new june, 30 2018 - banco votorantim · 2018. 8. 30. · 3 management report | 1st semester 2018...

www.bancovotorantim.com.br/ir

June, 30 2018

CONSOLIDATED

FINANCIAL

STATEMENTS

Banco Votorantim S.A.

Consolidated Financial Statements

Semester ended June 30,2018

Amounts in thousand of Reais, unless when indicated

CONTENTS

3

13

15

CONSOLIDATED FINANCIAL STATEMENTS

2123242526

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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MANAGEMENT REPORT

3. PRESENTATION OF FINANCIAL STATEMENTS4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

INDEPENDENT AUDITOR'S REPORT

1. THE CONGLOMERATE AND ITS OPERATIONS2. CORPORATE RESTRUCTURING

STATEMENT OF FINANCIAL POSITIONSTATEMENT OF INCOMESTATEMENT OF CHANGES IN SHAREHOLDER'S EQUITYSTATEMENT OF CASH FLOWSSTATEMENT OF VALUE ADDED

18. ACCEPTANCES AND ENDORSEMENTS

19. OTHER LIABILITIES

6. INTERBANK INVESTMENTS

AUDIT COMMITTEE REPORT

5. CASH AND CASH EQUIVALENTS

7. SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS

27. RISK AND CAPITAL MANAGEMENT

28. OTHER INFORMATION

22. SHAREHOLDER’S EQUITY

23. TAXES

24. RELATED PARTIES

26. CONTINGENT ASSETS AND LIABILITIES AND LEGAL, TAX AND SOCIAL SECURITY OBLIGATIONS

25. EMPLOYEE BENEFITS

8. INTERBANK ACCOUNTS

9. LOAN AND LEASE OPERATIONS

10. FOREIGN EXCHANGE PORTFOLIO

11. OTHER RECEIVABLES - SUNDRY

20. OTHER OPERATING INCOME/ EXPENSES

21. NON-OPERATING INCOME

12. OTHER ASSETS

13. INVESTMENTS

14. PROPERTY FOR USE

15. INTANGIBLE ASSETS

16. DEPOSITS AND MONEY MARKET REPURCHASE COMMITMENTS

17. BORROWINGS AND ONLENDINGS

3 Management report | 1st semester 2018

BANCO VOTORANTIM S.A. | Management Report | 1st Half of 2018

We present the Management Report and the Financial Statements of Banco Votorantim S.A. and subsidiaries,

for the periods ended June 30, 2018 (1st half of 2018 - 1H18) and 2017 (1st half of 2017 - 1H17).

1 KEY INFORMATION

2 ECONOMIC ENVIRONMENT AND BANKING SECTOR

1H18 showed a more negative environment in terms of expectations, with rising global uncertainty,

reconsideration of domestic risks, lower-than-expected growth, and a high inflation outlook. This change of

mood was initiated by international financial markets, which have been working since the beginning of the year

with a rising interest rate scenario in the United States and lower growth rates in Europe. As a result, investors

have become more cautious and selective, which ended up inhibiting capital flows to emerging markets after

a period of enhanced global confidence in 2017.

The less favorable overseas environment prompted a reconsideration of fiscal uncertainty and domestic

policies, reinforcing the currency depreciation trajectory observed since the beginning of the year. This more

negative sentiment experienced by financial markets was enhanced by weaker domestic activity indicators

and by the standstill of the freight transport sector in May. GDP expectations for the year were halved,

plummeting from close to 3% to projections around 1.5%. Inflation rose once again, under pressure from the

effects of the standstill and of currency depreciation, although most of these impacts are likely to be transient.

After ending 2017 at 2.95% and fluctuating around 2.80% until May, the market consensus at the end of the

six-month period was that the IPCA (Amplified Consumer Price Index) would be close to 4% in 2018. In this

context, the Brazilian Central Bank interrupted the cycle of loosening the monetary policy, indicating stability

of the benchmark interest rate at the level of 6.5%.

The increase in tension generated moderate impacts on the confidence of consumers and entrepreneurs,

allowing the credit market to maintain the recovery of concessions in real terms. Delinquency and spreads

Net Income (R$ million) 511 273 87.5%

Return on Average Equity¹ (ROAE) (%) 11.6 6.6 5.0 p.p.

Return on Average Assets² (ROAA) (%) 1.1 0.5 0.5 p.p.

Total Assets (R$ million) 98,154 102,467 -4.2%

Loan Portfolio (R$ million) 49,170 46,828 5.0%

Wholesale segment (R$ million) 12,326 12,697 -2.9%

Consumer Finance segment (R$ million) 36,844 34,131 7.9%

Guarantees provided and private securities (R$ million) 10,027 12,528 -20.0%

Funding sources (R$ million) 63,820 63,352 0.7%

Shareholders' equity (R$ million) 9,349 8,508 9.9%

Basel Ratio (%) 16.0 13.5 2.5 p.p.

Tier I Capital (%) 12.8 10.3 2.4 p.p.

90-day NPL (%) 4.0 4.4 -0.4 p.p.

Coverage Ratio (90-day NPL) (%) 184 158 26.8 p.p.

AuM³ (R$ million) 50,122 54,428 -7.9%

Employees (individuals) 3,831 3,878 -1.2%

VariationJun.17 (1H17)

3. Includes onshore funds (ANBIMA criteria) and private clients' resources.

Jun.18 (1H18)

1. Ratio betw een net income and average equity of the period;

2. Ratio betw een net income and average assets of the period;


were back to their historical averages for both households and companies. With the continued reduction of the

cost of credit, the segment of durable goods maintained a good performance. Vehicle sales recorded high

growth rates in the new vehicles segment and kept up a satisfactory pace in used vehicles, although the pace

was less intense than in 2017.

The environment of greater uncertainty should make the economic scenario more challenging. A potential

deterioration of domestic risk perception could once again have a negative impact on confidence, and further

delay the resumption of economic activity. For the time being, the expectation of continuity of gradual recovery

and of interest rates at historically low levels persists, contributing to maintain the growth of consumption and

demand for credit.

3 CORPORATE STRATEGY

We seek to consolidate our position among the main national privately-held banks, leveraging synergies with

our shareholders and bringing the client to the center of the business. Accordingly, we are focusing on

maximizing business profitability, increasing operational efficiency, and diversifying sources of income,

investing continuously in digital transformation aimed at improving the experience of our clients. Along these

lines, we recently implemented the "BV Lab", our innovation laboratory dedicated to connecting the institution

with new technologies and experiences.

We also made new investments in data science, and hiring new talent, building up our analytical skills, and

reinforcing the technological infrastructure to deal with structured and unstructured data, which enables us to

be more efficient and generate important insights into improving our client experience and business

management. Using artificial intelligence, big data, speech analytics, decentralized business intelligence and

other concepts and technologies, we are making progress towards transforming data science into one of the

pillars of our transformation process.

In line with our plan to continue advancing on fronts that promote an environment of innovation and promotion

of companies that are changing the markets in which they operate, we recently made investments through BR

Startups (seed capital fund), a partnership with Microsoft, in the Quero Quitar platform, a financial education

and debt negotiation company. We also made progress with GuiaBolso - Brazil's main financial education and

control application. Through this platform, we offer clients the opportunity to take out loans online with the

exclusive terms of BV, our Consumer Finance brand.

In May 2018, we took on the custody services and payment account handling of the clients of Neon

Pagamentos. We plan to jointly develop initiatives in the digital banking market, while leveraging the strengths

of the two companies This partnership reinforces our strategy of diversifying business and digital

transformation.

As regards business segmentation, our portfolio is divided into three units: Consumer Finance, Wholesale

Bank and Wealth Management, with well-defined strategies.

Consumer Finance Business

In Consumer Finance, with BV, we are leaders in Used Auto Finance (multi-brand dealers), and we diversify

our businesses and solutions to meet the demands of our clients and partners, providing credit, payment

methods, and insurance.

In 2018, we advanced in the repositioning of BV with the launch of a new logo, more modern and without the

term "financial", as well as an advertising campaign that presented the brand positioning, "credit for those who

believe". This change reflects the consolidation of the positioning of Consumer Finance, which has worked to

increase the offer of credit solutions and the distribution channels to make us even closer to our partners and


clients. During this period, we launched a new website for end clients, providing an integrated view of the

products contracted in a single environment, developed a new application to make life easier for vehicle

dealerships in the formalization of finance proposals, and enhanced client experience in our physical stores

with a new design.

In the Auto Finance business, which is the core of our Consumer Finance segment, we continue to originate

with scale and quality, as a result of the continuous improvement of credit policies, processes and models.

The volume of auto finance origination totaled R$ 8.1 billion in 1H18, with 90% relating to used cars, a sector

in which we have a history of leadership and recognized competence.

Using the client base of Vehicles, we seek to diversify our sources of income through

credit cards and insurance, both products with well-defined strategies:

The credit card portfolio – composed of billing of cash payments, installment sales, and revolving credit

- grew 17.1% over June 2017, and ended 1H18 at R$ 2,0 billion, with more than 900 thousand active

cards.

We expanded sales of insurance (e.g.: credit insurance, auto, life, residential etc.) whose revenues

from brokerage totaled R$ 227 million in 1H18, a growth of 32.3% compared to 1H17.

It is worth mentioning that Promotiva S.A. – a subsidiary created to act as a promoter of business, directly to

the shareholder Banco do Brasil - ended 1H18 with R$ 3.2 billion, mainly in payroll loan.

In terms of diversification we also emphasize the increase in the generation of new leads through strategic

business partnerships, such as Ideal Invest, Kroton, Solar Portal, GuiaBolso, among others, which together

represented the origination of R$ 22 million in new loans in 1H18 (up 266% over 1H17).

We ended 1H18 as the fifth best bank in the ranking of complaints of the Brazilian Central Bank, composed of

11 financial institutions. This outstanding position reflects the continuous work undertaken by the Ombudsman

department with the other operational and business areas, in using client input to continually revisit the

organization's internal processes and to propose improvements in the company-consumer relationship. With

an investment in technology, we began to use new tools to expand the range of customer service channels to

facilitate and expedite the exchange of information and the handling of complaints.

Wholesale Bank Businesses

In the Wholesale business we continue with our strategy of increasing penetration in the Corporate segment

with special emphasis on fixed income, treasury, mergers and acquisitions, corporate and project finance

operations.

With a focus on developing a more customer-oriented strategy, we have launched a new Internet Banking that

provides a new digital experience, and simplifies product management.

In the same direction, we have expanded the supply of cash management services, incorporating specific

developments to the needs of our clients.

Wealth Management Business (VWM&S)

In Wealth Management, through Votorantim Asset Management (VAM), we have maintained our position as

one of the leaders in the management and administration of Real Estate Funds (Brazilian FIIs), Private Equity

Investment Funds (FIPs) and Receivables Investment Funds (FIDCs), and relevant provider of succession

solution and financial planning in Private Bank.


It is worth noting that VAM has a partnership with Banco do Brasil for the structuring, management,

administration and distribution of investment funds, operating in a comprehensive group of investor segments

- from corporate and institutional to private bank clients and distributors.

VAM occupies a prominent position within its peer group (i.e. Assets without a branch network structure), and

in late June 2018 was in 11th place in the overall ranking of managers of ANBIMA (Brazilian Association of

Financial and Capital Markets Entities), with a total volume of AuM (Asset under Management) of R$ 50.1

billion. In the segment of structured products, VAM ended June 2018 with administrated volume of R$21.7

billion and occupied the 2nd position in the Ranking of FII Managers and the 9th position in the Ranking of FIDC

Managers and 5th position in the Ranking of FIP Managers prepared by ANBIMA.

4 PERFORMANCE

4.1 | RESULT

For a detailed analysis of the figures presented below, we recommend reading this document together with

the Earnings Release of the first and second quarters of 2018. The Earnings Release presents our quarterly

managerial performance and is available on our website, on the Investor Relations page

(www.bancovotorantim.com.br/ir).

Net income of 1H18 totaled R$ 511 million - equivalent to a return on average shareholders' equity (ROAE) of

11.6% p.y., comparable to income of R$ 273 million in 1H17, representing growth of 87.5% in the period. The

following items contributed to the composition of income for the year:

1. Income from Financial Intermediation before Loan Losses Expenses: an increase of 3.6% when

compared to 1H17, mainly reflecting the higher profitability of business, in particular the Consumer

Finance operation, whose share in the portfolio has grown consistently. If we were to disregard the

fiscal effects of the hedge of foreign investments (see table above), this increase would be 12.5%.

2. Allowance for Loan Loss Expenses: a reduction of 8.1% in comparison to 1H17, mainly due to the

decrease in the delinquency ratios both the Wholesale and Consumer Finance segments. It is worth

mentioning that this reduction occurred despite the negative impacts in May and June in Consumer

Finance, due to the country's economy abrupt slowdown, the peak inflation generated, the significant

Gross Income from financial intermediation before ALL expenses¹ 2,683 2,589 3.6%

Revenues from recovery of written-off loans 446 425 5.0%

Allowance for loan losses expenses (ALL) (1,040) (1,132) -8.1%

Income from services and banking fees 669 616 8.6%

Personnel and administrative expenses (1,131) (1,055) 7.1%

Tax expenses (191) (178) 7.3%

Equity in income of subsidiaries 163 124 30.7%

Other operating income/expenses² (371) (444) -16.4%

income tax and social contribution and profit sharing expenses (272) (248) 9.5%

Net income 511 273 87.5%

2. Other operating income and expenses, and non-operating income.

Statement of income (R$ million) 1H18 1H17 Variation

1. We have an agency in Nassau that allow s us to make business via the international market. To hedge the exposure to exchange variations ofthis investment, w e use derivatives. Brazilian tax legislation establishes that gains and losses arising from foreign exchange variations on foreigninvestments are not taxable for the purposes of PIS / COFINS / IR / CSLL, w hile gains or losses arising from derivatives used as a hedge of thatposition are taxed. Tax treatment distinct from such exchange rate differences results in volatility in the Income from Financial Intermediation andTax Expenses (PIS / COFINS) and Income Tax (IR / CSLL).


increase in fuels price, and other derived effects on the macroeconomic situation. These impacts did

not affect the quality of the Consumer Finance portfolio, but entailed the need for additional provision

in comparison to the average figure recorded in previous months, particularly in June.

3. Income from services and banking fees: growth of 8.6% in comparison to 1H17, reflecting the

greater origination of Vehicles in 2018. It is also worth highlighting the growth of income with credit

cards, which reflects our income diversification strategy.

4. Equity in Income of Subsidiaries: growth of 30.7% compared to 1H17 due to the increase in the sale

of third party insurance, such as Credit Insurance and Auto Insurance. Sales are handled through the

subsidiary Votorantim Corretora de Seguros (VCS), and the result of recognized under the equity

method of accounting.

5. Personnel and Administrative Expenses: increase of 7.1% compared to 1H17, due to: (i) higher

expenses with consulting and advisory services engaged in 2018, largely due a higher business volume

in 2018, and (ii) higher provisions with labor lawsuits associated to the monetary restatement of the

balance of claims, with special emphasis on the substantial drop in the appearance of new cases.

Disregarding these extraordinary provisions, personnel and administrative expenses would have grown

by 2.1%, below the accumulated inflation of the period (IPCA: 4.4%).

6. Other income and expenses: the reduction of 16.4% results, mainly, from lower expenses with

provision for civil lawsuits.

4.2 | BALANCE SHEET ANALYSIS

4.2.1 | LOAN PORTFOLIO

In 1H18, we maintained a conservative stance in credit concession. In June 2018, the balance of the expanded

credit portfolio, including guarantees provided and private securities, reached R$ 59.2 billion, practically stable

over the last 12 months.

Total assets¹ 98,154 102,467 -4.2%

Expanded loan portfolio 59,197 59,356 -0.3%

Loan Portfolio 49,170 46,828 5.0%

Consumer Finance segment 36,844 34,131 7.9%

Wholesale segment 12,326 12,697 -2.9%

Guarantees provided and private securities 10,027 12,528 -20.0%

Allowance for loan losses (ALL) (3,622) (3,231) 12.1%

Permanent assets 1,404 809 73.5%

Liabilities² 88,806 93,958 -5.5%

Funding resources 63,820 63,352 0.7%

Shareholders' equity 9,349 8,508 9.9%

2. Considers Total Liabilities less shareholders' equity.

R$ Million Jun.18 Jun.17 Variation

1. Pursuant to Article 8 of Bacen Circular 3,068, w e declare that w e have the financial capacity and intention to hold to maturity thesecurities classif ied as held-to-maturity securities in the amount of R$ 2.3 billion, representing 15 % of total securitiess.


The expanded credit portfolio of Wholesale ended June 2018 with a balance of R$ 22.4 billion, down 11.4%

compared to June 2017, mainly due to the reduction in the balance of private securities. In Consumer Finance,

the loan portfolio reached R$ 36.8 billion in June 2018, 7.9% higher than in June 2017, leveraged by growth in

Vehicles, specially used ones.

Portfolio Quality

The 90-day NPL ratio of the consolidated portfolio reached 4,0% in June 2018 compared to 4.4% in June 2017,

with a reduction in both Consumer Finance and Wholesale.

The delinquency (90-day NPL ratio) of Consumer finance portfolio ended June 2018 at 4.9%, 0.3 p.p. lower in

relation to June 2017, due to the improvement in Vehicle portfolio quality, whose 90-day NPL ratio reduced

0.3 p.p. in the last 12 months to 4.4%. The index improvement is a result of the combination of improvements

in the credit processes and models and the prudence in the granting of loans.

Repeating the point already addressed in loan losses expenses, it is worth mentioning the negative impacts

that occurred in May and June in Consumer Finance, given the abrupt slowdown of the country, the peak

inflation generated, the significant increase of fuels and other derived effects on the macroeconomic situation.

These impacts did not affect the structural quality of the Consumer Finance portfolio, but caused more delays,

especially in June. It is worth mentioning that the quality of the credit vintages generated remains at historically

good levels, and the effect observed is not a reflection of a greater risk in concession, but rather a result of the

economic impact described above.

In Wholesale, delinquency (90-day NPL ratio) was down to 1.3% in June 2018, compared to 2.3% in June

2017.


The Coverage Ratio of transactions past due over 90 days remained at a comfortable level, rising from 158%

in June 2017 to 184% in June 2018, confirming the strengthening of the balance sheet and reflecting our

solidity in risk management.

4.2.2 | FUNDING SOURCES

The volume of funding sources reached R$ 63.8 billion in June 2018, remaining practically stable over the last

12 months. During this period, the decrease in the balance of repos backed by Debentures is emphasized,

reflecting the regulatory change introduced by Res. No. 4.527, which makes it impossible new repo with

debentures of lease subsidiaries since May 2018. In lieu of this instrument, we increased the volume of funding

in Deposits and Financing Bills.

In terms of liquidity, we ended June 2018 with cash at a level more than sufficient to fully cover funding with

daily liquidity. The LCR (Liquidity Coverage Ratio) - which is the ratio between the balance of high-quality liquid

assets and the total cash outflows expected for the next 30 days in a stress scenario - of 2Q18 was 172%,

exceeding the minimum regulatory requirement of 90%.

Additionally, it is important to emphasize that we have a committed credit facility at Banco do Brasil since 2009,

which represents a significant liquidity reserve and that has never been tapped.

4.2.3 | CAPITAL

The Basel ratio is calculated pursuant to the Financial Statements prepared in accordance with accounting

practices adopted in the country, applicable to institutions licensed to operate by the Brazilian Central Bank.

To guarantee our solidity and availability of capital to support the development of our business, we have

maintained regulatory capital above the level required by the Brazilian Central Bank. For 2018, the minimum

capital requirement is 10.5%, where 7.9% was the minimum for Tier I Capital, and 6.4% for Common Equity

Tier I.

The Basel Ratio reached 16,0% in late June 2018, with the following breakdown: (i) 12.8% relating to Tier I

Capital, which consists of the sum of Equity Tier (10.8%) and Additional Capital (1.9%); and (ii) 3.3% relating

to Tier II Capital. It is worth mentioning that in November 2017, we issued USD 300 million in perpetual bonds

abroad, eligible to compose the complementary capital level I. This operation was approved in March 2018 by

the Brazilian Central Bank, strengthening our capital base.

Debentures (repo) 6,465 8,579 -24.6%

Deposits 12,636 10,255 23.2%

Subordinated debts 6,352 5,560 14.3%

Borrowings and onlendings 4,111 4,459 -7.8%

Bills 25,453 23,095 10.2%

Financing bills 20,844 20,432 2.0%

Securitization with recourses 8,198 10,447 -21.5%

Securities abroad 606 959 -36.8%

Total funding 63,820 63,352 0.7%

R$ Million Jun.18 Jun.17 Variation


For further information, see the "Risk and Capital Management" report on our website, on the Investor

Relations page (www.bancovotorantim.com.br/ir).

5 RATINGS

The Bank is rated by international rating agencies and the ratings assigned reflect the operating performance,

financial soundness and the quality of our management, in addition to other factors related to the financial

sector and economic environment in which we are.

In March 2018, Moody's rating agency reaffirmed our ratings, maintaining them as ‘Ba2’ (domestic currency)

and ‘Ba3’ (foreign currency), both with negative outlook.

In March 2018, the rating agency Standard & Poor's (S&P) also reaffirmed our global rating as 'BB-', with a

stable outlook, following the sovereign rating outlook.

In June 2018, S&P, with the intention of providing a more appropriate distinction between assigned ratings,

reviewed the national credit rating mapping table. As a result, our rating was changed from 'brAA-' to 'brAAA',

maintaining the stable outlook.

6 CORPORATE GOVERNANCE

We strive to comply with good corporate governance practice to improve the quality of management and to

seek efficiency in the decision-making process. Our governance is shared by the Votorantim Finanças

shareholders and Banco do Brasil, with parity appointment of Board of Directors' members in the Fiscal Council

and other forums which advise the Board of Directors.

Basel Ratio 16.0% 13.5%

Tier I Capital 12.8% 10.3%

Common Equity Tier I 10.8% 10.3%

Additional Tier I 1.9% -

Tier II Capital 3.3% 3.2%

Jun.18 Jun.17

RATING AGENCIESInternational National

Local Foreign Local

Moody’sLong-term Ba2 Ba3 Aa3.br

Short-term NP NP BR-1

Standard & Poor’sLong-term BB- brAAA

Short-term B brA-1+

Brazil

Sovereign rating

Ba2

BB-


At the beginning of year 2018, the Risk and Capital Committee was implemented, with direct reporting to the

Board of Directors and whose principal attributions and proposition of improvements of the structures of Risk

and Capital Management.

7 PEOPLE

We invest continuously in the management of culture, and recent experiences have shown the benefits in the

practice of Our Way of Being and Doing. An example of this is the strategic partnership that we formed with

Neon Pagamentos, in which different areas joined forces and took on a leading role, acting with the necessary

celerity to make this business practicable in record time.

The entire transformation journey is also experienced in our way of working. We adopt a more informal dress

code, adhere to remote work, and reform our work spaces to make them more modern and collaborative,

affording greater synergy between the areas. This movement encourages us to have a simple and efficient

environment, which directly influences the attitude of our employees. We continue with initiatives focused on

wellness, such as the agreement with Gympass and the unprecedented partnership with the Hospital Sírio

Libanês, which installed a unit at our headquarters.

We value people development and intensify our on-site and distance training. We encourage self-development,

organizing various meetings to promote innovation and the digital mindset, through speeches with relevant

topics and up-to-date content in our virtual training platform. In addition, in 1H18 we held an event on women’s

empowerment and how this can reflect and underpin our culture.

For senior executives we have developed specific programs with an emphasis on people management,

business and innovation. Succession planning, which ensures the organization's perpetuity and sustainability,

is part of our talent management strategy. In this period, we also evaluate and identify the best paths to

expansion and executive leadership style.

Finally, we believe that our culture is an element in continuous evolution and we intensify its management,

because it directs how we conduct business, produce results and develop relations with others. After all, we

are what we do.

8 SUSTAINABILITY

We had evolution in our sustainability strategy aimed at reaffirming our commitment to the development of

Brazil, impact on environment, and how we address the business strategy with our clients and collaborators.

We also approximated our Sustainability principles to the purpose, organizational culture and brand positioning

plan.


We remain committed to build long-term relationship through actions targeting the economic wellbeing of

society and the amplified management of risks and opportunities. We stressed the important role we should

play in the development of solutions that meet the financial needs of our clients – Wholesale and Consumer

Finance, connecting the social and environmental aspects to all of our business fronts.

Our main Sustainability initiatives in the 1H18 were as follows:

Business Sustainability

We increased our offering of Solar Power Financing, through partnership with Portal Solar, the largest

solar energy marketplace in Brazil

We made progress towards the offering of Student Loan with Ideal Invest, responsible for PRAVALER,

the largest finance program targeted at higher education in the country; and with Kroton, one of the

largest private educational organizations in Brazil and around the world;

We maintained access to private investment in public-interest infrastructure projects, in the areas of

energy, transportation, water, basic sanitation, and irrigation, by three investment funds of

infrastructure for clean energy generation - BB Votorantim Energia Sustentável I, II, III.

We continue to be signatories to the Equator Principles, adjusting our business solutions to mitigate

the social and environmental impacts of our Corporate clients.

We created the “BV Lab”, our innovation laboratory, aiming at the continuous improvement in the

experiences that we provide to our clients.

Social Responsibility

We followed-up 19 social projects supported by tax incentive laws in the areas of culture, sports,

childhood and adolescence, and elderly.

Conscious Consumption and Impact of activities

We celebrated the world water day (March 22), providing sustainable cups to all of our collaborators,

reducing the use and disposal of disposable cups.

We received full adherence of and effort from our collaborators to the implementation of distance work,

reducing transportation and CO2 emission.

We approved the support to the Pomar Project/SP initiative, which in partnership with Legado das

Águas – Votorantim Group, will revitalize 3km of Pinheiros River’s margins.

9 ACKNOWLEDGMENT

We are grateful to the clients, investors and shareholders for their trust and to the employees for their

continuous effort and dedication.

São Paulo, August 02, 2018.

Executive Board

13 THIS PAGE IS AN INTEGRAL PART OF THE SUMMARY OF THE AUDIT COMMITTEE’S REPORT FOR THE 1ST HALF OF 2018

Summary of the Audit Committee

First Half 2018

Introduction

The Audit Committee is a statutory body governed by the National Monetary Council (“CMN”) Resolution No. 3198/2004, the bylaws of Banco Votorantim S.A. and its Internal Regulation, which are available for consultation at http://www.bancovotorantim.com.br/ri.

It is a body that provides advice to the Board of Directors, operating as a permanent and independent function. In the first half, the Committee operated with four independent members and two of them were appointed by the shareholder Votorantim Finanças S.A. and two were appointed by the shareholder Banco do Brasil S.A.

Banco Votorantim S.A. chose, pursuant to Article 11 of Resolution 3,198/2004, to set up a single Audit Committee for the Multiple Bank and for the subsidiaries. The Audit Committee, in compliance with its Internal Regulation and the Bylaws of Banco Votorantim S.A., has the following main duties, in addition to other duties provided for in the legislation or assigned by the Board of Directors: to assess the efficiency of the internal control system; to review financial statements prior to disclosure, to assess the effectiveness of the internal and independent audits; to fulfill the aforementioned duties and responsibilities also with respect to the subsidiaries of Banco Votorantim S.A. that adhere to the single Audit Committee.

As of January 2018, in compliance with Resolution No. 4.557/2017, a Risk and Capital Committee was established to report on the risk and capital management of the Votorantim Financial Conglomerate.

The managements of Banco Votorantim S.A. and its subsidiaries are responsible for preparing and ensuring the integrity of the financial statements, managing risks, maintaining an effective and consistent internal control system, and ensuring compliance with the applicable laws and regulations.

The mission of the Internal Audit is to provide the shareholders, Board of Directors and Executive Board with independent, impartial and timely reviews regarding the effectiveness of risk management, the adequacy of controls, and compliance with the standards and regulations associated with the Conglomerate's operations.

KPMG Auditores Independentes is the firm responsible for providing financial statement audit services; issuing an opinion on their adequacy in relation to the equity and financial position, in accordance with accounting practices adopted in Brazil; and assessing the quality and adequacy of the internal control system, including electronic data processing and risk management systems, and compliance with the applicable laws and regulations. Exercised activities in the period

With a view to fulfilling its duties and complying with its Annual Work Plan, approved by the Board of Directors on 12/07/2017, the Audit Committee held a meeting to review 2018 activities’ planning, nine meetings only with Committee and Advisory members, one meeting for final discussions and approval of the Semiannual Report, two meetings with the risk and Capital Committee and thirty-four meetings (Regulations provide at least six meetings during the period), emphasizing one meeting with the Board of Directors, Executive Committee, representatives of senior management, the internal and independent audits (KPMG), and the main persons responsible for business and control areas.

At these meetings, the Audit Committee addressed especially matters related to accounting processes, internal controls, business and product areas, operations, compliance, lawsuits and administrative proceedings, information technology, risk management, internal and independent audit recommendations, and external oversight bodies.

14 THIS PAGE IS AN INTEGRAL PART OF THE SUMMARY OF THE AUDIT COMMITTEE’S REPORT FOR THE 1ST HALF OF 2018

At meetings with the internal audit, it followed up on the work carried out in the period, the main findings, recommendations, discussed and recommended the work plan’s approval for 2018. At meetings with the independent audit, it followed up and verified the work carried out in the period, especially the review of the financial statements and report referring to Circular Letter No. 3.467/2009. It examined the Technical Study on the consumption of Tax Credits, according to item II, subparagraph 2, of article 1 of Bacen’s Circular Letter 3.776/2015.

It reviewed the parent company and consolidated financial statements, the main assets and liabilities, shareholders' equity, profit or loss, and explanatory notes under BRGAAP, the accounting practices adopted and the content of the independent auditors’ report. In situations in which it detected opportunities for improvement, it suggested such improvements.

Conclusion

Based on the activities it carried out in the period and considering its duties and the limitations inherent in the scope of its work, the Audit Committee concluded that:

a) Internal Control System – the Internal Control System is effective and commensurate with the size and nature of the operations and risk appetite approved by the Board of Directors;

b) Risk Management - the Conglomerate's risk structure and management are effective and commensurate with the size and nature of the operations and risk appetite approved by the Board of Directors;

c) Internal Audit - the audit performs its activities in a satisfactory, professional and independent manner;

d) Independent Auditors- worked efficiently and assigned the right number of professionals with the proper qualifications to perform the review of the financial statements for the period;

e) Financial Statements - Financial statements as of June 30, 2018, for the first half of 2018 were prepared in compliance with the laws and practices in effect in Brazil, and present fairly, in all material respects, the equity and financial position of the Conglomerate on such date.

São Paulo-SP, August 02, 2018.

Gilberto Lourenço da Aparecida Armando Wolfrid Coordinator Member

Alexandre Correa Abreu José Danúbio Rozo Member Member

KPMG Auditores Independentes, uma sociedade simples brasileira e firma-membro da rede KPMG de firmas-membro independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça.

KPMG Auditores Independentes, a Brazilian entity and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

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KPMG Auditores Independentes

Rua Arquiteto Olavo Redig de Campos, 105, 6º andar - Torre A

04711-904 - São Paulo/SP - Brasil

Caixa Postal 79518 - CEP 04707-970 - São Paulo/SP - Brasil

Telefone +55 (11) 3940-1500, Fax +55 (11) 3940-1501

www.kpmg.com.br

Independent auditors' report on the financial statements

To The Board of Directors and Shareholders of Banco Votorantim S.A. São Paulo - SP Opinion We have audited the individual and consolidated financial statements of Banco Votorantim S.A. (“Bank”) referred to as “Bank” and “Consolidated”, respectively, which comprise the statement of financial position as at June 30, 2018 and statements of income, changes in shareholder’s equity and cash flows, for the six month period then ended, and notes, including significant accounting practices. In our opinion, the accompanying individual and consolidated financial statements referred above, present fairly, in all material respects, the individual and consolidated financial position of Banco Votorantim S.A. as at June 30, 2018, its individual and consolidated financial performance and its individual and consolidated cash flows for the six month period then ended, in accordance with the accounting practices adopted in Brazil applicable to institutions authorized to operate by the Central Bank of Brasil - Bacen. Basis for opinion We conducted our audit in accordance with Brazilian and International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the “Auditor’s responsibilities for the audit of individual and consolidated financial statements” section of our report. We are independent of the Bank in accordance with the ethical requirements that are relevant in the Accountant´s Professional Ethics Code and the Professional Standards issued by the Federal Accounting Council (CFC), and we have fulfilled our ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the six month period. These matters were addressed in the context of our audit of the individual and consolidated financial statements as a whole, and in forming our opinion thereon, and therefore, we do not provide a separate opinion on these matters.



16

Allowance for loans losses As disclosed in notes 4h and 9, for purposes of measuring the allowance for loan losses, the Bank classifies its loans (which comprise loans, leasing, advances on foreign exchange contracts and other receivables with credit characteristics) into nine risk levels, taking into account and assumptions such as late payments, economic and financial position, indebtedness level, economy sector, guarantee characteristics and other factors and assumptions of the current regulation, with rating "AA" being the minimum risk level and "H" the maximum risk level. The Bank initially applies the loss percentages established in the regulation for each risk level for purposes of calculating the allowance and further increases the allowance, when necessary, based on internal evaluations. The classification of loans into risk levels requires the Bank to make assumptions and judgments, based on its internal risk classification methodologies, and the allowance for loan losses represents the Bank´s best estimate of the portfolio losses. Due to the relevance of loans and the uncertainties and judgements related to the allowance for loan losses and the impact that any changes in assumptions may generate on the recorded amounts in the individual and consolidated financial statements, we considered this as a significant matter in our audit. How our audit addressed this matter We have evaluated the design and operating effectiveness of the relevant internal controls, manual and automated, implemented by the Bank and related to the processes of approval, recording, classifying and updating the risk levels of loans and the main assumptions used for calculating the allowance for loan losses. On a sampling basis, we evaluated whether the Bank met the minimum requirements established by the current regulations related to the determination of the allowance for loan losses and whether the disclosures in the individual and consolidated financial statements described in notes 4h and 9 are in accordance with the applicable accounting practices. Based on the evidence obtained from the procedures described above, we have considered adequate the level of provisioning and the related disclosure in the context of the individual and consolidated financial statements taken as a whole. Fair value of financial instruments As disclosed in Notes 4f, 4g and 7, the Bank has significant balances of derivative financial instruments and securities measured at fair value. For financial instruments that are not actively traded and those which market prices and parameters are not available, the determination of fair value is subject to a higher uncertainty level, to the extent the Bank makes significant judgments to estimate such amounts. Therefore, we considered the fair value measurement of these financial instruments as a significant matter in our audit. How our audit addressed this matter We have tested the design and operating effectiveness of the relevant internal controls, manual and automated, implemented by the Bank to mitigate the risk of material misstatement in the individual and consolidated financial statements arising from uncertainties in the fair value measurement of financial instruments, which depend on the Bank´s internal models. For a sample of financial instruments for which the fair value measurement parameters are not observable, with the technical support of our specialists with knowledge of financial instruments, we evaluated the adequacy of the models developed by the Bank for determining fair values and the reasonableness of data, the parameters and information included in the pricing models used, and recalculated the corresponding fair values of these transactions. We also evaluated whether the disclosures in the individual and consolidated financial statements, in Notes 4f, 4g and 7, are in accordance with the applicable accounting practices.



17

Based on the evidence obtained from the procedures described above, we have considered adequate the fair value measurement of financial instruments and the related disclosure in the context of the individual and consolidated financial statements taken as a whole. Provisions and contingent liabilities - labor, civil and tax As disclosed in Notes 4o and 26, the Bank recognizes provision for labor, civil and tax claims arising from the normal course of its operations. Estimates of the outcome and the financial effect are determined by the nature of the claims and by the Bank's judgment, based on the opinion of the legal advisors, on the elements of the process, complemented by the experience of similar claims. Due to the relevance, complexity and judgment involved in the evaluation, measurement, timing of recognition definition and disclosures related to Provisions and contingent Liabilities and Provisions, we considered this as a significant matter in our audit. How our audit addressed this matter We have evaluated the design and operating effectiveness of the relevant internal controls, manual and automated, implemented by the Bank, related to the process identification, risk evaluation, measurement of provision, process management and closing steps. We have evaluated the adequacy of the measurement, recognition and sufficiency of the provision and disclosure of contingent liabilities, considering the constitutions, reversals and the assessment of Bank´s internal and external laywer. We have evaluated the determination of the procedural risk of causes for relevant matters and values of the Bank by evaluating the criteria adopted in the measurement methodology for the amounts recognized and/or disclosed, as well as historical data and information and analyzed the changes in the assumptions in relation to previous periods, when applicable. We also have evaluated whether the disclosures made in the individual and consolidated financial statements, disclosed in Notes 4o and 26, are in accordance with the applicable accounting practices. Based on the evidence obtained from the procedures described above, we have considered adequate the level of provisioning and the related disclosure in the context of the individual and consolidated financial statements taken as a whole. Projection of future results for realization of deferred tax assets The individual and consolidated financial statements include assets related to deferred tax assets (Notes 4n, 23e and 23f), which realization depends on future profitability based on the business plan and budgets prepared by the Bank and approved at its governance levels. To prepare the projections of future results for purposes, among others, of verifing the realization of assets, the Bank adopts assumptions based on its corporate strategies and the macroeconomic scenario, such as interest rate, inflation rate, among others, considering the current and past performance and the expected growth in the market it acts. Due to the relevance of the balances related to these assets (deferred tax assets), as they are based on estimative of future profitability and the impact that eventual changes in the assumptions would have on the amounts recorded in the individual and consolidated financial statements, we considered this as a significant matter in our audit. How our audit addressed this matter We have evaluated the design and effectiveness of the relevant internal controls implemented by the Bank related to the process for determining and approving the assumptions used to prepare the projection of future results, which is the basis for evaluating the realization of assets. With the support of our corporate finance specialists, we evaluated the reasonableness of the assumptions used by the Bank, recalculated the projections based on such assumptions, and considered if they were in compliance with current regulatory guidelines. With the support of our tax specialists, we evaluated the



18

bases of calculation to which the current tax rates are applied and the study of the capacity to realize the deferred tax assets. We also have evaluated whether the disclosures in the individual and consolidated financial statements described in notes 4n, 23e and 23f are in accordance with the applicable accounting practices. Based on the evidence obtained from the procedures described above, we have considered adequate the measurement of the deferred tax assets and the related disclosure in the context of the individual and consolidated financial statements taken as a whole. Other matters - Statements of value added The individual and consolidated statements of value added for the six month period ended June 30, 2018, prepared under the responsibility of the Bank´s management, and presented as supplementary information for purposes of accounting practices adopted in Brazil applicable to financial institutions authorized to operate by the Central Bank of Brazil - Bacen, were subject to audit procedures performed in conjunction with the auditing of the Bank's financial statements. For the purpose of forming our opinion, we assess whether these statements are reconciled with the financial statements and accounting records, as applicable, and if their form and content are in accordance with the criteria set forth in Technical Pronouncement CPC 09 - Statement of Value Added. In our opinion, these statements of value added have been properly prepared, in all material respects, in accordance with the criteria set forth in this Technical Pronouncement and are consistent with the individual and consolidated financial statements taken as a whole. Other information that accompany the individual and consolidated financial statements and the auditor’s report The Bank’s management is responsible for other information that comprises the Management´s Report. Our opinion on the individual and consolidated financial statements does not cover the Management´s Report and we do not express any form of assurance conclusion thereon. In connection with our audit of the individual and consolidated financial statements, our responsibility is to read the Management´s Report, and, in doing so, consider whether the other information is, on all material respects, inconsistent with the individual and consolidated financial statements or with our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement in the Management´s Report, we are required to report this fact. We have nothing to report in this regard. Responsibilities of the management and those charged with governance for the individual and consolidated financial statements Management is responsible for the preparation and fair presentation of the individual and consolidated financial statements in accordance with the accounting practices adopted in Brazil applicable to institutions authorized to operate by Central Bank of Brazil - Bacen and for such internal controls as management determines is necessary to enable the preparation of these financial statements that are free from material misstatement, whether due to fraud or error. In preparing the individual and consolidated financial statements, management is responsible for assessing the Bank and its subsidiaries ability to continue as going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Bank and its subsidiaries or to cease operations, or has no realistic alternative but to do so.



19

Those charged with governance are those responsible for overseeing the Bank’s financial reporting process. Auditor’s responsibilities for the audit of the individual and consolidated financial statements Our objectives are to obtain reasonable assurance about whether the individual and consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Brazilian and international standards on auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit performed in accordance with the Brazilian and international standards on auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the individual and consolidated financial statements, whether due to fraud or error, designed and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involves the override of internal control, collusion, forgery, intentional omissions or misrepresentations.

Obtain an understanding of internal control relevant to the audit to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank and it’s subsidiaries internal control.

Evaluate the appropriateness of the accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether material uncertainty exists related to events or conditions that may cast significant doubt on the Bank and it’s subsidiaries ability to continue as a going concern. If we conclude that a material uncertainty exists, then we are required to draw attention in our auditors’ report to the related disclosures in the individual and consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Bank and it’s subsidiaries to cease to continue as a going concern.

Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the individual and consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the



20

planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we have identified during our audit. We also have provided those charged with governance with a statement that we have complied with the relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and where applicable, related safeguards. From the matters communicated with those charged with governance, we have determined those matters that were of most significance in the audit of the individual and consolidated financial statements of the current period and are therefore the key audit matters. We have described these matters in our auditors’ report, unless law or regulation precludes public disclosure about the matter, or when, in extremely rare circumstances, we have determined that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefit of such communication. São Paulo, August 02, 2018 KPMG Auditores Independentes CRC SP014428/O-6 (Original report in portuguese signed by) João Paulo Dal Poz Alouche Accountant CRC 1SP245785/O-2


06.30.2018 06.30.2017 06.30.2018 06.30.2017

CURRENT ASSETS 53.077.970 43.345.548 55.929.952 55.291.092

Cash and due from banks 5 87.796 90.357 92.029 134.900

Interbank investments 6a 38.156.591 25.186.396 20.657.522 17.742.062

Money market repurchase commitments 19.827.326 16.078.683 19.827.326 16.078.683

Interbank deposit investments 18.329.265 9.107.713 830.196 1.663.379

Securities and Derivative financial instruments 6.082.845 10.493.080 7.032.700 11.052.097

Own portfolio 7a 1.930.172 914.533 3.389.278 4.120.464

Subject to repurchase commitment 7a 1.510.476 8.640.789 827.247 5.715.241

Subject to guarantees provided 7a 7.348 223.798 17.847 252.324

Derivative financial instruments 7d 3.000.535 985.047 3.164.014 1.235.155

(Provision for impairment of securities) 7a (365.686) (271.087) (365.686) (271.087)

Interbank accounts 1.296.977 357.109 1.296.977 357.109

Payments and receivables to be settled 205 129 205 129

Reserve requirements 8a 1.296.662 356.915 1.296.662 356.915

Compulsory deposits at the Central Bank of Brazil 1.296.662 356.915 1.296.662 356.915

Correspondents 110 65 110 65

Loan operations 9a 3.381.358 3.639.555 20.234.405 19.558.525

Public sector 115.512 95.465 115.512 95.465

Private sector 3.426.347 3.842.877 17.510.359 15.870.470

Loan operations subject to assignment - - 4.105.372 5.400.894

(Allowance for loans losses) (160.501) (298.787) (1.496.838) (1.808.304)

Lease operations 9a - - 161.411 70.146

Private sector - - 162.265 72.774

(Allowance for leases losses) - - (854) (2.628)

Other receivables 3.993.424 3.426.294 6.294.477 6.123.405

Foreign exchange portfolio 10a 1.319.534 1.335.289 1.319.534 1.335.289

Income receivable 74.561 6.080 89.690 18.544

Securities clearing accounts 71.203 76.811 101.139 169.071

Sundry 11 2.541.814 2.123.126 4.807.812 4.723.596

(Allowance for other receivables losses) 9a (13.688) (115.012) (23.698) (123.095)

Other assets 12 78.979 152.757 160.431 252.848

Non-operating assets and material inventories 90.591 160.416 182.057 264.160

(Accumulated impairment) (26.684) (21.921) (45.662) (45.439)

Prepaid expenses 15.072 14.262 24.036 34.127

NON-CURRENT ASSETS 39.261.839 53.312.018 42.224.479 47.176.075

LONG-TERM ASSETS 35.696.349 49.283.622 40.820.246 46.366.873

Interbank investments 6a 10.615.614 15.989.206 - 199.426

Interbank deposit investments 10.615.614 15.989.206 - 199.426

Securities and Derivative financial instruments 17.396.681 24.529.709 12.926.590 18.674.010

Own portfolio 7a 4.680.223 6.648.163 7.602.608 10.527.127

Subject to repurchase commitment 7a 11.479.928 16.780.203 3.822.762 6.430.970

Subject to guarantees provided 7a 347.053 545.912 634.491 1.160.482

Derivative financial instruments 7d 1.675.292 1.486.831 1.652.544 1.486.831

(Provision for impairment of securities) 7a (785.815) (931.400) (785.815) (931.400)

Loan operations 9a 5.133.973 6.390.277 21.668.382 21.421.336

Public sector 384.686 406.394 384.686 406.394

Private sector 5.151.061 6.547.797 19.530.612 18.425.555

Loan operations subject to assignment - - 3.104.392 3.855.493

(Allowance for loans losses) (401.774) (563.914) (1.351.308) (1.266.106)

Lease operations 9a - - 78.953 53.075

Private sector - - 79.367 55.085

(Allowance for leases losses) - - (414) (2.010)


Credits for sureties and guarantees paid - 17.207 - 17.207

Income receivable 484 8.215 484 8.215

Securities clearing accounts 2.573 813 2.573 813

Sundry 11 3.285.901 2.367.056 6.863.768 5.894.872

(Allowance for other receivables losses) 9a (739.142) (19.108) (749.352) (28.812)

Other assets 12 265 247 28.848 126.731

Prepaid expenses 265 247 28.848 126.731

PERMANENT ASSETS 3.565.490 4.028.396 1.404.233 809.202

Investments 3.328.425 3.857.834 1.091.595 578.868

Investments in subsidiaries 13a 3.317.847 3.848.860 1.019.801 509.236

Domestic 3.317.847 3.800.178 1.019.801 509.236

Abroad - 48.682 - -

Other investments 13c 14.518 16.714 95.690 100.257

(Accumulated impairment) 13c (3.940) (7.740) (23.896) (30.625)

Property for use 14 70.593 52.729 108.201 94.884

Other property for use 205.477 167.370 346.582 305.059

(Accumulated depreciation) (134.884) (114.641) (238.381) (210.175)

Intangible assets 15a 166.472 117.833 204.437 135.450

Intangible assets 253.731 177.799 359.169 242.685

(Accumulated amortization) (68.837) (42.540) (135.125) (89.623)


TOTAL ASSETS 92.339.809 96.657.566 98.154.431 102.467.167

See the accompanying notes to the financial statements.

STATEMENT OF FINANCIAL POSITION

in June 30, 2018 and June 30, 2017

(In thousands of Reais, unless otherwise stated)

Bank ConsolidatedNote

21


06.30.2018 06.30.2017 06.30.2018 06.30.2017

STATEMENT OF FINANCIAL POSITION

in June 30, 2018 and June 30, 2017



CURRENT LIABILITIES 61.572.174 60.713.752 63.343.185 61.821.469

Deposits 16a 10.830.926 8.721.340 10.415.182 8.304.676

Demand deposits 111.739 68.004 109.037 66.897

Interbank deposits 872.010 824.093 462.577 408.536

Time Deposits 9.847.177 7.829.243 9.843.568 7.829.243

Money market repurchase commitments 16c 28.013.117 36.649.747 20.887.706 29.880.985

Own portfolio 11.853.654 23.165.337 8.064.239 18.613.062

Third-party portfolio 13.590.063 9.484.230 10.254.067 7.395.740

Free portfolio 2.569.400 4.000.180 2.569.400 3.872.183

Acceptances and endorsements 18 15.932.799 8.937.911 17.958.471 8.937.911

Funds from real estate bills, mortgage, credit and similar 15.338.582 8.009.186 17.364.254 8.009.186

Securities issued abroad 594.217 919.640 594.217 919.640

Structured operations certificates - 9.085 - 9.085

Interbank accounts 3.626 1.098 3.626 1.098

Payments and receivables to be settled 3.626 1.098 3.626 1.098

Interbranch accounts 68.677 54.714 68.677 54.714

Third-party funds in transit 68.677 54.714 68.677 54.714

Borrowings 17a 1.690.375 1.189.024 1.690.375 1.189.024

Foreign borrowings 1.690.375 1.189.024 1.690.375 1.189.024

Domestic onlendings - Official institutions 17b 722.970 693.125 722.970 693.125

National Treasury 22.309 42.194 22.309 42.194

BNDES 366.601 324.594 366.601 324.594

FINAME 334.060 326.337 334.060 326.337


Other liabilities 1.484.353 2.822.265 8.772.755 11.115.408

Collection and levy of taxes and alike 1.584 4.398 18.442 24.138

Foreign exchange portfolio 10a 662.297 966.196 662.297 966.196

Social and statutory 23.819 35.778 65.613 94.703

Tax and social security 19a 31.447 80.056 291.007 310.402


Subordinated debts 19b - 989.990 - 989.990

Sundry 19d 626.756 616.844 7.551.570 8.480.745

NON-CURRENT LIABILITIES 21.419.060 27.435.638 25.462.671 32.137.522

LONG-TERM LIABILITIES 21.379.128 27.404.605 25.422.513 32.106.489

Deposits 16a 2.220.448 1.953.196 2.220.448 1.949.845

Interbank deposits 1.411.972 1.345.908 1.411.972 1.345.908

Time Deposits 808.476 607.288 808.476 603.937

Money market repurchase commitments 16c 1.305.127 1.577.344 1.236.024 1.135.857

Own portfolio 1.305.127 1.577.344 1.236.024 1.135.857

Acceptances and endorsements 18 8.099.951 15.116.238 8.099.951 15.116.238

Funds from real estate bills, mortgage, credit and similar 8.088.362 15.086.147 8.088.362 15.086.147

Securities issued abroad 11.589 30.091 11.589 30.091

Borrowings 17a 42.429 42.837 42.429 42.837

Foreign borrowings 42.429 42.837 42.429 42.837

Domestic onlendings - Official institutions 17b 1.654.925 2.526.194 1.654.925 2.534.084

BNDES 642.976 1.237.899 642.976 1.237.899

FINAME 1.011.949 1.288.295 1.011.949 1.296.185


Other liabilities 6.562.633 4.872.952 10.707.299 10.011.784

Tax and social security 19a - 1.467 8.958 13.222


Subordinated debts 19b 3.201.355 3.339.726 3.201.355 3.339.726

Debt instruments eligible to capital 19c 3.151.013 1.229.795 3.151.013 1.229.795

Sundry 19d 178.451 222.166 4.308.167 5.325.312

DEFERRED INCOME 39.932 31.033 40.158 31.033

SHAREHOLDERS’ EQUITY 9.348.575 8.508.176 9.348.575 8.508.176

Capital 8.130.372 8.130.372 8.130.372 8.130.372

Domestic 22a 8.130.372 8.130.372 8.130.372 8.130.372

Capital reserves 22b 372.120 372.120 372.120 372.120

Profit reserves 22c 439.022 78.300 439.022 78.300

Equity valuation adjustments 22d 151.593 (220.829) 151.593 (220.829)

Accumulated profits 255.468 148.213 255.468 148.213

Non-Controlling Interests - - - -

TOTAL LIABILITIES 92.339.809 96.657.566 98.154.431 102.467.167


22


Six month period ended June 30, 2018 and June 30, 2017


1H2018 1H2017 1H2018 1H2017

FINANCIAL INTERMEDIATION INCOME 3.355.379 4.993.122 6.213.807 7.271.108

Loan operations 9b 741.087 836.968 4.156.283 3.814.987

Lease operations 9h - - 102.927 53.930

Income from securities 7b 2.316.935 4.030.224 1.148.834 2.169.914

Income from derivative financial instruments 7d9 125.173 66.045 (137.284) 1.886

Income from exchange foreign operations 10b 159.990 48.134 159.990 48.134

Income from compulsory deposits 8b 12.194 11.751 12.194 11.751

Assigned financial assets 9j - - 770.863 1.170.506

FINANCIAL INTERMEDIATION EXPENSES (3.370.890) (4.889.667) (4.570.384) (5.813.824)

Deposits and securities sold under repurchase agreements 16d (2.935.075) (4.403.816) (2.709.643) (3.699.611)

Borrowings and onlendings 17c (297.162) (147.583) (296.560) (147.978) Lease operations 9h - - (80.920) (49.622)

Assigned financial assets 9j (2.094) (34.253) (443.590) (784.943)

Allowance for loan losses 9f (136.559) (304.015) (1.039.671) (1.131.670)

GROSS INCOME (LOSS) FROM FINANCIAL INTERMEDIATION (15.511) 103.455 1.643.423 1.457.284

OTHER OPERATING INCOME/EXPENSES 376.387 157.194 (855.440) (919.383)

Service income 20a 92.782 112.053 248.590 249.012

Income from banking fees 20b 301 357 420.777 367.217

Personnel expenses 20c (102.154) (192.212) (553.093) (523.856)

Other administrative expenses 20d (104.063) (93.670) (577.698) (531.621)

Tax expenses 23c (21.808) (33.479) (190.653) (177.654)

Share of earnings (losses) in equity-method investments 13a 495.942 371.963 162.670 124.457

Other operating income 20e 29.424 26.355 65.742 83.879

Other operating expenses 20f (14.037) (34.173) (431.775) (510.817)

OPERATING INCOME 360.876 260.649 787.983 537.901

NON-OPERATING INCOME 21 (4.989) (13.981) (4.986) (16.932)

Non-operating income 2.060 13.874 3.650 8.268

Non-operating expenses (7.049) (27.855) (8.636) (25.200)

INCOME (LOSS) BEFORE TAXES AND CONTRIBUTIONS 355.887 246.668 782.997 520.969

INCOME TAX AND SOCIAL CONTRIBUTION 23a 167.698 50.224 (208.853) (151.868)

PROFIT SHARING - EMPLOYEES AND MANAGEMENT (12.546) (24.327) (63.105) (96.536)

NON-CONTROLLING INTERESTS - - - -

NET INCOME 511.039 272.565 511.039 272.565

EARNINGS PER SHARE

Earnings per share - R$ 4,85 2,59

Number of shares (in thousand) 22a 105.391.473 105.391.473


STATEMENT OF INCOME

ConsolidatedBankNote

23


STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

NoteCapital

Realised capital LegalOther

reserves

Balances at 12.31.2016 7.826.980 372.120 70.499 303.392 (147.101) - 8.425.890

Effects of adjust from inicial aplication of Resolution CMN nº 4.512/2016 22e - - - - - (116.551) (116.551)

Capital increase 22a 303.392 - - (303.392) - - -

Equity valuation adjustments 22d - - - - (73.728) - (73.728)

Net income for the period - - - - - 272.565 272.565

Allocations:

Legal reserve - - 7.801 - - (7.801) -

Balances at 06.30.2017 8.130.372 372.120 78.300 - (220.829) 148.213 8.508.176

Changes in the period 303.392 - 7.801 (303.392) (73.728) 148.213 82.286

Balances at 12.31.2017 8.130.372 372.120 93.784 331.795 (60.521) - 8.867.550

Effect of adjust from initial application of the new accounting criteria of FIP´s recognition of the quota´s

changes22e - - - - 242.128 (242.128) -

Equity valuation adjustments 22d - - - - (30.014) - (30.014)

Net income for the period - - - - - 511.039 511.039

Allocations:

Legal reserve - - 13.443 - - (13.443) -

Balances at 06.30.2018 8.130.372 372.120 107.227 331.795 151.593 255.468 9.348.575

Changes in the period - - 13.443 - 212.114 255.468 481.025

Earnings per Share are disclosed in the Statement of Income.


Retained

earningsTotal



EVENTSCapital

reserves

Profit reservesAdjustments

to equity

value

24



(In thousands of Reais)

1H2018 1H2017 1H2018 1H2017

Cash flows from operating activities

Income before income and social contribution taxes 355.887 246.668 782.997 520.969

Adjustments to Income before income and social contribution taxes (673.903) (102.307) 638.016 1.007.262

Allowance for loan losses 9f 136.559 304.015 1.039.671 1.131.670

Depreciation and amortization 20d 24.073 15.032 39.918 24.942

Income from appraisal of recoverable value of assets - (460) - (1.390)

Share of earnings (losses) in equity-method investments 13a (495.942) (371.963) (162.670) (124.457)

Exchange variation of investments abroad 7d9 (259.154) (19.948) (259.154) (21.666)

(Income) Loss on disposal of assets 21 2.664 15.103 3.539 18.499

Provision (Reversal) to devaluation of other assets 5.075 (2.666) 3.322 (3.000)

Expenses (Reversal) with civil, labor and tax provisions 5.929 21.404 71.570 65.445

Effect of changes in foreign exchange rates on cash and cash equivalents (146.923) (13.366) (146.923) (13.368)

Interest income and foreign exchange losses of securities available for sale 97.001 210.135 97.001 210.135

Interest income from securities held to maturity (42.428) (275.636) (42.428) (275.636)

Other operating income and expenses (703) 15.500 (5.776) (4.598)

Other non-operating income and expenses - 545 - 704

Other adjustments (54) (2) (54) (18)

Adjusted income before income and tax social contribution (318.016) 144.361 1.421.013 1.528.231

Changes in assets/liabilities (12.421.506) (8.203.564) (9.111.082) (1.083.420)

(Increase) decrease in interbank investments (10.553.845) (4.603.269) (6.833.305) (199.312)

Increase (decrease) in trading securities and derivative financial instruments 202.689 1.554.552 160.214 890.105

(Increase) decrease in interbank accounts 8.532 (43.995) 8.532 (43.995)

(Increase) Decrease in compulsory deposits at the Central Bank of Brazil (1.282.588) (16.346) (1.282.588) (16.346)

(Increase) Decrease in loan operations 347.086 204.088 (1.323.465) (1.352.065)

(Increase) Decrease in lease operations - - 3.341 (2.831)

(Increase) /decrease in other receivables, net of deferred taxes (478.025) 117.312 (836.241) 126.068

(Increase) decrease in other assets (22.587) 5.262 18.372 93.381

Income and social contribution taxes paid - (19.851) (147.326) (34.684)

(Decrease) increase in deposits 4.057.769 971.065 4.132.378 5.676.884

(Decrease) increase in money market repurchase commitments (4.785.310) (8.253.932) (3.613.189) (4.656.537)

(Decrease) Increase in acceptances and endorsements (52.168) 2.251.735 1.973.504 2.251.735

(Decrease) increase in liabilities from borrowings and onlendings 57.090 (743.253) 49.117 (743.737)

(Decrease) Increase in other obligations 72.006 379.585 (1.428.399) (3.065.569)

(Decrease) increase in deferred income 7.845 (6.517) 7.973 (6.517)

CASH GENERATED (USED) BY OPERATING ACTIVITIES (12.739.522) (8.059.203) (7.690.069) 444.811

Cash flows from investing activities

(Acquisition / increase) of securities available for sale (398.863) (4.961.772) (605.269) (5.335.457)

(Acquisition / increase) of securities held to maturity - (137.317) - (137.317)

(Acquisition) of property for use (12.311) (11.574) (18.510) (12.528)

(Acquisition) of intangible (28.533) (39.394) (63.110) (40.711)

(Acquisition / increase) of investments (255.034) - (255.034) -

Disposal/Decrease, maturity of securities available for sale 5.416.662 13.365.228 1.957.425 5.069.931

Maturity of securities held to maturity 4.284.881 297.268 4.284.881 1.135.785

Disposal of property for use 1.540 1.529 1.688 2.093

Disposal/Decrease of investments 874.257 9.748 326.842 24.353

Disposal of intangible assets 9 93 483 96

Interest on own capital / Dividends received 531.436 - - -

NET CASH GENERATED (USED) BY INVESTING ACTIVITIES 10.414.044 8.523.809 5.629.396 706.245

Cash flows from financing activities

Dividends paid 28e (110.598) (101.131) (110.598) (101.131)

(Decrease) Increase in obligations due to subordinated debts 28e 282.872 (546.918) 282.872 (546.918)

(Decrease) Increase in capital and debt instruments 28e 251.706 60.851 251.706 60.851

CASH GENERATED (USED) BY FINANCING ACTIVITIES 423.980 (587.198) 423.980 (587.198)

Net variation for cash and cash equivalents (1.901.498) (122.592) (1.636.693) 563.858

Beginning of the period 2.915.303 1.558.846 2.654.731 2.095.702

Effect of changes in foreign exchange rates on cash and cash equivalents 146.923 13.366 146.923 13.368

End of the period 5 1.160.728 1.449.620 1.164.961 2.672.928

Increase in cash and cash equivalents (1.901.498) (122.592) (1.636.693) 563.858


STATEMENT OF CASH FLOWS


25


STATEMENT OF VALUE ADDEDSix month period ended June 30, 2018 and June 30, 2017

(In thousands of Reais)

1H2017 1H2017 1H2018 1H2017

Income 3.322.301 4.779.718 5.472.484 6.311.797

Financial operations income 3.355.379 4.993.122 6.213.807 7.271.108

Service income and banking fees 20a / 20b 93.083 112.410 669.367 616.229

Allowance for loan losses 9f (136.559) (304.015) (1.039.671) (1.131.670)

Other income (expenses) 20e / 20f / 21 10.398 (21.799) (371.019) (443.870)

Financial intermediation expenses (3.234.331) (4.585.652) (3.530.713) (4.682.154)

Inputs acquired from third parties (74.482) (69.228) (513.256) (477.262)

Water, electricity and gas 20d (499) (996) (3.581) (4.037)

Outsourced services 20d (503) (525) (7.051) (4.494)

Communications 20d (473) (664) (34.063) (34.024)

Data processing 20d (35.669) (34.091) (100.809) (100.719)

Transportation 20d (603) (498) (5.941) (7.198)

Surveillance and security services 20d (680) (1.204) (1.120) (1.676)

Specialized technical services 20d (16.611) (14.670) (191.062) (172.714)

Financial system services 20d (8.605) (5.769) (52.128) (48.263)

Advertising and publicity 20d (881) (298) (18.505) (8.427)

Judicial and notary public fees 20d (3.031) (3.257) (39.529) (45.338)

Other 20d (6.927) (7.256) (59.467) (50.372)

Gross added value 13.488 124.838 1.428.515 1.152.381

Amortization/depreciation expenses 20d (24.073) (15.032) (39.918) (24.942)

Net added value produced by the Entity (10.585) 109.806 1.388.597 1.127.439

Added value received as transfer 495.942 371.963 162.670 124.457

Share of earnings (losses) in equity-method investments 13a 495.942 371.963 162.670 124.457

Added value payable 485.357 100,00% 481.769 100,00% 1.551.267 100,00% 1.251.896 100,00%

Distributed added value 485.357 100,00% 481.769 100,00% 1.551.267 100,00% 1.251.896 100,00%

Personnel 82.660 17,03% 216.539 44,95% 539.223 34,76% 620.392 49,56%

Salaries, fees and labor demands 45.961 124.757 380.272 341.661

Profit sharing - Employees and Management 12.546 24.327 63.105 96.536

Benefits and training programs 11.394 15.007 62.397 62.329

FGTS 12.739 52.432 33.429 119.479

Other charges 20 16 20 387

Taxes, rates and contributions (113.850) -23,46% (16.745) -3,48% 476.481 30,72% 329.522 26,32%

Federal (118.909) (21.445) 444.412 301.565

State 10 7 374 342

Municipal 5.049 4.693 31.695 27.615

Third-party capital remuneration 5.508 1,13% 9.410 1,95% 24.524 1,58% 29.417 2,35%

Rental 20d 5.508 9.410 24.524 29.417

Remuneration of own capital 511.039 105,29% 272.565 56,58% 511.039 32,94% 272.565 21,77%

Retained earnings 511.039 272.565 511.039 272.565


ConsolidatedBankNote

26





Notes to the Individual and Consolidated Financial Statements

1. THE CONGLOMERATE AND ITS OPERATIONS

2. CORPORATE RESTRUCTURING

3. PRESENTATION OF FINANCIAL STATEMENTS

Banco Votorantim S.A. (“Banco Votorantim”, “Bank”, “Conglomerate” or “Consolidated”) is a private company which,

operating as a Multiple Bank, develops banking activities in authorized categories, including commercial banking,

investment banking and foreign exchange operation portfolios.

Through its subsidiaries, the Institution also carries out activities in the areas of consumer credit, leasing, administration of

investment funds and credit cards, securities brokerage and distribution and any other activities in which institutions that

are part of the National Financial System are permitted to engage.

Transactions are conducted in the context of a set of institutions that operate in an integrated manner in the financial

market, including in relation to risk management, and certain transactions have the joint participation or the intermediation

of member institutions, which form an integral part of the financial system. The benefits of the services provided between

these institutions and the costs of the operational and administrative structure, are absorbed based on the practicality and

reasonableness of the allocation of benefits and costs, jointly or individually.

The consolidated financial statements were prepared based on the accounting guidelines derived from Brazilian

Corporation Law and the rules and instructions of the National Monetary Council (CMN), the Central Bank of Brazil

(BACEN), and are presented in accordance with the Accounting Plan for Institutions in the National Financial System

(COSIF) highlighting the ones related to the Conglomerate.

The preparation of the financial statements in accordance with accounting practices adopted in Brazil, applicable to

financial institutions, requires that Management use its judgment in determining and recording accounting estimates, when

applicable. Significant assets and liabilities subject to these estimates includes: the residual value of permanent assets,

allowance for loan losses, deferred tax assets, provision for labor, tax and civil claims, valuation of financial instruments

and other provisions. Definitive values of transactions involving these estimates are recognized only upon settlement.

By Private Instrument of Amendment of the Articles of Incorporation of Votorantim Asset Management Distribuidora de

Títulos e Valores Mobiliários Ltda. meeting of Votorantim - Corretora de Títulos e Valores Mobiliários Ltda., held on

January 31, 2018, Banco Votorantim SA, controller of both, approved the merger of Votorantim CTVM into Votorantim

Asset, in accordance with the Protocol and Justification of Incorporation between them. The merged net assets were

valued at book value on December 31, 2017, the transaction's base date, in the amount of R$ 266,791; adding up the

equity variations occurring between the base date of the appraisal report and the date of the merger. The merger is

justified by the discontinuation of the activities of Votorantim CTVM and the object identity among the companies involved

and represents the improvement of the corporate structure of the Conglomerate, rationalizes its operations, simplifies

administration, facilitates accounting and financial procedures; minimizes administrative expenses, leading to the

optimization of its assets and results. As a result, Votorantim CTVM had its legal personality extinguished and Votorantim

Asset became the successor, on a universal basis, of all its rights and obligations. The merger will imply an increase of

Votorantim Asset's Capital Stock in the amount of R$ 190,763, through the issuance of 19,076,313,565 new shares with a

par value of R$ 0.01, to be attributed to Votorantim CTVM's shareholders, replacing to its shares in this company. In

addition to the amendment to the Capital Stock clause, Votorantim Asset's articles of association will not be altered.

We present below the equity balances at December 31, 2017 of Votorantim CTVM incorporated by Votorantim Asset:

Assets: R$ 386,995

Liabilities: R$ 120,204

Shareholder’s equity: R$ 266,791

27





06.30.2018 06.30.2017

Banking segment - Domestic

BV Financeira S.A. Crédito, Financiamento e Investimento (1) 100,00% 100,00%

BV Leasing Arrendamento Mercantil S.A. (1) 100,00% 100,00%

Votorantim Corretora de Títulos e Valores Mobiliários Ltda. (1) (2) - 99,99%

Fund management segment

Votorantim Asset Management Distribuidora de TVM Ltda. (1) 99,99% 99,99%

Banking segment - Foreign

Banco Votorantim Securities Inc. (1) (3) - 100,00%

Votorantim Securities (UK) Limited (1) (4) - 100,00%

´(1) Financial subsidiaries.´(2)

´(3)

´(4)

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies adopted by Banco Votorantim were consistently applied to all periods presented in these

consolidated financial statements and have been applied consistently by all entities of the Conglomerate.

Shareholding interest included in the consolidated financial statements, by business segment:

Activity

In the preparation of consolidated financial statements, intercompany transactions, and any unrealised income and

expenses arising from intercompany transactions, and intercompany balances, including interest held by one company in

another, were eliminated, net of tax effects. Interest held by non-controlling shareholders in the shareholders’ equity of the

subsidiaries and in income were highlighted in consolidated financial statements. The lease transactions were classified

as a financial lease, and the reclassified amounts under leased property, plant and equipment to the caption lease

transactions including the excess and/or insufficient depreciation, less residual value received in advance. These

consolidated financial statements do not include the consolidation of the exclusive investment funds and of the credit

receivable investment funds and non-financial subsidiaries in conformity with the consolidation rules established by the

CMN for the purposes of the Financial Conglomerate. The book balances of the overseas direct subsidiaries, which are

prepared in accordance with International Financial Reporting Standards (IFRS), were translated into Reais, using the

foreign currency quotation on the closing date of the period, and were adjusted to conform to the accounting policies

described in Note 4. The exchange variation of the operations in the Country of the branch and of the subsidiary

companies abroad was distributed on the lines of the statement of income, according to the respective assets and

liabilities which originated them. The result of exchange variation of foreign investments are presented in the “Income from

derivative financial instruments” with the purpose of eliminating the effect of hedging against the exchange rate

fluctuations of these investments.

The National Monetary Council (CMN) approved the following pronouncements of Accounting Pronuncements Committee

(CPC) which were fully applied by the Bank, as applicable: CPC 00 (R1) - Basic Conceptual Pronouncement, CPC 01

(R1) - Impairment of assets, CPC 03 (R2) - Statement of cash flows, CPC 05 (R1) - Related party disclosures, CPC 10

(R1) - Share-based payment, CPC 23 - Accounting Policies, Change in Accounting Estimates and Correction of Errors,

CPC 24 - Subsequent events, CPC 25 - Provisions, contingent assets and liabilities and CPC 33 (R1) - Employee

Benefits.

The Conglomerate applies pronouncement CPC 09 - Statement of value added, which is not in conflict with the rules of

the Central Bank of Brazil, as provided for in the prevailing regulations

The Consolidated Financial Statements were authorized for issue by Executive Board on August 02, 2018.

Asset Management

Asset Management

Interest %

Votorantim Corretora de Títulos e Valores Mobiliários Ltda. was merged into Votorantim Asset Management Distribuidora de TVM Ltda on January 31, 2018, as described

in Note 2.

Financial

Lease

Brokerage house

Asset Management

Banco Votorantim Securities Inc. was extinguished on December 28, 2017.

Votorantim Securities (UK) Limited had its activities closed during the year ended December 31, 2017 and is in the process of dissolution.

28





a) Statement of income

b) Functional and presentation currency

c) Measurement at present value

d) Cash and cash equivalents

e) Interbank investments

f) Securities

The methodology of adjustment to fair value was established in compliance with consistent and verifiable criteria, which

take into consideration the average price of trading on the date of calculation, or, in the absence thereof, the daily basis

adjustment of forward market transactions disclosed by external sources, or the probable net realizable value determined

by pricing models, using interest rate future value curves, exchange rates, price and currency indexes. The determination

of fair value takes unto consideration the credit risk of the issuer (credit spread adjustment).

Revenues and expenses are recognized on an accrual basis in the period earned or incurred . Transactions that were

carried out with floating financial charges are adjusted on a pro rata basis, based on the variation of the respective agreed-

on indices; and transactions with fixed financial charges are recorded at redemption value, rectified by unrecognized

income or unrecognized expenses corresponding to the future period. Transactions indexed to foreign currencies are

adjusted at the reporting sheet date at the current rate criteria.

The functional currency, which is the currency of the principal economic environment in which an entity operates, is the

Real for all Conglomerate entities. In the consolidated financial statements the presentation currency is also the Real.

Financial assets and liabilities are presented at present value as a result of application of accrual regime for recognition of

respective interest revenues and expenses.

Non-contractual obligations, mainly represented by provisions for lawsuits and legal obligations whose disbursement date

is unknown and not under control of the Conglomerate, are measured at present value, as they are initially recognized at

estimated disbursement value on evaluation date and are adjusted on a monthly basis.

Cash and cash equivalents comprise domestic and foreign currency, money market repurchase commitments - own

portfolio, interbank accounts or relations and investments in foreign currency, with original maturities of 90 days or less

from the acquisition date that are subject to an insignificant risk of changes in their fair value.

Interbank investments are shown at cost of investment or acquisition, plus income accrued up to the reporting date and

adjusted for reserve for losses, as applicable.

Securities are recorded at the amount effectively paid, net of reserve for losses, and classified into three different

categories based on Management's intent:

Trading securities: Securities acquired for the purpose of being actively and frequently negotiated. Subsequent to initial

recognition, trading securities are measured at fair value with changes therein recognized in profit or loss;

Securities available for sale: Securities that may be traded at any time, though are not acquired for the purpose of being

actively and frequently negotiated. Subsequent to initial recognition, securities available for sale are measured at fair

value with changes therein recognized in a separate account in shareholders’ equity, net of taxes; and

Securities held to maturity: Securities acquired with the positive intent and financial capacity to hold to maturity. Held-to-

maturity securities are initially recognized at cost plus any directly attributable transaction costs. Subsequent to initial

recognition, held-to-maturity financial assets are measured at amortised cost using the effective interest method, less any

impairment losses. For securities reclassified to this category, the fair value adjustment is incorporated to cost and is

recorded prospectively at amortized cost using the effective interest rate method.

Income on securities, regardless of the category, is accrued pro rata, based on the variation of the index and on the

agreed-upon interest rates, by the compounding or straight-line method, up to the date of maturity or of the final sale of

the security, and is recognized directly in profit or loss.

29





·

·

g) Derivative financial instruments

The Conglomerate adopted in the semester ended June 30, 2018 a new accounting standard for recognition of changes

in investment fund quotas. Prior to the change in the criterion, the variation of quotas was always treated as income

produced by the funds, with their recognition in the result of the period in "Income from securities". Following guidelines of

the Central Bank of Brazil, the quota variation was treated as an adjustment to fair value for funds with the following

characteristics:

Funds in which there is a forecast of payment of dividends, as a form of remuneration of its quotaholders in the course

of the fund's business.

Funds in which the updated balance of the quotas is not available for redemption (realization) in the short term, that is,

when the redemption of quotas occurs only in the liquidation or closure of the fund; and

Losses on securities classified as available for sale and as held to maturity that are not temporary losses are directly

recognized in profit or loss and now comprise the new asset cost basis.

Upon disposal, difference determined between sales value and acquisition cost adjusted by earnings and other than

temporary impairment losses, are considered as the transaction result and is accounted for on transaction date as Income

or Loss of securities.

Derivative financial instruments are valued at fair value at the reporting date. Changes in value are recorded in the income

or expense accounts of the respective financial instruments.

The fair value adjustment methodology of derivative financial instruments was established based on consistent and

verifiable criteria, considering the average price of trading on the date of calculation, or, in the absence thereof,

conventional and proven methodologies and pricing models that reflect the net realizable value. The fair value considers

the credit risk of the counterparty (Credit valuation adjustment).

Derivative financial instruments used to offset, in whole or in part, the risks arising from exposure to variations in the fair

value of financial assets or liabilities are considered hedging instruments and are classified according to their nature as

either:

Market risk hedge: changes in the fair values of the financial instruments and the corresponding hedged items are

recognized in profit or loss; and

Cash flow hedge: For financial instruments classified in this category, the effective portion of changes in fair value is

recorded in a separate account of Shareholders' equity, net of tax effects. The effective portion is that portion for which

the variation in the fair value of the hedging instrument directly offsets the change in fair value of the hedged item,

considering transaction accumulated effect. Other variations in these instruments are recognized in profit or loss for the

period.

For items that were discontinued from the hedge list and that remain recorded in the statement of financial position, as in

the case of credit contracts assigned with substantial retention of risks and benefits, when applicable, the fair value

adjustment is recognized in the income over the remaining term of the operations.

h) Loan and lease operations, advances on foreign exchange contracts, other receivables with loan

characteristics and allowance for loan losses

Loans and lease operations, advances on foreign exchange contracts and other receivables with loan characteristics are

classified according to Management's assessment regarding the level of risk, taking into consideration the current

economic environment, past experience and risks specifically related to the respective operation, the counterparty and

guarantors, periods of delinquency, and economic group in accordance with the parameters established by CMN, which

requires the classification of the portfolio into nine risk levels, ranging from AA (minimum risk) to H (maximum risk), as well

as the classification of transactions with delinquency of more than 14 days as non-performing loans. In relation to the

delinquency period for operations with a term of over thirty-six (36) months, a double counting of days is adopted over

intervals of delinquency defined for the nine levels risks to retail operations. For wholesale operations, a double counting

days for the intervals of delinquency is also permitted, according to the internal assessment.

30





·

·

i) Prepaid expenses

j) Permanent assets

When all the risks and benefits related to assets are substantially transferred to an entity, assets are derecognized.

The operations generated as from January 1, 2017, have the remuneration fully recognized as an expense.

Assets recorded pursuant to permission provided for in BACEN Circular Letter no. 3,738/2014 are amortized on a straight-

line basis over the maximum period of 36 months.

Beginning as of January 1, 2020, all amounts recorded in assets and related to remuneration of correspondents in Brazil

will be immediately written off, with contra-entry in the appropriate expense account for the period.

Investments: investments in subsidiaries and associates with significant influence or interest of 20% or more in the voting

capital are accounted for by the equity method based on the shareholders’ equity in the subsidiary. Financial statements

of subsidiaries abroad are conformed to accounting criteria in force in Brazil and translated into Brazilian Reais in

accordance with prevailing law, and their effects are recognized in profit or loss. Other permanent investments are valued

at cost of acquisition, less provision for impairment, as applicable.

Property for use: property, plant and equipment is valued at acquisition cost less depreciation, which is calculated on a

straight-line basis using the following annual rates in accordance with estimated useful lives of assets, as follows: vehicles

- 20%, data processing systems - 20% and other items - 10% (Note 14).

Intangible assets: intangible assets corresponds to the expenditure in software intended for the maintenance of the

Institution. Intangible assets have defined useful lives and primarily relates to softwares (Note 15). Amortization is

calculated by the straight-line method, based on the period over which the benefit is generated and is recorded under

Other administrative expenses - Amortization (Note 20d).

These 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.

Beginning January 2, 2015, in compliance with requirements of CMN Resolution no. 4,294/2013, and in accordance with

permission provided for in BACEN Circular Letter no. 3,738/2014, two thirds of the remuneration relating to 2015

origination of credit or lease transactions by correspondents are recorded in assets, and the remaining portion is

recognized in profit or loss for the period upon origination. As of January 1, 2016, the portion recorded in assets was

reduced to one third of the remuneration of operations originated in 2016.

Financial assets assigned consider the transfer level of risks and benefits of assets transferred to other entity:

Loan and lease operations that are hedged against market risk are stated at fair value using consistent and verifiable

criterion. Adjustments to these transactions from fair value adjustment valuations are recorded in credit and lease

transactions, as a contra-entry to “Income from derivative financial instruments”.

Interest from credit transactions overdue for more than 59 days is recognized as income only when effectively received,

regardless of risk level.

Operations with a risk level H continue in this status for 180 days, at which time they are written off against the existing

provision and controlled in off-balance sheet accounts.

Renegotiated operations are maintained, at a minimum, at the level at which they were initially rated on the date of

renegotiation. Renegotiations of credit transactions that had been previously written off against provisions are rated as

level H and any gains from renegotiation are recognized in profit or loss when effectively received.

The allowance for loan losses, considered sufficient by Management, complies with the requirement established by CMN

Resolution 2,682/1999 (Note 9e).

When financial assets are transferred to another entity, but there is no substantial transfer of the risks and benefits

related to the transferred assets, assets remain on the Company’s statement of financial position. The income and

expenses arising from these operations are recognized in an accrual basis accordingly to the remaining period of these

operations; and

31





k) Impairment of non-financial assets - Impairment

Methodologies applied to the evaluation of the recoverable value of non-financial assets:

l) Employee benefits

n) Taxes

Taxes

Income tax (15% + 10% additional) 25%

Social contribution on net income - CSLL (1) 20%

PIS / PASEP 0,65%

Contribution for Social Security Funding - COFINS 4%

Service tax (ISS) - ISSQN De 2% a 5%(1)

Impairment loss recognized to adjust these assets’ recoverable value is stated in respective notes.

The Conglomerate has a variable compensation program eligible for its officers and employees. Amounts to be paid that

are adjusted according to the grace period (from one to a maximum of four years) and to the characteristics of each

benefit are recorded under “Other sundry obligations - Provision for payments” as a contra entry to caption “Personnel

expenses - Proceeds”. Program details are disclosed in Note 25.

Recognition, measurement and disclosure of employee benefits (short and long-term) are conducted in accordance with

criteria defined in CPC 33 (R1) - Benefits to employees, approved by the CMN Resolution No. 4,424/2015. In accordance

with the accrual regime, this pronouncement requires that an entity recognize a liability as a contra-entry to the net income

of the period when the employee provides services in exchange for benefits to be paid in the future.

The Conglomerate assesses periodically, if there is any sign that an asset may be impaired. If so, the Institution estimates

the asset's recoverable value, which is the greater of: i) the asset’s fair value less costs to sell; and ii) the asset’s value in

use.

Current rates

m) Deposits and money market repurchase commitments

Costs incurred in issuing securities or other forms of funding that are included as transaction costs are recognized in the

income statement on an accrual basis for the term of the original transactions.

Funding that is subject to market risk hedging is valued at its fair value using consistent and verifiable criteria. The

valuation adjustments to fair value of these operations are recorded in the same line as the financial instrument, in contra-

entry to income from derivative financial instruments.

Deposits and money market repurchase commitments are stated at the amounts of the liabilities and consider, when

applicable, the charges enforceable up to the reporting date, recognized on a “pro rata” daily basis.

Taxes are calculated based on rates shown in the chart below:

Rate applicable to financial companies, from September 01, 2015 (the rate was 15% until August 31, 2015). Beginning as of January 2019, the rate will return to 15%.

If the asset’s recoverable value is lower than its carrying value, the asset’s carrying value is reduced to its recoverable

value through a provision for impairment losses that is recognized in Statement of Income, in Other Administrative

Expenses or Other Operating Expenses, according to the nature of the asset.

Investments: the methodology for determining the recoverable value of investments accounted for by the equity method

is based on evaluation of equity in investees, their business plans and invested amounts’ return capacity. A provision for

impairment loss is recognized in profit or loss in the period when the carrying value of an investment, exceeds its

recoverable value.

Intangible assets: Software - software is developed internally and according to the Conglomerate’s needs. This

development process is in compliance with the Bank investment policy which aims the modernization and adequacy to

new technologies and business requirements. As there are no similar items in the market and also because of the high

cost to implement metrics that permit determining the value in use, testing of software recoverability is comprised of the

evaluation of its utility for the Institution such that when the software no longer has future economic benefits, the

recoverable value of the intangible asset is adjusted.

32





o) Provisions, contingent assets and liabilities and legal obligations

p) Guarantees and sureties

·

·

·

Commissions received in advance are accounted for under advanced income in group deferred income, on a monthly

basis at the accrual system.

Provision for financial guarantees provided, with the application of CMN Resolution 4,512/2016

In line with the requirements of CMN Resolutions 2,682/1999 and 4,512/2016, the constitution of a provision for losses in

the provision for financial guarantees to customers, takes into account:

When the obligation value is subject to exchange variation or to any other type of adjustment, balances of these accounts

are adjusted at the reporting date.

Deferred tax assets and deferred tax liabilities are recognized through the application of prevailing tax rates on respective

bases. For recognition, maintenance and write-off of deferred tax assets, the criteria established in CMN Resolution no.

3,059/2002, as amended by CMN Resolutions no. 3,355/2006 and 4,192/2013, are followed, supported by a study on

realization capacity.

The deferred tax assets resulting from the increase of the CSLL rate from 15% to 20% are being recognized in a sufficient

amount to its consumption until the final date of effective of the new rate (December 2018), according to Law no.

13,169/2015.

Deferred income tax is recognized at the subsidiary BV Leasing, calculated at the rate of 25%, on the adjustment of

excess of depreciation of the lease portfolio of subsidiary BV Leasing.

Recognition, measurement and disclosure of provisions, contingent assets and liabilities and of legal obligations are

conducted in accordance with criteria defined in CPC 25 - Provisions, Contingent Liabilities and Contingent Assets,

approved by the CMN Resolution 3,823/2009 (Note 26).

Contingent assets are not recognized in the Financial Statements, since they may be a result that can never be realized.

However, when the realization of the gain is practically certain, then the related asset is not a contingent asset and its

recognition is performed in the Financial Statements.

Contingent liabilities are recognized when, based on the opinion of legal counsel and Management, the risk of loss of a

lawsuit or administrative proceeding is considered probable, with a probable outflow of financial resources for the

settlement of obligations and when the sums involved are reasonably estimable. Contingent liabilities rated as possible

losses are not recognized and are only be disclosed in notes; those rated “remote” do not require provision or disclosure.

The sector of performance, competitive and regulatory environment, stock control and management, as well as financial

solidity, being these variables captured through the qualitative and quantitative rating models, as well as;

In the case of guarantees given on the behalf of customers involved in legal or administrative proceedings, the

likelihood that the customer will be required to make a payment under the final ruling.

Income for the period from provided guarantee and sureties commissions not yet received, are accounted for on a

monthly basis in “Commissions for Co-obligations Receivable, as a contra entry to Income from Provided Guarantees.

The financial guarantees provided, which require contractually defined payments, as a result of non-payment of the

obligation by the debtor on the due date, such as: guarantee, guarantee, co-obligation, or other obligation that represents

a guarantee of compliance with third parties' financial obligations, are recorded and controlled in off-balance sheet

accounts.

The effects of the adjustments by the initial application of CMN Resolution 4512/2016, which occurred on January 1,

2017, which resulted in the constitution of a liability provision, were recorded as a contra entry to the retained earnings

account, net of tax effects.

The financial guarantees provided are shown in Other Liabilities - Sundry (Note 19d) under subitem:

Legal obligations comprise lawsuits related to tax obligations, where the subject being contested is the legality or

constitutionality of such obligations, which, regardless of the probability of success, are recognized in full in the

consolidated financial statements.

33





q) Others assets and liabilities

5. CASH AND CASH EQUIVALENTS

06.30.2018 06.30.2017 06.30.2018 06.30.2017

Cash and due from banks 87.796 90.357 92.029 134.900

Cash and due from banks in national currency 1.070 1.312 3.792 4.877

Cash and due from banks in foreign currency 86.726 89.045 88.237 130.023

Interbank funds applied (1) 1.072.932 1.359.263 1.072.932 2.538.028

Money market repurchase - commitments - Sales pending settlement - own portfolio 498.532 - 498.532 1.459.450

Interbank accounts or relations 208.239 558.352 208.239 264.038

Investments in foreign currency 366.161 800.911 366.161 814.540

Total 1.160.728 1.449.620 1.164.961 2.672.928 (1)

6. INTERBANK INVESTMENTS

a) Breakdown

06.30.2018 06.30.2017 06.30.2018 06.30.2017

Money market repurchase commitments 19.827.326 16.078.683 19.827.326 16.078.683

Sales pending settlement - Own portfolio 3.505.008 2.552.138 6.898.629 4.787.346

Financial Treasury Bills - LFT - 21.162 500.037 614.161

National Treasury Bills - LTN 234.455 164.776 1.787.580 990.001

National Treasury Notes - NTN 3.270.553 2.366.200 4.611.012 3.183.184

Sale pending settlement - Financed operations 13.691.050 9.534.548 10.297.429 7.299.340

Financial Treasury Bills - LFT 500.037 1.697.169 - 1.104.170

National Treasury Bill - LTN 10.353.672 6.148.195 8.800.546 5.322.970

National Treasury Notes - NTN 2.837.341 1.689.184 1.496.883 872.200

Sale pending settlement - Short position 2.631.268 3.991.997 2.631.268 3.991.997

Federal public securities - National Treasury 2.631.268 3.991.997 2.631.268 3.991.997

Interbank deposit investments 28.944.879 25.096.919 830.196 1.862.805

Total 48.772.205 41.175.602 20.657.522 17.941.488

Current assets 38.156.591 25.186.396 20.657.522 17.742.062

Non-current assets 10.615.614 15.989.206 - 199.426

b) Income from interbank investments

1H2018 1H2017 1H2018 1H2017

Income from money market repurchase commitments 563.605 967.894 563.605 967.894

Own portfolio 73.348 72.915 165.284 239.106

Financed Operations 367.739 722.572 275.803 556.381

Short position 122.518 172.407 122.518 172.407

Income from interbank deposits 1.037.113 1.383.780 26.379 53.369

Total 1.600.718 2.351.674 589.984 1.021.263

Bank Consolidated

Bank Consolidated

Other assets and liabilities are stated at realizable values, including, when applicable, monetary and exchange variations

(on a pro rata basis) and a reserve for losses, as necessary. Liabilities are stated at known measurable amounts plus, as

applicable, monetary charges, inflation adjustments and foreign exchange variation on a pro rata basis.

Bank Consolidated

Refer to transactions with original maturities of 90 days or less from the acquisition date and are subject to an insignificant risk change in fair value.

34





7. SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS

a) Securities

a.1) Breakdown of the portfolio by category, type of paper and maturity term

Bank

Without

maturity

From 0 to 30

days

From 31 to 180

days

From 181 to

360 daysOver 360 days Cost Fair value

Fair value

adjustmentCost Fair value

Fair value

adjustment1 – Trading securities 154 228.951 7.391 36.877 1.164.245 1.433.769 1.437.618 3.849 4.336.902 4.348.165 11.263

Government bonds - 228.951 7.391 36.141 1.109.052 1.376.764 1.381.535 4.771 4.296.671 4.307.859 11.188

Financial Treasury Bills - - - - - - - - 10.658 10.658 -

National Treasury Bills - 228.951 - 14.638 815.719 1.055.649 1.059.308 3.659 3.651.512 3.660.531 9.019

National Treasury Notes - - 7.391 21.503 281.296 309.091 310.190 1.099 627.411 629.578 2.167

Brazilian Foreign Debt Securities - - - - 12.037 12.024 12.037 13 7.090 7.092 2

Private securities 154 - - 736 55.193 57.005 56.083 (922) 40.231 40.306 75

Shares 154 - - - - 52 154 102 52 252 200

Eurobonds - - - 736 38.412 40.166 39.148 (1.018) 25.275 25.180 (95)

Debentures - - - - 16.781 16.787 16.781 (6) - - -

Other - - - - - - - - 14.904 14.874 (30)

2 – Securities available for sale 10.947 360.883 205.523 573.659 13.890.743 15.281.838 15.041.755 (240.083) 22.405.016 21.996.732 (408.284)

Government bonds - - 4.100 7.040 5.010.303 5.112.923 5.021.443 (91.480) 6.190.712 6.249.058 58.346

Financial Treasury Bills - - 4.100 7.040 1.839.738 1.851.407 1.850.878 (529) 3.683.435 3.689.334 5.899

National Treasury Bills - - - - 35.692 35.780 35.692 (88) - - -

National Treasury Notes - - - - 1.602.119 1.653.763 1.602.119 (51.644) 1.157.444 1.153.677 (3.767)

Agrarian debt securities - - - - - - - - 753 758 5

Brazilian Foreign Debt Securities - - - - 1.532.754 1.571.973 1.532.754 (39.219) 1.349.080 1.405.289 56.209

Private securities 10.947 360.883 201.423 566.619 8.880.440 10.168.915 10.020.312 (148.603) 16.214.304 15.747.674 (466.630)

Debentures (1) - 360.144 18.987 135.485 6.444.729 7.123.783 6.959.345 (164.438) 12.942.958 12.481.144 (461.814)

Promissory notes - - 124.312 3.159 9.472 138.712 136.943 (1.769) 486.149 486.144 (5)

Shares (2) 10.947 - - - - 15.078 10.947 (4.131) 18.447 16.358 (2.089)

Shares in investment funds (3) - - - - 1.551.312 1.551.312 1.551.312 - 1.567.393 1.567.393 -

Rural Product Notes - commodities (4) - 739 48.663 50.204 243.823 359.759 343.429 (16.330) 236.971 229.057 (7.914)

Eurobonds (5) - - - 144.371 245.065 390.877 389.436 (1.441) 465.214 458.892 (6.322)

Financial Bills - - - 171.402 - 171.482 171.402 (80) 104.310 104.310 -

Floating Rate Notes - - - 61.998 95.475 157.136 157.473 337 - - -

Other - - 9.461 - 290.564 260.776 300.025 39.249 392.862 404.376 11.514

3 – Securities held to maturity - - 349.854 150.222 1.914.641 2.324.326 2.414.717 90.391 6.206.014 6.398.235 192.221

Government bonds - - 349.854 150.222 1.914.641 2.324.326 2.414.717 90.391 6.206.014 6.398.235 192.221

National Treasury Bills - - - - 1.209.662 1.142.015 1.209.662 67.647 4.286.623 4.445.788 159.165

National Treasury Notes - - 349.854 150.222 704.979 1.182.311 1.205.055 22.744 1.919.391 1.952.447 33.056

Total (1 + 2 + 3) 11.101 589.834 562.768 760.758 16.969.629 19.039.933 18.894.090 (145.843) 32.947.932 32.743.132 (204.800)

Maturity in days

In the Statement of Financial position, securities classified in the “Trading securities” category are presented as Current Assets, regardless of the maturity terms.

Fair value Total Total

06.30.2018 06.30.2017

35





Consolidated

Without

maturity

From 0 to 30

days

From 31 to 180

days

From 181 to

360 daysOver 360 days Cost Fair value

Fair value


Fair value

adjustment1 – Trading securities 154 228.951 7.391 36.877 1.166.304 1.435.828 1.439.677 3.849 5.035.359 5.046.623 11.264

Government bonds - 228.951 7.391 36.141 1.111.111 1.378.823 1.383.594 4.771 4.995.128 5.006.317 11.189

Financial Treasury Bills - - - - 2.059 2.059 2.059 - 27.204 27.206 2

National Treasury Bills - 228.951 - 14.638 815.719 1.055.649 1.059.308 3.659 4.333.423 4.342.441 9.018

National Treasury Notes - - 7.391 21.503 281.296 309.091 310.190 1.099 627.411 629.578 2.167

Brazilian Foreign Debt Securities - - - - 12.037 12.024 12.037 13 7.090 7.092 2

Private securities 154 - - 736 55.193 57.005 56.083 (922) 40.231 40.306 75

Shares 154 - - - - 52 154 102 52 252 200

Eurobonds - - - 736 38.412 40.166 39.148 (1.018) 25.275 25.180 (95)

Debentures - - - - 16.781 16.787 16.781 (6) - - -

Other - - - - - - - - 14.904 14.874 (30)

2 – Securities available for sale 244.202 360.883 209.431 578.190 9.986.023 11.652.481 11.378.729 (273.752) 16.157.079 15.751.484 (405.595)

Government bonds - - 8.008 11.571 6.001.024 6.078.839 6.020.603 (58.236) 7.908.710 8.020.104 111.394

Financial Treasury Bills - - 8.008 11.571 1.848.904 1.869.012 1.868.483 (529) 3.712.674 3.718.570 5.896

National Treasury Bills - - - - 328.580 314.664 328.580 13.916 249.412 262.816 13.404

National Treasury Notes - - - - 2.290.786 2.323.190 2.290.786 (32.404) 2.596.791 2.632.671 35.880

Agrarian debt securities - - - - - - - - 753 758 5

Brazilian Foreign Debt Securities - - - - 1.532.754 1.571.973 1.532.754 (39.219) 1.349.080 1.405.289 56.209

Private securities 244.202 360.883 201.423 566.619 3.984.999 5.573.642 5.358.126 (215.516) 8.248.369 7.731.380 (516.989)

Debentures (1) - 360.144 18.987 135.485 1.533.193 2.212.247 2.047.809 (164.438) 4.296.043 3.834.229 (461.814)

Promissory notes - - 124.312 3.159 9.472 138.712 136.943 (1.769) 486.149 486.144 (5)

Shares (2) 241.626 - - - - 312.670 241.626 (71.044) 691.478 639.030 (52.448)

Shares in investment funds (3) 2.576 - - - 1.567.407 1.569.983 1.569.983 - 1.575.342 1.575.342 -

Rural Product Notes - commodities (4) - 739 48.663 50.204 243.823 359.759 343.429 (16.330) 236.971 229.057 (7.914)

Eurobonds (5) - - - 144.371 245.065 390.877 389.436 (1.441) 465.214 458.892 (6.322)

Financial Bills - - - 171.402 - 171.482 171.402 (80) 104.310 104.310 -

Floating Rate Notes - - - 61.998 95.475 157.136 157.473 337 - - -

Other - - 9.461 - 290.564 260.776 300.025 39.249 392.862 404.376 11.514

3 – Securities held to maturity - - 349.854 150.222 1.914.641 2.324.326 2.414.717 90.391 6.206.014 6.398.235 192.221

Government bonds - - 349.854 150.222 1.914.641 2.324.326 2.414.717 90.391 6.206.014 6.398.235 192.221

National Treasury Bills - - - - 1.209.662 1.142.015 1.209.662 67.647 4.286.623 4.445.788 159.165

National Treasury Notes - - 349.854 150.222 704.979 1.182.311 1.205.055 22.744 1.919.391 1.952.447 33.056

Total (1 + 2 + 3) 244.356 589.834 566.676 765.289 13.066.968 15.412.635 15.233.123 (179.512) 27.398.452 27.196.342 (202.110)

The fair value considers the prudential adjustment of credit risk spread, fulfilling the provision in Article 8 of the CMN Resolution no. 4,277/2013 of the Brazilian Central Bank.

(1)

(2)

(3)

(4)

(5)

The cost of the Rural Product Notes also considers the provision for losses in the amount of R$ 56,254 (R$ 21,055 on June 30, 2017) contra entry the Income from securities.

On June 30, 2017 the cost value of the Eurobonds includes a provision for losses in the amount of R$ 4,958 contra entry the Income from securities.

The securities classified as "Held to maturity" are recorded at cost in accordance with BACEN Circular No. 3,068/2001. For purposes of presentation, these operations are adjusted to fair value.

06.30.2018 06.30.2017

Maturity in days

Fair value Total Total

The cost of the Debentures includes a provision for losses in the amount of R$ 1,001,272 (R$ 1,101,729 on June 30, 2017) contra entry the Income from securities.

The cost value of the Shares includes a provision for losses in the amount of R$ 81,600 (R$ 74,745 on June 30, 2017) contra entry the Income from securities. The fair value of the shares represents the quotation disclosed by B3 - Brasil,

Bolsa, Balcão.

The cost value of the Shares in investments funds includes a provision for losses in the amount of R$ 12,375 contra entry the Income from securities.

36





a.2) Composition of portfolio by caption in the statement of financial position and maturity term

Without

maturity

From 0 to 30

days

From 31 to

180 days

From 181 to

360 days

Over 360

daysCost Fair value

Fair value


Fair value

adjustment

Bank

By portfolio 11.101 589.834 562.768 760.758 16.969.629 19.039.933 18.894.090 (145.843) 32.947.932 32.743.132 (204.800)

Own portfolio 92.701 834.133 228.494 474.304 4.980.969 6.671.361 6.610.601 (60.760) 7.752.573 7.564.201 (188.372)

Subject to repurchase clause - 9.824 364.237 279.360 12.421.048 13.165.619 13.074.469 (91.150) 25.626.774 25.589.697 (37.077)

Subject to guarantees provided - - - 7.094 353.427 354.454 360.521 6.067 771.072 791.721 20.649

Provision for impairment of securities (81.600) (254.123) (29.963) - (785.815) (1.151.501) (1.151.501) - (1.202.487) (1.202.487) -

Consolidated

By portfolio 244.356 589.834 566.676 765.289 13.066.968 15.412.635 15.233.123 (179.512) 27.398.452 27.196.342 (202.110)

Own portfolio 325.956 834.133 407.120 474.304 8.998.920 11.124.734 11.040.433 (84.301) 14.779.658 14.649.096 (130.562)

Subject to repurchase clause - 9.824 185.611 279.360 4.210.939 4.799.351 4.685.734 (113.617) 12.423.874 12.314.916 (108.958)

Subject to guarantees provided - - 3.908 11.625 642.924 640.051 658.457 18.406 1.397.407 1.434.817 37.410

Provision for impairment of securities (81.600) (254.123) (29.963) - (785.815) (1.151.501) (1.151.501) - (1.202.487) (1.202.487) -

a.3) Composition of portfolio by category and maturity term in years

Without

maturity

Falling due,

up to 1 year

Falling due -

From 1 to 5

years

Falling due

from 5 to 10

years

Falling due

for more than

10 years

Cost Fair value Cost Fair value

Bank

By category 11.101 1.913.360 8.199.022 7.070.184 1.700.423 19.039.933 18.894.090 32.947.932 32.743.132

Trading securities 154 273.219 1.103.426 60.237 582 1.433.769 1.437.618 4.336.902 4.348.165

Securities available for sale 10.947 1.140.065 5.345.769 6.935.227 1.609.747 15.281.838 15.041.755 22.405.016 21.996.732

Securities held to maturity - 500.076 1.749.827 74.720 90.094 2.324.326 2.414.717 6.206.014 6.398.235

Consolidated

Por Categoria 244.356 1.921.799 8.678.851 2.671.598 1.716.519 15.412.635 15.233.123 27.398.452 27.196.342

Trading securities 154 273.219 1.105.485 60.237 582 1.435.828 1.439.677 5.035.359 5.046.623

Securities available for sale 244.202 1.148.504 5.823.539 2.536.641 1.625.843 11.652.481 11.378.729 16.157.079 15.751.484

Securities held to maturity - 500.076 1.749.827 74.720 90.094 2.324.326 2.414.717 6.206.014 6.398.235

Maturity in years

06.30.2018 06.30.2017

Fair value Total Total Maturity in days

06.30.2017

Total

06.30.2018

Fair value Total

37





a.4) Summary of the portfolio by statement of financial position caption

CurrentNon-

CurrentTotal Current

Non-

CurrentTotal

Bank

By portfolio 3.082.310 15.721.389 18.803.699 9.508.033 23.042.878 32.550.911

Own portfolio 1.930.172 4.680.223 6.610.395 914.533 6.648.163 7.562.696

Subject to repurchase commitment 1.510.476 11.479.928 12.990.404 8.640.789 16.780.203 25.420.992

Subject to guarantees provided 7.348 347.053 354.401 223.798 545.912 769.710

Provision for impairment of securities (365.686) (785.815) (1.151.501) (271.087) (931.400) (1.202.487)

Consolidated

By portfolio 3.868.686 11.274.046 15.142.732 9.816.942 17.187.179 27.004.121

Own portfolio 3.389.278 7.602.608 10.991.886 4.120.464 10.527.127 14.647.591

Subject to repurchase commitment 827.247 3.822.762 4.650.009 5.715.241 6.430.970 12.146.211

Subject to guarantees provided 17.847 634.491 652.338 252.324 1.160.482 1.412.806

Provision for impairment of securities (365.686) (785.815) (1.151.501) (271.087) (931.400) (1.202.487)

a.5) Summary of the portfolio by category

By category

Bank

1 – Trading securities 1.437.618 8% 4.348.165 13%

2 – Securities available for sale 15.041.755 80% 21.996.732 68%

3 – Securities held to maturity 2.324.326 12% 6.206.014 19%

Book value of portfolio 18.803.699 100% 32.550.911 100%

Fair value adjustment of category three 90.391 192.221

Fair value of portfolio 18.894.090 32.743.132

Consolidated

1 – Trading securities 1.439.677 10% 5.046.623 19%

2 – Securities available for sale 11.378.729 75% 15.751.484 58%

3 – Securities held to maturity 2.324.326 15% 6.206.014 23%

Book value of portfolio 15.142.732 100% 27.004.121 100%

Fair value adjustment of category three 90.391 192.221

Fair value of portfolio 15.233.123 27.196.342

b) Income from securities

1H2018 1H2017 1H2018 1H2017

Interbank investments (Note 6b) 1.600.718 2.351.674 589.984 1.021.263

Fixed income securities 686.712 1.587.697 545.369 975.576

Securities abroad 31.018 34.095 31.018 34.114

Variable income securities (28.999) (19.176) (45.830) 61.855

Investments in investment funds 16.626 75.686 17.433 76.855

Other 10.860 248 10.860 251

Total (1) 2.316.935 4.030.224 1.148.834 2.169.914

(1)

c) Reclassifications of securities

There was no reclassifications of Securities between categories in the semester ended June 30, 2018 and in the

semester ended June 30, 2017, in accordance with BACEN Circular 3068/2001.

Includes provision for losses in the amount of R$ 97,001 in the semester ended June 30, 2018 (R$ 210,135 in the semester ended June 30, 2017).

06.30.2018 06.30.2017

Book value Book value

The Conglomerate, in fulfilling the provision of Article 8 of Circular 3,068/01, of the Central Bank of Brazil, declares that it

has the necessary financial capacity and intention to hold to maturity the securities classified in the “securities held to

maturity” category, in the amount of R$ 2,324,326 (R$ 6,206,014 on June 30, 2017), representing 15% of the total

securities (23% on June 30, 2017). In the Bank, the corresponding amount is R$ 2,324,326 (R$ 6,206,014 on June 30,

2017), representing 12% of total securities (19% on June 30, 2017).

06.30.2018 06.30.2017

Bank Consolidated

38





d) Derivative financial instruments

·

·

Operational risk is defined as the possibility of occurrence of losses resulting from external events or from failure,

deficiency or inadequacy of internal processes, people or systems.

The models employed in derivative risk management are periodically reviewed, and decision making is based on the best

risk/return ratios, with likely losses being estimated following an analysis of macroeconomic scenarios.

The principal risks inherent in derivative financial instruments deriving from the Bank and its subsidiaries’ businesses are

credit risk, market risk, liquidity risk and operational risk.

Credit risk is defined as the possibility of losses associated with: (a) Non-compliance by the counterparty (the borrower,

the guarantor or the issuer of securities or securities acquired), of its obligations under the terms agreed upon; (b)

Devaluation, reduction of income and expected gains on financial instruments arising from the deterioration of the credit

quality of the counterparty, the intervening party or the mitigating instrument; (c) Restructuring of financial instruments; or

(d) Costs of recovery of exposures of problematic assets.

Exposure to credit risk in futures contracts is minimized due to the daily financial settlement. Swap contracts registered

with CETIP are subject to credit risk in case that the counterparty is not able or willing to comply with its contractual

obligations, while swap contracts registered with B3 are not subject to the same risk, considering that Conglomerate’s

transactions in this stock exchange have the same guarantor.

Liquidity risk is defined as:

The Conglomerate has tools and systems that are adequate to manage derivative financial instruments. Negotiation of

new derivatives, standardized or not, depends on prior risk analysis. Subsidiaries’ risk evaluation is carried out on an

individual basis and its management is carried out on a consolidated basis.

The Conglomerate uses statistical methodologies and simulations to measure the risk of its positions, including with

derivatives, using value at risk and sensitivity models and stress analysis.

The Conglomerate uses Derivative Financial Instruments to manage its positions on a consolidated basis and to fulfill the

needs of it’s client’s, classifying its own positions as necessary for hedging (of market risk and cash flow) or trading, both

with approval limits in the Company. The hedging strategy for asset protection, which is approved by Management, is in

line with the macroeconomic scenario analyses.

In the options market, assets or long positions have the Conglomerate as the holder, while liability or short positions have

the Conglomerate as the seller.

Market risk is defined as the possibility of financial losses arising from variations in the fair value of exposures held by a

Financial Institution. These financial losses may be due to variations in interest rates, exchange rates and prices of shares

and commodities.

The possibility that the Bank may not be able to trade a position at the market price due to its large size in relation to

the usually traded volume, or due to market discontinuity.

The possibility of not being able to effectively honor expected and unexpected current and future obligations, including

those deriving from binding guarantees, without affecting its daily operations and without incurring significant losses;

and

Risks

39





d.1) Breakdown of Derivative Financial Instruments Portfolio by index

Nominal value Cost Fair value Nominal value Cost Fair value Nominal value Cost Fair value Nominal value Cost Fair value

Futures contracts

Purchase commitments 16.266.126 - - 17.792.971 - - 16.288.708 - - 17.792.971 - -

Interbank deposits 7.734.000 - - 6.176.647 - - 7.756.582 - - 6.176.647 - -

Currencies 574.048 - - 2.987.665 - - 574.048 - - 2.987.665 - -

Index 639.836 - - 1.217.659 - - 639.836 - - 1.217.659 - -

Foreign currency coupon 7.318.242 - - 7.354.159 - - 7.318.242 - - 7.354.159 - -

Other - - - 56.841 - - - - - 56.841 - -

Sales commitments 44.689.923 - - 50.354.995 - - 56.983.278 - - 64.721.696 - -

Interbank deposits 22.023.966 - - 27.210.195 - - 34.317.321 - - 41.576.896 - -

Currencies 2.539.556 - - 518.718 - - 2.539.556 - - 518.718 - -

Index 235.235 - - - - - 235.235 - - - - -

Libor 12.031.408 - - 15.851.795 - - 12.031.408 - - 15.851.795 - -

Foreign currency coupon 7.718.487 - - 6.774.287 - - 7.718.487 - - 6.774.287 - -

Other 141.271 - - - - - 141.271 - - - - -

Forward transactions

Asset position 1.872.633 1.872.633 1.873.115 615.117 615.117 615.101 1.872.633 1.872.633 1.873.115 615.117 615.117 615.101

Government bond term 1.872.633 1.872.633 1.873.115 615.117 615.117 615.101 1.872.633 1.872.633 1.873.115 615.117 615.117 615.101

Liability position 1.872.633 (1.872.633) (1.872.521) 615.117 (615.117) (615.236) 1.872.633 (1.872.633) (1.872.521) 615.117 (615.117) (615.236)

Government bond term 1.872.633 (1.872.633) (1.872.521) 615.117 (615.117) (615.236) 1.872.633 (1.872.633) (1.872.521) 615.117 (615.117) (615.236)

Option contracts (1)

Purchase - Long position 5.187.028 353.434 513.924 7.444.797 150.380 108.520 5.187.028 353.434 513.924 7.444.797 150.380 108.520

Foreign currency 4.117.763 330.364 455.461 6.428.288 122.979 96.246 4.117.763 330.364 455.461 6.428.288 122.979 96.246

Flexible options 1.069.265 23.070 58.463 574.609 10.711 6.530 1.069.265 23.070 58.463 574.609 10.711 6.530

Shares - - - 441.900 16.690 5.744 - - - 441.900 16.690 5.744

Sale - Long position 46.992.938 443.047 95.532 9.426.360 459.183 359.681 47.160.528 548.749 259.359 9.690.184 744.390 609.789


Interbank deposits 39.570.000 4.702 4.237 - - - 39.570.000 4.702 4.237 - - -

Flexible options 3.100.288 204.270 65.974 2.986.485 180.410 99.397 3.100.288 204.270 65.974 2.986.485 180.410 99.395

Shares - - - 655.450 25.157 25.685 167.590 105.702 163.827 919.274 310.364 275.795

Purchase - Short position 8.114.374 (464.661) (1.028.731) 9.785.925 (460.963) (419.769) 8.114.374 (464.661) (1.028.731) 9.785.925 (460.963) (419.769)

Foreign currency 4.509.438 (249.068) (537.771) 5.333.988 (135.843) (96.142) 4.509.438 (249.068) (537.771) 5.333.988 (135.843) (96.142)

Flexible options 3.604.936 (215.593) (490.960) 3.717.237 (290.061) (313.975) 3.604.936 (215.593) (490.960) 3.717.237 (290.061) (313.975)

Shares - - - 734.700 (35.059) (9.652) - - - 734.700 (35.059) (9.652)

Sale - Short position 44.244.391 (200.059) (38.566) 8.470.631 (747.776) (742.026) 44.244.391 (200.059) (38.566) 8.470.631 (747.776) (742.026)


Interbank deposits 39.570.000 (2.728) (3.748) - - - 39.570.000 (2.728) (3.748) - - -

Flexible options 757.953 (18.996) (11.590) 503.918 (11.425) (18.050) 757.953 (18.996) (11.590) 503.918 (11.425) (18.050)

Shares - - - 480.200 (8.284) (5.068) - - - 480.200 (8.284) (5.068)

By index

Bank Consolidated06.30.2018 06.30.2017 06.30.201706.30.2018

40





Nominal value Cost Fair value Nominal value Cost Fair value Nominal value Cost Fair value Nominal value Cost Fair value

Swaps contracts (1)

Asset position 10.087.060 1.406.461 1.475.625 9.585.014 1.088.333 1.198.558 8.736.776 1.397.157 1.452.529 9.585.014 1.088.333 1.198.558

Interbank deposits 2.092.466 285.175 305.829 3.289.672 575.090 484.071 1.697.488 278.577 283.379 3.289.672 575.090 484.071


Pre fixed 2.756.755 67.858 223.898 1.330.400 17.889 185.124 1.801.449 65.152 223.252 1.330.400 17.889 185.124

IPCA 2.022.745 229.831 304.663 2.093.170 159.870 194.007 2.022.745 229.831 304.663 2.093.170 159.870 194.007

IGPM 15.000 849 1.235 215.000 47.540 46.845 15.000 849 1.235 215.000 47.540 46.845

Libor 17.505 328 428 22.529 194 199 17.505 328 428 22.529 194 199

Other 64.865 272 3.296 90.938 289 11.740 64.865 272 3.296 90.938 289 11.740

Liability position 10.568.170 (1.196.530) (1.301.445) 9.958.420 (783.161) (1.018.305) 7.694.112 (1.196.225) (1.267.359) 9.958.420 (783.161) (1.018.305)

Interbank deposits 3.984.533 (73.196) (83.111) 2.004.347 (107.727) (61.703) 1.239.311 (72.907) (49.070) 2.004.347 (107.727) (61.703)


Pre fixed 856.535 (41.167) (217.474) 970.002 (25.201) (222.685) 727.699 (41.151) (217.429) 970.002 (25.201) (222.685)

IPCA 2.273.136 (495.907) (619.119) 2.291.319 (401.387) (462.452) 2.273.136 (495.907) (619.119) 2.291.319 (401.387) (462.452)

IGPM 10.000 (3.773) (3.806) 80.000 (25.809) (26.359) 10.000 (3.773) (3.806) 80.000 (25.809) (26.359)

Libor 860.627 (82.170) (85.017) 545.166 (13.177) (13.808) 860.627 (82.170) (85.017) 545.166 (13.177) (13.808)

Euro 8.876 (125) (162) - - - 8.876 (125) (162) - - -

Other - - - 10.000 (297) (838) - - - 10.000 (297) (838)

Asset position 7.878.371 737.080 717.631 5.838.038 196.678 190.018 7.878.371 737.080 717.631 5.838.038 196.678 190.018

Non Deliverable Forward (1) 7.878.371 737.080 717.631 5.821.497 196.578 189.867 7.878.371 737.080 717.631 5.821.497 196.578 189.867

Credit derivatives (2) - - - 16.541 100 151 - - - 16.541 100 151

Liability position 1.168.690 (68.564) (77.683) 5.192.613 (211.656) (165.036) 1.168.690 (68.564) (77.683) 5.192.613 (211.656) (165.036)

Non Deliverable Forward (1) 1.067.668 (62.195) (70.374) 4.810.516 (189.015) (152.653) 1.067.668 (62.195) (70.374) 4.810.516 (189.015) (152.653)

Credit derivatives (2) 98.323 (6.369) (7.294) 382.097 (22.641) (12.383) 98.323 (6.369) (7.294) 382.097 (22.641) (12.383)

Other 2.699 - (15) - - - 2.699 - (15) - - - (1)

(2)

By index

06.30.201706.30.2018

The fair value for swap operations, options and non-deliverable forward considers the credit risk of the counterparty (Credit valuation adjustment).

The presentation of credit derivatives by position (active or passive) takes into account the respective fair value of each contract.

06.30.201706.30.2018

Other derivatives financial

instruments

ConsolidatedBank

41





d.2) Breakdown of derivative financial instruments by maturity date (nominal value)

From 0 to 30From 31 to

180

From 181 to

360Over 360 06.30.2018 06.30.2017 From 0 to 30

From 31 to

180

From 181 to

360Over 360 06.30.2018 06.30.2017

Future contracts 7.465.259 17.639.998 13.790.566 22.060.226 60.956.049 68.147.966 7.487.254 20.218.919 16.166.326 29.399.487 73.271.986 82.514.667

Forward contracts 1.872.633 1.872.633 615.117 1.872.633 1.872.633 615.117

Option contracts 8.878.276 2.846.866 82.959.076 9.854.513 104.538.731 35.127.713 8.878.276 2.846.866 83.126.666 9.854.513 104.706.321 35.391.537

Swap contracts 546.384 2.888.129 3.513.932 13.706.785 20.655.230 19.543.434 304.968 2.808.707 2.387.810 10.929.403 16.430.888 19.543.434

Credit derivatives - - 1.928 96.395 98.323 398.638 - - 1.928 96.395 98.323 398.638

2.409.828 3.012.655 2.094.990 1.428.566 8.946.039 10.632.013 2.409.828 3.012.655 2.094.990 1.428.566 8.946.039 10.632.013

Other - 771 - 1.928 2.699 - - 771 - 1.928 2.699 -

Total 21.172.380 26.388.419 102.360.492 47.148.413 197.069.704 134.464.881 20.952.959 28.887.918 103.777.720 51.710.292 205.328.889 149.095.406

d.3) Breakdown of derivative financial instruments Portfolio by negotiation place and counterparty (nominal value on June 30, 2018)

Futures Terms Options SwapCredit

derivatives

Non

Deliverable

Forward

Outros

Bank

B3 60.956.049 - 96.178.443 - - - -

Over-the-counter (CETIP) - 1.872.633 8.360.288 20.655.230 98.323 8.946.039 2.699

Financial institutions - 1.872.633 - 15.836.438 98.323 3.014.663 2.699

Client - - 8.360.288 4.818.792 - 5.931.376 -

Consolidated

B3 73.271.986 - 96.346.033 - - - -

Over-the-counter (CETIP) - 1.872.633 8.360.288 16.430.888 98.323 8.946.039 2.699

Financial institutions - 1.872.633 - 11.612.096 98.323 3.014.663 2.699

Client - - 8.360.288 4.818.792 - 5.931.376 -

ConsolidatedBank

Non Deliverable Forward - Foreign

currency

Maturity in days

42





d.4) Breakdown of credit derivative financial instruments portfolio

Nominal value Cost Fair value Nominal value Cost Fair value

Credit Swap

Long position - Received risk 98.323 (6.369) (7.294) 297.738 (19.582) (10.995)

Short position - Transferred risk - - - 100.900 (2.959) (1.237)

Por indexador

Asset position - Pre fixed - - - 16.541 100 151

Liability position - Pre fixed 98.323 (6.369) (7.294) 382.097 (22.641) (12.383)

For received risk transactions, credit limits are approved both for client risk and counterparty risk, according to the credit committee’s levels and forums. Credit limits are

assigned to the underlying exposure at derivative reference value, considering amounts deposited in guarantee.

To transfer risk, transaction is conducted in a trading portfolio with a sovereign risk client. In this case, future possible exposure is considered to assign the counterparty limit.

The credit derivative financial instruments portfolio impacted Portion Referring to Weighed Exposures per Risk Factor (PRMR) for determination of the Bank’s Basel ratio of

R$ 848 (R$ 6,084 on June 30, 2017).

06.30.201706.30.2018

43





06.30.2018 06.30.2017 06.30.2018 06.30.2017

Financial Treasury Bills - LFT 14.089 213.005 16.148 229.552

National Treasury Notes - NTN 264.523 157.503 269.774 652.146

National Treasury Bills - LTN 40.179 392.346 297.565 495.879

Shares in investment funds - B3 31.262 - 46.898 -

Other 25.110 55.686 25.110 55.686

Total 375.163 818.540 655.495 1.433.263

d.6) Breakdown of derivatives portfolio for hedging

Market risk hedge

06.30.2018 06.30.2017 06.30.2018 06.30.2017

Market risk hedge

Hedge instruments

Assets 3.290.290 3.125.591 3.454.116 3.375.699

Future 3.290.290 3.116.703 3.290.290 3.116.703

Swap - 8.888 - 8.888

Options - - 163.826 250.108

Liabilities 12.537.956 18.603.959 24.745.247 32.890.056

Future 12.537.956 18.603.959 24.745.247 32.890.056

Hedged itens

Assets 8.010.324 11.455.504 20.678.747 27.942.510

Interbank funds applied 6.686.751 9.328.049 6.686.751 9.328.049

Securities - - 47.406 254.800

Loan operations 1.323.573 2.127.455 13.944.590 18.359.661

Liabilities 3.160.017 3.148.215 3.160.017 3.148.215

Subordinated debt 3.160.017 3.148.215 3.160.017 3.148.215

Cash flow hedge

06.30.2018 06.30.2017

Cash flow hedge

Hedge instruments

Liabilities 8.883.407 292.617

Future 8.705.171 292.617

Swap (1) 178.236 -

Hedged itens

Liabilities 10.043.970 268.238

Financial bills 8.088.110 25.969

Subordinated debt 1.955.860 242.269 (1)

d.5) Breakdown of Margin Given in Guarantee of operations with Derivative Financial Instruments and other

transactions settled in clearing or providers of clearing and settlement services

ConsolidatedBank

ConsolidatedBank

Hedge transactions were evaluated as effective, in accordance with provisions of BACEN Circular Letter no. 3,082/2002,

and hedge effectiveness varies from 80% to 125%. For loans operations, the risk level is considered in the risk

assessment of the fair value and consequently considered in the effectiveness calculation metric.

The Conglomerate, in order to protect itself against fluctuations in its financial instruments’ interest and exchange rates,

contracted derivatives to offset risks deriving from exposures to fair value variations.

Bank and Consolidated

To protect the future cash flows of payments against exposure to variable interest rate (CDI), the Conglomerate traded DI

Future contracts at B3.

To protect the cash flow of future disbursements on securities issued abroad against exposure to exchange rate risk

(USD), the Conglomerate has traded over-the-counter Swap contracts recorded in B3.

The nominal value of the swap is R$ 970, 620 on June 30, 2018.

44





d.7) Gains and losses on the results from hedge instruments and hedged items result

Market risk hedge

1H2018 1H2017 1H2018 1H2017

Losses from hedged Items (596.298) (279.710) (706.734) (315.184)

Gains from hedge instruments 595.132 277.819 706.640 312.179

Net effect (1.167) (1.891) (94) (3.004)

Losses from hedged Items 482.158 647.360 1.028.452 1.824.602

Gains from hedge instruments (479.921) (661.030) (1.024.376) (1.832.323)

Net effect 2.238 (13.669) 4.075 (7.721)

Cash flow hedge

Effective

portion

accumulated

Ineffective

portion

accumulated

Effective

portion

accumulated

Ineffective

portion

accumulated

Future DI 42.183 11 (36.253) (20)

Swap (561) (4.230) - -

Total 41.622 (4.219) (36.253) (20)

d.8) Derivative financial instruments breakdown into Current and Non-current

CurrentNon-


Non-

CurrentTotal

Assets

Term Operations 1.873.115 - 1.873.115 615.101 - 615.101

Options market 240.091 369.365 609.456 191.250 276.951 468.201

Swap contracts 287.839 1.187.786 1.475.625 86.341 1.112.217 1.198.558

Credit derivatives - - - 133 18 151

Non Deliverable Forward 599.490 118.141 717.631 92.222 97.645 189.867

Total 3.000.535 1.675.292 4.675.827 985.047 1.486.831 2.471.878

Liabilities

Term Operations (1.872.521) - (1.872.521) (615.236) - (615.236)

Options market (566.141) (501.156) (1.067.297) (761.775) (400.020) (1.161.795)

Swap contracts (318.635) (982.810) (1.301.445) (117.561) (900.744) (1.018.305)

Credit derivatives - (7.294) (7.294) (73) (12.310) (12.383)

Non Deliverable Forward (68.034) (2.340) (70.374) (149.883) (2.770) (152.653)

Other - (15) (15) - - -

Total (2.825.331) (1.493.615) (4.318.946) (1.644.528) (1.315.844) (2.960.372)

Bank Consolidated

Bank and Consolidated 06.30.201706.30.2018

Hedge instruments

Net losses of tax effects relating to cash flow hedges that the Conglomerate expects to recognize in income over the next

12 months totaling R$ 11,919 (profit of R$ 5,617 in the semester ended June 30, 2017).

Bank

06.30.2018 06.30.2017

The effective portion is recognized in Shareholders' Equity in equity valuation adjustments and the ineffective portion is

recognized in the statement of income in financial intermediation income - income from derivative financial instruments.

In the semester ended June 30, 2018, the fair value adjustment of the effective portion, in the amount of R$ 93,949 (R$

(36,253) in the semester ended June 30, 2017) was recognized in Shareholders' Equity and ineffective portion, in the

amount of R$ 463 (R$ (20) in the semester ended June 30, 2017) was recognized in "Income from derivative financial

instruments".

45





CurrentNon-


Non-

CurrentTotal

Assets

Term Operations 1.873.115 - 1.873.115 615.101 - 615.101

Options market 403.918 369.365 773.283 441.358 276.951 718.309

Swap contracts 287.491 1.165.038 1.452.529 86.341 1.112.217 1.198.558

Credit derivatives - - - 133 18 151

Non Deliverable Forward 599.490 118.141 717.631 92.222 97.645 189.867

Total 3.164.014 1.652.544 4.816.558 1.235.155 1.486.831 2.721.986

Liabilities

Term Operations (1.872.521) - (1.872.521) (615.236) - (615.236)

Options market (566.141) (501.156) (1.067.297) (761.775) (400.020) (1.161.795)

Swap contracts (316.727) (950.632) (1.267.359) (117.561) (900.744) (1.018.305)

Credit derivatives - (7.294) (7.294) (73) (12.310) (12.383)

Non Deliverable Forward (68.034) (2.340) (70.374) (149.883) (2.770) (152.653)

Other - (15) (15) - - -

Total (2.823.423) (1.461.437) (4.284.860) (1.644.528) (1.315.844) (2.960.372)

d.9) Income from derivative financial instruments

1H2018 1H2017 1H2018 1H2017

Swap (209.599) 99.257 (198.609) 99.152

Term 570 (397) 570 (397)

Options (402.028) 22.352 (368.045) 10.033

Future (344.661) (25.029) (360.537) (283.593)

Credit derivatives 576 7.973 576 7.973

Fair value adjustment of hedged credit transactions 13.762 (8.440) (277.792) 196.671

Non Deliverable Forward 807.331 (49.619) 807.331 (49.619)

Credit Linked Notes 68 - 68 -

Exchange variation on investments abroad 259.154 19.948 259.154 21.666

Total 125.173 66.045 (137.284) 1.886

d.10) Hedge accounting

06.30.2017 06.30.2018 06.30.2017

Fair valueUnrealized

gain (loss)Fair value Fair value Fair value

6.686.751 (1.868) 9.328.049 Future DI 7.655.213 11.560.291

Future DI 194.332 177.765 Future DDI 638.159 1.452.242

Future Libor 4.050.252 5.413.661 Future DDI 3.290.290 3.116.703

Swap - 256.712

Future DI 8.705.171 292.617

Swap 1.390.771 -

Hedge instruments

Bank Consolidated

Bank

06.30.2018

10.043.970 (41.058) 268.238

8.474 2.127.455 1.323.573

Hedge of Financial Bills and Subordinated

Debt / Cash flow / pre-fixed rate

Subordinated debt hedge / exchange

variation / IGP-M3.160.017 57.872 3.148.215

Loan operations hedge / fixed rate /

exchange variation

Purchase and sale commitment hedge/ fixed

rate

Strategy/Risk

Derivative

Consolidated

06.30.2018 06.30.2017

Object of hedge

46





06.30.2017 06.30.2017

Fair valueUnrealized

gain (loss)Fair value Derivative Fair value Fair value

6.686.751 (1.868) 9.328.049 Future DI 7.655.213 11.560.291

47.406 (66.194) 254.800 Options 163.826 250.108

Future DI 12.401.623 14.463.862

Future DDI 638.159 1.452.242

Future Libor 4.050.252 5.413.661

Future DDI 3.290.290 3.116.703

Swap - 256.712

Future DI 8.705.171 292.617

Swap 1.390.771 -

8. INTERBANK ACCOUNTS

a) Reserve requirements

06.30.2018 06.30.2017

Compulsory deposits at the Central Bank of Brazil 1.296.662 356.915

Compulsory deposits on demand deposits 2 22.047

Compulsory deposits on time deposits 1.294.555 332.732

Compulsory deposits on microfinance transactions 2.105 2.136

Total 1.296.662 356.915

Current assets 1.296.662 356.915

b) Income from compulsory deposits

1H2018 1H2017

Credits linked to Central Bank of Brazil 12.194 11.751

Requirement on time deposits 12.194 11.751

Total 12.194 11.751

06.30.2018

Loan operations hedge / fixed rate /

exchange variation13.944.590 153.669 18.359.661



Strategy/RiskPurchase and sale commitment hedge/ fixed

rate

Securities hedge / fixed rate variation

3.148.215 Subordinated debt hedge / exchange

variation / IGP-M

Hedge of Financial Bills and Subordinated

Debt / Cash flow / pre-fixed rate10.043.970 (41.058) 268.238

3.160.017 57.872

06.30.2018

Object of hedge Hedge instrumentsConsolidated

47





9. LOAN AND LEASE OPERATIONS

a) Portfolio by modality

06.30.2018 06.30.2017 06.30.2018 06.30.2017

Loan operations 9.077.606 10.892.533 44.750.933 44.054.271

Loan and discounted notes 3.647.037 3.468.861 7.037.541 7.345.857

Financings 4.965.051 6.674.049 30.038.110 26.702.404

Rural and agribusiness financing 395.834 525.016 395.834 525.016

Real estate financing agreements 69.684 224.607 69.684 224.607

Loan operations linked to assignments (Note 9j) (1) - - 7.209.764 9.256.387


Credit card operations - - 1.166.835 966.173

Advances on exchanges contracts (2) 578.497 360.637 578.497 360.637

Guarantees and sureties paid - 17.207 - 17.207

Trade and credit receivables with credit assignment characteristics (Note 11) 2.428.601 1.299.659 2.432.190 1.301.756

Lease operations - - 241.632 127.859

Total loan portfolio 12.084.704 12.570.036 49.170.087 46.827.903

Allowance for loan losses (1.315.105) (996.821) (3.622.464) (3.230.955)

(Allowance for loan losses) (562.275) (862.701) (2.848.146) (3.074.410)

(Allowance for other receivables losses) (3) (752.830) (134.120) (773.050) (151.907)

(Allowance for lease losses) - - (1.268) (4.638)

Total loan portfolio, net of provisions 10.769.599 11.573.215 45.547.623 43.596.948 (1)

(2)

(3)

b) Income from loan and lease operations

1H2018 1H2017 1H2018 1H2017

Loan operations 741.087 836.968 4.156.283 3.814.987

Loan and discounted notes 196.167 288.986 809.450 968.214

Financings 315.497 309.645 2.884.886 2.388.119

Rural and agribusiness financing 17.674 18.206 17.674 18.206

Real estate financing agreements 3.554 18.349 3.554 18.349

Recovery of loan written off as loss 206.544 201.349 434.405 416.991

Financing in foreign currency 1.267 (236) 1.267 (236)

Guarantees and sureties paid - 369 - 369

Other 384 300 5.047 4.975

Income from lease (Note 9h) - - 22.007 4.308

Total (1) 741.087 836.968 4.178.290 3.819.295

(1)

ConsolidatedBank

Credit transactions assigned with substantial retention of the risks and benefits of the financial asset that is the transaction object.

Advances on exchange contracts are recorded as a reducer of the "Other Liabilities” - (Advances on exchange contracts) account plus accrued interest receivable from

advances granted under Other receivables - Foreign exchange portfolio (Note 10a) and other related credits, recorded under Other receivables - Sundry (Note 11).

Credit transactions linked to assignments are not included. Considering such assets, income from Consolidated loan and lease operations in the the semester ended June

30, 2018 would total R$ 4,949,153 (R$ 4,989,901 in the semester ended June 30, 2017).

Bank

Includes provision for losses on operations under homologated judicial reorganization.

Consolidated

48





c) Loan portfolio by sector of economic activity

Bank 06.30.2018 % 06.30.2017 %

Public sector 500.198 4,14% 501.859 4,03%

Government 500.198 4,14% 501.859 4,03%

Public administration 500.198 4,14% 501.859 4,03%

Private sector 11.576.031 95,86% 11.959.464 95,97%

Individual (1) 293.205 2,43% 353.881 2,84%

Legal entity 11.282.826 93,43% 11.605.583 93,13%

Animal agribusiness 315.225 2,61% 354.503 2,84%

Vegetable agribusiness 175.015 1,45% 256.580 2,06%

Specific construction activities 7.373 0,06% 74.180 0,60%

Automotive 21.809 0,18% 17.218 0,14%

Wholesale commerce and sundry industries 4.304.508 35,64% 4.052.308 32,52%

Retail business 741.334 6,14% 576.331 4,62%

Heavy construction 6.690 0,06% 34.323 0,28%

Electric power 288.205 2,39% 501.259 4,02%

Real estate 153.068 1,27% 216.833 1,74%

Financial institutions and services 1.090.560 9,03% 518.240 4,16%

Wood and furniture 3.588 0,03% 10.431 0,08%

Mining and Metallurgy 138.872 1,15% 465.664 3,74%

Paper and pulp 87.455 0,72% 304.124 2,44%

Paper and pulp 630.282 5,22% 1.028.763 8,26%

Services 2.110.353 17,48% 1.771.591 14,22%

Telecommunications 210.256 1,74% 57.031 0,46%

Textile and apparel 68.725 0,57% 70.794 0,57%

Transportation 796.377 6,59% 1.026.291 8,24%

Other activities 133.131 1,10% 269.119 2,14%

Total 12.076.229 100,00% 12.461.323 100,00%

(+/-) Adjustment to fair value (2) 8.475 108.713

Total fair value of loan portfolio 12.084.704 12.570.036

Consolidated 06.30.2018 % 06.30.2017 %

Public sector 500.198 1,02% 501.859 1,08%

Government 500.198 1,02% 501.859 1,08%

Public administration 500.198 1,02% 501.859 1,08%

Private sector 48.516.220 98,98% 45.803.345 98,92%

Individual (1) 36.110.153 73,67% 33.303.169 71,92%

Legal entity 12.406.067 25,31% 12.500.176 27,00%

Animal agribusiness 318.137 0,65% 357.007 0,77%

Vegetable agribusiness 179.600 0,37% 261.212 0,56%

Specific construction activities 29.840 0,06% 99.089 0,21%

Automotive 27.872 0,06% 24.852 0,05%

Wholesale commerce and sundry industries 4.372.495 8,92% 4.125.400 8,91%

Retail business 884.494 1,80% 720.636 1,56%

Heavy construction 7.943 0,02% 35.577 0,08%

Electronics 74 0,00% 94 0,00%

Electric power 289.658 0,59% 502.468 1,09%

Real estate 157.496 0,32% 220.914 0,48%

Financial institutions and services 1.092.792 2,23% 518.969 1,12%

Wood and furniture 10.733 0,02% 17.908 0,04%

Mining and Metallurgy 139.912 0,29% 466.746 1,01%

Paper and pulp 88.117 0,18% 304.877 0,66%

Paper and pulp 630.817 1,29% 1.029.318 2,22%

Services 2.508.856 5,12% 2.055.518 4,44%

Telecommunications 212.443 0,43% 59.322 0,13%

Textile and apparel 74.609 0,15% 77.249 0,17%

Transportation 1.048.815 2,14% 1.310.516 2,83%

Other activities 331.364 0,67% 312.504 0,67%

Total 49.016.418 100,00% 46.305.204 100,00%


Total fair value of loan portfolio 49.170.087 46.827.903 (1)

(2)

Includes loans operations of the agribusiness sectors and other sectors of economic activity made with individuals.

Refers to fair value adjustment of loan operations that are the object of market risk hedge.

49





d) Loan portfolio per risk level and maturity

Bank AA A B C D E F G H 06.30.2018 06.30.2017

Falling due installments 4.232.092 4.085.072 1.337.377 468.636 332.154 195.512 77.392 710.217 272.241 11.710.693 11.946.138

From 01 to 30 808.510 295.568 137.182 7.813 18.468 2.974 650 1.288 2.223 1.274.676 1.242.361

From 31 to 60 343.279 278.961 81.550 3.747 2.473 8.781 1.755 - 815 721.361 613.440

From 61 to 90 234.836 310.750 102.000 17.089 2.549 15.083 3.379 421 770 686.877 470.617

From 91 to 180 137.148 615.182 342.631 40.792 50.437 11.010 4.218 1.396 14.237 1.217.051 1.207.921

From 181 to 360 559.705 680.703 193.315 39.050 38.375 24.534 3.893 1.821 6.482 1.547.878 1.532.813

Over 360 days 2.148.614 1.903.908 480.699 360.145 219.852 133.130 63.497 705.291 247.714 6.262.850 6.878.986

Installments overdue - - - - 11 7.743 2.900 - 1.026 11.680 8.550

Up to 14 days - - - - 11 7.743 2.900 - 1.026 11.680 8.550

Subtotal 4.232.092 4.085.072 1.337.377 468.636 332.165 203.255 80.292 710.217 273.267 11.722.373 11.954.688

Falling due installments - - 35 94.595 - 35.089 - 36.079 130.439 296.237 249.181

From 01 to 30 - - - - - 450 - 136 3.577 4.163 9.990

From 31 to 60 - - - - - 443 - 114 3.031 3.588 11.034

From 61 to 90 - - - 363 - 385 - 117 3.070 3.935 8.949

From 91 to 180 - - - 2 - 6.405 - 868 10.323 17.598 15.426

From 181 to 360 - - 35 151 - 6.349 - 1.824 22.989 31.348 36.865

Over 360 days - - - 94.079 - 21.057 - 33.020 87.449 235.605 166.917

Installments overdue (1) - - 38 2.742 399 6.118 - 6.949 41.373 57.619 257.454

From 01 to 14 - - - - - 77 - 280 4.040 4.397 3.256

From 15 to 30 - - 38 2.211 314 5.562 - 744 10.741 19.610 90.627

From 31 to 60 - - - 531 64 479 - 397 5.167 6.638 82.964

From 61 to 90 - - - - 21 - - 620 4.345 4.986 4.203

From 91 to 180 - - - - - - - 4.908 10.943 15.851 60.551

From 181 to 360 - - - - - - - - 6.137 6.137 12.495

Over 360 days - - - - - - - - - - 3.358

Subtotal - - 73 97.337 399 41.207 - 43.028 171.812 353.856 506.635

Total 4.232.092 4.085.072 1.337.450 565.973 332.564 244.462 80.292 753.245 445.079 12.076.229 12.461.323


Total fair value adjustment loan portfolio 12.084.704 12.570.036

Performing loans

Non-performing loans

50





Consolidated AA A B C D E F G H 06.30.2018 06.30.2017

Falling due installments 4.321.889 20.789.664 7.707.199 7.107.203 945.124 322.290 111.614 758.446 359.277 42.422.706 40.301.803

From 01 to 30 815.492 1.534.489 377.278 262.802 46.348 9.067 2.981 3.872 8.317 3.060.646 2.878.157

From 31 to 60 350.262 1.141.409 313.928 248.713 28.093 14.453 3.753 2.548 6.520 2.109.679 1.931.671

From 61 to 90 241.818 1.146.322 330.300 257.801 27.556 20.650 5.333 3.101 6.299 2.039.180 1.755.086

From 91 to 180 154.873 2.971.258 1.011.151 745.291 123.666 27.236 9.761 8.962 29.504 5.081.702 4.878.668

From 181 to 360 593.534 4.514.747 1.406.708 1.317.074 169.122 53.412 13.422 14.293 30.979 8.113.291 7.682.544

Over 360 days 2.165.910 9.481.439 4.267.834 4.275.522 550.339 197.472 76.364 725.670 277.658 22.018.208 21.175.677

Installments overdue 1.611 1.120.407 83.730 90.112 23.243 16.140 5.595 954 9.570 1.351.362 1.121.874

Up to 14 days 1.611 1.120.407 83.730 90.112 23.243 16.140 5.595 954 9.570 1.351.362 1.121.874

Subtotal 4.323.500 21.910.071 7.790.929 7.197.315 968.367 338.430 117.209 759.400 368.847 43.774.068 41.423.677

Falling due installments - - 835.019 1.126.395 379.148 319.910 278.546 260.107 668.840 3.867.965 3.325.846

From 01 to 30 - - 47.714 55.362 23.453 15.485 14.900 13.303 39.169 209.386 205.487

From 31 to 60 - - 45.600 49.649 20.250 13.997 13.391 11.615 33.991 188.493 184.866

From 61 to 90 - - 43.690 48.211 19.422 13.458 12.958 11.343 32.815 181.897 176.315

From 91 to 180 - - 120.514 136.313 55.011 43.498 36.934 32.251 92.544 517.065 481.933

From 181 to 360 - - 194.806 227.349 88.641 68.427 62.220 53.038 152.227 846.708 773.082

Over 360 days - - 382.695 609.511 172.371 165.045 138.143 138.557 318.094 1.924.416 1.504.163

Installments overdue (1) - - 121.639 195.266 148.345 123.107 116.791 120.788 548.449 1.374.385 1.555.681

From 01 to 14 - - 2.132 22.855 12.051 6.557 6.590 5.380 18.908 74.473 264.172

From 15 to 30 - - 119.507 85.818 42.988 36.562 19.986 12.981 45.447 363.289 247.977

From 31 to 60 - - - 77.595 25.263 14.264 15.793 13.547 42.495 188.957 274.524

From 61 to 90 - - - 8.998 68.043 13.489 13.367 13.951 41.252 159.100 204.216

From 91 to 180 - - - - - 52.235 61.055 74.929 120.034 308.253 392.785

From 181 to 360 - - - - - - - - 269.126 269.126 160.489

Over 360 days - - - - - - - - 11.187 11.187 11.518

Subtotal - - 956.658 1.321.661 527.493 443.017 395.337 380.895 1.217.289 5.242.350 4.881.527

Total 4.323.500 21.910.071 8.747.587 8.518.976 1.495.860 781.447 512.546 1.140.295 1.586.136 49.016.418 46.305.204


Total fair value adjustment loan portfolio 49.170.087 46.827.903 (1)

(2)

Performing loans

Non-performing loans

For transactions with unelapsed terms greater than 36 months, delayed periods are counted double, as permitted by CMN Resolution no. 2,682/1999.


51





e) Allowance for loan losses by risk levels

Value of

operations

Minimum

provision

required

Additional

provision (1)

Existing

provision

Value of

operations

Minimum

provision

required

Existing

provision

Bank

AA 0,00% 4.232.092 - - - 3.750.310 - -

A 0,50% 4.085.072 (20.426) - (20.426) 3.523.058 (17.615) (17.615)

B 1,00% 1.337.450 (13.375) - (13.375) 2.303.645 (23.036) (23.036)

C 3,00% 565.973 (16.980) - (16.980) 1.143.276 (34.298) (34.298)

D 10,00% 332.564 (33.256) (10.371) (43.627) 659.619 (65.962) (65.962)

E 30,00% 244.462 (73.338) - (73.338) 169.792 (50.938) (50.938)

F 50,00% 80.292 (40.146) - (40.146) 168.926 (84.463) (84.463)

G 70,00% 753.245 (527.271) (134.863) (662.134) 73.960 (51.772) (51.772)

H 100,00% 445.079 (445.079) - (445.079) 668.737 (668.737) (668.737)

Total 12.076.229 (1.169.871) (145.234) (1.315.105) 12.461.323 (996.821) (996.821)


12.084.704 12.570.036

Consolidated

AA 0,00% 4.323.500 - - - 3.754.518 - -

A 0,50% 21.910.071 (109.550) - (109.550) 20.228.284 (101.141) (101.141)

B 1,00% 8.747.587 (87.476) - (87.476) 8.572.448 (85.724) (85.724)

C 3,00% 8.518.976 (255.568) - (255.568) 8.553.259 (256.598) (256.598)

D 10,00% 1.495.860 (149.585) (10.371) (159.956) 1.714.956 (171.496) (171.496)

E 30,00% 781.447 (234.436) - (234.436) 645.267 (193.581) (193.581)

F 50,00% 512.546 (256.274) - (256.274) 559.272 (279.636) (279.636)

G 70,00% 1.140.295 (798.205) (134.863) (933.068) 448.062 (313.641) (313.641)

H 100,00% 1.586.136 (1.586.136) - (1.586.136) 1.829.138 (1.829.138) (1.829.138)

Total 49.016.418 (3.477.230) (145.234) (3.622.464) 46.305.204 (3.230.955) (3.230.955)

(+/-) Total fair value adjustment of loan operations (2) 153.669 522.699

49.170.087 46.827.903 (1)

(2)

New additional provisions were constituted, whose increase in risk level is not applicable.


Total fair value adjustment of loan operations

Risk level

Total fair value adjustment of loan operations

% Provision

06.30.201706.30.2018

52





f) Changes in the allowance for loan losses

1H2018 1H2017 1H2018 1H2017

Opening balance 1.446.758 1.369.080 3.674.236 3.671.220

Reinforcement / (reversal) 136.559 304.015 1.039.671 1.131.670

Minimum provision required 139.230 304.015 1.042.342 1.131.670

Additional provisional (2.671) - (2.671) -

Write-offs to losses (268.212) (676.274) (1.091.443) (1.571.935)

Closing balance 1.315.105 996.821 3.622.464 3.230.955

g) Lease portfolio by maturity

Consolidated 06.30.2018 06.30.2017

Up to 1 year(1) 162.265 72.774

From 1 to 5 years 79.367 55.085

Total presente value(2) 241.632 127.859

(1)

(2)

h) Net income from Lease operations

Consolidated 1H2018 1H2017

Income from Lease operations 102.927 53.930

Financial leases 90.300 45.322

Profit on sale of leased assets 7.866 1.430

Recovery of loans written off as loans 4.761 7.178

Expenses from lease operations (80.920) (49.622)

Financial leases (80.920) (49.236)

Loss on disposal of leased assets - (386)

Total 22.007 4.308

i) Concentration of Loan operations

06.30.2018 % of portfolio 06.30.2017 % of portfolio

Bank

Largest debtor 674.314 5,58% 1.020.460 8,19%

10 largest debtors 3.698.320 30,62% 3.587.715 28,79%

20 largest debtors 5.057.961 41,88% 5.071.624 40,69%

50 largest debtors 7.393.394 61,22% 7.659.591 61,46%

100 largest debtors 9.412.089 77,94% 9.827.767 78,86%

Consolidated

Largest debtor 674.314 1,38% 1.020.460 2,20%

10 largest debtors 3.698.320 7,55% 3.587.715 7,75%

20 largest debtors 5.071.878 10,35% 5.071.624 10,95%

50 largest debtors 7.518.266 15,34% 7.740.164 16,71%

100 largest debtors 9.604.645 19,59% 9.903.098 21,39%

j) Information on loan assignments

Assignments with co-obligation

Financial

assets

subject to

sale

Financial

assets

subject to

sale

Financial institutions - related parties 7.209.764 8.197.600 9.256.387 10.446.573

Total 7.209.764 8.197.600 9.256.387 10.446.573(1)

Bank Consolidated

Liability related to obligation

assumed (1)

06.30.2018

Liability related to obligation

assumed (1)

06.30.2017

Transfers of financial assets to related parties (consumer loans) were undertaken, with a substantial retention of the risks

and benefits by the Institution.

Includes the amount related to overdue installments.

Includes the trade and credit receivables presented under "Other receivables".

(1) Recorded in caption “Other liabilities - Sundry - Bond transactions linked to disposals (Note 19d).

It is comprised of loan and lease operations and other receivables with loan characteristics.

53





k) Changes on credit renegotiated

1H2018 1H2017 1H2018 1H2017

Opening balance 2.289.815 2.935.495 5.671.132 6.765.372

Signings 705.145 936.167 1.526.843 1.988.908

(Receiving) and accrual of interest, net (641.343) (1.029.843) (1.551.929) (2.178.051)

Written off as losses (102.373) (354.457) (255.436) (522.962)

Closing balance 2.251.244 2.487.362 5.390.610 6.053.267

l) Supplementary information

l.1) Recovered amounts, written-off as loss

1H2018 1H2017 1H2018 1H2017

Loan operations (note 9b) 206.544 201.349 434.405 416.991

Lease operations (note 9h) - - 4.761 7.178

Foreign exchange portfolio (note 10b) 6.642 558 6.642 558

Total 213.186 201.907 445.808 424.727

l.2) Other information

06.30.2018 06.30.2017 06.30.2018 06.30.2017

Credit contracted to be released 648.402 379.345 2.819.603 2.067.576

Guarantees provided 5.511.541 5.080.845 5.511.541 5.080.845

10. FOREIGN EXCHANGE PORTFOLIO

a) Breakdown

Bank and Consolidated 06.30.2018 06.30.2017

Other receivables

Purchased foreign exchange to be settled 1.035.117 868.955

Receivables from foreign exchange sales 293.782 466.273

(Advances in domestic/foreign currency received) (19.018) (7.024)

Earnings receivable from granted advances 9.653 7.085

Total 1.319.534 1.335.289

Current assets 1.319.534 1.335.289

Other liabilities

Sold foreign exchange to be settled (297.832) (468.556)

Liabilities for foreign exchange purchases (933.309) (848.101)

(Advances on exchange contracts) 568.844 350.461

Total (662.297) (966.196)

Current liabilities (662.297) (966.196)

Net foreign exchange portfolio 657.237 369.093

Memorandum Accounts

Credits opened for imports 23.499 50.817

Bank

Bank Consolidated

In the Conglomerate, in the semester ended June 30, 2018, the income from assigned financial assets totaled R$

770,863 (R$ 1,170,506 in the semester ended June 30, 2017) and expenses on the liabilities with assigned financial

assets totaled R$ 443,590 (R$ 784,943 in the semester ended June 30, 2017). In the Bank, in the semester ended June

30, 2018 and in the semester ended June 30, 2017 there was no income from assigned financial assets and expenses on

the liabilities with assigned financial assets totaled R$ 2,094 (R$ 34,253 in the semester ended June 30, 2017).

Consolidated

ConsolidatedBank

54





b) Income from foreign exchange operations

1H2018 1H2017

Foreign exchange income 766.014 642.086

Recovery of loans written off as loss 6.642 558

Foreign exchange expenses (612.666) (594.510)

Income from foreign exchange operations 159.990 48.134

11. OTHER RECEIVABLES - SUNDRY

06.30.2018 06.30.2017 06.30.2018 06.30.2017

Deferred tax assets (Note 23e) 3.066.229 2.985.470 7.041.573 7.494.757

Deposits in guarantee - Contingency (Nota 26g) 111.911 64.870 632.178 575.902

Deposits in guarantee - Other 65 56 72 350

Credit card operations (Note 9a) - - 1.166.835 966.173

Operations under Court-Ordered Reorganization approved (Note 9a) 804.658 83.781 806.636 85.878

Trade and credit receivables (1)

(Note 9a) 1.623.943 1.215.878 1.625.554 1.215.878

Taxes and contributions recoverable 36.700 74.306 170.718 118.274

Debtors for purchase of assets 53.619 3.454 53.619 3.454

Awards on credits linked to transactions acquired through assignment 12.254 12.725 12.254 12.725

Sundry domestic debtors 46.879 22.676 135.432 119.650

Receivables from associated companies 62.344 15.598 - -

Other 9.113 11.368 26.709 25.427

Total 5.827.715 4.490.182 11.671.580 10.618.468

Current assets 2.541.814 2.123.126 4.807.812 4.723.596

Non-current assets 3.285.901 2.367.056 6.863.768 5.894.872 (1)

12. OTHER ASSETS

06.30.2018 06.30.2017 06.30.2018 06.30.2017

Assets not for own use 90.591 160.416 182.016 263.036

Vehicles and alike 2.673 931 93.570 102.704

Real estate 35.489 37.708 35.693 37.844

Properties under special regime 52.197 120.828 52.235 120.828

Machinery and equipment 232 949 518 1.660

Materials inventories - - 41 1.124

Subtotal 90.591 160.416 182.057 264.160

(Provision for devaluation) (26.684) (21.921) (45.662) (45.439)

Prepaid expenses 15.337 14.509 52.884 160.858

Insurance costs 1.315 339 4.510 3.840

Data processing expenses 9.885 7.868 10.240 10.818

Commission for intermediation of operations (1) - - 32.481 138.229

Financial system service expenses 2.532 2.471 2.763 2.637

Specialized technical service expenses 1.384 1.172 1.881 2.067

Other 221 2.659 1.009 3.267

Total 79.244 153.004 189.279 379.579

Current assets 78.979 152.757 160.431 252.848

Non-current assets 265 247 28.848 126.731 (1)


ConsolidatedBank

Bank Consolidated

Includes operations contracted with institutions not included in the financial system, resulting from the acquisition of receivables from commercial transactions, without co-

obligation from the originator institution.

Refer to the amounts deferred for costs associated with loan transactions granted incurred in its origin.

Credit transactions originated prior to January 02, 2015, pursuant to the terms of CMN Resolution no. 4,294/2013 and in compliance with permission provided for in

BACEN Circular Letter no. 3,738/2014, had remuneration paid to correspondents recognized in assets, corresponding to the amount of R$ 29,043 in the semester ended

June 30, 2018 (R$ 111,700 in the semester ended June 30, 2017).

55





13. INVESTMENTS

a) Changes in interest in subsidiaries

Book balanceDividends/

Other events

Equity in

income

subsidiaries

Equity in

income

subsidiaries

12.31.2017 06.30.2018 06.30.2017 1H2017

Domestic 3.181.974 (360.069) 495.942 3.317.847 3.800.178 379.388

Consolidated 2.512.189 (547.415) 333.272 2.298.046 3.290.943 254.931

1.130.677 (538.458) 312.422 904.641 1.925.531 233.129

BV Leasing Arrendamento Mercantil S.A. 1.012.767 (4.149) 8.484 1.017.102 999.794 4.496

Votorantim CTVM Ltda. (1) 267.182 (268.326) 1.144 - 270.899 5.559

Votorantim Asset DTVM Ltda. (1) 101.563 263.518 11.222 376.303 94.719 11.747

Non Consolidated 669.785 187.346 162.670 1.019.801 509.236 124.457 Votorantim Corretora de Seguros S.A.. 495.641 (62.025) 143.177 576.793 344.405 109.922

BV Investimentos Alternativos e Gestão de Recursos S.A. 140.322 (1.615) 10.071 148.778 139.968 6.450

Promotiva S.A. 33.822 (4.048) 9.422 39.196 24.863 8.085

Atenas SP 02 Empreendimentos Imobiliários Ltda (2) - 255.034 - 255.034 - -

Abroad - - - - 48.682 (7.425)

Consolidated - - - - 48.682 (7.425)

Banco Votorantim Securities (3) - - - 31.905 (6.767)

Votorantim Securities (UK) Limited (4) - - - 16.777 (658)

Total interest in subsidiaries 3.181.974 (360.069) 495.942 3.317.847 3.848.860 371.963 (1)

(2)

(3)

(4)

Capital

Adjusted

shareholder’s

equity

Ownership

interest %

Domestic

Votorantim Asset DTVM Ltda. (1) 247.774 376.303 12.366 24.777.389 99,99%

500.403 904.641 312.422 3.080 100,00%

BV Leasing Arrend. Merc. S.A. 932.512 1.017.102 8.484 510 100,00%(1)

Atenas SP 02

Empr. Imob.

Ltda

Votorantim

Corretora de

Seguros S.A.

BV Invest.

Alternativos e

Gestão de

Recursos

S.A.

Promotiva

S.A.

Votorantim

Corretora de

Seguros S.A.

BV Invest.

Alternativos e

Gestão de

Recursos

S.A.

Promotiva

S.A.

Total assets 401.170 720.193 153.081 71.661 406.924 142.615 53.944

Total liabilities 401.170 720.193 153.081 71.661 406.924 142.615 53.944

Liabilities 255.087 143.400 4.303 32.465 62.519 2.647 29.081

Shareholder’s equity 146.083 576.793 148.778 39.196 344.405 139.968 24.863

Net income in the period 1.519 143.177 10.071 9.422 109.922 6.450 8.085

c) Other investments

06.30.2018 06.30.2017 06.30.2018 06.30.2017

Investments via tax incentives 14.332 16.432 93.753 98.195

Shares and quotas 180 180 180 180

Other 6 102 1.757 1.882

Total 14.518 16.714 95.690 100.257


Bank

06.30.2018 06.30.2017

Consolidated

b) Summary financial information of non-consolidated ownership in the Consolidated Financial Statements

BV Financeira S.A. – Crédito, Financiamento

e Investimento.

Balances at 06.30.2018

Changes –

1H2018

Book balance

Net income (loss)

1H2018

Number of Commom Shares

(in thousands)

Votorantim Corretora de Títulos e Valores Mobiliários Ltda. was merged into Votorantim Asset Management Distribuidora de TVM Ltda on January 31, 2018, as

described in Note 2.

In the semester ended June 30, 2018, Banco Votorantim received for payment, shares of Atenas SP 02 Empreendimentos Imobiliários. Includes goowill on acquisition in

the amount of R$ 108,951.

Banco Votorantim Securities Inc. was extinguished on December 28, 2017.

Votorantim Securities (UK) Limited had its activities closed during the year ended December 31, 2017 and is in the process of dissolution.

Includes the net income of Votorantim CTVM in the period.

BV Financeira S.A. – Crédito, Financiamento e

Investimento

56





14. PROPERTY FOR USE

06.30.2017

Changes Depreciation CostAccumulated

depreciationBook balance Book balance

Bank

Facilities 36.508 5.081 (4.346) 78.454 (41.211) 37.243 24.187

7.504 (628) (995) 27.519 (21.638) 5.881 5.723

Communication system 1.926 423 (304) 9.953 (7.908) 2.045 2.065

23.288 5.932 (4.051) 86.712 (61.543) 25.169 18.907

Security system 62 2 (12) 2.406 (2.354) 52 49

Transportation system 234 15 (46) 433 (230) 203 176

Fixed assets in progress - - - - - - 1.622

Total 69.522 10.825 (9.754) 205.477 (134.884) 70.593 52.729

Consolidated

Facilities 62.225 5.734 (7.470) 142.354 (81.865) 60.489 52.298

11.580 1.880 (1.470) 43.149 (31.159) 11.990 10.766

Communication system 1.990 423 (312) 14.630 (12.529) 2.101 2.156

30.287 6.083 (5.819) 140.329 (109.778) 30.551 27.736

Security system 147 2 (22) 2.560 (2.433) 127 130

Transportation system 234 15 (45) 821 (617) 204 176

Fixed assets in progress - 2.739 - 2.739 - 2.739 1.622

Total 106.463 16.876 (15.138) 346.582 (238.381) 108.201 94.884

15. INTANGIBLE ASSETS

a) Changes and Breakdown

CostAccumulated

amortization

Accumulated

impairment Book balance Cost

Accumulated

amortization

Accumulated

impairment Book balance

Bank

Software acquired 27.368 (18.789) - 8.579 22.216 (14.063) - 8.153

Use licenses 76.864 (39.022) - 37.842 47.628 (20.047) - 27.581

149.499 (11.026) (18.422) 120.051 107.955 (8.430) (17.426) 82.099

Total 253.731 (68.837) (18.422) 166.472 177.799 (42.540) (17.426) 117.833

Consolidated

Software acquired 30.145 (20.517) - 9.628 24.473 (14.949) - 9.524

Use licenses 135.928 (90.299) - 45.629 101.292 (59.566) - 41.726

7.511 (7.511) - - 5.000 (5.000) - -

184.585 (16.798) (18.607) 149.180 111.920 (10.108) (17.612) 84.200

1.000 - (1.000) - - - - -

Total 359.169 (135.125) (19.607) 204.437 242.685 (89.623) (17.612) 135.450

12.31.2017

Softwares internally

developed

06.30.201706.30.2018

Brands and patents

Softwares internally

developed

06.30.2018

Book balance

Sales rights agreements

1H2018

Furniture and equipment in

use

Furniture and equipment in

use

System data processing

System data processing

57





b) Changes

31.12.2017 06.30.2018

Book balance Acquisitions Write-off Amortization Book balance

Bank

Software acquired 10.315 278 - (2.014) 8.579

Use licences 21.977 26.415 (9) (10.541) 37.842 Softwares internally developed 120.971 1.840 (996) (1.764) 120.051

Total 153.263 28.533 (1.005) (14.319) 166.472

Consolidated

Software acquired 11.662 279 (2) (2.311) 9.628

Use licenses 33.200 27.413 (481) (14.503) 45.629

- 2.511 - (2.511) -

Softwares internally developed 122.724 32.907 (996) (5.455) 149.180

- - - - -

Total 167.586 63.110 (1.479) (24.780) 204.437

c) Amortization estimate on June 30, 2018

2018 2019 2020 2021 2022 As from 2023 Total

Bank

Amounts to be amortized 19.121 42.992 27.513 24.239 23.053 29.554 166.472

Consolidated

Amounts to be amortized 25.847 55.613 34.769 30.698 27.956 29.554 204.437

16. DEPOSITS AND MONEY MARKET REPURCHASE COMMITMENTS

a) Deposits

06.30.2018 06.30.2017 06.30.2018 06.30.2017

Demand deposits 111.739 68.004 109.037 66.897

Individuals 42.418 17.794 42.418 17.794

Legal entities 66.603 49.087 66.603 49.087

Associated companies 2.702 1.107 - -

Institutions of the financial system 16 16 16 16

Interbank deposits 2.283.982 2.170.001 1.874.549 1.754.444

Time deposits 10.655.653 8.436.531 10.652.044 8.433.180

Local currency 10.345.165 7.806.387 10.341.556 7.803.036

Foreign currency 310.488 630.144 310.488 630.144

Total 13.051.374 10.674.536 12.635.630 10.254.521

Current liabilities 10.830.926 8.721.340 10.415.182 8.304.676

Non-current liabilities 2.220.448 1.953.196 2.220.448 1.949.845

b) Segregation of Time Deposits by Maturity

Without

maturity

Up to 3

months

From 3 to 12

months

From 1 to 3

years

From 3 to 5

yearsOver 5 years 06.30.2018 06.30.2017

Bank

Demand deposits 111.739 - - - - - 111.739 68.004

Interbank accounts or relations - 314.071 557.939 26.960 1.385.012 - 2.283.982 2.170.001

Time deposits - 1.977.455 7.869.722 793.290 10.055 5.131 10.655.653 8.436.531

Total 111.739 2.291.526 8.427.661 820.250 1.395.067 5.131 13.051.374 10.674.536

Consolidated

Demand deposits 109.037 - - - - - 109.037 66.897

Interbank accounts or relations - 278.768 183.809 26.960 1.385.012 - 1.874.549 1.754.444

Time deposits - 1.973.846 7.869.722 793.290 10.055 5.131 10.652.044 8.433.180

Total 109.037 2.252.614 8.053.531 820.250 1.395.067 5.131 12.635.630 10.254.521

Bank

Sales rights agreements

1º Semestre/2018

Consolidated

Brands and patents

58





c) Money market repurchase commitments

06.30.2018 06.30.2017 06.30.2018 06.30.2017

Own portfolio 13.158.781 24.742.681 9.300.263 19.748.919

Private securities - Debentures (1) 6.506.727 9.682.557 6.465.375 8.578.565

Private securities - Promissory notes - 246.314 - -

Financial Treasury Bills 1.672.651 3.273.683 - 1.891.221

National Treasury Bills 1.931.029 7.542.961 495.058 6.069.407

National Treasury Notes 1.668.972 2.720.341 960.340 1.932.385

Private securities - Other 1.379.402 1.276.825 1.379.490 1.277.341

Third-party portfolio 13.590.063 9.484.230 10.254.067 7.395.740

National Treasury Bills 10.292.267 6.130.473 8.776.202 5.431.523

Financial Treasury Bills 500.036 1.697.085 - 1.104.086

National Treasury Notes 2.797.760 1.656.672 1.477.865 860.131

National Treasury Notes 2.569.400 4.000.180 2.569.400 3.872.183

Total 29.318.244 38.227.091 22.123.730 31.016.842

Current liabilities 28.013.117 36.649.747 20.887.706 29.880.985

Non-current liabilities 1.305.127 1.577.344 1.236.024 1.135.857 (1)

d) Deposits and securities sold under repurchase agreements

1H2018 1H2017 1H2018 1H2017

Money Market Funding Expenses (330.005) (529.693) (316.508) (368.817)

Time Deposits (248.346) (249.706) (248.237) (249.531)

Interbank accounts or relations (81.659) (279.987) (68.271) (119.286)

Expenses with money market repurchase commitments (944.963) (2.273.428) (724.160) (1.730.095)

Own portfolio (447.779) (1.418.929) (215.816) (971.820)

Third-party portfolio (378.767) (718.386) (389.927) (622.162)

Free portfolio (118.417) (136.113) (118.417) (136.113)

Expenses with Fund Raising from Acceptance and Issuance of Securities (716.002) (1.341.739) (724.870) (1.341.743)

Real estate credit bills (17.566) (29.779) (17.566) (29.779)

Agribusiness Credit Bills (60.513) (112.839) (60.513) (112.839)

Financial bills (793.826) (1.283.285) (793.826) (1.283.285)

Financial lease bills - - (8.841) -

Issue of securities abroad 163.340 89.597 163.340 89.597

Structured operations certificates (329) (106) (329) (106)

Other (7.108) (5.327) (7.135) (5.331)

Expenses with Subordinated Debts Abroad (944.105) (258.956) (944.105) (258.956)

Total (2.935.075) (4.403.816) (2.709.643) (3.699.611)

17. BORROWINGS AND ONLENDINGS

a) Borrowings

Bank and Consolidated Up to From 91 to90 days 360 days

Abroad 715.996 974.379 42.429 1.732.804 1.231.861

Raised from foreign banks 703.855 961.636 42.429 1.707.920 1.206.761

Exports 5.735 - - 5.735 4.932

Imports 6.406 12.743 - 19.149 20.133

Other - - - - 35

Total 715.996 974.379 42.429 1.732.804 1.231.861

Current liabilities 1.690.375 1.189.024

Non-current liabilities 42.429 42.837

ConsolidatedBank

Bank Consolidated

From 1 to 3

years06.30.2018 06.30.2017

Includes repurchase commitments with debentures issued by the subsidiaries, in accordance with BACEN Resolution No. 4,527 / 2016.

59





b) Onlendings

Domestic - Official institutions

Programs Remuneration p.a. (1) 06.30.2018 06.30.2017 06.30.2018 06.30.2017

National Treasury 22.309 42.194 22.309 42.194

Fixed rate From 5.80% to 8.50% p.a. 22.309 42.093 22.309 42.093

Variable rate Selic - 101 - 101

BNDES 1.009.577 1.562.493 1.009.577 1.562.493

Fixed rate From 0.70% p.a. to 7.00% p.a. 205.645 326.768 205.645 326.768

From 1.50% p.a. to 10.01% p.a. + IPCA

From 0.90% p.a. to 4.00% p.a. + TJLP 765.359 1.195.535 765.359 1.195.535

From 1.80% p.a. to 2,38% p.a. + Selic

Exchange rate variation 38.573 40.190 38.573 40.190

FINAME 1.346.009 1.614.632 1.346.009 1.622.522

Fixed rate Up 18.96% p.a. 1.155.523 1.455.070 1.155.523 1.462.960

From 0.50% p.a. to 5.50% p.a. + TJLP

From 1.50% p.a. to 2.33% p.a. + IPCA

From 1.70% p.a. to 2.56% p.a. + SELIC

Exchange rate variation 2.337 2.164 2.337 2.164

Total 2.377.895 3.219.319 2.377.895 3.227.209

Current liabilities 722.970 693.125 722.970 693.125

Non-current liabilities 1.654.925 2.526.194 1.654.925 2.534.084(1)

c) Expenses with liabilities from borrowings and onlendings

1H2018 1H2017 1H2018 1H2017

Borrowing expenses (230.439) (71.781) (230.439) (71.781)

Expenses with Onlendings (84.780) (103.510) (84.178) (103.905)

National Treasury (1.632) (2.994) (1.632) (2.994)

BNDES (46.664) (61.771) (46.062) (61.771)

FINAME (36.484) (38.745) (36.484) (39.140)

Expenses with Obligations to foreign bankers 18.057 27.708 18.057 27.708

Total (1) (297.162) (147.583) (296.560) (147.978)

(1)

Bank Consolidated

ConsolidatedBank

Variable rate

The remuneration rates refers to the operations on June 30, 2018.

Includes foreign exchange variation on Loans and Onlendings abroad.

157.398188.149157.398188.149Variable rate

From 1.70% to 2.00% p.a + exchange

variation

From 1.30% p.a. to 3.00% p.a. + exchange

variation

60





18. ACCEPTANCES AND ENDORSEMENTS

FUNDING 06.30.2018 06.30.2017

Real estate credit note funds 565.687 647.078

Fixed rate R$ 1.900 From 8.38% to 15.04% p.a. 2015 2021 2.239 4.245

Variable rate R$ 493.706 2015 2021 560.378 633.784

Variable rate R$ 2.674 2015 2021 3.070 9.049

Agribusiness crdeit bills 2.017.400 2.016.596


Variable rate R$ 1.677.960 2009 2022 1.955.987 1.929.076

Variable rate R$ 23.847 2015 2021 32.095 37.274

Financial bills 20.843.857 20.431.659


Variable rate R$ 177.304 2012 2023 239.237 539.068

Variable rate R$ 679 2016 2019 877 1.077

Securities issued abroad 605.806 949.731


Variable rate R$ 1.365 2018 2018 1.374 2.203

Exchange rate variation USD 149.026 2012 2020 548.982 898.060

Exchange rate variation EUR - 2016 2017 - 2.636

Certificates of Structured Operations - 9.085

Fixed rate R$ - From 8.98% to 9.38% p.a. 2017 2018 - 9.085

Total 24.032.750 24.054.149


Non-current liabilities 8.099.951 15.116.238 (1)

From 2.60% to 6.07% p.a. +

IPCA

From 5.14% to 6.39% p.a. +

IPCA

Up 0.69% a.a + Interbank

Deposit

From 100.00% to 107.50%

Interbank Deposit

From 3.71% to 9.44% p.a.

+IPCA

From 7.02% to 7.43% p.a.

+IGPM

From 93.50% to 95.00% do DI

Variable rate 19.498.450 R$ 18.216.496 2013 2022

BankAmount

issuedCurrency Remuneration p.a.

(1) MaturityFunding date

From 90.00% to 97.00%

Interbank Deposit

20.214.644


From 87.50% to 97.20% p.a.

Interbank Deposit

Up 6.60% p.a. + exchange

variation

61





FUNDING 06.30.2018 06.30.2017

Financial lease bills 2.025.672 -

Variable rate R$ 2.017.661 2018 2019 2.025.672 -

Real estate credit note funds 565.687 647.078


Variable rate R$ 493.706 2015 2021 560.378 633.784

Variable rate R$ 2.674 2015 2021 3.070 9.049

Agribusiness crdeit bills 2.017.400 2.016.596


Variable rate R$ 1.677.960 2009 2022 1.955.987 1.929.076

Variable rate R$ 23.847 2015 2021 32.095 37.274

Financial bills 20.843.857 20.431.659


Variable rate R$ 177.304 2012 2023 239.237 539.068

Variable rate R$ 679 2016 2019 877 1.077

Securities issued abroad 605.806 949.731


Variable rate R$ 1.365 2018 2018 1.374 2.203

Exchange rate variation USD 149.026 2012 2020 548.982 898.060

Exchange rate variation EUR - 2016 2017 - 2.636

Certificates of Structured Operations - 9.085

Fixed rate R$ - From 8.98% to 9.38% p.a. 2017 2018 - 9.085

Total 26.058.422 24.054.149



19. OTHER LIABILITIES

a) Tax and social security

06.30.2018 06.30.2017 06.30.2018 06.30.2017

Income tax and social contribution payable - 1.467 5.643 6.866

Provision for taxes and contributions on income - 9.806 145.140 22.019

Taxes and contributions payable 20.714 20.081 73.518 58.548

Deferred tax liabilities (Note 23d) 10.733 50.169 75.664 236.191

Total 31.447 81.523 299.965 323.624

Current liabilities 31.447 80.056 291.007 310.402

Non-current liabilities - 1.467 8.958 13.222

From 2.60% to 6.07% p.a. +

IPCA

From 5.14% to 6.39% p.a. +

IPCA

Up 0.69% p.a + Interbank

Deposit

From 100.00% to 107.50%

Interbank Deposit

From 3.71% to 9.44% p.a.

+IPCA

From 7.02% to 7.43% p.a.

+IGPM

From 93.50% to 95.00%

Interbank Deposit

From 100.50% to 102.10%

Interbank Deposit

From 90.00% to 97.00%

Interbank Deposit

MaturityRemuneration p.a. (1)

2022 20.214.644

Funding date

18.216.496 2013


Bank Consolidated

19.498.450 Variable rate R$

Consolidated

From 87.50% to 97.20% p.a.

Interbank Deposit

Up 6.60% p.a. + exchange

variation

Amount

issuedCurrency

62





b) Subordinated debts

Funding 06.30.2018 06.30.2017

Subodinated debt 3.147.222 2.906.494

Exchange rate variation USD 808.048 2013 2020 3.147.222 2.906.494

Subordinated financing bills 54.133 1.423.222

Fixed rate - From 11.72% to 12.65% p.a. 2017 2017 - 13.875

Variable rate 1.800 2016 2023 2.217 951.147

Variable rate - 2011 2017 - 239.204

Variable rate 28.933 2010 2020 51.916 218.996

Total 3.201.355 4.329.716

Current liabilities - 989.990


c) Debt instruments eligible as capital

Funding 06.30.2018 06.30.2017

Subordinated financing bills 1.994.305 1.229.795

Variable rate 324.732 2013 2030 509.789 424.774

Fixed rate 103.200 2015 2024 146.209 97.170

Variable rate 27.500 117.50% SELIC 2016 2023 35.537 32.683

FundingAmount

issued

Perpetual Bonus s (2) 1.156.708 -

Fixed rate USD 300.000 8,25% p.a. 1.156.708 -

Total 3.151.013 1.229.795

3.151.013 1.229.795 (1)

(2)

From 7.10% to 7.86% p.a.

+IPCA

From 1.24% to 2.16% p.a. +

Interbank Deposit

From 110.00% to 120.00%

Interbank Deposit

From 5.72% to 9.31% p.a. +

IPCA

From 11.03% p.a. to 17.98%

p.a.

From 119.00% to 119.00%

Interbank Deposit

From 6.59% to 7.56% p.a.

+IGPM

Amount

issuedRemuneration p.a.

(1)

Amount

issuedRemuneration p.a.

(1) Fundig year Maturity

2024 1.302.770

2017

1.004.426

Non-current liabilities

Variable rate



On November 30, 2017, the issuance abroad of USD 300,000 was made with semi-annual interest payments.

The bonds have a redemption option on the initiative of the Bank as of Dec. 2022 or in each subsequent half-yearly interest payment, provided that it has previously been

authorized by the Central Bank of Brazil (BACEN).



Fundig year

MaturityFunding year

2014

Remuneration p.a.

675.168

7.38% p.a. + exchange

variation

63





d) Sundry

06.30.2018 06.30.2017 06.30.2018 06.30.2017

Obligations from transactions linked to assignments (Note 9j) (1) - - 8.197.600 10.446.573

Liabilities for acquisition of assets and rights 760 8.061 1.153 8.066

Provision for unsettled payments 228.542 271.328 482.371 500.300

Provisions for civil claims (Note 26e1) 10.326 8.109 303.293 319.249

Provisions for labor claims (Note 26e1) 199.171 176.433 1.083.766 931.888

Provisions for tax claims (Note 26e1) (2) 21.883 22.857 75.176 75.216

Amounts payable to associated companies 77 1.223 234 133

Sundry creditors - abroad 6.659 12.818 6.659 12.818

Provision for losses - Other risks 482 277 8.574 26.713

Sundry domestic creditors 2.392 18.429 143.787 135.334

Credit card operations - - 1.203.386 987.159

Provision for restructurings 23.147 38.322 41.970 81.455

Provision for financial guarantees provided 311.702 281.131 311.702 281.131

Other 66 22 66 22

Total 805.207 839.010 11.859.737 13.806.057

Current liabilities 626.756 616.844 7.551.570 8.480.745

Non-current liabilities 178.451 222.166 4.308.167 5.325.312 (1)

(2)

20. OTHER OPERATING INCOME/ EXPENSES

a) Service income

1H2018 1H2017 1H2018 1H2017

Fund management - 77.896 58.583

Collection 5.680 550 5.680 550

Commissions on placing of securities 21.569 23.800 22.209 34.202

Bookerage of Stock Exchange transactions - - 1.862 8.866

Income from custody services 2.737 2.640 8.461 2.906

Income from guarantees provided 48.214 59.594 48.214 59.594

Credit card transactions - - 55.643 46.089

Insurance brokerage commission - - 11.907 11.177

Financial advisory services 11.288 22.291 11.288 22.291

Other services 3.294 3.178 5.430 4.754

Total 92.782 112.053 248.590 249.012

b) Income from banking fees

1H2018 1H2017 1H2018 1H2017

Master file registration - - 210.056 186.027

Funds transfer 174 163 174 163

Appraisal of assets - - 143.671 127.381

Income from credit card - - 66.101 52.658

Other 127 194 775 988

Total 301 357 420.777 367.217

c) Personnel expenses

1H2018 1H2017 1H2018 1H2017

Fees and retainer fee (Note 24) (5.278) (4.299) (8.792) (7.315)

Benefits (10.807) (13.522) (60.351) (60.597)

Social charges (44.799) (51.638) (110.424) (116.795)

Salary (17.321) (99.133) (220.881) (242.901)

Labor claims (23.362) (22.135) (150.599) (94.516)

Training (587) (1.485) (2.046) (1.732)

Total (102.154) (192.212) (553.093) (523.856)

Bank

Bank

Bank

Refers to liabilities regarding sales or transfers of financial assets with substancial retention of the risks and benefits.

Includes legal obligations (note 26h).

Consolidated

Consolidated

Consolidated

Consolidated

Bank

64





d) Other administrative expenses

1H2018 1H2017 1H2018 1H2017

Water, energy and gas (347) (865) (2.404) (2.567)

Rental (5.508) (9.410) (24.524) (29.417)

Communications (473) (664) (34.063) (34.024)

Maintenance and preservation of assets (841) (1.253) (7.296) (7.485)

Material (152) (131) (1.177) (1.470)

Data processing (35.669) (34.091) (100.809) (100.719)

Promotions and public relations (527) (178) (5.023) (3.039)

Advertising and publicity (881) (298) (18.505) (8.427)

Publications (369) (348) (1.820) (654)

Financial system services (482) (741) (2.051) (1.560)

Financial system services (8.605) (5.769) (52.128) (48.263)

Outsourced services (503) (525) (7.051) (4.494)

Surveillance and security services (680) (1.204) (1.120) (1.676)

Specialized technical services (16.611) (14.670) (191.062) (172.714)

Transportation (603) (498) (5.941) (7.198)

Traveling (943) (927) (4.545) (3.749)

Judicial and notary public fees (3.031) (3.257) (39.529) (45.338)

Amortization (14.319) (7.199) (24.780) (11.484)

Depreciation (9.754) (7.833) (15.138) (13.458)

Other (3.765) (3.809) (38.732) (33.885)

Total (104.063) (93.670) (577.698) (531.621)

e) Other operating income

1H2018 1H2017 1H2018 1H2017

Recovery of charges and expenses - - 1.412 769

Restatement of judicial deposits 2.694 4.173 16.768 19.012

Monetary inflation indexation 1.737 2.487 1.772 4.195

Reversal of provision for losses - Other risks 2.239 214 7.314 20.312

Countervailing fines 17.966 18.429 17.966 18.429

Civil claims 1.308 - - -

Other 3.480 1.052 20.510 21.162

Total (1) 29.424 26.355 65.742 83.879

(1)

f) Other operating expenses

1H2018 1H2017 1H2018 1H2017

Costs associated with the production - Business partners (1) (242) - (287.069) (300.700)

Costs associated with the production - Business partners (814) (968) (10.544) (9.987)

Tax claims (1.903) (3.209) (10.755) (7.390)

Civil claims - (3.198) (72.162) (128.453)

Provisions - Financial guarantees provided (1.537) (15.714) (1.537) (15.714)

Expenses with interest (REFIS joining and PERT) - (1.121) (115) (1.313)

Other (9.541) (9.963) (49.593) (47.260)

Total (2) (14.037) (34.173) (431.775) (510.817)

(1)

(2) Income and expenses of the same type are presented at the net amount determined in each period.

Bank

Consolidated

Bank

Consolidated

Refers mainly to commissions on loans originated by the partners and trade agreements with retailers.

Consolidated

Income and expenses of the same type are presented at the net amount determined in each period.

Bank

65





21. NON-OPERATING INCOME

1H2018 1H2017 1H2018 1H2017

Non-operating income 2.060 13.874 3.650 8.268

Rental income - 433 - 433

Reversal of impairment allowance of other assets - 2.667 - 3.000

Reversal of provision for losses with tax incentives - 10.660 - 1.390

Other non-operating income 2.060 114 3.650 3.445

Non-operating expenses (7.049) (27.855) (8.636) (25.200)

Loss on disposal of assets (2.664) (15.103) (3.539) (18.499)

Losses in investments due to tax incentives - (10.200) - -

Capital losses - - (2.465) (3.435)

Devaluation of other assets (4.079) - (2.326) -

Other non-operating expenses (306) (2.552) (306) (3.266)

Total (1) (4.989) (13.981) (4.986) (16.932)

(1)

22. SHAREHOLDER’S EQUITY

a) Capital

b) Capital reserve

Capital reserve is recognized from goodwill on subscription of shares, in the amount of R$ 372,120.

c) Profit reserve

Legal reserve

Statutory reserve for expansion

d) Equity valuation adjustments

Opening

balanceChanges

(2)Tax effect

(2) Closing

balance

Opening

balanceChanges Tax effect

Closing

balance

(31.741) 257.266 (96.824) 128.701 (132.487) (124.370) 55.967 (200.890)

Banco Votorantim (1) (58.532) 286.385 (109.912) 117.941 (142.042) (143.508) 64.579 (220.971)

Subsidiaries 26.791 (29.119) 13.088 10.760 9.555 19.138 (8.612) 20.081

(28.780) 93.949 (42.277) 22.892 (14.614) (9.682) 4.357 (19.939)

Banco Votorantim (28.780) 93.949 (42.277) 22.892 (14.614) (9.682) 4.357 (19.939)

Total (60.521) 351.215 (139.101) 151.593 (147.101) (134.052) 60.324 (220.829) (1)

(2)

1H2018 1H2017

Includes the effect of adjustments to the initial application of the new accounting criteria for recognition of the variation of FIP quotas.

Cash flow hedge

Income and expenses of the same type are presented at the net amount determined in each period.

Includes agency abroad.

Bank

At the Extraordinary Shareholders’ Meeting held on April 26, 2017, decided and approved the increase of Capital Stock

through incorporation of the special profit reserve in the amount of R$ 303,392, without issuance of new shares, approved

by Central Bank of Brazil on May 26, 2017.

Securities

Capital of Banco Votorantim S.A., fully subscribed and paid-in, in the amount of R$ 8,130,372 (R$ 8,130,372 on June 30,

2017) is represented by 105,391,472,816 nominative shares, of which 86,229,386,840 are common shares with no par

value and 19,162,085,976 nominative preferred shares with no par value.

Composed mandatorily of 5% of the period’s net income, up to the limit of 20% of Capital. The Legal Reserve may cease

to be funded when jointly with Capital Reserves it exceeds 30% of Capital. The Legal Reserve may be employed only in a

capital increase or to offset losses.

Consolidated

The law and the Bylaws allow management, at the end of the period, to propose that the portion of the profit not destined

to the Legal Reserve and not distributed, if any, be allocated to "Statutory Reserve for Expansion", in order to meet the

investments for business expansion. In addition, the reserve balance may also be used to pay dividends.

66





e) Accumulated profits

23. TAXES

a) Income Tax and Social Contribution Expenses

1H2018 1H2017 1H2018 1H2017

Current amounts - (9.024) (146.375) (21.238)

IR & CSLL in Brazil - Current - (9.805) (145.787) (22.019)

IR & CSLL in Brazil - Previous year - 781 (588) 781

Deferred amounts 167.698 59.248 (62.478) (130.630)

Deferred tax liabilities 16.407 3.054 130.703 (75.871)

Fair value adjustment 16.407 3.054 130.703 (75.871)

Deferred tax assets 151.291 56.194 (193.181) (54.759)

Tax losses/negative basis of CSLL 111.700 (11.866) 58.893 (18.521)

Temporary differences (146.881) 47.781 (283.657) (88.161)

Fair value adjustment 186.472 20.279 31.583 51.923

Total 167.698 50.224 (208.853) (151.868)

b) Reconciliation of IR and CSLL charges

1H2018 1H2017 1H2018 1H2017

Income (loss) before taxes and contributions 355.887 246.668 782.997 520.969

Total IR charges (25% rate) and CSLL (20% until December 2018 and 15% from January 2019) (160.150) (111.001) (352.348) (234.435)

Equity in the earnings of subsidiaries 223.174 176.360 73.201 56.003

Charges on employees’ profit sharing 5.645 10.946 28.397 43.441

Other amounts 99.029 (26.081) 41.897 (16.877)

Income tax and social contribution in the period 167.698 50.224 (208.853) (151.868)

c) Tax expenses

1H2018 1H2017 1H2018 1H2017

Cofins (12.102) (23.585) (132.811) (125.758)

ISSQN (3.597) (3.722) (29.090) (25.532)

PIS (1.967) (3.833) (21.582) (20.422)

Other (4.142) (2.339) (7.170) (5.942)

Total (21.808) (33.479) (190.653) (177.654)

d) Deferred tax liabilities

06.30.2018 06.30.2017 06.30.2018 06.30.2017

d) Deferred tax liabilities 10.733 50.169 75.664 236.191

Total deferred tax 10.733 50.169 75.664 236.191

Income tax 5.963 27.871 42.036 131.217

Social contribution 4.770 22.298 33.628 104.974

Consolidated

ConsolidatedBank

Bank Consolidated

Bank Consolidated

On July 28, 2016, CMN Resolution No. 4,512 was issued, which provides for accounting procedures applicable to the

evaluation and registration of a provision for financial guarantees provided. The standard requires the constitution of a

provision to cover losses associated with financial guarantees provided in any form. The effects of the adjustments

resulting from the initial application of this Resolution were recorded as a contra entry to the accumulated profit and loss

account by the net amount of tax effects at January 1, 2017 in the amount of R$ 116,551.

In the semester ended June 30, 2018, the Conglomerate adopted a new accounting standard for recognition of changes

in investment fund quotas. Prior to the change in the criterion, the variation of quotas was always treated as income

produced by the funds, with their recognition in the result of the period in "Income from securities". Following Bacen's

guidelines, the quota variation was treated as an adjustment to fair value, for funds with certain characteristics, as

described in note 4f. In June 2018, adjustments for the initial application of this new accounting criteria, with effect from

January 1, 2018, resulted in the constitution of a reserve of equity valuation adjustments for investments in FIP quotas,

contra entry to the retained earnings, net of tax effects, in the amount of R$ 242,128. These adjustments will be included

in the dividend calculation basis for the year ended December 31, 2018, as established by Bacen Circular No. 1273/1987.

Bank

67





e) Deferred tax assets (Recognised)

Bank 12.31.2017 06.30.2018 (1) 06.30.2017

Constitution Write-off

Temporary differences 2.547.758 333.489 (284.635) 2.596.612 2.592.210

Allowance for loan losses 1.571.540 17.561 (142.126) 1.446.975 1.456.367

Liability provisions 659.771 41.093 (65.028) 635.836 687.114

Fair value adjustment (2) 299.175 273.217 (77.481) 494.911 431.347

Other provisions 17.272 1.618 - 18.890 17.382

CSLL tax loss/negative basis 357.917 120.727 (9.027) 469.617 393.260

Total deferred tax assets recognized 2.905.675 454.216 (293.662) 3.066.229 2.985.470

Income tax 1.768.416 271.165 (159.124) 1.880.457 1.793.879

Social contribution 1.137.259 183.051 (134.538) 1.185.772 1.191.591

Consolidated 12.31.2017 06.30.2018 (1) 06.30.2017

Constitution Write-off

Temporary differences 6.160.090 563.444 (795.649) 5.927.885 6.348.517

Allowance for loan losses 4.374.793 373.623 (609.907) 4.138.509 4.398.806

Liability provisions 1.283.894 64.820 (113.018) 1.235.696 1.304.361

Fair value adjustment (2) 475.014 124.171 (72.719) 526.466 617.668

Other provisions 26.389 830 (5) 27.214 27.682

CSLL tax loss/negative basis 1.054.795 67.919 (9.026) 1.113.688 1.146.240

Total deferred tax assets recognized 7.214.885 631.363 (804.675) 7.041.573 7.494.757

Income tax 4.533.781 394.843 (436.967) 4.491.657 4.647.318

Social contribution 2.681.104 236.520 (367.708) 2.549.916 2.847.439

(1)

(2)

f) Deferred tax asset (Not recognized)

06.30.2018 06.30.2017 06.30.2018 06.30.2017

Deferred tax assets abroad - 13.156 - 13.156

Total deferred tax assets not recognized - 13.156 - 13.156

Income tax - 8.222 - 8.222

Social contribution - 4.934 - 4.934

Realization estimate

Nominal

valuePresent value

Nominal

valuePresent value

In 2018 776.717 762.537 1.562.354 1.533.832

In 2019 331.809 310.211 1.218.544 1.139.227

In 2020 375.810 332.837 1.025.054 907.842

In 2021 260.881 217.805 709.399 592.263

In 2022 289.815 227.295 797.241 625.258

As from of 2023 1.031.197 605.377 1.728.981 1.099.901

Total deferred tax assets 3.066.229 2.456.062 7.041.573 5.898.323

The amounts corresponding to the changes of deferred tax asset arising from adjustments to fair value of securities available for sale, recorded in Shareholder’s equity

account in the semester ended June 30, 2018 is R$ (9,264) of the total R$ (195,736) in the Bank and R$ (19,869) of the total R$ (51,452) in the Consolidated.

1H2018

The realization estimate of deferred tax assets is supported by in the technical study prepared as at June 30, 2018.

Consolidated

In the semester ended June 30, 2018, deferred tax assets were realized in the Bank totaling R$ 558,243 (R$ 501,000 in

the semester ended June 30, 2017), equal to 67% (60% in 2017) of the respective use projection for the semester ended

June 30, 2018, which was included in the technical study prepared on December 31, 2017.

Consolidated

On June 30, 2018 there was no unrecorded deferred tax assets in the Bank and Consolidated. The unrecorded deferred

tax assets on June 30, 2017 was R$ 13,156).

Book

balance

Book

balance

Net changes in the period

Bank

In the semester ended June 30, 2018, the amount of R$ 88,704 (of the total of R$ 494,911) in the Bank, and R$ 61,452 (of the total of R$ 526,466) in the Consolidated is

the deferred tax asset arising from fair value adjustment of securities classified as available for sale, recorded in Shareholder’s equity.

Book

balance

1H2018

Book

balance

Net changes in the periodBook

balance

Book

balance

Bank

68





Realization of nominal values for deferred tax assets

In 2018

In 2019

In 2020

In 2021

In 2022

As from of 2023(1)

(2)

24. RELATED PARTIES

1H2018 1H2017 1H2018 1H2017

Fees and retainer fee 5.278 4.299 8.792 7.315

Bonuses 33.923 28.820 48.499 40.466

Social charges 12.201 10.316 17.195 14.371

Total 51.402 43.435 74.486 62.152

22%

6% 18%

Bank

29% 3%

Tax losses/Social

contribution on net income

to offset (1)

Consolidated

25%

Tax losses/Social

contribution on net income

to offset (1)

8% 11%

40%

Bank Consolidated

24%

9%

10%

23%

8%

34%

13%16%

These transactions are carried out under terms and conditions similar to those performed with third parties where

applicable, prevailing at the transaction dates. These transactions do not involve extraordinary default risks.

The Conglomerate, through its subsidiary BV Financeira, carried out credit assignments with a related party, with

substantial risk retention. In the semester ended June 30, 2018 the sum of present values totaled R$ 2,017,324 (R$

829,223 in the semester ended June 30, 2017). The net result of credit assignments, considering income and expenses

of the assignments with substantial retention of risks and benefits is presented in the table below under “Income from

interest, provision of services and other income”.

The balances of accounts relating to transactions between consolidated companies of the Bank are eliminated in the

consolidated financial statements and also take into consideration the lack of risk. The shareholders of the Institution are

Banco do Brasil Conglomerate and Votorantim Conglomerate (main companies that are part of the Votorantim

Conglomerate are: Votorantim Finanças, Votorantim Cimentos, Votorantim Metais, Votorantim Siderurgia, Votorantim

Energia, Fibria and Citrosuco) .

Intertemporal Differences (2)

Intertemporal Differences (2)

7%

Costs of salaries and other benefits granted to key management personnel of Banco Votorantim, comprising the Board,

Audit Committee, Board of Directors and Fiscal Council:

The Conglomerate does not provide post-employment benefits to key management personnel.

The Conglomerate does not grant loans to key Management personnel in accordance with the prohibition established by

the Central Bank of Brazil.

15%

0%

The Conglomerate carries out banking transactions with related parties, such as current account deposits (not

remunerated), remunerated deposits, money market repurchase commitments, derivative financial instruments and

assignment of credit transaction portfolios. There are also service agreements.

12%

19%

Projected consumption linked to the capacity to generate IRPJ and CSLL taxable amounts in subsequent periods.

The consumption capacity arises from movements in provisions expectation of reversals, write-offs and uses).

29%

19%

69





Banco do Brasil

Conglomerate

Votorantim

S.A

Financial

subsidiaries (1)

Non-financial

subsidiaries (2)

Key

management

personnel (3)

Other (4) Total

Assets

Cash and due from banks 748 - - - - - 748

Interbank investments 560.045 - 28.114.682 - - 556.940 29.231.667

- 14.005 4.934.631 - - 1.935.232 6.883.868

Other assets 257.804 9.747 75.578 - 327 324 343.780

-

Liabilities -

Demand deposits (256) (3.232) (1.410) (231) (77) (696) (5.902)

Time Deposits (203.199) (709.635) (3.610) (711.819) (950) - (1.629.213)

Interbank accounts - - (409.432) - - - (409.432)

Money market repurchase commitments (143.841) (151.651) (7.194.711) - (6.667) - (7.496.870)

Acceptances and endorsements - (434.608) - - (13.643) - (448.251)

Derivative financial instruments (32.893) (122) (34.086) - - (466.347) (533.448)

Other liabilities (8.355.418) - (77) - - - (8.355.495)

Income (loss)

367.553 16 1.219.274 - - 30.220 1.617.063

(26.184) 13.356 (10.991) - - 148.995 125.176

(22.326) (37.474) (234.409) (19.080) (638) - (313.927)

Banco do Brasil

Conglomerate

Votorantim

S.A

Financial

subsidiaries (1)

Non-financial

subsidiaries (2)

Key

management

personnel (3)

Other (4) Total

Assets

Cash and due from banks 2.144 - - - - - 2.144

Interbank investments 189.999 - 23.247.744 - - 575.638 24.013.381

- 222 8.646.915 - - 1.726.332 10.373.469

Other assets 205.782 6.073 15.755 - 254 320 228.184

Liabilities

Demand deposits (231) (869) (956) (285) (6) (3) (2.350)

Time Deposits (198.919) (477.698) (3.351) (386.531) (878) - (1.067.377)

Interbank accounts - - (415.556) - - - (415.556)

Money market repurchase commitments (268.768) (228.823) (7.211.114) - (524) - (7.709.229)

Acceptances and endorsements - (373.559) - - (11.251) - (384.810)

Obrigações por empréstimos e repasses (232.400) - - - - - (232.400)

Derivative financial instruments (30.046) (3.247) - - - (230.617) (263.910)

Other liabilities (10.589.085) - (18.603) - - - (10.607.688)

Income (loss)

515.209 - 2.075.415 - - 98.276 2.688.900

(4.814) (6.458) - - - 12.636 1.364

(7.729) (145.100) (704.344) (17.012) (723) - (874.908)

(1)

(2)

(3)

(4)

25. EMPLOYEE BENEFITS

Companies listed in Note 3, identified in item (1). Does not include operation between subsidiaries.

It includes Promotiva S.A., BVIA - BV Investimentos e Participações de Gestão de Recursos S.A. and Votorantim Corretora de Seguros S.A.

Board of Directors, Executive Board, Audit Committee, Fiscal Council and family members (spouse, children and stepchildren) of key management personnel, as well as

all companies in which the key management personnel has participation.

Includes BVIA FIP and Votorantim Expertise Multimercado.

Derivative financial instruments

Securities and derivative financial

instruments

Income from interest, provision of

services and other income

06.30.2017

Securities and derivative financial

instruments

Income from interest, provision of

services and other income

Derivative financial instruments

Fund raising, administrative expenses

and other

1H2018

There are no post-employment benefits such as: pensions, other retirement benefits, post-employment life insurance and

medical care, other long-term benefits to employees, including long service leave and other leaves, jubilee or other

benefits per years of service, share-based remuneration and rescission of contract benefits.

06.30.2018

1H2017

Fund raising, administrative expenses

and other

70





Variable compensation program

1H2018 1H2017

- 20.743

36.403 35.844

42.028 43.439

31.205 6.683

2.466 -

29 -

Total 112.131 106.709

Changes in virtual shares

1H2018 1H2017 1H2018 1H2017

Opening quantity 52.685.745 59.475.878 70.388.083 78.561.466

New 10.023.053 15.184.220 12.864.397 19.163.139

Paid (33.869.685) (34.871.258) (42.442.767) (43.741.331)

Expired (367.279) (1.107.311) (535.816) (1.213.219)

Closing quantity 28.471.834 38.681.529 40.273.897 52.770.055

a) Contingent assets

b) Labor lawsuits

The Conglomerate is the defendant in labor lawsuits mostly filed by former employees. Provisions for probable losses

represent several claims, such as: Indemnities, overtime, working time exemption, supplement per function and

representation, among other matters.

On June 30, 2018, the Conglomerate recorded under caption “Other liabilities - Other - Sundry - Provision for unsettled

payments”, in the amount of R$ 239,179 (R$ 274,676 on June 30, 2017).

Program Year

2012

2013

2015

In the semester ended June 30, 2018 were recognized in the result, under Personnel Expenses - Salary R$ 63,444 (R$

66,806 in the semester ended June 30, 2017) in relation to long-term incentives transactions. These incentives in general

become a right between one and in not more than four years as of the granting date.

In the Consolidated the following payments were made to employees related to the Long-Term Remuneration Programs:

Virtual share value is calculated at least on a quarterly basis and is based on the Conglomerate’s income and on entries

directly made to Shareholders’ equity accounts, as determined by prevailing accounting practices. From this change in

Shareholders’ Equity value, non-recurring movements will be excluded, individually evaluated and submitted to the

Remuneration Committee, which will decide on its exclusion or not from Shareholders’ equity calculation basis to value

virtual share.

Contingent assets are not recognized in the financial statements in accordance with CMN Resolution 3,823/2009.

2014

2016

The Long-Term and Short-Term Compensation Programs: Conditional Variable Incentive, Long-Term Incentive and

Virtual Share Repurchase Program approved by the Board of Directors on May 10, 2012 were valid until 2016, with effect

until 2021.

In the first semester of 2017, the Conglomerate implemented the new Variable Compensation Program. The directors and

employees of the Conglomerate are eligible for the program. This program was approved by the Board of Directors on

March 09, 2017.

The program also has a long-term incentive plan that aims to: (i) attract, motivate and retain talent; (ii) alignment of the

interests of the officers and employees with the objectives and interests of the shareholders; (Iii) generation of results and

sustainable creation of value; And (iv) creating a long-term vision:

ILP plan: a four-year plan consisting of the granting of an incentive based on the performance of each year. All

employees of the Conglomerate are eligible for the plan.

Bank Consolidated

2017

26. CONTINGENT ASSETS AND LIABILITIES AND LEGAL, TAX AND SOCIAL SECURITY OBLIGATIONS

71





c) Tax lawsuits

d) Civil lawsuits

e) Provision for labor, tax and civil lawsuits - Probable

1H2018 1H2017 1H2018 1H2017

Tax claims

Opening balance 3.483 7.648 42.964 52.812

Additions - 298 6.727 4.723

Reversal of provision - 182 - (1.599)

Write-offs due to payment - - (4) (88)

Inflation indexation 45 - 868 858

Closing balance 3.528 8.128 50.555 56.706

Civil claims

Opening balance 12.893 5.545 311.724 302.241

Additions 848 2.303 52.740 53.350

Reversal of provision (3.170) (73) (42.935) (38.842)

Write-offs due to payment (538) (86) (31.475) (32.732)

Inflation indexation 293 420 13.239 35.232

Closing balance 10.326 8.109 303.293 319.249

Labor claims

Opening balance 190.720 158.073 1.011.356 887.345

Additions 27.151 21.397 138.665 84.655

Reversal of provision (18.964) (10.545) (65.149) (38.318)

Write-offs due to payment (19.051) (2.980) (105.583) (33.518)

Inflation indexation 19.315 10.488 104.477 31.724

Closing balance (1) 199.171 176.433 1.083.766 931.888

Total Labor, Tax and Civil claims 213.025 192.670 1.437.614 1.307.843 (1) In October 2017 the risk measurement criteria were improved, so that the mass valuation model was incorporated into the model that includes risk inputs with greater

granularity, as well as the effects of judicial settlements.

The Conglomerate is subject, to inspections made by tax authorities, to questionings related to taxes, which may

eventually generate assessments, for example: composition of the IRPJ/CSLL tax basis (deductibility); and discussion

related to the levy of taxes, upon occurrence of certain economic facts. Most lawsuits deriving from tax assessments refer

to ISS, IRPJ, CSLL, PIS/COFINS and Employer Social Security Contributions. Some of them are guaranteed, when

necessary, by escrow deposits made to suspend payment of taxes under discussion.

Basically refer to indemnity actions whose natures are as follows: challenge on contracts’ total effective cost; review on

contract conditions and charges; and fees.

In conformity with CMN Resolution no. 3,823/2009, the Conglomerate recognized a provision for labor, tax and civil

lawsuits with “probable” risk of loss, classifed by individual methodology or on a collective basis, according to the nature

and/or value of the process.

The estimates of outcome and financial effect are determined by the nature of the actions, by the judgment of the entity’s

Management, by the opinion of the legal counsel, based on the process elements, supplemented by the experience and

complexity of similar claims.

The provision for labor, tax and civil lawsuits that was set up to cover the losses estimated, are considered sufficient by

the Conglomerate’s Management.

Bank Consolidated

e.1) Changes in provisions for tax, civil and labor claims classified as probable

72





e.2) Estimated schedule of disbursements on June 30, 2018

Labor Tax Civil Labor Tax Civil

Up to 5 years 199.171 3.320 10.326 1.083.766 49.007 303.293

From 5 to 10 years - 208 - - 1.548 -

Total 199.171 3.528 10.326 1.083.766 50.555 303.293

f) Contingent liabilities - Possible

Balances of contingent liabilities classified as possible

06.30.2018 06.30.2017 06.30.2018 06.30.2017

Tax claims (1) 624.908 613.344 1.064.106 1.053.430

Civil claims (2) 21.154 12.272 130.939 62.095

Labor claims (3) 195.083 12.056 650.587 201.798

Total 841.145 637.672 1.845.632 1.317.323

(1)

Description of the main possible causes - Taxes 06.30.2018 06.30.2017

INSS on Profit Sharing PLR 146.608 142.267

IRPJ - FINOR 63.501 61.205

ISS 11.701 11.581

INSS on Profit Sharing PLR - Nassau Branch 44.277 42.836

PIS/COFINS on demutualization 41.144 39.886

IRPJ on undue offset of tax loss - Gratuities to statutory officers 21.908 29.025

IRPJ/CSLL - Deduction Allowance for loan losses (PDD) 2008 109.938 106.908

Infringement Fine (non-homologation of DCOMP) 86.153 81.551

CSLL - Exclusion of interests of oreign government securities 148.984 142.954

IRPJ/CSLL - Assessment notice: improper exclusion of goodwill on acquisition of securities of foreign governments 23.162 22.475

IRRF from remittances abroad: impossibility of compensation 35.279 33.753

PF e BNCSLL: excess compensation AB 2012 66.704 64.568

IRPJ/CSLL on JCP cumulatively distributed 135.538 130.897

Other 129.209 143.524

Total 1.064.106 1.053.430 (2)

(3)

g) Deposits as collateral

Balances of escrow deposits recognized for contingencies

06.30.2018 06.30.2017 06.30.2018 06.30.2017

Tax claims 72.424 32.927 116.870 70.543

Civil claims 9.472 10.725 199.432 206.919

Labor claims 30.015 21.218 315.876 298.440

Total 111.911 64.870 632.178 575.902

In Consolidated, basically refer to:

Refers, basically, to collection actions.

Refers to actions mostly brought by former employees claiming compensation, overtime pay, working hours, extra pay associated with certain jobs, and representation

costs, and others.

In October 2017 the risk measurement criteria were improved, so that the mass valuation model was incorporated into the model that includes risk inputs with greater

granularity, as well as the effects of judicial settlements.

ConsolidatedBank

Bank Consolidated

Consolidated

Uncertain lawsuit duration and the possibility of changes in prior court judgments make disbursement schedule and values

uncertain.

ConsolidatedBank

Amounts shown in the chart below represent estimated disbursement value in case the Bank receives a negative

judgement. Claims are classified as possible when there are no elements that permit concluding final lawsuit outcome and

when likelihood of loss is lower than probable and higher than remote.

73





h) Legal obligations

i) Public civil lawsuits

27. RISK AND CAPITAL MANAGEMENT

a) Risk management process

In sum, the Conglomerate follows the following principles in its integrated risk management process:

· Consolidated risk vision;

· Compatibility between levels of exposure to risks, authorized limits and expected financial return;

· Job segregation between business areas, risk control, audit and operational processing;

· Adoption of risk calculation methodologies based on the market practices; and

· Involvement of Senior Management.

b) Credit risk

·

·

·

·

The levels of risk exposure are monitored through a risk limit framework, incorporated into the Conglomerate's daily

activities by means of an organized management and control process which assigns functional responsibilities to the

areas involved. Senior Management gets involved by following up and performing actions that are necessary for risk

management.

Financial return is calculated by processes that permit the monitoring of managerial earnings in different business lines,

consistent with established budgets and in accordance with accounting income.

Credit Risk is defined as the possibility of occurrence of losses associated to:

The Conglomerate maintains the amount of R$ 24,621 (R$ 18,510 on June 30, 2017) with the Bank being registred the

amount of R$ 18,355 (R$ 14,729 on June 30, 2017) recorded in specific Legal Obligations account and the discussion

about on a Declaratory Action in which it is intended to offset the impact of the ISS on revenues arising guarantee and

other guarantees provided, as well as to obtain the restitution of the amounts paid in the last five years, the amount

provisioned for in the Bank is R$ 16,958 (R$ 13,795 on June 30, 2017).

Costs of recovery of exposures of problematic assets.

Non-compliance by the counterparty (the borrower, the guarantor or the issuer of securities or securities acquired),

from its obligations under the terms agreed upon;

The other actions refers to PIS LC 07/10, ISS Deduction in the PIS and COFINS calculation basis and APF - Accident

Protection Factor.

Restructuring of financial instruments; or

Devaluation, reduction of remuneration and expected gains in financial instruments arising from the deterioration of the

credit quality of the counterparty, the intervening party or the mitigating instrument;

Conglomerate has contingent liabilities involving public civil actions in which, based on the opinion of the legal advisors

and Management’s judgment, the risk of loss is considered possible. Due to their current stage of completion,

measurement of amounts involved in these lawsuits could not be determined safely.

Main themes discussed in these lawsuits refer to collection of tariffs and issues involving payroll credit to INSS retirees

and pensioners.

The integrated risk-management approach includes adopting instruments to ensure that material risks incurred by the

Conglomerate. This approach aims to organize the decision process and define the mechanisms that establish risk

appetite and risk level that is acceptable and compatible with the volume of capital available, in line with the business

strategy adopted.

The consolidation of risks covers material exposures inherent to the Conglomerate's business lines. The exposures are

mainly grouped into the following risk categories: market, credit and liquidity. This consolidation process is carried out

through a structured process which includes the mapping and calculation of the total values at risk.

74





c) Liquidity risk

Liquidity risk is defined as:

·

·

d) Operational risk

·

·

·

·

·

·

·

e) Market risk

f) Capital management

·

·

·

·

·

·

·

·

Stress tests and their impacts on Capital;

Operational risk is defined as the possibility of occurrence of losses resulting from external events or from failure,

deficiency or inadequacy of internal processes, people or systems.

Evaluation of Capital Adequacy in the Regulatory and Economic View; and

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

Capital Plan for three years, including Capital targets and projections, main funding sources and Capital contingency

plan;

Managerial reports to the Senior Management (Executive Board and Board of Directors);

Damage to physical assets owned or in use by the Conglomerate;

Situations that lead to the disruption of the activities of the Conglomerate;

Inadequate practices regarding customers, products and services;

This definition includes the Legal Risk associated with inadequacies or deficiencies in contracts signed by the

Conglomerate, penalties for noncompliance with legal provisions and indemnities for damages to third parties arising from

the activities developed by the Conglomerate. Operational risk events include:

In line with CMN Resolution no. 4,557, the institution has structure and policies for capital management approved by the

Board of Directors, in compliance with the internal process for evaluation of capital Adequacy (ICAAP), contemplating the

following items:

Possibility of the Institution not being able to effectively honor expected and unexpected current and future obligations,

including those deriving from guarantee binding, without affecting its daily operations and without incurring significant

losses; and

Possibility that the Institution may not be able to trade a position at market price due to its large size in relation to the

usually traded volume, or due to market discontinuity.

Labor claims and poor workplace safety;

Report to the regulator regarding capital management, through the Statement of Operational Limits and Annual Report

of Internal capital adequacy assessment process (ICAAP).

Internal and external fraud;

Failure to execute, comply with deadlines or manage the activities of the Conglomerate.

Capital management through a continuous process of planning, evaluating, controlling and monitoring the capital

needed to deal with the relevant risks;

Documented policies and strategies;

Market risk is defined as the possibility of financial losses arising from variations in the fair value of exposures held by a

financial institution. These financial losses may be generated based on the impact of the variation of risk factors, such as

interest rates, exchange rate parities, stock and commodity prices, among others.

Following the regulations of BACEN and in accordance with the recommendations of the Basel Committee on Banking

Supervision, the Institution employs prudential guidelines of capital management in a consolidated manner aiming at the

efficient and sustainable management of its resources and contributing to promote the stability of the National Financial

System.

In March 2017, Bacen issued Resolution No. 4,557, which provides for the risk management structure and the capital

management structure, repealing CMN Resolutions 3,988, 3,380, 3,464, 3,721, 4,090, after implementation of the new

recommendations set out in the standard. Banco Votorantim is classified in Segment 2 (S2), according to CMN Resolution

4,553, whose beginning of validity of application of this norm for segments S2 was February of 2018.

Failures in information technology (IT) systems, processes or infrastructure;

75





Capital Adequacy (Regulatory view)

Capital ratios

I

II

(i)

(ii)

(iii)

(iv)

(v)

(vi)

(vii)

(viii)

new methodology to determine requirements to maintain capital, adopting minimum PR, Level I and Main Capital

requirements, and introducing the Additional Main Capital.

Aiming at assessing capital adequacy to address associated risks and compliance with regulatory operational limits, the

institution annually prepares a Capital Plan considering growth projections for the loan portfolio and other operations and

assets.

Monthly after the calculation of the Referential Equity (PR) and Required Capital, management reports for monitoring the

capital allocated to risks and capital rations (Basel, Level I and Principal) are published for the areas involved.

new methodology to determine regulatory capital, which continues to be divided into Levels I and II, Level I being

comprised of Main Capital (less Prudential Adjustments) and Supplementary Capital;

For comparison purposes, Basel Ratio information is presented for Prudential Conglomerate:

Consolidation scope used as the basis to verify operating limits and also considers the Financial Conglomerate, and the

Prudential Conglomerate beginning as of January 1, 2015, as defined in CMN Resolution no. 4,280/2013.

At the Institution, capital is managed in order to ensure adequacy within regulatory limits and to establish a strong capital

base, enabling the Institution to develop business and transactions in accordance with its strategic plan.

Capital ratios are calculated according to the criteria set by CMN Resolutions 4,192/2013 and 4,193/2013, which refer to

the calculation of Reference Equity (PR) and the Minimum Regulatory Capital (PRMR) in relation to Risk-Weighted Assets

(RWA), respectively.

In October 2013, onwards the set of rules that implemented in Brazil the recommendations of the Basel Committee on

Banking Supervision related to the Capital structure of financial institutions, known as Basel III, came into effect. Newly

adopted rules address the following matters:

Since January 2014, CMN Resolution no. 4,192/2013 defines the following items relating to prudential adjustments to be

deducted from Reference Equity:

goodwill paid on acquisition of investments based on expected future income net of deferred tax liabilities;

intangible assets formed as from October 2013;

actuarial assets related to defined benefit pension plans net of related deferred tax liabilities associated to them;

non-controlling interest;

direct or indirect investments higher than 10% of capital of entities similar to non-consolidated financial institutions and

of insurance and reinsurance firms, capitalization organizations and open pension plan entities (higher investments);

deferred tax assets deriving from temporary differences that depend from future income generation or tax revenues for

their realization;

deferred tax assets from depreciation excess tax loss;

deferred tax assets deriving from tax losses and social contribution on net income negative basis.

In accordance with CMN Resolution no. 4,192/2013, deductions referring to prudential adjustments will be carried out

gradually, at 20% p.a. from 2014 to 2018, except for deferred assets and funding instruments issued by financial

institutions, which are already being fully deducted since October 2013.

76





06.30.2018 06.30.2017

PR - Reference Equity 9.576.470 8.178.049

Tier I 7.632.639 6.255.309

Complementary Capital 1.156.708 -

Common Equity 6.475.931 6.255.309

Shareholders' equity (1) 9.113.965 8.287.747

Prudential adjustments (2.638.034) (2.032.438)

Other (2.637.577) (2.031.161)

Adjustment to fair value (457) (1.277)

Tier II 1.943.831 1.922.740

Subordinated debts eligible as capital 1.943.831 1.922.740

Subordinated debts authorized pursuant to CMN Resolution no. 4,192/2013 1.393.973 946.888

Subordinated debts authorized pursuant to rules prior to CMN Resolution no. 4,192/2013 (2) 549.858 975.852

Funding sources abroad 536.167 953.502

Funds raised with CDB - -

Funds raised with Financing Bills 13.691 22.350

Risk-weighted assets (RWA) 59.784.134 60.445.530

Credit risk (RWACPAD) 51.818.928 53.575.358

Market risk (RWAMPAD) 2.325.604 1.719.233

Operational risk (RWAOPAD) 5.639.602 5.150.939

Minimum Required Regulatory Capital (3) 5.156.382 5.591.212

Minimum Required Capital (4) 2.690.286 2.720.049

Tier I Minimum Required Reference Equity (5) 3.587.048 3.626.732

383.387 268.997

Margin on Minimum Required Regulatory Capital 4.420.088 2.586.837

Margin on Minimum Required Capital 3.785.645 3.535.260

Margin on Minimum Required Tier I Regulatory Capital 4.045.591 2.628.577

Margin on Minimum Required Regulatory Capital including RBAN and ACP (6) 1.794.796 2.317.840

Common Equity Index (CP / RWA) 10,83% 10,35%

Tier I Capital Index (Tier I / RWA) 12,77% 10,35%

Basel Ratio (PR / RWA) 16,02% 13,53%(1)

(2)

(3)

(4)

(5)

(6)

Prudential Adjustments deducted from Common Equity:

06.30.2018 06.30.2017

Prudential Adjustment I - Goodwill paid (108.951) -

Prudential Adjustments II - Intangible assets (204.437) (107.387)

Prudential Adjustments VII Deferred tax assets and Intertemporal differences (1.210.500) (1.006.782)

Prudential Adjustments VIII - Deferred tax assets of Tax losses/negative basis of CSLL (1.113.688) (916.992)

Prudential Adjustments XV - Understatement - Resolution 4,277/13 Adjustments (457) (1.277)

Total (2.638.033) (2.032.438)

g) Fixed asset ratio

Corresponds to the application of the “F” factor to RWA amount, being “F” equal to:

a. 9,25% do RWA, from January 1, 2017 to December 31, 2017.

b. 8,625% do RWA, from January 1, 2018 to December 31, 2018.

c. 8% do RWA, as from January 1, 2019

It represents at least 4.5% of RWA.

It represents at least 6% of RWA.

The balance of the Subordinated Debt instruments issued prior to CMN Resolution No. 4,192 / 2013 was considered with the application of the reducers established in

art. 27 of that Resolution.

Regulatory Capital determined to cover interest rate risk of transactions not classified in trading portfolio (RBAN)

According to article art. 4, paragraph 2 of CMN Resolution No. 4,192 / 2013, the cash flow hedge does not compose the calculation basis for purposes of calculating the

Reference Equity.

Additional Principal Capital (ACP) corresponding to the Additional Conservation and Complementary Countercyclical.

Basel ratio

On November 30, 2017, the Bank issued a perpetual bond issue in the amount of USD 300,000, which was approved by

the Central Bank of Brazil (BACEN), and now includes Level I of the Reference of March 2018, further strengthening the

Conglomerate's Capital structure.

The property, plant and equipment indexrequired ratio of the Prudential Conglomerate amounted to 20.80% (20.26% as of

June 30, 2017) and determinated in accordance with CMN Resolutions No. 4,192 / 2013 and No. 2,669 / 1999.

77





06.30.2018 06.30.2017

Fixed assets limit 4.788.234 4.089.024

Value of fixed assets limit position 1.992.058 1.656.710

Value of margin or insufficiency 2.796.176 2.432.314

28. OTHER INFORMATION

a) Commitments undertaken due to funding from international financial institutions

b) Information about branches and subsidiaries abroad

Current and non-current assets 5.787.913 5.555.030

Banco Votorantim S.A. - Nassau Branch 5.787.538 5.500.313

Others subsidiaries 375 54.717

Total Assets 5.787.913 5.555.030

Current and non-current liabilities (3.931.656) (3.968.314)

Banco Votorantim S.A. – Nassau Branch (3.931.281) (3.962.279)

Others subsidiaries (375) (6.035)

Shareholders’ equity (1.856.257) (1.586.716)

Banco Votorantim S.A. – Nassau Branch (1.856.257) (1.538.034)

Others subsidiaries - (48.682)

Total Liabilities (5.787.913) (5.555.030)

1H2018 1H2017

Income (loss) 64.476 19.960

Banco Votorantim S.A. – Nassau Branch 64.476 29.103

Others subsidiaries - (9.143)

c) Insurance coverage

Insurance in force on June 30, 2018

Covered riskCovered

values

Award

amount

Insurance Guarantee - Guarantee for legal proceedings 476.154 4.487

Real estate insurance for properties in use of relevant third parties 258.866 74

06.30.2018 06.30.2017

The Conglomerate is a borrower of short-term loans from international financial institutions, who in certain cases may

require compliance with financial ratios (financial covenants). When required, the financial ratios are calculated based on

the financial information prepared in accordance with Brazilian law and standards of the Central Bank of Brazil (BACEN).

On June 30, 2018 the Conglomerate did not have operations with these characteristics.

d) Agreements for offset and settlement of liabilities in the scope of the National Financial System

The Conglomerate contracts insurance coverage for assets subject to risks for amounts considered to be sufficient to

cover eventual claims, considering the nature of its activity.

Agreements were executed for the offset and settlement of receivables and payables pursuant to CMN Resolution No.

3,263/2005, the purpose of which is to enable the offsetting of credits and debits maintained with the same counterparty,

and in which the maturity dates of receivables and payables can be advanced to the date in event of default by one of the

parties occurs or in case of the bankruptcy of the debtor.

In compliance with the Brazilian Central Bank (BACEN) Circular 3,678/2013 and 3,716/2014, Conglomerate maintains

additional information on its risk and capital management process available in the website:

www.bancovotorantim.com.br/ri.

78

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









































Bank and ConsolidatedSubordinated

debts

Debt

instruments

eligible for

capital

Dividends

and JCP Capital

Capital and

profit

reserves

Balance at 12.31.2017 2.918.483 2.899.307 110.598 8.130.372 797.699 14.856.459

Proceeds from the allocation of income - - - - 13.443 13.443

Dividends and interest on capital paid - - (110.598) - - (110.598)

Liquidation (206.864) (55.566) - - - (262.430)

Transfer (625) 625 - - - -

Interest expenses 108.923 134.650 - - - 243.573

Exchange variation 432.494 164.340 - - - 596.834

Other (51.056) 7.657 - - - (43.399)

282.872 251.706 (110.598) - 13.443 437.423

Balance at 06.30.2018 3.201.355 3.151.013 - 8.130.372 811.142 15.293.882

Bank and ConsolidatedSubordinated

debts

Debt

instruments

eligible for

capital

Dividends

and JCP Capital

Capital and

profit

reserves

Balance at 12.31.2016 4.876.634 1.168.944 101.131 7.826.980 746.011 14.719.700

Capital increase - - - 303.392 (303.392) -

Proceeds from the allocation of income - - - - 7.801 7.801

Dividends and interest on capital paid - - (101.131) (101.131)

Funds from new funding 374.997 - - 374.997

Liquidation (124.953) (1.074.184) - (1.199.137)

Transfer (1.070.716) 1.070.716 - -

Interest expenses 215.675 64.319 - 279.994

Exchange variation 38.814 - - 38.814

Other 19.265 - - 19.265

(546.918) 60.851 (101.131) 303.392 (295.591) (579.397)

Balance at 06.30.2017 4.329.716 1.229.795 - 8.130.372 450.420 14.140.303

***

e) Reconciliation of equity transactions with cash flows arising from financing activities

Liabilities

Total changes in financing cash flows

Liabilities Shareholder’s equity

Total

Total changes in financing cash flows

Shareholder’s equity

Total

79

new june, 30 2018 - banco votorantim · 2018. 8. 30. · 3 management report | 1st semester 2018...

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