2Q10 Earnings Release

Transcription

1 2Q10 Earnings Release 1

2 São Paulo, August 2, 2010 Banco Daycoval S.A. ( Daycoval or the Bank ) (BM&FBovespa: DAYC4 / Level 1 ADR: BDYVY), announced today its results for the second quarter of 2010 (2Q10). Except where otherwise stated, the financial and operating information herein is presented on a consolidated basis and in Brazilian Reais. 2Q10 Highlights Net income of R$64.2 million, rising 17.4% compared with previous quarter ROAE rises to 16% and NIM- A (1) reaches 11.7% Operating profit of R$100.3 million, rising 39.3% compared with previous quarter Balance of Credit Portfolio up 11.8% to R$4,786.8 million, rising 31% in last 12 months Middle Market Portfolio up 17.3% compared with previous quarter, increasing share of total credit portfolio to 62% Debt Recovery continues, reaching R$13 million, up from R$6.1 million in previous quarter Total Funding up 13.3% compared with previous quarter, boosted by US$165 million four-year syndicated loan from IFC (World Bank Group) Efficiency ratio of 24.1%, demonstrating adequate management of operating costs. (1) New methodology excluding repurchase agreements tri-party repos outstanding. (1) Adjusted in accordance with reclassification of exchange-rate variation, when applicable. (2) Includes assignments, sureties and avals. (3) New methodology excluding repurchase agreements tri-party repos outstanding. 2Q10 Conference Call August 3, 2010 Portuguese 10h00 BR 9:00 AM US EST Tel.: +55 (11) Code: Banco Daycoval +55 (11) (11) ri@daycoval.com.br Investor Relations Daniela Warchavsky Head Erich Romani Manager Natalie Ramalhoso Analyst 2

3 Message from Management Daycoval s credit portfolio continued to expand strongly in first-half 2010, reaching a balance of R$4,786.8 million on June 30, 2010, for 31% growth year over year. The highlight was loans to small and medium enterprises (middle market), which reached a balance of R$2,997.3 million, for 17.3% growth compared with 1Q10. Margins remained stable, at similar levels as in recent quarters, while delinquencies fell. Our main business lines are middle-market loans and payroll loans. With regard to funding, the highlight in 2Q10 was a syndicated loan from IFC (International Finance Corporation, part of the World Bank Group) worth approximately US$165 million. The amount and attractive rate evidenced Daycoval s credibility once again despite the European fiscal crisis. The IFC facility will help Daycoval not only to diversify its funding base but also to lengthen average duration while at the same time strengthening the foundations for sustained support to small and medium enterprises, thus reflecting the Bank s conservative strategy. With regard to credit portfolio growth, we believe ROE will return to a higher level if we succeed in maintaining this pace. Brazil s economic fundamentals are sound and, despite external turbulence, we are optimistic about the next 12 months. Macroeconomic Overview The global economy continues to display signs of uncertainty despite the recovery in some countries. Instability in Europe remains a cause for concern, as the aid packages approved for the most fragile economies have been insufficient to calm the financial markets. Economic agents are increasingly risk-averse, and stock prices have fallen sharply, interrupting the rallies in the mature economies and reflecting the strength of the dollar against some of the world s major currencies. The euro is on a fouryear low. In contrast, the emerging economies continue to grow, with markets for goods, services and construction performing robustly in some cases. On the domestic front, Brazil is enjoying a fast pace of growth, and expansionary monetary and fiscal policies have rapidly mitigated the impact of the crisis, allowing economic activity to recover. The labor market is performing strongly, and rising levels of job creation alongside improving incomes are stimulating consumption and hence driving up aggregate demand. To contain the inflationary pressures fueled by the growth in consumer spending and adjust monetary conditions, the Monetary Policy Committee (Copom) raised the Central Bank s benchmark Selic rate to 10.25% p.a., for a rise of 1.7 percentage points in first-half During the same period the exchange rate depreciated 4.5% against the U.S. dollar, averaging R$1.80 per dollar. Generally speaking, we take the view that Brazil enjoys exceptionally favorable conditions. Demand for credit remains strong, and several sectors of the economy are expanding vigorously. The outlook for 2010 points to moderate global growth, with the presence of volatility due to uncertainty about the economic situation in several developed countries, which may be reflected by the domestic economy. 3

4 Profitability Net income up 17.4% in 2Q10, with ROAE reaching 16% Net income in 2Q10 was R$64.2 million, up 17.4% compared with the previous quarter, thanks to growth in lending income and a lower level of loan loss provision (LLP) expense. Net income totaled R$118.8 million in the first half of Annualized Net Interest Margin (NIM) excluding loan loss provision (LLP) and adjusted for the impact of exchange-rate variation on liabilities, was 10.1%, down 0.5 pp compared with the previous quarter. However, annualized Adjusted Net Interest Margin (NIM-A) reached 11.7% in 2Q10, up 0.4 pp compared with the previous quarter. For the sake of comparison, as of 2Q10 this indicator excludes from Interest-Bearing Assets the value of tri-party repurchase agreements booked under Current Liabilities, since even when significant in the composition of Interest-Bearing Assets these repos yield practically no interest margin in relation to the volume transacted. The next chart shows the growth in Adjusted Net Interest Margin (NIM-A). As a result of the increase in net income, return on average equity (ROAE) reached 16%, up 2.4 pp compared with the previous quarter. The return on average assets (ROAA) was 3.2%% in 2Q10, unchanged from the previous quarter. 4

5 Asset Breakdown Total assets grew 15.5% in 2Q10 compared with the previous quarter, reflecting the continuing improvement in the business environment, which drove growth in the credit portfolio and interbank deposits. Loans were again the largest asset, accounting for 48.2% of the total in 2Q10. 5

6 Liquidity Liquid Assets & Cash Balance of liquid assets remains high The balance of liquid assets remained high even though it fell 6% in the quarter. At end-june 2010, liquid assets totaled R$2,017.5 million. Daycoval maintained a high cash position in 2Q10. Cash in hand amounted to R$1,581.6 million at the end of the first half, with overnight repos accounting for 77.8% of the total and Brazilian government securities available for sale accounting for 22.2%. Daycoval also tracks liquidity in terms of the ratio between the cash position and total deposits. This ratio was 57% in 2Q10 (73.2% in 1Q10). The reduction was due to growth in the credit portfolio. 6

7 Operating Performance Funding Funding grows 13.3% in 2Q10, reflecting success of external transaction The total balance of funding amounted to R$4,725.5 million, up 13.3% compared with the previous quarter and 44.8% year over year. The increase mainly reflected a syndicated loan from IFC (International Finance Corporation, part of the World Bank Group) worth approximately US$165 million, with a repayment term of up to four years. The transaction is also well-suited to Daycoval s focus on diversifying its sources of funding and lengthening average duration to match the Bank s capital structure. Funding growth is aligned with the growth of the credit portfolio and with the average duration of the portfolio, which is 400 days, whereas the average duration of funding is 561 days. Deposits of all types accounted for 58.7% of total funding at the end of 2Q10, compared with 60.1% in the previous quarter. The balance of foreign issues fell owing to repayment of US$125 million in June Borrowings and onlending obligations totaled R$1,238.4 million, up 62.2% in the quarter. The increase was due to growth in foreign borrowings and BNDES onlending facilities, which together reached a balance of R$1,230.3 million, compared with R$747.4 million in the previous quarter. Time deposits were again the principal source of funding, accounting for 54% of the total in 2Q10. The outlook for this type of funding remains favorable, with significant volumes on offer from the various players in the financial market. In 2Q10 Daycoval continued to reduce interbank funding in order to prioritize deposits from individuals and corporates, where maturities and costs are better matched with the credit portfolio. 7

8 Total deposits amounted to R$2,775 million in 2Q10, for growth of 10.7% compared with the previous quarter. This growth was mainly due to increased demand for this type of investment by corporates. 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. June/10 March/10 8

9 Asset/Liability Matching Positive gap in duration between credit and funding operations is more than 150 days 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 2Q10 for 65.6% of the total portfolio, while only 42% of funding falls due in the same period, showing a significant positive gap between assets and liabilities. The average duration of certificates of deposit (CDs), including those issued under the Investment Agreement signed in February 2009, was 561 days in 2Q10. The ratio of total funding to loans reached 107.5%, maintaining an adequate degree of compatibility between funding and the profile of each credit portfolio segment, which avoids asset/liability mismatches and assures liquidity in all operations. 9

10 Distribution Banco Daycoval currently has 29 branches in 18 states and the Federal District, thus offering nationwide coverage and a structure for delivering differentiated services to middle-market customers. We are in the process of expanding our branch network. In 2Q10 we opened a branch in Natal, Rio Grande do Norte, and several more are scheduled to open by end In consumer finance, in addition to the four DayCred stores currently operating, the Bank works with independent promoters as the main distributors of its retail products. Exchange Bureaus In accordance with its strategy of diversifying its products and providing even better services that meet all the needs of its customers, Banco Daycoval recently opened two exchange bureaus on Av. Paulista, Brazil s major business hub. The Bank partners with travel agencies, brokers and other financial institutions to offer customers a range of options through rapid, secure and flexible service when buying or selling foreign currency. Daypag Established in 2008, Daypag meets the financing needs of car license agents, expediters and driving schools in São Paulo State by extending loans for clients to pay vehicle registration fees (road tax, compulsory third-party liability insurance, fines etc.) and facilitating payments by wire transfer. There are now seven Daypag offices in major cities of São Paulo State (Osasco, Barueri, Guarulhos, Atibaia, Campinas, Ribeirão Preto, Mogi Guaçu, and Detran São Paulo), staffed by specialists who guarantee the provision of rapid and efficient services. These offices processed some 70,000 payment slips in June alone, and the number is increasing month by month. This product is part of Daycoval s strategy of diversifying products and expanding its distribution network to continue meeting more of its customers needs. 10

11 Credit Portfolio Middle market expands 17.3% compared with 1Q10, and increases share of total portfolio As of 1Q10, the credit portfolio results disclosed in Daycoval s earnings releases include the balance of sureties and avals granted to middle-market clients, in accordance with best practice for the financial services industry. Daycoval s total credit portfolio reached R$4,786.8 million at end-june 2010, for growth of 11.8% compared with 1Q10. Credit operations expanded 31% in the past 12 months, thanks to maintenance of spreads and guarantee levels. The balance of payroll loans plus assigned payroll portfolios totaled R$3,384 million at end-june 2010, for growth of 12.9% compared with 1Q10, reflecting the dynamism of this modality. The line comprising auto loans + trade finance + auto loan assignments grew 12.1% compared with 1Q10, mainly reflecting an increase of R$93 million in the BNDES portfolio. 11

12 As shown in the above table, middle-market loans + trade finance + sureties and avals accounted for 62.6% of the total portfolio in 2Q10 (59.7% in 1Q10 and 57.5% 4Q09), reflecting sales efforts targeting this segment. Loans to individuals (payroll and auto loans + in-store financing and other) accounted for 37.4% of the total portfolio in 2Q10 (40.3% in 1Q10). The credit portfolio totaled R$4,786.8 million, for growth of 11.8% compared with 1Q10 and 31% year over year. Middle Market: Loans to small and medium business totaled R$2,997.3 million at end-june 2010, growing 17.3% in the quarter and 52.5% year over year. This growth was due to expansion of the sale force and creation of new products. The main products in this segment include working capital and receivables financing, alongside trade finance, BNDES onlending, and sureties and avals. The Bank continued to diversify the profile of its customer base in this segment, in terms of both geographical location and size. The balance of the trade finance portfolio, which also targets the middle-market segment, totaled R$281.7 million in 2Q10, for growth of 29.5% compared with the previous quarter. This growth reflected a more favorable environment for these transactions, especially by importers. 12

13 Daycoval operates as an accredited onlending agent for BNDES, the National Development Bank, offering agility and differentiated service for the Bank s small and medium business clients. This segment continued to expand strongly on a quarterly basis, reaching R$230.6 million at end-june 2010, up 67.6% from R$137.5 million in 1Q10. The Bank also provides Sureties & Avals for middle-market clients. The balance of this modality was R$124.1 million in 2Q10, down 5.9% compared with the previous quarter. Middle market loans totaled R$2,997.3 million, for growth of 17.3% compared with 1Q10 and 52.5% year over year. 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: The current condition of the payroll lending segment remained highly attractive for Daycoval. Accordingly, this portfolio grew 9.9% compared with 1Q10 and 37.7% year over year, reaching a record volume of R$1,238.1 million (including assignments) in the first half of The Bank continued focusing on growth in solid nationwide agreements such as those with the social security system (INSS) and the Armed Forces, which together accounted for 66.7% of total payroll lending (65.4% in 1Q10, 62% in 4Q09). At end-june 2010, the payroll loan segment comprised 299,000 active contracts, for an average ticket of R$4,300 and average duration of 40 months. Origination rose 39.8% to R$301.2 million in 2Q10. New loans extended via the INSS and Armed Forces accounted for 72.5% of total origination in the period (77.5% in 1Q10, 72.1% in 4Q09). 13

14 Payroll loans totaled R$1,238.1 million, for growth of 9.9% compared with 1Q10 and 37.7% year over year. Auto Loans: The Bank has been working hard to increase auto loan origination and reverse contraction in this portfolio. As shown in the next chart, the balance of auto loans including the assigned portion totaled R$524.3 million, contracting 8.8% in the quarter and 32.3% year over year. Small vehicles continued to account for the largest share (including the assigned portion), with 66.7% of total volume at end-june

15 Considering the total balance of payments receivable (PMTs) from the start of operations until 2Q10, i.e. only installments due in or before March 2010, the liquidity of the auto loan portfolio was 90.2% at the end of 2Q10, compared with 90.6% in the previous quarter. In-store Financing: In 2009 Daycoval began extending consumer finance through partnerships with a number of retailers, initially in the states of São Paulo and Rio de Janeiro. This type of credit, which is guaranteed by postdated checks, demonstrates the Bank s capacity to develop products and solutions for its customers, even in new markets. As shown in the chart below, the volume of in-store financing totaled R$27.1 million in 2Q10, for growth of 7.1% compared with the previous quarter. Operations will be implemented in other regions of Brazil in forthcoming periods. 15

16 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 1Q10. The items relating to assigned loans assume provisioning in accordance with their characteristics, excluding the Auto Loan FIDC (R$188.0 million), as well as sureties and avals: The coverage ratio between total loan loss provisioning and the total credit portfolio including assignments fell 1 percentage point to 3.4% in 2Q10, from 4.5% in 1Q10. The middle-market segment again contributed most to this decrease, with LLP coverage in this segment falling to 2.9% in 2Q10, from 4.0% in 1Q10. In payroll loans and auto loans, LLP coverage remained practically unchanged on 2.2% and 12.7% respectively. 16

17 Allowance for Loan Losses (ALL) (1) LLP coverage of past-due loans remains stable 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: (1) Banco Daycoval S.A. non-consolidated. Loan loss provision amounting to R$29.5 million was constituted in 2Q10, for a reduction of 22% compared with R$37.8 million in the previous quarter. As mentioned in earlier Earnings Releases, this reduction was expected: the conservative strategy adopted for provisioning had initially led to a rise in LLP, assuring a better analysis of possible problems due to borrower insolvency. Management expects LLP to return to historical levels during the coming quarters, since the credit portfolio growth seen in recent months has occurred in a more favorable setting for lending operations. It is also important to note that the volume of loans written off was R$51.8 million in 2Q10, for a decrease of 20.4% compared with the previous quarter, while debt recoveries amounted to R$13 million, reflecting the success of Daycoval s initiatives to collect from delinquent borrowers. 17

18 The improvement in credit portfolio quality is demonstrated by the behavior of loans more than 14 and 60 days past due, which again fell significantly compared with the previous quarter, as can be seen in the table above. With regard to middle market + trade finance, it is important to note that loans more than 14 days past due fell 9.3% in the quarter to R$57.8 million, while loans more than 60 days past due fell 13.4% to R$38.3 million. Auto loans more than 14 days past due fell 18.6% to R$22.4 million, while auto loans more than 60 days past due fell 18.9% to R$14 million. The ratio of LLP to past-due loans overall remained practically the same as in the previous quarter. In 2Q10 this ratio was 168.1% for loans more than 14 days past due and 254.5% for loans more than 60 days past due. Shareholders Equity & Leverage Low leverage and falling Basel ratio Shareholders Equity Shareholders equity totaled R$1,668 million at end-june 2010, for a decrease of 3.2% compared with 1Q10. The decrease was due to dividend distribution of R$96.7 million in May. Capital Adequacy Basel Ratio Daycoval s Basel II ratio calculated by the standard method was 22.3% as at June 30, 2010 (27.2% in 1Q10). The decrease was due mainly to credit portfolio growth and dividend distribution. This ratio evidenced the maintenance of capital adequacy relative to risk-weighted assets. Loan Portfolio/Shareholders Equity Daycoval ended 2Q10 with leverage of 2.6 measured by the ratio of loans (excluding FIDC, assignments, and sureties and avals) to equity, compared with 2.2 in 1Q10. This indicator evidences Daycoval s current low leverage and its total capacity to participate actively in the Brazilian credit market. 18

19 Financial Performance Significant rise in financial intermediation income Financial Intermediation Income Financial intermediation income adjusted as shown in the above chart totaled R$306.7 million in 2Q10, rising 15.6% compared with the previous quarter. This increase reflected vigorous growth in the Middle Market + Trade Finance portfolio, up 26.2% compared with 1Q10. Income from trading securities totaled R$75.2 million in 2Q10, for growth of 35.6% compared with the previous quarter due to gains in treasury transactions and an increased balance. This source accounted for 24.5% of Daycoval s total adjusted financial intermediation income in 2Q10. Financial Intermediation Expense (1) In 2Q09, reclassified to Financial Intermediation Income (result of foreign-exchange transactions). Financial intermediation expense adjusted in accordance with the above chart totaled R$170.7 million in 2Q10, compared with R$145.8 million in 1Q10. The main reason for the increase was growth in open-market trading transactions. 19

20 Efficiency Ratio The efficiency ratio was 24.1% in 2Q10, down 3.2 percentage points compared with 1Q10, demonstrating Daycoval s consistent pursuit of profitability. The efficiency ratio considering provisions for expenses with profit sharing programs (PPR and PLR) would be 27.1% in 2Q10. Expenses Personnel Expenses Personnel expenses totaled R$21.8 million in 2Q10, for no change compared with the previous quarter. It is important to note that 40 employees were hired in the quarter to reinforce front-office staffing. Administrative Expenses Administrative expenses amounted in 2Q10 to R$18.3 million, for growth of 5.4% compared with the previous quarter. The increase was in line with expectations and will continue in the months ahead as the credit portfolio continues to grow. Daycoval invests regularly in the hiring and development of staff in order to keep pace with the institution s expansion. Commission Expenses Commission expenses continued to fall, reaching R$6.5 million in 2Q10. This decrease reflected the change in the form of payment effected since first-half 2008, when loans began to be booked by the total effective cost method. 20

21 Other Operating Revenues/Expenditures Other operating revenues totaled R$7.0 million in 2Q10, and other operating expenditures R$11.1 million, giving a net result of minus R$4.1 million (minus R$4.3 million in 1Q10). Excluding the effects of exchange-rate variation, the result was minus R$5.8 million in 2Q10 and minus R$2.7 million in 1Q10. The main contribution to this variation came from R$1.9 million in provisioning for probable losses in civil lawsuits in 2Q10. Profit Sharing Programs (PPR & PLR) Expenses relating to the PPR and PLR profit sharing programs totaled R$5.7 million in 2Q10, for a decrease of 13.4% compared with 1Q10 (R$6.6 million). Income Tax & Social Contribution on Net Income Expenses relating to Corporate Income Tax (IRPJ) and Social Contribution on Net Income (CSLL) totaled R$26.3 million in 2Q10, for an increase of 82.6% compared with the previous quarter after deducting the effects of the non-recurring tax credit in 1Q10 (R$6.3 million). Ratings The ratings shown in the chart below 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. 21

22 Capital Markets Ownership Structure Daycoval s registered share capital comprises 216,324,512 shares, of which 142,418,179 are common shares (ON) and 73,906,333 are preferred shares (PN). The free float is 25.2%, equivalent to 54,474,328 preferred shares. Stock Performance Banco Daycoval (DAYC4) has been listed on Level 1 of the São Paulo Stock Exchange (BM&FBovespa) since June 2007 and is part of the Special Corporate Governance Stock Index (IGC) and Special Tag-Along Stock Index (ITAG). In 2Q10 the number of DAYC4 trades totaled 5,300, comprising 15.7 million shares. Average daily trading volume was R$1.3 million. On June 30, 2010, the stock price was R$8.80, giving Daycoval a market capitalization of R$1.9 billion. DAYC4 lost 10.0% in 2Q10, compared with losses of 11.2% for the Ibovespa Index, 7.3% for the IGC, and 8.4% for the ITAG in the same period. DAYC4 is currently covered by 16 different local and international research analysts. 22

23 Swaps The first two total return swap (TRS) agreements with Crédit Suisse were completed, with a reference value of R$20.0 million and 5 million preferred shares. A meeting of the Board of Directors held on June 15, 2010, approved the signature of a new TRS with Credit Suisse Próprio Fundo de Investimento Multimercado (Credit Suisse), for an aggregate reference value of up to R$20.0 million. 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 Crédit Suisse. The free float will not change as a result and any proceeds will be netted out at expiration. Shareholder Remuneration Distribution of an intermediate dividend in the amount of R$96,724, (ninety-six million, seven hundred twentyfour thousand, six hundred sixty-seven reais and eighty-three cents), corresponding to R$ per share, was voted by a meeting of the Board of Directors held on May 5, 2010, subject to approval by the next Shareholder Meeting. Disbursement occurred on May 20, using monies booked under the heading Statutory Profit Reserve Relating to Net Income for the Year Ended December 31, 2008 in the balance sheet for December 31, A meeting of the Board of Directors held on June 29, 2010, ratified a proposal approved by the Executive Committee to pay interest on equity for the period between March 31 and June 29, 2010, in the amount of R$23,066, (twentythree million, sixty-six thousand, two hundred seventy reais and thirty-seven cents). Payment was disbursed on July 15, The Bank s shares traded ex-right to interest on equity as of June 30, 2010, inclusive. 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 2Q10 Earnings Conference Call: In Portuguese August 3, h00 (BR) (09:00 AM US EST) Dial-In Number: +55 (11) Code: Banco Daycoval 23

24 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 29 branches in 26 cities of 18 states across Brazil, as well as the Federal District. In second-quarter 2010, its credit portfolio reached R$4.8 billion, with total assets of R$8.8 billion and net income of R$64.2 million. Daycoval pursues a conservative strategy and stands out for high liquidity and low leverage, as evidenced by its Basel II Ratio of 22.3% in June In March 2010 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 and braa- from Standard & Poor s, both of which are national scale long-term ratings. 24

25 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. 25

26 Attachment I: Balance Sheet R$ 000 Assets 2Q10 1Q10 2Q09 Current Assets 6,436,299 5,380,238 4,611,902 Cash and Cash Equivalents 58,306 59,374 28,616 Interbank Investments 3,021,014 2,314,165 1,706,353 Securities and Derivatives 172, , ,247 Interbank Accounts 11,428 10,904 13,207 Interbranch Accounts Lending Operations 2,761,494 2,434,676 2,011,678 Other Receivables 352, , ,668 Other Assets 58,622 57,273 45,133 Long-Term Assets 2,366,828 2,242,012 1,572,213 Interbank Investments 2,549 4, Securities and Derivatives 581, , ,483 Lending Operations 1,486,474 1,335, ,422 Other Receivables 267, , ,848 Other Assets 28,362 25,594 37,460 Permanent 10,334 10,446 12,096 Investments Property and Equipment in Use 9,889 9,989 11,623 Intangible Total Assets 8,813,461 7,632,696 6,196,211 Liabilities 2Q10 1Q10 2Q09 Current Liabilities 3,872,569 3,162,732 2,660,122 Deposits 1,334,269 1,241,694 1,018,399 Money Market Funding 1,691,890 1,040, ,846 Funds from Acceptance and Issuance of Securities 15, , ,962 Interbank Accounts 3,595 3,609 1,452 Interbranch Accounts 4,428 3,865 2,919 Borrowings and Onlendings 634, , ,069 Derivatives 5, Provisions of Insurance and Pension Plans 20,019 20,128 5,831 Other payables 162, , ,816 Long-term Liabilities 3,268,458 2,741,510 1,898,064 Deposits 1,440,687 1,263,987 1,012,595 Funds from Acceptance and Issuance of Securities 696, , ,160 Borrowings and Onlendings 720, , ,797 Derivatives 14,455 14,020 10,449 Other Payables 397, , ,063 Deferred Income 3,848 4,326 6,365 Minority Interest Shareholders Equity 1,668,016 1,723,566 1,631,129 Capital of Brazilian Residents 1,359,143 1,359,143 1,359,143 ( - ) Treasury Stocks (11,706) (14,534) (36,885) Capital Reserves Revaluation Reserves 1,492 1,519 1,867 Profit Reserves 253, , ,046 Adjustments of Shareholders' Equity Evaluation - Securities and Derivatives Available for Sale (66) 1, Retained Earnings 65,363 30, ,269 Total Liabilities 8,813,461 7,632,696 6,196,211 26

27 Attachment II: Quarterly Income Statement R$ 000 2Q10 1Q10 Chg. % 2Q09 Chg. % Income from Financial Intermediation 323, , % 87, % Lending Operation 234, , % 181, % Securities Operations 75,152 55, % 68, % Derivatives 8,358 7, % (161,801) n.a. Foreign Exchange Operations 5,968 8, % - - Expenses of Financial Intermediation (170,746) (145,833) 17.1% (181,721) -6.0% Funding Expenses (122,958) (92,767) 32.5% (79,228) 55.2% Borrowing and Onlendings (18,278) (15,285) 19.6% (11,688) 56.4% Foreign Exchange Operations - - n.a. (11,728) n.a. Loan Losses Provisions (29,510) (37,781) -21.9% (79,077) -62.7% Gross Profit from Financial Intermediation 153, , % (93,754) % Other Operating Income (Expenses) (52,714) (52,907) -0.4% 144, % Income from Services Provided 7,202 7, % 3, % Personnel Expenses (21,793) (21,426) 1.7% (15,497) 40.6% Other Administrative Expenses (24,766) (25,388) -2.4% (28,319) -12.5% Tax Expenses (9,202) (8,860) 3.9% (9,638) -4.5% Other Operating Income 6,984 5, % 210, % Other Operating Expenses (11,139) (10,328) 7.9% (15,868) -29.8% Income from Operation 100,292 72, % 51, % Non-operating Expenses (4,034) (2,556) 57.8% (2,058) 96.0% Income before Taxes and Minority Interest 96,258 69, % 48, % Income and Social Contribution Taxes (26,344) (8,152) 223.2% (7,520) 250.3% Provision for Income Tax (14,402) (9,670) 48.9% (21,951) -34.4% Provision for Social Contribution Tax (8,691) (5,782) 50.3% (11,979) -27.4% Deferred Taxes (3,251) 7,300 n.a. 26, % Profit-Sharing (5,747) (6,640) -13.4% (2,929) 96.2% Minority Interest (9) (9) - (11) -18.2% Net Income 64,158 54, % 38, % Interest on Shareholders Equity (23,067) (24,531) -6.0% (23,850) -3.3% Earnings per Share (R$) n.a n.a. Number of Shares 215,070, ,767,120 n.a. 216,619,312 n.a. 27

28 Attachment III: Semiannual Income Statement R$ 000 1H10 1H09 Chg. % Income from Financial Intermediation 594, , % Lending Operation 433, , % Securities Operations 130, , % Derivatives 15,723 (144,626) n.a. Foreign Exchange Operations 14,583 - n.a. Expenses of Financial Intermediation (316,579) (371,748) -14.8% Funding Expenses (215,725) (174,154) 23.9% Borrowing and Onlendings (33,563) (37,048) -9.4% Foreign Exchange Operations (6,205) n.a. Loan Losses Provisions (67,291) (154,341) -56.4% Gross Profit from Financial Intermediation 277,914 9,605 n.a. Other Operating Income (Expenses) (105,621) 105,788 n.a. Income from Services Provided 14,336 8, % Personnel Expenses (43,219) (30,704) 40.8% Other Administrative Expenses (50,154) (55,943) -10.3% Tax Expenses (18,062) (17,910) 0.8% Other Operating Income 12, , % Other Operating Expenses (21,467) (26,185) -18.0% Income from Operation 172, , % Non-operating Expenses (6,590) (9,399) -29.9% Income before Taxes and Minority Interest 165, , % Income and Social Contribution Taxes (34,496) (13,754) 150.8% Provision for Income Tax (24,072) (35,658) -32.5% Provision for Social Contribution Tax (14,473) (19,103) -24.2% Deferred Taxes 4,049 41, % Profit-Sharing (12,387) (5,649) 119.3% Minority Interest (18) (23) -21.7% Net Income 118,802 86, % Interest on Shareholders Equity (47,597) (48,115) -1.1% Earnings per Share (R$) % Number of Shares 215,070, ,619,312 n.a. 28

29 Attachment III: Quarterly and Semiannual Cash Flow Statement R$ 000 2Q10 1Q10 2Q09 1H10 1H09 Operational Activities Net Cash from Operating Activities Received (96,606) 513,364 (190,244) 416, ,439 Cash from Operations 114, , , , ,736 Net Income 64,158 54,644 38, ,802 86,568 Total Adjustment to Reconcile Net Income to Net Cash provided by Operating Activities 50,132 69,020 68, , ,168 Loan Losses Provisions 29,470 38,520 79,077 67, ,338 Depreciation and Amortization Adjustment to Fair Value - Securities and Derivatives Available for Sale (1,261) 735 (923) (526) 5,416 Deffered Taxes 3,251 (7,300) (27,051) (4,049) (37,758) Provision for Contingent 17,283 38,293 19,467 55,483 67,754 Other Loan Losses Provisions 40 (739) - (699) 3 Other Assets Losses Provisions 864 (994) (2,113) (130) (1,604) Restatement of exchange membership certificates Revaluation Reserves on Income Tax and Social Contribution Variations in Assets and Liabilities (210,896) 389,700 (297,773) 178,912 26,703 (Increase) Reduction in Short-Term Interbank Investments (37,883) (8,488) (27,268) (46,372) (71,354) (Increase) Reduction in Securities and Derivative Instruments 125,061 (33,178) 43,464 91,883 (40,813) (Increase) Reduction in Interbank and Interbranch Accounts 25 10,434 8,013 10, (Increase) Reduction in Loan Operations, Leasing and Other Credits (506,957) (343,835) (69,279) (850,790) 279,770 (Increase) Reduction in Other Credits (125,341) (29,481) 48,671 (156,380) 85,278 (Increase) Reduction in Other Securities and Assets (4,981) (949) 16,054 (5,929) 34,208 Increase (Reduction) in Deposits 269, , , , ,026 Increase (Reduction) in Funding in Open Market (198,412) 138,201 (161,869) (60,210) (123,024) Increase (Reduction) in Funds from Acceptance and Securities Issued (190,685) 529,315 (133,838) 338,630 (145,373) Increase (Reduction) in Borrowing and Onlending Obligations 453,087 26,207 (130,011) 479,294 (193,627) (Reduction) Increase in Other Liabilities 6,394 (21,698) (822) (13,641) (72,100) (Redution) Increase in Deferred Income (479) (680) 184 (1,159) (1,193) Investment Activities Net Cash used in Investing Activities (284) (89) 121 (373) 95 Sale of Fixed Assets Purchase of Fixed Assets (284) (89) (5) (373) (61) Net Cash Provided Used by Financing Activities (95,401) (24,531) (40,592) (119,931) (68,126) Cash Dividends and Interest on Shareholders' Equity paid (96,725) (24,530) (23,850) (121,255) (48,115) Acquisition Disposal of the own shares 1,324 (1) (16,742) 1,324 (20,011) Net Increase (Decrease) in Cash and Cash Equivalents (192,291) 488,744 (230,715) 296, ,408 Cash and Cash Equivalents at the beginning of the period 1,653,449 1,164,705 1,629,693 1,164,705 1,164,570 Cash and Cash Equivalents at the end of the period 1,461,158 1,653,449 1,398,978 1,461,158 1,398,978 Net Cash and Cash Equivalents (192,291) 488,744 (230,715) 296, ,408 29