2nd quarter 2008 - mz · 2nd quarter 2008. 3 banrisul financial statements june 2008 ceo’s...

ND2 QUARTER2008

33333BANRISUL FINANCIAL STATEMENTS JUNE 2008

Ceo’s Message

Banrisul is The Best Public Financial

Conglomerate of the Country. This rating of

nationwide highlight, granted by Conjuntura

Econômica magazine, which is edited by the

Brazilian Institute of Economics of Getulio

Vargas Foundation, acknowledges the advances

of a successful management strategy. The

Board of Executive Officers and the competent

staff proudly receive this motivating

acknowledgement in the year in of the

Institution’s 80th anniversary.

This distinction reinforces the bank’s

responsibility in consolidating the soundness it

has achieved. In the first half of 2008, Banrisul’s

performance kept the growth path in pace with

the expansion cycle of the Brazilian economy.

The Bank’s credit operations recorded a growth

of 45% in the total volume over the past twelve

months. The commercial portfolio featured a

significant growth, having increased by 55%,

which was leveraged, in particular, by

companies, reaching 75% in the segment. As

for individuals, the segment increased by 38%

in comparison to June 2007.

The loan expansion in the period is grounded

on the 19% increase in funding, which was

reinforced by the performance of time deposits,

Fernando Guerreiro de LemosCEO

which increased by 22%, and shareholders’

equity, which grew by 57%.

Banrisul is in line with the state-the-art trend of

the financial market. In many cases, actually,

the bank is a step ahead in technology and bank

security. The investments addressed to

modernization provided the products and

services offered by the bank with more quality,

in addition to acknowledgments through

national and international awards.

We are a benchmark today. We have the only

own-brand card of the country: Banricompras.

Accepted in over 66,000 affiliated business

establishments, the product accounted for 25.2

million transactions in the first half of 2008, an

R$1.4 billion financial volume.

Only a structured, sound and profitable

institution is able to operate as a social and

economic development tool in the communities

where it is present. Along with this focus, the

Bank reached a net income in the amount of

R$308.2 million in the first half of 2008.

By generating good results and efficiently

applying Corporate Governance practices,

Banrisul complies with its social role and

rewards all the prestige and trust deposited in

it by more than 2.9 million clients.


Index

Ceo’s Message .................................................................................................................... 03Press Release ...................................................................................................................... 07Analysis of the Performance in the 2nd Quarter of 2008 ................................. 11

Financial Highlights ......................................................................................................... 13Banco do Estado do Rio Grande do Sul .................................................................... 14Economic Scenario ......................................................................................................... 15The State of Rio Grande do Sul ...................................................................................... 16Market Share . ................................................................................................................ 17Operational Highlights ................................................................................................... 18Important Events . ......................................................................................................... 18Awards and Recognition ................................................................................................ 19Economic and Financial Indicators.................................................................................. 21

Consolidated Balance Sheet for the 1st Half of 2008 ....................................... 22Total Assets .................................................................................................................... 22

Securities ................................................................................................................... 22Interbank and Interbranch Transactions .................................................................... 23Credit Operations ..................................................................................................... 23

Breakdown of Credit to Companies by Company Size ........................................ 23Breakdown of Credit by Sector ............................................................................ 24Breakdown of Credit by Portfolio ........................................................................ 25Commercial Credit ............................................................................................... 26General Credit to Individuals ................................................................................ 26General Credit to Companies .............................................................................. 27Breakdown of Portfolio by Rating ........................................................................ 27

Allowance for Loan Losses ........................................................................................ 28Cover Rate ........................................................................................................... 29Default Ratio ........................................................................................................ 29

Funds Raised and Under Management ............................................................. 29Demand Deposits ..................................................................................................... 30Savings Accounts ....................................................................................................... 30Time Deposits ........................................................................................................... 30Third Party Funds ...................................................................................................... 30Cost of Funding ......................................................................................................... 31

Stockholders’s Equity ......................................................................................... 32Return on Average Stockholders’s Equity ................................................................. 32Basel Ratio ................................................................................................................ 32

Pace of Growth .............................................................................................................. 33Consolidated Income Statement for the 1st Half of 2008 ...................................... 34

Consolidated Results for the 1st half of 2008 .................................................................. 34Income Adjusted for Extraordinary Events ..................................................................... 34Financial Income ............................................................................................................. 35Revenues from Credit Operations .................................................................................. 35Revenues from Commercial Credit to Individuals and Companies ................................. 36Financial Expenses .......................................................................................................... 37Expenses with Market Funding Operations ................................................................... 38Allowance for Loan Losses ............................................................................................ 38Gross Profit from Financial Intermediation ..................................................................... 39Financial Margin ............................................................................................................. 39


Revenue from Services .................................................................................................... 40Administrative Expenses ................................................................................................ 40Other Operations income / Expenses ............................................................................ 41

Other Operating Income ........................................................................................... 41Other Operating Expenses ....................................................................................... 41

Economic Indicators ............................................................................................... 42Leverage Ratio ............................................................................................................... 42Operating Ratio ............................................................................................................. 42Capital Ratio .................................................................................................................. 43Employee Productivity .................................................................................................... 43Efficiency Ratio ............................................................................................................... 43Margin Analysis .............................................................................................................. 44Variations in Interest Income and Expense: Volumes and Rates .................................... 45

Consolidate Pro Forma Balance Sheet .................................................................. 46Consolidated Pro Forma Income Statement ......................................................... 47Management Report .............................................................................................. 49Financial Statement ................................................................................................ 75Balance Sheets ........................................................................................................ 77

Statement of Income ......................................................................................... 81Statements of Changes in Financial Position .................................................... 82Statements of Changes in Shareholders’ Equity ............................................... 84

Index to the Notes .................................................................................................. 85Note 01 – Operations .................................................................................................... 87Note 02 – Presentation of the Financial Statements ................................................... 87Note 03 – Significant Accounting Practices ................................................................ 89Note 04 – Interbank Investments ................................................................................... 92Note 05 – Securities and Derivatives .............................................................................. 92Note 06 – Restricted Deposits ....................................................................................... 95Note 07 – Lending Operations, Leasing Operations and Other Receivables ................. 96Note 08 – Other Receivables .......................................................................................... 98Note 09 – Prepaid Expenses .......................................................................................... 99Note 10 – Deposits and Money Market Funding ........................................................ 99Note 11 – Foreign Borrowings ....................................................................................... 100Note 12 – Onlendings .................................................................................................... 100Note 13 – Other Payables .............................................................................................. 101Note 14 – Reserves for Tax, Labor and Civil Contingencies ...................................... . 102Note 15 – Income from Services Rendered .................................................................... 102Note 16 – Income from Bank Fees ................................................................................. 103Note 17 – Other Administrative Expenses ..................................................................... 103Note 18 – Other Operating Income ............................................................................... 103Note 19 – Other Operating Expenses ........................................................................... 104Note 20 – Shareholders’ Equity - Banrisul ...................................................................... 104Note 21 – Basel Accord .................................................................................................. 106Note 22 – Commitments, Guarantees and Other .......................................................... 107Note 23 – Income and Social Contribution Taxes ....................................................... 108Note 24 – Fundação Banrisul de Seguridade Social and CABERGS - Caixa de

Assistência dos Empregados do Banco do Estado do Rio Grande do Sul ......... 110Note 25 – Financial Instruments ..................................................................................... 111Note 26 – Balances and Transactions with Related Parties ............................................ 112Note 27 – Amendment to the Brazilian Corporate Law ............................................... 112Note 28 – Cash Flow ...................................................................................................... 114

Reports .................................................................................................................. 115


This document contains forward-looking statements, which not only relate to historic facts but

also reflect the targets and expectations of the Company management. The terms “anticipate”,

“desire”, “expect”, “project”, “plan”, “intend” and similar words are intended to identify

statements that necessarily involve known and unknown risks. Known risks include uncertainties

that are not limited to the price and service war impact, acceptance of services by the market,

services’ transactions from either the Company or its competitors, regulatory approval, currency

fluctuation, changes in the service mix and other risks described in the Company’s reports. This

Press Release is updated until the present date and Banrisul is not obliged to update it upon

new information and/or future events.

Tuesday, August 12, 2008 Earnings Results for the 1st Half of 2008 (1H08)

We present below Banrisul’s figures for the 1st half of 2008, containing our Management Discussion

and Analiysis of Results, Management Report, complete Financial Statements, including the

Accompanying Notes, which are also available at Banrisul’s site (www.banrisul.com.br/ir).

Press ReleaseBovespa: BRSR3, BRSR5 , BRSR6

Indexes (%) ................................................... 1H08 1H07Net Income / Average Shareholders’

Equity (ROAE) ................................................. 22.8% 113.7%Net Income/Average Total Assets (ROAA) ........ 2.8% 9.0%Operating Costs ................................................ 5.8% 6.7%Efficiency Ratio .................................................. 56.9% 57.5%Basel Ratio ........................................................ 22.2% 21.1%Funding / Shareholders’ Equity .......................... 15.9% 12.0%Highlights (R$ Million) ................................... 1H08 1H07Total Assets ....................................................... 23,223.1 17,170.3Total Credit Operations ..................................... 9,951.6 6,866.7Securities + Interbank Account -

Matched Transactions ..................................... 6,587.3 5,901.0Funding ............................................................. 18,273.6 15,388.0Shareholders’ Equity .......................................... 2,906.3 1,845.9

Results (R$ Million) ........................................ 1H08 1H07

Income from Services Rendered ........................ 271.9 266.5Revenue from Credit Operations ...................... 1,000.6 810.8Administrative Expenses ................................... (682.0) (603.9)Interest on Own Capital / Dividends ................. (189.6) (172.2)Consolidated Net Income .................................. 308.2 725.1Net Income Adjusted to Non Recurring Event .. 222.0 196.6

Financial Margin (R$ Million) .......................... 1H08 1H07

Net Financial Margin ......................................... 897.4 778.9Gross Profit from Financial Operations ............. 794.5 660.7Average Profitable Assets(1) ..................................................... 19,676.7 15,104.4Net Financial Margin(2) (%) ................................. 9.3% 10.6%Gross Profit from Financial Operations(3) (%) ..... 8.2% 8.9%

(1) Average Profitable Assets for the six-month period.(2) Net Financial Margin / Average Profitable Assets (Anualized).(3) Gross Profit from Financial Operations / Average Profitable Assets (Anualized).

Net Income was R$308.2 million in 1H08,

including tax credits of R$86.2 million. In 1H07,

Net Income was R$725.1 million, including tax

credits of R$528.5 million. Excluding non-

recurring effects of 2007 and 2008, Net Income

totaled R$222.0 million in 1H08, up 12.9% over

the R$196.6 million in the same period last year.

Annualized Return on Average Stockholders’

Equity was 22.8%. Stockholders’ Equity was

R$2,906.3 million, up 57.4% year-on-year.

Banrisul’s Total Assets amounted to R$23,223.1million at the end of June 2008, increase of35.3% and 7.4% versus June 2007 and March2008, respectively.

Credit Operations grew by 44.9% over June2007, and 12.3% over March 2008, totalingR$9,951.6 million.

Credit to Individuals totaled R$3,446.5 million,an increase of 38.2% in relation to June 2007and 10.4% in relation to March 2008, while


Credit to Companies totaled R$3,722.0 million,an increase of 75.3% in comparison to 2Q07and 17.7% in comparison to March 2008.

Payroll-Deducted Credit represents 70.2% of the

Credit to Individuals segment, which registered

an excellent performance, growing by 72.8%

over 1H2007, to R$2,419.3 million in 1H2008.

In the Credit to Companies segment, thehighlight was Working Capital, which grew86.6% in relation to June 2007 and 18.2% inrelation to March 2008, totaling R$2,753.4million, and representing 74.0% of total creditin the Companies segment.

Funds Raised and Under Management were up18.8% versus June 2007 and 3.7% versus March2008, totaling R$18,273.6 million. Of thisamount, it is worth mentioning about TimeDeposits, which amounted to R$6,964.3 million,accounting for 38.1% of the total; AssetsManaged, which totaled R$5,268.9 million,representing 28.8% of the total, and SavingsDeposits, at R$4,468.0 million, accounting for24.5% of the total.

Banrisul paid and provisioned R$190.8 million

in Own Taxes and Contributions related to 1H08,

which is equivalent to 62.0% of Net Income.

Gross Income from Financial Intermediation in

1H08 totaled R$794.5 million, up 20.3% from

1H07. In 2Q08, Gross Income from Financial

Intermediation was R$399.7 million, up 13.2%

from 2Q07.

Income from Operations totaled R$310.8

million, 11.0% higher than in 1H2007. This

performance results mainly from the higher

volume of credit revenues (R$189.8 million),

treasury revenues (R$32.5 million), and revenues

from services rendered (R$5.4 million) in 1H08.

Revenues from Services Rendered and Bank

Service Fees totaled R$271.9 million in 1H08,

up 2.0% from 1H07. The fee limits set by the

Brazilian Central Bank significantly affected

performance during the period.

Net Financial Margin in absolute values was

R$897.4 million in 1H08, an increase of 15.2%

over 1H07. Net Financial Margin on Average

Profitable Assets was 9.3% in 1H08, against

10.6% in 1H07, mainly due to the 10.0% decrease

in the Selic rate during the period, which is the

reference rate for the yield on assets.

Highlights

In March 2008, the Annual and Extraordinary

General Meeting resolved that for the financial

years 2007 and 2008, Dividends will be increased

by 10% to 35% of Adjusted Net Income.

On May 13, 2008, the risk rating agency Austin

Rating raised Banrisul’s long-term risk rating

from ‘A’ to ‘A+’, based on excellent capital base,

dispersal of assets and liabilities, diverse funding

sources, quality of loans, adequate liquidity

levels, profitability and expansion of the area

of operations through inauguration of new

branches outside the state.

Investments in technological upgrade totaled

R$ 76.4 million in the first half of 2008, growing

by 10.4% over 1H07.


Acknowledgments

Banrisul is Brazil’s top bank in return on

shareholders’ equity. Annualized return touched

45.2% on accrued earnings till 3Q07. The study

refers to September 2007 and was conducted

by the consulting firm Economática and

published in the magazine IstoÉ Dinheiro.

Banrisul has been indicated as one of the best

investment options for 2008 by the magazine

Exame, which also states that the Bank has the

third highest potential growth (50%) among

banks.

International recognition came in the form of

the award for the best integrated card project

- e-government (Certifying Authority of Rio

Grande do Sul) and the banking system, granted

at the 10th year celebration of the MULTOS

System in London. MULTOS is Banrisul’s

operating system for chip cards, whose

advantage is its capability to support several

applications.

Banrisul received the Reputação Corporativa

award as one of the most prestigious brands in

Rio Grande do Sul, according to a survey, the

first of its kind in Brazil, by the magazine Amanhã

and the consultancy Troiano Consultoria de

Marca, of São Paulo.

For the first time in its history, Banrisul has

entered the list of the world’s 2,000 largest

companies, according to Forbes magazine,

which specializes in economy, finance and

business. The Forbes ranking takes into account

annual sales in US dollars, profit, assets and

market cap.

In May, the Smart Card Alliance Latin America

(SCALA) awarded Banrisul the ‘Outstanding

Smart Card Achievement – Latin America’

(OSCA-LA) award in the Runner Up category

for its Banrisul Internet Chip Card, considered

the most innovative and forward-looking project

in Latin America.

Banrisul was elected the Best Financial

Conglomerate in Brazil in the public banking

segment based on its financial results of 2007,

by a study carried out by the magazine

Conjuntura Econômica of the Getúlio Vargas

Foundation (FGV). The recognition is based on

the growth indicators in the domestic market,

economic and financial performance and size (net

equity/yield).

Banrisul won the e-finance 2008 award givenby the magazine Executivos Financeiros in theElectronic Data Transfer category, for itsinnovative projects in IT and telecommunicationsinfrastructure and applications that helped toraise the quality of services provided by financialinstitutions in Brazil.

Banrisul was elected one of the five best retailbanks in Brazil by the magazine BalançoFinanceiro 2008. The ranking was prepared byAustin Rating and published in the newspaperGazeta Mercantil of São Paulo. The study liststhe best in each category among banks, leasingcompanies, brokerages, distributors, insurancecompanies, pension funds and investmentcompanies. The publication is an exhaustivereport on the industry with the key indicatorsof 432 institutions.

Porto Alegre, August 12, 2008.

Analysis of the Performancein the 2nd Quarter of 2008

FOLLOWING IS THE ANALYSIS OF THE

PERFORMANCE OF BANCO DO ESTADO DO

RIO GRANDE DO SUL IN THE SECOND

QUARTER OF 2008 AND IN THE SIX-MONTH

PERIOD ENDED JUNE 2008.


Financial Highlights

Consolidated Net Income totaled R$308.2 million in the first half of 2008, as against R$725.1

million in the same period last year. The results of both periods were impacted by the

booking of deferred income tax and social contribution credits on temporary differences

relating to earlier periods, amounting to R$528.5 million in the first half of 2007 and

R$86.2 million in the first half of 2008.

Excluding the effect of tax credits, Net Income in the first half of 2008 was R$222.0

million, which is R$25.4 million or 12.9% more than the R$196.6 million in the same period

in 2007. In the second quarter of 2008 (2Q08), Consolidated Net Income was R$187.3

million, 54.9% or R$66.4 million more than in 1Q08.

The result for the first half of 2008 is an annualized return of 22.8% on average Stockholders’

equity. In June 2008, Stockholders’ Equity was R$2,906.3 million, 57.4% higher than in

June 2007 and 3.0% higher than in March 2008.

Gross Profit from Financial Intermediation in the first half of 2008, amounting to R$794.5

million, was 20.3% higher than in the same period last year. In 2Q08, it was R$4.9 million

higher than in 1Q08. The first half performance reflects the higher volume of revenues

from credit operations and the improvement in portfolio quality, resulting in lesser allowances

for loan losses. The performance in 2Q08 was equally impacted by the good performance

of credit operations and the revenues from treasury operations.

Consolidated assets totaled R$23,223.1 million in June 2008, a 35.3% growth over June

2007 and de 7.4% growth over March 2008. The credit portfolio totaled R$9,951.6 million,

which was de 44.9% higher than in June 2007 and 12.3% higher than in March 2008.

Demand for credit in the Brazilian economy continued to be intense in the first half of 2008,

which was reflected in Banrisul’s credit operations. General Credit to Individuals totaled

R$3,446.5 million in June 2008, growing by 38.2% over June 2007, and 10.4% over

March 2008. General Credit to Companies totaled R$3,722.0 million at the end of June

2008, growing by 75.3% over June 2007 and 17.7% over 1Q08.

Funds Raised and Under Management totaled R$18,273.6 million in June 2008 – a nominal

growth of 18.8% in relation to June 2007 and 3.7% in relation to March 2008. Deposits in

the first half of 2008 totaled R$13,004.8 million, a 19.2% growth over June 2007 and

4.3% over March 2008. Funds under management totaled R$5,268.9 million, a 17.7%

increase over June 2007 and 2.3% over March 2008.

Banrisul paid and provisioned R$190.8 million by way of own taxes and contributions in the

first half of 2008. Taxes on financial intermediation revenues, withheld and paid, totaled

R$205.2 million.


Banco do Estado do Rio Grande do Sul

Branches ....................................................... 423Rio Grande do Sul ........................................... 394Santa Catarina ................................................. 13Other States ..................................................... 14Exterior ............................................................. 2Service Network .............................................. 276Office ................................................................. 1Total Banking Services .................................... 700Total of municipalities of RS State ............... 496Municipalities of RS with Branches Banrisul 294Municipalities of RS with Banking Services Banrisul .......................................................... 105Municipalities with Services Banrisul ............ 408Service Range ................................................... 82.3%Participation of Population of State Range 97.4%Participation of GDP of State Range ............ 97.3%

Banrisul completes 80 years in 2008.

Established on September 12, 1928,

the Bank is a mixed-capital company

capital company constituted as a

sociedade anônima (corporation). Its

controlling shareholder is the state of

Rio Grande do Sul, which owns 57.0%

of the capital stock.

As a multiple-service bank, Banrisul operates in

commercial banking, credit, financing and investments real estate credit, development and leasing

and investments.

Through the commercial portfolio, Banrisul offers consumer finance and related services for

individuals, and working capital loans for micro, small and medium enterprises. The agricultural

industry, public sector and large companies too are the Bank’s partners.

Through its development portfolio, Banrisul acts as a business intermediary and agent to foster

the production chains in the state. On the social sphere, it sponsors projects aimed at improving

the quality of life of gauchos (the people of Rio Grande do Sul), especially in the areas of

education, culture, sports and environment.

Though the Bank's service network is

concentrated in the state of Rio Grande do Sul,

where it serves 2.9 million clients, it has 1,107

service points across Brazil, distributed among

423 branches, 276 service posts and 407

eletronic sales points, 2 overseas branches (New

York and Grand Cayman) and an office in

Buenos Aires. Four branches were inaugurated

in the second quarter, further increasing the

points of contact with clients.

The Banrisul group is made up of the Banco do

Estado do Rio Grande do Sul S.A., Banrisul S.A.

Administradora de Consórcios, Banrisul S.A.

Corretora de Valores Mobiliários e Câmbio, Banrisul Armazéns Gerais and Banrisul Serviços

Ltda.

InvestimentsFunds

ForeignExchange,Consortium Banricompras

Loans: Individual,Payroll-deductible,Consumer Loan,

Housing

Working Capital , Vendor,Compror, Leasing

Credit CardPayroll,

GuaranteeLetter

ReceivableDiscount,

Collection of DebtInstruments

VirtualBranch

Accounts Payable,Bank Account Direct

Debit

Financing:Agribusiness,

Vehicules and Machinesand Equipments

Deposits:demand,

time, saving

Product Portfolio


Economic Scenario

The Brazilian economy continued its growth trajectory in the second quarter of 2008, driven by

domestic demand caused mainly by increased consumption and investments. However, a few

uncertainties became stronger during the period. Rising prices have once again caused inflation

to become a cause for concern. At the global level, the deceleration of the world economy, still

affected by the need to realize losses and adjustments arising from the U.S. subprime crisis that

affected the international financial markets, has not entirely set in and the inflationary trends

too have become a worrying factor. These changes in the world economy have resulted in

financial markets becoming less liquid and more selective, pushing up costs and, consequently,

affecting the domestic market.

The reduction in funds raised abroad, the establishment of mandatory deposits by monetary

authorities on leasing companies, and the expansion of credit in the country in recent years

have resulted in higher cost of funding, especially on the rates offered for bank deposit certificates

(CDBs) and interbank deposit certificates (CDIs) offered to institutional investors. This, together

with the increase in the basic interest rate, led to higher interest rates on loans, as seen in

official statistics.

In this quarter, based on the bleak outlook in terms of domestic inflation and price levels,

especially wholesale prices, and the mismatch in the pace of growth between supply and demand,

the monetary authorities decided to raise the basic interest rate (Selic) by 50 basis-points twice,

in April and June 2008, to reach 12.25% p.a. Authorities expect inflation to close the year

within the target. However, inflation should end the year close to the tolerance range ceiling,

that is, 6.5% p.a. On the other hand, in order to bring inflation down to the core target of 4.5%

p.a. in 2009, authorities should continue to raise the Selic rate till the end of 2008.

According to data available till May, current account deficit was US$14.7 billion, result of the

increase in outbound remittances of profits and dividends and the lower trade balance during

the period, basically due to the faster growth of imports compared to exports. On the other

hand, foreign direct investments increased significantly, as were funds raised by Brazilian

companies abroad. The Brazilian Real continued to appreciate, reflecting the excellent perception

about the country abroad after it was rated ‘investment’ grade by two risk rating agencies and

the relative calm of the Brazilian economy in comparison to the rest of the world.

The economy of Rio Grande do Sul continued the growth trend that began in the first quarter,

led by the strong growth in the services sector. However, according to the preliminary estimates

for the beginning months of the year, results expected should be a little lower than in 2007 yet

a little higher than the country’s growth. Based on preliminary estimates, the economy is expected

to grow by around 5% in 2008.


The State of Rio Grande do Sul

Rio Grande do Sul is located in the southernmost part of Brazil, occupying a little more than 3%

of the country’s territory and home to 6% of the

population. It is the country’s largest producer of

grains and the second most important business and

industrial center.

The state’s GDP, the fourth highest in Brazil, grew

by 7% in 2007 to touch R$175.2 billion. The three

sectors that make up the GDP – farming, industry

and services – were evenly matched in their growth,

outperforming the country’s GDP growth of 5.4% in

the year.

The recent evolution of the industry indicators shows that

the economic growth cycles of the country and the state

continued at the beginning of the year. According to the

state’s Secretary of Finance, between January and May

2008, the state’s GDP grew 5%, in tune with the Brazilian

economy, which grew by 5.8% in the first quarter of 2008

in comparison with the same period last year.

The region’s economy should continue its brisk growth in

2008, driven by the farming and exports sectors. Harvest

estimates point to a slightly lower performance than in 2007, due to the climactic changes and

also to the comparison with that year, whose results were extraordinary. Moreover, exporters

have been feeling the effects of a stronger Real, which should affect their competitiveness in

the export markets, resulting in a more modest performance.

Rio Grande do SulTotal Population (2006) ............................ 10,867,102 habitantsArea (2006) .................................................. 281,748.5 km2

Nº of Municipalities ................................... 496Population Density (2006) ........................ 38.6 hab/km2

Illiteracy (2000) ........................................... 6.65 %Life Expectancy (2000) ............................... 72.05 yearsInfancy Mortality Rate (2006) .................... 13.20 live births per thousand birthsGross Domestic Product (GDP) fair value (2007) R$ 175,208,681Gross Domestic Product (GDP) per capita (2007) R$ 15,813Total Exports (2007) .................................. US$FOB 15,017,674,227Value Added Tax (VAT) (2007) ................... R$ 12,257,603,035Source: Statistics and Economy Foundation (FEE), RS.


Market Share

Most of the bank branches in Brazil are concentrated in the southeast and south, principally in

the largest cities. The biggest banks in Brazil favor such markets even though they have branches

all over the country. Banrisul is a regional bank, with its branch coverage serving 97.3% of the

state’s GDP.

Yet, its position as one of the 50 biggest banks according to the Brazilian Central Bank’s ranking

proves its importance in the national scenario. In March 2008, at a time of mergers and

acquisitions and when institutions are rolling out their growth strategies, Banrisul was ranked

10th in number of branches and 15th in assets and Stockholders’ equity.

COMPETITIVE POSITIONINGI INDEX DEC/2004 DEC/2005 DEC/2006 DEC/2007 MAR/2008

TOTAL ASSETS 15º 15º 14º 14º 15º STOCKHOLDERS’ EQUITY 19º 19º 18º 14º 15º NET INCOME 12º 13º 14º 13º 14º TOTAL DEPOSITS 12º 12º 12º 11º 11º Nº OF BRANCHES 10º 10º 10º 10º 10º

Source: 50 largest Banks - Central Bank of Brazil.

The volume of credit in Brazil reached R$1.067 trillion, which is 36.5% of the GDP and is 14 %

more than in December 2007. The growth in credit availability has pushed demand, bolstering

production, employment and investments. At Banrisul, volume of credit grew 24% in the first

half of the year, which is 10 percentage points more than the growth of the financial institutions

as a whole.

Money supply totaled R$2,041 trillion in June 2008, in line with the high domestic demand,

and, specifically, the maintenance of the credit growth pace. M4, the broadest measure of

money supply, rose 8.3% in six months. At Banrisul, deposits and funds under management

grew by 6.6 % in the same period.

COMPETITIVE MARKET OF BRAZIL

INDEX

DEC/2006 DEC/2007 JUN/2008

BRAZIL BANRISUL % BRAZIL BANRISUL % BRAZIL BANRISUL %

TIME DEPOSITS (Million) 281,968 5,108 1.81% 298,147 5,881 1.97% 414,981 7,133 1.72%SAVING DEPOSITS (Million) 187,864 3,820 2.03% 234,672 4,634 1.97% 247,732 4,468 1.80%DEMAND DEPOSITS (Million) 105,421 1,331 1.26% 149,179 1,828 1.23% 113,568 1,562 1.38%CREDIT OPERATIONS (Million) 732,590 6,357 0.87% 935,973 8,024 0.86% 1,067,355 9,951 0.93%Nº OF BRANCHES 16,106 415 2.58% 19,528 419 2.15% 19,528 423 2.17%

Source: Central Bank of Brazil.

The evolution of financial volumes in the past two years, for which data is available, in the

regional context is provided in the table below. In the state, Banrisul accounted for a third of

the branches in operation, 31.5% of time deposits and 17.6% of credit operations.


Operacional HighlightsOn May 13, 2008, the risk rating agency Austin Rating raised Banrisul’s long-term risk

rating from ‘A’ to ‘A+’, based on excellent capital base, dispersal of assets and liabilities,

diverse funding sources, quality of loans, adequate liquidity levels, profitability and expansion

of the area of operations through inauguration of new branches outside the state. The ‘A+’

rating signifies that the Bank has solid intrinsic fundamentals, operates in a secure manner

and has a good financial condition. The business environment may change without affecting

the bank’s operations. Risk is very low.

Investments in technological upgrade totaled R$76.4 million in the first half of 2008.

Information technology is an important differential in the Bank’s performance and reliability

in a competitive market. The security model adopted by Banrisul is based on the most

widely used standards in the world in a single medium (chip card): for financial operating

standards (EMV – European Master & Visa standard) and for security standards and e-

governance efforts (PKI - Public Key Infrastructure).

COMPETITIVE MARKET OF RIO GRANDE DO SUL

INDEX DEC/2006 DEC/2007STATE RGS BANRISUL % STATE RGS BANRISUL %

TIME DEPOSITS (Million) 16,580 5,108 30.81% 18,669 5,881 31.50% SAVING DEPOSITS (Million) 15,914 3,820 24.00% 19,893 4,634 23.29% DEMAND DEPOSITS (Million) 6,239 1,331 21.34% 8,686 1,828 21.04% CREDIT OPERATIONS (Million) 37,041 6,357 17.16% 45,540 8,024 17.62% Nº OF BRANCHES 1,334 415 31.11% 1,302 419 32.18%

Source: Central Bank of Brazil.

Important EventsMarch 2008 – Banrisul inaugurates regional sales office and expands its presence in Santa

Catarina state. The Santa Catarina Regional Office was inaugurated on March 17, 2008 in

the city of Blumenau. The opening of a regional sales office and the expected inauguration

of ten more branches in the regions of Vale do Itajaí, Greater Florianópolis and the southern

coast of the state, cover the first phase of Banrisul's expansion plans for that state. By the

end of 2008, the service network will have 23 branches, plus an increase in the number of

ATMs, correspondent banking units and business establishments affiliated to the

Banricompras network. The expansion project for Santa Catarina state is intended to

strengthen the relationship with local clients, promote alliances that boost the state’s

development and expand Banrisul's scale of operations.

March 2008 – Distribution of Additional Dividends. The Board of Directors of Banrisul

submitted the bank’s proposal for payment of additional dividends of 10% for the years

2007 and 2008. This proposal was approved at the Annual and Extraordinary General

Meeting held on March 25, 2008, resulting in the payment of dividend at 35% of adjusted

Net Income.


Awards and Recognition

January 2008. Banrisul provides the best return on Stockholders’ equity

among the banks in Brazil.

Banrisul is the top bank in Brazil in return on Stockholders’ equity. Annualized

return was 45.2% on profits accrued till September 2007. The study was carried

out by the consulting firm Economática and published in the magazine IstoÉ

Dinheiro.

February 2008. Banrisul is one of the best investment options for 2008.

Banrisul is one of the best investment options for 2008, according to the magazine

Exame. According to the São Paulo-based magazine, the Bank has the third

highest potential growth rate (50%) among banks.

March 2008. Banrisul receives award for development of integrated card.

International recognition came in the form of the award for the best integrated

card project - e-government (Certifying Authority of Rio Grande do Sul) and the

banking system. The award was given at the 10th year celebrations of the

MULTOS System in London. This award represents international recognition of

the cutting-edge technology implemented at the Bank. MULTOS is Banrisul's

operating system for chip cards. One of its competitive advantages is its capability

to support several applications. MULTOS enables a card to be used both for

debit transactions, within the international EMV standard, and for security in online banking

operations, besides the digital certification from the state’s Certifying Authority.

March 2008. Reputação Corporativa Award.

Banrisul received the Reputação Corporativa award as one of the most prestigious

brands in Rio Grande do Sul, according to a survey, the first of its kind in Brazil,

conducted by the magazine Amanhã and Troiano Consultoria de Marca of São

Paulo.

April 2008. Banrisul joins the list of the world's largest companies.

For the first time in its history, Banrisul entered the list of the world's 2,000

largest companies, according to Forbes magazine. The Forbes ranking takes

into account annual sales in U.S dollars, profits, assets and market cap.


May 2008. Banrisul receives ‘Outstanding Smart Card Achievement –

Latin America’ award.

In May, the Smart Card Alliance Latin America (SCALA) awarded Banrisul the

‘Outstanding Smart Card Achievement – Latin America’ (OSCA-LA) award in

the Runner Up category for its Banrisul Internet Chip Card, considered the

most innovative and forward-looking project in Latin America. The awards

ceremony was held during the event CardTechSecurTech 2008 in Orlando,

USA.

June 2008. Banrisul is honored as the Best Public Financial Conglomerate

in Brazil.

Banrisul was elected the Best Financial Conglomerate in Brazil in the public

banking segment based on its financial results of 2007, by a study carried

out by the magazine Conjuntura Econômica of the Getúlio Vargas Foundation

(FGV). The recognition is based on the growth indicators in the domestic

market, economic and financial performance and size (Stockholders’ equity/

yield). This achievement is the result of the restructuring efforts at the Bank,

implementation of new management model, employee profit sharing program

and entry into the capital markets.

June 2008. Banrisul receives award for IT.

Banrisul won the e-finance 2008 award given by the magazine

Executivos Financeiros in the Electronic Data Transfer category, for its

innovative projects in IT and telecommunications infrastructure and

applications that helped to raise the quality of services provide by the

financial institutions in Brazil.

June 2008. Banrisul is elected one of the best retail banks in Brazil.

Banrisul was elected one of the five best retail banks in Brazil by the magazine

Balanço Financeiro 2008. The ranking was prepared by Austin Rating and

published in the newspaper Gazeta Mercantil of São Paulo. The study lists

the best in each category among banks, leasing companies, brokerages,

distributors, insurance companies, pension funds and investment companies.

The publication is an exhaustive report on the industry with the key indicators

of 432 institutions.


Economic and Financial Indicators

Results - R$ Million 1H07(*) 1H08(*) % 1Q08 2Q08(*) %1H08/1H07 2Q08/1Q08

(1) Including Personnel Expenses, Other Administrative Expenses and Other Operational Expenses.

(2) In 1Q08 and 1H08, includes Dividends of R$87.1 million paid in March 2008, as complementarydividend for the previous year, as decided by the Annual and Extraordinary General Meeting.

(3) Total Credit Portfolio

(4) Efficiency Ratio – 12-month period accumulation.

Personnel Expenses + Other Administrative Expenses / Net Financial Margin + Revenue fromServices Provided + Profit from Interest in Subsidiaries + (Other Operational Income – OtherOperational Expenses)

(5) Fixed Assets / Stockholders’ Equity.

(6) Net Income / Average Stockholders’ Equity.

(7) Net Income / Average Total Assets.

(*) Including the effects of tax credits of R$528.5 million booked in March 2007, and R$86.2million in May 2008.

Gross Profit from Financial Operations ......................... 660.7 794.5 20.3 394.8 399.7 1.3Income from Services Rendered .................................... 266.5 271.9 2.0 143.3 128.6 (10.2)Administrative and Other Operational Expenses (1) ....... 698.6 766.4 9.7 366.2 400.2 9.3Income from Operations .................................................. 280.0 310.8 11.0 166.4 144.5 (13.2)Consolidated Net Income ................................................. 725.1 308.2 (57.5) 120.9 187.3 54.9

Used / Distributed Results - R$ Million

Interest on Own Capital - Dividends (2).............................................. 172.2 189.6 10.1 87.1 102.5 17.7

Balance Sheets - R$ Million

Total Assets ..................................................................... 17,170.3 23,223.1 35.3 21,630.1 23,223.1 7.4Total Lending(3)

............................................................................................................... 6,866.7 9,951.6 44.9 8,860.7 9,951.6 12.3Own Funding, Net and Under Management ................... 15,388.0 18,273.6 18.8 17,622.0 18,273.6 3.7Stockholders’ Equity ........................................................ 1,845.9 2,906.3 57.4 2,821.7 2,906.3 3.0Equity Index ..................................................................... 1,844.0 2,791.8 51.4 2,711.1 2,791.8 3.0Average Stockholders’ Equity ........................................ 1,570.5 2,849.2 81.4 2,806.8 2,864.0 2.0Average Total Assets ................................................. 16,409.4 21,841.7 33.1 21,046.9 22,426.6 6.6

Financial Index (%) per Year

Return on Total Assets .................................................... 8.6% 2.7% 2.3% 3.3%Efficiency Ratio(4)

........................................................................................................ 57.5% 56.9% 56.1% 56.9%Basel Ratio ....................................................................... 21.1% 22.2% 24.2% 22.2%Fixed Assets Ratio(5)

............................................................................................... 6.1% 4.0% 4.1% 4.0%ROAE Annualized(6)

.................................................................................................. 113.7% 22.8% 18.4% 28.8%ROAA Annualized(7)

.................................................................................................. 9.0% 2.8% 2.3% 3.4%


Assets Composition (R$ Million)

Total Assets (R$ Million)

Consolidated Balance Sheetfor the 1st Half of 2008

Total Assets

Of the total asset balance in June 2008, 42.9%

are Credit operations, 39.3% are Interbank

Transactions and Securities, 13.8% Interbank

and Interbranch accounts and 4.0% are Other

Assets.

Total Assets at the end of the first half of 2008

amounted to R$23.223.1 million, 35.3% more

than in June 2007 and 7.4% (R$1,593.0

million) more than in March 2008.

The growth in assets in the past twelve months

is mainly due to the higher volume of deposits

(amounting to R$2,092.9 million), and the

capital increase of R$800 million.

The growth in the asset portfolio is aslo mainly

due to the increase in credit and treasury

operations, amounting to R$3,084.9 million

and R$1,811.2 million, respectively, in relation

to June 2007.

Securities

Investments in Securities totaled R$6,587.3

million in June 2008, which was 11.6% higher

than in June 2007 and 4.0% higher than in

March 2008. This amount includes Liquid

Interbank Transactions but excludes Total

Liabilities from Matched Transactions.

The capital increase of R$800 million in July

2007, and the growth in deposits, which totaled

R$2,092.9 million in 12 months, were

responsible for the increased investment in

securities.

Securities and LiquidInterbank Invetments*

(R$ Million)

(*) reduced from Onlending.


Interbank and Interbranch Transactions

The balance of Interbank and Interbranch

transactions was R$3,202.3 million at the end

of June 2008, which is R$735.4 million (29.8%)

more than in June 2007 and R$178.9 million

(5.3%) less than in March 2008.

The year-on-year growth is due to the volume

of mandatory deposits on demand deposits

and savings accounts totaling R$2,092,9 million,

resulting in the higher volume of mandatory

deposits, amounting to R$480.3 million

Interbank and Interbranchtransactions (R$ Million)

Demand for credit remained intense in the first

half of 2008, especially in the Companies

segment, reflecting the consolidation of the

growth cycle in the Brazilian economy. Volume

of credit operations at Banrisul totaled

R$9,951.6 million in June 2008, which is 44.9%

higher than in June 2007. 24.0% over

December 2007 and 12.3% higher than in

March 2008.

Total Credit Operations(R$ Million)

Breakdown of Credit to Companies by Company Size

Of the total credit operations as of in June 2008, 52.2% correspond to credit to Companies

and 47.8% to Individuals. The breakdown of credit operations to Companies by company size

is given in the following table.

The increase in demand for credit in the Companies segment reflects the dynamic economic

activity since 2007. The volume of credit to Companies increased 59.8% in the past 12 months,

in which the share of large companies rose from 19.8% to 25.3% of the total volume.

Credit Operations


Breakdown of Credit by Sector

The breakdown of the credit portfolio by sector is given in the following chart. Of the total

loans disbursed, 98.2% went to the private sector, which grew by 46.2% in 12 months. The

highlight was the business segment, where industry and commerce grew by 76.0% and 74.3%,

respectively, in the past 12 months.

Breakdown of Credit to Companies by Company Size (R$ Million)

2Q07* 1Q08* 2Q08% % Total % % Total % %Total

Size BalanceCo. Portfolio

BalanceCo. Portfolio

BalanceCo. Portfolio

2Q08/1Q08 2Q08/2Q07

Large Companies 1,356.2 41.7% 19.8% 2,154.6 47.4% 24.3% 2,521.4 48.6% 25.3% 17.0% 85.9%

Total Middle/Small/Micro 1,892.3 58.3% 27.6% 2,389.1 52.6% 27.0% 2,670.0 51.4% 26.8% 11.8% 41.1%

Middle Companies 1,435.1 44.2% 20.9% 1,827.1 40.2% 20.6% 2,063.7 39.8% 20.7% 13.0% 43.8%

Small Companies 292.5 9.0% 4.3% 419.3 9.2% 4.7% 469.2 9.0% 4.7% 11.9% 60.4%

Micro-companies 164.7 5.1% 2.4% 142.7 3.1% 1.6% 137.0 2.6% 1.4% (4.0%) (16.8%)

Total Companies 3,248.5 100.0% 47.3% 4,543.7 100.0% 51.3% 5,191.4 100.0% 52.2% 14.3% 59.8%

Total LendingOperations 6,866.7 100.0% 8,860.7 100.0% 9,951.6 100.0% 12.3% 44.9%

* Reclassified

The criterion used for determining company size is average monthly revenue: micro – up to R$20,000; small –up to R$200,000, mid-sized – up to R$10million and large – above R$10 million.

Breakdown of Credit by Sector (R$ Million)

2Q07 1Q08 2Q08 2Q08/1Q08 2Q08/2Q07

Municipality Public SectorGovernment - Direct and Indirect Management .... 158.7 168.6 163.3 (3.1%) 2.9%Corporate - Other Services ..................................... 28.4 22.8 20.7 (9.2%) (27.1%)

Total Public Setor .................................................... 187.1 191.4 184.0 (3.9%) (1.6%)Private Sector

Rural ........................................................................ 559.2 618.2 667.4 8.0% 19.3%Industrial ................................................................. 1,332.6 1,952.6 2,345.0 20.1% 76.0%Commercial ............................................................ 817.9 1,256.8 1,425.4 13.4% 74.3%Other Services ........................................................ 702.6 880.1 996.7 13.3% 41.9%Individuals ............................................................... 2,494.4 3,120.9 3,446.5 10.4% 38.2%Housing .................................................................. 773.0 840.8 886.7 5.5% 14.7%

Total Private Sector ................................................. 6,679.7 8,669.3 9,767.6 12.7% 46.2%

Total ........................................................................... 6,866.7 8,860.7 9,951.6 12.3% 44.9%


Breakdown of Credit by Portfolio

The Portfolio breakdown shows the free and directed credit invested in loan assets. Investments

in the Commercial portfolio, Leasing and the Public sector, which account for 74.6% of the

total portfolio, are originated from free credit deposit. The Deveopment, Rural, Real Estate

and Foreig Exchange portfolios accounting for 25.4% of the total portolio, are mostly from

specific funding sources and hence used for directed credit.

The Commercial portfolio, which consists of the Individual and Companies segments, totaled

R$7,168.5 million at the end of June 2008, accounting for 72.0% of the total credit volumes

(see item Commercial Credit).

Real estate credit totaled R$886.7 million at the end of June 2008, representing 8.9% of total

credit volume. These operations grew by 14.7% in 12 months and 5.5% in relation to March

2008.

Rural credit totaled R$667.4 million in June 2008, which was 19.3% higher than in June 2007,

and 8.0% higher than in the first quarter of this year. As of end-June 2008, Rural credit

represented 6.7% of total credit operations.

The Development portfolio at the end of June 2008 totaled R$578.6 million, representing

5.8% of total credit volume. Long-term loans grew by 37.4% in 12 months and by 7.9% in

relation to March 2008.

Breakdown of Credit by Portfolio

Credit Portfolio 2Q07 1Q08 2Q08 2Q08/1Q08 2Q08/2Q07

Commercial Credits - Private Sector ...................... 4,618.0 6,283.3 7,168.5 14.1% 55.2%Individuals ............................................................. 2,494.4 3,120.9 3,446.5 10.4% 38.2%Companies ........................................................... 2,123.6 3,162.4 3,722.0 17.7% 75.3%

Public Sector ........................................................... 187.1 191.4 184.0 (3.9%) (1.6%)Development ........................................................... 421.1 536.4 578.6 7.9% 37.4%Housing ................................................................... 773.0 840.8 886.7 5.5% 14.7%Rural Credit ............................................................. 559.2 618.2 667.4 8.0% 19.3%Foreign Exchange/Export ........................................ 268.4 335.5 396.6 18.2% 47.7%Lease - companies ................................................. 39.8 55.1 69.8 26.7% 75.2%

Total Operations ..................................................... 6,866.7 8,860.7 9,951.6 12.3% 44.9%


General Credit to Individuals

Consumer credit continued to grow in the first half of 2008, reflecting the favorable prospects

for employment and income. One must also highlight the efforts made by the Bank in this

market, especially through loans to public servants through agreements signed with 322

municipal governments, giving it exclusive rights in payroll-deducted credits.

General Credit to Individuals in June 2008 totaled R$3,446.5 million, growth of 38.2%

(R$952.1 million) over June 2007, 27.0% (R$733.4 million) over December 2007 and 10.4%

(R$325.6 million) over March 2008.

The main type of general credit to individuals is payroll-deducted credit, which, at the end of

June 2008, represented 70.2% of total Commercial Credit to Individuals and 33.7% of

Commercial Credit. The growth in payroll-deducted credit was 72.8% (R$1,019.3 million) in 12

months and 9.6% (R$211.7 million) in relation to March 2008. The breakdown of the general

credit to individuals follows:

Growth of Commercial CreditOperations Individuals and

Companies (R$ Million) Commercial Credit

The growth in the total volume of credit is

basically from the growth in the Commercial

Credit. Of the increase of R$3,084.9 million in

total credit portfolio in the past 12 months,

R$2,550.5 million came from Commercial

Portfolio, which grew 55.2% over June 2007.

In the previous quarter, the Commercial

Portfolio grew by 14.1% or R$885.2 million.

Of the Commercial Credit amount, the Individuals segment amounted to R$3,446.5 million at

the end of June 2008, accounting for 48.1% of the commercial portfolio and 34.6% of the

Bank’s total credit operations. The Companies segment, with a balance of R$3,722.0 million in

June 2008, accounted for 51.9% of Commercial Credit and 37.4% of total credit.

Breakdown of General Credit to Individuals (R$ Million)

2Q07 1Q08 2Q08 2Q08/1Q08 2Q08/2Q07

Payroll-deductible Loan .......................................... 1,400.0 2,207.6 2,419.3 9.6% 72.8%Payroll-deductible Individual Loan ......................... 1,355.1 2,089.8 2,296.6 9.9% 69.5%

Own Portfolio ........................................................ 1,196.1 1,757.0 1,947.1 10.8% 62.8%Third-party Acquired Portfolio ............................... 159.0 332.8 349.5 5.0% 119.8%

Vehicule Loan .......................................................... 52.7 134.0 140.9 5.2% 167.3%Payroll-deductible Vehicule Loan ........................ 44.8 117.8 122.7 4.2% 173.8%Non Payroll-deductible ......................................... 7.9 16.3 18.2 12.0% 130.2%

Individual Loan ........................................................ 631.2 412.9 479.7 16.2% (24.0%)Overdraft Account .................................................... 283.9 314.3 328.2 4.4% 15.6%Others - Individuals ................................................. 171.4 169.8 201.0 18.4% 17.3%

Total Individuals ...................................................... 2,494.4 3,120.9 3,446.5 10.4% 38.2%


General Credit to Companies

The dynamic economic activity led companies to require higher volume of credit to sustain their

operations. Thus, General Credit to Companies totaled R$3,722.0 million at the end of June

2008, representing growth of 75.3% (R$1,598.4 million) in 12 months, 32.3% (R$908.3 million)

in 6 months, and 17.7% (R$559.6 million) in the past 3 months.

Working Capital operations account for the biggest share, representing 74.0% of total General

Credit to Companies in June 2008, and 38.4% of the Commercial Credit. Working Capital lines

grew by 86.7% (R$1,278.2 million) in 12 months and 18.2% (R$423.7 million) in relation to

March 2008. The breakdown is given below:

General Credit to Companies (R$ Million)

2Q07 1Q08 2Q08 2Q08/1Q08 2Q08/2Q07

Guaranted Account .................................................. 264.8 280.5 390.0 39.0% 47.2%Working Capital ....................................................... 1,475.2 2,329.7 2,753.4 18.2% 86.7%Vendor ...................................................................... 112.0 181.9 178.2 (2.0%) 59.1%Debt Instruments Discount ..................................... 160.7 217.4 239.8 10.3% 49.2%Other - Companies ................................................. 110.9 153.0 160.6 5.0% 44.8%

Total Companies ..................................................... 2,123.6 3,162.4 3,722.0 17.7% 75.3%

Breakdown of Portfolio by Rating

Banrisul’s credit management policy is focused

on monitoring the quality of the portfolio. Risk

is minimized by increasing the volume of

payroll-deducted operations, selective

operations with large companies, and dispersal

of credit to small and medium companies,

thereby enabling the continuous improvement

of the portfolio quality.

At the end of June 2008, credit operations

rated between AA and C, signifying normal risk

according to Resolution 2682/99 of the Brazilian

Central Bank, represented 85.1% of the credit

portfolio, as against 79.7% in June 2007 and

84.0% in March 2008.

Credit Portfolio by Risk Levels

(R$ Million)


Alowance for Loan Losses

Allowance for loan losses was R$917.9 million,

equivalent to 9.2% of the consolidated credit

portfolio. In June 2007, the allowance was

equivalent to 12.4% and in March 2008, 10.0%.

The decrease in the allowance is due to the

improvement in the quality of the credit

portfolio.

Allowance for Loan Losses (R$ Million)

The breakdown of allowance for loan losses in June 2008, according to Resolution 2682/99 of

the Brazilian Central Bank, was as follows:

• R$261.5 million for operations with installments overdue for more than 60 days;

• R$547.6 million for contracts falling due or are overdue for up to 60 days; and

• R$108.8 million based on percentage above that is legally required to complement the amount

equivalent to 100% of the existing balance of loans overdue for more than 60 days, including

long term operations with installments overdue for more than 60 days and renegotiated loans,

even if they have not fallen due.

The amount of R$108.8 million for additional provisions represents 11.9% of the total provision

balance.

Balance of Allowance for LossesR$ Million

Accumulated Total Resolution EffectiveRating Required Total Relative Credits Total Past 2682 Total Provision

Provision Portfolio Status Paste Credits Exceeded Over% Consolidated % Due Receivable Due Receivable Provision Provision Portfolio%

AA 0.0% 1,956.6 19.7% 0.0 1,956.6 0.0 0.0 0.0 0.0 0.0%A 0.5% 3,807.1 57.9% 0.8 3,806.3 0.0 19.0 2.7 21.7 0.6%B 1.0% 1,735.0 75.4% 0.6 1,734.4 0.0 17.3 10.0 27.3 1.6%C 3.0% 976.7 85.2% 6.4 970.3 0.2 29.1 17.6 46.9 4.8%D 10.0% 289.7 88.1% 9.6 280.1 1.0 28.0 12.5 41.5 14.3%E 30.0% 217.8 90.3% 10.6 207.2 3.2 62.1 10.3 75.6 34.7%F 50.0% 601.3 96.3% 56.6 544.7 28.3 272.3 47.6 348.2 57.9%G 70.0% 63.0 96.9% 21.2 41.8 14.8 29.4 8.1 52.3 83.0%H 100.0% 304.4 100.0% 214.0 90.4 214.0 90.4 0.0 304.4 100.0%

Total 9,951.6 319.8 9,631.8 261.5 547.6 108.8 917.9 9.2%

Balance of Allowance for Losses


Default Ratio

Banrisul’s risk management policy, which focuses

on leveraging lower risk portfolios, has proven

successful, given the significant reduction in

defaults in operations overdue for more than

60 days, in comparison with the total credit

portfolio, as shown in the graph below:

Default Ratio Quarterly Trends(%)

Funds Raised and Under Management

Funds raised and undermanagement (R$ Million)

Funds raised and under management totaled

R$18,273.6 million at the end of June 2008,

which is 18.8% more than in June 2007. In

comparison with December 2007, funds raised

were 6.6% higher and in comparison with March

2008, growth was 3.7%.

The growth of R$2,885.6 million in the past

12 months comes mainly from the increase in

deposits, amounting to R$2,092.9 million. In

the past 6 months, deposits contributed

R$638.8 million and funds R$484.9 million to

the total growth of R$1,123.7 million. In the

past quarter, R$651.7 million came from

deposits in the amount of R$535.0 million.

Cover Rate

Credit operations overdue for more than 60

days and that do not generate revenue totaled

R$319.8 million in June 2008, representing

3.2% of the total credit portfolio. The following

graph shows the coverage ratio, represented

by the percentage between the provision for

credit losses and the balance of operations

overdue for more than 60 days that do not

generate revenue, which shows the capacity to

cover defaults with provisions.

Cover Rate (%)


Demand Deposits

Demand Deposits, which make up 8.5% of the funds raised and under management, totaled

R$1,562.0 million at the end of June 2008, which represents growth of R$353.3 million (29.2%)

over the same period last year, a R$265.7 million (14.5%) decline compared to December

2007 and an increase of R$99.2 million (6.8%) since March 2008.

The reduction in deposits since December 2007 is due to the seasonal impact and the influence

of the revocation of the CPMF tax last year-end, which resulted in clients maintaining their funds

in their checking accounts for future investments. The growth in deposits in the last quarter

comes mainly from company deposits.

Savings Accounts

Savings accounts totaled R$4,468.0 million at the end of June 2008, with growth of R$564.1

million (14.4%) over June 2007, reduction of R$165.8 million (3.6%) from December 2007 and

remaining practically stable in relation to March 2008. These funds represent 24.5% of the

total funds raised and under management.

Time Deposits

Time deposits represent 38.1% of total funds raised and under management. At the end of

June, Time Deposits totaled R$6,964.3 million, growth of R$1,251.6 million (21.9%) higher

than in June 2007, R$1,083.2 million (18.4%) higher than in December 2007, and R$439.1

million (6.7%) higher than in March 2008.

The increase is mainly due to their attractiveness when compared to other funding products and

encouragement they get through business policies as they are the main funding instrument for

free rate credit operations.

Third Party Funds

Funds under management totaled R$5,268.9 million at the end of June 2008, representing

growth of 17.7% (R$792.7 million) over June 2007, growth of 10.1% (R$484.9 million) over

December 2007 and 2.3% (R$116.6 million) over March 2008.

The growth in Funds under Management in the past 12 months is due to the performance of the

referenced and fixed income funds, which totaled R$375.3 million, and the new fixed income

products launched in September 2007, which raised more than R$165.4 million this half-year.

Funding Composition (R$ Million)

2Q07 1Q08 2Q08 2Q08/1Q08 2Q08/2Q07

Time Deposits ......................................... 5,712.7 6,525.2 6,964.3 6.7% 21.9%Demand Deposits ................................... 1,208.7 1,462.8 1,562.0 6.8% 29.2%Saving Deposits ....................................... 3,903.9 4,454.5 4,468.0 0.3% 14.4%Other Deposits ......................................... 86.6 27.2 10.4 (61.8%) (88.0%)Funds under Management ...................... 4,476.2 5,152.2 5,268.9 2.3% 17.7%TOTAL ....................................................... 15,388.0 17,622.0 18,273.6 3.7% 18.8%


Cost of Funding

In the past 12 months, the growth in the

volume of deposits was in a scenario of high

funding costs as in relation to the Selic rate:

from 71.99% in 2Q07 to 74.44% in 2Q08, is

compatible with the context of a reduction in

the basic interest rates, which reflects in the

higher premium demanded by investors to

maintain their funds in remunerated deposits.

The reduction in the average cost of Time

Deposits, the main funding instrument, from

2.60% in 2Q07 to 2.50% in 2Q08 is directly

Cost of Funding (%)

related to the widely dispersed funding structure, with most of the deposits coming directly

from the branches.

The raise in the basic interest rate last quarter led to the increase in the average cost of funding,

from 1.97% in 1Q08 to 2.07% in 2Q08.

Cost of Funding (R$ Million)

2Q07 2Q07 1Q08 1Q08 2Q08 2Q08Average Accumulated Average Average Accumulated Average Average Accumulated AverageBalance Expenses Cost Balance Expenses Cost Balance Expenses Cost

Demand Deposits .......................................... 1,203.8 1,453.0 1,473.7Saving Deposits ............................................ 3,814.9 (63.2) 1.7% 4,501.0 (66.6) 1.5% 4,426.6 (67.9) 1.5%Time Deposits ............................................... 5,590.5 (145.5) 2.6% 6,364.5 (151.3) 2.4% 6,865.8 (171.9) 2.5%Interbank Deposits ......................................... 77.4Credit Guarantee Fund Expenses .............. (4.0) (4.6) (4.8)Matched Transactions Expenses ............... 1,297.9 (39.7) 3.1% 2,255.7 (65.0) 2.9% 2,372.2 (68.9) 2.9%Payable for Financial and Development Funds ................................... 2.1 1.8 1.9Investment Deposits ..................................... 10.9 16.7 11.5

Total Average Balance / Total Expenses 11,997.4 (252.4) 2.1% 14,592.7 (287.5) 2.0% 15,151.6 (313.5) 2.1%

Selic ................................................................ 2.9% 2.6% 2.8%Average Cost / Selic .................................... 72.0% 75.4% 74.4%

Cost of Time Deposits / Selic ................. 89.1% 91.0% 90.1%


At the end of June 2008, Stockholders’ Equity

of Banrisul was R$2,906.3 million, a 57.4%

growth over June 2007, 4.1% in comparison

with December 2007 and 3.0% over March

2008.

The public share offering amounting to R$800

million and the incorporation of the results

generated in the period were responsible for

the growth in Stockholders’ Equity. The General

and Extraordinary General Meeting of the

stockholders approved a 10% increase in the

dividends relating to the years 2007 and 2008,

by which they will increase from 25% to 35%

of adjusted net income. Thus, in March 2008, an additional sum of R$87.1 million was allocated

to the dividends provisioned in 2007.

Stockholders´ Equity

Renturn on Average Stockholders´ Equity

Annualized return on average stockholders’

equity was 22.8% in the first half of 2008. The

equity structure underlines the solid financial

condition of the Bank, as evident from the ratio

of Stockholders’ Equity to Total Assets, which

rose from 10.7% at the end of June 2007 to

12.5% in June 2008.

Return on AverageStockholders’ Equity (%)

Basel Ratio

The Basel Index represents the ratio of reference

equity to risk-weighted assets, which shows the

Company’s capital adequacy. The Brazilian

Central Bank has set the minimum capital

adequacy ratio at 11.0%. Banrisul’s Basel Index

was 22.2% in June 2008, 11.2 p.p. over the

minimum. This difference enables the Bank to

maintain the accelerated growth of its credit

operations.

Evolution of Basel Ratio (%)

Stockholders’ Equity (R$ Million)


Pace of Growth

The pace of growth in funding and lending, measured by the relative growth in the volumes in 12

months, is given the following graph. The growth trajectory of credit, averaging 38% every 12

months, has maintained a significant pace due to the growth in deposits of 21.0%.

Imbalances between the credit portfolio and funding sources may adversely affect operational

results and the Bank’s capacity to increase its credit assets. The risk of mismatch between

assets and liabilities is still driven by pricing (interest rate risk) and by maturities.

Banrisul´s fast credit growth is monitored by its Economic Management and Banking Committees.

The balance between assets and liabilitites positions is reviewed on a weekly basis, in order to

maintain the current liquidity status, and changed promptly in accordance with market changes.

Banrisul’s liquidity risk is considered low by Austin Asis a risk rating agency, due to the dispersal

of its funding structure. Time deposits, its main funding instrument, are obtained at the branches

and are contracted under fixed or floating rates, which represented 66% and 34% of such

portfolio in June 2008, respectively.

Therefore, the stability of the funds raised, thanks to the historically high volume of funding on

account of the capillarity of the service points and of the bank’s customers, and also to the

substantial securities portfolio and stockholder’s equity of Banrisul, enables it to sustain the

brisk growth in credit assets.

Total Credit – Brazilian Financial System and Banrisul,Banrisul - Commercial Credit, Total Funding,

Pace of Growth in 12 months


Net Income (R$ Million)

Banrisul’s performance in the first half of 2008 reflects the higher volume of revenues from

credit operations, thanks to the growth 44.9% in the volume of operations in 12 months, as

well as the improment in credit quality, which resulted in a reduction in the allowance for loan

losses. The performance of the Securities portfolio, which grew by 11.6% over June 2007, also

contributed to the income.

Income Adjusted for Extraordinary Events

Excluding the effects of tax credits, the Net Income of R$222.0 million in the first half of 2008

is R$25.4 million (12.9%) higher than the R$196.6 million in the first half of 2007. In 2Q08, Net

Income was R$101.1 million, which was 16.6% (R$14.4 million) higher than in 2Q07 and 16.4%

(R$19.8 million) lower than in 1Q08.

Adjusted Net Income (R$ Million)

Consolidated Income Statementfor the 1st Half of 2008

Consolidated Results for the 1st half of 2008

Consolidated Net Income totaled R$308.2 million in the first half of 2008, as against R$725.1

million in the same period last year. The results of both periods were impacted by the booking

of deferred income tax and social contribution credits on temporary differences relating to

earlier periods, amounting to R$528.5 million in the first half of 2007 and R$86.2 million in the

first half of 2008

In 2Q08, Consolidated Net Income totaled R$187.3 million, which is 116.0% (R$100.6 million)

more than in 2Q07 and 54.9% (R$66.4 million) more than in 1Q08. The tax credits of R$86.2

million were booked in 2Q08.


Revenues from Credit Operations

Revenues from credit operations totaled R$1,000.6 million in the first half of 2008, 23,4%

(R$189.8 million) more than in the first half of 2007. In 2Q08, Revenues from credit operations

totaled R$521.2 million, 25.3% (R$105.4 million) more than in 2Q07 and 8.9% (R$42.2 million)

more than in 1Q08.

Revenues from Commercial Credit, which correspond to 88.9% of the revenues from General

Credit, totaled R$460,2 million in 2Q08, of which R$288.4 million originated from Indiviuals,

R$170.5 million from the Companies segment and R$1.3 million from the public sector.

Revenues from credit operations and leasing (R$ Million)

Financial Income

Financial Income totaled R$1,582.3 million in the first half of 2008, 17.3% (R$233.0 million)

higher than in the same period in 2007, mainly from the growth in credit revenues amounting to

R$188.1 million.

In 2Q08, Financial Income totaled R$812.1 million, 18.7% (R$127.7 million) higher than in the

same quarter last year and 5.4% (R$41.8 million) over 1Q08.

In the last quarter, the main factors that impacted Financial Income were: credit revenues, which

grew R$41.4 million (due to the 12.3% increase in the volume of operations, amounting to

R$1,090.9 million), increase in Securities revenues, amounting to R$7.2 million, and Income

from Compulsory Investments, which rose R$7.9 million,on account of the 4.0% (R$255.4

million) growth in treasury transactions).

Financial Income (R$ Million)


Revenues from commercial credit to individuals and companies

In 2Q08, revenues from Commercial Credit to Individuals and Companies totaled R$458.9

million, 28.6% more than in 2Q07 and 12.4% more than in 1Q08.

Revenues from Commercial Credit to Individuals totaled R$288.4 million in 2Q08, 21.5% (R$50.9

million) more than in 2Q07 and 11.5% (R$29.8 million) more than in 1Q08. In the Companies

segment, revenues totaled R$170.5 million, a 42.9% (R$51.2 million) increase over 2Q07 and

14.1% (R$21.0 million) over 1Q08.

Among the types of credit to individuals, Payroll-deducted loans and Overdraft account for

48.9% and 27.5% of the segment’s revenues. Together, they account for 76.4% of the segment’s

revenues and 48.0% of the revenues from Commercial Credit.

In the Companies segment, Working Capital credit accounts for 65.8% of the segment’s revenues

and 24.4% of the revenues from Commercial Credit.

Payroll-deducted loans and Working Capital credit jointly account for 55.2% of the revenues

from Commercial Credit.

Revenues from Commercial Credit – Individuals and Companies (R$ Million)

The growth in revenues in 12 months is due to the increase in the volume of operations, given

the falling interest rates. In the past 3 months, the increase in the number of loans resulted in

growing revenues, accompanied by the adjustments in the costs of loans, reflecting the rise in

the basic rate.

2Q07 1Q08 2Q08 2Q08/1Q08 2Q08/2Q07

Payroll-deductible Loan ............... 87.5 122.2 141.1 15.4% 61.2%Payroll-deductible Individual Loan 86.4 117.3 135.4 15.4% 56.6% Own Portfolio .............................. 81.8 107.5 123.6 14.9% 51.0% Third-party Acquired Portfolio .... 4.6 9.7 11.8 21.2% 155.3%Vehicule Loan ............................... 1.6 5.8 6.7 14.2% 313.5% Payroll-deductible Vehicule Loan 1.1 5.0 5.7 14.2% 429.1% Non Payroll-deductible .............. 0.5 0.9 1.0 14.5% 83.2%Individual Loan ............................. 73.1 49.4 52.0 5.3% (28.9%)Overdraft Account ......................... 71.1 71.2 79.3 11.3% 11.5%Other - Individuals ........................ 5.1 14.9 15.1 1.5% 195.4%

Total Individuals .......................... 237.5 258.6 288.4 11.5% 21.5%

Guaranted Account ...................... 31.4 29.5 33.2 12.6% 5.6%Working Capital ............................ 69.7 98.5 112.2 13.8% 61.0%Vendor ........................................... 4.1 4.9 5.8 17.0% 40.1%Debt Instruments Discount ......... 9.6 11.6 13.0 12.2% 36.3%Other - Companies ...................... 4.5 5.0 6.4 28.4% 41.3%

Total Companies ......................... 119.3 149.5 170.5 14.1% 42.9%


Banrisul Consolidated2Q07 1Q08 2Q08

Payroll-deductible Loan ............................................................... 2.21% 1.92% 2.00%Payroll-deductible Individual Loan ............................................. 2.23% 1.95% 2.02% Own Portfolio ............................................................................. 2.33% 2.10% 2.19% Third-party Acquired Portfolio ................................................... 1.26% 1.09% 1.12%Vehicule Loan .............................................................................. 1.47% 1.50% 1.60% Payroll-deductible Vehicule Loan ............................................. 1.23% 1.45% 1.56% Non Payroll-deductible ............................................................. 2.40% 1.85% 1.88%Individual Loan ............................................................................ 3.65% 4.37% 3.73%Overdraft Account ........................................................................ 8.15% 7.93% 8.28%Other - Individuals ....................................................................... 0.96% 2.74% 2.58%

Total Individuals ......................................................................... 3.21% 2.88% 2.87%

Guaranted Account ..................................................................... 3.10% 3.67% 3.06%Working Capital ........................................................................... 1.69% 1.46% 1.42%Vendor .......................................................................................... 1.12% 1.01% 1.03%Debt Instruments Discount ........................................................ 2.04% 1.82% 1.83%Other - Companies ..................................................................... 1.51% 1.30% 1.42%

Total Companies ........................................................................ 1.90% 1.65% 1.59%

Commercial Credit Rates – Individuals and Companies

Financial Expenses

Financial Expenses totaled R$787.8 million in the first half of 2008, 14.4% more than in 2007.

In 2Q08, Financial Expenses totaled R$412.3 million, 24.5% more than in 2Q07 and 9.8% more

than in 1Q08.

The increase of R$99.2 million in 12 months is due to the increase in the volume of funds raised,

which reflected in the increase in expenses with funding operations (R$76.8 million) and the

expenses with borrowings, assignments and onlendings (R$37.7 million) which were offset by

the lower need for allowance for loan losses (R$15.3 million).

The R$81.2 million difference in 2Q08 over 2Q07 is due to the rise in the volume of funds in the

Reserve Fund for Judicial Deposits, whose remuneration is based on the Selic rate and is

compensated by the revenue of the same amount, booked under Securities.

The increase in Financial Expenses last quarter, amounting to R$36.9 million is due to the increase

in the volume of funds raised (R$535.0 million), impacting the Expenses with Market Funding

Operations in the amount of R$26.0 million, and the greater need for allocation of allowances

for loan losses (R$21.4 million) in relation to 1Q08.

Financial Expenses (R$ Million)


Expenses with Market Funding Operations

Expenses with Market Funding Operations totaled R$601.0 million in the first half of 2008,

14.7% more than in the same period last year. In 2Q08, these expenses totaled R$313.5

million, 24.2% more than in 2Q07 and 9.1% more than in 1Q08.

The higher volume of expenses in 12 months is due to the growth in deposits (R$2,092.9

million) and open market funding (R$1,124.9 million), given that the effective basic half-yearly

rate, which signals the funding remuneration, fell from 6.03% in 2007 to 5.43% in 2008.

In the last quarter, the increase of R$26.0 million in Expenses with Market Funding Operations

was mainly due to the growth in Time Deposits, amounting to R$439.1 million.

Expenses with Market Funding Operations (R$ Million)

Allowance for Loan Losses

Expenses with allowance for loan losses totaled R$102.9 million in the first half of 2008, 13.0%

(R$15.3 million) less than in the same period in 2007. In 2Q08, expenses with allowance for

loan losses totaled R$62.2 million, 15.8% (R$8.5 million) more than in 2Q07 and 52.6% (R$21.4

million) more than in 1Q08.

The need for lower allocation of funds for allowance, in 12 months, is due to improvement in

the quality of the credit portfolio.

The rise in expenses with allowance for loan losses in 2Q08 over 1Q08 is mainly due to the

growth of the credit portfolio, without affecting payment delay and default rate.

Expenses with Provision for Loan Losses (R$ Million)


Gross Profit from Financial Intermediation

Gross Profit from Financial Intermediation in the first half of 2008, amounting to R$794.5

million, was 20.3% higher than in the same period last year, resulting from the bigger volume of

revenues from credit and treasury operations.

In 2Q08, Gross Profit from Financial Intermediation was R$399.7 million, 13.1% (R$46.4 million)

more than in 2Q07, and 1.2% (R$4.9 million) more than in 1Q08. The 2Q08 performance was

positively impacted by credit and securities and negatively by the higher volume of funding

expenses due to the increase in the volume of funds raised and the higher volume of allowance

for loan losses than in 1Q08.

Financial Margin

Financial Margin was R$897.4 million in the first half of 2008, 15.2% (R$118.5 million) more

than in the same period last year. In 2Q08, Financial Margin was R$461.9 million, 13.5% (R$54.9

million) more than in 2Q07 and 6.1% (R$26.4 million) more than in 1Q08.

The rise in the Financial Margin in 1H08 is due to the increase in revenues from credit and

treasury operations (R$220.6 million) which decreased because of the increase in expenses with

market funding operations (R$76.8 million) and expenses with borrowings, assignments and

onlendings (R$37.7 million).

In 2Q08, the increase in the Financial Margin in relation to 1Q08 is due to the higher revenues

from credit and treasury operations (R$41.4 million) which was reduced by the increase in

expenses with market funding operations, of R$26.0 million.

Financial Margin (R$ Million)


Revenue from Services

Revenues from Services totaled R$271.9 million in the first half of 2008, 2.0% (R$5.4 million)

more than in the same period in 2007. In 2Q08, Revenues from Services totaled R$128.6

million, a 2.8% (R$3.7 million) decline from 2Q07 and 10.3% (R$14.7 million) from 1Q08.

The increase in the volumes between the first half of 2007 and 2008 is due to the change in the

revenue mix and realignment of tariffs. The decreases in the quarterly comparison are due to

the implementation of a new tariff collection system, as required by the Brazilian Central Bank

starting from May 2008.

Administrative Expenses

Administrative Expenses totaled R$682.0 million in the first half of 2008, 12.9% (R$78.1 million)

more than in the first half of 2007. In 2Q08, Administrative Expenses totaled R$361.5 million,

21.6% (R$64.1 million) more than in 2Q07 and 12.8% (R$41.0 million) more than in 1Q08.

Personnel Expenses, which represent 59.7% of total Administrative Expenses, totaled R$407.2

million in the first half of 2008, 14.7% (R$52.1 million) more than in the first half of 2007. In

2Q08, Personnel Expenses were R$213.2 million, 17.2% (R$31.3 million) more than in 2Q07

and 9.9% (R$19.2 million) more than in 1Q08.

In 12 months, the increase in Personnel Expenses is partly due to the wage increase granted as

part of the collective bargaining agreement, which was agreed at 6.0% in September 2007, and

the higher volume of variable remuneration paid and provisioned as the performance target

model adopted in August 2006 has been stabilized. The changes in the quarterly volumes reflect

the concentration of employees on vacation in the first three months of the year.

Other Administrative Expenses totaled R$274.8 million in the first half of 2008, a 10.4% (R$26.0

million) increase over 1H07. In 2Q08, Other Administrative Expenses were R$148.3 million,

28.4% (R$32.8 million) more than in 2Q07 and 17.3% (R$21.9 million) more than in 1Q08.

The increase in Other Administrative Expenses in 12 months is due to the increased spending on

Advertising and Publicity (R$15.7 million) and Third-Party Services (R$8.6 million). The changes

in 2Q08 compared to 1Q08 are due to the increase in Communication Expenses (R$8.6 million)

and Advertising and Publicity (R$6.1 million).

Revenues from Services (R$ Million)


Personnel Expenses and Other Administrative Expenses (R$ Million)

Other Operating Income / Expenses

Other Operating Income

Other Operating Income totaled R$85.0 million in the first half of 2008, 32.4% (R$40.8 million)

down from the first half of 2007. In 2Q08, Other Operating Income totaled R$53.8 million,

62.0% (R$20.6 million) more than in 2Q07 and 73.0% (R$22.7 million) over 1Q08.

The reduction in Other Operating Income between 1Q07 and 1Q08 is due to the reversal of

provisions relating to the revision of the indexer of the lawsuit arising from foreign exchange

operations and the settlement of tax proceedings, launched in the first half of 2007, which did

not repeat this half-year.

The higher volume of Other Operating Income in the quarterly comparisons is due to the reversal

of the operating provisions booked in the period.

Other Operating Income (R$ Million)

Other Operating Expenses

Other Operating Expenses totaled R$84.4 million in the first half of 2008, 10.9% (R$10.3

million) lower than in the first half of 2007. In 2Q08, Other Operating Expenses totaled R$38.7

million, 15.7% (R$7.2 million) lower than in 2Q07 and 15.4% (R$7.0 million) lower than in

1Q08.


Economic Indicators

Operating Cost

Operating Cost measures the total of

Administrative Expenses in relation to Total

Assets. The ratio is calculated based on the

expenses in the 12 months against the balance

of assets at the end of the period being

analyzed.

Leverage Ratio

The Leverage Ratio is the ratio of the credit

operations portfolio to Shareholders’ Equity.

In June 2007, Banrisul’s credit operations were

3.7x Shareholders’ Equity, which declined to

3.1x in March 2008 and rose to 3.4x in June

2008.

The capital inflow from the July 2007 primary share offering amounting to R$800 million and the

incorporate of profits added greater value to Shareholders’ Equity than the growth in loans,

thereby reflecting the reduction in leverage in 12 months. In 2Q08, the increase in the leverage

ratio is related to the consistent growth of credit assets (by R$1,090.9 million) in comparison to

March 2008.

Leverage Ratio

Operating Cost

Banrisul’s ratio was 5.8% in the 12 months ended June 2008, below the 6.7% in the 12 months

ended June 2007. The growth in assets – 35.3% in the past 12 months, consequent to the

public offering, growth of credit and excellent funding operations have contributed to reducing

costs in relation to assets.

The reduction in Other Operating Expenses is due to the lower volume of Labor Provisions and

the reversal of revenues receivable from the state of Rio Grande do Sul, which were booked in

the first half of 2007, as per Agreement 1959/2007, between Banrisul and the state of Rio

Grande do Sul. In 2Q08, the reversal of labor provisions positively impacted Other Operating

Expenses.Other Operating Expenses (R$ Million)


Employee Productivity(R$ Thousand)

Efficiency Ratio

The Efficiency Ratio measures the volume of

resources from operating activities required to

cover administrative expenses. The ratio in 2Q08

remained practically stable in comparison to

2Q07 and 1Q08.

The improvement in operational efficiency in the

12 months is due to higher financial income from

credit and treasury operations, resulting in

lower administrative costs in relation to income.

Efficiency Ratio (%)

The productivity ratio, which is measured by the

total volume of business (funding and credit)

per employee, grew 24.8% in the past 12 months

to R$3,120.2 per employee, which is explained

by the Bank’s excellent business performance

and the system of variable remuneration, which

helps to raise productivity.

As of June 2008, Banrisul had 9,046

employees, 145 more than in June 2007.

Capital Ratio

The Capital Ratio measures the ratio of

Shareholders’ Equity to funds raised from the

public, including investment funds. Leverage

evaluates the safety that the company’s own

funds could offer to third-party capital.

In June 2008, the Capital Ratio was 15.9%,

3.9 p.p. more than in June 2007. The increase

in Shareholders’ Equity and the volume of funds raised through capitalization and reinvestment

of profits, equally add a higher margin for leverage third-party funds and, consequently, expand

credit operations.

Capital Ratio

Employee Productivity


Margin Analysis

The margin analysis in the chart below was based on the average balances of assets and liabilities,

calculated as of the closing balances of the months in each quarter.

The chart shows the revenue-generating assets and interest-bearing liabilities, the corresponding

financial incomes on assets and financial expenses on liabilities, as well as the effective average

rates generated by the respective yields and interest paid in each period.

Credit operations include advances on foreign exchange contracts and lease agreements, shown

at the current net value of the lease agreements. Income from credit operations overdue for

more than 60 days, irrespective of their risk level, will only be booked as revenues when they

are received. Income from lease operations is booked when each installment becomes due.

These criteria impact the average volume of income and the effective rates in the periods being

analyzed.

Average balances of interbank investments, funds invested or raised in the interbank market,

correspond to the redemption amount deducted from the income or expenses corresponding

to future periods.

Average balances of deposits, open-market funding, loans and onlendings, include the fees

payable till the date of closing of the financial statements, booked on pro rata die basis. As for

expenses related to these items, fees relating to deposits include the expenses relating to the

contribution to the Credit Guarantee Fund (FGC).

Interest booked in the balance sheet includes nominal interest and a component of monetary

restatement, which may be related to an inflation index, changes in exchange rates (usually U.S.

dollar) or floating interest rates. The interest and monetary restatement are applied at the end

of each month on the balance of the principal of each operation. The restated amount is the new

basis for calculating interest and monetary restatement of the next month, and so on, till final

settlement.

2Q2007 1Q2008 2Q2008Average Income Average Average Income Average Average Income Average Balance (Expense) Rate Balance (Expense) Rate Balance (Expense) Rate

Interest-Earning AssetsLoan Portfolio ................................ 6,424,584 419,959 6.5% 8,241,108 498,110 6.0% 9,306,047 516,682 5.6%Resales pending Settlement ......... 2,179,759 57,581 2.6% 3,685,814 96,409 2.6% 4,084,837 109,606 2.7%Money Market Investments .......... 113,984 3,752 3.3% 81,742 2,099 2.6% 69,296 1,899 2.7%Available-for-Sale Securities ........ 469,857 15,465 3.3% 456,016 11,713 2.6% 423,171 11,598 2.7%Held-to-Maturity Securities ........... 3,513,581 115,644 3.3% 3,503,557 89,987 2.6% 3,109,517 85,221 2.7%Interbank Deposits ........................ 18,753 327 1.7% 121,970 2,999 2.5% 223,065 5,435 2.4%Other Interest-Earning Assets ......

Compulsory ............................... 2,194,085 56,016 2.6% 2,626,625 60,749 2.3% 2,739,976 67,920 2.5%Others ....................................... 382,445 15,590 4.1% 333,851 12,973 3.9% 346,813 13,721 4.0%

Total Interest-Earning Assets ..... 15,297,048 684,333 4.5% 19,050,683 775,039 4.1% 20,302,722 812,082 4.0%

Interest-Bearing LiabilitiesInterbank Deposits ........................ 77,440 1,443 1.9%Savings Deposits .......................... 3,814,872 63,213 1.7% 4,501,001 66,564 1.5% 4,426,556 67,962 1.5%Time Deposits ................................ 5,603,446 149,492 2.7% 6,382,977 155,942 2.4% 6,879,154 176,716 2.6%Resales pending Settlement ......... 1,297,851 39,676 3.1% 2,255,695 64,964 2.9% 2,372,169 68,851 2.9%Borrowings and Onlendings

Domestic ................................... 550,494 8,101 1.5% 650,427 10,148 1.6% 680,479 11,601 1.7%Foreign ...................................... 177,269 2,733 1.5% 334,207 19,573 5.9% 401,128 (10,637) (2.7%)Others ....................................... 478,222 12,691 2.7% 958,788 22,342 2.3% 1,424,608 35,683 2.5%

Total Interest-Bearing Liabilities 11,999,594 277,349 2.3% 15,083,095 339,533 2.3% 16,184,094 350,176 2.2%

Spread .......................................... 2.2% 1.8% 1.8%NIM (Quarterly) ............................ 2.7% 2.3% 2.3%NIM (Yearly) ................................. 11.1% 9.5% 9.4%

Margin Analysis (R$ Million / %)


Jun 08 / Jun 07 Jun 08 / Mar 08Increase / Reduction Due to Variation in: Increase / Reduction Due to Variation in:

Volume Interest Rate Net Variation Volume Interest Rate Net VariationInterest - Earning Assets

Lending Operations, Leasing Operations and Other Receivables ............................ 145.6 (48.9) 96.7 50.3 (31.7) 18.6Resales pending Settlement ....................... 51.1 0.9 52.0 10.6 2.6 13.2Securities and Derivatives .......................... (23.3) (12.9) (36.2) (11.8) 6.7 (5.1)

Compulsory Deposits ...................................... 13.4 (1.5) 11.9 2.7 4.5 7.2Other Interest-Earning Assets ......................... 5.1 (1.8) 3.3 3.8 (0.6) 3.2

Total Interest - Earning Assets ..................... 191.9 (64.2) 127.7 55.6 (18.5) 37.1

Interest - Bearing LiabilitiesTime Deposits .............................................. 32.4 (5.2) 27.2 12.5 8.2 20.7Savings Deposits ........................................ 8.8 (4.0) 4.8 (1.1) 2.5 1.4Other Interest-Earning Assets ..................... 23.7 (0.7) 23.0 11.6 1.8 13.4Money Market Funding ................................ 31.0 (1.9) 29.1 3.4 0.5 3.9

Total Funding ................................................. 95.9 (11.8) 84.1 26.4 13.0 39.4

Total Onlendings ............................................ 3.6 (13.5) (9.9) 2.6 (31.3) (28.7)

Total Interest - Bearing Liabilities .............. 99.5 (25.3) 74.2 29.0 (18.3) 10.7

Variations in Interest Income and Expense: Volumes and Rates

The following chart shows the variations in the interest incomes and expenses consolidated

among the variations in volume and interest rates (i) in 2Q08 compared to 2Q07 and (ii) in

2Q08 in relation to 1Q08.

The variations in the volume and interest rates were calculated based on the average balances in

the period and the variations in the nominal interest rates on income-generating assets and

average of interest-bearing liabilities. Net variation was calculated based on the variations in

volume and rates, and was allocated to the respective variation (volume and interest rate)

proportionally, considering the absolute amount attributable to the volume and interest rates.

Variations in Interest Income and Expense: Volumes and Rates (R$ Milhões)


Consolidated Pro FormaBalance Sheet

R$ MillionAbsolute Change

ASSETS Jun 2007* Mar 2008* Jun 2008 Jun 2008 - Jun 2008 -Mar 2007 Jun 2007

Current and Long-Term Assets ....................... 17,026.3 21,489.2 23,080.7 1,591.5 6,054.4

Cash ....................................................................... 214.8 291.3 251.2 (40.1) 36.4 Interbank Investments ............................................. 2,454.9 3,812.1 4,606.7 794.6 2,151.8 Securities and Derivatives ...................................... 4,868.7 4,660.0 4,528.1 (131.9) (340.6) Interbank and Interbranch Accounts ....................... 2,466.9 3,381.2 3,202.3 (178.9) 735.4 Lending Operations ................................................ 6,497.8 8,466.4 9,479.3 1,012.9 2,981.5 (Allowance for Loan Losses) ................................. (835.5) (869.5) (898.7) (29.2) (63.2) Leasing Operations ................................................ 42.3 58.8 75.7 16.9 33.4 (Allowance for Doubtful Lease Receivables) ......... (4.2) (4.5) (4.4) 0.1 (0.2) Other Receivables .................................................. 1,330.7 1,470.0 1,608.1 138.1 277.4 (Allowance for Losses on Other Receivables) ....... (30.9) (15.1) (15.7) (0.6) 15.2 Other Assets .......................................................... 20.8 238.5 248.1 9.6 227.3

Permanent ........................................................... 144.0 140.9 142.4 1.5 (1.6)

Investments ............................................................ 9.5 8.1 8.1 0.0 (1.4)Property in Use ....................................................... 113.2 115.2 116.3 1.1 3.1Leased Property ..................................................... 0.0 0.0 0.0 0.0 0.0Deferred ................................................................. 21.3 17.6 18.0 0.4 (3.3)

Total Assets ......................................................... 17,170.3 21,630.1 23,223.1 1,593.0 6,052.8


LIABILITIES Jun 2007* Mar 2008* Jun 2008 Jun 2008 Jun 2008 -Mar 2008 Jun 2007

Current and Long-Term Liabilities .................. 15,317.2 18,803.3 20,312.4 1,509.1 4,995.2

Deposits ................................................................. 10,911.9 12,469.7 13,004.8 535.1 2,092.9Demand Deposits ................................................... 1,208.7 1,462.8 1,562.0 99.2 353.3Saving Deposits ..................................................... 3,903.9 4,454.5 4,468.0 13.5 564.1Intebank Deposits .................................................. 77.9 0.0 0.0 0.0 (77.9)Time Deposits ......................................................... 5,712.8 6,525.2 6,964.4 439.2 1,251.6Other Deposits ....................................................... 8.6 27.2 10.4 (16.8) 1.8Money Market Funding ........................................... 1,422.6 2,140.2 2,547.5 407.3 1,124.9Intebank and Interbranch Accounts ........................ 282.6 574.8 622.2 47.4 339.6Borrowings and Onlendings ................................... 764.1 1,028.2 1,110.0 81.8 345.9Derivatives ............................................................. 18.6 24.0 27.6 3.6 9.0Other Payables ...................................................... 1,917.4 2,566.4 3,000.3 433.9 1,082.9Collected Taxes and Other ..................................... 93.0 110.5 111.6 1.1 18.6Foreign Exchange Portfolio .................................... 24.5 77.9 40.1 (37.8) 15.6Social and Statutory ............................................... 92.9 133.8 33.2 (100.6) (59.7)Tax ans Social Securities ....................................... 439.8 437.9 465.7 27.8 25.9Trading Account ..................................................... 1.1 1.4 1.3 (0.1) 0.2Financial and Development Funds .......................... 558.7 1,081.3 1,593.0 511.7 1,034.3Other ...................................................................... 707.4 723.6 755.4 31.8 48.0

Deferred Income ................................................ 6.0 3.7 3.0 (0.7) (3.0)Minority Interest ................................................ 1.2 1.4 1.4 0.0 0.2

Stockholders’ Equity .......................................... 1,845.9 2,821.7 2,906.3 84.6 1,060.4

Total Liabilities and Stockholders’ Equity ....... 17,170.3 21,630.1 23,223.1 1,593.0 6,052.8

*Reclassified

*Reclassified


Consolidated Pro Forma IncomeStatement


2Q08 - 1H08 -2Q07* 1Q08* 2Q08 1H07* 1H08

2Q07 1H07

Financial Income ........................................ 684.3 770.2 812.1 1,349.3 1,582.3 127.7 233.0Expenses Income ...................................... 277.3 334.7 350.2 570.3 684.9 72.8 114.5Financial Margin ......................................... 407.0 435.5 461.9 778.9 897.4 54.9 118.5Allowance for Loan Losses ....................... (53.7) (40.7) (62.2) (118.2) (102.9) (8.4) 15.3Gross Profit from Financial Income .......... 353.3 394.8 399.7 660.7 794.5 46.5 133.8

Other Operations Income / Expenses ... (214.9) (228.4) (255.3) (380.7) (483.7) (40.4) (103.0)Services .................................................. 42.7 31.9 34.9 88.0 66.8 (7.8) (21.2)Bank Fees ............................................... 89.5 111.4 93.7 178.5 205.1 4.2 26.6Personnel Expenses .............................. (181.9) (194.0) (213.2) (355.1) (407.2) (31.3) (52.1)Other Administrative Expenses .............. (115.5) (126.5) (148.3) (248.8) (274.8) (32.8) (26.0)Other Operation Income ......................... 33.2 31.1 53.8 125.8 85.0 20.7 (40.9)Tax Expenses .......................................... (37.1) (36.6) (37.6) (74.4) (74.2) (0.5) 0.3Other Operating Expenses ..................... (45.8) (45.7) (38.7) (94.7) (84.4) 7.2 10.3

Income from Operations ............................ 138.3 166.4 144.4 280.0 310.8 6.1 30.8Non-Operating (Expenses) Income, Net .. (2.6) 2.8 (2.0) (2.4) 0.9 0.6 3.2Income Before Taxes on Income .............. 135.8 169.2 142.5 277.7 311.7 6.7 34.0Income and Social Contribution Taxes ..... (49.0) (48.3) 58.2 448.4 9.9 107.2 (438.5)Statutory Interest ........................................ 0.0 0.0 (13.3) (0.9) (13.3) (13.3) (12.4)Minority Interest .......................................... (0.0) (0.0) (0.1) (0.1) (0.1) (0.0) (0.0)

Net Income ................................................ 86.7 120.9 187.3 725.1 308.2 100.6 (416.9)

(-) Extraordinary Events .......................... 0.0 0.0 86.2 528.5 86.2 86.2 (442.3)

Adjusted Net Income ............................... 86.7 120.9 101.1 196.6 222.0 14.4 25.3

*Reclassified

Management Report

WE PRESENT THE MANAGEMENT REPORT AND FINANCIAL STATEMENTS

OF BANCO DO ESTADO DO RIO GRANDE DO SUL S.A. FOR THE FIRST

HALF OF 2008, PREPARED IN ACCORDANCE WITH THE RULES OF THE

BRAZILIAN SECURITIES AND EXCHANGE COMMISSION (COMISSÃO DE

VALORES MOBILIÁRIOS – CVM) AND OF THE BRAZILIAN CENTRAL BANK.


Economic Scenario

In 1H08, the Brazilian economy maintained a growth path, grounded on the ongoing expansion

of domestic demand. The uncertainties aroused in mid 2007 continued to intensify over the

period. In the domestic sphere, inflation has indicated an uptrend, having become a point of

unquietness. In the international scenario, the foreseen downturn of world economy persisted,

however it did not take place at the speed projected by many, since the negative effects derived

from the financial losses after the burst of United States housing bubble have not been fully felt

yet, in addition to the upturn in price levels, which is becoming another worldwide concern. In

the recent scenario, the inflation was observed as natural phenomena, arising deriving from an

ongoing increase in metal and agricultural commodities, in particular the last, and oil prices,

which caused a process of relative price adjustment, “importing inflation” to local economy.

In this half year, the Brazilian monetary authority increased Selic rate by 100 basis-points, reaching

a 12.25% annual rate, due to the deterioration of the future expectations of domestic inflation,

as well as the hike in current prices and the persistent mismatch between the growth in supply

and demand. More than the increase itself, it is clear that a continuous process of Selic rate

increase has started, trend which is likely to continue in 2008. On the other hand, the Long-Term

Interest Rate (TJLP), a rate applied to long-term investment projects, remained at 6.25% per

year, which have encouraged companies to expand their production capacity, reducing the

pressure on product gap for the upcoming years, consequently reducing the pressure on domestic

inflation, too.

Current transactions, as per data available up to May, posted a year-to-date deficit of US$14.7

billion, which resulted, among other things, from the increase in the payment of interest and

dividends abroad, and from the reduction in the commercial surplus, due to the stronger growth

in imports rather than in exports. On the other hand, direct foreign investments in the country

maintained their growth trend, as well as funding by Brazilian companies overseas. In this scenario,

the Brazilian real kept appreciating, also strengthened by the country’s attainment of the

investment grade, granted by two risk rating agencies.

The state of Rio Grande do Sul’s economy, specifically, kept growing in the period, following the

process started in the previous year, with highlight to the sound growth of service sector. However,

according to the preliminary estimates of the first months of this year, the expected results

should be a little below the results accomplished in 2007, yet trending to grow slightly above the

country. According to the preliminary estimates, the economic growth is expected to be of

approximately 5% in 2008.


Material Events

March 2008 – Banrisul opens a regional selling branch and expands its presence in the state of

Santa Catarina. Headquartered in the city of Blumenau, the Superintendence of Santa Catarina

was opened on March 17, 2008. The implementation of a regional selling branch and the plan to

open ten extra branches in the regions of Vale do Itajaí, Greater Florianópolis and the Southern

Coast of the state are efforts that comprise the first phase of Banrisul’s expansion project in the

state of Santa Catarina. By the end of 2008, the service network will have 23 branches, in

addition to an increased number of ATMs, correspondent banking units, and business

establishments affiliated to Banricompras network. The expansion project in the state of Santa

Catarina is aimed at improving the relationship with local clients, favoring partnerships that

strengthen the development of the state of Santa Catarina and broaden Banrisul’s scale of

operation.

March 2008 – Payment of Additional Dividends. Banrisul’s Board of Directors submitted a

proposal to establish additional dividends at 10%, effective as of the fiscal years 2007 and 2008.

This proposal was approved at the Annual and Extraordinary General Meeting held on March

25, 2008, bringing about the payment of total dividends at 35% on the adjusted net income.

May 2008 – Rating Reclassification. On May 13, 2008, the credit risk rating agency Austin Rating

increased Banrisul’s long-term risk rating from “A” to “A+”. The rating increase is due to the

good capitalization, distribution of assets and liabilities, diversification of income sources, credit

quality, proper liquidity levels, profitability and expansion of the operation area through the

opening of strategic branches outside the state of Rio Grande do Sul. The “A+” rating means

that the Bank accounts for intrinsic financial stability and that it operates safely, featuring good

financial background. The corporate environment may vary without, however, impacting the

institution’s operation condition. The risk is reduced.


The strong consolidation movement experienced by the financial sector in previous years, jointly

with the growing demand for banking services in the country due to the economic upturn led

institutions to search new means to expand the client portfolio, sale of products and maintenance

of results. The client base’s continuous expansion by means of branch network’s expansion has

been consolidated as an important strategy adopted by institutions in the Brazilian market.

Banrisul, a public institution, has been competing under equal conditions with the market’s

leading institutions and is ranked amid the five best retail banks as per study carried out by

Austin Rating, published by the Gazeta Mercantil newspaper on Balanço Financeiro magazine as

of June 2008.

Unless the commercial strategy is continuously improved, it is not possible to operate regionally

as a sound, safe and competitive institution in the domestic scenario. The advances consolidated

by Banrisul in the previous half years reflect the accomplishment of the following elements:

Deposit and credit portfolios growth uptrend, aimed at expanding the revenues and adding

value to shareholders by means of a closer relationship with clients of high business potential;

expanding real estate loans by means of strategic partnerships; execution of agreements intended

to expand the business at the municipal civil servants; improvement of products and services in

view of the clients’ requirement; in addition to qualifying the selling process at the branches.

Maintenance of leadership in the state of Rio Grande do Sul. Having the state as the main

geographic operation focus, Banrisul expands its service network by means of opening of branches

and service stations, in addition to registering correspondent banking units and expanding the

number of ATM machines. In this half year, in particular, Banrisul’s service network expansion to

the state of Santa Catarina was an important focus of expansion of the borders where the bank

operates.

Technology intensification, as cost reduction factor, expansion of the product mix made

available and gains in scale. The use of Banricompras and Banricontas channel, as well as the

expansion of mobile services by use of Banrisul Celular and internet banking with multiple-use

cards (Smart Card technology) are business modes, which have succeeded due to technology

and market knowledge approaches.

Commercial Strategy


Consolidated Performance

Net income

Banrisul recorded Net Income of R$308.2 million in the first half of 2008, including tax credits

effects in the amount of R$86.2 million.

In the first half of 2007, Net Income came to R$725.1 million, above the amount recorded in the

first half of 2008, due to the activation of the tax credit, in the amount of R$528.5 million.

Excluding non-recurring effects from years 2007 and 2008, the Net Income for the first half of

2008 was R$222.0 million, 12.9% up the amount recorded in the same period of the previous

year, which was R$196.6 million.

Banrisul’s performance in the first half of 2008 reflects higher credit revenues due to the increase

in the volume of operations, which expanded by 44.9% in the twelve-month period, as well as to

the improvement on credit quality, reducing the need of allocating financial resources in provision

expenses. The performance featured by the securities portfolio, which grew 11.6% in relation to

June 2007, has also contributed to the result’s accomplishment.

Shareholders’ Equity

Banrisul’s Shareholders’ Equity amounted to

R$2,906.3 million by the end of June 2008, an

increase of 57.4% compared to June 2007.

Annualized return on average Shareholders’

Equity reached 22.8% in this half year.

Compared to the last four years, Shareholders’

Equity recorded an increase of 247.9% due to

the incorporation of increasing results recorded

in the periods, and to the capital injection from

the public offering, worth R$800.0 million, event

taken place in July 2007.

Net Income - Encluding taxcredit effects(R$ Million)

Net Income - Excluding taxcredit effects(R$ Million)

Shareholders’ Equity Evolution

(R$ Million)


Total Assets

Total Assets amounted to R$23,223.1 million at

the end of June 2008, an increase of 35.3%

against the R$17,170.3 million in the same

period last year.

The main items that contributed to the growth in

assets, in 12 months, were the increase in deposit

raising, in the amount of R$ 2,092.0 million, and

the capital injection of R$ 800.0 million.

It is also worth noting, in the Assets’ structure,

the expansion of credit and treasury operations,

which totaled R$ 3,084.9 million and R$ 1,811.2

million, respectively. In four years, Total Assets

rose 90.0%.

Total Assets Evolution (R$ Million)

Capital Adequacy Ratio

The Capital Adequacy Ratio represents the

relation between the reference equity and risk-

-weighted assets, demonstrating the company’s

solvency. The Brazilian Central Bank controls the

maintenance of the minimum standard ratio at

11.0%. Banrisul’s Capital Adequacy Ratio

reached 22.2% in June 2008, 11.2 p.p. higher

than the minimum required. This difference

allows for the Bank to maintain the fast growth

of its credit operations.

Capital adequacy ratioevolution (%)

Interest on Own Capital/Dividends

The Bank’s Board of Directors proposed and the Annual and Extraordinary General Meeting

held on March 25, 2008 approved a 10% addition to the payment of dividends for the fiscal years

of 2007 and 2008, totaling 35.0% of the adjusted net income. Thus, R$87.1 million were paid this

half year as for additional dividends on the result of the previous year, in addition to R$84.1

million referring to interest on equity interest and R$18.4 million were provisioned due to dividends

generated by the performance recorded in the first half of 2008.

Taxes and Contributions

Banrisul collected and provisioned R$190.8 million in taxes and own contributions relative to the

accumulated balance as of June 2008. Taxes retained and passed through, levied directly on

financial intermediation and other payments, amounted to R$205.2 million.


Breakdown of Funds Raised and Under Management

Raised and managed funds in the first half consisted of: Time Deposits, the key funding instrument

for credit operations, amounting to R$6,964.3 million, or 38.1% of the total; followed by Asset

Management, R$5,268.9 million, or 28.8% of the total; Savings Deposits, R$4,468.0 million and

24.5% of the total; and Demand Deposits, R$1,562.0 million, with 8.5% of the total amount.

Funds Raised and Under Management

Funds raised and managed amounted to

R$18,273.6 million at the end of the first half of

2008, up 18.8%, or R$2,885.6 million, over June

2007.

The funding strategy in the period promoted

the increase in funds from deposits and

investment funds, which aims at maintaining the

credit expansion and the generation of service

revenues.

Operating Performance

Time deposits totaled R$6,964.3 million, an increase of 21.9% or R$1,251.6 million compared to

the first half of 2007. Savings Deposits rose 14.4% or R$564.1 million, totaling R$4,468.0 million.

Demand Deposits went up by 29.2% or R$353.3 million compared to June 2007.

Asset Management amounted to R$5,268.9 million, 17.7% growth or R$792.7 million in relation

to June 2007. In the four previous years, Investment Funds increased by 86.1%. The Funds’

favorable evolution achieved in the past twelve months derived from the performance of fixed

income and indexed funds, which added R$375.3 million to the portfolio, as well as the new fixed

income products that were launched in September 2007, products whose raising surpassed

R$165.4 million this semester.

Evolution of Funds Raisedand Under Management(R$ Million)

Breakdown of Funds Raised and Under Management (R$ Million)


Investments in Securities amounted to

R$6,587.3 million in June 2008, up 11.6% or

R$686.3 million compared to the same period

of 2007. This balance includes Interbank

Investments, net of Liabilities from Resale and

Repurchase Agreements.

The evolution in the securities portfolio of the

past twelve months mirrors the accelerated

credit asset growth policy adopted by the

Institution, which grew R$3,084.9 million in the

period, chiefly due to deposit funding, which

increased R$2,092.9 million.

Banrisul holds a financial capacity confirmed by technical studies, which were internally carried

out, and intends to keep it until the maturity of securities classified at “held-to-maturity”, pursuant

to article 8 of Circular Letter 3,068 of the Brazilian Central Bank of November 08, 2001.

Securities

Evolution in Securities(R$ Million)

Loan Operations Loan Policy

Taking into account the domestic scenario of credit growth maintenance, which accounted for

36.5% of the GDP, in the first semester, Banrisul’s credit policy aimed at expanding the operation

volume, in particular for Companies. It also focused on monitoring the portfolio quality in order

to improve the return and mitigate risks. The diversity of products, in addition to the distribution

of the client portfolio, are key elements in an environment of credit dynamism. The favorable

evolution of Banrisul’s credit portfolio is commented below.

With regard to credit quality, the portfolio risk rating follows the procedures provided for in

Resolution 2,682/99 of the Brazilian Central Bank. At end of the first half of 2008, the operations

rated as Normal Risk, which comprise levels AA to C, amounted to R$8,352.1 million, or 85.1%

of the total portfolio, 6.8% up the proportion recorded as of June 2007. Operations rated as

Risk 1, which includes levels D to G, totaled R$1,263.5 million, accounting for 11.8% of the

portfolio. Risk 2, which exclusively consists of level H operations, requires 100% of provision and

totaled R$336.0 million, or 3.1% of total credit operations. The evolution in credit portfolio takes

place in a moment of improvement of rating composition. The delinquency ratio was 3.2% in the

first half of 2008, featuring a significant reduction in comparison to the 4.1% of the same period

of the previous year.


Credit Performance

Credit demand remained intense in the first half

of 2008, especially for Companies, reflecting the

consolidation of Brazilian economy’s growth

cycle.

Banrisul’s balance of credit operations totaled,

in June 2008, R$9,951.6 million, an increase of

44.9% from the R$6,866.7 million recorded in

the first half of 2007.

Commercial Credit

Last year’s credit portfolio growth was primarily driven by the expansion in the commercial

credit portfolio, reflecting the favorable outlooks of income allocation by consumers and

investment decisions by business people.

Commercial credit operations totaled R$7,168.5

million in the first half of 2008, up 55.2% over

June 2007. The volume of operations addressed

to Individuals totaled R$3,446.5 million,

increasing by 38.2%. As for Companies, the

operations’ balance reached R$3,722.0 million,

increasing by 75.3% in twelve months, chiefly

due to working capital’s operations, mode which

is especially attractive to companies because

of the economy’s more dynamic scenario.

In addition to the Commercial Portfolio, Real

Estate loans totaled R$886.7 million up 14.7%,

or R$113.7 million, in 12 months; Rural Credit,

R$667.4 million, a growth of 19.3%, or

R$108.2 million; and Development and Infrastructure Portfolio, R$578.6 million up 37.4%, or

R$157.5 million; ACC and ACE contracts (pre- and post-shipment export financing contracts),

R$396.6 million, up 47.7%, or R$128.2 million; Leasing operations, R$69.8 million, an increase of

75.2%, or R$30.0 million; and the Public Sector balance, R$184.0 million, a reduction of 1.6%

over June 2007.

Credit Operations (R$ Million)

General Credit - Individualsand Companies (R$ Million)


Commercial Credit - Individuals

Commercial credit operations targeted at Individuals came to R$3,446.5 million, accounting for

48.1% of the Commercial Portfolio and for 34.6% of all credit operations in June 2008. The

increase of R$952.1 million in 12 months was mainly driven by payroll-deductible operations.

In June 2008, payroll-deductible loans reached R$2,419.3 million, a year-on-year growth of 72.8%.

Payroll-deductible loans granted totaled R$1,091.5 million in the six-month period, throughout

188.5 thousand operations.

The technical and financial cooperation agreement executed between Banrisul and the Federation

of Cities of Rio Grande do Sul (Famurs in Portuguese), in November 2007, which regulates the

exclusivity of salary payment and granting of payroll-deductible loans to state employees and to

322 municipalities, has become an important mechanism to expand payroll-deductible operations.

Payroll-deductible loans volume in the scope of the agreement totaled R$220.5 million in the first

half of 2008.

Commercial Credit - Companies

General Credit operations – Companies reached R$3,722.0 million in June 2008, accounting for

51.9% of the Commercial Portfolio and 37.4% of all credit operations. The business segment

added R$1,598.4 million to the Companies balance since June 2007.

The dynamism recorded in the Companies segment, based on the working capital modalities,

reflects the more dynamic scenario of the economic activity. Working capital, which totaled

R$2,753.4 million at the end of June 2008, rose 86.6% year-on-year. Also regarding the Companies

segment, it is worth mentioning the fund granting to the health and education areas, whose

contracted amounts totaled R$194.1 million in the first half of 2008, throughout 200 operations.

Microcredit

Microcredit facilities correspond to short-term operations which aim at granting SMBs access to

working capital. Among the products offered by Banrisul in this segment the most relevant are

Promicro, Corporate Account (Conta Empresarial), Giro Fácil, and Banricompras Receivables.

In the first half of 2008, Microcredit granting facilities totaled R$529.8 million, 48.3% up from the

R$357.2 million granted in the first half of 2007, through 731.5 thousand operations. The highlights

were the Promicro, with granting amounting to R$269.4 million, through 16.9 thousand operations;

Corporate Account (Conta Empresarial), R$150.0 million of funds allocated in 47.2 thousand

operations and Banricompras Receivables, R$90.2 million allocated to 551.8 thousand operations.


Agribusiness

The credit allocated to Agribusiness comprises two specific lines addressed to Rural Investments

and Costing. Rural credit’s operations amounted to R$667.4 million as of June 2008, growing by

19.3% in relation to the same month of the previous year. Loan granting totaled R$217.2 million

in the semester, arising from 9,100 agreements.

Rural funding operations recorded growth of 35.9% versus the balance of the first half of 2007,

totaling R$403.6 million at the end of June 2008. Rural credit restricted to Investment facilities,

which allow the acquisition of machinery and equipment, soil and pasture recovery, environmental

adequacy, development of poultry and pig farming, among other activities, totaled R$263.8

million in June 2008.

Foreign Exchange

As for the Bank’s international area, in the first half of 2008 a new exchange operating system

was implemented, providing operating processes with readiness and improving the existing

controls. ACC and ACE operations (pre- and post-shipment export financing contracts) achieved

R$396.6 million as of June 2008, increasing by 47.7% in relation the same period of 2007.

In the first half of 2008, 3,992 export operations were contracted, totaling a US$390.7 million

volume, composed mainly of ACC in the amount of US$220.3 million, ACE, US$8.5 million, and

Spot Operations, which added US$149.0 million. As compared to the same period of 2007, in

which granting totaled US$332.3 million, the first half of 2008 posted an increase of 17.6%.

Import operations turned over US$297.5 million in 4,823 transactions in this half year. Up to June

2007, these operations totaled US$130.8 million, in 3,589 transactions. The portfolio’s performance

reflects the policy of expanding the international businesses adopted by the Management in the

period.

Real Estate Loan

Banrisul’s Real Estate Loan portfolio amounted to R$886.7 million in the end of June 2008, an

increase of 14.7% compared to June 2007.

In the first half of 2008, a total of 3,383 real estate loan operations were contracted, turning

over R$211.3 million. Of this amount, credit for construction totaled R$80.2 million in 1,576

operations; and credit for the acquisition of property, R$131.1 million in 1,807 operations. Against

the first half of 2007, when R$72.8 million were granted in 1.084 operations, there was an increase

of 190.2% in Reais and of 212.0% in the number of operations. The environment of economic

stability, characterized by the increase in income and jobs, has favored the expansion of these

operations.


Development and Infrastructure Credit

By means of the Long-Term Loan Portfolio, Banrisul operates as an agent transferring financial

resources from BNDES, FINAME and CEF, which are addressed to social economic development

projects to the communities of Rio Grande do Sul. The bank also encourages projects of services,

industrial and commercial expansion generating financial economical results to the population

of Rio Grande do Sul.

Development and Infrastructure operations reached, in June 2008, the total of R$578.6 million,

an increase of 37.4% compared to the balance of R$421.1 million recorded by the end of the

first half of 2007.

In the first half of 2008, a total of R$69.9 million were granted in 182 operations of the

Development and Infrastructure portfolio, targeted at both the public and private sectors. Of

this amount, R$16.6 million were allocated to commerce, R$44.7 million to the manufacturing

sector, R$1.7 million to the services sector and R$6.9 million to the public sector.

In this last half year, credit lines were launched in order to foster companies needing working

capital by means of Revitaliza product, lines to which R$15 million were invested.

Products and ServicesAt Banrisul, making products and services available is grounded in the institution’s mission and

principles: a financial agent promoting the economic and social development of the state of Rio

Grande do Sul, operating in accordance with the values of transparency, ethics, integration,

commitment and effectiveness. Based on this philosophy, abroad branch network and diversified

product mix, Banrisul establishes itself, regionally, as an acknowledged institution.

Banricompras

Through Banricompras, Banrisul’s clients use

debit card to make cash, term or installment

payments for their purchases in accredited

commercial establishments. It is a mean of

payment that increases the purchase power,

makes it easier to monitor expenses and does

not burden card users.

Banrisul makes available about 66,000

establishments affiliated to serve over 2.9 million

clients. In the first half of 2008, 25.2 million

transactions were carried out, comprising a

monetary movement in the amount of R$1.4 billion, a growth of 22.9% and 20.9% in the number

of establishments affiliated in relation to the same period of 2007.

Banricompras – AccreditedEstablishments (Thousands)


Banrisul’s Correspondent Banks

Banrisul’s Correspondent Banks are bank service stations made available in commercial

establishments, where clients can pay bills, make deposits, withdrawals, among other services,

with flexible working hours and convenience.

In the first half of 2008, nearly 2.5 thousand Correspondent Banks turned over R$4.0 billion, in

24.4 million transactions. It is important to mention the year-on-year increase of 25.0% in financial

transactions recorded in the first half of 2008, when compared to the same period of last year,

which totaled R$3.2 billion.

Virtual Branch – Home and Office Banking

The Bank offers access channels to clients through Home and Office Banking. In the first half of

2008, the virtual branch turned over R$32.3 billion in 32.5 million operations. In the same period

of 2007, 27.1 million transactions were carried out, turning over R$21.7 billion. These figures

represent an increase of 48.9% in Reais, and of 19.9% in the number of operations. This

performance shows clients’ adherence to the fast and secure electronic services offered by the Bank.

Online Trading Session

Banrisul’s Online Trading Session is a modern Purchasing Portal on the internet for indirectly-

managed public companies and municipal governments. Using this tool, the public manager can

receive budgets online, which allows for economy in making the financial planning, as well as

following up on and controlling the negotiations carried out during the process.

In the first half of 2008, the Purchasing Establishments affiliated at Banrisul’s Purchasing Portal

performed 5.266 biddings via Internet. The businesses achieved substantial results in the values

traded, amounting to R$30.1 million, resulting in an economy of R$4.6 million for users of the

Public Sector.

In addition to being the administrator, Banrisul is a user of the Purchasing Portal, having carried

out 88 trading sessions in the first half of 2008, totaling R$3.3 million in amounts traded. The

savings achieved 18.9%.

Banricompras – FinancialTurnover (R$ Million)

Banricompras – Transactions(Million)


Call Center

The phone answering service channel that is made available by the Bank comprises electronic

and/or personalized service for information and bank transactions. The branches’ Call Center, a

system that captures the calls, addressing the ones made to the network to a service center,

provides information and performs financial transactions through a standardized and safe process,

enabling market teams located at the branches to focus exclusively on selling.

In the first half of 2008, the phone answering service channels received 54,300 calls of personalized

service from the 11 branches currently served by the system of automatic capture of calls. This

process will be implemented in 50 branches up to the end of the year. Through Banrifone, the

number of calls reached 2.7 million accesses via electronic service and 242,600 via personalized

service, transacting R$87.4 million of financial resources, which confirm the adherence and reliability

of the services rendered as from October 1994.

Banrisul Customer Service NetworkBanrisul’s customer service network covers 97.3% of the State of Rio Grande do Sul’s GDP,

present in 82.3% of the cities in the State, or 408 municipalities. The Bank has 423 branches, of

which 394 are located in the State of Rio Grande do Sul, 13 in the State of Santa Catarina and 14

in other states, in addition to offices in New York and Grand Cayman.

As for the customer service network, it is worth mentioning that in the first half of 2008 a new

regional sales office was launched in the State of Santa Catarina, an action which characterizes

Banrisul’s expansion in that State.

For the second half of 2008, the expansion policy foresees the implementation of new branches

in the states of Rio Grande do Sul and Santa Catarina, areas which are not currently served, but

featuring high business potential, including the opening of ten branches in Santa Catarina and

thirteen stations in locations of Rio Grande do Sul, which are not assisted by banking services

yet.

The strategy keeps pace with the market trend, focusing on organic expansion, working as a

mechanism for expanding the client base and result generation. Banrisul market share in Rio

Grande do Sul corroborates to effort for maintaining the leadership held by the institution in the

regional context. As per data from the Brazilian Central Bank, at the year-end 2007, the Bank

had 32.2% of the number of branches operating in the state.


Banrisul S.A.Administradora de

Consórcios

99.6%

Banrisul S.A.Corretora de ValoresMobiliários e Câmbio

98.7%

BanrisulArmazéns Gerais S.A.

99.5%

BanrisulServiços Ltda.

99.8%

Banco do Estado do RioGrande do Sul S.A.

In the first half of 2008, the subsidiaries generated R$12.3 million of income, a 17.4% decrease

compared to the amount recorded in the same period of 2007. The performance registered in

the semester reflects the reduction in income generated by Banrisul Serviços, in view of the

migration of the credit card portfolio to the Bank in October 2007, resulting in the transfer of

the income derived from annuities and financings, which became part of Banrisul’s accounting.

The operating performances of associated companies are commented below.

Banrisul S.A. Administradora de Consórcios

Banrisul Consórcios manages the establishments of groups formed with the purpose of acquiring

new and semi-new vehicles, tractors, residential, commercial, rural and leisure properties, featuring

flexibility of terms and different fees of letters of credit.

In the first half of 2008, the company recorded a favorable performance in comparison to the

same period of the previous year. The amount of loans granted in the first half of 2008 reached

R$64 million, evolving by 198.5% in twelve months, chiefly due to the 29.3% increase in the

number of consortium groups. The net income amounted to R$4.5 million, a 4.6% increase.

Banrisul S.A. Corretora de Valores Mobiliários e Câmbio

Banrisul Corretora operates in the capital market intermediating securities traded at stock

exchanges. Its store and plenary are located at the Banrisul’s Central Branch and the services are

offered through the bank’s broad service network, aiding investors to identify good opportunities

in the capital market.

In the first half of 2008, the Company traded a volume of R$427.4 million in the variable income

market, growing by 74.8% in relation to the amount recorded in the same period of 2007. It is

important to stress the business expansion carried out through the Home Broker, R$257.5 million,

accounting for 60.3% of the Banrisul Corretora’s total volume. The Net Income amounted to

R$4.4 million, or 65.1% growth in relation to the same period of 2007.

Subsidiaries


Banrisul Armazéns Gerais S.A.

Banrisul Armazéns Gerais operates as an entity authorized by the Internal Revenue Service,

managing the Dry Port of the Metropolitan Region, working with import and export as custom

house, public customs warehouse and certified customs warehouse - and general warehouse.

In the first half of 2008, the Company registered an increase of 15.0% in the net operating

income in relation to the same period of 2007 due to the adjustment of fees and the good

performance of the state’s economy, which favors warehousing activities. The net income for the

period amounted to R$1.2 million, 126.9% up the amount registered in the first half of 2007.

Banrisul Serviços Ltda.

Banrisul Serviços manages and trades the Refeisul Ticket – Food and Meal card and voucher, in

addition to Private Label, Fuel and Gift cards.

In the first half of 2008, Refeisul and Fuel cards generated over 2.5 million transactions, 18.0% up

the volume recorded in the same period of the previous year, and R$164.0 million in Sales, 6.0%

up June 2007’s volume. The net income for the first half amounted to R$2.3 million, R$5.2 million

down the amount recorded in the same period of the previous year. The drop of the previous

semester results from the incorporation of the credit card portfolio by Banrisul, whose revenues

became part of the Bank’s accounting.

Corporate GovernanceAiming at providing its owning partners with the company’s strategic management and at effectively

monitoring the executive board, Banrisul adhered to the Level 1 of Corporate Governance in

2007 by making a share public offering, including a capital increase of approximately R$800

million. The ownership and the management are related by means of the Board of Directors, the

independent audit and the Fiscal Council, which are key control tools. Good corporate governance

ensures equity to its shareholders, management transparency and responsibility for the results.

In order to accomplish the commitment of responsibility on shares, the institution adopted

Banrisul’s Code of Ethics, an instrument driving the ethical and moral behavior that was spread

to the employees’ routine, which establishes the behavior pattern to be adopted towards the

public of interest, whether they are shareholders, employees, suppliers, clients, competitors,

entities, the community and the government.

As for Bank’s listing at Level 1, it requires the compliance with the rules applicable to companies

with shares listed at Novo Mercado (Bovespa’s New Market), which are included in Banrisul’s

Bylaws and are displayed below:


• Out of the members of the Board of Directors, at least 20% shall be independent members;

• Public offerings must be carried out under certain circumstances;

• All shareholders shall be entitled to the same conditions held by the controlling shareholders

at the disposal of the bank’s control; and

• Banrisul, its controlling shareholders, managers and members of the Fiscal Council are subjected

to the Regulation of the Arbitration Chamber of Bovespa’s Market for solving the conflicts

arising from, related to or derived from the application, validity, effectiveness, interpretation,

violation, as well as the effects, of the provisions included in the Brazilian Corporation Law,

Banrisul’s Bylaws, rules issued by the Brazilian Monetary Council, the Brazilian Central Bank and

the Brazilian Securities and Exchange Commission, in addition to those provided for in the

Regulation of Governance’s Level 1, the Arbitration Regulation and the Agreement of Adoption

of Corporate Governance Practices’ Level 1.

In line with rules of the Brazilian Securities and Exchange Commission, Banrisul informs that

Deloitte Touche Tohmatsu Auditores Independentes rendered services to the Bank exclusively

related to auditing in the first half of 2008.

Investor Relations

Banrisul’s consolidation in the capital markets, following its public offering early in the second

half of 2007, and the Bank’s listing in Bovespa’s (São Paulo Stock Exchange) Level 1 of Corporate

Governance, requires the maintenance of a permanent communication channel with investors.

In the first half of 2008, Banrisul took part in 6 events sponsored by: Credit Suisse, UBS Pactual,

Deutsche Bank, JP Morgan and Expomoney. Lectures and meetings held in São Paulo, Rio de

Janeiro, New York and Porto Alegre were attended by a varied public, including market analysts,

local and international investors, as well as individual investors.

Nearly 200 physical or virtual meetings with market analysts and shareholders in Brazil and

abroad were carried out in the first half of 2008, combined with internal relationship activities

that provided guidance and tackled doubts and inquiries from the branch network and other

bodies of Banrisul’s General Management, in addition to meeting demand from external bodies,

such as the external audit, the Brazilian Central Bank, Bovespa and the Brazilian Clearing and

Depositary Corporation (CBLC).

The main highlights in the six-month period were as follows: (i) proposal for the payment of

additional dividends for the years of 2007 and 2008, in an amount equivalent to ten percent

(10%) of the adjusted net income, from the Statutory Reserve, totaling dividends of thirty-five

percent (35%); (ii) sale, at a public auction, of the remainder fractions form the bonus and

reverse-split process approved at the Annual and Extraordinary General Meeting held in 2007;

and (iii) adoption of a policy for the payment of interest on equity before the closure of each

quarter. As of 2008, payments will be made until the last business day of each quarter.

Regarding such payment, R$189.6 million were paid (and provisioned) to shareholders up to the

end of June 2008, as interest on own capital/dividend.


The performance of Banrisul’s shares (based on PNB – preferred shares class B – BRSR6, due to

the greater liquidity and smaller volatility compared to Common shares – ON – and Preferred

shares class A – PNA) in the first half of 2008 is summarized as follows:

(i) Volume of trading increased by 52.4% from December 2007 to June 2008 (average daily

trading: 126 operations in December 2007 and 192 in June 2008), closing June at 19.3% above

the average for the six-month period, the equivalent of 161 operations.

(ii) Financial volume traded was up 3.6% from December 2007 to the average for the first half of

2008, at R$6.4 million traded daily, reaching the highest level in May, at R$10.4 million.

Internal Controls and Compliance

The Internal Controls System monitors activities in all levels of the Organization. The institutional

policy of internal controls ensures compliance with the parameters, procedures and standards

set forth by the legislation, whose limits and guidelines are defined by the Banking Management

Committee and monitored by the Internal Controls Committee.

Risk Management comprises Market, Liquidity, Credit and Operational Risks. At Banrisul, Risk

Management constantly goes through improvement processes. By improving the development

of policies, internal control systems and security rules, the Bank aims at being in line with the

standards recommended by the New Capital Accord – Basel II.

Operational Risk

In compliance with Resolution 3,380/06 issued by the Brazilian Monetary Council, the Bank’s

management structure is trained to identify, assess, monitor, control and mitigate its risks,

including those deriving from outsourced services.

The Operational Risk management structure is integrated with the Bank’s Internal Control structure,

and performs periodic assessments of the activities and processes, identifying inherent risks and

the effectiveness of controls.

The Operational Risk management structure has an automated system based on knowledge

management, which allows the Organization to identify, create, represent and distribute

knowledge, enabling the use, awareness and learning thereof. Among the main functionalities, it

makes available the application of risk checklists to business process managers, the creation of

action plans to mitigate identified risks, the improvement of controls and the Risk Matrix, whose

result allows for the awareness of mapped operational risks, enabling the consultation to

operational risks, their traits, controls, status, evidences, effects, recommendations, activities,

references, threats posed, relevance, likelihood, severity and indicators.


Managers of Head Office’s Unitsand Branches

Internal Controls Agents

Controller

Internal ControlsManagement Committee

Responsible Director

Board of Directors

and Executive OfficersThe Institution will adopt the method of Assessing the

Basic Indicator, aiming at assessing the portion of

capital to cover the Operational Risk, as provided

for in Circular Letter 3,383, as of April 30, 2008,

and Notice 16,913, as of May 20, 2008, issued by

the Brazilian Central Bank.

Below is the structure adopted by the

Institution to manage operating risks.

Market Risk

With the release of rules by the Brazilian Central Bank for the implementation of market risk

management structures, procedures to provide information related to exposition to market

risks and assessment of the respective portions of the Required Reference Equity, which will

produce effects as of July 1, 2008, Banrisul, in compliance with the provisions in the New Basel II

Accord, has taken all necessary measures to meet the risk management requirements. Systematic

changes have been made to implement the internal models for assessing the capital requirement

to meet market risks, as well as the mapping of processes and systems that will be necessary to

acquire the required information.

Liquidity Risk

The Liquidity Risk corresponds to the possibility of occurring unbalances between tradable assets

and liabilities deriving from operations with financial instruments, which may affect the Institution’s

payment capacity, taking into consideration the different currencies and payment terms for

rights and obligations. Risk measurement is made through a tool based on the value-at-risk

(VAR) method of accounting. To control the exposure level to risks, limits were established, and

are monitored daily.

Credit Risk

Credit Risk Management maintained as guideline the Institution’s selective and conservative

attitude, following strategies defined by the high Management and technical areas of the

corporation. This line enabled the Bank to achieve, in the first half of 2008, a credit performance

above the last two years, with an improvement in the quality of the portfolio, reflected in the

increase of the percentage of operations rated in levels AA to C, regarding the total credit

volume.

Banrisul’s risk assessment structure is grounded on the principle of joint group decisions, with

the definition of credit granting scopes corresponding to the decision level comprising from the

extensive branch network, with its various categories, up to the directive scopes and its risk and

credit committees in the General Management. This process aims at accelerating credit granting,

based on technically pre-defined limits that determine the wished exposure the institution is

willing to operate with each Individual client and Company, meeting the risk x return rate. As for


companies, the Bank adopts technical studies made by the internal risk analysis area, which

assess companies under the financial, managerial, market and productive viewpoints, with periodic

revisions that also take into consideration the current and future economic and competitive

scenarios, inserting companies in these environments.

The continuous and growing implementation of statistic methodologies to assess risks from

operations with individuals and companies, with parameterization of credit policies and business

rules, have intensified and strengthened the assessments. The adoption of the Credit Score and

Behavior Score systems provided an opportunity to establish pre-approved credits, according to

risk classifications set forth in statistic models, which are conceptually more attractive to handle

with mass credit. The proprietary models are compliant with Resolution 2,682/99 issued by the

Brazilian Central Bank.

Technology ModernizationIn financial institutions, the Information Technology goes beyond the updating purpose, featuring

as competitive edge. The evolution of investments in technology promotes the inclusion of

population in the financial market, consequently generating growth in the country as a whole.

Automation and technology are determining to improve the customer service network’s capillarity

and making services available to clients. Investments in technology amounted to R$76.4 million

in this half year.

The security and advance in the quality of banking services derive from the improvements

implemented by the Information Technology. Banrisul is in display, receiving national and

international awards acknowledging the results achieved by the investments in technology. In the

first half of 2008, Banrisul became the first Brazilian and Latin-American bank to join the PCI

Council, an international entity of security standardization of credit card operations.

The security model adopted by Banrisul joins the two standards which are the most used worldwide

in a single medium (card with chip): for the financial operations standard, EMV- - European

Master & Visa standard; and for the security standard and electronic government actions, PKI -

Public Key Infrastructure. The use of intelligent cards with multi-application chips – Banrisul’s

Multiple Card - consolidated the company as the technology structure of the Certifying Authority

of the state of Rio Grande do Sul (AC-RS), a public entity created by state law, which comprises

all the powers of the state.

In terms of Information technology service management, the Bank implemented, in the first half

of 2008, digital identities for administrative employees, ensuring increased security in network

access. In this period, the Bank also defined, configured and implemented environments to support

the Additional Security Device, used in the process to prevent and combat electronic fraud.


Banrisul has an informatics infrastructure comprised of two data centers interconnected through

optical fiber, over 10,000 work stations, 700 servers, including Windows Lynux, 3,000 ATMs and

60,000 points of sale. The strategy defined by the Management projects the investments will

surpass R$150 million this year, keeping the bank’s innovative profile in the technology area.

Actions with the Public Power

State Public Sector

Banrisul centralizes the collection of taxes and fees, payment to creditors, suppliers and civil

servants’ payroll. Along with the state executive, the bank celebrated a record collection, closing

the semester with the best collection of the previous years.

The collection of state revenues linked to the State Administration totaled 12.8 million documents,

which were received through several channels made available to citizens. The amount collected

in the semester amounted to approximately R$9.3 billion.

Currently, the Bank makes the payment of the entire monthly payroll of Rio Grande do Sul’s

Direct and Indirect State Administration.

Municipal Public Sector

The covenant Banrisul/Famurs resulted in the addition of 83% new payrolls to the bank’s client

portfolio. Entering into the covenant led to a vertiginous growth, bringing about almost all the

migration of current accounts that were at other banks as a result of the covenant execution.

In order to better cater for its clients and to speed up the payroll migration, Banrisul will inaugurate

13 new Advance Service Stations and 19 ATMs in the forthcoming months in locations not yet

assisted by the bank.

Currently, Banrisul is the leader in the state’s municipal segment: its market share is over 60% of

municipalities that agreed on the exclusivity of their payrolls to the Bank.

Judiciary and Public Prosecutor Office

In the first half of 2008, Banrisul collected over 680,000 documents issued by the Judiciary in

rendering legal services to the society. Banrisul is concerned about the quality of services rendered

to the Judiciary and to the client/user; hence it is expanding the collection channels, providing

operations with readiness, transparency and security. Banrisul makes available a complete product

mix and specific services to such public.


Marketing

Banrisul has been granted with several acknowledgements that reinforce the development of

campaigns focused on the Institution’s commercial strategy and business.

In the first half year, several initiatives were implemented in order to support a better utilization

of products and services offered by the Bank, amid which we highlight the disclosure of

Banricompras Premiável, by means of advertising campaigns and other marketing initiatives.

The project is aimed at strengthening the product’s competitive advantages and encouraging

card use.

The pioneer initiative carried out in universities throughout the State is also enhanced. During

the period of college entrance examinations there is a forecast of new accounts, which brings

this segment closer to the Institution. This initiative has resulted in positive achievements related

to the increase in the client base.

Another innovative initiative carried out in the first half was Banrisul no Colégio (“Banrisul at

School”). This promotion consists of stimulating the development of financial responsibility in

children, teenagers and youngsters at school, by means of a fun game that encourages the use

of bank card in different daily situations, providing this public with education and disclosure of

the Bank’s products.

Banrisul has also been giving special attention to Culture. The Bank is a partner in several projects

and developments. Joining music and education together, the Institution sponsored the 9th edition

of Concertos Banrisul para Juventude (“Banrisul Concerts for the Youth”), which introduces the

artistic environment of the Orquestra Câmara do Theatro São Pedro orchestra to children and

teenagers from public and private schools. Banrisul also sponsors projects and events like

Multipalco, Festa da Uva, Expodireto and Expobento, Casa de Cultura Mario Quintana, Museu

de Arte do Rio Grande do Sul, Memorial do Rio Grande do Sul, Museu de Comunicação Hipólito

José da Costa and Museu Julio de Castilhos, as well as movie productions in Rio Grande do Sul.

The most important soccer clubs of the state are sponsored by Banrisul, as well as athletes from

Rio Grande do Sul who stand out in many different sports modalities, such as judo, swimming

and roller-skating. These sponsorships equally endorse our effort on spreading and strengthening

the Bank’s brand.

Another marketing strategy consists of developing a new visual identity, mainly through an

institutional campaign named “Quem tem Banrisul tem tudo” (“Having Banrisul means having

everything”), implemented by means of improvements in the Institution’s website, among other

initiatives. Our Internet portal is now more attractive and agile after the inclusion of thematic

areas making the access easier in accordance with the client’s interests.


Human ResourcesWith the purpose of renewing its staff, as well as the succession process, Banrisul hired 421 new

employees in an official examination and dismissed 195 employees in the first half of 2008.

At end of June 2008, the staff was comprised of 9,046 employees. Increasing the number of

employees was necessary due to the expansion of Banrisul’s branches and customer service

networks.

The accumulated balance of day-care assistance, education allowance and MBA and post-

graduation programs as of June 2008 totaled R$1.3 million. It is worth mentioning that R$233,300

were invested in graduation programs, R$720,800 in post-graduation and MBA programs,

R$100,900 in language courses so as to qualify the staff according to the competitive needs of

financial institutions.

Investments of R$2.6 million in trainings strengthen the personal development and qualification

policy strategically contributing to the company growth. By June 2008, 671 courses were given,

totaling 214,396 hour-class made available to 4,420 employees.

Banrisul adopts a model of personnel management, which provide professionl development

opportunities integrated to the company’s purposes. Promoting and enhancing knowledge results

in a team versatile in the solution of problems and proactive as to market innovations.

Corporate ResponsibilityThroughout its 80 years of existence, Banrisul has always

been an important partner of the state government, aiming

at the economic, social and cultural development of Rio

Grande do Sul. Banrisul’s commitment to a modern

management, grounded on economic sustainable development, led the Institution to invest R$13.3

million in educational, cultural, sportive and health-related programs in the first half year.

Concerned with its employees, Banrisul invested in programs addressed to their mental and

physical health, as well as to the construction of a safe work environment. By means of the

Medical Control of Occupational Health Program (PCMSO), 4,665 assistances were carried out

in this period. Additionally, Banrisul served 13 branches with the Program of Attention and

Monitoring of Employees under Stressful Situations (PASS), which, since 2002, assists employees

who have been exposed to traumatic situation, such as assaults.

As to actions targeted at the community, as from 2004, Banrisul has a Projeto Pescar (Fishing

Project)’s unit in partnership with Projeto Pescar Foundation, allowing youth under social

vulnerability, aged between 16 and 19, to access labor market through vocational trainings.

2008’s group has 20 students. In addition to this project, Banrisul sponsors the Banrisul Concerts

for Youth in partnership with Theatro São Pedro, the Program Criança no Esporte (Children at

Sport) and the Karate Social Program, developed in partnership with the Karate Federation of

Rio Grande do Sul.


As for the environment, Banrisul has an environmental commission, which is comprised of severalareas within the bank. The highlights of the first six months of the year were: incentive to theconsumption of organic food, Banrisul’s participation in the State Week of Environment, thelaunching of the poster “You are endangered too”, which was distributed to state schoolsthough the State Department of Education, bringing attention to endangered species in thestate of Rio Grande do Sul, in partnership with Fundação Zoobotânica.

Banrisul has been concerned with the environment for many years. The Banrisul Recycling Programaims at reducing waste production in the Institution and seeks a proper disposal for them,diminishing the environmental impact and encouraging the use of recycled material. The Programis also responsible for broadening the bank’s employees and the public in general socialresponsibility awareness in relation to the relevance of environmental concern. In the first half of2008, 17,367 kg of dry waste were collected at the administrative units and 200,370 kg ofpapers were addressed to recycling, which equals to 2,855 spared threes.

Banrisul Power Program (Banrisul’s Power Program- PROGEB), implemented in 2004, focuses

on energy efficiency and is grounded on Costs and Social Management guidelines. The actions

are based on projects of energy efficiency, waste combat and reduction in electricity expenses.

The awareness and training of employees achieved results of significant savings, without any

prejudice to the comfort and banking activities. As from the implementation of the program,

approximately 400,000 kw/h of consumption were saved.

Awards Jan/2008. Banrisul features the best return on shareholders’ equity amid Brazilian banks.

Banrisul ranked first among the country’s banking institutions in return on shareholders’ equity.The annual profitability reached 45.2% over the accrued result by September 2007. Study wasprepared by Economática consulting and published by IstoÉ Dinheiro magazine.

Feb/2008. Banrisul is one of the best investment options for 2008.

Banrisul is one of the best investment options for 2008, according to Exame magazine. Themagazine states the Bank has the third highest potential for a rise among banking institutions,with a rate of 50%.

Mar/2008. Banrisul is awarded for developing the integrated card.

The international acknowledgement in the category of integrated card’s best project – electronicgovernment (Certifying Authority of Rio Grande do Sul) and banking system was granted at the10-year anniversary of MULTOS system, in London, England. The award endorses the internationalrecognition of the state-of-the-art technology development implemented by the bank. MULTOSis the operating system of Banrisul’s chip card, whose competitive edge lies on the ability tosupport several applications. MULTOS allows a card to be used for debit transactions, withinthe international standard EMV, and for safe Internet Banking operations and the digitalcertification of the State Certifying Authority.

Mar/2008. Corporate Reputation Award.

Banrisul was granted the Corporate Reputation award, as one of the most respected corporatebrands in Rio Grande do Sul, according to an unprecedented survey conducted in the country by


Revista Amanhã magazine, and Troiano Consultoria de Marca, a brand consulting firm based inSão Paulo.

Apr/2008. Banrisul enters the list of the largest companies of the world.

Banrisul is now listed, for the first time ever, among the 2,000 largest companies in the world,

according to U.S. Forbes magazine, which specializes in economy, finance and businesses. Forbes’s

rating takes into account annual sales in dollars, results, assets and market value.

May/2008. Banrisul receives the trophy “Outstanding Smart Card Achievement – Latin America”

Banrisul was awarded by Smart Card Alliance Latin America (SCALA) in May, receiving the trophy

“Outstanding Smart Card Achievement – Latin America” (OSCA-LA), at the “Runner Up” category

for the Cartão Internet Banrisul com Chip (Banrisul’s Internet Chip Card), deemed by the entity

as the most audacious and emerging Project in Latin America. The award was granted during

the CardTechSecurTech 2008, held in Orlando, EUA.

Jun/2008. Banrisul is acknowledged as Brazil’s Best Financial Public Conglomerate.

In 2007, Banrisul was appointed as the Brazilian Best Financial Public Conglomerate by Conjuntura

Econômica magazine, which is edited by the Brazilian Institute of Economics of Getulio Vargas

Foundation (FGV). The acknowledgement is referenced on domestic market’s growth indicators,

financial and economic performance and structure (shareholders’ equity/profitability). The

performance accomplished is related to reestructuring efforts carried out by the Institution, the

implementation of a new management model, the participation of the employees in the results

and the listing in the capital market.

Jun/2008. Banrisul receives award in national IT event.

Banrisul received the e-finance 2008 award, which is granted by Executivos Financeiros magazine,

in Electronic Data Transfer category. The award is given to innovative projects in Information

Technology and Telecommunication infrastructure and applications, contemplating projects aimed

at improving the quality of services rendered by the country’s financial institutions.

Jun/2008. Banrisul is elected as one of the best Brazilian retail Banks.

Banrisul was elected one of the five Best retail Banks in Brazil by Balanço Financeiro 2008 magazine.

The ranking was prepared by Austin Rating and published in Gazeta Mercantil newspaper of São

Paulo. The survey ranks the best institutions in each category for Banks, leasing, brokers,

distributors, financial institution, insurance, pension plans and capitalization. The publication

shows the sector in details, featuring indicators from 432 institutions.

AcknowledgementsWe thank our clients and shareholders for their trust and the state of Rio Grande do Sul for its

support. The dedication of Banrisul’s team and the efficiency of the Institution’s management

were determining for the purposes’ accomplishment. The results achieved in the semester

corroborate that Banrisul beats the challenges faced by the banking market.

Board of Executive Officers

Financial Statements


For the Six-month Period ended June 30, 2008(In Thousands of Reais)

Balance Sheets

Banrisul Banrisul ConsolidatedASSETS 2008 2007 2008 2007

(reclassified) (reclassified)

CURRENT .......................................................................................... 15,047,826 10,136,630 15,108,232 10,251,801CASH .............................................................................................. 251,135 214,740 251,169 214,809INTERBANK INVESTMENTS (Notes 03 (b) and 04) ...................... 4,589,609 2,440,135 4,606,693 2,454,934

Money Market Investments ........................................................... 4,362,300 2,411,820 4,379,384 2,426,619Interbank Deposits ........................................................................ 227,309 28,315 227,309 28,315

SECURITIES AND DERIVATIVES (Notes 03 (c) and 05) ................ 1,647,180 908,049 1,648,364 908,116Own Portfolio ................................................................................ 1,362,965 415,958 1,364,144 416,021Linked to Repurchase Commitments .............................................. 158,346 399,852 158,346 399,852Derivatives ................................................................................... 12,513 12,014 12,513 12,014Linked to Central Bank of Brazil ..................................................... 113,356 18,515 113,356 18,515Linked to Guarantees .................................................................... - 61,710 - 61,710Privatization Certificates ................................................................. - - 5 4

INTERBANK ACCOUNTS ............................................................... 2,774,535 2,120,744 2,774,535 2,120,744Payments and Receipts Pending Settlement .................................. 295,977 135,814 295,977 135,814Restricted Deposits (Note 06)

- Central Bank of Brazil .............................................................. 2,451,672 1,971,366 2,451,672 1,971,366- Correspondents ...................................................................... 26,886 13,564 26,886 13,564

INTERBRANCH ACCOUNT ........................................................... 76,622 47,197 76,622 47,197Third-party Funds in transit ........................................................... 1,757 2,115 1,757 2,115Internal Transfers of Funds .......................................................... 74,865 45,082 74,865 45,082

LENDING OPERATIONS (Notes 03 (d) and 07) ............................ 4,780,644 3,714,164 4,780,644 3,714,164Lending Operations

- Public Sector ........................................................................... 88,052 86,823 88,052 86,823- Private Sector .......................................................................... 4,998,986 3,929,876 4,998,986 3,929,876

Allowance for Loan Losses (Note 03 (f)) ....................................... (306,394) (302,535) (306,394) (302,535)LEASING OPERATIONS (Notes 03 (d) and 07) .............................. 33,686 22,698 33,686 22,698

Lease Receivables- Public Sector ........................................................................... 1,655 1,244 1,655 1,244- Private Sector .......................................................................... 33,707 23,402 33,707 23,402

Allowance for Doubtful Lease Receivables .................................... (1,676) (1,948) (1,676) (1,948)OTHER RECEIVABLES (Note 08) ................................................... 822,575 656,617 864,534 756,727

Foreign Exchange Portfolio ........................................................... 386,051 268,184 386,051 268,184Income Receivable ....................................................................... 34,854 32,809 32,009 64,209Trading Accounts .......................................................................... - - 2,109 1,456Other ............................................................................................ 415,392 368,359 458,899 453,632Allowance for Losses on Other Receivables (Note 07) .................. (13,722) (12,735) (14,534) (30,754)

OTHER ASSETS ............................................................................. 71,840 12,286 71,985 12,412Temporary Investiments ................................................................ 3,070 3,441 3,070 3,441Allowance for Losses .................................................................... (617) (1,541) (617) (1,541)Other Assets .................................................................................. 14,757 16,535 14,774 7,510Allowance for Valuation ................................................................. (2,204) (10,487) (2,204) (1,448)Prepaid Expenses (Note 09) ........................................................ 56,834 4,338 56,962 4,450


LONG-TERM ASSETS ...................................................................... 7,948,539 6,757,306 7,972,447 6,774,569SECURITIES AND DERIVATIVES (Notes 03 (c) and 05) ................ 2,877,393 3,958,960 2,879,740 3,960,588

Own Portfolio ................................................................................ 981,910 2,016,877 981,910 2,016,877Linked to Repurchase Commitments .............................................. 723,948 1,055,051 723,948 1,055,051Derivatives ................................................................................... 119,484 104,484 119,484 104,484Linked to Central Bank of Brazil ..................................................... 873,769 682,166 873,769 682,166Linked to Guarantees .................................................................... 178,282 100,382 180,629 102,010

INTERBANK ACCOUNTS ............................................................... 351,105 298,937 351,105 298,937Restricted Deposits (Note 06)

- National Housing System ......................................................... 351,105 298,937 351,105 298,937LENDING OPERATIONS (Notes 03 (d) and 07) ............................. 3,799,995 1,948,218 3,799,995 1,948,218

Lending Operations- Public Sector ........................................................................... 92,388 97,116 92,388 97,116- Private Sector .......................................................................... 4,299,921 2,384,020 4,299,921 2,384,020

Allowance for Loan Losses (Note 03 (f)) ...................................... (592,314) (532,918) (592,314) (532,918)LEASING OPERATIONS (Notes 03 (d) and 07) .............................. 37,614 15,311 37,614 15,311

Lease Receivables- Public Sector ........................................................................... 1,938 1,867 1,938 1,867- Private Sector .......................................................................... 38,368 15,735 38,368 15,735

Allowance for Doubtful Lease Receivables .................................... (2,692) (2,291) (2,692) (2,291)OTHER RECEIVABLES (Note 08) ................................................... 706,338 527,483 727,899 543,118

Foreing Exchange Portfolio ........................................................... 1,149 125 1,149 125Other ............................................................................................ 706,338 527,483 727,899 543,118Allowance for Losses on Other Receivables (Note 07) ................. (1,149) (125) (1,149) (125)

OTHER ASSETS ............................................................................. 176,094 8,397 176,094 8,397Other Assets .................................................................................. 13,357 17,436 13,357 17,436Allowance for Valuation ................................................................. (6,761) (9,039) (6,761) (9,039)Prepaid Expenses (Note 09) ........................................................ 169,498 - 169,498 -

PERMANENT ASSETS....................................................................... 394,078 359,980 142,374 143,976INVESTIMENTS .............................................................................. 264,795 231,927 8,100 9,445

Investments in Domestic Subsidiaries (Note 02 (c)) ...................... 257,882 225,013 - -Other Investiments ......................................................................... 11,910 11,911 13,570 14,915Allowance for Losses .................................................................... (4,997) (4,997) (5,470) (5,470)

PROPERTY AND EQUIPMENT IN USE (Note 03 (h)) .................... 111,348 106,730 116,292 113,208Real Estate ................................................................................... 120,056 120,193 127,083 131,528Other ............................................................................................ 294,065 277,222 298,895 282,228Accumulated Depreciation ............................................................. (302,773) (290,685) (309,686) (300,548)

DEFERRED CHARGES .................................................................. 17,935 21,323 17,982 21,323Organization and Expansion Costs ............................................... 106,571 101,575 106,618 101,575Accumulated Amortization .............................................................. (88,636) (80,252) (88,636) (80,252)

TOTAL ASSETS ................................................................................. 23,390,443 17,253,916 23,223,053 17,170,346

Banrisul Banrisul Consolidated 2008 2007 2008 2007



Banrisul Banrisul ConsolidatedLIABILITIES AND SHAREHOLDERS´ EQUITY 2008 2007 2008 2007


CURRENT .......................................................................................... 16,931,419 12,496,094 16,763,448 12,404,020DEPOSITS (Note 10) ...................................................................... 10,554,709 8,969,762 10,391,296 8,837,950

Demand Deposits .......................................................................... 1,564,101 1,219,192 1,562,034 1,208,695Saving Deposits ............................................................................ 4,468,020 3,903,938 4,468,020 3,903,938Interbank Deposits ........................................................................ - 77,944 - 77,944Time Deposits ............................................................................... 4,512,190 3,760,075 4,350,844 3,638,760Other Deposits .............................................................................. 10,398 8,613 10,398 8,613

MONEY MARKET FUNDING (Note 10) ......................................... 2,599,583 1,455,119 2,547,496 1,422,606Own Portfolio ................................................................................ 882,296 1,455,119 830,209 1,422,606Third Parties ................................................................................. 1,717,287 - 1,717,287 -

INTERBANK ACCOUNTS ............................................................... 403,462 166,118 403,462 166,118Receipt and Payment Pending Settlement ...................................... 398,447 164,167 398,447 164,167Correspondents ............................................................................ 5,015 1,951 5,015 1,951

INTERBRANCH ACCOUNT ........................................................... 218,739 116,519 218,739 116,519Third-party Funds in Transit ......................................................... 212,879 115,268 212,879 115,268Internal Transfers of Funds ........................................................... 5,860 1,251 5,860 1,251

BORROWINGS................................................................................ 408,225 201,947 408,225 203,154Domestic Borrowings - Other Institutions ........................................ - - - 1,207Foreign Borrowings (Note 11) ...................................................... 408,225 201,947 408,225 201,947

DOMESTIC ONLENDINGS - OFFICIAL INSTITUTIONS (Note 12) 311,370 245,368 311,370 245,368Nacional Treasury ........................................................................ 37,791 34,949 37,791 34,949National Economic and Social Development Bank (BNDES) ......... 195,543 164,599 195,543 164,599Federal Savings and Loan Bank (CEF) ........................................ 1,372 1,299 1,372 1,299National Equipment Financing Authority (FINAME) ........................ 76,664 44,521 76,664 44,521

FOREING ONLENDINGS................................................................ 15,288 602 15,288 602Foreign Onlendings (Note 12) ...................................................... 15,288 602 15,288 602

DERIVATIVES (Note 05 (d)) ........................................................... 5,220 4,614 5,220 4,614Derivatives ................................................................................... 5,220 4,614 5,220 4,614

OTHER PAYABLES (Note 13) ......................................................... 2,414,823 1,336,045 2,462,352 1,407,089Collected Taxes and Other Foreign Exchanges ........................... 111,554 92,970 111,554 92,970Foreign Exchange Portfolio ........................................................... 40,082 24,525 40,082 24,525Social and Statutory ...................................................................... 33,159 92,798 33,221 92,850Tax and Social Security ................................................................ 100,096 93,303 110,198 104,322Trading Account ........................................................................... - - 1,259 1,112Financial and Development Funds (Note 22 (a)) ........................... 1,592,971 558,732 1,592,971 558,732Other ............................................................................................ 536,961 473,717 573,067 532,578

LONG-TERM LIABILITIES ............................................................... 3,549,694 2,911,427 3,548,832 2,913,280DEPOSITS (Note 10) ..................................................................... 2,614,691 2,073,899 2,613,456 2,073,899

Time Deposits ............................................................................... 2,614,691 2,073,899 2,613,456 2,073,899DOMESTIC ONLENDINGS - OFFICIAL INSTITUTIONS (Note 12) 375,098 314,990 375,098 314,990

Nacional Treasury ........................................................................ 15,157 17,145 15,157 17,145National Economic and Social Development Bank (BNDES) ......... 271,924 234,808 271,924 234,808Federal Savings and Loan Bank (CEF) ........................................ 5,583 6,658 5,583 6,658National Equipment Financing Authority (FINAME) ....................... 82,434 56,379 82,434 56,379

DERIVATIVES (Note 05 (d)) .......................................................... 22,413 14,033 22,413 14,033Derivatives ................................................................................... 22,413 14,033 22,413 14,033

OTHER PAYABLES (Note 13) ......................................................... 537,492 508,505 537,865 510,358Tax and Social Security ................................................................ 355,485 335,508 355,485 335,508Other ............................................................................................ 182,007 172,997 182,380 174,850


DEFERRED INCOME ........................................................................ 3,017 519 3,017 5,999Deferred Income ........................................................................... 3,017 519 3,017 5,999

MINORITY INTEREST....................................................................... - - 1,443 1,171SHAREHOLDERS’ EQUITY (Note 20) ............................................. 2,906,313 1,845,876 2,906,313 1,845,876

Capital .......................................................................................... 2,300,000 1,234,000 2,300,000 1,234,000Capital Reserves .......................................................................... 6,161 5,983 6,161 5,983Profit Reserves ............................................................................. 604,376 605,863 604,376 605,863Adjustment to Fair Value - Securities

and Derivatives (Note 05 (b)) ...................................................... (4,224) 30 (4,224) 30

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY ................... 23,390,443 17,253,916 23,223,053 17,170,346




Staments of Income



FINANCIAL INCOME ....................................................................................... 1,578,256 1,347,012 1,582,285 1,349,272

Lending Operations ......................................................................................... 994,194 806,091 994,194 806,091

Leasing Operations ......................................................................................... 6,412 4,758 6,412 4,758

Securities Transactions ................................................................................... 407,849 377,163 411,878 379,423

Derivatives ..................................................................................................... 5,374 4,028 5,374 4,028

Foreign Exchange Operations ........................................................................ 9,349 8,589 9,349 8,589

Compulsory Investments ............................................................................... 155,078 146,383 155,078 146,383

FINANCIAL EXPENSES ................................................................................. 796,214 693,625 787,763 688,570

Funding Operations ........................................................................................ 609,485 531,931 601,014 524,210

Borrowings, Assignments and Onlendings ..................................................... 83,860 46,139 83,860 46,139

Allowance for Loan Losses (Note 07 (d)) ...................................................... 102,869 115,555 102,889 118,221

GROSS PROFIT FROM FINANCIAL OPERATIONS ................................... 782,042 653,387 794,522 660,702

OTHER OPERATING INCOME (EXPENSES) ............................................... (478,635) (380,815) (483,677) (380,658)

Income from Services Rendered (Note 15) .................................................... 47,580 47,090 66,756 88,000

Bank Fees Income (Note 16) ......................................................................... 205,130 178,522 205,130 178,522

Equity in Subsidiaries (Note 02 (c)) .............................................................. 12,342 14,948 - -

Personnel Expenses ...................................................................................... (403,988) (353,129) (407,190) (355,061)

Other Administratives Expenses (Note 17) .................................................... (271,084) (237,851) (274,806) (248,832)

Tax Expenses ............................................................................................... (70,823) (68,350) (74,175) (74,433)

Other Operating Income (Note 18) ................................................................ 85,894 125,695 84,965 125,821

Other Operating Expenses (Note 19) ............................................................. (83,686) (87,740) (84,357) (94,675)

INCOME FROM OPERATIONS ...................................................................... 303,407 272,572 310,845 280,044

NONOPERATING (EXPENSES) INCOME, NET ............................................ 853 (2,443) 855 (2,352)INCOME BEFORE TAXES ON INCOME AND EMPLOYEE

PROFIT SHARING ....................................................................................... 304,260 270,129 311,700 277,692

INCOME AND SOCIAL CONTRIBUTION TAXES (Notes 03 (m) and 23 (a)) 17,255 455,902 9,904 448,410

EMPLOYEE PROFIT SHARING ..................................................................... (13,288) (900) (13,288) (900)

MINORITY INTEREST .................................................................................... - - (89) (71)

NET INCOME FOR THE SIX-MONTH PERIOD ............................................ 308,227 725,131 308,227 725,131

Number of Outstanding Shares (Thousands) .................................................... 408,974 51,346,172 - -

Earning per Thousand Shares (R$) .................................................................... 753,66 14,12 - -



Statement of Changes inFinancial Position



SOURCES OF FUNDS .................................................................................. 3,586,320 2,202,064 3,600,555 2,206,766

NET INCOME ............................................................................................ 308,227 725,131 308,227 725,131

ADJUSTMENTS TO NET INCOME ......................................................... 5,632 2,742 18,608 18,146

Depreciation and Amortization ................................................................... 17,974 17,690 18,608 18,146

Equity in Subsidiaries ............................................................................... (12,342) (14,948) - -

INVESTIMENTS GRANTS ........................................................................ - (2,451) - (2,451)

CHANGE IN DEFERRED INCOME ........................................................ (1,250) (107) (1,250) 33

UPDATING OF STOCK EXCHANGES MEMBERSHIP ....................... (114) 320 (114) 320

ADJUSTMENT TO FAIR VALUE - SECURITIES AND DERIVATIVES (4,271) 16 (4,271) 16

THIRD-PARTIES FUNDS FROM INCREASE OF: ................................. 3,278,096 1,476,413 3,279,355 1,465,571

LIABILITIES ............................................................................................. 2,649,792 1,338,335 2,653,073 1,329,422

Deposits ................................................................................................ 647,544 560,810 638,794 558,911

Money Market Funding ......................................................................... 310,393 - 319,377 -

Interbank and Interbranch Accounts ....................................................... 514,725 174,161 514,725 174,161

Borrowings and Onlendings .................................................................. 167,740 116,523 167,649 117,377

Derivatives ............................................................................................ 5,732 7,189 5,732 7,189

Other Payables ..................................................................................... 1,003,658 479,652 1,006,796 471,784

DECREASE IN ASSETS ....................................................................... 623,764 136,044 625,981 135,589

Interbranch Investments ........................................................................ - 136,044 - 135,589

Securities .............................................................................................. 623,764 - 625,981 -

DISPOSAL OF PERMANENT ASSETS ............................................... 375 560 301 560

Investiments .......................................................................................... 76 - - -

Property in Use ..................................................................................... 299 560 301 560

DIVIDENDS RECEIVABLES FROM SUBSIDIARIES ........................ 4,165 1,474 - -


Statement of Changes inFinancial Position (CONTINUATION)

USES OF FUNDS .......................................................................................... 3,682,489 2,249,080 3,696,739 2,253,758DIVIDENDS PAID OR ACCRUED ........................................................... 105,438 71,519 105,438 71,519INTEREST ON OWN CAPITAL PAID ...................................................... 84,104 100,700 84,104 100,700CHANGES IN MINORITY INTEREST ..................................................... - - (42) (66)ADDITIONS ................................................................................................ 18,871 16,169 17,637 16,438

Investiments ............................................................................................. 23 1,339 27 1,362Property in Use ........................................................................................ 18,848 14,830 17,610 15,076

DEFERRED CHANGES ............................................................................ 4,121 3,140 4,121 3,140INCREASE ASSETS ................................................................................. 3,469,955 1,728,667 3,485,481 1,731,440

Interbank Investments ............................................................................... 907,192 - 908,631 -Securities .................................................................................................. - 334,599 - 334,628 Interbank and Interbranch Accounts ......................................................... 493,379 357,356 493,380 357,356Lending Operations ................................................................................... 1,812,569 440,984 1,812,570 440,984Leasing Operations ................................................................................... 30,592 1,919 30,592 1,919Other Receivables .................................................................................... 200,628 591,448 214,653 594,162Other Assets ............................................................................................. 25,595 2,361 25,655 2,391

DECREASE IN LIABILITIES ..................................................................... - 328,885 - 330,587Money Market Funding ............................................................................. - 328,885 - 330,587

DECREASE IN CASH .................................................................................... (96,169) (47,016) (96,184) (46,992)DECREASE IN CASH REPRESENTED BY CASH:

Beginning of the Period ............................................................................ 347,304 261,756 347,353 261,801End of the Period ..................................................................................... 251,135 214,740 251,169 214,809

DECREASE IN CASH .................................................................................... (96,169) (47,016) (96,184) (46,992)


8484 848484

BA

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E 2008


Statement of Changes on Shareholders´ Equity

In Thousands of Reais Capital Reserves Profit Reserves Adjustment

Updating of to Fair ValueCapital Stock Exchange Investiments For Security and Retained

Stock Memberships Grants Legal Estatutory Expansion Derivatives Earnings TOTAL

Balance as of January 01, 2007 .................................................... 900,000 1,152 6,962 75,051 180,359 131,541 14 - 1,295,079

Capital Increase (Note 20 (a)) .......................................................... 334,000 - - (22,099) (180,360) (131,541) - - -

Updating of Stock Exchange Memberships ..................................... - 320 - - - - - - 320

Subventious for Investiments .......................................................... - - (2,451) - - - - - (2,451)

Adjustment to Fair Value - Securities and Derivatives (Note 05 (b)) - - - - - - 16 - 16

Net Income for the Six-month Period .............................................. - - - - - - - 725,131 725,131

Allocation of Net Income (Note 20 (b))

Recognition of Reserves ............................................................ - - - 36,256 181,283 335,373 - (552,912) -

Dividends Accrued ...................................................................... - - - - - - - (71,519) (71,519)

Interest on Own Capital .............................................................. - - - - - - - (100,700) (100,700)

Balance as of June 30, 2007 .......................................................... 1,234,000 1,472 4,511 89,208 181,282 335,373 30 - 1,845,876

Balance as of January 01, 2008 .................................................... 2,034,000 1,764 4,511 98,770 229,095 423,826 47 - 2,792,013

Capital Increase (Note 20 (a)) .......................................................... 266,000 - - - - (266,000) - - -

Updating of Stock Exchange Membership ....................................... - (114) - - - - - - (114)

Adjustment to Fair Value - Securities and

Derivatives (Note 05 (b)) .............................................................. - - - - - - (4,271) - (4,271)

Net Income for the Six-month Period .............................................. - - - - - - - 308,227 308,227

Allocation of Net Income (Note 20 (b))

Recognition of Reserves ............................................................ - - - 15,411 77,057 113,273 - (205,741) -

Interest on Own Capital .............................................................. - - - - - - - (84,104) (84,104)

Dividends Accrued ...................................................................... - - - - (87,056) - - (18,382) (105,438)

Balance as of June 30, 2008 .......................................................... 2,300,000 1,650 4,511 114,181 219,096 271,099 (4,224) - 2,906,313

Notes to Financial Statements asof June, 30 2008 and 2007


Notes to Financial Statements

NOTA 01

OperationsBanco do Estado do Rio Grande do Sul S.A. is a multiple-service bank, operating commercial,lending, financing and investment, mortgage loan, development, leasing and investment portfolios,including exchange, securities brokerage, and credit card and consortium management.Transactions are conducted within the context of a group of financial institutions that operate onan integrated basis in the financial market. Banrisul also operates as an instrument for the executionof the economic and financial policy of the state of Rio Grande do Sul, in conformity with the stategovernment’s plans and programs.

NOTA 02

Presentation of the Financial Statements(a) The individual and consolidated financial statements have been prepared in accordance withBrazilian accounting practices and standards and instructions from the Central Bank of Brazil andfrom the Brazilian Securities and Exchange Commission – CVM, which include accounting practicesand estimates concerning the recognition of allowances and determination of assets that compriseits securities portfolio. Actual results could differ from those estimated.

(b) The Bank’s individual financial statements include operations conducted both in Brazil as wellas the incorporation of its foreign branches (New York and Grand Cayman). Assets, liabilities andincome from foreign branches, before consolidation eliminations, are summarized as follows:

In Thousands of Reais

2008 2007ASSETSSecurities ............................................................................................................ 7,390 18,808Lending Operations ......................................................................................... 142,466 135,898

Operations in Brazil ....................................................................................... 69,892 118,100Other Lending Operations ............................................................................. 72,574 17,798

Other Assets ..................................................................................................... 22,015 32,411Total Assets ....................................................................................................... 171,871 187,117

LIABILITIESDeposits .............................................................................................................. 71,294 71,038

Operations in Brazil ....................................................................................... 1,701 5,672Other Deposits ............................................................................................... 69,593 65,366

Other Liabilities ................................................................................................. 278 1,148Shareholders’ Equity ........................................................................................ 100,299 114,931Total Liabilities and Shareholders’ Equity .................................................. 171,871 187,117

Statement of IncomeFinancial Intermediation Income ..................................................................... 4,783 5,648Financial Intermediation Expenses ................................................................ (1,403) (1,619)Other Expenses, Net ..................................................................................... (786) (741)Non-Operating Income ................................................................................... (11) (6)

Net Income for the Semester ....................................................................... 2,583 3,282


The effects of the exchange variation over operations in foreign branches are included in thestatement of income according to the nature of the corresponding assets and liabilities.

(c) The consolidated financial statements include the accounts of the Bank, its foreign branchesand its subsidiaries which, investments, as of June 30, 2008, amounted to R$257,882 thousand(2007 – R$225,013 thousand) and generated equity gains in subsidiaries on semester of R$12,342thousand (2007 – R$14,948 thousand), are presented as follows:

MAIN INFORMATION ON INVESTMENTS IN SUBSIDIARIES:

In Thousands of Reais

Banrisul Banrisul S.A. Banrisul S.A. BanrisulArmazéns Corretora de Val. Administradora Serviços

Gerais S.A. Mob. e Câmbio de Consórcios Ltda. Total

Thousands of Shares/Quotas

. Common Shares ......................................... 696 10,000 89,114 - -

. Preferred Shares ....................................... - 19,608 - - -

. Quotas ........................................................ - - - 2,780 -

Adjusted Ownership Interest (%) .................... 99,498 98,693 99,569 99,785 -

Capital Stock ...................................................... 21,150 40,000 80,000 23,043 -

Adjusted Shareholders’ Equity .......................... 22,640 53,492 109,172 74,021 -

Net Income for the Semester ............................ 1,187 4,397 4,522 2,669 -

Net Amounts Eliminated on Consolidation (Note 26)

Assets (Liabilities)

. As of June 30, 2008 ................................... (165) (50,156) (107,453) (79,185) (236,959)

. As of June 30, 2007 ................................... (95) (31,909) (102,746) (37,582) (172,332)

Income (Expenses)

. As of June 30, 2008 ................................... (580) (2,037) (4,638) 235 (7,020)

. As of June 30, 2007 ................................... (315) (1,355) (5,080) (6) (6,756)

Book Value of the Investment

. As of June 30, 2008 ................................... 22,527 52,793 108,701 73,861 257,882

. As of June 30, 2007 ................................... 20,969 36,424 101,648 65,972 225,013

Equity in Subsidiaries

. As of June 30, 2008 ................................... 1,181 4,368 4,503 2,290 12,342

. As of June 30, 2007 ................................... 517 2,627 4,274 7,530 14,948

The preparation of consolidated financial statements did not include interests among consolidatedcompanies, remaining balance or results of transactions. The portions of income for the six-month period and shareholders’ equity referring to minority shareholders’ interest have beenhighlighted.

(d) Financial Leasing Operations are stated at present value in the Balance Sheet, and relatedincome and expenses, which represent the financial result of said operations, are grouped inLeasing Operations in the Statement of Income. In 2007, for comparison purposes, there was areclassification from Leased Property the amount of R$66,731 thousand, from Deferred Chargesthe amount of R$3,847 thousand and from Other Liabilities – Advances for Guaranteed ResidualValue the amount of R$28,598 thousand to Leasing Operations, thus this item increased fromR$141 thousand to R$42,248 thousand. In the Statement of Income, Expenses on LeasingOperations in the amount of R$10,046 thousand were reclassified to Income from LeasingOperations.


NOTA 03

Significant Accounting Practices

(a) Results of operationsIncome and expenses are recorded on the accrual basis.

(b) Interbank InvestmentsRepresent funds invested in the interbank market, stated at present value, calculated on “prorata die” basis, according to the variation of both the agreed index and the interest rate.

(c) Securities and DerivativesAccording to Brazilian Central Bank Circular 3,068 as of November 8, 2001 and supplementaryregulation, securities are classified and assessed into three specific categories, in conformity tothe following accounting criteria:

i) Trading Securities – securities acquired for the purposes of being actively and frequently traded,adjusted to fair value, and realized and unrealized gains or losses recognized in the statement ofincome in the semester.

ii) Available-for-Sale Securities – Include securities used as part of the strategy to manage risk ofchanges in interest rates and which may be traded as a result of these changes, changes inpayment conditions or other factors. These securities are adjusted to fair value, and incomeearned is recorded in the statements of income, whereas unrealized gains and losses from changesin fair value are recorded in a separate shareholders’ equity caption, net of taxes, where applicable,denominated “Adjustment to fair value – securities and derivatives” until they are realized throughsale.

Gains and losses, when realized, are recorded in the statement of income on the trading date,with a contra entry to a specific shareholders’ equity account, net of taxes, where applicable.

iii) Held-to-Maturity Securities – Include securities for which Management has the intent andfinancial capacity to hold to maturity and are stated at cost plus income earned. Financial capacityis defined in cash flow projections, disregarding any possible sale of these securities.

Derivatives – Derivatives contracted in conjunction with other operations for investments arestated at the amounts of income earned and expenses incurred through the balance sheet date.

(d) Lending Operations, Leasing Operations and Other ReceivablesAll lending and leasing operations are classified based on Management’s risk assessment, takinginto account the economic scenario, past experience and specific risks related to operations,debtors and guarantors, pursuant to National Monetary Council (CMN) Resolution 2,682/99,which requires a periodic analysis of the portfolio and its classification into nine risk levels, fromAA to H. A summary of this classification is presented in Note 7.

Lending and leasing operations are recorded at present value, calculated on a daily pro-ratabasis, using the agreed index and interest rate, and are adjusted up to the sixtieth day of delay.Thereafter, income is recognized only when received.

Renegotiated operations’ risks are classified in accordance with the criteria established byResolution 2,682/99, that is, they are maintained at the same level at which they were classifiedbefore renegotiation and renegotiated lending operations that had been previously written-offagainst the allowance and were controlled in memorandum accounts are classified into level H.Any gains on renegotiation are recognized as revenue only when actually received.


(e) Other Receivables – Operations with Credit CardsUnbilled amounts are represented by receivables from cardholders for transactions in Visa andMasterCard merchants. These amounts are accounted for as Notes and Credits Receivable, anddo not have credit characteristic, transactions paid in installments when Banrisul is the issuer, andthe outstanding balance of transactions paid by the minimum amount of the bill (Revolving), arereclassified as Lending Operations.

(f) Allowance for Loan Losses, for doubtful lease receivables and for losses on other receivablesAllowance recorded in an amount considered sufficient to cover possible losses, based on theminimum allowance percentages required by Brazilian Central Bank (BACEN) Resolution 2,682/99for each risk level, supplemented by an allowance equivalent to 100% of the operations over 60days past-due, including long-term operations with installments over 60 days past-due balance,and renegotiated receivables, although not yet past-due.

As of June 30, 2008, the total amount of allowance for loan losses, for doubtful lease receivablesand for losses and other receivables, as stated in Note 7, is above the minimum amount thatwould be required only taking into account the risk level of operations based on past due dayspursuant to Brazilian Central Bank Resolution 2,682/99, procedure which has been adopted bythe Management since its publication to cover possible losses on operations.

(g) Prepaid ExpensesConsist mainly of investments whose benefits shall take place in future periods. This account iscomposed mainly of bank service agreements, as described in Note 9.

(h) Permanent AssetsPermanent assets are stated at cost, monetarily adjusted through December 31, 1995, consideringthe following aspects:

• investments in subsidiaries are accounted for under the equity method, based on financialstatements prepared following the same accounting practices. Other investments are adjustedbased on allowances for losses, where applicable;

• depreciation of property in use calculated under the straight-line method, as follows:

Banrisul In Thousands of Reais

Original Net Balance Net BalanceRate Cost Depreciation in 2008 in 2007

Property in UseLand and Buildings in Use ................................ 4% 120,056 (95,983) 24,073 27,351Other

Furniture and Equipment in Inventory ........... - 17,566 - 17,566 19,059Property and Equipment in Progress ............ - 5,361 - 5,361 5,358Facilities .......................................................... 10% 618 (50) 568 95Furniture and Equipment in Use ..................... 10% 60,088 (45,481) 14,607 16,166Other

Communication System ............................... 10% 4,477 (3,916) 561 765Data Processing System ............................. 20% 193,845 (149,203) 44,642 34,059Security System .......................................... 10% 9,593 (6,424) 3,169 3,321Transportation System ................................ 20% 2,517 (1,716) 801 556

Total .................................................................. 414,121 (302,773) 111,348 106,730


Banrisul Consolidated In Thousands of de Reais

Original Net Balance Net BalanceRate Cost Depreciation in 2008 in 2007

Property in UseLand and Buildings in Use ................................ 4% 127,083 (99,998) 27,085 32,174Other

Furniture and Equipment in Inventory ........... - 17,566 - 17,566 19,059Property and Equipment in Progress ............ - 6,153 - 6,153 5,592Facilities .......................................................... 10% 950 (286) 664 428Furniture and Equipment in Use ..................... 10% 63,147 (47,684) 15,463 16,988Other

Communication System ............................... 10% 4,478 (3,916) 562 767Data Processing System ............................. 20% 194,491 (149,662) 44,829 34,323Security System .......................................... 10% 9,593 (6,424) 3,169 3,321Transportation System ................................ 20% 2,517 (1,716) 801 556

Total .................................................................. 425,978 (309,686) 116,292 113,208

• deferred charges related to organization and expansion costs refers primarily to leaseholdimprovements and software acquisition, whose amortization is calculated under the straight-linemethod based are upon of property lease contracts and, for other items, at 10% per year.

(i) Assets and Liabilities Denominated in Foreign CurrencyThe assets and liabilities of foreign branches, as well as other assets and liabilities in foreigncurrency, were translated at the exchange rate prevailing at the balance sheet closing date.

(j) Deposits, Money Market Funding, Borrowings and Onlendings and Financial and DevelopmentFundStated at original amounts plus charges incurred through the balance sheet date, recognized on“pro rata die” basis.

Pursuant to Laws 12,069/04 and 12,585/06 of the Rio Grande do Sul State Government, up to85% of the escrow deposits made by third parties in the Bank are made available to the state ofRio Grande do Sul, and the remaining balance is retained at the Bank for allocation to a fund. Theescrow deposited transferred are controlled in a memorandum account and the retained portionis classified as “Other Payables”, as mentioned in Note 22(a). The charges on the remainingbalance are recorded under the caption Expenses with Borrowings, Assignments and Onlendings.

(l) Reserves for Tax, Labor and Civil RisksThese reserves are recorded based on the legal counsel’s opinion, using models and criteria inorder to obtain the best estimate possible, despite the uncertainty about their period and theamount upon the final outcome of the lawsuit. The criterion used according to the nature of thecontingency is as follows:

i) Labor Contingencies – Recognized upon court notification for judicial discussion involving Banrisul,the risk of loss of which is deemed as probable. Amounts are determined according to disbursementestimates by our Management, opportunely revised based on information received from ourlegal counsels, adjusted based on the amount of the deposit related to the execution, whenrequired.

ii) Civil Contingencies – Recognized, upon court notice, and monthly adjusted based on the intendedamount of indemnities, the evidence presented, and the legal counsel’s evaluation – which considersprevious court decisions, factual support, evidence produced in the records and legal decisionsthat might be rendered in the lawsuit.

iii) Tax and Social Security Contingencies – Refer basically to taxes whose lawfulness orconstitutionality is being challenged at administrative or judicial level and whose likelihood of loss is– or has been in previous phases – deemed as probable and are recognized at the full amount underdispute. For lawsuits with respective escrow deposits amounts are not updated except when theBank is authorized to withdraw the deposits on account of a favorable outcome of the lawsuit.


(m) Income and Social Contribution TaxesCalculated at the rate of 15% for social contribution tax (9% up until April 30, 2008)and 15% (plusa 10% surtax pursuant to legislation) for income tax on taxable income in the period, adjusted bypermanent differences. Deferred income tax and social contribution were calculated based on therates in force on the financial statements date over the temporary additions and recorded underthe item Other Receivables, with contra entry to Income for the Period.

(n) Post-Employment benefitsThe Bank sponsors a “defined benefit” plan to its employees and the actuarial assessment ofobligation provided based on specific legislation. According to CVM Resolution 371/00 and basedon the appraisal report issued by an independent actuary’s opinion, the Bank annually assessesthe actuarial situation of the plan, as mentioned in Note 24.

NOTE 04

Interbank Investments In Thousands of Reais Banrisul Banrisul Consolidated 2008 2007 2008 2007

Money Market Investments ................................................. 4,362,300 2,411,820 4,379,384 2,426,619Resales pending Settlement - Own Portfolio

Treasury Bills - LFT ............................................................. 1,859 1,246,825 1,859 1,246,825National Treasury Bills - LTN ............................................... 2,055,856 1,164,995 2,055,856 1,164,995

National Treasury Notes - NTN ............................................... 588,080 - 588,080 - Other ..................................................................................... - - 17,084 14,799 Resales pending Settlement - Third-Party Portfolio

National Treasury Notes - NTN ............................................ 1,716,505 - 1,716,505 -Interbank Deposits ................................................................. 227,309 28,315 227,309 28,315 Interbank Deposits .................................................................... 227,309 28,315 227,309 28,315Total ......................................................................................... 4,589,609 2,440,135 4,606,693 2,454,934

NOTE 05

Securities and Derivatives

Breakdown of the portfolio of Securities and Derivatives: In Thousands of Reais Banrisul Banrisul Consolidated 2008 2007 2008 2007

Trading Securities ....................................................................... 69,931 155,945 69,931 155,945Available-for-sale Securities ..................................................... 423,638 433,445 424,822 433,510Held-to-Maturity Securities ......................................................... 3,899,007 4,161,121 3,901,354 4,162,751Derivatives ................................................................................... 131,997 116,498 131,997 116,498Total ......................................................................................... 4,524,573 4,867,009 4,528,104 4,868,704

Current Assets ....................................................................... 1,647,180 908,049 1,648,364 908,116Long-Term Assets ................................................................. 2,877,393 3,958,960 2,879,740 3,960,588

The fair value presented in the chart below were assessed as follows: Treasury Bills that holdactive negotiations is determined based on prices published by the ANDIMA; to shares of Publicly-held Companies the average price of the last negotiation of the day is used; and for securitiesthat have no price published, the Bank adopts as basis for calculation of the fair value, the valueobtained by means of internal pricing technique.


(a) Trading SecuritiesBreakdown of Trading Securities Portfolio per category at fair value:

Banrisul and Banrisul Consolidated In Thousands of Reais 2008 2007

Federal Government SecuritiesTreasury Bills - LFT ............................................................................................... 69,931 94,235Salary Variation Compensation Fund (CVS) ........................................................ - 61,710Total ...................................................................................................................... 69,931 155,945

Breakdown per maturity:


Restated FairMaturity Acquisition Cost ValueFrom 1 to 3 years .................................................................................................. 69,865 69,931Total in 2008 ......................................................................................................... 69,865 69,931Total in 2007 ......................................................................................................... 135,200 155,945

According to Central Bank of Brazil regulations, these securities are classified in current assets attheir fair value.

In the six-month period ended June 30, 2008, due to the reassessment of the Management’sintention to maintain the CVS securities from the portfolio acquired, the amount of R$67,236thousand was reclassified from trading securities to held-to-maturity securities. Adjustment tofair value determined on these securities in the amount of R$22,894 thousand was incorporatedto its cost value pursuant to Circular Letter 3,068/01 of the Central Bank of Brazil. On June 30,the book value of these securities is R$70,276 thousand.

(b) Available-for-Sale SecuritiesBreakdown of the Available-for-Sale Securities Portfolio by type of securities per fair value:

In Thousands of Reais Banrisul Banrisul Consolidated 2008 2007 2008 2007

Treasury Bills - LFT .................................................................... 409,708 433,445 409,708 433,445Shares of Publicly-Held Companies .......................................... 13,930 - 14,101 61Privatization Certificates ............................................................ - - 5 4Fixed Income Fund Quotas ........................................................ - - 1,008 -Total ............................................................................................ 423,638 433,445 424,822 433,510

Breakdown per maturity: In Thousands of Reais Banrisul Banrisul Consolidated

Restated RestatedAcquisition Fair Acquisition Fair

Maturity Cost Value Cost Value

No Maturity ................................................................................... 21,274 13,930 22,351 15,114Up to 3 months ............................................................................ 24,701 24,705 24,701 24,7053 to 12 months ............................................................................. 334,118 334,275 334,118 334,2751 to 3 years ................................................................................. 50,687 50,728 50,687 50,728Total in 2008 ............................................................................... 430,780 423,638 431,857 424,822Total in 2007 ............................................................................... 433,413 433,445 433,478 433,510

The adjustment to fair value as of June 30, 2008, in the amount of R$7,142 thousand (2007 -R$32 thousand), was recorded under a specific Shareholders’ Equity account, net of taxes ofR$2,857 thousand (2007 - R$11 thousand), recorded in “Other Credits”.


(c) Held-to-Maturity SecuritiesThe Portfolio of Held-to-Maturity Securities, by category, stated at cost plus income earned is asfollows:

In Thousands of Reais Banrisul Banrisul Consolidated

Restated RestatedAcquisition Fair Acquisition Fair Cost Value Cost Value

Federal Government SecuritiesTreasury Bills - LFT ................................................................ 3,624,588 3,629,902 3,626,935 3,632,249National Treasury Bills - NTN ................................................. 28,390 28,390 28,390 28,390Salary Variation Compensation Fund - CVS ........................... 183,956 141,700 183,956 141,700Brazilian Foreign Debt Securities ........................................... 7,390 7,390 7,390 7,390

Fixed Income Fund Quotas ........................................................ 9,829 9,829 9,829 9,829Other ............................................................................................ 6 6 6 6Mortgage-Backed Securities - LH .............................................. 41,650 41,650 41,650 41,650Certificate of Real Estate Receivables - CRI ............................. 3,198 3,198 3,198 3,198Total in 2008 ............................................................................... 3,899,007 3,862,065 3,901,354 3,864,412Total in 2007 ............................................................................... 4,161,121 4,116,964 4,162,751 4,118,594

The maturities of securities are as follows: In Thousands of Reais Banrisul Banrisul Consolidated 2008 2007 2008 2007

Up to 3 months ............................................................................ 44,767 - 44,767 -3 to 12 months ............................................................................. 1,147,059 698,562 1,147,059 698,5621 to 3 years ................................................................................. 2,176,556 2,397,139 2,178,903 2,398,7693 to 5 years ................................................................................. - 634,194 - 634,1945 to 15 years ............................................................................... 346,669 320,866 346,669 320,866Over 15 years ............................................................................. 183,956 110,360 183,956 110,360Total ............................................................................................ 3,899,007 4,161,121 3,901,354 4,162,751

Currente Assets .................................................................... 1,191,826 698,562 1,191,826 698,562

Long-Term Assets .................................................................. 2,707,181 3,462,559 2,709,528 3,464,189

(d) DerivativesIn order to meet its own needs and to minimize the effect of changes in the fixed rate, exchangevariation and TR (a managed prime rate), the Bank has conducted swap transactions to exchangethese rates for SELIC (Central Bank overnight rate) variation, Other risks are stated in Note 25.

Banrisul and Banrisul Consolidated In Thousands of Reais

National Up to 3 3 to 12 1 to 3 3 to 5 5 to 15 Over 15Value months months years years years years 2008 2007

AssetsSELIC 10,419 - - - - - - - -SELIC+Fixed Rate-FCVS 99,985 - - - 168 13,361 7,009 20,538 18,263SELIC+Fixed Rate-DMAE 111,218 8,211 4,302 17,208 17,208 64,530 - 111,459 98,235

LiabilitiesFixed Rate (10,419) (4) (11) (2,278) (1,167) (6) - (3,466) (3,154)TR+Fixed Rate (99,985) (1,923) (3,282) (7,238) (3,799) (6,566) (1,359) (24,167) (15,493)USD+BID+Fixed Rate (111,218) - - - - - - - -Net Adjustment 6,284 1,009 7,692 12,410 71,319 5,650 104,364 97,851

Swap transactions, “SELIC + Fixed-rate FCVS” and “SELIC + Fixed-rate DMAE” have as acounterpart the Rio Grande do Sul state Government and were entered in connection to theassignment of credits of the Salary Variation Compensation Fund (FCVS) and receivables fromthe Municipal Department of Water and Sewage (DMAE), respectively, and will be settled on thesame dates the main operations are received, These swap transactions, together with transactionslinked to them, have rates equivalent to the market rates on the same date, because the operationsmature simultaneously, and the Bank has the intent to hold the original transactions and the swapagreements to maturity.


As of June 30, 2008, the amounts receivable and amounts payable are as follows:


Derivatives ..........................................................................................................Adjustments Receivable - Short Term ................................................................. 12,513 12,014Adjustments Receivable - Long Term .................................................................. 119,484 104,484OtherAdjustments Payable - Short Term ...................................................................... (5,220) (4,614)Adjustments Payable - Long Term ....................................................................... (22,413) (14,033)Net Adjustment ................................................................................................. 104,364 97,851

As of June 30, 2008, there were no futures or options contracts.

NOTE 06

Restricted DepositsBanrisul and Banrisul Consolidated In Thousands of Reais

Description Interest Rate 2008 2007Compulsory Deposits - Brazilian Central Bank ............................................. 2,451,672 1,971,366

Demand deposits and other funds ......... None .......................................... 359,051 321,661Additional obligation ................................ SELIC ......................................... 980,686 809,602Saving deposits ...................................... Savings account ...................... 837,271 745,566Other deposits ......................................... None .......................................... 7,210 3,672Other deposits ......................................... TR .............................................. 267,454 90,865

Credits with the National Housing System ................................................. 351,105 298,937Acquired portfolio - swap ...................... 17.25% to 26.5% p.a.(*) ............ 248,090 223,980Acquired portfolio ................................... TR + Interest .............................. 88,769 61,281Own portfolio .......................................... TR + Interest .............................. 14,246 13,676

Correspondents ...................................... None ......................................... 26,886 13,564Total ....................................................................................................................... 2,829,663 2,283,867

Current Assets .................................................................................................. 2,478,558 1,984,930Long-term Assets ............................................................................................. 351,105 298,937

(*)Swap transactions as detailed in Note 5 (d).

National Housing System - Third-party Portfolio Acquired - From October 2002 to March 2005,The Bank acquired from the Rio Grande do Sul State Government, receivables from the SalaryVariation Compensation Fund (FCVS). As of June 30, 2008, the credits are stated at cost plusincome earned through the financial statement date, at the amount of R$336,859 thousand(2007 – R$285,261 thousand), similar to fair value. Their face value is of R$696,274 thousand (2007– R$662,740 thousand). These receivables will be converted into CVS securities, pursuant toratification and novation processes, and, in spite of no established maturity, their fair values,upon the issuance of the securities, may differ significantly from the carrying amounts.

National Housing System - Own Portfolio – Refers to credits of the FCVS arising from Banrisul’sown mortgage loans portfolio that have already been approved by the FCVS’s regulatory body.


NOTE 7

Lending Operations, Leasing Operations and OtherReceivables

The tables below show the balance of lending operations and balances of the leasing and foreignexchange portfolio.

(a) Breakdown by Type of Operation and Risk Level:


AA A B C D E F G H 2008 2007

Loan and Discounted Receivables .............. 1,295,007 3,082,259 1,210,753 694,666 153,034 107,327 437,590 19,226 196,347 7,196,209 4,682,969Financing ..................................................... 92,102 313,349 159,467 24,397 19,396 15,723 31,513 7,037 40,382 703,366 450,373Rural and Agro-Industrial Financing ............. 162,430 129,042 119,951 67,278 69,452 23,245 32,348 35,364 28,290 667,400 559,227Real Estate Financing .................................. 323,595 160,653 117,545 62,710 35,980 66,437 83,552 906 35,290 886,668 773,016Infrastructure and Development Financing ... - 2,354 - 20,992 - 50 - - 2,308 25,704 32,250Total Lending Operations ........................ 1,873,134 3,687,657 1,607,716 870,043 277,862 212,782 585,003 62,533 302,617 9,479,347 6,497,835Leasing Operations (1) ................................. 16,699 11,755 25,564 13,503 2,507 2,134 3,066 252 188 75,668 42,248Advances on Foreign Exchange Contracts(2) 63,201 105,919 99,358 91,681 8,926 2,009 9,835 141 941 382,011 256,202Other Receivables - Foreign Exchange (3) .. 3,550 1,823 2,357 1,445 383 834 3,414 126 672 14,604 12,234Total Banrisul in 2008 ................................. 1,956,584 3,807,154 1,734,995 976,672 289,678 217,759 601,318 63,052 304,418 9,951,630Total Banrisul in 2007 ................................. 824,278 1,157,213 1,420,924 2,067,100 294,055 247,690 487,188 68,638 241,433 6,808,519Other Credits - Subsidiaries (4) ..................... 58,211Total Consolidated in 2007 ........................ 6,866,730

(1) Leasing operations are stated at the present value of the agreements.(2) Advances on foreign exchange contracts are classified as a reduction of “Other payables - Foreign exchangeportfolio” (Note 13).(3) Other Receivables - Foreign exchange, include receivables from foreign exchange contracts and receivablesfrom export contracts.(4) Operations having credit characteristics of non-financial Subsidiary Banrisul Serviços Ltda that as of 2008 arepresently conducted by Banrisul.

(b) Client Breakdown per Maturity and Risk Levels:


AA A B C D E F G H 2008 2007

Falling due (*) ............................................. 1,955,882 3,804,912 1,730,371 965,720 283,092 211,940 557,452 50,589 179,940 9,739,898 6,644,578Up to180 days ......................................... 887,391 1,199,807 890,555 497,828 109,881 76,189 276,523 13,549 40,927 3,992,650 3,179,916181to 360 days ........................................ 290,780 540,005 237,238 154,871 40,036 25,473 73,064 7,358 21,913 1,390,738 972,742Over 360 days ......................................... 777,711 2,065,100 602,578 313,021 133,175 110,278 207,865 29,682 117,100 4,356,510 2,491,920

Past-due ...................................................... 702 2,242 4,624 10,952 6,586 5,819 43,866 12,463 124,478 211,732 163,941Up to 180 days ......................................... 702 2,242 4,624 10,952 6,586 5,462 39,654 11,796 43,667 125,685 98,302181 to 360 days ....................................... - - - - - 357 4,212 667 27,570 32,806 32,240Over 360 days ......................................... - - - - - - - - 53,241 53,241 33,399

Total in 2008 ............................................... 1,956,584 3,807,154 1,734,995 976,672 289,678 217,759 601,318 63,052 304,418 9,951,630Total Banrisul in 2007 ................................. 824,278 1,157,213 1,420,924 2,067,100 294,055 247,690 487,188 68,638 241,433 6,808,519Other Credits without Risk Level -

SubsidiariesFalling Due ............................................. 32,702Past Due ................................................. 25,509

Total Consolidated in 2007 ....................... 6,866,730

(*) Amounts up to 14 days past-due are included in the current.


(c) Portfolio Breakdown by Business Sector: In Thousands of Reais Banrisul Banrisul Consolidated 2008 2007 2008 2007

Municipal Public SectorGovernment - direct and indirect administration ................... 163,288 158,662 163,288 158,662Corporate activity - Other services ....................................... 20,696 28,388 20,696 28,388

Total Public Sector .................................................................. 183,984 187,050 183,984 187,050

Private sectorRural ......................................................................................... 667,400 559,227 667,400 559,227Industry .................................................................................... 2,345,065 1,332,706 2,345,065 1,332,706Commerce ............................................................................... 1,425,436 817,872 1,425,436 817,872Financial brokers ..................................................................... 9 17 9 17Services and other ................................................................. 996,675 702,530 996,675 702,530Pessoa Física .......................................................................... 3,446,393 2,436,101 3,446,393 2,494,312Housing .................................................................................... 886,668 773,016 886,668 773,016

Total Private Sector ................................................................ 9,767,646 6,621,469 9,767,646 6,679,680Total ............................................................................................ 9,951,630 6,808,519 9,951,630 6,866,730

As of June 30, 2008, lending operations with entities of the Municipal Public Sector includeR$94,342 thousand (2007 - R$115,323 thousand) relating to receivables acquired from the RioGrande do Sul State Government or from entities controlled thereby.

As of June 30, 2007, the Bank had in its own portfolio R$248,331 thousand from credit operationsto state government employees, relating to the early payment of the 13th salary.

(d) Changes in allowances for loans losses, doubtful lease receivables and other receivables: In Thousands of Reais Banrisul Banrisul Consolidated 2008 2007 2008 2007

Opening balance of allowance for loan losses .............. 891,990 844,328 891,990 860,655Allowance recorded in the semester ........................................ 102,869 115,555 102,889 118,221Write-offs to memorandum accounts ........................................ (76,912) (107,331) (76,120) (108,305)

Allowance for Loan losses per Risk level ....................... 917,947 852,552 918,759 870,571

Allowance for lending operationsCurrent Assets ............................................................................ 306,394 302,535 306,394 302,535Long-Term Assets ...................................................................... 592,314 532,918 592,314 532,918

Allowance for doubtful lease receivablesCurrent Assets ............................................................................ 1,676 1,948 1,676 1,948Long-Term Assets ...................................................................... 2,692 2,291 2,692 2,291

Allowance for losses in other receivablesCurrent Assets ............................................................................ 13,722 12,735 14,534 30,754Long-Term Assets ...................................................................... 1,149 125 1,149 125


(e) Breakdown of allowances for loans losses, doubtful lease receivables and other receivablesper risk level:

Banrisul and Banrisul Consolidated In Thousands of Reais Recorded Allowance

Minimumallowance Minimum

Risk Loan required by allowance Additional Allowancelevel Portfolio nº 2.682/99 required (Note 03(f)) TotalA A 1,956,584 0.0% - - -A 3,807,154 0.5% 19,036 2,668 21,704B 1,734,995 1.0% 17,350 9,981 27,331C 976,672 3.0% 29,300 17,614 46,914D 289,678 10.0% 28,968 12,523 41,491E 217,758 30.0% 65,327 10,252 75,579F 601,318 50.0% 300,659 47,562 348,221G 63,052 70.0% 44,136 8,152 52,288H 304,419 100.0% 304,419 - 304,419

Total in 2008 9,951,630 809,195 108,752 917,947

Total in 2007 6,808,519 718,795 133,757 852,552

Total in 2007-Consolidated 6,866,730 736,814 133,757 870,571

Lending operations written-off at loss in the period ended June 30, 2008 and controlled basedon the adjusted amount until the date of the respective write-off in a memorandum accountamounted to R$76,912 thousand individually (2007 – R$107,331 thousand) and R$76,120thousand consolidated (2007 - R$108,305 thousand).

Recoveries of lending operations previously written off as loss have been recognized as incomefrom lending operations and amounted to R$32,525 thousand (consolidated – R$32,525thousand) in the year ended June 30, 2008 (2007 - R$20,695 thousand – consolidated R$23,966thousand), net of losses or gains generated from these recoveries.

NOTE 08

Other Receivables In Thousands of Reais Banrisul Banrisul Consolidated 2008 2007 2008 2007

Foreign Exchange Portfolio .................................................. 387,200 268,309 387,200 268,309Exchange purchased pending settlement ............................. 378,016 261,804 378,016 261,804Term bills in foreign currency ................................................. 294 704 294 704Rights to foreign exchange sold ............................................ 21,866 8,024 21,866 8,024Advances in local currency ................................................... (18,329) (5,980) (18,329) (5,980)Income receivable from advances ......................................... 5,353 3,757 5,353 3,757

Income receivable .................................................................. 34,854 32,809 32,009 64,209Dividends and bonuses receivable ........................................ 2,845 1,520 - 47Receivables from services rendered .................................... 30,178 29,531 30,178 29,531Other ........................................................................................ 1,831 1,758 1,831 34,631

Negociation and intermediation of amounts ................... - - 2,109 1,456Negociation and intermediation of amounts ........................... - - 2,109 1,456

Sundry ....................................................................................... 1,121,730 895,842 1,186,798 996,750Advances to employees ......................................................... 13,810 13,237 13,869 13,305Advances for payment by our account ................................ 490 493 5,955 5,831Deferred income tax and social contribution (Note 23(b)) ... 578,686 518,243 585,516 518,243Receivables on sale of other assets .................................... - - 1,167 966Escrow deposits ..................................................................... 136,658 135,301 151,928 150,610Recoverable taxes ................................................................. 105,203 43,366 113,148 51,406Reimbursable payments ......................................................... 61,929 43,110 61,972 43,175Notes and credits receivable (a) ........................................... 117,263 110,185 118,125 137,419Credit Cards (b) ...................................................................... 62,203 - 62,203 50,807Amounts receivable from affiliated companies .................... 547 - 547 -Other debtors – Domestic ...................................................... 44,941 31,907 72,368 24,988

Allowance for losses on other receivables .................... (14,871) (12,860) (15,683) (30,879)Total other receivables ......................................................... 1,528,913 1,184,100 1,592,433 1,299,845

Current assets ........................................................................ 822,575 656,617 864,534 756,727Long-term assets .................................................................. 706,338 527,483 727,899 543,118


(a) In the first quarter of 2005, in accordance with the receivables recovery policy, Banrisulreceived securities as payment for past-due loans from several companies. These securities wereissued to cover court-ordered debts with the National Treasury, and were held by these companies.As of June 30, 2008, these securities amount to R$91,841 thousand (2007 - R$82,388 thousand).These receivables are subject to the variation of the price and interest index.

(b) Refers to Billable Purchases and Billed Purchases Receivable from credit card operations. Upto October 2007, these transactions were made by subsidiary Banrisul Serviços Ltda.

NOTE 09

Prepaid Expenses In Thousands of Reais Banrisul Banrisul Consolidated 2008 2007 2008 2007

Exclusive Banking Services Agreements:Municipal Public Sector (*) ........................................ 217,827 - 217,827 -Private Sector (*) ....................................................... 4,385 - 4,385 -

Rentals ........................................................................... 2,104 1,727 2,104 1,727Data Processing ............................................................ 1,363 2,015 1,363 2,015Other ............................................................................... 653 596 781 708Total ............................................................................... 226,332 4,338 226,460 4,450Current Assets .......................................................... 56,834 4,338 56,962 4,450Long-Term Assets .................................................... 169,498 - 169,498 -

(*) It refers to agreements entered into in the second half of 2007 with the municipal government to ensure theexclusivity in banking services for processing of payroll credit and deductible payroll loans, bill collection portfolio,supplier payment and other services. Such agreements are effective for a five-year period, and are classified ascurrent and long-term pursuant to their duration.

NOTE 10

Deposits and Money Market FundingBanrisul In Thousands of ReaisWithout Up to 3 3 to 12 Over 12Maturity months months months 2008 2007

DepositsDemand deposits .................. 1,564,101 - - - 1,564,101 1,219,192Savings deposits ................. 4,468,020 - - - 4,468,020 3,903,938Interbank deposits ............... - - - - - 77,944Time deposits ....................... 6,796 1,536,472 2,968,922 2,614,691 7,126,881 5,833,974Other deposits ...................... 10,398 - - - 10,398 8,613

Total ...................................... 6,049,315 1,536,472 2,968,922 2,614,691 13,169,400 11,043,661

Current liabilities ................. 10,554,709 8,969,762Long-term liabilities ............ 2,614,691 2,073,899

Money Market FundingOwn Portfolio ....................... - 882,296 - - 882,296 1,455,119Third-party Portfolio ............. - 1,717,287 - - 1,717,287 -

Total ...................................... - 2,599,583 - - 2,599,583 1,455,119

Banrisul Consolidated In Thousands of ReaisWithout Up to 3 3 to 12 Over 12Maturity months months months 2008 2007

DepositsDemand deposits .................. 1,562,034 - - - 1,562,034 1,208,695Savings deposits ................. 4,468,020 - - - 4,468,020 3,903,938Interbank deposits ............... - - - - - 77,944Time deposits ....................... 6,796 1,536,472 2,807,576 2,613,456 6,964,300 5,712,659Other deposits ...................... 10,398 - - - 10,398 8,613

Total ...................................... 6,047,248 1,536,472 2,807,576 2,613,456 13,004,752 10,911,849

Current liabilities ................. 10,391,296 8,837,950Long-term liabilities ............ 2,613,456 2,073,899

Money Market FundingOwn Portfolio ....................... - 830,209 - - 830,209 1,422,606Third-party Portfolio ............. - 1,717,287 - - 1,717,287 -

Total ...................................... - 2,547,496 - - 2,547,496 1,422,606


Time deposits are made by the Bank’s customers, with floating or fixed charges equivalent to66% and 34% of the total portfolio, respectively. The average funding rate for floating-ratedeposits corresponds to 97.04% of the CDI variation, and for fixed-rate deposits, to 9.57% peryear.

Funding through money market purchase and sale commitments operations – own portfolio –conducted with financial institutions, has an average funding rate of 100% of the CDI variation.

NOTE 11

Foreign BorrowingsForeign borrowings are represented by funds obtained from foreign banks to be used in foreignexchange transactions subject to the variation of the corresponding currencies plus annual interestof 3.68% to 7.00% (2007 – 4.24% to 7.45%) maturing in up to 1.797 days (2007 – 360 days).

NOTE 12

OnlendingsBanrisul and Banrisul Consolidated In Thousands of Reais

Domestic Onlendings - Official Institutions Foreign Onlendings Total 2008 2007 2008 2007 2008 2007

Up to 90 days ............................. 215,118 187,417 - 448 215,118 187,86591 to 360 days ........................... 96,252 57,951 15,288 154 111,540 58,105Over 360 days ............................. 375,098 314,990 - - 375,098 314,990Total ........................................... 686,468 560,358 15,288 602 701,756 560,960

Current liabilities .................... 311,370 245,368 15,288 602 326,658 245,970Long-term liabilities ................ 375,098 314,990 - - 375,098 314,990

Internal funds for onlending refer basically to funds from Official Institutions (BNDES – NationalBank for Economic and Social Development, FINAME – National Equipment Financing Authorityand Caixa Econômica Federal – Federal Savings and Loan Bank). These liabilities mature on amonthly basis through July 2023, and are subject to interest of 0.5% to 6.5% (2007 – 0.50% to6.00%) per year, plus variation of the indexers (TJLP, U.S. dollar and Currency Basket) for floating-rate operations and up to 9.40% (2007 – 9.40%) per year for fixed-rate operations. Funds aretransferred to customers on the same terms and with the same funding rates, plus commissionon financial intermediation. These funds are collateralized by the same guarantees received forthe related lending operations.


NOTE 13

Other Payables In Thousands of Reais Banrisul Banrisul Consolidated 2008 2007 2008 2007

Collected taxes and other .................................................... 111,554 92,970 111,554 92,970Receipt of federal taxes ......................................................... 111,406 92,820 111,406 92,820Receipt of state and municipal taxes .................................... 2 4 2 4Other ........................................................................................ 146 146 146 146

Foreign exchange portfolio .................................................. 40,082 24,525 40,082 24,525Exchange sold pending settlement ........................................ 21,702 7,973 21,702 7,973Foreign exchange purchased ................................................ 400,390 272,753 400,390 272,753Advances on foreign exchange contracts (Note 07 (a)) .... (382,011) (256,202) (382,011) (256,202)Other ........................................................................................ 1 1 1 1

Social and statutory ................................................................ 33,159 92,798 33,221 92,850Dividends and bonuses payable (Note 20 (b)) ..................... 19,059 92,021 19,121 92,073Bonuses and profit sharing payable ..................................... 14,100 777 14,100 777

Taxes and social security ..................................................... 455,581 428,811 465,683 439,830Taxes and contributions payable ........................................... 33,116 27,432 34,799 28,156Reserve for taxes and social contribution over profit ......... 64,350 55,752 71,372 63,176Reserve for deferred taxes and contributions (Note 23 (b2)) 2,629 10,119 2,674 11,672Reserve for tax contingencies (Note 14 (a)) ........................ 355,486 335,508 356,838 336,826

Trading and intermediation of securities ........................ - - 1,259 1,112Trading and intermediation of securities ............................... - - 1,259 1,112

Financial and development funds ...................................... 1,592,971 558,732 1,592,971 558,732Payables for financial and development funds (Note 22 (a)) .... 1,574,770 540,708 1,574,770 540,708Other ........................................................................................ 18,201 18,024 18,201 18,024

Sundry ....................................................................................... 718,968 646,714 755,447 707,428Cashier’s check ...................................................................... 762 792 762 792Creditors for unreleased funds ............................................. 32,649 12,985 32,828 13,125Payables for acquisition of assets and rights ...................... 3,681 1,989 3,791 2,028Liabilities under government agreements .............................. 15,991 2,974 15,991 2,974Accrued vacation and related charges ................................ 148,184 123,280 128,663 114,047Actuarial deficit of Fundação Banrisul (Note 24 (a)) ........... 59,625 54,455 59,625 54,455Reserve for labor contingencies (Note 14 (b)) .................... 115,663 175,529 134,398 176,194Brazilian Central Bank fines on foreign exchangetransactions (Note 14 (c)) ...................................................... 103,532 99,056 103,532 99,056Reserve for social security contingencies ........................... 18,783 18,783 18,783 18,783Reserve for securitization losses (*) .................................... 15,455 14,316 15,455 14,316Reserve for other contingencies ........................................... 8,347 9,568 8,347 9,568Reserve for debts assumed with Grupo de Empresas

Seguradoras Brasileiras (GESB) arising fromCompanhia União de Seguros Gerais ................................ 6,891 8,399 6,891 8,399

FGTS (Severance Pay Fund) for amortization ..................... 3,411 2,538 3,411 2,538Sundry creditors – Domestic ................................................. 85,340 69,706 122,316 138,161Card transactions payable ..................................................... 42,304 - 42,304 -Other ........................................................................................ 58,350 52,344 58,350 52,992

Total Other Payables ............................................................... 2,952,315 1,844,550 3,000,217 1,917,447

Current Liabilities ................................................................... 2,414,823 1,336,045 2,462,352 1,407,089Long-Term Liabilities ............................................................. 537,492 508,505 537,865 510,358

(*) The management of the Bank maintains provision for co-obligation of securitized receivables with the NationalTreasury, in the amount of R$46,611 thousand (2007 – R$47,517 thousand) controlled in a memorandum account,which are owned by agricultural financing customers.


NOTE 14

Reserves for Tax, Labor and Civil Contingencies

(a) The reserve for tax contingencies refers mainly to Income and Social Contribution taxes ondeduction of expense arising from the settlement of the actuarial deficit of Fundação Banrisul deSeguridade Social (pension plan), challenged by the Federal Revenue Service for the period from1998 to 2002, and amounts related to the same matter for 2003 to 2005, which have not yetbeen challenged. Through its legal counsel, the Bank has been challenging the matter in courtand, on a conservative basis, has recorded a reserve for contingencies considering the probableloss amount. As of December 31, 2007, the reserve value was R$345,732 thousand and in thesemester it was supplemented by R$9,754 thousand, totaling R$355,486 thousand as of June30, 2008.

(b) As of December 31, 2007, the Bank had a reserve for labor contingencies in the amount ofR$144,524 thousand that, after settlements in the first half of 2008 in the amount of R$34,380thousand and additions to the reserve of R$5,519 thousand, totaled R$115,663 thousand inJune 2008. Of the aforementioned reserve, the amount of R$75,408 thousand has beendeposited in escrow accounts and is recorded under the item “Other receivables – EscrowDeposits” (Note 8). In the consolidated balance as of December 31, 2007, the Bank had a laborreserve of R$163,115 thousand that, after settlements in the semester of R$34,442 thousand,provision reversion of R$46 thousand and additions to the reserve of R$5,771 thousand, amountedto R$134,398 thousand in June 2008. Of the aforementioned reserve, the amount of R$90,973thousand has been deposit in escrow.

(c) On September 29, 2000, Banrisul received an assessment notice from the Central Bank ofBrazil in connection with administrative proceedings related to supposed irregularities in foreignexchange transactions between 1987 and 1989. In a decision on an appeal at the administrationlevel, Banrisul was required to pay a fine equivalent to 100% of the amount of the supposedlyirregular transactions. This decision is being challenged in court by Management, which on aconservative basis and in compliance with BACEN requirements, recorded a reserve for thiscontingency. The balance as of June 30, 2008 is R$103,532 thousand, with an increase in thequarter of R$2,420 thousand. In the six-month period ended June 30, 2007, the amount of R$48,292thousand was reversed due to the revision of the estimate of the amount to be disbursed recordedin Other Operating Income.

NOTE 15

Income from Services Rendered In Thousands of Reais Banrisul Banrisul Consolidated 2008 2007 2008 2007

Income from Funds Management ............................................... 26,330 25,278 30,469 27,095Collection of Debt Instruments ................................................... 20,825 21,752 20,825 21,752Income from Custody Services .................................................. - - 109 14Income from Transfer of Funds ................................................. - - 66 47Refeisul and Credit Card Fee (*) ................................................ - - 7,129 33,272Income from Group Financing .................................................... - - 3,239 1,985Income from Brokerage of Operations ...................................... - - 1,827 1,191Other Income ............................................................................... 425 60 3,092 2,644Total ............................................................................................ 47,580 47,090 66,756 88,000

(*) In 2007, Interest and Financial Charges from Credit Card operations belonged to subsidiaryBanrisul Serviços Ltda. As of October 2007, the portfolio was transferred to the Bank and isaccounted in “Other Credit Receivables”.


NOTE 16

Income from Bank Fees In Thousands of Reais Banrisul and Banrisul Consolidated 2008 2007

Banricompras .............................................................................. 25,074 16,108Check Returns ............................................................................ 16,583 23,748Checking Account Debits ........................................................... 4,315 4,273Collection Services ..................................................................... 26,611 24,014Transactions with Checks ......................................................... 4,739 2,249Bank Fees from Checking Accounts ......................................... 109,726 88,776Other Income from Fees ............................................................. 18,082 19,354Total ............................................................................................ 205,130 178,522

From the income amount of R$205,130 thousand for the period, R$114,394 thousand wereoriginated from operations with individuals and R$90,736 thousand from operations withcompanies.

NOTE 17

Other Administrative Expenses In Thousands of Reais Banrisul Banrisul Consolidated 2008 2007 2008 2007

Data Processing and Telecommunication .................................. 69,281 68,005 70,482 69,196Securty and Money Transportation ........................................... 38,118 29,772 38,262 29,908Amortization and Depreciation ................................................... 15,961 16,565 16,395 17,221Rentals ........................................................................................ 17,042 15,336 16,420 14,984Supplies ....................................................................................... 12,297 10,846 12,326 10,872Outside Services ........................................................................ 43,500 35,076 44,640 36,048Advertising, Promotions and Publicity ....................................... 39,895 24,226 40,224 24,516Maintenance ................................................................................ 8,670 8,916 8,870 8,980Water, Electricity and Gas .......................................................... 9,300 9,053 9,385 9,147Other ............................................................................................ 17,020 20,056 17,802 27,960Total ............................................................................................ 271,084 237,851 274,806 248,832

NOTE 18

Other Operating Income In Thousands of Reais Banrisul Banrisul Consolidated 2008 2007 2008 2007

Recovery of Charges and Expenses ........................................ 21,540 23,032 20,210 21,880Reversal of Operating Reserves

- Losses on Equity Investments ............................................. 751 464 751 464- Brazilian Central Bank Exchange Fines (Note 14(c)) ......... - 50,864 - 50,864- Other Assets ......................................................................... 6,490 5,198 6,490 5,198- Reserve for Securitization Losses (Note 13) ..................... 2,999 1,990 2,999 1,990- Other - Tax ............................................................................ - 16,844 - 16,844

Other Taxes ................................................................................. 1,086 1,852 1,086 1,852Commission on Capitalization Cerficates ................................... 1,902 2,708 1,902 2,708Interbank Fees ............................................................................ 10,439 8,959 10,439 8,959Credit Notes Receivable ............................................................. 5,579 4,081 5,579 4,081Reserve Fund - Escrow Deposit - Law 12,069 ....................... 5,761 3,655 5,761 3,655Commission and management Fee of Insurance Placement .... 1,110 1,874 1,110 1,874Other Operating Income ............................................................. 28,237 4,174 28,638 5,452Total ............................................................................................ 85,894 125,695 84,965 125,821


NOTE 19

Other Operating Expenses In Thousands of Reais Banrisul Banrisul Consolidated 2008 2007 2008 2007

Discount Granted from Renegotiations ..................................... 2,246 3,402 2,246 3,402Reserves for Labor Provisions(Note 14 (b)) ............................ 5,519 20,000 5,771 20,000Losses on Investments .............................................................. 144 - 144 -Provision for Properties - Assets not in use ............................. 182 472 182 472Provision for Securitization Losses .......................................... 4,126 1,600 4,126 1,600Reserves for Civil Contingencies .............................................. 276 1,789 276 1,789Acquisition of Payroll of Municipal Public Sector (Note 09) ..... 22,636 - 22,636 -Collection of Federal Taxes ........................................................ 480 574 480 574Monetary Adjustment of Reserve for Tax Contingencies

(Social Contribution / Income Tax) - (Note 14 (a)) ................ 9,754 11,201 9,754 11,201Lawsuits Indemnifications ......................................................... 1,432 1,669 1,432 1,669Monetary Adjustment of Brazilian Central Bankfines on

Foreign Exchange (Note14 (c)) .............................................. 2,420 1,888 2,420 1,888Monetary Adjustment of Actuarial Deficit of Fundação Banrisul

(Note 24) ................................................................................ 5,505 2,648 5,505 2,648Overdraft Accounts and Banricompras Premiável ................... 3,273 3,315 3,273 3,315Provision for Debts Assumed with GESB ................................. 775 191 775 191Exchange Adjustment - Foreign Branches ............................... 11,012 12,277 11,012 12,277Financial Expenses ..................................................................... - - - 6,950Reversal of Income Receivable from the Rio Grande do Sul

State (*) .................................................................................... - 16,662 - 16,662Lawsuits ..................................................................................... 4,195 - 4,195 -Cards ........................................................................................... 3,661 - 3,661 -Other Operating Expenses ........................................................ 6,050 10,052 6,469 10,037Total ............................................................................................ 83,686 87,740 84,357 94,675

(*) Pursuant to the Term of Agreement, whereby the State of Rio Grande do Sul ensures Banrisul’s exclusivity inproviding banking service related to the payroll of active and inactive civil servants, life and special pensioners ofthe Executive Branch, and pension fund beneficiaries. In the same Term of Agreement, Banrisul exempts State fromany costs associated with the provision of banking services related to the collection of state charges and taxes,debits from checking accounts, Employment Security Fund (FGTS) statements and real estate receivable collectionsince 2002, and consequently the balance receivable mentioned above.

NOTE 20

Sharehokders’ Equity – Banrisul(a) CapitalFully subscribed and paid-up capital as of June 30, 2008 is R$2,300,000 thousand and it isrepresented by 408,974 thousand shares without par value as follows:

ON PNA PNB Total

Amount % Amount % Amount % Amount %Rio Grande do Sul State .................. 204,199,859 99.60 2,721,484 70.05 26,086,957 13.04 233,008,300 56.97Fundação Banrisul de Seguridade

Social (pension plan) .................. 449,054 0.22 158,983 4.09 - 0.00 608,037 0.15Social Security Institute of Rio

Grande do Sul State ................... 44,934 0.02 168,612 4.34 - 0.00 213,546 0.05Other ................................................ 324,014 0.16 835,817 21.52 173,984,763 86.96 175,144,594 42.83Total ................................................ 205,017,861 100.00 3,884,896 100.00 200,071,720 100.00 408,974,477 100.00

On April 30, 2007, the Bank, by means of the Annual and Extraordinary General meetings,increased capital by incorporating Profits Reserve by means of the issuance of 10,269,234thousand new shares (before the reverse stock split), in the amount of R$334,000 thousand. TheMeetings also approved the new designation of existing class A Preferred shares and the creationof type B preferred shares and the possibility of class A Preferred shareholders converting theirshares into Common shares or class B Preferred shares.


On June 28, 2007 the State of Rio Grande do Sul converted 10,207,640 thousand Class A PreferredShares (before the reverse stock split) into Common Shares, and on July 5, 2007, it converted20,000,000,000 Class A Preferred shares into Class B Preferred Shares (before the reverse split ofshares). On July 23, 2007, as per the authorization provided for in the Minutes of the ExtraordinaryGeneral Meeting held on June 1, 2007, a reverse-split took place in the ratio of 150 shares for oneshare of the respective type and class.

On July 30, 2007, the Bank carried out the primary and secondary public offering of Class BPreferred shares in the total global amount of R$2,086,957 thousand, whereby 66,666,666new Class B Preferred shares were issued at the issuance price per share of R$12.00, generatinga capital increase in the amount of R$800,000 thousand.

On March 25, 2008, an Annual and Extraordinary General meeting approved the capital increaseby incorporation of Profits Reserve in the amount of R$266,000 thousand, with no new sharesissued.

The summary of these operations, including the conversions occurred up to June 30, 2008, is asfollows:

Preferred shares do not carry voting rights and are entitled to the following:

Class A Preferred Shares:

i) Priority to receive a non-cumulative, preferred fixed dividend of six percent (6%) per year,calculated over the quotient resulting from the division of capital stock by the amount of sharescomposing it;

ii) Right to take part, after the payment to Class B Common and Preferred Shares of a dividendequal to that paid to those shares, in the distribution of any other dividends or bonuses in cashdistributed by the company, under equal conditions with Class B Common and Preferred Shares,adding ten percent (10%) over the amount paid to those shares;

iii) Participation in capital increases deriving from the capitalization of reserves, under equalconditions of Class B Common and Preferred Shares;

iv) Priority in capital reimbursement, without premium;

v) Interest on capital may be attributed to Mandatory Dividend, this composing Dividends Paid bythe Bank.

Class B Preferred Shares:

i) Participation in capital increases deriving from the capitalization of reserves, under equal conditionsof Class A Common and Preferred Shares;

ii) Priority in capital reimbursement, without premium;

iii) Interest on capital may be attributed to Mandatory Dividend, this composing Dividends Paidby the Bank.

(b) Allocation of IncomeNet income for the year, adjusted in accordance with Law 6,404/76, will have the following allocations:(i) 5% to the Legal Reserve, which will not exceed 20% of Capital Stock, (ii) 25% to the StatutoryReserve, and (iii) mandatory minimum dividends up to the limit of 25% of adjusted net income. Theremaining net income will be allocated as decided in the Shareholders´ Meeting.

In Thousands of Shares SharesCapital Amount Amount Increase by Capital Capital

Stock as New After After Reverse Issuance of Stock as of Stock as of12/31/2006 Designation Issuance Conversion Conversion Split Conversion Shares 12/31/2007 Conversion 06/30/2008

ON 20,538,469 - - 10,207,640 30,746,109 204,974,060 43,801 - 205,017,861 - 205,017,861PN 20,538,469 (20,538,469) - - - - - - - - -PNA - 20,538,469 10,269,234 (30,207,640) 600,063 4,000,417 (68,001) - 3,932,416 (47,520) 3,884,896PNB - - - 20,000,000 20,000,000 133,333,334 24,200 66,666,666 200,024,200 47,520 200,071,720Total 41,076,938 - 10,269,234 - 51,346,172 342,307,811 - 66,666,666 408,974,477 - 408,974,477

Typeo fShare


The Statutory Reserve is intended to ensure funds for investments in the information technologyarea, and is limited to 70% of paid-up capital stock.

In March 2008, an Annual and Extraordinary General meeting approved the proposal of distributionof additional dividends of the years 2007 and 2008, in the percentage equivalent to 10% of theadjusted net profit, derived from the Statutory Reserve. In order to do so, the amount of R$87,056thousand in complementary dividends from 2007 was paid in April 23, 2008.

The remaining net income will be allocated in order to meet business expansion projects accordingto capital budget approved at the Annual and Extraordinary General Meeting held on March 25,2008.

As permitted by Law no. 9,249/95, Banrisul’s management paid interest on own capital in theamount of R$84,104 thousand (2007 – R$100,700 thousand).

The payment of this interest on own capital resulted in a tax benefit for the Bank in the amount ofR$30,224 thousand (2007 – R$28,049) (Note 23).

In Thousands of Reais 2008 2007

Net Income for the Six-month Period ...................................................................... 308,227 725,131Adjustment- Legal Reserve ................................................................................................................. (15,411) (36,256)Calculation Basis of Dividends ................................................................................... 292,816 688,875Minimum Mandatory Dividend 25% ................................................................................... 73,204 172,219Complementary Dividend 10% to 2008 ............................................................................. 29,282 -Total Dividends ............................................................................................................... 102,486 172,219

A) Interest on Own Capital (*) ..................................................................................... 84,104 100,700Paid- Commom Shares (R$ 205,64519 per thousand shares) .............................................. 42,161 39,619- Preferred Shares Class A (R$ 205,64519 per thousand shares) ................................ 808 40,881- Preferred Shares Class B (R$ 205,64519 per thousand shares) ............................... 41,135 -Provisioned- Commom Shares .............................................................................................................. - 10,096- Preferred Shares Class A .............................................................................................. - 10,104

B) Dividends Provisioned ............................................................................................. 18,382 71,519- Commom Shares (R$ 44,94583 per thousand shares) ................................................ 9,215 -- Preferred Shares Class A (R$ 44,94583 per thousand shares) .................................. 175 -- Preferred Shares Class B (R$ 44,94583 per thousand shares) ................................. 8,992 -

Total Interest on Own Capital and Dividends (A+B) .............................................. 102,486 172,219

(*)The payment of interest on shareholders’ equity is net of withholding income tax, calculated at the base rate of

15%, except for qualified or exempt investors.

NOTE 21

Basel AccordPursuant to National Monetary Council Resolution 2,099/94 and supplementary legislation, Brazilianfinancial institutions are required to maintain shareholders’ equity compatible with the risk level oftheir asset structure. As of June 30, 2008, the ratio between the reference equity and the requiredshareholders’ equity of the Banrisul Financial Group determined a Basel Ratio of 22.24% (2007 –21.12%), therefore, significantly higher than the minimum of 11% required by prevailing standards.


NOTE 22

Commitments, Guarantees and Other(a) On April 22, 2004, State Law 12,069, amended by Law 12,585 as of August 29, 2006, wasapproved, under which the Bank must make available to Rio Grande do Sul State up to 85% ofthe escrow deposits made by third parties with the Bank (except for those in which the litigant isa municipality). The remaining amount not available is recorded in a reserve fund to ensure therefund of said escrow deposits. As of June 30, 2008, the amount of escrow deposits made bythird parties with the Bank, brought up to the date of the Statement of Account by the TR(Reference Rate) variation plus interest of 6.17% p.a., totaled R$3,617,770 thousand (2007 –R$2,085,708 thousand), of which R$2,043,000 thousand (2007 – R$1,545,000 thousand) wastransferred to the State and written off from the respective equity accounts, and the remainingbalance that makes up the aforementioned fund, managed by Banrisul, is recorded in OtherPayables - Financial and Development Funds (Note 13).

(b) Sureties and guarantees granted to customers amount to R$443,686 thousand (2007 – R$126,482thousand), and are subject to financial charges and backed by the beneficiaries’ sureties.

(c) The Bank is responsible for the custody of 250,659 thousand securities of customers(2007 – 165,995 thousand).

(d) The Bank has co-obligations in import credits in the amount of R$25,015 thousand(2007 – R$21,106 thousand).

(e) During the first semester of 2008 the Bank paid R$866 thousand to its management(2007 – R$ 649 thousand).

(f) The Bank manages various funds and portfolios, which have the following net assets: In Thousands of Reais Banrisul Banrisul Consolidated 2008 2007 2008 2007

Investment funds ........................................................................ 4,158,277 3,572,012 4,393,200 3,692,971Investment funds in investment fund quotas ............................ 453,800 390,543 453,800 390,543Fund to Guarantee the Liquidity of Rio Grande do Sul State

Debt Securities ........................................................................ 1,717,288 127,459 1,717,288 127,459Support Fund for Micro Companies, Rural Micro Producers

and Small Sized Companies (FUNAMEP) ............................... - 13 - 13Managed portfolio ....................................................................... 342,433 287,318 342,433 287,318Credit Rights Investment Fund ................................................... 79,425 105,350 79,425 105,350

Total ............................................................................................ 6,751,223 4,482,695 6,986,146 4,603,654

(g) The subsidiary Banrisul S.A. Administradora de Consórcios is responsible for the managementof 75 groups (58 in June 2007) of consortia, distributed among real estate, motorcycles, vehicles,and tractors, gathering 13,359 active consortium members (9,748 in June 2007).


NOTE 23

Income and Social Contribution Taxes

(a) Conciliation of Expenses/Income with Income Tax and Social Contribution: In Thousands of Reais Banrisul Banrisul Consolidated 2008 2007 2008 2007

Income before Taxes ............................................................. 304,260 270,129 311,700 277,692

Income Tax on Profit - Rate 25%................................................ (76,065) (67,532) (77,925) (69,423)

Social Contribution Tax on Profit - Rate 9% .............................. (17,183) (24,312) (17,773) (24,992)

Social Contribution Tax on Profit - Rate 15% (*) ....................... (17,001) - (17,163) -

Total Income and Social Contribution Taxes calculated

at Effective Rate ................................................................... (110,249) (91,844) (112,861) (94,415)

Effect of Increased Rate Social Contribution Tax on Net Income

in Tax Credit (*) ........................................................................ 86,285 - 86,276 -

Adjustment of Fine on Foreign Exchange Operations .............. (873) 16,419 (873) 16,419

Profit Sharing ............................................................................... 5,313 306 5,313 908

Interest on Own Capital .............................................................. 30,224 28,049 30,224 28,049

Equity in Subsidiaries - Foreign Branches ................................ 1,254 908 - -

Other Additions, Net of Exclusions ............................................ 1,958 1,163 (1,518) (3,452)

Tax Credit of Previous years ..................................................... 3,343 504,239 3,343 504,239

Portion of Unrecorded Tax Credit .............................................. - (3,338) - (3,338)

Total Income and Social Contribution Taxes ................... 17,255 455,902 9,904 448,410

(*) Law 11,727 as of June 23, 2008, changed the Social Contribution on Net Income (CSLL) rate of the financialindustry, increasing it from 9% to 15% as of May 2008. This increase also impacted tax credits recorded ontemporary differences existing on the reference date.

(b) Deferred Income Tax and Social Contribution:Since 1998, when the Bank was included in the Financial Institutions Restructuring Program –PROES, Banrisul has reverted the loss history and has been presenting increasing taxable incomeresulting from its business plans.

CVM Instruction 371, as of June 27, 2002, and National Monetary Council Resolution 3,059, as ofDecember 20, 2002, amended by Resolution 3,355, as of March 31, 2006, and in view of thetechnical study that presents provision for Banrisul’s growth and the ability to generate futuretaxable income, continuously and in sufficient amounts, it is evident the probability of futuretaxable obligations with taxes and contributions that allow the realization of tax credit in themaximum term of ten years. Banrisul’s Management considers that the Bank’s capital increase,which took place in 2007 with new fund raisings, was a solid step for the business planimplementation for the next years, specially the growth of its credit portfolio and will materiallycontribute for the growth of operations and the fortification of the financial situation of theinstitution. Due to the factors abovementioned, in the first semester of 2007 it was registeredDeferred Income Tax and Social Contribution Tax Credits over Temporary Differences of previousyears in the amount of R$ 528,464 thousand. In June 2008 the Bank had Deferred Income Tax andSocial Contribution Tax Credits on temporary differences as per:


(b1) Tax creditsThe balances of tax credits basis are as follows:Banrisul In Thousands of Reais

Balance on Balance on 12/31/2007 Constitution(*) Realization 06/30/2008

Allowance for loan losses ......................................................... 387,319 132,502 71,448 448,373Reserve for labor contingencies ............................................... 49,138 11,563 14,436 46,265Reserve for tax contingencies .................................................. 45,857 12,307 313 57,851Other temporary provisions ....................................................... 22,935 3,285 - 26,220Total tax credits on temporary differences .................... 512,022 160,073 86,556 585,539Unrecorded credits ..................................................................... (3,432) 3,409 - (23)Total tax credits recorded .................................................... 501,817 163,066 86,197 578,686Deferred tax liabilities ................................................................. (10,286) (727) (8,384) (2,629)Tax credits, net of deferred liabilities ............................... 496,853 162,710 76,721 582,842

(*) Includes effects of the increase in the Social Contribution rate, as described in item (a).

Banrisul Consolidated In Thousands of Reais Balance on Balance on

12/31/2007 Constitution(*) Realization 06/30/2008

Allowance for loan losses ......................................................... 387,319 132,502 71,448 448,373Reserve for labor contingencies ............................................... 55,459 11,971 14,795 52,635Reserve for tax contingencies .................................................. 46,308 12,316 313 58,311Other temporary provisions ....................................................... 22,936 3,284 - 26,220Total tax credits on temporary differences .................... 512,022 160,073 86,556 585,539Unrecorded credits ..................................................................... (3,432) 3,409 - (23)Total tax credits recorded .................................................... 508,590 163,482 86,556 585,516Deferred tax liabilities ................................................................. (11,737) (772) (9,835) (2,674)Tax credits, net of deferred liabilities ............................... 496,853 162,710 76,721 582,842

(*) Includes effects of the increase in the Social Contribution rate, as described in item (a).

The expectations of realization of these receivables are as follows: In Thousands of Reais Banrisul Banrisul Consolidated Temporary Differences

Year Income Tax Social Contribution Total Totals Recorded Totals Recorded

2008 41,463 24,878 66,341 66,341 66,6592009 48,077 28,846 76,923 76,923 77,5612010 50,666 30,400 81,066 81,066 81,7042011 97,860 58,716 156,576 156,576 157,2142012 55,369 33,222 88,591 88,591 89,2292013 a 2015 56,661 33,996 90,657 90,657 93,0282016 a 2018 11,583 6,949 18,532 18,532 20,121Após 2018 14 9 23 - -Total on 06/30/2008 361,693 217,016 578,709 578,686 585,516Total on 06/30/2007 383,515 138,066 521,581 518,243 518,917

The total consolidated present value of tax credits is R$424,920 thousand and the present valueof tax credits recorded is R$424,911 thousand, calculated based on the expected realization oftemporary differences at average funding rate, projected for the corresponding periods.


(b2) Deferred Tax LiabilitiesThe balance of the Reserve for Deferred Taxes and Contributions is represented by:

In Thousands of Reais Banrisul Banrisul Consolidated 2008 2007 2008 2007

Excess Depreciation ................................................................... (2,530) - (2,530) -Available for Sale Securities ...................................................... (82) - (82) -Adjustment to Fair Value of Trading Securities ........................ (17) (7,053) (62) (7,053)Others ......................................................................................... - (3,066) - (4,619)Total ............................................................................................ (2,629) (10,119) (2,674) (11,672)

NOTE 24

Fundação Banrisul de Seguridade Social and CABERGS– Caixa de Assistência dos Empregados do Banco doEstado do Rio Grande do Sul

(a) The Bank is the main sponsor of Fundação Banrisul de Seguridade Social (pension plan), whosemain objectives are to supplement the retirement benefits provided by the Government to theemployees of the Bank and CABERGS (Bank Employees Social Assistance Fund), as well as toprovide assistance programs offered by their sponsors.

In order to accomplish its objectives, Fundação Banrisul receives monthly contributions fromsponsors and participants, calculated based on employees’ monthly compensation. The Bank’scontributions in the quarter amounted to R$4,679 thousand (2007 - R$4,782 thousand), equivalent,as of June 30, 2008, to 3.45% (3.45% in 2007) of the monthly payroll of participating employees,and were recorded as operating expenses.

Fundação Banrisul offers a defined benefit plan and its valuation, in accordance with specificlegislation, is carried out annually at the fiscal year’s closing date by an independent actuary.

As of December 31, 1997, the actuarial deficit of Fundação Banrisul was estimated at R$ 525,389thousand. On March 31, 1998, in connection with Banrisul’s financial restructuring process, withinthe context of the State Financial System Restructuring Program – PROES, the Rio Grande do SulState Government contractually assumed the liability to pay part of this deficit, in the amount ofR$ 500,000 thousand, in 30 years, plus annual interest of 6% and monetarily adjusted based onthe variation of the IGP-DI (general price index – domestic supply).The amount assumed by the State is also annually adjusted based on new actuarial calculations.This debt was collateralized by shares of Companhia Estadual de Energia Elétrica (CEEE), held bythe Rio Grande do Sul State Government. Additionally, Banrisul was authorized to collect defaultamounts, with their related charges, from the State bank account with Banrisul.

In the semester ended June 30, 2008, Rio Grande do Sul State paid Fundação Banrisul de SeguridadeSocial the amount of R$34,409 thousand (2007 – R$33,362 thousand); the contractual terms arebeing complied with.

The remaining portion of the actuarial deficit as of December 31, 1997 was assumed by Banrisul,and must be paid in the same conditions of term, interest and monetary adjustment. As of June30, 2008, it amounted to R$59,625 thousand (2007 - R$54,455 thousand), recorded in “Otherpayables” (Note 13).

(b) Banrisul also offers health and dental care benefits, through CABERGS, to its employees andthrough Fundação Banrisul, to retired employees.


(c) As of December 31, 2007, the actuarial valuation of post-employment benefits granted toemployees is as follows:

In Thousands of ReaisPension Health and

plan dental care plans TotalPresent value of actuarial obligations .......................... (1,855,866) (87,710) (1,943,576)Fair value of Fundação Banrisul’s assets (*) .............. 1,966,096 65,458 2,031,554Unrecognized gains/losses and costs of services ..... 214,333 34,623 248,956Actuarial assets (liabilities) .................................... 324,563 12,371 336,934

(*) Includes the amount receivable from the Rio Grande do Sul State Government relating to theactuarial deficit determined as of December 31, 1997, as mentioned in item (a), in the adjustedand revalued amount of R$805,271 thousand, which are being received within due date.

The main actuarial assumptions used as of December 31, 2007 were:

- Discount rate: 11.28% p.a.- Expected rate of return on assets of the pension plan: 10.72% p.a.- Expected rate of return on assets of health care plan: 9.39% p.a.- Future salary increases: 6.08% p.a.- Increase in medical costs: 7.12% p.a.- Inflation: 4.00% p.a.- Mortality table: AT - 83

NOTE 25

Financial InstrumentsThe main risks related to financial instruments are credit risks, market risks and liquidity risks, asfollows:

• Credit risk: The risk results from counterparty’s noncompliance with the commitment,deterioration of guarantees, and concentration on client or sector. The risk area is in charge ofassessing the credit risk of treasury operations, as well as proposing maximum limits.Banrisul has adopted the proprietary model of risk rating, which is in conformity with Resolution2,682 of the Central Bank of Brazil (BACEN), allowing for the rating of the entire Institution’sclient base. The granting of loan uses statistical models to define credit limits to retail clients,especially in operations with individuals.

• Market risk: it is the exposure created by the potential fluctuation of interest rates, exchangerates, market prices and other values, and in view of the type of the product, the volume ofoperations, terms and conditions of the agreement and underlying volatility.

• Liquidity risk: it is the occurrence of unbalances between tradable assets and current liabilitiesderiving from financial instruments operations that may affect the institution’s payment capacity,taking into account the various currencies and payment terms of their rights and obligations.

Risks are measured by means of a tool based on the value-at-risk (VAR) calculation methodology.In order to control the exposure level, limits have been established and monitored on a dailybasis.


NOTE 26

Balances and Transactions with Related PartiesBanrisul In Thousands of Reais

Subsidiaries Rio Grande do Sul State Assets (Liabilities) Income (Expenses) Assets (Liabilities) Income (Expenses) 2008 2007 2008 2007 2008 2007 2008 2007

Derivatives .................... - - - - 107,830 101,005 5,374 4,028Collection Services ....... - - - - 5,072 5,072 - -Other Receivables ........ 3,148 1,625 2,031 1,286 - - - -Demand Deposits .......... (4,889) (10,497) - - (110,640) (112,782) - -Time Deposits ................ (162,091) (121,314) (5,482) (5,846) - - - -Money Market Funding .. (52,087) (32,513) (2,989) (1,875) (1,717,287) (127,458) (80,701) (11,920)Other Payables ............. (21,040) (9,633) (580) (321) - - - -Total ............................... (236,959) (172,332) (7,020) (6,756) (1,715,025) (134,163) (75,327) (7,892)

Banrisul Consolidated In Thousands of Reais Rio Grande do Sul State

Assets (Liabilities) Income (Expenses) 2008 2007 2008 2007

Available funds - SIAC ............................................................... 17,085 15,628 1,027 1,570Derivatives .................................................................................. 107,830 101,005 5,374 4,028Collection services ..................................................................... 5,072 5,072 - -Other receivables ....................................................................... 4,499 7,320 362 383Time deposits .............................................................................. (110,640) (112,782) - -Money market funding ................................................................ (1,717,287) (127,458) (80,701) (11,920)Total ............................................................................................ (1,693,441) (111,215) (73,938) (5,939)

Investments and loans with related parties were contracted at rates compatible with those forunrelated parties, prevailing at the dates of the transactions.

On June 29, 2007, it was established the Agreement Term 1959/2007 between Banrisul and theState of Rio Grande do Sul, in which the State ensures Banrisul the exclusivity in bank servicesrelated to the personnel payment of active and inactive government employees, life and specialpensioners of the Executive Power and social security pensioners, for a 5-year term. In the sameAgreement Term, Banrisul exempts the State of Rio Grande do Sul from any cost related to bankservices of collection of revenues and state taxes, debt to checking accounts, UnemploymentCompensation Fund (FGTS) statements and real estate credit collection services.

NOTE 27

Amendment to the Brazilian Corporate LawOn December 28, 2007, Law 11,638/07 was enacted, amending, revoking and introducing newprovisions to the Brazilian Corporate Law, particularly in relation to chapter XV, regardingaccounting procedures, which takes effect as of the fiscal year starting on January 1, 2008. ThisLaw aimed mainly at updating the Brazilian corporate law in order to enable the process ofconvergence of the accounting practices adopted in Brazil with those of international accountingstandards and allow for new accounting standards and procedures to be issued by the Securitiesand Exchange Commission of Brazil (CVM) in compliance with the international accountingstandards.

A significant portion of the main changes promoted by the legislation are adopted by the Bankand its subsidiaries, as a result of requirements of the Brazilian Central Bank, by the adoption ofthe classification and mark-to-market criteria of financial instruments, and voluntarily, as in the


presentation of Cash Flow Statement (Note 28).

The Brazilian Central Bank, by means of Official Notice no. 16,669 as of March 20, 2008 and CVM,by means of Notice to the Market as of January 14, 2008, have waived the application of theprovisions in Law no 11,638/07 in the preparation of interim financial statements of 2008. Thus,the accounting information for the quarter ended June 30, 2008 was prepared in accordance withspecific instructions of Brazilian Central Bank and Comissão de Valores Mobiliários (CVM, BrazilianSEC equivalent) and do not comprise the changes of practices introduced by the legislation.

The main changes are as follows:

· The Statement of Added Value (SAV) is included.

· Creation of new accounts subgroups: intangible assets.

· Companies now must analyze, periodically, the capacity of recovering the amounts recorded asproperty, plant and equipment, intangible assets and deferred charges.

The Management estimates in its initial evaluation that the aforementioned amendments will nothave material effects on the Bank’s financial statements as of December 31, 2008. However, at themoment and under these circumstances, it is not viable to safely determine the effects of the fulladoption of the new law.


NOTA 28

Cash Flow In Thousands of Reais Banrisul Banrisul Consolidated 2008 2007 2008 2007

Adjusted net income before changes in working capital 360,387 291,183 373,581 309,253Net income in the Semester ................................................... 308,227 725,131 308,227 725,131Adjustments not affecting cash flow:Depreciation and Amortization ............................................... 17,974 17,690 18,608 18,146Equity accounting .................................................................... (12,342) (14,948) - -Grants for investments ........................................................... - (2,451) - (2,451)Allowance for doubtful credits .............................................. 102,869 115,555 102,889 118,221Reserve on co-obligations ..................................................... 1,127 (390) 1,127 (390)Reserve for contingencies ..................................................... 19,401 (31,161) 19,653 (31,161)Deferred income tax and social contribution ........................ (76,869) (518,243) (76,923) (518,243)

Change in assets and liabilities .......................................... 643,208 (376,789) 631,555 (392,702)Fair value adjustment of securities ........................................ (4,271) 16 (4,271) 16(Increase) decrease in securities ......................................... 635,863 (323,381) 638,080 (323,410)(Increase) decrease in derivatives ....................................... (6,367) (4,029) (6,367) (4,029)(Increase) decrease in Interbank and Interbranch accounts 21,346 (183,195) 21,345 (183,195)(Increase) decrease in loan operations ................................ (1,839,042) (462,248) (1,839,043) (462,248)(Increase) decrease in leasing operations ........................... (31,554) (2,771) (31,554) (2,771)(Increase) decrease in Other Receivables ........................... (119,435) (59,314) (137,064) (63,719)(Increase) decrease in Other Assets ................................... (25,595) (2,361) (25,655) (2,391)Increase (decrease) in deposits ............................................ 647,544 560,810 638,794 558,911Increase (decrease) in Money Market fundings ................... 310,393 (328,885) 319,377 (330,587)Increase (decrease) in Onlendings ....................................... 167,740 116,523 167,649 117,377Increase (decrease) in other liabilities .................................. 964,748 419,484 967,634 411,616Increase (decrease) in deferred income .............................. (1,250) (107) (1,250) 33Loan operations written-off against allowance for loan losses (76,912) (107,331) (76,120) (108,305)

NET CASH FROM OPERATING ACTIVITIES ........................... 1,003,595 (85,606) 1,005,136 (83,449)CASH FLOW FROM INVESTMENT ACTIVITIES

Dividends receivable from subsidiaries ................................ 1,319 1,474 - -Restated assets in subsidiaries ............................................. (114) 320 (114) 320Disposal of Investments ......................................................... 76 - - -Disposal of property and equipment in use ........................... 299 560 301 560Acquisition of investments ..................................................... (23) (1,339) (27) (1,362)Acquisition of property and equipment in use ...................... (18,848) (14,830) (17,610) (15,076)Use in deferred ....................................................................... (4,121) (3,140) (4,121) (3,140)

NET CASH USED IN INVESTMENT ACTIVITIES ..................... (21,412) (16,955) (21,571) (18,698)

CASH FLOW FROM FINANCING ACTIVITIESDividends paid ......................................................................... (87,056) - (87,056) -Interest on own capital paid ................................................... (84,104) (80,500) (84,104) (80,500)Change in Minority Interest ..................................................... - - 42 66

NET CASH FROM FINANCING ACTIVITIES ............................ (171,160) (80,500) (171,118) (80,434)

NET INCREASE IN CASH AND CASH EQUIVALENTS ............. 811,023 (183,061) 812,447 (182,581)Cash ......................................................................................... 347,304 261,756 347,353 261,801Interbank investments ............................................................. 3,682,417 2,576,180 3,698,062 2,590,523

CASH AND CASH EQUIVALENTS AT THE BEGINNINGOF THE SEMESTER .................................................................... 4,029,721 2,837,936 4,045,415 2,852,324

Cash ......................................................................................... 251,135 214,740 251,169 214,809Interbank investments ............................................................. 4,589,609 2,440,135 4,606,693 2,454,934

CASH AND CASH EQUIVALENTS AT THE ENDOF THE SEMESTER .................................................................... 4.840.744 2.654.875 4.857.862 2.669.743

Reports


I. Institutional and Statutory Provisions – The Audit Committee,as na statutory body fo Bancodo Estado do Rio Grande do Sul S/A, , created by the Extraordinary General Meeting held onApril 29, 2004, is formed by Mr. João Verner Juenemann, Mr. João Zani e Mr. Manoel André daRocha, all members of the Board of Directors, being the first and the third independent members,elected by the Board of Directors on June 24, 2004 and reelected on April 03, 2008, with term ofOffice until the first meeting of the Board of Directors to be heldo after the Annual GeneralMeeting of 2009. The Audit Committee’s Internal Regulations are available on:http://www.banrisul.com.br/bob/data/RegimentoInterno.pdf.

II. Duties and Responsabilities – The Audit Committee has the responsibility of supervising thecompliance with regulatory and legal requirements, the integrity and quality of the financialstatements of the institution and its subsidiaries, the efficiency and effectiveness of the independentaudit and internal audit performance. It is also responsible for the permanent follow-up on thequality of the internal controls and risk management.

Management is responsible for the elaboration of the financial statements of the companiesthat make part of Grupo Banrisul (Banrisul Group), in compliance with the guidelines focused onensuring the quality of the processes related to the financial information, and to the control andrisk management activities.

It is incumbent upon Deloitte Touche Tohmatsu Auditores Independentes, the external auditcompany responsible for the financial statements analysis, to issue an opinion on whether theyadequately represent the equity and financial situation of the group, pursuant to the fundamentalprinciples of accounting, the Brazilian corporate legislation and the rules of the Securities andExchange Commission of Brazil – CVM, the National Monetary Council and the Brazilian CentralBank.

III. Work Programming for Year 2008 - In compliance with the provisions of its Internal Regulations,the Committee has prepared its work programming, for year 2008, at the meeting held on 02-26-2008 (Minutes of the Meeting no. 157). For the compliance with that programming, thefollowing time schedule has been defined: 1) monthly meetings with the Bank’s CEO and ExecutiveOfficers, with the Internal Audit, the Legal Advisory, the Controllership, Operational Unit andthe Accounting, Credit Recovery, Human Resources , Financial, Credit and Risk ManagementUnits; 2) quarterly meetings with the Fiscal Council, with the independent auditors, with subsidiaries(Banrisul S/A Corretora de Valores Mobiliários e Câmbio, Banrisul S/A Administradora deConsórcios e Banrisul Armazéns Gerais S/A) and also, with Fundação Banrisul de SeguridadeSocial and Caixa de Assistência dos Funcionários do Banrisul – Cabergs.

IV. Activities Schedule – During the 1st half of 2008, qhich comprises the period between February02, 2008 and June 24, 2008, the Committee held nineteen (19) meetings, with additional five (05)until August 2008, as an excerpt of the Audit Committee Report, in which it discussed, in thescope of its authority, the most different subjects, as described in the minutes of the meetings.In these meetings, the Committee was supported by the analysis of the accounting data,managerial reports, supplementary information and meetings held with the presidency and

Summary of the Audit CommitteeReport - 1st Half of 2008


executive officers of the institution, with executives from different levels of the organization, andwith the executive officers from the subsidiaries It has also obtained reports, documents andinformation from the executive managing directors of several units of the Bank. It has, likewise,requested the attendance, when necessary, of the professionals of or the responsible for therespective area of operation, as well as of the independent auditors.

V. Internal Audit: The Internal Audit, linked to the CEO, has, among its objectives, to safeguardof the assets and to assure the compliance with the policies, plans, procedures and laws, beingresponsible for assisting the Audit Committee and the independent auditors. This structureaimed to comply with the planning approved for year 2008, with a view to contemplate therecommended systematic implementations and processes improvements. With this scope, andin line with the planning approved for year 2008, with a view to contemplate the recommendedsystematic implementations and processes improvements. The Committee promoted independentassessment of Internal Audit’s activities. As reported in the minutes of the meetings of thisCommittee, the teams responsible for the execution of the tasks related to the operational,administrative and systems areas, have periodically discussed the conclusions reported.

Considering the reports made available by the Internal Audit and the answers produced by therespective areas, the Audit Committee believes to have had reasonable knowledge of each andevery one of the subjects under analysis.

VI. External Audit: The work planning for 2008 has been examined and opportunely approvedby the Audit Committee in December 18, 2007.

The report on the evaluation of the accounting and internal control systems, related to 2007,presented by the external audit company, along with the recommendations made, has beendiscussed with the Committee, which has followed with the Internal Audit the implementation ofthe actions suggested for each unit, throughout the year. Due to the permanent supervision ofthis work, the Committee believes that the work developed was adequate to Banrisul’s needs..

At the discretion of that Committee, during the six-month period ended June 2008, theindependent auditors have performed the tasks contractually attributed to them. The independentauditors work has been supervised throughout the year, with the guarantee of unrestrictedaccess to the institution’s data, with a view to ensure total freedom in the performance of thecontract. There is no evidence of any fact or circumstance that might have impaired the adoptionof an independent posture, or the development of the auditors’ work.

VII. Controle Externo – Os membros do Comitê de Auditoria tomaram conhecimento dasrequisições dos órgãos de controle externo no período, do seu atendimento e das eventuaisrecomendações decorrentes.

VIII. Operational Risk – The Committee has followed the development of the Business ContinuityPlan. It has also supervised the implementation of an adequate dimensioning of the civil andlabor contingencies, with a view to establish the provisions necessary to their coverage in acorrespondent level. At the same time, the internal control processes have been analyzed regardingthe aspects related to the corresponding judicial deposits. As an addendum to this activity, theAudit Committee has recommended the acceleration of the activities of the Civil and LaborContingencies Management Group and of the Labor Lawsuits Negotiation and Prevention Board.


During this half, the Audit Committee has also supervised the development of the IT activities.This supervision includes the replacement of internal use equipment or of equipment made availableto clients or to other users in general. This process has been particularly focused on thedevelopment of IT security programs with a view to prevent electronic fraud practices to theclients and to the Bank itself, and to protect the confidentiality of the operations performed bythe Institution.

IX. Error and Fraud Communication Channel - The denunciations received by the Audit Committeedid not include the existence or the evidence of error or fraud, for the effects of article 8 of itsInternal Regulation. The other denunciations have been addressed to the competent areas forthe necessary measures, with no need for additional remarks, since they were punctual and didnot have great significance for the overall situation.

X. Capital Market – The Audit Committe has supervised, in the first half of 2008, the activities ofthe Investor Relations area, recommending the adoption of mesures deemed suitable to itsroutines and development.

XI. Continued Education – The Audit Committee members have participated in events, duringthe first six months of 2008, about ccorporate governance, risk management and better practicesfor audit committees, as well as for fully understanding the difficulties involved in the process ofcomplying with international accounting standards. With that target, it has promoted severalphysical meetings and fonoconferences with large financial institutions’ Internal Audit Committe’srepresentatives.

XII. Conclusion - Considering the existing internal control systems, the scope, the thoroughnessand the quality of the work performed by the internal and external audits, as well as the issue ofthe independent auditors’ opinion, without remarks, on August 04, 2008, along with the set ofrecommendations of the Audit Committee, described in the respective minutes of the meetings,we recommend, to the Board of Directors, the approval of the audited financial statements,related to the six-month period closed on June 30, 2008.


João Verner Juenemann

João Zani

Manoel André da Rocha


Opinion of the Fiscal Council

As members of the Fiscal Council of Banco do Estado do Rio Grande do Sul S.A. and in the

exercise of the responsibilities conferred to us by Article 163, items II and VII of Law 6,404 dated

December 15, 1976, and by the provisions of the Company´s Bylaws, we have examined the

Management Report and the Financial Statements, which comprise the Balance Sheet, Statement

of Income for the semester, Statement of Changes in Financial Position, Statements of Changes

in Shareholders’ Equity, Notes to the Financial Statements, Audit Committee Report and other

statements for the six-month period ended June 30, 2008. Based on our examinations and on

the Opinion of the Independent Auditors it is our opinion that the statements cited above should

be approved.


Claudio Morais MachadoChairman

Ronei Xavier JanovikVice-Chairman

Americano Lopes NetoIrno Luiz BassaniRubens Lahude

Members


Independent Auditors´ Report

Deloitte Touche TohmatsuAuditores IndependentesCRC nº. 2 SP 11.609/O-8/F/RS

To the Management and Stockholders of

Banco do Estado do Rio Grande do Sul S.A.

Porto Alegre - RS

1. We have audited the accompanying individual

(Bank) and consolidated balance sheets of Banco do

Estado do Rio Grande do Sul S.A. and subsidiaries as

of June 30, 2008 and 2007, and the related

statements of income, changes in stockholders’

equity (Bank), and changes in financial position for

the six-month periods then ended, all expressed in

Brazilian reais and prepared under the responsibility

of the Bank’s management. Our responsibility is to

express an opinion on these financial statements.

2. Our audits were conducted in accordance with

auditing standards in Brazil and comprised: (a)

planning of the work, taking into consideration the

significance of the balances, volume of transactions,

and the accounting and internal control systems of

the Bank and its subsidiaries, (b) checking, on a test

basis, the evidence and records that support the

amounts and accounting information disclosed, and

(c) evaluating the significant accounting practices

and estimates adopted by Management, as well as

the presentation of the financial statements taken

as a whole.

3. In our opinion, the financial statements

referred to in paragraph 1 present fairly, in all material

respects, the individual and consolidated financial

positions of Banco do Estado do Rio Grande do Sul

S.A. and subsidiaries as of June 30, 2008 and 2007,

and the results of their operations, the changes in

stockholders’ equity (Bank), and the changes in their

financial positions for the six-month periods then

ended, in conformity with Brazilian accounting

practices adopted prior to Law No. 11,638/07.

4. As mentioned in note 27, on December 28,

2007, Law No. 11638 was enacted, altering, revoking

and adding new provisions to Law No. 6,404/76

(Brazilian Corporate Law). This Law is effective for

fiscal years beginning on or after January 1, 2008

and introduced changes in the Brazilian accounting

practices. Although this Law has already become

effective, some changes introduced by it are subject

to regulation by the National Monetary Council and

Central Bank of Brazil before being applied by

institutions regulated by them. Accordingly, during

this transition phase, the Central Bank of Brazil,

through Release No. 16669, of March 20, 2008, has

permitted institutions not to apply the provisions of

Law No. 11638/07 in the preparation of the interim

financial statements. Thus, the financial statements

referred to in paragraph 1 have been prepared in

conformity with specific instructions of the Central Bank

of Brazil and do not include the changes in accounting

practices introduced by Law No. 11638/07.

5. Our audits were conducted for the purpose of

forming an opinion on the basic financial statements

referred to in paragraph 1, taken as a whole. The

accompanying individual and consolidated

statements of cash flows for the six-month periods

ended June 30, 2008 and 2007 are presented in

note 28 for purposes of additional analysis and are

not a required part of the basic financial statements

in accordance with Brazilian accounting practices

adopted prior to Law No. 11638/07. Such statements

have been subjected to the auditing procedures

described in paragraph 2 and, in our opinion, are

fairly presented, in all material respects, in relation

to the basic financial statements taken as a whole.

6. The accompanying financial statements have

been translated into English for the convenience of

readers outside Brazil.

Porto Alegre, August 4, 2008

Fernando CarrascoEngagement PartnerCRC nº. 1 SP 157.760/T/RS

Board of Executive OfficersBoard of Executive OfficersBoard of Executive OfficersBoard of Executive OfficersBoard of Executive Officers

FERNANDO GUERREIRO DE LEMOSCEO

RUBENS SALVADOR BORDINIVice-President

CARLOS TADEU AGRIFOGLIO VIANNALUIZ GONZAGA VERAS MOTA

LUIZ VALDIR ANDRESPAULO ROBERTO GARCIA FRANZ

RICARDO RICHINITI HINGELURBANO SCHMITT

Officers

Board of DirectorsBoard of DirectorsBoard of DirectorsBoard of DirectorsBoard of Directors

AOD CUNHA DE MORAES JÚNIORChairman

FERNANDO GUERREIRO DE LEMOSVice-Chairman

ARIO ZIMMERMANNIVO DA SILVA LECH

JOÃO VERNER JUENEMANNJOÃO ZANI

MANOEL ANDRÉ DA ROCHARUBENS SALVADOR BORDINI

Board Members

LUIZ CARLOS MORLINAccountant CRCRS 51.124

GOVERNMENT OFGOVERNMENT OFGOVERNMENT OFGOVERNMENT OFGOVERNMENT OF RIO GRANDE DO SUL ST RIO GRANDE DO SUL ST RIO GRANDE DO SUL ST RIO GRANDE DO SUL ST RIO GRANDE DO SUL STAAAAATETETETETE

Secretary of the TreasuryBanco do Estado do Rio Grande do Sul

BANCO DO ESTADO DO RIO GRANDE DO SUL S.A. - FOUNDED IN SEPTEMBER 12, 1928MAIN ADDRESS: RUA CAPITÃO MONTANHA, 177 - PORTO ALEGRE - RS - BRASIL

www.banrisul.com.br

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