4Q09 Earnings Release

Transcription

1 4Q09 Earnings Release 1

2 Earnings Release 4Q09 São Paulo, February 10, 2010 Banco Daycoval S.A. ( Daycoval or Bank ) (BM&FBovespa: DAYC4 / Level 1 ADR: BDYVY), announced today its results for the fourth quarter of 2009 (4Q09). Except where otherwise stated, the financial and operating information herein is presented on a consolidated basis and in Brazilian Reais. Highlights Net income totaled R$82.5 million in 4Q09, for growth of 96.1% compared with 3Q09; Accumulated net income of 2009 reached R$211.1 million, for year over year growth of 5.5%; Return on average equity (ROAE) exceeding 21% and consistent evolution of profitability indicators; net interest margin of 13% in 4Q09 demonstrate The credit portfolio expanded 7.9%, ending 4Q09 on R$3,944.8 million; Focus on the middle market portfolio drove growth of 14.3% in the quarter; Loan loss provision (LLP) expense was significantly reduced, falling reversals, mainly in the middle market segment; 75.1% compared with 3Q09 thanks to Loan loss coverage respectively; LLP/loans more than 14 and 60 days past due improved to 155.9% and 211.6%, Efficiency ratio of 22. 6% in 4Q09 demonstratess adequate management of operating costs; Daycoval s global and local scale ratings were upgraded by two leading agencies during 4Q09; DAYC4 stock price gained 84.5% in Key Figures (R$ MM) 4Q09 3Q09 Chg. % 4Q08 Chg. % Chg. % Income from Financial Intermediation (1) % % % Income from Operation % % % Net Income Shareholders Equity , , % 2.8% % , % 1, , % 5.3% Total Assets 7, , % 6, % 7, , % Loan Portfolio (includes credit assignments) Funding 3, , , , % -1.6% 3, % 3, , % 3, , , % 7.2% Net Interest Margin (NIM) (% p.a.) 13.0% 12.2% 0.8 p.p 11.4% 1.6 p.p 12.1% 10.6% 1.5 p.p Return on Average Equity (ROAE) (% p.a.) 21.4% 10.7% 10.7 p.p 5.1% 16.3 p.p 12.9% 12.6% 0.3 p.p Efficiency Ratio (%) BIS Index (%) ) (2) 22.6% 23.2% 28.6% 29.3% -0.6 p.p -0.7 p.p 30.3% -7.7 p.p 22.5% 28.2% 0.4 p.p 28.6% 33.0% p.p 28.2% 0.4 p.p (1) A (2) E Adjusted in accordance with reclassification of exchange rate variation. Excludes R$5.9 million in expenses incurred for advance appropriation of commissions relating to assignment of Auto Loan FIDC and non recurring effects of adjustment to appropriation of commissions in Q09 Conference Call February 11, 2010 Portuguese/English (simultaneous translation) 14h30 BR 11:30 am US EST Tel: +55 (11) Tel: +1 (888) Code: Banco Daycoval Code: Banco Daycoval Investor Relations Carlos Lazar Natalie Ramalhoso IR Superintendent Analyst Tel: +55 (11) /1039 ri@daycoval.com.br 2

3 Message from Management Banco Daycoval maintained its recognized conservative profile and solid capital structure throughout We are convinced that these points were essential in enabling us to address the innumerable challenges we faced during the year, especially those raised by the global crisis. One of the most salient examples of this was the adoption of a stricter policy on renewal of past due loans, which obliged us to increase loan loss provisioning substantially for a time, but also evidenced the real conditions of the credit portfolio and supported us in foreclosing collaterals. As the market situation improved, especially in the second half, we noted a significant progress in funding conditions, and above all in the quality of our portfolio, with several reversals of provisions in the last quarter of the year. In addition, we pursued the best opportunities to expand lending, which ended the year totaling R$3.9 billion, i.e. returning to the level seen in 2008, despite a contraction of 11.2% in first half In this context it is also worth highlighting the middle market segment, which expanded 14.3% in 4Q09 alone, with higher margins than those seen in the pre crisis period. Despite the low level of leverage, net income reached R$211.1 million in 2009, for a return on average equity of 12.9% and an efficiency ratio of 22.5%. These indicators reflect the correctness of the strategy pursued and the conditions enjoyed by the Bank to continue creating shareholder value. Daycoval s global scale and local scale ratings were upgraded by Standard & Poor s and Fitch in 4Q09, in recognition of its adequately conservative management, which has consistently sought to place the Bank on a differentiated plane within the national financial system. Supported by all these achievements, we begin 2010 with optimism and aim to take part actively in the Brazilian credit market, as always focusing on the maintenance of adequate profitability and ever stronger relationships with all stakeholders. Macroeconomic Overview In strong contrast with the forecasts of most analysts at the start of 2009, the global and Brazilian economies ended the year in a highly positive condition. Governments in the major economies took several measures to cope with the recession, and some emerging economies, such as China and India, enjoyed fairly vigorous growth. Brazil succeeded in obtaining a differentiated position thanks to rapid signs of an economic recovery and the solidity achieved even after the advent of one of the worst crises in modern history. However, a more intense domestic recovery still faces a number of challenges, especially relating to interest rates and inflation. The expansionary monetary and fiscal policies introduced to mitigate the crisis stimulated consumption and boosted aggregate demand. Although inflation is under control, current market forecasts point to a rise in interest rates to counteract any additional inflation pressures. The extent of this rise is subject to uncertainty, particularly because 2010 is an election year. Another key concern is the management of exchange rate policy, given the rise in foreign direct and portfolio investment. The resulting local currency appreciation against the US dollar has hindered exports by making Brazilian goods less price competitive. Generally speaking, the global outlook for 2010 suggests moderate growth with the presence of some volatility, due to persistent uncertainty regarding some developed country economies. Brazilian GDP is expected to grow more than 5%, with inflation of about 4.5%, in line with the official target. In light of these expectations for the domestic economy, Management is optimistic about Daycoval s performance in the year and confident of its capacity to make good use of the many opportunities that will arise, especially in the middle market segment. 3

4 Profitability Net income rises to R$82.5 million in 4Q09, for growth of 96.1% in the quarter Net income in 4Q09 was R$82.5 million, up 96.1% compared with the previous quarter, mainly reflecting a lower level of loan loss provision (LLP) expense and growth in lending income due to expansion of the portfolio in the last six months. Net income in 2009 amounted to R$211.1 million, for year over year growth of 5.5%. Annualized net interest margin (NIM) adjusted for loan loss provision (LLP) and exchange rate variation followed the same trend as net income, reaching 13.0% in 4Q09, for an increase of 0.8 of a percentage point (pp) compared with the previous quarter due to a reduction in LLP expense and maintenance of margins. NIM in 2009 was 12.1%, up 1.5 pp in the year. As a result of the increase in net income, return on average equity (ROAE) reached 21.4%, compared with 10.7% in 3Q09, and return on average assets (ROAA) rose to 5.3% in 4Q09, from 2.8% in the previous quarter. These indicators also improved overall in 2009, with ROAE reaching 12.9% in the year and ROAA ending the period on 3.3%. Net Income (R$ MM) Net Interest Margin (NIM) (% p.a.) Return on Average Equity (ROAE) (% p.a.) Q08 3Q09 4Q09 4Q08 3Q09 4Q09 4Q08 3Q09 4Q09 Net Interest Margin (R$ MM) 4Q09 3Q09 Chg. % 4Q08 Chg. % Income from Financial Intermediation % % Gross Income from Financial Intermediation n.a % Exchange Rate Variation (1) % (0.2) n.a. (+) Loan Loss Provision % % Income from Financial Intermediation adjusted by Loan Loss Provision and Exchange Rate Variation (A) % % Average Remunerated Assets (B) 6, , % 6, % Interbank Investments 1, , % 1, % Securities and Derivatives % % Lending Operation (does not include assignments) 3, , % 3, % Trade Finance % % Net Interest Margin (% p.a.) (A/B) 13.0% 12.2% 0.8 p.p 11.4% 1.6 p.p (1) Reclassified from Other Operating Revenues/Expenditures (impact of exchange rate variation on liabilities and trade finance). 4

5 Asset Breakdown Assets Breakdown (R$ MM) 4Q09 3Q09 Chg. % 4Q08 Chg. % Total Assets 7, , % 6, % Interbank Investments 2, , % 1, % Securities and Derivatives % % Lending Operation 3, , % 3, % Other Assets % % ROAE e ROAA (R$ MM) 4Q09 3Q09 Chg. % 4Q08 Chg. % Net Income (A) % % Average Shareholders' Equity (B) 1, , % 1, % Average Assets (C) 6, , % 6, % Return on Average Equity (ROAE) (% p.a.) (A/B) 21.4% 10.7% 10.7 p.p 5.1% 16.3 p.p Return on Average Asset (ROAA) (% p.a.) (A/C) 5.3% 2.8% 2.5 p.p 1.2% 4.1 p.p Daycoval s asset balance grew 14.3% in the quarter, reflecting the improvement in economic conditions, which resulted in larger volumes of interbank deposits and credit portfolio growth. Loans accounted for 49.1% of total assets, compared with 50.6% in 3Q % 8.5% Assets Breakdown 4Q09 % Interbank Investments 30.3% Securities and Derivatives Lending Operation 13.1% Other Assets Liquidity Liquid Assets & Cash Decrease in cash position reflects growth of credit portfolio Breakdown of the Liquid Assets (R$ MM) 4Q09 3Q09 Chg. % 4Q08 Chg. % Cash and Cash Equivalents % % Liquidity Interbank Investments 1, , % % Money Market Investment (net) 1, , % % Interbank Investments % 10.1 n.a. Foreign Currency Investments % % Securities and Derivatives (Own Portfolio - Available for Sale) % % Net Interbank Accounts % % Total Liquid Assets 1, , % 1, % The balance of liquid assets fell 14.2% in the quarter, reaching US$1,789.3 million at end December 2009, owing to the increase in the volume of funds allocated to lending in the period. 5

6 Cash Evolution (R$ million) 1, , , , , , , , , , , , ,372.1 Dec 08 Jan 09 Feb 09 Mar 09 Apr 09 May 09 Jun 09 Jul 09 Aug 09 Sep 09 Oct 09 Nov 09 Dec 09 Daycoval ended 2009 with a comfortable cash position. In fact, it was higher than at the start of the year, demonstrating the conservative strategy pursued during the period. The decrease seen in the last quarter was due mainly to expansion of the credit portfolio and repayment of a tranche of the Bank s eurobond program. Cash available amounted at year end to R$1,372.1 million (opening position on December 31, 2009), with overnight repos accounting for 65.2% of the total and federal government securities available for sale accounting for 34.8%. Cash Breakdown (December/09) Cash / Total Deposits (%) 87.1% 65.2% 34.8% 64.8% 74.4% 73.3% 57.6% Federal Government Bonds Overnight Repos (Selic) 4Q08 1Q09 2Q09 3Q09 4Q09 Daycoval also tracks liquidity in terms of the ratio between the cash position and total deposits. As expected, this ratio fell to 57.6% in 4Q09 (from 73.3% in 3Q09), owing to the new cycle of growth in leverage. 6

7 Operating Performance Funding Deposits account for 67.9% of funding structure Funding (R$ MM) 4Q09 3Q09 Chg. % 4Q08 Chg. % Total Deposits 2, , % 1, % Demand Deposits + Other Deposits % % Time Deposits 2, , % 1, % Interbank Deposits % % Foreign Issuances % % Borrowing and Onlending % % Total 3, , % 3, % The total balance of funding amounted to R$3,508.8 million, down 1.6% in the quarter. The decrease was mainly due to repayment of a US$120 million tranche of the Bank s Eurobond program in October 2009, as anticipated in the Earnings Release for 3Q09. This tranche was not rolled over, since Management took the view that market conditions at the time were not suitable even though there was significant demand for this type of issue. Current conditions are more attractive and the Bank may therefore proceed to another foreign issue in the coming months. It is also worth noting that funding outgrew the credit portfolio (excluding assignments) in 2009: funding expanded 7.2% while lending rose 3.0% in the period. Deposits of all types accounted for 67.9% of total funding at the end of 4Q09, compared with 65.4% in the previous quarter. Borrowings and onlending obligations increased as a share of total funding to 21.5% in 4Q09, from 18.1% in 3Q09. Time deposits remained the largest source of funding, accounting for 60.5% of the total. This reflects a focus on adequate costs and maturities, achieved thanks to the solidity and credibility amassed by Daycoval throughout its history. In the same direction, during the quarter the Bank avoided rolling over the higher cost facilities obtained in first half Daycoval continued to reduce interbank funding in 4Q09 in order to prioritize funding via deposits from individual and corporate customers, where maturities are better matched with those of the credit portfolio. The 16.6% increase in borrowing and onlending obligations reflects growth in BNDES onlending in the period. Funding (R$ million) Funding Breakdown 4Q09 3, , , , ,508.8 Total Deposits 21.5% 67.9% Foreign Issuances 10.6% Borrowing and Onlending 4Q08 1Q09 2Q09 3Q09 4Q09 7

8 Total Deposits Breakdown (R$ MM) 4Q09 3Q09 Chg. % 4Q08 Chg. % Legal Entities + Demand Deposits 1, , % % Individuals % % Investment Funds % % Institutional % % Financial Institutions + Interbank Deposits % % Total 2, , % 1, % Total deposits amounted to R$2,381.8 million in 4Q09, for growth of 2.2% compared with the previous quarter. This growth was mainly due to increased demand for this type of investment by asset managers. As a result, Management opted to reduce exposure to deposits from financial institutions. It should also be noted that Daycoval has not so far taken any Time Deposits with Special Guarantees from the Credit Guarantee Fund (DPGE FGC), although it has an available limit of approximately R$3.2 billion for use of this instrument. Asset & Liability Management Positive gap between asset and liability maturities Assets and liabilities remained adequately aligned, minimizing exposure to rate and tenor mismatches, as evidenced by the charts below. Loans due in 12 months accounted in 4Q09 for 64.5% of the total portfolio, while only 55.3% of funding will fall due in the same period, showing a significant positive gap between assets and liabilities. Loan Portfolio Outstanding Operations (December/09) 6.2% 0.8% Funding Outstanding Operations (December/09) 1.3% 3.5% 28.5% 33.3% 15.0% 19.2% 31.2% 28.4% 32.6% Up to 3 months From 1 to 3 years Over 5 years From 3 to 12 months From 3 to 5 years No maturity From 3 to 12 months From 3 to 5 years Up to 3 months From 1 to 3 years Over 5 years Average Term of Loan Portfolio: 404 days Average Term of Funding Portfolio: 516 days Considering funding transactions without liquidity and a five year term for the Certificates of Deposit (CDs) issued under the Investment Agreement concluded in February 2009, average duration was 516 days in 4Q09 (341 days excluding the effects of the Agreement). The ratio of total funding to loans reached 96.7%, maintaining an adequate degree of compatibility between funding and lending in each segment, which avoids asset/liability mismatches and assures liquidity in all operations. The average duration of deposits, the principal source of funding for the middle market segment, was 699 days in 4Q09. 8

9 Distribution Daycoval operates a network of 27 branches in 17 states and the Federal District, thus offering nationwide coverage and a structure for delivering differentiated services to middle market customers. Daycoval also has a branch in Cayman Islands, which is an important instrument not only for funding, but also to provide commercial lines and facilitate relations with correspondent banks. In consumer finance, the Bank ended 2009 with five DayCred stores in operation, as well as working with correspondents as the main distributors of Daycoval s retail products. 27 Branches São Paulo SP HQ Alphaville Bom Retiro Brás Aracaju SE Belém PA Belo Horizonte MG Brasília DF Campinas SP Campo Grande MS Caxias do Sul RS Cuiabá MT Curitiba PR Florianópolis SC Fortaleza CE Guarulhos SP Goiânia GO Londrina PR Maceió AL Manaus AM Porto Alegre RS Recife PE Ribeirão Preto SP Rio de Janeiro RJ Salvador BA São Bernardo SP Vitória ES Asset Management Daycoval Asset Management was set up in 2004 to offer high net worth clients sophisticated solutions designed according to their individual investment profiles by a specialized team with in depth knowledge of the markets. Development of this area is currently part of Daycoval s strategy of increasing the number of products targeted to clients. Offering a range of investment funds and differentiated products and services such as portfolio management, Daycoval Asset Management has expanded consistently. The volume of funds under management totaled some R$620 million in December Asset Management AUM (R$ MM) Technology In 2009, Daycoval became the first middle market bank in Brazil to offer pre authorized direct debit under a system known as DDA. This pioneering e billing service enables customers and clients to settle online any utility bill, credit installment, insurance premium or other debt registered in their name with Daycoval or any other financial institution in the DDA system, using our internet banking platform. The benefits to users include agility, convenience and security. Another initiative was investment in the Bank s portal, especially Dayconnect, a dynamic and secure internet banking platform. As part of this service Daycoval implemented a secure and reliable authentication system called Daycoval e Code, to ensure that only authorized users with their own security cards and tokens can access Dayconnect. 9

10 Credit Portfolio Credit portfolio expands 7.9% in 4Q09, remaining stable year over year Loan Portfolio by Type (R$ MM) 4Q09 3Q09 Chg. % 4Q08 Chg. % Loans + Payroll Loans Portfolio Assignments 2, , % 2, % Discounted Trade Notes % % Financings / Trade Finance + Auto Loans Portfolio Assignments % 1, % Total 3, , % 3, % Daycoval strengthened its commercial initiatives to resume credit portfolio growth and ended the year at the same level as at end This can be seen in the chart on the right, which shows significant growth in the credit portfolio during second half The total portfolio including assignments reached R$3,944.8 million in December 2009, for growth of 7.9% compared with 3Q09. This was the fastest rate of quarterover quarter growth in the year. Excluding credit assignments, the portfolio totaled R$3,814.8 million in 4Q09. 3, This growth is even more significant considering the steady contraction in the auto loan segment seen in recent periods. An analysis of middle market loans and payroll loans, currently the two main segments of the portfolio, shows growth of 12.1% in 4Q09 compared with 3Q09 and 6.5% in 2009 compared with These numbers do not include operations relating to credit letters, sureties and avals, which totaled R$88.2 million at the end of 4Q09. 3,705.5 Total Loan Portfolio R$ (MM) 3, , , , , , , , Q08 1Q09 2Q09 3Q09 4Q09 Assignments Loan Portfolio by Segment (R$ MM) 4Q09 3Q09 Chg. % 4Q08 Chg. % Middle Market / Other 2, , % 2, % Trade Finance % % Total Middle Market + Trade Finance 2, , % 2, % Payroll Loans % % Payroll Loans Portfolio Assignments % % Total Payroll Loans 1, % % Auto Loans % % Auto Loans Portfolio Assignments % % Total Auto Loans % % Direct Credit to Consumers (DCC) % 5.6 n.a. Total Credit Portfolio 3, , % 3, % Middle market loans plus trade finance accounted for 56.6% of the total portfolio including assignments in 4Q09 (53.9% in 3Q09), reflecting a focus on this segment in sales and marketing. Loans to individuals (payroll + auto loans + credit to consumer / other) accounted for 43.4%, down from 46.1% in 3Q09. The decrease derived from the strategy adopted by Daycoval to reduce origination of auto loans while prioritizing loans to small and medium enterprises, which have accounted for a growing share of the total portfolio in recent quarters. 10

11 Vehicles 16.2% DCC + Other 0.6% December/09 Middle Market + Trade Finance 56.6% Vehicles 19.3% DCC + Other 0.6% September/09 Middle Market + Trade Finance 53.9% Vehicles 22.4% DCC + Other 0.1% December/08 Middle Market + Trade Finance 55.9% Payroll 26.6% Payroll 26.2% Payroll 21.6% Middle Market: Loans to small and medium enterprises totaled R$2,042.7 million at end December 2009, growing 14.3% in the quarter and remaining stable year over year. In line with the Bank s strategy, this segment expanded its share of the total credit portfolio to 51.8%, or 2.9 pp more than in the previous quarter. Hiring of managers, product launches and new campaigns to win business contributed to expansion in 4Q09 and will enable Daycoval to continue growing the segment in The balance of the trade finance portfolio, which also targets the middle market segment, totaled R$188.9 million in 4Q09, for growth of 2.2% compared with 3Q09. This improvement reflected a more favorable business environment for these transactions, especially by importers. Daycoval also operates as an accredited onlending agent for BNDES, the national development bank, offering agility and differentiated service for the Bank s small and medium enterprise clients. This segment expanded strongly in the period, reaching about R$100 million at end December 2009, up from R$40 million in 3Q09. DayCred, Banco Daycoval s finance house, offers loans to individuals, especially payroll loans to salaried employees in the public and private sectors, and auto loans, among other products and services. Payroll Loans: conditions for payroll lending remained attractive for Daycoval in the period, offering an adequate risk return ratio, particularly in the case of loans to publicsector employees. Accordingly, the volume of payroll loans including the assigned portion totaled R$1,051.8 million at end December 2009, for growth of 9.9% in the quarter and 22.5% in the year. The Bank opted to focus on growing the more solid agreements with the national social security system (INSS) and the Army, which together accounted at end 2009 for 62.0% of total payroll lending (59.3% in 3Q09). Origination rose 28.0% to R$202.5 million in 4Q09. New loans extended via the INSS and Army accounted for 72.1% of total origination in 4Q09 (78.6% in 3Q09). Breakdown of Payroll Portfolio (includes credit assignments) December/09 Municipalities 7.5% Courts 8.6% Other 6.0% Private 1.0% INSS 39.5% Army 22.5% Federal Government 14.9% At end December 2009, the payroll loan segment comprised 276,000 contracts, for an average ticket of R$4,

12 Origination of Payroll Loans (R$ MM) Q08 1Q09 2Q09 3Q09 4Q09 Breakdown of Payroll Origination 4Q09 Army 45.0% INSS 27.1% Federal Government 16.5% Auto Loans: In line with the strategy adopted in 4Q08 to reduce the volume of auto loans, the balance of this segment of the portfolio ended 2009 on R$637.4 million including the assigned portion, for a decrease of 9.7% in 4Q09 compared with the previous quarter and of 28.5% year over year. Small vehicles continued to account for the largest share (including the assigned portion), with 66.2% of total volume at end Origination rose in 4Q09 compared with the previous quarter, totaling R$25.9 million, of which small vehicles accounted for 62.2% and heavy vehicles for 37.5%. Breakdown of Auto Loans Portfolio (includes credit assignments) December/09 Origination of Auto Loans (R$ MM) Heavy duty Vehicles 20.7% Small Vehicles 66.2% Private 0.5% Municipalities 4.9% Courts 5.3% Others 0.7% Motorcycles 13.1% 4Q08 1Q09 2Q09 3Q09 4Q09 Considering the total balance of payments receivable (PMTs) from the start of operations until 3Q09, i.e. only installments due in or before September 2009, the liquidity of the auto loan portfolio was 91.1% at the end of 4Q09, for no change compared with the previous quarter. Liquidity of the Auto Loans Portfolio - Aug-06 to Sep-09 R$ (MM) % Accum. PMTs received in advance % 33.6% PMTs received on date of maturity % 46.8% PMTs received with delay of 30 days % 77.6% PMTs received with delay of 60 days % 85.2% PMTs received with delay of 90 days % 87.9% PMTs received with delay of 120 days % 89.1% PMTs received over 120 days % 91.1% PMT s overdue % 100.0% Liquidity of the Auto Loans Portfolio % Outstanding PMT s Total Amount up to September/ % Direct Credit to Consumer (DCC): In 2009 Daycoval began extending consumer finance through partnerships with a number of retailers, basically in the states of São Paulo and Rio de Janeiro. This type of credit, which is guaranteed by predated checks, demonstrates the Bank s capacity to develop products and solutions for its customers, even in new markets. The volume of credit to consumer totaled R$24.0 million in 4Q09. Operations will be implemented in other regions of Brazil in forthcoming periods. 12

13 Credit Portfolio Quality For a better understanding of Daycoval s credit quality, the following charts show loan risk ratings and characteristics according to Central Bank rules, as well as the respective shares of the total portfolio and loan loss provisions in 4Q09. The items relating to assigned loans assume provisioning in accordance with their characteristics, excluding the Auto Loan FIDC (R$187.5 million): Rating Required Banco Daycoval - R$ MM Provision Loans % Provision AA 0.0% % - A 0.5% 1, % 7.9 B 1.0% 1, % 15.3 C 3.0% % 3.8 D 10.0% % 5.4 E 30.0% % 11.2 F 50.0% % 18.2 G 70.0% % 16.2 H 100.0% % Subtotal 3, % Credit Assignments % 1.0 Total 3, % Middle Market/Trade Finance (R$ MM) Payroll Loans (R$ MM) 4Q09 Loans % Provision 4Q09 Loans % Provision AA - C 2, % 18.0 AA - C % 5.2 D % 2.6 D % 0.7 E % 6.1 E % 1.2 F % 11.5 F % 0.9 G % 8.0 G % 1.2 H % 64.8 H % 16.3 Subtotal 2, % Subtotal % Credit Assignment % 0.4 Total 2, % Total 1, % 25.9 Auto Loans (R$ MM) DCC / Other (R$ MM) 4Q09 Loans % Provision 4Q09 Loans % Provision AA - C % 3.8 AA - C % 0.1 D % 2.0 D % 0.0 E % 3.8 E % 0.1 F % 5.6 F % 0.1 G % 6.9 G % 0.2 H % 42.9 H % 0.9 Subtotal % % 1.4 Credit Assignment % 0.6 Credit Assignment Total % % 1.4 The coverage ratio between total loan loss provisioning and the total credit portfolio including assignments fell 2 pp, from 7.4% in 3Q09 to 5.4% in 4Q09. The middle market segment contributed most to this decrease, with LLP coverage in this segment falling from 7.7% in 3Q09 to 5.0% in 4Q09. In payroll loans and auto loans, LLP coverage remained practically unchanged on 2.5% and 14.6% respectively. 13

14 Loan Loss Provision (LLP) (1) Reduction in provisioning reflects substantial improvement in portfolio quality For a better understanding of the change in LLP, we recommend analysis of the nominal amounts in the charts below, which track provisioning in the quarterly periods concerned: Loan Loss Provision (LLP) (R$ MM) 4Q09 3Q09 Chg. % 4Q08 Chg. % Chg. % Balance at the Begining of the Period % % % Establishment of Provision % % % Middle Market + Trade Finance (4.1) 36.8 n.a n.a % Payroll % % % Auto % % % DCC + Other % % n.a. Write-offs (72.1) (59.4) 21.3% (33.1) 117.5% (219.9) (68.1) 222.9% Middle Market + Trade Finance (37.6) (29.8) 26.4% (21.3) 76.6% (114.2) (42.7) 167.5% Retail (34.5) (29.7) 16.3% (11.8) 193.3% (105.7) (25.4) n.a. Final Balance (R$ MM) % % % Write-offs / Total Loan Portfolio (%) 2.0% 1.8% 0.2 p.p 1.0% 1.0 p.p 6.1% 2.0% 4.1 p.p Recovered Loans % % n.a. (1) Banco Daycoval S.A. non consolidated. LLP totaled R$17.0 million in 4Q09, down 75.1% from R$68.2 million in the previous quarter. The decrease was due to several reversals effected after the economic situation improved, especially for small and medium enterprises in various sectors. It should be noted that the conservative provisioning strategy adopted by the Bank, which led to expansion of LLP in the first nine months of 2009, assured a better analysis of possible problems due to borrower insolvency. As mentioned by Management in the previous quarterly release, the more favorable economic and financial environment is expected to lead to a return to historical levels for this indicator. In this context, it is significant that LLP rose 35.5% year over year in 2009 to R$239.5 million (from R$176.9 million in 2008), while the credit portfolio contracted 17.0% on average. Similarly, it is important to note that the volume of loans written off reached R$219.9 million in 2009, for growth of 222.9% year over year. This poses several challenges with regard to possible future recoveries. In 2009, recovered loans amounted to R$28.8 million, demonstrating the success of Daycoval s initiatives to collect from delinquent borrowers. Overdue Loans (R$ MM) 4Q09 3Q09 Chg. % 4Q08 Chg. % Overdue Loans more than 14 days past due % % Middle Market + Trade Finance % % Payroll % % Auto % % DCC + Other 119.9% 95.6% 0.3 p.p 23.6% n.a. LLP Balance / Overdue Loans > 14 days (%) 155.9% 131.6% 24.3 p.p 80.6% 75.3 p.p Overdue Loans more than 60 days past due % % Middle Market + Trade Finance % % Payroll % % Auto % % DCC + Other % 0.1 n.a. LLP Balance / Overdue Loans > 60 days (%) 211.6% 166.2% 45.4 p.p 144.3% 67.3 p.p Confirming the improvement in credit portfolio quality in 4Q09, the proportion of loans more than 14 and 60 days past due fell significantly compared with the previous quarter, as can be seen in the table above. The top performer in this regard was middle market + trade finance, with the volume of loans more than 14 days past due falling 42.2% in the quarter to R$86.1 million, and the volume of loans more than 60 days past due falling 45.7% to R$66.8 million. This 14

15 reflected an economic and financial recovery by several clients who resumed timely repayment after a period of delinquency. Accordingly, the ratio of LLP to past due loans also rose substantially. In 4Q09 this ratio was 155.9% for loans more than 14 days past due and 211.6% for loans more than 60 days past due. Capital Structure Low level of leverage maintained Shareholders Equity Shareholders equity totaled R$1,692.7 million at end December 2009, for year over year growth of 2.8% even considering the effects of the payment of interest on equity and the share buyback program. Capital Adequacy (Basel Ratio) Central Bank of Brazil Communiqués (2004) and (2007) establish guidelines, procedures and the implementation timetable for the Revised International Capital Framework known as Basel II, stipulating criteria for the allocation of regulatory capital based on the risks incurred by financial institutions. On August 29, 2007, the Central Bank issued Resolution 3490 establishing new criteria for computing the Tier 1 capital requirement (mainly stockholders equity). These new rules came into force on July 1, Daycoval s Basel II ratio calculated by the standard method was 28.6% as at December 31, 2009 (29.3% in 3Q09), thus maintaining capital adequacy relative to risk weighted assets. BIS Ratio (%) Q08 3Q09 4Q09 Loan Portfolio / Shareholders Equity Daycoval ended 4Q09 with leverage of 2.1 measured by the ratio of loans to equity, compared with 2.0 in 3Q09. This indicator continues to evidence Daycoval s capacity to participate actively in a more intense recovery of the Brazilian credit market. Loan Portfolio / Shareholders' Equity (times) Q08 3Q09 4Q09 15

16 Financial Performance Income from lending rises 9.7% compared with 3Q09 Income from Financial Intermediation Income from Financial Intermediation (R$ MM) 4Q09 3Q09 Chg. % 4Q08 Chg. % Loans Operations % % Middle Marlket + Trade Finance % % Payroll % % Auto % % Direct Credit to Consumer + Other % 0.4 n.a. Foreign Exchange Variation (Middle Market) (1.5) (4.1) -63.5% % Foreign Exchange Variation (Trade Finance) - - n.a n.a. Securities Operations % % Derivatives (1) (18.9) (89.4) -78.9% % Foreign Exchange Operations n.a % Total % % Adjustment on Derivatives % (146.8) % Adjustment on Foreign Exchange Operations (2.3) 4.9 n.a. (0.8) 187.3% Reclassified from Expenses from Financial Intermediation - (1.5) n.a. - n.a. Reclassified from Others Operating Income/Expenses (2.3) % (0.8) n.a. Adjusted Total % % (1) In 4Q09, 3Q09 and 4Q08, includes ( ) R$21.0 million, ( ) R$87.2 million and R$146.8 million respectively with regard to hedging of foreign issues. Income from financial intermediation adjusted as shown in the above chart totaled R$276.3 million in 4Q09, for growth of 5.6% compared with the previous quarter. The highlight was income from lending operations, which totaled R$211.1 million, up 9.7% compared with 3Q09. The increase mainly reflected Daycoval s efforts to keep the return on lending operations above the levels seen before the crisis. Exchange rate variation relating to onlending in compliance with Central Bank Resolution 2770 (foreign currency loans) caused a negative impact of R$1.5 million in 4Q09. Income from securities operations totaled R$58.0 million in 4Q09, for a decrease of 12.8% compared with the previous quarter. This source accounted for 21.0% of Daycoval s total adjusted income in 4Q09. Daycoval obtained a negative result of R$18.9 million from derivatives trading, basically due to the impact of local currency appreciation on ( ) R$21.0 million in hedging of foreign issues, due to the Real appreciation. The results of foreign exchange transactions have been reclassified to account for local currency appreciation and to assure a better understanding of changes in the period. 16

17 Expenses on Financial Intermediation Expenses on Financial Intermediation (R$ MM) 4Q09 3Q09 Chg. % 4Q08 Chg. % Funding Operations (75.0) (74.5) 0.6% (281.8) -73.4% Borrowings and Onlendings Operations (11.7) (12.4) -6.0% (111.4) -89.5% Foreing Exchange Operations - (1.5) n.a. - n.a. Loan Loss Provision (LLP) (17.0) (68.2) -75.1% (67.7) -74.9% Total (103.7) (156.6) -33.8% (460.9) -77.5% Adjustment on Foreign Exchange Operations (1) n.a. (0.2) n.a. Adjusted Total (103.7) (155.1) -33.1% (461.1) -77.5% (1) In 3Q09 and 4Q08, reclassified to Financial Intermediation Income (result of foreign exchange transactions). Expenses on financial intermediation adjusted in accordance with the above chart totaled R$103.7 million in 4Q09, compared with R$155.1 million in 3Q09. The main reason for the decrease was the reduction in LLP expense. Expenses Efficiency ratio remains one of best in peer group Personnel and Administrative Expenses (R$ MM) 4Q09 3Q09 Chg. % 4Q08 Chg. % Personnel Expenses (17.8) (15.5) 14.7% (18.9) -6.0% Administrative Expenses (17.5) (15.7) 11.6% (18.7) -6.5% Subtotal (35.3) (31.2) 13.1% (37.6) -6.2% Commission Expenses (total) (9.3) (11.0) -15.7% (17.8) -47.9% Payroll (4.9) (6.1) -19.9% (10.0) -51.2% Auto Loans (1) (4.0) (4.5) -11.3% (7.7) -47.9% Direct Credit to Consumer (DCC) (0.4) (0.4) 0.0% (0.1) n.a. Total (44.6) (42.2) 5.6% (55.4) -19.6% (1) In 4Q08, excludes R$10.8 million in expenses incurred for advance appropriation of commissions relating to operating agreements with promoters. Personnel Expenses Personnel expenses totaled R$17.8 million in 4Q09, for growth of 14.7% compared with the previous quarter, mainly due to a 6% increase in payroll resulting from a pay rise awarded under a collective bargaining agreement and paid retroactively to September Another significant factor was a rise of some 10% in the number of employees over the last six months. The workforce totaled 593 at end December 2009, with the sales force (front office) comprising 133 people. Administrative Expenses Administrative expenses amounted in 4Q09 to R$17.5 million, up 11.6% from R$15.7 million in 3Q09. The increase was due mainly to debt recovery efforts, especially in the middle market and auto loan segment. Commission Expenses Commission expenses continue to fall, reaching R$9.3 million in 4Q09. It should be stressed that this expense will tend to continue declining owing to a change in the form of payment effected since June 2008, when loans began to be booked by the total effective cost method. 17

18 Other Operating Revenues/Expenses Other operating revenues amounted to R$31.8 million in 4Q09, with R$24.5 million of this total relating to the effects of local currency appreciation on liabilities. Other operating expenditures amounted to R$10.8 million, of which R$6.4 million related to the impact of exchange rate variation on loans (R$6.0 million) and on dollar investments (R$0.4 million) in the period. The net result of other operating revenues (expenses) in 4Q09 excluding the effects of exchange rate variation was plus R$3.0 million (minus R$1.7 million in 3Q09), due mainly to the effects of adhering to the Federal Revenue s tax recovery program (REFIS Amnesty, Law 11941/09), with installments and debt settlement amounting to R$1.6 million. Profit Sharing Programs (PPR & PLR) Provisioning for the PPR and PLR profit sharing programs totaled R$6.3 million in 4Q09. Total provisioning in 2009 was R$14.6 million, compared with R$17.5 million in Efficiency Ratio Efficiency Ratio (R$ MM) 4Q09 3Q09 Chg. % 4Q08 Chg. % (+) Personnel + Administrative Expenses + Commisions (44.6) (42.2) 5.6% (55.4) -19.6% (+) Depreciation and Amortization % % Total expenses (A) (44.1) (41.7) 5.7% (54.7) -19.5% (+) Income from Financial Intermediation + LLP % % (+) Income from Services Provided % % (+) Exchange Rate Variation % - n.a. Total (B) % % Efficiency Ratio (A/B) (%) 22.6% 23.2% -0.6 p.p 30.3% -7.7 p.p The efficiency ratio was 22.6% in 4Q09, down 0.6 pp compared with 3Q09, evidencing Daycoval s consistent pursuit of profitability. The efficiency ratio considering provisions for expenses with profit sharing programs (PPR and PLR) would be 25.8% in 4Q09. In the last 12 months the efficiency ratio excluding expenses with the PPR and PLR profit sharing programs was 22.5%. Ratings It is important to stress that two of the leading rating agencies, Standard & Poor s and Fitch Ratings, which maintained their assessment of Daycoval throughout the turbulence created by the global crisis, awarded global and national scale upgrades in 4Q09, in recognition of the Bank s adequately conservative management, which has consistently sought to place it on a differentiated plane within the national financial system. Global Scale Long Term BB Short Term B National Scale Long Term braa Short Term bra 2 Stable November 2009 Global Scale Long Term BB Short Term B National Scale Long Term A + (bra) Short Term F1 (bra) Stable December 2009 National Scale Long Term AA Short Term A 1 Low Risk mid term Index Stable October 2009 January

19 Standard & Poor s (S&P) upgraded its long term global scale rating to BB and raised its long term local scale rating to braa. Fitch upgraded its long term foreign and local currency IDRs (Issuer Default Ratings) to BB (from BB ) and raised its long term national rating to A+(bra) (from A(bra) ). Both agencies kept the outlook on stable. The ratings shown in the chart above evidence the low level of risk and the solidity achieved by Daycoval in its operations. The agencies complete reports can be found on our Investor Relations website. The reports issued by rating agencies are taken very seriously by the financial markets but should not be construed as an investment recommendation. Capital Markets DAYC4 stock price appreciates 84.5% in 2009 Share Buyback Programs In the first Share Buyback Program, which ended on July 31, 2009, Daycoval repurchased 6,309,000 preferred shares at an average price of R$6.18 per share. On July 31, 2009, an Extraordinary Stockholder Meeting approved the cancellation of these preferred shares then held in treasury (6,309,000), without any decrease in registered capital. This cancellation was ratified by the Central Bank on October 2, After cancellation of these shares, the total number outstanding fell to 216,324,512, of which 142,418,179 were common shares and 73,906,333 were preferred shares (DAYC4). December Preferred Shares (million) 54,173,220 Share Price (DAYC4) (R$/share) 9.78 Avg. Daily Traded Vol. 4Q09 (R$ million) 1.31 Market Capitalization (R$ billion) 2.12 A second Share Buyback Program was approved by the Board of Directors on October 7, 2009, authorizing repurchase of up to 1,557,392 preferred shares, equivalent to 2.8% of free float, to be held in treasury for later sale or cancellation. Under this second buyback program, all the shares allowed had been repurchased by January 20, 2010, for an average price of R$9.33 per share. Swaps Meetings of the Board of Directors held on September 22, 2009, and January 22, 2010, approved the signature of contracts for the exchange of the results of future financial flows (swaps) with Credit Suisse Próprio Fundo de Investimento Multimercado (Crédit Suisse), with a reference value of up to R$20.0 million and 5 million preferred shares respectively. Under the agreements Daycoval hedges against a decline in the price of DAYC4 preferred stock and in exchange undertakes to pay 100% of the CDI (interbank deposit) rate plus a spread determined by Credit Suisse. The free float will not change as a result and the results of these contracts, upon expiration, shall be settled financially. Stock Performance Banco Daycoval (DAYC4) has been listed on Level 1 of the São Paulo Stock Exchange (BM&FBovespa) since June The stock has been part of the Special Corporate Governance Stock Index (IGC) and Special Tag Along Stock Index (ITAG) since it began trading. DAYC4 traded in all sessions in The number of trades totaled 12,000 in the year, comprising 38.2 million shares. Average daily trading volume was R$1.1 million. On December 30, 2009, the free float was 25.0%, equivalent to 54.2 million preferred (PN) shares, and the stock price was R$9.78, giving Daycoval a market capitalization of R$2.1 billion. DAYC4 gained 13.7% in 4Q09 and 84.5% in 2009, compared with gains of 11.5% and 82.7% respectively for the Ibovespa Index, 11.9% and 83.4% for the IGC, and 10.5% and 84.9% for the ITAG. DAYC4 is currently covered by 14 different local and international research analysts. 19

20 Shareholder Remuneration A meeting of the Board of Directors held on December 22, 2009, ratified a proposal approved by the Executive Committee to pay supplementary interest on equity for fiscal 2009, in the amount of R$21,000, Payment was disbursed on January 15, The bank s shares traded ex right to interest on equity as of December 23, 2009 inclusive. Interest on equity paid by Daycoval for fiscal 2009 amounted all told to R$94,565, (ninety four million five hundred sixty five thousand eight hundred seventy five reais and forty nine cents ). Level 1 ADR Program Daycoval was the first middle market institution in Brazil to implement a Level 1 ADR program trading in the over thecounter (OTC) market, with the aim of building even closer ties with investors in the United States and other parts of the world. Each ADR issued and traded in the OTC market represents two (2) preferred shares in the stock of Banco Daycoval. Forthcoming Events 4Q09 Earnings Conference Call: In Portuguese February 11, h30 BR (11:30 AM US EST) Dial In Number: +55 (11) Code: Banco Daycoval In English (simultaneous translation) February 11, :30 am US EST (14h30 BR) Dial In Number: +1 (888) (786) Code: Banco Daycoval About Banco Daycoval Banco Daycoval S.A. is a financial institution that specializes in the middle market segment and has significant activity in the retail business. Headquartered in São Paulo, it has 27 branches in 25 cities of 17 states across Brazil, as well as the Federal District. In 2009 its credit portfolio reached R$3.9 billion, with total assets of R$7.1 billion and net income of R$211.1 million. Daycoval pursues a conservative strategy and stands out for high liquidity and low leverage, as evidenced by its Basel II Ratio of 28.6% in December In September 2009, the Brazilian Central Bank s ranking of all private sector banks put Daycoval in 14th place by shareholders equity and 28th by total assets less financial intermediation income. Daycoval has won important ratings, including an A+ from Fitch Ratings, braa from Standard & Poor s, and AA from Austin Rating, all of which are national scale long term ratings. 20

21 Glossary Basel Accord: National Monetary Council (CMN) Resolution 2099, dated August 17, 1994, requires financial institutions to maintain equity at certain minimum levels as a percentage of total risk weighted assets in compliance with the Basel Accord supervised by the Bank for International Settlements (BIS). CDI: Certificate of Interbank Certificate of Deposit fixed income security issued by financial institutions. Central Bank Resolution nº 2,682: Rules for rating loans and constituting loan loss allowances issued by the Brazilian Central Bank. Central Bank Resolution nº 2,770: governs loans between borrowers residing or domiciled in Brazil and lenders residing or domiciled abroad. Corporate Governance Level 1: Introduced by the São Paulo Stock Exchange (Bovespa) on July 26, 2001, as a special trading segment for companies whose management and controlling shareholders voluntarily undertake to comply with stricter requirements for transparency, disclosure and minority shareholder rights than those imposed by law. Among the requirements for listing on Level I are (i) assuring a free float of at least 25%, (ii) issuing stock only through public offerings, (iii) full quarterly disclosure of financial information and continuously improving communication with investors and other stakeholders, (iv) enhanced transparency, (v) publication of shareholder agreements and stock option programs, and (vi) publication of an annual corporate event calendar. Efficiency Ratio: Defined by Banco Daycoval as the percentage produced by dividing (a) payroll expense plus other administrative expenses less depreciation and amortization (included in other administrative expenses) by (b) interest income before loan loss allowance plus fee income and foreign exchange translation gain on liabilities. Efficiency ratio is not defined as part of Brazilian GAAP and is not a standardized metric: Daycoval s definition may therefore not be compatible with the definitions of efficiency ratio used by other banks. Daycoval s management uses efficiency ratio to measure operating performance of the Bank. Middle Market: Banco Daycoval defines the middle market segment as comprising corporate clients with gross annual sales of between R$ 8.0 million and R$ million. Net Interest Margin (NIM): Interest income before loan loss allowance plus foreign exchange translation gain on liabilities divided by the average balance of interest bearing assets expressed as a percentage. Rating: Analysis and assessment of the creditworthiness of a corporate or government bond issuer and of the bond s relative safety from an investment standpoint based mainly on the issuer's ability to repay principal and make interest payments. ROAA: Return on Average Assets net income divided by average assets in the period, expressed as a percentage. ROAE: Return on Average Equity net income divided by average equity in the period, expressed as a percentage. SELIC Rate: The Brazilian Central Bank s overnight lending rate, generally considered the basic rate of interest for the Brazilian financial system and the main instrument of monetary policy (SELIC is the local acronym for Special System of Clearance and Custody). Tag Along: Guaranteed in Brazil by Law 10303/01 ( Lei das SAs or company law), assuring the right of minority shareholders to participate pro rata and on identical terms in any sale of a controlling interest by the controlling shareholder(s). Trade Finance: Credit facilities extended to middle market clients to finance import and export transactions via foreign exchange, letters of credit and other products. Disclaimer This material may include estimates and forward looking statements. These estimates and forward looking statements are to a large extent based on current expectations and projections about future events and financial trends that affect or may come to affect the Bank s business. Many important factors may adversely affect the results of Banco Daycoval as described in management s estimates and forward looking statements. These factors include, but are not limited to, the following: the performance of the Brazilian and international economies; fiscal, foreign exchange and monetary policies; increasing competition in the middle market segment; Banco Daycoval s ability to obtain funding for its operations; and changes to Central Bank rules and regulations. The words believe, may, could, seek, estimate, continue, anticipate, plan, expect and other similar words are used to identify estimates and projections. Considerations involving estimates and forward looking statements include information relating to results and projections, strategies, competitive positioning, the industry environment, growth opportunities, the effects of future regulation, and the effects of competition. Such estimates and projections are valid only at the time of writing. Daycoval does not undertake to publish updates or review any of these estimates in response to new information, future events or other factors. In light of the risks and uncertainties involved, the estimates and forward looking statements contained herein may not materialize. Given these limitations, shareholders and investors should not make decisions based on the estimates, projections and forward looking statements contained in this material. 21