december 31, 2017 consolidated financial statements · r$1 million, through fundo br startups, to...

December 31, 2017

Consolidated Financial Statements

Banco Votorantim S.A. Consolidated Financial Statements Year ended on December 31, 2017

Amounts in thousand of Reais, unless when indicated

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CONTENTS MANAGEMENT REPORT............................................................................................................3 AUDIT COMMITTEE REPORT………………………………........................................................11 INDEPENDENT AUDITOR’S REPORT………………………………………………………………13 CONSOLIDATED FINANCIAL STATEMENTS STATEMENT OF FINANCIAL POSITION ................................................................................. 19 STATEMENT OF INCOME ........................................................................................................ 20 STATEMENT OF CHANGES IN SHAREHOLDER’S EQUITY .................................................. 21 STATEMENT OF CASH FLOWS ............................................................................................... 22 STATEMENT OF VALUE ADDED ............................................................................................. 23 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS .............................................. 24 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTENTS ................................................................................................................................... 2 1. THE CONGLOMERATE AND ITS OPERATIONS .............................................................. 24 2. PRESENTATION OF FINANCIAL STATEMENTS ............................................................. 24 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ................................................. 26 4. CASH AND CASH EQUIVALENTS ..................................................................................... 32 5. INTERBANK INVESTMENTS ............................................................................................. 32 6. SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS ......................................... 34 7. INTERBANK ACCOUNTS ................................................................................................... 47 8. LOAN AND LEASE OPERATIONS ..................................................................................... 47 9. FOREIGN EXCHANGE PORTFOLIO ................................................................................. 55 10. OTHER RECEIVABLES - SUNDRY .................................................................................... 56 11. OTHER ASSETS ................................................................................................................. 56 12. INVESTMENTS ................................................................................................................... 57 13. PROPERTY FOR USE ........................................................................................................ 58 14. INTANGIBLE ASSETS ........................................................................................................ 58 15. DEPOSITS AND MONEY MARKET REPURCHASE COMMITMENTS ............................. 59 16. BORROWINGS AND ONLENDINGS .................................................................................. 60 17. ACCEPTANCES AND ENDORSEMENTS.......................................................................... 61 18. OTHER LIABILITIES ........................................................................................................... 61 19. OTHER OPERATING INCOME/ EXPENSES ..................................................................... 63 20. NON-OPERATING INCOME ............................................................................................... 64 21. SHAREHOLDER’S EQUITY ................................................................................................ 65 22. TAXES ................................................................................................................................. 66 23. RELATED PARTIES ............................................................................................................ 68 24. EMPLOYEE BENEFITS ...................................................................................................... 70 25. CONTINGENT ASSETS AND LIABILITIES AND LEGAL, TAX AND SOCIAL SECURITY

OBLIGATIONS .................................................................................................................... 71 26. RISK AND CAPITAL MANAGEMENT ................................................................................. 75 27. OTHER INFORMATION ...................................................................................................... 79 28. SUBSEQUENT EVENTS..................................................................................................... 80

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BANCO VOTORANTIM S.A.

Management report To the Shareholders, In compliance with legal and statutory provisions, we are presenting the Management Report and the Individual and Consolidated Financial Statements of Banco Votorantim S.A. (Bank) relating to the periods ended December 31, 2017 and 2016, accompanied by the respective notes to the statements and the independent auditors’ report. 1. Economic Environment and Banking Sector The 2nd half of 2017 was a period of global exuberance. The signs of economic expansion in many developed countries, in particular in the United States, have generated a greater equilibrium with emerging markets, in special, foreign trade. At the same time, the slowdown of inflation at the beginning of the year reduced the pressure on the monetary policy by the major central banks, which enabled international liquidity conditions to continue very favorable. As result, there was expressive valuation of prices of assets, recovery of commodity prices and high interest by emerging markets. This global environment enabled, despite all the domestic fiscal and political uncertainties, the economic and financial environment to continue stable, which contributed to the return of trust and recovery of growth. The expectations of GDP for 2017 and 2018 have been reviewed upward. In addition, inflation continued to be favored by the prices of food and enabled the Brazilian Central Bank to extend the cycle of monetary loosening. The IPCA closed the year at 2.95% and the Selic rate reached 7.0%. This scenario favored the lending market, in special, concessions to individuals. With lower indebtedness of the families, recovery of actual income caused by the drop of inflation, lower financial costs and continuity of recovery of trust, the free credit portfolios had actual growth near 3.0%, with delinquency at historically-low levels. The sectors of consumption of durable goods, in particular, the vehicles market – sector in which Banco Votorantim is leader, was largely benefitted in this scenario, and both sales of new vehicles as well as of used vehicles had strong recovery in 2017. However, the challenge in the corporate sector continues, with delinquency by legal entities still above the historical average and drop of approximately 7.0% in the free credit portfolio. Possible instabilities in the financial markets in 2018 may reinforce the caution seen in this market. The year 2017, therefore, brought overcoming of recession and better outlooks of economic growth for the coming years. Interest, income and trust indicate that the conditions of offer and demand of credit will continue in recovery, favoring the consumption and investment for the next six-month periods.

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2. Main Information – Consolidated position

RESULTS (R$ Million)

Net Interest Income (a) 5,220 5,632 7.9%

Allowance for loan losses - ALL (b) (2,467) (2,585) 4.8%

Gross Income from Financial Operations (a - b) 2,753 3,047 10.7%

Income from services and banking fees1 1,123 1,318 17.4%

Administrative and personnel expenses (2,378) (2,239) -5.8%

Operating income (Loss) 814 1,168 43.5%

Provision for income tax and social contribution (257) (425) 65.2%

Net income (Loss) 426 582 36.7%

MANAGEMENT INDICATORS (%)Return on Average Equity2 (ROAE) 5.2 6.8 1.6 p.p.

Return on Average Assets3 (ROAA) 0.4 0.6 0.2 p.p.

Basel Ratio 15.1 15.5 0.4 p.p.

Tier I 11.2 11.4 0.2 p.p.

BALANCE SHEET (R$ Million)

Total assets 102,998 93,519 -9.2%

Loan portfolio 47,620 48,679 2.2%

Wholesale segment 14,161 12,687 -10.4%

Consumer Finance segment 33,459 35,992 7.6%

Guarantees provided 7,824 4,862 -37.9%

Funding sources 67,343 61,203 -9.1%

Shareholders' equity 8,426 8,868 5.2%

Capital (Basel Ratio) 9,219 9,257 0.4%

LOAN PORTFOLIO QUALITY INDICATORS (%)90-day NPL/ Loan portfolio 5.5 4.0 -1.5 p.p.

ALL provisions / 90-day NPL 139 191 52 p.p.

ALL provisions / Loan portfolio 7.7 7.5 -0.2 p.p.

OTHER INFORMATION

AuM4 (R$ Million) 53,753 55,696 3.6%

1. Includes banking fees income;2. Ratio between net income and average equity of the period. This ratio is annualized;3. Ratio between net income and average assets of the period. This ratio is annualized.

Variation2016

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

2017

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3. Business Performance Transactions of the Bank are conducted in the context of a set of subsidiaries that operate in an integrated manner in the financial market, including in relation to risk management. These subsidiaries include BV Financeira, BV Leasing, Votorantim Asset Management (VAM) and Votorantim Corretora de Títulos e Valores Mobiliários. The Bank has Votorantim Group and Banco do Brasil as its shareholders, Banco Votorantim is one of the largest Brazilian privately-held banks in total assets and also in loan portfolio, and has a diversified wholesale bank businesses (CIB), consumer finance and wealth management business portfolio. The results of 2017 prove the Bank’s development in the deployment of its strategic plan, based on increasing our business profitability, operational efficiency, and revenue diversification. The main highlights of the year were:

1. Net income of R$ 582 million in 2017, compared to R$ 426 million in 2016, equivalent to annualized return on shareholders’ equity of 6.8%.

2. Growing and diversified income generation. Net Interest Income grew 7.9% in 2017/2016, whereas total revenues from services and fees increased 17.4% in the same comparison. It is worth emphasizing that the gross result from financial intermediation (post-credit provisions) grew 10.7%, totaling R$ 3,047 million in 2017.

3. Maintenance of conservative approach to credit. The balance of loan portfolio ended Dec.17 at R$ 48.8 billion, a growth of 2.2% in last 12 months. The Wholesale portfolio reduced 10.4% compared to Dec.16, whereas the Consumer Finance grew 7.6% in the same comparison.

4. Drop in delinquency. The 90 days NPL ended Dec.17 at 4.0%, 1.5 p.p. lower than in

Dec.16. The delinquency of the Consumer Finance portfolio decreased 0.8 p.p. compared to Dec.16, to 4.7%, mainly resulting in an improvement in the quality of the portfolio of Vehicles, whose delinquency reduced 0.9 p.p. in the last 12 months.

5. Effective cost management. Administrative and personnel expenses had a nominal decrease of 5.8% in 2017/2016 comparison. As a result of a strict control of costs, the efficiency ratio for the last 12 months improved, decreasing to 34.4% in Dec.17, against 36.4% in Dec.16.

These results reflect the developments achieved in several businesses of the Bank. In 2017, the Bank ensured in the Consumer Finance sector the quality and profitability of the origination, intensifying the focus on used vehicles and maintaining a selective operation in agreements of payroll loans. The Bank continued providing auto finance loan origination with quality and scale, a result of the continuous refinement of the credit policies, processes and models. The volume of auto finance loan origination totaled R$ 16.1 billion in 2017, with 87% relating to used light vehicles, a sector in which the Bank has a history of leadership and recognized competence. The Bank also continued to apply more conservative terms and percentages of entry. The loan portfolio of Consumer Finance ended Dec.17 at R$ 36.0 billion, compared to R$ 33.5 billion in Dec.16. In the payroll loans business, the total portfolio ended Dec.17 at R$ 2.8 billion, compared to R$ 3.6 billion in Dec.16. The Bank maintained the focus on the refinancing of the portfolio of INSS payroll loans and in the growth of the portfolio of private payroll-deductible loans, operating on selective manner in public agreements. It is worth mentioning that Promotiva S.A. – a subsidiary of the Bank created to act as a promoter of business, directly to the shareholder Banco do Brasil - ending 2017 with R$ 7.3 billion in payroll loans.

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Aligned with the strategy of diversifying income sources leveraging Consumer Finance client base, the credit card portfolio was up 18.4% over Dec.16, and ended Dec.17 at R$ 1.9 billion, with more than 900 million active cards. Also, the Bank has expanded sales of insurance (e.g.: credit insurance, auto, life insurance etc.) whose revenues from brokerage totaled R$ 409 million in 2017, a growth of 59.9% compared to 2016. Sales are handled through the subsidiary Votorantim Corretora de Seguros, and the result of this operation, as well as the Promotiva, is recognized under the equity method of accounting. In 2017, we advanced in the strategy of diversifying business and digital transformation. We implemented new products with relevant Brazilian fintechs, such as Guia Bolso. We consolidated partnerships to offer Student Financing with Ideal Invest and Kroton. We launched the financing for acquisition of residential solar power panel from Portal Solar, the largest digital market-place of the sector. In Credit Cards, we launched the app for mobile and expanded the options of redemption of points with the new partnerships with Livelo and Avianca. In 4Q17, we contributed R$1 million, through Fundo BR Startups, to “QueroQuitar!”, fintech for online negotiation of debts and financial education. We launched the new website of BV, a single channel where end clients may access information about the products offered. We successfully concluded the first phase of the program “InovaJunto”, a joint innovation program with the shareholder Banco do Brasil, which took employees from both institutions to develop projects in Silicon Valley. The Wholesale sector maintained the focus on expanding the base of Corporate clients – companies with annual billing between R$ 300 million and R$ 1,500 million – aimed to diversify the risk and increase spread and cross-sell of high value-added products like derivatives (hedge), structured products, DCM and FX. By means of agile and flexible relationships, and efficient capital management (risk/return ratios) and sectorial expertise, the Corporate provides integrated financial solutions and adequate to its clients’ needs. In the Large Corporate segment – companies with annual revenue above R$ 1.5 billion – the focus is to increase the return on capital, especially through unfunded products (guarantees). In Dec./17, the balance of the expanded credit portfolio (including guarantees provided and private securities) of Wholesale closed at R$ 21.0 billion against R$ 27.4 billion in Dec.16. Votorantim Asset Management (VAM), in turn, maintained the focus on being one of the best structurers and managers of high value-added products. VAM occupies 9th place in Anbima’s ranking of managers, ending Dec.17 with R$ 55.7 billion in AuM (Asset under Management), a growth of 3.6% than in Dec.16. Pursuant to communication to the market in Sept.17, aligned to the strategic plan of generating income from the new and current businesses, VAM incorporated Votorantim Corretora, strengthening the service in the Private Bank’s channel and no longer operating in the Institutional sector. Banco Votorantim S.A., parent company of both, approved the incorporation of the companies at meeting held on January 31, 2018. During 2017, the Bank maintained a conservative attitude towards loan concession, resulting in a lower demand for funding. Volume of funding sources decreased 9.1% in the last 12 months, reached R$61.2 billion in Dec.17, with expansion of more stable funding instruments, such as Financing Bills, which represented 34% of total funding sources in Dec.17. In terms of liquidity, the Bank ended Dec.17 with cash at a record level, more than sufficient to fully cover funding with daily liquidity. And the LCR, which is the ratio between the balance of highly-liquid assets and the total cash outflows expected for the next thirty days - of 4Q17 was 185%, exceeds the minimum regulatory requirement (80%). Regarding capital, the Basel ratio ended Dec.17 at 15.5% - above the regulatory minimum of 10.5% - and the Tier I Capital at 11.4%, fully comprised of Equity Tier. In Nov.17 the Bank issued USD 300 million in perpetual bonds abroad, eligible to compose the complementary capital level I. This operation, when approved by Brazilian Central Bank, will impact by approximately 170 bps the Basel Ratio after incorporation in the Reference Equity, strengthening the capital base of the Bank.

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For further information on the consolidated economic and financial performance of the Bank, see the “4Q17 Earnings Release” on the Investor Relations website (www.bancovotorantim.com.br/ri). Banco Votorantim, in compliance with the provisions of Article 8 of Bacen Circular Letter no 3,068/01, declares that it has the necessary financial capacity and intention to hold to maturity the securities classified in the “held to maturity” category, in the amount of R$ 6.6 billion, representing 31% of the total securities.” 4. Rating agencies Banco Votorantim is rated by international rating agencies and the ratings assigned reflect its operating performance, financial soundness and the quality of its management, in addition to other factors related to the financial sector and economic environment in which the company is operating. In Sept.17, the risk rating agency Standard & Poor’s (S&P) removed the “credit watch” from Brazil’s sovereign, maintaining a credit note at “BB” with negative outlook. This change reflected directly on ratings of Brazil’s main banks, including Banco Votorantim. In addition, S&P also reviewed “from-to” scales of global and national ratings; accordingly, the Bank’s national scale rates had an upgrade and became equal to sovereign rating. In Jan.18, S&P downgraded Brazil’s rating from ‘BB’ to ‘BB-’, with stable outlook. Consequently, the agency reviewed the ratings of the banks, and in line with the sovereign rating, the global rating scale of Banco Votorantim was changed to BB-/stable. The national rating scale was reaffirmed, but the outlook was also adjusted to stable. In Sept.17, Moody's rating agency reaffirmed the Bank’s rates, maintaining them as Ba2 (domestic currency) and Ba3 (foreign currency), both with negative outlook, according to sovereign perspective.

5. Corporate Governance The current corporate governance model is continuously improved for more robustness and transparency and to ensure fast decision making, which is a characteristic quality of the Bank. The Bank’s governance is shared by the Votorantim Group shareholders and Banco do Brasil, both enjoying parity of participation in the Board of Directors, Fiscal Council and other forums which advise the Board of Directors. Among the statutory bodies, the highlights are the following:

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

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

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

Long-Term Ba2 Ba3

Short-Term NP NP

Long-Term

Short-Term

Ba2

BB-

Moody'sAa3.br

BR-1

Standard & Poor's BB- brAA-

B brA-1+

RATINGS AGENCIESInternacional Brazil

Sovereign rating

National

Local Currency IDR

Foreign Currency IDR

Local Currency IDR

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

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Moreover, the Bank’s administrative management is conducted by the Board of Executive officers and its respective internal bodies: Executive Committee and other subordinated Committees, always involving the Bank’s executive leaders. At the beginning of year 2018, the Risks and Capital Committee was implemented, with direct reporting to the CA and whose principal attribution is the assessment of the operation of the structures of Management of Risks and Capital of the Bank. 6. Personnel Management The Human Resources and Organizational Culture area acts as a strategic partnership in the development of actions that support business growth, besides providing the breakdown of institutional guidelines for all the employees, promoting actions geared towards human capital management and the maintenance of values and organizational culture. Our pillars are:

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

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

Resources. At the end of Dec.17, the number of employees totaled 3,873, with 53% of men and 47% of women. Besides investing in the hiring of talented professionals as a basis for employee framework, the Bank seeks to attract professionals with competitive differentials aligned with the organizational culture and values. Throughout 2017 the Bank increased its onsite training sessions and incentivized self-development, providing technical development and the development of topics related to the Organizational Culture. The Organizational Culture structure has four attributes: Clients, Leadership, Results and Governance. “The way we are and the way we make difference” is in the practice, on the day by day of the Bank. In the way we do business, generate results and in how the employees relate with each other. Managing performance and handling the management of talents are both necessary to achieve Bank’s goals. The current Performance Management model supports the execution of the organizational strategy by means of the joint definition of targets and evaluation of corporate competencies. This model values the feedback and feedforward conversation practice to support the development of professionals, always encouraging the employees to act as protagonists in the management of their careers. Expressing a genuine concern to monitor and maintain a pleasant working environment, the Bank values cooperation between people and seeks to build relationships of trust based on ethics, transparency, and mutual respect. Compensation practices are based on a meritocratic model, recognizing and differentiating individual performance and its impact on the collective result. The model aims at aligning the interests of both shareholders and professionals, and stimulates the seeking of sustainable results. 7. Sustainability According to Banco Votorantim, ‘Sustainability is the construction of the long-term relationship through actions targeting the economic wellbeing of society and the amplified management of risks and opportunities. These three pillars set the directions to be taken and are present in all the areas and businesses of the organization.

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Aligned with these concepts, the key focal points of activity of the Institution related to the topic are: Business Sustainability, Financial Education, Social Responsibility and Impact of Activities. Business Sustainability In 2017, the emphasis was to improve the understanding of the Low Carbon Economy and the trends and impacts on the business of the Bank. The Bank established a partnership with “Legado das Águas” (environmental asset of Votorantim Group) managed by Reservas Votorantim so as to enable the Bank to support the preservation of the area, that is, to invest funds in “standing forest”, thus making the equivalence of the volume of CO² not emitted in the atmosphere. In addition, in the 2nd half of 2017 the financing “Energia Solar BV” was launched, a credit facility destined to projects of solar panels for power generation. The product launched contributed to attain the goals assumed by Brazil, and is in line with the Low Carbon Economy. Financial Education In 2017, Banco Votorantim implemented a series of actions to promote the theme of financial education aimed to encourage a more prosperous society prepared to changes, through the financial health of our employees, clients and society. It is possible to point out the following actions occurred in the 2nd half of 2017:

• 65 managers received recycling in Financial Education focused on the proper orientation to the client, and they were qualified to be multipliers of the theme;

• Lectures on Financial Education were voluntarily held by business managers to entities supported by the Bank. In total, 11 entities with 423 people were benefitted.

Social Responsibility Volunteer Revitalization Plan In the 1st half of 2017, the revitalization of the Volunteer Program of Banco Votorantim was initiated aimed at greater commitment and participation of the employees. An agenda and groups with pre-defined actions were created, which employees from all the areas of the Bank were able to join in order to participate in the activities during the year. With the Volunteer Revitalization Plan, there was an increase of almost 50% of the number of participants. Donation platform - Individual Another point worth mentioning was the development of the Platform of Donation - Individuals via payroll. As of 2018, with the platform any employee of the Bank will have the option to voluntarily donate/invest in social projects already supported by the Bank, with possibility of monitoring via platform web and payroll discount. The purpose is social engagement, to integrate donators and beneficiaries, supported by the legislation and technological facilitation. Social investment The social investment of the Consolidated includes initiatives that are aligned to the social responsibility strategy and in conformity with the positioning of the brand, reflecting the commitment with the future of Brazil. Through the destination of funds, the social investment encourages projects in the social, cultural and sports areas developed by previously selected entities with recognized operation in the sector. Based on funds for the year 2017, R$ 7.8 million were invested to support 21 projects in 2018. Institutional The Bank participated in 10 Work Groups (GT) organized by external entities, such as FEBRABAN, ANBIMA and CEBDS, for us to monitor the movements of social and environmental good practices. 8. Acknowledgment

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The Management of Banco Votorantim is grateful to its clients and shareholders for their trust and to the employees for their continuous effort and dedication.

São Paulo, February 09, 2018.

Executive Board

11 THIS PAGE IS AN INTEGRAL PART OF THE SUMMARY OF THE AUDIT COMMITTEE’S REPORT FOR THE 2nd HALF OF 2017

Summary of the Audit Committee

Second Half of 2017

Introduction

The Audit Committee is a statutory body governed by the National Monetary Council (“CMN”) Resolution 3198/2004, the bylaws of Banco Votorantim S.A. and its Internal Regulation, which are available for consultation at http://www.bancovotorantim.com.br/ri.

It is a body that provides advice to the Board of Directors, operating as a permanent and independent function, should be comprised from three (3) to five (5) members, and one (1) of them is designated as coordinator, elected by the Board of Directors, with an office of two (2) years and may be removed by the Board of Directors at any time. At least one of the members of the Audit Committee shall have proven knowledge in the areas of accounting and auditing, enabling the qualification for the position. In the second half, the Committee operated with four independent members and two of them were appointed by the shareholder Votorantim Finanças S.A. and two were appointed by the shareholder Banco do Brasil S.A.

As permitted by article 11, Resolution 3198, Banco Votorantim S.A. elected to set up a single Audit Committee for the Multiple Bank and the subsidiaries BV Financeira S.A Crédito Financiamento e Investimento, Votorantim Asset DTVM LTDA, Votorantim Corretora de Títulos e Valores Mobiliários Ltda e BV Leasing - Arrendamento Mercantil S.A, Votorantim Securities (UK) Ltd. and Banco Votorantim Securities, Inc. Banco Votorantim Securities, Inc. was dissolved on December 28, 2017. The Audit Committee, in compliance with its Internal Regulation and the Bylaws of Banco Votorantim S.A., has the following main duties, in addition to other duties provided for in the legislation or assigned by the Board of Directors: to assess the efficiency of the internal control system; to review, prior to disclosure, and express an opinion on the quality of the financial statements; to assess the effectiveness of the internal and independent audits; to fulfill the aforementioned duties and responsibilities also with respect to the subsidiaries of Banco Votorantim S.A. that adhere to the single Audit Committee.

The managements of Banco Votorantim S.A. and its subsidiaries are responsible for preparing and ensuring the integrity of the financial statements, managing risks, maintaining an effective and consistent internal control system, and ensuring compliance with the applicable laws and regulations.

The mission of the Internal Audit is to provide the shareholders, Board of Directors and Executive Board with independent, impartial and timely reviews regarding the effectiveness of risk management, the adequacy of controls, and compliance with the standards and regulations associated with the Conglomerate's operations.

KPMG Auditores Independentes is the firm responsible for providing financial statement audit services; issuing an opinion on their adequacy in relation to the equity and financial position, in accordance with accounting practices adopted in Brazil; and assessing the quality and adequacy of the internal control system, including electronic data processing and risk management systems, and compliance with the applicable laws and regulations.

Exercised activities in the period With a view to fulfilling its duties and complying with its Annual Work Plan, approved by

the Board of Directors on 12/08/2016, the Audit Committee held two preparatory meetings for 2018 activities’ planning, six meetings only with Committee and Advisory members, two meetings for the preparation of Semiannual Report and 47 meetings (Regulations provide at least six meeting during the period), with the Board of Directors, Executive Committee, representatives of senior management, the internal and external audits (KPMG), and the main persons responsible for business and control areas.

At these meetings, the Audit Committee addressed especially matters related to accounting processes, internal controls, business and product areas, operations, compliance, lawsuits and administrative proceedings, information technology, risk management, internal and external audit recommendations, and external oversight bodies.


12 THIS PAGE IS AN INTEGRAL PART OF THE SUMMARY OF THE AUDIT COMMITTEE’S REPORT FOR THE 2nd HALF OF 2017

At meetings with the internal audit, it followed up on the work carried out in the period, the main findings, recommendations, discussed and recommended the work plan’s approval for 2018. At meetings with the external audit, it followed up and verified the work carried out in the period, especially the review of the financial statements and report referring to Circular Letter 3467. It examined the Technical Study on the consumption of Tax Credits, according to item II, subparagraph 2, of article 1 of Bacen’s Circular Letter 3776.

It reviewed the parent company and consolidated financial statements, the main assets and liabilities, shareholders' equity, profit or loss, and explanatory notes under BRGAAP, the accounting practices adopted and the content of the opinion issued by the independent auditors. In situations in which it detected opportunities for improvement, it suggested such improvements. Conclusion

Based on the activities it carried out in the period and considering its duties and the limitations inherent in the scope of its work, the Audit Committee concluded that:

a) Internal Control System – the Audit Committee concluded that the Internal Control System is effective and commensurate with the size and nature of the operations and risk appetite approved by the Board of Directors;

b) Risk Management - the Conglomerate's risk structure and management are effective and commensurate with the size and nature of the operations and risk appetite approved by the Board of Directors;

c) Internal Audit - the audit performs its activities in a satisfactory, professional and independent manner;

d) Independent Auditors- worked efficiently and assigned the right number of professionals with the proper qualifications to perform the review of the financial statements for the period. We recommend, however, to draw attention to timeliness when submitting any work proposals out of the scope of opinion on financial statements to the Committee for prior examination;

e) Financial Statements - Financial statements for 2017 were prepared in compliance with the laws and practices in effect in Brazil, and present fairly, in all material respects, the equity and financial position of the Conglomerate on such date.

São Paulo, February 09, 2018.

José Danúbio Rozo Armando Wolfrid Coordinator Member

Alexandre Corrêa Abreu Gilberto Lourenço da Aparecida

Member Member

KPMG Auditores Independentes, uma sociedade simples brasileira e firma-membro da rede KPMG de firmas-membro independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça.

KPMG Auditores Independentes, a Brazilian entity and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

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KPMG Auditores Independentes Rua Arquiteto Olavo Redig de Campos, 105, 6º andar - Torre A 04711-904 - São Paulo/SP - Brasil Caixa Postal 79518 - CEP 04707-970 - São Paulo/SP - Brasil Telefone +55 (11) 3940-1500, Fax +55 (11) 3940-1501 www.kpmg.com.br

Independent auditors' report on the financial statements To The Board of Directors and Shareholders of Banco Votorantim S.A. São Paulo - SP Opinion We have audited the individual and consolidated financial statements of Banco Votorantim S.A. (“Bank”) referred to as “Bank” and “Consolidated”, respectively, which comprise the individual and consolidated statement of financial position as at December 31, 2017 and the individual and the consolidated statements of income, changes in shareholder’s equity and cash flows, for the six month period and the year then ended, and notes, to the individual and to the consolidated financial statements, including significant accounting practices and other explanatory information. In our opinion, the accompanying individual and consolidated financial statements present fairly, in all material respects, the individual and consolidated financial position of Banco Votorantim S.A. as at December 31, 2017, and of its individual and consolidated financial performance and its individual and consolidated cash flows for the six month period and the year then ended in accordance with the accounting practices adopted in Brazil, applicable to institutions authorized to operate by the Central Bank of Brasil - Bacen. Basis for opinion We conducted our audit in accordance with Brazilian and international Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the the Auditor’s Responsibilities for the Audit of Individual and Consolidated Financial Statements section of our report. We are independent of the Bank in accordance with the ethical requirements that are relevant to our audit of the individual and consolidated financial statements established in the Accountant´s Professional Ethics Code and the Professional Standards issued by the Federal Accounting Council (CFC), and we have fulfilled our ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the individual and consolidated financial statements of the current year. These matters were addressed in the context of our audit of the individual and consolidated financial statements as a whole, and in forming our opinion thereon, and, we do not provide a separate opinion on these matters.



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



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



16

projections based on such assumptions, and considered if they were in compliance with current regulatory guidelines. With the support of our tax specialists, we evaluated the bases of calculation to which the current tax rates are applied and the study of the capacity to realize the deferred tax assets. We also have evaluated whether the disclosures in the individual and consolidated financial statements described in notes 3n, 22e and 22f are in accordance with the applicable accounting practices. Based on the evidence obtained from the procedures described above, we considered the measurement of the deferred tax assets adequate in the context of the individual and consolidated financial statements taken as a whole. Other matters – Statements of value added The individual and consolidated statements of value added for the six month and year ended December 31, 2017, prepared under the responsibility of the Bank´s management, and presented as supplementary information for purposes of accounting practices adopted in Brazil applicable to financial institutions authorized to operate by the Central Bank of Brazil – Bacen, were subject to audit procedures performed in conjunction with the auditing of the Bank's financial statements. For the purpose of forming our opinion, we assess whether these statements are reconciled with the financial statements and accounting records, as applicable, and if their form and content are in accordance with the criteria set forth in Technical Pronouncement CPC 09 - Statement of Value Added. In our opinion, these statements of value added have been properly prepared, in all material respects, in accordance with the criteria set forth in this Technical Pronouncement and are consistent with the individual and consolidated financial statements taken as a whole. Responsibilities of the management and those in charge with governance for the individual and consolidate financial statements Management is responsible for the preparation and fair presentation of the individual and consolidated financial statements in accordance with the accounting practices adopted in Brazil applicable to institutions authorized to operate by Central Bank of Brazil – Bacen and for such internal controls as management determines is necessary to enable the preparation of these financial statements that are free from material misstatement, whether due to fraud or error. In preparing the individual and consolidated financial statements, management is responsible for assessing the Bank and its subsidiaries ability to continue as going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Bank and its subsidiaries or to cease operations, or has no realistic alternative but to do so. Those charged with governance are those responsible for overseeing the Bank’s financial reporting process. Auditor’s responsibilities for the audit of the individual and consolidated financial statements Our objectives are to obtain reasonable assurance about whether the individual and consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Brazilian and international standards on auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these individual and



17

consolidated financial statements. As part of an audit performed in accordance with the Brazilian and international standards on auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the individual and

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

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

• Evaluate the appropriateness of accounting policies used and the reasonableness of

accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of

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

• Evaluate the overall presentation, structure and content of the individual and

consolidated financial statements, including the disclosures, and whether the individual and consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the

entities or business activities within the Bank to express an opinion on the individual and consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we have identified during our audit. We also have provided those charged with governance with a statement that we have complied with the relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and where applicable, related safeguards. From the matters communicated with those charged with governance, we have determined



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those matters that were of most significance in the audit of the individual and consolidated financial statements of the current period and are therefore the key audit matters. We have described these matters in our auditors’ report, unless law or regulation precludes public disclosure about the matter, or when, in extremely rare circumstances, we have determined that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefit of such communication. São Paulo, February 09, 2018 KPMG Auditores Independentes CRC 2SP014428/O-6 (Original report in portuguese signed by) João Paulo Dal Poz Alouche Accountant CRC 1SP245785/O-2

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Banco Votorantim S.A.

Note 12.31.2017 12.31.2016 12.31.2017 12.31.2016 Note 12.31.2017 12.31.2016 12.31.2017 12.31.2016

CURRENT ASSETS 46,624,644 40,339,785 50,142,741 55,614,057 CURRENT LIABILITIES 56,847,123 69,810,393 56,329,498 64,680,704

Cash and due from banks 4 268,484 56,400 296,335 183,569 Deposits 15a 7,070,533 7,904,792 6,580,180 2,782,122 Demand deposits 99,267 89,688 94,633 87,991

Interbank investments 5a 30,204,204 23,607,320 15,108,170 17,066,698 Interbank deposits 1,148,559 5,829,814 666,282 708,841 Money market repurchase commitments 13,370,148 14,702,886 13,370,148 14,702,886 Time Deposits 5,822,707 1,985,290 5,819,265 1,985,290 Interbank deposit investments 16,834,056 8,904,434 1,738,022 2,363,812

Money market repurchase commitments 15c 33,017,929 44,425,550 24,688,751 34,637,971 Securities and Derivative financial instruments 8,221,307 9,308,228 8,770,230 12,518,174 Own portfolio 20,918,632 30,516,941 14,163,638 22,656,894

Own portfolio 6a 876,623 1,024,105 6,499,230 9,628,904 Third-party portfolio 7,486,409 11,702,126 5,912,225 9,774,594 Subject to repurchase commitment 6a 6,552,996 6,259,197 1,313,104 472,730 Free portfolio 4,612,888 2,206,483 4,612,888 2,206,483 Subject to guarantees provided 6a 80,841 966,395 117,204 1,089,548 Derivative financial instruments 6d 823,639 1,185,022 953,484 1,453,483 Acceptances and endorsements 17 12,607,246 10,244,503 12,607,246 10,244,503 (Provision for impairment of securities) 6a (112,792) (126,491) (112,792) (126,491) Funds from real estate bills, mortgage, credit and similar 12,021,152 8,981,104 12,021,152 8,981,104

Securities issued abroad 576,582 1,263,399 576,582 1,263,399 Interbank accounts 14,156 340,641 14,156 340,641 Structured operations certificates 9,512 - 9,512 -

Reserve requirements 7a 14,074 340,569 14,074 340,569 Compulsory deposits at the Central Bank of Brazil 14,074 340,569 14,074 340,569 Interbranch accounts 63,538 99,685 63,538 99,685

Correspondents 82 72 82 72 Third-party funds in transit 63,538 99,685 63,538 99,685

Loan operations 8a 3,713,769 3,553,628 19,912,865 19,302,622 Public sector 97,988 40,387 97,988 40,387 Borrowings 16a 1,087,621 1,671,462 1,087,621 1,671,462 Private sector 3,896,632 4,178,032 16,840,150 14,720,741 Foreign borrowings 1,087,621 1,671,462 1,087,621 1,671,462 Loan operations subject to assignment - - 4,800,985 6,723,321 (Allowance for loans losses) (280,851) (664,791) (1,826,258) (2,181,827) Domestic onlendings - Official institutions 16b 970,813 697,018 975,546 701,857

National Treasury 45,429 80,768 45,429 80,768 Lease operations 8a - - 144,640 70,111 BNDES 577,873 302,671 577,873 302,671

Private sector - - 145,472 73,584 FINAME 347,511 313,579 352,244 318,418 (Allowance for leases losses) - - (832) (3,473)

Derivative financial instruments 6d 623,803 1,721,867 623,803 1,721,867 Other receivables 4,139,578 3,303,024 5,745,451 5,861,620

Foreign exchange portfolio 9a 665,099 516,244 665,099 516,244 Other liabilities 1,405,640 3,045,516 9,702,813 12,821,237 Income receivable 6,380 14,876 19,283 27,426 Collection and levy of taxes and alike 2,372 3,356 17,956 19,209 Securities clearing accounts 44,210 120,959 100,376 255,987 Foreign exchange portfolio 9a 335,342 218,165 335,342 218,165 Sundry 10 3,533,246 2,751,854 5,080,073 5,181,241 Social and statutory 176,263 161,174 270,203 240,213 (Allowance for other receivables losses) 8a (109,357) (100,909) (119,380) (119,278) Tax and social security 18a 60,145 209,630 460,169 391,871

Securities clearing accounts 192,603 209,186 278,268 362,157 Other assets 11 63,146 170,544 150,894 270,622 Debt instruments eligible to capital 18b - 1,851,720 - 1,851,720

Non-operating assets and material inventories 69,754 180,361 161,377 283,023 Sundry 18d 638,915 392,285 8,340,875 9,737,902 (Accumulated impairment) (21,973) (23,825) (42,703) (46,812) Prepaid expenses 15,365 14,008 32,220 34,411 NON-CURRENT LIABILITIES 23,735,050 23,954,275 28,321,877 29,891,408

NON-CURRENT ASSETS 42,825,079 61,850,773 43,376,184 47,383,945 LONG-TERM LIABILITIES 23,702,963 23,916,725 28,289,692 29,853,858

LONG-TERM ASSETS 39,409,743 58,238,664 42,360,556 46,724,031 Deposits 15a 1,923,072 1,798,679 1,923,072 1,795,515 Interbank deposits 1,382,086 1,288,477 1,382,086 1,288,477

Interbank investments 5a 9,588,043 13,108,196 1,511 49,583 Time Deposits 540,986 510,202 540,986 507,038 Interbank deposit investments 9,588,043 13,108,196 1,511 49,583

Money market repurchase commitments 15c 1,085,625 2,055,472 1,048,168 1,035,408 Own portfolio 1,085,625 2,055,472 1,048,168 1,035,408

Securities and Derivative financial instruments 22,091,354 35,647,755 14,348,163 18,646,868 Own portfolio 6a 6,459,218 7,522,575 7,666,845 9,213,838 Acceptances and endorsements 17 11,477,672 11,557,911 11,477,672 11,557,911 Subject to repurchase commitment 6a 15,468,548 27,064,584 6,192,441 8,059,424 Funds from real estate bills, mortgage, credit and similar 11,446,947 11,505,211 11,446,947 11,505,211 Subject to guarantees provided 6a 23,082 694,655 348,371 1,007,665 Securities issued abroad 30,725 52,700 30,725 52,700 Derivative financial instruments 6d 1,082,214 1,231,802 1,082,214 1,231,802 (Provision for impairment of securities) 6a (941,708) (865,861) (941,708) (865,861) Borrowings 16a 40,056 126,845 40,056 126,845

Foreign borrowings 40,056 126,845 40,056 126,845 Loan operations 8a 5,198,735 6,971,819 21,619,738 21,443,803

Public sector 368,410 486,971 368,410 486,971 Domestic onlendings - Official institutions 16b 1,955,119 2,699,109 1,958,359 2,702,644 Private sector 5,261,188 6,894,488 18,828,708 16,684,442 National Treasury - 1,971 - 1,971 Loan operations subject to assignment - - 3,513,905 5,442,750 BNDES 786,457 1,294,597 786,457 1,294,597 (Allowance for loans losses) (430,863) (409,640) (1,091,285) (1,170,360) FINAME 1,168,662 1,402,541 1,171,902 1,406,076

Lease operations 8a - - 99,012 51,219 Derivative financial instruments 6d 1,077,423 985,842 1,077,423 985,842 Private sector - - 99,581 53,757 (Allowance for leases losses) - - (569) (2,538) Other liabilities 6,143,996 4,692,867 10,764,942 11,649,693

Tax and social security 18a - 154,575 8,171 159,782 Other receivables 2,531,357 2,510,734 6,229,510 6,314,720 Securities clearing accounts 74,608 97,914 90,882 120,133

Credits for sureties and guarantees paid - 174,084 - 174,084 Subordinated debts 18b 2,918,483 3,024,914 2,918,483 3,024,914 Income receivable 4,797 1,148 4,797 1,148 Debt instruments eligible to capital 18c 2,899,307 1,168,944 2,899,307 1,168,944 Securities clearing accounts 1,340 2,206 1,340 2,206 Sundry 18d 251,598 246,520 4,848,099 7,175,920 Sundry 10 3,150,907 2,527,036 6,859,285 6,331,026 (Allowance for other receivables losses) 8a (625,687) (193,740) (635,912) (193,744) DEFERRED INCOME 32,087 37,550 32,185 37,550

Other assets 11 254 160 62,622 217,838 SHAREHOLDERS’ EQUITY 8,867,550 8,425,890 8,867,550 8,425,890 Prepaid expenses 254 160 62,622 217,838

Capital 8,130,372 7,826,980 8,130,372 7,826,980 PERMANENT ASSETS 3,415,336 3,612,109 1,015,628 659,914 Domestic 21a 8,130,372 7,826,980 8,130,372 7,826,980

Investments 3,192,551 3,475,864 741,579 455,708 Capital reserves 21b 372,120 372,120 372,120 372,120 Investments in subsidiaries 12a 3,181,974 3,466,371 669,785 384,779

Domestic 3,181,974 3,410,265 669,785 384,779 Profit reserves 21c 425,579 373,891 425,579 373,891 Abroad - 56,106 - -

Other investments 12c 14,517 27,893 95,690 123,476 Equity valuation adjustments 21e (60,521) (147,101) (60,521) (147,101) (Accumulated impairment) 12c (3,940) (18,400) (23,896) (52,547)

Non-Controlling Interests - - - - Property for use 13 69,522 50,514 106,463 97,887

Other property for use 195,121 164,785 331,947 304,457 (Accumulated depreciation) (125,599) (114,271) (225,484) (206,570)

Intangible assets 14a 153,263 85,731 167,586 106,319 Intangible assets 225,274 138,512 296,555 202,084 (Accumulated amortization) (54,585) (35,355) (110,357) (78,153) (Accumulated impairment) (17,426) (17,426) (18,612) (17,612)

TOTAL ASSETS 89,449,723 102,190,558 93,518,925 102,998,002 TOTAL LIABILITIES 89,449,723 102,190,558 93,518,925 102,998,002

See the accompanying notes to the financial statements.

Bank Consolidated

STATEMENT OF FINANCIAL POSITIONIn December 31, 2017 and 2016

(In thousands of Reais, unless otherwise stated)

Bank Consolidated

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Years ended December 31, 2017 and 2016 and six month period ended December 31, 2017


Note 2H2017 2017 2016 2H2017 2017 2016

FINANCIAL INTERMEDIATION INCOME 3,961,655 8,954,778 10,575,683 6,739,428 14,010,537 15,117,895 Loan operations 8b 602,561 1,439,529 1,212,367 3,747,816 7,562,803 6,669,296 Lease operations 8h - - - 104,679 158,609 191,088 Income from securities 6b 3,307,288 7,337,512 9,523,879 1,963,788 4,133,702 4,766,663 Income from derivative financial instruments 6d9 (14,245) 51,800 44,158 (219,257) (217,371) 470,877 Income from exchange foreign operations 9b 58,118 106,252 (264,398) 58,118 106,252 (264,398) Income from compulsory deposits 7b 7,933 19,685 42,792 7,933 19,685 42,792 Assigned financial assets 8k - - 16,885 1,076,351 2,246,857 3,241,577

FINANCIAL INTERMEDIATION EXPENSES (3,955,339) (8,845,006) (9,814,361) (5,149,288) (10,963,112) (12,364,552) Deposits and securities sold under repurchase agreements 15d (3,115,606) (7,519,422) (9,808,520) (2,762,997) (6,462,608) (7,905,072) Borrowings and onlendings 16c (104,082) (251,665) 375,083 (105,050) (253,028) 374,214 Lease operations 8h - - - (80,128) (129,750) (158,436) Assigned financial assets 8k (111,373) (145,626) - (747,757) (1,532,700) (2,208,256) Allowance for loan losses 8f (624,278) (928,293) (380,924) (1,453,356) (2,585,026) (2,467,002)

GROSS INCOME (LOSS) FROM FINANCIAL INTERMEDIATION 6,316 109,772 761,322 1,590,140 3,047,425 2,753,343

OTHER OPERATING INCOME/EXPENSES 243,367 400,559 (113,652) (960,207) (1,879,592) (1,939,543) Service income 19a 96,920 208,972 237,570 240,238 489,250 496,696 Income from banking fees 19b 360 717 771 461,994 829,211 626,066 Personnel expenses 19c (163,481) (355,693) (397,900) (571,038) (1,094,894) (1,229,722) Other administrative expenses 19d (123,858) (217,529) (236,179) (612,703) (1,144,324) (1,148,056) Tax expenses 22c (38,493) (71,972) (106,697) (217,672) (395,327) (385,973) Share of earnings (losses) in equity-method investments 12a 486,331 858,294 338,425 160,551 285,006 194,483 Other operating income 19e 27,428 53,783 108,521 78,848 155,337 417,247 Other operating expenses 19f (41,840) (76,013) (58,163) (500,425) (1,003,851) (910,284)

OPERATING INCOME 249,683 510,331 647,670 629,933 1,167,833 813,800

NON-OPERATING INCOME 20 15,820 1,840 (28,498) 20,152 3,220 942 Non-operating income 16,314 5,257 4,614 22,967 18,647 31,938 Non-operating expenses (494) (3,417) (33,112) (2,815) (15,427) (30,996)

INCOME (LOSS) BEFORE TAXES AND CONTRIBUTIONS 265,503 512,171 619,172 650,085 1,171,053 814,742

INCOME TAX AND SOCIAL CONTRIBUTION 22a 74,050 124,274 (138,513) (272,916) (424,783) (257,185)

PROFIT SHARING - EMPLOYEES AND MANAGEMENT (29,889) (54,216) (54,845) (67,505) (164,041) (131,743)

NON-CONTROLLING INTERESTS - - - - -

NET INCOME 309,664 582,229 425,814 309,664 582,229 425,814

EARNINGS PER SHARE

Earnings per share - R$ 21d 2.94 5.52 4.04 Number of shares (thousand lot) 21a 105,391,473 105,391,473 105,391,473


Bank Consolidated

STATEMENT OF INCOME

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Banco Votorantim S.A. STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITYPeriod from January 1 to December 31, 2017 and 2016 and six month period ended December 31, 2017

Note Capital

Realised capital Legal Other

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

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

Equity valuation adjustments 21e - - - - 484,543 - 484,543

Net income for the period - - - - - 425,814 425,814

Allocations:

Legal reserve - - 21,291 - - (21,291) -

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

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

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

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

Balances at 06.30.2017 8,130,372 372,120 78,300 - (220,829) 148,213 8,508,176



Allocations: -

Legal reserve - - 15,484 - - (15,484) -

Dividends 21d - - - - - (110,598) (110,598)

Special profit reserve - - - 331,795 - (331,795) -

Balances at 12.31.2017 8,130,372 372,120 93,784 331,795 (60,521) - 8,867,550

Changes in the period - - 15,484 331,795 160,308 (148,213) 359,374

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

Effects of adjust from inicial aplication of Resolution CMN nº 4.512/2016 21f - - - - - (116,551) (116,551)

Capital increase 21a 303,392 - - (303,392) - - -



Allocations:

Legal reserve - - 23,285 - - (23,285) -

Dividends 21d - - - - - (110,598) (110,598)

Special profit reserve - - - 331,795 - (331,795) -

Balances at 12.31.2017 8,130,372 372,120 93,784 331,795 (60,521) - 8,867,550

Changes in the period 303,392 - 23,285 28,403 86,580 - 441,660

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


TotalEVENTS Capital reserves Profit reservesAdjustments to

equity value Retained earnings

22


Years ended December 31, 2017 and 2016 and six month period ended December 31, 2017


Note 2H2017 2017 2016 2H2017 2017 2016

Cash flows from operating activitiesIncome before income and social contribution taxes 265,503 512,171 619,172 650,085 1,171,053 814,742 Adjustments to Income before income and social contribution taxes (294,761) (423,107) 620,893 910,873 1,892,307 2,603,051

Allowance for loan losses 8f 624,278 928,293 380,924 1,453,356 2,585,026 2,467,002 Depreciation and amortization 19d 22,299 37,331 41,568 36,470 61,414 64,049 Income from appraisal of recoverable value of assets - (460) 683 - (1,390) 4,011 Share of earnings (losses) in equity-method investments 12a (486,331) (858,294) (338,425) (160,551) (285,006) (194,483) (Income) Loss on disposal of assets 85 (19,863) 262,495 780 (20,888) 279,973 Provision (Reversal) to devaluation of other assets (14,731) 372 25,928 (12,587) 5,911 20,258 Provision (Reversal) to devaluation of other investments (940) (3,606) 2,552 (2,889) (5,889) 2,804 Expenses (Reversal) with civil, labor and tax provisions 14,425 35,830 15,279 58,201 123,645 (13,636) Effect of changes in foreign exchange rates on cash and cash equivalents 55 (13,313) 152,330 53 (13,313) 167,270 Interest income and foreign exchange losses of securities available for sale (147,987) 62,148 661,726 (147,987) 62,148 661,726 Interest income from securities held to maturity (305,528) (592,610) (581,878) (305,528) (592,610) (679,604) Other operating income and expenses (382) 524 (3,968) (8,393) (27,392) (178,908) Other non-operating income and expenses - 545 1,610 - 705 2,474 Other adjustments (4) (4) 69 (52) (54) 115

Adjusted income before income and tax social contribution (29,258) 89,064 1,240,065 1,560,958 3,063,360 3,417,793 Changes in assets/liabilities (2,144,232) (10,324,591) (6,417,442) (5,159,027) (6,216,448) (11,823,354)

(Increase) decrease in interbank investments 2,670,911 (1,932,358) (3,905,480) 2,652,175 2,452,863 (6,705,542) Increase (decrease) in trading securities and derivative financial instruments 1,886,641 3,441,192 (10,547,619) 2,700,803 3,590,909 (781,396) (Increase) decrease in interbank accounts 7,838 (36,157) 68,330 7,838 (36,157) 68,330 (Increase) Decrease in compulsory deposits at the Central Bank of Brazil 342,841 326,495 (320,337) 342,841 326,495 (320,337) (Increase) Decrease in loan operations 1,111,320 1,315,409 2,217,492 (1,388,437) (2,740,502) 617,628 (Increase) Decrease in lease operations - - - (117,360) (120,191) 43,049 (Increase) /decrease in other receivables, net of deferred taxes (1,569,569) (1,443,646) 1,812,439 (894,697) (757,034) 2,067,774 (Increase) decrease in other assets 105,275 110,538 (20,907) 181,539 274,922 114,068 Income and social contribution taxes paid (8,481) (28,332) (103,874) (103,241) (143,397) (206,736) (Decrease) increase in deposits (1,680,931) (709,866) 5,058,767 (1,751,269) 3,925,615 371,759 (Decrease) increase in money market repurchase commitments (4,123,537) (12,377,468) 6,831,377 (5,279,923) (9,936,460) 2,873,457 (Decrease) Increase in acceptances and endorsements 30,769 2,282,504 (3,519,820) 30,769 2,282,504 (3,520,391) (Decrease) increase in liabilities from borrowings and onlendings (397,571) (1,140,825) (2,688,517) (397,488) (1,141,226) (2,690,400) (Decrease) Increase in other obligations (520,792) (126,614) (1,288,596) (1,143,729) (4,189,424) (3,743,920) (Decrease) increase in deferred income 1,054 (5,463) (10,697) 1,152 (5,365) (10,697)

CASH GENERATED (USED) BY OPERATING ACTIVITIES (2,173,490) (10,235,527) (5,177,377) (3,598,069) (3,153,088) (8,405,561)

Cash flows from investing activities(Acquisition) of securities available for sale (6,384,622) (10,281,698) (6,385,080) (2,366,595) (4,869,614) (9,455,548) (Acquisition) of securities held to maturity (1,519) (127,390) (5,686,215) (1,519) (127,390) (5,686,033) (Acquisition) of property for use (28,289) (39,866) (22,925) (30,009) (41,993) (28,485) (Acquisition) of intangible (47,607) (87,001) (46,275) (53,004) (93,715) (52,563) (Acquisition) of investments (9,317) (16,637) (348,155) (3,804) (3,025) (372,916) Disposal, maturity of securities available for sale 8,690,352 20,981,620 9,546,412 5,772,833 7,998,732 11,646,846 Maturity of securities held to maturity - 297,268 3,386,353 - 1,135,785 6,585,365 Disposal of property for use 1,270 2,799 1,803 2,775 4,304 2,940 Disposal/Decrease of investments 1,042,158 1,059,879 13,258 864 24,438 - Disposal of intangible assets 108 201 3,110 105 201 6,533 Interest on own capital / Dividends received 118,415 118,415 332,324 - - 150,852

NET CASH GENERATED (USED) BY INVESTING ACTIVITIES 3,380,949 11,907,590 794,610 3,321,646 4,027,723 2,796,991

Cash flows from financing activitiesDividends paid 27e - (101,131) (114,409) - (101,131) (114,409) (Decrease) Increase in obligations due to subordinated debts 27e (1,411,233) (1,958,151) (1,169,302) (1,411,233) (1,958,151) (1,169,302) (Decrease) Increase in capital and debt instruments 27e 1,669,512 1,730,363 287,302 1,669,512 1,730,363 287,302

CASH GENERATED (USED) BY FINANCING ACTIVITIES 258,279 (328,919) (996,409) 258,279 (328,919) (996,409)

Net variation for cash and cash equivalents 1,465,738 1,343,144 (5,379,176) (18,144) 545,716 (6,604,979)

Beginning of the period 1,449,620 1,558,846 7,090,352 2,672,928 2,095,702 8,867,951 Effect of changes in foreign exchange rates on cash and cash equivalents (55) 13,313 (152,330) (53) 13,313 (167,270) End of the period 4 2,915,303 2,915,303 1,558,846 2,654,731 2,654,731 2,095,702

Increase (Decrease) in cash and cash equivalents 1,465,738 1,343,144 (5,379,176) (18,144) 545,716 (6,604,979)


STATEMENT OF CASH FLOWS

Bank Consolidated

24

Banco Votorantim S.A.STATEMENT OF VALUE ADDEDYears ended December 31, 2017 and 2016 and six month period ended December 31, 2017


Note 2H2017 2,017 2,016 2H2017 2,017 2,016

Income 3,436,065 8,215,784 10,454,960 5,586,879 11,898,678 13,281,560 Financial operations income 3,961,655 8,954,778 10,575,683 6,739,428 14,010,537 15,117,895 Service income and banking fees 19a / 19b 97,280 209,689 238,341 702,232 1,318,461 1,122,762 Allowance for loan losses 8f (624,278) (928,293) (380,924) (1,453,356) (2,585,026) (2,467,002) Other income (expenses) 19e / 19f / 20 1,408 (20,390) 21,860 (401,425) (845,294) (492,095)

Financial intermediation expenses (3,331,061) (7,916,713) (9,433,437) (3,695,932) (8,378,086) (9,897,550)

Inputs acquired from third parties (91,558) (160,787) (167,348) (548,789) (1,026,049) (1,016,049) Water, electricity and gas 19d (1,268) (2,264) (3,226) (4,408) (8,444) (10,152) Outsourced services 19d (625) (1,150) (1,145) (8,863) (13,358) (9,629) Communications 19d (726) (1,390) (1,229) (34,545) (68,569) (78,346) Data processing 19d (40,038) (74,129) (66,395) (103,714) (204,433) (198,965) Transportation 19d (668) (1,164) (1,135) (7,948) (15,146) (12,901) Surveillance and security services 19d (1,177) (2,381) (1,506) (1,436) (3,112) (2,433) Specialized technical services 19d (25,302) (39,973) (50,578) (206,425) (379,139) (376,393) Financial system services 19d (7,631) (13,400) (13,412) (48,281) (96,545) (93,696) Advertising and publicity 19d (797) (1,095) (867) (12,243) (20,670) (6,735) Judicial and notary public fees 19d (3,107) (6,365) (9,896) (48,549) (93,887) (110,942) Other 19d (10,219) (17,476) (17,959) (72,377) (122,746) (115,857)

Gross added value 13,446 138,284 854,175 1,342,158 2,494,543 2,367,961

Amortization/depreciation expenses 19d (22,299) (37,331) (41,568) (36,470) (61,414) (64,049)

Net added value produced by the Entity (8,853) 100,953 812,607 1,305,688 2,433,129 2,303,912

Added value received as transfer 486,331 858,294 338,425 160,551 285,006 194,483 Share of earnings (losses) in equity-method investments 12a 486,331 858,294 338,425 160,551 285,006 194,483

Added value payable 477,478 100.00% 959,247 100.00% 1,151,032 100.00% 1,466,239 100.00% 2,718,135 100.00% 2,498,395 100.00%

Distributed added value 477,478 100.00% 959,247 100.00% 1,151,032 100.00% 1,466,239 100.00% 2,718,135 100.00% 2,498,395 100.00%

Personnel 178,544 37.39% 357,941 37.31% 405,704 35.25% 581,093 39.63% 1,117,952 41.13% 1,231,273 49.28%Salaries, fees and labor demands 131,520 257,087 307,035 426,794 771,527 921,778 Profit sharing - Employees and Management 29,889 54,216 54,845 67,505 164,041 131,743 Benefits and training programs 11,066 26,074 26,489 65,304 127,632 127,971 FGTS 6,053 20,531 17,306 21,422 54,297 49,021 Other charges 16 33 29 68 455 760

Taxes, rates and contributions (20,731) -4.34% (334) -0.03% 292,251 25.39% 548,038 37.38% 961,093 35.36% 773,350 30.95%Federal (25,547) (9,849) 277,968 502,946 888,045 717,386 State 8 15 2 16,764 17,106 2,309 Municipal 4,808 9,500 14,281 28,328 55,942 53,655

Third-party capital remuneration 10,001 2.09% 19,411 2.02% 27,263 2.37% 27,444 1.87% 56,861 2.09% 67,958 2.72%Rental 19d 10,001 19,411 27,263 27,444 56,861 67,958

Remuneration of own capital 309,664 64.86% 582,229 60.70% 425,814 36.99% 309,664 21.12% 582,229 21.42% 425,814 17.05%Dividends 110,598 110,598 101,131 110,598 110,598 101,131 Retained earnings 199,066 471,631 324,683 199,066 471,631 324,683


Banco Consolidado



24

Notes to the Consolidated Financial Statements 1. THE CONGLOMERATE AND ITS OPERATIONS Banco Votorantim S.A. (“Banco Votorantim”, “Bank”, “Conglomerate” or “Consolidated”) is a private company which, operating as a Multiple Bank, develops banking activities in authorized categories, including commercial banking, investment banking and foreign exchange operation portfolios. Through its subsidiaries, the Institution also carries out activities in the areas of consumer credit, leasing, administration of investment funds and credit cards, securities brokerage and distribution and any other activities in which institutions that are part of the National Financial System are permitted to engage. Transactions are conducted in the context of a set of institutions that operate in an integrated manner in the financial market, including in relation to risk management, and certain transactions have the joint participation or the intermediation of member institutions, which form an integral part of the financial system. The benefits of the services provided between these institutions and the costs of the operational and administrative structure, are absorbed based on the practicality and reasonableness of the allocation of benefits and costs, jointly or individually. 2. PRESENTATION OF FINANCIAL STATEMENTS The consolidated financial statements were prepared based on the accounting guidelines derived from Brazilian Corporation Law and the rules and instructions of the National Monetary Council (CMN), the Central Bank of Brazil, and are presented in accordance with the Accounting Plan for Institutions in the National Financial System (COSIF) highlighting the ones related to the Conglomerate. The preparation of the financial statements in accordance with accounting practices adopted in Brazil, applicable to financial institutions, requires that Management use its judgment in determining and recording accounting estimates, when applicable. Significant assets and liabilities subject to these estimates includes: the residual value of permanent assets, allowance for loan losses, deferred tax assets, provision for labor, tax and civil claims, valuation of financial instruments and other provisions. Definitive values of transactions involving these estimates are recognized only upon settlement. In the preparation of consolidated financial statements, intercompany transactions, and any unrealised income and expenses arising from intercompany transactions, and intercompany balances, including interest held by one company in another, were eliminated, net of tax effects. Interest held by non-controlling shareholders in the shareholders’ equity of the subsidiaries and in income were highlighted in consolidated financial statements. The lease transactions were classified as a financial lease, and the reclassified amounts under leased property, plant and equipment to the caption lease transactions including the excess and/or insufficient depreciation, less residual value received in advance. These consolidated financial statements do not include the consolidation of the exclusive investment funds and of the credit receivable investment funds and non-financial subsidiaries in conformity with the consolidation rules established by the CMN for the purposes of the Financial Conglomerate. The book balances of the overseas direct subsidiaries, which are prepared in accordance with International Financial Reporting Standards (IFRS), were translated into Reais, using the foreign currency quotation on the closing date of the period, and were adjusted to conform to the accounting policies described in Note 3. The exchange variation of the operations in the Country of the branch and of the subsidiary companies abroad was distributed on the lines of the statement of income, according to the respective assets and liabilities which originated them. The result of exchange variation of foreign investments are presented in the “Income from derivative financial instruments” with the purpose of eliminating the effect of hedging against the exchange rate fluctuations of these investments. The National Monetary Council (CMN) approved the following pronouncements of Accounting Pronuncements Committee (CPC) which were fully applied by the Bank, as applicable: CPC 00 (R1) – Basic Conceptual Pronouncement, CPC 01 (R1) - Impairment of assets, CPC 03 (R2) – Statement of cash flows, CPC 05 (R1) – Related party disclosures, CPC 10 (R1) – Share-based payment, CPC 23 –



25

Accounting Policies, Change in Accounting Estimates and Correction of Errors, CPC 24 - Subsequent events, CPC 25 – Provisions, contingent assets and liabilities and CPC 33 (R1) – Employee Benefits. The Conglomerate applies pronouncement CPC 09 - Statement of value added, which is not in conflict with the rules of the Central Bank of Brazil, as provided for in the prevailing regulations The Consolidated Financial Statements were authorized for issue by Executive Board on February 09, 2018. Shareholding interest included in the consolidated financial statements, by business segment:

Activity 12.31.2017 12.31.2016

Interest % Banking segment - Domestic BV Financeira S.A. Crédito, Financiamento e Investimento (1) Financial 100.00% 100.00% BV Leasing Arrendamento Mercantil S.A. (1) Lease 100.00% 100.00% Votorantim Corretora de Títulos e Valores Mobiliários Ltda. (1) Brokerage house 99.99% 99.99% Fund management segment Votorantim Asset Management Distribuidora de TVM Ltda. (1) Asset Management 99.99% 99.99% Banking segment - Foreign Votorantim Bank Limited (1) (2) Banking - 99.99% Banco Votorantim Securities Inc. (1) (3) Brokerage house - 100.00% Votorantim Securities (UK) Limited (1) (4) Brokerage house - 100.00%

(1) Financial subsidiaries. (2) Votorantim Bank Limited had its activities closed during the year ended December 31, 2016 and was terminated in January

4, 2017. (3) Banco Votorantim Securities Inc. was extinguished on December 28, 2017. (4) Votorantim Securities (UK) Limited had its activities closed during the year ended December 31, 2017 and is in the process

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

• Reclassification of adjustments to fair value of financial instruments designated as hedges from Financial Intermediation Expenses - Deposits and securities sold under repurchase and Loan and Lease operations agreements to Financial Intermediation Income - Income from derivative financial instruments.

• Reclassification of the Income from foreign exchange operations from Financial Intermediation Expenses to Financial Intermediation Income.

Statement of income

Bank 2016

Previous disclosure Reclassification Reclassified

balance FINANCIAL INTERMEDIATION INCOME 10,733,516 (157,833) 10,575,683 Loan and lease operations (Note 8b) 1,211,773 594 1,212,367 Income from derivative financial instruments (note 6d9) (61,813) 105,971 44,158 Income from foreign exchange operations (Note 9b) - (264,398) (264,398) FINANCIAL INTERMEDIATION EXPENSES (9,972,194) 157,833 (9,814,361) Deposits and securities sold under repurchase agreements (note 15d) (9,701,955) (106,565) (9,808,520)

Income from foreign exchange operations (Note 9b) (264,398) 264,398 -



26

Consolidated 2016

Previous disclosure Reclassification Reclassified

balance FINANCIAL INTERMEDIATION INCOME 15,275,728 (157,833) 15,117,895 Loan and lease operations (Note 8b) 6,661,252 8,044 6,669,296 Income from derivative financial instruments (note 6d9) 372,356 98,521 470,877 Income from foreign exchange operations (Note 9b) - (264,398) (264,398) FINANCIAL INTERMEDIATION EXPENSES (12,522,385) 157,833 (12,364,552) Deposits and securities sold under repurchase agreements (note 15d) (7,798,507) (106,565) (7,905,072)

Income from foreign exchange operations (Note 9b) (264,398) 264,398 - 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies adopted by Banco Votorantim were consistently applied to all periods presented in these consolidated financial statements and have been applied consistently by all entities of the Conglomerate. a) Statement of income Revenues and expenses are recognized on an accrual basis in the period earned or incurred . Transactions that were carried out with floating financial charges are adjusted on a pro rata basis, based on the variation of the respective agreed-on indices; and transactions with fixed financial charges are recorded at redemption value, rectified by unrecognized income or unrecognized expenses corresponding to the future period. Transactions indexed to foreign currencies are adjusted at the reporting sheet date at the current rate criteria. b) Functional and presentation currency The functional currency, which is the currency of the principal economic environment in which an entity operates, is the Real for all Conglomerate entities. In the consolidated financial statements the presentation currency is also the Real. c) Measurement at present value Financial assets and liabilities are presented at present value as a result of application of accrual regime for recognition of respective interest revenues and expenses. Non-contractual obligations, mainly represented by provisions for lawsuits and legal obligations whose disbursement date is unknown and not under control of the Conglomerate, are measured at present value, as they are initially recognized at estimated disbursement value on evaluation date and are adjusted on a monthly basis. d) Cash and cash equivalents Cash and cash equivalents comprise domestic and foreign currency, money market repurchase commitments - own portfolio, interbank accounts or relations and investments in foreign currency, with original maturities of 90 days or less from the acquisition date that are subject to an insignificant risk of changes in their fair value. e) Interbank investments Interbank investments are shown at cost of investment or acquisition, plus income accrued up to the reporting date and adjusted for reserve for losses, as applicable. f) Securities Securities are recorded at the amount effectively paid, net of reserve for losses, and classified into three different categories based on Management's intent:



27

Trading securities: Securities acquired for the purpose of being actively and frequently negotiated. Subsequent to initial recognition, trading securities are measured at fair value with changes therein recognized in profit or loss; Securities available for sale: Securities that may be traded at any time, though are not acquired for the purpose of being actively and frequently negotiated. Subsequent to initial recognition, securities available for sale are measured at fair value with changes therein recognized in a separate account in shareholders’ equity, net of taxes; and Securities held to maturity: Securities acquired with the positive intent and financial capacity to hold to maturity. Held-to-maturity securities are initially recognized at cost plus any directly attributable transaction costs. Subsequent to initial recognition, held-to-maturity financial assets are measured at amortised cost using the effective interest method, less any impairment losses. For securities reclassified to this category, the fair value adjustment is recognized. The methodology of adjustment to fair value was established in compliance with consistent and verifiable criteria, which take into consideration the average price of trading on the date of calculation, or, in the absence thereof, the daily basis adjustment of forward market transactions disclosed by external sources, or the probable net realizable value determined by pricing models, using interest rate future value curves, exchange rates, price and currency indexes. The determination of fair value takes unto consideration the credit risk of the issuer. Income on securities, regardless of the category, is accrued pro rata, based on the variation of the index and on the agreed-upon interest rates, by the compounding or straight-line method, up to the date of maturity or of the final sale of the security, and is recognized directly in profit or loss. Losses on securities classified as available for sale and as held to maturity that are not temporary losses are directly recognized in profit or loss and now comprise the new asset cost basis. Upon disposal, difference determined between sales value and acquisition cost adjusted by earnings and other than temporary impairment losses, are considered as the transaction result and is accounted for on transaction date as Income or Loss of securities. g) Derivative financial instruments Derivative financial instruments are valued at fair value at the reporting date. Changes in value are recorded in the income or expense accounts of the respective financial instruments. The fair value adjustment methodology of derivative financial instruments was established based on consistent and verifiable criteria, considering the average price of trading on the date of calculation, or, in the absence thereof, conventional and proven methodologies and pricing models that reflect the net realizable value. The fair value considers the credit risk of the counterparty (Credit valuation adjustment). Derivative financial instruments used to offset, in whole or in part, the risks arising from exposure to variations in the fair value of financial assets or liabilities are considered hedging instruments and are classified according to their nature as either: Market risk hedge: changes in the fair values of the financial instruments and the corresponding hedged items are recognized in profit or loss; and

Cash flow hedge: For financial instruments classified in this category, the effective portion of changes in fair value is recorded in a separate account of Shareholders' equity, net of tax effects. The effective portion is that portion for which the variation in the fair value of the hedging instrument directly offsets the change in fair value of the hedged item, considering transaction accumulated effect. Other variations in these instruments are recognized in profit or loss for the period.



28

For items that were discontinued from the hedge list and that remain recorded in the statement of financial position, as in the case of credit contracts assigned with substantial retention of risks and benefits, when applicable, the fair value adjustment is recognized over the remaining period at the new effective interest rate. h) Loan and lease operations, advances on foreign exchange contracts, other receivables with

loan characteristics and allowance for loan losses Loans and lease operations, advances on foreign exchange contracts and other receivables with loan characteristics are classified according to Management's assessment regarding the level of risk, taking into consideration the current economic environment, past experience and risks specifically related to the respective operation, the counterparty and guarantors, periods of delinquency, and economic group in accordance with the parameters established by CMN, which requires the classification of the portfolio into nine risk levels, ranging from AA (minimum risk) to H (maximum risk), as well as the classification of transactions with delinquency of more than 14 days as non-performing loans. In relation to the delinquency period for operations with a term of over thirty-six (36) months, a double counting of days is adopted over intervals of delinquency defined for the nine levels risks to retail operations. For wholesale operations, a double counting days for the intervals of delinquency is also permitted, according to the internal assessment. Interest from credit transactions overdue for more than 59 days is recognized as income only when effectively received, regardless of risk level. Operations with a risk level H continue in this status for 180 days, at which time they are written off against the existing provision and controlled in off-balance sheet accounts. Renegotiated operations are maintained, at a minimum, at the level at which they were initially rated on the date of renegotiation. Renegotiations of credit transactions that had been previously written off against provisions are rated as level H and any gains from renegotiation are recognized in profit or loss when effectively received. The allowance for loan losses, considered sufficient by Management, complies with the requirement established by CMN Resolution 2,682/1999 (Note 8e). Loan and lease operations that are hedged against market risk are stated at fair value using consistent and verifiable criterion. Adjustments to these transactions from fair value adjustment valuations are recorded in credit and lease transactions, as a contra-entry to “Income from derivative financial instruments”. The income from loan assignments with recourse performed up to December 31, 2011, was calculated on the date of assignment and the income was fully recognized through write-off of the corresponding assets, whether risk was retained or not. For the portfolio of loans assigned with recourse, Management established a reserve for losses, recorded under “Other liabilities – Sundry – Sundry domestic creditors”. As of January 1, 2012, financial assets assigned consider the transfer level of risks and benefits of assets transferred to other entity: • When financial assets are transferred to another entity, but there is no substantial transfer of the risks

and benefits related to the transferred assets, assets remain on the Institution’s statement of financial position. The income and expenses arising from these operations are recognized in an accrual basis accordingly to the remaining period of these operations; and

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



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i) Prepaid expenses These expenses refer to the application of payments made in advance, for which the benefits or the services will occur in subsequent periods. Prepaid expenses are recorded at cost and amortized as incurred. Transactions related to “Usufruct rights on shares” have been recognized based on the funds paid by the Conglomerate for temporary beneficial ownership of other companies’ preferred shares in exchange for consideration. These “Usufruct rights on shares” grant the right to receive dividends in the manner provided for in the bylaws of each of these companies, among other rights and benefits. The funds paid are deferred with a corresponding entry to profit or loss, in accordance with the term of each beneficial ownership transaction, whereas the amounts arising from rights to the payment of dividends are recognized as revenues when proven. Beginning January 2, 2015, in compliance with requirements of CMN Resolution no. 4,294/2013, and in accordance with permission provided for in BACEN Circular Letter no. 3,738/2014, two thirds of the remuneration relating to 2015 origination of credit or lease transactions by correspondents are recorded in assets, and the remaining portion is recognized in profit or loss for the period upon origination. As of January 1, 2016, the portion recorded in assets was reduced to one third of the remuneration of operations originated in 2016. The operations generated as from January 1, 2017, have the remuneration fully recognized as an expense. Assets recorded pursuant to permission provided for in BACEN Circular Letter no. 3,738/2014 are amortized on a straight-line basis over the maximum period of 36 months. Beginning as of January 1, 2020, all amounts recorded in assets and related to remuneration of correspondents in Brazil will be immediately written off, with contra-entry in the appropriate expense account for the period. j) Permanent assets Investments: investments in subsidiaries and associates with significant influence or interest of 20% or more in the voting capital are accounted for by the equity method based on the shareholders’ equity in the subsidiary. Financial statements of subsidiaries abroad are conformed to accounting criteria in force in Brazil and translated into Brazilian Reais in accordance with prevailing law, and their effects are recognized in profit or loss. Other permanent investments are valued at cost of acquisition, less provision for impairment, as applicable. Property for use: property, plant and equipment is valued at acquisition cost less depreciation, which is calculated on a straight-line basis using the following annual rates in accordance with estimated useful lives of assets, as follows: vehicles – 20%, data processing systems – 20% and other items – 10% (Note 13). Intangible assets: intangible assets corresponds to the expenditure in software intended for the maintenance of the Institution. Intangible assets have defined useful lives and primarily relates to softwares (Note 14). Amortization is calculated by the straight-line method, based on the period over which the benefit is generated and is recorded under Other administrative expenses - Amortization (Note 19d). k) Impairment of non-financial assets - Impairment The Conglomerate assesses at the end of each period, if there is any sign that an asset may be impaired. If so, the Institution estimates the asset's recoverable value, which is the greater of: i) the asset’s fair value less costs to sell; and ii) the asset’s value in use. If the asset’s recoverable value is lower than its carrying value, the asset’s carrying value is reduced to



30

its recoverable value through a provision for impairment losses that is recognized in profit or loss. Methodologies applied to the evaluation of the recoverable value of non-financial assets: Investments The methodology for determining the recoverable value of investments accounted for by the equity method is based on evaluation of equity in investees, their business plans and invested amounts’ return capacity. A provision for impairment loss is recognized in profit or loss in the period when the carrying value of an investment, including goodwill, exceeds its recoverable value. Intangible assets Software - software is developed internally and according to the Conglomerate’s needs. This development process is in compliance with the Bank investment policy which aims the modernization and adequacy to new technologies and business requirements. As there are no similar items in the market and also because of the high cost to implement metrics that permit determining the value in use, testing of software recoverability is comprised of the evaluation of its utility for the Institution such that when the software no longer has future economic benefits, the recoverable value of the intangible asset is adjusted. Impairment loss recognized to adjust these assets’ recoverable value is stated in respective notes. l) Employee benefits Recognition, measurement and disclosure of employee benefits (short and long-term) are conducted in accordance with criteria defined in CPC 33 (R1) – Benefits to employees, approved by the CMN Resolution No. 4,424/2015. In accordance with the accrual regime, this pronouncement requires that an entity recognize a liability as a contra-entry to the net income of the period when the employee provides services in exchange for benefits to be paid in the future. The Conglomerate has a variable compensation program eligible for its officers and employees. Amounts to be paid that are adjusted according to the grace period (from one to a maximum of four years) and to the characteristics of each benefit are recorded under “Other sundry obligations - Provision for payments” as a contra entry to caption “Personnel expenses - Proceeds”. Program details are disclosed in Note 24. m) Deposits and money market repurchase commitments Deposits and money market repurchase commitments are stated at the amounts of the liabilities and consider, when applicable, the charges enforceable up to the reporting date, recognized on a “pro rata” daily basis. Costs incurred in issuing securities or other forms of funding that are included as transaction costs are recognized in the income statement on an accrual basis for the term of the original operations. Funding that is subject to market risk hedging is valued at its fair value using consistent and verifiable criteria. The valuation adjustments to fair value of these operations are recorded in the same line as the financial instrument, in contra-entry to income from derivative financial instruments. n) Taxes Taxes are calculated based on rates shown in the chart below: Taxes Current rates Income tax (15% + 10% additional) 25% Social contribution on net income - CSLL (1) 20% PIS / PASEP 0.65% Contribution for Social Security Funding - COFINS 4% Service tax (ISS) - ISSQN De 2% a 5%

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



31

of January 2019, the rate will return to 15%.

Deferred tax assets and deferred tax liabilities are recognized through the application of prevailing tax rates on respective bases. For recognition, maintenance and write-off of deferred tax assets, the criteria established in CMN Resolution no. 3,059/2002, as amended by CMN Resolutions no. 3,355/2006 and 4,192/2013, are followed, supported by a study on realization capacity. The deferred tax assets resulting from the increase of the CSLL rate from 15% to 20% are being recognized in a sufficient amount to its consumption until the final date of effective of the new rate (December 2018), according to Law no. 13,169/2015. Deferred income tax is recognized at the subsidiary BV Leasing, calculated at the rate of 25%, on the adjustment of excess of depreciation of the lease portfolio of subsidiary BV Leasing. o) Provisions, contingent assets and liabilities and legal obligations Recognition, measurement and disclosure of provisions, contingent assets and liabilities and of legal obligations are conducted in accordance with criteria defined in CPC 25 - Provisions, Contingent Liabilities and Contingent Assets, approved by the CMN Resolution 3,823/2009 (Note 25). Contingent assets are not recognized except when Management has full control over the situation or when there are secured guarantees or favorable sentences to which no further appeals are applicable, characterizing a favorable judgment as practically certain. Contingent liabilities are recognized when, based on the opinion of legal counsel and Management, the risk of loss of a lawsuit or administrative proceeding is considered probable, with a probable outflow of financial resources for the settlement of obligations and when the sums involved are reasonably estimable. Contingent liabilities rated as possible losses are not recognized and are only be disclosed in notes; those rated “remote” do not require provision or disclosure. Legal obligations comprise lawsuits related to tax obligations, where the subject being contested is the legality or constitutionality of such obligations, which, regardless of the probability of success, are recognized in full in the consolidated financial statements. p) Guarantees and sureties The financial guarantees provided, which require contractually defined payments, as a result of non-payment of the obligation by the debtor on the due date, such as: guarantee, guarantee, co-obligation, or other obligation that represents a guarantee of compliance with third parties' financial obligations, are recorded and controlled in off-balance sheet accounts. When the obligation value is subject to exchange variation or to any other type of adjustment, balances of these accounts are adjusted at the reporting date. Income for the period from provided guarantee and sureties commissions not yet received, are accounted for on a monthly basis in “Commissions for Co-obligations Receivable, as a contra entry to Income from Provided Guarantees. Commissions received in advance are accounted for under advanced income in group deferred income, on a monthly basis at the accrual system. In line with the requirements of CMN Resolutions 2,682/1999 and 4,512/2016, the constitution of a provision for losses in the provision for financial guarantees to customers, takes into account:

• The sector of performance, competitive and regulatory environment, stock control and management, as well as financial solidity, being these variables captured through the qualitative and quantitative rating models, as well as;

• In the case of guarantees given on the behalf of customers involved in legal or administrative



32

proceedings, the likelihood that the customer will be required to make a payment under the final ruling.

The effects of the adjustments by the initial application of CMN Resolution 4512/2016, which occurred on January 1, 2017, which resulted in the constitution of a liability provision, were recorded as a contra entry to the retained earnings account, net of tax effects. The financial guarantees provided are shown in Other Liabilities - Sundry (Note 18d) under subitem:

• Provision for losses - Not honored guarantees, until 2016;

• Provision for financial guarantees provided, starting in 2017, with the application of CMN Resolution 4,512/2016.

q) Others assets and liabilities Other assets and liabilities are stated at realizable values, including, when applicable, monetary and exchange variations (on a pro rata basis) and a reserve for losses, as necessary. Liabilities are stated at known measurable amounts plus, as applicable, monetary charges, inflation adjustments and foreign exchange variation on a pro rata basis. 4. CASH AND CASH EQUIVALENTS

Bank Consolidated 12.31.2017 12.31.2016 12.31.2017 12.31.2016

Cash and due from banks 268,484 56,400 296,335 183,569 Cash and due from banks in national currency 912 690 2,402 83,014 Cash and due from banks in foreign currency 267,572 55,710 293,933 100,555

Interbank funds applied (1) 2,646,819 1,502,446 2,358,396 1,912,133 Money market repurchase -

commitments - Sales pending settlement - own portfolio 1,198,511 315,942 1,458,881 711,425

Interbank accounts or relations 1,119,949 897,954 571,156 897,954 Investments in foreign currency 328,359 288,550 328,359 302,754 Total 2,915,303 1,558,846 2,654,731 2,095,702

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

insignificant risk change in fair value. 5. INTERBANK INVESTMENTS a) Breakdown


Money market repurchase commitments 13,370,148 14,702,886 13,370,148 14,702,886 Sales pending settlement - Own portfolio 1,289,971 756,177 2,860,576 2,716,713

Financial Treasury Bills - LFT - 8,033 - 114,119 National Treasury Bills - LTN 56,442 509,920 353,007 680,436 National Treasury Notes - NTN 1,233,529 238,224 2,507,569 1,922,158

Sale pending settlement - Financed operations 7,479,112 11,757,500 5,908,507 9,796,964 Financial Treasury Bills - LFT 1,506,540 6,603,162 1,506,540 6,497,077 National Treasury Bill - LTN 2,350,344 2,656,221 2,053,779 2,485,704 National Treasury Notes - NTN 3,622,228 2,498,117 2,348,188 814,183

Sale pending settlement - Short position 4,601,065 2,189,209 4,601,065 2,189,209 Federal public securities - National Treasury 4,601,065 2,189,209 4,601,065 2,189,209

Interbank deposit investments 26,422,099 22,012,630 1,739,533 2,413,395 Total 39,792,247 36,715,516 15,109,681 17,116,281 Current assets 30,204,204 23,607,320 15,108,170 17,066,698 Non-current assets 9,588,043 13,108,196 1,511 49,583



33

b) Income from interbank investments

Bank Consolidated 2H2017 12.31.2017 12.31.2016 2H2017 12.31.2017 12.31.2016

Income from money market repurchase commitments 709,810 1,677,704 2,110,349 709,810 1,677,704 2,280,236

Own portfolio 76,971 149,886 151,906 174,585 399,240 443,086 Financed Operations 464,828 1,187,400 1,815,961 367,214 938,046 1,694,668 Short position 168,011 340,418 142,482 168,011 340,418 142,482

Income from interbank deposits 1,100,425 2,484,205 2,980,101 39,085 92,455 138,143

Total 1,810,235 4,161,909 5,090,450 748,895 1,770,159 2,418,379



34

6. SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS

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

a.1) Breakdown of the portfolio by category, type of paper and maturity term

Bank 12.31.2017 12.31.2016

Maturity in days

Fair value Total Total

Without maturity

From 0 to 30 days

From 31 to 180

days

From 181 to 360

days Over 360

days Cost Fair value Fair value adjustment Cost Fair value Fair value

adjustment

1 - Trading securities 215 884,928 49,201 2,643 815,343 1,749,510 1,752,330 2,820 5,749,221 5,714,790 (34,431) Government bonds - 884,928 49,201 2,643 793,311 1,727,404 1,730,083 2,679 5,715,741 5,681,626 (34,115)

Financial Treasury Bills - - - - 74 74 74 - 183,451 183,384 (67) National Treasury Bills - 203,307 49,201 - 531,444 781,624 783,952 2,328 3,272,031 3,279,737 7,706 National Treasury Notes - 681,544 - 2,643 261,793 945,630 945,980 350 2,256,334 2,214,605 (41,729) Brazilian Foreign Debt Securities - 77 - - - 76 77 1 3,925 3,900 (25)

Private securities 215 - - - 22,032 22,106 22,247 141 33,480 33,164 (316) Shares 215 - - - - 43 215 172 52 138 86 Eurobonds - - - - 755 806 755 (51) 10,927 10,870 (57) Debentures - - - - 21,277 21,257 21,277 20 - - - Other - - - - - - - - 22,501 22,156 (345)

2 - Securities available for sale 14,973 543,587 270,395 191,722 19,120,740 20,268,044 20,141,417 (126,627) 30,985,989 30,734,040 (251,949) Government bonds - - 136,838 28,073 5,695,273 5,804,652 5,860,184 55,532 5,668,497 5,716,950 48,453

Financial Treasury Bills - - 136,838 28,073 2,782,911 2,945,126 2,947,822 2,696 1,851,037 1,850,332 (705) National Treasury Bills - - - - - - - - 979,131 982,369 3,238 National Treasury Notes - - - - 1,521,981 1,509,312 1,521,981 12,669 1,507,946 1,521,884 13,938 Agricultural debt securities - - - - - - - - 707 716 9 Brazilian Foreign Debt Securities - - - - 1,390,381 1,350,214 1,390,381 40,167 1,329,676 1,361,649 31,973

Private securities 14,973 543,587 133,557 163,649 13,425,467 14,463,392 14,281,233 (182,159) 25,317,492 25,017,090 (300,402) Debentures(1) - 517,245 - 96,396 10,992,380 11,799,287 11,606,021 (193,266) 22,347,169 22,080,595 (266,574) Promissory notes - - 3,359 3,359 13,431 20,154 20,149 (5) 233,423 232,847 (576) Shares(2) 14,973 - - - - 18,455 14,973 (3,482) 18,447 23,648 5,201 Shares in investment funds(3) - - - - 1,531,745 1,531,745 1,531,745 - 1,321,842 1,321,842 -

Rural Product Notes - Commodities (4) - 26,342 112,247 26,076 110,399 292,754 275,064 (17,690) 240,015 230,056 (9,959) Eurobonds(5) - - - - 341,079 337,107 341,079 3,972 520,759 488,803 (31,956) Credit Linked Notes - - - - - - - - 97,987 97,628 (359) Financial Bills - - - - 109,221 109,238 109,221 (17) 200,888 200,797 (91) Other - - 17,951 37,818 327,212 354,652 382,981 28,329 336,962 340,874 3,912

3 - Securities held to maturity - 4,285,466 - 344,912 2,026,792 6,513,061 6,657,170 144,109 6,090,329 6,222,987 132,658 Government bonds - 4,285,466 - 344,912 2,026,792 6,513,061 6,657,170 144,109 6,090,329 6,222,987 132,658

National Treasury Bills - 3,499,069 - - 1,169,536 4,569,922 4,668,605 98,683 4,025,086 4,143,466 118,380 National Treasury Notes - 786,397 - 344,912 857,256 1,943,139 1,988,565 45,426 2,065,243 2,079,521 14,278

Total (1 + 2 + 3) 15,188 5,713,981 319,596 539,277 21,962,875 28,530,615 28,550,917 20,302 42,825,539 42,671,817 (153,722)



35

Consolidated 12.31.2017 12.31.2016

Maturity in days

Fair value Total Total

Without maturity From 0 to 30 days

From 31 to 180

days

From 181 to 360

days Over 360

days Cost Fair value Fair value adjustment Cost Fair value Fair value

adjustment

1 - Trading securities 215 884,928 53,425 2,977 815,343 1,754,067 1,756,888 2,821 5,764,884 5,730,448 (34,436) Government bonds - 884,928 53,425 2,977 793,311 1,731,961 1,734,641 2,680 5,731,404 5,697,284 (34,120)

Financial Treasury Bills - - 4,224 334 74 4,631 4,632 1 199,114 199,042 (72) National Treasury Bills - 203,307 49,201 - 531,444 781,624 783,952 2,328 3,272,031 3,279,737 7,706 National Treasury Notes - 681,544 - 2,643 261,793 945,630 945,980 350 2,256,334 2,214,605 (41,729) Brazilian Foreign Debt Securities - 77 - - - 76 77 1 3,925 3,900 (25)

Private securities 215 - - - 22,032 22,106 22,247 141 33,480 33,164 (316) Shares 215 - - - - 43 215 172 52 138 86 Eurobonds - - - - 755 806 755 (51) 10,927 10,870 (57) Debentures - - - - 21,277 21,257 21,277 20 - - - Other - - - - - - - - 22,501 22,156 (345)

2 - Securities available for sale 412,607 543,587 283,494 195,510 11,377,548 12,916,494 12,812,746 (103,748) 16,146,012 15,820,463 (325,549) Government bonds - - 149,937 31,861 6,914,296 6,974,143 7,096,094 121,951 8,063,668 8,143,462 79,794

Financial Treasury Bills - - 149,937 31,861 2,796,184 2,975,290 2,977,982 2,692 1,879,673 1,878,956 (717) National Treasury Bills - - - - 282,656 263,857 282,656 18,799 1,424,026 1,438,328 14,302 National Treasury Notes - - - - 2,445,075 2,384,782 2,445,075 60,293 3,429,586 3,463,813 34,227 Agricultural debt securities - - - - - - - - 707 716 9 Brazilian Foreign Debt Securities - - - - 1,390,381 1,350,214 1,390,381 40,167 1,329,676 1,361,649 31,973

Private securities 412,607 543,587 133,557 163,649 4,463,252 5,942,351 5,716,652 (225,699) 8,082,344 7,677,001 (405,343) Debentures(1) - 517,245 - 96,396 2,014,437 2,821,343 2,628,078 (193,265) 4,411,909 4,145,335 (266,574) Promissory notes - - 3,359 3,359 13,431 20,154 20,149 (5) 233,423 232,847 (576) Shares(2) 410,481 - - - - 457,504 410,481 (47,023) 691,478 591,738 (99,740) Shares in investment funds(3) 2,126 - - - 1,547,473 1,549,599 1,549,599 - 1,348,923 1,348,923 - Rural Product Notes - Commodities (4) - 26,342 112,247 26,076 110,399 292,754 275,064 (17,690) 240,015 230,056 (9,959) Eurobonds(5) - - - - 341,079 337,107 341,079 3,972 520,759 488,803 (31,956) Credit Linked Notes - - - - - - - - 97,987 97,628 (359) Financial Bills - - - - 109,221 109,238 109,221 (17) 200,888 200,797 (91) Other - - 17,951 37,818 327,212 354,652 382,981 28,329 336,962 340,874 3,912

3 - Securities held to maturity - 4,285,466 - 344,912 2,026,792 6,513,061 6,657,170 144,109 6,928,846 7,061,608 132,762 Government bonds - 4,285,466 - 344,912 2,026,792 6,513,061 6,657,170 144,109 6,928,846 7,061,608 132,762

National Treasury Bills - 3,499,069 - - 1,169,536 4,569,922 4,668,605 98,683 4,025,086 4,143,466 118,380 National Treasury Notes - 786,397 - 344,912 857,256 1,943,139 1,988,565 45,426 2,903,760 2,918,142 14,382

Total (1 + 2 + 3) 412,822 5,713,981 336,919 543,399 14,219,683 21,183,622 21,226,804 43,182 28,839,742 28,612,519 (227,223) The fair value considers the prudential adjustment of credit risk spread, fulfilling the provision in Article 8 of the CMN Resolution no. 4,277/2013 of the Brazilian Central Bank. The securities classified as "Held to maturity" are recorded at cost in accordance with BACEN Circular No. 3,068/2001. For purposes of presentation, these operations are adjusted to fair value. (1) The cost of the Debentures includes a provision for losses in the amount of R$ 929,311 (R$ 894,514 on December 31, 2016) contra entry the “Income from securities”. (2) The cost value of the Shares includes a provision for losses in the amount of R$ 74,745 (R$ 74,745 on December 31, 2016) contra entry the Income from securities. The fair value of the shares

represents the quotation disclosed by B3 - Brasil, Bolsa, Balcão. (3) The cost value of the Shares in investments funds Shares includes a provision for losses in the amount of R$ 12,397 contra entry the “Income from securities”. (4) The cost of the Rural Product Notes also considers the provision for losses in the amount of R$ 38,047 (R$ 8,286 on December 31, 2016) contra entry the “Income from securities”. (5) On December 31, 2016, the cost value of Eurobonds also considers the provision for losses in the amount de R$ 14,807 contra entry the “Income from securities”.



36

a.2) Composition of portfolio by caption in the statement of financial position and maturity term

Maturity in days

12.31.2017 12.31.2016 Fair value Total Total

Without maturity

From 0 to 30 days

From 31 to 180 days

From 181 to 360 days

Over 360 days Cost Fair value Fair value

adjustment Cost Fair value Fair value adjustment

Bank By portfolio 15,188 5,713,981 319,596 539,277 21,962,875 28,530,615 28,550,917 20,302 42,825,539 42,671,817 (153,722)

Own portfolio 59,626 539,033 133,977 116,042 6,487,163 7,394,022 7,335,841 (58,181) 8,636,569 8,548,543 (88,026) Subject to repurchase clause - 5,174,948 185,619 461,282 16,343,350 22,087,470 22,165,199 77,729 33,479,493 33,437,299 (42,194) Subject to guarantees provided 30,307 - - - 74,070 103,623 104,377 754 1,701,829 1,678,327 (23,502) Provision for impairment of securities (74,745) - - (38,047) (941,708) (1,054,500) (1,054,500) - (992,352) (992,352) -

Consolidated By portfolio 412,822 5,713,981 336,919 543,399 14,219,683 21,183,622 21,226,804 43,182 28,839,742 28,612,519 (227,223)

Own portfolio 442,100 5,709,351 133,977 155,836 7,735,952 14,217,804 14,177,216 (40,588) 19,008,607 18,649,043 (359,564) Subject to repurchase clause - 4,630 185,619 421,730 7,026,080 7,571,923 7,638,059 66,136 8,689,031 8,841,339 152,308 Subject to guarantees provided 45,467 - 17,323 3,880 399,359 448,395 466,029 17,634 2,134,456 2,114,489 (19,967) Provision for impairment of securities (74,745) - - (38,047) (941,708) (1,054,500) (1,054,500) - (992,352) (992,352) -

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

Maturity in years

12.31.2017 12.31.2016 Fair value Total Total

Without maturity

Falling due, up to 1 year

Falling due - From 1 to 5 years

Falling due from 5 to 10 years

Falling due for more than 10 years Cost Fair value Cost Fair value

Bank By category 15,188 6,572,854 7,523,499 12,731,326 1,708,050 28,530,615 28,550,917 42,825,539 42,671,817

Trading securities 215 936,772 787,288 2,478 25,577 1,749,510 1,752,330 5,749,221 5,714,790 Securities available for sale 14,973 1,005,704 5,008,880 12,521,714 1,590,146 20,268,044 20,141,417 30,985,989 30,734,040 Securities held to maturity - 4,630,378 1,727,331 207,134 92,327 6,513,061 6,657,170 6,090,329 6,222,987

Consolidated By category 412,822 6,594,299 7,590,263 4,905,645 1,723,775 21,183,622 21,226,804 28,839,742 28,612,519

Trading securities 215 941,330 787,288 2,478 25,577 1,754,067 1,756,888 5,764,884 5,730,448 Securities available for sale 412,607 1,022,591 5,075,644 4,696,033 1,605,871 12,916,494 12,812,746 16,146,012 15,820,463 Securities held to maturity - 4,630,378 1,727,331 207,134 92,327 6,513,061 6,657,170 6,928,846 7,061,608



37

a.4) Summary of the portfolio by statement of financial position caption

12.31.2017 12.31.2016 Book value Book value

Current Non-current Total Current Non-current Total Bank By portfolio 7,397,668 21,009,140 28,406,808 8,123,206 34,415,953 42,539,159

Own portfolio 876,623 6,459,218 7,335,841 1,024,105 7,522,575 8,546,680 Subject to repurchase commitment 6,552,996 15,468,548 22,021,544 6,259,197 27,064,584 33,323,781 Subject to guarantees provided 80,841 23,082 103,923 966,395 694,655 1,661,050 Provision for impairment of securities (112,792) (941,708) (1,054,500) (126,491) (865,861) (992,352)

Consolidated By portfolio 7,816,746 13,265,949 21,082,695 11,064,691 17,415,066 28,479,757

Own portfolio 6,499,230 7,666,845 14,166,075 9,628,904 9,213,838 18,842,742 Subject to repurchase commitment 1,313,104 6,192,441 7,505,545 472,730 8,059,424 8,532,154 Subject to guarantees provided 117,204 348,371 465,575 1,089,548 1,007,665 2,097,213 Provision for impairment of securities (112,792) (941,708) (1,054,500) (126,491) (865,861) (992,352)

a.5) Summary of the portfolio by category By category 12.31.2017 12.31.2016 Bank 1 - Trading securities 1,752,330 6% 5,714,790 13% 2 - Securities available for sale 20,141,417 71% 30,734,040 73% 3 - Securities held to maturity 6,513,061 23% 6,090,329 14% Book value of portfolio 28,406,808 100% 42,539,159 100% Fair value adjustment of category 3 144,109 132,658 Fair value of portfolio 28,550,917 42,671,817 Consolidated 1 - Trading securities 1,756,888 8% 5,730,448 20% 2 - Securities available for sale 12,812,746 61% 15,820,463 56% 3 - Securities held to maturity 6,513,061 31% 6,928,846 24% Book value of portfolio 21,082,695 100% 28,479,757 100% Fair value adjustment of category 3 144,109 132,762 Fair value of portfolio 21,226,804 28,612,519

The Conglomerate, in fulfilling the provision of Article 8 of Circular 3,068/01, of the Central Bank of Brazil, declares that it has the necessary financial capacity and intention to hold to maturity the securities classified in the “securities held to maturity” category, in the amount of R$ 6,513,061 (R$ 6,928,846 on December 31, 2016), representing 31% of the total securities (24% on December 31, 2016). In the Bank, the corresponding amount is R$ 6,513,061 (R$ 6,090,329 on December 31, 2016), representing 23% of total securities (14% on December 31, 2016). b) Income from securities


Interbank investments (Note 5b) 1,810,235 4,161,909 5,090,450 748,895 1,770,159 2,418,379 Fixed income securities 1,412,380 3,000,077 4,257,946 1,147,971 2,123,547 2,100,729 Securities abroad 74,460 108,554 (45,226) 74,460 108,573 (44,752) Variable income securities 1,154 (18,023) 21,448 (10,074) 51,781 90,134 Investments in investment funds 8,252 83,938 198,889 1,727 78,582 201,790 Interbank investments (Note 5b) 807 1,057 372 809 1,060 383 Total (1) 3,307,288 7,337,512 9,523,879 1,963,788 4,133,702 4,766,663

(1) Includes provision for losses in the amount of R$ 62,148 in the year ended December 31, 2017 (R$ 661,726 in the year ended

December 31, 2016).



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c) Reclassification of securities On December 31, 2016, occurred the reclassification of Government Bonds - National Treasury Notes, from category “Available for sale” to category “Held to maturity”, as a result of Management’s intention review on respective securities. Reclassification of these securities does not impact results and shareholders' equity in the respective base date of the event.

Bank and Consolidated Cost Fair value Unrealized gain/ (Loss)

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

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

Consolidated Cost Fair value Unrealized gain/ (Loss)

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

There was no reclassification of Securities between categories in the year ended December 31, 2017. d) Derivative financial instruments The Conglomerate uses Derivative Financial Instruments to manage its positions on a consolidated basis and to fulfill the needs of it’s client’s, classifying its own positions as necessary for hedging (of market risk and cash flow) or trading, both with approval limits in the Company. The hedging strategy for asset protection, which is approved by Management, is in line with the macroeconomic scenario analyses. In the options market, assets or long positions have the Conglomerate as the holder, while liability or short positions have the Conglomerate as the seller. The models employed in derivative risk management are periodically reviewed, and decision making is based on the best risk/return ratios, with likely losses being estimated following an analysis of macroeconomic scenarios. The Conglomerate has tools and systems that are adequate to manage derivative financial instruments. Negotiation of new derivatives, standardized or not, depends on prior risk analysis. Subsidiaries’ risk evaluation is carried out on an individual basis and its management is carried out on a consolidated basis. The Conglomerate uses statistical methodologies and simulations to measure the risk of its positions, including with derivatives, using value at risk and sensitivity models and stress analysis.



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Risks The principal risks inherent in derivative financial instruments deriving from the Bank and its subsidiaries’ businesses are credit risk, market risk, liquidity risk and operational risk. Credit Risk is defined as the likelihood of losses occurring due to a counterparty’s not complying with its respective financial obligations in accordance with contractual terms. Exposure to credit risk in futures contracts is minimized due to the daily financial settlement. Swap contracts registered with CETIP are subject to credit risk in case that the counterparty is not able or willing to comply with its contractual obligations, while swap contracts registered with B3 are not subject to the same risk, considering that Conglomerate’s transactions in this stock exchange have the same guarantor. Market risk is defined as the possibility of financial losses arising from variations in the fair value of exposures held by a financial institution. These financial losses may be due to variations in interest rates, exchange rates and prices of shares and commodities. Liquidity risk is defined as:

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

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

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



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d.1) Breakdown of Derivative Financial Instruments Portfolio by Index

By index


Nominal value Cost Fair value Nominal value Cost Fair value Nominal value Cost Fair value Nominal value Cost Fair value

Futures contracts Purchase commitments 17,826,525 - - 28,014,200 - - 17,843,228 - - 28,014,200 - -

Interbank deposits 7,735,621 - - 15,192,049 - - 7,752,324 - - 15,192,049 - - Currencies 349,271 - - 1,612,388 - - 349,271 - - 1,612,388 - - Index 296,084 - - 1,278,055 - - 296,084 - - 1,278,055 - - Foreign currency coupon 9,330,268 - - 9,931,708 - - 9,330,268 - - 9,931,708 - - Others 115,281 - - - - - 115,281 - - - - -

Sales commitments 45,260,613 - - 44,129,875 - - 61,157,633 - - 57,685,592 - - Interbank deposits 27,299,529 - - 18,484,002 - - 43,196,549 - - 32,039,719 - - Currencies 120,421 - - 1,609,229 - - 120,421 - - 1,609,229 - - Índex 36,815 - - 327,655 - - 36,815 - - 327,655 - - Libor 11,074,453 - - - - - 11,074,453 - - - - - Foreign currency coupon 6,647,677 - - 23,708,989 - - 6,647,677 - - 23,708,989 - - Others 81,718 - - - - - 81,718 - - - - -

Forward transactions Asset position 177,111 177,111 177,101 314,132 314,132 314,092 177,111 177,111 177,101 314,132 314,132 314,092

Forward currency - - - 73,863 73,863 73,863 - - - 73,863 73,863 73,863 Government bond term 177,111 177,111 177,101 240,269 240,269 240,229 177,111 177,111 177,101 240,269 240,269 240,229

Liability position 177,111 (177,111) (177,078) 314,132 (314,132) (309,209) 177,111 (177,111) (177,078) 314,132 (314,132) (309,209) Forward currency - - - 73,863 (73,863) (69,017) - - - 73,863 (73,863) (69,017) Government bond term 177,111 (177,111) (177,078) 240,269 (240,269) (240,192) 177,111 (177,111) (177,078) 240,269 (240,269) (240,192)

Option contracts (1) Purchase - Long position 2,547,030 113,040 49,890 9,628,705 217,717 78,080 2,547,030 113,040 49,890 9,628,705 217,717 78,080

Foreign currency 2,058,350 99,971 37,398 8,018,900 168,921 49,732 2,058,350 99,971 37,398 8,018,900 168,921 49,732 Flexible options 462,680 9,516 6,958 594,485 12,042 1,810 462,680 9,516 6,958 594,485 12,042 1,810 Shares 26,000 3,553 5,534 1,015,320 36,754 26,538 26,000 3,553 5,534 1,015,320 36,754 26,538

Sale - Long position 5,396,182 318,952 214,572 9,690,526 419,405 586,640 5,534,451 424,654 344,417 9,988,348 704,612 849,067 Foreign currency 2,452,325 165,236 127,044 5,754,700 222,717 341,334 2,452,325 165,236 127,044 5,754,700 222,717 341,334 Flexible options 2,912,607 151,345 86,928 2,915,426 177,133 223,022 2,912,607 151,345 86,928 2,915,426 177,133 223,022 Shares 31,250 2,371 600 1,020,400 19,555 22,284 169,519 108,073 130,445 1,318,222 304,762 284,711

Purchase - Short position 5,721,001 (211,954) (230,310) 14,804,009 (568,483) (377,201) 5,721,001 (211,954) (230,310) 14,804,009 (568,483) (377,201) Foreign currency 2,333,850 (48,008) (48,833) 9,299,763 (188,411) (33,759) 2,333,850 (48,008) (48,833) 9,299,763 (188,411) (33,759) Flexible options 3,358,151 (161,651) (178,932) 3,891,606 (342,743) (307,245) 3,358,151 (161,651) (178,932) 3,891,606 (342,743) (307,245) Shares 29,000 (2,295) (2,545) 1,612,640 (37,329) (36,197) 29,000 (2,295) (2,545) 1,612,640 (37,329) (36,197)

Sale - Short position 2,479,198 (149,748) (161,516) 8,597,969 (707,500) (921,989) 2,479,198 (149,748) (161,516) 8,597,969 (707,500) (921,989) Foreign currency 2,178,488 (140,391) (143,637) 6,039,325 (643,709) (842,701) 2,178,488 (140,391) (143,637) 6,039,325 (643,709) (842,701) Flexible options 269,210 (7,318) (17,122) 575,924 (15,735) (40,956) 269,210 (7,318) (17,122) 575,924 (15,735) (40,956) Shares 31,500 (2,039) (757) 1,982,720 (48,056) (38,332) 31,500 (2,039) (757) 1,982,720 (48,056) (38,332)

Swaps contracts (1) (2) Asset position 10,937,748 1,059,447 1,334,065 11,625,169 1,342,704 1,342,097 10,937,748 1,059,447 1,334,065 12,412,169 1,348,737 1,348,023

Interbank deposits 3,571,848 577,465 491,268 6,399,349 714,718 696,808 3,571,848 577,465 491,268 7,186,349 720,751 702,734 Foreign currency 2,996,422 276,211 282,967 1,382,488 289,315 223,079 2,996,422 276,211 282,967 1,382,488 289,315 223,079 Pre fixed 2,124,943 31,679 246,099 806,176 20,431 122,690 2,124,943 31,679 246,099 806,176 20,431 122,690 ÍPCA 2,109,170 169,139 301,457 2,477,513 242,339 212,235 2,109,170 169,139 301,457 2,477,513 242,339 212,235



41

By index


Nominal value Cost Fair value Nominal value Cost Fair value Nominal value Cost Fair value Nominal value Cost Fair value

IGPM 35,000 4,513 5,516 285,000 75,751 74,534 35,000 4,513 5,516 285,000 75,751 74,534 Libor 22,527 84 288 180,580 3 326 22,527 84 288 180,580 3 326 Other 77,838 356 6,470 94,063 147 12,425 77,838 356 6,470 94,063 147 12,425

Liability position 7,730,092 (780,543) (1,087,924) 7,356,954 (822,107) (921,632) 7,730,092 (780,543) (1,087,924) 7,356,954 (822,107) (921,632) Interbank deposits 1,992,651 (124,361) (50,738) 2,086,776 (109,035) (71,688) 1,992,651 (124,361) (50,738) 2,086,776 (109,035) (71,688) Foreign currency 2,156,826 (164,290) (146,999) 1,418,788 (168,358) (163,518) 2,156,826 (164,290) (146,999) 1,418,788 (168,358) (163,518) Pre fixed 732,263 (33,620) (257,260) 915,623 (16,017) (160,162) 732,263 (33,620) (257,260) 915,623 (16,017) (160,162) ÍPCA 2,303,017 (426,736) (598,421) 2,699,789 (483,577) (480,293) 2,303,017 (426,736) (598,421) 2,699,789 (483,577) (480,293) IGPM 40,000 (14,189) (15,768) 95,000 (44,239) (44,147) 40,000 (14,189) (15,768) 95,000 (44,239) (44,147) Libor 495,335 (16,663) (18,239) 130,978 (764) (1,098) 495,335 (16,663) (18,239) 130,978 (764) (1,098) Other 10,000 (684) (499) 10,000 (117) (726) 10,000 (684) (499) 10,000 (117) (726)

Other derivatives financial instruments Asset position 5,512,285 179,589 130,225 4,100,865 92,321 95,915 5,512,285 179,589 130,225 4,100,865 92,321 95,915

Non Deliverable Forward(1) 5,494,091 180,073 130,105 4,051,978 89,744 93,254 5,494,091 180,073 130,105 4,051,978 89,744 93,254 Credit derivatives(3) 18,194 (484) 120 48,887 2,577 2,661 18,194 (484) 120 48,887 2,577 2,661

Liability position 3,573,906 (35,733) (44,398) 2,486,708 (182,960) (177,678) 3,573,906 (35,733) (44,398) 2,486,708 (182,960) (177,678) Non Deliverable Forward(1) 3,573,906 (35,733) (44,398) 1,882,145 (164,396) (165,826) 3,573,906 (35,733) (44,398) 1,882,145 (164,396) (165,826) Credit derivatives(3) - - - 604,563 (18,564) (11,852) - - - 604,563 (18,564) (11,852)

(1) The fair value for swap operations, options and non-deliverable forward considers the credit risk of the counterparty (Credit valuation adjustment). (2) Includes swaps accounted for in accordance with BACEN Circular No. 3,129/2002 at cost. For purposes of presentation by index, these operations are adjusted at fair value. On December 31,

2017 in the Consolidated there was no swaps in accordance with the Circular (On December 31, 2016 the fair value adjustment in the Consolidated the fair value adjustment asset position was negative of R$ 108).

(3) The presentation of credit derivatives by position (active or passive) takes into account the respective fair value of each contract.



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

Maturity in days From 0 to 30 From 31 to 180 From 181 to 360 Over 360 12.31.2017 12.31.2016 Bank Future contracts 18,378,020 15,515,957 6,414,996 22,778,165 63,087,138 72,144,075 Forward contracts 177,111 - - - 177,111 314,132 Option contracts 2,143,379 1,158,850 9,619,056 3,222,126 16,143,411 42,721,209 Swap contracts 344,733 3,398,071 2,254,778 12,670,258 18,667,840 18,982,123 Credit derivatives - - 16,540 1,654 18,194 653,450 Non Deliverable Forward - Foreign currency 4,447,288 2,097,129 984,204 1,539,376 9,067,997 5,934,123 Consolidated Future contracts 18,385,016 18,009,372 9,526,259 33,080,214 79,000,861 85,699,792 Forward contracts 177,111 - - - 177,111 314,132 Option contracts 2,143,379 1,158,850 9,619,056 3,360,395 16,281,680 43,019,031 Swap contracts 344,733 3,398,071 2,254,778 12,670,258 18,667,840 19,769,123 Swap contracts - - 16,540 1,654 18,194 653,450 Non Deliverable Forward – Foreign currency 4,447,288 2,097,129 984,204 1,539,376 9,067,997 5,934,123

d.3) Breakdown of derivative financial instruments Portfolio by negotiation place and counterparty (nominal value on December 31, 2017)

Bank Consolidated

Futures Terms Options Swap Credit derivatives

Non Deliverable

Forward Futures Terms Options Swap Credit

derivatives Non Deliverable

Forward

B3 63,087,138 - 9,312,918 - - - 79,000,861 - 9,451,187 - - - Over-the-counter (CETIP) - 177,111 6,830,493 18,667,840 18,194 9,067,997 - 177,111 6,830,493 18,667,840 18,194 9,067,997

Financial institutions - 177,111 - 11,935,856 18,194 5,358,373 - 177,111 - 11,935,856 18,194 5,358,373 Client - - 6,830,493 6,731,984 - 3,709,624 - - 6,830,493 6,731,984 - 3,709,624



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d.4) Breakdown of credit derivative financial instruments portfolio Bank and Consolidated 12.31.2017 12.31.2016

Nominal value Cost Fair value Nominal value Cost Fair value Credit Swap

Long position - Received risk 18,194 (484) 120 278,653 (18,539) (11,502) Short position - Transferred risk - - - 374,797 2,552 2,311

By index

Asset position – Prefixed 18,194 (484) 120 48,887 2,577 2,661 Liability position – Prefixed - - - 604,563 (18,564) (11,852)

For received risk transactions, credit limits are approved both for client risk and counterparty risk, according to the credit committee’s levels and forums. Credit limits are assigned to the underlying exposure at derivative reference value, considering amounts deposited in guarantee. To transfer risk, transaction is conducted in a trading portfolio with a sovereign risk client. In this case, future possible exposure is considered to assign the counterparty limit. The credit derivative financial instruments portfolio impacted Portion Referring to Weighed Exposures per Risk Factor (PRMR) for determination of the Bank’s Basel ratio of R$ 1,862 (R$ 3,310 on December 31, 2016).



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d.5) Breakdown of Margin Given in Guarantee of operations with Derivative Financial Instruments and other transactions settled in clearing or providers of clearing and settlement services


Financial Treasury Bills - LFT 13,923 223,328 19,140 238,987 National Treasury Notes - NTN - 822,356 312,017 1,214,236 National Treasury Bills - LTN 55,478 608,881 55,478 608,881 Shares in investment funds – B3 30,307 - 45,467 - Other 22,342 35,036 22,342 35,036 Total 122,050 1,689,601 454,444 2,097,140

d.6) Breakdown of derivatives portfolio for hedging Hedge transactions were evaluated as effective, in accordance with provisions of BACEN Circular Letter no. 3,082/2002, and hedge effectiveness varies from 80% to 125%. For loans operations, the risk level is considered in the risk assessment of the fair value and consequently considered in the effectiveness calculation metric. Market risk hedge The Conglomerate, in order to protect itself against fluctuations in its financial instruments’ interest and exchange rates, contracted derivatives to offset risks deriving from exposures to fair value variations.


Market risk hedge Hedge instruments

Assets 3,040,459 3,156,655 3,170,303 3,425,116 Future 3,040,459 3,126,786 3,040,459 3,126,786 Swap - 29,869 - 35,902 Options - - 129,844 262,428

Liabilities 14,730,913 14,746,212 30,482,345 28,227,058 Future 14,730,913 14,746,212 30,482,345 28,227,058

Hedged itens Assets 8,235,401 8,170,407 24,484,219 22,938,973

Interbank funds applied 6,675,740 5,781,536 6,675,740 5,781,536 Securities - - 70,329 1,035,899 Loan operations 1,559,661 2,388,871 17,738,150 16,121,538

Liabilities 2,869,143 3,271,177 2,869,143 3,271,177 Subordinated debt 2,869,143 3,271,177 2,869,143 3,271,177

Cash flow hedge

To protect the future cash flows of payments against exposure to variable interest rate (CDI), the Conglomerate traded DI Future contracts at B3. To protect the cash flow of future disbursements on securities issued abroad against exposure to exchange rate risk (USD), the Conglomerate has traded over-the-counter Swap contracts recorded in B3.

Bank and Consolidated 12.31.2017 12.31.2016

Cash flow hedge Hedge instruments

Liabilitoes 4,265,317 265,531 Swap (1) 9,389 -

Future 4,255,928 265,531 Hedged itens

Liabilities 5,264,962 250,639 Financial bills 4,012,491 23,514 Subordinated debt 1,252,471 227,125

(1) The nominal value of the swap is R$ 970, 620 on December 31, 2017.



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


Losses from hedged Items (287,695) (575,693) (1,214,705) (336,245) (659,717) (1,243,926) Gains from hedge instruments 287,541 573,722 1,254,182 336,043 656,584 1,281,496 Net effect (154) (1,971) 39,477 (202) (3,133) 37,570 Losses from hedged Items 616,360 1,270,018 1,992,117 1,542,066 3,373,052 4,531,606 Gains from hedge instruments (611,091) (1,278,720) (2,015,584) (1,530,391) (3,369,298) (4,557,345) Net effect 5,269 (8,702) (23,467) 11,675 3,754 (25,739)

Cash flow hedge

Bank/Consolidated Hedge instruments

12.31.2017 12.31.2016 Effective portion

accumulated Ineffective portion

accumulated Effective portion

accumulated Ineffective portion

accumulated Future DI (48,842) (23) (26,571) (15) Swap (3,485) (4,659) - - Total (52,327) (4,682) (26,571) (15)

The effective portion is recognized in Shareholders' Equity in equity valuation adjustments and the ineffective portion is recognized in the statement of income in financial intermediation income - income from derivative financial instruments. As of December 31, 2017, the fair value adjustment of the effective portion, in the amount of R$ (25,756) (R$ (26,571) as of December 31, 2016) was recognized in Shareholders' Equity and ineffective portion, in the amount of R$ (4,667) (R$ (15) in the year ended December 31, 2016) was recognized in "Income from derivative financial instruments". Net losses of tax effects relating to cash flow hedges that the Conglomerate expects to recognize in income over the next 12 months totaling R$ 13,088 (R$ 3,529 as of December 31, 2016). d.8) Derivative financial instruments breakdown into Current and Non-current

Bank 12.31.2017 12.31.2016

Current Non-current Total Current Non-current Total Assets Term Operations 177,101 - 177,101 314,092 - 314,092 Options market 193,601 70,861 264,462 423,428 241,292 664,720 Swap contracts 322,977 1,011,088 1,334,065 357,081 985,016 1,342,097 Credit derivatives 112 8 120 - 2,661 2,661 Other derivative financial instruments 129,848 257 130,105 90,421 2,833 93,254

Total 823,639 1,082,214 1,905,853 1,185,022 1,231,802 2,416,824 Liabilities Term Operations (177,078) - (177,078) (309,209) - (309,209) Options market (277,941) (113,885) (391,826) (1,135,862) (163,328) (1,299,190) Swap contracts (135,693) (952,231) (1,087,924) (120,152) (801,480) (921,632) Credit derivatives - - - (350) (11,502) (11,852) Other derivative financial instruments (33,091) (11,307) (44,398) (156,294) (9,532) (165,826)

Total (623,803) (1,077,423) (1,701,226) (1,721,867) (985,842) (2,707,709)



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Consolidated 12.31.2017 12.31.2016

Current Non-

current Total Current Non-

current Total Assets Term Operations 177,101 - 177,101 314,092 - 314,092 Options Market 323,446 70,861 394,307 685,855 241,292 927,147 Swap contracts 322,977 1,011,088 1,334,065 363,115 985,016 1,348,131 Credit derivatives 112 8 120 - 2,661 2,661 Other derivative financial instruments 129,848 257 130,105 90,421 2,833 93,254 Total 953,484 1,082,214 2,035,698 1,453,483 1,231,802 2,685,285

Liabilities

Term Operations (177,078) - (177,078) (309,209) - (309,209) Options Market (277,941) (113,885) (391,826) (1,135,862) (163,328) (1,299,190) Swap contracts (135,693) (952,231) (1,087,924) (120,152) (801,480) (921,632) Credit derivatives - - - (350) (11,502) (11,852) Other derivative financial instruments (33,091) (11,307) (44,398) (156,294) (9,532) (165,826) Total (623,803) (1,077,423) (1,701,226) (1,721,867) (985,842) (2,707,709)

d.9) Income from derivative financial instruments


Swap 161,834 261,092 1,197,937 161,834 260,986 1,214,870 Term 158 (239) 5,405 158 (239) 5,405 Options 10,260 32,612 49,124 69,500 79,533 26,346 Future (131,097) (156,126) (622,539) (425,975) (709,568) (1,305,310) Credit derivatives 10,405 18,377 33,417 10,405 18,377 33,417 Fair value adjustment of hedged credit transactions (17,792) (26,232) 44,539 13,529 210,199 909,194

Options bucket - - (268,158) - - - Non Deliverable Forward (47,928) (97,547) (133,072) (47,928) (97,547) (133,072) Exchange variation on investments abroad (85) 19,863 (262,495) (780) 20,888 (279,973) Total (14,245) 51,800 44,158 (219,257) (217,371) 470,877 d.10) Hedge accounting

Bank Strategy/ Risk

Object of hedge Hedge instruments 12.31.2017 12.31.2016

Derivative 12.31.2017 12.31.2016

Fair value

Unrealized gain (loss) Fair value Fair value Fair value

Purchase and sale commitment hedge/ fixed rate 6,675,740 2,601 5,781,536 Future DI 9,153,055 6,782,618

Loan transaction hedge/ fixed rate / exchange variation 1,559,661 52,977 2,388,871

Future DI 252,165 172,610 Future DDI 854,542 1,671,709

Future Libor 4,471,151 509,582 Subordinated debt hedge / exchange variation / IGP-M 2,869,143 (113,769) 3,271,177 Future DDI 3,040,459 3,126,786

Swap - 390,317 Hedge of Financial bills and subordinated debt / Cash flow/ fixed rate 5,264,962 (50,590) 250,639 Future DI 4,255,928 265,531

Swap 1,263,056 -



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Consolidated Strategy/ Risk

Object of hedge Hedge instruments 12.31.2017 12.31.2016

Derivative 12.31.2017 12.31.2016

Fair value Unrealized gain (loss) Fair value Fair value Fair value

Purchase and sale commitment hedge/ fixed rate 6,675,740 2,601 5,781,536 Future DI 9,153,055 6,782,618

Securities hedge / fixed rate variation - - 838,517 Swap - 834,219

Shares of companies 70,329 (43,270) 197,382 Options 129,844 262,428

Purchase and sale commitment hedge/ fixed rate 17,738,150 452,598 16,121,538

Future DI 16,003,597 13,653,456 Future DDI 854,542 1,671,709

Future Libor 4,471,151 509,582 Subordinated debt hedge / exchange variation / IGP-M 2,869,143 (113,769) 3,271,177 Future DDI 3,040,459 3,126,786

Swap - 390,317 Subordinated debt hedge / exchange variation / IGP-M 5,264,962 (50,590) 250,639 Future DI 4,255,928 265,531

Swap 1,263,056 -

7. INTERBANK ACCOUNTS

a) Reserve requiriments


Compulsory deposits at the Central Bank of Brazil 14,074 340,569 Compulsory deposits on demand deposits 12,038 3,812 Compulsory deposits on time deposits - 334,552 Compulsory deposits on microfinance transactions 2,036 2,205

Total 14,074 340,569 Current assets 14,074 340,569

b) Income from compulsory deposits

Bank and Consolidated

2H2017 12.31.2017 12.31.2016 Credits linked to Central Bank of Brazil 7,933 19,685 42,792 Requirement on time deposits 7,933 19,685 42,714

Additional requirement - - 78 Total 7,933 19,685 42,792

8. LOAN AND LEASE OPERATIONS

a) Portfolio by modality


Loan operations 9,624,218 11,599,878 44,450,146 44,098,612 Loan and discounted notes 3,928,102 3,801,935 7,514,680 7,858,881 Financings 5,087,797 7,040,300 28,012,257 23,316,017 Rural and agribusiness financing 461,067 450,197 461,067 450,197 Real estate financing agreements 147,252 307,446 147,252 307,446 Loan operations linked to assignments (Note 8k) (1) - - 8,314,890 12,166,071

Other receivables 2,817,895 2,435,045 3,983,817 3,394,120 Credit card operations - - 1,163,889 956,900

Advances on exchanges contracts (2) 322,256 316,167 322,256 316,167 Guarantees and surities paid - 174,084 - 174,084 Trade and credit receivables with credit assignment

characteristics 2,495,639 1,944,794 2,497,672 1,946,969

Lease operations - - 245,053 127,341 Total loan portfolio 12,442,113 14,034,923 48,679,016 47,620,073 Allowance for loan losses (1,446,758) (1,369,080) (3,674,236) (3,671,220) (Allowance for loan losses) (711,714) (1,074,431) (2,917,543) (3,352,187) (Allowance for other receivables losses) (735,044) (294,649) (755,292) (313,022) (Allowance for lease losses) - - (1,401) (6,011) Total loan portfolio, net of provisions 10,995,355 12,665,843 45,004,780 43,948,853



48

(1) Credit transactions assigned with substantial retention of the risks and benefits of the financial asset that is the transaction object.

(2) Advances on exchange contracts are recorded as a reducer of the "Other Liabilities” - (Advances on exchange contracts) account plus accrued interest receivable from advances granted under Other receivables - Foreign exchange portfolio (Note 9a) and other related credits, recorded under Other receivables - Sundry (Note 10).

b) Income from loan and lease operations

Bank Consolidated

2H2017 12.31.2017 12.31.2016 2H2017 12.31.2017 12.31.2016 Loan operations 602,561 1,439,529 1,212,367 3,747,816 7,562,803 6,669,296 Loan and discounted notes 225,080 514,066 670,148 853,906 1,822,120 2,094,264 Financings 266,920 576,565 248,642 2,529,014 4,917,133 3,805,941 Rural and agribusiness financing 20,623 38,829 34,162 20,623 38,829 34,162 Real estate financing agreements 6,999 25,348 56,603 6,999 25,348 56,603 Recovery of loan written off as loss (1) 82,083 283,431 199,852 330,853 747,844 663,956

Financing in foreign currency 461 225 1,310 461 225 1,310 Guarantees and sureties paid 134 503 713 134 503 713 Other 261 562 937 5,826 10,801 12,347 Income from lease (Note 8h) - - - 24,551 28,859 32,652 Total (2) 602,561 1,439,529 1,212,367 3,772,367 7,591,662 6,701,948

(1) In the year ended December 31, 2017 the recovered credit transactions written off in loss in the amount of R$ 323,746 (R$

702,364 in the year ended December 31, 2016), with impact in the net income of R$ 14,146 (R$ 18,300 in the year ended December 31, 2016), through credit assignments, without recourse to entities that are not members of the National Financial System, in accordance with CMN Resolution No. 2,836/2001. In the Bank, the sale of credit transactions written off is R$ 320,175, with impact in the net income of R$ 13,991 in the year ended December 31, 2017 (there were no recovered credit transactions in the year ended December 31, 2016).

(2) Credit transactions linked to assignments are not included. Considering such assets, income from Consolidated loan and lease operations in the the year ended December 31, 2017 would total R$ 9,838,519 (R$ 9,943,525 in the year ended December 31, 2017).

c) Loan portfolio by sector of economic activity

Bank 12.31.2017 % 12.31.2016 % Public sector 466,398 3.76% 527,358 3.79%

Government 466,398 3.76% 527,358 3.79% Public administration 466,398 3.76% 527,358 3.79%

Private sector 11,922,738 96.24% 13,391,514 96.21% Individual (1) 340,098 2.75% 359,625 2.58% Legal entity 11,582,640 93.49% 13,031,889 93.63%

Animal agribusiness 320,753 2.59% 377,656 2.71% Vegetable agribusiness 207,227 1.67% 261,883 1.88% Specific construction activities 46,658 0.38% 369,456 2.65% Automotive 4,605 0.04% 34,150 0.25% Wholesale commerce and sundry industries 4,018,306 32.43% 4,320,462 31.05% Retail business 979,000 7.90% 1,037,367 7.45% Heavy Construction 25,105 0.20% 43,698 0.31% Electronics - 0.00% 1,666 0.01% Electric power 379,107 3.06% 569,940 4.09% Real estate 165,870 1.34% 249,074 1.79% Financial institutions and services 742,784 6.00% 720,321 5.19% Wood and furniture 6,325 0.05% 15,394 0.11% Mining and Metallurgy 191,336 1.54% 306,329 2.20% Paper and pulp 317,608 2.56% 309,285 2.22% Chemical 511,693 4.13% 1,076,239 7.73% Services 1,919,253 15.49% 1,624,174 11.66% Telecommunications 35,189 0.28% 80,700 0.58% Textile and apparel 69,726 0.56% 70,177 0.50% Transportation 884,605 7.14% 1,101,382 7.91% Other activities 757,490 6.11% 462,536 3.34%

Total 12,389,136 100.00% 13,918,872 100.00% (+/-) Adjustment to fair value (2) 52,977 116,051 Total fair value of loan portfolio 12,442,113 14,034,923



49

Consolidated 12.31.2017 % 12.31.2016 % Public sector 466,398 0.97% 527,358 1.12%

Government 466,398 0.97% 527,358 1.12% Public administration 466,398 0.97% 527,358 1.12%

Private sector 47,759,971 99.03% 46,739,827 98.88% Individual (1) 35,081,687 72.74% 32,905,505 69.62% Legal entity 12,678,284 26.29% 13,834,322 29.26%

Animal agribusiness 321,244 0.67% 378,178 0.80% Vegetable agribusiness 207,490 0.43% 262,484 0.56% Specific construction activities 49,591 0.10% 382,521 0.81% Automotive 6,372 0.01% 38,362 0.08% Wholesale commerce and sundry industries 4,028,965 8.35% 4,340,008 9.17% Retail business 995,858 2.06% 1,073,845 2.27% Heavy Construction 25,300 0.05% 43,974 0.09% Electronics 31 0.00% 1,715 0.00% Electric power 379,244 0.79% 570,347 1.21% Real estate 166,320 0.34% 249,927 0.53% Financial institutions and services 742,929 1.54% 720,698 1.52% Wood and furniture 7,270 0.02% 17,349 0.04% Mining and Metallurgy 191,533 0.40% 306,679 0.65% Paper and pulp 317,751 0.66% 309,587 0.65% Chemical 511,841 1.06% 1,076,464 2.28% Services 2,101,673 4.36% 1,766,451 3.74% Telecommunications 35,420 0.07% 81,112 0.17% Textile and apparel 70,488 0.15% 71,646 0.15% Transportation 935,482 1.94% 1,198,664 2.54% Other activities 1,583,482 3.28% 944,311 2.00%

Total 48,226,369 100.00% 47,267,185 100.00% (+/-) Adjustment to fair value (2) 452,647 352,888 Total fair value of loan portfolio 48,679,016 47,620,073

(1) Includes loans operations of the agribusiness sectors and other sectors of economic activity made with individuals. (2) Refers to fair value adjustment of loan operations that are the object of market risk hedge.



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d) Loan portfolio per risk level and maturity Bank AA A B C D E F G H 12.31.2017 12.31.2016

Performing loans Falling due installments 3,917,416 3,017,547 2,747,102 607,043 569,428 84,950 70.852 700.374 306.025 12.020.737 12.988.999

From 01 to 30 724,627 516,664 156,430 5,667 8,026 1,131 152 143 73.880 1.486.720 1.286.237 From 31 to 60 280,592 128,411 124,454 6,114 3,804 11,647 2.857 - 3.495 561.374 946.995 From 61 to 90 216,780 143,416 148,326 6,214 12,426 6,850 70 - 7.762 541.844 490.859 From 91 to 180 268,259 259,687 431,875 35,868 46,164 4,402 9.967 134 11.107 1.067.463 1.085.759 From 181 to 360 477,312 659,427 574,415 58,590 99,130 13,007 7.474 2.217 17.976 1.909.548 1.751.818 Over 360 days 1,949,846 1,309,942 1,311,602 494,590 399,878 47,913 50.332 697.880 191.805 6.453.788 7.427.331

Installments overdue 1,160 - 175 - 420 33 - - 28.525 30.313 23.304 Up to 14 days 1,160 - 175 - 420 33 - - 28.525 30.313 23.304

Subtotal 3,918,576 3,017,547 2,747,277 607,043 569,848 84,983 70.852 700.374 334.550 12.051.050 13.012.303 Non-performing loans

Falling due installments - - 325 503 496 20,495 37.857 1.252 156.885 217.813 128.512 From 01 to 30 - - - - 70 517 219 113 1.900 2.819 8.075 From 31 to 60 - - - - 70 168 200 98 3.495 4.031 5.772 From 61 to 90 - - - - 70 169 190 104 16.814 17.347 7.557 From 91 to 180 - - 35 352 214 4,024 190 316 7.202 12.333 16.103 From 181 to 360 - - - - 72 6,541 608 621 14.631 22.473 29.977 Over 360 days - - 290 151 - 9,076 36.450 - 112.843 158.810 61.028

Installments overdue (1) - - 116 134 153 8,015 3.586 100 108.169 120.273 778.057 From 01 to 14 - - - - 76 187 520 - 1.021 1.804 5.056 From 15 to 30 - - 116 - - 422 - 50 8.610 9.198 88.978 From 31 to 60 - - - 134 77 241 437 50 9.812 10.751 20.406 From 61 to 90 - - - - - 5,832 318 - 2.955 9.105 10.562 From 91 to 180 - - - - - 1,333 2.311 - 3.191 6.835 67.031 From 181 to 360 - - - - - - - - 80.557 80.557 551.009 Over 360 days - - - - - - - - 2.023 2.023 35.015

Subtotal - - 441 637 649 28,510 41.443 1.352 265.054 338.086 906.569 Total 3,918,576 3,017,547 2,747,718 607,680 570,497 113,493 112.295 701.726 599.604 12.389.136 13.918.872 (+/-) Adjustment to fair value (2) 52.977 116.051 Total fair value adjustment loan portfolio 12,442,113 14,034,923



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Consolidated AA A B C D E F G H 12.31.2017 12.31.2016 Performing loans

Falling due installments 3,997,286 19,488,808 8,809,965 7,370,965 1,156,651 206,378 102,816 744,833 401,274 42.278.976 40.795.291 From 01 to 30 728,396 1,662,777 376,879 253,642 33,562 6,910 2,173 2,603 79,328 3.146.270 2.788.953 From 31 to 60 284,343 1,050,487 362,900 274,494 30,415 17,648 4,920 2,747 9,647 2.037.601 2.349.789 From 61 to 90 220,531 982,272 368,684 253,009 36,503 12,356 1,946 2,597 13,392 1.891.290 1.778.467 From 91 to 180 279,513 2,595,808 1,066,506 749,475 115,564 20,219 15,269 7,279 26,982 4.876.615 4.705.679 From 181 to 360 499,716 4,474,238 1,723,882 1,354,317 222,239 40,847 16,490 13,979 42,068 8.387.776 7.849.859 Over 360 days 1,984,787 8,723,226 4,911,114 4,486,028 718,368 108,398 62,018 715,628 229,857 21.939.424 21.322.544

Installments overdue 1,236 1,135,941 77,121 84,837 22,245 7,951 2,344 1,021 37,773 1.370.469 1.135.012 Up to 14 days 1,236 1,135,941 77,121 84,837 22,245 7,951 2,344 1,021 37,773 1.370.469 1.135.012

Subtotal 3,998,522 20,624,749 8,887,086 7,455,802 1,178,896 214,329 105,160 745,854 439,047 43.649.445 41.930.303 Non-performing loans

Falling due installments - - 678,679 835,698 301,267 258,154 266,693 205,710 685,237 3.231.438 3.258.943 From 01 to 30 - - 41,354 44,814 18,694 12,981 12,210 11,705 36,780 178.538 200.892 From 31 to 60 - - 40,745 44,680 18,272 12,656 12,262 11,607 37,608 177.830 195.689 From 61 to 90 - - 36,877 40,498 16,899 11,390 11,053 10,522 47,370 174.609 180.692 From 91 to 180 - - 103,355 112,333 45,107 35,192 30,513 28,776 90,295 445.571 491.040 From 181 to 360 - - 165,021 185,688 71,113 58,222 51,425 46,715 145,262 723.446 795.007 Over 360 days - - 291,327 407,685 131,182 127,713 149,230 96,385 327,922 1.531.444 1.395.623

Installments overdue (1) - - 102,199 160,937 129,522 110,963 101,297 101,900 638,668 1.345.486 2.077.939 From 01 to 14 - - 1,495 19,653 10,258 5,592 6,135 4,909 16,525 64.567 76.051 From 15 to 30 - - 100,704 67,930 39,141 29,491 18,371 12,344 43,993 311.974 392.896 From 31 to 60 - - - 73,354 22,525 13,234 14,469 12,619 48,766 184.967 209.304 From 61 to 90 - - - - 57,598 18,214 11,557 12,061 39,896 139.326 149.582 From 91 to 180 - - - - - 44,432 50,765 59,967 113,576 268.740 342.041 From 181 to 360 - - - - - - - - 373,888 373.888 866.878 Over 360 days - - - - - - - - 2,024 2.024 41.187

Subtotal - - 780,878 996,635 430,789 369,117 367,990 307,610 1,323,905 4.576.924 5.336.882 Total 3,998,522 20,624,749 9,667,964 8,452,437 1,609,685 583,446 473,150 1,053,464 1,762,952 48.226.369 47.267.185 (+/-) Adjustment to fair value (2) 452.647 352.888 Total fair value adjustment loan portfolio 48,679,016 47,620,073

(1) For transactions with unelapsed terms greater than 36 months, delayed periods are counted double, as permitted by CMN Resolution no. 2,682/1999. (2) Refers to fair value adjustment of loan operations that are the object of market risk hedge.



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e) Allowance for loan losses by risk levels

Risk level % Provision

12.31.2017 12.31.2016 Value of

operations Minimum provision

required Additional provision

Existing provision

Value of operations

Minimum provision required

Existing provision

Bank AA - 3,918,576 - - - 3,982,491 - - A 0.50% 3,017,547 (15,087) - (15,087) 4,737,006 (23,687) (23,687) B 1.00% 2,747,718 (27,477) - (27,477) 1,647,405 (16,475) (16,475) C 3.00% 607,680 (18,231) - (18,231) 1,467,413 (44,025) (44,025) D 10.00% 570,497 (57,050) (13,042) (70,092) 748,612 (74,862) (74,862) E 30.00% 113,493 (34,048) - (34,048) 121,167 (36,349) (36,349) F 50.00% 112,295 (56,147) - (56,147) 40,060 (20,030) (20,030) G 70.00% 701,726 (491,209) (134,863) (626,072) 70,218 (49,152) (49,152) H 100.00% 599,604 (599,604) - (599,604) 1,104,500 (1,104,500) (1,104,500) Total 12,389,136 (1,298,853) (147,905) (1,446,758) 13,918,872 (1,369,080) (1,369,080)

(+/-) Adjustment to fair value(1) 52.977 116,051 Total fair value adjustment of loan operations that are the object of market risk hedge

12.442.113

14,034,923

Consolidated AA - 3,998,522 - - - 3,983,502 - - A 0.50% 20,624,749 (103,125) - (103,125) 22,172,467 (110,862) (110,862) B 1.00% 9,667,964 (96,680) - (96,680) 7,434,062 (74,341) (74,341) C 3.00% 8,452,437 (253,572) - (253,572) 8,082,948 (242,490) (242,490) D 10.00% 1,609,685 (160,969) (13,042) (174,011) 1,734,299 (173,431) (173,431) E 30.00% 583,446 (175,034) - (175,034) 598,532 (179,559) (179,559) F 50.00% 473,150 (236,574) - (236,574) 476,651 (238,325) (238,325) G 70.00% 1,053,464 (737,425) (134,863) (872,288) 441,713 (309,201) (309,201) H 100.00% 1,762,952 (1,762,952) - (1,762,952) 2,343,011 (2,343,011) (2,343,011) Total 48,226,369 (3,526,331) (147,905) (3,674,236) 47,267,185 (3,671,220) (3,671,220)

(+/-) Adjustment to fair value(1) 452,647 352,888 Total fair value adjustment of loan

operations that are the object of market risk hedge

48,679,016

47,620,073

(1) Refers to fair value adjustment of loan operations that are the object of market risk hedge.



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f) Changes in the allowance for loan losses

It is comprised of loan and lease operations and other receivables with loan characteristics.


Opening balance 996,821 1,369,080 2,008,304 3,230,955 3,671,220 4,152,135 Reinforcement / (reversal) 624,278 928,293 380,924 1,453,356 2,585,026 2,467,002 Minimum provision required 476,373 780,388 604,669 1,305,451 2,437,121 2,690,747 Additional provisional (1) 147,905 147,905 (223,745) 147,905 147,905 (223,745) Write-offs to losses (174,341) (850,615) (1,020,148) (1,010,075) (2,582,010) (2,947,917) Closing balance 1,446,758 1,446,758 1,369,080 3,674,236 3,674,236 3,671,220

(1) In the fourth quarter of 2016, the additional provision became the minimum provision required, with the improvement of criteria

for credit risk assessment (behavior scoring), as well as a higher level of risk. In the fourth quarter of 2017, additional provision were constituted, whose increased risk level is not applicable.

g) Lease portfolio by maturity

Consolidated 12.31.2017 12.31.2016 Up to 1 year (1) 145,472 73,589 From 1 to 5 years 99,581 53,762 Total presente value (2) 245,053 127,351

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

h) Net income from Lease operations

Consolidated 2H2017 12.31.2017 12.31.2016

Lease operations 104,679 158,609 191,088 Financial leases 87,378 132,700 127,647 Profit on sale of leased assets 12,438 13,868 42,478 Recovery of loans written off as loans 4,863 12,041 20,963

Expenses from lease operations (80,128) (129,750) (158,436) Financial leases (79,983) (129,220) (155,822) Loss on disposal of leased assets (145) (530) (2,614)

Total 24,551 28,859 32,652

i) Concentration of Loan operations

12.31.2017 % da carteira 12.31.2016 % da carteira Bank Largest debtor 674,314 5.44% 1,011,003 7.26% 10 largest debtors 3,619,824 29.22% 3,954,235 28.40% 20 largest debtors 5,011,363 40.45% 5,569,892 40.00% 50 largest debtors 7,537,220 60.84% 8,482,680 60.92% 100 largest debtors 9,803,709 79.13% 10,853,115 77.94% Consolidated Largest debtor 674,314 1.40% 1,011,003 2.14% 10 largest debtors 3,619,824 7.51% 3,954,235 8.36% 20 largest debtors 5,011,363 10.39% 5,569,892 11.78% 50 largest debtors 7,617,591 15.80% 8,550,298 18.09% 100 largest debtors 9,984,079 20.70% 10,953,214 23.17%



54

j) Information on loan assignments carried out up to December 31, 2011 In the year ended December 31, 2017, the Conglomerate did not recorded expenses for loan assignements, which are fully recognized in income statements (R$ 2,470 in the year ended December 31, 2016). In the same period, the Conglomerate recorded revenue with the reversal of a provision for losses of R$ 101 (R$ 7,182 in the year ended December 31, 2016), regarding assignments carried out up to December 31, 2011. Since the first quarter of 2017, the Conglomerate has no further exposure to these operations.

k) Information on loan assignments carried out from January 1, 2012

k.1) Assignments with co-obligation Transfers of financial assets to related parties (consumer loans) were undertaken, with a substantial retention of the risks and benefits by the Institution.

Consolidated

12.31.2017 12.31.2016 Financial assets subject to sale

Liability related to obligation assumed (1)

Financial assets subject to sale

Liability related to obligation assumed (1)

Financial institutions – related parties 8,314,890 9,445,296 12,166,071 13,755,869

Total 8,314,890 9,445,296 12,166,071 13,755,869 (1) Recorded in caption “Other liabilities - Sundry - Bond transactions linked to disposals (Note 18d).

In the Conglomerate, in the year ended December 31, 2017, the income from assigned financial assets totaled R$ 2,246,857 (R$ 3,241,577 in the year ended December 31, 2016) and expenses on the liabilities with assigned financial assets totaled R$ 1,387,074 (R$ 2,208,256 in the year ended December 31, 2016). The Conglomerate has not adopted the option provided in CMN Resolution no. 4,036/2011 on treatment of early settlement losses, instead it recognizes the full losses at the time they occur. k.2) Assignments without co-obligation In the Bank and Consolidated, in the year ended December 31, 2017 there were no income from assigned financial assets (R$ 16,885 in the year ended December 31, 2016) and expenses on the liabilities with assigned financial assets totaled R$ 145,626 (there were no expenses with these type of operations in the year ended December 31, 2016).

l) Changes on credit renegotiated


Opening balance 2,487,362 2,935,495 3,584,748 6,053,267 6,765,372 7,961,559 Signings 1,664,927 2,601,094 2,494,621 2,558,573 4,547,480 4,353,894 (Receiving) and accrual of interest,

net (1,860,272) (2,890,115) (2,845,086) (2,793,956) (4,972,006) (4,848,717)

Written off as losses (2,202) (356,659) (298,788) (146,752) (669,714) (701,364) Closing balance 2,289,815 2,289,815 2,935,495 5,671,132 5,671,132 6,765,372



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m) Supplementary information

m.1) Recovered amounts, written-off as loss


Loan operations (note 8b) 82,083 283,431 199,852 330,853 747,844 663,956 Lease operations (note 8h) - - - 4,863 12,041 20,963 Foreign exchange portfolio (note 9b) 31,542 32,100 34,774 31,542 32,100 34,774 Total 113,625 315,531 234,626 367,258 791,985 719,693

m.2) Other information


Credit contracted to be released 397,858 280,458 2,432,083 1,785,990 Guarantees provided 4,861,733 7,823,978 4,861,733 7,823,978

9. FOREIGN EXCHANGE PORTFOLIO a) Breakdown Bank and Consolidated 12.31.2017 12.31.2016 Other receivables

Purchased foreign exchange to be settled 452,795 336,653 Receivables from foreign exchange sales 208,295 178,705 (Advances in domestic/foreign currency received) (2,847) (7,057) Earnings receivable from granted advances 6,856 7,943

Total 665,099 516,244 Current assets 665,099 516,244 Other liabilities

Sold foreign exchange to be settled (208,791) (177,680) Liabilities for foreign exchange purchases (441,748) (344,145) (Advances on exchange contracts) 315,197 303,660

Total (335,342) (218,165) Current liabilities (335,342) (218,165) Net foreign exchange portfolio 329,757 298,079 Memorandum Accounts

Credits opened for imports 80,235 43,044 b) Income from foreign exchange operations

Bank and Consolidated 2H2017 12.31.2017 12.31.2016

Foreign exchange income 431,440 1,073,526 1,910,927 Recovery of loans written off as loss 31,542 32,100 34,774 Foreign exchange expenses (404,864) (999,374) (2,210,099) Foreign exchange income 58,118 106,252 (264,398)



56

10. OTHER RECEIVABLES - SUNDRY


Deferred tax assets (Note 22e) 2,905,675 2,782,639 7,214,885 7,411,491 Deposits in guarantee - Contingency (Note 25g) 107,457 315,191 633,128 824,776 Deposits in guarantee - Other 56 55 56 379 Credit card operations (Note 8a) - - 1,163,889 956,900 Operations under Court-Ordered Reorganization approved (Note 8a) 758,091 82,610 760,124 84,775

Trade and credit receivables (1) (Note 8a) 1,737,548 1,862,184 1,737,548 1,862,194 Taxes and contributions recoverable 40,960 170,215 180,166 230,477 Debtors for purchase of assets 50,646 1,212 50,646 1,212 Awards on credits linked to transactions acquired through assignment 11,542 13,688 11,542 13,688

Sundry domestic debtors 37,910 14,844 161,486 98,454 Receivables from associated companies (2) 1,020,919 17,386 - - Other 13,349 18,866 25,888 27,921 Total 6,684,153 5,278,890 11,939,358 11,512,267 Current assets 3,533,246 2,751,854 5,080,073 5,181,241 Non-current assets 3,150,907 2,527,036 6,859,285 6,331,026

(1) Includes operations contracted with institutions not included in the financial system, resulting from the acquisition of

receivables from commercial transactions, without co-obligation from the originator institution. (2) In the Bank, includes includes amounts receivable related to capital reduction of the investee BV Financeira. 11. OTHER ASSETS


Assets not for own use 69,754 180,361 161,095 282,174 Vehicles and alike 2,202 2,105 92,443 103,527 Real estate 17,130 37,189 17,364 37,189 Properties under special regime 48,661 139,837 48,661 139,959 Machinery and equipment 1,761 1,230 2,627 1,499

Materials inventories - - 282 849 Subtotal 69,754 180,361 161,377 283,023 (Provision for devaluation) (21,973) (23,825) (42,703) (46,812) Prepaid expenses 15,619 14,168 94,842 252,249

Insurance costs 2,057 834 5,585 3,604 Data processing expenses 9,615 5,434 10,650 7,657 Commission for intermediation of operations (1) - - 72,287 230,722 Financial system service expenses 2,570 2,367 2,685 2,469 Specialized technical service expenses 1,309 1,515 2,328 2,853 Usufruct right on shares - 1,249 - 1,249 Other 68 2,769 1,307 3,695

Total 63,400 170,704 213,516 488,460 Current assets 63,146 170,544 150,894 270,622 Non-current assets 254 160 62,622 217,838

(1) Refer to the amounts deferred for costs associated with loan and lease transactions granted incurred in its origin.

Credit transactions originated prior to January 02, 2015, pursuant to the terms of CMN Resolution no. 4,294/2013 and in compliance with permission provided for in BACEN Circular Letter no. 3,738/2014, had remuneration paid to correspondents recognized in assets, corresponding to the amount of R$ 62,166 in the year ended December 31, 2017 (R$ 170,886 in the year ended December 31, 2016).



57

12. INVESTMENTS

a) Changes in interest in subsidiaries

Book

balance Changes – 12.31.2017 Book balance

Equity in income subsidiaries

12.31.2016 Dividends/Other events (3)

Equity in income subsidiaries 12.31.2017 12.31.2016

Domestic 3,410,265 (1,101,178) 872,887 3,181,974 353,903 Consolidated 3,025,486 (1,101,178) 587,881 2,512,189 159,420 BV Financeira S.A. – Crédito, Financiamento e Investimento 1,681,876 (1,101,178) 549,979 1,130,677 119,814

BV Leasing Arrendamento Mercantil S.A. 995,298 - 17,469 1,012,767 34,709 Votorantim CTVM Ltda. 265,340 - 1,842 267,182 (1,683) Votorantim Asset DTVM Ltda. 82,972 - 18,591 101,563 6,580 Non Consolidated 384,779 - 285,006 669,785 194,483 Votorantim Corretora de Seguros S.A. 234,483 - 261,158 495,641 168,721 BV Investimentos Alternativos e Gestão de Recursos S.A. 133,518 - 6,804 140,322 13,576

Promotiva S.A. 16,778 - 17,044 33,822 12,186 Abroad 56,106 (41,513) (14,593) - (15,478) Consolidated 56,106 (41,513) (14,593) - (15,478) Votorantim Bank Limited (1) - - - - (3,228) Banco Votorantim Securities (2) 38,672 (25,457) (13,215) - (4,294) Votorantim Securities (UK) Limited (2) 17,434 (16,056) (1,378) - (7,956) Total interest in subsidiaries 3,466,371 (1,142,691) 858,294 3,181,974 338,425

(1) Votorantim Bank Limited had its activities closed during the year ended December 31, 2016. (2) Banco Votorantim Securities and Votorantim Securities (UK) Limited had their activities closed during the year ended

December 31, 2017. (3) Includes the Capital reduction of the investee BV Financeira, as well as the repatriation of Capital of the companies abroad.

Balances at 12.31.2017 Capital Adjusted

shareholder’s equity

Net income (loss) 12.31.2017

Number of Commom Shares

(in thousands) Ownership interest %

Domestic Votorantim CTVM Ltda. (1) 190,763 266,791 1,842 19,076,314 99.99% Votorantim Asset DTVM Ltda. (2) 57,011 97,148 18,591 5,701,076 99.99% BV Financeira S.A. – Crédito, Financiamento e Investimento. (3) 500,403 608,195 549,979 3,080 100.00%

BV Leasing Arrend. Merc. S.A. (4) 932,512 1,008,618 17,469 510 100.00% Abroad Banco Votorantim Securities - - (13,795) - - Votorantim Securities (UK) Limited - - (1,796) - -

(1) The shareholders' equity includes the allocation of mandatory minimum dividends in the amount of R$ 391. (2) The shareholders' equity includes the allocation of mandatory minimum dividends in the amount of R$ 4,416. (3) The shareholders' equity includes the allocation of mandatory minimum dividends in the amount of R$ 130,621 and additional

of R$ 391,860. (4) The shareholders' equity includes the allocation of mandatory minimum dividends in the amount of R$ 4,149. b) Summary financial information of non-consolidated ownership in the Consolidated

Financial Statements

12.31.2017

Votorantim Corretora de Seguros S.A.

BV Investimentos Alternativos e Gestão de Recursos S.A. Promotiva S.A.

Total assets 633,351 142,697 60,477 Total liabilities 633,351 142,697 60,477

Liabilities 199,737 3,989 30,702 Shareholder’s equity (1) 433,614 138,708 29,775

Net income in the period 261,158 6,804 17,044

(1) Shareholders' Equity includes the allocations of income for the year ended December 31, 2017.



58

12.31.2016

Votorantim Corretora de Seguros S.A

BV Investimentos Alternativos e Gestão de Recursos S.A Promotiva S.A

Total assets 320,580 135,897 44,392 Total liabilities 320,580 135,897 44,392

Liabilities 254,819 5,602 30,411 Shareholder’s equity (1) 65,761 130,295 13,981

Net income in the period 168,721 13,576 12,186

(1) Shareholders' Equity includes the allocations of income for the year ended December 31, 2017. c) Other investments

Bank Consolidated

12.31.2017 12.31.2016 12.31.2017 12.31.2016 Investments via tax incentives 14,332 27,610 93,753 121,412 Membership certificates - 176 - 176 Shares and quotas 180 6 180 6 Other 5 101 1,757 1,882 Total 14,517 27,893 95,690 123,476 (Accumulated impairment) (3,940) (18,400) (23,896) (52,547)

13. PROPERTY FOR USE

12.31.2016 12.31.2017 12.31.2017

Book balance Changes Depreciation Cost Accumulated

depreciation Book

balance Bank Facilities 23,157 21,156 (7,805) 73,338 (36,830) 36,508 Furniture and equipment in use 8,038 2,233 (2,767) 28,808 (21,304) 7,504 Communication system 2,325 130 (529) 9,529 (7,603) 1,926 System data processing 16,777 13,373 (6,862) 80,626 (57,338) 23,288 Security system 28 52 (18) 2,403 (2,341) 62 Transportation system 189 127 (82) 417 (183) 234 Total 50,514 37,071 (18,063) 195,121 (125,599) 69,522 Consolidated Facilities 53,793 22,480 (14,048) 136,602 (74,377) 62,225 Furniture and equipment in use 13,977 1462 (3,859) 42,790 (31,210) 11,580 Communication system 2,439 130 (579) 14,211 (12,221) 1,990 System data processing 27,400 13,450 (10,563) 134,983 (104,696) 30,287 Security system 89 94 (36) 2,557 (2,410) 147 Transportation system 189 127 (82) 804 (570) 234 Total 97,887 37,743 (29,167) 331,947 (225,484) 106,463

14. INTANGIBLE ASSETS

a) Changes and Breakdown

12.31.2016 12.31.2017 12.31.2017

Book balance Acqusitions Write-

offs Amortization Cost Accumulated amortization

Accumulated impairment

Book balance

Bank Software acquired 9,542 5,669 (117) (4,779) 27,089 (16,774) - 10,315 Use licences 25,285 10,290 (84) (13,514) 50,526 (28,549) - 21,977 Softwares internally developed 50,904 71,042 - (975) 147,659 (9,262) (17,426) 120,971

Total 85,731 87,001 (201) (19,268) 225,274 (54,585) (17,426) 153,263 Consolidated Software acquired 11,124 6,189 (117) (5,534) 29,867 (18,205) - 11,662 Use licenses 41,761 16,484 (84) (24,961) 109,064 (75,864) - 33,200 Sales rights agreements 85 - - (85) 5,000 (5,000) - -

Softwares internally developed 53,349 71,042 - (1,667) 151,624 (11,288) (17,612) 122,724

Brands and patents - - - - 1,000 - (1,000) - Total 106,319 93,715 (201) (32,247) 296,555 (110,357) (18,612) 167,586



59

b) Amortization estimate 2018 2019 2020 2021 2022 A partir de 2023 Total Bank Amounts to be amortized 36,974 37,559 24,945 23,540 23,073 7,172 153,263 Consolidated Amounts to be amortized 48,114 40,114 25,573 23,540 23,073 7,172 167,586

15. DEPOSITS AND MONEY MARKET REPURCHASE COMMITMENTS

a) Deposits


Demand deposits 99,267 89,688 94,633 87,991 Individuals 37,469 17,482 37,469 17,482 Legal entities 57,148 70,469 57,148 70,469 Restricted deposits 4,634 1,697 - - Institutions of the financial system 16 40 16 40

Interbank deposits 2,530,645 7,118,291 2,048,368 1,997,318 Time deposits 6,363,693 2,495,492 6,360,251 2,492,328

Local currency 6,062,103 2,112,665 6,058,661 2,109,501 Foreign currency 301,590 382,827 301,590 382,827

Total 8,993,605 9,703,471 8,503,252 4,577,637 Current liabilities 7,070,533 7,904,792 6,580,180 2,782,122 Non-current liabilities 1,923,072 1,798,679 1,923,072 1,795,515

b) Segregation of Time Deposits by Maturity

Without maturity

Up to 3 months

From 3 to 12

months

From 1 to 3

years

From 3 to 5

years

Over 5

years 12.31.2017 12.31.2016

Bank Demand deposits 99,267 - - - - - 99,267 89,688 Interbank accounts or relations - 456,323 692,236 44,651 1,337,435 - 2,530,645 7,118,291 Time deposits - 1,036,186 4,786,521 523,074 13,670 4,242 6,363,693 2,495,492 Total 99,267 1,492,509 5,478,757 567,725 1,351,105 4,242 8,993,605 9,703,471 Consolidated Demand deposits 94,633 - - - - - 94,633 87,991 Interbank accounts or relations - 148,594 517,688 44,651 1,337,435 - 2,048,368 1,997,318 Time deposits - 1,036,186 4,783,079 523,074 13,670 4,242 6,360,251 2,492,328 Total 94,633 1,184,780 5,300,767 567,725 1,351,105 4,242 8,503,252 4,577,637

c) Money market repurchase commitments


Own portfolio 22,004,257 32,572,413 15,211,806 23,692,302 Private securities - Debentures (1) 9,622,588 17,591,794 9,290,025 15,958,949 Private securities – Promissory notes - 233,122 - - Financial Treasury Bills 2,908,165 1,569,132 1,892,958 1,569,132 National Treasury Bills 5,376,483 7,499,156 1,665,685 3,439,828 National Treasury Notes 2,950,425 4,399,409 1,216,239 1,444,200 Private securities - Other 1,146,596 1,279,800 1,146,899 1,280,193

Third-party portfolio 7,486,409 11,702,126 5,912,225 9,774,594 National Treasury Bills 2,347,851 2,656,091 2,051,912 2,485,111 Financial Treasury Bills 1,506,221 6,602,570 1,506,221 6,496,484 National Treasury Notes 3,632,337 2,443,465 2,354,092 792,999

Free portfolio 4,612,888 2,206,483 4,612,888 2,206,483 Total 34,103,554 46,481,022 25,736,919 35,673,379 Current liabilities 33,017,929 44,425,550 24,688,751 34,637,971 Non-current liabilities 1,085,625 2,055,472 1,048,168 1,035,408

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



60

d) Deposits and securities sold under repurchase agreements


Money Market Funding Expenses (399,590) (929,284) (1,262,858) (381,091) (749,909) (515,195) Time Deposits (292,231) (541,938) (249,245) (292,107) (541,639) (248,558) Interbank accounts or relations (107,359) (387,346) (1,013,613) (88,984) (208,270) (266,637) Expenses with money market repurchase commitments (1,464,871) (3,738,299) (5,803,777) (1,130,742) (2,860,837) (4,647,793)

Own portfolio (865,453) (2,284,382) (3,822,107) (521,211) (1,493,031) (3,351,779) Third-party portfolio (460,316) (1,178,702) (1,811,248) (470,429) (1,092,591) (1,125,592) Free portfolio (139,102) (275,215) (170,422) (139,102) (275,215) (170,422) Expenses with Fund Raising from Acceptance and Issuance of Securities (1,116,851) (2,458,588) (3,037,416) (1,116,870) (2,458,611) (3,037,615) Real estate credit bills (23,348) (53,127) (44,465) (23,348) (53,127) (44,465) Agribusiness Credit Bills (79,459) (192,298) (350,223) (79,459) (192,298) (350,223) Financial bills (992,621) (2,275,906) (2,568,021) (992,621) (2,275,906) (2,568,021) Issue of securities abroad (13,332) 76,265 (66,978) (13,332) 76,265 (66,978)

Debentures - - - - - (56) Certificate of Structured Transactions (428) (534) - (428) (534) - Other (7,663) (12,988) (7,729) (7,682) (13,011) (7,872) Expenses with Subordinated Debts Abroad (134,294) (393,251) 295,531 (134,294) (393,251) 295,531 Total (3,115,606) (7,519,422) (9,808,520) (2,762,997) (6,462,608) (7,905,072)

16. BORROWINGS AND ONLENDINGS

a) Borrowings

Bank and Consolidated Up to

90 days

From 91 to

360 days

From 1 to 3

years 12.31.2017 12.31.2016

Abroad 621,731 465,890 40,056 1,127,677 1,798,307 Raised from foreign banks 603,436 451,701 40,056 1,095,193 1,763,293 Exports - 7,581 - 7,581 18,893 Imports 18,295 6,608 - 24,903 16,121

Total 621,731 465,890 40,056 1,127,677 1,798,307 Current liabilities 1,087,621 1,671,462 Non-current liabilities 40,056 126,845

b) Onlendings Domestic – Official institutions Programs Remuneration p.a. (1)


National Treasury 45,429 82,739 45,429 82,739 Fixed rate From 5.50% to 8.50% p.a. 45,429 82,734 45,429 82,734 Variable rate Selic - 5 - 5

BNDES 1,364,330 1,597,268 1,364,330 1,597,268 Fixed rate Up 0.70 to 9.50% a.a. 264,726 389,657 264,726 389,657

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

1,063,593 1,160,451 1,063,593 1,160,451 Up 4.00% p.a. + TJLP From 1.70% to 2.40% p.a. + Selic

Exchange rate variation From 1.30% to 3.00% p.a. + Exchange variation 36,011 47,160 36,011 47,160 FINAME 1,516,173 1,716,120 1,524,146 1,724,494

Fixed rate Up 18.96% p.a. 1,323,642 1,627,758 1,331,615 1,636,132

Variable rate From 0.50% to 5.50% p.a. + TJLP 190,442 87,769 190,442 87,769 From 1.70% to 2.48% p.a. + SELIC Exchange rate variation From 1.70% to 2.00% p.a. + Exchange variation 2,089 593 2,089 593

Total 2,925,932 3,396,127 2,933,905 3,404,501 Current liabilities 970,813 697,018 975,546 701,857 Non-current liabilities 1,955,119 2,699,109 1,958,359 2,702,644

(1) The remuneration rates refers to the operations on December 31, 2017.



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c) Expenses with liabilities from borrowings and onlendings


Borrowing expenses (44,950) (116,731) 441,595 (44,950) (116,731) 441,594 Expenses with Onlendings (98,142) (201,652) (191,587) (99,110) (203,015) (192,455)

National Treasury (1,198) (4,192) (6,708) (1,198) (4,192) (6,708) BNDES (57,369) (119,140) (105,304) (57,369) (119,140) (105,304) FINAME (39,575) (78,320) (79,575) (40,543) (79,683) (80,443)

Expenses with Obligations to foreign bankers(1) 39,010 66,718 125,075 39,010 66,718 125,075

Total (1) (104,082) (251,665) 375,083 (105,050) (253,028) 374,214 (1) Includes foreign exchange variation on Loans and Onlendings abroad.

17. ACCEPTANCES AND ENDORSEMENTS

Funding Currency Amount issued Remuneration p.a. (1) Funding date Maturity Bank and Consolidated 12.31.2017 12.31.2016

Real estate credit note funds 660,338 369,810 Fixed rate R$ 1,900 From 8,38% to 15,04% p.a. 2015 2021 2,128 13,543 Variable rate R$ 595,052 From 89,00% to 97,00% Interbank Deposit 2015 2021 655,412 348,019 Variable rate R$ 2,524 From 4,42% a 6,07% p.a. + IPCA 2015 2021 2,798 8,248 Agribusiness crdeit bills 2,190,501 2,564,336 Fixed rate R$ 22,765 From 8,05% to 15,44% p.a. 2015 2021 29,239 64,137 Variable rate R$ 1,836,918 From 87,50% a 98,50% p.a. Interbank Deposit 2009 2022 2,130,673 2,460,129 Variable rate R$ 23,847 From 5,14% to 6,39% p.a. +IPCA 2015 2021 30,589 40.070 Financial bills 20,617,260 17,552,169 Fixed rate R$ 293,845 From 7,84% to 17,63% p.a. 2012 2024 341,541 356,219 Variable rate R$ 17,655,489 From 100,00% to 110,00% Interbank Deposit 2013 2022 19,781,328 16,582,501 Variable rate R$ 344,362 From 3,71% to 8,31% p.a. + IPCA 2012 2022 493,259 612,388 Variable rate R$ 967 From 5,70% to 7,43% p.a. + IGPM 2016 2019 1,132 1,061 Securities issued abroad 607,307 1,316,099 Fixed rate R$ 26,264 From 7,50% to 19,09% p.a. 2012 2020 35,236 56,234 Variable rate R$ 3,543 From 92,10% to 101,40% Interbank Deposit 2012 2017 - 4,331 Exchange rate variation USD 183,042 Up 6,60% a.a. + Exchange variation 2012 2020 572,071 1,186,193 Exchange rate variation EUR 20,200 Up 0,48% a.a. + Exchange variation 2016 2017 - 69,341

Certificates of Structured Operations 9,512 - Variable rate R$ 9,695 From 8,98% to 10,64% p.a. 2017 2018 9.512 - Total 24,084,918 21,802,414 Current liabilities 12,607,246 10,244,503 Non-current liabilities 11,477,672 11,557,911

(1) The remuneration rates refers to the operations on December 31, 2017. 18. OTHER LIABILITIES

a) Tax and social security


Income tax and social contribution payable 1,105 154,574 12,248 159,782 Provision for taxes and contributions on income 5,321 119,401 169,619 152,176 Taxes and contributions payable 26,578 37,008 77,657 79,375 Deferred tax liabilities (Note 22d) 27,141 53,222 208,816 160,320 Total 60,145 364,205 468,340 551,653 Current liabilities 60,145 209,630 460,169 391,871 Non-current liabilities - 154,575 8,171 159,782



62

b) Subordinated debts Funding

Amount issued Remuneration p.a. (1)

Funding year Maturity


Subodinated debt 2,866,616 2,876,929 Foreign exchange variation USD 803,048 7.38% p.a. + Exchange

variation 2013 2020 2,866,616 2,876,929

Subordinated financing bills 51,867 1,999,705 Pre fixed 300 14.21% a.a. 2016 2023 - 324

Variable rate 2,400 From 112.80% to 119.00% Interbank Deposit 2016 2023 2,751 1,353,799

Variable rate 187,200 From 6,60% to 7,57% p.a. + IGPM 2011 2017 - 383,694

Variable rate 28,933 Up 7,86% p.a. + IPCA 2011 2020 49,116 261,888 Total 2,918,483 4,876,634 Current liabilities - 1,851,720 Non-current liabilities 2,918,483 3,024,914

(1) The remuneration rates refers to the operations on December 31, 2017. c) Debt instruments eligible as capital

Funding Amount issued Remuneration p.a. (1) Fundig year Maturity Bank and Consolidated

12.31.2017 12.31.2016 Subordinated financing bills 1,908,710 1,168,944

Variable rate 1,003,826 From 1.24% to 2.16% p.a. + CDI

2014 2024 1,256,359 647,365 From 100.00% to 120.00% Interbank Deposit

Variable rate 324,732 From 5.72% to 9.31% p.a. + IPCA 2013 2030 481,988 401,212 Pre fixed 103,200 From 11.03% to 17.98% p.a. 2015 2024 136,107 89,734 Variable rate 27,500 From 117.20 to 117.50% SELIC 2016 2023 34,256 30,633

Funding Amount issued Remuneração a.a. Funding year

Perpetual Bonus (2) 990,597 - Pre fixed USD 300,000 8,25% a.a. 2017 990,597 - Total 2,899,307 1,168,944

Non-current liabilities 2,899,307 1,168,944

(1) The remuneration rates refers to the operations on December 31, 2017. (2) On November 30, 2017, the issuance abroad of USD 300,000 was made with semi-annual interest payments.

The bonds have a redemption option on the initiative of the Bank as of Dec. 2022 or in each subsequent half-yearly interest payment, provided that it has previously been authorized by the Central Bank of Brazil (BACEN).

d) Sundry

Bank Consolidated

12.31.2017 12.31.2016 12.31.2017 12.31.2016 Obligations from transactions linked to assignments (note 8k) (1) - - 9,445,296 13,755,869 Liabilities for acquisition of assets and rights 670 1,764 677 1,790 Provision for unsettled payments 322,811 305,076 564,943 565,332 Provisions for civil claims (Note 25e1) 12,893 5,545 311,724 302,241 Provisions for labor claims (Note 25e1) 190,720 158,073 1,011,355 887,345 Provisions for tax claims (Note 25e1) (2) 19,980 19,648 64,420 67,825 Amounts payable - associated companies 1,012 1,449 132 - Sundry creditors - abroad 703 1,321 703 1,321 Provision for losses - Unpaid guarantee - 71,059 - 71,059 Provision for losses - Other risks 948 490 14,497 13,253 Sundry domestic creditors 4,228 24,083 184,109 145,177 Credit card operations - - 1,225,067 989,175 Provision for restructurings 27,434 50,276 56,937 113,412 Provision for financial guarantees provided 309,092 - 309,092 - Other 22 21 22 23 Total 890,513 638,805 13,188,974 16,913,822 Current liabilities 638,915 392,285 8,340,875 9,737,902 Non-current liabilities 251,598 246,520 4,848,099 7,175,920

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

(2) Includes legal obligations.



63

19. OTHER OPERATING INCOME/ EXPENSES

a) Service income


Fund management - - - 68,455 127,037 114,863 Collection 3,265 3,815 2,010 3,265 3,815 2,010 Commissions on placing of securities 23,880 47,680 74,470 25,498 59,700 78,556

Bookerage of Stock Exchange transactions - - - 5,342 14,208 18,660

Income from custody services 2,589 5,229 4,245 3,694 6,600 4,662 Income from guarantees granted 51,604 111,198 127,185 51,604 111,198 127,185 Credi card transactions - - - 51,426 97,515 80,259 Insurance brokerage commission - - - 12,945 24,122 18,250 Financial advisory services 8,041 30,332 25,677 8,041 30,332 26,492 Other services 7,541 10,718 3,983 9,968 14,723 25,759 Total 96,920 208,972 237,570 240,238 489,250 496,696

b) Income from banking fees


Master file registration - - - 238,960 424,987 318,607 Funds transfer 174 337 416 174 337 416 Appraisal of assets - - - 159,577 286,958 213,231 Income from credit card - - - 62,356 115,014 91,860 Other 186 380 355 927 1,915 1,952 Total 360 717 771 461,994 829,211 626,066

c) Personnel expenses


Fees and retainer fee (Note 23) (4,926) (9,224) (9,020) (8,234) (15,549) (18,470) Benefits (11,065) (24,587) (23,755) (62,936) (123,533) (124,898) Social charges (20,895) (72,533) (64,376) (78,939) (195,734) (179,973) Salary (105,379) (204,513) (214,643) (281,657) (524,559) (556,615) Labor claims (21,215) (43,349) (83,372) (136,904) (231,420) (346,694) Training (1) (1,487) (2,734) (2,368) (4,099) (3,072) Total (163,481) (355,693) (397,900) (571,038) (1,094,894) (1,229,722)

d) Other administrative expenses


Water, energy and gas (984) (1,849) (3,037) (2,454) (5,020) (6,997) Rental (10,001) (19,411) (27,263) (27,444) (56,861) (67,958) Communications (726) (1,390) (1,229) (34,545) (68,569) (78,346) Maintenance and preservation of assets (2,171) (3,425) (2,289) (9,370) (16,855) (15,296) Material (284) (415) (189) (1,954) (3,424) (3,155) Data processing (40,038) (74,129) (66,395) (103,714) (204,433) (198,965) Promotions and public relations (1,500) (1,678) (1,771) (7,338) (10,377) (9,980) Advertising and publicity (797) (1,095) (867) (12,243) (20,670) (6,735) Publications (47) (395) (582) (75) (729) (1,139) Insurance (276) (1,017) (2,082) (2,132) (3,692) (3,496) Financial system services (7,631) (13,400) (13,412) (48,281) (96,545) (93,696) Outsourced services (625) (1,150) (1,145) (8,863) (13,358) (9,629) Surveillance and security services (1,177) (2,381) (1,506) (1,436) (3,112) (2,433) Specialized technical services (25,302) (39,973) (50,578) (206,425) (379,139) (376,393) Transportation (668) (1,164) (1,135) (7,948) (15,146) (12,901) Traveling (1,722) (2,650) (3,276) (4,825) (8,574) (9,742) Judicial and notary public fees (3,107) (6,365) (9,896) (48,549) (93,887) (110,942) Amortization (12,069) (19,268) (13,582) (20,762) (32,247) (23,645) Depreciation (10,230) (18,063) (27,986) (15,708) (29,167) (40,404) Other (4,503) (8,311) (7,959) (48,637) (82,519) (76,204) Total (123,858) (217,529) (236,179) (612,703) (1,144,324) (1,148,056)



64

e) Other operating income


Recovery of charges and expenses - - - 1,351 2,120 2,245 Restatement of judicial deposits 1,677 5,849 25,046 12,474 31,486 58,542 Monetary inflation indexation 1,030 3,516 7,169 1,572 5,767 12,635 Reversal of provision for losses - Other risks 408 622 24,480 10,314 30,625 223,763

Reversal of provisions - tax claims - - - 10,166 2,776 - Countervailing fines 18,464 36,893 36,189 18,464 36,893 36,189 Reimbursement of operating costs - - - 6,792 13,908 21,018 Other 5,849 6,903 15,637 17,715 31,762 62,855 Total (1) 27,428 53,783 108,521 78,848 155,337 417,247

(1) Income and expenses of the same type are presented at the net amount determined in each period.

f) Other operating expenses


Costs associated with the production - Business partners (1) (92) (92) - (316,325) (617,025) (507,199)

Costs associated with the production - Other expenses (965) (1,932) (1,026) (8,832) (18,819) (25,234)

Tax claims 2,249 (960) (4,178) - - (6,328) Civil claims (6,122) (9,320) (2,140) (94,720) (223,172) (209,533) Provisions - Financial guarantees provided (26,921) (42,636) - (26,921) (42,636) - Provision for losses - Unsecured guarantees - - (7,591) - - (7,591)

Expenses with interest COFINS (REFIS joining and PERT) (26) (1,146) (12,921) (1,921) (3,233) (35,512)

Other (9,963) (19,927) (30,307) (51,706) (98,966) (118,887) Total (2) (41,840) (76,013) (58,163) (500,425) (1,003,851) (910,284)

(1) Refers mainly to commissions on loans originated by the partners and trade agreements with retailers. (2) Income and expenses of the same type are presented at the net amount determined in each period.

20. NON-OPERATING INCOME

Bank Consolidated

2H2017 12.31.2017 12.31.2016 2H2017 12.31.2017 12.31.2016 Non-operating income 16,314 5,257 4,614 22,967 18,647 31,938 Income on disposal of assets 14,731 - - 12,587 - - Rental income - 433 3,053 - 433 3,053 Reversal of impairment allowance of other assets 940 3,606 - 2,889 5,889 -

Reversal of provision for losses with tax incentives - 460 - - 1,390 -

Other non-operating income 643 758 1,561 7,491 10,935 28,885 Non-operating expenses (494) (3,417) (33,112) (2,815) (15,427) (30,996) Loss on disposal of assets - (372) (25,928) - (5,911) (20,258) Losses in investments due to tax incentives - - (586) - - (3,437)

Capital losses - - - (2,146) (5,581) - Devaluation of other assets - - (2,552) - - (2,804)

Other non-operating expenses (494) (3,045) (4,046) (669) (3,935) (4,497) Total (1) 15,820 1,840 (28,498) 20,152 3,220 942

(1) Income and expenses of the same type are presented at the net amount determined in each period.



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21. SHAREHOLDER’S EQUITY a) Capital Capital of Banco Votorantim S.A., fully subscribed and paid-in, in the amount of R$ 8,130,372 (R$ 7,826,980 on December 31, 2016) is represented by 105,391,472,816 nominative shares, of which 86,229,386,840 are common shares with no par value and 19,162,085,976 nominative preferred shares with no par value. On April 28, 2016 the Extraordinary Shareholders’ Meeting approved an increase of Capital Stock through capitalization of the special profit reserve in the amount of R$ 343,226, without issuance of new shares, approved by Central Bank of Brazil on May 12, 2016. At the Extraordinary Shareholders’ Meeting held on April 26, 2017, decided and approved the increase of Capital Stock through incorporation of the special profit reserve in the amount of R$ 303,392, without issuance of new shares, approved by Central Bank of Brazil on May 26, 2017. b) Capital reserve Capital reserve is recognized from goodwill on subscription of shares, in the amount of R$ 372,120. c) Profit reserve Legal reserve Composed mandatorily of 5% of the period’s net income, up to the limit of 20% of Capital. The Legal Reserve may cease to be funded when jointly with Capital Reserves it exceeds 30% of Capital. The Legal Reserve may be employed only in a capital increase or to offset losses. Special profit reserve Management may propose that the portion of profit not distributed should be destined to “Special profit reserve”, which will be available to shareholders for future deliberation at General Meeting. d) Dividends Shareholderes are assured a minimum mandatory dividend equal to 25% of net income of the year, less the Legal Reserve. Management proposes to distribute the net income in the amount of R$ 110,598 referring to the year ended December 31, 2017 (R$ 101,131 in the year ended December 31, 2016).

Bank 12.31.2017 12.31.2016 Value (R$ thousands) Value (R$ thousands)

Net income for the period 582,229 425,814 Effects of adjust from inicial aplication of Resolution CMN nº 4.512/2016 (116,551) - Legal reserve (23,285) (21,291) Calculation basis 442,393 404,523 Mandatory minimum dividend 110,598 101,131 Proposed value 110,598 101,131 % on the basis of calculation 25% 25%

Bank

12.31.2017 12.31.2016

Value (R$ thousands)

Value per lot of one thousand shares – R$

Value (R$ thousands)

Value per lot of one thousand shares –

R$ Net income for the period 582,229 5,52 425,814 4,04 Dividends payable 110,598 1,05 101,131 0,96



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e) Equity valuation adjustments Bank and Consolidated 2H2017

Opening balance Changes Tax effect Closing balance Securities available for sale (200,890) 307,920 (138,771) (31,741) Banco Votorantim (1) (220,971) 295,719 (133,280) (58,532) Subsidiaries 20,081 12,201 (5,491) 26,791 Cash flow hedge (19,939) (16,074) 7,233 (28,780) Banco Votorantim (19,939) (16,074) 7,233 (28,780) Total (220,829) 291,846 (131,538) (60,521)


12.31.2017 12.31.2016 Opening balance Changes Tax effect

(2) Closing balance

Opening balance Changes Tax effect Closing

balance Securities (132,487) 183,550 (82,804) (31,741) (631,644) 715,479 (216,322) (132,487) Banco Votorantim (1) (142,042) 152,211 (68,701) (58,532) (561,705) 570,945 (151,282) (142,042) Subsidiaries 9,555 31,339 (14,103) 26,791 (69,939) 144,534 (65,040) 9,555 Cash flow hedge (14,614) (25,756) 11,590 (28,780) - (26,571) 11,957 (14,614) Banco Votorantim (14,614) (25,756) 11,590 (28,780) - (26,571) 11,957 (14,614) Total (147,101) 157,794 (71,214) (60,521) (631,644) 688,908 (204,365) (147,101)

(1) Includes agency abroad. (2) Since the fourth quarter of 2016, we recognize the tax effects of securities available for sale abroad. f) Accumulated profits On July 28, 2016, CMN Resolution No. 4,512 was issued, which provides for accounting procedures applicable to the evaluation and registration of a provision for financial guarantees provided. The standard requires the constitution of a provision to cover losses associated with financial guarantees provided in any form. The effects of the adjustments resulting from the initial application of this Resolution were recorded as a contra entry to the accumulated profit and loss account by the net amount of tax effects at January 1, 2017 in the amount of R$ 116,551. These adjustments were included in the dividend calculation basis for the year ended December 31, 2017, as established by Bacen Circular No. 1273/1987.

22. TAXES a) Income Tax and Social Contribution Expenses


Currente amounts 6,087 (2,937) (117,167) (150,639) (171,877) (138,298) IR & CSLL in Brazil - Current 4,484 (5,321) (119,401) (147,600) (169,619) (152,061) IR & CSLL in Brazil – Previous year 1,603 2,384 2,234 (3,039) (2,258) 13,763

Deferred amounts 67,963 127,211 (21,346) (122,277) (252,906) (118,887) Deferred tax liabilities 21,711 24,765 26,087 47,975 (27,895) 98,356 Fair value adjustment 21,711 24,765 26,087 47,975 (27,895) 83,176 Excess depreciation - - - - - 15,180 Deferred tax assets 46,252 102,446 (47,433) (170,252) (225,011) (217,243) Tax losses/negative basis of CSLL (35,344) (47,210) 8,694 (91,445) (109,966) (1,849)

Temporary differences 87,720 135,501 215,204 (45,773) (133,934) 72,854 Fair value adjustment (6,124) 14,155 (271,331) (33,034) 18,889 (288,248) Total 74,050 124,274 (138,513) (272,916) (424,783) (257,185)



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b) Reconciliation of IR and CSLL charges


Income (loss) before taxes and contributions 265,503 512,171 619,172 650,085 1,171,053 814,742 Total IR charges (25% rate) and CSLL (20% until December 2018 and 15% from January 2019)

(119,476) (230,477) (278,626) (292,538) (526,973) (366,635)

Equity in the earnings of subsidiaries 256,511 432,871 152,290 (77,411) (21,408) 87,517 Charges on employees’ profit sharing 13,450 24,396 24,680 30,376 73,817 59,283 Other amounts (76,435) (102,516) (36,857) 66,657 49,781 (37,350) Income tax and social contribution in the period 74,050 124,274 (138,513) (272,916) (424,783) (257,185)

c) Tax expenses


Cofins (23,195) (47,116) (72,158) (139,796) (265,554) (268,302) ISSQN (4,015) (7,883) (12,334) (29,199) (54,731) (49,636) PIS (3,806) (7,711) (11,773) (22,793) (43,215) (43,651) Other (7,477) (9,262) (10,432) (25,884) (31,827) (24,384) Total (38,493) (71,972) (106,697) (217,672) (395,327) (385,973)

d) Deferred tax liabilities


Fair value adjustment 27,141 53,222 208,816 160,320 Total deferred tax 27,141 53,222 208,816 160,320

Income tax 15,078 29,567 116,009 89,066 Social contribution 12,063 23,655 92,807 71,254

e) Deferred tax assets (Recognised) Bank

12.31.2016 12.31.2017 12.31.2017 (1)

Book balance Net changes in the period

Book balance Constitution Write-off Temporary differences 2,377,513 701,314 (531,069) 2,547,758

Allowance for loan losses (2) 1,382,089 385,712 (196,261) 1,571,540 Liability provisions 635,183 134,013 (109,425) 659,771 Fair value adjustment (3) 342,133 181,589 (224,547) 299,175 Other provisions 18,108 - (836) 17,272

CSLL tax loss/negative basis 405,126 3,730 (50,939) 357,917 Total deferred tax assets recognized 2,782,639 705,044 (582,008) 2,905,675

Income tax 1,669,637 430,009 (331,230) 1,768,416 Social contribution 1,113,002 275,035 (250,778) 1,137,259

Consolidated

12.31.2016 12.31.2017 12.31.2017 (1)

Book balance Net changes in the period

Book balance Constitution Write-off

Temporary differences 6,246,730 1,510,856 (1,597,496) 6,160,090 Allowance for loan losses (2) 4,407,687 1,107,672 (1,140,566) 4,374,793 Liability provisions 1,305,303 181,441 (202,850) 1,283,894 Fair value adjustment (3) 505,422 221,743 (252,151) 475,014 Other provisions 28,318 - (1,929) 26,389

CSLL tax loss/negative basis 1,164,761 2,871 (112,837) 1,054,795 Total deferred tax assets recognised 7,411,491 1,513,727 (1,710,333) 7,214,885

Income tax 4,587,104 896,145 (949,468) 4,533,781 Social contribution 2,824,387 617,582 (760,865) 2,681,104

(1) On December 31, 2017, the amount of R$ 79,440 (of the total of R$ 299,175) in the Bank, and R$ 39,100 (of the total of R$ 475,014) in the Consolidated is the deferred tax asset arising from fair value adjustment of securities classified as available for sale, recorded in Shareholder’s equity.

(2) On December 31, 2017 deferred tax asset was recorded, referring to the provision for losses with sureties, in the amount of R$ 77,702, recorded in a Shareholder’s equity account (pursuant to CMN Resolution No. 4,512 of July 28, 2016).

(3) The amounts corresponding to the changes of deferred tax asset arising from adjustments to fair value of securities available



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for sale, recorded in Shareholder’s equity account in the year ended December 31, 2017 is R$ (57,113) of the total R$ (49,958) in the Bank and R$ (42,297) of the total R$ (30,408) in the Consolidated.

f) Deferred tax asset (Not recognized)


Deferred tax assets abroad - - - 10,278 Total deferred tax assets not recognized - - - 10,278 Income tax - - - 5,710 Social contribution - - - 4,568

On December 31, 2017 there was no unrecorded deferred tax assets. The unrecorded deferred tax assets on December 31, 2016 was R$ 10,278. Realization estimate The realization estimate of deferred tax assets is supported by in the technical study prepared as at December 31, 2017.

Bank Consolidated Nominal value Present value Nominal value Present value

In 2018 802,411 770,906 2,291,315 2,201,351 In 2019 314,036 287,721 1,226,588 1,123,804 In 2020 395,210 343,495 993,159 863,202 In 2021 247,937 203,732 638,227 524,437 In 2022 299,528 232,258 661,122 512,644 As from 2023 846,553 481,189 1,404,474 794,156 Total deferred tax assets 2,905,675 2,319,301 7,214,885 6,019,594

In the year ended December 31, 2017, deferred tax assets were realized in the Bank totaling R$ 695,352 (R$ 1,054,162 in 2016), equal to 83% (91% in 2016) of the respective use projection for the entire calendar year of 2016, included in the technical study prepared on December 31, 2017, which was included in the technical study prepared on December 31, 2016. Realization of nominal values for deferred tax assets

Bank Consolidated Tax losses/Social

contribution on net income to offset (1)

Intertemporal Differences (2)

Tax losses/Social contribution on net income to offset (1)

Intertemporal Differences (2)

In 2018 0% 30% 2% 36% In 2019 13% 11% 10% 18% In 2020 19% 13% 14% 14% In 2021 43% 5% 16% 8% In 2022 25% 9% 8% 9% As from 2023 0% 32% 50% 15%

(1) Projected consumption linked to the capacity to generate IRPJ and CSLL taxable amounts in subsequent periods. (2) The consumption capacity arises from movements in provisions expectation of reversals, write-offs and uses). 23. RELATED PARTIES Costs of salaries and other benefits granted to key management personnel of Banco Votorantim, comprising the Board, Audit Committee, Board of Directors and Fiscal Council:


Fees and retainer fee 4,926 9,224 9,020 8,234 15,549 18,470 Bonuses - 28,820 20,591 - 40,466 32,745 Social charges 1,747 12,062 10,158 2,268 16,639 15,104 Total 6,673 50,106 39,769 10,502 72,654 66,319



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The Bank does not provide post-employment benefits to key management personnel. The Bank does not grant loans to key Management personnel in accordance with the prohibition established by the Central Bank of Brazil. The balances of accounts relating to transactions between consolidated companies of the Bank are eliminated in the consolidated financial statements and also take into consideration the lack of risk. The shareholders of the Institution are Banco do Brasil Conglomerate and Votorantim Conglomerate (main companies that are part of the Votorantim Conglomerate are: Votorantim Finanças, Votorantim Cimentos, Votorantim Metais, Votorantim Siderurgia, Votorantim Energia, Fibria and Citrosuco) . The Conglomerate carries out banking transactions with related parties, such as current account deposits (not remunerated), remunerated deposits, money market repurchase commitments, derivative financial instruments and assignment of credit transaction portfolios. There are also service agreements. These transactions are carried out under terms and conditions similar to those performed with third parties where applicable, prevailing at the transaction dates. These transactions do not involve extraordinary default risks. In the year ended December 31, 2016 the Bank sold securities (Shares in investment funds) classified in the category Available for sale to subsidiary BV Financeira. This operation generated no impact on the net income, subject to elimination in the financial Conglomerate’s consolidation process. In the year ended December 31, 2017, Conglomerate, through its subsidiary BV Financeira, carried out credit assignments with a related party, with substantial risk retention. Sum of present values totaled R$ 3,511,983 (R$ 7,593,212 on December 31, 2016). The net result of credit assignments, considering income and expenses of the assignments with substantial retention of risks and benefits is presented in the table below under “Income from interest, provision of services and other income”.

12.31.2017 Banco do

Brasil Conglomerate

Votorantim S.A.

Financial subsidiaries (1)

Non-financial subsidiaries (2)

Key management personnel (3) Other (4) Total

Assets Cash and due from banks 1,032 - - - - - 1,032 Interbank investments 1,506,540 - 24,682,565 - - 572,376 26,761,481

Securities and derivative financial instruments 950 477 8,977,943 - - 1,562,587 10,541,957 Other assets 248,844 7,926 1,021,190 - 324 313 1,278,597

Liabilities Demand deposits (283) (3,957) (2,389) (560) (13) (210) (7,412) Time Deposits (100,321) (395,063) (3,441) (582,618) (453) - (1,081,896) Interbank accounts - - (482,276) - - - (482,276) Money market repurchase commitments (275,290) (319,408) (8,367,044) - (6,459) - (8,968,201)

Acceptances and endorsements - (420,744) - - (12,573) - (433,317) Derivative financial instruments (5,940) (798) - - - (177,563) (184,301) Other liabilities (9,594,953) - (29,700) - - - (9,624,653)

2H2017 Income (loss)

Income from interest, provision of services and other income 496,159 - 1,061,339 - - 42,511 1,600,009 Derivative financial instruments 202 3,535 - - - 3,404 7,141 Fund raising, administrative expenses and other (29,263) (51,499) (352,648) (19,497) (511) - (453,418)

12.31.2017 Income (loss)

Income from interest, provision of services and other income 1,011,368 - 3,136,754 - - 140,787 4,288,909

Derivative financial instruments (4,612) (2,923) - - - 16,040 8,505 Fund raising, administrative expenses and other (36,992) (196,599) (1,056,992) (36,509) (1,234) - (1,328,326)



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12.31.2016 Banco do

Brasil Conglomerate

Votorantim S.A.

Financial subsidiaries

(1)

Non-financial

subsidiaries (2)

Key management personnel (3)

Other (4) Total

Assets Cash and due from banks 79,879 - - - - - 79,879 Interbank investments 5,054,804 - 19,613,440 - - - 24,668,244

Securities and derivative financial instruments - 384 17,935,260 - - 1,223,195 19,158,839

Other assets 260,746 7,848 17,386 - 383 290 286,653 Passivos Demand deposits (188) (225) (1,697) (1,046) (50) - (3,206) Time Deposits (690) (19,172) (3,164) (297,926) (587) - (321,539) Interbank accounts - - (5,120,973) - - - (5,120,973) Money market repurchase commitments (569,695) (974,487) (10,809,573) - (1,667) - (12,355,422)

Acceptances and endorsements (56,883) (347,781) - - (10,050) - (414,714) Borrowings and onlendings (375,061) - - - - - (375,061) Derivative financial instruments (23,947) (9,430) - - - - (33,377) Other liabilities (13,946,963) (50,565) (1,447) - - - (13,998,975)

12.31.2016 Income (loss)

Income from interest, provision of services and other income 1,303,786 - 5,428,691 - 2 149,267 6,881,746 Derivative financial instruments (419) (6,463) (263,648) - - - (270,530) Fund raising, administrative expenses and other (97,187) (202,724) (1,754,445) (42,817) (1,902) - (2,099,075)

(1) Companies listed in Note 2, identified in item (1). Does not include operation between subsidiaries. (2) It includes Promotiva S.A., BVIA - BV Investimentos e Participações de Gestão de Recursos S.A. and Votorantim Corretora

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

of key management personnel, as well as all companies in which the key management personnel has participation. (4) In 2017 it includes BVIA FIP and Votorantim Expertise Multimercado; and in 2016 it includes BVIA FIP.

24. EMPLOYEE BENEFITS There are no post-employment benefits such as: pensions, other retirement benefits, post-employment life insurance and medical care, other long-term benefits to employees, including long service leave and other leaves, jubilee or other benefits per years of service, share-based remuneration and rescission of contract benefits. Variable compensation program The Long-Term and Short-Term Compensation Programs: Conditional Variable Incentive, Long-Term Incentive and Virtual Share Repurchase Program approved by the Board of Directors on May 10, 2012 were valid until 2016. In the first semester of 2017, the Conglomerate implemented the new Variable Compensation Program. The directors and employees of the Conglomerate are eligible for the program. This program was approved by the Board of Directors on March 09, 2017. The program has a long-term incentive plan that aims to: (i) attract, motivate and retain talent; (ii) alignment of the interests of the officers and employees with the objectives and interests of the shareholders; (Iii) generation of results and sustainable creation of value; And (iv) creating a long-term vision: ILP plan: a four-year plan consisting of the granting of an incentive based on the performance of each year. All employees of the Conglomerate are eligible for the plan. In the year ended December 31, 2017 were recognized in the result, under Personnel Expenses - Salary R$ 156,391 (R$ 166,206 in the year ended December 31, 2016) in relation to long-term incentives transactions. These incentives in general become a right between one and in not more than four years as of the granting date, with settlement in cash.



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In the Consolidated, the following payments related to the Long-Term Compensation Programs ocurred: Program Year 2H2017 12.31.2017 12.31.2016 2012 - 40,382 41,147 2013 305 66,284 64,925 2014 73 76,612 11,440 2015 185 9,686 89 2016 185 235 - Total 748 193,199 117,601

On December 31, 2017, the Conglomerate recorded under caption “Other liabilities - Other - Sundry - Provision for unsettled payments”, in the amount of R$ 335,403 (R$ 345,380 on December 31, 2016). Virtual share value is calculated at least on a quarterly basis and is based on the Conglomerate’s income and on entries directly made to Shareholders’ equity accounts, as determined by prevailing accounting practices. From this change in Shareholders’ Equity value, non-recurring movements will be excluded, individually evaluated and submitted to the Remuneration Committee, which will decide on its exclusion or not from Shareholders’ equity calculation basis to value virtual share. Changes in virtual shares


Opening quantity 38,681,529 59,475,878 48,683,372 52,770,055 78,561,466 65,642,106 New 14,121,307 29,305,527 32,617,742 17,863,688 37,026,827 42,312,245

Paid - (34,871,258) (20,622,784) - (43,741,331) (27,583,094) Expired (117,091) (1,224,402) (1,202,452) (245,660) (1,458,879) (1,809,791)

Closing quantity 52,685,745 52,685,745 59,475,878 70,388,083 70,388,083 78,561,466 25. CONTINGENT ASSETS AND LIABILITIES AND LEGAL, TAX AND SOCIAL SECURITY

OBLIGATIONS a) Contingent assets Contingent assets are not recognized in the financial statements in accordance with CMN Resolution 3,823/2009. b) Labor lawsuits The Conglomerate is the defendant in labor lawsuits mostly filed by former employees. Provisions for probable losses represent several claims, such as: Indemnities, overtime, working time exemption, supplement per function and representation, among other matters. c) Tax lawsuits The Conglomerate is subject, to inspections made by tax authorities, to questionings related to taxes, which may eventually generate assessments, for example: composition of the IRPJ/CSLL tax basis (deductibility); and discussion related to the levy of taxes, upon occurrence of certain economic facts. Most lawsuits deriving from tax assessments refer to ISS, IRPJ, CSLL, PIS/COFINS and Employer Social Security Contributions. Some of them are guaranteed, when necessary, by escrow deposits made to suspend payment of taxes under discussion. d) Civil lawsuits Basically refer to indemnity actions whose natures are as follows: challenge on contracts’ total effective cost; review on contract conditions and charges; and fees. e) Provision for labor, tax and civil lawsuits - Probable In conformity with CMN Resolution no. 3,823/2009, the Conglomerate recognized a provision for labor, tax and civil lawsuits with “probable” risk of loss, classifed by individual methodology or on a collective basis, according to the nature and/or value of the process.



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The estimates of outcome and financial effect are determined by the nature of the actions, by the judgment of the entity’s Management, by the opinion of the legal counsel, based on the process elements, supplemented by the experience and complexity of similar claims. The provision for labor, tax and civil lawsuits that was set up to cover the losses estimated, are considered sufficient by the Conglomerate’s Management. e.1) Changes in provisions for tax, civil and labor claims classified as probable Bank 2H2017 12.31.2017 12.31.2016 Tax claims Opening balance 8,128 7,648 2,710

Additions 1,192 1,490 1,163 Reversal of provision (1,105) (1,105) - Write-offs due to payment(1) (4,906) (4,906) (349) Inflation indexation 174 356 4,124

Closing balance 3,483 3,483 7,648 Civil claims Opening balance 8,109 5,545 4,554

Additions 1,553 3,855 287 Reversal of provision (773) (846) (17) Write-offs due to payment (141) (227) (51) Inflation indexation 4,145 4,566 772

Closing balance 12,893 12,893 5,545 Labor claims Opening balance 176,433 158,073 148,723

Additions 38,245 65,339 97,078 Reversal of provision (20,573) (26,272) (63,401) Write-offs due to payment (16,474) (29,999) (42,429) Inflation indexation 13,089 23,579 18,102

Closing balance(2) 190,720 190,720 158,073 Total Labor, Tax and Civil claims 207,096 207,096 171,266



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Consolidated 2H2017 12.31.2017 12.31.2016 Tax claims Opening balance 56,706 52,812 45,724

Additions 6,590 11,313 10,152 Reversal of provision (1,667) (3,266) (6,792) Write-offs due to payment(1) (19,463) (19,551) (2,147) Inflation indexation 798 1,656 5,875

Closing balance 42,964 42,964 52,812 Civil claims Opening balance 319,249 302,241 300,598


Closing balance 311,724 311,724 302,241 Labor claims Opening balance 931,888 887,345 909,712


Closing balance(2) 1,011,356 1,011,356 887,345 Total Labor, Tax and Civil claims 1,366,044 1,366,044 1,242,398

(1) Includes payments resulting from the adhesion to the “Debt Installment Program of São Paulo´s Government” occured in the year ended December 31, 2017.

(2) In October 2017 the risk measurement criteria were improved, so that the mass valuation model was incorporated into the model that includes risk inputs with greater granularity, as well as the effects of judicial settlements. This change resulted in an increase in the provision in the amount of R$ 5,839 in the Consolidated and reversal in the provision in the Bank of R$ 8,074.

e.2) Estimated schedule of disbursements

Bank Consolidated Labor Tax Civil Labor Tax Civil

Up to 5 years 190,720 2,963 12,893 1,011,356 33,357 311,724 From 5 to 10 years - 520 - - 9,607 - Total 190,720 3,483 12,893 1,011,356 42,964 311,724

Uncertain lawsuit duration and the possibility of changes in prior court judgments make disbursement schedule and values uncertain. f) Contingent liabilities - Possible Amounts shown in the chart below represent estimated disbursement value in case the Bank receives a negative judgement. Claims are classified as possible when there are no elements that permit concluding final lawsuit outcome and when likelihood of loss is lower than probable and higher than remote. Balances of contingent liabilities classified as possible


Tax claims (1) 615,714 743,787 1,048,142 1,202,059 Civil claims (2) 13,694 10,402 103,302 43,070 Labor claims (3) 226,356 349,673 614,406 820,655 Total 855,764 1,103,862 1,765,850 2,065,784

(1) In Consolidated, basically refer to:



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Descrição das principais causas possíveis - Fiscais Consolidated

12.31.2017 12.31.2016 INSS on Profit Sharing PLR 144,713 138,907 IRPJ - FINOR 62,478 59,394 ISS 11,981 11,096 INSS on Profit Sharing PLR - Nassau Branch 43,663 41,700 PIS/COFINS on demutualization 40,608 38,895 IRPJ on undue offset of tax loss - Gratuities to statutory officers 21,667 28,418 IRPJ/CSLL - Deduction Allowance for loan losses (PDD) 2008 108,648 104,520 Infringement Fine (non-homologation of DCOMP) 84,193 142,804 CSLL – Exclusion of interests of oreign government securities 146,416 138,200 IRPJ/CSLL - Assessment notice: improper exclusion of goodwill on acquisition of securities of foreign governments 22,869 21,935

IRRF from remittances abroad: impossibility of compensation 34,629 32,550 PF e BNCSLL: excess compensation AB 2012 65,794 62,883 IRPJ/CSLL on JCP cumulatively distributed 133,563 - Others 126,920 380,757 Total 1,048,142 1,202,059

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

associated with certain jobs, and representation costs, and others. In October 2017 the risk measurement criteria were improved, so that the mass valuation model was incorporated into the model that includes risk inputs with greater granularity, as well as the effects of judicial settlements. The amounts of contingent liabilities classified as possible disclosed on December 31, 2016 in the Bank of R$ 57,687 and in the Consolidated of R$ 289,441 were restated, in order to demonstrate for both periods the possible loss risk in the light of this new modeling of provision calculation implemented for comparability purposes.

g) Deposits as collateral Balances of escrow deposits recognized for contingencies


Tax claims 69,134 273,201 110,935 307,246 Civil claims 9,704 24,916 199,888 242,009 Labor claims 28,619 17,074 322,305 275,521 Total 107,457 315,191 633,128 824,776

h) Legal obligations

The Conglomerate maintains the amount of R$ 21,456 (R$ 15,013 on December 31, 2016) with the Bank being registred Bank the amount of R$ 16,497 (R$ 12,000 on December 31, 2016) recorded in specific Legal Obligations account and the discussion about on a Declaratory Action in which it is intended to offset the impact of the ISS on revenues arising guarantee and other guarantees provided, as well as to obtain the restitution of the amounts paid in the last five years, whose provisioned amount is R$ 15,310 (R$ 11,275 on December 31, 2016). The other actions refers to PIS LC 07/10, ISS Deduction in the PIS and COFINS calculation basis and APF - Accident Protection Factor. i) Public civil lawsuits Conglomerate has contingent liabilities involving public civil actions in which, based on the opinion of the legal advisors and Management’s judgment, the risk of loss is considered possible. Due to their current stage of completion, measurement of amounts involved in these lawsuits could not be determined safely. Main themes discussed in these lawsuits refer to collection of tariffs and issues involving payroll credit to INSS retirees and pensioners.



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

• Consolidated risk vision; • Compatibility between levels of exposure to risks, authorized limits and expected financial

return; • Job segregation between business areas, risk control, audit and operational processing; • Adoption of risk calculation methodologies based on the market practices; and • Involvement of Senior Management.

b) Credit risk Credit Risk is defined as the possibility of occurrence of losses associated to:

• Non-compliance by the counterparty (the borrower, the guarantor or the issuer of securities or securities acquired), from its obligations under the terms agreed upon;

• Devaluation, reduction of remuneration and expected gains in financial instruments arising from the deterioration of the credit quality of the counterparty, the intervening party or the mitigating instrument;

• Restructuring of financial instruments; or • Costs of recovery of exposures of problematic assets.

c) Liquidity risk

Liquidity risk is defined as:

• Possibility of the Conglomerate not being able to effectively honor expected and unexpected

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

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



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d) Operational risk Operational risk is defined as the possibility of occurrence of losses resulting from external events or from failure, deficiency or inadequacy of internal processes, people or systems. This definition includes the Legal Risk associated with inadequacies or deficiencies in contracts signed by the Conglomerate, penalties for noncompliance with legal provisions and indemnities for damages to third parties arising from the activities developed by the Conglomerate. e) Market risk Market risk is defined as the possibility of financial losses arising from variations in the fair value of exposures held by a financial institution. These financial losses may be generated based on the impact of the variation of risk factors, such as interest rates, exchange rate parities, stock and commodity prices, among others. f) Capital management Following the regulations of BACEN and in accordance with the recommendations of the Basel Committee on Banking Supervision, the Institution employs prudential guidelines of capital management in a consolidated manner aiming at the efficient and sustainable management of its resources and contributing to promote the stability of the National Financial System. In line with CMN Resolution no. 3,988 and BACEN Circular Letter no. 3,846, the institution has structure and policies for capital management approved by the Board of Directors, in compliance with the internal process for evaluation of capital Adequacy (ICAAP), contemplating the following items:

• Identification and assessment of material risks; • Documented policies and strategies; • Capital Plan for three years, including Capital targets and projections, main funding sources and

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

In March 2017, Bacen issued Resolution No. 4,557, which provides for the risk management structure and the capital management structure, repealing CMN Resolutions 3,988, 3,380, 3,464, 3,721, 4,090, after implementation of the new recommendations set out in the standard. Banco Votorantim is classified in Segment 2 (S2), according to CMN Resolution 4,553, in this case, Resolution 4,557 is to be implemented by February 2018. Capital Adequacy (Regulatory view) At the Institution, capital is managed in order to ensure adequacy within regulatory limits and to establish a strong capital base, enabling the Institution to develop business and transactions in accordance with its strategic plan. Our annual capital plan includes growth projections for the loan portfolio and other transactions and assets, in order to assess adequacy of its consolidated capital to deal with the associated risks and ensure compliance with regulatory operational limits. Management reports tracking the capital allocated to risks and the capital indices (Basel, Level I and Core) are disclosed on a monthly basis after the determination of the Capital and Capital Requirement.



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Capital ratios Capital ratios are calculated according to the criteria set by CMN Resolutions 4,192/2013 and 4,193/2013, which refer to the calculation of Reference Equity (PR) and the Minimum Regulatory Capital (PRMR) in relation to Risk-Weighted Assets (RWA), respectively. In October 2013, onwards the set of rules that implemented in Brazil the recommendations of the Basel Committee on Banking Supervision related to the Capital structure of financial institutions, known as Basel III, came into effect. Newly adopted rules address the following matters: I - new methodology to determine regulatory capital, which continues to be divided into Levels I and II, Level I being comprised of Main Capital (less Prudential Adjustments) and Supplementary Capital; II - new methodology to determine requirements to maintain capital, adopting minimum PR, Level I and Main Capital requirements, and introducing the Additional Main Capital. Since January 2014, CMN Resolution no. 4,192/2013 defines the following items relating to prudential adjustments to be deducted from Reference Equity:

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

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

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

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

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

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

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



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Basel ratio 12.31.2017 12.31.2016 PR - Reference Equity 9,233,158 9,218,435 Tier I 6,758,636 6,836,538 Common Equity 6,758,636 6,836,538

Shareholders' equity 8,618,574 8,247,123 Prudential adjustments (1,859,938) (1,410,585)

Other (1,859,258) (1,408,486) Adjustment to fair value (680) (2,099)

Tier II 2,474,522 2,381,897

Subordinated debts eligible as capital 2,474,522 2,381,897 Subordinated debts authorized pursuant to CMN Resolution no. 4,192/2013 1,521,133 956,147

Subordinated debts authorized pursuant to rules prior to CMN Resolution no. 4,192/2013 (1) 953,389 1,425,750 Funding sources abroad 940,433 1,404,551 Funds raised with Financing Bills 12,956 21,199 Risk-weighted assets (RWA) 59,409,716 61,230,489

Credit risk (RWACPAD) 52,083,037 55,945,627 Market risk (RWAMPAD) 1,937,099 669,866 Operational risk (RWAOPAD) 5,389,580 4,614,996

Minimum Required Regulatory Capital (2) 5,495,399 6,046,511 Minimum Required Capital (3) 2,673,437 2,755,372 Tier I Minimum Required Reference Equity (4) 3,564,583 3,673,829 Regulatory Capital determined to cover interest rate risk of transactions not classified in trading portfolio (RBAN) 162,651 299,168 Margin on Minimum Required Regulatory Capital 3,737,760 3,171,924 Margin on Minimum Required Capital 4,085,199 4,081,165 Margin on Minimum Required Tier I Regulatory Capital 3,194,053 3,162,708 Margin on Minimum Required Regulatory Capital including RBAN 2,089,866 2,872,756 Common Equity Index (CP / RWA) 11.37% 11.17% Tier I Capital Index (Tier I / RWA) 11.37% 11.17% Basel Ratio (PR / RWA) 15.53% 15.06%

(1) The balance of Subordinated Debt instruments comprising Reference Equity as of December 31, 2012 was considered after

applying on it the decay of 10% as determined by CMN Resolution no. 4,192/2013. (2) Corresponds to the application of the “F” factor to RWA amount, being “F” equal to:

a. 9,25% do RWA, from January 1, 2017 to December 31, 2017. b. 8,625% do RWA, from January 1, 2018 to December 31, 2018. c. 8% do RWA, as from January 1, 2019

(3) It represents at least 4.5% of RWA.. (4) It represents at least 6% of RWA.. On November 30, 2017, the Bank issued a perpetual bond issue in the amount of USD 300,000, which, after approval by the Central Bank of Brazil, will integrate Level I of the Referential Equity as complementary capital, further strengthening the structure of the Conglomerate. If perpetual bonds were already part of Complementary Capital as of December 31, 2017, the indices would be as follows: 12.31.2017 Common Equity Index (CP / RWA) 11.37% Tier I Capital Index (Tier I / RWA) 13.04% Basel Ratio (PR / RWA) 17.20%

Prudential Adjustments deducted from Common Equity: 12.31.2017 12.31.2016 Prudential Adjustments II - Intangible assets (133,765) (62,272) Prudential Adjustments VII Deferred tax assets and Intertemporal differences (881,658) (647,358) Prudential Adjustments VIII - Deferred tax assets of Tax losses/negative basis of CSLL (843,835) (698,857) Prudential Adjustments XV - Understatement - Resolution 4,277/13 Adjustments (680) (2,099) Total (1,859,938) (1,410,586)

g) Fixed asset ratio The property, plant and equipment indexrequired ratio of the Prudential Conglomerate amounted to



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37.30% (33.10% as of December 31, 2016) and determinated in accordance with CMN Resolutions No. 4,192 / 2013 and No. 2,669 / 1999. 12.31.2017 12.31.2016 Fixed assets limit 4,616,579 4,609,217 Value of fixed assets limit position 1,720,395 1,523,243 Value of margin or insufficiency 2,896,184 3,085,974

In compliance with the Brazilian Central Bank (BACEN) Circular 3,678/2013, Conglomerate maintains additional information on its risk and capital management process available in the website: www.bancovotorantim.com.br/ri. 27. OTHER INFORMATION a) Commitments undertaken due to funding from international financial institutions

The Conglomerate is a borrower of short-term loans from international financial institutions, who in certain cases may require compliance with financial ratios (financial covenants). When required, the financial ratios are calculated based on the financial information prepared in accordance with Brazilian law and standards of the Central Bank of Brazil (BACEN). On December 31, 2017 the Conglomerate did not have operations with these characteristics.

b) Information about branches and subsidiaries abroad

12.31.2017 12.31.2016 Assets

Banco Votorantim S.A. – Nassau Branch 4,833,144 6,110,935 Others subsidiaries 25,789 63,485

Total Assets 4,858,933 6,174,420 Liabilities (3,242,980) (4,681,293)

Banco Votorantim S.A. – Nassau Branch (3,217,191) (4,673,914) Others subsidiaries (25,789) (7,379)

Shareholders’ equity (1,615,953) (1,493,127) Banco Votorantim S.A. – Nassau Branch (1,615,953) (1,437,020) Others subsidiaries - (56,107)

Total liabilities (4,858,933) (6,174,420) 2H2017 12.31.2017 12.31.2016 Income or loss 77,334 97,294 50,943

Banco Votorantim S.A. – Nassau Branch 83,782 112,885 42,218 Others subsidiaries (6,448) (15,591) 8,725

c) Insurance coverage The Conglomerate contracts insurance coverage for assets subject to risks for amounts considered to be sufficient to cover eventual claims, considering the nature of its activity. Insurance in force on December 31, 2017

Covered risk Valores Cobertos Valor do Prêmio Insurance guarantee 438,276 4,113 Real state insurance 258,866 74




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d) Agreements for offset and settlement of liabilities in the scope of the National Financial

System

Agreements were executed for the offset and settlement of receivables and payables pursuant to CMN Resolution No. 3,263/2005, the purpose of which is to enable the offsetting of credits and debits maintained with the same counterparty, and in which the maturity dates of receivables and payables can be advanced to the date in event of default by one of the parties occurs or in case of the bankruptcy of the debtor. e) Reconciliation of equity transactions with cash flows arising from financing activities


Liabilities Shareholder’s equity

Total Subordinated debts

Debt instruments eligible for

capital

Dividends and JCP Capital

Capital and profi reserves

Balance at 12.31.2016 4,876,634 1,168,944 101,131 7,826,980 746,011 14,719,700 Changes financing cash flows Proceeds from the allocation of income - - - 303,392 51,688 355,080 Dividends and interest on capital paid - - (101,131) - - (101,131) Subordinated debts Funds from new funding 600 - - - - 600 Liquidation (232,188) - - - - (232,188) Transfer (1,952,379) - - - - (1,952,379) Interest expenses 201,391 - - - - 201,391 Exchange variation 39,616 - - - - 39,616 Other (15,191) - - - - (15,191) Debt instruments eligible for capital Funds from new funding - 1,560,831 - - - 1,560,831 Liquidation - (2,091,248) - - - (2,091,248) Transfer - 1,952,379 - - - 1,952,379 Interest expenses - 301,515 - - - 301,515 Exchange variation - 13,920 - - - 13,920 Other - (7,034) - - - (7,034) Total changes in financing cash flows (1,958,151) 1,730,363 (101,131) 303,392 51,688 26,161 Balance at 12.31.2017 2,918,483 2,899,307 - 8,130,372 797,699 14,745,861

28. SUBSEQUENT EVENTS

a) Merger of Votorantim Corretora de Títulos e Valores Mobiliários By Private Instrument of Amendment of the Articles of Incorporation of Votorantim Asset Management Distribuidora de Títulos e Valores Mobiliários Ltda. meeting of Votorantim - Corretora de Títulos e Valores Mobiliários Ltda., held on January 31, 2018, Banco Votorantim SA, controller of both, approved the merger of Votorantim CTVM into Votorantim Asset, in accordance with the Protocol and Justification of Incorporation between them. The merged net assets were valued at book value on December 31, 2017, the transaction's base date, in the amount of R$ 266,791; adding up the equity variations occurring between the base date of the appraisal report and the date of the merger. The merger is justified by the discontinuation of the activities of Votorantim CTVM and the object identity among the companies involved and represents the improvement of the corporate structure of the Conglomerate, rationalizes its operations, simplifies administration, facilitates accounting and financial procedures; minimizes administrative expenses, leading to the optimization of its assets and results. As a result, Votorantim CTVM had its legal personality extinguished and Votorantim Asset became the successor, on a universal basis, of all its rights and obligations. The merger will imply an increase of Votorantim Asset's Capital Stock in the amount of R$ 190,763, through the issuance of 19,076,313,565 new shares with a par value of R$ 0.01, to be attributed to Votorantim CTVM's shareholders, replacing to its shares in this company. In addition to the amendment to the Capital Stock clause, Votorantim Asset's articles of association will not be altered. We present below the equity balances at December 31, 2017 of Votorantim CTVM incorporated by Votorantim Asset:



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Asstes: 386,995 Liabilities: 120,204 Shareholder’s equity: 266,791

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december 31, 2017 consolidated financial statements · r$1 million, through fundo br startups, to...

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