Earnings Presentation 2 nd Quarter, 2015 Disclaimer: This presentation may include references and statements on expectations, planned synergies, growth estimates, projections of results, and future strategies for Banco Votorantim, it’s associated and affiliated companies, and subsidiaries. Although these references and statements reflect the management’s belief, they also involve imprecision and risks that are highly difficult to be foreseen. Consequently, they may conduct to different results from those anticipated and discussed here. These expectations are highly dependent on market conditions, on Brazil’s economic and banking system performances, as well as on international market conditions. Banco Votorantim is not responsible for bringing up to date any estimate in this presentation.
Transcript
Earnings Presentation
2nd Quarter, 2015
Disclaimer: This presentation may include references and statements on expectations, planned synergies, growth estimates, projections of results, and future strategies for Banco
Votorantim, it’s associated and affiliated companies, and subsidiaries. Although these references and statements reflect the management’s belief, they also involve imprecision and
risks that are highly difficult to be foreseen. Consequently, they may conduct to different results from those anticipated and discussed here. These expectations are highly dependent on
market conditions, on Brazil’s economic and banking system performances, as well as on international market conditions. Banco Votorantim is not responsible for bringing up to date
any estimate in this presentation.
2
Net income of R$ 146M in 2Q15 Consistent revenue generation, drop in delinquency and cost base under control
Executive summary
1. Ratio between Net Interest Income (NII) and Average Interest-Earning Assets; 2. First payment default by vintage; 3 Allowance for Loan Losses (ALL), net of revenues from recovery of written-off loans
Net Profit of
R$ 146M
Net income totaled R$ 146M in 2Q15, compared to R$ 122M in 1Q15 and R$ 140M in 2Q14
Shareholders' equity reached R$ 7.85B in Jun/15 (R$ 7.68B in Mar/15)
Consistent
revenue
generation
Net Interest Income (NII) reached R$ 1,287M in 2Q15, up 5.2% QoQ, despite the 3.0% (R$ 2.0B)
decrease in the expanded credit portfolio
Net Interest Margin¹ (NIM) of 5.5% p.y., 0.1 p.p. higher than in 1Q15
Drop in
delinquency
90-day NPL dropped to 5.2% in Jun/15 (6.5% in Mar/15), the lowest level since Dec/13
• Wholesale: 90-day NPL dropped to 4.8% (Mar/15: 9.0%), benefited by renegotiation of a specific case
• Consumer Finance: Inad 30² and 90-day NPL of auto loans remain under control
Credit provisions
under control
Credit provision expenses³ increased QoQ, but reduced 30% in the 1H15/1H14 comparison
Coverage ratio of loans past due over 90 days reached 141% in Jun/15 (115% in Mar/15)
Effective cost
management
Personnel and admin expenses increased 1.3% in 1H15/1H14 – below the period’s inflation
Efficiency Ratio over the past 12 month reached 38.7% (Mar/15: 37.8%)
Highlights of Banco Votorantim’s results
3
Net Income of R$ 146M in 2Q15 Earnings grew 20% over 1Q15 and 4% over 2Q14
146
122
75
135140152
121
1Q14 4Q13
+4.1% +19.8%
2Q15 1Q15 4Q14 3Q14 2Q14
Net Income evolution (R$M)
In 2015, earnings growth is expected
R$292M R$268M
Change agenda Earnings growth agenda
• Profitability
• Efficiency
• Synergies with Banco do Brasil
Consolidated results
4
Net Interest Income (A) 1,332 1,223 1,287 5.2% 2,628 2,510 -4.5%
ALL expenses¹ (B) (523) (417) (448) 7.4% (1,237) (866) -30.0%
Equity in Income of Associated Companies and Subsidiaries 34 38 39 4.8% 75 77 2.5%
Other Operating Income/Expenses (227) (143) (198) 37.8% (278) (341) 22.7%
Operating Income (Loss) 164 221 205 -7.1% 242 426 75.9%
Net Income 140 122 146 19.8% 292 268 -8.4%
2Q15Var. 1H15
/1H141H14(R$ million)
Var. 2Q15
/1Q151Q152Q14 1H15
Continued evolution of results’ fundamentals,
with growth in Operating Income
Highlights of Results Consistent revenue generation, drop in delinquency and cost base under control
1
2
3
Consolidated results
Managerial Income Statement
1. Allowance for Loan Losses (ALL), net of revenues from recovery of written-off loans
5
Consistent revenue generation NII increased 5.2% QoQ, despite the reduction in the credit portfolio
1. Ratio between Net Interest Income and Average Interest-Earning Assets; 2. Sum of reserve requirements, interbank transactions, securities and loan portfolio
Net Interest Income (NII) rose 5.2%
in the 2Q15/1Q15 comparison...
... despite decrease in the
expanded credit portfolio
+5.2%
2Q15
1,287
5.5%
1Q15
1,223
5.4%
2Q14
1,332
5.9%
2Q15
-1.5%
67.7
1Q15
68.7
2Q14
69.2
Average expanded credit portfolio² (R$B)
NIM
1
Net Interest
Income (NII)
91.5 93.2 95.3
Net Interest Income
Net Interest Income (R$M) e NIM¹ (% p.y.)
Average interest-
earning assets³ (R$B)
6
27.0
29.4
68.7
5.7 4.8
29.4
5.3
Dec/14
-3.1%
Payroll
-3.0%
Large
Companies
Jun/15
Mid-sized
Companies
Auto Finance
66.7
5.4
Sept/14
68.2
26.2
6.0
29.3
5.5
Jun/14
68.8
25.7
6.6
29.6
5.8
27.3
4.3
5.1
28.8
Mar/15
68.7
28.1
Maintenance of the conservative approach to credit Credit portfolio retraction is a result of the focus on profitability and asset quality
1
-2.8%
-2.0%
∆Jun15
/Mar15
Wholesale (CIB)
-3.8%
-10.6%
Others¹
Gradual reduction in
the “lower middle”
Expanded credit portfolio (R$B) (includes guarantees provided and private securities)
Credit portfolio by segment
Focus on profitability (vs. asset growth)
1. Credit cards and individual loans Note: Mid-sized companies are those with annual revenues up to R$600M
7
407
271
358
116
147
90
-14.3% 7.4%
2Q15
448
1Q15
417
2Q14
523
-30.0%
1H15
866
628
237
1H14
1,237
965
272
141%
115%118%
Jun/15
2,727
3,843
Mar/15
3,628 4,174
Jun/14
3,662
4,309
90-day NPL balance (R$M)
Allowance for Loan Losses balance (R$M)
Credit provision expenses reduced 30% in 1H15/1H14 Provision expenses reduced both in Consumer Finance and Wholesale in 1H15 / 1H14
Credit provision expenses
reduced 30.0% in 1H15/1H14 90-day CR² reached 141% in Jun/15,
1. Allowance for Loan Losses, net of income from recovery of written-off loans; 2. Ratio between the balance of ALL and the balance of loans past due over 90 days
8
Used
cars
Other
vehicles¹
2Q15
3.0
2.5
(83%)
0.5
1Q15
3.3
2.7
(82%)
0.6
4Q10
7.8
4.1
(52%)
3.7
Jun/15
13.75
27.6
Mar/15
12.75
27.5
Dec/10
10.75
24.6
26%40% 41%
444452
2Q15 1Q15 4Q10
Auto finance: greater focus on used cars and maintenance
of tight credit origination standards
BV Financeira
Selic
2
Greater focus on used cars,
with caution in loan origination Continued focus on quality and profitability
of the new auto finance vintages
6.3
-5%
1H15
5.2
(82%)
1.1
1H14
6.6
5.3
(80%)
1.3
Consumer Finance – Auto Finance
Origination of auto loans (R$B)
Average term
Down payment
Down payment (%) and Average term (months)
Auto finance interest rate x Selic² rate (% p.y.)
Banco Votorantim is one of the leading players
in the auto financing market
1. New cars, trucks and motorcycles; 2. Benchmark interest rate (Central Bank). Note: In Jun/15, the average ticket size was R$ 18,000, and the average vehicle age was 4.7 years (portfolio)
9
Jun/15 Dec/14
1.3
Jun/14 Dec/13
1.3
Jun/13 Dec/12
1.1
Jun/12 Dec/11
1.0
Jun/11 Dec/10
2.1
Jun/09 Dec/09
1.5
Auto finance: maintenance of quality in auto finance
origination since 2011
Inad 30¹ (by vintage)
Used car dealers
New car dealers
Origination with better quality has contributed
to the favorable trend in delinquency
Lower quality vintages /
Managed auto finance portfolio²
6%11%
27%
48%
Dec/13 Dec/12 Jun/15 Dec/14
2
45 months
Lower quality vintages
Auto Finance – Origination by channel (R$B) and first payment default by vintage – Inad 30¹ (%)
June09-
June10
average
Consumer Finance – Auto Finance
1. First payment default, or % of each month’s production with first installment past due over 30 days; 2. Includes securitization with substantial risk retention before Res. 3,533
10
Jun/15
4.8%
5.2%
5.36%
Mar/15
9.0%
6.5%
5.33%
Dec/14
6.2%
5.7%
5.5%
Sept/14
5.4%
5.9%
6.1%
Jun/14
6.2%
6.4%
6.5%
Jun/15
2.2%
6.1%
7.9%
Mar/15
2.4%
7.0%
9.4%
6.2%
8.2%
Dec/14
4.1%
6.3%
7.3%
Sept/14
2.6%
6.3%
7.9%
Jun/14
1.5%
90-day NPL dropped to 5.2% in Jun/15 (6.5% in Mar/15) Wholesale NPL dropped to 4.8% and the Consumer Finance NPL remained nearly stable (5.36%)
NPL ratios of managed loan portfolio (%)
90-day NPL
Wholesale Total Consumer Finance
15-90 day
NPL ratio
2 Credit indicators – Delinquency
11
541 561
438 454
196 176
+1.3%
1H15
1,190
1H14
1,175
257 274 287
216 221 233
7494 81
+1.9%
Administrative
Other
Labor
claims²
2Q15
601
1Q15
590
2Q14
547
Effective cost management Personnel and administrative expenses increased 1.3% in 1H15/1H14, below inflation¹
Personnel and administrative expenses (R$M)
1. The IPCA price index and IGP-M index reached 8.89% and 5.58% in the last 12 months, respectively; 2. Include indemnities and provisions for labor contingencies, mainly
linked to the restructuring process ended in 2014
3
3.7%
3.7%
-10.4%
Personnel
∆ 2Q15/1Q15
4.7%
5.2%
∆ 1H15/1H14
-13.8%
-0.7%
-0.5%
38.7 36.0
Personnel and administrative expenses
Efficiency ratio –
last 12 months (%)
12
Net Interest Income (NII) Credit provision expenses – ALL
Personnel and Administrative expenses Net Income and Net Financial Margin
Summary: Net Income of R$146M in 2Q15 and R$268M in 1H15 Highlight for the reduction in ALL expenses and control of the cost base in 1H15/1H14
+5.2%
2Q15
1,287
1Q15
1,223
2Q14
1,332
-4.5%
1H15
2,510
1H14
2,628
407271 358
116
147
+7.4%
Varejo
Atacado
2Q15
448
90
1Q15
417
2Q14
523
-30.0%
1Q15
866
628
237
1Q14
1,237
965
272
-12.8%
-34.9%
257 274 287
290 316 314
+1.9%
Admin.
Personnel
2Q15
601
1Q15
590
2Q14
547
541 561
635 630
+1.3%
1H15
1,190
1H14
1,175
1H15
268
1.644
1H14
292
1.391
146122140
839806808
2Q15 1Q15 2Q14
Net margin (post-provisions) Net income
Consolidated results
R$ million
13
Funding profile improved over the past 12 months Bills and Credit Assignments rose to 45% of total funding (40% in Jun/14)
Additionally, Banco Votorantim has a stand-by credit
facility of ~R$7B from BB, which has never been tapped
1. Includes cash and interbank deposits and Structured finance certificates (“COEs”); 2. Funding from loans assigned with recourse under Resolution 3,533
Note: International funding is 100% swapped for BRL
14
Total Capital 11,052 10,523 10,967
Tier I Capital 7,256 6,873 7,105
Common Equity Tier I 7,256 6,873 7,105
Additional Tier I - - -
Tier II Capital 3,796 3,651 3,862
Risk Weighted Assets (RWA) 73,119 76,289 73,786
Credit risk 66,709 68,988 66,293
Market risk 2,248 2,894 3,087
Operational risk 4,162 4,407 4,407
Minimum Capital Requirement 8,043 8,392 8,116
Basel Ratio (Capital/RWA) 15.1% 13.8% 14.9%
Tier I Capital Ratio 9.9% 9.0% 9.6%
Common Equity Tier I Ratio 9.9% 9.0% 9.6%
Additional Tier I Ratio - - -
Tier II Capital Ratio 5.2% 4.8% 5.2%
BASEL RATIO
(R$ Million)Jun.15Jun.14 Mar.15
Basel Ratio of 14.9% in Jun/15 Tier I Capital of 9.6%, entirely composed of Common Equity
Capital structure
15
Appendix
16
106
152
162
187
620881
892
1,078
1,206
1,401
Votorantim Safra
BTG Pactual
HSBC Santander Bradesco
BNDES
CEF
Itaú
Banco do Brasil
State-owned
Foreign
National privately-held
30
56
56
68
258353
406
575
621
664
Banrisul Votorantim
Safra
HSBC Santander
BNDES
Bradesco
Itaú
CEF
Banco do Brasil
State-owned
Foreign
National privately-held 9th
Banco Votorantim is one of the leading banks in Brazil “Top 10” in total assets, with strong shareholders and shared governance
Banco Votorantim is one of the largest
privately-held Brazilian banks in total assets...
...and also in terms of loan portfolio
10 largest Banks in Mar/15¹ - Total Assets (R$B)
10 largest Banks in Mar/15¹ – Loan Portfolio² (R$B)
10th
Shareholder
50% Total
Equal
representation
of each
shareholder
Board of
Directors
Executive board
Fiscal
Council
Audit
Committee
Compensation
& HR
Committee
Products &
Marketing
Committee
Finance
Committee
Total: 50.00%
Voting: 49.99%
Non-voting: 50.01%
Total: 50.00%
Voting: 50.01%
Non-voting: 49.99%
Votorantim Group Banco do Brasil
Ownership Structure
Corporate Governance Structure
1.Jun/15 Central Bank (“Bacen”) data unavailable by the preparation of this presentation; 2. On-balance loan portfolio according to Bacen’s Resolution 2,682
Banco Votorantim - Overview
17
Banco do Brasil Grupo Votorantim +
R$ 66.7B
Consumer Finance
Auto
Finance
To originate portfolios with quality, scale and profitability
To focus on used auto finance (multi-brand dealers), where BV has a history of leadership and expertise
Other
Businesses
Payroll loans: to focus on
INSS (portfolio refinancing)
and Private (portfolio growth)
Credit cards, insurance,
individual loans and
CrediCasa (home equity): to
leverage the existing client
base
Other synergies with BB: BV
Promotora, mortgage, etc.
R$ 35.1B
R$ 28.8B R$ 6.3B
Wealth
Mgmt. & BVEP
Asset: 9th largest in the market, with innovative products and growing synergies with BB
R$ 43.8B in AuM¹
Private: focus on estate management through taylor-made solutions
BVEP: investment in real estate projects
Wealth Mgmt.
Corporate &
IB (CIB)
To be the best wholesale bank to our target clients, focused on:
• Long-term relationships
• Capturing synergies in the origination and structuring of financial solutions
• Efficient capital management
Wholesale R$ 31.6B
Diversified business portfolio Focus on increasing business profitability, operating efficiency and synergies with BB
Strategy
1. Assets under management 2. Includes guarantees provided by the Bank and private securities Note: In Jun/15, the outstanding volume of loans (off-balance) securitized with recourse prior to Resolution 3,533 totaled R$ 0.7B (versus R$ 1.1B in Mar/15)
Shareholders
Pillars
Expanded² credit portfolio
18
Balance sheet
Balance sheet
Jun.15/Mar.15 Jun.15/Jun.14
CURRENT AND LONG-TERM ASSETS 95,904 105,142 102,935 (2.1) 7.3
ALL balance / Managed loan portfolio ALL balance (R$M)
ALL Balance (R$M) Managed loan portfolio rated by risk level¹ (%)
Credit quality indicators
AA-C
D-H
Jun/15
89.8%
10.2%
Mar/15
89.5%
10.5%
Dec/14
89.6%
10.4%
Sept/14
89.2%
10.8%
Jun/14
88.7%
11.3%
223
148 157 166 151
3Q14 2Q14 2Q15 1Q15 4Q14
Credit Recovery (R$M) Net Loss (R$M)
633 623508 412
683
2Q15
5.3%
1Q15
3.0%
4Q14
3.7%
3Q14
4.5%
2Q14
4.5%
Net loss / Loan portfolio Net loss
1. According to Bacen’s Resolution 2,682
Credit portfolio
22
-0.12%
1.90%
0.98% 0.67% 1.64%
2.24%
0.94% 1.04%
1.36% 1.00% 0.95%
1.36% 1.60%
0.68
3Q12
1.27 1.01
2Q12
1.08 1.23
0.67 0.55
3Q14
0.77
0.38
2Q14
0.86 0.96
1Q14
0.87
1.36
4Q13
1.43
0.58
3Q13
0.90 0.66
2Q13
1.34
0.90
1Q13
1.15
0.68
4Q12 2Q15
0.83
-0.07
1Q15
0.58
1.05
4Q14
0.87
New NPL rate
Write-off (R$B)
New NPL (R$B)
Credit portfolio
New NPL
Rate¹
1. Variation in the balance of NPL 90 + loans written-off to loss in the quarter, divided by loan portfolio by the end of the immediately preceding quarter
