COMPANY ECONOMIC OPERATING AND CORPORATE …€¦ · R$ 1 million through the BR Startups Fund in...

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COMPANY PROFILE

KEY INFORMATION

ECONOMIC ENVIRONMENT AND

BANK SECTOR

OPERATING AND FINANCIAL

PERFORMANCE

CORPORATEGOVERNANCE

RISK AND CAPITAL

MANAGEMENT

PEOPLEMANAGEMENT

SUSTAINABILITY

ANNUAL REPORT 2017

MESSAGE ABOUT 2017 RESULTS 3

COMPANY PROFILE 5

OWNERSHIP STRUCTURE

CORPORATE STRATEGY

KEY INFORMATION 10

ECONOMIC ENVIRONMENT AND BANK SECTOR 12

OPERATING AND FINANCIAL PERFORMANCE 14

WHOLESALE BANKING BUSINESS (CORPORATE BANK)

OPERATING TOMBSTONES 2017

WEALTH MANAGEMENT BUSINESS

CONSUMER FINANCE

FUNDING AND LIQUIDITY

BASEL

RATINGS

CORPORATE GOVERNANCE 26

RISK AND CAPITAL MANAGEMENT 29

RISK MANAGEMENT

PEOPLE MANAGEMENT 36

SUSTAINABILITY 39

INDEX

3

COMPANY PROFILE

KEY INFORMATION


BANK SECTOR


PERFORMANCE

CORPORATEGOVERNANCE

RISK AND CAPITAL

MANAGEMENT

PEOPLEMANAGEMENT

SUSTAINABILITY

MESSAGE ABOUT 2017 RESULTS

4

COMPANY PROFILE

KEY INFORMATION


BANK SECTOR


PERFORMANCE

CORPORATEGOVERNANCE

RISK AND CAPITAL

MANAGEMENT

PEOPLEMANAGEMENT

SUSTAINABILITY

In addition, we maintained conservatism in the management of funding, liquidity and capital,

strengthening the quality of our balance sheet. The volume of funds raised reached R$ 61.2

billion in Dec.17, with an increase in the participation of more stable funding instruments, such

as Financial Letters. In terms of liquidity, we kept the cash free at a conservative level, more

than enough to fully cover our funding with daily settlement. With regard to capital, we closed

Dec.17 with a Basel index of 15.5% - above the regulatory minimum of 10.5% - and with

Capital Level I of 11.4%, composed entirely of Principal Capital (CET1).

MESSAGE ABOUT2017 RESULTS

s Net income of R$ 582 million, in 2017, an increase of 36.7% compared to 2016, when it totaled R$ 426 million.

s Growing and diversified revenue generation. Total revenues (gross margin and insurance brokerage revenues) increased 4.6% in the quarter and 7.0% in 2017/2016. Revenue from services and insurance increased to 25% of total revenue in 2017 (2016: 22%), in line with our strategy of diversifying revenue sources. It is also important to highlight that Net Interest Margin (NIM) increased to 5.6% in 2017, compared to 5.2% in the previous year.

s Reduction in credit costs. The result with Reduction in credit costs and impairments - net of credit recovery revenues - decreased 11.3% compared to 2016, driven by improvement in the quality of vehicle financing portfolio. The Coverage Ratio for operations with arrears of more than 90 days remained conservative, closing Dec.17 at 192%, compared to 149% at Dec.16.

s Drop in delinquency. The loan portfolio’s delinquency over 90 days (NPL90) closed Dec.17 at 4.0%, with a reduction of 1.5 pp compared to Dec.16. In Wholesale, the NPL90 dropped to 1.8% in Dec.17, while NPL90 of the Retail portfolio decreased to 4.7% in Dec.17, reflecting the improvement in the quality of the Vehicle portfolio, which NPL90 reduced 0.9 pp in the last 12 months to 4.2%.

s Control of the cost base. Administrative and personnel expenses decreased nominally by 4.2% in the comparative period 2017/2016. Due to the strict cost control, the Efficiency Index of the last 12 months improved, reducing to 34.4% in Dec.17, compared to 36.4% in Dec.16.

In 2017 we continue to participate in the strategic profit creation, based on the profitability of the business, the increase of operational capacity and the diversification of revenues.The main highlights were:

In 2017, we also advanced the strategy of business diversification and digital transformation. We implemented new products with relevant Brazilian fintechs, such as GuiaBolso; we have consolidated partnerships for the provision of Student Financing with Ideal Invest and Kroton; and we have launched financing for the acquisition of residential solar energy board with Solar Portal, the largest digital market place in the sector. In Credit Cards, we launched the mobile app and expanded the points redemption options with the new Livelo and Avianca partnerships. In 4Q17, we contributed R$ 1 million through the BR Startups Fund in “QueroQuitar!”, online debt negotiation and financial education Fintech; we announce the new BV website, allowing end customers a single channel to access the contracted products; and we successfully concluded the first stage of “InovaJunto”, an innovation program jointly with BB shareholder that led employees from both institutions to develop projects in Silicon Valley.

In 2018, we will continue to advance our business profitability strategy, increase operational efficiency and diversify revenue sources, in order to sustain the consistent trajectory of our results.

Elcio Jorge dos SantosCEO

COMPANY PROFILE

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KEY INFORMATION


BANK SECTOR


PERFORMANCE

CORPORATEGOVERNANCE

RISK AND CAPITAL

MANAGEMENT

PEOPLEMANAGEMENT

SUSTAINABILITY

COMPANY PROFILE

Banco Votorantim is one of the largest private Brazilian banks in total assets. Founded in 1988

as a securities dealer (DTVM), in 1991 it became a privately capital multiple bank. It currently has a

diversified portfolio of bank business in the Wholesale, Consumer Finance and Wealth Management. Its

activities include:

In 2009 was established a strategic partnership with Banco do Brasil, the largest financial institution in Latin America, which acquired 49.99% of Banco Votorantim’s voting shares and 50% of its total capital.This partnership is based on a strong strategic rationale and long-term vision, and has allowed BV and BB to explore business opportunities in various segments. BV Financeira started operating as an extension of BB in auto financing out of bank branches, consolidating its leadership position in used auto finance at multi-brand dealers. Additionally, VWM&S has worked together with BB DTVM in the development, management, administration and distribution of customized and innovative investment funds. Based on strong business logic, this partnership has favored business expansion and contributed to an even stronger and more competitive institution.

BV Financeira, which is responsible for the consumer finance business, operates mainly through an outsourced distribution network, comprising more than 20 thousand vehicle resales and approximately 1.2 thousand banking correspondents, in addition to 67 consumer credit shops in the main cities of Brazil.

I. retail operations;

II. service to companies;

III. management of investment funds;

IV. securities broker;

V. leasing operations

VI. customer service for private banking

VII. international operations.

To support its operations and provide strategic capillarity, Banco Votorantim is headquartered in São Paulo, with 9 points of service in the Wholesale business in Brazil, as well as a subsidiary and agency in Nassau (Bahamas). In December 17 it had the involvement of four thousand employees.

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KEY INFORMATION


BANK SECTOR


PERFORMANCE

CORPORATEGOVERNANCE

RISK AND CAPITAL

MANAGEMENT

PEOPLEMANAGEMENT

SUSTAINABILITY

OWNERSHIP STRUCTURE

Total Shareholders % Shares ON % Shares PN % of CT

Votorantim Finanças 52,695,736,408 Votorantim Finanças 50.01% 49.99% 50.00%

Banco do Brasil 52,695,736,408 Banco do Brasil 49.99% 50.01% 50.00%

Total 105,391,472,816 Total 100.00% 100.00% 100.00%

Votorantim Finanças(1)

BV Financeira

Votorantim Asset

BV Leasing

Votorantim Corretora de Seguros

Promotiva

BVIA

Banco do Brasil(1)

Votorantim S.A.

50%50%

100%

100%

100%

100%

99.99%

100%

100%

100%

Banco Votorantim

BVIA FIP

BVEP

(1)Percentage calculated on Total Capital

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KEY INFORMATION


BANK SECTOR


PERFORMANCE

CORPORATEGOVERNANCE

RISK AND CAPITAL

MANAGEMENT

PEOPLEMANAGEMENT

SUSTAINABILITY

Retail Business (Consumer Finance)

The core business of Retail is Vehicle Financing, in which the Bank operates through the subsidiary BV, mainly in the market for used light commercial vehicles (multi-brand resellers), in which it has a history of leadership and recognized competence.

Among its competitive advantages, it is worth mentioning:

I. expertise in pricing, credit granting and collection;

II. high capillarity through an extensive outsourced distribution network;

III. aagility in decision making; and

IV. relationship with resellers.

Taking advantage of the vehicle customer

base, the Bank seeks to diversify its sources

of revenue through credit cards and

insurance brokerage, both with well defined

strategies:

Credit Cards

It seeks to expand the volume of active

cards - issued with the MasterCard and

Visa flags, both through the offering to the

current customer base of vehicle financing

and through the offering to customers of

business partners.

Insurance Brokerage

Through Votorantim Corretora de Seguros,

it aims to increase insurance brokerage

revenues. In addition to keep growing in

products such as Auto and Lender, the

Bank has also diversified its portfolio, which

currently includes capitalization products

and life insurance, residential and personal

accident insurance.

In addition, the Bank has specific strategies for other loan and financing products.

Payroll Loan

It aims to maintain a relevant position in the payroll loan market, focusing on Private (organic portfolio growth) and INSS (portfolio refinancing).

Personal Loans and Other Business

• Personal Loan: partnership with fintechs (eg, GuiaBolso and Neon Payments) and leveraging the BV customer base;

• Personal Loan: partnership with fintechs (eg, GuiaBolso and Neon Payments) and leveraging the BV customer base;

• Real State Loan;

• Financing for the acquisition of residential solar energy board in partnership with Solar Portal.

Banco Votorantim seeks to consolidate itself among the main national private banks,

leveraging synergies with shareholders and bringing the customer to the core of the business.

To this end, the Bank has focused on business profitability, increased operational efficiency and

diversification of revenue sources, investing continuously in digital transformation aimed at improving the customer

experience. Banco Votorantim’s portfolio is divided into three

CORPORATE STRATEGY

business units:

• Retail Business (Consumer Finance)

• Wholesale Bank (Corporate Bank)

• Resource management (Wealth Management)

In addition, the Bank has sought to increase the commission income of Promotiva S.A., a joint venture with BB, which mainly operates in the origination of payroll loans (Public and INSS) directly to the shareholder.

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KEY INFORMATION


BANK SECTOR


PERFORMANCE

CORPORATEGOVERNANCE

RISK AND CAPITAL

MANAGEMENT

PEOPLEMANAGEMENT

SUSTAINABILITY

Wealth Management

The Asset Management business develops and provides sustainable solutions in asset management, with well-defined strategic objectives for the two distinct markets in which it operates:

Large Corporate

Customers¹ (includes financial institutions)

with annual revenues above R$ 1.5 billion,

whose main focus is to operate in the capital

market, financial structuring, guarantees

(sureties) and treasury.

Corporate

Customers¹ with revenues up to R$ 1.5

billion, focused on selective operations in

cash management, financial structuring,

guarantees (guarantees), working capital,

hedge, foreign exchange, capital markets and

mergers and acquisitions.

Asset Management

Recognized for consistency in performance and the development of solutions appropriate to customers needs, through its innovative and differentiated capacity for structuring and managing high added value products.

Votorantim Asset Management (VAM) occupies a prominent position in its peer group (i.e., Assets without branch network structure) and has a partnership with BB for the structuring, management, administration and distribution of investment funds.

Private Bank

Positioning itself among the best private banks

of the market, expanding its performance in

integrated patrimonial management through

differentiated solutions.

Private Bank adopts a macro approach,

evaluating different scenarios to identify the

best investment options, always supported

by modern management tools, statistical

models and specially developed systems

for interpretation of stress scenarios and

risk monitoring in order to prioritize the

protection of the invested capital.

Wide offer of products

Local Currency & Cash Management

Currency & FX

Corporate Finance

Project Finance

Derivatives

Capital market & M&A

Funding

Wholesale Bank (Corporate Bank)

With a diversified portfolio of banking products and services, industry expertise and an agile and customized service, the Wholesale Bank serves customers with annual revenues above R$ 300 million, which are internally grouped into two segments.

1Economic groups

KEY INFORMATION

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COMPANY PROFILE


BANK SECTOR


PERFORMANCE

CORPORATEGOVERNANCE

RISK AND CAPITAL

MANAGEMENT

PEOPLEMANAGEMENT

SUSTAINABILITY

KEY INFORMATION

2016 2017 Variation 2017/2016

RESULTS (R$ MILLION)

Gross Financial Margin 4,985 5,081 1.9%

Result of loan losses and impairments (2,260) (2,004) - 11.3%

Revenue from services and bank fees 1,123 1,318 17.4%

Personnel and administrative expenses (includes PLR) (2,510) (2,403) - 4.2%

Operating income 580 1,191 105.4%

Net income 426 582 36.7%

MANAGEMENT INDICATORS (%)

Return on Average Equity1 (ROAE) 5.2 6.8 1.6 p.p.

Return on Average Assets2 (ROAA) 0.4 0.6 0.2 p.p.

Net Interest Margin3 (NIM) 5.2 5.6 0.4 p.p.

Efficiency Index (IE) - accumulated of 12 months 36.4 34.4 - 2.0 p.p.

Basel Ratio 15.1 15.5 0.4 p.p.

Tier I Capital Ratio 11.2 11.4 0.2 p.p.

MACROECONOMIC INDICATORS5

CDI - in the period (%) 14.0 14.0 0.0 p.p.

Selic rate - end of the period (% a.a.) 13.75 7.00 - 6.8 p.p.

IPCA - in the period (%) 6.3 2.9 - 3.4 p.p.

Dolar exchange rate - end of the period (R$) 3.26 3.31 1.5%

Dec16 Dec17 Variation Dec17/Dec16

BALANCE SHEET (R$ MILLION)

Total assets 104,166 94,363 - 9.4%

Extended Loan portfolio 63,434 59,021 - 7.0%

Wholesale segment 29,974 23,029 - 23.2%

Consumer Finance segment 33,459 35,992 7.6%

Funds raised 64,073 58,444 - 8.8%

Net Income 8,358 9,074 8.6%

LOAN PORTFOLIO QUALITY INDICATORS (%)

90-day NPL/ Loan portfolio 5,5 4.0 - 1.5 p.p.

Provision balance/ 90-day NPL 140 192 52.0 p.p.

OTHER INFORMATION

Employees6 (amount) 3,936 3,873 - 1.6%

Managed Resources7 (R$ Million) 53,753 54,749 1.9%

1Ratio between net income and average equity for the period. Annualized exponentially;2The quotient between the net profit and the total average assets of the period. Annualized exponentially;3Ratio between the gross financial margin and the average profitable assets of the period. Annualized exponentially;4IE = personnel and administrative expenses / (gross financial margin + revenue from services and tariffs + participations in affiliates and subsidiaries + other operating revenues + other operating expenses);5Source: Cetip; Bacen; IBGE;6Does not consider trainees and statutory;7Includes onshore funds (ANBIMA criteria) and private customer funds (fixed income, variable income and offshore funds).

ECONOMIC ENVIRONMENT AND BANK SECTOR

13

COMPANY PROFILE

KEY INFORMATION


PERFORMANCE

CORPORATEGOVERNANCE

RISK AND CAPITAL

MANAGEMENT

PEOPLEMANAGEMENT

SUSTAINABILITYMESSAGE ABOUT

2017 RESULTS

ECONOMIC ENVIRONMENT AND BANK SECTOR

The second half of 2017 was a period of global exuberance. Signs of economic expansion in a

number of developed countries, particularly in the United States, have generated greater balance with

emerging markets, especially for international trade. At the same time, the deceleration in inflation observed

at the beginning of the year reduced the pressure on the conduct of monetary policy by the main central banks,

making international liquidity conditions very favorable. As a result, there was significant appreciation of asset prices, recovery

of commodity prices and high interest in emerging markets.

This global environment has allowed the economic and financial environment to remain stable, in spite of all fiscal and domestic policy

uncertainties, favoring the return of confidence and the recovery of growth. GDP expectations for 2017 and 2018 have been revised upwards.

In addition, inflation continued to be favored by food prices and allowed the Central Bank to extend the cycle of monetary easing. The IPCA closed the year at

2.95% and the Selic rate reached the level of 7.0%.

This scenario favored the credit market, especially the concessions for individuals. With lower

The year 2017, therefore, has brought overcoming the recession and better prospects for economic growth for the next few years. Interest, income and confidence indicate that credit supply and demand conditions will continue to recover, favoring consumption and investment over the coming semesters.

household indebtedness, recovery of real income generated by falling inflation, lower financial costs and continued recovery of confidence, free loan portfolios had real growth close to 3.0%, with default at historically low levels. Durable consumer goods segments, particularly the vehicle market - the segment in which Votorantim is the leader with its retail brand BV - benefited greatly in this scenario and both new and used vehicle sales 2017. However, the challenge in the corporate segment continues, with corporate defaults still operating above its historical average and a drop of approximately 7.0% in the free loan portfolio. Potential instabilities in the financial markets in 2018 may reinforce the present caution in this market.

OPERATING AND FINANCIAL PERFORMANCE

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COMPANY PROFILE

KEY INFORMATION


BANK SECTOR

CORPORATEGOVERNANCE

RISK AND CAPITAL

MANAGEMENT

PEOPLEMANAGEMENT

SUSTAINABILITY

OPERATING AND FINANCIAL PERFORMANCE

The operations of Banco Votorantim are conducted through a group of controlled companies that act integrally in the financial market, including in relation to risk management. Having as shareholders the Votorantim Group and Banco do Brasil, Banco Votorantim is one of the largest Brazilian private banks in total assets and credit portfolio, with a diversified portfolio of wholesale bank business, consumer finance and resource management .

Banco Votorantim seeks consolidation among the main national private institutions, leveraging synergies with shareholders and placing the customer at the center of the business. To this end, the Bank focuses on profitability of business, increasing operational efficiency and diversifying revenue sources, investing continuously in digital transformation aimed at improving the customer experience. The result of 2017 confirms the progress in the implementation of the strategic plan, the main highlights of the year being:

s Net income of R$ 582 million in 2017, compared to R $ 426 million in 2016, equivalent to an annualized return on equity of 6.8%.

s Income growth and diversification. Gross Financial Margin grew 7.9% in 2017/2016, while total revenues from services and tariffs increased by 17.4% in the same comparison. It is worth noting that gross income from financial intermediation (after the Reduction in credit costs) increased 10.7%, totaling R $ 3,047 million in 2017.

s Maintenance of conservatism in credit. The balance of credit portfolio ended Dec. 17 at R$ 48.8 billion, growth of 2.2% last 12 months. Wholesale decreased 10.4% from Dec.16, while Retail grew 7.6% on the same basis of comparison.

s Delinquency decrease. The delinquency rate over 90 days of the rated portfolio ended Dec. 17 at 4.0%, 1.5 pp below Dec.16. Retail loan defaults reduced by 0.8 pp from Dec.16 to 4.7%, mainly reflecting the improvement in the quality of the Vehicle portfolio, whose delinquency reduced by 0.9 pp in the last 12 months.

s Effective management of costs. Administrative and personnel expenses decreased nominally by 5.8% compared to 2017/2016. Due to the strict cost control, the Efficiency Index of the last 12 months improved, reducing to 34.4% in Dec.17, compared to 36.4% in Dec.16.

In 2017, there was a change in the strategy of business diversification and digital transformation. Increased capacity to execute new investment data, data analysis and database planning. experience. Through artificial intelligence, big data, speech analysis, business intelligence, among other themes and technologies, it became a data analysis movement in one of the pillars of Votorantim’s transformation process.

In line with the plan to continue advancing on fronts that promote an environment of innovation

and fostering companies that are changing the markets in which they operate, investments

were made through the BR Startups Fund, a partnership with Microsoft, in the QueroQuitar!

Platform, a company that has debt and financial education. It has also strengthened its activities

with GuiaBolso, Brazil’s main financial control and education application. Through this platform,

Banco Votorantim offers clients the possibility of contracting online financing with the exclusive

conditions of BV, the Bank’s Retail brand.

Finally, the first edition of “InovaJunto”, a joint innovation program with the shareholder Banco do Brasil, has been successfully completed, bringing employees from both institutions to develop projects in Silicon Valley, the United States, the world technology innovation

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COMPANY PROFILE

KEY INFORMATION


BANK SECTOR

CORPORATEGOVERNANCE

RISK AND CAPITAL

MANAGEMENT

PEOPLEMANAGEMENT

SUSTAINABILITY

WHOLESALE BANKING BUSINESS (CORPORATE BANK)

With a diversified portfolio of banking products and services, industry expertise, agile and customized

service, Banco Votorantim’s Wholesale Business area serves clients with annual revenues above R$

300 million, which are internally grouped into two segments:

Large Corporate

Economic groups (including financial institutions) with annual revenues above R$ 1.5 billion, whose

main focus is to operate capital markets, financial structuring, guarantees and treasury.

Corporate

Economic groups with revenues up to R$ 1.5 billion, focused on selective operations in cash

management, financial structuring, guarantees (guarantees), working capital, hedge, foreign

exchange, capital markets and mergers and acquisitions.

Wide products offer

Local Currency & Cash Management

Currency & FX

Corporate Finance

Project Finance

Derivatives

Capital Market & M&A

Funding

1Risk-adjusted return.

Strategy

Discipline in Capital Allocation and Risk Management (RAR¹)

Leverage competitive advantages

• Agility and flexibility in serving customers

• Sector expertise (infrastructure and agribusiness)

• DCM local distribution

• Officers with responsibility for credit

Increased operational efficiency

Private TVM Others

Loan Guarantees Financing Export/Import

BNDES onlendings

Extended Loan Portfolio by Product (R$B)

9.4 7.8 5.4 3.3 27.4

8.9 4.9 3.5 21.02.8Dec/17

Dec/16 0.6

0.3

The Wholesale loan portfolio (including sureties, guarantees and private TVM) ended Dec.17 with a balance of R $ 21.0 billion, down 23.3% in 12 months, as a result of the greater discipline of capital use and demand moderation.

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COMPANY PROFILE

KEY INFORMATION


BANK SECTOR

CORPORATEGOVERNANCE

RISK AND CAPITAL

MANAGEMENT

PEOPLEMANAGEMENT

SUSTAINABILITY

MARANHÃO

PIAUÍ

PARAÍBA

DISTRITOFEDERAL

Performance map

Banco Votorantim is present in the blue States.

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COMPANY PROFILE

KEY INFORMATION


BANK SECTOR

CORPORATEGOVERNANCE

RISK AND CAPITAL

MANAGEMENT

PEOPLEMANAGEMENT

SUSTAINABILITY

OPERATING TOMBSTONES 2017

jan/17

Leader Coordinator

DEB INFRA - 10 years

dec/17

DEB - 4 years

Coordinator

LF - 2 e 3 years

Leader Coordinator

dec/17

DEB - 5 e 7 years

Coordinator

dec/17

FII

dec/17

Coordinator Leader Coordinator

CRI - 6 years

dec/17

Leader Coordinator

CRI - 4 years

dec/17

CRA - 4 years

Leader Coordinator

dec/17 dec/17

Coordinator

CRA - 3 years

nov/17

Leader Coordinator

NP - 3 years

nov/17

Leader Coordinator

NP - 2 years

nov/17

Leader Coordinator

NP - 2 years

nov/17

Leader Coordinator

FIDC - 3 years

sep/17

Leader Coordinator

NP - 1,5 years

sep/17

Leader Coordinator

LF - 2 e 3 years

sep/17

Leader Coordinator

CRA- 4,5 years

sep/17

Leader Coordinator

CRI - 8 e 9 years

aug/17

Coordinator

CRA - 3 years

aug/17

Coordinator

DEB - 5 years

aug/17

Leader Coordinator

NP - 6 meses

Leader Coordinator

aug/17

CRI - 4 years

Leader Coordinator

aug/17

LF - 2 years

jul/17

Leader Coordinator

DEB - 2 years

jul/17

Leader Coordinator

CRI - 12 e 15 years

jul/17

Leader Coordinator

DEB - 3 e 5 years

jun/17

Leader Coordinator

NP - 1 ano

jun/17

Leader Coordinator

CRI - 3 years

jun/17

Leader Coordinator

DEB - 5 years

jun/17

Leader Coordinator

FIDC - 3 years

jun/17

Leader Coordinator

NP - 1 ano

jun/17

Leader Coordinator

CRA - 3 years

jun/17

Leader Coordinator

NP - 1 mês

v17

Coordinator

DEB - 3 years

may/17

Coordinator

DEB - 7 years (Repac 5º)

Leader Coordinator

may/17

NP - 1 e 2 years

Coordinator

may/17

DEB - 5 e 7 years

may/17

Leader Coordinator

CRI - 3 years

apr/17

Coordinator

DEB - 3 years

mar/17

Leader Coordinator

NP - 1 ano

jan/17

Leader Coordinator

R$ 23,250,000

R$ 130,000,000 R$ 405,000,000 R$ 1,085,020,000 R$ 211,000,000 R$ 100,000,000 R$ 51,000,000 R$ 80,000,000 R$ 119,959,000 R$ 20,000,000 R$ 60,000,000

R$ 131,000,000 R$ 699,500,000 R$ 150,000,000 R$ 300,000,000 R$ 65,000,000 R$ 120,000,000 R$ 351,000,000 R$ 400,000,000 R$ 150,000,000 R$ 50,000,000

R$ 300,000,000 R$ 200,000,000 R$ 275,000,000 R$ 500,000,000 R$ 150,000,000 R$ 44,500,000 R$ 300,000,000 R$ 1,000,000,000 R$ 135,000,000 R$ 50,000,000

R$ 50,000,000 R$ 60,000,000 R$ 700,000,000 R$ 200,000,000 R$ 1,000,000,000 R$ 100,000,000 R$ 80,000,000 R$ 55,000,000 R$ 35,000,000CRI - 20 years

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COMPANY PROFILE

KEY INFORMATION


BANK SECTOR

CORPORATEGOVERNANCE

RISK AND CAPITAL

MANAGEMENT

PEOPLEMANAGEMENT

SUSTAINABILITY

WEALTH MANAGEMENT BUSINESS

Banco Votorantim’s Wealth Management is one of the leaders in the management and

administration of Real Estate Funds (FIIs), Equity Investment Funds (FIPs) and Credit Rights Investment

Funds (FIDCs), as well as a relevant structuring of succession and planning solutions in the Private Bank.

The VWM&S, consolidator organizational structure of the Asset Management (VAM) and Private Bank activities has

ended 2017 with shareholders’ equity of R$ 97.1 million (R$ 81.4 million in Dec.16) and a net result of R$ 18.6 million (R$ 6.6

million in 2016).

In order to reinforce its commitment to incorporate social, environmental and corporate governance criteria in the processes of asset analysis and

management, since 2012 VAM is a signatory of the PRI - Principles of Responsible Investment.

VAM operates in a broad group of investor segments - from corporate and institutional to private bank customers and distributors - and is currently among the top 10 asset managers in Brazil according to ANBIMA’s ranking of managers, ranking 9th at the end of Dec.17 with a total volume of managed resources of R$ 55.7 billion, against R$ 53.8 billion at the end of 2016.

In the structured products segment, VAM ended 2017 with a managed volume of R$ 21.7 billion and occupies the 2nd position in the Ranking of Real Estate Funds Managers, the 9th position in the Ranking of Investment Funds Managers in Credit Rights and the 5th position of Investment Funds in Holdings prepared by ANBIMA, with a market share of 10.8%, 1.8% and 6.4%, respectively.

Throughout 2017 VAM continued its partnership

with Banco do Brasil, together with BB DTVM, in

the development, administration, management

and distribution of innovative and customized

real estate investment funds (FIIs), Credit Rights

( FIDCs), Investments in Participations (FIPs) and

Private Credit. At the end of December 17, the

total volume of funds related to this partnership

amounted to R $ 4.7 billion.

As announced to the market in Sep.17, aligned with the strategic plan to monetize new and current businesses, VAM carried out the merger of Votorantim Corretora de Valores Mobiliários Ltda., Strengthening the service in the Private Bank channel. Banco Votorantim S.A., controller of both, approved the merger of the companies in a meeting held on January 31, 2018.

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COMPANY PROFILE

KEY INFORMATION


BANK SECTOR

CORPORATEGOVERNANCE

RISK AND CAPITAL

MANAGEMENT

PEOPLEMANAGEMENT

SUSTAINABILITY

Highlights

Asset Management

• Focus on structured products and high added value

• Synergies with BB: funds with AuM R$ 4.7B e.g.

• BB Votorantim Highland Infrastructure (FIDC) -2013

• BB Progressive II (FII) - 2012

• BB Votorantim Sustainable energy (FIP) - 2011

• BB Corporate Income (FII) - 2011

Private Bank

• Focus on high and ultra high customers (over R$ 25MM)

• Integrated wealth management, through differentiated and customized solutions

Managed Resources (R$B)

RankingANBIMA 9th

Dec/16 Dec/17

55.753.8

9th

Related to the Private Bank segment, in Dec.17 VWM&S reached a total volume of assets of R$ 27.5 billion, continuing its mission of being a Private Solutions focused on asset management.

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COMPANY PROFILE

KEY INFORMATION


BANK SECTOR

CORPORATEGOVERNANCE

RISK AND CAPITAL

MANAGEMENT

PEOPLEMANAGEMENT

SUSTAINABILITY

CONSUMER FINANCE

In Retail, Banco Votorantim operates with its subsidiary BV, the leading brand in vehicle financing, mainly in the used light commercial vehicle market (multibrand resellers), where it has a history of leadership and recognized competence. Among its competitive advantages, it is worth mentioning:

I. expertise in pricing, credit granting and collection;

II. high capillarity through an extensive outsourced distribution network;

III. agility in decision making; and

IV. relationship with resellers.

In Retail, the loan portfolio reached R$ 36.0 billion in Dec.17, an increase of 3.0% in relation to Sep.17, and a 7.6% increase compared to Dec.16, driven by growth in Vehicles - mainly used, a segment that the Bank has recognized competence and leadership.

In addition, it seeks to diversify sources of revenue with solutions to meet the demands of customers and partners, providing credit, means of payment and insurance, such as credit cards and insurance brokerage, both with well-defined strategies:

Credit cards

It seeks to expand the volume of active cards - issued with the MasterCard and Visa flags, both through the offering to the current customer base of vehicle financing and through the offering to customers of business partners.

Insurance Brokerage

Through Votorantim Corretora de Seguros, it aims to increase insurance brokerage revenues. In addition to keep growing in products such as Auto and Lender, the Bank has also diversified its portfolio, which currently includes capitalization products and life insurance, residential and personal accident insurance.

In addition, the Bank has specific strategies for other loan and financing products.

Payroll loan

It aims to maintain a relevant position in the payroll loan market, focusing on Private (organic portfolio growth) and INSS (portfolio refinancing).

Personal Credit and other business

Personal Credit: partnership with fintechs (eg, GuiaBolso and Neon Payments) and leveraging the BV customer base;

Student Credit: partnership with Ideal Invest and Kroton;

Credit with property in guarantee;

Financing for the acquisition of residential solar energy board in partnership with Solar Portal.

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Noteworthy is the 18.4% growth of the credit card portfolio in the last 12 months, reflecting the strategy of revenue diversification. Throughout 2017, the Bank strengthened its portfolio of cards and grew organically through both the cross-sell to the current customer base of vehicle financing and the offering to customers of commercial partners (eg Netpoints). At the end of the year, it launched an specific mobile app to this product, enhancing the customer experience.

+18.4%-15.9%

+10.6%

3.6

30.5Vehicles

Loans

Dec/17

36.0

Cards

Dec/16

33.5

27.6

4.3

+7.6%

1.61.9

Credit Portfolio by Product (R$B)

Despite the challenging macroeconomic scenario, the Bank has originated vehicle financing with scale and quality, as a result of the continuous improvement of credit policies, processes and models. The volume of vehicle financing origination totaled R$ 16.1 billion in 2017, 87% of which refers to used light vehicles, a segment in which the Bank has a history of leadership and recognized competence. In addition, more conservative deadlines and entry percentages continue to be practiced.

The combination between improvements in credit processes and models and prudence in financing grant has yielded tangible results.

The delinquency of the retail portfolio closed Dec.17 at 4,7%, 0.1 pp lower than Sep.17 and 0.8 pp lower than Dec.16, reflecting the improvement in the quality of Vehicle portfolio, which Inad 90 reduced by 0.9 pp in the last 12 months to 4, 2% - lowest since Mar.11.

5.5% 5.4% 5.7% 5.7% 5.5% 5.2%4.7%

5.5% 5.3% 5.3% 5.4% 5.1% 4.7% 4.2%

ConsumerFinance

AutoFinance

Dec/15Jun/15 Jun/17Jun/16 Dec/16Dec/14 Dec/17

The Bank also expanded insurance sales, such as Prestamista and Auto, whose revenues totaled R$ 409 million in 2017, compared to R$ 256 million in the previous year. This sale is made through the subsidiary Votorantim Corretora de Seguros (VCS), whose results are recognized through equity equivalence.

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FUNDING AND LIQUIDITY

The volume of funds raised reached R$ 61.2 billion at the end of Dec.17, a reduction of 9,1% in the last 12 months, as shown below:

Funding(R$ billion)

Dec 16 Sep 17 Dec 17Variation %

Dec 17/Sep 17 Dec 17/Dec 16

Debentures (BV Leasing) 16.0 8.7 9.3 6.5 (41.8)

Deposits 4.6 9.9 8.5 (14.5) 85.8

Time Deposits (CDB) 2.5 7.7 6.4 (17.4) 155.2

Deposits (cash and interbank deposits) 2.1 2.2 2.1 (4.7) 2.8

Letters 20.5 23.9 23.5 (2.0) 14.6

Financial Letters 17.6 21.3 20.6 (3.0) 17.5

LCI and LCA 2.9 2.7 2.9 6.4 (2.8)

Loans and Onlendings 5.2 4.5 4.1 (9.1) (21.9)

Subordinated Debt 6.0 5.3 5.8 9.9 (3.8)

Financial Letters Subordinated 3.2 2.6 2.0 (24.2) (38.1)

Other subordinated debts 2.9 2.7 3.9 42.4 34.1

TVM abroad 1.3 0.9 0.6 (31.9) (53.9)

Obligations with credit grants 13.8 11.5 9.4 (17.9) (31.3)

Others1 - 0.0 0.0 - -

Total funding from third parties 67.3 64.8 61.2 (5.5) (9.1)

1Includes Certificate of Structured Operations (ICOE) options

In recent quarters, the Bank has maintained a conservative stance regarding the granting of credit. In this context of lower demand for funding, the Bank has been working to improve the profile of resources raised by the market and expanded the participation of more stable funding instruments, such as Financial Letters, which represented 34% of total funds raised in December 17.

It is worth mentioning that the reduction in the balance of commitments with debentures of BV Leasing in relation to Dec.16 is a reflection of the regulatory change introduced by Resolution 4,527, which makes it impossible to carry out new operations with debentures of leased subsidiaries as from 2018. As a substitute for this instrument, the Bank has increased the volume of funding with CDB (time deposit) and Financial Letters.

With regard to liquidity, the Bank has kept its cash free at a fairly conservative level, enough to cover the total funding with daily liquidity. In addition, it is important to note that the Bank has a credit line with BB since 2009, which represents a significant reserve of liquidity and has never been used.

In October 15, BACEN Circular 3.749 established the minimum limits of the “Liquidity Coverage Ratio” (LCR), which aims to measure the banks’ short-term liquidity in a stress scenario. It corresponds to the ratio between the HQLA (High Quality Liquid Assets) and the total net cash outflows forecast for a period of 30 days. In 2017, the minimum requirement of the CRL was 80%, and it will reach 100% in 2019. On December 17, the Bank’s HQLA balance was R$ 11.5 billion and the CRL was 185%.

Further details on the LCR can be found in the Risk and Capital Management Report on the IR website: www.bancovotorantim.com.br/ri

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BASEL

In Dec.17, the Prudential Conglomerate’s Reference Equity reached R$ 9,233 million, compared to risk-weighted assets of R$ 59,435 million. As a result, Banco Votorantim’s Basel index closed Dec. 17 at 15.5%, with the Level I Capital Index closing at 11.4%. The growth of the index in 4Q17 is mainly explained by the reduction of RWA in credit risk, impacted by the retraction of the Wholesale credit portfolio.

Basel Index(R$ million)

Dec16 Sep17 Dec17

Total Capital 9,219 8,808 9,233

Tier I Capital 6,837 6,592 6,759

Common Equity Tier I 6,837 6,592 6,759

Additional – – –

Tier II Capital 2,382 2,216 2,475

Risk Weighted Assets (RWA) 61,207 60,213 59,410

Credit risk 55,922 53,267 52,083

Market risk 670 1,557 1,937

Operational risk 4,615 5,390 5,390

Minimum Required Reference Equity 6,733 5,946 5,495

Basel Ratio (Capital/RWA) 15.1% 14.6% 15.5%

Tier I Capital Ratio 11.2% 10.9% 11.4%

Common Equity Tier I Ratio 11.2% 10.9% 11.4%

Additional – – –

Tier II Capital Ratio 3.9% 3.7% 4.2%

On Nov.17, the Bank issued USD 300 million in perpetual bonds abroad, at the fixed rate of 8.25%, eligible to form the complementary Tier I capital. This operation, when approved by the Central Bank, will impact the Basel Index approximately 170 bps after incorporation into the Reference Equity, strengthening the Bank’s capital base.

The Basel Index was calculated in accordance with Resolutions 4,192 and 4,193, which deal with the Basel III methodology for calculation and the minimum requirements for Reference Equity, Level I and Principal Capital. In 2017, the minimum capital requirement was 10.50%, with a minimum of 7.25% for Capital Level I and 5.75% for Principal Capital (CET1). In 2018, the minimum requirement for Capital Level I increases to 7.88%, and CET1 to 6.38%.

Considering the current capital base, if the Basel III rules established by the Bacen were applied immediately and fully, the Tier I Capital Index would be 11.0% in Dec.17, including the expected tax credit consumption until 2019.

CET1Dec/17

Anticipationof BIS IIIschedule

CET1with BIS IIIfull rules

Consumptionof tax credituntil 2019

CET1simulatedwith BIS III

11.4

0.9 0.5

11.0

10.5

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RATINGS

In Sep.17, the rating agency Standard & Poor’s (S&P) withdrew the credit watch from Brazil’s

sovereign rating, keeping the credit note at “BB” with a negative outlook. This change reflected

directly on the ratings of the country’s main banks, including Banco Votorantim. In addition, S&P

also reviewed the “from-to” scales between the global and national ratings, and with this the

Bank’s ratings have been upgraded nationally, matching them to the sovereign rating.

In Sep.17, the rating agency Moody’s reaffirmed the Bank’s ratings, keeping them in Ba2 (local

currency) and Ba3 (foreign currency), both with negative outlook, following the sovereign’s

perspective.

On Jan.18, S & P downgraded Brazil’s rating from ‘BB’ to ‘BB-’, with the stable outlook. Consequently,

the agency revised the ratings of the banks, and in line with the sovereign, Banco Votorantim’s

global scale rating was changed to BB- / stable. Nationwide ratings have been reaffirmed, but the

outlook has also been adjusted to stable.

Banco Votorantim is ranked by international rating agencies and the ratings attributed reflect its operational performance, financial strength and quality of management, as well as other factors related to the financial sector and the economic environment in which the company operates.

The table below shows the ratings of the main agencies:

Rating Agencies

Globalscale

National scale Brazil

Local Currency

Foreign Currency

Local Currency

Sovereign rating

Moody’sLong-term Ba2 Ba3 Aa3.br

Ba2Short-term NP NP BR-1

Standard & Poor’sLong-term BB- brAAA

BB-Short-term B brA-1+

CORPORATE GOVERNANCE

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CORPORATE GOVERNANCE

The current corporate governance model is continually improving to achieve greater robustness and transparency, ensuring agility in decision-making processes.

The Bank’s management is shared between the shareholders Votorantim Finanças and Banco do Brasil, with an equal participation of both in the Board of Directors (CA), which is composed of six members.

CA meetings occur at least monthly to discuss strategic issues, monitor and guide the Conglomerate’s business. Decisions are taken by an absolute majority with no “casting vote”.

Each member of the Board of Directors has a two-year term and the positions of Chairman and Vice-Chairman are alternated annually between both shareholders.

Also included in the governance bodies are the Fiscal Council and the CA advisory forums, as well as the Executive Board, Executive Committee and Internal Governance Technical Committees.

It is worth highlighting the institution of Risk and Capital Committee at the beginning of 2018, which reports to the CA and has as its main attribution the evaluation of the functioning of the Bank’s risk and capital management structures.

Board of Directors

Executive Committee

General Meeting

SupervisoryBoard

Audit Board

Remunerationand HR

Committee

AdvisoryCommittee

CapitalRisk

Committee

AdministrativeCouncil

Votorantim S.A. Banco do BrasilTotal: 50.00%

Com. Shares: 49.99%

Pref. Shares: 50.01%

Total: 50.00%

Com. Shares: 50.01%

Pref. Shares: 49.99%

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Administrative Council Composition

Name Position Shareholder

Paulo Rogério Caffarelli Chairman Banco do Brasil

José Luiz Majolo Vice-Chairman Votorantim Finanças

Antonio Mauricio Maurano Director Banco do Brasil

Celso Scaramuzza Director Votorantim Finanças

Marcelo Augusto Dutra Labuto Director Banco do Brasil

Jairo Sampaio Saddi Director Votorantim Finanças

Executive Committee

Elcio Jorge dos Santos

Alvaro Jorge Fontes de Azevedo

André Duarte

Gabriel José Gama Ferreira

Paulo Euclides Bonzanini

Ricardo Abrahão Fajnzylber

Robert John van Djik

RISK AND CAPITAL MANAGEMENT

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RISK AND CAPITAL MANAGEMENT

Banco Votorantim has institutional structures and policies for the management of credit risk, market risk, liquidity risk, operational risk and capital management approved by the Board of Directors. The basic principles observed in management and control were established in accordance with current regulations and market practices.

With an integrated control model and the decision-making process, the Bank has deliberative committees in order to ensure adequate capital management and self-assessment of its risks.

The internal governance structure ensures that all stakeholders effectively contribute to the internal risk management and mitigation process in addition to capital adequacy assessment. Below is the risk governance structure in force since February 2018.

COMMITTEE OF CONTROLS AND RISKS

ALM COMMITTEE AND TAXES

PEOPLE MANAGEMENT COMMITTEE

PRODUCT AND TECHNOLOGY COMMITTEE

CREDIT COMMITTEE

ADMINISTRATIVE COUNCIL

BOARD OF DIRECTORSEXECUTIVE COMMITTEE

RISK AND CAPITAL COMMITTEE

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RISK MANAGEMENT

Credit Risk

Credit risk is defined as the possibility of losses associated with:

s The. Non-compliance by the counterparty (the borrower, the guarantor or the issuer of securities or securities acquired), from its obligations under the terms agreed;

s Devaluation, reduction of remuneration and expected gains in financial instruments arising from the credit quality deterioration of the counterparty, the intervening party or the mitigating instrument;

s Restructuring of financial instruments; or

s Recovery costs of problematic assets exposures.

• Criteria and procedures for selecting clients and preventing money laundering;

• Rules for analysis, grant and management of credit;

• Procedures for the analysis, approval and release of new products with credit risk;

• Classification of the portfolio in risk levels, weighting the rating of the clients, the guarantees involved and delays in the operations;

• Monitoring of sectoral concentrations and economic groups, as well as monitoring of internal and regulatory limits defined within policies and standards;

• Management of limits and counterparty credit risk of financial derivative instruments;

• Risk assessment in sales operations or asset transfer operations;

• Procedures formalized contemplating the recovery credits flow;

• Establishment of limits to carry out operations subject to credit risk, at both individual and aggregate level (group with common economic interest) and borrowers or counterparties with similar characteristics;

• Control of guarantees and instruments to mitigate credit risk;

• Monitoring of the active loan portfolio through indicators with the objective of minimizing the risk of losses;

• Performance of stress tests, measuring the combined effect of adverse movements on macroeconomic indicators, estimating financial impacts affecting delinquency, provisions and, consequently, available and required capital;

• Issuance of periodic management reports to the Senior Management, with indicators of risk management performance as a result of the policies and strategies adopted; and

• Documented procedures for exceptions to the policy.

The purpose of credit risk management is to support management in the decision-making process by defining strategies and policies, establishing operating limits, risk mitigation mechanisms and procedures to maintain exposure to credit risk at levels considered acceptable by the Bank’s management.

The basic principles observed for the credit risk management are:

• Manuals and documents containing the organizational structure, relevant products, corporate policies, standards and procedures containing flows and rules related to governance, business and credit support processes;

• Technological environment encompassing the credit cycle ranging from the admission of risk, its follow-up and monitoring, to the restructuring when applicable;

• Validation process covering the risks involved in systems, accuracy of the models for calculation and quality of processed data, as well as the comprehensiveness of the documents;

• Structure of committees and credit approval lines;

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Market Risk

Market risk is defined as the possibility of financial losses arising from the fluctuation in market values of exposures held by a Financial Institution. These financial losses may be incurred based on the impact produced by the variation of risk factors, such as interest rates, exchange rate parities, stock and commodity prices, among others.

It is the objective of market risk control to support business management, establish processes and implement the necessary tools to evaluate and control market risks, enabling the measurement and monitoring of risk appetite levels defined by management.

• Segregation of portfolios: For management of the market risk consolidated control of exposures, operations are differentiated into two types of portfolio: trading (negotiation) or banking (non negotiation);

• Independence of functions: segregation of functions between the areas responsible for executing operations and the definition of business strategies, and the areas in charge of accounting, risk control, compliance and internal controls and auditing;

• Definition of pricing and risk calculation methodologies: For the purpose of risk control, structured methodologies of mandatory corporate use are adopted, based on market practices and other factors that may be used in the model marking, in accordance with prudential criteria established by the regulator, which include cost of settlement of positions, spread of credit risk, among others;

• Establishing limits: Clear and objective definition of authorized risk limits, based on risk measures. This definition is structured in order to include in the daily activities the levels of risk appetite defined by the Bank;

• Monitoring of limits: definition of monitoring process and reporting the use level of authorized limits.

The basic principles observed in the management of market risk are:

• Board of Directors involvement: The existing committees are structured with the purpose of involving the management in global supervision of the risk taking;

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Liquidity Risk

Liquidity risk is defined as:

• Independence of functions: segregation of functions between the areas responsible for executing operations and the definition of business strategies, and the areas in charge of accounting, risk control, compliance and internal controls and auditing. This segregation is structured with the objective of guaranteeing independence and autonomy in the conduct of the attributions inherent to each function;

• Definition of assignments: clear definition of the processes and the range of activities of each function involved in management and control of liquidity risks. This definition is structured with the objective of enabling an organized and efficient operational management;

• Monitoring of limits: definition of monitoring process and reporting the use level of authorized limits.

• Definition of methodologies for scenario building: structured methodologies of mandatory corporate use are adopted, based on market practices, that aim to incorporate the dynamics of the contracting of new operations and the liquidation of the existing portfolios;

• Establishing limits: Clear and objective definition of authorized risk limits, based on risk measures. This definition is structured in order to include in the daily activities the levels of risk appetite defined by the Administration Council;

• Liquidity contingency plan: definition and periodic review of a structured plan for recomposition of the pre-established of cash levels, with the attribution of responsible and instruments.

s The possibility that the Conglomerate will not be able to efficiently honor its expected and

unexpected obligations, current and future, including those resulting from collateral, without

affecting its daily operations and without incurring significant losses; and

s The possibility that the Conglomerate will not be able to negotiate at a market price a

position, due to its size in relation to the volume normally transacted or due to some

discontinuity in the market.

Liquidity risk management aims to organize, evaluate and monitor the liquidity risk of the institution,

establishing the processes, tools and necessary limits for the generation and analysis of prospective

liquidity scenarios, as well as monitoring the levels of risk appetite established by the board of

directors.

The basic principles observed in the management of liquidity risk are:

• Board of Directors involvement: The existing committees are structured with the purpose of

involving the management in global supervision of the risk taking;

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Operational Risk

Operational risk is defined as the possibility of loss resulting from failure, deficiency or inadequacy of internal processes, people and systems, or events outside the institution. This definition includes the Legal Risk associated with the inadequacies or deficiencies in contracts signed by the Conglomerate, the sanctions due to non-compliance with legal provisions and indemnities for damages to third parties arising from the activities developed by the Conglomerate.

• Mapping of operational and systemic processes, mapping of existing controls and analysis of inherent and residual risks;

• Analysis, communication and implementation of action plans to improve processes and controls to mitigate the risks incurred.

Socio-environmental risk

Socio-environmental risk is defined as the possibility of losses (financial or reputational) due to social and environmental damages.

The basic principles observed in the management of operational risk are:

• Involvement of board of directors in the global supervision of risk-taking through established committees;

• Acculturation of the Bank in the concepts of Operational Risk management through corporate training and through discussions promoted in specific governance forums;

• Capturing operational losses and maintenance of a structured database with information related to the events;

• Elaboration and evaluation of operational losses indicators;

• Calculation of capital allocated to operational risk based on structured methodologies and adequate to regulatory requirements.

The objective of operational risk management is to support business management by assessing

and controlling risk, capturing and managing the operational loss base, and measuring the capital

allocated to operational risk, enabling the prioritization and implementation of improvement

plans accordance with the levels of risk tolerance defined by the board of directors.

In line with the socio-environmental risk guidelines in the Bank’s business chains, in 2016 Banco Votorantim became a signatory to the Equator Principles. With the signing, the Bank started to adopt a series of voluntary commitments in order to determine, evaluate and manage socio-environmental risks in projects.

In 2017, there was no hiring of a Project Finance Advisory and Financing Service, as well as a Corporate Loan for Projects framed under the criteria of Principles of Ecuador III.

The socio-environmental risk management observes the applicable environmental legislation, as well as evaluates and monitors the socio-environmental aspects with which the client is involved in order to subsidize the decision making.

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Other Risks

In addition to the risks previously described, the Bank considers relevant and has specific treatment and monitoring, as part of the Internal Capital Adequacy Assessment Process (ICAAP), for the following risks: Reputation; Strategy, Compliance and Models.

CAPITAL MANAGEMENT

The Bank has institutional structure and policies for capital management, approved by the Administration Council, in accordance with the Internal Capital Adequacy Assessment Process (ICAAP), which includes the following items:

• Capital management through a continuous process of planning, evaluating, controlling and monitoring the capital needed to deal with the relevant risks;

• Documented policies and strategies;

• Specific forums to compose strategies and manage the use of capital;

• Capital plan for three years, covering capital targets and projections, main funding sources and capital contingency plan;

• Stress tests and their impacts on capital;

• Management reports for Board of Directors and Administration Council;

• Capital Adequacy Assessment in Regulatory and Economic View; and

• Report to the regulator regarding capital management, through the Statement of Operational Limits and Internal Process for the Evaluation of Capital Adequacy (ICAAP) Annual Report.

Detailed information on the risk and capital management process is available in the Risk and Capital Management Report on the website www.bancovotorantim.com.br/ri

PEOPLE MANAGEMENT

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MANAGEMENTSUSTAINABILITY

PEOPLE MANAGEMENT

Managing performance and managing talent is critical to achieving the objectives of Banco Votorantim.

At Dec.17, the number of employees totaled 3,875, with 53% of men and 47% of women distributed throughout all generations, with the average age reaching 36 years. The Human Resources (HR) area of Banco Votorantim acts as a strategic partnership in the development of actions that support business growth, besides providing the breakdown of institutional guidelines for all the employees, promoting actions geared towards human capital management and the maintenance of values and organizational culture.

The several areas of activity in the HR area include the following actions:

Organizational Culture

Banco Votorantim invests continuously in the management of organizational culture (which has four attributes: Clients, Protagonism, Results and Governance) and recent experiences have shown the benefits in practice of Our Way of Being and Doing. The entire transformation journey is also experienced in the way of working, with the adoption of more informal dress code, remote work and spaces reform, leaving more modern and collaborative, providing greater synergy between the areas. The purpose of these movements was to stimulate an agile and simple environment, which directly influences the attitude of employees.

The culture of Banco Votorantim is a constantly evolving element and management is intensified, as it guides the way business is done, results and relationships with each other. After all, Banco Votorantim’s motto is: we are what we do.

Attracting Professionals

Attracting professionals with competitive differentials aligned with values and organizational culture is one of Banco Votorantim principles. We have invested in the hiring of talented professionals as a basis for the formation of our staff. We continuously encourage the professional training, creating conditions for individuals to develop and feel part of the whole.

Training Programs

There were more than 14,000 participations in training in 2017, with almost 24,000 hours dedicated to development of employees, between face-to-face courses and distance methodologies. The main highlights are the internal multiplier program, lecture series, technical training and graduation, leadership strengthening, as well as development actions to expand Banco Votorantim’s practice of being and doing.

Self-development of employees is continuously encouraged. In 2017, new sponsorships were offered for extension courses, post-graduation, MBA and professional master’s degree. In addition to educational partnerships for discount in recognized institutions in the country, was offered Specialization in Business Management in company in partnership with Fundação Dom Cabral.

The Executive Coaching Program is a highlight of the leadership development strategy and is offered to executives to leverage high impact competencies for the organization.

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MANAGEMENTSUSTAINABILITY

Talent Management

Managing performance and handling the management of our talents are both absolutely necessary to achieve our goals. Our Performance Management model supports the execution of the organizational strategy by means of the joint definition of targets and evaluation of corporate competencies by the leaders. In our model we value the practice of feedback and feedforward to support the development of our professionals. We encourage our employees to be protagonists in the Management of their Careers.

Through talent management, we identify potential, incentivize professional development and internal mobility.

As a part of the Talent Management, the Succession Planning is held annually, ensuring the continuity and sustainability of the Organization.

Climate Management

With the genuine concern to monitor and maintain a pleasant working environment, we value the cooperation between people and we build trusting relationships based on ethics, transparency and mutual respect. To ensure that the working atmosphere is in line with the culture, values and the strategic guidelines of the organization, we constantly work in the environment management and monitoring.

Payment

Our compensation practices are informed in a meritocratic model, recognizing and differentiating individual performance and its impact on collective result . The model has intended to align the interests of shareholders and professionals, stimulating the search sustainable results.

Benefits

The Bank’s policy provides for a comprehensive relationship of benefits to employees: medical care; dental care; meal ticket; food voucher; transportation voucher; child care assistance; life insurance; private pension; PAC (Worker Support Program).

Health and safety at work programs are encouraged to provide well-being and quality of life to employees:

Physical activity promotion: Agreement that provides access to the gym with less cost.

Healthy eating: Partnerships for sale of healthy food products.

Health Incentive and Prevention: Chronic case management programs in partnership with insurers.

Health Profile Mapping: Understand people’s habits and promote new actions. Through the periodic medical examinations, a questionnaire of the Health profile is applied, aiming the monitoring of population health, allowing a preventive and assertive work.

Workplace Safety

SIPAT is promoted, encouraging the quality of life in which issues relevant to prevention are addressed, such as the importance of physical activity, food health orientation with nutritionist, among others.

SUSTAINABILITY

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SUSTAINABILITY

For Banco Votorantim, Sustainability is the building of long-term relationships through actions aimed at the economic well-being of society and the increased management of risks and opportunities. These are the three pillars that guide our direction and permeate all areas and businesses of the organization, which Banco Votorantim believes is possible to transform society.

Business Sustainability

The bank understands that Sustainability in business stems from the consideration of socio-environmental aspects in the analysis of risks and operations opportunities.

In 2017, the emphasis was on improving the understanding of the Low Carbon Economy issue and trends and reflexes in the Bank’s business. It was verified that it will be necessary to evaluate the Bank’s portfolio of greenhouse gas emissions, as well as identify portfolio business that is promoting the Low Carbon Economy and could be considered as an emission mitigation.

s Long-term relationship: Strengthen the relationship of trust and the long-term relationship with clients, employees, shareholders and society, through sustainable attitudes, behaviors and business, based on ethics and good service.

s Society’s financial well-being: To stimulate a more prosperous society prepared for change, through the financial health of our employees, customers and society.

s Extended Management of Risk and Opportunity: Ensure the insertion of socio-environmental aspects in the analysis of risks and opportunities, strengthening internal practices and encouraging their application in the market.

In line with these concepts, we highlight the main focuses of the Institution related to the theme:

• Business Sustainability

• Financial education

• Social responsibility

• Impact of Activities

A highlight was the launch of Energia Solar BV, a credit line for individuals and companies that wants to build a solar panel project for energy generation.

This movement of Banco Votorantim, in addition to diversifying its product portfolio, shows the alignment with important causes for society.

The solar panels credit line for power generation also contributes to Brazil’s achievement of the targets set by the Paris treaty in 2015 and is in line with the low-carbon economy. It represents, in addition to revenue generation, value for the image of Financial Institution by doing “do good” to promote the use of renewable energy and decrease of Greenhouse Gases, besides reaffirming the Bank’s effort to bring Sustainable Business in line of revenues.

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Financial Education

Financial Education for the Bank is to increase understanding of financial concepts and products, to help individuals and society to improve their understanding of financial product concepts so that, with information, training and guidance, they develop values and skills necessary to become more aware of the opportunities and risks involved in them and, then, be able to make well-informed choices that improve their well-being.

Concerned about contributing to formation of responsible individuals and societies, and committed to the future, Banco Votorantim carried out a series of actions to promote the theme with its employees, clients and society. Here are some examples:

I. ENEF Week:

• The theme of personal finance for employees of the Bank’s headquarters was discussed during the National Financial Education Week (ENEF), in order to stimulate reflection on the subject and, mainly, to present the new rules on credit card. 89 employees participated in this action.

• Lectures were given on the importance of financial planning for development of socially responsible, critical, participatory teenagers and capable of building their life project. This action brought together 114 young people and adults from Projeto Viver (Jardim Colombo - São Paulo) and Instituto Querô (Santos).

II. Financial Education Training:

Continuation of the Financial Education Training Program with BV Relationship Managers:

• Business Channel - 65 managers received recycling in Financial Education with focus on the product adequate orientation for clients and capacity to multiply the knowledge to their teams

III. Financial education lectures for supported entities:

• Lecture “Transform dreams into achievement” for all entities supported by the Bank. A timetable was drawn up and the branch business managers gave lectures voluntarily. In total, 423 people benefited from 11 entities.

Social Responsibility

The Social Investment of the Conglomerate aims to encourage, through the allocation of resources, assistance projects in the social, culture, sports, elderly and health areas, developed by previously recognized entities in the sector.

In 2017, R$ 5.1 million was allocated to support 23 projects classified as “incentive”:

In the cultural area, the incentivized resources were allocated to social inclusion projects in cultural spaces such as the São Paulo Art Museum - MASP, Inhotim Institute, São Paulo State Symphony Orchestra - OSESP, Querô Institute, Iberê Camargo Foundation, Museu de Arte do Rio, Mozarterum and the Minas Gerais Philharmonic Orchestra.

In addition, the Cícero Dias Exhibition was also supported, which presented a retrospective of the artist Cícero Dias, one of the great icons of Modernism in the country. The show brought together about 120 works, including paintings, watercolors and public works, which are part of national and international collections, mostly from Paris (France). The exhibition featured an interactive and child-oriented part.

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Starting in 2017, the projects framed in Culture and Sport laws were verified together with the Marketing area to properly align with the brand positioning, however, without losing the main guideline of public resource with a social purpose.

of follow-up via web platform and payroll discount. The purpose is to integrate donors and beneficiaries, supported by legislation, through technological facilitation.

Impact of Activities and Environment

The environment is considered integrally in all activities of Banco Votorantim as an important factor for decision making. In order to achieve this, social and environmental standards are established for the realization of any relationship, taking into account the needs of current and future generations, aiming at sustainable development with respect to human rights, biodiversity and attention to climate change.

As a practical example of this concern, in 2017, the Bank formalized appropriate practices from the generation to the destination of waste, in order to reduce, reuse, recycle and monitor, minimizing impacts to the environment and respecting current legislation.

Specifically on waste disposal, it is important to highlight that at the Bank’s headquarters there is a segregation of responsibilities where the condominium collects and destines the “common trash and recyclable waste” of the whole building and the Bank discards the waste of electronic equipment. he common waste is sent to certified landfills, recyclable waste is sent to cooperatives and recycling companies, and electronic waste is destined for accredited companies committed to preserving the environment.

Still in this item, as a result of Socio-environmental Good Practices for the financial sector operating in the State of São Paulo adhesion in 2015, from the agreement between the State Secretariat of Environment of the Government of São Paulo and FEBRABAN, the Bank prepared its first inventory of direct and indirect greenhouse gas emissions from energy consumption, in spite of the protocol determining the scope of the inventory to be limited to the units located in the State of São Paulo, the Bank decided to inventory the Units throughout the country. This action deserves to be highlighted because Banco Votorantim demonstrates initiative to quantify its emissions in a more comprehensive way so that in the future it can adopt policies and practices to mitigate GHG emissions.

In the social area, resources were allocated to municipal funds for children and adolescents in cities that have high levels of social vulnerability. Projects that meet demands in the area of childhood and adolescence were aligned with the guidelines of the ECA - Statute of the Child and Adolescent.

Also in the social area, resources were also provided to entities that promote the improvement of elderly quality of life, through municipal funds of the Elderly Law.

Projects such as Guri, Barretos Cancer Hospital, Pequeno Príncipe Hospital, among others were also contemplated.

In total, about 585 thousand people were benefited by projects encouraged by Banco Votorantim.

Volunteering

Also within this item Banco Votorantim revitalized the volunteer program, which consists of encouraging and facilitating the involvement of employees from all companies in the Conglomerate in voluntary activities, giving conditions for the participation of all stakeholders. The revitalization of this program was aimed at encouraging and engaging the largest number of employees of the Institution. In order to do so, several actions were taken: senior leadership engagement, inspiring volunteers, new actions schedule, among others.

PF Donation Platform

The Individual Donation Platform was launched in 2017 via Payroll. The system will allow any employee of the Bank to voluntarily donate / invest in social projects already supported by the Institution, with possibility

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Dissemination and absorption of market practices

Banco Votorantim is part of FEBRABAN’s Social Responsibility and Sustainability Committee, whose mission is to disseminate concepts and foster sustainable development practices in the national financial sector. Among its objectives, we highlight the concern to keep the banking sector and FEBRABAN at the forefront of the modern business practices of socio-environmental responsibility; contribute to the sector being in compliance with the regulation and environmental and social legislation; engaging the sector towards the green economy, promoting knowledge

and identifying opportunities; instrumentalize the integration between business and sustainable

development, acting proactively in themes and projects of banking sector interest with institutions,

public or private organizations, regulators, class entities and companies, national or international.

Due to the relevance of the theme “Sustainability”, Banco Votorantim continues to integrate

other forums and working groups related to the theme:

s GT Indicators for Green Economy (FEBRABAN): Group Coordinated by Banco Votorantim to monitor and collaborate with the Getulio Vargas Studies on Sustainability Center (GVces) for the preparation of the study that will define concepts, methodology, and survey of the resources allocated in the green economy, both under environmental and social points of view.

s GT Losses Records due to Socio-Environmental Damage (FEBRABAN): Group created to structure the recorded data related to the effective losses due to socio-environmental damage in compliance with the provisions of Article n. 6 from the 4327/14 Resolution and with the Chapter n. VII of the SARB 14/14.

s GT Contamination Evidences Survey (FEBRABAN): Group created to establish a standard model document for Contamination Evidence Survey in Urban Estate, demonstrating diligence and commitment from the Financial Institutions in the assessment of its operations and activities environmental impacts and meeting the Chapter n. VII, Article n. 18 of SARB 14/14.

s Financial Education Committee (FEBRABAN): Strengthen Financial Education initiatives, to give more robustness to the topic in the banking system.

s Investor Education Committee (ANBIMA): a group responsible for elaborating the Investors’ Education strategy of ANBIMA, suggesting and structuring initiatives that contribute to the financial education of the Brazilian population, focusing particularly on those aspects related to the individuals and families’ investment decisions.

s Brazilian Business Council for Sustainable Development (CEBDS): a group that brings together the country’s largest financial institutions to discuss opportunities in sustainable finance area, disseminate best practices and stimulate financial sector participation in the adoption of practices that foster sustainable development;

s GT Social Performance: group led by Votorantim Institute with the objective of maintaining the alignment of social performance of all Votorantim Group companies. This group discusses the best practices of social responsibility and social investment of the Group companies.

s GT Energy Efficiency (FEBRABAN): a group responsible for implementing measures to increase funding focused on projects of generation, distribution of photovoltaic solar energy.

s GT Socio-environmental judicial processes database (FEBRABAN): a group responsible for creating mechanisms for mapping, identification of the content and assistance in the handling of administrative procedures, social and environmental lawsuits filed against the banking sector.

s GT Forest Restoration Financing (FEBRABAN): a group responsible for identifying and evaluating models for financing the restoration of Legal Reserve areas, considering the management of rural property as a whole and ways to reduce the operations credit risk.

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CONTACTS AND ADDRESSES

Addresses

BANCO VOTORANTIM S.A.Av. das Nações Unidas, 14.171Torre A - 18° andar - Vila Gertrudes04794-000 - São Paulo - SPTel. +55 11 5171 1000

VOTORANTIM BANK LIMITED

Saffrey Square Building Suite #204Bay Street & Bank LaneP.O. Box N-1951Nassau, New ProvidenceCommonwealth of the BahamasTel. +1 242 3280981/2Fax +1 242 3280981/2

Sites

www.bancovotorantim.com.br

www.vam.com.br

www.bv.com.br

Credits

Graphic Design , Layout and ReviewLUZ PUBLICIDADE

Attendance to Investors and Market Analysts

INVESTOR RELATIONS AREA

Based on best market practices, Banco Votorantim provides investors, market analysts and other stakeholders a selection of relevant strategic, financial and operational information to allow a better analysis of the institution by the market through its website: www.bancovotorantim.com.br/ri

e-mail: [email protected]

CUSTOMER CARE SERVICE: 0800 728 0083. Hearing and speech impaired: 0800 701 8661 - 24 hours a day, 7 days a week, or e-mail [email protected]

OMBUDSMAN: 0800 707 0083. Hearing and speech impaired: 0800 701 8661, from Monday to Friday - 9:00 a.m. to 6:00 p.m., except national holidays.

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