7.6.3 Cards Collections Administrative Expenses Personnel Expenses Other Administrative Expenses...

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This report contains expectations, planned synergies, growth estimates, results forecasts and future strategies references and statements related to Banco do Brasil, its subsidiaries, associated companies and affiliates. Although these references and statements reflect management believes they involve imprecision and hard risks to predict, leaving room for results or consequences different from those anticipated and discussed here. These expectations highly depend on market conditions, on Brazil’s economic performance, and on banking and international markets deevelopments. Banco do Brasil will not be held responsible for updating any estimate contained in this report.

This report tables and charts present rounded off financial figures in R$ million. The rounding used complies with Regulation 886/66 of Fundação IBGE: if the last digit is equal to or higher than 5, the last remained digit is increased by one unit; if the last digit is lower than 5, it is discarded and the digit before it is maintained. Variations, both nominal and in percentage, were calculated using numbers in units.

Banco do Brasil informs that studies for a eventual public offering were started. Before investing in Banco do Brasil’s stocks, read carefully the Prospect, specially the “Risk Factors” section.

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Summary

Index of Tables... 5

Index of Figures ... 9

Introduction...11

Summary of Results ...12

Assumptions used in 2010 Guidance Prediction ...25

1 – Economic Environment ...26

2 – BB Securities...33

2.1 Shares ...33

2.2 Warrants...36

2.3 Performance of the Shares...37

3 – Corporate Governance...41

4 – Other Information...43

5 – Summarized Financial Statements ...45

5.1 Summarized Balance Sheet ...45

5.2 Summarized Corporate Law Income Statement ...47

5.3 Income Statement with Reallocations ...48

5.3.1 Details of the Reallocations ...49

6 - Balance Sheet Analysis ...54

6.1 Breakdown ...54

6.2 Analysis of Assets ...55

6.3 Securities Portfolio ...56

6.4 Tax Credits...57

6.5 Loan Portfolio ...58

6.5.1 Individual Loan Portfolio ...60

6.5.2 Business Loan Portfolio ...62

6.5.3 Agribusiness Loan Portfolio ...65

6.6 Analysis of Liabilities ...75

6.7 Liquidity Analysis ...77

6.8 Deposits and Money Market Funding ...78

6.8.1 Foreign Borrowing ...79

7 – Analysis of Results ...80

7.1 Net Interest Income...80

7.2 Analysis of Investments ...83

7.3 Analysis of Funding...86

7.4 Analysis of Volume and Spread...88

7.5 Provision for Credit Risk ...90

7.5.1 Retail Loan Portfolio ...95

7.5.2 SMEs Loan Portfolio ...99

7.5.3 Commercial Loan Portfolio...100

7.5.4 Agribusiness Loan Portfolio ...101

7.5.5 Foreign Trade Loan Portfolio ...105

7.5.6 Foreign Loan Portfolio and Others ...106

7.6 Fee Income...107

7.6.1 Revenues from Account Fees ...108

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7.6.3 Cards ...111

7.6.4 Collections ...113

7.7 Administrative Expenses ...114

7.7.1 Personnel Expenses ...115

7.7.2 Other Administrative Expenses ...116

7.7.3 Distribution Network...117

7.7.4 Automated Channels ...120

7.7.5 Productivity – Coverage Ratios...122

7.8 Operating Income ...125

7.9 Net Value Added ...127

8 – Risk Management...128 8.1 Risk Management ...128 8.1.1 Market Risks...128 8.1.2 Liquidity Risk ...137 8.1.3 Credit Risk...139 8.1.4 Operating Risk ...143 8.2 Capital Structure...145 8.2.1 Shareholders’ Equity ...145 8.2.2 Regulatory Capital ...146 8.2.3 Economic Capital ...152

9 – Social and Environmental Performance ...154

9.1 Employee Relations...155

9.2 Eco-efficiency ...159

9.3 Social Environmental focused Business...162

9.4 Investor Market Recognition ...166

10 – Strategic Investments ...167

10.1 Information...167

10.2 Insurance, Pension Plans and Capitalization ...168

10.3 Acquisition, Incorporations and Strategic Partnership ...172

10.3.1 Transactions in the Period ...172

10.3.2 Businesses in Progress - Security...180

11.1 Summarized Balance Sheet ...182

11.2 Summarized Corporate Law Income Statement ...184

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5 - Banco do Brasil – MDA 4Q09

Index of Tables

Table 1. 2009 Guidance (BB Stand-alone) ... 14

Table 2. Main Balance Sheet Items ... 14

Table 3. Main Balance Sheet Items (Banco do Brasil stand-alone)... 15

Table 4. Loan Portfolio (Conglomerate) ... 15

Table 5. Loan Portfolio – Organic Growth (Banco do Brasil stand-alone) ... 16

Table 6. Income Statement with reallocations ... 16

Table 7. Main Indicators of Income/Expenses ... 17

Table 8. Statement of Operations with reallocations (Banco do Brasil stand-alone) ... 17

Table 9. Main Indicators of Income/Expenses (Banco do Brasil stand-alone)... 17

Table 10. Net Interest Income by business line ... 18

Table 11. Annualized spread... 19

Table 12. Loan Portfolio Quality Indicators (BB+BV+BNC) ... 20

Table 13. Allowance for loan losses ... 21

Table 14. Expenses with Allowance for Loan Losses over Portfolio... 21

Table 15. Administrative expenses ... 22

Table 16. Fee income... 22

Table 17. Extraordinary Items ... 24

Table 18. Guidance 2010 ... 25

Table 19. Main Macroeconomic Ratios ... 32

Table 20. Shareholding Breakdown ... 33

Table 21. Distribution of Dividends/Interest on Own Capital... 34

Table 22. Free Float by Range of Shares Owned... 34

Table 23. Breakdown of the Series “C” Warrant Holders... 36

Table 24. Series “C” Warrants... 36

Table 25. Expected Dilution of Capital ... 36

Table 26. Other Information ... 43

Table 27. Summarized Balance Sheet – Assets ... 45

Table 28. Summarized Balance Sheet - Liabilities... 46

Table 29. Summarized Corporate Law Income Statement ... 47

Table 30. Income Statement with Reallocations ... 48

Table 31. Reallocations – Other Operating Income / Expenses ... 50

Table 32. Fiscal Effects and Statutory Profit Sharing on Extraordinary Items ... 53

Table 33. Breakdown of Assets... 55

Table 34. Securities Portfolio by Category ... 56

Table 35. Securities Portfolio by Maturity - Market Value ... 56

Table 36. Breakdown of Tax Credit ... 57

Table 37. Acquired Portfolios and Interbank Deposits with Credit Guarantee... 58

Table 38. Loan Portfolio ... 59

Table 39. Credit Portfolio – Organic Growth ... 59

Table 40. Individual Loan Portfolio ... 61

Table 41. Business Loan Portfolio... 62

Table 42. Private Securities – Businesses ... 63

Table 43. ACC/ACE Average Volume per Contract ... 63

Table 44. SME Credit Products... 64

Table 45. Exports ... 66

Table 46. Brazil’s participation on Global Agribusiness ... 66

Table 47. Agribusiness Loan Portfolio by Region ... 67

Table 48. Agribusiness Loan Portfolio by Purpose ... 68

Table 49. Agribusiness Loan Portfolio by Product ... 68

Table 50. Agribusiness Loan Portfolio by Financed Items ... 69

Table 51. Funds Released for the 09/10 Crop by Customer Size ... 69

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Table 53. Equalizationable Resources from the Loan Portfolio ... 71

Table 54. 2009/2010 Crop Plan ... 73

Table 55. Costs – Transaction Profile ... 73

Table 56. Liabilities... 75

Table 57. Sourcers and Uses ... 76

Table 58. Liquidity Balance ... 77

Table 59. Deposits and Money Market Funding ... 78

Table 60. Foreign Borrowing (without BNC)... 79

Table 61. Foreign Issues ... 79

Table 62. Net Interest Income ... 80

Table 63. Analysis of Volume (Earning Assets) and Quarterly Spread – 3Q09 and 4Q09... 81

Table 64. Analysis of Volume (Earning Assets) and Nine Months Spread – 2008 and 2009... 81

Table 65. Margin, Net of Interest and Profit Margin ... 82

Table 66. Revenues from Loans Net of Exchange Impact (Res. 2,770)... 83

Table 67. Securities Income... 84

Table 68. Avg Balance of the BS accounts and info. on interest rates - Earning assets (quarterly) ... 85

Table 69. Avg Balance of the BS accounts and info. on interest rates - Earning assets (annual)... 85

Table 70. Avg Balances of the BS accounts and info. on int rates – Int.Bearing Liabilities (quarterly) ... 86

Table 71. Avg Balances of the BS accounts and info. on int rates – Int.Bearing Liabilities (annual) ... 87

Table 72. Int. increase and decrease (Inc. and Exp.) due to changes in Volume and Rates (quarterly) 88 Table 73. Int. increase and decrease (Inc. and Exp.) due to changes in Volume and Rates (annual).... 89

Table 74. Net Financial Margin ... 90

Table 75. Allowance for Loan Losses Expenses over Portfolio ... 90

Table 76. Loan Portfolio by Level of Risk... 92

Table 77. Delinquency Ratio ... 93

Table 78. Average Portfolio Risk ... 94

Table 79. Retail Loan Portfolio by Level Risk... 95

Table 80. Changes in the Allowance – Retail ... 96

Table 81. Small and Micro Enterprise Loan Portfolio ... 99

Table 82. Changes in the Allowance – SMEs ... 99

Table 83. Commercial Loan Portfolio by Level Risk ... 100

Table 84. Changes in the Allowance – Commercial ... 100

Table 85. Portfolio with and without Roll Over – Agribusiness... 101

Table 86. Changes in the Allowance – Agribusiness ... 101

Table 87. Portfolio with and without Roll Over - Agribusiness ... 102

Table 88. Rates of the Agribusiness Portfolio ... 103

Table 89. Foreign Trade Loan Porfolio by Level Risk ... 105

Table 90. Changes in Allowance – Foreign Trade ... 105

Table 91. Foreign Loan Portfolio by Level Risk ... 106

Table 92. Other Transactions Portfolio – Banco Nossa Caixa and Banco Votorantim (50%) ... 106

Table 93. Fee Income... 107

Table 94. Investment Funds and Managed Portfolios by Customer ... 109

Table 95. Investment Funds and Managed Portfolios by Type... 110

Table 96. Total Cards Revenues... 112

Table 97. Commercial Income ... 114

Table 98. Personnel Expenses ... 115

Table 99. Other Administrative Expenses ... 116

Table 100. Distribution Network ... 117

Table 101. Wholesale Pillar Branches ... 118

Table 102. Distribution Network Abroad... 119

Table 103. Coverage Ratios – without extraordinary items ... 122

Table 104. Cost Income Ratio – without extraordinary items... 123

Table 105. Operating Income... 125

Table 106. Accumulated Amortization... 126

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Table 108. Net Value Added ... 127

Table 109. Balance in Foreign Currency... 130

Table 110. Consolidated BB VaR... 132

Table 111. Foreign Network's VaR ... 133

Table 112. International Trading Porfolio’s VaR ... 134

Table 113. Domestic Trading Porfolio’s VaR ... 135

Table 114. Sensitivity to Interest Rate – 12/31/2009 ... 136

Table 115. Concentration of the Loan Portfolio on the 100 Largest Borrowers ... 141

Table 116. Concentration of the Loan Portfolio of the 100 Largest Borrowers % in relation to RE ... 141

Table 117. Concentration of the Loan Portfolio by Macro-sector... 142

Table 118. Monitoring of Operational Loss ... 144

Table 119. Shareholders’ Equity ... 145

Table 120. BIS Ratio – Financial Conglomerate ... 148

Table 121. Main accounts of the PEPR share (Economic Financial Conglomerate)... 148

Table 122. PRE for Market Risk by Risk Factor... 149

Table 123. Allocated capital for operational risk by line of business... 149

Table 124. Changes in Composition of BIS Ratio ... 150

Table 125. Fixed Asset Ratio ... 151

Table 126. Economic Capital ... 152

Table 127. Distribution of Economic Capital in the Loan Portfolio ... 152

Table 128. VaR by Risk Factor ... 153

Table 129. Distribution of Economic Capital in the Loan Portfolio ... 153

Table 130. Growth in the number of scholarships granted ... 156

Table 131. Employee Training – Annual Flow ... 157

Table 132. Quarterly Average Expense per Employee (Statement with Reallocations)... 157

Table 133. Expenses with Statutory Porfit Sharing ... 157

Table 134. Employee Turnover ... 158

Table 135. Use of Water... 159

Table 136. Use of Paper... 160

Table 137. Sustainable Regional Development (DRS) ... 162

Table 138. Microcredit operations ... 163

Table 139. Credit with RSA - Other Programs ... 164

Table 140. Investment funds with RSA criteria ... 164

Table 141. Complaints registered in the Central Bank... 165

Table 142. Interest in the capital of companies... 167

Table 143. Insurance, Pension Plans and Capitalization... 168

Table 144. Income Statement by Line of Business ... 168

Table 145. Securities Operating Highlights ... 170

Table 146. Securities Operating Highlights ... 171

Table 147. Banco Votorantim – Highlights of the Result... 173

Table 148. Banco Votorantim – Realocations - (Market to Market - MKT) ... 174

Table 149. Banco Votorantim – Realocations - (Market to Market - MKT) ... 174

Table 150. Banco Votorantim – Reallocations (Currency Variation)... 174

Table 151. Banco Votorantim – Reallocations (Bank Credit Bills) ... 175

Table 152. Banco Votorantim – Equity Highlights ... 176

Table 153. Banco Votorantim – Loan Portfolio by Level of Risk ... 176

Table 154. Banco Votorantim – Delinquency Ratios... 177

Table 155. Banco Votorantim – Vehicle Portfolio... 177

Table 156. Banco Votorantim – Operational and Structural Highlights... 177

Table 157. Banco Nossa Caixa – Income Statement Highlights ... 178

Table 158. Banco Nossa Caixa – Loan Portfolio ... 179

Table 159. Banco Nossa Caixa – Operating Highlights ... 179

Table 160. Insurance, Pension and Capitalization Companies ... 180

Table 161. Partnership Revision – Principal Financial Group... 181

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Table 163. Balance Sheet – Assets ... 182

Table 164. Balance Sheet – Liabilities ... 183

Table 165. Summarized Corporate Law Income Statement ... 184

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Index of Figures

Figure 1. Earnings (R$ million) and ROE (%) ... 12

Figure 2. Earnings per Share (R$) ... 12

Figure 3. Dividends and Interest on Own Capital (R$ million) ... 13

Figure 4. Delinquency 15 and 90 days - BB Stand Alone ... 19

Figure 5. Delinquency 15 and 90 days – Individuals Porfolio (loan as reference for interest rate)... 20

Figure 6. BIS Ratio ... 23

Figure 7. International Reserves (US$ billion) ... 26

Figure 8. Sovereign Risk (EMBI) x Foreign Exchange Rate (R$/US$) ... 27

Figure 9. Trade Balance, Exports and Imports (US$ billion)... 27

Figure 10. Industrial production, growth rate (movable average - 3 months) ... 28

Figure 11. Businessmen's Confidence Index ... 28

Figure 12. Unemployment Rate (% of the Economically Active Population) ... 29

Figure 13. IPCA (yearly variation) X Inflation Targets (%) ... 29

Figure 14. Basic Interest Rate x Real Interest (% per annum)... 30

Figure 15. Total Credit Volume of the Brazilian Economy (% of GDP) ... 30

Figure 16. Credit Evolution by Type of Financial Institution ... 31

Figure 17. Free Float Breakdown... 34

Figure 18. Share of Equity Held by Foreign Investors ... 35

Figure 19. BB Shares vs. Ibovespa... 37

Figure 20. BBAS3 in Ibovespa ... 38

Figure 21. Average financial volume – BBAS3 ... 38

Figure 22. Average amount traded – BBAS3 ... 39

Figure 23. Market Ratios ... 40

Figure 24. Decision Structure ... 42

Figure 25. Earning Assets vs. Interest Bearing Liabilities ... 54

Figure 26. Breakdown of Assets ... 55

Figure 27. Agribusiness Participation in GDP and in Labor Market... 65

Figure 28. Trade Balance (FOB) ... 65

Figure 29. Production vs. Planted Area... 66

Figure 30. Agribusiness Loan Portfolio by Customer... 70

Figure 31. Agribusiness Loan Portfolio by Funding Sources ... 70

Figure 32. Equalization Revenues and Weighting Factors ... 71

Figure 33. Agricultural Insurance and Proagro ... 72

Figure 34. Evolution of contracted operations with mitigation... 72

Figure 35. Price/cost relation between soybean and corn ... 74

Figure 36. Liquidity Balance ... 77

Figure 37. Market Share of BB Funding... 78

Figure 38. NIM Analysis ... 82

Figure 39. NIM by Loan Portfolio... 83

Figure 40. Securities Portfolio by Index (Multiple Bank) ... 84

Figure 41. Allowances Breakdown ... 91

Figure 42. Past due Loans + 15 and 90 days ... 93

Figure 43. Allowance/Past Due Loans +90 days – BB x BI (%)... 94

Figure 44. Quarterly Vintage ... 97

Figure 45. Annual Vintage ... 97

Figure 46. Annual vintage - Vehicle Financing Portfolio - Arena I ... 98

Figure 47. Annual vintage - Vehicle Financing Portfolio - Arena II ... 98

Figure 48. Stratified Agribusiness Portfolio ... 104

Figure 49. Checking Account Base ... 108

Figure 50. Asset Management ... 109

Figure 51. Credit and Debit Cards... 111

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Figure 53. BB Billings Volume... 113

Figure 54. Business vs. Expenses ... 114

Figure 55. Changes in Workforce... 115

Figure 56. Total Distribution Network ... 117

Figure 57. Automated Teller Machines ... 120

Figure 58. Costumer Access Options - % ... 121

Figure 59. Coverage Ratios – without Extraordinary Items... 122

Figure 60. Cost Income Ratio – without Extraordinary Items... 123

Figure 61. Other Productivity Ratios ... 124

Figure 62. Changes in Foreign Exchange Exposure ... 130

Figure 63. Composition of Banco do Brasil's assets and liabilities in the country ... 131

Figure 64. Net Position ... 131

Figure 65. Financial Consolidated BB VaR ... 132

Figure 66. Consolidated Foreign Network's VaR ... 133

Figure 67. VaR for the International Trading Portfolio... 134

Figure 68. VaR for the Domestic Trading Portfolio ... 135

Figure 69. Liquidity Reserve - Domestic Treasury ... 137

Figure 70. DRL Indicator ... 138

Figure 71. Liquidity Reserve - International Treasury ... 138

Figure 72. Measuring and management instruments... 139

Figure 73. BIS Ratio – Economic Financial Conglomerate ... 149

Figure 74. Employees Age ... 155

Figure 75. Aged Bracked... 155

Figure 76. Level of Education... 156

Figure 77. Transactions without use of paper ... 160

Figure 78. Toner consumption – in units ... 161

Figure 79. PRONAF Portfolio / Proger Rural (R$ million) ... 163

Figure 80. BBAS3 participation in ISE, ITAG and IGC... 166

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Introduction

The Management Discussion and Analysis (MD&A) report presents the economic/financial situation of Banco do Brasil (BB). Geared toward market analysts, stockholders and investors, with quarterly periodicity, this report addresses topics such as the economic environment, BB's shares performance, corporate governance practices, and risk management. There are separate analyses of the capital structure and the results. Moreover, in conformity with the Triple Bottom Line concept, the report also presents Social-Environmental Performance indicators of Banco do Brasil (Chapter 9), with the purpose of evidencing the generation of value of these initiatives to our shareholders and other stakeholders. The reader will also find eight period historical series tables of the Summarized Balance Sheet, the Summarized Corporate Law Income Statement, the Income Statement with Reallocations, the Analytic Spread, and other information about profitability, productivity, loan quality portfolio, capital structure, capital market, and structural data.

According to the paragraph 55 of CVM Regulation 371/2000, Banco do Brasil decided to adopt, from the year-end 2009 on, in current and consistent basis, to account faster the income and losses related to the Plano de Benefícios I (Plano I of Previ).

Aiming to allow a better comparability of the 4Q09 results with the previous quarters, the Bank decided not to adjust the recurring net income of the period. However, the analysis of the full year 2009 already takes into account this decision.

Considering the strategic transactions relevance announced as of the second half of 2008 (acquisitions, mergers and partnerships), the detailing of the main information related to the companies associated with business in course and to transactions already executed are presented in this report, evidencing the impact of the transactions over the numbers of BB.

In relation to the partnership with Banco Votorantim (BV), as from 3Q09, the accounting information of equity accounts is consolidated in BB's financial statements. On the other hand, income accounts were consolidated as of this quarter. The main figures of BV are presented in a specific chapter. Throughout this report, some indicators and tables evidence the numbers of BB separated from information of BV, aiming to facilitate comparison and analysis.

We also emphasize that, as of 1Q09, all the financial statements and management analyses developed will be based on the "Economic Financial Consolidation" view, which provides for the consolidation of all the companies belonging to the economic group. Heretofore the Performance Analysis report contained the financial companies consolidation only. For comparability, we inform that 2008 results also respect the same vision.

At the end of the report we present the Financial Statements and Explanatory Notes for the quarter under analysis.

ON-LINE ACCESS

The Performance Analysis report can also be read through Banco do Brasil’s Investor Relations website. Further information about the Bank is also available there, such as: Corporate Governance, news, frequently asked questions, a download center which contains versions of this report for the Adobe® Reader® software. General information, Balance Sheet and Income Statement analysis and complete financial statements; the historical series in Excel; presentations to the market; Annual and Social and Environment Responsibility Report; Social Balance Sheet; Results Conference Calls and others are also available on the Website.

LINKS OF INTEREST

Banco do Brasil S.A. bb.com.br

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Summary of Results

Banco do Brasil earns R$ 10.15 billion in 2009

Banco do Brasil reported net income of R$ 10,148 million in 2009. The result corresponds to an annualized return on average equity (ROAE) of 30.7%. Segregating the extraordinary effects, recurring income amounted to R$ 8,506 million, 27.2% above the amount recorded in 2008, and correspondent to a recurring return on average equity of 25.8%. The recurring result for the year was influenced by the amount of R$ 3,030 million, as a result of the actuarial assets and liabilities update of the “Plano de Aposentadoria e Pensão dos Funcionários do Banco do Brasil (Previ)”.

In 4Q09, the Bank's net income reached R$ 4,155 million, which corresponds to an annualized ROAE of 56.8%. On recurring bases, the net income recorded R$ 1,819 million in 4Q09, 3.1% higher than the income of 3Q09 and 11.9% higher than the recurring net income of 4Q08.

Figure 1. Earnings (R$ million) and ROE (%)

Earnings per share of R$ 3.95 in 2009

Net income per share reached R$ 3.95 in 2009, 14.7% higher than that observed in 2008. In the quarterly comparison, earnings per share recorded R$ 1.62, 109.9% higher than earnings per share of 3Q09.

Figure 2. Earnings per Share (R$)

8 ,5 0 6 1 ,8 1 9 6 ,6 8 5 1 ,7 6 4 1 ,7 2 7 1 ,5 2 2 1 ,6 2 6 2 ,0 3 7 1 ,4 6 3 1 0 ,1 4 8 4 ,1 5 5 8 ,8 0 3 1 ,9 7 9 2 ,3 4 8 1 ,6 6 5 2 ,9 4 4 1 ,8 6 7 1 ,6 4 4 25.8 24.7 30.7 32.5 22.5 24.6 33.6 24.5 21.6 23.7 23.1 33.2 26,2 23.8 47.4 30.5 27.9 56.8 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 2008 2009 Recurring Income Net Income Recurring ROE - % ROE - % 8 ,5 0 6 1 ,8 1 9 6 ,6 8 5 1 ,7 6 4 1 ,7 2 7 1 ,5 2 2 1 ,6 2 6 2 ,0 3 7 1 ,4 6 3 1 0 ,1 4 8 4 ,1 5 5 8 ,8 0 3 1 ,9 7 9 2 ,3 4 8 1 ,6 6 5 2 ,9 4 4 1 ,8 6 7 1 ,6 4 4 26.2 8 ,5 0 6 1 ,8 1 9 6 ,6 8 5 1 ,7 6 4 1 ,7 2 7 1 ,5 2 2 1 ,6 2 6 2 ,0 3 7 1 ,4 6 3 1 0 ,1 4 8 4 ,1 5 5 8 ,8 0 3 1 ,9 7 9 2 ,3 4 8 1 ,6 6 5 2 ,9 4 4 1 ,8 6 7 1 ,6 4 4 25.8 24.7 30.7 32.5 22.5 24.6 33.6 24.5 21.6 23.7 23.1 33.2 26,2 23.8 47.4 30.5 27.9 56.8 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 2008 2009 Recurring Income Net Income Recurring ROE - % ROE - % 8 ,5 0 6 1 ,8 1 9 6 ,6 8 5 1 ,7 6 4 1 ,7 2 7 1 ,5 2 2 1 ,6 2 6 2 ,0 3 7 1 ,4 6 3 1 0 ,1 4 8 4 ,1 5 5 8 ,8 0 3 1 ,9 7 9 2 ,3 4 8 1 ,6 6 5 2 ,9 4 4 1 ,8 6 7 1 ,6 4 4 26.2 0.73 1.15 0.65 0.91 0.77 1.62 3.44 3.95 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 2008 2009 0.73 1.15 0.65 0.91 0.77 1.62 3.44 3.95 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 2008 2009

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40% of net income distributed to shareholders

The amount distributed to shareholders totaled R$ 4,059 million in 2009, equivalent to 40% of the net income (payout). Of this total, R$ 1,858 million were distributed as interest on own capital (IOC) and R$ 2,201 million as dividends.

Figure 3. Dividends and Interest on Own Capital (R$ million)

Performance confirms estimates for 2009

The performance of Banco do Brasil (stand alone) in 2009 has confirmed the majority of the estimates disclosed to the market upon the announcement of the result of 4Q08, except the following items:

• Recurring ROAE: in addition to the strong performance of the Net Interest Income, the growth of the Fee Income and the control of the administrative expenses, the recurring ROAE for 2009 has been affected by accounting profit/losses related to the “Plano de Benefícios I” (Plano I of Previ). As explained in the Introduction section of this report, from now on such bookings will be held on a consistent and recurring basis during the upcoming years. These factors were decisive to allow the ROAE to reach a higher performance than the prediction made in the 2009 Guidance.

• Spread: influenced by the changes in the mix of the loan portfolio, with an increase in the relative share of operations with less associated risks, and therefore a lower spread (such as payroll loans and vehicle financing) and by the increase of the share of short-term investments in total assets that, as they have lower spread, they have contributed for lowering the Bank´s global spread.

• Deposits: the non-fulfillment of the guidance of growth of total deposits was motivated by the consolidation of Banco Nossa Caixa that added R$ 39,821 million to BB's deposit base, minimizing the need for funding; and

• Allowance for Loan Losses: Influenced by the deterioration of the macroeconomic panorama, generating a greater need for provisioning.

• Tax rate: the accounting of the actuarial profit and losses related to the Plano I of Previ on a recurring basis generated a positive impact on the taxable income of the Bank and consequently increase on deferred expenses with IRPJ and CSLL (at a higher tax rate than the effective tax rate observed in the Income Statement with Reallocations with the first nine months of 2009), which led the effective tax rate just above the range predicted in the 2009 Guidance.

1,548 1,858 1,184 1,973 1,178 1,662 4,059 406 410 448 456 476 478 483 767 341 218 315 2,201 939 ₇₉₁ 3,521 747 666 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 2008 2009 Interest on Own Capital Dividends

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Table 1. 2009 Guidance (BB Stand-alone) Items Performance - Conglomerate Performance - Proforma BB Stand Alone 2009 Guidance - Proforma BB Stand Alone

Recurring Return on Equity 25.8% 24.5% 19% - 22%

Net Interest Margin 6.7% 6.5% 6.8% - 7.2%

Total Deposits 24.6% 5.4% 10% - 14%

Domestic Loan Portfolio 35.2% 15.7% 13% - 17%

Individuals 88.1% 30.3% 23% - 25%

Businesses 29.0% 16.6% 16% - 19%

Agribusiness 4.3% 3.1% 2% - 5%

Allowance for Loan Losses 4.6% 4.6% 3.8% - 4.2%

Fee Income 14.4% 5.7% 5% - 8%

Administrative Expenses 24.9% 10.0% 9% - 12%

Tax Rate 32.7% 33.5% 30% - 33%

The main highlights of income/expenses and indicators above are discussed below.

BB consolidates leadership: total assets reach R$ 708.5 billion

Banco do Brasil recorded R$ 708,549 million in total assets at the end of 2009, a growth of 3.3% quarter-on-quarter and of 35.9% compared to 2008. These figures already consider consolidation of all the interests in financial and non-financial companies, in addition to mergers (BESC and BEP), the acquisition of equity control in Banco Nossa Caixa (BNC) and the conclusion of the strategic partnership established with Banco Votorantim (BV). In addition to these corporate transactions, the growth of money market borrowings and of deposits, which backed the strong expansion of the loan portfolio in 2009, merits special emphasis.

Table 2. Main Balance Sheet Items

R$ million Dec/08 Sep/09 Dec/09 On Dec/08 On Sep/09

Total Assets 521,273 685,684 708,549 35.9 3.3 Loan Portfolio 224,808 285,517 300,829 33.8 5.4 Securities 86,909 129,818 124,337 43.1 (4.2) Short-term Interbank Operations 119,408 157,541 168,398 41.0 6.9 Deposits 270,841 326,958 337,564 24.6 3.2 Demand Deposits 51,949 50,107 56,459 8.7 12.7 Savings Deposits 54,965 72,233 75,742 37.8 4.9 Interbank Deposits 14,065 9,627 11,619 (17.4) 20.7 Time Deposits 149,618 194,707 193,516 29.3 (0.6) Money Market Borrowing 91,130 153,603 160,821 76.5 4.7 Shareholder’s Equity 29,937 33,661 36,119 20.6 7.3

Chg. %

For purposes of comparison with the 2009 guidance, the following table presents the main balance sheets items of BB on a stand-alone basis, allowing the comparison between the balance at the end of 2009 and that recorded in 2008.

Segregating the effects of consolidation of BNC and BV, the growth of total assets of Banco do Brasil was 5.0% quarter-on-quarter and 14.9% in twelve months. Among the Assets, it is worth mentioning the loan portfolio and short-term interbank investments, which grew 15.6% and 30.1% in 12 months, respectively.

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Table 3. Main Balance Sheet Items (Banco do Brasil stand-alone)

Total Assets 521,273 570,629 598,993 14.9 5.0 Loan Portfolio 224,808 245,712 259,840 15.6 5.8 Securities 86,909 93,189 88,323 1.6 (5.2) Short-term Interbank Operations 119,408 137,881 155,328 30.1 12.7 Deposits 270,841 275,253 285,504 5.4 3.7 Demand Deposits 51,949 45,860 52,230 0.5 13.9 Saving Deposits 54,965 60,358 63,625 15.8 5.4 Interbank Deposits 14,065 7,974 10,748 (23.6) 34.8 Time Deposits 149,618 160,738 158,693 6.1 (1.3) Money Market Borrowing 91,130 124,736 146,963 61.3 17.8 Shareholder’s Equity 29,937 33,661 36,119 20.6 7.3

Chg. %

Loan Portfolio surpasses the R$ 320 billion mark

In an amplified concept, which includes guarantees provided and private securities, Banco do Brasil's loan portfolio ended the last quarter at R$ 320,696 million (already considering the portfolios of BNC and of BV), growth of 6.4% in the quarter and of 35.2% compared to the amplified portfolio of 2008. BB's amplified loan portfolio on a stand-alone basis reached R$ 279,707 million, a growth of 6.9% quarter on quarter and of 17.9% in 12 months.

The classified loan portfolio (in accordance with CMN Resolution 2682) reached R$ 300,829 million, growth of 33.8% in 12 months and of 5.4% in the quarter. The domestic loan portfolio grew 35.2% in the year and 4.7% over 3Q09, surpassing again the industry's growth, which recorded a progression of 14.9% in 2009 and of 4.6% in the quarter.

Table 4. Loan Portfolio (Conglomerate)

Loan Portfolio 224,808 285,517 300,829 33.8 5.4 Brazil 209,693 270,748 283,560 35.2 4.7 Individuals 48,811 85,717 91,791 88.1 7.1 Payroll Loan 17,626 33,973 36,514 107.2 7.5 Auto Loans 6,694 19,255 20,738 209.8 7.7 Businesses 97,192 116,994 125,336 29.0 7.1 SME 34,900 41,159 44,920 28.7 9.1 Other 62,292 75,834 80,416 29.1 6.0 Agribusiness 63,690 68,038 66,434 4.3 (2.4) Abroad 15,115 14,769 17,268 14.2 16.9 Chg. %

At the end of 2009, loans to individual clients amounted to R$ 91,791 million, an increase of 88.1% in the year and of 7.1% quarter-on-quarter. In both comparisons, the payroll loan was the main responsible for this growth of the individual customers portfolio, which since June has surpassed that of agribusiness, contributing to allow the individual portfolio to reach a relative share of 30.5% of the total portfolio at the end of 2009, as opposed to 21.7% at the end of 2008.

The business portfolio, which represents 41.7% of BB's total portfolio, amounted to R$ 125,336 million in December 2009, expansion of 29.0% in twelve months and of 7.1% in the quarter, driven in both comparisons by the growth of working capital operations.

Disregarding the consolidations of Banco Nossa Caixa and of Banco Votorantim, it is worth mentioning the strong growth of the loan portfolio of BB in an organic way. BB's domestic loan portfolio reached a

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balance of R$ 242,572 million, growth of 5.0% in the quarter and of 15.7% in 12 months. Within the same concept, the total portfolio recorded R$ 259,840 million in December 2009, growth of 5.8% in the quarter. The following table allows the understanding of the evolution of stand-alone figures, and the impacts of Banco Votorantim's consolidation and evolution of Banco Nossa Caixa's portfolio.

Table 5. Loan Portfolio – Organic Growth (Banco do Brasil stand-alone)

Banco do Brasil 224,808 245,712 259,840 15.6 5.8 Individuals 48,811 58,747 63,585 30.3 8.2 Businesses 97,192 104,958 113,336 16.6 8.0 Agribusiness 63,690 67,237 65,651 3.1 (2.4) Abroad 15,115 14,769 17,268 14.2 16.9 Nossa Caixa - 19,308 19,766 - 2.4 Individuals - 14,524 15,080 - 3.8 Businesses - 3,984 3,904 - (2.0) Agribusiness - 800 783 - (2.2) Banco Votorantim* - 20,498 21,222 - 3.5 Individuals - 12,446 13,126 - 5.5 Businesses - 8,052 8,096 - 0.5 Total 224,808 285,517 300,829 33.8 5.4 Chg. %

*Amounts equal to 50% of BV Loan Portfolio

Recurring income reflects robustness of the financial margin, growth of banking

service fees and control of expenses

The table below, extracted from the statement of income with reallocations, presents the main highlights of the period. The breakdown of reallocations is in Section 5.3.1 of the Performance Analysis Report. Table 6. Income Statement with reallocations

Chg. %

R$ million 4Q08 3Q09 4Q09 On 4Q08 On 3Q09 2008 2009 On 2008

Financial Intermediation Income 20,412 16,048 17,984 (11.9) 12.1 58,400 65,329 11.9

Loan operations + Leasing 11,253 10,756 12,177 8. 2 13.2 34,821 42,303 21.5

Securities 8,097 5,083 5,321 (34.3) 4.7 20,496 21,350 4.2

Financial Intermediation Expenses (13,335) (7,729) (8,715) (34.6) 12.8 (33,885) (32,269) (4.8)

Net Interest Income 7,077 8,320 9,268 31. 0 11.4 24,515 33,060 34.9

Allowance for Loan Losses (2,240) (3,017) (2,950) 31. 7 (2.2) (6,799) (11,629) 71.1

Net Financial Margin 4,837 5,303 6,318 30. 6 19.1 17,716 21,431 21.0

Fee income 3,058 3,526 3,606 17. 9 2.3 11,811 13,511 14.4

Contribution Margin 7,534 8,461 9,367 24. 3 10.7 28,058 33,367 18.9

Administrative expenses (4,344) (4,897) (5,465) 25. 8 11.6 (15,358) (19,185) 24.9

Personnel Expenses (2,301) (2,693) (2,844) 23. 6 5.6 (8,112) (10,280) 26.7

Other Administrative Expenses (2,043) (2,203) (2,621) 28. 3 18.9 (7,246) (8,905) 22.9

Commercial Income 3,144 3,540 3,876 23. 3 9.5 12,560 14,083 12.1

Legal Claims (97) (40) 46 - - (161) (242) 49.8

Labor Lawsuits (129) (216) (49) (61.7) (77.1) (560) (260) (53.6)

Other Income and Expenses (537) (562) (938) 74. 6 67.0 (1,786) 263 -

Income Before Taxes 2,380 2,723 2,934 23. 3 7.8 10,052 13,844 37.7

Income and Social Contribution Taxes (557) (727) (853) 53. 4 17.4 (2,416) (4,155) 72.0

Corporate Profit Sharing (198) (230) (262) 32. 7 13.9 (951) (1,157) 21.6

Recurring Net Income 1,626 1,764 1,819 11. 9 3.1 6,685 8,506 27.2

Chg. %

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Table 7. Main Indicators of Income/Expenses

Indicators - % 4Q08 3Q09 4Q09 2008 2009

Global Spread 7,2 6,7 6,7 7,0 6,7 Expenses with Allowance for Loan Losses over Portfolio 3,6 4,7 4,6 3,6 4,6 Efficiency Ratio¹ 45,7 44,6 44,4 45,6 40,7 Recurring Return on Equity 24,5 23,1 22,5 24,7 25,8 Effective Rate of Tax 25,5 29,2 31,9 26,5 32,7

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The extraordinary effects of the period were segregated in the calculation.

Table 8. Statement of Operations with reallocations (Banco do Brasil stand-alone)

Chg. %

Financial Intermediation Income 20,412 14,013 14,517 (28.9) 3.6 58,400 58,001 (0.7)

Loan operations + Leasing 11,253 9,643 9,878 (12.2) 2.4 34,821 37,865 8.7

Securities 8,097 4,223 4,190 (48.2) (0.8) 20,496 18,621 (9.1)

Financial Intermediation Expenses (13,335) (6,820) (6,949) (47.9) 1.9 (33,885) (28,797) (15.0)

Allowance for Loan Losses (2,240) (2,779) (2,613) 16. 6 (6.0) (6,799) (10,802) 58.9

Net Financial Margin 4,837 4,414 4,955 2. 4 12.3 17,716 18,403 3.9

Fee income 3,058 3,213 3,189 4. 3 (0.7) 11,811 12,481 5.7

Contribution Margin 7,534 7,325 7,485 (0.6) 2.2 28,058 29,338 4.6

Administrative expenses (4,344) (4,215) (4,511) 3. 8 7.0 (15,358) (16,891) 10.0

Personnel Expenses (2,301) (2,314) (2,369) 3. 0 2.4 (8,112) (9,068) 11.8

Other Administrative Expenses (2,043) (1,901) (2,142) 4. 8 12.7 (7,246) (7,823) 8.0

Commercial Income 3,144 3,104 2,974 (5.4) (4.2) 12,560 12,409 (1.2)

Legal Claims (97) (14) 56 - - (161) (186) 15.2

Labor Lawsuits (129) (142) 1 - - (560) (92) (83.6)

Other Income and Expenses (537) (460) (270) (49.8) (41.4) (1,786) 1,151 -

Income Before Taxes 2,380 2,488 2,762 16. 1 11.0 10,052 13,282 32.1

Income and Social Contribution Taxes (557) (662) (942) 69. 3 42.3 (2,416) (4,113) 70.3

Corporate Profit Sharing (198) (218) (208) 5. 4 (4.6) (951) (1,091) 14.7

Recurring Net Income 1,626 1,606 1,612 (0.8) 0.4 6,685 8,078 20.8

Chg. %

Quarterly Flow Annual Flow

Table 9. Main Indicators of Income/Expenses (Banco do Brasil stand-alone)

Indicators - % 4Q08 3Q09 4Q09 2008 2009

Global Spread 7.2 6.5 6.6 7.0 6.5 Expenses with Allowance for Loan Losses over Portfolio 3.6 4.6 4.6 3.6 4.6 Efficiency Ratio¹ 45.7 42.8 40.9 45.6 41.4 Recurring Return on Equity 24.5 20.9 19.8 24.7 24.5 Effective Rate of Tax 25.5 29.2 36.9 26.5 33.5

(1)

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Loan growth drives the increase of the Net Interest Income

The Net Interest Income(NII) recorded growth of 11.4% quarter on quarter and of 31.0% year-over-year, influenced by the consolidation of Banco Votorantim's figures as of 4Q09. In a pro forma comparison, excluding the effects of the consolidation of BV and of BNC, the Net Interest Income of Banco do Brasil on a stand-alone basis amounted to R$ 7,568 million in 4Q09, up 10.2% over 3Q09, driven by the advance of revenues from loans due to the increase in the volume of these operations.

In the annual comparison, the net interest income reached R$ 33,060 million in 2009, up 34.9% over 2008. Disregarding the effects of the consolidation of BV and of BNC, BB's net interest income on stand-alone view totaled R$ 29,205 million, growth of 19.1% over 2008, motivated essentially by the growth of the volume of loan operations and by the reduction of the cost of funding, offsetting the spreads reduction.

The following table presents the breakdown of the Net Interest Income. The contribution of the loan portfolio in its main business lines, computing the revenues and the costs associated with these operations, including the fundraising cost, is highlighted. In addition, the amounts corresponding to revenue with recovery of receivables written-off as loss, and the amounts of revenues relating to compulsory deposits with remuneration are segregated. The item “Other Income”, comprised mainly of income from treasury, resulting from transactions with securities, derivatives and foreign exchange, completes the NII formation.

Table 10. Net Interest Income by business line

Chg. %

Loan Operations 4,725 5,978 6,852 45. 0 14.6 16,394 23,570 43.8 Individuals 2,273 3,299 3,741 64. 6 13.4 8,356 12,413 48.6 Businesses 1,598 1,844 2,178 36. 3 18.1 5,107 7,576 48.3 Agribusiness 854 834 933 9. 2 11.8 3,006 3,581 19.1 Other 2,352 2,342 2,416 2. 7 3.2 8,121 9,490 16.9 Remunerated Compulsory 424 213 214 (49.4) 0.5 1,910 816 (57.3) Recovery of Write-offs 467 525 647 38. 6 23.2 1,714 2,059 20.1 Other 1,462 1,603 1,555 6. 4 (3.0) 4,496 6,615 47.1 BB Stand-alone

Chg. %

Gross global spread ended the quarter at 6.7%, remaining stable quarter-on-quarter. In 2009, the spread came to 6.7%, 30 basis points below the spread recorded in 2008. Several factors affected the global spread of Banco do Brasil in 2009, with an emphasis on:

• The consolidation of BNC, which as it has an expressive base of low-cost deposits (judicial deposits), presented a higher spread than that of BB, which had affected positively the global spread; And those that had a negative effect:

• The decrease of the basic interest rate, which reduced the remuneration of the own securities portfolio;

• The change in the loan portfolio mix, with an increase of the relative share of operations with lower associated risk and, therefore, lower spread (such as payroll loans and vehicle financing);

• The consolidation of the interest of 50% in the capital of Banco Votorantim, which exhibits a lower global spread than that of Banco do Brasil, as it does not have a base of low-cost deposits and operates in segments characterized by lower risks and, therefore, lower spread;

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Table 11. Annualized spread R$ million 4Q08 3Q09 4Q09 2008 2009 Loan Operations 9.8 10.2 10.1 9.3 9.8 Individuals 21.6 20.6 18.6 21.0 18.7 Businesses 7.3 7.4 7.4 6.7 7.2 Agribusiness 5.6 4.9 5.3 5.1 5.3 Other 9.7 3.6 3.4 4.6 3.7 Global Spread 7.2 6.7 6.7 7.0 6.7

Delinquency shows a strong decrease in 4Q09

The percentage of operations past due for more than 15 days in the conglomerate dropped to 5.1% in December 2009, as opposed to 5.8% in September. On the other hand, the percentage of loans overdue for more than 90 days recorded a decrease of 30 basis points in the last quarter.

The monthly monitoring of BB's domestic loan portfolio (stand-alone) also demonstrates this downslide in default ratios: the ratio that measures the loans overdue for more than 15 days recorded a reduction of 110 basis points since August 2009. In the same period, the ratio that measures the loans overdue for more than 90 days fell by 50 basis points, confirming that the peak of default occurred in 3Q09.

Figure 4. Delinquency 15 and 90 days - BB Stand Alone

The recovery of the labor market and the successful strategy of BB, concentrating the mix of its individuals loan portfolio in low risk operations, such as payroll loans, were decisive to allow the delinquency ratios of its portfolio to show successive drops from the peak shown in 1Q09. During this period, the ratios of operations overdue for more than 15 days and 90 days fell respectively 170 and 110 basis points. 5.1 5.5 5.9 5.9 6.2 6.0 5.9 6.3 5.6 5.3 5.2 5.2 3.5 3.6 3.9 3.9 4.0 3.6 3.6 3.5 3.2 3.1 3.0 2.9

Jan/09 Feb/09Mar/09 Apr/09 May/09 Jun/09 Jul/09 Aug/09 Sep/09Oct/09 Nov/09Dec/09 ICRED_15 ICRED_90 5.1 5.5 5.9 5.9 6.2 6.0 5.9 6.3 5.6 5.3 5.2 5.2 3.5 3.6 3.9 3.9 4.0 3.6 3.6 3.5 3.2 3.1 3.0 2.9

Jan/09 Feb/09Mar/09 Apr/09 May/09 Jun/09 Jul/09 Aug/09 Sep/09Oct/09 Nov/09Dec/09 ICRED_15 ICRED_90

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Figure 5. Delinquency 15 and 90 days – Individuals Porfolio (loan as reference for interest rate)

_{Quality of the portfolio remains above the Banking Industry}

On the portfolio quality, average risk stood at 5.3% in December 2009, 40 basis points below that seen for September 2009, and below the average risk of the Banking Industry, that recorded 6.9% at the end of December.

Delinquency above 90 days reached 3.3% of the total portfolio at the end of 2009, one more time better than the performance of the Banking Industry, which recorded 4.4%.

Table 12. Loan Portfolio Quality Indicators (BB+BV+BNC)

% Dec/08 Sep/09 Dec/09

Past Due Loans/Loan Portfolio 4.0 6.9 6.8 Allowance/Loan Portfolio 6.1 6.7 6.2 Past due loans + 60 days/Total Portfolio (%) 2.8 4.1 3.7 Past due loans + 90 days/Total Portfolio (%) 2.4 3.6 3.3 Allowance/Past Due Loans + 60 days 218.2 161.1 166.3 Allowance/Past Due Loans + 90 days 257.7 183.4 190.3 Average Risk BB 5.4 5.7 5.3 Average Risk – Banking Industry 5.3 7.2 6.9 Transactions overdue + 90 days/Total Portfolio – Banking Industry 3.2 4.4 4.4

Beyond the perception of improvement of the economic and business environment, Banco do Brasil maintained its prudent attitude on the balance of provisions for credit risk and on the percentage of coverage of the portfolio in 2009. The balance of provisions ended December 2009 at R$ 18,617 million, growth of 36.2% over that observed in 2008, in line with the expansion of 33.8% of the loan portfolio in 12 months and with the increase in the default rates compared to 2008. In the quarterly comparison the balance of provisions presented a downslide of 2.4%, in line with the improvement observed in the risk profile of the operations.

The coverage ratio of provisions over the loan portfolio total balance came to 6.2%, a reduction of 50 basis points compared to the ratio of September 2009 and growth of 10 basis points in the comparison with the ratio recorded at the end of 2008.

4.8% 5.2% 5.7% 5.9% 5.8% 5.8% 5.8% 5.6% 9.9% 8.8% 9.2% 10.5% 9.6% 9.4% 9.7% 10.4%

Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 ICRED_90 Individuals Portfolio ICRED_15 Individuals Portfolio

4.8% 5.2% 5.7% 5.9% 5.8% 5.8% 5.8% 5.6% 9.9% 8.8% 9.2% 10.5% 9.6% 9.4% 9.7% 10.4%

Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 ICRED_90 Individuals Portfolio ICRED_15 Individuals Portfolio

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Table 13. Allowance for loan losses

Required 12,079 16,167 15,835 31.1 (2.1)

Additional 1,594 2,903 2,782 74.5 (4.2)

Total 13,673 19,070 18,617 36.2 (2.4)

Chg. %

Provision expenses recorded a decrease of 2.2% in the quarter, which contributed for the rate that measures the ratio between these expenses and the total portfolio to end 4Q09 at 1.0%, down 20 basis points compared to the rate of 3Q09. The ratio between expense in 12 months and the average portfolio of the same period reached 4.6%, as opposed to 4.7% in the 12 months ended in the previous quarter. Table 14. Expenses with Allowance for Loan Losses over Portfolio

R$ million 4Q08 3Q09 4Q09

(A) Allowance for Loan Losses - Quarterly (2,240) (3,017) (2,950) (B) Allowance for Loan Losses - 12 Months (6,800) (10,919) (11,629) (C) Loan Portfolio 224,808 265,019 300,829 (E) Average Portfolio – 3 Months 218,626 257,948 282,405 (E) Average Portfolio – 12 Months 189,144 234,430 250,888 Expenses over Portfolio (A/D) - % 1.0 1.2 1.0 Expenses over Portfolio (B/E) - % 3.6 4.7 4.6

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Operating Efficiency: expenses under control, growth of the service revenues and of

the financial margin

Disregarding the consolidation of the figures of Banco Nossa Caixa and of Banco Votorantim, the administrative expenses of BB, which include personnel expenses and the other administrative expenses, amounted to R$ 16,890 million in 2009, up 10.0% over 2008, in line with the guidance proposed for 2009 (9% to 12%). Also in the stand-alone view, the administrative expenses of 4Q09 reached R$ 4,511 million, growth of 3.8% in the comparison with 4Q08.

Table 15. Administrative expenses

Chg. %

R$ million 4Q08 3Q09 4Q09 On 4Q08 On 3Q09 2008 2009 On 2008

BB 4,344 4,897 5,465 25. 8 11.6 15,358 19,185 24.9

Personnel Expenses 2,301 2,693 2,844 23. 6 5.6 8,112 10,280 26.7

Other Administrative Expenses 2,043 2,203 2,621 28. 3 18.9 7,246 8,905 22.9

BNC / BV - 682 954 - 39.9 - 2,294 -

Personnel Expenses - 380 475 - 25.1 - 1,212 -

Other Administrative Expenses - 302 479 - 58.5 - 1,082 -

BB - BNC 4,344 4,215 4,511 3. 8 7.0 15,358 16,890 10.0

Personnel Expenses 2,301 2,314 2,369 3. 0 2.4 8,112 9,068 11.8

Other Administrative Expenses 2,043 1,901 2,142 4. 8 12.7 7,246 7,822 7.9

Chg. %

The control of administrative expenses was followed by an increase in fee income, which totaled R$ 3,606 million in 4Q09, growth of 2.3% in the quarter and of 17.9% over 4Q08. In 2009, fee income amounted to R$ 13,511 million, recording growth of 14.4% over 2008. Segregating the effects of the consolidation of Banco Nossa Caixa and of Banco Votorantim, fee income of BB stand-alone, amounted to R$ 3,189 million in 4Q09, recording a slight decrease of 0.7% in the quarter. This performance was influenced by the discontinuation of the collection of the registration renewal fee pursuant to Circular 3,466 of September 11, 2009 of the Brazilian Central Bank. In the comparison with 4Q08, there was a growth of 4.3%. In 2009 the growth of BB stand alone fee income reached 5.7%, within the Guidance for the year (5% to 8% range).

Table 16. Fee income

Chg. % R$ million 4Q08 3Q09 4Q09 On 4Q08 On 3Q09 2008 2009 On 2008 BB 3,058 3,526 3,606 17. 9 2.3 11,811 13,511 14.4 BNC / BV - 313 418 - 33.3 - 1,031 - BB - BNC 3,058 3,213 3,189 4. 3 (0.7) 11,811 12,481 5.7 Chg. %

The positive performance of Net Interest Income, fee income, combined with the increase of other operating income and the control of administrative expenses, contributed toward the improvement of the cost to income ratio.

The conglomerate ratio for 2009 was of 40.7%, an improvement of 490 basis points compared to the 2008 ratio. In the quarterly comparison, the cost to income ratio of the group recorded 44.6% in 4Q09, remaining stable compared to 3Q09 and 109 basis points better than the rate recorded in 4Q08.

BIS Ratio records growth

Banco do Brasil's capital ratio (K) ended December 2009 at 13.7%, a 70 bps increase over the preceding quarter. The Basel ratio shown allows the Bank to expand its loan portfolio by R$ 104,600 million in credit assets, considering a 100% weighting.

The improvement observed in the period results from the incorporation of profits, the issue of R$ 1 billion in Subordinated Bank Deposit Certificates and the issue of US$ 1.450 billion worth of perpetual bonds.

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The Central Bank considered this last issue eligible for calculation purposes of the Tier I Capital, in the hybrid capital and debt instrument category.

In 4Q09 Banco do Brasil released a material fact, informing the market that, with the consent of the National Treasury, it is finalizing studies to increase its capital by at least R$ 8 billion and by a maximum of R$ 10 billion, aiming to sustain its future growth.

Figure 6. BIS Ratio

Extraordinary Events

The extraordinary effects added R$ 2,336 million to BB's net income in 4Q09 and R$ 1,642 million in 2009. The main effects are as follows:

4Q09

Reversal of provisions for civil claims resulting from economic plans, generating extraordinary income of R$ 530 million, of which R$ 161 million are expenses arising from Banco Nossa Caixa.

_{Assignment of credits written-off to Ativos S. A., generating extraordinary income in the amount of}

R$ 242 million in 4Q09.

Extraordinary income of R$ 3,030 million regarding the partial accounting of non-recognized actuarial gains of Plano de Aposentadoria e Pensão dos Funcionários do Banco do Brasil – PREVI. These gains are derived from the review of actuarial assets and liabilities performed in accordance with Resolution 26 issued by Conselho de Gestão da Previdência Complementar (CGPC) on September 29, 2008 in accordance with CVM Regulation 371/2000.

_{Expenses of R$ 215 million arising from Voluntary Resignation Program for employees of Banco}

Nossa Caixa.

_{Reversal of provision for labor claims due to changes in the methodology of recognition of these}

contingencies, generating extraordinary income of R$ 644 million, that from 4Q09 on, the provisions balance began to be established to cover the average value effectively disbursed by the Bank in legal claims of the same origin (until the moment the provision used to be set based on the amount requested by the applicant).

Tax Impacts and profit sharing on extraordinary items generating expenses of R$ 1,895 million. 3Q09

Exercise of the Greenshoe Option, whereby BB sold the lot of 14,330,229 shares of CIELO, which generated extraordinary income of R$ 209 million before taxes.

_{Partial sale of investments, corresponding to 56.1% of the shares of the BB group (Multiple Bank,}

CIELO and VisaVale) in the company Visa Inc., generating positive extraordinary result of R$ 361 million in 1Q08. In September 2009, a portion of the remaining shares was sold, generating an extraordinary revenue of approximately R$ 141 million.

_{Assignment of credits written-off to Ativos SA, generating revenues in the amount of R$ 119 million.}

10.2 _8.4 _8.8 10.9 10.4 10.8 _9.1 9.7 4.5 4.1 4.2 4.3 4.6 4.5 3.9 12.5 15.2 15.0 15.3 _13.7 4.0 13.0 14.7 13.0

Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Tier I Tier II 10.2 _8.4 _8.8 10.9 10.4 10.8 _9.1 9.7 4.5 4.1 4.2 4.3 4.6 4.5 3.9 12.5 15.2 15.0 15.3 _13.7 4.0 13.0 14.7 13.0

Mar/08 Jun/08 Sep/08 Dec/08 Mar/09 Jun/09 Sep/09 Dec/09 Tier I Tier II

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_{Expenses with civil claims regarding economic plans totaling R$ 84 million.}

_{Tax Impacts and profit sharing on extraordinary items generating expenses in the amount of R$ 171}

million. 2Q09

_{Extraordinary Expense incurred in 2Q09, equal to an additional allowance for loan losses, in the}

amount of R$ 676 million according to a public announcement published on June 30, 2009.

_{Sale of shares representing 7.1% of the capital stock of Companhia Brasileira de Meios de}

Pagamento - CIELO, an affiliate of BB Banco de Investimento S/A – BB-BI, a wholly-owned subsidiary of Banco do Brasil, generating positive extraordinary result of R$ 1,415 million in 2Q09.

_{Assignment of credits written-off to Ativos SA, generating revenues in the amount of R$ 271 million.} Tax Impacts and profit sharing on extraordinary items generating expenses in the amount of R$ 362

million.

1Q09

_{Expense of R$ 1,367 million, before taxes, that refers to the supplementation of provision to cover}

labor, civil and fiscal claims, according to the material fact released on April 29, 2009.

_{Income of R$ 1,213 million relating to the recognition of tax credits originating from the alteration of}

the rate of Social Contribution on Net Income - CSLL from 9% to 15%, according to a public announcement published on April 29, 2009.

_{Tax Impacts and profit sharing on extraordinary items generating income in the amount of R$ 557}

million.

The table below details the extraordinary effects of the quarter and of the year 2009: Table 17. Extraordinary Items

R$ million 4Q09 2009

Recurring Net Income 1,819 8,506

(+) Extraordinary Effects of the Period 2,336 1,642

Sale of Interest in VISA Internacional - 141 Disposal of investments – Visanet Brasil - 1,625 Economic Plans 530 157 Credit Assignment 242 633 Previ - Recognition of Actuarial Gains 3,030 - Additional Allowance for Loan Losses - (676) Provision for Labor, Civil, and Tax cCaims - (1,367) Reversal of Labor Liabilities 644 644 Tax Credits - differential of CSLL rate - 1,213 Voluntary Resignation Program - BNC (215) (215) Tax Impacts and PLR on Extraordinary Items (1,895) (513)

Net Income 4,155 10,148

Guidance: Estimates for 2010 confirm BB’s confidence in the business expansion

The estimates for 2010 include the entire conglomerate of Banco do Brasil, including the consolidation of Banco Nossa Caixa and Votorantim.

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The indicators that measure the growth of Administrative Expenses and Fee Income will be followed by 2009 pro-forma series, which consider the income and expenses from BV and BNC as these banks have been consolidated for accounting purposes during the entire year 2009.

Table 18. Guidance 2010

Assumptions used in 2010 Guidance Prediction

Assumptions affected by the Administration:

• Improve the profitability of the customers base as a way to boost revenues; • Alignment of the cost structure to the growth of the business volume; • Contractual adjustments and collective bargaining agreement;

• Growth of sales force appropriate to the strategy of improving the profitability of the customers base;

• Current business model, not considering further acquisitions and/or strategic partnerships, which may occur for the exploration of specific segments;

• Account of actuarial profit and losses of Plano de Benefícios I from Previ, in accordance with paragraph 55 of CVM Regulation 371/2000.

_{Assumptions that get out of the Administration control :}

• Gradual resumption of the global and Brazilian economic growth in 2010;

• Increased resistance, but not immunity, of the Brazilian economy to external shocks; • Additional improvement of the conditions of domestic loan granting;

• Political environment without institutional rupture;

• Maintenance of the current architecture of the domestic macroeconomic policy: floating exchange rate, inflation targeting and fiscal discipline, implying gradual and consistent reduction of the relation between the Public Sector Net Debt (PSND) and the Gross Domestic Product (GDP);

• Advance of the regulatory framework / microeconomic agenda, with incentives to public and private investments;

• Gradual increase in the growth potential of the Brazilian economy (potential GDP); • Maintenance of the status of investment grade for Brazil;

• 2009/2010 crop plan;

• Regulatory stability, including tax rates on the Bank’s activities and labor and social security laws;

• Interest rates, inflation and GDP evolution in line with market consensus.

Items 2010 Guidance

Recurring Return on Equity 21% - 24% Net Interest Margin 6.5% - 7.0%

Total Deposits 12% - 16%

Domestic Loan Portfolio 18% - 23%

Individuals 27% - 32%

Businesses 16% - 21%

Agribusiness 4% - 9%