29
1 Acquisition of Control of
1
Acquisition of Control of
2
This presentation contains references and statements, planned synergies,
increasing estimates, projections of results and future strategy for Banco do
Brasil, it’s Associated and Affiliated Companies and Subsidiaries. Although these
references and statements reflect the management’s belief, they also involve
imprecision and high difficult risks to be foreseen, consequently, they may
conduct to a different result than the one anticipated here. These expectations
are highly dependent on market conditions, on Brazil’s economic and banking
system performances, as well as on international market one. Banco do Brasil is
not responsible for bringing up to date any estimate in this presentation.
Disclaimer
3
Section 1
Transaction Description
4
Main terms of the transaction
Structure � The acquisition of Nossa Caixa’s controlling stake will be made through the purchase of 76,262,912 common shares of Nossa Caixa from the State of São Paulo, equivalent to 71.25% of voting and total capital
Price of the Transaction
Payment
Precedent Conditions
Tag Along
Source of Funds
� Acquisition price for 71.25% of Nossa Caixa’s equity: R$ 5,386.5 million (equivalent to R$ 7,560 million for 100% of Nossa Caixa’s equity, or R$ 70.63 per share)
� P / BV 3Q08: 2.4x
� P / Earnings 1: 13.0x
� 18 monthly payments of R$ 299.25 million, starting on March 2009
� Law approval by the House of Representatives of the State of São Paulo
� Transaction approval by the Brazilian Central Bank (Banco Central)
� Based on the Novo Mercado regulation, BB will offer to minority shareholders the possibility to sell their shares under the same terms of those agreed with the Government of the State of São Paulo
� Proceeds available (cash)
1 Based on the net income over the last twelve months, ending September 30th, 2008.
5
Section 2
Growth Strategy
6
240
156
1995 Jun-08
� Incorporação/aquisição de bancos estaduais
Banco do Brasil’s InitiativesScenario
Source: Brazilian Central Bank (Banco Central do Brasil).
1 Includes only multiple and commercial banks authorized to operate by the Central Bank.
2 Pro-forma for the merger of Itaú/Unibanco, Santander/Real, BB/BESC and BB/BEP.
� International Financial Crisis: lack of liquidity, change of compulsory regulation, and acceleration of consolidation process of the Brazilian Banking Sector
� Credit Evolution in Brazil - R$ billion
209.3
1995
379.5
2000
CAGR
8.9%
379.5
1,148.9
2000 2007
Financial partnership +
economic growth
CAGR
21.2%
� Consolidation of the Brazilian Banking Industry
Number of Banks 1% of total deposits owned by
the 5 largest banks 2
Strategic growth
� Merger/acquisition of state-owned banks
� Purchase of loan portfolios / payroll
� Assessment of potential acquisitions of stakes in financial institutions
� Expansion to international markets
59%
75%
1995 Jun-08
7
� Among the top Brazilian banks
� 7th largest in deposits
� 3rd largest state-owned bank
� Stable and predictable funding at competitive costs
� Judicial deposits and savings represents 79.0% of the total deposits
� Stable and attractive client base
� Financial agent of the State of São Paulo
� 559 branches, out of which 552 located in the State of São Paulo, 386 services outlets and 3,723 ATM’s
� 5.7 million clients, of which 5.5 million are individuals
� 1.7 million credit cards
� R$ 27.3 billion of assets under management
� 1.7 million life insurance policies, and 283.1 thousand active pension plan policies
Highlights
Operational HighlightsFinancial Highlights
Footprint in the State of São Paulo
Nossa Caixa is a unique asset, given its strong presence in the strategic State of São Paulo
� The State accounts for 31% of the Brazilian GDP
� More than 40 million inhabitants
R$ billion 2006 2007 % 9M07 9M08 %
Net Income 0.5 0.3 (33%) 0.3 0.5 65%
Shareholders' Equity 2.6 2.8 6% 2.8 3.2 14%
Deposits 27.5 32.3 17% 28.8 34.0 18%
Loan Portfolio 7.2 8.7 22% 8.6 11.5 34%
Total Assets 39.3 47.4 21% 46.5 53.4 15%
8
R$ billion Banco do Brasil 1Nossa Caixa BB + Nossa Caixa Growth
Total Assets 458.9 53.4 512.4 12%
Loan Portfolio 202.2 11.5 213.7 6%
Total Deposits 230.1 34.0 264.0 15%
Assets Under Management 244.2 27.3 271.5 11%
# of Employees (thousands) 88.7 14.3 103.0 16%
# of Branches 4,329 559 4,888 13%
# of Clients (million) 47.6 5.7 53.3 12%
Basel Ratio 2 13.6% 15.6% 12.8% (74) bps
Figures relative to September 30th, 2008.
1 Considers BB + BESC + Bescri.
2 Considers the Basel Ratio of BB’s financial business group.
3 Not assuming the merger of Nossa Caixa into Banco do Brasil.
+
The transaction complements Banco do Brasil’s growth strategy
3
9
Section 3
Transaction Rationale
10
Transaction Rationale
1 Considering the mergers between Itaú/Unibanco and Santander/Real.
� 7th largest bank in total deposits� 9th largest bank in terms of total assets1
� 10th largest group in terms of loan portfolio 1
� Grow and gain scale in a scenario of increasing consolidation within the banking industry
� 552 branches, being the 5th largest branch network in the State of São Paulo
� Complementary distribution networks� 21.4% of combined market share in the State of
São Paulo (in number of branches)
� Increase presence in the State of São Paulo
� Low product penetration within client base� Large and stable base of judicial and savings
deposits at attractive costs� Increase client base and deposits
� Enhance profitability of client base� Expansion of loan portfolio with improvement on
credit quality� Efficiency gains and economies of scale
� Capture synergies
11Source: Brazilian Central Bank – figures as of June 2008.
The combination of BB and Nossa Caixa will create the largest branch network in the State of São Paulo
Branches
1.168846 755
449 394772
552
Bradesco Itaú BB Santander Nossa Caixa Real Unibanco
1.240 1.204 1.1681.324
BB + Nossa Caixa Itaú + Unibanco Santander + Real Bradesco
ConsolidationConsolidation
Branches Located in the State of São Paulo
Branches Located in the State of São Paulo After the Recent Consolidation Process
12
BB and Nossa Caixa hold the largest deposits base, lowest funding costs and strongest leverage potential
Figures relative to September 30, 2008.
In R$ BillionsDemand Deposits
Savings Deposits
Judicial DepositsTotal Low-cost
DepositsLoan Portfolio
Credit / Total Deposits
Credit / Low-cost Deposits
Banco do Brasil 43.0 52.7 32.7 128.4 202.2 88% 157%
Nossa Caixa 3.4 11.0 15.8 30.2 11.5 34% 38%
BB + Nossa Caixa 46.4 63.7 48.6 158.6 213.7 81% 135%
Itaú + Unibanco 23.3 37.2 0.0 60.5 225.3 135% 372%
Bradesco 27.6 35.7 0.0 63.3 160.6 115% 254%
Santander + Real 13.5 19.1 0.0 32.6 130.5 107% 400%
Total 110.8 155.7 48.6 315.0 730.1 105% 232%
13
The complementarity between the networks should generate attractive opportunities to increase the
profitability of Nossa Caixa’s clients
1 As of December 31st, 2007.
2 Monthly income up to R$800.00.
3 Monthly income between R$800.00 and R$4,000.00.
4 Monthly income over R$4,000.00.
Overlap of the Distribution Network 1 Client Profile
2%
2.8%
3.7%
3.7%
3.7%
3.7%
4.6%
4.6%
7.3%7.3%
7.3%
10%
14%
26%
0%Up to 2.5%From 2.5% to 5%
From 5% to 15%Over 25%
Level of Overlap:
� 5.7 million clients
� 1.5 million public employees
– 0.1 million municipal and federal employees
– 1.4 million state employees
Client Segmentation by Income (Individuals) 1
Prime4
Preferential3
Standard 257,2%
36,3%
6,5%
14
Section 4
Benefits of the Transaction
15
The transaction will allow BB to capture potential sy nergies, mainly through the following sources:
Enhancement of Services Improvement of Credit Quality
� Enhance the profitability of Nossa Caixa’s client base by using Banco do Brasil’sbusiness model and product portfolio
� Improvement of credit analysis (credit scoring), leading to reduction in delinquency
Expansion of Credit Portfolio
� Leverage on Nossa Caixa’sdeposits base to increase credit operations
� Under penetrated client base
1 2 3
4
Efficiency Gains Tax Benefit from Goodwill Amortization
� Improvement of revenue and cost efficiency, combined with economies of scale, through the implementation of Bancodo Brasil’s operational model
� Tax benefit from the goodwill amortization after the merger of Nossa Caixa with BB
Optimization of Expenses
� Optimization of IT and administrative expenses
4 5 6
16
Potential expansion of the loan portfolio using Nossa Caixa’s attractive funding base
� Currently, Nossa Caixa invests R$28.4 billion of its funding in marketable securities that yields approximately CDI
� There is a strong potential to increase the credit penetration within Nossa Caixa’s individual client base
� Banco do Brasil’s credit portfolio represents 88% of the bank’s total deposits, which indicates a great potential for credit expansion within Nossa Caixa
� Assuming that Nossa Caixa reaches BB’s loans to deposits ratio, there is a potential to increase its net interest margin result by approximately R$ 2.0 billion 2
per year
230.1202.2
34.0
11.5
Deposits Loans Deposits Loans
In R$ billions
87.9% 33.8%
� Judicial Deposits
– Stable and predictable
– Attractive cost (TR + 6%)
– Highly disperse
– No compulsory deposits
� Savings
– One of the bank’s most traditional products
– 5th largest Brazilian bank in saving deposits in terms of market share
– Attractive cost (TR + 6%)
Loans / Deposits
1 As of September 30, 2008.2 Based on the average spread for loans to individuals of BB after allowances for loans losses during 9M08. Not considering any marginal operational expenses and/or taxes.
11 1 1
Deposits Profile 1
Loan Portfolio and Deposits
1
Demand10%
Savings32%
Time11%
Judicial47%
17
The synergies with Nossa Caixa credit growth can be captured even with an average spread of 4%
1 Data from Banco do Brasil as of September 30, 2008.
2 Data from Nossa Caixa as of September 30, 2008.
3 Additional credit calculated based on the difference between the loan to deposits ratio of Banco do Brasil and Nossa Caixa.
4 Consolidated spread of Banco do Brasil as of September 30, 2008.
5 Average spread for individuals of Banco do Brasil as of September 30, 2008.
6 Conservative spread.
Under different scenarios, even considering conservative assumptions, suggests gains after taxes in excess of R$440 million per year, in a recurring basis
1
1
2
2
3
4 5 6
Loan Portfolio BB 202,201 202,201 202,201Total Deposits BB 230,050 230,050 230,050Loan / Deposits 87.9% 87.9% 87.9%
Loan Portfolio NC 11,489 11,489 11,489Total Deposits NC 33,960 33,960 33,960Loan / Deposits 33.8% 33.8% 33.8%
Additional Credit NC 18,360 18,360 18,360Spread 7.1% Spread 11.0% Spread 4.0%Gains before Taxes 1,303.5 2,019.6 734,4IR + CSLL 40% 40% 40%Gains after Taxes 782.1 1,211.7 440.6
Scenario 1 - Spread BB 9M08 Scenario 2 - Spread for Pa yroll Loans Scenario 3 - Conservative Spread
1
R$ million
4 5 6
Loan Portfolio BBTotal Deposits BBLoan / Deposits
Loan Portfolio NCTotal Deposits NCLoan / Deposits
Additional Credit NC
Gains before TaxesIR + CSLLGains after Taxes
Loan Portfolio BBTotal Deposits BBLoan / Deposits
Loan Portfolio NCTotal Deposits NCLoan / Deposits
Additional Credit NC
Gains before TaxesIR + CSLLGains after Taxes
18
Nossa Caixa’s low product penetration presents strong potential gains for BB in banking s ervices
54%
89%
Credit Cards/Current Account Holders (Individuals) 2
High Income Medium Income Low Income
Product Penetration (Individuals) 1
Assets Under Management / Current Account Holders (Individuals) (R$ / client) 2
Segmentation
1 As of December 31st, 2007.2 As of September 30th, 2008.3 Gross interest margin + banking service fees
Assuming that Nossa Caixa Banking Service Fees reach 25% of total revenues 3, gains resulted from the change in mix could reach approximately R$ 130 million per year
20.0%
32.2%
22.6%
31.4%
2007 9M08
Banking Service Fees as a % of Total Revenues 3
2
2.9
5.1
2.63.2
1.5 1.6
8.5
9.1
19
134.1%95.1%
134.1% 146.5%119.3% 107.7%
4.9% 3.6%
7.5%
3.3%
10.1%
6.4%
Enhancement of the credit quality
Coverage Ratio 3
Allowances for Loan Losses / Loan Portfolio
Allowances for Loan Losses Expenses / Average Loan Portfolio
1 As of December 31st, 2007.2 As of September 30st, 2008.3 Allowance for loan losses expenses over charge-offs.4 Accumulated over the last 12 months ended on September 30th, 2008.
9.1%
6.8%
9.0%
5.9%
11.4%
7.1%
2006 2007 3T08
2006 2007 9M08 4
Rationale for Credit Quality Enhancement
� Enhancement in risk management technology (automatic credit scoring)
� Economies of scale in credit analysis and collections
2006 2007 9M08
3
20
Strong potential to reduce the implied acquisition multiple through efficiency gains in Nossa Caixa
1 Personnel Expenses + Other Administrative Expenses + Other Tax Expenses/ (Gross Profit form Financial Intermediation + Service Revenues + Other Operational Revenues /Expenses). Does not consider amortization of the FOPAG for the Government of the State of São Paulo.
2 Considers 40% of effective tax rate (IR and CSLL).
3 Assuming a transaction value of R$7,560 million for 100% of Nossa Caixa.
4 Accumulated over the last twelve months ended as of September 30th, 2008.
45,0% 45,7%
69,6%72,0%
Efficiency Ratio 1
2007 9M08 4
4/5
Nossa Caixa'sEfficiency
Ratio 1
Potential Gain with Synergies
after-tax 2
Pro-forma Net Income LTM
Implied Price/Earnings
Multiple 3
69.6% 0.0 581.1 13.0x
65.0% 114.9 696.0 10.9x
60.0% 238.7 819.8 9.2x
55.0% 362.6 943.6 8.0x
50.0% 486.4 1,067.5 7.1x
45.7% 592.8 1,173.9 6.4x
R$ million
21
Banco do Brasil has conditions to make the transactio n accretive in a earnings per share perspective since 20 09
1 BB and Nossa Caixa net earnings estimates based in market consensus. The estimates above were not prepared by Banco do Brasil, and therefore, Banco do Brasil does not take any responsibility for the numbers above. These estimates refer to the average of market analyst forecasts according to the information published by Bloomberg. Source: Bloomberg.
2 Opportunity cost based on current Selic interest rate (13.75%) over the transaction value assuming 100% of minority shareholders acceptance to tag-along offer (R$ 7,560 million) and excluding taxes. Considering 10 installments for 2009 and considering 8 additional installments for 2010.
3 Considering only the controlling stake of Nossa Caixa.
4 Minimum net gains necessary to make the transaction accretive in a earnings per share perspective.
Even under conservative scenarios, we estimate annual synergies in excess to R$100 million
3
3
In R$ millions except otherwise mentioned
Banco do Brasil
Nossa CaixaOpportunity Cost
of Cash in the Transaction 2
Banco do Brasil + Nossa
Caixa
Synergies after taxes
Banco do Brasil + Nossa
Caixa after Synergies
Net Income 2009E 1 6,790 248 (347) 6,692 100 6,792
# Shares (million) 2,565 76 2,565 2,565
Earnings per Share (R$) 2.65 3.25 2.61 2.65
2009
E
4
22
Synergies with credit expansion are possible even considering a reduction in growth expected for 2009
Ave
rage
bal
ance
of a
dditi
onal
cre
dit –
R$
mill
ion
BB – São Paulo
44,662 11,489Loan Portfolio – R$ million
5.9 5.7
7,570 2,016
3.8 x
# of Clients - million
Loan / Clients – R$
Loan / ClientsBB / Nossa Caixa
Figures relative to September 30, 2008.
1 Net gains calculated considering spread net of taxes (40% tax rate of IR + CSLL).
2 EPS of 2.65 forecasted for 2009 (Bloomberg consensus) was considered as the break-even point.
1
2
Spread – 4.1% 7.0% 11.0%
1,000 24.84 42.00 66.002,000 49.68 84.00 132.003,000 74.52 126.00 198.004,000 99.36 168.00 264.005,000 124.20 210.00 330.006,000 149.04 252.00 396.00
1,000 2.62 2.63 2.632,000 2.63 2.64 2.663,000 2.64 2.66 2.694,000 2.65 2.67 2.715,000 2.66 2.69 2.746,000 2.67 2.71 2.76
Net Gains - R$ million
EPS - R$
23
-
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Jan-
07
Mar
-07
May
-07
Jul-0
7
Sep
-07
Nov
-07
Jan-
08
Mar
-08
May
-08
Jul-0
8
Sep
-08
Nov
-08
Why acquiring Nossa Caixa now?
1 Price to book value based on Banco do Brasil’s common shares (ON). Based on closing market prices and on the last available published shareholders’ equity. Source: Economática, Companies' reports and Brazilian Central Bank.
Timing Considerations Banco do Brasil’s Historical P / BV 1
� Favorable regulation– MP no 443
� Scenario of increasing consolidation within the Brazilian banking sector
� Complementary operations with focus in the State of São Paulo and strong potential to capture synergies
� Price paid reflects strategic value of Nossa Caixa to BB and is in line with BB’s historical trading multiple and recent transactions in the sector
Precedent Transaction Multiples
Date Buyer Target P/BVNov-08 Itaú Unibanco 2.0xSep-07 BB BESC 1.7xMay-07 Santander Real 3.6xFeb-07 Societe Generale Cacique 2.6xJan-07 Bradesco BMC 2.8xMay-06 Itaú Bank Boston 2.1xDec-05 Bradesco BEC 1.9xFeb-04 Bradesco BEM 2.3xAverage 2.4x
Average = 2.7x
Average 2008 = 2.4x
1.2x(19-Nov-08)
24
Section 5
Indicative Timetable
25
Next steps – indicative timetable
D1
Signing of the sales and purchase
Agreement
Announcement of acquisition of Nossa Caixa’s
controlling stake
D
Signing of memorandum of understanding
D1+10D1-15
TJSP’sapproval
Announcement to the market –SPA and tag-
along offer
BB’sshareholders’meeting call
notice
D1+15
Filling of regulatory
documentation with Central Bank
D1+30
Filing of the tag-along offer
documentation with CVM
D2 (?)
Transaction approval by State of São Paulo
House of Representatives
D3 (?)
Transaction approval by the Central Bank
Mar-09
Transaction closing and financial settlement
D3 + 10
Announcement of tag along offer
terms
D3 + 30
Auction of tag-along offer
Assuming shortest possible timeframe
26
Section 6
Conclusion
27
Conclusion
+
Nossa Caixa is a unique asset for Banco do Brasil
� Another major step for BB’s growth and value creatio n strategy
� Expansion of BB’s presence in the State of São Paulo
� Consolidation of BB’s position as a leading financia l institution in the Brazilian financial industry
– Combined market share of 16% in total assets
– Combined market share of 22% in total deposits
� Combination of highly complementary assets with sig nificant potential to capture synergies
� Enhancement of services to clients through the expa nsion of distribution network and product portfolio
� Expansion of BB’s funding base, with the addition of Nossa Caixa’s attractive deposits
� Value creation for shareholders, with benefits for Nossa Caixa, employees and clients
28
Transaction advisors
Financial Advisor
Valuation and Due Diligence
Synergies & Integration
Fairness Opinion
29
Investor RelationsSBS Qd.01 – Ed.Sede III, 5º andar
CEP - 70.073-901 Brasília – DF
Phone: (61) 3310.3990Fax: (61) 3310-3735
For further details, please access www.bb.com.br/ri
