Strategic Partnership
1
Disclaimer
This presentation contains references and statements, planned synergies,
including estimates, projections of results and future strategy for Banco do Brasil,
it’s Associated and Affiliated Companies and Subsidiaries. Although these
references and statements reflect the management’s belief, they also involve
imprecision and high difficult risks to be foreseen, consequently, they may
conduct to a different result than the one anticipated here. These expectations
are highly dependent on market conditions, on Brazil’s economic and banking
system performances, as well as on international market one. Banco do Brasil is
not responsible for bringing up to date any estimate in this presentation.
2
Section 1
Transaction Description
3
Transaction Highlights
Structure
Acquisition of a stake at Banco Votorantim, owned by Votorantim Finanças S.A., and partial capital
increase equivalent to 50% of the total capital and 49.99% of the voting capital
Acquisition value of a 50% stake after the transaction: R$ 4.2 billion, paid through:
Price of the
Transaction
⇒ R$ 3.0 billion paid to Votorantim Finanças S.A.
⇒ R$ 1.2 billion paid in Banco Votorantim S.A., through capital increase
Payment
Closing date (after Brazilian Central Bank approval): R$ 3.75 billion
Six months after closing date: R$ 450 million
Precedent
Conditions
Brazilian Central Bank approval
4
Partnership Structuring
1
Shares ON
Banco
do Brasil
2
Votorantim
Finanças
R$
49.99% (ON)
50.01% (ON)
50.01% (PN)
49.99% (PN)
50% Total
Shares
issuance
R$ 1.2 billion
Stake sale
R$ 3.0 billion
50% Total
R$
0
Newly
issued PN
shares
BV Financeira e
BV Leasing
Historical
dividend
distribution
R$ 0.75 billion
R$
VAM
Brokerage House
Other business
50
50 –– 50
50 total
total capital
capital partnership
partnership
Private
sector
retains
voting
Private sector retains voting capital
capital majority
majority
ON: VF with 33,356,791,208 and BB with 33,356,791,198 shares
PN: VF with 7,412,620,267 and BB with 7,412,620,277 shares
5
Partnership Structuring
3
2
Shareholders’
Equity Book
Value of
Banco
Votorantim
(R$ bn)
1
Dividend
Distribution to VF
45% stake acquisition
on Banco Votorantim
for R$ 3.0 billion
Capital increase of R$ 1.2 billion,
reaching a 50% stake in
Banco Votorantim’ total capital
3.00
6.87
6.42
(0.75)
5.67
5.67
1.20
50%
45%
50%
55%
Initial status
Stake in BV
(%)
Dividend
distribution of BV
to VF
Post Dividend
distribution
Post stake
acquisition
(secondary)
Capital increase
from BB at BV
Final status after
capital increase
100.0%
55.0%
50.0%
0.0%
45.0%
50.0%
6
Corporate Structure
Votorantim
Finanças S.A.
Banco do Brasil S.A.
49.99% (ON)
50.01% (ON)
50.01% (PN)
49.99% (PN)
50% Total
50% Total
100%
BV Empreendimentos
e Participações Ltda.
BV Trading S.A.
100%
CP Promotora
de Vendas
Ltda.
100%
100%
BV
BV
Sistemas Ltda. Financeira S.A.
100%
BV Leasing
Arrendamento
Mercantil S.A.
100%
100%
100%
Votorantim
CTVM Ltda.
Votorantim
Asset
Management
DTVM Ltda.
Agência
Banco
Votorantim
Nassau
100%
Banco
Votorantim
Securities Inc.
100%
Votorantim
Bank Limited
100%
BV Corretora
de Seguros
7
Future Corporate Governance of Banco Votorantim
Board with 2 year mandate and Chairman rotation annually
Chairman of the Board
Antonio Francisco de Lima Neto
Vice-Chairman of the Board
José Ermírio de Moraes Neto
Equal Number of Seats on the Board of Directors
•
3 members indicated by Votorantim Finanças
• 3 members indicated by Banco do Brasil
CEO
Wilson Masao Kuzuhara
Existent Management Team
•
Current Management Philosophy remains
Current
Current business
business model
model and
and management
management team
team of
of Banco
Banco Votorantim
Votorantim will
will
remain
remain
8
Section 2
Strategical Alignment
9
Strategic Growth
Scenario
Banco do Brasil’s Initiatives
Consolidation of the Brazilian Banking Industry
Number of Banks 1,2
Merger/acquisition of state-owned banks
% of total deposits owned by
the 5 largest banks 2
240
75%
153
1995
Dec-08
59%
1995
Sep-08
Jun-08
International Financial Crisis: lack of liquidity,
change of requirement regulation, and acceleration
of consolidation process of the Brazilian Banking
Sector
Credit Evolution in Brazil - R$ billion
1,046.6
209.3
1995
CAGR
CAGR
8.9%
24.8% 3
379.5
2002
Financial
partnership +
economic
growth
Footprint in mortgage and vehicle financing
Purchase of loan portfolios
Assessment of potential acquisitions of stakes
in financial institutions
Expansion to international markets
379.5
2002
Alternative product distribution through
complimentary channels
Sep-08
Source: Brazilian Central Bank (Banco Central do Brasil)
1 Includes only multiple and commercial banks authorized to operate by the Central Bank
2 Pro-forma for the merger of Itaú/Unibanco, Santander/Real, BB/BESC, BB/BEP and BB/Nossa Caixa
3 Loan operations CAGR considering the annualized data from January through September 2008
Strength positioning in capital markets
10
Banco Votorantim
Main Figures
Clients and Distribution
Performance – Sep/08
17
7th
largest bank in
Brazil in Total Assets
R$ 81.9 billion
Assets Under
Management
R$ 18.8 billion
Loan
Portfolio
4th position1
Vehicle
Financing
12.0%
R$ 38.2 billion
Net Income LTM
R$ 1.15 billion
Efficiency Ratio
(average 05-07)
25%
1 September/2008 ranking, considering Itaú and Unibanco merger
Source: Austin Asis, Brazilian Central Bank and banks financial statements
Branches
8 in SP, 8 in other states: GO (1),
MG (1), PR (1), RJ (2) , RS (2) and
SC (1), abroad (Nassau)
3
Million clients attended by
BV Financeira
6.800 Employees
Alternative Distribution:
BV Financeira: 61 branches, 82 credit
stores
Outsourcing Network: 29 thousand of
partners
Diversified Portfolio:
corporate market, capital markets,
treasury, international businesses, asset
management, consumer finance and
brokerage
11
Banco Votorantim Assets Evolution
Brazilian largest financial institutions (ranked by total assets – R$bn)
1994
1. BANCO DO BRASIL
2 CAIXA
3. BANESPA
4. BRADESCO
5. BAMERINDUS)
6. NACIONAL
7. UNIBANCO
8. REAL
9. SAFRA
10. ECONOMICO
11. NOSSA CAIXA
12. BANRISUL
13. BNB
14. LLOYDS TSB BANK
15. SANTANDER NOROESTE
16. APLICAP (LIQ EXT)
17. ITAU HOLDING FIN
18. SANTANDER (BOZANO)
19. MULTIPLIC
20. BANERJ EX JUD)
21. CITIBANK, N.A.
22. BBM
23. BANORTE
24. SANTANDER BANESPA
25. ABN - AMRO BANK
26. BANKBOSTON, N.A.
27. IBM
28. ITAMARATI
29. UBS PACTUAL
30. BMB
1998
1. BANCO DO BRASIL
2. CAIXA
3. BRADESCO
4. ITAÚ
5. UNIBANCO
6. BANESPA
7. REAL
8. SAFRA
9. HSBC BANK BRASIL
10. NOSSA CAIXA
11. SANTANDER BANESPA
12. SANTANDER BRASIL
13. ABN - AMRO BANK
14. SANTANDER NOROESTE
15. SANTANDER (BOZANO)
16. BNB
17.VOTORANTIM 4.8 bn
18. ITAU HOLDING FIN
19. BICBANCO
20. BANKBOSTON, N.A.
21. BARCLAYS
22. JP MORGAN (CHASE)
23. ALFA
24. BBM
25. LLOYDS TSB BANK
26. BESC
27. RURAL
28. UBS PACTUAL
29. BMB
30. ICATU
2002
1. BANCO DO BRASIL
2. BRADESCO
3. CAIXA
4. ITAU HOLDING FIN
5. UNIBANCO
6. SANTANDER BRASIL
7. ABN - AMRO BANK
8. BANESPA
9. NOSSA CAIXA
10. CITIBANK
11. SAFRA
12. HSBC BANK BRASIL
13. VOTORANTIM 19bn
14. BANRISUL
15. BNB
16. SANTANDER (BOZANO)
17. JP MORGAN (CHASE)
18. BANKBOSTON, N.A.
19. LLOYDS TSB BANK
20. SANTOS (LIQ)
21. BNP PARIBAS
22. RURAL
23. ALFA
24. BASA
25. UBS PACTUAL
26. BMB
27. WESTLB
28. FIBRA
29. ABC BRASIL
30. VOLKSWAGEN
Today11
2007
1.
2.
3.
4.
5.
6.
7.
BANCO DO BRASIL
BRADESCO
ITAU HOLDING FIN
SANTANDER + ABN
CAIXA
UNIBANCO
HSBC BANK BRASIL
8.VOTORANTIM 64bn
9. SAFRA
10. NOSSA CAIXA
11. CITIBANK
12. UBS PACTUAL
13. BANRISUL
14. BBM
15. BNP PARIBAS
16. DEUTSCHE BANK
17. BNB
18. FIBRA
19. BICBANCO
20. JP MORGAN
21. BMB
22. BANESTES
23. PANAMERICANO
24. VOLKSWAGEN
25. BMG
26. DAYCOVAL
27. ING
28. BASA
29. GMAC
30. BANCO IBI
1.
2.
3.
4.
5.
6.
ITAÚ + UNIBANCO
BANCO DO BRASIL + NC
BRADESCO
SANTANDER + ABN
CAIXA
HSBC BANK BRASIL
7.VOTORANTIM 82 bn
8. SAFRA
9. CITIBANK
10. BANRISUL
11. BNP PARIBAS
12. UBS PACTUAL
13. FIBRA
14. BNB
15. ALFA
16. BBM
17. DEUTSCHE BANK
18. JP MORGAN
19. BICBANCO
20. VOLKSWAGEN
21. BANESTES
22. PANAMERICANO
23. SICREDI
24. BMB
25. DAYCOVAL
26. BMG
27. GMAC
28. BASA
29. ABC BRASIL
30. BESC
34.VOTORANTIM 0.8 bn
Source: Austin Asis
1 Data from sep/08: considering the merger of Itaú-Unibanco and the acquisition of Nossa Caixa by BB (pro-forma)
12
The transaction complements
Banco do Brasil’s growth strategy
+
R$ billion
Banco do Brasil
Total Assets
Loan Portfolio
1
Banco Votorantim
BB + Votorantim (50%)
Growth
512.4
81.9
553.3
8%
213.7
38.2
232.8
9%
Individuals
51.5
21.7
62.6
21%
Corporations
88.1
16.5
96.4
9%
264.0
23.4
275.7
4%
6.5
0.8
6.8
6%
13.5%
13.6%
12.5%
100 bps
Total Deposits
Net Income (nine months)
BIS Ratio
2
Figures relative to September 30th, 2008.
1
Considers BB + Nossa Caixa + BESC + Bescri.
2
BIS Ratio estimated for dec/08 considering change in the impacts of tax credits and the acquisition of Nossa Caixa.
13
Section 3
Transaction Rationale
14
Strategic reasons behind the partnership
Grow faster under an intense consolidation
process of the Brazilian Banking Sector
Leverage asset generation of low cost, stable
and secure funding sources
Consolidate and grow in the vehicle financing
market
High quality asset generation
Diversified product portfolio for the corporate
market
Expertise and size in vehicle financing, with
more than 3 million serviced clients
BV Financeira: 4th largest in vehicle financing
Develop and explore off-branch distribution
channels
Strength positioning in capital markets, including
retail segment
Distribution through sales representatives with
more than 29 thousand points of sale
Votorantim Corretora (Top 18 at BM&F and Top
35 at Bovespa), with strong potential of leverage
on BB client base
15
Strategic reasons behind the partnership
Banco do Brasil is the only retail bank that does not have a consumer finance arm
Rationale of BV Financeira to Banco do Brasil
Consumer
Finance Arm
Controller
Consumer Finance Portfolio Breakdown of Major
Banks
Retail Funding
Funding Generation + Assets
Instituição
Crédito PF % Crédito
(R$ bi)
Total
Veículos 1
(R$ bi)
% Crédito
PF
51.5
24.1%
5.6
10.9%
21.7
56.8%
16.8
77.6%
+
73.2
29.1%
22.4
30.6%
+
95.2
39.9%
47.1
50.9%
63.7
39.7%
31.2
49.0%
57.3
43.9%
23.7
41.4%
Source: Quarterly company information, Central Bank
1
Considers CDC Auto and Leasing
The strategic partnership will foster BB’s vehicle financing growth off-branches, what today represents
R$ 1.9 billion, 34% of vehicle loan portfolio
16
Strategic reasons behind the partnership
Banco do Brasil is the only retail bank that does not have a brokerage house
Macroeconomic Environment
Benefits for Banco do Brasil
Consistent growth of the average daily
trading volume negotiated at Bovespa in the
last years
Increasing number of individuals in the stock
exchange
Brokerage House
Increasing participation of foreign investors
searching for higher return
1
2
Potential
Potential value
value creation
creation through
through
Banco
do
Brasil
client
Banco do Brasil client base
base
Votorantim
Votorantim CTVM
CTVM counting
counting with
with efficient
efficient operational
operational
structure
to
leverage
its
business
through
structure to leverage its business through
Banco
Banco do
do Brasil
Brasil strong
strong franchise
franchise
The combination of brokerage services with the large individuals and institutional
investors base of Banco do Brasil will create several opportunities for the partnership
17
Banco do Brasil and Banco Votorantim Combination
Vehicle Financing
4th
place in ranking
1st
(16%)
Market Share (%)
Corporate and Large
Corporate Credit
Payroll Loans
place in ranking
(22%)
Market Share (%)
12%
2nd
place in ranking
(21%)
Market Share (%)
19%
14%
7%
4%
3%
1
2
1
2
1
2
Source: Central Bank; Austin Asis; banks financial statements; press
Note: Considering the merger of Itaú + Unibanco (pro-forma), sep/08 data for vehicle financing, jun/08 data for payroll deductible loans and dec/07 data for Corporate/Large loans
18
Section 4
Benefits of the Transaction
19
BB-BV Partnership Fit into
Nossa Caixa acquisition
Credit and Funding Fit
Diversified
Diversified Individuals
Individuals Product
Product Portfolio
Portfolio
Low
Low Cost
Cost Funding
Funding
Huge
Huge Client
Client Base
Base
(Individuals
and
(Individuals and Corporate)
Corporate)
Low
Low Leverage
Leverage
Resources
Resources Availability
Availability
Low
Low Cost
Cost Funding
Funding
State
State of
of SP
SP Payroll
Payroll
National
National Presence
Presence
High
High Quality
Quality Asset
Asset Generation
Generation
Diversified
Diversified Corporate
Corporate Product
Product Portfolio
Portfolio
Outsourced
Outsourced Distribution
Distribution
Brokerage
Brokerage House
House
20
Operational and strategic fit between both companies
will also benefit Nossa Caixa recent acquisition
Individuals Loans / Low cost deposits (x)
Consumer Credit 1 / Individual Loans
0.89x
150.5x
0.66x
0.48x
0.33x
0.28x
1
2
3
1
2
3
Fit between operations will foster profitability
♦ 56% of Banco do Brasil deposits and 89% of Nossa Caixa deposits are considered low cost funding
♦ Low cost funding: Demand deposits, savings deposits and judicial deposits
Note: Figures relative to September 30th, 2008.
1
Do not considers payroll deductible loans
21
Evolution of vehicle financing in the last 12 months
Although there was a small spike in delinquency rates, recent evolution of vehicle financing
demonstrates spread increases and average maturity reductions
1
Final Balance (R$ bn)
Spread (p.p.)
23
20
17
1
22.2
18.6
18.7
18.8
17.2
16.5
18.4
18.4
16.4 16.4
18.8
16.3
112
114
117
120
123
126
129
133
135
138
138
137
14
8
8
8
8
8
7
8
8
8
8
8
08
y/0
t/0
r/0
r-0
c-0
v-0
n-0 Jul-0
g/0 Sep/
n-0
b-0
Ma
Ju
Ap
Oc
Ja
Ma
De
No
Au
Fe
1 Estimated data for Spt/08, Oct/08 and Nov/08
Average Maturity (days)
1 Estimated data for Spt/08, Oct/08 and Nov/08
1
1
Delinquency (%)
600
595
590
585
594
590
594
595
593
592
592
591
586
587
580
575
583
573
570
565
7
8
8
8
8
r/0
r-0
c-0
n-0
b-0
Ap
Ja
Ma
Fe
De
8
8
7
8
8
8
8
8
8
8
08
/08
t/0 ov-0
r/0
r-0
c-0
n-0 Jul-0 ug/0 Sep/
n-0
ay
b-0
p
a
e
a
e
M
A
Oc
Ju
J
F
D
M
A
N
8
8
i/0
n-0
Ma
Ju
1 Estimated
1 Estimated
datadata
for for
Spt/08,
Spt/08,
Oct/08
Oct/08
andand
Nov/08
Nov/08
8
8
8
8
08
p/0
l-0
t/0
v-0
ug
Ju
Se
Oc
Ag
No
5.0%
5.0%
4.0%
4.0%
3.0%
3.0%
2.0%
2.0%
1.0%
1.0%
0.0%
0.0%
Nov-06
Nov-06
Market
May-07
May-07
Nov-07
Nov-07
May-08
May-08
Nov-08
Nov-08
1 Estimated data for Spt/08, Oct/08 and Nov/08
22
Banco do Brasil and Banco Votorantim have conditions
to make the transaction accretive
LTM 3Q2008
In R$ millions
except otherwise
mentioned
Net Income LTM08
Banco do
Brasil
1
Banco
Votorantim
Opportunity Cost
of Cash in the
Transaction
3
7,075
578
(495)
2
Banco do
Brasil + Banco
Votorantim
7,158
# Shares (million)
2,565
2,565
Earnings per Share (R$)
2.76
2.79
Immediate value creation of 1.2% in Earnings per Share, without considering potential synergies
1
2
3
Last twelve months net income ended on September 30, 2008
Opportunity cost based on current Selic interest rate (13.75%) over the transaction value (R$ 3,600 million) and excluding taxes. Considering cash payment. Value of R$3,600 million = R$3,000
million (stake acquisition) + 50% x R$1,200 million (capital increase)
Considering Banco do Brasil stake only
23
A stronger and more competitive Banco do Brasil
+
Improve capacity of assets origination in the competitive consumer finance industry;
Access to well developed alternative distribution channels - auto dealers, partners
and BV Financeira stores;
Successful sales promotion model with nationwide presence in the vehicle financing
industry;
Strength positioning of BB in capital markets;
Higher diversification in the corporate product portfolio
24
Section 5
Indicative Timetable
25
Next steps – indicative timetable
Material Fact
informing the
acquisition of a
stake at Banco
Votorantim
Transaction
approval by the
Central Bank
D
D+15
Signing of the
Sales and
Purchase
Agreement and
Underwriting
Agreement
Filling of
regulatory
documentation
with Central Bank
D1
Apr-09
Transaction closing
and financial
settlement
Assuming shortest possible timeframe
26
Transaction advisors
Financial Advisor
Due Diligence
Legal Advisor
FRANÇ
FRANÇA E NUNES PEREIRA
ADVOGADOS
Fairness Opinion
Financial Advisor
Due Diligence
27
Investor Relations
SBS Qd.01 – Ed.Sede III, 5º andar
CEP - 70.073-901
Brasília – DF
Phone: (61) 3310.3990
Fax: (61) 3310-3735
bb.com.br
[email protected]
For further details, please access www.bb.com.br/ri
28