performance analysis and financial statements net financial margin 83 7.2.1 retail loan portfolio 87...

Banco do Brasil

Performance Analysis andFinancial Statements

3rd Quarter 2004

Summary

Index of Tables ..........................................................................................................................................4Index of Figures.........................................................................................................................................7Presentation...............................................................................................................................................91 � Economic Environment ....................................................................................................................152 � BB Shares ..........................................................................................................................................16

2.1 Shares .........................................................................................................................................162.2 Warrants .....................................................................................................................................192.3 Performance of the Shares.......................................................................................................20

3 � Corporate Governance......................................................................................................................234 � Other Information ..............................................................................................................................255 � Summarized Financial Statements ..................................................................................................27

5.1 Summarized Balance Sheet......................................................................................................275.2 Summarized Corporate Law Income Statement.....................................................................295.3 Income Statement with Realocations ......................................................................................30

5.3.1 Details of Reallocations ....................................................................................................316 � Balance Sheet Analysis ....................................................................................................................33

6.1 Breakdown .................................................................................................................................336.2 Analysis of Assets.....................................................................................................................346.3 Analysis of Liquidity..................................................................................................................356.4 Securities Portfolio....................................................................................................................366.5 Loan Portfolio.............................................................................................................................38

6.5.1 Retail Loan Portfolio .........................................................................................................406.5.2 Commercial Loan Portfolio...............................................................................................436.5.3 Agribusiness Loan Portfolio ............................................................................................456.5.4 Foreign Trade Portfolio.....................................................................................................516.5.5 Concentration of the Portfolio..........................................................................................52

6.6 Tax Credits .................................................................................................................................536.7 Intangible Assets .......................................................................................................................546.8 Analysis of Liabilities ................................................................................................................566.9 Deposits and Money Market Funding......................................................................................58

6.9.1 Foreing Borrowing ............................................................................................................606.10 Shareholders� Equity...............................................................................................................616.11 Basel Ratio ...............................................................................................................................626.12 Fixed Asset Ratio.....................................................................................................................646.13 Risk Management ....................................................................................................................65

6.13.1 Market Risk Management ...............................................................................................656.13.2 Liquidity Risk Management ............................................................................................69

7 � Analysis of Results ...........................................................................................................................717.1 Gross Financial Margin .............................................................................................................71

7.1.1 Analysis of Uses................................................................................................................737.1.2 Analysis of Funding ..........................................................................................................767.1.3 Analysis of the Spread......................................................................................................787.1.4 Analytical Spread...............................................................................................................797.1.5 Management Analysis of the Spread...............................................................................81

7.2 Net Financial Margin..................................................................................................................837.2.1 Retail Loan Portfolio .........................................................................................................877.2.2 Commercial Loan Portfolio...............................................................................................887.2.3 Agribusiness Loan Portfolio ............................................................................................897.2.4 Foreign Trade Loan Portfolio ...........................................................................................907.2.5 Foreign Loan Portfolio ......................................................................................................91

7.3 Contribution Margin ..................................................................................................................927.3.1 Revenues from Customer Relationship Fees.................................................................957.3.2 Asset Management............................................................................................................967.3.3 Credit Cards .......................................................................................................................987.3.4 Collections .........................................................................................................................99

7.4 Commercial Income.................................................................................................................1007.4.1 Personnel Expenses .......................................................................................................1017.4.2 Other Administrative Expenses .....................................................................................1037.4.3 Distribution Network .......................................................................................................1047.4.4 Automated Channels.......................................................................................................1077.4.5 Productivity � Coverage Ratios .....................................................................................109

7.5 Operating Income ....................................................................................................................1107.6 Net Income................................................................................................................................1117.7 Net Value Added ......................................................................................................................1147.8 Gross Value Added..................................................................................................................1157.9 Insurance, Pension Plans and Capitalization .......................................................................117

7.9.1 Income Statement by Line of Business ........................................................................1177.9.2 Combined Ratio ...............................................................................................................1187.9.3 Brasilseg...........................................................................................................................1197.9.4 Brasilsaúde ......................................................................................................................1197.9.5 Aliança do Brasil..............................................................................................................1197.9.6 Brasilcap...........................................................................................................................1207.9.7 Brasilprev .........................................................................................................................1207.9.8 BB Previdência ................................................................................................................121

8 � Financial Statements.......................................................................................................................1228.1 Summarized Balance Sheet....................................................................................................1228.2 Summarized Corporate Law Income Statement...................................................................1248.3 Income Statement with Reallocations ...................................................................................1258.4 Analytical Spread.....................................................................................................................126

Complete Financial Statements ...........................................................................................................130

Index of TablesTable 1. Main Macroeconomic Indicators .................................................................................................15Table 2. Shareholding Breakdown............................................................................................................16Table 3. Shareholders by Range of Shares Owned .................................................................................17Table 4. Free Float by Range of Shares Owned ......................................................................................17Table 5. Tax Residence of the Investors ..................................................................................................17Table 6. Breakdown of the Warrants Holders ...........................................................................................19Table 7. B and C Warrants Series ............................................................................................................19Table 8. Other Information ........................................................................................................................25Table 9. Summarized Balance Sheet - Assets .........................................................................................27Table 10. Summarized Balance Sheet - Liabilities ...................................................................................28Table 11. Summarized Corporate Law Income Statement.......................................................................29Table 12. Income Statement with Reallocations.......................................................................................30Table 13. Reallocations � Other Operating Income / Expenses...............................................................31Table 14. Breakdown of Assets ................................................................................................................34Table 15. Liquidity Balance.......................................................................................................................35Table 16. Securities Portfolio by Category................................................................................................36Table 17. Securities Portfolio by Maturities...............................................................................................36Table 18. Loan Portfolio by Segment........................................................................................................38Table 19. Loan Portfolio by Pillar ..............................................................................................................39Table 20. Retail Loan Portfolio..................................................................................................................40Table 21. MSB Credit Products ................................................................................................................41Table 22. Commercial Loan Portfolio........................................................................................................43Table 23. Main Receivables � Business Customers ................................................................................43Table 24. Exports ......................................................................................................................................45Table 25. Agribusiness Loan Portfolio by Purpose...................................................................................46Table 26. Agribusiness Loan Portfolio by Product....................................................................................47Table 27. Agribusiness Loan Portfolio by Product....................................................................................48Table 28. Funds Released for the 03/04 Crop by Segment .....................................................................48Table 29. Variables Associates to Technical Risk System for Agribusiness � RTA.................................50Table 30. Foreign Trade Loan Portfolio ....................................................................................................51Table 31. ACC/ACE Average Volume per Contract .................................................................................51Table 32. Concentration of the Loan Portfolio on the 100 Largest Borrowers..........................................52Table 33. Concentration of the Loan Portfolio by Macro-sector ...............................................................52Table 34. Liabilities ...................................................................................................................................56Table 35. Foreign Borrowing.....................................................................................................................60Table 36. Shareholders� Equity.................................................................................................................61Table 37. BIS Ratio ...................................................................................................................................62Table 38. Changes in Composition of BIS Ratio ......................................................................................63Table 39. Fixed Asset Ratio......................................................................................................................64Table 40. Balance Sheet of Foreign Exchange Assets and Liabilities .....................................................65Table 41. Balance Sheet by Currencies - Assets .....................................................................................66Table 42. Balance Sheet by Currencies � Liabilities ................................................................................67Table 43. Portfolios Indexed to Fixed Interest Rates................................................................................68Table 44. Domestic Trading Portfolio........................................................................................................69Table 45. International Trading Portfolio...................................................................................................69Table 46. Average V@R, Minimum and Maximum...................................................................................69Table 47. Gross Financial Margin .............................................................................................................71Table 48. Analysis of Volume and Spread................................................................................................71Table 49. Investment Rate........................................................................................................................73Table 50. Investment Rate on Available Funds in Foreign Currency .......................................................73Table 51. Investment Rate on Securities and Interbank Investments ......................................................73Table 52. Securities Income .....................................................................................................................74

Table 53. Investment Rate on Loans and Leasing ...................................................................................74Table 54. FX Gain (Loss) and Other FX Operations ................................................................................75Table 55. Funding Cost.............................................................................................................................76Table 56. Cost of Foreign Borrowing ........................................................................................................76Table 57. Market Funding Cost.................................................................................................................77Table 58. Investment Rate, Funding Cost, and Spread............................................................................78Table 59. Analytical Spread � Investment Rates......................................................................................79Table 60. Analytical Spread � Funding Costs...........................................................................................79Table 61. Reconciliation with the Gross Financial Margin ........................................................................80Table 62. Main Components of the Spread ..............................................................................................80Table 63. Investment Rates and Funding Costs.......................................................................................80Table 64. Nominal Spread per Transaction ..............................................................................................81Table 65. Composition of the Transactions ..............................................................................................82Table 66. Weighted Spread per Transaction ............................................................................................82Table 67. Analysis of Volume and Management Spread (12 months) .....................................................82Table 68. Net Financial Margin .................................................................................................................83Table 69. Expenses with Allowance for Loan Losses over Portfolio ........................................................83Table 70. Loan Portfolio by Level of Risk .................................................................................................85Table 71. Delinquency Ratio.....................................................................................................................86Table 72. Retail Loan Portfolio by Level Risk ...........................................................................................87Table 73. Changes in the Allowance - Retail ............................................................................................87Table 74. Commercial Loan Portfolio by Level Risk .................................................................................88Table 75. Changes in the Allowance � Commercial .................................................................................88Table 76. Agribusiness Loan Portfolio by Level Risk................................................................................89Table 77. Changes in the Allowance � Agribusiness................................................................................89Table 78. Foreign Trade Loan Portfolio by Level Risk..............................................................................90Table 79. Changes in the Allowance � Foreign Trade..............................................................................90Table 80. Loan Portfolio Abroad by Risk ..................................................................................................91Table 81. Contribution Margin...................................................................................................................92Table 82. Service Revenues.....................................................................................................................93Table 83. Investment Funds and Managed Portfolios by Customer.........................................................96Table 84. Commercial Income ................................................................................................................100Table 85. Personnel Expenses ...............................................................................................................101Table 86. Other Administrative Expenses...............................................................................................103Table 87. Distribution Network................................................................................................................104Table 88. Agências do Pilar Atacado......................................................................................................105Table 89. Rede de Distribuição no Exterior ............................................................................................106Table 90. Coverage Ratios .....................................................................................................................109Table 91. Operating Income ...................................................................................................................110Table 92. Efficiency Ratio .......................................................................................................................110Table 93. Net Income..............................................................................................................................111Table 94. Return on Shareholders� Equity..............................................................................................113Table 95. Net Value Added.....................................................................................................................114Table 96. Gross Value Added.................................................................................................................115Table 97. Insurance, Pension Plan and Capitalization Companies........................................................117Table 98. Income Statement by Line of Business ..................................................................................117Table 99. Brasilseg Data.........................................................................................................................119Table 100. Brasilsaúde Data...................................................................................................................119Table 101. Aliança do Brasil Data...........................................................................................................120Table 102. Brasilcap Data.......................................................................................................................120Table 103. Brasilprev Data......................................................................................................................120Table 104. BB Previdência Data.............................................................................................................121Table 105. Balance Sheet � Assets........................................................................................................122Table 106. Balance Sheet � Liabilities....................................................................................................123Table 107. Summarized Corporate Law Income Statement...................................................................124

Table 108. Income Statement with Reallocations...................................................................................125Table 109. Analytical Spread ..................................................................................................................126

Index of FiguresFigure 1. Total Distributionof the Free Float .............................................................................................17Figure 2. Free FloatDistribution at the CBLC ...........................................................................................18Figure 3. BB Shares vs. Ibovespa ............................................................................................................20Figure 4. BBAS3 Share in Ibovespa.........................................................................................................21Figure 5. Financial Volume and Quantity Traded of BBAS3 ....................................................................21Figure 6. Market Indices ...........................................................................................................................22Figure 7. Remunerated Assets vs. Interest Bearing Liabilities.................................................................33Figure 8. Breakdown of Assets.................................................................................................................34Figure 9. Liquidity .....................................................................................................................................35Figure 10. Securities Portfolio ..................................................................................................................37Figure 11. Securities Portfolio with Maturities between 1 and 5 years.....................................................37Figure 12. Breakdown of the Loan Portfolio .............................................................................................38Figure 13. Main Retail Loan Portfolio Products........................................................................................40Figure 14. Main Products for Micro and Small Businesses......................................................................41Figure 15. Main Commercial Portfolio Products.......................................................................................44Figure 16. Trade Balance (FOB) ..............................................................................................................45Figure 17. Production vs. Palnted Area....................................................................................................46Figure 18. Main Products of the Agribusiness Loan Portfolio ..................................................................47Figure 19. Agribusiness Loan Portfolio by Funding Sources ...................................................................49Figure 20. Equalization Revenues............................................................................................................49Figure 21. Main Products of the Foreign Trade LoanPortfolio .................................................................51Figure 22. Breakdown of Tax Credits .......................................................................................................53Figure 23. Average Value of Credit Operation per Customer ..................................................................54Figure 24. Changes in the Liabilities ........................................................................................................57Figure 25. Deposits and Market Funding .................................................................................................58Figure 26. Market Share of BB Funding ...................................................................................................59Figure 27. Brazilian Sovereign Risk vs. Marking to Market......................................................................61Figure 28. Bis Ratio ..................................................................................................................................62Figure 29. Changes in FX Exposure ........................................................................................................66Figure 30. Balance Sheet by Index ..........................................................................................................67Figure 31. Mismatch Gaps by Index.........................................................................................................68Figure 32. Availablity of Free Funds.........................................................................................................70Figure 33. Analysis of Volume and Quarterly Spread ..............................................................................72Figure 34. Securities Portfolio by Index....................................................................................................74Figure 35. Spread by Loan Portfolio.........................................................................................................75Figure 36. Ganho Cambial e Outras Operações de Câmbio ...................................................................75Figure 37. Changes in the spread ............................................................................................................78Figure 38. Analysis of Volume and Spread of Uses and Funding............................................................82Figure 39. Expenses with Allowance for Loan Losses over Portfolio.......................................................84Figure 40. Breakdown of Allowance .........................................................................................................84Figure 41. CLP/CT BB vs. SFN ................................................................................................................85Figure 42. Delinquency Ratio ...................................................................................................................86Figure 43. Growth in Service Revenues...................................................................................................92Figure 44. Changes in the Composition of Service Revenues.................................................................94Figure 45. Revenues from Relationship Fees and the Customer Base ...................................................95Figure 46. Customer Base........................................................................................................................95Figure 47. Asset Management .................................................................................................................96Figure 48. Investment Funds and Managed Portfolios.............................................................................97Figure 49. Investment Funds....................................................................................................................97Figure 50. Managed Portfolios and Investment Clubs .............................................................................97Figure 51. Credit Cards ............................................................................................................................98Figure 52. Credit Card Sales by Brand.....................................................................................................98

Figure 53. BB Collection Volume..............................................................................................................99Figure 54. Changes in Commercial Income ...........................................................................................100Figure 55. Changes in the Workforce.....................................................................................................101Figure 56. Tenure ...................................................................................................................................102Figure 57. Productivity Ratios.................................................................................................................102Figure 58. Cost Structure Indexes..........................................................................................................103Figure 59. Total Distribution Network .....................................................................................................104Figure 60. Distribution Network - Wholesale ..........................................................................................105Figure 61. Distribution Network - Government .......................................................................................105Figure 62. Automated Teller Machines...................................................................................................107Figure 63. Share of Automated Transactions / Total Transactions........................................................107Figure 64. Customer Access Options.....................................................................................................108Figure 65. Coverage Ratios....................................................................................................................109Figure 66. Efficiency Ratio......................................................................................................................110Figure 67. Changes in Earnings before Taxes.......................................................................................111Figure 68. Changes in Net Income .......................................................................................................112Figure 69. Changes in ROE....................................................................................................................112Figure 70. Net Value Added ...................................................................................................................116Figure 71. Gross Value Added ...............................................................................................................116Figure 72. Combined Ratio.....................................................................................................................118

9 - Banco do Brasil � Performance Analysis and Financial Statements 3rd Quarter 2004

PresentationThe Performance Analysis is a report published quarterly and intended for market analysts, investorsand others who need a deeper understanding of the economic and financial situation of Banco do Brasil(BB). The report starts with an overview of the economic environment, which is followed by an analysisof the performance of BB paper and of the main practices of corporate governance adopted by theinstitution. Continuing the report, there are separate analyses of the capital structure and the results.

The reader will also find tables with historical series, from 8 periods, of the summarized balance sheet,the summarized corporate law income statement, the income statement with reallocations, the analyticspread, and Other Information about profitability, productivity, quality of the loan portfolio, capitalstructure, capital market, and structural data.

The Balance Sheet Analysis brings a more detailed study of the main components of the balance sheet,such as the securities portfolio, the loan portfolio, tax credits, market borrowings, and shareholders�equity, amongst others.

The analysis of results shows, step by step, the items of the reallocated statement of income. Thecorporation�s income statement is submitted to these reallocations with the intention of favoring a betterunderstanding of the results, making the historical series more concise and facilitating accurateforecasts from this data.

Finally, the financial statements and explanatory notes for the quarter under analysis are presented.

ON-LINE ACCESS

The Performance Analysis report can also be read through Banco do Brasil�s Investor Relations website.Further information is also made available about the Bank, such as: corporate governance, to tools likeinteractive balance sheets and fundamentalist indicators, news items, frequently asked questions, andthe Download Center, containing versions of this report for the Adobe® Reader® software and thehistorical series in Excel, presentations to the market, Annual Report and Report on SocioenvironmentalResponsibility, the Social Balance Sheet, audio of the teleconferences on results, and others.

LINKS OF INTEREST

Banco do Brasil www.bb.com.br/Investor Relations (RI) www.bb.com.br/appbb/portal/ri/index.jspDownload Center (RI) www.bb.com.br/appbb/portal/ri/dce/MenuCenter.jspShareholder�s Room (also attends to www.bb.com.br/appbb/portal/ri/sla/index.jsp shareholders of other companies with custody in BB)

Banco do Brasil - Análise do Desempenho 3º Trimestre/2004 - 10

IntroductionBB showed net income of R$ 2.3 billion in the first nine months of 2004, against R$ 1.7 billion in thesame period of 2003, growing 29.2%. This result represents an annualized return on averageshareholders' equity of 23.8%. In the third quarter, the result was R$ 833 million, compared to theincome of R$ 665 million in the third quarter of 2003, growth was 25.2%. Income per share amounted toR$ 1.14 (unit), against R$ 0.91 in the 3rd quarter of 2003 (thousand share lot).

A special mention for the growth in the loan portfolio of R$ 84.1 billion, increase of R$ 11.5 billion, inrelation to September 2003. BB maintained its leadership for granting credit in Brazil, with 18.3% of themarket.

At the end of the quarter, the loans classified as AA, A, B and C accounted for 91.8% of the total of theportfolio, a quality of loan transactions that is higher than that of the National Financial System, whichshowed 89.4% in the same period.

The credit used by individual customers ended the quarter with a balance of R$ 14.2 billion, growing24.2% in relation to September 2003. The balance of Direct Consumer Credit (CDC) transactions, themain product intended for the segment, closed the quarter at R$ 9.6 billion, representing 7.7 milliontransactions.

The credit made available for micro and small businesses closed September 2004 with a volume of R$16.1 billion, growing 32.9% in relation to the same period of 2003. At the end of the 3rd quarter, thebalance used by this segment was R$ 11.7 billion. The main working capital line intended for thissegment, BB Giro Rápido, showed a balance of R$ 3,4 billion, growing 41.7% (Sep03 to Sep04). Thisline alone serves over 630 thousand companies. BB Giro Automático, a credit line exclusively for microcompanies with turnover of up to R$ 500 thousand created at the beginning of 2004, has recorded over66 thousand contracts.

The credit used by the over 23.5 thousand Wholesale customers added up to R$ 26.5 billion, R$ 5.5billion in operations abroad and R$ 21 billion in internal operations. Internally, headlight to workingcapital operations with a R$ 9 billion balance and credit for exportation operations with R$ 7.2 billion.

In the 3Q04, credit products based on receivables � short term transactions � offered by the Bank areBB Vendor, checks discounted and trade bills discounted, which reached the contracted volume of R$6.4 billion for the Wholesale market.

Banco do Brasil is also prominent in the structured operations market. In the Energy Sector, bySeptember, structured financings were contracted for seven energy projects, totaling 9 hydroelectricpower plants. These ventures add up to investments of about R$ 3 billion, with total financings of R$ 1.7billion. In the same way, Banco do Brasil has been working in the value chains of several sectors(particularly the agribusiness, automotive, pulp and paper and oil sectors), structuring specificoperations in such a way as to boost domestic production and contribute towards the increase ofexports.

BB has maintained its leadership in the financing for Brazilian agribusiness, the portfolio for which addedup to R$ 25.7 billion in September 2004, growing 3.6% in relation to the same period in 2003, when itrecorded R$ 24.8 billion. The CPR operations totaled 39,1 thousand contracts and R$ 2.8 billion in theperiod. In supporting family agriculture, operations totaled 450 thousand contracts and R$ 1.7 billion.

The main products of the Foreign trade finance portfolio are Advances on Foreign Exchange Contracts(ACC) and Advances on Delivered Exchange Securities (ACE), which reached a transacted volume ofUS$ 6.7 billion in the first nine months of 2004.


BB has maintained its leadership of the financial system in Customer Base, reaching 20.7 millioncustomers � 19.3 million individuals and 1.4 million businesses, increasing 21.3% (Sep/03 to Sep/04).Only from January to September, BB conquered 1.9 million customers. The increase in the CustomerBase confirms the synergy between the markets Retail, Wholesale and Public Sector markets,substantiated by payroll agreements.

BB DTVM closed the quarter with Assets under Management in the order of R$ 122.5 billion, growing33.4% in relation to the amount shown for the same period of 2003. This result corresponds to a 20%market share, which consolidates the leadership of BB DTVM as the largest manager of third partyfunds in Latin America.

The Bank maintained its leadership in Deposits and Money Market Borrowing, closing the quarter with atotal of R$ 157.1 billion, growing 5% in relation to September 2003 (R$ 30.2 billion in demand deposits;R$ 49.4 billion in time deposits; R$ 29.9 billion in savings deposits; R$ 5.5 billion in interbank depositsand R$ 42 billion in money market borrowing).

Shareholders� Equity reached R$ 13.8 billion, an increase of 17.8%, in relation to September 2003. Thisincrease is due mainly to the generation and incorporation of results.

The growing profits and the consequent increase in Shareholders� Equity made it possible for the BaselRatio to remain above the 11% required by the Central Bank. In September 2004, this ratio reached15.7%, compared to 14.3% in September 2003. The actual ratio permits BB to offer more than R$ 55.2billion in loans and financing.

The increase in revenues and the control over costs allowed a noteworthy improvement in theproductivity ratios. The coverage ratio (Service Revenues/Personnel Expenses) went up from 84% inthe 3rd quarter of 2003, to 98.4% in the 3rd quarter of 2004. Broadening the concept to the capacity forcovering all the administrative expenses, the ratio went up from 48.2% in the 3rd quarter of 2003, to54.9% in the 3rd quarter of 2004.

The Efficiency Ratio (Administrative expenses/operating income), in the 3rd quarter of 2004, was 55.9%,against 57.6%, achieved in the same period of 2003. The lower the ratio is, the higher the degree ofefficiency.

Service Revenues reached R$ 1.7 billion in the quarter, an increase of 21.5% when compared with thesame period of 2003. Customer relationship fees accounted for 30% of these revenues.

Administrative expenses, which comprise Personnel Expenses and Other Administrative Expenses,added up to R$ 3.1 billion in the 3rd quarter of 2004, an increase of 6.4% in relation to the same periodof the previous year.

With a single brand � BB Insurance � Banco do Brasil achieved premiums in the order of R$ 389.1million and R$ 698.3 million in its automobile and life insurance portfolios respectively, growing 20.3% e36.3% over the same period of the previous year.

In September 2004, BB reached 1.3 million participants in the open supplementary pension fundssegment, which accounted for R$ 7.2 billion in the managed portfolio. BB Previdência, which works inthe closed supplementary funds segment through multisponsored funds, reached 36 thousandparticipants and R$ 563.2 million in assets under management.

In capitalization bonds BB�s sales totaled R$ 2.2 billion in portfolio with 2,9 billion active Ourocap bonds,growth of 9% and 4.6% compared to same period last year.

Created with the purpose of facilitating access to durable and consumer goods, BB Consortium began,in April, a pilot project exclusively for BB members of staff, and, in August, made it available to all the


customers of Banco do Brasil. At the end of the quarter, over 3,095 customers were taking part ingroups for the acquisition of automobiles, motorcycles and electrical and electronic goods, totaling R$32,3 million in volume of business.

Banco Popular do Brasil (a BB subsidiary that works with microentrepreneurs and the informal sector)had won over, by the month of September, over 145.9 thousand customers in 1,720 points of service.The figures correspond to a daily average of 2,177 simplified accounts opened and the contracting of 26banking correspondents. The volume of banking transactions carried out in this period R$ 1.5 million incredits granted to over 6.9 thousand customers.

In the ANBID ranking of underwriting origination and distribution in the domestic fixed interest capitalmarket, BB reached 2nd place, having taken part in six operations in the quarter. In relation to thefinancial volume, BB occupies the 2rd place in the past 12 months, with a 15.2% share in the volumerecorded. Other highlights of the quarter were: the winning over of the shareholder base of Petrobras,made up of 136 thousand investors; 7th place in the ranking of purchase and sale transactions via theInternet; and three large operations of public share offers.

The credit and debit cards maintained their leadership in sales R$ 17.4 billion from January toSeptember, with a 20% market share. In the same period, the credit card base grew 1.2 million of units,closing the month of September with 6.6 million card. In the period Business customers correspond forR$ 550 million revenues, with 260 thousand Business cards.

Banco do Brasil is present in 2,977 municipalities in the whole of the national territory. At the end ofSeptember 2004, the Bank�s a distribution network consisted of 14,230 points (growing 10.1% in relationto September 2003) segmented as follows: 3,662 branches catering to the Retail market, 38 to theGovernment market, and 85 to the Wholesale market.

Banco do Brasil�s network abroad can count on 38 points of service (17 branches, 7 sub-branches, 9business units and offices, and 5 subsidiaries) in 21 countries.

The automated channels � automated teller machines, Internet, telephone/fax, cell phone, cashmanagement, POS (credit and debit card machines in commercial establishments) and bankingcorrespondents � accounted for 89.6% of the total of transactions carried out by BB customers in themonth of September 2004, against 85.2% in the same period of the previous year.

BB�s customers have at their disposal the largest network of automated teller machines in LatinAmerica, with access to terminals in Brazil and abroad. At the end of September 2004, this network had38,242 of them, against 34,679, in September 2003, growing 10.3%. In the quarter, 506 milliontransactions were carried out on the network of terminals, an increase of15.5% if compared with thesame period of the previous year.

Banco do Brasil continues in the leadership of customers registered on the Internet. At the end ofSeptember 2004, the number of registered customers reached 6.7 million, growing 18.7% in relation tothe same period of the previous year. The percentage of transactions carried out on the Internet went upfrom 27.7% in September 2003, to 31.8% in September 2004, of which 15% individuals and 16.8%businesses, using Cash Management.

In the same period (January to September), more than 23 million calls were answered in the CallingCenter to solve several customers and non-customers demands, like transactions, loans andinvestments, suggestions, complains and compliments, and also informations about BB�s products andservices.

BB�s work in the Federal Government�s Zero Hunger Program, founded on structured concrete actions,makes the Bank a benchmark for other companies. Amongst other actions, over 1,460 tons of foodstuffs


were collected; and applied R$ 1.7 million from Investment Fund BB Di Básico e BB Seguro VidaMulher.

The Banco do Brasil Foundation attended to some 135 thousand youngsters and adults by means of BBEducate, a program for teaching to read and write that relies on volunteers from BB itself.

Until September, the Regional Sustainable Development strategy developed by BB assisted about 9.4thousand families in the North and Northeast of Brazil, evolving resources in the amount of R$ 24million.

BB�s Highlights

Financial Statements (R$ million) Sep/03 Jun/04 Sep/04 Change onSep/03 - %

Change onJun/04 - %

Total Assets 215,134 227,374 235,599 9.5 3.6Securities 74,055 69,855 71,120 (4.0) 1.8 Securities Available for Trading 5,393 11,998 12,690 135.3 5.8 Securities Available for Sale 43,158 31,008 31,997 (25.9) 3.2 Securities Held to Maturity 25,109 25,146 25,945 3.3 3.2 Financial Derivatives 396 1,702 488 23.5 (71.3)Loans 60,418 69,241 69,954 15.8 1.0Permanent Assets 4,047 4,517 4,585 13.3 1.5Deposits 103,071 115,795 115,079 11.6 (0.6) Demand Deposits 20,498 29,425 30,191 47.3 2.6 Savings Deposits 26,578 28,939 29,915 12.6 3.4 Interbank Deposits 6,438 7,684 5,530 (14.1) (28.0) Time Deposits 49,558 49,747 49,444 (0.2) (0.6)Money Market Borrowing 46,478 37,132 42,003 (9.6) 13.1Shareholder�s Equity 11,687 12,864 13,771 17.8 7.1

Income (R$ milhões) 3Q03 2Q04 3Q04 Change on3Q03 - %

Change on/2Q04 - %

Gross Income from Financial Intermediation 2.962 2.421 2.334 (21,2) (3,6)Allowance for Loan Losses (777) (1.201) (1.071) 37,7 (10,9)Service Revenues 1.412 1.643 1.717 21,5 4,5Personnel Expenses (1.681) (1.952) (1.744) 3,7 (10,7)Other Administrative Expenses (1.221) (1.381) (1.344) 10,1 (2,7)Operating Income 1.213 1.144 1.365 12,5 19,2Recurring Income 665 703 724 8,8 2,9Net Income 665 805 833 25,2 3,4


Leaderships

- 1st in Assets � R$ 235.6 billion;

- 1st in Total Deposits � R$ 115.1 billion;

- Largest Loan Portfolio � R$ 84.1 billion;

- Leader in the export foreign exchange segment � 26.9% of the market;

- Leader in asset management in Latin America � R$ 122.5 billion, 20% market share;

- Largest Customer Base � 20.7 million customers;

- Leader in the Internet � 6.7 million registered customers;

- Largest distribution network in the country, with 14,230 points;

- Largest automated teller machine network in Latin America � 38,242;

- 2nd in the ANBID�s ranking of fixed income in volume and in the ranking of quantity of operations,with 15.2% market share.


1 � Economic EnvironmentIn the third quarter of 2004, the indicators of growth of the global economy were favorable to theBrazilian economy. The American Central Bank (Federal Reserve) continued its gradualist strategy ofraising the basic interest rate, favoring the maintenance of the high international liquidity. However, therise in oil prices continued to be the main source of risk in the short term, because of the potentialnegative effects on the international economic activity, whose consequences in the Brazilian economyhave been minimized, in the light of the strengthening of the domestic macroeconomic fundamentals.

Generally speaking, the domestic indicators of economic activity continue to show a trajectory ofrecovery, started in the second half of 2003. This dynamism, to begin with explained by the performanceof the export sector, started to spread positively to domestic demand. A favorable collaboration for thiscame from the real increase in the volume of credit in the economy and the gradual growth of the levelsof income and employment. An important consequence is the fact that the level of usage of the installedcapacity of the transformation industry having reached the level of 86.1% in the quarter, the highestsince January 19771.

In this context, the concerns that a possible mismatch between supply and demand could impair thecontinuity of the growth of the economy prompted preventive action from the Brazilian Central Bank,which, in September, started a cycle of moderate adjustment of the basic interest rate, raising it to16.25% p.a.. This movement was also a response to the increase in commodity prices on theinternational market and to the increase in the expectations for inflation in 2005.

The tightening up of the monetary policy, though, does not alter the prospects shown for an evolution ofthe economic fundamentals, including the public debt/GDP ratio. Furthermore, the signs point to theapproval/implementation of the microeconomic agenda that will drive private investment and sustainedgrowth of the economy.

Table 1. Main Macroeconomic Indicators

Change %

3Q03 2Q04 3Q04 12 monthsPtax Dollar Sale 1.8 6.8 (8.0) (2.2)Accumulated IGP-DI FGV 1.5 4.0 3.0 11.7Accumulated IGP-M FGV 1.1 4.0 3.3 11.9Accumulated Selic 5.6 3.7 3.9 16.7Accumulated TR (formerly BTN) 1.2 0.5 0.6 2.1Ptax Dollar Sale * 2.9234 3.1075 2.8586 -* Closing RateSource: Economática

The fall in Selic from 5.6% in 3Q03 to 3.9% in 3Q04 brought about a reduction in the results fromsecurities, considering that, in net terms, BB had assets with this index.

On the other hand, the exchange rate appreciation of 8.0% against depreciation of 6.8% in the previousperiod brought about an increase in Income tax and social contribution, in the light of the characteristicsof the assets and liabilities in foreign currency. (Please see the Net Income chapter)

The rise in inflation from 1.5% in 3Q03 to 3.0% in 3Q04 caused negative effects on the results,considering that the IGP-DI indexes the Bank�s actuarial liability.

1 Economic Situation Probe of the Getúlio Vargas Foundation


2 � BB Shares2.1 Shares

In September 2004, Banco do Brasil�s approved capital stock was made up of 743,275,506 ordinaryshares, represented in dematerialized form and without any nominal value. The largest shareholder isthe National Treasury, with 71.8% of the capital, followed by Caixa de Previdência dos Funcionários doBanco do Brasil (Previ) with 13.8%, and BNDESPar � the equity investment company of National Bankfor Economic and Social Development � which has 5.7% of the capital. Without taking intoconsideration the shares that are held in treasury, the other shares � 7.2% - are well spread in themarket.

On 07.08.2004, the Board of Directors approved the carrying out of the operations of a Public Offer forAcquiring �B� and �C� Warrants and the simultaneous Private Share Issue, with the objective ofacquiring, for the purposes of cancellation, the outstanding warrants. The operations had the intent ofenhancing the price of the Bank�s shares, which besides adding value for the current shareholdersmakes it possible to attract Brazilian and international capital.

The result of the operations was the object of the Advice to Shareholders of 11.12.2004. With regard tothe Private Share Subscription, the total reached was 66,913,789 ordinary shares, in the amount of R$1,489,500,943.14. Also subscribed to were 428,120 ON shares on account of the exercise of 410,691�B� warrants, corresponding to R$ 8,463,725.30. The two issues add 67,341,909 shares to the Bank�scapital, corresponding to an 8.4% dilution of the previous shareholding base, without counting theshares in treasury.

After approval by the Shareholders� Meeting and ratification by the Monetary Authority, the Bank�scapital stock will go up to R$ 9,864,153,395.17, divided into 810,617,415 ordinary shares, representedin dematerialized form and without any nominal value. The table below evidences the new compositionof BB�s shareholder base:

Table 2. Shareholding Breakdown

Shareholders % Before* % After*

National Treasury 71.8 72.1Previ 13.8 13.9BNDESPar 5.7 5.8Free Float 7.2 6.8 Foreign Capital 2.7 2.5

Pension Funds 0.6 0.5

Others 3.9 3.8

Subtotal 98.5 98.6

Shares in Treasury 1.5 1.4

Total 100.0 100.0* Before and after the Public Offer for Acquiring Warrants.

BB�s shareholder base is characterized by the great concentration of shareholders with a small share inthe capital. As can be seen from the table below, 270,454 shareholders (98.7%) account for 1.0% of thecapital, while 3,481 shareholders (1.3%) hold 99.0% of the total of shares.


Table 3. Shareholders by Range of Shares Owned

Range of shares owned Nº shareholders % Shareholders Qty. Shares % Qty. Shares1 to 10 shares 182,267 66.5 654,615 0.111 to 50 shares 60,936 22.2 1,380,191 0.251 to 100 shares 11,644 4.3 829,368 0.1101 to 1000 shares 15,607 5.7 4,541,632 0.6Over 1000 shares 3,481 1.3 735,869,700 99.0Total 273,935 100.0 743,275,506 100.0

Table 4. Free Float by Range of Shares Owned

Range of shares owned Nº shareholders % Shareholders Qty. Shares % Qty. Shares1 to 10 shares 183,266 66.0 659,098 1.211 to 50 shares 62,622 22.6 1,396,978 2.651 to 100 shares 11,845 4.3 844,401 1.6101 to 1000 shares 16,301 5.9 4,738,646 8.9Over 1000 shares 3,595 1.3 45,349,710 85.6Total 277,629 100.0 52,988,833 100.0

With regard to the tax residence of the investors, it is to be noted that that quantity of shareholdersresident in Brazil is 273,779 (99.94%), who hold 97.3% of the total of the shares, while the quantity offoreign shareholders is 156 (0.06%), who hold 2.7% of the shares.

Table 5. Tax Residence of the Investors

Tax Residence Nº shareholders % Shareholders Qty. Shares % Qty. SharesBrazil 273,779 99.94 723,406,149 97.3Abroad 156 0.06 19,869,357 2.7Total 276,632 100.00 743,275,506 100.0

Total Distribution of the Free Float

Figure 1. Total Distributionof the Free Float

With regard to the total of the Bank�s shares that are well spread out in the market (7.1%), that is, thefree float, the predominance of individuals is observed, as they hold 44.6% (23.7 million shares) of thetotal.

The major part of the free float, 66.2% (35.6 million shares), is under the custody of the BrazilianClearing and Depository Corporation (CBLC), distributed according to Figure 2 below. It is to be notedthat, of the total of shares available for trading at the CBLC, 55.6% is to be found in the possession of

44.6%

18.0%

37.4%

Private Individuals Corporate Bodies Foreign Capital


foreign investors. It is important to point out that the foreign investors� share in BB�s capital is 2.7%, andis limited by law to a maximum of 5.6%.

Free Float Distribution at the CBLC

Figure 2. Free FloatDistribution at the CBLC

23.0%

21.4%

55.6%

Private Individuals Corporate Bodies Foreign Capital


2.2 WarrantsIn 1996, on the occasion of BB�s capital increase, three series of warrants were issued: A, B, and C,maturing in 2001, 2006, and 2011, respectively. The exercise price for these warrants was establishedat R$8.50, with readjustment by the IGP-DI. On 09.30.2004, the updated price corresponds to 20.89.

Studies carried out with the market indicated that the subscription warrants, conditioned to a pre-established price, had a negative influence on the value of the shares. Accordingly, in February 2004,the Bank�s Board of Directors approved a proposal that authorized the Management Council toimplement a Public Offer of Acquisition of the �� B" and "C" warrants and a Private Share Issue. . On07.22.2004, the Bank advised the market that the minimum percentage of 90% of acceptances hadbeen reached, guaranteeing that the operations would be carried out within the period previously stated(08.13.2004).

The result of the adhesion to the Public Offer of Acquisition of Warrants implied the acquisition by theBank of 197,187,709 �B� warrants and 328,957,694 �C� warrants, totaling a disbursement of R$1,450,208,125.93. This amount was debited to the Revenues Reserves account of the Bank�sshareholders� equity. After the results of the operations were made known, the breakdown of the warrantholders came to seen as in the following table:

Table 6. Breakdown of the Warrants Holders

% BNB % BNC

Private Individuals 41.2 40.6Corporate Bodies 35.1 36.1

Foreign Capital 23.7 23.3

Total 100.0 100.0

The warrants in circulation, �B� and �C�, show the following characteristics after the Public Offer ofAcquisition of Warrants:

Table 7. B and C Warrants Series

Series Code Period Quantity Exercise Price R$ Quotation in R$B Warrants BBAS 12 03.31 to 06.30.2006 15,993,142 20.89 4.00C Warrants BBAS 13 03.31 to 06.30.2011 27,028,746 20.89 4.16

In a simulation after the Public Offer of Acquisition Warrants, thinking that until 2011 won´t be anyincrease of capital and the total amount of �B� and �C� bonus will be exercised on term, the expecteddilution of BB�s capital is 5.0%, where 2.0% is related to �B� bonus and 3.0% related to �C� bonus.


2.3 Performance of the SharesThe Bovespa index closed the month of September with an appreciation of 1.9% in nominal terms,reaching 23,245 points.

The behavior of the stock market in the third quarter was influenced by the positive data from theBrazilian economy and by the disclosure of economic measures that reflect the government�scommitment to a declining path for inflation and an austere fiscal policy.

Prominent in this context are the surplus in the trade balance, the 25 basic points rise in the interestrate, which went up from 16% to 16.25% p.a., and the increase in the target for the primary surplus in2004, from 4.25% to 4.5% of the GDP. Added to this, there was a rise in the Brazilian rating by threeinternational agencies, justified by the favorable progress of the Brazilian economy in the year.

In the light of this positive domestic scene, the falls observed in the main American and European stockexchanges, caused by the rise in the price of oil and doubts about the speed of the increase in interestrates in the United States were not capable of affecting negatively the domestic market.

Comparing the appreciation of BB shares with Ibovespa in the third quarter of this year, in relation to thesame period of the previous year, was seen that the Bank�s shares enjoyed an appreciation of 57.5%,while Ibovespa rose 45.2%.

BB Shares vs. IbovespaBasis 100 = 09.30.2003

Source: Economática

Figure 3. BB Shares vs. Ibovespa

With regard to the shares participation in the theoretical portfolio of Ibovespa, calculated on a four-monthly basis, a reduction was seen in the last 6 four-month period. In Banco do Brasil�s case, itsparticipation in Ibovespa was as shown below:

-

50.00

100.00

150.00

200.00

250.00

300.00

Sep/03 Out/03 Nov/03 Dec/03 Jan/04 Fev/04 Mar/04 Abr/04 Mai/04 Jun/04 Jul/04 Aug/04 Sep/04

Daily Volume BBAS3 - R$ million BBAS3 IBOVESPA

57.5%45.2%


BBAS3 Share in Ibovespa - %


Figure 4. BBAS3 Share in Ibovespa

The reduction in the participation of BB�s shares in Ibovespa can be explained by the graphs below. Ascan be observed, the financial volume and the quantity of deals in Ibovespa enjoyed growth of 9.3% and3.3%, respectively. In other way, BBAS3 shares presented a reduction of 31.3% and 22.8% fromSeptember 2003 to September 2004. These indicators go into the Tradability Index, which determinesthe participation of shares in the index.

Financial Volume and Quantity Traded of BBAS3Basis 100 = 09.30.2003


Figure 5. Financial Volume and Quantity Traded of BBAS3

Market capitalization reached R$18,447 million at the end of September 2004, compared to R$ 11,712million in the same period of the previous year, an increase of 57.5%. The price/book value ratioreached 1.34x, compared to 1.00x , and net income per share reached R$1.14, compared to R$0.91.

1.67

1.351.11

0.970.83

1.96

Jan/03 - Abr/03 Mai/03 - Aug/03 Sep/03 - Dec/03 Jan/04 - Abr/04 Mai/04 - Aug/04 Sep/04 - Dec/04

Quantity Traded

3.3 %

-22.8%0.070.0

140.0210.0280.0350.0

Set/03 Dez/03 Mar/04 Jun/04 Set/04

Ibovespa BBAS3

Financial Volume Traded

9.3 %

-31.3%0.070.0

140.0210.0280.0350.0

Sep/03 Nov/03 Jan/04 Mar/04 Mai/04 Jul/04 Sep/04

Ibovespa BBAS3


Market Indices

Figure 6. Market Indices

Net income per Share - R$

0.820.65

0.820.91 0.87 0.84

1.10 1.14

4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04

Price / Earnings 12 months

3.54 3.574.20

5.00

7.386.77

6.05 6.38

Dec/02 Mar/03 Jun/03 Sep/03 Dec/03 Mar/04 Jun/04 Sep/04

Price / Book Value

0.78 0.760.88

1.00

1.44 1.34 1.28 1.34


Market Capitalization - R$ million

7,174 7,7089,582

11,712

17,568 17,041 16,47018,447


Book Value per Share - R$

12.56 13.88 14.85 15.97 16.63 17.33 17.57 18.81


Free Float Capitalization - R$ million

519 558694

848

1,272 1,234 1,1921,339


Dividends o r Interest on Own Capital

307 272322

424 450

1H02 2H02 1H03 2H03 1H04

Payout Rate - %

37.3

22.6

29.832.5 31.7

1H02 2H02 1H03 2H03 1H04

Net Income - R$ million

823

1,2051,079

1,3021,421

1H02 2H02 1H03 2H03 1H04

Dividend Yield - %

4.2

7.06.2

3.54.6

1H02 2H02 1H03 2H03 1H04


3 � Corporate GovernanceThe practices of corporate governance implemented voluntarily by BB characterize its willingness toobserve a set of corporate rules, generically known as �good corporate governance practices�, stricterthan those required by Brazilian legislation. These rules have the main objective of expanding the rightsof the shareholders and to provide for an additional disclosure, improving the quality of the informationsupplied.

The appreciation and the liquidity of the shares in the market are positively influenced by the degree ofsecurity that the rights granted to the shareholders offer and by the quality of the information supplied bythe companies. The adoption of best corporate governance practices, amongst other factors, hascontributed towards the appreciation of BB shares and of other assets issued by the company.

The Animec Seal, awarded by the National Capital Market Investors Association (ANIMEC), came toattest to Banco do Brasil�s commitment to corporate governance. This award is a recognition given tocompanies, bodies, entities or institutions that have collaborated effectively in the defense of theinterests of the investors in the Brazilian capital market, or have contributed to its development.

BB won the award in 2004 for having shown significant progress in relation to its corporate governancepractices, highlighting the conversion of the preference shares into ordinary ones and the grouping ofshares (1000 x 1), with an increase in liquidity.

Besides the Animec Seal, another indicator that corroborates the Bank�s commitment to its shareholdersis the fact of being one of the eight companies that constitute the �I3 � Individual Investor Index�. Thisindex is made up only by companies that have established special policies for relationship with theindividual shareholder and investor in funds. BB stared to compose the index in 2004.

The members of the Audit Committee, created in November 2003, were elected by the ExtraordinaryGeneral Meeting (EGM), held on April 27, 2004.This Committee, made up of three members, of whichtwo indicated by the majority shareholder and one by the minority shareholders, had its plan of workapproved by the Board of Directors, to which it reports. Amongst its prerogatives, we highlight thesupervision of the activities and the assessment of the works of the Independent Audit and the InternalAudit; and advising the Board of Directors as far as the exercise of its supervisory functions areconcerned.

BB�s Executive Board has 20 Directorates, besides the Management Council, made up by the Presidentand seven Vice-Presidents. All the members of the Directorate were reelected by the Board of Directors,at a meeting held on September 2, for the 2004/2007 mandate.

The Investor Relations Management (RI) responds for BB�s relationship with its shareholders and theinvestor market. In the belief that the present-day investor is globalized and more alert to businessattitudes, besides being resistant to massification and having quicker and easier access to new markets,RI seeks to cater to the needs of this public by putting at its disposal corporate information with qualityand detail, in line with the best corporate governance practices.

The RI website, on the BB portal (www.bb.com.br) has been reformulated to provide analysts, investorsand shareholders with new contents and improvement in navigability, besides including interactive tools,such as balance sheets and economic indicators.

The website also has an unprecedented Shareholder�s Room, exclusively to attend to the BBshareholder, including non current account holders, via access to a secure environment, which makes itpossible to consult balances and statements of position, a statement of share movement, and an incometax schedule, amongst others.


In the third quarter of 2004, the Bank held eight meetings in Brazil with third party funds managers,investors and capital market analysts in Brazil and abroad, two teleconferences on results (one inPortuguese and another in English), and one to provide clarification on the Public Offer For Acquiring Band C Warrants and the Private Share Subscription. It also carried out two road shows, in the UnitedStates and Europe, to present BB to potential investors in an issue of Banco do Brasil subordinateddebt; and it took part in an international conference that brought to, in New York, executives from majorcompanies in Latin America, Asia, Eastern Europe and South Africa.


4 � Other InformationTable 8. Other Information

4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04ProfitabilityNet Income per Share - R$ 0.82 0.65 0.82 0.91 0.87 0.84 1.10 1.14ROE � Annualized % 30.2 21.3 24.8 25.7 23.1 21.3 27.7 27.5ROE � Accumulated and Annualized % 22.6 21.3 22.7 22.9 22.3 21.3 23.9 23.8ROA � Annualized % 1.2 0.9 1.2 1.3 1.1 1.1 1.4 1.4GFM / (Assets - Permanent) � Annualized % 8.2 7.9 7.3 7.6 7.4 6.9 7.4 7.1GFM / Remunerated Assets � Annualized % 10.3 9.8 9.2 9.5 9.0 8.5 9.2 8.8ProductivityEfficiency Ratio - % 58.0 56.7 54.0 57.6 56.5 54.2 59.0 55.9Service Fees / Personnel Expenses - % 77.1 80.7 90.7 84.0 77.5 98.6 98.1 98.4Service Fees / Administrative Expenses - % 42.5 45.0 54.5 48.2 48.0 56.8 53.1 54.9Personnel Expenses per Workforce - R$ 17,057 16,737 16,408 18,571 21,456 17,049 18,085 18,734Workforce / (Branches + PAA + PAB) 17 17 17 17 17 17 17 17Credit Portfolio QualityAllowance / Credit Portfolio - % 5.6 5.5 5.6 5.6 5.4 5.9 6.1 6.4Allowance / (E + F + G + H) - % 101.1 107.8 111.3 113.1 118.4 126.6 128.9 127.8Portfolio Net of Provions / Total Portfolio - % 95.0 95.2 95.1 95.1 95.3 95.1 95.0 94.8Capital StructureLeverage x 22.2 20.6 18.9 18.4 18.9 18.2 17.7 17.1BIS Ratio - % 12.2 13.4 13.8 14.3 13.7 14.3 14.5 15.7Total Quantity of Shares � thousand 732,018 732,018 732,018 732,018 732,018 732,018 732,018 732,018Quantityof Tresaury Shares � thousand 11,258 11,258 11,258 11,258 11,258 11,258 11,258 11,258Capital MarketsPrice / Earings 12 months 3.54 3.57 4.20 5.00 7.38 6.77 6.05 6.38Price / Book Value 0.78 0.76 0.88 1.00 1.44 1.34 1.28 1.34Market Capitalization - R$million 7,174 7,708 9,582 11,712 17,568 17,041 16,470 18,447Book Value per Share - R$ 12.56 13.88 14.85 15.97 16.63 17.33 17.57 18.81Price of Share 9.80 10.53 13.09 16.00 24.00 23.28 22.50 25.20Structural InformationDistribution Network 12,333 12,545 12,755 12,930 13,220 13,549 13,908 14,230 Branches 3,164 3,183 3,209 3,218 3,241 3,564 3,618 3,662 PAA 418 421 421 424 438 181 187 188 PAB 1,595 1,606 1,598 1,576 1,562 1,541 1,520 1,495 PAE 4,157 4,323 4,484 4,609 4,821 5,054 5,280 5,461 SAA 2,978 2,992 3,023 3,084 3,140 3,191 3,285 3,406 PAP 21 20 20 19 18 18 18 18Accounts � thousand 15,391 15,911 16,718 17,049 18,751 19,275 20,055 20,677 Individual � thousand 14,399 14,905 15,645 15,937 17,534 18,047 18,781 19,303 Business � thousand 992 1,005 1,073 1,112 1,217 1,228 1,274 1,373Saving Accounts � mil 9,985 10,231 10,433 10,911 11,463 11,704 12,023 12,506 Individual � thousand 9,916 10,151 10,352 10,823 11,366 11,605 11,914 12,392 Business � thousand 69 80 80 88 96 99 109 114Workforce 88,159 90,161 90,255 90,531 90,821 92,347 92,606 93,091 Employees 78,619 79,527 79,474 79,710 80,640 81,795 81,936 82,565 Interns 9,540 10,634 10,781 10,821 10,181 10,552 10,670 10,526


4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04Global Ratings Fitch Ratings Individual D/E D/E D D D D C/D C/D Short-Term � Local Currency B B B B B B B B Long-Term � Local Currency B B B B B+ B+ BB- BB- Short-Term � Foreign Currency B B B B B B B B Long-Term � Foreign Currency B B B B B+ B+ B+ B+ Moody's Financial Strength E+ E+ E+ E+ E+ E+ E+ E+ Short-Term � Local Currency P-2 P-2 P-2 P-2 P-2 P-2 P-2 P-2 Short-Term � Foreign Currency NP NP NP NP NP NP NP NP Long-Term Debt � Foreign Currency Ba3 Ba3 Ba3 Ba3 Ba3 Ba3 Ba3 Ba2 Long-Term Deposits � Local Currency A3 A3 A3 A3 A3 A3 A3 A3 Long-Term Deposits � Foreign Currency B3 B3 B3 B3 B3 B3 B3 B2 Standard & Poor's Long-Term � Local Currency BB BB BB BB BB BB BB BB Long-Term � Foreign Currency B+ B+ B+ B+ B+ B+ B+ B+Ratings Nacionais Fitch Atlantic Ratings Short-Term F1+(bra) F1+(bra) F1+(bra) F1+(bra) F1+(bra) F1+(bra) F1+(bra) F1+(bra) Long-Term AA(bra) AA(bra) AA(bra) AA(bra) AA(bra) AA(bra) AA(bra) AA(bra) Moody's Short-Term BR-1 BR-1 BR-1 BR-1 BR-1 BR-1 BR-1 BR-1 Long-Term Aaa.Br Aaa.Br Aaa.Br Aaa.Br Aaa.Br Aaa.Br Aaa.Br Aaa.Br

4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 Demand Deposits Rate 45% 60% 60% 45% 45% 45% 45% 45% Adittional 8% 8% 8% 8% 8% 8% 8% 8% Compulsory Investments* 25% 25% 25% 25% 25% 25% 25% 25% Free 22% 7% 7% 22% 22% 22% 22% 22% Savings Rate 20% 20% 20% 20% 20% 20% 20% 20% Adittional 10% 10% 10% 10% 10% 10% 10% 10% Compulsory Investments* 30% 30% 30% 40% 40% 40% 40% 50% Free 40% 40% 40% 30% 30% 30% 30% 20% Time Deposits Rate 15% 15% 15% 15% 15% 15% 15% 15% Adittional 8% 8% 8% 8% 8% 8% 8% 8% Free 77% 77% 77% 77% 77% 77% 77% 77% Judicial Deposits Rate 60% 60% 60% 60% 60% 15% 0% 0% Free 40% 40% 40% 40% 40% 85% 100% 100%* Compulsory Investments at BB are invested in Agrinusiness operations


5 � Summarized Financial Statements5.1 Summarized Balance Sheet

Table 9. Summarized Balance Sheet - AssetsR$ million

Balances Chg. %Sep/03 Jun/04 Sep/04 on Sep/03 on Jun/04

ASSETS 215,134 227,374 235,599 9.5 3.6Current and Long-term Assets 211,087 222,858 231,014 9.4 3.7Available Funds 6,083 15,841 16,669 174.0 5.2Short-term Interbank Investments 23,257 14,475 18,559 (20.2) 28.2Securities 74,055 69,855 71,120 (4.0) 1.8 Securities Available for Trading 5,393 11,998 12,690 135.3 5.8 Securities Available for Sale 43,158 31,008 31,997 (25.9) 3.2 Securities Held to Maturity 25,109 25,146 25,945 3.3 3.2 Financial Derivatives 396 1,702 488 23.5 (71.3)Interbank Accounts 18,279 20,959 21,152 15.7 0.9 Deposits with the Central Bank 16,127 18,781 18,919 17.3 0.7 Compulsory Deposits on Demand Deposits and Float 5,324 7,118 6,527 22.6 (8.3) Compulsory Deposits on Savings Deposits 10,803 11,662 12,392 14.7 6.3 Other 2,152 2,178 2,232 3.7 2.5Intrabank Accounts 413 13 108 (73.8) 714.4Loans 60,418 69,241 69,954 15.8 1.0 Public Sector 4,693 4,647 4,552 (3.0) (2.0) Private Sector 59,475 69,472 70,520 18.6 1.5 ( Allowance for Loan Losses) (3,750) (4,877) (5,118) 36.5 4.9Leasing 24 6 6 (74.3) 6.5 Leasing and Subleasing Receivables 335 411 472 41.1 15.0 (Unearned Lease Income) (296) (385) (443) 50.0 15.3 (Allowance for Lease Losses) (15) (20) (22) 49.6 12.0Other Receivables 28,330 32,196 33,194 17.2 3.1 Receivable on Guarantees Honored 75 29 41 (45.2) 43.9 Foreign Exchange Portfolio 9,971 11,508 11,455 14.9 (0.5) Income Receivable 342 309 354 3.7 14.7Trading and Brokerage of Securities 48 45 41 (14.5) (7.7) Specific Credits 480 516 530 10.4 2.7 Specific Operations 1 1 1 (0.0) 0.0 Tax Credits 9,897 8,971 8,505 (14.1) (5.2) Atuarial Assets - 909 1,450 - 59.5 Warrants Deposits Receivable 5,698 7,750 8,127 42.6 4.9 Other Credits 3,134 3,746 4,437 41.6 18.4 (Provision or Doubtful Receivables) (1,317) (1,587) (1,749) 32.8 10.2 (With Loan Characteristics) (279) (205) (234) (16.2) 14.1 (Without Loan Characteristics) (1,038) (1,383) (1,515) 45.9 9.6Other Assets 228 272 252 10.7 (7.4) Interest in Companies 0 0 0 5.9 (4.3) Other Assets 403 398 391 (3.0) (1.6) (Provision for Possible Losses) (204) (201) (201) (1.5) (0.1) Prepaid Expenses 28 76 62 118.5 (18.6)Permanent Assets 4,047 4,517 4,585 13.3 1.5 Investments 916 823 843 (8.0) 2.4 Property and Equipment 2,403 2,730 2,723 13.3 (0.3) Leasing Assets 411 466 519 26.2 11.5 Deferred Charges 317 498 500 57.7 0.3


Table 10. Summarized Balance Sheet - LiabilitiesR$ million

Balances Chg. %

Sep/03 Jun/04 Sep/04 on Sep/03 on Jun/04

LIABILITIES AND SHAREHOLDER�S EQUITY 215,134 227,374 235,599 9.5 3.6Current and Long-term Liabilities 203,341 214,373 221,689 9.0 3.4Deposits 103,071 115,795 115,079 11.6 (0.6) Demand Deposits 20,498 29,425 30,191 47.3 2.6 Savings Deposits 26,578 28,939 29,915 12.6 3.4 Interbank Deposits 6,438 7,684 5,530 (14.1) (28.0) Time Deposits 49,558 49,747 49,444 (0.2) (0.6)Money Market Borrowing 46,478 37,132 42,003 (9.6) 13.1Funds from Acceptances and Securities Placed 1,615 1,397 768 (52.5) (45.0) Foreign Securities 1,615 1,397 768 (52.5) (45.0)Interbank Accounts 1,816 1,945 2,034 12.0 4.5Intrabank Accounts 989 1,189 1,852 87.3 55.8Borrowing 7,509 13,872 16,017 113.3 15.5Foreign Borrowing 7,509 13,872 16,017 113.3 15.5Domestic Onlending � Official Institutions 6,311 8,448 8,778 39.1 3.9 National Treasury 1,222 1,940 2,059 68.4 6.1 BNDES 2,821 3,322 3,484 23.5 4.9 CEF - - - - - Finame 1,747 2,720 2,662 52.4 (2.1) Other Institutions 521 466 574 10.2 23.1Foreign Onlending 2 1 9 374.2 518.9Financial Derivatives 530 1,996 370 (30.2) (81.5)Other Accounts Payable 35,021 32,599 34,780 (0.7) 6.7 Collection of Taxes and Contributions 2,185 2,168 2,328 6.6 7.4 Foreign Exchange Portfolio 10,120 5,480 7,509 (25.8) 37.0 Shareholder and Statutory Distributions 125 644 262 109.3 (59.3) Taxes and Social Security 902 984 1,013 12.3 3.0 Trading and Brokerage of Securities 3,407 4,217 3,759 10.3 (10.9) Financial and Development Funds 1,707 1,825 1,814 6.3 (0.6) Special Operations 2 2 2 (0.3) (0.1) FCO (Subordinated Debt) 4,833 5,573 6,637 37.3 19.1 Actuarial Liabilities 3,759 2,894 2,885 (23.3) (0.3) Other Liabilities 7,980 8,812 8,571 7.4 (2.7)Unearned Income 105 138 139 32.0 1.2Shareholders� Equity 11,687 12,864 13,771 17.8 7.1 Capital 8,366 8,366 10,302 23.1 23.1 (Unpaid Capital) - - (445) - - Capital Reserves 5 5 5 0.3 (0.0) Revaluation Reserves 25 24 26 4.2 5.9 Revenue Reserves 2,796 4,645 3,195 14.3 (31.2) Mark-to-Market � Securities and Derivatives (43) (51) (17) (59.8) (66.0) Retained Earnings (Accumulated losses) 0 - 0 (31.3) - (Treasury Shares) (126) (126) (126) - - Income Accounts 665 - 833 25,2 -


5.2 Summarized Corporate Law Income StatementTable 11. Summarized Corporate Law Income Statement

R$ million

Quarterly Flow Chg. %

3Q03 2Q04 3Q04 on 3Q03 on 2Q04

Financial Intermediation Income 10,032 8,159 7,165 (28.6) (12.2) Loans 4,239 4,361 4,120 (2.8) (5.5) Leasing 20 21 23 16.1 9.4 Securities 4,444 2,930 2,660 (40.1) (9.2) Financial Derivatives (201) (194) 22 10.7 11.1 Foreign Exchange Portfolio 1,093 729 - (100.0) (100.0) Compulsory Investments 438 312 340 (22.2) 9.0Financial Intermediation Expenses (7,070) (5,739) (4,831) (31.7) (15.8) Money Market Funds (4,598) (3,070) (3,222) (29.9) 4.9 Borrowing, Assignments and Onlending (1,695) (1,467) (315) (81.4) (78.6) Foreign Exchange Portfolio - - (224) - - Allowance for Loan Losses (777) (1,201) (1,071) 37.7 (10.9)Gross Income from Financial Intermediation 2,962 2,421 2,334 (21.2) (3.6)Other Operating Income (Expenses) (1,749) (1,276) (969) (44.6) (24.0) Service Revenues 1,412 1,643 1,717 21.5 4.5 Personnel Expenses (1,681) (1,952) (1,744) 3.7 (10.7) Other Administrative Expenses (1,221) (1,381) (1,344) 10.1 (2.7) Taxes (271) (360) (385) 42.1 6.9 Equity Int. in the Results of Subs. and Affil. 147 347 (275) (386.5) (279.2) Other Operating Revenues 366 983 2,637 620.7 168.4 Other Operating Expenses (501) (555) (1,576) 214.2 184.1Operating Income 1,213 1,144 1,365 12.5 19.2Non-operating Income 17 39 80 363.5 104.5Income Before Taxes 1,231 1,184 1,445 17.4 22.1 Income and Social Contribution Taxes (516) (239) (545) 5.7 128.5 Statutory Profit Sharing (50) (140) (67) 34.4 (52.1)Net Income 665 805 833 25.2 3.4


5.3 Income Statement with RealocationsTable 12. Income Statement with Reallocations

R$ millionQuarterly Flow Chg. %

3Q03 2Q04 3Q04 on 3Q03 on 2Q04

Financial Intermediation Income 10,181 8,462 7,455 (26.8) (11.9) Loans 4,239 4,361 4,120 (2.8) (5.5) Leasing 20 21 23 16.1 9.4 Securities 4,444 2,930 2,660 (40.1) (9.2) Financial Derivatives (201) (194) 22 10.7 11.1 Foreign Exchange Portfolio 1,093 729 (224) (220.5) (230.7) Compulsory Investments 438 312 340 (22.2) 9.0 FX Gain (Loss) on Foreign Investments (1) 105 268 (354) (535.8) (332.3) Other Op. Inc. of a Fin. Intermed. Nature (2) 43 35 869 1.913.3 2.370.0Financial Intermediation Expenses (6,293) (4,537) (3,536) (43.8) (22.1) Money Market Funds (4,598) (3,070) (3,222) (29.9) 4.9 Borrowing, Assignments and Onlending (1,695) (1,467) (315) (81.4) (78.6)Gross Financial Margin 3,888 3,925 3,919 0.8 (0.2) Allowance for Loan Losses (3) (5) (747) (903) (856) 14.6 (5.3)Net Financial Margin 3,141 3,022 3,063 (2.5) 1.4 Service Revenues 1,412 1,643 1,717 21.5 4.5 Taxes on Revenues (4) (242) (323) (345) 42.6 6.7Contribution Margin 4,312 4,341 4,435 2.9 2.2Administrative Expenses (2,931) (3,093) (3,129) 6.7 1.1 Personnel Expenses (7) (1,681) (1,675) (1,744) 3.7 4.1 Other Administrative Expenses (1,221) (1,381) (1,344) 10.1 (2.7) Other Tax Expenses (4) (29) (37) (41) 38.0 8.4Commercial Income 1,381 1,248 1,307 (5.4) 4.7Other Operating Income (Expenses) (167) (245) (51) (69.4) (79.1) Equity Interest in Results of Subs. and Affil. (1) 42 79 80 90.1 0.6 Other Operating Income (2) (6) (8) 323 383 457 41.6 19.3 Other Operating Expenses (2) (3) (532) (707) (588) 10.5 (16.9)Operating Income 1,213 1,003 1,256 3.5 25.1Non-operating Income 17 39 80 363.5 104.5Income Before Taxes 1,231 1,043 1,336 8.5 28.1 Income and Social Contribution Taxes (9) (10) (516) (200) (545) 5.7 173.1 Statutory Profit Sharing (50) (140) (67) 34.4 (52.1)Recurring Income 665 703 724 8.8 2.9Extraordinary Items - 102 109 - 6.7 Extraordinary Provision for Credit Risks (5) - (146) (80) - (45.5) Recovery of Undue Taxes (6) - 565 - - (100.0) Provision for Retirement Incentive Plan (7) (8) - (277) 189 - 68.0 Provision for Non-recurring IR and CS (9) - (192) - - - Interest on Own Capital Tax Benefit (10) - 153 - - (100.0)Net Income 665 805 833 25.2 3.4


5.3.1 Details of Reallocations

The adjustments made in the statement of income to arrive at the reallocated statement of income aredetailed below. These adjustments did not change the final result, since they were only intended toarrange more coherently revenue and expense items, considering the performance dynamics of afinancial institution. Basically, these adjustments were intended to:

a) Allow the financial margin recorded in the period to reflect, effectively, the gain from all theremunerated assets, seeking to inform the market what was the spread achieved from the divisionof this margin by the assets, except the permanent assets. For this, it was necessary to:

• Include in the financial margin income recorded in other operating income that had intermediationcharacteristics and which was derived from remunerated assets recorded in the balance sheetunder other assets;

• Identify the foreign exchange gain/(loss) on financial assets and liabilities abroad in the quarter in aspecific financial margin item (financial equity);

• Retain as financial margin amounts related to negative foreign exchange adjustments that wererecorded in other operating income and expenses to avoid inverting the balance of accounts of afinancial intermediation nature;

b) segregate the impacts of extraordinary events in order to demonstrate recurring income of the Bankin the period.

Reallocations in the Gross Financial Margin(1) The Foreign Exchange Gain (Loss) on Foreign Financial Equity is reallocated from Equity Interest

in the Results of Subsidiaries and Affiliates for inclusion in the financial margin. This adjustment isrequired to maintain the equilibrium and coherence of analyses of the spread, since assets andliabilities previously included in permanent assets are included in other balance sheet items afterconsolidation. The spread would be improperly reduced without reallocation.

(2) The reallocations of other operating income / expenses to other operating income of a financialintermediation nature are detailed below:

Table 13. Reallocations � Other Operating Income / Expenses

R$ million


3Q03 2Q04 3Q04 on 3Q03 on 2Q04

Income from Special Operations 27 24 26 (2.7) 8.7Income from Specific Credits 16 13 14 (14.2) 8.2FX Readjustment (0) (2) 828 * * FX Readjustment Income 0 (2) 1,952 * * FX Readjustment Expense (0) 0 (1,123) * *

Total 43 35 869 1,913.3 2,370.0* Change >│10.000│%


Reallocations in the Net Financial Margin

(3) The expense with the allowance for loan losses includes credits without characteristics of financialintermediation, so that this part of the allowance is reallocated to other operating expenses.

Reallocations in the Contribution Margin

(4) Considering the model used for the income statement, tax expenses revenues were reallocated andincluded in the contribution margin.

Extraordinary Items

(5) In 2Q04, there was an increase came from refinement in the methodology for the risk rating ofbusiness loans for subsidiaries companies abroad, which generated a total reinforcement to theallowance for loan losses of R$ 146 million. In 3Q04, there was a change in the methodology for therisk rating business loan for business customers, generating a total reinforcement to the allowancefor loan losses of R$ 80 million.

(6) BB totaled an amount of R$ 565 million concerning to the recognizing right to compensate tributarycredits of FINSOCIAL (Tributary Indebt), due to judicial decision, regarding the period fromSeptember 1989 to Mach 1992.

(7) In 2Q04, the Retirement Incentive Plan � PEA was created, having as its target public 6.361effective position staff, executive cashiers, and career support staff with an age equal to 50 years ormore and a contribution time to PREVI equal to 15 years or more, and provisions in the amount ofR$ 277 million were established at the time.

(8) The Retirement Incentive Plan - PEA achieved the adhesion of 923 members of staff, about 14.5%of the original expectation, which allowed the reversal of R$ 189 million, in 3Q04, from theestablished provisions.

(9) The Tributary Indebt, extraordinary item 6, integrated the calculus to the Income tax and SocialContribution. So, the Income Tax and Social Contribution that came from this event calculated witha 34% rate (25% Income Tax and 9% Social Contribution) was allocated as an extraordinary item. Itlooks toward the correct measure of the Recurrent Results.

(10) Considering that the profit distribution by dividends or interest on own capital is decided onsemesters according to the Company�s will, the fiscal benefit that come from Interest on Own Capitalpayment is being treated as a Non-Recurrent Result. With the same idea of extraordinary item 9,that reallocation was made.


6 � Balance Sheet Analysis6.1 BreakdownBanco do Brasil is the largest financial institution in Brazil, with total assets of R$235,599 million. In thelast 12 months, BB increased its assets by 9.5%.

In the graph below, it is possible to observe a reduction in the share of remunerated assets and ofinterest bearing liabilities in relation to September 2003. The remunerated assets in September 2004proved to be decreasing in relation to the same period of the previous year, as a result of the reductionin foreign exchange sales, for which the position is balanced by means of the acquisition of investmentsin international capital markets, booked as short-term interbank investments. Although, this isproportional and does not change the equilibrium on the structure breakdown.

On the liabilities side, a reduction was to be seen in the relative share of remunerated liabilities, from70.2% to 68.3%. This reduction is explained by the increase of 47.3% in the volume of demanddeposits, which accounted for 12.8% of total liabilities, compared to 9.5% in the same period of theprevious year.

Remunerated Assets2 Vs. Interest Bearing Liabilities3 - %

Figure 7. Remunerated Assets vs. Interest Bearing Liabilities

2 Available Funds Denominated in a Foreign Currency, Securities, Financial Investments, Loans, Leasing, RemuneratedCompulsory Deposits and Other Remunerated Assets.3 Savings, Interbank Deposits, Time Deposits, Money Market Borrowing, Foreign Borrowing, Onlending, Financial andDevelopment Funds, Subordinated Debt, and Liabilities with Foreign Securities.


79.880.3 78.882.281.878.279.478.8

21.8 18.2 17.8 19.7 21.2 20.221.2 20.6

72.1 72.2 69.2 70.2 64.6 63.8 68.0 68.3

27.935.4

27.8 30.8 29.8 36.2 32.0 31.7

Remunarated Assets Other Assets

Remunerated Liabilities Other Liabilities


6.2 Analysis of AssetsThe share of Securities in total assets have decreased from 34.4% to 30.2% (Sep/2003 � Sep 2004),mainly due to the increase in credit operations, which increased from 28.1% to 29.7% of the assets inthe same period.

Breakdown of Assets - %

Figure 8. Breakdown of Assets

With regard to loans, the retail loan portfolio is to be highlighted, which grew 35.0% in the period, inrelation to 3Q03. Furthermore, tax credits showed a balance of R$8,505 million in September 2004,decreasing from 4.6% to 3.6% of total assets.

Table 14. Breakdown of AssetsR$ million

Dec/02 Mar/03 Jun/03 Sep/03 Dec/03 Mar/04 Jun/04 Sep/04Total Assets 204,595 209,240 205,762 215,134 230,144 231,107 227,374 235,599 Liquidity Assets except Securities 29,043 23,251 18,648 29,340 44,197 43,612 30,316 35,228 Securities 70,943 75,631 72,746 74,055 69,590 67,875 69,855 71,120 Loans and Leasing 51,470 53,475 56,686 60,442 65,604 66,461 69,247 69,961 Tax Credits 11,847 10,927 10,433 9,897 9,406 9,116 8,971 8,505 Other Assets 41,292 45,956 47,249 41,400 41,347 44,044 48,986 50,785

20.2 22.0 23.0 19.2 18.0 19.1 21.5 21.6

25.2 25.6 27.528.1 28.5 28.8 30.5 29.7

34.7 36.1 35.434.4

30.2 29.430.7 30.2

14.2 11.1 9.113.6 19.2 18.9 13.3 15.0

3.63.93.94.14.65.15.25.8


Other Assets Tax CreditsLoans and Leasing SecuritiesLiquidity Assets except Securities


6.3 Analysis of LiquidityOne way of measuring the liquidity of a financial institution consists of determining the differencebetween liquidity assets and liquid liabilities. An analysis of the graph below shows a comfortablesituation with this indicator. The Bank�s liquidity has remained above the R$32 billion level sinceSeptember 2002.

Liquidity Assets (-) Liquidity LiabilitiesR$ million

Figure 9. Liquidity

In 2003, Banco do Brasil carried out advances to major customers on their sales of foreign exchange.To annul the exposure in dollar liabilities generated by these transactions, the Bank increased its short-term interbank deposits. These transactions, however, were settled in April 2004, and the liquiditybalance closed the half year at R$ 52,963 million. This reduction was mitigated by the gradual extinctionof the compulsory deposit on judicial deposits (Bacen Circular 3223/04), from January 2004, and whichculminated in its extinction in May 2004, which implied an increase in liquidity of about R$ 9 billion. Theslight growth observed in 3Q04 reflects the expansion in foreign borrowing, besides the very generationof results.

Table 15. Liquidity Balance

R$ million

Dez/02 Mar/03 Jun/03 Sep/03 Dez/03 Mar/04 Jun/04 Sep/04Liquidity Assets (A) 90,343 88,366 79,381 91,627 102,439 104,795 97,779 103,297 Available Funds 11,279 7,569 6,300 6,083 10,789 15,279 15,841 16,669 Interbank Investments 17,764 15,682 12,348 23,257 33,407 28,333 14,475 18,559 Securities (except those linked to Bacen) 61,300 65,114 60,733 62,287 58,242 61,182 67,463 68,069Liquidity Liabilities (B) 52,203 54,800 46,904 52,915 47,339 46,562 44,816 47,533 Interbank Deposits 3,876 5,230 5,437 6,438 7,275 6,219 7,684 5,530 Money Market Borrowing 48,327 49,570 41,468 46,478 40,063 40,343 37,132 42,003Liquidity Balance (A - B) 38,140 33,566 32,477 38,712 55,100 58,233 52,963 55,765

38,1

40

33,5

66

32,4

77 38,7

12

38,1

00

46,2

33

52,9

63

55,7

65

17,0

00 12,0

00Dec/02 Mar/03 Jun/03 Sep/03 Dec/03 Mar/04 Jun/04 Sep/04

32.500


6.4 Securities PortfolioThe securities portfolio showed a decrease of 4.0% in relation to the same period of the previous year.This downturn was due to the reduction in the volume of money market borrowing (9.6%) and to thegrowth in loans.

In relation to 2Q04, there was growth of 1.8% in the securities portfolio, partly explained by the rise inmoney market borrowing in the period of 13.1% and of funding with foreign borrowing. It should bepointed out that there has been an alteration to the profile of the portfolio, which now has 17.8% insecurities available for trading and 45.0% in securities available for sale, compared to 7.3% and 58.3%in the same period of last year, respectively.

Table 16. Securities Portfolio by Category

R$ million

Balances Share %

Dec/02 Mar/03 Jun/03 Sep/03 Dec/03 Mar/04 Jun/04 Sep/04 Sep/03 Sep/04

Securities 70,943 75,631 72,746 74,055 69,590 67,875 69,855 71,120 100.0 100.0 Available for Trading 3,585 5,137 2,104 5,393 16,095 12,338 11,998 12,690 7.3 17.8 Available for Sale 41,303 43,352 42,515 43,158 28,307 30,266 31,008 31,997 58.3 45.0 Held to Maturity 25,763 26,846 27,640 25,109 24,821 24,959 25,146 25,945 33.9 36.5 Financial Derivatives 292 296 487 396 368 331 1,702 488 0.5 0.7

In the following table, it can be seen that there has a maintenance of the concentration in securities witha maturity of between 1 and 5 years in the last few years, with their share in the total of the portfoliogoing up from 70.5% to 65.9% in September 2004. The difference of the periods is the result, mainly, ofthe migration to the securities portfolio with maturity until 1 year.

Table 17. Securities Portfolio by Maturities

R$ million

Up to 1 year 1 to 5 years 5 to 10 years Over 10 yearsBalance Share % Balance Share % Saldo Share % Saldo Share %

Total

Dec/02 15,449 22.8 41,375 61.0 8,933 13.2 2,052 3.0 67,809Mar/03 19,540 26.8 42,427 58.2 9,714 13.3 1,224 1.7 72,906Jun/03 15,243 21.6 45,280 64.1 8,869 12.6 1,202 1.7 70,594Sep/03 13,684 18.9 51,036 70.5 6,332 8.7 1,336 1.8 72,387Dec/03 11,462 16.7 49,377 72.0 6,354 9.3 1,424 2.1 68,616Mar/04 13,044 19.5 46,439 69.3 7,100 10.6 457 0.7 67,040Jun/04 14,416 21.4 45,341 67.3 7,179 10.7 416 0.6 67,353Sep/04 15,910 22.8 46,062 65.9 7,491 10.7 446 0.6 69,910


Securities Portfolio by MaturitiesIn days

Figure 10. Securities Portfolio

The portfolio of securities with maturities between 1 and 5 years accounted for 65.9% of the total of theportfolio in September 2004, compared to 70.5% in the same period of the previous year. With theobjective of demonstrating better this distribution, this share was opened up into from 1 to 3 years andfrom 3 to 5 years in the securities portfolio of the multiple bank, which account for a great part of theconsolidated securities portfolio.

There was an 1,260 basis point increase in the share of securities with a maturity of from 1 to 3 years, inrelation to September 2003.

Securities Portfolio with Maturities between 1 and 5 yearsMultiple Bank

Figure 11. Securities Portfolio with Maturities between 1 and 5 years

Sep/03

81.1%

10.4%

6.3% 2.2%

Jun/04

78.6%

13.2%

5.1%3.1%

Sep/04

77.2%

11.7%

8.8% 2.2%

Over 360 days 181 to 360 days 31 to 180 days Up to 30 days

Sep/03

60.4%

39.6%

Sep/04

73.0%

27.0%

1 - 3 years 3 - 5 years


6.5 Loan PortfolioBanco do Brasil has maintained its unchallenged leadership in lending in Brazil, with an 18.3% share inthe financial system4. BB�s loan portfolio reached the amount of R$ 84,148 million in September 2004,representing an increase of 15.9% in a 12 month period.

The major growth in total loan portfolio occurred in the retail portfolio, which grew 35.0%, going up from20.6% of the total portfolio to 24.0%.

Breakdown of the Loan Portfolio

Figure 12. Breakdown of the Loan Portfolio

Table 18. Loan Portfolio by SegmentR$ million

Dez/02 Mar/03 Jun/03 Sep/03 Dez/03 Mar/04 Jun/04 Sep/04Total Portfolio 62,900 65,715 68,662 72,601 77,636 79,647 83,131 84,148 Retail 12,569 13,340 14,275 14,982 15,602 17,797 19,085 20,227 Commercial 14,012 14,595 14,965 14,817 16,450 16,110 16,957 18,046 Agribusiness 16,803 18,342 21,519 24,766 26,766 25,907 25,573 25,666 Foreign Trade 7,602 8,088 7,563 7,543 7,315 8,217 8,810 8,507 Abroad 10,315 9,546 8,432 8,952 9,481 10,037 11,088 10,016 Other 1,598 1,804 1,909 1,540 2,022 1,579 1,619 1,686

4 Source: Banco Central

Retail Commercial AgribusinessForeign Trade Abroad Other

Jun/04

23.0%

20.4%

30.8%

10.6%

13.3% 1.9%

Sep/03

20.6%

20.4%

34.1%

10.4%

12.3%2.1%

Sep/04

24.0%

21.4%30.5%

10.1%

11.9% 2.0%


A new way of analyzing the loan portfolio is to break it down according to the Bank�s business pillars(Retail, Wholesale, Public Sector and Others). From this point of view, we can see that, in September2004, the Retail Pillar was responsible for 59.9% of total portfolio and the Wholesale Pillar responded for25.1% of it.

Table 19. Loan Portfolio by Pillar

R$ million09.30.2004

Business PillarsRetail Wholesale Government Others

TotalBrazil Abroad Loan

PortfolioRetail 20,118 37 5 66 20,227 - 20,227Commercial 6,867 10,965 9 205 18,046 - 18,046Agribusiness 22,222 2,139 - 1,306 25,666 - 25,666Foreign Trade 689 7,801 6 11 8,507 - 8,507Others 497 152 125 911 1,686 10,016 11,702Total 50,394 21,094 146 2,499 74,132 10,016 84,148


6.5.1 Retail Loan Portfolio

Loans to retail operations reached R$20,227 million at the end of September 2004, which representedan increase of 35.1% in relation to the same period of the previous year. Retail transactions areintended for private individuals and micro and small businesses, a category that includes companieswith annual sales of up to R$10 million.

Table 20. Retail Loan Portfolio R$ million

Dez/02 Mar/03 Jun/03 Sep/03 Dez/03 Mar/04 Jun/04 Sep/04Direct consumer credit (CDC) 6,736 6,885 7,165 7,302 7,666 8,534 9,251 9,590Overdraft accounts 1,920 2,192 2,339 2,451 2,048 2,559 2,605 2,679BB Giro Rápido (WCL) 1,539 1,789 2,076 2,410 2,701 2,984 3,173 3,373Credit Cards 1,361 1,402 1,541 1,451 1,620 1,650 1,742 1,842Others 1,013 1,071 1,153 1,368 1,568 2,071 2,313 2,743Total 12,569 13,340 14,275 14,982 15,602 17,797 19,085 20,227

Loans to Individuals - Banco do Brasil meets the credit needs of individuals through mass distributedproducts. BB´s credit scoring system calculates pre-approved limits for direct consumer credit (CDC),overdraft banking, and credit cards based on a series of customer information.

CDC transactions showed 31.3% growth, in relation to September 2003, to reach a balance of R$ 9,590million, with an average value per transaction of R$ 1,311.39 at the end of September 2004. Theincrease to be seen was basically due to the growth of the CDC Electronic Loan and CDC Salarytransactions, of 45.6% and 35.6% (Set/03 � Set/04), respectively. CDC can be contracted via theInternet, self-service terminals, and in the branch network. Furthermore, it combines a low operationalcost with credit well spread out, with an investment rate of 53.8% in 3Q04, compared to 67.3% in 3Q03.

In September 2004, 65,5% of the individual customers had accounts with a credit limit. Overdraftaccounts ended September 2004 with a balance of R$ 2,679 million (a 13,2% share in retailtransactions), an increase of 9.3% (Sep/03 � Sep/04). The investment rate for overdraft accounts was108.8% in 3Q04, compared to 123.2% in 3Q03.

The balance of credit card transactions showed an increase of 27.0% (Sep/03 � Sep/04), with a balanceof R$ 1,842 million at the end of September 2004, while the quantity of cards created rose 30.3%, goingup from 5,051 thousand to 6,583 thousand. The investment rate for credit card transactions was 32.9%in 3Q04, compared to 41.6% in 3Q03.

Main Retail Loan Portfolio ProductsR$ million

Figure 13. Main Retail Loan Portfolio Products

CDC

6,736 6,885 7,165 7,302 7,6668,534

9,251 9,590


Credit Cards

1,361 1,402 1,541 1,4511,620 1,650 1,742 1,842



Credit for Micro and Small Businesses � In May 2004, Banco do Brasil created the Micro and SmallBusiness Directorate, with a view to increasing the market share, by means of customer loyaltystrategies, and to improving the relationship with the segment. In conjunction with the far-reachingservice network and the specific training of the workforce, its products and services give BB uniqueconditions for attending to the needs of these customers.

Transactions with micro and small business now accounted for 25.9% of the retail portfolio inSeptember 2004, compared to 21.0% in the previous year. The balance of these transactions was R$5,242 million, a 66.8% increase in relation to September 2003.

Table 21. MSB Credit Products

R$ million

Dec/02 Mar/03 Jun/03 Sep/03 Dec/03 Mar/04 Jun/04 Sep/04BB Giro Rápido 1,539 1,789 2,076 2,410 2,701 2,984 3,173 3,373Proger Urbano Emp. 506 544 614 722 866 1,009 1,201 1,426Others 10 10 10 10 10 390 412 443Total 2,055 2,343 2,700 3,143 3,577 4,382 4,787 5,242

The main credit product intended for this segment, BB Giro Rápido offers financing for working capitalwithout red tape and without requiring tangible collateral. The transaction is divided into a part with anoverdraft account and another for working capital, paid in installments over 12 months. At the end ofSeptember 2004, this line of credit reached a balance of R$ 3,373 million, a 40.2% increase (Sep/03 �Sep/04). The 633 thousand or so contracts showed an average value of R$ 5,268.40. The investmentrate for this product was 47.6% in 3Q04, compared to 54.6% in 3Q03.

The Proger Urbano Empresarial transactions use funding from the Worker�s Support Fund (FAT) tofinance projects or investment with the respective working capital, which provides for the generation ofemployment and income in urban areas. These transactions showed an increase of 97.5% (Sep/03 �Sep/04), ending the year with a balance of R$ 1,426 million. The quantity of contracts was about 59thousand, with an average value of R$ 23,673.56.

Main Products for Micro and Small BusinessesR$ million

Figure 14. Main Products for Micro and Small Businesses

BB Giro Rápido

1,539 1,7892,076

2,410 2,701 2,984 3,173 3,373


Proger Urbano Emp.

506 544 614 722866

1,0091,201

1,426



Loans for the lower income population � With the Federal Government�s decision to expand thefinancial services industry to the population with a lower income and to microentrepreneurs, Law10735/03 was passed, which makes provisions about the channeling of resources equivalent to 2% ofdemand deposits taken by financial institutions towards microcredit transactions, at an interest rate of2% a month.

To maintain coherence with its corporate strategy, Banco do Brasil adopted as an institutional solutionthe creation of a separate structure from the multiple bank, so as to guarantee the transparency of theprocess, besides adapting the products, processes, credit policy and operational costs, aiming at thecurrent business practice of attending to the these specific customer groups in a differentiated andpersonalized manner.

Banco Popular do Brasil was created as a full subsidiary of Banco do Brasil through Law 10738/03, inthe form of a multiple bank with commercial, credit, financing and investment portfolios. The businessplan was designed for the bank to work with high efficiency and low costs.

At a meeting on 05.03.2004, Banco do Brasil�s Board of Directors approved a revision of the businessplan for the Banco Popular do Brasil S.A., which generated the need for R$ 157,571 thousand in capital,additional to the R$ 24,500 thousand subscribed in 2003, of which R $92,050 thousand in 2004, alreadypaid up, and R$ 65,521 thousand in 2005. According to the business plan, the breakeven point will bemet in 2006.

Banco Popular do Brasil has constructed an innovative and unprecedented technological model. Thesolution was designed to work with any communication technology, through data capture applications,which work with portable POS (point of sale) and PC equipment, with a low conFiguretion requirement.

In September 2004, Banco Popular had 145,913 current account holders and 1,720 points of service.On average, 2,177 simplified accounts were opened and 26 banking correspondents contracted a day.


6.5.2 Commercial Loan Portfolio

The commercial loan portfolio encompasses the products intended mainly for medium and large sizedcompanies and for the corporate customers. Banco do Brasil has adopted a segmentation model thathas the objective of perfecting the management of this customer base, dividing them into the sectors ofIndustry, Commerce, and Services, and into the medium, large, and corporate segments. The modelfavors a better knowledge of the specific needs of each company and seeks to develop, diversify andachieve a return from the business. In September 2004, the portfolio reached a balance of R$ 18,046million, a 21.8% increase (Sep/03 � Sep/04).

Table 22. Commercial Loan Portfolio

R$ million

Dez/02 Mar/03 Jun/03 Sep/03 Dez/03 Mar/04 Jun/04 Sep/04Receivables 6,428 6,737 7,028 7,500 8,133 8,316 8,359 9,028Investment finance 2,707 2,703 2,711 2,695 2,754 2,798 2,833 2,958Overdraft accounts 1,895 2,010 2,072 1,946 2,051 1,791 1,919 1,805Working capital � others 1,697 1,747 1,751 1,420 1,928 1,923 2,355 2,517Others 1,286 1,396 1,404 1,257 1,326 1,283 1,492 1,738Total 14,012 14,593 14,965 14,819 16,192 16,110 16,957 18,046

The products that stand out most in this portfolio are the receivables, with a 50.0% share in September2004. The balance of these transactions in September 2004 was R$ 9,028 million, which represents anincrease of 20.4% (Sep/03 � Sep/04). The transactions with receivables are short term and show a lowcredit risk for the Bank. For the companies, they mean an excellent alternative to working capitalfinancing, and an opportunity for boosting their sales. The main credit products based on receivables arechecks discounted, trade bills discounted and BB Vendor, which showed an average investment rate of29.5% in 3Q04, compared to 38.6% in 3Q03.

Table 23. Main Receivables � Business CustomersR$ million

Checks Discounted Trade Bills Discounted BB VendorBalance at 09.30.2004 2,732 3,008 2,643Change over Set/03 - % 5.6 30.7 24.1Change over Jun/04 - % (0.9) 6.8 24.7Average term of the transactions in days 31 30 115Average monthly disbursements � 3Q04 1,896 2,310 1,047

The BB overdraft account offers a revolving credit line with a term for repayment of up to 12 months. Atthe end of September 2004, the balance of these transactions amounted to R$ 1,805 million, a 7.2%reduction in relation to the same period of last year.


Main Commercial Portfolio ProductsR$ million

Figure 15. Main Commercial Portfolio Products

The investment transactions comprise lines of credit intended mainly for the expansion or modernizationof production via the acquisition of machines and equipment, including freight vehicles. The balance ofthese transactions increased 9.8% (Sep/03 � Sep/04), to reach R$ 2,958 million in September 2004.

Receivables

6,428 6,737 7,028 7,4988,286 8,316 8,359

9,028


Overdrafts Accounts

1,895 2,010 2,072 1,946 1,908 1,791 1,919 1,805



6.5.3 Agribusiness Loan Portfolio

Agribusiness is one of the main sectors of the Brazilian economy, of fundamental importance to thegrowth of the country. In its role as an agent of public policies, Banco do Brasil represents a linkbetween the government and the rural producer, and knows better than anyone the needs of those whodedicate themselves to farming, in all the stages of the productive chain.

The Brazilian trade balance has increased due to the positive contribution from agribusiness. The tradebalance of this sector generated a US$ 26.2 billion surplus from January to September 2004, accountingfor 42.5% of all export transactions in the period.

Trade Balance (FOB)US$ billion

Source: MAPA � Ministry of Agriculture, Animal Husbandry and Supply

Figure 16. Trade Balance (FOB)

The table below shows exports broken down into the main products.

Table 24. ExportsUS$ million

2001 2002 2003 Jan/04 - Sep/04Soybeans and related products 5.297 6.009 8.125 8.638Meat 2.553 2.751 3.641 4.003Leather, hides and shoes 2.339 2.341 2.465 1.994Sugar and alcohol 2.371 2.263 2.298 2.206Timber and wood products 1.878 2.214 2.620 2.714Pulp and paper 2.190 2.056 2.831 1.648Coffee, mate and spices 1.340 1.331 1.424 1.259Fruit juice 926 1.134 1.292 810Tobacco 944 1.008 1.090 1.017Other products 4.025 3.732 4.852 1.963Total 23.863 24.839 30.639 26.252Souce: MAPA � Ministry of Agriculture, Animal Husbandry and Supply

The sector�s extremely positive performance is due to the permanent quest for new technologies and forvaluing the services provided by the professionals from the area, always aiming at profitability andcontinuity in the enterprises. In the figure that follows, the increased productivity per area planted, aresult of the gain in productivity, can be visualized.

14.4 14.819.0 20.3

25.8 26.2

(1.2)

(0.7)13.1

24.8 25.1

2.6

1999 2000 2001 2002 2003 Jan/04 -Sep/04

Agribusiness Brazil


Production vs. Planted Area

Figure 17. Production vs. Palnted Area

Rural credit finances the costs of production and marketing of agricultural products, stimulates ruralinvestments, including storage, processing and industrial transformation of agricultural products.Furthermore, it encourages the introduction of rational methods into the system of production.

The growth in the volume of BB�s Agribusiness Loan Portfolio was 3.6% (Sep/03 � Sep/04), closingSeptember 2004 with a balance of R$25,666 million. Investment transactions, intended for themodernization of the productive process, accounted for 48.3% of this portfolio and have an averageterm of 4 years. Lending to cover costs and marketing, intended to finance the goods and servicesneeded for the production of crops and livestock, accounted for 49.2% of the agribusiness portfolio andshowed an average term of about 1 year.

Table 25. Agribusiness Loan Portfolio by Purpose

R$ million

Dec/02 Mar/03 Jun/03 Sep/03 Dec/03 Mar/04 Jun/04 Sep/04Costs 7,525 7,999 9,295 10,525 12,468 12,286 11,827 11,674Investment 8,208 8,777 9,379 9,807 10,642 11,386 12,016 12,389Marketing 760 700 1,079 1,306 1,257 717 1,000 958Other 310 866 1,766 3,128 2,400 1,518 730 644Total 16,803 18,342 21,519 24,766 26,766 25,907 25,573 25,666

The funds made available by the Bank are obtained from savings deposits (MCR 6-4), demand deposits(MCR 6-2), the Rural Area Employment and Income Generation Program (Proger Rural), the NationalFamily Farming Strengthening Program, of the Ministry for Agrarian Development (Pronaf), the Center-West Development Constitutional Fund (FCO), the National Bank for Economic and Social Development(BNDES), amongst others.

-

20

40

60

80

100

120

140

160

90/91 91/92 92/93 93/94 94/95 95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05*-

50

100

150

200

250

300

Production (million ton.) Area (million ha) Productivity (ton./ha) - %


Table 26. Agribusiness Loan Portfolio by Product

R$ million

Dec/02 Mar/03 Jun/03 Sep/03 Dec/03 Mar/04 Jun/04 Sep/04Agricultural and livestock costs 5,254 5,620 6,803 8,166 9,053 8,934 8,329 8,409Pronaf/Proger Rural 3,728 3,889 4,110 4,044 5,283 5,665 6,099 5,937FCO Rural 2,244 2,505 2,608 2,711 2,740 2,862 2,908 2,912BNDES/Finame Rural 1,683 1,776 1,848 2,001 2,145 2,486 2,774 3,064Others 3,894 4,552 6,150 7,844 7,546 5,961 5,463 5,345Total 16,803 18,342 21,519 24,766 26,766 25,907 25,573 25,666

Proger Rural is a product that offers fixed credit for crop and livestock costs, as well as financial supportfor fixed and semi-fixed investments, and the National Family Farming Strengthening Program � Pronafaims at financing the costs of the farming business. These two products added up to R$ 5,937 millionat the end of September, growing 46.8% in relation to the same period of the previous year.

FCO Rural offers a financial supplement for working capital and costs for the rural producer of theCenter-West region. Transactions in the product grew 7.4% in the last 12 months, to a total of R$ 2,912million.

The BNDES / Finame Rural products have the objective of financing investments in the modernization ofmachines and equipment intended for rural production. Transactions with these totaled R$ 3,064 millionat the end of September 2004, growing 53.1% in relation to September 2003.

Main Products of the Agribusiness Loan PortfolioR$ million

Figure 18. Main Products of the Agribusiness Loan Portfolio

The following table shows the balance of the loans intended for agribusiness.

Pronaf/Proger Rural

3,728 3,889 4,110 4,0445,283 5,665 6,099 5,937


BNDES/Finame Rural

1,683 1,776 1,848 2,001 2,1452,486

2,7743,064



Table 27. Agribusiness Loan Portfolio by Product

R$ million

Items Financed Jun/04 Part. % Set/04 Share % Chg. %Soybeans 2,932 11.5 2,966 11.6 1.2Bovinocultura 1,662 6.5 2,946 11.5 77.3Machinery and Equipment 2,448 9.6 2,581 10.1 5.5Corn 2,704 10.6 2,303 9.0 (14.8)Improvement of Prodictivity forLivestock Production 1,466 5.7 1,470 5.7 0.3

Improvement of Productivity forFarm Production 1,283 5.0 1,315 5.1 2.5

Cotton 769 3.0 884 3.4 14.9Rice 922 3.6 846 3.3 (8.2)Coffee 647 2.5 720 2.8 11.3Fertilizers 609 2.4 659 2.6 8.2Wheat 660 2.6 657 2.6 (0.4)Sugar Cane 332 1.3 375 1.5 12.9Manioc 266 1.0 271 1.1 1.7Beans 183 0.7 171 0.7 (6.6)Orange 148 0.6 166 0.6 12.0Poultry 158 0.6 158 0.6 (0.0)Tabbaco 96 0.4 157 0.6 63.8Avicultura 136 0.5 149 0.6 9.6Pork 146 0.6 134 0.5 (8.1)Others 8,006 31.3 6,738 26.3 (15.8)Total 25,573 100.0 25,666 100.0 0.4

In its work of financing Brazilian agribusiness, Banco do Brasil reaches all the segments, from the smallproducer to the large agroindustrial companies. The table below reveals this work, showing that whilefinancing mini and small producers accounts for 72.4% of the total of contracts, the transactions with theother agents show a 86.3% share of the amount financed.

Table 28. Funds Released for the 03/04 Crop by Segment

R$ million

Qty. Contracts Qty. Contracts - % Amount Contracted Amount Contracted - %Mini 122,284 37.1 342 4.8Small 116,165 35.3 636 8.9Cooperatives 183 0.1 207 2.9Others 90,765 27.6 5,941 83.4Total 329,397 100.0 7,127 100.0


Agribusiness Loan Portfolio by Funding Sources

Figure 19. Agribusiness Loan Portfolio by Funding Sources

From September 2003 to September 2004, the funds available from MCR 6.2, demand deposits,reduced from R$ 4,494 million to R$ 2,900 million, a balance 35.5% lower.

However, investments with saving deposits, the main source of funding for the portfolio, increased 1.9%,reaching a total of R$ 9,139 million in September 2004. The substantial increase in 2003 was duebasically to the rise in compulsory investments from 30% to 40%, in September 2003, and to 50% inSeptember 2004.

The Bank uses funds from Ouro savings accounts and the FAT (Worker�s Support Fund) in ruralfinancings at reduced interest rates. To make this kind of intermediation viable, the National Treasurypays the Bank, in the form of equalization, the difference between the funding, administrative and taxcosts and the amount charged to the taker of the loans.

The graph that follows shows a history of the receipt of revenues by way of interest rate equalization.

Equalization RevenuesR$ million

Figure 20. Equalization Revenues

A reduction can be seen in the installments paid to the Bank by way of equalization. This movementbetween the 2Q04 and 3Q04 is due to seasonal effect of investment operations, that are received in thesecond and fourth quarter of each year.

141159

172 169

137

67

132

60

4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04

4,49

4

8,96

8

2,17

5

3,18

7

2,26

7 3,67

44,95

7

9,99

7

2,09

2 3,27

1

2,45

2 3,99

9

4,46

2

8,95

0

2,42

7 3,39

7

2,69

4 3,97

7

3,63

6

8,82

7

2,32

1 3,45

6

3,14

2 4,19

2

2,90

0

9,13

9

2,72

2 3,50

5

3,39

0

4,01

0

Demand Deposits Savings FAT FCO BNDES/Finame Others

Sep/03 Dec/03 Mar/04 Jun/04 Sep/04


Besides the mechanisms for risk management applicable to all the Bank�s loan portfolios, the Bankapplies, in the management of the agribusiness portfolio, specific methods for identifying risks andminimizing losses.

To define the maximum level of exposure with each customer, the Bank has developed a credit limitsystem specific for the rural producer - ANC Rural Producer � that takes into account behavioral dataand the technical risk of the business.

Table 29. Variables Associates to Technical Risk System for Agribusiness � RTA

Productivity Cost PriceSoil � �Climate � � �Roads � �Warehouse �Technology � �Distance � �Market �

For measuring the technical risk of the business of each customer, BB�s system is unique, made up of amicroregional database including historical series of product prices, productivities observed in the crops,and modal production costs. There are 85 thousand production spreadsheets that represent the variouskinds of productive systems that there are in the country.

Besides improving the quality of the assets, this database makes it viable to automate the creditprocess. A system like this, associated with the observance of the parameters of the FederalGovernment�s Agricultural Zoning, has also created the conditions for implementing a new system forrural insurance, the Farm Gold Insurance. Launched in September 2000, this instrument protects thefarmer against losses from climatic hazards.


6.5.4 Foreign Trade Portfolio

The balance of Banco do Brasil�s foreign trade finance portfolio went up from R$ 7,546 million to R$8,507 million (Sep/03 - Sep/04), a 12.8% increase. Banco do Brasil has available several instrumentsfor supporting foreign trade, such as training courses, consultancies that accompany step by step all thestages of an international transaction, the Foreign Trade Counter, a virtual environment for tradebetween Brazilian companies and the global market, and others.

The portfolio�s main product is ACC/ACE, which reached a balance of R$ 7,056 million at the end ofSeptember 2004, a 4.9% increase, in relation to September 2003. This amount corresponds to 82.9% ofthe balance of the foreign trade finance portfolio.

Table 30. Foreign Trade Loan Portfolio

R$ million

Dez/02 Mar/03 Jun/03 Sep/03 Dez/03 Mar/04 Jun/04 Sep/04ACC/ACE 6,377 7,049 6,800 6,729 6,464 6,937 7,117 7,056Import finance 1,111 957 646 695 735 650 947 909BNDES Exim - - - - - 625 740 537Others 115 82 117 119 116 4 6 6Total 7,602 8,088 7,563 7,543 7,315 8,217 8,810 8,507

Main Products of the Foreign Trade LoanPortfolioR$ million

Figure 21. Main Products of the Foreign Trade LoanPortfolio

The table below shows the details of the ACC/ACE transactions:

Table 31. ACC/ACE Average Volume per Contract

ACC/ACE 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04Volume Contractad (US$ million) 1,253 1,680 1,857 2,062 2,038 2,381 2,284 1,990Quantity of contracts 5,672 6,005 6,785 7,538 7,427 7,263 7,809 7,511Average volume per contract (US$ mil) 221 280 274 273 274 328 292 265Market share - % 30.3 36.0 31.8 35.8 32.4 36.2 33.1 30.7

ACC - FX Advantages

6,3777,049 6,800 6,729 6,464

6,937 7,117 7,056


Import Financing

1,111 957646 695 735 650

947 909



6.5.5 Concentration of the Portfolio

BB�s business loan portfolio in Brazil showed a concentration of 29.0% in the transactions with the 100largest borrowers at September, compared to 32.6% in December 2003. There has been a betterdistribution of credit to business customers, in relation to the previous periods.

Table 32. Concentration of the Loan Portfolio on the 100 Largest Borrowers

%

Período 1st Customer 2nd to 20th 21st to 100th 100 largestDec/03 1.2 12.4 19.0 32.6Mar/04 1.8 13.3 18.0 33.0Jun/04 2.1 14.1 17.7 33.9Sep/04 1.5 14.2 17.9 29.0

The table below shows the distribution of the business loan portfolio in Brazil by macro-sector of theeconomy.

Table 33. Concentration of the Loan Portfolio by Macro-sector

R$ million

Macro-sector Jun/04 Share % Sep/04 Share % Chg. %Services 6,920 15.6 7,663 16.2 10.7Foodstuffs of Vegetable Origin 4,401 9.9 4,480 9.5 1.8Metalworking and Steel 4,116 9.3 4,161 8.8 1.1Automotive 2,885 6.5 3,246 6.9 12.5Foodstuffs of Animal Origin 2,397 5.4 3,137 6.6 30.8Oil 2,788 6.3 2,330 4.9 (16.5)Retail Trade 1,874 4.2 2,042 4.3 9.0Textiles and Garments 1,961 4.4 2,004 4.2 2.2Electrical and Electronic Goods 1,724 3.9 1,976 4.2 14.6Pulp and Paper 1,929 4.3 1,924 4.1 (0.2)Agricultural Consumables 1,606 3.6 1,909 4.0 18.9Building 1,674 3.8 1,761 3.7 5.2Timber and Furniture 1,741 3.9 1,594 3.4 (8.5)Telecommunications 1,391 3.1 1,515 3.2 8.9Chemicals 1,181 2.7 1,331 2.8 12.7Electricity 1,088 2.4 1,130 2.4 3.9Transport 1,027 2.3 1,056 2.2 2.9Leather and Shoes 794 1.8 823 1.7 3.7Wholesale Trade and Sundry Industries 667 1.5 722 1.5 8.3Beverages 532 1.2 514 1.1 (3.3)Other Activities 1,789 4.0 2,060 4.3 15.1Total 44,485 100.0 47,378 100.0 6.5


6.6 Tax CreditsIn the third quarter of 2004, there was a consumption of R$ 466 million of the stock of Tax Credits,representing a 5.2% reduction in relation to June 2004. In relation to the same period of the previousyear, this consumption was R$ 1,392 million, representing a reduction of 14.1%.

It is worth pointing out that 53.7% of the active tax credits derive from temporary differences, arisingfrom the tax legislation not permitting the inclusion of given revenues and expenses in the basis forcalculation at the moment they occur (accrual basis), but at the moment they are settled financially (cashbasis). If we disregard these tax credits, the consumption in the period came to 10.6% in relation to June2004, and 26.1% in relation to September 2003. The tax credits arising from tax losses and CSLL to beoffset reduced their share in the total of tax credits, going down from 52.6% in 3Q03 to 45.5% in 3Q04.The exchange rate appreciation in the period brought about a higher consumption of tax credits than thelevels seen in 2Q04, which can be noted from the higher ratio of IR/CS over pre-tax income in theperiod, shown in the figure below.

Considering that tax credit require an allocation of capital three times higher than the majority of assets� a risk weighting factor of 300% - for the purposes of determining the Basel ratio, the reduction to beseen in 3Q04 released capital that allows the leverage of up to R$ 1,398 million in 100% risk weightedassets. In the last 12 months this effect would be of R$ 4,176 million.

Breakdown of Tax CreditsR$ million

Figure 22. Breakdown of Tax Credits

According to the latest technical study on the consumption of tax credits, the timetable for usage for thenext few periods provides for a consumption of R$1,079 million in 2004, R$1,865 million in 2005,R$1,965 million in 2006, R$2,455 million in 2007, R$920 million in 2008, and a remaining balance ofR$1,062 million after 2008. The balance remaining after 5 years is subject to the allocation of capitalrequired by CMN Resolution 3059/02, a subject addressed in the chapter dedicated to an analysis of theBasel Ratio.

4,571 4,571 4,571 4,573 4,573 4,567 4,571 4,571

3,223 2,751 2,543 2,196

3,485 3,269 3,145 3,014 2,884 2,810 2,765 2,638

336 174 114 47 43

1,903 1,696 1,577 1,231

58 65

568

8,5058,9719,1169,4069,89710,43310,92711,847

35.4

57.9

38.7 41.936.4 36.1

20.2

37.7


N on-Tem poral D ifferences Fiscal Loss and N egative Base

Social C ontribution to be C om pensated M ark to M arket

Incom e Tax/Inc. B ef. Incom e Tax - %


6.7 Intangible AssetsOne of the largest intangible assets of Banco do Brasil is the potential for generating business present inits customer base � 20.7 million, the largest in the National Financial System. Made up of 19.3 millionindividuals and 1.4 million businesses, the BB customer base shows a lower level of consumption percustomer than the average of its main competitors, which indicates room for the leverage of newbusiness.

The first challenges faced by BB to avail itself of the potential existing in its customer base wereovercome with the implantation of the strategic segmentation by markets � Retail, Wholesale andGovernment � started in March 2002. Developed according to the needs of the different segments, themodel has brought greater punctuality in service, as well as providing for the development of moreeffective marketing strategies, whether for fostering expansion, customer loyalty, upkeep, improvedreturn or rejuvenation of the customer base.

The winning over of BB�s customer base is grounded on the solid reputation of its brand, on thewidespread nature of its distribution network, and, in the last few years, on strategies for organic growth,particularly the strategy for expansion by means of the establishment of payrolls agreements withcustomers of the Government and Wholesale.

Since it started the segmentation by markets, BB has recorded an increase in excess of 45% in itscustomer base. In the same period, more than proportional increases can be seen in the customerrelationship fees (78%) and in service revenues (67%), which clearly demonstrates the success of themodel, placing Banco do Brasil on new levels of doing business.

Considering that new customers take about 12 months to achieve the maximum level of relationship withthe Bank, the analysis of the graph bellow shows the relationship between the balance of creditoperations in a period and the customer�s base in the same period of the previous year.

Average Value of Credit Operation per Customer12 months gap and in R$ thousand

Figure 23. Average Value of Credit Operation per Customer

The segmentation model has been constantly perfected to cater to the different niches existing in thetarget markets. The most recent results in the Bank�s structure were the development of specializednetworks for serving high income individuals (Banco do Brasil Estilo) and those with a greater potentialfor investment (Banco do Brasil Private); the creation of a Directorate for Micro and Small Businesses;and the stratification of the Wholesale market according to sectors and lines of business.

2.69 2.662.6

2.692.75 2.78

2.84

Mar/03 /Mar/02

Jun/03 /Jun/02

Sep/03 /Sep/02

Dec/03 /Dec/02

Mar/04 /Mar/03

Jun/04 /Jun/03

Sep/04 /Sep/03


Risk Management

According to the New Basel Agreement, financial institutions will be able to calculate the necessarycapital to face operational risks, from three methodology � Basic Index Approach, Standard andAdvanced.

In relation to credit risk, the New Basel Agreement foresees the possibility of two approaches: TheStandard e the one based on internal ratings, that, can be sub-divided on Basic and Advanced.

The Bank�s aim is to be able to measure the operational risk and the credit risk of the Conglomerateaccording to the Advanced Approaches. The utilization of the internal models will improve the riskmanagement process and will allow a more efficient capital allocation.


6.8 Analysis of LiabilitiesBanco do Brasil has succeeded in maintaining its position of leadership in the Brazilian banking systemby means of a strategy for organic growth, without carrying out mergers or acquisitions.

The Bank continues working on the expansion of the customer base, improving relationships,strengthening ties with the customers, and expanding business. The funding obtained by the Bank bymeans of deposits (demand deposits, savings and time deposits) has grown 13.4% over the balance ofSeptember 2003. Demand deposits increased 47.3%, to reach R$ 30,191 million, savings grew 12.6%,to a total of R$ 29,915 million, and time deposits showed a slight decrease of 0.2%, to reach R$ 49,444in September 2004. This shows a reduction of the Bank�s funding cost, which is very positive,particularly in a scenario of reducing spreads.

In relation to September 2004, other liabilities remained practically constant (a decrease of 0.4%).However, a reduction was to be seen in foreign currency sale transactions for future delivery, the effectof which was minimized in other liabilities, due to an increase in subordinated debt

Table 34. Liabilities

R$ million

Dec/02 Mar/03 Jun/03 Sep/03 Dec/03 Mar/04 Jun/04 Sep/04Demand Deposits 24,342 21,049 21,170 20,498 27,140 30,306 29,425 30,191Savings Deposits 26,918 26,804 26,427 26,578 27,425 27,590 28,939 29,915Time Deposits 42,117 45,046 46,847 49,558 48,173 46,104 49,747 49,444Money Market Borrowing 48,327 49,570 41,468 46,478 40,063 40,343 37,132 42,003Foreign Borrowing 14,488 12,332 9,787 9,126 11,620 12,048 15,270 16,793Domestic Onlending 5,921 5,891 6,134 6,311 7,458 8,003 8,448 8,778Other Liabilities 33,284 38,383 43,057 44,899 56,093 54,026 45,550 44,704Shareholders� Equity 9,197 10,164 10,872 11,687 12,172 12,686 12,864 13,771Total Liabilities 204,595 209,240 205,762 215,134 230,144 231,107 227,374 235,599

The figure that follows shows the changes in the percentage share of the main liabilities in such a wayas to facilitate an understanding of the composition of the sources of financing.


Changes in the Share of the Main Liabilities - %

Figure 24. Changes in the Liabilities

Time Deposits

SavingsDeposits

Demand Deposits

Money MarketBorrowing

ForeignBorrowing

DomesticOnlending

Other Liabilities

11.9 10.1 10.3 9.5 11.8 13.1 12.9 12.8


13.2 12.8 12.8 12.4 11.9 11.912.7 12.7


20.6 21.5 22.8 23.0 20.9 19.9 21.9 21.0


23.6 23.7 20.2 21.6 17.4 17.5 16.3 17.8


7.1 5.9 4.8 4.2 5.0 5.2 6.7 7.1


2.9 2.8 3.0 2.9 3.2 3.5 3.7 3.7


16.3 18.3 20.9 20.9 24.4 23.4 20.0 19.0


4.5 4.9 5.3 5.4 5.3 5.5 5.7 5.8


Shareholders� Equity


6.9 Deposits and Money Market FundingBanco do Brasil�s deposits and money market borrowing amounted R$ 157,082 million in September2004, a 5.0%% increase in relation to September 2003. In absolute numbers, the main items of fundingwere time deposits, totaling R$ 49,444 million, and money market borrowing, amounting to R$ 42,003million.

Deposits and Market FundingR$ billion

Figure 25. Deposits and Market Funding

BB�s position of leadership in deposits and money market borrowing shows the trust that Brazilians havein the institution, which, in June 2004, accounted for 21.1% of the funding of the Brazilian bankingsystem.

At the end of June 2004, the Bank was the leader in demand deposits, with a market share of 36.3%,and in time deposits, with 20.4%, besides a prominent position in savings, with a 19.4% share.

20.5 26.6

6.4

29.4

28.9

7.7

30.2

29.9

5.5

149.

5

46.5

49.6

152.

9

37.149

.7

157.

1

42.049

.4

Demand Deposits Savings Interbank Deposits Time Deposits Money MarketFunding

Total

Sep/03 Jun/04 Sep/04


Market Share5 of BB FundingR$ million

Figure 26. Market Share of BB Funding

5 The information on shares in the banking system come from the Central Bank�s website, with the 50 largest banks. The latestposition in this system, up to the publication of this reports, dates from Jun/04.

24,3

42

21,0

49

21,1

70

20,4

98 27,1

40

30,3

06

29,4

25

30,1

91

30.8 31.8 32.4 32.3 32.9 36.7 36.3


Demand Deposits Market Share - %

26,91

8

26,80

4

26,42

7

26,57

8

27,42

5

27,59

0

28,93

9

29,91

5

19.3 19.4 19.3 19.3 19.1 19.2 19.4

Dec/02 Mar /03 Jun/03 Sep/03 Dec/03 Mar /04 Jun/04 Sep/04

Savings Market Share - %

42,11

7

45,04

6

46,84

7

49,55

8

48,17

3

46,10

4 49,74

7

49,44

4

18.8 19.1 19.9 20.0 19.717.0

20.4


Time Deposits Market Share - %

145,5

81

147,7

00

149,5

49

150,0

77

150,5

62

152,9

27

157,0

82

141,3

48

23.6 24.1 23.0 23.1 21.7 21.6 21.1


Funding Market Share - %


6.9.1 Foreing Borrowing

Its foreign borrowing demonstrates that Banco do Brasil�s credibility goes beyond the national frontiers,making BB a very attractive investment option for international investors.

Using innovative forms of funding, such as the securitization of the flow of financial remittances fromBrazilian workers in Japan (dekasseguis) and the securitization of the flow of receivables on Visanetcredit cards, BB has sought to reduce costs and lengthen the terms of funding in the capital market,besides expanding the base of purchasers of its paper, attracting foreign institutional investors.

In September 2004, BB issued US$ 300 million in subordinated debt, at a term of 10 years and a half-yearly coupon at a rate of 8.5% a year. The operation also enjoys protection against politicalconvertibility and transfer risks, in the form of a letter of credit.

The amount borrowed will be used to finance medium and long-term loans, and has been classified astier II capital, which has been reflected positively in the Basel Ratio and in the Bank�s capacity forleverage, as explained in the Basel Ratio chapter.

Table 35. Foreign Borrowing

Issue Date Volume inUS$ million Term in

yearsCupom(%)

InterestInterval

Issueprice

Return for theInvestor (%)

PremiumoverTreasury

CurrentRating Program

06.09.97 200 10 9.375 Half-yearly 99.2190 9.500 287 Ba3 GMTN08.10.01 300 5 7.875 Quarterly 99.6850 7.990 375 BBB Dekasseguis12.27.01 450 7 7.890 Quarterly 100.0000 7.890 325 BBB/Baa1 MT 10007.03.02 300 7 L3M+0.60 Quarterly 100.0000 5.013 *266 AAA/Aaa MT 10009.11.02 40 7 7.890 Quarterly 100.0000 7.890 489 BBB/Baa1 MT 10003.17.03 120 7 7.260 Quarterly 100.0000 7.260 450 BBB/Baa1 MT 10004.25.03 75 2 6.375 Half-yearly 99.9537 6.400 475 B+ GMTN07.10.03 178 8 5.911 Quarterly 100.0000 5.955 350 BBB+/Baa1 Visanet07.10.03 45 8 4.777 Quarterly 95.0000 5.955 350 BBB+/Baa1 Visanet12.19.03 250 10 6.550 Quarterly 100.0000 6.550 292 BBB/Baa1 MT 10009.20.04 300 10 8.500 Half-yearly 99.1740 8.625 447 Baa1 Dív. Subor.* 492 basis points over Libor


6.10 Shareholders� EquityBanco do Brasil closed 3Q04 with R$ 13,771 million in shareholders� equity, an amount 17.8% higherthan in the same period of the previous year and 7.1% higher than the amount closed in June 2004. Thefactors that contributed towards the increase in shareholders� equity were the results for the period, thereduction in the negative adjustment from marking-to-market of securities, and the slight increase inshareholders� equity arising from the operations of Public Offer for Acquiring Warrants (OPA) and thePrivate Share Subscription � R$ 43 million.

An analysis of the graph below shows the inversely perfect relation between Brazilian sovereign risk andthe impact of marking to market on shareholders� equity, indicating that the discount on the securitieshas been reducing because of the greater confidence of the investors in the Brazilian market.

Brazilian Sovereign Risk (points) vs. Marking to Market (R$ million)

Figure 27. Brazilian Sovereign Risk vs. Marking to Market

Table 36. Shareholders� Equity

R$ million

Dec/02 Mar/03 Jun/03 Sep/03 Dec/03 Mar/04 Jun/04 Sep/04Shareholders� Equity 9,197 10,164 10,872 11,687 12,172 12,686 12,864 13,771 Capital 7,436 7,436 8,366 8,366 8,366 8,366 8,366 9,857 Reserves 2,998 2,998 2,826 2,826 3,704 3,704 4,674 3,226 MtM - Securities and Derivatives (1,111) (623) (194) (43) 228 127 (51) (17) (Treasury shares) (126) (126) (126) (126) (126) (126) (126) (126) Income accounts - 479 - 665 - 616 - 833

(1,111)(623)

(194) (43)228 127 (51) (17)

2,396

1,4391,059

788 695463 557 646 466

(1,724)Sep/02 Dec/02 Mar/03 Jun/03 Sep/03 Dec/03 Mar/04 Jun/04 Sep/04

Mark-to-Market Brazilian Sovereign Risk


6.11 Basel RatioBanco do Brasil closed 3Q04 with total regulatory capital 10.8% higher than was seen in 2Q04 and22.7% higher than in the same period of the previous year, to reach R$ 20,272 million.

Shareholders� equity increased 17.8% in relation to September 2003 because of the generation andincorporation of results. This led to an improvement in the capital adequacy ratio from 14.3% to 15.7%in the last 12 months

In the quarter, the capital adequacy ratio went up from 14.5% in 2Q04 to 15.7% in 3Q04. This ratio ishigher than the 11% required by the Central Bank and allows BB leverage of R$ 55,185 million in loanassets (65.6% of the loan portfolio).

Table 37. BIS Ratio

R$ million

Dec/02 Mar/03 Jun/03 Sep/03 Dec/03 Mar/04 Jun/04 Sep/04APR � Risk Weight Assets 103,859 104,043 105,974 109,121 120,973 119,691 119,966 121,391Required Shareholders� Equity 12,024 11,941 12,350 12,705 13,772 13,646 13,929 14,201 APR Requirement 11,424 11,445 11,657 12,003 13,307 13,166 13,196 13,353 Swap Requirement 142 154 166 173 152 150 152 223 FX Exposure Requirement - - - - - - - - Interest Rate Exposure Requirement 457 343 528 529 313 331 581 625Referential Shareholders� Equity 13,377 14,545 15,479 16,520 17,162 17,740 18,299 20,272 Tier I 9,172 10,139 10,847 11,663 12,147 12,336 12,702 13,609 Capital 7,436 7,436 8,366 8,366 8,366 8,366 8,366 9,857 Retained Earnings (Accumulated Losses) - 0 - 0 - 0 - 0 Capital Reserves 5 5 5 5 5 5 5 5 Revenue Reserves 2,969 2,969 2,796 2,796 3,674 3,674 4,645 3,195 Mark-to-Market � Securities andDerivatives (1,111) (623) (194) (43) 228 127 (51) (17)

Treasury Shares (126) (126) (126) (126) (126) (126) (126) (126) Income Accounts - 479 - 665 - 616 - 833 20% Tax Credits Realized After 5 years - - - - - (326) (137) (137) Tier II 4,205 4,406 4,632 4,858 5,015 5,405 5,597 6,663 Subordinated Debt 4,180 4,382 4,607 4,833 4,991 5,380 5,573 6,637 Revaluation Reserves 25 25 25 25 24 24 24 26Shareholders� Equity Surplus / Deficit 1,353 2,604 3,128 3,815 3,391 4,094 4,371 6,070Leverage Surplus / Deficit 12,302 23,673 28,439 34,680 30,825 37,220 39,733 55,185K Coefficient % 12.2 13.4 13.8 14.3 13.7 14.3 14.5 15.7

Bis Ratio - %

Figure 28. Bis Ratio

8.4 9.3 9.7 10.1 9.7 9.9 10.1 10.5

3.8 4.1 4.1 4.2 4.0 4.4 4.4 5.212.2 13.4 13.8 14.3 13.7 14.3 14.5 15.7


Tier I Tier II

11%


CMN Resolution 3059 of 2002 determines that, as from 01.01.2004, there will be additional allocation ofcapital for the stock of tax credits that exceed a 5 year consumption period from the date of the balancesheet. According to the instruction, 20% of the remaining balance will be deducted from Tier I in 2004,40% in 2005, 60% in 2006, and so on, until it arrives at 100% in 2008.

In accordance with technical studies of tax credit consumption, as mentioned in the notes to the financialstatements (note 18), at 09.30.2004, the amount that exceeds 5 years was R$1,062 million.Accordingly, the effect on tier I capital at that date was a reduction of R$137 million.

Table 38. Changes in Composition of BIS Ratio

R$ million

ReferentialShareholders�Equity

RequiredShareholders�Equity

Efect in BaselRatio

Efect inLaverage

Net Income 833 - 0.7 7,569Change of Adj. to market value � securities and derivatives 34 - 0.0 307Increase of Subordinated Debt 1,066 - 0.8 9,689Other Changes in Referential Shareholders� Equity 40 - 0.0 365Increase of Shareholders� Equity Requirement on RiskWeight Assets - 157 (0.2) (1,425)

Increase of Referential Shareholders� Equity Requirementon Swap - 72 (0.1) (653)

Increase of Referential Shareholders� Equity Requirementon Interest Rate Exposure - 44 (0.0) (400)

Quarterly Changes 1,972 273 1.3 15,452

Balance at Jun/04 18,299 13,929 14.5 39,733Balance at Sep/04 20,272 14,201 15.7 55,185Net Quarterly Changes 1,972 273 1.3 15,452

From the above table, it is possible to see that the determinant factors for an increase in 130 basispoints (excess leverage of R$ 15,452 million) in the capital adequacy ratio in 3Q04 were: the result ofthe quarter (which generated an excess leverage of R$ 7,569 million � 70 basis points) and the increasein the Bank�s subordinated debt (which generated excess leverage of R$ 9,689 million � 80 basispoints).

These factors were more than sufficient to support the increase in the allocation of capital arising fromthe growth of the requirement for RWA, which reduced the Bank�s leverage capacity R$ 1,425 million.


6.12 Fixed Asset RatioBB�s fixed asset ratio has been showing a reduction since December 2003, due to the increase in theReferential Shareholders� Equity, via retained earnings and an increase in subordinated debt. Asexplained in the chapter on Foreign Borrowing, there was an increase of US$ 300 million insubordinated debt qualifying for capital, which brought about a fall in the fixed asset ratio, which wentdown from 22.0% to 20.0% (Sep/03 - Sep/04).

With the current level of fixed assets, BB can increase these assets by R$ 6,071 million, without causingany lack of observance of the maximum limit of 50% of the Referential Shareholders� Equity.

Table 39. Fixed Asset Ratio

R$ million

Dec/02 Mar/03 Jun/03 Sep/03 Dec/03 Mar/04 Jun/04 Sep/04 Shareholder�s Equity 9,197 10,164 10,872 11,687 12,172 12,686 12,864 13,771 Stock Exchange and Cetip Clearing (2) (2) (2) (2) (2) (2) (2) (2) Subordinated Debt Qualifying as Capital 4,180 4,382 4,607 4,833 4,991 5,380 5,573 6,637 20% Tax Credits Realized After 5 years - - - - - (326) (137) (137)Referential Shareholders� Equity (A) 13,375 14,543 15,476 16,518 17,160 17,738 18,297 20,269 Permanent Assets 4,350 4,141 4,048 4,047 4,513 4,439 4,517 4,585 Stock Exchange and Cetip Clearing (2) (2) (2) (2) (2) (2) (2) (2) Leasing Assets (542) (493) (438) (406) (385) (405) (456) (507) Losses with Leasing to be Amortized (5) (5) (5) (5) (7) (8) (10) (12)Total Fixed Assets (B) 3,800 3,641 3,603 3,634 4,118 4,023 4,049 4,063Fixed Asset Ratio (B/A) - % 28.4 25.0 23.3 22.0 24.0 22.7 22.1 20.0Margin (Surplus) - % 43.2 49.9 53.4 56.0 52.0 54.6 55.7 59.9


6.13 Risk ManagementBanco do Brasil has integrated the management of the conglomerate�s market, liquidity, operational,and credit risks into the same area. This integration is bringing about greater precision in themeasurement of risks and a better allocation of capital, by generating an increase in the synergy ofprocesses and of the degree of specialization.

The Global Risk Committee (CGR) is responsible for the integrated management of the Bank�s risk,defining exposure limits, contingency plans and risks measurement models.

6.13.1 Market Risk Management

In its market risk management, BB uses methodologies using statistics and simulation, like Value at Risk(V@R), stress and sensitivity analysis, amongst others.

The Value at Risk (V@R) is a measure of maximum expected loss in monetary values, under normalmarket conditions, in a determined time, with a chosen level of probability. At BB, the V@R is measuredby historical simulation methodology, with probability of 95%, for a period of 1 (one) day.

To improve the management of its foreign currency exposure, the Bank now uses a basket of pre-established currencies, in accordance with Bacen Circular 3229/04, taking into consideration themethodology that incorporates the effect of the diversification of its exposures in Euro, US dollar, Swissfranc, Yen, Pound Sterling and Gold.

The balance sheet of foreign currency assets and liabilities below, referenced to the US dollar, showedan exposed asset of US$ 135 million.

Table 40. Balance Sheet of Foreign Exchange Assets and LiabilitiesMultiple Bank - US$million

09.30.04ASSETS LIABILITIES

Trade Bills 702 Currency Swap 492U.S. Dollar Spot 61U.S. Dollar Future 41DDI 312 Res, 2770 1,838

Debt Assumption 208Foreign Investiment 1,496

Other FX Assets 61Total 2,673 Total 2,538FX Exposure 135

The graph that follows shows the behavior of Banco do Brasil�s foreign exchange exposure in thecourse of the year ended September 2004, with an exposure of 1.7% in relation to the ReferentialShareholders� Capital, an increase of 50 basis points when compared with March 2004.


Changes in FX Exposure - %

Figure 29. Changes in FX Exposure

The balance sheet by currencies has the objective of showing the volume of foreign currency assets andliabilities in Brazil and abroad.

Table 41. Balance Sheet by Currencies - AssetsR$ million

09.30.04Brasil

DomesticCurrency

ForeignCurrency Total

Abroad Consolidated

Assets 183,469 22,257 205,726 29,873 235,599Current and Long-term Assets 179,077 22,228 201,305 29,710 231,014Available Funds 2,381 9,942 12,323 4,346 16,669Short-term Interbank Investments 5,983 233 6,216 12,344 18,559Securities 66,041 2,009 68,049 3,071 71,120Interbank Accounts 21,149 1 21,150 2 21,152Intrabank Accounts 108 - 108 - 108Loans and Leasing 59,335 937 60,271 9,689 69,961Other Assets 24,080 9,107 33,188 258 33,446Permanent Assets 4,393 29 4,421 163 4,585 Investments 839 29 868 (25) 843 Property and Equipment 2,546 - 2,546 177 2,723 Leasing Assets 519 - 519 - 519 Deferred Charges 488 - 488 12 500

2.41.8

0.9

2.01.2

0.5

3.1

1.51.2

1.0 1.0

2.4

1.4

2.5

1.7

0.40.40.70.9

0.6

0.60.60.5

0.6

0.70.5

0.5

Jan/04 Feb/04 Mar/04 Apr/04 May/04 Jun/04 Jul/04 Aug/04 Sep/04

Exposure % - Currency Basket Exposure % - Other Currencies Exposure % - Total


Table 42. Balance Sheet by Currencies � Liabilities

R$ million

BrasilDomesticCurrency

ForeignCurrency Total

Abroad Consolidated

Liabilities and Shareholder�s Equity 181.553 18.512 200.065 33.389 235.599Current and Long-term Liabilities 167.759 18.512 186.271 33.273 221.689Deposits 94.975 846 95.821 19.258 115.079 Demand Deposits 25.474 845 26.320 3.871 30.191 Savings Deposits 29.915 - 29.915 - 29.915 Interbank Deposits 467 - 467 5.063 5.530 Time Deposits 39.119 1 39.120 10.324 49.444Money Market Borrowing 40.677 - 40.677 1.327 42.003Funds from Acceptances and Securities Placed - - - 768 768Interbank Accounts 2.023 - 2.023 11 2.034Intrabank Accounts 190 1.662 1.852 - 1.852Onlending 6.633 10.540 17.174 5.485 22.659Financial Derivatives 302 302 67 370Other Liabilities 22.960 5.463 28.423 6.357 34.780Unearned Income 136 - 136 4 139Shareholders�s Equity 13.658 - 13.658 113 13.771 Contas de Resultado 719 - 719 113 833

With the intention of managing exposures and analyzing the possible impacts in various scenarios,Banco do Brasil accompanies the composition of assets and liabilities, detailed by index.

Balance Sheet by Index6

R$ billion � 09.30.04

Figure 30. Balance Sheet by Index

6 Multiple Bank view

33.621.09.6

19.225.7

25.67.8

7.36.0

2.928.3

48.2

76.7

54.1

51.2 35.4

Liabilities: Shareholders� Equity;.Administrative Prov.; Float

Asset: Tax Credit;Permanent

w/o IndexUS$

TJLP

IGPIRP/TBF/TR

CDI/TMS

FixedFixed

CDI/TMS

IRP/TBF/TR

IGPTJLP

US$

w/o Index

Asset Liabilities

Total R$ 226.3 billion


The graph below shows Banco do Brasil�s net mismatch by index (multiple bank view). It can be seenthat BB�s main asset exposure is in CDI/TMS, R$ 22.6 billion, while the main liability exposure is inIRP/TBF/TR, R$ 19.9 billion.

Mismatch Gaps by Index5

R$ billion � 09.30.04

Figure 31. Mismatch Gaps by Index

For the purposes of managing market risk, BB segregates its commercial and treasury transactions fromits trading transactions, with their own limits and strategies. The segregation aims at affording the Banka conservative stance in market risk management.

Fixed Interest Rate Portfolio

The Brazilian Central Bank, through its Circular 2972/00, stipulated the use of the V@R (Value at Risk)methodology in order to measure the risk of maximum expected loss for the fixed interest rate portfolio,a risk that has to be the object of capital allocation.

To do so, a calculation methodology is adopted that separates the exposure in fixed interest ratetransactions into 7 bands (called vertices), according to maturity periods. The present value of theportfolio is ascertained, in accordance with the market interest curves, and, next, the maximum expectedloss is calculated, with a 99% confidence level.

The Bank has established a V@R limit for its Marked to Market - MtM fixed interest rate portfolios(except for the Dealer and Trading portfolio positions) and for the Adjusted Cost portfolio, for which themethodology referred to in the above mentioned circular is adopted. The table below presents the sumof the present value of standard vertices and the V@R of these two portfolios.

The MtM portfolios basically comprise fixed rate securities in categories I (available for trading) and II(available for sale), as well as derivatives. Operations booked by adjusted acquisition cost consistmainly of loans and borrowings at fixed interest rates.

Table 43. Portfolios Indexed to Fixed Interest Rates

Fixed Interest Rate Σ VP Vertices V@RMarked-to-Market � MtM Portfolio 2,717,623 23,775Cost Adjusted Portfolio 18,856,934 118,113

22.615.8

(12.6)(19.9)

3.1

(9.6)

0.10.5

CDI/TMS Fixed IGP TJLP US$ w/o Index Other IRP/TBF/TR

mailto:V@R

mailto:V@R


Trading Portfolio

For the purposes of management, Banco do Brasil segregates the trading transactions from the others,establishing specific strategies and limits. The effect of diversification shows the risk reduction of theportfolio decedent from the correlation between the assets that it comprises. In the following table, theV@R is shown for the trading portfolio by risk factor.

Table 44. Domestic Trading PortfolioR$ thousand

Domestic TradingRisk Factor MtM Amount VaRFixed Rate 73,892 9Floating Rate 13,516 123Diversification effect - (6)Total 87,408 126

Table 45. International Trading PortfolioR$ thousand

International TradingRisk Factor MtM Amount VaRUS Dollar 32,869 170Euro (71) 10Sterling Pound 288 5Other Currencies 35 -Diversification effect - (4)Total 33,122 181

The table below sets out the average, minimum and maximum V@R of the trading portfolios from Juneto September 2004.

Table 46. Average V@R, Minimum and Maximum

R$ thousand

Trading Minimum Average MaximumDomestic (R$) 13 70 165International (US$) 126 214 353

6.13.2 Liquidity Risk Management

In the management of liquidity risk, constant monitoring of the cash flow is carried out, bearing in mindthe maintenance of a minimum limit compatible with the degree of exposure to risk arising from theBank�s capital structure and from the analysis of market conditions. In order to accomplish that, theBank�s Global Risk Committee (CRG) established and approved, in November 2003, an indicator forhelping this monitoring. This indicator was named as Availability of Free Funds (DRL).

The DRL is an indicator that shows the surplus of free funds, after the free investment of these funds,defined as investments that are the fruit of the Bank�s business strategy and not of a normativeinstruction.

The minimum limit established by the CGR for the DRL in 2004 was 25%. This level of structural liquidityis sufficient for carrying on with transactions, without requiring treasury to borrow short-term funds forfinancing the loan portfolio.


In the figure below, the DRL seen in the first half of 2004 is shown. It is worth pointing out that thegradual reduction of the compulsory deposit on judicial deposits, that culminated with its extinction inMay 2004, made possible a significant expansion in structural liquidity, enabling the Bank to meet thedemand for credit in a balanced and comfortable manner.

Availability of Free Funds � DRL %

Figure 32. Availablity of Free Funds

32.7 36.342.3

52.5

64.9 68.274.1 70.9

63.1

Jan/04 Feb/04 Mar/04 Apr/04 Mai/04 Jun/04 Jul/04 Aug/04 Sep/04

25%


7 � Analysis of Results7.1 Gross Financial MarginTable 47. Gross Financial Margin

R$ million


3Q03 2Q04 3Q04 on 3Q03 on 2Q04

Financial Intermediation Income 10,181 8,462 7,455 (26.8) (11.9) Loans 4,239 4,361 4,120 (2.8) (5.5) Leasing 20 21 23 16.1 9.4 Securities 4,444 2,930 2,660 (40.1) (9.2) Financial Derivatives (201) (194) 22 10.7 11.1 Foreign Exchange Portfolio 1,093 729 (224) (220.5) (230.7) Compulsory Investments 438 312 340 (22.2) 9.0 FX Gain (Loss) on Foreign Investments 105 268 (354) (535.8) (332.3) Other Op. Inc. of a Fin. Intermed. Nature 43 35 869 1.913.3 2.370.0Financial Intermediation Expenses (6,293) (4,537) (3,536) (43.8) (22.1) Money Market Funds (4,598) (3,070) (3,222) (29.9) 4.9 Borrowing, Assignments and Onlending (1,695) (1,467) (315) (81.4) (78.6)Gross Financial Margin 3,888 3,925 3,919 0.8 (0.2)

The gross financial margin represents the result from financial intermediation business, beforeprovisions for credit risks. In 3Q04, there was an increase of 0.8%, reaching R$ 3,919 million in theperiod, compared to R$ 3,888 million in the same period of the previous year. The expansion in thevolume of business, with special mention of loans, more than offset the shrinking in the margin causedby the reduction in the spread in financial intermediation. In 3Q04, the margin remained practicallyunchanged, although with significant movement between items, by virtue of the currency appreciationthat occurred in the period. The Bank�s low foreign currency exposure minimized these effects.

The table below demonstrates the formation of the gross financial margin from the changes in thespread and from the growth in the volume of investments (assets � permanent assets).

Table 48. Analysis of Volume and Spread

R$ million

3Q03 3Q04 Abs. Chg. Comp. %Volume: Assets � Permanent Assets * 209,072 227,099 18,027Gross Financial Margin 3,888 3,919 31Spread - % ** 1.8597 1.7257 (0.1341)Gain/(loss) with volume 4,223 335 1,089,0Gain/(loss) with spread 3,608 (280) (910.5)Gain/(loss) with volume and spread (24) (78.5)* Average Balances** Gross Financial Margin / (Assets � Permanent Assets)

The gross financial margin showed an increase of R$ 31 million in 3Q04, in relation to the same periodof the previous year, basically because of the growth in the volume of transactions, since the spread


showed a downturn. The negative effect brought about by the reduction in Selic in the period was offsetby the growth in the volume of operations

Analysis of Volume and Quarterly Spread

Figure 33. Analysis of Volume and Quarterly Spread

335

(280) (24)

3,888

Gain/(Loss) in VolumeGain/(Loss) in SpreadGain/(Loss) in Volume and Spread

3Q03 - 1.8597

3Q04 - 1.7257

3Q04 - 227,0993Q03 - 209,072

Volume - R$ million

Spread - %


7.1.1 Analysis of Uses

The spread for financial intermediation in relation to remunerated assets decreased from 4.9% to 3.3%between 3Q03 and 3Q04, equivalent to annualized rates of 20.9% and 13.8%, respectively. Thedecrease in the spread was due chiefly to the lower Selic rate seen in the period and to the reduction inthe rates in loan transactions. The improvement in the composition of the loan portfolio and the growth involume minimized this effect. The effect of the reduction in the Selic rate is to be seen in the result fromsecurities, which fell 40.1% in relation to 3Q03 and 9.2% in relation to 2Q04.

Table 49. Investment Rate

Average Balances in R$ million

3Q03 2Q04 3Q04Assets � Permanent Assets 209,072 219,318 227,099Financial Intermediation Income (Reallocated Income Statement) 10,181 8,462 7,455Fin. Intermed. Income / (Assets � Permanent Assets) 4.9 3.9 3.3Fin. Intermed. Income / (Assets � Permanent assets) � annualized 20.9 16.4 13.8

The balance of available funds in foreign currency increased between 3Q03 and 3Q04, due to theincrease in the volume of sales of foreign currency. However, the effect of this movement was notreflected in income from available funds in foreign currency, because of the strong appreciation of thecurrency that occurred in the period. The spread in 3Q04 came to 0.8%, against 31.9% the same periodof the previous year.

Table 50. Investment Rate on Available Funds in Foreign Currency


3Q03 2Q04 3Q04Available Funds in Foreign Currency 2,774 7,813 9,266Income from Available Funds in Foreign Currency 199 430 18Annualized Rate - % 31.9 23.9 0.8

The result from securities in 3Q04 totaled R$ 2,660 million, an amount 40.1% lower than that recordedin 3Q03. This fall reflected the significant reduction in the TMS in the period.

Table 51. Investment Rate on Securities and Interbank Investments


3Q03 2Q04 3Q04Securities + Interbank Investments 93,427 83,162 87,637Securities Income excluding Hedges 4,444 2,930 2,660Annualized Rate - % 20.4 14.9 12.7

The table below shows the sources of revenues from securities. In 3Q04, the accrual of revenues fromthe portfolio showed a fall of 39.2% (R$ 1,361 million) in relation to the same period of the previousyear, basically because of the reduction in the average Selic rate, which varied 3.9% in 3Q04,compared to 5.6% in the same period of the previous year. The result of marking-to-market � MTMproduced a positive effect of R$ 8 million in 3Q04, compared to the positive effect of R$ 36 million in3Q03. This movement reflects the stability of the market price of securities in the period.


It is worth pointing out that besides the effect of the fall in the TMS, the result with securities was alsoimpacted with the exchange valorization in the period, that had a direct impact on the profitability ofthose securities linked in American Dollars, about 3% of the securities portfolio of BB.

Table 52. Securities IncomeR$ million


3Q03 2Q04 3Q04 on 3Q03 on 2Q04

Securities Income 4,444 2,930 2,660 (40.1) (9.2) Fixed Income Securities 3,901 2,537 2,370 (39.2) (6.6) Revaluation � Curve 3,712 2,586 2,351 (36.7) (9.1) Income from Trading 152 48 11 (92.9) (77.3) Marking to Market 36 (97) 8 (77.1) 8.7 Others 543 393 290 (46.6) (26.1)

The graph below shows the main indices in BB´s securities portfolio

Securities Portfolio by IndexMultiple Bank � 06.30.04

Figure 34. Securities Portfolio by Index

In 3Q04, revenues from loans and leasing reached R$ 3,865 million, a decrease of 2.7% in relation tothe same period of the previous year. The rates observed went down from 28.1% in the 3Q03 to 22.6%in the period. The decrease in profitability was due to the gradual movement of reduction in the finalinterest rates of loans that occurred over the year. The growth in the volume of transactions by 19.2% inthe period almost completely mitigated the effect of the fall of profitability on revenues.

Table 53. Investment Rate on Loans and Leasing

Average Balances in R$million

3Q03 2Q04 3Q04Loans + Leasing 62,085 73,086 73,984Loans + Leasing Income 3,971 4,067 3,865Annualized Rate - % 28.1 24.2 22.6

The graph below shows the changes in the spread on credit by portfolio. A greater reduction is to beseen in the spread on the retail portfolio in 3Q04.

81.2%

4.9%4.5%

3.0%

6.4%

TMS Fixed TR Dollar IGP/Others


Spread by Loan Portfolio - %

Source: Management data. Includes: financial revenues, oportunity cost and taxes.

Figure 35. Spread by Loan Portfolio

The behavior of the dollar explains the changes in the items below. The relationship of these accountswith exchange rate variation is show in the following graph.

Table 54. FX Gain (Loss) and Other FX Operations


3Q03 2Q04 3Q04FX Gain (Loss) on Foreign Investments 105 268 (354)Other FX Operations 894 300 (242)

FX Gain (Loss) and Other FX OperationsR$ million

Figure 36. Ganho Cambial e Outras Operações de Câmbio

4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04

FX Gain on Foreign Exchange

Other FX Operations

Changer Dollar - %

7.8 7.8 7.5 6.7

9.7 9.4 9.9 9.7 9.5 9.1 8.7

6.2 5.25.4

46.7 47.0 44.4 45.2 44.5 43.0 40.4

1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04

Agribusiness Commercial Retail


7.1.2 Analysis of Funding

The fall in the Selic rate, the TR and, chiefly, the foreign exchange rate in the period brought about areduction in financial intermediation expenses. In the period, the Bank�s total cost of borrowing(intermediation expenses / assets � permanent assets) decreased from 12.6% in 3Q03 to 6.4% in 3Q04.An analysis of 3Q04 in relation to 2Q04 shows a similar movement.

Table 55. Funding Cost


3Q03 2Q04 3Q04Assets � Permanent Assets 209,072 219,318 227,099Financial Intermediation Expenses (6,293) (4,537) (3,536)Finan. Intermed. Expenses / (Assets � Permanent Assets) 3.0 2.1 1.6Finan. Intermed. Expenses / (Assets � Permanent Assets) � Ann. 12.6 8.5 6.4

In the table below, it is possible to see the effect of the fall in the foreign exchange rate on the expensesof borrowing abroad. The appreciation of the currency observed in 3Q04 caused a sharp fall in theseexpenses in the period, when compared with the previous periods.

Table 56. Cost of Foreign BorrowingAverage Balances in R$million

3Q03 2Q04 3Q04Foreign Borrowing 7,943 12,531 14,963Expenses with Borrowing, Onlending, and Foreign Banks (1,445) (1,200) (60)Annualized Rate - % 95.1 44.2 1.6

A downturn of 29.5% in expenses with deposits and money market borrowing was to be seen in 3Q04,in relation to 3Q03. This movement is explained basically by the lower variation of the average Selic rate(TMS), which fell from 5.6% in 3Q03 to 3.9% in 3Q04. In addition, the referential rate (TR) decreasedfrom 1.2% to 0.6% in the same period of comparison. The slight growth in funding costs in 3Q04 inrelation to the immediately foregoing period is due to the slight rise in interest rates and, consequently,of the referential rate in the period.


Table 57. Market Funding Cost


3Q03 2Q04 3Q04Money Market Borrowing 147,217 151,909 154,955Expenses withd Money Market Borrowing 7 (4,522) (2,972) (3,186)Annualized Rate - % 12.9 8.1 8.5 Savings Deposits 26,544 28,392 29,718 Expenses with Savings Deposits (740) (561) (707) Annualized Rate - % 11.6 8.1 9.9 Interbank Deposits 6,102 7,580 6,279 Expenses with Interbank Deposits (70) (52) (69) Annualized Rate - % 4.7 2.8 4.4 Time Deposits 48,785 48,928 49,164 Expenses with Time Deposits (1,512) (1,124) (1,059) Annualized Rate - % 13.0 9.5 8.9 Money Market Borrowing 45,851 36,973 39,855 Expenses with Money Market Borrowing (2,199) (1,235) (1,351) Annualized Rate - % 20.6 14.0 14.3 Demand Deposits 19,937 30,037 29,938

7 Expenses with Deposits and Money Market Borrowing except Expenses with Foreign Securities, Expenses with FGC on DemandDeposits, and Expenses with Debt Assumption Contracts.


7.1.3 Analysis of the Spread

The increase in the share of rural transactions, the significant reduction in the TMS, which indexes thegreater part of the securities portfolio, coupled with the tightening of the spread between TMS and TR,have been causing a reduction in the overall spread of BB�s financial intermediation.

The growth of the loan portfolio, coupled with the constant improvement in the mix of operations, hasminimized the declining trend in the spread on financial intermediation, although not sufficiently to annulthis effect entirely.

Changes in the Spread - %

Figure 37. Changes in the spread

Table 58. Investment Rate, Funding Cost, and Spread


3Q03 2Q04 3Q04Finan. Intermed. Income / (Assets � Permanent Assets) 4.9 3.9 3.3Finan. Intermed. Income / (Assets � Permanent Assets) � Ann. 20.9 16.4 13.8Finan. Intermed. Expenses / (Assets � Permanent Assets) 3.0 2.1 1.6Finan. Intermed. Expenses / (Assets - Permanent Assets) � Ann. 12.6 8.5 6.4GFM / (Assets � Permanent Assets) 1.9 1.8 1.7GFM / (Assets � Permanent Assets) � Annualized 7.6 7.4 7.1

8.27.9

7.3

7.67.4

6.9

7.47.1

4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04


7.1.4 Analytical Spread

Table 59. Analytical Spread � Investment RatesAverage Balances in R$million

3Q03 2Q04 3Q04Remunerated Assets 169,158 176,216 183,393Available Funds in Foreign Currency 2,774 7,813 9,266Income from Available Funds in Foreign Currency 199 430 18Annualized Rate - % 31.9 23.9 0.8Securities + Interbank Investments 93,427 83,162 87,637Securities Income excluding Hedges 4,444 2,930 2,660Annualized Rate - % 20.4 14.9 12.7Loans + Leasing 62,085 73,086 73,984Loans + Leasing Income 3,971 4,067 3,865Annualized Rate - % 28.1 24.2 22.6Remunerated Compulsory Deposit 10,336 11,614 11,946Income from Compulsory Deposits 438 312 340Annualized Rate - % 18.0 11.2 11.9Other Remunerated Assets 536 542 561Other Income with Financial Intermediation Characteristics 43 37 40Annualized Rate - % 36.4 30.3 31.9Tax Credits 10,104 8,913 8,651Other Assets 29,810 34,189 35,055Permanent Assets 4,058 4,471 4,538TOTAL ASSETS 213,130 223,789 231,636

Table 60. Analytical Spread � Funding CostsAverage Balances in R$million

3Q03 2Q04 3Q04Remunerated Liabilities 149,598 151,362 157,351Savings Deposits 26,544 28,392 29,718Expenses with Savings Deposits (740) (561) (707)Annualized Rate - % 11.6 8.1 9.9Interbank Deposits 6,102 7,580 6,279Expenses with Interbank Deposits (70) (52) (69)Annualized Rate - % 4.7 2.8 4.4Time Deposits 48,785 48,928 49,164Expenses with Time Deposits (1,512) (1,124) (1,059)Annualized Rate - % 13.0 9.5 8.9Money Market Borrowing 45,851 36,973 39,855Expenses with Money Market Borrowing (2,199) (1,235) (1,351)Annualized Rate - % 20.6 14.0 14.3Foreign Borrowing 7,943 12,531 14,963Expenses with Foreign Borrowing, Onlending and Banks (1,445) (1,200) (60)Annualized Rate - % 95.1 44.2 1.6Onlending 6,243 8,266 8,731Expenses with Onlending (132) (159) (139)Annualized Rate - % 8.7 7.9 6.5Financial and Development Funds + Subordinated Debt 6,522 7,306 7,845Expenses with Financial and Development Funds (110) (108) (116)Annualized Rate - % 6.9 6.1 6.0Foreign Securities 1,610 1,388 795Expenses with Foreign Securities (25) (24) (16)Annualized Rate - % 6.4 7.2 8.5Other Liabilities 52,049 58,544 60,129 Demand Deposits 19,937 30,037 29,938 Other Liabilities 32,112 28,507 30,190Shareholders� Equity + Income Accounts 11,483 13,050 13,541TOTAL LIABILITIES AND SHAREHOLDERS� EQUITY 213,130 223,789 231,636


Table 61. Reconciliation with the Gross Financial MarginAverage Balances in R$ million

3Q03 2Q04 3Q04Financial Intermediation Income (Reallocated Income Statement) 10,181 8,462 7,455Income from Remunerated Assets 9,095 7,776 6,924Income from Financial Derivatives (201) (194) 22FX Gain (Loss) on Foreign Investments 105 268 (354)Other FX Operations 894 300 (242)Other Operating Income (0) (2) 828Recovery of Write-offs 287 315 278Financial Intermediation Expenses (6,293) (4,537) (3,536)Expenses with Remunerated Liabilities (6,233) (4,463) (3,517)Expenses with FGC on Demand Deposits (12) (17) (17)Expenses with Debt Assumption Contracts (47) (58) (2)Other Expenses (0) 0 0

Table 62. Main Components of the SpreadAverage Balances in R$million

3Q03 2Q04 3Q04Gross Financial Margin 3,888 3,925 3,919Assets � Permanent Assets 209,072 219,318 227,099Remunerated Assets 169,158 176,216 183,393

Table 63. Investment Rates and Funding CostsAverage Balances in R$million

3Q03 2Q04 3Q04Finan. Intermed. Income / (Assets � Permanent Assets) 4.9 3.9 3.3Finan. Intermed. Income / (Assets � Permanent Assets) � Ann. 20.9 16.4 13.8Finan. Intermed. Expenses / (Assets � Permanent Assets) 3.0 2.1 1.6Finan. Intermed. Expenses / (Assets � Permanent Assets) � Ann. 12.6 8.5 6.4GFM / (Assets � Permanent Assets) 1.9 1.8 1.7GFM / (Assets � Permanent Assets) � Annualized 7.6 7.4 7.1Finan. Intermed. Income / (Remunerated Assets) 6.0 4.8 4.1Finan. Intermed. Income / (Remunerated Assets) � Annualized 26.3 20.6 17.3Finan. Intermed. Expenses / (Remunerated Assets) 3.7 2.6 1.9Finan. Intermed. Expenses / (Remunerated Assets) � Annualized 15.7 10.7 7.9GFM / (Remunerated Assets) 2.3 2.2 2.1GFM / (Remunerated Assets) � Annualized 9.5 9.2 8.8


7.1.5 Management Analysis of the Spread

We carried out a management assessment of the spread in financial intermediation, by means of areconciliation of the management information on the loan portfolio and on deposits and money marketborrowing with the accounting information.

The spread was assessed by comparing the gross financial margin of each investment and borrowingproduct with their respective volume. The gross financial margin is determined by taking intoconsideration the opportunity cost of each product. In the case of an investment in credit, for example,the gross financial margin is made up of the financial revenues from the product after deduction of theopportunity costs. In the case of a borrowing, the margin is determined by comparing the financialexpenses with the respective opportunity revenue.

The opportunity costs and revenues of each product are determined in accordance with theircharacteristics. As a general rule, the average Selic rate (TMS) is adopted as a point of reference for theopportunity cost for the greater part of the products of financial intermediation. There are, however,exceptions like, for example, funding with savings, where the opportunity revenue is hybrid, that is, it isremunerated by the TMS on the free portion, by the rural CDI in the case of the portion invested in ruralcredit, and by TR+6% a year, in the case of the portion intended for the compulsory deposit.Accordingly, the gross spread of each product is determined by assessing its actual contribution to theformation of the result.

The table below shows the composition of the average semi-annual spread, where , while it should beobserved that the spread on transactions with individuals � where the risk vs. return ratio is better � hasbeen showing a systematic reduction, because of the downturn in the interest rates, which has beenaccompanied by the agroindustrial transactions. In addition, borrowings have also been showing aconstant downturn, because of the decrease in the TMS, the basic index for calculating the opportunityrevenues on fundings.

Table 64. Nominal Spread per Transaction%

3Q03 2Q04 3Q04Nominal Spread 1.86 1.79 1.73 Loans 3.12 3.06 3.02 Individuals 9.30 9.27 8.70 Businesses 2.02 1.99 1.96 Agribusiness 1.62 1.24 1.37 Other Transactions (0.53) 0.99 0.58 Fundings 1.44 1.00 0.91 Other 1.15 1.38 1.38

The systematic reduction in average spreads, in the case of the loan portfolio, has been offset by theimprovement in the mix, in which transactions with individuals have been increasing their share. Thismovement can be perceived from the behavior of the weighted average spread, which demonstrates thealterations in the mix and in the nominal spreads, as shown in the following tables.

The tightening of the spread between TR and TMS has been bringing about a systematic reduction inthe weighted spread on borrowings. This movement is relatively natural at times of decreasing interestrates. The same occurs when there is an increase in the base rate of the economy, as the TR does notusually accompany this movement, basically for indexing a significant portion of rural and propertyfinance.


Table 65. Composition of the Transactions%

3Q03 2Q04 3Q04Composition (Mix) Loans 30.07 33.89 33.19 Individuals 18.21 18.53 19.16 Businesses 43.91 44.84 45.64 Agribusiness 34.28 33.08 31.72 Other transactions 3.60 3.54 3.48 Fundings 40.36 41.62 42.06 Other 29.57 24.50 24.76

The improvement in the mix was not sufficient to mitigate in full the effect of the reductions of theaverage spreads in the weighted spread of loan transactions.

Table 66. Weighted Spread per Transaction%

3Q03 2Q04 3Q04Weighted Spread 1.86 1.79 1.73 Loans 0.94 1.04 1.00 Individuals 0.51 0.58 0.55 Businesses 0.27 0.30 0.30 Agribusiness 0.17 0.14 0.14 Other transactions (0.01) 0.01 0.01 Fundings 0.58 0.42 0.38 Other 0.34 0.34 0.34

Table 67. Analysis of Volume and Management Spread (12 months)

Ganho/(Perda)Volume Taxa Volume e Taxa

Total

Aplicações 230 139 12 381Captações 105 (419) (36) (350)Total 335 (280) (24) 31

Analysis of Volume and Spread of Uses and Funding

Figure 38. Analysis of Volume and Spread of Uses and Funding

Gain/(Loss) in VolumeGain/(Loss) in SpreadGain/(Loss) in Volume and Spread

230

139 12

2,669

3Q04 - 1.3432

3Q03 - 1.2768

3Q04 - 227,0993Q03 - 209,072

Volume - R$ million

Spread - %

Uses

105

(419) (36)

1,219

3Q03 - 0.5828

3Q04 - 0.3825

3Q04 - 227,0993Q03 - 209,072

Volume - R$ million

Spread - %

Funding


7.2 Net Financial MarginTable 68. Net Financial MarginR$ million


3Q03 2Q04 3Q04 on 3Q03 on 2Q04

Gross Financial Margin 3,888 3,925 3,919 0.8 (0.2) Allowance for Loan Losses (747) (903) (856) 14.6 (5.3)Net Financial Margin 3,141 3,022 3,063 (2.5) 1.4

The net financial margin is arrived at by deducting expenses with allowances for loan losses (PCLD)from the gross financial margin. The 14.6% increase in the loan portfolio recurring allowance in 3Q04, inrelation to the same period of the previous year., has been compatible with the growth of the loanportfolio, which change was of 15.9% between September 2003 and September 2004.

The expenses with the allowance have represented around 1.1% of the average loan portfolio in eachquarter. When we use the accumulated expense with the allowance in 12 months over the average loanportfolio in the same period, we arrive at a figure of 4.4% in 3Q04, compared to 4.7% in 3Q03, whichreflects stability in the setting up of provisions in relation to the total of the portfolio.

Table 69. Expenses with Allowance for Loan Losses over Portfolio R$ million

4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04(A) Allowance for Loan Losses - Quarterly (855) (636) (863) (747) (827) (901) (903) (856)(B) Allowance for Loan Losses - 12Months (2,873) (2,916) (3,188) (3,101) (3,072) (3,337) (3,378) (3,487)

(C) Allowance for Loan Losses - 12Months* (3,005) (3,048) (3,188) (3,101) (3,072) (3,600) (3,786) (3,975)

(D) Loan Potfolio 62,900 65,715 68,662 72,601 77,636 79,647 83,131 84,148(E) Average Portfolio � 3 Months 62,391 64,650 67,125 70,484 76,550 78,823 82,283 82,942(F) Average Portfolio � 12 Months 57,425 60,622 63,572 66,163 69,702 73,245 77,035 80,149Expenses over Portfolio (A/E) - % 1.4 1.0 1.3 1.1 1.1 1.1 1.1 1.0Expenses over Portfolio (B/F) - % 5.0 4.8 5.0 4.7 4.4 4.6 4.4 4.4Expenses over Portfolio (C/F) - % 5.2 5.0 5.0 4.7 4.4 4.9 4.9 5.0* With Extraordinary Items


Expenses with Allowance for Loan Losses over Portfolio

Figure 39. Expenses with Allowance for Loan Losses over Portfolio

The graph below details the allowance for loan losses, segregating the minimum provisions required byCMN Resolution 2682 from the additional provisions.

Breakdown of AllowanceR$ million

Figure 40. Breakdown of Allowance

Banco do Brasil�s loan portfolio increased R$ 11,547 million (Sep/03 � Sep/04) and ended up bringingthe profile of this portfolio closer to the curve observed in the market. The main changes occurredbecause of the growth of the retail portfolio, that has the higher risk, and the revision of the methodologypreviously applied to certain groups of operations in the companies portfolio. At the end of September2004, loans ranked as AA, A and B accounted for 78.8% of the total of the portfolio, compared to 85.6%in September 2003.

855

636

863

747 82

7 901

903

856

1.4 1.0 1.3 1.1 1.1 1.1 1.1 1.0

5.0 4.8 5.0 4.7 4.4 4.6 4.4 4.4

5.2 5.0 5.0 4.7 4.44.9 4.9 5.0

4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04(A) Allowance for Loan Losses (R$ million) Expenses over Portfolio (A/E) - %Expenses over Portfolio (B/F) - % Expenses over Portfolio (C/F) - %

3,142 3,124 3,374 3,549 3,637 3,915 4,128 4,375

364 469 449 495 558778

973 999

3,506 3,593 3,823 4,044 4,1954,693

5,102 5,374


Allow ance Required Aditional Allow ance Total Allow ance


Table 70. Loan Portfolio by Level of RiskR$ million

Sep/03 Jun/04 Sep/04Balance Allowance Comp. % Balance Allowance Comp. % Balance Allowance Comp. % *NFS

AA 15,673 - 21.6 17,528 - 21.1 16,571 - 19.7 28,4A 30,879 154 42.5 22,710 114 27.3 22,447 112 26.7 32,9B 15,629 156 21.5 25,512 255 30.7 27,312 273 32.5 17,9C 4,890 147 6.7 10,949 328 13.2 10,923 328 13.0 10,3D 1,956 196 2.7 2,475 247 3.0 2,690 269 3.2 4,4E 577 173 0.8 631 189 0.8 716 215 0.9 1,3F 342 171 0.5 433 216 0.5 397 198 0.5 1,1G 343 240 0.5 386 270 0.5 372 261 0.4 0,6H 2,312 2,312 3.2 2,508 2,508 3.0 2,719 2,719 3.2 3,3

Total 72,601 3,549 100.0 83,131 4,128 100.0 84,148 4,375 100,0 100,0

AA-B 62,181 311 85.6 65,750 369 79.1 66,331 385 78.8 79.1C-D 6,846 342 9.4 13,424 576 16.1 13,613 597 16.2 14.7E-H 3,574 2,896 4.9 3,958 3,184 4.8 4,204 3,393 5.0 6.2* Preliminary data for September/2004

The ratio of the portfolio net of allowances (CLP) over the total portfolio (CT) - (CLP/CT) demonstratesthe overall assessment of the weighted portfolio, in accordance with CMN Resolution 2682. Thefollowing graph shows that Banco do Brasil has maintained a better quality in its loan portfolio than theNational Financial System.

CLP/CT BB vs. SFN - %

Figure 41. CLP/CT BB vs. SFN

95.0 95.2 95.1 95.1 95.3 95.1 95.0 94.8

93.4 93.192.5 92.7 93.0

94.0 94.2 94.3


BB NFS


In September 2004, past due loans accounted for 5.6% of the total of the loan portfolio, while theallowance for loan losses amounted to 6.4% of the portfolio. This shows that the PCLD covers the totalbalance of the past due loans. Should only the loans past due over 60 days be taken into consideration,the PCLD would cover 197.1% of these transactions, compared to 173.4% in September 2003.

Table 71. Delinquency RatioR$ million

4T02 1T03 2T03 3T03 4T03 1T04 2T04 3T04Loan Portfolio 62,900 65,715 68,662 72,601 77,636 79,647 83,131 84,148Past Due Loans 3,801 3,681 3,610 3,596 3,656 4,144 4,256 4,703Past Due Loans/Loan Portfolio - % 6.0 5.6 5.3 5.0 4.7 5.2 5.1 5.6

Past Due Loans + 15 days 3,738 3,631 3,497 3,494 3,591 4,026 4,128 4,585Past Due Loans + 15 days/Loan Portfolio - % 5.9 5.5 5.1 4.8 4.6 5.1 5.0 5.4

Past Due Loans + 60 days 2,105 2,034 2,228 2,333 2,347 2,557 2,639 2,726Past Due Loans + 60 days/Loan Portfolio - % 3.3 3.1 3.2 3.2 3.0 3.2 3.2 3.2

Write-off 1,494 528 559 534 673 668 660 641Recovery of Write-offs (559) (169) (207) (287) (371) (224) (315) (278)Net Loss 934 359 352 246 302 444 345 364Net Loss/Loan Portfolio - % annualized 6.1 2.2 2.1 1.4 1.6 2.2 1.7 1.7

Allowance 3,506 3,593 3,823 4,044 4,195 4,693 5,102 5,374Allowance/Loan Portfolio - % 5.6 5.5 5.6 5.6 5.4 5.9 6.1 6.4Allowance/Past Due Loans + 15 dias - % 93.8 99.0 109.3 115.8 116.8 116.6 123.6 117.2Allowance/Past Due Loans + 60 dias - % 166.5 176.7 171.6 173.4 178.8 183.6 193.3 197.1

The figure below shows stability in the levels of delinquency in the loan portfolio.

Delinquency Ratio - %

Figure 42. Delinquency Ratio

6.05.6

5.35.0 4.7

5.2 5.15.6

5.95.5

5.14.8 4.6

5.1 5.05.4

3.3 3.1 3.2 3.2 3.0 3.2 3.2 3.2


Past Due Loans / Loan PortfolioPast Due Loans + 15 days / Loan PortfolioPast Due Loans + 60 days / Loan Portfolio


7.2.1 Retail Loan Portfolio

The retail loan portfolio, grew 35.0% in the last 12 months, has shown a fall in quality in relation toSeptember 2003, due to the revision in the methodology for rating risk in transactions below R$ 50thousand in March 2004. Loans ranked at risk levels B and C increased their share, going up from13.4% to 77.2% (Sep/03 � Sep/04). However, should loans ranked from AA to C be taken intoconsideration, a small reduction can be seen in the composition of the risk, which was 86.5% inSeptember 2003, to 84.9% in September 2004. It is important to note that, in the period (Sep/03 �Sep/04), the 35% growth in the portfolio did not imply a worsening in the risks from E to H, whichmaintained their share.

Table 72. Retail Loan Portfolio by Level RiskR$ million

Sep/03 Jun/04 Sep/04Balance Allowance Comp. % Balance Allowance Comp. % Balance Allowance Comp. %

AA 76 - 0.5 197 - 1.0 244 - 1.2A 10,881 54 72.6 1,402 7 7.3 1,324 7 6.5B 1,377 14 9.2 9,520 95 49.9 10,178 102 50.3C 627 19 4.2 5,283 158 27.7 5,429 163 26.8D 320 32 2.1 528 53 2.8 715 71 3.5E 249 75 1.7 336 101 1.8 361 108 1.8F 215 108 1.4 291 146 1.5 284 142 1.4G 205 144 1.4 247 173 1.3 252 176 1.2H 1,031 1,031 6.9 1,282 1,282 6.7 1,440 1,440 7.1

Total 14,982 1,476 100.0 19,085 2,014 100.0 20,227 2,209 100.0

AA-B 12,334 68 82.3 11,118 102 58.3 11,746 108 58.1C-D 947 51 6.3 5,811 211 30.4 6,144 234 30.4E-H 1,701 1,357 11.4 2,155 1,701 11.3 2,336 1,867 11.6

The following table details the movement in allowances for loan losses in the retail portfolio. Retail PCLDincreased mainly because of the worsening of risk, reinforced by the implementation of the methodologymentioned above.

Table 73. Changes in the Allowance - RetailR$ million

3Q03 4Q03 1Q04 2Q04 3Q04

Retail Loan Portfolio 14,982 15,602 17,797 19,085 20,227

Initial Allowance 1,366 1,477 1,599 1,858 2,014

1 - Risk Migration 317 394 556 514 451a) Risk Deterioration 561 640 799 713 750b) Risk Improvement (243) (245) (242) (199) (300)2 � New Transactions 101 120 139 162 2163 � Write-offs (286) (353) (363) (414) (407)

Total (1 + 2 + 3): 132 162 332 261 259

Other Impacts* (22) (39) (74) (105) (64)

Final Allowance 1,477 1,599 1,858 2,014 2,209

Allowance Required by CMN Resolution 2682 1,477 1,599 1,858 2,014 2,209

*Amortization, settlement, installments, and charges


7.2.2 Commercial Loan Portfolio

The 21,8% growth of the commercial portfolio was accompanied by a slight improvement in risk (Sep/03� Sep/04). At the end of September 2004, the levels of risk AA, A and B now comprised 89.3% of thetotal of the portfolio , compared to 88.3% at the end of September 2003. Credits rated C and Ddecreased from 9.1% to 8.2% in the same period.

Table 74. Commercial Loan Portfolio by Level Risk

R$ million


AA 3,931 - 26.5 4,378 - 25.8 4,683 - 26.0A 5,898 29 39.8 5,893 29 34.8 6,260 31 34.7B 3,252 33 21.9 4,900 49 28.9 5,172 52 28.7C 628 19 4.2 713 21 4.2 754 23 4.2D 718 72 4.8 644 64 3.8 724 72 4.0E 92 28 0.6 79 24 0.5 123 37 0.7F 47 24 0.3 58 29 0.3 45 22 0.2G 35 25 0.2 33 23 0.2 25 17 0.1H 215 215 1.5 258 258 1.5 260 260 1.4

Total 14,817 444 100.0 16,957 498 100.0 18,046 514 100.0

AA-B 13,081 62 88.3 15,172 78 89.5 16,116 83 89.3C-D 1,346 91 9.1 1,357 86 8.0 1,478 95 8.2E-H 390 291 2.6 428 334 2.5 452 336 2.5

The table of changes in the allowance shows that the movement of risk deterioration has beenpractically offset by risk improvement, with the increase in the allowance explained by the contracting ofnew transactions.

Table 75. Changes in the Allowance � CommercialR$ million

3Q03 4Q03 1Q04 2Q04 3Q04

Commercial Loan Portfolio 14,817 16,450 16,110 16,957 18,046

Initial Allowance 474 444 458 475 498

1 - Risk Migration 13 53 14 20 58a) Risk Deterioration 155 157 205 126 186b) Risk Improvement (142) (104) (191) (106) (128)2 � New Transactions 108 95 157 133 1193 � Write-offs (74) (105) (82) (85) (120)

Total (1 + 2 + 3): 47 43 90 69 56

Other Impacts* (77) (28) (73) (45) (41)

Final Allowance 444 458 475 498 514

Allowance Required by CMN Resolution 2682 444 458 475 498 514

* Amortization, settlement, installments, and charges


7.2.3 Agribusiness Loan Portfolio

The quality of the agribusiness loan portfolio shows the efficiency of BB�s specialized mechanisms forgranting credit to this segment. The 3.6% growth (Sep/03 � Sep/04) in this portfolio was accompaniedby a improvement in the ranking of the transactions at levels of risk AA to C, which comprised 97.3% ofthe total of the portfolio in September 2004, compared to 95.9% in September 2003.

Table 76. Agribusiness Loan Portfolio by Level RiskR$ million


AA 4,648 - 18.8 4,955 - 19.4 4,877 - 19.0A 9,403 47 38.0 9,099 45 35.6 8,315 42 32.4B 7,796 78 31.5 7,239 72 28.3 8,314 83 32.4C 2,250 68 9.1 3,189 96 12.5 3,096 93 12.1D 306 31 1.2 640 64 2.5 625 63 2.4E 89 27 0.4 97 29 0.4 92 28 0.4F 31 16 0.1 32 16 0.1 41 21 0.2G 64 45 0.3 61 43 0.2 60 42 0.2H 179 179 0.7 260 260 1.0 244 244 1.0

Total 24,766 489 100.0 25,573 625 100.0 25,666 615 100.0

AA-B 21,847 125 88.2 21,294 118 83.3 21,507 125 83.8C-D 2,556 98 10.3 3,830 160 15.0 3,721 155 14.5E-H 363 266 1.5 450 348 1.8 438 335 1.7

An analysis of the following table shows that the reinforcement in the allowance for rural loans was dueto setting up an allowance for risk deterioration, due to the change in the methodology for rating retailloans below R$50 thousand, which had the effect of dragging down agribusiness loans. Thisdeterioration was, however, partly offset by the movement of risk improvement in the portfolio.

Table 77. Changes in the Allowance � AgribusinessR$ million

3Q03 4Q03 1Q04 2Q04 3Q04

Agribusiness Loan Portfolio 24,766 26,766 25,907 25,573 25,666


1 - Risk Migration (54) (41) 156 (19) (100)a) Risk Deterioration 149 176 321 246 203b) Risk Improvement (202) (218) (166) (265) (303)2 � New Transactions 125 113 66 121 1833 � Write-offs (68) (44) (34) (46) (60)

Total (1 + 2 + 3): 3 27 187 56 23

Other Impacts* 8 (7) (103) (23) (33)


Allowance Required by CMN Resolution 2682 489 509 593 625 615* Amortization, settlement, installments, and charges


7.2.4 Foreign Trade Loan Portfolio

The foreign trade finance portfolio recorded an increase of 12.8% (Sep/ - Sep/04) accompanied by animprovement in the quality of these transactions. Loans rated at levels of risk AA, A and B increasedtheir share from 81.4% in September 2004 to 82.1% in September 2003. Loans rated C and D alsoincreased their share, which went up from 15.7% to 17.2% in the same period. The loans rated betweenE and H reduced their share, going down from 2.9% to 0.7% (Sep/03 - Sep/04).

Table 78. Foreign Trade Loan Portfolio by Level RiskR$ million


AA 1,051 - 13.9 1,378 - 15.6 1,079 - 12.7A 3,264 16 43.3 3,593 18 40.8 3,259 16 38.3B 1,824 18 24.2 2,342 23 26.6 2,646 26 31.1C 912 27 12.1 1,302 39 14.8 1,341 40 15.8D 276 28 3.7 143 14 1.6 119 12 1.4E 36 11 0.5 3 1 0.0 21 6 0.2F 5 2 0.1 1 1 0.0 2 1 0.0G 2 2 0.0 3 2 0.0 2 2 0.0H 173 173 2.3 44 44 0.5 38 38 0.4

Total 7,543 277 100.0 8,810 143 100.0 8,507 142 100.0

AA-B 6,139 35 81.4 7,313 41 83.0 6,984 43 82.1C-D 1,188 55 15.7 1,445 53 16.4 1,460 52 17.2E-H 216 188 2.9 51 48 0.6 64 47 0.7

The table below shows that the risk improvement of the already contracted loans of the foreign tradefinance portfolio was sufficient to cover the movement of risk deterioration recorded in the portfolio andeven to partly offset the new allowances for credit risk.

Table 79. Changes in the Allowance � Foreign TradeR$ million

3Q03 4Q03 1Q04 2Q04 3Q04

Foreign Trade Loan Portfolio 7,543 7,315 8,217 8,810 8,507


1 - Risk Migration (50) (63) (50) (46) (53)a) Risk Deterioration 25 12 16 21 17b) Risk Improvement (74) (74) (66) (66) (70)2 � New Transactions 64 56 87 79 703 � Write-offs (51) (114) (43) (10) (3)

Total (1 + 2 + 3): (37) (120) (7) 23 14

Other Impacts* (20) (5) (12) (14) (15)


Allowance Required by CMN Resolution 2682 277 152 133 143 142

* Amortization, settlement, installments, and charges


7.2.5 Foreign Loan Portfolio

The table below shows the risk profile of BB�s international loan portfolio. In September 2004, loansranked at levels of risk between AA and B had a 92.4% share of the total, while in September 2003these levels of risk showed an even greater concentration, amounting to 94.4% of this portfolio.

Table 80. Loan Portfolio Abroad by RiskR$ million


AA 5,864 - 65.5 6,515 - 58.8 5,557 - 55.5A 1,250 6 14.0 2,566 13 23.1 3,142 16 31.4B 1,154 12 12.9 1,299 13 11.7 758 8 7.6C 268 8 3.0 276 8 2.5 161 5 1.6D 79 8 0.9 188 19 1.7 161 16 1.6E 11 3 0.1 8 2 0.1 21 6 0.2F 2 1 0.0 1 0 0.0 0 0 0.0G 23 16 0.3 22 16 0.2 14 10 0.1H 300 300 3.4 213 213 1.9 202 202 2.0

Total 8,952 354 100.0 11,088 284 100.0 10,016 262 100.0

AA-B 8,269 18 92.4 10,380 26 93.6 9,457 23 94.4C-D 347 16 3.9 465 27 4.2 322 21 3.2E-H 336 320 3.8 244 231 2.2 237 218 2.4


7.3 Contribution MarginTable 81. Contribution MarginR$ million


3Q03 2Q04 3Q04 on 3Q03 on 2Q04

Net Financial Margin 3,141 3,022 3,063 (2.5) 1.4 Service Revenues 1,412 1,643 1,717 21.5 4.5 Taxes on Revenues (242) (323) (345) 42.6 6.7Contribution Margin 4,312 4,341 4,435 2.9 2.2

The contribution margin comprises the results from the Bank�s financial activity (net financial margin),after adding on service revenues (RPS), and deducting taxes on revenues (Pasep, Cofins and ISSQN).

In spite of the increase in tax expenses, the growth in service revenues has made possible the 2.9%increase in the contribution margin between 3Q03 and 3Q04, to reach R$ 4,435 million.

The graph below shows the percentage growth of service revenues of one quarter in relation to thesame period of the previous year, showing that since the beginning of 2003 Banco do Brasil has beenachieving an average growth of 23.5% in these revenues.

Growth in Service Revenues - Xt/Xt-4 %

Figure 43. Growth in Service Revenues

11.6

18.4 18.0

26.430.3

27.5

22.3 21.5

4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04


The table below shows further details of the service revenues. The largest revenues in this group are thecustomer relationship fees and those coming from asset management.

Table 82. Service RevenuesR$ million


3Q03 2Q04 3Q04 on 3Q03 on 2Q04

Service Revenues 1,412 1,643 1,717 21.5 4.5 Customer Relationship Fees 407 510 514 26.3 0.8 Investment Fund Management Fees 214 242 270 26.2 11.6 Loan Fees 142 161 161 13.1 (0.6) Collections 130 157 158 21.7 0.8 Services Provided to Related Companies 34 39 46 34.0 19.0 Funds Transfers 104 104 112 8.1 8.1 Credit Cards 109 141 137 26.4 (2.9) Others 273 289 318 16.8 10.3


Changes in the Composition of Service Revenues - %

Figure 44. Changes in the Composition of Service Revenues

Customer Relationshipfees

Investment fundsmanagement fees

Loans

Collection

Services provided torelated companies

Funds transfer

Credit Cards

29.0 31.8 30.0 28.8 29.8 31.0 31.0 30.0

4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04

13.3 13.7 13.615.1 14.6 15.1 14.7 15.7

4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04

8.3 9.1 10.2 10.1 9.8 9.4 9.8 9.4

4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04

9.28.8 8.9 9.2 9.5 9.6 9.6 9.2

4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04

1.9 1.8 2.9 2.4 1.8 2.5 2.4 2.7

4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04

8.2 7.1 7.1 7.3 7.0 6.8 6.3 6.5

4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04

9.6 8.8 8.6 7.7 8.6 8.3 8.6 8.0

4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04

20.4 19.0 18.8 19.3 18.9 17.3 17.6 18.5

4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04

Others


7.3.1 Revenues from Customer Relationship Fees

Revenues from customer relationship fees totaled R$ 514 million in 3Q04, an increase of 26.3% inrelation to 3Q03. These revenues have maintained their share in the total of service revenues at around30.0%.

The graph below shows that the revenues from customer relationship fees have grown more than thecustomer base, which shows that the Bank has been succeeding in strengthening its business ties withits customers.

Revenues from Relationship Fees and the Customer Base

Figure 45. Revenues from Relationship Fees and the Customer Base

BB�s customer base has been growing year by year, to reach 20.7 million customers in September2004, a number 21.3% higher than last year�s.

Customer Basein thousands

Figure 46. Customer Base

52.9%

34.3%

4T02 1T03 2T03 3T03 4T03 1T04 2T04 3T04

Revenues from Customer Relationship Fees (base 100)

Customer (base 100)

14,399 14,905 15,645 15,93717,534 18,047 18,781 19,303

992 1,005 1,073 1,112 1,217 1,228 1,274 1,373


Individuals Companies


7.3.2 Asset Management

In 3Q04, the Bank received R$ 270 million in fund management fees, an amount 26.2% higher than thefigure for 3Q03. The share of fund management fees in the total of RPS grew 60 basis points, reaching15.7% in 3Q04.

BB Administração de Ativos � Distribuidora de Títulos e Valores Mobiliários (BB DTVM), a full subsidiaryof the Bank, showed 33.4% growth in the volume of assets under management in the last 12 months,which totaled R$ 122.5 billion (20.0% share in the Brazilian market) at the end of 3Q04. This volume ofmanaged assets confirms BB�s leadership as the largest asset manager in Latin America.

Asset ManagementR$ billion

Figure 47. Asset Management

The assets managed by BB DTVM have funds for different kinds of customer.

Table 83. Investment Funds and Managed Portfolios by CustomerR$ million

Chg. %Sep/03 Share % Jun/04 Share % Sep/04 Share % on Sep/03 on/ Jun/04

Individuals 25,185 27.4 32,606 27.9 34,032 27.8 35.1 4.4Businesses 11,196 12.2 13,506 11.6 12,787 10.4 14.2 (5.3)Government 13,155 14.3 11,753 10.1 12,670 10.3 (3.7) 7.8Institutional investors 40,297 43.9 52,118 44.6 54,083 44.2 34.2 3.8Foreign investors 1,802 2.0 6,732 5.8 8,746 7.1 385.2 29.9Others 196 0.2 196 0.2 153 0.1 (22.1) (21.8)Total 91,832 100.0 116,911 100.0 122,471 100.0 33.4 4.8

78.0 83.2 91.8102.7

116.0 116.9 122.5

18.6 18.7 18.9 19.020.2 19.9 20.0

Mar/03 Jun/03 Sep/03 Dec/03 Mar/04 Jun/04 Sep/04

Asset Management Market Share - %


Investment Funds and Managed PortfoliosR$ billion

Figure 48. Investment Funds and Managed Portfolios

Investment FundsR$ billion

Figure 49. Investment Funds

Managed Portfolios and Investment ClubsR$ billion

Figure 50. Managed Portfolios and Investment Clubs

78.0 83.291.8

102.7116.0 116.9 122.5

84.0 86.8 90.2

59.5 62.5 68.075.1 79.8 80.9 83.8

20.8 22.3 24.5 26.4 29.0 30.2 31.8

81.576.670.2

63.8


BB Bradesco Itaú CEF

4.8

8.8 8.8 9.3

5.2 5.3 5.8 6.05.2

6.8 6.7

3.3 3.4 3.3 3.7

5.15.04.64.64.84.6

9.09.19.39.4

5.45.1

4.5


BB Bradesco Itaú Unibanco

73.4 78.487.2

98.1111.1 111.9 117.4

75.2 78.1 80.9

62.369.0 74.6 74.1 77.1

18.3 19.8 22.2 24.2 27.1 28.3 29.7

54.4 60.967.6

72.5

57.254.3


BB Bradesco Itaú CEF


7.3.3 Credit Cards

The share of revenues from credit cards in the total of RPS amounted to 8.0% in 3Q04. These revenuestotaled R$ 137 million in the quarter, growing 26.4% in relation to the same period of the previous year.In the last 12 months, Banco do Brasil expanded its credit card base by 30.3%, closing the quarter with6.6 million cards.

Credit Cardsin millions

Figure 51. Credit Cards

Credit Card Sales by BrandR$ million

Figure 52. Credit Card Sales by Brand

4.7 4.8 4.9 5.15.3

5.66.1

6.6


856 798940 865 912 920 965 980 971

177 161 190 173 183 185 194 203 196

Jan/04 Feb/04 Mar/04 Apr/04 May/04 Jun/04 Jul/04 Aug/04 Sep/04

Visa Mastercard


7.3.4 Collections

Revenues from collections increased 21.7% in the course of one year, to reach R$ 158 million. InSeptember 2004, BB had over 342 thousand active collection agreements.

BB Collection Volume R$ million

Figure 53. BB Collection Volume

48,5

07

50,6

45

55,8

31

59,1

06

66,3

85

66,1

07

71,9

49

76,5

26

4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04


7.4 Commercial IncomeTable 84. Commercial IncomeR$ million


3Q03 2Q04 3Q04 on 3Q03 on 2Q04

Contribution Margin 4,312 4,341 4,435 2.9 2.2Administrative Expenses (2,931) (3,093) (3,129) 6.7 1.1 Personnel Expenses (1,681) (1,675) (1,744) 3.7 4.1 Other Administrative Expenses (1,221) (1,381) (1,344) 10.1 (2.7) Other Tax Expenses (29) (37) (41) 38.0 8.4Commercial Income 1,381 1,248 1,307 (5.4) 4.7

Commercial income represents the Bank�s business earnings after the deduction of the expensesnecessary for carrying on the business. In 3Q04, BB earned R$ 1,307 million under this heading, anincrease of 4.7% in relation to 2Q04, explained mainly by the greater stability of administrative expensesagainst the increase in the contribution margin.

Changes in Commercial IncomeBase 100 = 4Q02

Figure 54. Changes in Commercial Income

-7.0%

5.5%

-11.4%

4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04

Net Financial Margin Contribution Margin Commercial Income


7.4.1 Personnel Expenses

Personnel expenses went up from R$ 1,681 million in 3Q03 to R$ 1,744 million in 3Q04, an increase of3.7%.

Table 85. Personnel ExpensesR$ million


3Q03 2Q04 3Q04 on 3Q03 on 2Q04

Personnel Expenses (1,681) (1,675) (1,744) 3.7 4.1 Salaries (688) (831) (712) 3.5 (14.3) Benefits (163) (191) (182) 11.7 (4.7) Social Charges (278) (312) (300) 8.1 (3.7) Training (10) (11) (10) (2.5) (9.5) Remuneration for Counselors and Directors (1) (2) (3) 128.6 26.5 Administrative Personnel Provisions (417) (206) (396) (5.1) 92.3 Labor Lawsuits (125) (122) (141) 13.3 15.5 Provisions for Labor Lawsuits (44) (49) (76) 71.0 55.1 Losses in Labor Lawsuits (80) (73) (65) (18.7) (11.0)

Banco do Brasil closed the period with 93.091 collaborators, a workforce 2,8% higher than recorded in3Q03.

Changes in the Workforce

Figure 55. Changes in the Workforce

The natural renewal of the Bank�s workforce has allowed a relative stability in expenses with personnel,after with the salary increases awarded � 12,6% in 2003 and 8,5% in 2004

88,1

59

90,1

61

90,2

55

90,5

31

90,8

21

92,3

47

92,6

06

93,0

91

78,6

19

79,5

27

79,4

74

79,7

10

80,6

40

81,7

95

81,9

36

82,5

65

9,54

0

10,6

34

10,7

81

10,8

21

10,1

81

10,5

52

10,6

70

10,5

26


Total Employees Interns


Tenure

Figure 56. Tenure

The strategy of renewal of the Bank�s workforce, hiring new employees, allowed the increase in BB�scustomer base, but also maintained the productivity ratios, as graph below:

Productivity Ratios

Figure 57. Productivity Ratios

3Q03

31.7%

5.2%

30.6%

32.4%

2Q04

37.5%

3.1%22.3%

37.0%

3Q04

37.9%

2.0%23.9%

36.2%

Up to 5 years 6 to 10 years 11 to 20 years Over 20 years

Assets per Work Force - R$ thousand

2,321 2,3212,280

2,376

2,534 2,5032,455

2,531


Customer per Work Force

175 176 185 188206 209 217 222


Work Force / (Branch + PAA + PAB)

17.017.3 17.3 17.3 17.3

17.5 17.4 17.4



7.4.2 Other Administrative Expenses

Other administrative expenses in 3Q04 totaled R$ 1,344 million, an increase of 10.1% in relation to3Q03.

Table 86. Other Administrative ExpensesR$ million


3Q03 2Q04 3Q04 on 3Q03 on 2Q04

Other Administrative Expenses (1,221) (1,381) (1,344) 10.1 (2.7) Telecommunications and Data Processing (292) (316) (315) 8.0 (0.2) Amortization and Depreciation (122) (138) (131) 7.6 (4.9) Security, Guard and Transport Services (164) (171) (173) 5.2 1.5 Expenses with Premises and Equipment (137) (154) (145) 5.8 (5.8) Marketing and Public Relations (102) (104) (132) 29.1 26.4 Expenses with Outsourced Services (96) (121) (127) 32.7 4.9 Other Administrative Expenses (308) (377) (320) 4.2 (15.0)

The items most directly related to the running of the business (telecommunications and data processing,security, guard and transport services, property and equipment, and outsourced services) added up toR$ 761 million, showing growth of 10.4% in relation to 3Q03, which is explained by the following factors:

- 11.7% increase in the IGP DI (3Q03-3Q04) � items like telephony, postage, outsourced services,rents and others are adjusted for inflation;

- 10.1% expansion in the service network � opening new points of service has a direct implication foran increase in the greater part of the items making up administrative expenses;

- 21.3% increase in the customer base � the increase in the quantity of customers, besides theincrease in the points of service, has an influence on the quantity of correspondence sent, dataprocessing, use of the self-service channels, etc.

To face the constant growth of the customer base, the distribution network of the Bank also increased,but BB has maintained its cost structure compatible with business generation, as observed in the graphbelow:

Cost Structure Indexes

Figure 58. Cost Structure Indexes

In relation to 2Q04, a reduction of R$ 37 million is to be seen, which is explained in part by the 15.0%decrease in other administrative expenses, because of the reduction in the volume of provision for civillawsuits.

Customer/ (Branch + PAA + PAB)

2,973 3,054 3,198 3,2673,578 3,646 3,766 3,868


Points of Service

12.3 12.5 12.8 12.9 13.2 13.5 13.9 14.2

5.1 5.2 5.4 5.6 5.9 5.9 6.0 5.9

Dec/02 Mar/03 Jun/03 Sep/03Dec/03 Mar/04 Jun/04 Sep/04Points of ServiceLoan Portfolio / Points of Service - R$ million


7.4.3 Distribution Network

Banco do Brasil is present in 2,977 municipalities all over the Brazilian territory. At the end of September2004, the Bank�s distribution network comprised 14,230 points of service (growing 10.1% in relation toSeptember 2003), classified as follows:

Table 87. Distribution Network

Dec/02 Mar/03 Jun/03 Sep/03 Dec/03 Mar/04 Jun/04 Sep/04Agência 3,164 3,183 3,209 3,218 3,241 3,564 3,618 3,662PAA 418 421 421 424 438 181 187 188PAB 1,595 1,606 1,598 1,576 1,562 1,541 1,520 1,495PAE 4,157 4,323 4,484 4,609 4,821 5,054 5,280 5,461SAA 2,978 2,992 3,023 3,084 3,140 3,191 3,285 3,406PAP 21 20 20 19 18 18 18 18Total 12,333 12,545 12,755 12,930 13,220 13,549 13,908 14,230

The Bank�s distribution network is divided into 4 types of points of service, besides the branches:PAA � Advanced Service Post: these are points of service intended for towns without a bank. They havea small staff and automated teller machines;PAB � Banking Service Post: this type of unit is located inside the premises of companies orgovernment offices. This service requires one employee and automated teller machines;PAE � Electronic Service Post: Services are available through a automated teller machine;SAA � Service Room: service structure, only eletronic instaled in the main areas of the branches andPAP � Payment and collection post: located mainly in government offices (town halls) for carrying outreceipts and payments. Employees and automated teller machines provide the service.

Total Distribution Network

Figure 59. Total Distribution Network

To handle services to the Wholesale segment, Banco do Brasil has a specific distribution network. Thestaff of this network undergoes highly specialized training and works in harmony with the various needsof this segment.

NorthBranchesOthersTotal

BB 7.1%

BB 24.9%

BB 11.5%

BB 37.0%

BB 19.6%

218 790

1,008

MidwestBranchesOthersTotal

3571,2741,631

SouthBranchesOthersTotal

7572,0272,784

SoutheastBranchesOthers

Total

1,3983,8625,260

NortheastBranchesOthersTotal

9322,6153,547


The locations of the Wholesale pillar include 17 Corporate branches and 68 Business branches, whichare intended to serve companies with annual sales as shown in the following table:

Table 88. Agências do Pilar Atacado

Industry Commerce ServicesCorporate Over R$90 million Over R$150 million Over R$150 millionBusiness From R$10 to R$90 million From R$10 to R$150 million From R$10 to R$150 million

Distribution Network - Wholesale

Figure 60. Distribution Network - Wholesale

The Government market keeps its focus on managing the relationship with the federal, state andmunicipal government, in the spheres of the executive, legislative and judiciary branches. TheGovernment market�s strategy of work has ensured appropriate solutions for the specific aspects ofeach one of the niches of its segment, acting to generate value through solutions with new products andfreeing processes from red tape.

The locations of the Government pillar include 38 branches with 867 specialized members of staff.

Distribution Network - Government

Figure 61. Distribution Network - Government

Besides its own network, BB has a network of banking correspondents (Aqui tem BB), which at the endof the 3Q04 included 2,252 points of service and 15,280 cashiers for receiving payment books, taxes

NorthBusinessCorporate Total

202

MidwestBusinessCorporate Total

415

SouthBusinessCorporate Total

184

22

SoutheastBusinessCorporate

Total

371148

NortheastBusinessCorporate Total

718

NorthBranchesOthers

Total

718

MidwestBranchesOthersTotal

628

SouthBranchesOthersTotal

538

SoutheastBranchesOthers

Total

96

15

NortheastBranchesOthers Total

115

16


and bank bills. This network was responsible for over 49 million transactions that totaled R$ 8,595million in the period.

Banco do Brasil�s network abroad comprised 38 points of service (17 branches, 7 sub-branches, 9business units and offices and 5 subsidiaries) in 21 countries. To supplement its own network abroad, atthe end of 3Q04 BB maintained a relationship with 1,750 financial institutions in the five continents,carrying out business of its own and making transactions for customers viable through this network ofcorrespondent banks.

Table 89. Rede de Distribuição no Exterior

Branches Sub-Branches Business Units SubsidiariesAmsterdam Cascais Caracas BAMBAssunção Gifu Cidade do México BB AG VienaBuenos Aires Gunma Hong Kong BB Leasing CompanyCidade do Leste Hamamatsu Lima BB SecuritiesFrankfurt Ibaraki Luanda Banco do Brasil Securities - LLCGrand Cayman Nagano RomaLa Paz Nagoya Santa Cruz de La SierraLisboa WashingtonLondres XangaiMadriMiamiMilãoNova IorquePanamáParisSantiagoTóquio


7.4.4 Automated Channels

Banco do Brasil�s self-service network represents a strategic differential. BB�s customers have at theirdisposal the largest network of automated teller machines (ATMs) in Latin America, with terminals inBrazil and abroad. At the end of September 2004, the network boasted 38,242 ATMs, compared to34,679 in September 2003, a 10.3% increase.

Automated Teller Machines

Figure 62. Automated Teller Machines

This technological infrastructure has provided support for BB in its strategy for controlling costs. In3Q04, 506 million transactions were carried out over the ATM network, an increase of 15.5%, comparedwith the same period of the previous year.

The importance of this channel in BB�s transactions can be seen from the figures below, which show thepercentage of banking transactions carried out through the ATMs:

- 95.3% of cash withdrawals

- 85.4% of the checkbooks delivered;

- 73.2% of the deposits; and

- 66.9% of the receipts of bills and contractual payments.

The share of automated transactions in the total of transactions carried out by BB�s customersamounted to 89.6% in September 2004, compared to 85.2% in the same period of the previous year.

Share of Automated Transactions / Total Transactions - %

Figure 63. Share of Automated Transactions / Total Transactions

33,6

45

34,0

94

34,1

64

34,6

79

37,0

18

37,0

18 38,1

53

38,2

42


84,1 84,6 85 85,286,4 86,3 86,9

89,6



Besides the cashiers at the branches and the ATMs, Banco do Brasil offers several other options foraccess to banking services, such as the Internet, its Financial Manager (an Internet banking tool forbusinesses), POS equipment (credit and debit card machines at the commercial establishments),telephone, fax, and WAP.

The graph below shows that the other service channels have been gaining ground in the customers�preference.

Customer Access Options - %

Figure 64. Customer Access Options

Banco do Brasil continues to be the leader on the Internet. At the end of September 2004, the number ofcustomers enabled reached 6.7 million, an increase of 18.7% in relation to the same period of theprevious year. The above graph shows that the share of transactions carried out via the Internet hasgrown, gaining ground from such important channels as cashiers and ATMs, which shows theconvenience and security of the Internet. The percentage of transactions carried out via the Internetwent up from 27.7% in September 2003 to 31.8% in September 2004, of which 15.0% individuals and16.8% businesses, using the Financial Manager.

53.4 53.7 52.5 51.2 51.5 50.6 51.2 50.6

14.8 14.3 15.0 16.0 16.3 16.2 16.6 16.815.9 15.4 15.0 14.8 13.6 13.7 13.1

11.611.110.59.0 10.7 12.2 11.9 15.0

10.4

7.27.27.37.96.9 6.1 6.4 6.4

Dez/02 Mar/03 Jun/03 Set/03 Dez/03 Mar/04 Jun/04 Set/04

ATM Internet Financial Management Cashier POS and Others


7.4.5 Productivity � Coverage Ratios

The coverage ratios show the capacity for covering fixed costs using only service revenues (RPS).

As the graph below shows, coverage ratio of RPS over personnel expenses went up from 84.0% in3Q03 to 98.4% in 3Q04, which amounts to a noteworthy improvement. Broadening the concept to thecapacity for coverage of all the administrative expenses, a similar movement is to be observed, withgrowth from 48.2% in 3Q03 to 54.9% in 3Q04.

Coverage Ratios - %

Figure 65. Coverage Ratios

Table 90. Coverage Ratios

R$ million

4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04Service Revenues 1,159 1,218 1,343 1,412 1,511 1,553 1,643 1,717Administrative Expenses (2,728) (2,709) (2,466) (2,931) (3,149) (2,735) (3,093) (3,129)Personnel Expenses (1,504) (1,509) (1,481) (1,681) (1,949) (1,574) (1,675) (1,744)Service Revenues/Personnel Expenses - % 77.1 80.7 90.7 84.0 77.5 98.6 98.1 98.4Service Revenues/Administrative Expenses - % 42.5 45.0 54.5 48.2 48.0 56.8 53.1 54.9

Service Revenues/Personnel Expenses

77.1 80.790.7 84.0 77.5

98.6 98.1 98.4

4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04

Services Revenues/Administrative Expenses

42.5 45.054.5

48.2 48.056.8 53.1 54.9

4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04


7.5 Operating IncomeTable 91. Operating IncomeR$ million


3Q03 2Q04 3Q04 on 3Q03 on 2Q04

Commercial Income 1,381 1,248 1,307 (5.4) 4.7Other Operating Income (Expenses) (167) (245) (51) (69.4) (79.1) Equity Interest in Results of Subs. and Affil. 42 79 80 90.1 0.6 Other Operating Income 323 383 457 41.6 19.3 Other Operating Expenses (532) (707) (588) 10.5 (16.9)Operating Income 1,213 1,003 1,256 3.5 25.1

Operating income in 3Q04 totaled R$1,256 million, an increase of 3.5% in relation to 3Q03 and of 25,1%in relation to 2Q04. A increase is to be seen in other operating revenues, which went up from R$ 323million in 3Q03 to R$ 457 million in 3Q04, due mainly to the increase of revenues coming fromguarantee deposits. Other Operating Expenses show an increase of 10.5% in the period between 3Q03and 3Q04. It can be explained by expenses in reinforcement in total allowances, without financialallowance. Compared to 2Q04, the Other Operating Expenses show a decrease of 16.9%, due mainly tothe decrease of pension funds total liabilities.

The following table and graph show the improvement in efficiency attained by Banco do Brasil. The ratioof administrative expenses over operating income amounted to 55.9% in 3Q04, a reduction of 160 basispoints in relation to the same period of the previous year.

Table 92. Efficiency RatioR$ million

4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04A) Administrative Expenses (2,728) (2,709) (2,466) (2,931) (3,149) (2,735) (3,093) (3,129) Personnel Expenses (1,504) (1,509) (1,481) (1,681) (1,949) (1,574) (1,675) (1,744) Other Administrative Expenses (1,197) (1,170) (955) (1,221) (1,165) (1,126) (1,381) (1,344) Other Tax Expenses (27) (30) (30) (29) (35) (34) (37) (41)B) Operating Income 4,706 4,781 4,567 5,091 5,569 5,048 5,244 5,592 Gross Financial Margin 4,148 3,917 3,524 3,888 3,977 3,829 3,925 3,919 Service Revenues 1,159 1,218 1,343 1,412 1,511 1,553 1,643 1,717 Other Operating Income 458 346 508 323 1,206 432 383 457 Other Operating Expenses (1,059) (700) (808) (532) (1,124) (766) (707) (588)Efficiency Ratio (A:B) - % 58.0 56.7 54.0 57.6 56.5 54.2 59.0 55.9

Efficiency Ratio - %

Figure 66. Efficiency Ratio

58.056.7

57.656.5

59.0

55.954.254.0

59.1 58.456.6 56.5 56.2 55.6

56.8 56.4

4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04

Efficiency Ratio Efficiency Ratio - 12 months Average


7.6 Net IncomeTable 93. Net IncomeR$ million


3Q03 2Q04 3Q04 on 3Q03 on 2Q04

Operating Income 1.213 1,003 1,256 3.5 25.1Non-operating Income 17 39 80 363.5 104.5Income Before Taxes 1,231 1,043 1,336 8.5 28.1 Income and Social Contribution Taxes (516) (200) (545) 5.7 173.1 Statutory Profit Sharing (50) (140) (67) 34.4 (52.1)Recurring Income 665 703 724 8.8 2.9Extraordinary Items - 102 109 - 6.7 Extraordinary Provision for Credit Risks - (146) (80) - (45.5) Recovery of Undue Taxes - 565 - - (100.0) Provision for Voluntary Retirement Plan - (277) 189 - 68.0 Provision for Non-recurring IR and CS - (192) - - - JCP Tax Benefit - 153 - - (100.0)Net Income 665 805 833 25.2 3.4

In the third quarter of 2004, Banco do Brasil achieved a net income of R$ 833 million, an amount 25.2%higher than the R$ 665 million recorded in the same period of 2003 and 3.4% higher than the amountrecorded in the immediately foregoing period. The average annualized return on shareholder�s equitywas 27.5% in 3Q04.

Expenses with recurring income and social contribution taxes grew 5.7% in 3Q04, to reach R$ 545million. The ratio between expenses with IR/CS and the income before taxes (EBT) fell from 41.9% inthe 3Q03 to 37.7% in 3Q04, as shown in the figure below. This ratio tends to be volatile, by virtue of theprofile of the assets and liabilities in foreign currency, associated to the behavior of the foreign exchangerate. Considering that there is a greater volume of liabilities whose expenses are deductible from thebasis for taxation than of assets whose revenues are taxable, this implies an increase in the basis fortaxation at times of appreciation of the local currency and a reduction in this basis when the oppositeoccurs.

Changes in Earnings before TaxesR$ million

Figure 67. Changes in Earnings before Taxes

9951,185

1,0581,231 1,245

1,0271,184

1,445

35.457.9

38.7 41.9 36.4 36.120.2

37.7

4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04

EBT Income Tax / EBT - %


Net income has been growing due to the synergy between the activities of financial intermediation,expansion of service revenues and the control of credit risk. In 3Q04, though, some non-recurringevents influenced the results for the period, namely:

In 2Q04, there was an increase came from refinement in the methodology for the risk rating of businessloans for subsidiaries companies abroad, which generated a total reinforcement to the allowance forloan losses of R$ 146 million. In 3Q04, there was a change in the methodology for the risk ratingbusiness loan for business customers, generating a total reinforcement to the allowance for loan lossesof R$ 80 million.

BB totaled an amount of R$ 565, 621 thousand concerning to the recognizing right to compensatetributary credits of FINSOCIAL (Tributary Indebt), due to judicial decision, regarding the period fromSeptember 1989 to Mach 1992.

In 2Q04, the Retirement Incentive Plan � PEA was created, having as its target public 6.361 effectiveposition staff, executive cashiers, and career support staff with an age equal to 50 years or more and acontribution time to PREVI equal to 15 years or more, and provisions in the amount of R$ 277 millionwere established at the time. The Plan - PEA achieved the adhesion of 923 members of staff, about14.5% of the original expectation, which allowed the reversal of R$ 189 million, in 3Q04, from theestablished provisions.

The Tributary Indebt, extraordinary item 6, integrated the calculus to the Income tax and SocialContribution. So, the Income Tax and Social Contribution that came from this event calculated with a34% rate (25% Income Tax and 9% Social Contribution) was allocated as an extraordinary item. It lookstoward the correct measure of the Recurrent Results.

Considering that the profit distribution by dividends or interest on own capital is decided on semestersaccording to the Company�s will, the fiscal benefit that come from Interest on Own Capital payment isbeing treated as a Non-Recurrent Result. With the same idea of extraordinary item 9, that reallocationwas made.

The graphs that follow show the changes both in net income and recurring income, and in thecorresponding returns on shareholders� equity.

Changes in Net Income Changes in ROE - %R$ million

Figure 68. Changes in Net Income Figure 69. Changes in ROE

600 589 665 621831

600479

665 637 616724703

490

833805600

4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04

Recurring Income Net Income

30.226.6 25.7

29.5

30.2

21.325.7

21.322.5 23.623.9

20.0

23.1 27.527.724.8

4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04

Recuring ROE ROE


Table 94. Return on Shareholders� EquityR$ million

4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04Recurring Income 600 589 490 665 621 831 703 724Net Income 600 479 600 665 637 616 805 833Average Shareholders� Equity 8,804 9,680 10,518 11,280 11,930 12,429 12,775 13,318Recurring ROE - % 30.2 26.6 20.0 25.7 22.5 29.5 23.9 23.6ROE - % 30.2 21.3 24.8 25.7 23.1 21.3 27.7 27.5


7.7 Net Value AddedThe table Net Value Added shows how the result of Banco do Brasil is formed by the generation of valuefrom each the Bank�s businesses, and subsequently presents details on the distribution of this funds.This viewpoint is used for the gross financial margin, which includes financial intermediation revenuesand expenses, without the allowances for loan losses.

Table 95. Net Value AddedR$ million


3Q03 2Q04 3Q04 on 3Q03 on 2Q04

Gross Fnancial Margin 3,888 3,925 3,919 0.8 (0.2)Income from Non-Financial Products 1,406 1,580 1,710 21.7 8.2 Customer Relationship Fees 407 510 514 26.3 0.8 Investment Fund Management Fees 207 227 255 22.9 12.0 Loan Fees 142 161 161 13.1 (0.6) Collections 130 157 158 21.7 0.8 Services Provided to Related Companies 34 39 46 34.0 19.0 Funds Transfers 104 104 112 8.1 8.1 Credit Card 109 141 137 26.4 (2.9) Insurance 273 241 327 20.1 36.0 Auto 49 36 49 (0.1) 37.2 Health 2 3 5 117.2 74.0 Life and Others 162 136 204 25.5 49.6 Pension plans 25 31 31 24.9 (0.9) Capitalization 34 35 39 13.7 11.4Others 389 564 623 60.3 10.5Value Added 5,682 6,069 6,252 10.0 3.0Distribution of Value Added (except shareholders) (5,018) (5,264) (5,420) 8.0 3.0Operating Expenses with risk (1,279) (1,610) (1,443) 12.9 (10.4) Provision for credit risk (747) (903) (856) 14.6 (5.3) Other operating expenses (532) (707) (588) 10.5 (16.9)Personnel expenses (1,731) (1,815) (1,811) 4.6 (0.2) Personnel expenses (1,681) (1,675) (1,744) 3.7 4.1 Statutory profit sharing (50) (140) (67) 34.4 (52.1)Administrative expenses (1,221) (1,381) (1,344) 10.1 (2.7)Tax Expenses (787) (560) (930) 18.2 66.1 Taxes on Sales (242) (323) (345) 42.6 6.7 Other Tax Expenses (29) (37) (41) 38.0 8.4 Income and social contribution taxes (516) (200) (545) 5.7 173.1Extraordinary Items - 102 109 - 6.7

Value Added for the Shareholders 665 805 833 25.2 3.4

Observing the distribution of the Value Added, it is noticiable an increase in the Personnel Expenses,the Statutory Profit Sharing increased 34.4% because of the �Superation� program, estimulates theachievement of set goals established by the organization.


7.8 Gross Value AddedAnother way to analyze the distribution of value added among the Bank�s various stakeholders ispresented in the graph below. Intermediation revenues are included in value added, while intermediationexpenses are included in distribution of value added to Banco do Brasil�s various creditors.

Table 96. Gross Value Added

R$ million


3Q03 2Q04 3Q04 on 3Q03 on 2Q04

Financial Intermediation Income 10,181 8,462 7,455 (26.8) (11.9)Income from Non-Financial Products 1,406 1,580 1,710 21.7 8.2 Customer Relationship Fees 407 510 514 26.3 0.8 Investment Fund Management Fees 207 227 255 22.9 12.0 Loan Fees 142 161 161 13.1 (0.6) Collections 130 157 158 21.7 0.8 Services Provided to Related Companies 34 39 46 34.0 19.0 Funds Transfers 104 104 112 8.1 8.1 Credit Card 109 141 137 26.4 (2.9) Insurance 273 241 327 20.1 36.0 Auto 49 36 49 (0.1) 37.2 Health 2 3 5 117.2 74.0 Life and Others 162 136 204 25.5 49.6 Pension plans 25 31 31 24.9 (0.9) Capitalization 34 35 39 13.7 11.4 Others 389 564 623 60.3 10.5Value Added 11,975 10,606 9,789 (18.3) (7.7)Value Added (except shareholders) (11,310) (9,801) (8,956) (20.8) (8.6)Financial Intermediation Expenses (6,293) (4,537) (3,536) (43.8) (22.1)Operating Expenses with risk (1,279) (1,610) (1,443) 12.9 (10.4) Allowance for Loan Losses (747) (903) (856) 14.6 (5.3) Other Operating Expenses (532) (707) (588) 10.5 (16.9)Structure Expenses (2,952) (3,196) (3,155) 6.9 (1.3) Personnel Expenses (1,681) (1,675) (1,744) 3.7 4.1 Other Administrative Expenses (1,221) (1,381) (1,344) 10.1 (2.7) Statutory Profit Sharing (50) (140) (67) 34.4 (52.1)Tax Expenses (787) (560) (930) 18.2 66.1 Taxes on Sales (242) (323) (345) 42.6 6.7 Other Tax Expenses (29) (37) (41) 38.0 8.4 Income and social contribution taxes (516) (200) (545) 5.7 173.1Extraordinary Items - 102 109 - 6.7

Value Added for the Shareholders 665 805 833 25.2 3.4


Net Value Added

Figure 70. Net Value Added

Gross Value Added

Figure 71. Gross Value Added

6,2526,252

62.7

27.3

10.0

3Q03

Gross Financial Margin

Income from non--financial products

Other

5,682 5,682

29.0

14.9

13.3

21.5

21.3

Personnel Expenses

Other

Tax Expenses

Value Added to Shareholders

Administrative Expenses

3Q04

68.4

24.7

6.9

Gross Financial Margin


Other

30.5

13.8

11.7

21.5

22.5

Personnel Expenses

Other

Tax Expenses

Value Added to Shareholders


85.0

11.83.2

3Q04

Other

9,789

Financial Intermediationexpenses

Other

Personnel Expenses

Administrative ExpensesTax Expenses

52.5

10.7

14.4

10.26.65.6

3Q03

76.2

17.4

6.4

Financial Intermediation


Other

11,975

36.1

13.7

18.5

13.7

9.58.5

Financial Intermediationexpenses

Other

Personnel Expenses


Tax ExpensesValue Added to Shareho lders

income


Financial Intermediationincome

Value Added to Shareho lders


7.9 Insurance, Pension Plans and CapitalizationBanco do Brasil, through BB Banco de Investimentos, a full subsidiary, has a participating interest inseveral companies in the areas of insurance, pension plans, capitalization, offering a broad range ofnon-banking products. The table below details BB�s holdings in these companies, together with the lineof business in which they work:

Table 97. Insurance, Pension Plan and Capitalization Companies

Company Share % Business PartnershipBrasilseg Participações S.A. 70.00 Auto Insurance Sul América SegurosCia. De Seguros Aliança do Brasil S.A. 70.00 Life Insurance and Others Aliança da BahiaBrasilprev 49.99 Pension Plans Principal Financial Group e SebraeBrasilcap 49.99 Capitalization Icatu Hartford, Sul América e Aliança da BahiaBrasilsaúde 49.92 Health Insurance Sul América Seguros

The income statement by line of business for the third quarter of 2004 is shown below to help tounderstand the process and to show greater transparency in the insurance, pension plan andcapitalization business.

7.9.1 Income Statement by Line of Business

Table 98. Income Statement by Line of BusinessR$ mil

Insurances

Auto Health Life & Other TotalPension PLan Capitalization Consolidated

Rev. From Insurance, Pension Plans andCapitalization 169,928 33,996 251,732 455,656 445,167 407,434 1,308,256

Retained Insurance Premiums 169,928 33,996 251,732 455,656 - - 455,656 Revenues from Pension Plans - - - - 445,167 - 445,167 Revenues from Capitalization - - - - - 407,434 407,434Changes in Technical Provisions (33,285) (61) (8,666) (42,013) (230,840) (349,947) (622,799) Insurance (33,285) (61) (8,666) (42,013) - - (42,013) Pension Plans - - - - (230,840) - (230,840) Capitalization - - - - - (349,947) (349,947)Benefits and Redemption Expenses - - - - (198,157) - (198,157)Earned Premiums 136,643 33,935 243,066 413,644 - - 413,644Gross Income from Pension Plans andCapitalization - - - - 16,170 57,487 73,657

Retained claims (90,579) (24,705) (83,560) (198,843) - - (198,843)Marketing Expenses (19,570) (1,760) (54,650) (75,979) (9,543) (29,680) (115,203) Insurance (19,570) (1,760) (54,650) (75,979) - - (75,979) Pension Plans - - - - (9,543) - (9,543) Capitalization - - - - - (29,680) (29,680)Administrative Expenses (17,137) (4,021) (26,407) (47,565) (27,660) (11,735) (86,961)Commercial Income 9,357 3,449 78,449 91,255 (21,033) 16,071 86,293Other Operating Income (Expenses) (9,639) (3,167) (43,311) (56,117) 11,569 (4,204) (48,753)Financial Income 11,024 1,643 21,420 34,086 45,438 32,850 112,375 Financial Revenues 13,171 1,957 28,339 43,467 322,039 82,446 447,952 Financial Expenses (2,147) (314) (6,919) (9,381) (276,601) (49,596) (335,578)Operating Income 10,742 1,925 56,557 69,224 35,974 44,717 149,915Non-operating Income 434 3 660 1,098 4 1,807 2,908Income before Taxes 11,176 1,928 57,217 70,322 35,978 46,524 152,823 Income and Social Contribution Taxes (3,734) (660) (15,782) (20,177) (11,217) (12,679) (44,073) Profit sharing - - - - - - -


Net Income/(Loss) 7,442 1,268 41,435 50,145 24,761 33,844 108,750Insurance

Auto Health Life and Other TotalPension Plan Capitalization Consolidated

Interest of Other Shareholders (2,233) (635) (12,431) (15,298) (12,383) (16,926) (44,606)Result from Equity Interest 5,210 633 29,005 34,847 12,378 16,919 64,144Service Revenues � Comission 43,405 4,237 173,091 220,733 10,981 16,366 248,081Service Revenues � Assets Managements 513 111 1,558 2,183 7,422 5,616 15,221Insure Value Added 49,128 4,981 203,654 257,763 30,781 38,901 327,445

7.9.2 Combined Ratio

The combined ratio shows the percentage of earned premiums used up by operating expenses in theinsurance business (retained claims, expenses with marketing and administrative expenses). The graphbelow indicates an improvement in the consolidated combined ratio, which went from 89.1% in 3Q03,para 77.9% in 3Q04. Both the reduction in expenses with marketing and the reduction in retained claimscontributed towards the reduction in the consolidated combined ratio.

Combined Ratio - %

Figure 72. Combined Ratio

59.1 58.6 58.1 55.7 56.6 53.8 48.1

19.2 19.4 19.0 18.0 17.7 17.418.4

12.3 11.512.712.212.012.212.190.4 90.2 89.1 85.8 87.1 83.4

77.9

1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04

Administrative Expenses / Earned Premiums - %

Selling Expenses / Earned Premiums - %

Claims / Earned Premiums - %

72.0 67.0 69.2 67.5 76.7 70.1 66.3

13.3 12.9 12.2 11.611.3

11.2 14.313.3 12.5

11.7 13.5 12.5 12.613.4

97.0 93.4 93.8 91.6101.4 94.7 93.2

1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04

68.7 77.0 83.5 82.2 74.6 77.0 72.8

19.819.7

16.3 14.5

5.25.25.25.15.05.1

5.011.812.612.4

93.5101.8 104.9 101.7

92.3 94.7 89.8

1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04

48.9 50.9 48.3 46.0 42.8 41.9 34.4

25.2 25.4 24.8 23.0 23.1 22.322.5

11.710.9

11.3 10.4 11.2 11.7 12.4

85.4 86.7 84.3 80.7 78.3 75.867.7

1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04

Life and OthersHealth

Consolidated Auto


7.9.3 Brasilseg

Brasilseg Participações is a company with the object of participating in companies in the insurancemarket, and it holds 100% of the voting capital of Brasilveículos, which occupies 6th place in the rankingof vehicle insurers. Its main product is the BB Ouro auto insurance, which is marketed through Bancodo Brasil�s points of service, spread all over the Brazilian territory.

In 12 months, the insured fleet increased 16.4%, going up from 487 thousand vehicles to 567 thousandin September 2004. The combined ratio improved, because of the increase in retained claims, risingfrom 93.8% para 93.2% (3Q03 � 3Q04).

Table 99. Brasilseg DataR$ thousand

Chg. %Sep/03 Jun/04 Sep/04 s/ Sep/03 s/ Jun/04

Fleet � thousand 487 545 567 16.4 4.0Volume of the Managed Portfolio 156,347 192,275 212,023 35.6 10.3

7.9.4 Brasilsaúde

Brasilsaúde uses BB branches and brokers to market health insurance in the following modalities:company, professional, individual, and dental.

The number of lives insured increased 23% in relation to the September 2003, increasing the quantity ofearned premiums. Accordingly, the combined ratio went down from 104.9% to 89.8%, due to thedecrease of administrative expenses and retained claims.

Table 100. Brasilsaúde DataR$ thousand

Chg. %Sep/03 Jun/04 Sep/04 on Sep/03 on Jun/04

Lives Insured � thousand 74 90 91 23.0 1.1Volume of the Managed Portfolio 36,293 41,591 46,075 27.0 10.8

7.9.5 Aliança do Brasil

Founded in June 1997, Companhia de Seguros Aliança do Brasil resulted from the association betweenBanco do Brasil and Aliança da Bahia. The company is ranked second in the market and operatesthroughout Brazil, offering its products through Banco do Brasil branches and brokers.

Aliança do Brasil has a diversified portfolio of products, made up of 20 types of insurance from the lifeand basic lines, and offers solutions that meet the needs of individuals and businesses.

The number of policies increased 3.2% in 12 months, although the volume of the managed portfolioincreased 25.3% in the same period, which indicates that the insurance taken out was for higher values.The combined ratio showed improvements with the fall of retained claims, from 84.3% to 67.7%.


Table 101. Aliança do Brasil DataR$ thousand

Var. %Sep/03 Jun/04 Sep/04 on Sep/03 on Jun/04

Life Insurance Policies � thousand 1,259 1,379 1,300 3.2 (5.7)Volume of the Managed Portfolio 501,695 598,142 628,835 25.3 5.1

7.9.6 Brasilcap

Brasilcap was formed in 1995, following a partnership between Banco do Brasil and Icatu Hartford, SulAmérica and Aliança da Bahia. The company�s main product is Ourocap, which can only be acquired byBB current account holders. This product is based on two forms of payment: a single installment, or inmonthly installments, with the customer competing for several prizes.

Revenues from capitalization bonds showed an increase of 14.2% in relation to 3Q03. Considering thatexpenses with technical provisions did not accompany this increase, there was an expansion in results -from Gross Capitalization Revenues, which rose by 32.8%, to a total of R$ 57,487 thousand. Net incomeamounted to 29.4% of Gross Capitalization Revenues in 3Q04. In the last 12 months, there has been anincrease of 4.6% in the quantity of bonds and of 9.0% in the volume of the managed portfolio.

Table 102. Brasilcap DataR$ thousand

Var. %Sep/03 Jun/04 Sep/04 s/ Sep/03 s/ Jun/04

Quantity of Bonds � thousand 2,772 2,805 2,900 4.6 3.4Volume of the Managed Portfolio 2,030,390 2,151,879 2,212,131 9.0 2.8

7.9.7 Brasilprev

Brasilprev is a supplementary pension plan company of Banco do Brasil, in association with thePrincipal Financial Group and Sebrae. Founded in 1993, it actually started marketing its products in1995. These include the traditional, PGBL and VGBL plans, and the company is ranked third in thepension plan market.

The number of active participants increased 19,5% in relation to September 2003.

Table 103. Brasilprev DataR$ thousand

Chg. %Sep/03 Jun/04 Sep/04 on Sep/03 on Jun/04

Active participants � thousand 1,119 1,309 1,337 19.5 2.1Volume of the Managed Portfolio 5,042,992 6,762,186 7,248,037 43.7 7.2


7.9.8 BB Previdência

BB Previdência is a multisponsored pension fund created in 1994, with the objective of instituting andmanaging private pension plans (annuity or income) offering benefits to public and private sectorcompanies, trade associations, associations and trade unions operating in Brazilian territory.

Its main competitive advantages are:

- Lower management fees, as the institution has its own workforce which is shared with various plans;and

- Better investment rates for the assets under management, given the volumes that are invested.

The institution showed a 24.4% increase in the number of active participants in relation to the previousyear, bringing the total to 35,565 participants at the end of September 2004. Contribution revenuesamounted to R$ 81,377 thousand, an amount 228.6% higher than in the previous year.

Table 104. BB Previdência DataR$ thousand

Var. %Sep/03 Jun/04 Sep/04 on Sep/03 on Jun/04

Active Participants � thousand 32 35 36 12.8 1.7Sponsors 41 45 51 24.4 13.3Volume of the Managed Portfolio 394,194 515,651 563,159 42.9 9.2


8 � Financial Statements8.1 Summarized Balance SheetTable 105. Balance Sheet � AssetsR$ million

Dec/02 Mar/03 Jun/03 Sep/03 Dec/03 Mar/04 Jun/04 Sep/04Assets 204,595 209,240 205,762 215,134 230,144 231,107 227,374 235,599Current and long-term assets 200,245 205,099 201,714 211,087 225,632 226,668 222,858 231,014Available funds 11,582 7,569 6,683 6,083 10,789 15,279 15,841 16,669Short-term interbank investments 17,764 15,682 12,348 23,257 33,407 28,333 14,475 18,559 Open market investments 10,125 7,767 1,051 7,644 5,092 5,349 4,662 6,160 Interbank deposits 7,639 7,915 11,297 15,613 28,316 22,984 9,813 12,400Marketable securities 70,943 75,631 72,746 74,055 69,590 67,875 69,855 71,120 Securities for trading 3,585 5,137 2,104 5,393 16,095 12,338 11,998 12,690 Securities available for sale 41,303 43,352 42,515 43,158 28,307 30,266 31,008 31,997 Securities held to maturity 25,763 26,846 27,640 25,109 24,821 24,959 25,146 25,945 Financial derivatives 292 296 487 396 368 331 1,702 488Interbank accounts 18,178 22,201 22,110 18,279 18,666 19,409 20,959 21,152 Central Bank deposits 17,971 19,056 18,911 16,127 18,477 17,099 18,781 18,919 Compulsory dep. on demand. Dep & float 7,254 8,271 8,327 5,324 7,129 5,950 7,118 6,527 Compulsórios dep. on savings dep. 10,717 10,785 10,584 10,803 11,348 11,148 11,662 12,392 Others 207 3,145 3,199 2,152 189 2,311 2,178 2,232Interdepartmental accounts 270 331 308 413 34 39 13 108Loans 51,407 53,426 56,654 60,418 65,591 66,451 69,241 69,954 Public sector 5,617 5,289 4,437 4,693 4,364 4,461 4,647 4,552 Private sector 48,993 51,426 55,715 59,475 65,207 66,475 69,472 70,520 (Allowance for loan losses) (3,202) (3,289) (3,498) (3,750) (3,980) (4,485) (4,877) (5,118)Leasing 62 49 32 24 13 10 6 6 Leasing and sub-leasing receivables 438 395 349 335 328 358 411 472 Public sector 21 15 11 9 - 12 20 40 Private sector 417 380 338 326 328 346 390 432 (Unearned lease income) (361) (332) (303) (296) (299) (327) (385) (443) (Allowance for lease losses) (15) (14) (14) (15) (17) (20) (20) (22)Other receivables 29,784 29,970 30,600 28,330 27,309 28,983 32,196 33,194 Receivable on guarantees honored 38 34 49 75 30 28 29 41 Foreign exchange portfolio 10,161 11,387 12,075 9,971 8,859 10,196 11,508 11,455 Income receivable 299 305 280 342 401 292 309 354 Trading and brokerage of securities 17 18 27 48 88 40 45 41 Specific credits 434 448 464 480 494 506 516 530 Special operations 5 4 1 1 1 1 1 1 Tax credits 11,847 10,927 10,433 9,897 9,406 9,116 8,971 8,505 Other credits - - - - - 357 909 1,450 (Provision or doubtful receivables) 4,065 4,725 5,520 5,698 6,244 6,704 7,750 8,127 (With loan characteristics) 3,427 3,262 3,075 3,134 3,030 3,168 3,746 4,437 (Without loan characteristics) (508) (1,139) (1,323) (1,317) (1,246) (1,425) (1,587) (1,749)Other assets (288) (290) (311) (279) (199) (187) (205) (234) Statutory profit sharing (220) (850) (1,012) (1,038) (1,047) (1,238) (1,383) (1,515) Others 254 240 234 228 233 289 272 252 (Provision for possible losses) 0 0 0 0 0 0 0 0 Prepaid expenses 410 409 402 403 412 421 398 391Permanent assets (200) (203) (198) (204) (204) (202) (201) (201) Investments 44 34 30 28 24 70 76 62 Investm. in associated and subsidiary co. 4,350 4,141 4,048 4,047 4,513 4,439 4,517 4,585Local 970 867 903 916 878 785 823 843Foreign 1,009 1,013 1,022 1,077 881 767 803 819 Other investments 230 228 231 232 232 232 234 231 (Provision for losses) (268) (374) (350) (392) (235) (214) (215) (208) Property and equipment 2,539 2,476 2,404 2,403 2,886 2,844 2,730 2,723 Land and buildings in use 2,222 2,227 2,222 2,237 2,211 2,231 2,275 2,270 Other property and equipment in use 3,076 3,094 3,070 3,110 3,681 3,494 3,446 3,534 (Accumulated depreciation) (2,759) (2,846) (2,887) (2,945) (3,005) (2,881) (2,991) (3,082) Leased assets 547 498 443 411 393 413 466 519 Leases assets 668 623 568 533 510 530 579 636 (Accumulated depreciation) (121) (125) (125) (122) (117) (117) (114) (117) Deferred charges 293 300 298 317 356 396 498 500 Organization and expansion costs 574 597 594 628 677 747 882 907 (Accumulated amortization) (281) (297) (296) (311) (321) (351) (384) (407)


Table 106. Balance Sheet � LiabilitiesR$ million

Dec/02 Mar/03 Jun/03 Sep/03 Dec/03 Mar/04 Jun/04 Sep/04Liabilities and Shareholders' Equity 204,595 209,240 205,762 215,134 230,144 231,107 227,374 235,599Current and long-term assets 195,295 198,973 194,793 203,341 217,846 218,294 214,373 221,689Deposits 97,253 98,130 99,881 103,071 110,014 110,219 115,795 115,079 Demand deposits 24,342 21,049 21,170 20,498 27,140 30,306 29,425 30,191 Savings deposits 26,918 26,804 26,427 26,578 27,425 27,590 28,939 29,915 Interbank deposits 3,876 5,230 5,437 6,438 7,275 6,219 7,684 5,530 Time deposits 42,117 45,046 46,847 49,558 48,173 46,104 49,747 49,444Money market borrowing 48,327 49,570 41,468 46,478 40,063 40,343 37,132 42,003 Own portfolio 37,852 41,424 40,041 38,320 37,531 34,911 32,371 36,679 Third-party portfolio 10,475 8,146 1,427 8,158 2,532 5,433 4,761 5,324Funds from acceptances and securities placed 1,053 1,010 1,071 1,615 1,637 1,340 1,397 768 Foreign securities 1,053 1,010 1,071 1,615 1,637 1,340 1,397 768Interbank accounts 74 2,438 2,676 1,816 17 1,445 1,945 2,034 Receipts and payments pending settlement 69 2,437 2,676 1,816 17 1,445 1,945 2,034 Correspondent banks 5 1 0 - - - - -Interdepartmental accounts 1,366 956 813 989 1,834 1,172 1,189 1,852 Thrid-party funds in transit 1,366 941 797 968 1,816 1,149 1,063 1,743 Internal transfers of funds 1 15 15 21 19 23 126 109Borrowing 13,432 11,316 8,714 7,509 9,982 10,707 13,872 16,017 Foreign borrowing 13,432 11,316 8,714 7,509 9,982 10,707 13,872 16,017Domestic onlending � official institutions 5,921 5,891 6,134 6,311 7,458 8,003 8,448 8,778 Federal Treasury 1,181 1,163 1,184 1,222 1,829 1,878 1,940 2,059 National Development Bank (BNDES) 2,571 2,662 2,737 2,821 2,932 3,081 3,322 3,484 Federal Savings and Loan (CEF) 0 - - - - - - - Fed,l Program for Capital Equip, Finan, (FINAME) 1,787 1,692 1,699 1,747 2,140 2,510 2,720 2,662 Other institutions 383 374 515 521 557 534 466 574Foreign onlending 2 7 2 2 2 2 1 9Financial derivatives 743 720 702 530 533 473 1,996 370Other accounts payable 27,123 28,936 33,333 35,021 46,306 44,590 32,599 34,780 Collection of taxes and contributions 187 1,775 1,613 2,185 272 2,221 2,168 2,328 Foreign exchange portfolio 4,414 5,481 9,771 10,120 22,407 19,406 5,480 7,509 Stockholders and statutory distributions 347 28 397 125 585 60 644 262 Taxes and social security 1,190 705 792 902 908 924 984 1,013 Trading and brokerage of securities 3,832 3,972 3,369 3,407 4,054 4,009 4,217 3,759 Financial and development funds 1,776 1,753 1,777 1,707 1,744 1,768 1,825 1,814 Special operations 2 2 2 2 2 2 2 2 Subordineted Debt 4,180 4,382 4,607 4,833 4,991 5,380 5,573 6,637 Other liabilities 4,591 4,397 4,141 3,759 3,175 2,908 2,894 2,885 Actuarial liabilities 6,603 6,439 6,864 7,980 8,170 7,911 8,812 8,571Deferred income 102 104 97 105 126 127 138 139Shareholders� equity 9,197 10,164 10,872 11,687 12,172 12,686 12,864 13,771 Capital 7,436 7,436 8,366 8,366 8,366 8,366 8,366 10,302 (Unpaid Capital) - - - - - - - (445) Capital reserves 5 5 5 5 5 5 5 5 Revaluation reserves 25 25 25 25 24 24 24 26 Revenue reserves 2,969 2,969 2,796 2,796 3,674 3,674 4,645 3,195 Mark-to-market � securities and derivatives (1,111) (623) (194) (43) 228 127 (51) (17) Retained earnings (accumulated losses) - 0 - 0 - 0 - 0 (Treasury shares) (126) (126) (126) (126) (126) (126) (126) (126) Income accounts - 479 - 665 - 616 - 833


8.2 Summarized Corporate Law Income StatementTable 107. Summarized Corporate Law Income StatementR$ million

4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04Financial Intermediation Income 7,760 8,525 7,951 10,032 8,122 7,565 8,159 7,165 Loans 3,265 3,760 3,894 4,239 4,244 4,198 4,361 4,120 Leasing 25 23 21 20 19 19 21 23 Securities 4,896 4,591 3,508 4,444 3,197 2,826 2,930 2,660 Financial Derivatives (357) (289) 73 (201) (134) (37) (194) 22 Foreign Exchange Portfolio (428) - - 1,093 448 252 729 - Compulsory Investments 360 440 455 438 348 307 312 340Financial Intermediation Expenses (3,988) (6,157) (6,344) (7,070) (5,067) (5,152) (5,739) (4,831) Money Market Funds (4,166) (4,539) (4,554) (4,598) (3,731) (3,047) (3,070) (3,222) Borrowing, Assignments and Onlending 1,033 (323) (329) (1,695) (503) (745) (1,467) (315) Foreign Exchange Portfolio - (589) (514) - - - - (224) Allowance for Loan Losses (855) (706) (948) (777) (833) (1,359) (1,201) (1,071)Gross Income from Financial Intermediation 3,772 2,368 1,606 2,962 3,056 2,414 2,421 2,334Other Operating Income (Expenses) (2,880) (1,233) (590) (1,749) (1,849) (1,402) (1,276) (969) Service Revenues 1,159 1,218 1,343 1,412 1,511 1,553 1,643 1,717 Personnel Expenses (1,504) (1,509) (1,481) (1,681) (2,101) (1,574) (1,952) (1,744) Other Administrative Expenses (1,197) (1,170) (955) (1,221) (1,165) (1,126) (1,381) (1,344) Taxes (277) (262) (272) (271) (325) (319) (360) (385) Equity Int. in the Results of Subs. and Affil. (517) (326) (710) 147 250 116 347 (275) Other Operating Revenues 514 1,525 3,383 366 1,249 518 983 2,637 Other Operating Expenses (1,059) (709) (1,898) (501) (1,269) (570) (555) (1,576)Operating Income 893 1,135 1,016 1,213 1,206 1,012 1,144 1,365Non-operating Income 102 51 41 17 39 15 39 80Income Before Taxes 995 1,185 1,058 1,231 1,245 1,027 1,184 1,445 Income and Social Contribution Taxes (352) (687) (409) (516) (453) (370) (239) (545) Statutory Profit Sharing (43) (20) (49) (50) (155) (41) (140) (67)Net Income 600 479 600 665 637 616 805 833


8.3 Income Statement with ReallocationsTable 108. Income Statement with ReallocationsR$ million

4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04Financial Intermediation Income 7,282 8,779 8,407 10,181 8,210 7,622 8,462 7,455 Loans 3.265 3,760 3,894 4,239 4,244 4,198 4,361 4,120 Leasing 25 23 21 20 19 19 21 23 Securities 4,896 4,591 3,508 4,444 3,197 2,826 2,930 2,660 Financial Derivatives (357) (289) 73 (201) (134) (37) (194) 22 Foreign Exchange Portfolio (428) (589) (514) 1,093 448 252 729 (224) Compulsory Investments 360 440 455 438 348 307 312 340 FX Gain (Loss) on Foreign Investments (535) (257) (729) 105 45 18 268 (354) Other Op, Inc, of a Fin, Intermed, Nature 56 1,100 1,699 43 43 38 35 869Financial Intermediation Expenses (3,133) (4,862) (4,883) (6,293) (4,233) (3,793) (4,537) (3,536) Money Market Funds (4,166) (4,539) (4,554) (4,598) (3,731) (3,047) (3,070) (3,222) Borrowing, Assignments and Onlending 1,033 (323) (329) (1,695) (503) (745) (1,467) (315)Gross Financial Margin 4,148 3,917 3,524 3,888 3,977 3,829 3,925 3,919 Allowance for Loan Losses (855) (636) (863) (747) (827) (901) (903) (856)Net Financial Margin 3,293 3,281 2,661 3,141 3,150 2,928 3,022 3,063 Service Revenues 1,159 1,218 1,343 1,412 1,511 1,553 1,643 1,717 Taxes on Revenues (249) (232) (241) (242) (289) (284) (323) (345)Contribution Margin 4,203 4,267 3,763 4,312 4,372 4,197 4,341 4,435Administrative Expenses (2,728) (2,709) (2,466) (2,931) (3,149) (2,735) (3,093) (3,129) Personnel Expenses (1,504) (1,509) (1,481) (1,681) (1,949) (1,574) (1,675) (1,744) Other Administrative Expenses (1,197) (1,170) (955) (1,221) (1,165) (1,126) (1,381) (1,344) Other Tax Expenses (27) (30) (30) (29) (35) (34) (37) (41)Commercial Income 1,476 1,558 1,297 1,381 1,223 1,462 1,248 1,307Other Operating Income (Expenses) (583) (313) (280) (167) 112 (235) (245) (51) Equity Interest in Results of Subs, and Affil, 19 41 19 42 30 99 79 80 Other Operating Income 458 346 508 323 1,206 432 383 457 Other Operating Expenses (1,059) (700) (808) (532) (1,124) (766) (707) (588)Operating Income 893 1,244 1,016 1,213 1,335 1,227 1,003 1,256Non-operating Income 102 51 41 17 39 15 39 80Income Before Taxes 995 1,295 1,058 1,231 1,374 1,242 1,043 1,336 Income and Social Contribution Taxes (352) (687) (519) (516) (597) (370) (200) (545) Statutory Profit Sharing (43) (20) (49) (50) (155) (41) (140) (67)Recurring Income 600 589 490 665 621 831 703 724Extraordinary Items - (110) 109 - 16 (215) 102 109 Extraordinary Provision for Credit Risks - - - - - (262) (146) (80) Provision for Losses on Maxblue - (110) - - 175 - - - Provision for Voluntary Retirement Plan - - - - (152) 47 - - Reversal of Prov, for Losses on Maxblue - - - - (151) - - - Recovery of Undue Taxes - - - - - - 565 - Provision for Retirement Incentive Plan - - - - - - (277) 189 Provision for Non-recurring IR and CS - - - - - - (192) - JCP Tax Benefit - - 109 - 144 - 153 -Net Income 600 479 600 665 637 616 805 833


8.4 Analytical SpreadTable 109. Analytical SpreadAverage Balances in R$ million

4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04Remunerated Assets 167,523 165,432 158,940 169,158 182,819 186,354 176,216 183,393Available Funds in Foreign Currency 8,544 6,711 4,124 2,774 4,333 6,103 7,813 9,266Income from Available Funds in ForeignCurrency (291) 26 (7) 199 52 11 430 18Annualized Rate - % (13.0) 1.6 (0.7) 31.9 4.9 0.7 23.9 0.8Securities + Interbank Investments 84,371 80,754 73,970 93,427 98,205 98,569 83,162 87,637Securities Income excluding Hedges 4,896 4,591 3,508 4,444 3,197 2,826 2,930 2,660Annualized Rate - % 25.3 24.8 20.4 20.4 13.7 12.0 14.9 12.7Loans + Leasing 54,381 55,927 58,368 62,085 68,632 70,443 73,086 73,984Loans + Leasing Income 3,088 3,615 3,708 3,971 3,892 3,994 4,067 3,865Annualized Rate - % 24.7 28.5 27.9 28.1 24.7 24.7 24.2 22.6Remunerated Compulsory Deposit 19,760 21,558 21,983 10,336 11,098 10,708 11,614 11,946Income from Compulsory Deposits 360 440 455 438 348 307 312 340Annualized Rate - % 7.5 8.4 8.5 18.0 13.2 12.0 11.2 11.9Other Remunerated Assets 467 483 496 536 551 532 542 561Other Income with Financial IntermediationCharacteristics 56 44 46 43 43 37 37 40Annualized Rate - % 57.4 42.3 42.6 36.4 35.1 30.5 30.3 31.9Tax Credits 12,020 11,245 10,404 10,104 9,543 9,223 8,913 8,651Other Assets 28,375 27,399 28,923 29,810 29,015 33,369 34,189 35,055Permanent Assets 4,486 4,245 4,058 4,058 4,234 4,423 4,471 4,538TOTAL ASSETS 212,404 208,321 202,326 213,130 225,611 233,370 223,789 231,636


Remunerated Liabilities 152,518 148,508 143,954 149,598 152,150 148,649 151,362 157,351Savings Deposits 26,766 26,965 26,534 26,544 26,940 27,618 28,392 29,718Expenses with Savings Deposits (643) (750) (761) (740) (595) (525) (561) (707)Annualized Rate - % 10.0 11.6 12.0 11.6 9.1 7.8 8.1 9.9Interbank Deposits 4,575 5,031 5,116 6,102 6,299 6,730 7,580 6,279Expenses with Interbank Deposits (71) (55) (60) (70) (68) (50) (52) (69)Annualized Rate - % 6.4 4.4 4.8 4.7 4.4 3.0 2.8 4.4Time Deposits 42,125 44,163 46,931 48,785 50,650 48,117 48,928 49,164Expenses with Time Deposits (1,056) (1,269) (1,440) (1,512) (1,246) (1,049) (1,124) (1,059)Annualized Rate - % 10.4 12.0 12.9 13.0 10.2 9.0 9.5 8.9Money Market Borrowing 52,358 46,963 42,795 45,851 43,938 39,571 36,973 39,855Expenses with Money Market Borrowing (2,363) (2,431) (2,264) (2,199) (1,782) (1,373) (1,235) (1,351)Annualized Rate - % 19.3 22.4 22.9 20.6 17.2 14.6 14.0 14.3Foreign Borrowing 14,083 12,427 9,164 7,943 9,044 10,403 12,531 14,963Expenses with Foreign Borrowing, Onlendingand Banks 1,167 (76) (55) (1,445) (262) (358) (1,200) (60)Annualized Rate - % (29.2) 2.5 2.4 95.1 12.1 14.5 44.2 1.6Onlending 5,603 5,977 6,068 6,243 7,020 7,840 8,266 8,731Expenses with Onlending (115) (146) (123) (132) (146) (146) (159) (139)Annualized Rate - % 8.4 10.1 8.4 8.7 8.6 7.6 7.9 6.5Financial and Development Funds +Subordinated Debt 5,925 6,022 6,291 6,522 6,641 7,022 7,306 7,845Expenses with Financial and DevelopmentFunds (106) (102) (151) (110) (103) (241) (108) (116)Annualized Rate - % 7.3 6.9 9.9 6.9 6.3 14.5 6.1 6.0Foreign Securities 1,081 960 1,055 1,610 1,618 1,348 1,388 795Expenses with Foreign Securities (21) (22) (17) (25) (34) (26) (24) (16)Annualized Rate - % 7.9 9.5 6.7 6.4 8.6 7.8 7.2 8.5Other Liabilities 50,784 49,864 47,637 52,049 61,302 72,238 58,544 60,129 Demand Deposits 22,435 21,197 20,296 19,937 23,258 27,838 30,037 29,938 Other Liabilities 28,349 28,667 27,341 32,112 38,044 44,400 28,507 30,190Shareholders� Equity + Income Accounts 9,103 9,949 10,734 11,483 12,159 12,483 13,050 13,541TOTAL LIABILITIES AND SHAREHOLDERS�EQUITY 212,404 208,321 202,326 213,130 225,611 233,370 223,789 231,636


Financial Intermediation Income(Reallocated Income Statement) 7,282 8,779 8,407 10,181 8,210 7,622 8,462 7,455Income from Remunerated Assets 8,109 8,716 7,709 9,095 7,532 7,174 7,776 6,924Income from Financial Derivatives (357) (289) 73 (201) (134) (37) (194) 22FX Gain (Loss) on Foreign Investments (535) (257) (729) 105 45 18 268 (354)Other FX Operations (137) (615) (506) 894 396 241 300 (242)Other Operating Income - 1,055 1,653 (0) (0) 2 (2) 828Recovery of Write-offs 202 169 207 287 371 224 315 278Financial Intermediation Expenses (3,133) (4,862) (4,883) (6,293) (4,233) (3,793) (4,537) (3,536)Expenses with Remunerated Liabilities (3,208) (4,850) (4,871) (6,233) (4,237) (3,767) (4,463) (3,517)Expenses with FGC on Demand Deposits (12) (12) (12) (12) (13) (16) (17) (17)Expenses with Debt Assumption Contracts 88 - - (47) 17 (10) (58) (2)Other Expenses (1) 0 (0) (0) 0 (0) 0 0

Gross Financial Margin 4,148 3,917 3,524 3,888 3,977 3,829 3,925 3,919Assets � Permanent Assets 207,918 204,076 198,267 209,072 221,377 228,946 219,318 227,099Remunerated Assets 167,523 165,432 158,940 169,158 182,819 186,354 176,216 183,393

Finan. Intermed. Income / (Assets � PermanentAssets) 3.5 4.3 4.2 4.9 3.7 3.3 3.9 3.3Finan. Intermed. Income / (Assets � PermanentAssets) � Ann. 14.8 18.4 18.1 20.9 15.7 14.0 16.4 13.8Finan. Intermed. Expenses / (Assets �Permanent Assets) 1.5 2.4 2.5 3.0 1.9 1.7 2.1 1.6Finan. Intermed. Expenses / (Assets �Permanent Assets) � Ann. 6.2 9.9 10.2 12.6 7.9 6.8 8.5 6.4GFM / (Assets � Permanent Assets) 2.0 1.9 1.8 1.9 1.8 1.7 1.8 1.7GFM / (Assets � Permanent Assets) �Annualized 8.2 7.9 7.3 7.6 7.4 6.9 7.4 7.1Finan. Intermed. Income / (RemuneratedAssets) 4.3 5.3 5.3 6.0 4.5 4.1 4.8 4.1Finan. Intermed. Income / (RemuneratedAssets) � Annualized 18.6 23.0 22.9 26.3 19.2 17.4 20.6 17.3Finan. Intermed. Expenses / (RemuneratedAssets) 1.9 2.9 3.1 3.7 2.3 2.0 2.6 1.9Finan. Intermed. Expenses / (RemuneratedAssets) � Annualized 7.7 12.3 12.9 15.7 9.6 8.4 10.7 7.9GFM / (Remunerated Assets) 2.5 2.4 2.2 2.3 2.2 2.1 2.2 2.1GFM / (Remunerated Assets) � Annualized 10.3 9.8 9.2 9.5 9.0 8.5 9.2 8.8


Vice-presidency of Finance, Capital Markets and Investor Relations

Vice-presidentLuiz Eduardo Franco de Abreu

Investor Relations ManagerMarco Geovanne Tobias da Silva

Deputy ManagerGilberto Lourenço da AparecidaMarcelo Jorge Lydia

AnalystsAline Japiassú Van DeventerAnanias Pereira da SilvaBruno Ciuffo MoreiraCarla Sarkis TeixeiraDacirlei Neres dos SantosEduardo Amaral PilenghiGlauco Risperi WermelingerLuís Gustavo do Lago QuinteiroMariana Reschke da CunhaRicardo Borges de Araújo RosaYara Márcia Almeida Costa Dutra da Silva


Complete Financial Statements

3rd Quarter 2004

(A free translation of the original in Portuguese)Banco do Brasil S.A.Financial Statements (in thousands of reais )Balance Sheet

BB – Domestic and ForeignBranches BB - Consolidated

ASSETS 09.30.2004 09.30.2003 09.30.2004 09.30.2003

CURRENT ASSETS 129,657,083 118,617,155 122,653,597 105,361,741

AvailableFunds 16,655,962 6,052,523 16,668,752 6,082,946

Short-term Interbank Investments (Note 4) 24,691,050 36,339,702 16,865,378 21,957,260 Open market investments 6,155,271 7,586,737 6,101,412 7,523,809 Interbank deposits 18,535,779 28,752,965 10,763,966 14,433,451

Marketable securities (Note 5) 15,101,477 13,063,150 16,040,814 13,749,147 Own portfolio 8,747,912 3,782,939 9,706,828 4,479,595 Subject to repurchase commitments 5,358,229 7,549,975 5,362,084 7,549,975 Restricted deposits – Central Bank 540,713 1,307,807 540,713 1,307,807 Restricted to guarantees provided -- 21,393 -- 25,193 Derivative financial instruments 454,623 401,036 431,189 386,577Interbank accounts 21,146,415 18,164,802 21,151,794 18,279,269 Payments and receipts pending settlement 2,099,550 1,981,269 2,099,725 2,095,736 Restricted deposits Central Bank deposits 18,919,329 16,126,846 18,919,331 16,126,846 National Treasury – rural credit receivable 18,198 7,074 18,198 7,074 National Housing Financing System (SFH) 1,814 1,224 1,814 1,224 Interbank onlendings 5,384 6,012 5,385 6,012 Correspondent banks 102,140 42,377 107,341 42,377Interdepartmental accounts 108,315 413,127 108,315 413,127 Internal transfers of funds 108,315 413,127 108,315 413,127Lending operations 35,872,600 30,978,496 35,611,806 31,315,062 Lending operations Public sector (Note 6b) 704,454 320,950 712,748 478,906 Private sector (Note 6b) 37,969,687 32,554,228 37,733,853 33,068,357 (Allowance for loan losses) (Notes 6e and 6f) (2,801,541) (1,896,682) (2,834,795) (2,232,201)Leasing operations 2,347 -- 627 17,581 Leases and subleases receivable Public sector 14,426 -- 14,426 8,817 Private sector 2,882 -- 210,161 169,515 (Unearned income from leasing operations) (14,950) -- (206,259) (150,974) (Allowance for leasing losses) (Note 6e) (11) -- (17,701) (9,777)Other receivables 15,830,842 13,380,644 15,954,109 13,319,668 Receivables on guarantees honored 38,161 56,698 41,286 56,698 Foreign exchange portfolio (Note 8a) 11,455,409 10,146,307 11,455,409 9,970,847 Income receivable 284,530 263,036 307,776 282,738 Negotiation and intermediation of securities 6,246 28,177 41,211 48,180 Specific credits (Note 8b) 264,955 240,005 264,955 240,005 Special operations 1,355 1,356 1,355 1,356 Sundry (Note 8c) 5,391,672 3,799,523 5,460,789 3,878,105 (Allowance for other losses) (Notes 6e and 6f) (1,611,486) (1,154,458) (1,618,672) (1,158,261)Other assets 248,075 224,711 252,002 227,681 Shareholdings 4 3 4 3 Other assets (Note 9) 383,632 402,063 391,235 403,211 (Allowance for losses) (193,682) (202,912) (200,906) (203,759) Prepaid expenses 58,121 25,557 61,669 28,226

(A free translation of the original in Portuguese)Banco do Brasil S.A.Financial Statements (in thousands of reais )

Balance Sheet

BB – Domestic and ForeignBranches BB - Consolidated

ASSETS 09.30.2004 09.30.2003 09.30.2004 09.30.2003

Long-term receivables 106,036,285 104,363,974 108,360,887 105,725,000Interbank investments (Note 4) 1,427,617 1,123,369 1,693,955 1,299,692 Open market investments 58,186 120,231 58,186 120,231 Interbank deposits 1,369,431 1,003,138 1,635,769 1,179,461Marketable securities andDerivative financial instruments (Note 5) 54,449,788 59,630,650 55,079,219 60,305,917 Own portfolio 19,548,953 16,057,713 20,066,119 16,617,113 Subject to repurchase commitments 31,871,785 32,590,408 31,984,050 32,706,275 Restricted deposits - Central Bank 2,510,008 10,460,216 2,510,008 10,460,216 Restricted for guarantees provided 461,940 513,359 461,940 513,359 Derivative financial instruments 57,102 8,954 57,102 8,954Lending operations 33,005,642 28,705,448 34,342,684 29,102,666 Lending operations Public sector (Note 6b) 3,835,550 4,201,946 3,839,559 4,214,246 Private sector (Note 6b) 31,258,485 26,021,688 32,786,159 26,406,606 (Allowance for loan losses) (Notes 6e and 6f) (2,088,393) (1,518,186) (2,283,034) (1,518,186)Leasing operations 4,175 -- 5,559 6,528 Leases and subleases receivable Public sector 25,647 -- 25,647 -- Private sector 1,661 -- 221,928 156,379 (Unearned income from leasing operations) (23,113) -- (237,241) (144,601) (Allowance for leasing losses) (Note 6e) (20) -- (4,775) (5,250)Other receivables 17,149,063 14,904,507 17,239,470 15,010,197 Receivables on guarantees honored -- 18,702 -- 18,702 Income receivable 46,437 58,945 46,546 59,054 Specific credits (Note 8b) 264,955 240,005 264,955 240,005 Sundry (Note 8c) 16,958,821 14,736,506 17,057,865 14,850,966 (Allowance for other losses) (Notes 6e and 6f) (121,150) (149,651) (129,896) (158,530)Permanent assets 7,454,246 6,629,938 4,584,811 4,047,189Investments 4,231,053 3,912,487 842,701 916,174 Investments in subsidiaries and in associate companies(Note 19) Domestic 2,591,089 2,145,659 819,416 855,447 Abroad 1,599,698 1,726,681 -- 221,460 Other investments 194,989 194,778 231,279 231,723 (Allowance for losses) (154,723) (154,631) (207,994) (392,456)Property and equipment in use 2,717,226 2,401,127 2,722,926 2,402,673 Land and buildings in use 2,270,368 2,235,425 2,270,368 2,236,936 Other property and equipment in use 3,518,663 3,102,219 3,534,452 3,110,391 (Accumulated depreciation) (3,071,805) (2,936,517) (3,081,894) (2,944,654)Leased assets 38,839 -- 519,113 411,258 Leased assets 39,176 -- 636,269 532,940 (Accumulated depreciation) (337) -- (117,156) (121,682)Deferred charges 467,128 316,324 500,071 317,084 Organization and expansion costs 847,502 617,621 906,622 627,621 (Accumulated amortization) (380,374) (301,297) (406,551) (310,537)Total 243,147,614 229,611,067 235,599,295 215,133,930


BB – Domestic andForeign Branches BB - Consolidated

Liabilities/Shareholders’ Equity 09.30.2004 09.30.2003 09.30.2004 09.30.2003Current liabilities 190,326,441 177,014,034 181,293,469 162,159,102Deposits (Note 10) 113,401,665 101,766,871 107,712,820 90,706,776 Demand deposits 30,139,123 20,376,712 30,190,776 20,497,643 Savings deposits 29,914,859 26,577,861 29,914,859 26,577,861 Interbank deposits 8,865,805 16,001,889 2,997,155 4,724,014 Time deposits 44,481,878 38,810,409 44,610,030 38,907,258Funds obtained in the open market 38,242,526 42,569,299 37,602,925 42,157,194 Own portfolio 32,833,822 34,725,326 32,737,894 34,313,221 Third-party portfolio 5,408,704 7,843,973 4,865,031 7,843,973Notes and securities 220,446 831,061 180,220 811,375 Foreign marketable securities 220,446 831,061 180,220 811,375Interbank accounts 2,032,721 1,695,114 2,033,635 1,815,882 Receipts and payments pending settlement 2,032,721 1,695,114 2,033,635 1,815,882Interdepartmental accounts 1,851,654 988,724 1,851,654 988,724 Third-party funds in transit 1,742,914 967,679 1,742,914 967,679 Internal transfers of funds 108,740 21,045 108,740 21,045Borrowings (Note 11) 14,458,689 6,887,726 12,193,767 3,701,029 Foreign borrowings 14,458,689 6,887,726 12,193,767 3,701,029Local onlendings – official institutions (Note 12) 1,753,491 899,593 1,757,299 903,096 National Treasury 1,752,334 879,089 1,752,334 879,089 National Economic Development Bank (BNDES) -- 1,082 -- 1,082 National Industrial Financing Authority (FINAME) -- 18,282 3,693 20,916 Other institutions 1,157 1,140 1,272 2,009Foreign onlendings 946,258 256,499 7,630 -- Foreign onlendings 946,258 256,499 7,630 --Derivative financial instruments (Note 5b) 311,255 511,630 297,865 514,217Derivative financial instruments 311,255 511,630 297,865 514,217Other liabilities 17,107,736 20,607,517 17,655,654 20,560,809 Collection of taxes and social contributions 2,328,242 2,185,059 2,328,500 2,185,282 Foreign exchange portfolio (Note 14a) 7,509,146 10,445,379 7,509,146 10,120,412 Social and statutory 261,466 125,218 262,166 125,267 Taxes and social security charges 654,306 570,815 990,110 875,729 Negotiation and intermediation of securities 2,676 329,660 54,656 368,994 Financial and development funds (Note 14b) 115,441 52,502 115,441 52,502 Special operations 2,394 2,402 2,394 2,402 Subordinated Debts (Note 14e) -- 4 -- 4 Sundry (Note 14d) 6,234,065 6,896,478 6,393,241 6,830,217



P A S S I V O / P A T R I M Ô N I O L Í Q U I D O 09.30.2004 09.30.2003 09.30.2004 09.30.2003Long-term liabilities 38,910,606 40,804,688 40,395,101 41,182,001Deposits (Note 10) 6,049,904 11,365,220 7,365,998 12,364,405 Interbank deposits 1,216,299 714,464 2,532,393 1,713,649 Time deposits 4,833,605 10,650,756 4,833,605 10,650,756Funds obtained in the open market 4,342,871 4,247,492 4,400,324 4,320,307 Own portfolio 3,884,089 3,933,480 3,941,542 4,006,295 Third-party portfolio 458,782 314,012 458,782 314,012Notes and securities 587,486 803,715 587,486 803,715 Foreign marketable securities 587,486 803,715 587,486 803,715Borrowings (Note 11) 3,863,921 4,552,808 3,822,804 3,808,120 Foreign borrowings 3,863,921 4,552,808 3,822,804 3,808,120Local onlendings - official institutions (Note 12) 7,016,643 5,401,471 7,020,952 5,407,558 National Treasury 306,602 343,290 306,602 343,290 National Economic Development Bank (BNDES) 3,483,681 2,819,657 3,483,681 2,819,657 National Industrial Financing Authority (FINAME) 2,653,712 1,719,642 2,658,021 1,725,729 Other institutions 572,648 518,882 572,648 518,882Foreign onlendings 176,592 151,785 1,077 1,836 Foreign onlendings 176,592 151,785 1,077 1,836Derivative financial instruments (Note 5b) 63,710 8,002 71,807 15,508 Derivative financial instruments 63,710 8,002 71,807 15,508Other liabilities 16,809,479 14,274,195 17,124,653 14,460,552 Taxes and social security charges -- 35 22,868 26,665 Negotiation and intermediation of securities 3,701,186 3,034,879 3,703,927 3,037,621 Financial and development funds 1,698,433 1,654,467 1,698,433 1,654,467 Subordinated debts (Note 14e) 6,636,942 4,832,844 6,636,942 4,832,844 Sundry (Note 14d) 4,772,918 4,751,970 5,062,483 4,908,955Deferred income 139,103 104,996 139,261 105,478 Deferred income 139,103 104,996 139,261 105,478Stockholders' equity (Note 16) 13,771,464 11,687,349 13,771,464 11,687,349Capital 8,366,189 8,366,189 8,366,189 8,366,189 Local residents 8,343,671 8,363,797 8,343,671 8,363,797 Foreign residents 22,518 2,392 22,518 2,392Increase of capital 1,935,527 -- 1,935,527 --Common Shares on Domestic Market 1,892,945 -- 1,892,945 --Common Shares on Foreign Market 42,582 -- 42,582 --(Unpaid capital) (445,182) -- (445,182) --Capital reserves 4,768 4,754 4,768 4,754Revaluation reserves 25,751 24,717 25,751 24,717Revenue reserves 3,195,071 2,796,091 3,195,071 2,796,091Adjustments to market value –Securities andderivatives (Note 16e) (17,437) (43,423) (17,437) (43,423)

Retained earnings 832,556 664,800 832,556 664,800

(Treasury stocks) (125,779) (125,779) (125,779) (125,779)Total 243,147,614 229,611,067 235,599,295 215,133,930

(A free translation of the original in Portuguese)Banco do Brasil S.A.Financial Statements (in thousands of reais )Statement of Income


09.30.2004 09.30.2003 09.30.2004 09.30.2003

Revenue from financial intermediation 7,123,212 9,979,823 7,215,988 10,087,815Lending operations 4,093,111 4,200,451 4,119,736 4,238,580

Leasing operations 2,076 -- 73,779 75,373Marketable securities 2,652,524 4,447,160 2,660,472 4,444,089

Derivative financial instruments 35,072 (190,649) 21,572 (200,999)Foreign exchange -- 1,085,267 -- 1,093,178Compulsory investments 340,429 437,594 340,429 437,594

Expenses from financial intermediation (4,876,119) (7,103,326) (4,882,073) (7,125,574)Deposits and funds obtained in the open market (3,257,312) (4,620,822) (3,221,812) (4,597,622)Borrowings and onlendings (320,924) (1,705,333) (314,670) (1,695,095)

Leasing operations (777) -- (50,750) (55,529)Net loss on exchange transaction (231,492) -- (224,199) --Provision for credit losses (Note 6e) (1,065,614) (777,171) (1,070,642) (777,328)

Gross profit from financial transaction 2,247,093 2,876,497 2,333,915 2,962,241

Other operating income / expenses (929,948) (1,700,931) (969,401) (1,748,838)Services rendered (Note 14a) 1,575,300 1,322,556 1,716,648 1,412,355Personnel expenses (Note 14b) (1,724,564) (1,668,577) (1,743,945) (1,681,214)Other administrative expenses (Note 14c) (1,326,638) (1,211,417) (1,344,030) (1,220,809)Taxes (357,579) (257,599) (385,106) (270,978)

Equity in the earnings of associated and subsidiaries(Note 18) (177,550) 231,912 (274,697) 147,305

Other operating income (Note 14d) 2,636,220 365,171 2,637,452 365,944Other operating expenses (Note 14e) (1,555,137) (482,977) (1,575,723) (501,441)

Operating profit 1,317,145 1,175,566 1,364,514 1,213,403

Non-operating income (Note 14f) 76,498 18,401 80,432 17,352Income 90,785 46,685 94,878 49,336Expenses (14,287) (28,284) (14,446) (31,984)

Income before taxes and profit sharing 1,393,643 1,193,967 1,444,946 1,230,755

Income tax and social contribution (Note 16) (494,075) (479,310) (545,378) (516,098) Income tax (362,303) (350,018) (399,806) (375,658) Social contribution (133,564) (130,758) (146,771) (139,914) Deferred tax credits 1,792 1,466 1,199 (526)

Profit sharing (Note 21) (67,024) (49,873) (67,024) (49,873)

Net income 832,544 664,784 832,544 664,784

Number of shares 743,275,506 743,275,506 743,275,506 743,275,506Treasury shares (11,257,678) (11,257,678) (11,257,678) (11,257,678)Total shares used in the calculation of net income per share 732,017,829 732,017,829 732,017,829 732,017,829Net income per share 1,14 0,91 1,14 0,91

(A free translation of the original in Portuguese)

Banco do Brasil S.A.Report of Independent Accountants on theLimited Review of Quarterly Information (ITR)September 30, 2004 and 2003

Banco do Brasil S.A.

Notes to the Quarterly Informationat September 30, 2004 and 2003All amounts in thousands of reais unless otherwise indicated

Notes to the Financial Statements

1 – The Bank and its Operations2 – Presentation of the Financial Statements3 – Significant Accounting Practices4 – Short-Term Interbank Deposits5 – Securities and Derivative Financial Instrume6 – Loan and Lease Operations7 - Provisions for Vacation Pay, Paid Leave and8 – Other Receivables9 – Other Assets10 – Deposits11 – Borrowings – Foreign Borrowings12 – Local Onlendings – Official Institutions13 – Funds Obtained in Foreign Capital Markets14 – Other liabilities15 – Analysis of Income Statement Items16 – Stockholders’ Equity17 – Income Tax and Social Contribution on Ne18 – Tax Credits19 – Equity in the Earnings (Loss) of Subsidiary20 – Related Party Transactions21 – Operating Limits – Basel Agreement22 – Assets and Liabilities in Foreign Currency23 – Retirement and Pension Plans – Post-Emp24 – Compensation Paid to Employees and Man25 – Assignment of Employees to External Orga26 – Commitments, Responsibilities and Contin27 – Statement of Value Added28 – Statement of Cash Flows29 – Other Information

1

nts

Litigation

t Income

and Associated Companies

loyment Benefitsagementnizationsgencies



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1 The Bank and its Operations

Banco do Brasil S,A, is a publicly listed company established under private law and subject to therequirements of Brazilian corporate legislation, Its corporate purpose is to carry out all the asset,liability and accessory banking operations, to provide bank services, intermediate and originatefinancial transactions in various forms and exercise any activity permitted to the institutions thatare part of the National Finance System, It is also the main financial agent of the BrazilianFederal Government and is therefore required to carry out the functions attributed to it by law,specifically those of art, 19 of Law 4595/1964,

2 Presentation of the Financial Statements

2,a) The financial statements of Banco do Brasil S,A, have been prepared in accordance withthe requirements of Law 6404/1976 and the rules and instructions issued by the BrazilianCentral Bank (BACEN) and the Brazilian Securities Commission (CVM),

The financial statements labeled “BB - Domestic and Overseas branches” include theBank’s operations in Brazil and its branches abroad, The consolidated amounts (“BB –Consolidated”) also include the financial subsidiaries, The balances of foreign branchesand subsidiaries included in the financial statements of “BB - Domestic and Overseasbranches” and “BB – Consolidated”, respectively, are as follows:



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Foreign branches andForeign branches subsidiaries

9,30,2004 9,30,2003 9,30,2004 9,30,2003Current assets 34,537,242 37,378,637 32,870,437 36,650,402Long-term receivables 9,862,219 7,111,843 10,148,507 7,555,205Permanent assets 192,051 194,389 216,829 213,266Total assets 44,591,512 44,684,869 43,235,773 44,418,873

Current liabilities 29,603,228 31,841,254 26,798,853 29,963,084Long-term liabilities 12,126,616 9,675,847 11,975,397 9,560,857Deferred income 3,456 4,668 3,613 5,151Stockholders’ equity 2,858,212 3,163,100 4,457,910 4,889,781Total liabilities and stockholders’ equity 44,591,512 44,684,869 43,235,773 44,418,873

Net income for the Quarter 23,951 9,420 48,133 43,013

2,b) The consolidated financial statements (BB - Consolidated) comprise the domestic andforeign branches and the foreign subsidiaries: Banco do Brasil - A,G, Vienna - Austria, BB -Leasing Company Ltd,, Brazilian American Merchant Bank – BAMB and the domesticsubsidiaries: BB - Administração de Ativos - Distribuidora de Títulos e Valores MobiliáriosS,A,, BB - Banco de Investimento S,A, and BB - Leasing S,A, - Arrendamento Mercantil,Brasil Aconselhamento Financeiro S,A, and BB - Banco Popular do Brasil S,A,

The asset and liability and the income and expense accounts recording transactions betweenthe foreign branches and subsidiaries and Banco do Brasil S,A, were eliminated onconsolidation, The translation into Brazilian reais of the financial statements prepared in aforeign currency is carried out using current exchange rates, in conformity with CVM Decision28/1986,

BB - Corretora de Seguros e Administradora de Bens S,A,, BB - Administradora de Cartões deCrédito S,A,, BBTUR Viagens e Turismo Ltda,, COBRA Tecnologia S,A,, Ativos S,A, and BB -Administradora de Consórcios S,A, were not included in the consolidation, in accordance withCVM Instruction 247/1996, as they do not materially affect the consolidated financial statements,The investments in these companies were recorded on the equity method of accounting and theinformation required by article 20 of CVM Instruction 247/1996 and CVM Deliberation 26/1986 ispresented in Notes 19 and 20, respectively,



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3 Significant Accounting Practices

3,a) Net income is determined on the accrual basis of accounting,

3,b) The assets and liabilities in foreign currencies and those subject to indexation are adjusted inaccordance with the exchange rates or official indices as of the balance sheet date and arepresented at realizable values, The assets and liabilities with floating financial charges arerecorded at present value, calculated pro rata based on the variations in the contractual indices,Those with fixed financial charges are recorded at future value, adjusted to reflect unearnedincome or unexpired expenses,

3,c) The allowance for loan losses is recorded based on the parameters of CMN Resolution2682/1999, for domestic branches and subsidiaries, as well as those abroad, taking intoconsideration the risks of the transactions based on consistent and verifiable criteria, supported byinternal and external information, and covering all aspects established in the resolution,

3,d) Securities:

The securities purchased for the Bank’s portfolio are recorded at the actual amount paid,including brokerage charges and fees, and are classified based on the intention of management,in three different categories:

3,d,1) Trading securities: these are securities purchased to be actively and frequently traded,They are adjusted to market value on a monthly basis and increases and decreases in valueare recorded in income and expense accounts for the period;

3,d,2) Securities available for sale: these are securities which, although not actively andfrequently traded, can be traded at any time, They are adjusted to market value on a monthlybasis and increases and decreases in value are recorded, net of tax effects, in a separatestockholders’ equity account;

3,d,3) Securities held to maturity: these are securities that the Bank intends and has thefinancial capacity to hold to maturity, The financial capacity is supported by a cash flowprojection that does not consider the possibility of sale of these securities, They are notadjusted to market value,



5

The mark-to-market methodology used for securities was established following consistent andverifiable criteria, which consider the average price of trading on the day of calculation or, ifnot available, pricing models that estimate the probable net realizable value,

Income accrued on the securities, irrespective of the category in which they are classified, isappropriated on a pro rata basis on the accrual basis of accounting up to the date of maturityor of final sale, on an exponential or linear method, based on the contractual remunerationand purchase price, and recorded directly in income for the period,

Losses with securities classified as available for sale and held to maturity, if judged not to betemporary, are recorded directly in expense for the period and a new cost basis for the assetis determined,

Upon sale, the difference between the sale amount and the cost of purchase plus accruedincome is considered as a result of the transaction and is recorded on the date of thetransaction as a gain or loss on securities,

3,e) Derivative Financial Instruments:

Derivative financial instruments are recorded at market value at each monthly trial balance andbalance sheet date, Increases or decreases in value are recorded in income or expenseaccounts of the respective financial instruments,

Derivative financial instruments used to offset, in whole or in part, the risks arising fromexposure to variations in financial asset or liability market values are considered hedgeinstruments and are classified according to their nature:

3,e,1) Market Risk Hedge – increases or decreases in value of the financial instrumentsclassified in this category, as well as of the item hedged, are recorded in income and expenseaccounts for the period;

3,e,2) Cash Flow Hedge – the effective amount of the increases or decreases in value of thefinancial instruments classified in this category is recorded, net of tax effects, in a separatestockholders’ equity account, The effective amount is that in which the variation of the itemhedged, directly related to the corresponding risk, is offset by the variation in the financialinstrument used for hedge, considering the accumulated effect of the transaction, Othervariations in these instruments are recorded directly in income or expense accounts for theperiod,



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The mark-to-market methodology used for derivative financial instruments was establishedfollowing consistent and verifiable criteria, which consider the average price of trading on thedate of calculation or, if not available, pricing models that estimate the probable net realizablevalue, according to the characteristics of the derivative,

3,f) Permanent assets

Investments are stated at cost and, when material, are recorded on the equity method ofaccounting, Property and equipment is stated at cost less depreciation calculated on the straight-line method at the following annual rates: buildings and improvements - 4%; vehicles, installationsand equipment - 20%; others - 10%;

Organization and expansion expenses recorded in deferred charges relate to:

3,f,1) Leasehold improvements in properties owned by third parties for the installation offacilities, amortized at rates based on the rental terms;

3,f,2) Cost of purchase and development of systems, amortized at the annual rate of 20%;

3,g) Vacations, paid leave and thirteenth month salaries are accrued monthly, in accordancewith the period of acquisition of the right;

3,h) Current benefits for existing employees are recognized on the accrual basis as theservices are provided, Post-employment benefits, comprising supplementary retirementbenefits, medical assistance and other benefits for which the Bank is responsible, werecalculated at December 31, 2003 in accordance with criteria established by CVM Deliberation371/2000, considering a 6,9% annual interest rate, and are being allocated monthly inaccordance with this calculation, as shown in Note 23, The retirement benefit liability relatingto the assumption of the obligation to employees admitted before April 14, 1967 was providedon the basis of an actuarial calculation considering the 6% annual interest rate established inthe contract between PREVI – Caixa de Previdência dos Funcionários do Banco do Brasiland the Bank,



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3,i) Corporate income tax is calculated at the basic rate of 15% plus a surcharge of 10% ontaxable income above a specific limit, and the social contribution on net income is calculatedat the basic rate of 9% on taxable income (Note 17,a), Income tax and social contribution onnet income tax credits are recorded in accordance with the criteria mentioned in Note 18 andare supported by a study of future realization prepared by management,

4 Short-term Interbank Deposits

Current and long-termBB - Domestic andForeign Branches BB – Consolidated

9,30,2004 9,30,2003 9,30,2004 9,30,2003Repurchase agreements 6,213,457 7,706,968 6,159,598 7,644,039 Sales pending settlement – own operations 985,535 1,013 989,862 1,013 Sales pending settlement – financed operations 5,227,922 7,705,955 5,169,736 7,643,026Interbank deposits 18,993,857 22,776,656 12,166,932 15,612,906Foreign currency deposits 911,353 6,979,447 232,803 7 Total 26,118,667 37,463,071 18,559,333 23,256,952



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5 Securities and Derivative Financial Instruments

Securities are classified in three categories: trading securities, securities available for sale andsecurities held to maturity, and derivative financial instruments in derivates for trading andderivatives for hedging purposes, Trading securities are adjusted to market value and theadjustments recorded as income or expense for the period while similar adjustments forsecurities available for sale are recorded in a separate stockholders’ equity account, Securitiesheld to maturity are stated at cost plus income accrued in the period,

The derivative financial instruments for trading, used at the request of clients or for own account,do not comply with the hedging criteria and are recorded at market value and the adjustmentsrecorded as income or expense, Derivatives for hedging purposes are used to protect exposuresto risk or to modify the characteristics of financial assets and liabilities, They are directly relatedto a specific transaction and are also adjusted to market value with contra-entry to income orexpense when a market risk hedge and to a separate stockholders’ equity account when a cashflow hedge,

The parameters for the calculation of market values of marketable securities and derivativefinancial instruments are:

- the average of the representative trading price on the day of the calculation and the dailyadjustment of future market transactions reported by ANDIMA, BM&F, BOVESPA and theBrazilian Central Bank; or

- the net probable realizable value obtained through the use of curves of future interest rates,foreign exchange rates, price and currency indices, all consistent with prices in effect during thesix-month period,



9

5,a) Securities

The cost plus accrued income and the market value of securities at September 30, 2004 are as follows:

BB - Domestic and Foreign Branches9,30,2004 9,30,2003

Maturity in days Market Value Total TotalWith nomaturity

0-30 31-180 181-360 Over 360 Cost MarketValue

Unrealizedgain (loss)

Cost Market Value Unrealized gain(loss)

I – Trading securities 13,264 22,975 3,259,369 6,531,394 2,716,470 12,571,585 12,543,472 -- 5,289,653 5,311,037 --

Domestic 13,264 22,975 3,259,369 6,531,394 2,716,470 12,571,585 12,543,472 -- 5,289,653 5,311,037 --

Financial Treasury Bills -- 12,827 2,805,141 4,866,392 1,660,492 9,347,853 9,344,852 -- 3,890,118 3,891,290 --

Federal Treasury Bills -- 10,148 454,228 1,665,002 901,979 3,051,505 3,031,357 -- 954,381 958,404 --

Federal Treasury Notes -- -- -- -- 153,999 158,676 153,999 -- 385,999 402,221 --

Shares in listed companies 13,264 -- -- -- -- 13,551 13,264 -- 59,155 59,122 --

II – Securities available for sale 27,221 437,317 985,438 144,507 28,959,820 30,456,418 30,554,303 91,314 41,774,448 41,866,425 91,977

Domestic 17,489 437,317 685,009 1,566 27,804,916 28,800,721 28,946,297 139,005 40,672,569 40,758,786 86,217

Financial Treasury Bills -- -- -- -- 17,987,377 18,065,872 17,987,377 (78,494) 28,028,438 27,821,444 (206,994)

Brazilian Central Bank Notes -- 156,039 -- -- 209,364 353,713 365,403 5,201 742,809 777,823 35,014

Federal Treasury Notes -- 277,647 680,423 -- 4,771,463 5,570,245 5,729,533 159,205 6,391,378 6,593,697 202,319

Federal Government Securities –Other -- -- -- -- 4,773,035 4,721,168 4,773,035 51,867 5,457,991 5,519,958 61,967

Debentures -- -- -- -- 48,519 47,452 48,519 1,067 2,409 2,429 20

Agricultural Debt Securities -- 3,631 4,586 1,566 15,158 27,527 24,941 (2,587) 34,800 30,584 (4,216)



10

9,30,2004 9,30,2003





Shares in Investment Funds 5,834 -- -- -- -- 5,834 5,834 -- 5,834 5,834 --

Shares in Social Development Funds 1,678 -- -- -- -- 1,545 1,678 134 1,545 1,045 (500)

Shares in listed companies 9,977 -- -- -- -- 7,365 9,977 2,612 7,365 5,972 (1,393)

Foreign 9,732 -- 300,429 142,941 1,154,904 1,655,697 1,608,006 (47,691) 1,101,879 1,107,639 5,760

EUROBONDS -- -- -- -- 82,707 82,620 82,707 87 565,415 567,198 1,783

Brazilian Foreign Debt Securities -- -- -- -- 1,071,256 1,120,885 1,071,256 (49,629) 392,218 396,793 4,575

Foreign Debt Securities – Other Countries -- -- 11 142,941 941 145,020 143,893 (1,127) 5,085 4,278 (807)

Shares in Equity Funds 9,731 -- -- -- -- 8,889 9,731 842 9,030 9,030 --

Shares in listed companies 1 -- -- -- -- -- 1 1 -- -- --

Other -- -- 300,418 -- -- 298,283 300,418 2,135 130,131 130,340 209

III – Securities held to maturity -- 319,167 1,525,929 1,289,400 22,085,065 25,941,765 25,219,561 -- 25,106,348 23,834,127 --

Domestic -- 317,668 1,506,946 1,289,400 20,787,747 24,793,043 23,901,761 -- 23,684,627 22,268,256 --

Debentures -- -- -- -- 44,585 47,817 44,585 -- 46,020 42,814 --

Financial Treasury Bills -- -- 1,085,182 1,084,227 16,871,079 19,439,431 19,040,488 -- 18,509,692 17,796,348 --

Federal Treasury Notes -- -- -- -- 1,706,086 2,184,443 1,706,086 -- 2,019,359 1,398,834 --

Federal Government Securities – Other -- 278,052 -- -- 2,165,997 2,472,931 2,444,049 -- 3,109,556 3,030,260 --

Commodities -- 39,616 421,764 205,173 -- 648,421 666,553 -- -- -- --

Foreign -- 1,499 18,983 -- 1,297,318 1,148,722 1,317,800 -- 1,421,721 1,565,871 --

EUROBONDS -- -- -- -- -- -- -- -- 17,062 17,062 --



11

9,30,2004 9,30,2003





Brazilian Foreign Debt Securities -- -- -- -- 1,294,474 1,125,397 1,294,474 -- 1,150,806 1,294,955 --

Certificates of Deposit -- 34 18,869 -- -- 18,903 18,903 -- 206,883 206,883 --

Foreign Debt Securities – Other Countries -- 1,426 -- -- 1,023 2,449 2,449 -- 1,264 1,264 --

Other -- 39 114 -- 1,821 1,973 1,974 -- 45,706 45,707 --

Total 40,485 779,459 5,770,736 7,965,301 53,761,355 68,969,768 68,317,336 91,314 72,170,449 71,011,589 91,977



12


Market Value Total Total

Maturity in daysWith nomaturity




Total by Portfolio 40,485 779,459 5,770,736 7,965,301 53,761,355 68,969,768 68,317,336 91,314 72,170,449 71,011,589 91,977a) Own Portfolio 40,485 779,459 4,263,196 3,750,912 19,115,836 28,165,942 27,949,888 149,591 20,056,983 19,645,400 176,730b) Subject to Repurchase Agreements -- -- 1,507,540 3,672,484 31,701,145 37,291,159 36,881,169 (58,271) 39,677,344 39,086,224 48,593c) Deposits with the Brazilian Central Bank -- -- -- 541,905 2,488,054 3,050,721 3,029,959 -- 11,901,275 11,759,259 (133,251)d) Pledged in Guarantee -- -- -- -- 456,320 461,946 456,320 (6) 534,847 520,706 (95)


Maturity in years Market Value Total TotalWith nomaturity

Due in up to oneyear

Due from 1 to 5years


Due after 10years

Cost Market Value Cost Market value

Total by category 40,485 14,515,496 45,930,319 7,490,928 340,108 68,969,768 68,317,336 72,170,449 71,011,589

I - Trading securities 13,264 9,813,738 2,716,470 -- -- 12,571,585 12,543,472 5,289,653 5,311,037

II - Securities available for sale 27,221 1,567,262 28,483,808 135,904 340,108 30,456,418 30,554,303 41,774,448 41,866,425

III – Securities held to maturity -- 3,134,496 14,730,041 7,355,024 -- 25,941,765 25,219,561 25,106,348 23,834,127



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The portfolio after marking-to-market is as follows:

9,30,2004 9,30,2003% of the total

portfolio% of the total

portfolioTotal by category 69,039,540 100% 72,283,810 100%I - Trading securities 12,543,472 18% 5,311,037 7%II - Securities available for sale 30,554,303 44% 41,866,425 58%III – Securities held to maturity 25,941,765 38% 25,106,348 35%



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BB - Consolidated9,30,2004 9,30,2003


0-30 31-180 181-360 over 360 Cost MarketValue



I – Trading securities 13,264 24,258 3,334,734 6,601,604 2,716,470 12,718,527 12,690,330 -- 5,371,503 5,393,025 -- Domestic 13,264 22,975 3,331,834 6,531,394 2,716,470 12,644,037 12,615,937 -- 5,289,653 5,311,037 -- Financial Treasury Bills -- 12,827 2,877,606 4,866,392 1,660,492 9,420,305 9,417,317 -- 3,890,118 3,891,290 -- Federal Treasury Bills -- 10,148 454,228 1,665,002 901,979 3,051,505 3,031,357 -- 954,381 958,404 -- Federal Treasury Notes -- -- -- -- 153,999 158,676 153,999 -- 385,999 402,221 -- Shares in listed companies 13,264 -- -- -- -- 13,551 13,264 -- 59,155 59,122 -- Foreign -- 1,283 2,900 70,210 -- 74,490 74,393 -- 81,850 81,988 -- EUROBONDS -- 927 53 50,426 -- 51,670 51,406 -- 58,338 58,293 -- Brazilian Foreign Debt Securities -- 356 -- 19,767 -- 19,956 20,123 -- 20,400 20,582 -- Foreign Debt Securities – Other Countries -- -- 2,847 -- -- 2,847 2,847 -- 3,069 3,070 -- Other -- -- -- 17 -- 17 17 -- 43 43 --II – Securities available for sale 643,311 535,998 1,307,064 315,112 29,195,355 31,915,003 31,996,840 75,265 43,159,116 43,157,558 (1,558) Domestic 594,874 528,632 1,002,781 165,852 27,928,009 30,087,954 30,220,148 125,622 41,812,404 41,850,855 38,451 Financial Treasury Bills -- -- -- -- 17,987,377 18,065,872 17,987,377 (78,494) 28,028,438 27,821,444 (206,994) Brazilian Central Bank Notes -- 156,040 -- -- 209,364 353,713 365,404 5,201 742,809 777,823 35,014 Federal Treasury Notes -- 277,647 680,423 -- 4,771,463 5,570,245 5,729,533 159,205 6,391,378 6,593,697 202,319 Federal Government Securities –Other -- -- -- -- 4,773,035 4,721,168 4,773,035 51,867 5,472,847 5,534,445 61,598 Debentures -- -- -- -- 171,513 170,670 171,513 843 205,381 206,151 770 Promissory Notes -- -- -- -- -- -- -- -- 4,372 4,402 30 Agricultural Debt Securities -- 3,631 4,586 1,566 15,158 27,527 24,941 (2,587) 34,800 30,584 (4,216) Shares in investment Funds – Other 5,834 -- -- -- -- 5,834 5,834 -- 8,780 8,780 -- Shares in Social Development Funds 1,678 -- -- -- -- 10,321 1,678 (8,642) 10,321 1,045 (9,276) Shares in listed companies 426,411 -- -- -- -- 403,724 426,411 22,687 498,629 488,675 (9,954)



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9,30,2004 9,30,2003Maturity in days Market Value Total Total

With nomaturity




Shares in Equity Funds 160,951 -- -- -- -- 189,099 160,951 (28,148) 189,074 154,367 (34,707) Commodities – Agricultural Products

Certificates-- 91,314 317,772 164,286 99 568,973 573,471 4,,498 224,767 229,442 4,675

Securities in Special Status Company -- -- -- -- -- 808 -- (808) 808 -- (808) Foreign 48,437 7,366 304,283 149,260 1,267,346 1,827,049 1,776,692 (50,357) 1,346,712 1,306,703 (40,009) EUROBONDS -- -- -- -- 82,707 82,620 82,707 87 565,415 567,198 1,783 Brazilian Foreign Debt Securities -- -- 3,854 -- 1,177,380 1,220,285 1,181,234 (39,051) 528,998 525,466 (3,532) Foreign Debt Securities – Other Countries -- -- 11 142,941 941 145,020 143,893 (1,127) 5,085 4,278 (807) Shares in Equity Funds 46,715 -- -- -- -- 42,628 46,715 4,087 47,355 47,355 -- Shares in listed companies 1,722 -- -- -- -- 1,285 1,722 437 6,510 1,031 (5,479) Other -- 7,366 300,418 6,319 6,318 335,211 320,421 (14,790) 193,349 161,375 (31,974)III – Securities held to maturity -- 319,174 1,525,929 1,289,400 22,087,874 25,944,572 25,222,377 -- 25,108,950 23,836,741 -- Domestic -- 317,668 1,506,946 1,289,400 20,787,747 24,793,042 23,901,761 -- 23,684,627 22,268,256 -- Debentures -- -- -- -- 44,585 47,817 44,585 -- 46,020 42,814 -- Financial Treasury Bills -- -- 1,085,182 1,084,227 16,871,079 19,439,430 19,040,488 -- 18,509,692 17,796,348 -- Federal Treasury Notes -- -- -- -- 1,706,086 2,184,443 1,706,086 -- 2,019,359 1,398,834 -- Federal Government Securities - Other -- 278,052 -- -- 2,165,997 2,472,931 2,444,049 -- 3,109,556 3,030,260 -- Commodities -- 39,616 421,764 205,173 -- 648,421 666,553 -- -- -- -- Foreign -- 1,506 18,983 -- 1,300,127 1,151,530 1,320,616 -- 1,424,323 1,568,485 -- EUROBONDS -- -- -- -- -- -- -- -- 17,062 17,062 -- Brazilian Foreign Debt Securities -- -- -- -- 1,297,080 1,128,004 1,297,080 -- 1,153,215 1,297,364 -- Certificates of Deposit -- 34 18,869 -- -- 18,903 18,903 -- 206,883 206,883 -- Foreign Debt Securities – Other Countries -- 1,427 -- -- 1,091 2,514 2,518 -- 1,326 1,332 -- Other -- 45 114 -- 1,956 2,109 2,115 -- 45,837 45,844 --Total 656,575 879,430 6,167,726 8,206,116 53,999,699 70,578,102 69,909,546 75,265 73,639,569 72,387,324 (1,558)



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9,30,2004 9,30,2003Maturity in days Market Value Total Total

With nomaturity






17

BB - Consolidated9,30,2004 9,30,2003

Market Value Total Total

Maturity in daysWith nomaturity




Total by Portfolio 656,575 879,430 6,167,727 8,206,116 53,999,699 70,578,102 69,909,547 75,265 73,639,569 72,387,324 (1,558)a) Own Portfolio 656,575 879,430 4,656,333 3,991,727 19,241,915 29,668,661 29,425,980 123,038 21,402,070 20,901,466 87,559b) Subject to Repurchase Agreements -- -- 1,511,394 3,672,484 31,813,410 37,396,774 36,997,288 (47,767) 39,799,670 39,202,093 42,135c) Deposits with the Brazilian Central Bank -- -- -- 541,905 2,488,054 3,050,721 3,029,959 -- 11,901,275 11,759,259 (133,250)d) Pledged in Guarantee -- -- -- -- 456,320 461,946 456,320 (6) 536,554 524,506 1,998

BB - Consolidated9,30,2004 9,30,2003

Maturity in years Market Value Total TotalWith nomaturity

Due in up to oneyear



Due after 10years

Cost Market value Cost Market Value

Total by category 656,575 15,253,273 46,062,434 7,491,034 446,231 70,578,102 69,909,547 73,639,569 72,387,324

I - Trading securities 13,264 9,960,596 2,716,470 -- -- 12,718,527 12,690,330 5,371,503 5,393,025

II - Securities available for sale 643,311 2,158,174 28,613,220 135,904 446,231 31,915,003 31,996,840 43,159,116 43,157,558

III – Securities held to maturity -- 3,134,503 14,732,744 7,355,130 -- 25,944,572 25,222,377 25,108,950 23,836,741



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The portfolio after marking-to-market is as follows:

9,30,2004 9,30,2003% of totalportfolio

% of totalportfolio

Total by Portfolio 70,631,742 100% 73,659,533 100%I - Trading securities 12,690,330 18% 5,393,025 7%II - Securities available for sale 31,996,840 45% 43,157,558 59%III – Securities held to maturity 25,944,572 37% 25,108,950 34%

5,b) Derivative Financial Instruments

The Bank uses Derivative Financial Instruments to manage, in a consolidated manner, itspositions and to meet clients’ needs, classifying own positions into Hedging (market risk) andTrading, both with limits of approval, This information is made available to the areas of pricing,trading, controls and calculation of results, which are segregated within the Bank,

The models used to manage risks with derivatives are reviewed periodically and the decisionsmade follow the best risk/return relationship, estimating possible losses based on the analysis ofmacroeconomic scenarios,

The Bank uses appropriate tools and systems to manage the derivatives, Trading in newderivatives, standardized or not, is subject to a previous risk analysis,

The hedge strategy of the equity positions is in line with the macroeconomic analyses and isapproved by management,

Risk analysis of the subsidiaries is individual and its control consolidated,

The Bank uses statistical methods and simulations to measure the risks of its positions, includingderivatives, using models of values at risk sensibility and stress analysis,



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Risks

The main risks inherent to derivative financial instruments resulting from the Bank’s and itssubsidiaries’ business are credit, market and operating risks, all similar to those related to othertypes of financial instruments,

Credit risk is the exposure to loss in the event of default by a counterparty to a transaction, Thecredit exposure in futures contracts is minimized due to daily settlement in cash, Swap contractsregistered at CETIP and at BM&F are subject to credit risk if the counterparty is unable orunwilling to comply with his contractual liabilities, Total credit exposure in swaps at September30, 2004 is R$ 1,111,812 (R$ 873,780 at September 30, 2003), The credit risk associated withoptions contracts is limited to the premiums paid on purchased options,

Market risk is the exposure created by a potential fluctuation in interest rates, exchange rates,quotations of goods, prices quoted on stock markets and other values, and is a function of thetype of product, the volume of operations, the term and conditions of the contract and theunderlying volatility,

Operating risk is the probability of financial losses resulting from failures or inadequacy of people,processes and systems, or factors such as catastrophes or criminal activities,

The tables below show the notional amounts restated to market value and the respective netexposures in the balance sheet at September 30, 2004 for the derivative financial instrumentsclassified in conformity with their classification as Trading or Hedge instruments,



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5,b,1) Trading DerivativesBB - Domestic and Foreign Branches

By Index 9,30,2004 9,30,2003Counterparty Notional Cost Market Notional Cost Market

(*) Amount Value Amount ValueExchange TradingFutures contractsPurchase commitments 2,889,312 (124,530) (123,524) 1,420,180 (6,746) (6,746) DI E -- 3,335 3,335 1,056,705 410 410 U,S, dollar E 358,867 (18,830) (18,830) 58,040 (3,468) (3,468) Index E -- 569 569 -- 149 149 Foreign exchange coupon E 1,111,237 (109,560) (109,560) 305,046 (3,832) (3,832) Commodities E -- (44) (44) 389 (5) (5) Libor FI 1,419,208 -- 1,006 -- -- --

Sales commitments 3,738,687 (35,893) (35,503) 400,215 (3,860) (3,860) DI E 2,344,591 (6,372) (6,372) 33,531 (2,093) (2,093) U,S, dollar E -- 797 797 -- (59) (59) Index E 9,120 471 471 4,840 (462) (462) Foreign exchange coupon E 321,678 22,948 22,948 361,844 (1,314) (1,314) Commodities E -- 9 9 -- 68 68 SCC E 494,596 (53,746) (53,746) -- -- -- Libor FI 568,702 -- 390 -- -- --

Fixed term options 95,356 (3,340) (4,075)Purchase options E -- -- -- 37,120 2,013 1,535

Sales options E -- -- -- 58,236 (5,353) (5,610)

Fixed term currency optionsAsset position E 228,250 14,067 9,020 -- -- --

Liability position E 215,485 (28,724) (25,099) -- -- --

Options marketPurchase options 570 134 137 -- -- -- Shares E 570 134 137 -- -- --

Sales options (231) (275) (269) -- -- -- Shares E (231) (275) (269) -- -- --

Over-the-counter tradingSwap contracts Asset position 5,716,308 518,566 488,529 13,082,508 355,249 369,446 DI C 2,857,674 379,427 349,473 2,182,501 183,321 193,760

FI 356,908 55,305 51,832 393,279 22,845 20,087 Foreign currency C -- -- -- 9,402 225 299



21

FI 1,546,560 78,841 81,405 8,804,630 137,411 130,355 Prefixed C 791,581 4,822 5,630 455,293 8,943 21,617 Referential Rate (TR) C 26,411 140 158 38,728 536 1,360 Other -- 137,174 31 31 1,198,675 1,968 1,968

Liability position 11,613,004 (347,843) (349,162) 13,048,823 (496,878) (499,492) DI C 8,462,277 (135,137) (136,047) 6,177,686 (207,754) (207,316)

FI 428,525 (74,030) (67,323) 1,368,681 (132,606) (129,284) Foreign currency C 143,500 967 (868) 112,488 (2,412) (3,681)

FI 1,065,898 (67,338) (72,464) 2,179,566 (64,107) (67,912) Prefixed C 4,073 (92) (107) 34,424 (1,084) (1,560) SELIC rate C 630,392 (41,851) (41,851) 2,050,934 (52,929) (52,929) Referential Rate (TR) C 764,027 (30,304) (30,444) 841,448 (34,739) (35,562) General Price Index – Market

(IGP-M)FI -- -- -- 283,596 (1,248) (1,248)

Other -- 114,312 (58) (58) -- -- --

(*) Counterparty: (E) Exchange, (FI) Financial Institution, (C) Customer,

BB – Domestic and Foreign Branches9,30,2004 9,30,2003

By Maturity Notional Cost Market Notional Cost MarketAmount Value Amount Value

Futures contractsPurchase commitments 2,889,312 -- 1,006 1,420,180 -- --Up to 30 days 607,219 -- -- 650,163 -- --31 to 60 days 144,472 -- -- 436,722 -- --61 to 90 days 207,480 -- 286 389 -- --91 to 180 days 419,317 -- 224 194,944 -- --181 to 360 days 547,671 -- 233 18,375 -- --1 to 5 years 963,153 -- 263 119,587 -- --

Sales commitments 3,738,687 -- 390 400,215 -- --Up to 30 days 838,626 -- -- 33,914 -- --31 to 60 days 197,501 -- -- -- -- --61 to 90 days 381,234 -- 109 -- -- --91 to 180 days 548,244 -- 119 -- -- --181 to 360 days 1,168,400 -- 157 224,472 -- --1 to 5 years 604,682 -- 5 141,829 -- --



22

BB – Domestic and Foreign Branches9,30,2004 9,30,2003

By Maturity Notional Cost Market Notional Cost MarketAmount Value amount Value

Fixed term currency optionsAsset position 228,250 14,067 9,020 -- -- --Up to 30 days 138,739 5,809 5,042 -- -- --31 to 60 days 43,704 2,185 1,795 -- -- --61 to 90 days 3,014 230 163 -- -- --91 to 180 days 4,381 475 347 -- -- --181 to 360 days 38,412 5,369 1,673 -- -- --1 to 5 years -- -- --

Liability position 215,485 (28,724) (25,099) -- -- --Up to 30 days 76,061 (7,842) (7,520) -- -- --31 to 60 days 38,188 (5,915) (5,405) -- -- --61 to 90 days 30,490 (4,684) (4,164) -- -- --91 to 180 days 70,445 (10,220) (7,971) -- -- --181 to 360 days 216 (44) (29) -- -- --1 to 5 years 84 (20) (11) -- -- --

Options market Purchase options Shares 570 134 137 37,120 2,013 1,535 Up to 30 days 570 134 137 11,720 809 241 31 to 60 days -- -- -- 6,200 395 311 91 to 180 days -- -- -- 19,200 809 983

Sales options Shares (231) (275) (269) 58,236 (5,353) (5,610) Up to 30 days (231) (275) (269) 32,836 (3,120) (2,583) 31 to 60 days -- -- -- 6,200 (318) (804) 91 to 180 days -- -- -- 19,200 (1,915) (2,223)

Swap contractsAsset 5,716,308 518,566 488,529 13,082,508 355,249 369,446 Up to 30 days 718,215 64,981 65,098 7,288,933 76,218 80,840 31 to 60 days 718,568 31,340 29,193 698,667 36,237 35,569 61 to 90 days 903,026 74,718 70,065 751,487 38,548 42,646 91 to 180 days 814,709 90,036 82,360 1,283,487 94,020 99,955 181 to 360 days 1,774,357 189,944 175,992 1,684,756 61,096 66,153 1 to 5 years 787,433 67,547 65,821 1,375,091 49,114 44,236 5 to 10 years -- -- -- 87 16 46

Liability 11,613,004 (347,843) (349,162) 13,048,823 (496,878) (499,492)



23

Up to 30 days 719,606 (46,611) (46,709) 2,336,708 (78,721) (85,091) 31 to 60 days 317,836 (22,631) (21,908) 1,001,463 (49,478) (48,735) 61 to 90 days 151,751 (12,730) (12,645) 660,689 (32,884) (33,057) 91 to 180 days 944,115 (58,620) (58,057) 929,701 (111,624) (105,322) 181 to 360 days 6,297,119 (139,379) (137,104) 4,922,807 (100,634) (102,431) 1 to 5 years 3,182,577 (67,872) (72,739) 3,197,455 (123,537) (124,855)



24

BB - ConsolidatedBy Index 9,30,2004 9,30,2003

Counterparty Notional Cost Market Notional Cost Market (*) Amount Value Amount Value

Exchange TradingFutures contractsPurchase commitments 2,889,312 (124,530) (123,524) 1,420,180 (6,746) (6,746) DI E -- 3,335 3,335 1,056,705 410 410 U,S, dollar E 358,867 (18,830) (18,830) 58,040 (3,468) (3,468) Index E -- 569 569 -- 149 149 Foreign exchange coupon E 1,111,237 (109,560) (109,560) 305,046 (3,832) (3,832) Commodities -- -- (44) (44) 389 (5) (5) Libor FI 1,419,208 -- 1,006 -- -- --

Sales commitments 3,738,687 (35,893) (35,503) 400,215 (3,860) (3,860) DI E 2,344,591 (6,372) (6,372) 33,531 (2,093) (2,093) U,S, dollar E -- 797 797 -- (59) (59) Index E 9,120 471 471 4,840 (462) (462) Foreign exchange coupon E 321,678 22,948 22,948 361,844 (1,314) (1,314) Commodities E -- 9 9 -- 68 68 SCC E 494,596 (53,746) (53,746) -- -- -- Libor FI 568,702 -- 390 -- -- --

Fixed term currency optionsAsset position 228,250 14,067 9,020 -- -- --

Liability position 215,485 (28,724) (25,099) -- -- --

Options market Purchase options 3,730 344 409 86,990 3,909 2,549 Shares E 570 134 137 37,120 2,013 1,535 Financial assets and goods C 3,160 210 272 49,870 1,896 1,014

Sales options 2,929 (485) (541) 108,106 (7,249) (6,624) Shares E (231) (275) (269) 58,236 (5,353) (5,610) Financial assets and goods FI 3,160 (210) (272) 49,870 (1,896) (1,014)

Over-the-counter trading Swap contracts Asset position 4,988,592 501,973 464,823 12,797,233 349,070 353,973 DI C 2,857,674 379,427 349,473 2,182,501 183,321 193,759

FI 337,317 48,756 43,736 373,689 18,459 12,582 Foreign currency FI 1,393,643 70,089 67,993 8,692,277 137,853 131,447 Prefixed C 236,373 3,530 3,433 311,362 6,933 12,857 Referential Rate (TR) C 26,411 140 157 38,729 536 1,360 Other -- 137,174 31 31 1,198,675 1,968 1,968



25

BB - ConsolidatedBy Index 9,30,2004 9,30,2003

Counterparty Notional Cost Market Notional Cost Market (*) Amount Value amount Value

Liability position 11,346,962 (342,506) (343,597) 12,969,362 (505,967) (508,571) DI C 8,340,912 (135,057) (135,497) 6,177,686 (207,754) (207,316)

FI 428,525 (74,030) (67,323) 1,368,681 (132,606) (129,284) Foreign currency C 143,500 967 (868) 112,488 (2,412) (3,681)

FI 921,221 (62,081) (67,449) 2,097,880 (73,196) (76,969) Prefixed C 4,073 (92) (107) 36,649 (1,084) (1,583) SELIC rate C 630,392 (41,851) (41,851) 2,050,934 (52,928) (52,928) Referential rate (TR) C 764,027 (30,304) (30,444) 841,448 (34,739) (35,562) Other -- 114,312 (58) (58) 283,596 (1,248) (1,248)


BB – Consolidated9,30,2004 9,30,2003


Futures contractsPurchase commitments 2,889,312 -- 1,006 1,420,180 -- --Up to 30 days 607,219 -- -- 650,163 -- --31 to 60 days 144,472 -- -- 436,722 -- --61 to 90 days 207,480 -- 286 389 -- --91 to 180 days 419,317 -- 224 194,944 -- --181 to 360 days 547,671 -- 233 18,375 -- --1 to 5 years 963,153 -- 263 119,587 -- --

Sales commitments 3,738,687 -- 390 400,215 -- --Up to 30 days 838,626 -- -- 33,914 -- --31 to 60 days 197,501 -- -- -- -- --61 to 90 days 381,234 -- 109 -- -- --91 to 180 days 548,244 -- 119 -- -- --181 to 360 days 1,168,400 -- 157 224,472 -- --1 to 5 years 604,682 -- 5 141,829 -- --



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BB – Consolidated9,30,2004 9,30,2003


Fixed term currency optionsAsset position 228,250 14,067 9,020 -- -- --Up to 30 days 138,739 5,809 5,04231 to 60 days 43,704 2,185 1,79561 to 90 days 3,014 230 16391 to 180 days 4,381 475 347 -- -- --181 to 360 days 38,412 5,369 1,673 -- -- --

Liability position 215,485 (28,724) (25,099) -- -- --Up to 30 days 76,061 (7,842) (7,520)31 to 60 days 38,188 (5,915) (5,405)61 to 90 days 30,490 (4,684) (4,164)91 to 180 days 70,445 (10,220) (7,971) -- -- --181 to 360 days 216 (44) (29) -- -- --1 to 5 years 84 (20) (11) -- -- --

Options market Purchase options Shares 3,730 344 409 86,990 3,909 2,549 Up to 30 days 1,231 169 165 14,506 971 418 31 to 60 days 88 2 5 911 97 3 61 to 90 days 285 11 4 11,148 557 318 91 to 180 days 86 5 11 33,585 1,244 1,022 181 to 360 days 2,040 157 224 26,840 1,040 788

Sales options Shares 2,929 (485) (541) 108,106 (7,249) (6,624) Up to 30 days 430 (310) (297) 35,622 (3,282) (2,760) 31 to 60 days 88 (2) (5) 911 (97) (3) 61 to 90 days 285 (11) (4) 11,148 (480) (811) 91 to 180 days 86 (5) (11) 33,585 (2,350) (2,262) 181 to 360 days 2,040 (157) (224) 26,840 (1,040) (788)

Swap contractsAsset 4,988,592 501,973 464,823 12,797,233 349,070 353,973 Up to 30 days 586,219 65,564 65,674 7,288,865 87,064 91,688



27

31 to 60 days 624,099 31,230 29,064 698,603 36,233 35,565 61 to 90 days 851,050 74,626 69,941 742,060 38,321 42,345 91 to 180 days 705,678 89,752 81,890 1,181,596 92,635 94,591 181 to 360 days 1,606,287 189,272 174,654 1,595,185 57,382 60,078 1 to 5 years 615,259 51,529 43,600 1,290,837 37,419 29,660 5 to 10 years -- -- -- 87 16 46

Liability 11,346,962 (342,506) (343,597) 12,969,362 (505,967) (508,571) Up to 30 days 550,970 (41,348) (41,670) 2,336,708 (89,578) (95,948) 31 to 60 days 317,809 (22,631) (21,906) 1,001,463 (49,478) (48,735) 61 to 90 days 151,719 (12,729) (12,644) 657,074 (32,468) (32,673) 91 to 180 days 878,842 (58,554) (57,758) 929,633 (111,621) (105,320) 181 to 360 days 6,265,224 (139,379) (136,881) 4,917,107 (100,210) (101,942) 1 to 5 years 3,182,398 (67,865) (72,738) 3,127,377 (122,612) (123,953)



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5,b,2) Hedge DerivativesBB - Domestic and Foreign Branches

By Index 9,30,2004 9,30,2003Counterparty Notional Cost Market Notional Cost Market

(*) Amount Value amount ValueExchange TradingFutures contractsPurchase commitments -- -- -- 71,659 (2,089) (2,089) Foreign exchange coupon E -- -- -- 71,659 (2,089) (2,089)

Sales commitments -- -- -- 691,278 3,200 3,200 Foreign exchange coupon E -- -- -- 691,278 3,200 3,200

Over-the-counter tradingSwap contracts Asset position 210,550 15,581 14,039 378,102 46,670 39,009 DI C 134,068 7,891 7,410 209,067 28,306 27,108

FI 58,803 6,779 5,745 160,287 17,568 10,965 Prefixed C 17,679 911 884 8,748 796 936

Liability position 14,301 -- 1 96,436 (18,547) (14,530) Foreign currency C 14,301 -- 1 60,000 (11,120) (7,599) DI FI -- -- -- 36,436 (7,427) (6,931)




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BB - Domestic and Foreign BranchesBy Maturity 9,30,2004 9,30,2003

Notional Cost Market Notional Cost MarketAmount Value amount Value

Futures contractsPurchase commitments -- -- -- 71,658 -- -- 91 to 180 days -- -- -- 43,110 -- -- 181 to 360 days -- -- -- 28,548 -- --

Sales commitments -- -- -- 691,278 -- -- 181 to 360 days -- -- -- 381,882 -- -- 1 to 5 years -- -- -- 309,396 -- --

Swap contractsAsset 210,550 15,551 14,039 378,102 46,670 39,009 Up to 30 days 77,753 1,278 1,031 17,351 2,307 2,513 31 to 60 days 1,195 157 159 10,147 924 942 61 to 90 days 12,535 1,560 1,522 3,702 931 848 91 to 180 days 43,170 3,728 3,620 53,505 13,487 12,547 181 to 360 days 17,094 2,049 1,962 293,397 29,021 22,159 1 to 5 years 58,803 6,779 5,745 -- -- --

Liability 14,301 -- (1) 96,436 (18,547) (14,530) Up to 30 days 14,301 -- (1) 36,436 (7,427) (6,931) 181 to 360 days -- -- -- 60,000 (11,120) (7,599)



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BB – ConsolidatedBy Index 9,30,2004 9,30,2003

Counterparty Notional Cost Market Notional Cost Market (*) Amount Value Amount Value

Exchange TradingFutures contractsPurchase commitments -- -- -- 71,658 (2,089) (2,089) Foreign exchange coupon E -- -- -- 71,658 (2,089) (2,089)

Sales commitments -- -- -- 691,278 3,200 3,200 Foreign exchange coupon E -- -- -- 691,278 3,200 3,200

Over-the-counter tradingSwap contracts Asset position 210,550 15,581 14,039 378,102 46,670 39,009 DI C 134,068 7,891 7,410 209,067 28,306 27,108

FI 58,803 6,779 5,745 160,287 17,568 10,965 Prefixed C 17,679 911 884 8,748 796 936

Liability position 14,301 -- 1 96,436 (18,547) (14,530) Foreign currency C 14,301 -- 1 60,000 (11,120) (7,599) DI FI -- -- -- 36,436 (7,427) (6,931)




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BB - ConsolidatedBy Maturity 9,30,2004 9,30,2003

Notional Cost Market Notional Cost Marketamount Value amount Value

Futures contractsPurchase commitments -- -- -- 71,658 -- -- 91 to 180 days -- -- -- 41,110 -- -- 181 to 360 days -- -- -- 28,548 -- --

Sales commitments -- -- -- 691,278 -- -- 181 to 360 days -- -- -- 381,882 -- -- 1 to 5 years -- -- -- 309,396 -- --

Swap contractsAsset 210,550 15,551 14,039 378,102 46,670 39,009 Up to 30 days 77,753 1,278 1,031 17,351 2,307 2,513 31 to 60 days 1,195 157 159 10,147 924 942 61 to 90 days 12,535 1,560 1,522 3,702 931 848 91 to 180 days 43,170 3,728 3,620 53,505 13,487 12,547 181 to 360 days 17,094 2,049 1,962 293,397 29,021 22,159 1 to 5 years 58,803 6,779 5,745 -- -- --

Liability 14,301 -- (1) 96,436 (18,547) (14,530) Up to 30 days -- -- -- 36,436 (7,427) (6,931) 91 to 180 days 14,301 -- (1) -- -- -- 1 to 5 years -- -- -- 60,000 (11,120) (7,599)

The margin given as guarantee for transactions with derivative financial instruments is comprisedof Financial Treasury Bills (LFT) amounting to R$ 456,320 THOUSAND (R$ 520,706 atSeptember 30, 2003),



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Banco do Brasil uses derivative financial instruments to minimize the risks arising from commercialand financial operations, as well as providing for the need of its customers,

The portfolio of derivative financial instruments for hedging market risks and the items hedged areas follows:

I – Hedged item:Market Value

9,30,2004 9,30,2003AssetForeign exchange securities 158,580 945,442 Federal Treasury Notes– D 34,075 651,119 Brazilian Central Bank Notes – E 124,505 294,323

II – Derivatives for Market Risk Hedge:Reference Value

9,30,2004 9,30,2003LiabilityDerivative financial instruments 272,502 1,112,318 DI Contracts -- 619,620 Swap contracts 272,502 492,698

The effectiveness calculated for the hedge portfolio at September 30, 2004 was 100,41%(118,90% at September 30, 2003), This percentage complies with that established by BACENCircular Letter 3082/02, which determines that hedge effectiveness should range from 80% to125%,



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5,c) Adjustment to market value – securities and derivatives:

The mark-to-market accounting requirement established by Circulars Letters 3068 and 3082 andlater regulations resulted in the following income and expense being recognized in the thirdquarter:

BB – Consolidated3rt quarter 2004 3rt quarter 2003

Securities 11,619 33,544Derivatives (65,394) (30,104)Total (53,775) 3,440

The changes of the specific account in stockholder’s equity is shown in Note 16e,

6 Loan Operations

6,a) Details of the loan portfolio and loan operations classified as Other receivables:

BB - Domestic and ForeignBranches BB – Consolidated

9,30,2004 9,30,2003 9,30,2004 9,30,2003Loan operations 68,878,242 59,683,944 69,954,490 60,417,728 Loans and bills discounted 34,506,744 28,756,211 35,099,581 29,738,993 Financing 13,346,615 9,711,146 14,063,391 9,806,158 Rural and Agribusiness financing 25,909,347 24,622,964 25,909,347 24,622,964 Financing of securities 5,470 8,491 -- -- Allowance for loan losses (4,889,934) (3,414,868) (5,117,829) (3,750,387)Other receivables with loan

characteristics 8,407,238 7,837,376 8,789,840 8,129,721 Receivables from guarantees honored 38,161 75,400 41,286 75,400 Advances on foreign exchange

contracts7,168,569 6,731,405 7,168,569 6,731,405

Sundry 1,429,423 1,307,679 1,813,524 1,601,586 Provision for other losses (228,915) (277,108) (233,539) (278,670)Lease operations 6,522 -- 6,186 9,082 Lease operations 6,553 -- 28,662 24,109 Allowance for lease losses (31) -- (22,476) (15,027)Total 77,292,002 67,521,320 78,750,516 68,556,531



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6,b) Details of the loan portfolio by sector, including operations with loancharacteristics classified as Other receivables:

BB - Domestic and Foreign Branches BB – Consolidated9,30,2004 % 9,30,2003 % 9,30,2004 % 9,30,2003 %

PUBLIC SECTOR 4,576,246 5,5 4,524,236 6,4 4,588,549 5,5 4,703,310 6,5Domestic 474,474 0,5 295,902 0,4 474,474 0,5 295,902 0,4 Government 335,394 0,4 186,163 0,2 335,394 0,4 186,163 0,2 Direct Administration 159,061 0,2 163,266 0,2 159,061 0,2 163,266 0,2 Indirect Administration 176,333 0,2 22,897 -- 176,333 0,2 22,897 -- Business entities 139,080 0,1 109,739 0,2 139,080 0,1 109,739 0,2 Industry 35,036 -- 20 -- 35,036 -- 20 -- Financial services 68,046 0,1 66,764 0,1 68,046 0,1 66,764 0,1 Other services 35,998 -- 42,955 0,1 35,998 -- 42,955 0,1Foreign 4,101,772 5,0 4,228,334 5,9 4,114,075 5,0 4,407,408 6,1 Business entities 4,101,772 5,0 4,228,334 5,9 4,114,075 5,0 4,407,408 6,1 Other banks -- -- 26,574 -- -- -- 35,392 0,1 Public services 4,101,772 5,0 4,201,760 5,9 4,114,075 5,0 4,372,016 6,0PRIVATE SECTOR 77,858,142 94,5 66,689,060 93,7 79,559,317 94,5 67,897,305 93,5Domestic 73,336,924 88,9 63,146,973 88,6 73,657,670 87,5 63,352,760 87,2 Rural 24,836,642 30,1 21,499,416 30,2 24,836,642 29,5 21,499,416 29,6 Industry 17,046,522 20,7 16,713,865 23,5 17,163,746 20,4 16,800,299 23,1 Commerce 8,715,098 10,6 6,434,247 9,0 8,819,502 10,5 6,481,444 8,9 Financial services 292 -- 316 -- 292 -- 316 -- Other services 8,115,619 9,8 7,078,503 9,9 8,182,953 9,7 7,096,957 9,8 Individuals 14,622,751 17,7 11,420,626 16,0 14,654,535 17,4 11,474,328 15,8Foreign 4,521,218 5,6 3,542,087 5,1 5,901,647 7,0 4,544,545 6,3 BB Group 58,398 0,1 79,391 0,1 65,494 0,1 49,815 0,1 Commerce 147,069 0,2 221,117 0,3 180,983 0,2 270,315 0,4 Industry 3,601,617 4,4 2,720,041 3,9 4,667,580 5,6 3,194,342 4,4 Other companies 556 -- -- -- 28,192 -- -- -- Other banks 467,983 0,6 395,346 0,6 517,009 0,6 406,963 0,6 Individuals 19,434 -- 21,602 -- 19,480 -- 23,067 -- Other services 226,161 0,3 104,590 0,2 422,909 0,5 600,043 0,8Total 82,434,388 100,0 71,213,296 100,0 84,147,866 100,0 72,600,615 100,0



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6,c) Details of the loan portfolio by risk level and maturity, including operations with loancharacteristics classified as Other receivables:

BB - Domestic and Foreign BranchesLoans falling due

Total Share Total ShareRisk level 0-15 16-30 31-60 61-90 91-180 181-360 Over 360 Portfolio % Portfolio %

9,30,2004 9,30,2003AA 1,206,960 625,898 1,529,796 1,207,380 1,497,778 1,025,301 9,245,557 16,338,670 21% 15,334,066 23%A 1,185,769 1,055,971 1,,911,813 1,802,369 2,900,366 4,819,197 8,104,120 21,779,605 29% 30,698,159 45%B 1,708,785 892,857 1,467,464 1,091,385 3,159,279 7,210,573 10,686,842 26,217,185 34% 14,742,730 22%C 671,838 277,878 580,218 513,172 1,224,846 1,945,849 4,870,434 10,084,235 13% 4,397,275 7%D 86,891 40,078 236,675 81,379 158,619 220,705 1,197,020 2,021,367 3% 1,494,082 1%E 30,250 3,539 5,842 5,786 60,683 34,654 214,218 354,972 -- 309,931 --F 4,812 1,743 2,978 3,059 5,696 12,112 72,620 103,020 -- 99,685 --G 4,014 1,360 2,507 2,250 5,511 7,678 77,253 100,573 -- 78,852 --H 37,331 8,250 10,283 18,401 22,430 58,422 610,781 765,898 1% 498,249 1%

Total 4,936,650 2,907,574 5,747,576 4,725,181 9,035,208 15,334,491 35,078,845 77,765,525 100% 67,653,029 100%

BB - Domestic and Foreign BranchesLoans overdue


9,30,2004 9,30,2003B 85,348 626,316 23,314 392 238 56 155 735,819 16% 492,534 14%C 17,155 341,198 385,983 11,319 6,451 20 41 762,167 16% 396,681 11%D 3,814 89,015 134,928 271,356 22,931 542 119 522,705 11% 403,665 11%E 845 31,175 35,012 64,673 204,031 8,104 -- 343,840 7% 265,160 7%F 371 16,423 14,785 26,988 224,531 9,527 1 292,626 6% 240,932 7%G 286 11,356 10,325 12,161 214,566 11,371 -- 260,065 6% 240,808 7%H 1,040 69,088 61,429 52,619 273,877 1,139,772 153,816 1,751,641 38% 1,520,487 43%

Total 108,859 1,184,571 665,776 439,508 946,625 1,169,392 154,132 4,668,863 100% 3,560,267 100%



36

BB – ConsolidatedLoans falling due


9,30,2004 9,30,2003AA 1,229,326 627,717 1,538,019 1,219,056 1,521,768 1,033,386 9,402,186 16,571,458 21% 15,672,954 23%A 1,197,304 1,063,185 1,911,931 1,819,863 2,912,489 4,843,294 8,698,691 22,446,757 28% 30,878,873 45%B 1,711,697 893,259 1,475,248 1,096,479 3,162,960 7,270,541 10,957,865 26,568,049 33% 15,131,944 22%C 674,675 277,888 580,330 520,070 1,234,216 1,950,350 4,918,475 10,156,004 13% 4,490,754 7%D 87,102 40,084 236,724 81,426 174,604 221,729 1,322,711 2,164,380 3% 1,548,992 2%E 30,343 3,539 5,908 5,809 60,732 34,811 229,647 370,789 -- 311,071 --F 4,812 1,743 2,987 3,059 5,716 12,142 72,701 103,160 -- 99,973 --G 4,080 1,360 2,507 2,250 5,511 7,698 87,437 110,843 -- 101,371 --H 41,349 8,253 10,285 18,409 25,581 58,472 791,316 953,665 1% 768,921 1%

Total 4,980,688 2,917,028 5,763,939 4,766,421 9,103,577 15,432,423 36,481,029 79,445,105 100% 68,004,853 100%

BB - ConsolidatedLoans overdue


9,30,2004 9,30,2003B 91,741 628,020 23,662 392 238 56 155 744,264 16% 496,838 14%C 18,234 341,883 388,714 11,321 6,476 20 41 766,689 16% 399,296 11%D 4,797 89,527 135,601 272,552 22,941 542 124 526,084 11% 406,513 11%E 1,026 31,305 35,441 64,866 204,661 8,104 -- 345,403 7% 266,353 7%F 520 16,435 14,930 27,093

225 309 9,527 1 293,815 6% 242,102 7%

G 358 11,454 10,484 12,218215 437

11,386 -- 261,337 6% 241,710 7%H 1,377 69,404 61,826 52,952 274,874 1,143,106 161,630 1,765,169 38% 1,542,950 43%

Total 118,053 1,188,028 670,658 441,394 949,936 1,172,741 161,951 4,702,761 100% 3,595,762 100%



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6,d) Details of the allowance for loan losses by risk level, including operations with loancharacteristics classified as Other receivables:

BB – Domestic and Foreign BranchesRisk level % Balance Allowance Balance Allowance

9,30,2004 9,30,2004 9,30,2003 9,30,2003AA 0 16,338,670 -- 15,334,066 --A 0,5 21,779,605 108,898 30,698,159 153,491B 1 26,953,004 269,530 15,235,264 152,353C 3 10,846,402 325,392 4,793,955 143,819D 10 2,544,072 254,407 1,897,747 189,775E 30 698,812 209,644 575,091 172,526F 50 395,646 197,822 340,617 170,308G 70 360,638 252,446 319,660 223,762H 100 2,517,539 2,517,539 2,018,737 2,018,736

Subtotal 82,434,388 4,135,678 71,213,296 3,224,770Additional Allowance Foreign * -- 46,620 -- 58,984Additional Allowance Domestic ** -- 936,581 -- 408,222

Total 82,434,388 5,118,880 71,213,296 3,691,976

BB – ConsolidatedRisk level % Balance Allowance Balance Allowance

9,30,2004 9,30,2004 9,30,2003 9,30,2003AA 0 16,571,458 -- 15,672,954 --A 0,5 22,446,757 112,234 30,878,873 154,395B 1 27,312,313 273,123 15,628,782 156,288C 3 10,922,693 327,681 4,890,050 146,700D 10 2,690,464 269,046 1,955,505 195,550

E 30 716,192 214,858 577,424 173,227F 50 396,975 198,487 342,075 171,038G 70 372,180 260,526 343,081 240,157H 100 2,718,834 2,718,834 2,311,871 2,311,871

Subtotal 84,147,866 4,374,789 72,600,615 3,549,226Additional Allowance Foreign* -- 62,410 -- 86,636Additional Allowance Domestic ** -- 936,645 -- 408,222

Total 84,147,866 5,373,844 72,600,615 4,044,084



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* Additional allowance required by local legislation,** Includes R$ 497,640 at September 30, 2004 (R$ 329,992 at September 30, 2003) of adjustmentto present value of the Bank’s PESA risk operations, in compliance with the recommendation ofthe Brazilian Central Bank; R$ 147,647 thousand relating to interest on PROAGRO operationspending reimbursement by the Brazilian Central Bank; R$ 146,035 thousand relating to thereclassification of risk levels of renegotiated operations; and R$ 101,000 thousand relating to theestimated loss of the small business segment, due to the adoption of the new model of riskanalysis to conform with the new Basel Agreement,

6,e) Changes in the allowance for loan and lease losses and for operations with loancharacteristics classified as Other receivables:

BB – Domestic and ForeignBranches

BB – Consolidated

3rt quarter2004

3rt quarter2003

3rt quarter2004

3rt quarter2003

Opening balance 4,831,544 3,476,037 5,101,508 3,822,896Additional allowances 930,359 746,650 935,380 747,316Exchange variation on allowances – foreign (2,014) 1,456 (21,565) 7,582Loans written off (641,009) (532,167) (641,479) (533,710)Closing balance 5,118,880 3,691,976 5,373,844 4,044,084

6,f) Changes in the provision for loss on Other receivables without loan characteristics:

BB – Consolidated3rt quarter

20043rt quarter

2003Opening balance * 1,382,627 1,011,662Additional provisions 135,254 30,012Exchange variation on allowances – foreign 180 343Loans written off (3,032) --Reclassification ** -- 38,924Provision used -- (42,820)Closing balance 1,515,029 1,038,121

* Includes the provision of R$ 444,285 in March 2003 relating to the restatement of judicialdeposits made in respect of litigation recorded in the “Provision for contingent tax liabilities”,



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** Reclassification of provisions for loss on transactions with sundry debtors which are notencompassed by the rules of CMN Resolution 2682/99,

6,g) Supplementary information:

BB - Domestic and ForeignBranches

BB – Consolidated

9,30,2004 9,30,2003 9,30,2004 9,30,2003Renegotiated loans 920,527 849,182 920,527 849,310Recoveries of loans written off as losses* 276,942 286,422 277,936 287,320

* Includes R$ 13,178 (R$ 10,894 at September 30, 2003) of recoveries of assignments of loans toindividuals and corporate entities which are recorded in the statement at income in the accountIncome from loan operations, as permitted by CMN Resolution 2836/2001,

7 Provision for Vacation Pay, Paid Leave and Litigation:

The changes in the provisions are as follows:

Bank7,a) Vacation pay (Other liabilities – Sundry): 9,30,2004 9,30,2003Opening balance 580,076 486,136Provision/(reversal) 150,924 177,300Provision used (110,062) (97,926)Closing balance 620,938 565,510

7,b) Paid leave (Other liabilities – Sundry): 9,30,2004 9,30,2003Opening balance 571,585 525,463Provision/(reversal) 67,274 109,463Provision used (48,538) (47,823)Closing balance 590,321 587,103



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7,c) Labor claims (Other liabilities – Sundry): 9,30,2004 9,30,2003Opening balance 1,891,235 1,429,004Provision/(reversal) 55,437 44,486Closing balance 1,946,672 1,473,490

7,d ) Tax claims (Other liabilities –Taxes and social security charges):9,30,2004 9,30,2003

Opening balance 124,272 137,969Provision/(reversal) 1,887 (924)Closing balance 126,159 137,045

7,e) Other legal claims (Other liabilities –Sundry):

9,30,2004 9,30,2003

Opening balance 658,591 710,412Provision/(reversal) 27,198 71,506Closing balance 685,789 781,918



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8 Other Receivables

8,a) Foreign Exchange Portfolio

Current and long-term

BB - Domestic andForeign Branches

BB - Consolidated

9,30,2004 9,30,2003 9,30,2004 9,30,2003Forward foreign exchange purchases pending settlement 8,902,193 8,283,414 8,902,193 8,195,684Bills of exchange and time drafts in foreign currency 117,859 117,777 117,859 117,777Receivables from sales of foreign exchange 5,775,828 8,468,465 5,775,828 8,380,735Advances received (3,425,564) (6,897,002) (3,425,564) (6,897,002)Foreign currency receivables 18,554 39,604 18,554 39,604Income receivable on advances granted 66,535 134,031 66,535 134,031Income receivable on financed imports 4 18 4 18Total 11,455,409 10,146,307 11,455,409 9,970,847

8,b) Specific Credits

These are credits from the Federal Treasury of R$ 529,910 for the extension of terms of ruralfinancing (R$ 480,010 at September, 2003), as determined by Law 9138/1995,

8,c) Sundry

Current and long-termBB – Domestic and Foreign

Branches BB – Consolidated9,30,2004 9,30,2003 9,30,2004 9,30,2003

Salary and other advances 101,149 192,120 101,399 192,137Accounts receivable – Federal Treasury 497,928 402,458 497,928 402,458Accounts receivable – Credit card operations 931,371 737,550 931,371 737,550Accounts receivable – Other 290,272 291,402 303,408 305,484Tax credits (Note 18) 8,390,076 9,758,962 8,505,199 9,897,078Sundry debtors – foreign 41,238 39,691 41,894 40,030Sundry debtors – domestic * 2,895,953 575,145 2,900,493 576,005Receivables from guarantee deposits** 8,114,889 5,697,419 8,127,137 5,697,612Income tax and social contribution on net income to offset 240,285 34,741 305,565 89,013Receivables from sale of assets and rights 575,505 560,749 593,283 580,935Other 271,827 245,792 210,977 210,769



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Total 22,350,493 18,536,029 22,518,654 18,729,071



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* At September 30, 2004, includes the net amount of R$ 1,449,509 of the PREVI actuarial liabilityrelating to the 1997 contract, less the adjustment account of this liability (Note 23,e),

** Includes R$ 6,427,163 relating to filing appeals of tax claims, R$ 1,259,476 relating to filingappeals of labor claims and R$ 411,491 relating to other appeals, in the multiple Bank,

9 Other Assets

Current and long-termBB – Domestic and Foreign Branches BB – Consolidated

9,30,2004 9,30,2003 9,30,2004 9,30,2003Non-operating assets 357,755 369,278 365,358 370,427Supplies materials 25,877 32,785 25,877 32,784Total 383,632 402,063 391,235 403,211



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10 Deposits

Current and long-termBB - Domestic and Foreign

Branches BB – Consolidated9,30,2004 9,30,2003 9,30,2004 9,30,2003

Demand deposits 30,139,123 20,376,712 30,190,776 20,497,643 Related companies 1,554,477 514,291 1,554,477 514,291 Individuals 9,762,842 7,538,065 9,767,014 7,539,498 Corporate entities 12,168,477 7,133,121 12,221,722 7,254,835 Financial institutions 190,551 138,375 185,026 136,206 Government 1,499,454 1,308,827 1,499,454 1,308,827 Federal Treasury 268,401 132,591 268,401 132,591 Domiciled abroad 28,991 17,441 28,707 17,394 Restricted 3,795,514 2,834,358 3,795,559 2,834,358 In foreign currency 848,058 720,161 848,058 720,161 Other 22,358 39,482 22,358 39,482Savings deposits 29,914,859 26,577,861 29,914,859 26,577,861 Individuals 28,444,912 25,450,737 28,444,912 25,450,737 Corporate entities 1,163,764 891,215 1,163,764 891,215 Related companies 303,683 232,835 303,683 232,835 Financial institutions 2,500 3,074 2,500 3,074Interbank deposits 10,082,104 16,716,353 5,529,548 6,437,663Time deposits 49,315,483 49,461,165 49,443,635 49,558,014 Time deposits 24,194,760 28,285,565 24,322,911 28,382,414 Time deposits in foreign currency 974 768 974 768 Time deposits with automatic renewal 190,101 195,324 190,102 195,324 Remunerated judicial deposits 16,054,942 15,284,638 16,054,942 15,284,638 Special deposits relating to Funds and Programs (Note 14,c) 8,874,706 5,694,870 8,874,706 5,694,870Total 119,451,569 113,132,091 115,078,818 103,071,181



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11 Borrowings – Foreign Borrowings

BB - Domestic and Foreign BranchesNo Up to From 91 to From 1 From 3 to From 5 to Total Total

Maturity 90 days 360 days to 3 years 5 years 15 years 9,30,2004 9,30,2003 Exports -- 44,623 91,579 -- -- -- 136,202 368,925 Imports -- 74,683 176,670 77,086 31,149 3,208 362,796 388,533 Foreign exchange 10,250,197 -- -- -- -- -- 10,250,197 2,593,968 Specific credit lines -- 35,728 -- 204,707 162,276 3,301,507 3,704,218 3,737,915 Other -- 2,256,747 1,528,462 83,988 -- -- 3,869,197 4,351,193Total 10,250,197 2,411,781 1,796,711 365,781 193,425 3,304,715 18,322,610 11,440,534

BB – ConsolidatedNo Up to From 91 to From 1 From 3 to From 5 to Total Total

Maturity 90 days 360 days to 3 years 5 years 15 years 9,30,2004 9,30,2003 Exports -- 14,394 -- -- -- -- 14,394 113,991 Imports -- 53,244 102,239 77,086 31,149 3,208 266,926 320,597 Foreign exchange 10,250,197 -- -- -- -- -- 10,250,197 2,593,968 Specific credit lines -- 35,728 -- 204,707 162,276 3,301,507 3,704,218 3,737,915 Other -- 887,299 850,666 42,871 -- -- 1,780,836 742,678Total 10,250,197 990,665 952,905 324,664 193,425 3,304,715 16,016,571 7,509,149

Banco do Brasil S,A, policy in respect of its foreign borrowings is to seek the lowest possible costfor the maturity, type of instrument, and its balance sheet profile, The Bank uses the Libor and USTreasury rates, respectively, as references for its financial and capital transactions, constantlymonitoring rates in the various markets,



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12 Local Onlendings – Official Institutions

Programs Financial charges BB - Domestic and ForeignBranches

BB – Consolidated

9,30,2004 9,30,2003 9,30,2004 9,30,2003Federal Treasury 2,058,936 1,222,379 2,058,936 1,222,379Rural Credit 2,055,564 1,137,705 2,055,564 1,137,705 Farming and livestock breeding TR or 9% p,a, 37,242 36,446 37,242 36,446 PGPM-EGF TR or 5,75% p,a, to 9% p,a, -- 1,500 -- 1,500 PNDR (C) TJLP + 9,81% p,a, 2,827 3,444 2,827 3,444 PROFIR TJLP + 5% p,a, 5,647 9,787 5,647 9,787 Cocoa TJLP + 0,6% p,a, or 6,35% p,a, 35,020 26,811 35,020 26,811 PRONAF 1% p,a, or 4% p,a, 1,680,072 732,931 1,680,072 732,931 RECOOP 5,75% to 7,25% p,a, 294,756 326,785 294,756 326,785Other funds and programs 3,372 84,674 3,372 84,674 PNDA Foreign exchange variation +

7,31% p,a, or TJLP + 9,81% p,a, 3,372 3,274 3,372 3,274 Alcohol storage TMS -- 81,400 -- 81,400BNDES * 3,483,681 2,820,739 3,483,681 2,820,739FINAME ** 2,653,712 1,737,924 2,661,714 1,746,645Other Institutions -- 573,805 520,022 573,920 520,891 PROHEMP -- 1,264 1,414 1,264 1,414 FBB – Fundec II -- 14,433 19,068 14,433 19,068 FUNCAFÉ TR or TMS (Available) or

TJLP + 3% p,a, or 4% p,a,(Invested) 557,875 498,415 557,875 498,415

Other -- 233 1,125 348 1,994Total 8,770,134 6,301,064 8,778,251 6,310,654

* BNDES- Programs with fixed interest rates: interest paid to the BNDES varies from 3% p,a, to 9% p,a,- Programs with Long-Term Interest Rate (TJLP) or foreign exchange variation: interest paid to the

BNDES varies from 0,5% p,a, to 11% p,a,



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** FINAME- Programs with fixed interest rates: interest paid to BNDES/FINAME varies from 5,75% p,a, to 11%p,a,- Programs with TJLP or foreign exchange variation: interest paid to BNDES/FINAME varies from0,5% p,a, to 4,5% p,a,

13 Funds Obtained in Foreign Capital Markets

The current outstanding transactions in the foreign capital markets are listed below, in millions:

Transactions Coupon AmountDate offunding Maturity

“Global Medium-Term Notes” Program** 9,375% p,a, US$ 200 Jun/97 Jun/07Securitization of the Flow of Remittance of Funds –Dekasseguis* 7,875% p,a, US$ 300 Aug/01 Aug/06Securitization of the Flow of Electronic Remittances (MT - 100)* 7,890% p,a, US$ 450 Dec/01 Dec/08Securitization of the Flow of Electronic Remittances (MT - 100)* Libor 3m+0,60% p,a, US$ 300 Jul/02 Jun/09Securitization of the Flow of Electronic Remittances (MT - 100)* 7,890% p,a, US$ 40 Sep/02 Sep/09Securitization of the Flow of Electronic Remittances (MT - 100)* 7,26% p,a, US$ 120 Mar/03 Mar/10“Global Medium-Term Notes” Program** 6,375% p,a, US$ 75 Apr/03 Apr/05Securitization of Credit Card Receivables – Visanet* 5,911% p,a, US$ 178 Jul/03 Jun/11Securitization of Credit Card Receivables – Visanet* 4,777% p,a, US$ 45 Jul/03 Jun/11Securitization of the Flow of Electronic Remittances (MT - 100)* 6,55% p,a, US$ 250 Dec/03 Dec/13Subordinated Debt 8,5% p,a, US$ 300 Sep/04 Sep/14

Total issued per program:Foreign Currency Reais***

“Global Medium-Term Notes” Program – GMTN US$ 275 786Securitization of the Flow of Electronic Remittances (MT - 100) US$ 1,160 3,315Securitization of Credit Card Receivables – Visanet US$ 223 637Securitization of the Flow of Remittance of Funds – Dekasseguis US$ 300 857Subordinated Debt US$ 300 857Total 6,453

* Recorded under Other liabilities – Negotiation and intermediation of securities** Recorded under Funds from acceptance and issue of securities – foreign securities*** Converted at R$ 2,8578 per US$ 1,00



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14 Other Liabilities

14,a) Foreign Exchange PortfolioCurrent and long-term

BB - Domestic and ForeignBranches BB – Consolidated

9,30,2004 9,30,2003 9,30,2004 9,30,2003Forward foreign exchange sales pending settlement 5,612,177 8,435,790 5,612,177 8,198,553Advances in foreign currencies (151,464) (18,997) (151,464) (18,997)Import financing (11,136) (2,459) (11,136) (2,459)Foreign exchange purchase liabilities 9,189,864 8,532,574 9,189,864 8,444,844Advances on foreign exchange contracts (7,168,569) (6,616,180) (7,168,569) (6,616,180)Foreign currency payables 34,816 38,759 34,816 38,759Unearned income on advances granted 3,458 2,681 3,458 2,681Liabilities for sales – floating rates -- 73,211 -- 73,211Total 7,509,146 10,445,379 7,509,146 10,120,412

14,b) Financial and Development Funds

Current and long-termBB - Domestic and Foreign Branches and

BB - Consolidated9,30,2004 9,30,2003

PIS/PASEP 1,264,424 1,212,367Merchant Navy 14,614 7,999Land and Agrarian Reform - BB Banco da Terra 106,520 94,989Special Lending Program for Agrarian Reform – Procera 318,937 376,504Other 109,379 15,110Total 1,813,874 1,706,969



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14,c) Fund for Worker Assistance (FAT) and Fund to Guarantee the Increase in Employmentand Earnings (FUNPROGER):

FAT is a special accounting and financial fund, established by Law 7998/90, attached to the Ministryof Labor and Employment (MTE) and managed by the Executive Council of the Worker AssistanceFund (CODEFAT), CODEFAT is a collective, tripartite and equal level organization, composed ofrepresentatives of workers, employees and government, which acts as the manager of FAT,

The main sources of funding of FAT are contributions payable to the Social Integration Program (PIS)and to the Public Service Employees Savings Program (PASEP),

FAT’s objective is to fund the Unemployment Insurance Program (with specific responsibilities forpayment of Unemployment Insurance benefits, professional qualification and requalification, andorientation and intermediation of employment), the Salary Bonus, and finance programs foreconomic development as well as to promote employment,

The main actions to promote employment using FAT funds are centralized in the Programs for theIncrease in Earnings (PROGER), whose resources are allocated by special deposits, established byLaw 8352/91, in official federal financial institutions (including, among others, PROGER in the Urbanand Rural categories, and the National Program to Strengthen Family Farming - PRONAF),

The Bank acts as a partner of FAT in carrying out programs for the increase in employment andearnings, through special deposits to be invested in PROGER, Urban and Rural, and in PRONAF,offering credit lines to micro and small companies, cooperatives, workers in the informal economicsector, and rural workers,

Special deposits held by Banco do Brasil, while available, are remunerated on a pro rata basis by theTMS (Average SELIC Rate), When they are invested in financing to support PRONAF and PROGER,they are remunerated by the TJLP (Long-term Interest Rate) during the period in which the financing isin effect,

The remuneration of the funds held by the Bank are paid to FAT in the month subsequent to that ofdeposit, Remuneration of funds applied to finance final borrowers are paid as stipulated in each specificresolution,



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The Fund to Guarantee the Increase in Employment and Earning (FUNPROGER) is a specialaccounting fund, established on November 23, 1999 through Law 9872, changed by Law 10360/01,and regulated by CODEFAT Resolution 231/99, changed by CODEFAT Resolution 276/01, and ismanaged by the Bank with the supervision of CODEFAT/MTE, with a balance of R$ 184,397 atSeptember 30, 2004 (R$ 94,570 at September 30, 2003),

The objective of FUNPROGER is provide guarantees to entrepreneurs who do not have the necessaryguarantees of their own to contract PROGER Urbano financing, through the payment of a commission,

The net assets of FUNPROGER are accumulated through funds arising from the difference betweenthe average SELIC Rate and the Long-Term Interest Rate (TJLP) in respect of the remuneration of thespecial deposit balances available in the Fund for Worker Assistance (FAT), Other sources of fundsare the earnings from its operations and the income on its cash resources paid to Banco do Brasil, theFund manager,



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Program Resolution TMS TJLP Total Return of FAT fundsAvailable (1) Invested (2) Type (*) Initial date Final date

PROGER Rural and PRONAF 1,013,174 2,723,324 3,736,497Rural III 129/1996

133/1996 607,611 84,565 692,175 03 PAS 11/2004 11/2006Rural IV 140/1997 51,226 659,351 710,578 PU - 06/2005Rural V and Pronaf III 239/2000 65,411 17,427 82,838 05 PAS 10/2004 10/2008Rural VI 271/2001 22,869 40,251 63,120 04 PAS 05/2004 05/2007Rural VII 300/2002 6,606 108,799 115,405 07 PAS 07/2005 07/2011Rural VIII 366/2003 551 467,257 467,808 07 PAS 07/2006 07/2012Rural iX 398/2004 50,000 - 50,000 07 PAS 07/2013 07/2019Pronaf I 173/1998 56,864 243,133 299,997 PU - 09/2006Pronaf II 217/1999 55,927 215,974 271,902 07 PAS 07/2004 07/2010Pronaf IV 283/2002 27,905 215,869 243,774 06 PAS 07/2005 07/2010Pronaf V 303/2002 67,540 146,121 213,661 07 PAS 07/2005 07/2011Pronaf VI 367/2003 663 524,577 525,239 07 PAS 07/2006 07/2012

PROGER Urban 431,673 3,385,014 3,816,687Urbano V 228/1999 7,972 94,897 102,869 13 PSS 02/2002 02/2008Urbano VI 243/2000 9,448 96,051 105,499 12 PSS 06/2003 12/2008Urbano VII 260/2001 13,273 152,555 165,828 12 PSS 12/2003 06/2009Urbano VIII 280/2002 13,470 231,636 245,106 12 PSS 02/2005 08/2010Urbano IX 307/2002 12,599 165,152 177,750 12 PSS 06/2005 12/2010Urbano X 312/2003 7,448 108,607 116,055 12 PSS 09/2005 03/2011Urbano XI 322/2003 6,132 216,894 223,026 12 PSS 01/2006 07/2011Urbano XII 357/2003 1,388 322,027 323,415 12 PSS 05/2006 11/2011Urbano XIII 375/2003 494 305,725 306,219 12 PSS 10/2006 04/2012Urbano XIV 397/2004 100,000 - 100,000 12 PSS 04/2007 10/2012Popular company 1 – 1st

tranche294/2002 16,997 101,774 118,772 09 PSS 11/2004 11/2008

Popular company 1 – 2nd

tranche294/2002 14,531 99,303 113,834 09 PSS 04/2005 04/2009

Popular company 2 338/2003 46,616 162,403 209,019 09 PSS 10/2005 10/2009Small/medium size company 1 297/2002 50,678 514,887 565,565 07 PSS 01/2005 01/2008Small/medium size company 2 331/2003 52,085 796,665 848,750 09 PSS 11/2004 11/2008Turismo I 323/2003 34,168 16,440 50,608 16 PSS 02/2006 08/2013Turismo II 324/2003 44,372 1 44,373 09 PSS 08/2004 08/2008Other 183,979 703,029 887,009Electric appliances 360/2003 8,656 2,579 11,236 07 PSS 03/2004 03/2007Export i 347/2003 49,934 67 50,001 09 PSS 06/2005 06/2009Residence I 349/2003 18,152 195,078 213,231 09 PSS 11/2004 11/2008Residence II 378/2003 7,090 303,329 310,419 09 PSS 04/2005 04/2009Residence III 387/2004 100,147 201,977 302,123 09 PSS 07/2005 07/2009Total 1,628,826 6,811,367 8,440,193

(1) Funds remunerated by the TMS: Average SELIC Rate(2) Funds remunerated by the TJLP: Long-term Interest Rate



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(*) Type: PU (Single payment at the end of the period), PAS (Annual and successive installments) and PSS(Semiannual and successive installments)



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The FAT and FUNPROGER funds refer to the balance of the account “Special Deposits relating toFunds and Programs” (Note 10),14.d) Sundry

Current and long-termBB - Domestic and Foreign

Branches BB – Consolidated9.30.2004 9.30.2003 9.30.2004 9.30.2003

Provisions for payments* 4,850,097 5,593,936 4,858,523 5,595,524

Contracts of assumption of liabilities 1,242,542 1,519,132 645,623 653,657

Provisions for contingent liabilities (Note 7) 2,643,933 2,262,442 2,677,759 2,266,076

Sundry creditors – overseas 43,157 30,570 45,267 33,927

Sundry creditors – domestic 706,912 672,038 708,948 673,713

Credit card operations 859,217 716,820 859,217 716,820

Liabilities for official agreements 102,387 389,408 102,387 389,408

Accounts payable for payment services provided 428,404 273,705 428,404 273,705

Funds restricted to credit operations 108,007 70,098 997,558 899,999

Other 22,327 120,299 132,038 236,343

Total 11,006,983 11,648,448 11,455,724 11,739,172

* Includes R$ 2,884,910 relating to the sum of the "PREVI Actuarial Liability of the Informal Plan”(exclusive responsibility of the Bank) and the “CASSI Actuarial Liability" at September 30, 2004.(Note 23.e).

14.e) Subordinated Debt

As from June 30, 2001, as determined by CMN Vote No. 67 of June 28, 2001 and Bacen-DiretOfficial Letter 2001/1602 of June 29, 2001, Banco do Brasil has considered the funds from theCentral-Western Constitutional Fund (FCO) as subordinated debt and as Level II ReferenceEquity, due to the low repayment requirement and extended period held in the Bank.On September 13 2004, Banco do Brasil issued for the first time in the international marketsubordinated debt. The operation totals an amount of USS 300 million (R$ 850,921 thousand) fora 10 years term. The operation was made by Credit Suisse First Boston and BB Securities.At September 30, 2004, these payables amount to R$ 6,636,942 (at September 30, 2003, R$4,832,848).



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15 Analysis of Income Statement Items

15.a) Banking services fees

BB - Domestic and ForeignBranches

BB – Consolidated

3rd quarter 2004 3rd quarter 2003 3rd quarter 2004 3rd quarter 2003Investment fund management -- -- 269,829 213,841Collection services 157,935 129,542 158,246 129,988Services rendered to related companies 191,631 163,178 46,070 34,380Fund transfers 33,333 30,353 33,394 30,438Guarantees granted 38,478 17,439 38,490 17,439Check clearing services and other 138,301 118,254 138,301 118,254Review of requests for exclusion from CCF 17,198 15,483 17,198 15,483PASEP administration 18,745 20,834 18,745 20,834Loans contracted 150,301 132,190 150,301 132,190Deposit account fees 51,468 45,207 51,468 45,207Checking account fees 23,742 25,725 23,742 25,725Fees for issuing documents 27,523 25,454 27,523 25,454Fees for preparing customer record data 11,038 10,968 11,038 10,968Ouro plan 299,720 218,330 299,720 218,330Fees for official services 65,619 62,885 65,619 62,885International trade services 3,989 4,192 3,989 4,192Third party collection services 41,787 37,779 41,787 37,779Commissions for administration of public

sector debt 14,519 11,759 14,519 11,759Payments for third parties 32,869 28,153 32,869 28,153Annuities 64,899 52,512 64,899 52,512Credit cards – fees on cash withdraws and

purchases 2,029 2,043 2,029 2,043Credit cards – commissions of issuing

bank 56,420 40,306 56,420 40,306Other 133,756 129,970 150,452 134,195Total 1,575,300 1,322,556 1,716,648 1,412,355



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15.b) Personnel expenses

BB – Domestic and Foreign Branches BB - Consolidated3rd quarter 2004 3rd quarter 2003 3rd quarter 2004 3rd quarter 2003

Salaries (699,023) (678,849) (712,018) (687,616)Benefits (180,927) (162,493) (182,254) (163,173)Social charges (295,779) (274,742) (300,330) (277,792)Training (9,859) (10,128) (9,921) (10,174)Directors and board member fees (2,164) (1,048) (2,610) (1,142)Personnel provisions* (395,519) (416,598) (395,519) (416,598)Provisions for labor claims (76,079) (44,485) (76,079) (44,485)Labor claim losses (65,214) (80,234) (65,214) (80,234)Total (1,724,564) (1,668,577) (1,743,945) (1,681,214)

15.c) Other Administrative Expenses


Water, electricity and gas (45,715) (39,640) (45,745) (39,676)Rent (53,225) (50,171) (54,576) (50,880)Leasing costs (40,383) (66,714) (40,383) (66,714)Communications (181,556) (163,796) (182,890) (164,628)Maintenance and upkeep (42,832) (44,580) (43,436) (45,174)Materials (34,833) (35,250) (35,017) (35,364)Data processing (129,719) (124,978) (132,366) (127,220)Promotion and public relations (82,388) (47,597) (82,452) (47,654)Advertising and publicity (47,369) (54,409) (49,308) (54,411)Financial system services (74,437) (64,379) (75,022) (64,711)Third party services (99,041) (78,203) (100,225) (78,246)Security services (86,812) (83,684) (86,903) (83,732)Specialized technical services (25,203) (16,758) (27,109) (17,692)Transportation (85,800) (80,376) (86,123) (80,669)Domestic travel (25,378) (19,549) (26,064) (19,784)Amortization (26,137) (26,132) (28,372) (26,614)Depreciation (102,275) (94,928) (102,651) (95,141)Expenses with tax and civil lawsuits (79,243) (75,888) (79,243) (75,888)Other (64,292) (44,385) (66,145) (46,611)Total (1,326,638) (1,211,417) (1,344,030) (1,220,809)



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15.d) Other operating income


Recovery of charges and expenses 77,081 103,882 76,905 103,973

Income from special operations 26,429 27,160 26,429 27,160

Income from specific credits 13,773 16,048 13,773 16,048

Income from other credit operations 19 6,654 19 6,654

Income from payments of INSS benefits 13,852 15,584 13,852 15,584

Income from guarantee deposits 220,676 117,599 220,676 117,599Income from securities and credits

receivable from the Federal Treasury66,202 13,562 66,202 13,562

Dividends received 3,453 2,847 3,453 2,847Exchange adjustments of credit card

transactions4,773 7,122 4,773 7,122

Tax unduly paid 21,433 -- 21,433 --

Reversal of provisions 183,036 -- 183,036 --Exchange losses/Reclassification of

balances1,951,779 -- 1,951,779 --

Revenues from clearance services abroad 4,027 856 4,027 856

Other 44,687 53,857 46,095 54,539

Total 2,636,220 365,171 2,637,452 365,944



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15.e) Other operating expenses

BB – Domestic and Foreign Branches BB – Consolidated3rd quarter 2004 3rd quarter 2003 3rd quarter 2004 3rd quarter 2003

Discounts granted on renegotiations –credit operations (15,862) (18,194) (15,862) (18,194)

Updating of the pension liability (75,988) (132,651) (75,988) (132,651)Interest on funds allocated for payment of

benefits (7,728) (8,312) (7,728) (8,312)CASSI – Adjustments arising from CVM

Resolution 371 (69,930) (57,563) (69,930) (57,563)Losses from robberies and theft (7) (8,111) (7) (8,111)Errors and fraud (8,923) (7,067) (8,923) (7,067)BB Personal Banking expenses (22,832) (26,395) (22,832) (26,395)Expenses with credit card operations (35,844) (67,826) (35,844) (67,826)Provision for restatement of taxes and

contributions payable -- (60,024) -- (60,024)Foreign exchange losses (1,123,343) -- (1,123,343) --Law 9138/95 – Restatement of funds to be

returned to the Federal Treasury (37,221) (18,363) (37,221) (18,363)Securitization dekasseguis – liabilities with

the SPE (9,489) (13,809) (9,489) (13,809)Securitization SWIFT MT100 – liabilities

with the SPE (58,659) (49,427) (58,659) (49,427)Other (89,311) (15,235) (109,897) (33,699)Total (1,555,137) (482,977) (1,575,723) (501,441)



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15.f) Non-operating income


Non-operating income 90,785 46,685 94,878 49,336Profit on the sale of assets 46,152 13,439 46,152 13,475Capital gains 1,330 1,134 1,330 1,178Rental income 2,178 2,439 2,178 2,439Valuation of other assets 9,745 10,515 9,745 10,815Gains on shares and quotas -- -- 3,260 385Sale of properties 29,438 16,262 29,439 16,262Other non-operating income 1,942 2,896 2,774 4,782Non-operating expenses (14,287) (28,284) (14,446) (31,984)Loss on sale of investments -- (1,745) -- (4,007)Loss on sale of assets (6,506) (459) (6,519) (459)Capital losses (3,404) (3,659) (3,409) (3,962)Loss in value of other assets (3,590) (21,711) (3,620) (21,711)Losses with shares and quotas -- -- (111) (1,135)Other non-operating expenses (787) (710) (787) (710)Total 76,498 18,401 80,432 17,352

16 Stockholders’ Equity

16.a) Stockholders’ equity of R$ 13,771,464 (R$ 11,687,349 at September 30, 2003) includes netincome for the period, and the book value per share is R$ 18.81 (R$ 15.97 per a lot of thousandshares at September 30, 2003) considering the total of 732,017,829 common shares (disregardingtreasury stock).

16.b) Capital

Capital comprises 743,275,506 common shares with no par value. The Federal Treasury is thecontrolling stockholder.

The Extraordinary General Meeting of stockholders held on November 12, 2003 approved the grouping,on January 23, 2004, of the Series B and C shares and subscription bonuses, in the proportion of onenew share/bonus for each lot of one thousand existing shares/bonuses.



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89

16.c) Treasury stock

The Bank purchased 10,234,252 preferred shares, equivalent to 1.44% of the total capital, asreimbursement to dissident stockholders not in agreement with the conversion of preferred sharesinto common shares, approved at the Special Preferred Stockholders’ Meeting held on June 7, 2002.These shares were converted into 11,257,677 common shares and remain in treasury in accordancewith article 45 of Law 6404/76.

The amount paid as reimbursement totaled R$ 125,778,962.78, equivalent to R$ 12.29 per share atthe book value per share at December 31, 2001. The market value per common share at September30, 2004 was R$ 25.20 (R$ 16.00 per a lot of thousand shares at September 30,2003).

16.d) Revaluation reserves

These refer to revaluations of property of the associated company Kepler Weber. The realizations of thereserves in the period through depreciation, totaling R$ 54 thousand, were transferred to the “Retainedearnings” account.

16.e) Adjustment to Market Value – Securities and Derivative Financial Instruments

In accordance with BACEN Circular Letters 3068/01 and 3082/02, this account records the mark-to-market adjustment of securities available for sale, totaling R$ 17,437 (R$ 43,423 at September30, 2003), net of tax effects. The changes in this stockholders’ equity account are as follows:

June 2004 Net changes in September 2004the period

Securities available for sale Balance Balance Bank 250,726 (111,721) 139,005

Subsidiary and associated Companies (212,931) 106,012 (106,919) Tax effects (89,032) 39,509 (49,523)Total (51,237) 33,800 (17,437)



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June 2003 Net changes in September 2003the period

Securities available for sale Balance Balance Bank (214,693) 243,057 28,364

Subsidiary and associated Companies (58,961) (10,855) (69,816) Tax effects 79,551 (81,522) (1,971)Total (194,103) 150,680 (43,423)

16.f) Shareholding positions

As prescribed in paragraphs IV, V, VI and VII of Article 40 of the Bank’s by-laws, the shareholdingpositions are as follows:

Paragraph IV: Shareholdings of all those who hold, directly or indirectly, more than 5% of capital:

Stockholders Total shares % TotalFederal Treasury 533,507,414 71.8Banco do Brasil Employees Retirement Fund (PREVI) 102,536,547 13.8BNDES Participações S.A. – BNDESPAR 42,822,675 5.8



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Paragraph V: Number and characteristics of the securities issued by the Bank and directly orindirectly held by the controlling stockholder, management and members of the Fiscal Council; and

Paragraph VI: Changes in ownership of the parties referred to in the previous paragraph of thesesecurities during the preceding twelve months:

Controlling stockholder – Federal Treasury 9.30.2004 9.30.2003Common shares (ON) 533,507,414 533,507,414,282B Bonus 155,276,743 155,276,743,847C Bonus 258,794,573 258,794,573,092

ON Shares B Bonds C BondsBoard of Directors Position 9.30.04 9.30.03 9.30.04 9.30.03 9.30.04 9.30.03Bernard Appy President 01 01 -- -- -- --Cássio Casseb Lima Vice-President 01 01 -- -- -- --Carlos Augusto Vidotto Counselor 02 01 -- -- -- --Francisco Augusto da Costa e Silva Counselor 02 01 -- -- -- --João Carlos Ferraz Counselor 02 01 -- -- -- --José Carlos Rocha Miranda Counselor 01 01 -- -- -- --Tarcísio José Massote de Godoy Counselor 01 01 -- -- -- --

ON Shares B Bonds C BondsFiscal Council Position 9.30.04 9.30.03 9.30.04 9.30.03 9.30.04 9.30.03Marcus Pereira Aucélio President -- -- -- -- -- --Luiz Awazu Pereira da Silva Member -- -- -- -- -- --Rodrigo Pirajá Wienskoski Member -- -- -- -- -- --Artemio Bertholini Member -- -- -- -- -- --Vicente de Paulo Barros Pegoraro Member 01 1,232 -- 336 -- 560Ernesto Rubens Gelbcke Deputy -- -- -- -- -- --Marcos de Andrade Reis Villela Deputy -- -- -- -- -- --Otávio Ladeira de Medeiros Deputy -- -- -- -- -- --Pedro Paulo Bernardes Lobato Deputy -- -- -- -- -- --



92

ON Shares B Bonus C BonusExecutive Board of Directors Position 9.30.04 9.30.03 9.30.04 9.30.03 9.30.04 9.30.03Cássio Casseb Lima President 01 01 - - - -Adézio de Almeida Lima Vice-President 02 2,464 - 769 1 1,233Edson Machado Monteiro Vice-President 57 57,876 17 17,362 28 28,939José Luiz de Cerqueira César Vice-President - - - - - -Luiz Eduardo Franco de Abreu Vice-President 01 1,000 - - - -

Luiz Oswaldo Sant’Iago Moreira de Souza Vice-President 02 2,544 - 748 1 1,249Ricardo Alves da Conceição Vice-President 371 371,463 111 111,253 185 185,424Rossano Maranhão Pinto Vice-President - - - - - -

ON Shares B Bonds C BondsDirectors Position 9.30.04 9.30.03 9.30.04 9.30.03 9.30.04 9.30.03Aldo Luiz Mendes Director - - - - - -Antônio Francisco de Lima Neto Director - 403 - 120 - 203Augusto Braúna Pinheiro Director - - - - - -Derci Alcântara Director 33 33,676 9 9,806 16 16,345Henrique Pizzolato Director 26 26,537 7 7,714 12 12,858Izabela Campos Alcântara Lemos Director - - - - - -João Carlos de Mattos Director - - - - - -José Carlos Soares Director 219 - 6 - 10 -José Gilberto Jaloretto Director - - - - - -José Maria Rabelo Director 20 - 6 - 10 -Juraci Masiero Director - - - - - -Manoel Gimenes Ruy Director 14 14,267 4 4,192 6 6,988Miguel Oscar Viana Peixoto Director - - - - - -Murilo Castellano Director 3 - - - 1 -Paulo César Simplício da Silva Director 29 29,044 8 8,568 14 14,281Paulo Euclides Bonzanini Director - - - - - -Paulo Rogério Caffarelli Director - - - - - -Renato Donatello Ribeiro* Director 84,9811* 84,9811* 2 2,438 4 4,064Ricardo José da Costa Flores Director 19 - 5 - 9 -William Bezerra Cavalcanti Filho Director - - - - - -

* Shares held by the Banco do Brasil Employees Investment Club (CIN).

Statutory AuditorJosé Luis Salinas General Auditor - - - - - -

Paragraph VII – Number of shares in the market and percentage in relation to the total issued:

BB shares Number %Market 53,151,193 7.2Total issued 743,275,506 100.0



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17 Income Tax and Social Contribution on Net Income

17.a) Details of calculation basisBB – Consolidated

9.30.2004 9.30.2003

Income taxSocial

contribution Income taxSocial

contribution

a) Income before taxes and after employee profit sharing 3,837,001 3,837,001 3,523,438 3,523,438- Income before taxation 3,654,171 3,654,171 3,474,814 3,474,814- Net income of foreign entities (161,619) (161,619) (68,021) (68,021)- Intercompany eliminations 523,729 523,729 184,681 184,681- Employee profit sharing (179,280) (179,280) (68,036) (68,036)b) Permanent additions/(deductions) : (1,439,458) (1,458,560) 149,020 110,549- Equity in the (earnings)/loss of subsidiary and associated

companies(686,310) (686,310) 695,459 695,459

- Expense with interest on own capital (449,958) (449,958) (321,916) (321,916)- Non-deductible expenses and provisions 225,622 197,004 205,045 160,432- Other additions/(deductions) (528,812) (519,296) (429,568) (423,426)

c) Temporary additions/(deductions): 2,345,294 2,362,995 1,512,070 2,570,590

- Allowance for loan losses 3,642,868 3,642,868 2,509,944 2,509,944- Provision for loss on securities and investments 1,145 1,149 (788) (788)- Provision for pension liabilities (1,554,098) (1,552,605) (1,381,033) (337,277)- Provision for labor claims, tax contingencies, and contingent

liabilities355,956 376,598 510,188 532,007

- Amortization of goodwill on investments 5,730 -- 7,248 --- Other additions/(deductions) (106,307) (105,015) (133,489) (133,296)d) Other additions/(deductions) : (1,612,028) (1,603,881) (590,986) (578,553)- Foreign profits 117,248 117,248 157,797 157,797- Adjustment – BACEN Resolution 2682/99 and Law 9430/99 (1,712,045) (1,712,045) (732,618) (732,618)- Other (17,231) (9,084) (16,165) (3,732)e) Taxable income 3,130,809 3,137,,555 4,593,542 5,626,024f) Income tax/Social contribution: 756,750 280,297 1,100,618 499,655- Rate of 15% / 9% 472,566 284,147 689,031 506,342- Additional 10% 314,972 -- 459,282 --- Tax incentives (13,369) -- (19,841) --- Income tax on profits of foreign entities (17,419) (3,850) (27,854) (6,687)



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17.b) Details of income tax and social contribution on net income expense:BB – Consolidated

9.30.2004 9.30.2003

Income taxSocial


contributiona) Income tax and social contribution expenses per the

Statement of income (399,806) (146,771) (375,658) (139,914) - Provision for income tax and social contribution – present values (379,111) (140,097) (370,561) (140,038)- (Provision)/reversal of deferred income tax on the adjustment of

the portfolio and depreciation (leasing operations) 970--

4,316 --- Foreign income tax (4,492) -- (10,808) --- (Provision)/reversal of provision for deferred taxes – positive MTM 10,831 3,407 1,521 169- (Provision)/reversal of the provision for deferred income tax – sale

of investments in installments (BB - BI) 214 77 (126) (45)- (Provision)/reversal of provision for deferred taxes-restatement of

judicial deposits (28,218) (10,158) -- --b) Deferred tax credits 1,140 59 (1,088) 562- Recording/(reversal) of tax credits on temporary differences 326 37 1,757 560- Recording/(reversal) of tax credits on income tax and social

contribution losses (1,040) -- (4,316) --- Recording/(reversal) of tax credits – negative MTM 1,854 22 1,471 2c) Total income tax and social contribution expense (a + b) (398,666) (146,712) (376,746) (139,352)



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17.c) Reconciliation of income tax and social contribution on net income expense:BB – Consolidated

a) Income Tax 3rd quarter 2004 3rd quarter 2003 Income before taxation and profit sharing 1,444,946 1,230,755 - Total income tax charge (rate of 25%) (361,237) (307,689) - Effects of non-taxable income 318,584 240,180 - Effects of non-deductible expenses (469,707) (333,527) - Effects of foreign profits (8,726) (19,854) - Reclassification/(additional write-off) of tax credit -- 1,329 - Deferred charges on mark-to-market adjustments 605 348 - Other 117,297 46,643 - Fiscal incentives (Workers Meal Program, Culture and others) 4,518 (4,176) Income tax expense (398,666) (376,746)b) Social Contribution on Net Income Income before taxation and profit sharing 1,444,946 1,230,755 - Total social contribution charge (rate of 9%) (130,045) (110,768) - Effects of non-taxable income 112,832 80,998 - Effects of non-deductible expenses (169,176) (120,070) - Effects of foreign profits (2,821) (4,163) - Deferred charges on mark-to-market adjustments 218 125 - Other 42,280 14,526 Social contribution expense (146,712) (139,352)

17.d) Litigation: Income tax and social contribution on net income

In February 1998, the Bank filed a legal request for full offset of prior year income tax and social contributionon net income losses against taxable income, whereas tax legislation enacted as from 1995 restricted thisoffset to 30% of annual taxable income. Since then, the Bank has offset these tax losses in full againstincome tax and social contribution taxable income and has made judicial deposits of the taxes otherwise due(on 70% of the amount offset). These deposits prompted the Federal District 16th Court to issue a dispatchrecognizing the suspension of payment of these taxes until final judgment of the Bank’s request, based onarticle 151, II, of the Tax Code.



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The amounts relating to this matter are as follows:BB - Consolidated9.30.2004 9.30.2003

a) Judicial deposits 4,843,161 3,406,625

- Amount paid 3,738,731 2,800,950

- Restatement 1,104,430 605,675

b) Receivables from guarantee deposits 4,843,161 3,406,625

- Original amounts 3,738,731 2,800,950

- Restatement 1,104,430 605,675

c) 70% thereof 3,842,960 2,937,274

- Income tax losses incurred up to December 31, 1994 739,067 739,067

- Income tax losses incurred after December 31, 1994 1,372,944 726,672

- Social contribution losses incurred up to December 31, 1994 356,007 356,007

- Social contribution losses incurred after December 31, 1994 560,880 560,880

- Social contribution to offset (Temporary differences up to 1998) 814,062 554,648

d) The offset of income tax and social contribution losses results in the reduction of the deferred taxcredits.

e) The provision relating to the judicial deposit, recorded in Provision for losses on assets withoutloan characteristics, amounts to R$ 1,104,430. Management considers this provision sufficientbased on the status of the lawsuit at September 30, 2004.

f) In the event of an unfavorable decision, the extraordinary appeal of which was accepted by thePresident of the Federal Regional Court – First Region on November 26, 2001 and submitted tothe Federal Supreme Court for judgment, the deposits equivalent to the amount of taxesdetermined to be payable will be transferred to the Federal Revenue Secretariat; the amount ofthese deposits, net of the provision recorded, will be expensed. The resulting deferred tax assetto be recorded in this event, arising from the reinstatement of the tax losses previously offset, willbe subject to analysis in respect of its possible future realization at the time it is recorded.



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18 Tax credits

18.a) Tax credits recorded as assets:BB – Consolidated

9.30.2004 9.30.2003

Income taxSocial


contribution Nature and origin: a) Income tax and social contribution losses 4,922,954 -- 8,782,630 -- a.1) Rate (%) 25 9 25 9 a.2) Tax credit recorded 1,230,739 -- 2,195,658 -- b) Timing differences 14,142,467 11,508,558 14,144,540 11,519,868 b.1) Rate (%) 25 9 25 9 b.2) Tax credit recorded 3,535,617 1,035,770 3,536,135 1,036,788 c) Negative mark-to-market adjustments 124,206 114,689 263,709 255,926 c.1) Rate (%) 25 9 25 9 c.2) Tax credit recorded 31,051 10,322 65,927 23,033 d) Social Contribution to offset -- 2,638,105 -- 3,014,491 e) Tax credits abroad 14,449 -- 14,487 -- f) Total income tax and social contribution tax

credits recorded ( a.2 + b.2 + c.2 + d + e ) . 4,811,856 3,684,197 5,812,207 4,074,312

PASEP COFINS PASEP COFINS g) Negative mark-to-market adjustments 196,691 196,691 279,889 276,263 g.1) Rate (%) 0,65 4 0,65 4 g.2) Tax credit recorded 1,278 7,868 1,820 8,739 h) Total PASEP and COFINS credits recorded (g.2) 1,278 7,868 1,820 8,739 i) Total tax credits recorded (f + h) 4,813,134 3,692,065 5,814,027 4,083,051



98

18.b) Tax credits not recorded as assets:

BB – Consolidated9.30.2004 9.30.2003

Income taxSocial


contribution Nature and origin: a) Income tax and social contribution losses 652,660 40,040 604,721 39,695 a.1) Rate (%) 25 9 25 9 a.2) Tax credits not recorded 163,165 3,604 151,180 3,573 b) Timing differences 3,522,135 5,920,660 1,446,087 3,603,669 b.1) Rate (%) 25 9 25 9 b.2) Tax credits not recorded 880,534 532,859 361,522 324,330 c) Negative mark-to-market adjustments 68,642 68,642 20,251 20,464 c.1) Rate (%) 25 9 25 9 c.2) Tax credits not recorded 17,161 6,178 5,063 1,842 d) Accounting losses of foreign entities in countries

with favorable taxation444,073 444,073 414,444 414,444

d.1) Rate (%) 25 9 25 9 d.2) Tax credits not recorded 111,018 39,967 103,611 37,300 e) Tax credits abroad 132,034 -- 130,636 -- f) Total income tax and social contribution credits not

recorded ( a.2 + b.2 + c.2 + d.2 + e )1,303,912 582,608 752,012 367,045

PASEP COFINS PASEP COFINSg) Negative mark to market adjustments 1,958 1,958 6,328 9,954 g.1) Rate (%) 0.65 4 0.65 3 g.2) Tax credits not recorded 12 78 41 398h) Total PASEP and COFINS tax credits not recorded(g.2)

12 78 41 398

i) Total tax credits not recorded (f + h) 1,303,924 582,686 752,053 367,443



99

18.c) Changes during the period

Tax credits recorded during the periodBB – Consolidated

9.30.2004 9.30.2003

Income taxSocial


contribution a) On timing differences 3,887 1,382 1,740 638 b) On negative mark-to-market adjustments 13,741 4,923 -- -- c) Total income tax and social contribution credits recorded ( a + b ) 17,628 6,305 1,740 638

PASEP COFINS PASEP COFINS d) On negative mark-to-market adjustments 545 3,354 -- 223 e) Total tax credits recorded ( c + d ) 18,173 9,659 1,740 861

Tax credits reversed during the period

BB – Consolidated9.30.2004 9.30.2003

Income taxSocial


contribution a) Relating to income tax and social contribution losses 671,848 -- 1,027,525 -- b) Relating to timing differences 4,382 2,386 51 1 c) Relating to social contribution to offset (MP 1858/99) -- 245,890 -- 470,247 d) Relating to negative mark-to-market adjustments 635 292 300,235 92,905 e) Tax credits abroad 3,203 -- 5,546 -- f) Total reversals of income tax and social contribution tax

credits ( a + b + c + d + e )680,068 248,568 1,333,357 563,153

PASEP COFINS PASEP COFINS g) Relating to negative mark-to-market adjustments 51 134 9,987 45,974 h) Total tax credits reversed ( f + g ) 680,119 248,702 1,343,344 609,127



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18.d) Deferred tax liabilities

BB – Consolidated9.30.2004 9.30.2003

Income taxSocial


contribution a) Arising from sale of investments 1,137 409 1,618 583 b) Arising from mark-to-market adjustments 65,868 23,701 87,024 31,329 c) Arising from portfolio adjustment 30,198 -- 41,507 -- d) Arising from tax incentive depreciation 3 -- 3 -- e) Entities abroad 2,025 -- 4,941 -- f) Arising from restatement of judicial deposits 92,933 33,456 -- -- g) Total deferred income tax and social contribution

liabilities (a + b + c + d + e + f)192,164 57,566 135,093 31,912

PASEP COFINS PASEP COFINS h) Arising from mark-to-market adjustments 1,795 11,047 2,349 10,920 i) Arising from restatement of judicial deposits 2,534 15,594 -- -- j) Total deferred tax liabilities ( g + h + I ) 196,493 84,207 137,442 42,832

18.e) Estimates of the realization of tax credits recorded (tax losses, timing differences andsocial contribution available for offset)

BB - ConsolidatedNominal value Present value

In 2004 645,754 627,798 In 2005 1,864,975 1,735,900 In 2006 1,964,763 1,737,058 In 2007 2,454,684 2,067,455 In 2008 920,420 745,739 From 2009 to 2013 1,056,096 810,255 From 2014 to 2016 6,479 2,963 Total tax credits 8,913,171 7,727,168



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In the 3rd quarter of 2004, the tax credits of the Bank were reduced by R$ 467,977, equivalent to72.47% of the amount estimated to be offset during the year (R$ 645,754 million according to atechnical study prepared as of June 30, 2004).

The above estimates of the annual realization of the tax credits are based on a technical studyprepared as of June 30, 2004.

18.f) Other information

f.1) The tax credits were recorded at the current rates calculated on their respective bases. The rulesestablished by BACEN Resolution 3059/2002 for the recording, maintenance and reversal/use of thecredits are being followed.

f.2) The tax credits recorded include Social Contribution to Offset relating to tax credits calculated at therate of 18% on tax losses and temporary differences existing on December 31, 1998. ProvisionalMeasure (MP) 1.858/99 (current MP 2.158-35/2001) reduced the rate of social contribution from 18% to8% and authorized the maintenance of this credit classified in Other Receivables – Sundry. AtSeptember 30, 2004, the balance of this account amounted to R$ 2,638,105.

Since January 1, 2003, the rate for social contribution on net income is 9%, in conformity with Law10.637/2002.

f.3) The Bank, in order to accelerate the reversal of the tax credits recorded, has been recordingadditional reversals, from the 4th quarter 2001 to the 4th quarter 2003, when the provisions forincome tax and social contribution, including deferred taxes, were less than the amount calculatedby applying the total statutory rates (currently 34%) on accounting income before taxation. Thesereversals were discontinued in 2004, as explained below.



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With the issue of BACEN Resolution 3059/02, more objective regulations to recognize andmaintain tax credits were established, among which the exclusion, for purposes of calculation oflevel I of the Referential Equity (PR), of those tax credits that are estimated to be realized beyondfive years, as shown in Note 20. The Bank has established a schedule beginning in January 2004to exclude 20% of those credits annually, totaling 100% as from January 2008.

Accordingly, as from January 2004, the Bank has ceased to record the additional reversals inorder to avoid a double impact on the calculation of the index of capital adequacy.

f.4) Projections of taxable income for the Bank indicate that the tax credits will be realized in up to sevenyears in the following proportions, according to the technical study prepared as of June 30, 2004: 2004,7%; 2005. 21%; 2006, 22%; 2007, 28%; 2008, 10% and as from 2009, 12%. This study also considersthe tax credits at their present value, based on the average rate of funding of the Bank.

The tax credits on temporary differences are recorded based on the amounts of the non-deductibleprovisions; most of these amounts are only expected to be realized in the long-term.

f.5) The Bank has recorded IRPJ, CSLL, PASEP and COFINS tax credits on the negative mark-to-marketadjustments of securities and derivative financial instruments recorded in a separate account inStockholders’ equity. The Bank has only recognized PASEP and COFINS tax credits on negative mark-to-market adjustments recorded in income for the period, in compliance with the rules included in BACENResolution 3.059/2002 and BACEN Circular 3.171/2002 (Note 3, items “d” and “e”).

IRPJ, CSLL, PASEP and COFINS) deferred tax liabilities have been recorded on the positive mark-to-market adjustments of securities and derivative financial instruments recorded in income and in aseparate account in Stockholders’ equity (Note 3, items “d” and “e”).

19 Equity in the Earnings (Loss) of Subsidiary and Associated Companies

Significant investments in Brazil and abroad are stated on the equity method of accounting, inconformity with BACEN and CVM instructions, and are classified in an investment account inpermanent assets.



103

The equity accounting adjustments were recorded in the account “Equity in the earnings (loss) ofsubsidiary and associated companies" as follows:



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19.a) BB – Domestic and foreign branchesInvestments of BB-Banco Múltiplo

Equity accountingadjustments Book value

DESCRIPTION Paid incapital

Adjustedstockholders’

equityOwnership%

Dividends/interest onown capital Operational

Foreignexchangevariations 9.30.2004 9.30.2003

SUBSIDIARIESBAMB – Brazilian American Merchant Bank 1,214,565 1,412,941 100.00 -- 24,289 (121,177) 1,412,941 1,317,721Banco do Brasil A.G. Vienna (Austria) 66,795 96,669 100.00 -- (1,661) (6,577) 96,669 89,399BB – Leasing Company Ltd. -- 90,088 100.00 -- 1,553 (7,711) 90,088 319,561BB – Administradora de Cartões de CréditoS.A.

9,300 33,946 100.00 -- 911 -- 33,946 48,827

BB – Administradora de Consórcios S.A. 14,100 12,868 100.00 -- (1,232) -- 12,868 --BB – Corretora de Seguros e Administradora.de Bens S.A.

26,918 64,840 100.00 -- 10,700 -- 64,840 64,549

BB – Administração de Ativos – Distribuidorade Títulos e Valores Mobiliários S.A.

99,628 176,393 100.00 -- 56,414 -- 176,393 156,606

BB – Banco de Investimento S.A. 1,589,399 2,087,110 100.00 -- 116,917 -- 2,087,110 1,719,809BB – Leasing S.A. – Arrendamento Mercantil 61,860 21,523 100.00 -- (1,039) -- 21,523 48,301Banco Popular do Brasil S.A. 116,550 113,419 100.00 -- (3,131) -- 113,419 --Cobra Tecnologia S.A. * 17,183 -- 99.35 -- (7,937) -- -- 21,846ASSOCIATED COMPANIESCentral Clearing -- -- -- -- -- -- -- 3,540CADAM – Caulim da Amazônia S.A. ** 183,904 377,283 21.64 -- (699) -- 80,990 82,181 SUBTOTAL -- -- -- -- 195,085 (135,465) 4,190,787 3,872,340AbroadForeign exchange gain/losses in the branches -- -- -- -- -- (238,309) -- --Increase/decrease in stockholders’ equityarising from other matters.

-- -- -- -- 1,139 -- -- --

TOTAL -- -- -- -- 196,224 (373,774) 4,190,787 3,872,340

* Information from the July 2004 trial balance. The Stockholders Equity – R$ 25,134 thousand – presentitself adjusted by the unrealized result of operations with controlling of R$ 28,715 thousand.** Information from the August 2004 trial balance.



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19.b) BB - ConsolidatedEquity accounting

AdjustmentsBook value

DESCRIPTION Paid incapital

Adjustedstockholders’

equity Ownership%

Dividends/interest onown capital Operational

Foreignexchangevariations Provision 9.30.2004 9.30.2003

1) Investments of the BankSUBSIDIARIESBB – Administradora de Cartões de CréditoS.A.

9,300 33,946 100.00 -- 911 -- -- 33,946 48,827

BB – Administradora de Consórcios S.A. 14,100 12,868 100.00 -- (1,232) -- -- 12,868 --BB – Corretora de Seguros e Admin. deBens S.A.

26,918 64,840 100.00 -- 10,700 -- -- 64,840 64,549

Cobra Tecnologia S.A. 17,183 -- 99.35 -- (7,937) -- -- -- 21,846ASSOCIATED COMPANIESCADAM – Caulim da Amazônia S.A. 183,904 377,283 21.64 -- (699) -- -- 80,990 82,181Central Clearing -- -- -- -- -- -- -- -- 3,540 SUBTOTAL (1) -- -- -- 1,743 -- -- 192,644 220,9432) Investments of BB - BI Banco de InvestimentoASSOCIATED COMPANIESBrasilseg Participações S.A. 84,290 181,250 70.00 5,600 5,209 -- -- 126,875 150,013Cia. de Seguros Aliança do Brasil S.A. 129,861 227,346 70.00 21,544 28,085 -- -- 159,142 137,085Brasilprev (A) 77,687 186,264 49.99 5,759 12,378 -- -- 98,201 81,141Brasilcap 71,500 137,670 49.99 31,062 15,965 -- -- 68,821 107,555Brasilsaúde (B) 39,726 39,726 49.92 -- 633 -- -- 20,627 19,398Cia. Brasileira de Meios de Pagamento (C) 74,534 92,879 32.03 747 15,064 -- -- 29,998 39,023Seguradora Brasileira de Crédito àExportação

9,165 14,808 12.088 -- 168 -- -- 1,790 1,459

Cibrasec 60,003 54,951 10.00 323 307 -- -- 5,495 5,424Itapebi 150,000 200,367 19.00 -- 4,244 -- -- 38,527 30,879Kepler Weber 51,228 111,299 24.38 -- 1,425 -- -- 27,135 20,457Cia Brasileira de Soluções e Serviços 8,718 (440) 37.467 -- (245) -- -- -- 1,866Ativos S.A.. 4,577 17,108 74.50 11,212 6,420 -- -- 12,745 5,699Brasil Aconselhamento Financeiro S.A (D) 203,498 28,971 100.00 -- -- -- 3,097 -- 11,192 SUBTOTAL (2) -- -- -- 76,247 89,653 -- 3,097 589,356 611,1913) Investments of BAMB – Brazilian American Merchant BankSUBSIDIARIESBBTUR – Viagens e Turismo Ltda. 12,634 12,995 99.00 1,252 931 1,026 -- 12,865 12,598Ativos S.A. 4,577 14,446 25.50 4,949 1,192 278 -- 3,684 1,167Other -- -- -- -- -- -- -- 17 18SUBTOTAL (3) -- -- -- -- 2,123 1,304 -- 16,566 13,7834) Investment of BB – Leasing Company Ltd.ASSOCIATED COMPANYBB TUR – Viagens e Turismo Ltda. 12,634 12,995 1.00 -- 17 -- -- 127 --SUBTOTAL (4) -- -- -- -- 17 -- -- 127 --5) Investment of BB – Administração de ativos – Distribuidora de Títulos e Valores Mobiliários S.A. ASSOCIATED COMPANIES- (not stated on the equity method)PRONOR -- -- 12.02 -- -- -- -- 20,722 20,722 SUBTOTAL (5) -- -- -- -- -- -- -- 20,722 20,722AbroadForeign exchange gains/(losses) in the

branches-- -- -- -- -- (238,309) -- -- --

Foreign exchange gains/(losses) insubsidiaries

-- -- -- -- -- (135,464) -- -- --

Increase/decrease in stockholders’ equityarising from other matters.

-- -- -- -- 1,139 -- -- -- --

TOTAL -- -- -- -- 94,675 (372,470) 3,097 819,415 866,640



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(A) Goodwill of R$ 5,088;(B) Negative goodwill of R$ 111;(C) Goodwill of R$ 249;(D) On December 19, 2003, the contracts for the corporate dissolution of Maxblue Americas Holdings S.A weresigned through which BB BI exchanged its 49.9% investment in this company for 100% of Maxblue DTVM. TheExtraordinary General Meeting of stockholders held on 5/12/2004 changed the Company’s name from MaxblueDTVM S.A to “Brasil Aconselhamento Financeiro e DTVM S.A.” and the Extraordinary General Meeting of July 26,2004 to “Brasil Aconselhamento Financeiro S.A”, maintaining the provision for loss of investments in R$ 28,522.

Note: The goodwill recorded on the acquisition of investments was based on the expectation of future profits and thenegative goodwill on other economic reasons.



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20 Related Party Transactions

The transactions carried out between companies of the conglomerate:

BB – Consolidated

9.30.2004 9.30.2003Assets Income Assets Income

(liabilities) (expenses) (liabilities) (expenses)Cash and cash equivalents 1,173 -- 550 --Foreign subsidiaries 1,173 -- 550 --Short-term Interbank deposits 903,578 59,025 7,129,441 56,739Foreign subsidiaries 678,550 48,764 6,979,441 43,884BB – Banco de Investimento S.A. -- -- 65,000 3,570BB – Leasing S.A. – Arrendamento Mercantil 224,928 10,261 85,000 9,285BB – Banco Popular do Brasil S.A. 100 -- -- --Securities 9,710 (459) 17,390 (363)Foreign subsidiaries -- 411 -- 221BB – Banco de Investimento S.A. 717 -- -- --BB – Leasing S.A. – Arrendamento Mercantil 8,993 -- 16,565 --BB – Administração de Ativos - DTVM S.A. -- (178) -- --BB – Administradora de Cartões de Crédito S.A. -- (692) -- (584)BB – Tur Viagens e Turismo Ltda. -- -- 825 --Loan operations 73,516 165,183 75,255 137,554Foreign subsidiaries -- 316 -- 987BB – Leasing S.A. – Arrendamento Mercantil 68,046 2,300 66,764 2,944BB – Administração de Ativos - DTVM S.A. 5,470 162,567 8,491 133,623Other receivables 141,843 -- 246,857 --Foreign subsidiaries -- -- 175,460 --BB – Banco de Investimento S.A. 46,574 -- 2,542 --BB – Leasing S.A. – Arrendamento Mercantil 2,236 -- 1,339 --BB – Administração de Ativos - DTVM S.A. 55,655 -- 45,931 --BB – Administradora de Cartões de Crédito S.A. 583 -- 961 --BB – Corretora de Seguros e Administradora de Bens S.A. 17,200 -- 19,363 --BB – Banco Popular do Brasil S.A. 13,658 -- -- --BB – Administradora de Consórcios S.A. 1,249 -- -- --Brasil Aconselhamento Financeiro S.A. 323 -- -- --



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BB – Consolidated


(liabilities) (expenses) (liabilities) (expenses)BB – Tur Viagens e Turismo Ltda. 4,065 -- 1,261 --Ativos S.A. 300 -- -- --Demand deposits (12,050) -- (12,385) --Foreign subsidiaries (284) -- (47) --BB – Banco de Investimento S.A. (900) -- (1,299) --BB – Leasing S.A. – Arrendamento Mercantil (232) -- (30) --BB – Administração de Ativos - DTVM S.A. (2,173) -- (841) --BB – Administradora de Cartões de Crédito S.A. (501) -- (1,062) --BB – Corretora de Seguros e Administradora de Bens S.A. (697) -- (1,298) --BB – Tur Viagens e Turismo Ltda. (1,284) -- (4,609) --Cobra Tecnologia S.A. (5,956) -- (3,199) --Brasil Aconselhamento Financeiro S.A. (10) -- -- --Ativos S.A. (12) -- -- --BB – Administradora de Consórcios S.A. (1) -- -- --Interbank Deposits (11,422,314) -- (17,410,826) --Foreign subsidiaries (11,422,314) -- (17,410,826) --Deposits received under security repurchaseagreements

(815,792) (20,253) (774,624) (23,173)

Foreign subsidiaries (58,186) -- (62,929) --BB – Banco de Investimento S.A. -- (2,364) (10,387) (501)BB – Leasing S.A. – Arrendamento Mercantil (1,499) (35) (2,070) (1,336)BB – Administração de Ativos - DTVM S.A. (375,899) (11,338) (351,064) (13,862)BB – Administradora de Cartões de Crédito S.A. (188,688) (258) (232,050) (2,259)BB – Corretora de Seguros e Administradora de Bens S.A. (123,900) (4,007) (114,390) (5,210)Cobra Tecnologia S.A. -- -- (730) --BB – Banco Popular do Brasil S.A. (44,406) (1,881) -- --BB – Administradora de Consórcios S.A. (12,718) (370) -- --BB – Tur Viagens e Turismo Ltda. (10,496) -- (1,004) (5)Funds from acceptance and issue of securities (40,226) -- (19,686) --Foreign subsidiaries (40,226) -- (19,686) --Foreign borrowings (2,313,460) -- (4,037,622) --Foreign subsidiaries (2,313,460) -- (4,037,622) --Foreign onlendings (1,114,143) (8,990) (406,448) (11,285)



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BB – Consolidated


(liabilities) (expenses) (liabilities) (expenses)Foreign subsidiaries (1,114,143) (8,990) (406,448) (11,285)Derivative financial instruments (7,321) 209 (2,115) 4,736Foreign subsidiaries (5,726) -- -- --BB – Banco de Investimento S.A. (745) -- -- --BB – Leasing S.A. – Arrendamento Mercantil -- 359 (894) 3,148BB – Administradora de Cartões de Crédito S.A. (358) (150) (1,221) 1,828BB – Administradora de Consórcios S.A. (492) -- -- --BB – Tur Viagens e Turismo Ltda. -- -- -- (240)Other liabilities (633,346) -- (1,205,506) --Foreign subsidiaries (597,020) -- (1,190,546) --BB – Leasing S.A. – Arrendamento Mercantil (36) -- (13) --BB – Administradora de Cartões de Crédito S.A. -- -- (330) --BB – Administração de Ativos – DTVM S.A. (2,371) -- (1,061) --Cobra Tecnologia S.A. (29,432) -- (9,713) --BB – Tur Viagens e Turismo Ltda. (4,487) -- (3,843) --Other operating income -- 33,116 -- 46,141Foreign subsidiaries -- 29,683 -- 42,605BB – Banco de Investimento S.A. -- 1,117 -- 295BB – Administração de Ativos – DTVM S.A. -- 2,138 -- 3,096BB – Corretora de Seguros e Administradora de Bens S.A. -- 178 -- 145BB – Tur Viagens e Turismo Ltda. -- -- -- --Other administrative/operating expenses (162,165) (2,283) (136,041) (1,013)BB – Administração de Ativos – DTVM S.A. -- (2,283) -- (1,012)BB – Administradora de Cartões de Crédito S.A. -- -- -- (1)Cobra Tecnologia S.A. (162,165) -- (136,041) --

Other receivables include accounts receivable from related parties, dividends and interest onown capital receivable.



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21 Operating Limits – Basel Agreement

At September 30, 2004, the referential stockholders’ equity exceeded the minimum requiredby the Brazilian Central Bank by R$ 6,070,326, and the coefficient of capital adequacy was15.70% (14.30% as of September 30, 2003), while the minimum required is 11%.

The risk-weighted assets are as follows:

9.30.2004 9.30.2003Cash and cash equivalents 2,554,182 1,681,405

Credits and securities issued or guaranteed by the BrazilianGovernment

73,697,190 76,906,377

Deposits with the Brazilian Central Bank 18,919,331 16,126,846

Receivables from related companies 114,976 41,128

Specific credits – rescheduling of rural credits 529,910 480,011

Foreign exchange portfolio 1,832,211 1,678,530

Other 1,142,042 606,808

Total subject to zero-risk 98,789,842 97,523,105

Foreign currency funds 9,797,740 2,302,466

Clearing services for checks and other papers 2,099,725 2,095,736

Foreign exchange portfolio 1,150,631 884,257Deposits with other banks 4,320,975 2,086,099Investments in gold 11,388 12,982Total subject to 20% risk 17,380,459 7,381,541

Weighted amount 3,476,092 1,476,308

Funds applied in interbank deposits 12,051,956 15,571,779Foreign exchange portfolio 7,822,690 6,928,162Foreign securities 149,254 8,674Other 848,438 770,025Total subject to 50% risk 20,872,338 23,278,640

Weighted amount 10,436,169 11,639,320



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9.30.2004 9.30.2003

Loan operations 69,814,145 60,290,915Property and equipment in use 2,722,926 2,402,673Leased assets 507,209 405,782Investments 860,240 889,958Securities 2,948,492 4,382,290Foreign exchange portfolio 649,877 479,899Memorandum accounts (8,308,671) (10,876,277)Other 13,179,571 8,339,125Total subject to 100% risk 82,373,789 66,314,365

Weighted amount 82,373,789 66,314,365

Deferred tax credits – income tax and social contribution on netincome 8,368,320 9,897,078

Total subject to 300% risk 8,368,320 9,897,078

Weighted amount 25,104,960 29,691,234

Total assets subject to risk weighting 227,784,748 204,394,729Total weighted amount 121,391,010 109,121,227



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The calculations of the required stockholders’ equity and the adequacy coefficient are asfollows:

9.30.2004 9.30.2003

A) Assets subject to risk weighting 227,784,748 204,394,729B) AWR (assets weighted by risk) 121,391,010 109,121,226C) SWAP credit risk 1,117,360 866,296D) Requirement of stockholders’ equity on AWR (11% of B) 13,353,011 12,003,335E) Requirement of stockholders’ equity on SWAP (20% of C) 223,472 173,259F) Requirement of stockholders’ equity on interest rate exposure 624,719 528,821G) Required stockholders’ equity (RSE): D + E + F 14,201,202 12,705,415H) Referential equity amount (RE) 20,271,527 16,520,197 Level I 13,608,833 11,662,632 - Capital 8,366,189 8,366,189 Capital Increase 1,935,527 - Unpaid capital (445,182) - - Capital reserves 4,768 4,754 - Revenue reserves 3,195,071 2,796,091 - Adjustment to market value – Securities and derivatives (17,437) (43,423) - Retained earnings and accumulated deficit 12 16 - Income accounts 13,867,458 14,623,149 - Expense accounts (13,034,914) (13,958,365) - Treasury stock (125,779) (125,779) - 20% of tax credits realizable after 5 years (136,879) - Level II 6,662,694 4,857,565 Subordinated debts eligible as capital 6,636,942 4,832,848 - Funds raised with the FCO 5,789,871 4,832,848 - Funds raised overseas 847,071 - Revaluation reserves 25,751 24,717I) Ratio between Referential equity amount to required stockholders’

equity: RE and RSE (H/G)1.43 1.30

J) Surplus/(insufficiency) of stockholders’ equity: RE - RSE (H-G) 6,070,326 3,814,782L) Margin/(surplus) of leverage: (J x 100)/11 55,184,778 34,679,837M) Basel Ratio: RE x 100/(RSE/0.11) 15.70 14.30



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22 Assets and Liabilities in Foreign Currencies

The balance sheet amounts in foreign currencies are as follows:


9.30.2004 9.30.2003 9.30.2004 9.30.2003Assets

Assets in foreign currencies recorded in Brazil (exceptinvestments) 33,860,421 21,716,796 33,180,698 14,562,239

Investments in foreign currencies recorded in Brazil 41,613 24,134 -- --Assets in foreign currencies recorded abroad 35,140,829 35,592,787 28,355,097 28,097,065Total 69,042,863 57,333,717 61,535,795 42,659,304

LiabilitiesLiabilities in foreign currencies recorded in Brazil 31,238,905 16,750,651 27,208,430 11,062,376Liabilities in foreign currencies recorded abroad 36,841,632 40,630,611 33,361,398 31,657,895Total 68,080,537 57,381,262 60,569,828 42,720,271

23 Retirement and Pension and Health Plans – Post-Employment Benefits

23.a) Caixa de Previdência dos Funcionários do Banco do Brasil - PREVI

Banco do Brasil is the sponsor of Caixa de Previdência dos Funcionários do Banco doBrasil (PREVI) which provides participants and their dependents with benefits which arecomplementary or similar to those of the Basic Government Retirement Plan. The plansoffered through PREVI are of defined contribution (Plano Previ Futuro) or defined benefit(Plan 1), the latter having adopted the capitalization method for actuarial calculations. AtSeptember 30, 2004, the number of participants was 128,908, of which 74,699 are activeand 54,209 retired employees.



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23.a.1) The funding of the vested and unvested benefits are summarized as follows:

a) Participants employed before April 14, 1967, contemplated in the contract signed onDecember 24, 1997 between the Bank and PREVI (Plan 1): The sponsor assumes thecommitment for the payment of benefits for this group; the mathematical reserves whichguarantee the benefits are not yet fully funded. The balance of the commitmentsassumed for this group of R$ 1,020,968 is fully provided by the Bank at September 30,2004. The retirement benefit of this group is characterized as a defined benefit.

b) Participants employed between April 15, 1967 and December 23, 1997 (Plan 1): activeparticipants contribute 3% of their contribution salary plus 2% of the amount of suchsalary that exceeds six-month of the PREVI contribution (R$ 2,057.53 at September 30,2004), plus 8% of the amount of such salary that exceeds the PREVI contribution.Participants receiving benefits contribute 8% of the amount of the pension complement andthe sponsor an amount equal to the contributions of the participants. The retirementbenefit of this group is characterized as a defined benefit.

c) Participants employed as from December 24, 1997 (Plano Previ Futuro): active participantscontribute to PREVI an amount between 7% and 17% of their contribution salary, varyingbased on length of service and the amount of the contribution salary. There is nocontribution for retired participants. The sponsor contributes an amount equal to thecontributions of the participants, limited to 14% of the total contribution payroll of theseparticipants. The retirement benefit of this group is characterized as a defined contribution.



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23.a.2) Effects of Benefit Plan 1, based on actuarial appraisals as of December 31, 2002and 2003 carried out by an independent actuary, and of the Plano Previ Futuro asrequired by CVM Resolution 371/00:

a) Equity effect (reconciliation of assets and liabilities):9.30.2004 9.30.2003

Plan 1 Plan 11) Present value of actuarial liabilities with coverage 46,567,548 42,088,2172) Present value of actuarial liabilities not covered -- --3) Present value of actuarial liabilities (1+2) 46,567,548 42,088,2174) Fair value of the plan assets (55,714,690) (42,529,571)5) Present value of liabilities in excess of (less than) the

fair value of the assets (3 + 4)(9,147,142) (441,354)

6) Actuarial (gains) or losses not recognized (6,676,666) 1,115,0717) Net actuarial liability (asset) to be provided (5 – 6) (2,470,476) (1,556,425)

The Previ Futuro Plan, being a defined contribution plan, is not required to record actuarialassets or liabilities.

b) Amounts paid to PREVI – 3rd quarter:9.30.2004 9.30.2003

Plan 1 PlanoPrevi

Futuro

Total Plan 1 PlanoPrevi

Futuro

Total

Sponsor contributions 101,747 9,451 111,198 86,003 5,738 91,741Amounts paid to PREVI referring to the1997 Contract 517,919 -- 517,919 430,891 -- 430,891

Total paid to PREVI 619,666 9,451 629,117 516,894 5,738 522,632



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c) Effect on net income – 3rd quarter:9.30.2004 9.30.2003

Plan 1 PlanoPrevi

Futuro

Total Plan 1 PlanoPrevi

Futuro

Total

1) Cost of current service (with interest) 75,378 18,444 93,822 89,248 10,197 99,445

2) Expected earnings on the planassets 1,441,119 -- 1,441,119 1,296,277 -- 1,296,277

3) Interest on actuarial liabilities 1,190,066 -- 1,190,066 1,272,371 -- 1,272,371

4) Deferment of the net earnings fromassets and liabilities as fromJune/2003 (2-3)

251,053 -- 251,053 23,906 -- 23,906

5) Total gross expense/(income)(1 – 2 + 3 +4) 75,378 18,444 93,822 89,248 10,197 99,445

6) Expected contributions fromparticipants 41,068 9,465 50,533 49,832 5,746 55,578

7) Previ liability expense/(income)related to the 1997 contract 39,366 -- 39,366 91,530 -- 91,530

8) Subtotal net expense/(income)(5 – 6 + 7)

73,676 8,979 82,655 130,946 4,451 135,397

9) Previ management fee 5,082 473 5,555 4,300 287 4,587

10) Effect of the net expense/(income)(8 + 9)

78,758 9,452 88,210 135,246 4,738 139,984

23.a.3) The principal economic assumptions adopted for the actuarial calculations were thefollowing:

- Real interest rate used for discounting actuarial liabilities to present value: 6.9% p.a. - Real expected yield on plan assets: 6.9% p.a. - Estimated salary increases: 1.5987% p.a. for Plan 1 and 3.1409% p.a. for Plano

Previ Futuro



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23.b) Benefits of sole responsibility of the Bank

Banco do Brasil is also responsible for assistance and pension benefits for employeesemployed before April 14, 1967, not covered by the PREVI Benefits Plan, with characteristicsof a defined benefit plan, and the regime adopted for the actuarial calculations is that ofcapitalization. There were 7,969 participants at September 30, 2004.

The main benefits are: (a) retirement pensions to founder participants and pension payments tosurvivors of participants deceased prior to April 14, 1967; (b) payment of retirementsupplements to the other participants employed by Banco do Brasil who retired up to April 14,1967 or who, on that date, would have the right through length of service to retire and who hadat least 20 years of effective service with the Bank; and (c) increase in retirement benefits andpension payments in excess of those provided by the PREVI Benefit Plans, as a result of judicialand administrative decisions due to the restructuring of job and salary plans and incentivescreated by the Bank.

23.b.1) The cost of these benefits is totally funded by Banco do Brasil.

23.b.2) Effects on the financial statements based on actuarial appraisals as of December 31,2002 and 2003 carried out by an independent actuary, as required by CVM Resolution371/00:

a) Equity effect (reconciliation of assets and liabilities):Description 9.30.2004 9.30.2003

1) Present value of actuarial liabilities with coverage -- --2) Present value of actuarial liabilities not covered (Plans without

financial assets)1,492,491 1,421,934

3) Present value of actuarial liabilities (1 + 2) 1,492,491 1,421,9344) Fair value of the plan assets -- --5) Present value of liabilities in excess of the fair value of the

assets (3 + 4)1,492,491 1,421,934

6) Actuarial (gains) or losses not recognized 259,090 188,4297) Net actuarial liability/ (asset) to be provided (5 – 6) 1,233,401 1,233,505



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b) Amounts paid to PREVI – 3rd quarter:9.30.2004 9.30.2003

Sponsor contributions 66,181 57,860

c) Effect on net income - 3rd quarter:9.30.2004 9.30.2003

1) Cost of current service (with interest) -- --2) Expected contributions from participants -- --3) Interest on actuarial liabilities 36,622 41,1214) Actuarial (gains) or losses -- --5) Expected earnings on assets -- --6) Effect of the expense recorded (1 - 2 + 3 + 4 - 5) 36,622 41,121

23.b.3) The economic assumptions adopted for the actuarial calculations are the same asthose adopted for the PREVI Plan 1 (item 23.a.3).

23.c) CASSI - Caixa de Assistência dos Funcionários do Banco do Brasil

The Bank is the sponsor of a Health Plan managed by CASSI – Caixa de Assistência dosFuncionários do Banco do Brasil. The main objective is to provide coverage for expenses withthe promotion, protection, recovery and rehabilitation of a member’s health and of his/herinscribed beneficiaries. At September 30, 2004, there were 151,068 participants, of which82,382 active and 68,686 retired participants and pensioners.

The Bank contributes monthly an amount equivalent to 150% of the total contributions frommembers (active and retired) and from pension beneficiaries of employees employed beforeDecember 23, 1997 and 100% of the total contributions from participants employed after thatdate. Monthly contributions from members and pension beneficiaries amount to 3% of thetotal payroll or the total retirement or pension plan benefits.

23.c.1) Effects of the CASSI Plan on the financial statements, based on actuarial appraisalsas of December 31, 2002 and 2003 carried out by an independent actuary, as requiredby CVM Resolution 371/00:



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a) Equity effect (reconciliation of assets and liabilities):9.30.2004 9.30.2003

1) Present value of actuarial liabilities with coverage -- --2) Present value of actuarial liabilities not covered (Plans withoutfinancial assets)

2,389,460 1,831,412

3) Present value of actuarial liabilities (1 + 2) 2,389,460 1,831,4124) Fair value of the plan assets -- --5) Present value of liabilities in excess of the fair value of theassets (3 + 4)

2,389,460 1,831,412

6) Actuarial (gains) or losses not recognized 737,951 254,6077) Net actuarial liability/(asset) to be provided (5 – 6) 1,651,509 1,576,805

b) Amounts paid to CASSI – 3rd quarter:9.30.2004 9.30.2003

Sponsor contributions 88,182 75,500

c) Effect on net income - 3rd quarter:9.30.2004 9.30.2003

1) Cost of current service (with interest) 5,944 5,2562) Expected contributions from participants -- --3) Interest on actuarial liabilities 60,939 55,4284) Actuarial (gains) or losses 8,990 2,1355) Expected earnings on assets -- --6) Effect of the expense recorded (1 – 2 + 3 + 4 – 5) 75,873 62,819

23.c.2) The economic assumptions adopted for the actuarial calculations were the same asthose applied to the PREVI Plan 1 (item 23.a.3).

23.d) Policy for the recognition of actuarial gains and losses

In accordance with CVM Deliberation 371, the actuarial gains or losses to be recognized asincome or expense in a defined benefit plan are the amount of unrecognized gains andlosses that exceed, in each period, the higher of the following limits:



120

- 10% of the present value of the total actuarial liability of the defined benefit; and- 10% of the fair value of plan assets.

This amount is being amortized annually over the estimated average time of serviceremaining for the participating employees.

23.e) Summary of the Provisions for the PREVI and CASSI Liabilities

9.30.2004Net actuarial

liability/(asset) on01.07.2004

Expense (income)recorded in the

income statement

Sponsorcontributions

in the 3rdquarter 2004

Prior periodsponsor

contributions

Net actuarialliability

(asset) on9.30.2004

PREVI actuarial liability in respect of the1997 contract 1,499,520 39,366 (517,919) -- 1,020,967

Adjustment account of the PREVI actuarialliability (2,408,024) 34,310 (96,762) -- (2,470,476)

PREVI actuarial liability in respect of theInformal Plan (sole responsibility of theBank)

1,262,778 36,622 (66,181) 182 1,233,401

CASSI actuarial liability 1,631,114 75,873 (55,478) -- 1,651,509Total 1,985,388 186,171 (736,340) 182 1,435,401

9.30.2003

Net actuarialliability/ (asset)on 01.07.2003

Expense (income)recorded in the

income statement

Sponsorcontributions inthe 3rd quarter

2004

Net actuarialliability

(asset) on9.30.2003

PREVI actuarial liability in respect of the 1997contract 2,844,523 91,530 (430,891) 2,505,162

Adjustment account of the PREVI actuarial liability (1,514,138) 39,416 (81,703) (1,556,425)PREVI actuarial liability in respect of the Informal

Plan (sole responsibility of the Bank) 1,250,244 41,121 (57,860) 1,233,505

CASSI actuarial liability 1,560,383 62,819 (46,397) 1,576,805Total 4,141,012 234,886 (616,851) 3,759,047



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23.f) PREVI contributions parity

In order to comply with the Federal Constitution, a parity was established as from April 6, 2001between the contributions from the Bank and from participants.

On April 12, 2001, the Judge of the Seventh Federal Court of the Federal District granted apartial injunction for a claim filed by the São Paulo Bank Employees Union against theSecretariat of Complementary Retirement Benefits and against the Fiscal Director appointedby the Secretariat for PREVI.

The injunction suspends the decision issued by the Fiscal Director on April 6, 2001 whichauthorizes the use of R$ 2.2 billion attributable to Banco do Brasil’s share in PREVI’sremaining reserve balances, after the implementation of the parity, to amortize the pensionliability with the entity that is the Bank’s responsibility, retroactive to December 15, 2000.

While the injunction is in effect, the decision of the Fiscal Director cannot be carried out.

The readjusted amount of the initial R$ 2.2 billion totals R$ 4.5 billion at September 30, 2004.

A decision on October 17, 2003 partially granted the request by the São Paulo Bank EmployeesUnion to exclude from the implementation of the contribution parity the retired beneficiaries whohad already been receiving supplementary benefits from PREVI, as well as the insuredemployees who had already enrolled in PREVI prior to the enactment of ConstitutionalAmendment 20/98, which instituted the pension reform.

The compliance with the sentence (the re-establishment of the contribution in the proportion of2 to 1) has been prevented by the Suspension of Injunction (Process 2004.01.06.024554-1),requested by the Government and granted by the President of the Federal Court of Appeals –1st Region, on June 17, 2004. For this reason, Banco do Brasil maintains the parity betweenthe contributions from the sponsor and the contributions from the participants.



122

24 Compensation Paid to Employees and Management

The monthly compensation of employees and management of the Bank in Brazil is presentedbelow (in reais) in the format required by item 4, Section C of Ministry of Finance Statement ofJustification 139/88:

3rd quarter2004

3rd quarter2003

Lowest salary:Standard amount 780.30 638.40

Semiannual bonus 195.07 159.60

Total 975.37 798.00

Highest salary:Standard amount 1,079.68 883.50

Amount per individual/Supplement for length of service – I 374.81 305.39

Amount per individual – Standard amount 1,144.36 936.43

Variable temporary supplement – Commissioned position 10,426.63 8,536.96

Additional per function 2,597.40 2,125.80

Additional for temporary work updated 1,612.20 1,319.40

Semiannual bonus 1,702.12 1,392.63

Total 18,937.20 15,500.10

Average salary 2,834.63 4,740.39

ManagementPresident 24,679.20 20,200.20

Vice President 22,235.70 18,200.10

Director 18,937.20 15,500.10



123

25 Assignment of Employees to External Organizations

25.a) With costs for the Bank:

a) Federal Government

Assignments are regulated by article 93 of Law 8112/90 (amended by Law 9257/97), byDecree 925/93, and by PGFN/CJN Note 088/96 issued by the General Counsel of theFederal Treasury.

3rd quarter 2004 3rd quarter 2003Number of employees assigned 14 7Cost for the period R$ 660 Thousand R$ 198 Thousand

b) Labor Unions

Assignments occur in cases prescribed in the Collective Labor Agreement or by commitmentsassumed as a result of salary negotiations:

3rd quarter 2004 3rd quarter 2003Number of employees assigned 115 93Cost for the period R$ 2,000 Thousand R$ 1,280 Thousand

c) Other Organizations/Entities

Assignments occur as a result of agreements of strategic business interest of the Bank:

3rd quarter 2004 3rd quarter 2003Number of employees assigned 3 3Cost for the period R$ 217 Thousand R$ 192 Thousand



124

25.b) Without cost to the Bank

3rd quarter 2004 3rd quarter 2003a) Federal, State and Municipal Governments 322 330b) External organizations 619 655c) Labor unions -- 1d) Employee entities 33 --e) Subsidiary and associated companies 296 22

Total employees assigned 1,402 1,101

26 Commitments, Responsibilities and Contingencies

26.a) Contingent liabilities

The Bank and its subsidiaries are parties in lawsuits involving labor, civil, tax and socialsecurity contingencies.

The Bank classifies contingencies as remote, possible and probable, based on thepossibilities of loss determined after a legal update of each claim. This procedure complieswith Statement XXII - Contingencies issued by the Institute of Independent Auditors of Brazil– IBRACON, which requires a provision for the total amount of the contingencies classified asprobable, and does not require a provision to be recorded for those classified as possible andremote.

The provisions for claims are recorded taking into consideration the possibility of success by theplaintiff in the lawsuit against the Bank/subsidiary.

The provisions for labor claims are recorded considering, also, the jurisprudence applicable toeach claim.

The details of the contingent liabilities at September 30, 2004, segregated by nature of claim andclassification of loss, as well as the provisions recorded, whose changes on the multiple Bankare shown in Note 7, are the following:



125


Amount Provision Amount ProvisionLabor claims 2,354,180 1,947,073 2,354,180 1,947,073 Probable loss 1,947,073 1,947,073 1,947,073 1,947,073

Possible loss 407,107 -- 407,107 --

Tax claims 284,183 126,971 286,594 127,029 Probable loss 126,971 126,971 127,029 127,029

Possible loss 157,212 -- 159,565 --

Civil claims 1,921,915 687,078 1,963,252 715,028 Probable loss 687,078 687,078 715,028 715,028

Possible loss 1,234,837 -- 1,248,224 --

Social security claims 464 8 464 8 Probable loss 8 8 8 8

Possible loss 456 -- 456 --

26.b) Contingent tax assets

26.b.1) The Bank has filed lawsuits for reimbursement of taxes unduly paid, the most importantbeing:

- Unconstitutionality of Income Tax on Net Income paid in 1989 and in the 1st six months of 1992, inthe amount of R$ 10,243;- Tax on Financial Transactions (IOF) – Law 8033/90 (Price-level restatement), in the amount of R$160,006;- Unconstitutionality of the payment of Social Contribution on Net Income during 1998 - Law7.689/88, in the amount of R$ 239,312.

26.b.2) The Bank recorded R$ 564,621 as a credit to income relating to the recognition of the rightto offset tax credits (FINSOCIAL) in a final unappelable decision. R$ 208,163 was recorded asRecovery of Charges and Expenses (principal) and R$ 356,458 thousand in Other OperatingIncome (interest).



126

26.c) Other commitments

26.c.1) The Bank is the sponsor of Fundação Banco do Brasil whose purpose is the promotion,support, advancement and sponsorship of educational, cultural, social, philanthropic, andrecreational/sporting activities, as well as the promotion of research activities of atechnological and scientific nature, and rural and urban community assistance services.

26.c.2) Guarantees to third parties, for a fee and with counter-guarantees from the beneficiaries– guarantees, sureties and bonds - amounted to R$ 4,189,619 at September 30, 2004 (R$2,665,034 at September 30, 2003). A provision of R$ 43,584 has been recorded and isconsidered sufficient to cover any potential loss arising on these guarantees, it is registeredin Other Obligations.

26.c.3) Available credit lines for loan and lease operations amount to R$ 20,827,379 atSeptember 30, 2004 (R$ 15,458,256 at September 30, 2003).

26.c.4) The confirmed import and export letters of credit total R$ 1,158,328 at September 30,2004 (R$ 1,314,129 at September 30, 2003).

26.c.5) The Bank is the operator of the Fund for Sectorial Investments (FISET), with net assetsof R$ 2,292 (R$ 2,315 at September 30, 2003), and is the manager of the Public ServiceEmployee Savings Program (PASEP), with net assets of R$ 1,264,424 at September 30,2004 (R$ 1,212,367 at September 30, 2003). The Bank guarantees the latter a minimumremuneration equivalent to the Long-Term Interest Rate (TJLP).

26.c.6) Despite the reduced level of risk to which its assets are subject, the Bank contractsinsurance cover for its assets in amounts considered sufficient to cover any losses.



127

27 Statement of Added Value

BB – Domestic and Foreign Branches BB - Consolidated3rd quarter

20043rd quarter

20033rd quarter

20043rd quarter

2003DESCRIPTION % % % %

Added Value Calculation

Net income from financialintermediation

2,247,093 2,876,497 2,333,915 2,962,241

Banking service fees 1,575,300 1,322,556 1,716,648 1,412,355Other operating income (expenses), net (117,143) (1,208,164) (151,278) (1,234,552)Non-operating income, net 76,498 18,401 80,432 17,352

Added Value 3,781,748 3,009,290 3,979,717 3,157,396

Equity in the earnings (loss) ofsubsidiary and associatedcompanies (177,550) 231,912 (274,697) 147,305

Gross Added Value 3,604,198 3,241,202 3,705,020 3,304,701

Depreciation and amortization (128,412) (121,060) (131,023) (121,755)

Added Value to Be Distributed 3,475,786 100.00 3,120,142 100.00 3,573,997 100.00 3,182,946 100.00

Distribution of Added Value

Employees 1,598,150 45.98 1,551,644 49.73 1,615,473 45.20 1,563,027 49.10Salaries and fees 1,117,011 1,095,016 1,130,452 1,103,877Benefits, social charges, and training 414,115 406,755 417,997 409,277Employee profit sharing 67,024 49,873 67,024 49,873

Governments 1,045,092 30.07 903,714 28.96 1,125,980 31.51 955,135 30.01Brazil 1,043,097 30.01 893,684 28.64 1,122,858 31.42 944,582 29.68 Social security contributions (INSS)

on salaries 193,438 166,805 195,496 168,060 Tax expenses (except income tax and

social contribution on net income) 356,007 255,423 383,318 268,714 Income tax/social contribution on net

income 493,652 471,456 544,044 507,808



128

BB – Domestic and Foreign Branches BB - Consolidated3rd quarter

20043rd quarter

20033rd quarter

20043rd quarter

2003DESCRIPTION % % % %

Foreign 1,995 0.06 10,030 0.32 3,122 0.09 10,553 0.33 Tax expenses (except income tax and

social contribution on net income) 1,572 2,176 1,788 2,264 Income tax and social contribution on

net income 423 7,854 1,334 8,289

Stockholders 832,544 23.95 664,784 21.31 832,544 23.29 664,784 20.89 Retained earnings 832,544 664,784 832,544 664,784

Added Value Distributed 3,475,786 100.00 3,120,142 100.00 3,573,997 100.00 3,182,946 100.00



129

28 Statement of Cash Flows

BB - Domestic and ForeignBranches BB - Consolidated

3rd quarter2004

3rd quarter2003

3rd quarter2004

3rd quarter2003

Cash flows from operating activities

Net income 664,784 664,784

Depreciation and amortization 121,060 121,755Depreciation of leased assets -- 34,553Amortization of losses -- 631Equity in the (earnings) loss of subsidiary and

associated companies(231,912) (147,305)

Foreign exchange gains (losses) 79,000 110,662Restatement of disposal of investments long-term -- (996)(Gains)/losses, changes in the percentage

ownership of investments(Gain)/losses on investments (10) (10)(Income)/loss on the sale of assets and

investments9 (595)

Provision for loss on investments (315) 435Provision for loss of other assets -- (300)Fixed asset disposals 65,840 65,840Excess depreciation -- 17,758Amortization of share premium -- 2,416Disposals of other assets (BNPU) 5,442 5,442Other adjustments (1,146) (324)Changes in deferred income 8,165 8,173Loan operations (3,854,453) (3,763,080)Lease operations -- 7,996Interbank and interdepartmental accounts 3,051,626 3,041,141Other receivables 4,191,579 2,270,157Adjustment to market value – securities and

derivatives150,680 150,680

Net cash used in operating activities 4,250,349 2,589,272

Cash flows from financing activitiesDeposits 10,193,386 3,190,474Borrowings and onlendings (183,910) (1,028,395)Deposits received under security repurchase

agreements5,211,767 5,009,759

Derivative financial instruments (180,288) (172,176)Other liabilities (486,136) 1,688,487Funds from acceptance and issue of securities 545,153 543,701



130

BB - Domestic and ForeignBranches BB - Consolidated

3rd quarter2004

3rd quarter2003

3rd quarter2004

3rd quarter2003

Net cash provided by (used in) financingactivities

15,099,972 9,231,850

Cash flows from investing activitiesDividends received from subsidiary and associated

companies-- 36,254

Interest on own capital receivable -- 9,420Remittance of funds to subsidiaries (102,550) (102,550)Purchases of non-operating assets 10,727 11,272Purchases of leased assets -- 387,093Investments 102,550 104,550Adjustment to market value of associated

companies2,625 (15,555)

Disposal of assets not in use (10,284) (10,356)Disposal of fixed assets in use (160,982) (161,035)Disposal of leased assets -- (408,440)Disposal of investments (170) (13,922)Expenditures in deferred charges (45,963) (45,985)Short-term interbank deposits (18,502,911) (10,908,996)Marketable securities and derivative financial

instruments(1,242,548) (1,309,156)

Other assets 5,035 6,469

Cash provided by (used in) investing activities (19,944,471) (12,420,937)

Net increase (decrease) in cash and cashequivalents

(594,150) (599,815)

Change in cash and cash equivalents:At the beginning of the period 6,646,673 6,682,761At the end of the period 6,052,523 6,082,946

Net increase (decrease) in cash and cashequivalents

(594,150) (599,815)



131

29 Other Information

The Board of Directors approved in February 16, 2004 a proposal which authorized the Executive Board tomake a Public Purchase Offer for the Series “B” and “C” subscription bonuses and the Private Issue ofShares, as already advised by the Significant Events Notice issued on February 17, 2004.

The Public Offer for Purchase of Subscription “B” and “C” Bonuses and Private Stock Subscriptiontransactions completed on August 13, 2004, showed the following results:

a) the applications for the Public Offer for Purchase of Subscription Bonuses entailed the purchase of197,187,709 "B" series bonuses and 328,957,694 "C" series bonuses by the Bank, with a total disbursementof R$ 1,450,208,125.93. This amount was debited to Revenue Reserve in the Bank’s Stockholders' Equity.

b) the stock subscription totaled 66,913,789 common shares, amounting to R$ 1,489,500,943.14. Also,428,120 registered common shares were subscribed through the exercise of 410,691 "B" bonuses,representing R$ 8,463,725,30. Both issues added 67,341,909 shares to the Bank’s capital, representing an8.42% dilution over the previous stock base, net of treasury stock.

c) after the approval by General Meeting of Stockholders and ratification by the Brazilian Central Bank, theBank’s capital will total R$ 9,864,153,395.17 divided into 810,617,415 common shares, without par value.The table below shows the new composition of BB’s stock base:

%National treasuryPreviBNDESparTreasury sharesFree float

d) the remaining subscription bonuses total 15,993,142 "B" bonuses and 27,028,746 "C" bonuses, which areentitled to be exercised in the originally established periods – March 31, 2006 to June 30, 2006 and March31, 2011 to June 30, 2011, respectively.

(A free translation of the original in Portuguese)

Banco do Brasil S.A.Quarterly InformationBalance SheetIn thousands of reais

132

September 30 June 30 September 30 June 30(Unaudited) (Unaudited)

2004 2004 2004 2004

Current assets 122,653,597 116,893,394 Current liabilities 181,293,469 175,121,610

Available funds 16,668,752 15,840,683 Deposits (Note 10) 107,712,820 108,250,094 Demand deposits 30,190,776 29,425,435

Short-term interbank investments (Note 4) 16,865,378 12,526,914 Savings deposits 29,914,859 28,938,999 Open market investments 6,101,412 4,599,273 Interbank deposits 2,997,155 4,944,916 Interbank deposits 10,763,966 7,927,641 Time deposits 44,610,030 44,940,744

Marketable securities andDerivative financial instruments (Note 5) 16,040,814 15,603,323

Funds obtained in the open market37,602,925 33,035,075

Own portfolio 9,706,828 9,536,606 Own portfolio 32,737,894 28,767,277 Subject to repurchase commitments 5,362,084 4,407,757 Third-party portfolio 4,865,031 4,267,798 Restricted deposits – Central Bank 540,713 -- Restricted to guarantees provided -- -- Derivative financial instruments 431,189 1,658,960 Notes and securities 180,220 775,369

Foreign marketable securities 180,220 775,369

Interbank accounts 21,151,794 20,958,960 Interbank accounts 2,033,635 1,945,158 Payments and receipts pending settlement 2,099,725 2,082,323 Receipts and payments pending settlement 2,033,635 1,945,158 Restricted deposits Central Bank deposits 18,919,331 18,780,512 National Treasury – rural credit receivable 18,198 11,835 National Housing Financing System (SFH) 1,814 2,362 Interdepartmental accounts 1,851,654 1,188,613 Interbank onlendings 5,385 5,363 Third-party funds in transit 1,742,914 1,062,616 Correspondent banks 107,341 76,565 Internal transfers of funds 108,740 125,997

Interdepartmental accounts 108,315 13,300 Borrowings (Note 11) 12,193,767 9,927,584 Internal transfers of funds do 108,315 13,300 Foreign borrowings 12,193,767 9,927,584

Lending operations 35,611,806 36,091,765 Local onlendings – official institutions (Note 12) 1,757,299 1,625,038 Lending operations National Treasury 1,752,334 1,620,252


Quarterly InformationBalance SheetIn thousands of reais (continued)

133


2004 2004 2004 2004

Public sector (Note 6b) 712,748 443,047 National Economic Development Bank (BNDES) -- -- Private sector (Note 6b) 37,733,853 38,566,527 National Industrial Financing Authority (FINAME) 3,693 3,523 (Allowance for loan losses) (Notes 6e and 6f) (2,834,795) (2,917,809) Other institutions 1,272 1,263

Leasing operations 627 (1,582) Leases and subleases receivable Foreign onlendings 7,630 281,000 Public sector 14,426 7,317 Foreign onlendings 7,630 281,000 Private sector 210,161 189,175 (Unearned income from leasing operations) (206,259) (182,031) (Allowance for leasing losses) (Note 6e) (17,701) (16,043)

Other receivables 15,954,109 15,587,813 Derivative financial instruments (Note 5b) 297,865 1,986,470 Receivables on guarantees honored 41,286 28,690 Derivative financial instruments 297,865 1,986,470 Foreign exchange portfolio (Note 8a) 11,455,409 11,507,528 Income receivable 307,776 273,576 Other liabilities 17,655,654 16,387,928 Negotiation and intermediation of securities 41,211 44,668 Collection of taxes and social contributions 2,328,500 2,168,059 Specific credits (Note 8b) 264,955 258,068 Foreign exchange portfolio (Note 14a) 7,509,146 5,480,406 Special operations 1,355 1,355 Social and statutory 262,166 643,886 Sundry (Note 8c) 5,460,789 4,947,526 Taxes and social security charges 990,110 955,694 (Allowance for other losses) (Notes 6e and 6f) (1,618,672) (1,473,598) Negotiation and intermediation of securities 54,656 570,642

Financial and development funds (Note 14b) 115,441 35,036Other assets 252,002 272,218 Special operations 2,394 2,397 Shareholdings 4 4 Subordinated Debts (Note 14e) -- -- Other assets (Note 9) 391,235 397,591 Sundry (Note 14d) 6,393,241 6,531,808 (Allowance for losses) (200,906) (201,164) Prepaid expenses 61,669 75,787



134


2004 2004 2004 2004

Long-term receivables 108,360,887 105,964,237 Long-term liabilities 40,395,101 39,251,739

Interbank investments (Note 4) 1,693,955 1,947,995 Deposits (Note 10) 7,365,998 7,545,249 Open market investments 58,186 62,456 Interbank deposits 2,532,393 2,739,145 Interbank deposits 1,635,769 1,885,539 Time deposits 4,833,605 4,806,104

Funds obtained in the open market 4,400,324 4,096,636Marketable securities andDerivative financial instruments (Note 5) 55,079,219 54,251,348

Own portfolio 3,941,542 3,603,842

Own portfolio 20,066,119 21,567,608 Third-party portfolio 458,782 492,794 Subject to repurchase commitments 31,984,050 29,712,294 Restricted deposits - Central Bank 2,510,008 2,391,371 Restricted for guarantees provided 461,940 536,637 Notes and securities 587,486 621,340 Derivative financial instruments 57,102 43,438 Foreign marketable securities 587,486 621,340

Lending operations 34,342,684 33,149,645 Borrowings (Note 11) 3,822,804 3,944,012 Lending operations Foreign borrowings 3,822,804 3,944,012 Public sector (Note 6b) 3,839,559 4,203,478 Private sector (Note 6b) 32,786,159 30,905,189 (Allowance for loan losses) (Notes 6e and 6f) (2,283,034) (1,959,022)

Leasing operations 5,559 7,388 Local onlendings - official institutions (Note 12) 7,020,952 6,823,010 Leases and subleases receivable National Treasury 306,602 319,556 Public sector 25,647 13,007 National Economic Development Bank (BNDES) 3,483,681 3,321,797 Private sector 221,928 201,111 National Industrial Financing Authority (FINAME) 2,658,021 2,716,524 (Unearned income from leasing operations) (237,241) (202,706) Other institutions 572,648 465,133 (Allowance for leasing losses) (Note 6e) (4,775) (4,024)

Foreign onlendings 1,077 1,125 Foreign onlendings 1,077 1,125



135


2004 2004 2004 2004

Derivative financial instruments (Note 5b) 71,807 9,063 Derivative financial instruments 71,807 9,063

Other receivables 17,239,470 16,607,861 Receivables on guarantees honored -- -- Income receivable 46,546 35,402 Other liabilities 17,124,653 16,211,304 Specific credits (Note 8b) 264,995 258,069 Taxes and social security charges 22,868 27,815 Sundry (Note 8c) 17,057,865 16,428,028 Negotiation and intermediation of securities 3,703,927 3,646,786 (Allowance for other losses) (Notes 6e and 6f) (129,896) (113,638) Financial and development funds 1,698,433 1,789,990

Subordinated debts (Note 14e) 6,636,942 5,572,615 Sundry (Note 14d) 5,062,483 5,174,098

Deferred income 139,261 137,545Permanent assets 4,584,811 4,516,809 Deferred income 139,261 137,545

Investments 842,701 822,565 Stockholders' equity (Note 16) 13,771,464 12,863,546 Investments in subsidiaries and in associate companies (Note19) Domestic 819,416 803,333 Capital 10,301,716 8,366,189 Abroad -- -- Local residents 10,236,617 8,343,671 Other investments 231,279 234,227 Foreign residents 65,099 22,518 (Allowance for losses) (207,994) (214,995)

(Unpaid capital) (445,182) --Property and equipment in use 2,722,926 2,730,093 Land and buildings in use 2,270,368 2,275,115 Capital reserves 4,768 4,769 Other property and equipment in use 3,534,452 3,446,071 (Accumulated depreciation) (3,081,894) (2,991,093) Revaluation reserves 25,751 24,325



136


2004 2004 2004 2004

Leased assets 519,113 465,737 Leased assets 636,269 579,240 Revenue reserves 3,195,071 -- (Accumulated depreciation) (117,156) (113,503)

Adjustments to market value –Securities andderivatives (Note 16e) (17,437)

(51,237)

Deferred charges 500,071 498,414 Organization and expansion costs 906,622 882,197 Retained earnings 832,556 4,645,279 (Accumulated amortization) (406,551) (383,783)

(Treasury stocks) (125,779) (125,779)

Total 235,599,295 227,374,440 Total 235,599,295 227,374,440

The accompanying notes are an integral part of these financial statements.


Quarterly InformationBalance SheetIn thousands of reais

137

7.01.2004 to 9.30.2004 7.01.2004 to 9.30.2004 7.01.2003

Revenue from financial intermediation 7,215,988 7,215,988Lending operations 4,119,736 4,119,736

Leasing operations 73,779 73,779Marketable securities 2,660,472 2,660,472

Derivative financial instruments 21,572 21,572Foreign exchange -- --Compulsory investments 340,429 340,429

Expenses from financial intermediation (4,882,073) (4,882,073)Deposits and funds obtained in the open market (3,221,812) (3,221,812)Borrowings and onlendings (314,670) (314,670)

Leasing operations (50,750) (50,750)Net loss on exchange transaction (224,199) (224,199)Provision for credit losses (Note 6e) (1,070,642) (1,070,642)

Gross profit from financial transaction 2,333,915 2,333,915

Other operating income / expenses (969,401) (969,401)Services rendered (Note 14a) 1,716,648 1,716,648Personnel expenses (Note 14b) (1,743,945) (1,743,945)Other administrative expenses (Note 14c) (1,344,030) (1,344,030)Taxes (385,106) (385,106)

Equity in the earnings of associated and subsidiaries (Note 18) (274,697) (274,697)Other operating income (Note 14d) 2,637,452 2,637,452Other operating expenses (Note 14e) (1,575,723) (1,575,723)

Operating profit 1,364,514 1,364,514

Non-operating income (Note 14f) 80,432 80,432Income 94,878 94,878Expenses (14,446) (14,446)

Income before taxes and profit sharing 1,444,946 1,444,946

Income tax and social contribution (Note 16) (545,378) (545,378) Income tax (399,806) (399,806) Social contribution (146,771) (146,771) Deferred tax credits 1,199 1,199


Quarterly InformationBalance SheetIn thousands of reais

138

7.01.2004 to 9.30.2004 7.01.2004 to 9.30.2004 7.01.2003 Profit sharing (Note 21) (67,024) (67,024)

Net income 832,544 832,544

Number of shares 743,275,506 743,275,506Treasury shares (11,257,678) (11,257,678)Total shares used in the calculation of net income per share 732,017,829 732,017,829Net income per share 1.14 1.14

The accompanying notes are an integral part of these financial statements.

performance analysis and financial statements net financial margin 83 7.2.1 retail loan portfolio 87...

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