New MD&A 4Q11 - BB · 2015. 10. 2. · Banco do Brasil – MD&A 4Q11 1 This report contains statements concerning expectations, planned synergies, growth estimates, forecasts and

MD&A4Q11

Banco do Brasil – MD&A 4Q11

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This report contains statements concerning expectations, planned synergies, growth estimates, forecasts and future strategies related to Banco do Brasil and its subsidiaries, associated companies and affiliates. Although these statements reflect management's current beliefs, they involve imprecisions and risks that are difficult to predict, and actual results and events may differ from those anticipated and discussed herein. These expectations depend materially on market conditions, Brazil’s economic performance and developments in the banking industry and international markets. Banco do Brasil does not assume any responsibility to update the estimates contained in this report.

This report contains tables and charts that present financial figures rounded to the nearest million of Brazilian real. The rounding method used complies with Regulation 886/66 issued by Fundação IBGE: if the last digit is equal to or greater than 5, the last remaining digit is increased by one unit; and if the last digit is less than 5, it is discarded and the digit before it is maintained. Variations, in both nominal and percentage terms, were calculated using numbers in units.


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Summary Summary ................................................................................................................................................. 2 Index of Tables ........................................................................................................................................ 4 Index of Figures ....................................................................................................................................... 7 Presentation ............................................................................................................................................ 8 Summary of the Results .......................................................................................................................... 9

Results ............................................................................................................................................. 9 Shareholder's Return ......................................................................................................................... 11 Net Interest Income ............................................................................................................................ 11 Managerial Margin and Spread.......................................................................................................... 12 Assets ........................................................................................................................................... 13 Loan Portfolio ..................................................................................................................................... 13 Basel ........................................................................................................................................... 15 Fee Income ........................................................................................................................................ 16 Administrative Expenses .................................................................................................................... 17 Cost Income Ratio ............................................................................................................................. 17 Insurance ........................................................................................................................................... 18 Guidance ........................................................................................................................................... 18

1 - Key Statistics .................................................................................................................................... 20 2 - Summarized Financial Statements .................................................................................................. 24

2.1. Summarized Balance Sheet .............................................................................................. 24 2.2. Summarized Corporate Law Income Statement ............................................................... 26 2.3. Income Statement with Reallocations ............................................................................... 27

2.3.1 Details of the Reallocations .............................................................................................. 28 2.3.2 Glossary ............................................................................................................................. 30

2.4. Breakdown of Balance Sheet ............................................................................................ 32 2.5. Breakdown of Income Statement with Reallocations ........................................................ 33

3 -Loans ................................................................................................................................................. 34 3.1. Loan Portfolio .................................................................................................................... 34

3.1.1 Individual Loan Portfolio .................................................................................................... 34 3.1.2 Business Loan Portfolio ..................................................................................................... 36 3.1.3 Agribusiness Loan Portfolio ............................................................................................... 38

3.2. Credit Risk ......................................................................................................................... 46 3.2.1. Total Portfolio ................................................................................................................. 47 3.2.2. Individual Loan Portfolio ................................................................................................ 48 3.2.3. Business Loan Portfolio ................................................................................................. 51 3.2.4. Agribusiness Loan Portfolio ........................................................................................... 51 3.2.5 Foreign and Banco Votorantim Loan Portfolio .................................................................. 56 3.2.6 Renegotiated Loan Portfolio .............................................................................................. 56

3.3 Concentration .................................................................................................................... 57 4 – Liquidity Assets ................................................................................................................................ 59 5 - Funding ............................................................................................................................................ 61 6 – Other Components of the Balance Sheet........................................................................................ 66

6.1. Deferred Taxes .................................................................................................................. 66 6.2. Acturial Asset ..................................................................................................................... 66 6.3. Goodwill on equity ............................................................................................................. 68 6.4. Intangible assets ................................................................................................................ 68

7 - Financial Results .............................................................................................................................. 70 7.1. Analysis of Investments ..................................................................................................... 70 7.2. Analysis of Funding ........................................................................................................... 72 7.3. Volume and Rate Analysis ................................................................................................ 73 7.4. Spread ............................................................................................................................... 75 7.5. Net Interest Income ........................................................................................................... 76

8 - Non-Financial Business.................................................................................................................... 77 8.1. Fee income ........................................................................................................................ 77 8.2. Cards ................................................................................................................................. 77 8.3. Insurance ........................................................................................................................... 78 8.4. Capital Market .................................................................................................................... 83

9 – Administrative Expenses ................................................................................................................. 85


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9.1. Human Resources ............................................................................................................. 85 9.2. Operating Structure ........................................................................................................... 86 9.3. Other Income Information .................................................................................................. 88 9.4. Productivity Ratios ............................................................................................................. 89

10 – Risk Management .......................................................................................................................... 91 10.1. Risk Management .............................................................................................................. 91

10.1.1 Credit Risk ........................................................................................................................ 91 10.1.2 Market Risks .................................................................................................................... 91 10.1.3 Liquidity Risk .................................................................................................................... 94 10.1.4 Operating Risk ................................................................................................................. 96

10.2. Capital Structure ................................................................................................................ 97 11. Strategic Investments ...................................................................................................... 100

11.1 Informations ..................................................................................................................... 100 11.2. Banco Votorantim ............................................................................................................ 101 11.3. Banco Postal .................................................................................................................... 114 11.4 Internacionalization .......................................................................................................... 114

11.4.1 Acquisitions .................................................................................................................. 114 12 - Financial Statements .................................................................................................................... 116

12.1. Summarized Balance Sheet ............................................................................................ 116 12.2. Summarized Corporate Law Income Statement ............................................................. 120 12.3. Income Statement with Reallocations ............................................................................. 122


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Index of Tables Table 1. Income Statement with Reallocations – Main Lines ............................................................... 10 Table 2. One-Off Items .......................................................................................................................... 10 Table 3. Main Indicators of Income/Expenses ...................................................................................... 10 Table 4. NII Breakdown ......................................................................................................................... 12 Table 5. Managerial Margin .................................................................................................................. 12 Table 6. Annualized NIM ....................................................................................................................... 12 Table 7. Main Equity Items.................................................................................................................... 13 Table 8. Amplified Loan Portfolio¹ ......................................................................................................... 13 Table 9. Loan Portfolio Quality Indicators ............................................................................................. 15 Table 10. Expenses with Allowance for Loan Losses over Loan Portfolio ........................................... 15 Table 11. Renegotiated Loan Portfolio ................................................................................................. 15 Table 12. Fee Income and Results from Insurance Operations ........................................................... 16 Table 13. Administrative Expenses ....................................................................................................... 17 Table 14. Consolidated Insurance Ratio ............................................................................................... 18 Table 15. 2011 Guidance ...................................................................................................................... 18 Table 16. 2012 Guidance ...................................................................................................................... 19 Table 17. Main Macroeconomic Indicators¹ .......................................................................................... 20 Table 18. Ownership Structure - % ....................................................................................................... 21 Table 19. Distribution of Dividends/Interest on Own Capital ................................................................ 21 Table 20. Market Ratios ........................................................................................................................ 21 Table 21. Participation of BB’s Shares in Brazilian Stock Market Indexes - % .................................... 21 Table 22. Key Statistcs ......................................................................................................................... 22 Table 23. Ratings .................................................................................................................................. 23 Table 24. Compulsory/Direct Lending ................................................................................................... 23 Table 25. Summarized Balance Sheet - Assets ................................................................................... 24 Table 26. Summarized Balance Sheet - Liabilities ............................................................................... 25 Table 27. Summarized Corporate Law Income Statement ................................................................... 26 Table 28. Income Statement with Reallocations ................................................................................... 27 Table 29. Statement of Reallocations and Extraordinary Items ............................................................ 29 Table 30. Tax Impacts and Statutory Profit Sharing on Extraordinary Items ........................................ 31 Table 31. Breakdown – Assets and Liabilities ...................................................................................... 32 Table 32. Breakdown of Income Statement with Reallocations ............................................................ 33 Table 33. Loan Portfolio ........................................................................................................................ 34 Table 34. Loan in the Brazilian Banking Industry ................................................................................. 34 Table 35. Individual Loan Portfolio ........................................................................................................ 35 Table 36. Individual Loan Portfolio – Market Share .............................................................................. 35 Table 37. Payroll Loans – Portfolio Breakdown .................................................................................... 35 Table 38. Average rates and terms ....................................................................................................... 35 Table 39.Portfolios Acquired ................................................................................................................. 36 Table 40.Business Loan Portfolio ......................................................................................................... 36 Table 41. Private securities – Businesses ............................................................................................ 36 Table 42. ACC/ACE Average Volume per Contract ............................................................................. 36 Table 43. Export and import foreign exchange ..................................................................................... 37 Table 44. Loans to SMEs by sector ...................................................................................................... 37 Table 45. SME Credit Products ............................................................................................................ 37 Table 46. Exports .................................................................................................................................. 39 Table 47. Brazil's share in world agribusiness in 2011 ......................................................................... 39 Table 48. Agribusiness Loan Portfolio by Region ................................................................................. 40 Table 49. Agribusiness Loan Portfolio by Purpose ............................................................................... 40 Table 50. Agribusiness Loan Portfolio by Loans Type ......................................................................... 40 Table 51. Agribusiness Loan Portfolio by Product ................................................................................ 41 Table 52.Resources Hired in the 2011/2012 Harvest by Size of Customer ......................................... 41 Table 53.Agribusiness portfolio by Size ................................................................................................ 41 Table 54. Equalizable Funds of the Agribusiness Portfolio .................................................................. 43 Table 55. Distribution of Insurance of Working Capital for Input Purchase .......................................... 43 Table 56. 2011/2012 Harvest Plan ....................................................................................................... 44 Table 57. Working Capital for input Purchase - Contracting Profile ..................................................... 44 Table 58. Expenses with Allowance for Loan Losses over Portfolio .................................................... 46 Table 59. Delinquency Ratio ................................................................................................................. 47


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Table 60. Average Portfolio Risk .......................................................................................................... 47 Table 61. Total Loan Portfolio by Risk Level ........................................................................................ 47 Table 62. Individual Loan Portfolio by Risk Level

(1) .............................................................................. 48

Table 63. Changes in Allowance for Loan Losses - Individuals ........................................................... 48 Table 64. Business Loan Portfolio ........................................................................................................ 51 Table 65. Changes in the Allowance for Loan Losses - Businesses .................................................... 51 Table 66. Agribusiness Loan Portfolio by Risk Level ............................................................................ 52 Table 67. Agribusiness Individual Loan Portfolio by Risk Level* .......................................................... 52 Table 68. Changes in Allowance for Loan Losses – Agribusiness Individual ....................................... 53 Table 69. Corporate Agribusiness Portfolio by Risk Level

(1) ................................................................. 53

Table 70. Changes in the Allowance for Loan Losses – Corporate Agribusiness ................................ 54 Table 71. Agribusiness Transactions with/without rollover ................................................................... 54 Table 72. Rates of the Agribusiness Portfolio ....................................................................................... 55 Table 73. Foreign Loan Portfolio by Risk Level .................................................................................... 56 Table 74. Banco Votorantim Loan Portfolio (50%) ............................................................................... 56 Table 75. Renegotiated Loan Portfolio ................................................................................................. 56 Table 76. 100 Largest Borrowers .......................................................................................................... 57 Table 77. 100 Largest Borrowers in relation to RE ............................................................................... 57 Table 78. Concentration of Loan Portfolio by Macro-Sector ................................................................. 58 Table 79. Earnings Assets¹ and Interest Bearing Liabilities² ................................................................ 59 Table 80. Breakdown of Assets ............................................................................................................ 59 Table 81. Securities Portfolio by Category ............................................................................................ 59 Table 82. Securities Portfolio by Maturities – Market Value ................................................................. 60 Table 83. Liquidity Balance ................................................................................................................... 60 Table 84.Deposits and Market Funding ................................................................................................ 61 Table 85. Foreign Borrowing ................................................................................................................. 62 Table 86. Overseas Issues ................................................................................................................... 62 Table 87. Sources and Uses ................................................................................................................. 63 Table 88. Cost of funding vs. Selic Rate ............................................................................................... 63 Table 89. Segregation of Deposits by Deadline Chargeability ............................................................. 63 Table 90. Fee Income From Asset Management ................................................................................. 64 Table 91. Investment Funds and Managed Portfolios by Customer ..................................................... 64 Table 92. Investment Funds and Managed Portfolios by Type ............................................................ 65 Table 93. Breakdown of Tax Credit ...................................................................................................... 66 Table 94. Breakdown of Deferred Tax Liabilities .................................................................................. 66 Table 95. Previ - Effects of Half-Yearly Accounting .............................................................................. 67 Table 96. Goodwill on Investment Acquisition ...................................................................................... 68 Table 97. Intangible Assets ................................................................................................................... 68 Table 98. Estimate of Amortization of Intangible Assets ...................................................................... 69 Table 99. Average Balances and Interest Rates – Earning Assets (Quarterly).................................... 70 Table 100. Average Balances and Interest Rates – Earning Assets (Annual) ..................................... 70 Table 101. Spread by Portfolio ............................................................................................................. 71 Table 102. Securities Income ............................................................................................................... 71 Table 103. Average Balances and Interest Rates - Interest Bearing Liabilities (Quarterly) ................. 72 Table 104. Average Balances and Interest Rates - Interest Bearing Liabilities (Annual) ..................... 73 Table 105. Change in Revenues and Expenses and Change Volume / Rate (Quarterly) ................... 74 Table 106. Change in Revenues and Expenses and Change Volume / Rate (Annual) ....................... 74 Table 107. Analysis of Volume (Earning Assets) and Quarterly Spread – 3Q11 and 4Q11 ................ 75 Table 108. Analysis of Volume (Earning Assets) and Spread in the Period – 2010 and 2011 ............ 75 Table 109. Adjusted Net Interest Margin and Interest Rate .................................................................. 76 Table 110. Net Interest Income Breakdown .......................................................................................... 76 Table 111. Fee Income ......................................................................................................................... 77 Table 112. Customer Base and Checking Accounts ............................................................................ 77 Table 113. Income Statement by Line of Business – 4Q11.................................................................. 80 Table 114. Income Statement by Line of Business – 2011 .................................................................. 81 Table 115. Operating Highlights of the Insurance Group ..................................................................... 82 Table 116. Consolidated Insurance Ratio ............................................................................................. 83 Table 117. Personnel Expenses ........................................................................................................... 85 Table 118. Other Administrative Expenses ........................................................................................... 86 Table 119. Total Distribution Network ................................................................................................... 86 Table 120. Network of Branches by Region ......................................................................................... 87 Table 121. Distribution Network Abroad ............................................................................................... 87


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Table 122. Other Operating Income ..................................................................................................... 89 Table 123. Other Operating Expenses ................................................................................................. 89 Table 124. Coverage Ratios – Without One-Off Items ......................................................................... 90 Table 125. Efficiency Ratios – Without One-Off Items ......................................................................... 90 Table 126. Other Productivity Ratios .................................................................................................... 90 Table 127.Balance in Foreign Currencies – Position: 12/30/2011 ....................................................... 92 Table 128.Repricing Profile of Interest Rates - 12/30/2011 .................................................................. 94 Table 129. Monitoring of Operational Loss ........................................................................................... 97 Table 130. BIS Ratio – Economic-Financial Conglomerate* ................................................................ 98 Table 131. Main Accounts of the PEPR Quota (Economic-Financial Conglomerate) ......................... 98 Table 132. PRE for Market Risk by Risk Factor ................................................................................... 99 Table 133. Allocated Capital for Operational Risk by Line of Business ................................................ 99 Table 134. Interest in the Capital of Companies ................................................................................. 100 Table 135. Banco Votorantim – Summarized Corporate Law Income Statement .............................. 102 Table 136. Banco Votorantim – Income Statement with Reallocations .............................................. 103 Table 137. Banco Votorantim – Statement of Reallocations .............................................................. 104 Table 138. Banco Votorantim – Reallocation (Fee Income) ............................................................... 105 Table 139. Banco Votorantim – Reallocations (Market-to-Market - MKT) .......................................... 105 Table 140. Banco Votorantim – Reallocations (Currency Variation) .................................................. 106 Table 141. Banco Votorantim – Margin, Net of Interest and Profit Margin ......................................... 107 Table 142. Banco Votorantim – Highlights of the Result Equity ......................................................... 109 Table 143. Banco Votorantim – Vehicle Portfolio ............................................................................... 109 Table 144. Banco Votorantim – Loan Portfolio by Level of Risk - Total ............................................. 110 Table 145. Banco Votorantim – Loan Portfolio by Level of Risk – Wholesale .................................... 111 Table 146. Banco Votorantim – Loan Portfolio by Level of Risk – Retail ........................................... 111 Table 147. Banco Votorantim – Delinquency Ratios – Total .............................................................. 111 Table 148. Banco Votorantim – Delinquency Ratios – Wholesale ..................................................... 112 Table 149. Banco Votorantim – Delinquency Ratios – Retail ............................................................. 112 Table 150. Banco Votorantim – Operating and Structural Highlights ................................................. 113 Table 151. Banco Votorantim – Main Productivity Indicators ............................................................. 113 Table 152. Banco Votorantim – BIS Ratio .......................................................................................... 113 Table 153. Banco Patagonia – Key Income Figures .......................................................................... 115 Table 154. Banco Patagonia – Equity Highlights ................................................................................ 115 Table 155. Banco Patagonia – Operating and Structural Highlights .................................................. 115 Table 156. Banco Patagonia – Indicators on Returns, Capital, and Credit ........................................ 115 Table 157. Balance Sheet Assets – Quarterly .................................................................................... 116 Table 158. Balance Sheet Assets – Annual ........................................................................................ 117 Table 159. Balance Sheet Liabilities – Quarterly ................................................................................ 118 Table 160. Balance Sheet Liabilities – Annual.................................................................................... 119 Table 161. Summarized Corporate Law Income Statement – Quarterly ............................................ 120 Table 162. Summarized Corporate Law Income Statement – Annual ............................................... 121 Table 163. Income Statement with Reallocations – Quarterly ............................................................ 122 Table 164. Income Statement with Reallocations – Annual ............................................................... 123


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Index of Figures Figure 1. Income (R$ million) and Return on Average Equity (ROAE) (%) ............................................ 9 Figure 2. Earnings per Share................................................................................................................ 11 Figure 3. Dividend and Interest on Own Capital ................................................................................... 11 Figure 4. BIS Ratio ............................................................................................................................... 16 Figure 5. Cost Income Ratio – Without One-Off Items – % ................................................................. 17 Figure 6.Trade Balance (FOB) ............................................................................................................. 38 Figure 7. Production vs. Planted Area .................................................................................................. 39 Figure 8. Agribusiness Loan Portfolio by Type of Client ...................................................................... 42 Figure 9. Agribusiness Loan Portfolio by Funding Sources ................................................................. 42 Figure 10. Equalization Revenues and Weighting Factor .................................................................... 43 Figure 11. Percentage of Operations Contracted with Risk Mitigators ................................................ 44 Figure 12.Ratio Price/Cost of soybean and corn .................................................................................. 45 Figure 13. Breakdown of Allowances ................................................................................................... 46 Figure 14. Quarterly Vintage................................................................................................................. 49 Figure 15. Annual Vintage .................................................................................................................... 50 Figure 16. Annual Vintage – Vehicle Financing Portfolio – Arena I ..................................................... 50 Figure 17. Market Share of BB Funding ............................................................................................... 61 Figure 18. Asset Management ............................................................................................................. 64 Figure 19. Securities Portfolio by Index (BB Multiple Bank) ................................................................. 72 Figure 20. Analysis of Spread .............................................................................................................. 75 Figure 21. Base and Revenues from Cards ......................................................................................... 78 Figure 22. Corporate Structure ............................................................................................................. 79 Figure 23. Expanded Combined Index ................................................................................................. 83 Figure 24. Charges in Workforce .......................................................................................................... 85 Figure 25. Automated Teller Machines ................................................................................................. 88 Figure 26. Transactions by Customer Service Channel - % ................................................................ 88 Figure 27.Changes in Foreign Exchange Exposure in % of the Referential Equity Amount (RE) ....... 93 Figure 28. Composition of Banco do Brasil's Assets and Liabilities in the Country. ............................ 93 Figure 29. Net Position of BB Consolidated ......................................................................................... 94 Figure 30. Liquidity Reserve in Local Currency (Last Business Day) .................................................. 95 Figure 31. Liquidity Reserve – Foreign Currency (Last Business Day) ............................................... 96 Figure 32. DRL Indicator ....................................................................................................................... 96 Figura 33. Banco Votorantim – Production (Vehicle and Payroll Loans) ........................................... 109


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Presentation The Management Discussion and Analysis presents the economic/financial situation of Banco do Brasil (BB). Geared toward market analysts, stockholders and investors, with quarterly periodicity, this report content provides data on main economic indicators, BB's shares performance and risk management. The reader will also find tables with historical series, from up to eight periods, of the Summarized Balance Sheet, the Summarized Corporate Law Income Statement, the Income Statement with Reallocations, the Analytic Spread besides information about profitability, productivity, quality of the loan portfolio, capital structure, capital market, and structural data.

At the end of this report the Financial Statements and Explanatory Notes, for the quarter under analysis, will be presented.

High Lights

1) Historical data revised since the first quarter of 2010, by accounting for two items against the credit operations income that previously comprised the Other Operational Expenses/Revenue: amortization of premiums paid on purchase of portfolios and expenses for settlement / prepayment contracts.

2) Reclassification, from the first quarter of 2010, of the grouping items of revenue to provide services for the grouping income from banking fees, according to Central Bank Circular Letter n. º 3.490/2011.

3) The disclosure of Net Interest Income has been redesigned to better detail of its composition.

4) In Chapter 3, have been made available information on the renegotiated loan portfolio of non-performing loans in BB, such as balance, provision, delinquency rate and non-performing loan rate.

5) The Sources and Uses table, information and parcel of Chapter 5 has been reformatted for easier identification of transactions that compose the funding of the Bank and the investment of resources.

6) The report presents, in Chapter 11, information about the loan portfolio by risk level and non-performing loans rates, detailed in the Retail and Wholesale pillars, in addition the Capital Adequacy Ratio (Basel) of Banco Votorantim.

On-line Access

The Management Discussion and Analysis can also be read through Banco do Brasil’s Investor Relations website. Further information about BB is also available there, such as: Corporate Governance, news, frequently asked questions, a download center which contains versions of this report for the Adobe® Reader® software. General information, Balance Sheet Analysis, and Complete Financial Statements; the historical series in Excel: presentations to the market; Social and Environment Responsibility Report Social Balance Sheet; Conference Calls on Results and other are also available on the website.

Banco do Brasil bb.com.br Investor Relations bb.com.br/ir

http://www.bb.com.br/

http://www.bb.com.br/ri


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Summary of the Results

Results

BB's Recurring Income grew 10.2% in 2011

Banco do Brasil recorded a recurring income of R$ 11,751 million in 2011, up 10.2% over the amount verified in 2010 that corresponds to an annualized return on average shareholders' equity (ROAE) of 21.7%. The net income reached R$ 12,126 million in 2011, increasing 3.6% if compared with 2010.

The one-off effects amounted to R$ 375 million in 2011 due to the following reasons: disposal of BB's interest in Visa Internacional and Mastercard (R$ 169 million); tax efficiency (R$ 386 million); economic plans (-R$ 103 million) and R$ -78 million due to tax effects and statutory profit sharing on these items.

Figure 1. Income (R$ million) and Return on Average Equity (ROAE) (%)

Revenues from financial intermediation surpassed the milestone of R$ 100,000 million in 2011, reached R$ 102,849 in 2011, representing a 27.9% increase over 2010. Income from loan and lease operations followed loan portfolio performance (+19.4%) and grew 20.7% in 2011. The securities income in 2011 was driven by the increase of the average Selic rate (TMS), depreciation of the Brazilian real in relation to the US dollar and increase in average balances of securities. Additional information regarding Bank investments can be consulted in Chapter 7 of the MD&A report.

Regarding market funding expenses, the growth of 43.1% in 2011 over 2010 was mainly due to change in deposits mix and greater share of time deposits in detriment of others. This happened because of the strategy to enhance the liquidity of BB in the 3Q11 and 4Q11. Even in view of this change, BB’s net interest income closed the year with growth of 11.1% over 2010, within the proposed guidance.

The administrative expenses remained under control in 2011 and grew 9.7% over 2010, and 12.2% in the 4Q11-3Q11 comparison. Average salary adjustment of 9.0% (September base date) and the increase in the number of employees led in growth of personnel expenses. Regarding other administrative expenses, the advances observed are in line with the contractual adjustments made and with the organic growth of transactions.

In addition to the administrative costs control, the expenses with allowance for loan losses increased at a slower pace than the loan portfolio due to improvement in the portfolio risk and low levels of delinquency, contributing for the results presented in the period.

The following table, extracted from the statement of income with reallocations, presents the main highlights of the period. The breakdown of reallocations is in Section 2.3.1 of the MD&A report.

3,7042,573

3,025

10,66411,751

4,0022,891 2,972

11,703 12,126

36.6

22.6 22.527.0

22.4

33.6

20.0 22.9 24.6 21.7

4Q10 3Q11 4Q11 2010 2011

Recurring Net Income Net Income ROAE - % Recurring ROAE - %


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Table 1. Income Statement with Reallocations – Main Lines

(1) Historical series reviewed since 1Q10 accounting for two items in loan operations income that previously included in Other Operating Expenses / Revenue: amortization of premiums paid on portfolio acquisitions and expenses for settlement / prepayment contracts.

One-Off Items

The following table shows the description of the one-off items which added R$ 375 million to BB's net income in 2011, net amount of taxes and statutory profit sharing. In the quarter, only the amount referring to economic plans was treated as one-off items.

Table 2. One-Off Items

Table 3. Main Indicators of Income/Expenses

(1) Annualized indicators. (2) Accumulated Allowance for Loan Losses expenses for the 12-month period divided by the average loan portfolio in the same period. (3) The One-Off Items of the period were segregated in the calculation.

Quarterly Flow Chg. % Annual Flow Chg. %

R$ million 4Q10 3Q11 4Q11 On 4Q10 On 3Q11 2010 2011 On 2010

Financial Intermediation Income 21,417 30,271 25,970 21.3 (14.2) 80,436 102,849 27.9

Loan Operations¹ + Leasing 14,207 17,806 16,833 18.5 (5.5) 54,219 65,101 20.1

Securities 6,137 10,574 7,189 17.1 (32.0) 23,238 30,849 32.7

Financial Intermediation Expenses (11,568) (19,626) (14,622) 26.4 (25.5) (42,038) (60,173) 43.1

Net Interest Income 9,849 10,645 11,348 15.2 6.6 38,398 42,675 11.1

Allow ance for Loan Losses (2,139) (3,259) (2,892) 35.2 (11.3) (10,675) (11,827) 10.8

Net Financial Margin 7,711 7,386 8,456 9.7 14.5 27,724 30,848 11.3

Fee income 4,306 4,720 5,027 16.7 6.5 16,173 18,242 12.8

Income f/ Insur., Pension Plans and Sav. Bonds 491 570 515 5.0 (9.6) 1,888 2,265 20.0

Contribution Margin 11,539 11,670 12,927 12.0 10.8 42,157 47,274 12.1

Administrative Expenses (6,068) (6,208) (6,966) 14.8 12.2 (22,565) (24,752) 9.7

Personnel Expenses (3,270) (3,481) (3,954) 20.9 13.6 (12,244) (13,943) 13.9

Other Administrative Expenses (2,798) (2,727) (3,012) 7.7 10.4 (10,322) (10,809) 4.7

Commercial Income 5,452 5,395 5,900 8.2 9.4 19,484 22,306 14.5

Legal Claims 35 (122) 275 676.8 - (427) (135) (68.3)

Labor Law suits 92 (369) (278) - (24.7) (649) (724) 11.5

Other Operating Income 608 (1,031) (966) - (6.3) (908) (2,533) 179.0

Income Before Taxes 6,186 3,897 4,940 (20.2) 26.8 17,543 18,970 8.1

Income and Social Contribution Taxes (1,923) (924) (1,425) (25.9) 54.3 (5,242) (5,388) 2.8

Corporate Profit Sharing (559) (373) (450) (19.5) 20.5 (1,637) (1,737) 6.1

Recurring Net Income 3,704 2,573 3,025 (18.3) 17.6 10,664 11,751 10.2

R$ million 4Q10 3Q11 4Q11 2010 2011

Recurring Net Income 3,704 2,573 3,025 10,664 11,751

(+) One-Off Items of the Period 298 318 (53) 1,039 375

Sale of Investments - - - 214 169

Economic Plans (145) (35) (95) (371) (103)

Tax Efficiency 460 386 - 460 386

Contingent Liabilities (BESC) - - - 250 -

Additional Allow ance for Loan Losses - - - 332 -

Reversal of Labor Liabilities - - - 568 -

Capital Gain - BB Seguros Participações - - - 114 -

Tax Eff. and Stat. Profit Sharing on One-Off Items (16) (33) 42 (527) (78)

Net Income 4,002 2,891 2,972 11,703 12,126

Indicators - % 4Q10 3Q11 4Q11 2010 2011

Net Interest Margin (NIM)¹ 6.0 5.6 5.8 6.1 5.7

Expenses w ith Allow ance for Loan Losses over Portfolio² 3.3 3.0 3.1 3.3 3.1

Cost-Income Ratio³ 39.0 44.9 42.9 42.6 42.1

Cost-Income Ratio - 12 Months 42.6 41.1 42.1 - -

Recurring Return on Equity¹ 33.6 20.0 22.9 24.6 21.7

Effective Tax Rate 34.2 26.2 31.7 33.0 31.3


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Shareholder's Return

Earnings per share reached R$ 4.28

The earnings per share attained R$ 4.28 in 2011, against R$ 4.34 recorded in 2010. The following table shows this indicator.

Figure 2. Earnings per Share

Remuneration to shareholders reached R$ 4.9 billion for the year

Banco do Brasil maintained the policy of paying out 40% of its net income to its shareholders. R$ 4.9 billion was set aside as shareholders' compensation in 2011, representing a growth of 4.1% in relation to 2010.

Figure 3. Dividend and Interest on Own Capital

Net Interest Income

In the following table, the items Loan Operations and Funding Expenses do not consider the effect of exchange rate changes. The item treasury includes: (i) the result with interest, (ii) the revenue with remunerated compulsory deposit, (iii) tax hedge, derivative transactions and other financial instruments that offset the effects of change in exchange rate over the result. The item other consists mainly of the resources provisioned in BB linked to loans with official funds, such as, Finame, BNDES and FCO.

1.401.01 1.08

4.34 4.28

4Q10 3Q11 4Q11 2010 2011

917361 443

2,3021,848

686796 795

2,4033,051

1,6031,157 1,237

4,7064,899

4Q10 3Q11 4Q11 2010 2011

Dividends (R$ million) Interest on Own Capital (R$ million)


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Table 4. NII Breakdown

Managerial Margin and Spread

The table below presents BB managerial margin segmented into loan operations and deposits. Each line is calculated by the difference between financial revenues/expense and the respective opportunity financial cost/revenue of each line, for example, average Selic rate (TMS), long term interest rate (TJLP), reference rate (TR).

Table 5. Managerial Margin

BB's loan portfolio to individual customers is concentrated in consumer credit, payroll loans, vehicles financing and mortgage loans that together accounted for 80% of the individual customers portfolio. Traditionally, these facilities have lower spreads than others in the individual loan portfolio.

In relation to the agribusiness spread, the increase of the quarterly rate was mainly influenced by the growth of equalization revenues which grew 11.7% comparison 4Q11-3Q11 and 20.2% in the 4Q11-4Q10.

"Risk-Adjusted Net Interest Margin" is calculated based on ratio between net financial margin and profitable assets, that is, it considers expenses with allowance for loan losses. The table below presents the performance of the spread indices by portfolio.

Table 6. Annualized NIM

Quarterly Flow Chg. %

R$ million 4Q10 1Q11 2Q11 3Q11 4Q11 On 4Q10 On 3Q11

Net Interest Income 9,849 10,159 10,524 10,645 11,348 15.2 6.6

Loan Operations 13,468 13,928 14,647 15,737 16,218 20.4 3.1

Funding Expenses (5,294) (5,625) (6,202) (7,048) (6,845) 29.3 (2.9)

Recovery of Write-offs Loans 863 855 953 985 851 (1.4) (13.6)

Treasury 1,885 2,088 2,167 1,950 2,197 16.5 12.6

Other (1,073) (1,087) (1,041) (979) (1,073) (0.1) 9.6

Quarterly Flow Chg. % Chg. %


Loan Operations 6,869 7,708 8,244 20.0 7.0 27,676 30,321 9.6

Individuals 3,946 4,295 4,560 15.6 6.2 15,812 17,230 9.0

Businesses 1,854 2,286 2,340 26.2 2.4 7,827 8,667 10.7

Agribusiness 1,068 1,127 1,344 25.8 19.3 4,037 4,424 9.6

Deposits 1,287 1,481 1,290 0.2 (12.9) 4,708 5,853 24.3

Time Deposits 744 903 778 4.6 (13.9) 2,676 3,426 28.0

Demands Deposits 376 392 348 (7.5) (11.2) 1,298 1,496 15.2

Saving Deposits 167 186 164 (1.9) (12.0) 603 743 23.2

Annual Flow

% 4Q10 3Q11 4Q11 2010 2011

Loan Operations 8.6 8.8 9.0 9.0 8.5

Individuals 15.4 14.9 15.5 15.8 14.4

Businesses 5.5 6.3 6.1 6.0 5.8

Agribusiness 5.6 5.4 6.1 5.6 5.3

Deposits 1.6 1.7 1.4 1.5 1.6

Time Deposits 1.8 1.7 1.4 1.7 1.7

Demands Deposits 3.0 3.5 3.1 2.7 3.2

Saving Deposits 0.8 0.8 0.7 0.7 0.8

Net Interest Margin (NIM) 6.0 5.6 5.8 6.1 5.7

Risk Adjusted NIM 4.6 3.9 4.3 4.4 4.1


13

Assets

Total assets grew 21.0% in twelve months

Total assets of Banco do Brasil attained R$ 981,230 million in Dec/11, corresponding to a 21.0% growth over Dec/10. The main lines of assets are loan operations, securities and short-term interbank investments that accounted for 73.0% of BB's total assets in Dec/11 compared to 70.6% in Dec/10.

The following table presents the main items of the assets.

Table 7. Main Equity Items

(1) It is included guarantees provided and private securities

Loan Portfolio

Credit grows 19.8% in twelve months

Amplified loan portfolio, which includes guarantees provided and private securities in the portfolio, attained R$ 465,093 million, growth of 5.3% in the quarter and 19.8% in twelve months. Banco do Brasil’s market share in the domestic loan portfolio was 19.2% in Dec/11.

Table 8. Amplified Loan Portfolio¹

(1) It is included guarantees provided and private securities.

Chg. %

R$ million Dec/10 Sep/11 Dec/11 On Dec/10 On Sep/11

Total Assets 811,172 949,781 981,230 21.0 3.3

Loan Portfolio¹ 388,224 441,579 465,093 19.8 5.3

Securities 143,867 158,844 168,230 16.9 5.9

Short-Term Interbank Operations 107,579 157,413 166,288 54.6 5.6

Deposits 376,851 419,519 442,386 17.4 5.5

Demand Deposits 63,503 57,614 62,016 (2.3) 7.6

Savings Deposits 89,288 95,512 100,110 12.1 4.8

Interbank Deposits 18,998 13,586 14,450 (23.9) 6.4

Time Deposits 204,652 252,806 265,809 29.9 5.1

Money Market Borrow ing 142,175 194,728 195,175 37.3 0.2

Shareholder’s Equity 50,441 56,713 58,416 15.8 3.0

Balance Chg. %

R$ million Dec/10 Share % Sep/11 Share % Dec/11 Share %On Dec/10On Sep/11

Loan Portfolio (a) 358,366 100.0 402,555 100.0 422,989 100.0 18.0 5.1

Brazil 337,921 94.3 372,156 92.4 390,508 92.3 15.6 4.9

Individuals 113,096 31.6 125,747 31.2 130,561 30.9 15.4 3.8

Payroll Loan 44,976 12.6 49,020 12.2 51,246 12.1 13.9 4.5

Consumer Loan Backed by Direct Deposits 12,878 3.6 14,946 3.7 15,327 3.6 19.0 2.5

Vehicle Loans 27,395 7.6 31,435 7.8 31,329 7.4 14.4 (0.3)

Mortgage 2,951 0.8 5,030 1.2 6,035 1.4 104.5 20.0

Credit Card 11,867 3.3 11,729 2.9 13,193 3.1 11.2 12.5

Overdraft Accounts 2,598 0.7 3,110 0.8 2,554 0.6 (1.7) (17.9)

Other 10,432 2.9 10,477 2.6 10,877 2.6 4.3 3.8

Businesses 149,810 41.8 163,340 40.6 171,290 40.5 14.3 4.9

SME 56,960 15.9 62,316 15.5 68,062 16.1 19.5 9.2

Middle and Large 92,850 25.9 101,024 25.1 103,228 24.4 11.2 2.2

Agribusiness 75,015 20.9 83,069 20.6 88,658 21.0 18.2 6.7

Individuals 48,907 13.6 53,437 13.3 57,194 13.5 16.9 7.0

Businesses 26,107 7.3 29,632 7.4 31,465 7.4 20.5 6.2

Abroad 20,445 5.7 30,400 7.6 32,480 7.7 58.9 6.8

Private Securities (b) 29,858 39,024 42,104 41.0 7.9

Amplified Loan Portfolio (a + b) 388,224 100.0 441,579 100.0 465,093 100.0 19.8 5.3

Individuals 113,097 29.1 125,766 28.5 130,589 28.1 15.5 3.8

Businesses 176,382 45.4 199,085 45.1 210,167 45.2 19.2 5.6

Agribusiness 75,707 19.5 83,780 19.0 89,361 19.2 18.0 6.7

Abroad 23,038 5.9 32,948 7.5 34,976 7.5 51.8 6.2


14

Mortgage surpasses R$ 7.6 billion in Dec/11

Starting its operations with housing loans for individual clients in 2Q08, BB has henceforth exhibited continuous growth, and ended Dec/11 with a sum of R$ 6,035 million in this category, an amount 20.0% higher than that observed in Set/11. The amount disbursed in 4Q11 was R$ 1,098 million, a volume 96.5% higher than the one recorded in the same quarter of 2010. For corporate customers the outlay was R$ 391 million in 4Q11 and the portfolio balance reached R$ 1,571 million.

The total amount of the loan portfolio for individual customers (R$ 130,589 million) exhibited a expansion of 15.5% over December 2010, and of 3.8% over September 2011.

The portfolio of loans to corporate customers ended Dec/11 with a balance of R$ 210,167 million, which represents growth of 5.6% over Sep/11 and 19.2% in twelve months. This result was driven by the portfolio of large and mid-sized companies, which besides demanding credit through traditional lines (investment and working capital) raise funds through the issue of private securities. The balance of the portfolio of these securities added to the offering of guarantees ended Dec/11 at R$ 42,104 million.

In SME sector, the loan portfolio presented expansion of 19.5% compared to the observed in 2010 december and 9.2% against last September, with a balance of R$ 68,062 million. Banco do Brasil used the Fundo de Garantia de Operações – FGO (Operations Guarantee Fund) to allow a greater access credit for SME, to reduce the costs for the final borrower and to expand the portfolio volume. Another mechanism that supports the operations contracting of investment financing is the Fundo de Aval às Micro e Pequenas Empresas – Fampe (Endorsement Fund for SMEs). This fund is comprised by resources from Serviço Nacional de Apoio às Micro e Pequenas Empresas – Sebrae (National Service for SMEs Support) and complements up to 80% of the needed guarantees value to contract operations with SMEs that have gross annual turnover up to R$ 2.4 million.

The agribusiness loan portfolio ended the quarter with a balance of R$ 89,361 million, which corresponds to growth of 6.7% over Sep/11 and of 18.0% in twelve months. The quarterly performance results mainly from loans to individual customer in investment lines. The low rate of default on the agribusiness loan portfolio merits special emphasis. The indicator that measures the ratio between the loan portfolio and transactions over ninety days past due ended the quarter with a percentage of 0.7%, compared to 2.5% in the same period of 2010.

Delinquency remains at rates below than observed in the Banking Industry

The delinquency indicators of Banco do Brasil continue better than those observed in the Banking Industry (BI) in December 2011. The indicator that measures non-performing loans (NPL) for more than 90 days (ratio between loans for more 90 days and the loan portfolio) of the Banking Industry ended this quarter at 3.6%, compared to 2.1% of BB. Practically all of BB's credit quality indicators improved when compared to December 2010 and remained in line with the indices observed in the previous quarter.

Comparing operations classified by risk level, BB also presents a better loan structure than BI. Operations rated at risk levels AA-C at Dec/11 closed in 93.9% of the total portfolio, against 92.3% verified in the BI. The following table presents indexes of quality loan portfolio.


15

Table 9. Loan Portfolio Quality Indicators

Expenses with allowance for loan losses in the outlook of twelve months showed an increase of 10.8% in 2011 over previous year; while the loan portfolio increase 18.0% in this period. Consequently, the indicator that measures portfolio expenses recorded an improvement of 20 bps in comparison to 2010.

Table 10. Expenses with Allowance for Loan Losses over Loan Portfolio

The balance of allowance for loan losses ended the quarter at R$ 19,015 million, which provides coverage of 215.6% of non-performing loans more than 90 days, percent higher than in BI which reached 158.9% in Dec/11.

The following table shows the renegotiated loan portfolio of non-performing loan operations. Note that the coverage ratio reached 272.6% in Dec/11 against 214.3% in the same period in the previous year.

Table 11. Renegotiated Loan Portfolio

(1) Refers to renegotiated loan portfolio of non-performing loan operations (2) Historical series reviewed due to change in methodology in the calculation of the information.

Basel

BIS ratio higher than minimum required

The capital ratio (K) of Banco do Brasil ended December at 14.0%, higher than the minimum required by the Central Bank of Brazil (11%). The BIS ratio presented indicates an excess of Referential Shareholders’ Equity of R$ 17.2 billion, which enables an expansion of up to R$ 156.0 billion in credit assets, considering a weighting of 100%.

% Dec/10 Sep/11 Dec/11

NPL + 15 days/Total Portfolio (%) 3.7 3.9 3.6

NPL 15-59 days/Total Portfolio (%) 1.1 1.3 1.1


NPL 15-89 days/Total Portfolio (%) 1.5 1.7 1.5


AA - C Loans / Total Portfolio (%) 93.7 93.9 93.9

Allow ance/Loan Portfolio 4.8 4.6 4.5

Individuals Allow ance/Loan Portfolio 6.8 7.3 6.8

Business Allow ance/Loan Portfolio 3.2 3.0 3.1

Allow ance/NPL + 60 days 182.2 182.7 180.4

Allow ance/NPL + 90 days 212.1 219.4 215.6

Average Risk BB 4.3 4.2 4.1

Average Risk – Banking Industry 5.6 5.6 5.7

NPL + 90 days/Total Portfolio – BI 3.2 3.5 3.6

R$ million 4Q10 3Q11 4Q11

(A) Allow ance for Loan Losses - Quarterly (2,139) (3,259) (2,892)

(B) Allow ance for Loan Losses - 12 Months (10,675) (11,074) (11,827)

(C) Loan Portfolio 358,366 402,555 422,989

(D) Average Portfolio – 3 Months 352,699 392,129 412,439

(E) Average Portfolio – 12 Months 325,051 368,196 383,408

Expenses over Portfolio (A/D) - % 0.6 0.8 0.7

Expenses over Portfolio (B/E) - % 3.3 3.0 3.1

R$ milhões Dec/10 Sep/11² Dec/11

Renegotiated Loan Portfolio¹ 10,226 7,004 6,991

Allow ance 2,406 1,689 1,606

NPL + 90days 1,122 547 589

Allow ance/Loan Portfolio - % 23.5 24.1 23.0

NPL + 90 days/Loan Portfolio - % 11.0 7.8 8.4

Allow ance/NPL + 90 days - % 214.3 309.0 272.6


16

In January 2012, an external issuance in the amount of US$ 1 billion was carried out for the funding of Perpetual Bonuses. BB is awaiting Central Bank of Brazil authorization to classify the fund as Tier I capital and, in case this amount becomes part of the Referential Shareholders’ Equity, BIS Ratio would reach 14.3%, considering Dec/2011 figures.

Figure 4. BIS Ratio

Fee Income

Fee Income reflects business diversification

It is worth highlighting the greater diversification of BB revenues, due to projects such as the restructuring of activities in the retail segment, focused on customer base service and profitability, and corporate restructuring of the insurance area.

Fee income, a line that includes both services income (RPS), and banking fee income (RTB) reached R$ 18,242 million in 2011, a result 12.8% higher than the observed in the previous year and inside the estimated range for 2011 Guidance. It is worth to highlight the fee income from credit/debit cards and management of investment fund.

Results from insurance, pension plans and saving bonds operations reached R$ 2,265 million in 2011, rose by 20.0% over 2010. In 4Q11-3Q11 comparison, the decrease of 9.6% was due the growth of retained claims (+7.9%) and marketing expenses (+17.7%), mainly, with insurance operations.

The indicator that measures the ratio between commercial revenues (sum of Net Interest Income, fee income and results from insurance operations) and the average client base reached R$ 302.7, in this quarter, in comparison to R$ 269.1 in 4Q10. This index shows, on average, the value of business generated per client.

Table 12. Fee Income and Results from Insurance Operations

11.0 10.6 10.5

3.1 3.3 3.5

14.1 13.9 14.0

Dec/10 Sep/11 Dec/11

Tier I Tier II



Fee Income 4,306 4,720 5,027 16.7 6.5 16,173 18,242 12.8

Account Fees 1,006 1,054 1,136 12.9 7.8 3,714 4,077 9.8

Credit / Debit Cards 928 997 1,084 16.8 8.7 3,306 3,926 18.7

Investment Fund Management Fees 687 845 829 20.7 (1.9) 2,672 3,197 19.7

Loan Fees 459 485 496 8.0 2.1 1,710 1,822 6.6

Collections 304 314 321 5.6 2.3 1,197 1,241 3.7

Insurance, P. Plans and Savings Bonds 114 115 122 7.6 6.3 432 499 15.7

Billings 173 183 195 13.1 6.9 614 725 18.0

Interbank 144 168 168 16.9 (0.2) 549 640 16.5

Capital Market Fees 113 76 96 (15.7) 25.7 436 350 (19.9)

Other 378 483 580 53.4 20.2 1,543 1,764 14.4

Insurance P. Plans and Sav. Bonds Income 491 570 515 5.0 (9.6) 1,888 2,265 20.0

Annual Flow


17

Administrative Expenses

Administrative Expenses in Conformity with Guidance

According to the Guidance forecast, administrative expenses are under control. In 2011, these expenses amounted to R$ 24,752 million, a growth of 9.7% over the previous year. These expenses include personnel and other administrative expenses, which grew, respectively, in the year-over-year comparison, 13.9% and 4.7%.

In the twelve-month comparison, the growth of Personnel Expenses line was mainly due to three reasons: (i) salary adjustment, granted in the base date of Sept/2010; (ii) increase of administrative provisions by the inflation; (iii) and to the increase of 4.7% in staff numbers in relation to the 4Q10, which reflects the Retail Revitalization Program. In relation to the other administrative expenses, the performance is in line with the contractual adjustments made and with the organic growth of transactions.

Table 13. Administrative Expenses

Cost Income Ratio

Cost income ratio, a ratio between administrative expenses and operating revenues, improved 200 bps in the 4Q101-3Q11 comparison. In the quarter, operating revenues increased 8.8%, against 4.0% in administrative expenses, which improved the indicator.

While in the 4Q11-4Q10 comparison, it is worth emphasizing that Previ's Plan I actuarial gains in the amount of R$ 1.4 billion were recognized in 4Q10, event that did not occur in this quarter. This fact adversely impacted the indicator.

Cost Income ratio based on cumulative 12 months allows an analysis with lower volatility, specially in the comparison with pair quarters (2Q and 4Q), periods in which revenues from actuarial revaluation of Previ's 1 plan is accounted for. We verified that even with actuarial gains not being recognized in 2H11, there was an improvement of 50 bps in twelve months.

Figure 5. Cost Income Ratio – Without One-Off Items – %






Annual Flow

42.6 41.1 42.1

4Q10 3Q11 4Q11

Cost-Income Ratio (last 12 months)

39.0

44.9 42.9

4Q10 3Q11 4Q11

Cost-Income Ratio


18

Insurance

Income from Insurance

The insurance ratio that measures the share of this segment in the recurring net income of BB has been growing and went from 12.7% in 2010 to 13.7% in 2011. This evolution is in line with the strategy adopted by BB of raising participation of the insurance segment in the conglomerate. The table below presents the breakdown of insurance income, as well as the insurance ratio.

Table 14. Consolidated Insurance Ratio

Guidance

The table below presents the 2011 guidance with the respective results verified. There were deviations between realized and projected interval in individual loan portfolio, business loan portfolio, and allowance for loan losses.

Table 15. 2011 Guidance

The main reasons for deviations in the 2011 guidance are:

a) Individual Loan Portfolio – influence of macroprudential measures, requiring higher capital requirement for vehicle financing and payroll loans, with consequent reduction in financing terms;

b) Business Loan Portfolio – part of large companies' credit demand was met mainly through the issuance of debentures, promissory notes and credit notes (private securities), which grew 41.0% in 12 months;

c) Allowance for Loan Losses – detailed studies allow BB to understand its clients in a better way, regarding the business potential and credit risks. This approach results in a significantly improve in the allowance for loan losses indicator and is based on continuous improvement in credit granting methodologies.



Insurance Income 411 410 422 2.7 3.0 1,354 1,604 18.5

Brokerage Net Income 69 94 100 44.4 6.5 289 362 25.3

Service Fee Net Income 56 56 61 8.6 8.3 215 249 15.7

Equity in the Earnings 285 260 261 (8.5) 0.6 849 993 16.9

BB Recurring Income 3,704 2,573 3,025 (18.3) 17.6 10,664 11,751 10.2

Insurance Ratio 11.1 15.9 13.9 12.7 13.7

Annual Flow

Items Performance 2011 2011 Guidance

Recurring Return on Equity 21.7% 21% - 24%

Net Interest Income 11.1% 11% - 13%

Total Deposits 17.4% 14% - 18%

Domestic Loan Portfolio 15.6% 15% - 18%

Individuals 15.4% 17% - 21%

Businesses 14.3% 16% - 19%

Agribusiness 18.2% 8% - 12%

Allow ance for Loan Losses 3.1% 3,3% - 3,7%

Fee Income 12.8% 12% - 17%

Administrative Expenses 9.7% 9% - 12%

Tax Rate 31.3% 31% - 34%


19

2012 Guidance

The following table presents the 2012 guidance:

Table 16. 2012 Guidance

The 2012 forecasts were prepared regarding the following assumptions:

Assumptions influenced by management

1. Increase in customer portfolio profitability as a way to boost revenues;

2. Expansion of the service network, based on new clients, and profitability of the current customer portfolio, considering the partnership with Banco Postal;

3. Maintenance of the current business model, without considering new acquisitions and/or partnerships that might be entered into to exploit specific segments;

4. Alignment of the cost structure to business volume growth;

5. Adjustments in contracts to suppliers and collective bargaining agreement in line with market practices;

6. Recognition of actuarial gains and losses in the Previ Benefit Plan I, as established by the CVM Resolution 600/2009.

Assumptions that are not under management control:

1. Low growth of developed economies in 2012;

2. Greater resistance, but not immunity, of the Brazilian economy to foreign shocks;

3. A political environment without institutional rupture;

4. Maintenance of Brazilian sovereign rating as investment grade;

5. Maintenance of the current domestic macroeconomic policy structure: floating exchange rate, inflation targets (nominal anchor) and fiscal discipline, entailing a gradual and consistent reduction of the relationship between Public Sector Net Debt (PSND) and the Gross Domestic Product (GDP);

6. Increase of the Brazilian trade balance and its effects in the foreign trade;

7. A gradual increase in the Brazilian economy's potential for growth (potential GDP);

8. Evolution of interest rates, foreign exchange, inflation rate and GDP according to the market's consensus;

9. An advancement of the regulatory mark / microeconomic agenda with stimulus to public and private investment;

10. Regulatory stability, also in what concerns the rates of taxes levied on the Bank's activities, labor legislation, and social security legislation;

11. Change in capital consumption rules and rates of the compulsory payment – macroprudential measures;

12. Implementation of Basel III recommendations;

13. Guidelines of the 2012/2013 crop plan.

Items 2012 Guidance

Recurring Return on Equity 19% - 22%

Net Interest Income 11% - 15%

Total Deposits 14% - 18%

Domestic Loan Portfolio 17% - 21%

Individuals 19% - 23%

Businesses 18% - 22%

Agribusiness 9% - 12%

Allow ance for Loan Losses 3,1% - 3,5%

Fee Income 13% - 18%

Administrative Expenses 8% - 12%

Tax Rate 31% - 34%


20

1 - Key Statistics

Table 17. Main Macroeconomic Indicators¹

(1) All indicators were obtained from official sources such as Central Bank of Brazil, FGV (Getúlio Vargas Foundation), IBGE, etc (2) Loans as Reference for Interest Rate.

2007 2008 2009 2010 2011

Economic Activity

GDP (% YTD in 12 months) 6.1 5.2 (0.6) 7.5 ND

Family Consumption 6.1 5.7 4.2 7.0 ND

Government Consumption 5.1 3.2 3.9 3.3 ND

Gross Fixed Capital Formation 13.9 13.6 (10.3) 21.9 ND

Exports 6.2 0.5 (10.2) 11.5 ND

Imports 19.9 15.4 (11.5) 36.2 ND

Use of Installed Capacity (%) 82.4 82.6 79.9 82.3 ND

Agent Population (% YTD in 12 months) 1.5 2.0 0.6 1.8 1.1

Unemployment Rate (% YTD in 12 months) 9.3 7.9 8.1 6.7 6.0

Formal employment – net creation in 12 m (thousand jobs) 1,617.4 1,452.2 995.1 2,524.3 1,566.0

Industrial Production (% YTD in 12 months) 6.0 3.1 (7.4) 10.4 ND

External Sector

Current Transactions (% YTD in 12 months) 0.1 (1.7) (1.5) (2.3) (2.1)

Direct Foreign Investment (US$ billion) 34.6 45.1 25.9 48.5 66.7

International Reserves (US$ billion – year accumulated) 180.3 206.8 239.1 288.6 352.0

Sovereign Risk (base points – EOP) 213.0 430.0 197.0 189.0 223.0

Trade Balance (US$ billion – year accumulated) 40.0 24.7 25.3 20.3 29.8

Exports (US$ billion – year accumulated) 160.6 197.9 153.0 201.9 256.0

Imports (US$ billion – year accumulated) 120.6 173.2 127.6 181.6 226.2

Ptax Dollar Sale (EOP) 1.8 2.3 1.7 1.7 1.9

Ptax Dollar Sale (% YTD in 12 months) (17.2) 31.9 (25.5) (4.3) 12.6

Monetary Ratios

IGP-DI FGV (% YTD in 12 months) 7.9 9.1 (1.4) 11.3 5.0

IGP-M FGV (% YTD in 12 months) 7.8 9.8 (1.7) 11.3 5.1

IPCA – IBGE (% YTD in 12 months) 4.5 5.9 4.3 5.9 6.5

Selic (EOP %) 11.25 13.75 8.75 10.75 11.0

Accumulated Selic (% YTD in 12 months) 11.88 12.48 9.93 9.78 11.6

Accumulated TR (exBTN) (% YTD in 12 months) 1.5 1.8 0.7 0.8 1.3

TJLP - IBGE (EOP %) 6.3 6.3 6.0 6.0 6.0

Libor (EOP %) 5.2 3.9 0.3 0.3 0.4

Public Finance

Primary Surplus (% GDP 12 months accumulated) 3.3 3.4 2.0 2.8 ND

PSGD (% GDP) 58.0 57.4 62.0 54.7 ND

PSND (% GDP) - Without Petrobras 45.5 38.5 42.8 40.2 ND

Credit Ratios

Banking Industry Loan Portfolio (R$ billion) 936.0 1,227.3 1,414.3 1,705.9 2,029.6

Individuals (R$ billion) 425.4 532.3 635.9 778.2 940.2

Companies (R$ billion) 510.6 695.0 778.4 927.7 1,089.5

Credit/GDP (% YTD in 12 months) 34.2 41.3 44.4 45.2 49.1

Household Debt (%) 29.3 33.2 36.7 38.7 39.8

Total Default (% past due loans over 90 days) 3.2 3.2 4.3 3.2 3.6

Individuals² 7.0 8.0 7.7 5.7 7.3

Businesses² 2.0 1.8 3.8 3.5 3.9

Total Investment Rate (%)² 33.8 43.3 34.3 35.0 37.1

Individuals 43.9 57.9 42.7 40.6 43.8

Businesses 22.9 30.7 25.5 27.9 28.2

Total Spread (%)² 22.3 30.7 24.4 23.5 26.9

Individuals 31.9 45.0 31.6 28.5 33.7

Businesses 11.9 18.4 16.5 17.0 17.9

Average Term (%)²

Individuals 14.6 16.3 16.8 18.7 20.0

Businesses 9.2 10.1 9.5 13.3 13.4


21

Table 18. Ownership Structure - %

1 Positions considering the Bonus C exercise.

Table 19. Distribution of Dividends/Interest on Own Capital

Table 20. Market Ratios

¹ Dividend and Interest on Own Capital - 12 months / Market Capitalization

Table 21. Participation of BB’s Shares in Brazilian Stock Market Indexes - %

Shareholders Dec/10 Mar/11 Jun/11 Sep/11 Dec/11

Federal Government 59.2 59.2 59.2 59.2 59.1

Previ 10.4 10.4 10.4 10.4 10.4

BNDESPar 0.0 0.0 0.0 0.0 0.1

Treasury Shares 0.0 0.0 0.0 0.0 0.0

Free Float 30.4 30.4 30.4 30.4 30.4

Individuals 5.5 5.7 5.7 5.7 6.2

Companies 7.4 8.3 8.2 8.8 8.7

Foreign Capital 17.5 16.4 16.5 15.9 15.5

Total 100.0 100.0 100.0 100.0 100.0

4Q10 1Q11 2Q11 3Q11 4Q11

Federal Government 948.9 694.2 788.4 684.5 731.2

Previ 166.2 121.7 138.2 119.9 128.2

BNDES 0.1 0.1 0.1 0.1 1.6

Individuals 88.3 67.3 76.3 66.5 76.8

Companies 118.7 97.9 109.7 101.2 107.7

Foreign Capital 281.0 191.8 219.3 184.4 191.9

Total 1,603.2 1,172.9 1,332.0 1,156.5 1,237.5

R$ million

4Q10 1Q11 2Q11 3Q11 4Q11

Earnings per Share - R$ 1.43 1.03 1.16 1.01 1.04

Price / Earnings (12 months) 7.68 6.88 6.21 5.40 5.60

Price / Book Value 1.78 1.62 1.47 1.25 1.16

Market Capitalization - R$ million 89,884 84,535 80,100 71,061 67,910

Book Value 17.63 18.22 19.09 19.82 20.39

Price of Share - R$ 31.42 29.55 28.00 24.84 23.70

Share Appreciation in the Period - % (2.2) (6.0) (5.2) (11.3) (4.6)

Dividend Yield - %¹ 5.2 5.8 6.4 7.4 7.2

Sep/10 -

Dec/10

Jan/11 -

Apr/11

May/11 -

Aug/11

Sep/11 -

Dec/11

Jan/12 -

Apr/12

Bovespa Index - Ibovespa 2.430 2.735 3.105 3.136 3.170

Brazil Index - IBrX 2.620 2.561 2.445 2.627 2.215

Brazil 50 Index - IBrX - 50 3.056 3.011 2.951 3.186 2.697

Carbon Efficient Index - ICO2 4.840 4.869 4.754 5.236 4.604

Financial Index - IFNC 12.504 12.833 12.592 13.379 11.186

Corporate Governance Trade Index - IGCT 3.304 3.355 3.126 3.327 2.835

Special Corporate Governance Stock Index - IGC - 4.461 4.236 4.396 3.769

Corporate Sustainability Index - ISE - 1.676 1.636 1.85 1.438

Special Tag Along Stock Index - ITAG 4.225 4.265 4.032 4.271 3.577

Mid-Large Cap Index - MLCX 2.744 2.666 2.541 2.735 2.301


22

Table 22. Key Statistcs

4Q10 1Q11 2Q11 3Q11 4Q11

Balance Sheet Items – R$ billion

Assets 811.2 866.6 904.1 949.8 981.2

Shareholders’ Equity 50.4 52.1 54.6 56.7 58.4

Credit Portfolio 358.4 364.7 383.4 402.6 423.0

Deposits 376.9 381.2 396.2 419.5 442.4

Demand Deposits 63.5 59.6 61.1 57.6 62.0

Saving Deposits 89.3 90.5 89.2 95.5 100.1

Time Deposits 204.7 219.0 234.2 252.8 265.8

Profitability

Net Income per Share - R$ 1.40 1.03 1.16 1.01 1.04

Recurring Income per Share – R$ 1.29 1.02 1.13 0.90 1.06

ROE - Annual Basis % 36.6 24.9 27.5 22.6 22.5

Recurring ROE - Annual Basis % 33.6 24.8 26.6 20.0 22.9

ROE in 12 months - Annual Basis % 27.0 27.4 27.6 25.2 22.4

ROA - Annual Basis % 2.0 1.4 1.5 1.3 1.3

NII / Earning Assets - Annual Basis 6.0 5.9 5.8 5.6 5.8

Productivity

Cost/Income Ratio¹ - % 39.0 40.9 39.7 44.9 42.9

Cost/Income Ratio 12 months accumulated¹ - % 42.6 41.8 41.1 41.1 42.1

Fee Income / Personnel Expenses¹ - % 135.5 127.4 130.5 122.6 118.8

Fee Income / Adm. Expenses¹ - % 72.5 70.0 72.2 70.5 72.1

Personnel Expenses per Employee - R$ 29,039 27,085 28,843 31,213 34,812

Employees / (Branches + PAA + PAB) 17.2 17.5 17.9 18.0 17.5

Checking Accounts per Collaborator 302.3 292.3 290.8 290.2 295.2

Assets per Employee – R$ thousand 6,824 7,174 7,386 7,700 8,018

Loan Portfolio / Points of Service – R$ million 19.5 19.8 20.8 21.9 22.5

Loan Portfolio Quality

Allow ance / Loan Portfolio - % 4.8 4.7 4.6 4.6 4.5

Allow ance / (E + F + G + H) - % 118.4 118.6 117.6 114.2 108.4

Portfolio Net of Allow ance / Total Portfolio - % 95.2 95.3 95.4 95.4 95.5

Capital Structure

Leverage (times) 16.1 16.6 16.6 16.7 16.8

BIS Ratio - % 14.1 14.1 14.4 13.9 14.0

Tier I 11.0 11.2 11.1 10.6 10.5

Tier II 3.1 3.0 3.3 3.3 3.5

Total Quantity of Shares - thousand 2,861 2,861 2,861 2,861 2,865

Structural Information

Branches 5,078 5,103 5,094 5,138 5,263

Total Service Points 18,359 18,450 18,445 18,363 18,765

Total Customers - thousand 54,366 54,967 55,216 55,609 56,001

Total Checking Accounts - thousand 35,934 35,304 35,596 35,798 36,121

Individuals - thousand 33,758 33,128 33,405 33,588 33,875

Businesses - thousand 2,176 2,176 2,191 2,210 2,247

Total Savings Accounts - thousand 23,601 23,536 23,984 24,113 24,709

Staff 118,879 120,797 122,409 123,344 122,377

Employees 109,026 111,224 112,913 113,594 113,810

Interns 9,853 9,573 9,496 9,750 8,567

Market Share

Assets 20.8 20.9 21.0 20.9 N/A

Deposits 26.3 26.0 26.2 26.4 N/A

BNDES Onlending 19.4 17.9 18.3 17.9 21.5

Loan 19.8 19.5 19.5 19.3 19.2

Agribusiness 60.5 60.8 62.2 61.4 63.1

Asset Management 21.2 22.0 22.3 22.0 21.6

Cards Revenues 20.7 20.9 21.1 21.1 20.8

Import Exchange 23.0 23.9 22.2 22.6 20.2

Export Exchange 31.8 31.3 29.5 30.0 26.5

(1) Ex Nonrecurring Items

N/A - Not available


23

Table 23. Ratings

Table 24. Compulsory/Direct Lending

* Reserve Requirements at BB are directed to Rural Credit. (1) Up to 06/21/2010: 42% rate (Bacen Circular 3,413 of 10/14/2008); From 06/28/2010 to 07/02/2012: 43% rate; From 07/09/2012 to 06/16/2014: 44% rate; Up to 06/23/2014: 45% rate (Bacen Circular 3,497 of 06/24/2010). (2) Up to 12/03/2010: 8% rate (Bacen Circular 3.486 of 02/24/2010); From 12/06/2010: 12% rate (Bacen Circular 3,514 of 12/03/2010). (3) Up to 06/30/2010: 30%; From 07/01/2010 to 06/30/2011: 29%; From 07/01/2011 to 06/30/2012; 28%; From 07/01/2012 to 06/30/2013: 27%; From 07/01/2013 to 06/30/2014: 26%; Up to 07/01/2014: 25% (MCR 6-2 Changed by Bacen Resolution 3,746 of 06/30/2009). (4) Bacen Resolution 3,422, of 11/30/2006. (5) Up to 06/25/2010: 15% rate; From 06/28/2010 to 06/24/2011: 16% rate; From 06/27/2011 to 06/29/2012: 17% rate; From 07/02/2012 to 06/28/2013: 18% rate; From 07/01/2013 to 06/27/2014: 19%; From 06/30/0214 to 06/26/2015: 20% (Bacen Resolution 3,705 of 03/26/2009). (6) Bacen Circular 3,486, From 02/24/2010. (7) Up to 06/30/2010: 70%; From 07/01/2010 to 06/30/2011: 69%; From 07/01/2011 to 06/30/2012: 68%; From 07/01/2012 to 06/30/2013: 67%; From 07/01/2013 to 06/30/2014: 66%; From 07/01/0214 to 06/30/2015: 65% (Bacen Resolution 3,705 of 03/26/2009). (8) Up to 12/05/2010: 15% rate (Bacen Circular 3,485 of 02/24/2010); From 12/06/2010: 20% rate (Bacen Circular 3,513 of 12/03/2010). (9) Up to 12/03/2010: 8% rate (Bacen Circular 3,486 of 02/24/2010); From 12/06/2010: 12% rate (Bacen Circular 3,514 of 12/03/2010). (10) Bacen Circular 3,223, of 02/06/2004..

4Q10 1Q11 2Q11 3Q11 4Q11

Ratings

Fitch Ratings

Individual C / D C / D C / D C / D C / D

Short-Term - Local Currency F3 F2 F2 F2 F2

Long-Term - Local Currency BBB- BBB BBB BBB BBB

Short-Term - Foreign Currency F3 F2 F2 F2 F2

Long-Term - Foreign Currency BBB- BBB BBB BBB BBB

National Ratings

Short-Term F1+(bra) F1+(bra) F1+(bra) F1+(bra) F1+(bra)

Long-Term AA+(bra) AAA (bra) AAA (bra) AAA (bra) AAA (bra)

Moody's

Financial Strength C+ C+ C+ C+ C+

Short-Term - Local Currency P-1 P-1 P-1 P-1 P-1

Short-Term - Foreign Currency P-3 P-3 P-2 P-2 P-2

Long-Term Debt- Foreign Currency Baa2 Baa2 Baa1 Baa1 Baa1

Long-Term Deposits - Local Currency A2 A2 A2 A2 A2

Long-Term Deposits - Foreign Currency Baa3 Baa3 Baa2 Baa2 Baa2

National Ratings

Short-Term BR-1 BR-1 BR-1 BR-1 BR-1

Long-Term Aaa.br Aaa.br Aaa.br Aaa.br Aaa.br

Standard & Poor's

Long-Term - Local Currency BBB- BBB- BBB- BBB- BBB

Long-Term - Foreign Currency BBB- BBB- BBB- BBB- BBB

4Q10 1Q11 2Q11 3Q11 4Q11

Compulsory/Reserve Requirements

Demand Deposits

Rate (1) 43% 43% 43% 43% 43%

Additional (2) 12% 12% 12% 12% 12%

Reserve Requirements* (3) 29% 29% 29% 28% 28%

Direct Lending (micro f inance) (4) 2% 2% 2% 2% 2%

Unmarked 14% 14% 14% 15% 15%

Savings Deposits

Rate (5) 16% 16% 17% 17% 17%

Additional (6) 10% 10% 10% 10% 10%

Reserve Requirements* (7) 69% 69% 69% 68% 68%

Unmarked 5% 5% 4% 5% 5%

Time Deposits

Rate (8) 20% 20% 20% 20% 20%

Additional (9) 12% 12% 12% 12% 12%

Unmarked 68% 68% 68% 68% 68%

Judicial Deposits

Rate (10) 0% 0% 0% 0% 0%

Unmarked 100% 100% 100% 100% 100%


24

2 - Summarized Financial Statements

2.1. Summarized Balance Sheet

Table 25. Summarized Balance Sheet - Assets

R$ million Dec/10 Sep/11 Dec/11 On Dec/10On Sep/11

ASSETS 811,172 949,781 981,230 21.0 3.3

Current and Long-term Assets 791,403 927,456 957,800 21.0 3.3

Available Funds 9,745 20,466 10,034 3.0 (51.0)

Short-term Interbank Investments 107,579 157,413 166,288 54.6 5.6

Securities and Financial Derivatives 143,867 158,844 168,230 16.9 5.9

Securities Available for Trading 50,445 63,154 63,257 25.4 0.2

Securities Available for Sale 75,142 75,364 88,385 17.6 17.3

Securities Held to Maturity 16,656 18,280 15,191 (8.8) (16.9)

Financial Derivatives 1,624 2,046 1,397 (14.0) (31.7)

Interbank Accounts 89,526 95,468 96,342 7.6 0.9

Deposits w ith the Central Bank 87,035 89,654 93,660 7.6 4.5

Compulsory Deposits on Demand Deposits and Float 18,487 14,366 14,307 (22.6) (0.4)

Compulsory Deposits on Savings Deposits 68,548 75,288 79,353 15.8 5.4

Other 2,491 5,814 2,682 7.7 (53.9)

Intrabank Accounts 258 169 335 29.8 98.6

Loans 317,726 359,095 379,045 19.3 5.6

Public Sector 7,184 8,441 8,486 18.1 0.5

Private Sector 326,975 368,470 388,781 18.9 5.5

( Allow ance for Loan Losses) (16,433) (17,816) (18,222) 10.9 2.3

Leasing 3,857 3,158 2,851 (26.1) (9.7)

Leasing and Subleasing Receivables 4,048 3,372 3,064 (24.3) (9.1)

(Allow ance for Lease Losses) (191) (214) (213) 11.5 (0.3)

Other Receivables 114,962 128,011 129,554 12.7 1.2

Receivable on Guarantees Honored 75 76 77 1.9 1.0

Foreign Exchange Portfolio 11,878 18,000 17,615 48.3 (2.1)

Income Receivable 944 1,079 1,410 49.4 30.6

Trading and Brokerage of Securities 383 1,576 317 (17.2) (79.9)

Specif ic Credits 1,030 1,117 1,146 11.3 2.6

Credits from Insurance, Pension and Capitalization Op. 1,109 1,670 1,742 57.1 4.3

Tax Credits 21,970 23,772 22,754 3.6 (4.3)

Actuarial Assets 9,895 12,688 13,372 35.1 5.4

Warrants Deposits Receivable 23,388 25,314 25,584 9.4 1.1

Destination Superavit Fund - PREVI 7,595 7,953 8,030 5.7 1.0

Other Credits 38,269 36,021 39,172 2.4 8.7

(Provision or Doubtful Receivables) (1,572) (1,256) (1,665) 5.9 32.5

(With Loan Characteristics) (690) (580) (580) (16.0) (0.1)

(Without Loan Characteristics) (882) (676) (1,085) 23.0 60.5

Other Assets 3,884 4,831 5,120 31.8 6.0

Other Assets 388 459 468 20.7 2.0

(Provision for Possible Losses) (177) (185) (188) 6.3 1.7

Prepaid Expenses 3,673 4,557 4,840 31.8 6.2

Permanent Assets 19,770 22,326 23,430 18.5 4.9

Investments 8,128 7,948 7,973 (1.9) 0.3

Property and Equipment 4,904 5,210 5,589 14.0 7.3

Leasing Assets - 1 1 - (6.8)

Intangible 6,452 8,984 9,736 50.9 8.4

Deferred Charges 286 184 132 (54.0) (28.6)

Chg. %Balance


25

Table 26. Summarized Balance Sheet - Liabilities

Balance

R$ million Dec/10 Sep/11 Dec/11 On Dec/10On Sep/11

LIABILITIES AND SHAREHOLDER’S EQUITY 811,172 949,781 981,230 21.0 3.3

Current and Long-term Liabilities 760,432 892,751 922,467 21.3 3.3

Deposits 376,851 419,519 442,386 17.4 5.5

Demand Deposits 63,503 57,614 62,016 (2.3) 7.6

Savings Deposits 89,288 95,512 100,110 12.1 4.8

Interbank Deposits 18,998 13,586 14,450 (23.9) 6.4

Time Deposits 204,652 252,806 265,809 29.9 5.1

Investment Deposits 410 0 - - -

Money Market Borrow ing 142,175 194,728 195,175 37.3 0.2

Funds from Acceptances and Securities Placed 13,486 29,163 32,323 139.7 10.8

Commercial Papers 4,314 14,366 16,138 274.1 12.3

Foreign Securities 9,172 14,798 16,185 76.5 9.4

Interbank Accounts 18 3,240 24 34.0 (99.3)

Intrabank Accounts 3,688 1,790 3,819 3.6 113.4

Borrow ing 8,598 12,185 12,257 42.6 0.6

Foreign Borrow ing 8,598 12,185 12,257 42.6 0.6

Domestic Onlending – Official Institutions 50,764 48,024 50,991 0.4 6.2

National Treasury 1,549 1,689 1,722 11.1 1.9

BNDES 26,978 27,503 28,978 7.4 5.4

CEF 147 268 338 130.0 26.2

Finame 14,046 16,292 17,506 24.6 7.5

Other Institutions 8,043 2,272 2,446 (69.6) 7.7

Foreign Onlending 97 101 102 5.4 1.4

Financial Derivatives 5,297 4,438 3,621 (31.6) (18.4)

Other Accounts Payable 159,459 179,563 181,768 14.0 1.2

Collection of Taxes and Contributions 297 3,836 360 21.2 (90.6)

Foreign Exchange Portfolio 29,506 29,689 28,416 (3.7) (4.3)

Shareholder and Statutory Distributions 1,992 2,425 2,122 6.6 (12.5)

Taxes and Social Security 27,613 27,770 28,057 1.6 1.0

Trading and Brokerage of Securities 1,676 801 836 (50.1) 4.4

Technical Prov. Insurance, Pension and Capitalization Op. 32,369 41,965 45,023 39.1 7.3

Financial and Development Funds 3,568 3,705 4,002 12.2 8.0

Perpetual Securities 3,361 2,872 2,846 (15.3) (0.9)

Special Operations - 11 2 - (80.4)

FCO (Subordinated Debt) 23,412 29,694 30,885 31.9 4.0

Actuarial Liabilities 6,907 7,099 7,142 3.4 0.6

Other Liabilities 28,757 29,697 32,077 11.5 8.0

Unearned Income 300 318 347 15.7 9.0

Shareholders’ Equity 50,441 56,713 58,416 15.8 3.0

Capital 33,078 33,123 33,123 0.1 -

Revaluation Reserves 6 5 5 (24.2) (0.4)

Reserve for Retained Earnings 16,889 20,290 24,121 42.8 18.9

Mark-to-Market – Securities and Derivatives 467 711 724 54.9 1.9

Retained Earnings (Accumulated losses) - (26) - - -

(Treasury Shares) (0) (0) (0) (99.8) 0.4

Corporate Profit Sharing 0 488 444 - (9.1)

Income Accounts - 2,122 - - -

Chg. %


26

2.2. Summarized Corporate Law Income Statement

Table 27. Summarized Corporate Law Income Statement

(1) Reduced Loan Operations Revenues related to loans acquired, given that the premiums paid in acquisitions of portfolios have been recognized in contrast with the Financial Intermediation Income. The historical data of information has changed since 1Q10. (2) Reclassified, since 1Q10, from services income to Banking Fee Income, according to Bacen Circular Letter Nº 3,490/2011.




Loans¹ 13,397 17,022 15,944 19.0 (6.3) 50,960 61,998 21.7

Leasing 151 186 116 (23.2) (37.6) 814 616 (24.3)

Securities 6,137 10,574 7,189 17.1 (32.0) 23,238 30,849 32.7

Financial Derivatives (571) 233 (403) (29.3) - (2,239) (1,461) (34.8)

Foreign Exchange Portfolio 538 (1,577) 190 (64.6) - 1,083 (374) -

Compulsory Investments 1,276 1,969 1,923 50.7 (2.3) 3,586 7,231 101.6

Financial Inc. Insur., Pension & S.Bonds Ope. 165 226 212 28.6 (6.0) 592 803 35.6


Money Market Funds (10,727) (15,401) (13,340) 24.4 (13.4) (38,756) (53,055) 36.9

Borrow ing, Assignments and Onlending (841) (4,225) (1,282) 52.4 (69.7) (3,473) (7,118) 105.0

Allow ance for Loan Losses (2,112) (3,285) (3,211) 52.1 (2.2) (10,244) (11,975) 16.9

Gross Income from Financial Intermediation 7,414 5,722 7,338 (1.0) 28.2 25,562 27,513 7.6

Other Operating Income (Expenses) (1,409) (2,261) (2,521) 78.9 11.5 (7,151) (9,006) 25.9

Fee Income² 2,824 3,138 3,374 19.5 7.5 10,777 12,213 13.3

Banking Fees Income² 1,482 1,581 1,652 11.5 4.5 5,396 6,028 11.7



Taxes (993) (1,027) (1,129) 13.7 10.0 (3,750) (4,259) 13.6

Eqty. Int. in the Res. of Subs., and Affiliates (36) 558 56 - (90.0) (46) 455 -

Income f/ Ins., Psn & S.Bonds Operations 491 570 515 5.0 (9.6) 1,888 2,265 20.0

Other Operating Revenues 4,574 2,698 3,290 (28.1) 21.9 13,788 12,978 (5.9)

Other Operating Expenses (2,796) (2,505) (2,355) (15.8) (6.0) (9,144) (10,351) 13.2

Operating Income 6,005 3,461 4,818 (19.8) 39.2 18,410 18,507 0.5

Non-operating Income (2) 24 9 - (63.3) 370 225 (39.2)

Income Before Taxes 6,004 3,485 4,826 (19.6) 38.5 18,781 18,732 (0.3)

Income and Social Contribution Taxes (1,426) (148) (1,372) (3.8) 828.0 (5,321) (4,722) (11.3)

Statutory Profit Sharing (575) (420) (443) (23.0) 5.6 (1,756) (1,791) 2.0

Minority Interest Earnings - (27) (39) - 46.8 0 (93) -

Net Income 4,002 2,891 2,972 (25.7) 2.8 11,703 12,126 3.6


27

2.3. Income Statement with Reallocations

Table 28. Income Statement with Reallocations





Loan Operations* (4) 14,056 17,620 16,717 18.9 (5.1) 53,405 64,486 20.7

Lease Operations 151 186 116 (23.2) (37.6) 814 616 (24.3)

Securities 6,137 10,574 7,189 17.1 (32.0) 23,238 30,849 32.7

Financial Derivatives (571) 233 (403) (29.3) - (2,239) (1,461) (34.8)

Foreign Exchange Portfolio 538 (1,577) 190 (64.6) - 1,083 (374) -

Compulsory Investments 1,276 1,969 1,923 50.7 (2.3) 3,586 7,231 101.6

Fin. Inc. from Insur, Pens. and Capitaliz. Oper. 165 226 212 28.6 (6.0) 592 803 35.6

FX Gain (Loss) on Foreign Equity (1) (58) 577 9 - (98.4) (149) 433 -

Other Op. Inc. of a Fin. Intermed. Nature (2) (224) 40 (5) (97.6) - 252 (75) -

Hedge Fiscal (5) (54) 422 20 - (95.2) (147) 341 -


Money Market Funds (3) (10,727) (15,401) (13,340) 24.4 (13.4) (38,565) (53,055) 37.6

Borrow ing, Assignments and Onlending (841) (4,225) (1,282) 52.4 (69.7) (3,473) (7,118) 105.0

Net Interest Income 9,849 10,645 11,348 15.2 6.6 38,398 42,675 11.1

Allow ance for Loan Losses (6) (19) (2,139) (3,259) (2,892) 35.2 (11.3) (10,675) (11,827) 10.8

Net Financial Margin 7,711 7,386 8,456 9.7 14.5 27,724 30,848 11.3

Fee Income 4,306 4,720 5,027 16.7 6.5 16,173 18,242 12.8

Services Income** 2,824 3,138 3,374 19.5 7.5 10,777 12,213 13.3

Banking Fee Income** 1,482 1,581 1,652 11.5 4.5 5,396 6,028 11.7

Insur., Pension Plan and Capitaliz. Income 491 570 515 5.0 (9.6) 1,888 2,265 20.0

Taxes on Revenues (5) (7) (968) (1,006) (1,071) 10.6 6.5 (3,627) (4,081) 12.5

Contribution Margin 11,539 11,670 12,927 12.0 10.8 42,157 47,274 12.1


Personnel Expenses (9) (3,270) (3,481) (3,954) 20.9 13.6 (12,244) (13,943) 13.9

Other Administrative Expenses (8) (12) (2,798) (2,727) (3,012) 7.7 10.4 (10,322) (10,809) 4.7

Other Tax Expenses (7) (19) (67) (61) 228.0 (9.4) (107) (216) 101.4

Commercial Income 5,452 5,395 5,900 8.2 9.4 19,484 22,306 14.5

Legal Risk 127 (491) (4) - (99.3) (1,076) (860) (20.1)

Legal Claims (8) (10) (15) (17) 35 (122) 275 676.8 - (427) (135) (68.3)

Labor Law suits (9) (11) (18) (20) 92 (369) (278) - (24.7) (649) (724) 11.5

Other Operating Income 608 (1,031) (966) - (6.3) (908) (2,533) 179.0

Eq. Int. in Results of Subs. And Aff il. (1) 22 (18) 47 114.4 - 102 22 (78.9)

FX Other Operating Income / Expenses 586 (1,013) (1,013) - (0.0) (1,010) (2,554) 152.8

Other Operating Income (2) (3) (4) (10) (11) (13) 1,613 1,401 1,641 1.7 17.2 4,999 5,939 18.8

PREVI (13) 1,921 531 531 (72.4) (0.0) 4,299 2,981 (30.7)

Other Operating Expenses (2) (6) (12) (2,948) (2,944) (3,184) 8.0 8.2 (10,309) (11,475) 11.3

Operating Income 6,188 3,873 4,931 (20.3) 27.3 17,500 18,914 8.1

Non-operating Income (14) (21) (2) 24 9 - (63.3) 43 56 32.2

Income Before Taxes 6,186 3,897 4,940 (20.2) 26.8 17,543 18,970 8.1

Income and Social Contrib. Taxes (5) (16) (23) (1,923) (924) (1,425) (25.9) 54.3 (5,242) (5,388) 2.8

Interest on Ow n Capital Tax Benefit 274 318 318 15.9 (0.1) 961 1,221 27.0

Statutory Profit Sharing (22) (559) (373) (450) (19.5) 20.5 (1,637) (1,737) 6.1

Minority Interest Earnings - (27) (39) - 46.8 0 (93) -

Recurring Income 3,704 2,573 3,025 (18.3) 17.6 10,664 11,751 10.2

Extraordinary Items 298 318 (53) - - 1,039 375 (63.9)

Sale of Investments (14) - - - - - 214 169 (21.0)

Economic Plans (15) (231) (35) (95) (58.9) 171.6 (371) (103) (72.4)

Tax Eff iciency (16) 460 386 - - - 460 386 (15.9)

Contingent Liabilities – BESC (17) (18) - - - - - 250 - -

Additional Provision for Loan Losses (19) - - - - - 332 - -

Reversal of Labor Liabilities (20) - - - - - 568 - -

Capital Gain - BB Seguros Participações (21) - - - - - 114 - -

Tax Eff. and Stat. Prof. on One-Off Items (22) (23) 70 (33) 42 (39.4) - (527) (78) (85.2)

Net Income 4,002 2,891 2,972 (25.7) 2.8 11,703 12,126 3.6


28

2.3.1 Details of the Reallocations

In this chapter the adjustments made in the Corporate Law Income Statement to get the Income Statement with Reallocated are detailed below. Such adjustments aim to:

a) Separate the extraordinary items and show the recurring income for the period;

b) Change the manner that income and expenses are shown, in order to provide a better understanding of the business and the company's performance;

c) Allow the Net Interest Income (NII) recorded in the period to reflect, effectively, the gain from all the earning assets, seeking to inform the market what is the spread achieved from the division of this margin by average balance of earning assets. For this, it was necessary to:

I - Include in the NII the income recorded in Other Operating Income that had financial intermediation characteristics and which was derived from earning assets recorded in the Other Receivables in the Balance Sheet;

II - Identify the Foreign Exchange Gain/(Loss) on assets and liabilities abroad in the period in a specific NII item (Equity);

III - To keep in NII, amounts related to negative foreign exchange adjustments that were recorded in Other Operating Income/Expenses to avoid inverting the balance of accounts which have a financial intermediation nature;

IV - Detect and cancel the effects of Tax Hedge transactions entered into as of 4Q08, on the Effective Tax Rate and NII.

The origin, destination and description of each adjustment made in the Corporate Law Income Statement are presented in the table below:


29

Table 29. Statement of Reallocations and Extraordinary Items

R$ million

ITEM FROM TO EVENT 4Q10 3Q11 4Q11 2010 2011

1 Eq. Int. in Results of Subs. And Affil FX Gain (Loss) on Foreign Investments FX Gain (Loss) on Foreign Equity (57.9) 576.6 9.2 (148.8) 433.3

2 Other Operating Income Other Op. Inc. of a Fin. Intermed. Nature Other Op. Inc. of a Fin. Intermediation Nature 35.8 - - 170.8 42.6

2 Other Operating Income Other Op. Inc. of a Fin. Intermed. Nature FX Readjustment 67.3 150.6 9.3 832.9 957.4

2 Other Operating Expenses Other Op. Inc. of a Fin. Intermed. Nature FX Readjustment (326.8) (110.3) (14.6) (751.2) (1,075.1)

3 Other Operating Income Money Market Funds Reversal of Charges with the Restatement of Saving Deposits - - - 191.0 -

4 Other Operating Income Loan Operations Equalization Revenues of Charges over Loan Operations 659.6 598.6 773.6 2,444.9 2,487.7

5 Tax on Revenues Tax Hedge Tax Hedge (5.9) 45.9 2.2 (15.9) 37.1

5 Income and Social Contribution Taxes Tax Hedge Tax Hedge (48.4) 376.3 18.2 (130.8) 304.2

6 Allowance for Loan Losses Other Operating Expenses Allowance for Loan Losses (Credits w/o Charact. of Fin. Int.) 27.0 (26.2) (319.8) 98.9 (147.9)

7 Other Tax Expenses Tax on Revenues Taxes on Revenues (974.3) (959.8) (1,068.5) (3,642.8) (4,043.6)

8 Other Administrative Expenses Legal Claims Expenses of Legal Claims (198.8) (174.2) (127.8) (703.3) (562.7)

9 Personnel Expenses Labor Lawsuits Provision for Labor Lawsuits (182.0) (369.3) (306.2) (776.1) (969.1)

10 Other Operating Income Legal Claims Reversal of Contingent Liabilities 3.4 17.4 307.5 9.7 324.9

11 Other Operating Income Labor Lawsuits Reversal of Labor Liabilities 273.9 - 28.0 840.7 244.6

12 Other Administrative Expenses Other Operating Expenses Premiums Paid to Costumers (505.4) (523.2) (523.5) (2,014.8) (2,051.1)

13 Other Operating Revenues PREVI Revision in the Actuarial Assets and Liabilities of Previ 1,921.0 530.6 530.6 4,299.2 2,981.3

14 Non-Operating Income Sale of Investments Sale of Investments - - - 213.7 168.9

15 Legal Claims Economic Plans Economic Plans (230.8) (34.9) (94.9) (371.4) (102.6)

16 Income and Social Contribution Taxes Tax Efficiency Tax Efficiency 459.6 386.4 - 459.6 386.4

17 Legal Claims Contingent Liabilities – BESC Contingent Liabilities – BESC - - - 104.6 -

18 Labor Lawsuits Contingent Liabilities – BESC Contingent Liabilities – BESC - - - 145.7 -

19 Allowance for Loan Losses Additional Provision for Loan Losses Additional Provision for Loan Losses - - - 331.9 -

20 Labor Lawsuits Reversal of Labor Liabilities Reversal of Labor Liabilities - - - 568.4 -

21 Non-Operating Income Capital Gain - BB Seguros Participações Capital Gain - BB Seguros Participações - - - 114.0 -

22 Statutory Profit Sharing Tax FX and Statutory Profits over One-Off Items Tax Effects and Statutory Profits over One-Off Items (16.2) (46.4) 6.9 (119.5) (53.3)

23 Income and Social Contribution Taxes Tax FX and Statutory Profits over One-Off Items Tax Effects and Statutory Profits over One-Off Items 85.7 13.0 35.2 (408.0) (24.7)


30

2.3.2 Glossary

(1) Corresponds to the result of the variations of rights and obligations relating to foreign exchange variations incurred due to the periodic restatement of loans and financings payable in foreign currency.

(2) Includes financial income and expenses from foreign exchange besides Other Operating Income with characteristics of financial intermediation .

(3) Refers to the reversal of charges with the restatement of savings deposits recorded upon the closing of the semesters. In the months after the closing of the Balance Sheets, this reallocation is necessary in order to correctly evidence the NII. As from 3Q10, this amount started to be directly recorded in financial intermediation expenses in the Corporate Law Income Statement, and reallocations were no longer necessary.

(4) Refers to the equalization revenues of charges on rural credit operations. The calculations for equalization of the interest rates are based on the administrative rulings of the Ministry of Finance, which determine the calculation formulas, according to the source of funds.

(5) Mechanism that reduces the effects of exchange variation on the result.

(6) Expenses with the Allowance for Loan Losses include credits without characteristics of financial intermediation.

(7) Tax expenses reallocated to form the Contribution Margin.

(8) Expenses originating from legal claims.

(9) Expenses originating from labor law suits.

(10) Reversal of balances that, due to the Chart of Accounts of the Central Bank of Brazilian (COSIF), could not be accounted for in Other Administrative Expenses in the corporate statement of income.

(11) Reversal of balances that, due to the Chart of Accounts of the Brazilian Central Bank (COSIF), could not be accounted for in Personnel Expenses in the Corporate Law Income Statement.

(12) Portion of the premium paid to costumers accounted for in other administrative expenses.

(13) Revenues originating from the review of the Actuarial Assets and Liabilities of PREVI.

(14) Partial sale of investments of the BB group. In the 2Q11, sale of interest in Internacional Visa and Mastercard.

(15) Expense with provision originating from lawsuits relating to the economic plans.

(16) Revenue referring to tax efficiency generated by Banco do Brasil in periodic review of the treatment given to tax credits activation.

(17) and (18) Extraordinary revenue arising from the reversal of a reserve for labor, legal and tax lawsuits arising from Banco do Estado de Santa Catarina (BESC).

(19) Partial reversal of the Additional Allowance for Loan Losses recognized in the 2nd quarter of 2009.

(20) Reversal of provisions for labor law suits, generating extraordinary income in 1Q10. As of 4Q09, provision was determined so as to cover the average sum of amounts effectively outlaid by the BB in legal proceedings of the same nature (provision was formerly defined with a basis on the amount requested by the applicant). The amount recorded as extraordinary in 1Q10 resulted from the migration of the base of labor law suits recorded in the controls of Banco Nossa Caixa to the methods and systems of Banco do Brasil.

(21) Extraordinary revenue due to the increase in the Banco do Brasil's Holding in the company Brasilprev. The holding increased from 50% to 75%.

(22) and (23) Segregation of effects of extraordinary items of the period on the payment of Statutory Profit Sharing (PLR), and unification of effects of these items on taxes (IR and CSLL). The table below shows separately the effect of each extraordinary item on taxes and on PLR.


31

Table 30. Tax Impacts and Statutory Profit Sharing on Extraordinary Items


R$ million 4Q10 3Q11 4Q11 On 4Q10On 3Q11 2010 2011 On 2010

Sale of Investments - - - - - (96) (75) (22.2)

Economic Plans 70 15 42 (39.4) 172.6 165 46 (72.4)

Tax Efficiency - (49) - - - (33) (49) 49.8

Contingent Liabilities (BESC) - - - - - (111) - -

Additional Provision for Loan Losses - - - - - (147) - -

Reversal of Labor Liabilities - - - - - (256) - -

Capital Gain - BB Seguros Participações - - - - - (50) - -

Total 70 (33) 42 (39.4) - (527) (78) (85.2)


32

2.4. Breakdown of Balance Sheet

Table 31. Breakdown – Assets and Liabilities

Balance

R$ million Dec/10 Share % Sep/11 Share % Dec/11 Share %

ASSETS 811,172 100.0 949,781 100.0 981,230 100.0

Current and Long-term Assets 791,403 97.6 927,456 97.6 957,800 97.6

Available Funds 9,745 1.2 20,466 2.2 10,034 1.0

Short-term Interbank Investments 107,579 13.3 157,413 16.6 166,288 16.9

Securities and Financial Derivatives 143,867 17.7 158,844 16.7 168,230 17.1

Interbank Accounts 89,526 11.0 95,468 10.1 96,342 9.8

Deposits w ith the Central Bank 87,035 10.7 89,654 9.4 93,660 9.5

Compulsory Deposits on Demand Deposits and Float 18,487 2.3 14,366 1.5 14,307 1.5

Compulsory Deposits on Savings Deposits 68,548 8.5 75,288 7.9 79,353 8.1

Other 2,491 0.3 5,814 0.6 2,682 0.3

Intrabank Accounts 258 0.0 169 0.0 335 0.0

Loans 317,726 39.2 359,095 37.8 379,045 38.6

Leasing 3,857 0.5 3,158 0.3 2,851 0.3

Other Receivables 114,962 14.2 128,011 13.5 129,554 13.2

Foreign Exchange Portfolio 11,878 1.5 18,000 1.9 17,615 1.8

Tax Credits 21,970 2.7 23,772 2.5 22,754 2.3

Actuarial Assets 9,895 1.2 12,688 1.3 13,372 1.4

Destination Superavit Fund - PREVI 7,595 0.9 7,953 0.8 8,030 0.8

Other 63,625 7.8 65,597 6.9 67,783 6.9

Other Assets 3,884 0.5 4,831 0.5 5,120 0.5

Permanent Assets 19,770 2.4 22,326 2.4 23,430 2.4

Investments 8,128 1.0 7,948 0.8 7,973 0.8

Intangible 6,452 0.8 8,984 0.9 9,736 1.0

Other 5,190 0.6 5,395 0.6 5,721 0.6

LIABILITIES AND SHAREHOLDER’S EQUITY 811,172 100.0 949,781 100.0 981,230 100.0

Current and Long-term Liabilities 760,432 93.7 892,751 94.0 922,467 94.0

Deposits 376,851 46.5 419,519 44.2 442,386 45.1

Demand Deposits 63,503 7.8 57,614 6.1 62,016 6.3

Savings Deposits 89,288 11.0 95,512 10.1 100,110 10.2

Interbank Deposits 18,998 2.3 13,586 1.4 14,450 1.5

Time Deposits 204,652 25.2 252,806 26.6 265,809 27.1

Investment Deposits 410 0.1 0 0.0 - -

Money Market Borrow ing 142,175 17.5 194,728 20.5 195,175 19.9

Funds from Acceptances and Securities Placed 13,486 1.7 29,163 3.1 32,323 3.3

Interbank Accounts 18 0.0 3,240 0.3 24 0.0

Intrabank Accounts 3,688 0.5 1,790 0.2 3,819 0.4

Borrow ing 8,598 1.1 12,185 1.3 12,257 1.2

Domestic Onlending – Official Institutions 50,764 6.3 48,024 5.1 50,991 5.2

Foreign Onlending 97 0.0 101 0.0 102 0.0

Financial Derivatives 5,297 0.7 4,438 0.5 3,621 0.4

Other Accounts Payable 159,459 19.7 179,563 18.9 181,768 18.5

Foreign Exchange Portfolio 29,506 3.6 29,689 3.1 28,416 2.9

Taxes and Social Security 27,613 3.4 27,770 2.9 28,057 2.9

Technical Prov. Insurance, Pension and Capitalization Op. 32,369 4.0 41,965 4.4 45,023 4.6

FCO (Subordinated Debt) 23,412 2.9 29,694 3.1 30,885 3.1

Actuarial Liabilities 6,907 0.9 7,099 0.7 7,142 0.7

Other 39,652 4.9 43,346 4.6 42,246 4.3

Unearned Income 300 0.0 318 0.0 347 0.0

Shareholders’ Equity 50,441 6.2 56,713 6.0 58,416 6.0


33

2.5. Breakdown of Income Statement with Reallocations

Table 32. Breakdown of Income Statement with Reallocations

Balance

R$ million 4Q10 Share % 3Q11 Share % 4Q11 Share %

Net Interest Income 9,849 64.6 10,645 71.4 11,348 71.3

Fee Income 4,306 28.2 4,720 31.7 5,027 31.6

Insurance, Pension Plan and Capitalization Income 491 3.2 570 3.8 515 3.2

Eq. Int. in Results of Subs. And Aff il. 22 0.1 (18) (0.1) 47 0.3

FX Other Operating Income / Expenses 586 3.8 (1,013) (6.8) (1,013) (6.4)

Total Operating Income 15,254 100.0 14,904 100.0 15,924 100.0

Expanded Administrative Expenses (5,941) (38.9) (6,699) (45.0) (6,970) (43.8)

Administrative Expenses (6,068) (39.8) (6,208) (41.7) (6,966) (43.7)

Personnel Expenses (3,270) (21.4) (3,481) (23.4) (3,954) (24.8)

Other Administrative Expenses (2,798) (18.3) (2,727) (18.3) (3,012) (18.9)

Legal Risk 127 0.8 (491) (3.3) (4) (0.0)

Other Tax Expenses (19) (0.1) (67) (0.5) (61) (0.4)

Taxes on Revenues (968) (6.3) (1,006) (6.7) (1,071) (6.7)

Allow ance for Loan Losses (2,139) (14.0) (3,259) (21.9) (2,892) (18.2)

Operating Income 6,188 40.6 3,873 26.0 4,931 31.0

Non-operating Income (2) (0.0) 24 0.2 9 0.1

Income Before Taxes 6,186 40.6 3,897 26.1 4,940 31.0

Income Taxes and Statutory Profit Sharing (2,482) (16.3) (1,297) (8.7) (1,875) (11.8)

Minority Interest Earnings - - (27) (0.2) (39) (0.2)

Recurring Income 3,704 24.3 2,573 17.3 3,025 19.0

One-off Items 298 2.0 318 2.1 (53) (0.3)

Net Income 4,002 26.2 2,891 19.4 2,972 18.7


34

3 -Loans

3.1. Loan Portfolio

The following tables show the share of each credit portfolio area in the total portfolio, besides the table with Banking Industry (BI) figures.

The loan portfolio classified following the criteria set by the Brazilian Central Bank (BACEN). The concept of expanded loan portfolio also includes securities and guarantees. The segmentation of the credit portfolio in this chapter refers to the classified portfolio, unless otherwise specified.

Table 33. Loan Portfolio

1) Beginning in 2Q11, the SME segment includes companies with annual revenue until R$ 25 million, against R$ 10 million for the industry and R$ 15 million for commerce and services previously used. Balances in December 2010 have been reviewed with this criterion to maintain comparability. (2) Includes Securities and guarantees provided.

Table 34. Loan in the Brazilian Banking Industry

3.1.1 Individual Loan Portfolio

The following tables show the main credit facilities for individuals.

R$ million D ec/ 10 Share - % Sep/ 11 P art .% D ec/ 11 Share - % On D ec/ 10 On Sep/ 11

Lo an P o rtfo lio (a) 358,366 100.0 402,555 100.0 422,989 100.0 18.0 5 .1

B razil 337,921 94.3 372,156 92.4 390,509 92.3 15.6 4 .9

Individuals 113,096 31.6 125,747 31.2 130,561 30.9 15.4 3 .8

Payro ll Loan 44,976 12.6 49,020 12.2 51,246 12.1 13.9 4.5

Consumer Loan Backed by Direct Deposits 12,878 3.6 14,946 3.7 15,327 3.6 19.0 2.5

Auto Loans 27,395 7.6 31,435 7.8 31,329 7.4 14.4 (0.3)

M ortgage 2,951 0.8 5,030 1.2 6,035 1.4 104.5 20.0

Credit Card 11,867 3.3 11,729 2.9 13,193 3.1 11.2 12.5


Other 10,432 2.9 10,477 2.6 10,877 2.6 4.3 3.8

B usinesses 149,810 41.8 163,340 40.6 171,290 40.5 14.3 4 .9

SM E¹ 56,960 15.9 62,316 15.5 68,062 16.1 19.5 9.2

M iddle and Large 92,850 25.9 101,024 25.1 103,228 24.4 11.2 2.2

A gribusiness 75,015 20.9 83,069 20.6 88,658 21.0 18.2 6 .7

Individuals 48,907 13.6 53,437 13.3 57,194 13.5 16.9 7.0

Businesses 26,107 7.3 29,632 7.4 31,465 7.4 20.5 6.2

A bro ad 20,445 5 .7 30,400 7 .6 32,480 7 .7 58.9 6 .8

B o nds Securit ies (b) 29,858 39,024 42,104 41.0 7 .9

A mplif ied Lo an P o rtfo lio ² (a + b) 388,224 100.0 441,579 100.0 465,093 100.0 19.8 5 .3

Individuals 113,097 29.1 125,766 28.5 130,589 28.1 15.5 3.8

Businesses 176,382 45.4 199,085 45.1 210,167 45.2 19.2 5.6

Agribusiness 75,707 19.5 83,780 19.0 89,361 19.2 18.0 6.7

Abroad 23,038 5.9 32,948 7.5 34,976 7.5 51.8 6.2

B alance C hg. %

B alance C hg. %

R$ million D ec/ 10 M ar/ 11 Jun/ 11 Sep/ 11 D ec/ 11 On D ec/ 10 On Sep/ 11

B I 1,705,890 1,753,633 1,835,147 1,931,425 2,029,646 19.0 5.1

Individuals 778,209 806,759 850,853 893,084 940,160 20.8 5.3

Business 927,681 946,874 984,294 1,038,341 1,089,485 17.4 4.9


35

Table 35. Individual Loan Portfolio

Table 36. Individual Loan Portfolio – Market Share

Table 37. Payroll Loans – Portfolio Breakdown

Table 38. Average rates and terms

The following table evidences the balances of the payroll loans and vehicle financing portfolios acquired.

Balance Chg. %

R$ million Dec/10 Share - % Sep/11 Share - % Dec/11 Share - % On Dec/10 On Sep/11

Direct Consumer Credit (CDC) 63,438 56.1 69,295 55.1 72,298 55.4 14.0 4.3

Payroll Loan 44,976 39.8 49,020 39.0 51,246 39.3 13.9 4.5

Consumer Finance 5,585 4.9 5,330 4.2 5,725 4.4 2.5 7.4

Consumer Loan Backed by 12,878 11.4 14,946 11.9 15,327 11.7 19.0 2.5

Mortgage 2,951 2.6 5,030 4.0 6,035 4.6 104.5 20.0

Vehicles Loan 27,395 24.2 31,435 25.0 31,329 24.0 14.4 (0.3)

Credit Card 11,867 10.5 11,729 9.3 13,193 10.1 11.2 12.5


Microcredits 1,123 1.0 896 0.7 848 0.6 (24.5) (5.3)

Other 3,724 3.3 4,252 3.4 4,304 3.3 15.6 1.2

Total 113,096 100.0 125,747 100.0 130,561 100.0 15.4 3.8


R$ million BB BI Share - % BB BI Share - % BB BI Share - %

Payroll Loan 44,976 138,240 32.5 49,020 155,790 31.5 51,246 158,628 32.3

Mortgage 2,951 138,778 2.1 5,030 184,458 2.7 6,035 200,506 3.0

Vehicles Loan 27,395 185,916 14.7 31,435 199,261 15.8 31,329 200,634 15.6

Balance Chg. %

Dec/10 Share - % Sep/11 Share - % Dec/11 Share - % On Dec/10 On Sep/11

Civil Servants 38,022 84.5 41,567 84.8 43,725 85.3 15.0 5.2

INSS's Retirees and Pensioners 3,938 8.8 4,626 9.4 4,691 9.2 19.1 1.4

Employees from the Private Sector 3,016 6.7 2,827 5.8 2,831 5.5 (6.1) 0.1


Banco do Brasil

CDC - Vehicles

Average rate - % p.m 1.5 1.6 1.6

Average term - months 48.3 49.2 49.4

Vahicles Leasing



Mortgage

Average Contracted Amount - R$ thousand 151.0 150.7 163.3


Payroll Loan



BV - Vehicles Loan




36

Table 39.Portfolios Acquired

3.1.2 Business Loan Portfolio

The following table displays key corporate credit lines.

Table 40.Business Loan Portfolio

BB paid out R$ 18,119 million in on-lending operations of BNDES in 2011, which represented a share of 21.5% in the total amount of these transactions, which guaranteed the leadership of the ranking for the period.

Private Securities – In recent years, BB has been operating in the capital market, as an alternative to the traditional credit facilities, by means of issues of debentures, promissory notes and bank credit bills. It is emphasized that a portion of the demand for loans is being served by that type of subscription, and that has boosted the corporate loan portfolio's performance. The balances of these Certificates are presented in the table below.

Table 41. Private securities – Businesses

* Securities issued in the country registered in compliance with Bacen Circular 3,068 in Available for sale.

Foreign Trade Finance - In 4Q11, Banco do Brasil (BB) remained a key partner of the Brazilian’s foreign trade, with import and export foreign exchange operations of more than R$ 28 billion.

Table 42. ACC/ACE Average Volume per Contract

Chg. %

R$ million Dec/10 Mar/11 Jun/11 Sep/11 Dec/11 On Dec/10 On Sep/11

Payroll loans 8,636 9,201 9,295 9,000 8,855 2.5 (1.6)

Vehicle financing 5,877 6,885 8,166 8,644 10,869 84.9 25.7

Total 14,514 16,086 17,461 17,645 19,724 35.9 11.8

Balance Chg. %


Working Capital 75,630 50.5 81,261 49.7 84,727 49.5 12.0 4.3

Investment 33,046 22.1 37,043 22.7 39,070 22.8 18.2 5.5

Receivables 16,257 10.9 15,624 9.6 17,968 10.5 10.5 15.0

Pré-Approved Credit 3,070 2.0 2,846 1.7 2,878 1.7 (6.2) 1.1

ACC/ACE 8,997 6.0 11,227 6.9 9,688 5.7 7.7 (13.7)

BNDES Exim 5,116 3.4 4,967 3.0 4,876 2.8 (4.7) (1.8)

Credit Cards 3,994 2.7 6,133 3.8 7,290 4.3 82.5 18.9

Overdraft Account 187 0.1 178 0.1 163 0.1 (12.7) (8.4)

Other 3,512 2.3 4,060 2.5 4,629 2.7 31.8 14.0

Total 149,810 100.0 163,340 100.0 171,290 100.0 14.3 4.9

Balance Chg. %

R$ million Dec/10 Mar/11 Jun/11 Sep/11 Dec/11 On Dec/10 On Sep/11

Private Securities* 14,249 18,005 21,988 20,646 22,609 58.7 9.5

Banco do Brasil 9,041 12,044 15,716 14,698 18,363 103.1 24.9

BV 5,207 5,961 6,272 5,948 4,246 (18.5) (28.6)

Chg. %

4Q10 1Q11 2Q11 3Q11 4Q11 On 4Q10 On 3Q11

Export Exchange

Contracted Amount (US$ million) 17,526 16,579 19,073 23,544 17,179 (2.0) (27.0)

Market Share 31.8 31.3 29.5 30.0 26.5 - -

Import Exchange


Market Share 23.0 23.9 22.2 22.6 20.2 - -


37

Table 43. Export and import foreign exchange

Loans to SMEs - In the delivery of services to micro and small companies, Banco do Brasil remained to act as a key partner of the segment. At the end of 4Q11, BB had 2.2 million checking accounts with 2.1 million SME customers.

BB has also been operating together with cooperativist credit segment and making available the Compe/SPB Integration Service, which enables the access of these institutions to the System for the Clearing of Checks and Other Instruments and to the Payment Settlement and Transfer System (SPB). This service allowed bank products to be made available to 416.3 thousand cooperative members, associated with 329 credit cooperatives, contributing with innovation in the supply of solutions in products and sale formats, essential functions for the growth of BB's competitiveness and maintenance of partnerships.

The balance of SME operation in December 2011 was R$ 68.1 billion, a 19.5% increase in relation to the same period in 2010. This amount considers the change in criterion for the classification of companies in the SME segment, that as 2Q11 has begun to include companies with annual revenue of up to R$ 25 million, against R$ 10 million for the industry and R$ 15 million for trade and services previously used. Balances at December 2010 have been reviewed with this criterion to maintain comparability.

The following table displays key corporate credit lines to SMEs.

Table 44. Loans to SMEs by sector

Table 45. SME Credit Products

In working capital lending and financing investments to SME companies, Banco do Brasil has aply used of the Fundo Garantidor de Operações (Operations Guarantee Fund) - FGO to mitigate credit risk in the transactions and expand portfolio volume. The FGO a system which supplements by up to

Balance Chg. %

ACC/ACE 4Q10 1Q11 2Q11 3Q11 4Q11 On 4Q10 On 3Q11


Quantity of Contracts 4,117 3,938 4,324 5,049 3,741 (9.1) (25.9)

Average Volume per Contract (US$ thousand) 919 905 1,154 1,106 881 (4.1) (20.3)

Balance Chg. %

R$ billion Dec/10 Share - % Sep/11 Share - % Dec/11 Share - % On Dec/10 On Sep/11

Manufacturing Industries 17,264 30.3 20,357 32.7 23,189 34.1 34.3 13.9

Trade 25,722 45.2 27,562 44.2 29,215 42.9 13.6 6.0

Services Segment 13,974 24.5 14,397 23.1 15,659 23.0 12.1 8.8

Total 56,960 100.0 62,316 100.0 68,062 100.0 19.5 9.2

Balance Chg. %


Working Capital 41,170 72.3 43,613 70.0 47,867 70.3 16.3 9.8

BB Giro Rápido 6,064 10.6 6,232 10.0 6,221 9.1 2.6 (0.2)

BB Giro Empresa Flex 10,683 18.8 12,583 20.2 14,044 20.6 31.5 11.6

BB Giro Recebíveis 9,466 16.6 10,292 16.5 11,320 16.6 19.6 10.0

BB Giro Cartões 1,898 3.3 1,993 3.2 2,097 3.1 10.4 5.2

BB Giro and Giro Mix Pasep 6,453 11.3 5,722 9.2 5,931 8.7 (8.1) 3.7

Other 6,607 11.6 6,791 10.9 8,254 12.1 24.9 21.5

Investment 14,678 25.8 16,989 27.3 18,364 27.0 25.1 8.1

Cartão BNDES 3,188 5.6 5,056 8.1 5,950 8.7 86.6 17.7

Proger Urbano Empresarial 4,606 8.1 4,055 6.5 3,974 5.8 (13.7) (2.0)

Finame 3,454 6.1 3,442 5.5 3,713 5.5 7.5 7.9

BNDES and FCO 2,773 4.9 3,484 5.6 3,672 5.4 32.4 5.4

Other 656 1.2 951 1.5 1,055 1.5 60.9 10.9

Foreign Trade 1,111 2.0 1,714 2.8 1,831 2.7 64.8 6.9

Total 56,960 100.0 62,316 100.0 68,062 100.0 19.5 9.2


38

80% the guarantees required from business customers for loans and financing, particularly micro and small-sized companies. At the end of 2011, there were 428.6 thousand operations with FGO (Operations Guarantee Fund) coverage, totaling the invested balance of R$ 9.8 billion. The operations guaranteed by this Fund represent approximately 27% of the disbursements observed in the lines that permit the link with this collateral.

Another important mechanism to enable the contracting of investment financing operations is the Fundo de Aval às Micro e Pequenas Empresas (Guarantee Fund for SME’s) - Fampe. Formed with funds from Serviço Nacional de Apoio às Micro e Pequenas Empresas (Brazilian Service of Support to SME’s)- Sebrae, Fampe supplements by up to 80% the value of guarantees necessary for the performance of operations with SME’s with annual revenue turnover of up to R$ 2.4 million. At the end of 2011, the debit balance of operations guaranteed by Fampe reached R$ 4 billion, whereas the secured debit balance was R$ 2.9 billion.

3.1.3 Agribusiness Loan Portfolio

Agribusiness is one of the main sectors of the Brazilian economy, of fundamental importance to the growth of the Country. In its role as an agent of public policies, Banco do Brasil represents a link between the government and the rural producer, acting as the largest financier of Brazilian agribusiness in all its segments and in all stages of the productive chain, from the small farmer to the large agroindustrial companies.

Up to December 2011, the Brazilian trade balance showed a US$ 29.8 billion surplus. The observed volume is sustained by the positive numbers in the Brazilian agribusiness trade balance, which, in the same period, recorded a surplus of US$ 77.5 billion, as shown below:

Figure 6.Trade Balance (FOB)

US$ billion

Source: MAPA – Ministério da Agricultura, Pecuária e Abastecimento. (Ministry of Agriculture, Livestock and Food Supply).

The tables below reflect the flow of exports broken down by key products and Brazil's share in international agribusiness.

42,7

49,7

60,0

54,9

63,1

58,1

46,1

40,0

24,7 24,620,3

23,0

,00

10,00

20,00

30,00

40,00

50,00

60,00

70,00

80,00

2006 2007 2008 2009 2010 2011

Agribusiness Brazil


39

Table 46. Exports

Source: MAPA – Ministério da Agricultura, Pecuária e Abastecimento. (Ministry of Agriculture, Livestock and Food Supply).

Table 47. Brazil's share in world agribusiness in 2011

Source: USDA - PSD Online

The sector's performance in the last few years is due to the permanent quest for new technologies and for appreciation of the services provided by the professionals from this area, always aiming at improving profitability and perennial in the businesses. Those improvements in technology and technical assistance quality have allowed the Brazilian production to increase much more than proportionally to the opening of new land for agriculture, despite losses from storms that occurred in 2011 in the southeast and south. In the following chart, the increased productivity per planted area, as a result of gains in productivity, can be visualized.

Figure 7. Production vs. Planted Area

Source: Conab – Companhia Nacional de Abastecimento (National Supply Company).

Agribusiness at BB

US$ million 2007 2008 2009 2010 2011

Soybeans and Related Products 11,381 17,980 17,240 17,107 24,139

Meat 6,578 7,873 9,716 13,776 16,180

Leather and Related Products 11,295 14,545 11,787 13,630 15,639

Sugar 8,819 9,326 7,223 9,282 9,638

Forest Products 4,093 4,971 4,470 5,962 9,034

Coffee, Mate and Spices 2,262 2,752 3,046 2,762 2,935

Fruit Juice 3,554 3,140 2,041 2,639 2,761

Tobacco 2,374 2,152 1,752 1,925 2,566

Other Products 8,059 9,066 7,480 9,358 11,699

Total 58,416 71,806 64,756 76,441 94,591

Production Export % World Trade

Coffee 1º 1º 28.0

Orange Juice 1º 1º 79.2

Cattle 2º 2º 16.7

Sugar Cane 1º 1º 42.0

Soybeans and Related Products 2º 1º 40.7

Poultry 3º 1º 36.1

Corn 4º 4º 9.0

Cotton 4º 5º 5.5

113,4119,4

133,3

143,3

134,1

146,8

163,0 158,4

48,7 47,2 46,2 47,1 47,6 47,3 49,9 50,7

1.934

2.5302.884

3.0422.817

3.100 3.264 3.128

-2.000

-1.000

0

1.000

2.000

3.000

4.000

0

20

40

60

80

100

120

140

160

180

200

04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12

Yie

ld (to

n /

ha)

Pro

du

cti

on /

Are

a (m

illion

)

Production (million ton.) Area (million ha) Yield (ton / ha)


40

The distribution of agribusiness operations by Brazilian region shows the South and Southeast regions as the most important ones, participation as together have more than 75% of total.

Table 48. Agribusiness Loan Portfolio by Region

The rural credit finances the costs of producing and trading of agricultural products, stimulates rural investments, including warehousing, processing and the industrial transformation of agricultural products. It also promotes sustainable agricultural techniques that contribute to improve income, reduce the emission of greenhouse gases and preserve natural resources, as the ABC Program.

Agricultural and cattle breeding activity follows the agricultural calendar, known as the harvest-year, which begins in July of each year and ends in June of the following year. Hence, the 2010/2011 harvest ended in Jun/11. The current (2011/2012) harvest began in Jul/11 and will end in Jun/12.

In the first quarter of the crop year, funds are required for input purchase for the summer crop and there is a concentration of the loans raised in the preceding summer harvest-year. From October to December, the demand for working capital for input purchase continues, however, at a lower volume than in the first quarter of the crop. During the harvest's third quarter (January to March) demand begins for the winter harvest's loans, and for the summer harvest in the northern and northeastern regions. And demand grows during the harvest-year's last quarter for loans to crop trading, since this is a harvesting period.

The rural portfolio of Brazilian Banking Industry attained R$ 140,426 million in Dec/11, an increase of 13.3% in twelve months and of 3.7% in relation to Sep/11. The rural portfolio represented 19.2% of the total portfolio of BB in 4Q11. BB continues to act as a main key partner of the Brazilian agribusiness with a market share of 63.1%.

The following table shows a breakdown of BB's agribusiness portfolio, divided into funding for input purchase, investments, and crop trading.

Table 49. Agribusiness Loan Portfolio by Purpose

Table 50. Agribusiness Loan Portfolio by Loans Type

(1) The observed balance reduction is due to the discontinuation of the PROCER, special rural credit facility of the National Bank for Economic and Social Development (BNDES).

Region Share - %

Southeast 43.6

South 31.9

Midw est 17.7

Northeast 4.3

North 2.5

Balance Chg. %

R$ million Dec/10 Share - % Sep/11 Share - % Dec/11 Share - %On Dec/10 On Sep/11

Work. Cap. for Input Purchase 28,578 38.1 26,725 32.2 28,391 32.0 (6.5) 6.2

Investment 26,225 35.0 29,868 36.0 32,131 36.2 13.9 7.6

Crop Trading 4,726 6.3 4,208 5.1 4,518 5.1 (11.0) 7.4

Agroindustry 15,434 20.6 19,227 23.1 20,853 23.5 24.6 8.5

Other 52 0.1 3,041 3.7 2,767 3.1 - (9.0)

Total 75,015 100.0 83,069 100.0 88,658 100.0 10.7 6.7

Balance Chg. %


Agri. and Livestock Working Capital 16,704 22.3 17,715 21.3 18,538 20.9 11.0 4.6

Loans to Companies 16,689 22.2 19,988 24.1 21,459 24.2 28.6 7.4

Pronaf / Pronamp 22,084 29.4 24,995 30.1 27,200 30.7 23.2 8.8

FCO Rural 5,732 7.6 6,376 7.7 6,700 7.6 16.9 5.1

BNDES / Finame Rural¹ 6,749 9.0 5,853 7.0 5,322 6.0 (21.1) (9.1)

Other 7,057 9.4 8,142 9.8 9,438 10.6 33.7 15.9

Total 75,015 100.0 83,069 100.0 88,658 100.0 18.2 6.7


41

The following table shows the balance of the loan transactions intended for agribusiness by item financed.

Table 51. Agribusiness Loan Portfolio by Product

In its work of financing Brazilian agribusiness, Banco do Brasil reaches all the segments, from the small producer to the agro-industrial companies. The information in the following table includes sums loaned during the harvest 2011/12, but not actually disbursed, which information is explained in the following table 2011/2012 Harvest Plan, in this chapter.

Table 52.Resources Hired in the 2011/2012 Harvest by Size of Customer

The following table shows the view by size of customer in relation to the total balance of the agribusiness loan portfolio.

Table 53.Agribusiness portfolio by Size

In the figure below we present the distribution of the balance of the Agribusiness Loan Portfolio by type of customer.

R$ million Chg. %

Item Financed Dec/10 Share - % Sep/11 Share - % Dec/11 Share - % On Dec/10 On Sep/11

Livestock 12,344 16.5 15,749 19.0 17,196 19.4 39.3 9.2

Soybeans 6,080 8.1 5,935 7.1 6,833 7.7 12.4 15.1

Corn 2,489 3.3 2,981 3.6 3,820 4.3 53.4 28.1

Sugar Cane 2,373 3.2 2,191 2.6 2,629 3.0 10.8 20.0

Machinery and Equipment 1,770 2.4 2,111 2.5 2,403 2.7 35.8 13.8

Coffee 1,987 2.6 2,260 2.7 2,382 2.7 19.9 5.4

Rice 1,848 2.5 1,836 2.2 1,781 2.0 (3.6) (3.0)

Aviculture 855 1.1 1,077 1.3 1,148 1.3 34.3 6.6

Cotton 869 1.2 1,270 1.5 1,388 1.6 59.8 9.2

Sw ine Production 710 0.9 807 1.0 899 1.0 26.7 11.3

Other 43,690 58.2 46,850 56.4 48,180 54.3 10.3 2.8

Total 75,015 100.0 83,069 100.0 88,658 100.0 18.2 6.7

R$ million

Qty. Contracts

(units)

Qty. Contracts -

%

Amount

Contracted

Amount

Contracted - %

Mini 177,787 30.3 1,359 4.8

Small 275,673 47.0 4,740 16.7

Medium and Large Sized 130,172 22.2 19,742 69.5

Cooperatives 3,494 0.6 2,569 9.0

Total 587,126 100.0 28,410 100.0

R$ million

Segment Dec/10 Mar/11 Jun/11 Sep/11 Dec/11

Mini 5,338 5,247 5,279 5,154 5,256

Small 16,150 16,454 17,060 17,473 18,429

Medium and Large Sized 50,337 52,224 53,343 55,209 59,488

Cooperatives 3,191 3,477 4,870 5,232 5,485

Total 75,015 77,403 80,551 83,069 88,658


42

Figure 8. Agribusiness Loan Portfolio by Type of Client

US$ billion

Next, the Agribusiness Loan Portfolio by Funding Sources is shown.

Figure 9. Agribusiness Loan Portfolio by Funding Sources

US$ billion

In rural and agro industrial financing, BB uses 79.7% of own funds (demand deposits and rural savings accounts), as shown in the above illustration. In this quarter, it is worth to emphasize the operations balance evolution from demand deposits which reached R$ 55.2 billion. In addition to those, BB also onlends funds from the Brazilian Development Bank (BNDES), the Workers Protection Fund (FAT), and institutional funds such as the Constitutional Fund for Financing of the Midwest (FCO) and the Coffee Production Economy Defense Fund (Funcafé).

The Bank uses funding from Poupança Ouro (savings) and Demand Deposits, from the Workers Protection Fund (FAT), the Federal Treasury, Coffee Production Economy Defense Fund (Funcafé), and Constitutional Fund for Financing of the Midwest (FCO), for low-rate agricultural loans. In order to make this intermediation feasible, the National Treasury or Fundo Constitucional pays the Bank an equalization fee which is the difference between the sums charged to the borrower and the funding cost, credit risk, administrative costs and taxes and BB’s profitability.

Moreover, weighting factors are set for financing obtained with funds from demand and savings deposits. The weighting factor is a multiplier applied to certain rural credit operations for the fulfillment of banking liabilities. This instrument produces profits for Banco do Brasil through the release of funds to cash (TMS remuneration). It should be highlighted that the weighting factor for 2011 was recalculated, as part of the enhancement of the Bank's information generation process.

48,9 49,5 51,6 53,4 57,2

26,1 27,9 28,9 29,631,5

Dec/10 Mar/11 Jun/11 Sep/11 Dec/11

Businesses Individuals

11,9

43,0

4,1

7,6

7,1

1,3

11,5

45,7

3,7

7,8

7,5

1,1

14,7

47,2

3,4

8,1

6,1

1,0

19,6

44,9

2,9

8,4

6,3

0,9

15,4

55,2

2,6

8,8

5,7

0,9

Demand Deposits Savings FAT FCO BNDES/Finame Other



43

During this quarter the balance of equalization revenues, including the weighting factor, rose by 11.7%, mainly due to the increase of the balance of equalizable balances by 33.5% against 3Q11.

The following figure shows a history of the revenues received by way of interest rate equalization and weighting factor.

Figure 10. Equalization Revenues and Weighting Factor

US$ million

The following table evidences the distribution of equalizable funds from BB's Agribusiness portfolio.

Table 54. Equalizable Funds of the Agribusiness Portfolio

The table below shows the use of risk mitigation instruments in the contracting of cost operations of harvest 2011/2012.

Table 55. Distribution of Insurance of Working Capital for Input Purchase

Since 2006/07 harvest, Banco do Brasil has required the contracting of conjugated form of protection against bad weather (Agricultural Insurance or Proagro) in operations of working capital for input purchase. Since then the strategy has been maintained and improved with each new crop, including the mass offer of options during the 2009/10 crop.

The risk mitigation strategy takes into account several types of information on the customers' requested transactions, such as customer risk, type of crop to be financed, and financing location.

660

579537

599

774

125

207 227247

170

4Q10 1Q11 2Q11 3Q11 4Q11

Equalization Revenues Weighting Factors

Chg. %

R$ millionDec/10 Mar/11 Jun/11 Sep/11 Dec/11

On

Dec/10

On

Sep/11

Equalizable Resources 27,130 28,166 27,492 24,864 33,194 22.3 33.5

Working Capital for Input Purchase 15,350 15,778 14,975 12,343 17,687 15.2 43.3

Investments 10,157 10,804 11,359 12,093 13,332 31.3 10.2

Crop Trading 1,623 1,584 1,158 428 2,174 34.0 408.3

Non-Equalizationable Resources 47,884 49,237 53,059 58,205 55,465 15.8 (4.7)

Total Loan Portfolio 75,015 77,403 80,551 83,069 88,658 18.2 6.7

Operation Contrated

R$ million Crop 11/12 Share %

Working Capital for Input Purchase 10,147 100.0

Total Insured 5,760 56.8

With Proagro 3,116 30.7

With Insurance 2,065 20.4

Hedge Price 343 3.4

Outcome Insurance 236 2.3

Without Insurance 4,387 43.2


44

Those types of information allow driving the protective devices (agricultural insurance/Proagro or Options) that are most fitting to the risk profile of each transaction.

This strategy makes it possible for Banco do Brasil operate with greater safety in the agricultural sector, such as the dry spell in the South Region, without affecting its results. Despite confirmed losses in the South Region, the agricultural purchase operations portfolio for the crops and municipalities affected by the dry spell is protected against potential climatic influences - with Proagro, Agricultural Insurance and Revenue Insurance - totaling an average coverage of 90.3% of the contracts for the corn crop; 81.1% of the contracts for the soybean crop and 76.3% of the contracts for the bean crop.

The figure below evidences the percentage of agricultural funding transactions operations contracted with risk mitigators since the harvest of 2009/10.

Figure 11. Percentage of Operations Contracted with Risk Mitigators

The table below displays a comparative funding of the harvest (2011/12) with the previous year (2010/11), describing the purpose of the loans and allocation.

Table 56. 2011/2012 Harvest Plan

We show the four key crops subject to agricultural funding, with the percentage share of funding for the 2011/12 harvest and the concentration per state regarding each of these crops.

Table 57. Working Capital for input Purchase - Contracting Profile

Breakdown about price and cost of the corn and soybean crops in the history of the last harvests are presented below. The margin is represented by the percentage of revenues net of the costs involved in each crop, i.e., the part designed for the producer. The figures regarding the plantations' price and

62%

38%

Crop 2009/2010

47%

53%

Crop 2010/2011

57%43%

Crop 2011/2012

Working Capital for Input Purchase with Mitigation Working Capital for Input Purchase without Mitigation

R$ million Crop 10/11 (A) Crop 11/12(B) Chs. (%) (B/A)

Familiar 5,188 5,548 6.9

Working Capital for Input Purchase 3,164 3,172 0.3

Investment 2,024 2,376 17.4

Corporate 16,942 20,872 23.2

Working Capital for Input Purchase 11,443 12,972 13.4

Investment 2,099 3,982 89.7

Crop Trading 3,400 3,918 15.2

Total 22,130 26,421 19.4

Soybeans Corn Rice Cotton

PR 30.9% RS 23.7% RS 78.8% MT 44.3%

RS 22.7% PR 20.1% SC 13.2% BA 18.3%

GO 11.8% MG 18.6% TO 1.8% GO 12.1%

MS 11.3% SC 18.2% PR 1.7% MS 11.1%

3.4%35.1% 16.7% 7.7%


45

costs are referenced based on the state of Paraná with the key municipalities serving to find a proportional average.

Figure 12.Ratio Price/Cost of soybean and corn

51,9

65,0

47,1

34,8

53,6 52,9

06/07 07/08 08/09 09/10 10/11 11/12

%

Margin - Soybean

45,652,8

24,0 22,4

56,4

45,7

06/07 07/08 08/09 09/10 10/11 11/12

%

Margin - Corn

0,50

0,74 0,76

0,54

0,69 0,68

0,24 0,26 0,40 0,35 0,32 0,32

06/07 07/08 08/09 09/10 10/11 11/12

R$/k

g

Evolution Price and Cost - Soybean

Price Cost

0,25

0,340,27

0,23

0,390,35

0,13 0,16

0,21 0,18 0,17

0,19

06/07 07/08 08/09 09/10 10/11 11/12

R$/k

g

Evolution Price and Cost - Corn

Price Cost


46

3.2. Credit Risk

In the twelve-month perspective, expenses with allowance for loan losses increased 10.8% in relation to 2010, while the loan portfolio increased 18.0% in this period. Accordingly, the indicator that measures the expenses with allowance for loan losses on 12-month average loan portfolio improved 20 base points as compared to 2010.

Table 58. Expenses with Allowance for Loan Losses over Portfolio

The figure below details the allowance for loan losses, segregating the minimum provisions required by CMN Resolution 2682/99 from the total booked. In Dec/11, the total allowance for loan losses increased 9.8% in comparison with the same period of the previous year and 2.2% in comparison to Sep/11. Even with good indicators in the portfolio quality, BB continues to be cautious in relation to the balance of credit risk provisions and the percentage of coverage.

Figure 13. Breakdown of Allowances

R$ million

The main indicators of non-performing loans and provisions are presented in the next figures: BB non-performing loans are still better than those observed in the Banking Industry. The ratio that measures delay of non-performing loans for more than 90 days of the Banking Industry ended this quarter by 3.6%, against 2.1% of the BB. Practically all of BB's credit quality indicators improved when compared to Dec/10 and remained in line with ratios verified in the prior quarter.

R$ million 4Q10 1Q11 2Q11 3Q11 4Q11

(A) Allow ance for Loan Losses - Quarterly (2,139) (2,629) (3,047) (3,259) (2,892)

(B) Allow ance for Loan Losses - 12 Months (10,675) (10,278) (10,454) (11,074) (11,827)

(C) Loan Portfolio 358,366 364,659 383,378 402,555 422,989

(D) Average Portfolio – 3 Months 352,699 361,964 375,447 392,129 412,439

(E) Average Portfolio – 12 Months 325,051 338,575 353,906 368,196 383,408

Expenses over Portfolio (A/D) - % 0.6 0.7 0.8 0.8 0.7

Expenses over Portfolio (B/E) - % 3.3 3.0 3.0 3.0 3.1

15,549 15,250 15,926 16,759 17,259

1,766 1,7661,808

1,851 1,75617,315 17,016

17,73418,610 19,015


Additional Provision Required Provision


47

Table 59. Delinquency Ratio

The following table shows that the BB's portfolio average risk showed a decrease in the comparison with the previous quarter and in the same period in 2010, lower than the recorded by the Banking Industry.

Table 60. Average Portfolio Risk

(1) required provision/loan portfolio

3.2.1. Total Portfolio

The transactions rated at risk levels AA-C in Dec/2011 (93.9%) presented an improvement in comparison to Dec/2010 and stability in comparison with Sep/2011. BB shows better risk levels than those observed in the Banking Industry for the same classification.

Table 61. Total Loan Portfolio by Risk Level

(1) Previous data of December/2011

R$ million 4Q10 1Q11 2Q11 3Q11 4Q11

Loan Portfolio 358,366 364,659 383,378 402,555 422,989

NPL + 15 days 13,437 14,704 14,536 15,517 15,366

NPL + 15 days/Loan Portfolio 3.7 4.0 3.8 3.9 3.6

NPL + 60 days 9,505 9,186 9,527 10,184 10,541


NPL 15-59 days/Loan Portfolio 1.1 1.5 1.3 1.3 1.1

NPL + 90 days 8,164 7,673 7,829 8,481 8,821


NPL 15-89 days/Loan Portfolio 1.5 1.9 1.7 1.7 1.5

NPL + 90 days/Loan Portfolio - BI 3.2 3.2 3.4 3.5 3.6

Write-off 2,962 2,923 2,377 2,427 2,456

Recovery of Write-offs (863) (855) (953) (985) (851)

Net Loss 2,099 2,068 1,424 1,443 1,604

Net Loss/Loan Portfolio - % annualized 2.4 2.3 1.5 1.4 1.5

Allowance 17,315 17,016 17,734 18,610 19,015

Allow ance/Loan Portfolio - % 4.8 4.7 4.6 4.6 4.5

Allow ance/NPL + 15 days - % 128.9 115.7 122.0 119.9 123.7




Average Risk BB¹ - % 4.3 4.2 4.2 4.2 4.1

Average Risk BI - % 5.6 5.5 5.6 5.6 5.7

Dec/10 Sep/11 Dec/11 BI¹

R$ million Balance Provision Share % Balance Provision Share % Balance Provision Share %

AA 97,834 - 27.3 114,700 - 28.5 118,935 - 28.1 24.9

A 78,895 394 22.0 90,842 454 22.6 102,694 513 24.3 41.4

B 120,647 1,206 33.7 131,947 1,319 32.8 142,910 1,429 33.8 17.4

C 38,350 1,151 10.7 40,517 1,215 10.1 32,611 978 7.7 8.6

D 8,013 801 2.2 8,250 825 2.0 8,299 830 2.0 2.4

E 2,239 672 0.6 2,977 893 0.7 3,724 1,117 0.9 1.0

F 1,405 702 0.4 1,570 785 0.4 1,763 881 0.4 0.7

G 1,205 843 0.3 1,618 1,132 0.4 1,812 1,268 0.4 0.6

H 9,779 9,779 2.7 10,134 10,134 2.5 10,241 10,241 2.4 3.1

Total 358,366 15,549 100.0 402,555 16,759 100.0 422,989 17,259 100.0 100.0

AA-C 335,725 2,751 93.7 378,006 2,989 93.9 397,149 2,921 93.9 92.3

D-H 22,641 12,797 6.3 24,550 13,770 6.1 25,839 14,338 6.1 7.7


48

3.2.2. Individual Loan Portfolio

The following table shows an individual loan portfolio and does not take into consideration the transactions of the partnership with BV.

In 4Q11, the individuals loan portfolio and the allowance for loan losses grew by 6.8% and 0.6%, respectively, in comparison with the previous quarter. Compared to 4Q10, the increase was 18.1% and 18.5%, in the same order.

The operations classified as AA-C risk level accounted for 91.1% of the total in Dec/11, showing an improvement in comparison with Sep/11 and Dec/10.

Table 62. Individual Loan Portfolio by Risk Level(1)

(1) Does not consider Banco Votorantim portfolio

The following table shows the changes in allowance for loan losses for Individuals Loan Portfolio

Table 63. Changes in Allowance for Loan Losses - Individuals

(1) Does not consider Banco Votorantim portfolio. (2) Amortization, settlement, release of installments and charge debt.

Vintage

We present the vintage of the individuals loan portfolio in the graphs below. This methodology, known abroad as Vintage, affords greater detailing and closer to the portfolio than traditional indicators.


R$ million Balance Provision Share Balance Provision Share Balance Provision Share

AA 510 - 0.5 604 - 0.6 648 - 0.6

A 11,491 57 12.2 13,777 69 13.2 26,264 131 23.5

B 48,783 488 51.6 53,764 538 51.5 55,907 559 50.1

C 25,598 768 27.1 26,828 805 25.7 18,842 565 16.9

D 2,500 250 2.6 2,567 257 2.5 2,618 262 2.3

E 564 169 0.6 875 263 0.8 999 300 0.9

F 428 214 0.5 518 259 0.5 600 300 0.5

G 415 291 0.4 547 383 0.5 591 414 0.5

H 4,201 4,201 4.4 5,011 5,011 4.8 5,098 5,098 4.6

Total 94,489 6,437 100.0 104,489 7,583 100.0 111,569 7,629 100.0

AA-C 86,382 1,313 91.4 94,972 1,411 90.9 101,662 1,256 91.1

D-H 8,107 5,124 8.6 9,518 6,172 9.1 9,907 6,374 8.9

R$ million 4Q10 1Q11 2Q11 3Q11 4Q11

Individuals Loan Portfolio¹ 94,489 97,183 102,102 104,489 111,569

Initial Allowance 6,430 6,437 6,537 6,980 7,583

1 - Risk Migration 913 971 1,163 1,189 990

a) Risk Deterioration 1,243 1,213 1,477 1,548 1,593

b) Risk Improvement (330) (241) (314) (359) (603)

2 – New Transactions 251 196 239 231 278

3 – Write-offs (1,060) (1,124) (965) (761) (1,040)

Total (1 + 2 + 3) 104 43 437 659 229

Other Impacts² (96) 56 6 (56) (182)

Final Allowance 6,437 6,537 6,980 7,583 7,629

Allow ance Required by CMN Resolution 2,682 6,437 6,537 6,980 7,583 7,629

Provision Flow - R$ million 1,068 1,223 1,408 1,364 1,086

a) Additional Provision - - - - -

b) Provision Expenses 1,068 1,223 1,408 1,364 1,086

Provision / Portfolio - % 6.8 6.7 6.8 7.3 6.8

Provision Flow / Portfolio - % 1.1 1.3 1.4 1.3 1.0

NPL +15 days/Loan Portfolio 5.3 5.8 5.4 5.6 4.9



49

Vintage makes it possible to evaluate how the default of the set of operations contracted in a particular period behaves over time. In the first graph, for example, the quarterly view is presented. The lines show how the default of operations contracted in each quarter behaved in the subsequent periods. The longer lines, therefore, refer to the oldest monitoring period.

In the graphs below, we consider non-performing loans for more than 90 days, and for determination of the Individuals Loan Portfolio, the Overdraft and Credit Card operations.

The Vintage shows how the operations contracted most recently present a more favorable default curve than those contracted at the beginning of the monitoring. This result shows the constant optimization in the credit analysis, concession and monitoring models. The inflections presented in the curves refer to loan assignments.

Figure 14. Quarterly Vintage

The second graph contains the vintage with annual periodicity, facilitating the viewing and interpretation of data.


50

Figure 15. Annual Vintage

In the graphs below, we present detailing of the vehicle financing portfolio, segmented by the operation contracting origin: Arena I – operations contracted in the sphere of the BB's branches. In line with BB strategy of partnership with BV, the transactions entered into Arena II (transactions with accredited vehicle dealers) were assumed by that institution.

Figure 16. Annual Vintage – Vehicle Financing Portfolio – Arena I


51

3.2.3. Business Loan Portfolio

The following table shows a Business Loan portfolio and does not take into consideration the transactions of the partnership with BV. In this portfolio, the share of operations rated in the AA-C risk levels reached 95.2% of the total portfolio in December 2011.

Table 64. Business Loan Portfolio

* Does not include Banco Votorantim transactions

The following table details the changes in Allowance for Loan Losses for the Business Loan Portfolio:

Table 65. Changes in the Allowance for Loan Losses - Businesses

(1) Does not consider Banco Votorantim portfolio (2) Amortization, settlement, release of installments and charge debt

3.2.4. Agribusiness Loan Portfolio

Next, the Agribusiness Loan Portfolio by risk level is presented.



AA 60,986 - 43.6 71,031 - 46.5 72,425 - 45.0

A 32,531 163 23.2 33,317 167 21.8 35,697 178 22.2

B 35,417 354 25.3 36,205 362 23.7 40,698 407 25.3

C 4,119 124 2.9 5,061 152 3.3 4,329 130 2.7

D 2,230 223 1.6 2,100 210 1.4 2,074 207 1.3

E 941 282 0.7 1,027 308 0.7 1,607 482 1.0

F 569 285 0.4 566 283 0.4 649 324 0.4

G 451 316 0.3 578 404 0.4 622 435 0.4

H 2,764 2,764 2.0 2,723 2,723 1.8 2,817 2,817 1.8

Total 140,009 4,510 100.0 152,608 4,609 100.0 160,918 4,981 100.0

AA-C 133,052 640 95.0 145,615 681 95.4 153,149 715 95.2

D-H 6,956 3,870 5.0 6,993 3,928 4.6 7,769 4,266 4.8

R$ million 4Q10 1Q11 2Q11 3Q11 4Q11

Commercial Loan Portfolio¹ 140,009 138,677 145,309 152,608 160,918


1 - Risk Migration 647 854 990 1,144 1,167

a) Risk Deterioration 1,086 1,046 1,190 1,337 1,370



3 – Write-offs (1,134) (1,039) (864) (1,079) (860)

Total (1 + 2 + 3) (291) (79) 255 189 453

Other Impacts² (196) (80) (81) (106) (81)

Final Allowance 4,510 4,352 4,526 4,609 4,981


Changes in the Provision - in R$ million 648 880 1,038 1,162 1,233


b) Provision Expense 648 880 1,038 1,162 1,233


Changes in the Provision - % of Portfolio 0.5 0.6 0.7 0.8 0.8




52

Table 66. Agribusiness Loan Portfolio by Risk Level

(1) Does not consider Banco Votorantim portfolio

The following tables present the individuals agribusiness loan portfolio by risk level and the respective movements in the Allowance for loan losses.

Table 67. Agribusiness Individual Loan Portfolio by Risk Level*

* Does not consider Banco Votorantim portfolio



AA 15,102 - 20.1 18,254 - 22.0 19,503 - 22.0

A 12,833 64 17.1 16,438 82 19.8 16,468 82 18.6

B 32,805 328 43.7 35,981 360 43.3 39,987 400 45.1

C 7,855 236 10.5 6,785 204 8.2 7,313 219 8.2

D 2,823 282 3.8 2,880 288 3.5 2,875 287 3.2

E 632 190 0.8 572 171 0.7 566 170 0.6

F 288 144 0.4 219 109 0.3 221 110 0.2

G 265 185 0.4 246 172 0.3 271 189 0.3

H 2,412 2,412 3.2 1,694 1,694 2.0 1,456 1,456 1.6

Total 75,015 3,841 100.0 83,069 3,081 100.0 88,658 2,914 100.0

AA-C 68,595 628 91.4 77,458 646 93.2 83,270 702 93.9

D-H 6,420 3,213 8.6 5,611 2,435 6.8 5,388 2,213 6.1



AA 2,150 - 4.4 1,929 - 3.6 1,891 - 3.3

A 8,816 44 18.0 11,352 57 21.2 11,515 58 20.1

B 25,059 251 51.2 29,243 292 54.7 32,779 328 57.3

C 6,999 210 14.3 5,704 171 10.7 6,188 186 10.8

D 2,520 252 5.2 2,730 273 5.1 2,556 256 4.5

E 594 178 1.2 488 146 0.9 495 148 0.9

F 267 133 0.5 203 102 0.4 205 103 0.4

G 234 164 0.5 219 153 0.4 239 167 0.4

H 2,269 2,269 4.6 1,569 1,569 2.9 1,326 1,326 2.3

Total 48,908 3,502 100.0 53,437 2,763 100.0 57,194 2,571 100.0

AA-C 43,024 505 88.0 48,228 520 90.3 52,373 571 91.6

D-H 5,884 2,997 12.0 5,208 2,243 9.7 4,821 2,000 8.4


53

Table 68. Changes in Allowance for Loan Losses – Agribusiness Individual

(1) Does not consider Banco Votorantim portfolio. (2) Amortization, settlement, release of installments and charge debt

The following tables show the Corporate Agribusiness Lending Portfolio per risk level and the respective changes in the allowance for loan losses.

Table 69. Corporate Agribusiness Portfolio by Risk Level(1)

(1) Does not consider Banco Votorantim portfolio.

R$ million 4Q10 1Q11 2Q11 3Q11 4Q11

Individuals Agribusiness Loan Portfolio¹ 48,908 49,536 51,649 53,437 57,194


1 - Risk Migration 363 356 184 202 88

a) Risk Deterioration 621 566 490 468 462



3 – Write-offs (559) (584) (344) (398) (269)

Total (1 + 2 + 3): (130) (196) (93) (116) (104)

Other Impacts² (175) (101) (131) (102) (88)

Final Allowance 3,502 3,205 2,981 2,763 2,571


Changes in the Provision - in R$ million 254 287 120 180 77


b) Provision Expense 254 287 120 180 77


Changes in the Provision - % of Portfolio 0.5 0.6 0.2 0.3 0.1



AA 12,952 - 49.6 16,325 - 55.1 17,612 - 56.0

A 4,017 20 15.4 5,086 25 17.2 4,953 25 15.7

B 7,746 77 29.7 6,738 67 22.7 7,208 72 22.9

C 856 26 3.3 1,081 32 3.6 1,125 34 3.6

D 303 30 1.2 151 15 0.5 319 32 1.0

E 38 11 0.1 84 25 0.3 72 22 0.2

F 21 11 0.1 16 8 0.1 15 8 0.0

G 31 21 0.1 27 19 0.1 32 22 0.1

H 143 143 0.5 125 125 0.4 129 129 0.4

Total 26,107 340 100.0 29,632 318 100.0 31,465 343 100.0

AA-C 25,571 123 97.9 29,230 125 98.6 30,897 131 98.2

D-H 536 216 2.1 403 192 1.4 567 213 1.8


54

Table 70. Changes in the Allowance for Loan Losses – Corporate Agribusiness

(1) Does not consider Banco Votorantim portfolio. (2) Amortization, settlement, release of installments and charge debt

The average risk of the portfolio is influenced by the operations of the harvests from 2005 to 2007 with rollover with total balance of R$ 5,694 million. CMN Resolution 2682/99, which provides for risk ratings and the creation of allowance for loan losses, requires maintenance of risk with renegotiated loans at the risk level found at the time of renegotiation. Owing to these rule, renegotiated transactions increase the loan portfolio's average risk.

In the following table, the Agribusiness Loan Portfolio in divided in with and without rollover operations. We noted that the operations past-due for over 90 days accounted for 0.4% of the total without rollover portfolio in 4Q11, while this same indicator reached 5.8% for extended operations.

Table 71. Agribusiness Transactions with/without rollover

(1) Non-performing loans at level AA refer to credit with third party risk (2) The delay resulting from non-performing loans with third party risk was not included in the calculation of the rate

R$ million 4Q10 1Q11 2Q11 3Q11 4Q11

Business Agribusiness Loan Portfolio¹ 26,107 27,867 28,903 29,632 31,465

Initial Allowance 303 340 353 315 318

1 - Risk Migration 42 18 36 (3) 22

a) Risk Deterioration 57 33 55 42 46



3 – Write-offs (8) (5) (44) (6) (5)

Total (1 + 2 + 3): 66 27 21 16 50

Other Impacts² (29) (14) (59) (13) (25)

Final Allowance 340 353 315 318 343

Allow ance Required by CMN Resolution 2,682 340 353 315 318 343

Provision Flow - R$ million 45 18 6 9 31


b) Provision Expenses 45 18 6 9 31


Provision Flow / Portfolio - % 0.2 0.1 0.0 0.0 0.1

Portfolio Without Rollover Portfolio w ith Rollover

Risk

Balance

Allowance

for Loan

Losses

Past Due_90¹ Balance

Allowance

for Loan

Losses

Past Due_90

AA 19,376 - 52 126 - 9

A 16,198 81 0 270 1 (0)

B 38,535 385 - 1,451 15 -

C 5,936 178 0 1,376 41 0

D 1,812 181 3 1,063 106 3

E 255 77 25 311 93 31

F 92 46 22 129 65 11

G 102 71 29 169 118 35

H 657 657 175 798 798 243

Total 82,964 1,677 254 5,694 1,238 323


55

In the table below we present the balances, rate of default 90 days and average risk of the agribusiness portfolio segmented in total portfolio, with and without rollover.

The relationship between the provisions required (CMN Resolution 2682/99) and the balance of operations dropped to 3.3% in the 4Q11, with an improvement of 180 base points in relation to the same period of previous year.

A simulation performed with unextended BB risk transactions, after removing the drag effect caused by extended loans, shows that would be a decrease in the average risk to 0.31% from 2.0% in 4Q11.

Table 72. Rates of the Agribusiness Portfolio

(1) Does not consider Banco Votorantim portfolio. (2) The delay resulting from non-performing operations with third party risk was included in the calculation of the rate

R$ million Dec/10 Mar/11 Jun/11 Sep/11 Dec/11

Loan Portfolio¹ 75,015 77,403 80,551 83,069 88,658

Provision 3,841 3,557 3,296 3,081 2,914

NPL + 90 days 1,846 1,422 739 718 638

NPL + 90 days/Loan Portfolio - %² 2.5 1.8 0.9 0.9 0.7

Allow ance/Loan Portfolio - % 5.1 4.6 4.1 3.7 3.3

Write-Off 567 589 388 301 274

Unextended Operations – BB Risk + Third Parties 66,288 70,063 74,034 77,273 82,964

Provision 1,840 1,819 1,796 1,737 1,677

NPL + 90 days 977 910 481 475 306

NPL + 90 days/Unextended operations - % 1.5 1.3 0.6 0.6 0.4

Provision/Unextended Operations - % 2.8 2.6 2.4 2.2 2.0

Write-Off 249 170 159 197 119

Unextended Operations – BB Risk 65,209 69,088 73,098 76,388 82,139

Provision 1,839 1,819 1,795 1,736 1,676

NPL + 90 days 977 910 481 475 306



Write-Off 249 170 159 197 119

Extended Operations – BB Risk + Third Parties 8,727 7,340 6,517 5,796 5,694

Provision 2,001 1,738 1,500 1,344 1,238

NPL + 90 days 869 512 258 243 332

NPL + 90 days/Total Portfolio (%) 10.0 7.0 4.0 4.2 5.8

Provision/Extended Operations - % 22.9 23.7 23.0 23.2 21.7

Write-Off 318 418 229 105 155

Extended Operations – BB Risk 8,557 7,186 6,377 5,671 5,585

Provision 2,001 1,738 1,499 1,344 1,237

NPL + 90 days 861 504 251 235 322



Write-Off 318 418 229 105 155

Operations not Extended without drag effect of Extended Operations Simulation

a- BB Risk + Third Parties 66,288 70,063 74,034 77,273 82,964

b- Provision 616 1,008 434 427 253

Average Risk (b/a) 0.93 1.44 0.59 0.55 0.31

c- BB Risk 65,209 69,088 73,098 76,388 82,139

d- Provision 616 1,008 434 427 253

Average Risk (d/c) 0.94 1.46 0.59 0.56 0.31


56

3.2.5 Foreign and Banco Votorantim Loan Portfolio

The following tables show the Foreign Portfolio and the BV Portfolio by risk level.

Table 73. Foreign Loan Portfolio by Risk Level

Table 74. Banco Votorantim Loan Portfolio (50%)

3.2.6 Renegotiated Loan Portfolio

The table below presents the renegotiated loan portfolio of non-performing operations (including participation in the BV), which reached R$ 6,991 million in Dec/2011, a decrease of 31.6% and 0.2% in comparison with Dec/10 and Sep/11, respectively. The delinquency over 90 days ratio of this portfolio decreased by 260 base points in comparison with Dec/10, while the coverage percentage reached 272.6% in Dec/11.

Table 75. Renegotiated Loan Portfolio

.

(1) Refers to renegotiated loan portfolio of non-performing operations. (2) data were revised due to a change in the measuring method.



AA 14,880 - 72.8 18,975 - 62.4 21,036 - 64.8

A 2,842 14 13.9 6,872 34 22.6 6,573 33 20.2

B 2,133 21 10.4 3,678 37 12.1 4,014 40 12.4

C 215 6 1.1 685 21 2.3 721 22 2.2

D 254 25 1.2 121 12 0.4 78 8 0.2

E 4 1 0.0 14 4 0.0 17 5 0.1

F 0 0 0.0 9 4 0.0 3 2 0.0

G 8 5 0.0 3 2 0.0 4 3 0.0

H 109 109 0.5 44 44 0.1 35 35 0.1

Total 20,445 183 100.0 30,400 158 100.0 32,480 146 100.0

AA-C 20,070 42 98.2 30,210 92 99.4 32,344 95 99.6

D-H 375 141 1.8 190 67 0.6 136 52 0.4



AA 6,355 - 22.4 5,836 - 18.2 5,323 - 18.1

A 19,198 96 67.6 20,439 102 63.9 17,692 88 60.3

B 1,509 15 5.3 2,319 23 7.2 2,303 23 7.8

C 564 17 2.0 1,158 35 3.6 1,406 42 4.8

D 207 21 0.7 582 58 1.8 655 65 2.2

E 97 29 0.3 490 147 1.5 535 160 1.8

F 120 60 0.4 259 129 0.8 289 145 1.0

G 66 46 0.2 244 171 0.8 325 227 1.1

H 293 293 1.0 662 662 2.1 836 836 2.8

Total 28,408 577 100.0 31,989 1,328 100.0 29,363 1,587 100.0

AA-C 27,626 128 97.2 29,751 160 93.0 26,724 154 91.0

D-H 782 449 2.8 2,238 1,168 7.0 2,639 1,434 9.0

R$ million Dec/10 Sep/11² Dec/11

Renegotiated Loan Portfolio¹ 10,226 7,004 6,991

Allow ance Balance 2,406 1,689 1,606

NPL + 90days 1,122 547 589

Allow ance/Loan Portfolio - % 23.5% 24.1% 23.0%

NPL + 90 days/Loan Portfolio 11.0% 7.8% 8.4%

Allow ance/NPL + 90 days - % 214.3% 309.0% 272.6%


57

3.3 Concentration

In the concentration analysis for the amplified loan portfolio, we noted an decrease in exposure to the 100 largest borrowers from 24.1% in Dec/2010, and 25.1% in Sept/2011, to 18.9% in Dec/2011. Information on the concentration of credit does not include Banco Votorantim operations.

Table 76. 100 Largest Borrowers

Exposure by the 100 largest borrowing customers as compared to the Referential Equity decreased to 108.2% in Dec/11, compared to 139.8% at the end of Dec/10 and 144.8% in Sept/11. The ratio between the exposure of the largest borrower and the Referential Equity Amount ended Dec/11 in 11.6%, an decrease of 420 bps in relation to the recorded at the same period of the last year.

Table 77. 100 Largest Borrowers in relation to RE

Next we present the Loan Portfolio's concentration by macro-sector:

R$ million

Period1st

CustomerBalance 2nd to 20th Balance

21st to

100th Balance

100th

largestBalance

Mar/10 2.3 7,478 10.9 35,745 10.3 33,575 23.5 76,797

Jun/10 2.8 9,707 10.9 38,209 10.2 35,587 23.9 83,503

Sep/10 2.5 9,288 10.7 38,969 10.2 37,370 23.5 85,627

Dec/10 2.7 10,558 10.4 40,393 11.0 42,590 24.1 93,540

Mar/11 2.7 10,731 10.8 42,960 11.4 45,462 24.9 99,152

Jun/11 2.2 9,462 8.6 36,091 9.6 40,309 20.4 85,862

Sep/11 2.4 10,689 11.2 49,884 11.4 50,775 25.1 111,793

Dec/11 2.0 9,321 7.9 36,200 9.0 41,596 18.9 87,117

R$ million

Period

1st

Customer

(%)

Balance2nd to 20th

(%)Balance

21st to

100th (%)Balance

100th

largest (%)Balance

Mar/10 12.1 7,478 58.0 35,745 54.5 33,575 124.6 76,797

Jun/10 16.0 9,707 63.0 38,209 58.7 35,587 137.7 83,503

Sep/10 13.3 9,288 55.8 38,969 53.5 37,370 122.6 85,627

Dec/10 15.8 10,558 60.4 40,393 63.6 42,590 139.8 93,540

Mar/11 15.7 10,731 62.7 42,960 66.4 45,462 144.8 99,152

Jun/11 12.9 9,462 49.2 36,091 55.0 40,309 117.1 85,862

Sep/11 13.8 10,689 64.6 49,884 65.8 50,775 144.8 111,793

Dec/11 11.6 9,321 45.0 36,200 51.7 41,596 108.2 87,117


58

Table 78. Concentration of Loan Portfolio by Macro-Sector

(1) Does not consider Banco Votorantim portfolio..

R$ million Chg. %

Macro-sector¹ Dec/10 Share - % Sep/11 Share - % Dec/11 Share - % On Dec/10 On Sep/11

Oil and Gas 20,043 9.3 25,247 10.1 24,561 9.5 22.5 (2.7)

Foodstuffs of Vegetable Origin 20,246 9.4 21,329 8.5 23,313 9.0 15.1 9.3

Metalw orking and Steel 22,584 10.5 27,273 10.9 27,361 10.5 21.2 0.3

Services 15,974 7.4 19,687 7.9 19,853 7.6 24.3 0.8

Foodstuffs of Animal Origin 9,857 4.6 10,771 4.3 11,446 4.4 16.1 6.3

Automotive 12,438 5.8 13,436 5.4 15,036 5.8 20.9 11.9

Building 18,252 8.5 21,351 8.5 22,461 8.6 23.1 5.2

Electricity 13,527 6.3 16,924 6.8 17,042 6.6 26.0 0.7

Transport 10,596 4.9 12,708 5.1 13,149 5.1 24.1 3.5

Telecommunications 5,921 2.8 5,740 2.3 7,229 2.8 22.1 25.9

Retail Trade 9,501 4.4 11,505 4.6 12,779 4.9 34.5 11.1

Textile and Garments 7,944 3.7 8,785 3.5 9,587 3.7 20.7 9.1

Pulp and Paper 6,013 2.8 5,988 2.4 6,796 2.6 13.0 13.5

Electrical and Eletronic Goods 6,419 3.0 7,324 2.9 9,009 3.5 40.3 23.0

Other Activities 9,968 4.6 17,280 6.9 13,596 5.2 36.4 (21.3)

Agricultural Consumables 6,280 2.9 6,283 2.5 6,485 2.5 3.3 3.2

Chemicals 5,005 2.3 5,896 2.4 6,035 2.3 20.6 2.4

Timber and Furniture 4,142 1.9 4,753 1.9 5,216 2.0 25.9 9.7

Wholesale Trade and Sundry Ind. 3,449 1.6 3,823 1.5 4,206 1.6 22.0 10.0

Beverages 4,220 2.0 2,212 0.9 2,286 0.9 (45.8) 3.4

Leather and Shoes 2,155 1.0 2,317 0.9 2,455 0.9 13.9 6.0

Total 214,534 100.0 250,631 100.0 259,900 100.0 21.1 3.7

Internal Loan Portfolio 164,909 181,824 191,884

Abroad Loan Portfolio 20,453 26,686 27,967

Garantees 13,286 14,682 14,999

Securities 15,886 27,439 25,051

Total 214,534 250,631 259,900


59

4 – Liquidity Assets In Earning Assets, highlights the evolution of the balance of securities and Loans and Leasing Operations. Within the Interest bearing liabilities, the increase in time deposits was the item with the highest absolute growth.

Table 79. Earnings Assets¹ and Interest Bearing Liabilities²

(1) Cash and Cash Equivalents in Foreign Currency, Securities, Financial Investments, Loan Operations Leasing, Remunerated Compulsory Deposit and Other Earning Assets. (2) Savings Deposits, Interbank Deposits, Time Deposits, Money Market Borrowings, Foreign Borrowings, Onlendings, Financial and Development Funds, Subordinated Debts, Perpetual Securities, and Foreign Securities.

In relation to Total Assets, it is observed the increase in the participation of the Loan and Leasing operation.

Table 80. Breakdown of Assets

The table below shows the breakdown of Securities Portfolio by category. Highlight on the reduction in Securities Available for Sale balance, due redemptions performed by businesess, an alternative to traditional credit lines.

Table 81. Securities Portfolio by Category

The table below shows the composition of portfolio securities by category. Highlight for growth in the balance of available to Sale in dez/11, mainly in government bonds.

Chg. %

R$ million Dec/10 Share % Sep/11 Share % Dec/11 Share % On Dec/10 On Sep/11

Earning Assets 665,252 82.0 780,082 82.1 825,039 84.1 24.0 5.8

Other Assets 145,920 18.0 169,700 17.9 156,191 15.9 7.0 (8.0)

Total 811,172 100.0 949,781 100.0 981,230 100.0 21.0 3.3

Interest Bearing Liabilities 556,662 68.6 679,333 71.5 706,391 72.0 26.9 4.0

Other Liabilities 254,510 31.4 270,448 28.5 274,839 28.0 8.0 1.6

Total 811,172 100.0 949,781 100.0 981,230 100.0 21.0 3.3

Balance

Balance Chg. %


Total Assets 811,172 100.0 949,781 100.0 981,230 100.0 21.0 3.3

Liquidity Assets except Securities 117,323 14.5 177,879 18.7 176,322 18.0 50.3 (0.9)

Securities 143,867 17.7 158,844 16.7 168,230 17.1 16.9 5.9

Loans and Leasing 321,583 39.6 362,253 38.1 381,896 38.9 18.8 5.4

Tax Credits 21,970 2.7 23,772 2.5 22,754 2.3 3.6 (4.3)

Other Assets 206,429 25.4 227,033 23.9 232,028 23.6 12.4 2.2

Chg. %


Securities 143,867 100.0 158,844 100.0 168,230 100.0 16.9 5.9

Available for Trading 50,445 35.1 63,154 39.8 63,257 37.6 25.4 0.2

Available for Sale 75,142 52.2 75,364 47.4 88,385 52.5 17.6 17.3

Held to Maturity 16,656 11.6 18,280 11.5 15,191 9.0 (8.8) (16.9)

Financial Derivatives 1,624 1.1 2,046 1.3 1,397 0.8 (14.0) (31.7)

Balance


60

Table 82. Securities Portfolio by Maturities – Market Value

The table below presents the liquidity balance, difference between Liquidity Assets and Liabilities.

Table 83. Liquidity Balance

Up to 1 year 1 to 5 years 5 to 10 years Over 10 years

R$ million Balance Share % Balance Share % Balance Share % Balance Share %

Mar/10 28,025 23.7 68,319 57.9 14,581 12.4 7,132 6.0 118,057

Jun/10 31,311 23.9 79,737 60.9 10,925 8.3 8,929 6.8 130,902

Sep/10 37,653 27.7 77,062 56.6 11,298 8.3 10,111 7.4 136,124

Dec/10 40,618 28.6 79,681 56.1 11,006 7.7 10,778 7.6 142,083

Mar/11 35,173 24.3 86,112 59.4 14,305 9.9 9,348 6.4 144,938

Jun/11 36,480 23.8 88,321 57.6 18,054 11.8 10,362 6.8 153,217

Sep/11 48,645 31.1 93,445 59.7 11,676 7.5 2,869 1.8 156,635

Dec/11 45,364 27.2 105,971 63.6 12,107 7.3 3,252 2.0 166,693

Total

Balance


Liquidity Assets (A) 261,190 100.0 336,724 100.0 344,552 100.0 31.9 2.3

Available Funds 9,745 3.7 20,466 6.1 10,034 2.9 3.0 (51.0)

Interbank Investments 107,579 41.2 157,413 46.7 166,288 48.3 54.6 5.6

Securities (except linked to Bacen) 143,867 55.1 158,844 47.2 168,230 48.8 16.9 5.9

Liquidity Liabilities (B) 161,173 100.0 208,313 100.0 209,626 100.0 30.1 0.6

Interbank Deposits 18,998 11.8 13,586 6.5 14,450 6.9 (23.9) 6.4

Money Market Borrow ing 142,175 88.2 194,728 93.5 195,175 93.1 37.3 0.2

Liquidity Balance (A - B) 100,017 128,411 134,926 34.9 5.1

Chg. %


61

5 - Funding Banco do Brasil's funding in the domestic market were mainly driven in the quarter by the expansion of the volume in term deposits.

Table 84.Deposits and Market Funding

We present below the shares of Banco do Brasil in the deposits and money market funding of the Brazilian Banking Industry*.

Figure 17. Market Share of BB Funding

R$ billion

*Information about participation in the Brazilian Banking Industry comes from the top 50 banks of the Central Bank of Brazil site. The latest available position at the time of publishing this report was Sep/11.

In the 4Q11, the expansion in BB's funding abroad in relation to the prior quarter was led by the growth in the Securities Issue, Repo and Businesses lines. In the comparison with the same prior-year period, special emphasis is placed on the Issues in the international capital market and Businesses.

The operations of Banco Patagonia have been consolidated since 2Q11, which contributed to the growth in funding. In December, the balances were: US$ 1,844 million in Businesses; US$ 1,238 million for Individuals; US$ 124 million for Interbank; US$ 51 million for Issues; and US$ 202 million in Repo.

Balance Chg. %


Demand Deposits 63,503 12.2 57,614 9.4 62,016 9.7 (2.3) 7.6

Saving Deposits 89,288 17.2 95,512 15.5 100,110 15.7 12.1 4.8

Interbank Deposits 18,998 3.7 13,586 2.2 14,450 2.3 (23.9) 6.4

Time Deposits 205,062 39.5 252,807 41.2 265,809 41.7 29.6 5.1

Judicial Deposits 64,688 12.5 76,354 12.4 77,667 12.2 20.1 1.7

Money Market Borrow ing 142,175 27.4 194,728 31.7 195,175 30.6 37.3 0.2

TOTAL 519,026 100.0 614,246 100.0 637,561 100.0 22.8 3.8

55.0 59.0 59.063.5 59.6 61.1 57.6 62.0

33.1 33.2 32.5 33.0 33.4 33.4

31.1

Mar/10 Jun/10 Sep/10 Dec/10 Mar/11 Jun/11 Sep/11 Dec/11

Demand Deposits Market Share - %

78.7 81.585.7

89.3 90.5 89.295.5

100.1

24.0 23.9 23.7 23.5 23.5 22.9 23.3


Savings Depos its Market Share - %

197.9 192.7 192.0204.7

219.0234.2

252.8265.8

26.3 25.4 24.6 25.0 25.5 26.1 26.9


Time Deposits Market Share - %

500.5 510.6 513.9 519.0561.3 589.0 614.2 637.6

25.7 25.0 24.2 23.6 24.5 25.0 25.1


Deposits and Market Funding Market Share - %


62

Table 85. Foreign Borrowing

(1) Included the products of the Banco Patagonia from jun/11. (2) The total emissions comprises the emissions in the international capital markets and Certificate of Deposits.

The table below shows the borrowings of Banco do Brasil in the international capital market. In the year, a highlight to the issue of subordinated debt in the amount of US$ 1.5 billion in May, funding was considered eligible as Tier II capital by the Central Bank of Brazil, increasing by 47 basis points the BlS Ratio of BB and for the Senior Notes issue in November in the amount of US$ 500 million.

Table 86. Overseas Issues

Sources and Uses

The indicators of the following table show the relationship between funding sources and investments in Banco do Brasil.

In the quarterly comparison, it can be noted that the total deposits growth occurs in a faster rate than the loan portfolio, which contributed to the increase in cash and reduced the ratio between loans and deposit. The rise in total deposits is mainly due to the increase in time deposits.

US$ million Balance Chg. %

Products¹ Dec/10 Share % Sep/11 Share % Dec/11 Share % On Dec/10 On Sep/11

Interbanking 8,769 34.6 9,860 30.2 10,022 29.0 14.3 1.6

Repo 1,824 7.2 2,591 7.9 3,158 9.1 73.1 21.9

Businesses 4,899 19.3 6,536 20.0 6,997 20.2 42.8 7.1

Special 201 0.8 294 0.9 305 0.9 51.7 3.7

Individuals 2,067 8.2 3,151 9.7 3,135 9.1 51.7 (0.5)

Issues² 7,588 29.9 10,179 31.2 10,955 31.7 44.4 7.6

TOTAL 25,348 100.0 32,611 100.0 34,572 100.0 36.4 6.0

Half-

Yearly

Volume

in US$

million

Term in

years

Cupom

(%)

Interest

Interval

Issue

price

Return for

Investor

(%)

Premium

over

Treasury

Current

Rating -

Outlook

Program

12.19.2003 250 10 6.550 Quarterly 100.000 6.550 292 A-/A2 MT 100

09.20.2004 300 10 8.500 Half-Yearly 99.174 8.625 447 A3 S Stand Alone

07.18.2007 187 10 9.750 Half-Yearly 100.000 9.750 - Baa1 P GMTN

03.06.2008 250 6 L3M+0,55 Quarterly 100.000 L3M+0,55 - AAA/Aa2 MT 100

04.29.2008 150 10 5.250 Quarterly 100.000 5.250 - A-/A2 MT 100

09.05.2008 200 7 L3M+1,2 Quarterly 100.000 L3M+1,2 - A-/A2 MT 100

07.02.2009 100 5 L6M+2,55 Half-Yearly 98.250 L6M+2,55 - Baa1 P GMTN

10.20.2009 1,500 - 8.500 Half-Yearly 100.000 8.500 - Baa1 S Stand Alone

01.22.2010 500 5 4.500 Half-Yearly 99.333 4.651 220 Baa1 P GMTN

01.22.2010 500 10 6.000 Half-Yearly 99.451 6.074 237.5 Baa1 P GMTN

04.29.2010 450 5 4.500 Half-Yearly 100.684 4.337 180 Baa1 P GMTN

10.05.2010 660 10 5.375 Half-Yearly 99.361 5.464 300 Baa1 P Stand Alone

01.20.2011 1,009 5 4.500 Annual 99.453 4.625 mid-swap+200 Baa1 P GMTN

05.26.2011 1,500 10 5.875 Half-Yearly 98.695 6.044 288 Baa1 P Stand Alone

11.23.2011 500 5 3.875 Half-Yearly 99.413 4.000 312 Baa1 P Stand Alone


63

Table 87. Sources and Uses

(1)Includes Agribusiness and Mortgage Letters of Credit (2)Includes Foreign Borrowings, Foreign Securities, Foreign Onlendings and Perpetual Securities.

Table 88. Cost of funding vs. Selic Rate

Table 89. Segregation of Deposits by Deadline Chargeability

(1) Includes the amount of R$ 151,015.003 thousand (R$ 72,371,360 thousand in 12.31.2010 in BB-Multiple Bank and R$ 156,117,461 thousand (R$ 82,387,902 thousand on 12.31.2010 and R$ 81,909,851 thousand on 09.30.2010) in BB – Consolidated, related to time deposits with early repurchase clause (liquidity commitment), considering the original maturity dates.

Asset Management

Banco do Brasil, through BB Gestão de Recursos - BB DTVM, is the leader in investment fund national industry since 1994. At the end of December 2011, reached R$ 415.8 billion in Assets under Management, with a market share of 21.6%. Note that Banco do Brasil market share would reach 22.4% if 50.0% of funds managed by Banco Votorantim through Votorantim Asset Management - VAM (R$ 30.1 billion at the end of the 4rd quarter of 2011) were considered.

Balance Chg. %

R$ million Dec/10 Share % Sep/11 Share % Dec/11 Share %On

Dec/10

On

Sep/11

Sources 498,334 100.0 564,549 100.0 595,892 100.0 19.6 5.6

Total Deposits 376,851 75.6 419,519 74.3 442,386 74.2 17.4 5.5

Domestic Onlending 50,764 10.2 48,024 8.5 50,991 8.6 0.4 6.2

Financial and Development Funds 3,568 0.7 3,705 0.7 4,002 0.7 12.2 8.0

FCO (Subordinated Debt) 23,412 4.7 29,694 5.3 30,885 5.2 31.9 4.0

Commercial Papers¹ 4,314 0.9 14,366 2.5 16,138 2.7 274.1 12.3

Foreign Borrow ing² 21,228 4.3 29,956 5.3 31,390 5.3 47.9 4.8

Allow ance for Loan Losses 18,197 3.7 19,286 3.4 20,100 3.4 10.5 4.2

Uses 498,334 100.0 564,549 100.0 595,892 100.0 19.6 5.6

Available Funds 52,933 10.6 72,340 12.8 79,243 13.3 49.7 9.5

Loan Portfolio 358,366 71.9 402,555 71.3 422,988 71.0 18.0 5.1

Compulsory Deposits 87,035 17.5 89,654 15.9 93,660 15.7 7.6 4.5

Indicators - %

Loan Portfolio / Total Deposits 95.1 96.0 95.6

4Q10 3Q11 4Q11

R$ millionAverage

BalanceCost

as % of

Selic

Average

BalanceCost

as % of

Selic

Average

BalanceCost

as % of

Selic

Core Deposits 223,478 (2,812) 49.1 235,659 (3,392) 47.8 243,695 (3,286) 50.4

Demand Deposits 60,851 - - 56,962 - - 59,501 - -

Savings Deposits 87,738 (1,557) 69.2 93,628 (1,790) 63.5 97,971 (1,822) 69.6

Time Deposits 74,888 (1,255) 65.3 85,069 (1,602) 62.5 86,223 (1,464) 63.5

Funds and Programs 11,004 (172) 61.1 9,211 (154) 55.3 8,671 (142) 61.2

Judicial Deposits 63,884 (1,083) 66.1 75,858 (1,448) 63.3 77,552 (1,322) 63.8

Others Time Deposits 125,189 (3,039) 94.6 160,221 (4,693) 97.2 174,250 (4,459) 95.7

Interbank Deposits 19,514 (359) 71.6 15,984 (303) 62.8 13,856 (144) 38.9

Total Deposits 368,180 (6,210) 65.8 411,864 (8,388) 67.6 431,801 (7,889) 68.3

R$ millionNo

expirati

Up to 3

months

3 to 12

months

1 to 3

years

3 to 5

years

Over 5

years

Total

12.31.2011

Total

12.31.2010

Time Deposits¹ 87,501 18,477 22,482 68,354 68,976 20 265,809 205,062

Saving Deposits 100,110 - - - - - 100,110 89,288

Demand Deposits 62,016 - - - - - 62,016 63,503

Interbank Deposits 328 5,841 5,750 1,940 273 318 14,450 18,998

Total 249,955 24,318 28,232 70,294 69,248 338 442,386 376,851


64

Figure 18. Asset Management

R$ billion

Table 90. Fee Income From Asset Management

BB continued as the leader in third-party fund management of the Institutional Investor segment, with 23.4% of the market. This continues to be the main client in resource management, accounting for 40.4% of the total resources managed, an increase of 18.4% in twelve months, which corresponds to an absolute growth of R$ 26.1 billion.

Also note the increase of foreign investors (R$ 2.7 billion) in the same period.

Table 91. Investment Funds and Managed Portfolios by Customer

As regards the classification per type, there is, despite the investment funds in fixed-income have attracted investors throughout 2011 due to the uncertainties arising from the economic crisis in Europe, variable income already showed signs of recovery, recording a slight increase in the 4Q11.

330.1344.9 350.9 360.2

393.9407.7 410.8 415.8

21.722.3

21.4 21.222.0

22.322.0 21.6


Asset Management Market Share - %

Balance Balance Chg. %


Asset Management 687 845 829 20.7 (1.9) 2,672 3,197 19.7

Chg. %

Balance Chg. %


Institutional Investors 141,822 39.4 159,774 38.9 167,893 40.4 18.4 5.1

Individuals 82,672 23.0 91,706 22.3 91,981 22.1 11.3 0.3

Government 82,305 22.8 97,707 23.8 94,169 22.6 14.4 (3.6)

Businesses 37,951 10.5 44,495 10.8 43,590 10.5 14.9 (2.0)

Foreign Investors 15,451 4.3 17,123 4.2 18,159 4.4 17.5 6.0

Total 360,200 100.0 410,804 100.0 415,793 100.0 15.4 1.2


65

Table 92. Investment Funds and Managed Portfolios by Type

Funds management in Banco do Brasil is directed to all market segments and, since 2006, received from Moody's, one of the main global risk rating agencies, the maximum score (MQ1) in Management Quality Excellence.

BB DTVM is a signatory to the United Nations Principles for Responsible Investment (PRI), agreeing to apply in its management processes practices that favor the integration of environmental, social and corporate governance topics with its investment decision-making. Currently, BB DTVM is developing its own methodology with a view to applying such practices to the evaluation and selection of companies, covering the Triple Bottom Line.

Balance Share %


Investment Fund 346,178 96.1 398,114 96.9 403,845 97.1 16.7 1.4

Fixed 190,789 53.0 268,952 65.5 264,655 63.7 38.7 (1.6)

Equity 56,863 15.8 52,946 12.9 55,317 13.3 (2.7) 4.5

Multimarket 53,863 15.0 19,795 4.8 20,820 5.0 (61.3) 5.2

Others 44,664 12.4 56,422 13.7 63,052 15.2 41.2 11.8

Managed Portfolios 14,022 3.9 12,690 3.1 11,948 2.9 (14.8) (5.8)

Fixed 13,882 3.9 12,690 3.1 11,948 2.9 (13.9) (5.8)

Equity 139 0.0 - - - - - -

TOTAL 360,200 100.0 410,804 100.0 415,793 100.0 15.4 1.2


66

6 – Other Components of the Balance Sheet

6.1. Deferred Taxes

Tax Credits

Tax credits derive mainly from Income Tax, Social Contribution and tax loss temporary differences.

Temporary differences represent the right to offset tax paid in advance on expense recognized in the period and not currently acknowledged by tax law but that is deductible when tax rules are met, permitting the correction of tax recognition between periods. This tax credit category represents 85.6% of the stock.

Tax credits from tax losses represent a tax benefit as it may be offset against generated taxable basis and tax payable (future taxable income).

Table 93. Breakdown of Tax Credit

In 2011, it was observed the realization of tax credits at Banco do Brasil in the amount of R$ 6,920 million. This amount corresponds to 195.95% of the tax credits utilization projections in 2011, according to technical study carried out in 12.31.2010.

Deferred tax liabilities

Deferred tax liability represents the amount of income tax payable in a future period related to taxable temporary differences. The table below shows the opening of deferred tax liabilities:

Table 94. Breakdown of Deferred Tax Liabilities

6.2. Acturial Asset

In the employee benefit plans, defined benefit description, the actuarial risk and the investment risk fall either partially or fully on the sponsoring entity. Therefore, cost accounting requires the measurement of plan obligations and expenses, with a possibility of actuarial gains or losses leading to record a liability, when the amount of the actuarial value of assets exceeds the benefit plan, or inversely, an asset when the amount of assets exceeds the value of plan obligations. In the latter case, the asset should be recorded only when there is evidence that it can effectively reduce the contributions from the sponsor or will be refundable in future.

According to CVM Resolution 600/09, the limit established by the corridor rule must be observed when calculating the value of assets or actuarial liability to be recognized by the sponsor. The rule only allows the recording of values that are higher than 10% of assets and / or liabilities, thus avoiding the volatility of the amount over time.

Previ's Benefit Plan I (Plan I), established as a Defined Benefit plan and partially sponsored (50%) by Banco do Brasil, has a surplus that allows the recognition of an actuarial asset in BB. Therefore, for

Balance Chg. %


Time Differences 18,148 82.6 20,427 85.9 19,474 85.6 7.3 (4.7)

Social contrib. on Net Income 2,809 12.8 2,477 10.4 2,488 10.9 (11.4) 0.4

Tax Loss / Negative Base 618 2.8 229 1.0 175 0.8 (71.7) (23.4)

Excess Depreciation 394 1.8 640 2.7 616 2.7 56.4 (3.6)

Total Tax Credit 21,970 100.0 23,772 100.0 22,754 100.0 3.6 (4.3)

Income Tax / Pre-tax Income - % 34.2 26.2 31.7

Balance Chg. %

R$ million Dec/10 Share % Sep/11 Share % Dec/11Share % On Dec/10 On Sep/11

Acturial Gains 4,049 68.5 5,098 71.3 5,325 75.0 31.5 4.5

Restatement of Judicial Deposits 316 5.4 347 4.9 357 5.0 12.7 2.8

Market-to-market 414 7.0 730 10.2 266 3.8 (35.6) (63.5)

Other 1,128 19.1 971 13.6 1,148 16.2 1.8 18.2

Total Deferred Tax Liabilities 5,907 100.0 7,146 100.0 7,096 100.0 20.1 (0.7)

Income Tax / Pre-tax Income - % 34.2 26.2 31.7


67

the recognition of an actuarial asset in favor of BB corridor rule is adjusted according to their participation in the surplus, that is, 50% of present value of assets and actuarial liabilities of the Plan.

The actuarial studies that measure the present value of assets and obligations of Plan I are carried out on a half-yearly basis (in June and December) and clear the calculation of the balance of actuarial assets for the current semester and the estimate for the end of the subsequent semester.

Based on the balance of actuarial assets calculated for the current period, BB accounts for the half-yearly adjustment to its assets with a contra entry to recurring income or expenses for the period. The value in question is the amount of unrecognized surplus that exceeded the corridor, divided by the average remaining work of employees who participate in the plan.

From the estimated actuarial results of Plan I to the end of the subsequent semester, BB accounts the recognition of that monthly amount at the rate of one sixth of the projected gains or losses, as the semester to which it relates.

Table below shows the method used to estimate the actuarial asset.

Table 95. Previ - Effects of Half-Yearly Accounting

R$ million 1H10 2H10 1H11 2H11

(a) Fair Value of the Plan's Assets 130.163,5 141.566,3 138.224,7 133.079,4

(b) Present Value of Actuarial Liabilities 83.005,4 90.805,5 94.711,3 98.849,5

(c) Surplus BB = [(a) + (b)] x 50% 23.579,0 25.380,4 21.756,7 17.114,9

(d) Amount Recognized before the Half-Yearly Accouting 14.120,5 8.525,5 11.379,4 13.372,0

Acturial Assets (Period Initial) 12.655,0 14.510,0 9.894,8 12.051,1

Montly Recognition 1.437,0 1.103,0 1.248,0 1.061,0

Fundo Paridade and Fundo Destinação Adjustment ¹ 28,5 (7.087,5) 236,6 259,9

(e) Unrecognized Amount = (c) - (d) 9.458,5 16.854,9 10.377,3 3.742,9

(f) Corridor Method - BB ² 6.508,2 7.078,3 6.911,2 6.654,0

(g) Excess = (e) - (f) 2.950,4 9.776,6 3.466,0 -

(h) Average Remaining Work Period (half-yearly) 7,6 7,1 5,2 4,7

(i) Amount Recognized in Half-Yearly Adjust = (g) / (h) 389,2 1.369,3 671,7 -

(j) Acturial Assets (Period End) = (f) + (i) 14.509,7 9.894,8 12.051,1 13.372,0

(1) Amouts do not impact the income statement. Are detailed in Note 27.e.

(2) 50% of max value of 10% of Assets or Liabilit ies (the highest)


68

6.3. Goodwill on equity

Table 96. Goodwill on Investment Acquisition

6.4. Intangible assets

Table 97. Intangible Assets

R$ million 4Q10 1Q11 2Q11 3Q11 4Q11

Banco Nossa Caixa

Balance 4,961.0 4,961.0 4,961.0 4,961.0 4,961.0

Accumulated amortization (212.0) (270.1) (328.3) (386.4) (444.5)

Balance w ithout amortization 4,749.0 4,690.9 4,632.8 4,574.7 4,516.5

Amortization expenses for the period (37.8) (58.1) (58.1) (58.1) (58.1)

Banco Votorantim

Balance 425.7 425.7 425.7 425.7 425.7


Balance w ithout amortization 385.9 374.5 363.5 351.5 340.1


Banco Patagônia

Balance - - 318.6 318.6 318.6

Accumulated amortization - - (4.1) (8.3) (13.0)

Balance w ithout amortization - - 314.5 310.4 305.6

Amortization expenses for the period - - (4.1) (4.1) (5.0)

Cielo

Balance 1,002.1 1,002.1 1,002.1 1,002.1 1,002.1




Other expenses of the Conglomerate

Balance 635.4 958.6 689.4 800.4 800.4




Quarterly Flow

R$ million 4Q10 1Q11 2Q11 3Q11 4Q11

Rights due to payroll acquisition

Initial Balance 6,141.4 5,803.6 5,299.2 4,991.5 5,358.7


Other 0.5 - 3.4 0.3 -

Acquisitions 485.1 7.3 352.5 1,088.2 1,782.1

Write-offs (318.0) (6.3) (164.8) (198.0) (590.1)

Final Balance (a) 5,803.6 5,299.2 4,991.5 5,358.7 6,027.2

Acquisition/development of software

Initial Balance 527.2 642.3 729.7 770.6 799.3


Other 176.0 132.4 72.3 (204.8) 391.6

Acquisitions (31.3) (8.8) 8.8 275.7 (275.9)

Write-offs (0.0) (0.0) (0.1) (0.0) 0.0

Final Balance (b) 642.3 729.7 770.6 799.3 871.5

Other Intangible Assets

Initial Balance 4.2 5.8 7.0 7.0 2,826.0

Amortization expenses for the period (0.2) (0.1) - (0.2) (0.1)

Other - (0.0) - (0.3) (0.1)

Acquisitions 1.8 1.3 - 2,819.5 14.8

Write-offs - (0.0) (0.0) - (3.0)

Final Balance (c) 5.8 7.0 7.0 2,826.0 2,837.5

Balance ( a+ b + c) 6,451.7 6,036.0 5,769.1 8,984.0 9,736.2


69

Table 98. Estimate of Amortization of Intangible Assets

R$ million 2012 2013 2014 2015 2016 Total

Amounts to be Amortized 2,655 2,337 1,958 1,506 1,281 9,736


70

7 - Financial Results This chapter presents Banco do Brasil’s equity analysis (short-term investments and funding) and the results analysis. In relation to equity items, note the breakdown of earning assets and interest bearing liabilities, as well as management spread of credit transactions. In results sections, volume and rates are analyzed and interest revenue and expenses are recognized by changing the average volume of equity items and average interest rate variation.

7.1. Analysis of Investments

Table 99. Average Balances and Interest Rates – Earning Assets (Quarterly)

Table 100. Average Balances and Interest Rates – Earning Assets (Annual)

Spread by Portfolio

The table below presents the management spread by transactions. Spread is the result of the managerial financial margin divided by the respective average balances.

For managerial financial margin calculation, financial revenues classified by portfolio type are calculated first. Subsequently, financial expenses are deducted and opportunity costs defined for each of the portfolio lines are added. In case of Individual and Business portfolios, with free funds, the opportunity cost is the average Selic rate. For the agricultural portfolio and other directed funds, the opportunity cost is calculated according to the funding source and the necessity or not of compulsory investing part of this funding.

3Q11 4Q11

R$ million

Average

BalanceInterest

Annualized

Rate (%)

Average

BalanceInterest

Annualized

Rate (%)

Earning Assets

Available Funds in Foreign Currency 1,306 117 41.1 1,665 1 0.3

Securities + Interbank Invest. on Hedge 316,647 10,574 14.0 319,047 7,189 9.3

Loans + Leasing 377,964 16,821 19.0 398,318 15,982 17.0

Remunerated Compulsory Deposits 74,252 1,969 11.0 77,993 1,923 10.2

Total 770,169 29,482 16.2 797,023 25,096 13.2

Non Earning Assets

Tax Credits 23,207 23,273

Other Assets 113,081 109,132

Permanent Assets 28,831 28,849

Total 165,119 161,255

TOTAL ASSETS 935,288 958,278

2010 2011

R$ million

Average

BalanceInterest

Annualized

Rate (%)

Average

BalanceInterest

Annualized

Rate (%)

Earning Assets

Available Funds in Foreign Currency 743 86 11.6 1,245 187 15.0

Securities + Interbank Invest. on Hedge 274,676 23,238 8.5 306,091 30,849 10.1

Loans + Leasing 313,914 50,916 16.2 371,902 61,457 16.5

Remunerated Compulsory Deposits 44,048 3,586 8.1 73,838 7,231 9.8

Total 633,380 77,827 12.3 753,075 99,724 13.2

Non Earning Assets

Tax Credits 22,349 22,799

Other Assets 85,809 107,813

Permanent Assets 27,235 27,751

Total 135,393 158,364

TOTAL ASSETS 768,773 911,439


71

Table 101. Spread by Portfolio

Securities Income

The income with securities reached the end 2011 with a balance of R$ 30,849 million, representing a rise of 32.7% in relation to 2010. This performance is explained, specially, for three reasons: (i) increase of the Average Selic Rate (TMS) by 180 base-points in 2011 over 2010; (ii) appreciation of the Real against the US Dollar by 12.6% in the year; and (iii) growth in the average balances of Securities of 11.4% in 2011.

In the quarterly comparison (4Q11-3Q11), there was a decrease in revenues from Securities of 32.0%, influenced by three main reasons: (i) the behavior of the Average Selic Rate (TMS) in the quarter, with a reduction of 30 base points in comparison with 3Q11; (ii) lower number of business days (4 days) in the 4Q11 and in relation to 3Q11; (iii) and, due to the decrease in the foreign revenues caption. It should also be highlighted that the result of 3Q11 was influenced (approximately R$ 2,580 million) by exchange rate variation, appreciating by 18.9% (3Q11/2Q11). This quarter, the currency remained practically stable (+1.2%) in relation to 3Q11 and the foreign revenues line ended the quarter at R$ 134 million.

It is important to note that the table below does not represent the result of Banco do Brasil's treasury department. The results from the operations of the entire Conglomerate (including non-financial companies, BB Banco de Investimento, Banco Votorantim, subsidiaries and branches based abroad) are only evidenced in the operations classified by the Central Bank of Brazil as Securities/Short-term Interbank Investments.

Table 102. Securities Income

The figure below presents the classification of BB's portfolio of securities by type of index. The classification below does not include the portfolio of BV.

% 4Q10 3Q11 4Q11 2010 2011

Loan Operations 8.6 8.8 9.0 9.0 8.5

Individuals 15.4 14.9 15.5 15.8 14.4

Businesses 5.5 6.3 6.1 6.0 5.8

Agribusiness 5.6 5.4 6.1 5.6 5.3

Other 3.6 2.9 3.0 3.4 3.2

Global Spread 6.0 5.6 5.8 6.1 5.7

Quarterly Flow Annual Flow Chg. %


Securities Income 6,137 10,574 7,189 17.1 (32.0) 23,238 30,849 32.7

Fixed Income Securities 6,032 10,455 6,947 15.2 (33.5) 22,975 30,131 31.1

Revaluation – Curve 2,771 3,441 2,937 6.0 (14.6) 10,050 12,000 19.4

Income/Loss from Negotiation 8 121 275 3,518.1 127.6 201 488 143.1

Mark to Market (37) 369 (183) - - (46) 126 -

Interbank Accounts 3,289 4,174 3,785 15.1 (9.3) 12,480 15,028 20.4

Foreign Income 2 2,351 134 - - 289 2,489 759.7

Others 104 119 242 131.5 102.5 264 717 172.0

Chg. %


72

Figure 19. Securities Portfolio by Index (BB Multiple Bank)

7.2. Analysis of Funding

Table 103. Average Balances and Interest Rates - Interest Bearing Liabilities (Quarterly)

75.4%

23.1%

1.5%

CDI / Average Selic Rate Fixed Other

R$ million

Average

BalanceInterest

Annualized

Rate (%)

Average

BalanceInterest

Annualized

Rate (%)

Interest Bearing Liabilities

Saving Deposits 93,628 (1,790) 7.9 97,971 (1,822) 7.7

Interbank Deposits 15,984 (303) 7.8 13,856 (144) 4.2

Time Deposits 245,290 (6,295) 10.7 260,473 (5,923) 9.4

Money Market Borrow ing 193,111 (5,440) 11.8 181,548 (4,623) 10.6

Foreign Borrow ing 10,755 (3,266) 188.9 11,841 (440) 15.7

Onlending 49,156 (702) 5.8 50,202 (678) 5.5

Financial and Development Funds + Subordinated Debt 31,333 (257) 3.3 33,589 (164) 2.0

Foreign Securities Borrow ing 14,729 (880) 26.1 16,874 (194) 4.7

Commercial Papers 12,491 (586) 20.1 15,571 (520) 14.0

Total 666,477 (19,519) 12.2 681,925 (14,507) 8.8

Other Liabilities

Demand Deposits 56,962 59,501

Other Liabilities 155,823 158,815

Shareholder’s Equity 56,027 58,037

Total 268,811 276,353

TOTAL LIABILITIES 935,288 958,278

3Q11 4Q11


73

Table 104. Average Balances and Interest Rates - Interest Bearing Liabilities (Annual)

7.3. Volume and Rate Analysis

The table below shows the appropriation of changes in interest income and expenses due to the change in the average volume of earning assets and interest bearing liabilities and the change in the average interest rate on such assets and liabilities, in the periods under analysis.

The changes in volume and interest rate were calculated based on changes in average balances in the period and the changes in the average interest rates on earning assets and interest bearing liabilities. The Average Rate Change was calculated by the variation in the interest rate in the period multiplied by the average quantity of assets generating income or by the average quantity of liabilities generating expenses in the first period. The Net Change is the difference between the interest income of the present period and the previous period. The variation by Average Volume is the difference between the Net Change and that resulting from the Average Rate.

It is important to highlight that the 18.9% appreciation (3Q11-2Q11) of the US dollar has significantly affected the result of 3Q11 because of an increase in both revenues and expenses, a fact which, as explained in Chapter 7.1, influenced the quarterly comparisons.

Regarding the annual comparison, the side of earning assets, credit operations continued as the main line revenue generator, both the volume effect and the effect of rate. In relation to liabilities, the change in the funding mix has contributed to the increase in the expenses for the period.

R$ million

Average

BalanceInterest

Annualized

Rate (%)

Average

BalanceInterest

Annualized

Rate (%)


Saving Deposits 82,697 (5,597) 6.8 92,918 (6,908) 7.4

Interbank Deposits 13,396 (805) 6.0 13,921 (808) 5.8

Time Deposits 195,492 (15,550) 8.0 237,138 (22,231) 9.4

Money Market Borrow ing 159,325 (15,362) 9.6 183,157 (19,701) 10.8

Foreign Borrow ing 8,968 (577) 6.4 10,185 (3,773) 37.0

Onlending 40,154 (2,440) 6.1 50,581 (2,696) 5.3

Financial and Development Funds + Subordinated Debt 25,265 (455) 1.8 30,206 (649) 2.1

Foreign Securities Borrow ing 10,091 (452) 4.5 14,995 (1,382) 9.2

Commercial Papers 3,304 (425) 12.9 10,750 (1,593) 14.8

Total 538,692 (41,238) 7.7 643,850 (59,743) 9.3

Other Liabilities

Demand Deposits 57,033 59,188

Other Liabilities 129,575 153,413

Shareholder’s Equity 43,473 54,988

Total 230,080 267,589

TOTAL LIABILITIES 768,773 911,439

2010 2011


74

Table 105. Change in Revenues and Expenses and Change Volume / Rate (Quarterly)

(1) Net Change - Average Rate (2) (Interest Current Period / Balance Current Period) x Balance Previous Period) - (Interest Previous Period) (3) Current Interest - Interest for Previous Period

Table 106. Change in Revenues and Expenses and Change Volume / Rate (Annual)

(1) Net Change - Average Rate (2) (Interest Current Period / Balance Current Period) x Balance Previous Period) - (Interest Previous Period) (3) Current Interest - Interest for Previous Period

R$ million

Average

Volume

(1)

Average

Rate

(2)

Net

Change

(3)

Average

Volume

(1)

Average

Rate

(2)

Net

Change

(3)

Earning Assets

Available Funds in Foreign Currency 0 (116) (116) 1 (20) (20)

Securities + Interbank Investments on Hedge 54 (3,439) (3,385) 972 80 1,052

Loans + Leasing 817 (1,656) (839) 2,380 258 2,638

Remunerated Compulsory Deposits 92 (138) (46) 457 191 647

Total 846 (5,232) (4,386) 3,838 480 4,319


Saving Deposits (81) 49 (32) (190) (75) (265)

Interbank Deposits 22 137 159 59 156 215

Time Deposits (345) 717 372 (1,373) (255) (1,629)

Money Market Borrow ing 294 523 817 (612) 202 (410)

Foreign Borrow ing (40) 2,866 2,826 (101) (305) (406)

Onlending (14) 39 25 (1) 20 19

Financial and Development Funds + Subord. Debt (11) 104 93 (34) (21) (54)

Foreign Securities Borrow ing (25) 710 686 (73) (44) (118)

Commercial Papers (103) 169 66 (383) (4) (387)

Total (329) 5,340 5,012 (2,479) (556) (3,035)

4Q11/3Q11 4Q11/4Q10

R$ million

Average

Volume

(1)

Average

Rate

(2)

Net

Change

(3)

Earning Assets

Available Funds in Foreign Currency 75 25 101

Securities + Interbank Investments on Hedge 3,166 4,444 7,610

Loans + Leasing 9,583 959 10,541

Remunerated Compulsory Deposits 2,917 728 3,645

Total 15,850 6,047 21,898


Saving Deposits (760) (551) (1,311)

Interbank Deposits (30) 27 (3)

Time Deposits (3,904) (2,778) (6,682)

Money Market Borrow ing (2,563) (1,775) (4,339)

Foreign Borrow ing (451) (2,745) (3,196)

Onlending (556) 300 (256)

Financial and Development Funds + Subord. Debt (106) (88) (194)

Foreign Securities Borrow ing (452) (479) (931)

Commercial Papers (1,103) (64) (1,167)

Total (9,758) (8,747) (18,504)

2011/2010


75

7.4. Spread

Table 107. Analysis of Volume (Earning Assets) and Quarterly Spread – 3Q11 and 4Q11

(1) Average Balances (2) Net Interest Income / Earning Assets

Table 108. Analysis of Volume (Earning Assets) and Spread in the Period – 2010 and 2011

(1) Average Balances (2) Net Interest Income / Earning Assets

Figure 20. Analysis of Spread

R$ million 3Q11 4Q11 Abs. Chg.

Volume: Assets – Earning Assets¹ 770,169 797,023 26,854

Net Interest Income 10,645 11,348 703

Spread - %² 1.3822 1.4237 0.0416

Gain/(loss) w ith volume 11,016 371

Gain/(loss) w ith spread 10,965 320

Gain/(loss) w ith volume and spread 11

R$ million 2010 2011 Abs. Chg.

Volume: Assets – Earning Assets¹ 633,380 753,075 119,695

Net Interest Income 38,398 42,675 4,277

Spread - %² 6.0624 5.6668 (0.3956)

Gain/(loss) w ith volume 45,655 7,256

Gain/(loss) w ith spread 35,893 (2,506)

Gain/(loss) w ith volume and spread (474)

6.3 6.3 6.36.0 5.9 5.8

5.65.8

4.2 4.34.6 4.6

4.3 4.13.9

4.3

1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11

NII / (Earning Assets) - Annualized NFM / (Earning Assets) - Annualized


76

Table 109. Adjusted Net Interest Margin and Interest Rate

(1) Defined as interest income less interest expenses. (2) Contains derivatives, debt assumption contracts, foreign exchange portfolio, recovery of write-offs, gold loans, credit guarantor fund, foreign exchange gain/loss abroad and other income of a financial intermediation nature. (3) Total interest income divided by the average balance of earning assets. (4) Total interest expenses divided by the average balance of interest bearing liabilities. (5) Difference between average rate of earning assets and average rate of interest bearing liabilities. (6) Income net of interest divided by the average balance of earning assets. (7) Rates are annualized.

7.5. Net Interest Income

In the table below, loan operations and funding expenses lines do not consider exchange variation effect. The treasury line comprises: (i) interest income; (ii) remunerated compulsory deposits; (iii) tax hedge, derivatives and other financial instruments that compensate the exchange variation in result. The “other” line comprises, mainly, provisioned resources at BB that must be applied in loan operations regarding official government programs, as Finame, BNDES and FCO.

Table 110. Net Interest Income Breakdown

R$ million 4Q10 3Q11 4Q11 2010 2011

Average Earning Assets (AEA) 675,130 770,169 797,023 633,380 753,075

Average Interest Bearing Liabilities (AIBL) 565,416 666,477 681,925 538,692 643,850

Net Interest Gain (1) 9,305 9,964 10,589 36,163 39,981

Interest Income 20,778 29,482 25,096 77,827 99,724

Interest Expense (11,472) (19,519) (14,507) (41,664) (59,743)

Net Interest Income Other Items (2) 544 681 759 2,236 2,694

NII 9,849 10,645 11,348 38,398 42,675

AIBL / AEA – % 83.7 86.5 85.6 85.1 85.5

Interest Rate on AEA (3) (7)- % 12.9 16.2 13.2 12.3 13.2

Interest Rate on AIBL (4) (7)- % 8.4 12.2 8.8 7.7 9.3

Net Interest Rate (5) - % 4.5 4.0 4.4 4.6 4.0

Adjusted NIM (6) (7) - % 5.6 5.3 5.4 5.7 5.3

NIM (7) – % 6.0 5.6 5.8 6.1 5.7

Quarterly Flow Var. %

R$ million 4T10 1T11 2T11 3T11 4T11 s/4T10 s/3T11

Net Interest Income 9,849 10,159 10,524 10,645 11,348 15.2 6.6

Loan Operations 13,468 13,928 14,647 15,737 16,218 20.4 3.1

Funding Expenses (5,294) (5,625) (6,202) (7,048) (6,845) 29.3 (2.9)

Recovery of Write-offs Loans 863 855 953 985 851 (1.4) (13.6)

Treasury 1,885 2,088 2,167 1,950 2,197 16.5 12.6

Other (1,073) (1,087) (1,041) (979) (1,073) (0.1) 9.6


77

8 - Non-Financial Business

8.1. Fee income

In the quarterly and the annual comparison, a highlight goes to revenues from credit/debit cards and asset management fees, boosted by the increase in the customer base and, mainly, the profit increase strategy adopted by the Bank.

Table 111. Fee Income

Table 112. Customer Base and Checking Accounts

After the process of current checking accounts basis revision occurred in the first quarter of the year, was observed the growth in the period, as a result of the increase in the customer basis.

8.2. Cards

The cards basis recorded an increase of 1.9% as compared to the prior quarter, and a reduction of 5.7% in relation with 4Q10. This reduction is due to the resumption of the write-off process of unused cards during 2011.

The billing from cards rose 8.4% over 3Q11, and 15.6% in relation to 4Q10. As a result of the launching of new product, such as Ourocard Elo, Ourocard Bônus Celular, billing from the Ourocard Agronegócios, the leadership in BNDES Cards disbursements and by the business generated by Cielo and Alelo (new denomination of the company CBSS – Companhia Brasileira de Soluções e Serviços).



Fee Income 4,306 4,720 5,027 16.7 6.5 16,173 18,242 12.8

Account Fees 1,006 1,054 1,136 12.9 7.8 3,714 4,077 9.8

Credit / Debit Cards 928 997 1,084 16.8 8.7 3,306 3,926 18.7

Asset Manegement Fees 687 845 829 20.7 (1.9) 2,672 3,197 19.7

Loan Fees 459 485 496 8.0 2.1 1,710 1,822 6.6

Collections 304 314 321 5.6 2.3 1,197 1,241 3.7

Insurance, Pension and Savings Bonds 114 115 122 7.6 6.3 432 499 15.7

Billings 173 183 195 13.1 6.9 614 725 18.0

Interbank 144 168 168 16.9 (0.2) 549 640 16.5

Capital Market Fees 113 76 96 (15.7) 25.7 436 350 (19.9)

Other 378 483 580 53.4 20.2 1,543 1,764 14.4


thousand 4Q10 1Q11 2Q11 3Q11 4Q11 On 4Q10 On 3Q11

Customers 54,361 54,967 55,216 55,609 56,001 3.0 0.7

Checking Accounts 35,934 35,304 35,596 35,798 36,121 0.5 0.9

Individuals 33,758 33,128 33,405 33,588 33,875 0.3 0.9

Business 2,176 2,176 2,191 2,210 2,247 3.3 1.7


78

Figure 21. Base and Revenues from Cards

8.3. Insurance

The statement of income of insurance is also disclosed in note 21 explanatory, which refers to Insurance, Pension Plans and Capitalization Operations. Therefore, there are differences between the accounting results presented in the aforesaid note and the management information detailed in this chapter.

The information contained in the explanatory note was prepared according to the guidelines of Resolution CVM 582/2009 (CPC 22), having the mandatory nature of individualized financial information as one of its assumptions.

The insurance ratio shown in this chapter includes the performance added by companies in the Conglomerate active in strategic insurance plan segments. The net profits of these companies (in proportion to BB's interests in the capital of each one of them) are added to the net brokerage revenues earned by BB Corretora and to the net fees earned from insurance business of BB Multiple Bank.

Corporate Restructuring

Continuing with the corporate reorganization process of the insurance, open complementary private pension and capitalization of Banco do Brasil, BB Seguros Participações S.A. ("BB Seguros"), a wholly-owned subsidiary of BB, and insurance Group Mapfre (“Mapfre Group”) entered into a partnership agreement (“Agreement”) to form a strategic alliance in the field of personal insurance, casualties, and vehicles effective for 20 years.

As a result of that agreement, two holding companies were created, as private companies, with majority interest of the Mapfre Group in the voting capital, shared governance and segmented operations by insurance lines and distribution channels, as follows:

61.0 57.8 58.6 59.4 60.8

27.626.6 26.3 22.6 22.7

88.684.4 84.9 82.0 83.6

33.6

30.4

33.7 35.9 38.9

4Q10 1Q11 2Q11 3Q11 4Q11

Credit Cards - million Issue Cards - million Revenues - R$ billion


79

Figure 22. Corporate Structure

On June 30, 2011, BB Seguros and the Mapfre Group contributed the assets of the insurance companies to the holding companies, on the same date when, to equalize the ownership interest in the two holding companies, BB Seguros disbursed the amount of R$ 332.6 million (as described in the Communication to the Market of July 1, 2011).

Due to the completion of those procedures, SH1 started controlling the insurance companies Mapfre Vera Cruz Vida S/A, Vida Seguradora S/A and Companhia de Seguros Aliança do Brasil, and the SH2 started controlling the insurance companies Mapfre Vera Cruz Seguradora S/A, Mapfre Riscos Especiais Seguradora S/A, Aliança do Brasil Seguros S/A and Brasilveículos Companhia de Seguros.

Regarding the strategy of BB Conglomerate for its business of capitalization bonds, the maintenance of BB's historic leadership in the segment is prioritized. Accordingly, Icatu Group was defined as the ideal partner to implement the desired strategy.

As a step to get to the desired corporate structure, BB Seguros and Sul América Capitalização S.A ("Sulacap") entered into an agreement for share purchase and sale on January 24, 2011 through which BB Seguros acquired total shareholding interest held by by Sulacap in Brasilcap and, after some conditions are complied with, the financial transactions was settled on July 22, 2011. Thus, BB Seguros increased its share in the total capital of Brasilcap from 49.99% to 66.66%.

Market and Performance of Grupo Banco do Brasil

According to data from the Superintendency of Private Insurance - SUSEP, the net premiums issued by the Brazilian insurance market amounted to R$ 31.4 billion up to July/2011, a growth of 12.0% in relation to the same period of last year.

People insurance premiums amounted to R$ 11.0 billion, representing a growth of 24.3% in relation to the first seven months of 2010. Banco do Brasil group, which is considering to enter into a partnership with Mapfre Group, participates in this segment with R$ 2.0 billion and remaining as market leader.

In automobile insurance group, a 6.5% market growth was observed in premium revenues over 12 months, totaling R$ 11.9 billion. The premium revenue in that group represents approximately one third of the insurance market (37.9%). Considering the partnership with Mapfre group, Banco do Brasil group is the 2

nd in the market, with 16.0% of market share.


80

In accordance with Fenaprevi, the pension market presented a total collection of R$ 46.5 billion until November 2011, a 18.2% growth when compared to the last year. In this market, Banco do Brasil recorded a collection of R$ 10.4 billion in 2011, a 23.9% growth when compared to 2010 and corresponding to a 22.3% market share, equivalent to the 3

nd position. The reserves of pension plans

totaled R$ 255.9 billion, a 18.3% expansion in 12 months, out of which R$ 47.2 billion is the Banco do Brasil contribution.

According to Fenacap, the capitalization companies' revenue reached R$ 12.8 billion up to November 2011, a 23.6% increase in comparison with the same period in the previous year. Thus, the provisions reached R$ 19.5 billion until November 2011, against R$ 16.9 billion in comparison to the same period in 2010. In this market, Banco do Brasil recorded R$ 3.3 billion in revenues and R$ 4.9 billion in provisions, placing itself in the 1

st place in both items.

Consolidated

The table shown below is the consolidated net income of insurance companies, in accordance with the new corporate structure. Presented results fully consider the company's performance without separating Banco do Brasil interest. Under this new concept, the sectors are divided as follows:

I - BB Mapfre SH1 Participações S.A. (“SH1”) – insurance for individuals, property, and agriculture;

II - Mapfre BB SH2 Participações S.A. (“SH2”) – with activities in non-life insurance, including vehicle insurance and excluding property, and agriculture:

III - Pension Plans;

IV - Capitalization.

Considering that joint operations started in June 2011, the 3Q11 is the first quarter with partnership numbers in all months, and is the starting point for future comparisons.

Table 113. Income Statement by Line of Business – 4Q11

Insurance Chg. %

R$ million SH1 SH2 On 4Q10

Rev. from Ins., Pens. Plans and Sav. Bonds 859 1,285 2,144 3,170 923 6,238 23.4

Deductions from Revenue (88) 56 (32) (3,140) (831) (4,003) (0.7)

Earned Premiums 771 1,341 2,112 30 93 2,235 139.4

Retained Claims (344) (758) (1,102) - - (1,102) 155.0

Marketing Expenses (194) (372) (566) (43) (49) (658) 143.2

Other Operating Income (Expenses) 39 (34) 5 169 (7) 166 308.8

Business Result 272 177 449 155 36 641 77.6

Administrative Expenses (46) (175) (221) (67) (22) (311) 96.9

Tax Expenses (23) (39) (62) - (5) (66) -

Financial Income 87 76 163 74 49 287 33.1

Operating Income 290 40 330 162 59 551 31.9

Equity Account Adjust 0 2 2 - - 2 -

Non-operating Income 0 2 2 (0) 0 2 -

Income before Taxes 290 44 334 162 59 555 33.4

Inc and Soc Contrib Taxes (97) (7) (104) (62) (22) (189) 32.9

Profit Sharing (3) (5) (7) (3) (2) (12) 39.3

Net Income (Loss) 191 32 223 97 34 354 33.5

Average Shareholder's Equity 1,516 2,056 3,572 795 226 4,593

ROE (Annual) - % 12.6% 1.6% 6.2% 12.2% 15.0% 7.7%

TotalPension

Plans

Savings

BondsConsolidated


81

Table 114. Income Statement by Line of Business – 2011

Insurance Chg. %

R$ million SH1 SH2 On 2010

Rev. from Ins., Pens. Plans and Sav. Bonds 3,081 3,963 7,044 11,720 3,288 22,052 34.1

Deductions from Revenue (413) (69) (482) (11,629) (2,899) (15,010) 21.8

Earned Premiums 2,668 3,894 6,562 50 191 6,803 82.5

Retained Claims (999) (2,264) (3,263) - - (3,263) 87.7

Marketing Expenses (663) (998) (1,661) (157) (202) (2,021) 90.4

Other Operating Income (Expenses) (154) (121) (274) 631 (19) 338 173.5

Business Result 853 511 1,364 565 167 2,096 45.2

Administrative Expenses (136) (467) (602) (255) (79) (936) 60.6

Tax Expenses (89) (105) (194) - (19) (214) 125.9

Financial Income 259 215 474 338 207 1,019 43.4

Operating Income 887 154 1,041 648 276 1,965 33.1

Equity Account Adjust 4 2 6 - - 6 155.9

Non-operating Income 0 2 3 0 0 3 -

Income before Taxes 892 158 1,049 648 276 1,973 33.6

Inc and Soc Contrib Taxes (296) (49) (345) (204) (111) (659) 30.6

Profit Sharing (7) (13) (20) (53) (4) (77) 274.3

Net Income (Loss) 589 95 685 391 162 1,237 30.1

Average Shareholder's Equity 1,516 2,056 3,572 795 226 4,593

ROE (Annual) - % 38.9% 4.6% 19.2% 49.1% 71.5% 26.9%

TotalPension

Plans

Savings

BondsConsolidated


82

Table 115. Operating Highlights of the Insurance Group

(1) The information on rankings and market shares of the segments of insurance, captalization and pension were provided by SUSEP (Rank: Julho/2011). (2) The information on rankings and market shares of the segments of capitalization and pension were provided by FenaCap and Fenaprevi, respectively (Rank: Nov/11). As for the insurance industry (SH1 and SH2), the new report did not provide Susep after Julho/2011. (3) The data presented before June/11 refers to the company Alliança do Brasil. (4) The data presented before June/11 refer to Brasilveículos company;

Insurance Ratio

BB's Insurance Index reflects the pension segment's share of the Conglomerate's income, i.e., how much the companies in the fields of insurance, open pension plans and capitalization have contributed to the formation of net income at Banco do Brasil conglomerate.

Balance Chg. %

Dec/10 Sep/11¹ Dec/11² On Dec/10 On Sep/11

BB Mapfre SH1³

Lives Insured – thousand 3,200 15,429 15,442 382.6 0.1

Volume of Managed Portfolio 1,739 3,495 3,869 122.4 10.7

Technical Reserves - R$ milhões 1,278 2,727 2,890 126.1 6.0

Accident Rate - % 29.3% 38.7% 38.6% 9,4p.p. -0,1p.p.

Market share - rural line - % 44.1% 60.0% N/A - -

Market share - life line - % 11.5% 19.4% N/A - -

Rural line position 1 st 1 st N/A

Life line position 4 th 1 st N/A

BB Mapfre SH2 4

Fleet – thousand 1,028 2,492 2,720 164.6 9.1

Volume of the Managed Portfolio - R$ million 684 3,326 3,474 408.2 4.4

Technical Reserves - R$ million 1,126 4,531 4,648 312.8 2.6

Accident Rate - % 70.4% 63.9% 57.2% -13,2p.p. -6,7p.p.

Rate of Portfolio Retention - % 80.7% 97.0% 88.3% 7,6p.p. -8,7p.p.

Market share - % 7.8% 13.9% N/A - -

Ranking 6 th 1 st N/A

Brasilcap

Quantity of Bonds – thousand 3,449 3,676 3,795 10.0 3.2

Volume of Managed Portfolio 4,390 4,864 5,283 20.4 8.6


Quantity of Prize-w inning Bonds 13,551 8,307 8,282 (38.9) (0.3)

Sum of Prizes Distributed 31,767 17,050 37,282 17.4 118.7

Market share - collection - % 23.2% 23.8% 23.6% 0,4p.p. -0,3p.p.

Market share - reserves - % 24.3% 24.3% 24.8% 0,5p.p. 0,5p.p.

Collection Ranking 1 st 1 st 1 st

Reserves Ranking 1 st 1 st 1 st

Brasilprev

Rate of Redemptions - % 7.5% 8.9% 8.7% 1,2p.p. -0,2p.p.

Active agreements - thousands 3,949 2,282 2,361 (40.2) 3.4

Volume of the Managed Portfolio - R$ million 37,199 45,657 49,163 32.2 7.7


Market share - collection - % 21.1% 23.2% 22.3% 1,3p.p. -1p.p.

Market share - reserves - % 17.0% 18.2% 18.4% 1,5p.p. 0,3p.p.

Collection Ranking 2 nd 2 nd 3 rd

Reserves Ranking 3 rd 3 rd 3 rd


83

Table 116. Consolidated Insurance Ratio

Expanded Combined Index

The Expanded Combined Index expresses the percentage of Premiums Earned and the financial income consumed by operating and administrative expenses with the insurance business (Retained claims, Selling expenses, Administrative expenses and Other operating income/expenses).

It should be emphasized that, due to the new corporate structure of the Banco do Brasil insurance group, the series will be presented only in the consolidated format, since the view per insurance line, presently distributed into SH1 and SH2, have insufficient data to assemble the historical data.

Figure 23. Expanded Combined Index

8.4. Capital Market

Banco do Brasil operates in the domestic capital market through BB Banco de Investimento S.A. - BB-BI. In 2011, it was 64 fixed income securities issues that amounted R$ 16.9 billion, being placed in 2

nd

in the Brazilian Association of Financial and Capital Market Entities (ANBIMA) ranking origination, with 19.7% of market share.

In the securitization market BB BI – (Investment Banking of BB) ended the 4Q11 with the completion of 9 operations, and coordinated and distributed 5 issues of Investment Funds Credit Rights – FIDC quotas and 4 issues of Real Estate Receivables Certificates - CRI, which totaled $ 1.4 billion according to the ANBIMA ranking origination. According to the same classification, the BB-BI ended the year in 5th place in both origination and distribution of value in securitization products.

In the international capital market, BB, through its overseas brokers BB Securities Ltd (London) and Banco do Brasil Securities LLC (New York), took part in 16 of the 60 foreign funding operations carried out by companies, banks and the Brazilian government, of which 12 had lead manager condition and 4 co-manager status. Of the total sum of approximately US$ 37.0 billion issued in 2011, BB participated in around US$ 12.64 billion. In addition, BB operated in 3 transactions of foreign issuers, of which 1 as a lead-manager and 2 as co-manager, for the total amount of US$ 2.7 billion and EUR 750 million.

In the equity market, BB-BI coordinated 3 public offerings totaling R$ 1.7 billion, and had participation as a co-manager in 4 securities distribution offerings. In terms of distribution, BB obtained the 10

th

place in the Brazilian Association of Financial and Capital Market Entities (ANBIMA) ranking of variable income distribution, with 2.6% of market share.



Insurance Result 411 410 422 2.7 3.0 1,354 1,604 18.5

Brokerage Net Revenue 69 94 100 44.4 6.5 289 362 25.3

Service Fee Net Income 56 56 61 8.6 8.3 215 249 15.7

Equity In The Earnings (Loss) 285 260 261 (8.5) 0.6 849 993 16.9

BB Recurring Income 3,704 2,573 3,025 (18.3) 17.6 10,664 11,751 10.2

Insurance Ratio (%) 11.1 15.9 13.9 - - 12.7 13.7 -

317 357 397 550809 792

396 432 484

630

1,047 1,102

260 258 188

340

369 382

73.3% 75.3% 82.4% 77.6% 83.4% 83.2%

3Q10 4Q10 1Q11 2Q11 3Q11 4Q11

Other Revenues / Expenses Claims Operating M argin ECI


84

In the private equity industry since 2004 BB-BI acts as an investor and in 2007 began providing advisory services to financial-economic Participation Investment Funds. BB is currently a shareholder of 13 funds and advises 4 funds invested. The total capital committed by BB-BI in this market segment is up to R$ 1,262 million.

In the asset custody segment, the Bank closed the period in the 3rd

place in the ANBIMA ranking 2011, with funds custodies amounting to R$ 510 billion, representing a market share of 21.4%.

For retail investors, BB offers the service of buying and selling shares through its network of branches and by Internet banking service (Home Broker) and mobile phone. In 4Q11, the volume handled for this service was R$ 4.6 billion, a period which highlights the launch of the new stock trading platform that allows access Home Broker by tablet (IPad and Android devices) or smartphone.


85

9 – Administrative Expenses

9.1. Human Resources

In the twelve-months comparison, the growth of the Personnel Expenses is mainly due to the average salary adjustment, granted in the base date of September/2010, the adjustment of administrative provisions based on the inflation index of the period from October/2010 to September/2011 and to the increase in staff numbers in relation to the 3Q10, which reflects the Retail Revitalization Program.

The 20.9% growth in Personnel Expenses in the 4Q11-4Q10 comparison is mainly explained by two reasons: (1) The 2011 Collective Bargaining Agreement that generated an average salary adjustment of 9%, an increase in the minimum salary and strengthening in the provisions for vacation pay, bonus leave and bonuses; (2) increase in the number of employees in the period (4.73%).

In addition, the growth in Administrative and Personnel Provisions in the twelve-month period was influenced in Dec/11 by the adjustment, of approximately R$ 98 million, to the expense for the SAT (occupational accident insurance) contribution. In 4Q11, the 29.1% decrease in comparison with the previous quarter reflects the reversal of provisions established in previous periods.

The 164.6% increase in training expenditures was partly caused by the decision not to invest in the Professional Enhancement Program in 3Q11, resuming these expenditures in 4Q11 upon the execution of the Collective Bargaining Agreement.

Table 117. Personnel Expenses

The following figure shows the growth of BB's staff.

Figure 24. Charges in Workforce




Salaries (1,847) (1,674) (2,117) 14.6 26.5 (6,177) (7,117) 15.2

Benefits (464) (477) (531) 14.4 11.4 (1,760) (1,911) 8.6

Social Charges (634) (605) (715) 12.7 18.1 (2,211) (2,456) 11.1

Training (33) (14) (37) 12.5 164.6 (86) (77) (10.6)

Pension Fund (80) (71) (95) 18.9 33.9 (235) (306) 29.9

Remuneration for Counselors and Directors (13) (15) (16) 20.2 8.1 (55) (58) 5.5

Administrative Personnel Provisions (199) (625) (443) 122.9 (29.1) (1,719) (2,019) 17.4

118,8

79

120,7

97

122,4

09

123,3

44

122,3

77

109,0

26

111,2

24

112,9

13

113,5

94

113,8

10

9,8

53

9,5

73

9,4

96

9,7

50

8,5

67


Total Employees Interns


86

9.2. Operating Structure

The expenses rise is in line with contract adjustments and the organic growth of operations. In addition, they were partially offset by Bank expenses control actions and synergy gains due to the BNC merger.

The Marketing and Public Relations line item seasonally has its expenses concentrated in the last quarter of each year, and, this quarter, advertising campaigns such as the Ourocard campaign, BB institutional campaigns abroad and sponsorships, influenced the increase in this line item.

The expenses increase in Data Processing in comparison with 3Q11 was mainly due to the acquisition of software licenses.

Table 118. Other Administrative Expenses

Distribution Network

BB won the bid to explore the Banco Postal of Empresa Brasileira de Correios e Telégrafos (Correios) in May 2011. Accordingly, as from January 1, 2012, BB will have access to Correios distribution network over five years, with more than 6 thousand branches in 95% of Brazilian municipalities. This acquisition allows BB to bring forward the strategy of extending its service points throughout the country and of being in 100% of Brazilian municipalities by 2015. As a result, BB’s service network is distributed over 5,378 Brazilian municipalities and in 23 countries. In December 2011, BB had the largest branch network in Brazil.

In addition to its own distribution network, BB also has partnerships for the sharing of automated teller machines (ATM’s) and to use the chain of lottery stores that performs withdrawals, deposits, payments and other services. Besides reducing costs with new investments and with terminal maintenance, these partnerships consolidate the dispersed and national customer service of Banco do Brasil.

Table 119. Total Distribution Network

The table below presents the network of branches of BB in Brazil per Region in the country




Telecommunications and Data Processing (586) (495) (556) (5.2) 12.3 (2,347) (2,022) (13.9)

Amortization and Depreciation (301) (322) (331) 10.0 3.0 (1,182) (1,293) 9.4

Security. Guard and Transport Services (388) (424) (450) 16.0 6.2 (1,412) (1,622) 14.9

Expenses w ith Premises and Equipment (357) (418) (448) 25.6 7.2 (1,382) (1,625) 17.6

Marketing and Public Relations (188) (131) (263) 39.7 100.6 (609) (683) 12.2

Expenses w ith Outsourced Services (520) (525) (525) 1.0 (0.1) (1,841) (1,974) 7.2

Other Administrative Expenses (457) (412) (439) (4.1) 6.5 (1,549) (1,590) 2.7

Quarterly Flow

Dec/10 Sep/11 Dec/11 On Dec/10 On Sep/11

Distribution Channel

Branches 5,087 5,138 5,263 3.5 2.4

SAA 4,815 4,898 4,919 2.2 0.4

Services Posts 8,457 8,327 8,583 1.5 3.1

Subtotal 18,359 18,363 18,765 2.2 2.2

Banking Agentes 10,145 12,577 13,733 35.4 9.2

Shared Distribution Channels

CEF - lottery stores 10,748 10,803 10,993 2.3 1.8

Banco 24h 10,294 11,478 11,566 12.4 0.8

Subtotal 21,042 22,281 22,559 7.2 1.2

Total 49,546 53,221 55,057 11.1 3.4

Chg. %


87

Table 120. Network of Branches by Region

The overseas network is comprised by 49 facilities located in 23 countries (13 branches, 8 sub-branches, 11 representation offices, 14 subsidiaries and associated subsidiaries, 2 shared service units and 1 business unit). Complementing this structure, Banco do Brasil has an agreement with other foreign financial institutions to serve its customers: at the end of last December, there were 1,048 banks acting as BB's correspondent banks in 133 countries.

Table 121. Distribution Network Abroad

Automated Channels

Banco do Brasil’s service network represents a strategic differential, offering an extensive range of services to clients, besides supporting the cost control strategy of the institution. These network numbers are listed in the chart below, which includes BB own network terminals, and machines from

BB BI Share %

North 315 947 33.3

Northeast 1,099 3,123 35.2

Middle West 470 1,569 30.0

Southeast 2,331 11,261 20.7

South 1,048 4,027 26.0

Total 5,263 20,927 25.1

Branches Sub-branchesRepresentative

Offices

Subsidiaries and

affiliates

Shared Services

Units

Business

Units

Assuncion Cidade do Leste Caracas Banco do Brasil AG BB USA Servicing

CenterRome

Buenos Aires Gifu Mexico CityBanco do Brasil Securities

LLC

BB Europa Servicing

Center

Frankfurt Gunma Dubai BB Leasing Company Ltd.

Grand Cayman Hamamatsu Hong KongBAMB Brazilian American

Merchant Bank

La Paz Ibaraki Lima BB Securities Ltd. Londres

London Nagano Luanda BB USA Holding Company

Madrid Nagóia Montevideo BB Money Transfers, Inc.

Miami Santa Cruz de

La SierraPanama

Banco do Brasil Securities

Asia PTE, Ltd

Milan Seoul

Banco do Brasil AG -

Branch Off ice in Portugal -

Cascais

New York Washington



Marquês de Pombal

Paris Shanghai



Parque das Nações

Santiago



Porto

Tokyo



Costa da Caparica


88

strategic partnerships, such as external terminals of Caixa Econômica Federal (CEF), Banco Regional de Brasília (BRB) and the service network of Banco 24h. Due to the technological park renewal strategy, which is part of the Retail Revitalization Program, automated teller machines are being replaced by modern terminals that join withdrawal and deposit functions in the same equipment.

Figure 25. Automated Teller Machines

The ATM's are responsible for the processing of an expressive portion of the total banking operations performed by Banco do Brasil. The figure below shows that 93.8% of transactions are carried out through alternative channels at the end of the 4Q11. Change in line COBAN and Others refers to the inclusion of automatic debit agreements that started to be informed as of 1Q11.

Figure 26. Transactions by Customer Service Channel - %

9.3. Other Income Information

The remaining relevant variations in other operating income and expenses are presented in the tables below.

44,954 44,340 43,920 43,916 43,602

10,294 10,894 11,479 11,478 11,566

1,804 1,804 1,882 1,828 1,975


ATM: BRB + CEF ATM: Banco 24h Automated Teller Machines

36.4 34.4 33.9 33.7 33.6

19.8 20.9 20.7 20.8 19.6

18.7 18.4 18.6 18.7 18.7

7.0 7.1 7.3 7.2 6.2

12.1 10.1 10.5 10.5 12.9

6.1 9.1 9.1 9.2 9.0

93.0 92.9 92.7 92.9 93.8

4Q10 1Q11 2Q11 3Q11 4Q11

COBAN and Other POS Cash

Internet Businesses Internet Individuals ATM

Automated Transactions


89

Table 122. Other Operating Income

In Other Operating Expenses, it is worth to explain:

a) Business Partners: refers to expenses from partnerships, mainly in Banco Votoramtim;

b) Credit and Debit Card Transactions: expenses related mainly to the raise of the costs with individuals relationship program (points of card program) and fees over sales volume;

c) Premiums Paid to Clients: represents mainly the agreement for Judicial Deposits fundraising;

d) The 155.9% variation over 2010 in goodwill amortization is due to the rise of Aliança do Brasil and Nossa Caixa expenses;

e) Negotiation Relationship Allowance: expenses mainly from negotiations for payroll acquisitions from Government Direct and Indirect Administration.

f) The evolution observed in the line Other is mainly due the accounting of Provisions for Other Receivables without Characteristics of Credit.

Table 123. Other Operating Expenses

9.4. Productivity Ratios

In this section, the productivity ratios usually adopted in the analysis of financial institutions are shown below. In twelve months, the favorable performance of banking service fees and control of administrative expenses led to an improvement in the ratio that measures personnel expenses coverage as well as that which measures administrative expenses coverage.

Efficiency indicator with accumulated basis of 12 months allows an analysis that is less volatile, mainly in comparison with even quarters (2Q and 4Q). From this standpoint, an improvement of 20 basis points on the comparison with 2010. In the quarterly comparison, the performance observed arises from a decrease in Previ revenues in 2011 in comparison with 2010.



Other Operating Income 1,613 1,401 1,641 1.7 17.2 4,999 5,939 18.8

Recovery of charges and expenses 431 151 230 (46.6) 52.8 1,720 797 (53.7)

Income from guarantee deposits 335 392 386 15.2 (1.5) 1,210 1,501 24.1

Update on Allocation of Surplus Funds - Previ 138 198 251 81.6 26.9 281 1,014 261.0

Other 709 660 774 9.1 17.2 1,788 2,627 46.9



Other Operating Expenses (2,948) (2,944) (3,184) 8.0 8.2 (10,309) (11,475) 11.3

Actuarial Liabilities (303) (226) (277) (8.6) 22.8 (1,171) (998) (14.8)

Other Oper. Exp. from Non-Financ. Comp. (313) (456) (247) (21.1) (45.9) (1,196) (1,443) 20.6

Business Partners (300) (158) (78) (73.9) (50.5) (1,178) (539) (54.3)

Credit and Debit Card Transactions (217) (311) (389) 79.3 25.2 (876) (1,260) 43.9

Premiums Paid to Clients (356) (371) (403) 13.3 8.6 (792) (1,447) 82.6

Restatement of Guarantee Deposits (147) (114) (101) (31.0) (11.5) (484) (425) (12.2)

Hybrid Capital and Debt Instruments (69) (61) (63) (8.8) 3.3 (299) (227) (24.2)

Discounts Granted on Renegotiations (89) (67) (83) (6.6) 23.2 (348) (290) (16.7)

Goodw ill Amotization (67) (140) (143) 113.1 2.3 (225) (575) 155.9

Failures/Frauds and Other Losses (78) (54) (56) (28.7) 2.1 (264) (460) 74.0

Negotiation Relationship Allow ance (505) (523) (524) 3.6 0.1 (2,015) (2,051) 1.8

Other (503) (461) (819) 62.8 77.6 (1,461) (1,762) 20.6


90

Table 124. Coverage Ratios – Without One-Off Items

(1) In the calculation of this ratio Labor Claims are included. (2) In the calculation of this ratio Legal Risk is included (Legal Claims and Labor Lawsuits),

Table 125. Efficiency Ratios – Without One-Off Items

The table below presentes other productivity ratios used.

Table 126. Other Productivity Ratios

Quarterly Flow

R$ million 4Q10 3Q11 4Q11 2010 2011

Fee Income 4,306 4,720 5,027 16,173 18,242

Administrative Expenses 5,941 6,699 6,970 23,642 25,612

Personnel Expenses 3,178 3,850 4,232 12,893 14,668

Fee Income / Personnel Exp.¹ 135.5 122.6 118.8 125.4 124.4

Fee Income / Administ. Exp.² 72.5 70.5 72.1 68.4 71.2

Annual Flow

Quarterly Flow

R$ million 4Q10 3Q11 4Q11 2010 2011

Operating Income (A) 15,227 14,930 16,243 55,452 60,797

Gross Income from Financial Intermediation 7,360 6,144 7,359 25,415 27,854

Allow ance for Loan Losses 2,112 3,285 3,211 10,244 11,975

Fee Income 4,306 4,720 5,027 16,173 18,242

Equity Int. in the Results of Subs. and Affil. (36) 558 56 (46) 455

Income f/ Insurance, Pension & Savings Bonds Op. 491 570 515 1,888 2,265

Other Operating Revenues 4,297 2,680 2,954 12,938 12,408

Other Operating Expenses (3,301) (3,028) (2,879) (11,159) (12,402)

Administrative Expenses (B) 5,941 6,699 6,970 23,642 25,612

Personnel Expenses 3,178 3,850 4,232 12,893 14,668

Other Administrative Expenses 2,762 2,849 2,738 10,749 10,944

Cost Income Ratio (B/A) - % 39.0 44.9 42.9 42.6 42.1

Cost Income Ratio 12 months- % 42.6 41.1 42.1 - -

Annual Flow

Quarterly Flow

4Q10 1Q11 2Q11 3Q11 4Q11

Assets per Employee - R$ thousand 6,823.5 7,174.3 7,386.3 7,700.3 8,018.1

Checking Accounts per Employee 302.3 292.3 290.8 290.2 295.2

Employees/(Branches+PAA+PAB) 17.2 17.5 17.9 18.0 17.5

Employees in Branches/(Branches+PAA+PAB) 11.9 12.2 12.5 12.6 12.4

Credit Portfolio/Points of Service - R$ million 19.5 19.8 20.8 21.9 22.5

Fee Income/Points of Service - R$ thousand 230.2 222.6 237.9 257.0 267.9

Personnel Expenses per Employee - R$ thousand 30.1 28.6 30.0 30.7 34.8

Checking Accounts/(Branches+PAA+PAB) 5,189.0 5,101.7 5,197.2 5,216.1 5,169.1


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10 – Risk Management

10.1. Risk Management

The Risk Management

Risk management in the Financial Group of Banco do Brasil covers in a comprehensive manner: credit, market, liquidity and operational risks. Management activities are performed by specific and specialized structures, according to objectives, policies, strategies, processes and systems described in each one of these risks. Although activities are focused on credit, market, liquidity and operational risks, the Bank adopts mechanisms to ensure the sufficiency of capital to cover other risks incurred.

Collegiate risk management is performed completely apart from the business units. Risk policies are specified by BB’s Board of Directors and by the Global Risk Committee (CRG), a discussion group composed by the President and by vice-presidents. Actions for implementing and monitoring guidelines issued by the CRG are directed at specific sub-committees (Credit, Market, and Operations), which are groups formed by Directors.

To find out more about the risk management process at Banco do Brasil, access the website bb.com.br/ir.

The tables and graphs contained in this chapter do not consider the financial information of Banco Votorantim (BV), unless there is explicit reference to the contrary. Accordingly, the term BB Consolidated is defined as Banco do Brasil in Brazil and abroad, excluding BV.

10.1.1 Credit Risk

Credit Risk is defined as the possibility of losses associated with non-performance by the borrower or counterparty of their respective financial obligations under the agreed terms, with loan agreement devaluation arising from the deterioration in the borrower's risk rating, with reduced earnings or remuneration, with benefits granted in the renegotiation and with recovery costs. The definition of credit risk involves, among others:

I - the credit risk of the counterparty, is the possibility of non-performance, by a particular counterparty, of obligations relating to the settlement of transactions involving the trading of financial assets, including those relating to the settlement of derivative financial instruments;

II - the country risk, is the possibility of losses associated with the non-performance of financial obligations under the terms agreed by a borrower or counterparty located outside the country, as a result of actions taken by the government of the country where the borrower or counterparty is located, and the transfer risk, understood as the possibility of obstacles in the currency conversion of amounts received;

III - the possibility of outlays to honor sureties, guarantees, co-obligations, loan commitments or other operations of a similar nature; and

IV - the possibility of losses associated with the non-performance of financial obligations under the terms agreed by the intermediary or contracting party of loan operations.

In Banco do Brasil, the credit risk management structure is composed of a Risk Management Directorship, a Credit Directorship, and an Operating Assets Restructuring Directorship, and the Risk Management Director, by appointment of the Board of Directors, is in charge of the BB’s credit risk management. This structure is in accordance with CMN Resolution 3721 dated April 30, 2009.

10.1.2. Market Risks

Market Risk reflects the possibility of losses resulting from fluctuations in the market values of positions held by a financial institution. It includes the risks of operations subject to foreign exchange variation, of interest rates, of stock prices and of commodity prices.

The Risk Management Directorship (Diris), as provided for in Resolution 3464, of 6.26.2007, is responsible for managing market and liquidity risk at Banco do Brasil, with a structure for managing market and liquidity risks consistent with the nature of operations, the complexity of products and the dimension of the institution's risk exposure, segregated from the trading units and from the unit executing the internal audit activity.


92

Banco do Brasil uses statistical methodologies to measure the market risks of its positions. Among the metrics resulting from the use of these methodologies, it is worth highlighting:

I - Sensitivity,

II - Value at Risk (VaR) and

III - Stress.

Banco do Brasil adopts the policy of managing its exchange risk so as to reduce its effects on the consolidated economic and financial result.

Following, we present the statement of assets, liabilities and derivatives of BB Consolidated, referenced to foreign currencies. Net foreign exchange exposure, for 12.30.2011 is negative in the amount of US$ 427.1 million, reflecting the fiscal hedging strategy adopted by the Bank. The purpose of tax hedge is to reduce the volatility of the result, after the tax effects, since exchange gains on investments abroad are not subject to taxation and likewise losses do not generate deduction in the tax basis.

Table 127.Balance in Foreign Currencies – Position: 12/30/2011

R$ millionBALANCE SHEET

CURRENCY ASSETS LIABILITIESU.S. Dollar 78,368 86,383

Euro 11,056 10,574

Pound Sterling 105 166

Yen 1,406 2,135

Swiss Franc 59 21

Gold 18 -

Other 7,323 7,639

Total 98,335 106,917

Net Position - Equity (8,582)

DERIVATIVESCURRENCY LONG SHORTU.S. Dollar 20,232 11,755

Euro 3,534 3,956

Pound Sterling 46 64

Yen 688 269

Swiss Franc - 37

Other 171 809

Total 24,671 16,890

Net Position - Derivative 7,781

TOTAL OF DERIVATIVES AND BALANCE SHEET 123,006 123,807 Total Net Position (801) Total Net Position - in U.S. Dollar (427)

BB Consolidated regulatory foreign exchange exposure, calculated according to Bacen Circular 3,389, of June 25, 2008, was R$ 3,921.3 million at December 30, 2011.

The chart below shows the quarterly behavior of BB Consolidated’s foreign exchange exposure in relation to the Referential Equity amount (RE) since September 2009.


93

Figure 27.Changes in Foreign Exchange Exposure in % of the Referential Equity Amount (RE)

¹ In accordance with Bacen Circular Letter no. 3389, of June 25, 2008, the "G" portion is the value added to the conglomerate foreign exchange exposure in case the country's exposure and the exposure of the branches network abroad have opposite positions. In this situation, the portion with lower absolute value is added.

Balance Sheet by Index

We present below the composition of assets and liabilities, including derivatives, of BB Consolidated, detailed by index:

Figure 28. Composition of Banco do Brasil's Assets and Liabilities in the Country.

The chart below shows BB Consolidated’s net mismatches, by index in Brazil BB Consolidated:

0.77%0.47% 0.69%

0.94%1.16%

1.88%

0.68% 0.87%

3.36%

0.11%

0.08%0.15%

0.13%

0.07%

0.09%

0.68%0.79%

1.34%

0.69%

1.63%

0.11%

Dec/09 Mar/10 Jun/10 Sep/10 Dec/10 Mar/11 Jun/11 Sep/11 Dec/11

Compensation "G Parcel" ¹ Other Currencies Currency Basket

46.0100.718.8

12.0134.4

135.131.1

31.110.6

0.371.5

180.6

231.2

235.6

418.0

266.2

961.6 961.6

Assets Liabilities

FIXED

CDI / TMS / FACP

IRP/TBF/TR

PRICE INDEX

TJLP

US$ / GOLD

W/O INDEX

EQUITY / OTHERS


94

Figure 29. Net Position of BB Consolidated

R$ billion – 12.30.11

Statement of Repricing Profile of Interest Rates

We present below a table containing the inventory of operations sensitive to the variations in the interest rates, allocated by risk factor and by interest rate indexation period, of BB Consolidated:

Table 128.Repricing Profile of Interest Rates - 12/30/2011

10.1.3 Liquidity Risk

Liquidity risk is defined as an occurrence of imbalances between marketable assets and enforceable liabilities - "mismatchings" between payments and receipts - that may affect the payment capacity of

151.7

10.3 6.9 -0.1 -0.7 -4.3

-54.7

-109.1

15.78%

1.07% 0.72%

0.00% -0.06% -0.46%

-5.68%

-11.35%

FIXED PRICE INDEX TJLP W/O INDEX US$ / GOLD CDI / TMS /FACP

EQUITY /OTHERS

IRP/TBF/TR

R$ million

Assets < 1 Mo 1 > 3 Mo 3 > 6 Mo 6 > 12 Mo 1 > 3 Yrs > 3 Yrs Total

Fixed 194,966 20,744 30,267 47,156 54,989 69,847 417,969

CDI/TMS 231,218 - - - - - 231,218

TR/TBF/IRP - 71,469 - - - - 71,469

Price Index - 10,570 - - - - 10,570

TJLP 2,155 28,943 - - - - 31,099

US$/ME 24,648 25,605 17,946 20,640 14,617 30,712 134,169

Total - Assets 452,988 157,331 48,213 67,796 69,606 100,559 896,494

Passivos

Fixed 145,022 13,673 10,030 23,945 22,262 51,293 266,224

CDI/TMS 235,611 - - - - - 235,611

TR/TBF/IRP - 180,617 - - - - 180,617

Price Index - 237 - - - - 237

TJLP 1,672 29,471 - - - - 31,143

US$/ME 25,641 9,109 14,122 21,886 16,080 48,294 135,132

Total - Liabilities 407,945 233,107 24,152 45,831 38,342 99,587 848,963

Gap 45,043 (75,776) 24,062 21,965 31,264 972 47,530

Cumulative Gap 45,043 (30,733) (6,672) 15,294 46,558 47,530

Cumulative Gap as %

Assets (Earning Assets) 9.9% -48.2% 49.9% 32.4% 44.9% 1.0% 5.3%

Assets

Lia

bilit

ies

Note: The total o f checking account deposits in pre-indexed passives (R$ 49.4 billion) are considered


95

the institution, taking into account the different currencies and settlement terms of their rights and obligations.

Banco do Brasil maintains levels of liquidity apropriate for the institution's commitments assumed in Brazil and abroad, resulting from its broad and diversified depositor base and the quality of its assets, the capillarity of its network of overseas branches and of access to the international capital market. Stringent control over liquidity risk is in accordance with the Market and Liquidity Risk Policy established for the Conglomerate, fulfilling the requirements of national banking supervision and of the other countries where BB operates.

The liquidity risk management of Banco do Brasil separates liquidity in Reais from liquidity in Foreign Currencies. For this purpose, it uses the following tools:

I - Maps of mismatching of terms;

II - Short, Medium and Long Term Liquidity Forecasts;

III - Stress Test;

IV - Liquidity Risk Limits;

V - Liquidity Contingency Plan; and,

VI - Test of Potential of Liquidity Contingency Measures.

Liquidity risk management tools are periodically monitored and reported to the Strategic Committees of the institution. The figure below presents the monitoring of the Liquidity Reserve in Local Currency of BB.

Figure 30. Liquidity Reserve in Local Currency (Last Business Day)

The figure below presents the monitoring of the Liquidity Reserve in Foreign Currency of BB.

Dec/10 Jan/11 Feb/11 Mar/11 Apr/11 May/11 Jun/11 Jul/11 Aug/11 Sep/11 Oct/11 Nov/11 Dec/11

Average Liquidity Liquidity Reserve


96

Figure 31. Liquidity Reserve – Foreign Currency (Last Business Day)

The indicator of the Availability of Free Funds (DRL), another liquidity risk limit used by BB, aims to guarantee a balance between funding and investment of resources from the commercial portfolio of the internal area and to ensure the financing of liquidity in local currency with commercial and structural resources.

The limit of DRL, defined annually by the Global Risk Committee (CRG) according to the funding and commercial investment goals, is the parameter used in the planning and in the execution of the institution's budget and its monitoring is performed on a monthly basis.

Figure 32. DRL Indicator

Maintaining liquidity in domestic and foreign currency above established risk limits, as presented in pictures 4, 5 and 6, permitted the Company to strategically plan its business at comfortable levels of liquidity risk exposure.

10.1.4.Operating Risk

Operating risk represents the possibility of loss resulting from faults, deficiencies, or the inadequacy of internal processes, personnel and systems, or derived from external events. This definition includes the possibility of losses arising from legal risks associated to the inadequacy or deficiency in contracts entered into by the institution, as well as penalties due to non-compliance with legal provisions and indemnities for third party damages arising from activities developed by the institution.


Average Liquidity Liquidity Reserve


DRL Monthly DRL Limit


97

The operational risk management structure at Banco do Brasil is composed of the Directorships of Risk Management, Internal Controls and Security Management. Information about the Management Structure and Operational Risk Management Process can be found in more detail on BB's Internet page, Investor Relations Website.

In conformity with the schedule established in Bacen Notification 19028, of 10.29.2009, BB has been implementing actions aimed at the adoption of advanced models for operational risk. Special emphasis is placed on the performance of a candidature plan designed to qualify BB, in compliance with the guidelines published in Notification 19217, of 12.24.2009, involving the use of four essential elements: Internal Data Base, External Database, Scenario and Internal Control Factors Analysis and Business Environment.

Banco do Brasil participated in the construction of a scenario library together with other banks associated to ORX - Operational Riskdata eXchange Association consortium. This library content may be used by associates to manage and model the operating risk.

In the same period, BB also reviewed its operating risk management policies to conform them to the requirements of Basel II, to CMN Resolution no. 3,380 and to best market practices.

The table below presents the monitoring of BB's operational loss, by loss event categories, in percentages, disregarding those from Banco Votorantim. It is emphasized that BB, as of the 3rd quarter of 2010, started considering recordings/reversals of provisions in the total operational loss determined for the "Labor Issues" and "Business Failures" categories.

Table 129. Monitoring of Operational Loss

10.2. Capital Structure

The BIS ratio was determined according to the criteria established by CMN Resolutions 3,444/2007 and 3,490/2007, which address the calculation of Referential Equity Amount (RE) and of Required Referential Equity Amount (RSE), respectively.

In this disclosure the information relating to Banco Votorantim (BV) was consolidated by the Equity Method (MEP).

Performance

Banco do Brasil ended the last quarter of 2011 with Referential Equity Amount 20.3% higher than that observed in December 2010, reaching R$ 80,482 million.

Capital index (K) of Banco do Brasil ended the year at 13.98%, higher than the minimum required by the Central Bank of Brazil. The BIS ratio presented indicates an excess of Reference Shareholders' Equity of R$ 17.2 billion, which enables an expansion of up to R$ 156 billion in credit assets, considering a weighting of 100.

It is emphasized that Central Bank of Brazil Circular 3515/10, which increased the capital requirement for loan and leasing operations, took effect in July 2011, an event that increases the Required Referential Equity (RE).

Loss Event Category 4Q10 1Q11 2Q11 3Q11 4Q11

Labor Issues -18.7% 19.2% 0.4% 51.7% 58.5%

Business Failures 70.0% 54.1% 68.1% 33.2% 24.3%

External Fraud and Theft 15.8% 17.5% 19.0% 9.4% 11.9%

Process Failures 31.5% 6.7% 8.7% 4.2% 4.0%

Physical Assets Damage 0.2% 0.7% 1.0% 0.5% 0.6%

Internal Frauds 1.2% 1.7% 2.6% 0.9% 0.7%

System Failures 0.0% 0.1% 0.2% 0.1% 0.0%

Activities Interruption 0.0% 0.0% 0.0% 0.0% 0.0%

Total 100.0% 100.0% 100.0% 100.0% 100.0%


98

Table 130. BIS Ratio – Economic-Financial Conglomerate*

* The information and book balances of BV were not included in the statements of limits of risk management and in the calculation basis of the BB's Basel Ratio, retroactive to 9.30.2009. (1) Referring to the PEPR portion pursuant to circular 3,360 of 9/12/2007. (2) Referring to the PCAM, PJUR, PCOM and PACS portions, Circulars 3361 to 3364/2007, 3366/2007, 3368/2007 and 3389/2008. (3) Referring to the POPR portion, pursuant to circular 3,383, of 4/30/2008.

BB's RRE reached the sum of R$ 63,326 million in December 2011, increase of 21.1% over Deptember 2010 and 3.8% over last September. The main part of the requirement was caused by the credit risk portion (PEPR), which reflects mainly the growth of loan operations. The following table presents the main variations in the PEPR quota accounts in the fourth quarter of 2011, in relation to the same 2010 period, and in comparison to the last quarter, considering the Economic-Financial Consolidated:

Table 131. Main Accounts of the PEPR Quota (Economic-Financial Conglomerate)

With respect to market risk, we present in the following table the Required Referential Equity in December 2011, by risk factor.

R$ million Dec/10 Mar/11 Jun/11 Sep/11 Dec/11

Reference Equity (RE) 66,928 68,467 73,342 77,202 80,482

Tier I 52,397 54,058 56,450 58,833 60,615

Capital 33,078 33,078 33,123 33,123 33,123

Reserve for retained earnings 16,896 16,448 20,656 20,294 24,126

Reavaluation reserves (6) (6) (6) (5) (5)

Mark-to-Market – Securit. And Derivatives 467 385 442 711 724

Treasury shares - (0) (0) (0) (0)

Accumulated Earnings or Losses (0) 0 - (26) -

Corporate Profit Sharing 0 0 398 488 444

Income accounts - 2,208 - 2,122 -

Tax Credit excl. RE's Tier I – Res.3059 (22) (14) (13) (0) (0)

Deferred Assets (227) (214) (193) (175) (165)

Mark-to-market (203) (188) (219) (388) (351)

Additional Provision - - - - -

Hybrid Capital and Debt Instruments - Tier I 2,415 2,360 2,262 2,688 2,719

Tier II 14,530 14,409 16,892 18,370 19,867

Subordinated debt 18,738 19,443 22,111 23,363 24,522

Hybrid Capital and Debt Instruments 816 - - - -

Revaluation reserves 6 6 6 5 5

Mark-to-market 203 188 219 388 351

Financial Instruments Excluded from RE (5,233) (5,228) (5,444) (5,385) (5,011)

RSE/RRE 52,297 53,315 56,112 61,009 63,326

Credit Risk(1) 48,901 49,950 52,706 57,470 59,802

Market risk(2) 31 23 65 106 90

Operating Risk(3) 3,365 3,342 3,342 3,433 3,433

Surplus/(insuff iciency) of RE 14,630 15,152 17,230 16,194 17,156

K Coefficient % 14.08 14.13 14.38 13.92 13.98


Loan Operations 27,201 33,313 35,538 30.7 6.7

Other Credits (gold, advances to FGPC, other advances) 7,625 7,815 8,207 7.6 5.0

Securities and Derivatives 3,027 4,099 3,762 24.3 (8.2)

Loans to release 1,627 1,776 1,775 9.1 (0.0)

Permanent 2,601 2,876 2,951 13.5 2.6

Other 6,820 7,591 7,569 11.0 (0.3)

TOTAL 48,901 57,470 59,802 22.3 4.1

Chg. %


99

Table 132. PRE for Market Risk by Risk Factor

(1) Includes positions of BNC and BB's interest in BV's positions

For the operational risk, BB has opted for the utilization of the Alternate Standardized Approach, according to Bacen Circular No. 3383. The total amount calculated, R$ 3,433 million, includes sums from Banco Votorantim and the non-financial companies. The allocated capital amount, by line of business, corresponds to:

Table 133. Allocated Capital for Operational Risk by Line of Business

R$ million

Risk Factors Dec/10 Sep/11 Dec/11 On Dec/10 On Sep/11

RSE FX - - - - -

RSE Interest Rate 22 86 84 285.3 (3.3)

RSE Commodities 3 19 6 112.2 (66.3)

RSE Shares 7 1 1 (90.0) (0.8)

RSE Market Risk¹ 31 106 90 187.8 (14.4)

Chg. %

Business Line Amount (R$ million) Share %

Asset Management 116 3.4

Subsidiaries and Affiliates in the Country and Abroad 256 7.4

Commercial 955 27.8

Retail Brokerage 4 0.1

Corporate Finance 52 1.5

Trading and Sales 981 28.6

Payments and Settlements 434 12.6

Financial Agent Services 91 2.7

Retail 544 15.9

TOTAL 3,433 100.0


100

11. Strategic Investments

11.1 Informations

Table 134. Interest in the Capital of Companies

Sha re Book Va lueEquiva le nc e

Re sults

R$ thousand Ac tivity 2 0 11 2 0 10 2 0 11 2 0 11

Consolida te d Equity Inte re sts

Ba nking Se gme nt

BB Leasing S.A. – Arrendamento Mercantil Leasing 100.00% 3,315,768 3,453,732 180,936

Banco do Brasil – AG. Viena Banking 100.00% 200,628 213,083 12,455

BB Leasing Company Ltd. Leasing 100.00% 72,878 83,157 10,279

BB Securities LLC. Brokerage 100.00% 27,514 37,096 9,582

BB Securities Ltd. Brokerage 100.00% 58,948 70,305 349

Brasilian American Merchant Bank Banking 100.00% 707,151 816,428 109,277

BB USA Holding Company, Inc. Holding 100.00% 2,877 2,734 14

Besc Distribuidora de Títulos e

Valores Mobiliários S.A.Asset Management 99.62% 11,848 7,127 5,843

Banco Patagonia S.A. Multiple Bank 58.96% - 637,770 112,515

Banco Votorantim S.A. Multiple Bank 50.00% 3,955,638 3,504,357 (321,734)

Inve stme nt Se gme nt

BB Banco de Investimento S.A. Investment Bank 100.00% 1,113,206 1,815,300 919,049

Kepler Weber S.A. Industry 17.56% 33,537 52,282 18,745

Companhia Brasileira de

Securitização – Cibrasec Credit Acquisition 12.12% 8,864 9,144 1,283

Neoenergia S.A. Energy 11.99% 1,247,249 1,325,228 140,860

Se gme nt of Fund Ma na ge me nt

BB Gestão de Recursos – Distribuidora de

Títulos e Valores Mobiliários S.A.Asset Management 100.00% 133,647 125,829 559,455

Se gme nt of Insura nc e , Priva te

Pe nsion Fund, a nd Ca pita liza tion

BB Seguros Partic ipações S.A. Holding 100.00% 1,190,044 3,887,002 788,612

BB Corretora de Seguros e

Administradora de Bens S.A.Brokerage 100.00% 33,540 33,513 147,610

Nossa Caixa Capitalização S.A. Capitalization 100.00% 5,394 5,502 286

Brasilprev Seguros e Previdência S.A.

Insurance Company

/

Pension

74.99% 471,782 671,176 289,269

Brasilcap Capitalização S.A. Capitalization 66.66% 83,816 160,494 96,543

BB Mapfre SH1 Partic ipações S.A. Holding 74.99% - 2,015,815 340,656

Mapfre BB SH2 Partic ipações S.A. Holding 50.00% - 1,111,194 134

Seguradora Brasileira de Crédito à

Exportação – SBCEInsurance Company 12.09% 2,950 2,850 85

Se gme nt of Pa yme nt Me thods

BB Administradora de Cartões de

Crédito S.A. Service Rendering 100.00% 21,205 19,326 17,961

BB Elo Cartões Partic ipações S.A. Holding 100.00% 10,771 18,843 (8,428)

Elo Partic ipações S.A. Holding 49.99% - 16,531 (8,669)

Companhia Brasileira de Soluções e

Serviços CBSS – Alelo Service Rendering 49.99% 99,141 164,911 87,849

Cielo S.A. Service Rendering 28.74% 340,090 404,850 521,731

Tecnologia Bancária S.A. – Tecban Service Rendering 13.53% 22,908 20,421 (2,487)

Othe r Se gme nts

Ativos S.A. Securitizadora de

Créditos Financeiros Credit Acquisition 100.00% 790,506 840,042 51,141

BB Administradora de Consórcios S.A. Consortiums 100.00% 24,443 49,960 111,026

BB Tur Viagens e Turismo Ltda. Tourism 100.00% 7,546 11,579 2,047

BB Money Transfers Inc. Service Rendering 100.00% 2,963 2,903 74

Cobra Tecnologia S.A. IT 99.99% 63,114 124,390 (8,725)

BV Partic ipações S.A. Holding 50.00% 67,140 105,119 44,947


101

11.2. Banco Votorantim

Since September 2009 is in effect the strategic partnership between BB and Votorantim Finanças of Banco Votorantim, through which BB now holds 50% of the total capital of BV. The management of Banco Votorantim and its related companies is performed through the Board of Directors, where the shareholders take part in a joint manner.

The partnership is rational and strategic, with a long-term prospect, having allowed the BB explore business opportunities in several segments, with tangible results already achieved, as listed below:

I) Expansion of asset origination capability in the consumer finance market: since the establishment of the partnership, BV Financeira has been acting as an extension of BB for performing vehicle financing outside of branches, which contributed to relevant growth of its vehicles loan portfolio. Facing the new economic and regulatory context, over 2012 BB and BV should move forward in structuring a new model of origination ("BV Financial Originator"), focusing on the cars dealership segment;

II) Purchase of credit assets: through an Operating Agreement, BB purchase payroll loans and vehicle loans arising from BV, with recourse. The balance of assets purchased from BV reached R$ 14.5 billion in Dec/2011, which R$ 10.3 billion are from vehicles loans and the remaining from payroll loans. Due to the new economic-regulatory scenario, and after the Brazilian Central Bank Circular 3533 took effect in January 2012, which change the rules for accounting credit assignment, the BB and BV are jointly advancing the evolution of a new model of origination as described in the previous item;

III) Cross offer of investment products: BB DTVM and Votorantim Asset Management & Services (VWM&S) has been acting jointly in the development and distribution of investment funds of Receivables (FIDCs), Real Estate (FIIs), Equity Investments (FIPs) and Private Lending. At the end of 2011, the volume of funds associated to the partnership amounted R $ 2.4 billion, with emphasis on FIC BB Seleção Private, F II BB Renda Corporativa, FIDC Phoenix (Lojas Americanas) and FIP-IE BB Votorantim Energia Sustentável I, II and III. The last one is a Private Equity Fund Investment in biomass plants, wind energy and small hydropower centers (PCHs), which is pioneering in its format;

IV) Expansion of distribution network: BB gets access to alternative and well-developed distribution network, car dealerships, retail facilities and stores of BV Financeira.

Banco do Brasil and Banco Votorantim will remain to explore the additional opportunities from business synergies, strengthening the strategic partnership.

The consolidation of the financial statements is proportional to BB's ownership interest in the total capital of BV. The assets and liabilities started to be consolidated in the financial statements since 3Q09 and the income statement accounts since 4Q09. The statements of risk management and operating limits, at the decision of the Central Bank of Brazil (BACEN), have been prepared under the equity method since November 2010.

The tables below present the main figures of BV. We present below the Income Statement with Reallocations. We emphasize that the reclassifications conducted by BV are considered as the most adequate for monitoring the business peculiarities at hand, even if they are not those adopted in BB’s Statement of Income with Reallocation. Further information can be obtained from the website of Banco Votorantim.

Share Book ValueEquivalence

Results

R$ thousand Activity 2011 2010 2011 2011

Equity Interest

Mapfre Nossa Caixa Vida e Previdência S.AInsurance Company /

Pension 49.00% 102,351 11,074 1,705

Cadam S.A. Mining 21.64% 44,019 22,216 (25,841)

Cia. Hidromineral Piratuba Sanitation 16.19% 2,211 2,305 94

Itapebi Energy 19.00% 63,307 75,259 23,506

Estruturadora Brasileira de Projetos - EBP Service Rendering 11.11% 1,552 406 (2,875)


102

Table 135. Banco Votorantim – Summarized Corporate Law Income Statement



Financial Intermediation Income 2,887 6,089 2,767 (4.2) (54.6) 12,157 16,043 32.0

Loans 1,849 3,233 2,528 36.7 (21.8) 8,813 11,092 25.9

Leasing 87 99 115 31.1 15.6 671 494 (26.3)

Securities 1,180 1,779 767 (35.0) (56.9) 4,307 4,862 12.9

Financial Derivatives (318) 719 (811) 155.5 - (2,004) (1,175) (41.4)

Foreign Exchange Portfolio (41) 80 11 - (86.1) 42 107 155.8

Compulsory Investments 129 178 158 22.7 (11.2) 329 663 101.6


Money Market Funds (1,811) (4,117) (2,218) 22.5 (46.1) (6,360) (10,129) 59.3

Borrow ing, Assignments and Onlending (46) (798) (121) 163.8 (84.8) (209) (906) 333.2

Allow ance for Loan Losses 5 (978) (1,097) - 12.2 (1,189) (3,343) 181.2

Gross Income from Financial Intermediation 1,035 196 (669) - - 4,400 1,666 (62.1)

Other Operating Income (Expenses) (511) (383) (308) (39.6) (19.5) (2,357) (2,005) (14.9)

Fee Income 140 93 162 15.9 75.0 440 481 9.2

Banking Fees Income 237 238 126 (47.0) (47.2) 804 766 (4.8)

Personnel Expenses (224) (235) (209) (6.6) (10.9) (775) (859) 10.8

Other Administrative Expenses (440) (423) (438) (0.4) 3.6 (1,536) (1,573) 2.4

Taxes (113) (143) (150) 32.7 4.6 (457) (623) 36.2

Equity Interest in the Results of Subsidiaries, and Affiliates - (0) (0) - - - (0) -

Other Operating Revenues 699 170 31 (95.6) (82.1) 2,090 246 (88.2)

Other Operating Expenses (811) (84) 170 - - (2,923) (444) (84.8)

Operating Income 524 (187) (978) - 424.1 2,043 (340) -

Non-operating Income (17) (7) (85) 394.0 1,071.2 (83) (76) (8.9)

Income Before Taxes 507 (194) (1,063) - 448.4 1,960 (415) -

Income and Social Contribution Taxes (144) 189 491 - 160.4 (547) 570 -

Profit Sharing (90) (80) (85) (6.2) 5.7 (398) (355) (10.7)

Corporate Profit Sharing (0) 0 (0) - - (0) (0) -

Net Income 272 (85) (656) - 669.3 1,015 (201) -


103

Table 136. Banco Votorantim – Income Statement with Reallocations



Financial Intermediation Income 3,540 4,205 3,487 (1.5) (17.1) 13,121 15,554 18.5

Loan operations (1) (2) (3) (4) (5) (6) (7) (11) (12) (16) (20) 2,459 2,946 2,814 14.5 (4.5) 8,939 11,081 24.0

Lease operations (2) (3) (4) (11) 133 95 102 (23.4) 7.8 616 466 (24.3)

Securities Income (8) (11) (12) 1,160 1,239 915 (21.1) (26.2) 4,162 4,552 9.4

Income from Financial Derivatives (9) (10) (11) (12) (13) (14) (341) (253) (502) 47.5 98.8 (925) (1,208) 30.6

Compulsory Investments 129 178 158 22.7 (11.2) 329 663 101.6

Income from Financial Intermediation (2,237) (2,782) (2,665) 19.1 (4.2) (7,671) (10,073) 31.3

Market Borrow ing (11) (12) (14) (15) (2,108) (2,647) (2,498) 18.5 (5.6) (7,198) (9,527) 32.4

Borrow ings, Assignments and Onlendings (11) (12) (130) (135) (167) 28.8 24.0 (473) (546) 15.5

Net Interest Income 1,303 1,422 822 (36.9) (42.2) 5,450 5,481 0.6

Allow ance for loan losses (1) (6) (16) (356) (1,000) (1,158) 225.8 15.9 (1,634) (3,589) 119.6

Net Financial Margin 947 423 (337) - - 3,816 1,892 (50.4)

Bank fee income 105 72 108 2.1 48.5 286 325 13.6

Fee income (2) 102 46 100 (2.5) 115.5 273 272 (0.3)

Bank Fee Income (2) 3 26 8 148.7 (69.4) 14 53 290.5

Taxes on Revenues (10) (109) (114) (111) 1.8 (2.6) (444) (469) 5.6

Contribution Margin 943 381 (341) - - 3,659 1,749 (52.2)

Administrative expenses (435) (410) (403) (7.2) (1.7) (1,515) (1,554) 2.6

Personnel Expenses (7) (18) (22) (224) (231) (199) (11.2) (14.0) (774) (841) 8.7

Other Administrative Expenses (4) (5) (13) (15) (17) (18) (19) (20) (210) (177) (198) (5.8) 11.8 (732) (697) (4.8)

Other Tax Expenses (19) (2) (3) (7) 370.4 164.4 (9) (16) 71.4

Commercial Income 508 (30) (744) - 2,410.9 2,144 195 (90.9)

Legal Risk (13) (68) (215) 1,619.1 218.1 (145) (414) 185.9

Legal Claims (17) 14 (37) (173) - 370.2 (38) (260) 578.0

Labor Law suits (18) (8) (16) (20) 165.8 24.6 (20) (70) 256.4

Fiscal Law suits (19) (19) (15) (22) 12.3 48.1 (87) (85) (2.7)

Other Components of the Result 48 (0) (3) - 624.7 107 (5) -

Subsidiaries and Aff iliates Income (0) (0) (0) - - (0) (0) -

Other Operating Income (Expenses) 48 (0) (3) - 786.8 107 (5) -

Other Operating Income(3) (9) (17) (18) (19) (21) 56 24 9 (84.6) (63.8) 132 49 (63.1)

Other operating expenses (1) (3) (6) (9) (17) (18) (19) (21) (8) (24) (12) 47.1 (50.6) (25) (54) 119.0

Operating Result 544 (98) (962) - 885.4 2,107 (224) -

Non-operating Income (23) (17) (7) (85) 394.0 1,070.7 (86) (86) (0.4)

Profit before taxation and profit sharing 526 (105) (1,048) - 898.3 2,020 (310) -

Income and Social Contribution Taxes (8) (10) (21) (164) 100 477 - 375.3 (610) 457 -

Profit Sharing (22) (90) (81) (86) (5.3) 6.0 (398) (358) (10.0)

Profit before minority interest 272 (85) (656) - 669.3 1,012 (211) -

Minority interest (0) 0 (0) - - (0) 0 -

Non-Recurring Items 272 (85) (656) - 669.3 1,012 (211) -

Extraordinary Items (23) - - - - - 3 10 245.6

FINOR (23) - - - - - 3 10 245.6

Net Income 272 (85) (656) - 669.3 1,015 (201) -


104

Table 137. Banco Votorantim – Statement of Reallocations

R$ million Quarterly Flow Annual Flow

ITEM FROM TO EVENT 4Q10 3Q11 4Q11 2010 2011

1 Other Operating Expenses Loan Operations Adjust of Discounts Granted Expenses (49.1) (0.0) - (195.0) (4.3)

1 Other Operating Expenses Allowance for loan losses Adjust of Discounts Granted Expenses - - - (76.6) -

2 Fee Income Loan Operations Other Op. Inc. of a Fin. Intermediation Nature 267.8 255.7 180.5 933.0 914.6

2 Fee Income Lease Operations Other Op. Inc. of a Fin. Intermediation Nature 4.1 3.0 0.0 25.2 6.9

3 Other Operating Expenses/Income Loan Operations Other Op. Inc/Exp. of a Fin. Intermediation Nature (4.1) (7.9) (11.7) (153.8) (400.7)

3 Other Operating Expenses/Income Lease Operations Other Op. Inc/Exp. of a Fin. Intermediation Nature 0.8 (0.3) (0.4) (43.1) (2.3)

4 Other Administrative Expenses Loan Operations Other Op. Inc/Exp. of a Fin. Intermediation Nature (201.6) (211.0) (202.2) (718.8) (746.7)

4 Other Administrative Expenses Lease Operations Other Op. Inc/Exp. of a Fin. Intermediation Nature (9.2) (7.2) (12.2) (34.3) (32.7)

5 Other Administrative Expenses Loan Operations Adjust in other adm. exp. related to Guarantees (4.2) (7.4) (2.0) (4.2) (21.1)

6 Allowance for loan losses / Other Operat. Expenses Loan Operations Credit Assignment 249.8 - - 28.6 71.0

7 Personnel Expenses Loan Operations Sales Bonuses - (2.8) (0.9) - (3.8)

8 Income and Social Contribution Taxes Securities Adjustments of Tax benefit generated by tax-free 28.1 25.6 15.9 97.3 90.2

9 Other Operating Expenses/Income Financial Derivatives Exchange Gain (loss) over Foreign Equity (11.4) 126.3 10.6 (30.7) 90.4

10 Taxes on revenues Financial Derivatives Tax Hedge (1.7) 7.7 (0.2) (4.8) 2.7

10 Income and Social Contribution Taxes Financial Derivatives Tax Hedge (13.8) 62.8 (1.6) (39.2) 22.4

11 Loans Op./Lease Op./Securities/Monney Market Funds / Borrowings and onlendingsFinancial Derivatives Reallocation of all MKT effects due to hedge (193.6) 107.5 171.1 208.3 318.5

12 Loans Op./Securities/Borrow.Assignm. and onlending Financial Derivatives Reallocation of all MKT effects due to hedge 98.1 (1,422.2) 59.6 437.8 (864.9)

13 Other Administrative Expenses Financial Derivatives Financial Derivatives Op. Adjustment (8.2) (7.9) (4.7) (32.3) (27.5)

14 Financial Derivatives Monney Market Funds BOX of options rreallocation (113.2) (74.3) (63.1) (488.6) (318.1)

15 Other Administrative Expenses Monney Market Funds Oth. Adm. Exp. Related to Subordinated Debt adjustment (4.9) (3.2) (6.2) (4.9) (16.3)

16 Loans Operations Allowance for loan losses All. For loan loss. Exp related to joint liabilitie Borrow.Assignm. (30.3) (22.3) (61.6) (55.4) (174.7)

17 Oth. Adm. Exp./Oth. Op. Exp./Oth.Op. Income Legal Risk - Legal Claims Legal Claims Exp. Adj. 14.3 (36.8) (173.2) (38.4) (260.0)

18 Personnel Exp./Oth. Adm. Exp./Oth. Op. Inc. / Oth. Op. Exp. Legal Risk - Labour Lawsuits Labour Lawsuits exp. Adj. (7.6) (16.2) (20.1) (19.5) (69.5)

19 Oth. Adm. Exp./Oth. Op. Exp./Oth.Op. Inc./Oth. Tax exp. Legal Risk - Tax Claims Tax Claims exp. Adj. (19.2) (14.6) (21.6) (87.0) (84.7)

20 Other Administrative Expenses Loan Operations Production Costs - (7.1) (8.7) - (21.3)

21 Other Operating Expenses/Income Income and Social Contribution Taxes Other Op. Exp. related to IRF Foreign Securities adjustment. (5.3) - - (5.3) -

22 Personnel Expenses Statutory Profits Staturory Profits Exp. - (0.5) (0.8) - (2.7)

23 Non-Operating Income One-Off Items FINOR Income - - - 3.0 10.3


105

Glossary

(1) Reclassification from Other Operating Expenses to Loan Operations and Allowance for Loan Losses corresponding to the amount of expenses with discounts granted on loan operations, being necessary its reallocation for comparability purposes

(2) Fee revenues arising from loan operations recorded under Fee Income with characteristics of financial intermediation were reallocated to Loan and Leasing Operations.

Table 138. Banco Votorantim – Reallocation (Fee Income)

(3) The Operating Revenues and Expenses directly associated with the loan operations were reallocated to loan and leasing operations.

(4) Other Administrative Expenses directly related to loan operations were reallocated to loans and leasing operations.

(5) The Other Administrative Expenses referring to Guarantees provided were reallocated to loans operations.

(6) For better comparability purposes, Other Operating Expenses of the allowance for loan losses were reallocated to loan operations.

(7) Reallocating the expenses on campaign premiums from Other Personnel Expenses to Loan Operations.

(8) The effect of the tax benefit generated by the tax-free interest of securities issued abroad was reallocated from the Income Tax and Social Contribution to Securities Income.

(9) The foreign exchange gain (loss) on foreign financial equity is reallocated from Other Operating Income/Expenses to Income from Financial Derivatives for inclusion in the Net Interest Income.

(10) Reallocations were performed in order to cancel the Tax Hedge's effects. The effect was reallocated to income from derivative financial instruments due to tax expenses on income and social contribution taxes.

(11) All mark-to-market effects were reallocated as a result of the hedge on the result of Derivative financial instruments, as follows:

Table 139. Banco Votorantim – Reallocations (Market-to-Market - MKT)

(12) All currency variation effects were reallocated, including for dollar, Yen, Turkish Lira, Euro, among others, due to the hedge in result of Derivative Financial Instruments, as follows:

Quarterly Flow Annual Flow

R$ million 4Q10 3Q11 4Q11 2010 2011

Fee Income (TC /TLA / TAC) (2) (181) (146) (87) (626) (506)

Credit Card Fees (2) (9) (13) (14) (28) (46)

Guarantees Income (2) (31) (37) (36) (144) (141)

Valuation of Assets Fee (2) (51) (63) (42) (160) (215)

Fee Income - Loan Operations (2) - (1) (1) - (14)

Allocation on Loan Operations + Leasing (2) 272 259 181 958 922


R$ million 4Q10 3Q11 4Q11 2010 2011

Loan Operations (BV Financeira) (11) 216 - - 95 -

Loans Operations (BV) (11) 97 (29) (43) 55 (109)

Leasing (11) 50 - - (3) -

Securities (11) (86) (448) 136 (303) (315)

Funding (11) (82) 339 (224) (53) 115

Borrow ing, Assignments and Onlending - 30 (39) - (9)

Alocation in Derivatives (11) (194) 108 171 208 319


106

Table 140. Banco Votorantim – Reallocations (Currency Variation)

(13) Other Administrative Expenses directly related to Derivative transactions were reallocated to Income from Financial Derivatives.

(14) A reallocation from the derivative market of the options BOX, accounted for in Derivative Financial Instruments, to Money Market Funds

(15) Adjustment of Other Administrative Expenses related to Subordinated Debt which were reallocated to the line of Money Market Funds.

(16) The expenses of the Allowance for Loan Losses arising from Transfers made with guarantee and which are recorded in Loan Operations were reallocated to expenses of Allowance for Loan Losses.

(17) to (19) The Labor, civil and tax claim expenses were segregated to the group called Legal risk, so

as to facilitate analysis of the Other Income and Operating expenses, Other Administrative expenses and Personnel Expenses, and provide greater transparency to that type of risk.

(20) For a better comparability, we reallocated the production costs from Other Administrative expenses to Credit Operations.

(21) The Income Tax Withholding on Securities Abroad has been reallocated from Other Operating Income and Expenses to Income Tax and Social Contribution.

(22) Adjustment referring to profit sharing expenses classified into Personnel expenses and reallocated to Profit Sharing.

(23) Line was relocated Non-Operating Income for the line of the result Extraordinary Items with the activation and valuation of shares of the Northeast Investment Fund (FINOR).


R$ million 4Q10 3Q11 4Q11 2010 2011

VCR Loans Operations (12) 9 (301) (59) 48 (236)

VCR Securities (12) 15 (118) (8) 66 (90)

VCR Fundings (12) (67) 1,208 14 (288) 822

VCR Loans and On Lending (12) (55) 633 (7) (263) 369

Alocation of VCR on Derivatives (12) 98 (1,422) 60 438 (865)


107

Summary – Highlights on the Result (Income Statement with Reallocations)

Net Interest Income

During the year, the income from financial intermediation amounted to R$ 15,554 million, an increase of 18.5% in comparison with 2010, mainly as a result of: 1) increase in the revenues from loan operations, resulting from the growth in the average balance of the portfolio; 2) the result of derivative financial instruments is mainly explained by the revenues from the hedge on money market funding and foreign borrowings, resulting from the 12.3% appreciation of the US dollar against the Brazilian real in the year; and 3) 9.4% increase in the result of securities, totaling R$ 4,552 million in 2011, mainly explained by the increase in the revenues from structured operations in the Corporate & Investment Banking segment.

However, the increase in revenues from financial intermediation was partially compensated by the growth in expenses from financial intermediation, which increased by 31.3% in 2011 in comparison with the previous year, totaling R$ 10,073 million. Partially, this increase is due to: 1) the 18.3% increase in the average funding balance, with an extension of the average term and increased subordination, through long-term funding transactions both in the domestic market (Treasury Bills) and abroad (Eurobonds); 2) prudential increase in liquidity in view of the volatility in the external scenario; and 3) effects of the foreign exchange variation and interest rate fluctuations, whose effects on funding costs are greatly offset in the Income from Financial Derivatives caption.

Due to this, the Net Interest Income ended 2011 with R$ 5,481 million, a growth of 0.6% when compared with 2010.

Net Interest Margin, ended the year with 5.1%, a 70 base-point decline as compared to 2010.

Table 141. Banco Votorantim – Margin, Net of Interest and Profit Margin

(1) Defined as interest income minus interest expenses. (2) Contains derivatives, debt assumption contracts, foreign exchange portfolio, recovery of write-offs, gold loans, credit guarantor fund, foreign exchange gain/loss abroad and other income of a financial intermediation nature (3) Total interest income divided by the average balance of earning assets. (4) Total interest expenses divided by the average balance of interest bearing liabilities. (5) Difference between the average rate of earning assets and the average rate of interest bearing liabilities. (6) Net Interest Gain divided by the average balance of earning assets

R$ million 4Q10 3Q11 4Q11 2010 2011

Average Earning Assets (AEA) 103,583 112,784 108,602 93,684 108,052

Average Interest Bearing Liabilities (AIBL) 92,912 102,071 99,266 83,913 97,368

Net Interest Gain (1) 1,571 1,641 1,294 6,214 6,546

Interest Income 3,799 4,415 3,951 13,853 16,587

Interest Expense (2,229) (2,774) (2,657) (7,639) (10,041)

Net Interest Income Other Items (2) (268) (218) (473) (764) (1,065)

NII 1,303 1,422 822 5,450 5,481

AIBL / AEA – % 89.7 90.5 91.4 89.6 90.1

Interest Rate on AEA (3)- % 15.5 16.6 15.4 14.8 15.4

Interest Rate on AIBL (4) - % 9.9 11.3 11.1 9.1 10.3

Net Interest Rate (5) - % 5.6 5.3 4.2 5.7 5.0

Adjusted NIM (6) - % 6.2 5.9 4.9 6.6 6.1

NIM – % 5.1 5.1 3.1 5.8 5.1


108

Credit Portfolio

Banco Votorantim loan portfolio closed 2011 with a balance of R$ 58.7 billion, a growth 3.4% in 12 months.

The Individual loan portfolio1 amounted R$ 38.0 billion in 2011, with a slight growth of 2.1% over the last twelve months and a decrease of 10.7% in the last quarter. The moderate growth in this segment is associated with the institution's more conservative approach to the new economic-regulatory context and the increase in the delinquency rate of the vehicle financing segment.

In order to resume sustainable growth and profitability in the retail segment, Banco Votorantim has been rapidly moving towards the implementation of strategic initiatives that comprise its Change Plan, fully supported by the shareholders. Among the measures adopted, we must highlight:

I) The Operational Review Committee (CRO) is made up of representatives of the shareholders and works in association with BV teams in the identification of the need for and implementation of operational improvements at BV Financeira;

II) Adoption of more strict credit policies, with reduce the average maturity, including a restriction on productions with a term of more than 48 months and a down payment of less than 20%. Thus, in 4Q11, the percentage of vehicles financing proposals approved was lower than the same period in the last year;

III) Review of recovery procedures, including intensification of campaigns recovery and application of rules as billing customer profile;

IV) Revision of the sales force incentive system;

V) Revision of the operating model of BV Financeira in relation to vehicle financing, with a focus on the multibrand dealership segment (used cars) for own origination and advance in the structuring of the new origination model for BB ("BV Financeira Originator") in new cars dealership, which will be consolidated throughout 2012.

The improvement of credit policies under retail operational procedures, resulted in a best risk level of recent productions. In November/2011, the ratio non-performing loans for more than 30 days in the vehicle production already returns to a historical level of BV Financeira.

The Business Loan portfolio, in turn, totaled R$ 20.7 billion at the end of 2011, an increase of 5.8% over the last twelve months.

The Middle Market maintained its expansion trend, reaching a loan portfolio of R$ 8.2 billion, a growth of 44.6% in relation to 2010. The segment continues to operate with a high level of substantial guarantees, which provided coverage for 88% of the portfolio in December 2011. At the end of 2011, 94.3% of the loan portfolio of this segment was classified between AA - C pursuant to the criteria of Resolution No. 2682 of the Brazilian Central Bank (BACEN), evidencing their quality standard.

The Corporate segment presented a loan portfolio of R$ 12.8 billion at the end of the year, a decrease of 8.6% in comparison with 2010. BV is one of the major players in terms of loans to large companies, with a high market penetration. With a view to increasing its importance to clients, BV has expanded its credit supply by offering structured products with a high added value (investment banking services, hedge and derivatives).

The balance of assigned assets increased to R$ 15.4 billion, R$ 14.5 billion of which, or 95% of the total, had the BB shareholder as its assignee. BB regularly acquires vehicle financing portfolios and payroll loan portfolios originating from BV, in line with its strategy for the expansion of the consumer loan portfolio.

1 Total of portfolio from BV Financeira and BV Leasing.


109

Table 142. Banco Votorantim – Highlights of the Result Equity

(1) Except other deposits

Table 143. Banco Votorantim – Vehicle Portfolio

Figura 33. Banco Votorantim – Production (Vehicle and Payroll Loans)

Delinquency and Allowance


Assets 107,818 124,339 112,445 4.3 (9.6)

Securities 25,163 27,406 26,733 6.2 (2.5)

Loan Portfolio 56,816 63,978 58,726 3.4 (8.2)

Individuals 37,214 42,513 37,981 2.1 (10.7)

Payroll Loan 4,947 6,020 6,201 25.3 3.0

Vehicles Loan 27,656 32,527 28,187 1.9 (13.3)

Leasing and Subleasing Receivables 4,325 3,704 3,347 (22.6) (9.7)

Other 286 261 247 (13.7) (5.4)

Businesses 19,602 21,465 20,745 5.8 (3.4)

Working Capital 6,938 7,507 7,820 12.7 4.2

BNDES/Finame 6,981 7,288 6,316 (9.5) (13.3)

Export Letter of Credit 2,319 2,602 2,649 14.3 1.8

Other 3,365 4,069 3,960 17.7 (2.7)

Permanent Assets 207 243 244 17.9 0.6

Deposits¹ 23,598 24,966 25,625 8.6 2.6

Demand Deposits 309 379 432 39.5 13.8

Time Deposits 22,563 22,393 22,337 (1.0) (0.3)

Money Market Borrow ing 34,380 40,523 33,535 (2.5) (17.2)

Shareholders’ Equity 8,389 8,718 8,041 (4.1) (7.8)



Average rate per crop - % p.m. 1.8 2.0 2.0

Average term per crop 50.8 48.6 46.4

Duration 22.1 21.1 20.2

Average Portfolio Term (p.y.) 22.5 22.5 24.7

Used Vehicles / Vehicles Portfolio - % 70.1 67.9 67.1

Average Vehicle Age (years) 7.5 4.9 4.8

Financed Value / Asset Value – average % 67.8 67.5 67.6

2.0 1.9

2.7

2.42.5

2.7

2.9

3.2

3.03.1

3.4

3.0

1.9

2.32.4

2.5

3.0

2.7 2.7

2.9

2.3

1.8

1.5 1.4


110

The expenses with allowance for Loan Losses increased 119.6% in 2011, totaling R$ 3,589 million, against R$ 1,634 million in 2010. This increase is due to two main factors: increase in the delinquency levels of individuals and more conservative approach in relation to the treatment given to provisions.

The retail segment, which accounted for 87% of the provisions in 2011, was impacted by the increase of delinquency in the individuals market. It should be noted that the macroprudential measures significantly impacted the finance industry, mainly the institutions that have portfolios with a greater focus on consumer credit, such as the subsidiary BV Financeira. When raising the capital requirement for long-term vehicle financing and payroll loan operations, the macroprudential measures contributed to an increase in the interest rates adopted and to a reduction in the average payment terms, with a subsequent increase in the amount of the installments. These factors, associated with the higher inflation, the moderate increase in salaries and a greater proportion of family income committed to paying installments, have led to an increase in the delinquency ratio of individuals. In the vehicle financing segment, which accounted for 83% of the Individuals loan portfolio at the end of 2011, data from Brazilian Central Bank – (BACEN) show that the default rate doubled to 5.0% in December 2011 (2.5% in December 2010).

In the Wholesale, the increase in allowance for loan losses was mainly prudential and aimed at increasing the Middle Market coverage ratio and recognizing residues of provisions related to the 2008 crisis. It should be highlighted that, despite the continuous expansion in the Middle Market, the delinquency rate recorded at the end of 2011 was 1.6%, which shows the quality of this portfolio. In this segment, 94.4% of the operations were classified between AA - C risks.

In the Consolidated, delinquency totaled 5.8% of the loan portfolio in 4Q11, an increase of 150 base points over that for the previous quarter. This growth was driven by the delinquency in retail segment, which amounted to 8.0% in December, in comparison with the 5.8% calculated last September. Important to emphasize that considering the loan portfolio managed (including assignments with recourse and FIDC) delinquency rates of the consolidated portfolio and Retail are respectively 4.4% and 5.4%.

Table 144. Banco Votorantim – Loan Portfolio by Level of Risk - Total



AA 12,710 - 22.4 11,673 - 18.2 10,647 - 18.1

A 38,395 192 67.6 40,877 204 63.9 35,384 177 60.3

B 3,019 30 5.3 4,637 46 7.2 4,606 46 7.8

C 1,127 34 2.0 2,315 69 3.6 2,811 84 4.8

D 413 41 0.7 1,164 116 1.8 1,309 131 2.2

E 195 58 0.3 981 294 1.5 1,070 319 1.8

F 240 120 0.4 518 259 0.8 579 289 1.0

G 131 92 0.2 489 342 0.8 649 454 1.1

H 586 586 1.0 1,324 1,324 2.1 1,672 1,672 2.8

Total 56,816 1,153 100.0 63,978 2,656 100.0 58,726 3,172 100.0

Add. Allow . 0 - 34

Total Allow. 1,153 2,656 3,206

AA-C 55,251 256 97.2 59,503 320 93.0 53,448 307 91.0

D-H 1,565 897 2.8 4,476 2,336 7.0 5,278 2,865 9.0


111

Table 145. Banco Votorantim – Loan Portfolio by Level of Risk – Wholesale

Table 146. Banco Votorantim – Loan Portfolio by Level of Risk – Retail

Table 147. Banco Votorantim – Delinquency Ratios – Total



AA 12,042 - 61.4 11,465 - 53.4 10,514 - 50.7

A 5,527 28 28.2 5,774 29 26.9 5,387 27 26.0

B 1,538 15 7.8 2,583 26 12.0 2,604 26 12.6

C 169 5 0.9 637 19 3.0 1,067 32 5.1

D 12 1 0.1 271 27 1.3 310 31 1.5

E 13 4 0.1 360 108 1.7 405 119 2.0

F 119 59 0.6 45 23 0.2 34 17 0.2

G 29 20 0.1 137 96 0.6 188 132 0.9

H 153 153 0.8 193 193 0.9 235 235 1.1

Total 19,602 286 100.0 21,465 520 100.0 20,745 619 100.0

Add. Allow . - - 34

Total Allow. 286 520 653

AA-C 19,276 48 98.3 20,459 74 95.3 19,573 85 94.4

D-H 326 238 1.7 1,007 447 4.7 1,172 534 5.6



AA 669 - 1.8 208 - 0.5 132 - 0.3

A 32,868 164 88.3 35,103 176 82.6 29,997 150 79.0

B 1,481 15 4.0 2,054 21 4.8 2,002 20 5.3

C 958 29 2.6 1,678 50 3.9 1,744 52 4.6

D 401 40 1.1 893 89 2.1 999 100 2.6

E 182 54 0.5 621 186 1.5 665 199 1.8

F 121 61 0.3 473 236 1.1 545 273 1.4

G 102 71 0.3 351 246 0.8 461 323 1.2

H 433 433 1.2 1,132 1,132 2.7 1,437 1,437 3.8

Total 37,214 868 100.0 42,513 2,136 100.0 37,981 2,554 100.0

Add. Allow . - - -

Total Allow. 868 2,136 2,554

AA-C 35,975 208 96.7 39,044 246 91.8 33,875 222 89.2

D-H 1,239 660 3.3 3,469 1,889 8.2 4,107 2,331 10.8


Loan Portfolio 56,816 63,978 58,726

Non-performing Loans (NPL) 4,763 8,802 9,250

NPL/Loan Portfolio 8.4% 13.8% 15.8%

NPL + 90 days 884 2,760 3,388


Write-off (384) (282) (546)

Recovery of Write-offs 81 42 38

Net Loss (303) (239) (509)

Net Loss/Loan Portfolio - % annualized 2.1% 1.5% 3.5%

Provision 1,153 2,656 3,206

Allow ance/Loan Portfolio 2.0% 4.2% 5.5%


Allow ance Expenses / Loan Portfolio (12 months average) 2.4% 3.8% 5.5%


112

Table 148. Banco Votorantim – Delinquency Ratios – Wholesale

Table 149. Banco Votorantim – Delinquency Ratios – Retail

Administrative Expenses

Administrative expenses remained under control, totaling R$ 1,554 million at the end of the year, an increase of 2.6% in comparison with 2010. During the quarter, there was a decrease of 1.7% in relation to the 3Q11. The same occurred to personnel expenses, which increased 8.7% between 2010 and 2011, while, in 4Q11, they remained 14.0% below the amount recorded in the previous quarter. Other administrative expenses, which decreased 4.8% during the year, grew 11.8% in the last quarter of 2011 in comparison to the previous quarter.

A significant portion of the increase in the administrative expenses of Banco Votorantim over the last twelve months is mainly associated with the intensification of the collection processes in Retail and expenses for advisory and projects, such as the implementation of Sarbanes-Oxley, which will contribute to the improvement of corporate governance.

As part of its Change Plan, BV has adopted a set of corporate initiatives, including the establishment of a specific committee (Committee for the Analysis and Approval of Expenses - CAAD) in the second half year of 2011, with the participation of the main officers in the analysis and approval of expenses.


Loan Portfolio 19,602 21,465 20,745

Non-performing Loans (NPL) 276 647 581


NPL + 90 days 96 274 349


Write-off (27) (23) (9)


Net Loss (20) (22) (7)


Provision 286 520 653





Loan Portfolio 37,214 42,513 37,981

Non-performing Loans (NPL) 4,487 8,155 8,668


NPL + 90 days 788 2,485 3,039


Write-off (357) (259) (538)


Net Loss (283) (217) (501)


Provision 868 2,136 2,554





113

Table 150. Banco Votorantim – Operating and Structural Highlights

¹ Includes offshore products and treasury products. ² Includes employees and trainees.

BV has historically recorded efficiency rates below the average of the other market players because of its business model with a low fixed cost, which is based on a broad outsourced distribution network in the consumer financing business. As previously mentioned, BV has been implementing initiatives to improve its cost and expense structure, allowing for additional efficiency gains.

Despite the moderate growth in total revenues, which include the Net Interest Income and revenues from services provided, BV presented an efficiency index of 40.0% at the end of the year (the lower, best). Despite having ended the year above the 38.8% recorded in 2010, it remained lower than the market's average.

Table 151. Banco Votorantim – Main Productivity Indicators

(1) Efficiency Ratio calculated by Banco Votorantim: (Sum of Personnel Expenses and Other Administrative Expenses) ÷ (Sum of Net income from financial intermediation, of expenses with Allowance for Loan Losses (PCLD), Service Revenues and Result of Other Operating Income and Expenses). (2) Includes employees and trainees

BIS Ratio

At the end of 2011, the Basel ratio was 14.13%, 9.48% of which in the form of Tier I Capital. The increase of 140 base points in comparison with the 12.72% recorded in the previous quarter mainly arises from the impacts of BACEN Circular No. 3563, of November 11, 2011, which revoked the additional capital requirement demanded by Circular No. 3515, of December 3, 2010.

Table 152. Banco Votorantim – BIS Ratio


Customers 4,895,239 5,531,538 5,474,154

Assets Under Management - R$ million¹ 31,414 38,584 42,985

Employees² 9,284 8,638 7,932

Number of Branch Offices 317 260 259

4Q10 3Q11 4Q11 2010 2011

Cost Income Ratio¹ - % 51.8 39.6 70.8 38.8 40.0

Personnel Expenses per Employee² - R$ 24,078 26,721 25,037 83,360 106,073

R$ million Dec/10 Sep/11 Dec/11

RE - Referential Equity Amount 11,845 13,057 12,054

RE Tier I 8,405 8,741 8,086

RE Tier II 3,439 4,316 3,968

RRE - Required Referential Equity Amount 9,946 11,295 9,386

Sufficiency of RE: (RE – RRE) 1,899 1,763 2,668

BIS Ratio: (RE x 100) / (RRE / 0.11) 13.10 12.72 14.13

Tier I 9.30 8.51 9.48

Tier II 3.80 4.20 4.65


114

11.3. Banco Postal

In May 2011, Banco do Brasil was the winner in the bidding process for a five-year period, to exploit the postal bank network of the Brazilian Mail Service (Correios), and, since early 2012, has been working through its network, which has 6,337 service points in 5,270 Brazilian municipalities.

In the first month of operation, the strategy allowed the opening of 142.3 thousand new current accounts and registered 6.8 million transaction involving cash receipts, payments and queries. During the period, about 98% of post offices conducted at least one operation.

This action will allow BB’s expand and profitable the customer basis and expand its service network to 96% of Brazilian municipalities, anticipating the strategy for 2012 to be present throughout the country, before scheduled for 2015.

The target public of BB's work in Banco Postal branches will be the 'D' and 'E' classes, a portion of the population that, due to the advancement provided by the economic policy over the last few years shows a great potential of consumption of banking products and services. In addition, the Postal Bank will contribute to make urban micro-entrepreneurs to use bank services and obtain guidance to generate sustainable businesses and contribute to Brazil's development.

11.4 Internacionalization

As the Brazilian bank with the largest presence in the world market, with 49 units in 23 countries, Banco do Brasil has been intensifying its international operation over the last few years.

The BB’s strategic overseas positioning was aimed at wholesale and retail activities in favor of Brazilian immigrant communities, in funding Brazilian companies with business involving foreign trade and acting in the capital market. The conglomerate's actions are aimed at intensifying relations with international financial institutions, economic agents, and governments, in support of implementing transnational and binational projects.

Simultaneously with strategic guidelines, the Bank has focused efforts in continuing to be Brazil's overseas partner with capillarity to assist its customers everywhere, with the purpose of being the first bank for Brazilians at home and overseas.

11.4.1 Acquisitions

EuroBank

On April 25, 2011, Banco do Brasil formalized the purchase of 100% of the capital stock of the North American bank EuroBank, for the price of US$ 6.0 million. The operation is still to be authorized by regulatory bodies in Brazil and in the United States. The operation was authorized by the Central Bank of Brazil on August 9, 2011 and the Office of Financial Regulation (OFR) on October 19, 2011 by the regulators Americans Federal Deposit Insurance Corporation (FDIC) on November 07, 2011, and finally by the Federal Reserve Bank (FED) on December 16, 2011. With this, on January 19, 2012 was effected the closing of the acquisition of all shares.

The EuroBank, a closed-capital company founded in 1991, with main offices in Florida, currently has three branches located in the regions of Coral Gables, Pompano Beach and Boca Raton and a customer base of approximately 1.8 thousand accounts and 1.3 thousand customers, including individuals and businesses.

The acquisition is part of BB's business expansion strategy in the U.S. and will allow the bank to operate in the North American retail market, focusing on serving the Brazilian and Hispanic communities living in that country.

Banco Patagonia

In April 2010, BB acquired the shareholding control of Banco Patagonia, from Argentina, through the acquisition of 51% of its capital. This business was a milestone in the internationalization process and the first step of the new operating model in promising markets.

Subsequently, the Brazilian Central Bank authorized the BB to increase its participation in that bank up to 75% of its total capital through Public Offer (PO). In this sense, BB filed with Comisión Nacional de Valores da Argentina (CNV), the capital market regulatory agency of that country, request permission to perform in Argentina, OP to acquire shares issued by Banco Patagonia.


115

The authorization was conceded by the CNV on 08.17.2011 and the period from 09.01.2011 to 10/05/2011, OP was made on the Stock Exchange of Buenos Aires. After the closing, in 10.11.2011, the offer resulted in the acquisition by Banco do Brasil, 135,174,290 common shares class "B" at a price of ARS 5.1959759225 per share. Thereby, BB now holds 424,101,958 Class “B” common shares, representing 58.96% of capital and voting of Banco Patagonia.

The aim of the transaction was to expand the partnership with Brazilian and Argentine companies and diversify the products and services portfolio, seeking to potentialize customer service, expand the loan portfolio and operate in the value chain of the Corporate segment of Argentina, mainly in the Buenos Aires and Rio Negro provinces.

Banco Patagonia is a solid institution and has a strong relationship with local companies, particularly in the management of company payrolls, and also operates in the retail banking segment. BB contributes by sharing its experience in serving major Brazilian corporate groups.

We list below a selection of economic and structural indicators for Banco Patagonia, and income figures.

Table 153. Banco Patagonia – Key Income Figures

Table 154. Banco Patagonia – Equity Highlights

Table 155. Banco Patagonia – Operating and Structural Highlights

Table 156. Banco Patagonia – Indicators on Returns, Capital, and Credit

Quarterly Flow Annual Flow Chg. %


Net Interest Income 147 126 231 56.9 83.5 496 602 21.5

Allow ance for Loan Losses (5) (9) (25) 367.3 181.6 (23) (45) 96.2

Fee income 56 85 91 61.4 6.7 194 295 52.4

Administrative Expenses (104) (124) (136) 31.5 10.0 (368) (468) 27.3

Others 6 6 5 (20.9) (22.1) 13 29 114.7

Income Before Taxes 100 84 165 64.3 95.9 312 413 32.3

Taxes (35) (30) (69) 98.5 131.5 (111) (159) 43.3

Net Income 66 54 96 46.3 76.4 202 255 26.3

Chg. %

Balance


Assets 6,144 7,412 8,424 37.1 13.7

Loan Operations 3,137 4,559 5,099 62.5 11.8

Exposure to Public Sector 38 48 51 33.8 6.9

Deposits 4,401 5,556 5,924 34.6 6.6

Shareholders' Equity 884 996 1,082 22.3 8.5

Chg. %

Dec/10 Sep/11 Dec/11 On Dec/10 On Sep/11

Clients 784,151 805,354 813,864 3.8 1.1

Bank Branches 142 145 147 3.5 1.4

Branches in Buenos Aires 76 78 78 2.6 -

Service Points 164 171 172 4.9 0.6

Employees 2,929 3,071 3,133 7.0 2.0

Chg. %

% 4Q10 3Q11 4Q11

Return on Equity 24.7 24.1 27.4

Capital Adequacy Ratio (Basel) 25.5 20.9 19.4

Provisions / Past Due Loans (+90 days) 167.6 199.2 234.2

Past Due Loans (+90 days) / Loan Portfolio 1.2 0.9 0.9


116

12 - Financial Statements

12.1. Summarized Balance Sheet

Table 157. Balance Sheet Assets – Quarterly

R$ million M ar/ 10 Jun/ 10 Sep / 10 D ec/ 10 M ar/ 11 Jun/ 11 Sep / 11 D ec/ 11

A SSET S 72 4 ,8 8 1 755,70 6 79 6 ,8 15 8 11,172 8 6 6 ,6 3 6 9 0 4 ,14 5 9 4 9 ,78 1 9 8 1,2 3 0

C urrent and Lo ng - T erm A sset s 70 6 ,10 2 73 7,151 777,52 8 79 1,4 0 3 8 4 7,3 6 1 8 8 5,13 0 9 2 7,4 56 9 57,8 0 0

Available Funds 7,364 9,535 9,545 9,745 12,575 19,639 20,466 10,034

Short-Term Interbank Investments 152,595 132,543 135,300 107,579 146,458 147,565 157,413 166,288

Open M arket Investments 125,683 107,838 111,325 85,060 124,823 125,022 130,023 139,032

Interbank Deposits 26,911 24,704 23,975 22,519 21,635 22,543 27,391 27,256

M arketable Securit ies 119,364 132,249 137,595 143,867 146,500 154,634 158,844 168,230

Securit ies for Trading 38,183 44,830 50,850 50,445 51,742 55,591 63,154 63,257

Securit ies Available for Sale 62,950 67,153 66,205 75,142 76,310 79,882 75,364 88,385

Securit ies Held to M aturity 17,070 19,049 19,207 16,656 17,052 17,903 18,280 15,191

Financial Derivat ives 1,162 1,217 1,332 1,624 1,396 1,258 2,046 1,397

Interbank Accounts 53,144 64,857 75,463 89,526 94,232 94,897 95,468 96,342

Central Bank Deposits 47,244 59,374 70,054 87,035 87,053 89,283 89,654 93,660

Compuls. Dep, on Demand, Dep & Float 12,700 14,035 16,021 18,487 15,744 15,877 14,366 14,307

Compulsory Dep, on Savings Dep, 34,545 45,339 54,033 68,548 71,309 73,406 75,288 79,353

Others 5,900 5,483 5,410 2,491 7,179 5,614 5,814 2,682

Interdepartmental Accounts 99 110 167 258 109 119 169 335

Loans 267,317 289,075 300,919 317,726 325,682 342,481 359,095 379,045

Public Sector 5,668 6,145 7,071 7,184 7,702 7,607 8,441 8,486

Private Sector 279,054 300,028 310,985 326,975 334,120 351,766 368,470 388,781

(Allowance for Loan Losses) (17,405) (17,097) (17,137) (16,433) (16,140) (16,892) (17,816) (18,222)

Leasing 4,593 4,394 4,149 3,857 3,499 3,351 3,158 2,851

Leasing and Sub-Leasing Receivables 4,826 4,641 4,377 4,048 3,694 3,563 3,372 3,064

Public Sector 59 53 49 46 42 38 35 31

Private Sector 4,767 4,588 4,328 4,002 3,652 3,525 3,337 3,033

(Allowance for Lease Losses) (233) (246) (228) (191) (195) (212) (214) (213)

Other Receivables 99,430 101,887 110,897 114,962 114,238 117,705 128,011 129,554

Receivable on Guarantees Honored 89 73 67 75 77 80 76 77

Foreign Exchange Port folio 11,808 12,258 15,011 11,878 15,082 14,278 18,000 17,615

Income Receivable 588 678 774 944 971 1,065 1,079 1,410

Trading and Brokerage of Securit ies 400 409 556 383 286 365 1,576 317

Specif ic Credits 954 978 1,004 1,030 1,057 1,086 1,117 1,146

Special Operat ions - - - - - - - -

Credits from Ins., Pension and Savings Bonds 850 816 908 1,109 1,070 1,574 1,670 1,742

Tax Credits 22,000 22,431 22,571 21,970 22,325 22,351 23,772 22,754

Atuarial Assets 13,374 14,510 15,061 9,895 10,563 12,051 12,688 13,372

Warrants Deposits Receivable 21,764 22,380 23,114 23,388 24,203 24,604 25,314 25,584

Dest inat ion Superavit Fund - PREVI - - - 7,595 7,854 7,894 7,953 8,030

Other Credits 29,226 28,988 33,510 38,269 32,315 33,686 36,021 39,172

(Provision for Doubtful Receivables) (1,625) (1,633) (1,679) (1,572) (1,565) (1,330) (1,256) (1,665)

(With Loan Characterist ics) (678) (744) (775) (690) (681) (630) (580) (580)

(Without Loan Characterist ics) (947) (890) (904) (882) (884) (700) (676) (1,085)

Other Assets 2,196 2,501 3,492 3,884 4,069 4,740 4,831 5,120

Others 384 394 371 388 404 463 459 468

(Provision for Possible Losses) (176) (171) (174) (177) (181) (187) (185) (188)

Prepaid Expenses 1,988 2,278 3,294 3,673 3,846 4,464 4,557 4,840

Permanent A sset s 18 ,78 0 18 ,555 19 ,2 8 8 19 ,770 19 ,2 75 19 ,0 15 2 2 ,3 2 6 2 3 ,4 3 0

Investments 6,869 6,866 7,888 8,128 8,126 8,002 7,948 7,973

Investm, in Assoc. and Subsidiary Co, 5,964 5,910 6,909 7,116 7,052 6,966 6,925 6,841

Other Investments 986 1,023 1,061 1,097 1,159 1,114 1,102 1,216

(Provision for Losses) (82) (68) (82) (84) (84) (78) (79) (84)

Property and Equipment 4,230 4,259 4,396 4,904 4,867 5,030 5,210 5,589

Land and Buildings in Use 3,256 3,392 3,368 3,557 3,645 3,859 4,011 4,217

Land and Buildings in Use Reavaliat ion - - 150 150 150 150 150 150

Other Property and Equipment in Use 6,759 6,969 7,002 7,394 7,452 7,722 7,966 8,344

(Accumulated Depreciat ion) (5,785) (6,102) (6,124) (6,198) (6,381) (6,701) (6,918) (7,123)

Leased Assets 1 1 0 - 1 1 1 1

Leases Assets 2 2 1 - 1 1 1 1

(Accumulated Depreciat ion) (1) (1) (1) - (1) (1) (1) (1)

Intangible 7,267 7,052 6,673 6,452 6,036 5,771 8,984 9,736

Intangible Assets 9,670 9,872 10,017 10,259 10,381 10,583 14,216 14,947

(Accumulated Amort izat ion) (2,403) (2,820) (3,345) (3,808) (4,345) (4,812) (5,232) (5,211)

Deferred Charges 413 377 332 286 245 210 184 132

Organizat ion and Expansion Costs 2,201 2,041 2,162 2,155 2,086 2,074 2,074 2,034

(Accumulated Amort izat ion) (1,788) (1,664) (1,830) (1,868) (1,841) (1,863) (1,890) (1,903)


117

Table 158. Balance Sheet Assets – Annual

R$ million 2 0 0 7 2 0 0 8 2 0 0 9 2 0 10 2 0 11 C A GR - %

A SSETS 3 6 7,2 10 52 1,2 73 70 8 ,54 9 8 11,172 9 8 1,2 3 0 2 7.9

C urrent and Long- Term A sset s 3 6 0 ,9 0 6 511,76 1 6 9 1,53 9 79 1,4 0 3 9 57,8 0 0 2 7.6

Available Funds 4,352 5,545 7,843 9,745 10,034 23.2

Short-Term Interbank Investments 51,124 119,408 168,398 107,579 166,288 34.3

Open M arket Investments 43,391 95,160 144,174 85,060 139,032 33.8

Interbank Deposits 7,733 24,249 24,224 22,519 27,256 37.0

M arketable Securit ies 75,201 86,909 124,337 143,867 168,230 22.3

Securit ies for Trading 19,112 26,136 38,274 50,445 63,257 34.9

Securit ies Available for Sale 38,109 38,374 62,161 75,142 88,385 23.4

Securit ies Held to M aturity 16,830 20,123 22,439 16,656 15,191 (2.5)

Financial Derivat ives 1,150 2,276 1,463 1,624 1,397 5.0

Interbank Accounts 33,445 21,287 26,592 89,526 96,342 30.3

Central Bank Deposits 32,278 20,882 24,280 87,035 93,660 30.5

Compuls. Dep, on Demand, Dep & Float 12,681 12,381 10,161 18,487 14,307 3.1

Compulsory Dep, on Savings Dep, 19,597 8,501 14,118 68,548 79,353 41.9

Others 1,167 405 2,312 2,491 2,682 23.1

Interdepartmental Accounts 188 228 295 258 335 15.6

Loans 138,817 190,882 261,783 317,726 379,045 28.5

Public Sector 2,472 4,040 6,388 7,184 8,486 36.1

Private Sector 146,324 200,020 273,080 326,975 388,781 27.7

(Allowance for Loan Losses) (9,980) (13,179) (17,685) (16,433) (18,222) 16.2

Leasing 32 2,968 4,701 3,857 2,851 207.9

Leasing and Sub-Leasing Receivables 1,109 3,039 4,932 4,048 3,064 28.9

Public Sector 80 55 63 46 31 (21.4)

Private Sector 1,028 2,984 4,869 4,002 3,033 31.1

(Unearned Lease Income) (1,054) - - - - -

(Allowance for Lease Losses) (23) (71) (231) (191) (213) 74.6

Other Receivables 54,883 83,279 95,233 114,962 129,554 24.0

Receivable on Guarantees Honored 49 71 91 75 77 11.8

Foreign Exchange Portfolio 9,023 20,914 8,671 11,878 17,615 18.2

Income Receivable 372 413 563 944 1,410 39.5

Trading And Brokerage of Securit ies 259 347 436 383 317 5.1

Specif ic Credits 757 846 932 1,030 1,146 10.9

Special Operat ions 1 0 0 - - -

Credits from Ins., Pension and Savings Bonds - 441 908 1,109 1,742 -

Tax Credits 13,826 16,499 21,910 21,970 22,754 13.3

Atuarial Assets 2,268 7,794 12,655 9,895 13,372 55.8

Warrants Deposits Receivable 15,409 18,007 21,209 23,388 25,584 13.5

Dest inat ion Surplus Fund - Previ - - - 7,595 8,030 -

Other Credits 13,816 19,325 29,539 38,269 39,172 29.8

(Provision for Doubtful Receivables) (896) (1,377) (1,682) (1,572) (1,665) 16.7

(With Loan Characterist ics) (311) (579) (702) (690) (580) 16.9

(Without Loan Characterist ics) (585) (798) (980) (882) (1,085) 16.7

Other Assets 2,865 1,256 2,358 3,884 5,120 15.6

Statutory Prof it Sharing 0 0 - - - -

Others 262 308 364 388 468 15.6

(Provision for Possible Losses) (152) (170) (176) (177) (188) 5.5

Prepaid Expenses 2,755 1,118 2,170 3,673 4,840 15.1

Permanent A sset s 6 ,3 0 4 9 ,512 17,0 10 19 ,770 2 3 ,4 3 0 3 8 .8

Investments 1,368 1,524 6,645 8,128 7,973 55.4

Investm, in Assoc. and Subsidiary Co, 1,316 721 5,776 7,116 6,841 51.0

Other Investments 115 871 947 1,097 1,216 80.2

(Provision for Losses) (64) (68) (78) (84) (84) 7.3

Property and Equipment 2,844 3,339 4,214 4,904 5,589 18.4

Land and Buildings in Use 2,349 2,668 3,336 3,557 4,217 15.7

Land and Buildings in Use Reavaliat ion - - - 150 150 -

Other Property and Equipment in Use 4,594 5,610 6,632 7,394 8,344 16.1

(Accumulated Depreciat ion) (4,100) (4,940) (5,753) (6,198) (7,123) 14.8

Leased Assets 1,507 4 1 - 1 (85.8)

Leases Assets 1,937 8 4 - 1 (84.4)

(Accumulated Depreciat ion) (430) (4) (2) - (1) (81.2)

Intangible - 4,041 5,677 6,452 9,736 -

Intangible Assets - 4,043 7,659 10,259 14,947 -

(Accumulated Amort izat ion) - (2) (1,982) (3,808) (5,211) -

Deferred Charges 586 604 472 286 132 (31.2)

Organizat ion and Expansion Costs 1,490 1,846 2,247 2,155 2,034 8.1

(Accumulated Amort izat ion) (904) (1,241) (1,775) (1,868) (1,903) 20.4


118

Table 159. Balance Sheet Liabilities – Quarterly

R$ million M ar/ 10 Jun/ 10 Sep / 10 D ec/ 10 M ar/ 11 Jun/ 11 Sep / 11 D ec/ 11

LIA B ILIT IES A N D SHA R EH. ' EQU ITY 72 4 ,8 8 1 755,70 6 79 6 ,8 15 8 11,172 8 6 6 ,6 3 6 9 0 4 ,14 5 9 4 9 ,78 1 9 8 1,2 3 0

C urrent and Long- Term A sset s 6 8 6 ,9 9 7 716 ,14 7 74 8 ,3 6 4 76 0 ,4 3 2 8 14 ,2 2 1 8 4 9 ,2 3 7 8 9 2 ,751 9 2 2 ,4 6 7

Deposits 342,624 343,961 348,336 376,851 381,170 396,151 419,519 442,386

Demand Deposits 54,973 59,025 59,018 63,503 59,553 61,138 57,614 62,016

Savings Deposits 78,719 81,541 85,703 89,288 90,516 89,217 95,512 100,110

Interbank Deposits 10,749 10,436 11,216 18,998 12,069 11,553 13,586 14,450

Time Deposits 197,934 192,715 192,042 204,652 219,031 234,243 252,806 265,809

Investment Deposits 249 243 358 410 0 0 0 -

M oney M arket Borrowing 157,866 166,603 165,594 142,175 180,112 192,875 194,728 195,175

Own Portfolio 45,011 63,630 60,188 56,795 55,939 68,406 64,864 66,475

Third-Party Portfolio 112,281 102,923 104,595 84,080 123,433 123,570 128,919 128,696

Others 574 50 811 1,300 740 900 944 4

Funds From Accept and Securit ies Placed 11,656 12,232 12,812 13,486 19,550 22,420 29,163 32,323

Commercial Papers 3,038 2,601 3,867 4,314 6,825 9,394 14,366 16,138

Foreign Securit ies 8,617 9,631 8,945 9,172 12,725 13,026 14,798 16,185

Interbank Accounts 2,341 3,034 2,922 18 2,292 3,188 3,240 24

Receipts and Paym. Pending Sett lement 2,320 3,023 2,909 0 2,280 3,177 3,226 0

Correspondent Banks 21 11 13 18 12 12 14 24

Interdepartmental Accounts 2,503 1,783 1,805 3,688 1,968 1,757 1,790 3,819

Third-Party Funds in Transit 2,414 1,768 1,652 3,683 1,946 1,747 1,787 3,817

Internal Transfers of Funds 88 15 154 4 21 10 3 3

Borrowing 7,884 12,016 9,443 8,598 8,939 9,699 12,185 12,257

Foreign Borrowing 7,884 12,016 9,443 8,598 8,939 9,699 12,185 12,257

Domestic Onlending – Off icial Inst itut ions 33,201 36,512 48,849 50,764 51,626 51,353 48,024 50,991

Federal Treasury 2,065 2,074 2,086 1,549 1,552 1,603 1,689 1,722

Nat ional Development Bank (BNDES) 20,264 22,250 26,013 26,978 27,163 26,406 27,503 28,978

Caixa Econômica Federal (CEF) 139 142 13 147 167 197 268 338

Fed. Prog. for Cap. Equip. Finan. (Finame) 9,708 11,373 12,812 14,046 14,897 15,414 16,292 17,506

Other Inst itut ions 1,025 675 7,925 8,043 7,847 7,733 2,272 2,446

Foreign Onlending 99 104 96 97 87 87 101 102

Financial Derivat ives 4,085 3,238 5,195 5,297 4,916 4,290 4,438 3,621

Other Accounts Payable 124,740 136,665 153,312 159,459 163,562 167,416 179,563 181,768

Collect ion of Taxes and Contribut ions 3,295 2,896 3,309 297 3,263 3,747 3,836 360

Foreign Exchange Portfolio 12,609 16,321 27,947 29,506 33,361 27,063 29,689 28,416

Stockholders and Statutory Distribut ions 1,355 1,885 2,157 1,992 1,662 2,326 2,425 2,122

Taxes and Social Security 21,796 24,308 26,404 27,613 23,952 25,747 27,770 28,057

Trading and Brokerage of Securit ies 1,071 1,247 1,385 1,676 1,670 1,656 801 836

Technical Prov. Ins., Pension & Cap.Op. 18,356 26,921 29,131 32,369 34,999 38,972 41,965 45,023

Financial and Development Funds 3,685 3,729 3,506 3,568 3,499 3,578 3,705 4,002

Perpetual Securit ies 3,659 3,643 3,474 3,361 2,521 2,366 2,872 2,846

Special Operat ions - 2 - - - 10 11 2

Subordinated Debt (FCO) 20,792 21,340 22,090 23,412 24,464 27,155 29,694 30,885

Actuarial Liabilit ies 6,525 6,758 6,803 6,907 6,921 7,032 7,099 7,142

Other Liabilit ies 31,597 27,615 27,105 28,757 27,250 27,764 29,697 32,077

D ef erred Income 2 3 8 2 2 7 2 4 7 3 0 0 2 9 6 2 9 0 3 18 3 4 7

Shareho lders’ Equit y 3 7,6 4 6 3 9 ,3 3 2 4 8 ,2 0 4 50 ,4 4 1 52 ,12 0 54 ,6 19 56 ,713 58 ,4 16

Capital 18,567 33,078 33,078 33,078 33,078 33,123 33,123 33,123

(Unpaid Capital) - (7,050) - - - - - -

Capital Reserves 5 - - - - - - -

Revaluat ion Reserves 6 6 6 6 6 6 5 5

Reserve for Retained Earnings 16,857 12,917 12,539 16,889 16,442 20,650 20,290 24,121

M ark-to-M arket – Securit ies and Derivat ives 405 411 630 467 385 442 711 724

Retained Earnings (Accumulated Losses) 4 - 1 - 0 - (26) -

(Treasury Shares) (31) (31) (0) (0) (0) (0) (0) (0)

Corporate Prof it Sharing 0 0 0 0 0 398 488 444

Income Accounts 1,833 - 1,951 - 2,208 - 2,122 -


119

Table 160. Balance Sheet Liabilities – Annual

R$ million 2 0 0 7 2 0 0 8 2 0 0 9 2 0 10 2 0 11 C A GR - %

LIA B ILIT IES A N D SHA R EHOLD ER S' EQU ITY 3 6 7,2 10 52 1,2 73 70 8 ,54 9 8 11,172 9 8 1,2 3 0 2 7.9

C urrent and Long- Term A sset s 3 4 2 ,8 2 5 4 9 1,3 3 6 6 72 ,4 2 9 76 0 ,4 3 2 9 2 2 ,4 6 7 2 8 .1

Deposits 188,282 270,841 337,564 376,851 442,386 23.8

Demand Deposits 51,311 51,949 56,459 63,503 62,016 4.9

Savings Deposits 45,839 54,965 75,742 89,288 100,110 21.6

Interbank Deposits 5,144 14,065 11,619 18,998 14,450 29.5

Time Deposits 85,520 149,618 193,516 204,652 265,809 32.8

Investment Deposits 468 243 229 410 - -

M oney M arket Borrowing 72,270 91,130 160,821 142,175 195,175 28.2

Own Portfolio 28,126 21,927 31,902 56,795 66,475 24.0

Third-Party Portfolio 44,144 69,203 128,745 84,080 128,696 30.7

Others - - 174 1,300 4 -

Funds from Acceptances and Securit ies Placed 1,297 3,479 7,362 13,486 32,323 123.4

Commercial Papers - 269 2,765 4,314 16,138 -

Foreign Securit ies 1,297 3,210 4,597 9,172 16,185 87.9

Interbank Accounts 12 21 21 18 24 20.2

Receipts and Payments Pending Sett lement 2 1 1 0 0 (67.6)

Correspondent Banks 9 20 21 18 24 26.5

Interdepartmental Accounts 2,428 2,496 3,229 3,688 3,819 12.0

Third-Party Funds in Transit 2,311 2,495 3,215 3,683 3,817 13.4

Internal Transfers of Funds 117 0 14 4 3 (60.6)

Borrowing 2,833 7,627 6,370 8,598 12,257 44.2

Foreign Borrowing 2,833 7,627 6,370 8,598 12,257 44.2

Domest ic Onlending – Off icial Inst itut ions 17,487 22,436 31,390 50,764 50,991 30.7

Federal Treasury 3,185 3,485 2,101 1,549 1,722 (14.3)

Nat ional Development Bank (BNDES) 8,713 11,168 19,630 26,978 28,978 35.0

Caixa Econômica Federal (CEF) - - 146 147 338 -

Fed. Prog. For Cap. Equip. Finan. (Finame) 4,866 6,585 8,381 14,046 17,506 37.7

Other Inst itut ions 723 1,199 1,133 8,043 2,446 35.6

Foreign Onlending 0 98 99 97 102 282.7

Financial Derivat ives 1,947 3,895 4,724 5,297 3,621 16.8

Other Accounts Payable 56,268 89,312 120,848 159,459 181,768 34.1

Collect ion of Taxes and Contribut ions 233 252 377 297 360 11.5

Foreign Exchange Portfolio 6,609 15,964 12,174 29,506 28,416 44.0

Stockholders and Statutory Distribut ions 850 1,838 2,625 1,992 2,122 25.7

Taxes and Social Security 12,725 17,570 24,297 27,613 28,057 21.9

Trading and Brokerage of Securit ies 243 401 528 1,676 836 36.2

Technical Prov. Insurance, Pension & Capitalizat ion. Op. - 12,675 17,339 32,369 45,023 -

Financial and Development Funds 2,117 2,458 4,135 3,568 4,002 17.3

Perpetual Securit ies 894 1,185 3,516 3,361 2,846 33.6

Special Operat ions 2 2 206 - 2 (2.5)

Subordinated Debt (FCO) 10,012 11,772 18,553 23,412 30,885 32.5

Actuarial Liabilit ies 4,051 5,662 6,374 6,907 7,142 15.2

Other Liabilit ies 18,533 19,531 30,725 28,757 32,077 14.7

D ef erred Income 12 3 - - 3 0 0 3 4 7 2 9 .6

Shareho lders’ Equit y 2 4 ,2 6 2 2 9 ,9 3 7 3 6 ,119 50 ,4 4 1 58 ,4 16 2 4 .6

Capital 13,212 13,780 18,567 33,078 33,123 25.8

Capital Reserves 0 5 5 - - -

Revaluat ion Reserves 6 7 7 6 5 (5.4)

Reserve For Retained Earnings 10,695 15,977 17,301 16,889 24,121 22.5

M ark-to-M arket – Securit ies and Derivat ives 350 199 270 467 724 19.9

Retained Earnings (Accumulated Losses) - - - - - -

(Treasury Shares) - (31) (31) (0) (0) -

Corporate Prof it Sharing - (0) 0 0 444 -


120

12.2. Summarized Corporate Law Income Statement

Table 161. Summarized Corporate Law Income Statement – Quarterly


R$ million 1Q10 2 Q10 3 Q10 4 Q10 1Q11 2 Q11 3 Q11 4 Q11

F inancial Int ermed iat io n Inco me 17,893 18,737 20,312 21,093 21,909 23,948 28,633 25,172

Loans¹ 11,864 12,253 13,446 13,397 14,019 15,014 17,022 15,944

Leasing 240 204 218 151 151 163 186 116

Securit ies 5,644 5,195 6,262 6,137 6,133 6,952 10,574 7,189

Financial Derivat ives (232) (29) (1,407) (571) (413) (878) 233 (403)

Foreign Exchange Portfolio (18) 71 491 538 244 768 (1,577) 190

Compulsory Investments 274 917 1,119 1,276 1,597 1,742 1,969 1,923

Financial Inc. from Insur., Pension & Savings Bonds 120 125 182 165 178 187 226 212

F inancial Int ermed iat io n Exp enses (12,356) (12,577) (13,861) (13,679) (14,986) (16,418) (22,911) (17,834)

M oney M arket Funds (8,493) (9,055) (10,481) (10,727) (11,539) (12,774) (15,401) (13,340)

Borrowing. Assignments and Onlending (903) (997) (732) (841) (816) (795) (4,225) (1,282)

Allowance for Loan Losses (2,959) (2,525) (2,648) (2,112) (2,631) (2,848) (3,285) (3,211)

Gro ss Inco me f ro m F inanc. Int ermed iat io n 5 ,537 6 ,160 6 ,451 7 ,414 6 ,923 7 ,530 5 ,722 7 ,338

Ot her Op erat ing Inco me ( Exp enses) (1,807) (1,677) (2 ,258) (1,409) (2 ,069) (2 ,156) (2 ,261) (2 ,521)

Fee Income² 2,555 2,639 2,758 2,824 2,835 2,865 3,138 3,374

Banking Fees Revenues² 1,148 1,386 1,380 1,482 1,272 1,522 1,581 1,652

Personnel Expenses (3,021) (3,105) (3,442) (3,452) (3,272) (3,531) (3,850) (4,260)

Other Administrat ive Expenses (3,277) (3,039) (3,223) (3,502) (3,133) (3,201) (3,425) (3,664)

Taxes (864) (944) (949) (993) (1,019) (1,084) (1,027) (1,129)

Equity Int. in the Results of Subs. and Aff il. 50 29 (89) (36) (20) (140) 558 56

Income from Insur., Pension & Savings Bonds 440 468 488 491 512 667 570 515

Other Operat ing Revenues 3,041 2,948 3,225 4,574 3,085 3,905 2,698 3,290

Other Operat ing Expenses (1,881) (2,061) (2,405) (2,796) (2,329) (3,162) (2,505) (2,355)

Op erat ing Inco me 3 ,730 4 ,482 4 ,193 6 ,005 4 ,854 5 ,374 3 ,461 4 ,818

Non-Operat ing Income 217 129 26 (2) 19 173 24 9

Inco me B ef o re T axes 3 ,946 4 ,612 4 ,218 6 ,004 4 ,873 5 ,547 3 ,485 4 ,826

Income and Social Contribut ion Taxes (1,242) (1,473) (1,180) (1,426) (1,497) (1,705) (148) (1,372)

Statutory Prof it Sharing (353) (414) (414) (575) (443) (484) (420) (443)

M inority Interest Earnings 0 0 - - (0) (27) (27) (39)

N et Inco me 2 ,351 2 ,725 2 ,625 4 ,002 2 ,932 3 ,330 2 ,891 2 ,972


121

Table 162. Summarized Corporate Law Income Statement – Annual


R$ million 2007 2008 2009 2010 2011 C A GR - %

F inancial Int ermed iat io n Inco me 40,274 55,641 63,138 78,035 99,661 25.4

Loans¹ 25,261 33,221 40,368 50,960 61,998 25.2

Leasing 192 314 647 814 616 33.8

Securit ies 12,632 20,692 21,350 23,238 30,849 25.0

Financial Derivat ives 175 (1,283) (1,223) (2,239) (1,461) -

Foreign Exchange Portfolio 396 464 686 1,083 (374) -

Compulsory Investments 1,616 1,910 816 3,586 7,231 45.4

Financial Inc. from Insur., Pension & Savings Bonds - 324 494 592 803 -

F inancial Int ermed iat io n Exp enses (25,119) (42,822) (45,052) (52,473) (72,148) 30.2

M oney M arket Funds (17,797) (25,532) (30,146) (38,756) (53,055) 31.4

Borrowing. Assignments and Onlending (1,645) (8,685) (2,510) (3,473) (7,118) 44.2

Allowance for Loan Losses (5,677) (8,606) (12,396) (10,244) (11,975) 20.5

Gro ss Inco me f ro m F inancial Int ermed iat io n 15,155 12,819 18,086 25,562 27,513 16.1

Ot her Op erat ing Inco me ( Exp enses) (7 ,881) (1,150) (4 ,494) (7 ,151) (9 ,006) 3 .4

Fee Income² 9,902 9,771 10,172 10,777 12,213 5.4

Banking Fees Revenues² - 2,040 3,339 5,396 6,028 -

Personnel Expenses (9,161) (8,870) (11,838) (13,020) (14,913) 13.0

Other Administrat ive Expenses (6,735) (7,917) (11,212) (13,040) (13,422) 18.8

Taxes (2,064) (2,635) (3,333) (3,750) (4,259) 19.9

Equity Int. in the Results of Subs. and Aff il. 154 1,392 (991) (46) 455 31.2

Income from Insur., Pension & Savings Bonds - 892 1,574 1,888 2,265 -

Other Operat ing Revenues 5,024 11,782 16,974 13,788 12,978 26.8

Other Operat ing Expenses (5,000) (7,605) (9,180) (9,144) (10,351) 20.0

Op erat ing Inco me 7 ,273 11,669 13,592 18,410 18,507 26.3

Non-Operat ing Income 281 413 1,844 370 225 (5.4)

Inco me B ef o re T axes 7 ,554 12,082 15,435 18,781 18,732 25.5

Income and Social Contribut ion Taxes (1,847) (2,145) (3,903) (5,321) (4,722) 26.5

Statutory Prof it Sharing (649) (1,134) (1,385) (1,756) (1,791) 28.9

M inority Interest Earnings - - (1) 0 (93) -

N et Inco me 5 ,058 8 ,803 10,148 11,703 12,126 24.4


122

12.3. Income Statement with Reallocations

Table 163. Income Statement with Reallocations – Quarterly

* Reduced Loan Operations Revenues related to loans acquired, given that the premiums paid in acquisitions of portfolios have been recognized in contrast with the Financial Intermediation Income. The historical data of information has changed since 1Q10. ** Reclassified, since 1Q10, from services income to Banking Fee Income, according to Bacen Circular Letter Nº 3,490/2011.

R$ million 1Q10 2 Q10 3 Q10 4 Q10 1Q11 2 Q11 3 Q11 4 Q11

F inancial Int ermed iat ion Income 18 ,4 74 19 ,4 0 1 2 1,14 4 2 1,4 17 2 2 ,514 2 4 ,0 9 4 3 0 ,2 71 2 5,9 70

Loans* 12,392 12,879 14,078 14,056 14,598 15,550 17,620 16,717

Leasing 240 204 218 151 151 163 186 116

Securit ies 5,644 5,195 6,262 6,137 6,133 6,952 10,574 7,189

Financial Derivat ives (232) (29) (1,407) (571) (413) (878) 233 (403)

Foreign Exchange Port folio (18) 71 491 538 244 768 (1,577) 190

Compulsory Investments 274 917 1,119 1,276 1,597 1,742 1,969 1,923

Financial Income from Insur., Pension & Cap. Op. 120 125 182 165 178 187 226 212

FX Gain (Loss) on Foreign Investments 18 (5) (104) (58) (29) (124) 577 9

Other Op. Inc. of a Fin. Intermed. Nature 28 57 391 (224) 75 (185) 40 (5)

Tax Hedge 8 (15) (86) (54) (19) (82) 422 20

F inancial Int ermed iat ion Expenses ( 9 ,2 0 5) ( 10 ,0 52 ) ( 11,2 13 ) ( 11,56 8 ) ( 12 ,3 55) ( 13 ,570 ) ( 19 ,6 2 6 ) ( 14 ,6 2 2 )

M oney M arket Funds (8,302) (9,055) (10,481) (10,727) (11,539) (12,774) (15,401) (13,340)

Borrowing .Assignments and Onlending (903) (997) (732) (841) (816) (795) (4,225) (1,282)

N et Int erest Income 9 ,2 6 9 9 ,3 4 9 9 ,9 3 1 9 ,8 4 9 10 ,159 10 ,52 4 10 ,6 4 5 11,3 4 8

Allowance for Loan Losses (3,026) (2,871) (2,639) (2,139) (2,629) (3,047) (3,259) (2,892)

N et F inancial M arg in 6 ,2 4 2 6 ,4 78 7,2 9 2 7,711 7,53 0 7,4 77 7,3 8 6 8 ,4 56

Fee Income 3,704 4,025 4,138 4,306 4,108 4,388 4,720 5,027

Fee Income** 2,555 2,639 2,758 2,824 2,835 2,865 3,138 3,374

Banking Fee Income** 1,148 1,386 1,380 1,482 1,272 1,522 1,581 1,652

Res. from Ins., Pension Plan and Savings Bonds 440 468 488 491 512 667 570 515

Taxes on Revenues (839) (909) (911) (968) (977) (1,027) (1,006) (1,071)

C ont r ibut ion M arg in 9 ,54 8 10 ,0 6 3 11,0 0 7 11,53 9 11,173 11,50 4 11,6 70 12 ,9 2 7

Administrat ive Expenses (5,300) (5,471) (5,726) (6,068) (5,692) (5,886) (6,208) (6,966)

Personnel Expenses (2,851) (2,937) (3,186) (3,270) (3,145) (3,364) (3,481) (3,954)

Other Administrat ive Expenses (2,449) (2,534) (2,541) (2,798) (2,547) (2,522) (2,727) (3,012)

Other Tax Expenses (26) (34) (29) (19) (40) (48) (67) (61)

C ommercial Income 4 ,2 2 2 4 ,559 5,2 52 5,4 52 5,4 4 0 5,571 5,3 9 5 5,9 0 0

Legal Risk (450) (239) (515) 127 (177) (188) (491) (4)

Legal Claims (238) 35 (259) 35 (98) (190) (122) 275

Labor Lawsuits (212) (274) (256) 92 (79) 2 (369) (278)

Other Operat ing Income (Expenses) (360) (451) (705) 608 (443) (93) (1,031) (966)

Eq.Interest in Resul. Subs. and Aff il. 32 34 15 22 9 (16) (18) 47

Other Operat ing Income/Expenses (392) (485) (720) 586 (452) (77) (1,013) (1,013)

Other Operat ing Income 1,043 1,108 1,235 1,613 1,587 1,311 1,401 1,641

PREVI 913 913 552 1,921 624 1,296 531 531

Other Operat ing Expenses (2,348) (2,507) (2,506) (2,948) (2,663) (2,684) (2,944) (3,184)

Operat ing Income 3 ,4 12 3 ,8 6 9 4 ,0 3 2 6 ,18 8 4 ,8 2 0 5,2 9 0 3 ,8 73 4 ,9 3 1

Non-Operat ing Income 3 15 26 (2) 19 5 24 9

Income Before Taxes 3 ,4 15 3 ,8 8 4 4 ,0 57 6 ,18 6 4 ,8 3 9 5,2 9 5 3 ,8 9 7 4 ,9 4 0

Income and Social Contribut ion Taxes (1,053) (1,194) (1,072) (1,923) (1,474) (1,566) (924) (1,425)

Interest on Own Capital Tax Benef it 207 210 270 274 290 295 318 318

Interest on Own Capital Tax Benef it (307) (363) (408) (559) (442) (472) (373) (450)

Statutory Prof it Sharing - - - - - - - -

M inority Interest Earnings 0 0 - - (0) (27) (27) (39)

R ecurr ing Income 2 ,0 56 2 ,3 2 7 2 ,578 3 ,70 4 2 ,9 2 3 3 ,2 3 0 2 ,573 3 ,0 2 5

Extraordinary Items 384 310 47 298 10 100 318 (53)

Sale of Investments 214 - - - - 169 - -

Economic Plans (85) (140) 84 (231) 17 10 (35) (95)

Tax Eff iciency - - - 460 - - 386 -

Cont ingent Liabilit ies (BESC) - 250 - - - - - -

Addit ional Provision for Loan Losses - 332 - - - - - -

Reversal of Labor Liabilit ies 568 - - - - - - -

Capital Gain - BB Seguros Part icipações - 114 - - - - - -

Tax Effects and Statutory Prof it Sharing on One-Off Items (313) (246) (37) 70 (8) (79) (33) 42

PREVI Actuarial Assets - Adjustments (88) 88 - - - - - -

N et Income 2 ,3 51 2 ,72 5 2 ,6 2 5 4 ,0 0 2 2 ,9 3 2 3 ,3 3 0 2 ,8 9 1 2 ,9 72


123

Table 164. Income Statement with Reallocations – Annual

* Reduced Loan Operations Revenues related to loans acquired, given that the premiums paid in acquisitions of portfolios have been recognized in contrast with the Financial Intermediation Income. The historical data of information has changed since 1Q10. ** Reclassified, since 1Q10, from services income to Banking Fee Income, according to Bacen Circular Letter Nº 3,490/2011.

R$ million 2 0 0 7 2 0 0 8 2 0 0 9 2 0 10 2 0 11 C A GR - %

F inancial Int ermed iat io n Inco me 39,975 58,400 65,182 80,436 102,849 26.6

Loans* 25,261 34,507 41,509 53,405 64,486 26.4

Leasing 192 314 647 814 616 33.8

Securit ies 12,632 20,496 21,350 23,238 30,849 25.0

Financial Derivat ives 175 (1,283) (1,223) (2,239) (1,461) -

Foreign Exchange Port folio 396 464 686 1,083 (374) -

Compulsory Investments 1,616 1,910 816 3,586 7,231 45.4

Financial Income from Insur., Pension & Capitalizat ion Op. - 324 494 592 803 -

FX Gain (Loss) on Foreign Investments (574) 941 (1,042) (149) 433 -

Other Op. Inc. of a Fin. Intermed. Nature 276 392 2,721 252 (75) -

Tax Hedge - 334 (776) (147) 341 -

F inancial Int ermed iat io n Exp enses (19,168) (33,885) (32,269) (42,038) (60,173) 33.1

M oney M arket Funds (17,523) (25,200) (29,759) (38,565) (53,055) 31.9

Borrowing .Assignments and Onlending (1,645) (8,685) (2,510) (3,473) (7,118) 44.2

N et Int erest Inco me 20,807 24,515 32,913 38,398 42,675 19.7

Allowance for Loan Losses (5,378) (6,799) (11,629) (10,675) (11,827) 21.8

N et F inancial M arg in 15,430 17,716 21,284 27,724 30,848 18.9

Fee Income 9,902 11,811 13,511 16,173 18,242 16.5

Fee Income** 9,902 9,771 10,172 10,777 12,213 5.4

Banking Fee Income** - 2,040 3,339 5,396 6,028 -

Res. From Insurance, Pension Plan and Savings Bonds - 892 1,574 1,888 2,265 -

Taxes on Revenues (1,911) (2,362) (3,149) (3,627) (4,081) 20.9

C o nt r ib ut io n M arg in 23,420 28,058 33,220 42,157 47,274 19.2

Administrat ive Expenses (13,448) (15,358) (19,185) (22,565) (24,752) 16.5

Personnel Expenses (7,077) (8,112) (10,280) (12,244) (13,943) 18.5

Other Administrat ive Expenses (6,219) (7,246) (8,905) (10,322) (10,809) 14.8

Other Tax Expenses (153) (140) (100) (107) (216) 9.1

C o mmercial Inco me 9 ,972 12,560 13,936 19,484 22,306 22.3

Legal Risk (993) (722) (502) (1,076) (860) (3.6)

Legal Claims (317) (161) (242) (427) (135) (19.2)

Labor Lawsuits (676) (560) (260) (649) (724) 1.7

Other Operat ing Income (Expenses) (98) (2,198) 332 (908) (2,533) 125.6

Eq.Interest in Resul. Subs. and Aff il. 728 (97) 51 102 22 (58.5)

Other Operat ing Income/Expenses (825) (2,102) 281 (1,010) (2,554) 32.6

Other Operat ing Income 2,744 3,698 6,843 4,999 5,939 21.3

PREVI - - 1,193 4,299 2,981 -

Other Operat ing Expenses (3,569) (5,799) (7,755) (10,309) (11,475) 33.9

Op erat ing Inco me 8 ,881 9 ,639 13,766 17,500 18,914 20.8

Non-Operat ing Income 132 413 78 43 56 (19.1)

Inco me B ef o re T axes 9,013 10,052 13,844 17,543 18,970 20.4

Income and Social Contribut ion Taxes (2,484) (2,416) (4,155) (5,242) (5,388) 21.4

Interest on Own Capital Tax Benef it 455 526 743 961 1,221 28.0

Interest on Own Capital Tax Benef it (649) (951) (1,157) (1,637) (1,737) 27.9

Statutory Prof it Sharing - - (26) - - -

Part icipações M inoritárias - - (1) 0 (93) -

R ecurr ing Inco me 5 ,880 6 ,685 8 ,506 10,664 11,751 18.9

Extraordinary Items (821) 2,118 1,642 1,039 375 -

Addit ional Provision for Loan Losses - (1,594) (676) 332 - -

Cassi - Assistence Plan (493) - - - - -

PAA - Early Ret irement Plan (915) - - - - -

Permanent Exclusions Tax Benef it 141 - - - - -

Disposal of Investments 149 142 1,625 - - -

Economic Plans (199) (372) 157 (371) (103) (15.3)

Revaluat ion of Consolidated Shares - 241 - - - -

Change of Credit Card Basis - (54) - - - -

Previ – Unrecognized Actuarial Gains - 5,326 - - - -

Cassi – Unrecognized Actuarial Losses - (1,259) - - - -

Sale of Interest in VISA Internacional - 361 141 214 169 -

Credit Assignment - 67 633 - - -

Tax Eff iciency - 412 - 460 386 -

Cont ingent Liabilit ies (BESC) - (360) - 250 - -

Tax Credits (BESC) - 194 - - - -

Provision for Labor, Civil and Tax Claims - - (1,367) - - -

Tax Credits - Dif ferent ial of CSLL rate - - 1,213 - - -

Voluntary Resignat ion Program - BNC - - (215) - - -

Reversal of Labor Liabilit ies - - 644 568 - -

Capital Gain - BB Seguros Part icipações - - - 114 - -

Tax Effects and Statutory Prof it Sharing on One-Off Items 496 (986) (513) (527) (78) -

N et Inco me 5,058 8 ,803 10,148 11,703 12,126 24.4


124

Vice Presidency of Financial Management, Capital Markets and Investor Relations Vice-Presidency Ivan de Souza Monteiro Investor Manager Director Gustavo Henrique Santos de Sousa Executive Manager Gisele Campana Rodrigues Divisional Managers Alfredo Tertuliano de Carvalho Erick Figueiredo Rodrigues Glauco Ribeiro Barbirato Tavares Analysts Alita de Oliveira Arantes Bruno Pio de Abreu Travassos Bruno Santos Garcia Carlos Vieira do Nascimento Danilo de Melo Farias Diogo Simas Machado Elias Santos Lima Eva Maria Gitirana de Oliveira Fabíola Lopes Ribeiro Heverton Masaru Ono Hilzenar Souza Alves da Cunha Janaína Marques Storti Joabel Martins de Oliveira Joaquim Camilo de Castro Leonardo Resende Nader Marcelo de Campos e Silva Marcone Edson de Vasconcelos Formiga Filho Mariana Reschke da Cunha Rafael Augusto Sperendio Rafael de Freitas Peixoto Raquel Castelo de Carvalho Ferrari Toni Rudi Schmitz

INDEX

Management Report 2

Financial Statements 31

Balance Sheet ...................................................................................................................................... 31 Statement of Income ............................................................................................................................ 35 Statement of Changes in Shareholders’ Equity................................................................................ 36 Statement of Cash Flows .................................................................................................................... 38 Statement of Added Value .................................................................................................................. 39

Notes to the Financial Satatements 40

Note 1 – The Bank and its operations ................................................................................................ 40 Note 2 – Corporate restructuring ....................................................................................................... 40 Note 3 – Presentation of the Financial Statements .......................................................................... 43 Note 4 – Description of significant accounting policies .................................................................. 46 Note 5 – Information by segment ....................................................................................................... 53 Note 6 – Cash and cash equivalents .................................................................................................. 58 Note 7 – Short-term Interbank Investments ...................................................................................... 58 Note 8 – Securities and derivative financial instruments ................................................................ 59 Note 9 – Interbank accounts ............................................................................................................... 73 Note 10 – Loan Operations ................................................................................................................. 74 Note 11 – Other receivables ................................................................................................................ 82 Note 12 – Foreign exchange portfolio ............................................................................................... 84 Note 13 – Other assets ........................................................................................................................ 85 Note 14 – Investment ........................................................................................................................... 86 Note 15 – Property and equipment .................................................................................................... 90 Note 16 – Intangible assets ................................................................................................................. 91 Note 17 – Deposits and money market borrowings ......................................................................... 92 Note 18 – Borrowing and onlendings ................................................................................................ 96 Note 19 – Resources from Securities Issues .................................................................................... 99 Note 20 – Other liabilities .................................................................................................................. 101 Note 21 – Operations of insurance, pension and capitalization ................................................... 105 Note 22 – Other income/operating expenses .................................................................................. 109 Note 23 – Non-operating income, net .............................................................................................. 111 Note 24 – Shareholders' equity ........................................................................................................ 112 Note 25 – Taxes .................................................................................................................................. 116 Note 26 – Related-party Transactions ............................................................................................. 119 Note 27 – Benefits for employees .................................................................................................... 122 Note 28 – Contingent assets and liabilities and legal obligations – Taxes and social security 133 Note 29 – Risk management and regulatory capital ...................................................................... 137 Note 30 – Statement of comprehensive income ............................................................................. 146 Note 31 – Other Information.............................................................................................................. 146

Independent Auditors’ Report 150

Summary of Audit Commitee Report 152

Declaration of the Board of Directors 154

Fiscal Council Report 155

Members of the Management Bodies 156

Management Report 2011

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Dear Shareholders,

We present the Management Report of Banco do Brasil (BB) for the year 2011, in conformity with the requirements of the Brazilian Corporate Law, the National Monetary Council (CMN), the Central Bank of Brazil – Bacen, the Brazilian Securities and Exchange Commission – CVM and BB's By-laws.

ECONOMIC ENVIRONMENT

In the international environment, the year 2011 was marked by the deterioration in the perception of risk concerning the fiscal sustainability of some countries from the European continent in an outlook of strong review of economic growth prospects, increase of the sovereign risk, downgrading of rating and significant worsening of financing conditions. The risk of a new recession in the Region also led the European Central Bank to reduce the interest rate to 1.0% per annum.

In the United States, notwithstanding the incipient signs of economic recovery, especially from the second half of the year, which also contributed to the appreciation of the US dollar, the challenges for maintenance of economic growth are still relevant. The job market continued weak, with the average unemployment rate close to 9.0% in 2011, and the family deleveraging process still at a slow pace, besides the creation of a certain political impasse surrounding tax issues.

Among these adversities, the Brazilian economy again has shown resilience, anchored in robust macroeconomic fundamentals and supported by domestic demand’s dynamism. Considering that the adverse overseas environment will bring a disinflationary process for Brazil, through the decline in international commodity prices and through the slowdown of activity’s level, Bacen decided proactivelychange the direction of the monetary policy in the second half of 2011. The continuous process of raising the interest rate observed up to the middle of the year brought on a new cycle of monetary policy easing as of August, which was also facilitated by more favorable fiscal conditions. As a result, the Selic rate, which reached 12.5% per annum, in July, ended the year at 11.0% per annum even in an environment of strong pressure on prices, whose inflation rate, measured by the Amplified Consumer Price Index - IPCA, ended the period at 6.5%. Thus, 2011 was the eighth consecutive year of inflation target fulfillment.

Although the transmission channels of the crisis have led to a less dynamism in the Brazilian economy, especially in the final part of the year, 2011 was characterized by unemployment rates at minimum levels, high net generation of formal jobs and important real income gains. Such fundamentals, together with the dynamism of the credit market, continued acting as the main impulse vectors of domestic demand and functioned as preponderant factors to guarantee better resistance of economy to the adverse effects of the crisis in developed countries.

HIGHLIGHTS OF THE PERIOD

With a net income of R$ 12.1 billion and total assets of R$ 981.2 billion, BB ended the year 2011 as the leader in the Brazilian Banking Industry, with an emphasis on its loan operations, with a market share of 19.2%.

We present below a chronological list of some events relating to BB that merit special emphasis in the period:

a) issuance, in January, of securities in its Global Medium Term Notes (GMTN) program in Euros, which resulted in the funding of EUR 750 million, one of the largest ever carried out by a Brazilian company;

b) acquisition in January, of all the equity interest (16.67% ON) held by Sul América Capitalização S.A. in Brasilcap, for the price of R$ 137 million;

c) in January, signing of a stock purchase agreement with Visa International Service Association for the purchase of part of the shares held by that firm in Companhia Brasileira de Soluções e Serviços - CBSS, corresponding to 4.99% of the capital of CBSS, valued at R$ 85.5 million;


3

d) launch of the Bandeira Elo flag, administered by the company Elo Serviços, with sales of the Ourocard Elo starting on April. The consummation of the partnership of Banco do Brasil with Elo Participações - responsible for the consolidation of business related to electronic payment methods (credit cards, debit, prepaid, co-branded) – was consummated with the signing of the corporate documents on April;

e) upgrading, in April, of BB’s ratings by the Fitch Rating agency;

f) consummated the operation for acquisition of the controlling interest of Banco Patagonia (from Argentina), with the payment to the sellers and transfer to BB of 366,825,016 common shares, corresponding to 51% of the capital stock and voting capital of that bank. The Public Offering of Compulsory Acquisition (OPA) was held in October. With the Offer BB became the holder of 424,101,958 common shares, corresponding to 58.96% of the capital stock and voting capital;

g) signing, on April, of an agreement for the sale for acquisition of 100% of the stock of EuroBank, for the price of US$ 6 million;

h) overseas Subordinated Debt issue in the value of US$ 1.5 billion, in May. Bacen approved the eligibility of this issue as Tier II capital of the Referential Equity.

i) opening of the concept store in Brasilia, in May, constituting an unprecedented initiative in retail banking, with a space where customers can experience the key attributes that make up BB's brand positioning;

j) in May, acquisition for R$ 2.8 billion, of the rights to offer banking products and services, as of 01.02.2012, at the branches of the "Banco Postal" of Empresa Brasileira de Correios e Telégrafos - ECT;

k) upgrading, in June, of BB's ratings by the Moody's agency;

l) Banco do Brasil completed, in June, 5 years of listing in the Novo Mercado, or New Market, the highest segment of companies that adopt Corporate Governance practices of BM&FBovespa;

m) on October, Bacen approved the ratification of BB’s capital increase of R$ 44.6 million, resulting from the exercise of the series "C" Subscription Bonuses. The operation resulted in the issue of 4.7 million new common shares. After the operation, Banco do Brasil liquidated all the series "C" Subscription Bonuses;

n) upgrading, on November, of the rating on the global scale from "BBB-" to "BBB" by the Standard & Poor's agency;

o) issuance of Senior Notes in the US market in November. Banco do Brasil funded US$ 500 million with the operation, with one of the lowest costs ever recorded, which shows the confidence of international investors in the Institution.

STRATEGIC PLAN FOR THE PERIOD OF 2012–2016

Aiming to maintain its leadership in the Brazilian Banking Industry and to reinforce its role of essential partner for the development of Brazil, Banco do Brasil prioritized the generation of sustainable results, expansion of globalization, improvement of customer care, and improvement of operating efficiency as major strategic topics of the period of 2012-2016.

The sustainable results will be derived from the maintenance of good Corporate Government practices, combined with investments in infrastructure and technology, as well as the continuous training of the employees for the Company's new challenges. The fulfillment of the institutional role that coordinates the profitability of operations with the commitment to the country's development also contributes towards business sustainability. The partnership with the government will be achieved with an emphasis on social and productive inclusion - urban and rural - on technical and professional qualification in activities that generate income and employment and on the modernization of public pension plans.


4

The expansion of international operations will have three vectors as drivers: overseas Brazilian communities, the transnationalization of Brazilian corporations, and expansion of the Brazil's business relations with the world.

The improvement in customer service will occur through the refinement of the relationship with clients and the increase of operating efficiency will take place through the improvement of process management.

SUSTAINABILITY

In 2011, Banco do Brasil once again incorporated socio-environmental responsibility into the Company's various processes. One of the areas of emphasis was responsible credit, which prohibits the concession of loans to clients included in a list of employers that submit their workers to degrading forms of labor, keep them under slavery-like conditions or are involved in child labor and the sexual exploitation of minors. In addition, BB is a signatory of Sustainable Credit Pacts and Commitments, such as the Equator Principles and the Green Protocol.

BB'S AGENDA 21

In the scope of the Sustainability Plan - BB's Agenda 21, in 2011, actions were deployed, intended to refine the management of crises and risks related to extreme climatic events and the management of suppliers with new standards for sustainable purchasing and reverse logistics.

The management of BB's Digital Inclusion Program transferred from the Technology Directorship to Fundação Banco do Brasil and integrating the projects of telecenters with that of digital stations and the opening of a new program, the Program for Social Inclusion and Transformation, by means of the donation of replaced computers.

In the year 2011, the Sustainable Regional Development Strategy recorded 4.1 thousand business plans under implementation, involving 1.7 million beneficiaries in 4.1 thousand Brazilian municipalities, with a loan portfolio balance of R$ 11.8 billion, of which about R$ 7.1 billion were invested through the National Program for Family-based Agriculture Empowerment (Pronaf).

In 2011, Banco do Brasil launched four fascicles on performance in the chain of recycling and solid waste, focusing on the 4,976 municipalities with up to 50 thousand inhabitants. Guidance to local governments and contribute to the preparation of the Municipal or Inter-municipal plans for Integrated Management of Solid Waste, in compliance with Law 12305/10, which established the National Policy on Solid Waste, of shared responsibility among governments, entrepreneurs and citizens.

The segment of micro and small enterprises, BB's partnership in the Local Productive Arrangements (APL) seeks to promote association and cooperation among entrepreneurs, to increase the concession of credit, to promote expansion and technological innovation as well as business capacity building and, consequently, access to markets. Up to December, BB supported 206 APL, delivering services to 21.4 thousand ventures and delivering R$ 2.7 billion in loans.

For further information, see the website www.bb.com.br/sustentabilidade

ÁGUA BRASIL (WATER BRAZIL) PROGRAM

Banco do Brasil acts in defense of the "water" cause by means of projects in the rural environment and in the urban environment, in communication and engagement for the cause, in the refinement of socio-environmental criteria for financing and investment of the Bank and in the development of new business.

In order to carry out actions, BB agreed to enter into a five-year partnership, extendable for a further five years, with WWF – Brasil, FBB – Fundação Banco do Brasil and ANA – Agência Nacional de Águas.


5

Also in relation to the topic of water, BB became a signatory of the platforms CEO Water Mandate and World Water Council, world-level discussion forums aiming at the identification and replication of best practices in the consumption of water resources.

For further information, see the website www.bb.com.br/aguabrasil

ECONOMIC-FINANCIAL PERFORMANCE

Banco do Brasil recorded net income of R$ 12.1 billion in the year, 3.6% higher than the one recorded in the same period of previous year, with an annualized return on equity of 22.4%. Net income per share was R$ 4.28 for the period.

Assets totaled R$ 981.2 billion, growth of 21% in 12 months, with a return on assets of 1.4% in the period. Shareholders' equity reached R$ 58.4 billion, an increase of 15.8% in 12 months.

R$ million

Highlights

Income¹ 2011 2010 � 2010 (%)Net Income 12,126 11,703 3.6 Income (without extraordinary items) 11,751 10,664 10.2 Gross Financial Intermediation Income 27,513 25,562 7.6 Revenue from Loans 61,998 50,960 21.7 Fee Income 18,242 16,173 12.8 Income from Insurance, Pension Plans and Saving Bonds 2,265 1,888 20.0 Administrative expenses² 28,335 26,060 8.7 Net Income per Share (in R$) 4.28 4.34 (1.4) Return on Assets 1.4 1.5 (10 bps) Return on Equity 22.4 27.0 (47 bps) Cost Income Ratio3 42.4 42.6 (20 bps)

R$ billion

Equity Dec/11 Dec/10 � Dec/10 (%)

Assets 981.2 811.2 21.0 Amplified Loan Portfolio4 465.1 388.2 19.8 Deposits and Market Funding5 637.6 519.0 22.8 Assets under Management 415.8 360.2 15.4

¹ Items based on Consolidated Financial Statements. 2 Refers to the sum of Personnel Expenses and Other Administrative Expenses. 3 Administrative Expenses on Operating Income, without extraordinary items. 4 Includes Private Securities and guarantees provided 5 Time and demand deposits, Savings Deposits, Interbank Deposits and Money Market Borrowings

See further information about the economic-financial performance of BB in the Management Discussion and Analysis Report at bb.com.br/ri.

STOCK PERFORMANCE

BB ended 2011 with market value of R$ 67.9 billion. In the theoretical portfolio of Ibovespa for the next four months (Jan/12–Apr/12), Banco do Brasil occupies 7th place, with 3.17% market share.

Banco do Brasil's shares (BBAS3) closed the year 2011 at R$ 23.70, variation of -24.6% in 12 months, against 18.1% Ibovespa depreciation.

BBAS3 was traded in all BM&FBovespa's sessions, in the daily mid amount of R$ 155.2 million in the year, as opposed to R$ 125.1 million in the previous year, and continues to be listed in the theoretical portfolios of the major São Paulo Stock Exchange indexes: Ibovespa, Ibrx50, IGC, ISE and Itag.


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The shares of Banco do Brasil were once again listed in the ISE index of BM&FBovespa as the result of management guided by the entrepreneurial Agenda 21.

In December/2011, the American Depositary Receipt – ADR Level I Program of Banco do Brasil recorded 13 million ADRs in circulation.

The Series “C” subscription bonuses (BBAS13) issued on 6.17.1996 were exercised in the period from April to June 2011. Each bonus guaranteed the right to subscribe 3.131799 shares. The exercise of the bonuses generated 4,687,773 securities that, after ratification by Bacen, on October 27, 2011, were converted into an equal number of common shares. This movement resulted in an increase of R$ 44.6 million in BB's capital.

Banco do Brasil, aligned with its profit reinvestment and dividend distribution policy, keeps the payout of 40% of the net income earned in the form of dividends and interest on own capital with quarterly periodicity. Thus, during the year 2011, R$ 4.9 billion was set aside as shareholders' compensation - R$ 1,848 million in dividends and R$ 3,051 million as interest on own capital. The 60% of the remaining income were used as legal and by-laws reserves.

BUSINESS PERFORMANCE

CUSTOMER RELATIONSHIP

BB ended 2011 with a base of 56 million clients and 36.1 million checking accounts (33.9 million from individuals and 2.2 million from businesses), a growth of 0.5% in 12 months.

BB 2.0 Retail Transformation Program

The "BB 2.0 Retail Transformation Program" groups the main strategic actions designed to consolidate and expand BB’s leadership in the Brazilian retail banking sector, focused on the streamlining of returns on the client base, through excellent service, knowledge of clients (CRM), expansion of relationship and business, efficiency in processes and increase of the offer of convenience through adequacy of the customer service channels.

Among the main actions carried out under the program over the course of the year, we highlight:

a) conclusion of the deployment of the new model of relationship with individual customers at all the branches of BB, which promotes the adequacy of the number of clients under the responsibility of each relationship manager, with intensification of contacts and business and improvement in the service provided;

b) training of the sales force in the new business platform, a tool that rationalizes the core sales processes and builds up knowledge about opportunities with the client, boosting the assertiveness of offers.

c) deployment of consumption propensity models for banking products prioritized in the retail business operation.

d) rationalization of sales processes, with the objective of mitigating operational risks and of increasing client satisfaction and operating efficiency;

e) configuration of 187 branches with the new customer service environment which reinforces attributes of modernity and convenience for customers, while valuing the spaces reserved for doing business;

f) construction of the Strategic Convenience Plan for 2011/2015 that consolidates the proposal of investments in physical channels of BB for the next five years;

g) training and up-skilling of more than 69 thousand employees from the network of branches in business practices and customer service (further information on training can be found in the "People" chapter of this report);


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h) development of a new strategy of relationship with businesses served in the retail market (Small and Micro Enterprise - SME), starting to include companies with gross annual turnover of up to R$ 25 million;

i) adoption of a differentiated relationship model for agribusinessmen that are clients, with personalized service, supply of specific products and services and expert advice.

BB created the Directorship of Individual Customers in May, with the objective of enhancement of the results obtained with the retail operation, running the institutional side of various actions originating within the BB 2.0 program and acting strategically to ensure the customer vision in commercial and relationship actions.

Aiming to align the supply of products and services with consumption propensity, in July, the bank created the Personalized Active Offer, which presents customers, via automated teller machines, with the best supply of credit for their needs. The information is updated daily, guaranteeing greater assertiveness in the supply, which may be noticed by the contracting of more than 496 thousand operations with a volume of R$ 3.2 billion and contracted average value of R$ 6.5 thousand, in the period.

Banco do Brasil organized the restructuring of the Directorship of Small and Micro Enterprises in August, focusing on improving the delivery of services to SME clients.

University Niche

Banco do Brasil is the financial institution with the largest market share in the young college student segment, with 1.3 million university accounts, corresponding to 25% of the market.

During the year 2011, BB carried out various actions at public and private higher education institutions, besides promoting sports and cultural events and developed actions through the social networks – Twitter (@eufacoacontecer), Facebook - and the website www.eufacoacontecer.com.br, a collaborative space where youths can interact with BB, find out about events and take part in promotions.

As a financial agent of the Fund for Financing Higher Education Students, or Fundo de Financiamento ao Estudante do Ensino Superior - FIES, BB has formed partnerships with private universities, which contributed to the result observed in 2011, with the contracting of 46 thousand operations, which totaled R$ 1.6 billion.

Wholesale Clients

In the area of Wholesale clients, BB provides services to companies with gross annual turnover above R$ 25 million. In 2011, the segmentation of these clients was reviewed according to the following characteristics:

a) Business Segment: subdivided into Middle and Upper Middle, it is composed of clients with gross annual turnover between R$ 25 million and R$ 400 million (manufacturing) or R$ 600 million (trade and services);

b) Corporate Segment: these are clients with gross annual turnover from R$ 400 million (manufacturing) or R$ 600 million (trade and services) up to R$ 1.5 billion (manufacturing) or R$ 2 billion (trade and services);

c) Large Corporate Segment: composed of clients with gross annual turnover above R$ 1.5 billion (manufacturing) or R$ 2 billion (trade and services).

To adapt the operational structures to the new segmentation model, the service network was also reviewed, with expansion of the quantity of points from 121 to 132, involving Large Corporate, Corporate and Business branches and Service Platforms. This movement was especially characterized by the reinforcement of the network of branches dedicated to the Corporate and Large Corporate segments, and by the deployment of 10 new service platforms in development hubs in the interior of the country such as Sinop (Mato Grosso) and Feira de Santana (Bahia).


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The new service delivery model is also based on the centralization of middle and back office services of all the Wholesale branches at units called Wholesale Service Centers - CSAs, which render specialized services to the branches for the running of registration processes, credit operations and others, optimizing the client response time and improving the levels of compliance, besides promoting economies of scale resulting from specialization and volumes. The quantity of CSA units was increased from two to three in 2011 and the branches served doubled from 9 to 18. For 2012 the bank is planning to expand the CSA network to five units, which will serve the 82 Wholesale branches.

Within the sphere of employee training, the bank calculated 163 thousand hours in training courses developed for the different areas of specialization, which is equivalent to an average of 60 hours per employee in 2011. These training courses were offered by BB's corporate university and by first class business schools.

As a result of these initiatives, the Contribution Margin of wholesale clients grew 27.2% in the period.

Private Clients

The volume of assets under management of the Private Bank segment rose from R$ 35.3 billion in December 2010 to 50.8 billion in December 2011, growth of 44% in the period.

In the category of client farmers with Annual Gross Income from Agriculture and Livestock of R$ 10 million or above, BB developed a differentiated relationship model, with personalized customer service, offer of customized products and services with superior performance, differentiated flows and qualified consulting. The model currently responds to the requirements of 1,769 clients, concentrating 3.6 billion in total credit volume.

In 2011, Banco do Brasil surpassed the milestone of R$ 6.2 billion in inventory of Agricultural Credit Bills - LCA, distributed around more than 1.6 thousand operations, representing accentuated growth over the inventory of R$ 270 million in December 2010. The Product is appealing to individual investors, on account of the prevailing tax benefit (free of tax), especially in the Private segment, providing a higher return on capital than other investments of equivalent risks.

Management of Customer Service and Channels

BB makes available to its customers an access for conducting business by physical networks (branches, service centers, automated teller machines and correspondents) and virtual networks (call center, internet, mobile banking and Digital TV) with a vision of convenience for the client where each service point fulfills the needs and dynamics of each region.

BB ended the year with the largest quantity of branches in Brazil in its physical network, with 5,263 thousand units, besides having 13,733 correspondents, more than 8.5 thousand service points and the largest collection of automatic teller machines (ATMs) in Latin America, with 43,602 of its own machines. Out of the branches and of the Bank Service Points - PAB of BB, 94.5% are already adapted for physically handicapped people.

Consistent with the strategy of expanding its presence in peaceful communities, in 2011 BB opened branches in Morro do Alemão, Cidade de Deus and Rocinha, in Rio de Janeiro, contributing to banking inclusion and the sustainable development of these places.

BB is the only bank that has a network of specialized branches for the delivery of services to the public sector, present in all the Brazilian capitals and major towns and cities.

BB has two overseas networks: own, formed by 40 service points in 23 countries, and supplementary, formed by 1,048 correspondent banks in 133 countries. In South America, BB's presence is expanded by the Banco Patagonia network, which adds 172 service points.

In the automated teller machines, about 33.6% of all BB banking transactions were performed monthly. In order to provide more comfort and convenience, in 2011, 3,265 terminals were modernized and over 250 were installed in new points. In this equipment, BB consolidated the use of technologies such as the Linux operating platform and touch screen monitors. The menu of products and services was stylized according to the segmentation of clients, providing personalized service, a


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supply of solutions geared towards each audience and a lighter appearance. The automated channels were accountable for 93.8% of the total transactions.

BB's internet self-service closed the year with the mark of over 1.6 billion effective transactions, corresponding to 34% of the total of transactions and over 12.5 million customers able to use using that channel. The Financial Manager, the self-service channel for business clients, reached 2.7 billion operations, being used for more than 1.6 million companies.

BB cell phone self-service accounted for 41 million transactions carried out by over 1.8 million customers with a cell phone enabled to perform banking operations. As of 2011 BB made new applications available for access to BB mobile banking by means of smartphones, involving 87% of the operating platforms existing for this type of equipment.

A total of 226.8 million transactions were performed in the year 2011 at the BB Service Center. At the year end, 10.1 million clients were authorized to use the channel. Since November, all of BB's branches have been part of the new Consumer Support Service - SAC BB, which centralizes the handling of incident tickets opened by dialing the toll free number 0800 729 0722 and registered on the Internet or at the actual branches.

The year 2011 was also marked by innovations in the customer service provided to clients. Innovations that merit special emphasis include:

a) availability of access to the Financial Manager and Public Sector Self-Service via iPhone and iPod Touch.

b) launch of the totally innovative BB mobile portal, with dynamic content, interactivity, links to the main news about BB and direct access to the social networks;

c) launch of the self-service solution for Open Digital TV, the only one in the country;

d) launch, in partnership with a manufacturer of television sets, of an application for Smart TV that allows access to BB self-service transactions, such as inquiries (balances and statements), simulation and contracting of CDC (consumer lending), deposits and redemption in investment funds and CDB (Certificates of Deposit);

e) BB Fluvial: in April, Amazonas was the first Brazilian state to receive a unit of the riverine mobile banking correspondent, specialized in promoting the integration and access to banking services of the riverside population of the Amazon Watershed as well as the fulfillment of their requirements. There are currently four vessels in operation, with three in the state of Amazonas and one in Pará;

f) Espaço Banco do Brasil: on May, BB opened the first concept store of the national financial sector in Shopping Iguatemi Brasilia. The Space was idealized to be a brand experimentation site, bringing BB even closer to its clients;

g) BB convenience room in New York: the first overseas convenience room was officially opened on July, offering personalized service to individual clients, in Portuguese and English;

h) BB Móvel: launched in August, this mobile land-based banking correspondent was developed to serve clients in districts or communities without access to bank services, fairs, events and in cities struck by weather catastrophes;

i) conclusion of the Pilot Test of Sharing of the External Networks of ATMs, with the participation of Banco do Brasil, Banco Bradesco and Banco Santander, aiming to evaluate the appeal to the customers of institutions, as well as technological impacts and operational implications relating to the topic;

j) formalization, to operate throughout Brazil, of the partnership formed between BB and the loyalty program operating company Dotz, offering BB's clients more alternatives and higher speed in the accumulation of points.

Customer service through social networks, through Twitter with the profile @maisbb, and with the Mais Banco do Brasil page on Facebook proved to be effective and has been attracting more and more customers.


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In 2011, it is highlighted the acquisition, by Banco do Brasil, of the right to be a partner of Empresa Brasileira de Correios e Telégrafos for the rendering of bank correspondent services through the Banco Postal. The operation will allow BB to bring forward the strategy of extending its service outlets throughout the country and of being in 100% of Brazilian municipalities by 2015. Under the agreement, this target will be achieved in 2012.Today, BB is in 5,378 municipalities, with 55,057 service outlets. Correios (Brazilian Post Office Company) has 6,192 branches with the Banco Postal and is present in 95% of Brazilian municipalities.

The commitment to consumer rights and to good customer service is manifested by transparency and objectiveness in relations with clients. BB informs the rates and tariffs practiced in a clear and direct manner. The employees receive specific training to improve customer service, such as "Brazilian Sign Language - Libras" and "Consumer Defense Code".

As evidence of the importance that Banco do Brasil places on the topic of customer service, in 2011 it hired 8,754 new employees, with 7,838 referred directly to customer service at our branches.

Partnerships with Government Clients

Banco do Brasil is one of the main financial agents of the Federal, State and Municipal Governments in the deployment of public policies, projects and programs, which are drivers of the country's development.

At present, besides the partnerships with the Federal Government, Banco do Brasil is the financial agent of 16 States, 16 Capitals and maintains business with most of the country's municipalities, offering specific solutions to public administration. In 2011, some of the main products and services are:

a) Onlending of Resources: among the transfers performed by the Federal Government to public entities special emphasis is placed on the constitutional transfers, such as FPM, FPE and Fundeb, which totaled R$ 354.7 billion;

b) Government Investment Funds: the volume of Government Investment Funds totaled R$ 102.4 billion in assets under management, up 12.2%, or R$ 11.2 billion, over the same prior-year period. The volume funded in Short-term Administrative Funds was responsible for most of the growth of government funds in the period, with positive evolution of 26.3% or R$ 7.5 billion in the comparison with the same prior-year period, reaching R$ 36.2 billion in December;

c) Payment of Benefits: payments of more than R$ 7 million/month of benefits of various government programs were made using a specific card and crediting of accounts;

d) Collection of taxes: The volume of tax levies in the year amounted to R$ 374 billion, which is R$ 42 billion or 13% above the amount verified last year. The most outstanding products were Federal Levy, with 13% of growth, totaling R$ 235 billion and FGTS Levy, which remained stable, totaling R$ 16 billion in the year;

e) Fund for Workers’ Assistance (FAT): BB's loan portfolio with funds from FAT amounted to R$ 6.7 billion. Of this total, the sum of R$ 4.0 billion invested in the lines of Proger Urbano Investimento (Proger Urbano Empresarial, within the sphere of BB) and R$ 1.7 billion at Pronaf merit special emphasis;

f) Credit Management: The management of the Federal Government's property totaled the volume of R$ 489.3 billion in 2011;

g) Funproger: since its creation, in 1999, the Fund has already secured more than R$ 9.9 billion in loan operations for investment by micro and small enterprises, distributed around than 275 thousand operations;

h) Generation of Funding for Loan Operations: in the year the funding in the Public Sector, for investment in loan operations, including agribusiness, totaled R$ 2.5 billion. Funding in Government Funds and Programs, which provides resources for operations of FAT, FCO, Funcafé and Finame/Bndes, among others, ended the year with a volume of R$ 74.4 billion;


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i) Constitutional Fund for Financing of the Midwest - FCO: since its creation, FCO has granted more than R$ 31.2 billion in productive activity financing, totaling more than 722.3 thousand operations. In the year, the sum of R$ 5.5 billion was contracted in approximately 73.5 thousand operations in all the Midwestern municipalities;

j) Loan operations: in 2011, the volume of Credit Operations with the Public Sector reached R$ 3.3 billion, up R$ 260 million or 8.7% over the same period of 2010;

k) PIS-PASEP Fund: by means of a specific contract, BB carries out the operating services of PASEP, such as release and payment of quotas, payment of yields and management of of participants’ accounts. In 2011, BB made more than 4 million payments of yields and shares of principal, in the amount of R$ 447 million;

l) Competitive Bids: Licitações-e is currently an important electronic purchasing tool used by states and municipalities. In 2011 50.3 thousand bidding processes in the total amount of R$ 17 billion were performed through this system;

m) Self-service Public Sector - AASP: during the year, 226.3 transactions were performed in AASP, totaling 18.9 thousand users. The Bank provided access to the Public Sector Self-service through iPhone/iPod Touch and cellular phone/smartphone with the Android system. The new method of access strictly conforms to the Bank's security standards and the same methods of authentication of the Public Sector Self-service via the Internet;

n) State of São Paulo: The network specialized providing exclusive services to Government clients in the state of São Paulo was enlarged, covering the State, Municipal and Judiciary segments. New Public Sector branches were officially opened in Bauru and Ribeirão Preto, in addition to those already existing in Campinas and in the capital. In the year, government funding in the state of São Paulo totaled R$ 82.5 billion, which represents 43% of the total funded by the Bank in this niche. There was also reorganization in the delivery of services to city councils and other municipal public entities from the state of São Paulo, due to the takeover of Banco Nossa Caixa. Such a movement characterized the designation of specific branches for the relationship with the municipal managers, involving around 2,118 accounts.

Social Security System

Banco do Brasil is the financial institution with the largest market share in fundraising of the Social Security System segment.

Expansion of the personalized customer service with this segment for the rendering of social security services and qualified financial advice by means of exclusive investment funds and structured solutions, which has contributed to client loyalty and the results observed in 2011, when the bank funded R$ 4.7 billion, totaling R$ 17.1 billion at the year end.

In 2011, BB operated with a focus on support to government policies targeting the sustainability and development of the social security for civil servants, with special emphasis on the cooperation agreement with the Ministério da Previdência Social – MPS (Ministry of Social Security) in the furtherance of specifics Social Security Systems creation.

INTERNATIONALIZATION

BB started the organizational centralization project of its units from the European continent in Vienna (Austria). The process already has the approval of the local regulatory authorities and seeks to enhance the existing governance structure. In addition, BB concluded the implementation of a business support center in Portugal, aiming to provide services to all the units in Europe.

Continuing with the overseas expansion project, Banco do Brasil obtained:

a) authorization from the Bacen for the transformation of the representative office BB Shanghai (China) into a branch, which will allow the expansion of the Bank's business activities in that country;


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b) authorization from the Bacen for the installation of the representative office of BB in Bogotá (Colombia). The opening of the premises will provide the Bank with the chance to build up its knowledge of the local market and to confirm business opportunities, allowing it, at the same time, to gain expertise and to gradually penetrate the market.

FUNDING

Banco do Brasil, leader in the market of deposits, recorded R$ 637.6 billion in funding at the end of 2011, growth of 22.8% over the same period of previous year, which reflects the clients' confidence in BB. Time deposits and saving deposits deserve special emphasis with growth of 29.6% and 12.1%, respectively, in the last 12 months.

Foreign funding reached the amount of US$ 34.6 billion at the end of the year 2011, variation of US$ 9.2 billion or 36.4% in relation to the previous year. The volume funded in Interbank Deposits abroad reached US$ 10 billion in December/2011, with special emphasis on the funding of time deposits in the amount of US$ 9.2 billion, which reveals a contracting rate of 121.8% of the amount maturing in the period.

We emphasize the security issues of the Global Medium Term Notes (GMTN) program in Euros, which resulted in the funding of EUR 750 million, one of the largest ever carried out by a Brazilian company. Additionally, BB also issued Subordinated Debt in the amount of US$ 1.5 billion and Senior Notes in the amount of US$ 500 million. For all of them, financial costs were competitive, factors that demonstrate the market's interest in securities issued by BB.

Seeking to diversify its modus operandi in the market, BB offers its clients the chance to invest in Financial Bills - LF, with a balance of R$ 7.1 billion at the end of 2011.

Asset Management

BB Gestão de Recursos - BB DTVM, a wholly-owned subsidiary of Banco do Brasil, is a signatory of Principles for Responsible Investment - PRI, of the United Nations – UN, not acquiring interest in companies that disrespect principles relating to environmental preservation and to human and employment rights.

In 2011, BB DTVM, the largest asset manager company in the country, reached R$ 415.8 billion in assets under management, divided between investment funds and managed portfolios. This volume represented growth of 15.4% in 12 months according to the Associação Brasileira das Entidades dos Mercados Financeiros e de Capitais – Anbima (Brazilian Financial and Capital Markets Association) mainly as a result of the launch of 63 funds over the course of 2011, which together add up to approximately R$ 8.2 billion in Equity.

These figures still do not include funds managed by Banco Votorantim (BV), that attained R$ 30.1 billion at the end of December 2011. If 50.0% of the balance managed by BV were to be consolidated, a percentage equal to BB's interest in the latter's total equity capital, Banco do Brasil's market share would rise to 22.4%.

In order to qualify its portfolio of products with Private clients, BB DTVM created the Fundo de Investimento Multimarket Global Acqua - which invests part of its assets in Brazilian and global companies connected to the water sector, BB Multimarket LP Allocation Private, BB Multimarket LP Allocation Plus Private and BB Multimarket LP Allocation Advanced Private as well as the funds BB Estratégia 6, 7, 8, 9 and 10.

Also targeting sustainability, in March BB DTVM launched the BB Multimercado Balanceado LP Jovem fund and remodeled BB Ações Índice de Sustentabilidade Empresarial Jovem, both geared towards young clients, which set aside 20% of the management fee for Programa Água Brasil, by means of Fundação Banco do Brasil. On the same line, in August there was the launch together with Votorantim of the first family of Fundos de Investimento de Participações em Infraestrutura (Investment Funds for Infrastructure) – FIPs-IE: BB Votorantim Energia Sustentável I, II, III. These portfolios invest in the renewable energy sector.


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Following market trends, the funding of two new options of capital protected funds started in November: BB Multimercado Capital Protegido Commodities Agrícolas II LP Private and BB Multimercado Capital Protegido Índices Globais LP Private, created especially to respond to the needs of investors seeking diversification of their investments with capital protection. The main objective of the first is to obtain earnings with a portfolio of commodities (soybean, corn-bean and sugar) and the second, with a global portfolio of stock indexes (Ibovespa, S&P 500 and Euro Stoxx 50). Both have their greatest differential in their structure, which will assign different weights to each asset that forms the portfolio.

In its internationalization strategy, BB DTVM signed a memorandum of understanding in January with Interbolsa Sociedad Administradora de Inversiones, a Colombian broker, kicking off a partnership for the distribution of BB portfolio funds to Colombian investors.

LOAN PORTFOLIO

BB's loan portfolio in the amplified concept (including private securities and guarantees provided) ended the year 2011 with a balance of R$ 465.1 billion, growth of 19.8% in relation to the same period of 2010 and with a market share of 19.2%.

In 2011, operations with individuals in the amplified concept remained prominent in the Bank's total portfolio, representing 28.1% even after the adoption of macroprudential measures by Bacen at the end of the year 2010, which reduced the expansion of credit to individuals. Faced with the new economic scenario, with the advent of Bacen Circular 3563 of November/11, which was aimed at adjusting the measures hitherto prevailing via incentive to consumer credit in sustainable terms, a new level of growth can already be noted.

The payroll loan is still the most representative category in the portfolio of loans to individuals, with 39.3% of the total. With the customers base qualification strategy and a focus on lines of lower risk, payroll loan portfolio exhibited growth of 13.9% in the last 12 months, which reinforces BB’s leadership in this segment, whose market share reached 32.3%. The loans granted to civil servants are still the most representative of this portfolio, accounting for 85.3% of the total loans. The remaining loans were granted to INSS's retirees and pensioners (9.2%) and employees from the private sector (5.5%).

The balance of vehicle financing operations (including leasing operations and acquisitions of portfolios of BV Financeira) reached R$ 31.3 billion, up 14.4% in twelve months.

BB's real estate credit kept the growth trend recorded in the previous semesters, ending 2011 with a balance of R$ 7.6 billion, a growth of 122.7% in relation to 2010. In the last 12 months, 22,678 contracts were released to individuals, in a total balance of R$ 6.0 billion. The corporate real estate loan portfolio ended the year with a balance of R$ 1.6 billion and corresponds to the formalization of 119 contracts in the last 12 months.

The business loan portfolio in the amplified concept ended 2011 with a balance of R$ 210.2 billion and represented 45.2% of BB's total loan portfolio, against 45.4% in the closing of 2010. Together, the working capital and investments lines present 72.3% of total business loan portfolio.

In 2011, special emphasis is placed on BB's performance in the intensification of relationships with Wholesale clients, especially the growths of the balances:

a) loan portfolio 22% in the year;

b) working capital operations in 15%;

c) agro-industrial credit in 21%;

d) securities operations in 61%;

e) investment loans in 28%.

In the delivery of services to small and micro companies, Banco do Brasil continued to act as principal partner of the segment. At the end of December/2011, BB had 2.1 million small and micro business clients. The balance of transactions in favor of SMEs was of R$ 68.1 billion, a 19.5% increase as


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compared to December/2010. It is worth emphasizing the allocation of R$ 47.9 billion for working capital, which represented growth of 16.3% in relation to December/2010. It is worth highlighting the BB Giro Empresa Flex credit facility, that reached a balance of R$ 14 billion, representing 29.3% of the working capital portfolio.

In working capital lending to small and micro companies, Banco do Brasil made full use of the Fundo de Garantia de Operações – FGO (Operations Guarantee Fund) to mitigate credit risk in the transactions and expand portfolio volume. At the end of 2011, there were 428.6 thousand operations with FGO coverage, totaling the invested balance of R$ 9.8 billion.

At the end of 2011, the balance of small and micro enterprise investment financing operations reached R$ 18.4 billion, up 25.1% over December/2010. The Cartão BNDES, main line of the block for the segment, which reached the balance of R$ 6 billion, corresponding to 86.6% of growth over December 2010, merits special emphasis.

In 2011, BB was the first financial institution to issue the Cartão BNDES in the two main flagship brands, Visa and MasterCard. Furthermore, Banco do Brasil maintains the leadership of the Cartão BNDES Card in amounts disbursed, quantity of cards issued and quantity of transactions.

BB financed R$ 5.5 billion in 73.5 thousand operations with resources from the Fundo Constitucional de Financiamento do Centro-Oeste – FCO (Constitutional Fund for Financing of the Midwest) and provided services to 466 municipalities from the region. This sum represents an increase of 29.7% in relation to 2010. We emphasize the fact that 36% of this total benefited mini/micro and small borrowers.

The construction of 50 vessels and 4 shipyards, in the amount of R$ 3.3 billion, was financed in the year 2011 by means of the Fundo da Marinha Mercante – FMM (Merchant Marine Fund). Accordingly the volume of financed projects corresponds to R$ 4.7 billion, up 237% over 2010.

By December/2011, Banco do Brasil had recorded a market share of 21.5% and a total disbursement of R$ 18.1 billion in the Global Ranking of fund transfers by BNDES. In the Finame category, Banco do Brasil recorded an outlay of R$ 6.7 billion, corresponding to 37% of the total resources released by BNDES, delivered by BB up to December/2011.

Also with respect to credit, in every financing in the project finance category, in addition to the application of the Equator Principles, BB adopts socio-environmental criteria in the evaluation of the study on the limit of credit to companies with current or projected net operating revenue above R$ 50 million and to investment projects with an amount financed by BB that is equal to or higher than R$ 2.5 million.

The table below shows the projects analyzed in light of the Equator Principles in 2011:

Equator Principles¹

R$ million

Industry Risk Level Amount Financed Number of Projects Energy C 17.8 1

¹ The Equator Principles are a set of socio-environmental responsibility criteria applicable to investment projects that use the standards of performance in social and environmental sustainability of the International Finance Corporation (IFC) and of the World Bank as a reference.

Agribusiness

The agribusiness portfolio in the amplified concept ended the year with a balance of R$ 89.4 billion. This sum represents an increase of 18% in relation to 2010. Of the total agribusiness portfolio, R$ 20.1 billion are related to operations contracted with family farmers and R$ 69.3 billion with the segment of corporate agriculture.

In the contracting of rural credit loans, special emphasis is placed on the use of risk mitigation mechanisms - bad weather and prices. In December/2011, 57% of the agricultural costing operations contracted in the crop of 2011/2012 were covered with production insurance (agricultural insurance or Proagro), price insurance (options contracts) or turnover insurance. Seguro Agrícola Faturamento is a


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new product designed to guarantee compensation as a result of the reduction of the income of rural producers due to weather conditions and/or negative price variations.

Besides the historical leadership in financing in the National Program for Family-Based Agriculture Empowerment, or Pronaf (Programa Nacional de Fortalecimento da Agricultura Familiar), with 73% market share, Banco do Brasil has participated intensely in the National Program to Support the Medium-sized Farmer - Pronamp, geared towards producers with an annual gross income from agriculture and livestock activities of up to R$ 700 thousand in the 2011/2012 crop. The balance of operations contracted with this audience reached R$ 7.1 billion, up 63% over the year 2010. In the first six months of the 2011/2012 crop (July to Dec/2011), the Bank contracted R$ 3.1 billion, representing 80% of the amount disbursed by the National Rural Credit System - SNCR (Sistema Nacional de Crédito Rural - SNCR).

Operations with agribusiness cooperatives reached the balance of R$ 5.5 billion, 71.9% higher than 2010. For the 2011/2012 crop (July to December/2011) the Bank contracted R$ 2.5 billion in rural operations with cooperatives, a growth of 26% in relation to the same period of previous crop. We emphasize activities in the sphere of the Program for Capitalization of Agricultural Cooperatives- Procap (Programa de Capitalização de Cooperativas Agropecuárias), in which Banco do Brasil has been the number one contributor since it was launched, with a total outlay of R$ 1.7 billion.

In the Low Carbon Agriculture Program - ABC (Programa Agricultura de Baixo Carbono), which encourages rural producers to use sustainable agricultural and livestock breeding techniques, targeting the reduction of greenhouse gas emissions, Banco do Brasil was the leading investor in the Brazilian Banking Industry in the 2011/2012 crop, with R$ 153 million contracted in 551 operations.

The model of specialized service delivery to rural producers involved in corporate agriculture covers the entire country. Accordingly, the largest producing regions were contemplated by the new service delivery model, totaling 47.5 producers, distributed around 323 structures with managers specialized in the agribusiness market. In addition, about 1,700 rural producers from the Private segment also benefited from a model of differentiated relationship and customer service, with the creation of 53 portfolios. Such measures enable the Bank to remain at the forefront of national agribusiness, aligned with the best market practices in the relationship with producers from different segments, aggregating revenues and better business.

This performance ratifies Banco do Brasil as the largest Brazilian agribusiness partner, contributing to the growth of productivity and competitiveness of national agricultural and livestock products and of agribusiness exports, a sector responsible for the Brazilian balance of trade surplus.

Foreign Trade

In the foreign trade, the Bank maintained its leadership of the export and import exchange market, with volumes of US$ 76.4 billion and US$ 45.6 billion, respectively, and market shares of 29.3% and 22.2 %, respectively.

In relation to its performance in the financial foreign exchange market, BB reached the milestone of US$ 31.3 billion and US$ 48.6 in purchase and sale transactions, respectively. In this segment, the prepaid card in foreign currency known as Ourocard Visa Travel Money, which in its first year of sales had already reached 43% of the total volume of foreign exchange sales intended for international travel (foreign currency exchange in cash), merits special emphasis.

In export financing, ACC/ACE operations stand out with disbursements of US$ 17.4 billion, the annual historical record for operations of this nature, which maintains BB's position as market leader with 33.7% market share. The onlending of government programs of support to foreign trade also merited special emphasis in the year. Disbursements of the Federal Government for the Export Finance Program - Proex totaled US$ 554.2 million in the Financing modality, and repass operations of the BNDES-Exim facility reached US$ 790.4 million. As regards imports, the financed volume increased 52.7% in comparison with 2010, totaling US$ 6.6 billion.

Exchange and foreign trade online services continue to post records: 67.5% of such export exchange contracts and 48% of import contracts were agreed on through the Internet. The Bank also offers international business training services. In the year 7,046 people were trained across the whole country.


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In October, there was the renewal, for a further five years, of the cooperation agreement between BB and the Ministry of Development, Industry and Foreign Trade - MDIC, with a view to the effective operation of foreign trade services.

To support Brazilian companies that have gone global and to keep track of the growth of the Brazilian trade flow, BB continues to expand its presence in the world. It is present in Americas with branches in Argentina, Bolivia, Chile, United States and Paraguay and representation offices in Venezuela, Peru, Uruguai, Mexico and Panamá. In Europe, BB operates through its units in Germany, Austria, Spain, France, Italy, Portugal and the United Kingdom. It is present in Asia with 7 points of service in Japan and offices in Seoul, Shanghai and Hong Kong. Also in Africa and Middle East with offices in Angola and United Arab Emirates.

Quality of the Loan Portfolio

In Banco do Brasil, the rate of non-performing loans over 90 days reached 2.1% at the end of December/2011, as compared to 2.3% recorded at the end of December/2010, below the 3.6% recorded by the Brazilian Banking Industry at the end of 2011. The transactions rated at risk levels AA to C accounted for 93.9% of portfolio, against the 92.3% verified in the Banking Industry.

In January 2011, Banco do Brasil adopted new measures for the qualified expansion of business with lower risk clients. One of these consists of identifying elements in the corporate client base with the lowest potential risk, also using data from external sources. The parameters for calculation of the credit limit for these clients was adjusted to allow access to a volume of operations better suited to the risk that it presents . During this period, BB also increased the use of tools to quality the profile of clients with defaulted operations, which permitted the refinement of the collection strategies.

Revenues with credit recovery, arising from efficient management of the collection process, ended 2011 with a balance of R$ 3.6 billion.

CARDS

In 2011, BB obtained a turnover of R$ 138.8 billion with cards, an increase of 23.8% as compared to 2010. This performance brought the market share up to 20.8%, according to data estimated for the period by the Associação Brasileira de Empresas de Cartões de Crédito – Abecs (Brazilian Association of Credit Card Companies), keeping BB in the leadership of turnover in the Brazilian market of debit cards and in Visa cards.

We emphasize the performance of the turnover in business generated in value chain by means of the Cartão BNDES and of the Cartão Ourocard Agronegócios, in the amounts of R$ 5.5 billion and of R$ 7.6 billion, respectively, in 2011.

Consolidating its avant-garde position in the card market, in 2011, BB launched the Ourocard Bônus Celular, the Ourocard Elo, the Ourocard customizable with images chosen by the holder, the Ourocard Visa Rio, with promotional images of the movie Rio, the Ourocard Crediário and the Ourocard "Origens", a thematic card made from recycled plastic that is partially set aside for the planting of trees for recovery of riparian forests in the Atlantic Rainforest biome.

In 2011, BB also launched the Ourocard Pré-pago Recarregável, and the Ourocard Transportador Visa Cargo, a prepaid card that allows carriers and shipping companies to transport money for the payment of installments of freight, fuel and travel expenses, also serving as an electronic coin acceptor to receive toll vouchers.

With the launch of innovative products and solutions, BB is getting increasingly closer to its clients, and was appointed the favorite card of Brazilians according to the Cardmonitor/Instituto Medida Certa survey and the best credit card by the CVA Solutions survey.

In the year 2011 there was the organization of Elo Participações S.A., a holding company that consolidates businesses related to electronic payment methods. Banco do Brasil holds 49.99% of the shares and paid up capital in the amount of R$ 25.2 million through BB Elo Cartões Participações S.A.


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Elo Participações S.A. is the parent company of Elo Serviços S.A., which is responsible for the management of the national card flagship brand Elo.

INSURANCE, PENSION PANS AND SAVING BONDS

Businesses with insurance, pension plans and saving bonds added R$ 1.6 billion to BB's income in 2011, including ownership equity as well as service and brokerage revenues, which represents an increase of 18.5% over 2010. This result mirrors the insurance ratio, which is the share of insurance in the recurring net income of Banco do Brasil, which reached 13.7% in 2011.

The revenues of the insurance companies was R$ 22.1 billion in 2011, growth of 34.1% over the same period of previous year. The figures reflect the good performance of the corporate restructuring commenced in 2008.

As of June 2011, BB and the Mapfre group started to operate in a unified manner, forming the 2nd largest group in collection of insurance premiums in the Brazilian market.

Originating from this new corporate model, BB Mapfre SH1, an insurance company operating with the life, housing and rural segments, ended the year with R$ 3.1 billion in revenues and R$ 589.5 million in net income.

Mapfre BB SH2, an insurance company operating with the vehicle and property segments, recorded R$ 4.0 billion of turnover and net income of R$ 95.4 million.

As a result of the strategic partnership and of the integration between BB and Mapfre, two solutions were launched in protection: the brand new BB Seguro Auto, available for sale throughout the Banco do Brasil Network and BB Seguro Agrícola Faturamento, initially available for soybeans, and that has a protection mechanism against price variations of the commodity in the market.

Brasilcap presented revenue 20.4% higher than in the year 2010, totaling R$ 3.3 billion. Its technical provisions exceeded the amount of R$ 4.9 billion, which represents growth of 18.9% and consolidates the position of leadership in the market.

Brasilprev presented R$ 49.2 billion in managed portfolio, growth of 32.2% in the last 12 months, ending 2011 with 20.2% of market share in the collection.

With regard to closed-end private pension plans, BB Previdência ended the year with R$ 1.8 billion in assets, 43 corporate plans by 56 sponsoring companies, 2 plans created by 2 trade and professional entities, and over 60 thousand participants.

CAPITAL MARKET

Banco do Brasil operates in the domestic capital market through BB Banco de Investimento S.A. – BB-BI. In 2011, 64 issues of fixed-income securities were made, adding up to R$ 16.9 billion, placing BB on 2nd place in the Anbima ranking of Consolidated Origination, with 19.7% of market share.

In the segment of Debentures and Promissory Notes, BB-BI coordinated a total of 55 issues, amounting to R$ 15.6 million of originated volume.

In the securitization segment, BB made 5 issuances of Fundos de Investimento em Direitos Creditórios – FIDC (Credit Rights Investment Fund), 4 of Real Estate Receivables Certificates – CRI.

BB innovated in structuring Real Estate Investment Funds linked to its branch network expansion strategy. These funds obtained R$ 159 million in 2011.

In the equity market, BB-BI coordinated 3 public offerings totaling R$ 1.7 billion and had a participation as a contracted co-manager in 4 stock distribution offerings. BB reached 10th place in the Anbima ranking of Variable Income Distribution, with 2.6% market share.


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In the custody of assets in the domestic market, BB occupies 3rd place in the Anbima ranking December/2011, with R$ 510 billion under custody, representing 21.4% of market share, and operates as a real estate asset depository institution. It is worth remembering that the Anbima ranking does not include the custody of the assets of the actual custodian institution and its conglomerate. Including the assets belonging to the Treasury of BB and of the Extra market Funds, total assets under custody would totalize more R$ 282 billion.

In the international capital market, BB, through its overseas brokers BB Securities Ltd (London) and Banco do Brasil Securities LLC (New York), took part in 16 of the 60 foreign funding operations carried out by companies, banks and the Brazilian government, of which 12 had lead manager status and 4 co-manager status. Of the total sum of approximately US$ 37 billion issued in 2011, BB participated in around US$ 12.6 billion. In addition, BB operated in 3 transactions of foreign issuers, of which 1 as a lead-manager and 2 as co-manager, with the amount of US$ 2.7 billion and EUR 750 million.

Aiming to attract more investors in the Asian market, BB will inaugurate a new BB Securities in Singapore in 2012. The region currently represents 5% of the buyers of securities placed by BB abroad.

In the mergers & acquisitions market, BB-BI participated in one operation, in the amount of R$ 86 million, and took the 18th place in the Anbima, ranking for accumulated data up to September 30th, the latest available data.

BB offers a share purchase and sale service by means of the network of branches, Internet (home broker) and cellular phone, that recorded a volume of R$ 19.4 billion in 2011.

In the private equity sector, BB-BI has been operating as an investor since 2004 and currently has quota units of 13 funds. Since 2007, it has been rendering economic and financial advisory services for Equity Funds, operating as an advisor to 4 invested funds. The total capital allocated by BB-BI to the private equity sector is R$ 1.3 billion.

SERVICES

BB Administradora de Consórcios ended 2011 with 347 thousand active quotas, growth of 66.1% in 12 months. It is worth to highlight the vehicle segment, which grew 85.1%, reaching 311.7 thousand quotas in December. During the year there were 186 thousand new consortium quotas sold, representing R$ 4.4 million in letters of credit.

By means of the bank collection, tax deposit form collection and standing order services, Banco do Brasil provides services to over 576 thousand companies, which brought in R$ 797 billion in 2011, with a total of 986.4 million bills. These services added R$ 2 billion in revenue, growth of 9.6% in relation to 2010.

The new electronic payment collection solution, called Débito Direto Autorizado – DDA (Authorized Direct Debit), had 1.2 million electronic drawees, 18% market share and more than 99 million bills paid electronically. That service avoids payment form printing, a measure that contributes to reduce paper use, and thus benefits the environment.

Banco do Brasil processed credits originating from payroll agreements, totaling R$ 210.6 million, involving corporate clients and the public sector in the year. Overall, BB provided these services to a total of 16.3 million people, involving civil servants and employees from private enterprises.

ENVIRONMENTALLY AND SOCIALLY RESPONSIBLE PRODUCTS AND SERVICES

Banco do Brasil has an extensive portfolio of financial products and services with socio-environmental appeal, which ranges from saving bonds, which set aside part of the management fee for socio-environmental projects, to lines of credit that support the modernization of industrial parks by means of the financing of eco-efficient machinery and equipment.


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BB launched the Cheque Especial PF 10 dias sem juros (Revolving Credit Check for Individual Customers 10 days without interest) in April. The new product is exempt from the collection of interest from customers and employees that have used the overdraft limit for a period not exceeding 10 days, consecutive or alternate, considering the duration of the portion of charges. For this purpose, the customer or employee should adhere to one of the Environment Bonus Service Packages. Besides the benefit of interest rate exemption, part of the revenue earned (up to 5%), with the fees of the Environmental Bonus Service Packages will be set aside for Programa Água Brasil.

In the month of September 2011, Banco do Brasil started operating directing in Microcrédito Produtivo Orientado – MPO (Guided Production-Based Microcredit), offering microcredit facilities geared towards informal and formal entrepreneurs (Individual Businessmen and Microenterprises) with annual turnover of up to R$ 120 thousand.

Banco do Brasil operates with MPO all over the country, through its network of branches and already has more than 26.5 thousand employees trained to serve and provide guidance to entrepreneurs. Just over three months from its operations, the MPO has reached R$ 145.7 million in contracted operations, benefiting more than 34.8 thousand entrepreneurs across the country.

SOCIAL INVESTMENT

Social investment actions are carried out directly by BB or by Fundação Banco do Brasil – FBB. FBB, invested the amount of R$ 25.9 million for the reapplication of social technologies in the areas of generation of employment and income and education, promoting social leadership, economic solidarity with environmental care and respect for local cultures. The amount was set aside as a priority for the segments of the population of the base of the social pyramid, which are those socially excluded or at risk of exclusion, prioritized in public policies, which include communities of family farmers, agrarian reform settlers, quilombolas, indigenous peoples and collectors of recyclable materials across the country.

By means of the sponsorship program, of the activities of the Cultural Centers and of initiatives of FBB, the Bank prioritizes incentives to the fine and audiovisual arts, since besides their educational nature, these activities arouse vocations and generate employment and income. A total of R$ 50.6 million was invested in culture in 2011.

In 22 years of activity, the Banco do Brasil Cultural Centers - CCBB have accumulated an audience comparable to the largest museums in the world. In 2011 alone, they received more than 4.5 million visitors, with 5,146 musical, dance and theatrical performances, among others. With activities offered free of charge or at low prices, events designed for disabled people and a broad educational program, the accessibility and the democratization of culture have been one of the guidelines of activity of the CCBBs.

The actions of BB and of FBB currently in progress that merit special emphasis are:

a) BB Volunteer Program – in 2011, the BB Volunteer Program celebrated its 10th anniversary and is in a phase of revitalization, with the implementation of a set of actions geared towards enhancing and expanding its activity in favor of the country's development, with the fight against extreme poverty as one of its cornerstones. Over 5 thousand employees were registered as volunteers of BB in the end of 2011. Support was provided to 134 projects of social entities that rely on the support of volunteers from BB totaling more than R$ 8.5 million, with resources from FBB an resulting from the tax waiver originating from donations to the Childhood and Adolescence Funds (Fundos da Infância e Adolescência);

b) Programa Aprendiz Banco do Brasil e Estágio de Estudantes (Student Internship and Apprentice Program) – 5,551 low income adolescents trained in 2011 and 8,567 trainees doing curricular activities on the premises of BB;

c) Digital Inclusion Program – over 3.3 thousand points of digital inclusion installed, including the telecenters from Banco do Brasil's Digital Inclusion Programa (PIDBB), and the Digital Stations. In April, the migration of the Digital Inclusion Program of BB - PIDBB to FBB was performed, as well as the creation of the Program for Social Inclusion and Transformation by means of the Donation of Replaced Computers. Thus, Banco do Brasil aims to confer social benefit to the


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disposal of the equipment, with greater integration of actions and solutions, visibility and leverage to the program;

d) Sport Sponsorship – social projects and participative promotional actions; collection of foodstuffs in sports' events; and volleyball and tennis schools for the local community from the venues of the events;

e) Banco de Tecnologias Sociais (Social Technology Bank) – 1,116 technologies certified in 2011;

f) Program AABB-Community - in 2011, approximately 52.3 children and adolescents took part in educational supplementation actions in 403 municipalities from all the regions of the country.

For further information visit www.fbb.org.br.

CORPORATE MANAGEMENT

CORPORATE GOVERNANCE

Banco do Brasil's corporate governance structure is comprised by: the Board of Directors, advised by the Audit Committee and Internal Audit, and the Executive Board, made up of the Board of Officers (president and nine vice-presidents) and by 26 statutory directors. BB also has a permanent Board of Auditors.

Decisions are taken collectively at all management levels of Banco do Brasil. With the purpose of involving the executives in the definition of strategies and approval of proposals for BB's different businesses, the company’s management uses committees, subcommittees and commissions at a strategic level, which ensure the agility and security for the decision making. Among the instruments used to assure good governance, it is also worth highlighting the Corporate Governance Code and the Code of Ethics.

As a good corporate governance practice, BB has introduced tools to evaluate the performance of the Board of Directors, Audit Committee and Executive Board, in order to support the preparation of internal diagnoses and the identification of measures to improve performance.

MARKET RELATIONS

BB discloses its activities to the market in as much detail as possible, on a timely basis and without losing quality in the information provided. The relationship with the market occurs mainly through the Investor Relations Unit, which is part of the Vice Presidency of Financial Management, Capital Market and Investors Relations, reorganized in 2011 with the intention of guaranteeing greater integration of the areas of Accounting, Controlling and Finance, responsible for the Bank's financial management. The measure also aligned the BB to the precepts of national and international regulators.

In addition, the Vice Presidency of Credit, Controllership and Global Risk, was renamed the Vice Presidency of Internal Controls and Risk Management, grouping under its management the Directorships of Credit, Risk Management, Restructuring of Operating Assets, Internal Controls, Security Management and Legal. The change aims to guarantee greater integration of BB's risk management and internal controls, enhancing the efficiency of processes and the efficacy of the risk identification and mitigation tools.

Besides the extensive range of reports and of information made available to CVM (Securities Commission) and on the Investor Relations website, BB adopts the posture of inviting the market to conferences whenever Management considers it necessary to elucidate specific topics concerning the Company. It also takes part in the meetings held by Apimec and other events with shareholders. Thus, in 2011, BB took part in 145 meetings with domestic investors and analysts, 20 conferences, and promoted 8 conference calls on results with analysts and investors, besides over 400 responses to telephone inquiries.


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In November, Banco do Brasil also held the 2nd BB Day, an event attended by 48 participants, including sell and buy-side analysts, where discussions were held about Cards, Insurance and Retail Credit.

In December, BB held its III Panel of Stakeholders in São Paulo with the presence of employees, clients, shareholders, suppliers, specialists in corporate reports and government and society representatives. This practice follows the guidelines of the reporting model adopted by Banco do Brasil (Global Report Initiative - GRI) and allows the review of information made available by BB according to what its audiences consider important and relevant in the relationship with the Company, adding value to the BB brand.

BB provides up-to-date information to the market at the Investor Relations site (bb.com.br/ri).

EXTERNAL OMBUDSMAN

The demands received by the BB Ombudsman Service freely portraits past experiences of consumers. After an unbiased and impartial analysis, become inputs for potential improvements of processes, products, services and channels of Banco do Brasil.

In 2011, the BB Ombudsman Service presented 44 proposals for improvements of various products and services to the Board of Directors of Banco do Brasil.

The BB Ombudsman Service also seeks integration with the main consumer protection entities and regulatory and oversight agencies, for dialogue and refinement of positioning, implementation of shared actions and strengthening of the ombudsman culture besides respect for consumers.

Over and above complying with legal determinations, the BB Ombudsman Service represents the commitment of Banco do Brasil to good market practices, in respect of consumer rights and the constant pursuit of refinement and improvement of its relationship with the various audiences served.

INTERNAL PROCEDURES

Risk Management

At Banco do Brasil, risk management is carried out on a joint and segregated basis in relation to its business units. The risk and loan policies are approved by the Bank's Board of Directors and are expressed by global risk exposure limits, which are defined by the Global Risk Committee (CRG), which is a forum composed of its president and vice-presidents. The measures for implementing and monitoring the guidelines issued by the CRG are carried out by the Credit Risk, Marked and Liquidity and Operating Subcommittees.

In 2011, as far as market risks are concerned, Banco do Brasil revised the control, monitoring and follow-up procedures for the overall limits on the trading and non-trading securities portfolios. BB also revised the corporate manual for the calculation of the future cash flows of commercial products.

Seeking to improve the market risk management process, pursuant to Bacen Circular Letter 3478, dated 12/24/2009, many improvements were made throughout the year, among which we highlight the following:

a) calculation methodology: Definition of the 10-business day holding period under the Value at Risk - VaR method for liquidity adjustment purposes;

b) stress tests: Implementation of retrospective and prospective periodic stress tests for the trading portfolio and the risk factors of the mandatory capital portions;

c) backtest: Implementation of backtesting, enabling a comparison between the actual and hypothetical daily VaR results for all operations, jointly or separately;

d) process for the analysis of new products: Implementation of the Carps tool for controlling and evaluating the Risks Related to Products, Services and Service Channels, by the Internal


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Controls Directorship, with which the manager should assess risks and implement controls with the assistance of the areas involved in the process; and

e) Technological infrastructure: migration from the information production environment to the management of the market risk of departmental systems for corporate systems.

In relation to liquidity risk, in 2011, Banco do Brasil revised the models and methods applied, particularly the Liquidity Contingency Plan, Stress Scenario, Resource Availability Index and Liquidity Reserve; and actively participates in quantitative impact studies (QIS) of the new liquidity risk requirements provided for in Basel III and regulated by Bacen.

For credit risk management, BB uses proprietary methodologies for the risk rating of clients, which are in line with best market practices and with the concepts introduced by the Basel Accord, considering the cadastral aspects (credit score), the credit history (behavior score) with the Bank and the market, as well as the use of banking products. In 2011, BB has also made important investments in information technology (IT) solutions to support its credit risk management process, whereas the new tools are already in the process of installation.

In relation to the implementation of the approach based on Basel II internal ratings for credit risk, the Bank has a strategic project which is in charge of building the databases, developing the risk parameters and validation processes and ensuring the integration with management and the related documentation.

Alongside credit concession standards, Banco do Brasil maintains strategies for collection and recovery of receivables based on statistical models that indicate from the identified profile of each client, the most suitable channels and the most efficacious relationship model for resolution of the credit delinquency.

In order to manage operational risk, Banco do Brasil, following the best market practices, monitors operational loss through a systemized internal database, exposure limits and key risk indicators, besides risk matrix to assess relevant outsourced services.

Searching for the continuous improvement of its operating risk management process, in 2011, BB revised its operating risk policies and the specific limits on operating losses which include losses related to "labor issues", "failures in businesses", "failures in processes", "external fraud and thefts" and "internal fraud", for the purpose of expediting the proposal and carrying out of mitigation actions.

The Bank also approved an eligibility plan aimed at the adoption of the advanced approach and at the improvement of operational risk management, thus seeking better allocation of its capital in line with its business requirements.

Among the actions to prepare for the use of the advanced approach, we highlight the Bank's participation in the preparation of a library about the ORX Consortium Operational Riskdata eXchange Association.

The Bank uses the Technical Risk Recommendation – (RTR), issued to the process or product management areas when the need for adoption of loss mitigation. In 2011, 45 RTRs were issued and 53 corrective measures implemented by the managing areas. In addition to the RTRs, BB also uses Technical Control Recommendations – RTC, Technical Security Recommendations – RTS, and the recommendations of internal and external audits.

In relation to Tier II of Basel II, with a view to ensuring enough capital to support its strategies and underlying risks and complying with the standards related to prudential banking regulation, throughout 2011, BB revised monitoring indicators and improved its capital planning process.

The Bank has a specific capital management forum which assesses potential impacts of changes on the market and regulatory environments, made, strategic decisions and their consequences, focusing on the optimization of management and the adequacy of risk exposure. As far as regulatory matters are concerned, the Bank began the implementation of the requirements of CMN Resolution No. 3988/11 relating to the capital management framework and the Internal Capital Adequacy Assessment Process (ICAAP) of BACEN Circular Letter No. 3547/11.


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For purposes of compliance with Pillar III of Basel II, related to the reduction of the asymmetry of information and favoring of market discipline, Banco do Brasil published the required information about risk management, Required Referential Equity and Referential Equity, as provided for in Bacen Circular 3477/2009.

The risk management policies of Banco do Brasil are available at the website bb.com.br/ri.

Internal Controls

With the purpose of strengthening the processes related to the generation and disclosure of information to the market, mechanisms were implemented throughout the year to ensure control efficiency, in conformity with CVM Instruction No. 480/09.

For the launch of new products on the market, the Bank has a system and tools for keeping track of the prospecting, development, implementation and monitoring phases, which have undergone improvements in the year 2011, aiming at making this process more secure.

A new method for management to work with overseas branches was implemented during the year, with the use of new instruments for assessing the controls existing at these units.

The distribution network Units and the Support Units are aided by the Regional Internal Control Managements in the identification of the reasons for the non-compliances identified in the processes reviewed, the implementation of improvement actions and the communication of the internal control culture.

The Bank evaluates the effectiveness of internal controls related to consolidated financial statements for each year. Regarding the consolidated financial statements ended at December 31, 2011, we concluded, with reasonable level of assurance, that Banco do Brasil's internal controls are adequate to the Bank's size, business complexity and risks it is exposed to.

Prevention and Avoidance of Money Laundering and Financing of Terrorism–PLD/FT

For Banco do Brasil, preventing and fighting against money laundering and financing of terrorism besides a legal obligation is a commitment to the Country. On its webpage, the Bank discloses the policies adopted to prevent and fight such practices.

The Bank invests to improve the mechanisms that prevent and combat money laundering and terrorism financing, and to train its employees. In the end of 2011, 10,484 employees held on-site training and 17,719 had an internal certification in the Bank's Prevention and Avoidance of Money Laundering and Financing of Terrorism. The Bank's trainings and certifications are certified with Seal by Enccla - National Strategy for the Avoidance of Corruption and Money Laundering, granted by the Ministry of Justice.

Security of Service Channels

The year of 2011 was an important one for the security sector in service channels. The Bank started a number of strategic projects that provide increased security for its clients to carry out financial transactions.

The Bank started to use biometrics in automated teller machines, and the total adjustment of these channels will be completed by 2014.

In the businesses sector, the BB Token was launched, a device used to access the Financial Manager, which also simplifies the transactions providing an increase in operating efficiency for clients and the branch network.


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For the individual sector, the launch the BB Code is expected for 2012, a device to sign Internet transactions in a more secure way. With the BB Code, the customer will no longer need to register their computer to carry out transactions on this channel.

Banco do Brasil is also a signatory of the technical cooperation agreement entered into between the Brazilian Banking Federation (FEBRABAN) and the Federal Police Department, which enables the exchange of information about electronic fraud in the Banking Industry, strengthening the fight against organized cybernetic crime, fraud and corruption.

Security of information

BB adopts the best practices in information security management. Monitoring activities, analysis of weaknesses, review of accesses, management of identities, implementation and management of the most advanced tools related to security and prevention of information losses made it possible for BB to become a benchmark in information security.

Banco do Brasil is the registration authority of ICP-Brasil, operating in the issuance of e – CPF e e – CNPJ certificates (Brazilian legal registration for individuals and businesses, respectively). Internally, the Bank makes this technology available for use in the authentication of users in the corporate data network.

Our clients are offered the facility of accessing their checking accounts through the www.bb.com.br portal, using the standard ICP – Brasil digital certificate both to make consultations and authorize transactions. The use of a digital certificate in the signatures of foreign exchange contracts contributes to an increased operating efficiency and lower environmental impacts as a result of the sharp drop in the use of prints in the electronic process.

Environment Security

Banco do Brasil constantly invests in the update of the security mechanisms of its units. In 2011, the Bank's management of the security of its environments makes used of new image visualization technologies to prevent and respond to criminal attacks, enabling the control and monitoring of security in the banking environments.

Investments in technology, together with the constant improvement of banking security professionals, contribute to the protection of clients, employees and society, as they hamper the funding of criminal activities.

Crisis Management and Business Continuity

Banco do Brasil has a permanent commitment to the Brazilian society and Brazil as regards the continuity of the organization in the communities where it operates.

Through an interdisciplinary process called Management of Crises and Business Continuity, BB managers at the various organizational levels are instructed to prepare to respond to situations that pose a threat to life and the environments, businesses and image of the Company.

Situations that pose risks to people and businesses are monitored on an ongoing basis, such as disasters caused by natural events, with a view to expediting the assistance provided for the community, employees and clients affected by them.

TECHNOLOGY

The Bank continuously invests in the improvement of its technological architecture and the modernization of its IT installations not only from a technical viewpoint, but also in terms of its governance, management and the qualification of its professionals.


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The online monitoring of business events, the application development process, and a service-oriented architecture enables a high level of component reutilization and the prompt development of new solutions.

BB's processing architecture enables an specialization of the infrastructure in a manner that meets the needs of each business process, providing the means for an increased assertiveness and efficiency of investments.

In 2011, in the "Retail Transformation Program", for instance, Banco do Brasil acted to modernize its technological architecture, with emphasis on the new business platform interface already in use by retail agencies, optimizing service time spent with our customers. This platform supports client relationship processes and the sales dynamics, including the provision of information for the active monitoring of businesses and the management of products, services and controlling activities.

The technological platform of branches located abroad is being replaced with a new solution that will enable parameterization and efficiency, while safeguarding the alignment with the specific matters of each country, laying the groundwork for the internationalization of the Bank's businesses.

BB is also heavily investing in the preparation of a strong corporate technological environment to comply with the various regulatory requirements, such as the solutions in progress to ensure alignment with the Basel II standards in the management of market, credit and operational risk.

In 2011, the new Data Processing Center under construction in Brasília, Distrito Federal, was intensified, featuring the most modern technologies in this area. This Center will provide increased reliability, availability and security for our technological infrastructure, even in the event of external disasters, supporting the continuity of businesses. The conclusion is estimated for 2012.

To improve governance of all these processes, BB defined a new IT Governance model, prepared based on best practices and standards, and appropriate to meet present and future Conglomerate needs, focused on aligning Corporate Strategy, on operating efficiency and effective control on processes.

Aware that a group of skilled professionals is a key factor regarding IT, the Bank invests in the identification of talents and training of its IT personnel. In 2011, hundreds of new professionals were recruited and prepared to ensure the maintenance of the renowned quality level of our technical personnel.

LOGISTICS

Continuing service improvement process, Banco do Brasil, since the beginning of 2011, started to monitor, on a centralized basis, its automated teller machines and created CMA (Self-service Monitoring Center) for the purpose of guaranteeing clients' satisfaction with this channel.

In parallel, real time image monitoring was also implemented in self-service rooms located in Brazil's great cities. The purpose of the project is to offer an attractive environment for business performance, through maintenance of rooms (cleaning and infrastructure) and equipment’s availability.

In purchases and hirings to meet the institution's needs, Banco do Brasil is ahead with the inclusion of sustainable criteria in Invitations to Bid for the purchase of paper and furniture, among others.

ECOEFFICIENCY

Banco do Brasil has the Ecoefficiency Program intended to contribute to the management and maintenance of natural resources and energy consumption in production to maintain it at responsible standards, reducing waste and production and operating costs.

In matters related to the climate, note that BB is a founder member of the Company's Program for the Climate and the Brazilian Program for the GHG Protocol, both oriented to think and propose actions to combat climate changes.


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In its 2011 emission inventory, based on 2010 information, BB included three new emission sources: express mail, land transportation of employees on doing business and cooling systems. In addition to including new sources, its inventory was verified by an independent party and received a golden seal, the greatest recognition level, from the GHG Brazilian Protocol Program. In relation to paper consumption, Banco do Brasil has implemented several actions, among them the adequacy of corporate systems to print any material preferably on both sides of paper and the performance of awareness campaigns with employees. In addition, paper consumed in production has FSC or Cerflor seals, for origin certification.

On this wise, Banco do Brasil has invested in new channels for processing transactions and for doing business with its customers. There is growing trend to employ channels that do not involve printing and, therefore, do not consume paper. Among such channels, we may point out the Internet, Customer Assistance, and Mobile Banking, as well as the consolidation of the DDA - Authorized Direct Debit initiative.

Another example is the hiring of toner cartridge reconditioning services since 1999, which promotes the reuse of materials and natural resources (cleaning of used plastic carcasses, replacement of internal components and toner addition) and the use of domestic labor in products that were initially manufactured abroad.

A specific indicator was developed in the period to manage and monitor the corporate results relating to ecoefficiency: Índice de Ecoeficiência Pegada - IE Pegada.

PEOPLE

TALENT AND CAREER MANAGEMENT

BB closed 2011 with 113,810 employees, as compared to 109,026 in 2010. This workforce includes 8,754 new employees approved in public contests, reinforcing the Bank's commitment in improving working conditions and customer service.

The Bank offers to its employees the possibility of managing their professional trajectory and plan their careers, offering a Professional Rise Program and a Talent and Opportunity Data Base (TAO) through which it identifies the most skilled employees to perform different functions in the Company. In 2011, 28,021 employees were identified in TAO system and appointed to commissioned jobs.

CORPORATE UNIVERSITY

The Banco do Brasil Corporate University (UniBB), discloses personal and professional development actions and distance training in the Web Portal. This portal may be accessed through Corporate Intranet and Internet in the address: http://uni.bb.com.br.

In 2011, UniBB responded to 797,320 requests for training in the onsite, self-instructional or on-the-job categories, totaling 8,303 thousand hours. In 2011, the average hours of training per employee was 73.8 hours. Training opportunities were made available in 1,405 courses. These training actions use different teaching and support methods, such as: corporate TV, web, press, booklets, etc.

BB also offers degree, post-degree (specialization, MBA and doctorate) and language courses scholarships to its employees. At the end of 2011, the Bank had 9,833 scholarship employees, as graduation and post-graduation students, and 306 in foreign languages. General education at the end of 2011 was as follows: 24.7% of BB employees had completed specialization, master or PhD courses, 48.2% had completed degree courses, 26.7% had completed high school and 0.5% had completed the basic education.

LIBRARIES

The Bank has libraries that coordinate prospection, management, and dissemination of information and knowledge activities. The community has access to the libraries' premises to study, research and


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also to consult our book collection. Providing services to the community is part of the Bank's social responsibility actions.

In 2011, 275.4 thousand books were lent to users. Facilities were visited by 15.2 thousand people and the book collection increased due to 32.2 thousand new acquisitions and 10.1 thousand donations.

CERTIFICATIONS

BB allows its employees to take part in the Program for Internal Certification of Knowledge, as a training and professional qualification strategy. At the end of 2011, 73 thousand certificates were issued.

Bank encourages employees to obtain legal investment certificates (CPA 10 and 20). At the end of 2011, 64,136 employees had CPA 10 and/or 20 certificates.

PERFORMANCE MANAGEMENT

Performance of BB employees is formally monitored and evaluated through a tool denominated "Performance Management through Competences" (GDP). The performance is assessed from five perspectives: financial, customers, internal processes, organizational behavior and society. Evaluation is carried out by bosses, subordinated employees, peers (colleagues) and employees themselves (self-evaluation). In 2011, 112,226 employees had their performance followed up through this tool.

REMUNERATION AND BENEFITS

The table below shows the remuneration and the benefits granted to the employees:

R$ million

2011 2010 ∆ (%) Payroll¹ 13,503 11,867 13.8 Supplementary Pension² 305.8 235.4 29.9 Health Care Plans² 894.9 722.8 23.8

Profit-Sharing Plan³ 1,791 1,756 2.0

Training4 76.6 85.7 (10.6) ¹ Expenses with salaries, benefits, social charges and personnel provisions 22.c (Personnel Expenses) ² Funding of supplementary pension and health care plans, pursuant to Note 22.c and 27 (Bank's contributions to benefit plans table) ³ Amount set aside for profit-sharing plan, as Corporate Law Income Statement for the year. 4 According to Note 22.c

LIFE QUALITY AND ORGANIZATIONAL CLIMATE

The Bank's structure includes the Area of Quality of Life at Work, which develops and manages several programs aimed at improvement in the quality of life of employees, such as PCMSO (Program for Medical Control of Occupational Health), Sesmt (Specialized Services in Safety Engineering and in Occupational Medicine of BB), Tabas (Program for the Control of Smoking), Pavas (Program for Assistance to Holdup and Kidnapping Victims), Program for Recognition of Employees and the Quality of Life at Work Program.

BB provides to its employees an institutional channel denominated Ouvidoria Interna (Internal Ombudsman). Internal Ombudsman actions intend to stimulate dialogue in work environment to strengthen participative, democratic and transparent management, as well as compliance with principles and conducts stated in its Code of Ethics and Code of Conduct.

In 2011, the Bank promoted actions related to ethics management, among which: a) creation of 28 Committees for Ethics; b) provision of the course Getting to Know the Corporate Ethics Management Program and c) launching of website Ethics and Conduct in Intranet.


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Half-annually, the Ombudsman forwards Executive Summaries to the Bank's Board of Officers and to management areas about claims indicated by employees.

Banco do Brasil maintains a process of transparent and respectful dialogue with the representatives of its employees and a Collective Labor Agreement of national sphere, holds permanent negotiations with the trade unions and organizes theme groups with the bankers' representatives to discuss in detail topics of interest to the workers and to the company. Moreover, the Bank launches both a "collective bargaining" website on the intranet and a specific blog on the topic, aiming at the refinement of the communication

Banco do Brasil also entered into an agreement with union representatives, regarding the American continent, to respect collective negotiation rights and union freedom in the countries where it operates.

DISCIPLINE MANAGEMENT

In 2011, Banco do Brasil created the GEDIP (Discipline and Loss Management) system. This System comprises a chain of procedures to conduct irregularities done by employee or former employee for the purpose of improving discipline management, mitigating risks and reducing losses arising from violation of rules, as well as generating an internal loss basis to build an operating risk measurement model (Basel II AccordI).

LEGAL INFORMATION

In compliance with CVM Instruction No. 381, Banco do Brasil reports that KPMG Auditores Independentes has not provided, to the Bank and subsidiaries, any services that could affect its independence in relation to audit work in 2011.

In the engagement of services not related to external audits, Banco do Brasil adopts procedures based on the applicable legislation and on internationally accepted principles that preserve the independence of the auditor. These principles consist of: (i) the auditor should not audit his own work and (ii) the auditor should not act managerially before his client nor promote the interests of his client.

In 2011, Banco do Brasil did not contract KPMG Auditores Independentes to provide other services not related to the Bank's and its subsidiaries' external audit.

In Banco do Brasil, the contracting of services related to external audit should be preceded by the opinion of the Audit committee.

In compliance with article 8 of Bacen Circular 3068/2001, Banco do Brasil confirms that it has the intention and financial capacity to hold until maturity the securities classified in the "Securities Held to Maturity" category. The financial capacity is backed by a cash flow forecast that does not take into consideration the possibility of selling these securities.

According to the provisions of CVM Resolution 488/05, BB explains that:

a) in 2011, fixed investments amounted to R$ 1,572 million, emphasizing the investment in new service points and in the improvement of the ambience of the bank branches (R$ 741 million) as well as the investment made in information technology (R$ 630 million);

b) has R$ 299.5 million non-active tax credits arising from requirements defined by CMN Resolutions 3,059 of December 20, 2002 and 3,355 of March 31, 2006, and presented in a financial statement note for 2011;

c) records in a memorandum account, according to rules provided for in Financial Institutions Accounting Plan (Cosif), the amount of R$ 23.4 billion deriving from Co-obligations and Risks in Guarantees Provided to clients and companies of the BB Conglomerate;

d) In 2009 was entered in an Opening Contract Interbank Revolving Credit Line to release with Banco Votorantim, by the limit equivalent to the value of shareholders’ equity of that institution. The operation was accounted for in memorandum accounts, according to rules provided for


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Financial Institutions Accounting Plan (Cosif) and was issued in the 2011 Related-party Transactions on notes of Consolidated Financial Statements.

In compliance with Article 243 of Law 6404/76, BB reports that investments in subsidiary and associated companies totaled R$ 20.2 billion as of December 31, 2011.

In accordance with criteria defined by the Brazilian Statute of Small and Micro Enterprises (General Law of Small and Micro Enterprises), 91.5% of BB's business clients are classified as small and micro enterprises. The volume of funds used by SMEs reached R$ 40.3 billion in the 2011, representing a 13.5% increase as compared to the previous year. The balance of working capital operations contracted by micro companies totaled R$ 6.4 billion, and of small companies totaled R$ 21.2 billion. Investment operations aimed at micro companies reached R$ 2.5 billion; for small companies, investments reached R$ 9.4 billion.

MAIN AWARDS RECEIVED IN THE PERIOD

a) Licitações-e, Banco do Brasil's public purchase portal, was the winner of the V Prêmio 19 de Março (March 19 Award), granted during the VI Brazilian Congress of Auctioneers occurred in March. Of the five awards granted to the category 'Electronic Trading Systems, Licitações-e won three: 'Greatest number of trading sessions conducted and completed in 2010'; '2010 Best Electronic Trading System'; and 'Best Interaction with the Supplier'.

b) Ourocard, the Favorite Card of Brazilians according to the research conducted by Cardmonitor / Instituto Medida Certa from December 2010 to January 2011, was also elected as the best credit card (Brand Force), according to the research CVA Solutions carried out in February and March 2011.

c) Banco do Brasil was the winner of the X Prêmio e-Finance, (e-Finance Award), granted by Editora Executivos Financeiros, in the category GED-Gerenciador Eletrônico de Documentos (Electronic Document Manager), with the following cases: "Electronic Folder - Stage II" and "Servicing Center Europe - Electronic Management of Documents for the Europe Block”. Also won in the category Market Innovation, with the following cases: Brasília Concept Sore and New York Convenience Room.

d) Premium Top of Mind of the newspaper Folha de São Paulo as Brazilian's most reminded bank.

e) Best IR professional of Latin America for the banking and financial services industry in the opinion of buy side analysts, an award granted by the American magazine Institutional Investor. The same magazine granted to Banco do Brasil the award Best IR Team of Latin America, also for the banks and financial services industry.

f) Winner of the Internet and Social Media category of the XI ABT Award, with case "Um passarinho me contou... Banco do Brasil: Excelência em 140 caracteres". This case reported the work developed to serve BB clients through profile @MaisBB, at Twitter.

g) Banco do Brasil received, in September 2011, the Accessibility Certificate granted by ABNT (Brazilian Association of Technical Rules). It refers to an new certificate and BB was the first bank to receive it. The Augusta Branch received the certificate, as all the adequacies made to the building structure to permit access to disabled people were inspected.

h) BB, represented by the Ambiência 2.0 project, received, for the entire refurbishment, the highest award of the category of the VIII Corporate Architecture Great Award, the highest Latin America award of the segment.

i) Banco do Brasil Private was acknowledged by the Global Private Banking Awards 2011 of magazines The Banker and PWM Professional Wealth Management (Financial Times Group) as Highly Commended for categories "Best Private Bank in Brazil" and "Best Private Bank in Latin America".


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j) Banco do Brasil, in a partnership with BB DTVM, won for the fifth time and for the second consecutive year the award Best Bank for You to Invest of magazine Você S.A, and published in the 2011 December edition.

k) Banco do Brasil CEO, Aldemir Bendine, was honored in the category Public Management and Innovation Leader of the "Brazil Leaders Award" promoted by Jornal Brasil Econômico and Grupo de Líderes Empresariais – Lide (corporate leaders group).

l) Award "Época Negócios 100 - Most Prestigious Companies in Brazil", promoted by magazine Época Negócios. In 7th, BB is the only one financial institutions included in the first 10 position of 2011 ranking.

m) BB Móvel was awarded in the category "Best Bank Correspondent " by the 7ª edition of the Bank Report Award.

ACKNOWLEDGMENTS

We thank the dedication and diligence of our employees and collaborators, as well as the trust of shareholders, clients and Brazilian society.

Further information: Investor Relations Website (www.bb.com.br/ir)

Banco do Brasil S.A.Financial StatementsIn thousands of Reais

BALANCE SHEET

BB-Banco Múltiplo BB-Consolidated

A S S E T S 12.31.2011 12.31.2010 12.31.2011 12.31.2010

CURRENT ASSETS 518,716,710 423,727,363 582,945,119 476,495,166

Cash and Cash Equivalents (Note 6) 9,227,217 9,397,247 10,034,370 9,744,688

Short-term Interbank Investments (Note 7.a) 160,955,700 109,929,317 149,233,680 106,615,633 Open market investments 132,234,087 78,628,740 139,032,202 85,060,184 Interbank deposits 28,721,613 31,300,577 10,201,478 21,555,449

Securities and Derivative Fnancial Instruments (Note 8) 38,595,673 40,722,362 83,570,189 76,342,346 Own portfolio 21,749,007 17,355,563 65,381,143 46,402,185 Subject to repurchase agreements 16,208,777 22,532,857 16,599,145 26,465,657 Deposits with the Brazilian Central Bank 16 15 16 15 Pledged in guarantee 84,496 130,860 522,801 2,217,127 Derivative financial instruments 553,377 703,067 1,067,084 1,257,362

Interbank Accounts 93,272,906 86,287,448 96,289,363 89,442,660 Payments and receipts pending settlement 27,327 129,007 27,327 129,007 Restricted deposits (Note 9.a) 92,785,842 85,796,265 95,709,307 88,902,532 Brazilian Central Bank deposits 90,736,391 83,928,847 93,659,856 87,035,114 National Treasury - rural credits receivable 123,644 74,520 123,644 74,520 National Housing Financing System 1,925,807 1,792,898 1,925,807 1,792,898 Interbank onlendings 12,881 2,718 91,643 38,828 Correspondent banks 446,856 359,458 461,086 372,293

Interdepartmental Accounts 335,167 258,144 335,167 258,144 Internal transfers of funds 335,167 258,144 335,167 258,144

Loan Operations (Note 10) 152,464,403 120,368,657 167,930,020 129,099,180 Public sector 5,633,082 3,229,361 6,210,366 880,256 Private sector 154,626,514 124,363,469 170,451,280 135,727,663 (Allowance for loan losses) (7,795,193) (7,224,173) (8,731,626) (7,508,739)

Lease Operations (Note 10) 18,942 18,227 1,537,076 1,799,814 Public sector 18,942 18,227 19,282 18,787 Private sector -- -- 1,640,691 1,815,796 (Allowance for lease losses) -- -- (122,897) (34,769)

Other Receivables 62,322,583 55,245,556 71,291,703 61,658,370 Receivables from guarantees honored 76,698 75,303 76,698 75,303 Foreign exchange portfolio (Note 12.a) 17,169,064 9,936,710 17,615,404 10,291,956 Receivables 2,015,615 1,431,206 1,383,895 913,332 Securities trading 97,264 78,741 317,141 382,996 Insurance, pension plan and capitalization (Note 21.a) -- -- 1,738,997 1,086,548 Sundry (Note 11.b) 43,831,069 44,611,607 51,189,006 49,880,444 (Provision for other losses) (867,127) (888,011) (1,029,438) (972,209)

Others Assets (Note 13) 1,524,119 1,500,405 2,723,551 1,534,331 Others assets 289,523 291,787 468,465 388,071 (Accumulated impairment) (170,279) (169,506) (188,463) (177,233) Prepaid expenses 1,404,875 1,378,124 2,443,549 1,323,493

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A S S E T S 12.31.2011 12.31.2010 12.31.2011 12.31.2010

NON-CURRENT ASSETS 371,635,547 313,769,814 398,284,788 334,677,042

LONG-TERM RECEIVABLES 336,701,838 284,935,139 374,854,442 314,906,723

Short-term Interbank Investments (Note 7.a) 16,617,249 4,785,325 17,054,126 963,157 Interbank deposits 16,617,249 4,785,325 17,054,126 963,157

Securities and Derivative Financial Instruments (Note 8) 66,446,845 56,542,795 84,659,684 67,524,388 Own portfolio 24,302,592 30,617,318 39,439,392 39,315,949 Subject to repurchase agreements 38,598,302 23,145,800 40,002,383 24,860,036 Deposits with the Brazilian Central Bank 47,406 42 47,406 42 Pledged in guarantee 3,353,143 2,648,397 4,840,887 2,982,132 Derivative financial instruments 145,402 131,238 329,616 366,229

Interbank Accounts 52,584 83,378 52,584 83,378 Restricted deposits (Note 9.a) 550 46,644 550 46,644

National Treasury - rural credits receivable 550 46,644 550 46,644 Interbank onlendings 52,034 36,734 52,034 36,734

Loan Operations (Note 10) 195,612,261 170,927,298 211,115,025 188,627,319 Public sector 2,782,299 3,921,148 2,342,407 6,380,810 Private sector 201,715,407 175,609,950 218,262,979 191,171,151 (Allowance for loan losses) (8,885,445) (8,603,800) (9,490,361) (8,924,642)

Lease Operations (Note 10) 11,039 26,246 1,313,803 2,055,899 Public sector 11,039 26,246 11,324 27,034 Private sector -- -- 1,392,785 2,185,322 (Allowance for lease losses) -- -- (90,306) (156,457)

Other Receivables 55,349,386 50,524,101 58,262,545 53,303,233 Foreign exchange portfolio (Note 12.a) -- 1,585,804 -- 1,585,804 Receivables 31,151 30,228 25,927 30,305 Specific credits (Note 11.a) 1,146,328 1,029,638 1,146,328 1,029,638 Insurance, pension plan and capitalization (Note 21.a) -- -- 2,511 22,022 Sundry (Note 11.b) 54,798,755 48,469,480 57,722,862 51,235,371 (Provision for other losses) (626,848) (591,049) (635,083) (599,907)

Others Assets (Note 13) 2,612,474 2,045,996 2,396,675 2,349,349 Prepaid expenses 2,612,474 2,045,996 2,396,675 2,349,349

PERMANENT ASSETS 34,933,709 28,834,675 23,430,346 19,770,319

Investments 20,241,221 17,641,326 7,973,024 8,127,754 Investments in subsidiary and associated companies (Note 14.a) 20,222,750 17,606,546 6,840,943 7,115,534 In Brazil 18,034,933 16,598,375 6,440,660 7,115,534 Abroad 2,187,817 1,008,171 400,283 -- Others Investments (Note 14.b) 67,717 86,135 1,216,279 1,096,635 (Accumulated impairment) (49,246) (51,355) (84,198) (84,415)

Property and Equipment in Use (Note 15) 5,062,238 4,610,729 5,589,086 4,903,927 Land and buildings in use 4,232,214 3,687,187 4,367,549 3,707,685 Other property and equipment in use 7,437,965 6,823,602 8,344,291 7,394,339

(Accumulated depreciation) (6,607,941) (5,900,060) (7,122,754) (6,198,097)

Intangible Assets (Note 16) 9,515,802 6,327,609 9,736,024 6,451,532 Intangible assets 14,539,108 10,099,437 14,947,352 10,259,044 (Accumulated amortization) (5,023,306) (3,771,828) (5,211,328) (3,807,512)

Deferred Charges 114,448 255,011 132,212 287,106 Organization and expansion costs 2,003,489 2,061,656 2,035,551 2,156,036 (Accumulated amortization) (1,889,041) (1,806,645) (1,903,339) (1,868,930)

TOTAL ASSETS 890,352,257 737,497,177 981,229,907 811,172,208

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L I A B I L I T I E S / S H A R E H O L D E R S ' E Q U I T Y 12.31.2011 12.31.2010 12.31.2011 12.31.2010

CURRENT LIABILITIES 572,481,618 505,211,636 620,776,955 532,710,235

Deposits (Note 17.a) 291,937,609 284,318,438 302,505,147 290,696,257 Demand deposits 60,371,172 63,295,580 62,016,372 63,502,759 Savings deposits 100,109,839 89,287,840 100,109,839 89,287,840 Interbank deposits 16,242,031 19,664,373 11,918,965 17,434,462 Time deposits 115,214,567 111,660,899 128,459,971 120,061,375 Other deposits -- 409,746 -- 409,821

Money Market Borrowing (Note 17.c) 172,149,993 120,389,184 184,926,104 134,252,629 Own portfolio 51,969,513 43,663,028 62,006,581 52,879,938 Third-party portfolio 120,180,480 76,726,156 122,919,523 80,107,269 Subject to repurchase agreements with free movement -- -- -- 1,265,422

Funds from Acceptance and Issue of Securities (Note 19) 14,210,883 1,772,857 15,246,923 2,621,208 Funds from housing bonds, mortgage, of credit and similar 10,082,293 483,439 10,135,836 838,765 Funds from debentures -- -- 809,898 -- Foreign securities 4,128,590 1,289,418 4,301,189 1,782,443

Interbank Accounts 24,275 18,109 24,275 18,109 Receipts and payments pending settlement 24 486 24 486 Correspondent banks 24,251 17,623 24,251 17,623

Interdepartmental Accounts 3,757,975 3,671,766 3,819,452 3,687,786 Thrid-party funds in transit 3,755,254 3,667,418 3,816,622 3,683,438 Internal transfers of funds 2,721 4,348 2,830 4,348

Borrowings (Note 18.a) 8,368,049 13,103,563 9,505,975 6,957,419 Domestic loans - other institutions -- -- 92,647 48,585 Foreign borrowing 8,368,049 13,103,563 9,413,328 6,908,834

Domestic Onlending – Official Institutions (Note 18.b) 16,089,557 20,487,941 17,474,727 21,821,275 National Treasury -- -- 60,737 25,419 BNDES 10,074,353 9,129,773 10,864,791 9,896,077 Caixa Econômica Federal 338,253 147,079 338,253 147,079 Finame 3,233,785 3,168,319 3,764,544 3,709,930 Other institutions 2,443,166 8,042,770 2,446,402 8,042,770

Foreign Onlending (Note 18.b) 13,114 112,178 13,114 11,238 Foreign onlendings 13,114 112,178 13,114 11,238

Derivative Financial Instruments (Note 8.d) 1,510,251 2,426,655 3,089,880 3,979,755 Derivative financial instruments 1,510,251 2,426,655 3,089,880 3,979,755

Other Liabilities 64,419,912 58,910,945 84,171,358 68,664,559 Collection of taxes and contributions 290,338 232,021 360,074 296,980 Foreign exchange portfolio (Note 12.a) 16,044,850 11,458,085 16,134,916 11,905,011 Shareholders and statutory distributions 2,044,016 1,826,050 2,122,374 1,991,682 Taxes and social security (Note 20.b) 17,444,318 19,041,535 20,689,746 21,085,197 Securities trading 337,664 185,325 835,717 1,675,612 Expenses of technical provisions for insurance, pension plan and capitalization

(Note 21.b) -- -- 12,384,381 5,152,564

Financial and development funds (Note 20.a) 2,002,989 1,469,280 2,002,989 1,469,280 Subordinated debts (Note 20.c) -- 14,941 568,288 740,479 Hybrid capital and debt instruments (Note 20.d) 48,479 55,746 48,479 55,746 Other liabilities (Note 20.e) 26,207,258 24,627,962 29,024,394 24,292,008

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L I A B I L I T I E S / S H A R E H O L D E R S' E Q U I T Y 12.31.2011 12.31.2010 12.31.2011 12.31.2010

NON-CURRENT LIABILITIES 259,721,949 181,789,800 302,036,582 228,021,290

LONG-TERM LIABILITIES 259,393,319 181,507,564 301,690,008 227,721,771

Deposits (Note 17.a) 136,867,133 84,368,330 139,880,409 86,154,411 Interbank deposits 1,897,876 2,358,347 2,531,389 1,563,640 Time deposits 134,969,257 82,009,983 137,349,020 84,590,771

Money Market Borrowing (Note 17.c) 8,052,259 5,869,643 10,249,172 7,922,326 Own portfolio 2,276,226 1,896,616 4,468,906 3,915,215 Third-party portfolio 5,776,033 3,973,027 5,776,033 3,973,027 Subject to repurchase agreements with free movement -- -- 4,233 34,084

Funds from Acceptance and Issue of Securities (Note 19) 7,928,806 5,258,702 17,076,367 10,864,899 Funds from housing bonds, mortgage, of credit and similar 352,199 -- 5,391,394 1,852,461 Funds from debentures -- -- 838,925 1,623,056 Foreign securities 7,576,607 5,258,702 10,846,048 7,389,382

Borrowings (Note 18.a) 15,117,096 2,285,851 2,751,099 1,640,255 Domestic loans - official institutions -- -- 28,347 44,865 Foreign borrowing 15,117,096 2,285,851 2,722,752 1,595,390

Domestic Onlending – Official Institutions (Note 18.b) 31,732,731 26,765,071 33,516,317 28,942,750 National Treasury 1,643,963 1,512,821 1,660,770 1,524,071 BNDES 17,153,628 15,807,991 18,113,663 17,082,350 Finame 12,935,140 9,444,259 13,741,884 10,336,329

Foreign Onlending (Note 18.b) 274,294 413,962 89,239 85,897 Foreign onlendings 274,294 413,962 89,239 85,897

Derivative Financial Instruments (Note 8.d) 330,224 466,762 530,775 1,316,885 Derivative financial instruments 330,224 466,762 530,775 1,316,885

Other Liabilities 59,090,776 56,079,243 97,596,630 90,794,348 Foreign exchange portfolio 12,281,341 17,600,976 12,281,341 17,600,976 Taxes and social security (Note 20.b) 5,477,282 4,049,364 7,366,946 6,527,922 Securities trading 1,139,599 1,191,321 -- --

Expenses of technical provisions for insurance, pension plan and capitalization

(Note 21.b) -- -- 32,638,556 27,216,851

Financial and development funds (Note 20.a) 1,999,266 2,099,107 1,999,266 2,099,107 Subordinated debts (Note 20.c) 27,189,053 19,945,681 30,316,395 22,671,637 Hybrid capital and debt instruments (Note 20.d) 2,799,522 3,315,537 2,797,313 3,305,647 Other liabilities (Note 20.e) 8,204,713 7,877,257 10,196,813 11,372,208

DEFERRED INCOME 328,630 282,236 346,574 299,519

SHAREHOLDERS' EQUITY (Note 24) 58,148,690 50,495,741 58,416,370 50,440,683

Capital 33,122,569 33,077,996 33,122,569 33,077,996 Local residents 27,984,894 27,427,230 27,984,894 27,427,230 Domiciled abroad 5,137,675 5,650,766 5,137,675 5,650,766

Revaluation Reserves 4,730 6,241 4,730 6,241

Revenue Reserves 24,297,550 16,944,324 24,121,302 16,889,416

Credit Valuation Adjustments (Note 8.f) 723,842 467,435 723,842 467,435

(Treasury Shares) (1) (255) (1) (452)

Non-controlling interests -- -- 443,928 47

TOTAL LIABILITIES 890,352,257 737,497,177 981,229,907 811,172,208

See the accompanying notes to the financial statements.

34

Banco do Brasil S.A. Financial StatementsIn thousands of Reais

STATEMENT OF INCOME

Banco do Brasil BB-Consolidated

2nd Half 2011 2011 2010 2nd Half 2011 2011 2010

INCOME FROM FINANCIAL INTERMEDIATION 49,602,261 90,080,002 71,400,839 56,945,684 103,329,631 81,685,766 Loans (Note 10.b) 29,018,123 55,075,090 46,618,034 32,965,384 61,997,797 50,960,085 Leases (Note 10.i) 10,680 21,996 40,372 1,037,557 2,249,071 3,032,523 Securities (Note 8.b) 16,521,703 28,598,042 21,574,907 17,763,660 30,848,662 23,238,429 Derivative financial instruments (Note 8.e) 326,927 (515,152) (1,231,410) (170,502) (1,461,020) (2,239,364) Foreign exchange portfolio (Note 12.b) -- -- 977,066 -- -- 1,082,831 Compulsory deposits (Note 9.b) 3,724,828 6,900,026 3,421,870 3,892,658 7,231,314 3,586,245 Financial income of insurance, pension plan and capitalization (Note 21.e) -- -- -- 1,456,927 2,463,807 2,025,017

EXPENSES FROM FINANCIAL INTERMEDIATION (37,783,976) (65,465,745) (48,409,415) (43,885,399) (75,816,567) (56,124,231) Market norrowing (Note 17.d) (25,509,396) (47,791,722) (35,437,679) (28,741,229) (53,054,995) (38,756,358) Borrowings and onlendings (Note 18.c) (5,371,547) (6,872,359) (3,391,835) (5,507,011) (7,118,192) (3,472,666) Lease operations (Note 10.i) (8,393) (17,058) (34,487) (735,923) (1,633,241) (2,218,481) Foreign exchange portfolio (Note 12.b) (1,496,071) (582,944) -- (1,386,204) (374,217) -- Financial expenses of insurance, pension plan and capitalization (Note 21.e) -- -- -- (1,018,436) (1,660,831) (1,432,686) Allowance for loan losses (Notes 10.f and 10.g) (5,398,569) (10,201,662) (9,545,414) (6,496,596) (11,975,091) (10,244,040)

NET INCOME FROM FINANCIAL INTERMEDIATION 11,818,285 24,614,257 22,991,424 13,060,285 27,513,064 25,561,535

OTHER OPERATING INCOME/EXPENSES (3,976,765) (7,342,117) (5,942,816) (4,781,367) (9,006,297) (7,151,340) Service fee (Note 22.a) 4,487,495 8,273,102 7,071,729 6,512,743 12,213,287 10,776,645 Bank fee (Note 22.b) 2,875,987 5,452,195 4,993,502 3,233,686 6,028,289 5,395,895 Personnel expenses (Note 22.c) (7,366,202) (13,610,639) (12,155,360) (8,110,127) (14,912,575) (13,019,591) Other administrative expenses (Note 22.d) (6,341,526) (12,028,035) (11,572,155) (7,088,436) (13,422,420) (13,039,969) Tax expenses (Note 25.c) (1,602,276) (3,214,770) (2,960,769) (2,156,301) (4,259,475) (3,749,945) Equity in the earnings/(loss) of associated and subsidiary companies (Note 14) 1,629,796 3,020,730 2,873,966 614,252 454,879 (46,323) Results from insurance, pension plan and capitalization (Note 21.e) -- -- -- 1,085,438 2,264,977 1,887,722 Other operating income (Note 22.e) 5,448,888 11,784,868 12,004,722 5,987,583 12,977,559 13,788,125 Other operating expenses (Note 22.f) (3,108,927) (7,019,568) (6,198,451) (4,860,205) (10,350,818) (9,143,899)

OPERATING INCOME 7,841,520 17,272,140 17,048,608 8,278,918 18,506,767 18,410,195

NON-OPERATING INCOME (Note 23) 67,242 176,187 190,504 33,046 225,352 370,349 Income 107,102 276,320 286,060 145,613 439,519 544,949 Expenses (39,860) (100,133) (95,556) (112,567) (214,167) (174,600)

INCOME BEFORE TAXATION AND PROFIT SHARING 7,908,762 17,448,327 17,239,112 8,311,964 18,732,119 18,780,544

INCOME AND SOCIAL CONTRIBUTION TAXES (Note 25) (1,159,741) (3,637,836) (3,980,792) (1,519,828) (4,722,455) (5,321,189)

EMPLOYEE PROFIT SHARING (764,058) (1,563,161) (1,500,227) (862,730) (1,790,543) (1,756,190)

MINORITY INTEREST EARNINGS/(LOSSES) -- -- -- (65,783) (93,131) 20

NET INCOME (Note 24.g) 5,984,963 12,247,330 11,758,093 5,863,623 12,125,990 11,703,185

EARNINGS PER SHARE (Note 24.e)Weighted average number of shares - basic 2,862,083,461 2,861,404,718 2,711,976,359 -- -- -- Basic earnings per share (R$) 2.09 4.28 4.34 -- -- -- Weighted average number of shares - diluted 2,865,416,989 2,869,849,797 2,727,868,423 -- -- -- Diluted earnings per share (R$) 2.09 4.27 4.31 -- -- --


35

Banco do Brasil S.AFinancial StatementsIn thousands of Reais

STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

Banco do Brasil Revenue reservesEquity

evaluation Retained

Realized Capital Revaluation adjustments Treasuary earnings

E V E N T S capital reserves reserves Legal Statutory shares (loss) in the Total

reserves reserves Associated and parent company

subsidiary companies

Balances at 12.31.2009 18,566,919 5,188 6,746 2,296,291 15,005,148 212,286 57,878 (31,191) -- 36,119,265

Capital increase – capitalization of reserves 7,418,087 (5,188) -- -- (7,412,899) -- -- -- -- --

Capital increase - share public offering 7,049,900 -- -- -- -- -- -- -- -- 7,049,900

Capital increase - "C" Bonus subscription 42,816 -- -- -- -- -- -- -- -- 42,816

Capital increase - merger of subsidiaries 274 -- -- -- -- -- -- -- -- 274

Credit valuation adjustments (Note 8.f) -- -- -- -- -- 141,400 55,871 -- -- 197,271

Disposal of treasury shares -- -- -- -- -- -- -- 30,936 -- 30,936

Losses in the disposal of treasury shares -- -- -- -- (2,581) -- -- -- -- (2,581)

Expired dividends and interest on own capital -- -- -- -- -- -- -- -- 3,152 3,152

Prior-year adjustments - conformity with the Law n.° 11,6 38/2007 -- -- -- -- -- -- -- -- 2,191 2,191

Realization of revaluation reserve in subsidiary/associated companies (Note 24.c) -- -- (505) -- -- -- -- -- 505 --

Net income -- -- -- -- -- -- -- -- 11,758,093 11,758,093

Appropriations - Reserves -- -- -- 587,905 7,290,591 -- -- -- (7,878,496) --

- Dividends (Note 24.f) -- -- -- -- (820,131) -- -- -- (1,482,195) (2,302,326)

- Interest on own capital (Note 24.f) -- -- -- -- -- -- -- -- (2,403,250) (2,403,250)

Balances at 12.31.2010 33,077,996 -- 6,241 2,884,196 14,060,128 353,686 113,749 (255) -- 50,495,741

Changes in the period 14,511,077 (5,188) (505) 587,905 (945,020) 141,400 55,871 30,936 -- 14,376,476

Balances at 06.30.2011 33,122,569 -- 5,960 3,197,314 17,508,015 361,719 80,525 (1) -- 54,276,101

Credit valuation adjustments (Note 8.f) -- -- -- -- -- 256,837 24,761 -- -- 281,598

Expired dividends/interest on own capital -- -- -- -- -- -- -- -- 1,197 1,197

Realization of revaluation reserve in subsidiary/associated companies -- -- (47) -- -- -- -- -- 47 --

Write-off of revaluation reserve in subsidiary/associated companies (Note 24.c) -- -- (1,183) -- -- -- -- -- -- (1,183)

Net income -- -- -- -- -- -- -- -- 5,984,963 5,984,963


- Dividends (Note 24.f) -- -- -- -- (360,714) -- -- -- (442,565) (803,279)


Balances at 12.31.2011 33,122,569 -- 4,730 3,496,562 20,800,988 618,556 105,286 (1) -- 58,148,690

Changes in the period -- -- (1,230) 299,248 3,292,973 256,837 24,761 -- -- 3,872,589

Balances at 12.31.2010 33,077,996 -- 6,241 2,884,196 14,060,128 353,686 113,749 (255) -- 50,495,741

Capital increase - "C" Bonus subscription (Note 24.b) 44,573 -- -- -- -- -- -- -- -- 44,573

Credit valuation adjustments (Note 8.f) -- -- -- -- -- 264,870 (8,463) -- -- 256,407

Disposal of treasury shares -- -- -- -- (254) -- -- 254 -- --

Expired dividends and interest on own capital -- -- -- -- -- -- -- -- 4,755 4,755

Realization of revaluation reserve in subsidiary/associated companies (Note 24.c) -- -- (328) -- -- -- -- -- 328 --

Write-off of revaluation reserve in subsidiary/associated companies (Note 24.c) -- -- (1,183) -- -- -- -- -- -- (1,183)

Net income -- -- -- -- -- -- -- -- 12,247,330 12,247,330


- Dividends (Note 24.f) -- -- -- -- (809,738) -- -- -- (1,037,887) (1,847,625)


Balances at 12.31.2011 33,122,569 -- 4,730 3,496,562 20,800,988 618,556 105,286 (1) -- 58,148,690

Changes in the period 44,573 -- (1,511) 612,366 6,740,860 264,870 (8,463) 254 -- 7,652,949


Banco do Brasil

36

Banco do Brasil S.AFinancial StatementsIn thousands of Reais

STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

BB-Consolidated Revenue reservesEquity

evaluation Retained

Realized Capital Revaluation adjustments Treasuary earnings Non-controlling

E V E N T S capital reserves reserves Reserva Reservas shares (loss) in the interest Total

Legal Estatutárias Associated and parent company

subsidiary companies

Balances at 12.31.2009 18,566,919 5,188 6,746 2,296,291 15,005,148 212,286 57,878 (31,191) -- 141 36,119,406

Capital increase – capitalization of reserves 7,418,087 (5,188) -- -- (7,412,899) -- -- -- -- -- --

Capital increase - share public offering 7,049,900 -- -- -- -- -- -- -- -- -- 7,049,900

Capital increase - "C" Bonus subscription 42,816 -- -- -- -- -- -- -- -- -- 42,816

Capital increase - merger of subsidiaries 274 -- -- -- -- -- -- -- -- -- 274

Credit valuation adjustments (Note 8.f) -- -- -- -- -- 141,400 55,871 -- -- -- 197,271

Disposal of treasury shares -- -- -- -- -- -- -- 30,936 -- -- 30,936

Losses in the disposal of treasury shares -- -- -- -- (2,581) -- -- -- -- -- (2,581)

Expired dividends/interest on own capital -- -- -- -- -- -- -- -- 3,152 -- 3,152

Prior-year adjustments - conformity with the Law n.° 11,6 38/2007 -- -- -- -- -- -- -- -- 2,191 -- 2,191

Realization of revaluation reserve in subsidiary/associated companies (Note 24.c) -- -- (505) -- -- -- -- -- 505 -- --

Reciprocal participation in subsidiaries -- -- -- -- -- -- -- (197) -- -- (197)

Change in non-controlling interest -- -- -- -- -- -- -- -- -- (74) (74)

Net income -- -- -- -- -- -- -- -- 11,703,185 (20) 11,703,165

Unrealized results -- -- -- -- (54,908) -- -- -- 54,908 -- --

Realization of Unrealizes results -- -- -- -- -- -- -- -- -- -- --

Appropriations - Reserves -- -- -- 587,905 7,290,591 -- -- -- (7,878,496) -- --

- Dividends (Note 24.f) -- -- -- -- (820,131) -- -- -- (1,482,195) -- (2,302,326)

- Interest on own capital (Note 24.f) -- -- -- -- -- -- -- -- (2,403,250) -- (2,403,250)

Balances at 12.31.2010 33,077,996 -- 6,241 2,884,196 14,005,220 353,686 113,749 (452) -- 47 50,440,683

Changes in the period 14,511,077 (5,188) (505) 587,905 (999,928) 141,400 55,871 30,739 -- (94) 14,321,277

Balances at 06.30.2011 33,122,569 -- 5,960 3,197,314 17,453,107 361,719 80,525 (1) -- 397,779 54,618,972

Credit valuation adjustments (Note 8.f) -- -- -- -- -- 256,837 24,761 -- -- -- 281,598


Realization of revaluation reserve in subsidiary/associated companies -- -- (47) -- -- -- -- -- 47 -- --

Write-off of revaluation reserve in subsidiary/associated companies (Note 24.c) -- -- (1,183) -- -- -- -- -- -- -- (1,183)

Change in non-controlling interest -- -- -- -- -- -- -- -- -- (19,634) (19,634)

Net income -- -- -- -- -- -- -- -- 5,863,623 65,783 5,929,406



- Dividends (Note 24.f) -- -- -- -- (360,714) -- -- -- (442,565) -- (803,279)


Balances at 12.31.2011 33,122,569 -- 4,730 3,496,562 20,624,740 618,556 105,286 (1) -- 443,928 58,416,370

Changes in the period -- -- (1,230) 299,248 3,171,633 256,837 24,761 -- -- 46,149 3,797,398

Balances at 12.31.2010 33,077,996 -- 6,241 2,884,196 14,005,220 353,686 113,749 (452) -- 47 50,440,683

Capital increase - "C" Bonus subscription (Note 24.b) 44,573 -- -- -- -- -- -- -- -- -- 44,573

Credit valuation adjustments (Note 8.f) -- -- -- -- -- 264,870 (8,463) -- -- -- 256,407

Disposal of treasury shares -- -- -- -- (254) -- -- 254 -- -- --


Realization of revaluation reserve in subsidiary/associated companies (Note 24.c) -- -- (328) -- -- -- -- -- 328 -- --

Write-off of revaluation reserve in subsidiary/associated companies (Note 24.c) -- -- (1,183) -- -- -- -- -- -- -- (1,183)

Reciprocal participation in subsidiaries -- -- -- -- -- -- -- 197 -- -- 197

Change in non-controlling interest -- -- -- -- -- -- -- -- -- 350,750 350,750

Net income -- -- -- -- -- -- -- -- 12,125,990 93,131 12,219,121



- Dividends (Note 24.f) -- -- -- -- (809,738) -- -- -- (1,037,887) -- (1,847,625)


Balances at 12.31.2011 33,122,569 -- 4,730 3,496,562 20,624,740 618,556 105,286 (1) -- 443,928 58,416,370

Changes in the period 44,573 -- (1,511) 612,366 6,619,520 264,870 (8,463) 451 -- 443,881 7,975,687


Banco do Brasil

37

Banco do Brasil S.A.Financial StatementsIn thousands of Reais

STATEMENT OF CASH FLOWS


2nd Half 2011 2011 2010 2nd Half 2011 2011 2010

CASH FLOWS FROM OPERATING ACTIVITIESIncome before income and social contribution taxes 7,908,762 17,448,327 17,239,112 8,311,964 18,732,119 18,780,544 Adjustment to income (loss) before tax 2,489,442 6,773,908 7,720,767 10,515,659 22,490,022 20,366,277

Provision for credits, lease and other credits (Notes 10.f and 10.g) 5,398,569 10,201,662 9,545,414 6,496,596 11,975,091 10,244,040 Depreciation and amortization (Note 22.d) 1,653,071 3,255,128 3,136,697 1,700,222 3,343,603 3,196,517 Impairment assessment result (Notes 15 and 16) 169 (3,274) 14,932 16 (2,959) 15,621 Income from holdings in subsidiaries and affiliates (Note 14.a) (1,629,796) (3,020,730) (2,873,966) (614,252) (454,879) 46,323 (Income)/ loss on the sale of assets (Note 23) (9,125) (12,625) (43,911) 46,462 61,457 16,695 Income on the sale of investments (Note 23) (12,739) (104,653) (117,166) (20,732) (192,396) (221,568) Capital (gain)/loss (Note 23) 4,401 22,198 21,814 (2,059) (3,757) (91,509) Foreign currency translation results (Note 14.a) 364,264 267,786 (111,534) 585,809 433,284 (166,972) Provision/(reversal) for devaluation of other assets (Note 23) 832 4,507 8,914 (13) 7,786 8,969 Amortization of goodwill (Note 14.c) 148,203 291,526 186,719 282,721 574,807 224,578 Expenses with civil, labor and tax provisions (Note 28.b) 304,808 811,724 802,680 584,827 1,183,610 1,012,731 Expenses of technical provisions for insurance, pension plan and capitalization (Note 21.e) -- -- -- 5,437,922 10,768,270 8,927,554 Adjustment of actuarial assets/liabilities (Note 27) (960,045) (2,759,004) (3,816,028) (960,045) (2,759,004) (3,816,028) Effect of changes in foreign exchange rates in cash and cash equivalents (2,773,184) (2,183,655) 963,164 (2,956,067) (2,355,099) 966,275 Minority interest results -- -- -- (65,783) (93,131) 20 Other adjustments 14 3,318 3,038 35 3,339 3,031

Income adjusted before income and social contribution taxes 10,398,204 24,222,235 24,959,879 18,827,623 41,222,141 39,146,821 Equity variations (2,802,810) (6,505,951) (38,283,268) (4,985,659) (9,128,159) (44,661,898)

(Increase) Decrease in short-term interbank deposits (8,819,699) (52,386,541) 40,525,803 (1,894,217) (39,618,707) 46,189,983 (Increase) Decrease in trading securities and derivative financial instruments (3,859,651) (3,282,238) 2,459,541 (8,475,888) (13,039,525) (11,786,094)(Increase) Decrease in interbank and interdepartmental accounts (2,802,328) (6,939,312) (59,408,439) (2,763,086) (6,755,100) (62,442,063)(Increase) Decrease in loan operations (41,791,925) (66,515,124) (57,209,481) (42,677,847) (70,097,363) (65,253,458)(Increase) Decrease in lease operations 7,533 14,492 16,302 445,866 986,337 690,323 (Increase) Decrease in other receivables net of deferred taxes (10,406,940) (8,565,688) (13,576,075) (10,368,622) (9,885,651) (14,551,933)(Increase) Decrease in other receivables (374,728) (582,074) (1,601,228) (427,011) (1,277,451) (1,552,232) Income and social contribution taxes paid (1,434,418) (3,408,970) (4,992,276) (1,904,073) (4,927,873) (6,468,349) (Decrease) Increase in deposits 43,191,951 60,117,974 38,582,012 46,234,413 61,252,419 39,286,841 (Decrease) Increase in money market borrowing 4,093,048 53,943,425 (23,261,984) 2,299,846 53,000,321 (18,646,232)(Decrease) Increase in funds from acceptance and issue of securities 8,717,002 15,108,130 4,460,062 9,903,192 18,837,183 6,123,788 (Decrease) Increase in borrowings and onlendings 7,826,394 8,426,275 21,560,572 2,212,326 3,633,981 21,395,265 (Decrease) Increase in other liabilities 2,796,518 (2,482,694) 14,128,599 2,372,467 (1,283,785) 22,240,729 (Decrease) Increase in deferred income 54,433 46,394 33,324 56,975 47,055 111,534

CASH PROVIDED BY (USED IN) OPERATIONS 7,595,394 17,716,284 (13,323,389) 13,841,964 32,093,982 (5,515,077)

CASH FLOWS FROM INVESTING ACTIVITIES(Increase) Decrease in securities available for sale (5,992,645) (7,694,098) (9,962,648) (8,221,180) (12,986,285) (12,784,266)(Increase) Decrease in securities held to maturity 3,043,892 2,489,726 7,957,737 2,712,674 1,465,195 5,782,871 Dividends received from subsidiary/associated companies 562,422 1,297,688 2,040,902 -- -- -- (Acquisition)/sale of property, plant and equipment in use and leased (960,328) (1,383,286) (1,465,488) (1,060,231) (1,589,068) (1,578,376) (Acquisition)/ sale of investments (352,153) (861,647) (3,815,248) (202,849) (198,808) (1,304,959) Acquisition of intangible assets/ deferred assets (4,493,340) (4,852,871) (2,839,415) (4,569,441) (4,975,135) (2,911,625) Net cash of assets and liabilities from ownership interest in Banco Patagonia (Note 2.a) -- (764,819) -- -- (327,356) -- Net cash received on disposal of Brasilsaúde -- -- -- -- -- 29,057 CASH PROVIDED /(USED IN) INVESTING ACTIVITIES (8,192,152) (11,769,307) (8,084,160) (11,341,027) (18,611,457) (12,767,298)

CASH FLOWS FROM FINANCING ACTIVITIESChange in minority interest -- -- -- 46,149 443,881 (94) (Decrease) Increase in subordinated debts 2,871,694 7,228,431 3,573,053 3,729,839 7,472,567 4,858,876 (Decrease) Increase in hybrid capital and debt instruments 481,382 (523,282) (145,501) 479,494 (515,601) (154,410) Capital increase -- -- 7,092,715 -- -- 7,092,715 Disposal of treasury shares -- 254 30,936 -- 254 30,936 Dividends paid (956,036) (2,322,470) (2,425,302) (956,036) (2,322,470) (2,425,302) Interest on own capital paid (1,532,480) (2,256,401) (2,881,340) (1,532,480) (2,256,401) (2,881,340) C Subscription bonuses -- 44,572 -- -- 44,572 -- CASH PROVIDED /(USED IN) FINANCING ACTIVITIES 864,560 2,171,104 5,244,561 1,766,966 2,866,802 6,521,381

Net variation of cash and cash equivalents 267,802 8,118,081 (16,162,988) 4,267,903 16,349,327 (11,760,994)At the beginning of the period 39,837,109 32,576,359 49,702,511 36,628,169 25,147,713 37,874,982 Effect of changes in foreign exchange rates in cash and cash equivalents 2,773,184 2,183,655 (963,164) 2,956,067 2,355,099 (966,275) At the end of the period 42,878,095 42,878,095 32,576,359 43,852,139 43,852,139 25,147,713 Increase in cash and cash equivalents 267,802 8,118,081 (16,162,988) 4,267,903 16,349,327 (11,760,994)


38

Banco do Brasil S,A,Financial StatementsIn thousands of Reais

STATEMENT OF VALUE ADDED


2 nd half/2011 2011 2010 2 nd half/2011 2011 2010Balance % Balance % Balance % Balance % Balance % Balance %

Income 53,452,679 97,608,056 78,786,617 61,780,562 113,513,027 93,152,636

Income from Financial Intermediation 49,602,261 90,080,002 71,400,839 56,945,684 103,329,631 81,685,766

Income from service and bank fee 7,363,482 13,725,297 12,065,231 9,746,429 18,241,576 16,172,540

Allowance for loan losses (5,398,569) (10,201,662) (9,545,414) (6,496,596) (11,975,091) (10,244,040)

Other income/expenses 1,885,505 4,004,419 4,865,961 1,585,045 3,916,911 5,538,370

Income from Financial Intermediation (32,385,407) (55,264,083) (38,864,001) (37,388,803) (63,841,476) (45,880,191)

Inputs Purchased from Third Parties (3,841,097) (7,234,544) (6,783,892) (4,332,028) (8,144,138) (7,849,772)

Materials, electric power and other (232,205) (466,412) (443,480) (249,199) (495,336) (459,434)

Expenses with outsourced services (642,320) (1,211,325) (1,077,466) (676,203) (1,294,143) (1,206,847)

Communications (Note 22.d) (651,122) (1,245,217) (1,181,377) (712,744) (1,354,235) (1,269,841)

Data processing (Note 22.d) (481,505) (903,392) (1,006,867) (337,803) (667,731) (1,077,662)

Transport (Note 22.d) (452,587) (814,798) (702,215) (476,143) (857,868) (738,927)

Security services (Note 22.d) (387,735) (747,377) (668,699) (398,465) (763,813) (673,038)

Financial system services (Note 22.d) (252,520) (493,813) (513,155) (341,644) (661,529) (629,219)

Advertising and publicity (Note 22.d) (159,997) (304,457) (278,514) (237,463) (420,337) (375,994)

Others (581,106) (1,047,753) (912,119) (902,364) (1,629,146) (1,418,810)

Gross Added Value 17,226,175 35,109,429 33,138,724 20,059,731 41,527,413 39,422,673

Depreciation and amortization (Note 22.d) (1,653,071) (3,255,128) (3,136,697) (1,700,222) (3,343,603) (3,196,517)

Wealth Created by the Entity 15,573,104 31,854,301 30,002,027 18,359,509 38,183,810 36,226,156

Wealth Received in Transfer 1,629,796 3,020,730 2,873,966 614,252 454,879 -46,323

Equity in the earnings (loss) of subsidiary and associated companies 1,629,796 3,020,730 2,873,966 614,252 454,879 (46,323)

Added Value to be Distributed 17,202,900 100.00 34,875,031 100.00 32,875,993 100.00 18,973,761 100.00 38,638,689 100.00 36,179,833 100.00

Wealth Distributed 17,202,900 100.00 34,875,031 100.00 32,875,993 100.00 18,973,761 100.00 38,638,689 100.00 36,179,833 100.00

Personnel 7,107,962 41.32 13,354,157 38.30 12,057,658 36.68 7,862,365 41.44 14,721,248 38.10 13,048,428 36.07

Salaries and fees 4,635,702 8,601,544 7,694,473 5,117,789 9,444,814 8,234,776

Employee profit sharing 764,058 1,563,161 1,500,227 862,730 1,790,543 1,756,190

Benefits and training programs 984,981 1,841,280 1,716,280 1,083,978 2,013,294 1,845,990

FGTS (Government Severance Indemnity Fund for Employees) 286,082 536,370 502,139 325,312 606,662 551,520

Other charges 437,139 811,802 644,539 472,556 865,935 659,952

Taxes, Rates and Contributions 3,784,313 22.00 8,672,248 24.87 8,539,506 25.97 4,786,620 25.23 10,963,798 28.38 10,798,506 29.85

Federal 3,441,187 8,022,032 7,984,837 4,284,895 10,033,785 10,067,315

State 450 971 853 1,406 2,739 872

Municipal 342,676 649,245 553,816 500,319 927,274 730,319

Interest on Third Parties' Capital 325,662 1.89 601,296 1.72 520,736 1.58 395,370 2.08 734,522 1.90 629,734 1.74

Rent (Note 22.d) 325,662 601,296 520,736 395,370 734,522 629,734

Interest on Capital (Note 24.e) 5,984,963 34.79 12,247,330 35.12 11,758,093 35.77 5,929,406 31.25 12,219,121 31.62 11,703,165 32.34

Federal Government interest on own capital 939,923 1,804,385 1,487,739 939,923 1,804,385 1,487,739

Interest on own capital of other shareholders 650,784 1,246,923 915,511 650,784 1,246,923 915,511

Federal Government dividends 474,644 1,092,745 1,425,815 474,644 1,092,745 1,425,815

Dividends from other shareholders 328,635 754,880 876,511 328,635 754,880 876,511

Retained earnings 3,590,977 7,348,397 7,052,517 3,469,637 7,227,057 6,997,609

Minority interest in retained earnings -- -- -- 65,783 93,131 (20)

See the accompanying notes to financial statements,39

Notes to the financial statements

40

13/02/2012 17:34

1 – The Bank and its Operations

O Banco do Brasil S.A. (Banco do Brasil or Bank) is a publicly listed company established under private law, with both public and private shareholders, and subject to the requirements of Brazilian corporate legislation, headquartered in Setor Bancário Sul, Quadra 1, Lote 32, Bloco C, Edifício Sede III, Brasília, Federal District, Brazil. Its purpose is to carry out all asset, liability and accessory banking operations, to provide banking services, to promote financial intermediation and originate financial transactions in various forms, including foreign exchange transactions and supplementary activities, with an emphasis on insurance, private pension, capitalization, securities brokerage, administration of credit/debit cards, consortiums, investment funds and management portfolios, and to practice any activities permitted for the institutions that are part of the National Finance System. It is also the main financial agent of the Brazilian Federal Government and is therefore required to carry out the functions attributed to it by law, specifically those of article 19 of Law n.° 4,595/1964.

2 – Company Restructuring

a) Acquisitions

Banco Patagonia S.A.

On 04.12.2011, after approvals by the regulatory agencies of Brazil and Argentina, the Banco do Brasil acquired controlling interest of Banco Patagonia, with the purchase of 366,825,016 shares (51% of the capital stock and of the voting capital) for the price of R$ 764,819 thousand (USD 482,040 thousand), through a cash payment, as follows, resulting in the value of USD 1.3141 per share.

On 08.17.2011, the Comisión Nacional de Valores of Argentina, the capital market regulatory agency of that country, authorized, in Argentina, a Mandatory Takeover Bid of Banco Patagonia to increase the share position of Banco do Brasil from 51% to 75% of the capital and the voting shares.

From 09.01.2011 to 10.05.2011, the Banco do Brasil made the Mandatory Takeover Bid, with a price per share of classes A and B of Banco Patagonia of USD 1.314 to be paid in argentine pesos at the exchange rate indicated in the Prospectus, with a deduction of $0.3346500775 argentine pesos per share, relating to the dividends paid for the year ended December 2010.

On 10.11.2011, the Mandatory Takeover Bid of Banco Patagonia was closed on the Stock Exchange of Buenos Aires. The offering resulted in the purchase of 57,276,942 class B common shares by Banco do Brasil at the price of $5.1959759225 argentine pesos per share. The Banco do Brasil became the holder of 424,101,958 class B common shares and now holds 58.9633% of the capital and voting shares of Banco Patagonia.

When the controlling interest was acquired, investment and goodwill values were determined based on adjusted balance sheet of Banco Patagonia of March 31, 2011. When acquired share increased, these values were determined based on adjusted balance sheet of September 30, 2011. Goodwill was allocated to the cash generating unit after determining the fair value of the net assets of Banco Patagonia.

13/02/2012 17:34


41

R$ thousand

Acquired controlling (51%)

Value of adjusted equity on 03.31.2011 (1) 782,319

Amount paid 764,819

Equity value corresponding to the acquired share 398,983

Dividends 47,188

Value of goodwill 318,648

Share increase (7.9633%)

Value of adjusted equity em 09.30.2011 (1) 972,888

Amount paid 128,791

Equity value corresponding to the acquired share 77,474


Total value of premium 369,965

Intangible premium 292,701

Premiuim of assets fair value 39,867

Goodwill 37,397

(1) Net of values related to unrealized results, revaluation reserves, asset valuation adjustments and dividends, with incorporation of the income accounts.

b) Growth of Shares

Visa Vale

On 01.24.2011, the subsidiary BB Banco de Investimento S.A. (BB BI) acquired part of the shares owned by the Companhia Brasileira de Soluções e Serviços – CBSS (Visa Vale), increasing its share from 45% to 49.99%.

Brasilcap Capitalização S.A. (Brasilcap)

On 01.06.2010, the Bank announced that the subsidiary BB Seguros Participações S.A. (BB Seguros) and Grupo Icatu (Icatu), entered into a Memorandum of Understanding with a view to forming a strategic alliance in the Brazilian market to develop and sell capitalization products.

On 01.24.2011, BB Seguros signed a Purchase and Sale Agreement to acquire all of the shareholding (16.67% ON) owned by Sul América Capitalização S.A. (Sulacap) in Brasilcap. On 07.22.2011, the deal became effective, and the participation of BB Seguros increased from 49.99% to 66.66%.

Summary of the values involved in the transactions:R$ thousand

Visa Vale

Price for the share aquisition 85,528

Equity Value corresponding to the acquired share (4.99%) 9,887

Goodwill value for the acquisition 75,641

Brasilcap

Price for the share aquisition 145,224

Equity Value corresponding to the acquired share (16.67%) 34,475

Goodwill value for the acquisition 110,749

c) Corporate Reorganizations in the area of Insurance, Open Pension Plan, Capitalization and Reinsurance

The BB Seguros and Mapfre Partnership

On 05.05.2010, Banco do Brasil announced that BB Seguros and the insurance Group Mapfre entered into a Partnership Agreement effective for 20 years to form a strategic alliance in the field of personal insurance, casualties, and vehicles.

Based on the Agreement, as of 06.30.2011, the Bank, through BB Seguros and Mapfre, (Grupo Segurador Banco do Brasil e Mapfre), started commercial operations. The Bank set up the holding


42

companies BB Mapfre SH1 Participações S.A., whose branch of activity aggregates personal, property and agricultural insurance, and Mapfre BB SH2 Participações S.A., focused on casualty and vehicle insurance, with separate legal identities under private law, with majority interest of the Mapfre Group in the voting capital and shared governance.

The companies present the following configuration:

BB Mapfre SH1 Participações S.A. Mapfre BB SH2 Participações S.A.

% Total Capital

% Common % Preferred % Total Capital % Common % Preferred

BB Seguros Participações S.A. 74.99 49.99 100 50 49 51

Mapfre 25.01 50.01 -- 50 51 49

The subscription of capital in SH1 by BB Seguros and Mapfre was made with transfer of the investiments in insurance companies Companhia de Seguros Aliança do Brasil, Mapfre Vera Cruz Vida e Previdência S.A. and Vida Seguradora S.A., as well as holdings BB Aliança Participações S.A. e Mapfre Participações Ltda. The subscription of capital in SH2 by BB Seguros and Mapfre was made with transfer of the investiments in insurance companies Aliança do Brasil Seguros S.A., Brasilveículos Companhia de Seguros, Mapfre Vera Cruz Seguradora S.A. and Mapfre Riscos Especiais Seguradora S.A., as well as holding BB Aliança Rev Participações S.A. and Mapfre Assistência S.A.

In order to equalize the intended equity interest in both holdings created due to the “Agreement”, BB Seguros subscribed capital on the amount of R$ 332,614 thousand. The transaction was based on book values of the companies.

Insurance branch main balance accounts for 2011 and 2010, and income/expenses for 2nd Half 2011 and 2nd Half 2010:

R$ thousand

12.31.2011 12.31.2010

Total Assets 52,216,493 36,958,903

Fixed income securities 4,686,892 3,718,121

Shares in investment funds 41,375,225 28,938,104

Receivables from Insurance, Pension and Capitalization operations 1,741,508 1,108,570

Other assets 4,412,868 3,194,108

Total Liabilities 47,917,012 34,114,936

Technical Provisions – elementary branches and group life 4,121,294 2,712,682

Technical Provisions - complementary social security 17,673,641 14,500,053

Technical Provisions - capitalization 3,324,923 2,096,820

Technical Provisions - individual life and survival coverage 19,903,079 13,067,053

Provision for pending payment 1,028,592 398,989

Other liabilities 1,712,589 1,339,339

Derivative financial instruments 152,894 --

Shareholders’ Equity 4,299,481 2,843,967

2nd Half 2011 2nd Half 2010

Financial and Operating Income 1,523,929 1,326,288

Financial Income 1,456,927 1,190,235

Restatement and Interest of Technical Provisions (1,018,436) (842,805)

Operating Income 1,085,438 978,858

d) Partnership with Bradesco S.A. in the card segment

On 03.14.2011, Banco do Brasil and Banco Bradesco executed a Memorandum of Understanding for establishment of holding company Elo Participações S.A., that consolidates joint businesses related to


43

13/02/2012 17:34

electronic payment methods. Banco do Brasil owns 49.99% of the shares and Banco Bradesco, 50.01%.

On 03.30.2011, was officially launched a Brazilian brand of credit, debit and pre-paid cards, referred to as Elo, managed by Elo Serviços, controlled by Elo Participações S.A.

On 05.20.2011, financial resources were provided by Banco do Brasil to Elo Participações S.A. in the amount of R$ 9,200 thousand.

e) Constitutions

The Board of Directors of the Banco do Brasil, on 05.16.2011, approved the protocol of incorporation of BB Securities Asia Pte. Ltd., a legal personality entity, wholly owned subsidiary of Banco do Brasil S.A., to act in Asian stock market.

The capital of US$ 5,000 thousand is divided into 5,000,000 bok-entry common shares without face value. The corporation, which headquarter is located in the Singapura Republic, will have a Board of Directors composed of 07 members and a Executive Board composed of 01 Executive Director abroad. BAMB – Brazilian American Merchant Bank made the capital investment in this subsidiary on 11.01.2011, and the operating activities start up on 01.02.2012.

3 – Presentation of Financial Statements

The Financial Statements have been prepared in accordance with the accounting guidelines derived from Brazilian corporation law, the rules and instructions issued by the National Monetary Council (CMN), Brazilian Central Bank (Bacen), the National Council of Private Insurance (CNSP), the Superintendency of Private Insurance (Susep), the National Health Agency (ANS) and the Securities and Exchange Commission of Brazil (CVM), as applicable.

The preparation of financial statements in accordance with accounting practices adopted in Brazil, applicable to financial institutions, requires that Management use judgment in the determination and recording of accounting estimates, when applicable. Significant assets and liabilities subjected to these estimates and assumptions include: the residual value of fixed assets, the allowance for loan losses, deferred tax assets, provision for labor, civil and tax demands, appreciation of derivative financial instruments, assets and liabilities relating to post-employment benefits and other provisions. The final amounts of transactions involving these estimates are only known upon their settlement.

The financial statements include operations of Banco do Brasil in Brazil and abroad (Banco do Brasil), and the consolidated financial statements also include operations of financial and non-financial subsidiaries in Brazil and abroad, Jointly Controlled entities, Special Purpose Entity - Dollar Diversified Payment Rights Finance Company, including the Investment Funds which the Bank controls directly or indirectly, and investments in subsidiaries and associated companies, in accordance with Bacen requirements (BB-Consolidated).

In the preparation of these financial statements, amounts resulting from transactions between consolidated companies, including the ownership interest held by one in another, balances of balance sheet accounts, revenues, expenses and unrealized profits, net of tax effects, were eliminated. Non-controlling interest in net equity and in income were separately disclosed in the financial statements. The balances of balance sheet and income accounts of ownership interest where control is shared with other shareholders were consolidated proportionally to the ownership held in the capital. Leasing operations were considered based on financial method, and the amounts were reclassified from the heading of leased assets to the heading of leasing operations, after deduction of residual amounts received in advance.

The Accounting Pronouncements Committee (CPC), since 2008, issues accounting standards and interpretations, based on international accounting standards, approved by CVM. Bacen accepted the following pronouncements, which are applied in full by the Bank: CPC 01 – Reduction in Recoverable Value of Assets, CPC 03 - Statement of Cash Flows (DFC), CPC 05 – Related Party Disclosures, CPC 10 – Share-Based Payment, CPC 23 – Accounting Policies, Changes in Accounting Estimates


44

and Errors, CPC 24 – Events After the Reporting Period and CPC 25 - Provisions, Contingent Liabilities and Contingent Assets. The adoption of CPC 10 and CPC 23 will impact the financial statements of Bank after Janeiro 2012.

Additionally, the Brazilian Central Bank issued CMN Resolution 3,533/2008, whose terms begin in January, 2012, which established procedures for reclassification, accounting and disclosure of sale and transfer transactions related to financial assets. This Resolution meets the criteria for write off assets specified in the CPC 38 – Financial Instruments: Recognition and Measurement. Taking into account that transactions of credit cession is not a practice adopted by the Bank and that Banco Votorantim exclusively assign credit portfolio to Banco do Brasil, eliminating account effects on the consolidation, there is no expected impact in the financial statements.

The Bank has also applied the following pronouncements which do not conflict with the Bacen rules, as established by Article 22, § 2 of Law 6385/1976: CPC 09 – Value Added Statement, CPC 12 – Adjustment at Present Value, CPC 19 – Investment in Joint Venture, CPC 22 – Information by segment, CPC 27 – Fixed Assets, CPC 33 – Employee Benefits and CPC 41 – Income per share.

Pronouncements CPC 07 - Government Grants and Assistance, CPC 17 - Construction Contracts, CPC 29 - Biological Assets and Agricultural Produce and CPC 35 - Separate Statements, which do not conflict with the Bacen rules, may be applied by the Bank as events or transactions covered by the aforementioned CPCs take place.

The application of other standards, which depend on Bacen’s regulations, results primarily in immaterial adjustments or in changes in the way of disclosure, except the following pronouncements, that may result in significant impacts on the financial statements:

CPC 04 - Intangible Assets and CPC 15 - Business Combinations - a) reclassification of intangible assets identified on acquisitions of controlling interest of Banco Nossa Caixa and of Banco Votorantim share, in 2009, as on acquisition of controlling interest of Banco Patagonia, in 2011, from the investment account to the account of intangible assets, in the group of Non-Current Assets – Permanent; b) derecognition of goodwill amortization expenses from acquisitions; and c) recognition of amortization expenses of intangible assets with definite useful lives, identified in the acquisitions.

CPC 36 - Consolidated Statements – in the formation of holding companies SH1 and SH2 (Note 2.c), the Bank contributed to their insurance companies and received indirect participation in insurance companies arising from the Mapfre, with the following effects: a) derecognition of assets and liabilities of enterprises contributed by the Bank at its book value at the date control was lost; b) recognition of the assets received at fair value in return; c) recognition of the remaining investment in former subsidiaries at fair value on the same date; and d) recognition of the difference with a resulting gain or loss.

CPC 38 - Financial Instruments: Recognition and Measurement - adjustment in the allowance for loan losses, due to the adoption of the incurred loss criterion.

These financial statements were approved by the Executive Board of Directors on 02.07.2012.

Shareholding interest included in the consolidated financial statements, segregated by business segments


45

% of Total Share

12.31.2011 12.31.2010

Banking segment Activity

Banco do Brasil – AG. Viena (1) (4) Banking 100% 100%

BB Leasing Company Ltd. (1) (4) Leasing 100% 100%

BB Leasing S.A. – Leasing Mercantil (1) (4) Leasing 100% 100%

BB Securities Asia Pte. Ltd. (1) (4) Broker 100% --

BB Securities LLC. (1) (4) Broker 100% 100%

BB Securities Ltd. (1) (4) Broker 100% 100%

BB USA Holding Company, Inc. (1) (4) Holding 100% 100%

Brasilian American Merchant Bank (1) (4) Banking 100% 100%

Besc Distribuidora de Títulos e Valores Mobiliários S.A. (1) (4) Asset Management 99.62% 99.62%

Banco Patagonia S.A. (1) (4) Multiple Bank 58.96% --

Banco Votorantim S.A. (2) (4) Multiple Bank 50% 50%

Investment segment Activity

BB Banco de Investimento S.A. (1) (4) Investment Bank 100% 100%

Kepler Weber S.A. (2) (4) Industry 17.56% 17.56%

Companhia Brasileira de Securitização – Cibrasec (3) (5) Purchase of Credits 12.12% 12.12%

NeoEnergia S.A. (2) (4) Energy 11.99% 11.99%

Segment of Fund Management Activity

BB Gestão de Recursos – Distribuidora de Títulos e Valores Mobiliários S.A.

(1) (4) Asset Management 100% 100%

Segment of Insurance, Private Pension Fund and Capitalization Activity

BB Seguros Participações S.A. (1) (4) Holding 100% 100%

BB Broker de Seguros e Administradora de Bens S.A. (1) (4) Broker 100% 100%

Nossa Caixa Capitalização S.A. (1) (4) Capitalization 100% 100%

BB Aliança Participações S.A. (3) (4) Holding 74.99% 100%

Companhia de Seguros Aliança do Brasil (3) (4) Insurance Company 74.99% 100%

BB Mapfre SH1 Participações S.A. (3) (4) Holding 74.99% --

Mapfre Vera Cruz Vida e Previdência S.A. (3) (4) Insurance Company/Pension

74.99% --

Mapfre Participações Ltda. (3) (4) Holding 74.99% --

Vida Seguradora S.A. (3) (4) Insurance Company 74.99% --

Brasilprev Seguros e Previdência S.A. (3) (4) Insurance Company/Pension

74.99% 74.99%

Brasilcap Capitalização S.A. (3) (4) Capitalization 66.66% 49.99%

Aliança do Brasil Seguros S.A. (3) (4) Insurance Company 50% 100%

BB Aliança Rev Participações S.A. (3) (4) Holding 50% 100%

Brasilveículos Companhia de Seguros (3) (4) Insurance Company 50% 100%

Mapfre BB SH2 Participações S.A. (3) (4) Holding 50% --Mapfre Vera Cruz Seguradora S.A. (3) (4) Insurance Company 50% --

Mares Mapfre Riscos Especiais S.A. (3) (4) Insurance Company 50% --

Mapfre Assistência S.A. (3) (4) Service Rendering 50% --

Seguradora Brasileira de Crédito à Exportação – SBCE (3) (4) Insurance Company 12.09% 12.09%

Segment of Payment Methods Activity

BB Administradora de Cartões de Crédito S.A. (1) (4) Service Rendering 100% 100%

BB Elo Cartões Participações S.A. (1) (4) Holding 100% --

Elo Participações S.A. (2) (4) Holding 49.99% --

Companhia Brasileira de Soluções e Serviços CBSS (3) (4) Service Rendering 49.99% 45%

Elo Serviços S.A. (2) (4) Service Rendering 33.33% --

Cielo S.A. (2) (4) Service Rendering 28.72% 28.74%

Tecnologia Banking S.A. – Tecban (3) (4) Service Rendering 13.53% 13.53%

Other Segments Activity

Ativos S.A. Securitizadora de Créditos Financeiros (1) (4) Credit Acquisition 100% 100%

Ativos S.A. Gestão de Cobrança e Recuperação de Crédito (1) (4) Credit Acquisition 100% 100%

BB Administradora de Consórcios S.A. (1) (4) Consortium 100% 100%

BB Tur Viagens e Turismo Ltda. (1) (5) Tourism 100% 100%

BB Money Transfers Inc. (1) (4) Service Rendering 100% 100%

Cobra Tecnologia S.A. (1) (4) IT 99.97% 99.99%

BV Participações S.A. (2) (4) Holding 50% 50%

(1) Subsidiaries.

(2) Joint venture, proportionately included in consolidation.

(3) Associated companies, proportionately included in consolidation, as Bacen resolve.

(4) Financial Statements for consolidation on Dez/2011.

(5) Financial Statements for consolidation on Nov/2011.

The following investment funds were also consolidated: BV Financeira FIDC II, BV Financeira FIDC IV, BV Financeira FIDC V, BV Financeira FIDC VI, Fundo de Investimento Sedna Referenciado DI, Votorantim G&K Fundo de Investimento em Participações, Fundo de Investimento Nióbio I and BVIA Fundo de Investimento em Participações, as well as special-purpose entity located abroad Dollar Diversified Payment Rights Finance Company, that are directly or indirectly controlled by the Bank.


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A reclassification at Banco do Brasil and BB-Consolidated was made, of the amount of R$ 1,169,317 thousand, from the grouping of Service Revenue to the grouping of Income from Bank Fees, pursuant to Bacen Circular Letter 3,490/ 2011, which altered the function of accounting titles and subtitles for recording income from tariffs.

In 2010, it was made a reclassification of R$ 304,632 thousand at BB – Consolidated from the Other Operating Income account to Service Provision Income, regarding Cielo POS equipment rental incomes.

4 – Description of significant accounting policies

a) Statement of income

In accrual basis accounting, revenues and expenses are reported in the statement of income of the period to which they belong and, when correlated, simultaneously, regardless of receipt or payment. The operations with floating financial charges are adjusted pro rata, based on the indexes agreed, and operations with fixed financial charges are recorded at redemption value, rectified because of unearned income or Prepaid expenses for future periods. The operations indexed to foreign currencies are adjusted up to the date of the balance at the current rates criterion.

b) Cash and cash equivalents

Cash and cash equivalents comprise available funds in local currency, foreign currency, investments in gold, investments in repurchase agreements - own operations, interbank deposits and investments in foreign currencies, with high liquidity and insignificant risk of change in value, with maturity not exceeding 90 days.

c) Short-term interbank investments

Short-term interbank investments are recorded at their investment or acquisition amount, plus income accrued up to the balance sheet date and adjustment to allowance for losses

d) Securities

The securities purchased for the Bank's portfolio are recorded at the actual amount paid, including brokerage charges and fees, and are classified based on management’s intention, in one of three different categories, according to Bacen Circular 3068/2001:

Trading Securities: these are securities purchased to be actively and frequently traded. They are adjusted monthly to market value. The increases and decreases in value are recorded in income and expense accounts for the period;

Securities available for sale: these are securities that may be traded at any time, but are not acquired to be actively and frequently traded. They are adjusted monthly to market value and their increases and decreases in value are recorded, net of tax effects, in a separate shareholders' equity account.

Securities held to maturity: these are securities that the Bank owns and has the financial capacity and intention to hold to maturity. These securities are not adjusted to market value. The financial capacity is supported by a cash flow projection that does not consider the possibility of sale of these securities.

The mark-to-market methodology used for securities was established following consistent, verifiable criteria, which consider the average price of trading on the day of calculation or, if not available, the daily adjustment of future market transactions reported by Anbima, BM&FBovespa or the net expected realizable value obtained through pricing models, using future interest rate curves, foreign exchange rates, and price and currency index, all consistent with prices adopted during the year.

Income accrued on the securities, irrespective of the category in which they are classified, is appropriated on a pro rata basis on the accrual basis of accounting until the date of maturity or final


47

sale, according to the exponential or straight-line method, based on the contractual remuneration and purchase price, and recorded directly in the statement of income for the period.

Impairment on securities classified as available for sale and held to maturity, if considered not to be temporary, are recorded directly in expense for the period and a new cost basis for the asset is determined.

Upon sale, the difference between the sale amount and the cost of purchase plus accrued income is considered as a result of the transaction and is recorded on the date of the transaction as a gain or loss on securities.

e) Derivative financial instruments

Derivative financial instruments are adjusted to market value at each monthly trial balance and balance sheet date. Increases or decreases in value are recorded in income or expense accounts of the respective financial instruments.

The mark-to-market methodology used for derivative financial instruments was established following consistent and verifiable criteria, which consider the average price of trading on the date of calculation or, if not available, pricing models that estimate the expected net realizable value.

Derivative financial instruments used to offset, in whole or in part, the risks arising from exposure to variations in financial asset or liability market values are considered hedge instruments and are classified according to their nature:

Market Risk Hedge - increases or decreases in value of the financial instruments, as well as of the hedged item, are recorded in income/expenses accounts for the period; and

Cash Flow Hedge - the effective portion of the increases or decreases in value of the derivative financial instruments classified in this category are recorded, net of tax effects, in a separate Shareholders' Equity account. The effective amount is that in which the variation of the hedged item, directly related to the corresponding risk, is offset by the variation in the financial instrument used for the hedge, considering the accumulated effect of the transaction. Other variations in these instruments are recorded directly in the statement of income/expenses for the period.

f) Loan and lease operations, advances on foreign exchange contracts, other receivables with loan characteristics and allowance for loan losses

Loans, leases, advances on foreign exchange contracts and other receivables with loan characteristics are classified according to Management's judgment with respect to the level of risk, taking into consideration market conditions, past experience and specific risks in relation to the operation, to borrowers and guarantors, observing the parameters established by CMN Resolution 2682/1999, which requires periodic analyses of the portfolio and its classification into nine levels, ranging from AA (minimum risk) to H (maximum risk), as well as the classification of operations more than 15 days overdue as non-performing.

Income from loans overdue for more than 60 days, regardless of their risk level, will only be recognized as income when effectively received.

Operations classified at level H, which remain in this classification for 180 days, are written off against the existing allowance.

Renegotiated operations are maintained, at a minimum, at the same level at which they were rated. The renegotiations of loans already written off against the allowance are rated as H level and any gains from renegotiation are recognized as income when effectively received.

Allowance for loan losses, considered sufficient by management, satisfies the minimum requirement established by the aforementioned CMN Resolution nº 2682/1999 (Note 10.e).


48

g) Taxes

Taxes are calculated based on the rates shown in the table below:

Taxes Rate

Income Tax (15% + additional 10%) 25%

Social Contribution on Net Income (CSLL) (1) 15%

Social Integration Program (PIS/Pasep) (2) 0.65%

Contribution to Social Security Financing – Cofins (2) 4%

Tax Services of any kind – ISSQN Up to 5%

(1) For non-financial firms, the CSLL rate is 9%.

(2) For non-financial firms that have opted for the non-cumulative regime of calculation, the PIS/PASEP rate is 1.65% and Cofins rate is 7.6%.

Deferred tax assets (tax credits) and deferred tax liabilities are recorded by applying the current rates of taxes on their respective bases. For recording, maintaining, and writing off tax credits the Bank follows the established criteria by CMN Resolution n.º 3059/2002, and amended by CMN Resolution n.º 3355/2006, and they are supported by a study of their realizability.

h) Prepaid expenses

Refer to the application of payments made in advance, for which the benefits or the services will occur in subsequent periods. Prepaid expenses are recorded at cost and amortized as incurred.

i) Permanent assets

Investment: investments in subsidiaries and associated companies in which the Bank has significant influence or an ownership interest of 20% or more of the voting shares, and in other companies which are part of a group or are under common control are accounted for by the equity method based on the shareholders’ equity of the subsidiary or associated company.

Goodwill, the premium paid over the book value of the investment acquired due a future profitability expectation, is based on financial economic evaluations which substantiate the purchase price of the business and is amortized based on annual income projections of those evaluations. Goodwill is tested for impairment annually.

The statements of the branches and subsidiaries abroad are adapted to the prevailing accounting criteria in Brazil and translated into Brazilian Reais using current exchange rates, in conformity with Bacen Circulars 2397/1993 and 2571/1995, and their impacts are recorded in the statement of income for the period.

Other permanent investments are valued at acquisition cost, less allowance for impairment losses, as applicable.

Property and equipment: property and equipment are stated at cost less depreciation, calculated using the straight-line method at the following annual rates: buildings and improvements - 4%; vehicles - 20%; data processing systems - 20% and others - 10% (Note 15).

Deferred: deferred assets are recorded at cost of acquisition or formation, net of accrued amortization. They are composed mainly of restructuring expenditures , and the expenditures, up to 09.30.2008, with third parties properties, as a result of opening branches, which are amortized according to rates based on rental terms, as well as expenditures on the acquisition and development of information systems, which are amortized at 20% per annum (p.a.).

Intangible: intangible assets consist of rights that have as their object intangible assets intended for the maintenance of the company or that are exercised for that purpose, including acquired goodwill.

An asset meets the criteria for identification as an intangible asset, when it is separable, i.e. it can be separated from the entity and sold, transferred or licensed, rented or exchanged, individually or jointly with a contract, related assets or liabilities, regardless of the intention for use by the entity; or results


49

from contractual rights or other legal rights, regardless of whether these rights are transferable or separable from the entity or other rights and obligations.

Intangible assets that have finite useful lives basically refers to disbursements for the acquisition: (i) of rights to provide banking services (rights to managing payrolls), amortized over the terms of contracts; (ii) software, straight-line amortized on a rate of 20% per year from the date it is available for use; (3) and in Other Intangible Assets account, the right to use the Banco Postal network, which is amortized according to the contractual period. Intangible assets are adjusted by allowance for impairment losses, if applicable (Note 16). The intangible assets amortization is recorded in Other Administrative Expenses account.

j) Impairment of non-financial assets

At the end of each reporting period, the Bank assesses whether there is any indication that a non-financial asset may be impaired based on internal and external sources of information. If there is an indication that an asset may be impaired the Bank estimates the recoverable amount of the asset. The recoverable amount of the asset is the higher of fair value less costs to sell it and its value in use.

Whether there is indication of impairment, the Bank tests, at least annually, the recoverable amount of intangible assets not yet available for use and goodwill on acquisition of investments. This test can be run at any time in the annual period, provided it is performed at the same time every year.

If the recoverable amount of the asset is less than its carrying amount, the asset's carrying amount is reduced to its recoverable amount through a provision for impairment, that is recorded in the Income Statement.

Methodologies in assessing the recoverable amount of the main non-financial assets:

Assets:

Land and buildings - in determining the recoverable amount of land and buildings, technical assessments are carried out in accordance with the rules of the Brazilian Association of Technical Standards - ABNT.

Data processing systems - in determining the recoverable value of their relevant items, it is considered the market value, if it is avaiable, or the recoverable value for use in the operations of the Bank, otherwise the calculation considers the projection of benefits cash flows arising from the use of each asset during its useful life, discounted to present value based on the rate of the Interbank Deposit Certificate - CDI.

Other assets - although they are subject to impairment test, other assets have little value individually and, given the cost-effectiveness, the Bank does not assess the recoverable value of these items individually. However, the Bank conducts inventory each year, where lost or damaged goods in the are properly written off.

Investments and Goodwill on acquisition of investments

The methodology for calculating the recoverable amount of goodwill and investments for future profitability, consists in measuring the expected result of the investment using discounted cash flow (DCF). To measure this result, the assumptions made are based on (i) operational projections, results and investment plans, (ii) macroeconomic scenarios developed by the Bank, and (iii) internal methodology for calculating the cost of capital based on the Capital Asset Pricing Model - CAPM.

Specifically in the acquisition of Banco Nossa Caixa, which was incorporated by the Banco do Brasil in November 2009, the methodology is to compare the goodwill paid, less the accumulated amortization, with the present value of the results of the Bank designed for the State of São Paulo, minus assets with finite lives. The projections are based initially on results and progress based on growth assumptions of profitability for the Banco do Brasil and they are discounted based on the market fixed curve, calculated using BM & F Bovespa - Term Structure of Interest Rates - ETTJ .


50

Intangible

Rights to Managing Payrolls - The model for assessing the recoverable amount of the rights to managing payroll is related to monitoring contracts performance, that are calculated from the contribution margins of customer relationship related to each contract in order to check if the projections that justified the acquisition of assets match to the observed performance. For the contracts that do not reach the expected performance, a provision for impairment loss is recognized.

Software - Software, substantially developed by the Bank in accordance with it needs constantly receive investments for modernization and adaptation to new technologies and business requirements. Considering that no similar products on the market and the high cost to deploy metrics that allow calculation of its value in use, the impairment test of the software evaluates its usefulness to the company so that when software enters into disuse, its value is written off.

Other Intangible Assets - Right to use the Banco Postal network - The methodology to evaluate the recoverable amount of the right to use the network of the Banco Postal is to calculate the present value of income flows from operations contracted through Banco Postal, that are projected based on assumptions made and values defined in the business plan, and are discounted by the market fixed curve, using BMF & BOVESPA - Term Structure of Interest Rates - ETTJ.

Other Assets

Assets not in use - regardless of whether indicative of loss, the impairment test for these assets must occur every six months, through formalization of market value in appraisal report performed according to ABNT.

The losses recorded on the result to adjust the recoverable value of these assets, if any, are stated in the respective notes.

k) Employee benefits

Employee benefits related to short-term benefits for current employees are recognized on the accrual basis as the services are provided. Post-employment benefits, comprising supplementary retirement benefits and medical assistance for which the Bank is responsible, were assessed in accordance with criteria established by CVM Resolution n.º 600/2009 (Note 27). As of 06.30.2010, the evaluations are performed twice a year and not per year as on 12.31.2009.

In defined-contribution plans, the actuarial risk and the investment risk are borne by the plan participants. Accordingly, cost accounting is based on each period's contribution amount representing the Bank's obligation. Consequently, no actuarial calculation is required when measuring the obligation or expense, and there are neither actuarial gains nor losses.

In defined benefit plans, the actuarial risk and the investment risk value of plan assets fall either partially or fully on the sponsoring entity. Accordingly, cost accounting requires the measurement of plan obligations and expenses, with a possibility of actuarial gains and losses, leading to record a liability when the amount of the actuarial obligation exceeds the value of plan assets, or an asset when the amount of assets exceeds the value of plan obligations. In the latter instance, the asset should be recorded only when there is evidence that it can effectively reduce the contributions from the sponsor or refundable in future.

The portion of gains or losses recognized in income of the Bank corresponds to the excess of the Bank that did not fit in the corridor divided by the average remaining working time of the employees who participate in the plan. The corridor is the greater of:

1- 10% of the total actuarial obligation present present value of the defined benefit, and 2- 10% of the fair value of plan assets.

The Bank, as permitted by CVM Resolution n.º 600/2009, adopted the procedure of recognizing actuarial gains/losses in the period in which the service was performed.

Since the contributions to be paid by the Bank in some cases will endure after the employee’s retirement, the Banks obligations are evaluated by the present actuarial value of the contributions to


51

be paid over the expected period when the plan participants and beneficiaries will be linked to the plan. Such obligations are evaluated and recognized under the same criteria used for defined benefit plans.

The actuarial asset recognized in the balance sheet (Note 27) refers to the actuarial gains and its implementation must occur by the end of the plan. There may be partial completion of actuarial assets, conditioned upon satisfying the requirements of the Supplementary Law n.º 109/2001 and Resolution CGPC n.º 26/2008.

l) Operations related to insurance, pension and capitalization activities

Statement of Income/Expenses

Insurance premiums and selling expenses are recorded upon the issuance of policies or billings and are recognized in income/expenses, according to the elapsed coverage period. Revenues from premiums and the corresponding selling expenses, related to present risks without the issuing of respective policies are recognized in the statement of income/expenses based on estimates.

Income from insurance premiums of unelapsed risks is deferred for the validity period of the insurance policies, by means of the formation of provision for unearned premiums, based on the net retention of earned premiums issued.

Accepted coinsurance, retrocession and Dpvat convention (Personal injuries caused by motor vehicles) operations are recorded based on information received from similar companies, IRB Brasil Resseguros S.A. and the Seguradora Lider - Dpvat, respectively.

The revenue from pension plans, life insurance plans with living benefits and capitalization plans are recognized in the statement of income when effectively received, as a contra-entry to the recognition of technical provisions, except the revenue to cover risks in cases of combined pension plans, which must be recognized by the duration of the risk, regardless of its receipt. The selling costs are deferred on the issuing of the contract or policy and allocated to income/expenses on a straight-line basis, over the average estimated period for their recovery, except the ones related to capitalization.

Other income and expenses are determined on the accrual basis of accounting.

Technical Provisions

Rules and procedures for the formation of technical provisions are regulated by the Resolutions 162/2006, 181/2007, 195/2008 and 204/2009 of the National Council of Private Insurance (CNSP) and Regulatory Resolutions 75/2004 and 274/2011 of the National Supplementary Health Agency (ANS), and calculated in accordance with the specific actuarial technical notes approved by the Superintendency of Private Insurance (Susep) and the National Supplementary Health Agency (ANS).

Insurance

Provision for Unearned Premiums(PUP) represents the portions of premiums that will be allocated to income over the course of the insurance policies, as calculated on a pro rata die basis.

Provision for Unearned Premiums for Present Risks but Not Yet Issued (PUP-PRNI) represents the adjustment for the Provision for Unearned Premiums given the existence of risks assumed by the insurance company where the policy covering the risk has not yet been formally issued, except for health plan insurance.

Provision for Premium Deficiency: represents the need for coverage of possible deficiencies of the Provision for Unearned Premiums due to the expectations of payment and re-assessment of claims incurred.

Provision for Unsettled Loss Claims represents the estimated probable payments of claims, judicial or otherwise, gross reinsurance and net of recoveries coinsurance ceded, monetarily restated for indexed insurance determined based on notices received up to the balance sheet date, adjusted by the estimate for Claims Incurred but Not Enough Reported (IBNER).


52

Provision for Claims Incurred but not Reported (IBNR) represents the amount expected of claims incurred but not reported until the base date of the financial statements.

Premium Complementary Provision (PCP), has as object to maintain the company protected in monthly transactions, keeping the amount of the technical premium provisions (PUP and PUP-PRNI) higher or equal to the daily average of the month of calculation.

Pension plan

Mathematical Provision for Future Benefit Payments - Represents the sum of the premiums and contributions transferred by the participants, net of the loading rate, plus the financial income earned from the investments of the resources. This provision refers to participants whose perception of the benefits has not yet started.

Provision for benefits granted: refers to those already receiving the benefits.

Provisions for a Deficiency in Contributions and in Premiums are formed to meet the possible adverse changes in the technical risks made in the mathematical provisions of benefits granted and to be granted, resulting from the trend for a higher survival rate of participants and the calculation is made using the Mitigated AT 2000 Male/Female mortality table and related assumptions, considering all the effective plans.

Provision for Financial Fluctuation: is formed to account for the potential impacts of unfavorable variations in future rates of funds earmarked for the payment of benefits and redemptions to participants, considering the minimum remuneration guaranteed in existing contracts.

Capitalization

Mathematical Reserve for Redemption is calculated on the face value of the notes, restated based on actuarial technical notes approved by Susep.

Provisions for Redemption of Overdue and Prepaid Notes are recorded at the values of the notes with finalized and rescinded capitalization periods, restated in the period between the date of the right to redemption and effective settlement.

Provision for Unrealized Draws for Premiums are calculated on the face value of the notes, based on actuarial technical notes approved by Susep. The write-off of the provision for unrealized draws for premiums is recorded by the amount equivalent to the lapsed risk, i.e., the balance of provision for unrealized draws for premiums represents the defrayed amounts of premiums draws not yet executed.

Provision for Draws for Premiums Payable is formed at the amounts of the notes payable from draws for premiums restated for the period between the date of the draw and the effective settlement.

m) Contingent assets and liabilities and legal obligations

The recognition, measurement and disclosure of contingent assets and liabilities and legal obligations are made in accordance with the criteria defined CPC 25 – Provisions, Contingent Assets and Contingent Liabilities, aproved by CMN Resolution n.º 3823/2009 (Note 28).

Contingent assets are only recognized in the financial statements upon the existence of evidence assuring their realization usually represented by the final judgment of the lawsuit and by the confirmation of the capacity for its recovery by receipt or offsetting by another receivable.

Contingent liabilities are recognized in the financial statements when, based on the opinion of legal advisor and Management, the risk of loss of legal or administrative proceedings is considered probable, with a probable outflow of financial resource for the settlement of the obligation and when the amounts involved are measurable with sufficient assurance, being quantified when judicial noticed and revised monthly as follows:

Aggregated – cases that are similar and recurring in nature and whose values are not considered relevant. Provisions are based on statistical data for groups of cases, type of judicial body (Special


53

13/02/2012 17:34

Civil Court or Common Court) and plaintiff. For labor claims, provisions are based on the average payments for cases closed in the last 24 months, corrected by the National Wide Consumer Price Index (Índice Nacional de Preços ao Consumidor Amplo, or IPCA). For civil claims, including related to economic plans, provisions are based on the average payments for cases closed in the last 24 months, without any correction.

Individual – cases considered unusual or whose value is considered relevant by our legal counsel. Provisions are based on: the amount claimed; probability of an unfavorable decision; evidence presented; evaluation of legal precedents; other facts raised during the process; judicial decisions made during the course of the case; and the classification and the risk of loss of legal actions.

Contingent liabilities considered as possible losses are not recognized in the balance sheet and only need to be disclosed in the notes to the financial statements, while those classified as remote do not require provisioning or disclosure.

Legal obligations (fiscal and social security) are derived from tax obligations provided in the legislation, regardless of the probability of success of lawsuits in progress, which have their amounts recognized in full in the financial statements.

n) Earnings per share

The disclosure of earnings per share is done according to the criteria defined in Resolution CVM 636/2010. Bank's basic earnings per share were calculated by dividing the net profit attributable to shareholders by the weighted average number of total shares, excluding treasury shares (Note 24.e).

o) present value measurement

The financial assets and liabilities are presented at present value because the application of the accrual basis in the recognition of their income and interest expenses.

The non-contractual liabilities, primarily represented by contingent liabilities and legal obligations, wich the disbursement date is uncertain and is not under the Bank control, are presented at present value because they are initially recognized at estimated disbursement value on the valuation date and are updated monthly.

5 – Information by Segment

The information by segment was compiled with a basis on the reports used by Management in the appraisal of the segment's performance, decision making regarding the allocation of funds for investment and other purposes, considering the regulatory environment and the similarities between goods and services.

The operations of Banco do Brasil are basically divided into five segments: banking, investments, fund management, insurance (insurance, pension and capitalization) and payment methods. In addition, the Bank participates in other business activities, such as leasing and operating support, that were aggregated in "Other Segments".

Intersegment transactions are conducted under normal market conditions, substantially under the terms and conditions for comparable transactions, including interest rates and collateral. These transactions do not involve abnormal payment risks.

a) Banking Segment

Responsible for the most significant portion of Banco do Brasil results, preponderantly obtained in Brazil, this segment involves a large diversity of products and services, such as deposits, loans and services that are made available to customers by means of a wide variety of distribution channels, located in the country and abroad.


54

The operations of the banking segment include business with the retail, wholesale and government markets, carried out by network and customer service teams, and business with micro-entrepreneurs and the informal sector, performed through banking correspondents.

b) Investment Segment

In this segment, deals are performed in the domestic capital market, with activity in the intermediation and distribution of debts in the primary and secondary markets, as well as equity interest and the rendering of financial services.

The operations income of the segment is obtained by means of revenues accrued in investments in securities minus expenses with funding to third parties. The existing equity interests are concentrated at our associated and subsidiary companies. Financial service fee income results from economic/financial advisory services, underwriting, fixed and variable income.

c) Segment of Fund Management

Responsible for operations inherent to the purchase, sale and custody of securities, portfolio management, institution, organization and management of investment funds and clubs. Revenues mainly derived from commissions and management fees charged to investors for services rendered.

d) Segment of Insurance, Private Pension Fund, and Capitalization

In this segment, products and services offered are related to life, property and automobile insurance, complementary private pension plans and capitalization plans.

Income comes mainly from revenues from insurance premiums issued, contributions for private pension plans, capitalization bonds and investments in securities, net of commercialization expenses, technical provisions and expenses related to benefits and redemptions.

e) Segment of Payment Methods

Such segment is mainly responsible for funding, transmission, processing services and financial settlement of operations in electronic means.

Revenues are derived mainly from commissions and management fees charged to commercial and banking establishments for the services rendered described in the previous paragraph, as well as income from rent, installation and maintenance of electronic terminals.

f) Other segments

Other segments comprise the operational support and consortium segments, which have not been aggregated as they are not individually significant.

Their revenues are originated mainly from provision of services not covered in previous segments, such as: credit recovery, consortium administration, development, manufacture, commercialization, rent and integration of digital electronic systems and equipment, peripherals, programs, inputs and computing supplies, intermediation of air tickets, lodging and organization of events.


55

R$ thousand

2nd Half 2011

BB-Consolidated Banking Investment Fund Management

Insurance and Related

Payment methods

Other Segments

Intersegment transactions

Total

Income 68,577,492 646,595 615,592 2,886,923 1,108,652 773,057 (1,469,516) 73,138,795

Income from loans and leases (1) 34,214,737 300 -- -- -- -- (212,096) 34,002,941

Income from operations with securities and derivative financial instruments

17,474,389 163,693 55,245 24,636 128,520 17,269 (270,594) 17,593,158

Income from foreign exchange operations and Compulsory

2,506,572 -- -- -- (118) -- -- 2,506,454

Financial results from insurance operations, pension and capitalization

-- -- -- 1,422,878 -- -- 34,049 1,456,927

Income from service fees 4,809,635 193,901 390,170 263,252 929,431 554,133 (627,779) 6,512,743

Income from tariffs, rates and commissions

3,059,076 17,817 156,793 -- -- -- -- 3,233,686

Equity in the (earnings)/loss of subsidiary and associated companies

595,254 17,501 -- 1,497 -- -- -- 614,252

Results from Insurance, Pension Plan and Capitalization Operations

-- -- -- 1,085,438 -- -- -- 1,085,438

Other Income 5,917,829 253,383 13,384 89,222 50,819 201,655 (393,096) 6,133,196

Expenses (62,311,850) (419,567) (109,976) (2,029,659) (626,202) (586,997) 1,257,420 (64,826,831)

Expenses of Market funding (28,778,293) (192,174) -- -- -- (23,925) 253,163 (28,741,229)

Loans, assignments, transfers and leases (6,242,851) -- -- -- (36) (47) -- (6,242,934)

Allowance/reversal for loan losses (6,496,591) (4) (31) -- 91 (61) -- (6,496,596)

Restatement and interest of technical reserves

-- -- -- (1,018,436) -- -- -- (1,018,436)

Personnel Expenses (7,748,959) (25,186) (27,086) (157,195) (52,030) (102,493) 2,822 (8,110,127)

Other administrative expenses (5,261,182) (27,877) (11,328) (517,429) (128,513) (107,845) 665,959 (5,388,215)

Depreciation (482,755) (1,238) -- (7,999) (6,469) (3,144) -- (501,605)

Amortization of deferred assets (50,394) -- -- (11,640) (1,324) (2,551) -- (65,909)

Amortization of intangible assets (1,132,661) -- -- 31 -- (77) -- (1,132,707)

Revenues / (Expenses) from impairment 80 -- -- -- (96) -- -- (16)

Other expenses(2) (6,118,244) (173,088) (71,531) (316,991) (437,825) (346,854) 335,476 (7,129,057)

Profit before tax and participations 6,265,642 227,028 505,616 857,264 482,450 186,060 (212,096) 8,311,964

Income tax and social contribution(3) (851,594) (42,001) (201,165) (294,829) (159,320) (61,675) 90,756 (1,519,828)

Profit sharing (846,554) -- (226) (12,586) (886) (2,478) -- (862,730)

Minority interest earnings/(losses) (65,780) -- -- -- -- (3) -- (65,783)

Net Income (4) 4,501,714 185,027 304,225 549,849 322,244 121,904 (121,340) 5,863,623

Balance Sheets

Assets 931,760,537 7,034,312 1,073,470 52,216,493 2,997,253 4,491,293 (18,343,451) 981,229,907

Investment in subsidiaries and associate companies

11,289,612 3,681,638 68 484,240 -- -- (8,614,615) 6,840,943

Liabilities 873,167,951 3,832,020 947,641 48,293,129 2,368,896 1,984,794 (7,780,894) 922,813,537

(1) Includes intersegment transactions in the amount of R$ 212,096 thousand, related to the elimination of unrealized results in the BB-Consolidated, due to the credit cession of the Banco do Brasil to Ativos S.A.

(2) According to Brazilian Central Bank standards, since Janeiro 2011, premium amortization is recognized (note 14.c). In this semester, R$87,058 thousand was amortized on insurance segment.

(3) Were activated in BB-Consolidated the amount of R$ 90,756 thousand (highlighted on intersegment transactions) relating to tax credits incident to unrealized results (previous section).

(4) Includes intersegment transactions in the amount of R$ 121,340 thousand, related to elimination of unrealized results, net of tax.


56

R$ thousand

2011



Payment methods

Other segments


Total

Income 128,432,214 1,240,772 1,151,629 5,341,223 2,050,591 1,429,425 (2,311,930) 137,333,924

Income from loans and leases (1) 64,458,664 300 -- -- -- -- (212,096) 64,246,868


29,301,292 273,856 87,223 44,319 228,996 27,407 (575,451) 29,387,642


6,857,220 -- -- -- (66) (64) 7 6,857,097


-- -- -- 2,404,644 -- -- 59,163 2,463,807

Income from service fees 8,784,786 373,072 891,180 495,767 1,739,525 980,614 (1,051,657) 12,213,287


5,837,097 34,399 156,793 -- -- -- -- 6,028,289


436,007 20,631 490 (2,249) -- -- -- 454,879


-- -- -- 2,237,199 -- -- 27,778 2,264,977

Other Income 12,757,148 538,514 15,943 161,543 82,136 421,468 (559,674) 13,417,078

Expenses (113,730,369) (794,750) (220,901) (3,759,638) (1,128,120) (1,067,861) 2,099,834 (118,601,805)



Allowance/reversal for loan losses (11,976,368) (15) (104) -- 91 1,305 -- (11,975,091)


-- -- -- (1,660,831) -- -- -- (1,660,831)


Other administrative expenses (9,771,831) (55,205) (24,138) (968,267) (219,490) (208,853) 1,168,966 (10,078,818)

Depreciation (948,365) (2,427) -- (11,736) (11,192) (6,590) -- (980,310)


Amortization of intangible assets (2,213,194) -- -- -- -- (159) -- (2,213,353)

Revenues / (Expenses) from impairment 3,119 -- -- -- (160) -- -- 2,959

Other expenses(2) (12,563,774) (309,614) (144,078) (828,714) (798,434) (619,752) 436,947 (14,827,419)

Profit before tax and participations 14,701,845 446,022 930,728 1,581,585 922,471 361,564 (212,096) 18,732,119

Income tax and social contribution(3) (3,382,131) (66,818) (370,866) (566,901) (305,956) (120,539) 90,756 (4,722,455)

Profit sharing (1,740,848) (21) (432) (22,793) (1,534) (24,915) -- (1,790,543)

Minority interest earnings/(losses) (93,133) -- -- -- -- 2 -- (93,131)

Net Income (4) 9,485,733 379,183 559,430 991,891 614,981 216,112 (121,340) 12,125,990

Balance Sheets

Assets 931,760,537 7,034,312 1,073,470 52,216,493 2,997,253 4,491,293 (18,343,451) 981,229,907


11,289,612 3,681,638 68 484,240 -- -- (8,614,615) 6,840,943

Liabilities 873,167,951 3,832,020 947,641 48,293,129 2,368,896 1,984,794 (7,780,894) 922,813,537


(2) According to Brazilian Central Bank standards, since Janeiro 2011, premium amortization is recognized (note 14.c). In this semester, R$188,879 thousand was amortized on insurance segment.




57

R$ thousand

2010



Payment methods

Other segments


Total

Income 105,570,927 984,398 942,807 4,316,013 1,648,859 1,570,626 (1,000,851) 114,032,779

Income from loans and leases (1) 54,088,584 -- -- -- -- -- (95,976) 53,992,608


20,778,735 122,094 54,089 19,769 143,289 27,176 (146,087) 20,999,065


4,669,076 -- -- -- -- -- -- 4,669,076


-- -- -- 2,001,007 -- -- 24,010 2,025,017

Income from service fees 7,437,495 423,669 888,083 160,512 1,278,317 1,149,444 (560,875) 10,776,645


5,395,908 -- -- -- -- -- (13) 5,395,895


(67,746) 25,708 (4,285) -- -- -- -- (46,323)


-- -- -- 1,887,722 -- -- -- 1,887,722

Other Income 13,268,875 412,927 4,920 247,003 227,253 394,006 (221,910) 14,333,074

Expenses (90,543,809) (557,801) (182,696) (2,839,690) (841,312) (1,191,802) 904,875 (95,252,235)



Allowance/reversal for loan losses (10,246,011) 1 12 -- -- 1,958 -- (10,244,040)


-- -- -- (1,432,686) -- -- -- (1,432,686)


Other administrative expenses (9,188,317) (52,107) (21,098) (522,553) (166,167) (499,484) 606,274 (9,843,452)

Depreciation (869,546) (517) -- (4,848) (6,931) (7,393) -- (889,235)


Amortization of intangible assets (2,111,712) -- -- (93) -- (131) -- (2,111,936)

Revenues / (Expenses) from impairment (14,696) -- -- -- (925) -- -- (15,621)

Other expenses (11,113,929) (209,033) (112,767) (688,688) (601,616) (501,349) 174,559 (13,052,823)

Profit before tax and participations 15,027,118 426,597 760,111 1,476,323 807,547 378,824 (95,976) 18,780,544

Income tax and social contribution(2) (4,085,513) (90,905) (308,699) (482,910) (269,242) (124,988) 41,068 (5,321,189)

Profit sharing (1,699,220) (213) (395) (16,500) -- (39,862) -- (1,756,190)

Minority interest earnings/(losses) -- -- -- -- -- 20 -- 20

Net Income (3) 9,242,385 335,479 451,017 976,913 538,305 213,994 (54,908) 11,703,185

Balance Sheets

Assets 769,518,892 6,418,369 964,331 39,876,844 2,445,239 5,108,624 (13,160,091) 811,172,208


12,223,714 3,426,401 18,651 730,116 -- -- (9,283,348) 7,115,534

Liabilities 720,270,153 4,015,511 830,685 34,698,267 1,922,548 2,848,410 (3,854,049) 760,731,525





58

13/02/2012 17:34

13/02/2012 17:34

6 – Cash and Cash Equivalents

R$ thousand


12.31.2011 12.31.2010 12.31.2011 12.31.2010

Cash and Cash Equivalents 9,227,217 9,397,247 10,034,370 9,744,688

Local currency 7,907,973 8,559,836 8,462,693 8,848,327

Foreign currency 1,319,244 837,411 1,554,778 883,681

Investments in gold -- -- 16,899 12,680

Interbank Investments (1) 33,650,878 23,179,112 33,817,769 15,403,025

Open market investments – sales pending settlement – held position

9,486,246 149,794 10,051,955 513,055

Interbank deposits 22,786,426 22,567,704 22,259,298 14,384,692

Investments in foreign currency 1,378,206 461,614 1,506,516 505,278

Total Cash and Cash Equivalents 42,878,095 32,576,359 43,852,139 25,147,713

(1) Refer to investments whose maturity is less than or equal to 90 days.

7 – Short-term Interbank Investments

a) Breakdown

R$ thousand


12.31.2011 12.31.2010 12.31.2011 12.31.2010

Open Market Investments 132,234,087 78,628,740 139,032,202 85,060,184

Sales Pending Settlement – Held Position 9,486,246 149,794 13,543,025 1,419,922

Financial Treasury bills 286 -- 704,394 3,193

National Treasury bills 1,651,681 88,409 2,870,134 201,371

National Treasury notes 7,834,279 -- 9,622,482 1,135,054

Others Securities -- 61,385 346,015 80,304

Sales Pending Settlement – Financed Position 122,747,841 78,478,946 125,489,177 82,375,105

Financial Treasury bills 106,114,287 52,794,239 106,931,871 52,794,239

National Treasury bills 15,766,156 19,735,808 17,590,708 22,644,595

National Treasury notes 848,332 5,889,416 947,532 6,876,788

Others Securities 19,066 59,483 19,066 59,483

Sales Pending Settlement – Sold Position -- -- -- 1,265,157

Federal Government securities – National Treasury -- -- -- 1,265,157

Interbank Deposits 45,338,862 36,085,902 27,255,604 22,518,606

Total 177,572,949 114,714,642 166,287,806 107,578,790

Current assets 160,955,700 109,929,317 149,233,680 106,615,633

Non-current assets 16,617,249 4,785,325 17,054,126 963,157

b) Income from Short-term Interbank Investments

R$ thousand


2 nd half/2011 2011 2010 2 nd half/2011 2011 2010

Income from Open Market 7,205,944 13,713,582 11,320,215 7,687,645 14,572,708 12,014,625

Held position 64,271 207,672 702,118 252,045 478,870 849,587

Financed position 7,141,673 13,505,910 10,618,097 7,397,780 14,003,370 11,127,780

Sold position -- -- -- 37,820 90,468 37,258

Income from Interbank Investiments 816,285 1,392,409 1,275,926 308,369 546,255 502,522

Total 8,022,229 15,105,991 12,596,141 7,996,014 15,118,963 12,517,147

59

13/02/2012 17:34 8 – Securities and Derivative Financial Instruments

a) Securities

R$ thousand

Banco do Brasil

12.31.2011 12.31.2010

Maturity in days Market Value Total Total

Withoutmaturity

0-30 31-180 181-360More

than 360Cost

ValueMarket

valueMark toMarket

Cost Value

Market value

Mark toMarket

1 – Trading securities 492 4,715,486 30,263 4,365,166 11,091,462 20,027,918 20,202,869 174,951 17,866,247 17,838,046 (28,201)

Federal Government Bonds -- 4,715,486 28,397 4,357,759 11,017,779 19,944,448 20,119,421 174,973 17,699,142 17,671,585 (27,557)

Financial treasury bills -- -- 2,701 -- 4,538,147 4,541,051 4,540,848 (203) 4,873,609 4,873,406 (203)

National treasury bills -- -- 25,696 4,357,759 3,894,256 8,147,166 8,277,711 130,545 10,347,881 10,323,823 (24,058)

Treasury notes -- 4,715,486 -- -- 2,585,376 7,256,231 7,300,862 44,631 2,477,652 2,474,356 (3,296)

Corporate bonds 492 -- 1,866 7,407 73,683 83,470 83,448 (22) 167,105 166,461 (644)

Debentures -- -- 1,866 7,407 73,683 82,979 82,956 (23) 166,820 166,183 (637)

Shares 492 -- -- -- 491 492 1 285 278 (7)

2 - Securities available for sale 173,615 3,230,893 5,655,605 5,082,789 62,086,197 75,653,601 76,229,099 575,498 67,816,316 68,191,309 374,993

Federal Government Bonds -- 1,678,470 2,794,648 3,846,363 43,052,572 50,701,716 51,372,053 670,337 52,110,127 52,408,709 298,582

Financial treasury bills -- -- 1,294,296 2,537,909 34,046,744 37,882,160 37,878,949 (3,211) 36,166,255 36,163,404 (2,851)

National treasury bills -- -- -- 1,233,869 2,707,837 3,947,646 3,941,706 (5,940) 5,848,901 5,840,177 (8,724)

Treasury notes -- 1,544,024 -- 20 811,798 2,355,233 2,355,842 609 3,843,060 3,830,620 (12,440)

Agricultural debt securities -- 31 482 1,499 6,936 9,870 8,948 (922) 10,883 9,479 (1,404)

Brazilian foreign debt securities -- 100,858 -- 73,066 3,139,031 2,740,420 3,312,955 572,535 2,430,777 2,751,243 320,466

Foreign Government bonds -- 33,557 1,499,870 -- 2,164,236 3,598,264 3,697,663 99,399 3,732,128 3,732,680 552

Others -- -- -- -- 175,990 168,123 175,990 7,867 78,123 81,106 2,983

Corporate bonds 173,615 1,552,423 2,860,957 1,236,426 19,033,625 24,951,885 24,857,046 (94,839) 15,706,189 15,782,600 76,411

Debentures -- -- 950,006 342,388 16,863,902 18,083,554 18,156,296 72,742 12,300,926 12,359,315 58,389

Promissory notes -- 811,429 1,635,816 682,258 -- 3,133,697 3,129,503 (4,194) 1,402,858 1,401,478 (1,380)

Credit Notes -- -- -- -- 20,179 20,308 20,179 (129) 25,384 25,150 (234)

Shares in investment funds 173,573 -- -- 3,678 744,670 1,050,867 921,921 (128,946) 327,121 330,839 3,718

Shares 42 -- -- -- -- 79 42 (37) 9,182 53,956 44,774

Rural Product Bills - Commodities -- 65,222 275,135 208,102 344 550,620 548,803 (1,817) 449,498 447,231 (2,267)

Certificate of deposit -- 646,815 -- -- -- 646,514 646,815 301 299,933 300,614 681

Others -- 28,957 -- -- 1,404,530 1,466,246 1,433,487 (32,759) 891,287 864,017 (27,270)


60

R$ thousand

Banco do Brasil

12.31.2011 12.31.2010

Maturity in days Market value Total Total

Without maturity

0-30 31-180 181-360 More than 360

Cost value

Market value

Mark to Market

Cost value

Market value

Mark to Market

3 - Securities held to maturity -- 27,687 -- 3,667,446 4,048,297 7,911,771 7,743,430 (168,341) 10,401,497 10,233,634 (167,863)

Federal Government Bonds -- 27,687 -- 3,667,446 3,920,775 7,610,557 7,615,908 5,351 10,121,705 10,130,543 8,838

Financial treasury bills -- -- -- 3,667,446 3,799,143 7,469,498 7,466,589 (2,909) 9,979,376 9,979,358 (18)

National treasury notes -- -- -- -- 24,323 25,224 24,323 (901) 23,515 21,341 (2,174)

Brazilian foreign debt securities -- 27,687 -- -- 97,309 115,835 124,996 9,161 118,814 129,844 11,030

Corporate bonds -- -- -- -- 127,522 301,214 127,522 (173,692) 279,792 103,091 (176,701)

Others -- -- -- -- 127,522 301,214 127,522 (173,692) 279,792 103,091 (176,701)

Total 174,107 7,974,066 5,685,868 13,115,401 77,225,956 103,593,290 104,175,398 582,108 96,084,060 96,262,989 178,929

R$ thousand

Banco do Brasil

12.31.2011 12.31.2010

Maturity in days Market value Total Total

Without maturity

0-30 31-180 181-360 More than 360

Cost value

Market value

Mark to Market

Cost value

Market value

Mark to Market

Total by portfolio 174,107 7,974,066 5,685,868 13,115,401 77,225,956 103,593,290 104,175,398 582,108 96,084,060 96,262,989 178,929

Own portfolio 174,107 7,974,066 4,389,072 3,953,429 29,393,324 45,795,878 45,883,998 88,120 47,646,615 47,802,700 156,085

Subject to repurchase agreements -- -- 1,296,796 9,117,014 44,392,529 54,311,273 54,806,339 495,066 45,657,058 45,680,975 23,917

Deposits with the Brazilian Central Bank -- -- -- 16 47,406 47,490 47,422 (68) 102 57 (45)

Pledged in guarantee -- -- -- 44,942 3,392,697 3,438,649 3,437,639 (1,010) 2,780,285 2,779,257 (1,028)

R$ thousand

Banco do Brasil

12.31.2011 12.31.2010

Maturity in years Market value Total Total

Withoutmaturity

Due in upto one year

Due from1 to 5 years

Due from5 to 10 years

Due after10 years

Cost value

Marketvalue

Cost value

Marketvalue

Total by category 174,107 26,775,335 62,574,122 11,541,236 3,110,598 103,593,290 104,175,398 96,084,060 96,262,989

1 - Trading securities 492 9,110,916 10,842,124 249,337 -- 20,027,918 20,202,869 17,866,247 17,838,046

2 - Securities available for sale 173,615 13,969,286 47,795,876 11,288,472 3,001,850 75,653,601 76,229,099 67,816,316 68,191,309

3 - Securities held to maturity -- 3,695,133 3,936,122 3,427 108,748 7,911,771 7,743,430 10,401,497 10,233,634


61

R$ thousand

Banco do Brasil

12.31.2011 12.31.2010

Book value Book value

Current Non-current Total Current Non-current Total

Total by portfolio 38,042,296 66,301,443 104,343,739 40,019,295 56,411,557 96,430,852

Own portfolio 21,749,007 24,302,592 46,051,599 17,355,563 30,617,318 47,972,881

Subject to repurchase agreements 16,208,777 38,598,302 54,807,079 22,532,857 23,145,800 45,678,657

Deposits with the Brazilian Central Bank 16 47,406 47,422 15 42 57

Pledged in guarantee 84,496 3,353,143 3,437,639 130,860 2,648,397 2,779,257

R$ thousand

Banco do Brasil

12.31.2011 12.31.2010

Total by category

Trading Securities 20,202,869 19% 17,838,046 18%

Securities available for sale 76,229,099 73% 68,191,309 71%

Securities held to maturity 7,911,771 8% 10,401,497 11%

Portfolio book value 104,343,739 100% 96,430,852 100%

Mark-to-market - held to maturity (168,341) (167,863)

Portfolio market value 104,175,398 96,262,989

62

R$ thousand

BB-Consolidated

12.31.2011 12.31.2010

Maturity in days

Market value Total Total

Without maturity 0-30 31-180 181-360 More than 360

Costvalue

Market value

Mark to Market Costvalue

Market value

Mark to Market

1 - Trading securities 2,451,516 10,284,309 2,667,199 8,162,424 39,691,977 61,652,443 63,257,425 1,604,982 50,134,629 50,444,872 310,243

Federal Government Bonds 19,180 8,898,924 944,641 5,719,842 33,189,362 47,821,152 48,771,949 950,797 39,282,334 39,463,240 180,906

Financial treasury bills 17,590 219,962 14,323 150,918 10,723,247 11,124,859 11,126,040 1,181 10,198,197 10,196,181 (2,016)

National treasury bills -- 566 363,733 5,458,533 7,494,961 13,073,931 13,317,793 243,862 13,386,869 13,356,100 (30,769)

National treasury notes -- 5,720,487 -- 61,857 14,277,179 19,582,402 20,059,523 477,121 13,345,239 13,557,280 212,041

Agricultural debt securities -- 129 45,594 29,626 155,584 230,447 230,933 486 27,232 27,808 576

Brazilian foreign debt securities -- 7,383 -- 1,119 53,763 61,236 62,265 1,029 148,250 146,878 (1,372)

Foreign Government bonds 27 46,909 51,536 13,833 414,904 419,552 527,209 107,657 965,407 965,901 494

Others 1,563 2,903,488 469,455 3,956 69,724 3,328,725 3,448,186 119,461 1,211,140 1,213,092 1,952

Corporate bonds 2,432,336 1,385,385 1,722,558 2,442,582 6,502,615 13,831,291 14,485,476 654,185 10,852,295 10,981,632 129,337

Debentures 419,036 63,523 37,647 238,141 3,269,716 3,578,465 4,028,063 449,598 2,735,435 2,755,386 19,951

Promissory notes -- 61,606 -- 22,724 -- 84,330 84,330 -- 15,569 15,560 (9)

Certificate of banking credit -- 69,164 1,602,162 1,777,247 1,724,334 5,170,748 5,172,907 2,159 -- --‘ --

Shares 1,476,955 -- -- -- -- 1,607,857 1,476,955 (130,902) 1,596,607 1,735,699 139,092

Shares in investment funds 468,666 1,129,255 -- -- 701,835 2,078,705 2,299,756 221,051 1,316,704 1,313,689 (3,015)

Rural Product Bills - Commodities -- 33,425 66,839 57,368 50,671 200,993 208,303 7,310 228,948 233,191 4,243

Certificate of deposit 14,348 9,325 -- 256,264 -- 256,264 279,937 23,673 3,875,813 3,875,705 (108)

Eurobonds 7,414 264 1,420 4,049 79,885 94,965 93,032 (1,933) 52,479 51,221 (1,258)

Others 45,917 18,823 14,490 86,789 676,174 758,964 842,193 83,229 1,030,740 1,001,181 (29,559)


63

R$ thousand

BB-Consolidated

12.31.2011 12.31.2010

Maturity in days Market Value Total Total

Without maturity 0-30 31-180 181-360 Morethan 360

Costvalue

Market value

Mark to Market Costvalue

Market value

Mark to Market

2 – Securities available for sale 2,849,952 3,289,652 5,874,260 5,679,080 70,692,065 87,718,978 88,385,009 666,031 74,697,382 75,142,337 444,955

Federal Government Bonds 45,618 1,678,510 2,803,175 4,279,828 49,029,082 57,082,910 57,836,213 753,303 55,218,970 55,543,130 324,160

Financial treasury bills -- -- 1,301,262 2,543,868 34,051,001 37,899,363 37,896,131 (3,232) 36,511,087 36,508,115 (2,972)

National federal treasury Bills -- -- -- 1,233,869 5,271,954 6,521,962 6,505,823 (16,139) 5,901,449 5,892,693 (8,756)

National treasury notes -- 1,544,024 -- 1,507 3,859,554 5,382,028 5,405,085 23,057 6,476,073 6,437,014 (39,059)

Agricultural debt securities -- 71 1,175 2,409 12,071 16,309 15,726 (583) 10,883 9,479 (1,404)

Brazilian foreign debt securities -- 100,858 868 73,066 3,247,317 2,804,722 3,422,109 617,387 2,487,934 2,840,743 352,809

Foreign Government bonds -- 33,557 1,499,870 425,109 2,406,103 4,262,119 4,364,639 102,520 3,732,823 3,733,347 524

Others 45,618 -- -- -- 181,082 196,407 226,700 30,293 98,721 121,739 23,018

Corporate bonds 2,804,334 1,611,142 3,071,085 1,399,252 21,662,983 30,636,068 30,548,796 (87,272) 19,478,412 19,599,207 120,795

Debentures -- 3,869 1,075,176 424,674 17,884,152 19,312,246 19,387,871 75,625 13,538,724 13,610,789 72,065

Promissory notes -- 811,429 1,711,332 737,306 -- 3,264,269 3,260,067 (4,202) 1,402,858 1,401,478 (1,380)

Credit Notes -- 12,613 9,118 25,492 45,215 92,566 92,438 (128) 25,384 25,150 (234)

Shares in investment funds 1,928,719 41,557 -- 3,678 1,698,681 3,745,464 3,672,635 (72,829) 1,385,856 1,420,284 34,428

Shares 872,974 -- -- -- -- 882,916 872,974 (9,942) 1,033,506 1,102,641 69,135

Rural Product Bills - Commodities -- 65,222 275,135 208,102 344 550,620 548,803 (1,817) 449,498 447,231 (2,267)

Certificate of deposit -- 646,815 -- -- -- 646,514 646,815 301 395,030 395,711 681

Eurobonds -- -- -- -- 399,728 416,328 399,728 (16,600) -- -- --

Others 2,641 29,637 324 -- 1,634,863 1,725,145 1,667,465 (57,680) 1,247,556 1,195,923 (51,633)

3 – Securities held to maturity -- 256,254 -- 3,849,560 10,945,189 15,190,739 15,051,003 (139,736) 16,655,934 16,496,200 (159,734)

Federal Government Bonds -- 256,254 -- 3,849,560 10,730,760 14,802,618 14,836,574 33,956 16,376,142 16,393,109 16,967

Financial treasury bills -- -- -- 3,667,446 3,799,143 7,469,498 7,466,589 (2,909) 9,979,376 9,979,358 (18)

National treasury notes -- 228,567 -- 144,003 6,768,187 7,114,983 7,140,757 25,774 6,111,845 6,118,121 6,276

National treasury bills -- -- -- 38,100 66,115 102,285 104,215 1,930 166,081 165,760 (321)

Agricultural debt securities -- -- -- -- -- -- -- -- 26 26 --

Brazilian foreign debt securities -- 27,687 -- -- 97,309 115,835 124,996 9,161 118,814 129,844 11,030

Others -- -- -- 11 6 17 17 -- -- -- --

Corporate bonds -- -- -- -- 214,429 388,121 214,429 (173,692) 279,792 103,091 (176,701)

Others -- -- -- -- 214,429 388,121 214,429 (173,692) 279,792 103,091 (176,701)

Total 5,301,468 13,830,215 8,541,459 17,691,064 121,329,231 164,562,160 166,693,437 2,131,277 141,487,945 142,083,409 595,464


64

R$ thousand

BB–Consolidated

12.31.2011 12.31.2010

Maturity in days

Market Value Total Total

Without maturity

0-30 31-180 181-360More

than 360

Cost

value

Market

value

Mark to market

Cost

value

Market

value

Mark to market

Total by portfolio 5,259,472 13,872,211 8,541,459 17,691,064 121,329,231 164,562,160 166,693,437 2,131,277 141,487,945 142,083,409 595,464

Own portfolio 5,259,472 13,872,211 6,910,318 8,034,763 68,857,306 101,318,515 102,934,070 1,615,555 84,982,319 85,556,083 573,764

Subject to repurchase agreements -- -- 1,629,175 9,175,003 47,544,078 57,834,094 58,348,256 514,162 51,275,370 51,328,012 52,642

Deposits with the Brazilian Central Bank -- -- -- 16 47,406 47,490 47,422 (68) 102 57 (45)

Pledged in guarantee -- -- 1966 481,282 4,880,441 5,362,061 5,363,689 1,628 5,230,154 5,199,257 (30,897)

R$ thousand

BB-Consolidated

12.31.2011 12.31.2010

Maturity in days

Market value Total Total

Without maturityDue in up

to one year

Due from 1 to 5 years

Due from 5 to 10 years

Due after 10 yearsCost

valueMarket

valueCost

valueMarket

value

Total by category 5,259,472 40,104,734 105,970,683 12,106,649 3,251,899 164,562,160 166,693,437 141,487,945 142,083,409

1 - Trading securities 2,409,520 21,155,930 39,326,352 332,605 33,018 61,652,443 63,257,425 50,134,629 50,444,872

2 - Securities available for sale 2,849,952 14,842,990 55,811,316 11,770,617 3,110,134 87,718,978 88,385,009 74,697,382 75,142,337

3 - Securities held to maturity -- 4,105,814 10,833,015 3,427 108,747 15,190,739 15,051,003 16,655,934 16,496,200

65

R$ thousand

BB-Consolidated

12.31.2011 12.31.2010

Book value Book value

Current Non-current Total Current Non-current Total

Total by portfolio 82,503,105 84,330,068 166,833,173 75,084,984 67,158,159 142,243,143

Own portfolio 65,381,143 39,439,392 104,820,535 46,402,185 39,315,949 85,718,134

Subject to repurchase agreements 16,599,145 40,002,383 56,601,528 26,465,657 24,860,036 51,325,693

Deposits with the Brazilian Central Bank 16 47,406 47,422 15 42 57

Pledged in guarantee 522,801 4,840,887 5,363,688 2,217,127 2,982,132 5,199,259

R$ thousand

BB-Consolidated

12.31.2011 12.31.2010

Total by category

Trading securities 63,257,425 38% 50,444,872 35%

Securities available for sale 88,385,009 53% 75,142,337 53%

Securities held to maturity 15,190,739 9% 16,655,934 12%

Portfolio book value 166,833,173 100% 142,243,143 100%

Mark-to-market - held to maturity (139,736) (159,734)

Portfolio market value 166,693,437 142,083,409

b) Income from operations with securities

R$ thousand


2sd Half/2011 2011 2010 2sd Half/2011 2011 2010

Short-term Interbank Investments (Note 7.b) 8,022,229 15,105,991 12,596,141 7,996,014 15,118,963 12,517,147

Fixed income securities 6,007,105 10,999,120 8,699,681 7,095,183 12,873,139 10,381,312

Variable income securities 2,492,369 2,492,931 279,085 2,672,463 2,856,560 339,970

Total 16,521,703 28,598,042 21,574,907 17,763,660 30,848,662 23,238,429

c) Reclassification of securities

During the fiscal year, 2011 the Banco Votorantim reclassified R$ 1,773,418 thousand (market value) securities of foreign governments from the category "Trading securities" to the category "Securities available for sale", as a result of the Administration’s intention review about these securities. This reclassification has not impacted the results and equity on this date.

d) Derivative financial instruments

The Bank uses derivative financial instruments to manage, at the consolidated level, its positions and to meet clients' needs, classifying its own positions as both hedge (market risk and risk of cash flow) and trading, both with limits and approved by committees at the Bank. The hedge strategy of the equity positions is in line with macroeconomic analyses and is approved by the Executive Board of Directors.

In the options market, active or long positions have the Bank as holder, while passive or short positions have the Bank as writer.

The models used to manage risks with derivatives are reviewed periodically and the decisions made follow the best risk/return relationship, estimating possible losses based on the analysis of macroeconomic scenarios.

The Bank uses appropriate tools and systems to manage the derivatives. Trading in new derivatives, standardized or not, is subject to a prior risk analysis.


66

Risk analysis of the subsidiaries is undertaken on an individual basis and its risk management is done on a consolidated basis.

The Bank uses statistical methods and simulations to measure the risks of its positions, including derivatives, using models of values at risk sensibility and stress analysis.

Risks

The main risks inherent to derivative financial instruments resulting from the business dealings of the bank and its subsidiaries are credit, market, liquidity and operating risks.

Credit risk is the exposure to loss in the event of default by a counterparty to a transaction. The credit exposure in futures contracts is minimized due to daily settlement in cash. The swap contracts, recorded in Cetip are subject to credit risk if the counterparty is not able or willing to perform its contractual obligations, while the swap contracts registered in the BM&FBovespa are not subject to the same risk, given that the Bank operations in Brazil that have the same stock exchange as guarantor.

Total credit exposure in swaps is R$ 989,363 thousand (R$ 1,004,041 thousand at 12.31.2010). The swap operations in negotiations associated with the operation to capture and/or application of R$ 131,172 thousand (R$ 418,170 thousand at 12.31.2010) are recorded at values updated as changes incurred from their indices (curve), and are not at market value, as permitted by Circular n.º 3,150/2002 from Brazilian Central Bank.

Market risk is the possibility of losses caused by changes in the behavior of interest rates and exchange rates, stock prices and commodities.

Market liquidity risk is the possibility of loss resulting from the inability to perform a transaction within a reasonable time and without significant loss of value due to the size of the transaction in the volume usually negotiated.

Operational risk denotes the probability of financial losses resulting from failures or inadequacy of people, processes and systems, or factors such as catastrophes or criminal activities.


67

Breakdown of the Portfolio of Derivatives for Trading by Index R$ thousand


By Index 12.31.2011 12.31.2010 12.31.2011 12.31.2010

Notionalvalue

Costvalue

Market value

Notionalvalue

Costvalue

Market value

Notionalvalue

Costvalue

Market value

Notionalvalue

Costvalue

Market value

Futures contracts

Purchase commitments

10,820,921 -- -- 16,135,641 -- -- 48,657,214 -- -- 38,023,623 -- --

Interbank deposits 1,061,535 -- -- 2,350,234 -- -- 31,920,368 -- -- 18,277,199 -- --

Currencies 9,270,291 -- -- 7,438,974 -- -- 9,412,815 -- -- 8,508,156 -- --

T-Note -- -- -- -- -- -- -- -- -- 27,059 -- --

Index -- -- -- -- -- -- 26,289 -- -- 144,478 -- --

Foreign exchange coupon

113,703 -- -- 96,899 -- -- 6,629,056 -- -- 4,371,617 -- --

Libor 374,882 -- -- 6,249,420 -- -- 374,882 -- -- 6,249,420 -- --

Commodities 510 -- -- 114 -- -- 4,953 -- -- 114 -- --

SCC (1) -- -- -- -- -- -- 288,851 -- -- 445,580 -- --

Sales commitments 16,929,787 -- -- 13,633,413 -- -- 56,534,961 -- -- 61,710,441 -- --

Interbank deposits 14,802,495 -- -- 7,862,213 -- -- 47,328,215 -- -- 50,604,157 -- --

Currencies 57,330 -- -- 74,736 -- -- 384,140 -- -- 584,523 -- --

T-Note -- -- -- -- -- -- 165,294 -- -- 294,059 -- --

Index -- -- -- -- -- -- 17,997 -- -- -- -- --

BGI (2) -- -- -- -- -- -- 48 -- -- -- -- --

Foreign exchange coupon

121,403 -- -- 224,469 -- -- 6,385,422 -- -- 3,896,696 -- --

Libor 1,900,317 -- -- 5,455,137 -- -- 1,900,317 -- -- 5,455,137 -- --

Commodities 48,242 -- -- 16,858 -- -- 65,198 -- -- 432,339 -- --

SCC (1) -- -- -- -- -- -- 288,330 -- -- 443,530 -- --

Forward operations

Asset position 4,396,569 313,507 406,283 1,604,041 117,790 80,095 4,408,996 314,288 407,388 1,621,408 118,059 80,364

Tern currencies 4,395,087 313,417 406,090 1,604,041 117,790 80,095 4,407,514 314,198 407,195 1,621,408 118,059 80,364

Term commodities 1,482 90 193 -- -- -- 1,482 90 193 -- -- --

Liability position 3,895,747 (401,673) (218,134) 4,515,069 (453,906) (261,984) 3,908,174 (402,141) (371,496) 4.532.436 (453.991) (262.069)

Tern currencies 3,876,452 (396,463) (214,262) 4,515,069 (453,906) (261,984) 3,888,879 (396,931) (367,624) 4,532,436 (453,991) (262,069)

Term commodities 19,295 (5,210) (3,872) -- -- -- 19,295 (5,210) (3,872) -- -- --

(1) foreign exchange swap with periodic adjustments

(2) live cattle futures contract


68

R$ thousand


By Index 12.31.2011 12.31.2010 12.31.2011 12.31.2010

Notional value

Costvalue

Market value

Notional value

Costvalue

Market value

Notional value

Costvalue

Market value

Notional value

Costvalue

Market value

Option market 2,221,406 (692,676) (765,525) 55,135,530 (1,631,686) (1,657,222) 237,550,891 (1,699,950) (1,751,209) 562,698,675 (2,537,305) (2,729,059)

Purchase - Purchase options 156,370 5,231 13,516 26,015,428 771,159 328,272 95,686,518 145,528 237,983 287,109,956 965,731 591,433

Foreign currency 156,370 5,231 13,516 26,014,195 771,137 328,255 1,776,275 92,221 191,575 29,097,215 829,980 405,253

Interbank Market -- -- -- -- -- -- 12 67 -- 75 676 172,115

Interbank deposit -- -- -- -- -- -- 93,063,775 15,722 3 255,422,659 94,017 988

Flexible Currency Options -- -- -- -- -- -- 805,996 36,475 45,593 2,387,799 14,388 5,635

Shares -- -- -- 1,233 22 17 12,255 256 274 22,639 26,242 7,014

Commodities -- -- -- -- -- -- 385 12 1 179,569 428 428

Others -- -- -- -- -- -- 27,820 775 537 -- -- --

Sold – Purchase options 156,556 5,503 159 -- -- -- 32,660,372 26,815 16,967 -- -- --

Foreign currency 156,370 5,500 159 -- -- -- 1,381,121 16,244 2,303 -- -- --

Interbank Market -- -- -- -- -- -- 6 56 550 -- -- --

Interbank deposit -- -- -- -- -- -- 31,149,000 7,238 13,254 -- -- --

Flexible Currency Options -- -- -- -- -- -- 25,031 508 197 -- -- --

Shares -- -- -- -- -- -- 76,657 2,532 398 -- -- --

Commodities 186 3 -- -- -- -- 186 3 -- -- -- --

Others -- -- -- -- -- -- 28,371 234 265 -- -- --

Purchase – Sales options 224,406 (43,036) (106,928) 26,125,270 (833,951) (382,245) 66,835,621 (529,172) (624,645) 26,125,270 (833,951) (381,156)

Foreign currency 187,255 (6,390) (14,724) 26,062,984 (772,919) (329,123) 3,213,968 (103,160) (188,062) 26,062,984 (772,919) (328,034)

Interbank Market -- -- -- -- -- -- 173 (3,082) -- -- -- --

Prefixed 36,579 (36,579) (92,175) 61,020 (61,020) (53,113) 341,433 (363,888) (419,484) 61,020 (61,020) (53,113)

Interbank deposit -- -- -- -- -- -- 62,706,550 (7,011) (2) -- -- --

Flexible Currency Options -- -- -- -- -- -- 515,284 (50,425) (16,039) -- -- --

Shares -- -- -- 1,266 (12) (9) 48,363 (863) (585) 1,266 (12) (9)

Commodities 572 (67) (29) -- -- -- 4,090 (484) (264) -- -- --

Others -- -- -- -- -- -- 5,760 (259) (209) -- -- --

Sold – Sales options 1,684,074 (660,374) (672,272) 2,994,832 (1,568,894) (1,603,249) 42,368,380 (1,343,121) (1,381,514) 249,463,449 (2,669,085) (2,939,336)

Foreign currency 166,304 (5,805) (179) 722,743 (9,774) -- 2,135,010 (19,752) (932) 6,733,259 (53,081) (34,982)

Interbank Market -- -- -- -- -- -- 170 (1,869) (27,128) -- -- --

Prefixed 642,201 (642,201) (669,108) 1,549,346 (1,549,346) (1,603,198) 1,203,083 (1,279,274) (1,299,343) 1,549,346 (2,616,309) (2,761,189)

Interbank deposit -- -- -- -- -- -- 37,534,200 (5,166) (41,783) 236,843,565 (82,892) (81,348)

Flexible Currency Options -- -- -- -- -- -- 527,454 (22,793) (7,553) 3,336,174 26,137 (58,261)

Shares -- -- -- -- -- -- 13,000 (129) (169) 195,700 66,808 (3,393)

Commodities 875,569 (12,368) (2,985) 722.743 (9.774) (51) 881,935 (13,052) (3,574) 805.405 (9.748) (163)

Others -- -- -- -- -- -- 73,528 (1,086) (1,032) -- -- --


69

R$ thousand


By Index 12.31.2011 12.31.2010 12.31.2011 12.31.2010

Notional value Costvalue

Market value Notional value Costvalue



Market value

Swap contracts

Asset position 6,701,476 135,438 243,722 5,591,833 298,564 352,544 13,062,879 597,538 586,395 10,538,133 4,221,717 646,390

Interbank Deposit 655,188 61,836 80,870 4,258,842 279,437 322,793 2,142,200 148,970 105,012 5,165,842 1,187,885 456,829

Foreign currency 1,213,604 38,840 44,766 372,717 7,656 8,863 3,117,221 246,810 155,595 451,735 84,261 9,653

Prefixed 4,813,230 31,629 113,959 939,886 9,350 15,981 5,609,269 102,891 193,808 2,610,490 1,772,446 72,154

IPCA 19,454 3,133 4,127 20,388 2,121 4,907 1,145,831 25,378 47,747 759,170 456,478 13,374

IGPM -- -- -- -- -- -- 533,702 53,303 65,835 430,287 487,065 76,560

Commodities -- -- -- -- -- -- 501 8,217 19 883,164 1,288 8,751

Others -- -- -- -- -- -- 514,155 11,969 18,379 237,445 232,294 9,069

Liability position 11,087,323 (485,385) (664,715) 12,058,868 (403,165) (565,504) 17,932,498 (756,780) (1,030,868) 21,209,610 (7,775,421) (1,482,882)

Interbank Deposit 382,305 (48,577) (57,518) 5,747,367 (382,395) (412,172) 1,555,655 (77,685) (86,700) 7,580,800 (2,139,544) (832,262)

Foreign currency 5,631,972 (375,879) (428,098) 1,345,047 109,394 (34,061) 6,054,431 (399,665) (390,030) 1,482,214 (245,392) (36,047)

Prefixed 4,794,242 (57,564) (175,754) 4,608,961 (126,826) (110,588) 6,607,473 (66,181) (211,733) 6,501,271 (1,905,687) (370,347)

TMS 278,804 (3,365) (3,345) 278,804 (93) (5,438) 278,804 (3,365) (3,345) 278,804 93 (5,438)

TR -- -- -- 78,689 (3,245) (3,245) 5,952 (679) (1,150) 78,689 3,245 (3,244)

IGPM -- -- -- -- -- -- 393,635 (45,454) (57,719) 445,000 (595,558) (57,103)

IPCA -- -- -- -- -- -- 2,316,169 (161,053) (251,758) 2,404,363 (2,844,016) (160,459)

Commodities -- -- -- -- -- -- 1,211 (6) (169) 2,395,441 (625) (16,023)

Others -- -- -- -- -- -- 719,168 (2,692) (28,264) 43,028 (47,937) (1,959)

Other derivative financial instruments

Asset position 747,487 25,830 35,099 4,337,549 71,129 73,394 2,032,592 25,827 125,359 4,998,557 71,129 292,231

Foreign currency 747,487 25,830 35,099 4,337,549 71,129 73,394 2,032,592 25,827 125,359 4,998,557 71,129 292,231

Liability position 3,466,916 (169,264) (178,426) 4,831,590 (71,448) (80,435) 3,999,095 (164,651) (194,059) 5,883,741 (74,259) (214,423)

Foreign currency 3,466,916 (169,264) (178,426) 4,831,590 (71,448) (80,435) 3,999,095 (164,651) (194,059) 5,883,741 (74,259) (214,423)


70

Breakdown of the credit derivatives portfolio by maturity (notional value) R$ thousand


0 – 30 31-180 181-360 More than 360 12.31.2011 12.31.2010 0 – 30 31-180 181-360 More than 360 12.31.2011 12.31.2010

Futures contracts 5,024,984 11,032,164 7,223,426 4,470,134 27,750,708 29,769,054 30,375,754 22,532,386 12,993,504 39,290,531 105,192,175 99,734,064

Forward operations 1,154,371 4,120,814 2,058,457 958,674 8,292,316 6,119,110 1,155,577 4,140,512 2,061,834 959,248 8,317,171 6,153,844

Option market 24,127 1,158,384 1,038,895 -- 2,221,406 55,135,530 226,552,787 5,794,967 4,996,034 207,105 237,550,893 562,698,675

Swap contracts 924,898 3,306,600 6,365,001 7,192,300 17,788,799 17,650,701 1,514,384 5,087,127 9,389,277 15,004,589 30,995,377 31,747,743

Credit derivatives -- -- -- -- -- -- 2,039,539 -- -- -- 2,039,539 2,771,813

Others 590,581 1,722,562 991,147 910,113 4,214,403 9,169,139 1,100,839 2,477,550 1,401,491 1,051,807 6,031,687 10,882,298

Breakdown of the credit derivative portfolio by notional value, trading market and counterpart (12.31.2011) R$ thousand


Futures contracts

Forward operations

Option market

Swap contracts

OthersFutures

contractsForward

operationsOption market

Swap contracts

Credit derivatives

Others

BM&FBovespa 25,475,509 -- 2,221,406 -- -- 102,916,976 -- 237,477,362 -- -- --

Over-the-counter

Financial Institutions 2,275,199 -- -- 5,653,878 4,214,403 2,275,199 24,854 -- 15,376,346 2,039,539 4,088,847

Client -- 8,292,316 -- 12,134,921 -- -- 8,292,316 -- 15,619,031 -- 1,942,840

Breakdown of the credit derivative portfolio R$ thousand


12.31.2011 12.31.2010 12.31.2011 12.31.2010

Notional value

Market value

Notional value

Market value

Notional value

Market value

Notional value

Market value

Asset position -- -- -- -- 1,861,338 22,608 1,012,217 13,173

Credit swaps – Derivatives with Banks -- -- -- -- 1,861,338 22,608 1,012,217 13,173

Liability position -- -- -- -- 178,201 (18,073) 1,759,596 (16,774)

Credit swaps – Derivatives with Banks -- -- -- -- 178,201 (18,073) 1,759,596 (16,774)


71

The portfolio of credit derivatives is composed exclusively of purchases and sales carried out by Banco Votorantim. Currently the portfolio is composed of customers whose risk is rated as investment grade and, as counterparty, contains the main international market leaders for this product. For the sale of protection is approved credit limit, for both the client and for the counterparty risk, according to the approval of the committees and forums of credit. The credit limit risk allocation is made to the client by the reference value (notional) of derivatives, considering the amounts deposited as collateral.

For the purpose of mitigating the risk, transactions are performed in portfolio trading with client sovereign risk, especially Brazil. In this case, we consider the potential future exposure to allocate credit limit to the counterparty. The portfolio of credit derivatives did not generate impacts in the PEPR - Portion related exposures weighted by risk factor for calculating the Basel index, since information from Banco Votorantim were not included in the calculation, as per determination of the Brazilian Central Bank (Note 29.f).

Breakdown of margin given as guarantee for transactions with derivative financial instruments R$ thousand


12.31.2011 12.31.2010 12.31.2011 12.31.2010

Financial treasury bills 2,553,252 2,040,492 2,575,122 2,061,512

National treasury notes -- -- 337,150 960,706

National treasury bills -- -- 895,916 10,507

Foreign government securities -- -- 666,279 792,678

Eurobonds -- -- 4,836 517,672

Others -- -- -- 116,618

Total 2,553,252 2,040,492 4,479,303 4,459,693

Portfolio of derivatives designated as hedge of market risk R$ thousand

Banco do Brasil BB-Consolidated(1)

12.31.2011 12.31.2010 12.31.2011 12.31.2010

Hedging instruments

Assets 352,295 337,107 10,776,038 11,705,985

Future -- -- 6,991,760 5,064,318

Swap 352,295 337,107 2,068,382 3,891,982

Options -- -- 1,715,896 2,749,685

Liabilities -- -- 26,580,744 39,601,301

Future -- -- 24,451,844 20,237,546

Swap -- -- 1,195,548 15,626,860

Options -- -- 933,352 3,736,895

Hedged items

Assets -- -- 22,368,654 29,497,069

Loan Operations -- -- 19,359,558 17,213,846

Securities and derivative financial instruments -- -- 224,204 9,308,980

Lease operations -- -- 1,827,441 2,271,714

Foreign Investments -- -- 360,021 345,022

Other assets -- -- 597,430 357,507

Liabilities 352,199 337,188 4,040,513 2,945,841

Other liabilities 352,199 337,188 4,040,513 2,945,841

(1) Transactions arising from Banco do Brasil and Banco Votorantim.

The Bank, in order to hedge against possible fluctuations in interest and exchange rates issued securities on the international capitals market, contracted derivative operations to offset the exposure to the market value changes. The hedge was assessed as effective, in accordance with the Circular n.º 3,082/2002 from Brazilian Central Bank, which require evidence of hedge effectiveness between 80% and 125%.


72

Derivative financial instruments segregated by current and long-term R$ thousand


12.31.2011 12.31.2010 12.31.2011 12.31.2010

Current Non-current Current Non-current Current Non-current Current Non-current

Assets

Fixed-term options 384,210 22,073 73,418 6,677 385,292 22,096 73,678 6,686

Options market 13,675 -- 328,272 -- 249,220 5,730 571,351 20,082

Swap contracts 120,393 123,329 227,983 124,561 315,432 270,963 398,242 248,148

Credit derivatives -- -- -- -- 22,608 -- 13,173 --

Other derivative financial instruments 35,099 -- 73,394 -- 94,532 30,827 200,918 91,313

Total 553,377 145,402 703,067 131,238 1,067,084 329,616 1,257,362 366,229

Liabilities

Fixed-term options (191,565) (26,569) (218,803) (43,181) (344,927) (26,569) (218,888) (43,181)

Options market (779,200) -- (1,703,779) (281,715) (1,984,894) (21,265) (2,532,492) (788,000)

Swap contracts (366,335) (298,380) (426,100) (139,404) (553,594) (477,274) (1,043,116) (439,766)

Credit derivatives -- -- -- -- (18,073) -- (16,774) --

Other derivative financial instruments (173,151) (5,275) (77,973) (2,462) (188,392) (5,667) (168,485) (45,938)

Total (1,510,251) (330,224) (2,426,655) (466,762) (3,089,880) (530,775) (3,979,755) (1,316,885)


73

13/02/2012 17:34

e) Income from derivative financial instruments

R$ thousand


2sd Half/2011 2011 2010 2sd Half/2011 2011 2010

Swap (434,618) (594,112) (360,138) (353,460) (754,955) (752,100)

Forward 315,916 24,695 (947) 318,755 28,229 (5,072)

Options (41,459) (101,374) (80,939) (844) (58,785) (59,813)

Future 464,832 214,348 (417,507) (149,394) (489,760) (801,224)

Credit derivatives -- -- -- 13,904 20,303 2,023

Others 22,256 (58,709) (371,879) 537 (206,052) (623,178)

Total 326,927 (515,152) (1,231,410) (170,502) (1,461,020) (2,239,364)

f) Equity Valuation Adjustment of securities and derivatives recognized in Shareholders' equity

R$ thousand

2011 2010

Opening balance

Net change Closing balance

Opening balance

Net change Closing balance

Securities available for sale

Banco do Brasil 364,618 211,909 576,527 191,270 173,348 364,618

Subsidiaries and affiliates 168,329 (28,745) 139,584 57,087 111,242 168,329

Tax effects (65,512) 73,243 7,731 21,807 (87,319) (65,512)

Total 467,435 256,407 723,842 270,164 197,271 467,435

9 – Interbank accounts

a) Restricted deposits

R$ thousand


12.31.2011 12.31.2010 12.31.2011 12.31.2010

Compulsory Deposits at the Central Bank of Brazil 90,736,391 83,928,847 93,659,856 87,035,114

Additional reserve requirements on deposits 34,766,271 29,283,429 36,003,271 30,639,918

Time deposits 23,265,337 15,177,844 24,886,309 16,866,606

Savings deposits 17,291,294 14,760,321 17,291,294 14,760,321

Demand deposits 13,421,937 17,308,041 13,484,505 17,367,209

Resources on rural credit (1) 1,991,552 7,399,212 1,991,552 7,399,212

Resources on microfinance -- -- 2,925 1,848

Housing Finance System 1,925,807 1,792,898 1,925,807 1,792,898

Fund for compensation of wage changes 2,038,805 1,926,986 2,038,805 1,926,986

Other 4,589 6,951 4,589 6,951

Provision for losses on loans tied (117,587) (141,039) (117,587) (141,039)

National Treasury - Rural credit 124,194 121,164 124,194 121,164

Total 92,786,392 85,842,909 95,709,857 88,949,176

Current assets 92,785,842 85,796,265 95,709,307 88,902,532

Non-current assets 550 46,644 550 46,644

(1) Refers to funds deposited in the Central Bank, because of the failure transferring to rural credits, according to Resolution CMN nº 3745/2009. The funds were subject to special supply by the Central Bank and maintained by the Bank, and recorded in borrowings and Transfers (Note 18.b).


74

13/02/2012 17:34

b) Income on compulsory deposits

R$ thousand


2ndHalf2011 2011 2010 2ndHalf2011 2011 2010

Income Credit Linked to Central Bank 3,634,186 6,735,294 3,223,671 3,802,016 7,066,582 3,388,046

Additional reserve requirements on deposits 1,826,049 3,435,153 1,581,880 1,897,974 3,576,244 1,651,278

Resources of rural credit 9,144 49,959 28,235 9,144 49,959 28,235

Savings deposits 612,500 1,149,675 898,487 612,500 1,149,675 898,487

Requirements over the long term resources 1,186,493 2,100,507 715,069 1,282,398 2,290,704 810,046

Income Credit Linked to SFH 78,761 144,010 177,802 78,761 144,010 177,802

Income Credit Linked to National Treasury – Rural Credit

11,881 20,722 20,397 11,881 20,722 20,397

Total 3,724,828 6,900,026 3,421,870 3,892,658 7,231,314 3,586,245

10 – Loan operations

a) Portfolio by modality

R$ thousand


12.31.2011 12.31.2010 12.31.2011 12.31.2010

Loan Operations 364,757,302 307,123,928 397,267,032 334,159,880

Loans and treasury discounted 163,356,402 141,461,847 175,977,806 149,036,753

Financing 100,983,128 85,267,041 120,279,127 104,006,325

Rural and agribusiness financing 92,769,092 76,972,710 93,207,757 77,639,334

Real estate financing 7,647,830 3,421,356 7,801,492 3,476,494

Financing of Infrastructure and development 850 974 850 974

Other receivables with loan characteristics 22,146,945 19,721,065 22,657,460 20,158,934

Credit card operations 12,473,666 10,623,969 12,473,666 10,623,969

Advances on foreign exchange contracts (1) 9,399,692 8,785,982 9,773,934 9,054,882

Guarantees honored 76,698 75,303 76,698 75,303

Others 196,889 235,811 333,162 404,780

Lease operations 29,981 44,473 3,064,082 4,046,939

Total Loan Portfolio 386,934,228 326,889,466 422,988,574 358,365,753

Allowance for loan losses (17,236,001) (16,499,018) (19,014,978) (17,314,731)

(Allowance for loan losses) (16,680,638) (15,827,973) (18,221,987) (16,433,381)

(Allowance for other losses) (555,363) (671,045) (579,788) (690,124)

(Allowance for lease losses) -- -- (213,203) (191,226)

Total Loan Portfolio Net of Provisions 369,698,227 310,390,448 403,973,596 341,051,022

(1) Advances on foreign exchange contracts are classified as a deduction to other liabilities.


75

b) Loan operations income

R$ thousand


2nd Half 2011

2011 20102nd Half

20112011 2010

Loan operations income 29,018,123 55,075,090 46,618,034 32,965,384 61,997,797 50,960,085

Loans and treasury discounted 18,721,093 35,291,190 28,955,364 19,973,039 37,626,250 30,470,536

Financing 4,099,571 8,468,184 8,257,473 6,488,961 12,457,722 10,711,346

Rural and agribusiness financing 3,328,365 6,238,552 5,166,896 3,353,667 6,293,490 5,204,631

Recovery of written-off loans (Note 10.k) 1,844,901 3,416,496 3,111,656 1,835,954 3,644,134 3,303,155

Income housing financing 311,557 514,601 241,657 313,759 517,802 241,657

Advances on foreign exchange contracts 163,556 317,052 284,086 439,086 644,018 429,852

Guarantees honored -- 11,397 7,507 16 11,436 7,522

Others 549,080 817,618 593,395 560,902 802,945 591,386

Lease Operations Income (Note 10.i) 10,680 21,996 40,372 1,037,557 2,249,071 3,032,523

Total 29,028,803 55,097,086 46,658,406 34,002,941 64,246,868 53,992,608

c) Breakdown of the loan portfolio by sector

R$ thousand


12.31.2011 % 12.31.2010 % 12.31.2011 % 12.31.2010 %

Public sector 8,407,541 2.0 7,150,509 2.2 8,552,773 1.8 7,261,066 2.0

Government 2,622,326 0.6 2,772,577 0.9 2,622,436 0.5 2,772,577 0.8

Direct administration 2,246,205 0.5 2,449,398 0.8 2,246,315 0.5 2,449,398 0.7

Indirect administration 376,121 0.1 323,179 0.1 376,121 - 323,179 0.1

Business entities 5,785,215 1.4 4,377,932 1.3 5,930,337 1.3 4,488,489 1.2

BB Group 27,971 -- 12,729 -- -- - -- --

Industry 3,851,259 1.0 2,480,426 0.8 3,993,601 0.9 2,553,541 0.7

Financial services 115,824 -- 114,766 -- 119,866 - 126,428 --

Other services 1,790,161 0.4 1,770,011 0.5 1,816,870 0.4 1,808,520 0.5

Private sector 378,526,687 98.0 319,738,957 97.8 414,435,801 98.2 351,104,687 98.0

Rural 67,637,241 17.6 57,331,133 17.5 68,075,906 16.2 57,987,817 16.2

Industry 120,174,341 31.2 98,973,789 30.3 126,983,669 30.2 105,234,145 29.4

Commerce 43,766,553 11.3 38,160,481 11.7 47,120,937 11.3 40,125,804 11.2

Financial services 777,872 0.2 1,425,713 0.4 796,931 0.1 1,172,864 0.3

Individuals 91,342,604 23.6 79,022,416 24.2 111,154,868 26.2 98,274,542 27.4

Housing 6,003,224 1.5 2,931,782 0.9 6,073,590 1.4 2,931,782 0.8

Other services 48,824,852 12.6 41,893,643 12.8 54,229,900 12.8 45,377,733 12.7

Total 386,934,228 100.0 326,889,466 100.0 422,988,574 100.0 358,365,753 100.0


76

d) Loan portfolio by risk level and maturity

R$ thousand

Banco do Brasil

Normal operations

12.31.2011 12.31.2010

AA A B C D E F G H Total portfolio Total portfolio

Installments falling due

01 to 30 7,577,958 6,128,385 12,263,075 2,311,051 437,125 125,702 21,150 37,346 76,765 28,978,557 20,836,940

31 to 60 6,251,397 4,986,421 5,819,899 1,513,401 259,954 60,781 14,808 14,842 46,814 18,968,317 15,979,979

61 to 90 5,006,187 3,848,977 4,975,276 1,136,987 202,592 56,742 13,190 11,267 51,438 15,302,656 11,548,164

91 to 180 12,249,888 8,904,414 14,362,272 3,612,581 617,673 275,348 46,751 46,089 226,923 40,341,939 34,642,776

181 to 360 18,408,225 14,717,719 26,630,386 6,612,943 1,116,483 387,952 97,106 91,875 375,725 68,438,414 53,601,099

More than 360 62,097,489 42,793,520 73,723,324 14,987,927 4,152,730 1,259,986 502,553 361,820 3,090,331 202,969,680 178,651,910

Installments overdue

Up to 14 days 167,191 73,846 155,952 76,781 30,648 18,026 7,678 4,726 40,878 575,726 364,584

Others (1) 972,236 -- -- -- -- -- -- -- -- 972,236 1,286,169

Subtotal 112,730,571 81,453,282 137,930,184 30,251,671 6,817,205 2,184,537 703,236 567,965 3,908,874 376,547,525 316,911,621

(1) Operations with third party risk tied to government funds and programs, primarily Pronaf, Procera, FAT, BNDES and FCO. They include the amount of overdue installments in the total amount of R$ 44,544 thousand, which comply with rules defined in each program for reimbursement with the managers and do not imply a credit risk for the Bank.


77

R$ thousand

Abnormal operations

12.31.2011 12.31.2010



01 to 30 -- -- 63,198 75,196 41,428 49,848 37,724 39,768 201,787 508,949 1,453,671

31 to 60 -- -- 27,839 38,862 25,851 30,415 24,353 24,652 118,097 290,069 305,142

61 to 90 -- -- 22,210 30,306 23,517 29,841 22,872 24,022 112,455 265,223 225,541

91 to 180 -- -- 55,422 81,110 63,922 84,011 66,538 69,025 318,787 738,815 645,523

181 to 360 -- -- 94,547 136,419 129,256 151,037 107,082 127,077 624,033 1,369,451 1,243,756

More than 360 -- -- 180,866 220,749 264,339 392,085 307,064 358,732 2,089,196 3,813,031 3,041,625


01 to 14 -- -- 13,130 20,300 12,189 10,977 9,610 11,455 39,975 117,636 97,459

15 to 30 -- -- 70,721 54,952 24,911 26,299 19,738 35,015 103,668 335,304 231,254

31 to 60 -- -- 1,899 103,493 49,432 67,775 32,146 35,341 170,799 460,885 439,403

61 to 90 -- -- 2 1,314 88,341 51,436 36,332 34,419 149,647 361,491 356,456

91 to 180 -- -- 1 2,206 4,236 66,305 89,677 85,819 398,149 646,393 672,074

181 to 360 -- -- 326,147 1 1,357 4,421 4,552 58,287 585,343 980,108 735,511

More than 360 -- -- -- -- -- 1 1,004 3,721 494,622 499,348 530,430

Subtotal -- -- 855,982 764,908 728,779 964,451 758,692 907,333 5,406,558 10,386,703 9,977,845

Total 112,730,571 81,453,282 138,786,166 31,016,579 7,545,984 3,148,988 1,461,928 1,475,298 9,315,432 386,934,228 326,889,466


78

R$ thousand

BB-Consolidated

Normal operations

12.31.2011 12.31.2010



01 to 30 7,949,607 7,502,286 12,425,899 2,379,333 453,486 130,767 21,562 37,819 79,420 30,980,179 22,432,893

31 to 60 6,524,353 6,054,560 5,953,278 1,577,336 283,767 68,525 15,159 18,068 49,097 20,544,143 17,166,174

61 to 90 5,324,242 4,872,029 5,098,517 1,165,429 212,051 59,619 13,535 11,728 53,551 16,810,701 12,727,075

91 to 180 13,033,134 11,645,199 14,740,975 3,822,971 645,706 284,855 47,911 51,389 235,071 44,507,211 37,734,452

181 to 360 19,443,643 18,325,303 27,155,403 6,734,649 1,178,796 398,561 99,317 104,473 386,470 73,826,615 58,815,213

More than 360 65,516,748 53,567,770 75,492,304 15,221,922 4,253,735 1,442,785 515,253 406,872 3,113,256 219,530,645 195,901,412


Up to 14 days 171,351 725,661 187,822 79,263 35,021 18,651 7,766 4,923 43,599 1,274,057 383,515

Others (1) 972,236 983 -- -- -- -- -- -- -- 973,219 1,286,169

Subtotal 118,935,314 102,693,791 141,054,198 30,980,903 7,062,562 2,403,763 720,503 635,272 3,960,464 408,446,770 346,446,903

(1) Operations with third party risk tied to government funds and programs, primarily Pronaf, Procera, FAT, BNDES and FCO. They include the amount of overdue installments in the total amount of R$ 44,544 thousand, which comply with rules defined in each program for reimbursement with the managers and do not imply a credit risk for the Bank.


79

R$ thousand

Abnormal operations

12.31.2011 12.31.2010



01 to 30 -- -- 101,067 107,893 58,769 60,398 46,131 46,944 225,624 646,826 1,539,731

31 to 60 -- -- 65,114 70,201 42,789 40,898 32,617 31,192 139,324 422,135 388,131

61 to 90 -- -- 59,558 59,963 39,689 39,626 30,779 30,381 133,225 393,221 303,469

91 to 180 -- -- 158,816 165,348 109,438 111,957 88,822 86,883 375,204 1,096,468 863,354

181 to 360 -- -- 275,771 283,768 209,703 200,266 146,574 158,952 722,310 1,997,344 1,625,716

More than 360 -- -- 703,053 649,640 496,817 547,053 425,108 462,546 2,374,802 5,659,019 3,767,129


01 to 14 -- -- 34,568 52,259 35,316 30,117 24,856 25,591 48,983 251,690 124,169

15 to 30 -- -- 110,479 70,868 39,473 32,036 24,258 41,725 119,076 437,915 297,926

31 to 60 -- -- 20,852 144,311 68,615 81,274 40,847 45,648 193,190 594,737 498,757

61 to 90 -- -- 2 17,098 108,622 69,467 44,995 44,023 171,940 456,147 394,681

91 to 180 -- -- 1 8,375 26,180 92,290 115,056 112,810 471,469 826,181 739,169

181 to 360 -- -- 326,147 1 1,365 14,873 21,076 84,909 754,609 1,202,980 796,238

More than 360 -- -- -- -- -- 1 1,004 4,885 551,251 557,141 580,380

Subtotal -- -- 1,855,428 1,629,725 1,236,776 1,320,256 1,042,123 1,176,489 6,281,007 14,541,804 11,918,850

Total 118,935,314 102,693,791 142,909,626 32,610,628 8,299,338 3,724,019 1,762,626 1,811,761 10,241,471 422,988,574 358,365,753


80

e) Allowance for loan losses by risk level

R$ thousand

Banco do Brasil

12.31.2011 12.31.2010

Level of risk

% Provision

Value of loans

Value of allowance

Additional allowance(1)

Existent Allowance

Value of loans

Value of allowance

Additional allowance(1)

Existent Allowance

AA 0 112,730,571 -- -- -- 90,617,509 -- -- --

A 0.5 81,453,282 407,266 72,325 479,591 59,239,251 296,196 41 296,237

B 1 138,786,166 1,387,862 49 1,387,911 117,892,981 1,178,930 3,740 1,182,670

C 3 31,016,579 930,497 198,431 1,128,928 37,668,789 1,130,064 298,111 1,428,175

D 10 7,545,984 754,598 172,766 927,364 7,655,850 765,585 262,434 1,028,019

E 30 3,148,988 944,696 747,614 1,692,310 2,116,071 634,821 626,205 1,261,026

F 50 1,461,928 730,964 356,606 1,087,570 1,273,308 636,654 368,390 1,005,044

G 70 1,475,298 1,032,709 184,186 1,216,895 1,115,844 781,091 206,893 987,984

H 100 9,315,432 9,315,432 -- 9,315,432 9,309,863 9,309,863 -- 9,309,863

Total 386,934,228 15,504,024 1,731,977 17,236,001 326,889,466 14,733,204 1,765,814 16,499,018

R$ thousand

BB-Consolidated

12.31.2011 12.31.2010

Level of risk

% Provision

Value of loans

Value of allowance

Additional allowance (1)

Existent Allowance

Value of loans

Value of allowance

Additional allowance (1)

Existent Allowance

AA 0 118,935,314 -- -- -- 97,833,583 -- -- --

A 0.5 102,693,791 513,469 74,523 587,992 78,894,697 394,473 41 394,514

B 1 142,909,626 1,429,096 1,212 1,430,308 120,646,719 1,206,467 3,740 1,210,207

C 3 32,610,628 978,319 198,485 1,176,804 38,350,191 1,150,506 298,111 1,448,617

D 10 8,299,338 829,934 176,676 1,006,610 8,013,281 801,328 262,434 1,063,762

E 30 3,724,019 1,117,206 763,390 1,880,596 2,239,113 671,734 626,205 1,297,939

F 50 1,762,626 881,313 357,465 1,238,778 1,404,747 702,374 368,390 1,070,764

G 70 1,811,761 1,268,233 184,186 1,452,419 1,204,624 843,237 206,893 1,050,130

H 100 10,241,471 10,241,471 -- 10,241,471 9,778,798 9,778,798 -- 9,778,798

Total 422,988,574 17,259,041 1,755,937 19,014,978 358,365,753 15,548,917 1,765,814 17,314,731

(1) Refers to the additional provision to the minimum required by CMN Resolution nº. 2,682/1999, increased the experience of Management, by simulating on the loan portfolio, considering the history of default of operations in accordance with the good banking practice.

f) Changes in allowance for loan losses

Includes loans, leases and other receivables with characteristics of credit.

R$ thousand


2nd Half 2011

2011 20102nd Half

20112011 2010

Opening balance 16,565,476 16,499,018 17,611,907 17,733,709 17,314,731 18,617,380

Provision/(reversal) 5,065,238 10,065,243 9,642,874 6,150,581 11,827,192 10,342,953

Value of allowance 5,132,430 10,099,080 10,653,360 6,202,308 11,837,069 11,359,204

Additional allowance (67,192) (33,837) (1,010,486) (51,727) (9,877) (1,016,251)

Exchange variation on allowances - foreign 12,013 4,332 (2,807) 13,708 1,241 (9,258)

Write-Off / Other settings (4,406,726) (9,332,592) (10,752,956) (4,883,020) (10,183,060) (11,636,344)

Added values(1) -- -- -- -- 54,874 --

Closing balance 17,236,001 17,236,001 16,499,018 19,014,978 19,014,978 17,314,731

(1) Refers to the balance from Banco Patagonia.


81

g) Changes in allowance for other doubtful accounts

Includes provisions for other receivables without characteristics of credit.

R$ thousand


2nd Half 2011

2011 20102nd Half

20112011 2010

Opening balance 604,732 808,015 909,630 700,033 881,992 980,272

Provision/(reversal) 333,331 136,419 (97,460) 346,015 147,899 (98,913)

Exchange variation on allowances - foreign 137 133 (103) 1,688 1,684 (103)

Write-Off / Other settings 412 (5,955) (4,052) 36,997 51,625 736

Added values(1) -- -- -- -- 1,533 --

Closing balance 938,612 938,612 808,015 1,084,733 1,084,733 881,992

(1) Refers to the balance from Banco Patagonia.

h) Leasing portfolio by maturity

R$ thousand


12.31.2011 12.31.2010 21.31.2011 12.31.2010

Up to 1 year (1) 18,942 18,227 1,659,973 1,834,583

More than 1 year and up to 5 years 11,039 26,246 1,395,455 2,203,085

Over 5 years -- -- 8,654 9,271

Total Present Value 29,981 44,473 3,064,082 4,046,939

(1) Includes amounts related to installments overdue.

i) Income from leasing operations

R$ thousand


2nd Half 2011

2011 20102nd Half

20112011 2010

Lease revenue 10,680 21,996 40,372 1,037,557 2,249,071 3,032,523

Leasing 10,680 21,996 40,372 1,037,557 2,249,071 3,032,363

Operating leases -- -- -- -- -- 160

Lease expenses (8,393) (17,058) (34,487) (735,923) (1,633,241) (2,218,481)

Leasing (8,393) (17,058) (34,487) (734,298) (1,630,642) (2,214,538)

Operating leases -- -- -- (58) (116) (479)

Loss on disposal of leased assets -- -- -- (1,567) (2,483) (3,464)

Total 2,287 4,938 5,885 301,634 615,830 814,042

j) Concentration of loans

R$ thousand

Banco do Brasil

12.31.2011 % of credit portfolio 12.31.2010 % of credit portfolio

10 largest debtors 29,837,569 7.7 28,093,555 8.6

Next 50 largest debtors 33,549,790 8.7 28,788,465 8.8

Next 100 largest debtors 23,769,858 6.1 21,141,242 6.5


82

13/02/2012 17:34

k) Supplementary information

R$ thousand


2nd Half 2011

2011 20102nd Half

20112011 2010

Renegotiated loans (1) 14,319,917 24,312,877 26,195,922 16,292,847 29,313,212 30,624,001

Income from recovery of loans previously written off as loss

1,844,901 3,416,496 3,111,656 1,835,954 3,644,134 3,303,155

Amount of Credits Assigned to Other Financial Institutions

-- -- -- -- -- 1,251,357

Book value -- -- -- -- -- 1,131,506

Earnings on sales before taxes -- -- -- -- -- 119,851

12.31.2011 12.31.2010 12.31.2011 12.31.2010

Credits contracted to release 119,395,981 91,326,087 111,974,517 86,083,616

Guarantees given (2) 7,345,903 8,071,232 12,604,492 12,500,620

Confirmed export credits 1,032,833 742,827 1,037,372 755,362

Credit opened for import 437,833 463,154 505,697 463,424

Resources linked (3) 628,848 716,859 1,093,251 1,179,658

Credit operations linked (3) 901,043 805,419 969,511 890,628

(1) Refers to the book value of loan operations, normal and abnormal, renegotiated using Internet, ATM network or the agency chain. It is considered a renegotiation any type of agreement involving the change in maturity or the payment terms originally agreed, as composition of debt, extension, novation, granting of a new operation for partial or full liquidation of previous operation.

(2) For these operations, the Bank maintains an allowance recorded in Other Liabilities - Sundry, (Note 20.e) totaling R$ 111,760 thousand (R$ 82,230 thousand, on 12.31.2010) in Banco do Brasil and R$ 115,624 thousand in BB-Consolidated (R$ 85,510 thousand, on 12.31.2010), calculated in accordance with Resolution CMN n.º 2682/1999.

(3) On 12.31.2011, there are no operations in default and not judicial questioning on active operations or linked to the funds raised to implement these operations.

11 – Other Receivables

a) Specific credits

Refer to National Treasury credits – extension of the terms of rural financing - in the amount of R$ 1,146,328 thousand (R$ 1,029,638 thousand on 12.31.2010), established in Law 9,138/1995.


83

b) Sundry

R$ thousand


12.31.2011 12.31.2010 12.31.2011 12.31.2010

Deferred tax assets - Tax credits (Note 25.e) 19,748,466 19,751,902 22,753,544 21,969,538

Credit and debit card operations 15,907,511 14,121,902 15,907,511 14,121,902

Actuarial assets – Previ (Note 27.d) 13,372,004 9,894,787 13,372,004 9,894,787

Sundry debtors from escrow deposits – lawsuit (Note 28.e) 13,348,256 12,485,258 13,348,256 12,485,258

Sundry debtors from escrow deposits – contingencies (Note 28.d) 10,496,135 9,401,829 12,187,865 10,843,777

Fund allocation of surplus - Previ (note 27.e) 9,638,387 9,119,367 9,638,387 9,119,367

Income tax and social contribution on net income to offset 7,700,142 9,495,380 8,788,727 10,268,266

National Treasury - equalization of taxes Agricultural Crop 3,519,364 3,493,439 3,519,364 3,493,439

Receivables - non-financial companies -- -- 2,387,450 2,888,627

Notes and credits receivable – other 1,035,859 887,161 2,286,374 1,265,895

Sundry debtors – domestic 1,391,821 1,391,406 1,819,216 1,740,272

Accounts receivable – National Treasury 1,047,434 1,305,327 1,047,434 1,305,327

Sundry debtors - foreign 83,090 14,138 511,334 15,370

Advances to Credit Guarantee of Fund (FGC) 467,679 711,686 467,679 711,686

Salary and other advances 228,621 247,735 238,757 256,385

Purchase of assets receivable 128,381 177,806 128,383 177,806

Acquisition of rights arising from exploration and production of oil, natural gas and mineral resources

59,948 85,282 59,948 85,282

Sundry debtors from escrow deposits - others 12,406 56,899 47,737 58,494

Others 444,320 439,783 401,898 414,337

Total 98,629,824 93,081,087 108,911,868 101,115,815

Current assets 43,831,069 44,611,607 51,189,006 49,880,444

Non-current assets 54,798,755 48,469,480 57,722,862 51,235,371


84

13/02/2012 17:34

12 – Foreign Exchange Portfolio

a) Breakdown

R$ thousand


12.31.2011 12.31.2010 12.31.2011 12.31.2010

Other Receivables

Forward foreign exchange purchases pending settlement

14,931,009 10,241,560 15,362,484 10,852,280

Bills of exchange and time drafts in foreign currency 79,730 72,340 79,730 72,340

Receivables from sales of foreign exchange 21,667,265 28,661,146 21,672,632 28,691,802

(Advances received in local/foreign currency) (19,629,278) (27,541,940) (19,631,530) (27,834,542)

Foreign currency receivables 5,549 5,269 5,549 5,269

Income receivable on advances granted and financed imports

114,789 84,139 126,539 90,611

Total 17,169,064 11,522,514 17,615,404 11,877,760

Current assets 17,169,064 9,936,710 17,615,404 10,291,956

Non-current assets _ 1,585,804 _ 1,585,804

Other Liabilities

Forward foreign exchange sales pending settlement 23,448,449 27,631,836 23,453,654 27,661,366

(Financed imports) (5,569) (17,510) (5,569) (17,510)

Foreign exchange purchase liabilities 13,967,565 10,574,863 14,360,893 11,200,934

(Advances on foreign exchange contracts) (9,091,438) (9,144,263) (9,453,929) (9,406,691)

Foreign currency payables 5,175 10,408 59,199 64,161

Unearned income on advances granted 2,009 3,727 2,009 3,727

Total 28,326,191 29,059,061 28,416,257 29,505,987

Current liabilities 16,044,850 11,458,085 16,134,916 11,905,011

Non-current liabilities 12,281,341 17,600,976 12,281,341 17,600,976

Net Foreign Exchange Portfolio (11,157,127) (17,536,547) (10,800,853) (17,628,227)

Memorandum Accounts

Credit opened for imports 860,272 935,474 942,877 949,106

Confirmed export credit 1,032,833 742,827 1,037,372 755,362

b) Foreign Exchange Results

R$ thousand


2ndHalf2011 2011 2010 2ndHalf2011 2011 2010

Foreign exchange income 8,140,025 11,627,681 7,432,010 9,062,405 13,113,223 8,412,269

Foreign exchange expenses (9,636,096) (12,210,625) (6,454,944) (10,448,609) (13,487,440) (7,329,438)

Foreign exchange result (1,496,071) (582,944) 977,066 (1,386.204) (374,217) 1,082,831


85

13/02/2012 17:34 13 – Other Assets

R$ thousand


12.31.2011 12.31.2010 12.31.2011 12.31.2010

Non-operating Assets(1) 266,868 269,978 409,124 349,428

Assets in special regime 162,588 162,028 162,674 162,114

Vehicles 578 648 107,999 77,445

Buildings 76,893 78,865 96,006 80,212

Property 18,675 19,185 18,675 19,185

Machinery and equipment 8,056 6,725 8,980 7,656

Other 78 2,527 14,790 2,816

Supply Materials 22,655 21,809 59,341 38,643

Subtotal Other Assets 289,523 291,787 468,465 388,071

(Impairment) (170,279) (169,506) (188,463) (177,233)

Prepaid Expenses 4,017,349 3,424,120 4,840,224 3,672,842

Premiums for purchased credits payroll (2) 3,265,592 2,557,495 2,370,968 2,046,909

Right on the custody of judicial deposits 514,948 625,667 514,948 625,667

Premium paid to costumers – Partnerships retailers

63,590 76,611 63,590 76,611

Insurance and capitalization selling expenses -- -- 982,521 389,024

Commissions paid to tradesmen – financing of vehicles

11,361 27,668 376,671 101,720

Personnel expenses – meal program 92,751 82,068 92,751 82,068

Other 69,107 54,611 438,775 350,843

Total Other Assets 4,136,593 3,546,401 5,120,226 3,883,680

Current assets 1,524,119 1,500,405 2,723,551 1,534,331

Non-current assets 2,612,474 2,045,996 2,396,675 2,349,349

(1) The Bank recognized impairment losses of assets not in use in the amount of R$ 41,380 thousand (R$ 47,513 thousand for the year 2010) in the Banco do Brasil and the amount of R$ 46,891 thousand (R$ 47,750 thousand for the year 2010) in the BB-Consolidated).

(2) The amounts are amortized over the maturity of the installments of loans acquired from other financial institutions.


86

13/02/2012 17:34 14 – Investments

a) Changes in subsidiaries and affiliates

R$ thousand


Book value Changes in the year/2011 Book value Equity income Book value Changes in the year/2011 Book value Equity income

12.31.2010 Dividends Other Events

Equity income

12.31.2011 2010 12.31.2010 Dividends Other Events

Equity income

12.31.2011 2010

Domestic 16,598,375 (1,441,195) 452,235 2,425,518 18,034,933 2,947,087 7,115,534 (11,554) (651,648) (11,672) 6,440,660 120,649

BB Seguros Participações S.A. (1) 1,190,044 (228,508) 2,136,854 788,612 3,887,002 397,093 -- -- -- -- -- --

Banco Votorantim S.A. 3,955,638 (128,344) (1,203) (321,734) 3,504,357 305,287 -- -- -- -- -- 39,680

BB Leasing S.A. - Arrendamento Mercantil 3,315,768 (42,972) -- 180,936 3,453,732 106,717 -- -- -- -- -- --

BB Banco de Investimento S.A. 1,113,206 (218,328) 1,373 919,049 1,815,300 944,303 -- -- -- -- -- --BB Gestão de Recursos - Distribuidora de Títulos e Valores Mobiliários S.A.

133,647 (559,489) (7,784) 559,455 125,829 451,018 -- -- -- -- -- --

Cobra Tecnologia S.A.(2) 63,114 -- 69,998 (8,725) 124,387 (51,639) -- -- -- -- -- --

BV Participações S.A. 67,140 (6,968) -- 44,947 105,119 29,346 -- -- -- -- -- --

BB Administradora de Consórcios S.A. 24,443 (85,509) -- 111,026 49,960 61,031 -- -- -- -- -- --

BB Corretora de Seguros e Administradora de Bens S.A. 33,540 (147,609) (29) 147,610 33,512 114,830 -- -- -- -- -- --

Cadam S.A. (3) 44,019 -- 4,038 (25,841) 22,216 (2,312) 44,019 -- 4,038 (25,841) 22,216 (2,312)

BB Administradora de Cartões de Crédito S.A. 21,205 (17,962) (1,878) 17,961 19,326 10,247 -- -- -- -- -- --

BB-Elo Cartões Participações S.A.(4) 10,771 -- 16,500 (8,428) 18,843 534 -- -- -- -- -- --Besc Distribuidora de Títulos e Valores Mobiliários S.A. - Bescval

11,848 (5,364) (5,200) 5,843 7,127 89 -- -- -- -- -- --

Tecnologia Bancária S.A. - Tecban (2) 7,636 -- -- (829) 6,807 470 -- -- -- -- -- --

Cia. Hidromineral Piratuba 2,211 -- -- 94 2,305 124 2,211 -- -- 94 2,305 124

Companhia Brasileira de Securitização – Cibrasec (5) 2,216 (142) -- 212 2,286 38 -- -- -- -- -- --

Cia. Catarinense de Assessoria e Serviços – CCA (6) 228 -- -- -- 228 -- 228 -- -- -- 228 --

Itapebi -- -- -- -- -- -- 63,307 (11,554) -- 23,506 75,259 27,468

Mapfre Nossa Caixa Vida e Previdência S.A.(7) 102,353 -- (102,353) -- -- 58,472 102,353 -- (89,029) (2,250) 11,074 58,472

Estruturadora Brasileira de Projetos - EBP -- -- -- -- -- -- 1,552 -- 1,729 (2,875) 406 (1,760)

BB Aliança Participações S.A.(8) 1,358,987 -- (1,374,298) 15,311 -- 518,914 -- -- -- -- -- --

Nossa Caixa Capitalização S.A.(7) 5,394 -- (5,413) 19 -- 202 -- -- -- -- -- --

BB Banco Popular do Brasil S.A.(9) -- -- -- -- -- 1,768 -- -- -- -- -- --

Besc Financeira S.A.- Bescredi (9) -- -- -- -- -- 414 -- -- -- -- -- --

Besc S.A. Arrendamento Mercantil - Besc Leasing (9) -- -- -- -- -- 141 -- -- -- -- -- --

Pronor (10) -- -- -- -- -- -- 18,606 -- (19,096) 490 -- (4,288)

Other equity (11) -- -- -- -- -- -- -- -- 68,845 (4,796) 64,049 3,265

Goodwill/Bargain purchase on acquisition of investiments 5,134,967 -- (278,370) -- 4,856,597 -- 6,883,258 -- (618,135) -- 6,265,123 --


87

R$ thousand

BB-Banco Múltiplo BB-Consolidado

Book value Changes in the year/2011 Book value Equity income Book value Changes in the year/2011 Book value Equity income

12.31.2010 Dividends Other Events

Equity income

12.31.2011 2010 12.31.2010 Dividends Other Events

Equity income

12.31.2011 2010

Abroad 1,008,171 -- 584,434 595,212 2,187,817 (73,121) -- -- (66,268) 466,551 400,283 (166,972)

Brasilian American Merchant Bank 707,151 -- 104,024 5,253 816,428 75,940 -- -- -- -- -- --

Banco Patagonia -- -- 525,255 112,515 637,770 -- -- -- -- -- -- --

Banco do Brasil AG. Viena (Áustria) 200,628 -- 7,752 4,703 213,083 4,463 -- -- -- -- -- --

BB Leasing Company Ltd 72,878 -- 9,285 994 83,157 1,373 -- -- -- -- -- --

BB Securities LLC 27,514 -- 4,520 5,062 37,096 11,916 -- -- -- -- -- --

Other equity abroad -- -- 10,207 33,267 43,474 -- -- -- 10,207 33,267 43,474 --

Goodwill/Bargain purchase on acquisition of investiments -- -- 356,809 -- 356,809 -- -- -- 356,809 -- 356,809 --

Profit / (loss) in the agencies -- -- (267,786) 267,786 -- (111,534) -- -- (267,786) 267,786 -- (111,534)

Profit / (loss) of subsidiaries -- -- (165,498) 165,498 -- (55,438) -- -- (165,498) 165,498 -- (55,438)

Increase / decrease in equity resulting from handling -- -- (134) 134 -- 159 -- -- -- -- -- --

Total Investments in Subsidiaries and Affiliates 17,606,546 (1,441,195) 1,036,669 3,020,730 20,222,750 2,873,966 7,115,534 (11,554) (717,916) 454,879 6,840,943 (46,323)

(1) Variation of “Other events” mainly due to capital increase of R$ 2,151,589 thousand in 2011.

(2) The information refers to the period from November/2010 to December/2011.

(3) In the year/2011, there were, in BB-Banco Múltiplo, impairment losses in the amount of R$ 4,038 thousand.

(4) New denomination to Nossa Caixa S.A. – Administradora de Cartão de Crédito.

(5) The information refers to the period from November/2010 to November/2011.

(6) Company in liquidation process, not valued by the equity method.

(7) Investment transferred to subsidiary BB-Seguros Participações S.A. in 1st half of 2011.

(8) Investment transferred to holding BB-Mapfre SH1 Participações S.A. (Note 2.c).

(9) Companies incorporated by the Banco do Brasil in 1st half of 2010.

(10) Investment divested in 1st half of 2011.

(11) Refers to investments on non-financial associated companies.


88

R$ thousand

Realized

capital stock

Adjusted Shareholde

rs' Equity

Net income (loss) for

the period

Quantity of Shares (in thousands)

Ownership interest in the

total capital % Common Preferred

Domestic

Banco Votorantim S.A. 4,026,848 8.041.428 (201.078) 33,356,791 7,412,620 50.00

BB Seguros Participações S.A. 3,087,847 3,887,002 788,612 235,922 -- 100.00

BB Leasing S.A. - Arrendamento Mercantil 3,261,860 3,453,732 180,936 3,000 -- 100.00

BB Banco de Investimento S.A. 1,088,126 1,815,300 919,049 3,249 -- 100.00

Itapebi 105,000 396,095 123,712 19,950 -- 19.00

BV Participações S.A. 60,423 210,239 89,894 15,105 15,106 50.00

Tecnologia Bancária S.A. – Tecban (1) 166,406 150,931 (18,381) 169,395 -- 13.53

BB Gestão de Recursos - Distribuidora de Títulos e Valores Mobiliários S.A.

109,698 125,829 559,455 100,000 -- 100.00

Cobra Tecnologia S.A . 119,527 124,425 (8,853) 248,459 248,586 99.97

Cadam S.A. 183,904 102,662 (119,413) -- 4,762 21.64

Companhia Brasileira de Securitização – Cibrasec (2) 68,475 75,445 6,997 8 -- 12.12

BB Administradora de Consórcios S.A. 24,443 49,960 111,026 14 -- 100.00

BB Corretora de Seguros e Administradora de Bens S.A. 26,918 33,512 147,610 1,000 -- 100.00

BB Administradora de Cartões de Crédito S.A. 9,300 19,326 17,961 398,158 -- 100.00

BB-Elo Cartões Participações S.A. 26,500 18,843 (8,428) 10,000 -- 100.00

Cia. Hidromineral Piratuba 2,047 14,235 579 63,931 -- 16.19

Besc Distribuidora de Títulos e Valores Mobiliários S.A. - Bescval 6,312 7,154 5,865 10,168,624 -- 99.62

Estruturadora Brasileira de Projetos - EBP 50,280 3,649 (25,876) 3,859 -- 11.11

Cia. Catarinense de Assessoria e Serviços - CCA 780 474 -- 260 520 48.13

Abroad

Banco Patagonia 313,384 1,081,640 190,822 424,101,958 -- 58.96

Brasilian American Merchant Bank 451,942 816,428 5,253 241,023 -- 100.00

Banco do Brasil AG. Viena (Áustria) 45,781 213,083 4,703 188 -- 100.00

BB Leasing Company Ltd. -- 83,157 994 1,000 -- 100.00

BB Securities LLC 9,376 37,096 5,062 5,000 -- 100.00

(1) Banco do Brasil’s direct interest of 4.51%.

(2) Banco do Brasil’s direct interest of 3.03%.

Due to the notifications “A”5272 and “A”5273, from 01.27.2012, issued by Argentine Central Bank, the Banco Patagonia may not distribute dividends of 2011 fiscal year. These notifications increased the minimum capital requirements and solvency to Argentine financial institutions and the index of additional capital requirement to dividends distribution. In addition, local regulation requires SEFyC (Superintendency of Financial and Exchange Institutions) and BCRA preliminary authorization to the distribution of results.

b) Other Investments R$ thousand


12.31.2011 12.31.2010 12.31.2011 12.31.2010

Tax incentive investments 11,386 18,810 84,403 82,988

Equity securities 58 58 146 146

Stocks and shares 52,738 52,482 56,789 56,186

Other investments (1) 3,232 3,265 1,074,638 944,993

Other investments abroad 303 11,520 303 12,322

Total 67,717 86,135 1,216,279 1,096,635

Allowance for losses (2) (49,246) (51,355) (84,198) (84,415)

(1) Includes, in BB-Consolidated, the amount of R$ 914,059 thousand (R$ 866,917 thousand in 12.31.2010), realting to the investments of Neoenergia S.A. a jointly-owned subsidiary.

(2) Includes, in BB-Banco Múltiplo, the amount of R$ 4.267 thousand relating to impairment losses in Cadam S.A. and Cia. Catarinense de Assessoria e Serviços – CCA.


89

c) Goodwill on acquisition of investments

R$ thousand

Changes of Goodwill Banco do Brasil BB-Consolidated

2nd half/2011 Year/2011 Year/2010 2nd half/2011 Year/2011 Year/2010

Opening Balance 5,310,292 5,134,967 5,114,807 6,744,151 6,887,332 5,601,574

Acquisitions (1) 51,317 369,965 206,879 162,065 556,355 1,510,336

Amortizations (2) (148,203) (291,526) (186,719) (282,721) (574,807) (224,578)

Others (3) -- -- -- -- (245,385) --

Closing Balance 5,213,406 5,213,406 5,134,967 6,623,495 6,623,495 6,887,332

(1) According to Note 2,a,

(2) Recorded in Other Operating Expenses,

(3) Includes reductions for participation in goodwill on investments in Brasilveículos Companhia de Seguros and Companhia de Seguros Aliança do Brasil, amounting to R$ 123,645 thousand and R$ 121,740 thousand, respectively.

d) Expected Goodwill Amortization

R$ thousand

2012 2013 2014 2015 2016 2017 2018 2019From 2020

to 2052Total

Banco do Brasil 578,600 712,472 806,770 906,963 999,726 1,104,198 36,296 37,021 31,360 5,213,406

Banco Nossa Caixa 473,923 617,846 709,394 807,756 900,156 1,007,459 -- -- -- 4,516,534

Banco Votorantim 49,191 54,570 56,722 57,981 60,466 61,133 -- -- -- 340,063

Banco Patagonia 55,486 40,056 40,654 41,226 39,104 35,606 36,296 37,021 31,360 356,809

Tax effects(1) (231,440) (284,989) (322,708) (362,785) (399,890) (441,679) (14,518) (14,808) (12,545) (2,085,362)

Net total 347,160 427,483 484,062 544,178 599,836 662,519 21,778 22,213 18,815 3,128,044

Outras Participações

BB-BI 109,997 127,614 147,360 168,092 191,781 211,293 43,280 -- -- 999,417

Cielo 96,911 111,552 127,883 146,681 168,243 192,975 38,571 -- -- 882,816

CBSS 13,086 16,062 19,477 21,411 23,538 18,318 4,709 -- -- 116,601

BB Aliança Participações S,A,

116,984 90,674 -- -- -- -- -- -- -- 207,658

Aliança do Brasil 116,984 90,674 -- -- -- -- -- -- -- 207,658

BB Aliança Rev Participações S,A,

22,653 26,049 30,096 25,766 -- -- -- -- -- 104,564

Brasilveículos 22,653 26,049 30,096 25,766 -- -- -- -- -- 104,564

BB Seguros 19,429 18,308 15,505 11,022 9,154 8,593 8,780 7,659 -- 98,450

Brasilcap 19,429 18,308 15,505 11,022 9,154 8,593 8,780 7,659 -- 98,450

BB Consolidated 847,663 975,117 999,731 1,111,843 1,200,661 1,324,084 88,356 44,680 31,360 6,623,495

Tax effects (1) (329,521) (381,945) (397,156) (442,530) (479,715) (529,118) (34,815) (17,412) (12,545) (2,624,757)

Net total 518,142 593,172 602,575 669,313 720,946 794,966 53,541 27,268 18,815 3,998,738

(1) 25% of income tax and social contribution of 15% for financial companies and 25% of income tax and social contribution of 9% for non-financial company.

The expected amortization of goodwill generated by acquisitions of equity is based on projections of results that supported the business, prepared by specialized firms contemplating the timing of the estimates and discount rates used in calculating the net present value of expected cash flows.

e) Goodwill Impairment test

Recoverable amount of goodwill on acquisition of investment is determined based on value in use, which is evaluated at discounted cash flow method, that is based on cash flow projection to the invested entity (cash-generating unit) and on measurement of the discount rate of this flow.

Assumptions adopted to measure this flow are based on public information, on budget and business plan of evaluated entities. These assumptions consider current and past performance as well as expected growth on its market and in the macroeconomic environment.


90

13/02/2012 17:34

The cash flow of the entities below were designed for ten years, perpetuating from the eleventh year, with growth rate established. For the periods of excess cash flow to the terms of budget and business plan, the growth estimates are in line with those adopted by the entities. The nominal discount rate was measured, annually, based on the CAPM (Capital Asset Pricing Model) adjusted to the Brazilian market and referenced in Reais (R$), exception of Banco Patagonia, whose model was adjusted to Argentine market and referenced in Argentine Pesos (ARS).

Entities (cash-generating units) Growth rate(1) Discount rate(2)

Banco Votorantim 5.00% 12.45%

Banco Patagonia 14.90% 23.92%

Cielo 5.00% 12.80%

CBSS 5.00% 12.43%

Aliança do Brasil 5.00% 14.09%

Brasilveículos 5.00% 11.25%

Brasilcap 2.85% 9.16%

(1) Nominal growth in perpetuity.

(2) Geometric mean of ten years of projection.

The impairment test of goodwill on acquisition of Banco Nossa Caixa, which was incorporated by Banco do Brasil, consider the value in use of Banco do Brasil in the state of São Paulo (cash-generating unit). Cash flows are based on cash-generating unit results in 2011, with increase of PIB (Gross Domestic Product) and IPCA (National Consumer Price Index) designed for ten years. Cash flows were discounted by ETTJ (Term Structure of Interest Rates), collected at the BM&FBovespa.

Entity (cash-generating unit) Growth rate (1) Discount rate (1)

Banco do Brasil – State of São Paulo – Goodwill of Banco Nossa Caixa 6.80% 10.96%

(1) Geometric mean of ten years of projection.

According to the sensitivity analysis performed, there is no indication that changes in assumptions can make the book value of cash-generating units exceed the recoverable amount.

In 2011 and 2010, there was no impairment loss on goodwill generated in the acquisition of investments.

15 – Property and Equipment

R$ thousand

Banco do Brasil

12.31.2010 2011 12.31.2011

Book Balance Changes Depreciation Provision for

Impairment Cost Accumulated

Depreciation Accumulated Impairment

Book Balance

Property and Equipment in Use

Buildings 1,767,296 551,978 (234,468) (867) 4,028,092 (1,940,008) (4,145) 2,083,939

Data processing systems (1) 1,552,105 505,725 (507,426) 445 4,356,736 (2,804,927) (960) 1,550,849

Furniture and equipment in use 533,840 187,343 (103,554) -- 1,365,136 (747,507) -- 617,629

Land 212,604 (4,337) -- -- 208,267 -- -- 208,267

Facilities 176,920 41,397 (35,674) -- 964,343 (781,700) -- 182,643

Constructions in progress 128,509 91,453 -- -- 219,962 -- -- 219,962

Communication systems 129,210 (38,441) (26,401) -- 205,308 (140,940) -- 64,368

Security systems 94,307 58,113 (23,711) -- 319,818 (191,109) -- 128,709

Furniture and equipment in stock 15,889 (11,697) -- -- 4,192 -- -- 4,192

Transport systems 49 1,752 (121) -- 3,430 (1,750) -- 1,680

Total 4,610,729 1,383,286 (931,355) (422) 11,675,284 (6,607,941) (5,105) 5,062,238


91

13/02/2012 17:34

R$ thousand

BB-Consolidated

12.31.2010 2011 12.31.2011

Book Balance Changes Depreciation Provision for

Impairment Cost Accumulated

Depreciation Accumulated Impairment

Book Balance

Property and Equipment in Use

Buildings 1,775,777 636,787 (236,670) (867) 4,143,161 (1,963,989) (4,145) 2,175,027

Data processing systems (1) 1,652,762 571,407 (518,181) 445 4,610,881 (2,903,488) (960) 1,706,433

Furniture and equipment in use (1) 651,357 270,759 (131,995) 262 1,870,952 (1,079,679) (890) 790,383

Land 218,994 9,539 -- -- 228,533 -- -- 228,533

Facilities 200,495 60,529 (40,092) -- 1,030,822 (809,890) -- 220,932

Constructions in progress 156,401 95,857 -- -- 252,258 -- -- 252,258

Communication systems 133,618 (36,063) (27,278) -- 218,671 (148,394) -- 70,277

Security systems 95,215 59,384 (24,023) -- 324,199 (193,623) -- 130,576

Transport systems 3,419 9,127 (2,071) -- 34,166 (23,691) -- 10,475

Furniture and equipment in stock 15,889 (11,697) -- -- 4,192 -- -- 4,192

Total 4,903,927 1,665,629 (980,310) (160) 12,717,835 (7,122,754) (5,995) 5,589,086

(1) Reversal of impairment provision,

16 – Intangible Assets

a) a) Changes and Breakdown

R$ thousand

Banco do Brasil

12.31.2010 2011 12.31.2011

Book Balance Acquisitions Write-offs Amortization

Provision for Impairment (1) Cost

Accumulated Amortization

Accumulated Impairment Book Balance

Rights to manage payroll

5,803,461 3,229,972 (959,061) (2,051,053) 3,696 10,804,766 (4,724,851) (52,900) 6,027,015

Softwares 524,148 300,269 (49) (159,437) -- 963,386 (298,455) -- 664,931

Other intangible assets (2)

-- 2,823,856 -- -- -- 2,823,856 -- -- 2,823,856

Total 6,327,609 6,354,097 (959,110) (2,210,490) 3,696 14,592,008 (5,023,306) (52,900) 9,515,802

R$ thousand

BB-Consolidated

12.31.2010 2011 12.31.2011

Book Balance

Acquisitions Write-offs Amortization Provision for Impairment

(1) Cost Accumulated Amortization

Accumulated Impairment

Book Balance

Rights to manage payroll

5,803,461 3,229,972 (959,061) (2,051,053) 3,696 10,804,766 (4,724,851) (52,900) 6,027,015

Softwares 642,261 391,513 (282) (161,925) (105) 1,357,462 (485,895) (105) 871,462

Other intangible assets (2) 5,810 2,835,557 (2,974) (375) (472) 2,838,601 (582) (472) 2,837,547

Total 6,451,532 6,457,042 (962,317) (2,213,353) 3,119 15,000,829 (5,211,328) (53,477) 9,736,024

(1) Recorded in Other Operating Expenses. There was in Banco do Brasil and BB-Consolidated, partial reversion of provision for impairment in amount of R$ 3,696 thousand during 2011.

(2) Includes the right to use the structure of the Postal Bank to correspondent banking services in the amount of R$ 2,823,856 thousand (Note 31.d).

b) Estimate for Amortization

R$ thousand

Banco do Brasil

Year 2012 2013 2014 2015 2016 Total

Amounts to be amortized 2,610,354 2,292,432 1,913,742 1,461,845 1,237,429 9,515,802


92

13/02/2012 17:34

R$ thousand

BB-Consolidated

Year 2012 2013 2014 2015 2016 Total

Amounts to be amortized 2,654,541 2,336,621 1,957,931 1,506,034 1,280,897 9,736,024

17 – Deposits and Money Market Borrowing

a) Deposits

R$ thousand


12.31.2011 12.31.2010 12.31.2011 12.31.2010

Demand Deposits 60,371,172 63,295,580 62,016,372 63,502,759

Individuals 24,720,856 27,256,630 24,779,124 27,304,103

Companies 22,063,307 24,730,542 23,728,405 24,925,483

Restricted 6,522,029 5,232,546 6,528,126 5,219,078

Government 3,530,600 3,311,606 3,530,600 3,311,606

Related companies 864,420 468,532 811,726 469,831

Foreign currency 759,764 521,739 759,684 521,644

Special from Federal Treasury 702,242 805,562 702,242 805,562

Institutions of the financial system 625,785 364,871 594,732 342,328

Domiciled abroad 38,570 20,552 38,134 20,124

Other 543,599 583,000 543,599 583,000

Savings Deposits 100,109,839 89,287,840 100,109,839 89,287,840

Individuals 93,778,940 83,636,945 93,778,940 83,636,945

Companies 6,056,292 5,391,191 6,056,292 5,391,191

Related companies 257,435 251,709 257,435 251,709

Institutions of the financial system 17,172 7,995 17,172 7,995

Interbank Deposits 18,139,907 22,022,720 14,450,354 18,998,102

Time Deposits 250,183,824 193,670,882 265,808,991 204,652,146

National currency 153,957,218 109,697,944 164,801,983 120,397,640

Judicial 77,591,835 64,687,761 77,666,810 64,688,005

Foreign currency 10,018,819 8,483,755 14,724,246 8,765,079

Funds and programs – FAT (Note 17.e) 7,924,910 10,234,642 7,924,910 10,234,642

Funproger (Note 17.f) 147,175 111,968 147,175 111,968

Others 543,867 454,812 543,867 454,812

Deposits for Investments -- 409,746 -- 409,821

Total 428,804,742 368,686,768 442,385,556 376,850,668



b) Segregation of deposits by deadline chargeability

R$ thousand

Banco do Brasil

Without maturity

Up to 3 months

3 to 12 months

1 to 3 years

3 to 5 years

More than5 years

12.31.2011 12.31.2010

Time deposits (1) 87,500,594 12,403,765 15,310,208 66,035,573 68,921,269 12,415 250,183,824 193,670,882

Savings deposits 100,109,839 -- -- -- -- -- 100,109,839 89,287,840

Demand deposits 60,371,172 -- -- -- -- -- 60,371,172 63,295,580

Interbank deposits 328,259 9,666,685 6,247,087 1,655,698 232,928 9,250 18,139,907 22,022,720

Deposits for investments -- -- -- -- -- -- -- 409,746

Total 248,309,864 22,070,450 21,557,295 67,691,271 69,154,197 21,665 428,804,742 368,686,768


93

R$ thousand

BB-Consolidated

Without maturity

Up to 3 months

3 to 12 months

1 to 3 years

3 to 5 years

More than 5 years

12.31.2011 12.31.2010

Time deposits (1) 87,500,594 18,477,248 22,482,129 68,353,646 68,975,503 19,871 265,808,991 204,652,146

Savings deposits 100,109,839 -- -- -- -- -- 100,109,839 89,287,840

Demand deposits 62,016,372 -- -- -- -- -- 62,016,372 63,502,759

Interbank deposits 328,259 5,840,608 5,750,098 1,940,050 272,933 318,406 14,450,354 18,998,102

Deposits for investments -- -- -- -- -- -- -- 409,821

Total 249,955,064 24,317,856 28,232,227 70,293,696 69,248,436 338,277 442,385,556 376,850,668

(1) Includes the amounts of R$ 151,015,003 thousand, (R$ 72,371,360 thousand on 12.31.2010) at Banco do Brasil and R$ 156,117,461 thousand (R$ 82,387,902 thousand, on 12.31.2010 ) in BB-Consolidated, relating to term deposits with early repurchase clause (liquidity commitment), considering the original maturity dates established in the fundings.

c) Money market borrowing

R$ thousand


12.31.2011 12.31.2010 12.31.2011 12.31.2010

Own Portfolio 54,245,739 45,559,644 66,475,487 56,795,153


Corporate bonds 663,897 -- 10,966,500 8,834,614

National treasury notes 8,433,559 9,557,645 8,137,004 9,137,821

Securities abroad 2,376,421 729,051 2,805,225 736,193

National treasury bills 329,210 -- 2,431,697 2,677,992

Others -- -- 450,359 442,295

Third-Party Portfolio 125,956,513 80,699,183 128,695,556 84,080,296


National treasury bills 15,765,106 19,688,654 17,181,358 22,569,425

Securities abroad 3,218,920 2,335,240 3,209,680 2,335,240

National treasury notes 848,333 5,881,601 947,549 6,381,943

Subject to Repurchase Agreements with Free Movement

-- -- 4,233 1,299,506

Total 180,202,252 126,258,827 195,175,276 142,174,955


Non-current liability 8,052,259 5,869,643 10,249,172 7,922,326

d) Expenses with Money Market and Expenses borrowings with Deposits

R$ thousand


2nd Half 2011

2011 20102nd Half

20112011 2010

Expenses Borrowings with Deposits (16,554,452) (30,127,439) (21,602,404) (18,678,625) (33,353,564) (23,393,861)

Time deposits (8,583,656) (15,398,314) (10,301,408) (9,447,706) (17,037,407) (11,539,326)

Savings deposits (3,612,683) (6,908,451) (5,788,358) (3,612,683) (6,908,451) (5,788,358)

Demand deposits (2,769,987) (5,194,304) (4,010,190) (2,769,943) (5,194,063) (4,010,190)

Interbank deposits (521,337) (953,946) (806,337) (446,760) (808,227) (804,802)

Others (1,066,789) (1,672,424) (696,111) (2,401,533) (3,405,416) (1,251,185)

Expenses with Money Market Repurchase Commitments

(8,954,944) (17,664,283) (13,835,275) (10,062,604) (19,701,431) (15,362,497)

Third-party portfolio (7,207,861) (13,638,792) (10,714,533) (7,462,306) (14,132,852) (11,219,381)

Own portfolio (1,745,519) (4,023,843) (3,116,591) (2,498,147) (5,424,202) (4,079,803)

Subject to repurchase agreements with free movement

(1,564) (1,648) (4,151) (102,151) (144,377) (63,313)

Total (25,509,396) (47,791,722) (35,437,679) (28,741,229) (53,054,995) (38,756,358)


94

e) Fund for Workers’ Assistance (FAT)

R$ thousand

Program Resolution/

TADE (1)

Return of FAT funds 12.31.2011 12.31.2010

Type(2) Initial date

Final date

Available TMS (3)

TJLP Applied (4) Total

Available TMS (3)

TJLP Applied (4) Total

Proger Rural and Pronaf 372,533 2,635,836 3,008,369 269,114 4,223,643 4,492,757

Pronaf Custeio 04/2005 RA 11/2005 -- 7,571 31,489 39,060 36,963 73,351 110,314

Pronaf Investimento 05/2005 RA 11/2005 -- 250,326 1,809,716 2,060,042 84,368 2,581,667 2,666,035

Giro Rural – Aquisição de Títulos 03/2005 SD 01/2008 01/2014 -- 509,546 509,546 -- 1,019,428 1,019,428

Giro Rural Fornecedores 14/2006 RA 08/2006 -- 94,033 132,442 226,475 114,269 310,209 424,478

Rural Custeio 02/2006 RA 11/2005 -- 896 5,868 6,764 1,982 10,742 12,724

Rural Investimento 13/2005 RA 11/2005 -- 19,707 146,775 166,482 31,532 228,246 259,778

Proger Urbano 583,644 4,050,543 4,634,187 214,352 5,193,775 5,408,127

Urbano Investimento 18/2005 RA 11/2005 -- 235,207 4,042,844 4,278,051 169,514 4,686,928 4,856,442

Urbano Capital de Giro 15/2005 RA 11/2005 -- 346,717 4,460 351,177 38,804 485,761 524,565

Empreendedor Popular 01/2006 RA 11/2005 -- 1,720 3,239 4,959 6,034 21,086 27,120

Other 52,455 229,899 282,354 62,916 270,842 333,758

Exports 27/2005 RA 11/2005 -- 556 510 1,066 -- 2,145 2,145

Integrar Área Rural 26/2005 RA 11/2005 -- -- -- -- -- 18 18

Integrar Área Urbana 25/2005 RA 11/2005 -- 68 319 387 8,129 408 8,537

Inclusão Digital 09/2005 RA 11/2005 -- -- -- -- -- 10 10

FAT Giro Setorial Micro e Pequenas Empresas 08/2006 RA 09/2007 -- 526 48,800 49,326 17,183 31,748 48,931

FAT Giro Setorial Veículos MGE 09/2006 RA 02/2009 -- 100 118 218 1,666 4,367 6,033

FAT Giro Setorial Veículos MPE 08/2006 RA 02/2009 -- 3,505 3,844 7,349 19,033 50,005 69,038

FAT Fomentar Micro e Pequenas Empresas 11/2006 RA 08/2006 -- 1,173 7,958 9,131 1,394 12,391 13,785

FAT Fomentar Médias e Grandes Empresas 12/2006 RA 07/2006 -- 8,292 57,065 65,357 3,377 90,747 94,124

FAT Taxista 02/2009 RA 09/2009 -- 28,890 77,463 106,353 5,382 31,731 37,113

FAT Encargos a Capitalizar -- -- -- -- 9,345 33,822 43,167 6,752 47,272 54,024

Total 1,008,632 6,916,278 7,924,910 546,382 9,688,260 10,234,642

(1) TADE – Allocation Term of Special Deposits.

(2) RA - Auto Return (monthly, 2% on the balance) and SD - Available Balance.

(3) Funds remunerated by the Average Selic Rate (TMS).

(4) Funds remunerated by the Long Term Interest Rate (TJLP).


95

FAT is a special accounting and financial fund, established by Law 7998/1990, attached to the Ministry of Labor and Employment and managed by the Executive Council of the Workers’ Assistance Fund (Codefat). Codefat is a collective, tripartite, equal level organization, composed of representatives of workers, employers and government.

The main actions to promote employment using FAT funds are structured around the Programs for the Generating Employment and Earnings (Proger), whose resources are allocated through special deposits, established by Law 8352/1991, in official federal financial institutions (including, among others, Proger in the urban program - Investment and Working Capital - and rural program, the National Program for Strengthening Family Farming - Pronaf, the program that allocates resources for the purchase of construction materials - FAT Habitação (building material for popular housing), in addition to the special lines such as FAT Integrar – Rural e Urbano, FAT Giro Setorial – Micro e Pequenas Empresas (micro and small-sized companies), FAT Giro Setorial – Médias e Grandes Empresas (medium and large-sized companies), FAT Giro Setorial Veículos – Micro e Pequenas Empresas (micro and small-sized companies), FAT Giro Setorial Veículos – Médias e Grandes Empresas (medium and large-sized companies), FAT Fomentar – Micro e Pequenas Empresas (micro and small-sized companies), FAT Fomentar – Médias e Grandes Empresas (medium and large-sized companies), FAT Giro Agropecuário, FAT Inclusão Digital (digital inclusion) and FAT Taxista (taxi).

The FAT special deposits, allocated with Banco do Brasil, while available, incur interest on a daily pro rata basis using the Average Selic Rate. As they are applied on loans, the interest rate is changed to the Long-term Interest Rate during the effective period of the loans. The earnings on the Bank’s funds are paid to FAT on a monthly basis, as established in CODEFAT Resolutions 439/2005 and 489/2006.

f) Guarantee Fund for Generation of Employment and Earnings (Funproger)

The Guarantee Fund for Generation of Employment and Earnings (Funproger) is a special accounting fund established on November 23, 1999 by Law 9872/1999, amended by Law 10360/2001 and by Law 11110/2005 and regulated by Codefat Resolution 409/2004. It is managed by Banco do Brasil under the supervision of Codefat/MTE and the balance is R$ 147,175 thousand (R$ 111,968 thousand at 12.31.2010).

The objective of Funproger is provide guarantees to entrepreneurs who do not have the necessary guarantees of their own to contract Proger Urbano and Programa Nacional de Microcrédito Produtivo Orientado financing, through the payment of a commission. The net assets of Funproger are accumulated through funds arising from the difference between the Average Selic Rate and the Long-Term Interest Rate in respect of the remuneration of the special deposit balances available in FAT. Other sources of funds are the earnings from its operations and the income on its cash resources paid to Banco do Brasil, the fund manager.


96

13/02/2012 17:34

18 – Borrowings and Onlendings

a) Borrowings

R$ thousand

Banco do Brasil

up to 90 daysfrom 91 to

360 daysfrom 1 to 3

yearsfrom 3 to 5

yearsfrom 5 to 15

years12.31.2011 12.31.2010

Abroad

Borrowings from BB Group companies overseas

-- 273,434 13,635,263 -- -- 13,908,697 8,846,200

Borrowings from bankers abroad 2,496,959 5,132,654 708,898 60,672 -- 8,399,183 5,291,481

Public sector onlendings (1) -- 236,822 450,905 112,726 -- 800,453 914,401

Imports 77,394 139,790 105,210 42,819 603 365,816 318,861

Exports 3,762 7,234 -- -- -- 10,996 18,471

Total 2,578,115 5,789,934 14,900,276 216,217 603 23,485,145 15,389,414

Current liabilities 8,368,049 13,103,563

Non-current liabilities 15,117,096 2,285,851

R$ thousand

BB-Consolidated

up to 90 daysfrom 91 to

360 daysfrom 1 to 3

yearsfrom 3 to 5

yearsfrom 5 to 15

yearsTotal

12.31.201112.31.2010

Domestic

Borrowing from non financial companies

90,678 -- 22,676 -- -- 113,354 82,771

Others borrowings -- 1,969 1,891 3,780 -- 7,640 10,679

Abroad

Borrowings from bankers abroad 3,169,672 5,638,915 2,008,340 61,996 -- 10,878,923 7,179,761

Public sector onlendings (1) -- 236,822 450,905 112,726 -- 800,453 914,401

Exports 80,367 198,957 -- -- -- 279,324 178,092

Imports 43,972 44,623 63,082 25,329 374 177,380 231,970

Total 3,384,689 6,121,286 2,546,894 203,831 374 12,257,074 8,597,674



(1) Maturity date as of April 2015 and rate of 6.92% p.a.


97

b) Onlendings

Domestic – Official Institutions R$ thousand

Programs Financial chargesBanco do Brasil BB-Consolidated

12.31.2011 12.31.2010 12.31.2011 12.31.2010

National Treasury - Rural Credit 1,643,963 1,512,821 1,721,507 1,549,490

Pronaf TMS (if available) or

0.5% p.a. to 4.5% p.a. if applicable 1,424,918 1,274,161 1,424,918 1,274,161

Cocoa TJLP + 0.6% p.a. or 6.35% p.a. 103,007 47,678 103,007 47,678

Recoop 5.75% p.a. to 7.25% p.a. 96,511 117,353 96,511 117,353

Farming/livestock breeding

TR or TR + 9% p.a. -- 41,274 -- 41,274

Others -- 19,527 32,355 97,071 69,024

BNDES 27,227,981 24,937,764 28,978,454 26,978,427

Banco do Brasil S.A. 0.6305% p.a. to 14.1% p.a. or

TJLP/ exch. Var. + 0.5% p.a. to 5.9% p.a.27,227,981 24,937,764 27,227,981 24,937,764

Banco Votorantim Pre/TJLP/ exch. Var. + 0,9% p.a.

to 10.5% p.a. -- -- 1,750,473 2,040,663

Caixa Econômica Federal

-- 338,253 147,079 338,253 147,079

Finame 16,168,925 12,612,578 17,506,428 14,046,259

Banco do Brasil S.A.1% p.a. to 11% p.a. or

TJLP/ exch. Var. + 0.5% p.a. to 5.5% p.a.16,168,925 12,612,578 16,176,962 12,625,745

Banco Votorantim TJLP/Pre – 0.3% p.a. to 11.5% p.a. -- -- 1,329,466 1,420,514

Other Official Institutions -- 2,443,166 8,042,770 2,446,402 8,042,770

Special supply - Rural savings TR 1,991,552 7,399,212 1,991,552 7,399,212

Funcafé TMS (if available) or 6.75% p.a.

(if applicable) 451,475 643,419 451,475 643,419

Others 139 139 3,375 139

Total 47,822,288 47,253,012 50,991,044 50,764,025



Foreign R$ thousand


12.31.2011 12.31.2010 12.31.2011 12.31.2010

Funds obtained under the terms of Resolution CMN 3844/2010 286,931 525,663 101,876 96,658

Special fund for support to small and medium manufacturing companies - FAD 3

477 477 477 477

Total 287,408 526,140 102,353 97,135

Current liabilities 13,114 112,178 13,114 11,238

Non-current liabilities 274,294 413,962 89,239 85,897


98

c) Expense of Borrowings and Onlendings

R$ thousand


2nd Half 2011

2011 20102nd Half

20112011 2010

Cost of Borrowings (2,504,222) (2,562,073) (450,140) (2,487,478) (2,552,815) (344,932)

Expenses Onlendings (1,338,983) (2,554,297) (2,361,495) (1,437,477) (2,753,587) (2,534,100)

BNDES (869,675) (1,655,383) (1,428,209) (937,719) (1,785,195) (1,556,685)

Finame (340,632) (638,948) (573,591) (379,287) (716,019) (632,793)

National Treasury (31,632) (102,306) (170,672) (34,283) (105,569) (171,421)

Foreign (68,942) (68,942) (112,392) (58,086) (58,086) (96,570)

Caixa Econômica Federal (7,847) (11,552) (5,271) (7,847) (11,552) (5,271)

Others (20,255) (77,166) (71,360) (20,255) (77,166) (71,360)

Expenditure Obligations with Foreign Banks (1,107,293) (1,107,293) (125,370) (1,161,007) (1,163,094) (138,804)

Expenses for Financial and Development Liabilities (421,049) (648,696) (454,830) (421,049) (648,696) (454,830)

Total (5,371,547) (6,872,359) (3,391,835) (5,507,011) (7,118,192) (3,472,666)


99

13/02/2012 17:34 13/02/2012 17:34

19 – Resources from Securities Issues

R$ thousand

Borrowings CurrencyIssued Value

Remuneration p.a.Date of

FundingMaturity 12.31.2011 12.31.2010

Banco do Brasil Program Global Medium - Term Notes 5,198,652 2,964,545

R$ 350,000 9.75% 07/2007 07/2017 352,199 332,768USD 100,000 Libor 6m+2.55% 07/2009 07/2014 188,595 159,776USD 950,000 4.5% 01/2010 01/2015 1,819,507 1,617,034USD 500,000 6% 01/2010 01/2020 957,919 854,967EUR 750,000 4.5% 01/2011 01/2016 1,880,432 --

Senior Notes USD 500,000 3.87% 11/2011 01/2017 934,260 --

Certificates of Deposits - Long Term 1,795,894 2,286,150USD 4,000 3.8% 11/2009 11/2012(1) -- 6,662USD 1,000 3.67% 12/2009 12/2012(1) -- 1,665USD 99,000 3.03% 01/2010 01/2013(1) -- 164,875USD 100,000 2.88% 01/2010 01/2013(1) -- 166,540USD 2,000 3.19% 05/2010 05/2013 3,750 3,331USD 200,000 3.34% 08/2010 06/2012(1) -- 332,990USD 100,000 2.67% 08/2010 07/2012(1) -- 164,918USD 5,000 2.69% 08/2010 06/2012(1) -- 8,251USD 100,000 2.5% 08/2010 08/2012(1) -- 164,830USD 10,000 3.4% 08/2010 08/2016(1) -- 16,548USD 200,000 2.12% 08/2010 03/2013(1) -- 328,041USD 100,000 2.34% 09/2010 08/2012(1) -- 164,807USD 4,806 2.02% 09/2010 09/2012(1) -- 8,003USD 30,000 2.48% 09/2010 09/2013(1) -- 49,962USD 150,000 2.07% 10/2010 10/2012(1) -- 246,800USD 100,000 2.92% 11/2010 10/2012(1) -- 166,482USD 25,000 2.2% 11/2010 11/2012(1) -- 41,635USD 150,000 2.63% 12/2010 12/2013(1) -- 249,810USD 100,000 2.78% 01/2011 01/2013 187,510 --USD 99,000 2.87% 02/2011 01/2013 185,635 --USD 100,000 2.72% 03/2011 03/2013 187,441 --USD 200,000 2.02% 03/2011 03/2013 371,867 --USD 10,000 3% 08/2011 08/2016 18,652 --USD 30,000 2.55% 09/2011 09/2013 56,253 --USD 233,900 2.25% 10/2011 02/2014 438,586 --USD 25,630 1.95% 11/2011 02/2013 48,059 --USD 2,000 2.48% 12/2011 06/2013 3,750 --USD 150,000 2.93% 11/2011 12/2013 281,265 --USD 2,000 1.79% 12/2011 04/2014 3,750 --USD 5,000 1.74% 12/2011 04/2013 9,376 --

Certificates of Deposits - Short Term(2)4,128,590 1,289,609

Certificate of Loan EUR 3,500 3 a 3.31% -- 7,816

Resources Letters of Credit Agribusiness 6,595,550 275,445Short Term R$ 1,095,276 275,445Long Term(3) R$ 5,500,667 --Issuance costs R$ (393) --

Letters of Credit 3,486,743 207,994

Total Banco do Brasil 22,139,689 7,031,559

Banco Patagonia 99,481 --Bonds G PAT Series I ARS 50,000 14.30% 03/2011 03/2012 19,648 --Bonds G PAT Series II ARS 94,310 14.12% 05/2011 05/2012 28,287 --Bonds G PAT Series III ARS 71,000 15.27% 08/2011 08/2012 31,886 --Bonds G PAT Series IV ARS 50,200 23.87% 11/2011 11/2012 19,660 --

Special Purpose Entities Abroad(4)

Securitization of future flow of payment orders from abroad

USD 250,000 6.55% 12/2003 12/2013 156,772 202,361

USD 250,000 Libor 3m+0.55% 03/2008 03/2014 422,116 416,517

USD 200,000 Libor 3m+1.2% 09/2008 09/2015 280,310 315,303

USD 150,000 5.25% 04/2008 06/2018 281,962 250,429Total Special Purpose Entities Abroad 1,141,160 1,184,610


100

R$ thousand

Borrowings CurrencyIssued Value

Remuneration p.a.Date of

FundingMaturity 12.31.2011 12.31.2010

Banco Votorantim Debentures 1,565,574 1,506,785With exchange variation R$ PTAX+12.04% 12/2006 12/2011 -- 783,564Post-fixed R$ 0.35% DI 06/2006 07/2012 809,898 723,221Post-fixed R$ DI 04/2011 07/2016 755,676 --

Real Estate Receivables Certificates 87 a 95.5% DI 02/2009 01/2012 3,490 2,316

Letters of Credit - Agribusiness 825,979 894,759Post-fixed 45 a 96.5% DI 08/2007 03/2020 817,712 894,759Pre-fixed 11.86 a 12.35% 05/2008 04/2013 8,267 --

Letters of Credit 3,572,168 1,303,480Pre-fixed 10.9 a 14% 07/2010 02/2015 28,443 6,822Post-fixed 100 a 112% DI 07/2010 07/2017 3,446,800 1,296,658Post-fixed 108 a 109%Selic 02/2011 02/2013 25,625 --Post-fixed 4.5 a 7.81% +IPCA 01/2011 09/2014 69,980 --Post-fixed 5.05 a 5.99%+IGPM 08/2011 09/2013 1,320 --

Program Global Medium – Term Notes 2,966,110 1,441,671Short-Term(5) 73,118 478,224

Long-Term 2,892,992 963,447

R$ 100,000 9.25% 12/2005 12/2012 44,476 81,296USD 100,000 3.91% 09/2006 09/2016 89,691 80,532R$ 100,000 10.62% 04/2007 04/2014 104,721 103,606USD 250,000 4.25% 02/2010 02/2013 471,976 423,680USD 37,500 4.25% 04/2010 02/2013 71,329 57,637CHF 125,000 2.75% 12/2010 12/2013 255,268 216,696USD 2,318 3.02% 02/2011 02/2016 2,236 --USD 625,000 5.25% 02/2011 02/2016 1,189,180 --USD 37,500 3% 03/2011 03/2014 68,159 --USD 1,876 4.27% 04/2011 03/2014 1,884 --USD 938 3.18% 05/2011 05/2016 890 --R$ 10,000 14.19% 05/2011 01/2015 17,368 --R$ 309,253 6.25% 05/2011 05/2016 518,959 --USD 29,800 3.5% 07/2011 07/2013 56,855 --

Total Banco Votorantim 8,933,321 5,149,011

Non-Financial CorporationsCibrasec Real Estate Receivables Certificates (6) 5,577 7,233Kepler Weber S.A. Debentures R$ TJLP+3.8% 09/2007 09/2020 15,195 17,977Ativos S.A. Securitizadora de Créditos Financeiros Debentures R$ DI + 1.5% 03/2010 03/2014 68,053 98,294

Total Non-Financial Corporations 88,825 123,504

Eliminated Amount on Consolidation (7) (79,185) (2,577)

Total BB-Consolidated 32,323,290 13,486,107

Current liabilities 15,246,923 2,621,208Non-current liabilities 17,076,367 10,864,899

(1) Operations settled in advance during the year 2011.

(2) Securities maturing in less than 360 days and interest rates of the certificate issued in U.S. dollars between 0.35% p.a. and 3.8% p.a.

(3) Operations period between 361 and 720 days.

(4) The Special Purpose Entity (SPE) - "Dollar Diversified Payment Rights Finance Company" was organized under the laws of the Cayman Islands for the following purposes: (a) the issuance and sale of securities in the international market, (b) use of resources obtained by issuing securities to pay for the purchase, with the BB, the rights to payment orders issued by banking correspondents located in the U.S. and by the agency of BB New York in U.S. dollars, for any agency for Brasil ( "Rights on Consignment"); and (c) making payments of principal and interest on securities and other payments payable on the issuance of these securities. The SPE declares that it has no relevant asset or liability other than the rights and duties originating from the contracts for issue of securities. Bank does not hold the control, is not a shareholder, the owner, or is a beneficiary of any of the results of operations of the SPE. The liabilities arising from the issued securities are paid by the SPE using the funds accumulated in its account.

(5) Securities with a maturity of less than 360 days, foreign currency and national, and interest rates between 3.98% p.a. and 30.59% p.a.

(6) Reference Rate - TR, General Market Price Index - IGP-M, IPCA and average maturity of 110 months.

(7) Refers to securities issued by BB-Consolidated, in possession of subsidiary abroad.


101

20 – Other Liabilities

a) Financial and Development Funds

R$ thousand


12.31.2011 12.31.2010 12.31.2011 12.31.2010

PIS/Pasep 1,983,929 2,027,901 1,983,929 2,027,901

Merchant Navy 1,352,310 901,393 1,352,310 901,393

Funds from the State Government of São Paulo 563,911 516,424 563,911 516,424

Special Lending Program for Agrarian Reform – Procera 27,705 36,634 27,705 36,634

Consolidation of Family Farming – CAF 26,424 36,181 26,424 36,181

Combating Rural Poverty – Our First Land – CPR/NPT 6,405 2,957 6,405 2,957

Land and Agrarian Reform – BB Banco da Terra 1,812 2,237 1,812 2,237

Others 39,759 44,660 39,759 44,660

Total 4,002,255 3,568,387 4,002,255 3,568,387



b) Taxes and Social Security

R$ thousand


12.31.2011 12.31.2010 12.31.2011 12.31.2010

Legal liabilities (Note 28.e) 12,754,899 12,241,776 13,516,326 12,942,257

Deferred tax liabilities (Note 25.d) 6,090,342 4,733,093 7,095,787 5,907,382

Taxes and contributions on net income payable 2,705,225 4,748,986 3,476,176 5,257,069

Provision for tax litigation (Note 28.b) 164,943 195,377 1,400,444 1,260,923

Taxes payable 796,747 771,502 1,290,897 1,181,390

Provision for taxes and contributions on net income 93,045 83,766 961,808 750,904

Others 316,399 316,399 315,254 313,194

Total 22,921,600 23,090,899 28,056,692 27,613,119



13/02/2012 17:34:00 13/02/2012 17:34:00


102

c) Subordinated Debt

R$ thousand

Funding Issued Value

Remuneration p.a.

Date of Funding

Maturity 12.31.2011 12.31.2010

Banco do BrasilFCO – Resources from Fundo Constitucional do Centro-Oeste

14,771,005 13,455,864

Funds applied(1) 13,811,498 11,751,006Resources available (2) 924,167 1,492,488Charges to capitalize 35,340 212,370Subordinated CDB Issued in the Country 4,305,067 3,807,875

900,000 113.8% from CDI 03/2009 09/2014 1,227,011 1,082,8441,335,000 115% from CDI 03/2009 03/2015 1,823,569 1,607,1901,000,000 105% from CDI 11/2009 11/2015 1,254,487 1,117,841

Subordinated Debt Abroad 4,683,538 1,614,119USD thousand 300,000 8.5% 09/2004 09/2014 576,210 500,519USD thousand 660,000 5.375% 10/2010 01/2021 1,260,310 1,113,600USD thousand 1,500,000 5.875% 05/2011 01/2022 2,847,018 --

Subordinated Letters of Credit 3,429,443 1,082,7641,000,000 108.5% from CDI 03/2010 03/2016 1,219,800 1,082,7641,006,500 111% from CDI 03/2011 03/2017 1,107,259 --

335,100 111% from CDI 04/2011 04/2017 366,864 --13,500 111% from CDI 05/2011 05/2017 14,627 --

700,000 111% from CDI 09/2011 10/2017 720,893 --Total Subordinated Debt from Banco do Brasil 27,189,053 19,960,622

Banco VotorantimSubordinated CDB Issued in the Country 1,544,061 1,631,268

312,500 CDI+0.491417% 11/2007 11/2012 486,988 434,2288,500 CDI+0.491417% 12/2007 12/2012 13,223 11,791

200,000 (3) CDI+0.540556% 12/2007 12/2012 12,359 277,83832,500 IGPM+7.219701% 12/2007 12/2012 55,718 49,36057,500 IPCA+7.934241% 03/2008 03/2013 94,825 82,321

7,500 IPCA+7.855736% 08/2009 08/2014 10,269 8,9215,250 IPCA+7.924428% 08/2009 08/2014 7,199 6,250

19,500 IPCA+8.002932% 08/2009 08/2014 26,787 23,2392,500 IPCA+7.953867% 08/2009 08/2014 3,429 2,976

260,000 CDI+1.670229% 08/2009 08/2014 342,697 301,977250,000 CDI+1.635268% 12/2009 12/2014 318,518 280,768135,000 CDI+1.674668% 12/2009 12/2014 172,049 151,599

Subordinated Note USD thousand 575,000 7.38% 01/2010 01/2020 1,099,873 942,842Subordinated Letters of Credit 1,054,722 152,483

1,000 IPCA+6.88494% 11/2010 11/2016 -- 1,0205,000 IPCA+7.25% 11/2010 11/2020 5,422 5,0855,000 IPCA+7.2% 11/2010 11/2016 -- 5,076

15,000 IPCA+7.1% 11/2010 11/2016 -- 15,29494,950 CDI+1.3% 11/2010 11/2016 95,964 95,98230,000 CDI+1.6% 12/2010 12/2016 30,042 30,026

324,900 CDI+1.94% 05/2011 05/2017 329,887 --35,550 IGPM+7.420494% 05/2011 05/2017 38,042 --

1,400 IPCA+7.626766% 05/2011 05/2017 1,510 --4,650 IPCA+7.713512% 05/2011 05/2017 5,020 --7,500 IPCA+7.95% 05/2011 05/2017 8,079 --

45,000 IPCA+7.95% 07/2011 07/2016 47,648 --15,000 IGPM+7.7% 07/2011 07/2017 15,813 --

6.922 IPCA+8.02% 07/2011 07/2019 7,300 --25,000 IPCA+7.9% 08/2011 08/2016 26,420 --25,000 IPCA+7.93% 08/2011 08/2017 26,352 --20,000 IPCA+7.76% 08/2011 08/2017 21,002 --11,000 IPCA+7.85% 08/2011 08/2017 11,581 --10,050 IGPM+7.7% 08/2011 08/2017 10,571 --

1,250 115% from CDI 08/2011 08/2017 1,317 --33,000 117% from CDI 09/2011 09/2017 34,034 --15,000 IGPM+6.74% 09/2011 09/2017 15,525 --

250,000 119% from CDI 10/2011 10/2017 256,467 --215 IPCA+5.45% 10/2011 10/2014 220 --

18,000 IGPM+6.71% 10/2011 10/2017 18,454 --17,116 IPCA+7% 11/2011 11/2016 17,392 --25,000 109% from CDI 11/2011 12/2013 25,247 --

5,349 IPCA+7.2% 11/2011 11/2016 5,413 --Debentures 693,575 CDI+0.5% 04/2006 04/2016 -- 725,538Total Subordinated Debt from Banco Votorantim 3,698,656 3,452,131

Subordinated debt issued by the Banco do Brasil, in the possession of subsidiary abroad, eliminated in the BB-Consolidated (3,026) (637)Total Subordinated Debt from BB-Consolidated (4) 30,884,683 23,412,116

(1) Contracted charges are paid by borrowers, with less the del credere financial institution, according to article 9 of Law n.º 7,827/1989.

(2) Remunerated based on extra-rate announced by the Central Bank of Brazil (Bacen), according to article 9 of Law n.º 7,827/1989.

(3) The amount of R$ 192,071 thousand from the issued value was settled in the twelve months ended in December 2011.

(4) The amount of R$ 24,522,493 thousand (R$ 18,738,173 thousand on 12.31.2010) compose the level II of the Referential Equity (RE), in conformity with CMN Resolution n.º 3,444/2007. As determined by Bacen, subordinated debts issued by Banco Votorantim do not compose the Bank’s RE (Note 29.f).


103

d) Capital and Debt Hybrid Instruments

R$ thousand

Funding

Banco do Brasil and BB-Consolidated

Issued Value (USD thousand)

Remuneration p.a.

Date of Funding

12.31.2011 12.31.2010

Perpetual Bonuses

500,000 7.95% 01/2006 -- 911,750

1,500,000 8.5% 10/2009 2,848,001 2,459,533

Total Banco do Brasil 2,000,000 2,848,001 3,371,283

Values eliminated in the BB-Consolidated (2,209) (9,890)

Total BB-Consolidated 2,845,792 3,361,393

Current liabilities 48,479 55,746


The amount of R$ 2,718,895 thousand of Perpetual Bonuses compose the level I of the Referential Equity (R$ 2,414,830 thousand and R$ 816,046 thousand in 12.31.2010, respectively, the level I and the level II of Referential Equity), in conformity with CMN Resolution n.º 3,444/2007 (Note 29.f).

The Bank settled, in January 2011, the USD 500,000 thousand bonus, issued in January 2006, through the exercise of the redemption option provided in the operation.

The bonus of USD 1,500,000 thousand, issued in October 2009, has the option of redemption at the initiative of the Bank from 2020 or on each twice yearly payment of interest thereafter, provided by prior authorization of Bacen. If the Bank does not exercise the option to redeem in October 2020, the interest on the bonds will be fixed on this date for 7.782% over the trading price of 10 years North American Treasury bonds. Thereafter, every 10 years, the interest on the bonds will be corrected by taking into account the trading price of 10 years North American Treasury bonds. The terms of Perpetual Bonuses determine that the Bank suspend the twice yearly payments of interest and/or accessories on those securities issued (which shall not be paid or accrued) if:

(i) the Bank is not framed or the payment of such charges do not allow the Bank is in accordance with the levels of capital adequacy, operational limits or its financial indicators are below the minimum level required by the rules applicable to Brazilian banks;

(ii) Bacen or the regulatory authorities determine the suspension of payments of such charges; (iii) any event of insolvency bankruptcy occurs; (iv) any default occurs; or (v) the Bank has not distributed dividend payments or interest on equity to common

shareholders for the period corresponding to the period of calculation of such interest and/or accessories.


104

e) Sundry

R$ thousand


12.31.2011 12.31.2010 12.31.2011 12.31.2010

Credit/debit card operations 11,641,835 10,420,831 11,641,835 10,420,831

Actuarial liabilities (Note 27.d) 7,141,907 6,906,736 7,141,907 6,906,736

Provisions for payments 3,349,150 3,102,822 4,657,605 3,707,256

Sundry creditors – domestic 1,562,062 1,893,896 3,838,316 3,698,337

Provisions for civil claims (Note 28.b) 3,244,433 3,464,569 3,473,970 3,594,694

Provision for labor claims (Note 28.b) 2,340,058 2,462,390 2,514,536 2,538,036

Funds bounded to credit operations 628,848 716,859 1,093,251 1,179,658

Obligations for premiums granted by the customer loyalty 1,240,521 1,088,368 1,240,521 1,088,368

Liabilities for purchase of properties and rights 995,920 465,922 1,004,336 467,917

Liabilities for official agreements 727,697 756,351 727,697 756,351

Liabilities for payment services 688,304 389,253 688,304 389,253

Sundry creditors – overseas 31,485 142,065 350,447 150,779Provision for losses with Compensation Fund of Salaries Variations – FCVS 204,118 289,274 204,118 289,274

Provisions for guarantees provided 111,760 82,230 115,624 85,510

Contracts of assumption of liabilities – securitization (Note 20.f) -- 35,869 -- 35,869

Others 503,873 287,784 528,740 355,347

Total 34,411,971 32,505,219 39,221,207 35,664,216



f) Securitization

R$ thousand

Funding

Banco do Brasil and BB-Consolidated

Issued Value (USD thousand)

Remuneration p.a.

Date of Funding

Maturity 12.31.2011 12.31.2010

Future flow of credit/debit card invoice receivables

178,474 5.911% 07/2003 06/2011 -- 28,822

44,618 4.777% 07/2003 06/2011 -- 7,047

Total 223,092 -- 35,869

The Special Purpose Entity (SPE) "Brazilian Merchant Voucher Receivables" was created under the laws of the Cayman Islands with the following purposes:

(a) issue and sell securities in the international market; (b) use of funds raised with the issue of securities to pay for the purchase of current and future

rights of Cielo S.A. against Visa International Service Association over the receivables arising from: (i) credit or debit purchases made in Brazilian territory, in any currency processed by

Cielo, with Visa cards, issued by financial institutions located outside of Brazil; or (ii) credit or debit purchases processed by Cielo in foreign currency and made with Visa

cards issued by financial institutions located in Brazil; and (c) payments of principal and interest with regard to securities and other payments provided in

the agreements covering the issue of such securities.

The Bank is the beneficiary of 44.618488% of the funds, calculated based on the equity interest held in Cielo, on the issuing date, and the remaining funds made available to the other Brazilian financial institution which holds interest in Cielo. The SPE declares that it has no relevant asset or liability other than the rights and duties originating from the contracts for issue of securities. The Bank is not a shareholder, the owner, or is a beneficiary of any of the results of operations of the SPE. The liabilities arising from the issued securities are paid by the SPE using the funds accumulated in its account.


105

13/02/2012 17:34

21 – Operations of insurance, pension and capitalization

a) Operation credits

R$ thousand

BB-Consolidated 12.31.2011 12.31.2010

Direct insurance premiums receivable 1,244,809 977,155

Credit insurance business with insurers 58,944 7,097

Credit insurance transactions with reinsurers 435,023 122,771

Credit reinsurance pension 2,732 1,547

Total 1,741,508 1,108,570

Current assets 1,738,997 1,086,548

Non-current assets 2,511 22,022

b) Technical provisions

R$ thousand

BB-Consolidated 12.31.2011 12.31.2010

Insurance 4,121,294 2,712,682

Provision for unearned premiums 2,227,821 1,465,400

Provision for unsettled claims 1,310,803 888,751

Incurred but not reported 337,402 181,251

Provision for insufficiency of premiums 147,830 139,403

Mathematical provision for future benefits 6,273 4,173

Other provisions 91,165 33,704

Pension plan 37,576,720 27,567,107

Mathematical provision for future benefits 35,590,671 25,858,592

Mathematical provision for vested benefits 774,039 643,665

Provision for financial surplus 418,493 395,635

Provision for insufficiency of contributions 359,213 301,435

Provision for financial fluctuation 260,514 254,698

Mathematical provision for redemptions 63,852 42,183

Provision for insufficiency of premiums 34,123 31,371

Incurred but not reported 7,464 6,065


Capitalization 3,324,923 2,089,626

Mathematical provision for redemptions 3,160,764 2,028,909

Provision for prize draws and redemptions 113,227 35,256


Total 45,022,937 32,369,415




106

c) Technical provisions by product

R$ thousand

BB-Consolidated 12.31.2011 12.31.2010

Insurance 4,121,294 2,712,682

Auto 1,053,107 1,067,363

Life 1,614,310 857,975

Property/casualty 1,261,397 676,712

Dpvat 192,480 110,632

Pension plan 37,576,720 27,567,107

Free benefit generating plan - PGBL 12,519,440 9,858,613

Living benefits life insurance - VGBL 19,902,250 13,083,869

Traditional plans 5,155,030 4,624,625

Capitalization 3,324,923 2,089,626

Total 45,022,937 32,369,415


107

d) Guarantee of technical provisions

R$ thousand

BB-Consolidated 12.31.2011 12.31.2010

Insurance Pension plan Capitalization Total Insurance Pension plan Capitalization Total

Shares in Investment Funds (VGBL and PGBL) -- 32,110,668 -- 32,110,668 -- 22,693,391 -- 22,693,391

Shares in Investment Funds (except VGBL and PGBL) 2,062,447 3,888,047 2,055,333 8,005,827 1,464,706 3,387,192 1,386,313 6,238,211

Federal Government securities 1,305,715 1,891,871 433,098 3,630,684 814,204 1,788,979 283,944 2,887,127

Corporate bonds 431,318 25,218 944,228 1,400,764 239,104 27,523 498,339 764,966

Credit rights 637,575 -- 88,693 726,268 578,124 -- 25,326 603,450

Property 12,330 -- -- 12,330 1,709 -- -- 1,709

Deposits held at IRB and deposits in court 4,234 -- -- 4,234 96 -- -- 96

Total 4,453,619 37,915,804 3,521,352 45,890,775 3,097,943 27,897,085 2,193,922 33,188,950

e) Financial and operational results per segment

R$ thousand

BB–Consolidated 2nd Half 2011 2011 2010

Insurance Pension plan Capitalization Total Insurance Pension plan Capitalization Total Insurance Pension plan Capitalization Total

Financial Income 238,487 1,005,357 213,083 1,456,927 423,569 1,699,334 340,904 2,463,807 293,203 1,507,344 224,470 2,025,017

Financial revenues 283,719 1,860,172 213,949 2,357,840 495,678 3,064,007 343,158 3,902,843 318,275 2,343,104 224,989 2,886,368

Financial expenses (45,232) (854,815) (866) (900,913) (72,109) (1,364,673) (2,254) (1,439,036) (25,072) (835,760) (519) (861,351)


(29,151) (879,020) (110,265) (1,018,436) (45,330) (1,431,745) (183,756) (1,660,831) (33,888) (1,274,169) (124,629) (1,432,686)

Operating results 886,937 115,765 82,736 1,085,438 1,977,950 137,227 149,800 2,264,977 1,813,850 (18,695) 92,567 1,887,722

Retained premiums and contribution (Note 21.f)

2,474,000 4,464,678 1,150,817 8,089,495 4,758,355 9,051,576 1,931,345 15,741,276 3,596,849 7,274,269 1,365,310 12,236,428

Change in technical provisions (158,156) (4,243,581) (17,749) (4,419,486) (314,944) (8,758,582) (33,913) (9,107,439) (271,844) (7,201,321) (21,703) (7,494,868)

Retained claims (1,122,291) -- -- (1,122,291) (2,104,517) -- -- (2,104,517) (1,447,625) -- -- (1,447,625)

Selling expenses (306,616) (90,442) (46,809) (443,867) (360,944) (126,459) (77,941) (565,344) (63,530) (55,665) (77,348) (196,543)

Expenses with prize draws and redemptions of financial bonds

-- -- (1,003,523) (1,003,523) -- -- (1,669,691) (1,669,691) -- -- (1,173,692) (1,173,692)

Expenses with benefits and redemptions of pension plans

-- (14,890) -- (14,890) -- (29,308) -- (29,308) -- (35,978) -- (35,978)

Total 1,096,273 242,102 185,554 1,523,929 2,356,189 404,816 306,948 3,067,953 2,073,165 214,480 192,408 2,480,053


108

f) Retained insurance premiums, pension plan contributions and capitalization certificates

R$ thousand

BB–Consolidado 2nd Half 2011 2011 2010

Insurance Pension plan Capitalization Total Insurance Pension plan Capitalization Total Insurance Pension plan Capitalization Total

Premiums issued (VGBL retirement) 2,948,755 3,462,701 -- 6,411,456 5,354,295 7,283,078 -- 12,637,373 3,898,020 5,692,167 -- 9,590,187

Supplementary pension contributions (includes VGBL risk portion)

-- 1,017,601 -- 1,017,601 -- 1,801,338 -- 1,801,338 -- 1,616,927 -- 1,616,927

Revenues from capitalization certificates -- -- 1,150,817 1,150,817 -- -- 1,931,345 1,931,345 -- -- 1,365,310 1,365,310

Coinsurance premiums ceded (103,247) -- -- (103,247) (119,991) -- -- (119,991) (10,324) -- -- (10,324)

Reimbursed premiums (return of VGBL contribution)

(9,033) (15,624) -- (24,657) (17,416) (32,840) -- (50,256) (11,454) (34,825) -- (46,279)

Premiums issued net (premium issued - premium reimbursed) and supplementary pension contributions

2,836,475 4,464,678 1,150,817 8,451,970 5,216,888 9,051,576 1,931,345 16,199,809 3,876,242 7,274,269 1,365,310 12,515,821

Reinsurance premiums ceded, consortiums and funds

(362,475) -- -- (362,475) (458,533) -- -- (458,533) (279,393) -- -- (279,393)

Retained insurance premiums, pension plans and capitalization

2,474,000 4,464,678 1,150,817 8,089,495 4,758,355 9,051,576 1,931,345 15,741,276 3,596,849 7,274,269 1,365,310 12,236,428


109

13/02/2012 17:34 22 – Other Operating Income/Expenses

a) Service Fee Income

R$ thousand


2nd Half 2011

2011 20102nd Half

20112011 2010

Income from cards 965,583 1,657,135 1,297,342 1,835,478 3,296,989 2,648,548

Fund Management 859,739 1,649,996 1,400,513 1,516,295 3,040,218 2,672,101

Billing 622,079 1,221,741 1,192,126 634,796 1,241,237 1,196,552

Collection 377,958 725,241 614,399 377,958 725,241 614,399

Interbank 336,482 639,994 549,423 336,482 639,994 549,423

Insurance, pension and capitalization 237,432 499,083 431,533 237,432 499,083 431,533

National Treasury and management of official funds 312,448 412,136 234,588 312,448 412,136 234,588

Loans and guarantees provided 168,123 299,635 265,219 205,272 370,772 337,238

Account fees 184,748 361,580 345,686 186,144 363,788 347,663

Brokerage and custody 9,959 20,648 22,086 171,642 349,516 438,227

By non-financial associated companies -- -- -- 161,479 324,071 612,659

Consortium administration fees -- -- -- 111,545 201,972 112,813

Provided to the related 238,506 453,280 373,020 44,153 123,975 182,485

Other services 174,438 332,633 345,794 381,619 624,295 398,416

Total 4,487,495 8,273,102 7,071,729 6,512,743 12,213,287 10,776,645

b) Bank Fee Income

R$ thousand


2nd Half 2011

2011 20102nd Half

20112011 2010

Service package 1,763,083 3,243,848 2,922,422 1,763,908 3,245,485 2,923,390

Loans and registration file 607,295 1,092,874 971,548 775,478 1,451,406 1,372,311

Income from cards 238,366 616,769 657,693 245,723 629,066 657,693

Deposit account 145,393 293,672 296,249 145,662 294,076 296,470

Transfer of funds 92,003 168,875 145,590 94,336 173,413 146,031

Management of Investment Funds -- -- -- 156,927 157,033 --

Others 29,847 36,157 -- 51,652 77,810 --

Total 2,875,987 5,452,195 4,993,502 3,233,686 6,028,289 5,395,895

c) Personnel Expenses

R$ thousand


2nd Half 2011

2011 20102nd Half

20112011 2010

Salaries (3,329,519) (6,310,077) (5,671,244) (3,791,147) (7,117,073) (6,176,891)

Social charges (1,160,904) (2,177,070) (2,023,821) (1,320,050) (2,455,755) (2,210,932)

Personnel provisions (1,068,283) (2,019,056) (1,719,096) (1,068,283) (2,019,056) (1,719,096)

Benefits (915,866) (1,750,454) (1,639,565) (1,007,659) (1,911,015) (1,760,321)

Provisions for labor claims (674,381) (969,096) (776,090) (675,511) (969,096) (776,090)

Supplementary pension (162,376) (297,787) (228,247) (166,071) (305,754) (235,354)

Training (43,402) (65,113) (76,715) (50,606) (76,566) (85,669)

Directors’ fees (11,471) (21,986) (20,582) (30,800) (58,260) (55,238)

Total (7,366,202) (13,610,639) (12,155,360) (8,110,127) (14,912,575) (13,019,591)


110

d) Other Administrative Expenses

R$ thousand


2nd Half 2011

2011 20102nd Half

20112011 2010

Amortization (1,180,301) (2,323,773) (2,275,378) (1,198,617) (2,363,293) (2,307,282)

Communications (651,122) (1,245,217) (1,181,377) (712,744) (1,354,235) (1,269,841)

Expenses with Outsourced Services (642,320) (1,211,324) (1,077,466) (676,203) (1,294,143) (1,206,846)

Depreciation (472,770) (931,355) (861,319) (501,605) (980,310) (889,235)

Transport (452,587) (814,798) (702,215) (476,143) (857,868) (738,927)

Security services (387,735) (747,377) (668,699) (398,465) (763,813) (673,038)

Rent (325,662) (601,296) (520,736) (395,370) (734,522) (629,734)

Specialized technical services (120,998) (217,125) (219,196) (373,469) (679,824) (633,885)

Data processing (481,505) (903,392) (1,006,867) (337,803) (667,731) (1,077,662)

Financial system services (252,520) (493,813) (513,155) (341,644) (661,529) (629,219)

Litigation (298,534) (559,204) (703,305) (301,970) (562,656) (703,305)

Maintenance and upkeep (244,271) (452,339) (369,048) (272,990) (499,907) (391,499)

Advertising and publicity (159,997) (304,457) (278,514) (237,463) (420,337) (375,994)

Water, electricity and gas (169,236) (341,729) (324,776) (176,820) (355,222) (333,101)

Advertising and public relations (134,404) (224,202) (190,577) (157,095) (263,049) (233,015)

Domestic travel (81,433) (154,085) (133,317) (98,809) (186,366) (160,430)

Materials (62,970) (124,683) (118,704) (72,380) (140,115) (126,334)

Others (223,161) (377,866) (427,506) (358,846) (637,500) (660,622)

Total (6,341,526) (12,028,035) (11,572,155) (7,088,436) (13,422,420) (13,039,969)

e) Other Operating Income

R$ thousand


2nd Half 2011

2011 20102nd Half

20112011 2010

Previ – Restatement of Acturial Assets (Note 27.c) 1,061,209 2,981,314 4,299,199 1,061,209 2,981,314 4,299,199

Equalization of rates - harvest 1,372,222 2,487,737 2,444,924 1,372,222 2,487,737 2,444,924

Restatement of guarantee deposits 777,174 1,500,521 1,209,535 777,174 1,500,521 1,209,535

Update on allocation of surplus funds – Plan 1 (Note 27.e)

449,630 1,014,421 280,994 449,630 1,014,421 280,994

Readjustment negative exchange / reclassification of balances

-- 567,937 590,444 159,907 957,415 916,264

Recovery of charges and expenses 450,454 866,046 1,035,560 380,860 796,989 1,720,470

Reversal of provisions - Labor, civil and tax claims 352,858 569,529 850,328 352,858 569,529 850,328

Credit card transactions 220,675 332,548 194,082 220,994 333,434 194,082

Administrative expenses - Reversal of provisions 116,352 175,622 126,845 116,352 175,622 126,845

Dividends received 11,719 27,150 51,964 11,719 27,150 51,964

Personnel expenses - Reversal of provisions 8,781 13,379 131,754 8,781 13,379 131,754

Others 627,814 1,248,664 789,093 1,075,877 2,120,048 1,561,766

Total 5,448,888 11,784,868 12,004,722 5,987,583 12,977,559 13,788,125


111

f) Other Operating Expenses

R$ thousand


2nd Half 2011

2011 20102nd Half

20112011 2010

Premiums paid to clients (774,854) (1,446,841) (792,226) (774,854) (1,446,841) (792,226)

From non-financial associated companies -- -- -- (703,257) (1,442,557) (1,196,221)

Credit/debit card transactions (700,433) (1,260,254) (875,507) (700,433) (1,260,254) (875,507)

Readjustment negative exchange/reclassification of balances

-- (798,957) (612,030) (124,913) (1,075,131) (770,577)

Actuarial liabilities (503,167) (997,770) (1,171,381) (503,167) (997,770) (1,171,381)

Amortization of goodwill (148,203) (291,526) (186,719) (282,721) (574,807) (224,578)

Business partners (1) (6,147) (12,784) (22,142) (343,507) (538,520) (1,178,011)

Failures/frauds and other losses (109,974) (459,735) (264,149) (109,974) (459,735) (264,149)

Restatement of guarantee deposits (2) (215,546) (424,633) (483,894) (215,546) (424,633) (483,894)

Discounts granted on renegotiations (110,596) (212,885) (213,084) (150,383) (289,749) (347,878)

Restatement of hybrid capital and debt instruments (123,439) (226,783) (299,071) (123,439) (226,783) (299,071)

Premium life insurance - consumer credit (79,156) (165,180) (205,164) (79,156) (165,180) (205,164)

ATM Network (92,156) (160,040) (125,441) (92,156) (160,040) (125,441)

Restatement of funds to be returned to the Federal Treasury - Law n.º 9,138/1995

(30,513) (57,156) (48,453) (30,513) (57,156) (48,453)

INSS (24,226) (41,963) (29,589) (24,226) (41,963) (29,589)

Restatement of interest own capital/Dividends (25,431) (41,133) (43,155) (25,431) (41,133) (43,155)

Previ – Actuarial Adjustment (10,736) (23,709) (24,701) (10,736) (23,709) (24,701)

Fees for the use of Sisbacen – Central Bank of Brazil System

(8,496) (16,823) (16,465) (8,496) (16,823) (16,465)

Expenses Proagro (6,956) (13,018) (51,823) (6,956) (13,018) (51,823)

Updating the acquisition of investments -- -- (71,459) -- -- (71,459)

Others (138,898) (368,378) (661,998) (550,341) (1,095,016) (924,156)

Total (3,108,927) (7,019,568) (6,198,451) (4,860,205) (10,350,818) (9,143,899)

(1) Refers mainly to commission for loans originated by partners and commercial agreements with tenants.

(2) Update refers to the provision for deposit in court regarding the lawsuit (Income Tax and Social Contribution Tax on Net Income) as Note 28.e.

23 – Non-operating income

R$ thousand


2ndHalf2011 2011 2010 2ndHalf2011 2011 2010

Non-operating income 107,102 276,320 286,060 145,613 439,519 544,949

Profit on sale of investments 12,739 104,653 117,166 20,732 192,396 221,568

Capital gains 11,546 21,796 17,020 18,196 48,806 131,647

Provision reversal for devaluation of other assets 18,435 36,873 38,599 20,599 39,105 38,781

Profit on sale of assets 13,339 25,378 47,553 18,472 37,315 52,865

Disposal of property 8,910 19,201 31,767 8,910 19,201 31,767

Rental income 9,611 15,774 12,546 10,016 16,561 12,881

Other non-operating income 32,522 52,645 21,409 48,688 86,135 55,440

Non-operating expenses (39,860) (100,133) (95,556) (112,567) (214,167) (174,600)

Loss on sale of assets (4,214) (12,753) (3,642) (64,934) (98,772) (69,560)

Loss in value of other assets (19,267) (41,380) (47,513) (20,586) (46,891) (47,750)

Capital losses (15,947) (43,994) (38,834) (16,137) (45,049) (40,138)

Other non-operating expenses (432) (2,006) (5,567) (10,910) (23,455) (17,152)

Total 67,242 176,187 190,504 33,046 225,352 370,349


112

13/02/2012 18:31

24 - Shareholders' Equity

a) Book value and market value per common share

12.31.2011 12.31.2010

Shareholders' equity - Banco do Brasil (R$ thousand) 58,148,690 50,495,741

Book value per share (R$) 20.29 17.65

Market value per common share (R$) 23.70 31.42

Shareholders' equity - BB-Consolidated(1) (R$ thousand) 58,416,370 50,440,683

(1) Reconciled with the equity of Banco do Brasil (Note 24.g)

Book value per share is calculated based on the equity of Banco do Brasil.

b) Capital

The capital of R$ 33,122,569 thousand (R$ 33,077,996 thousand on 12.31.2010) of Banco do Brasil is divided into 2,865,417,020 book-entry common shares without par value. The Federal Government is the largest shareholder, holding the control.

The capital increased by R$ 44,573 thousand in 2011, due to the exercise of subscription of 1,496,831 bonuses “C” (Note 24.K).

The Bank may, even without amending the bylaws, if approved by a General Meeting, and in the conditions established therein, increase its capital up to the limit of R$ 50,000,000 thousand, by issuing common shares, granting shareholders preference for subscribing the capital increase proportionally to the number of held shares, while maintaining the rights of subscription bonus holders issued by the Bank.

c) Revaluation reserves

The revaluation reserves, totaling R$ 4,730 thousand (R$ 6,241 thousand on 12.31.2010), refer to revaluations of assets made by the associated/subsidiary companies.

In the year of 2011, reserves were held totaling R$ 1,511 thousand. From this amount, R$ 328 thousand (R$ 505 thousand in the year 2010) due to depreciation transferred to "Retained earnings (accumulated losses)" and R$ 1,183 thousand due to the write off of shareholding disposal of the BB Banco de Investimento in the Pronor Petroquímica. The remaining balance will be held until the date of the effective realization, in accordance to the CMN Resolution n.° 3,565/2008.

d) Profit reserves R$ thousand

12.31.2011 12.31.2010

Reserve for Retained Earnings(1) 24,297,550 16,944,324

Legal Reserve 3,496,562 2,884,196

Statutory Reserves (1) 20,800,988 14,060,128

Operating margin 16,765,834 10,725,406

Equalization of dividends 4,035,154 3,334,722

(1) In the BB-Consolidated, figures of profit reserve and statutories reserves are R$ 24,121,302 thousand and R$ 20,624,740 thousand, respectively, due to the R$ 176,248 thousand elimination of subsidiary company unrealized gains.

The Statutory reserve for Operating Margin aims to guarantee an operating margin compatible with the development of the company's transactions. It is formed by up to 100% of the balance of net income after legal distributions, including dividends, up to the limit of 80% of the capital.

The Statutory Reserve for Dividend Equalization assures resources for the payment of dividends and is formed by up to 50% of the balance of net income after legal distributions, including dividends, up to the limit of 20% of the capital.


113

e) Earnings per share

2ndHalf2011 Exerc/2011 Exerc/2010

Net profit attributable to shareholders (R$ thousand) 5,984,963 12.247.330 11,758,093

Weighted average number of shares

Basic 2,862,083,461 2,861,404,718 2,711,976,359

Diluted 2,865,416,989 2,869,849,797 2,727,868,423

Earnings per share

Basic earnings per share (R$) 2.09 4.28 4.34

Diluted earnings per share (R$) 2.09 4.27 4.31

f) Interest on own capital / Dividends

Amount(R$ thousand)

Amount per share (R$)

Base date of payment

Payment date

1st quarter/2011

Dividends paid 449,024 0.157 05.19.2011 05.27.2011

Interest on own capital paid 723,921 0.253 03.22.2011 05.27.2011

2nd quarter/2011

Dividends paid 595,322 0.208 08.18.2011 08.26.2011


3rd quarter/2011

Dividends paid 360,714 0.126 11.17.2011 11.25.2011


4rd quarter/2011

Dividends payable 442,565 0.154 02.17.2012 02.29.2012

Interest on own capital payable 794,907 0.277 12.21.2011 02.07.2012

Total destined to shareholders in the year 2011 4,898,933 1.711

Dividends 1,847,625 0.645

Interest on own capital(1) 3,051,308 1.066

Net income for the period 12,247,330

Amount(R$ thousand)

Amount per share (R$)

Base date of payment

Payment date

1st quarter/2010

Dividends paid 444,161 0.173 05.21.2010 05.31.2010


2nd quarter/2010

Dividends paid 564,785 0.220 08.18.2010 08.26.2010


3rd quarter/2010

Dividends paid 375,970 0.131 11.22.2010 11.30.2010


4rd quarter/2010

Dividends paid 917,410 0.321 02.23.2011 02.28.2011


Total destined to shareholders in the year of 2010 4,705,576 1.728

Dividends 2,302,326 0.845

Interest on own capital(1) 2,403,250 0.883

Net income for the period 11,758,093

(1) Amounts subject to the rate of 15% Income Tax Withholding


114

In accordance with Laws n.° 9,249/1995 and n.° 9,43 0/1996 and the Bank's bylaws, Management decided on the payment of Interest on Own Capital to its shareholders, imputed to the value of the dividends, plus additional dividends, equivalent to 40% of the net income.

The interest on own capital is calculated based on adjusted net equity accounts and is limited on a pro rata basis to the variation of long-term interest rate, as long as there is profit computed before its deduction or reserve for retained earnings and profit reserves at least twice its amount.

To comply with the Income Tax legislation, the amount of interest on own capital was recorded as corresponding entries against "Financial expenses" and, for purposes of disclosure of these financial statements, reclassified to "Retained earnings". The total interest on own capital during year of 2011, provided a reduction in spending on tax charges totaling R$ 1,220,523 thousand (R$ 961,300 thousand in the year of 2010).

Shareholders are entitled to a minimum mandatory dividend every six-month period equal to 25% (twenty five percent) of adjusted net income, with financial charges equivalent to the Selic (Brazilian Special Clearance and Escrow System) rate, from the end of the semester or the year in which is discharged until the day of actual collection or payment, as defined by law and the bylaws of the company.

g) Reconciliation of Net Income and Shareholders' Equity

R$ thousand

Net Income Shareholders' equity

2nd Half 2011 2011 2010 12.31.2011 12.31.2010

Banco do Brasil 5,984,963 12,247,330 11,758,093 58,148,690 50,495,741

Unrealized gains (121,340) (121,340) (54,908) (176,248) (54,908)

Reciprocal participation in subsidiaries -- -- -- -- (197)

Non-controlling interests -- -- -- 443,928 47

BB-Consolidated 5,863,623 12,125,990 11,703,185 58,416,370 50,440,683

h) Non-Controlling Interests

R$ thousand

Shareholders' equity

12.31.2011 12.31.2010

Banco Patagonia S.A. 443,869 --

Besc Distribuidora de Títulos e Valores Mobiliários S.A.

27 45

Cobra Tecnologia S.A. 32 2

Non-Controlling Interests 443,928 47


115

i) Stockholdings (Number of shares)

Gradual development of shares held by the Bank's shareholders, directly or indirectly, of more than 5% and by the directors and members of the Fiscal Council and Audit Committee:

Shareholders 12.31.2011 12.31.2010

Shares % Total Shares % Total

Federal Government 1,693,127,780 59.1 1,693,134,063 59.3

Ministério da Fazenda 1,483,727,780 51.8 1,483,734,063 51.9

Fundo de Garantia à Exportação 139,400,000 4.9 139,400,000 4.9

Fundo Fiscal de Investimento e Estabilização 62,500,000 2.2 62,500,000 2.2

Fundo Garantidor para Investimentos 7,500,000 0.2 7,500,000 0.3

Caixa de Previdência dos Funcionários do Banco do Brasil – Previ (1) 296,773,911 10.4 296,564,911 10.3

BNDES Participações S.A. – BNDESPar (1) 3,696,348 0.1 235,119 --

Treasury Stock 32 -- 9,753 --

Other shareholders 871,818,949 30.4 870,785,401 30.4

Total 2,865,417,020 100.0 2,860,729,247 100.0

Resident Shareholders 2,420,960,547 84.5 2,359,239,465 82.5

Non Resident Shareholders 444,456,473 15.5 50,489,782 17.5

(1) Connected to the Controller.

Common shares (ON) (1)

12.31.2011 12.31.2010

Board of Directors (Except the BB's President that is included in the Steering Committee of Banco do Brasil)

11 12

Executive Committee 27,463 33,331

Audit Committee 823 823

(1) The shareholding interest of the Board of Directors, Executive Committee and Audit Committee represents approximately 0,001% of the Bank's capital stock.

j) Free Float

2011 2010

Quantidade % Quantidade %

Free Float at the start date 870,752,058 30.4 562,527,754 21.9

Primary Offering -- 286,000,000

Subscription of Bonus Shares 4,687,773 4,859,696

Other Changes (1) (3,648,365) 17,364,608

Free Float at the end date (2) 871,791,466 30.4 870,752,058 30.4

Outstanding shares 2,865,417,020 100.0 2,860,729,247 100.0

(1) Refers mainly to changes coming from the controllers and Technical and Advisory Bodies.

(2) According to the Law n.º 6,404/1976 and the regulation of BM&FBovespa's New Market, The shares held by the Board of Directors and Executive committee are not included.

k) C subscription bonuses

According to the market release of 03.30.2011, the Bank announced to the bonuses of subscription C holders (BBAS13), which were issued and gratuitously distributed to the shareholders on 06.17.1996, the conditions for exercising the right to subscribe new shares arising from such bonuses in the period from 03.31.2011 to 06.30.2011 (until 06.28.2011 to holders of bonuses in custody of stock exchange). Each bonus guarantees the right to subscribe 3.131799 shares at the price of R$ 8.50 per bonus, corrected by the General Price Index - Internal Availability (IGP-DI), of Fundação Getúlio Vargas, from 06.17.1996 up to the date the application to exercise the subscription right is filed. The holders of 1,496,831 bonuses exercised their right generating 4,687,773 receipts which, after Bacen approval, will be converted to 4,687,773 common shares. The non subscribed bonuses, in total of 2,831,873, lost their validity from the closing date for subscription on 06.30.2011.


116

13/02/2012 17:3425 – Taxes

a) Breakdown of income tax and social contribution expenses

R$ thousand


2 nd Half 2011 2011 2010 2 nd Half 2011 2011 2010

Present values (513,104) (2,741,136) (4,603,134) (1,481,016) (4,789,543) (6,245,343)

Domestic income tax and social contribution (490,055) (2,705,774) (4,569,152) (1,357,753) (4,621,313) (6,205,106)

Foreign income tax (23,049) (35,362) (33,982) (123,263) (168,230) (40,237)

Deferred values (646,637) (896,700) 622,342 (38,812) 67,088 924,154

Deferred tax liabilities (742,828) (1,533,784) (397,878) (786,147) (1,339,271) (649,072)

Leasing operations – Portfolio adjustment and accelerated Depreciation

(215) (641) (2,973) (44,152) 150,450 (103,616)

Mark to Market (MTM) (79,435) 81,387 (164,503) (78,817) 124,809 (315,300)

Actuarial gains (404,745) (1,137,073) 65,722 (404,745) (1,137,073) 65,722

Restatement of judicial deposits (167,853) (329,147) (290,212) (167,853) (329,147) (290,212)

Income abroad 21,916 -- (2,032) 21,916 -- (2,032)

Transactions Carried out on the Futures Market -- 3,903 (3,880) -- 3,903 (3,634)

Recovering from losses MP n.º 517/2010 (1) (112,496) (152,213) -- (112,496) (152,213) --

Deferred tax assets 96,191 637,084 1,020,220 747,335 1,406,359 1,573,226

Temporary differences 83,718 789,640 780,495 736,356 1,550,983 1,276,321

Income tax and social contribution losses (52,111) (46,861) 128,789 (52,111) (37,231) 186,018

Mark to Market (MTM) 31,539 (141,839) 140,003 30,045 (143,537) 139,954

Transactions Carried out on the Futures Market 33,045 36,144 (29,067) 33,045 36,144 (29,067)

Total Income Tax and Social Contribution (1,159,741) (3,637,836) (3,980,792) (1,519,828) (4,722,455) (5,321,189)

(1) The MP n.° 517/2010, converted into Law n.° 12, 431/2011, allowed values recovered from losses on loans are recognized at the time of actual receipt of credit in cases of rural finance and operating loans to individual value up R$ 30 thousand.

b) Reconciliation of income tax and social contribution expense

R$ thousand


2 nd Half 2011 2011 2010 2 nd Half 2011 2011 2010

Profit before taxation and profit sharing 7,908,762 17,448,327 17,239,112 8,311,964 18,732,119 18,780,544

Total charges of IR (25%) and CSLL (15%) (3,163,505) (6,979,331) (6,895,645) (3,324,786) (7,492,848) (7,512,218)

Charges upon Interest on Own Capital 636,283 1,220,523 961,300 636,283 1,220,523 961,300

Equity in subsidiaries and associated 651,918 1,208,292 1,149,586 245,701 181,952 (18,529)

Profit sharing 303,762 621,701 596,888 342,726 711,597 698,222

Tax credits recorded – previous periods (1) 386,438 386,438 -- 386,438 386,438 --

Other amounts 25,363 (95,459) 207,079 193,810 269,883 550,036

Income Tax and Social Contribution Expense (1,159,741) (3,637,836) (3,980,792) (1,519,828) (4,722,455) (5,321,189)

(1) Use of tax credit on taxable charges of operations written off.

c) Tax Expenses

R$ thousand


2 nd Half 2011 2011 2010 2 nd Half 2011 2011 2010

Cofins (1,083,140) (2,206,068) (2,087,592) (1,416,124) (2,852,105) (2,603,843)

ISSQN (295,469) (563,480) (480,644) (380,038) (721,066) (624,022)

PIS/Pasep (176,010) (358,486) (318,509) (237,767) (476,088) (413,941)

Others (47,657) (86,736) (74,024) (122,372) (210,216) (108,139)

Total (1,602,276) (3,214,770) (2,960,769) (2,156,301) (4,259,475) (3,749,945)


117

d) Deferred tax liabilities

R$ thousand


12.31.2011 12.31.2010 12.31.2011 12.31.2010

Arising from unrecognized actuarial gains (1) 5,325,069 4,049,365 5,325,069 4,049,365

Arising from leasing portfolio adjustment 3,615 2,973 768,556 930,884

Arising from restatement of judicial deposits 356,541 316,412 356,541 316,412

Arising from mark-to-market adjustment 236,384 354,775 266,458 413,899

Entities abroad 14,470 3,141 14,480 3,175

Arising from futures market transactions 18 4,395 18 4,395

Arising from losses MP n.º 517/2010 152,213 -- 152,213 --

Other 2,032 2,032 212,452 189,252

Total deferred tax liabilities 6,090,342 4,733,093 7,095,787 5,907,382

Income tax 3,263,580 2,518,448 4,050,295 3,666,538

Social contribution 1,954,775 1,508,079 2,170,237 1,527,853

PIS/Pasep 121,891 98,767 122,348 99,665

Cofins 750,096 607,799 752,907 613,326

(1) The realization of deferred tax liabilities on actuarial gains is related to the achievement of the values of actuarial asset (Note 27).

e) Deferred tax assets (Tax Credit)

Recorded R$ thousand

Banco do Brasil

12.31.2010 2011 12.31.2011

Balance Constitution Write-off Balance

Temporary differences 16,821,714 6,688,187 6,295,359 17,214,542

Allowance for loan losses 6,879,043 4,266,285 3,919,228 7,226,100

Passive reserves 6,371,687 1,122,585 1,330,899 6,163,373

Loan Operations – effects of Law No 9.430/96 3,135,634 957,272 629,609 3,463,297

Mark to market 282,870 310,779 381,784 211,865

Other provisions 152,480 31,266 33,839 149,907

CSLL written to 18% (MP n.º 2.158/2001) 2,809,264 80,297 401,716 2,487,845

Fiscal losses/ negative bases 120,924 148,139 222,984 46,079

Total tax credits recorded 19,751,902 6,916,623 6,920,059 19,748,466

Income tax 10,573,273 4,312,572 4,107,799 10,778,046


PIS/Pasep 4,295 4,721 5,809 3,207

Cofins 26,431 29,055 35,681 19,805


118

R$ thousand

BB-Consolidated

12.31.2010 2011 12.31.2011

Balance Constitution Write-off Balance

Temporary differences 18,147,741 8,002,023 6,675,652 19,474,112

Allowance for loan losses 7,492,836 4,577,637 3,983,600 8,086,873

Passive reserves 6,536,650 1,344,744 1,340,712 6,540,682

Loan Operations – effects of Law No 9.430/96 3,135,634 957,272 629,609 3,463,297

Mark to market 299,337 370,628 385,787 284,178

Other provisions 683,284 751,741 335,944 1,099,081

CSLL written to 18% (MP n.º 2.158/2001) 2,809,263 80,297 401,715 2,487,845

Fiscal losses/ negative bases 618,325 150,600 593,712 175,213

Excess depreciation 394,209 247,020 24,854 616,375

Total tax credits recorded 21,969,538 8,479,939 7,695,933 22,753,544

Income tax 12,189,100 5,287,669 4,641,124 12,835,645


PIS/Pasep 4,643 4,678 5,861 3,460

Cofins 30,711 26,653 36,002 21,362

Not Recorded R$ thousand


12.31.2011 12.31.2010 12.31.2011 12.31.2010

Tax credit abroad 232,192 198,728 232,192 198,728

Temporary differences -- -- 49,224 14,249

Installment of Fiscal losses/ negative bases -- -- 18,064 --

Total tax credits not recorded 232,192 198,728 299,480 212,977

Income tax 145,120 124,205 177,514 138,449

Social contribution 87,072 74,523 121,966 74,528

Estimates for the realization

The expectation of implementation of deferred tax assets (tax credits) is based on technical study, prepared in 12.31.2011. and the present value determined based on the average rate of funding of Banco do Brasil.

R$ thousand


Par value Present value Par value Present value

In 2012 4,000,081 3,814,368 4,460,178 4,054,897

In 2013 3,964,268 3,649,377 4,888,154 4,231,801

In 2014 3,400,402 3,031,328 3,783,286 3,192,966

In 2015 2,874,446 2,479,514 3,170,639 2,585,648

In 2016 4,929,269 4,113,438 5,354,853 4,227,656

In 2017 580,000 475,174 807,849 570,132

In 2018 -- -- 60,138 27,678

In 2019 -- -- 57,050 23,600

In 2020 -- -- 53,803 19,889

In 2021 -- -- 117,594 38,935

Total tax credits – 12.31.2011 19,748,466 17,563,199 22,753,544 18,973,202

In the exercise it was possible to observe the realization of tax credits at Banco do Brasil in the amount of R$ 6,920,059 thousand corresponding to 195.95% of the respective projection of use for the period of 2011. contained in the technical study prepared on 12.31.2010.


119

13/02/2012 17:34

The realization of the nominal value of tax credit recorded. considering the recovery of those issued during the processing of the lawsuit -70%, based on a technical study conducted by the Banco do Brasil on 12.31.2011. is designed for 5.5 years in following proportions:


Tax losses carryforwards/CSLL

recoverable (1)

Intertemporary differences (2)

Tax losses carryforwards/CSLL

recoverable(1)

Intertemporary differences (2)

In 2012 42% 17% 40% 17%

In 2013 40% 17% 40% 17%

In 2014 18% 17% 18% 17%

In 2015 -- 17% 1% 17%

In 2016 -- 29% 1% 28%

From 2017 -- 3% -- 4%

(1) Projected consumption linked to the capacity to generate IRPJ and CSLL taxable amounts in subssequent periods.

(2) The consumption capacity results from the movements of provisions (expectation of reversals. write-offs and uses).

26 – Related Party Transactions

The costs of salaries and other benefits granted to key management personnel of the Banco do Brasil Group (Board of Directors, Executive Board, Audit Committee and Fiscal Council):

R$ thousand

2st half 2011 12.31.2011 12.31.2010

Short-term benefits 13,459 28,126 27,008

Fees 9,967 19,107 17,235

Executive Board 8,789 16,940 15,426

Audit Committee 856 1,603 1,341

Board of Directors 172 302 255

Fiscal Council 150 262 213

Profit sharing 2,952 6,863 7,662

Other 540 2,156 2,111

Termination benefits 2,724 3,501 2,125

Total 16,183 31,627 29,133

In November 2011, the Bank approved variable compensation payment in shares or share-based instruments to members of the Executive Board. They will receive, as a 2011 annual bonus, and according to the global amount approved at the Annual General Meeting of 04.27.2011, a value between two and four salaries, depending to the achievement of the Return on Equity - ROE target, set at 20%. For performances between 100% and 105% of target achievement, each member of the Executive Board will receive two additional salaries; for performances between 105% and 115%, the compensation will be proportionately calculated, and for greater performances above 115 %, each member will receive four salaries. Payment will be made in three equal and consecutive annual installments. The first payment will be within thirty days after the annual report disclosure. In 2011, the Bank recognized expense in the amount of $ 6,160 thousand as annual bonus payment.

The Bank is assessing the implementation criteria of the variable compensation plan for managers, that would be in force from 2012, according to the terms and conditions established by CMN Resolution 3921 of 25/11/2010.

The Bank does not offer post-employment benefits to its key management personnel, except for those who are part of the staff of the Bank, participating in the Pension Plan for Employees of the Banco do Brasil (Previ). Since January 2007, due to the accumulated surplus in the Plan of those officials, the Bank does not provide this benefit expense (Note 27).

The Bank does not grant loans to key management personnel, pursuant to the prohibition to all financial institutions established by the Central Bank of Brazil.


120

The balances referring to transactions between the consolidated companies of the Bank are eliminated in the Consolidated Financial Statements. With respect to majority shareholder, the transactions with National Treasury and with agencies of the direct administration of the Federal Government that maintain banking operations with the Bank, are included.

The Bank has banking transactions with these related parties, such as interest bearing and non-interest bearing deposits, loans, and sale and repurchases transactions, except for key management personnel. There are also service provision and guarantee agreements.

These transactions are conducted under normal market conditions, mainly under the terms and conditions for comparable transactions, including interest rates and collateral. These transactions do not involve payment risks.

The funds invested in government securities and federal funds for transfers and programs from the Official Institutions are listed as notes 8 and 18, respectively.

The Bank sponsors the Banco do Brasil Foundation (FBB) whose goals are the promotion, support, encouragement and sponsorship educational, cultural, social, philanthropic, recreational/sports projects and provide resources to scientific and technological activities. The Foundation also assists urban-rural communities areas. In 2011, the Bank made contributions to the FBB in the amount of R$ 42,527 thousand (R$ 90,320 thousand in 2010).

The information related to onlending and other transactions with other sponsored entities are disclosed in Note 27.

In 2011, the Banco do Brasil acquired loan portfolios from Banco Votorantim, sold with recourse, the amount of R$ 10,643,782 thousand (R$ 7,975,787 thousand in 12.31.2010). The unrealized results arising from such transactions amounted to R$ 516,357 thousand (R$ 302,978 thousand in 12.31.2010), net of tax effects.


121

Summary of related party transations R$ thousand

12.31.2011

Controller (1)

Subsidiaries(2)

Jointly controlled (3) Affiliates (4)

Key Management personnel (5)

Other related

parties(6)Total

Assets

Interbank deposits -- 20,590,919 18,434 -- -- -- 20,609,353

Securities -- 61,940 94,313 -- -- -- 156,253

Loan operations 836,224 49,612 7,861 -- -- 523,750 1,417,447

Receivables from related companies

-- 68,442 -- -- -- -- 68,442

Other assets -- 113,130 -- -- -- -- 113,130

Liabilities

Demand deposits 717,309 89,547 45,639 33,884 695 896,535 1,783,609

Saving deposits -- -- -- -- 1,151 -- 1,151

Remunerated time deposits -- 5,247,775 378,958 221,357 4,696 5,132,867 10,985,653

Money market borrowing -- 1,680,647 830,169 -- -- 1,113,044 3,623,860

Borrowings and onlendings 1,643,963 14,326,735 -- -- -- 43,735,159 59,705,857

Other liabilities -- 1,251,984 70,248 31 -- 1,125,124 2,447,387

Guarantees and Other Recourses (7) -- 629,116 7,474,911 -- -- -- 8,104,027

2st half 2011

Income from interest and services

79,224 1,188,008 13,550 77,098 -- 361,129 1,719,009

Expenses from raising funds (31,632) (858,044) (2,170) (3,044) (648) (1,769,594) (2,665,132)

12.31.2011


113,931 1,982,470 47,264 132,130 -- 423,145 2,698,940

Expenses from raising funds (97,341) (1,192,412) (50,671) (3,306) (1,014) (2,986,825) (4,331,569)

(1) National Treasury and agencies of the direct administration of the Federal Government.

(2) Includes related companies in Note 3 as identified in item (1).



(5) Board of Directors, Executive Board, Audit Committee and Fiscal Council.

(6) Includes public and party-state owned companies controlled by the Federal Government entities linked to employees.

(7) Includes Opening Contract Interbank Revolving Credit Line to release with Banco Votorantim, equivalent to the value of net assets of that institution.


122

13/02/2012 17:34

R$ thousand

12.31.2010

Controller (1)

Subsidiaries(2)

Jointly controlled (3) Affiliates (4) Key

Management personnel

Other related parties(6) Total

Assets

Interbank deposits -- 14,960,687 75,078 -- -- -- 15,035,765

Securities -- 5,632 92,574 27,988 -- -- 126,194

Loan operations 947,969 48,602 86,706 -- -- 798,938 1,882,215

Receivables from related companies

-- 29,570 -- -- -- -- 29,570

Other assets -- 402,472 318,106 -- -- 135,926 856,504

Liabilities

Demand deposits 816,374 51,353 50,069 5,680 522 1,226,662 2,150,660

Saving deposits -- -- -- -- 1,117 -- 1,117

Remunerated time deposits -- 3,492,926 1,159,700 708,689 5,636 7,115,485 12,482,436

Money Market Borrowing -- 1,174,729 -- -- -- 528,713 1,703,442

Borrowings and onlendings 1,512,821 9,443,002 -- -- -- 37,697,421 48,653,244

Other liabilities -- 31,075 113,117 -- -- 121,355 265,547

Guarantees and Other Recourses(7) -- 1,002,892 9,409,585 -- -- -- 10,412,477

2st half 2010


38,328 779,956 558,924 69,854 -- 341,681 1,788,743


12.31.2010


87,957 1,578,538 1,047,877 165,570 -- 427,908 3,307,850


(1) National Treasury and agencies of the direct administration of the Federal Government.




(5) Board of Directors, Executive Board, Audit Committee and Fiscal Council.

(6) Includes public and party-state owned companies controlled by the Federal Government entities linked to employees.

(7) Includes Opening Contract Interbank Revolving Credit Line to release with Banco Votorantim, equivalent to the value of net assets of that institution.

27 – Employee benefits

Banco do Brasil sponsors the following private pension and complementary health plan entities that provide for complementation of retirement and healthcare benefits for its employees:


123

Plans Benefits Classification

Previ - Caixa de Previdência dos Funcionários do Banco do Brasil

Previ Futuro Retirement and Pension Defined contribution

Plano de Benefícios 1 Retirement and Pension Defined benefit

Plano Informal Retirement and Pension Defined benefit

Cassi - Caixa de Assistência dos Funcionários do Banco do Brasil

Plano de Associados Health Care Defined benefit

Economus – Instituto de Seguridade Social

Prevmais Retirement and Pension Defined contribution

Regulamento Geral Retirement and Pension Defined benefit

Regulamento Complementar 1 Retirement and Pension Defined benefit

Grupo B’ Retirement and Pension Defined benefit

Plano Unificado de Saúde – PLUS Health Care Defined benefit

Plano Unificado de Saúde – PLUS II Health Care Defined benefit

Plano de Assistência Médica Complementar - PAMC

Health Care Defined benefit

Fusesc - Fundação Codesc de Seguridade Social Multifuturo I Retirement and Pension Defined contribution

Plano de Benefícios 1 Retirement and Pension Defined benefit

SIM - Caixa de Assistência dos Empregados dos Sistemas Besc e Codesc, do Badesc e da Fusesc

Plano de Saúde Health Care Defined contribution

Prevbep – Caixa de Previdência Social Plano BEP Retirement and Pension Defined benefit

Number of participants covered by benefit plans sponsored by the Bank

12.31.2011 12.31.2010

N.° of participants N.° of participants

Actives Assisted Total Actives Assisted Total

Retirement and Pension Plans 115,842 106,149 221,991 110,526 104,722 215,248

Plano de Benefícios 1 – Previ 30,659 83,825 114,484 32,449 82,727 115,176

Plano Previ Futuro 67,507 443 67,950 60,113 370 60,483

Plano Informal -- 7,649 7,649 -- 7,920 7,920

Other plans 17,676 14,232 31,908 17,964 13,705 31,669

Medical Assistance Plans 117,376 92,481 209,857 112,630 91,152 203,782

Cassi 103,293 83,202 186,495 98,221 82,153 180,374

Other plans 14,083 9,279 23,362 14,409 8,999 23,408

Bank’s contributions to benefit plans R$ thousand

2nd half 2011 2011 2010

Retirement and Pension Plans 623,687 1,164,046 1,004,182

Plano de Benefícios 1 – Previ (1) 259,445 495,401 459,051

Plano Previ Futuro 137,124 240,647 184,045

Plano Informal 156,445 297,618 295,797

Other plans 70,673 130,380 65,289

Medical Assistance Plans 465,381 894,943 722,785

Cassi 413,169 799,390 689,561

Other plans 52,212 95,553 33,224

Total 1,089,068 2,058,989 1,726,967

(1) Refers to the contributions from participants comprised by Agreement 97 and Plan 1, considering that these contributions occurred respectively by the realization of the Parity Fund (Note 27.e.1) and the Contribution Fund (Note 27.e.3). The Agreement 97 aims to regulating the way of funding required to achieve a portion equivalent to 53.7% of guarantee amount concerning the payment of supplement retirement due to the participants who joined the Bank up to 04.14.1967 and who have retired or will retire after the aforementioned date, except for those participants who are part of the Plano Informal.


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Values recognized in earnings R$ thousand

2nd half 2011 2011 2010

Retirement and Pension Plans 738,823 2,327,438 3,532,137

Plano de Benefícios 1 – Previ 1,061,209 2,981,314 4,299,199

Plano Previ Futuro (137,124) (240,647) (184,045)

Plano Informal (122,287) (244,809) (522,033)

Other plans (62,975) (168,420) (60,984)

Medical Assistance Plans (608,400) (1,132,022) (954,904)

Cassi (528,959) (998,483) (892,045)

Other plans (79,441) (133,539) (62,859)

Total 130,423 1,195,416 2,577,233

a) Retirement and pension plans

Previ Futuro (Previ)

Participants in this plan are the Bank's employees hired as from 12.24.1997. The active participants contribute to Previ an amount between 7% and 17% of their contribution salary, which varies based on time of service and the amount of the contribution salary. There is no contribution for retired participants. The sponsor contributes an amount equal to the contributions of the participants, limited to 14% of the total contribution payroll of these participants.

Plano de Benefícios 1 (Previ)

The participants of this plan are the Bank’s employees who were enrolled up to 12.23.1997. Due to the establishment of parity between the Bank's and participants' contributions, in December 2000, a parity fund was set up, and its resources are being used for the purpose of offsetting contributions to the plan. Due to the accumulated surplus, the contributions of participants, beneficiaries (retirees and pensioners) and of the sponsor (Banco do Brasil) were suspended, since January 2007. According to the Memorandum of Understanding signed between the Bank, Previ and entities representing the beneficiaries, it was proposed to amend the Rules of the Plan 1, which includes the suspension of contributions for the years 2011, 2012 and 2013, being linked to its continued existence of the Reserve Special plan.

Plano Informal (Previ)

The sole responsibility of the Banco do Brasil whose contractual obligations include (a) retirement pensions to founder participants and pension payments to beneficiaries of participants deceased up to 04.14.1967; (b) payment of retirement supplements to the other participants employed by Banco do Brasil who retired up to 04.14.1967 or who, on that date, would have the right through length of service to retire and who had at least 20 years of effective service with the Bank; and (c) increase in the amount of retirement benefits and of pensions in addition to that provided for in the benefit plan of Previ, resulting from judicial decisions and from administrative decisions on account of restructuring of the job and salary plan and of incentives created by the Bank.

Prevmais (Economus)

The participants of this plan are the employees from Banco Nossa Caixa (merged into Banco do Brasil on 11.30.2009) enrolled after 08.01.2006, and the participants previously linked to the Regulamento Geral benefit plan who opted for the distribution of their vested account balances. The funding for income benefits is equally provided by employees and employer, not exceeding 8% of the participants' salary. The plan also provides risk benefits, such as complementation of sickness aid, work – related accident, disability benefits and death pension.

Regulamento Geral (Economus)

The participants of this plan are the employees from Banco Nossa Caixa enrolled up to 07.31.2006. The plan is closed to new applicants. Employees and the sponsor contribute equally, on average, with 12.11% of participation salary.


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Regulamento Complementar 1 (Economus)

For officials coming from Banco Nossa Caixa. Offers the benefits of supplemental sickness benefit and annuity for death and disability. The cost of the plan is the responsibility of the sponsor, participants and assisted.

Grupo B' (Economus)

Participate in this plan the employees from Banco Nossa Caixa admitted between 01.22.1974 to 05.13.1974 and their beneficiaries. Plan closed to new members. The level of benefit to be granted when the implementation of all the conditions laid down in regulation, is known a priori.

Multifuturo I (Fusesc)

The participants of this plan are the employees from Banco do Estado de Santa Catarina - Besc (merged into Banco do Brasil on 09.30.2008) enrolled after 01.12.2003 and the employees previously linked to Fusesc's Benefit Plan 1 who opted for this plan. Employees and sponsor equally contribute from 2.33% to 7% of participation salary to that plan, as determined by each participant.

Plano de Benefícios 1 (Fusesc)

The participants of this plan are the employees from Besc enrolled until 01.11.2003. The plan is closed to new applicants. Employees and the sponsor contribute equally, on average, with 9.89% of participation salary.

Plano BEP (Prevbep)

Participants of this plan are the employees from Banco do Estado do Piauí – BEP (merged in to Banco do Brasil on 11.30.2008). Employees and the sponsor contribute equally, on average, with 3.58% of participation salary.

b) Medical Assistance Plans

Plano de Associados (Cassi)

The Bank is the sponsor of a health plan managed by Cassi which the main objective is to provide coverage for expenses related to the promotion, protection, recovery and rehabilitation of a member's health and of his/her enrolled beneficiaries. Each month, the Bank contributes with a sum equivalent to 4.5% of the total payroll or of the total retirement or pension plan benefit. Monthly contributions from members and pension beneficiaries amount to 3% of the total payroll or the total retirement or pension plan benefits and co-participation in some hospital procedures.

Plano Unificado de Saúde - PLUS (Economus)

The participants of this plan are the employees from Banco Nossa Caixa. Participation in this plan takes place by means of a 1.5% contribution of gross salary, without limitation, covering the owner and his/her preferred dependants, deducted from the owner's payroll and 10% as a co-participation in the price of each medical visit and low-cost exams, made by the owner and his/her dependants (preferred and non-preferred).

Plano Unificado de Saúde - PLUS II (Economus)

For employees from Banco Nossa Caixa. Participation in this plan takes place by means of a 1.5% contribution of gross salary, without limitation, covering the owner and his/her preferred dependants, deducted from the owner's payroll and 10% as a co-participation in the price of each medical visit and low-cost exams, made by the owner and his/her preferred dependants and children of age. The plan does not provide for non-preferred dependants.

Plano de Assistência Médica Complementar - PAMC (Economus)

For employees from Banco Nossa Caixa stationed in the State of São Paulo. Plan owners are those employees retired due to disability in Groups "B" and "C", and their dependants, who participate in costs in as much as they use it, and according to the salary range progressive table.


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Plano de Saúde (SIM)

The participants of this plan are the employees from Besc. Monthly contributions from members amount to 3% of the total payroll.


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c) Actuarial valuations

The actuarial valuations are prepared every six months and the information contained in the tables below refers to those carried out on the base dates of 12.31.2011 and 12.31.2010.

Changes in present value of defined benefit actuarial obligations R$ thousand

Plano 1 – Previ Plano Informal – Previ Plano de Associados – Cassi Other plans

2011 2010 2011 2010 2011 2010 2011 2010

Initial Balance (90,805,477) (80,270,786) (1,994,759) (1,743,385) (5,297,173) (4,943,220) (5,189,411) (4,432,673)

Interest cost (9,798,080) (8,434,756) (204,672) (202,866) (577,040) (542,750) (540,832) (514,367)

Current service cost (517,332) (447,544) -- -- (84,607) (70,937) (49,031) (41,506)

Benefits paid net contributions retirees 6,718,424 7,532,656 297,618 295,797 503,816 376,039 370,240 314,364

Administrative expenses paid by the plan -- -- -- -- -- -- 1,624 --

Liabilities transferred from other plans -- -- -- -- -- -- (6,576) --

Actuarial gain / (loss) on actuarial obligation (4,447,076) (9,185,047) (3,557) (344,305) (591,928) (116,304) (208,624) (515,229)

Closing Balance (98,849,541) (90,805,477) (1,905,370) (1,994,759) (6,046,932) (5,297,172) (5,622,610) (5,189,411)

Present value of actuarial liabilities with cover (98,849,541) (90,805,477) -- -- -- -- (4,477,749) (4,339,122)

Present value of actuarial liabilities without cover -- -- (1,905,370) (1,994,759) (6,046,932) (5,297,172) (1,144,861) (850,289)

Changes in fair value of plan assets R$ thousand


2011 2010 2011 2010 2011 2010 2011 2010

Initial Balance 141,566,322 137,814,150 -- -- -- -- 4,339,122 3,943,103

Estimated yield on plan assets 14,934,610 13,963,696 -- -- -- -- 478,661 532,843

Contributions received 495,904 459,300 297,618 295,797 503,816 376,039 90,925 56,326

Benefits paid net contributions retirees (6,718,424) (7,532,656) (297,618) (295,797) (503,816) (376,039) (307,090) (245,810)

Equity transfer -- -- -- -- -- -- 6,576 --

Allocation Fund to Sponsor and Participant (1) -- (15,068,115) -- -- -- -- -- --

Gain / (loss) on actuarial plan assets (17,199,016) 11,929,947 -- -- -- -- (130,445) 52,660

Closing Balance 133,079,396 141,566,322 -- -- -- -- 4,477,749 4,339,122

(1) Refers to the values used for setting up the fund allocation of the surplus, corresponding, to the Bank, the amount of R$ 7,519,058 thousand (Note 27.e.2).


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Amounts recognized in the balance sheet R$ thousand


12.31.2011 12.31.2010 12.31.2011 12.31.2010 12.31.2011 12.31.2010 12.31.2011 12.31.2010

1) Fair value of the plan’s assets 133,079,396 141,566,322 -- -- -- -- 4,477,749 4,339,122

2) Present value of actuarial liabilities (98,849,541) (90,805,477) (1,905,370) (1,994,759) (6,046,932) (5,297,172) (5,622,610) (5,189,411)

3) Surplus/(deficit) (1+2) 34,229,855 50,760,845 (1,905,370) (1,994,759) (6,046,932) (5,297,172) (1,144,861) (850,289)

4) Surplus/(deficit) - plot sponsor 17,114,928 25,380,423 (1,905,370) (1,994,759) (6,046,932) (5,297,172) (863,246) (684,994)

5) Unrecognized actuarial gains/(losses) 3,742,924 15,485,636 (162,896) (199,476) (1,240,517) (689,849) (270,228) (180,864)

6) Net actuarial (liability)/asset (4-5) 13,372,004 9,894,787 (1,742,474) (1,795,283) (4,806,415) (4,607,323) (593,018) (504,130)

The actuarial assets recorded in other receivables (Note 11.b) will be realized before the end of the plan. The end of the plan is understood as the date in which the last commitment will be paid.

Amounts recognized in income relating to defined benefit plans R$ thousand


2nd half 2011 2011 2010 2nd half 2011 2011 2010 2nd half 2011 2011 2010 2nd half 2011 2011 2010

Cost of current service (122,138) (258,666) (223,772) -- -- -- (43,065) (84,608) (70,937) (8,437) (24,592) (20,985)

Contributions from participants -- -- -- -- -- -- -- -- -- -- -- (4,366)

Interest cost (2,507,251) (4,899,040) (4,217,378) (100,406) (204,672) (202,866) (297,303) (577,041) (542,750) (147,831) (298,536) (283,195)

Expected earnings on the plan's assets

3,690,599 7,467,305 6,981,848 -- -- -- -- -- -- 120,765 238,942 268,359

Amortization of net actuarial gains/(losses)

-- 671,715 1,758,501 (21,881) (40,137) (319,167) (20,251) (31,347) (2,307) (16,998) (77,356) (17,055)

Unrecognized past service cost -- -- -- -- -- -- (4,956) (9,913) (9,913) -- -- --

Expense with active employees -- -- -- -- -- -- (163,384) (295,574) (208,894) -- -- --

Expenses with extraordinary contribution

-- -- -- -- -- -- -- -- (57,244) -- -- --

Effect of liability/asset not recognized

-- -- -- -- -- -- -- -- -- (63) (92) (30,995)

Other adjustments/reversal -- -- -- -- -- -- -- -- -- (134) (134) --

(Expense)/income recognized in Statement of Income

1,061,210 2,981,314 4,299,199 (122,287) (244,809) (522,033) (528,959) (998,483) (892,045) (52,698) (161,768) (88,237)


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Composition of the plans' assets, shown as a percentage of the total

Plano 1 - Previ Plano Informal - Previ Plano de Associados - Cassi Other plans

12.31.2011 12.31.2010 12.31.2011 12.31.2010 12.31.2011 12.31.2010 12.31.2011 12.31.2010

Fixed Revenue 30.2% 29.2% -- -- -- -- 90.9% 88.7%

Floating Revenue 62.2% 64.7% -- -- -- -- 4.3% 7.8%

Real estate investments 4.0% 3.2% -- -- -- -- 1.8% 1.7%

Loans and financing 3.2% 2.9% -- -- -- -- 1.8% 1.4%

Others 0.4% -- -- -- -- -- 1.2% 0.4%

Amounts listed in fair value of plan assets

In their own financial instruments of the entity 5.5% 6.7% -- -- -- -- -- --

In properties or other assets used by the entity 0.1% 0.1% -- -- -- -- 0.1% --

Comparative table showing expected and actual return from plan assets


2011 2010 2011 2010 2011 2010 2011 2010

Expected yield nominal rate on plan assets 10,96% p.a. 10,76% p.a. -- -- -- -- 10,96% p.a. 10,76% p.a.

Expected yield on assets for the period (R$ thousand) (1) 14,934,610 13,963,696 -- -- -- -- 478,661 532,843

Effective yield (R$ thousand) (2) (2,264,406) 10,825,528 -- -- -- -- 354,792 585,503

(1) 12.31.2010 a 12.30.2011 – Real rate 6.30% p.a. and Inflation rate 4.38% p.a.

12.31.2009 a 12.30.2010 – Real rate 6.30% p.a. and Inflation rate 4.20% p.a.

(2) Considers the effects of floating income investments.


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Main actuarial assumptions adopted in each period

Plano 1 – Previ Plano Informal – Previ Plano de Associados – Cassi Other plans (1)

12.31.2011 12.31.2010 12.31.2011 12.31.2010 12.31.2011 12.31.2010 12.31.2011 12.31.2010

Inflation rate (p.a.) 4.20% 4.38% 4.20% 4.38% 4.20% 4.38% 4.20% 4.38%

Real discount rate (p.a.) 6.10% 6.30% 6.10% 6.30% 6.10% 6.30% 6.10% 6.30%

Nominal return rate of investments (p.a.) 10.56% 10.96% -- -- -- -- 10.56% 10.96%

Real rate of future salary growth (p.a.) -- 0.41% -- -- -- 0.41% 0.65% 0.26%

Average remaining work period (years) 2.35 3.57 -- -- 14.12 14.81 6.73 5.24

Table actuarial survival AT-83 AT-83 AT-83 AT-83

Capitalization regime Projected credit unit Projected credit unit Projected credit unit Projected credit unit

(1) Grouped actuarial assumptions are expressed as weighted averages.


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In order to determine the values for the defined benefit plans, the Bank uses methods and assumptions different from those submitted by entities sponsored. The most significant differences are concentrated on the definition of the figures relating to Plano 1 – Previ.

Differences in assumptions of the Plano 1 - Previ

Bank Previ

Real discount rate (p.a.) 6.1% 5%

Table actuarial survival AT-83 AT-2000

Evaluation of assets – Exclusive funds Market value or discounted cash flow - base scenario

Discounted cash flow - conservative scenario

Capitalization regime Projected credit unit Aggregate Method

Reconciliation of Plan 1 amounts calculated - Previ/Bank R$ thousand

Plan assets Actuarial liabilities Effect in surplus

12.31.2011 12.31.2010 12.31.2011 12.31.2010 12.31.2011 12.31.2010

Value determined - Previ 121,969,218 116,790,760 (97,420,089) (90,629,774) 24,549,129 26,160,986

Incorporation of values from contract 97

13,188,500 13,147,607 (13,188,500) (13,147,607) -- --

Adjustment in the value of plan assets (1) (2,078,322) 11,627,955 -- -- (2,078,322) 11,627,955

Adjustment the liabilities – the discount rate/ capitalization regime

-- -- 11,759,048 12,971,904 11,759,048 12,971,904

Value determined - Bank 133,079,396 141,566,322 (98,849,541) (90,805,477) 34,229,855 50,760,845

(1) Refers mainly to adjustments made by the Bank in determining the fair value of plan assets, using the market value for shares of Vale and discounted cash flow – base scenario for Neonergia, 521 Holdings and Invepar assets, while at Previ is used the method of discounted cash flow - the conservative scenario.

Actuarial amounts for the current period and for the last four years R$ thousand

12.31.2011 12.31.2010 12.31.2009 12.31.2008 12.31.2007

Plano 1 (Previ) – Surplus/(deficit) 34,229,855 50,760,845 57,543,364 28,669,191 64,229,505

Defined benefit obligation (98,849,541) (90,805,477) (80,270,786) (76,109,637) (70,572,791)

Plan assets 133,079,396 141,566,322 137,814,150 104,778,828 134,802,296

Experience adjustment on the plan liabilities (p.a.) (2.6%) (8.4%) (3.6%) (7.1%) (3.2%)

Experience adjustment on plan assets (p.a.) (6.9%) 16.7% 20.8% (28.7%) (18.7%)

Plano Informal (Previ) – Surplus/(deficit) (1,905,370) (1,994,759) (1,743,386) (1,739,592) (1,666,065)


Experience adjustment on the plan liabilities (p.a.) (2.2%) (3.7%) (6.1%) (11.4%) (9.6%)

Plano de Associados (Cassi) – Surplus/(deficit) (6,046,932) (5,297,172) (4,943,220) (4,677,766) (4,547,868)


Experience adjustment on the plan liabilities (p.a.) (5.3%) (2.9%) (0.3%) 0.1% 8.8%

Other Plans – Surplus/(deficit) (1,144,861) (850,289) (489,570) 171,899 --

Defined benefit obligation (5,622,610) (5,189,411) (4,432,673) (446,280) --

Plan assets 4,477,749 4,339,122 3,943,103 618,179 --

Experience adjustment on the plan liabilities (p.a.) (4.7%) (6.9%) (17.6%) (4.9%) --

Experience adjustment on plan assets (p.a.) (2.5%) (0.5%) (3.2%) 0.4% --


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d) Overview of actuarial asset/(liability) recorded in the Bank

R$ thousand

Actuarial assets Actuarial liabilities

12.31.2011 12.31.2010 12.31.2011 12.31.2010

Plano 1 (Previ) 13,372,004 9,894,787 -- --

Plano Informal (Previ) -- -- (1,742,474) (1,795,283)

Plano de Associados (Cassi) -- -- (4,806,415) (4,607,323)

Regulamento Geral (Economus) -- -- (163,932) (113,592)

Regulamento Complementar 1 (Economus) -- -- -- (237)

Plus I e II (Economus) -- -- (313,822) (275,836)

Grupo B’ (Economus) -- -- (115,264) (114,465)

Total 13,372,004 9,894,787 (7,141,907) (6,906,736)

e) Allocations of the Surplus – Plano 1

R$ thousand

2nd half 2011 2011 2010

Fundo Paridade

Initial Balance 1,553,856 1,524,374 1,778,366

Restatement 74,659 167,125 205,059

Contributions to the Plano 1 – Contract 97 (20,136) (83,120) (459,051)

Closing Balance 1,608,379 1,608,379 1,524,374

Fundo de Destinação

Initial Balance 4,279,152 7,594,993 7,519,058

Restatement 187,061 489,911 75,935

Transfers to Fundo de Contribuição and Fundo de Utilização

(781,888) (4,400,579) --

Closing Balance 3,684,325 3,684,325 7,594,993

Fundo de Contribuição

Initial Balance 1,279,347 -- --

Constitution (1) -- 1,398,467 --

Restatement 56,396 110,247 --

Contributions to the Plano 1 (239,310) (412,281) --

Closing Balance 1,096,433 1,096,433 --

Fundo de Utilização

Initial Balance 2,335,848 -- --

Constitution (1) 781,888 3,002,112 --

Restatement 131,514 247,138 --

Closing Balance 3,249,250 3,249,250 --

(1) Funds setup in the first half 2011.

e.1) Fundo Paridade

The plan was funded, up to 12.15.2000, through a contribution of 2/3 (two thirds) from the Bank and another of 1/3 (one third) from participants. As from 12.16.2000, in order to adjust to the provisions of Constitutional Amendment N.° 20, both the Bank and the participants started to make a contribution of 1/2 (one half), and an agreement was signed by the parties involved and duly approved by the Supplementary Pension Plan Secretariat.

The cost for the implementation of the equal contributions was defrayed by using the Plan's surplus at the time. As a result of this Agreement, the Bank, yet, was entitled to recognize the amount of R$ 2,227,254 thousand, which was recorded in Fundos de Destinação - Previ. This Asset is monthly adjusted based on the actuarial goal (INPC + 5% per year) and, since January 2007, has been used to offset any financial imbalance in the ratio between the Unamortized Reserve and Advanced Amortization arising from the agreement entered into with Previ in 1997, which granted supplementary benefits to the participants of Plano 1 who joined the Plan up to 04.14.1967 and had not retired up to that date.


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e.2) Fundo de Destinação

On 11.24.2010, Banco do Brasil signed a Memorandum of Understanding with the entities that represent current and retired employees, the aim of which was to allocate and use a share of the Plan's surplus, as determined by Supplementary Law N.° 109/2001 and CGPC Resolution N.° 26/2008.

In view of the approval of the measures provided for in the Memorandum of Understanding by Previ's Decision-Making Council, the Bank recorded, as of November 30, 2010, under "Fundos de Destinação - Previ", the amount of R$ 7,519,058 thousand against the write-off of the amount from "Other receivables - Actuarial assets", adjusted by the actuarial target (INPC + 5% p.a.).

e.3) Fundo de Contribuição

The fund is composed by resources transferred from the Fundo de Destinação to support the interruption of contribution payments for a period of three exercises, as established in the Memorandum of Understanding. The amount related to the Bank’s contributions is transferred to Previ, in a monthly basis. The Fundo de Contribuição is updated by an actuarial goal (INPC + 5% p.a.).

e.4) Fundo de Utilização

The fund is composed by resources transferred from the Fundo de Destinação and it can be used by the Bank after fulfilling the requirements established by applicable law. The Fundo de Utilização is updated by an actuarial goal (INPC + 5% p.a.).

28 – Contingent Assets and Liabilities and Legal Obligations – Taxes and Pension Plan

a) Contingent Tax Assets

The Banco do Brasil is an active participant in judicial proceedings to restore tax paid out which will be recognized in the financial statements only on the assumption favorable to the Bank, according Resolution CMN nº. 3,823/2009. The action of most relevance, is related to IOF – Law nº. 8,033/1990 (Indexation), in the amount of R$ 216,264 thousand (R$ 223,660 thousand on 12.31.2010).

b) Contingent Liabilities – Probable

Labor Lawsuits

The Bank is a party to labor lawsuits mainly filed by ex-employees or trade unions of the banking industry. Allowance for probable losses represent various claimed requests, such as: compensation, overtime, distortion of the working day, additional function and representation, and others.

Fiscal Lawsuits

The Bank is subject to challenges by the tax authorities in relation to taxes, which can give rise to notice assessments with the subject matter of jurisdiction or the sum of taxable income or deductible expense. Most of the lawsuits originating from tax assessment notices refer mainly to ISSQN, CPMF, CSLL, IRPJ and IOF, and as a guarantee of some of them, there are attachments in cash or in properties.

Civil Lawsuits

The most significant civil lawsuits classified as probable losses are those aimed at the collection of the difference between the actual rates of inflation and the rate used for inflation correction of financial investments during the period of the various economic plans (Collor Plan, Bresser Plan and Summer Plan).

With the proximity of the prescriptive periods for bringing actions seeking the recovery of values based on inflation rates affected by these economic plans, there was an increase in the volume of lawsuits


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filed. Actions whose success by adverse parties are considered probable are properly provisioned. The refered rates are provided by law that regulated the Federal Government's economic policy by that time. With the prescription that occurred, there is potential liability to be considered representative.

In this regard, there is action pending trial in the Supremo Tribunal Federal (STF) - ADPF/165: Complaint of breach of fundamental precept - authored by the Confederação Nacional do Sistema Financeiro, with the aim of declaring the constitutionality of legislation that established the economic plans.

Changes in the provisions for civil, tax and labor claims classified as probableR$ thousand


2 nd half/2011 2011 2010 2 nd half/2011 2011 2010

Labor claims

Opening Balance 2,245,651 2,462,390 3,242,208 2,392,876 2,538,036 3,300,748

Addition 252,921 462,435 481,273 280,695 511,084 501,962

Reversal of the provision -- (224,698) (740,365) -- (227,447) (743,968)

Written off due payment (260,117) (551,527) (709,436) (260,723) (552,213) (709,440)

Monetary restatement 101,603 191,458 188,322 101,688 191,611 188,734

Amounts merged/added (1) -- -- 388 -- 53,465 --

Closing Balance 2,340,058 2,340,058 2,462,390 2,514,536 2,514,536 2,538,036

Tax claims

Opening Balance 203,133 195,377 174,696 1,292,012 1,260,923 1,138,706

Addition 20,371 32,453 25,659 109,270 202,367 266,708

Reversal of the provision (49,323) (56,162) (9,094) (50,600) (66,047) (138,924)



Change in equity interest held in associated companies(2) -- -- -- -- (237,556) --

Amounts merged/added (1) -- -- -- -- 182,178 (22,133)

Closing Balance 164,943 164,943 195,377 1,400,444 1,400,444 1,260,923

Civil claims

Opening Balance 3,531,358 3,464,569 3,036,381 3,669,939 3,594,694 3,131,472

Addition 197,148 650,905 929,880 301,481 770,108 1,081,380

Reversal of the provision (291,279) (433,245) (387,665) (294,490) (456,787) (473,404)



Amounts merged/added (1) -- -- 1,799 5 14,885 --

Closing Balance 3,244,433 3,244,433 3,464,569 3,473,970 3,473,970 3,594,694

Total Labor, Tax and Civil 5,749,434 5,749,434 6,122,336 7,388,950 7,388,950 7,393,653

(1) It is related to the balance from Banco Patagonia and from companies that make up the BB-Mapfre partnership in insurance business acquired in the first half 2011.

(2) Related to changes in equity interest held in non-financial associated companies.

c) Contingent Liabilities – Possible

The lawsuits, tax and civil risks classified "possible" are exempted from any provisions on the Resolution CMN nº. 3,823/2009.

Labor Lawsuits

Represents various applications demanded as compensation for overtime, distortion of the working day, additional function and representation, and others.


135

Fiscal Lawsuits

Represents a number of claims made such as: ISSQN, collection and other tax obligations from Secretaria da Receita Federal and Instituto Nacional do Seguro Social (INSS). The main contingencies originate from:

� Notices of labor infraction drawn by the INSS, aiming at the payment of contributions applicable on year-end bonuses paid in the collective agreements in the period from 1995 to 2006, in the amount of R$ 1,184,487 thousand, public transport pay and use of private car by employees of Banco do Brasil, in the amount of R$ 166,403 thousand and employee profit sharing corresponding to the period from April 2001 to October 2003, in the amount of R$ 27,150 thousand.

� Notices of tax assessment drawn by the Treasuries of the Municipalities, aiming at the collection of ISSQN, which amounts R$ 251,412 thousand.

Civil Lawsuits

In civil lawsuits there are actions that seek to recover the difference between inflation and the index used to restate financial investments during the period of economic plans (Collor Plan, Bresser Plan and Summer Plan).

The balances of contingent liabilities classified as possible R$ thousand


12.31.2011 12.31.2010 12.31.2011 12.31.2010

Labor claims 107,530 83,822 140,115 88,781

Tax Claims 2,914,842 2,180,924 4,092,203 3,422,182

Civil claims 3,754,877 2,761,507 4,294,798 2,871,303

Total 6,777,249 5,026,253 8,527,116 6,382,266

d) Deposits in Guarantee of Funds

The balances of deposits in guarantee recorded for contingenciesR$ thousand


12.31.2011 12.31.2010 12.31.2011 12.31.2010

Labor claims 2,488,543 2,420,578 2,522,179 2,440,689

Tax claims 4,433,333 4,149,248 5,915,700 5,419,232

Civil claims 3,574,259 2,832,003 3,749,986 2,983,856

Total 10,496,135 9,401,829 12,187,865 10,843,777

e) Legal Obligations

The Bank has a record in Other Liabilities - Fiscal and Social Security, of the amount of R$ 12,754,899 thousand (R$ 12,241,776 thousand on 12.31.2010) at Banco do Brasil and R$ 13,516,326 thousand (R$ 12,942,257 thousand on 12.31.2010) in BB-Consolidated, relating to the following actions:

Judicial Proceeding: Income and Social Contribution Taxes

In February 1998, the Bank applied for a writ of mandamus, in progress at the 16th Federal Court of Federal District claiming full compensation of accumulated losses of income tax and negative basis for the calculation of Social Contribution on Net Income (CSLL).Since then, the Bank has been fully offsetting tax loss and negative basis of social contribution against income tax and social contribution, and has made judicial deposits in the full amount due (70% of the amount offset). These deposits prompted the 16th Vara da Justiça Federal do Distrito Federal to issue an order recognizing the suspension of chargeability of these taxes until final judgment of the Bank's request, based on article 151, item II, of the Código Tributário Nacional (CTN). The case was dismissed in a first instance and an appeal brought by the Bank was deprived by the TRF of the 1st Region. The decision was challenged by extraordinary appeal filed by the Bank on 01.10.2002. Today, the appeal is pending in


136

the Federal Court of the 1st Region, the judgment by the Supreme Court of another extraordinary feature (RE No 591,340), which was recognized by the Supreme Court because the general impact.

The offsetting of tax loss carry forward and recoverable CSLL has resulted in the write-off of deferred tax credits, observing the limitation of 30%.

Deferred taxes including corporate income tax (IRPJ) and social contribution on net income (CSLL) on the restatement of judicial deposits are being offset with the tax credits resulting from the provision related to that judicial deposit, in conformity with paragraph 2, item II, article 1 of CMN Resolution n.º 3,059/2002, with no impact on income.

Based on the hypothesis of a successful outcome to its lawsuit, observed as of September 2005 and January 2009, the Bank would have consumed the entire stock of tax loss carry forward and recoverable social contribution, respectively. Therefore, since the accrual period of October 2005 and February 2009, the amount of IRPJ and CSLL are being paid in full. Moreover, there would be a transfer of resources from the account used to record judicial deposits to that of cash and cash equivalents. Tax credits for the escrow deposits (principal) would be written off against the allowance of IRPJ and CSLL and would be reversed against income, the provision for tax risks related to the restatement of the deposits, amounting to R$ 4,322,529 thousand.

If the Bank were unsuccessful in its lawsuit (situation in which the amounts deposited judicially would be converted into income in favor of the National Treasury), the portions of IRPJ tax credits on tax losses and CSLL to offset would be reclassified to the representative asset account "IRPJ recoverable" and "CSLL recoverable", respectively, that could be used since the accrual period of October 2005 and February 2009, observing the limitation of 30%. These taxes recoverable, which would result from the adjustments of Statements of Economic-Fiscal Information of Businesses, corresponds to R$ 4,158,704 thousand on 12.31.2011 and its restatement by the Selic Rate corresponds to R$ 998,849 thousand. This sum adjusts the provision for tax risks with respect to the updating of court deposits so that it will be sufficient to fully cancel the risk of a likely loss.

The amounts related to this matter R$ thousand

12.31.2011 12.31.2010

Legal Liability - Provision for lawsuit 12,153,757 11,697,619

Judicial Deposits 13,348,256 12,485,258

Amount realized 7,817,011 7,817,011

Restatement 5,531,245 4,668,247

The amount of tax credits corresponding to the 70% portion 6,585,045 6,540,168

Tax losses of IRPJ 3,002,033 3,002,033

CSLL losses to offset/ CSLL recoverable 3,583,012 3,538,135

Judicial Proceeding: PIS/Pasep and Cofins

Provision for lawsuit relating to the mandamus intended to achieve recognition of the right of Banco do Brasil, BB Corretora, Ativos S.A. and Banco Votorantim to pay PIS/Pasep and Cofins according to the calculation bases set out in Complementary Laws nº. 7/1970 and nº. 70/1991, recorded in Banco do Brasil the amount of R$ 601,142 thousand (R$ 544,157 thousand on 12.31.2010) and R$ 1,362,569 thousand in BB-Consolidated (R$ 1,244,638 thousand on 12.31.2010), considering R$ 759,932 thousand from Banco Votorantim. Since the injunctions were suspended on 08.12.2010, Banco do Brasil and BB Corretora returned to collect the PIS/Pasep and Cofins from the event of July 2010 as provided for in Law nº. 9,718/1998. The legal actions of Banco Votorantim concerning to Cofins, had favorable judgments which are subject to an appeal.


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13/02/2012 17:34

29 - Risk Management and Regulatory Capital

a) Risk Management Process

Banco do Brasil considers the management of risks one of the main vectors for the decision-making process.

In the Banco do Brasil, collegiate risk management is performed completely apart from the business units. Risk management policies and concentration are specified by the Bank's Board of Directors and by the Global Risk Committee (CRG), which is a discussion group composed by the President and by Vice-Presidents. Actions for implementing and monitoring guidelines issued by the CRG are directed at specific sub-committees (Credit, Market and Liquidity and Operational), which are groups formed by Directors.

To find out more about the risk management process at Banco do Brasil, access the website bb.com.br/ri.

b) Credit Risk

Credit Risk is associated with the possibility of loss resulting from uncertainty regarding the receipt of amounts agreed upon with borrowers, counterparts of contracts or issues of securities.

In order to comply with the best practices of credit risk management and to increase efficiency in the economic capital management, Banco do Brasil uses risk and return metrics, present throughout its loan process, as a mechanism of risk management culture at the Institution.

c) Liquidity risk

Liquidity risk takes two forms: market liquidity risk and cash flow liquidity risk (funding). The first is the possibility of loss resulting from the incapacity to perform a transaction in a reasonable period of time and without significant loss of value. The second is associated with the possibility of a shortage of funds to honor commitments assumed on account of the mismatching between assets and liabilities.

d) Operational risk

Operational risk reflects the possibility of loss resulting from faults, deficiencies, or the inadequacy of internal processes, personnel and systems, or external events. This concept includes legal risks.


138

e) Market Risk

Market Risk reflects the possibility of loss that can be caused by changes in the behavior of interest and exchange rates and of prices of shares and commodities.

Financial Instruments – Fair Value

Financial instruments recorded in balance-sheet accounts, compared to fair value:

R$ thousand

BB-Consolidated

12.31.2011 12.31.2010 Unrealized gain/loss, net of tax effects

Book value Fair value Book value Fair value On Income On Shareholders´ Equity

12.31.2011 12.31.2010 12.31.2011 12.31.2010

Assets

Short-term interbank deposits 166,287,806 166,287,194 107,578,790 107,564,261 (612) (14,529) (612) (14,529)

Securities 166,833,173 166,693,437 142,243,143 142,083,409 526,295 285,221 (139,736) (159,734)

Adjustment of securities available for sale (Note 8.a) -- -- -- -- 666,031 444,955 -- --

Adjustment of securities held to maturity (Note 8.a) -- -- -- -- (139,736) (159,734) (139,736) (159,734)

Derivative financial instruments 1,396,700 1,396,700 1,623,591 1,623,591 -- -- -- --

Loan operations 379,045,045 379,158,229 317,726,499 317,801,144 113,184 74,645 113,184 74,645

Liabilities

Interbank deposits 14,450,354 14,673,099 18,998,102 19,007,052 (222,745) (8,950) (222,745) (8,950)

Time deposits 265,808,991 265,922,145 204,652,146 204,636,840 (113,154) 15,306 (113,154) 15,306

Money Market Borrowing 195,175,276 195,155,509 142,174,955 142,100,736 19,767 74,219 19,767 74,219

Borrowings and onlendings 63,350,471 63,280,538 59,458,834 59,416,542 69,933 42,292 69,933 42,292

Derivative financial instruments 3,620,655 3,620,655 5,296,640 5,296,640 -- -- -- --

Other liabilities 181,767,988 181,761,619 159,458,907 159,393,860 6,369 65,047 6,369 65,047

Unrealized gain/loss, net of tax effects 399,037 533,251 (266,994) 88,296


139

Determination of Fair Value of Financial Instruments

Short-term interbank investments: The fair value was obtained by discounted future cash flows, using interest rates exercised by the market in similar operations in the balance sheet date.

Securities: Securities and derivative financial instruments are accounted for by market value, as provided for in Bacen Circular nº 3,068/2001, except for securities held to maturity. The securities fair value, including those held to maturity, were obtained according to rates collected at the market.

Loan operations: Fixed rate operations have been estimated through the future cash flow discount method, considering the interest rates utilized by the Bank for contracting of similar operations at the balance sheet date. For these operations that are remunerated by floating rates, the fair value was equivalent to the book value itself.

Interbank deposits: The fair value has been calculated through discount of the difference between future cash flows and rates currently applicable in the fixed operations market. In case of floating operations which maturities did not exceed 30 days, the book value was deemed equivalent to the fair value.

Time deposits: The same criteria adopted for interbank deposits were utilized in the determination of the fair value.

Money Market Borrowing: For operations at fixed rates, the fair value was determined calculating the discount of the estimated cash flows adopting a discount rate equivalent to the rates applicable in contracting of similar operations in the last market day. For floating operations, book values have been deemed equivalent to market value.

Borrowing and onlendings: Such operations are exclusive to the Bank, without similarity in the market. In face of their specific characteristics, exclusive rates for each fund entered, inexistence of an active market and similar instrument, the fair values of such operations were considered equivalent to the book value.

Other liabilities: Fair values have been determined by the discounted cash flow method, which takes into account interest rates offered in the market for obligations for which maturities, risks and terms are similar.

Other financial instruments: Included or not in the balance sheet, fair value was approximately equivalent to the correspondent book value.

Derivatives: According to Bacen Circular nº 3,082/2002, derivatives are recorded at market value. Derivatives' market value was estimated in accordance with an internal pricing model, with the use of the rates disclosed for transactions with similar terms and indices on the fiscal years' last business day.

Level of information regarding assets and liabilities measured at fair value in the balance sheet

According to the level of information in the measurement at fair value, the assessment techniques used by the Bank are the following:

Level 1 – Prices quoted are used in active markets for identical financial instruments. A financial instrument is considered quoted in an active market if the quoted prices are readily and regularly available and these prices represent real market transactions which occur regularly on an arm's length basis.

Level 2 – other information available is used, except that from Level 1, in which the prices are quoted in non-active markets or for similar assets and liabilities, or other available information is used or that can be corroborated by information observed in the market to support the assessment of the assets and liabilities.


140

Level 3 – information that is not available in the market is used in the definition of the fair value. If the market for the financial instrument is not active, the entity establishes the fair value using the valuation technique which takes into account internal data that is consistent with the economic methodologies accepted for pricing of financial instruments.

Assets and liabilities measured at fair value in the balance sheet R$ thousand

Balance at 12.31.2011 Level 1 Level 2 Level 3

Assets

Trading securities, measured by market value 63,257,425 46,662,817 16,594,608 --

Derivative financial instruments 1,396,700 125,359 1,271,103 238

Available-for-sale securities, measured by market value 88,385,009 59,415,292 28,125,499 844,218

Liabilities

Hedge funding 4,040,513 2,591,380 1,449,133 --

Derivative financial instruments 3,620,655 194,058 3,421,873 4,724

R$ thousand

Balance at 12.31.2010 Level 1 Level 2 Level 3

Assets

Trading securities, measured by market value 50,444,872 40,242,450 10,037,224 165,198


Available-for-sale securities, measured by market value 75,142,337 56,961,784 17,413,007 767,546

Liabilities

Hedge funding 2,945,841 1,896,182 1,049,659 --


Sensitivity analysis (CVM Instruction nº 475/2008)

The Banco do Brasil manages its risks in a dynamic process, identifying, assessing, monitoring, and controlling market risk exposure in its own position. In this context, the Bank takes into account the risk limits defined by the Strategic Committees and likely scenarios, to act in a timely manner in reversing any occasional adverse results.

In accordance with CMN Resolution nº 3,464/2007 and with Bacen Circular nº 3,354/2007, to manage more efficiently its transactions exposed to market risks, Banco do Brasil separates its transactions, including derivative financial instruments, as follows:

1) Trading Book: consisting of own positions held for trading or as a hedge for its trading portfolio, for which there is an intention of trading prior to their contractual expiry, subject to normal market conditions and that do not have a non-trading clause.

2) Banking Book: consisting of transactions not classified in the Trading Book whose feature is held to maturity.

The sensitivity analysis for all the operations with assets and liabilities of the Balance Sheet, in compliance with CVM Instruction nº 475/2008, related to scenario II and III above, does not adequately reflect the market risk management process and the best practices adopted by the Institution

In order to determine the sensitivity of the Bank's capital to the impacts of market volatility (except Banco Votorantim capital), simulations were performed with three likely scenarios, two of which with an adverse effect for the Bank. The scenarios used are listed below:

Scenario I: Likely situation, which reflects the perception of the Bank’s senior management, the scenario most likely to occur for a 3-month horizon, considering macroeconomic factors and market


141

information (BM&FBovespa, Andima, etc.). Assumptions: exchange rate - Reais/Dollar of R$ 1.87 andraising the Selic rate to 10% per annum based on market conditions observed at 12.31.2011.

Scenario II: Possible situation. Assumptions employed: parallel shock of 25.0% in the risk variables, based on market conditions observed on 12.31.2011 considering the worst losses by risk factor and, therefore, neglecting the dynamics of macroeconomic factors;

Scenario III: Possible situation. Assumptions employed: parallel shock of 50.0% in the risk variables, based on market conditions observed on 12.31.2011 considering the worst losses by risk factor and thus ignoring the dynamics of macroeconomic factors.

The tables below summarize the results for the Trading Portfolio (Trading), excluding Banco Votorantim's positions, composed of public and private securities, derivative financial instruments and funds obtained through commitment operations.

R$ thousand

Scenario I

Risk Factor Concept

12.31.2011 12.31.2010

Variation of rates Income Variation of rates Income

Prefixed rate Risk of variation of prefixed interest rates Decrease 3,619 Increase (13,129)

TMS and CDI coupons Risk of variation of interest rate coupons Increase (39) Increase 164

IPCA Risk of variation of price index coupons Decrease 1,064 Increase (971)

Foreign currency coupons (US Dollars)

Risk of variation of foreign exchange coupon Increase -- Decrease --

Exchange rates variation Risk of variation of exchange rates Decrease (283) Increase 2,382

R$ thousand

Scenario II

Risk Factor Concept

12.31.2011 12.31.2010


Prefixed rate Risk of variation of prefixed interest rates Increase (7,354) Increase (35,251)

TMS and CDI coupons Risk of variation of interest rate coupons Increase (29) Increase (41)

IPCA Risk of variation of price index coupons Increase (1,014) Increase (1,451)


Risk of variation of foreign exchange coupon Decrease -- Increase --

Exchange rates variation Risk of variation of exchange rates Decrease (22,918) Decrease (22,653)

R$ thousand

Scenario III

Risk Factor Concept

12.31.2011 12.31.2010


Prefixed rate Risk of variation of prefixed interest rates Increase (14,871) Increase (73,052)

TMS and CDI coupons Risk of variation of interest rate coupons Increase (58) Increase (82)

IPCA Risk of variation of price index coupons Increase (1,981) Increase (2,837)


Risk of variation of foreign exchange coupon Decrease -- Increase --


For transactions classified in the Banking Book, appreciations or depreciations resulting from changes in interest rates practiced in the market do not imply in a significant financial and accounting impact on the Bank's income. It’s a result of the portfolio quality that is composed on large scale of loan operations (consumer credit, agribusiness, working capital, etc.); retail funding (demand, time, and savings deposits), and securities, which are recorded in the books according to the agreed on rates when contracting these operations. In addition, it should be pointed out that these portfolios have as their key feature the intention of holding the respective positions to maturity, and hence they are not


142

subject to the effects of fluctuating interest rates, or the fact that such transactions are naturally related to other instruments (natural hedge), hence minimizing the reflexes of a stress scenario.

The tables below show a summary of the Trading Portfolio (Trading) and Non Trading (Banking), except from Banco Votorantim:

R$ thousand

Scenario I

Risk Factor Concept

12.31.2011 12.31.2010


Prefixed rate Risk of variation of prefixed interest rates Decrease 1,787,692 Increase (1,928,246)

TR Risk of variation of interest rate coupons

Decrease (2,928,968) Increase 1,449,619

TBF Decrease (671) Decrease (145)

TJLP Risk of variation of interest rate coupons

Decrease (248,336) Increase 137,778

TMS and CDI coupons Increase 71,001 Increase (27,143)

IGP-M

Risk of variation of price index coupons

Decrease 170,715 Increase (137,572)

IGP-DI Decrease 280 Increase (207)

INPC Decrease 405,481 Increase (70,605)

IPCA Decrease 46,853 Increase (31,214)

Foreign Currency Coupom Risk of variation of foreign exchange coupon Increase 519,294 Decrease (116,853)

Exchange rates variation Risk of variation of exchange rates Decrease (5,236) Increase 21,083

R$ thousand

Scenario II

Risk Factor Concept

12.31.2011 12.31.2010


Prefixed rate Risk of variation of prefixed interest rates Increase (3,562,867) Increase (5,300,903)


Decrease (5,154,022) Decrease (4,570,631)



Decrease (205,023) Decrease (203,752)

TMS and CDI coupons Decrease (102,427) Increase (35,049)

IGP-M


Increase (168,062) Increase (187,811)

IGP-DI Increase (323) Increase (287)

INPC Increase (418,739) Increase (101,491)

IPCA Increase (45,617) Increase (45,560)

Foreign Currency Coupom Risk of variation of foreign exchange coupon Decrease (710,749) Decrease (29,465)


R$ thousand

Scenario III

Risk Factor Concept

12.31.2011 12.31.2010


Prefixed rate Risk of variation of prefixed interest rates Increase (6,877,667) Increase (10,163,642)


Decrease (10,669,317) Decrease (9,476,165)



Decrease (418,286) Decrease (414,806)

TMS and CDI coupons Decrease (204,955) Increase (70,073)

IGP-M


Increase (316,569) Increase (351,961)

IGP-DI Increase (643) Increase (570)

INPC Increase (821,008) Increase (198,695)

IPCA Increase (87,822) Increase (88,026)

Foreign Currency Coupom Risk of variation of foreign exchange coupon Decrease (1,446,248) Decrease (59,180)



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The scenarios used for preparing the framework of sensitivity analysis must use situations of deterioration of at least 25% and 50% for variable risk, in a individuallized basis, as determined by CVM Instruction nº 475/2008. Thus, the combined analysis of the results is impaired. For example, simultaneous shocks of increase in the prefixed interest rate and reduction of TR Coupon are not consistent from the macroeconomic perspective.

The derivative transactions classified in the Banking Book, don’t represent a relevant market risk to Banco do Brasil, as these positions originated mainly to fulfill the following situations:

� Changing the index of funding and lending transactions performed to meet customer needs; � Market risk hedge, which purpose and effectiveness are described in Note 8.d. Also in this

transaction, the interest and exchange rate variations have no effects on the Bank's income.

The Banco do Brasil did not enter into any transaction likely to be classified as an exotic derivative, as described in CVM Instruction nº 475/2008 - Attachment II.

Interest in Banco Votorantim

Banco Votorantim, in the first half of 2011, revised the criteria for classification of operations, which resulted in the migration of part of its trading book positions for non-trading. Thus, the sensitivity analysis of the positions regarding to the participation of Banco do Brasil in Banco Votorantim considers the trading and non-trading book together and the trading book in a segregated way.

Simulations were also made with three possible scenarios, two of which with consequent adverse result, as follows:

Scenario I: Likely situation, which reflects the perception of the Banco Votorantim’ senior management in the scenario most likely to occur. Assumptions employed: exchange rates real/dollar from R$ 1.80 and the Selic rate of interest 10.25% per year to 2011.

Scenario II: Assumptions: parallel shock of 25% in the risk variables, based on market conditions observed on 12.31.2011 and considering the worst losses by risk factor and, therefore, neglecting the dynamics of macroeconomic factors;

Scenario III: Assumptions: employed parallel shock of 50% in the risk variables, based on market conditions observed on 12.31.2011 and considering the worst losses by risk factor and therefore ignoring the dynamics of macroeconomic factors.

In the tables below are presented the results for the positions of the Bank for its participation in Banco Votorantim:

R$ thousand

Scenario I

Risk Factor Concept

12.31.2011 12.31.2010


Prefixed rate Risk of variation of prefixed interest rates Decrease 16,682 Increase --

Foreign currency coupons Risk of variation of foreign exchange coupon Maintenance -- Increase 42,497

Exchange variation Risk of variation of exchange rates Increase 1,395 Increase (690,382)

Price Indexes Risk of variation of price index coupons Increase 130 Increase (2,403)

Interest rates Risk of variation of interest rate coupons Maintenance -- Increase (425)

Other Risk of variation of other coupons Decrease (487) Increase (12,221)


144

R$ thousand

Scenario II

Risk Factor Concept

12.31.2011 12.31.2010


Prefixed rate Risk of variation of prefixed interest rates Increase (37,944) Decrease (605,880)

Foreign currency coupons Risk of variation of foreign exchange coupon Increase (923) Decrease (111,898)

Exchange variation Risk of variation of exchange rates Increase (91,152) Increase (732,519)

Price Indexes Risk of variation of price index coupons Decrease (315) Increase (8,522)

Interest rates Risk of variation of interest rate coupons Increase -- Increase (2,973)

Other Risk of variation of other coupons Increase (13,204) Decrease (21,201)

R$ thousand

Scenario III

Risk Factor Concept

12.31.2011 12.31.2010


Prefixed rate Risk of variation of prefixed interest rates Increase (87,694) Decrease (1,237,639)

Foreign currency coupons Risk of variation of foreign exchange coupon Increase (1,813) Decrease (167,073)

Exchange variation Risk of variation of exchange rates Increase (428,656) Increase (1,025,643)

Price Indexes Risk of variation of price index coupons Decrease (741) Increase (14,498)

Interest rates Risk of variation of interest rate coupons Increase -- Increase (5,241)

Other Risk of variation of other coupons Increase (47,152) Decrease (207,868)

In the tables below are presented the results for the positions of the Bank for its participation in Banco Votorantim of the trading and non-trading book:

R$ thousand

Scenario I

Risk Factor Concept

12.31.2011

Variation of rates Income

Prefixed rate Risk of variation of prefixed interest rates Decrease 188,936

Foreign currency coupons Risk of variation of foreign exchange coupon Increase (4,044)

Exchange variation Risk of variation of exchange rates Increase 2,190

TJLP Risk of variation of TJLP coupons Maintenance --

TR/TBF Risk of variation of TR/TBF coupons Maintenance --

Price Index Risk of variation of price index coupons Increase 1,255

R$ thousand

Scenario II

Risk Factor Concept

12.31.2011


Prefixed rate Risk of variation of prefixed interest rates Increase (431,632)


Exchange variation Risk of variation of exchange rates Increase (96,182)

TJLP Risk of variation of TJLP coupons Decrease (1,987)

TR/TBF Risk of variation of TR/TBF coupons Decrease (605)

Price Index Risk of variation of price index coupons Decrease (2,649)


145

R$ thousand

Scenario III

Risk Factor Concept

12.31.2011


Prefixed rate Risk of variation of prefixed interest rates Increase (1,003,137)


Exchange variation Risk of variation of exchange rates Increase (441,553)

TJLP Risk of variation of TJLP coupons Decrease (4,100)

TR/TBF Risk of variation of TR/TBF coupons Decrease (1,206)

Price Index Risk of variation of price index coupons Decrease (5,880)

f) Regulatory Capital

The Basel Ratio was determined in accordance with the criteria established by CMN Resolutions n.º 3,444/2007 and n.º 3,490/2007, which refer to the calculation of the Referential Equity (RE) and of the Required Referential Equity (RRE), respectively, without considering the information relating to Banco Votorantim as determined by Bacen.

R$ thousand

12.31.2011 12.31.2010

Economic and Financial

FinancialEconomic and

FinancialFinancial

RE - Referential equity amount 80,481,841 82,154,035 66,927,567 68,257,551

Tier I 60,615,163 60,791,381 52,397,235 52,452,142

Shareholders' equity 58,416,370 58,592,587 50,440,683 50,495,590

Revaluation reserves (4,731) (4,730) (6,241) (6,241)

Deferred Assets (164,671) (164,671) (226,529) (226,529)

Mark-to-market (350,594) (350,594) (203,031) (203,031)

Tax credits excluded from Level I of RE (106) (106) (22,477) (22,477)

Hybrid Capital and Debt Instruments - Level I 2,718,895 2,718,895 2,414,830 2,414,830

Tier II 24,877,818 24,877,817 19,763,491 19,763,491

Mark-to-market 350,594 350,594 203,031 203,031

Subordinated Debt Qualifying as Capital 24,522,493 24,522,493 18,738,173 18,738,173

Funds obtained from the FCO 14,771,005 14,771,005 13,455,864 13,455,864

Funds obtained abroad 4,228,367 4,228,367 1,369,813 1,369,813

Funds obtained from the CDB 2,337,638 2,337,638 2,829,732 2,829,732

Funds raised in Financial Letters 3,185,483 3,185,483 1,082,764 1,082,764

Hybrid Capital and Debt Instruments – Level II -- -- 816,046 816,046

Revaluation reserves 4,731 4,730 6,241 6,241

Deduction from the RE (5,011,140) (3,515,163) (5,233,159) (3,958,082)

Financial instruments excluded from RE (5,011,140) (3,515,163) (5,233,159) (3,958,082)

RRE - Required Referential Equity Amount 63,326,079 62,528,344 52,297,217 50,993,696

Credit risk 59,802,205 59,260,188 48,900,525 47,805,205

Market Risk 90,442 90,442 31,422 31,422

Operational Risk 3,433,432 3,177,714 3,365,270 3,157,069

Sufficiency of RE: (RE – RRE) 17,155,762 19,625,691 14,630,350 17,263,855

BIS Ratio: (RE x 100) / (RRE / 0.11) 13.98 14.45 14.08 14.72

g) Fixed asset ratio

The Fixed Asset Ratio in relation to the Referential Equity (RE) is 27.19% (20.99% on 12.31.2010) for the Consolidated Financial Report, and 22.11% (16.83% on 12.31.2010) for the Consolidated Economic and Financial Report, in compliance with CMN Resolution n.º 2,669/1999. The difference between the Fixed Assets Ratio of Consolidated Financial and Economic-Financial is the result of the inclusion of non-financial subsidiaries / affiliates that have high liquidity and low level of restraint, wich consequently reduces the Fixed Assets Ratio of Consolidated Financial and Economic.


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13/02/2012 17:34

13/02/2012 17:34

30 – Statement of Comprehensive Income

R$ thousand


2nd Half 2011 2011 2010 2nd Half 2011 2011 2010

Net income presented in the Statement of Income

5,984,963 12,247,330 11,758,093 5,863,623 12,125,990 11,703,185

Other comprehensive income / (loss)

Assets valuation adjustments (Note 8.f) 254,952 183,164 284,590 254,952 183,164 284,590

Own 225,780 211,909 173,348 225,780 211,909 173,348

Subsidiaries and affiliates 29,172 (28,745) 111,242 29,172 (28,745) 111,242

Income and social contribution taxes related to unrealized gains / (losses) (Note 8.f)

26,646 73,243 (87,319) 26,646 73,243 (87,319)

Other comprehensive income / (loss), net of income and social contribution taxes

281,598 256,407 197,271 281,598 256,407 197,271

Comprehensive income – Banco do Brasil 6,266,561 12,503,737 11,955,364 6,145,221 12,382,397 11,900,456

Comprehensive income – Non-controlling interests

-- -- -- 65,783 93,131 (20)

31 – Other Information

a) Novo Mercado

At 05.31.2006, Banco do Brasil signed a contract with the São Paulo Stock Exchange for adhesion to the Novo Mercado segment of BM&FBovespa, which assembles a group of companies with the best corporate governance practices in Brazil.

Banco do Brasil, its Shareholders, the Officers, and the members of the Fiscal Council undertake to resolve all and any dispute or controversy related with the Novo Mercado Listing Regulation by means of the Arbitration Chamber of the BM&FBovespa, in compliance with a commitment clause contained in the By-Laws of Banco do Brasil.

b) Distribution of Dividends and/or Interest on Own Capital

During a meeting held on 01.21.2011, the Board of Directors approved the setting, for the year 2011, of the payout rate equivalent to the minimum 40% of net income, fulfilling the policy for payment of dividends yield and/or interest on own capital on a quarterly basis, pursuant to art. 43 of the Bank's By-Laws.

c) Bescredi and Besc Leasing - Auction of Fractions

On 03.03.2011 there was an auction for the sale at BM&FBovespa of the remaining fractions of shares of Banco do Brasil S.A., resulting from the conversion of instruments of the merged companies Besc S.A. Arrendamento Mercantil and Besc Financeira S.A. - Credito, a total of R$ 5,247.98, equivalent to 178 shares.

d) Banco Postal

On 05.31.2011, the Bank won the bidding process to five years exploration period, of correspondent banking services provided by the chain of Banco Postal of Empresa Brasileira de Correios e Telégrafos - ECT. The financial offer was R$ 2,800,000 thousand.

In accordance with the contract signed on 07.01.2011 by the companies, the Bank paid on cash R$ 2,300,000 thousand to ECT on 07.11.2011, related to total of “Basic Value to Access the


147

Business”. The amount of R$ 500,000 thousand, refered to “Value for the Agency Chain” was paid on 01.02.2012, updated pro rata temporis, as contract clause.

Since 01.01.2012, the Bank has had access to the ECT’s agencies chain, with 6,915 service points located at 95% of brasilian cities. Through this investment, the Bank anticipated its strategic plan of increase its service points to achieve all the brasilian municipalities.

e) EuroBank

On 01.19.2012, the acquisition of entire EuroBank stock ended with the payment to the sellers and the transfer of 835,855 ordinary stock to Banco do Brasil, corresponding to the entire social and voting capital of EuroBank, that is a north american financial institucion.

On 2011, the acquisition had already past through the following approval:

• on 05.31.2011 – Shareholder Meeting of Banco do Brasil; • on 08.09.2011 – Brazilian Central Bank; • on 10.19.2011 - Florida Office of Financial Regulation (OFR); • on 11.07.2011 - Federal Deposit Insurance Company (FDIC); • on 12.16.2011 - Federal Reserve Board (FED).

Investment and goodwill were calculated using the adjusted equity of EuroBank, on december 2011, converted to the exchange rate of 01.17.2012.

R$ thousand

Investment value 10,651

Value of adjusted equity 4,497


Capital investment (1) 52,368

(1) The capital investment allowed the emission of 4,916,666 (four million, nine hundred sixteen thousand, six hundred sixty-six) ordinary stock.

EuroBank, a close corporation which headquarter is located in the state of Flórida (United States), has a network of three agencies located in the cities of Coral Gables, Pompano Beach and Boca Raton. Entire assets, in 09.30.2011, summed up to USD 83,434 thousand.

f) Funds and Programs

The Bank is administrator of the Programa de Formação do Patrimônio do Servidor Público - Pasep with assets of R$ 1,983,929 thousand .(R$ 2,027,901 thousand on 12.31.2010), guaranteeing a minimum return equivalent to Taxa de Juros de Longo Prazo - TJLP.

g) Investment Funds Administration

Position of investment funds managed by BB Gestão de Recursos - Distribuidora de Títulos e Valores Mobiliários S.A.:

N.º Funds/Portfolios Balance (R$ thousand)

12.31.2011 12.31.2010 12.31.2011 12.31.2010

Managed funds 521 489 415,792,780 360,200,007

Investment Funds 507 471 403,844,665 348,659,790

Managed Portfolios 14 18 11,948,115 11,540,217


148

h) Details of branches, subsidiaries and associated abroad

R$ thousand


12.31.2011 12.31.2010 12.31.2011 12.31.2010

Assets

BB Group 26,302,917 16,773,425 23,535,468 14,931,097

Third parties 51,529,172 37,217,130 62,051,334 39,120,507

Total assets 77,832,089 53,990,555 85,586,802 54,051,604

Liabilities

BB Group 14,927,245 9,063,431 12,325,721 7,093,625

Third parties 59,457,189 42,378,018 67,619,119 43,428,217

Shareholders' equity 3,447,655 2,549,106 5,641,962 3,529,762

attributable to parent company 3,447,655 2,549,106 5,198,093 3,529,762

participation of non-controlling -- -- 443,869 --

Total liabilities 77,832,089 53,990,555 85,586,802 54,051,604

2 nd half/2011 2011 2010 2 nd half/2011 2011 2010

Net income (loss) 258,882 278,475 24,653 384,731 495,051 106,429

attributable to parent company 258,882 278,475 24,653 318,972 401,939 106,429

participation of non-controlling -- -- -- 65,759 93,112 --

i) Consortium funds

R$ thousand

12.31.2011 12.31.2010

Monthly forecast of funds receivable Purchase Pool Members 122,458 71,052

Obligations of the group due to contributions 7,450,510 4,524,352

Purchase Pool Members - assets to be contemplated 7,026,937 4,236,828

(In units)

Quantity of groups managed 426 532

Quantity of active purchase pool members 346,990 208,486

Quantity of assets deliverable to purchase pool members 16,307 15,934

Quantity of assets delivered in the period 14,899 41,286


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j) Assignment of Employees to Outside Agencies

Federal government assignments are regulated by Law nº. 10470/2002 and Decree nº. 4050/2001.

2 nd half/2011 2011 2010

Employees

Ceded (1)

Cost in the

Period (R$ thousand)

Employees

Ceded (1)

Cost in the


Employees

Ceded (1)

Cost in the


With costs for the Bank

Federal Government 5 902 5 1,854 10 2,512

Labor unions 234 14,330 234 27,489 232 24,106

Other organizations/entities: 5 1,063 5 2,036 5 1,647

Subsidiary and associated companies 2 451 2 867 -- --

Without cost to the Bank

Federal, state and municipal governments 273 -- 273 -- 303 --

External organizations (Cassi, FBB, Previ and Economus)

769 -- 769 -- 753 --

Employee entities 84 -- 84 -- 87 --

Subsidiary and associated companies 345 -- 345 -- 331 --

Total 1,717 16,746 1,717 32,246 1,721 28,265

(1) Balance in the last day of the period.

k) Remuneration of Employees and Managers

Monthly wages paid to employees and Directors of the Banco do Brasil: R$

12.31.2011 12.31.2010

Lowest salary 1,760.00 1,600.13

Highest salary 29,583.36 27,140.70

Average salary 4,869.19 4,444.70

Management

President 52,513.00 44,505.00

Vice-President 47,003.00 40,197.00

Director 39,836.00 34,380.00

Directors

Fiscal Council 4,192.19 3,606.85

Board of Directors 4,192.19 3,606.85

Audit Committee – Member 35,852.40 30,942.00

Audit Committee - Substitute 32,267.16 27,847.80

l) Insurance Policy of Assets

Despite the reduced level of risk to which its assets are subject, the Bank contracts insurance cover for its assets in amounts considered sufficient to cover any losses.

Insurance contracted by the Bank in force on 12.31.2011: R$ thousand

Covered Risks Amounts Covered Value of the Premium

Property insurance for the relevant assets 8,591,967 3,320

Life insurance and personal accident for the collective Board (1) 700 (1) 191

Other 21,298 2,326

Total 8,613,965 5,837

(1) Refers to individual coverage for members of the Executive Board.

13/02/2012 17:34

2

Report of Independent Auditors for Financial Statements

To

The Board of Directors, Shareholders and Management

Banco do Brasil S.A.

Brasília - DF

We have audited the accompanying, individual and consolidated financial statements of Banco do

Brasil S.A., which comprise the balance sheet as of December 31, 2011 and the related

statements of income, of changes in stockholders' equity and of cash flows for the year and

semester then ended, as well as the summary of significant accounting policies and other notes to

the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these individual and

consolidated financial statements in accordance with accounting practices adopted in Brazil,

applicable to institutions authorized to operate by the Brazilian Central Bank (BACEN), and for

designing, implementing and maintaining internal control relevant to the preparation of financial

statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We

conducted our audit in accordance with approved Brazilian auditing standards and International

Standards on Auditing. Those standards require that we comply with ethical requirements and

plan and perform the audit to obtain reasonable assurance about whether the financial statements

are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and

disclosures in the financial statements. The procedures selected depend on the auditor's judgment,

including the assessment of the risks of material misstatement of the financial statements,

whether due to fraud or error. In making those risk assessments, the auditor considers internal

controls relevant to the Bank's preparation and fair presentation of the financial statements of

Banco do Brasil S.A. in order to design audit procedures that are appropriate in the

circumstances, but not for the purpose of expressing an opinion on the effectiveness of the

internal control of Banco do Brasil S.A.. An audit also includes evaluating the appropriateness of

accounting policies used and the reasonableness of accounting estimates made by management,

as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a

basis for our audit opinion.

3

Opinion

In our opinion, the individual and consolidated financial statements referred to above present

fairly, in all material respects, the financial position of Banco do Brasil S.A. at December 31,

2011, the financial performance of its operations and its cash flows for the year and semester then

ended, in accordance with accounting practices adopted in Brazil applicable to institutions

authorized to operate by the Brazilian Central Bank.

Statement of value added

We have also audited the individual and consolidated statement of value added (DVA),

elaborated under the responsibility of the management of Banco do Brasil S.A., for the year and

semester ended December 31, 2011, submission of which publicly-held companies are required

to make according to Brazilian corporate law. This statement was subjected to the same audit

procedures described above and, in our opinion, is presented fairly in all material respects in

relation to the financial statements taken as a whole.

Brasília, February 10, 2012.

KPMG Auditores Independentes

CRC 2SP014428/O-6 F-DF

Original report in Portuguese signed by

Giuseppe Masi Carlos Massao Takauthi

Accountant CRC 1SP176273/O-7 S-DF Accountant CRC 1SP206103/O-4 S-DF

152

SUMMARY OF THE AUDIT COMMITTEE REPORT

Second Half 2011

Introduction

The Audit Committee of the Banco do Brasil (BB) is the advising statutory body of the Board of Directors whose mains attributions are: evaluate the internal controls system and the internal and external audits effectiveness, and review prior to publication, all the financial statements. The BB Audit Committee bylaws are available at www.bb.com.br/ri.

The action universe of the Committee comprises BB Banco do Brasil and the following subsidiaries: BB DTVM Gestão de Recursos – Distribuidora de Títulos e Valores Mobiliários S.A., BB Banco de Investimento S.A., BB Leasing S.A. – Arrendamento Mercantil, BB Administradora de Cartões S.A. e BB Administradora de Consórcios S.A. e Besc Distribuidora de Títulos e Valores Mobiliários S.A.

BB management and its subsidiaries’ management are responsible for preparing and assuring the integrity of the financial statements, for managing risks, for maintaining an effective and consistent internal control system, and for ensuring compliance with applicable legal and regulatory standards.

The Internal Audit independently responds for periodic actions in order to evaluate risk management work, as well as to evaluate adequacy and effectiveness of internal controls.

KPMG Auditors Independents is responsible for auditing the Bank’s financial statements and for issuing an opinion on whether the financial position is presented fairly, in all material respects, and on whether its internal controls are in conformity with accounting practices adopted in Brazil. Evaluates, also, the quality and adequacy of internal controls system, concerning the auditing over financial statements, including the system of electronic data processing and risk management, and compliance with legal and regulatory provisions.

Activities

According to its activities, the Audit Committee has held, a total of 76 meetings on the second semester and 133 meetings on the year, with the Board of Directors, with the internal and independent auditors, with external inspection agency, and with the chiefs from business, accounting, investors relation, human resources, security, internal controls, legal, technology and risk management areas.

During these meetings, the considered issues were capital management, risk management, Basel Agreement, provisions, legal contingencies, impairment, goodwill, improvements of the internal controls mechanisms, compliance with laws and standards, procedures for money laundering, information security, technology solutions, internal and external ombudsman, and advice from internal and independents audits and external inspection agencies.

The Committee maintained dialogue with internal and external audits teams, during which was verified the performance its annual planning, the committee knew the work result carried out and examined its main conclusions and advices.

It also monitored the process used for preparing the financial statements, examined relevant aspects, coverage, compliance and notes quality. The Committee verified the accounting practices adopted, the criteria used to establish provisions and met the contents of the document issued by the independent audit.

When improvements opportunities were identified, the Committee suggested that improvements for the specific area of the Institution.

153

Conclusions

Based on the activities undertaken during the period, and tanking in place its attributions and coverage limitations, the Committee concluded that:

a) the internal control system is adequate to the complexity and subjected to permanent attention by the administration. The Committee has requested and the Bank has done a special work of revising of the internal controls system in order to ensure the adoption of the best practices;

b) the Group adopts a conservative posture in the assumption of risks and has appropriate instruments in place for risk management and mitigation of risks;

c) the internal auditors’ duties have been assessed as effective and independent, as well as adequately reported at the Committee’s request;

d) the independent auditors work has been carried out effectively and nothing was noted that would indicate noncompliance with applicable independence rules and regulations; and

e) the financial statements for the year ended December 31st 2011 were prepared in compliance with legal standards and accounting practices adopted in Brazil, and present fairly, in all material respects, the financial situation of the Group for the period then ended.

Brasília-DF, February 10th, 2012.

José Danúbio Rozo (Coordinator)

Celene Carvalho de Jesus José Gilberto Jaloretto

DECLARATION OF THE BOARD OF DIRECTORS

The Board of Directors of Banco do Brasil declares that, in a meeting

performed at this date, approved the Audit Commitee Report and, in compliance with

paragraph V of Art. 142 of Law 6,404 of December 15, 1976, it became aware and

recommended the approval of the Director’s accounts and of the Management’s

Report related to the fiscal year ended 2011.

February 10, 2012.

_____________________________ Nelson Henrique Barbosa Filho

__________________________________ __________________________________ Aldemir Bendine Adriana Queiroz de Carvalho

__________________________________ __________________________________ Bernardo Gouthier Macedo Henrique Jager

__________________________________ __________________________________ Francisco de Assis Leme Franco Sergio Eduardo Arbulu Mendonça

155

FISCAL COUNCIL REPORT

THE FISCAL COUNCIL OF BANCO DO BRASIL S.A., according to its legal and and statutory duties, have reviewed the management report and the financial statements, including the proposal concerning to result distribution related to the fiscal year ended December 31, 2011, which were approved by the Board of Directors at this date.

Based on the exams performed, on information provided throughout the year and on the unqualified Independent Auditor’s Report issued by KPMG Auditores Independentes, at this date, the Fiscal Council understand that the aforementioned documents are eligible to be submitted to the appreciation and approval of the Stockholder’s General Meeting.

Brasília (DF), February 10, 2012.

Anelize Lenzi Ruas de Almeida Member

Clóvis Ailton Madeira Member

Marcos Machado Guimarães Member

Pedro Carvalho de Mello Member

Daniel Sigelmann President

156

MEMBERS OF THE MANAGEMENT BODIES

PRESIDENT Aldemir Bendine

VICE-PRESIDENTS Alexandre Corrêa Abreu Dan Antonio Marinho Conrado Danilo Angst Geraldo Afonso Dezena da Silva Ivan de Souza Monteiro Osmar Fernandes Dias Paulo Rogério Caffarelli Ricardo Antônio de Oliveira Robson Rocha

DIRECTORS Adilson do Nascimento Anisio Admilson Monteiro Garcia Adriano Meira Ricci Antonio Maurício Maurano Antônio Pedro da Silva Machado Ary Joel de Abreu Lanzarin Carlos Alberto Araujo Netto Carlos Eduardo Leal Neri Clenio Severio Teribele Gueitiro Matsuo Genso Hayton Jurema da Rocha Ives Cézar Fülber José Mauricio Pereira Coelho Luiz Henrique Guimarães de Freitas Márcio Hamilton Ferreira Marco Antonio Ascoli Mastroeni Marco Antônio da Silva Barros Marcos Ricardo Lot Nilson Martiniano Moreira Oswaldo de Salles Guerra Cervi Paulo Roberto Lopes Ricci Sandro José Franco Sandro Kohler Marcondes Sérgio Ricardo Miranda Nazaré Walter Malieni Júnior

ACCOUNTING DEPT. Eduardo Cesar Pasa General Accountant Accountant CRC-DF 017601/O-5 CPF 541.035.920-87

Daniel André Stieler Accountant CRC-DF 013931/O-2 CPF 391.145.110-53

BOARD OF DIRECTORS Nelson Henrique Barbosa Filho (Presidente) Aldemir Bendine (Vice-presidente) Adriana Queiroz de Carvalho Bernardo Gouthier Macedo Francisco de Assis Leme Franco Henrique Jäger Sérgio Eduardo Arbulu Mendonça

FISCAL COUNCIL Daniel Sigelmann (Presidente) Anelize Lenzi Ruas de Almeida Clóvis Ailton Madeira Marcos Machado Guimarães Pedro Carvalho de Mello

AUDIT COMMITTEE José Danúbio Rozo (Coordenador) Celene Carvalho de Jesus José Gilberto Jaloretto