consolidated financial statements - banco votorantim · 2018. 8. 30. · to r$ 2,753 million in...

December 31, 2016 Consolidated Financial Statements

BANCO VOTORANTIM S.A.

Management report To the Shareholders, In compliance with legal and statutory provisions, we are presenting the Management Report and the Individual and Consolidated Financial Statements of Banco Votorantim S.A. (Bank) for the periods ended December 31, 2016 and 2015, accompanied by the respective notes to the statements and the independent auditors’ report. 1. Economic Environment and Banking Sector The second six-month period started with high expectations, with most of the market agents confident that the new economic policy would put an end to Brazil's recession by the end of the year. However, the most recent economic indicators evidence the difficulties faced by the companies, which continue to experience a low demand for their products, and the difficulties faced by individuals, who are still deep in debt and worried about the rising unemployment rate. Consequently, the initial optimism had to be adjusted, and the GDP projection for 2017 was reduced to 0.5%. On the other hand, the persistence of the recession led to progress in certain structural reforms which are of great importance to Brazil, making it possible for Brazilian assets to perform better than the assets of other emerging countries. The Brazilian currency (real) remained practically stable in the second six-month period - closing the year at R$3.26 per US dollar, despite the possibility of a more accelerated interest rate increase in the United States. The gains on commodity prices, with the prospect of an acceleration in the pace of world economic growth, also helped to create a more favorable environment for local assets. It is worth emphasizing that Ibovespa gained 18.1% in the second half of the year. In view of the above, the scenario for the banking industry in Brazil remained challenging. In the corporate segment, delinquency increased from 2.6% at the end of Dec.15 to 3.5% in Dec.16, but decreased from 4.2% to 4.0% in the individual client segment. Despite the growth observed in the stock of credit of the financial system over the last two months of the year, there was a nominal decrease of 3.5% over the last twelve months. In the auto finance loan segment, a segment in which Banco Votorantim is one of the market leaders, credit also decreased in the year (-11.1%), but showed signs of a recovery in Dec.16. The recovery of economic activity tends to benefit from the monetary policy. The most substantial decrease in inflation, which closed the year in line with the official target and expectations, coupled with progress in the approval of fiscal adjustment measures, paved the way for interest rate cuts. After ending the year at 13.75%, the benchmark interest rate (SELIC) was reduced to 13.00% in January 17, and the Brazilian Central Bank (BACEN) announced further cuts. If these further cuts in the benchmark interest rate (SELIC) occur and the consumers' uncertainties abate, the expectation is for credit to gain momentum and Brazil to resume growth in the medium- and long-term. However, in the short term, conditions must be created to enable the necessary reforms to restore Brazil's economic dynamics.

2. Main Information – Consolidated position

RESULTS (R$ Million)

Net Interest Income (a) 5,135 5,220 1.7%

Allowance for loan losses - ALL (b) (3,061) (2,467) -19.4%

Gross Income from Financial Operations (a - b) 2,074 2,753 32.8%

Income from services and banking fees1 961 1,123 16.8%

Administrative and personnel expenses (2,332) (2,378) 2.0%

Operating income (Loss) (244) 814 -

Provision for income tax and social contribution 936 (257) -

Net income (Loss) 482 426 -11.6%

MANAGEMENT INDICATORS (%)

Return on Average Equity2 (ROAE) 6.3 5.2 -1.1 p.p.

Return on Average Assets3 (ROAA) 0.5 0.4 -0.1 p.p.

Basel Ratio 15.2 15.1 -0.1 p.p.

Tier I 9.5 11.2 1.7 p.p.

BALANCE SHEET (R$ Million)

Total assets 110,221 102,998 -6.6%

Loan portfolio 50,984 47,620 -6.6%

Wholesale segment 17,377 14,161 -18.5%

Consumer Finance segment 33,606 33,459 -0.4%

Guarantees provided 9,468 7,824 -17.4%

Funding sources 77,953 67,349 -13.6%

Shareholders' equity 7,617 8,426 10.6%

Capital (Basel Ratio) 10,742 9,219 -14.2%

LOAN PORTFOLIO QUALITY INDICATORS (%)

90-day NPL/ Loan portfolio 5.7 5.5 -0.2 p.p.

ALL provisions / 90-day NPL 142.3 139.2 -3.1 p.p.

ALL provisions / Loan portfolio 8.1 7.7 -0.4 p.p.

OTHER INFORMATION

AuM4 (R$ Million) 47,418 53,753 13.4%

1. Includes banking fees income;

2. Ratio between net income and average equity of the period. This ratio is annualized;

3. Ratio between net income and average assets o f the period. This ratio is annualized.

4. Includes onshore funds (ANBIM A criteria) and private clients’ assets (fixed income, equities and offshore funds).

Variation2015 2016

3. Business Performance Transactions of the Bank are conducted in the context of a set of subsidiaries that operate in an integrated manner in the financial market, including in relation to risk management. These subsidiaries include BV Financeira, BV Leasing, Votorantim Asset Management (VAM) and Votorantim Corretora de Títulos e Valores Mobiliários. Having Votorantim Group and Banco as its shareholders, Banco Votorantim is one of the largest Brazilian privately-held banks in total assets and also in loan portfolio, and has a diversified wholesale bank businesses (CIB), consumer finance and wealth management business portfolio. 2016 was a year marked by a rather challenging macroeconomic scenario, but, despite that, the Bank continued to focus on the rolling out of its strategic plan, based on the increase of the profitability of businesses and operational efficiency, as well as a diversification of revenues. The main highlights of the year were:

1. Net income of R$ 426 million, equivalent to annualized return on shareholders’ equity of 5.2%.

2. Consistent revenue generation. Gross earnings from financial intermediation amounted to R$ 2,753 million in 2016, growth of 32.8% compared to 2015. It is worth emphasizing that total fee income/banking fees income grew 16.8% in 2016/2015.

3. Maintenance of conservative approach to credit. The balance of the expanded credit portfolio closed Dec.16 at R$ 60.8 billion, decreasing 7.3% in the last 12 months especially due to a maintenance of the focus on the profitability and quality of assets. However, it should be mentioned that the extended loan portfolio grew by 2.5% in the second semester.

4. Delinquency under control. Despite the presence of a challenging macroeconomic

scenario, delinquency above 90 days of the on loan portfolio ended Dec.16 at 5.5%, 0.2 p.p. lower than in Dec.15. The delinquency of the Consumer Finance portfolio decreased 0.2 p.p. compared to Dec.15, to 5.1%, resulting in an improvement in the quality of the portfolio of Vehicles, whose delinquency reduced 0.2 p.p. in the last 12 months, while the average market delinquency of this segment grew 0.4 p.p. in the same period.

5. Effective cost management. Administrative and personnel expenses increased by 2.0%

in 2016/2015 comparison, compared to the IPCA of 6.3% in the last year. As a result of a strict control of costs, the Efficiency ratio for the last twelve months had an improvement of 38.8%.

These results reflect the developments achieved in all the Bank’s businesses. In 2016, the Corporate Segment continued to focus on increasing the profitability of capital. By means of long-term, agile relationships, and efficient capital management (risk/return ratios), the Corporate provided integrated financial solutions and adequate to its clients’ needs. Aligned with such strategy, the expanded credit portfolio (including guarantees provided and private securities) of the segment ended Dec.16 with a balance of R$ 27.4 billion, compared to R$ 31.9 billion in Dec.15. Votorantim Corretora continued to focus on the BM&FBovespa trading desk services, macroeconomic and political research, as well as on Corporate Access. In Dec.16, the Bank discontinued its Equity Research activities, without changing the quality of its services and of the team that serves companies and investors. Votorantim Wealth Management & Services (VWM&S), in turn, maintained the focus on being one of the best structurers and managers of high value added products. VWM&S occupied 9th place in Anbima’s ranking of managers, ending Dec.16 with R$ 53.8 billion in AuM (Asset under Management), a growth of 13.4 than in Dec.15.

In Consumer Finance, the Bank maintained its focus on guaranteeing the quality and profitability of the new vintages, ending Dec.16 with a loan portfolio of R$ 33.5 billion (R$ 33.9 billion in Dec.15). Despite the challenging macroeconomic environment, the Bank has been providing auto finance loan origination with quality and scale, a result of the continuous refinement of the credit policies, processes and models. The volume of auto finance loan origination totaled R$ 13.3 billion in 2016, with 82% relating to used light vehicles, a sector in which the Bank has a history of leadership and recognized competence. In addition, the Bank improved the policies, processes and models for the loan concession in the Consumer Finance Segment, adopting more conservative terms and down payment requirements. In the payroll loans business, the Bank continued to prioritize the refinancing of payroll loans to retirees and pensioners, who have a better risk profile, besides acting selectively in private and public agreements. The payroll loans portfolio ended Dec.16 at R$ 3.6 billion, compared to R$ 4.7 billion in Dec.15. It is worth mentioning that Promotiva S.A. – a subsidiary of the Bank created to act as a promotor of sales of loan assets directly to the shareholder Banco do Brasil – started its wide-scale operation in 2016 and generated around R$ 400 million per month in payroll loans. Aligned with the strategy of growing revenues in a diversified manner, the credit card portfolio was up 26.4% over Dec.15, and ended Dec.16 at R$ 1.6 billion, with more than 3.6 million cards issued. Also, the Bank has expanded sales of insurance for credit insurance and auto, whose revenues from brokerage totaled R$ 256 million in 2016, a growth of 19.6% compared to 2015. Sales are handled through the subsidiary Votorantim Corretora de Seguros, and the result of this operation, as well as the Promotiva, is recognized under the equity method of accounting. In 2016, the Bank maintained a conservative attitude towards loan concession, resulting in a lower demand for funding. In this context, the Bank improved the profile of funding sources, expanding the share of more stable funding instruments, such as bills (financing bills, real estate credit bills and agribusiness credit bills) and assignments of receivables with recourse, which accounted for a half (R$ 34.3 billion) out of the total funding sources in Dec.16. In terms of liquidity, the Bank ended Dec.16 with cash at a record level, more than sufficient to fully cover our funding with daily liquidity. And the Managerial LCR, which is the ratio between the balance of highly-liquid assets and the total cash outflows expected for the next thirty days - was 251% at the end of Dec.16, a figure which exceeds the minimum regulatory requirement (70%). Regarding capital, the Basel ratio ended Dec.16 at 15.1 - above the regulatory minimum of 10.5% - and the Tier I Capital at 11.2%, higher than in Dec.15 at 2.7 p.p. and composed entirely of Principal Capital. For further information on the consolidated economic and financial performance of the Bank, see the “4Q16 Earnings Release” on the Investor Relations website (www.bancovotorantim.com.br/ri). We emphasize that Banco Votorantim, in compliance with the provisions of Article 8 of Bacen Circular No. 3,068/01, declares that it has the necessary financial capacity and intention to hold to maturity the securities classified in the “held to maturity” category, in the amount of R$ 7.1 billion, representing 24.7% of the total securities.”

4. Rating agencies Banco Votorantim is rated by international rating agencies and the ratings assigned reflect its operating performance, financial soundness and the quality of its management, in addition to other factors related to the financial sector and economic environment in which the company is operating. In Feb.16, Moody’s rating agency downgraded Brazil’s issuer rating and debt notes rating to “Ba2” with negative perspective, impacting the Bank’s long-term local currency deposits rating from “Ba1” to “Ba2”, and long-term foreign currency from “Ba1” to “Ba3”. In May.16, the agency reviewed its national scale methodology, and the Bank’s rating was therefore changed from “Aa2.br” to “Aa3.br”. In Feb.16, the risk rating agency Standard & Poor’s (S&P) lowered Brazil’s sovereign rating from “BB+” to “BB”. This review had an impact on the ratings of several financial institutions, including that of Banco Votorantim: the global scale long-term rating was reviewed as “BB”, while the national scale long-term rating was reviewed from “brAA-” to “brA+”.

5. Corporate Governance The current corporate governance model is continuously improved for more robustness and transparency and to ensure fast decision making, which is a characteristic quality of the Bank. The Bank’s governance is shared by the Votorantim Group shareholders and Banco do Brasil, both enjoying parity of participation in the Board of Directors and its advisory committees (Finance & Products and Marketing), and in the following three statutory bodies:

Fiscal Council, which is an independent body created to supervise the administrative management acts;

Audit Committee, a body whose duties include evaluating the effectiveness of the internal control system and of the internal and independent audits, besides reviewing and issuing an opinion on the quality of the financial statements; and

Compensation and Human Resources Committee, body that monitors matters related to the Management Compensation Policy and HR practices.

Moreover, the Bank’s administrative management is conducted by the Board of Executive officers and its respective internal bodies: Executive Committee and other subordinated Operating Committees, always involving the Bank’s executive leaders. 6. Personnel Management The Human Resources and Organizational Culture (HR) area acts as a strategic partnership in the development of actions that support business growth, besides providing the breakdown of institutional guidelines for all the employees, promoting actions geared towards human capital management and the maintenance of values and organizational culture. Our pillars are:

Environment, represented by a place with values aligned with the organization’s purpose.

Long-Term Ba2 Ba3

Short-Term NP NP

Long-Term

Short-Term

RATINGS AGENCIESInternacional Brazil

Sovereign rating

National

Local Currency IDR

Foreign Currency IDR

Local Currency IDR

Ba2

BB

Moody'sAa3.br

BR-1

Standard & Poor's BB brA+

B brA-1

Bond, which reflects the employees’ ties to the organization. Excellence, support with the best tools, modern and innovative practices of Human

Resources. At the end of Dec.16, the number of employees totaled 3,937, with 53% of men and 47% of women. Besides investing in the hiring of talented professionals as a basis for our staffing framework, the Bank seeks to attract professionals with competitive differentials aligned with the organizational culture and values. During 2016, the Bank increased its onsite training sessions and incentivized self-development, providing technical development and the development of topics related to the Organizational Culture. Our Culture, which defines the way we are and act, is based on four attributes: Clients, Leadership, Results and Governance. Managing performance and handling the management of our talents are both absolutely necessary to achieve Bank’s goals. The current Performance Management model supports the execution of the organizational strategy by means of the joint definition of targets and evaluation of corporate competencies by the leaders. This model values the feedback and feedforward practice to support the development of professionals, always encouraging the Bank’s employees to act as protagonists in the management of their careers. Expressing a genuine concern to monitor and maintain a pleasant working environment, the Bank values cooperation between people and seeks to build relationships of trust based on ethics, transparency, and mutual respect. Compensation practices are based on a meritocratic model, recognizing and differentiating individual performance and its impact on the collective result. The model aims at aligning the interests of both shareholders and professionals, and stimulates the seeking of sustainable results. 7. Sustainability According to Banco Votorantim, ‘Sustainability is the construction of the long-term relationship through actions targeting the economic wellbeing of society and the amplified management of risks and opportunities. These three pillars set the directions to be taken and are present in all the areas and businesses of the organization. Aligned with these concepts, the key focal points of activity of the Institution related to the topic are: Business Sustainability, Financial Education, Social Responsibility and Impact of Activities. Business Sustainability In the second half of 2016, a study on the climate footprint of two investment funds of Votorantim Asset Management was conducted. After this study was concluded, the emissions of the “Fia Votorantim Sustentabilidade em Ações” Investment Fund referring to 2015 were offset (1.104 thousand tCO2e (tonnes of carbon dioxide equivalent)). The Bank is a pioneer in the offsetting of greenhouse gases of investment funds. Financial Education Banco Votorantim is committed to promoting financial education in the relationship with its stakeholders. In the second half of 2016, the Bank provided training for 753 employees from Consumer Finance Segment areas to pass on knowledge on this topic to the clients. The focus was the appropriate supply of products and financial guidance.

Two other actions aimed at the society were held: a financial education lecture at the Querô Project, a project based in Santos (state of São Paulo) which is supported by the Bank, and mini financial education workshops at the race and walk sponsored by the Bank in the city of Rio de Janeiro. Social Responsibility Banco Votorantim launched its online volunteering platform in May.16. Throughout the year, a total of 32 actions were organized by the Bank, with the help of 121 volunteer employees, benefiting 8963 people. In Dec.16, the Bank made the capital contributions to the projects that will be developed throughout 2017. A total of R$ 5.1 million was allocated to 23 projects under tax incentive laws. Impact of Activities The actions were aimed at the Management of the Waste generated by the Bank's buildings. The following actions were carried out: (i) visits to service providers; (ii) monitoring of the waste disposal process in administrative buildings; (iii) documentation control; (iv) creation of a solid waste work group; and (v) research on the solid waste disposal process at the branches. The objective is to improve the internal management of the waste generated by the Bank, focusing on a reduction of waste and its proper disposal. Institutional At the end of 2014, the Bank approved its Sustainability and Social Responsibility Policy, a document in its 4th version and aims at guiding the behavior of all companies of the Consolidated Financial Economic Votorantim, considering their specific needs and the legal and regulatory aspects to which they are subject. During 2016, the action plan that covers actions required for the adaptation of the organizational and operational structure of the institution was put into practice, as well as the routines and the procedure to be executed in compliance with the guidelines of the policy, according to a schedule specified by the institution. In the second half of 2016, the Bank was featured in the Exame Sustainability Guide. The Bank was recognized in the "Relationship with Clients and Consumers" category, an award granted to companies that achieve excellence in terms of the quality of their Ombudsman's Office. 8. Acknowledgment The Management of Banco Votorantim is grateful to its clients and shareholders for their trust and to the employees for their continuous effort and dedication.

São Paulo, February 9, 2017.

Executive Board

Banco Votorantim S.A.

Financial Statements on December 31, 2016

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CONTENTS INDEPENDENT AUDITOR’S REPORT ON THE FINANCIAL STATEMENTS ……………………3

FINANCIAL STATEMENTS BALANCE SHEET .. ………………………………………………………………………………………9 STATEMENT OF INCOME ……………………………………………………………………………10 STATEMENT OF CHANGES IN SHAREHOLDER’S EQUITY ................................................... 11 STATEMENTE OF CASH FLOWS ............................................................................................. 12 STATEMENT OF VALUE ADDED .............................................................................................. 13 NOTES TO THE FINANCIAL STATEMENTS ............................................................................. 14 1. THE CONGLOMERATE AND ITS OPERATIONS...............................................................14 2. PRESENTATION OF FINANCIAL STATEMENTS………. .................................................. 14 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ................................................. 16 4. CASH AND CASH EQUIVALENTS......................................................................................23 5. INTERBANK FUNDS APPLIED .......................................................................................... 24 6. SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS ......................................... 25 7. INTERBANK RELATIONS ................................................................................................... 37 8. LOAN OPERATIONS .......................................................................................................... 38 9. FOREIGN EXCHANGE PORTFOLIO ................................................................................. 45 10. OTHER RECEIVABLES - SUNDRY .................................................................................... 46 11. OTHER ASSETS ................................................................................................................. 46 12. INVESTMENTS ................................................................................................................... 47 13. PROPERTY FOR USE ........................................................................................................ 48 14. INTANGIBLE ASSETS ........................................................................................................ 49 15. DEPOSITS AND MONEY MARKET REPURCHASE COMMITMENTS ............................. 49 16. BORROWINGS AND ONLENDINGS .................................................................................. 51 17. ACCEPTANCES AND ENDORSEMENTS .......................................................................... 52 18. OTHER LIABILITIES ........................................................................................................... 52 19. OTHER OPERATING INCOME/EXPENSES ...................................................................... 54 20. NON-OPERATING INCOME ............................................................................................... 55 21. SHAREHOLDERS’ EQUITY ................................................................................................ 56 22. TAXES ................................................................................................................................. 57 23. RELATED PARTIES ............................................................................................................ 59 24. EMPLOYEE BENEFITS ...................................................................................................... 62 25. CONTINGENT ASSETS AND LIABILITIES AND LEGAL, TAX AND SOCIAL SECURITY

OBLIGATIONS .................................................................................................................... 63 26. RISK AND CAPITAL MANAGEMENT ................................................................................. 68 27. OTHER INFORMATION ...................................................................................................... 72 28. SUBSEQUENT EVENTS..................................................................................................... 73

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Independent auditors' report on individual and consolidated financial statements To The Board of Directors and Shareholders of Banco Votorantim S.A. São Paulo - SP Opinion We have audited the individual and consolidated financial statements of Banco Votorantim S.A. (“Bank”) referred to as “Bank” and “Consolidated”, respectively, which comprise the balance sheet as at December 31, 2016 and the respective statements of income, changes in shareholder’s equity and cash flows, for the six month period and year then ended, and notes, comprising the summary of the significant accounting practices. In our opinion, the accompanying individual and consolidated financial statements present fairly, in all material respects, the individual and consolidated financial position of Banco Votorantim S.A. as of December 31, 2016, the individual and consolidated financial performance of its operations and its individual and consolidated cash flows for the six month and year then ended, in accordance with the accounting practices adopted in Brazil, applicable to institutions authorized to operate by the Central Bank of Brasil - Bacen. Basis for opinion We conducted our audit in accordance with Brazilian and international standards on auditing. Our responsibilities, under those standards, are further described in the “The Auditor’s responsabilities for the audit of individual and consolidated financial statements”. We are independent of the Bank, in accordance with the ethical requirements established in the Accountant´s Professional Ethics Code and the Professional Standards issued by the Federal Accounting Council (CFC), and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matters Key audit matters are those that, in our professional judgment, were of most significance in our audit of the current year. These matters were addressed in the context of our audit of the individual and consolidated financial statements as a whole, and in forming our opinion thereon, and, we do not express a separate opinion on these matters.



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Allowance for loans losses As disclosed in notes 3g and 8, for purposes of measuring the allowance for loan losses, the Bank classifies its loans (which comprise loans, leasing, advances on foreign exchange contracts and other receivables with credit characteristics) into nine risk levels, taking into account and assumptions such as late payments, economic and financial position, indebtedness level, economy sector, guarantee characteristics and other factors and assumptions of the current regulation, with rating "AA" being the minimum risk level and "H" the maximum risk level. The Bank initially applies the loss percentages established in the regulation for each risk level for purposes of calculating the allowance and further increases the allowance, when necessary, its estimates based on internal evaluations. The classification of loans into risk levels requires the Bank to make assumptions and judgments, based on its internal risk classification methodologies, and the allowance for loan losses represents the Bank´s best estimate of the portfolio losses. Due to the relevance of loans and the uncertainties and judgements related to the of the allowance for loan losses and the impact that any changes in assumptions may generate on the recorded amounts in the individual and consolidated financial statements, we considered this as a significant matter in our audit. How our audit addressed this matter We have evaluated the design, implementation and operating effectiveness of the relevant internal controls, manual and automated, implemented by the Bank and related to the processes of approval, recording, classification and updating of risk levels of loans, leasing, advances on foreign exchange contracts and other receivables with credit characteristics and the main assumptions used for calculating the allowance for loan losses. On a sampling basis, we evaluated whether the Bank met the minimum requirements established by the current regulations related to the determination of the allowance for loan losses and whether the disclosures in the individual and consolidated financial statements described in notes 3g and 8 are in accordance with the applicable accounting practices. Based on the evidence obtained from the procedures described above, we considered the level of provisioning adequate in the context of the individual and consolidated financial statements taken as a whole. Market value of financial instruments As disclosed in Notes 3e, 3f and 6, the Bank has significant balances of derivative financial instruments and securities measured at market value. For financial instruments that are not actively traded and those which market prices and parameters are not available, the determination of market value is subject to a higher uncertainty level, to the extent the Bank makes significant judgments to estimate such amounts. Therefore, we considered the market value measurement of these financial instruments as a significant matter in our audit. How our audit addressed this matter We have tested the design, implementation, and operating effectiveness of the relevant internal controls, manual and automated, implemented by the Bank to mitigate the risk of material misstatement in the individual and consolidated financial statements arising from uncertainties in the market value measurement of financial instruments, which depend on the Bank internal models. For a sample of financial instruments for which market value measurement parameters are not observable, with the technical support of our specialists with knowledge of financial instruments, we evaluated the adequacy of the models developed by the Bank for determining market values and the reasonableness of data, the parameters and information included in the pricing models used, and recalculated the



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corresponding market values of these operations. We also evaluated whether the disclosures in the individual and consolidated financial statements, in Notes 3e, 3f and 6, are in accordance with the applicable accounting practices. Based on the evidence obtained from the procedures described above, we considered the market value measurement of financial instruments adequate in the context of the individual and consolidated financial statements taken as a whole. Provisions and contingent liabilities - labor, civil and tax As disclosed in Notes 3n and 25, the Bank recognizes provision for labor, civil and tax claims arising from the normal course of its operations. Estimates of the outcome and the financial effect are determined by the nature of the claims and by the Bank's judgment, based on the opinion of the legal advisors, on the elements of the process, complemented by the experience of similar claims. Due to the relevance, complexity and judgment involved in the evaluation, measurement, timing of recognition definition and disclosures related to Provisions and contingent Liabilities and Provisions, we consider this as a significant matter in our audit. How our audit addressed this matter We have evaluated the design, implementation and operating effectiveness of the relevant internal controls, manual and automated, implemented by the Bank, related to the process identification, risk evaluation, measurement of provision, process management and closing steps. We have evaluated the adequacy of the measurement and recognition of the provision and disclosure of contingent liabilities. By sampling, we performed audit procedures related to the amounts of constitutions and reversals and regarding the adequacy of the provision. We have evaluated the assumptions of the procedural risk of causes for relevant matters and values of the Bank by evaluating the criteria adopted in the measurement methodology for the amounts recognized and/or disclosed, as well as historical data and information and analyzed the changes in the assumptions in relation to previous periods, when applicable. We also have evaluated whether the disclosures made in the individual and consolidated financial statements, disclosed in Notes 3n and 25, are in accordance with the applicable accounting practices. Based on the evidence obtained from the procedures described above, we considered the level of provisioning adequate in the context of the individual and consolidated financial statements taken as a whole. Projection of future results for realization of deferred tax assets The individual and consolidated financial statements include assets related to deferred tax assets (Notes 3m, 22e and 22f), which realization depends on future profitability based on the business plan and budgets prepared by the Bank and approved at its governance levels. To prepare the projections of future results for purposes, among others, of verifing the realization of assets, the Bank adopts assumptions based on its corporate strategies and the macroeconomic scenario, such as interest rate, inflation rate, among others, considering the current and past performance and the expected growth in the market it acts. Due to the relevance of the balances related to these assets (deferred tax assets), as they are based on future profitability estimated and the impact that eventual changes in the assumptions would have on the amounts recorded in the individual and consolidated financial statements, we have considered this as a significant matter in our audit.



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How our audit addressed this matter We have evaluated the design, implementation and effectiveness of the relevant internal controls implemented by the Bank related to the process for determining and approving the assumptions used to prepare the projection of future results, which is the basis for evaluating the realization of assets. With the support of our corporate finance specialists, we evaluated the reasonableness of the assumptions used by the Bank, recalculated the projections based on such assumptions, and if they were in compliance with current regulatory guidelines. With the support of our tax specialists, we evaluated the bases of calculation in which the current tax rates are applied and the study of the capacity to realize the deferred tax assets. We also have evaluated whether the disclosures in the individual and consolidated financial statements described in notes 3m, 22e and 22f are in accordance with the applicable accounting practices. Based on the evidence obtained from the procedures described above, we considered the measurement of the deferred tax assets adequate in the context of the individual and consolidated financial statements taken as a whole. Other matters – Statements of value added The individual and consolidated statements of value added for the six month and year ended December 31, 2016, prepared under the responsability of Bank´s management, that is being presented as supplemental information in relation to the accounting practices adopted in Brazil applicable to institutions authorized to operate by the Central Bank of Brazil – Bacen, were subjected to the same auditing procedures described above. For the purposes of forming our opinion, we assess whether these statements are reconciled with the financial statements and accounting records, as applicable, and if their form and content are in accordance with the criteria set forth in Technical Pronouncement CPC 09 - Statement of Value Added. In our opinion, these statements of value added have been properly prepared, in all material respects, in accordance with the criteria set forth in this Technical Pronouncement and are consistent with the individual and consolidated financial statements taken as a whole. Other information that accompany the individual and consolidated financial statements and the auditor’s report The Bank’s management is responsible for other information that comprises the Management´s Report. Our opinion on the individual and consolidated financial statements does not cover the Management´s Report and we do not express any form of assurance conclusion thereon. In connection with our audit of the individual and consolidated financial statements, our responsibility is to read the Management´s Report, and, in doing so, consider whether the other information is, on all material respects, inconsistent with the individual and consolidated financial statements or with our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement in the Management´s Report, we are required to report this fact. We have nothing to report in this regard. Responsibilities of the management and those in charge with governance for the individual and consolidate financial statements Management is responsible for the preparation and fair presentation of individual and consolidated financial statements in accordance with the accounting practices adopted in Brazil applicable to insitutions authorized to operate by Central Bank of Brazil – Bacen and for such internal controls as management determines is necessary to enable the



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preparation of these financial statements that are free from material misstatement, whether due to fraud or error. In preparing the individual and consolidated financial statements, management is responsible for assessing the Bank and its subsidiaries ability to continue as going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Bank and its subsidiaries or to cease operations, or has no realistic alternative but to do so. Those charged with governance are those responsible for overseeing the Bank’s financial reporting process. Auditor’s responsibilities for the audit of the individual and consolidated financial statements Our objectives are to obtain reasonable assurance about whether the individual and consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Brazilian and international standards on auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these individual and consolidated financial statements. As part of an audit performed in accordance with the Brazilian and international standards on auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

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

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

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

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



8

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

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

We have communicated with those charged with governance regarding, among other matters, the planned scope, the audit timing and significant audit findings, including any significant deficiencies in internal control that we have identified during our audit. We also have provided those charged with governance with a statement that we have complied with the relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we have determined those matters that were of most significance in the audit of the individual and consolidated financial statements of the current period and are therefore the key audit matters. We have described these matters in our auditors’ report, unless law or regulation precludes public disclosure about the matter, or when, in extremely rare circumstances, we have determined that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefit of such communication. São Paulo, February 09, 2017 KPMG Auditores Independentes CRC 2SP014428/O-6 (Original report in Portuguese signed by) João Paulo Dal Poz Alouche Accountant CRC 1SP245785/O-2

Banco Votorantim S.A.BALANCE SHEETIn December 31, 2016 and December 31, 2015

(In thousands of Reais, unless otherwise stated)

Note 12.31.2016 12.31.2015 12.31.2016 12.31.2015 Nota 12.31.2016 12.31.2015 12.31.2016 12.31.2015

CURRENT ASSETS 40,339,785 48,432,299 55,614,057 61,610,225 CURRENT LIABILITIES 69,810,393 75,809,492 64,680,704 70,841,194

Cash and cash equivalents 4 56,400 118,916 183,569 179,915 Deposits 15a 7,904,792 3,059,208 2,782,122 2,627,146 Demand deposits 89,688 87,200 87,991 81,331

Interbank funds applied 5a 23,607,320 27,215,721 17,066,698 16,892,435 Interbank deposits 5,829,814 1,199,208 708,841 778,942 Money market repurchase commitments 14,702,886 14,851,895 14,702,886 14,851,895 Time Deposits 1,985,290 1,772,800 1,985,290 1,766,873 Interbank deposit investments 8,904,434 12,363,826 2,363,812 2,040,540

Money market repurchase commitments 15c 44,425,550 37,389,486 34,637,971 32,050,247 Securities and Derivative financial instruments 9,308,228 11,097,346 12,518,174 15,691,286 Own portfolio 30,516,941 27,375,338 22,656,894 26,291,499

Own portfolio 6a 1,024,105 4,318,172 9,628,904 10,078,538 Third-party portfolio 11,702,126 8,969,036 9,774,594 4,713,636 Subject to repurchase agreements 6a 6,259,197 4,727,044 472,730 3,486,611 Free portfolio 2,206,483 1,045,112 2,206,483 1,045,112 Given in guarantee 6a 966,395 1,117,832 1,089,548 1,157,610 Derivative financial instruments 6d 1,185,022 1,264,924 1,453,483 1,299,153 Acceptances and endorsements 17 10,244,503 15,482,515 10,244,503 15,483,086 (Provision for impairment of securities) 6a (126,491) (330,626) (126,491) (330,626) Funds from real estate bills, mortgage, credit and similar 8,981,104 7,659,358 8,981,104 7,659,358

Debenture funds - - - 571 Interbank relations 340,641 72,157 340,641 72,157 Securities issued overseas 1,263,399 7,823,157 1,263,399 7,823,157

Reserve requirements 7a 340,569 20,232 340,569 20,232 Compulsory deposits at the Central Bank of Brazil 340,569 20,232 340,569 20,232 Interbranch accounts 99,685 83,208 99,685 83,208

Interbank onlendings - 51,668 - 51,668 Third-party funds in transit 99,685 83,208 99,685 83,208 Correspondents 72 257 72 257

Borrowings 16a 1,671,462 4,090,964 1,671,462 4,090,964 Foreign borrowings 1,671,462 4,090,964 1,671,462 4,090,964

Loan operations 8a 3,553,628 4,921,015 19,302,622 21,187,840 Public sector 40,387 117,549 40,387 117,549 Private sector 4,178,032 5,340,821 14,720,741 15,611,411 Domestic onlendings - Official institutions 16b 697,018 877,357 701,857 878,211 Loan operations subject to assignment - - 6,723,321 7,345,265 National Treasury 80,768 71,884 80,768 71,884 (Allowance for loans losses) (664,791) (537,355) (2,181,827) (1,886,385) BNDES 302,671 417,564 302,671 417,564

FINAME 313,579 387,909 318,418 388,763 Leases 8a - - 70,111 97,925

Private sector - - 73,584 120,767 (Allowance for leases losses) - - (3,473) (22,842) Derivative financial instruments 6d 1,721,867 11,782,243 1,721,867 1,805,525

Other receivables 3,303,024 4,829,922 5,861,620 7,237,536 Other liabilities 3,045,516 3,044,511 12,821,237 13,822,807 Foreign exchange portfolio 9a 516,244 2,192,550 516,244 2,192,550 Collection and levy of taxes and alike 3,356 3,720 19,209 17,975 Income receivable 14,876 64,864 27,426 18,372 Foreign exchange portfolio 10a 218,165 1,533,310 218,165 1,533,310 Securities clearing accounts 120,959 584,917 255,987 722,307 Social and statutory 161,174 216,179 240,213 297,798 Sundry 10 2,751,854 2,278,134 5,181,241 4,601,484 Tax and social security 18a 209,630 145,136 395,112 595,021 (Allowance for other receivables losses) 8a (100,909) (290,543) (119,278) (297,177) Securities clearing accounts 209,186 199,607 362,157 324,096

Subordinated debts 18b 1,851,720 576,404 1,851,720 576,404 Sundry 18d 392,285 370,155 9,734,661 10,478,203

Other assets 11 170,544 177,222 270,622 251,131 Non-operating assets and material inventories 180,361 185,001 283,023 263,344 NON-CURRENT LIABILITIES 23,954,275 24,579,882 29,891,408 31,763,457 (Accumulated impairment) (23,825) (22,473) (46,812) (45,457) Prepaid expenses 14,008 14,694 34,411 33,244 LONG-TERM LIABILITIES 23,916,725 24,531,635 29,853,858 31,715,210

NON-CURRENT ASSETS 61,850,773 59,573,739 47,383,945 48,611,090 Deposits 15a 1,798,679 1,585,496 1,795,515 1,578,732 Interbank deposits 1,288,477 1,160,324 1,288,477 1,153,560

LONG-TERM ASSETS 58,238,664 56,201,093 46,724,031 48,089,398 Time Deposits 510,202 425,172 507,038 425,172

Interbank funds applied 5a 13,108,196 11,063,305 49,583 294,207 Money market repurchase commitments 15c 2,055,472 2,260,159 1,035,408 749,675 Interbank deposit investments 13,108,196 11,063,305 49,583 294,207 Own portfolio 2,055,472 2,260,159 1,035,408 749,675

Free portfolio - - - -

Acceptances and endorsements 17 11,557,911 9,839,719 11,557,911 9,839,719 Securities and Derivative financial instruments 35,647,755 33,891,197 18,646,868 17,282,722 Funds from real estate bills, mortgage, credit and similar 11,505,211 9,539,573 11,505,211 9,539,573

Own portfolio 6a 7,522,575 5,615,673 9,213,838 8,199,104 Securities issued overseas 52,700 300,146 52,700 300,146 Subject to repurchase agreements 6a 27,064,584 25,347,686 8,059,424 5,844,175 Given in guarantee 6a 694,655 1,677,450 1,007,665 1,989,055 Borrowings 16a 126,845 137,011 126,845 137,011 Derivative financial instruments 6d 1,231,802 1,250,388 1,231,802 1,250,388 Foreign borrowings 126,845 137,011 126,845 137,011 (Provision for impairment of securities) 6a (865,861) - (865,861) -

Loan operations 8a 6,971,819 8,630,121 21,443,803 23,057,311 Domestic onlendings - Official institutions 16b 2,699,109 2,777,619 2,702,644 2,787,022 Public sector 486,971 587,746 486,971 587,746 National Treasury 1,971 5,804 1,971 5,804 Private sector 6,894,488 8,665,267 16,684,442 17,176,631 BNDES 1,294,597 1,164,276 1,294,597 1,164,276 Loan operations subject to assignment - - 5,442,750 6,677,220 Finame 1,402,541 1,607,539 1,406,076 1,616,942 (Allowance for loans losses) (409,640) (622,892) (1,170,360) (1,384,286)

Derivative financial instruments 6d 985,842 1,108,857 985,842 1,108,857 Leases 8a - - 51,219 68,652

Private sector - - 53,757 72,545 Other liabilities 4,692,867 6,822,774 11,649,693 15,514,194 (Allowance for leases losses) - - (2,538) (3,893) Tax and social security 18a 174,223 152,371 224,366 573,104

Securities clearing accounts 97,914 115,643 120,133 140,726 Other receivables 2,510,734 2,615,415 6,314,720 7,012,047 Subordinated debts 18b 3,024,914 5,469,532 3,024,914 5,469,532

Credits for sureties and guarantees paid 174,084 197,497 174,084 197,497 Debt instruments eligible to capital 18c 1,168,944 881,642 1,168,944 881,642 Income receivable 1,148 585 1,148 585 Sundry 18d 226,872 203,586 7,111,336 8,449,190 Securities clearing accounts 2,206 566 2,206 566 Sundry 9 2,527,036 2,974,281 6,331,026 7,370,951 DEFERRED INCOME 37,550 48,247 37,550 48,247 (Allowance for other receivables losses) 8a (193,740) (557,514) (193,744) (557,552)

SHAREHOLDERS’ EQUITY 8,425,890 7,616,664 8,425,890 7,616,664

Other assets 11 160 1,055 217,838 374,459 Capital 7,826,980 7,483,754 7,826,980 7,483,754 Prepaid expenses 160 1,055 217,838 374,459 Domestic 21a 7,826,980 7,483,754 7,826,980 7,483,754

FIXED ASSETS 3,612,109 3,372,646 659,914 521,692 Capital reserves 21b 372,120 372,120 372,120 372,120

Investments 3,475,864 3,259,051 455,708 324,449 Profit reserves 21c 373,891 392,434 373,891 392,434 Investments in subsidiaries 12a 3,466,371 3,249,355 384,779 255,969

Domestic 3,410,265 3,164,513 384,779 255,969 Equity valuation adjustments 21d (147,101) (631,644) (147,101) (631,644) Abroad 56,106 84,842 - -

Other investments 12c 27,893 27,413 123,476 115,712 Retained earnings - - - - (Accumulated impairment) 12c (18,400) (17,717) (52,547) (47,232)

NON-CONTROLLING INTERESTS - - - - Property for use 13 50,514 42,066 97,887 97,125

Other property for use 164,785 117,087 304,457 248,989 (Accumulated depreciation) (114,271) (75,021) (206,570) (151,864)

Intangible assets 14a 85,731 56,957 106,319 85,351 Intangible assets 138,512 96,416 202,084 170,330 (Accumulated amortization) (35,355) (22,033) (78,153) (60,129) (Accumulated impairment) (17,426) (17,426) (17,612) (24,850)

Deferred assets - 14,572 - 14,767 Organizational and expansion expenses - 30,678 - 36,851 (Accumulated amortization) - (16,106) - (22,084)

TOTAL ASSETS 102,190,558 108,006,038 102,998,002 110,221,315 TOTAL LIABILITIES 102,190,558 108,006,038 102,998,002 110,221,315

See the accompanying notes to the financial statements.

Consolidated ConsolidatedBank Bank

9

Banco Votorantim S.A. STATEMENT OF INCOMEYears ended December 31, 2016 and 2015 and six month period ended December 31, 2016


Note 2H2016 2016 2015 2H2016 2016 2015

FINANCIAL INTERMEDIATION INCOME 6,210,761 10,733,516 12,238,858 8,011,157 15,275,728 20,461,187 Loan operations 8b 856,793 1,211,773 2,703,332 3,659,569 6,661,252 8,247,144 Leases 8h - - - 77,434 191,088 689,431 Income from securities 6b 5,092,461 9,523,879 10,198,721 2,753,302 4,766,663 5,007,329 Income from derivative financial instruments 6d 235,099 (61,813) (682,249) 115,892 372,356 2,378,160 Income from compulsory deposits 7b 26,408 42,792 - 26,408 42,792 - Sale or transfer of assigned financial assets 8k - 16,885 19,054 1,378,552 3,241,577 4,139,123

FINANCIAL INTERMEDIATION EXPENSES (6,128,425) (9,972,194) (12,993,189) (7,048,712) (12,522,385) (18,380,229) Money market repurchase agreements 15d (5,387,382) (9,701,955) (10,755,746) (4,207,443) (7,798,507) (10,734,458) Borrowings and onlendings 16c (165,151) 375,083 (1,440,054) (165,433) 374,214 (1,441,063) Leases 8h - - - (63,859) (158,436) (623,956) Income from foreign exchange operations 10b 54,919 (264,398) 507,859 54,919 (264,398) 507,869 Sale or transfer of assigned financial assets 8k - - (7,154) (891,123) (2,208,256) (3,027,578) Allowance for doubtful accounts 8f (630,811) (380,924) (1,298,094) (1,775,773) (2,467,002) (3,061,043)

GROSS INCOME FROM FINANCIAL INTERMEDIATION 82,336 761,322 (754,331) 962,445 2,753,343 2,080,958

OTHER OPERATING INCOME/EXPENSES (9,135) (113,652) 556,429 (831,453) (1,939,543) (2,325,284) Service income 19a 129,672 237,570 200,336 260,496 496,696 442,403 Income from banking fees 19b 410 771 929 341,472 626,066 518,659 Personnel expenses 19c (205,052) (397,900) (391,049) (633,595) (1,229,722) (1,209,701) Other administrative expenses 19d (119,864) (236,179) (244,951) (587,529) (1,148,056) (1,122,502) Tax expenses 22c (38,559) (106,697) (89,855) (181,686) (385,973) (401,707) Equity in income of subsidiaries 12a 206,982 338,425 851,138 104,640 194,483 155,873 Other operating income 19e 41,168 108,521 303,978 293,686 417,247 357,403 Other operating expenses 19f (23,892) (58,163) (74,097) (428,937) (910,284) (1,065,712)

OPERATING INCOME 73,201 647,670 (197,902) 130,992 813,800 (244,326)

NON-OPERATING INCOME 20 (10,597) (28,498) (18,162) (4,561) 942 (28,757) Non-operating income (2,039) 4,614 632 (11,734) 31,938 16,405 Non-operating expenses (8,558) (33,112) (18,794) 7,173 (30,996) (45,162)

INCOME BEFORE TAXES AND CONTRIBUTIONS 62,604 619,172 (216,064) 126,431 814,742 (273,083)

INCOME TAX AND SOCIAL CONTRIBUTION 22a 191,283 (138,513) 775,140 153,712 (257,185) 935,751

PROFIT SHARING - EMPLOYEES AND MANAGEMENT (22,482) (54,845) (77,356) (48,738) (131,743) (180,948)

NON-CONTROLLING INTERESTS - - - - - -

NET INCOME 231,405 425,814 481,720 231,405 425,814 481,720

EARNINGS PER SHARE

Earnings per share - R$ 2.20 4.04 4.57 Number of shares (in thousand) 105,391,473 105,391,473 105,391,473


Bank Consolidated

10

Banco Votorantim S.A. STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITYYears ended December 31, 2016 and 2015 and six month period ended December 31, 2016


Capital

EVENTS Note Legal Other Total

Balances at 12.31.2014 7,125,761 372,120 25,123 357,993 (327,123) - 7,553,874

Net adjustments in Equity valuation and Securities and Derivative financial instruments

21e- - - - (304,521) - (304,521)

Capital increase 21a 357,993 - - (357,993) - - -

Net income for the period - - - - - 481,720 481,720

Allocations:

Legal Reserve - - 24,085 - - (24,085) -

Dividendos 21d - - - - - (114,409) (114,409)

Special profit reserve - - 343,226 - (343,226)

Balances at 12.31.2015 7,483,754 372,120 49,208 343,226 (631,644) - 7,616,664

Changes in the period 357,993 - 24,085 (14,767) (304,521) - 62,790

Balances at 06.30.3016 7,826,980 372,120 58,928 - (160,300) 184,689 8,282,417


21e- - - - 13,199 - 13,199


Allocations:

Legal Reserve - - 11,571 - - (11,571) -

Dividendos 21d - - - - - (101,131) (101,131)

Special profit reserve - - - 303,392 - (303,392) -

Balances at 12.31.2016 7,826,980 372,120 70,499 303,392 (147,101) - 8,425,890

Changes in the period - - 11,571 303,392 13,199 (184,689) 143,473

Balances at 12/31/2015 7,483,754 372,120 49,208 343,226 (631,644) - 7,616,664


21e - - - - 484,543 - 484,543

Capital increase 21a 343,226 - - (343,226) - - -


Allocations:

Legal Reserve - - 21,291 - - (21,291) -

Dividends 21d - - - - - (101,131) (101,131)

Special profit reserve - - - 303,392 - (303,392) -

Balances at 12.31.2016 7,826,980 372,120 70,499 303,392 (147,101) - 8,425,890

Changes in the period 343,226 - 21,291 (39,834) 484,543 - 809,226

Earnings per share are disclosed in the Statement of Income.See the accompanying notes to the financial statements.

Adjustments to equity value

Retained earnings

Profit reservesRealised capital Capital reserves

11

Banco Votorantim S.A.STATEMENT OF CASH FLOWSYears ended December 31, 2016 and 2015

and six month period ended December 31, 2016


Note 2H2016 2016 2015 2H2016 2016 2015

Cash flows from operating activitiesIncome before income and social contribution taxes 62,604 619,172 (216,064) 126,431 814,742 (273,083) Adjustments to Income before income and social contribution taxes 1,685,495 206,428 (2,432,132) 95,440 742,090 769,855

Provision for credits, lease and other credits 8f 630,811 380,924 1,298,094 1,775,773 2,467,002 3,061,043 Depreciation and amortization 19d 14,786 41,568 21,009 25,008 64,049 43,689 Income from appraisal of recoverable value of assets 95,970 662,409 190,291 97,526 665,737 194,732 Equity in income of subsidiaries 12a (206,982) (338,425) (851,138) (104,640) (194,483) (155,873) (Income) Loss on disposal of assets 22,813 25,928 6,969 27,788 20,258 19,113 Provision (Reversal) to devaluation of other assets (14,435) 2,552 10,602 (14,849) 2,804 10,722 Expenses (Reversal) with civil, labor and tax provisions 6,289 15,279 30,517 (57,177) (13,636) (102,345) Effect of changes in foreign exchange rates on cash and cash equivalents (11,629) 152,330 (200,970) (12,773) 167,270 (234,980) Interest income and foreign exchange losses of securities available for sale 1,403,791 (139,049) (2,410,394) (1,183,016) (1,545,476) (1,287,360) Interest income from securities held to maturity (258,085) (581,878) (338,265) (266,582) (679,604) (711,179) Other operating income and expenses 563 (16,889) (188,903) (194,078) (214,420) (66,993) Other non-operating income and expenses 1,610 1,610 - 2,474 2,474 - Other adjustments (7) 69 56 (14) 115 (714)

Adjusted income before income and social contribution taxes 1,748,099 825,600 (2,648,196) 221,871 1,556,832 496,772 Equity variations (3,172,871) (7,134,476) (4,591,756) (3,104,749) (12,517,615) 2,427,834

(Increase) decrease in interbank funds applied 2,312,497 (3,905,480) (3,012,936) 1,453,836 (6,705,542) (3,736,072) Increase (decrease) in trading securities and derivative financial instruments (3,812,878) (11,277,574) (15,478,459) (1,376,420) (1,511,169) (1,993,047) (Increase) decrease in interbank accounts 101,647 68,330 19,458 101,647 68,330 16,624 (Increase) Decrease in compulsory deposits at the Central Bank of Brazil 244,622 (320,337) 34,973 244,622 (320,337) 34,973 (Increase) Decrease in credit transactions 47,750 2,217,492 (528,494) (1,033,246) 617,628 (29,723) (Increase) Decrease in lease operations - - - 2,989 43,049 183,818 (Increase) /decrease in other receivables, net of deferred taxes 926,715 1,812,439 (1,859,862) 1,074,536 2,067,774 (1,574,320) (Increase) decrease in other assets (8,713) (20,907) (98,286) 44,489 114,068 168,197 Income and social contribution taxes paid (35,091) (103,874) (91,127) (41,166) (206,736) (374,608) (Decrease) increase in deposits (3,505,781) 5,058,767 460,329 869,292 371,759 395,330 (Decrease) increase in money market repurchase commitments 521,926 6,831,377 11,665,776 (2,396,268) 2,873,457 4,814,101 (Decrease) Increase in acceptances and endorsements 2,526,654 (3,519,820) 2,408,462 2,526,654 (3,520,391) 2,408,915 (Decrease) increase in liabilities from borrowings and onlendings (1,005,386) (2,688,517) 1,234,082 (1,006,102) (2,690,400) 1,231,431 (Decrease) Increase in other obligations (1,488,449) (1,275,675) 638,542 (3,571,228) (3,708,408) 866,429 (Decrease) increase in the income of future years 1,616 (10,697) 15,786 1,616 (10,697) 15,786

CASH GENERATED (USED) BY OPERATING ACTIVITIES (1,424,772) (6,308,876) (7,239,952) (2,882,878) (10,960,783) 2,924,606

Cash flows from investment activities(Acquisition) of securities available for sale (4,144,896) (7,011,227) (9,747,760) (5,028,929) (8,571,798) (9,072,543) (Acquisition) of securities held to maturity (1,296,718) (4,956,260) - (1,296,718) (4,956,260) - (Acquisition) of investments (85,660) (85,660) (37,054) (92,943) (92,943) (17,958) (Acquisition) of property for use (4,088) (22,925) (29,717) (7,025) (28,485) (57,340) (Acquisition) of intangible (23,576) (46,275) (54,067) (24,574) (52,563) (72,123) Disposal, maturity of securities available for sale 3,262,212 10,311,608 20,631,264 3,588,171 12,308,572 9,719,719 Maturity of securities held to maturity 3,386,353 3,386,353 - 4,865,889 6,585,365 1,649,534 Disposal/Decrease of investments 13,258 13,258 19,120 - - 2,420 Disposal of property for use 1,209 1,470 6,891 2,256 2,607 33,552 Disposal of intangible 1,223 3,110 4,291 1,684 6,533 5,324 Disposal of deferred assets 333 333 4,536 333 333 4,536 Interest on own capital / Dividends received - 332,324 142,615 - 150,852 142,615

NET CASH GENERATED (CONSUMED) IN INVESTMENT ACTIVITIES 1,109,650 1,926,109 10,940,119 2,008,144 5,352,213 2,337,736

Cash flows from financing activitiesDividends paid - (114,409) (119,331) - (114,409) (119,331) (Decrease) Increase in obligations due to subordinated debts (574,435) (1,169,302) 240,688 (574,435) (1,169,302) 240,688 (Decrease) Increase in capital and debt instruments 193,553 287,302 447,352 193,553 287,302 447,352

CASH GENERATED (USED) BY FINANCING ACTIVITIES (380,882) (996,409) 568,709 (380,882) (996,409) 568,709

Net variation for cash and cash equivalents (696,004) (5,379,176) 4,268,876 (1,255,616) (6,604,979) 5,831,051

Beginning of the period 2,243,221 7,090,352 2,620,506 3,338,545 8,867,951 2,801,920 Effect of changes in foreign exchange rates on cash and cash equivalents 11,629 (152,330) 200,970 12,773 (167,270) 234,980 End of the period 4 1,558,846 1,558,846 7,090,352 2,095,702 2,095,702 8,867,951

Increase in cash and cash equivalents (696,004) (5,379,176) 4,268,876 (1,255,616) (6,604,979) 5,831,051


Bank Consolidated

12

Banco Votorantim S.A.STATEMENT OF VALUE ADDEDYears ended December 31, 2016 and 2015

and six month period ended December 31, 2016


Note 2H2016 2016 2015 2H2016 2016 2015 Income 5,716,711 10,612,793 11,353,748 6,697,540 13,439,393 17,624,140

Financial operations income 6,210,761 10,733,516 12,238,858 8,011,157 15,275,728 20,461,187 Service income and banking fees 19a / 19b 130,082 238,341 201,265 601,968 1,122,762 961,062 Allowance for doubtful accounts 8f (630,811) (380,924) (1,298,094) (1,775,773) (2,467,002) (3,061,043) Other income (expenses) 19e / 19f / 20 6,679 21,860 211,719 (139,812) (492,095) (737,066)

Financial intermediation expenses (5,497,614) (9,591,270) (11,695,095) (5,272,939) (10,055,383) (15,319,186)

Inputs acquired from third parties (91,435) (167,348) (182,784) (528,606) (1,016,049) (994,297) Water, electricity and gas 19d (1,828) (3,226) (3,424) (5,022) (10,152) (12,885) Outsourced services 19d (629) (1,145) (1,229) (5,866) (9,629) (8,702) Communications 19d (617) (1,229) (4,600) (42,793) (78,346) (73,221) Data processing 19d (37,004) (66,395) (55,584) (105,725) (198,965) (177,585) Transportation 19d (532) (1,135) (1,865) (6,894) (12,901) (12,683) Surveillance and security services 19d (1,011) (1,506) (945) (1,470) (2,433) (1,922) Specialized technical services 19d (28,821) (50,578) (46,304) (192,035) (376,393) (373,321) Financial system services 19d (6,065) (13,412) (21,493) (44,189) (93,696) (96,841) Advertising and publicity 19d (724) (867) (197) (4,811) (6,735) (4,505) Judicial and notary public fees 19d (4,590) (9,896) (16,667) (56,699) (110,942) (110,704) Other 19d (9,614) (17,959) (30,476) (63,102) (115,857) (121,928)

Gross added value 127,662 854,175 (524,131) 895,995 2,367,961 1,310,657

Amortization/depreciation expenses 19d (14,786) (41,568) (21,009) (25,008) (64,049) (43,689)

Net added value produced by the Entity 112,876 812,607 (545,140) 870,987 2,303,912 1,266,968

Added value received as transfer 206,982 338,425 851,138 104,640 194,483 155,873 Equity in income of subsidiaries 12a 206,982 338,425 851,138 104,640 194,483 155,873

Added value payable 319,858 100.00% 1,151,032 100.00% 305,998 100.00% 975,627 100.00% 2,498,395 100.00% 1,422,841 100.00%

Distributed added value 319,858 100.00% 1,151,032 100.00% 305,998 100.00% 975,627 100.00% 2,498,395 100.00% 1,422,841 100.00%

Personnel 211,371 66.08% 405,704 35.25% 423,659 138.45% 624,917 64.05% 1,231,273 49.28% 1,263,399 88.79%Salaries, fees and labor demands 166,636 307,035 297,885 483,678 921,778 895,236 Profit sharing - Employees and Management 22,482 54,845 77,356 48,738 131,743 180,948 Benefits and training programs 13,846 26,489 29,687 64,945 127,971 133,379 FGTS 8,391 17,306 18,709 27,324 49,021 52,745 Other charges 16 29 22 232 760 1,091

Taxes, rates and contributions (136,561) -42.69% 292,251 25.39% (640,539) -209.33% 85,390 8.75% 773,350 30.95% (406,794) -28.59% Federal (144,283) 277,968 (653,163) 56,077 717,386 (471,923) State 1 2 1 1,035 2,309 14,244 Municipal 7,721 14,281 12,623 28,278 53,655 50,885

Third-party capital remuneration 13,643 4.27% 27,263 2.37% 41,158 13.45% 33,915 3.48% 67,958 2.72% 84,516 5.94%Rental 19d 13,643 27,263 41,158 33,915 67,958 84,516

Remuneration of own capital 231,405 72.35% 425,814 36.99% 481,720 157.43% 231,405 23.72% 425,814 17.04% 481,720 33.86%Dividends 101,131 101,131 114,409 101,131 101,131 114,409 Retained earnings 130,274 324,683 367,311 130,274 324,683 367,311


Bank Consolidated

13

Banco Votorantim S.A. Financial statements

Year ended on December 31, 2016 Amounts in thousand of Reais, unless when indicated

14

Notes to the financial statements

1. THE CONGLOMERATE AND ITS OPERATIONS Banco Votorantim S.A. (“Banco Votorantim” or “Conglomerate”) is a private company which, operating as a Multiple Bank, develops banking activities in authorized categories, including commercial banking, investment banking and foreign exchange operation portfolios. Through its subsidiaries, the Company also carries out activities in the areas of consumer credit, leasing, administration of investment funds and credit cards, securities brokerage and distribution and any other activities in which institutions that are part of the National Financial System are permitted to engage. Transactions are conducted in the context of a set of institutions that operate in an integrated manner in the financial market, including in relation to risk management, and certain transactions have the joint participation or the intermediation of member institutions, which form an integral part of the financial system. The benefits of the services provided between these institutions and the costs of the operational and administrative structure, are absorbed based on the practicality and reasonableness of the allocation of benefits and costs, jointly or individually.

2. PRESENTATION OF FINANCIAL STATEMENTS The financial statements were prepared based on the accounting guidelines derived from Brazilian Corporation Law and the rules and instructions of the National Monetary Council (CMN), the Central Bank of Brazil, and are presented in accordance with the Accounting Plan for Institutions in the National Financial System (COSIF) highlighting the devices related to the Financial Conglomerate. The preparation of the consolidated Financial Statements in accordance with accounting practices adopted in Brazil, applicable to financial institutions, requires that Management uses its judgment in determining and recording accounting estimates, when applicable. Significant assets and liabilities subject to these estimates and assumptions include: the residual value of permanent assets, allowance for doubtful accounts, deferred tax assets, provision for labor, tax and civil claims, valuation of financial instruments and other provisions. Definitive values of transactions involving these estimates are recognized only upon settlement. In the preparation of consolidated Financial Statements, intercompany transactions, and any unrealized income and expenses arising from intercompany transactions, and intercompany balances, including interest held by one company in another, were eliminated, net of tax effects. Interest held by non-controlling shareholders in the shareholders’ equity of the subsidiaries and in income were highlighted in financial statements. Lease transactions were considered from a financial method viewpoint, and the reclassified amounts under leased property for use to the caption lease transactions including the excess and/or insufficient depreciation, less residual value received in advance. The process does not include the consolidation of the exclusive investment funds and of the credit receivable investment funds and non-financial subsidiaries in conformity with the consolidation rules established by the CMN for the purposes of the Financial Conglomerate. The book balances of the overseas direct subsidiaries, which are prepared in accordance with International Financial Reporting Standards (IFRS), were translated into Reais, using the foreign currency quotation on the closing date of the period, and were adjusted to conform to the accounting policies described in Note 3. The exchange variation was distributed on the lines of the statement of income, according to the respective assets and liabilities which originated them.



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The result of exchange variation of foreign investments are presented in the “Income from derivative financial instruments” with the purpose of eliminating the effect of hedging against the exchange rate fluctuations of these investments. The Accounting Pronouncements Committee (CPC) issues accounting standards and interpretations aligned with IFRS and approved by the Brazilian Securities and Exchange Commission. The National Monetary Council (CMN) approved the following pronouncements, which were fully applied by the Bank, as applicable: CPC 00 (R1) - Basic Conceptual Pronouncement, CPC 01 (R1) - Impairment of assets, CPC 03 (R2) - Statement of cash flows, CPC 05 (R1) - Related party disclosures, CPC 10 (R1) - Share-based payment, CPC 23 - Accounting Policies, Change in Accounting Estimates and Correction of Errors, CPC 24 - Subsequent events, CPC 25 - Provisions, contingent assets and liabilities and CPC 33 (R1) - Employee Benefits. The Bank applies pronouncement CPC 09 - Statement of value added, which is not in conflict with the rules of the Central Bank of Brazil, as provided for in the prevailing regulations. On July 28,2016, CMN Resolution no. 4,512 was issued which provides for accounting procedures applicable to the valuation and record of provision for financial guarantees provided. The standard requires the constitution of a provision to cover losses associated with financial guarantees provided in any form. The effects of the adjustments arising from the initial application of this Resolution, as of January 1, 2017, should be recorded contra entry the caption retained earnings at the net value of the tax effects. Note 28 presents an estimate of the impact of the adoption of the accounting procedures established by this Resolution. On September 29, 2016, CMN Resolution no. 4,524 was issued, which adresses the accounting procedures to be followed in the recognition of the effects of exchange rate variations on translation of financial statements and in the Hedge of exchange rate of dependence and affiliates or subsidiaries abroad. This standard revoked Resolution no. 4,455 of December 17, 2015 and Resolution no. 4,491, of May 31, 2016, and must be applied prospectively from January 1, 2017. There will be no impact on the Conglomerate in the application of this standard. On November 24, 2016, CMN Resolution No. 4,534 was issued, which addresses the recognition and measurement of the components of intangible and deferred assets. Requirements related to the discontinuance of the accounting records of deferred assets became effective as of the date of publication of the standard, and other requirements related to the measurement and classification of the intangible asset, should be applied prospectively as from January 1, 2017. The application of the standard will not imply impacts for the Conglomerate. The CMN Resolution No. 4,535, also issued on November 24, 2016, addresses the accounting record of the components of property, plant and equipment and applies prospectively as from January 1, 2017. The application of the standard will not imply significant impacts for the Conglomerate The Financial Statements were authorized for issue by Management on February 09, 2017.



16

Shareholding interest included in consolidated Financial Statements, segregated by business segments:

Activity 12.31.2016 12.31.2015 Interest % Banking segment - Domestic BV Financeira S.A. Crédito, Financiamento e Investimento (1) Financial 100.00% 100.00% BV Leasing Arrendamento Mercantil S.A. (1) Lease 100.00% 100.00% Votorantim Corretora de Títulos e Valores Mobiliários Ltda. (1) Brokerage house 99.99% 99.99% Fund management segment Votorantim Asset Management Distribuidora de TVM Ltda. (1) Asset Management 99.99% 99.99% Banking segment - Foreign Votorantim Bank Limited (1) Banking 99.99% 99.99% Banco Votorantim Securities Inc. (1) Brokerage house 100.00% 100.00% Votorantim Securities (UK) Limited (1) Brokerage house 100.00% 100.00%

(1) Subsidiaries.

Information for comparison purpose Statement of income reclassifications were made for comparative purposes and to better represent the transactions’ substance, as follows:

• Reclassification of the foreign exchange variation of investments abroad from Other Operating Income / Expenses to Financial Intermediation Income – Income from derivative financial instruments.

Statement of income

2015

Bank Previous

disclosure

Reclassification Reclassified

balance FINANCIAL INTERMEDIATION INCOME 12,251,494 (12,636) 12,238,858 Income from derivative financial instruments (Note 6d9) (1,177,472) 495,223 (682,249) OTHER OPERATING INCOME/(EXPENSES) 1,051,652 (495,223) 556,429 Other operating income (Note 19e) 896,075 (592,097) 303,978 Other operating expenses (Note 19f) (170,171) 96,074 (74,097)

2015

Consolidated Previous

disclosure

Reclassification Reclassified

balance FINANCIAL INTERMEDIATION INCOME 20,444,238 16,949 20,461,187 Income from derivative financial instruments (Note 6d9) 1,853,342 524,818 2,378,160 OTHER OPERATING INCOME/(EXPENSES) (1,800,466) (524,818) (2,325,284) Other operating income (Note 19e) 947,705 (590,302) 357,403 Other operating expenses (Note 19f) (1,124,337) 58,625 (1,065,712)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies adopted by Banco Votorantim were consistently applied to all periods presented in these financial statements and have been applied consistently by all entities of the Conglomerate. a) Statement of income Revenues and expenses are recognized on an accrual basis in the period earned or incurred . Transactions that were carried out with floating financial charges are adjusted on a pro rata basis, based on the variation of the respective agreed-on indices; and transactions with fixed financial charges are recorded at redemption value, rectified by unrecognized income or unrecognized expenses corresponding to the future period. Transactions indexed to foreign currencies are



17

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

b) Measurement at present value Financial assets and liabilities are presented at present value as a result of application of accrual regime for recognition of respective interest revenues and expenses. Non-contractual obligations, mainly represented by provisions for lawsuits and legal obligations whose disbursement date is unknown and not under control of the Conglomerate, are measured at present value, as they are initially recognized at estimated disbursement value on valuation date and are adjusted on a monthly basis. c) Cash and cash equivalents

Cash and cash equivalents comprise domestic and foreign currency, money market repurchase commitments - own portfolio, interbank accounts or relations and investments in foreign currency, with high liquidity and insignificant risk of changes in value, and original maturities of 90 days or less from the acquisition date. d) Interbank funds applied Interbank investments are shown at cost of investment or acquisition, plus income accrued up to the reporting date and adjusted for reserve for losses, as applicable.

e) Securities Securities are recorded at the amount effectively paid, net of reserve for losses, and classified into three different categories based on Management's intent, according with current law: Trading securities: Securities acquired for the purpose of being actively and frequently negotiated. Subsequent to initial recognition, trading securities are measured at fair value with changes therein recognized in profit or loss; Securities available for sale: Securities that may be traded at any time, though are not acquired for the purpose of being actively and frequently negotiated. Subsequent to initial recognition, securities available for sale are measured at fair value with changes therein recognized in a separate account in shareholders’ equity, net of taxes; and Securities held to maturity: Securities acquired with the positive intent and financial capacity to hold to maturity. Held-to-maturity securities are initially recognized at cost plus any directly attributable transaction costs. Subsequent to initial recognition, held-to-maturity financial assets are measured at amortised cost using the effective interest method, less any impairment losses. For securities reclassified to this category, the mark-to-market adjustment is incorporated to cost and kept prospectively at amortized cost using the effective interest rate method. The methodology of adjustment at market value was established in compliance with consistent and verifiable criteria, which take into consideration the average price of trading on the date of calculation, or, in the absence thereof, the daily adjustment value of future market transactions disclosed by external sources, or the probable net realizable value obtained pricing models, using interest rate future value curves, exchange rates, price and currency indexes, besides any adjustments in the prices of securities of low liquidity, all duly in conformity with the prices adopted in the period. The market value considers the credit risk of counterparty (credit valuation adjustment).



18

Income on securities, regardless of the category, is accrued pro rata, based on the variation of the index and on the agreed-upon interest rates, by the compounding or straight-line method, up to the date of maturity or of the final sale of the security, and is recognized directly in profit or loss. Losses on securities classified as available for sale and as held to maturity that are not temporary losses are directly recognized in profit or loss and now comprise the new asset cost basis. Upon disposal, difference determined between sales value and acquisition cost adjusted by earnings is considered as the transaction result and is accounted for on transaction date as Income or Loss with securities. f) Derivative financial instruments

Derivative financial instruments are valued at market value, upon the preparation of monthly trial balances and balance sheets. Changes in value are recorded in the income or expense accounts of the respective financial instruments. The mark-to-market methodology of derivative financial instruments was established based on consistent and verifiable criteria, considering the average price of trading on the date of calculation, or, in the absence thereof, conventional and proven methodologies and pricing models that reflect the net realizable value. The market value considers the credit risk of counterparty (credit valuation adjustment). Derivative financial instruments used to offset, in whole or in part, the risks arising from exposure to variations in the market value of financial assets or liabilities are considered hedging instruments and are classified according to their nature as either: Market risk hedge: changes in the market values of the financial instruments and the corresponding hedged items are recognized in profit or loss; and

Cash flow hedge: The financial instruments are allocated to compensate the variation of future cash flow of the institution. For these operations, both derivative financial instruments as the hedged items are adjusted by fair value. For financial instruments classified in this category, effective portion of appreciation or devaluation is recorded in a separate account of Shareholders' equity. Effective portion is that portion for which hedged item variation directly related to corresponding risk is offset against hedging financial instrument variation, considering transaction accumulated effect. Other variations in these instruments are directly recognized in profit or loss for the period. For object items that were discontinued from the hedge list and that remain recorded in the balance sheet, as in the case of credit contracts assigned with substantial retention of risks and benefits, when applicable, the mark-to-market adjustment is recognized over the remaining period at the new effective interest rate.

g) Loan and lease operations, advances on foreign exchange contracts, other receivables with loan characteristics and allowance for doubtful accounts

Loans and lease operations, advances on foreign exchange contracts and other receivables with loan characteristics are classified according to Management's assessment regarding the level of risk, taking into consideration the current economic environment, past experience and risks specifically related to the respective operation, the counterparty and guarantors, periods of delinquency, and economic group in accordance with the parameters established by CMN, which requires the classification of the portfolio into nine risk levels, ranging from AA (minimum risk) to H (maximum risk), as well as the classification of transactions with delinquency of more than 14 days as non-performing loans. In relation to the delinquency period for operations with a term of



19

over thirty-six (36) months, a double count is adopted over intervals of delinquency defined for the nine levels to retail operations. For wholesale operations, a double count for the intervals of delinquency is also permitted, according to the internal assessment. Interest from credit transactions overdue for more than 59 days is recognized as income only when effectively received, regardless of risk level. Operations with a risk level H continue in this status for 180 days, at which time they are written off against the existing provision and controlled in memorandum accounts. Renegotiated operations are maintained, at a minimum, at the level at which they were initially rated on the date of renegotiation. Renegotiations of credit transactions that had been previously written off against provisions are rated as level H and any gains from renegotiation are recognized in profit or loss when effectively received. The allowance for doubtful accounts, considered sufficient by Management, complies with the requirement established by the CMN Resolution 2,682/1999 (Note 8e). Loan operations that are hedged against market risk are stated at fair value using consistent and verifiable criterion. Adjustments to these transactions from mark-to-market valuations are recorded in loans, also considering the risk level and percentage of allowance, as a contra-entry to “Income from derivative financial instruments”. The income from loan assignments with recourse performed up to December 31, 2011, was calculated on the date of assignment and the income was fully recognized through write-off of the corresponding assets, whether risk was retained or not. For the portfolio of loans assigned with recourse, Management established a reserve for losses, recorded under “Other liabilities - Sundry - Sundry domestic creditors”. As of January 1, 2012, financial assets assigned consider the transfer level of risks and benefits of assets transferred to the other entity: • When financial assets are transferred to another entity, but there is no substantial transfer of

the risks and benefits related to the transferred assets, assets remain on the Company’s balance sheet; and

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

h) Prepaid expenses

These expenses refer to the application of payments made in advance, for which the benefits or the services will occur in subsequent periods. Prepaid expenses are recorded at cost and amortized as incurred. Transactions related to “Usufruct rights on shares” have been recognized based on the funds paid by the Conglomerate for temporary beneficial ownership of other companies’ preferred shares in exchange for consideration. These “Usufruct rights on shares” grant the right to receive dividends in the manner provided for in the bylaws of each of these companies, among other rights and benefits. The funds paid are deferred with a corresponding entry to profit or loss, in accordance with the term of each beneficial ownership transaction, whereas the amounts arising from rights to the payment of dividends are recognized as revenues when proven.



20

Beginning January 2, 2015, in compliance with requirements of CMN Resolution no. 4,294/2013, and in accordance with permission provided for in BACEN Circular Letter no. 3,738/2014, two thirds of the remuneration relating to 2015 origination of credit or lease transactions by correspondents are recorded in assets, and the remaining portion is recognized in profit or loss for the period upon origination. Assets recorded pursuant to permission provided for in BACEN Circular Letter no. 3,738/2014 are amortized on a straight-line basis over the maximum period of 36 months. In 2016, up to a third of the remuneration relating to origination of credit transactions became to be recorded in assets and recognized in income on a straight-line basis, for a maximum period of 36 months. Said remuneration for transactions generated beginning as of January 1, 2017 will be fully recognized as expenses. Beginning as of January 1, 2020, all amounts recorded in assets and related to remuneration of correspondents in Brazil will be immediately written off, with contra-entry in the appropriate expense account for the period. i) Fixed assets Investments: investments in subsidiaries with significant influence or interest of 20% or more in the voting capital are accounted for by the equity method based on the shareholders’ equity in the subsidiary. Financial statements of subsidiaries abroad are conformed to accounting criteria in force in Brazil and translated into Brazilian Reais in accordance with prevailing law, and their effects are recognized in profit or loss. Other permanent investments are valued at cost of acquisition, less provision for impairment, as applicable. Property for use: property, plant and equipment is valued at acquisition cost less depreciation, which is calculated on a straight-line basis using the following annual rates: vehicles - 20%, data processing systems - 20% and other items - 10% (Note 13). Deferred assets: as a result of the application of Resolution no. 4,534 issued on November 24, 2016, which deferred asset requirements apply as of the date of issuance of the standard, the balance of deferred assets comprised of expenses on third party real estate properties made up to December 30, September 2008, were reclassified from the deferred asset group to the fixed assets group, and the associated amortization expenses were reclassified to depreciation expense. Lease losses were reclassified to property, plant and equipment leased. Intangible assets: intangible assets corresponds to the rights that refer to incorporeal personal property intended for the maintenance of the Company or exercised with this purpose. Intangibles have a defined useful life and basically refer to softwares (Note 14). The amortization is carried out using the straight-line method based on the term for the benefit generated, based on availability of intangible assets for use and accounting in Other Administrative Expenses – Amortization (Note 19d). The entity assesses at the end of each reporting period whether an indication of an intangible asset suffered devaluation. If there is any indication, an entity estimated recoverable amount of asset.

j) Impairment of non-financial assets The company assesses at the end of each period, if there is any sign that an asset may be impaired. If so, the company estimates the asset's recoverable value, which is the greater of: i) the asset’s fair value less costs to sell; and ii) the asset’s value in use.



21

If the asset’s recoverable value is lower than its carrying value, the asset’s carrying value is reduced to its recoverable value through a provision for impairment losses that is recognized in profit or loss. Methodologies applied to the valuation of the recoverable value of main non-financial assets: Investments The methodology for determining the recoverable value of investments accounted for by the equity method is based on valuation of equity in investees, their business plans and invested amounts’ return capacity. A provision for impairment loss is recognized in profit or loss in the period when the carrying value of an investment exceeds its recoverable value. Intangible assets Software - software is developed internally and according to the Conglomerate’s needs. This development process is in compliance with the Bank investment policy which aims the modernization and adequacy to new technologies and business requirements. As there are no similar items in the market and also because of the high cost to implement metrics that permit determining the value in use, testing of software recoverability is comprised of the valuation of its utility for the Company such that when the software no longer has future economic benefits, the recoverable value of the intangible asset is adjusted. Impairment loss recognized to adjust these assets’ recoverable value is stated in respective notes. k) Employee benefits Recognition, measurement and disclosure of employee benefits (short and long-term) are conducted in accordance with criteria defined in CPC 33 - Benefits to employees, approved by the CMN Resolution No. 4,424/2015. In accordance with the accrual regime, this pronouncement requires that an entity recognize a liability when the employee provides services in exchange for benefits to be paid in the future as a contra-entry to the net income of the period. For the Short and Long-Term Incentive Program for the Conglomerate’s directors and employees, the opportunity to invest in “virtual shares” of the Company is offered. Amounts to be paid that are adjusted according to the grace period (from one to a maximum of four years) and to the characteristics of each benefit are recorded under “Other sundry obligations - Provision for payments” as a contra entry to caption “Personnel expenses - Proceeds”. Program details are disclosed in Note 24. l) Deposits and money market repurchase commitments Deposits and money market repurchase commitments are stated at the amounts of the liabilities and consider, when applicable, the charges enforceable up to the reporting date, recognized on a “pro rata” daily basis.



22

m) Taxes Taxes are calculated based on rates shown in the chart below: Taxes Current rate Income tax (15% + 10% additional) 25% Social contribution on net income - CSLL (1) 20% PIS / PASEP 0.65% Contribution for Social Security Funding - COFINS 4% Service tax (ISS) - ISSQN From 2 to 5%

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

Deferred tax assets and deferred tax liabilities are recognize through the application of prevailing tax rates on the respective bases. For recognition, maintenance and write-off of deferred tax assets, the criteria established in CMN Resolution no. 3,059/2002, as changed by CMN Resolutions no. 3,355/2006 and 4,192/2013, are followed, supported by a study on realization capacity. The deferred tax assets resulting from the increase of the CSLL rate from 15% to 20% are being recognized in a sufficient amount to its consumption until the end of the term of the new rate (December 2018), according to Law no. 13,169/2015. Deferred income tax is recognized in the subsidiary BV Leasing, calculated at the rate of 25%, on the adjustment of excess of depreciation of the lease portfolio of subsidiary BV Leasing.

n) Provisions, contingent assets and liabilities and legal obligations Recognition, measurement and disclosure of provisions, contingent assets and liabilities and of legal obligations are conducted in accordance with criteria defined in CPC 25 - Provisions, Contingent Liabilities and Contingent Assets, approved by the CMN Resolution 3,823/2009 (Note 25). Contingent assets are not recognized except when Management has full control over the situation or when there are secured guarantees or favorable sentences to which no further appeals are applicable, characterizing a favorable judgment as practically certain. Contingent liabilities are recognized when, based on the opinion of legal counsel and Management, the risk of loss of a lawsuit or administrative proceeding is considered probable, with a probable outflow of financial resources for the settlement of obligations and when the sums involved are reasonably estimable. Contingent liabilities rated as possible losses are not recognized and are only be disclosed in notes; those rated “remote” do not require provision or disclosure. Legal obligations comprise lawsuits related to tax obligations, where the subject being contested is the legality or constitutionality of such obligations, which, regardless of the probability of success, are recognized in full in the consolidated financial statements.

o) Guarantees and sureties Guarantee provided by the Company, and not yet called upon, that are not in cash, are recorded in memorandum accounts, and procedures are established to control, record and monitor the administrative actions that will result in the guarantee being called as a result of future occurrences, either foreseen or fortuitous.



23

When the obligation value is subject to exchange variation or to any other type of adjustment, balances of these accounts are adjusted at the reporting date. Income for the period from provided guarantee and sureties commissions not yet received, are accounted for on a monthly basis in “Commissions for Co-obligations Receivable, as a contra entry to Income from Provided Guarantees. Commissions received in advance are accounted for under advanced income in group deferred income, on a monthly basis at the accrual system. When, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation, based on the occurrence or not of one or more uncertain future events, the Conglomerate recognizes a contingent liability “Unpaid guarantee”, which is measured as the best estimate at the reporting date of the disbursement required to settle the obligation. Operations of delinquent sureties and guarantees have provisions recognized for each client of the economic group based on characteristics such as sector of operation, competitive and regulatory environment, shareholding control and management, as well as financial soundness, and these variables are captured through “rating” models on qualitative and quantitative basis, considering the respective minimum provisions as defined by CMN Resolution no. 2,682/1999, non-honored provision for sureties is recognized in Other obligations - Sundry - Sundry Domestic Creditors (note 18d). p) Others Assets and Liabilities Other assets and liabilities are stated at realizable values, including, when applicable, monetary and exchange variations (on a pro rata basis) and a reserve for losses, as necessary. Liabilities are stated at known measurable amounts plus, as applicable, monetary charges, inflation adjustments and foreign exchange variation on a pro rata basis.

4. CASH AND CASH EQUIVALENTS

Bank Consolidated 12.31.2016 12.31.2015 12.31.2016 12.31.2015

Cash and cash equivalents 56,400 118,916 183,569 179,915 Cash and cash equivalents in national currency 690 278 83,014 5,213 Cash and cash equivalents in foreign currency 55,710 118,638 100,555 174,702 Interbank funds applied (1) 1,502,446 6,971,436 1,912,133 8,688,036 Money market investments subject to repurchase agreements - Sales pending settlement - own portfolio

315,942 3,159,668 711,425 7,499,104

Interbank accounts or relations 897,954 3,634,542 897,954 991,360 Investments in foreign currency 288,550 177,226 302,754 197,572 Total 1,558,846 7,090,352 2,095,702 8,867,951

(1) Refer to transactions with original maturities of 90 days or less from the acquisition date and are

subject to an insignificant risk change in value.



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5. INTERBANK FUNDS APPLIED

a) Breakdown

Bank Consolidated 12.31.2016 12.31.2015 12.31.2016 12.31.2015 Money market repurchase commitments 14,702,886 14,851,895 14,702,886 14,851,895 Sales pending settlement - Own portfolio 756,177 4,715,452 2,716,713 9,054,888

Financial Treasury Bills 8,033 1,300,057 114,119 1,300,057 National Treasury Bills 509,920 576,875 680,436 576,875 National Treasury Notes 238,224 2,838,520 1,922,158 7,177,956

Sale pending settlement - Financed operations 11,757,500 9,065,034 9,796,964 4,725,598

Financial Treasury Bills 6,603,162 - 6,497,077 - National Treasury Bill 2,656,221 707,030 2,485,704 707,030 National Treasury Notes 2,498,117 8,358,004 814,183 4,018,568

Sale pending settlement - Short position 2,189,209 1,071,409 2,189,209 1,071,409 Federal public securities - National Treasury 2,189,209 1,071,409 2,189,209 1,071,409

Interbank deposit investments 22,012,630 23,427,131 2,413,395 2,334,747 Total 36,715,516 38,279,026 17,116,281 17,186,642 Current assets 23,607,320 27,215,721 17,066,698 16,892,435 Non-current assets 13,108,196 11,063,305 49,583 294,207

b) Income from interbank funds applied

Bank Consolidated

2H2016 12.31.2016 12.31.2015 2H2016 12.31.2016 12.31.2015 Income from money market repurchase commitments 1,146,446 2,110,349 1,720,512 1,148,212 2,280,236 1,791,651

Own portfolio 29,362 151,906 760,059 (38,865) 443,086 1,368,582 Financed Operations 1,045,764 1,815,961 893,408 1,115,757 1,694,668 356,024 Short position 71,320 142,482 67,045 71,320 142,482 67,045

Income from interbank deposits 1,516,520 2,980,101 2,941,864 66,670 138,143 117,062 Total 2,662,966 5,090,450 4,662,376 1,214,882 2,418,379 1,908,713



25

6. SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS

a) Securities In the Balance sheet, securities classified in the “Trading securities” category are presented as Current Assets, regardless of the maturity terms.

a.1) Breakdown of the portfolio by category, type of paper and maturity term Bank 12.31.2016 12.31.2015 Market value Total Total

Maturity in days Without maturity

From 0 to 30 days

From 31 to 180 days

From 181 to 360 days

Over Cost Market value

Mark-to-market Cost Market value

Mark-to-market 360 days

1 - Trading securities 138 3,704,662 43,143 156,276 1,810,571 5,749,221 5,714,790 (34,431) 5,251,918 5,175,086 (76,832) Government bonds - 3,702,374 41,150 155,822 1,782,280 5,715,741 5,681,626 (34,115) 5,122,054 5,045,493 (76,561) Financial Treasury Bills - - 110 16,496 166,778 183,451 183,384 (67) 541,145 541,126 (19) National Treasury Bills - 2,270,334 - 139,326 870,077 3,272,031 3,279,737 7,706 2,945,833 2,944,685 (1,148) National Treasury Notes - 1,432,040 41,040 - 741,525 2,256,334 2,214,605 (41,729) 1,621,663 1,546,970 (74,693) Brazilian Foreign Debt Securities - - - - 3,900 3,925 3,900 (25) 13,413 12,712 (701) Corporate securities 138 2,288 1,993 454 28,291 33,480 33,164 (316) 129,864 129,593 (271) Shares 138 - - - - 52 138 86 52 203 151 Eurobonds - 2,288 1,993 454 6,135 10,927 10,870 (57) 1,842 981 (861) Financial Bills - - - - - - - - 97,820 97,820 - Other - - - - 22,156 22,501 22,156 (345) 30,150 30,589 439

2 - Securities available for sale 23,648 1,071,532 186,403 836,678 28,615,779 30,985,989 30,734,040 (251,949) 34,885,444 34,089,467 (795,977) Government bonds - 909,538 - 149,481 4,657,931 5,668,497 5,716,950 48,453 8,039,124 7,592,767 (446,357) Financial Treasury Bills - - - 148,765 1,701,567 1,851,037 1,850,332 (705) - - - National Treasury Bills - 909,538 - - 72,831 979,131 982,369 3,238 4,305,392 4,128,851 (176,541) National Treasury Notes - - - - 1,521,884 1,507,946 1,521,884 13,938 2,648,536 2,443,840 (204,696) Agricultural debt securities - - - 716 - 707 716 9 1,322 1,310 (12) Brazilian Foreign Debt Securities - - - - 1,361,649 1,329,676 1,361,649 31,973 1,083,874 1,018,766 (65,108) Corporate securities 23,648 161,994 186,403 687,197 23,957,848 25,317,492 25,017,090 (300,402) 26,846,320 26,496,700 (349,620) Debentures(1) - - 20,545 418,142 21,641,908 22,347,169 22,080,595 (266,574) 22,575,050 22,456,741 (118,309) Promissory notes (2) - - - 232,847 - 233,423 232,847 (576) 636,030 585,321 (50,709) Shares(3) 23,648 - - - - 18,447 23,648 5,201 20,274 18,471 (1,803) Shares in investment funds - - - - 1,321,842 1,321,842 1,321,842 - 1,605,595 1,605,595 - Rural Product Notes - Commodities (4) - 16,918 55,186 36,208 121,744 240,015 230,056 (9,959) 390,383 374,127 (16,256) Eurobonds(5) - - 13,044 - 475,759 520,759 488,803 (31,956) 670,230 535,991 (134,239) Credit Linked Notes - - 97,628 - - 97,987 97,628 (359) 242,451 220,067 (22,384) Financial Bills - 145,076 - - 55,721 200,888 200,797 (91) 443,184 439,012 (4,172) Other - - - - 340,874 336,962 340,874 3,912 263,123 261,375 (1,748)

3 - Securities held to maturity - - 297,518 - 5,925,469 6,090,329 6,222,987 132,658 3,208,678 3,185,381 (23,297) Government bonds - - 297,518 - 5,925,469 6,090,329 6,222,987 132,658 3,208,678 3,185,381 (23,297) National Treasury Bills - - - - 4,143,466 4,025,086 4,143,466 118,380 2,069,516 2,051,820 (17,696) National Treasury Notes - - 297,518 - 1,782,003 2,065,243 2,079,521 14,278 1,139,162 1,133,561 (5,601)

Total (1 + 2 + 3) 23,786 4,776,194 527,064 992,954 36,351,819 42,825,539 42,671,817 (153,722) 43,346,040 42,449,934 (896,106)



26

Consolidated 12.31.2016 12.31.2015 Market value Total Total


From 0 to 30 days

From 31 to 180 days


Over 360 days

Cost Market value

Mark-to-market Cost

Market value

Mark-to-market

1 - Trading securities 138 3,704,662 43,143 160,952 1,821,553 5,764,884 5,730,448 (34,436) 5,291,493 5,214,663 (76,830) Government bonds - 3,702,374 41,150 160,498 1,793,262 5,731,404 5,697,284 (34,120) 5,161,629 5,085,070 (76,559) Financial Treasury Bills - - 110 21,172 177,760 199,114 199,042 (72) 580,720 580,703 (17) National Treasury Bills - 2,270,334 - 139,326 870,077 3,272,031 3,279,737 7,706 2,945,833 2,944,685 (1,148) National Treasury Notes - 1,432,040 41,040 - 741,525 2,256,334 2,214,605 (41,729) 1,621,663 1,546,970 (74,693) Brazilian Foreign Debt Securities - - - - 3,900 3,925 3,900 (25) 13,413 12,712 (701) Corporate securities 138 2,288 1,993 454 28,291 33,480 33,164 (316) 129,864 129,593 (271) Shares 138 - - - - 52 138 86 52 203 151 Eurobonds - 2,288 1,993 454 6,135 10,927 10,870 (57) 1,842 981 (861) Financial Bills - - - - - - - - 97,820 97,820 - Other - - - - 22,156 22,501 22,156 (345) 30,150 30,589 439

2 - Securities available for sale 611,970 1,071,532 293,653 836,923 13,006,385 16,146,012 15,820,463 (325,549) 18,937,776 18,061,323 (876,453) Government bonds - 909,538 107,250 149,726 6,976,948 8,063,668 8,143,462 79,794 10,811,150 10,275,980 (535,170) Financial Treasury Bills - - 144 149,010 1,729,802 1,879,673 1,878,956 (717) 1,525 1,525 - National Treasury Bills - 909,538 - - 528,790 1,424,026 1,438,328 14,302 5,185,339 4,996,967 (188,372) National Treasury Notes - - 107,106 - 3,356,707 3,429,586 3,463,813 34,227 4,539,090 4,257,412 (281,678) Agricultural debt securities - - - 716 - 707 716 9 1,322 1,310 (12) Brazilian Foreign Debt Securities - - - - 1,361,649 1,329,676 1,361,649 31,973 1,083,874 1,018,766 (65,108) Corporate securities 611,970 161,994 186,403 687,197 6,029,437 8,082,344 7,677,001 (405,343) 8,126,626 7,785,343 (341,283) Debentures(1) - - 20,545 418,142 3,706,648 4,411,909 4,145,335 (266,574) 3,199,560 3,081,252 (118,308) Promissory notes (2) - - - 232,847 - 233,423 232,847 (576) 636,030 585,321 (50,709) Shares(3) 591,738 - - - - 691,478 591,738 (99,740) 652,513 659,046 6,533 Shares in investment funds 20,232 - - - 1,328,691 1,348,923 1,348,923 - 1,629,152 1,629,152 - Rural Product Notes - Commodities (4) - 16,918 55,186 36,208 121,744 240,015 230,056 (9,959) 390,383 374,127 (16,256) Eurobonds(5) - - 13,044 - 475,759 520,759 488,803 (31,956) 670,230 535,991 (134,239) Credit Linked Notes - - 97,628 - - 97,987 97,628 (359) 242,451 220,067 (22,384) Financial Bills - 145,076 - - 55,721 200,888 200,797 (91) 443,184 439,012 (4,172) Other - - - - 340,874 336,962 340,874 3,912 263,123 261,375 (1,748)

3 - Securities held to maturity - 838,621 297,518 - 5,925,469 6,928,846 7,061,608 132,762 7,148,481 7,084,905 (63,576) Government bonds - 838,621 297,518 - 5,925,469 6,928,846 7,061,608 132,762 7,148,481 7,084,905 (63,576) National Treasury Bills - - - - 4,143,466 4,025,086 4,143,466 118,380 5,186,366 5,151,226 (35,140) National Treasury Notes - 838,621 297,518 - 1,782,003 2,903,760 2,918,142 14,382 1,962,115 1,933,679 (28,436)

Total (1 + 2 + 3) 612,108 5,614,815 634,314 997,875 20,753,407 28,839,742 28,612,519 (227,223) 31,377,750 30,360,891 (1,016,859) The market value considers the prudential adjustment of credit risk spread, fulfilling the provision in Article 8 of the CMN Resolution no. 4,277/2013 of the Brazilian Central Bank. The securities classified as "Held to maturity" are recorded at cost in accordance with BACEN Circular No. 3,068/2001. For purposes of presentation, these operations are adjusted at market value. (1) The cost of the Debentures includes a provision for losses in the amount of R$ 894,514 (R$ 75,764 on December 31, 2015) contra entry the “Income from securities”. (2) The cost of the Promissory Notes includes a provision for losses in the amount of R$ 101,397 as of December 31, 2015 contra entry the “Income from securities”. (3) The cost value of the Shares includes a provision for losses in the amount of R$ 74,745 (R$ 87,444 on December 31, 2015) contra entry the Income from securities. The market value of the shares represents the quotation disclosed by BM&FBovespa. (4) The cost of the Rural Product Notes also considers the provision for losses in the amount of R$ 8,286 (R$ 7,132 on December 31, 2015) contra entry the “Income from securities”. (5) The cost value of Eurobonds also considers the provision for losses in the amount of R$ 14,807 (R$ 58,889 as of December 31, 2015) contra entry the “Income from securities”.



27

a.2) Composition of portfolio by captions of publication and maturity term

12.31.2016 12.31.2015 Market value Total Total


From 0 to 30 days

From 31 to 180 days


Over 360 days Cost Market value

Mark-to-market Cost

Market value

Mark-to-market

Bank By portfolio 23,786 4,776,194 527,064 992,954 36,351,819 42,825,539 42,671,817 (153,722) 43,346,040 42,449,934 (896,106) Own portfolio 98,531 188,542 188,465 221,754 7,851,251 8,636,569 8,548,543 (88,026) 12,746,325 12,268,003 (478,322) Subject to repurchase agreements - 4,611,911 338,489 744,346 27,742,553 33,479,493 33,437,299 (42,194) 27,976,321 27,719,937 (256,384) Given in guarantee - - 110 54,341 1,623,876 1,701,829 1,678,327 (23,502) 2,954,020 2,792,620 (161,400) Provision for impairment of securities (74,745) (24,259) - (27,487) (865,861) (992,352) (992,352) - (330,626) (330,626) - Consolidated By portfolio 612,108 5,614,815 634,314 997,875 20,753,407 28,839,742 28,612,519 (227,223) 31,377,750 30,360,891 (1,016,859) Own portfolio 686,853 3,505,693 526,704 722,870 13,206,923 19,008,607 18,649,043 (359,564) 13,522,977 18,254,337 4,731,360 Subject to repurchase agreements - 2,133,381 251 243,229 6,464,478 8,689,031 8,841,339 152,308 14,879,999 9,301,830 (5,578,169) Given in guarantee - - 107,359 59,263 1,947,867 2,134,456 2,114,489 (19,967) 3,305,400 3,135,350 (170,050) Provision for impairment of securities (74,745) (24,259) - (27,487) (865,861) (992,352) (992,352) - (330,626) (330,626) -

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

12.31.2016 12.31.2015

Market value Total Total

Maturity in years Without maturity Falling due, up to 1 year

Falling due - From 1 to 5

years

Falling due from 5 to 10

years

Falling due for more than 10

years Cost Market value Cost Market value

Bank By portfolio 23,786 6,296,212 14,841,602 13,187,151 8,323,066 42,825,539 42,671,817 43,346,040 42,449,934 Trading securities 138 3,904,081 1,144,772 663,268 2,531 5,749,221 5,714,790 5,251,918 5,175,086 Securities available for sale 23,648 2,094,613 8,177,438 12,188,970 8,249,371 30,985,989 30,734,040 34,885,444 34,089,467 Securities held to maturity - 297,518 5,519,392 334,913 71,164 6,090,329 6,222,987 3,208,678 3,185,381 Consolidated By portfolio 612,108 7,247,004 15,331,929 3,914,865 1,506,613 28,839,742 28,612,519 31,377,750 30,360,891 Trading securities 138 3,908,757 1,155,754 663,268 2,531 5,764,884 5,730,448 5,291,493 5,214,663 Securities available for sale 611,970 2,202,108 8,656,783 2,916,684 1,432,918 16,146,012 15,820,463 18,937,776 18,061,323 Securities held to maturity - 1,136,139 5,519,392 334,913 71,164 6,928,846 7,061,608 7,148,481 7,084,905



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a.4) Summary of the portfolio by balance sheet caption

12.31.2016 12.31.2015 Book value Book value Current Non-current Total Current Non-current Total Bank By portfolio 8,123,206 34,415,953 42,539,159 9,832,422 32,640,809 42,473,231 Own portfolio 1,024,105 7,522,575 8,546,680 4,318,172 5,615,673 9,933,845 Subject to repurchase agreements

6,259,197 27,064,584 33,323,781 4,727,044 25,347,686 30,074,730

Given in guarantee 966,395 694,655 1,661,050 1,117,832 1,677,450 2,795,282 Provision for impairment of securities

(126,491) (865,861) (992,352) (330,626) - (330,626)

Consolidated By portfolio 11,064,691 17,415,066 28,479,757 14,392,133 16,032,334 30,424,467 Own portfolio 9,628,904 9,213,838 18,842,742 10,078,538 8,199,104 18,277,642 Subject to repurchase agreements

472,730 8,059,424 8,532,154 3,486,611 5,844,175 9,330,786

Given in guarantee 1,089,548 1,007,665 2,097,213 1,157,610 1,989,055 3,146,665 Provision for impairment of securities

(126,491) (865,861) (992,352) (330,626) - (330,626)

a.5) Summary of the portfolio by category

By category 12.31.2016 12.31.2015 Bank 1 - Trading securities 5,714,790 13% 5,175,086 12% 2 - Securities available for sale 30,734,040 73% 34,089,467 80% 3 - Securities held to maturity 6,090,329 14% 3,208,678 8% Book value of portfolio 42,539,159 100% 42,473,231 100% Mark-to-market of category 3 132,658 (23,297) Market value of portfolio 42,671,817 42,449,934 Consolidated 1 - Trading securities 5,730,448 20% 5,214,663 17% 2 - Securities available for sale 15,820,463 56% 18,061,323 59% 3 - Securities held to maturity 6,928,846 24% 7,148,481 24% Book value of portfolio 28,479,757 100% 30,424,467 100% Mark-to-market of category 3 132,762 (63,576) Market value of portfolio 28,612,519 30,360,891

The Conglomerate, in fulfilling the provision of Article 8 of Circular 3,068/01, of the Central Bank of Brazil, declares that it has the necessary financial capacity and intention to hold to maturity the securities classified in the “securities held to maturity” category, in the amount of R$ 6,928,846

(R$ 7,148,481 on December 31, 2015), representing 24% of the total securities (24% on December 31, 2015). In the Bank, the corresponding amount is R$ 6,090,329 (R$ 3,208,678 on December 31, 2015), representing 14% of total securities (8% on December 31, 2015). b) Income from securities

Bank Consolidated

2H2016 2016 2015 2H2016 2016 2015 Interbank funds applied (Note 5b) 2,662,966 5,090,450 4,662,376 1,214,882 2,418,379 1,908,713 Fixed income securities 2,304,532 4,257,946 5,500,365 1,197,897 2,100,729 2,896,461 Foreign securities 32,893 (45,226) (118,048) 33,076 (44,752) (115,034) Variable income securities (9,061) 21,448 (282) 206,225 90,134 99,690 Investments in investment funds 101,045 198,889 154,129 101,130 201,790 217,288 Other 86 372 181 92 383 211 Total 5,092,461 9,523,879 10,198,721 2,753,302 4,766,663 5,007,329



29

c) Reclassification of securities In 2015, Private Securities - Debentures was reclassified, going from category “Securities for trading” to category “Available for sale”, as a result of Management’s intention review on respective securities. Reclassification of these securities does not impact results and shareholders' equity in the respective base date of the event. Bank

Cost Market value Unrealized gain/ (Loss)

Debentures - subsidiaries 29,221,339 29,221,339 - Total 29,221,339 29,221,339 -

In 2016, occurred the reclassification of Government Bonds - National Treasury Notes, from category “Available for sale” to category “Held to maturity”, as a result of Management’s intention review on respective securities. Reclassification of these securities does not impact results and shareholders' equity in the respective base date of the event. Bank and Consolidated

Cost Market value Unrealized gain/

(Loss) National Treasury Notes 801,988 759,962 (42,026) Total 801,988 759,962 (42,026)

Also in 2016, occurred the reclassification of Government Bonds – Financial Treasure Bills from category “Securities for trading” to category “Available for sale”, as a result of Management’s intention review on respective securities. Reclassification of these securities does not impact results and shareholders' equity in the respective base date of the event. Bank and Consolidated

Cost Market value Unrealized gain/ (Loss)

Financial Treasure Bills 28,636 28,626 (10) Total 28,636 28,626 (10)

d) Derivative financial instruments The Conglomerate uses Derivative Financial Instruments to manage its positions on a consolidated basis and to fulfill the needs of it’s client’s, classifying its own positions as necessary for hedging (of market risk and cash flow hedge) or trading, both with approval limits in the Company. The hedging strategy for asset protection, which is approved by Management, is in line with the macroeconomic scenario analyses. In the options market, assets or long positions have the Conglomerate as the holder, while liability or short positions have the Conglomerate as the seller. The models employed in derivative risk management are periodically reviewed, and decision making is based on the best risk/return ratios, with likely losses being estimated following an analysis of macroeconomic scenarios. The Conglomerate has tools and systems that are adequate to manage derivative financial instruments. Negotiation of new derivatives, standardized or not, depends on prior risk analysis. Subsidiaries’ risk valuation is carried out on an individual basis and its management is carried out on a consolidated basis. The Conglomerate uses statistical methodologies and simulation to measure its positions’ risks, including with derivatives, using value at risk and sensitivity models and stress analysis.



30

Risks The principal risks inherent in derivative financial instruments deriving from the Bank and its subsidiaries’ businesses are credit risk, market risk, liquidity risk and operational risk. Credit Risk is defined as the likelihood of losses occurring due to a counterparty’s not complying with its respective financial obligations in accordance with contractual terms. Exposure to credit risk in futures contracts is minimized due to the daily financial settlement. Swap contracts registered with CETIP are subject to credit risk in case that the counterparty is not able or willing to comply with its contractual obligations, while swap contracts registered with BM&FBovespa are not subject to the same risk, considering that Conglomerate’s transactions in this stock exchange have the same guarantor. Market risk is defined as the possibility of financial losses arising from variations in the market value of exposures held by a financial institution. These financial losses may be due to variations in interest rates, exchange rates and prices of shares and commodities. Liquidity risk is defined as:

• The possibility of not being able to effectively honor expected and unexpected current and future obligations, including those deriving from binding guarantees, without affecting its daily operations and without incurring significant losses; and

• The possibility that the Bank may not be able to trade a position at the market price due to its large size in relation to the usually traded volume, or due to market discontinuity.

Operating risk is defined as the possibility of loss arising from any failure, deficiency or inadequacy of internal processes, people or systems, or from events apart from the Institution.



31

d.1) Breakdown of Derivatives Portfolio by Index


By index Reference

value Cost

Market value

Reference

value Cost

Market value

Reference

value Cost

Market value

Reference

value Cost

Market value

Futures contracts Purchase commitments 28,014,200 - - 31,336,697 - - 28,014,200 - - 31,336,697 - -

Interbank deposits 15,192,049 - - 9,689,066 - - 15,192,049 - - 9,689,066 - - Currencies 1,612,388 - - 3,655,150 - - 1,612,388 - - 3,655,150 - - Index 1,278,055 - - 492,173 - - 1,278,055 - - 492,173 - - Foreign currency coupon

9,931,708 - - 17,500,308 - - 9,931,708 - - 17,500,308 - -

Sales commitments 44,129,875 - - 39,352,905 - - 57,685,592 - - 52,433,963 - - Interbank deposits 18,484,002 - - 12,767,570 - - 32,039,719 - - 25,848,628 - - Currencies 1,609,229 - - 807,850 - - 1,609,229 - - 807,850 - - Índex 327,655 - - 32,794 - - 327,655 - - 32,794 - - Foreign currency coupon

23,708,989 - - 25,744,691 - - 23,708,989 - - 25,744,691 - -

Forward transactions Asset position 314,132 314,132 314,092 5,088 5,088 5,127 314,132 314,132 314,092 5,088 5,088 5,127

Forward currency 73,863 73,863 73,863 5,088 5,088 5,127 73,863 73,863 73,863 5,088 5,088 5,127 Government bond term

240,269 240,269 240,229 - - - 240,269 240,269 240,229 - - -

Liability position 314,132 (314,132) (309,209) 5,088 (5,088) (5,088) 314,132 (314,132) (309,209) 5,088 (5,088) (5,088) Forward currency 73,863 (73,863) (69,017) 5,088 (5,088) (5,088) 73,863 (73,863) (69,017) 5,088 (5,088) (5,088) Government bond term

240,269 (240,269) (240,192) - - - 240,269 (240,269) (240,192) - - -

Option contracts (1) Call - Long position 9,628,705 217,717 78,080 11,867,709 472,390 592,222 9,628,705 217,717 78,080 11,867,709 472,390 592,222

Foreign currency 8,018,900 168,921 49,732 8,837,000 413,343 494,547 8,018,900 168,921 49,732 8,837,000 413,343 494,547 Flexible options 594,485 12,042 1,810 2,865,709 49,064 96,505 594,485 12,042 1,810 2,865,709 49,064 96,505 Shares 1,015,320 36,754 26,538 165,000 9,983 1,170 1,015,320 36,754 26,538 165,000 9,983 1,170

Put - Long position 9,690,526 419,405 586,640 9,095,592 225,159 83,882 9,988,348 704,612 849,067 9,095,592 225,159 83,882 Foreign currency 5,754,700 222,717 341,334 8,556,044 198,163 43,015 5,754,700 222,717 341,334 8,556,044 198,163 43,015 Flexible options 2,915,426 177,133 223,022 6,048 336 233 2,915,426 177,133 223,022 6,048 336 233 Shares 1,020,400 19,555 22,284 533,500 26,660 40,634 1,318,222 304,762 284,711 533,500 26,660 40,634

Call - Short position 14,804,009 (568,483) (377,201) 14,799,098 (629,808) (1,295,934) 14,804,009 (568,483) (377,201) 14,799,098 (629,808) (1,295,934)

Foreign currency 9,299,763 (188,411) (33,759) 13,142,625 (485,323) (1,261,532) 9,299,763 (188,411) (33,759) 13,142,625 (485,323) (1,261,532)

Flexible options 3,891,606 (342,743) (307,245) 1,289,173 (136,269) (33,848) 3,891,606 (342,743) (307,245) 1,289,173 (136,269) (33,848) Shares 1,612,640 (37,329) (36,197) 367,300 (8,216) (554) 1,612,640 (37,329) (36,197) 367,300 (8,216) (554)



32


By Index Reference

value Cost

Market value

Reference

value Cost Market value

Reference value

Cost Market value

Reference

value Cost

Market value

Put - Short position 8,597,969 (707,500) (921,989) 8,397,037 (168,309) (98,931) 8,597,969 (707,500) (921,989) 8,397,037 (168,309) (98,931) Foreign currency 6,039,325 (643,709) (842,701) 6,142,250 (111,633) (60,366) 6,039,325 (643,709) (842,701) 6,142,250 (111,633) (60,366) Flexible options 575,924 (15,735) (40,956) 2,129,287 (51,319) (29,255) 575,924 (15,735) (40,956) 2,129,287 (51,319) (29,255) Shares 1,982,720 (48,056) (38,332) 125,500 (5,357) (9,310) 1,982,720 (48,056) (38,332) 125,500 (5,357) (9,310) Asset position 11,625,169 1,342,704 1,342,097 17,098,037 1,681,313 1,499,289 12,412,169 1,348,737 1,348,023 18,511,827 1,716,859 1,570,371 Interbank deposits 6,399,349 714,718 696,808 7,692,293 213,232 305,331 7,186,349 720,751 702,734 12,756,083 249,039 377,992 Foreign currency 1,382,488 289,315 223,079 1,977,587 949,677 790,663 1,382,488 289,315 223,079 1,977,587 949,677 790,663 Pre fixed 806,176 20,431 122,690 4,588,579 36,704 10,465 806,176 20,431 122,690 938,579 36,443 8,886 ÍPCA 2,477,513 242,339 212,235 2,301,378 216,788 120,353 2,477,513 242,339 212,235 2,301,378 216,788 120,353 IGPM 285,000 75,751 74,534 362,000 91,019 79,267 285,000 75,751 74,534 362,000 91,019 79,267 Libor 180,580 3 326 154,133 173,887 191,216 180,580 3 326 154,133 173,887 191,216 Other 94,063 147 12,425 22,067 6 1,994 94,063 147 12,425 22,067 6 1,994 Liability position 7,356,954 (822,107) (921,632) 15,566,942 (1,451,649) (1,425,553) 7,356,954 (822,107) (921,632) 10,003,941 (1,427,146) (1,394,212) Interbank deposits 2,086,776 (109,035) (71,688) 7,510,021 (50,639) (280,423) 2,086,776 (109,035) (71,688) 1,947,021 (27,713) (249,082) Foreign currency 1,418,788 (168,358) (163,518) 4,968,147 (820,265) (723,891) 1,418,788 (168,358) (163,518) 4,968,147 (820,265) (723,891) Pre fixed 915,623 (16,017) (160,162) 58,572 (1,648) (29) 915,623 (16,017) (160,162) 58,571 (72) (29) ÍPCA 2,699,789 (483,577) (480,293) 2,641,604 (412,780) (253,605) 2,699,789 (483,577) (480,293) 2,641,604 (412,780) (253,605) IGPM 95,000 (44,239) (44,147) 170,000 (81,020) (78,827) 95,000 (44,239) (44,147) 170,000 (81,020) (78,827) Libor 130,978 (764) (1,098) 218,598 (85,297) (88,778) 130,978 (764) (1,098) 218,598 (85,296) (88,778) Other 10,000 (117) (726) - - - 10,000 (117) (726) - - - Other Derivative financial instruments Asset position 4,100,865 92,321 95,915 2,389,962 326,824 354,192 4,100,865 92,321 95,915 2,389,962 326,824 354,192 Non Deliverable Forward(1)

4,051,978 89,744 93,254 2,376,944 326,782 354,147 4,051,978 89,744 93,254 2,376,944 326,782 354,147

Credit derivatives 48,887 2,577 2,661 13,018 42 45 48,887 2,577 2,661 13,018 42 45 Liability position 2,486,708 (182,960) (177,678) 20,810,404 (10,026,615) (10,065,594) 2,486,708 (182,960) (177,678) 2,689,617 (75,714) (120,217) Non Deliverable Forward(1)

1,882,145 (164,396) (165,826) 1,963,324 (53,907) (72,677) 1,882,145 (164,396) (165,826) 1,963,324 (53,907) (72,677)

Credit derivatives 604,563 (18,564) (11,852) 726,293 (21,807) (47,540) 604,563 (18,564) (11,852) 726,293 (21,807) (47,540) Box options - Fixed rate

- - - 18,120,787 (9,950,901) (9,945,377) - - - - - -

(1) The market value for swap operations, options and non-deliverable forward considers the credit risk of the counterparty (Credit valuation adjustment). (2) Includes swaps accounted for in accordance with BACEN Circular No. 3,129/2002 at cost. For purposes of presentation by index, these operations are adjusted at market value.

In the year ended December 31, 2016 the mark-to-market of the Consolidated was negative of R$ 108 (as ofDecember 31, 2015, the Bank in the asset position was positive of R$ 19,400 and in Consolidated position positive was R$ 56,253).



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d.2) Breakdown of derivative financial instruments by maturity date (reference value)

Maturity in days From 0 to 30 From 31 to 180 From 181 to 360 Over 360 12.31.2016 12.31.2015 Bank Future contracts 14,575,779 13,849,639 10,501,423 33,217,234 72,144,075 70,689,602 Term contracts 293,879 20,253 - - 314,132 5,088 Option contracts 14,333,457 12,147,870 9,675,945 6,563,937 42,721,209 44,159,436 Swap contracts 426,677 3,181,323 1,155,914 14,218,209 18,982,123 32,664,979 Credit derivatives - 325,910 16,296 311,244 653,450 739,311 Non Deliverable Forward - Foreign currency 666,178 3,679,845 1,376,058 212,042 5,934,123 4,340,268 Box options - Fixed rate - - - - - 18,120,787 Consolidated Future contracts 14,579,775 16,069,888 13,121,112 41,929,017 85,699,792 83,770,660 Term contracts 293,879 20,253 - - 314,132 5,088 Option contracts 14,333,457 12,147,870 9,973,767 6,563,937 43,019,031 44,159,436 Swap contracts 1,213,677 3,181,323 1,155,914 14,218,209 19,769,123 28,515,768 Credit derivatives - 325,910 16,296 311,244 653,450 739,311 Non Deliverable Forward - Foreign currency 666,178 3,679,845 1,376,058 212,042 5,934,123 4,340,268

d.3) Breakdown of Derivative Portfolio by negotiation place and counterparty (reference value on December 31, 2016)

Bank Consolidated

Futures Term Options Swap Credit

derivative

Non Deliverable

Forward

Futures Term Options Swap

Credit derivative

Non Deliverable

Forward BM&FBovespa 72,144,075 - 35,714,432 - - - 85,699,792 - 35,714,432 - - -

Over-the-counter (CETIP)

- 314,132 7,006,777 18,982,123 653,450 5,934,123

- 314,132 7,304,599 19,769,123 653,450 5,934,123

Financial institutions - 314,132 5,830,852 11,555,581 653,450 1,842,132

- 314,132 5,830,852 12,342,581 653,450 1,842,132

Client - - 1,175,925 7,426,542 - 4,091,991 - - 1,473,747 7,426,542 - 4,091,991



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d.4) Breakdown of credit derivative portfolio Bank and Consolidated 12.31.2016 12.31.2015 Reference value Cost Market value Reference value Cost Market value Credit Swap Received risk 278,653 (18,539) (11,502) 348,831 (21,738) (46,203) Transferred risk 374,797 2,552 2,311 390,480 (27) (1,292) By index Asset position - Prefixed 48,887 2,577 2,661 13,018 42 45 Liability position - Prefixed 604,563 (18,564) (11,852) 726,293 (21,807) (47,540)

For received risk transactions, credit limits are approved both for client risk and counterparty risk, according to the credit committee’s levels and forums. Credit limits are assigned to the underlying exposure at derivative reference value, considering amounts deposited in guarantee. To transfer risk, transaction is conducted in a trading portfolio with a sovereign risk client. In this case, future possible exposure is considered to assign the counterparty limit. The credit derivatives portfolio impacted Portion Referring to Weighed Exposures per Risk Factor (PRMR) for determination of the Bank’s Basel ratio of R$ 3,310 (R$ 9,552 on December 31, 2015).



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d.5) Breakdown of Margin Given in Guarantee of operations with Derivative Financial Instruments Bank Consolidated 12.31.2016 12.31.2015 12.31.2016 12.31.2016 Financial Treasury Bills 223,328 - 238,987 13,210 National Treasury Notes 822,356 1,109,730 1,214,236 1,420,010 National Treasury Bills 608,881 1,679,865 608,881 1,679,865 Other 35,036 202,782 35,036 203,758 Total 1,689,601 2,992,377 2,097,140 3,316,843

d.6) Breakdown of derivatives portfolio for hedging Hedge transactions were evaluated as effective, in accordance with provisions of BACEN Circular Letter no. 3,082/2002, and hedge effectiveness varies from 80% to 125%. For loans operations, the classification and percentage of allowance for doubtful accounts is considered in the effectiveness calculation metric. Market risk hedge The Conglomerate, in order to protect itself againstfluctuations in its financial instruments’ interest and exchange rates, contracted derivatives to offset risks deriving from exposures to market value variations. Bank Consolidated 12.31.2016 12.31.2015 12.31.2016 12.31.2015 Market risk hedge Hedge instruments

Assets 3,156,655 9,118,548 3,425,116 9,154,356 Future 3,126,786 9,088,434 3,126,786 9,088,434 Swap 29,869 30,114 35,902 65,922 Options - - 262,428 - Liabilities 14,746,212 17,230,896 28,227,058 17,230,896 Futuro 14,746,212 17,230,896 28,227,058 17,230,896 Itens Objeto de Hedge 8,170,407 9,050,566 22,938,973 26,049,354 Assets 5,781,536 3,443,442 5,781,536 3,443,442

Interbank funds applied - 2,069,516 1,035,899 6,009,320 Securities 2,388,871 3,537,608 16,121,538 16,596,592 Loan operations 3,271,177 9,091,821 3,271,177 9,091,821

Liabilities - 5,085,442 - 5,085,442 Foreign securities 3,271,177 4,006,379 3,271,177 4,006,379 Subordinated debt

Cash flow hedge To protect the future cash flows of payments against exposure to variable interest rate (CDI), the Conglomerate traded DI Future contracts at BM&FBOVESPA. The mark-to-market of the effective portion in the amount of R$ (26,571), was recognized in equity and the ineffective portion in the amount of R$ (15) was recognized in the net income as "Income from derivative financial instruments". Bank and Consolidated 12.31.2016 12.31.2015 Cash flow hedge Hedge instruments Liabilities 265,531 - Future 265,531 - Items to be hedged Liabilities 250,639 - Financial Bills 23,514 - Subordinated debt 227,125 -



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The maturity of cash flow hedged items, on December 31,2016, are as follows: Bank and Consolidated

Maturity Book value

January/2019 23,514

January/2020 75,286

October/2021 151,839

Total Cash Flow hedged items 250,639

d.7) Gains and losses from hedge instruments’ and hedged items’ result

Bank Consolidated 2H2016 2016 2015 2H2016 2016 2015 Losses from hedged Items (422,905) (1,214,705) (4,914,177) (452,126) (1,243,926) (5,031,437) Gains from hedge instruments 424,918 1,254,182 4,920,403 452,232 1,281,496 5,070,777 Net effect 2,013 39,477 6,226 106 37,570 39,340 Gains from hedge Items 693,362 1,992,117 2,571,503 1,815,071 4,531,606 4,181,176 Losses from hedge instruments (701,830) (2,015,584) (2,560,617) (1,822,018) (4,557,345) (4,181,264) Net effect (8,468) (23,467) 10,886 (6,947) (25,739) (88)

Net losses of tax effects relating to cash flow hedges that the conglomerate expects to recognize in income over the next 12 months totaling R$ 3,529. d.8) Derivative financial instruments divided into Current and Non-current

Bank Consolidated

12.31.2016 12.31.2015 12.31.2016 12.31.2015

Current

Non-current

Current Non-current

Current Non-current

Current

Non-current

Assets Term Operations 314,092 - 5,127 - 314,092 - 5,127 - Options market 423,428 241,292 661,195 14,909 685,855 241,292 661,195 14,909 Swap contracts 357,081 985,016 307,575 1,172,314 363,115 985,016 341,804 1,172,314 Credit derivatives - 2,661 45 - - 2,661 45 - Other derivative financial instruments

90,421 2,833 290,982 63,165 90,421 2,833 290,982 63,165

Total 1,185,022 1,231,802 1,264,924 1,250,388 1,453,483 1,231,802 1,299,153 1,250,388 Liabilities Term Operations (309,209) - (5,088) - (309,209) - (5,088) - Options market (1,135,862) (163,328) (1,384,884) (9,981) (1,135,862) (163,328) (1,384,884) (9,981) Swap contracts (120,152) (801,480) (395,220) (1,030,333) (120,152) (801,480) (363,879) (1,030,333) Box options - Fixed

income strategy - - (9,945,377) - - - - -

Credit derivatives (350) (11,502) - (47,540) (350) (11,502) - (47,540) Other derivative financial instruments

(156,294) (9,532) (51,674) (21,003) (156,294) (9,532) (51,674) (21,003)

Total (1,721,867) (985,842) (11,782,243) (1,108,857) (1,721,867) (985,842) (1,805,525) (1,108,857)

d.9) Income from derivative financial instruments

Bank Consolidated 2H2016 2016 2015 2H2016 2016 2015 Swap 147,446 1,197,937 (278,053) 153,964 1,214,870 (134,221) Term 7,381 5,405 3,276 7,381 5,405 3,276 Options 27,290 49,124 (524,655) (184,648) 26,346 (524,655) Future (6,672) (622,539) 1,734,453 (130,384) (1,305,310) 2,322,295 Credit derivatives 10,771 33,417 (17,852) 10,771 33,417 (17,852) Mark-to-market of hedged credit transactions

(7,282) (61,432) 18,493 202,796 810,673 (213,368)

Box options - (268,158) (2,531,323) - - (322) Non Deliverable Forward 35,065 (133,072) 418,189 35,065 (133,072) 418,189 Exchange variation on investments abroad

21,100 (262,495) 495,223 20,947 (279,973) 524,818

Total 235,099 (61,813) (682,249) 115,892 372,356 2,378,160



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d.10) Hedge accounting

Bank Object of hedge Hedge instruments

Strategy/Risk 12.31.2016 12.31.2015 12.31.2016 12.31.2015

Market value

Unrealized gain (loss)

Market value Derivative

Market value

Market value

Purchase and sale commitment hedge/ fixed rate

5,781,536 2,128 3,443,442 Future DI 6,782,618 4,584,069

Securities hedge / fixed rate

- - 2,069,516 Swap - 2,070,337

Loan transaction hedge/ fixed rate / exchange variation

2,388,871 118,869 3,537,608 Future DI

Future DDI Future Libor

172,610

1,671,709 509,582

359,967

2,496,538 748,012

Hedge of obligations due to foreign borrowings/ exchange variation

- - 5,085,442

Future DDI

- 5,089,518

Subordinated debt hedge / exchange variation / IGP-M

3,271,177 (150,713) 4,006,379 Future DDI

Swap

3,126,786 390,317

3,998,916

338,261

Hedge of Financial bills and subordinater debt / Cash flow/ fixed rate

250,639 - - Future DI 265,531 -

Consolidated Object of hedge Hedge instruments

Strategy/Risk 12.31.2016 12.31.2015 12.31.2016 12.31.2015

Market value

Unrealized gain (loss)

Market value Derivative

Market value

Market value

Purchase and sale commitment hedge/ fixed rate

5,781,536 2,128 3,443,442 Future DI 6,782,618 4,584,069

Securities hedge / fixed rate variation

838,517 - 6,009,320 Swap 834,219 6,020,277

Shares of companies 197,382 (22,779) - Opções 262,428 -

Loan transaction hedge/ fixed rate / exchange variation

16,121,538 354,292 16,596,592

Future DI Future DDI

Future Libor

13,653,456 1,671,709

509,582

13,305,967 2,496,538

748,012

Hedge of obligations due to foreign borrowings/ exchange variation

- - 5,085,442

Future DDI

- 5,089,518

Subordinated debt hedge / exchange variation / IGP-M

3,271,177 (150,713) 4,006,379 Future DDI

Swap

3,126,786 390,317

3,998,916

338,261

Hedge of Financial bills and subordinater debt / Cash flow/ fixed rate

250,639 - - Future DI 265,531 -

7. INTERBANK RELATIONS

a) Reserve requirements Bank and Consolidated 12.31.2016 12.31.2015 Compulsory deposits at the Central Bank of Brazil 340,569 20,232 Demand deposits 3,812 17,596 Time deposits 334,552 - Microfinance transactions 2,205 2,636 Total 340,569 20,232 Current assets 340,569 20,232



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b) Income from compulsory deposits Bank and Consolidated 2H2016 2016 2015 Credits linked to Central Bank of Brazil 26,408 42,792 -

Requirement on time deposits 26,330 42,714 - Additional requirement 78 78 -

Total 26,408 42,792 -

8. LOAN OPERATIONS

a) Portfolio by modality Bank Consolidated 12.31.2016 12.31.2015 12.31.2016 12.31.2015 Loan operations 11,599,878 14,711,383 44,098,612 47,515,822 Loans and discounted notes 3,801,935 4,850,607 7,858,881 9,262,464 Financings 7,040,300 8,933,494 23,316,017 23,303,591 Rural and agribusiness financing 450,197 458,207 450,197 458,207 Real estate financing agreements 307,446 469,075 307,446 469,075 Loan operation linked to assignments (1) - - 12,166,071 14,022,485 Other receivables with credit assignment characteristics

2,435,045 2,501,733 3,394,120 3,274,626

Credit card operations - - 956,900 769,792 Advances on exchange contracts (2) 316,167 593,551 316,167 593,551

Guarantees and sureties paid 174,084 197,497 174,084 197,497 Trade and credit receivables 1,944,794 1,710,685 1,946,969 1,713,786 Leases - - 127,341 193,312 Total loan portfolio 14,034,923 17,213,116 47,620,073 50,983,760 Allowance for doubtful accounts (1,369,080) (2,008,304) (3,671,220) (4,152,135) (Allowance for loans losses) (1,074,431) (1,160,247) (3,352,187) (3,270,671) (Allowance for other receivables losses) (294,649) (848,057) (313,022) (854,729) (Allowance for leases losses) - - (6,011) (26,735) Total loan portfolio, net of provisions 12,665,843 15,204,812 43,948,853 46,831,625 (1) Credit transactions assigned with substantial retention of the risks and benefits of the financial asset that is the

transaction object. (2) Advances on exchange contracts are recorded as a reducer of the "Other Liabilities” account.

b) Income from loan and lease operations

Bank Consolidated 2H2016 2016 2015 2H2016 2016 2015

Loan operations 856,793 1,211,773 2,703,332 3,659,569 6,661,252 8,247,144

Loans and discounted notes 316,841 670,086 726,067 1,032,239 2,094,193 2,123,935 Financings 331,241 249,909 1,700,406 2,184,961 3,797,968 5,331,335 Rural and agribusiness financing 16,904 34,162 33,926 16,904 34,162 33,926 Real estate financing agreements 22,800 56,603 63,540 22,800 56,603 63,540 Recovery of loans written off as loss (1) 167,182 199,852 124,027 395,150 663,956 653,010 Financing in foreign currency 1,887 1,310 36,779 1,887 1,310 36,779 Guarantees and sureties paid 120 713 4,371 120 713 4,371 Other (182) (862) 14,216 5,508 12,347 248 Income from leases (Note 8h) - - - 77,434 191,088 689,431 Total (2) 856,793 1,211,773 2,703,332 3,737,003 6,852,340 8,936,575 (1) Were recovered credit transactions written off in loss in the amount of R$ 702,364 in the year ended December 31,

2016 (with impact in the net income of R$ 18,300) and R$ 872,467 in the year ended December 31, 2015 (with impact in the net income of R$ 36,885), through credit assignments, without recourse to entities that are not members of the National Financial System, in accordance with CMN Resolution No. 2,836/2001.

(2) Credit transactions linked to assignments are not included. Considering such assets, income from Consolidated loan and lease operations in the year ended December 31, 2016 would total R$ 9,935,481 (R$ 12,451,742 in the year ended December 31, 2016).



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c) Loan portfolio by sector of economic activity

Bank 12.31.2016 % 12.31.2015 % Public sector 527,358 3.79% 705,295 4.14% Government 527,358 3.79% 705,295 4.14% Public administration 527,358 3.79% 705,295 4.14% Private sector 13,391,514 96.21% 16,330,156 95.86% Individual (1) 359,625 2.58% 327,295 1.92% Legal Entity 13,031,889 93.63% 16,002,861 93.94% Animal agribusiness 377,656 2.71% 338,239 1.99% Vegetable agribusiness 261,883 1.88% 371,679 2.17% Specific construction activities 369,456 2.65% 415,243 2.43% Automotive 34,150 0.25% 210,574 1.24% Wholesale commerce and sundry industries 4,320,462 31.05% 5,585,283 32.79% Retail business 1,037,367 7.45% 1,066,576 6.26% Heavy Construction 43,698 0.31% 650,505 3.82% Electronics 1,666 0.01% 1,603 0.01% Electric power 569,940 4.09% 623,330 3.66% Real estate 249,074 1.79% 392,516 2.30% Financial institutions and services 720,321 5.19% 240,705 1.41% Wood and furniture 15,394 0.11% 15,036 0.09% Mining and Metallurgy 306,329 2.20% 319,629 1.88% Paper and pulp 309,285 2.22% 672,102 3.95% Chemical 1,076,239 7.73% 1,251,411 7.35% Services 1,624,174 11.66% 1,998,580 11.73% Telecommunications 80,700 0.58% 90,730 0.53% Textile and apparel 70,177 0.50% 144,599 0.85% Transportation 1,101,382 7.91% 1,377,441 8.09% Other activities 462,536 3.34% 237,080 1.39% Total 13,918,872 100.00% 17,035,451 100.00% (+/-) Adjustment to market value (2) 116,051 177,665 Total mark-to-market loan portfolio 14,034,923 17,213,116

Consolidated 12.31.2016 % 12.31.2015 % Public sector 527,358 1.12% 705,295 1.38% Government 527,358 1.12% 705,295 1.38% Public administration 527,358 1.12% 705,295 1.38% Private sector 46,739,827 98.88% 50,522,628 98.62% Individual (1) 32,905,505 69.62% 33,764,187 65.91% Legal Entity 13,834,322 29.26% 16,758,441 32.71% Animal agribusiness 378,178 0.80% 339,346 0.66% Vegetable agribusiness 262,484 0.56% 373,637 0.73% Specific construction activities 382,521 0.81% 438,540 0.86% Automotive 38,362 0.08% 217,740 0.43% Wholesale commerce and sundry industries 4,340,008 9.17% 5,634,465 11.00% Retail business 1,073,845 2.27% 1,153,163 2.25% Heavy Construction 43,974 0.09% 651,076 1.27% Electronics 1,715 0.00% 1,676 0.01% Electric power 570,347 1.21% 623,897 1.22% Real estate 249,927 0.53% 394,731 0.77% Financial institutions and services 720,698 1.52% 241,033 0.47% Wood and furniture 17,349 0.04% 19,617 0.04% Mining and Metallurgy 306,679 0.65% 320,343 0.63% Paper and pulp 309,587 0.65% 672,619 1.31% Chemical 1,076,464 2.28% 1,251,800 2.44% Services 1,766,451 3.74% 2,209,689 4.31% Telecommunications 81,112 0.17% 91,287 0.18% Textile and apparel 71,646 0.15% 148,290 0.29% Transportation 1,198,664 2.54% 1,533,474 2.99% Other activities 944,311 2.00% 442,018 0.85% Total 47,267,185 100.00% 51,227,923 100.00% (+/-) Adjustment to market value (2) 352,888 (244,163) Total mark-to-market loan portfolio 47,620,073 50,983,760

(1) Includes loans operations of the agribusiness sectors and other sectors of economic activity made with individuals.

(2) Refers to mark-to-market adjustment of loan operations that are objects of market risk hedge.



40

d) Loan portfolio per risk level and maturity Bank AA A B C D E F G H 12.31.2016 12.31.2015 Performing loans Falling due installments 3,982,491 4,716,971 1,647,129 1,458,419 730,867 72,130 15,361 51,573 314,058 12,988,999 15,843,415 From 01 to 30 775,823 332,491 60,502 38,075 5,440 751 1,948 20 71,187 1,286,237 1,069,477 From 31 to 60 651,526 167,475 67,748 43,175 13,747 712 250 20 2,342 946,995 863,168 From 61 to 90 212,801 133,369 82,014 13,993 29,511 9,089 8,368 20 1,694 490,859 518,003 From 91 to 180 225,895 445,949 224,217 85,964 43,716 6,379 2,840 41,989 8,810 1,085,759 1,749,549 From 181 to 360 days 227,869 904,745 315,303 187,461 86,445 7,133 1,955 209 20,698 1,751,818 2,108,890 Over 360 days 1,888,577 2,732,942 897,345 1,089,751 552,008 48,066 - 9,315 209,327 7,427,331 9,534,328 Installments Overdue - 20,035 97 2,137 603 - 312 84 36 23,304 23,967 Up to 14 days - 20,035 97 2,137 603 - 312 84 36 23,304 23,967 Subtotal 3,982,491 4,737,006 1,647,226 1,460,556 731,470 72,130 15,673 51,657 314,094 13,012,303 15,867,382 Non-performing loans Falling due installments - - 163 6,614 10,982 19,130 4,586 12,669 74,368 128,512 641,235 From 01 to 30 - - 8 178 3,223 503 1,014 339 2,810 8,075 31,832 From 31 to 60 - - - 128 702 386 1,021 1,201 2,334 5,772 18,153 From 61 to 90 - - - 131 705 391 663 263 5,404 7,557 29,095 From 91 to 180 - - 85 2,504 2,025 1,021 860 1,372 8,236 16,103 61,835 From 181 to 360 days - - - 3,076 2,122 2,624 1,028 972 20,155 29,977 94,610 Over 360 days - - 70 597 2,205 14,205 - 8,522 35,429 61,028 405,710 Installments Overdue (1) - - 16 243 6,160 29,907 19,801 5,892 716,038 778,057 526,834 From 0 to 14 - - - - 529 184 2,055 1,347 941 5,056 10,610 From 15 to 30 - - 16 183 425 4,437 1,809 78 82,030 88,978 63,626 From 31 to 60 - - - 60 4,253 5,364 2,102 658 7,969 20,406 29,088 From 61 to 90 - - - - 953 805 5,652 65 3,087 10,562 19,083 From 91 to 180 - - - - - 19,117 788 2,642 44,484 67,031 140,788 From 181 to 360 days - - - - - - 7,395 1,102 542,512 551,009 263,639 Over 360 days - - - - - - - - 35,015 35,015 - Subtotal - - 179 6,857 17,142 49,037 24,387 18,561 790,406 906,569 1,168,069 Total 3,982,491 4,737,006 1,647,405 1,467,413 748,612 121,167 40,060 70,218 1,104,500 13,918,872 17,035,451 (+/-) Adjustment to market value (2) 116,051 177,665 Total mark-to-market loan portfolio 14,034,923 17,213,116



41

Consolidated AA A B C D E F G H 12.31.2016 12.31.2015 Performing loans Falling due installments 3,983,502 21,203,550 6,564,955 7,035,645 1,283,232 191,674 54,601 87,491 390,641 40,795,291 45,668,593 From 01 to 30 775,997 1,406,813 246,791 242,700 29,086 6,255 3,898 1,860 75,553 2,788,953 2,789,174 From 31 to 60 651,684 1,107,487 269,145 265,513 38,335 6,387 2,213 2,142 6,883 2,349,789 2,326,628 From 61 to 90 212,867 997,795 266,108 217,351 51,968 14,336 10,171 1,994 5,877 1,778,467 1,911,463 From 91 to 180 226,088 2,841,411 757,821 675,237 108,271 21,250 7,946 47,362 20,293 4,705,679 5,623,533 From 181 to 360 days 228,199 4,821,411 1,263,670 1,243,336 201,477 32,957 10,547 9,018 39,244 7,849,859 8,690,360 Over 360 days 1,888,667 10,028,633 3,761,420 4,391,508 854,095 110,489 19,826 25,115 242,791 21,322,544 24,327,435 Installments Overdue - 968,917 66,181 65,315 17,091 7,434 818 1,055 8,201 1,135,012 796,789 Up to 14 days - 968,917 66,181 65,315 17,091 7,434 818 1,055 8,201 1,135,012 796,789 Subtotal 3,983,502 22,172,467 6,631,136 7,100,960 1,300,323 199,108 55,419 88,546 398,842 41,930,303 46,465,382 Non-performing loans Falling due installments - - 695,961 806,068 302,246 264,959 283,803 233,755 672,151 3,258,943 2,978,961 From 01 to 30 - - 44,219 46,606 22,275 14,863 17,089 13,703 42,137 200,892 183,571 From 31 to 60 - - 43,448 45,993 19,254 14,628 17,020 14,341 41,005 195,689 164,784 From 61 to 90 - - 39,710 41,969 17,866 13,303 15,180 12,166 40,498 180,692 164,992 From 91 to 180 - - 110,946 117,197 47,632 36,800 40,651 33,868 103,946 491,040 423,998 From 181 to 360 days - - 176,539 189,175 74,425 61,003 67,461 54,204 172,200 795,007 663,686 Over 360 days - - 281,099 365,128 120,794 124,362 126,402 105,473 272,365 1,395,623 1,377,930 Installments Overdue (1) - - 106,965 175,920 131,730 134,465 137,429 119,412 1,272,018 2,077,939 1,783,580 From 0 to 14 - - 1,119 21,576 11,512 6,316 10,180 6,861 18,487 76,051 103,040 From 15 to 30 - - 103,070 75,263 33,378 29,409 21,227 12,835 117,714 392,896 289,795 From 31 to 60 - - 2,776 73,260 27,220 19,941 20,089 14,899 51,119 209,304 249,092 From 61 to 90 - - - 4,130 53,664 14,145 20,444 13,391 43,808 149,582 137,927 From 91 to 180 - - - 1,691 5,956 45,395 55,533 65,061 168,405 342,041 437,251 From 181 to 360 days - - - - - 19,259 9,956 6,365 831,298 866,878 559,114 Over 360 days - - - - - - - - 41,187 41,187 7,361 Subtotal - - 802,926 981,988 433,976 399,424 421,232 353,167 1,944,169 5,336,882 4,762,541 Total 3,983,502 22,172,467 7,434,062 8,082,948 1,734,299 598,532 476,651 441,713 2,343,011 47,267,185 51,227,923 (+/-)Adjustment to market value (2)

352,888 (244,163)

Total mark-to-market loan portfolio 47,620,073 50,983,760 (1) For transactions with unelapsed terms higher than 36 months, delayed periods are counted in double, as permitted by CMN Resolution no. 2,682/1999. For wholesale operations, a

double count for the intervals of delinquency is also permitted, according to the internal assessment. (2) Refers to mark-to-market adjustment of loan operations that are hedged objects of Market risk.



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e) Allowance for loan losses by risk levels

12.31.2016 12.31.2015

Risk level % Provision

Value of Operations

Minimum provision required

Additional provision

Existing provision

Value of Operations

Minimum provision required

Additional provision

Existing provision

Bank AA 0.0% 3,982,491 - - - 4,173,862 - - - A 0.5% 4,737,006 (23,687) - (23,687) 5,574,871 (27,875) (838) (28,713) B 1.0% 1,647,405 (16,475) - (16,475) 2,577,055 (25,770) (7,969) (33,739) C 3.0% 1,467,413 (44,025) - (44,025) 1,750,317 (52,510) (37,128) (89,638) D 10.0% 748,612 (74,862) - (74,862) 1,005,807 (100,580) (32,970) (133,550) E 30.0% 121,167 (36,349) - (36,349) 183,518 (55,055) (9,814) (64,869) F 50.0% 40,060 (20,030) - (20,030) 123,169 (61,585) (6,302) (67,887) G 70.0% 70,218 (49,152) - (49,152) 618,890 (433,222) (128,724) (561,946) H 100.0% 1,104,500 (1,104,500) - (1,104,500) 1,027,962 (1,027,962) - (1,027,962) Total 13,918,872 (1,369,080) - (1,369,080) 17,035,451 (1,784,559) (223,745) (2,008,304) (+/-)Adjustment to market value (1) 116,051 177,665 Total mark-to-market loan portfolio 14.034.923 17,213,116 Consolidated AA 0.0% 3,983,502 - - - 4,181,166 - - - A 0.5% 22,172,467 (110,862) - (110,862) 24,878,818 (124,395) (838) (125,233) B 1.0% 7,434,062 (74,341) - (74,341) 8,029,925 (80,298) (7,969) (88,267) C 3.0% 8,082,948 (242,490) - (242,490) 8,393,910 (251,817) (37,128) (288,945) D 10.0% 1,734,299 (173,431) - (173,431) 1,505,541 (150,553) (32,970) (183,523) E 30.0% 598,532 (179,559) - (179,559) 606,496 (181,949) (9,814) (191,763) F 50.0% 476,651 (238,325) - (238,325) 434,228 (217,115) (6,302) (223,417) G 70.0% 441,713 (309,201) - (309,201) 918,587 (643,011) (128,724) (771,735) H 100.0% 2,343,011 (2,343,011) - (2,343,011) 2,279,252 (2,279,252) - (2,279,252) Total 47,267,185 (3,671,220) - (3,671,220) 51,227,923 (3,928,390) (223,745) (4,152,135) (+/-)Adjustment to market value (1) 352,888 (244,163) Total mark-to-market loan portfolio 47,620,073 50,983,760

(1) Refers to mark-to-market adjustment of loan operations that are hedged objects of Market risk. (2) In the fourth quarter of 2016, the additional provision became the minimum provision required, with the improvement of credit risk assessment criteria (behaviour scoring), as well as a

higher level of risk.



43

f) Changes in the allowance for doubtful accounts It is comprised of credit transactions, lease operations and other receivables with loan characteristics. Bank Consolidated 2H2016 2016 2015 2H2016 2016 2015 Opening balance 896,867 2,008,304 1,826,115 2,988,867 4,152,135 4,033,543

Reinforcement / (reversal)

630,811 380,924 1,298,094

1,775,773 2,467,002 3,061,043

Minimum provision required 669,579 604,669

1,172,886 1,814,541 2,690,747 2,817,769

Additional provision (38,768) (223,745) 125,208 (38,768) (223,745) 243,274 Write-offs to losses (158,598) (1,020,148) (1,115,905) (1,093,420) (2,947,917) (2,942,451)

Closing balance 1,369,080 1,369,080 2,008,304 3,671,220 3,671,220 4,152,135

g) Lease portfolio by maturity

Consolidated 12.31.2016 12.31.2015 Up to 1 year (1) 73,589 121,368 From 1 to 5 years 53,762 72,907 Total present value (2) 127,351 194,275

(1) Includes the amount related to installments overdue. (2) Includes Securities and credits receivable under “Other credits”.

h) Net income from Leases 2H2016 2016 2015 Lease transactions 77,434 191,088 689,431 Financial leases 50,893 127,647 311,819 Recovery of loans written off as loss 17,502 42,478 351,156 Profit on sale of leased assets 9,039 20,963 26,456 Expenses from lease operations (63,859) (158,436) (623,956) Financial leases (63,281) (155,822) (623,396) Loss on disposal of leased assets (578) (2,614) (560) Total 13,575 32,652 65,475

i) Concentration of Credit Transactions

12.31.2016 % of

portfolio 12.31.2015

% of portfolio

Bank Largest debtor 1,011,003 7.26% 1,214,226 7.05% 10 largest debtors 3,954,235 28.40% 4,862,267 28.25% 20 largest debtors 5,569,892 40.00% 6,513,992 37.84% 50 largest debtors 8,482,680 60.92% 9,659,618 56.12% 100 largest debtors 10,853,115 77.94% 12,380,846 71.93% Consolidated Largest debtor 1,011,003 2.14% 1,214,226 2.38% 10 largest debtors 3,954,235 8.36% 4,862,267 9.54% 20 largest debtors 5,569,892 11.78% 6,569,802 12.89% 50 largest debtors 8,550,298 18.09% 9,760,914 19.15% 100 largest debtors 10,953,214 23.17% 12,482,182 24.48%

j) Information on loan assignments carried out up to December 31, 2011 In the year ended December 31, 2016, the Conglomerate determined early settlement expenses fully recognized in net income of R$ 2,470 (R$ 100,722 in the year ended December 31, 2015) and reserve for losses of R$ 7,182 (R$ 35,265 in the yaer ended December 31, 2015), regarding assignments carried out up to December 31, 2011. On December 31, 2015, an allowance for losses on assigned loans in the amount of R$ 7,260 was recorded under caption “Other obligations - Sundry - Reserve for Losses - Others risks”.



44

Balance of joint obligations with loan assignments 12.31.2016 12.31.2015 Financial institutions - related parties - 276,235 Total - 276,235

k) Information on loan assignments carried out from January 1, 2012 Transfers of financial assets (consumer loans) were made, with a substantial retaining of the risks and benefits to related parties.

12.31.2016 12.31.2015

Financial assets subject to sale

Liability related to obligation assumed

(1)

Financial assets

subject to sale

Liability related to obligation assumed (1)

Financial Institutions - related parties

12,166,071 13,755,869 14,022,485 15,676,940

Total 12,166,071 13,755,869 14,022,485 15,676,940 (1) Recorded in caption “Other liabilities - Sundry - Bond transactions linked to disposals (Note 18d).

In the Conglomerate, in the year ended December 31, 2016, the income from assigned financial assets totaled R$ 3,241,577 (R$ 4,139,123 in the year ended December 31, 2015) and expenses on the liabilities with assigned financial assets totaled R$ 2,208,256 (R$ 3,027,578 in the year ended December 31, 2015). In the Bank, in the year ended December 31, 2016, the income from assigned financial assets totaled R$ 16,885 (R$ 19,054 in the year ended December 31, 2015) and there was no expenses on the liabilities with assigned financial assets in the year ended December 31, 2016 (R$ 7,154 in the year ended December 31, 2015). The Bank has not adopted the option provided in CMN Resolution no. 4,036/2011 on treatment of early settlement losses, instead it recognizes the full losses at the time they occur. l) Changes on credits renegotiated Bank Consolidated 2H2016 2016 2015 2H2016 2016 2015 Opening balance 2,697,599 3,584,748 2,030,290 6,846,858 7,961,559 2,906,644 Signings (1) 1,455,524 2,494,621 4,158,350 2,415,397 4,353,894 9,335,072 (Receiving) and accrual of interest

(1,109,032) (2,845,086) (2,410,750) (2,187,753) (4,848,717) (3,791,599)

Written off as losses (108,596) (298,788) (193,142) (309,130) (701,364) (488,558) Closing balance 2,935,495 2,935,495 3,584,748 6,765,372 6,765,372 7,961,559 (1) In the year ended December 31, 2015 includes the increase in the stock of renegotiated balances arising from the

change of the classification criteria of the renegotiation of objects credits. m) Supplementary information Bank Consolidated 12.31.2016 12.31.2015 12.31.2016 12.31.2015 Credit contracted to be released 280,458 425,418 1,785,990 1,569,173 Guarantees provided 7,823,978 9,362,459 7,823,978 9,362,459

Bank Consolidated 2H2016 2016 2015 2H2016 2016 2015 Amount part of credits recovered, written-off as loss (1) 201,956 234,626 127,827 438,963 719,693 683,266

(1) Recorded in income under Income from Financial Intermediation - Income from Loans, Lease Transactions and Income from Foreign Exchange Operations, as per CMN Resolution no. 2,836/2001.



45

9. FOREIGN EXCHANGE PORTFOLIO

a) Breakdown

Bank and Consolidated 12.31.2016 12.31.2015 Other receivables

Purchased foreign exchange to be settled 336,653 1,562,382 Receivables from foreign exchange sales 178,705 631,864 (Advances in domestic/foreign currency received) (7,057) (18,200) Earnings receivable from granted advances 7,943 16,504

Total 516,244 2,192,550 Current assets 516,244 2,192,550 Non-current assets Other liabilities

Sold foreign exchange to be settled (177,680) (623,601) Liabilities for foreign exchange purchases (344,145) (1,460,187) (Advances on exchange contracts) 303,660 550,478

Total (218,165) (1,533,310) Current liabilities (218,165) (1,533,310) Net foreign exchange portfolio 298,079 659,240 Memorandum Accounts 43,044 13,826

Credits opened for imports

b) Income from foreign exchange operations Bank Consolidated 2H2016 2016 2015 2H2016 2016 2015 Foreign exchange income 744,031 1,910,927 3,036,674 744,031 1,910,927 3,036,774 Recovery of loans written off as loss 34,774 34,774 3,800 34,774 34,774 3,800 Foreign exchange expenses (723,886) (2,210,099) (2,532,615) (723,886) (2,210,099) (2,532,705) Foreign exchange income 54,919 (264,398) 507,859 54,919 (264,398) 507,869



46

10. OTHER RECEIVABLES - SUNDRY

Bank Consolidated 12.31.2016 12.31.2015 12.31.2016 12.31.2015 Deferred tax assets (Note 22e) 2,782,639 2,969,396 7,411,491 7,833,099 Deposits in guarantee - Contingences (Note 25g) 315,191 274,204 824,776 1,169,530 Deposits in guarantee - Other 55 11 379 331 Credit card operations (Note 8a) - - 956,900 769,792 Operations under Court-Ordered Reorganization approved 82,610 598,745 84,775 600,882 Trade and credit receivables (1) 1,862,184 1,111,940 1,862,194 1,112,904 Credits linked to transactions acquired through assignment - 88,562 - 88,562 Taxes and contributions recoverable 170,215 81,333 230,477 253,918 Recoverable taxes and contributions - - - 31 Awards on credits linked to transactions acquired through assignment

13,688 19,104 13,688 19,104

Sundry domestic debtors 14,844 54,291 98,454 65,601 Receivables from associated companies 17,386 13,374 - 2,668 Other 20,078 41,455 29,133 56,013 Total 5,278,890 5,252,415 11,512,267 11,972,435 Current assets 2,751,854 2,278,134 5,181,241 4,601,484 Non-current assets 2,527,036 2,974,281 6,331,026 7,370,951 (1) Includes operations contracted with institutions not included in the financial system, resulting from the acquisition

of receivables from commercial transactions, without co-obligation from the originator institution.

11. OTHER ASSETS Bank Consolidated 12.31.2016 12.31.2015 12.31.2016 12.31.2015 Assets not for own use 180,361 185,001 282,174 262,421 Vehicles and alike 2,105 2,293 103,527 79,233 Real estate 37,189 180,150 37,189 180,630 Properties under special regime 139,837 1,561 139,959 1,561 Machinery and equipment 1,230 997 1,499 997 Materials in stock - - 849 923 Subtotal 180,361 185,001 283,023 263,344 (Provision for devaluation) (23,825) (22,473) (46,812) (45,457) Prepaid expenses 14,168 15,749 252,249 407,703 Insurance costs 834 475 3,604 1,844 Data processing expenses 5,434 2,428 7,657 3,527 Commission for intermediation of operations (1) - - 230,722 388,476 Financial system service expenses 2,367 2,561 2,469 2,651 Specialized technical service expenses 1,515 930 2,853 1,417 Usufruct right to shares 1,249 6,167 1,249 6,167 Other 2,769 3,188 3,695 3,621 Total 170,704 178,277 488,460 625,590 Current assets 170,544 177,222 270,622 251,131 Non-current assets 160 1,055 217,838 374,459

(1) Refer to the Amounts to be deferred for costs associated to loan and lease transactions granted incurred in its origin. Credit transactions originated in January 02, 2015, pursuant to the terms of CMN Resolution no. 4,294/2013 and in compliance with permission provided for in BACEN Circular Letter no. 3,738/2014, had remuneration paid to correspondents recognized in assets, corresponding to the amount of R$ 170,886 (R$ 170,112 in the year ended December 31, 2015). In the year ended December 31, 2016, was recognized expenses amounting to R$ 207,288 (R$ 107,078 in the year ended December 31, 2015) referring to early recognition of the remuneration to correspondent was recognized under caption “Other Operating Expenses”.



47

12. INVESTMENTS

a) Changes in interest in subsidiaries

Book

balance

Changes - 2016

Book balance Equity in income of

subsidiaries 12.31.2015

Dividends/Other events

Equity in income of subsidiaries

12.31.2016 2015

Domestic 3,164,513 (108,151) 353,903 3,410,265 825,006 Consolidated 2,908,544 (42,478) 159,420 3,025,486 669,133 BV Financeira S.A. - Crédito, Financiamento e Investimento

1,602,942 (40,880) 119,814 1,681,876 638,472

BV Leasing Arrendamento Mercantil S.A.

960,589 - 34,709 995,298 29,672

Votorantim CTVM Ltda. 268,621 (1,598) (1,683) 265,340 6,727 Votorantim Asset DTVM Ltda. 76,392 - 6,580 82,972 (5,738) Non Consolidated 255,969 (65,673) 194,483 384,779 155,873 Votorantim Corretora de Seguros S.A..

215,022 (149,260) 168,721 234,483 149,261

BV Investimentos Alternativos e Gestão de Recursos S.A(1)

36,355 83,587 13,576 133,518 6,706

Promotiva S.A (2) 4,592 - 12,186 16,778 (94) Abroad 84,842 (13,258) (15,478) 56,106 26,132 Consolidadas 84,842 (13,258) (15,478) 56,106 26,132 Votorantim Bank Limited 16,486 (13,258) (3,228) - 9,873 Banco Votorantim Securities 42,966 - (4,294) 38,672 8,623 Votorantim Securities (UK) Limited

25,390 - (7,956) 17,434 7,636

Total interest in subsidiaries 3,249,355 (121,409) 338,425 3,466,371 851,138 (1) On June 15, 2016, the capital stock of subsidiary BVIA increased by R $ 85,182. The subsidiary distributed

mandatory minimum dividends for the year ended December 31, 2015 in the amount of R$ 1,593. (2) Current name of BV Promotora S.A.

Balances at 12.31.2016 Capital Adjusted

shareholders' equity

Net income (loss) 2016

Number of Common Shares

(in thousands)

Ownership interest %

Domestic Votorantim CTVM Ltda. 190,763 265,340 (1,683) 19,076,314 99.99% Votorantim Asset DTVM Ltda. (1) 50,884 81,440 6,580 5,088,407 99.99% BV Financeira S.A. - Crédito Financiamento e Investimento(2)

1,400,546 1,656,911 105,111 3,080 100.00%

BV Leasing Arrendamento Mercantil S.A. (3)

899,539 987,055 34,709 510 100.00%

Abroad Votorantim Bank Limited(4) - - (544) - - Banco Votorantim Securities 71,700 38,672 2,883 22,000 100.00% Votorantim Securities (UK) Limited 16,146 17,434 (340) 4,000 100.00%

(1) The shareholders' equity includes the allocation of mandatory minimum dividends in the amount of R$ 1,532. (2) In the year ended December 31, 2016, the amount of R$ 14,703 related to the sale of intangible assets,

recorded in the Non-Operating Income line was recognized (Note 20). The shareholders' equity includes the allocation of mandatory minimum dividends in the amount of R$ 24,965.

(3) The shareholders' equity includes the allocation of mandatory minimum dividends in the amount of R$ 8,244. (4) Votorantim Bank Limited had its activities closed during the year ended December 31, 2016.



48

b) Resumed financial information of non-consolidated ownership in the Consolidated Financial Statements

12.31.2016

Votorantim

Corretora de Seguros S.A..

BV Investimentos Alternativos e

Gestão de Recursos S.A

Promotiva S.A

Total assets 320,580 135,897 44,392 Total liabilities 320,580 135,897 44,392 Liabilities 254,819 5,602 30,411 Shareholders’ equity(1) 65,761 130,295 13,981

Net income in the period 168,721 13,576 12,186 (1) The shareholders' equity includes the allocation of income for the year ended December 31, 2016. 12.31.2015

Votorantim

Corretora de Seguros S.A..

BV Investimentos Alternativos e

Gestão de Recursos S.A

Promotiva S.A

Total assets 291,736 41,075 4,765 Total liabilities 291,736 41,075 4,765 Liabilities 225,975 6,313 173 Shareholders’ equity(1) 65,761 34,762 4,592

Net income in the period 149,259 6,706 (94) (1) The shareholders' equity includes the allocation of income for the year ended December 31, 2015.

c) Other investments

Bank Consolidated 12.31.2016 12.31.2015 12.31.2016 12.31.2015 Investments via tax incentives 27,610 27,130 121,412 115,398 Membership certificates 176 176 176 176 Shares and quotas 6 6 6 6 Other 101 101 1,882 132 Total 27,893 27,413 123,476 115,712 (Accumulated impairment) (18,400) (17,717) (52,547) (47,232)

13. PROPERTY FOR USE

12.31.2015 2H2016 12.31.2016

Book balance Changes Depreciation Cost Accumulated depreciation

Book balance

Bank

Facilities 14,389 20,562 (11,794) 51,432 (28,275) 23,157

Furniture and equipment in use 16,221 (1,979) (6,204) 33,780 (25,742) 8,038

Communication system 2,501 1,309 (1,485) 9,430 (7,105) 2,325

System data processing 7,776 16,536 (7,535) 67,393 (50,616) 16,777

Security system 883 (2) (853) 2,351 (2,323) 28

Transportation system 296 8 (115) 399 (210) 189 Total 42,066 36,434 (27,986) 164,785 (114,271) 50,514 Consolidated

Facilities 47,911 23,669 (17,787) 113,185 (59,392) 53,793

Furniture and equipment in use 23,264 (1,739) (7,548) 51,106 (37,129) 13,977

Communication system 3,544 1,312 (2,417) 14,737 (12,298) 2,439

System data processing 21,207 17,858 (11,665) 122,181 (94,781) 27,400

Security system 903 58 (872) 2,462 (2,373) 89

Transportation system 296 8 (115) 786 (597) 189 Total 97,125 41,166 (40,404) 304,457 (206,570) 97,887



49

14. INTANGIBLE ASSETS

a) Changes and Breakdown

12.31.2015 2H2016 12.31.2016

Book

balance Acquisition Write-offs Amortiz. Impairment (1) Cost

Acc. amortiz.

Accumulated impairment

Book balance

Bank

Software acquired 12,496 2,417 - (5,371) - 21,420 (11,878) - 9,542

Use licenses 25,262 7,960 - (7,937) - 40,475 (15,190) - 25,285 Software internally developed

19,199 35,089 (3,110) (274) - 76,617 (8,287) (17,426) 50,904

Total 56,957 45,466 (3,110) (13,582) - 138,512 (35,355) (17,426) 85,731

Consolidated

SISBEX BM&FBOVESPA

- - (200) - 200 - - - -

Software acquired 13,989 2,926 (7,039) (5,790) 7,038 23,677 (12,553) - 11,124

Use licenses 48,327 9,732 - (16,298) - 92,824 (51,063) - 41,761 Sales rights agreements

835 - - (750) - 5,000 (4,915) - 85

Software internally developed

22,200 38,489 (6,533) (807) - 80,583 (9,622) (17,612) 53,349

Total 85,351 51,147 (13,772) (23,645) 7,238 202,084 (78,153) (17,612) 106,319 (1) Refers to reversal of impairment due to write-off of assets.

b) Amortization estimate 2017 2018 2019 2020 2021 From 2022 Total Bank Amounts to be amortized 19,621 18,646 16,922 13,210 8,534 8,798 85,731 Consolidated Amounts to be amortized 27,242 24,888 22,707 14,261 8,423 8,798 106,319

15. DEPOSITS AND MONEY MARKET REPURCHASE COMMITMENTS

a) Deposits

Bank Consolidated 12.31.2016 12.31.2015 12.31.2016 12.31.2015 Demand deposits 89,688 87,200 87,991 81,331 Individuals 17,482 12,532 17,482 12,532 Legal entities 70,469 68,758 70,469 68,758 Related companies 1,697 5,869 - - Restricted deposits 40 41 40 41 Institutions of the financial system 7,118,291 2,359,532 1,997,318 1,932,502 Interbank deposits 2,495,492 2,197,972 2,492,328 2,192,045 Time deposits 2,112,665 2,115,075 2,109,501 2,109,148 Local currency 382,827 82,897 382,827 82,897 Foreign currency 9,703,471 4,644,704 4,577,637 4,205,878 Total 7,904,792 3,059,208 2,782,122 2,627,146 Current liabilities 1,798,679 1,585,496 1,795,515 1,578,732 Non-current liabilities



50

b) Segregation of Time Deposits per Maturity

Without maturity

Up to 3 months

From 3 to 12 months

From 1 to 3 years

From 3 to 5 years

Over 5 years 12.31.2016 12.31.2015

Bank Demand deposits 89,688 - - - - - 89,688 87,200 Interbank accounts or relations

- 5,169,601 660,213 78,346 1,109,824 100,307

7,118,291 2,359,532

Time Deposits - 456,379 1,528,911 493,859 7,952 8,391 2,495,492 2,197,972 Total 89,688 5,625,980 2,189,124 572,205 1,117,776 108,698 9,703,471 4,644,704 Consolidated Demand deposits 87,991 - - - - - 87,991 81,331 Interbank accounts or relations

- 142,325 566,516 78,346 1,109,824 100,307

1,997,318 1,932,502

Time Deposits - 456,379 1,528,911 490,695 7,952 8,391 2,492,328 2,192,045 Total 87,991 598,704 2,095,427 569,041 1,117,776 108,698 4,577,637 4,205,878

c) Money Market repurchase commitments


Own portfolio 32,572,413 29,635,497 23,692,302 27,041,174 Corporate securities - Debentures (1) 17,591,794 20,524,337 15,958,949 17,926,765 Corporate securities - Promissory notes 233,122 - - - Financial Treasury Bills 1,569,132 4,031 1,569,132 4,031 National Treasury Bills 7,499,156 5,133,719 3,439,828 5,133,719 National Treasury Notes 4,399,409 3,121,013 1,444,200 3,121,013 Corporate securities - Other 1,279,800 852,397 1,280,193 855,646 Third-party portfolio 11,702,126 8,969,036 9,774,594 4,713,636 National Treasury Bills 2,656,091 696,198 2,485,111 696,198 Financial Treasury Bills 6,602,570 - 6,496,484 - National Treasury Notes 2,443,465 8,272,838 792,999 4,017,438 Free portfolio 2,206,483 1,045,112 2,206,483 1,045,112 Total 46,481,022 39,649,645 35,673,379 32,799,922 Current liabilities 44,425,550 37,389,486 34,637,971 32,050,247 Non-current liabilities 2,055,472 2,260,159 1,035,408 749,675

(1) Includes repurchase commitments with debentures issued by the subsidiaries.

d) Deposits and securities sold under repurchase agreements

Bank Consolidated 2H2016 2016 2015 2H2016 2016 2015 Money Market Funding Expenses (675,205) (1,262,858) (546,647) (262,617) (515,195) (496,173) Time Deposits (128,084) (249,245) (280,412) (127,815) (248,558) (279,689) Interbank accounts or relations (547,121) (1,013,613) (266,235) (134,802) (266,637) (216,484) Expenses with money market repurchase commitments

(3,026,800) (5,803,777) (3,558,801) (2,259,382) (4,647,793) (3,587,534)

Own portfolio (1,918,330) (3,822,107) (2,614,456) (1,754,780) (3,351,779) (2,643,036) Third-party portfolio (1,040,021) (1,811,248) (892,328) (436,153) (1,125,592) (892,481) Free portfolio (68,449) (170,422) (52,017) (68,449) (170,422) (52,017) Expenses with Fund Raising from Acceptance and Issuance of Securities (1,530,451) (3,052,539) (4,779,227) (1,530,518) (3,052,738) (4,779,680)

Real estate credit bills (20,942) (44,465) (53,589) (20,942) (44,465) (53,589) Agribusiness Credit Bills (164,844) (350,247) (340,160) (164,844) (350,247) (340,160) Financial bills (1,327,415) (2,583,144) (2,270,854) (1,327,415) (2,583,143) (2,270,854) Issue of securities abroad (13,556) (66,978) (2,105,269) (13,556) (66,979) (2,105,269) Debentures - - - (5) (56) (453) Certificate of Structured Transactions - - (1,697) - - (1,697) Other (3,694) (7,705) (7,658) (3,756) (7,848) (7,658) Expenses with Subordinated Debts Abroad (154,926) 417,219 (1,871,071) (154,926) 417,219 (1,871,071) Total (5,387,382) (9,701,955) (10,755,746) (4,207,443) (7,798,507) (10,734,458)



51

16. BORROWINGS AND ONLENDINGS

a) Borrowings

Bank and Consolidated Up to

90 days From 91 to 360

days From 1 to 3

years 12.31.2016 12.31.2015

Abroad 995,999 675,463 126,845 1,798.307 4,227,975 Raised from foreign banks 966,481 669,967 126,845 1,763.293 4,143,258 Exports 13,874 5,019 - 18,893 72,768 Imports 15,644 477 - 16,121 11,949

Total 995,999 675,463 126,845 1,798,307 4,227,975 Current liabilities 1,671,462 4,090,964 Non-current liabilities 126,845 137,011

b) Onlendings

Domestic - Official institutions

Bank Consolidated

Programs Rates of restatement 12.31.2016 12.31.2015 12.31.2016 12.31.2015

National Treasury 82,739 77,688 82,739 77,688

Fixed rate From 5.5% to 9.5% p.a. 82,734 77,069 82,734 77,069

Variable rate Selic 5 619 5 619

BNDES 1,597,268 1,581,840 1,597,268 1,581,840

Fixed rate Until 9.50% p.a. 389,657 568,262 389,657 568,262

Variable rate

From 7.02% to 10.01% p.a. + IPCA

1,160,451 934,406 1,160,451 934,406 Until 4.00% p.a. + TJLP

From 1.70% to 2.50% p.a. + Selic Exchange rate variation

From 1.30% to 3.00% p.a. + exchange variation

47,160 79,172 47,160 79,172

FINAME 1,716,120 1,995,448 1,724,494 2,005,705

Fixed rate Until 18.96% p.a. 1,627,758 1,899,988 1,636,132 1,910,245

Variable rate From 0.50% to 5.50% p.a. + TJLP

87,769 94,560 87,769 94,560 From 1.70% to 2.48% p.a. + SELIC

Fixed rate 1.70% p.a. + exchange variation 593 900 593 900

Total 3,396,127 3,654,976 3,404,501 3,665,233

Current liabilities 697,018 877,357 701,857 878,211 Non-current liabilities

2,699,109 2,777,619 2,702,644 2,787,022

c) Expenses with liabilities from borrowings and onlendings Bank Consolidated 2H2016 2016 2015 2H2016 2016 2015 Borrowing expenses (50,489) 441,595 (48,189) (50,489) 441,594 (48,189) Expenses with Onlendings (103,427) (191,587) (221,952) (103,709) (192,455) (222,961)

National Treasury (3,637) (6,708) (6,133) (3,637) (6,708) (6,133) BNDES (60,599) (105,304) (156,344) (60,599) (105,304) (156,344) FINAME (39,191) (79,575) (59,475) (39,473) (80,443) (60,484)

Expenses with Obligations to foreign bankers (1)

(11,235) 125,075 (1,169,913) (11,235) 125,075 (1,169,913)

Total (165,151) 375,083 (1,440,054) (165,433) 374,214 (1,441,063) (1) Includes foreign exchange variation on Loans and Onlendings abroad.



52

17. ACCEPTANCES AND ENDORSEMENTS

Bank Consolidated

Funding Currency

Amount issued Remuneration p.a.

Funding date Maturity

12.31.2016 12.31.2015 12.31.2016 12.31.2015

Debentures - - - 571

Variable rate R$ 38 100.00% Interbank Deposit 2011 2016 - - - 571

Real estate credit note funds 369,810 389,439 369,810 389,439

Fixed rate R$ 11,286 From 12.10% to 15.36% p.a. 2015 2021 13,543 14,812 13,543 14,812

Variable rate R$ 311,183 From 88.00% to 100.00% Interbank Deposit

2014 2020 348,019 367,118 348,019 367,118

Variable rate R$ 6,907 From 4.85% to 6.07% p.a. + IPCA 2015 2018 8,248 7,509 8,248 7,509

Agribusiness credit bills 2,564,336 3,175,519 2,564,336 3,175,519


Variable rate R$ 2,071,314 From 90% to 98.50% p.a. Interbank Deposit

2008 2022 2,460,129 3,035,283 2,460,129 3,035,283

Variable rate R$ 34,132 From 4.52% to 6.50% p.a. +IPCA 2015 2021 40,070 45,802 40,070 45,802

Financial bills 17,552,169 13,633,973 17,552,169 13,633,973


Variable rate R$ 14,496,363 From 100.00% to 112.02% Interbank Deposit

2011 2020 16,582,501 12,746,766 16,582,501 12,746,766

Variable rate R$ 437,043 From 4.04% to 8.31% p.a. + IPCA 2012 2021 612,388 483,191 612,388 483,191

Variable rate R$ 967 From 5.70% to 7.43% p.a. + IGPM 2016 2019 1,061 12,133 1,061 12,133

Securities issued abroad 1,316,099 8,123,303 1,316,099 8,123,303

Fixed rate R$ 46,738 From 9.20% to 19.77% p.a. 2007 2020 56,234 1,158,483 56,234 1,158,483

Variable rate R$ 3,543 From 92.10% to 101.40% Interbank Deposit

2012 2017 4,331 11,272 4,331 11,272

Exchange rate variation

USD 362,355 Until 5.53% a.a. + foreing exchange variation

2012 2020 1,186,193 6,948,425 1,186,193 6,948,425

Exchange rate variation

EUR 20,200 Until 0.48% a.a. + foreing exchange variation 2016 2017 69,341 5,123 69,341 5,123

Total 21,802,414 25,322,234 21,802,414 25,322,805

Current liabilities 10,244,503 15,482,515 10,244,503 15,483,086

Non-current liabilities 11,557,911 9,839,719 11,557,911 9,839,719

18. OTHER LIABILITIES

a) Tax and social security Bank Consolidated 12.31.2016 12.31.2015 12.31.2016 12.31.2015 Legal obligations (Nota 25h) 12,000 6,882 15,013 9,686 Taxes and contributions on income payable 154,574 143,446 159,782 515,597 Provision for tax claims (1) (Note 25e1) 7,648 2,710 52,812 45,724 Provision for taxes and contributions on income 119,401 25,716 152,176 257,787 Taxes and contributions payable 37,008 39,445 79,375 80,660 Deferred tax liabilities (Note 22d) 53,222 79,308 160,320 258,671 Total 383,853 297,507 619,478 1,168,125 Current liabilities 209,630 145,136 395,112 595,021 Non-current liabilities 174,223 152,371 224,366 573,104



53

b) Subordinated debts Bank and Consolidated

Funding Amount issued Remuneration p.a. Funding

year Maturity

year 12.31.2016 12.31.2015

Subordinated debt 2,876,929 3,652,280 Foreign Exchange variation

USD 808,048 7.38% p.a. + foreign Exchange variation

2013 2020 2,876,929 3,652,280

Subordinated financing bills 1,999,705 2,393,656

Fixed rate 300 14.21% p.a. 2016 2023 324 5,558

Variable rate 1,314,034 From 1.90% to 1.91% p.a. + CDI

2011 2023 1,353,799 1,506,957 From 100.00% to 119.00% Interbank Deposit

Variable rate 187,200 From 6.60% to 7.57% p.a. + IGPM 2011 2017 383,694 318,754

Variable rate 169,022 From 7.25% to 8.00% p.a. + IPCA 2011 2022 261,888 562,387

Total 4,876,634 6,045,936

Current liabilities 1,851,720 576,404

Non-current liabilities 3,024,914 5,469,532

c) Debt instruments eligible to capital

Bank and Consolidated

Funding Amount issued Remuneration p.a. Funding

year Maturity year 12.31.2016 12.31.2015

Subordinated financing bills

Variable rate 464,831 From 1.72% to 2.16% p.a. + CDI

2014 2023 647,365 530.061 From 111.00% to 119.00% Interbank Deposit

Variable rate 289,842 7.32% to 9.31% p.a. + IPCA 2013 2030 401,212 312.809

Fixed rate 73,510 14.52% p.a. to 17.98% p.a. 2015 2022 89,734 38.772

Variable rate 27,500 117.50% SELIC 2016 2023 30,633 -

Total 1,168,944 881.642

Non-current liabilities 1,168,944 881,642

d) Sundry

Bank Consolidated 12.31.2016 12.31.2015 12.31.2016 12.31.2015 Obligations from transactions linked to assignments (1) - - 13,755,869 15,676,940 Liabilities for acquisition of assets and rights 1,764 206 1,790 209 Provision for unsettled payments 305,076 257,304 565,332 533,225 Provisions for civil claims (Note 25e1) 5,545 4,554 302,241 300,598 Provisions for labor claims (Note 25e1) 158,073 148,723 887,345 909,712 Amounts payable - associated companies 1,449 35,078 - - Sundry creditors - abroad 1,321 1,761 1,321 2,158 Provision for losses - Unpaid guarantee 71,059 64,704 71,059 64,704 Provision for losses - Other risks 490 4,008 13,253 257,709 Sundry domestic creditors 74,359 57,385 258,589 398,072 Credit card operations - - 989,175 784,032 Other 21 18 23 34 Total 619,157 573,741 16,845,997 18,927,393 Current liabilities 392,285 370,155 9,734,661 10,478,203 Non-current liabilities 226,872 203,586 7,111,336 8,449,190

(1) Refers to liabilities regarding sales or transfers operations of financial assets with substantial retaining of the risks and benefits, performed from January 01, 2012, as current law.



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19. OTHER OPERATING INCOME/EXPENSES

a) Service income Bank Consolidated 2H2016 2016 2015 2H2016 2016 2015 Fund management - - - 57,010 114,863 107,267 Collection 922 2,010 2,759 922 2,010 2,759 Commissions on placing of securities 46,810 74,470 49,279 49,260 78,556 54,388 Brokerage of Stock Exchange transactions

- - - 9,117 18,660 16,070

Income from custody services 2,442 4,245 1,876 2,641 4,662 2,369 Income from guarantees granted 62,323 127,185 125,599 62,323 127,185 125,599 Credit card transactions - - - 42,780 80,259 67,178 Insurance brokerage commission - - - 10,620 18,250 14,540 Financial advisory services 15,309 25,677 8,190 16,124 26,492 8,635 Other services 1,866 3,983 12,633 9,699 25,759 43,598 Total 129,672 237,570 200,336 260,496 496,696 442,403

b) Income from banking fees Bank Consolidated 2H2016 2016 2015 2H2016 2016 2015 Master file registration - - - 173,644 318,607 257,625 Funds transfer 219 416 406 219 416 406 Appraisal of assets - - - 118,300 213,231 176,792 Income from credit card - - - 48,154 91,860 81,895 Other 191 355 523 1,155 1,952 1,941 Total 410 771 929 341,472 626,066 518,659

c) Personnel expenses Bank Consolidated 2H2016 2016 2015 2H2016 2016 2015 Fees and retainer fee (Note 23) (3,394) (9,020) (10,629) (8,782) (18,470) (18,479) Benefits (12,169) (23,755) (27,928) (63,067) (124,898) (130,437) Social charges (24,570) (64,376) (63,478) (84,972) (179,973) (181,086) Salary (107,351) (214,643) (205,600) (294,779) (556,615) (583,234) Labor claims (55,891) (83,372) (81,655) (180,118) (346,694) (293,524) Training (1,677) (2,734) (1,759) (1,877) (3,072) (2,941) Total (205,052) (397,900) (391,049) (633,595) (1,229,722) (1,209,701)

d) Other administrative expenses Bank Consolidated 2H2016 2016 2015 2H2016 2016 2015 Water, energy and gas (1,723) (3,037) (2,411) (3,420) (6,997) (7,011) Rental (13,643) (27,263) (41,158) (33,915) (67,958) (84,516) Communications (617) (1,229) (4,600) (42,793) (78,346) (73,221) Maintenance and preservation of assets (966) (2,289) (2,714) (7,916) (15,296) (15,526) Material (105) (189) (1,013) (1,602) (3,155) (5,874) Data processing (37,004) (66,395) (55,584) (105,725) (198,965) (177,585) Promotions and public relations (1,303) (1,771) (2,472) (7,288) (9,980) (7,587) Advertising and publicity (724) (867) (197) (4,811) (6,735) (4,505) Publications (160) (582) (480) (235) (1,139) (717) Insurance (1,449) (2,082) (1,127) (2,297) (3,496) (2,225) Financial system services (6,065) (13,412) (21,493) (44,189) (93,696) (96,841) Outsourced services (629) (1,145) (1,229) (5,866) (9,629) (8,702) Surveillance and security services (1,011) (1,506) (945) (1,470) (2,433) (1,922) Specialized technical services (28,821) (50,578) (46,304) (192,035) (376,393) (373,321) Transportation (532) (1,135) (1,865) (6,894) (12,901) (12,683) Traveling (1,412) (3,276) (4,500) (5,526) (9,742) (11,200) Judicial and notary public fees (4,590) (9,896) (16,667) (56,699) (110,942) (110,704) Amortization (374) (13,582) (13,206) (4,892) (23,645) (23,160) Depreciation (14,412) (27,986) (7,803) (20,116) (40,404) (20,529) Other (4,324) (7,959) (19,183) (39,840) (76,204) (84,673) Total (119,864) (236,179) (244,951) (587,529) (1,148,056) (1,122,502)



55

e) Other operating income

Bank Consolidated 2H2016 2016 2015 2H2016 2016 2015 Recovery of charges and expenses - - - 1,163 2,245 1,373 Reversal of provisions - civil and tax

claims - - - - - 25,834

Restatement of judicial deposits 12,382 25,046 22,388 7,597 58,542 90,483 Monetary variation on assets 3,953 7,169 921 7,859 12,635 14,748 Reversal of provision for losses - Other risks

4,187 24,480 34,504 200,580 223,763 -

Reversal of provision for losses - Unpaid guarantees

- - 157,718 - - 87,403

Reversal of provision for variable remuneration

20 268 397 3,781 4,051 7,389

Interest on Equity - - 70,000 - - - Other 20,626 51,558 18,050 72,706 116,011 130,173 Total 41,168 108,521 303,978 293,686 417,247 357,403

f) Other operating expenses Bank Consolidated 2H2016 2016 2015 2H2016 2016 2015 Costs associated with the production - Business partners (1)

- - - (251,892) (507,199) (525,328)

Costs associated with the production – Other expenses

(600) (1,026) (478) (9,535) (25,234) (30,616)

Tax claims (250) (4,178) (3,455) (5,907) (6,328) - Civil claims (1,050) (2,140) (51) (70,913) (209,533) (211,860) Provision for losses - Unpaid guarantees (4,750) (7,591) - (4,750) (7,591) - Provision for losses - Other risks - - (3,319) - - (20,410) Expenses with interest COFINS (REFIS

joining) (6,499) (12,921) (12,154) (12,375) (35,512) (43,810)

Other (10,743) (30,307) (54,640) (73,565) (118,887) (233,688) Total (23,892) (58,163) (74,097) (428,937) (910,284) (1,065,712)

(1) Refers mainly to commissions on loans originated by the partners and trade agreements with retailers.

20. NON-OPERATING INCOME

Bank Consolidated 2H2016 2016 2015 2H2016 2016 2015 Non-operating income (2,039) 4,614 632 (11,734) 31,938 16,405

Income on disposal of assets (1) (417) - - (22,076) - - Rental income 1,363 3,053 632 1,363 3,053 633 Reversal of impairment allowance of other assets

(3,017) - - (3,593) - -

Other non-operating income 32 1,561 - 12,572 28,885 15,772 Non-operating expenses (8,558) (33,112) (18,794) 7,173 (30,996) (45,162)

Loss on disposal of assets (22,396) (25,928) (6,969) (5,712) (20,258) (19,113) Losses in investments due to tax

incentives (138) (586) (480) (1,694) (3,437) (3,863)

Capital losses 6 - (411) 39 - - Devaluation of other assets 17,452 (2,552) (10,602) 18,442 (2,804) (10,722) Other non-operating expenses (3,482) (4,046) (333) (3,902) (4,497) (11,464)

Total (10,597) (28,498) (18,162) (4,561) 942 (28,757)



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21. SHAREHOLDERS’ EQUITY a) Capital Capital of Banco Votorantim S.A., fully subscribed and paid-in, in the amount of R$ 7,826,980 (R$ 7,483,754 on December 31, 2015) is represented by 105,391,472,816 nominative shares, of which 86,229,386,840 are common shares with no par value and 19,162,085,976 nominative preferred shares with no par value. At the Extraordinary Shareholders’ Meeting held on March 25, 2015 decided and approved the increase of Capital Stock through incorporation of the special profit reserve in the amount of R$ 357,993, without issuance of new shares, homologated by Central Bank of Brazil on May 14, 2015. At the Extraordinary Shareholders’ Meeting held on April 28, 2016 decided and approved the increase of Capital Stock through incorporation of the special profit reserve in the amount of R$ 343,226, without issuance of new shares, homologated by Central Bank of Brazil on May 12, 2016. b) Capital reserve Capital reserve is recognized from goodwill on subscription of shares, in the amount of R$ 372,120. c) Profit reserve Legal reserve Composed mandatorily of 5% of the period’s Net Income, up to the limit of 20% of Capital. The Legal Reserve may cease to be funded when jointly with Capital Reserves it should exceed 30% of Capital. The Legal Reserve may be employed only in a capital increase or to offset losses. Special profit reserve Management may propose that the portion of profit not distributed should be destined to “Special profit reserve”, which will be available to shareholders for future deliberation at General Meeting. d) Dividends

Shareholders are guaranteed a mandatory minimum dividend, corresponding to 25% of Profit for the year, less legal reserve. Management proposes to distribute over the period in the amount of R$ 101,131 referring to the year ended December 31, 2016 (R$ 114,409 in the year ended December 31, 2015).

2016 2015

Value (R$ mil) Value (R$ mil) Net income for the period 425,814 481,720 Legal reserve (21,291) (24,086) Calculation basis 404,523 457,634 Mandatory minimum dividend 101,131 114,409 Proposed value 101,131 114,409 % on the basis of calculation 25% 25%

2016 2015

Value (R$ mil) Value per lot of one thousand

shares - R$ Value (R$ mil)

Value per lot of one thousand shares - R$

Net income for the period 425,814 4,04 481,720 4,57 Dividens payable 101,131 0,96 114,409 1.09



57

e) Equity valuation adjustments

2H2016 Opening

balance Changes Tax effect

Closing balance

Securities available for sale (149,210) 28,119 (11,396) (132,487) Banco Votorantim (139,180) (7,489) 4,627 (142,042) Subsidiaries (10,030) 35,608 (16,023) 9,555

Cash flow Hedge (11,090) (6,407) 2,883 (14,614) Banco Votorantim (11,090) (6,407) 2,883 (14,614)

Total (160,300) 21,712 (8,513) (147,101)

2016 2015 Opening

balance Changes

Tax effect (2)

Closing balance

Opening balance

Changes Tax

effect Closing balance

Securities available for sale

(631,644) 715,479 (216,322) (132,487) (327,123) (408,502) 103,981 (631,644)

Banco Votorantim(1) (561,705) 570,945 (151,282) (142,042) (222,626) (455,501) 116,422 (561,705) Subsidiaries (69,939) 144,534 (65,040) 9,555 (104,497) 46,999 (12,441) (69,939)

Cash flow Hedge - (26,571) 11,957 (14,614) - - - - Banco Votorantim - (26,571) 11,957 (14,614) - - - -

Total (631,644) 688,908 (204,365) (147,101) (327,123) (408,502) 103,981 (631,644) (1) Includes agency abroad (2) Since the fourth quarter of 2016, we recognize the tax effects of securities available for sale abroad.

22. TAXES a) Income Tax and Social Contribution Expenses Bank Consolidated 2H2016 2016 2015 2H2016 2016 2015 Current amounts 54,266 (117,167) (16,474) 39,485 (138,298) (212,601) IR & CSLL in Brazil - current 54,102 (119,401) (24,577) 33,814 (152,061) (256,646) IR & CSLL in Brazil - prior years

164 2,234 8,103 5,671 13,763 44,045

Deferred amounts 137,017 (21,346) 791,614 114,227 (118,887) 1,148,352 Deferred tax liabilities (3,933) 26,087 (16,236) (45,356) 98,356 75,172

Mark-to-market (3,933) 26,087 (16,236) (49,574) 83,176 (35,457) Excess depreciation - - - 4,218 15,180 110,629

Deferred tax assets 140,950 (47,433) 807,850 159,583 (217,243) 1,073,180 Tax losses/negative basis

of CSLL 109,056 8,694 147 (99,420) (1,849) (69,631)

Temporary differences 174,997 215,204 560,107 311,737 72,854 820,278 Mark-to-market (143,103) (271,331) 247,596 (52,734) (288,248) 322,533

Total 191,283 (138,513) 775,140 153,712 (257,185) 935,751

b) Reconciliation of IR and CSLL charges Bank Consolidated 2H2016 2016 2015 2H2016 2016 2015 Income (loss) before taxes and contributions

62,604 619,172 (216,064) 126,431 814,742 (273,083)

Total IR charges (25% rate) and CSLL (15% until August 2015 and 20% from September 2015)

(28,171) (278,626) 97,229 (56,893) (366,635) 122,888

Interest on equity - - - - - 31,500 Equity in the earnings of subsidiaries 93,142 152,290 383,012 47,088 87,517 70,143 Charges on employees’ profit sharing 10,116 24,680 34,810 21,931 59,283 81,427 Other amounts (1) 116,196 (36,857) 260,089 141,586 (37,350) 629,793 Income tax and social contribution in the period

191,283 (138,513) 775,140 153,712 (257,185) 935,751

(1) Includes in the year ended December 31, 2015, the amount of R$ 85,578 (Bank) and R$ 425,642 (Consolidated) on the activation of tax due to increase of the social contribution rate (Law No. 13,169 / 2015). Includes in the second half of 2016, the exchange variation adjustment related to the foreign agency's loss.



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c) Tax expenses

Bank Consolidated 2H2016 2016 2015 2H2016 2016 2015 COFINS (22,132) (72,158) (61,635) (121,537) (268,302) (274,263) ISSQN (6,474) (12,334) (11,161) (25,934) (49,636) (47,331) PIS (3,596) (11,773) (10,138) (19,723) (43,651) (44,786) Other (6,357) (10,432) (6,921) (14,492) (24,384) (35,327) Total (38,559) (106,697) (89,855) (181,686) (385,973) (401,707)

d) Deferred tax liabilities

Bank Consolidated 12.31.2016 12.31.2015 12.31.2016 12.31.2015 Deriving from excess depreciation over leasing operations - - - 15,179 Mark-to-market 53,222 79,308 160,320 243,492 Total deferred tax liabilities 53,222 79,308 160,320 258,671 Income tax 29,567 44,060 89,066 150,452 Social contribution 23,655 35,248 71,254 108,219

e) Deferred tax assets Bank 12.31.2015 2016 12.31.2016

Book balance Net changes in

the period (2) Book balance

Temporary differences 2,572,964 (195,451) 2,377,513 Allowance for doubtful accounts 1,461,797 (79,708) 1,382,089 Liability provisions 341,540 293,643 635,183 Mark-to-market (1) 752,788 (410,655) 342,133 Other provisions 16,839 1,269 18,108

CSLL tax loss/negative basis 396,432 8,694 405,126 Total deferred tax assets recognized 2,969,396 (186,757) 2,782,639

Income tax 1,762,340 (92,703) 1,669,637 Social contribution 1,207,056 (94,054) 1,113,002

Consolidated 12.31.2015 2016 12.31.2016

Book balance Net changes in

the period (2) Book balance

Temporary differences 6,666,488 (419,758) 6,246,730 Allowance for doubtful accounts 4,659,470 (251,783) 4,407,687 Liability provisions 982,158 323,145 1,305,303 Mark-to-market (1) 998,034 (492,612) 505,422 Other provisions 26,826 1,492 28,318

CSLL tax loss/negative basis 1,166,611 (1,850) 1,164,761 Total deferred tax assets recognized 7,833,099 (421,608) 7,411,491

Income tax 4,772,429 (185,325) 4,587,104 Social contribution 3,060,670 (236,283) 2,824,387

(1) In the year ended December 31, 2016, the amount of R$ 136,550 (of the total of R$ 342,133) in the Bank and R$ 110,313 (of the total of R$ 505,422) in the Consolidated is the tax credit arising from mark-to-market adjustment of securities classified as available for sale, recorded in Shareholder’s equity.

(2) The amounts corresponding to the movement of tax credits arising from adjustments to market value of securities available for sale, recorded in Shareholder’s equity account in the year ended December 31, 2016 is R$ (139,324) of the total R$ (410,655) in the Bank and R$ (204,364) of the total of R$ (492,612) in the Consolidated.

f) Deferred tax asset (Not recognized)


Deferred tax assets abroad - 1,027 10,278 11,855 Total deferred tax assets not recognized - 1,027 10,278 11,855 Income tax - 642 5,710 7,409 Social contribution - 385 4,568 4,446



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On December 31, 2016, the unrecorded deffered tax assets balance in the Consolidated was R$ 10,278 (R$ 11,855 on December 31, 2015) and in the Bank was R$ 1,027 on December 31, 2015 which will be recorded when address the regulatory aspects and presenting actual realization perspective. Realization estimate The realization estimate of deferred tax assets supports in the technical study prepared in the second half period of 2016.

Bank Consolidated Nominal value Present value Nominal value Present value

In 2017 831,952 782,886 2,174,756 2,046,494

In 2018 250,782 221,436 1,437,395 1,269,194

In 2019 260,246 215,272 814,764 673,962

In 2020 416,350 322,548 943,147 730,659

In 2021 311,010 225,464 837,444 607,096

As from 2022 712,300 401,453 1,203,986 645,576 Total deffered tax assets 2,782,640 2,169,059 7,411,491 5,972,981

In the year ended December 31, 2016, deferred tax assets were realized in the Bank totaling R$ 1,054,162 (R$ 264,580 in 2015), equal to 91% (79% in 2015) of the respective use projection for the entire calendar year of 2016, included in the technical study prepared on December 31, 2015.

Realization of nominal values for deferred tax assets Bank Consolidated

Tax losses/Social

contribution on net income to offset (1)

Intertemporal Differences (2)

Tax losses/Social

contribution on net income to offset (1)

Intertemporal Differences (2)

In 2017 0% 33% 1% 34% In 2018 5% 9% 8% 21% In 2019 14% 9% 16% 10% In 2020 3% 16% 9% 13% In 2021 28% 10% 7% 12% As from 2022 50% 23% 58% 10%

(1) Projected consumption linked to the capacity to generate IRPJ and CSLL taxable amounts in subsequent periods.

(2) The consumption capacity arises from movements in provisions expectation of reversals, write-offs and uses).

23. RELATED PARTIES Costs of salaries and other benefits granted to key management personnel of Banco Votorantim, formed by the Board, Audit Committee, Board of Directors and Fiscal Council: Bank Consolidated 2H2016 2016 2015 2H2016 2016 2015 Fees and retainer fee 3,394 9,020 10,629 8,782 18,470 18,479 Bonuses 2,214 20,591 15,718 2,620 32,745 26,012 Social charges 2,515 10,158 8,742 3,287 15,104 13,282 Total 8,123 39,769 35,089 14,689 66,319 57,773

The Bank does not provide post-employment benefits to key management personnel. The Bank does not grant loans to key Management personnel in accordance with the prohibition to any financial institution established by the current law.



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The balances of accounts relating to transactions between consolidated companies of the Bank are eliminated in the Consolidated Financial Statements and also take into consideration the lack of risk. In relation to the controlling shareholders, the transactions with the Banco do Brasil Financial Conglomerate and Votorantim SA (are included the main companies of which are: Votorantim Finanças, Votorantim Cimentos, Votorantim Metais, Votorantim Siderurgia, Votorantim Energia, Fibria and Citrosuco) . The Conglomerate carries out banking transactions with related parties, such as current account deposits (not remunerated), remunerated deposits, securities sold under repurchase agreements, derivative financial instruments and assignment of credit transaction portfolios. There are also service agreements. These transactions are carried out under terms and conditions similar to those performed with third parties where applicable, prevailing at the transaction dates. These transactions do not involve extraordinary default risks. In the year ended December 31, 2016, the Bank sold securities (Shares in investment funds) classified in the category Available for sale to subsidiary BV Financeira. This operation generated no impact on the net income, subject to elimination in the financial Conglomerate’s consolidation process. In the year ended December 31, 2016, Conglomerate, through its subsidiary BV Financeira, carried out credit assignments with a related party, with substantial risk retention. Sum of present values totaled R$ 7,593,212 (R$ 10,079,565 on December 31, 2015). The net result of credit assignments, considering income and expenses of the assignments with substantial retention of risks and benefits is presented in the table below under “Income from interest, provision of services and other income”.



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12.31.2016

Banco do

Brasil Conglomerate

Votorantim Conglomerate

Financial subsidiaries

(1) Non-financial

subsidiaries (2)

Key management personnel (3) Other (4) Total

Assets Cash and cash equivalents 79,879 - - - - - 79,879 Interbank funds applied 5,054,804 - 19,613,440 - - - 24,668,244 Securities and derivative financial instruments

- 384 17,935,260 - - 1,223,195 19,158,839

Other assets 260,746 7,848 17,386 - 383 290 286,653 Liabilities Demand deposits (188) (225) (1,697) (1,046) (50) - (3,206) Time Deposits (690) (19,172) (3,164) (297,926) (587) - (321,539) Interbank accounts or relations

- - (5,120,973) - - - (5,120,973)

Money market repurchase commitments (569,695) (974,487) (10,809,573) - (1,667) - (12,355,422)

Acceptances and endorsements

(56,883) (347,781) - - (10,050) - (414,714)

Borrowings and onlendings (375,061) - - - - - (375,061) Derivative financial instruments

(23,947) (9,430) - - - - (33,377)

Other liabilities (13,946,963) (50,565) (1,447) - - - (13,998,975)

2H2016 Income (loss) Income from interest, provision of services and other income

596,680 - 2,694,066 - - 121,857 3,412,603

Derivative financial instruments

(1,485) 102 - - - - (1,383)

Fund raising, administrative expenses and other

(57,141) (114,798) (1,142,186) (28,821) (800) - (1,343,746)

2016 Income (loss) Income from interest, provision of services and other income

1,303,786 - 5,428,691 - 2 149,267 6,881,746


(419) (6,463) (263,648) - - - (270,530)


(97,187) (202,724) (1,754,445) (42,817) (1,902) - (2,099,075)



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12.31.2015

Banco do

Brasil Conglomerate

Votorantim Conglomerate

Financial subsidiaries

(1) Non-financial

subsidiaries (2)

Key management personnel (3)

Other (4) Total

Assets Cash and cash equivalents 380 - - - - - 380 Interbank funds applied 9,197,180 - 21,113,149 - - - 30,310,329 Securities and derivative financial instruments

486 10,981 19,377,069 - - 994,974 20,383,510

Other assets 4,364 18,345 113,473 34 1,292 232 137,740 Liabilities Demand deposits (136) (1,028) (5,869) (379) (81) - (7,493) Time Deposits (619) (23,710) (5,928) (254,757) (23) - (285,037) Interbank accounts or relations

- - (427,030) - - - (427,030)

Money market repurchase commitments (106,738) (838,137) (6,854,290) - (1,663) - (7,800,828)

Acceptances and endorsements

(66,475) (422,855) - - (19,132) - (508,462)

Borrowings and onlendings (374,965) - - - - - (374,965) Derivative financial instruments

(15,576) (1,868) (9,976,718) - - - (9,994,162)

Other liabilities (15,762,580) - (35,125) (12) - - (15,797,717)

2015 Income (loss) Income from interest, provision of services and other income

1,150,587 14,327 6,274,386 - 65 152,989 7,592,354


(48,612) 3,908 (2,631,147) - - - (2,675,851)


(27,458) (95,200) (211,540) (34,318) (1,963) - (370,479)

(1) Companies listed in Note 2, identified in item (1). Don’t include operation between subsidiaries. (2) It includes Promotiva S.A (actual denomination of BVIP - BV Investimentos e Participações S.A.), BVIA - BV Investimentos e

Participações de Gestão de Recursos S.A. and Votorantim Corretora de Seguros S.A. (3) Board of Directors, Executive Board, Audit Committee, Fiscal Council and family members (spouse, children and stepchildren)

of key management personnel, as well as all companies in which the key management personnel has participation. (4) In 2016 it includes BVIA FIP; and in 2015 it includes BVIA FIP, FIDCS I e VI.

24. EMPLOYEE BENEFITS

There are no post-employment benefits such as: pensions, other retirement benefits, post-employment life insurance and medical care, other long-term benefits to employees, including long service leave and other leaves, jubilee or other benefits per years of service, share-based remuneration and rescission of contract benefits, except for those set out in the collective agreement for banking staff. Variable compensation program The Company put in place the Short-term and Long-term Compensation Program during the year ended December 31, 2013. Executive officers and Conglomerate employees are eligible for the program. This program was approved by the Board of Directors on May 10, 2012. The Company has three long-term incentives plans with the purpose of (i) attracting, motivating and retaining talents; (ii) aligning the interests of executive officers and employees to shareholders’ objectives and interests; (iii) creating revenues and a sustainable creation of value; and (iv) creation of a long-term outlook. These are: a) Conditioned Variable Incentive: a plan with a minimum one-year and maximum three-year duration, consisting of granting an incentive conditioned to performance during each year. All Conglomerate’s employees and officers are eligible for the plan.



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b) Long-term incentive: a plan with a four-year duration consisting in granting the Company’s Investment Units (known as “virtual shares”) based on performance during each year. All employees of the Conglomerate are eligible for the program. c) Virtual share repurchase program: a plan with a four-year duration in which every executive officer and employee has the opportunity to invest part or all of their variable compensation available in the Company’s Investment Units (known as “virtual shares”), and as a counterpart the Company will progressively grant additional Investment Units. In the year ended on December 31, 2016 were recognized in the result, under Personnel Expenses - Earnings R$ 165,588 (R$ 161,274 in the year ended December 31, 2015) in relation to long-term incentives transactions. This expense derives from agreements entered into with some Conglomerate’s employees, in conformity with the remuneration policy. These incentives in general become a right between one and in not more than four years as of the granting date, with settlement in cash. In the Conglomerate, in the year ended December 31, 2016, payments in the amount of R$ 117,601 were made, of which R$ 41,147 in regard to the Long-Term Remuneration Program of 2012, R$ 64,925 in regard to the Long-Term Compensation Program of 2013, R$ 11,440 in regard to the Long-Term Compensation Program of 2014 and R$ 89 in regard to the Lon-Term Compensation Program of 2015. On December 31, 2016, the Conglomerate recorded under caption “Other liabilities - Other - Sundry - Provision for unsettled payments”, in the amount of R$ 345,380 (R$ 293,509 on December 31, 2015). Virtual share value is calculated at least on a quarterly basis and is based on the Conglomerate’s income and on entries made directly to Shareholders’ equity accounts, as the applicable accounting practices. From this change in Shareholders’ Equity value, non-recurring movements will be individually evaluated and submitted to the Remuneration Committee, which will decide on its exclusion or not from Shareholders’ equity calculation basis to value virtual share. Changes in virtual shares Bank Consolidated 2H2016 2016 2015 2H2016 2016 2015 Opening quantity 43,324,813 48,683,372 27,814,108 57,578,495 65,642,106 36,715,932 New 16,304,672 32,617,742 29,522,800 21,146,154 42,312,245 40,064,146 Payd - (20,622,784) (7,959,312) - (27,583,094) (10,275,509) Called off (153,607) (1,202,452) (694,224) (163,183) (1,809,791) (862,463) Closing quantity 59,475,878 59,475,878 48,683,372 78,561,466 78,561,466 65,642,106

Initial value of virtual shares was calculated on Shareholder’s equity ate the end of each year, and the par value of R$ 1,00 was assigned to each virtual share unit.

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

a) Contingent assets Contingent assets are not recognized in the Financial Statements, as CMN Resolution 3,823/2009.



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b) Labor lawsuits The Conglomerate is the defendant in labor lawsuits mostly filed by former employees. Provisions for probable losses represent several claims, such as: Indemnities, overtime, working time exemption, supplement per function and representation, among other matters.

c) Tax lawsuits The Conglomerate is subject, in inspections made by tax authorities, to questionings related to taxes, which may eventually generate assessments, for example: composition of the IRPJ/CSLL tax basis (deductibility); and discussion related to the levy of taxes, upon occurrence of certain economic facts. Most lawsuits deriving from tax assessments refer to ISS, IRPJ, CSLL, PIS/COFINS and Employer Social Security Contributions. Some of them are guaranteed, when necessary, by escrow deposits made to suspend payment of taxes under discussion.

d) Civil lawsuits Basically refer to indemnity actions whose natures are as follows: challenge on contracts’ total effective cost; review on contract conditions and charges; and fees.

e) Provision for labor, tax and civil lawsuits - Probable

The Conglomerate recognized a provision for labor, tax and civil lawsuits with “probable” loss risk, quantified by individual methodology (including processes with success probability as remote, possible or probable) or massied,according to the nature and/or value of the process. The estimates of outcome and financial effect are determined by the nature of the actions, by the judgment of the entity’s Management, by the opinion of the legal counsel, based on the process elements, supplemented by the experience and complexity of similar transactions. The provision for labor, tax and civil lawsuits that was set up to cover the losses estimated, are considered sufficient by the Conglomerate’s Management. e.1) Changes in provisions for tax, civil and labor claims classified as probable Bank 2H2016 2016 2015 Tax claims Opening balance 7,268 2,710 2,577 Additions

534 1,163 - Write-offs due to payment (349) (349) - Adjustments 195 4,124 133 Closing balance 7,648 7,648 2,710 Civil claims Opening balance 4,800 4,554 1,234 Additions 202 287 3,231 Reversal of provision (12) (17) (59) Write-offs due to payment (2) (51) - Adjustments 557 772 148 Closing balance 5,545 5,545 4,554 Labor claims (1) Opening balance 152,909 148,723 121,659 Additions 47,425 97,078 121,626 Reversal of provision (38,665) (63,401) (60,811) Write-offs due to payment (15,118) (42,429) (48,385) Adjustments 11,522 18,102 14,634 Closing balance 158,073 158,073 148,723 Total Labor, Tax and Civil Claims 171,266 171,266 155,987



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Consolidated 2H2016 2016 2015 Tax claims Opening balance 46,774 45,724 71,557 Additions 8,160 10,152 14,177 Reversal of provision (2,431) (6,792) (28,086) Write-offs due to payment (458) (2,147) (15,277) Adjustments 767 5,875 3,353 Closing balance 52,812 52,812 45,724 Civil claims Opening balance 335,604 300,598 324,968 Additions 64,278 134,647 122,161 Reversal of provision (51,216) (88,680) (91,083) Write-offs due to payment (60,556) (107,814) (125,260) Adjustments 14,131 63,490 69,812 Closing balance 302,241 302,241 300,598 Labor claims Opening balance 917,197 909,712 961,854 Additions 287,090 493,374 526,071 Reversal of provision (1) (290,224) (399,346) (358,765) Write-offs due to payment (2) (81,902) (209,928) (301,627) Adjustments 55,184 93,533 82,179 Closing balance(3) 887,345 887,345 909,712 Total Labor, Tax and Civil Claims 1,242,398 1,242,398 1,256,034

(1) Refers basically to the negotiation of agreements, review processes and loss forecasts. (2) Refers, basically, to labor compensations due to agreements. (3) From August 2016, the measurement criteria were changed with the implementation of a statistical model for

calculating the provision for actions that have homogeneous or similar profiles and standards, which have been valuated in a mass way. This change resulted in an reversal of provision in the amount of R$ 16,810 in the Consolidated and R$ 808 in the Bank.

e.2) Estimated schedule of disbursements on December 31, 2016

Bank Consolidated

Labor Tax Civil Labor Tax Civil Up to 5 years 158,073 7,457 5,545 887,345 43,512 302,241 From 5 to 10 years - 191 - - 9,300 - Total 158,073 7,648 5,545 887,345 52,812 302,241

Uncertain lawsuit duration and the possibility of changes in prior court judgments make disbursement schedule and values uncertain.

f) Contingent liabilities - Possible Amounts shown in the chart below represent estimated disbursement value in case the Bank is convicted. Claims are classified as possible when there are no elements that permit concluding final lawsuit outcome and when likelihood of loss is lower than probable and higher than remote. Bank Consolidated 12.31.2016 12.31.2015 12.31.2016 12.31.2015 Tax claims (1) 743,787 557,596 1,202,059 1,016,785 Civil claims (2) 10,402 8,316 43,070 40,019 Labor claims (3) 57,687 149,602 289,441 467,292 Total 811,876 715,514 1,534,570 1,524,096 (1) In the Conglomerate refers basically to: a) IRPJ/CS on equity investments abroad R$ 235,787 (R$ 223,034 on

December 31, 2015); b) INSS on Profit Sharing (PLR) R$ 138,907 (R$ 51,514 on December 31, 2015); c) IRPJ of exceeding amount destined to FINOR R$ 45,837 (R$ 119,710 on December 31, 2015); d) ISS R$ 11,096 (R$ 11,139 on December 31, 2015); e) INSS on Profit Sharing - Nassau Branch R$ 41,700 (R$ 39,130 on December 31, 2015);



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f) PIS / COFINS on demutualization R$ 38,895 (R$ 36,651 on December 31, 2015); g) IRPJ/CS on undue offset of tax loss - Gratuities to statutory officers R$ 28,418 (R$ 27,043 on December 31, 2015); h) IRPJ/CSLL - Deduction Allowance for Doubtful Accounts (PDD) 2008 R$ 104,520 (R$ 99,113 on December 31, 2015); i) Infringement Fine (non-homologation of DCOMP) R$ 142,804 (R$ 127,753 on December 31, 2015); j) CSLL - Exclusion of Interests - Tax Assessments comprising improper exclusion in the BACEN relating to interest earned on the foreign public bonds (Denmark, Spain and Austria) of 2009 and 2010, in the amount of R$ 138,200 relating to principal, fine and interest of the year 2009 (R$ 127,441 on December 31, 2015); k) IRPJ/CSLL - Assessment notice: improper exclusion of goodwill on acquisition of securities of Foreign Governments (2010) in the amount of R$ 11,811 of IRPJ and R$ 10,124 of CSLL (R$ 11,152 of IRPJ and R$ 9,908 of CSLL, respectively, on December 31, 2015); l) Per comp: impossibility of the utilization of IRRF abroad on remittances abroad as negative balance of IRPJ, in the amount of R$ 32,550 (R$ 29,827 on December 31, 2015); m) Gratuity paid to managers (2011 and 2012): impossibility of deduction in the CSLL calculation basis R$ 17,775; n) Tax Loss and Negative Base CSLL: excess compensation (2012), in the amount of R$ 16,994 of IRPJ and R$ 45,889 of CSLL.

(2) In the Conglomerate refers, basically, to collection actions. (3) Refers to actions mostly brought by former employees claiming compensation, overtime pay, working hours, extra

pay associated with certain jobs, and representation costs, and others. In August 2016, the measurement criteria changed with the implementation of a statistical model for the calculation of the provision for actions that have homogeneous or similar profiles and standards, which are now being valuated in a mass way. For comparability purposes, the amount of contingent liabilities classified as possible disclosed on December 31, 2015 in the Bank of R$ 389,188 and in the consolidated amount of R $ 1,008,555 were restated, with the purpose of demonstrating for both periods the calculation of the risk of possible loss in light of the new provision calculation model implemented.

g) Deposits as collateral Balances of escrow deposits recognized for contingencies Bank Consolidated 12.31.2016 12.31.2015 12.31.2016 12.31.2015 Tax Claims 273,201 248,997 307,246 682,384 Civil claims 24,916 6,153 242,009 221,944 Labor claims 17,074 19,054 275,521 265,202 Total 315,191 274,204 824,776 1,169,530

h) Legal obligations

Conglomerate maintains the amount of R$ 15,013 (R$ 9,686 on December 31, 2015) recorded in specific Legal Obligations account. The Bank maintains the amount of R$ 12,000 (R$ 6,882 on December 31, 2015) relating the following lawsuits: h.1) PIS LC 07/70 - BV Financeira S.A. CFI The Writ of Mandamus with injunction was filed by BV Financeira S.A. - CFI aiming at recognition of the Plaintiff’s clear legal right of paying PIS contribution as provided for in Supplementary Law no. 7/70 for the period from July 1, 1997 up to 90 days after the publication of Constitutional Amendment no. 17/97. Also, it was claimed that, for subsequent period (from March 1998 to December 1999), said contribution be paid on gross operating income. Currently, the Writ of Mandamus is suspended in the Federal Regional Court of the 3rd Region, waiting for the Supreme Court’s decision. Such decision shall be replicated in all cases dealing with the same subject matter awaiting judgment. For that process we have a provision of R$ 711 (R$ 684 on December 31, 2015) registered under Other obligations - Tax and social security - Legal obligations. h.2) ISS (Service Tax) on Guarantees Provided - Banco Votorantim S.A. A decision was delivered on Declaratory Action on Absence of Legal-Tax Relation cumulated with Recovery of Undue Payment intended to rule out levy of ISS on revenues from guarantor and collateral transactions and other guarantees provided by Banco Votorantim S.A., and obtain



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reimbursement of amounts paid as such in the last five years. As injunctive relief request was rejected by the lower court judge, the Bank started to make a monthly escrow deposit of discussed amounts in order to suspend payment of deferred tax assets. Currently, Decision is being awaited. For said case we have a provision of R$ 11,275 (R$ 6,215 on December 31, 2015) under Other obligations - Tax and social security - Legal obligations. h.3) Accident Protection Factor - FAP - Banco Votorantim S.A., BV Financeira S.A. CFI Declaratory Actions were filed with the aim of declaring the non-existence of a legal and tax relationship requiring the plaintiff to calculate and pay the contribution to Workplace Accident Insurance (SAT - Seguro contra Acidentes de Trabalho) by applying the Accident Protection Factor (FAP - Fator Acidentário de Proteção), starting in January 2010. As the request for interim relief was dismissed by the judge of the first instance, the Bank and BV Financeira made judicial deposits of the amounts discussed for the year 2010, in order to suspend the collectability of the deferred tax assets. Thereafter, the amount began to be regularly paid. Regarding the actions, there was a judgment dismissing the request, as well as in the first case, extinguishing the suit without resolution of merit in relation to the INSS, given its inability to show cause. Vis-à-vis these decisions, a Motion for Clarification was filed, and the Bank’s appeal was upheld only to remedy the omission regarding the ad hoc claim of the Federal Government, however maintaining the decision dismissing the request. Thus, appeals were filed in order to fully reform the judgment of the first instance, which were received in their dual effect. Currently, we are awaiting the judgment of the Appeals filed. Regarding the suit of BV Financeira, after the distribution of the case, there was a judgment that upheld the request, also granting interim relief. However, despite the favorable decision, an appeal was filed by the Plaintiff for the matter to also be considered by TRF3, since the judge of first instance did not consider the factual/evidentiary material. Therefore, this is merely a preventive appeal, in case the argument of unconstitutionality of FAP is dismissed by the Court. Currently, we are awaiting judgment of the Appeals filed. For said case we have a provision of R$ 3,027 in the Consolidated and R$ 725 in the Bank (R$ 2,787 and R$ 667 on December 31, 2015 in the Consolidated and Bank, respectively) under Other obligations - Tax and social security - Legal obligations.

i) Public civil lawsuits Conglomerate has contingent liabilities involving public civil actions in which, based on the opinion of the legal advisors and Management’s judgment, the risk of loss is considered possible. Due to their current stage of completion, measurement of amounts involved in these lawsuits could not be determined safely. Main themes discussed in these lawsuits refer to collection of tariffs and issues involving payroll credit to INSS retirees and pensioners.



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26. RISK AND CAPITAL MANAGEMENT a) Risk management process The integrated risk-management approach includes adopting instruments to ensure that material risks incurred by the Conglomerate. This approach aims to organize the decision process and define the mechanisms that establish risk appetite and risk level that is acceptable and compatible with the volume of capital available, in line with the business strategy adopted. The consolidation of risks covers material exposures inherent to the Conglomerate's business lines. The exposures are mainly grouped into the following risk categories: market, credit and liquidity. This consolidation process is carried out through a structured process which includes the mapping and calculation of the total values at risk. The levels of risk exposure are monitored through a risk limit framework, incorporated into the Conglomerate's daily activities by means of an structured management and control process which assigns functional responsibilities to the areas involved. Senior Management gets involved by following up and performing actions that are necessary for risk management. Financial return is calculated by processes that permit the monitoring of managerial earnings in different business lines, consistent with established budgets and in accordance with accounting income. In sum, the Conglomerate follows the following principles in its integrated risk management process: • Consolidated risk vision; • Making risk exposure level, authorized limits and intended financial return compatible; • Job segregation between business areas, risk control, audit and operational processing; • Adoption of risk calculation methodologies based on the market practices; and • Involvement of Senior Management.

b) Credit risk Credit Risk is defined as the likelihood of losses occurring due to the borrower or counterparty not complying with their respective financial obligations in accordance with agreed terms with the Banco Votorantim. c) Liquidity risk

Liquidity risk is defined as: • Possibility of the institution not being able to effectively honor expected and unexpected

current and future obligations, including those deriving from guarantee binding, without affecting its daily operations and without incurring significant losses; and

• Possibility that the Bank may not be able to trade a position at market price due to its large size in relation to the usually traded volume, or due to market discontinuity.

d) Operational risk Operating risk is defined as the possibility of loss arising from any failure, deficiency or inadequacy of internal processes, people or systems, or from events apart from the Institution.



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e) Market risk Market risk is defined as the possibility of financial losses arising from variations in the market value of exposures held by a financial institution. These financial losses may be generated by variation in interest rates, exchange rates and prices of shares and commodities. f) Capital management Following the regulations of BACEN and in accordance with the recommendations of the Basel Committee on Banking Supervision, the Institution employs prudential guidelines of capital management in a consolidated manner aiming at the efficient and sustainable management of its resources and contributing to promote the stability of the National Financial System. In line with CMN Resolution no. 3,988 and BACEN Circular Letter no. 3,547, the institutional has structure and policies for capital management approved by the Board of Directors, in compliance with the internal process for valuation of capital Adequacy (ICAAP), contemplating the following items: • Identification and assessment of material risks; • Documented policies and strategies; • Capital Plan for three years, including Capital targets and projections, main funding sources

and Capital contingency plan; • Stress tests and their impacts on Capital; • Managerial reports to the Senior Management (Executive Board and Board of Directors); • Valuation of Capital Adequacy in the Regulatory and Economic View; and • Annual Report of Internal capital adequacy assessment process (ICAAP).

Capital Adequacy (Regulatory view) At the institution, capital is managed in order to ensure adequacy within regulatory limits and to establish a strong capital base, enabling the Institution to develop business and transactions in accordance with its strategic plan. Our annual capital plan includes growth projections for the loan portfolio and other transactions and assets, in order to assess adequacy of its consolidated capital to deal with the associated risks and ensure compliance with regulatory operational limits. Management reports tracking the capital allocated to risks and the capital indices (Basel, Level I and Core) are disclosed on a monthly basis after the determination of the Capital and Capital Requirement. Capital ratios Capital ratios are calculated according to the criteria set by CMN Resolutions 4,192/2013 and 4,193/2013, which refer to the calculation of Reference Equity (PR) and the Minimum Regulatory Capital (PRMR) in relation to Risk-Weighted Assets (RWA), respectively. In October 2013, onwards the set of rules that implemented in Brazil the recommendations of the Basel Committee on Banking Supervision related to the Capital structure of financial institutions, known as Basel III, came into effect. Newly adopted rules address the following matters: I - new methodology to determine regulatory capital, which continues to be divided into Levels I and II, Level I being comprised of Main Capital (less Prudential Adjustments) and Supplementary Capital;



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II - new methodology to determine requirements to maintain capital, adopting minimum PR, Level I and Main Capital requirements, and introducing the Additional Main Capital. Since January 2014, CMN Resolution no. 4,192/2013 defines the following items relating to prudential adjustments to be deducted from Reference Equity:

(i) goodwill paid on acquisition of investments based on expected future income net of deferred tax liabilities;

(ii) intangible assets formed as from October 2013; (iii) actuarial assets related to defined benefit pension plans net of deferred tax liabilities

associated to them; (iv) non-controlling interest; (v) direct or indirect investments higher than 10% of capital of entities similar to non-

consolidated financial institutions and of insurance and reinsurance firms, capitalization organizations and open pension plan entities (higher investments);

(vi) deferred tax assets deriving from temporary differences that depend from future income generation or tax revenues for their realization;

(vii) deferred tax assets from depreciation excess tax loss; (viii) deferred tax assets deriving from tax losses and social contribution on net income

negative basis. In accordance with CMN Resolution no. 4,192/2013, deductions referring to prudential adjustments will be carried out gradually, at 20% p.a. from 2014 to 2018, except for deferred assets and funding instruments issued by financial institutions, which are already being fully deducted since October 2013. Consolidation scope used as the basis to verify operating limits and also considers the Financial Conglomerate, and the Prudential Conglomerate beginning as of January 1, 2015, as defined in CMN Resolution no. 4,280/2013.



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For comparison purposes, Basel Ratio information is presented for Prudential Conglomerate: Basel ratio 12.31.2016 12.31.2015 PR - Reference Equity 9,218,435 10,742,263 Tier I 6,836,538 6,686,016 Common Equity 6,836,537 6,686,016 Shareholders' equity 8,247,124 7,616,664 Prudential adjustments (1,410,586) (930,648) Deferred assets - (14,767) Other (1,408,487) (913,229) Adjustment to market value (2,099) (2,652) Tier II 2,381,897 4,056,247 Subordinated debts eligible as capital 2,381,897 4,056,247 Subordinated debts authorized pursuant to CMN Resolution no. 4,192/2013 956,147 834,046 Subordinated debts authorized pursuant to rules prior to CMN Resolution no.

4,192/2013 (1) (2) 1,425,750 3,222,201

Funding sources abroad 1,404,551 1,884,476 Funds obtained with CDB - 272,451 Funds raised with Financing Bills 21,199 1,065,274 Risk-weighted assets (RWA) 61,230,489 70,549,049 Credit risk (RWACPAD) 55,945,627 62,926,270 Market risk (RWAMPAD) 669,866 2,842,895 Operational risk (RWAOPAD) 4,614,996 4,779,884

Minimum Required Regulatory Capital (3) 6,046,511 7,760,395

Minimum Required Capital (4) 2,755,372 3,174,707

Tier I Minimum Required Reference Equity (5) 3,673,829 4,232,943 Regulatory Capital determined to cover interest rate risk of transactions not classified in trading portfolio (RBAN)

299,168 392,989

Margin on Minimum Required Regulatory Capital 3,171,924 2,981,868 Margin on Minimum Required Capital 4,081,165 3,511,308 Margin on Minimum Required Tier I Regulatory Capital 3,162,708 2,453,073 Margin on Minimum Required Regulatory Capital including RBAN 2,872,756 2,588,879 Common Equity Ratio (CP / RWA) 11.17% 9.48% Tier I Capital Ratio (Tie I / RWA) 11.17% 9.48% Basel Ratio (PR / RWA) 15.06% 15.23%

(1) Instruments authorized by BACEN to comprise PR in accordance with CMN Resolution no. 3,444/2007 - and that do not qualify for requirements of CMN Resolution no. 4,192/2013 - will decay 10% p.a. from 2013 to 2022, on amounts that comprised PR as of December 31, 2012. (2) The balance of Subordinated Debt instruments comprising Reference Equity as of December 31, 2012 was considered after applying on it the decay of 10% as determined by CMN Resolution no. 4,192/2013. (3) Corresponds to the application of the “F” factor to RWA amount, being “F” equal to:

a. 11% of RWA, from October 10, 2013 to December 31, 2015. b. 9.875% of RWA, from January 1, 2016 to December 31, 2016. c. 9.25% of RWA, from January 1, 2017 to December 31, 2017. d. 8.625% of RWA, from January 1, 2018 to December 31, 2018. e. 8% of RWA, as from January 1, 2019.

(4) It represents at least 4.5% of RWA. (5) It represents at least 5.5% of RWA, from October 1, 2013 to December 31, 2014, and 6% of RWA, as from January 1, 2015.

Prudential Adjustments deducted from Common Equity:

12.31.2016 12.31.2015 Prudential Adjustments II - Intangible assets (62,272) (31,447) Prudential Adjustments VII Deferred tax assets and Intertemporal differences (647,358) (418,931) Prudential Adjustments VIII - Deferred tax assets of Tax losses/negative basis of CSLL (698,857) (462,851) Prudential Adjustments IX - Deferred assets - (14,767) Prudential Adjustments XV - Understatement - Resolution 4,277/13 Adjustments (2,099) (2,652) Total (1,410,586) (930,648)



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g) Fixed asset ratio Beginning as of 2015, property, plant and equipment index started to be required only for Prudential Conglomerate, totaling 16,52% (4,68% on December 31, 2015), and determined in conformity with CMN Resolutions no. 4,192/2013 and 2,669/1999. Fixed assets limit 12.31.2016 12.31.2015 Fixed assets limit 4,609,217 5,371,131 Value of fixed assets limit position 1,523,243 503,015 Value of margin or insufficiency 3,085,974 4,868,116

In compliance with the BACEN Circular no. 3,678/2013, Conglomerate maintains additional information on its risk and capital management process available in the website: www.bancovotorantim.com.br/ri.

27. OTHER INFORMATION

a) Commitments undertaken due to funding from international financial institutions The Conglomerate is a borrower of short-term loans from international financial institutions, who in certain cases may require compliance with financial ratios (financial covenants). When required, the financial ratios are calculated based on the financial information prepared in accordance with Brazilian law and standards of the Central Bank of Brazil (BACEN). On December 31, 2016 the Conglomerate did not have operations with these characteristics. b) Information about branches and subsidiaries abroad

12.31.2016 12.31.2015 Assets Banco Votorantim S.A. - Nassau Branch 6,110,935 9,234,863 Others subsidiaries 63,485 98,056 Total assets 6,174,420 9,332,919 Liabilities (4,681,293) (7,891,914) Banco Votorantim S.A. - Nassau Branch (4,673,914) (7,878,700) Others subsidiaries (7,379) (13,214) Shareholders’ equity (1,493,127) (1,441,005) Banco Votorantim S.A. - Nassau Branch (1,437,020) (1,356,163) Others subsidiaries (56,107) (84,842) Total liabilities (6,174,420) (9,332,919)

2H2016 2016 2015 Income or loss 106,340 50,943 63,495 Banco Votorantim S.A. - Nassau Branch 90,889 42,218 66,959 Others subsidiaries 15,451 8,725 (3,464)

c) Insurance coverage The Conglomerate contracts insurance coverage for assets subject to risks for amounts considered to be sufficient to cover eventual claims, considering the nature of its activity. The adopted risk assumptions, in view of their nature, are not part of the scope of an audit of Financial Statements; therefore, were not analyzed by our independent auditors. d) Agreements for offset and settlement of liabilities in the scope of the National Financial

System Agreements were executed for the offset and settlement of receivables and payables pursuant to CMN Resolution No. 3,263/2005, the purpose of which is to enable the offsetting of credits and

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



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debits maintained with the same counterparty, and in which the maturity dates of receivables and payables can be advanced to the date in event of default by one of the parties occurs or in case of the bankruptcy of the debtor.

28. SUBSEQUENT EVENTS

Pursuant to CMN Resolution No. 4,512, which adresses the accounting procedures applicable to the valuation and recorded of a provision for financial guarantees provided, the estimated net amount of the tax effects of the constitution of said provision contra entry the accumulated profit and loss account, by application of the referred standard on January 1, 2017 is R$ 116,551.

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consolidated financial statements - banco votorantim · 2018. 8. 30. · to r$ 2,753 million in...

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