1/15 EARNINGS RELEASE 1 st QUARTER 2014 BI&P - Banco Indusval & Partners is a commercial bank with more than 45 years of experience in the financial market, focusing on local and foreign currency, fixed income and corporate finance for companies. BI&P relies on a network of 7 branches and 2 banking service posts strategically located in economically relevant Brazilian regions, besides an offshore branch in Cayman Islands, its brokerage house Guide Investimentos operating at the São Paulo Stock, Commodities and Futures Exchange - BM&FBOVESPA and Serglobal Cereais, acquired in April 2011, which originates agricultural bonds. Highlights Expanded Credit Portfolio totaled R$3.9 billion, up 1.5% in the quarter and 28.8% in relation to March 2013. Loans rated between AA and B corresponded to 90% of the expanded credit portfolio, compared to 81% in March 2013. Of the loans granted in the quarter, 99% were rated between AA and B, reflecting the quality of the credit portfolio being built since April 2011. The Emerging companies and Corporate segments accounted for 43% and 56%, respectively, of the expanded credit portfolio. The managerial expense with allowance for loan losses (ALL) annualized in 1Q14 was 1.10% of the expanded credit portfolio (0.95% in 4Q13), in line with the conservative lending policy adopted by the Bank. Additional allowance remained at R$23.7 million, not yet allocated. Funding totaled R$3.9 billion and Free Cash totaled R$743.2 million at the end of 1Q14, in line with the strategy of loan portfolio growth. Income from services rendered and tariffs totaled R$12.9 million in the quarter, an increase of 29.7% from the previous quarter and 94.1% from 1Q13. The quarterly Result was a loss of R$9.9 million, mainly due to the following: (i) the effect of discontinuance of the designation of hedge accounting, adopted in 2Q12, of operations to protect the cash flow, which continue to be protected by hedge operations, without any cash effect, and (ii) the fact that the investments we made during the restructuring period have still not reached equilibrium point since, given the conservative risk adopted by us, we have still not attained the required scale through growth of the credit portfolio and income from services rendered. IDVL4: R$3.58 per share Closing: May 13, 2014 Outstanding Shares: 88,991,729 Market Cap: R$318.6 million Price/Book Value: 0.48 Conference Call / Webcasts May 14, 2014 In English 10 a.m. (US EST) / 11 a.m. (Brasília) Connections Brasil: +55 11 3193-1001 +55 11 2820-4001 EUA: +1 786 924-6977 Code: Banco BI&P In Portuguese 9 a.m. (US EST) / 10 a.m. (Brasília) Number: +55 11 3193-1001 +55 11 2820-4001 Code: Banco BI&P Website www.bip.b.br/ir Expanded Credit Portfolio totaled R$3.9 billion, up 1.5% in the quarter and 29% in twelve months Income from services rendered and tariffs totaled R$12.9 million, up 30% in the quarter and 94% in twelve months Managerial expense with allowance for loan losses (ALL) annualized in 1Q14 was 1.10% of the expanded credit portfolio, in line with Banco BI&P’s conservative lending policy
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1/15
EARNINGS RELEASE
1st QUARTER 2014
BI&P - Banco Indusval & Partners is a commercial bank with more than 45 years of experience in the financial market, focusing on local and foreign currency, fixed
income and corporate finance for companies. BI&P relies on a network of 7 branches and 2 banking service posts strategically located in economically relevant Brazilian
regions, besides an offshore branch in Cayman Islands, its brokerage house Guide Investimentos operating at the São Paulo Stock, Commodities and Futures Exchange -
BM&FBOVESPA and Serglobal Cereais, acquired in April 2011, which originates agricultural bonds.
Highlights
Expanded Credit Portfolio totaled R$3.9 billion, up 1.5% in the quarter
and 28.8% in relation to March 2013.
Loans rated between AA and B corresponded to 90% of the expanded
credit portfolio, compared to 81% in March 2013. Of the loans granted
in the quarter, 99% were rated between AA and B, reflecting the
quality of the credit portfolio being built since April 2011.
The Emerging companies and Corporate segments accounted for 43%
and 56%, respectively, of the expanded credit portfolio.
The managerial expense with allowance for loan losses (ALL)
annualized in 1Q14 was 1.10% of the expanded credit portfolio
(0.95% in 4Q13), in line with the conservative lending policy adopted
by the Bank. Additional allowance remained at R$23.7 million, not yet
allocated.
Funding totaled R$3.9 billion and Free Cash totaled R$743.2 million
at the end of 1Q14, in line with the strategy of loan portfolio growth.
Income from services rendered and tariffs totaled R$12.9 million in
the quarter, an increase of 29.7% from the previous quarter and
94.1% from 1Q13.
The quarterly Result was a loss of R$9.9 million, mainly due to the
following: (i) the effect of discontinuance of the designation of hedge
accounting, adopted in 2Q12, of operations to protect the cash flow,
which continue to be protected by hedge operations, without any cash
effect, and (ii) the fact that the investments we made during the
restructuring period have still not reached equilibrium point since,
given the conservative risk adopted by us, we have still not attained
the required scale through growth of the credit portfolio and income
from services rendered.
IDVL4: R$3.58 per share
Closing: May 13, 2014
Outstanding Shares: 88,991,729
Market Cap: R$318.6 million
Price/Book Value: 0.48
Conference Call / Webcasts
May 14, 2014
In English
10 a.m. (US EST) / 11 a.m. (Brasília)
Connections
Brasil: +55 11 3193-1001
+55 11 2820-4001
EUA: +1 786 924-6977
Code: Banco BI&P
In Portuguese
9 a.m. (US EST) / 10 a.m. (Brasília)
Number: +55 11 3193-1001
+55 11 2820-4001
Code: Banco BI&P
Website
www.bip.b.br/ir
Expanded Credit Portfolio totaled R$3.9 billion, up 1.5% in the quarter and 29% in twelve months
Income from services rendered and tariffs totaled R$12.9 million, up 30% in the quarter and 94% in twelve months
Managerial expense with allowance for loan losses (ALL) annualized in 1Q14 was 1.10% of the expanded credit
portfolio, in line with Banco BI&P’s conservative lending policy
Capital Adequacy .................................................................................................................................................................. 10
Capital Markets .................................................................................................................................................................... 11
Income Statement ................................................................................................................................................................ 15
3/15
EARNINGS RELEASE
1st Quarter 2014
Macroeconomic Scenario
The beginning of the year was marked by high temperatures and scarce rainfall, which affected both the energy sector
and some plantations across the country. In the Southeast and Midwest Brazil, water reservoirs reached alarmingly low
levels, raising the possibility of energy rationing in the country. With the government actioning the thermal power plants
to meet the energy demand, spot market energy prices rose sharply, forcing the government to announce a rescue plan
for energy distribution companies. To prevent the country’s public accounts from getting affected, the major portion of
the aid will come from the loan contracted by the Electric Energy Trading Chamber (CCEE), a private entity.
Despite the government’s announcement to cut federal spending by R$44 billion this year and its commitment to
achieve a primary surplus of R$99 billion, or 1.9% of GDP, worries about the status of public accounts persist. Initial
fiscal results from early this year have raised doubts about the government’s ability to meet the target set by it. In this
scenario, the rating agency Standard & Poor’s downgraded the country’s sovereign rating from BBB to BBB-, the lowest
level still considered investment grade, based on the argument that Brazil’s public accounts and economic activity are
deteriorating.
Note that the drought did not affect the electricity system alone. Several plantations were damaged by inclement
weather, pushing up the prices of fresh food items. The consumer price index (IPCA) in March rose higher than
economists’ expectations, and food prices should continue to exert pressure on inflation in the coming months.
Expectations regarding inflation have worsened, with a few economists even predicting the IPCA index to end 2014 at
above the inflation target of 6.5%. In this scenario, the Central Bank of Brazil continued its monetary tightening policy,
raising by one more percentage point the basic interest rate (Selic), which reached 11% p.a. at the end of March.
On the positive side, indicators of economic activity at the start of the year positively surprised economists. Industrial
production and retail sales registered growth and the Central Bank’s business activity index signaled economic growth
in the beginning of the year. Despite these positive developments, the market maintained its forecast of a slowdown in
economic activity over the coming months, with GDP growth in 2014 going below 2%.
The foreign exchange market remained highly volatile at the start of the year. In January, the negative exchange flows,
combined with the apathy of international markets towards emerging economies, resulted in a stronger U.S. dollar,
which went past the R$2.40 mark. In the succeeding months, the inflow of funds into the country, mainly reflecting
heightened tensions between Russia and Ukraine and the increase in foreign funding by Brazilian companies, pushed
up the Brazilian real, which closed the first quarter at R$2.25.
Credit volume in Brazil’s national financial system grew 13.7% in the first quarter of 2014 to reach R$2.758 trillion.
Average term of loans increased from 85.9 months in March 2013 to 103.6 months in December 2014. Credit as a
percentage of GDP ended the first quarter at 55.9%, lower than 56.1% at the end of last year, though still remaining
above 50%.
Default in the individuals segment dropped from 7.6% in the first quarter of 2013 to 6.5%, while corporate default
declined from 3.6% to 3.3%. These marginal improvements in default rates are the result of a more selective approach
to credit adopted by Brazilian banks.
Macroeconomic Data 1Q14 4Q13 1Q13 2013 2014(e)
Real GBP Growth (Q/Previous Q) 0.40%(e) 0.70% 0.00% 2.3% 1.80%
Efficiency Ratio 105.6% 101.0% 4.5 p.p. 155.2% -49.7 p.p.
Other Information 1Q14 4Q13 1Q14/4Q13 1Q13 1Q14/1Q13
Number of Corporate Clients 1,128 1,063 6.1% 811 39.1%
Number of Employees 453 443 2.3% 449 0.9%
Banco BI&P employees 379 372 1.9% 397 -4.5%
Brokerage house and Serglobal employees 74 71 4.2% 52 42.3%
n.c. = not comparable (percentage above 300% or below -300%, or number divided by zero).
Details in the respective sections of this report: 1 Excluding (i) revenues from recovery of loans written off, and (ii) discounts granted upon settlement of operations in the period. More details in the
Profitability section of this report. 2 Including additional provisions. 3 The allowance for loan losses on loans originated at Banco Intercap and absorbed by Banco BI&P will be fully reimbursed by the former controlling
shareholders of Banco Intercap since it has already exceeded the contractual ceiling of R$6.0 million for the first year after the merger (06/30/2013
to 06/30/2014). 4 Including Guarantees issued, Private Credit Bonds (PNs and Debentures) and Agro Securities (CDA/WA and CPR). 5 Excluding Agro Securities (CPRs and CDA/WA) and Private Credit Bonds (PNs and debentures) for trading. 6 Excluding (i) repos with equivalent volumes, tenors and rates both in assets, and (ii) effects of the discontinuance of the treatment of hedge
accounting, and also discounts granted in operations settled in the period.
5/15
EARNINGS RELEASE
1st Quarter 2014
Operating Performance
The quarterly result was a loss of R$9.9 million, mainly due to the following: (i) the effect of discontinuance of the
designation of hedge accounting, adopted in 2Q12, of operations to protect the cash flow, which continue to be
protected by hedge operations, without any cash effect, and (ii) the fact that the investments we made during the
restructuring period have still not reached equilibrium point since, given the conservative risk policy adopted by us, we
have still not attained the required scale.
Though loan origination by our commercial area continues to be a positive highlight, the expected profitability will come
with the gains in scale, that is, through growth of the loan portfolio and income from services rendered.
Sales operations/transfer of financial assets 0.0 (0.5) n.c. 0.0 n.c.
Gross Result from Financial Intermediation before ALL 28.1 41.7 -32.6% 22.7 23.6%
Allowance for Loan Losses (ALL) (13.4) (16.0) -16.4% (133.4) -90.0%
ALL Expenses - Credits from Banco BI&P (9.2) (7.0) 30.0% (133.4) -93.1%
ALL Expenses - Credits from Banco Intercap (4.2) (9.0) -52.9% 0.0 n.c.
Gross Result from Financial Intermediation 14.7 25.7 -42.7% (110.6) 113.3%
* Excluding the effects of (i) discounts granted upon settlement of loans in the peri, and (ii) by the discontinuance of the designation of hedge accounting,
more details in the Profitability section of this report.
** Excluding the effects of (i) recoveries from operations written off, and (ii) discounts granted upon settlement of loans in the period.
22.8
2.4
46.0 41.7
28.1
44.8
26.9
47,7 47.5
33.1
1Q13 2Q13 3Q13 4Q13 1Q14
R$
millio
n
Financial Intermediation Result before ALL
Financial Intermediation Result before ALL adjusted *
2.0
-10.0 -9.9
1Q13 2Q13 3Q13 4Q13 1Q14
R$
millio
n
-20.6
-91.4
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EARNINGS RELEASE
1st Quarter 2014
Net Interest Margin (NIM)
Net Interest Margin adjusted was 3.2% in the quarter as against 5.0% in 4Q13. The Managerial NIM with clients was
3.94% due to the increase participation of the Corporate segment.
1 Starting from March 2014, export credit notes (NCE) and export notes (CCE) originated by Banco Intercap are included in Loans & Financing in
BRL, as well as NCE and CCE originated by Banco BI&P are classified. 2 The Other segment basically consists of Consumer Credit operations for Used Vehicles and financing of non-operating assets.
The Emerging Companies segment consists of companies with annual revenue between R$80 million and R$400
million, this segment reached 43% of the Expanded Credit Portfolio while the Corporate segment which includes
companies with annual revenue between R$400 million and R$2 billion reached 56%.
Expanded Credit Portfolio
by Segment
Expanded Credit Portfolio by
Client Concentration
* The Other segment basically consists of Consumer Credit operations for Used Vehicles and financing of non-operating assets.
** Including R$97,2 million of loans assigned to Banco Intercap.
The agro bonds portfolio totaled R$747.1 million in 1Q14, down 1.5% in the quarter but up 101.4% in 12 months. The
growth in 12 months is due to our joint ventures and alliances, while the slight decline in the quarter is the result of the
typical seasonality of certain agricultural commodities.