for e-
payment services.
Fundação Banrisul de Seguridade Social - As described in Note 23, the Bank’s debt contracted
on March 31, 1998, related to the remaining portion of the actuarial deficit, amounts to R$61,236
thousand. This. In addition to this deficit, Fundação Banrisul pays interest of 6% per year with
final maturity in 2028, which is monthly adjusted based on the General Price Index – Domestic
Availability (IGP-DI).
To supplement the employees’ social security benefits the Bank contributed of R$9,192
thousand to Fundação Banrisul in the nine-month period ended September, 30 2010 as
described in Note 23.
The Bank is responsible for the provision of banking services related to the payment of
personnel, and the payment of retirement benefits and pension plans to Fundação Banrisul’s
beneficiaries. Fundação Banrisul also has an exclusive investment fund managed by the Bank,
which earned income of R$222,000 on this service in the nine-month period ended as of
September 30, 2010. Investments made by Fundação Banrisul with the Bank earn yield at
rates indexed to the CDI variation.
For the nine-month period ended September 30, 2010, the Bank’s lease agreements on the
Fundação Banrisul’s properties generated expenses in the amount of R$3,925 thousand.
83
CABERGS – Caixa de Assistência dos Empregados do Banco do Estado do Rio Grande do Sul
S.A. - Fundação Banrisul provides medical and dental care benefits to its employees and
retirees generating expenses during the nine-month period ended September 30, 2010, of
R$13,643 thousand.
The Bank is responsible for providing banking services related to the payment of staff and
suppliers. Cabergs also has an exclusive investment fund managed by the Bank which earned
income of R$94,000 on this service, in the nine-months period ended in September 30, 2010.
Investments made by Cabergs with earn yields at rates indexed to the CDI variation.
The Bank offers a solution for the management of electronic purchases through “Portal de
Compras Pregão On Line” this service is not paid.
All interest-bearing transactions were contracted at rates compatible with the third-parties’
rates prevailing on the transaction dates.
Transactions with companies and subsidiaries are as follows:
Banrisul In Thousands of Reais
Assets (Liabilities) Income (Expense) 2010 2009 2010 2009
Derivatives .................................................................................. 103,135 103,383 (1,095) 23,093
State of Rio Grande do Sul Government .................................. 103,135 103,383 (1,095) 23,093
Collection Services ..................................................................... 5,072 5,072 - -
State of Rio Grande do Sul Government .................................. 5,072 5,072 - -
Other Credits .............................................................................. 14,912 2,262 4,138 3,981
State of Rio Grande do Sul Government .................................. 12,483 - - -
Subsidiaries .................................................................................. 2,429 2,262 4,138 3,981
Demand Deposits ....................................................................... (163,573) (102,368) - -
State of Rio Grande do Sul Government .................................. (130,536) (76,055) - -
Subsidiaries of State of Rio Grande do Sul Government ....... (27,694) (22,268) - -
Subsidiaries .................................................................................. (5,343) (4,045) - -
Time Deposits ............................................................................. (223,660) (176,607) (8,330) (8,128)
Subsidiaries .................................................................................. (223,660) (176,607) (8,330) (8,128)
Money Market Funding .............................................................. (1,045,614) (1,629,922) (90,774) (144,779)
State of Rio Grande do Sul Government (*) ............................. (980,891) (1,570,078) (86,484) (140,508)
Subsidiaries .................................................................................. (64,723) (59,844) (4,290) (4,271)
Other Payables ............................................................................ (80,467) (83,628) (10,121) (10,106)
State of Rio Grande do Sul Government .................................. (11,576) - (851) (930)
Banrisul foundation .................................................................... (61,681) (58,891) (8,071) (8,102)
Subsidiaries .................................................................................. (7,210) (24,737) (1,199) (1,074)
Tot al ................................................................................................... (1,390,195) (1,881,808) (106,182) (135,939)
(*) These funds receive 100% of the CDI variation.
Banrisul Consolidated In Thousands of Reais Assets (Liabilities) Income (Expense) 2010 2009 2010 2009
Cash ............................................................................................ 17,988 19,387 1,247 1,390State of Rio Grande do Sul Government .................................. 17,988 19,387 1,247 1,390
Derivatives .................................................................................. 103,135 103,383 (1,095) 23,093State of Rio Grande do Sul Government .................................. 103,135 103,383 (1,095) 23,093
Tax R evenues .............................................................................. 5,072 5,072 - -State of Rio Grande do Sul Government .................................. 5,072 5,072 - -
Other Credits .............................................................................. 18,605 7,010 607 596State of Rio Grande do Sul Government .................................. 18,605 7,010 6 0 7 5 9 6
Demand Deposits ....................................................................... (158,230) (98,323) - -State of Rio Grande do Sul Government .................................. (130,536) (76,055) - -Subsidiaries of State State of Rio Grande do Sul Government . (27,694) (22,268) - -
Money Market Funding .............................................................. (980,891) (1,570,078) (86,484) (140,508)State of Rio Grande do Sul Government (*) ............................. (980,891) (1,570,078) (86,484) (140,508)
Other Payables ............................................................................ (73,257) (58,891) (8,922) (9,032)State of Rio Grande do Sul Government .................................. (11,576) - (851) (930)Banrisul Foundation ................................................................... (61,681) (58,891) (8,071) (8,102)
Tot al ............................................................................................ (1,067,578) (1,592,440) (94,647) (124,461)
(*) These funds receive 100% of the CDI variation.
84 FINANCIAL STATEMENTSSEPTEMBER 2010
Remuneration of the Senior Management
Yearly, in the General Shareholders’ Meeting, it is defined:
a) The total annual remuneration of the Management, the members of the Board, the members
of the Audit Committee and members of the Audit Committee as stated in the Company’s By-
Laws; and
b) The allowance to cover Complementary Pension Plans Additional on behalf of the Senior
Management, included in the Private Pension Plan for the Bank and its subsidiaries’
Management and Employees.
In 2010, it was fixed the maximum annual individual amount of R$403,000 as remuneration
and bonuses paid to the members of the Board of Administration, Board of Executive Officers,
Fiscal Council and Audit Committee.
For the nine-month period ended September 30, 2010, the Management compensation is as
follows: In Thousands of Reais
Short Term Benefits p aid to Senior Management 2010 2009
Salaries .................................................................................................................................... 2,727 2,015
Bonuses .................................................................................................................................... 3 -
Social Security ......................................................................................................................... 6 3 5 4 4 6
Total ................................................................................................................................ 3,365 2,461
Banrisul pays in full defined benefit pension plan to administrators who belong to the staff.
In the nine-month period ended September 30, 2010, contributions to Banrisul Foundation
Social Security are summarized as follows: In Thousands of Reais
Post-Employment Benefits 2010 2009
Defined Contribution Pension Plan ..................................................................................... 15 10
The Bank has contracted liability insurance to Officers and Councils Members, in the amount
of R$376,000, valid for the year 2010.
Banrisul does not offer any long-term benefits, termination of employment contracts or
stock-based compensation for its Senior Management.
Additional information
(1) According to existing legislation, financial institutions may not grant loans or advances to:
a) Directors and members of advisory, administrative or fiscal councils and the like, as well as
their spouses and relatives up to the 2nd degree;
b) Individuals or entities that participate in its Equity, with more than 10%; and
c) legal entities whose capital involved, with more than 10%, the very financial institution,
any directors or officers of the institution as well as their spouses and relatives up to the 2nd
degree.
Thus, it is not made by the Bank loans or advances to any subsidiary, members of the Board or
the Executive Board and their families.
85
MATEUS AFFONSO BANDEIRACEO
RUBENS SALVADOR BORDINIVice-President
LUIZ CARLOS MORLINAccountant CRCRS 51.124
BRUNO FRONZACARLOS TADEU AGRIFOGLIO VIANNA
CÉSAR ANTÔNIO CECHINATOLUIZ GONZAGA VERAS MOTA
MARINÊS BILHARPAULO ROBERTO GARCIA FRANZ
Officers
Board of Executive Officers
(2) Shareholding
Executive Officers and members of the Board of Administration, the Fiscal Council and Audit
Committee had jointly the following Banrisul shareholding Bank as of September 30, 2010.
Shares Amount
Voting Shares 12
Common Shares 1,282
Total Shares 1,294
NOTE 26 Authorization for Completion of the Financial Statements
Banrisul’s Board of Executive Officers authorized the completion of these financial statements
on November 03, 2010, which consider subsequent events occurred to this date that might
affect these financial statements
86 FINANCIAL STATEMENTSSEPTEMBER 2010
Report
87
Independent Accountants’Review Report
To the Management and Shareholders ofBanco do Estado do Rio Grande do Sul S.A.
Porto Alegre - RS
1. We have performed a limited review of the accompanying individual (Bank) and
consolidated balance sheets of Banco do Estado do Rio Grande do Sul S.A. (“Bank”) as of
September 30, 2010 and 2009 and the related statements of income, changes in
shareholders’ equity (Bank) cash flows and value added for the nine-month periods then
ended, all expressed in Brazilian reais and prepared under the responsibility of the Bank’s
management.
2. Our review was conducted in accordance with specific standards established by the
Brazilian Institute of Independent Auditors (IBRACON) and consisted principally of: (a)
inquiries of and discussions with certain officials of the Bank who have responsibility for
accounting, financial and operating matters about the criteria adopted in the preparation
of the financial statements referred to in paragraph 1 above; and (b) applying analytical
procedures to financial data. Since this review did not constitute an audit in accordance
with Brazilian auditing standards, we do not express an opinion on the interim financial
statements mentioned in paragraph 1.
3. Based on our limited review, we are not aware of any material modifications that should
be made to the financial statements referred to in paragraph 1 for them to be in conformity
with Brazilian accounting practices applicable to the institutions authorized to operate by
the Central Bank of Brazil.
4. The accompanying financial statements have been translated into English for the
convenience of readers outside Brazil.
Porto Alegre, November 3, 2010
Deloitte Touche TohmatsuAuditores IndependentesCRC nº. 2 SP 011.609/O-8/F/RSFernando CarrascoContadorCRC nº. 1 SP 157.760/T/RS
88 FINANCIAL STATEMENTSSEPTEMBER 2010
Analysis ofPerformance
3Q10
FOLLOWING IS THE ANALYSIS OF THE PERFORMANCE OF BANCO
DO ESTADO DO RIO GRANDE DO SUL S.A. IN THE 3RD QUARTER OF
2010 AND BETWEEN JANUARY AND SEPTEMBER 2010.
89
Banco do Estado do Rio Grande do Sul S.A.
Founded in 1928, Banrisul is a multiple-service bank
controlled by the State of Rio Grande do Sul. , with a strong
penetration among the population of the state that
strengthens its identity as a regional bank.
Banrisul is comparable to the large banks in Brazil, where it
occupies the 11th position in assets, according to Central Bank
of Brazil’s ranking as of June 2010. At the end of September
2010, Banrisul had R$32.3 billion in total assets, of which
R$16.2 billion in its loan portfolio, and equity of R$3.7 billion.
In the third quarter of 2010, Banrisul was listed as the 4th
best Brazilian bank according to the ranking of the As
Melhores da Dinheiro , published by the weekly magazine
IstoÉ Dinheiro, from São Paulo. The institution was also awarded in financial sustainability,
social responsibi lity, human resources and corporate governance. The Bank was also
highlighted in the survey The 500 Largest Companies in Brazil, appearing in the 98 th place.
During the Congress of Information Technology for F inancial Institutions, organized by the
Brazilian Federation of Banks between June 09 and 11, 2010, the Bank was distinctly awarded
in five categories: Social Management, Telecommunications Management, Digital Identity, IT
Governance, Risk Management, and also the Executive of the Year award, in the Best IT manager
special category, awarded to the Vice-president and CIO.
As a retail bank, Banrisul focuses on meeting consumer finance demands and lending working
capital to small and medium enterprises, in addition to providing financial related services to
public sector entities.
Its wide products and services portfolio includes: loans to individuals, specially consumer
credit and payroll loans; real estate financing; long-term financing with own funds and funds
from federal government institutions; agricultural credit; credit lines to companies, and various
types of investment and financial services to the community.
Among the main products, it is highlighted the payroll loans to individuals and working capital
to companies, the most representative credit lines in the commercial credit portfolio, with
4.2% and 8.0% growth in 3Q10, respectively. In twelve months, these credit lines grew 43.9%
and 39.3% respectively.
The geographic focus of the Bank is the Southern Region of Brazil, especially the state of Rio
Grande do Sul, with the 4th largest Gross Domestic Product (GDP) of all 27 states in Brazil and
where Banrisul’s headquarters is located.
Banrisul group consists of Banco do Estado do Rio Grande do Sul S.A., Banrisul S.A.
Administradora de Consórcios, Banrisul S.A. Corretora de Valores Mobi liários e Câmbio,
Banrisul Armazéns Gerais S.A. and Banrisul Serviços Ltda.
90 FINANCIAL STATEMENTSSEPTEMBER 2010
Macro-economic Environment andCompetitive Market
National Economy
From January to September 2010, the economic scenario was characterized by the preservation
of the heterogenic recovery process of the global economy, where emerging countries,
especially China, presented vigorous growth, while developed economies like Europe, USA
and Japan showed weak performances. Government officials responded to this situation of
deteriorating expectations by withdrawing monetary and fiscal stimulus to emerging countries,
and by further injections of liquidity and quantitative easing in the developed economies.
During that period, having presented moments of euphoria operating under strong assets
appreciation and drop in global risk aversion in the first quarter, and great strain from the
European fiscal crisis and the consequent fear of another recessive environment in the second
quarter, financial markets have taken a more cautious approach, on the outlook of a slower,
uneven global economic recovery in the coming years.
On its turn, Brazil has been presenting a vigorous, robust cycle of economic growth, with
domestic demand as the main growth vector, underpinned by low unemployment rates and
the payroll and credit market expansion. The exchange rate not only reflected the worth of
Brazi l’s economy, but also the effects of the US dollar global devaluation and the higher real
domestic interest rate in comparison to other economies. These factors led the exchange
rate to increase in 2.87%, from R$1.74/USD1.00 by the end of 2009 to R$1.69/USD1.00 at the
end of September 2010.
However, as occurred elsewhere in the world throughout the year, the growth rate settled
down and the levels of use of installed capacity and industrial production decompressed,
indicative of a potential pace closer to the projected. Indeed, general price levels have also
suffered some gradual decompression over the months, returning to more comfortable levels,
driving inflation expectations to closer to the inflation target. Accordingly, the IPCA inflation
in the first nine months of 2010 reached 3.60%, largely on account of prices behavior in the
first half of 2010. Moreover, the cooling of administered prices and services prices ultimately
improved the dynamics of inflation, the latter being less dynamic.
Identifying the reduction of real interest rate to neutral levels and the increasing effects of
the monetary policy, the Central Bank of Brazil estimated that the inflationary scenario, would
gradually return to the targeted path after the risks presented at the beginning of the year,
part from the reversal of a substantial portion of measures introduced during the financial
crisis, part from the perception of a slower global recovery process. Therefore, a cycle of
hikes in the Selic Rate, mostly concentrated in the second quarter of 2010, was observed: it
went from 8.75% pa to 10.75%, pa, a total adjustment of 200 basis points, steady since
September’s meeting.
91
Regional Economy
The State of Rio Grande do Sul is located in
the southernmost part of Brazil. With an
area of 281.7 thousand square kilometers,
it represents 3.32% of the Brazilian territory,
and is home to a population of 10,582,887
inhabitants, equivalent to 6% of the total
population of the country.
The first three quarters of 2010 have been
determined by the consolidation of the
recovery of economic activity, supported
mainly by the dynamism of the industry
sector Despite a brief accommodation
period due to the withdrawal of tax
incentives, the industry returned to an
upward recovery trajectory toward pre-
financial crisis levels, pace of activity which
is accompanied by all the variables included
on the Industrial Performance Index (IDI-RS) released by the Federation of Industries of Rio
Grande do Sul – FIERGS. With emphasis on sales, industry purchases and employment, the
IDI-RS grew 10.1% from January to August this year. It should be further mentioned that the
level of use of installed capacity in the industry segment remains at a consistent trend, reaching
84.7%, yet still below pre-crisis peak of 88.3%.
On the other hand, Rio Grande do Sul’s exports grew only 4.4% year-to-date, with a significant
drop in profitability as a result of the appreciation of the Brazilian Real and of still depressed
international prices. Imports have maintained strong growth, high of 46.7% in the nine months
of 2010, stimulated by the growth of employment and income levels in a context of booming
domestic economic activity. In this scenario, it is important to note that price indexes behaved
well in the first nine months of this year, ending September and 9M10 with increases of 0.19%
and 3.21% in the year, respectively, based on the Extended National Consumer Price Index –
IPCA, calculated for the metropolitan region of Porto Alegre.
Banking Industry and Competitive Environment
Over the nine months of 2010, despite the slower pace of global economic activity and high
volatility in international financial markets, the Brazilian economy continues to maintain
strong growth rates, supported by buoyant domestic demand, the favorable labor market
and credit expansion.
The expansion of credit supply occurs in an environment of reduced interest rates, less
delinquency and stretching terms, though access to the capital market has become an
important source of fundraising for the leverage of companies. The Credit/GDP ratio reached
46.7% in September 2010 and the balance of credit granted by the national financial system
grew 19.6% over the last twelve months.
92 FINANCIAL STATEMENTSSEPTEMBER 2010
Brazil Rio Grande do Sul Sep/10¹ Jun/10² Jun/10¹ Mar/10²
Demand Deposits 1.4643% 1.4756% 20.3190% 21.0328%
Saving Deposits 1.7484% 1.7660% 20.6787% 20.6081%
Time Deposits 1.6304% 1.5872% 29.5735% 27.5558%
Credit Operations 1.0073% 1.0100% 18.0972% 17.9710%
Number of Branches 2.2408% 2.2088% 25.6113% 25.2218%
¹ Last information disclosed
² Last available information
Table 01 Competitive Environment
Among the events that influenced the dynamics of the banking sector over the first nine
months of 2010, there is the change made in reserve requirements. The Central Bank of Brazil
has reversed the flexibility adopted in the last quarter of 2008, rising the enforceability of
reserve requirements on time deposits from 13.5% to 15.0% through Circular no. 3485 and no.
3486, of February 24, 2010 The additional reserve requirements on time and demand deposits,
set at 4.0% and 5.0% since December 2008, respectively, also changed, rising to 8.0% on both
items.
From the standpoint of corporate governance, financial institutions remain focused in
implementing financial statements reporting procedures in accordance with the guidelines
issued by the International Accounting Standards Board (IASB), as provided by the Central
Bank of Brazil Circular Letter No. 3447 of May 12, 2010.
Likewise, CVM Instruction 480, of December 07, 2009, required all publicly held companies to
compile a comprehensive array of information to be delivery at the end of June, by means of
the Reference Form, a requirement that greatly increased the quality of periodic data provided
to the market by issuers of equity and capital market financial instruments, increasing the
responsibility of the Administration.
Reduction in spreads in the financial industry is expected for the last quarter of 2010, from
the stabilization of default rates and a more competitive credit environment among banks.
The signs of credit expansion remain, either through increased demand of credit for
consumption or from greater needs of working capital and long-term funds on account of the
economic revival.
Banrisul held in June 2010 the 11th position among mid-sized banks and large national financial
system in total assets, 11th in equity, 8 th e in total deposits and 7th in number of branches,
according to rankings released by the Central Bank Brazil, BNDES apart, having gained national
market share in time deposits. In the State of Rio Grande do Sul, Banrisul increased market
share in time deposits as well, moving from 27.55% in March 2010 to 29.57% in June 2010, last
available regional information. In the same period, market share in credit also improved,
increasing 0.13 pp.
93
Economic and Financial Indicators
Table 2 Economic and Financial Indicators
( 1 ) Including Personnel Expenses, Other Administrative Expenses and Other Operating Expenses( 2 ) Interest on own capital and dividends paid and/or distributed (before income tax witholding at source),( 3 ) Including interbank investments and excluding matched transactions.( 4 ) Net income / average total assets.( 5 ) Net income / aver age shareholders’ equity.( 6 ) Efficiency Ratio - 12-month accumulation.
Personnel expenses + other administrative expenses/Net financial margin + revenue from services rendered + (other operating income - other operating expenses)( 7 ) Fixed assets/ shareholders’ equity.( 8 ) Default > 60 days / total loans( 9 ) Allowance for loan losses / default > 60 dias
Main Income Statement Accounts - R$ Million 9M10 9M09 3Q10 2Q10 1Q10 4Q09 3Q09 3Q10/ 9M10/
2Q10 9M09
Net Financial Margin 2,128.0 1,873.7 769.7 710.9 647.3 668.7 628.1 8.3% 13.6%
Allowance for Loan Losses Expenses (391.7) (325.9) (111.2) (127.1) (153.5) (96.7) (65.8) -12.5% 20.2%
Gross Profit from Financial Operations 1,736.2 1,547.8 658.5 583.9 493.8 572.0 562.3 12.8% 12.2%
Financial Income 3,531.4 3,185.9 1,298.2 1,165.4 1,067.8 1,076.7 1,045.5 11.4% 10.8%
Financial Expenses 1,795.2 1,638.1 639.7 581.5 574.0 504.7 483.2 10.0% 9.6%
Income from Services Rendered 468.2 427.2 160.9 157.4 149.9 152.1 144.6 2.2% 9.6%
Administrative and Other Operational Expenses (¹) 1,395.8 1,375.7 478.7 457.2 460.0 431.8 462.1 4.7% 1.5%
Other Operation Income 127.8 88.7 39.0 43.1 45.7 55.0 29.1 -9.5% 44.1%
Income from Operations 786.0 552.7 327.0 277.5 181.6 300.6 229.2 17.8% 42.2%
Net Income 511.4 356.8 206.4 183.1 121.9 184.3 146.0 12.7% 43.3%
Used/Distributed Results - R$ Million 9M10 9M09 3Q10 2Q10 1Q10 4Q09 3Q09 3Q10/ 9M10/
2Q10 9M09
Interest on Own Capital - Dividends (²) 172.8 141.8 51.6 71.0 50.2 73.7 46.6 -27.4% 21.9%
Main Balance Sheet Accounts - R$ Million 9M10 9M09 Sep10 Jun10 Mar10 Dec09 Sep09 3Q10 9M10/
2Q10 9M09
Total Assets 32,339.3 28,573.2 32,339.3 31,098.8 29,864.6 29,084.1 28,573.2 4.0% 13.2%
Securities (³) 10,014.1 10,683.3 10,014.1 10,150.4 9,949.1 10,758.6 10,683.3 -1.3% -6.3%
Total Lending 16,237.1 12,528.5 16,237.1 15,442.0 14,765.7 13,414.2 12,528.5 5.1% 29.6%
Allowance for Loan Losses (1,122.7) (1,039.3) (1,122.7) (1,117.5) (1,082.3) (1,016.8) (1,039.3) 0.5% 8.0%
Past Due Loans > 60 days 487.9 478.7 487.9 493.6 512.7 453.1 478.7 -1.1% 1.9%
Funding and Assets under Management 24,095.2 20,855.8 24,095.2 23,163.7 22,368.7 21,902.4 20,855.8 4.0% 15.5%
Shareholders’ Equity 3,746.4 3,299.8 3,746.4 3,590.1 3,480.0 3,408.5 3,299.8 4.4% 13.5%
Reference Equity 3,608.2 3,240.8 3,608.2 3,455.9 3,422.9 3,349.4 3,240.8 4.4% 11.3%
Average Shareholders’ Equity 3,577.4 3,189.5 3,668.2 3,535.1 3,444.2 3,354.1 3,249.0 3.8% 12.2%
Average Total Assets 30,711.7 26,889.3 31,719.1 30,481.7 29,474.4 28,828.7 28,158.3 4.1% 14.2%
Financial Inde x (%) per Year 9M10 9M09 3Q10 2Q10 1Q10 4Q09 3Q09
Return on Total Asse ts 2.1% 1.7% 2.6% 2.4% 1.6% 2.6% 2.1%
Return on Shareholders’ Equity 18.6% 14.7% 23.9% 22.0% 14.8% 23.4% 18.9%
ROAA (p.a.) ( 4) 2.2% 1.8% 2.6% 2.4% 1.7% 2.6% 2.1%
ROAE (p.a.) (5) 19.5% 15.2% 24.5% 22.4% 14.9% 23.9% 19.2%
Efficiency Ratio (6) 48.5% 53.5% 48.5% 50.5% 52.2% 52.0% 53.5%
Basel Ratio 15.4% 18.0% 15.4% 15.7% 16.5% 17.5% 18.0%
Fixed Assets Ratio (7) 4.6% 4.7% 4.6% 4.8% 5.1% 5.0% 4.7%
Default Rate (8) 3.0% 3.8% 3.0% 3.2% 3.5% 3.4% 3.8%
Cover Rate (9) 230.1% 217.1% 230.1% 226.4% 211.1% 224.4% 217.1%
Economic Indicators 9M10 9M09 3Q10 2Q10 1Q10 4Q09 3Q09
Effective Selic Rate (accrued) 7.03% 7.68% 2.62% 2.23% 2.03% 2.10% 2.19%
Foreign Exchange Rate (R$/USD – end of period) 1.69 1.78 1.69 1.80 1.78 1.74 1.78
Foreign Exchange (%) -2.70% -23.92% -5.96% 1.15% 2.29% -2.08% -8.89%
IGP-M (General Market Price Index) 7.90% -1.60% 2.09% 2.84% 2.77% -0.11% -0.37%
IPCA (Extended National Consumer Price Index) 3.60% 3.21% 0.50% 1.00% 2.06% 1.06% 0.63%
94 FINANCIAL STATEMENTSSEPTEMBER 2010
Assets and Earnings Structure
Financial Performance
April, 2010 marked a management reshuffle, when Mateus Bandeira took office as Banrisul’s
Chief Executive Officer replacing Fernando Guerreiro de Lemos. His management plans have
included the improvement of efficiency levels and business expansion, especially among the
Companies segment. The performance of 3Q10 already reflects the objectives defined as
priorities by the new CEO.
Last September, the Bank was surprised with investigations conducted by representatives of
the Prosecutor’s Office about alleged irregularities involving an employee working at
Banrisul’s Marketing Unity specifically related to activities involving marketing events and.
However, the fact helped implement a major overhaul of the internal control mechanisms,
which included the creation of Marketing Committee, revision of contracts and payment
schedule and changes in management tools, through the setting up of metrics to evaluate the
effectiveness of expenses.
Banrisul held in the nine months of 2010 a consistent growth of its asset base and ended the
period with favorable profitability and solvency indicators, with most of them above the
market guidance disclosed in 1H10. Credit growth was the dominant strategy, helped by the
revival of economic activity. The institution has diversified funding sources that ensure the
financial capacity to leverage credit growth, has low exposure to risk in treasury operations,
demonstrates adequate levels of default and cost of funding, besides management
mechanisms that support the implementation of its business strategy and mitigate market
and operating risks.
Banrisul’s liquidity is favored by its market fundraising features, from an extensive branch
network, especially in Rio Grande do Sul, in other cities in southern Brazil and in other states
of the federation. Deposits are the main source of funding. Moreover, the cash and cash
equivalents are invested in federal bonds indexed to the Selic Rate, Treasury bills or in matched
transactions, always backed by federal securities, without any foreign exchange exposure,
swaps or derivatives operations.
The policy of attracting small and medium depositors and savers, rather than institutional
investors, ensures the reduction of financial costs and the diversification of the sources of
funding, strategy suited to the needs of funding for new loans. Total deposits represented
62.8% of the third parties liabilities at the end of September 2010.
Responsible for 50.2% of total assets, the credit portfolio is too composed of non-concentrated
operations, mainly granted to individuals and small businesses. Payroll loans to individuals
and working capital to companies absorbed 32.9% and 23.2%, respectively, of total credit at
the end of September 2010.
Nonperforming loans over 60 days reduced to 3.0% of total loans in September 2010, from
3.8% in September 2009, 3.4% in December 2009, and 3.2% in June 2010. Total provisions
remain at a level sufficient to cover loans in arrears. The effective management of credit risk
exposure allows the continued, expedite and safe expansion of the loan portfolio on account
of efficient instruments used to measure each client’s risks. The Bank’s risk assessment
structure is based on the principle of collegiate technical decision, where limits for credit
95
granting are deliberated according to the existing decision levels for at branches, set in regards
to their internal classification, and at the Head Offices’ managing boards and it ’s the Credit
and Risk Committees. The structured allows to improve credit based on technically predefined
limits and determines the desirable exposure that the institution is willing to operate with
each individual and corporate client. The improvement of the credit portfolio has been based
on the continuous, increasing use of statistical methodologies for customers’ risk assessment
of, where parameterized credit policies and business rules are combined with the optimized
controls on customers’ information via branch evaluation.
Banrisul has conditions to support the growth of its transactions, capacity demonstrated by
the 15.4% Capital Adequacy Ratio, in September 2010. Administrative cost indicators, given
by the administrative costs-total assets ratio and the cost-income ratio, remains at descending
levels, having reached 5.2% and 48.5% in September 2010, respectively.
Accumulated results until September 2010 were not affected by non-recurring events.
Banrisul’s net income reached R$511.4 million at the end of 9M10, 43.3% or R$154.6 million
above 9M09. The performance is positively affected by the increase of credit revenues and
the reduction of other operating expenses, and negatively by lower treasury revenues, as
consequence of smaller balance of securities, fall in the Selic Rate, higher onlending expenses
and provisions for loan losses.
In 3Q10, net income of R$206.4 million is 41.3% or R$60.3 million above 3Q09 and 12.7% or
R$23.3 million over 2Q10. The performance of the 3Q10 compared to that registered in 2Q10
reflects the increase in credit and securities revenues and lower provisions costs.
The results obtained from January to September 2010 represent an annualized return on
average equity of 19.5%. In September 2010, shareholders’ equity reached R$3,746.4 million,
an increase of 13.5% over September 2009, of 9.9% over December 2009, and of 4.4% higher
than June 2010.
Gross profit from financial intermediation in 9M10 was R$1,736.2 million, 12.2% higher than
the same period last year. The performance in 2010 positively reflects the expansion of credit
revenues, while negatively affected by lower treasury revenues, higher onlending expenses
and provisions. In 3Q10, the gross margin totaled R$658.5 million, 17.1% higher than 3Q09 and
12.8% higher than 2Q10.
Consolidated total assets reached R$32,339.3 million in September 2010, an increase of 13.2%
over September 2009, 11.2% over December 2009 and 4.0% above June 2010. Year-on-year
and quarter-on-quarter asset growth was driven by the increase in credit operations, leveraged
mainly by the Individual segment.
Banrisul’s credit operations totaled R$16,237.1 million at the end of September 2010, a 29.6%
year-on-year increase, 21.0% year-to-date and 5.1% quarter-on-quarter. The commercial credit
(unmarked) portfolio totaled R$12,514.6 million, an increase of 34.1% in twelve months,
23.8% in the last nine months and 5.5% in the last quarter. Commercial credit to Individuals
totaled R$7,218.2 million at the end of September 2010, an increase of 40.5% over September
2009 and 4.7% over June 2010. Commercial credit to Companies totaled R$5,296.4 million in
September 2010, an increase of 26.2% compared with September last year and of 6.7%
compared to June 2010.
Funds raised and under management reached R$24,095.2 million in September 2010, growing
15.5% over September 2009, 10.0% over December 2009 and 4.0% from June 2010. Deposits
96 FINANCIAL STATEMENTSSEPTEMBER 2010
reached R$17,954.1 million in September 2010, growing 16.1% over September 2009, 9.7%
over December 2009 and 4.7% over June 2010. Assets under management reached
R$6,141.1 million, 13.9% above September 2009, 11.0% higher than December 2009 and
2.0% over June 2010.
From January to September 2010, Banrisul collected and provisioned R$380.8 million in taxes
and contributions, while taxes withheld and paid, which are levied directly on financial
intermediation and other payments, amounted to R$360.7 million.
Capital Expenditure Policy
Investments in infrastructure and in information technology are necessary to cope with the
purpose of offering customers state-of-art, most modern and secure financial services,
especially in electronic transactions. The capital expenditure policy unfolds on three pillars:
(i) technology expansion/modernization, (ii) service network renovation/expansion and (iii)
the expansion of distribution network. From January to September, 2010, hardware
investments, software and maintenance of goods totaled R$143.5 million.
Technology Expansion/Modernization
Investments in information technology amounted to R$120.3 million From January to
September, 2010,. The bank’s main priorities in this area are to strengthen the mechanisms
for security in banking transactions and increase the operational efficiency of its systems
infrastructure.
The IT infrastructure projects are aligned with Banrisul assumptions for simplification,
environmental management, business continuity and costs streamlining. Among the projects
implemented from January to September 2010, it is included: contingency and virtualization
of servers, a project that combines features of replication and continuity; reduced energy
costs, heat dissipation and physical space in data centers; the continuity of the automation of
the use of the OPEN SRM Site Recovery Manager; implementation of new storage environment
for Windows, Unix and Linux, with synchronous replication between the sites of the Bank,
consolidating corporate storage technologies on these platforms; and also the acquisition of
Blade Servers to act as a processing base of virtual systems.
As for information security, encryption mechanisms have been defined to be used with the
new Electronic Permit automation system for State Court of Justice, as well as security
mechanisms to allow using Banrisul multiple card for transactions at Banco 24 Horas, besides
the inception of an environment to request, install and sign digital certificates.
The Bank pays particular attention to prevent and combat fraud at ATMs and Internet Banking,
and maintains strategic group for the implementation of actions to ensure the minimization
of losses in such channels.
The Bank is the only Latin American institution that participates in the Board of Advisors of
the PCI (Payment Card Industry), which deals with card payments safety, directly influencing
the definition of rules to be applied worldwide.
From the partnership between Banrisul and MasterCard, the goal is that Banricompras network
fully complies with international safety standards, particularly in transactions with card flags
other than Banricompras that are processed at outsourced companies hired on behalf of
Banrisul as credit and debit card acquirer.
97
The Bank participated in several events during the first nine months of 2010, among which
are: CardWare 2010 (Canada); IV Electronic Crimes Combat Operational Symposium (SP - Brazil);
Websense - Protection of Information in Secure Gateway (RS - Brazil); RSA Conference (USA)
Fraud Prevention in Checks Imaging Clearing Seminar; Banking Security Seminar; CIAB and
CNAB Febraban Meeting (SP - Brazil); PCI board meeting (UK), meeting of the Subcommittee
on Digital Certificate in conjunction with GT (SP - Brazil) ; Pre-2010 CIAB Pre-2010 meeting (SP
- Brazil); CARDS 2010 Security Forum (SP - Brazil) and Forum CIAB 2010.
Banrisul coordinated, yet, the actions for the realization of the 3rd IT International Forum,
which brought together national and international experts, when several presentations
focused on the current and prospects situation in the payment means security were held.
Service Network Renovation/Expansion
At the end of 9M10, Banrisul had invested R$23.2
million to update and conserve its physical
infrastructure, in order to maintain good working
conditions from renovations and expansions in real
estate, CCTV’s (closed circuit television), metal
detector gates, alarm, thermal conditioning, electric
automation infrastructure, furniture, changes in
layout and design modernization.
Expansion of Distribution Network
By September 2010, continuing the project to expand the service network, four new branches,
six service station and 55 electronic service points were opened. It represents 62 new service
channels over December 2009, a strategy that contributes to strengthening the institution of
the regional market, expanding the customer base and market share. For the coming months,
it is scheduled the opening of two new branches, two service stations and one remote location
service station in Rio Grande do Sul. The expansion project will be continued in Santa Catarina,
with estimated five more branches in that state.
Passo da Areia Branch - Bourbon Country - Porto Alegre
Gaspar Branch - SC Curitiba Branch - PR
98 FINANCIAL STATEMENTSSEPTEMBER 2010
Table 03 Margin AnalysisR$ Million
9M10 9M09 2009 2008Average Income Average Average Income Average Average Income Average Average Income AverageBalance Expense Rate Balance Expense Rate Balance Expense Rate Balance Expense Rate
Interest-Earning Assets 28,004.0 3,530.4 12.61% 25,135.2 3,185.6 12.67% 25,996.9 4,262.1 16.39% 21,635.9 3,866.6 17.87%
Loan Portfolio 14,207.9 2,598.4 18.29% 11,512.9 2,174.5 18.89% 11,954.9 2,948.1 24.66% 9,963.5 2,574.7 25.84%
Resales pending Settlement 4,323.5 290.9 6.73% 5,410.5 401.3 7.42% 5,582.3 517.1 9.26% 4,519.2 509.2 11.27%
Money Market Investments 1,931.7 131.3 6.80% 1,582.5 117.8 7.45% 1,761.2 166.4 9.45% 333.7 33.7 10.09%
Available-for-Sale Securities 1,282.5 87.2 6.80% 928.1 69.1 7.45% 966.4 91.3 9.45% 465.0 46.9 10.09%
Held-to-Maturity Securities 4,022.0 273.3 6.80% 3,710.0 276.3 7.45% 3,677.5 347.4 9.45% 3,387.8 364.9 10.77%
Interbank Deposits 132.4 8.0 6.02% 162.3 12.9 7.95% 155.2 15.4 9.91% 230.3 27.0 11.75%
Other Interest-Earning Assets 2,104.0 141.3 6.72% 1,828.9 133.7 7.31% 1,899.3 176.4 9.29% 2,736.3 310.1 11.33%
Compulsories 1,645.6 95.3 5.79% 1,421.4 89.2 6.28% 1,479.8 117.6 7.95% 2,376.9 253.3 10.66%
Other 458.4 46.0 10.04% 407.5 44.5 10.92% 419.5 58.8 14.01% 359.4 56.8 15.79%
Non Interest-Earning Assets 2,353.2 2,123.7 1,980.3 2,256.8
Total Assets 30,357.3 3,530.4 11.63% 27,258.9 3,185.6 11.69% 27,977.2 4,262.1 15.23% 23,892.7 3,866.6 16.18%
Interest - Bearing Liabilities 22,752.4 (1.402.4) 6.16% 20,466.4 (1.311.9) 6.41% 21,097.3(1.719.7) 8.15% 17,435.5 (1,887.6) 10.83%
Domestic Interbank Deposits 79.4 (3.6) 4.57% 47.2 (2.7) 5.76% 59.3 (4.2) 7.10% 5.6 (0.7) 12.13%
Domestic Saving Deposits 5,809.7 (257.5) 4.43% 4,928.5 (220.2) 4.47% 5,136.1 (292.9) 5.70% 4,559.6 (296.9) 6.51%
Domestic Time Deposits 8,838.1 (602.0) 6.81% 8,168.9 (599.1) 7.33% 8,334.7 (782.3) 9.39% 7,129.5 (772.5) 10.83%
Money Market Funding 2,031.9 (161.1) 7.93% 2,578.4 (206.5) 8.01% 2,485.5 (257.6) 10.36% 2,662.7 (331.0) 12.43%
Borrowings and Onlendings 1,620.1 (83.1) 5.13% 1,374.3 (42.1) 3.06% 1,407.9 (57.1) 4.05% 1,195.2 (289.9) 24.26%
Domestic 1,040.2 (51.0) 4.90% 858.9 (30.2) 3.51% 914.6 (42.0) 4.59% 689.6 (44.9) 6.52%
Foreing 579.9 (32.2) 5.55% 515.4 (11.9) 2.30% 493.4 (15.0) 3.05% 505.7 (245.0) 48.45%
Other 4,373.1 (295.1) 6.75% 3,369.0 (241.4) 7.16% 3,673.8 (325.6) 8.86% 1,882.9 (196.6) 10.44%
Non Interest - Bearing Liabilities 4,076.5 3,588.3 3,609.0 3,499.7
Shareholders’ Equity 3,528.3 3,204.2 3,270.8 2,957.4
Total Liabi lities 30,357.3 (1,402.4) 4.62% 27,258.9 (1,311.9) 4.81% 27,977.2 (1,719.7) 6.15% 23,892.7 (1,887.6) 7.90%
Spread 7.01% 6.87% 9.09% 8.28%
NIM (9M) 2,128.0 7.60% 1,873.7 7.45%
NIM (Yearly) 10.26% 10.06% 2,542.4 9.78% 1,978.9 9.15%
Margin Analysis
The Margin Analysis in the following chart was based on the average balances of assets and
liabilities, calculated as of the closing balances of the months in each period.
The chart shows the revenue-generating assets and interest-bearing liabilities, the
corresponding financial incomes on assets and financial expenses on liabilities, as well as the
effective average rates generated by the respective yields and interest paid in each period.
Credit operations include advances on foreign exchange contracts and leasing agreements,
which are shown at the current net value of the leasing agreements. Income from credit
operations overdue for more than 60 days, irrespective of their risk level, will only be booked
as revenues when they are received. Income from leasing operations is booked when each
installment becomes due. These criteria impact the average volume of income and the
effective rates in the periods being analyzed.
Average balances of interbank investments, funds invested or raised in the interbank market
correspond to the redemption amount deducted from the income or expenses corresponding
to future periods.
Average balances of deposits, open-market funding, loans and onlendings include the fees
payable till the date of closing of the financial statements, booked on a pro rata die basis. As
for expenses related to these items, fees relating to deposits include contributions to the
Credit Guarantee Fund (FGC).
99
Interest booked in the balance sheet includes nominal interest and a component of monetary
restatement. This monetary restatement may be related to an inflation index, changes in
exchange rates (usually U.S. dollar) or floating interest rates. The interest and monetary
restatement are applied at the end of each month on the balance of the principal of each
operation. The restated amount is the new basis for calculating interest and monetary
restatement of the next month, and so on, till final settlement.
The higher margin generated in the first nine months of 2010 compared to that recorded in
9M09 is a direct effect of the reduction of the Selic Rate on average rates received from
interest-earning assets and paid to interest-bearing assets.
However, despite the reduction in average rates, a natural backdrop of the fall of the Selic
Rate, spreads were slightly higher, from the average 6.87% in 9M09 to 7.01% in 9M10. And the
accumulated margin until September 2010 was 0.57 percentage points higher than the effective
Selic Rate in the same period, while in the same period in 2009, the registered margin was
0.23 pp lower than the Selic.
The Annual statements also report margin drop from the 12.54% in 2008 to the 9.93% in 2009,
in line with falling basic interest rate. In both years, the margin was lower relative to the Selic
Rate in the period.
Margin hikes above the Selic Rate, reference to financial transactions, derive from changes in
the structure of assets and liabilities of the Bank. Higher yield assets such as credit have
increased share as proportion to total intersect-earning assets, from 45.8% in 9M09 to 50.7%
in 9M10.
On the other hand, savings deposits - funding with lower cost - increased share from 24.1% in
9M09 to 25.5% in 9M10 in proportion to the total interest-bearing liabilities, while higher cost
funding like market funding and time deposits, reduced share.
The Bank had gains of scale from 9M09 to 9M10. Total assets increased by R$3.1 billion year-
on-year. The volume increase offset decline in rates, since it generated higher spreads in 12
months and above the Selic Rate year-to-date.
Variations in Interest Income and Expenses: Volumes and Rates
The following chart shows the variations in the interest incomes and expenses consolidated
among the variations in volume and interest rates (i) in the first nine months of 2010 compared
to 9M09, (ii) 2009 compared to 2008, and (iii) 2008 in relation to 2007.
The variations in the volume and interest rates were calculated based on the average balances
in the period and the variations in the nominal interest rates on interest-earning assets and
average of interest-bearing liabilities. Net variation was calculated based on the variations in
the volume and rates, and was allocated to the respective variation (volume and interest
rate) proportionally, considering the absolute amount attributable to the volume and interest
rates.
The assessment of changes in revenues and expenditures due to increases or decreases in
volumes and rates shows that, in absolute terms, the increase of revenue on interest-earning
assets is associated with increased volumes, which offset the reduction in revenue caused by
falling rates, especially provoked by credit revenues.
100 FINANCIAL STATEMENTSSEPTEMBER 2010
Table 04 Variations in Interest Income and Expenses: Volumes and RatesR$ Million
9M10 / 9M09 2009 / 2008 2008 / 2007Increase / Decrease Increase / Decrease Increase / Decrease According tochange in: According to change in: According to change in:
Volume Interest Net Volume Interest Net Volume Interest NetRate Change Rate Change Rate Change
Interest - Earning AssetsLending Operations, Leasing Operationsand Other Receivables 490.4 (66.5) 423.9 484.1 (110.7) 373.4 805.9 52.8 858.7
Resales pending Settlement (66.7) (43.6) (110.3) 32.4 (24.5) 7.9 157.6 10.0 167.6
Securities and Derivatives 61.4 (32.8) 28.6 202.5 (42.8) 159.7 (4.1) (55.2) (59.3)
Interbank Deposits (4.5) (0.4) (4.9) 96.3 (5.8) 90.5 18.7 6.4 25.1
Other 16.6 (9.0) 7.6 (273.9) 38.0 (235.9) 7.3 15.7 23.0
Total Interest-E arning Asset s 497.3 (152.4) 344.9 541.4 (145.8) 395.6 985.4 29.7 1,015.1
Interest -Bearing Liabilities
Interbank Deposits (1.6) 0.7 (0.9) (3.9) 0.4 (3.5) 6.8 (2.6) 4.2
Savings Deposits (39.1) 1.8 (37.3) 256.2 (252.1) 4.1 (30.3) (9.3) (39.6)
Time Deposits (47.2) 44.3 (2.9) (120.8) 110.9 (9.9) (154.2) (25.1) (179.3)
Money Market Funding 43.4 2.1 45.5 20.9 52.4 73.3 (93.3) 1.0 (92.3)
Onlendings (5.7) (35.3) (41.0) (63.3) 296.2 232.9 (11.0) (224.9) (235.9)
Other Interest-Earning Assets (68.4) 14.7 (53.7) (162.6) 33.6 (129.0) (136.0) (5.4) (141.4)
Total Interest -Bearing Liabilities (118.6) 28.3 (90.3) (73.4) 241.3 167.9 (418.0) (266.3) (684.3)
As to interest-bearing liabilities, it is perceived that higher expenses are associated more to
changes in volume than to reductions caused by rates fluctuations.
101
Operational Highlights
· Management change. April 2010 marked an important administrative event at Banrisul: the
replacement of Officers at Banrisul. Mateus Affonso Bandeira as the Company’s new Chief
Executive Officer, replacing Fernando Guerreiro de Lemos. Also the Chief Financial Officer
and Investor Relations Officer, the Credit Officer and the Administrative Officer have been
replaced. The Board of Executive Officers is now complete, with its newly sworn-in officers,
Bruno Fronza, Cesar Antônio Cechinato and Marinês Bilhar, and will follow the strategy
implemented in recent years, not only because much of the structural soundness of Banrisul’s
assets and liabilities may be credited to it, but also because of the trajectory of impressive
results recorded.
· Customer Service Network. Banrisul presented, at the end of September 2010, 1,229 banking
service points distributed among 398 agencies in the State of Rio Grande do Sul and 40 outside
the State, 279 service posts and 512 electronic sales points. Also until 9M10, in continuity to
the project to expand service network, three branches were opened in the state of Santa
Catarina, in the cities of Florianopolis, Brusque and Rio Negrinho, one branch in the city of
Cachoeirinha, in Rio Grande do Sul, six service post and 55 electronic sales points. Compared
to December 2009, there are 62 new channels of service. The strategy of service network
expansion contributes to strengthening the institution in the regional market and to expanding
customer base and market share.
· Interest on Equity and Dividends Distribution Policy. The Annual Shareholders Meeting held
in April maintained the 15% additional dividends policy, ensuring the shareholders the
payment of interest on capital and/or dividends corresponding to 40% of net income, set in
2009, was approved by. The payment of interest on capital is due quarterly, as decided by the
Board of Administration in a meeting held on May 06, 2008. Thus, on 3Q10, the quarterly
payment of interest on equity totaled R$152.7 million, with dividends totaling R$20.1 million.
· Rating. In June 2010, the risk-rating agency Austin Rating ratified Banrisul’s long-term risk
rating “A+” and short-term risk rating “A-2.” The rating was maintained based on the Bank’s
excellent capitalization, dispersal of assets and liabilities, diverse funding sources, quality of
loans, adequate liquidity levels, profitability and expansion of its area of operations through
the inauguration of branches strategically outside the state. The “A+” rating signifies that the
Bank has solid intrinsic fundamentals, operates within safety limits and has a healthy financial
track record. The business environment may change without affecting the Bank’s operations.
The “A-2” rating is given to institutions that have good capacity to pay short-term debts and
low credit risk.
102 FINANCIAL STATEMENTSSEPTEMBER 2010
Table 05 Communication and Relationship Efforts
3Q10 2Q10 1Q10 4Q09 3Q09
Meetings 39 3 11 18 4
Conference Calls 28 28 17 12 18
Events Abroad * 0 2 0 22 28
Expo Money 0 0 0 1 0
APIMEC Meetings 0 0 0 2 0
TOTAL 67 33 28 55 50
*2009: Amster dam, Boston, Dublin, Frankfurt, Geneva, Lausanne, Lisbon, London, Los Angeles, Madrid, New York, Paris, Rotter dam, SanFrancisco and Washington.
* 2010: New York.
Banrisul’s StockMarket Performance
The graph below shows the performance of Banrisul PNB Shares (BRSR¨) vis-à-vis stock market
indexes.
Graph 01: Banrisul PNB stock’s performance vs. Brazilian Stock Market Indexes
Since September 2010, Banrisul’s shares have now been listed in Bovespa’s Mid-Large Cap
index, automatically delisted from the Small Cap group.
In the third quarter of 2010, Banrisul held 39 meetings and 28 conference calls totaling 67
opportunities for approaching market analysts, investors, as well as individual and corporate
shareholders in Brazil and abroad.
103
Banrisul’s share also performed positively in the stock market At the end of September 2010,
the PNB share (BRSR6) was ranked 69th among the 100 most traded shares in Bovespa (and 80th
in twelve months). In 3Q10, average daily financial trade was circa 80% higher than in 3Q09,
while average daily trade increase by 49% in the same period.
Graph 02: Financial Volume, Number of Trades and Number of Shares
The following chart gives the geographic distribution and the number of shares held by each
shareholder.
Graph 03: Banrisul´s Stock - Geographic Distribution
At the end of 3Q10, eight sell side financial institutions covered Banrisul.
104 FINANCIAL STATEMENTSSEPTEMBER 2010
Evolution of Balance Sheet Accounts
Total Assets
At the end of September 2010, total assets presented a balance of R$32,339.3 million, 13.2%
or R$3,766.1 million higher than in September 2009. In comparison with December 2009, total
assets increased 11.2% or R$3,255.2 million. In the last quarter, the assets increased 4.0% or
R$1,240.6 million.
The growth of assets, in twelve months, came from the expansion of deposits and the increase
in the Reserve Fund for Judicial Deposits, which totaled R$2,992.2 million. Credit Portfolio
growth was an important year-on-year driver for assets composition, increasing R$3,708.5
million in twelve months and R$795.1 million in the last quarter.
Graph 04: Total Assets - R$ Million
Total assets in September 2010 were represented by 50.2% of credit operations, 38.0% of
interbank investments and securities, 8.2% of interbank and interbranch accounts and 3.6%
of other assets.
Graph 05: Composition of Assets - R$ Million
105
Securities
Investments in securities totaled R$10,014.1 million at the end of September 2010, volume
6.3% below September, 2009, 6.9% below the balance of December 2009 and 1.3% below
June 2010. This amount includes liquid interbank transactions but excludes total liabilities
from matched transactions.
The Bank has prioritized asset allocation into higher yield portfolios such as credit, given
their higher profitability when compared to treasury operations, as well as due to its
comfortable liquidity.
Graph 06: Securities and Liquid Interbank Transaction* - R$ Million
* Excluding Matched Transactions
Interbank and Interbranch Transactions
The balance of interbank and interbranch transactions was R$2,650.5 million at the end of
September 2010, which is 38.3% (R$734.7 million) more than in September 2009 and 12.6%
(R$297.1 million) over than in June 2010. The 12-month variation refers to increase on reserve
requirements on account of higher balances of demand and savings deposits. Last quarter’s
variations also reflect the increase on reserve requirements, especially from the increase in
savings deposits.
Graph 07: Interbank and Interbranch Transactions - R$ Million
106 FINANCIAL STATEMENTSSEPTEMBER 2010
Sep10 Jun10 Sep09 % % Size Balance % Co. % Total Balance % Co. % Total Balance % Co. % Total Sep10/ Sep10/
Portfolio Portfolio Portfolio Jun10 Sep09
Large Companies 2,494.7 34.4% 15.4% 2,307.6 33.7% 14.9% 1,546.3 26.4% 12.3% 8.1% 61.3%
Total Middle/Small/Micr o 4,767.0 65.6% 29.4% 4,534.1 66.3% 29.4% 4,301.9 73.6% 34.3% 5.1% 10.8%
Middle Companies 3,346.9 46.1% 20.6% 3,190.7 46.6% 20.7% 3,268.6 55.9% 26.1% 4.9% 2.4%
Small Companies 1,152.7 15.9% 7.1% 1,077.3 15.7% 7.0% 794.8 13.6% 6.3% 7.0% 45.0%
Micro-companies 267.3 3.7% 1.6% 266.1 3.9% 1.7% 238.4 4.1% 1.9% 0.4% 12.1%
Total Companies 7,261.6 100.0% 44.7% 6,841.6 100.0% 44.3% 5,848.3 100.0% 46.7% 6.1% 24.2%
Table 6 Breakdown of Credit to Companies by Company Size R$ Million
Credit Operations
Banrisul‘s credit portfolio totaled R$16,237.1 million in September 2010, exceeding by 29.6%
the balance in September 2009, by 21.0% the amount of December 2009 and by 5.1% the
amount recorded in June 2010.
The growth in credit is basically due to the expansion in the portfolio of commercial credit to
individuals. Of the year-on-year R$3,708.5 million increase of in the credit portfolio, R$2,081.6
million came from the Individuals segment, which increased by 40.5% compared to September
2009. In the last quarter, the 5.5% or R$653.5 million increase observed in the commercial
credit was leveraged both by the individual segment, which added R$323.0 million to the
portfolio, mainly throughout payroll loans, and by the segment of companies, which
contributed with R$330.5 million to the unmarked portolio.
Graph 08: Credit Operations - R$ Million
Breakdown of Credit by Company Size
At the end of September 2010, credit to companies represented 44.7% of total credit portfolio.
Credit to individuals accounted for 55.3%, surpassing the companies’ share. The breakdown
of credit operations to companies by company size is provided in the following table.
The criterion used for de termining the company’s size is the average monthly revenue: Micro – up to R$20,000; Small – upto R$200,000; Mid-sized – up to R$10 million; and Large – above R$10 million.
107
Table 7 Breakdown of Credit by SectorR$ Million
Sep10 Jun10 Mar10 Dec09 Sep09 Sep10/ Sep10/Jun10 Sep09
Private Sector 16,107.3 15,307.0 14,634.6 13,292.7 12,415.8 5.2% 29.7%
Rural 1,181.1 1,139.9 1,047.4 1,020.9 937.3 3.6% 26.0%
Industrial 3,376.9 3,093.7 3,163.9 2,963.0 2,740.4 9.2% 23.2%
Commercial 1,899.2 1,816.9 1,689.8 1,615.2 1,471.5 4.5% 29.1%
Other Services 1,312.2 1,280.6 1,255.2 1,255.9 1,133.8 2.5% 15.7%
Individuals 7,120.3 6,815.8 6,356.5 5,352.4 5,076.9 4.5% 40.3%
Housing 1,217.6 1,160.0 1,121.8 1,085.3 1,055.9 5.0% 15.3%
Public Sector 129.8 135.0 131.1 121.5 112.8 -3.9% 15.1%
Government - Direct and Indirect Management 110.9 113.0 110.0 99.9 112.8 -1.9% -1.7%
Corporate - Other Services 18.9 22.1 21.1 21.6 0.0 -14.3% 0.0%
Total 16,237.1 15,442.0 14,765.7 13,414.2 12,528.5 5.1% 29.6%
The amount of credit to companies grew by 24.2% in the past twelve months and by 6.1% in
the last quarter. The 61.3% increase in twelve months in the balance of credit operations to
mid-sized, small and micro companies, expanded this segment’s share of total credit to
companies from 26.4% in September 2009 to 34.4% at the end of September 2010. Credit to
Companies, however, is mainly represented by operations with micro, small and medium
enterprises, whose balance increased by 10.8% in twelve months and 5.1% last quarter.
Breakdown of Credit by Sector
The following table provides the breakdown of the credit portfolio by sector. Of the total
loans disbursed at the end of September 2010, 99.2% were allocated to the private sector,
representing 29.7% growth in the past twelve months. Leading sectors to the year-on-year
growth were: individuals, with R$2,043.4 million growth; industry, which grew R$636.5 million;
commerce, with R$427.7 million increase; and rural, with a growth of R$243.8 million.
Breakdown of Credit by Portfolio
The portfolio breakdown shows unmarked and directed resources invested in loan assets.
Allocations in the commercial (unmarked) portfolio, leasing and public sector, which account
for 78.4% of the total portfolio, are funded from deposits and the Bank’s equity. Development
(long-term finance), rural, real estate and foreign exchange portfolios, which represent 21.6%
of the portfolio, are mostly from specific funding sources and are used for directed credit.
The commercial portfolio, consisting of revolving credit and installment loans for individuals
and companies, totaled R$12,514.6 million at the end of September 2010, representing 77.0%
of total credit volume. The breakdown of the commercial portfolio, given its importance, is
discussed in a specific item.
Real estate credit totaled R$1,217.6 million at the end of September 2010, up 15.3% (R$161.7
million) in twelve months and 5.0% (R$57.7 million) in the last three months, appearing shortly
after the commercial portfolio as the second best performance for the quarter. This product
was included in the commercial goals in the last quarter, given its relevance for the Bank and
the economic features which greatly promote the real estate market.
Rural credit totaled R$1,180.5 million in September 2010, up 26.1% (R$244.3 million) year-on-
year and 3.6% (R$41.2 million) over June 2010.
108 FINANCIAL STATEMENTSSEPTEMBER 2010
Table 8 Breakdown of Credit by PorfolioR$ Million
Sep10 Jun10 Mar10 Dec09 Sep09 Sep10/ Sep10/Jun10 Sep09
Private Sector 16,107.3 15,307.0 14,634.6 13,292.7 12,415.8 5.2% 29.7%
Foreign Exchange 470.0 443.9 426.5 482.9 514.6 5.9% -8.7%
Commercial Credit 12,514.6 11,861.1 11,370.6 10,108.6 9,331.9 5.5% 34.1%
Individuals 7,218.2 6,895.3 6,468.5 5,421.6 5,136.6 4.7% 40.5%
Credit Card 75.2 74.9 77.3 74.0 75.1 0.3% 0.1%
Loan and Discounted Receivables - Individuals 6,912.6 6,656.1 6,239.4 5,205.0 4,932.9 3.9% 40.1%
Customer Financing - Individuals 230.4 164.3 151.8 142.6 128.7 40.3% 79.1%
Companies 5,296.4 4,965.8 4,902.2 4,687.0 4,195.3 6.7% 26.2%
Foreign Credit 62.8 69.6 56.7 62.2 68.1 -9.7% -7.8%
Loan and Discounted Receivables - Companies 5,053.2 4,818.5 4,771.0 4,543.1 4,044.1 4.9% 25.0%
Customer Financing - Companies 180.4 77.8 74.5 81.7 83.1 131.8% 117.1%
Long-term Financing 644.3 617.4 579.7 501.3 478.9 4.4% 34.5%
Real Estate Financing 1,217.6 1,160.0 1,121.8 1,085.3 1,055.9 5.0% 15.3%
Leasing 80.2 85.3 89.6 94.6 98.2 -6.0% -18.3%
Rural 1,180.5 1,139.3 1,046.5 1,020.1 936.2 3.6% 26.1%
Agricultural Financing 129.8 135.0 131.1 121.5 112.8 -3.9% 15.1%
Public Sector 16,237.1 15,442.0 14,765.7 13,414.2 12,528.5 5.1% 29.6%
The long term credit portfolio at the end of September 2010 totaled R$644.3 million, up 34.5%
(R$165.4 million) in twelve months and 4.4% (R$27.0 million) over June 2010.
In commercial (unmarked) credit, the individuals segment totaled R$7,218.2 million at the
end of September 2010, representing 57.7% of the commercial portfolio balance and 44.4% of
the balance of total credit. The companies segment, which totaled R$5,296.4 million in
September 2010, absorbed 42.3% of commercial credit and 32.6% of total credit.
Graph 09: Commercial Credit Portfolio - Individualsand Companies - R$ Million
109
Commercial Credit
Commercial Credit (unmarked) to individuals totaled R$7,218.2 million in September 2010,
up 40.5% (R$2,081.6 million) from September 2009 and 4.7% (R$323.0 million) from June 2010.
The acquisition of payroll loans with co-obligation from vendor constituted an important
mechanism for leveraging these operations, accounting for large portion of the variation of
the credit portfolio in twelve months. In the last quarter, payroll loans of own origination
responded for much of the increased in credit registered.
At the end of September 2010, payroll loans, which accounted for 74.1% of commercial credit
to individuals, totaled R$5,347.4 million, up 43.9% (R$1,631.3 million) in the last twelve months
and 4.2% (R$214.0 million) in the last three months.
Among the payroll loans, credit of own generation came to R$3,311.1 million at the end of
September 2010, representing 61.9% of the payroll loan portfolio and 45.9% of the credit to
individuals, increasing 28.8% or R$740.2 million in twelve months and 7.3% or R$225.6 million
in three months. Acquired Payroll loans totaled R$2,036.3 million at the end of September
2010, an increase of 77.8% or R$891.1 million compared to September 2009 and a small decrease
compared to June 2010.
Credit to companies totaled R$5,296.4 million at the end of September 2010, up 26.2%
(R$1,101.1million) in twelve months and an increase of 6.7% (R$330.5 million) in the last
quarter.
In twelve months, working capital loans registered the best performance, growing 39.3%
(R$1,064.3 million), followed by receivables discounted portfolio, which increased 28.7% or
R$76.5 million, and by guarantee account, which grew 15.1% or R$61.7 million.
In 3Q10, working capital loans grew 8.0% (R$279.5 million), being responsible by 84.6% of the
increased in unmarked credit to companies. Working capital loans account for the biggest
share of credit to the companies segment, representing 71.2% of total commercial credit to
companies and 30.1% of total commercial credit.
110 FINANCIAL STATEMENTSSEPTEMBER 2010
R$ Million
Table 9 Composition of Unmarked Credit - Individuals and Companies
Sep10 Jun10 Mar10 Dec09 Sep09 Sep10/ Sep10/Jun10 Sep09
Individuals 7,218.2 6,895.3 6,468.5 5,421.6 5,136.6 4.7% 40.5%
Payroll-deductible Loan 5,158.0 5,003.5 4,751.8 3,957.9 3,612.1 3.1% 42.8%
Payroll-deductible Purchase of Consumer Goods 189.4 129.9 122.1 115.1 104.0 45.8% 82.1%
Purchase Goods - other 5.2 5.8 6.3 6.5 6.6 -9.4% -20.0%
Vehicle Loan - Individuals 36.4 29.8 24.9 22.3 19.3 22.2% 88.1%
Overdraft 610.4 588.2 540.9 446.4 469.9 3.8% 29.9%
One Minute Loan 259.2 241.0 212.8 190.4 184.0 7.6% 40.9%
Automatic Individual Loan 254.8 237.6 209.8 179.2 157.4 7.2% 61.9%
Non Payroll-deductible Loan 378.1 349.8 316.1 245.1 340.3 8.1% 11.1%
Credit Card 75.2 74.9 77.3 74.0 75.1 0.3% 0.1%
Other - Individuals 251.4 234.8 206.4 184.9 167.8 7.1% 49.8%
Companies 5,296.4 4,965.8 4,902.2 4,687.0 4,195.3 6.7% 26.2%
Purchase Goods - other 30.5 29.1 28.0 27.8 28.1 4.7% 8.6%
Vehicle Loan - Companies 22.4 20.1 18.7 18.6 18.1 11.7% 23.8%
Working Capital - Guarantee 2,780.4 2,671.5 2,662.8 2,514.6 2,124.0 4.1% 30.9%
Working Capital - Receivable 990.4 819.9 769.9 773.7 582.4 20.8% 70.0%
Financing to Customers - Companies 25.7 29.1 28.9 35.9 38.3 -11.7% -32.9%
Compror 102.1 104.4 181.0 236.7 243.2 -2.2% -58.0%
Indebted Security Account 171.7 165.1 166.3 169.8 172.4 4.0% -0.4%
Guaranted Account 470.5 458.6 429.8 338.5 408.7 2.6% 15.1%
Debt Instruments Discount 343.1 328.2 316.8 284.0 266.6 4.5% 28.7%
Vendor 121.0 88.2 89.0 85.9 97.9 37.2% 23.6%
Foreign Credit 62.8 69.6 56.7 62.2 68.1 -9.7% -7.8%
Other - Companies 175.8 182.1 154.4 139.3 147.5 -3.4% 19.2%
Total 12,514.6 11,861.1 11,370.6 10,108.6 9,331.9 5.5% 34.1%
Breakdown of Credit by Rating
At the end of September 2010, credit operations rated between AA and C, representing
normal risk according to Resolution 2,682/99 of the Central Bank of Brazil, accounted for 89.4%
of the credit portfolio, 3.2 percentage points higher than in September 2009 and 0.2 percentage
points higher than in June 2010.
Graph 10: Credit Portfolio by Risk Levels
111
Allowance for Loan Losses
Allowance for loan losses totaled R$1,122.7 million in September 2010, equivalent to 6.9% of
the consolidated credit portfolio, compared to 8.3% in September 2009, 7.6% in December
2009 and 7.2% in June 2010.
The reduction in the ratio of provisions to the volume of credit operations, in September
2010, is mainly due to three factors: (i) growth in the loan portfolio focused on lower risk
operations; (ii) adjustments in the allowance for loan losses as a result of write-offs of loans
contracted along an environment of greater risk; ( iii) improvements in the compliance
procedures for loans to individuals, thanks to the maturation of the model for classifying the
portfolio by rating, which enabled a reduction in the allowance for loan losses. However, the
Bank’s allowance ratio remains close to the average recorded by major commercial banks in
2010.
Graph 11: Breakdown of Allowance for Loan Losses - R$ Million
The breakdown of the allowance for loan losses in September 2010, according to Resolution
2,682/99 of the Central Bank of Brazi l, was as follows:
· R$374.7 million for operations with installments overdue for more than 60 days;
· R$663.6 million for contracts due or to be overdue for up to 60 days; and
· R$84.4 million relating to the excess allowance to the minimum required by Resolution
2,682/99 of the Central Bank of Brazil, which is constituted after a periodical analysis of the
portfolio risk carried out by the Bank Management, a procedure adopted ever since the
regulation was passed.
112 FINANCIAL STATEMENTSSEPTEMBER 2010
Graph 12: Cover Ratio
Graph 13: Default Ratio
R$ Million
Resolution EffectiveRating Required Total Accumulated Total Total Minimun Provision 2682 Total Provision
Provision Portfolio Relative Credits Credits Excess Over% Consolidated Status % Past Due Receivable Past Due Receivable Provision Provision Portfolio %
AA 0.0% 5,304.2 32.7% 0.0 5,304.2 0.0 0.0 10.5 10.5 0.2%
A 0.5% 5,552.2 66.9% 0.6 5,551.6 0.0 27.8 11.1 38.9 0.7%
B 1.0% 2,468.2 82.1% 0.2 2,467.9 0.0 24.7 12.3 37.0 1.5%
C 3.0% 1,191.9 89.4% 9.7 1,182.0 0.3 35.5 23.8 59.6 5.0%
D 10.0% 231.4 90.8% 19.9 212.1 1.9 21.2 4.6 27.8 12.0%
E 30.0% 242.8 92.3% 27.9 216.0 8.0 64.8 4.9 77.7 32.0%
F 50.0% 735.3 96.9% 89.9 643.9 45.7 322.0 14.7 382.3 52.0%
G 70.0% 82.2 97.4% 42.0 38.8 30.4 27.2 2.5 60.0 73.1%
H 100.0% 428.9 100.0% 297.7 140.5 288.4 140.5 0.0 428.9 100.0%
Total 16,237.1 487.9 15,757.1 374.7 663.6 84.4 1,122.7 6.9%
Table 10 Balance of Allowance for Losses
Cover Ratio
The following graph shows the cover ratio,
which is the percentage between the
allowance for loan losses and the balance of
operations overdue for more than 60 days that
did not generate revenue, which shows the
capacity to cover defaults with provisions
remains at comfortable levels. The cover ratio
of 230.1% in September 2010, 13.0 pp over
September 2009, proving Banrisul’s
conservative approach to credit risk
management.
Default Ratio
In September 2010, default loans over 60 days
in proportion to total loans still improved,
reaching 3.0%, below the 3.8% indicator
recorded in 3Q09, and also below down from
the 3.4% and 3.2% ratios of December 2009 and
June 2010, respectively.
The continuous, constant implementation of
statistical methodologies for risk assessment
of individuals and companies, where
parameterized credit policies and business rules are combined with the optimized controls
on customers’ information via branch evaluation, have intensified in the first half of 2010 and
improved credit granting. In this sense, the adoption of Behavior Score and Credit Score
systems have made possible to set pre-approved loans to individuals according to risk ratings
provided for in statistical models, which makes it a conceptually attractive tool for dealing
with massive credit.
113
Funds Raised and Under Management
Funds raised and under management totaled R$24,095.2 million at the end of September
2010, 15.5% up on September 2009, 10.0% up on December 2009 and 4.0% over June 2010.
The growth of R$3,239.4 million in twelve months came mainly from the increase in time and
savings deposits. In 3Q10, time deposits recorded the highest growth.
Graph 14: Funds Raised and Under Management - R$ Million
Demand Deposits
Demand deposits, which make up 8.8% of the funds raised and under management, totaled
R$2,108.9 million at the end of September 2010, 25.4% (R$426.8 million) over September 2009
and 3.9% (R$80.0 million) over June 2010. In twelve months, deposits from companies and
public sector presented the highest growth, the latter also responsible for the most significant
increase in the last quarter.
Savings Accounts
Savings accounts totaled R$6,295.7 million at the end of September 2010, 21.1% (R$1,095.5
million) over September 2009 and 4.3% (R$258.1 million) over June 2010. Savings accounts,
which represent 26.1% of the funds raised and managed, presented, in absolute numbers,
the best performance year-on-year and the second best performance quarter on-quarter
among funding sources.
Time Deposits
Time deposits represent 39.6% of the funds raised and under management. At the end of
September 2010, time deposits totaled R$9,533.0 million, up 12.0% (R$1,023.3 million) over
September 2009 and 5.5% (R$498.6 million) over June 2010. Being the main funding instrument
for unmarked credit, this product is promoted through business policies.
114 FINANCIAL STATEMENTSSEPTEMBER 2010
Sep10 Jun10 Mar10 Dec09 Sep09 Sep10/ Sep10/Jun10 Sep09
Total Deposits 17,954.1 17,144.7 16,519.9 16,369.7 15,462.3 4.7% 16.1%
Time Deposits 9,533.0 9,034.4 8,804.1 8,530.7 8,509.7 5.5% 12.0%
Demand Deposits 2,108.9 2,028.9 1,922.8 2,100.6 1,682.1 3.9% 25.4%
Saving Deposits 6,295.7 6,037.6 5,692.2 5,636.8 5,200.2 4.3% 21.1%
Other Deposits 16.5 43.8 100.7 101.6 70.3 -62.3% -76.5%
Funds Under Management 6,141.1 6,019.0 5,848.9 5,532.7 5,393.5 2.0% 13.9%
Total 24,095.2 23,163.7 22,368.7 21,902.4 20,855.8 4.0% 15.5%
R$ Million
Table 11 Funding Composition
Assets under Management
Assets under management totaled R$6,141.1 million at the end of September 2010, R$747.6
million higher than in September 2009, driven by changes introduced in the regulations related
to the allocation of funds belonging to municipal pension plans systems (RPPS), which allowed
the restructuring of the investment fund portfolio. In 3Q10, assets under management
increased by R$122.0 million, driven mainly by the growth in fixed income funds.
Cost of Funding
The Bank’s average cost of funding, as a percentage of the Basic Interest Rate (Selic), of
74.63% in 3Q10 was down from the 82.90% registered on 3Q09, and also down from the
78.19% registered in 2Q10. Last quarter’s trend reflects (i) the increased share of savings
accounts, of lower cost of funding in the total volume of funding, (ii) the reduced share of
market funding in the total of funds raised, (iii) the increase of demand deposits participation
to total funding which, however without cost, are added to funding and alter average cost,
(iv) the average funding terms, and (v) the mix between fixed and floating rates funding.
As to time deposits, the quarterly accumulated interest rates (2.17% in 3Q09, 2.11% in 2Q10
and 2.39% in 3Q10) demonstrate the trend of the Selic Rate and the amount of floating rate
deposits as proportion to the total portfolio, comprising 76% of the portfolio of time deposits.
The Selic Rate had an increase trend during the periods analyzed: 2.19% in 3Q09, 2.23% in
2Q10 and 2.62% in 3Q10. In an environment of rising Selic Rate, the cost of time deposits
contributes to reduce the cost of funding, decreasing from 98.81% in 3Q09 (94.74% in 2Q10) to
91.18% in 3Q10.
Graph 15: Cost of Funding as % of Selic Rate
115
3Q10 2Q10 3Q09Average Accumulated Average Average Accumulated Average Average Accumulated Average
Balance Expense Cost Balance Expense Cost Balance Expense Cost
Demand Deposits 2,074.4 2,017.2 1,627.0
Saving Deposits 6,208.8 -95.3 1.54% 5,900.9 -84.5 1.43% 5,124.4 -71.7 1.40%
Time Deposits 9,321.8 -222.6 2.39% 8,946.1 -188.7 2.11% 8,411.3 -182.3 2.17%
Interbank Deposits 28.0 -0.3 1.08% 68.6 -0.3 0.45% 76.8 -0.6 0.80%
Credit Guarantee Fund Expenses -6.6 -6.3 -5.7
Payable for Financial and Development Funds 2,180.1 -62.6 2.87% 2.009.8 -50.1 2.49% 2,504.3 -62.6 2.50%
Investment Deposits 2.1 1.9 2.0
Depósitos para Investimento 7.1 10.5 12.6
Total Averag e Balance / Total Expense s 19,822.3 -387.5 1.95% 18,955.0 -329.9 1.74% 17,758.3 -322.9 1.82%
Selic 2.62% 2.23% 2.19%
Average Cost / Selic 74.63% 78.19% 82.90%
Cost of Time Deposits / Selic 91.18% 94.74% 98.81%
R$ Million and %Table 12 Cost of Funding
Shareholders’ Equity
At the end of September 2010, Banrisul’s shareholders’ equity was R$3,746.4 million,
13.5% up on September 2009, 9.9% up on December 2009 and 4.4% higher than June 2010’s.
The changes in shareholders’ equity are related to the incorporation of results and the
payment of dividends and interest on equity.
Graph 16: Shareholders’ Equity - R$ Million
Return on Average Shareholders’ Equity
The Return on Average Shareholders’ Equity was 19.5%. The results during the nine months
of 2010 reflect positively the increase in the credit portfolio and the decrease in other
operating expenses, but were negatively affected the higher flow of financial expenses with
onlendings and credit provisions, and higher administrative expenses.
116 FINANCIAL STATEMENTSSEPTEMBER 2010
Graph 17: Return on Average Shareholders’ Equity
Basel Ratio
Basel Ratio is the relation between the reference equity and the weighted risks, as per
legislation, demonstrating the company’s solvency. The New Basel Accord II provides a better
measurement of the risks that financial institutions are exposed to. The Central Bank of Brazil
passed Resolution 3,490/07 specifying changes in the calculation of the reference equity
(PRE). Accordingly, this defined the installments that make up the PRE, which involved changes
in the calculation of the corresponding credit risks (Pepr), market risks (Pjur) and exchange
risks (Pcam). The resolution also included in the new PRE calculation method the portions
relating to operating risk (Popr), variations in share prices (Pacs) and the variation in
commodity prices (Pcom). Another requirement was the coverage for interest rate risks on
operations not included in the trading portfolio (Rban).
Banrisul’s Basel II Ratio in September 2010 was 15.4%. The reduction in the twelve-month
period was due to the increase in the credit portfolio.
With regards to the items included in the PRE calculation, it should be mentioned the variation
shown in the portion of the operating risk, which changed from 80% in September 2009 to
100% in January this year, as per Circular 3,383/08 of the Central Bank of Brazil. As to the part
of the required capital to cover exposures subject to market risk, the evolution of 26.4%
presented results from increased exposure to interest rate coupons.
Graph 18: Basel Ratio
117
Pace of Growth
The pace of growth in time deposits and commercial credit, measured by the relative growth
in volumes, is shown in the following graph. The 34.1% growth in commercial credit in the
twelve months ended September 2010 was higher than the 12.0% growth in time deposits.
Since December 2009 Banrisul’s total credit has been growing faster than the financial industry.
Credit operations grew 29.6% year-on-year in September 2010, while the financial sector
grew 19.6% in the same period.
Graph 19: Pace of Growth - Credit and Funding
118 FINANCIAL STATEMENTSSEPTEMBER 2010
Evolution of Income Statement Accounts
Net Income
Banrisul’s net income in the nine months of 2010 was R$511.4 million, 43.3% (R$154.6 million)
higher than the recurring income the nine months of 2009. In 3Q10, net income totaled R$206.4
million, 41.3% or R$60.3 million up on 3Q09 and 12.7% or R$23.3 million up on 2Q10.
The performance in 9M10 compared to 9M09 reflects positively the increase in credit revenues
and the reduction of other operating expenses, while is negatively affected by lower treasury
revenues (due to lower balances of securities transactions and lower Selic Rate) and by higher
financial expenses (onlendings), higher operating expenses and provisions.
When compared to 3Q09, 3Q10 was positively affected by higher credit and securities
revenues, and negatively by higher market funding and onlendings expenses. From 2Q10 to
3Q10, higher net income is associated with higher credit and securities and with lower
provisions and other administrative expenses (not including staff costs), reflecting cost cutting
efforts.
Graph 20: Net Income - R$ Million
Financial Income
Financial Income totaled R$3,351.4 million in 9M10, 10.8% (R$345.5 million) above the amount
registered in the same period in 2009. In 3Q10, financial income totaled R$1,298.2 million,
24.2% (R$252.7 million) above the amount registered in the same quarter last year and 11.4%
(R$132.8 million) above the amount recorded in 2Q10.
The higher amount of financial income until September 2010 is related to the R$436.2 million
growth in credit revenues that came from the R$3,708.5 million increase in the volume of
credit transactions and to the recovery of loans losses in the amount of R$ 43.8 million, which
helped offset lower treasury revenues in the amount of R$84.3 million, in light of the reduction
of the balance of operations and interest rates on account of a smaller effective Selic Rate
year-on-year.
From 3Q09 to 3Q10, revenues from financial income were also affected by credit revenues,
due to the increase of the loan portfolio. Quarter-on-quarter, besides the contribution of
revenues from credit, treasury income also grew by R$49.2 million, what is explained by
increasing Selic Rate and higher balance of treasury.
119
Graph 21: Financial Income - R$ Million
Revenue from Treasury Operations
In 9M10 revenues from securities and derivatives totaled R$791.8 million, 9.7% (R$85.4) million
below the amount recorded in the same period of 2009. In 3Q10, revenues from securities
and derivatives operations totaled R$303.9 million, 11.4% increase (R$31.0 million) over 3Q09
and up 20.4% (R$51.5 million) from 2Q10.
The reduction of the revenues of securities and derivatives observed in 9M10 from 9M09 is
due to the lower balance of the securities portfolio (less R$797.5 million) and lower effective
Selic Rate, which reduced from 7.68% in 9M09 to 7.03% in 9M10.
The increase in treasury revenues from 3Q09 to 3Q10 also comes from higher Selic Rate year-
on-year. From 2Q10 to 3Q10, an increase in the amount of the securities portfolio was observed,
as well as its average remuneration, as the Selic Rate (effective) rose from 2.23% in 2Q10 to
2.62% in 3Q10.
Revenues from Credit and Leasing Operations
Revenues from credit and leasing operations totaled R$2,551.6 million in 9M10, 20.6% (R$436.2
million) above 9M09. In 3Q10, revenues from credit and leasing operations totaled R$933.1
million, 31.3% (R$222.2 million) over 3Q09 and 9.7% (R$82.7 million) higher than 2Q10.
The increase in credit revenues from 9M09 to 9M10 reflects the growth of the loan portfolio,
which offset the decrease in credit rates, and the higher credit revenue from credit recovery.
In relation to 3Q09, 3Q10’s revenues reflect the increase of credit operations and the increase
in credit recovery. In relation to 2Q10, besides the previously explained reasons, the increase
in credit rates contributed to generating higher revenues.
120 FINANCIAL STATEMENTSSEPTEMBER 2010
Graph 22: Revenues from Credit and Leasing Operations - R$ Million
Revenues from Commercial Credit - Individuals and Companies
Revenues from commercial credit to individuals totaled R$1,525.8 million in 9M10, 26.9%
higher than in the same period of 2009. In 3Q10, revenues from commercial credit to individuals
totaled R$545.6 million, 29.2% more than in 3Q09 and 5.9% on 2Q10.
The R$323.7 million increase in revenues from commercial credit to individuals registered
from January to September 2010 is due to the growth in two of the main credit lines to
individuals: payroll loans and overdraft accounts. The increase in the balance offset lower
rates, contributing to increase revenues year-to-date.
From 3Q09 to 3Q10, the R$123.3 million increase in revenues also comes from the balance
growth of R$1,771.8 million in payroll loans and overdraft accounts. Revenues from these
products make up 76.2% of segment revenues and 49.6% of revenues from commercial credit.
Revenues from commercial credit to companies totaled R$800.0 million in 9M10, up 9.7%
(R$70.7 million) from the same period 2009, 28.6% (R$64.8 million) higher than 3Q09 and
increasing 10.5% (R$27.7 million) from 2Q10.
In 3Q10, working capital lines represented 59.0% of the revenues generated in the Companies
segment and 20.5% of commercial credit revenues. The increase in revenues from 3Q09 to
3Q10 was driven by the growth in operations and in the average rates increase. The revenue
increase in the last quarter also comes from the higher balance of working capital lines.
121
R$ Million
Table 13 Revenues from General Credit - Individuals and Companies
9M10 9M09 3Q10 2Q10 1Q10 4Q09 3Q09 9M10/9M09
Individuals 1,525.8 1,202.1 545.6 515.3 464.9 436.9 422.3 26.9%
Payroll-deductible Loan 757.8 569.0 263.9 255.5 238.4 216.0 205.9 33.2%
Payroll-deductible Purchase of Consumer Goods 18.9 14.8 7.5 5.8 5.6 5.2 4.8 27.8%
Purchase Goods - other 0.3 0.3 0.1 0.1 0.1 0.1 0.1 3.0%
Vehicle Loan - Individuals 4.9 3.7 1.9 1.6 1.4 1.3 1.2 34.1%
Overdraft 392.8 329.5 144.1 134.2 114.6 108.6 108.9 19.2%
One Minute Loan 109.2 89.5 40.4 36.4 32.4 30.9 30.2 22.1%
Automatic Individual Loan 96.6 62.3 35.9 32.7 28.1 23.8 20.7 55.1%
Non Payroll-deductible Loan 90.2 75.6 32.8 30.5 26.9 31.9 32.5 19.3%
Credit Card 35.0 42.4 11.4 11.9 11.8 14.0 13.2 -17.3%
Other - Individuals 20.0 15.1 7.7 6.7 5.7 5.1 4.7 32.5%
Companies 800.0 729.3 291.4 263.7 244.8 232.4 226.6 9.7%
Purchase Goods - other 3.6 3.8 1.3 1.2 1.1 1.0 1.1 -3.6%
Vehicle Loan - Companies 3.2 3.1 1.2 1.0 1.0 1.0 0.9 4.4%
Working Capital - Guarantee 365.7 320.5 131.2 121.6 113.0 106.4 102.0 14.1%
Working Capital - Receivable 103.5 94.7 40.7 33.7 29.1 26.2 25.7 9.4%
Financing to Customers - Companies 5.7 8.7 1.7 1.8 2.2 2.4 2.9 -34.7%
Compror 15.9 35.3 4.5 4.7 6.8 8.9 9.7 -54.9%
Indebted Security Account 22.9 30.5 8.0 7.7 7.2 7.6 7.8 -24.8%
Guaranted Account 195.7 153.8 72.0 64.3 59.4 54.1 52.0 27.3%
Debt Instruments Discount 54.8 50.1 19.9 18.2 16.6 15.6 15.5 9.2%
Vendor 10.8 16.0 3.9 3.4 3.4 3.7 4.5 -32.5%
Foreign Credit 1.5 2.0 0.6 0.5 0.5 0.5 0.5 -28.0%
Other - Companies 16.5 10.9 6.4 5.5 4.6 4.9 3.8 52.0%
Total 2,325.8 1,931.4 837.1 779.1 709.7 669.3 648.9 20.4%
The average commercial credit rates fell from 3Q09 to 3Q10, following the downward trend of
the Selic interest rate in the same period. The higher volume of revenues in 3Q10 over 3Q09
is chiefly due to increasing credit amounts, mainly commercial credit to individuals.
The commercial credit revenue increase from 2Q10 to 3Q10 also came from higher credit
amounts, both from individual and corporate segments. The average quarterly rates charged
to the individuals segment increased slightly, following the behavior of the Selic Rate,
particularly affecting overdraft accounts. As for working capital lines, the average rates charged
in 3Q10 also reflected the increase in the Selic Rate, given the larger portion of floating-rate
operations in such portfolio.
122 FINANCIAL STATEMENTSSEPTEMBER 2010
Table 14 Monthly Average Commercial Credit Rates - Individuals and Companies
9M10 9M09 3Q10 2Q10 1Q10 4Q09 3Q09
Individuals 2.55% 2.97% 2.56% 2.54% 2.55% 2.73% 2.84%
Payroll-deductible Loan 1.74% 2.04% 1.72% 1.73% 1.78% 1.90% 1.97%
Payroll-deductible Purchase of Consumer Goods 1.52% 1.61% 1.51% 1.52% 1.55% 1.58% 1.60%
Purchase Goods - other 0.60% 0.54% 0.63% 0.62% 0.55% 0.50% 0.50%
Vehicle Loan - Individuals 1.90% 2.07% 1.85% 1.90% 1.97% 2.05% 2.08%
Overdraft 7.80% 8.14% 7.95% 7.76% 7.66% 7.65% 7.86%
Crédito 1 Minuto 5.27% 5.54% 5.29% 5.25% 5.28% 5.39% 5.53%
Automatic Individual Loan 4.75% 4.35% 4.78% 4.75% 4.70% 4.64% 4.52%
Non Payroll-deductible Loan 3.00% 3.24% 2.96% 2.95% 3.09% 3.30% 3.35%
Credit Card 5.16% 6.00% 5.06% 5.25% 5.18% 6.23% 5.87%
Other - Individuals 1.00% 1.12% 1.04% 1.00% 0.95% 0.96% 0.96%
Companies 1.78% 1.85% 1.86% 1.79% 1.69% 1.74% 1.78%
Purchase Goods - other 1.42% 1.34% 1.52% 1.45% 1.29% 1.28% 1.27%
Vehicle Loan - Companies 1.77% 1.78% 1.79% 1.77% 1.75% 1.75% 1.75%
Working Capital - Guarantee 1.53% 1.66% 1.59% 1.54% 1.45% 1.53% 1.59%
Working Capital - Receivable 1.38% 1.65% 1.46% 1.39% 1.25% 1.28% 1.45%
Financing to Customers - Companies 2.18% 2.09% 2.10% 2.12% 2.30% 2.28% 2.25%
Compror 1.29% 1.45% 1.43% 1.38% 1.16% 1.21% 1.29%
Indebted Security Account 1.48% 1.88% 1.53% 1.45% 1.46% 1.45% 1.59%
Guaranted Account 4.77% 3.77% 4.97% 4.74% 4.59% 4.75% 4.14%
Debt Instruments Discount 1.87% 2.10% 1.92% 1.85% 1.84% 1.89% 1.97%
Vendor 1.29% 1.55% 1.27% 1.30% 1.31% 1.36% 1.39%
Foreign Credit 0.27% 0.28% 0.28% 0.26% 0.26% 0.25% 0.21%
Other - Companies 1.10% 0.95% 1.22% 1.06% 1.02% 1.18% 0.90%
Total 2.22% 2.42% 2.26% 2.23% 2.17% 2.28% 2.35%
Financial Expenses
Financial expenses totaled R$1,795.2 million in 9M10, which is 9, 6% (R$157.1 million) more
than 9M09. In 3Q10, they totaled R$639.7 million, 32.4% (R$156.5 million) higher than in 3Q09.
From 2Q10 to 3Q10, financial expenses increased 10.0% (R$58.2 million).
The increase in financial expenses from 9M09 to 9M10 resulted from higher loans and
onlendings costs, in the amount of R$95.8 million, from the R$500.4 million increase in the
balance of the reserve fund for escrow deposits, the higher volume of loans and onlendings
(R$163.7 million) and from equalization of rates in Finame operations with BNDES. Higher
amounts of credit provisions (R$65.8 million) on account of increases in the credit portfolio
and write-offs also contributed to increasing financial intermediation year-on-year.
The higher flow of expenses from 3Q09 to 3Q10 (R$156.5 million) stems mainly from (i) the
R$64.6 million increase in marketing funding due to larger deposit base and higher Selic Rate,
(ii) higher expenses with loans and onlendings, in the amount of R$48.0 million, which also
reflects increasing expenses with escrow deposits, and (iii) from the R$45,4 million increase
in provision expenses.
From 2Q10 to 3Q10, the increase in financial expenses is explained by market funding
operations, in the amount of R$57.6 million, basically due to larger deposit base and higher
Selic Rate, which was offset by the R$15.9 million reduction in provision expenses.
123
Graph 23: Financial Expenses - R$ Million
Expenses with Market Funding Operations
Expenses with market funding operations totaled R$1,021.4 million in 9M10, closer to the
amount in 9M09. In 3Q10, expenses with market funding operations totaled R$387.5 million,
a 20.0% (R$64.6 million) increase from 3Q09 and 17.5% (R$57.6 million) higher than 2Q10.
The slight reduction of R$5.7 million in expenses from 9M09 to 9M10 is due to the decrease of
the Basic Interest Rate (natural indexer for time deposits rates), to the funding structure
(retail and floating rates, mostly) and to the R$128.2 million year-on-year reduction in the
market funding balance.
The expenses increase from 3Q09 to 3Q10 is due to hikes in the Selic Rate and to higher time
and savings deposits balances at the end of each quarter. From 2Q10 to 3Q10, higher costs
were related to increases on the Selic Rate and on deposits and market funding.
Graph 24: Expenses with Market Funding Operations - R$ Million
124 FINANCIAL STATEMENTSSEPTEMBER 2010
Allowance for Loan Losses
Allowance for loan losses totaled R$391.7 million in 9M10, up 20.2% (R$65.8 million) over the
same period in 2009. In 3Q10, allowance for loan losses totaled R$111.2 million, a 69.0%
increase (R$45.4 million) from 3Q09, but 12.5% (R$15.9 million) down from 2Q10.
Despite the year-on-year improvement in the quality of the credit portfolio, the R$3,708.5
million growth in loans, combined with the write-offs of R$105.3 million above the amount
recorded in 9M09, led, as a consequence, to increasing the costs of provision. The write-offs
also reflect the amount of loans granted in 2009, a critical period on account of the worsening
of the financial crisis at the end 2008.
The changes in provisions from 3Q09 to 3Q10 are also associated with credit growth and
higher write-offs, reflected in increasing expenses. On the other hand, the lower provision
cost from 2Q10 to 3Q10 (R$5.7 million decrease) is due to the reduction in past due loans.
Graph 25: Allowance for Loan Losses - R$ Million
Gross Profit from Financial Intermediation
Gross profit from financial intermediation reached R$1,736.2 million in 9M10, 12.2% (R$188.4
million) higher than in same period of last year. The gross profit from financial intermediation
of R$658.5 million in 3Q10 represents an increase of 17.1% (R$96.2 million) from 3Q09, and of
12.8% (R$74.6 million) over 2Q10.
The performance in 9M10 reflects especially the growth of credit revenues, minimized by a
decline in treasury operations, the decrease of market funding on account of the decline of
the Selic Rate, and the increase of loans and onlendings expenses and of provision costs, with
a lowering effect on the outcome.
The higher gross financial margin from 3Q09 to 3Q10 is due to the higher flow of credit
revenues, compensating for the increase in market funding, loans and onlendings expenses
and with provisions. From 2Q10 and 3Q10, the increase in the gross profit from financial
intermediation reflects the expansion of revenues from credit and lower provision expenses,
minimized by the higher expenses with funding and onlendings.
125
Financial Margin
Financial margin was R$2,128.0 million in 9M10, 13.6% (R$254.3 million) more than in 9M09. In
3Q10, financial margin, in the amount of R$769.7 million, increased 22.5% (R$141.6 million)
from 3Q09, and 8.3% (R$58.8 million) from 2Q10.
From 9M09 to 9M10, higher revenues from credit contributed to increasing the financial margin,
while lower revenues from securities and higher loans and onlendings expenses affected
margins negatively.
The margin expansion from 2Q10 to 3Q10 is due to the increase in revenues from credit,
albeit minimized by higher flow of funding and onlendings costs, following the rise of the
Selic Rate.
Graph 26: Financial Margin - R$ Million
Revenue from Services Rendered
Revenues from services totaled R$468.2 million in 9M10, 9.6% (R$41.0 million) more than in
the same period of last year. In 3Q10, revenues form services, in the amount of R$160.9
million, increased 11.2% (R$16.2 million) from 3Q09, and 2.2% (R$3.4 million) from 2Q10.
The twelve-month increase from 9M09 and 9M10 in revenues from services was due to the
growth of Banricompras tariffs, the expansion of the affiliated network, and on checking
accounts, given the increased volume of transactions, especially in the companies segment.
The same reasons apply to explaining fees increases from 3Q09 to 3Q10: Banricompras and
fees on checking accounts, given the growth on Banricompras’ network and on financial
turnover, especially within the corporate segment. In comparison with 2Q10, the increase in
fees derives from assets under management, collection services and checking accounts for
individuals.
126 FINANCIAL STATEMENTSSEPTEMBER 2010
Graph 27: Revenue from Services Rendered - R$ Million
Administrative Expenses
In 9M10, administrative expenses totaled R$1,265.4 million, 7.6% or R$89.6 million above the
amount recorded in the same period in 2009. In 3Q10, administrative expenses totaled R$428.1
million, 4.4% or R$17.9 million above the amount recorded in 3Q09 and 3.4% or R$13.9 million
above 2Q10.
Staff costs, which comprise 54.3% of total administrative costs in 9M10, increased 2.5% or
R$16.8 million over the amount recorded in the same period of 2009, while other administrative
expenses increased 14.4% or R$72.9 million in the same period. The relatively small increase
on personnel expenses is function of staff turnover, as 740 employees were hired in the last
twelve months and headcount has remained stable.
The increase in other administrative expenses has, as drivers, increases in (i) third-party
services (R$14.5 million), (i i) marketing and advertisement (R$13.8 million) and ( iii)
amortization and depreciation (R$13.8 million).
Personnel expenses increased R$13.5 million from 3Q09 and R$17.6 from 2Q10. From 3Q09,
the variation is explained by wages increases granted in September 2009 affecting the
following months. In the last quarter, the higher amount of expenses comes from provisions
made for salary increases arising from collective agreements with the Union of Bank
Employees.
Other administrative expenses recorded an increase of R$4.4 million from 3Q09 and 3Q10,
and a decreased of R$3.7 million from 2Q10. The growth of other administrative expenses
from 3Q09 to 3Q10 is driven by increases on third party services and amortization and
depreciation, in the amount of R$10.8 million, which were offset by the R$17.3 million decrease
in marketing costs. The reduction observed in the last quarter is from lower marketing costs,
in the amount of R$15.6 million.
Since April 2010, cost-control points have been strengthened and implemented, goals for
managing corporate costs set, responsibilities and tasks for commercial and Head Offices’
areas defined, all with a view to the effective reduction of administrative expenses.
In September 2010, the marketing policy and its technical and administrative activities
(proposition, strategies analysis, consolidation and monitoring, product repositioning and
127
institutional campaigns, among others) were changed, becoming part of Banrisul’s
management model established in March 2007. The recently created Marketing Committee
aligns itself with the other nine existing committees, and its architecture ensures corporate
responsibility and economic rationality to the decision-making processes.
Graph 28: Personnel and Other Administrative Expenses - R$ Million
Other Operating Income
Other operating income totaled R$127.8 million in 9M10, 44.1% (R$39.1 million) higher than
in September of 2009, explained mainly because of accounting balances adjustments related
to systemic improvements, totaling R$20.6 million.
In 3Q10, other operating income totaled R$39.0 million, increasing 34.0% (R$9.9 million)
especially on adjustments related to systemic improvements, which also justify the 9.5%
(R$4.1 million) decrease quarter-on-quarter.
Graph 29: Other Operating Income - R$ Million
128 FINANCIAL STATEMENTSSEPTEMBER 2010
Other Operating Expenses
Other operating expenses totaled R$130.4 million in 9M10, 34.8% (R$69.5 million) below the
amount recorded in the same period last year, basically due to the payment of reserve
requirements on savings deposits from previous fiscal years, without repetition throughout
2010, in addition to foreign exchange variations that affected the foreign branches’ equity
and to post-employment benefits, as defined by Ibracon NPC 26 (Institute of Brazilian
Accountants – Accounting Standards and Procedures # 26), amounts partially offset by increased
labor provisions expenses .
In 3Q10, other operating expenses totaled R$50.6 million, 2.3% (R$1.2 million) below the
amount recorded in 3Q09 and 17.7% (R$7.6 million) above the amount of 2Q10. From 2Q10 to
3Q10, the increase of other operating expenses is due to higher expenses related to foreign
exchange variations.
Graph 30: Other Operating Expenses - R$ Million
129
Graph31: Leverage Ratio
Graph32: Operating Cost
Graph 33: Debt-Equity Ratio
Economic Indicators
Leverage Ratio
The leverage ratio is the ratio of the
credit operations portfolio to
shareholders’ equity. In September
2010, Banrisul’s credit operations
represented 4.3x of shareholders’
equity, rising from to the 3.8x
registered in September 2009, the 3.9x
in December 2009 and the 4.3x in June
2010.
The significant growth of the loan
portfolio in the twelve months reflected the variation of the Leverage Ratio. The Bank’s
comfortable leverage shows its capacity for loan portfolio growth in the future.
Operating Cost
Operating cost measures the total of
administrative expenses in relation to
total assets. The ratio is calculated
based on the expenses in the twelve
months against the balance of assets
at the end of the period being
analyzed.
The 13.2% growth in assets in the
twelve months, caused by the growth
in credit operations, helped to absorb
administrative expenses, reflecting in
the reduction of costs in proportion to assets in twelve months.
Debt-Equity Ratio
The debt-equity ratio measures the ratio of shareholders’ equity to funds raised from the
public, including investment funds. It evaluates the security that the company’s own funds
offer to third-party capital.
In September 2010, the debt-equity
ratio was 15.5%, 0.3 p.p. lower than
September 2009, 0.1 p.p. lower than
December 2009 and identical to June
2010. The reduction in the capital ratio
demonstrates the higher share of third-
party funds in the funding for loans.
130 FINANCIAL STATEMENTSSEPTEMBER 2010
Graph 34: Employee Productivity - R$ Thousand
Graph 35: Efficiency Ratio
Employee Productivity
The productivity ratio, which is
measured by the total volume of
business (funding and credit) per
employee, grew 16.8% in the twelve
months to R$4,314.1 thousand, thanks
to the Bank’s business performance,
driven by the system of variable
remuneration, which helped to raise
productivity.
In September 2010, Banrisul had 9,349 employees, 314 more than in September 2009.
Efficiency Ratio
The Efficiency Ratio measures the
percentage volume of revenues used
to cover administrative expenses. The
48,5% twelve-month accumulated
ratio in 3Q10 is the lowest level since
it started being calculated at Banrisul,
below the target released last quarter,
when the ratio was set in the range
between 49% and 54%.
The consistent reduction in efficiency
ratio reflects the capacity of the
financial margin, sustained by the growth in revenue from credit and securities operations
and favored by the reduction in other operating expenses, to absorb the increase in
administrative expenses.
131
R$ Million
Consolidated Pro Forma Balance Sheet
Assets Sep10 Jun10 Mar10 Dec09 Sep09 Sep10/ Sep10 /Jun10 Sep09
Curr ent and Long-Term Assets 31,972.6 30,719.6 29,509.4 28,726.2 28,223.8 4.1% 13.3%
Cash 396.4 339.9 357.2 411.2 356.8 16.6% 11.1%
Interbank Investments 3,822.6 4,133.2 4,090.8 5,356.5 5,762.3 -7.5% -33.7%
Securities and Derivatives 8,477.4 8,091.1 7,760.2 7,408.5 7,335.1 4.8% 15.6%
Interbank and Interbranch Accounts 2,650.5 2,353.5 2,238.1 1,856.8 1,915.9 12.6% 38.3%
Lending Operations 15,683.7 14,909.4 14,246.0 12,833.2 11,912.8 5.2% 31.7%
Allowance for Loan Losses (1,083.7) (1,054.7) (1,030.2) (966.2) (990.4) 2.7% 9.4%
Leasing Operations 83.2 88.5 93.0 97.9 101.0 -6.0% -17.6%
Allowance for Doubtful Lease Receivables (7.5) (9.8) (8.5) (8.7) (8.9) -23.3% -15.4%
Other Receivables 2,025.6 1,955.4 1,845.5 1,813.2 1,924.0 3.6% 5.3%
Allowance for Losses on Other Receivables (102.0) (121.9) (124.3) (122.1) (119.7) -16.3% -14.8%
Other Assets 26.5 35.1 41.5 45.9 35.1 -24.3% -24.4%
Permanent 366.7 379.2 355.1 357.9 349.4 -3.3% 5.0%
Investments 7.8 7.8 7.8 7.8 8.0 0.0% -3.0%
Property in Use 171.3 170.9 178.1 170.1 155.9 0.3% 9.9%
Intangible 187.6 200.6 169.2 180.1 185.5 -6.5% 1.1%
Total Assets 32,339.3 31,098.8 29,864.6 29,084.1 28,573.2 4.0% 13.2%
Passivo Sep10 Jun10 Mar10 Dec09 Set09 Sep10/ Sep10 /Jun10 Sep09
Current and Long-Term Liabi lities 28,591.2 27,506.9 26,382.9 25,674.0 25,271.8 3.9% 13.1%
Deposits 17,954.1 17,144.7 16,519.9 16,369.7 15,462.3 4.7% 16.1%
Demand Deposits 2,108.9 2,028.9 1,922.8 2,100.6 1,682.1 3.9% 25.4%
Saving Deposits 6,295.7 6,037.6 5,692.2 5,636.8 5,200.2 4.3% 21.1%
Intebank Deposits 14.7 34.6 91.1 90.0 61.6 -57.6% -76.2%
Time Deposits 9,533.0 9,034.4 8,804.1 8,530.7 8,509.7 5.5% 12.0%
Other Deposits 1.9 9.2 9.6 11.6 8.7 -79.7% -78.6%
Money Market Funding 2,285.9 2,073.9 1,901.9 2,006.5 2,414.1 10.2% -5.3%
Intebank and Interbranch Accounts 475.0 454.0 424.7 160.7 406.9 4.6% 16.7%
Borrowings and Onlendings 1,611.9 1,655.1 1,621.4 1,481.7 1,448.2 -2.6% 11.3%
Derivatives 56.5 51.6 46.6 47.0 42.3 9.6% 33.7%
Other Payables 6,207.8 6,127.7 5,868.3 5,608.5 5,498.0 1.3% 12.9%
Collected Taxes and Other 112.0 130.3 111.0 28.4 91.3 -14.1% 22.7%
Foreign Exchange Portfolio 42.5 37.2 33.7 24.1 18.6 14.3% 127.8%
Social and Statutory 55.7 43.3 38.5 33.4 23.2 28.5% 139.9%
Tax ans Social Securities 713.8 593.3 503.3 523.2 627.7 20.3% 13.7%
Trading Acc ount 3.1 3.1 2.5 4.2 2.6 -1.7% 19.8%
Financial and Development Funds 4,395.6 4,448.1 4,368.8 4,140.0 3,895.2 -1.2% 12.8%
Other 885.2 872.4 810.6 855.1 839.4 1.5% 5.4%
Minority Interest 1.8 1.7 1.7 1.7 1.6 2.9% 8.7%
Shareholders’ Equity 3,746.4 3,590.1 3,480.0 3,408.5 3,299.8 4.4% 13.5%
Total Liabilities and Shareholders’ Equity 32,339.3 31,098.8 29,864.6 29,084.1 28,573.2 4.0% 13.2%
Table 15 Consolidated Pro Forma Balance Sheet
132 FINANCIAL STATEMENTSSEPTEMBER 2010
R$ Million
Pro Forma Income Statement
Table 16 Pro forma Income Statement
9M10 9M09 3Q10 2Q10 1Q10 4Q09 3Q09 3Q10/ 9M10/2Q10 9M09
Financial Income 3,531.4 3,185.9 1,298.2 1,165.4 1,067.8 1,076.7 1,045.5 11.4% 10.8%
Expenses Income (1,403.5) (1,312.2) (528.5) (454.5) (420.5) (408.0) (417.4) 16.3% 7.0%
Financial Margin 2,128.0 1,873.7 769.7 710.9 647.3 668.7 628.1 8.3% 13.6%
Allowance for Loan Losses (391.7) (325.9) (111.2) (127.1) (153.5) (96.7) (65.8) -12.5% 20.2%
Gross Profit from Financial Income 1,736.2 1,547.8 658.5 583.9 493.8 572.0 562.3 12.8% 12.2%
Other Operations Income / Expenses (950.2) (995.1) (331.6) (306.4) (312.3) (271.4) (333.1) 8.2% -4.5%
Services / Bank Fees 468.2 427.2 160.9 157.4 149.9 152.1 144.6 2.2% 9.6%
Personnel Expenses (687.5) (670.8) (245.5) (227.9) (214.0) (230.2) (232.0) 7.7% 2.5%
Other Administrative Expenses (577.9) (505.0) (182.6) (186.3) (209.0) (173.9) (178.3) -2.0% 14.4%
Other Operation Income 127.8 88.7 39.0 43.1 45.7 55.0 29.1 -9.5% 44.1%
Tax Expenses (150.3) (135.2) (52.7) (49.7) (47.9) (46.7) (44.8) 5.9% 11.1%
Other Operation Expenses (130.4) (199.9) (50.6) (43.0) (36.9) (27.7) (51.8) 17.7% -34.8%
Income from Operations 786.0 552.7 327.0 277.5 181.6 300.6 229.2 17.8% 42.2%
Income Before Taxes on Income 786.0 552.7 327.0 277.5 181.6 300.6 229.2 17.8% 42.2%
Income Tax and Social Contribution (241.0) (173.3) (109.4) (83.2) (48.3) (94.3) (75.6) 31.5% 39.1%
Statutory Interest (33.5) (22.5) (11.1) (11.1) (11.3) (21.9) (7.5) 0.0% 49.0%
Minority Interest (0.1) (0.1) (0.1) 0.0 0.0 (0.1) 0.0 27.5% 11.8%
Net Income 511.4 356.8 206.4 183.1 121.9 184.3 146.0 12.7% 43.3%
133
Board of Executive OfficersBoard of Executive OfficersBoard of Executive OfficersBoard of Executive OfficersBoard of Executive Officers
MATEUS AFFONSO BANDEIRACEO
RUBENS SALVADOR BORDINIVice-President
BRUNO FRONZACARLOS TADEU AGRIFOGLIO VIANNA
CÉSAR ANTÔNIO CECHINATOLUIZ GONZAGA VERAS MOTA
MARINÊS BILHARPAULO ROBERTO GARCIA FRANZ
Officers
LUIZ CARLOS MORLINAccountant CRCRS 51.124
GOVERNO DO ESTADODO RIO GRANDE DO SUL
Secretaria da FazendaBanco do Estado do Rio Grande do Sul
Board of Directors
RICARDO ENGLERTChairman
MATEUS AFFONSO BANDEIRAVice Chairman
ARIO ZIMMERMANNDILIO SERGIO PENEDO
JOÃO VERNER JUENEMANNJOÃO ZANI
MANOEL ANDRÉ DA ROCHARUBENS SALVADOR BORDINI
Board Members