Banco do Brasil S.A. - MD&A 2Q17

This report makes references and statements, planned synergies, growth estimates, earnings and strategies projections regarding Banco do Brasil’s Conglomerate. Such statements are based on current expectations, estimates and projections of management about future events and financial trends that may affect the business of the Group.

These forward looking statements are not guarantees of future performance and involve risks and uncertainties that could extrapolate the control of management, and thus can result in balances and values different from those anticipated and discussed in this report. The expectations and projections depend of the market conditions (technological changes, competitive pressures on products, prices, etc.), the macroeconomic performance of the country (interest and exchange rates, political and economic changes, inflation, changes in tax legislation, etc.) and international markets.

Future expectations based in this report should consider the risks and uncertainties about the business of the Group. Banco do Brasil has no responsibility to update any estimate contained in reports published in previous periods.

The tables and charts in this report show, in addition to the accounting balances and values, financial and managerial numbers. The changes of relative rates are calculated before rounding procedure in million of R$. Rounding used follows the rules established by Resolution 886/66 of IBGE’s Foundation: if the decimal number is equal or greater than 0.5, it increases by one unit, if the decimal number is less than 0.5, there is no increase.

Banco do Brasil S.A. - MD&A 2Q17

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Table of Contents

Presentation ........................................................................................................................................... 8 Highlights ....................................................................................................................................... 8

On-line Access ................................................................................................................................... 8 Glossary ................................................................................................................................................. 9 2017 Guidance ..................................................................................................................................... 11 Earnings Summary .............................................................................................................................. 12 1 - Key Statistics .................................................................................................................................. 21

Corporate Governance ..................................................................................................................... 25 2 - Financial Statements Summary .................................................................................................... 27

2.1. Balance Sheet Summary ....................................................................................................... 27 2.2. Income Statement with Reallocations .................................................................................... 29

2.2.1. Reallocations Breakdown .............................................................................................. 30 2.2.2. Glossary of Reallocations .............................................................................................. 32 2.2.3. Tax Effect and Statutory Profit Sharing on One-Off Items ............................................. 32

3 - Loan ................................................................................................................................................. 33 Banco do Brasil Lending Process .................................................................................................... 33 3.1. Loan Portfolio ......................................................................................................................... 33

3.1.1. Individuals Loan Portfolio ............................................................................................... 35 3.1.2. Companies Loan Portfolio .............................................................................................. 39 3.1.3. Agribusiness Loan Portfolio ........................................................................................... 41 3.1.4. Concentration ................................................................................................................. 46

3.2. Credit Risk .............................................................................................................................. 48 3.2.1. Individuals Loan Portfolio ............................................................................................... 52 3.2.2. Loans to Companies ...................................................................................................... 55 3.2.3. Agribusiness Loan Portfolio ........................................................................................... 57 3.2.4. Foreign Loan Portfolio .................................................................................................... 61

3.3. Credit Collection, Regularization and Recovery .................................................................... 62 3.3.1. Management of Past Due Credits .................................................................................. 62 3.3.2. Credit Collection and Regularization Process ............................................................... 62 3.3.3. Credit Collection, Regularization and Recovery Operating Flow................................... 62 3.3.4. Process Efficiency .......................................................................................................... 63 3.3.5. Renegotiated Loan Portfolio .......................................................................................... 65

4 - Funding ........................................................................................................................................... 67 5 - Financial Earnings ......................................................................................................................... 70

5.1. Net Interest Income ................................................................................................................ 70 5.2. Financial Income from Loans Operations .............................................................................. 70 5.3. Funding Financial Expense .................................................................................................... 71 5.4. Institutional Funding Financial Expenses ............................................................................... 72 5.5. Income from Written-off Credit Recovery ............................................................................... 72 5.6. Treasury ................................................................................................................................. 72 5.7. Assets and Liabilities Analysis ............................................................................................... 74

5.7.1. Assets Analysis .............................................................................................................. 74 5.7.2. Liabilities Analysis .......................................................................................................... 76 5.7.3. Volume and Rate Analysis ............................................................................................. 77

5.8. Credit Spread by Portfolio ...................................................................................................... 80 6 - Fee Income ...................................................................................................................................... 81

6.1. Checking Accounts ................................................................................................................ 81 6.2. Payment Methods .................................................................................................................. 81

6.2.1. Cards Base and Turnover .............................................................................................. 82 6.2.2. Cards Service Income .................................................................................................... 83

6.3. Asset Management ................................................................................................................ 84 6.4. Capital Market ........................................................................................................................ 86 6.5. Insurance ................................................................................................................................ 89 6.6. Consortium ............................................................................................................................. 89

7 - Productivity and Efficiency ........................................................................................................... 91 7.1. Indicators ................................................................................................................................ 91 7.2. Personnel Expenses .............................................................................................................. 92 7.3. Other Administrative Expenses .............................................................................................. 93

7.3.1. Service Network ............................................................................................................. 93

Table of Contents

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7.3.2. Automated Service Channels ........................................................................................ 94 7.4. Other Operating Income and Expenses ................................................................................. 97 7.5. Operating Losses ................................................................................................................... 97

8 - Actuarial Assets and Liabilities .................................................................................................... 99 8.1 Previ – Plan 1 ............................................................................................................................. 99 8.2. Previ (Plan 1) Surplus Allocation Funds .................................................................................. 100 8.3. Cassi ........................................................................................................................................ 101 8.4. Effects on Shareholders’ Equity .............................................................................................. 102

9 - Risk Management ......................................................................................................................... 103 9.1. Risk Management ................................................................................................................ 103 9.2. Capital Structure .................................................................................................................. 105

10 - Strategic Investments ................................................................................................................ 110 10.1. Information on Subsidiaries and Affiliates ............................................................................ 110 10.2. Banco Votorantim ................................................................................................................. 111 10.3. International Businesses ...................................................................................................... 115

10.3.1. Banco Patagonia ........................................................................................................... 116

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List of Tables

Table 1. 2017 Guidance ........................................................................................................................ 11 Table 2. Loan Portfolio .......................................................................................................................... 11 Table 3. NII and ALLL Expenses .......................................................................................................... 11 Table 4. Net Income – R$ million .......................................................................................................... 12 Table 5. ROE Concepts – R$ million .................................................................................................... 13 Table 6. Market Indicators ..................................................................................................................... 13 Table 7. Fee Income – R$ million ......................................................................................................... 15 Table 8. Credits Renegotiated When Past Due – R$ million ................................................................ 20 Table 9. Main Macroeconomic Indicators¹ ............................................................................................ 21 Table 10. Ownership Structure – % ...................................................................................................... 22 Table 11. Distribution of Dividends and Interest on Own Capital¹ ........................................................ 22 Table 12. Market Ratios (ex-treasury shares) ....................................................................................... 22 Table 13. BB’s Shares in Brazilian Stock Market Indexes – % ............................................................. 22 Table 14. BB’s Shares in International Stock Market Index – % .......................................................... 22 Table 15. Banco do Brasil Key Statistics .............................................................................................. 23 Table 16. Ratings .................................................................................................................................. 24 Table 17. Compulsory/Reserve Requirement – %................................................................................ 24 Table 18. Balance Sheet Summary - Assets ........................................................................................ 27 Table 19. Balance Sheet Summary - Liabilities .................................................................................... 28 Table 20. Income Statement with Reallocations ................................................................................... 29 Table 21. Reallocations and One-Off Items Breakdown ....................................................................... 31 Table 22. Tax Effect and Statutory Profit Sharing on One-Off Items .................................................... 32 Table 23. Loan Portfolio – Classified and Broad Definition .................................................................. 34 Table 24. Organic Domestic Loan Portfolio – Broad Definition ............................................................ 34 Table 25. Loans in the Brazilian Banking Industry ................................................................................ 34 Table 26. Individuals Loan Portfolio ...................................................................................................... 36 Table 27. Individuals Loan Portfolio – Market Share ............................................................................ 36 Table 28. Account Time – Customers with Credit Transactions ........................................................... 37 Table 29. Average Rates and Maturity ................................................................................................. 37 Table 30. BB’s Organic Auto Loan Portfolio - Customers Characteristics ............................................ 38 Table 31. Companies Loan Portfolio ..................................................................................................... 39 Table 32. Companies Portfolio Breakdown ........................................................................................... 39 Table 33. Foreign Exchange for Export and Import Operations ........................................................... 40 Table 34. Forward Exchange Contracts (ACC) and Advance against Draft Presentation (ACE) ........ 40 Table 35. Account Time - Percentage of the Very Small and Small Companies Portfolio Balance ..... 41 Table 36. Very Small and Small Companies Loans by Sector ............................................................. 41 Table 37. Very Small and Small Companies Loan Products ................................................................ 41 Table 38. Brazil’s Share in World Agribusiness in Jun/17 .................................................................... 41 Table 39. Classified Agribusiness Loan Portfolio by Region ................................................................ 42 Table 40. Agribusiness Loan Portfolio by Credit Line/Program ............................................................ 43 Table 41. Agribusiness Loan Portfolio by Purpose ............................................................................... 43 Table 42. Agribusiness Loan Portfolio by Financed Item ..................................................................... 43 Table 43. Agribusiness Loan Portfolio by Customer Size ..................................................................... 44 Table 44. Agribusiness Loan Portfolio by Customer Type .................................................................... 44 Table 45. Agribusiness Loan Portfolio Broad Definition by Funding Sources ...................................... 44 Table 46. Equalization Revenues and Weighting Factor ...................................................................... 45 Table 47. Equalization Revenues Flow ................................................................................................. 45 Table 48. Equalizable resources in the Agribusiness Portfolio ............................................................. 45 Table 49. Disbursements by Purpose – Rural Credit ........................................................................... 45 Table 50. Insurance in the Working Capital for Input Purchase ........................................................... 46 Table 51. 100 Largest Customers in Relation to the Classified Loan Portfolio .................................... 46 Table 52. 100 Largest Customers in Relation to Reference Equity (R$ million) .................................. 47 Table 53. Concentration of Companies and Agro Companies Loan Portfolio by Macro-Sector .......... 47 Table 54. Classified Loan Portfolio by Risk Level ................................................................................. 51 Table 55. ALLL Expenses over Classified Loan Portfolio ..................................................................... 51 Table 56. Classified Loan Portfolio Delinquency Indicators .................................................................. 52 Table 57. Individuals Classified Loan Portfolio by Risk Level ............................................................... 53 Table 58. Changes in Allowance for Loan Losses – Individuals Classified Loan Portfolio .................. 53

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Table 59. NPL +90d Individuals Portfolio - % by Credit Line ................................................................ 54 Table 60. Classified Loans to Companies by Risk Level ...................................................................... 55 Table 61. Changes in Allowance for Loan Losses – Classified Loans to Companies .......................... 56 Table 62. NPL +90d Companies Portfolio - % by Credit Line ............................................................... 56 Table 63. Classified Agribusiness Loan Portfolio by Risk Level ........................................................... 57 Table 64. NPL +90d Agribusiness Portfolio - % by Credit Line ............................................................ 58 Table 65. Classified Agribusiness Loan Portfolio by Risk Level – Individuals ...................................... 58 Table 66. Changes in Allowance for Loan Losses – Agribusiness Individuals ..................................... 58 Table 67. Classified Agribusiness Loan Portfolio by Risk Level – Companies ..................................... 59 Table 68. Changes in the Allowance for Loan Losses – Agribusiness Companies .............................. 59 Table 69. Agribusiness Transactions with Rollover and without it ........................................................ 60 Table 70. Classified Agribusiness Loan Portfolio Delinquency Indicators ............................................ 61 Table 71. Classified Abroad Loan Portfolio by Risk Level .................................................................... 61 Table 72. Renegotiated Loan Portfolio – Multiple Bank¹ ...................................................................... 65 Table 73. Renegotiated Portfolio by Risk Level .................................................................................... 66 Table 74. Commercial Funding ............................................................................................................. 67 Table 75. Institutional Funding .............................................................................................................. 68 Table 76. Funding Abroad Borrowing - Type ........................................................................................ 68 Table 77. Funding Abroad Borrowing - Product .................................................................................... 68 Table 78. Sources and Uses ................................................................................................................. 69 Table 79. Current Debt Issues Abroad ................................................................................................. 69 Table 80. Main Indices .......................................................................................................................... 70 Table 81. Net Interest Income Breakdown ............................................................................................ 70 Table 82. Revenue from Loans ............................................................................................................. 70 Table 83. Assets Synthetic Composition .............................................................................................. 71 Table 84. Funding Result¹ ..................................................................................................................... 71 Table 85. Funding vs. Selic Rate .......................................................................................................... 72 Table 86. Institutional Funding Expenses ............................................................................................ 72 Table 87. Written-Off Credit Recovery Income ..................................................................................... 72 Table 88. Treasury Results ................................................................................................................... 72 Table 89. Result from Securities ........................................................................................................... 73 Table 90. Securities Portfolio by Category – Market Value .................................................................. 73 Table 91. Securities Portfolio by Maturity – Market Value .................................................................... 73 Table 92. Liquidity Balance ................................................................................................................... 74 Table 93. Open Market Funding Expenses .......................................................................................... 74 Table 94. Other Treasury Components ................................................................................................ 74 Table 95. Average Balances and Interest Rate – Earning Assets (Annual) ......................................... 74 Table 96. Average Balances and Interest Rate – Earning Asset (Quarterly) ....................................... 75 Table 97. Average Balances and Interest Rates – Earning Assets (Half - Yearly)............................... 75 Table 98. Average Balances and Interest Rates - Interest Bearing Liabilities (Annual) ....................... 76 Table 99. Average Balances and Interest Rates - Interest Bearing Liabilities (Quarterly) ................... 76 Table 100. Average Balances and Interest Rates - Interest Bearing Liabilities (Half - Yearly) ............ 77 Table 101. Analysis of Volume (Profitable Assets) – Quarterly Rate ................................................... 77 Table 102. Volume Analysis (Earning Assets) – Yearly - Rate ............................................................. 77 Table 103. NIM ...................................................................................................................................... 78 Table 104. Adjusted NIM and Net Interest Income ............................................................................... 78 Table 105. Change in Revenues and Expenses and Change Volume / Rate (Quarterly).................... 79 Table 106. Change in Revenues and Expenses and Change Volume / Rate (Half - Yearly) .............. 79 Table 107. Managerial Margin .............................................................................................................. 80 Table 108. Spread by Portfolio.............................................................................................................. 80 Table 109. Fee Income ......................................................................................................................... 81 Table 110. Customers and Checking Accounts .................................................................................... 81 Table 111. Cards Base ......................................................................................................................... 82 Table 112. Number of Transactions ...................................................................................................... 82 Table 113. Cards Service Income and Expenses – Quarterly Flow ..................................................... 84 Table 114. Cards Service Income and Expenses – Half - Yearly Flow ................................................ 84 Table 115. Investment Funds and Managed Portfolio by Customer..................................................... 85 Table 116. Investment Funds and Managed Portfolio by Type ............................................................ 85 Table 117. Investment Funds with Socio-Environmental Characteristics Management....................... 86 Table 118. Private Equity – Indirect Interest ......................................................................................... 88 Table 119. BB Seguridade – Performance Ratios ................................................................................ 89 Table 120. Consortium – Current Quotas per Type .............................................................................. 90 Table 121. Consortium – Average Ticket .............................................................................................. 90

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Table 122. Consortium¹ – Average Term and Average Management Rate ......................................... 90 Table 123. Pre-Tax and Pre-Provision Earnings .................................................................................. 91 Table 124. Cost-to-Income and Coverage Ratios – Adjusted¹ ............................................................. 91 Table 125. Other Productivity and Efficiency Indicators ....................................................................... 91 Table 126. Personnel Expenses ........................................................................................................... 92 Table 127. BB’s Staff Profile ................................................................................................................. 93 Table 128. Other Administrative Expenses ........................................................................................... 93 Table 129. Service Network .................................................................................................................. 94 Table 130. Branch Network by Region ................................................................................................. 94 Table 131. Other Operating Income/Expenses ..................................................................................... 97 Table 132. Breakdown of Operational Loss – (%) ................................................................................ 98 Table 133. Breakdown of Assets ........................................................................................................ 100 Table 134. Main Actuarial Assumptions .............................................................................................. 100 Table 135. Effects of Previ (Plan 1) Accounting – CVM Deliberation No. 695/2012 .......................... 100 Table 136. Previ (Plan 1) – Parity Fund .............................................................................................. 101 Table 137. Previ (Plan 1) – Surplus Fund ........................................................................................... 101 Table 138. Effects of the Cassi Accounting – CVM Deliberation No. 695/2012 ................................. 102 Table 139. Effects on Shareholders’ Equity – CVM Deliberation No. 695/2012 ................................. 102 Table 140. Balance in Foreign Currencies .......................................................................................... 103 Table 141. Interest Rate Repricing Profile .......................................................................................... 105 Table 142. Basel Index ....................................................................................................................... 106 Table 143. Factor “F” applied to the amount of Risk-Weighted Assets (RWA) .................................. 107 Table 144. MRRE in relation to RWACPAD ........................................................................................... 107 Table 145. MRRE in relation to RWAMPAD ........................................................................................... 108 Table 146. MRRE in relation to RWAOPAD ........................................................................................... 108 Table 147. RWACPAD Segregated by Risk Weighting Factor (RWF) ................................................... 109 Table 148. Interest in the Capital of Subsidiaries and Affiliates .......................................................... 110 Table 149. Income Statement with Reallocations¹ - Quarterly ........................................................... 111 Table 150. Income Statement with Reallocations¹ - Half-Yearly ........................................................ 112 Table 151 . Adjusted Net Interest Margin and Net Interest Rate ........................................................ 112 Table 153. Managed Portfolio Delinquency ........................................................................................ 113 Table 154. BIS Ratio ........................................................................................................................... 114 Table 155. Foreign Service Network ................................................................................................... 115 Table 156. Consolidated Abroad - Balance Sheet .............................................................................. 115 Table 157. Consolidated Abroad – Statement of Income Items ......................................................... 116 Table 158. Banco Patagonia – Equity Highlights ................................................................................ 116 Table 159. Banco Patagonia – Funding .............................................................................................. 116 Table 160. Banco Patagonia – Main Earnings Items .......................................................................... 116 Table 161. Banco Patagonia – Profitability, Capital and Credit Indicators ......................................... 117 Table 162. Banco Patagonia – Operating and Structural Highlights .................................................. 117

List of Figures

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List of Figures

Figure 1. Net Interest Income – R$ million ........................................................................................... 13 Figure 2. NIM and Loans Average Balance – R$ billion ....................................................................... 14 Figure 3. Managerial Spread by Segment – % ..................................................................................... 14 Figure 4. Main Components of Fee Income – 100 Base ...................................................................... 15 Figure 5. Administrative Expenses – R$ million ................................................................................... 15 Figure 6. Basel – % .............................................................................................................................. 16 Figure 7. Tier 1 Capital Ratio Simulation with the Full Application of Basel III (%) .............................. 16 Figure 8. Loan Portfolio (Broad Definition) – R$ billion ........................................................................ 17 Figure 9. Commercial Funding – R$ billion .......................................................................................... 17 Figure 10. Coverage¹ Ratios – % ......................................................................................................... 18 Figure 11. Coverage¹ by Segment – % ................................................................................................ 18 Figure 12. ALL Expenses by Segment – R$ million ............................................................................. 19 Figure 13. Average Risk – % ................................................................................................................ 19 Figure 14. NPL +90 days – % ............................................................................................................... 20 Figure 15. Senior Management Structure ............................................................................................ 25 Figure 16. Strategic Committees .......................................................................................................... 26 Figure 17. Banco do Brasil Lending Process ....................................................................................... 33 Figure 18. Classified Loan Portfolio BB by Contracted Period - % and R$ billion ............................... 35 Figure 19. BB’s Classified Loan Portfolio in Brazil by Maturity - % ...................................................... 35 Figure 20. Organic Individuals Loan Portfolio – Direct Consumer Credit and Auto Loan - % .............. 36 Figure 21. Organic Payroll Loan Breakdown - % ................................................................................. 37 Figure 22. Maturity of transactions contracted in the quarter – Payroll Loan ....................................... 38 Figure 23. Maturity of Transactions Contracted in the quarter – Auto Loan ........................................ 38 Figure 24. Loan to Value - Organic Auto Loan Portfolio - % ................................................................ 39 Figure 25. Disbursements by Onlending Fund - %............................................................................... 40 Figure 26. BB’s Market Share in Brazilian Agribusiness – % ............................................................... 42 Figure 27. Working Capital for Input Purchase Breakdown Risks - % ................................................. 46 Figure 28. Classified Loan Portfolio Average Risk ............................................................................... 48 Figure 29. Classified Loan Portfolio Coverage Index ........................................................................... 48 Figure 30. ALLL – Classified Loan Portfolio ......................................................................................... 49 Figure 31. NPL +90d – Percentage on the Classified Loan Portfolio ................................................... 49 Figure 32. NPL +90d per segment – Percentage on the Domestic Classified Loan Portfolio .............. 49 Figure 33. New NPL and Write-Off – Percentage on the Classified Loan Portfolio ............................. 50 Figure 34. ALLL Expenses / New NPL (%) .......................................................................................... 50 Figure 35. Individuals Loan Portfolio – Annual Vintage ........................................................................ 54 Figure 36. New NPL – Individuals Loan Portfolio ................................................................................. 55 Figure 37. New NPL – Companies Loan Portfolio ................................................................................ 56 Figure 38. Very Small and Small Companies Loans Portfolio – Annual Vintage ................................. 57 Figure 39. New NPL – Agribusiness Loan Portfolio ............................................................................. 60 Figure 40. Collection, Regularization and Recovery Network1 ............................................................. 63 Figure 41. Credit Regularization Rate Over Collection Period - % ....................................................... 63 Figure 42. Collection and Regularization before Write Off¹ - % ........................................................... 64 Figure 43. Accumulated Recovery (R$ billions) and Cash Recovery Index - % .................................. 64 Figure 44. Write-Off – Percentage on the Classified Loan Portfolio..................................................... 64 Figure 45. New NPL and Write-Off – Percentage on the Renegotiated Loan Portfolio ....................... 65 Figure 46. Market Share of BB’s Funding (R$ billion) .......................................................................... 67 Figure 47. Summary of Assets ............................................................................................................. 71 Figure 48. Securities Portfolio by Index (BB Multiple Bank) ................................................................. 73 Figure 49. Revenues From Loans Breakdown ..................................................................................... 78 Figure 50. Payment Methods Organizational Chart – Main Companies¹ ............................................. 82 Figure 51. Total Turnover – R$ billion .................................................................................................. 83 Figure 52. Traditional and Specific Business Total Turnover – R$ billion ............................................ 83 Figure 53. Fiduciary Management and Market Share – R$ billion ....................................................... 84 Figure 54. Domestic Custody Total Assets and Market Share – R$ billion .......................................... 86 Figure 55. Fixed Income Securities Origination – Domestic and International Markets....................... 87 Figure 56. Individuals Equity – Secondary Market ............................................................................... 88 Figure 57. Gold – Custody Balance and Revenues ............................................................................. 88 Figure 58. Consortium – Fee Income and Current Quotas .................................................................. 90

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Figure 59. Bank Product and Branches – (% of evolution) .................................................................. 92 Figure 60. Evolution of Headcount ....................................................................................................... 92 Figure 61. Transactions by Service Channel – (%) .............................................................................. 94 Figure 62. Number of Users (million) – Internet and Mobile Banking................................................... 95 Figure 63. Number of Transactions (million) – Internet (Individuals) and Mobile Banking ................... 95 Figure 64. Automated Teller Machines ................................................................................................. 95 Figure 65. Transactions - ATMs’ vs Teller – (average %) .................................................................... 96 Figure 66. Tecnology Investments ....................................................................................................... 96 Figure 67. Storage Capacity and Availability Indicator ......................................................................... 96 Figure 68. Operational Loss for Value Range – (%)............................................................................. 98 Figure 69. Evolution of the Foreign Exchange Exposure as a % of the Reference Equity (RE) ........ 104 Figure 70. Assets and Liabilities by Index (R$ billion) ........................................................................ 104 Figure 71. Net Result by Index (R$ billion) ......................................................................................... 105 Figure 72. Tier 1 Capital Ratio Simulation with the Full Application of Basel III (%) .......................... 107 Figure 73. Banco Patagonia – Net Income – R$ million ..................................................................... 117

Presentation

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Presentation

The Management Discussion and Analysis Report presents Banco do Brasil’s economic/financial situation. Addressed to market analysts, stockholders and investors, with quarterly periodicity, this report releases data on main economic indicators, BB's shares performance and risk management. The reader will also find tables with historical series of the Summarized Balance Sheet, the Income Statement with Reallocations, besides information about profitability, productivity, loan portfolio quality, capital structure, capital market, and structural data.

At the end of this report, the Financial Statements and the Notes to the Financial Statements will be presented.

Highlights

In chapter 5, two new figures are presented, with the credit revenue and the earning assets distribution.

On-line Access

The Management Discussion and Analysis report can also be read through Banco do Brasil’s Investor Relations website. Further information about BB is also available there, such as: Corporate Governance, news, frequently asked questions and a Download center.

Banco do Brasil bb.com.br Investor Relations bb.com.br/ir

Banco do Brasil S.A. - MD&A 2Q17

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Glossary

Leverage: financial indicator that measures the ratio between the total assets and shareholders' equity of the company.

Earnings Assets: reflects the sum of all assets that produce a financial return to the institution. The total return of these assets is included in the gross income from financial intermediation.

Commercial Funding: Includes Total Deposits, Agribusiness Letters of Credit - LCA, Mortgage Bonds - LCI and repurchase agreements operations with private securities.

Institutional Funding: Includes funding directed to institutional investors, with the use of instruments such Senior Debt, Letters Financial and Instrument Hybrid Capital and Debt (IHCD).

Classified Loan Portfolio: sum of the credit operations, financing, leasing, other credit with loan characteristics and acquired loan portfolio.

Loan Portfolio - Broad concept: it corresponds to the Classified Loan Portfolio added of the private securities and guarantees operations.

Organic Domestic Loan Portfolio - Broad concept: it corresponds to the Loan Portfolio – Broad concept added of the private securities and guarantees operations.

Domestic Loan Portfolio - Broad concept: classified loan portfolio plus guarantees provided and private securities, disregarding acquired loan portfolio.

Managed Loan Portfolio: concept adopted by Banco Votorantim, loan portfolio accounted as established by the CMN Resolution 2,862/99, added to private securities and guarantees, which includes assets assigned with recourse to other financial institutions and the assets assigned to Credit Receivables Investment Funds – FIDCs.

Managed Loan Portfolio - Broad Concept: concept adopted by Banco Votorantim, managed loan portfolio, plus private securities and guarantees.

Organic Loan Portfolio: Loan Portfolio excluding the acquired portfolios.

Overdue Renegotiated Loan Portfolio: It comprises the renegotiated loans for debts composition due to delay in payments by customers. Furthermore, it does not comprise the rollover operations of agribusiness loan portfolio.

Correspondent Services: are companies, whether or not members of the National Financial System, made by financial institutions and other institutions authorized by the Central Bank of Brazil for the provision of service to customers and users of these institutions.

Opportunity Cost: managerial assessment tool used to compare the effective result of active operations and the hypothetical result of use in a replacement alternative. The Average Selic Rate (TMS) is generally considered.

Fairness opinion: economic, financial and corporate analysis that provides those who will decide on a certain merger and acquisition transaction or to provide the shareholders an independent and unbiased opinion stating that, under the market conditions to which the company was subjected at the time the aforementioned transaction was negotiated, its terms were fair to the company and all its shareholders.

Guarantees: operations where the BB ensures the settlement of the contracts for import and export.

Structural Hedge: hired operations to cancel the changes in foreign currency effects on assets abroad.

Tax Hedge: hired operations to reduce the foreign exchange variation effects on the result, considering the impact on taxes.

Coverage Ratio Adjusted: indicates the magnitude of the coverage of tariff revenues on expenses.

Cost to Income Ratio: productivity indicator that measures the relation between administrative expenses and operating revenues. When the ratio is lower, more efficient is the company.

Adjusted Net Income: net income excluding one-off items.

ADB: Average Daily Balance

Net Interest Income (NII): It is calculated as the difference between income and expenses from financial intermediation considering the reallocations.

Glossary

10

Extraordinary Items: revenues or expenses incurred relevant identified in results for the period and which do not refer to the normal business of the Bank and/or refer to values recorded in previous years.

Adjusted NIM: net interest margin divided by the average balance of earning assets.

Net Interest Rate: difference between average rate of earning assets and average rate of interest bearing liabilities.

Net Interest Management: calculated on the basis of the financial revenues received, less any opportunity costs, is defined according to each type of product.

Net Interest Gain: defined as interest income from earning assets less interest expenses from interest bearing liabilities.

Interest Bearing Liabilities: includes the sum of all liabilities that carry an expense for the institution. The total financial cost of these liabilities reflects the expense of financial intermediation.

Reallocations: adjustments made in the Corporate Law Income Statement in order to provide a better understanding of the business and the company's performance.

Annualized Return on Equity: ratio between the net income and the arithmetic average of shareholders’ equity of the reporting period on the previous period, excluding non-controlling interest. The value was annualized for capitalization.

Managerial Spread: spread is the result of the managerial financial margin divided by the respective average balances. For managerial financial margin calculation, financial revenues classified by portfolio are calculated first. Subsequently, the opportunity costs defined for each of the portfolio lines are deducted. Considering the individuals and companies loan portfolios, with free resources, the opportunity cost is the average Selic rate. For the agribusiness portfolio and other directed resources, the opportunity cost is calculated according to the funding source and the necessity or not of compulsory investing part of this funding.

Net Interest Margin: Applying the concept of spread to the banking industry, which is calculated by dividing net interest income by average earning assets.

Private Securities: operations characterized by the acquisition of securities (commercial paper and debentures) mainly issued by private companies.

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2017 Guidance

In the following table it is presented the 2017 Guidance and their comparison with the performance in the quarter. The loan portfolio performance is measured by comparing 12-month balances. The Net Income and ALLL Expenses are followed by the amounts accumulated during the fiscal year. The performance of Fee Income and Administrative Expenses is measured in relation to the same period of the previous year.

Estimates are prepared for the year and variations along quarters may reflect specific events of the relevant period. The assumptions used to prepare these projections were presented in the 4Q16 MD&A.

Results depend on domestic and international market conditions and the Brazilian and international economic performance, which may affect the effective performance compared to that set forth in our estimates.

In 1H17, the following indicators were different from the expected:

a) Organic Domestic Loan Portfolio - Broad Definition: results were primarily affected by the performance of the companies portfolio;

b) Individuals: results affected by the prioritization of growth in lower risk lines;

c) Companies: results affected by repayments and priority given to disbursements in lines of credit with higher returns;

d) Rural Loans: performance within the strategy adopted, with the prospect of ending the year in the guidance;

e) Fee Income: performance affected by the strategy to increase service revenues, especially the performance of Asset Management and Consortium. The expectation is to return to the interval until the end of the year;

f) Administrative Expenses: performance affected by the strict expenses control.

Table 1. 2017 Guidance

2017 GuidanceRevised 2017

Guidance

Adjusted Net Income - R$ billion 9.5 to 12.5 5.2 Unchanged

NII (Net of Recovery of Write-offs) - % 0 to 4 0.3 -4 to 0

Organic Domestic Loan Portfolio - Broad Definition - % 1 to 4 (6.6) -4 to -1

Individuals - % 4 to 7 1.0 2 to 5

Companies - % -4 to -1 (14.5) -11 to -8

Rural Loans - % 6 to 9 3.7 Unchanged

ALLL Expenses net of Recovery of Write-offs - R$ billion -23.5 to -20.5 (11.0) Unchanged

Fee Income - % 6 to 9 10.0 Unchanged

Administrative Expenses - % 1.5 to 4.5 (0.9) -2.5 to 0.5

1H17 Performance

The following tables set forth new indicators performance effective from 2017.

Table 2. Loan Portfolio

R$ million Jun/16 Share % Mar/17 Share % Jun/17 Share % Jun/16 Mar/17

Organic Domestic Loan Portfolio - Broad Definition 684.587 100,0 633.271 100,0 639.692 100,0 (6,6) 1,0

Individuals 172.535 25,2 172.427 27,2 174.326 27,3 1,0 1,1

Companies 359.454 52,5 308.657 48,7 307.171 48,0 (14,5) (0,5)

Rural Loans 152.599 22,3 152.187 24,0 158.194 24,7 3,7 3,9

Balance Chg. %

Table 3. NII and ALLL Expenses

Chg. %

R$ million 2Q16 1Q17 2Q17 2Q16 1Q17 1H16 1H17 1H16

NII (Net of Recovery of Write-offs) 13.249 13.521 13.212 (0,3) (2,3) 26.665 26.733 0,3

ALLL Expenses net of Recovery of Write-offs (6.893) (5.757) (5.264) (23,6) (8,6) (15.177) (11.021) (27,4)

ALLL Expenses (8.277) (6.713) (6.658) (19,6) (0,8) (17.422) (13.371) (23,2)

Recovery of Write-offs 1.384 956 1.394 0,8 45,9 2.245 2.350 4,7

Quarterly Flow Chg. % Half-Yearly Flow

Earnings Summary

12

Earnings Summary

Adjusted Net Income of R$5.2 billion

Banco do Brasil had an adjusted net income of R$5.2 billion in 1H17, primarily due to the increase in fee income and the decrease in provision expenses, compared to the same period in the previous year. The pre-tax and pre-provision earnings increased 5.8% in the same period.

Table 4. Net Income – R$ million

Chg. %

2Q16 1Q17 2Q17 On 2Q16 On 1Q17 1H16 1H17 On 1H16

Total Operating Income (Banking Product) 23,939 23,730 24,009 0.3 1.2 47,061 47,740 1.4

Operating Income 23,686 23,601 23,939 1.1 1.4 46,488 47,540 2.3

Net Interest Income 14,633 14,476 14,606 (0.2) 0.9 28,909 29,083 0.6

Fee Income 5,886 6,096 6,316 7.3 3.6 11,285 12,411 10.0

Eq. Interest of Subsidiaries and Affiliates 1,091 953 1,062 (2.7) 11.5 2,089 2,015 (3.5)

Other Operating Income 2,075 2,076 1,955 (5.8) (5.8) 4,205 4,031 (4.1)

Previ - Plano de Benefícios 1 (54) (59) (59) 10.5 (0.0) (107) (119) 10.5

Previ - Fundo de Utilização Restatement 307 189 129 (57.9) (31.5) 680 318 (53.3)

Total Operating Expenses (13,262) (12,849) (12,680) (4.4) (1.3) (26,074) (25,529) (2.1)

Administrative Expenses (7,973) (7,774) (7,864) (1.4) 1.2 (15,781) (15,638) (0.9)

Personnel Expenses (4,956) (4,677) (4,817) (2.8) 3.0 (9,745) (9,494) (2.6)

Other Administrative Expenses (3,017) (3,096) (3,047) 1.0 (1.6) (6,036) (6,144) 1.8

Legal Risk (581) (751) (516) (11.2) (31.2) (1,371) (1,267) (7.6)

Other Tax Expenses (92) (118) (128) 39.4 8.7 (209) (245) 17.5

Taxes on Revenues (1,291) (1,262) (1,231) (4.7) (2.5) (2,514) (2,493) (0.8)

Other Operating Expenses (3,325) (2,945) (2,941) (11.6) (0.1) (6,199) (5,886) (5.1)

Non-Operating Income 72 45 59 (17.0) 31.8 108 105 (3.4)

Pre-Tax and Pre-Provision Earnings 10,749 10,926 11,389 6.0 4.2 21,095 22,315 5.8

Allowance for Loan Losses (8,277) (6,713) (6,658) (19.6) (0.8) (17,422) (13,371) (23.2)

Other/Taxes (671) (1,699) (2,082) 210.1 22.5 (587) (3,780) 544.0

Adjusted Net Income 1,801 2,515 2,649 47.1 5.3 3,087 5,164 67.3

One-Off Items 664 (72) (30) 0.0 (57.7) 1,738 (102) 0.0

Net Income 2,465 2,443 2,619 6.2 7.2 4,824 5,062 4.9

Chg. %

The table below sets forth the following ROE concepts:

a) ROE: calculated based on the statement of income;

b) Market ROE: reflects the metric that the main market analysts use to project results;

c) Adjusted ROE: ratio between adjusted net income and average adjusted shareholders’ equity. Adjusted ROE was included in the projections until 2016; and

d) Shareholders ROE: return for BB’s shareholders. The core capital eligible instrument is not taken into account in the calculation of the indicator because the payment of compensation is made with funds from accumulated earnings and profit reserves.

Banco do Brasil S.A. - MD&A 2Q17

13

Table 5. ROE Concepts – R$ million

2Q16 1Q17 2Q17 1H16 1H17

ROE - (a)/(b) % 12.3 11.5 12.1 12.0 11.7

a) Net Income 2,465 2,443 2,619 4,824 5,062

b) Shareholders' Equity - Average 83,803 88,507 90,302 82,493 88,989

Market ROE - (c)/(b-d) % 9.2 12.4 12.8 7.9 12.4

c) Adjusted Net Income 1,801 2,515 2,649 3,087 5,164

d) Minority Interest - Average 3,208 3,395 3,429 3,115 3,247

Adjusted ROE - (c)/(b-d-e) % 7.7 10.4 10.7 6.6 10.4

e) Benefit Plans - Average (15,375) (15,493) (15,735) (15,375) (15,735)

Shareholders' ROE - (c)/(b-d-f) % 10.3 13.7 14.1 8.8 13.7

f) Instruments Qualifying to CET1 Capital - Average 8,100 8,100 8,100 8,100 8,100

Market Indicators

The increase in the adjusted earnings per share stands out, having increased from R$1.11 in 1H16 to R$1.85 in 1H17.

Table 6. Market Indicators

1H16 1H17 2017 E¹

Earnings per Share - R$ 1.70 1.80 3.96

Adjusted Earnings per Share - R$ 1.11 1.85 3.91

Dividend Yield² - % 7.62 3.26 3.23

Price/Earnings 12 months 4.63 9.02 8.00

Price/Book Value 0.57 0.82 0.97

¹ Bloomberg estimate, on August 8, 2017, based on the average projections of market analysts. BB takes no responsibility for this information. ² Dividends and Interest on Shareholders’ Equity (12 months) / Market Capitalization.

Net Interest Income Increases by 0.6%

In the 1H17/1H16 comparison the NII increased 0.6%. Further analysis can be found in the MD&A chapter 5.

Figure 1. Net Interest Income – R$ million

,0,, ,0,,

,0,,,0,, ,0,,

28,909 (4,992)3,806

902 106 352 29,083

Net Interest Income1H16

Loan Operationsincome

Funding Expenses Financial Expense forInstitutional Funding

Recovery of Write-offs Treasury Income Net Interest Income1H17

The earning assets increased R$ 28,955 million in 2Q17, from 1Q17. The Loans and Leasing line decreased by R$3,334 million and was offset by an increase in securities + interbank invest. balance (R$32.969 million), a fact that negatively influenced the NIM because the securities have lower spreads.

Earnings Summary

14

Figure 2. NIM and Loans Average Balance – R$ billion

677.5661.1

644.5

627.6 624.3

4.9 4.95.1

4.84.7

2Q16 3Q16 4Q16 1Q17 2Q17

Loans¹ NIM - %²

¹ Average balances of loans operations, leasing and acquired loan portfolio. ² NIM - NII/Earning Assets average, annualized.

The managerial financial spread is calculated as managerial financial margin divided by the relevant average balances of the loan portfolios, annualized. In the case of prefixed transactions, managerial accounting spread takes into account the cost of funding at the time the loan was signed, and it is not affected by the variation in the Selic rate.

The 100 bps quarterly drop in spread for companies was affected by the decrease on the Small and Very Small portfolio, especially on the Working Capital line.

Figure 3. Managerial Spread by Segment – %

16.3 16.5 16.6 16.1 16.1

7.7 7.9 8.0 7.7 7.3

5.9 6.1 6.3 6.0

5.04.9 5.0 5.0 4.8 4.7

2Q16 3Q16 4Q16 1Q17 2Q17

Individuals Loan Operations Companies¹ Agribusiness

¹ It does not include transactions with the Government.

Fee Income Increases by 10.0%

Supported by the evolution of BB’s digital strategy, fee income increased by 10.0% compared to 1H16. The increase in asset management line stands out (26.5%) due to the increase in funds under management from R$668.1 billion in June/16 to R$816.4 billion in June/17.

Banco do Brasil S.A. - MD&A 2Q17

15

Table 7. Fee Income – R$ million

Chg. %

2Q16 1Q17 2Q17 On 2Q16 On 1Q17 1H16 1H17 On 1H16

Fee Income 5,886 6,096 6,316 7.3 3.6 11,285 12,411 10.0

Checking Account 1,534 1,597 1,712 11.6 7.2 2,969 3,309 11.5

Asset Management 1,077 1,295 1,336 24.0 3.1 2,080 2,631 26.5

Insurance, P. Plans and Premium Bonds 835 763 665 (20.3) (12.9) 1,532 1,429 (6.8)

Loan Fees 444 412 550 23.8 33.5 804 963 19.7

Collections 421 383 372 (11.7) (2.7) 840 755 (10.1)

Credit/Debit Cards 337 370 370 9.9 0.1 663 740 11.6

Consortium 123 161 175 42.6 8.6 238 336 41.0

Other 1,237 1,275 1,309 5.9 2.7 2,396 2,584 7.9

Chg. %

Figure 4. Main Components of Fee Income – 100 Base

100

90

101

91

80

104

99

120124

108

104

112

2Q16 3Q16 4Q16 1Q17 2Q17

Insurance, P. Plans and Premium Bonds Asset Management Checking Account

Administrative Expenses Decrease by 0.9%

The Bank consistently seeks to improve its operating efficiency and productivity, keeping a strict control of administrative expenses. Administrative Expenses were impacted by R$67 million in 1Q17 and R$77 million in 2Q17 due to the institutional reorganization.

Figure 5. Administrative Expenses – R$ million

4,9565,283 5,210

4,677 4,817

3,017 3,1373,406

3,096 3,047

39.9 39.8 39.7

39.3

38.9

35.0

36.0

37.0

38.0

39.0

40.0

41.0

(1, 000)

1,000

3,000

5,000

7,000

9,000

11, 000

2Q16 3Q16 4Q16 1Q17 2Q17

Personnel Expenses Other Administrative Expenses Cost-to-Income Ratio 12m - % ¹

¹ Cost-to-Income ratio: Administrative Expenses/Operating Revenues. Data from Income Statement with Reallocations.

Earnings Summary

16

Tier 1 Capital Ratio was 9.2%

Tier 1 capital ratio was 9.2%, an increase compared to the same period of the previous year due to an increase in Shareholders’ Equity and a decrease in Risk Weighted Asset (RWA).

Figure 6. Basel – %

8.49.1

9.6 9.2 9.2

11.312.2

12.8 12.4 12.4

5.1

5.45.7 5.7 5.616.5

17.618.5 18.1 18.0

Jun/16 Sep/16 Dec/16 Mar/17 Jun/17

Tier I Tier II CET1

Full application of Basel III rules

The following figure simulates the full application of Basel III and its impacts on the Bank’s CET1. It takes into account the capital base on June 30, 2017 and has three stages:

a) First stage: the calculation of the regulatory adjustments takes into account the assumptions of (i) anticipation of the deductions schedule (phase-in) and (ii) use of goodwill and intangible assets that were not amortized by 2017;

b) Second stage: the calculation takes into account the effects of the first stage combined with the anticipation of Factor F (from 9.25% to 8.0%) for operating and market risks; and

c) Third stage: the calculation takes into account all the effects of the previous stages combined with the usage of tax credits from temporary differences of 24% and tax losses of 30%, both in accordance with the usage estimates disclosed by the Bank in the Notes to the Consolidated Financial Statements.

Figure 7. Tier 1 Capital Ratio Simulation with the Full Application of Basel III (%)

9.119.18 (0.63)(0.13)

0.69

Common Equity Tier I (CET)Jun/17

Deductions ScheduleAnticipation

RWA Rules Anticipation Use of Tax Credits Simulated CET under FullBasel III Rules

Banco do Brasil S.A. - MD&A 2Q17

17

Loan Portfolio and Commercial Funding

The loan portfolio (broad definition) decreased by 7.6% in 12 months. The companies loan portfolio decreased by 15.4% in the same period, due to the decrease in working capital transactions (14.6%) and in private securities and guarantees (18.2%).

In line with the behavior of the loan portfolio, commercial funding decreased by 5.8% in 12 months. The decrease came mainly from agribusiness letters of credits (25.7%), repurchase agreements with private securities (18.1%) and interbank deposits (31.0%).

Figure 8. Loan Portfolio (Broad Definition) – R$ billion

327.6 316.8 294.7 280.8 277.2

189.7 187.6 187.8 185.1 185.9

184.5 179.6 179.8 180.1 188.2

51.2 51.5 45.7 42.7 44.9

753.0 735.4 708.1 688.7 696.1

(1.2)

(6.9)

(11.3) (11.4)

(7.6)

-

200. 0

400. 0

600. 0

800. 0

1,000. 0

1,200. 0

1,400. 0

Jun/16 Sep/16 Dec/16 Mar/17 Jun/17

Companies Individuals Agribusiness Abroad 12m Growth - %

Figure 9. Commercial Funding – R$ billion

202.5 203.4 204.2 199.4 210.4

153.5 150.6 142.0 133.7 120.8

148.4 148.7 151.8 148.9 151.0

62.5 61.6 69.3 64.0 62.4

57.9 55.6 46.3 38.5 44.0

624.8 619.9 613.6 584.4 588.5

(2.3)(6.1)

(8.3) (8.5)(5.8)

-

200. 0

400. 0

600. 0

800. 0

1,000. 0

1,200. 0

Jun/16 Sep/16 Dec/16 Mar/17 Jun/17

Time Deposits¹ Agrib. Letters of Credit and Mortgage Bonds

Saving Deposits Demand Deposits

Other 12m Growth - %

¹ Includes Judicial Deposits.

Earnings Summary

18

Quality of the Portfolio

The coverage of Banco do Brasil decreased from 146.5% in March/17 to 143.3% in June/17. Excluding a specific case, total coverage was 159.5% and the coverage for Businesses was 149.3%.

Figure 10. Coverage¹ Ratios – %

173.2167.8 167.7

164.2159.5

163.9159.4

146.5

143.3

180.0 175.7 178.4 174.4186.5

50. 0

70. 0

90. 0

110. 0

130. 0

150. 0

170. 0

190. 0

210. 0

140. 0

150. 0

160. 0

170. 0

180. 0

190. 0

200. 0

Jun/16 Sep/16 Dec/16 Mar/17 Jun/17

ALLL/NPL + 90d % - Ex-specific cases² ALLL/NPL + 90d % - BB Consolidated ALLL/NPL + 90d % - BI¹

¹ Indicator prepared based on the Average Risk Index, available at the Time Series Management System (Sistema Gerenciador de Séries Temporais – SGS) of the Central Bank of Brazil. ² Simulation excluding the effect of specific cases.

Figure 11. Coverage¹ by Segment – %

201.3190.9

199.6183.9 177.1

144.9 141.0 145.8

128.3 126.0

290.0 295.6

228.9

181.7 167.0

153.5149.3

Jun/16 Sep/16 Dec/16 Mar/17 Jun/17

Individuals Companies Agribusiness Companies ex specific case

¹ Ratio between the total balance of the provision (required plus additional) and the balance of transactions due over 90 days.

Banco do Brasil S.A. - MD&A 2Q17

19

Figure 12. ALL Expenses by Segment – R$ million

396730

(336)606 748

804 132

98

60188

5,794

4,370 5,517 4,370 3,979

1,282

1,411

2,207

1,677 1,743

8,277

6,644

7,486

6,713 6,658

2Q16 3Q16 4Q16 1Q17 2Q17

Agribusiness Abroad Companies Individuals

The average risk of the Bank (ratio between the required provision and the classified loan portfolio) remains below that of the Brazilian Banking Industry (BI).

Figure 13. Average Risk – %

6.306.50 6.60

6.80 6.90

5.345.58 5.52

5.705.89

Jun/16 Sep/16 Dec/16 Mar/17 Jun/17

Average Risk - BI Average Risk - BB

The NPL +90d (ratio between the operations more than 90 days overdue and the classified loan portfolio balance) was 4.11% in June 2017. Excluding a specific case the NPL +90d would have been 3.70%.

Earnings Summary

20

Figure 14. NPL +90 days – %

3.263.50

3.894.11

3.06

3.29

3.473.70

3.503.70 3.70

3.90

3.70

1.50

2.00

2.50

3.00

3.50

4.00

2.00

2.50

3.00

3.50

4.00

4.50

5.00

5.50

6.00

6.50

7.00

Jun/16 Sep/16 Dec/16 Mar/17 Jun/17

NPL +90d - BB NPL +90d - ex-specific cases NPL +90d - BI

The following table shows the renegotiated loan portfolio. It does not include the renegotiated operations of the agribusiness portfolio. In 2Q17, 44.4% of new renegotiations included more than 90 days past due operations, and 10.3% included written off operations.

In this quarter, two operations with more than 90 days past due were responsible for 20% of the total renegotiations. Highlight to the increase of amortizations net of interest accrued.

Table 8. Credits Renegotiated When Past Due – R$ million

2Q16 1Q17 2Q17 On 2Q16 On 1Q17

Credits Renegotiated When Past Due 25,050 26,618 27,042 8.0 1.6

Initial Balance 22,038 27,086 26,618 20.8 (1.7)

New Transactions 5,026 2,332 3,622 (27.9) 55.3

Amortization Net of Interest¹ (979) (864) (1,211) 23.7 40.1

Write-Off (1,036) (1,936) (1,986) 91.7 2.6

ALLL / Loan Portfolio - % 41.4 46.3 47.8

NPL + 90 days / Loan Portfolio - % 22.5 27.8 26.2

ALLL Balance/NPL + 90 days - % 183.8 166.2 182.2

Credits Renegotiated/Classified Portfolio - % 3.6 4.2 4.2

Chg. %

¹ Principal and interest payments net of interest accrued in period.

Banco do Brasil S.A. - MD&A 2Q17

21

1 - Key Statistics

Table 9. Main Macroeconomic Indicators¹

2014 2015 2016 2Q17

Economic Activity

Nominal GDP in 4 quarters (R$ billion) 5,779 6,001 6,267 NA

GDP (% yoy) 0.5 (3.8) (3.6) NA

Household Consumption 2.3 (3.9) (4.2) NA

Government Consumption 0.8 (1.1) (0.6) NA

Gross Fixed Capital Formation (4.2) (13.9) (10.2) NA

Exports (1.1) 6.3 1.9 NA

Imports (1.9) (14.1) (10.3) NA

Retail Sales ( % yoy) 0.9 (4.3) (6.3) NA

Business Confidence Index (quarter average) 86.1 74.9 85.0 91.4

Consumer Confidence Index (quarter average) 90.3 68.1 80.3 81.9

Industrial Production (% yoy) (3.0) (8.2) (6.4) (1.9)

Labor Market

Total Wages (index - basis: mar 2012 = 100) 110.5 109.0 105.4 106.9

Real Average Income (R$ thousand - last quarter prices) 2,118 2,062 2,090 2,104

Formal Employment (in thousands of people - 12 months net creation) 152.7 (1,625.6) (1,371.4) (786.8)

Occupied Population (in million of people - quarter average) 92.7 92.2 90.1 89.7

Unemployment Rate (% labor force - quarter average) 6.5 9.0 11.9 13.3

External Sector

Balance of Payments

Current Account (% GDP in 12 months) (4.3) (3.3) (1.3) (0.8)

Foreign Direct Investiment (US$ billion - year accumulated) 96.9 74.7 78.2 36.3

Trade Balance (US$ billion - year accumulated) (4.0) 19.7 47.7 36.3

Exports (US$ billion - year accumulated) 225.1 191.1 185.3 107.7

Basics 109.6 87.2 79.2 52.5

Manufactured 80.2 72.8 73.9 37.7

Semi-manufactured 29.1 26.5 28.0 15.1

Special Operations 6.3 4.7 4.2 2.5

Imports (US$ billion - year accumulated) 229.1 171.5 137.6 71.5

Capital Goods 29.5 23.3 18.4 7.3

Intermediate Goods 126.9 99.5 84.9 45.0

Consumer Goods 33.1 26.8 21.7 11.0

Fuel 39.5 21.7 12.4 8.2

Other 0.2 0.2 0.1 0.1

International Reserves (US$ billion - closing balance) 375.8 361.2 367.5 374.9

EMBI (basis point - EOP) 259 523 328 289

CDS 10Y (basis point - EOP) 259 558 360 346

Exchange Rate (R$/US$ - EOP) 2.66 3.90 3.26 3.31

Public Finance

General Government Gross Debt (% GDP) 56.3 65.5 69.9 73.1

Nominal Result (R$ billion - in 12 months) (343.9) (613.0) (562.8) (607.5)

Nominal Result (% GDP - in 12 months) (6.0) (10.2) (9.0) (9.5)

Monetary Indicators

Selic (% p.y. - EOP) 11.75 14.25 13.75 10.25

Selic (accumulated in 12 months) 10.9 13.3 14.0 12.9

Inflation Index

IPCA (% - accumulated in 12 months) 6.41 10.67 6.29 3.00

1 - All indicators were obtained from official sources such as Central Bank of Brazil, FGV (Getúlio Vargas Foundation), IBGE, etc. NA - Not Available.

Chapter 1 - key Statistics

22

Table 10. Ownership Structure – %

Shareholders Jun/16 Sep/16 Dec/16 Mar/17 Jun/17

Federal Government 54.4 54.4 54.4 54.4 53.9

Shares Owned by the Company 2.8 2.8 2.8 2.8 2.8

Free Float 42.8 42.8 42.8 42.8 43.2

Individuals 7.5 6.7 6.1 5.6 6.0

Companies 15.5 15.7 16.1 15.9 16.0

Previ 10.0 9.9 9.8 9.4 9.2

Foreign Capital 19.8 20.4 20.6 21.3 21.3

Total 100.0 100.0 100.0 100.0 100.0

Number of Shares 2,865,417,020 2,865,417,020 2,865,417,020 2,865,417,020 2,865,417,020

Table 11. Distribution of Dividends and Interest on Own Capital¹

R$ million 2Q16 3Q16 4Q16 1Q17 2Q17

Federal Government 427.8 368.6 159.4 397.5 432.3

Individuals 58.8 45.3 17.8 40.7 47.7

Companies 121.9 106.6 47.2 116.3 127.9

Previ 78.5 67.2 28.8 68.9 73.9

Foreign Capital 155.8 138.2 60.3 155.8 170.9

Total 764.5 658.7 284.7 710.3 778.8

1 - Values subject to income tax of 15%.

Table 12. Market Ratios (ex-treasury shares)

2Q16 3Q16 4Q16 1Q17 2Q17

Earnings per Share - R$ 0.88 0.80 0.34 0.86 0.94

Price / Earnings (12 months) 4.60 6.63 9.74 11.59 9.02

Price / Book Value 0.57 0.74 0.90 1.05 0.82

Market Capitalization - R$ million 47,843 63,493 78,224 94,046 74,638

Book Value - BBAS3 - R$ 29.97 30.78 31.31 32.25 32.60

BBAS3 Closing Price - R$ 17.18 22.80 28.09 33.77 26.80

BBAS3 - Change (%) (13.1) 32.7 23.2 20.2 (20.6)

Dividend Yield - %¹ 7.6 4.9 3.0 2.6 3.3

1 - Dividends and Interest on Capital – 12 months / Market Capitalization.

Table 13. BB’s Shares in Brazilian Stock Market Indexes – %

May/16 -

Aug/16

Sep/16 -

Dec/16

Jan/17 -

Apr/17

May/17 -

Aug/17

Sep/17 -

Dec/17

Bovespa Index - Ibovespa 2.954 2.931 3.446 3.726 3.240

Brazil 50 Index - IBrX - 50 2.974 2.636 3.533 3.808 3.324

Carbon Efficient Index - ICO2 4.647 4.789 5.938 6.143 5.476

Financial Index - IFNC 9.700 9.929 11.971 13.031 11.648

Corporate Governance Trade Index - IGCT 3.300 3.262 3.842 4.006 3.397

Special Corporate Governance Index - IGCX 4.046 4.001 4.788 4.996 4.224

Corporate Sustainability Index - ISE 1.563 1.523 1.769 1.796 1.644

Special Tag Along Stock Index - ITAG 3.550 3.502 4.226 4.374 3.743

Mid-Large Cap Index - MLCX 2.888 2.931 3.422 3.661 3.115

Table 14. BB’s Shares in International Stock Market Index – %

Jun/16 Sep/16 Dec/16 Mar/17 Jun/17

MSCI Brazil Index 1.701 2.007 2.447 2.736 2.245

Banco do Brasil S.A. - MD&A 2Q17

23

Table 15. Banco do Brasil Key Statistics

2Q16 3Q16 4Q16 1Q17 2Q17

Balance Sheet Items - R$ billion

Assets 1,445.1 1,448.2 1,401.4 1,402.4 1,445.6

Shareholders’ Equity 83.4 85.7 87.2 89.8 90.8

Loan Portfolio 691.8 672.6 653.6 638.3 642.8

Loan Portfolio - Broad Definition¹ 753.0 735.4 708.1 688.7 696.1

Deposits 440.9 437.7 446.0 430.6 442.8

Demand Deposits 62.5 61.6 69.3 64.0 62.4

Saving Deposits 148.4 148.7 151.8 148.9 151.0

Time Deposits 202.5 203.4 204.2 199.4 210.4

Profitability

Adjusted ROE - Annual Basis - % 7.5 9.9 7.4 10.4 10.6

Accounting ROE - % 12.3 11.2 4.5 11.5 12.1

Adjusted ROA - Annual Basis - Quarterly % 0.5 0.6 0.5 0.8 0.7

Annualized NIM - % 4.9 4.9 5.1 4.8 4.7

Productivity

Cost-to-Income Ratio (12 months accumulated) - % 39.9 39.8 39.7 39.3 38.9

Fee Income / Personnel Expenses - % 118.8 110.9 118.9 130.3 131.1

Fee Income / Administrative Expenses - % 73.8 69.6 71.9 78.4 80.3

Personnel Expenses per Employee - R$ thousand 45.2 48.3 49.7 46.6 48.3

Employees in Branches / (Branches + Service Posts) 12.0 11.9 9.9 9.5 9.4

Checking Accounts per Employee in Branches 439.6 443.0 525.0 553.7 563.5

Assets per Employee - R$ thousand 13,183.6 13,267.0 13,927.1 14,029.0 14,513.8

Loan Port. Broad Def. / Ow n Service Netw ork - R$ million 43.8 43.0 42.6 41.8 43.2

Loan Portfolio Quality

Allow ance for Loan Losses / Loan Portfolio - % 5.3 5.6 5.5 5.7 5.9

Coverage Ratio + 90 days - % 163.9 159.4 167.7 146.5 143.3

Loan Portfolio (Net of Allow ance) / Total Portfolio - % 94.7 94.4 94.5 94.3 94.1

Capital Structure

Leverage (times) 17.3 16.9 16.1 15.6 15.9

BIS Ratio - % 16.5 17.6 18.5 18.1 18.0

Tier I 11.3 12.2 12.8 12.4 12.4

CET1 Ratio 8.4 9.1 9.6 9.2 9.2

Total Shares - million 2,865.4 2,865.4 2,865.4 2,865.4 2,865.4

Structural Data

Branches 5,428 5,430 5,440 4,877 4,885

Ow n Service Netw ork 17,181 17,092 16,625 16,492 16,098

Total Customers - thousand 64,187 64,383 64,798 65,244 65,566

Total Checking Accounts - thousand 37,755 37,808 37,307 37,109 36,939

Individuals 35,353 35,177 34,902 34,741 34,587

Companies 2,402 2,631 2,405 2,368 2,353

Total Savings Accounts - thousand 39,310 39,211 39,255 39,124 38,112

Staff 114,340 112,751 102,950 101,384 101,071

Employees 109,615 109,159 100,622 99,964 99,603

Interns 4,725 3,592 2,328 1,420 1,468

Market Share

Assets 20.7 20.7 20.2 20.1 NA

Deposits 22.8 22.1 22.2 21.5 NA

Loan 20.7 20.2 19.8 19.6 19.7

Agribusiness 62.0 60.9 59.2 58.4 59.8

Asset Management² 22.1 21.5 22.4 23.0 23.1

Cards Revenues 24.2 24.0 23.7 23.3 NA

Insurance Premium 15.8 15.8 15.6 14.8 14.9

Auto 13.8 12.8 12.0 12.7 12.7

Life 16.7 17.1 17.2 14.1 14.4

Housing 6.5 6.4 6.7 6.4 6.4

Rural 74.9 74.9 74.7 75.3 76.3

Collection

Pension Plans (PGBL, VGBL and Traditional) 39.7 40.0 41.3 35.1 34.8

Premium Bonds 23.7 24.8 30.0 19.4 18.6

Import Exchange 14.3 14.5 15.5 12.5 12.7

Export Exchange 22.5 20.9 16.8 17.2 21.6

1 - Includes private securities, guarantees provided and the individual portfolio acquired with recourse, under CMN Resolution 3,533/08. 2 - Banco Votorantim’s asset management is not included. NA - Not Available.

Chapter 1 - key Statistics

24

Table 16. Ratings

2Q16 3Q16 4Q16 1Q17 2Q17

Global Ratings

Fitch Ratings

Availability bb- bb- bb- bb- bb-

Short-Term - Local Currency B B B B B

Long-Term - Local Currency BB BB BB BB BB

Outlook - Local Currency Negative Negative Negative Negative Negative

Short-Term - Foreign Currency B B B B B

Long-Term - Foreign Currency BB+ BB BB BB BB

Outlook - Foreign Currency Negative Negative Negative Negative Negative

Moody's

Short-Term - Local Currency NP NP NP NP NP

Short-Term - Foreign Currency NP NP NP NP NP

Long-Term Debt - Foreign Currency Ba2 Ba2 Ba2 Ba2 Ba2

Long-Term Deposits - Local Currency Ba2 Ba2 Ba2 Ba2 Ba2

Long-Term Deposits - Foreign Currency Ba3 Ba3 Ba3 Ba3 Ba3

Outlook Negative Negative Negative Stable Negative

Standard & Poor's

Long-Term - Local Currency BB BB BB BB BB

Outlook - Local Currency Negative Negative Negative Negative Negative

Short-Term - Foreign Currency B B B B B

Long-Term - Foreign Currency BB BB BB BB BB

Outlook - Foreign Currency Negative Negative Negative Negative Negative

Domestic Ratings

Fitch Ratings

Short-Term F1+(bra) F1+(bra) F1+(bra) F1+(bra) F1+(bra)

Long-Term AA+(bra) AA+(bra) AA+(bra) AA+(bra) AA+(bra)

Outlook Negative Negative Negative Negative Negative

Moody's

Short-Term BR-1 BR-1 BR-1 BR-1 BR-1

Long-Term Aa2.br Aa1.br Aa1.br Aa1.br Aa1.br

Outlook Negative Negative Negative Stable Negative

Table 17. Compulsory/Reserve Requirement – %

2Q16 3Q16 4Q16 1Q17 2Q17

Compulsory/Reserve Requirements (%)

Demand Deposits

Rate 45 45 45 45 45

Reserve Requirements (rural loan) 34 34 34 34 34

Reserve Requirements (micro f inance) 2 2 2 2 2

Unmarked 19 19 19 19 19

Savings Deposits

Rural

Rate 16 16 16 16 16

Additional 6 6 6 6 6

Reserve Requirements 74 74 74 74 74

Unmarked 5 5 5 5 5

Mortgage

Rate 25 25 25 25 25

Additional 6 6 6 6 6

Reserve Requirements 65 65 65 65 65

Unmarked 5 5 5 5 5

Time Deposits

Rate 25 25 25 25 36

Additional 11 11 11 11 0

Unmarked 64 64 64 64 64

Banco do Brasil S.A. - MD&A 2Q17

25

Corporate Governance

Corporate governance at Banco do Brasil (BB) defines a broad view of principles and practices that strengthen the management transparency and increase its institutional value. These guidelines are constantly updated as a result of legal or statutory changes.

BB adopts corporate governance best practices, ensuring the balance of rights among shareholders, accountability to investors and society, ethics in dealing with stakeholders and business sustainability supported by monitoring tools, which aligns the behavior of its executives with their shareholders and general society interests.

Since 2006, Banco do Brasil has been part of the B3's Novo Mercado, a listing segment that counts with companies subject to stricter corporate governance practices. In addition, BB is also listed in the Corporate Sustainability Index (ISE), Special Tag-Along Stock Index (ITAG), Special Corporate Governance Stock Index (IGCT) and, since 2012, in the Dow Jones Sustainability Index (DJSI).

Banco do Brasil’s corporate governance structure consists of the Board of Directors, composed of 8 members, assisted by the Audit Committee, Remuneration and Elegibility Committee, Risk and Capital Committee and Internal Audit, and the Executive Board, composed of Board of Directors (CEO and 9 Chief Officers) and 27 Statutory Officers. BB also maintains, on a permanent basis, a Fiscal Council composed of five incumbent members and five alternate members.

BB has tools to evaluate the performance of the Board of Directors, Audit Committee and Executive Board, which enables the mapping and identification of opportunities to improve their respective activities. In addition to the Bylaws, the Code of Corporate Governance and the Code of Ethics support the best corporate governance practices at Banco do Brasil.

BB's Bylaws establishes the segregation of duties among its Officers in order to avoid any conflicts of interest. The Bylaws also prevents that the members of the Board of Directors or Executive Board from making decisions on matters for which they may have a conflict of interest.

At all levels of BB, decisions are collective in order to engage executives in strategies definition and approving proposals for BB’s businesses. For this, the senior management uses strategic committees, which guarantee agility and security to the process of decision-making.

BB’s Bylaws also establishes, in its Article 24, section III, paragraph 2, that the Executive Board members must be career employees of Banco do Brasil.

The following figures present the senior management structure and the strategic committees of Banco do Brasil.

Figure 15. Senior Management Structure

Board of Officers

Individual

Customers

Chief Executive Officer

Payment

Methods

Digital

Business

Vice-Presidency

of

Services,

Infrastructure

and Operations

Vice-Presidency

of

Technology

Vice-Presidency

of

Internal Controls

and Risk

Management

(CRO)

Vice-Presidency

of

Agribusiness

Vice-Presidency

of

Retail Services

Finance

Investor

Relations

Controllership

Accounting

Vice-Presidency

of

Financial

Management

and IR (CFO)

Business

Solutions

Private Bank

Corporate

Bank

Capital Market

and

Infrastructure

Vice-Presidency

of Wholesale

Operating and

Solutions in IT

Technology

Micro and Small

Companies

Supplies,

Inf rastructure and

Property

Communication

Advisory

Human

Resources

Southeastern

Distribution

Agribusiness

Vice-Presidency

of

Distribution and

Human

Resources

Operations

InstitutionalSecurity

Legal

Consumer

Lending, Finance

and Mortgage

Distribution

Executive

Secretary

Strategy and

Organization

Vice-Presidency

of Government

Affairs

Government

Affairs

Channels

Credit

Risk

Management

Internal

Controls

Restructuring of

Operational

Assets

Internal Audit

Board of Directors

Shareholders General MeetingAudit Committee

Remuneration and Eligibility Committee

Audit Committee

Advisory

Related

Companies

Governance

Marketing and

Communication

Funding and

Investments

Retail

Integration

IT and Process

Governance

Engineering

and

Construction I

Engineering

and

Construction II

Fiscal Council

Business

Center

Risk and Capital Committee

Chapter 1 - key Statistics

26

Figure 16. Strategic Committees

Strategic Committees

Credit Transactions

Executive Committes

Credit Transations Resources Committee

Products and Services

Executive Committee

Prevention of Financial,Foreign Exchange Ilicit and

Information SecurityExecutive Committee

Credit Limit ExecutiveCommittee

Risk, Asset and Liabilities Liquidity and Capital Management

Superior Committee

Risk Management andInternal Controls

Executive Committee

Asset & Liabilities, Liquidity

and Capital Management Executive Committee

Related CompaniesGovernance Executive

Committee

Ethics and Discipline

Executive Committee

Human ResourcesExecutive Committee

Composition O

ffic

ers

Investor Relations

Executive Committee

Administrative and Operational

Executive Committee

14 Executive Committees Committees0301 Superior Committee

Exec

uti

ves

Bo

ard

of

Dir

ecto

rs

Information Technology Committee

Strategic Portfolio Management

Executive Committee

Customer Service andExperience

Executive Committee

Profitability and Performance

Executive Committee

More information about Banco do Brasil's corporate governance practices is available in section 12 of the Reference Form, available on BB's Investor Relations website at www.bb.com.br/ir.

Banco do Brasil S.A. - MD&A 2Q17

27

2 - Financial Statements Summary

2.1. Balance Sheet Summary

Table 18. Balance Sheet Summary - Assets

R$ million Jun/16 Mar/17 Jun/17 Jun/16 Mar/17

ASSETS 1,445,115 1,402,399 1,445,614 0.0 3.1

Current and Long-Term Assets 1,413,533 1,370,713 1,413,959 0.0 3.2

Cash and Cash Equivalents 14,052 15,314 14,330 2.0 (6.4)

Short-Term Interbank Investments 414,471 421,890 448,417 8.2 6.3

Securities and Derivative Financial Instruments 120,750 124,755 134,267 11.2 7.6

Securities Available for Trading 6,225 7,889 8,253 32.6 4.6

Securities Available for Sale 110,429 110,639 119,473 8.2 8.0

Securities Held to Maturity 841 5,052 5,151 - 2.0

Derivative Financial Instruments 3,256 1,176 1,390 (57.3) 18.1

Interbank Accounts 73,981 69,849 73,543 (0.6) 5.3

Deposits w ith Central Bank of Brazil 65,404 61,619 64,659 (1.1) 4.9

Compulsory Deposits on Demand Dep. and Float 11,050 10,131 13,242 19.8 30.7

Compulsory Deposits on Savings Deposits 54,354 51,488 51,418 (5.4) (0.1)

Other 8,576 8,230 8,884 3.6 8.0

Interdepartamental Accounts 132 133 153 16.0 15.5

Loans 597,578 553,192 556,756 (6.8) 0.6

(Allow ance for Loan Losses) (35,783) (35,212) (36,602) 2.3 3.9

Leasing 633 519 484 (23.6) (6.8)

Other Receivables 191,411 184,531 185,521 (3.1) 0.5

Receivable from Guarantees Honored 606 742 589 (2.8) (20.6)

Foreign Exchange Portfolio 19,801 16,879 17,288 (12.7) 2.4

Accrued Income 2,688 2,771 2,905 8.1 4.9

Securities Trading 1,027 1,047 979 (4.7) (6.5)

Specif ic Credits 356 389 399 12.3 2.6

Tax Credits 43,853 42,555 42,836 (2.3) 0.7

Actuarial Assets (Previ Plano 1) (4,910) (2,184) (2,596) (47.1) 18.8

Fundo Paridade 125 133 130 4.1 (2.0)

Fund of Surplus Allocation - Previ 9,377 9,488 9,486 1.2 (0.0)

Sundry Debtors from Escrow Deposits 47,275 51,785 52,950 12.0 2.3

Sundry 73,911 63,687 63,347 (14.3) (0.5)

(Allow ance for Other Credits) (2,698) (2,760) (2,793) 3.5 1.2

(With Loan Characteristics) (1,179) (1,234) (1,312) 11.3 6.3

(Without Loan Characteristics) (1,519) (1,526) (1,481) (2.5) (2.9)

Other Assets 524 531 488 (6.9) (8.2)

Assets Not for Ow n Use and Materials in Stock 328 356 354 7.9 (0.3)

(Allow ance for Impairment) (125) (137) (149) 19.0 8.3

Prepaid Expenses 320 313 282 (12.0) (9.9)

Permanent Assets 31,583 31,686 31,655 0.2 (0.1)

Investments 16,505 16,285 16,738 1.4 2.8

Property and Equipment 7,141 7,415 7,418 3.9 0.0

Intangible 7,924 7,986 7,499 (5.4) (6.1)

Deferred 13 - - - -

Chg. (%) on

Chapter 2 - Financial Statements Summary

28

Table 19. Balance Sheet Summary - Liabilities

R$ million Jun/16 Mar/17 Jun/17 Jun/16 Mar/17

LIABILITIES AND SHAREHOLDER’S EQUITY 1,445,115 1,402,399 1,445,614 0.0 3.1

Current and Long-Term Liabilities 1,361,227 1,312,130 1,354,399 (0.5) 3.2

Deposits 440,879 430,578 442,812 0.4 2.8

Demand Deposits 62,550 63,960 62,385 (0.3) (2.5)

Savings Deposits 148,368 148,910 150,982 1.8 1.4

Interbank Deposits 27,473 18,265 18,962 (31.0) 3.8

Time Deposits 202,489 199,442 210,483 3.9 5.5

Securities Sold Under Repurshase Agreements 411,969 409,966 449,822 9.2 9.7

Repurchase Agreements w ith Private Securities 30,415 20,135 24,898 (18.1) 23.7

Funds from Acceptance and Securities Issuance 174,509 157,085 145,822 (16.4) (7.2)

Agribusiness Letters of Credit 135,418 112,720 100,665 (25.7) (10.7)

Mortgage Bonds 18,066 21,012 20,132 11.4 (4.2)

Commercial Papers 2,393 2,812 3,088 29.0 9.8

Foreign Securities 18,631 20,540 21,937 17.7 6.8

Interbank Accounts 3,113 2,434 2,906 (6.6) 19.4

Interdepartamental Accounts 3,238 2,197 2,281 (29.6) 3.8

Borrow ings 22,763 17,769 19,741 (13.3) 11.1

Domestic Onlending 86,603 81,431 79,453 (8.3) (2.4)

National Treasury 166 161 164 (1.2) 1.4

BNDES 35,324 30,922 29,777 (15.7) (3.7)

Caixa Econômica Federal 21,648 24,487 25,009 15.5 2.1

Finame 27,532 23,736 22,467 (18.4) (5.3)

Other Institutions 1,933 2,124 2,037 5.3 (4.1)

Derivative Financial Instruments 3,019 2,159 1,970 (34.7) (8.8)

Other Liabilities 215,135 208,512 209,594 (2.6) 0.5

Billing and Collection of Taxes and Contributions 3,913 4,970 4,085 4.4 (17.8)

Foreign Exchange Portfolio 21,588 17,814 16,346 (24.3) (8.2)

Shareholders and Statutory Distributions 1,623 879 1,935 19.2 120.1

Taxes and Social Security 15,610 11,336 11,768 (24.6) 3.8

Securities Trading 993 624 755 (24.0) 21.1

Financial and Development Funds 13,741 14,817 14,837 8.0 0.1

Subordinated Debt 81,615 84,228 85,958 5.3 2.1

Equity and Debt Hybrid Securities 5,397 5,759 5,540 2.6 (3.8)

Subordinated Instruments 58,648 61,123 62,306 6.2 1.9

Debt Instruments Qualif ied as Capital 17,570 17,347 18,112 3.1 4.4

Actuarial Liabilities (Cassi) 7,519 8,020 8,284 10.2 3.3

Other Liabilities 68,532 65,825 65,624 (4.2) (0.3)

Deferred Income 439 449 431 (1.9) (4.0)

Shareholders’ Equity 83,449 89,820 90,783 8.8 1.1

Capital 67,000 67,000 67,000 - -

Instruments Qualifying to Common Equity Tier 1 Capital 8,100 8,100 8,100 - -

Capital Reserves 16 16 12 (19.8) (24.4)

Revaluation Reserves 3 3 2 (10.7) (8.9)

Profit Reserves 25,402 27,675 31,120 22.5 12.5

Other Comprehensive Income (18,319) (16,325) (16,882) (7.8) 3.4

Benefit Plans (16,832) (15,493) (15,978) (5.1) 3.1

Retained Earnings (Accumulated Losses) - 1,627 - - -

(Shares Ow ned by the Company) (1,855) (1,852) (1,850) (0.3) (0.1)

Non-Controlling Interests 3,102 3,577 3,280 5.7 (8.3)

Chg. (%) on

Banco do Brasil S.A. - MD&A 2Q17

29

2.2. Income Statement with Reallocations

Table 20. Income Statement with Reallocations

Chg. (%) on

R$ million 2Q16 1Q17 2Q17 2Q16 1Q17 1H16 1H17 1H16

Financial Intermediation Income 36,935 38,267 38,034 3.0 (0.6) 68,055 76,301 12.1

Loan Operations (1) 25,626 22,683 20,851 (18.6) (8.1) 45,592 43,534 (4.5)

Sale or Transference of Financial Assets (1) 571 476 386 (32.4) (18.9) 1,146 863 (24.7)

Lease Operations 35 31 29 (19.1) (7.4) 75 60 (20.4)

Securities (2) (9) 12,282 14,883 14,645 19.2 (1.6) 23,819 29,528 24.0

Financial Derivatives (1,310) (546) 351 - - (1,613) (195) (87.9)

Foreign Exchange Portfolio 917 278 172 (81.2) (38.0) 1,547 450 (70.9)

Compulsory Investments 1,447 1,255 1,070 (26.1) (14.8) 2,838 2,325 (18.1)

FX Gain (Loss) on Foreign Equity (3) (1,081) (166) 481 - - (2,349) 315 -

Tax Hedge (4) (5) (981) (150) 436 - - (1,854) 286 -

Financial Intermediation Expenses (22,302) (23,790) (23,428) 5.0 (1.5) (39,146) (47,218) 20.6

Money Market Funds (6) (17) (28,926) (24,258) (18,119) (37.4) (25.3) (52,577) (42,377) (19.4)

Borrow ing, Assignments and Onlending (3) (6) 6,624 467 (5,309) - - 13,431 (4,842) -

Net Interest Income 14,633 14,476 14,606 (0.2) 0.9 28,909 29,083 0.6

Allow ance for Loan Losses (10) (21) (8,277) (6,713) (6,658) (19.6) (0.8) (17,422) (13,371) (23.2)

Net Financial Margin 6,356 7,764 7,948 25.0 2.4 11,488 15,712 36.8

Fee Income 5,886 6,096 6,316 7.3 3.6 11,285 12,411 10.0

Service Fee Income 3,810 3,884 3,954 3.8 1.8 7,270 7,838 7.8

Banking Fee Income 2,076 2,212 2,362 13.8 6.8 4,015 4,574 13.9

Taxes on Revenues (4) (13) (1,291) (1,262) (1,231) (4.7) (2.5) (2,514) (2,493) (0.8)

Contribution Margin 10,952 12,597 13,033 19.0 3.5 20,258 25,630 26.5

Administrative Expenses (7,973) (7,774) (7,864) (1.4) 1.2 (15,781) (15,638) (0.9)

Personnel Expenses (16) (4,956) (4,677) (4,817) (2.8) 3.0 (9,745) (9,494) (2.6)

Other Administrative Expenses (11) (12) (3,017) (3,096) (3,047) 1.0 (1.6) (6,036) (6,144) 1.8

Other Tax Expenses (13) (92) (118) (128) 39.4 8.7 (209) (245) 17.5

Commercial Income 2,887 4,706 5,041 74.6 7.1 4,268 9,747 128.4

Legal Risk (581) (751) (516) (11.2) (31.2) (1,371) (1,267) (7.6)

Civil Claims (14) (15) (18) (19) (185) (358) (112) (39.5) (68.7) (576) (470) (18.4)

Labor Law suits (16) (20) (396) (393) (404) 2.0 2.9 (795) (797) 0.2

Other Operating Income 94 213 146 55.0 (31.5) 668 360 (46.2)

Eq. Int. in Results of Subsidiaries and Aff iliates (22) 1,091 953 1,062 (2.7) 11.5 2,089 2,015 (3.5)

Other Operating Income/Expenses Result (997) (739) (916) (8.1) 23.9 (1,420) (1,655) 16.5

Other Operating Income (2) (8) 2,075 2,076 1,955 (5.8) (5.8) 4,205 4,031 (4.1)

Previ - Plano de Benefícios 1 (7) (54) (59) (59) 10.5 (0.0) (107) (119) 10.5

Previ - Fundo Utilização Restatement (8) 307 189 129 (57.9) (31.5) 680 318 (53.3)

Other Operating Expenses (7) (9) (10) (11) (12) (14) (15) (3,325) (2,945) (2,941) (11.6) (0.1) (6,199) (5,886) (5.1)

Operating Income 2,400 4,168 4,671 94.6 12.1 3,565 8,840 147.9

Non-Operating Income 72 45 59 (17.0) 31.8 108 105 (3.4)

Income Before Taxes 2,472 4,214 4,731 91.4 12.3 3,674 8,944 143.5

Income and Social Contribution Taxes (5) (23) 12 (995) (1,334) - 34.0 671 (2,329) -

Interest on Ow n Capital Tax Benefit 344 320 350 1.9 9.6 635 670 5.5

Statutory Profit Sharing (24) (246) (307) (354) 44.3 15.3 (431) (662) 53.5

Minority Interest Earnings (438) (396) (394) (10.1) (0.6) (827) (790) (4.5)

Adjusted Net Income 1,801 2,515 2,649 47.1 5.3 3,087 5,164 67.3

One-Off Items 664 (72) (30) - (57.7) 1,738 (102) -

Economic Plans (17) (18) (185) (227) (64) (65.3) (71.7) (567) (291) (48.8)

Extraordinary Provision for Law suits (19) (20) 259 88 6 (97.8) (93.6) 666 94 (85.9)

Additional Allow ance for Loan Losses (21) (22) 1,209 - - - - 3,257 - -

Tax Eff. and Stat. Prof. on One-Off Items (23) (24) (618) 67 28 - (57.7) (1,617) 95 -#N/D #N/D

Net Income 2,465 2,443 2,619 6.2 7.2 4,824 5,062 4.9

Quarterly Flow Chg. (%) on Half-Yearly Flow

Each index presented in the table above corresponds to the event item in the table "Statement of Reallocations and One-Off Items".

Chapter 2 - Financial Statements Summary

30

2.2.1. Reallocations Breakdown

In this chapter, the adjustments made in the Corporate Law Income Statement to obtain the Income Statement with Reallocations are detailed. Adjustments aim to:

a) Separate the one-off items and show the adjusted net income for the period;

b) Change the way income and expenses are shown, in order to provide a better business and company's performance understanding;

c) Allow the Net Interest Income (NII) recorded during the period to reflect, effectively, the gain from all the earning assets, to inform the market regarding the spread achieved from the ratio of this margin by average balance of earning assets. For this, it was necessary to:

I - Include, in the NII, the income recorded in other operating income with financial intermediation characteristics and that was derived from earning assets recorded in the other receivables in the Balance Sheet;

II - Identify the foreign exchange gain/(loss) on assets and liabilities abroad during the period in a specific NII item;

III - Keep amounts related to negative foreign exchange adjustments and expenses reversal that were recorded in Other Operating Income and/or Other Expenses Income to avoid inverting the balance of accounts which have a financial intermediation nature;

IV - Include, in the NII, all expenses related to Subordinated Debt and Perpetual Securities.

The next table it shows the statement of the reallocations performed during the period:

Banco do Brasil S.A. - MD&A 2Q17

31

Table 21. Reallocations and One-Off Items Breakdown

R$ million

Item From To Event 2Q16 1Q17 2Q17 1H16 1H17

1 Sale or Transference of Financial Assets Loan Operations Sale or Transference of Financial Assets 571.0 476.4 386.2 1,145.9 862.6

2 Other Operating Income Securities Financial Investment Income 0.4 2.7 1.4 0.9 4.1

3 Borrow ing, Assignments and Onlending FX Gain (Loss) on Foreign Equity FX Gain (Loss) on Foreign Equity (1,081.5) (165.9) 480.9 (2,348.7) 315.0

4 Taxes on Revenues Tax Hedge Tax Hedge (52.7) (8.1) 23.5 (99.7) 15.4

5 Income and Social Contribution Taxes Tax Hedge Tax Hedge (928.0) (142.4) 412.6 (1,754.3) 270.3

6 Money Market Funds Borrow ing, Assignments and Onlending Restatement Expenses - Funds and Programs (117.5) (160.3) (106.9) (251.8) (267.2)

7 Other Operating Expenses Previ - Plano de Benefícios 1 Actuarial Assets and Liabilities Valuation Adjustements (53.7) (59.3) (59.3) (107.3) (118.6)

8 Other Operating Income Previ - Fundo Utilização Restatement Actuarial Assets and Liabilities Valuation Adjustements 307.0 188.6 129.2 680.3 317.8

9 Securities Other Operating Expenses Operating Provisions Reversal - - 16.0 - 16.0

10 Allow ance for Loan Losses Other Operating Expenses Allow ance for Loan Losses (Cred. w /o Char. of Fin. Int.) 7.1 (55.8) 45.5 4.3 (10.4)

11 Other Administrative Expenses Other Operating Expenses Goodw ill Amorization (276.5) (310.6) (298.8) (553.8) (609.4)

12 Other Administrative Expenses Other Operating Expenses Premiums Paid to Costumers (505.4) (471.3) (468.3) (1,010.9) (939.6)

13 Other Tax Expenses Taxes on Revenues Taxes on Revenues (1,343.7) (1,270.4) (1,207.4) (2,613.7) (2,477.8)

14 Other Operating Expenses Civil Claims Expenses w ith Civil Claims (265.1) (373.9) (250.2) (577.5) (624.1)

15 Other Operating Expenses Civil Claims Reversal of Contingent Liabilities 305.4 - 219.7 398.1 219.7

16 Personnel Expenses Labor Law suits Provision for Labor Law suits (380.4) (387.5) (403.0) (767.1) (790.5)

17 Money Market Funds Economic Plans Economic Plans (167.2) (127.9) (141.3) (326.5) (269.1)

18 Civil Claims Economic Plans Economic Plans (18.0) (98.7) 77.1 (241.0) (21.6)

19 Civil Claims Extraordinary Provision for Law suits Extraordinary Provision for Law suits 243.1 82.9 4.3 637.7 87.2

20 Labor Law suits Extraordinary Provision for Law suits Extraordinary Provision for Law suits 15.8 5.2 1.3 27.9 6.4

21 Allow ance for Loan Losses Additional Allow ance for Loan Losses Reversal of Additional Alow ance for Loan Losses 1,209.1 - - 3,230.0 -

22 Eq. Int. in Results of Subsidiaries and Affiliates Additional Allow ance for Loan Losses Reversal of Additional Alow ance for Loan Losses - BV - - - 26.6 -

23 Income and Social Contribution Taxes Tax Eff. and Stat. Prof. on One-Off Items Tax Eff. and Stat. Prof. on One-Off Items (543.6) 58.7 24.8 (1,421.6) 83.5

24 Statutory Profit Sharing Tax Eff. and Stat. Prof. on One-Off Items Tax Eff. and Stat. Prof. on One-Off Items (74.7) 8.1 3.4 (195.5) 11.5

Quarterly Flow Half-Yearly Flow

Chapter 2 - Financial Statements Summary

32

2.2.2. Glossary of Reallocations

(1) Revenues (expenses) generated in financial assets with co-obligation assignment.

(2) Revenues from non-financial companies financial investments.

(3) Corresponds to the results of exchange rate changes on investments in subsidiaries and branches abroad.

(4) and (5) Taxes effects on investments abroad hedge.

(6) Funding expenses on funds and programs.

(7) Expenses arising from Previ's actuarial assets and liabilities review.

(8) Financial income from restatement of Fundo Utilização da Previ.

(9) Provision for losses on equity interests reversal.

(10) Allowance for loan loss expenses for credits without characteristics of financial intermediation.

(11) Expenses from amortization of goodwill on investments.

(12) Payroll acquisition amortization.

(13) Tax expenses reallocated to compose the contribution margin.

(14) and (15) Reversal our expenses arising from civil claims.

(16) Provision for expenses arising from labor lawsuits.

(17) and (18) Expenses with provision arising from lawsuits relating to economic plans.

(19) and (20) Extraordinary provisions for lawsuits.

(21) Partial reversal of additional allowance for loan losses recognized in previous fiscal years.

(22) Partial reversal of additional allowance for loan losses recognized in previous fiscal years of Banco Votorantim.

(23) and (24) One-off items effects on the payment of statutory profit sharing and unification of these effects on income and social contribution taxes.

2.2.3. Tax Effect and Statutory Profit Sharing on One-Off Items

The next table shows the effects of taxes and statutory profit sharing on each one-off item.

Table 22. Tax Effect and Statutory Profit Sharing on One-Off Items

R$ million 2Q16 1Q17 2Q17 1H16 1H17

Economic Plans 89 109 31 274 140

Extraordinary Provision for Law suits (125) (42) (3) (321) (45)

Additional Allow ance for Loan Losses (583) - - (1,570) -

Total (618) 67 28 (1,617) 95

Quarterly Flow Half-Yearly Flow

Banco do Brasil S.A. - MD&A 2Q17

33

3 - Loan

Banco do Brasil Lending Process

Advanced methodologies for credit risk calculation supports lending process in Banco do Brasil. BB develops these methodologies and follows the best risk management practices.

Customer risk reflects the likelihood that a borrower will default in 1 year after the risk analysis. Banco do Brasil determines the amount of resources exposed to that borrower. To calculate the risk the Bank uses internal and external information, in addition to the history of the relationship with that customer, as follows.

I. Customer File Information: analysis of client information obtained from internal and external sources, including restrictive client information;

II. Behavior within BB: indebtedness evaluation, use of credit products, timely payments and data on relationships with the Bank;

III. Behavior within the Banking Industry: indebtedness analysis at other banks, use of competitors’ products and payment punctuality within the Banking Industry;

IV. Personalized Methodologies - evaluation of financial statements, customer’s segment outlook and other market information.

Risk is collectively calculated for individuals, very small companies, and farmers, and individually calculated for companies and government entities. The client’s credit risk is automatically calculated in the collective risk analysis, generating immediate results for the intended transaction.

Individual analyses are conducted by the technical staff of Banco do Brasil, using corporate systems calculations. Committees are responsible for approving these customers’ risk.

Customer risk is an important input to establish credit limits, to define proper classification of loan risk, and to guide business with the customer.

Figure 17. Banco do Brasil Lending Process

1 - SCR: Central Bank of Brazil Credit Information System.

3.1. Loan Portfolio

For a better understanding of BB’s loan operations, we present the following definitions related to the loan portfolio. The information presented in this chapter is divided into individuals, companies and agribusinesses segments.

a) Classified Loan Portfolio: sum of the credit operations, financing, leasing, other credit with loan characteristics and acquired loan portfolio.

b) Loan Portfolio – Broad Definition: classified loan portfolio added of the private securities and guarantees operations, where:

b.1) Private Securities: operations characterized by the acquisition of securities (commercial papers and debentures) mainly issued by private companies and underwritten by BB.

b.2) Guarantees: operations where BB ensures the settlement of the contracts.

Chapter 3 - Loan

34

Table 23. Loan Portfolio – Classified and Broad Definition

R$ million Jun/16 Share % Mar/17 Share % Jun/17 Share % Jun/16 Mar/17

Classified Loan Portfolio (a) 691,832 100.0 638,336 100.0 642,846 100.0 (7.1) 0.7

Brazil 647,650 93.6 603,009 94.5 607,273 94.5 (6.2) 0.7

Individuals 189,222 27.4 184,752 28.9 185,530 28.9 (2.0) 0.4

Payroll Loan 64,380 9.3 63,176 9.9 64,808 10.1 0.7 2.6

Mortgage 39,706 5.7 42,635 6.7 43,049 6.7 8.4 1.0

Credit Card 22,906 3.3 23,776 3.7 23,627 3.7 3.1 (0.6)

Salary Loans 20,482 3.0 19,716 3.1 19,850 3.1 (3.1) 0.7

Auto Loans 23,081 3.3 17,732 2.8 16,400 2.6 (28.9) (7.5)

Consumer Finance 7,392 1.1 5,841 0.9 6,110 1.0 (17.3) 4.6

Overdraft Account 2,775 0.4 2,580 0.4 2,425 0.4 (12.6) (6.0)

Other 8,502 1.2 9,295 1.5 9,261 1.4 8.9 (0.4)

Companies 274,875 39.7 238,827 37.4 234,078 36.4 (14.8) (2.0)

Middle Market and Corporates 156,353 22.6 139,695 21.9 138,033 21.5 (11.7) (1.2)

Very Small and Small Companies 81,167 11.7 61,425 9.6 57,442 8.9 (29.2) (6.5)

Government 37,355 5.4 37,707 5.9 38,603 6.0 3.3 2.4

Agribusiness 183,553 26.5 179,431 28.1 187,665 29.2 2.2 4.6

Individuals 130,475 18.9 134,010 21.0 138,715 21.6 6.3 3.5

Companies 53,078 7.7 45,421 7.1 48,949 7.6 (7.8) 7.8

Abroad 44,181 6.4 35,327 5.5 35,573 5.5 (19.5) 0.7

Private Securities and Guarantees (b) 61,140 50,353 53,275 (12.9) 5.8

Loan Portfolio - Broad Definition (a + b) 752,971 100.0 688,689 100.0 696,121 100.0 (7.6) 1.1

Brazil 701,756 93.2 645,968 93.8 651,250 93.6 (7.2) 0.8

Individuals 189,703 25.2 185,124 26.9 185,884 26.7 (2.0) 0.4

Companies 327,577 43.5 280,783 40.8 277,210 39.8 (15.4) (1.3)

Agribusiness 184,476 24.5 180,062 26.1 188,155 27.0 2.0 4.5

Abroad 51,215 6.8 42,720 6.2 44,871 6.4 (12.4) 5.0

Balance Chg. % on

For its guidance, Banco do Brasil considers the organic domestic loan portfolio – broad definition, calculated by the sum of the domestic organic loan portfolio and private securities and guarantees, not considering acquired loan portfolio. The agroindustry loans are excluded from rural loan portfolio and summed to companies loan portfolio.

Table 24. Organic Domestic Loan Portfolio – Broad Definition

R$ million Jun/16 Share % Mar/17 Share % Jun/17 Share % Jun/16 Mar/17

Organic Domestic Loan Portfolio - Broad Definition 684,587 100.0 633,271 100.0 639,692 100.0 (6.6) 1.0

Individuals 172,535 25.2 172,427 27.2 174,326 27.3 1.0 1.1

Companies 359,454 52.5 308,657 48.7 307,171 48.0 (14.5) (0.5)

Rural 152,599 22.3 152,187 24.0 158,194 24.7 3.7 3.9

Balance Chg. % on

The table below shows BB’s market share in the classified loan portfolio of the Brazilian Banking Industry (BI).

Table 25. Loans in the Brazilian Banking Industry

R$ billion Jun/16 Sep/16 Dec/16 Mar/17 Jun/17 Jun/16 Mar/17

BI 3,130 3,110 3,106 3,079 3,078 (1.6) (0.0)

Individuals 1,529 1,542 1,561 1,576 1,595 4.3 1.2

Companies 1,600 1,568 1,545 1,502 1,483 (7.3) (1.3)

BB Market Share - % 20.7 20.2 19.8 19.6 19.7

Balance Chg. % on

The following figure sets forth the domestic classified loan portfolio by the loans closing date. In certain cases, loan disbursement may continue to occur during quarters after the loan’s closing, being then added to the original closing quarter.

Considering the portfolio of Jun/17, 16.8% of assets were contracted in 2017. Assets contracted before 2015 corresponds to 45.8%.

Banco do Brasil S.A. - MD&A 2Q17

35

Figure 18. Classified Loan Portfolio BB by Contracted Period - % and R$ billion

6.8 6.6 6.3 6.1 5.6

2.9 2.7 2.5 2.3 2.1

4.2 3.9 3.7 3.4 3.2

9.5 9.3 8.9 8.5 8.1

16.6 16.3 15.5 15.113.3

17.5 16.615.6

14.713.5

4.13.8

3.63.4

3.1

5.85.4

5.14.7

4.2

7.85.5

4.94.4

4.0

9.2

8.2

5.85.2

4.6

7.1

6.4

5.8

4.5

3.8

8.8

9.0

8.2

7.4

5.3

6.3

6.4

5.9

5.1

8.0

8.4

7.3

6.0

6.0

10.8

Jun/16 Sep/16 Dec/16 Mar/17 Jun/17

Other 2010 2011 2012 2013 2014 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2T17

607.3 603.0 615.7 629.5 647.7

201621.5%

201515.9%

201413.5%

201313.3%

Up to 201219.0%

201716.8%

The following figure sets forth the BB’s Classified Loan Portfolio in Brazil by maturity. Up to 79.9% of the portfolio has a maturity period over 360 days, in line with the investment, mortgage and payroll loans trend, while 6.9% of the portfolio has a maturity of less than 90 days, notably working capital operations with companies.

Figure 19. BB’s Classified Loan Portfolio in Brazil by Maturity - %

3.3

1.8 1.9

5.4

7.8

79.9

Jun/17

Up to 30 days

From 31 to 60 days

From 61 to 90 days

From 91 to 180 days

From 181 to 360 days

Over 360 days

3.1.1. Individuals Loan Portfolio

The following tables show the main credit lines to individuals. BB’s total acquired loan portfolio is composed of payroll and auto loan operations. The decrease on the annual basis was mainly due to the reorganization and consolidation of the sector, specially the payroll loan segment. The joint obligation loan portfolio are 99.5% of this total.

Chapter 3 - Loan

36

Table 26. Individuals Loan Portfolio

R$ million Jun/16Share % Mar/17Share % Jun/17Share % Jun/16 Mar/17

Organic Classified Loan Portf. 172,054 90.7 172,054 92.9 173,972 93.6 1.1 1.1

Direct Consumer Credit 90,832 47.9 87,999 47.5 90,179 48.5 (0.7) 2.5

Payroll Loan 62,959 33.2 62,442 33.7 64,219 34.5 2.0 2.8

Salary Loan 20,482 10.8 19,716 10.7 19,850 10.7 (3.1) 0.7

Consumer Finance 7,392 3.9 5,841 3.2 6,110 3.3 (17.3) 4.6

Mortgage 39,706 20.9 42,635 23.0 43,049 23.2 8.4 1.0

Credit Card 22,906 12.1 23,776 12.8 23,627 12.7 3.1 (0.6)

Renegotiated Loan 6,876 3.6 8,049 4.3 8,139 4.4 18.4 1.1

Auto Loan 7,333 3.9 5,769 3.1 5,432 2.9 (25.9) (5.9)

Overdraft Account 2,775 1.5 2,580 1.4 2,425 1.3 (12.6) (6.0)

Microcredit 700 0.4 602 0.3 538 0.3 (23.2) (10.7)

Other 926 0.5 643 0.3 584 0.3 (36.9) (9.1)

Acquired Loan Portfolio¹ 17,169 9.1 12,697 6.9 11,558 6.2 (32.7) (9.0)

Payroll Loan 1,421 0.7 734 0.4 590 0.3 (58.5) (19.7)

Auto Loan 15,748 8.3 11,963 6.5 10,969 5.9 (30.3) (8.3)

Classified Loan Portfolio (a) 189,222 99.7 184,752 99.8 185,530 99.8 (2.0) 0.4

Private Securities and Guarantees (b) 481 0.3 372 0.2 354 0.2 (26.4) (4.9)

Broad Concept Loan Portfolio (a+b) 189,703 100.0 185,124 100.0 185,884 100.0 (2.0) 0.4

Balance Chg. % on

1 – Includes the balance of acquired joint obligation loan portfolio, in compliance with CMN Resolution No. 3,533/08.

BB remains among the market leaders in loan operations with lower risk. The following table shows BB's participation in these segments.

Table 27. Individuals Loan Portfolio – Market Share

R$ million BB¹ BI Share % BB¹ BI Share % BB¹ BI Share %

Payroll Loan 64,380 282,560 22.8 63,176 293,950 21.5 64,808 300,705 21.6

Auto Loan² 22,011 150,604 14.6 16,707 144,214 11.6 15,404 143,837 10.7

Mortgage 39,706 516,805 7.7 42,635 542,160 7.9 43,049 551,498 7.8

Jun/16 Mar/17 Jun/17

1 – Includes the acquired joint obligation loan portfolio, in compliance with CMN Resolution 3,533/08. 2 – Includes only free resources.

Civil servants and pensioners contracted the majority of direct consumer credit and auto loans, which portfolio was R$95.6 billion in Jun/17.

Figure 20. Organic Individuals Loan Portfolio – Direct Consumer Credit and Auto Loan - %

79.7 80.6 81.3

7.9 8.7 8.9

12.4 10.6 9.7

Jun/16 Mar/17 Jun/17

Civil Servants INSS Retirees and Pensioners Private Sector Employees

BB’s knowledge of its customers is one of the important components of credit methodology. Of those with credit transactions at BB, 89.9% have an account for at least five years.

Banco do Brasil S.A. - MD&A 2Q17

37

Table 28. Account Time – Customers with Credit Transactions

% Jun/16 Mar/17 Jun/17

Account Time

Up to 1 year 1.1 0.7 0.6

From 1 to 2 years 2.4 1.7 1.6

From 2 to 5 years 8.1 8.2 7.9

From 5 to 10 years 19.7 19.2 19.0

Over 10 years 68.8 70.1 70.9

The table below shows the average maturity and the rates of the operations with lower risk. The average maturity is calculated by weighting the remaining term with the closing balance. The average rate is calculated considering the portfolio.

Table 29. Average Rates and Maturity

Sep/15 Dec/15 Mar/16 Jun/16 Sep/16 Dec/16 Mar/17 Jun/17

Banco do Brasil

Auto Financing

Average Rate - % p.m. 1.58 1.63 1.66 1.71 1.75 1.79 1.82 1.83

Average Maturity - months 30 30 30 29 29 29 29 29

Mortgage

Average Contract Amount - R$ thousand 115.0 114.0 113.0 127.2 134.3 138.3 132.1 149.2

Average Rate - % p.y. 7.11 7.09 7.07 7.09 7.10 7.12 7.12 7.13

Average Maturity - months 344 346 347 339 338 338 335 332

LTV 59.6 59.6 59.8 59.9 60.0 60.1 60.2 60.6

Payroll Loan

Average Rate - % p.m. 1.81 1.83 1.85 1.87 1.89 1.91 1.92 1.92

Average Maturity - months 59 60 60 60 60 60 60 60

Direct Consumer Credit

Average Rate - % p.m. 3.73 3.83 3.97 4.07 4.12 4.15 4.21 4.22

Average Maturity - months 43 44 43 42 43 44 43 43

Payroll Loan

In the 2Q17, the disbursement was R$11.0 billion, best performance since 2014. The payroll loan portfolio was R$64.2 billion in Jun/17. It’s mainly composed by operations with civil servants and INSS pensioners, who have lower risk. The table below shows the portfolio breakdown.

Figure 21. Organic Payroll Loan Breakdown - %

88.5 88.0 87.8

8.4 9.3 9.6

3.0 2.7 2.6

Jun/16 Mar/17 Jun/17

Civil Servants INSS´s Retirees and Pensioners Private Sector Employees

Most of the payroll loan granted by BB in this quarter has a maturity period over 60 months. The profile of this portfolio allows customers to lengthen the term and generates loyalty and an opportunity to offer other products during this time.

Chapter 3 - Loan

38

Figure 22. Maturity of transactions contracted in the quarter – Payroll Loan

0 to 12 months

1.7%

13 to 24 months

4.4%25 to 36 months

5.5%

37 to 48 months

8.8%

49 to 60 months

9.9%

61 to 72 months

17.3%

73 to 84 months

6.0%

85 to 96 months

46.3%

Auto Loan

The balance of BB’s organic auto loan portfolio was R$5.4 billion in Jun/17. Disbursement was R$651.2 million in 2Q17.

The following table shows the main characteristics of the customers of BB’s organic auto loan portfolio. Most customers have hold accounts for over 10 years and receive their salary through the Bank.

Table 30. BB’s Organic Auto Loan Portfolio - Customers Characteristics

% Jun/16 Mar/17 Jun/17

Account Time

Up to 5 years 11.8 9.8 9.0

From 5 to 10 years 19.7 19.3 19.3

Over 10 years 68.5 70.9 71.7

Salary

Paid through Banco do Brasil 71.8 72.9 73.3

Paid through other banks 28.2 27.1 26.7

The next figure shows maturity of auto loan transactions contracted at Banco do Brasil in 2Q17. Approximately 74.9% of the disbursement matures within 48 months.

Figure 23. Maturity of Transactions Contracted in the quarter – Auto Loan

0 to 12 months

4.2%

13 to 24 months

18.4%

25 to 36 months

32.8%

37 to 48 months

19.6%

49 to 60 months

25.1%

The following figure sets forth the Loan-to-Value (LTV) ratio of financed assets. BB’s customers committed, in average, 33.5% of the asset’s value in 2Q17, which further reduces the probability of default.

Banco do Brasil S.A. - MD&A 2Q17

39

Figure 24. Loan to Value - Organic Auto Loan Portfolio - %

67.2 66.8 65.9 65.7 65.9 65.7 66.1 66.5

32.8 33.2 34.1 34.3 34.1 34.3 33.9 33.5

3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17

LTV Down Payment

Mortgage

In the last 12 months the balance increased R$ 3.3 billion confirming the upward trend as a percentage of the total portfolio, with the increase from 23.1% to 24.7% in organic portfolio. The increase was due the expansion of products offered to customers and process’ efficiency gain.

BB had a 7.8% of market share in Jun/17, an increase of 10bps from the same period of the last year.

3.1.2. Companies Loan Portfolio

The companies loan portfolio decrease in annual basis is a result, mainly, from the reduction of working capital operations.

Table 31. Companies Loan Portfolio

R$ million Jun/16 Share % Mar/17 Share % Jun/17 Share % Jun/16 Mar/17

Classified Loan Portfolio (a) 274,875 83.9 238,827 85.1 234,078 84.4 (14.8) (2.0)

Working Capital 134,356 41.0 117,236 41.8 114,707 41.4 (14.6) (2.2)

Investiments 62,383 19.0 57,881 20.6 56,471 20.4 (9.5) (2.4)

Renegotiated Loan 18,097 5.5 18,495 6.6 18,838 6.8 4.1 1.9

ACC/ACE 18,163 5.5 12,663 4.5 13,461 4.9 (25.9) 6.3

Mortgage 11,872 3.6 11,028 3.9 10,549 3.8 (11.1) (4.3)

Credit Card 12,573 3.8 8,863 3.2 7,593 2.7 (39.6) (14.3)

Receivables 10,959 3.3 7,450 2.7 7,522 2.7 (31.4) 1.0

Pre-Aproved-Credit 2,233 0.7 1,539 0.5 1,312 0.5 (41.3) (14.8)

BNDES Exim 925 0.3 765 0.3 708 0.3 (23.5) (7.4)

Overdraft Account 476 0.1 438 0.2 412 0.1 (13.3) (5.9)

Other 2,838 0.9 2,469 0.9 2,506 0.9 (11.7) 1.5

Private Sec. and Guarantees (b) 52,702 16.1 41,956 14.9 43,132 15.6 (18.2) 2.8

Loan Portfolio - Broad Definition (a+b) 327,577 100.0 280,783 100.0 277,210 100.0 (15.4) (1.3)

Balance Chg. % on

The following table sets forth the distribution of the companies portfolio, considering the broad definition.

Table 32. Companies Portfolio Breakdown

R$ million Jun/16 Share % Mar/17 Share % Jun/17 Share % Jun/16 Mar/17

Classified Loan Portfolio (a) 274,875 83.9 238,827 85.1 234,078 84.4 (14.8) (2.0)

Middle Market and Corporates 156,353 47.7 139,695 49.8 138,033 49.8 (11.7) (1.2)

Very Small and Small Companies 81,167 24.8 61,425 21.9 57,442 20.7 (29.2) (6.5)

Government 37,355 11.4 37,707 13.4 38,603 13.9 3.3 2.4

Private Sec. and Guarantees (b) 52,702 16.1 41,956 14.9 43,132 15.6 (18.2) 2.8

Loan Portfolio - Broad Definition (a+b) 327,577 100.0 280,783 100.0 277,210 100.0 (15.4) (1.3)

Balance Chg. % on

Foreign Trade Finance

BB is one of the main partners in Brazilian foreign trade, closing 2Q17 with a market share of 21.6% and 12.7% in foreign exchange for export and import operations, respectively. BB ended the quarter

Chapter 3 - Loan

40

with a 24.2% market share in operations of Forward Exchange Contracts (ACC) and Advance against Draft Presentation (ACE).

Table 33. Foreign Exchange for Export and Import Operations

2Q16 3Q16 4Q16 1Q17 2Q17 2Q16 1Q17

Export Exchange

Contracted Amount (US$ thousand) 11,198 8,433 8,061 8,120 11,079 (1.1) 36.4

Market Share - % 22.5 20.9 16.8 17.2 21.6

Import Exchange

Contracted Amount (US$ thousand) 4,402 4,593 5,066 4,051 4,228 (3.9) 4.4

Market Share - % 14.3 14.5 15.5 12.5 12.7

Balance Chg. % on

Table 34. Forward Exchange Contracts (ACC) and Advance against Draft Presentation (ACE)

2Q16 3Q16 4Q16 1Q17 2Q17 2Q16 1Q17

Contracted Amount (US$ million) 2,276 1,354 1,496 1,252 1,852 (18.6) 47.9

Quantity of Contracts 3,128 2,554 2,410 2,255 2,971 (5.0) 31.8

Average Vol. per Contract (US$ thousand) 728 530 621 555 623 (14.4) 12.2

Balance Chg. % on

Investment Loan

Banco do Brasil’s disbursements for investment loan were R$6.4 billion in 2Q17. Pronaf/Pronamp/Proger/FCO products stand out, accounting for most of disbursements in period.

The next chart shows the onlending funds share in disbursements.

Figure 25. Disbursements by Onlending Fund - %

15.4

51.9

9.1

0.8 2.8

13.3

6.6

2Q16

9.9

52.8

20.5

1.8 8.0

2.24.9

2Q17BNDES/Finame

Pronaf/Proger/Pronamp/FCO

Agr ibusiness Investment

Transport Infrastructure

Finance

Development Funds

BNDES Card

Other

Loan to the Government

Banco do Brasil supports the states, Federal District and the municipalities in their demands, financing investment programs that aims to improve quality and transparency of public administration, urban mobility, health, education and public safety, generating real benefits for the population and contributing to the develop of the country. In 2Q17 there were disbursed R$212 million to states and municipalities.

Under Central Bank of Brazil Circular 3,644/2013, Article 37, a Risk Weighting Factor (FPR) of 0% must be applied to the portion of exposure covered by credit guarantees provided by the National Treasury transactions, without thereby compromising capital.

Loan to Very Small and Small Companies

At the end of 2Q17, BB had 2.2 million very small and small companies customers. Companies with annual revenues up to R$ 25 million are categorized as very small and small companies customers.

The following table shows that 99.1% of this portfolio was concentrated by account holders who have accounts over two years.

Banco do Brasil S.A. - MD&A 2Q17

41

Table 35. Account Time - Percentage of the Very Small and Small Companies Portfolio Balance

% Jun/16 Mar/17 Jun/17

Account Time

Up to 1 year 0.3 0.1 0.2

From 1 to 2 years 2.1 1.1 0.7

From 2 to 5 years 18.5 15.1 14.8

From 5 to 10 years 34.3 34.2 34.3

Over 10 years 44.8 49.3 50.0

The following tables show the main details of loan to very small and small companies.

Table 36. Very Small and Small Companies Loans by Sector

R$ million Jun/16 Share % Mar/17 Share % Jun/17 Share % Jun/16 Mar/17

Trade 34,173 42.1 24,979 40.7 23,576 41.0 (31.0) (5.6)

Service Segment 25,753 31.7 20,174 32.8 18,723 32.6 (27.3) (7.2)

Industry 21,241 26.2 16,272 26.5 15,143 26.4 (28.7) (6.9)

Total 81,167 100.0 61,425 100.0 57,442 100.0 (29.2) (6.5)

Balance Chg. % on

Table 37. Very Small and Small Companies Loan Products

R$ million Jun/16 Share % Mar/17 Share % Jun/17 Share % Jun/16 Mar/17

Working Capital 51,593 63.6 38,675 63.0 36,858 64.2 (28.6) (4.7)

Investment 28,348 34.9 21,862 35.6 19,699 34.3 (30.5) (9.9)

Foreign Trade 1,226 1.5 888 1.4 885 1.5 (27.8) (0.4)

Total 81,167 100.0 61,425 100.0 57,442 100.0 (29.2) (6.5)

Balance Chg. % on

3.1.3. Agribusiness Loan Portfolio

Agribusiness is one of the main sectors of the Brazilian economy, with fundamental importance to the country’s growth and development.

Brazil is one of the world’s leading agribusiness exporters, especially in terms of production, export and trade of major agricultural supply chains.

Table 38. Brazil’s Share in World Agribusiness in Jun/17

Item Production Export % World Trade

Orange Juice 1st 1st 76.1%

Sugarcane 1st 1st 48.0%

Soybean and Related Products 2nd 1st 43.2%

Poultry 2nd 1st 38.3%

Coffee 1st 1st 25.0%

Cattle 2nd 2nd 18.7%

Corn 3rd 3rd 22.0%

Cotton 5th 4th 12.2%

Source: USDA – PSD online.

The main role played by Brazilian agribusiness results from the competence of farmers, available natural resources, state-of-the-art technology, and offer of credit. These factors place Brazil in a privileged position in the world scenario.

Agricultural and livestock activity follows the agricultural calendar, known as the crop-year, which begins in July of each year and ends in June of the following year. The data presented in this report includes information from fourth quarter of 2016/2017 crop.

Agribusiness at BB

Banco do Brasil is one of the main agents encouraging agribusiness development in Brazil, in line with the criteria established to maintain socio-environmental sustainability.

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42

Operating from the small producer to large agribusiness companies, BB finances the costs of producing and trading agricultural products, stimulates rural investment, including construction and enlargement of warehouses, purchase and modernization of agricultural machinery and farm implements, besides processing and industrialization of agricultural goods, as well as the rural properties adequacy to environmental legislation. Thus, BB supports the Brazilian agribusiness in all stages of the production chain.

Historically, Banco do Brasil remains as the main agribusiness financial agent in the country, contributing significantly to supply the credit demand. According to Central Bank of Brazil’s data, BB accounted for 59.8% of all financings granted to the agribusiness sector in in Jun/17.

Figure 26. BB’s Market Share in Brazilian Agribusiness – %

40.2

59.8

Jun/17

Banco do Brasil Other Financial Institutions

The distribution of agribusiness operations by Brazilian region shows the share of each in the loan portfolio.

Table 39. Classified Agribusiness Loan Portfolio by Region

Region Rural Credit - % Agroindustry - % Total - %

Southeast 31.3 97.4 41.9

South 32.6 1.4 27.6

Midw est 23.8 0.5 20.0

Northeast 6.9 0.5 5.9

North 5.4 0.1 4.6

The following table shows the breakdown of the agribusiness loan portfolio by credit line/program.

The Brazilian Program for the Strengthening of Family Farming (Programa Nacional de Fortalecimento da Agricultura Familiar – Pronaf) stands out, totaling R$43.0 billion in Jun/17, an increase of 6.1% on an annual basis. The Brazilian Program for Support to the Midsize Farmer (Programa Nacional de Apoio ao Médio Produtor Rural – Pronamp) was R$25.2 billion in Jun/17, an increase of 1.2% in 12 months. Also important is the working capital for input purchase, with R$40.6 billion in Jun/17, an increase of 7.5% in 12 months.

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43

Table 40. Agribusiness Loan Portfolio by Credit Line/Program

R$ million Jun/16 Share % Mar/17 Share % Jun/17 Share % Jun/16 Mar/17

Classified Loan Portfolio 183,553 99.5 179,431 99.6 187,665 99.7 2.2 4.6

Rural Loans 151,676 82.2 151,556 84.2 157,703 83.8 4.0 4.1

Pronaf 40,501 22.0 42,291 23.5 42,972 22.8 6.1 1.6

Work. Capital for Input Purchase 37,789 20.5 37,778 21.0 40,629 21.6 7.5 7.5

Pronamp 24,916 13.5 24,736 13.7 25,225 13.4 1.2 2.0

FCO Rural 9,411 5.1 10,742 6.0 11,481 6.1 22.0 6.9

Agricultural Investment 9,412 5.1 9,616 5.3 10,165 5.4 8.0 5.7

Low Carbon Agriculture Program 9,478 5.1 9,196 5.1 9,060 4.8 (4.4) (1.5)

BNDES/Finame Rural 9,432 5.1 8,730 4.8 8,565 4.6 (9.2) (1.9)

Agricultural Selling 7,429 4.0 5,552 3.1 6,797 3.6 (8.5) 22.4

Other 3,309 1.8 2,915 1.6 2,810 1.5 (15.1) (3.6)

Loans to Companies 31,877 17.3 27,875 15.5 29,961 15.9 (6.0) 7.5

Rural Product Bills and Guarantees 923 0.5 631 0.4 491 0.3 (46.8) (22.2)

Rural Loans - Broad Definition 152,599 82.7 152,187 84.5 158,194 84.1 3.7 3.9

Loan Portfolio - Broad Definition 184,476 100.0 180,062 100.0 188,155 100.0 2.0 4.5

Balance Chg. % on

The following table sets forth a breakdown of BB’s agribusiness portfolio, divided into working capital for input purchase, investments, agroindustry, crop trading and others.

Table 41. Agribusiness Loan Portfolio by Purpose

R$ million Jun/16 Share % Mar/17 Share % Jun/17 Share % Jun/16 Mar/17

Classified Loan Portfolio 183,553 99.5 179,431 99.6 187,665 99.7 2.2 4.6

Investment 82,168 44.5 83,415 46.3 84,505 44.9 2.8 1.3

Working Capital for Input Purchase 60,492 32.8 59,894 33.3 63,625 33.8 5.2 6.2

Agroindustry 31,877 17.3 27,875 15.5 29,961 15.9 (6.0) 7.5

Crop Trading 8,093 4.4 5,965 3.3 7,107 3.8 (12.2) 19.1

Other 924 0.5 2,282 1.3 2,466 1.3 166.8 8.1

Rural Product Bills and Guarantees 923 0.5 631 0.4 491 0.3 (46.8) (22.2)

Loan Portfolio - Broad Definition 184,476 100.0 180,062 100.0 188,155 100.0 2.0 4.5

Balance Chg. % on

The following table shows the balance of agribusiness loan transactions by financed item.

Table 42. Agribusiness Loan Portfolio by Financed Item

R$ million Jun/16 Share % Mar/17 Share % Jun/17 Share % Jun/16 Mar/17

Classified Loan Portfolio 183,553 99.5 179,431 99.6 187,665 99.7 2.2 4.6

Livestock 35,699 19.4 38,135 21.2 38,560 20.5 8.0 1.1

Meat 23,068 12.5 24,944 13.9 25,184 13.4 9.2 1.0

Milk 12,631 6.8 13,191 7.3 13,375 7.1 5.9 1.4

Machinery and Equipment 22,578 12.2 23,105 12.8 23,082 12.3 2.2 (0.1)

Soybean 17,083 9.3 18,246 10.1 20,621 11.0 20.7 13.0

Corn 8,202 4.4 9,272 5.1 9,704 5.2 18.3 4.7

Coffee 4,038 2.2 3,725 2.1 4,401 2.3 9.0 18.1

Sugarcane 3,612 2.0 3,268 1.8 3,479 1.8 (3.7) 6.4

Aviculture 3,235 1.8 3,601 2.0 3,698 2.0 14.3 2.7

Sw ine Production 1,899 1.0 2,850 1.6 3,246 1.7 70.9 13.9

Rice 2,392 1.3 2,008 1.1 2,504 1.3 4.7 24.7

Cotton 693 0.4 647 0.4 681 0.4 (1.6) 5.3

Other 52,246 28.3 46,698 25.9 47,728 25.4 (8.6) 2.2

Loans to Companies 31,877 17.3 27,875 15.5 29,961 15.9 (6.0) 7.5

Rural Product Bills and Guarantees 923 0.5 631 0.4 491 0.3 (46.8) (22.2)

Loan Portfolio - Broad Definition 184,476 100.0 180,062 100.0 188,155 100.0 2.0 4.5

Balance Chg. % on

The following table shows the balance of agribusiness loan portfolio and the breakdown for each customer type.

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44

Table 43. Agribusiness Loan Portfolio by Customer Size

R$ million Jun/16 Share % Mar/17 Share % Jun/17 Share % Jun/16 Mar/17

Classified Loan Portfolio 183,553 99.5 179,431 99.6 187,665 99.7 2.2 4.6

Medium and Large Sized 87,476 47.4 88,570 49.2 92,508 49.2 5.8 4.4

Small 42,999 23.3 45,440 25.2 46,208 24.6 7.5 1.7

Companies 42,594 23.1 37,260 20.7 40,563 21.6 (4.8) 8.9

Agroindustrial Cooperatives 10,485 5.7 8,161 4.5 8,386 4.5 (20.0) 2.8

Rural Product Bills and Guarantees 923 0.5 631 0.4 491 0.3 (46.8) (22.2)

Loan Portfolio - Broad Definition 184,476 100.0 180,062 100.0 188,155 100.0 2.0 4.5

Balance Chg. % on

The following table sets forth the breakdown of agribusiness loan portfolio by customer type.

Table 44. Agribusiness Loan Portfolio by Customer Type

R$ million Jun/16 Share % Mar/17 Share % Jun/17 Share % Jun/16 Mar/17

Classified Loan Portfolio 183,553 99.5 179,431 99.6 187,665 99.7 2.2 4.6

Individuals 130,475 70.7 134,010 74.4 138,715 73.7 6.3 3.5

Companies 53,078 28.8 45,421 25.2 48,949 26.0 (7.8) 7.8

Rural Product Bills and Guarantees 923 0.5 631 0.4 491 0.3 (46.8) (22.2)

Loan Portfolio - Broad Definition 184,476 100.0 180,062 100.0 188,155 100.0 2.0 4.5

Balance Chg. % on

BB uses 81.1% own funds in rural and agro industrial financing (mainly demand deposits, rural savings accounts and agribusiness letters of credit). In addition to those, BB also onlends funds from the BNDES (Brazilian development bank), FCO (constitutional fund for financing of the Midwest) and the Funcafé (coffee production economy defense fund).

The following table sets forth the breakdown of agribusiness loan portfolio – broad definition by funding sources.

Table 45. Agribusiness Loan Portfolio Broad Definition by Funding Sources

R$ million Jun/16 Share % Mar/17 Share % Jun/17 Share %

Agricultural Savings 92,146 50.0 91,971 51.1 97,751 52.0

Agribusiness Letters of Credit 38,178 20.7 33,620 18.7 35,152 18.7

Demand Deposits 19,929 10.8 20,801 11.6 19,703 10.5

FCO 13,184 7.1 14,966 8.3 15,843 8.4

BNDES/FINAME 11,955 6.5 11,748 6.5 11,793 6.3

Other¹ 9,084 4.9 6,955 3.9 7,914 4.2

Loan Portfolio - Broad Definition 184,476 100.0 180,062 100.0 188,155 100.0

Balance

1 – National Treasury, Funcafé, Rural Product Bills and Guarantees.

To enable financing with lower interest rates, covering the funding costs, credit risks, tax and administrative costs and BB’s profitability, National Treasury and Central Bank of Brazil may authorize following subsides:

a) Equalization Revenues: amount paid by the National Treasury that represents revenues for the banks to cover the administrative and tax costs, besides the guarantee of a profitability rate on the applied resources;

b) Weighting factor: multiplier adopted by the Federal Government to the use of resources from demand deposits and rural savings. Through this mechanism the banks are authorized to operate lower rates of rural credit. The released amount is invested in operations with market rates, in order to compensate the profitability difference from operations encouraged by the Federal Government.

The mechanism of a weighting factor reduces the amount of assets subject to equalization, and allows banks to increase interest income proportionally. At BB, the released funds has TMS remuneration.

The next table shows a history of equalization revenues and weighting factor.

Banco do Brasil S.A. - MD&A 2Q17

45

Table 46. Equalization Revenues and Weighting Factor

R$ million 2Q16 3Q16 4Q16 1Q17 2Q17

Equalization Revenues 1,416 1,706 1,722 1,415 1,385

Weighting Factor 481 72 67 75 59

Total 1,897 1,779 1,789 1,490 1,444

Quarterly Flow

Table 47. Equalization Revenues Flow

R$ million 2Q16 3Q16 4Q16 1Q17 2Q17

Initial Balance 1,357 2,767 1,700 3,418 1,401

Flow 1,410 (1,067) 1,718 (2,017) 1,382

Final Balance 2,767 1,700 3,418 1,401 2,783

Quarterly Flow

1 – Source: Notes to the Consolidated Financial Statements 12.b.

The following table sets forth the distribution of BB’s Agribusiness Portfolio equalization funds.

Table 48. Equalizable resources in the Agribusiness Portfolio

R$ million Jun/16 Mar/17 Jun/17

Classified Loan Portfolio 183,553 179,431 187,665

Equalizable Resources 95,500 92,578 96,358

Investments 50,970 49,449 49,779

Working Capital for Input Purchase 43,255 41,617 44,650

Crop Trading 1,275 1,512 1,929

Non-Equalizable Resources 88,054 86,853 91,306

Rural Product Bills and Guarantees 923 631 491

Loan Portfolio - Broad Definition 184,476 180,062 188,155

Balance

In the 2016/2017 crop, BB disbursed R$72.3 billion in agricultural loans. The Family Agriculture disbursement was R$13.4 billion, while the disbursement for Companies was R$46.9 billion. Operations through the National Program Support for Medium Farmers (Pronamp) were R$12.0 billion.

The next table compares the disbursements of the 2016/2017 crop to the 2015/2016 one, detailing the credit purpose, destination and customer type.

Table 49. Disbursements by Purpose – Rural Credit

R$ million Crop 15/16 Crop 16/17 Change (%)

Family - Pronaf 13,494 13,431 (0.5)

Working Capital for Input Purchase 7,276 7,581 4.2

Investment 6,218 5,851 (5.9)

Medium - Pronamp 14,313 11,964 (16.4)

Working Capital for Input Purchase 12,287 10,586 (13.8)

Investment 2,026 1,378 (32.0)

Companies 54,582 46,890 (14.1)

Working Cap. for Input Purch./Crop Trading 48,176 39,929 (17.1)

Investment 6,406 6,961 8.7

Total 82,389 72,285 (12.3)

Risk Mitigators

Banco do Brasil encourages the contracting of protection against bad weather (agricultural insurance or Proagro) in operations of working capital for input purchase. The strategy improves with each new crop, including the mass offering of options, such as seguro faturamento (price assurance).

The risk mitigation strategy takes into account several types of information on the customers’ requested transactions, such as activity risk, type of crop to be financed and financing location. Those types of

Chapter 3 - Loan

46

information allow the use of the protective devices (agricultural insurance/Proagro or options) that best fit the risk profile of each transaction.

The following table shows the recent historic use of risk mitigators in the working capital for input purchases.

Table 50. Insurance in the Working Capital for Input Purchase

R$ million Crop 14/15 Share % Crop 15/16 Share % Crop 16/17 Share %

Working Capital for Input Purchase 20,828 100.0 42,024 100.0 32,404 100.0

Total Insured 11,573 55.6 27,267 64.9 20,175 62.3

Proagro 6,908 33.2 6,536 15.6 5,876 18.1

Crop Insurance 4,513 21.7 19,602 46.6 14,010 43.2

Hedge Price 151 0.7 1,130 2.7 289 0.9

Without Insurance 9,255 44.4 14,757 35.1 12,229 37.7

Operation Contracted

The distribution of risks assumed as a result of agricultural insurance in the 2016/2017 crop is detailed below.

Figure 27. Working Capital for Input Purchase Breakdown Risks - %

IRB Re60.0

BB Mapfre

20.0

Mapfre Re20,0

3.1.4. Concentration

The following tables sets forth the concentration level of the portfolio with customers and business groups with which Banco do Brasil has relations. The first table sets forth the 100 largest borrowers over the classified loan portfolio and the second, over the Reference Equity (RE).

Table 51. 100 Largest Customers in Relation to the Classified Loan Portfolio

Period

1st.

Customer

(%)

Balance2nd. to

20th. (%)Balance

21st. to

100th (%)Balance

Top 100

Largest

(%)

Balance

Sep/15 3.6 25,780 13.5 95,844 10.1 71,822 27.2 193,446

Dec/15 3.5 25,121 13.6 97,774 10.4 74,672 27.5 197,567

Mar/16 3.6 25,562 13.4 94,092 10.1 71,045 27.1 190,699

Jun/16 3.6 24,902 12.9 89,119 10.0 69,381 26.5 183,403

Sep/16 3.8 25,390 13.2 88,649 10.1 67,662 27.0 181,701

Dec/16 3.8 24,760 12.9 84,340 9.4 61,430 26.1 170,529

Mar/17 3.9 25,136 12.9 82,148 9.1 58,001 25.9 165,284

Jun/17 4.0 25,467 12.6 81,145 9.2 59,263 25.8 165,876

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47

Table 52. 100 Largest Customers in Relation to Reference Equity (R$ million)

Period

1st

Customer

(%)

Balance2nd to

20th (%)Balance

21st to

100th (%)Balance

Top 100

Largest

(%)

Balance

Sep/15 18.9 25,780 70.1 95,844 52.6 71,822 141.6 193,446

Dec/15 18.5 25,121 72.1 97,774 55.1 74,672 145.8 197,567

Mar/16 19.9 25,562 73.3 94,092 55.3 71,045 148.5 190,699

Jun/16 19.9 24,902 71.3 89,119 55.5 69,381 146.6 183,403

Sep/16 20.0 25,390 69.8 88,649 53.3 67,662 143.0 181,701

Dec/16 19.0 24,760 64.7 84,340 47.1 61,430 130.7 170,529

Mar/17 20.3 25,136 66.2 82,148 46.8 58,001 133.2 165,284

Jun/17 20.0 25,467 63.9 81,145 46.6 59,263 130.6 165,876

The next table shows the concentration of the companies and agro companies’ considering Multiple Bank, guarantees and securities and abroad loan portfolio.

Each macrosector is divided into various economic sectors related with each other. The portfolio is in accordance with the main business of each customer.

Table 53. Concentration of Companies and Agro Companies Loan Portfolio by Macro-Sector

R$ million

Macrosector Jun/16 Share % Mar/17 Share % Jun/17 Share % Jun/16 Mar/17

Public Administration 37,997 9.0 38,303 10.7 39,225 10.9 3.2 2.4

Oil and Gas 42,595 10.1 38,436 10.8 38,660 10.8 (9.2) 0.6

Metalw orking and Steel 38,732 9.2 33,938 9.5 32,264 9.0 (16.7) (4.9)

Food products of Vegetable Origin 33,532 8.0 27,913 7.8 30,129 8.4 (10.1) 7.9

Electric Utilities 38,274 9.1 30,391 8.5 29,416 8.2 (23.1) (3.2)

Transportation 27,080 6.4 25,281 7.1 25,099 7.0 (7.3) (0.7)

Services 21,525 5.1 22,099 6.2 20,729 5.8 (3.7) (6.2)

Housing 20,778 4.9 18,668 5.2 17,640 4.9 (15.1) (5.5)

Automobiles and Components 23,041 5.5 16,404 4.6 15,944 4.4 (30.8) (2.8)

Food products of Animal Origin 16,427 3.9 14,892 4.2 15,538 4.3 (5.4) 4.3

Financials 16,439 3.9 9,709 2.7 12,187 3.4 (25.9) 25.5

Retail Trade 17,194 4.1 12,267 3.4 11,828 3.3 (31.2) (3.6)

Construction Materials 13,821 3.3 11,508 3.2 11,190 3.1 (19.0) (2.8)

Agricultural Inputs 10,191 2.4 7,399 2.1 8,038 2.2 (21.1) 8.6

Telecommunication Services 5,894 1.4 5,933 1.7 7,548 2.1 28.1 27.2

Textiles 10,116 2.4 7,282 2.0 7,242 2.0 (28.4) (0.5)

Electrical and Electronic Goods 8,048 1.9 6,624 1.9 6,792 1.9 (15.6) 2.5

Pulp and Paper 8,765 2.1 6,345 1.8 6,045 1.7 (31.0) (4.7)

Chemicals 7,065 1.7 5,742 1.6 5,586 1.6 (20.9) (2.7)

Heavy Construction 7,067 1.7 4,927 1.4 4,859 1.4 (31.2) (1.4)

Wholesale Trade and Industries 6,945 1.6 4,697 1.3 4,720 1.3 (32.0) 0.5

Furniture and Forest Products 5,576 1.3 4,887 1.4 4,639 1.3 (16.8) (5.1)

Leather and Shoes 2,631 0.6 2,122 0.6 2,066 0.6 (21.5) (2.6)

Beverages 1,598 0.4 1,258 0.4 1,279 0.4 (20.0) 1.7

Other Activities 45 0.0 12 0.0 15 0.0 (67.5) 22.2

Total 421,374 100.0 357,038 100.0 358,679 100.0 (14.9) 0.5

Domestic Loan Portfolio 328,006 284,249 282,907

Abroad Loan Portfolio 33,881 24,022 23,937

Guarantees 17,770 13,945 14,150

Securities 41,717 34,822 37,685

Total 421,374 357,038 358,679

Balance Chg. % on

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48

3.2. Credit Risk

All risk segmentations of the loan portfolio in this section refer to the Classified Portfolio, in compliance with CMN Resolution 2,682/99, unless otherwise indicated.

Banco do Brasil maintains a consistent process for risk credit evaluation and monitoring in loan transactions. The main loan portfolio’s quality indicator is the Average Risk, which shows the ratio between the required provision and the classified loan portfolio.

The figure below shows BB’s classified loan portfolio average risk historical evolution and its comparison with the Brazilian Banking Industry (BI). This index at BB remains lower than BI.

Figure 28. Classified Loan Portfolio Average Risk

3.964.22

4.86

5.345.58 5.52

5.70 5.89

5.505.70

6.00

6.306.50 6.60

6.80 6.90

4.16

4.60

4.945.15

5.52 5.585.77

Sep/15 Dec/15 Mar/16 Jun/16 Sep/16 Dec/16 Mar/17 Jun/17

Average Risk - BB Average Risk - BI¹ Average Risk - Ex-specific cases²

1 - Ratio created through Average Risk Index available at SGS (Time Series Management System) of the Central Bank of Brazil. 2 - Simulation excluding specific cases effect.

The following chart shows the coverage index (ALLL/NPL +90d), which states the ratio between the total provision (minimum, supplementary and additional) and the balance of transactions due over 90 days. It is worth mentioning that BB has sufficient provisions to support potential scenarios changes, such as higher delinquency.

Figure 29. Classified Loan Portfolio Coverage Index

218.1209.2

193.8

163.9159.4

167.7 146.5 143.3

173.2 167.8 167.7 164.2 159.5

177.4167.6 171.4

180.0175.7 178.4

174.4

186.5

Sep/15 Dec/15 Mar/16 Jun/16 Sep/16 Dec/16 Mar/17 Jun/17

ALLL/NPL + 90d % - BB Consolidated ALLL/NPL + 90d % - Ex-specific cases²

ALLL/NPL + 90d % - BI¹

1 - Ratio created through Average Risk Index available at SGS (Time Series Management System) of the Central Bank of Brazil. 2 - Simulation excluding specific cases effect.

The next figure shows the Allowance for Loan and Lease Losses – ALLL, segregating the minimum, supplementary, required and additional provision. In BR GAAP accounting standards, Banco do Brasil records credit provision for its portfolio following the statistical model risk provision according to CMN Resolution 2,682/99. The additional provision is recorded from the management's experience by applying stress testing on the portfolio, considering the operations default history and aligned with the good banking practice.

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49

Figure 30. ALLL – Classified Loan Portfolio

R$ million

36,968 37,51434,535 34,728 36,030

1,535 1,6861,851

36,968 37,51436,070 36,414

37,881

Jun/16 Sep/16 Dec/16 Mar/17 Jun/17

Provision Supplementary Provision Minimum Provision

The delinquency ratio (NPL +90d) states the ratio between the operations more than 90 days overdue and the classified loan portfolio balance.

Figure 31. NPL +90d – Percentage on the Classified Loan Portfolio

2.052.23

2.59

3.263.50

3.29

3.894.11

2.853.06

3.29 3.473.70

3.10

3.403.50

3.50

3.70 3.703.90

3.70

Sep/15 Dec/15 Mar/16 Jun/16 Sep/16 Dec/16 Mar/17 Jun/17

NPL +90d - BB NPL +90d - BI

1

1 - Simulation excluding specific cases effect.

The following graphic shows the NPL by BB’s business segments. Excluding the portfolio decrease and specific case effects, NPL +90d of companies portfolio would be 6.08% in Jun/17.

Figure 32. NPL +90d per segment – Percentage on the Domestic Classified Loan Portfolio

3.103.42

4.01

4.825.26

5.83

6.837.35

2.15 2.15 2.39 2.372.56 2.67

3.093.34

0.84 0.971.19

0.95 0.960.99

1.28 1.39

5.70

6.21

Sep/15 Dec/15 Mar/16 Jun/16 Sep/16 Dec/16 Mar/17 Jun/17

Companies Individuals Agr ibusiness

1

1 - Simulation excluding specific case effect.

Chapter 3 - Loan

50

The following chart shows the New NPL/Loan Portfolio index, which indicates the future delinquency trend. The index is calculated by the ratio between: (i) the quarterly change of the transactions more than 90 days overdue balance, plus the quarterly write-off; and (ii) the previous quarter classified loan portfolio balance.

The write-off process is strictly pursuant to CMN Resolution No. 2,682/99. Operations classified as risk H are accounted as write-off only after six months in delinquency at this risk level, never before that period.

Figure 33. New NPL and Write-Off – Percentage on the Classified Loan Portfolio

5.596.22

7.39

9.73

7.12 6.97

9.75

6.84

0.81 0.87 1.031.38

1.03 1.041.49

1.07

0.98 1.08

3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17

New NPL (R$ billion) New NPL(t)/Loan Portfolio( t-1)

11

1 - Simulation excluding specific cases effect.

The next figure shows the index between Allowance for Loan Losses expenses and the New NPL index.

Figure 34. ALLL Expenses / New NPL (%)

104.30 112.32123.80

85.05

93.32107.43

68.82

97.40

3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17

ALLL/New NPL (%)

120,55¹

94,93¹

1 - Simulation excluding specific cases effect.

The results achieved with loan portfolio management risk, combined with a low delinquency ratio and historical high coverage ratio, have enabled the continuous improvement of BB’s risk classification methodology.

In 4Q16 and 1Q17, BB improved its rating assessment, establishing intermediate levels to those minimum required by Resolution CMN nº 2,682/99. The column Supplementary Provision from next table presents the balance of these interim levels.

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Table 54. Classified Loan Portfolio by Risk Level

R$ million Balance

Minimum

Provision¹

Supplementary

Provision

Required

Provision Share % Balance

Minimum

Provision¹

Supplementary

Provision

Required

Provision Share %

AA 343,702 - - - 49.6 297,661 - - - 46.3

A 132,192 - - 661 19.2 91,552 458 46 504 14.2

B 120,082 - - 1,201 17.4 133,109 1,331 493 1,824 20.7

C 39,567 - - 1,187 5.7 63,470 1,904 1,160 3,064 9.9

D 8,465 - - 847 1.2 11,911 1,191 152 1,343 1.9

E 15,443 - - 4,633 2.2 12,624 3,787 - 3,787 2.0

F 5,161 - - 2,580 0.7 5,943 2,971 - 2,971 0.9

G 4,537 - - 3,176 0.7 7,293 5,105 - 5,105 1.1

H 22,684 - - 22,684 3.3 19,283 19,283 - 19,283 3.0

Total 691,832 - - 36,968 100.0 642,846 36,030 1,851 37,881 100.0

AA-C 635,543 - - 3,049 91.9 585,793 3,693 1,699 5,392 91.1

D-H 56,289 - - 33,919 8.1 57,053 32,338 152 32,489 8.9

AA 307,437 - - - 48.2 297,661 - - - 46.3

A 92,266 461 41 502 14.5 91,552 458 46 504 14.2

B 108,754 1,088 304 1,391 17.0 133,109 1,331 493 1,824 20.7

C 68,783 2,063 1,096 3,159 10.8 63,470 1,904 1,160 3,064 9.9

D 16,477 1,648 246 1,894 2.6 11,911 1,191 152 1,343 1.9

E 14,175 4,253 - 4,253 2.2 12,624 3,787 - 3,787 2.0

F 6,559 3,279 - 3,279 1.0 5,943 2,971 - 2,971 0.9

G 6,493 4,545 - 4,545 1.0 7,293 5,105 - 5,105 1.1

H 17,391 17,391 - 17,391 2.7 19,283 19,283 - 19,283 3.0

Total 638,336 34,728 1,686 36,414 100.0 642,846 36,030 1,851 37,881 100.0

AA-C 577,241 3,612 1,440 5,052 90.4 585,793 3,693 1,699 5,392 91.1

D-H 61,095 31,116 246 31,362 9.6 57,053 32,338 152 32,489 8.9

Jun/17Mar/17

Jun/16 Jun/17

1 - Minimum required provision by Resolution CMN nº 2,682/99.

The next table presents the ALLL expenses over the Classified Loan Portfolio, as well the average Classified Loan Portfolio and the ALLL indexes.

Table 55. ALLL Expenses over Classified Loan Portfolio

R$ million, unless other indicated 2Q16 3Q16 4Q16 1Q17 2Q17 on 2Q16 on 1Q17

ALLL Expenses

(A) BB - 12 months (30,248) (31,056) (31,552) (29,119) (27,501) (9.1) (5.6)

(B) BB - 3 months (8,277) (6,644) (7,486) (6,713) (6,658) (19.6) (0.8)

Average Loan Portfolio

(C) BB - 12 months 704,002 700,764 688,845 671,794 657,319 (6.6) (2.2)

(D) BB - 3 months 698,644 682,031 662,757 644,413 638,228 (8.6) (1.0)

Recovery of Write-offs

(E) 12 months 4,211 4,459 4,571 4,666 4,677 11.1 0.2

(F) Quarterly 1,384 968 1,359 956 1,394 0.8 45.9

ALLL Indexes - %

(A/C) ALLL Expenses/Loan Porfolio 12M - BB 4.30 4.43 4.58 4.33 4.18

(B/D) ALLL Expenses/Loan Porfolio 3M - BB 1.18 0.97 1.13 1.04 1.04

Balance Chg. %

The following table shows the key credit risk management indicators, some of them previously mentioned.

Chapter 3 - Loan

52

Table 56. Classified Loan Portfolio Delinquency Indicators

R$ million, unless other indicated 2Q16 3Q16 4Q16 1Q17 2Q17

Classified Loan Portfolio 691,832 672,638 653,591 638,336 642,846

NPL + 15 days 33,896 39,921 37,032 44,088 38,848

NPL + 15 days/Loan Portfolio - % 4.90 5.94 5.67 6.91 6.04

NPL + 15 days/Loan Portfolio - % - excluding specif ic cases 4.49 5.50 5.27 6.49 5.63

NPL + 60 days 25,722 27,559 25,134 30,354 29,807

NPL + 60 days/Loan Portfolio - % 3.72 4.10 3.85 4.76 4.64

NPL + 60 days/Loan Portfolio - % - excluding specif ic cases 3.30 3.66 3.85 4.33 4.22

NPL 15-59 days/Loan Portfolio - % 1.18 1.84 1.82 2.15 1.41

NPL + 90 days 22,559 23,535 21,504 24,853 26,435

NPL + 90 days/Loan Portfolio - % 3.26 3.50 3.29 3.89 4.11

NPL + 90 days/Loan Portfolio - % - excluding specif ic cases 2.85 3.06 3.29 3.47 3.70

NPL 15-89 days/Loan Portfolio - % 1.64 2.44 2.38 3.01 1.93

NPL + 90 days/Loan Portfolio - BI - % 3.50 3.70 3.70 3.90 3.70

Write-off 5,434 6,143 9,000 6,405 5,253

Write-off - excluding specif ic cases 6,078

Recovery of Write-off (1,384) (968) (1,359) (956) (1,394)

Recovery of Write-off/Write-off - % 25.46 15.75 15.10 14.93 26.54

Net Loss 4,050 5,176 7,641 5,449 3,859

Net Loss/Loan Portfolio - % annualized 2.36 3.11 4.76 3.46 2.42

Net Loss/Loan Portfolio - % annualized - excluding specif ic cases 2.92

Provision (Minimum + Supplementary + Additional) 36,968 37,514 36,070 36,414 37,881

ALLL/Loan Portfolio - % 5.34 5.58 5.52 5.70 5.89

ALLL/NPL + 15 days - % 109.06 93.97 97.40 82.59 97.51

ALLL/NPL + 60 days - % 143.72 136.12 143.51 119.97 127.09

ALLL/NPL + 90 days - % 163.87 159.39 167.74 146.52 143.30

3.2.1. Individuals Loan Portfolio

The following table shows the individuals classified loan portfolio and the respective changes in the allowance for loan losses and the NPL over 90 days.

Banco do Brasil S.A. - MD&A 2Q17

53

Table 57. Individuals Classified Loan Portfolio by Risk Level

R$ million Balance

Minimum

Provision¹

Supplementary

Provision

Required

Provision Share % Balance

Minimum

Provision¹

Supplementary

Provision

Required

Provision Share %

AA 66,036 - - - 34.9 42,376 - - - 22.8

A 49,879 - - 249 26.4 25,776 129 16 145 13.9

B 47,845 - - 478 25.3 70,383 704 314 1,017 37.9

C 12,721 - - 382 6.7 31,646 949 677 1,626 17.1

D 2,568 - - 257 1.4 5,197 520 96 616 2.8

E 2,038 - - 612 1.1 2,103 631 - 631 1.1

F 1,419 - - 710 0.8 1,347 673 - 673 0.7

G 1,207 - - 845 0.6 1,437 1,006 - 1,006 0.8

H 5,509 - - 5,509 2.9 5,267 5,267 - 5,267 2.8

Total 189,222 - - 9,041 100.0 185,530 9,878 1,103 10,981 100.0

AA-C 176,481 - - 1,109 93.3 170,180 1,782 1,007 2,789 91.7

D-H 12,742 - - 7,932 6.7 15,350 8,096 96 8,192 8.3

AA 56,560 - - - 30.6 42,376 - - - 22.8

A 36,899 184 8 192 20.0 25,776 129 16 145 13.9

B 45,360 454 123 577 24.6 70,383 704 314 1,017 37.9

C 27,210 816 547 1,363 14.7 31,646 949 677 1,626 17.1

D 8,682 868 183 1,051 4.7 5,197 520 96 616 2.8

E 2,171 651 - 651 1.2 2,103 631 - 631 1.1

F 1,584 792 - 792 0.9 1,347 673 - 673 0.7

G 1,336 935 - 935 0.7 1,437 1,006 - 1,006 0.8

H 4,950 4,950 - 4,950 2.7 5,267 5,267 - 5,267 2.8

Total 184,752 9,651 861 10,512 100.0 185,530 9,878 1,103 10,981 100.0

AA-C 166,029 1,454 678 2,132 89.9 170,180 1,782 1,007 2,789 91.7

D-H 18,723 8,196 183 8,379 10.1 15,350 8,096 96 8,192 8.3

Jun/17Jun/16

Mar/17 Jun/17

Jun/16 Jun/17

1 - Minimum required provision by Resolution CMN nº 2,682/99.

Table 58. Changes in Allowance for Loan Losses – Individuals Classified Loan Portfolio

R$ million, unless other indicated 2Q16 3Q16 4Q16 1Q17 2Q17

Classified Individuals Loan Portfolio 189,222 187,144 187,431 184,752 185,530

Initial Allowance 9,010 9,041 9,144 9,993 10,512

1- Risk Migration 1,132 1,409 1,908 1,406 1,355

a) Risk Deterioration 2,214 2,228 3,939 2,010 2,827

b) Risk Improvement (1,081) (818) (2,032) (604) (1,472)

2 - New Transactions 391 171 387 297 419

3 - Write-offs (1,251) (1,309) (1,357) (1,159) (1,274)

Total (1+2+3) 272 272 938 544 500

Other Impacts¹ (241) (169) (88) (26) (31)

Allowance Required (CMN Res. 2,682) 9,041 9,144 9,993 10,512 10,981

Provision Expenses - R$ million 1,282 1,411 2,207 1,677 1,743

Provision / Loan Portfolio - % 4.82 4.89 5.33 5.69 5.92

Provision Flow / Loan Portfolio - % 0.68 0.75 1.18 0.91 0.94

NPL + 15 days/Loan Portfolio - % 4.55 5.97 5.26 6.94 6.46

NPL + 90 days/Loan Portfolio - % 2.37 2.56 2.67 3.09 3.34

1 - Amortization, settlement, release of installments and charge debt.

The following table shows the NPL of the main lines regarding individuals’ credit portfolio and the share of each line in relation to the total loan portfolio. Thus, it is possible to analyze the delinquency of each product in relation to the relevance of this line in the portfolio.

Chapter 3 - Loan

54

Table 59. NPL +90d Individuals Portfolio - % by Credit Line

NPL Share % NPL Share % NPL Share %

Individuals 2.37 100.0 3.09 100.0 3.34 100.0

Payroll Loan 1.25 34.0 1.45 34.2 1.82 34.9

Mortgage 1.29 21.0 2.09 23.1 2.15 23.2

Credit Card 3.34 12.1 3.43 12.9 3.47 12.7

Salary Loan 2.61 10.8 3.54 10.7 4.94 10.7

Auto Loans 0.88 12.2 1.20 9.6 1.29 8.8

Jun/16 Mar/17 Jun/17

Vintage

The following graph shows the vintage of the individual’s loan portfolio delinquency. This methodology affords greater detailing and is closer to the portfolio than traditional indicators, in order to evaluate how the delinquency of a set of operations contracted for in a particular period behaves over the time.

Loans that have been nonperforming for more than 90 days are considered delinquent. Overdraft and credit card operations are not included in the individuals’ loan portfolio.

The following graph shows the vintage by year, making it easier to interpret the data.

Figure 35. Individuals Loan Portfolio – Annual Vintage

Banco do Brasil S.A. - MD&A 2Q17

55

The next figure shows the individuals loan portfolio new NPL in the last 8 quarters.

Figure 36. New NPL – Individuals Loan Portfolio

1.16 1.17

1.70

1.28

1.61 1.57

1.871.76

0.65 0.650.92

0.68 0.85 0.84 1.00 0.95

3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17

Individuals New NPL (R$ b illion) Individuals New NPL(t)/Individuals Loan Portfo lio(t-1)

3.2.2. Loans to Companies

The following tables show the classified loan portfolio for companies and the respective changes in allowance for loan losses.

Table 60. Classified Loans to Companies by Risk Level

R$ million Balance

Minimum

Provision¹

Supplementary

Provision

Required

Provision Share % Balance

Minimum

Provision¹

Supplementary

Provision

Required

Provision Share %

AA 153,977 - - - 56.0 129,395 - - - 55.3

A 37,892 - - 189 13.8 24,523 123 10 133 10.5

B 32,131 - - 321 11.7 24,599 246 107 353 10.5

C 18,100 - - 543 6.6 20,491 615 368 982 8.8

D 5,231 - - 523 1.9 5,257 526 42 567 2.2

E 10,732 - - 3,220 3.9 9,437 2,831 - 2,831 4.0

F 3,156 - - 1,578 1.1 3,929 1,964 - 1,964 1.7

G 2,817 - - 1,972 1.0 5,303 3,712 - 3,712 2.3

H 10,838 - - 10,838 3.9 11,145 11,145 - 11,145 4.8

Total 274,875 - - 19,185 100.0 234,078 21,161 526 21,688 100.0

AA-C 242,100 - - 1,054 88.1 199,008 983 484 1,468 85.0

D-H 32,775 - - 18,131 11.9 35,070 20,178 42 20,220 15.0

AA 131,041 - - - 54.9 129,395 - - - 55.3

A 15,001 75 10 85 6.3 24,523 123 10 133 10.5

B 27,701 277 112 389 11.6 24,599 246 107 353 10.5

C 29,233 877 447 1,324 12.2 20,491 615 368 982 8.8

D 6,422 642 53 696 2.7 5,257 526 42 567 2.2

E 10,786 3,236 - 3,236 4.5 9,437 2,831 - 2,831 4.0

F 4,143 2,071 - 2,071 1.7 3,929 1,964 - 1,964 1.7

G 4,639 3,248 - 3,248 1.9 5,303 3,712 - 3,712 2.3

H 9,861 9,861 - 9,861 4.1 11,145 11,145 - 11,145 4.8

Total 238,827 20,287 623 20,910 100.0 234,078 21,161 526 21,688 100.0

AA-C 202,976 1,229 569 1,798 85.0 199,008 983 484 1,468 85.0

D-H 35,851 19,058 53 19,111 15.0 35,070 20,178 42 20,220 15.0

Jun/17Jun/16

Mar/17 Jun/17

Jun/16 Jun/17

1 - Minimum required provision by Resolution CMN nº 2,682/99.

Chapter 3 - Loan

56

Table 61. Changes in Allowance for Loan Losses – Classified Loans to Companies

R$ million, unless other indicated 2Q16 3Q16 4Q16 1Q17 2Q17

Classified Loan Portfolio to Companies 274,875 263,539 249,204 238,827 234,078

Initial Allowance 16,665 19,185 19,561 21,183 20,910

1- Risk Migration 5,407 4,743 5,185 4,379 3,869

a) Risk Deterioration 6,455 5,504 6,370 5,681 5,181

b) Risk Improvement (1,049) (760) (1,184) (1,302) (1,312)

2 - New Transactions 468 337 433 118 195

3 - Write-offs (3,274) (3,994) (3,896) (4,643) (3,201)

Total (1+2+3) 2,601 1,086 1,722 (147) 863

Other Impacts¹ (81) (710) (101) (127) (85)

Allowance Required (CMN Res. 2,682) 19,185 19,561 21,183 20,910 21,688

Provision Expenses - R$ million 5,794 4,370 5,517 4,370 3,979

Provision / Loan Portfolio - % 6.98 7.42 8.50 8.76 9.27

Provision Flow / Loan Portfolio - % 2.11 1.66 2.21 1.83 1.70

NPL + 15 days/Loan Portfolio - % 7.09 8.47 9.29 11.09 9.41

NPL + 90 days/Loan Portfolio - % 4.82 5.26 5.83 6.83 7.35

NPL + 90 days/Loan Portfolio - % - Ex-specif ic case 4.82 5.26 5.83 5.70 6.21

1 - Amortization, settlement, release of installments and charge debt.

The following table sets forth the NPL of the main lines regarding companies’ credit portfolio and the share of each line in relation to the total loan portfolio. Thus it is possible to analyze the delinquency of each product in terms of the importance in the portfolio.

Table 62. NPL +90d Companies Portfolio - % by Credit Line

NPL Share % NPL Share % NPL Share %

Companies 4.82 100.0 6.83 100.0 7.35 100.0

Working Capital 3.32 48.9 4.98 49.1 5.21 49.0

Investments 1.68 22.7 2.03 24.2 3.30 24.1

FEC/ACE 0.38 6.6 0.61 5.3 0.05 5.8

Receivables 4.21 4.0 5.59 3.1 6.01 3.2

Jun/16 Mar/17 Jun/17

The next figure shows the companies loan portfolio new NPL in the last 8 quarters.

Figure 37. New NPL – Companies Loan Portfolio

3.614.15

4.715.02

4.63 4.55

6.41

4.11

1.26 1.43 1.58 1.75 1.69 1.73

2.57

1.721.50

3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17

Corporates New NPL (R$ billion)Companies New NPL(t)/Companies Loan Portfolio(t-1)

1

1 - Simulation excluding specific case effect.

The following chart shows Very Small and Small Companies credit on an annual basis, making it easier to interpret the data.

Banco do Brasil S.A. - MD&A 2Q17

57

Figure 38. Very Small and Small Companies Loans Portfolio – Annual Vintage

3.2.3. Agribusiness Loan Portfolio

The Classified Agribusiness Loan Portfolio by risk level table is shown on the following table.

Table 63. Classified Agribusiness Loan Portfolio by Risk Level

R$ million Balance

Minimum

Provision¹

Supplementary

Provision

Required

Provision Share % Balance

Minimum

Provision¹

Supplementary

Provision

Required

Provision Share %

AA 98,595 - - - 53.7 104,078 - - - 55.5

A 36,106 - - 181 19.7 33,834 169 20 189 18.0

B 33,452 - - 335 18.2 32,833 328 73 401 17.5

C 8,246 - - 247 4.5 11,133 334 115 449 5.9

D 627 - - 63 0.3 1,368 137 14 151 0.7

E 2,663 - - 799 1.5 1,069 321 - 321 0.6

F 565 - - 283 0.3 659 329 - 329 0.4

G 507 - - 355 0.3 543 380 - 380 0.3

H 2,792 - - 2,792 1.5 2,148 2,148 - 2,148 1.1

Total 183,553 - - 5,054 100.0 187,665 4,147 222 4,368 100.0

AA-C 176,399 - - 762 96.1 181,878 831 208 1,039 96.9

D-H 7,154 - - 4,291 3.9 5,787 3,315 14 3,329 3.1

AA 99,329 - - - 55.4 104,078 - - - 55.5

A 32,746 164 23 187 18.2 33,834 169 20 189 18.0

B 30,638 306 68 374 17.1 32,833 328 73 401 17.5

C 11,038 331 101 432 6.2 11,133 334 115 449 5.9

D 1,301 130 10 140 0.7 1,368 137 14 151 0.7

E 1,207 362 - 362 0.7 1,069 321 - 321 0.6

F 708 354 - 354 0.4 659 329 - 329 0.4

G 509 356 - 356 0.3 543 380 - 380 0.3

H 1,954 1,954 - 1,954 1.1 2,148 2,148 - 2,148 1.1

Total 179,431 3,958 202 4,160 100.0 187,665 4,147 222 4,368 100.0

AA-C 173,751 801 192 993 96.8 181,878 831 208 1,039 96.9

D-H 5,679 3,157 10 3,167 3.2 5,787 3,315 14 3,329 3.1

Jun/16 Jun/17

Mar/17 Jun/17

Jun/16 Jun/17

1 - Minimum required provision by Resolution CMN nº 2,682/99.

The table below shows the NPL of the main lines regarding Agribusiness credit portfolio and the share of each line in relation to the total loan portfolio. Thus, it is possible to analyze the delinquency of each product in relation to the relevance of this line in the portfolio.

Chapter 3 - Loan

58

Table 64. NPL +90d Agribusiness Portfolio - % by Credit Line

NPL Share % NPL Share % NPL Share %

Agribusiness 0.95 100.0 1.28 100.0 1.39 100.0

Pronaf 1.32 22.1 1.53 23.6 1.96 22.9

Working Capital for Input Purchase 0.98 20.6 1.13 21.1 1.02 21.6

Pronamp 1.52 13.6 2.38 13.8 2.75 13.4

BNDES/Finame Rural 0.63 5.1 1.07 4.9 1.14 4.6

Jun/16 Mar/17 Jun/17

The following tables show the individuals agribusiness loan portfolio by risk level and the respective changes in the allowance for loan losses.

Table 65. Classified Agribusiness Loan Portfolio by Risk Level – Individuals

R$ million Balance

Minimum

Provision¹

Supplementary

Provision

Required

Provision Share % Balance

Minimum

Provision¹

Supplementary

Provision

Required

Provision Share %

AA 68,987 - - - 52.9 73,752 - - - 53.2

A 19,598 - - 98 15.0 20,796 104 19 123 15.0

B 30,986 - - 310 23.7 30,516 305 66 371 22.0

C 3,957 - - 119 3.0 7,995 240 114 354 5.8

D 622 - - 62 0.5 1,356 136 14 150 1.0

E 2,608 - - 782 2.0 1,045 314 - 314 0.8

F 542 - - 271 0.4 630 315 - 315 0.5

G 462 - - 324 0.4 512 358 - 358 0.4

H 2,712 - - 2,712 2.1 2,113 2,113 - 2,113 1.5

Total 130,475 - - 4,678 100.0 138,715 3,884 214 4,098 100.0

AA-C 123,528 - - 527 94.7 133,060 649 200 849 95.9

D-H 6,946 - - 4,151 5.3 5,656 3,235 14 3,249 4.1

AA 71,950 - - - 53.7 73,752 - - - 53.2

A 20,186 101 22 123 15.1 20,796 104 19 123 15.0

B 28,470 285 62 347 21.2 30,516 305 66 371 22.0

C 7,873 236 100 336 5.9 7,995 240 114 354 5.8

D 1,271 127 10 137 0.9 1,356 136 14 150 1.0

E 1,189 357 - 357 0.9 1,045 314 - 314 0.8

F 678 339 - 339 0.5 630 315 - 315 0.5

G 472 330 - 330 0.4 512 358 - 358 0.4

H 1,922 1,922 - 1,922 1.4 2,113 2,113 - 2,113 1.5

Total 134,010 3,697 195 3,891 100.0 138,715 3,884 214 4,098 100.0

AA-C 128,479 622 185 807 95.9 133,060 649 200 849 95.9

D-H 5,531 3,075 10 3,084 4.1 5,656 3,235 14 3,249 4.1

Jun/16 Jun/17

Mar/17 Jun/17

Jun/16 Jun/17

1 - Minimum required provision by Resolution CMN nº 2,682/99.

Table 66. Changes in Allowance for Loan Losses – Agribusiness Individuals

R$ million, unless other indicated 2Q16 3Q16 4Q16 1Q17 2Q17

Classified Agrib. Loan Portfolio - Individuals 130,475 128,523 130,785 134,010 138,715

Initial Allowance 5,093 4,678 4,757 3,763 3,891

1- Risk Migration 488 812 (283) 575 769

a) Risk Deterioration 1,235 1,290 1,658 1,138 1,356

b) Risk Improvement (747) (478) (1,941) (563) (587)

2 - New Transactions 90 81 159 62 90

3 - Write-offs (717) (667) (648) (473) (533)

Total (1+2+3) (139) 226 (772) 165 326

Other Impacts¹ (276) (147) (223) (36) (119)

Allowance Required (CMN Res. 2,682) 4,678 4,757 3,763 3,891 4,098

Provision Expenses - R$ million 302 746 (346) 602 740

Provision / Loan Portfolio - % 3.59 3.70 2.88 2.90 2.95

Provision Flow / Loan Portfolio - % 0.23 0.58 (0.26) 0.45 0.53

1 - Amortization, settlement, release of installments and charge debt.

The following tables show the agribusiness loan portfolio for companies by risk level and the respective changes in the allowance for loan losses.

Banco do Brasil S.A. - MD&A 2Q17

59

Table 67. Classified Agribusiness Loan Portfolio by Risk Level – Companies

R$ million Balance

Minimum

Provision¹

Supplementary

Provision

Required

Provision Share % Balance

Minimum

Provision¹

Supplementary

Provision

Required

Provision Share %

AA 29,608 - - - 55.8 30,326 - - - 62.0

A 16,508 - - 83 31.1 13,037 65 1 66 26.6

B 2,465 - - 25 4.6 2,317 23 6 29 4.7

C 4,289 - - 129 8.1 3,138 94 1 95 6.4

D 4 - - 0 0.0 12 1 - 1 0.0

E 55 - - 17 0.1 23 7 - 7 0.0

F 24 - - 12 0.0 29 14 - 14 0.1

G 45 - - 31 0.1 32 22 - 22 0.1

H 80 - - 80 0.2 35 35 - 35 0.1

Total 53,078 - - 376 100.0 48,949 262 8 270 100.0

AA-C 52,870 - - 236 99.6 48,819 182 8 190 99.7

D-H 208 - - 140 0.4 131 80 (0) 80 0.3

AA 27,380 - - - 60.3 30,326 - - - 62.0

A 12,559 63 1 63 27.7 13,037 65 1 66 26.6

B 2,168 22 6 27 4.8 2,317 23 6 29 4.7

C 3,166 95 1 96 7.0 3,138 94 1 95 6.4

D 30 3 - 3 0.1 12 1 - 1 0.0

E 19 6 - 6 0.0 23 7 - 7 0.0

F 30 15 - 15 0.1 29 14 - 14 0.1

G 37 26 - 26 0.1 32 22 - 22 0.1

H 33 33 - 33 0.1 35 35 - 35 0.1

Total 45,421 262 7 269 100.0 48,949 262 8 270 100.0

AA-C 45,272 179 7 187 99.7 48,819 182 8 190 99.7

D-H 148 82 - 82 0.3 131 80 (0) 80 0.3

Jun/16 Jun/17

Mar/17 Jun/17

Jun/16 Jun/17

1 - Minimum required provision by Resolution CMN nº 2,682/99.

Table 68. Changes in the Allowance for Loan Losses – Agribusiness Companies

R$ million, unless other indicated 2Q16 3Q16 4Q16 1Q17 2Q17

Classified Agrib. Loan Portfolio - Companies 53,078 50,326 48,327 45,421 48,949

Initial Allowance 320 376 294 295 269

1- Risk Migration 90 40 10 3 10

a) Risk Deterioration 120 75 39 56 29

b) Risk Improvement (30) (36) (29) (54) (19)

2 - New Transactions 8 3 17 3 14

3 - Write-offs (38) (66) (9) (31) (7)

Total (1+2+3) 60 (24) 19 (25) 17

Other Impacts¹ (4) (58) (17) (1) (16)

Allowance Required (CMN Res. 2,682) 376 294 295 269 270

Provision Flow - R$ million 94 (16) 10 4 8

Provision / Loan Portfolio - % 0.71 0.58 0.61 0.59 0.55

Provision Flow / Loan Portfolio - % 0.18 (0.03) 0.02 0.01 0.02

1 - Amortization, settlement, release of installments and charge debt.

Chapter 3 - Loan

60

The next figure shows the agribusiness loan portfolio new NPL in the last 8 quarters.

Figure 39. New NPL – Agribusiness Loan Portfolio

0.700.84

0.98

0.37

0.70 0.72

1.020.87

0.42 0.49 0.560.21 0.38 0.40 0.57 0.48

3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17

Agr ibusiness New NPL (R$ billion)Agr ibusiness New NPL(t)/Agribusiness Loan Portfolio(t-1)

Portfolio with and without Rollover

The average portfolio risk is affected by extended transactions, primarily between 2005 and 2007, totaling R$7,433 million in Jun/17. The CMN Resolution 2,682/99, which provides for the classification of risk and constitution of allowances for loan losses, requires the maintenance of risk of the renegotiated loans at the risk level locked at the time of renegotiation. Due to this regulation, renegotiated transactions increase the loan portfolio’s average risk.

In the following table, the classified agribusiness loan portfolio, in 2Q17, is segregated in operations with rollover and without it. Operations more than 90 days overdue (BB risk + third parties) accounted for 1.21% of the total portfolio without rollover in Jun/17, while the same indicator for the transactions with rollover was 4.86%.

Table 69. Agribusiness Transactions with Rollover and without it

Portfolio without Rollover¹ Portfolio with Rollover¹

R$ million Balance

Required

Provision Past Due 90 Balance

Required

Provision Past Due 90

AA 103,155 - 38 924 - -

A 33,205 185 (0) 628 4 0

B 30,739 375 1 2,094 26 0

C 9,547 378 124 1,586 72 3

D 783 84 211 585 66 12

E 494 148 237 575 173 38

F 441 220 281 218 109 28

G 356 249 238 188 131 50

H 1,513 1,513 1,051 635 635 231

Total 180,231 3,152 2,181 7,433 1,216 361

AA-C 176,646 937 163 5,232 102 3

D-H 3,585 2,215 2,018 2,201 1,114 358

1 - Non-performing loans at level AA refers to credit with third party risk.

The following table shows the balance, the NPL +90days and the average risk of the classified agribusiness loan portfolio segmented in the total portfolio, with rollover and without it.

Banco do Brasil S.A. - MD&A 2Q17

61

Table 70. Classified Agribusiness Loan Portfolio Delinquency Indicators

R$ million Jun/16 Sep/16 Dec/16 Mar/17 Jun/17

Classified Loan Portfolio 183,553 178,848 179,111 179,431 187,665

ALLL 5,054 5,051 4,058 4,160 4,368

NPL + 15 days 2,662 3,203 3,238 4,122 4,204

NPL + 15 days/Loan Portfolio - % 1.45 1.79 1.81 2.30 2.24

NPL + 90 days 1,743 1,709 1,773 2,290 2,616

NPL + 90 days/Loan Portfolio¹ - % 0.95 0.96 0.99 1.28 1.39

ALLL/Loan Portfolio - % 2.75 2.82 2.27 2.32 2.33

Write-off 765 694 476 262 551

Transactions without Rollover - BB Risk + Third Parties 178,221 173,023 172,196 172,835 180,231

ALLL 4,106 4,084 2,968 3,084 3,152

NPL + 90 days 1,468 1,466 1,511 1,964 2,181

NPL + 90 days/ Transactions w ithout Rollover - % 0.82 0.85 0.88 1.14 1.21

ALLL / Transactions w ithout Rollover - % 2.30 2.36 1.72 1.78 1.75

Write-off 637 595 408 208 433

Transactions with Rollover - BB Risk + Third Parties 5,332 5,825 6,915 6,595 7,433

ALLL 947 967 1,089 1,076 1,216

NPL + 90 days 273 193 238 326 361

NPL + 90 days/ Transactions w ith Rollover - % 5.11 3.31 3.45 4.94 4.86

ALLL / Transactions w ith Rollover - % 17.76 16.60 15.75 16.31 16.36

Write-off 128 99 68 53 118

Simulation: Trans. w /o Rollover ex-drag effect of Trans. w / Rollover

a - BB Risk + Third Parties 177,828 172,629 171,794 172,834 180,230

b - ALLL 1,434 1,430 1,477 1,964 2,181

Average Risk (b/a) - % 0.81 0.83 0.86 1.14 1.21

1 - The past due resulting from non-performing operations with third party risk was included in the calculation of the index.

3.2.4. Foreign Loan Portfolio

The following table shows the Abroad Portfolio by risk level.

Table 71. Classified Abroad Loan Portfolio by Risk Level

R$ million Balance

Required

Provision Share % Balance

Required

Provision Share % Balance

Required

Provision Share %

AA 25,094 - 56.8 20,507 - 58.1 21,812 - 61.3

A 8,315 42 18.8 7,620 38 21.6 7,419 37 20.9

B 6,654 67 15.1 5,056 51 14.3 5,295 53 14.9

C 500 15 1.1 1,302 39 3.7 200 6 0.6

D 39 4 0.1 72 7 0.2 89 9 0.2

E 8 3 0.0 11 3 0.0 16 5 0.0

F 20 10 0.0 123 62 0.3 8 4 0.0

G 6 4 0.0 9 6 0.0 9 7 0.0

H 3,545 3,545 8.0 627 627 1.8 724 724 2.0

Total 44,181 3,688 100.0 35,327 833 100.0 35,573 845 100.0

AA-C 40,564 123 91.8 34,485 128 97.6 34,727 96 97.6

D-H 3,617 3,565 8.2 842 705 2.4 846 748 2.4

Jun/16 Mar/17 Jun/17

1 - Minimum required provision by Resolution CMN nº 2,682/99.

Chapter 3 - Loan

62

3.3. Credit Collection, Regularization and Recovery

3.3.1. Management of Past Due Credits

Banco do Brasil monitors credits presenting signs of default. The treatment of past due transactions is carried out in three stages: conduction, collection and regularization/recovery.

I. Conduction seeks to avoid the default, in a preventive manner;

II. Collection is to regularize past due operations in a short period of time; this reduces process costs and maintains the good relationship with the customer;

III. Regularization and recovery is to minimize losses, regularizing and recovering the highest possible amount.

3.3.2. Credit Collection and Regularization Process

Banco do Brasil uses its own quantitative models, which, together with automated collection and regularization platforms, track and manage non-performing customers’ behavior.

These customers’ profiles are statistically identified based on previous behavior in relation to collection proceedings, which results in determining likelihood of the collection and regularization.

I. Customers with a high probability of regularization;

II. Customers with an intermediate probability of regularization;

III. Customers with a low probability of regularization.

Based on information and variables analysis, proceedings, service network, renegotiation and discount policies, as well as credit cession to other companies, are established actions that support BB’s collection and regularization model.

The conceptual model that supports the process is based on the following assumptions:

I. Customer Profile: actions are defined based on customer’s profile, taking into consideration variables such as segmentation, relationship level, products contracted, indebtedness with BB, among others;

II. Service Network: regularization and recovery process occurs in several frameworks on a sequential basis;

III. Sequential Actions: credit collection actions are pre-determined according to each customer profile and their intensity increases along the time;

IV. Value Relations: variable approach that respects each customer relationship level with BB;

V. Information Systems: advanced analytical and operating platforms, which automate credit collection process and improve business efficiency, are used.

The credit collection historic performance actions determines the likelihood of credits in default to be regularized. The main consequence of statistical follow-up is the possibility of continuously improve the process with feedback from strategies with best results during the period.

The possibility of segregating non-performing customers is an important aspect of the credit collection and regularization strategy, of discount policy and credit cession.

Banco do Brasil uses credit cession as part of the recovery strategy, with the purpose of reducing losses and unpaid portfolio management costs, through transactions with autonomous companies.

3.3.3. Credit Collection, Regularization and Recovery Operating Flow

Sequential use of credit collection and recovery channels is closely related to BB’s strategy success.

Banco do Brasil S.A. - MD&A 2Q17

63

Figure 40. Collection, Regularization and Recovery Network1

1 - Gecor Network: refers to a group of business units specialized in dealing with past due credits of customers with indebtedness higher than R$ 400 thousand.

3.3.4. Process Efficiency

The following figures show results obtained in credit collection and regularization flow. From the volume of credit that entered to the collection process in the last 12 months, 93.5% were resolved within 360 days in the Jun/17.

Figure 41. Credit Regularization Rate Over Collection Period - %

56.4

74.4

84.587.3

89.3 90.2 90.7 92.1

58.9

77.7

85.988.5 89.6

91.6 92.2 93.5

Until 15 16 to 30 31 to 60 61 to 90 91 to 120 121 to 150 151 to 180 181 to 360

Credit Regularization 1Q17 Credit Regularization 2Q17

BB prioritizes receiving past due operations as soon as possible, and even acting preventively to avoid worsening the risk and new write-offs. BB collected and regularized R$ 21.9 billion in the last twelve months. Past due loans classified at risk H represented 7.4% of this amount and 92.6% were at lower risk ranges.

Chapter 3 - Loan

64

Figure 42. Collection and Regularization before Write Off¹ - %

86.2

13.8

2Q16

92.6

7.4

2Q17

Other Risks

Risk H

1 – 12 months accumulated

The recovery strategy of written off credit is geared towards receiving the defaulting operations in cash, which does not generate new credit provisions (ALLL). In the last 12 months R$4.7 billion were recovered. From this volume, R$1.8 billion were received in cash.

Figure 43. Accumulated Recovery (R$ billions) and Cash Recovery Index - %

3.74

4.214.46

4.57 4.67 4.68

52.247.5

44.441.2 39.8 38.1

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17

In addition, the following chart demonstrates the behavior of write-offs accumulated in 12 months in relation to average balance of the classified credit portfolio during the same period. BB has better historic indexes than the main market peers.

Figure 44. Write-Off – Percentage on the Classified Loan Portfolio

2.743.09

3.784.06 4.11

4.534.83

5.195.46

5.76

2Q16 3Q16 4Q16 1Q17 2Q17

Banco do Brasil Peer Average¹

1 – Corresponds to the three Brazilian largest private banks.

Banco do Brasil S.A. - MD&A 2Q17

65

3.3.5. Renegotiated Loan Portfolio

The following table shows the renegotiated loan portfolio. It does not include the renegotiated operations of the agribusiness portfolio, discussed in section 3.2.3 of this MD&A. These are the main lines of the following table:

a) Renegotiated Credits: loan operations renegotiated during the period, falling due or past due;

a.1) Renegotiated When Past Due: loan operations renegotiated during the period due to payment delay by customers;

a.2) Renewed: loan operations not past due renegotiated during the period to settle in whole or in part previous operations or any other kind of agreement that changes the maturity or payment terms originally agreed to. Up to 3Q16, it was just available for Individuals and from 4Q16 on, also for Companies.

In 2Q17, 44.4% of new renegotiations included more than 90 days past due operations, and 10.3% included written off operations. In this quarter, two operations with more than 90 days past due were responsible for 20% of the total renegotiations. Highlight to the increase of amortizations net of interest accrued.

Table 72. Renegotiated Loan Portfolio – Multiple Bank¹

R$ million 2Q16 3Q16 4Q16 1Q17 2Q17

Credits Renegotiated 11,921 9,190 9,955 9,524 13,959

Renegotiated When Past Due 5,026 2,758 3,873 2,332 3,622

Renew ed - not Past Due 6,895 6,432 6,082 7,192 10,337

Credits Renegotiated When Past Due - Changes

Initial Balance 22,038 25,050 25,694 27,086 26,618

New Transactions 5,026 2,758 3,873 2,332 3,622

Amortization Net of Interest² (979) (744) (1,113) (864) (1,211)

Write-Off (1,036) (1,370) (1,368) (1,936) (1,986)

Past due Renegotiated Loan Portfolio (A) 25,050 25,694 27,086 26,618 27,042

ALLL Balance (B) 10,369 10,784 11,925 12,314 12,924

NPL + 90 days (C) 5,642 6,370 7,375 7,410 7,094

Indicators - %

ALLL / Loan Portfolio (B/A) 41.4 42.0 44.0 46.3 47.8

NPL + 90 days / Loan Portfolio (C/A) 22.5 24.8 27.2 27.8 26.2

ALLL Balance/NPL + 90 days (B/C) 183.8 169.3 161.7 166.2 182.2

Credits Renegotiated/Classif ied Portfolio 3.6 3.8 4.1 4.2 4.2

1 – Accordingly to Financial Statements Note 10.k – Individuals Statements 2 – Principal and interest payments net of interest accrued in period.

Figure 45. New NPL and Write-Off – Percentage on the Renegotiated Loan Portfolio

1.551.91

2.382.10

2.37

1.971.67

9.96 9.71

10.78

8.379.24

7.286.27

4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17

New NPL (R$ billion) New NPL(t)/Credits Renegotiated (t - 1)

In the next table, the renegotiated loan portfolio breakdown by risk level is shown:

Chapter 3 - Loan

66

Table 73. Renegotiated Portfolio by Risk Level

R$ million Balance Provision Share % Balance Provision Share % Balance Provision Share %

AA 218 - 0.9 255 - 1.0 198 - 0.7

A 1,604 8 6.4 418 2 1.6 383 2 1.4

B 3,426 34 13.7 2,799 28 10.5 2,784 28 10.3

C 3,154 95 12.6 3,895 117 14.6 3,681 110 13.6

D 1,301 130 5.2 1,987 199 7.5 1,926 193 7.1

E 4,988 1,497 19.9 4,269 1,281 16.0 4,709 1,413 17.4

F 2,369 1,184 9.5 2,739 1,369 10.3 2,392 1,196 8.8

G 1,897 1,328 7.6 3,124 2,187 11.7 3,289 2,302 12.2

H 6,094 6,094 24.3 7,132 7,132 26.8 7,680 7,680 28.4

Total 25,050 10,369 100.0 26,618 12,314 100.0 27,042 12,924 100.0

AA-C 8,401 137 33.5 7,367 147 27.7 7,046 140 26.1

D-H 16,649 10,232 66.5 19,250 12,167 72.3 19,996 12,784 73.9

Jun/16 Mar/17 Jun/17

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67

4 - Funding

The amount of commercial funding increased 0.7% in the quarter. The positive variation of 23.7% in Rep. Agreement with Private Securities volume was compensated by other decreases in the period, mainly with Agribusiness Letters of Credits, lower by 10.7% compared to 1Q17. In the comparison with the same period of last year the commercial funding decrease was mainly due to the agribusiness letters of credit, interbank deposits and Rep. Agreement with Private Securities.

Table 74. Commercial Funding

R$ million Jun/16 Share % Mar/17 Share % Jun/17 Share %Jun/16 Mar/17

Commercial Funding 624,778 100.0 584,445 100.0 588,506 100.0 (5.8) 0.7

Saving Deposits 148,368 23.7 148,910 25.5 150,982 25.7 1.8 1.4

Judicial Deposits 116,655 18.7 121,931 20.9 130,514 22.2 11.9 7.0

Agribusiness Letters of Credits 135,418 21.7 112,720 19.3 100,665 17.1 (25.7) (10.7)

Time Deposits¹ 85,834 13.7 77,511 13.3 79,969 13.6 (6.8) 3.2

Demand Deposits 62,550 10.0 63,960 10.9 62,385 10.6 (0.3) (2.5)

Rep. Agreement w ith Private Securities² 30,415 4.9 20,135 3.4 24,898 4.2 (18.1) 23.7

Mortgage Bonds³ 18,066 2.9 21,012 3.6 20,132 3.4 11.4 (4.2)

Interbank Deposits 27,473 4.4 18,265 3.1 18,962 3.2 (31.0) 3.8

Balance Chg. (%) on

1 - Includes others deposits of Notes to the Consolidated Financial Statements. 2 - Includes part of the balances of the Repurchase Agreements Private Securities shown on Notes to the Consolidated Financial Statements. 3 - Includes the balance of CRI (Certificates of Real Estate Receivables).

The following figure shows BB’s market share in deposits and money market funding in the BI.

Figure 46. Market Share of BB’s Funding (R$ billion)

66.1 66.562.6 62.5 61.6

69.364.0 62.4

20.0 20.9 21.1 21.6 21.4

26.1 25.4

Sep/15 Dec/15 Mar/16 Jun/16 Sep/16 Dec/16 Mar/17 Jun/17

Demand Deposits (%)Market Share¹

149.8 151.8 151.9 148.4 148.7 151.8 148.9 151.0

22.9 22.8 23.3 23.0 22.8 22.5 22.3

Sep/15 Dec/15 Mar/16 Jun/16 Sep/16 Dec/16 Mar/17 Jun/17

Savings Deposits (%)Market Share¹

205.2 204.5 202.6 202.5 203.4 204.2 199.4210.4

23.2 23.6 23.8 22.6 21.7 21.220.1

Sep/15 Dec/15 Mar/16 Jun/16 Sep/16 Dec/16 Mar/17 Jun/17

Time Deposits² (%)Market Share¹

782.2 797.9 808.4852.8 848.2 820.6 840.5

892.6

22.5 22.6 22.8 23.7 22.9 22.1 22.4

Sep/15 Dec/15 Mar/16 Jun/16 Sep/16 Dec/16 Mar/17 Jun/17

Money Market Borrowing³ (%)Market Share¹

1 - Information about share in the BI from the “Dados selecionados de Entidades Supervisionadas” report of the Central Bank of Brazil website <https://www3.bcb.gov.br/informes/?wicket:interface=:0:1:::>. Position: Mar/17. 2 - Includes Judicial Deposits. 3 - Includes Total Deposits and Money Market Borrowing.

Chapter 4 - Funding

68

The following table shows the institutional funding balance, consisting in the issuance of securities acquired by institutional investors. In comparison with Jun/16, the increase of 1.1% is explained mainly by the increase in Securities Issued Abroad.

Table 75. Institutional Funding

R$ million Jun/16 Share % Mar/17 Share % Jun/17 Share %Jun/16 Mar/17

Institutional Funding 211,091 100.0 211,958 100.0 213,404 100.0 1.1 0.7

Borrow ing, Assignments and Onlending 124,185 58.8 122,193 57.6 120,881 56.6 (2.7) (1.1)

Hybrid Capital Instruments 31,068 14.7 31,206 14.7 31,753 14.9 2.2 1.8

Financial Letters 27,690 13.1 28,748 13.6 29,012 13.6 4.8 0.9

Securities Issued Abroad 18,631 8.8 20,540 9.7 21,937 10.3 17.7 6.8

Subordinated Debt Overseas 9,517 4.5 9,271 4.4 9,821 4.6 3.2 5.9

Chg. (%) onBalance

The following tables shows BB’s foreign funding balance (by type and by product), including Banco Patagonia and BB Americas.

Table 76. Funding Abroad Borrowing - Type

US$ million

Type Jun/16 Share % Mar/17 Share % Jun/17 Share %Jun/16 Mar/17

Issues and Certif icates of Deposit 14,929 36.3 15,570 41.5 15,711 40.2 5.2 0.9

Interbanking Deposits and Loans 14,831 36.1 10,631 28.3 10,876 27.8 (26.7) 2.3

Businesses 6,591 16.0 6,279 16.7 6,579 16.8 (0.2) 4.8

Individuals 3,624 8.8 3,951 10.5 4,091 10.5 12.9 3.5

Repo 1,051 2.6 1,032 2.7 1,783 4.6 69.5 72.8

Special Account 112 0.3 98 0.3 40 0.1 (64.2) (59.4)

TOTAL 41,137 100.0 37,561 100.0 39,080 100.0 (5.0) 4.0

Balance Chg. (%) on

In 2Q17, the foreign funding increase was mainly caused by Repo, 72.8% over the 1Q17.

BB’s commercial funding abroad is composed by demand deposits, time deposits and saving deposits.

Table 77. Funding Abroad Borrowing - Product

US$ million

Product Jun/16 Share % Mar/17 Share % Jun/17 Share %Jun/16 Mar/17

Issues and Certif icates of Deposit 14,929 36.3 15,570 41.5 15,711 40.2 5.2 0.9

Time Deposits 11,549 28.1 8,970 23.9 9,138 23.4 (20.9) 1.9

Loans 6,992 17.0 5,525 14.7 5,867 15.0 (16.1) 6.2

Demand Deposits 2,736 6.7 2,725 7.3 2,674 6.8 (2.3) (1.9)

Saving Deposits 1,287 3.1 1,526 4.1 1,670 4.3 29.7 9.4

Pledge 1,252 3.0 1,282 3.4 963 2.5 (23.1) (24.8)

Repo 1,051 2.6 1,032 2.7 1,783 4.6 69.5 72.8

Call Account 690 1.7 390 1.0 637 1.6 (7.6) 63.5

Over 539 1.3 444 1.2 597 1.5 10.8 34.7

Special Account 112 0.3 98 0.3 40 0.1 (64.2) (59.4)

TOTAL 41,137 100.0 37,561 100.0 39,080 100.0 (5.0) 4.0

Balance Chg. (%) on

Sources and Uses

The following table shows the relation between funding sources and investments at Banco do Brasil.

BB aims to diversify its funding sources by offering attractive alternatives to customers and providing a reduction in the funding cost for the Bank. In 2Q17 the increase in Repurchase Agreements with Private Securities and Total Deposits volume, compared with 1Q17, has contributed significantly to achieving the funding strategy in period.

The loan portfolio remains the main use of funding with a share of 82.9% of total uses.

The following table shows the adjusted net loan portfolio indicator over commercial funding, which disregards the credit originated by domestic onlending.

Banco do Brasil S.A. - MD&A 2Q17

69

Table 78. Sources and Uses

R$ million Jun/16 Share % Mar/17 Share % Jun/17 Share %Jun/16 Mar/17

Sources 802,737 100.0 761,795 100.0 766,782 100.0 (4.5) 0.7

Commercial Funding 624,778 77.8 584,445 76.7 588,506 76.8 (5.8) 0.7

Total Deposits 440,879 54.9 430,578 56.5 442,812 57.7 0.4 2.8

Agrib. Letters of Credit and Mortgage Bonds 153,485 19.1 133,732 17.6 120,797 15.8 (21.3) (9.7)

Repurch. Agreement w ith Private Securities¹ 30,415 3.8 20,135 2.6 24,898 3.2 (18.1) 23.7

Domestic Onlending 86,603 10.8 81,431 10.7 79,453 10.4 (8.3) (2.4)

Subordinated Debt 58,648 7.3 61,123 8.0 62,306 8.1 6.2 1.9

Foreign Borrow ing² 50,911 6.3 47,581 6.2 51,499 6.7 1.2 8.2

Hybrid Capital Instuments 31,068 3.9 31,206 4.1 31,753 4.1 2.2 1.8

Financial and Development Funds 13,741 1.7 14,817 1.9 14,837 1.9 8.0 0.1

Commercial Paper³ 2,393 0.3 2,812 0.4 3,088 0.4 29.0 9.8

Compulsory Deposits (65,404) (8.1) (61,619) (8.1) (64,659) (8.4) (1.1) 4.9

Uses 802,737 100.0 761,795 100.0 766,782 100.0 (4.5) 0.7

Net Loan Portfolio (a) 696,683 86.8 631,645 82.9 635,846 82.9 (8.7) 0.7

Classif ied Loan Portfolio 691,832 86.2 638,336 83.8 642,846 83.8 (7.1) 0.7

Private Securities 41,819 5.2 29,724 3.9 30,882 4.0 (26.2) 3.9

Allow ance for Loan Losses (36,968) (4.6) (36,414) (4.8) (37,881) (4.9) 2.5 4.0

Available Funds 106,054 13.2 130,150 17.1 130,936 17.1 23.5 0.6

Domestic Onlending Loans (b) 124,232 15.5 122,215 16.0 120,926 15.8 (2.7) (1.1)

Adjusted Net Loan Portfolio (a) - (b) 572,451 71.3 509,431 66.9 514,920 67.2 (10.1) 1.1

Indicators - %

Net Loan Portfolio / Total Deposits 158.0 146.7 143.6

Net Loan Portfolio / Commercial Funding 111.5 108.1 108.0

Adjusted Net Loan Portfolio / Commercial Funding 91.6 87.2 87.5

Net Loan Portfolio / Sources 86.8 82.9 82.9

Balance Chg. (%) on

1 - Includes part of the balance of Private Securities shown on Notes to the Consolidated Financial Statements. 2 - Includes Foreign Borrowings, Foreign Securities, foreign Onlending, Subordinated debt abroad and Hybrid Capital and Debit Instruments Abroad. 3 - Includes Letters of Credit and Debentures.

The following table presents the fixed income securities issued by BB in the international capital market.

Table 79. Current Debt Issues Abroad

Issue Date Maturity Call Date

Volume

(US$

thousand)

Cupon (%) ¹Issue

price

Return for

Investor

(%)

Spread over

TreasuryCurrency

Balance Jun/17

(US$ thousand)

Rating

S&P/Moody's/Fit

ch

Program

07/18/2007 07/18/2017 187,198 9.750 S 100.00 9.75 BRL 105,816.91 SR / Ba2 / SR GMTN

04/29/2008 06/15/2018 150,000 5.250 Q 100.00 5.25 USD 24,000.00 BBB *- / Ba1 / SR MT 100

10/20/2009 Perpetual 10/20/2020 1,500,000 8.500 S 100.00 8.50 USD 1,498,500.00 SR / B2 / SR Stand Alone

01/22/2010 01/22/2020 500,000 6.000 S 99.45 6.07 237.5 USD 500,000.00 BB *- / Ba2 / BB GMTN

10/05/2010 01/15/2021 660,000 5.375 S 99.32 5.46 300 USD 660,000.00 SR / Ba3 / SR Stand Alone

05/26/2011 01/26/2022 1,500,000 5.875 S 98.70 6.04 287.5 USD 1,500,000.00 SR / Ba3 / SR Stand Alone

01/20/2012 Perpetual 04/15/2023 1,000,000 9.250 S 100.00 9.25 732.7 USD 648,727.00 B- *- / SR / SR Stand Alone

03/05/2012 Perpetual 04/15/2023 750,000 9.250 S 108.50 8.49 USD 750,000.00 B- *- / SR / SR Stand Alone

06/19/2012 01/19/2023 750,000 5.875 S 99.02 6.00 434.1 USD 750,000.00 B *- / Ba3 / SR Stand Alone

10/10/2012 10/10/2022 1,925,000 3.875 S 98.98 4.00 237.5 USD 1,809,700.00 BB *- / Ba2 / BB Stand Alone

01/31/2013 Perpetual 04/15/2024 2,000,000 6.250 S 100.00 6.25 439.8 USD 1,988,000.00 B- *- / SR / SR Stand Alone

07/25/2013 07/25/2018 929,775 3.750 A 99.44 3.88 EUR mid-sw ap+283.9 EUR 820,020.00 BB *- / Ba2 / BB GMTN

12/20/2013 06/20/2019 306,988 2.500 A 99.73 2.56 CHF mid-sw ap+190 CHF 286,936.56 BB *- / Ba2 / BB GMTN

03/26/2014 07/25/2018 417,210 3.750 A 102.30 3.17 EUR mid-sw ap+230 EUR 320,880.00 BB *- / Ba2 / BB GMTN

06/18/2014 Perpetual 06/18/2024 2,500,000 9.000 S 100.00 9.00 636.2 USD 2,169,700.00 B- *- / B2 / SR Stand Alone

1 - A: annual; S: semiannual; Q: quaterly.

Banco do Brasil did not make any debt repurchase operations in 2Q17.

Chapter 5 - Financial Earnings

70

5 - Financial Earnings

This chapter describes the main components of Banco do Brasil’s financial results.

5.1. Net Interest Income

Table 80. Main Indices

% 2Q16 1Q17 2Q17 1H16 1H17 2Q16 1Q17 1H16

CDI 3.36 3.03 2.54 6.72 5.65 (24.4) (16.1) (16.0)

TMS 3.36 3.03 2.54 6.73 5.65 (24.4) (16.1) (16.0)

TJLP 1.82 1.89 1.71 3.68 3.62 (6.5) (9.6) (1.5)

TR 0.49 0.35 0.18 0.95 0.53 (63.5) (49.3) (44.1)

Exchange Rate (US$) 3.21 3.17 3.31 - - 3.1 4.4 -

Rate Chg. (%) on

The following table sets forth the NII’s breakdown.

Table 81. Net Interest Income Breakdown

1 - It includes senior bonds, subordinated debt, and Hybrid Instruments in Brazil and abroad.; 2 - It includes the result from interest, tax hedging, derivatives, and other financial instruments that offset the effects of the exchange rate variation on result. 3 – Series revised (Funding Expense for Institutional Funding to Treasury). Impact in all tables with those lines.

Bellow, the NII and its components are analyzed:

I. Financial income from loans decreased by R$1,825 million compared to the previous quarter, primarily (70.0%) due to the Companies Revenues. This line was affected by the the Small and Very Small companies, especially on the Working Capital line. For individuals, the reduction of R$321 million is primarily due to the decrease in income from credit card revolving credit, fact that had already impacted the 1Q17.

II. Credit recovery increased by R$438 million compared to 1Q17, and R$10.8 million compared to 2Q16.

III. Earning assets mix composition, with an increase in the securities + interbank invest. average balance in R$32,969 million (6.2%) and decrease in loans and leasing operations balance R$3,334 (-0.5%) in the quarter, affecting the revenue of the relevant line items.

5.2. Financial Income from Loans Operations

Table 82. Revenue from Loans

Chg. (%) on

R$ million 2Q16 1Q17 2Q17 2Q16 1Q17 1H16 1H17 1H16

Revenue from Loans 25,311 23,611 21,786 (13.9) (7.7) 50,390 45,398 (9.9)

Individuals 9,831 10,014 9,693 (1.4) (3.2) 19,242 19,708 2.4

Companies 9,226 7,561 6,283 (31.9) (16.9) 18,532 13,843 (25.3)

Agribusiness 4,941 4,749 4,662 (5.6) (1.8) 9,690 9,411 (2.9)

Equalization 1,416 1,415 1,385 (2.2) (2.1) 2,799 2,801 0.1

Abroad 580 670 683 17.8 2.0 1,467 1,354 (7.7)

Sale or Transference of Financial Assets 571 476 386 (32.4) (18.9) 1,146 863 (24.7)

Other 127 110 50 (60.4) (54.3) 238 160 (32.8)

Leasing 35 31 29 (19.1) (7.4) 75 60 (20.4)

Quarterly Flow Chg. (%) on Half-Yearly Flow

The decrease in credit revenues with individuals compared to 1Q17 (R$321 million) is primarily due to the decrease in income from credit card revolving credit, whose rates decreased in 1Q17. In the comparison with 1H16, even with the Individuals portfolio decrease of 2.0%, and increase of R$465.5 million due to the repricing process started on 2015.

Chg. (%)

R$ million 2Q16 1Q17 2Q17 2Q16 1Q17 1H16 1H17 1H16

Net Interest Income 14,633 14,476 14,606 (0.2) 0.9 28,909 29,083 0.6

Net Interest Income W/O Recovery 13,249 13,521 13,212 (0.3) (2.3) 26,665 26,733 0.3

Loan Operations 25,311 23,611 21,786 (13.9) (7.7) 50,390 45,398 (9.9)

Funding Expenses (11,034) (9,755) (8,404) (23.8) (13.9) (21,965) (18,159) (17.3)

Financial Expense for Institutional Funding¹ ³ (3,785) (3,470) (3,146) (16.9) (9.4) (7,518) (6,616) (12.0)

Treasury² ³ 2,758 3,135 2,975 7.9 (5.1) 5,758 6,110 6.1

Recovery of Write-offs 1,384 956 1,394 0.8 45.9 2,245 2,350 4.7

Quarterly Flow Chg. (%) on Half-Yearly Flow

Banco do Brasil S.A. - MD&A 2Q17

71

Income from loans operations with companies was negatively affected by the decrease in average balances, notably on the working capital products with Small and Very Small companies affected all the comparisons period.

The individuals revenues gained relevance of 565 bps and a fall of 761 bps in revenues from loans to companies. This movement is due to the reduction in the volume of the companies’ portfolio classified (14.8% in one year) as well as the repricing process in the individuals’ portfolio in recent periods.

Figure 47. Summary of Assets

Table 83. Assets Synthetic Composition

R$ million Jun/16 Share % Mar/17 Share % Jun/17 Share % Jun/16 Mar/17

Classified Loan Portfolio 691,832 47.9 638,336 45.5 642,846 44.5 (7.1) 0.7

Liquidity Assets 546,017 37.8 560,783 40.0 595,624 41.2 9.1 6.2

Other 207,267 14.3 203,281 14.5 207,144 14.3 (0.1) 1.9

Total Assets 1,445,115 1,402,399 1,445,614 0.0 3.1

Balance Chg. (%) on

5.3. Funding Financial Expense

Funding financial expenses include transactions with clients, except repo. Funding financial expenses also include the result of compulsory investments and FGC expenses.

Table 84. Funding Result¹

Chg. (%) on

R$ million 2Q16 1Q17 2Q17 2Q16 1Q17 1H16 1H17 1H16

Funding Result (11,034) (9,755) (8,404) (23.8) (13.9) (21,965) (18,159) (17.3)

Commercial Funding (7,905) (7,308) (6,579) (16.8) (10.0) (15,698) (13,888) (11.5)

Judicial Deposits (2,996) (3,024) (2,806) (6.3) (7.2) (5,886) (5,830) (1.0)

Savings Deposits (2,854) (2,668) (2,388) (16.3) (10.5) (5,698) (5,057) (11.3)

Time Deposits (2,054) (1,616) (1,385) (32.6) (14.3) (4,114) (3,001) (27.1)

Bonds (4,410) (3,545) (2,744) (37.8) (22.6) (8,766) (6,289) (28.3)

Agribusiness Letters of Credit (3,934) (3,112) (2,347) (40.4) (24.6) (7,814) (5,459) (30.1)

Mortgage Bonds (476) (432) (398) (16.4) (8.0) (951) (830) (12.8)

Compulsory Deposits 1,447 1,255 1,070 (26.1) (14.8) 2,838 2,325 (18.1)

FGC (167) (157) (149) (10.8) (5.2) (338) (307) (9.4)

Quarterly Flow Chg. (%) on Half-Yearly Flow

1 – It excludes expenses from repo.

In 2Q17, funding expenses decreased compared to the last quarter (R$1,352 million). The most relevant decrease was in the Agribusiness Letters of Credit expenses (R$766 million) or 56.7% of the total decrease, due to lower average balances and lower rates (the CDI rate decreased by 16.1% in the quarter). In the half – yearly flow, the decrease with that letter of credit represented 61.9% of the total decrease in the Funding Result line (R$3,806 million).

The following table sets forth BB’s funding costs and the average Selic rate in the period.

Chapter 5 - Financial Earnings

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Table 85. Funding vs. Selic Rate

R$ million

Average

BalanceCost

as % of

Selic

Average

BalanceCost

as % of

Selic

Average

BalanceCost

as % of

Selic

Savings Deposits 149,297 (2,854) 56.8 149,621 (2,668) 58.8 149,634 (2,388) 62.7

Time Deposits - Judicial Deposits 116,075 (2,996) 76.7 121,815 (3,024) 81.9 127,020 (2,806) 86.8

Agribusiness Letters of Credits 135,540 (3,934) 86.3 117,244 (3,112) 87.5 104,499 (2,347) 88.3

Time Deposits 87,418 (2,054) 69.9 78,366 (1,616) 68.0 78,434 (1,385) 69.4

Demand Deposits 60,827 - - 62,955 - - 62,194 - -

Mortgage Bonds 18,267 (476) 77.4 19,742 (432) 72.2 20,508 (398) 76.2

Interbank Deposits 31,671 (141) 13.3 18,495 (183) 32.6 17,906 (148) 32.5

Total Funding 599,095 (12,456) 61.8 568,239 (11,035) 64.0 560,195 (9,472) 66.5

2Q16 1Q17 2Q17

5.4. Institutional Funding Financial Expenses

The following table sets forth the breakdown of institutional funding expenses.

Table 86. Institutional Funding Expenses

Chg. (%) on

R$ million 2Q16 1Q17 2Q17 2Q16 1Q17 1H16 1H17 1H16

Institutional Funding (3,785) (3,470) (3,146) (16.9) (9.4) (7,518) (6,616) (12.0)

Borrow ing, Assignments and Onlending (2,088) (1,740) (1,572) (24.7) (9.7) (3,879) (3,312) (14.6)

Financial Letters (961) (940) (763) (20.6) (18.8) (1,973) (1,703) (13.7)

Hybrid Capital Instruments (438) (453) (461) 5.2 1.7 (973) (914) (6.1)

Securities Issued Abroad (176) (200) (210) 19.4 5.1 (418) (410) (1.9)

Subordinated Debt Abroad (122) (137) (140) 14.5 2.3 (274) (277) 0.9

Quarterly Flow Chg. (%) on Half-Yearly Flow

5.5. Income from Written-off Credit Recovery

More information about the process and balances of credit recovery transactions is set forth in sections 3.2 and 3.3 of this report.

Table 87. Written-Off Credit Recovery Income

Chg. (%) on

R$ million 2Q16 1Q17 2Q17 2Q16 1Q17 1H16 1H17 1H16

Recovery of Write-offs 1,384 956 1,394 0.8 45.9 2,245 2,350 4.7

Half-Yearly FlowQuarterly Flow Chg. (%) on

5.6. Treasury

Treasury result includes the result from interest and exchange rate variation of treasury activities. It also includes the effects of structural hedge of the exchange rate variation on financial income from loans, funding expenses, and institutional funding expenses.

Table 88. Treasury Results

Chg. (%) on

R$ million 2Q16 1Q17 2Q17 2Q16 1Q17 1H16 1H17 1H16

Treasury 2,758 3,135 2,975 7.9 (5.1) 5,758 6,110 6.1

Securities 14,473 15,536 13,884 (4.1) (10.6) 28,615 29,420 2.8

Open Market (11,664) (12,311) (11,030) (5.4) (10.4) (22,823) (23,341) 2.3

Financial Derivatives (172) (301) (113) (34.4) (62.5) (375) (414) 10.4

Other Treasury Components¹ 122 211 234 92.3 11.0 341 445 30.4

Quarterly Flow Chg. (%) on Half-Yearly Flow

1 – It includes items not listed in the treasury result breakdown, including exchange rate variation.

Below is an analysis of the components of treasury result:

Result from Securities

The following table sets forth the results from Securities transactions (only transactions classified by the Central Bank as securities/interbank liquidity investments).

Banco do Brasil S.A. - MD&A 2Q17

73

Table 89. Result from Securities

Chg. (%) on

R$ million 2Q16 1Q17 2Q17 2Q16 1Q17 1H16 1H17 1H16

Securities Income 14,473 15,536 13,884 (4.1) (10.6) 28,615 29,420 2.8

Fixed Income Securities 14,594 15,482 13,754 (5.8) (11.2) 28,595 29,236 2.2

Interbank Accounts 10,825 12,076 10,605 (2.0) (12.2) 21,147 22,681 7.3

Revaluation – Curve 3,767 3,236 3,066 (18.6) (5.2) 7,307 6,302 (13.8)

Income/Loss from Negotiation (7) 160 85 - (47.1) 110 245 123.4

Mark to Market 9 10 (2) - - 31 8 (75.2)

Other (121) 54 130 - 138.1 20 184 829.4

Half-Yearly FlowQuarterly Flow Chg. (%) on

The following figure sets forth the breakdown of the securities portfolio of BB Multiple Bank by index.

Figure 48. Securities Portfolio by Index (BB Multiple Bank)

The following tables set forth the breakdown of the Securities portfolio.

Table 90. Securities Portfolio by Category – Market Value

R$ million Jun/16 Share % Mar/17 Share % Jun/17 Share % Jun/16 Mar/17

Securities 117,205 100.0 123,233 100.0 132,320 100.0 12.9 7.4

Available for Trading 6,225 5.3 7,889 6.4 8,253 6.2 32.6 4.6

Available for Sale 110,429 94.2 110,639 89.8 119,473 90.3 8.2 8.0

Held to Maturity 552 0.5 4,706 3.8 4,594 3.5 732.9 (2.4)

Financial Derivatives 3,256 - 1,176 - 1,390 - (57.3) 18.1

Balance Chg. (%) on

Table 91. Securities Portfolio by Maturity – Market Value

R$ million Balance Share % Balance Share % Balance Share % Balance Share %

Sep/15 19,233 17.7% 56,388 51.9% 29,623 27.3% 3,299 3.0% 108,543

Dec/15 19,271 17.0% 55,534 48.8% 32,007 28.2% 6,871 6.0% 113,684

Mar/16 20,141 17.1% 71,329 60.6% 22,192 18.8% 4,130 3.5% 117,791

Jun/16 12,870 11.0% 74,179 63.3% 23,596 20.1% 6,560 5.6% 117,205

Sep/16 12,095 9.9% 79,237 64.8% 22,837 18.7% 8,170 6.7% 122,339

Dec/16 11,283 9.5% 74,762 62.8% 24,464 20.6% 8,497 7.1% 119,005

Mar/17 12,888 10.5% 76,523 62.1% 28,196 22.9% 5,627 4.6% 123,233

Jun/17 16,267 12.3% 74,993 56.7% 35,316 26.7% 5,743 4.3% 132,320

Up to 1 yearTotal

Over 10 years5 to 10 years1 to 5 years

The following table sets forth the Liquidity Balance, calculated as Liquidity Assets less Liquidity Liabilities.

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Table 92. Liquidity Balance

R$ million Jun/16 Share % Mar/17 Share % Jun/17 Share % Jun/16 Mar/17

Liquidity Assets (A) 546,017 100.0 560,783 100.0 595,624 100.0 9.1 6.2

Interbank Investments 414,471 75.9 421,890 75.2 448,417 75.3 8.2 6.3

Securities (except linked to Bacen) 117,494 21.5 123,579 22.0 132,877 22.3 13.1 7.5

Available Funds 14,052 2.6 15,314 2.7 14,330 2.4 2.0 (6.4)

Liquidity Liabilities (B) 439,441 100.0 428,231 100.0 468,783 100.0 6.7 9.5

Money Market Borrow ing 411,969 93.7 409,966 95.7 449,822 96.0 9.2 9.7

Interbank Deposits 27,473 6.3 18,265 4.3 18,962 4.0 (31.0) 3.8

Liquidity Balance (A - B) 106,576 132,552 126,841 19.0 (4.3)

Balance Chg. (%) on

Open Market Funding

Open market funding expenses primarily consist of expenses incurred with repo backed by the Bank’s own portfolio and third parties’ securities.

Table 93. Open Market Funding Expenses

Chg. (%) on

R$ million 2Q16 1Q17 2Q17 2Q16 1Q17 1H16 1H17 1H16

Open Market (11,664) (12,311) (11,030) (5.4) (10.4) (22,823) (23,341) 2.3

Third Party Portfolio (9,852) (10,678) (9,701) (1.5) (9.1) (18,924) (20,378) 7.7

Ow n Portfolio (1,659) (1,441) (1,169) (29.5) (18.9) (3,341) (2,610) (21.9)

Interbank Deposits (141) (183) (148) 4.8 (18.9) (541) (331) (38.9)

Other Open Market Op. (11) (10) (12) 8.8 20.1 (17) (22) 27.1

Chg. (%) onQuarterly Flow Half-Yearly Flow

Other Treasury Components

Other treasury components include, in addition to the results from foreign exchange earnings/losses on shareholders’ equity abroad and tax hedging, the exchange rate variation on credit, funding, and institutional funding transactions, among others, recorded in “others.”

Table 94. Other Treasury Components

Chg. (%) on

R$ million 2Q16 1Q17 2Q17 2Q16 1Q17 1H16 1H17 1H16

Other Treasury Components 122 211 234 92.3 11.0 341 445 30.4

Gain (Loss) over Equity Abroad (1,081) (166) 481 - - (2,349) 315 -

Tax Hedge (981) (150) 436 - - (1,854) 286 -

Foreign Exchange Portfolio 72 75 97 34.4 29.0 156 172 10.4

Other 2,112 452 (780) - - 4,388 (328) -

Quarterly Flow Chg. (%) on Half-Yearly Flow

5.7. Assets and Liabilities Analysis

5.7.1. Assets Analysis

Table 95. Average Balances and Interest Rate – Earning Assets (Annual)

R$ million

Average

Balance¹

Revenues

³

Yearly

Rate (%)²

Average

Balance¹

Revenues

³

Yearly

Rate (%)²

Earning Assets 1,218,676 41,279 14.3 1,252,360 36,782 12.7

Loans and Leasing⁴ 677,470 25,311 15.8 624,289 21,786 15.2

Secur. + Interbank Invest. w /o Hedge 479,125 14,473 12.6 568,449 13,884 10.5

Remunerated Compulsory Deposits 53,733 1,447 11.2 51,257 1,070 8.9

Other 8,348 48 2.3 8,366 43 2.1

Non Earning Assets 176,107 174,422

Other Assets 102,113 99,945

Tax Credits 42,429 42,889

Permanent Assets 31,564 31,588

TOTAL ASSETS 1,394,783 1,426,782

2Q16 2Q17

1 – Arithmetic average of the final balances in the months of the relevant periods.

Banco do Brasil S.A. - MD&A 2Q17

75

2 – Annualized average (business days of the quarter divided by 252). 3 – Calculated including the partial effect of the exchange rate variation. 4 – It includes Credit Transactions, Leases, and Acquired Portfolios.

Table 96. Average Balances and Interest Rate – Earning Asset (Quarterly)

R$ million

Average

Balance¹

Revenues

³

Yearly

Rate (%)²

Average

Balance¹

Revenues

³

Yearly

Rate (%)²

Earning Assets 1,223,404 40,454 13.9 1,252,360 36,782 12.7

Loans and Leasing⁴ 627,622 23,611 15.9 624,289 21,786 15.2

Secur. + Interbank Invest. w /o Hedge 535,480 15,536 12.1 568,449 13,884 10.5

Remunerated Compulsory Deposits 51,998 1,255 10.0 51,257 1,070 8.9

Other 8,304 51 2.5 8,366 43 2.1

Non Earning Assets 177,079 174,422

Other Assets 102,409 99,945

Tax Credits 42,524 42,889

Permanent Assets 32,146 31,588

TOTAL ASSETS 1,400,484 1,426,782

1Q17 2Q17

1 – Arithmetic average of the final balances in months of the relevant periods. 2 – Annualized average (business days of the quarter divided by 252). 3 – Calculated including the partial effect of the exchange rate variation. 4 – It includes Credit Transactions, Leases, and Acquired Portfolios.

Table 97. Average Balances and Interest Rates – Earning Assets (Half - Yearly)

R$ million

Average

Balance¹

Revenues

³

Yearly

Rate (%)²

Average

Balance¹

Revenues

³

Yearly

Rate (%)²

Earning Assets 1,220,103 82,007 14.1 1,237,882 77,236 13.1

Loans and Leasing⁴ 684,322 50,390 15.5 625,955 45,398 15.3

Secur. + Interbank Invest. w /o Hedge 473,776 28,615 12.7 551,964 29,420 11.1

Remunerated Compulsory Deposits 53,331 2,838 11.1 51,627 2,325 9.4

Other 8,674 165 3.9 8,335 93 2.3

Non Earning Assets 176,182 175,750

Other Assets 103,025 101,177

Tax Credits 41,553 42,706

Permanent Assets 31,603 31,867

TOTAL ASSETS 1,396,285 1,413,633

1H16 1H17

1 - Arithmetic average of the closing balances of months that comprise the period; 2 –Annualized rate (business day by 252); 3 - Calculated partial effect of exchange rate change; 4 - Included:Loans Operations, Leasing and acquired loan portfolio.

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5.7.2. Liabilities Analysis

Table 98. Average Balances and Interest Rates - Interest Bearing Liabilities (Annual)

R$ million

Average

Balance¹Expenses⁴

Yearly

Rate (%)²

Average

Balance¹Expenses⁴

Yearly

Rate (%)²

Interest Bearing Liabilities 1,133,923 (28,301) 10.4 1,164,459 (24,080) 8.8

Money Market Borrow ing 354,980 (11,522) 13.6 434,706 (10,882) 10.8

Time Deposits 203,493 (5,050) 10.3 205,454 (4,191) 8.7

Saving Deposits 149,297 (2,854) 7.9 149,634 (2,388) 6.8

Agribusiness Letters of Credit 135,540 (3,934) 12.1 104,499 (2,347) 9.6

Borrow ing and Onlending 111,418 (2,088) 7.7 98,624 (1,572) 6.8

Subordinated Debt 91,808 (1,521) 6.8 93,059 (1,364) 6.2

Others Commercial Papers³ 20,498 (476) 9.6 23,351 (398) 7.2

Foreign Securities Borrow ing 21,193 (176) 3.4 22,475 (210) 3.9

Interbank Deposits 31,671 (141) 1.8 17,906 (148) 3.5

Financial and Development Funds 14,026 (538) 16.2 14,750 (580) 17.3

Other Liabilities 260,860 262,322

Other Liabilities 117,628 117,461

Shareholder’s Equity 82,405 82,667

Demand Deposits 60,827 62,194

TOTAL LIABILITIES 1,394,783 1,426,782

2Q16 2Q17

1 – Arithmetic average of the final balances in the months of the relevant periods. 2 – Annualized average (business days of the quarter divided by 252). 3 - Included: Letters of Credit, Debentures, Mortgage Bonds and Mortgage Receivables Certificates. 4 – Calculated including the partial effect of the exchange rate variation.

Table 99. Average Balances and Interest Rates - Interest Bearing Liabilities (Quarterly)

R$ million

Average

Balance¹Expenses⁴

Yearly

Rate (%)²

Average

Balance¹Expenses⁴

Yearly

Rate (%)²

Interest Bearing Liabilities 1,139,061 (27,229) 9.9 1,164,459 (24,080) 8.8

Money Market Borrow ing 402,573 (12,129) 12.6 434,706 (10,882) 10.8

Time Deposits 200,181 (4,640) 9.6 205,454 (4,191) 8.7

Saving Deposits 149,621 (2,668) 7.3 149,634 (2,388) 6.8

Agribusiness Letters of Credit 117,244 (3,112) 11.0 104,499 (2,347) 9.6

Borrow ing and Onlending 100,900 (1,740) 7.1 98,624 (1,572) 6.8

Subordinated Debt 92,629 (1,530) 6.8 93,059 (1,364) 6.2

Others Commercial Papers³ 22,377 (432) 8.0 23,351 (398) 7.2

Foreign Securities Borrow ing 20,266 (200) 4.0 22,475 (210) 3.9

Interbank Deposits 18,495 (183) 4.0 17,906 (148) 3.5

Financial and Development Funds 14,776 (595) 17.1 14,750 (580) 17.3

Other Liabilities 261,422 262,322

Other Liabilities 116,862 117,461

Shareholder’s Equity 81,605 82,667

Demand Deposits 62,955 62,194

TOTAL LIABILITIES 1,400,484 1,426,782

1Q17 2Q17

1 – Arithmetic average of the final balances in the months of the relevant periods. 2 – Annualized average (business days of the quarter divided by 252). 3 - Included: Letters of Credit, Debentures, Mortgage Bonds and Mortgage Receivables Certificates. 4 – Calculated including the partial effect of the exchange rate variation.

Banco do Brasil S.A. - MD&A 2Q17

77

Table 100. Average Balances and Interest Rates - Interest Bearing Liabilities (Half - Yearly)

R$ million

Average

Balance¹Expenses⁴

Yearly

Rate (%)²

Average

Balance¹Expenses⁴

Yearly

Rate (%)²

Interest Bearing Liabilities 1,139,110 (55,865) 10.2 1,151,760 (51,309) 9.3

Money Market Borrow ing 345,700 (22,282) 13.5 418,640 (23,010) 11.5

Time Deposits 203,395 (10,000) 10.2 202,817 (8,831) 9.0

Saving Deposits 150,167 (5,698) 7.9 149,628 (5,057) 7.0

Agribusiness Letters of Credit 135,701 (7,814) 12.1 110,872 (5,459) 10.3

Subordinated Debt 94,438 (3,220) 7.1 92,844 (2,893) 6.4

Borrow ing and Onlending 113,781 (3,879) 7.1 99,762 (3,312) 6.9

Interbank Deposits 36,251 (541) 3.1 18,201 (331) 3.7

Foreign Securities Borrow ing 24,369 (418) 3.5 21,370 (410) 3.9

Others Commercial Papers³ 20,643 (951) 9.6 22,864 (830) 7.5

Financial and Development Funds 14,666 (1,060) 15.2 14,763 (1,175) 16.8

Other Liabilities 257,175 261,872

Other Liabilities 117,418 117,161

Shareholder’s Equity 77,641 82,136

Demand Deposits 62,117 62,575

TOTAL LIABILITIES 1,396,285 1,413,633

1H16 1H17

1 – Arithmetic average of the final balances in the months of the relevant periods. 2 – Annualized average (business days of the semester divided by 252). 3 - Included: Letters of Credit, Debentures, Mortgage Bonds and Mortgage Receivables Certificates. 4 – Calculated including the partial effect of the exchange rate variation.

5.7.3. Volume and Rate Analysis

Table 101. Analysis of Volume (Profitable Assets) – Quarterly Rate

R$ million 1Q17 2Q17 Abs. Chg.

Assets – Earning Assets (a)¹ 1,223,404 1,252,360 28,955

Net Interest Income (b) 14,476 14,606 130

Spread - % (b/a) 1.183 1.166 (0.017)

Gain/(loss) w ith Volume² 343

Gain/(loss) w ith Spread³ (208)

1 - Arithmetic average of the closing balances of months that comprise the period. 2 - Gain/(Loss) resulting from multiplying the earning assets volume of the current period for the spread of the previous period net previous NII; 3 - Gain/(Loss) resulting from multiplying the earning assets volume of the previous period for the spread of the current period net previous NII;

Table 102. Volume Analysis (Earning Assets) – Yearly - Rate

R$ million 1H16 1H17 Abs. Chg.

Assets – Earning Assets (a)¹ 1,220,103 1,237,882 17,779

Net Interest Income (b) 28,909 29,083 174

Spread - % (a/b) 2.369 2.349 (0.020)

Gain/(loss) w ith Volume² 421

Gain/(loss) w ith Spread³ (244)

Gain/(loss) w ith Volume and Spread⁴ (4)

1 - Arithmetic average of the closing balances of months that comprise the period. 2 - Gain/(Loss) resulting from multiplying the earning assets volume of the current period for the spread of the previous period net previous NII; 3 - Gain/(Loss) resulting from multiplying the earning assets volume of the previous period for the spread of the current period net previous NII; 4 - Combined Gain/(Loss) of the effects above.

Below is the Net Interest Margin evolution.

The earning assets increased R$28,955 million in 2Q17, from 1Q17. The Loans and Leasing line decreased by R$3,334 million and was offset by an increase in securities + interbank invest balance (R$32.969 million), a fact that negatively influenced the NIM since the securities have lower spreads.

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Figure 49. Revenues From Loans Breakdown1

The change in the mix of earning assets, including the increase in securities transactions and the decrease in credit transactions in the quarter, resulted in a decrease in global spread, fact that had already occurred on the 1Q17 .If the securities line did not increase (base effect), the new NIM would be 4.9%. The impact of the revolving credit revenue with individuals impacted the NIM in 10 bps.

Table 103. NIM

1 - NII/Earning Assets average, annualized; 2 - Risk adjusted Net Interest Margin (NII less Provision for Loan Losses)/Earning Assets average, annualized.

Table 104. Adjusted NIM and Net Interest Income

R$ million 2Q16 1Q17 2Q17 1H16 1H17

Average Interest Earning Assets (AIEA) (a) 1,218,676 1,223,404 1,252,360 1,220,103 1,237,882

Average Interest Bearing Liabilities (AIBL) (b) 1,133,923 1,139,061 1,164,459 1,139,110 1,151,760

NII (c) 14,633 14,476 14,606 28,909 29,083

Net Interest Gain (d) 12,977 13,224 12,702 26,142 25,927

Interest Income (1.d) 41,279 40,454 36,782 82,007 77,236

Interest Expense(2.d) (28,301) (27,229) (24,080) (55,865) (51,309)

Net Interest Income Other Items¹ (e) 1,655 1,252 1,904 2,767 3,156

AIBL / AIEA – % (b/a) 93.0 93.1 93.0 93.4 93.0

Yield Average Assets² ⁴ - % (1.d/a) 14.3 13.9 12.3 13.9 12.9

Liabilities Average Cost ² ⁴ - % (2.d/b) 10.4 9.9 8.5 10.0 9.1

Net Interest Rate² ³ - % 3.9 4.0 3.7 3.8 3.8

Adjusted NIM² - % (d/a) 4.3 4.4 4.1 4.3 4.2

NIM² – % (c/a) 4.9 4.8 4.7 4.8 4.8

1 - Includes derivatives, debt assumption contracts, foreign exchange portfolio, recovery of write-offs, gold loans, credit guarantor fund, foreign exchange gain/loss abroad and other income of a financial intermediation nature. 2 - Annualized Rates. 3 - Difference between average rate of earning assets and average rate of interest bearing liabilities. 4 - Calculated partial effect of exchange rate change.

The following tables set forth the variations in interest income and expenses due to the variation in the average volume of interest earning assets and interest bearing liabilities and by the change in the average interest rate on these assets and liabilities, for the periods indicated.

1 For Retail, considers Individuals and Small and Very Small Companies. For wholesale, considers medium and large companies, added to government credit operations.

3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17

NII / (Earning Assets) - Annualized ¹ 4.5 4.8 4.8 4.9 4.9 5.1 4.8 4.7

NFM / (Earning Assets) - Annualized ² 2.5 2.4 1.7 2.1 2.7 2.6 2.6 2.6

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Table 105. Change in Revenues and Expenses and Change Volume / Rate (Quarterly)

R$ million

Average

Volume¹

Average

Rate ²

Net

Change³

Average

Volume¹

Average

Rate ²

Net

Change³

Earning Assets ⁴ 850 (4,522) (3,671) 989 (5,486) (4,497)

Secur. + Interbank Invest. w /o Hedge 805 (2,458) (1,652) 2,182 (2,770) (589)

Loans and Leasing (116) (1,709) (1,825) (1,856) (1,668) (3,524)

Remunerated Compulsory Deposits (15) (170) (185) (52) (326) (378)

Other 0 (9) (8) 0 (6) (6)

Interest Bearing Liabilities ⁴ (525) 3,675 3,149 (631) 4,853 4,222

Saving Deposits (0) 280 280 (5) 471 466

Interbank Deposits 5 30 34 114 (121) (7)

Time Deposits (108) 557 449 (40) 899 859

Open Market Borrow ing (804) 2,051 1,247 (1,996) 2,637 641

Borrow ing and Onlending 36 132 168 204 312 516

Financial and Development Funds 1 13 14 (28) (14) (43)

Subordinated Debt (6) 173 166 (18) 175 157

Foreign Securities Borrow ing (21) 11 (10) (12) (22) (34)

Agribusiness Letters of Credit 286 480 766 697 891 1,588

Others Commercial Papers⁵ (17) 51 34 (49) 127 78

2Q17 / 1Q17 2Q17 / 2Q16

1 – Net variation – Average Rate. 2 – (Interest for the Current Period / Balance in the Current Period) x (Balance in the Previous Period) – (Interest for the Previous Period). 3 – Interest for the Current Period – Interest for the Previous Period. 4 – Calculation based on the same method presented in footnotes 1, 2, and 3. 5 - Included: Letters of Credit, Debentures, Mortgage Bonds and Mortgage Receivables Certificates.

Table 106. Change in Revenues and Expenses and Change Volume / Rate (Half - Yearly)

R$ million

Average

Volume¹

Average

Rate²

Net

Change³

Earning Assets ⁴ 1,109 (5,881) (4,771)

Secur. + Interbank Invest. w /o Hedge 4,168 (3,362) 806

Loans and Leasing (4,233) (759) (4,992)

Remunerated Compulsory Deposits (77) (436) (513)

Other (4) (68) (72)

Interest Bearing Liabilities ⁴ (564) 5,120 4,556

Saving Deposits 18 624 642

Interbank Deposits 328 (117) 211

Time Deposits 25 1,144 1,169

Money Market Borrow ing (4,009) 3,281 (728)

Domestic Borrow ing and Onlending 465 101 567

Financial and Development Funds (8) (108) (115)

Subordinated Debt 50 277 327

Foreign Securities Borrow ing 58 (50) 8

Agribusiness Letters of Credit 1,223 1,133 2,355

Others Commercial Papers⁵ (81) 202 122

1H17 / 1H16

1 – Net variation – Average Rate. 2 – (Interest for the Current Period / Balance in the Current Period) x (Balance in the Previous Period) – (Interest for the Previous Period). 3 – Interest for the Current Period – Interest for the Previous Period. 4 – Calculation based on the same method presented in footnotes 1, 2, and 3. 5 - Included: Letters of Credit, Debentures, Mortgage Bonds and Mortgage Receivables Certificates.

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5.8. Credit Spread by Portfolio

Determining the managerial financial margin begins as follows:

a) accrued interest income, classified by type of portfolio;

b) opportunity costs determined for each line item of the portfolios.

In the case of fixed rate transactions, the managerial financial spread takes into account the funding cost at the time of the contracting, and it is not affected by the variation in the Selic rate.

The opportunity cost for Loans allocated to Individuals and Businesses with free resources is the TMS and/or Term Structure of Estimated Interest Rates (Estrutura a Termo das Taxas de Juros Estimada – ETTJ). The opportunity cost for the agribusiness portfolio and other directed resources is calculated based on the source of funds and the need to make any compulsory investment with a portion of the funds from the relevant source.

Table 107. Managerial Margin

Chg. (%) on

R$ million 2Q16 1Q17 2Q17 2Q16 1Q17 1H16 1H17 1H16

Loan Operations 11,424 10,609 10,107 (11.5) (4.7) 22,586 20,716 (8.3)

Individuals 5,534 5,416 5,457 (1.4) 0.7 10,814 10,873 0.5

Companies 3,708 3,074 2,533 (31.7) (17.6) 7,544 5,607 (25.7)

Agribusiness 2,182 2,119 2,117 (3.0) (0.1) 4,229 4,236 0.2

Chg. (%) onQuarterly Flow Half-Yearly Flow

Spread

The following table presents the managerial spread by portfolio. The rate results from the managerial financial margin divided by respective average balances.

Table 108. Spread by Portfolio

% 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17

Loan Operations 7.1 7.4 7.5 7.7 7.9 8.0 7.7 7.3

Individuals 14.9 15.5 15.8 16.3 16.5 16.6 16.1 16.1

Companies¹ 5.7 5.8 5.9 5.9 6.1 6.3 6.0 5.0

Agribusiness 4.5 4.8 4.8 4.9 5.0 5.0 4.8 4.7

1 – It does not include transactions with the Government.

The decrease in the Companies Spread (100 bps) was the main cause of the loans operation spread reduction (40 bps). Three effects were predominant in this decrease: the TMS reduction in the period, which impacted revenues with the wholesale segment, the decrease in the working capital portfolio, notably with Small and Very Small companies and the increase in judicial recoveries (chapter 11), and the increase in judicial recoveries (chapter 11), which reduced interest accrual on transactions past due over 60 days .

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6 - Fee Income

The assertive offer of customized products and services brings clients’ needs closer to the solutions offered by the Bank, according to a strategy that seeks to generate higher satisfaction levels, profitability, and, as a result, increase in fees income.

In comparison of 2Q17/1Q17, the highlight was with Loan Fees that increased R$138 million, mainly due to the BB credit portfolio disbursement

In 1H17/1H16, the checking account fees and asset management fees performance had great relevance. The checking account fees income was driven by the qualification of accounts through service package with the consequent improvement in the relationship with the customer, despite the reduction in the base.

Table 109. Fee Income

Chg. (%) on

R$ million 2Q16 1Q17 2Q17 2Q16 1Q17 1H16 1H17 1H16

Fee Income 5,886 6,096 6,316 7.3 3.6 11,285 12,411 10.0

Checking Account Fees 1,534 1,597 1,712 11.6 7.2 2,969 3,309 11.5

Asset Management Fees 1,077 1,295 1,336 24.0 3.1 2,080 2,631 26.5

Insurance, Pension and Premium Bonds 835 763 665 (20.3) (12.9) 1,532 1,429 (6.8)

Loan Fees 444 412 550 23.8 33.5 804 963 19.7

Collections 421 383 372 (11.7) (2.7) 840 755 (10.1)

Credit / Debit Cards 337 370 370 9.9 0.1 663 740 11.6

Billings 257 273 270 4.9 (1.1) 517 543 4.9

Capital Market 192 170 180 (6.5) 5.6 320 350 9.3

National Treasury and Manag. of Official Funds 150 167 171 13.9 2.2 282 338 19.9

Consortium 123 161 175 42.6 8.6 238 336 41.0

Interbank 46 41 39 (14.7) (4.5) 89 81 (9.5)

Other 469 463 475 1.2 2.6 950 937 (1.3)

Quarterly Flow Chg. (%) on Half-Yearly Flow

1 – Revised series in 1Q17.

Below is a description of the main fee generator business in Banco do Brasil.

6.1. Checking Accounts

The growth pace of BB’s client base remained stable. BB’s customers and checking accounts basis in the last 12 months are shown below.

Table 110. Customers and Checking Accounts

thousands Jun/16 Sep/16 Dec/16 Mar/17 Jun/17 Jun/16 Mar/17

Customers 64,187 64,383 64,798 65,244 65,566 2.1 0.5

Checking Accounts 37,755 37,808 37,307 37,109 36,939 (2.2) (0.5)

Individuals 35,353 35,177 34,902 34,741 34,587 (2.2) (0.4)

Companies 2,402 2,631 2,405 2,368 2,353 (2.1) (0.6)

Position Chg. (%) on

Series revised in Jun/17.

6.2. Payment Methods

The chart below sets forth the main electronic payment businesses in which Banco do Brasil holds a direct or indirect equity interest.

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Figure 50. Payment Methods Organizational Chart – Main Companies¹

1 – As of June 30, 2017.

6.2.1. Cards Base and Turnover

The wide customer base, the quality and diversity of the services provided, make Banco do Brasil one of the main emitters of the Elo, Visa and Mastercard brand.

At the end of Jun/17, BB’s card base totaled 68.3 million, including credit, debit, and pre-paid cards. Elo cards totaled 11.6 million in the period.

Table 111. Cards Base

thousands Jun/16 Mar/17 Jun/17 Jun/16 Mar/17

Total of Cards¹ 78,644 69,238 68,321 (13.1) (1.3)

Credit Cards 22,315 17,098 16,589 (25.7) (3.0)

Elo 2,917 2,173 2,175 (25.4) 0.1

Debit Cards/Prepaid 56,329 52,140 51,732 (8.2) (0.8)

Elo 8,357 8,675 9,416 12.7 8.5

Chg. (%) on

1 - Reviewed series in Jun/17.

BB’s base of recurring use cards – i.e., with at least one purchase in the last thirty days, was 8.0 million for the credit function and 11.2 million for the debit function.

The following table shows the number of transactions performed in the quarter and the growth observed in the period, which is in line with the growth in traditional business revenues.

Table 112. Number of Transactions

Chg. (%) on

million 2Q16 1Q17 2Q17 2Q16 1Q17 1H16 1H17 1H16

Number of Transactions 614 651 662 7.7 1.6 1,216 1,313 8.0

Credit Cards 259 263 273 5.2 3.9 506 535 5.8

Debit Cards/Prepaid 355 389 389 9.6 0.1 710 778 9.5

Quarterly Flow Chg. (%) on Half-Yearly Flow

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The financial volume transacted through BB cards (total turnover), was R$ 67.6 billion in the 2Q17, increase of 1.8% in comparison the 1Q17. Considering only the traditional transactions, the growth was 7.6% in the quarter.

Figure 51. Total Turnover – R$ billion

37.4 37.6 40.0 37.4 37.9

74.0 75.3

30.5 29.332.0

29.0 29.8

58.1 58.8

67.9 66.972.0

66.4 67.6

132.0 134.1

2Q16 3Q16 4Q16 1Q17 2Q17 1H16 1H17

Debit/Prepaid Cards Credit Cards

Figure 52. Traditional and Specific Business Total Turnover – R$ billion

51.6 53.4 59.1 55.5 55.5

102.9111.0

16.3 13.612.9

10.9 12.1

29.223.1

67.9 66.972.0

66.4 67.6

132.0 134.1

2Q16 3Q16 4Q16 1Q17 2Q17 1H16 1H17

Specific Business¹ Traditional Segment

1 – It represents the volume of transactions with Ourocard Agronegócios, Ourocard Crediário, Cartão BNDES, payment of bank-issued invoices with card, Ourocard Pré-pago, Alelo, and B2B/corporate purchases with cards.

6.2.2. Cards Service Income

The card services result card services derives from the issuance and use of cards in the credit, debit, and consumer credit functions by clients and from services of credentialing/acquiring, pre-paid cards/vouchers, and card flags provided by the Bank’s affiliates.

The result of services does not include financial income and expenses from minimum or partial payments of the invoice (revolving credit). Administrative and operating costs directly related to the card business were included, as identified as of the current period.

The following table details the result of card services and the result after taxes. The performance in the quarter also reflects the seasonality that affected total invoicing.

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Table 113. Cards Service Income and Expenses – Quarterly Flow

R$ million 2Q16 1Q17 2Q17 2Q16 1Q17

Total Operating Income 2,244 2,163 2,366 5.4 9.4

Issuance 907 934 991 9.3 6.1

Acquiring 729 852 837 14.8 (1.8)

Other Revenues 608 377 538 (11.5) 42.7

Expenses (1,379) (1,213) (1,294) (6.2) 6.7

Issuance (650) (568) (640) (1.5) 12.7

Acquiring (581) (559) (592) 1.9 5.9

Other Expenses (148) (86) (62) (58.1) (28.0)

Cards Services Income 865 950 1,072 23.9 12.8

Tax Effect (313) (350) (404) 29.1 15.4

Cards Services Income After Tax 552 600 668 21.0 11.3

Chg. (%) on

Table 114. Cards Service Income and Expenses – Half - Yearly Flow

R$ million 1H16 1H17 Chg. (%) on

Total Operating Income 4,533 4,529 (0.1)

Issuance 1,775 1,925 8.5

Acquiring 1,366 1,689 23.6

Other Revenues 1,392 915 (34.3)

Expenses (2,726) (2,507) (8.0)

Issuance (1,291) (1,208) (6.4)

Acquiring (1,131) (1,151) 1.8

Other Expenses (304) (148) (51.3)

Cards Services Income 1,807 2,022 11.9

Tax Effect (658) (754) 14.6

Cards Services Income After Tax 1,149 1,268 10.4

6.3. Asset Management

The main activities of BB Gestão de Recursos DTVM S.A. are the administration, management, and distribution of funds and managed portfolios.

The following chart sets forth asset management and the market share held by BB DTVM in the Global Fund Administration ranking of the Brazilian Association of Entities of the Financial and Capital Markets (Associação Brasileira das Entidades dos Mercados Financeiros e de Capitais – Anbima).

Figure 53. Fiduciary Management and Market Share – R$ billion

1,778 1,868 2,002 2,2002,538 2,716

444494

555603

731816

2,222 2,3622,557

2,803

3,2693,533

20.020.9 21.7 21.5 22.4 23.1

2012 2013 2014 2015 2016 1H17

BB Market (ex-BB) Market Share - %

Source: Anbima.

In 1H17, the net funding of BB DTVM was positive in by R$ 43.2 billion, with highlights being Fixed Income and Pension Plans.

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According to Anbima’s Global Fund Administration ranking, in Jun/17, BB DTVM remained the market leader in the following segments: Institutional Investor, Government, and Retail.

The following tables set forth the breakdown of administered funds by segment and product, as of Jun/17.

Table 115. Investment Funds and Managed Portfolio by Customer

R$ million Jun/16 Share % Mar/17 Share % Jun/17 Share % Jun/16 Mar/17

Institutional Investors 311,772 46.7 350,142 43.8 351,917 43.1 12.9 0.5

Government 120,498 18.0 140,037 17.5 138,952 17.0 15.3 (0.8)

Retail 84,313 12.6 103,913 13.0 108,633 13.3 28.8 4.5

High income 45,607 6.8 55,482 6.9 62,828 7.7 37.8 13.2

RPPS 44,073 6.6 48,711 6.1 51,608 6.3 17.1 5.9

Corporate¹ 13,973 2.1 41,728 5.2 37,602 4.6 169.1 (9.9)

Private 25,965 3.9 33,697 4.2 36,961 4.5 42.4 9.7

Middle Market 14,505 2.2 16,965 2.1 19,326 2.4 33.2 13.9

Foreign Investors 7,444 1.1 8,037 1.0 8,614 1.1 15.7 7.2

Total 668,150 100.0 798,712 100.0 816,441 100.0 22.2 2.2

Balance Chg. (%) on

Source: Anbima. 1- In 4Q16 the BB DTVM started to administer the fund of an exclusive client, this same fund had negative net funding in 2Q17.

The growth observed in the investment funds of the Retail and High Income segments is due to the sales mobilization strategy that occurred in the period

Data about the breakdown by Anbima class is disclosed without discounting the units of own funds and third-party funds, which totaled R$3.959 million in Jun/17.

Table 116. Investment Funds and Managed Portfolio by Type

R$ million Jun/16 Share % Mar/17 Share % Jun/17 Share % Jun/16 Mar/17

Investment Fund 656,938 98.3 793,045 99.3 804,507 98.5 22.5 1.4

Fixed 422,596 63.2 495,048 62.0 505,239 61.9 19.6 2.1

Equity 42,564 6.4 37,583 4.7 34,149 4.2 (19.8) (9.1)

Multimarket 12,366 1.9 19,202 2.4 20,690 2.5 67.3 7.8

Others¹ 179,412 26.9 241,213 30.2 244,430 29.9 36.2 1.3

Managed Portfolios 14,379 2.2 16,040 2.0 15,892 1.9 10.5 (0.9)

Fixed 14,193 2.1 15,836 2.0 15,692 1.9 10.6 (0.9)

Equity 186 0.0 204 0.0 200 0.0 7.5 (2.0)

Fundos de Terceiros (3,168) (0.5) (10,373) (1.3) (3,959) (0.5) 25.0 (61.8)

Total 668,150 100.0 798,712 100.0 816,441 100.0 22.2 2.2

Balance Chg. (%) on

Source: Anbima 1 - Includes Pension, Exchange, FIP, ETF, Real Estate and Off Shore funds.

Custody

Banco do Brasil stands out as one of the main leaders in the following sectors: custody, controllership, accounting, and bookkeeping of assets. In Jun/17, the amount held in custody by BB totaled R$897 billion, representing a 19.4% increase compared to the same period in the previous year and a 1.8% increase compared to the last quarter. This increase in the volume held in custody is primarily due to advance of the fund industry.

The following figure sets forth the custody evolution at Banco do Brasil.

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Figure 54. Domestic Custody Total Assets and Market Share – R$ billion

592 587 631 650 661 700770 793

97 9897 102 113

106111 104

689 685728 752 773

806

881 897

21.3 21.1 20.3 20.919.9 20.0 20.6 20.6

Sep/15 Dec/15 Mar/16 Jun/16 Sep/16 Dec/16 Mar/17 Jun/17

Third-Party Own Resources Market Share - %

Source: Anbima.

Sustainability

Currently, BB DTVM manages five investment funds with social and environmental characteristics. The following table sets forth the balance of funds managed in these five funds.

Table 117. Investment Funds with Socio-Environmental Characteristics Management

R$ million Jun/16 Mar/17 Jun/17 Jun/16 Mar/17

BB Referenciado DI Social 50 105.6 165.5 563.3 433.4 240.4

BB Multi Global Acqua LP Private FI 289.9 254.4 302.8 4.4 19.0

BB Previdenciário Ações Governança 104.7 125.5 130.9 25.0 4.3

BB Ações ISE Jovem FIC 8.3 8.6 8.3 - (3.5)

BB Ações Carbono Sustent. FIA 4.6 4.2 4.0 (13.0) (4.8)

Total 513.1 558.2 1,009.3 96.7 80.8

Balance Chg. (%) on

Source: Brazilian Securities and Exchange Commission - CVM

6.4. Capital Market

Capital markets are one of the main sources of funds for production activities in economies in the whole world. Funding instruments not only enable companies to grow, but also contribute to generate and dilute the risk of new investments.

Banco do Brasil is present in the Brazilian capital market through BB – Banco de Investimento S.A. (BB-BI).

The BB conglomerate operates in the international capital market through its wholly-owned subsidiaries: BB Securites Ltd. (London), Banco do Brasil Securities LLC. (New York), and BB Securities Asia Pte Ltd. (Singapore).

The portfolio of BB includes market research, transaction structuring and distribution, settlement and custody of assets, products, and services for individuals and businesses. The main products and services are described below:

I. Mergers and acquisitions: provides financial advisory services in sales transactions, corporate reorganizations (consolidations, spin-offs, and mergers), private placements, and tender offers. BB-BI also issues appraisal reports and fairness opinions for companies.

II. Gold: offers sale and purchase services for gold in book entry form or ingots for its clients, in addition to custody of these assets.

III. Private Equity: is a member of 15 funds and provides advisory services for seven of them, with 53 indirect investments in companies located in different Brazilian regions, in a number of segments (energy, infrastructure, logistics, consumption, education, ti, services agribusiness, etc.), in different

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87

development stages (consolidated and emerging companies and companies with innovative technologies).

IV. Fixed Income: (i) Domestic Market: offers services of coordination, structuring, and distribution of debentures, promissory notes and financial bills; and (ii) International Market: BB Investimentos offers services of coordination, structuring, and distribution of securities issued by companies, banks, and governments through brokers located in London, New York, and Singapore, providing BB with global transactions in the capital market.

V. Variable Income: offers advisory services in all stages of public offerings of shares, tender offers, and Cepacs offers (a funding instrument used to finance public works). BB-BI also operates in the structuring and distribution of Real Estate Investment Funds (Fundos de Investimento Imobiliários – FII). The variable income portfolio includes services of purchase and sale of shares for individual investors and stock-share lease services for investors of the private segment.

VI. Securitization: coordinates, structures, and distributes securitization transactions, according to which a relatively consistent group of assets is converted into negotiable securities, through the following products: Credit Rights Investment Funds (Fundos de Investimento em Direitos Creditórios – FIDC), Real Estate Receivables Certificates (Certificados de Recebíveis Imobiliários – CRI), and Agribusiness Receivables Certificates (Certificados de Recebíveis do Agribusiness – CRA).

Performance in the Capital Market

In the first half of 2017, BB-BI operated in 7 issuances, with R$1.7 billion share in Long-Term Debentures, of which R$1.6 billion Long Term and R$108 million Short Term. This volume represents a market share of 6.6%, giving BB-BI the 5th position in the Anbima Origination Ranking.

In terms of securitization, according to Anbima Ranking published in Jun/17, BB-BI reached the 6th position in the number of Emissions of Certificates of Receivables of the Agribusiness (CRA), with 4 operations accumulated in the Anbima Origination Ranking, making a total volume R$663 million.

In 2Q17, 4 brazilian issuers (3 companies and 1 bank) accessed the international bond market, issuing a total of US$6.1 billion, and 2 companies hired BB to act as a lead-manager, issuing a total of US$4.4 billion. This represents a market share of 71.9% in the period. In the accumulated of the year, according to the Anbima External Emissions Ranking (position Jun/17), BB is 6th place.

Regarding foreign groups, BB acted as co-manager in another 3 transactions totaling US$7 billion in the period.

The following chart sets forth BB’s performance in the origination of fixed income securities in Brazil and abroad.

Figure 55. Fixed Income Securities Origination – Domestic and International Markets

943

8,709

1,688

36,889

20,614

8,279 11,42214,990

14.157.3 43.1

66.926.4

57.827.3 21.3

3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17

Volume (R$ million) Revenues (R$ million)

BB-BI offers share purchase and sale services to Retail investors through its network of branches, internet (home broker), and mobile banking. In 2Q17, shares purchase and sale services to Retail investors totaled R$7.5 billion, in the same in B3 counter R$154.6 billion. BB market share in the period was 4.8%. The following chart sets forth the quarterly evolution of retail variable income.

Chapter 6 - fee Income

88

Figure 56. Individuals Equity – Secondary Market

6,057 5,8837,399

8,70510,316 10,069

9,2397,528

4.6 4.95.8 5.9

6.6 6.86.3

5.3

3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17

Volume (R$ million) Revenues (R$ million)

BB-BI is a member of 15 funds in the private equity sector. Total capital invested by BB-BI in the private equity sector amounts to R$1.3 billion, as set forth in the table below.

Table 118. Private Equity – Indirect Interest

R$ million

Commited

Capital of BB-BI

Share in

Committed

Capital of the

Fund (%)

Commited

Capital of BB-BI

Share in

Committed

Capital of the

Fund (%)

Commited

Capital of BB-BI

Share in

Committed

Capital of the

Fund (%)

FIP Angra Infraestrutura 60.0 8.1 60.0 8.1 60.0 8.1

FIP Logística Brasil 60.0 13.0 60.0 13.0 60.0 13.0

FIP Brasil Energia 60.0 5.8 60.0 5.8 60.0 5.8

FIP Infra Brasil 60.0 7.3 60.0 7.3 60.0 7.3

FIP Coliseu 200.0 20.1 200.0 21.5 200.0 21.5

FMIEE Rio Bravo Nordeste II 20.0 15.2 20.0 15.2 19.9 15.1

FMIEE Jardim Botanico VC I 20.0 20.0 20.0 20.0 20.0 20.0

FMIEE Fundotec II 12.0 15.5 12.0 15.5 12.0 15.5

FIP Fundo Brasil de Governança Corporativa 82.5 13.8 82.5 13.8 82.5 13.8

FIP Brasil Agronegócio 160.0 19.1 160.0 19.0 160.0 19.0

FIP Brasil Sustentabilidade 40.0 9.5 40.0 9.5 40.0 9.5

FIP Fundo Brasil de Internacionalização de Empresas 88.0 24.4 88.0 24.4 88.0 24.4

FIP Brasil Portos e Ativos Logísticos 169.3 18.8 169.3 18.8 169.3 18.8

FIP Brasil Óleo e Gás 125.0 25.0 125.0 25.0 125.0 25.0

FIP Fundo Brasil de Internacionalização de Empresas II 150.0 21.4 150.0 21.5 150.0 21.5

Total 1,306.8 1,306.8 1,306.7

Jun/16 Mar/17 Jun/17

The figure below shows the balance and revenue arising from gold custody in BB-BI.

Figure 57. Gold – Custody Balance and Revenues

601.5 545.2 579.0 594.7 592.0515.6

594.9 625.2

1.4 1.4

2.4 2.3 2.2 2.2 2.4 2.5

3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17

Custody Value (R$ million) Revenues (R$ million)

Banco do Brasil S.A. - MD&A 2Q17

89

6.5. Insurance

BB Seguridade is the insurance group of Banco do Brasil. Established in 2012, the company is the result of corporate reorganizations undertaken since 2008. Its activities include the offer of insurance products, open pension plans, capitalization products, and brokerage services.

Other information about BB Seguridade and businesses of the insurance segment is included in the MD&A of BB Seguridade, available at http://www.bbseguridaderi.com.br/en.

The following table sets forth the main performance indicators of BB Seguridade.

Table 119. BB Seguridade – Performance Ratios

1 – Loss Ratio = Expenses with Claims / Earned Premiums. 2 – Comission Ratio = Acquisition Costs / Earned Premiums. 3 – Combined Ratio = (General Expenses + Administrative expenses + Acquisition Costs + Expenses with Claims + Revenue from Policy Issuance + Result with Reinsurance) / Earned Premiums. 4 – Expanded Combined Ratio = (General Expenses + Administrative Expenses + Acquisition Costs + Expenses with Claims + Revenue fromf Policy Issuance + Revenue with Reinsurance) / (Earned Premiums + Net Investment Income). 5 – Historical series reviewed in 1Q17.

6.6. Consortium

Banco do Brasil operates in the purchase consortium market through its subsidiary BB Administradora de Consórcios S.A. In April 2017, according to the most recent data available at the website of the Central Bank, BB Consórcios held a 9.6% market share. In June 2017, BB Marketed 44.7 thousand new consortiums shares quotas.

R$ million 2Q16 1Q17 2Q17 on/ 2Q16 on/ 1Q17

Performance Ratios - %

Insurance - Life, Mortgage and Rural

Loss Ratio¹ 30.9 24.6 27.4 (11.4) 11.3

Comission Ratio² 28.0 27.2 27.7 (1.0) 1.9

Technical Margin 41.3 48.5 45.1 9.2 (7.1)

Combined Ratio³ 68.5 72.1 69.2 0.9 (4.0)

Expanded Combined Ratio⁴ 62.3 65.8 64.3 3.2 (2.3)

Adjusted ROAE⁵⁴ 46.8 45.5 57.6 23.2 26.8

Insurance - Property and Casualty

Loss Ratio¹ 56.6 59.3 56.3 (0.6) (5.0)

Comission Ratio² 22.6 24.0 25.1 10.8 4.5

Technical Margin 21.0 17.1 18.9 (9.9) 10.5

Combined Ratio³ 96.8 105.9 101.2 4.6 (4.4)

Expanded Combined Ratio⁴ 88.9 101.2 93.8 5.5 (7.3)

Adjusted ROAE 13.9 (0.4) 6.6 (52.7) -

Pension Plans

Comission Ratio² 0.7 1.5 1.6 133.1 11.3

Adjusted ROAE 39.0 39.7 40.1 2.8 1.0

Premium Bonds

Comission Ratio⁵ 60.0 63.8 67.6 12.6 5.9

Premium Bonds Margin 18.3 12.3 12.3 (32.7) 0.2

Adjusted ROAE 84.1 98.7 43.5 (48.3) (56.0)

Brokerage

Adjusted Operating Margin 80.1 81.5 79.9 (0.2) (1.9)

Adjusted Net Margin 57.7 58.5 57.4 (0.5) (1.9)

Quarterly Flow Chg. (%) on

Chapter 6 - fee Income

90

Table 120. Consortium – Current Quotas per Type

units Jun/16 Share % Mar/17 Share % Jun/17 Share % Jun/16 Mar/17

Auto 579,103 92.9 613,479 91.9 585,867 90.0 1.2 (4.5)

Motorcycle 10,511 1.7 15,840 2.4 23,601 3.6 124.5 49.0

Mortgage 19,673 3.2 22,417 3.4 23,178 3.6 17.8 3.4

Tractor/Truck 7,562 1.2 8,300 1.2 8,966 1.4 18.6 8.0

Services 3,280 0.5 4,152 0.6 4,809 0.7 46.6 15.8

Electric and Electronic Devices 3,375 0.5 3,609 0.5 4,555 0.7 35.0 26.2

Total 623,504 100.0 667,797 100.0 650,976 100.0 4.4 (2.5)

Balance Chg. (%) on

Figure 58. Consortium – Fee Income and Current Quotas

623,504

695,721

665,495 667,797650,976

122.5

156.2 149.5 160.9 174.8

2Q16 3Q16 4Q16 1Q17 2Q17

Active Quotas (units) Management Fees - R$ million

The following tables set forth a comparison between the average balance, average term, and average management fees of the membership units sold in the period.

Table 121. Consortium – Average Ticket

R$ 2Q16 3Q16 4Q16 1Q17 2Q17

Tractor/Truck 156,528 141,843 154,346 159,260 161,634

Mortgage 187,132 141,912 162,867 165,905 159,207

Auto 35,394 31,232 39,431 37,405 39,862

Motorcycle 9,881 10,907 11,833 12,986 14,657

Services 7,101 7,343 7,360 6,842 7,236

Electric and Electronic Devices 4,535 4,736 4,557 4,233 4,428

Balance

Table 122. Consortium¹ – Average Term and Average Management Rate

Average

Term

(months)

Average

Rate (%)

Average

Term

(months)

Average

Rate (%)

Average

Term

(months)

Average

Rate (%)

Services 28 22.0 30 20.7 29 20.7

Motorcycle 46 20.3 53 20.1 57 20.1

Mortgage 129 19.6 133 19.8 141 19.9

Electric and Electronic Devices 29 19.1 28 18.7 31 19.2

Auto 66 15.3 67 15.3 67 15.2

Tractor/Truck 84 15.2 110 15.1 111 15.0

2Q16 1Q17 2Q17

1 – Contracted in the period

Banco do Brasil S.A. - MD&A 2Q17

91

7 - Productivity and Efficiency

Banco do Brasil seeks to improve its operating efficiency and productivity by maintaining a strict control of its administrative, personnel and operating expenses.

7.1. Indicators

This section presents the indicators normally used in the analysis of financial institutions. The following table present the Pre-Tax and Pre-Provision Earnings, that increased in the quarterly and semi-annual comparison, primarily consisting of the banking product and total operating expenses, showing the evolution of the Bank's businesses.

Table 123. Pre-Tax and Pre-Provision Earnings

Administrative Expenses were impacted by R$67 million in 1Q17 and R$77 million in 2Q17 due to the institutional reorganization.

The following table sets forth the coverage ratio by fee income and operating income evoluation in the 1H17/1H16, due to the increase in fee income, in addition to the strict expenses control.

Table 124. Cost-to-Income and Coverage Ratios – Adjusted¹

1 – Data refers to the Income Statement with Reallocations. 2 – Operating Income, net of Other Operating Expenses.

The following table sets forth other productivity and efficiency indicators.

Table 125. Other Productivity and Efficiency Indicators

The following figure sets forth the banking product (total operating revenues) and the number of branches evolution in the last five years.

Chg. (%) on Chg. (%) on

R$ million 2Q16 1Q17 2Q17 2Q16 1Q17 1H16 1H17 1H16

Total Operating Income (Banking Product) 23,939 23,730 24,009 0.3 1.2 47,061 47,740 1.4

Operating Income 23,686 23,601 23,939 1.1 1.4 46,488 47,540 2.3

Net Interest Income 14,633 14,476 14,606 (0.2) 0.9 28,909 29,083 0.6

Fee Income 5,886 6,096 6,316 7.3 3.6 11,285 12,411 10.0

Eq. Interest of Subsidiaries and Affiliates 1,091 953 1,062 (2.7) 11.5 2,089 2,015 (3.5)

Other Operating Income 2,075 2,076 1,955 (5.8) (5.8) 4,205 4,031 (4.1)

Previ - Plano de Benefícios (54) (59) (59) 10.5 (0.0) (107) (119) 10.5

Previ - Fundo de Utilização Restatement 307 189 129 (57.9) (31.5) 680 318 (53.3)

Total Operating Expenses (13,262) (12,849) (12,680) (4.4) (1.3) (26,074) (25,529) (2.1)

Administrative Expenses (7,973) (7,774) (7,864) (1.4) 1.2 (15,781) (15,638) (0.9)

Personnel Expenses (4,956) (4,677) (4,817) (2.8) 3.0 (9,745) (9,494) (2.6)

Other Administrative Expenses (3,017) (3,096) (3,047) 1.0 (1.6) (6,036) (6,144) 1.8

Legal Risk (581) (751) (516) (11.2) (31.2) (1,371) (1,267) (7.6)

Other Tax Expenses (92) (118) (128) 39.4 8.7 (209) (245) 17.5

Taxes on Revenues (1,291) (1,262) (1,231) (4.7) (2.5) (2,514) (2,493) (0.8)

Other Operating Expenses (3,325) (2,945) (2,941) (11.6) (0.1) (6,199) (5,886) (5.1)

Non-Operating Income 72 45 59 (17.0) 31.8 108 105 (3.4)

Pre-Tax and Pre-Provision Earnings 10,749 10,926 11,389 6.0 4.2 21,095 22,315 5.8

Quarterly Flow Half-Yearly Flow

% 2Q16 3Q16 4Q16 1Q17 2Q17 1H16 1H17

Fee Income/Personnel Expenses - Quarterly 118.8 110.9 118.9 130.3 131.1 115.8 130.7

Fee Income/Personnel Expenses - 12 months 116.8 115.1 115.3 119.4 122.4 - -

Fee Income/Administrative Expenses - Quarterly 73.8 69.6 71.9 78.4 80.3 71.5 79.4

Fee Income/Administrative Expenses - 12 months 71.0 70.6 71.1 73.3 74.9 - -

Cost-to-Income Ratio - 12 months² 39.8 39.7 39.7 39.3 38.9 - -

Half-Yearly Flow

Jun/16 Sep/16 Dec/16 Mar/17 Jun/17

Checking Accounts/Ow n Service Netw ork 2,197 2,212 2,244 2,250 2,295

Checking Accounts/Employees in Branches 440 443 525 554 564

Fee Income/Ow n Service Netw ork - R$ thousand 343 343 373 370 392

Credit Portf. (Broad Definition)/Ow n Service Netw ork - R$ million 44 43 43 42 43

Commercial Funding/Employess in Branches - R$ million 7 7 9 9 9

DTVM Funding/Employess in Branches - R$ milion 8 8 10 12 12

Personnel Expenses per Employee - R$ thousand 45 48 50 47 48

Employees in Branches/(Branches+Services Posts) 12 12 10 9 9

Chapter 7 - Productivity and Efficiency

92

Figure 59. Bank Product and Branches – (% of evolution)

7.2. Personnel Expenses

Personnel expenses increased by 3% in 2Q17/1Q17, impacted by the seasonality, mainly related to the vacation concentration.

In 1H17/1H16 comparison, the personnel expenses presented a 2.6% decrease. The decrease in expenses was mainly due to the internal Bank reorganization.

Table 126. Personnel Expenses

Chg. (%) on

R$ million 2Q16 1Q17 2Q17 2Q16 1Q17 1H16 1H17 1H16

Personnel Expenses (4,956) (4,677) (4,817) (2.8) 3.0 (9,745) (9,494) (2.6)

Salaries (2,687) (2,201) (2,589) (3.6) 17.6 (4,938) (4,790) (3.0)

Social Charges (825) (754) (797) (3.4) 5.6 (1,598) (1,551) (2.9)

Administrative Personnel Provisions (554) (735) (440) (20.6) (40.1) (1,438) (1,175) (18.3)

Benefits (669) (765) (762) 14.0 (0.3) (1,332) (1,527) 14.7

Pension Fund (192) (202) (204) 6.3 0.7 (387) (406) 4.8

Training (17) (9) (14) (19.3) 61.9 (28) (22) (21.0)

Remunerat. for Directors and Officers (13) (11) (11) (13.1) (0.4) (24) (22) (8.4)

Quarterly Flow Half-Yearly FlowChg. (%) on

The following figure and table set forth the changes and the profile in BB’s headcount (employees and interns).

Figure 60. Evolution of Headcount

114,340 112,751102,950 101,384 101,071

4,725 3,592 2,328 1,420 1,468

109,615 109,159100,622 99,964

99,603

Jun/16 Sep/16 Dec/16 Mar/17 Jun/17

Employees Interns

Banco do Brasil S.A. - MD&A 2Q17

93

Table 127. BB’s Staff Profile

Jun/16 Sep/16 Dec/16 Mar/17 Jun/17

Employees 109,615 109,159 100,622 99,964 99,603

Female 45,542 45,408 41,549 41,321 41,194

Male 64,073 63,751 59,073 58,643 58,409

Educational Level

High School 22,846 22,060 19,750 19,024 18,429

College 47,210 46,916 43,083 42,482 42,100

Specialization, Master's and Doctorate 39,250 39,875 37,575 38,249 38,868

Others 309 308 214 209 206

Turnover - Quarterly Index (%) 0.4 0.4 8.6 0.7 0.3

The 8.6% turnover rate in dec/16 reflects the Extraordinary Incentivized Retirement Program (PEAI) disclosed in the material fact on november 20, 2016.

7.3. Other Administrative Expenses

Other Administrative Expenses decreased by 1.6% compared to the previous quarter, especially the items below:

I - Telecommunications and Data Processing: actions implementation aimed at reducing current expenses and revising contracts.

II - Expenses with Outsourced Services: contracts renegotiation that impacted 1Q17.

There was an 1.8% increase in the half-yearly comparison, in which Rent and Property Maintenance had great importance due to the leasing of São Paulo and Brasília new buildings and the property return indemnities as a result of the restructuring plan started in november/2016.

Table 128. Other Administrative Expenses

Chg. (%) on

R$ million 2Q16 1Q17 2Q17 2Q16 1Q17 1H16 1H17 1H16

Other Administrative Expenses (3,017) (3,096) (3,047) 1.0 (1.6) (6,036) (6,144) 1.8

Rent and Property Maintenance¹ (625) (720) (708) 13.2 (1.8) (1,304) (1,428) 9.5

Security and Transport Services (567) (550) (562) (0.9) 2.3 (1,110) (1,112) 0.2

Telecommunications and Data Processing (510) (541) (444) (12.8) (17.9) (973) (985) 1.2

Expenses w ith Outsourced Services (445) (497) (476) 7.0 (4.2) (946) (973) 2.8

Amortization and Depreciation (338) (352) (355) 4.9 0.8 (674) (707) 4.9

Advertising and Public Affairs (128) (84) (96) (24.9) 15.3 (247) (180) (27.0)

Other Administrative Expenses (404) (353) (406) 0.6 15.0 (782) (759) (2.9)

Quarterly Flow Chg. (%) on Half-Yearly Flow

1- Includes expenses with Property Insurance.

We present below data on the Bank’s structure that is included in other administrative expenses.

7.3.1. Service Network

Banco do Brasil ended jun/17 with 66.1 thousand points of service, including its own service network, shared network channels and agents in the country. It is present in 99.8% of the Brazilian municipalities.

BB entered into partnerships to share automated teller machines (ATMs) and use the lottery network for withdrawals, deposits, payments, among others services, consolidating the nation-wide presence of Banco do Brasil’s network.

The following table sets forth the BB’s service network breakdown.

Chapter 7 - Productivity and Efficiency

94

Table 129. Service Network

Jun/16 Mar/17 Jun/17 Jun/16 Mar/17

Own Service Network 17,181 16,492 16,098 (6.3) (2.4)

Branches 5,428 4,877 4,885 (10.0) 0.2

Service Posts 1,738 2,180 2,117 21.8 (2.9)

Automated Service Posts 10,015 9,435 9,096 (9.2) (3.6)

MaisBB Network 14,110 13,622 13,486 (4.4) (1.0)

Agents in the Country 7,962 7,501 7,350 (7.7) (2.0)

Banco Postal 6,148 6,121 6,136 (0.2) 0.2

Shared Network Channels 35,680 36,731 36,488 2.3 (0.7)

Lottery Stores 13,146 13,038 13,021 (1.0) (0.1)

Banco 24h 18,935 20,516 20,340 7.4 (0.9)

ATM: Partner Banks 3,599 3,177 3,127 (13.1) (1.6)

Total 66,971 66,845 66,072 (1.3) (1.2)

Chg. (%) onQuantity

Table 130. Branch Network by Region

BB Banking Industry Share %

Southeast 2,118 11,743 18.0

Northeast 1,057 3,572 29.6

South 948 4,166 22.8

Middle West 457 1,817 25.2

North 305 1,143 26.7

Total 4,885 22,441 21.8

7.3.2. Automated Service Channels

Banco do Brasil’s automated service channels offers a wide range of services and products to costumers, and contributs to cost control. In jun/17, these channels accounted for 96.9% of all completed transactions.

Mobile and Internet Banking

BB Mobile and Internet Banking seek to make the banking experience simpler, faster, safer and more convenient to costumers, offering a wide portfolio of products and services everywhere and at any time.

The following figure sets forth the evolution of transactions by service channel.

Figure 61. Transactions by Service Channel – (%)

47.6

57.2

63.4

71.6

15.8 13.7 12.7

11.3

36.6

29.123.9

17.1

Jun/14 Jun/15 Jun/16 Jun/17

Internet + MobilePOS + Agents in the CountryOther Service Channels (ATM + CABB + Branch Cash)

The following figures sets forth the registered users and transactions number evolution conducted in the mobile banking and internet banking channels, respectively.

Banco do Brasil S.A. - MD&A 2Q17

95

Figure 62. Number of Users (million) – Internet and Mobile Banking

15.917.2

18.320.6

4.25.5

8.4

12.2

Jun/14 Jun/15 Jun/16 Jun/17

Internet Mobile

Figure 63. Number of Transactions (million) – Internet (Individuals) and Mobile Banking

603.8 421.3 408.4 338.5

513.0

1,661.8

2,511.63,143.7

1,116.8

2,083.1

2,919.9

3,482.2

2Q14 2Q15 2Q16 2Q17

Internet Mobile

CAGR 46.1%

Automated Teller Machines

Banco do Brasil has the largest network automated teller machines (ATMs) in Brazil. The following figure sets forth the number of BB’s ATMs and partnerships with Banks and Banco 24h ATM network.

Figure 64. Automated Teller Machines

42,251 41,952 40,542 37,958 37,712

18,935 19,456 19,868 20,516 20,340

3,599 3,452 3,296 3,177 3,127

64,785 64,860 63,706 61,651 61,179

Jun/16 Sep/16 Dec/16 Mar/17 Jun/17

Automated Teller Machines ATM: Banco 24h ATM: Partner Banks

The following figure sets forth that the ATMs, accounted for most of the basic banking transactions, including general consultations, withdrawals, deposits, and payments of bank-issued invoices and bills, compared to bank tellers and service stations.

Chapter 7 - Productivity and Efficiency

96

Figure 65. Transactions - ATMs’ vs Teller – (average %)

99.0 98.9 98.9 98.8

96.2 96.6 96.7 96.9

75.2 75.6 76.080.9

66.8 68.8

73.878.5

2Q14 2Q15 2Q16 2Q17

Check Withdrawals Deposits Payments

Technology Investments

Banco do Brasil consistently invests in technology to improve operational efficiency, reduce operating losses, expand businesses and improve client service. In the period between 2011 and jun/2017, investments totaled R$19.6 billion. The following figure sets forth investments in technology throughout 6 years.

Figure 66. Tecnology Investments

0.0

2.7

5.9

8.7

12.1

15.0

18.1

19.6

2.7

3.2

2.8

3.4

3.0

3.1

1.5

2011 2012 2013 2014 2015 2016 1H17 Total

Technology Investments (R$ billion)

Investments in technology primarily leads to a significant increase in data storage capacity and in the availability indicator, as shown in the figure below.

Figure 67. Storage Capacity and Availability Indicator

36,000

60,190

78,476

103,206

113,643

133,028

98.1 97.6 97.7 98.0 99.1 99.4

2012 2013 2014 2015 2016 2Q17

Storage Capacity (Terabytes) Availbility Index (%)

Banco do Brasil S.A. - MD&A 2Q17

97

7.4. Other Operating Income and Expenses

The following table sets forth the main line items of other operating income/expenses. The line item "Other" represents the sum of non-significant and pulverized sub-lines items amounts.

Table 131. Other Operating Income/Expenses

1- Revised series since 1Q17, due to the adjustment in the reallocation of Other Operating Expenses to Legal Risk - Civil Claims

7.5. Operating Losses

Banco do Brasil classifies its operating losses according to categories of operating risk events set forth by CMN Resolution No. 4,557/2017. BB includes provisions constitutions/reversals (notably, contingent liabilities) in the total amount of operating losses regarding labor issues, business failures and process failures categories.

BB records losses resulting from disagreements between employee and employer relating to agreements or laws, occupational health and safety, and discrimination in the work environment in “Labor Issues,” including losses derived from secondary liability relating to outsourced companies.

“External Fraud and Theft” are those losses resulting from acts committed by third parties who intend to steal valuables and physical assets of the Bank or clients. The main losses resulting from “External Fraud and Theft” are operating losses resulting from electronic fraud and external theft.

BB records operating losses related to reimbursements or indemnifications paid to account holders and non-account holders as a result of judicial and administrative proceedings in “Business Failures,” except those resulting from fraud and questionings related to client service practices, products sold, and services provided by the Bank and its business partners.

“Process Failures” are those losses resulting from possible payments to other Banks; business partners; suppliers; and regulatory, inspection and control agencies, due to failures or inadequacies in the execution, handling, and management of activities associated with the relevant internal processes. The following table sets forth operating losses by category.

Chg. (%) on

R$ million 2Q16 1Q17 2Q17 2Q16 1Q17 1H16 1H17 1H16

Other Operating Income 2,075 2,076 1,955 (5.8) (5.8) 4,205 4,031 (4.1)

Income from Guarantee Deposits 771 790 676 (12.4) (14.5) 1,437 1,466 2.0

Recovery of Charges and Expenses 494 506 507 2.6 0.2 1,016 1,013 (0.3)

Card Transactions 169 149 294 74.2 97.5 430 443 3.1

Receivables Income 228 229 185 (18.8) (19.1) 449 415 (7.8)

Income from non-financial Associated Companies 80 92 72 (9.5) (21.1) 157 164 4.4

Other Operating Expenses (3,325) (2,945) (2,941) (11.6) (0.1) (6,199) (5,886) (5.1)

Negotiation Relationship Allow ance (505) (471) (468) (7.4) (0.6) (1,011) (940) (7.1)

Discounts Granted on Renegotiations (411) (313) (422) 2.6 34.6 (641) (735) 14.7

Card Transactions (408) (326) (331) (18.7) 1.5 (733) (658) (10.2)

Goodw ill Amotization (277) (311) (299) 8.1 (3.8) (554) (609) 10.0

Actuarial Liabilities (312) (292) (292) (6.4) - (623) (583) (6.4)

Guarantee Deposits Expenses (318) (307) (267) (16.1) (13.1) (558) (573) 2.8

Negotiation Relationship Bonus (181) (230) (225) 24.6 (2.4) (260) (455) 74.8

Other Oper. Exp. from Non-Financ. Comp. (94) (98) (110) 16.3 11.4 (207) (208) 0.4

Self-Service Terminals (91) (86) (96) 5.6 11.3 (178) (182) 2.2

Operating losses (67) (79) (119) 76.8 50.3 (164) (198) 20.5

Payment Bonus (78) (58) (52) (32.5) (9.8) (150) (110) (26.3)

Remuneration for Transactions of Banco Postal (309) (55) (59) (80.9) 6.6 (607) (114) (81.2)

INSS Agreement (27) (38) (40) 49.5 5.1 (50) (78) 57.6

Life Insurance Premium - Consumer Credit (39) (34) (33) (15.4) (3.1) (78) (67) (14.5)

Other 123 64 92 (25.4) 42.3 331 156 (52.8)

Quarterly Flow Chg. (%) on Half-Yearly Flow

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Table 132. Breakdown of Operational Loss – (%)

2Q16 3Q16 4Q16 1Q17 2Q17

Labor Issues 63.9 29.6 29.2 32.7 56.2

External Fraud and Theft 16.6 15.7 14.2 14.4 21.1

Business Failures 20.7 51.6 52.0 50.1 19.9

Internal Fraud 0.1 0.9 0.3 1.0 1.4

Process Failures 0.9 2.1 4.2 1.7 1.2

Physical Assets Damage 0.0 0.1 0.1 0.1 0.2

System Failures - 0.0 0.0 0.0 -

Activities Interruption (2.2) - - - -

Total 100.0 100.0 100.0 100.0 100.0

BB’s operational losses are concentrated (96%) in amounts below R$5,000.00, with 88% in amounts below R$1,000.00.

Figure 68. Operational Loss for Value Range – (%)

88.0

8.0

2.01.01.0

Up to R$1,000.00

from R$1,000.00 to R$4,999.99

From R$5,000.00 to R$9,999.99

From R$10,000.00 to R$24,999.99

More than R$25,000.00

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8 - Actuarial Assets and Liabilities

BB records in its balance sheet actuarial assets and liabilities derived from benefit plans granted to itsemployees.

The most significant actuarial asset is Previ’s Plan 1 and the most significant actuarial liability is the health plan administered by Cassi. Amounts are periodically assessed based on an actuarial valuation report and the availability of funds is subject to the fulfillment of the requirements set forth by law and regulatory authorities.

Since 2Q16, information on other components of the balance sheet are available at the Investor Relations website (www.bb.com.br/ir), in the historical series spreadsheet.

8.1 Previ – Plan 1

Brief History

The Benefit Plan 1 (Plan) was created in 1967 and structured as a defined benefit plan.

Until December 2000, Banco do Brasil, as sponsor, made contributions representing 2/3 and members (retirees and pensioners) made contributions representing 1/3 of the total amount. New members were accepted until December 23, 1997.

As of January 2001, in order to comply with Constitutional Amendment No. 20, sponsor and members implemented a parity contribution (50%). Accordingly, the Bank makes contributions to the Plan surplus corresponding to 50% of the present value of the actuarial assets and liabilities.

In the period between January 2007 and December 2013, due to the Plan’s surplus, contributions were no longer charged. At that time, the Bank entered into a Memorandum of Understanding with Previ providing for the allocation and use of a portion of the surplus amount, once the requirements set forth by law (Supplementary Law No. 109/2001 and CGPC Resolution No. 26/2008) were fulfilled. In view of the approval of the measures set forth in the memorandum, a portion of the surplus amount was allocated in 2010 as agreed, recognized as Allocation Fund (Fundo de Destinação), and subsequently segregated in Contribution (Fundo de Contribuição) and Surplus Funds (Fundo de Utilização). In the period between December 2010 and December 2013, contributions were covered by the Contribution Fund.

In January 2014, as the accumulated surplus decreased, Previ informed that contributions were going to be charged again. BB’s contributions to the Plan were thereafter made by the Surplus Fund.

The Plan’s actuarial balance is measured on a semiannual basis (June and December) and contemplates: (i) the plan’s surplus/deficit amount at the end of current semester and (ii) the plan’s estimated financial results at the end of subsequent semester, considering current service cost projections, contributions, liabilities interest costs and return on assets.

BB makes an early monthly recognition based on the estimated financial result of the Plan for the end of the following month, corresponding to one-sixth (1/6) of the projected gains or losses throughout the semester to which it refers.

Members

Employees who were Previ members on December 24, 1997 and those dismissed or fired before then, but opted to remain in the plan are members of Plano 1. Three groups characterize these beneficiaries:

I. Contrato 97: only the workforce employed before April 14, 1967. They were included due to a contract signed on December 24, 1997 between BB and Previ. The contract provides a sponsor commitment to bear the contributions for the unformed mathematical reserve period. Beginning in April 1967, the Contrato 97 mathematical reserves were paid-in to Plano 1;

II. Employees admitted in the period between April 15, 1967 and December 23, 1997; and

III. Special Group (Grupo Especial): members of Previ’s Benefits Plan 1 who obtained additional retirement amounts as a result of administrative and/or judicial decisions.

Analysis

The assets of the Plan are measured at fair value based on their market value or according to the discounted cash flow method, as set forth in the following table.

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Actuarial obligations correspond to the net present value of benefits payable to members. Actuarial obligations take into account the survival statistics set forth in the Soft AT 2000 actuarial life table (reduced by 10%) and the nominal rate of return, measured by the future interest rate curve applied to trading of government securities indexed to inflation. The rate used by the Bank is different from that used by Previ, which takes into account the assumptions set forth in CGPC Resolution No. 18/2006.

Table 133. Breakdown of Assets

% Jun/16 Mar/17 Jun/17

Variable Income 45.9 49.1 44.2

Fixed Income 42.8 40.3 44.7

Real Estate Investments 6.7 6.3 6.7

Loans and Financing 3.9 3.6 3.7

Others 0.6 0.6 0.6

Amounts Listed in Fair Value of Plan Asset

In the Entity's Ow n Financial Instruments 6.6 8.1 7.5

In Properties or Other Assets Used by Entity 0.1 0.1 0.1

Table 134. Main Actuarial Assumptions

% 1H16 2016 1H17

Real Discount Rate (p.y.) 6.2 5.8 5.6

Nominal Rate of Return on Investments (p.y.) 12.0 11.5 10.7

The actuarial asset (liability) of Plan 1 corresponds to 50% (parity) of the positive or negative difference between the assets at fair value and liabilities at present value.

Banco do Brasil recognizes in advance the variation projected for the following semester, reducing the actuarial assets volatility.

Contributions set forth in item “f” (contribution from funds) in the table below are derived from the Surplus Fund, which is detailed in the “Previ (Plan 1) – Surplus Fund” table in section 8.2.

Table 135. Effects of Previ (Plan 1) Accounting – CVM Deliberation No. 695/2012

R$ million 2Q16 3Q16 4Q16 1Q17 2Q17

(a) Fair Value of the Plan's Assets 129,888 129,888 143,946 143,946 146,597

(b) Present Value of Actuarial Liabilities (139,707) (139,707) (148,350) (148,350) (151,789)

(c) Surplus/(Deficit) BB = [(a) + (b)] x 50% (4,910) (4,910) (2,202) (2,202) (2,596)

(d) Actuarial Assets (Initial Period) (1,453) (4,910) (4,977) (2,202) (2,184)

(e) Anticipated Financial Results (110) (199) (199) (115) (115)

(f) Contributions of Funds 135 131 177 132 136

(h) Semi-Annual Adjustmentment - Shareholders' Equity (3,482) - 2,797 - (433)

(i) Actuarial Assets/(Liabilities) (End Period) = (d) + (e) + (f) + (g) (4,910) (4,977) (2,202) (2,184) (2,596)

8.2. Previ (Plan 1) Surplus Allocation Funds

Banco do Brasil recognized in its assets the following amounts:

I. Parity contributions among sponsor and members, recorded in May 2006, based on the balance of the remaining reserves, at an initial amount of R$2.2 billion;

II. Allocation Fund (Fundo de Destinação): established after an agreement on the allocation of Previ surplus in 2010 to cover the Contribution and Surplus Funds. The process ended in 2013;

III Contribution Fund (Fundo de Contribuição): established with funds transferred from the Allocation Fund to cover the interruption of contributions charged in the period between 2010 and 2013. The Contribution Fund was fully used; and

IV Surplus Fund (Fundo de Utilização): established with funds transferred from the Allocation Fund and used by the Bank after 1Q14 to cover periodic contributions.

Parity Fund (Fundo Paridade)

The Parity Fund is adjusted monthly based on the actuarial target (INPC + 5% p.y.) and it has been used since January 2007 to offset obligations assumed under the 97 Agreement.

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Table 136. Previ (Plan 1) – Parity Fund

Surplus Fund (Fundo de Utilização)

In 2Q11, Surplus Fund was created through Allocation Fund resources transfers. It represents the amount subject to use by Banco do Brasil and reflects Previ’s accounting surplus distribution. This reserve is adjusted annually by the actuarial target (INPC + 5% p.y.) and its use is subject to the confirmation of the full coverage of obligations under the plan (Article 25, CGPC Deliberation No. 26/2008).

As of 1Q14, as periodic contributions resumed, the sponsor started making contributions through this fund.

Table 137. Previ (Plan 1) – Surplus Fund

8.3. Cassi

The Bank sponsors a health plan administered by Cassi, whose main purpose is to assist members and their registered beneficiaries in the coverage of their health expenses.

The members of the Plan are divided in:

I. Members: BB’s active and former employees (self-sponsored), retirees, and pensioners;

II. Dependents: spouses, partners, children and stepchildren below 24 years of age; and

III. Indirect Dependents: dependents who are directly related to members, of any degree of kinship, admitted until the amendment to the Articles of Association of 1996.

In 1995, due to successive mismatches between income and expenses, sponsor and members agreed to share the amount needed to cover the operating deficit. In 1996, Cassi and the Bank remodeled the Articles of Association to ensure the financial equilibrium of the plan. The main amendments include restricted access of new indirect dependents and the increase in contributions paid by members and the sponsor.

In 2007, the Bank entered into a new agreement with Cassi to amend its Articles of Association, which are currently in effect. The main amendments include:

I. a sponsor’s contribution corresponding to 4.5% of general salaries or of the total amount of the retirement or pension benefit, for all groups;

II. a monthly contribution payable by members and pension beneficiaries corresponding to 3% of general salaries or of the total amount of the retirement or pension benefit;

III. a contribution in the amount of R$315 million paid by BB to Cassi for investments in the improvement of the operations model regarding its own services; and

IV. the assumption by the Bank of the deficit of Indirect Dependents until this group is terminated.

The 2007 measures were complemented in 2016, when Banco do Brasil and representative entities entered into a Memorandum of Understanding, resulting in a proposal that was approved by members and ensures an additional monthly amount of R$40 million to the Plan, as follows:

I. R$23 million extraordinary monthly compensation by the Bank in Cassi favor, until December 2019;

II. additional 1% extraordinary monthly contribution from associates, until December 2019, on the same personal contribution calculation basis, in the estimated amount of R$17 million per month; and

R$ million 2Q16 3Q16 4Q16 1Q17 2Q17

Initial Balance 125 125 128 130 133

Contributions to Plano 1 - Contrato 97 (5) - - - (4)

Restatement 4 3 2 3 2

Closing Balance 125 128 130 133 130

R$ million 2Q16 3Q16 4Q16 1Q17 2Q17

Initial Balance 9,200 9,377 9,458 9,432 9,488

Restatement 307 212 151 189 129

Contributions to Plano 1 (131) (131) (177) (132) (132)

Closing Balance 9,377 9,458 9,432 9,488 9,486

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102

III. hiring a specialized company to analyze, review and develop processes, projects and actions focused on the governance, management and operation model of Cassi.

The following table sets forth the evolution of Cassi’s actuarial liability, pursuant to CVM Deliberation No. 695/2012.

Table 138. Effects of the Cassi Accounting – CVM Deliberation No. 695/2012

8.4. Effects on Shareholders’ Equity

The following table sets forth the effects of the Bank’s actuarial assets and liabilities recognized in BB’s Shareholders’ Equity pursuant to CVM Deliberation No. 695/2012.

The effects on Shareholders’ Equity are recorded half-yearly, based on the actuarial studies.

Table 139. Effects on Shareholders’ Equity – CVM Deliberation No. 695/2012

R$ million

Previ -

Plano 1Cassi

Other

PlansTotal

Jun/16

Valuation Adjustments (3,482) (1,062) (312) (4,857)

Tax Effects 1,393 425 125 1,943

Effect on Shareholders' Equity (2,089) (637) (187) (2,914)

Dec/16

Valuation Adjustments 2,797 (236) (329) 2,233

Tax Effects (1,119) 94 133 (892)

Effect on Shareholders' Equity 1,678 (141) (196) 1,341

Jun/17

Valuation Adjustments (433) (175) (205) (813)

Tax Effects 173 70 82 325

Effect on Shareholders' Equity (260) (105) (123) (488)

R$ million 2Q16 3Q16 4Q16 1Q17 2Q17

(a) Fair Value of the Plan's Assets - - - - -

(b) Present Value of Actuarial Liabilities (7,519) (7,519) (7,948) (7,948) (8,284)

(c) Deficit BB = [(a) + (b)] (7,519) (7,519) (7,948) (7,948) (8,284)

(d) Actuarial Liabilities (Initial Period) (6,368) (7,519) (7,619) (7,948) (8,020)

(e) Amounts recognized in statement of income (266) (248) (248) (253) (253)

(f) BB - Amount paid 178 148 154 181 164

(g) Semi-Annual Adjustment - Shareholders' Equity (1,062) - (236) - (175)

(h) Actuarial Liabilities (Period End) = [(d) + (e) + (f) + (g)] (7,519) (7,619) (7,948) (8,020) (8,284)

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9 - Risk Management

9.1. Risk Management

The risk management of the Financial Conglomerate of Banco do Brasil comprehensively includes credit, market, liquidity, and operating risks. Management activities are conducted by specialized structures, according to the objectives, policies, strategies, processes, procedures, and systems described for each of these risks.

For more information about Banco do Brasil’s risk management process, access the Risk Management Report – Pillar III at bb.com.br/ir.

Pursuant to its policy, Banco do Brasil manages its foreign exchange exposure to minimize its effects on the Consolidated Result. The following table sets forth BB’s Consolidated statement of assets, liabilities, and derivatives in foreign currencies. At June 30, 2017, net foreign exchange exposure totaled an expense of US$1,396 million.

Table 140. Balance in Foreign Currencies

R$ million

Currency Assets Liabities

U.S. Dollar 151,628 166,332

Euro 10,722 10,424

Yen 1,827 1,645

Pound Sterling 428 586

Sw iss Franc 9 975

Canadian Dollar 8 7

Gold 9 -

Other 15,332 14,477

Total 179,963 194,446

Net Position - Balance Sheet Items 14,483

R$ million

Currency Long Short

U.S. Dollar 34,083 24,156

Euro 3,909 4,525

Pound Sterling 346 839

Sw iss Franc 997 -

Yen - 511

Canadian Dollar - -

Other 567 5

Total 39,902 30,036

Net Position - Derivatives 9,866

Total of Derivatives and Balance Sheet 219,865 224,482

Total Net Position (4,617)

Total Net Position in US$ million (1,396)

Balance Sheet

Derivatives

BB’s Consolidated regulatory foreign exchange exposure, calculated pursuant Central Bank Circular Letter No. 3.641, dated March 4, 2013, including the tax hedging strategy, totals R$3,556 million at June 30, 2017. The purpose of tax hedging is to reduce the result’s volatility, after tax effects, considering that the earnings with the exchange rate variation of investments abroad are not taxed, just as losses do not generate a deduction in the tax base.

The following figure sets forth BB’s Consolidated foreign exchange exposure, as a percentage of the Reference Equity, for the quarters indicated, since March 2015.

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Figure 69. Evolution of the Foreign Exchange Exposure as a % of the Reference Equity (RE)

1,00

3,022,72

3,09

4,56

0,95

1,83

0,79

1,71

0,87

0,780,95

0,87

0,19

0,88

1,05

0,81

1,13

Jun/15 Sep/15 Dec/15 Mar/16 Jun/16 Sep/16 Dec/16 Mar/17 Jun/17

Other Currencies Currency Basket

Balance Sheet by Index

The following figure sets forth the breakdown of BB’s Consolidated assets and liabilities, including derivatives, by index, at June 30, 2017.

Figure 70. Assets and Liabilities by Index (R$ billion)

79.6 166.5

256.2

263.526.1

38.115.9

4.4162.4

306.7244.7

385.7

825.3

445.3

1,610.2 1,610.2

Assets Liabilities

Fixed

CDI / TMS / FACP

IRP/TBF/TR

Price Index

TJLP

US$ / Gold

W/O Index

The following figure sets forth net mismatches by index of BB’s Consolidated Results.:

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Figure 71. Net Result by Index (R$ billion)

380.0

11.5

(12.0) (7.4) (86.9)

(140.9) (144.3)

Fixed Price Index TJLP US$ / Gold W/O Index CDI / TMS IRP/TBF/TR

Statement of the Interest Rate Repricing Profile

The following table sets forth BB’s Consolidated inventory of transactions sensitive to variations in interest rates, by risk factor and interest rate indexation term.:

Table 141. Interest Rate Repricing Profile

R$ million < 1 Mo 1 > 3 Mo 3 > 6 Mo 6 > 12 Mo 1 > 3 Yrs > 3 Yrs Total

Assets 806,047 75,015 238,785 63,567 125,680 221,519 1,530,614

Fixed 509,234 25,880 46,875 39,246 98,317 105,767 825,318

CDI / TMS 244,742 - - - - - 244,742

TR/TBF/IRP - - 162,366 - - - 162,366

Price Index - - 15,909 - - - 15,909

TJLP 1,174 24,930 - - - - 26,104

US$/ME 50,898 24,205 13,634 24,321 27,363 115,752 256,173

Liabilities 764,191 60,385 345,298 39,558 67,455 166,780 1,443,667

Fixed¹ 326,292 7,424 15,430 17,074 33,886 45,220 445,326

CDI / TMS 385,652 - - - - - 385,652

TR/TBF/IRP - - 306,653 - - - 306,653

Price Index - - 4,411 - - - 4,411

TJLP 1,390 36,693 - - - - 38,083

US$/ME 50,857 16,268 18,804 22,484 33,569 121,560 263,542

Gap 41,856 14,630 (106,513) 24,009 58,225 54,739 86,947

Cumulative Gap 41,856 56,486 (50,027) (26,017) 32,208 86,947 -

Cumul. Gap as % Assets 5.2 75.3 (21.0) (40.9) 25.6 39.3 -

1 - Pre-fixed liabilities include all deposits in current accounts (R$44.3 billion).

9.2. Capital Structure

Considering the large number of technical terms used pursuant to capital regulations, we set forth below a glossary to assist in the interpretation of the information presented in this section:

a) MRRE: Minimum Required Reference Equity;

b) RWA: Risk-Weighted Asset;

c) RWACPAD: refers to exposures to credit risk subject to the calculation of capital requirement through the standardized approach;

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d) RWAMPAD: refers to exposures to market risk subject to the calculation of capital requirement through the standardized approach;

e) RWAOPAD: refers to capital requirement for operational risk exposures under the standardized approach.

CMN Resolution No. 4.193/2013, which provide for the calculation of the Reference Equity and the Minimum Required Reference Equity (MRER) in relation to the Risk Weighted Assets (RWA), respectively, considering Banco Votorantim by the Equity Method, as determined by the Central Bank.

Performance

The following table sets forth the calculation of the Reference Equity and RWA.

Table 142. Basel Index

R$ million Jun/16 Sep/16 Dec/16 Mar/17 Jun/17

Reference Equity (RE) 125,074 127,061 130,453 124,049 127,048

Tier I 86,188 87,976 90,284 84,867 87,643

Common Equity Tier 1 Capital (CET1) 63,965 65,500 67,718 62,926 64,734

Shareholders Equity 73,099 75,039 76,703 79,032 80,200

Instruments Eligible to Capital 8,100 8,100 8,100 8,100 8,100

Prudential Adjustments (17,234) (17,639) (17,085) (24,205) (23,566)

Sup. Investments, Tax credits of temporary differences dependent on profit

generation (15% excess)¹(4,589) (5,049) (4,637) (9,046) (9,149)

Intangible Assets composed as of 10/01/2013 (3,246) (3,514) (4,258) (5,233) (5,105)

Tax credits from temporary differences dependent on generation of profits (10%

excess)(6,887) (6,877) (6,099) (4,803) (4,852)

Superior investments (excess of 10%) - - - (2,070) (1,758)

Tax credits arising from tax losses and negative basis of Social Contribution (440) (336) (500) (1,195) (1,160)

Goodw ill paid on acquisition of investment on the basis of expected future

profitability(1,394) (1,233) (954) (966) (727)

Non-controlling interest (511) (465) (493) (711) (637)

Tax credits arising from tax loss of excess depreciation (81) (77) (76) (92) (84)

Actuarial Assets related to Defined Benefit Pension Funds net of deferred tax

liability associated(74) (77) (66) (90) (95)

Deferred Assets (13) (11) - - -

Additional Tier I Capital 22,224 22,476 22,565 21,941 22,909

HCDI authorized by CMN n.º 4,192/2013 resolution 17,570 17,770 17,840 17,347 18,112

HCDI authorized by previous rules to the CMN n.º 4,192/2013 resolution² 4,653 4,706 4,725 4,594 4,797

Tier II 38,885 39,085 40,170 39,182 39,405

Eligible to Capital Subordinated Debts 38,905 39,096 40,182 39,194 39,426

Subordinated Debts authorized by CMN n.º 4,192/2013 resolution - Financial Letters 5,584 5,286 5,466 5,349 4,936

Subordinated Debts authorized by previous rules to the CMN n.º 4,192/2013 resolution 33,320 33,810 34,716 33,844 34,490

FCO Funding³ 23,842 24,332 25,237 25,945 26,591

Financial Letters and Certif icates of Deposits⁴ 9,479 9,479 9,479 7,899 7,899

Tier II deductions (19) (12) (12) (11) (21)

Funding instruments issued by f inancial institutions (19) (12) (12) (11) (21)

Risk-Weighted Assets (RWA) 760,102 722,442 705,851 683,652 705,412

Credit Risk (RWACPAD) 702,886 668,872 643,214 618,942 633,781

Market Risk (RWAMPAD) 25,508 16,418 18,844 9,723 16,645

Operational Risk (RWAOPAD) 31,708 37,152 43,793 54,986 54,986

Minimum Required Referential Equity (MRRE)⁵ 75,060 71,341 69,703 63,238 65,251

MRRE Margin (RE-MRRE) 50,014 55,720 60,750 60,812 61,797

Tier I Capital Ratio (Tier I/RWA) - (%) 11.34 12.18 12.79 12.41 12.42

CET1 Ratio (CET1/RWA) - (%) 8.42 9.07 9.59 9.20 9.18

BIS Ratio (RE/RWA) - (%) 16.45 17.59 18.48 18.15 18.01

1 – On June 30, 2017, with regards to the investment in Financial Institutions (BV and Banco CBSS), R$2,353,039 thousand were fully deducted from the Reference Equity and R$2,106,257 thousand were weighted by 250% in the RWA. 2 – On June 30, 2017, Banco do Brasil considered all Tier 1 eligible debt instruments authorized by the Central Bank to be included in the Reference Equity, pursuant to CMN Resolution No. 3.444/2007, and that did not fulfill the requirement set forth in CMN Resolution No. 4.192/2013, based on the instruction given by the Central Bank of Brazil regarding the limit established in Article 28, Items I to X, of CMN Resolution No. 4.192/2013. 3 – Pursuant to CMN Resolution No. 4.192/2013, FCO balances are eligible to be included in the Reference Equity. 4 – On June 30, 2017, the Bank included the balance of the Subordinated Debt instruments that were included in the Reference Equity on December 31, 2012, applying a 50% limit percentage, pursuant to CMN Resolution No. 4.192/2013. 5 – Pursuant to CMN Resolution No. 4.193/2013, it corresponds to the application of Factor F to the amount of RWA.

The scope of the consolidation used as a base to verify operating limits is the Prudential Conglomerate, defined in CMN Resolution No. 4.280/2013, as of January 1, 2015.

Pursuant to the Accounting Plan of Financial Institutions (Cosif), the Prudential Conglomerate encompasses not only financial institutions, but also purchase consortium administrators, payment institutions, companies that directly or indirectly purchase transactions or assume credit risk, and investment funds in which the conglomerate retains significant risks and benefits.

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107

CMN Resolution No. 4.193/2013 set forth Factor F, representing the Basel index to be followed during the implementation process of the Basel III requirements.

Table 143. Factor “F” applied to the amount of Risk-Weighted Assets (RWA)

Period Factor "F" (%)

10/01/2013 to 12/31/2015 11.0

01/01/2016 to 12/31/2016 9.875

01/01/2017 to 12/31/2017 9.25

01/01/2018 to 12/31/2018 8.625

From 01/01/2019 on 8.0

Reference Equity, which takes into account the requirements to assess Basel III regulatory capital, reached R$127,048 million and MRRE totaled R$65,251 million at June 30, 2017.

Full Application of Basel III

The following figure simulates the full application of Basel III and its impacts on the Bank’s CET1. It takes into account the capital base on June 30, 2017 and has three stages:

d) First stage: the calculation of the regulatory adjustments takes into account the assumptions of (i) anticipation of the deductions schedule (phase-in) and (ii) use of goodwill and intangible assets that were not amortized by 2017;

e) Second stage: the calculation takes into account the effects of the first stage combined with the anticipation of Factor F (from 9.25% to 8.0%) for operating and market risks; and

f) Third stage: the calculation takes into account all the effects of the previous stages combined with the usage of tax credits from temporary differences of 24% and tax losses of 30%, both in accordance with the usage estimates disclosed by the Bank in the Notes to the Consolidated Financial Statements.

Figure 72. Tier 1 Capital Ratio Simulation with the Full Application of Basel III (%)

9.119.18 (0.63)(0.13)

0.69

CET 1 Ratio Jun/17 Deductions ScheduleAnticipation

RWA Rules Anticipation Tax Credits Realization Simulated CET 1 Ratio undercomplete Basel III Rules

The following table sets forth the breakdown of RWACPAD, including the main exposures.

Table 144. MRRE in relation to RWACPAD

R$ million RWACPAD MRRE (%)

Loan Operations 403,097 37,286 63.6

Other Credits 56,710 5,246 8.9

Securities and Derivatives 28,817 2,666 4.5

Tax Credits 37,533 3,472 5.9

Permanent Assets 29,906 2,766 4.7

Loans to release 17,790 1,646 2.8

Guarantees Provided 4,501 416 0.7

Investments in Clearings Guaratee Funds 32 3 0.0

Other 55,395 5,124 8.7

TOTAL 633,781 58,625 100.0

Jun/17

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The table below sets forth MRRE in relation to the RWAMPAD market risk, at June 30, 2017, by risk factor:

Table 145. MRRE in relation to RWAMPAD

R$ million RWAMPAD MRRE (%)

FX 12,105 1,120 72.7

Interest Rate 4,527 419 27.2

Commodities 4 0 0.0

Shares 9 1 0.1

TOTAL 16,645 1,540 100.0

Jun/17

Table 146. MRRE in relation to RWAOPAD

R$ million RWAOPAD MRRE (%)

Commercial 26,434 2,445 48.1

Retail 14,579 1,349 26.5

Trading and Sales 6,703 620 12.2

Payments and Settlements 3,499 324 6.4

Financial Agent Services 1,800 166 3.3

Asset Management 1,661 154 3.0

Corporate Finance 256 24 0.5

Retail Brokerage 54 5 0.1

TOTAL 54,986 5,086 100.0

Jun/17

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Table 147. RWACPAD Segregated by Risk Weighting Factor (RWF)

R$ million RWF (%) RWACPAD1

MRRE²

20 347 32

100 2,721 252

20 1,894 175

50 489 45

75 97 9

85 10,887 1,007

100 21,091 1,951

2 18 2

20 1 0

50 55 5

85 7,982 738

100 11,434 1,058

1,250 9,328 863

Investments in Clearings Guarantee Funds 2 32 3

20 528 49

50 261 24

100 3,957 366

20 60 6

35 13,340 1,234

50 3,250 301

75 169,052 15,637

85 100,814 9,325

100 116,581 10,784

75 229 21

85 3 0

100 175 16

50 11,057 1,023

75 16,428 1,520

85 4,516 418

100 24,707 2,285

Other Assets 100 466 43

100 15,136 1,400

250 14,770 1,366

50 680 63

75 8,334 771

85 374 35

100 1,759 163

50 537 50

75 591 55

85 3,553 329

100 1,961 181

75 159 15

85 7,318 677

100 4,276 396

20 5 0

50 15 1

75 107 10

85 1,589 147

100 2,786 258

100 27,095 2,506

250 9,505 879

300 933 86

50 1 0

100 49 5

50 1 0

Derivatives adjustment due to variation of credit quality from counterparty445 41

Total 633,781 58,625

Jun/17

Operations for settlement of sale of foreign currency, gold or securities on the spot

market

Operations for settlement of purchase of foreign currency, gold or securities on the

spot market

Tax Credits

Guarantees provided

Advance payment granted by the Institution

Loans to Concede

Credit Commitment non-cancellable unconditionally and unilaterally by the Institution

Permanent Assets

Other Receivables

Available Founds

Leasing

Loans

Interbank Accounts

Securities and Financial Derivatives

Short-term Interbank Investments

1 – Sum of the exposures multiplied by the respective Risk Weighting Factors, adjusted by the Conversion Factor. 2 – Exposure weighted by the Risk Factor multiplied by 9.25%.

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10 - Strategic Investments

10.1. Information on Subsidiaries and Affiliates

The following table presents Banco do Brasil S.A equity on its subsidiaries and affiliates.

Table 148. Interest in the Capital of Subsidiaries and Affiliates

Equity Interest Activity Share (%)

Equity

Income

R$ thousand Jun/17 Jun/16 Jun/17 2Q17

Banco do Brasil - AG. Viena Banking (I) 100,00 778.217 824.911 (3.145)

Banco Patagonia S.A. Multiple Bank (I) 58,97 1.224.391 1.145.236 103.946

Banco Votorantim S.A. Multiple Bank (II) 50,00 4.139.311 4.253.915 72.590

BB Adm. de Cartões de Crédito S.A. Service Rendering (I) 100,00 30.796 28.906 4.389

BB Administradora de Consórcios S.A. Consortiums (I) 100,00 167.522 197.078 88.935

BB Americas Multiple Bank (I) 100,00 147.475 131.395 4.334

BB Banco de Investimento S.A. Investment Bank (I) 100,00 2.951.414 3.014.376 354.122

Ativos S.A. Securitizadora de Créd. Financ. Credit Acquisition (I) 100,00 1.135.358 1.044.860 36.102

Cielo S.A. Service Rendering (II) 28,69 2.211.858 2.981.990 272.725

Companhia Brasileira de Securit. – Cibrasec Credit Acquisition (II) 12,12 9.098 9.192 347

Kepler Weber S.A. Industry (II) 17,45 83.302 79.996 (869)

Neoenergia S.A. Energy (II) 11,99 1.175.389 1.155.058 13.745

Seg. Brasileira de Créd. à Exportação – SBCE Insurance Company (II) 12,09 2.082 2.583 (12)

Tecnologia Bancária S.A. – Tecban Service Rendering (II) 12,52 49.668 55.594 1.874

BB DTVM S.A. Asset Management (I) 100,00 131.625 131.634 255.407

BB Elo Cartões Participações S.A. Holding (I) 100,00 4.733.893 5.231.086 187.671

Elo Participações S.A. Holding (II) 49,99 857.737 968.448 59.833

CBSS - Alelo Service Rendering (II) 49,99 732.774 813.335 49.315

Elo Serviços Service Rendering (II) 33,33 22.587 29.869 3.345

Cateno Gestão de Contas de Pagamento S.A.¹ Service Rendering (II) 50,09 3.630.487 3.652.952 45.539

BB Leasing S.A. – Arrendamento Mercantil Leasing (I) 100,00 4.243.141 4.474.015 60.036

BB Securities LLC. Brokerage (I) 100,00 189.700 213.077 5.753

BB Seguridade Participações S.A. Holding (I) 66,36 4.439.687 4.899.349 633.877

BB Corretora de Seg. e Adm. de Bens S.A.² Brokerage (I) 66,36 34.976 47.074 345.411

BB Seguros Participações S.A. Holding (I) 66,36 6.381.764 6.675.562 594.161

BB Mapfre SH1 Participações S.A. Holding (II) 49,76 2.087.506 1.653.394 310.031

Brasilcap Capitalização S.A. Capitalization (II) 44,24 359.713 288.881 29.769

Brasildental Operadora de Planos Odontológicos S.A. Service Rendering (II) 49,77 6.231 9.375 739

Brasilprev Seguros e Previdência S.A. Insurance / Pension (II) 49,77 1.924.164 1.918.539 171.128

IRB - Brasil Resseguros Reinsurance (II) 13,61 620.085 660.695 30.223

Mapfre BB SH2 Participações S.A. Holding (II) 33,18 1.744.987 1.577.235 26.097

BB Tecnologia e Serviços S.A. IT (I) 99,99 217.183 245.529 11.621

BB USA Holding Company, Inc. Holding (I) 100,00 691 693 (2)

Besc DTVM S.A. Asset Management (I) 99,62 7.165 7.148 (71)

Brasilian American Merchant Bank Banking (I) 100,00 1.482.712 1.505.833 (16.271)

BB Securities Asia Pte. Ltd. Brokerage (I) 100,00 17.760 21.837 260

BB Securities Ltd. Brokerage (I) 100,00 166.707 190.513 4.877

Book Value

(I) Subsidiaries fully included in the accounting consolidation. (II) Affiliate companies accounted for by equity method. 1 - The values shown (Book Value and Equity Income) of company Cateno Gestão de Contas de Pagamento S.A. are equivalent to 30% of direct participation by BB Multiple Bank. 2 – On Dec/16 BB Cor. Participações S.A was incorporated by BB Corretora de Seg. e Adm. de Bens S.A.

BB holds direct and indirect participations through BB Banco de Investimentos S.A. in the following companies:

I. Ativos SA: 75.71% by BB-BI and 24.29% by Brazilian American Merchant Bank (BAMB);

II. Cateno: 30.0% by BB Multiple Bank and 20.9% by BB-BI, totalling 50.9%;

III. Tecban: 8.01% by BB-BI and 4.51% by BB Multiple Bank, totalling 12.52%;

IV. Cibrasec: 7.32% by BB-BI and 4.8 by BB Multiple Bank, totalling 12.12%.

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10.2. Banco Votorantim

The equity method is used to present BV’s financial information in BB’s financial statements. Banco do Brasil owns a 50.0% stake and jointly-controls BV.

All data presented in this section reflects 100% of BV’s balance sheet and statement of income balances. More detailed information about Banco Votorantim can be obtained from the 2Q17 Earnings Release available at www.bancovotorantim.com.br/ir.

Earnings Highlights

BV’s 2Q17 net income was R$145 million, ROE of 7.1% p.y. In 1H17 the net income was R$273 million, growth of 40.2% compared to 1H16, mainly due to (i) lower ALLL expenses, (ii) growth of fees and insurance income and (iii) personal and administrative expenses decrease.

The NII’s decrease compared to the previous quarter was mainly due to a higher securities impairment. In half-yearly comparison, besides impairments, the conservative stance on loan granting and companies portfolio retraction also affected the NII. This decrease was partially offset by the 23.6% growth of income from insurance and fees in the same period.

In 1H17/1H16 comparison personnel expenses decreased, mainly due to decrease in labor claims expenses. In quarterly comparison, these expenses were affected by the sales agents wage bargaining. The last twelve months cost income ratio of was 38.4%.

Table 149. Income Statement with Reallocations¹ - Quarterly

Chg. (%) on

R$ million Corp. Law Adjustm. Adjusted Corp. Law Adjustm. Adjusted 1Q17

Financial Intermediation Income 3,584 (161) 3,423 3,638 (233) 3,405 (0.5)

Loans 1,711 (121) 1,590 2,104 (304) 1,801 13.3

Leasing 5 - 5 (1) - (1) -

Securities 1,180 - 1,180 989 - 989 (16.2)

Financial Derivatives 46 (40) 6 (44) 71 27 348.5

Foreign Exchange Portfolio (2) - (2) 50 - 50 -

Compulsory Investments 8 - 8 4 - 4 (52.4)

Sale or Transference of Financial Assets 636 - 636 535 - 535 (15.9)

Financial Intermediation Expenses (2,270) - (2,270) (2,363) 34 (2,328) 2.6

Money Market Funds (1,844) - (1,844) (1,856) - (1,856) 0.6

Borrow ing, Assignments and Onlending (15) - (15) (133) - (133) 814.2

Sale or Transference of Financial Assets (411) - (411) (374) 34 (339) (17.5)

Net Interest Income 1,314 (161) 1,153 1,275 (198) 1,077 (6.6)

Allow ance for Loan Losses (477) 109 (368) (654) 269 (385) 4.7

Net Financial Margin 837 (51) 785 621 71 691 (11.9)

Other Operating Income (Expenses) (477) 10 (467) (443) (6) (449) (3.9)

Fee Income 290 - 290 326 - 326 12.5

Personnel Expenses (245) - (245) (279) - (279) 13.9

Other Administrative Expenses (256) - (256) (275) - (275) 7.3

Tax Expenses (92) 4 (88) (86) (6) (92) 4.5

Equity Interest in Subsidiaries and Affiliates 58 - 58 66 - 66 13.5

Other Operating Revenues and Expenses (232) 6 (226) (195) 0 (195) (13.7)

Operating Income 360 (42) 318 178 65 243 (23.7)

Non-operating Income (16) - (16) (1) - (1) (96.8)

Income Before Taxes 344 (42) 302 177 65 242 (19.8)

Income and Social Contribution Taxes (177) 42 (135) 25 (65) (39) (70.9)

Profit Sharing (39) - (39) (58) - (58) 47.9

Net Income 127 (0) 127 145 0 145 13.9

Quarterly Flow

1Q17 2Q17

1 - Adjustments refer to: (i) income from written-off credits recovery and credit expenses referring to the portfolio granted with co-obligation, classified under line “Loans”, and reallocated to “Allowance for Loan Losses” and (ii) foreign investments exchange variations, which were accounted for under Other Operating Income (Expenses) and reallocated to Income from Derivative Financial Instruments, as well as these investments’ hedging strategy tax effects.

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Table 150. Income Statement with Reallocations¹ - Half-Yearly

Chg. (%) on

R$ million Corp. Law Adjustm. Adjusted Corp. Law Adjustm. Adjusted 1H16

Financial Intermediation Income 6,968 (1) 6,966 7,221 (393) 6,828 (2.0)

Loans 3,002 (281) 2,721 3,815 (425) 3,390 24.6

Leasing 19 - 19 4 - 4 (77.4)

Securities 2,013 530 2,543 2,170 - 2,170 (14.7)

Financial Derivatives 374 (250) 123 2 31 33 (72.9)

Foreign Exchange Portfolio (319) - (319) 48 - 48 -

Compulsory Investments 16 - 16 12 - 12 (28.3)

Sale or Transference of Financial Assets 1,863 - 1,863 1,171 - 1,171 (37.2)

Financial Intermediation Expenses (4,486) - (4,486) (4,633) 34 (4,598) 2.5

Money Market Funds (3,708) - (3,708) (3,700) - (3,700) (0.2)

Borrow ing, Assignments and Onlending 540 - 540 (148) - (148) -

Sale or Transference of Financial Assets (1,317) - (1,317) (785) 34 (751) (43.0)

Net Financial Margin 2,482 (1) 2,481 2,589 (359) 2,230 (10.1)

Allow ance for Loan Losses (691) (273) (965) (1,132) 378 (753) (21.9)

Net Interest Margin 1,791 (275) 1,516 1,457 19 1,477 (2.6)

Other Operating Income (Expenses) (1,108) 24 (1,084) (919) 4 (916) (15.5)

Fee Income 519 - 519 616 - 616 18.6

Personnel Expenses (596) - (596) (524) - (524) (12.1)

Other Administrative Expenses (561) - (561) (532) - (532) (5.2)

Tax Expenses (204) 27 (177) (178) (2) (180) 1.6

Equity Interest of Subsidiaries and Affiliates 90 - 90 124 - 124 38.5

Other Operating Income and Expenses (356) (3) (359) (427) 6 (421) 17.2

Operating Income 683 (251) 432 538 23 561 29.8

Non-operating Income 6 - 6 (17) - (17) -

Income Before Taxes 688 (251) 438 521 23 544 24.3

Income and Social Contribution Taxes (411) 251 (160) (152) (23) (175) 9.1

Profit Sharing (83) - (83) (97) - (97) 16.3

Net Income 194 0 194 273 0 273 40.2

Half-Yearly Flow

1H16 1H17

1 - Adjustments refer to: (i) income from written-off credits recovery and credit expenses referring to the portfolio granted with co-obligation, classified under line “Loans”, and reallocated to “Allowance for Loan Losses” and (ii) foreign investments exchange variations, which were accounted for under Other Operating Income (Expenses) and reallocated to Income from Derivative Financial Instruments, as well as these investments’ hedging strategy tax effects.

Table 151 . Adjusted Net Interest Margin and Net Interest Rate

R$ million 2Q16 1Q17 2Q17 2Q16 1Q17

Average Interest Earning Assets 95,988 92,769 92,056 (4.1) (0.8)

Average Interest Bearing Liabilities 90,800 86,467 85,834 (5.5) (0.7)

Net Interest Gain ¹ 1,212 1,151 1,003 (17.3) (12.9)

Interest Income 3,334 3,419 3,362 0.8 (1.7)

Interest Expense (2,122) (2,268) (2,359) 11.2 4.0

Net Interest Income Other Items² (4) 2 74 - -

NII 1,208 1,153 1,077 (10.9) (6.6)

AIBL/AEA – % 94.6 93.2 93.2

Yield Average Assets - % ³ 14.6 15.6 15.4

Liabilities Average Cost - % ⁴ 9.7 10.9 11.5

Net Interest Rate - % ⁵ 5.0 4.7 4.0

Adjusted NIM - % ⁶ 5.1 5.1 4.4

NIM – % 5.1 5.1 4.8

Chg. (%) on

1 - Defined as interest income less interest expenses. 2 - Includes derivatives, debt assumption contracts, foreign exchange portfolio, gold loans, credit guarantor fund, foreign exchange gain/loss abroad and other income from financial intermediation nature. 3 - Total interest income divided by average interest earning assets. 4 - Total interest expenses divided by average interest bearing liabilities. 5 - Difference between average rate of earning assets and average rate of interest bearing liabilities. 6 - Net Interest Gain divided by average interest earning assets.

Balance Sheet Highlights

The Loan Portfolio - Broad Definition decreased in the quarter and in the last twelve months, reflecting the more conservative stance to grant loans and focus to ensure quality of new loans. In this context,

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the Bank has been improving its funding mix, increasing the share of more stable financial instruments in total funding, such as financial letters, which accounted for 32.3% of total funding in Jun/17.

Table 152. Balance Sheet Main Items

R$ million Jun/16 Mar/17 Jun/17 Jun/16 Mar/17

Total Assets¹ 108,028 104,166 102,468 (5.1) (1.6)

Broad Definition Loan Portfolio 59,417 59,980 57,305 (3.6) (4.5)

Classif ied Loan Portfolio 46,875 46,931 46,828 (0.1) (0.2)

Retail (Individuals) 33,140 33,998 34,131 3.0 0.4

Wholesale (Business Loans) 13,735 12,932 12,697 (7.6) (1.8)

Guarantees Provided, Securities and Other 12,542 13,049 10,477 (16.5) (19.7)

Securities and Financial Derivatives 31,689 31,223 29,726 (6.2) (4.8)

Funding 67,520 64,073 63,352 (6.2) (1.1)

Commercial Papers 17,775 22,043 23,095 29.9 4.8

Financial Letters 14,797 19,431 20,432 38.1 5.2

Agribusiness and Real Estate Letters of Credit 2,978 2,613 2,664 (10.6) 2.0

Debenture (Linked to Repurchase) 16,211 11,760 8,579 (47.1) (27.1)

Assigned Assets Obligations 15,690 11,438 10,447 (33.4) (8.7)

Other 17,844 18,832 21,232 19.0 12.7

Shareholders' Equity 8,282 8,358 8,508 2.7 1.8

Chg. (%) on

1 - It considers creditors adjustments on anticipation of residual amounts, in financial leasing operations.

The NPL +90 days decreased in Jun/17, reflecting improvement in wholesale segment delinquency. The retail portfolio’s NPL +90 days remained stable compared to Mar/17, and decreased 50bps compared to Jun/16, to 5.2%, reflecting the decrease in auto loans delinquency that, in the last twelve months, decreased 70bps. The delinquency decreased 25bps in the banking industry in this segment, in the same period.

Table 153. Managed Portfolio Delinquency

R$ million 2Q16 1Q17 2Q17

Managed Loan Portfolio¹ 46,925 46,931 46,828

NPL + 90 days 2,174 2,120 2,065

NPL + 90 days/Managed Loan Portfolio - % 4.6% 4.5% 4.4%

Write-off (639) (926) (646)

Recovery of Write-offs 140 121 304

Net Loss (500) (804) (343)

Net Loss/Managed Loan Portfolio - annualized - % 4.3% 7.0% 3.0%

New NPL 560 408 591

New NPL/Managed Loan Portfolio² 1.2% 0.9% 1.3%

Provision³ 3,221 3,245 3,257

Allow ance/NPL + 90 days - % 148.2% 153.0% 157.8%

Balance AA-C 42,309 41,850 41,632

Balance AA-C/Managed Loan Portfolio 90.2% 89.2% 88.9%

1 - It includes assets assigned with recourse previously to the CMN Resolution nº 3,533. 2 - (Difference from the NPL amount from the last quarter and this quarter + write-off)/ loan portfolio of the previous quarter. 3 - It includes ALLL of assets assingned with recourse.

BIS Ratio

BIS ratio and Reference Equity Tier I (RE Tier I) ratio remain above the minimum required. The index improved in comparison to Mar/17 reflecting mainly the (i) credit RWA decrease, affected by the wholesale loan portfolio decrease, and (ii) RE Tier I increase, due to the equity increase due to the period profits.

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Table 154. BIS Ratio

R$ million Jun/16 Mar/17 Jun/17

RE - Reference Equity 9,675 8,051 8,178

RE Tier I 6,892 6,205 6,255

RE Tier II 2,782 1,846 1,923

RWA 64,839 61,058 60,445

Credit Risk 57,168 54,544 53,575

Market Risk 1,654 1,363 1,719

Operational 6,016 5,151 5,151

MRRE - Minimum Required Reference Equity 6,403 5,648 5,591

BIS Ratio 14.9% 13.2% 13.5%

RE Tier I 10.6% 10.2% 10.3%

RE Tier II 4.3% 3.0% 3.2%

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10.3. International Businesses

BB's presence abroad aims to maintain its reference position for Brazilian companies and individuals in international markets.

The Bank’s foreign service network consists of 34 subsidiaries located in 23 countries. In addition to this structure, Banco do Brasil has an agreement with others financial institutions abroad to service its customers. At the end of 2Q17, there were 880 banks acting as BB correspondents in 105 countries.

Table 155. Foreign Service Network

Branches Sub-branches Subsidiaries and Branches

Asunción - Paraguay Hamamatsu - Japan BB Americas / Miami - USA

Buenos Aires - Argentina Nagoya - Japan Banco Patagonia / Buenos Aires - Argentina

Frankfurt - Germany Santa Cruz de la Sierra - Bolivia BB AG (Aktiengesellschaft) / Vienna - Austria¹

Grand Cayman - Cayman Islands Representative Offices Shared Services Units

La Paz - Bolivia Caracas - Venezuela BB USA Servicing Center / Orlando - USA

London - England Mexico City - Mexico BB Europa Servicing Center / Lisbon - Portugal

Miami - USA Dubai - United Arab Emirates Securities

New York - USA Lima - Peru Banco do Brasil Securities LLC - U.S.

Santiago - Chile Luanda - Angola BB Securities Ltd - England

Tokyo - Japan Montevideo - Uruguay BB Securities Asia PTE - Singapore

Shanghai - China Panama City - Panama

1 - BB AG Vienna also has branches located in the cities of Madrid, Paris, Milan, Lisbon and Porto.

Table 156. Consolidated Abroad - Balance Sheet

Quarterly

FlowChg. (%) on

R$ million Jun/16 Mar/17 Jun/17 Jun/16 Mar/17

ASSETS 172.100 153.868 161.220 (6,3) 4,8

Short-term Interbank Investments 39.266 28.240 33.642 (14,3) 19,1

Securities 9.970 11.592 12.753 27,9 10,0

Securities Available for Trading 2.616 2.919 4.039 54,4 38,4

Securities Available for Sale 7.355 8.546 8.664 17,8 1,4

Securities Held to Maturity - 127 50 - (60,6)

Loans 44.181 35.327 35.573 (19,5) 0,7

Public Sector 870 751 571 (34,4) (24,0)

Private Sector 43.311 34.576 35.002 (19,2) 1,2

Other Assets 3.618 8.589 5.487 51,7 (36,1)

BB Group 75.064 70.120 73.765 (1,7) 5,2

LIABILITIES 172.100 153.868 161.220 (6,3) 4,8

Deposits 54.730 45.737 49.503 (9,6) 8,2

Demand Deposits 8.818 9.252 9.045 2,6 (2,2)

Time Deposits 20.701 20.450 24.062 16,2 17,7

Interbank Deposits 25.211 16.035 16.396 (35,0) 2,3

Funds from Acceptances and Securities Issuance 18.631 20.540 21.937 17,7 6,8

Borrow ings 22.278 17.605 19.547 (12,3) 11,0

Subordinated Debt and Perpetual Bonuses 32.431 32.326 33.398 3,0 3,3

Other Liabilities 8.086 8.993 9.717 20,2 8,1

BB Group 25.992 17.113 15.158 (41,7) (11,4)

Shareholders’ Equity 9.951 11.555 11.960 20,2 3,5

Controlling 9.100 10.667 11.163 22,7 4,6

Non-Controlling Interest¹ 852 888 797 (6,5) (10,2)

1 - It corresponds to non-controlling shareholders’ participation of Banco Patagonia.

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Table 157. Consolidated Abroad – Statement of Income Items

Chg. (%) on

R$ million 2Q16 1Q17 2Q17 2Q16 1Q17

Income after Taxes and Statutory Participations (30) 229 218 - (4,8)

Non-Controlling Interest¹ 72 62 73 1,4 17,7

Net Income 42 291 291 - -

1 - It corresponds to non-controlling shareholders’ participation of Banco Patagonia.

10.3.1. Banco Patagonia

All information presented in this section reflect 100% of Banco Patagonia’s balances equity accounts and earnings. The following tables show the main equity, earnings and structural data highlights.

In 2Q17 Banco Patagonia’s Net Income was R$176.3 million, stable when compared with the same period of the previous year.

Table 158. Banco Patagonia – Equity Highlights

Quarterly Flow Chg. (%) on

R$ million Jun/16 Mar/17 Jun/17 Jun/16 Mar/17

Assets 13,504 15,454 18,730 38.7 21.2

Loans 7,313 8,009 8,323 13.8 3.9

Deposits 9,140 10,583 11,315 23.8 6.9

Shareholders' Equity 2,076 2,165 1,942 (6.5) (10.3)

Table 159. Banco Patagonia – Funding

R$ million Jun/16 Mar/17 Jun/17 Jun/16 Mar/17

Interbanking 146 159 193 32.4 21.6

Repo 40 38 729 - -

Companies 1,485 1,510 1,548 4.2 2.5

Individuals 1,252 1,551 1,722 37.5 11.0

Issues 85 87 114 34.0 30.9

Total 3,008 3,344 4,305 43.1 28.7

Chg. (%) onQuarterly Flow

Table 160. Banco Patagonia – Main Earnings Items

Quarterly Flow Chg. (%) on

R$ million 2Q16 1Q17 2Q17 2Q16 1Q17

Financial Intermediation Income 359 384 427 18.8 11.1

Allow ance for Loan Losses 4 30 (23) - -

Income from Financial Intermediation 363 415 404 11.2 (2.7)

Fee income 124 189 210 69.3 11.4

Administrative Expenses (248) (288) (297) 19.6 3.3

Other 38 5 (6) - -

Income Before Taxes 277 321 310 11.9 (3.3)

Income and Social Contribuition Taxes (101) (169) (134) 32.9 (20.5)

Net Income 176 152 176 (0.1) 15.8

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117

Figure 73. Banco Patagonia – Net Income – R$ million

476

739786

700

328

2013 2014 2015 2016 1H17

Table 161. Banco Patagonia – Profitability, Capital and Credit Indicators

% 2Q16 1Q17 2Q17

Return on Equity 37.3 36.7 36.7

BIS Ratio 15.8 15.0 12.9

Coverage Index (+90 days) 269.9 254.3 239.7

NPL+90 days 1.1 1.3 1.3

1 - Adjusted series considering the rules established by Resolution #5,369 of the Central Bank of Argentina.

Table 162. Banco Patagonia – Operating and Structural Highlights

Quarterly Flow Chg. (%) on

Jun/16 Mar/17 Jun/17 Jun/16 Mar/17

Customers (thousand) 1,020 1,074 1,104 8.3 2.8

Branches 177 182 182 2.8 -

Branches in Buenos Aires 93 94 94 1.1 -

Service Points 199 204 206 3.5 1.0

Employees 3,421 3,391 3,367 (1.6) (0.7)

Banco do Brasil S.A. - IR

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Vice Presidency of Financial Management and Investor Relations Chief Financial Officer Alberto Monteiro de Queiroz Netto Head of Investor Relations Bernardo de Azevedo Silva Rothe Executive Manager Rodrigo Felippe Afonso Divisional Managers Daniel Henrique de Sousa Diniz Heverton Masaru Ono Janaína Marques Storti Joaquim Camilo de Castro Analysts Adriano Gonçalves de Souza Bruno Santos Garcia Cleber Antonio Lima Rentroia Daniela Priscila da Silva Debora Stefani Diogo Simas Machado Eva Maria Gitirana de Oliveira Fabíola Lopes Ribeiro Felipe de Mello Pimentel Fernanda Vasconcelos de Meneses Filipe Cardoso Duda Gustavo Correia de Brito Itala Tonon Jefferson Guarnieri Aquino Joabel Martins de Oliveira Luiz Fernando de Almeida Peterson Luiz Barbosa Regina Knysak Vilmar Francisco Thewes Vitor Lopes Rodrigues Viviane de Sousa

KPMG Auditores Independentes Agosto de 2017 KPDS

Banco do Brasil S.A. Limited Assurance Report about Supplementary Accounting information included within the Performance Analysis Report

June 30, 2017 (A free translation of the original report in Portuguese on the supplementary accounting information presented in the Performance Analysis Report)

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 SBS - Qd. 02 - Bl. Q - Lote 03 - Salas 708 a 711 Edifício João Carlos Saad 70070-120 - Brasília/DF - Brasil Caixa Postal 8587 - CEP 70312-970 - Brasília/DF - Brasil Telefone 55 (61) 2104-2400, Fax 55 (61) 2104-2406 www.kpmg.com.br

Limited Assurance Report about supplementary accounting information included within the Performance Analysis Report To Board of Directors, the Shareholders and the Directors of Banco do Brasil S.A. Brasília – DF Introduction We were hired by Banco do Brasil S.A. (“Bank”) to report on the supplementary accounting information of Banco do Brasil S.A. for the six month period then ended in June 30, 2017, in the form of a limited assurance conclusion if, based on our engagement performed, nothing has come to our attention that causes us to believe that the supplementary accounting information included within the Performance Analysis Report are not presented, in all material respects, in accordance to on the information referred to in the paragraph “Criteria for preparing the supplementary accounting information”. Responsibility of the Bank’s Management The Bank´s Management is responsible for preparing and adequately presenting the supplementary accounting information included within the Performance Analysis Report based on the criteria for the preparation of the supplementary accounting information described below, and the other information contained in such report, as well as for the design, implementation and maintenance of internal controls it deemed necessary to enable that such information are free from material misstatements, regardless of whether caused by fraud or error. Responsibility of the independent auditors Our responsibility is to review the supplementary accounting information included in the Performance Analysis Report prepared by the Bank and, based on that review, to issue a conclusion in the form of limited assurance. We conducted our works in conformity with the Brazilian Standard on Assurance Engagements NBC TO 3000 – Assurance Engagements Other than Audits or Reviews (ISAE 3000). That standard requires compliance with ethical requirements, including independence requirements, planning and execution of procedures to obtain a level of limited assurance that we are not aware of any fact that would lead us to believe that the supplementary accounting

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information presented in the Analysis Performance Report of the Bank are not presented, in all material respects, in accordance with the information referred to in the paragraph “Criteria for preparing the supplementary accounting information”. The procedures selected were based on our understanding of the supplementary accounting information included within the Performance Analysis Report, as well as other circumstances of our work and our consideration of other areas that may contain material misstatements. Procedures for collecting evidence for a limited assurance work are more limited than for a reasonable assurance work. Therefore, less assurance is obtained than in a reasonable assurance work. Consequently, we do not express an audit opinion or a reasonable assurance on the supplementary accounting information presented in Performance Analysis Report of the Bank. Our conclusion does not contemplate aspects related to any prospective information contained within the Performance Analysis Report, nor offers any guarantee if the assumptions used by Management to provide a reasonable basis for the projections presented. Therefore, our report does not offer any type of assurance on the scope of future information (such as goals, expectations and ambitions) and descriptive information that is subject to subjective assessment. Criteria for preparation of supplementary accounting information The supplementary accounting information disclosed within the Performance Analysis Report for the six month period then ended as at June 30, 2017, were prepared by the Bank’s management based on the accounting information contained in the June 30, 2017 consolidated financial statement and the criteria described in the Performance Analysis Report in order to allow additional analysis, without, however, being part of the consolidated financial statement disclosed on this date. Conclusion Our conclusion has been formed on the basis of, and is limited to the matters outlined in this report. Based on the limited assurance procedures performed, as summarized above, we are not aware of any facts that lead us to believe that the supplementary accounting information included within the Performance Analysis Report, are not presented, in all relevant aspects, in accordance with the information referred to in the paragraph “Criteria for preparing the supplementary accounting information”. Brasília, August 09, 2017 KPMG Auditores Independentes CRC SP-014428/O-6 F-DF Original report in Portuguese signed by Marcelo Faria Pereira Accountant CRC RJ-077911/O-2

Consolidated Financial Statements

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1st half 2017

Financial

Statements

Consolidated Financial Statements

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INDEX

Index............................................................................................................................................................. 1

Management Report ................................................................................................................................. 14

Financial Statements ................................................................................................................................ 15

BALANCE SHEET .................................................................................................................................. 15

STATEMENT OF INCOME .................................................................................................................... 19

STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY .............................................................. 20

STATEMENT OF CASH FLOWS ........................................................................................................... 21

STATEMENT OF VALUE ADDED ......................................................................................................... 22

Notes to the Consolidated Financial Statements .................................................................................. 23

- THE BANK AND ITS OPERATIONS ................................................................................................ 23

- COMPANY RESTRUCTURING ........................................................................................................ 23

- PRESENTATION OF FINANCIAL STATEMENTS ........................................................................... 23

- DESCRIPTION OF SIGNIFICANT ACCOUNTING POLICIES ......................................................... 27

- INFORMATION BY SEGMENT ........................................................................................................ 33

- CASH AND CASH EQUIVALENTS .................................................................................................. 37

- INTERBANK INVESTMENTS ........................................................................................................... 37

- SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS ...................................................... 38

- INTERBANK ACCOUNTS ................................................................................................................ 45

- LOAN OPERATIONS ...................................................................................................................... 47

11 - FOREIGN EXCHANGE PORTFOLIO ............................................................................................. 54

- OTHER RECEIVABLES .................................................................................................................. 55

- OTHER ASSETS ............................................................................................................................ 56

- INVESTMENTS ............................................................................................................................... 57

15 - PROPERTY AND EQUIPMENT ..................................................................................................... 64

- INTANGIBLE ASSETS .................................................................................................................... 64

Consolidated Financial Statements

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- DEPOSITS AND SECURITIES SOLD UNDER REPURCHASE AGREEMENTS ......................... 65

- FUNDS FROM ACCEPTANCE AND ISSUANCE OF SECURITIES.............................................. 69

- BORROWINGS AND ONLENDINGS ............................................................................................. 70

- OTHER LIABILITIES ....................................................................................................................... 71

- OTHER OPERATING INCOME/EXPENSES ................................................................................. 75

- NON-OPERATING INCOME .......................................................................................................... 77

- SHAREHOLDERS' EQUITY ........................................................................................................... 78

- TAXES ............................................................................................................................................. 85

- RELATED PARTY TRANSACTIONS ............................................................................................. 88

- EMPLOYEE BENEFITS .................................................................................................................. 91

- PROVISIONS, CONTINGENT ASSETS AND LIABILITIES, LEGAL LIABILITIES – TAXES AND SOCIAL SECURITY ............................................................................................................................. 102

- RISK AND CAPITAL MANAGEMENT .......................................................................................... 105

- STATEMENT OF COMPREHENSIVE INCOME .......................................................................... 115

- OTHER INFORMATION ............................................................................................................... 116

Independent Auditor’s Report ............................................................................................................... 119

Summary of the Audit Commitee Report ............................................................................................. 127

Declaration of the Executive Board Members about the Financial Statements............................... 129

Declaration of the Executive Board Members about the Report of Independent Auditors ............ 130

Members of Management....................................................................................................................... 131

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Dear Shareholders,

We present Banco do Brasil’s (BB) Management Report for 1H17, in accordance with the legal requirements and regulatory rules in force.

We suggest reading this document along with the MD&A for the first and second quarters of 2017. The MD&A is a quarterly report for market analysts, shareholders and investors, provides economic and financial indicators, analyzes our performance. These reports are available on our Investor Relations website at bb.com.br/ir.

1. Macroeconomic Environment

In the first semester, the domestic and international macroeconomic scenario was characterized by uncertainties that directly and indirectly affected the business environment for financial institutions. Although the domestic uncertainties level has declined during the first months of the year, non-economic events have again brought volatility to the markets.

In the United States, the economy began the year with growth below expected, but ended the semester show consistent recovery. The unemployment rate reduction to below full employment and the inflation convergence to the target set by the Federal Reserve allowed the monetary conditions normalization process continuation.

In Europe, economic activity responded to the monetary stimulus promoted by the European Central Bank, with GDP growth in its main economies. Add to this context there was uncertainties reduction due to the defeat of presidential candidates with nationalist profiles and who defended their countries exit from the European block.

In emerging markets, after doubts about US trade protection policy possible negative impacts, economic activity in China kept accelerating as expected. The result was the slight commodity prices appreciation in the international market.

In Brazil, after two years in recession, the first signs of economic activity recovery were observed. Driven by robust results in agriculture and livestock GDP increased 1.0% in the first quarter (compared to the last quarter of 2016, seasonally adjusted). In the semester the industry, commerce and services also presented positive figures.

With the dissipation of inflation shocks observed in 2015 and 2016, retail prices slowed, with IPCA reaching 3.0% in 12 months to June (accumulated), below the target (4.5%), result, partially, of macroeconomic policy reorientation, implemented throughout 2016.

There has been progress in approved reform agenda, such as establishment of a limit on public expenditure. Other reforms underway in Congress, such as pension system reform, also focus on structural issues for the country.

As a result, Brazil’s risk premium, as measured by 5-year CDS, declined by 23% compared to the end of 2016 (May, 2017 average over December/16 average), and the confidence indexes, whether entrepreneurs’ or consumers’, continued the improvement trend, signaling positive prospects in relation to the possibility of a gradual and sustained economic growth recovery.

Recently, non-economic events brougth increased uncertainties into the country. As a result, risk and exchange rate levels responded unfavorably, although there is no evidence on those event’s repercussion over monetary policy

conduction and moreover, on economic activity recovery.

By the semester end, those events more intense effects on country risk and exchange rate were already reversing, suggesting market expectations in discussions continuity on the reform agenda.

In this context, the monetary authority kept on the monetary distension process, reducing the interest rates to 9.25% p.y. Since the cycle beginning, in October/16, Selic rate has been reduced in 500 b.p.

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2. Corporate Strategy for the 2017-2021 period

Banco do Brasil’s strategic procedure for the 2017-2021 period is represented in challenges that guide us towards the vision of "Being the most reliable and relevant bank in the clients and employees lives and for brazilian development": a) Profitability, Risk and Capital Management; B) Customer Experience; C) Digital transformation; D) People Management; E) Knowledge Management.

In Profitability, Risk and Capital Management, we will prioritize profitability growth, revenue increase with service rendering, operational efficiency improvement, capital sustainability and operational and credit losses reduction.

Regarding the Customer Experience, the focus is in providing high value experiences, prioritizing actions that favor customer satisfaction improvement.

For Digital Transformation, we have been upgrading processes, products and channels, making them simpler, agile, innovative, integrated and Customer Experience oriented.

The company’s evolution is based on employees’s development. Therefore, in People Management, we will continue to invest in professional skills improvement for leadership and digital transformation. Also, we will improve succession and talent recognition programs.

Finally, in Knowledge Management, the priority is to strengthen the strategic knowledge acquisition and certification.

Besides the banking business, we have presence in other sectors. In insurance, we operate through BB Seguridade S.A., commercialization insurance products, open pension plans, premium bonds and dental care plans.

In payment market, we operate through BB Administradora de Cartões, BB Elo Cartões holding company, which concentrate Alelo, Stelo, Livelo and Cateno businesses and the stake in Cielo S.A., via BB-Banco de Investimento S.A., our subsidiary.

Working in these markets is part of our customer loyalty strategy, offering complementary services to credit and diversifying revenues, with a focus on increasing profitability. More information about these businesses can be found in BB Seguridade (bbseguridaderi.com.br) and Cielo (cielo.riweb.com.br/) investor relations website and in these companies’ Management Reports and also in BB’s MD&A (available at www.bb.com.br/ir).

Following next, awards received and other highlights events:

I. we launched in March, at CMEP (Congress of Electronic Payment Means), the Pulseira Ourocard, BB's first wearable bracelet, through which customers will make payments, by approximation, in debit and credit functions without needing the physical card;

II. with 38 cases, we won 21 categories in the efinance1 2017 Award for several innovations, among them the possibility of points2 purchase in real stores with Ourocard app, Open Banking solution with the Developer Portal launch, digital culture dissemination by LABBS in Silicon Valley development and the Conta Fácil3 (Digital Account), first step for the checking account opening with a cell phone;

III. for the 9th consecutive year, we were considered the preferred credit card, according to the Credit Cards National Survey, organized by CardMonitor;

1 The efinance Award identifies and highlights the most important projects in IT and Communication in finance in Brazil.

2 Regards “Ponto pra Você” loyalty program.

3 Payment account for those who do not have a account in BB yet and can be opened with a mobile phone.

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IV. we won the Prêmio Atendimento Ouro prize, from Associação das Relações Empresa Cliente (Costumer-company relationship association), as the best receptive call center service;

V. BBDTVM’s (Asset management) fund was considered the best in the share fund category in FGV’s “Melhor

Banco para Investir”;

VI. we launched in may, in BB’s Portal, “Fale Conosco”, another tool that enables the costumer to get in touch with

the Bank. The innovation benefits non-checking account holders or those clients who do not have an internet password, and previously did not have the option to register requests in BB’ Portal;

VII. we conquered the Top Básico category in the Broadcast Projections Award. The event, promoted by Agência Estado, rewarded institutions whose projections for the country's main economic indicators more closely approximated those observed during 2016. In the same event, four out of ten awarded in the Broadcast Analysts Award analysts worked for BB-Banco de Investimentos. The award evaluates the stock recommendations that obtained the best profitability in 2016.

3. Financial Performance

Following our main results in the year:

Table 1. Financial Performance

1 – Refers to the sum of Personnel Expenses and Other Administrative Expenses.

Capital

Banco do Brasil, aligned with regulatory guidelines and best market practices, has a capital plan with a three-year prospective view, incorporating the effects defined in Basel III and considering (a) the Declaration of Appetite and Risk Tolerance, (b) the Corporate Strategy and (c) the Corporate Budget.

1H16 1H17 1H16 1H17

Earnings (R$ million)

Net Income 4,752 5,018 4,824 5,062Gross Income from Financial Intermediation 17,461 13,252 16,248 15,158

Fee Income 8,223 8,962 11,285 12,411Administrative Expenses¹ (17,427) (17,239) (18,113) (17,977)

Consolidated Financial

Statements

Banco do Brasil Financial

Statements

Jun/16 Jun/17 Jun/16 Jun/17

Equity (R$ million)

Assets 1,551,539 1,503,116 1,445,115 1,445,614Classified Loan Portfolio 675,837 626,998 691,832 642,846Total Deposits 435,652 428,989 440,879 442,812Shareholders Equity 72,586 79,742 83,449 90,783

BIS Ratio (%) 16.5 18.0 16.5 18.0

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The Basel ratio was 18.0% in June, 2017. The Tier I capital ratio was 12.4%, with 9.2% in core capital. The reference equity reached R$ 127.0 billion.

Our focus is on organic capital generation and credit growth on more attractive lines under the return versus risk criteria and strategic holdings for the Bank's core business.

4. Business and Client Relationship

Present context

The customers’ habits and behavior have changed and the financial industry is more competitive, which requires evolution in the banks' relationship models. Therefore, we continue to advance in innovations to improve service through specialization and provide an integrated experience between face-to-face and digital channels.

The structural reorganization started in November, 2016 was set to make the Bank even more dynamic, agile, competitive and strengthening the sustainability of our business. The goal is to continuously improve the customer experience, generate efficiency in the processes and, consequently, reach profitability indexes compatible with our market peers. In 1H17, we reduced in R$ 863 million personnel expenses, as this process result.

It is important to emphasize that the branch closing and the transformation of others into service stations is part of service digitization strategy and was carried out in a way that does not hinder the customers, who continue to be served by other branches or migrated to digital service.

4.1 Individuals

Service

Our more than 63.0 million customers count on 16 thousand service points, present in 99.8% of Brazilian municipalities. To better serve them, we rely on relationship segments according to the each audience’s characteristics and necessity. Currently our segments are: Private, Estilo, Exclusivo, Personalizado, Varejo e Mercado Emergente. Furthermore, we have specialized service to college students and rural producers.

Private banking clients can be served in seven exclusive offices, 68 service points in the country and one abroad. Considering client’s specific needs, we offer financial consulting in investments and asset management by specialized

managers, of which 80% hold a CFP (financial planning certification).

In high income retail (Estilo, Exclusivo and Personalizado), we served in the first semester, more than 1.8 million customers in 250 branches and 42 offices.

For customers in Varejo and Emergente segments, there was an incentive to use the self-service channels, cash flow centralization at BB and credit responsible use, with priority for the supply of lines with lower risk. In the target audience, the clients that receive their salary with us and INSS beneficiaries stand out.

We also invest in tools to listen and understand the customer. Our SAC (Costumer Service) received, on average, 433 thousand monthly calls between information, complaints and sugestions, of which 94% were resolved in the first contact. In social media (Facebook and Twitter), approximately 15,5 thousand monthly demands were solved in the period.

Digital Experience

As for June, 2017, transactions in mobile and internet channels accounted for 48.8% and 22.8% of the total automated channel service, respectively. Nearly 12 million clients (19.4% of the total) used our mobile solutions and, monthly, we registered 450 thousand new app BB users.

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By the semester end, 50% of Private customers used the mobile service and 66% used the internet. We served more than 65% of private customers with "Fale com o seu gerente" solution, already available since the 1H15 to Estilo and Exclusivo clients and offered since November of 2016 to Private customers. The application allows the direct contact between the client and BB through the exchange of instant messages, in a secure way, with BB app or Internet banking.

We ended the semester with three Escritórios Estilo, two of which were opened this semester. The evolution in Estilo also occurred in the Exclusivo customer, with 643 thousand customers served in the digital model in 39 offices.

The relationship model evolution, combined with other innovations in product offerings, is aimed at raising customer satisfaction levels. That is why we intend to expand this performance and open 25 more Escritório Estilo and 207 Escritórios Exclusivo by the end of 2017.

Since 2016, our customers can finance auto and to contract tax income in advance in a totally digital way, using a smartphone. In 1H17, auto loan via mobile already represented 31.3% in the total disbursed in this line, being 57.3% of the operations performed outside business hours. In addition to offering convenience to the customer, the operation carried out by mobile phone has operational cost 65% lower than those made at the branch.

With chat investments advice, available in the BB app and Internet, we had R$861.3 million in investments. In addition, we offer, in BB app, a financial advisory solution called Minhas Finanças, which in the semester had 2.3 million accesses, and was used by 19% of customers that use mobile.

Business Inovation

We have expanded the products that can be contracted by BB app in 1H17. Our clients can renew their car insurance, purchase premium bonds and consortium, contract, simulate and cancel the BB Seguro Residencial via mobile. Such as the auto loan and tax anticipation, we were the first bank to make the purchase of mobile home insurance available.

For investor clients, we provide a new environment for trading capital market products, with a modern look and a focus on the customer experience. The platform allows greater user interaction, stock trading, gold and public securities, as well as the possibility of personalization. In 1H17, there were 1.5 million accesses, with R$16.7 billion in negotiations.

After Conta Fácil launch, in November, 2016, we started, in May, a pilot project to open a full checking account through BB app. From documents upload to password registration, everything is done by the clients in a mobile device. This innovation is expected to reduce the demand for account opening at branches and allow more time to conduct business. Fifteen thousand people were invited to participate in the project. The implementation is expected to be completed at the beginning of the second semester.

In real estate loan, we have implemented measures to optimize the granting process, such as expert advice to clients and the possibility of client monitoring the process progress through a smartphone and internet. These improvements resulted in an 11% reduction in contracting time in the second quarter.

We also launched Balcão dos Imóveis website, a platform that offers exclusive conditions for the purchase of properties built by construction companies that are Banco do Brasil’s clients. Since the year beginning, there were more than 10,000 monthly accesses to the portal.

Credit

Payroll loans remain the main line in the portfolio for individuals, with 34.9% of the total classified portfolio, with loans to civil servants the most representative (87.8%).

Real estate credit was R$43.0 billion, an increase of 8.4% over June, 2016.

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4.2 Companies and Government

Service

Our 2.4 million business customers are served in the following segments: Very Small and Small Companies, Empresa, Middle, Upper Middle, Corporate and Large Corporate.

In order to better serve Very Small and Small Companies, we inaugurated 55 Agências Empresa in the semester, specialized and exclusive, in which we serve more than 129 thousand customers. Currently, we have 93 branches and new units will be implemented by the end of 2017.

To improve those clients’ experience, employees involved in service were trained in actions such as the Internship for New Managers. Customized trainings have been developed for the managers who work in Agências Empresa. The expectation is that by the year end, 395 managers will be trained in this training. Yet, as part of the improvement and specialization effort, all branches general managers will receive training in credit, in 2017.

Digital Experience

By the semester end, we had 32 Escritórios de Negócio focused on Very Small and Small Companies, 12 of which were implemented in this semester. In these offices, we serve 86.0 thousand clients, who have digital relationship channels and extended service hours.

Since May, our clients have the possibility to contract export and import exchange operations 100% by the Gerenciador Financeiro (Financial management system). The solution centralizes international business operations on a single platform and brings agility and efficiency to the company’s management. In the first semester, US$27.5 million was traded in foreign exchange operations, with 62.7% of the export operations and 38.9% of imports being carried out over the Internet.

Business Inovation

We launched, in April, the electronic procuration, which allows clients to establish procuration directly in the Gerenciador Financeiro. The solution eliminates physical documents use, it offers agility to the customer, security and notary and transport cost reduction. In addition, it generates operational efficiency at the service centers that process these documents. On average, this innovation generated a 68% reduction in the analysis and registration time.

In 1H17, more than three thousand procurations were issued, representing 15% of the total registered in the period.

We have also invested in new Cash Management solutions development, focused on providing payment and receiving solutions to customers, including specialized consultants advice.

Government

We have developed a personalized credit card for the judiciary branch. The solution was created to offer the client agility, control, security and modernity in public resources use. The product, which provides cost reduction and transparency in the accountability process, will replace checks use.

Credit

Companies loan portfolio was R$234.0 billion in 1H17, a 14.9% fall to 1H16. In export and import exchange oprations, we had 19.5% and 12.6% market share, respectively, in june, 2017, consolidating our position as the main Brazilian foreign trade partners.

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Capital Markets

We operate in domestic capital markets through BB - Banco de Investimento S.A. (BB-BI) and abroad with our brokers BB Securities Ltd (London), Banco do Brasil Securities LLC (New York) and BB Securities Asia Pte. Ltd. (Singapore), focusing in retail and institutional clients. We have global coverage and work in fixed and variable income operations, M&A and Project Finance advisory, offering the clients different finance alternatives and access to investors in Brazil and abroad.

4.3 Rural e Agribusiness

Service

We expanded to 13 agribusiness specialized branches. A total of 10,6 thousand clients were served in this relationship model, in which they are assisted by a team trained in rural credit, have support from investment specialists, agronomists, and extended service hours.

Digital Experience

As part of our effort to provide even more convenience, our customers access credit for working capital for input purchase and investment with a smartphone. In 1H17, R$334 million were disbursed for working capital and R$4.2 million in investment operations.

The GeoMapa Rural app, a solution for rural properties delimitation via area to be financed geodetic coordinates and part of Agro Digital project, has already surpassed 300 thousand areas captured.

Business Inovation

We have launched rural properties automatic valuation, which allows the remote evaluation of rural properties. It generated efficiency with R$35.8 million in cost reduction and more than 127 thousand properties evaluated.

This initiative, in addition to others, such as rural financing simulation and the statement consultation through digital channels, reinforces our role as a modern and innovative financial agent, which provides its clients with solutions that ensure more transparency and convenience in operations follow-up.

Credit

We have been, historically, the main agribusiness financial agent in the country, contributing significantly to the credit demand supply in the segment. We ended the first semester with R$187,7 billion Agribusiness credit portfolio, with emphasis on the Working Capital for Input Purchase line. According to data from BACEN, we held, in June, 2017, 59.8% market share.

In rural credit operations we use risk mitigation mechanisms (weather and prices). In the 2016/2017 crop, 62.3% of the agricultural working capital operations were covered by production insurance (Seguro Agrícola or Proagro), price insurance (option contracts) or both (Billing Insurance).

5. Asset Management

With BB DTVM, we kept on as the market leader in asset management, with 23.1% market share and R$816.4 billion in assets under management. To maintain this leadership, it is critical to improve the customer experience. With this in mind, we have implemented, as of May, the possibility to Banco do Brasil’s quota holders to vote electronically, through the internet or mobile, in the funds assemblies.

The new voting format, carried out in a totally digital way, besides being more practical for the client, makes the internal process more efficient, since, previously, the voting was done through a branch.

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Initially, the possibility is available to individuals and funds exclusively to Private segment. Throughout 2017, other segments will have access to virtual voting. The focus in 2017 is to expand our operations in electronic means and improve our customer experience with innovative solutions.

6. Social Businesses and Sustainable Development

Our social businessess have as a priority the economically profitable initiatives development, using market mechanisms, to resolving socioeconomic inequalities in a sustainable manner, guaranteeing income, productive inclusion and access to public services.

As we believe in the feasibility of conciliate our shareholders' interests with socially and environmentally sustainable businesses development, we have the Integrated Sustainable Development Model (DS). This system allows programs, projects and actions mapping, as well as identifying opportunities in an integrated way, driving initiatives in Sustainable Development Action Plans (PADS).

Table 2. Main Social Businessess

7. Shareholders

Banco do Brasil's shares (BBAS3) remained in all B3 trading sessions and represented 3.7% of Ibovespa index for the four-month period from may to august, 2017. Banco do Brasil also has a level 1 ADR program (BDORY), traded on the over-the-counter market in the United States.

We release reports and information to CVM, and on the Investor Relations website. We also invite market analysts to conferences whenever management considers it necessary to elucidate specific topics concerning Banco do Brasil.

To institutional investor, we had 340 meetings, including 14 conferences in Brazil and other six abroad, besides promoting two earnings teleconferences.

To retail investors, we had meeting along with Private offices in Porto Alegre, Rio de Janeiro and São Paulo.

We keep an exclusive analyst and investors relationship team which had, to June, 600 contacts, including meeting and phone calls.

Table 3. Market Index

R$ million 1H16 1H17

MPO 566.7 405.9Fies 24,212.9 32,197.2Crédito Acessibilidade 137.5 140.4

Balance

1H16 1H17

BBAS3 - Book Value 26.1 28.6BBAS3 - Book Value - Consolidated 30.0 32.6BBAS3 - Closing Price 17.2 26.8Earnings per Share (R$) 1.7 1.8Return on Assets (%) 0.6 0.7Return on Assets (%) - Consolidated 0.7 0.7Return on Equity (%) 11.3 11.1Return on Equity (%) - Consolidated 10.4 10.2Interest on Ow n Capital (R$ million) 1,411 1,489ADR Price (US$) 5.3 8.2

Indexes

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Dividend Distribution

According to Material Fact dated 02.23.2016, the Board of Directors (BoD) decided, in the exercise of its attributions established in art. 21, item II in BB’s Bylaws, set at 25% the net income percentage for the year to be distributed to shareholders as dividends and/or interest on shareholders' equity. In june, 2017, the Board of Directors approved the Stockholder Remuneration Specific Policy creation.

Further clarifications on Banco do Brasil dividend policy may be found in the Reference Form, section 3 or in Article 46 of the Banco do Brasil’s Bylaws, available on bb.com.br/ir.

8. Corporate Governance

Banco do Brasil’s corporate governance is structured by the BoD and the Executive Board (EB). The BoD is composed

by eight members and advised by the Audit, Compensation and Eligibility, Risks and Capital (recently created) and Internal Audit Team. EB is composed of the Managing Board (CEO and nine Vice-Presidents) and 27 Statutory Directors. We also have a permanent Fiscal Council composed by five sitting members and five alternate members.

As a good corporate governance practice, we evaluate the Board of Directors, Audit Committee and Executive Board performance. The Bylaws, the Corporate Governance and Ethics codes also support our best governance practices. Furthermore, our shares are listed in B3 Novo Mercado, the highest segment in governance requirements.

Decisions are taken collectively at all Bank levels to conduct the adequate debate over strategic themes and business proposals. For such, management uses committees, subcommittees and commissions at a strategic level, which ensure the agility and security for the decision making.

In May, as provided for Law No. 13,303/2016 (State owned companies law), we released the Annual Chart of Public Policies and Corporate Governance, a document written in clear, direct language to the general public and investors and subscribed by the Board of Directors. We are also preparing to join the B3 Programa Destaque em Governança de Estatais (State owned companies governance program).

Internal Controls

Aligned with our corporate strategy, the Internal Control System continues with cohesive and coordinated action in risk management and controls.

The model preserves the Internal Controls Directorship authority and independence, provided responsible for consolidated assessment of the Internal Control System.

For further information on BB internal controls, see Reference Form 2016 available in www.bb.com.br/ir.

Institutional Security

We support and actively contribute to the actions taken within the Sistema Nacional de Prevenção e Combate à Lavagem de Dinheiro e à Corrupção (National System for Prevention and Combat Against Money Laundering and Corruption) through its participation in meetings to prepare and implement the Enncla (National Strategy for the Combat Against Corruption and Money Laundering), and technical cooperation agreements formalization with institutions such as Ministério da Justiça (Ministry of Justice), Coaf (Council for Financial Activities Control). During the period, 33,503 employees participated in corruption and 9,343 in money laudering prevention training.

9. People

For us, the policies development and practices on people management is guided by meritocracy, competencies development for work and organizational climate. They are the foundation that allows the strategic objectives achievement.

Management Report

1st half 2017

12

Following, our employees profile:

Table 4. Employee Profile

In 1H17, we invested R$34.8 million in corporate education through UniBB (Banco do Brasil Corporate University). This investment made possible the offering of 4.8 thousand undergraduation, 4.3 thousand graduation and 2.3 thousand foreign language scholarships.

As the investments’s result, we won the award for best corporate university in the world in the Innovation category at the Global CCU Awards. Aligned with the Digital Transformation strategic move, UniBB has been offering the most innovative technologies and educational methodologies.

As a state owned company, we selected our employees through a public test, with a minimum schooling requirement, no maximum age limit and 5% quota for people with disabilities and 20% for black and brown people. There are no wage differences between women and men holding the same position. In addition, the professional ascension process is based on meritocracy, taking into account training, experience and results obtained.

Aligned with our national and global commitments to value diversity and to provide equal opportunities for men and women, we launched, on March 8, 2017, measures to accelerate the organic ascention and increase women representation at all levels, including leadership roles. Among those measures are:

I. the adherence of all executives to United Nations Women HeForShe movement, in which they commit to do their part for a world without violence and discrimination against women. HeForShe reinforced the perception of men's fundamental role in making gender equity a reality;

II. gender affirmative action in all professional promotion corporate programs;

III. extension to transgender, of women exclusive Ombudsman.

1H16 1H17

Employee Profile

Employees 109,615 99,603Female 45,542 41,194Male 64,073 58,409

Education's Level

High School 22,846 18,429College 47,210 42,100Specialization, Master's and Doctorate 39,250 38,868Others 309 206

Geographic distribution

North 5,902 4,509Northeast 17,642 16,635Mid West 17,586 16,615Southeast 49,141 44,142South 19,301 17,665Abroad 43 37

Turnover (%) 0.75 0.98

Management Report

1st half 2017

13

Table 5. Compensation and Benefits

1 - Expenses with salaries, benefits, social charges and personnel provisions, as note 21 – b) Personnel Expenses; 2 - Funding of supplementary pension and health care plans, pursuant to Note Benefit Plan; 3 - Amount set aside for Profit and Gain Sharing, as Statement of Income; 4 – As note 21 – b) Personnel Expenses.

10. Legal Information

In accordance with criteria defined by the Very Small and Small Companies Brazilian Statute, 94.8% of our companies clients are very small and small companies. The funds used by small and very small companies were R$34.7 billion in June, 2017. The working capital operations balance contracted by very small companies was R$1.4 billion, and of small companies was R$20.2 billion. Investment operations aimed at very small companies was R$1.0 billion; for small companies, investments was R$12.0 billion.

In the engagement of services non related to external audits, we adopt procedures based on the applicable legislation and on internationally accepted principles that preserve the auditor independence. These principles consist on: (i) the auditor should not audit his own work and (ii) the auditor should not act managerially before his client nor promote the clients’ interests.

During the period, Banco do Brasil’s Conglomerate companies contracted KPMG Auditores Independentes to provide other services not related to the Bank's and its subsidiaries' external audit R$650.3 thousand, representing 1.7% of the fees related to the external audit service. The contracted services were:

Table 6. Hiring of KPMG Audit

R$ million 1H16 1H17 1H16 1H17

Payroll¹ 8,670.4 8,351.1 9,305.0 9,043.3 Supplementary Pension² 676.9 713.1 676.9 713.1 Health Care Plans² 592.5 608.0 592.5 608.0 Statutory Profit Sharing³ 625.2 648.0 626.8 650.4 Training⁴ 25.8 20.3 28.3 22.4

Banco do Brasil Financial

Statements

Consolidated Financial

Statements

Hiring Company Hiring Date End of Contract DescriptionAmount - In R$

Thousands

BB AG 03/06/2017 03/06/2017 Training Fit&Proper 15.4Banco Patagonia - Ur 04/01/2017 06/01/2017 Consulting 23.2Banco Patagonia 04/01/2017 05/01/2017 System 49.2Banco Patagonia 04/01/2017 06/01/2017 Consulting - Regulation 12.0BB Securities Londres 04/10/2017 - Consulting - ICAAP 107.6Banco Votorantim 04/06/2017 11/30/2017 Training 16.0Banco Votorantim 05/10/2017 07/31/2017 Consulting 95.0Banco Votorantim 06/24/2017 07/31/2017 Consulting - Taxes 100.0BB Londres 06/01/2017 12/31/2017 Consulting 52.4Neoenergia 06/30/2017 06/30/2017 Consulting 163.2BB AG 06/09/2017 06/09/2017 Training 16.3

Management Report

1st half 2017

14

In compliance with CVM Instruction 381, we report that in 1H17, the Independent Auditors KPMG did not provide services that could affect its independence, ratified by the adherence of its professionals to relevant ethical standards and independence that meet or exceed the standards promulgated by IFAC, PCAOB, SEC, AICPA, CFC, CVM, Central Bank, SUSEP PREVIC and by other regulatory agencies. These policies and procedures covering areas such as: personal independence, post-employment relationships, rotating professionals as well as the approval of audit and other services, are subject to constant monitoring.

In Banco do Brasil, the contracting of services related to external audit should be preceded by the Audit Committee’s

opinion.

Securities

In accordance with art. 8 of Bacen Circular 3,068/2001, we state that we have the intention and the financial capacity to hold, up to maturity, securities classified as held-to-maturity securities. Financial capacity is supported by cash flow projection that does not consider the possibility of selling these securities.

The securities breakdown by category and the reclassification of securities can be found in Note 8 - Securities and Derivative Financial Instruments. The amounts related to unrealized gains and losses relating to securities are disclosed in Note 28 - Risk and Capital Management.

Affiliates and Subsidiaries

Pursuant to article 243, Law 6,404/76, we hereby announce that the Company's investments in affiliates and subsidiaries are listed in Notes 3 - Presentation of Financial Statements and 14 - Investments.

Additional Information

I. In the semester, fixed investments amounted to R$666 million, emphasizing the investment in new service points and in branches ambience improvement (R$208 million) as well as the investment made in information technology (R$428 million).

II. We have R$1.4 billion non-active tax credits arising from requirements defined by CMN Resolutions 3,059, december 20, 2002 and 3,355, march 31, 2006, and presented in Banco do Brasil Financial Statements and Consolidated Financial Statements note for 1H17.

III. Records in a memorandum account, according to rules provided for in Cosif (Financial Institutions Accounting Plan), R$7.7 billion deriving from Co-obligations and Risks in Guarantees Provided to BB’s clients and

companies.

IV. In 2012 was entered Interbank Revolving Credit contract Line to release with Banco Votorantim, by the limit equivalent to R$ 6.8 billion. The operation was accounted for in memorandum accounts, according to rules provided for in Cosif and was issued in the Related Parties Note in Banco do Brasil Financial Statements and Consolidated Financial Statements related to the first semester.

V. During this period, there haven’t been any corporate reorganizations.

Banco do Brasil, its Shareholders, Officers, and the Fiscal Council members undertake to resolve all and any dispute or controversy related with Novo Mercado Listing Regulation by means of B3 Market Arbitration Chamber, in conformity with a commitment clause contained in Banco do Brasil By-laws.

Acknowledgements

We thank our employees’ and collaborators’ dedication and diligence, as well as the trust of shareholders, clients and company.

For more information, visit Investor Relations Website: www.bb.com.br/ir.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

15

BALANCE SHEET

ASSETS Note Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

CURRENT ASSETS 850,692,665 804,240,873 821,957,263

Cash and cash equivalents 6 14,330,233 12,805,771 14,052,402

Interbank investments 7.a 447,193,208 404,769,645 413,436,276

Open market investments 416,126,174 371,537,393 374,966,585

Interbank deposits 31,067,034 33,232,252 38,469,691

Securities and derivative financial instruments 8 23,333,147 16,959,199 19,781,675

Own portfolio 16,284,968 13,937,394 16,278,894

Subject to repurchase agreements 5,505,909 1,499,048 986,242

Pledged in guarantee 264,423 309,539 97,065

Derivative financial instruments 1,277,847 1,213,218 2,419,474

Interbank accounts 72,964,327 68,026,103 73,565,770

Payments and receipts pending settlement 9.a 3,468,477 3,513 3,818,464

Restricted deposits 9.b 67,363,327 66,063,844 68,059,575

Deposits with Banco Central do Brasil 64,659,229 63,451,094 65,404,128

National Treasury - rural credits resources 51,408 54,959 64,192

National Housing Finance System 2,652,690 2,557,791 2,591,255

Interbank onlendings -- -- 1,495

Correspondent banks 2,132,523 1,958,746 1,686,236

Interdepartmental accounts 153,424 376,530 132,293

Internal transfers of funds 153,424 376,530 132,293

Loan operations 10 173,843,293 174,149,338 178,585,686

Public sector 735,291 649,803 1,184,584

Private sector 186,791,557 186,111,325 190,217,383

Loan operations linked to assignment 827 374 649

(Allowance for loan losses) (13,684,382) (12,612,164) (12,816,930)

Leasing transactions 10 194,465 237,447 278,805

Private sector 218,677 269,250 322,129

(Allowance for leasing transactions losses) (24,212) (31,803) (43,324)

Other receivables 118,221,118 126,462,278 121,612,282

Receivables from guarantees honored 589,238 494,543 606,165

Foreign exchange portfolio 11.a 17,001,540 17,188,751 18,854,747

Accrued income 2,871,681 2,644,778 2,641,688

Securities trading 375,128 218,932 329,176

Specific credits 12.a 540 541 --

Sundry 12.b 99,374,659 107,887,734 101,215,592

(Allowance for other losses) (1,991,668) (1,973,001) (2,035,086)

Other assets 13 459,450 454,562 512,074

Assets not for own use and materials in stock 354,491 339,302 328,465

(Allowance for impairment) (148,531) (137,564) (124,846)

Prepaid expenses 253,490 252,824 308,455

See the accompanying notes to the financial statements.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

16

ASSETS Note Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

NON-CURRENT ASSETS 594,921,127 597,136,101 623,158,234

LONG-TERM RECEIVABLES 563,266,261 564,008,357 591,575,565

Interbank investments 7.a 1,223,482 942,027 1,034,690

Open market investments 335,232 145,292 148,919 Interbank deposits 888,250 796,735 885,771

Securities and derivative financial instruments 8 110,933,604 104,309,483 100,968,583

Own portfolio 78,648,526 65,273,440 76,783,299 Subject to repurchase agreements 30,395,180 35,791,728 20,367,464 Pledged in guarantee 1,778,204 2,844,970 2,981,022 Derivative financial instruments 111,694 399,345 836,798

Interbank accounts 579,104 497,227 414,825

Restricted deposits 9.b 2,957 1,909 12,513 National Treasury - rural credits resources 2,957 1,909 12,513

Interbank onlendings 576,140 495,306 402,312 Correspondent banks 7 12 --

Loan operations 10 382,912,362 390,774,002 418,992,475

Public sector 73,594,750 73,401,682 72,563,235 Private sector 331,686,531 338,986,894 368,732,315 Loan operations linked to assignment 549,006 611,713 663,397 (Allowance for loan losses) (22,917,925) (22,226,287) (22,966,472)

Leasing transactions 10 289,244 325,376 354,420

Private sector 295,499 334,946 382,558 (Allowance for leasing transactions losses) (6,255) (9,570) (28,138)

Other receivables 67,300,266 67,143,433 69,798,783

Foreign exchange portfolio 11.a 286,214 282,794 945,955 Accrued income 33,751 31,350 45,846 Securities trading 603,686 887,868 697,994 Specific credits 12.a 398,769 377,698 355,509 Sundry 12.b 66,779,138 66,337,503 68,416,115 (Allowance for other losses) (801,292) (773,780) (662,636)

Other assets 13 28,199 16,809 11,789

Prepaid expenses 28,199 16,809 11,789 PERMANENT ASSETS 31,654,866 33,127,744 31,582,669

Investments 16,737,539 16,855,006 16,504,684

Associates and joint ventures 14.a 16,585,040 16,703,729 16,350,824 Domestic 16,523,486 16,631,072 16,230,179 Abroad 61,554 72,657 120,645

Other investments 14.c 171,635 170,398 208,112 (Provision for losses) (19,136) (19,121) (54,252)

Property and equipment 15 7,418,223 7,557,478 7,140,829

Land and buildings 7,705,323 7,722,456 6,769,791 Other property and equipment 10,263,092 9,953,340 9,580,790 (Accumulated depreciation) (10,550,192) (10,118,318) (9,209,752)

Intangible 16 7,499,104 8,715,260 7,924,452

Intangible assets 19,952,308 19,602,197 17,590,378 (Accumulated amortization) (12,453,204) (10,886,937) (9,665,926)

Deferred -- -- 12,704

Organization and expansion costs 2,098 2,098 1,584,154 (Accumulated amortization) (2,098) (2,098) (1,571,450)

TOTAL ASSETS 1,445,613,792 1,401,376,974 1,445,115,497

See the accompanying notes to the financial statements.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

17

LIABILITIES/SHAREHOLDERS’ EQUITY Note Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

CURRENT LIABILITIES 1,104,357,067 1,004,424,338 1,011,489,183

Deposits 17.a 393,217,907 394,668,312 383,520,384

Demand deposits 62,384,828 69,349,186 62,549,870

Savings deposits 150,982,353 151,763,344 148,367,610

Interbank deposits 15,687,145 17,827,013 24,111,806

Time deposits 164,060,016 155,675,658 148,461,136

Other deposits 103,565 53,111 29,962

Securities sold under repurchase agreements 17.c 437,069,635 358,409,319 379,837,556

Own portfolio 33,888,906 42,983,151 18,677,267

Third-party portfolio 403,180,729 315,426,168 361,160,289

Funds from acceptance and issuance of securities 18 96,826,343 68,052,214 60,873,824

Bonds backed by real estate, mortgage and other credits 90,423,395 62,623,394 57,765,731

Foreign securities 6,278,234 5,428,820 3,108,093

Certificates of structured operations 124,714 -- --

Interbank accounts 2,905,777 1,075 3,112,659

Receipts and payments pending settlement 9.a 2,905,777 1,075 3,100,027

Correspondent banks -- -- 12,632

Interdepartmental accounts 2,280,882 2,450,012 3,238,264

Third-party funds in transit 2,279,328 2,446,807 3,236,114

Internal transfers of funds 1,554 3,205 2,150

Borrowings 19.a 15,977,925 17,997,094 18,577,980

Foreign borrowing 15,977,925 17,997,094 18,577,980

Domestic onlending - official institutions 19.b 39,332,945 39,463,427 38,264,763

BNDES 7,348,876 8,227,439 9,220,341

Caixa Econômica Federal 25,009,178 23,758,043 21,648,278

Finame 4,938,360 5,155,259 5,463,023

Other institutions 2,036,531 2,322,686 1,933,121

Foreign onlending 19.b 95 95 95

Derivative financial instruments 8.d 1,477,150 1,089,344 2,085,982

Other liabilities 115,268,408 122,293,446 121,977,676

Billing and collection of taxes and contributions 4,085,464 427,463 3,913,418

Foreign exchange portfolio 11.a 10,332,885 17,879,212 18,160,037

Shareholders and statutory distributions 1,934,819 1,125,248 1,622,869

Taxes and social security 20.a 11,188,234 15,293,551 14,877,176

Securities trading 722,249 379,982 680,317

Financial and development funds 20.b 8,946,766 9,055,620 8,606,530

Subordinated debts 20.c 8,331,154 4,158,742 2,448,477

Equity and debt hybrid securities 20.d 86,508 279,308 74,600

Other liabilities 20.e 69,640,329 73,694,320 71,594,252

See the accompanying notes to the financial statements.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

18

LIABILITIES/SHAREHOLDERS’ EQUITY Note Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

NON-CURRENT LIABILITIES 250,473,363 309,758,884 350,176,976

LONG-TERM LIABILITIES 250,042,160 309,312,622 349,737,563

Deposits 17.a 49,594,114 51,312,376 57,358,148

Interbank deposits 3,274,579 2,837,788 3,360,699 Time deposits 46,319,535 48,474,588 53,997,449

Securities sold under repurchase agreements 17.c 12,752,115 16,224,713 32,131,079

Own portfolio 12,752,099 16,224,699 32,131,079 Third-party portfolio 16 14 --

Funds from acceptance and issuance of securities 18 48,995,197 97,114,139 113,634,901

Bonds backed by real estate, mortgage and other credits 33,259,362 82,047,387 97,975,349 Foreign securities 15,659,050 14,964,440 15,522,755 Certificates of structured operations 76,785 102,312 136,797

Borrowings 19.a 3,762,720 2,412,254 4,185,001

Foreign borrowing 3,762,720 2,412,254 4,185,001

Domestic onlending - official institutions 19.b 40,119,676 43,619,266 48,337,873

National Treasury 163,552 149,248 165,578 BNDES 22,427,841 23,859,417 26,103,172 Finame 17,528,283 19,610,601 22,069,123

Foreign onlending 19.b 382 382 382

Derivative financial instruments 8.d 492,809 781,047 932,918

Other liabilities 94,325,147 97,848,445 93,157,261

Foreign exchange portfolio 11.a 6,013,322 5,322,077 3,428,033 Shareholders and statutory distributions 437 986 -- Taxes and social security 20.a 579,934 732,496 733,130 Securities trading 32,612 24,613 312,520 Financial and development funds 20.b 5,890,500 5,734,905 5,134,590 Special operations 2,213 2,203 2,205 Subordinated debts 20.c 46,659,043 50,942,804 49,816,340 Equity and debt hybrid securities 20.d 5,453,826 5,246,031 5,322,793 Debt instruments eligible as capital 20.c and 20.d 25,427,786 24,714,492 23,953,240 Other liabilities 20.e 4,265,474 5,127,838 4,454,410

DEFERRED INCOME 431,203 446,262 439,413

SHAREHOLDERS' EQUITY 23 90,783,362 87,193,752 83,449,338

Capital 67,000,000 67,000,000 67,000,000

Local residents 52,709,419 53,209,529 53,699,220 Domiciled abroad 14,290,581 13,790,471 13,300,780

Instruments qualifying to common equity tier 1 capital 23.c 8,100,000 8,100,000 8,100,000

Capital reserves 12,436 15,509 15,509

Revaluation reserves 2,407 2,660 2,695

Profit reserves 31,120,094 27,646,569 25,402,333

Accumulated other comprehensive income (16,881,666) (16,929,205) (18,318,685)

(Treasury shares) (1,850,043) (1,854,749) (1,854,749)

Non-controlling interests 3,280,134 3,212,968 3,102,235

TOTAL LIABILITIES 1,445,613,792 1,401,376,974 1,445,115,497

See the accompanying notes to the financial statements.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

19

STATEMENT OF INCOME

Note 2nd quarter/2017 2nd quarter/2016 1st half/2017 1st half/2016

INCOME FROM FINANCIAL INTERMEDIATION 37,181,137 38,042,616 75,819,981 72,387,822

Loan operations 10.b 20,464,550 24,034,104 42,671,447 44,446,419

Leasing transactions 10.i 64,172 83,078 137,711 177,925

Securities 8.b 14,659,395 12,281,551 29,539,380 23,818,215

Derivative financial instruments 8.e 351,200 (1,310,452) (195,274) (1,613,247)

Foreign exchange results 11.b 172,253 916,625 450,025 1,546,902

Compulsory investments 9.c 1,069,509 1,447,472 2,324,506 2,837,649

Operations of sale and transfer of financial assets 400,058 590,238 892,186 1,173,959

EXPENSES FROM FINANCIAL INTERMEDIATION (29,750,364) (29,656,907) (60,661,549) (56,139,430)

Deposits and securities sold under repurchase agreements 17.d (18,366,893) (29,211,134) (42,912,820) (53,155,215)

Borrowings and onlendings 19.c (4,721,296) 6,681,422 (4,259,610) 11,334,221

Leasing transactions 10.i (35,470) (47,580) (78,005) (102,955)

Operations of sale and transfer of financial assets (13,839) (19,207) (29,551) (28,044)

Allowance for loan losses 10.f and 10.g (6,612,866) (7,060,408) (13,381,563) (14,187,437)

INCOME FROM FINANCIAL INTERMEDIATION 7,430,773 8,385,709 15,158,432 16,248,392

OTHER OPERATING INCOME/EXPENSES (3,230,848) (3,774,622) (6,786,153) (7,574,212)

Service fee income and bank fee income 21.a 6,315,660 5,886,369 12,411,408 11,284,628

Service fee income 3,953,727 3,810,243 7,837,614 7,269,844

Bank fee income 2,361,933 2,076,126 4,573,794 4,014,784

Personnel expenses 21.b (5,219,709) (5,336,562) (10,284,584) (10,512,230)

Other administrative expenses 21.c (3,814,373) (3,798,862) (7,692,623) (7,600,784)

Tax expenses 24.c (1,335,108) (1,435,358) (2,723,047) (2,822,523)

Equity in associates and joint ventures 14 1,062,074 1,091,144 2,014,794 2,115,208

Other operating income 21.d 2,085,710 2,382,473 4,353,271 4,886,713

Other operating expenses 21.e (2,325,102) (2,563,826) (4,865,372) (4,925,224)

OPERATING INCOME 4,199,925 4,611,087 8,372,279 8,674,180

NON-OPERATING INCOME 22 59,475 71,688 104,590 108,280

Incomes 84,643 84,781 150,883 152,810

Expenses (25,168) (13,093) (46,293) (44,530)

PROFIT BEFORE TAXATION AND PROFIT SHARING 4,259,400 4,682,775 8,476,869 8,782,460

INCOME TAX AND SOCIAL CONTRIBUTION 24.a (896,043) (1,459,665) (1,975,184) (2,504,506)

EMPLOYEE AND DIRECTORS PROFIT SHARING (351,064) (320,452) (650,361) (626,769)

NON-CONTROLLING INTERESTS (393,611) (437,610) (789,621) (827,086)

NET INCOME 2,618,682 2,465,048 5,061,703 4,824,099

EARNINGS PER SHARE 23.f

Weighted average number of shares - basic and diluted 2,784,950,759 2,788,217,354 2,784,856,177 2,790,389,280

Basic and diluted earnings per share (R$) 0.94 0.88 1.80 1.70

See the accompanying notes to the financial statements.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

20

STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

BB Consolidated Note Capital

Instruments qualifying to

common equity tier 1 Capital

Capital reserves

Revaluation reserves

Profit reserves Accumulated other

comprehensive income Treasury shares

Retained earnings/acc

umulated losses

Non-controlling

interest Total

Legal reserve

Statutory reserves

Banco do Brasil

Associates and

subsidiaries

Balances at Dec 31, 2015 60,000,000 8,100,000 14,326 2,730 6,173,642 22,857,448 (16,678,569) (364,102) (1,697,380) -- 3,128,078 81,536,173

Capital increase - capitalization of reserves 7,000,000 -- -- -- -- (7,000,000) -- -- -- -- -- -- Accumulated other comprehensive income of securities and derivative financial instruments, net of taxes -- -- -- -- -- -- 1,332,892 305,089 -- -- -- 1,637,981

Accumulated other comprehensive income - benefit plans, net of taxes -- -- -- -- -- -- (2,913,995) -- -- -- -- (2,913,995) Share-based payment transactions -- -- 1,183 -- -- -- -- -- 6,157 -- -- 7,340 Operation due to performance secured by the FGCN - Fundo Garantidor da Construção Naval -- -- -- -- -- -- -- -- (163,526) -- -- (163,526)

Expired dividend/interest on own capital -- -- -- -- -- -- -- -- -- 4,554 -- 4,554 Realization of revaluation reserve in associates and subsidiaries 23.d -- -- -- (35) -- -- -- -- -- 35 -- -- Change in noncontrolling interest -- -- -- -- -- -- -- -- -- -- (25,843) (25,843) Net income 23.h -- -- -- -- -- -- -- -- -- 4,824,099 -- 4,824,099 Interest on instruments elegible to common equity -- -- -- -- -- -- -- -- -- (46,227) -- (46,227) Unrealized gains -- -- -- -- -- 25,957 -- -- -- (25,957) -- -- Allocation - Reserves 23.g -- -- -- -- 237,595 3,107,691 -- -- -- (3,345,286) -- --

- Interest on own capital 23.g -- -- -- -- -- -- -- -- -- (1,411,218) -- (1,411,218) Balances at Jun 30, 2016 67,000,000 8,100,000 15,509 2,695 6,411,237 18,991,096 (18,259,672) (59,013) (1,854,749) -- 3,102,235 83,449,338

Changes in the period 7,000,000 -- 1,183 (35) 237,595 (3,866,352) (1,581,103) 305,089 (157,369) -- (25,843) 1,913,165

Balances at Dec 31, 2016 67,000,000 8,100,000 15,509 2,660 6,570,147 21,076,422 (16,944,830) 15,625 (1,854,749) -- 3,212,968 87,193,752

Accumulated other comprehensive income of securities and derivative financial instruments, net of taxes -- -- -- -- -- -- 568,433 (1,942) -- -- -- 566,491

Accumulated other comprehensive income - benefit plans, net of taxes -- -- -- -- -- -- (487,658) -- -- -- -- (487,658) Foreign exchange variation and hedge of investments abroad 23.i -- -- -- -- -- -- -- (31,294) -- -- -- (31,294) Share-based payment transactions -- -- (3,073) -- -- -- -- -- 4,706 -- -- 1,633 Expired dividend/interest on own capital -- -- -- -- -- -- -- -- -- 4,098 -- 4,098 Realization of revaluation reserve in associates and subsidiaries 23.d -- -- -- (253) -- -- -- -- -- 253 -- -- Change in noncontrolling interest -- -- -- -- -- -- -- -- -- -- 67,166 67,166 Initial adoption of the CMN Resolution No. 4,512/2016 in Banco Votorantim S.A. 14.a -- -- -- -- -- -- -- -- -- (58,275) -- (58,275)

Net income 23.h -- -- -- -- -- -- -- -- -- 5,061,703 -- 5,061,703 Interest on instruments elegible to common equity -- -- -- -- -- -- -- -- -- (45,172) -- (45,172) Unrealized gains -- -- -- -- -- (1,178) -- -- -- 1,178 -- -- Allocation - Reserves 23.g -- -- -- -- 248,190 3,226,513 -- -- -- (3,474,703) -- --

- Interest on own capital 23.g -- -- -- -- -- -- -- -- -- (1,489,082) -- (1,489,082) Balances at Jun 30, 2017 67,000,000 8,100,000 12,436 2,407 6,818,337 24,301,757 (16,864,055) (17,611) (1,850,043) -- 3,280,134 90,783,362

Changes in the period -- -- (3,073) (253) 248,190 3,225,335 80,775 (33,236) 4,706 -- 67,166 3,589,610

See the accompanying notes to the financial statements.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

21

STATEMENT OF CASH FLOWS

Note 1st half/2017 1st half/2016

Cash flows from operating activities

Income before taxation and profit sharing 8,476,869 8,782,460

Adjustments to income before taxation and profit sharing 12,893,611 23,664,885

Provision for credits, leasing and other credits 10.f and 10.g 13,381,563 14,187,437 Depreciation and amortization 21.c 2,150,383 2,134,991 Exchange fluctuation in changes of intangible assets 16 (2,362) 17,406 Equity in subsidiaries and associates 14.a (2,014,794) (2,115,208) Gain on the disposal of assets 22 (8,264) (12,488) Gain on the disposal of investments 22 (311) -- Capital gain 22 (92,186) (71,810) Provision for devaluation of other assets 22 11,816 6,091 Amortization of goodwill 14.d 105,676 103,748 Expenses with civil, labor and tax provisions 27 1,069,221 1,409,317 Adjustment of actuarial assets/liabilities and surplus allocation funds 26 53,196 (259,572) Commissions income deferred (339,840) (342,383) Effect of changes in foreign exchange rates in cash and cash equivalents (493,908) 9,489,726 Non-controlling interests (789,621) (827,086) Other adjustments (136,958) (55,284)

Income adjusted before taxation and profit sharing 21,370,480 32,447,345

Equity variations (59,155,965) (48,118,921)

Increase in short-term interbank investments (90,232,512) (94,929,936) (Increase) decrease in trading securities and derivative financial instruments (1,856,609) 1,470,932

Increase in interbank and interdepartmental accounts (853,288) (2,632,071) Increase in compulsory deposits with Banco Central do Brasil (1,208,135) (4,593,210) (Increase) decrease in loan operations (4,970,485) 16,546,482 Decrease in leasing transactions 69,853 149,181 (Increase) decrease in other receivables net of deferred taxes 7,268,199 (2,930,265) Increase in other assets (19,830) (20,839) Income tax and social contribution paid (2,394,295) (4,039,627) Decrease in deposits (3,168,667) (23,541,186) Increase in securities sold under repurchase agreements 75,187,718 78,446,987 Decrease in funds from acceptance and issuance of securities (19,344,813) (14,052,767) Decrease in borrowings and onlendings (4,298,775) (10,364,972) (Decrease) increase in other liabilities (13,319,267) 12,392,165 Decrease in deferred income (15,059) (19,795)

CASH USED IN OPERATING ACTIVITIES (37,785,485) (15,671,576)

Cash flows from investing activities

Increase in securities available for sale (38,212,834) (23,202,854) Decrease in securities available for sale 27,291,946 16,620,658 Increase in securities held to maturity (804,450) (2,471,171) Decrease in securities held to maturity 1,249,080 5,495,175 Dividends received from associated and subsidiaries companies 4,681,924 1,173,185 Acquisition of property, plant and equipment in use (440,143) (417,960) Disposal of property, plant and equipment in use 4,326 38,172 Acquisition of investments (1,884,200) (54,265) Acquisition of intangible assets (357,906) (200,115) Disposal of intangible assets/deferred assets 1,114 --

CASH USED IN INVESTING ACTIVITIES (8,471,143) (3,019,175)

Cash flows from financing activities

Change in non-controlling interests 67,166 (25,843) (Decrease) increase in subordinated debts 329,837 (1,287,877) (Decrease) increase in equity and debt hybrid securities 287,103 (6,274,240) (Acquisition) disposal of treasury shares 4,706 (157,369) Interest on own capital paid (929,124) (1,276,973)

CASH USED IN FINANCING ACTIVITIES (240,312) (9,022,302)

Net variation of cash and cash equivalents (46,496,940) (27,713,053)

At the beginning of the period 103,123,670 102,707,171 Effect of changes in foreign exchange rates in cash and cash equivalents 493,908 (9,489,726) At the end of the period 57,120,638 65,504,392

Decrease in cash and cash equivalents (46,496,940) (27,713,053)

See the accompanying notes to the financial statements.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

22

STATEMENT OF VALUE ADDED

Note 1st half/2017 1st half/2016

Income 74,133,842 69,265,926

Income from financial intermediation 75,819,981 72,387,822

Income from service and bank fees 12.411.408 11,284,628

Allowance for loan losses (13,381,563) (14,187,437)

Capital gains 22 112,577 106,243

Other income/(expenses) (828.561) (325,330)

Expenses from financial intermediation (47,279,986) (41,951,993)

Inputs purchased from third parties (4,324,619) (4,392,957)

Materials, water, electric power and gas 21.c (315,165) (354,655)

Expenses with outsourced services 21.c (707,065) (750,845)

Communications 21.c (576,845) (579,417)

Data processing 21.c (407,848) (394,052)

Transportation 21.c (502,093) (547,500)

Security services 21.c (610,339) (562,162)

Financial system services 21.c (359,031) (393,649)

Advertising and marketing 21.c (122,999) (125,973)

Other (723,234) (684,704)

Gross added value 22,529,237 22,920,976

Depreciation and amortization 21.c (2,256,059) (2,238,739)

Value added produced by entity 20,273,178 20,682,237

Value added received through transfer 2,014,794 2,115,208

Equity in associates and joint ventures 2,014,794 2,115,208

Added value to distribute 22,287,972 100.00% 22,797,445 100.00%

Value added distributed 22,287,972 100.00% 22,797,445 100.00%

Personnel 9,708,567 43.56% 9,928,148 43.55%

Salaries and fees 6,326,069 6,505,872

Employee and directors profit sharing 650,361 626,769

Benefits and staff training 1,581,269 1,404,704

FGTS (Government severance indemnity fund for employees) 380,205 385,130

Other charges 770,663 1,005,673

Taxes, rates and contributions 5,924,610 26.58% 6,537,881 28.68%

Federal 5,161,188 5,859,273

State 477 416

Municipal 762,945 678,192

Interest on third parties' capital 803,471 3.61% 680,231 2.98%

Rent 21.c 803,471 680,231

Interest on own capital 23.g 5,851,324 26.25% 5,651,185 24.79%

Federal government's interest on own capital 803,318 767,567

Other shareholders’ interest on own capital 685,764 643,651

Interest on the instrument eligible to the federal government's common equity tier 1 capital 45,172 46,227

Retained earnings 3,527,449 3,366,654

Non-controlling interest in retained earnings 789,621 827,086

See the accompanying notes to the financial statements.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

23

- THE BANK AND ITS OPERATIONS

Banco do Brasil S.A. (Banco do Brasil or the Bank) is a publicly-traded company established under private law, with both public and private shareholders, subject to the rules of Brazilian Corporate Law. Its headquarters are located at Setor de Autarquias Norte, Quadra 5, Lote B, Edifício Banco do Brasil, Brasília, Distrito Federal, Brazil. The Bank's business activities include the following:

all manner of asset, liability and advisory services; banking and financial services, including foreign exchange transactions and other services such as insurance,

pension plans, capitalization bonds, securities brokerage, credit/debit card management, consortium management, investment funds and managed portfolios; and

all other types of transactions available to banks within Brazil´s National Financial System.

As an agent for execution of the Brazilian Federal Government's credit and financial policies, Brazilian Law requires the Bank to perform functions specifically those under article 19 of Law 4,595/1964.

- COMPANY RESTRUCTURING

Corporate reorganization in the area of insurance

Incorporation of BB Cor Participações S.A. by BB Corretora de Seguros e Administradora de Bens S.A.

On December 27, 2016, the BB Cor Participações S.A. (BB Cor) was merged into BB Corretora de seguros e Administradora de Bens S.A. (BB Corretora) in accordance with the terms of Protocol and Justification of Incorporation.

The incorporated net assets were evaluated at book value of R$ 26,976 thousand on the base date of the transaction, December 27, 2016.

The incorporation is justified by the unnecessary maintenance of BB Cor verified in the process of reviewing the business model in the segment of distribution of security products, as well as due to the lack of prospects that the company would develop operational activities.

Thereby a natural consequence, BB Corretora became the successor of BB Cor in a universal representation regarding of all its assets, rights and obligations, entirely taking over its assets.

Considering that BB Seguridade is the single shareholder of the merged entity on the date of the incorporation, there was no exchange between the shares of non-controlling shareholders of the merged company for shares of the absorbing company, therefore, there was no change in the share capital of BB Seguridade.

- PRESENTATION OF FINANCIAL STATEMENTS

The consolidated financial statements have been prepared in accordance with the accounting guidelines derived from Brazilian corporation law, the rules and instructions issued by the National Monetary Council (Conselho Monetário Nacional - CMN), the Central Bank of Brazil (Banco Central do Brasil - Bacen) and the Securities and Exchange Commission of Brazil (Comissão de Valores Mobiliários - CVM), as applicable. In the consolidated financial statements, there was a reclassification of the Instrument qualifying as CET1 - hybrid capital and debt instrument to Shareholder's equity. This adjustment is also performed in the prudential financial statements and to IFRS to improve the quality and transparency of these consolidated financial statements.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

24

The preparation of financial statements in accordance with accounting practices adopted in Brazil, applicable to financial institutions, requires that Management uses judgment in the determination and recording of accounting estimates, when applicable. Significant assets and liabilities subject to these estimates and assumptions include: the residual value of fixed assets, the allowance for loan losses, deferred tax assets, provision for labor, civil and tax demands, valuation of financial instruments, assets and liabilities relating to post-employment benefits and other provisions. The final amounts of transactions involving these estimates are only known upon their settlement.

The consolidated financial statements include the operations of the Bank performed by their domestic agencies and abroad and also include the operations of the Bank’s controlled entities, as well as of the special purpose entities (Dollar

Diversified Payment Rights Finance Company and Loans Finance Company Limited) and of the investment financial funds (Fênix Fundo de Investimento em Direitos Creditórios do Varejo, Fundo de Investimento em Direitos Creditórios da Companhia Pernambucana de Saneamento – Compesa, BB Fund Class A and BB Fund Class D) of which the companies of Banco do Brasil’s Conglomerate are the main beneficiaries or detain the main obligations. The consolidated financial statements reflect the assets, liabilities, income and expenses of Banco do Brasil and its controlled entities, in accordance with CPC 36 (R3) – Consolidated financial statements.

In the preparation of the consolidated financial statements, amounts resulting from transactions between consolidated companies, including the equity interest held by one in another, balances of balance sheet accounts, revenues, expenses and unrealized profits, net of tax effects, were eliminated. Non-controlling interest in net equity and in income of the controlled entities were separately disclosed in the financial statements. Leasing transactions were considered based on the financial method, and the amounts were reclassified from the Leased assets line to the Leasing transactions line, after deduction of residual amounts received in advance. The profit and loss with foreign exchange from branches operations are presented in the groupings of income in which the charges and income on these transactions are recognized. The foreign exchange profit and loss on overseas investments are presented in the grouping of Borrowings and onlendings, in order to eliminate the effect of protection for the exchange rate fluctuations of these investments.

The Brazilian Accounting Pronouncements Committee (Comitê de Pronunciamentos Contábeis - CPC) is responsible for issuing accounting pronouncements and interpretations, based on international accounting standards, approved by the CVM. Bacen adopted the following pronouncements of the CPC, applied by the Bank, as applicable: CPC 00 (R1) - Conceptual framework, CPC 01 - Decrease in recoverable amount of assets, CPC 03 - Statement of cash flows (DFC), CPC 05 - Related party disclosures, CPC 10 (R1) - Share-based payment, CPC 23 - Accounting policies, changes in accounting estimates and errors, CPC 24 - Events after the reporting period, CPC 25 - Provisions, contingent liabilities and contingent assets and CPC 33 (R1) - Employee benefits.

Additionally, Bacen issued CMN Resolution No. 3,533/2008, which became effective in January 2012 and established procedures for classification, accounting and disclosure of sale and transfer transactions related to financial assets. This Resolution establishes the criteria for the derecognition of financial assets as specified in the CPC 38 – Financial instruments: recognition and measurement.

The Bank has also applied the following pronouncements which do not conflict with the Bacen rules, as established by article 22, paragraph 2 of Law 6,385/1976: CPC 09 - Value added statement, CPC 12 - Adjustment at present value, CPC 22 - Information by segment, CPC 36 (R3) - Consolidated financial statements and CPC 41 - Earnings per share.

The application of other standards, which depend on Bacen’s regulations, results primarily in immaterial adjustments or

in changes in disclosure, except the following pronouncements, that may result in significant impacts on the financial statements:

CPC 04 (R1) - Intangible assets and CPC 15 (R1) - Business combinations - a) reclassification of intangible assets identified in the acquisition of the equity interest in Banco Votorantim, in 2009, as well as in acquisition of controlling interest of Banco Patagonia, in 2011, and of BB Americas, in 2012, from the investment account to the account of Intangible assets, in the group of Non-current assets - permanent; b) derecognition of goodwill amortization expenses from acquisitions; and c) recognition of amortization expenses of intangible assets with definite useful lives, identified in the acquisitions.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

25

CPC 18 (R2) - Investments in associates and joint ventures - a) recording at fair value of the equity interests received in the partnership of the formation of the joint ventures BB Mapfre SH1 and SH2, on June 30, 2011; b) write-off of the book value of the assets contributed by the Bank including any goodwill; and, c) recognition of the result of the transaction in the new constituted companies by the proportion of the equity interest.

CPC 38 - Financial instruments: recognition and measurement - adjustment in the allowance for loan losses, due to the adoption of the incurred loss criteria instead of the expected loss criteria.

These financial statements were approved by the Executive Board of Directors on August 08, 2017.

a) Equity interest included in the consolidated financial statements, segregated by business segments:

Activity Functional currency

Jun 30, 2017

Dec 31, 2016

Jun 30, 2016

% of Total Share

Banking segment

Banco do Brasil AG Banking Real 100.00% 100.00% 100.00%

BB Leasing Company Ltd. (1) Leasing Real -- -- 100.00%

BB Leasing S.A. - Arrendamento Mercantil Leasing Real 100.00% 100.00% 100.00%

BB Securities Asia Pte. Ltd. Broker Real 100.00% 100.00% 100.00%

Banco do Brasil Securities LLC. Broker Real 100.00% 100.00% 100.00%

BB Securities Ltd. Broker Real 100.00% 100.00% 100.00%

BB USA Holding Company, Inc. Holding Real 100.00% 100.00% 100.00%

Brasilian American Merchant Bank Banking Real 100.00% 100.00% 100.00%

Banco do Brasil Americas Banking American Dollar 100.00% 100.00% 100.00%

Banco Patagonia S.A. Banking Argentinian Peso 58.97% 58.97% 58.97%

Investment segment

BB Banco de Investimento S.A. Investment bank Real 100.00% 100.00% 100.00%

Segment of fund management

BB Gestão de Recursos - Distribuidora de Títulos e Valores Mobiliários S.A. Asset management Real 100.00% 100.00% 100.00%

Besc Distribuidora de Títulos e Valores Mobiliários S.A. Asset management Real 99.62% 99.62% 99.62%

Segment of insurance. private pension fund and capitalization

BB Seguridade Participações S.A. (2) Holding Real 66.36% 66.36% 66.36%

BB Cor Participações S.A. (2) (3) Holding Real -- -- 66.36%

BB Corretora de Seguros e Administradora de Bens S.A. (2) Broker Real 66.36% 66.36% 66.36%

BB Seguros Participações S.A. (2) Holding Real 66.36% 66.36% 66.36%

Segment of payment methods

BB Administradora de Cartões de Crédito S.A. Service rendering Real 100.00% 100.00% 100.00%

BB Elo Cartões Participações S.A. Holding Real 100.00% 100.00% 100.00%

Other segments

Ativos S.A. Securitizadora de Créditos Financeiros Credits acquisition Real 100.00% 100.00% 100.00%

Ativos S.A. Gestão de Cobrança e Recuperação de Crédito Credits acquisition Real 100.00% 100.00% 100.00%

BB Administradora de Consórcios S.A. Consortium Real 100.00% 100.00% 100.00%

BB Tur Viagens e Turismo Ltda. (4) Tourism Real 100.00% 100.00% 100.00%

BB Asset Management Ireland Limited Credits acquisition Real 100.00% 100.00% 100.00%

BB Tecnologia e Serviços (2) IT Real 99.99% 99.99% 99.97%

(1) The last General Assembly of the company was on January 28, 2016, when the balances of all balance sheet accounts were zero. The company was formally discontinued on April 29, 2016.

(2) Refers to the percentage of the equity interest, considering the acquisition of shares by the invested entity held in treasury. (3) On December 27, 2016, the company was merged into BB Corretora de Seguros e Administradora de Bens S.A. (Note 2). (4) The financial statements refers to May/2017.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

26

b) Information for comparability purposes

For comparability purposes in order to better show the nature of operations the following reclassifications were made:

Restated statement of income

Reimbursement of borrowings and onlendings expenses, of the grouping Other operating income to Borrowings and onlendings.

Reimbursement of Interbank operating costs of the grouping Service fee income to Recovery of charges and expenses of the grouping Other operating income.

2nd quarter/2016 Original report Adjustments Restated balances

EXPENSES FROM FINANCIAL INTERMEDIATION (29,972,356) 315,449 (29,656,907)

Borrowings and onlendings 6,365,973 315,449 6,681,422

INCOME FROM FINANCIAL INTERMEDIATION 8,070,260 315,449 8,385,709

OTHER OPERATING INCOME/EXPENSES (3,459,173) (315,449) (3,774,622)

Service fee income 3,986,862 (176,619) 3,810,243

Other operating income 2,521,303 (138,830) 2,382,473

1st half/2016 Original report Adjustments Restated balances

EXPENSES FROM FINANCIAL INTERMEDIATION (56,875,960) 736,530 (56,139,430)

Borrowings and onlendings 10,597,691 736,530 11,334,221

INCOME FROM FINANCIAL INTERMEDIATION 15,511,862 736,530 16,248,392

OTHER OPERATING INCOME/EXPENSES (6,837,682) (736,530) (7,574,212)

Service fee income 7,605,977 (336,133) 7,269,844

Other operating income 5,287,110 (400,397) 4,886,713

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

27

- DESCRIPTION OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies adopted by Banco do Brasil are applied consistently in all periods presented in these financial statements and applied to all the entities of the Conglomerate.

a) Statement of income

In accrual basis accounting, revenues and expenses are reported in the closing process of the period in which they are incurred, regardless of receipt or payment. The operations with floating rates are adjusted pro rata die, based on the variation of the indexes agreed, and operations with fixed rates are recorded at future redemption value, adjusted for the unearned income or prepaid expenses for future periods. The operations indexed to foreign currencies are converted at the reporting date using current rates.

b) Present value measurement

Financial assets and liabilities are presented at present value due to the application of the accrual basis in the recognition of their interest income and expenses.

Non-contractual liabilities are primarily represented by provisions for lawsuit and legal obligations, for which the disbursement date is uncertain and is not under the Bank's control. They are measured at present value because they are initially recognized at estimated disbursement value on the valuation date and are updated monthly.

c) Cash and cash equivalents

Cash and cash equivalents comprise available funds in local currency, foreign currency, investments in gold, securities purchased under resale agreements – guaranteed by securities not repledged/re-sold, interbank deposits and investments in foreign currencies, with high liquidity and insignificant risk of change in fair value, with maturity at time of acquisition not exceeding 90 days.

d) Interbank investments

Interbank investments are recorded at their investment or acquisition amount, plus income accrued up to the balance sheet date and adjustments for allowance for losses.

e) Securities

The securities purchased for the Bank's portfolio are recorded at the actual amount paid, including brokerage charges and fees, and are classified based on management’s intention, in one of three categories, according to Bacen Circular

3,068/2001:

Trading Securities: these are securities purchased to be actively and frequently traded. They are adjusted monthly to market value. The increases and decreases in value are recorded in income and expense accounts for the period;

Securities available for sale: these are securities that may be traded at any time, but are not acquired to be actively and frequently traded. They are adjusted monthly to market value and their increases and decreases in value are recorded, net of tax effects, in Accumulated other comprehensive income in Shareholders' equity; and

Securities held to maturity: these are securities that the Bank owns and has the financial capacity and intent to hold to maturity. These securities are not adjusted to market value. The Bank's financial capacity to hold to maturity is supported by a cash flow projection that does not consider the possibility of sale of these securities.

The marking-to-market methodology of derivative financial instruments was established on the basis of consistent and verifiable criteria that take into account the closing price, or adjustment, when applicable, on the day of calculation or, failing that, by means of Pricing models that reflect the net realizable value, or the price of a similar financial instrument, taking into account at least the payment and maturity dates, the credit risk and the currency or indexer.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

28

Income accrued on the securities, irrespective of the category in which they are classified, is appropriated on a pro rata die basis on an accrual basis until the date of maturity or final sale, using the cumulative or straight-line method, based on the contractual remuneration and purchase price, and recorded directly in the statement of income for the period.

Impairment of securities classified as available for sale and held to maturity, if considered not to be temporary, are recorded directly in expense for the period and a new cost basis for the asset is determined.

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

f) Derivative financial instruments

Derivative financial instruments are adjusted to market value at each monthly trial balance and balance sheet date. Increases or decreases in value are recorded in the appropriate income or expense accounts.

The mark-to-market methodology used for derivative financial instruments was established following consistent and verifiable criteria, which consider the average price of trading on the date of calculation or, if not available, pricing models that estimate the expected net realizable value, or the price of a similar financial instrument, considering at least, the payment or maturity date, the credit risk and currency or index.

Derivative financial instruments used to offset, in whole or in part, the risks arising from exposure to variations in the market value or asset cash flow or financial liabilities, commitment or future transaction, are considered hedge instruments and are classified according to their nature:

Market Risk Hedge: increases or decreases in value of the financial instruments, as well as of the hedged item, are recorded in income/expense accounts for the period; and

Cash Flow Hedge: the effective portion of the increases or decreases in value of the derivative financial instruments classified in this category are recorded, net of tax effects, in Accumulated other comprehensive income in Shareholders' equity. The effective amount is that in which the variation of the hedged item, directly related to the corresponding risk, is offset by the variation in the financial instrument used for the hedge, considering the accumulated effect of the transaction. Other variations in these instruments are recorded directly in the statement of income for the period.

g) Loan and leasing operations, advances on foreign exchange contracts, other receivables with loan characteristics and allowance for loan losses

Loans, leases, advances on foreign exchange contracts and other receivables with loan characteristics are classified according to Management's judgment with respect to the level of risk, taking into consideration market conditions, past experience and specific risks in relation to the operation, to borrowers and guarantors, observing the parameters established by CMN Resolution 2,682/1999, which requires periodic analyses of the portfolio and its classification into nine levels, ranging from AA (minimum risk) to H (maximum risk), as well as the classification of operations more than 15 days overdue as non-performing. For atypical transactions with a term of more than 36 months, there is a double counting on the days-past-due intervals defined for the nine levels of risk, as permitted by CMN Resolution 2,682/1999.

Income from loans overdue for more than 60 days, regardless of their risk level, will only be recognized as income when effectively received.

Operations classified at level H, which remain in this classification for 180 days, are written off against the existing allowance.

Renegotiated operations are maintained, at a minimum, at the same level at which they were rated on the date of renegotiation. The renegotiations of loans already written off against the allowance are rated as H level and any gains from renegotiation are recognized as income when effectively received. Reclassification to a lower risk category is allowed when there is significant amortization of the operation or when new material facts justify a change in risk level, according to CMN Resolution 2,682/1999.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

29

Allowance for loan losses, considered sufficient by management, satisfies the minimum requirement established by the aforementioned CMN Resolution 2,682/1999 (Note 10.e).

h) Taxes

Taxes are calculated based on the rates shown in the table below:

Taxes Rate

Income tax (15.00 + additional 10.00%) 25.00%

Social Contribution on Net Income (CSLL) (1) 20.00%

Social Integration Program/Public servant fund program (PIS/Pasep) (2) 0.65%

Contribution to Social Security Financing - (Cofins) (2) 4.00%

Tax on services of any kind - (ISSQN) Up to 5.00%

(1) Rate applied to financial companies and to non-financial companies in the areas of private insurance and capitalization, since September 01, 2015 (the rate was 15% until August 31, 2015). In January 2019, the rate will return to 15%. For others non-financial companies, the CSLL rate is 9%.

(2) For non-financial companies that have opted for the non-cumulative regime of calculation, the PIS/PASEP rate is 1.65% and the Cofins rate is 7.6%.

Deferred tax assets (tax credits) and deferred tax liabilities are recorded by applying the current rates of taxes on their respective bases. For the recording, maintaining and writing-off of deferred tax assets, the Bank follows the established criteria by CMN Resolution 3,059/2002, amended by Resolutions CMN No. 3,355/2006, CMN 4,192/2013 and CMN 4,441/2015 and they are supported by a study of their realizability. Tax credits resulting from the increase of the social contribution rate from 15% to 20% are being recognized in an amount sufficient for consumption by the end of the term of the new rate (December 31, 2018), according to Law 13,169/2015.

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.

j) Permanent assets

Investments: investments in subsidiaries and associates in which the Bank has significant influence or an ownership interest of 20% or more of the voting shares, and in other companies which are part of a group or are under common control are accounted for by the equity method based on the Shareholders’ equity of the subsidiary or associates.

In the consolidated financial statements, the subsidiaries are fully consolidated and the associates and joint ventures are presented under the equity method.

Goodwill, the premium paid over the book value of the investment acquired due to expectations of future profitability, is based on a financial-economic assessment which substantiate the purchase price of the business and is amortized based on annual income projections as per the assessment. Goodwill is tested for impairment annually.

The financial statements of branches and subsidiaries abroad follow the accounting criteria in force in Brazil and are converted into the Real currency by the current rate criterion, as provided for in Bacen Circular No. 2,397 / 1993 and CMN Resolution No. 4,524 / 2016. Their effects are recognized in the income statement, under the equity method for those who record the functional currency equal to the national currency, and in Shareholders' Equity, for those who record the functional currency different from the national currency.

Other permanent investments are valued at acquisition cost, less allowance for impairment losses, as applicable.

Property and equipment: property and equipment are stated at acquisition cost less the impairment losses and depreciation, calculated using the straight-line method by the useful life of the asset (Note 15).

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

30

Deferred: deferred assets are recorded at cost of acquisition or formation, net of accrued amortization. They are composed mainly of restructuring costs, and the expenditures, up to September 30, 2008, with: third party properties, as a result of opening branches, which are amortized according to rates based on rental terms, limited to 10 years; and with the acquisition and development of information systems, which are amortized at 10% per annum (p.a.). New values are not recorded in deferred assets, in accordance with Resolution CMN 4,534/2016.

In 2016, the balances recorded in excluded accounting securities were reclassified to the appropriate asset accounts, according to the nature of the transaction, in conformity with Bacen Circular 3,791/2016.

Intangible: intangible assets consist of rights over intangible assets used in the running of the Bank, including acquired goodwill.

An asset meets the criteria for identification as an intangible asset, when it is separable, i.e, it can be separated from the entity and sold, transferred or licensed, rented or exchanged, individually or jointly with a contract, related assets or liabilities, regardless of the intention for use by the entity; or results from contractual rights or other legal rights, regardless of whether these rights are transferable or separable from the entity or other rights and obligations.

Intangible assets with finite useful lives compromise: disbursements for the acquisition of rights to provide banking services (rights to managing payrolls), amortized over the terms of contracts; goodwill paid on the acquisition of merged company (Banco Nossa Caixa), amortized based on projections of annual results set in the economic-financial study; software, amortized on a straight-line basis by the useful life from the date it is available for use. Intangible assets are adjusted by allowance for impairment losses, if applicable (Note 16). The amortization of intangible assets is recorded in the Other administrative expenses account.

k) Impairment of non-financial assets

At each reporting date, the Bank determines if there is any indication that a non-financial asset may be impaired. This evaluation is based on internal and external sources of information. If there are indications of impairment, the Bank estimates the asset’s recoverable amount, which is the higher of its fair value less selling costs or its value in use.

Regardless of whether there are indications of impairment, the Bank performs an annual impairment test for intangible assets with indefinite useful lives (including goodwill acquired in business combinations and intangible assets not yet available for use). The Bank performs these tests at the same time every year.

If the recoverable amount of the asset is less than its carrying amount, the asset's carrying amount is reduced to its recoverable amount through a provision for impairment, which is recognized in the Income statement.

Methodologies in assessing the recoverable amount of the main non-financial assets:

Property and equipment in use

Land and buildings – the Bank relies on technical evaluations prepared in accordance with the standards of the Brazilian Association of Technical Standards - ABNT to determine the recoverable amount of land and buildings. The ABNT establishes general concepts, methods and procedures for the valuation of urban properties.

Data processing equipment – when available, the Bank uses market values to determine the recoverable amount of data processing equipment. When market values are not readily available, the Bank considers the amount recoverable by using the asset in its operations. Recoverable amount is calculated based on cash flow projections for the asset over its useful life, discounted to present value using the interbank deposit certificate - CDI rate.

Other items of property and equipment – these items are individually insignificant. Although subject to evaluation of impairment indicators, the Bank does not determine their recoverable amount on an individual basis due to cost benefit considerations. The Bank conducts annual inventory counts and writes off assets that are lost or showing signs of deterioration.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

31

Investments and goodwill on acquisition of investments

The recoverable amount of goodwill arising from business combinations is calculated using a discounted cash flow model based on the investments’ expected results. Assumptions used in estimating the results consist of:

the company’s operating projections, results and investment plans; macroeconomic scenarios developed by the Bank; and internal methodologies to determine cost of capital under CAPM.

Intangible

Rights due to the acquisition of payrolls – the recoverability of acquired payroll contracts is determined based on the contribution margin of the client relationships generated under each contract. The objective is to determine if the projections that justified the initial acquisition correspond to actual performance. An impairment loss is recognized on underperforming contracts.

Software – the Bank continuously invests in the modernization and adequacy of its internally developed software to accompany new technologies and meet the demands of the business. Since there is no similar software in the market, and because of the significant cost associated with developing models to calculate value in use, the Bank evaluates the ongoing utility of its software to test for impairment. Any software not being used is written off.

Goodwill on acquisition of merged company - the recoverable amount of goodwill arising from business combinations is calculated using a discounted cash flow model based on the investments’ expected results. Assumptions used in estimating the results consist of:

the company’s operating projections, results and investment plans; macroeconomic scenarios developed by the Bank; and internal methodologies to determine cost of capital under CAPM.

This methodology, particularly with respect to goodwill on the Bank’s acquisition of Banco Nossa Caixa in November 2009, involves comparing the portion of the purchase price attributable to goodwill to the Bank’s projected results in the state of São Paulo, less net assets with finite useful lives. These projections are based on Banco do Brasil’s historic results adjusted for current assumptions about earnings growth. The discount rate reflects the Bank’s cost of capital.

The losses recorded in the Statement of Income to adjust the recoverable value of these assets, if any, are stated in the respective notes.

l) Employee benefits

Employee benefits related to short-term benefits for current employees are recognized on the accrual basis as the services are provided. Post-employment benefits, comprising supplementary retirement benefits and medical assistance for which the Bank is responsible, are assessed in accordance with criteria established by CPC 33 (R1) -Employee benefits, approved by CVM Resolution 695/2012 (Note 26) and by the Resolution CMN 4,424/2015. The evaluations are performed semiannually.

In defined-contribution plans, the actuarial risk and the investment risk are borne by the plan participants. Accordingly, cost accounting is based on each period's contribution amount representing the Bank's obligation. Consequently, no actuarial calculation is required when measuring the obligation or expense, and there are neither actuarial gains nor losses.

In defined benefit plans, the actuarial risk and the investment risk value of plan assets fall either partially or fully on the sponsoring entity. Accordingly, cost accounting requires the measurement of plan obligations and expenses, with a possibility of actuarial gains and losses, leading to the register of a liability when the amount of the actuarial obligation exceeds the value of plan assets, or an asset when the amount of assets exceeds the value of plan obligations. In the latter instance, the asset should be recorded only when there is evidence that it can effectively reduce the contributions from the sponsor or will be refundable in the future.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

32

The Bank recognizes the components of defined benefit cost in the period in which the actuarial valuation was performed, in accordance with criteria established by CPC 33 (R1) - Employee benefits, as follows:

the current service cost and the net interest on the net defined benefit liability (asset) are recognized in profit or loss; and

the remeasurements of the net defined benefit liability (asset) are recognized in other comprehensive income, in the Bank’s equity, net of tax effects.

Contributions to be paid by the Bank to medical assistance plans in some cases will continue after the employee’s

retirement. Therefore, the Banks obligations are evaluated by the present actuarial value of the contributions to be paid over the expected period in which the plan participants and beneficiaries will be covered by the plan. Such obligations are evaluated and recognized under the same criteria used for defined benefit plans.

m) Deposits and securities sold under repurchase agreements

Deposits and securities sold under repurchase agreements are recorded at the amount of the liabilities and include, when applicable, related charges up to the balance sheet date, on a daily pro rata die basis.

n) Provisions, contingent assets and liabilities and legal obligations

The recognition, measurement and disclosure of provisions, contingent assets and liabilities and legal obligations are made in accordance with the criteria defined by CPC 25 – Provisions, Contingent Assets and Contingent Liabilities, approved by CMN Resolution 3,823/2009 (Note 27).

Contingent assets are not recognized in the financial statements however when there is evidence assuring their realization, usually represented by the final judgment of the lawsuit and by the confirmation of the capacity for its recovery by receipt or offsetting by another receivable, are recognized as assets.

Contingent liabilities are recognized in the financial statements when, based on the opinion of legal advisor and Management, the risk of loss of legal or administrative proceedings is considered probable, with a probable outflow of financial resource for the settlement of the obligation and when the amounts involved are measurable with sufficient assurance, being quantified when judicial noticed and revised monthly as follows:

Aggregated Method: cases that are similar and recurring in nature and whose values are not considered relevant. Provisions are based on statistical data. It covers civil, tax or labor judicial proceedings (except labor claims filed by trade unions and all proceedings classified as strategic) with probable value of award, estimated by legal advisors, up to R$ 1 million.

Individual Method: cases considered unusual or whose value is considered relevant by our legal counsel. Provisions are based on: the amount claimed; probability of an unfavorable decision; evidence presented; evaluation of legal precedents; other facts raised during the process; judicial decisions made during the course of the case; and the classification and the risk of loss of legal actions.

Contingent liabilities considered as possible losses are not recognized in the financial statements, they are disclosed in notes, while those classified as remote do not require provisioning or disclosure.

Legal obligations (fiscal and social security) are derived from tax obligations provided in the legislation, regardless of the probability of success of lawsuits in progress, and have their amounts recognized in full in the financial statements.

o) Debt instrument issue expense

Expenses related to transactions involving the issue of debt instruments are capitalized and presented as a reduction of the corresponding liability. The expenses are recognized in the income statement over the term of the transaction.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

33

p) Other assets and liabilities

Other assets are stated at their realizable amounts, including, when applicable, related income and monetary and exchange variations on a pro rata die basis, and allowance for losses, when deemed appropriate. Other liabilities are stated at their known and measurable amounts, plus, when applicable, related charges and monetary and exchange variations on a pro rata die basis.

q) Earnings per share

Earnings per share is disclosed in accordance with CPC 41 – Earnings per Share, approved by Resolution CVM 636/2010. The Bank's basic and diluted earnings per share were calculated by dividing the net profit attributable to shareholders by the weighted average number of total common shares, excluding treasury shares (Note 23.f). The Bank has no outstanding options, bonus of subscription nor its equivalents which provide their holders the right to acquire shares. Thus, the basic and diluted earnings per share are equal.

r) Functional and presentation currency

These consolidated financial statements are presented in Brazilian Reais, which is the Bank's functional and presentation currency. The functional currency is the currency of the main economic environment in which an entity operates. For most of the Conglomerate entities, the functional currency is the Real.

- INFORMATION BY SEGMENT

The segment information was prepared based on internal reports used by the Bank’s Chief Operating Decision Maker to

assess performance, and make decision about the allocation of fund for investment and other purposes. The framework also takes into account the regulatory environment and the similarities between goods and services. The information was prepared based on internal management reports (Management Information), reviewed regularly by Management.

The accounting policies adopted in the Management Information are different from those presented in the description of significant accounting policies of BB Consolidated (Note 4.j), because of proportionally consolidating the investments in joint ventures.

The Bank's operations were mainly in Brazil, divided into five segments: banking, investments, fund management, insurance (insurance, pension and capitalization) and payment methods. The Bank also engages in other activities, including consortium business and other services aggregated in "Other Segments".

The measurement of managerial income and of managerial assets and liabilities by segment takes into account all income and expenses as well as all assets and liabilities recorded by the controlled companies (Note 3) and joint ventures (Note 14). There were no common income or expenses nor common assets or liabilities allocated between the segments, for any distribution criteria.

Transactions between segments were eliminated in the column “Intersegment transactions”. They were conducted at the

same terms and conditions as those practiced with unrelated parties for similar transactions. These transactions do not involve any unusual payment risks.

None of the Bank’s customers individually account for more than 10% of the Bank’s income.

a) Banking segment

The results were mainly from operations in Brazil. It includes a wide array of products and services, including deposits, loans and services provided to customers through different distribution channels, located in the country and abroad.

The operations of the banking segment include business with the retail, wholesale and public sector, which were carried out by the Bank’s network and customer service teams. It also engages in business with micro-entrepreneurs and low-income population, undertaken through banking correspondents.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

34

b) Investments segment

This segment was responsible for operations in the domestic capital markets, being active in the intermediation and distribution of debts in the primary and secondary markets, as well as being responsible for equity investments and the rendering of some financial services.

The income from financial intermediation of this segment were the accrued interest on investments in securities less the interest expenses from third party funding costs. The principal equity investments were those in the associates and subsidiary companies. Financial service fee income were from economic/financial advisory services and the underwriting of fixed and variable income.

c) Fund management segment

The segment was involved in the purchase, sale and custody of securities, portfolio management, and management of investment funds and clubs. Income consists mainly of commissions and management fees for services charged to investors.

d) Insurance, pension, and capitalization segment

In this segment, the products and services offered relate to life, property and automobile insurance, private pension and capitalization plans.

Income were mainly from revenues from insurance premiums issued, contributions to private pension plans, capitalization bonds and investments in securities. The amounts offset by selling cost, technical insurance provision and expenses related to benefits and redemptions.

e) Payment methods segment

This segment was responsible for the funding, transmission, processing and settlement of operations via electronic means.

Revenues were mainly from commissions and management fees charged to businesses and financial institutions for the services rendered, as well as income from rent, installation and maintenance of electronic terminals.

f) Other segments

Other segments comprise the consortium management and other services segments, which have been aggregated as they were not individually significant.

Their revenues were originated mainly from rendering services not covered in previous segments, such as: credit recovery; consortium management; development, manufacturing, sale, lease and integration of digital electronic systems and equipment, peripherals, programs, inputs and computing supplies; and intermediation of air tickets, lodging and organization of events.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

35

g) Breakdown of managerial information by segment and accounting reconciliation

1st half/2017

Managerial Information by Segment Managerial to Accouting Reconciliation

Banking Investments Fund

Management

Insurance, pension and capitalization

Payment methods

Other segments

Intersegment transactions

Management information

Consolidation Adjustments

BB Consolidated

Income from financial intermediation 78,948,659 103,831 41,633 2,240,483 149,125 100,420 (251,521) 81,332,630 (5,512,649) 75,819,981

Income from loans and leases 45,543,493 -- -- -- -- 53,571 (33,980) 45,563,084 (2,753,926) 42,809,158 Securities 30,338,389 142,874 41,633 62,526 149,125 47,436 (256,633) 30,525,350 (985,970) 29,539,380 Derivative financial instruments (261,254) (39,043) -- -- -- -- -- (300,297) 105,023 (195,274) Income from exchange operations and compulsory deposits 2,811,190 -- -- -- -- (587) 654 2,811,257 (36,726) 2,774,531 Operations of sale and transfer of financial assets 516,841 -- -- -- -- -- -- 516,841 375,345 892,186 Financial results from insurance, pension and capitalization operations -- -- -- 2,177,957 -- -- 38,438 2,216,395 (2,216,395) --

Expenses from financial intermediation (63,377,187) (197,981) -- (1,525,408) -- (64,680) 409,083 (64,756,173) 4,094,624 (60,661,549)

Deposits and securities sold under repurchase agreements (44,897,229) (197,981) -- -- -- (64,680) 378,953 (44,780,937) 1,868,117 (42,912,820) Borrowings, assignments, onlending and leases (4,485,562) -- -- -- -- -- 30,130 (4,455,432) 117,817 (4,337,615) Allowance/reversal for loan losses (13,947,718) -- -- -- -- -- -- (13,947,718) 566,155 (13,381,563) Operations of sale and transfer of financial assets (46,678) -- -- -- -- -- -- (46,678) 17,127 (29,551) Financial expenses from technical provisions of insurance, pension plans and capitalization -- -- -- (1,525,408) -- -- -- (1,525,408) 1,525,408 --

Other income 14,183,332 518,593 1,033,915 3,722,234 2,917,228 1,256,180 (1,077,376) 22,554,106 (3,623,750) 18,930,356

Income from service and banking fees 9,740,815 397,880 1,024,748 1,290,902 2,426,654 866,753 (755,297) 14,992,455 (2,581,047) 12,411,408 Equity in associates and joint ventures 76,198 12,112 -- (11,476) (42,590) -- -- 34,244 1,980,550 2,014,794 Results from insurance, pension plan and capitalization operations -- -- -- 2,240,709 -- -- 102,154 2,342,863 (2,342,863) -- Other 4,366,319 108,601 9,167 202,099 533,164 389,427 (424,233) 5,184,544 (680,390) 4,504,154

Other expenses (26,085,495) (184,368) (160,867) (1,415,657) (1,743,290) (755,924) 919,814 (29,425,787) 3,813,868 (25,611,919)

Personnel expenses (10,280,705) (29,331) (43,246) (268,421) (112,577) (187,730) 4,416 (10,917,594) 633,010 (10,284,584) Other administrative expenses (6,021,232) (31,919) (28,618) (342,533) (245,769) (172,113) 753,905 (6,088,279) 651,715 (5,436,564) Amortization (1,618,584) (61,759) -- (57,649) (26,782) (2,026) -- (1,766,800) 85,813 (1,680,987) Depreciation (574,678) -- -- (8,057) (57,785) (7,013) -- (647,533) 72,461 (575,072) Tax expenses (2,389,757) (36,544) (70,713) (369,015) (269,208) (130,019) -- (3,265,256) 542,209 (2,723,047) Other (5,200,539) (24,815) (18,290) (369,982) (1,031,169) (257,023) 161,493 (6,740,325) 1,828,660 (4,911,665)

Profit before taxation and profit sharing 3,669,309 240,075 914,681 3,021,652 1,323,063 535,996 -- 9,704,776 (1,227,907) 8,476,869

Income tax and social contribution (895,154) (106,849) (411,254) (1,131,240) (461,898) (123,169) -- (3,129,564) 1,154,380 (1,975,184) Employee and directors profit sharing (699,741) -- (545) (20,703) (1,087) (1,812) -- (723,888) 73,527 (650,361) Non-controlling interests (134,753) -- -- (654,866) -- (2) -- (789,621) -- (789,621)

Net income 1,939,661 133,226 502,882 1,214,843 860,078 411,013 -- 5,061,703 -- 5,061,703

Balance sheet

Interbank investments 460,432,465 6,634 897,593 2,504,203 1,005,898 466,646 (8,074,319) 457,239,120 (8,822,430) 448,416,690 Securities and derivative financial instruments 144,040,920 1,022,503 7,069 177,281,880 6,416,057 1,051,760 (1,415,863) 328,404,326 (194,137,575) 134,266,751 Loan and leasing, net of allowance for losses 577,539,470 -- -- -- -- 2,725,418 (2,818,946) 577,445,942 (20,206,578) 557,239,364 Investments 14,562,796 5,418,018 26,967 572,018 756,547 27 (17,872,360) 3,464,013 13,273,526 16,737,539 Other assets 288,690,530 961,824 371,347 12,911,626 19,412,785 2,282,655 (3,609,372) 321,021,395 (32,067,947) 288,953,448

TOTAL ASSETS 1,485,266,181 7,408,979 1,302,976 193,269,727 27,591,287 6,526,506 (33,790,860) 1,687,574,796 (241,961,004) 1,445,613,792

Liabilities 1,396,345,235 4,394,603 1,164,168 185,887,029 19,256,264 3,626,905 (13,882,770) 1,596,791,434 (241,961,004) 1,354,830,430 Deposits 447,768,935 3,410,308 -- -- -- -- (3,528,517) 447,650,726 (4,838,705) 442,812,021 Securities sold under repurchase agreements 472,132,386 -- -- -- -- -- (7,302,673) 464,829,713 (15,007,963) 449,821,750 Funds from acceptance and issuance of securities 155,043,614 -- -- -- 449,075 2,805,000 -- 158,297,689 (12,476,149) 145,821,540 Onlendings 81,066,703 -- -- -- -- -- -- 81,066,703 (1,613,605) 79,453,098 Technical provisions for insurance, pension plans and capitalization -- -- -- 178,083,854 -- -- (5,250) 178,078,604 (178,078,604) -- Other liabilities 240,333,597 984,295 1,164,168 7,803,175 18,807,189 821,905 (3,046,330) 266,867,999 (29,945,978) 236,922,021

Shareholders' equity 88,920,946 3,014,376 138,808 7,382,698 8,335,023 2,899,601 (19,908,090) 90,783,362 -- 90,783,362 TOTAL LIABILITIES AND EQUITY 1,485,266,181 7,408,979 1,302,976 193,269,727 27,591,287 6,526,506 (33,790,860) 1,687,574,796 (241,961,004) 1,445,613,792

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

36

1st half/2016

Managerial Information by Segment Managerial to Accouting Reconciliation

Banking Investments Fund

Management

Insurance, pension and capitalization

Payment methods

Other segments

Intersegment transactions

Management information

Consolidation Adjustments

BB Consolidated

Income from financial intermediation 75,764,537 (49,087) 39,936 3,249,378 176,150 73,229 (334,952) 78,919,191 (6,531,369) 72,387,822

Income from loans and leases 47,880,584 -- -- -- -- -- (96,390) 47,784,194 (3,159,850) 44,624,344 Securities 24,675,779 (28,686) 39,936 68,991 176,150 73,071 (282,034) 24,723,207 (904,992) 23,818,215 Derivative financial instruments (1,613,697) (20,401) -- -- -- -- -- (1,634,098) 20,851 (1,613,247) Income from exchange operations and compulsory deposits 4,298,036 -- -- -- -- 158 (22) 4,298,172 86,379 4,384,551 Operations of sale and transfer of financial assets 523,835 -- -- -- -- -- -- 523,835 650,124 1,173,959 Financial results from insurance, pension and capitalization operations -- -- -- 3,180,387 -- -- 43,494 3,223,881 (3,223,881) --

Expenses from financial intermediation (58,799,309) (220,138) (9) (2,193,512) (56) (58,164) 413,922 (60,857,266) 4,717,836 (56,139,430)

Deposits and securities sold under repurchase agreements (55,256,241) (212,846) -- -- -- (58,512) 368,455 (55,159,144) 2,003,929 (53,155,215) Borrowings, assignments, onlending and leases 11,079,329 -- -- -- -- -- 45,467 11,124,796 106,470 11,231,266 Allowance/reversal for loan losses (14,594,353) (7,292) (9) -- (56) 348 -- (14,601,362) 413,925 (14,187,437) Operations of sale and transfer of financial assets (28,044) -- -- -- -- -- -- (28,044) -- (28,044) Financial expenses from technical provisions of insurance, pension plans and capitalization -- -- -- (2,193,512) -- -- -- (2,193,512) 2,193,512 --

Other income 14,256,595 591,896 811,796 3,705,419 3,017,277 1,227,605 (1,095,654) 22,514,934 (4,075,575) 18,439,359

Income from service and banking fees 8,862,343 362,577 804,583 1,119,196 2,561,290 742,738 (783,755) 13,668,972 (2,384,344) 11,284,628 Equity in associates and joint ventures 4,085 (10,788) -- 113 (62,835) 147 -- (69,278) 2,184,486 2,115,208 Results from insurance, pension plan and capitalization operations -- -- -- 2,377,213 -- -- 130,192 2,507,405 (2,507,405) -- Other 5,390,167 240,107 7,213 208,897 518,822 484,720 (442,091) 6,407,835 (1,368,312) 5,039,523

Other expenses (26,915,437) (268,037) (147,956) (1,314,287) (1,820,754) (784,762) 1,016,684 (30,234,549) 4,329,258 (25,905,291)

Personnel expenses (10,571,310) (37,623) (42,650) (272,287) (155,476) (180,577) 4,318 (11,255,605) 743,375 (10,512,230) Other administrative expenses (5,943,207) (35,330) (26,336) (356,793) (304,830) (155,235) 738,419 (6,083,312) 721,267 (5,362,045) Amortization (1,626,451) (54,630) -- (55,196) (74,476) (1,071) -- (1,811,824) 135,078 (1,676,746) Depreciation (566,901) (1,556) -- (9,357) (59,803) (5,136) -- (642,753) 80,760 (561,993) Tax expenses (2,563,488) (25,014) (55,936) (377,546) (295,076) (113,631) 3,999 (3,426,692) 604,169 (2,822,523) Other (5,644,080) (113,884) (23,034) (243,108) (931,093) (329,112) 269,948 (7,014,363) 2,044,609 (4,969,754)

Profit before taxation and profit sharing 4,306,386 54,634 703,767 3,446,998 1,372,617 457,908 -- 10,342,310 (1,559,850) 8,782,460

Income tax and social contribution (1,730,917) (15,597) (316,248) (1,346,300) (476,051) (115,412) -- (4,000,525) 1,496,019 (2,504,506) Employee and directors profit sharing (671,043) -- (421) (17,950) (83) (1,103) -- (690,600) 63,831 (626,769) Non-controlling interests (139,967) -- -- (687,118) -- (1) -- (827,086) -- (827,086)

Net income 1,764,459 39,037 387,098 1,395,630 896,483 341,392 -- 4,824,099 -- 4,824,099

Balance sheet

Interbank investments 425,578,110 7,756 710,293 2,087,527 1,083,998 362,345 (6,717,661) 423,112,368 (8,641,402) 414,470,966 Securities and derivative financial instruments 132,008,032 1,422,116 7,436 146,798,715 3,118,771 1,096,622 (2,070,689) 282,381,003 (161,630,745) 120,750,258 Loan and leasing, net of allowance for losses 619,004,077 -- -- -- -- 2,642,116 (2,747,819) 618,898,374 (20,686,988) 598,211,386 Investments 13,474,358 4,922,860 23,681 145,467 625,436 282,455 (16,159,707) 3,314,550 13,190,134 16,504,684 Other assets 292,220,846 966,759 315,485 14,924,453 7,641,217 2,720,800 (3,302,766) 315,486,794 (20,308,591) 295,178,203

TOTAL ASSETS 1,482,285,423 7,319,491 1,056,895 163,956,162 12,469,422 7,104,338 (30,998,642) 1,643,193,089 (198,077,592) 1,445,115,497

Liabilities 1,400,688,849 4,368,077 925,270 157,196,029 5,492,523 3,487,540 (12,414,537) 1,559,743,751 (198,077,592) 1,361,666,159 Deposits 442,562,176 3,322,337 -- 402 -- -- (3,492,500) 442,392,415 (1,513,883) 440,878,532 Securities sold under repurchase agreements 434,528,709 -- -- -- -- -- (5,572,127) 428,956,582 (16,987,947) 411,968,635 Funds from acceptance and issuance of securities 181,341,908 -- -- -- 904,942 2,796,516 -- 185,043,366 (10,534,641) 174,508,725 Onlendings 88,256,084 -- -- -- -- -- -- 88,256,084 (1,652,971) 86,603,113 Technical provisions for insurance, pension plans and capitalization -- -- -- 148,412,362 -- -- (11,461) 148,400,901 (148,400,901) -- Other liabilities 253,999,972 1,045,740 925,270 8,783,265 4,587,581 691,024 (3,338,449) 266,694,403 (18,987,249) 247,707,154

Shareholders' equity 81,596,574 2,951,414 131,625 6,760,133 6,976,899 3,616,798 (18,584,105) 83,449,338 -- 83,449,338 TOTAL LIABILITIES AND EQUITY 1,482,285,423 7,319,491 1,056,895 163,956,162 12,469,422 7,104,338 (30,998,642) 1,643,193,089 (198,077,592) 1,445,115,497

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

37

- CASH AND CASH EQUIVALENTS

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Cash and cash equivalents 14,330,233 12,805,771 14,052,402

Local currency 9,863,562 7,824,081 9,270,852

Foreign currency 4,457,648 4,974,123 4,773,276

Investments in gold 9,023 7,567 8,274

Interbank investments (1) 42,790,405 90,317,899 51,451,992

Securities purchased under resale agreements – guaranteed by securities not repledged / re-sold 12,616,995 58,269,836 13,530,909

Interbank deposits 29,918,361 32,037,173 37,921,083

Foreign currency 255,049 10,890 --

Total 57,120,638 103,123,670 65,504,394

(1) Investments whose original maturity is less than or equal to 90 days and with insignificant risk of change in fair value.

- INTERBANK INVESTMENTS

a) Breakdown

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Securities purchased under resale agreement 416,461,406 371,682,685 375,115,504

Reverse repos - own resources 12,648,042 58,281,504 13,530,909

Treasury financial bills 5,280,479 58,180,683 --

National Treasury bills -- -- 717,692

National Treasury notes 5,174,399 -- 12,643,646

Other securities 2,193,164 100,821 169,571

Reverse repos - financed position 403,813,364 313,401,181 361,584,595

Treasury financial bills 302,191,427 219,292,289 137,934,313

National Treasury bills 57,672,842 45,437,404 138,941,666

National Treasury notes 43,629,951 48,526,197 84,559,697

Other securities 319,144 145,291 148,919

Interbank deposits 31,955,284 34,028,987 39,355,462

Total 448,416,690 405,711,672 414,470,966

Current assets 447,193,208 404,769,645 413,436,276

Non-current assets 1,223,482 942,027 1,034,690

b) Income from interbank investments

1st half/2017 1st half/2016

Income from open market investments 22,255,054 20,660,456

Own resources 1,490,557 1,451,086

Financed position 20,764,497 19,209,370

Income from investments in interbank deposits 197,633 220,279

Total 22,452,687 20,880,735

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

38

- SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS

a) Securities

a.1) Breakdown of the consolidated portfolio by category, type of bonds and maturity

Maturity in days

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Market value Total Total Total

Without maturity

0 to 30 31 to 180 181 to 360 More than

360 Cost value

Market value

Mark to market

Cost value

Market value

Mark to market

Cost value

Market value

Mark to market

1 - Trading securities

1,383,498 867,842 2,948,970 276,510 2,776,599 7,952,157 8,253,419 301,262 5,520,274 6,074,220 553,946 5,999,358 6,224,897 225,539

Federal government bonds

5,232 866,414 2,939,840 274,631 2,730,958 6,621,212 6,817,075 195,863 4,417,848 4,918,333 500,485 4,744,700 4,948,209 203,509

Treasury financial bills -- -- 38,550 18,393 220,340 274,771 277,283 2,512 362,858 364,506 1,648 1,140,647 1,140,167 (480)

National Treasury bills -- 131,722 60,992 87,150 1,940,373 2,207,730 2,220,237 12,507 898,123 905,413 7,290 1,104,549 1,106,229 1,680

National Treasury notes -- -- -- -- 274,686 272,134 274,686 2,552 545,506 548,810 3,304 184,737 187,479 2,742

Brazilian foreign debt securities -- -- -- -- 26,534 26,816 26,534 (282) 57,873 55,805 (2,068) 20,531 19,423 (1,108)

Foreign Government bonds

5,232 734,692 2,744,316 169,088 201,653 3,681,530 3,854,981 173,451 2,445,109 2,926,174 481,065 2,233,928 2,434,604 200,676

Other -- -- 95,982 -- 67,372 158,231 163,354 5,123 108,379 117,625 9,246 60,308 60,307 (1)

Corporate bonds 1,378,266 1,428 9,130 1,879 45,641 1,330,945 1,436,344 105,399 1,102,426 1,155,887 53,461 1,254,658 1,276,688 22,030

Debentures -- -- -- -- 20,311 20,101 20,311 210 37,100 36,999 (101) 63,661 63,217 (444)

Shares in investment funds 1,353,624 -- -- -- -- 1,248,362 1,353,624 105,262 1,006,172 1,075,290 69,118 1,031,071 1,062,888 31,817

Shares 23 -- -- -- -- 16 23 7 16 28 12 18 32 14

Certificate of deposit -- -- 3 -- -- 3 3 -- 2 2 -- 1 1 --

Eurobonds -- 1,343 2,537 1,879 20,916 37,212 26,675 (10,537) 44,308 33,785 (10,523) 71,717 61,150 (10,567)

Other 24,619 85 6,590 -- 4,414 25,251 35,708 10,457 14,828 9,783 (5,045) 88,190 89,400 1,210

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

39

Maturity in days

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Market value Total Total Total

Without maturity

0 to 30 31 to 180 181 to 360 More than

360 Cost

value Market value

Mark to market

Cost value Market value

Mark to market

Cost value

Market value

Mark to market

2 - Available for sale securities

1,172,948 1,187,541 3,633,679 7,239,051 106,239,591 120,445,861 119,472,810 (973,051) 109,958,998 107,986,288 (1,972,710) 113,802,295 110,428,527 (3,373,768)

Federal government bonds

1,859 894,225 442,047 5,945,161 80,386,094 86,755,064 87,669,386 914,322 72,588,429 72,890,192 301,763 67,441,566 67,567,531 125,965

Treasury financial bills -- -- 330,274 2,506,802 56,092,942 58,933,955 58,930,018 (3,937) 49,913,679 49,847,895 (65,784) 43,716,189 43,679,271 (36,918)

National Treasury bills -- 599,768 -- 2,397,376 5,154,469 7,735,234 8,151,613 416,379 8,201,990 8,505,440 303,450 8,310,486 8,478,340 167,854

National Treasury notes -- -- -- 582,856 12,839,304 12,900,841 13,422,160 521,319 7,591,708 7,837,479 245,771 9,445,348 9,480,623 35,275

Agricultural debt securities -- 48 612 467 2,487 3,613 3,614 1 4,031 4,003 (28) 4,758 4,658 (100)

Brazilian foreign debt securities -- -- -- 4,460 2,700,613 2,656,745 2,705,073 48,328 2,747,485 2,679,586 (67,899) 2,575,637 2,615,511 39,874

Foreign Government bonds

-- 294,409 17,514 451,488 2,771,080 3,595,034 3,534,491 (60,543) 3,229,155 3,141,857 (87,298) 2,001,536 2,018,153 16,617

Other 1,859 -- 93,647 1,712 825,199 929,642 922,417 (7,225) 900,381 873,932 (26,449) 1,387,612 1,290,975 (96,637)

Corporate bonds 1,171,089 293,316 3,191,632 1,293,890 25,853,497 33,690,797 31,803,424 (1,887,373) 37,370,569 35,096,096 (2,274,473) 46,360,729 42,860,996 (3,499,733)

Debentures -- 43,897 2,433,028 906,693 23,438,660 28,001,485 26,822,278 (1,179,207) 30,902,601 29,512,403 (1,390,198) 38,406,034 37,591,269 (814,765)

Promissory notes -- 64,770 125,061 -- -- 189,245 189,831 586 189,478 190,093 615 746,659 753,025 6,366

Credit notes -- -- -- -- 42,638 45,627 42,638 (2,989) 47,794 44,990 (2,804) 49,368 46,185 (3,183)

Shares in investment funds 18,980 108,736 169,563 246,406 217,177 693,611 760,862 67,251 840,127 967,785 127,658 2,312,457 1,012,762 (1,299,695)

Shares 255,739 -- -- -- -- 103,281 255,739 152,458 103,273 198,167 94,894 103,226 128,735 25,509

Rural product bills - commodities -- 72,562 305,086 98,992 2,910 477,252 479,550 2,298 685,081 686,952 1,871 907,147 913,012 5,865

Certificate of deposit -- -- -- -- -- -- -- -- 309,653 309,520 (133) 80,234 80,208 (26)

Financial bills -- -- -- -- -- -- -- -- -- -- -- 22,195 22,094 (101)

Real estate receivables certificates

-- -- -- 7,756 194,496 337,267 202,252 (135,015) 413,561 345,056 (68,505) 408,223 400,284 (7,939)

Other 896,370 3,351 158,894 34,043 1,957,616 3,843,029 3,050,274 (792,755) 3,879,001 2,841,130 (1,037,871) 3,325,186 1,913,422 (1,411,764)

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

40

Maturity in days

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Market value Total Total Total

Without maturity

0 to 30 31 to 180 181 to 360 More than

360 Cost value

Market value

Mark to market

Cost value

Market value

Mark to market

Cost value

Market value

Mark to market

3 - Held to maturity securities

455,212 -- 113,450 -- 4,025,000 5,150,981 4,593,662 (557,319) 5,595,611 4,944,850 (650,761) 840,562 551,530 (289,032)

Federal government bonds

-- -- -- -- 50,024 50,024 50,024 -- -- -- -- -- -- --

Foreign Government bonds

-- -- -- -- 50,024 50,024 50,024 -- -- -- -- -- -- --

Corporate bonds 455,212 -- 113,450 -- 3,974,976 5,100,957 4,543,638 (557,319) 5,595,611 4,944,850 (650,761) 840,562 551,530 (289,032)

Debentures -- -- 113,450 -- 3,808,106 4,227,724 3,921,556 (306,168) 4,760,259 4,360,652 (399,607) 450,595 447,490 (3,105)

Real estate receivables certificates

-- -- -- -- 159,827 410,978 159,827 (251,151) 398,687 147,533 (251,154) 382,547 96,620 (285,927)

Financial letters 455,212 -- -- -- -- 455,212 455,212 -- 430,008 430,008 -- -- -- --

Other -- -- -- -- 7,043 7,043 7,043 -- 6,657 6,657 -- 7,420 7,420 --

Total 3,011,658 2,055,383 6,696,099 7,515,561 113,041,190 133,548,999 132,319,891 (1,229,108) 121,074,883 119,005,358 (2,069,525) 120,642,215 117,204,954 (3,437,261)

a.2) Breakdown of the consolidated portfolio by financial statement classification and maturity date

Maturity in days

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Market value Total Total Total

Without maturity

0 to 30 31 to 180 181 to 360 More than

360 Cost value Market value

Mark to market

Cost value Market value Mark to market

Cost value Market value Mark to market

Total by portfolio 3,011,658 2,055,383 6,696,099 7,515,561 113,041,190 133,548,999 132,319,891 (1,229,108) 121,074,883 119,005,358 (2,069,525) 120,642,215 117,204,954 (3,437,261)

Own portfolio 3,011,658 2,055,383 3,575,289 4,866,406 80,863,875 95,394,455 94,372,611 (1,021,844) 80,504,897 78,440,696 (2,064,201) 91,837,231 90,502,488 (1,334,743)

Subject to repurchase agreements -- -- 3,120,791 2,384,751 30,399,111 36,110,811 35,904,653 (206,158) 37,412,855 37,410,153 (2,702) 25,725,431 23,624,379 (2,101,052)

Pledged in guarantee -- -- 19 264,404 1,778,204 2,043,733 2,042,627 (1,106) 3,157,131 3,154,509 (2,622) 3,079,553 3,078,087 (1,466)

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

41

a.3) Breakdown of the consolidated portfolio by category and maturity in years

Maturity in years

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Market value Total Total Total

Without maturity

Due in up to one year

Due from 1 to 5 years

Due from 5 to 10 years

Due after 10 years

Cost value Market value Cost value Market value Cost value Market value

Total by category 3,011,658 16,267,043 74,993,320 35,316,388 2,731,482 133,548,999 132,319,891 121,074,883 119,005,358 120,642,215 117,204,954

1 - Trading securities 1,383,498 4,093,322 2,228,271 530,193 18,135 7,952,157 8,253,419 5,520,274 6,074,220 5,999,358 6,224,897

2 - Available for sale securities 1,172,948 12,060,271 70,790,757 33,560,629 1,888,205 120,445,861 119,472,810 109,958,998 107,986,288 113,802,295 110,428,527

3 - Held to maturity securities 455,212 113,450 1,974,292 1,225,566 825,142 5,150,981 4,593,662 5,595,611 4,944,850 840,562 551,530

a.4) Summary of the consolidated portfolio by financial statement classification

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Book value Book value Book value

Current Non-current Total Current Non-current Total Current Non-current Total

Total by portfolio 22,055,300 110,821,910 132,877,210 15,745,981 103,910,138 119,656,119 17,362,201 100,131,785 117,493,986

Own portfolio 16,284,968 78,648,526 94,933,494 13,937,394 65,273,440 79,210,834 16,278,894 76,783,299 93,062,193

Subject to repurchase agreements 5,505,909 30,395,180 35,901,089 1,499,048 35,791,728 37,290,776 986,242 20,367,464 21,353,706

Pledged in guarantee 264,423 1,778,204 2,042,627 309,539 2,844,970 3,154,509 97,065 2,981,022 3,078,087

a.5) Summary of the consolidated portfolio by category

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Total by category

1 - Trading securities 8,253,419 6% 6,074,220 5% 6,224,897 5%

2 - Available for sale securities 119,472,810 90% 107,986,288 90% 110,428,527 94%

3 - Held to maturity securities 5,150,981 4% 5,595,611 5% 840,562 1%

Portfolio book value 132,877,210 100% 119,656,119 100% 117,493,986 100%

Mark to market - held to maturity (557,319) -- (650,761) -- (289,032) --

Portfolio market value 132,319,891 -- 119,005,358 -- 117,204,954 --

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

42

b) Income from operations with securities

1st half/2017 1st half/2016

Short-term interbank investments (Note 7.b) 22,452,687 20,880,735

Fixed-income securities 6,882,099 7,875,966

Variable-income securities 204,594 (4,938,486)

Total 29,539,380 23,818,215

c) Reclassification of securities

There was no reclassification of securities in the June 30, 2017.

There was the following reclassification in the period from January 1 to December 31, 2016:

On April 27, 2016, Cielo's Board of Directors approved the partial repurchase of debentures issued by Cielo up to R$ 2.000.000 thousand, causing early maturity of the debentures, although the BB Conglomerate had the intention and financial capacity to hold Cielo's debentures to maturity (December 2023).

Due to this fact, on June 30, 2016, BB Conglomerate reclassified all the securities in the category "held to maturity" to the category "available for sale", resulting in a negative mark to market impact in Shareholders' Equity in the amount of R$ 39,326 thousand, net of tax effects.

Impact

Market value 3,446,831

Book value before reclassification 3,506,416

Mark to market (59,585)

Tax effects 20,259

Shareholders’ Equity impact (39,326)

d) Derivative financial instruments

The Bank uses derivative financial instruments to manage, at the consolidated level, its positions and to meet clients' needs, classifying its own positions as hedge (market risk and cash flow risk) and trading, both within limits approved by committees of the Bank. The hedge strategy of the equity positions is in line with macroeconomic analyses and is approved by the Executive Board of Directors.

In the options market, active or long positions have the Bank as holder, while passive or short positions have the Bank as writer.

The main risks inherent to derivative financial instruments resulting from the business of the Bank and its subsidiaries are credit, market, liquidity and operational, and the management process presented in note 28.

The models used to manage risks with derivatives are reviewed periodically and the decisions made follow the best risk/return relationship, estimating possible losses based on the analysis of macroeconomic scenarios.

The Bank uses tools and systems to manage the derivatives. Trading in new derivatives, standardized or not, is subject to a prior risk analysis.

Risk analysis of the subsidiaries is undertaken on an individual basis and its risk management is done on a consolidated basis.

The Bank uses statistical methods and simulations to measure the risks of its positions, including derivatives, using models of values at risk sensibility and stress analysis.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

43

Total credit exposure from swaps is R$ 196,393 thousand on Jun 30, 2017 (R$ 221,735 thousand on Dec 31, 2016 and R$ 325,571 thousand on Jun 30, 2016).

d.1) Breakdown of the portfolio of derivatives for trading by index

By Index Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Notional value Cost value Market value Notional value Cost value Market value Notional value Cost value Market value

Future contracts

Purchase commitments 7,270,990 -- -- 12,675,733 -- -- 10,742,812 -- --

Interbank deposits 3,973,906 -- -- 3,767,529 -- -- 5,004,419 -- -- Currencies 3,277,870 -- -- 8,899,499 -- -- 5,409,058 -- -- Libor -- -- -- -- -- -- 294,269 -- -- Commodities 19,214 -- -- 8,705 -- -- 35,066 -- --

Sales commitments 3,795,289 -- -- 2,109,516 -- -- 2,743,182 -- --

Interbank deposits 1,218,450 -- -- 1,103,821 -- -- 1,147,563 -- -- Currencies 741,203 -- -- 872,351 -- -- 1,590,796 -- -- Bovespa Index 123 -- -- -- -- -- -- -- -- On-shore USD rates 31,782 -- -- -- -- -- -- -- -- Libor 33,002 -- -- 111,061 -- -- -- -- -- Commodities 1,613,202 -- -- 22,283 -- -- 4,823 -- -- SCS 157,527 -- -- -- -- -- -- -- --

Forward operations

Asset position 4,274,313 585,502 604,623 4,472,363 300,860 253,699 6,269,155 705,241 634,241

Term securities 507,457 507,457 507,457 -- -- -- 36,023 36,023 36,023 Term currencies 3,729,400 73,818 90,835 4,436,664 297,777 242,787 6,197,930 667,717 588,784 Term commodities 37,456 4,227 6,331 35,699 3,083 10,912 35,202 1,501 9,434

Liability position 8,801,982 (1,108,566) (948,609) 10,058,932 (968,637) (582,138) 13,490,707 (2,026,068) (1,528,419)

Term securities 507,457 (507,457) (507,457) -- -- -- 36,023 (36,023) (36,023) Term currencies 8,259,144 (596,797) (434,950) 10,053,226 (967,623) (581,870) 13,432,210 (1,985,996) (1,483,687) Term commodities 35,381 (4,312) (6,202) 5,706 (1,014) (268) 22,474 (4,049) (8,709)

Option market

Purchase commitments - long position

30,151 1,524 71 244 15 -- 373 3 --

Shares 30,151 1,524 71 -- -- -- -- -- -- Commodities -- -- -- 244 15 -- 373 3 --

Sale commitments - long position

153,963 309,217 153,333 194,039 285,472 193,414 336,338 401,317 334,783

Foreign currency -- -- -- 573 25 67 1,728 62 173 Shares 153,963 309,217 153,333 193,333 285,437 193,333 334,610 401,255 334,610 Commodities -- -- -- 133 10 14 -- -- --

Purchase commitments - short position

360,756 (23,105) (28,619) 228,388 (19,787) (30,500) 330,949 (15,683) (14,841)

Foreign currency 146,484 (3,645) (3,177) 67,646 (2,518) (134) 269,422 (8,524) (924) Interbank deposit 1,979 (9) (3) 160,486 (17,244) (30,366) 57,141 (7,032) (13,770) Bovespa index 39,847 (1,915) (1,127) -- -- -- -- -- -- IPCA 171,497 (17,525) (24,312) -- -- -- -- -- -- Shares -- -- -- -- -- -- 1,084 (79) (111) Commodities 949 (11) -- 256 (25) -- -- -- -- Other -- -- -- -- -- -- 3,302 (48) (36)

Sale commitments - short position

220,288 (1,678) (1,025) 16,979 (306) (156) 82,140 (1,591) (614)

Foreign currency 1,212 (28) (1) 7,285 (161) (42) 2,502 (55) (65) Interbank deposit 209,543 (1,345) (799) -- -- -- -- -- -- Bovespa index 1,710 (65) (43) -- -- -- -- -- -- Shares 580 (14) -- -- -- -- -- -- -- Commodities 7,243 (226) (182) 9,694 (145) (114) 79,638 (1,536) (549)

Swaps contracts

Asset position 7,145,498 637,948 609,727 8,501,031 1,131,352 1,128,122 13,648,406 2,192,062 2,198,991

Interbank deposits 1,547,392 266,624 252,969 4,328,151 841,661 837,366 7,467,078 1,258,280 1,314,564 Foreign currency 5,368,344 358,288 341,492 3,933,371 283,274 282,439 5,705,210 862,372 809,018 Pre-fixed 229,762 13,036 15,266 239,509 6,417 8,317 453,721 70,105 74,771 IPCA -- -- -- -- -- -- 22,397 1,305 638

Liability position 8,873,569 (910,625) (905,418) 10,748,833 (1,078,089) (1,190,214) 9,683,116 (1,405,235) (1,435,345)

Interbank deposits 2,374,874 (180,351) (165,188) 2,565,720 (157,851) (152,659) 2,626,621 (560,702) (567,284) Foreign currency 6,147,408 (727,022) (726,172) 7,831,015 (915,496) (1,026,088) 6,823,029 (833,820) (853,286) Pre-fixed 351,287 (3,252) (14,058) 352,098 (4,742) (11,467) 34,575 (7,230) (7,593) IPCA -- -- -- -- -- -- 198,891 (3,483) (7,182)

Other derivatives (1)

Asset position

Foreign currency 855,510 22,721 21,787 3,258,027 42,868 37,328 2,573,607 178,671 88,257 Liability position

Foreign currency 3,556,892 (80,084) (86,288) 2,735,958 (83,191) (67,383) 1,146,261 (99,003) (39,681)

(1) Related, essentially, to Non Deliverable Forwards (NDF) which are traded in the over-the-counter (OTC) market and have as their object an exchange rate of a specific currency.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

44

d.2) Breakdown of the derivatives portfolio by maturity (notional value)

Maturity in days 0 to 30 31 to 180 181 to 360 More than 360 Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Futures 3,559,679 6,031,947 734,333 740,320 11,066,279 14,785,249 13,485,994

Forwards 4,837,364 5,850,467 1,348,584 1,039,880 13,076,295 14,531,295 19,759,862

Options 111,774 256,339 25,472 371,573 765,158 439,650 749,800

Swaps 1,999,056 3,539,634 4,508,410 5,971,967 16,019,067 19,249,864 23,331,522

Other 2,180,495 2,009,400 18,554 203,953 4,412,402 5,993,985 3,719,868

d.3) Breakdown of the derivative portfolio by trading market and counterparty (notional value on Jun 30, 2017)

Futures Forwards Option market Swaps Other

BM&FBovespa 11,033,277 -- 192,887 -- --

Over-the-counter

Financial institutions 33,002 1,919,299 -- 13,323,230 4,412,402

Client -- 11,156,996 572,271 2,695,837 --

d.4) Breakdown of margin given as guarantee for transactions with derivative financial instruments

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Treasury financial bills 1,282,328 1,587,775 1,520,645

Total 1,282,328 1,587,775 1,520,645

d.5) Portfolio of derivatives designated as hedge accounting

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Market risk hedge

Hedging instruments

Assets 518,728 555,105 689,677

Swaps 365,395 361,772 355,067

Options 153,333 193,333 334,610

Hedged items

Assets 255,062 197,585 128,252

Securities 255,062 197,585 128,252

Liabilities (365,461) (361,623) (355,080)

Other liabilities (365,461) (361,623) (355,080)

In order to hedge against possible fluctuations in the interest and exchange rates on its securities and foreign investments, the Bank uses swaps (cross currency interest rate swaps) to hedge a foreign funding and use option contracts to offset the risks arising from market variations some actions. Cited hedges were assessed as effective, in accordance with the provisions of Central Bank Circular No. 3,082/2002, which require evidence of hedge effectiveness is the range of 80 % to 125 %:

d.6) Income gains and losses with hedging instruments and hedged items

1st half/2017 1st half/2016

Hedge items gains 59,150 103,015

Hedging instruments losses (65,582) (102,837)

Net effect (6,432) 178

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

45

d.7) Derivative financial instruments segregated by current and non-current

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Current Non-current Current Non-current Current Non-current

Assets

Forwards 600,343 4,280 232,887 20,812 626,336 7,905

Options 153,404 -- 193,414 -- 173 334,610

Swaps 507,011 102,716 753,996 374,126 1,708,768 490,223

Other derivatives 17,089 4,698 32,921 4,407 84,197 4,060

Total 1,277,847 111,694 1,213,218 399,345 2,419,474 836,798

Liabilities

Forwards (879,434) (69,175) (482,991) (99,147) (1,527,870) (549)

Options (4,351) (25,293) (1,498) (29,158) (3,193) (12,262)

Swaps (512,383) (393,035) (540,564) (649,650) (517,982) (917,363)

Other derivatives (80,982) (5,306) (64,291) (3,092) (36,937) (2,744)

Total (1,477,150) (492,809) (1,089,344) (781,047) (2,085,982) (932,918)

e) Income from derivative financial instruments

1st half/2017 1st half/2016

Swaps 142,277 1,076,002

Forwards (156,924) (1,683,634)

Options (31,257) (17,651)

Futures (86,312) (906,160)

Other derivatives (63,058) (81,804)

Total (195,274) (1,613,247)

- INTERBANK ACCOUNTS

a) Payments and receipts pending settlement

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Assets

Rights against other participants of settlement systems (1)

Bank checks and other instruments 1,764,608 3,513 1,852,665

Documents sent by other participants 1,703,869 -- 1,965,799

Total 3,468,477 3,513 3,818,464

Current assets 3,468,477 3,513 3,818,464

Liabilities

Obligations to other participants of settlement systems (1)

Remitted receipts 2,125,141 -- 2,182,958

Bank checks and other instruments 775,159 -- 908,121

Other receipts 5,477 1,075 8,948

Total 2,905,777 1,075 3,100,027

Current liabilities 2,905,777 1,075 3,100,027

(1) There was no operation of the service of clearing checks and other securities on Dec 31, 2016.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

46

b) Restricted deposits

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Compulsory deposits with Banco Central do Brasil 64,659,229 63,451,094 65,404,128

Additional reserve requirements on deposits 8,257,226 13,958,774 14,754,847

Savings deposit requirements 23,953,922 23,919,390 23,714,737

Demand deposit requirements 13,241,642 11,443,864 11,050,143

Time deposit requirements 16,968,324 11,974,996 13,912,434

Resources for microfinance 318,413 261,744 319,288

Resources for rural credit (1) 1,874,492 1,874,492 1,643,753

Other 45,210 17,834 8,926

Housing Finance System 2,652,690 2,557,791 2,591,255

Compensation of wage changes fund 3,031,421 2,925,091 2,757,928

Provision for losses (391,835) (380,953) (175,871)

Other 13,104 13,653 9,198

National Treasury - rural credit 54,365 56,868 76,705

Rural credit - Proagro 253,777 247,558 250,688

Provision for losses (199,412) (190,690) (173,983)

Total 67,366,284 66,065,753 68,072,089

Current assets 67,363,327 66,063,844 68,059,575

Non-current assets 2,957 1,909 12,513

(1) Refers to funds deposited with the Banco Central do Brasil, because they were not lent on to rural credits, according to Resolution CMN No. 3,745/2009. The special supply funds were provided by Banco Central do Brasil and recorded in borrowings and onlendings (Note 19.b).

c) Compulsory investments

1st half/2017 1st half/2016

Deposits linked to the Banco Central do Brasil 2,226,958 2,741,222

Additional reserve requirements on deposits 671,952 942,050

Savings deposit requirements 821,445 967,466

Time deposit requirements 733,561 831,706

Deposits linked to real estate 93,380 94,693

Deposits linked to National Treasury - rural credit 23,883 22,320

Losses on restricted deposits (19,715) (20,586)

Total 2,324,506 2,837,649

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

47

- LOAN OPERATIONS

a) Portfolio by modality

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Loan operations 593,357,962 599,761,791 633,361,563

Loans and discounted credit rights 206,295,054 214,073,031 233,834,866

Financing 139,201,251 145,770,876 157,634,154

Rural and agribusiness financing 193,034,496 185,067,911 189,424,384

Real estate financing 54,277,152 54,237,642 51,720,740

Financing of infrastructure and development 176 244 83,373

Loan operations sold under assignment (1) 549,833 612,087 664,046

Other receivables with loan characteristics 48,973,668 53,225,445 57,765,275

Credit card operations 22,829,591 23,510,421 21,526,694

Advances on exchange contracts (2) 13,499,886 13,714,072 18,207,494

Other receivables purchase under assignment (3) 11,459,443 14,983,588 16,969,731

Guarantees honored 589,238 494,543 606,165

Other 595,510 522,821 455,191

Leasing transactions 514,176 604,196 704,687

Total loan portfolio 642,845,806 653,591,432 691,831,525

(Allowance)/reversal for loan losses (37,881,410) (36,070,120) (36,967,684)

(Allowance for loan losses - loan operations) (36,602,307) (34,838,451) (35,783,402)

(Allowance for other losses - other receivables) (4) (1,248,636) (1,190,296) (1,112,820)

(Allowance for lease losses - leasing transactions) (30,467) (41,373) (71,462)

Total loan portfolio net of provisions 604,964,396 617,521,312 654,863,841

(1) Loan operations assigned with retention of the risks and benefits of the financial assets. (2) Advances on exchange contracts are classified as a deduction to other liabilities. (3) Loan operations acquired with retention of the risks and benefits by the assignor of the financial assets. On June 30, 2016, the premiuns on Credits

linked to operations acquired in assignment were reclassified in the group Other receivables with loan characteristics, in the amount of R$ 1,764,623 thousand.

(4) Includes the amount of R$ 11,173 thousand as of June 30, 2017 (R$ 8,725 thousand as of June 30, 2016) related to allowance for interbank onlendings losses.

b) Loan operations and leasing transactions income

1st half/2017 1st half/2016

Loan operations income 42,671,447 44,446,419

Loans and discounted credit rights 21,165,111 28,996,693

Rural and agribusiness financing 6,875,068 7,194,939

Financing (1) 4,286,033 (2,222,033)

Real estate financing 3,364,942 2,476,376

Equalization of rates - agricultural crop- Law 8,427/1992 2,800,547 2,799,073

Recovery of loans previously written-off as loss (2) 2,350,271 2,244,654

Export financing 1,704,017 2,322,775

Guarantees honored 62,116 75,608

Income from foreign currency financing 20,945 505,199

Other 42,397 53,135

Leasing transactions income (Note 10.i) 137,711 177,925

Total 42,809,158 44,624,344

(1) The debit balances presented arise from the negative exchange variation of the period (the appreciation of the Real against the Dollar) (2) The amount of R$ 51,353 thousand in the 1st half/2017 (with impact on the income of R$ 26,931 thousand) and R$ 78,842 thousand in the 1st

half/2016 (with impact on the income of R$ 41,347 thousand) was received from assignments without recourse of written off credits to entities outside the financial system, in accordance with CMN Resolution 2,836/2001.The book value of these transactions were R$ 95,231 thousand and R$ 71,075 thousand, respectively.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

48

c) Breakdown of the loan portfolio by sector

Jun 30, 2017 % Dec 31, 2016 % Jun 30, 2016 %

Public sector 74,639,131 11.6 74,322,898 11.4 74,009,980 10.7

Public administration 38,816,482 6.0 38,405,221 5.9 37,587,327 5.4

Oil sector 24,783,584 3.9 24,103,485 3.7 24,354,756 3.5

Electricity 8,931,430 1.4 9,621,700 1.5 10,700,482 1.6

Services 970,376 0.2 1,018,844 0.2 303,048 --

Other activities 1,137,259 0.1 1,173,648 0.1 1,064,367 0.2

Private sector (1) 568,206,675 88.4 579,268,534 88.6 617,821,545 89.3

Individuals 329,390,270 51.2 322,781,095 49.4 323,551,243 46.8

Companies 238,816,405 37.2 256,487,439 39.2 294,270,302 42.5

Agribusiness of plant origin 29,120,856 4.5 28,655,250 4.4 32,111,232 4.6

Mining and metallurgy 28,946,558 4.5 31,000,025 4.7 34,796,928 5.0

Services 18,986,382 3.0 16,610,111 2.5 19,081,767 2.8

Transportation 18,536,764 2.9 19,229,779 2.9 19,255,317 2.8

Real estate agents 16,178,243 2.5 18,187,443 2.8 19,088,566 2.8

Agribusiness of animal origin 15,403,306 2.4 15,365,491 2.4 15,793,729 2.3

Automotive sector 15,029,221 2.3 16,596,819 2.5 21,428,415 3.1

Fuel 11,410,534 1.8 12,514,748 1.9 17,236,190 2.5

Electricity 11,157,909 1.7 15,781,797 2.4 16,835,113 2.4

Retail commerce 10,308,958 1.6 12,853,623 2.0 15,616,673 2.3

Specific activities of construction 8,342,421 1.3 9,178,884 1.4 10,789,385 1.6

Agricultural inputs 7,225,120 1.1 7,499,071 1.1 9,106,380 1.3

Textile and clothing 6,902,175 1.1 7,699,639 1.2 9,505,344 1.4

Electronics 5,972,645 0.9 6,587,528 1.0 7,056,826 1.0

Chemical 5,550,108 0.9 5,805,797 0.9 6,771,913 0.9

Wholesale and various industries 5,271,227 0.8 5,899,556 0.9 7,304,806 1.1

Pulp and paper 4,652,707 0.7 5,674,382 0.9 7,050,076 1.0

Woodworking and furniture market 4,556,507 0.7 5,134,764 0.8 5,429,632 0.8

Financial services 4,426,305 0.7 4,690,779 0.7 6,584,820 1.0

Telecommunications 3,832,692 0.6 3,878,719 0.6 3,866,926 0.5

Heavy construction 3,568,414 0.6 4,158,241 0.6 5,465,235 0.8

Other activities 3,437,353 0.6 3,484,993 0.6 4,095,029 0.5

Total 642,845,806 100.0 653,591,432 100.0 691,831,525 100.0

(1) The amounts disclosed under individuals include loans to the sectors of agribusiness, housing and other sectors of economic activity carried out with individuals. To the highlighted economic sectors, operations are exclusive to companies.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

49

d) Loan portfolio by risk level and maturity

AA A B C D E F G H Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Current operations Installments falling due 01 to 30 11,232,349 7,218,282 13,363,026 7,048,874 600,830 282,548 83,363 102,310 218,440 40,150,022 40,579,377 49,226,733 31 to 60 8,196,092 4,691,996 5,569,789 2,410,011 273,508 150,095 157,873 37,441 177,032 21,663,837 21,437,583 25,704,153 61 to 90 9,188,220 3,634,351 4,766,400 1,946,012 841,467 88,342 111,232 55,451 82,391 20,713,866 17,217,798 24,052,157 91 to 180 26,999,427 9,825,574 10,676,213 4,855,824 658,985 543,681 120,719 141,118 406,596 54,228,137 52,889,238 65,491,272 181 to 360 37,582,111 9,067,895 18,240,118 8,261,291 1,135,104 1,471,872 157,936 371,264 274,814 76,562,405 89,815,855 87,186,345 More than 360 203,821,216 56,996,573 78,653,372 35,415,641 5,323,265 6,794,382 2,164,497 2,145,298 4,584,597 395,898,841 397,073,805 407,546,119 Installments overdue Up to 14 days 244,433 117,368 150,767 157,307 91,574 20,360 17,561 8,727 23,149 831,246 2,954,178 1,311,045 Other (1) 397,146 -- -- -- -- -- -- -- -- 397,146 400,601 393,207 Subtotal 297,660,994 91,552,039 131,419,685 60,094,960 8,924,733 9,351,280 2,813,181 2,861,609 5,767,019 610,445,500 622,368,435 660,911,031 Operations past due Installments falling due 01 to 30 -- -- 46,152 176,481 98,327 97,306 103,543 150,472 514,822 1,187,103 1,234,254 1,272,217 31 to 60 -- -- 32,719 81,883 66,771 57,422 53,482 62,348 211,210 565,835 683,730 579,116 61 to 90 -- -- 29,819 72,924 88,826 55,086 58,597 102,453 202,924 610,629 528,503 583,339 91 to 180 -- -- 76,592 209,067 259,576 152,187 153,989 157,605 580,542 1,589,558 1,603,229 1,635,759 181 to 360 -- -- 154,822 359,165 365,174 265,043 249,364 277,166 993,362 2,664,096 2,980,962 2,794,316 More than 360 -- -- 1,158,780 1,864,027 1,591,581 1,839,876 1,718,413 2,429,395 6,096,559 16,698,631 13,592,170 11,663,704 Installments overdue 01 to 14 -- -- 6,514 30,412 27,983 40,282 23,480 38,700 92,090 259,461 300,298 276,650 15 to 30 -- -- 157,604 224,826 57,625 74,137 44,447 41,229 143,874 743,742 1,016,432 788,930 31 to 60 -- -- 21,238 297,647 135,768 215,450 89,289 74,043 310,288 1,143,723 1,439,130 1,122,093 61 to 90 -- -- -- 30,965 238,747 125,679 95,802 82,706 282,755 856,654 1,352,492 1,102,405 91 to 180 -- -- -- 17,589 53,473 258,271 377,708 529,178 1,013,346 2,249,565 2,909,284 2,965,931 181 to 360 -- -- 3,392 461 1,402 62,910 115,247 300,604 2,605,203 3,089,219 3,158,831 3,006,390 More than 360 -- -- 1,787 9,997 959 28,982 46,193 185,115 469,057 742,090 423,682 3,129,644 Subtotal -- -- 1,689,419 3,375,444 2,986,212 3,272,631 3,129,554 4,431,014 13,516,032 32,400,306 31,222,997 30,920,494 Total 297,660,994 91,552,039 133,109,104 63,470,404 11,910,945 12,623,911 5,942,735 7,292,623 19,283,051 642,845,806 653,591,432 691,831,525 (1) Operations with third party risk linked to government funds and programs, primarily Pronaf, Procera, FAT, BNDES and FCO. They include 13,369 thousand of overdue installments, which comply with rules defined in each program

for reimbursement by the program managers and, therefore, do not represent a credit risk for the Bank.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

50

e) Allowance for loan losses by risk level

Level of risk

% Minimum provision

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Value of loans Minimum required

allowance

Supplementary allowance (1)

Total Value of loans Minimum required

allowance

Supplementary allowance (1)

Total Value of loans Minimum required

allowance Total

AA 297,660,994 -- -- -- 302,706,394 -- -- -- 343,701,732 -- --

A 0.5 91,552,039 457,760 46,228 503,988 104,838,051 524,190 25,164 549,354 132,191,757 660,959 660,959

B 1 133,109,104 1,331,091 492,901 1,823,992 118,671,959 1,186,720 256,585 1,443,305 120,081,955 1,200,820 1,200,820

C 3 63,470,404 1,904,112 1,160,053 3,064,165 67,284,778 2,018,543 1,039,438 3,057,981 39,567,405 1,187,022 1,187,022

D 10 11,910,945 1,191,095 151,601 1,342,696 14,981,314 1,498,131 213,709 1,711,840 8,465,051 846,505 846,505

E 30 12,623,911 3,787,173 141 3,787,314 16,064,403 4,819,321 146 4,819,467 15,442,695 4,632,809 4,632,809

F 50 5,942,735 2,971,368 -- 2,971,368 5,822,600 2,911,300 -- 2,911,300 5,160,751 2,580,376 2,580,376

G 70 7,292,623 5,104,836 -- 5,104,836 5,483,533 3,838,473 -- 3,838,473 4,536,621 3,175,635 3,175,635

H 100 19,283,051 19,283,051 -- 19,283,051 17,738,400 17,738,400 -- 17,738,400 22,683,558 22,683,558 22,683,558

Total 642,845,806 36,030,486 1,850,924 37,881,410 653,591,432 34,535,078 1,535,042 36,070,120 691,831,525 36,967,684 36,967,684

(1) Refers to the supplementary allowance over and above the minimum requered by CMN Resolution 2,682/1999. This provision is established based on the internal scale of risk level.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

51

f) Changes in allowance for loan losses

Includes loans, leases and other receivables with characteristics of credit.

1st half/2017 1st half/2016

Opening balance 36,070,120 33,577,000

Adittion/(reversal) 13,371,203 14,191,667

Minimum required allowance 13,055,321 17,420,165

Additional allowance (1) -- (3,228,498)

Supplementary allowance (2) 315,882 --

Exchange fluctuation - foreign allowances 98,034 (191,558)

Write off (11,657,947) (10,609,425)

Closing balance 37,881,410 36,967,684

(1) Refers to the additional allowance over and above the minimum required by CMN Resolution 2,682/1999. This provision is established based on the experience of Management, by making projections for the loan portfolio, based on the history of default of operations.

(2) Refers to the supplementary allowance over and above the minimum requered by CMN Resolution 2,682/1999. This provision is established based on the internal scale of risk level.

g) Changes in allowance for other loan losses

Includes provisions for other receivables without characteristics of credit.

1st half/2017 1st half/2016

Opening balance 1,566,638 1,287,621

Adittion/(reversal) 10,360 (4,230)

Exchange fluctuation - foreign allowances (2,113) (1,759)

Write-off/other adjustments (19,388) 311,995

Closing balance 1,555,497 1,593,627

h) Leasing portfolio by maturity

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Up to 1 year (1) 218,677 269,250 322,129

More than 1 year and up to 5 years 295,069 334,612 375,038

Over 5 years 430 334 7,520

Total present value 514,176 604,196 704,687

(1) Includes amounts related to overdue installments.

i) Income from leasing transactions

1st half/2017 1st half/2016

Lease revenue 137,711 177,925

Leasing 137,711 177,925

Lease expenses (78,005) (102,955)

Leasing (77,942) (102,830)

Loss on disposal of leased assets (63) (125)

Total 59,706 74,970

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

52

j) Concentration of loans

Jun 30, 2017 % of credit portfolio

Dec 31, 2016 % of credit portfolio

Jun 30, 2016 % of credit portfolio

Largest debtor 25,467,331 4.0 24,759,930 3.8 24,902,493 3.6

10 largest debtors 80,922,188 12.6 82,224,321 12.6 84,799,603 12.3

20 largest debtors 106,612,782 16.6 109,099,432 16.7 114,021,590 16.5

50 largest debtors 142,113,219 22.1 146,075,455 22.3 156,854,968 22.7

100 largest debtors 165,875,751 25.8 170,529,116 26.1 183,403,024 26.6

k) Renegotiated credits

1st half/2017 1st half/2016

Credits renegotiated during the period (1) 23,484,515 21,735,942

Renegotiated when past due (2) 5,953,550 8,637,612

Renovated (3) 17,530,965 13,098,330

Changes on credits renegotiated when past due

Opening balance 27,086,224 19,652,990

Contracts (2) 5,953,550 8,637,612

Interest (received) and appropriated (2,072,533) (1,427,214)

Write off (3,924,763) (1,813,648)

Closing balance (4) 27,042,478 25,049,740

Allowance for loan losses of the portfolio renegotiated when past due 12,923,937 10,369,188

(%) Allowance for loan losses on the portfolio 47.8% 41.4%

90 days default of the portfolio renegotiated when past due 7,093,996 5,641,907

(%) Portfolio default 26.2% 22.5%

(1) Represents the balance of all installments (past due and future) of loans renegotiated during the period using the internet, automated teller machines (ATM) or branch network.

(2) Renegotiated credit under debt composition as a result of payment delay by the clients. (3) Renegotiated current credits (i.e. not past due) in the form of the extension or renewal of the credit or the granting of new loans for partial or full

settlement of previous contracts or any other type of agreement that changes the maturity or the payment terms, originally agreed. (4) Includes the amount of R$ 81,239 thousand (R$ 101,408 thousand as of June 30, 2016) related to renegotiated rural credits. The amount of R$

7,433,175 thousand (R$ 5,332,452 thousand as of June 30, 2016), related to deferred credits from rural portfolio governed by specific legislation, is not included.

l) Supplementary information

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Undrawn credit lines 119,686,272 118,745,942 142,317,122

Guarantees provided (1) 4,731,448 6,445,216 7,045,332

Confirmed export credit 249,940 218,348 203,830

Contracted credit opened for import 508,583 229,143 634,725

Linked resources 3,247,789 4,523,775 4,058,376

(1) For these operations, the Bank maintains an allowance recorded in Other liabilities - sundry, (Note 20,e) totaling R$ 366,209 thousand (R$ 442,300 thousand as of December 31, 2016 and R$ 525,327 thousand as of June 30, 2016 ) calculated in accordance with Resolution CMN 2,682/1999.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

53

m) Loan Operations by line of credit from Fund for Workers’ Assistance (Fundo de Amparo ao Trabalhador – FAT)

Lines of FAT TADE (1) Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Loans and discounted securities 1,036,462 770,150 16,532

Proger Urbano Capital de Giro 15/2005 and 01/2016 1,029,874 762,601 6

FAT Turismo - Capital de Giro 02/2012 6,588 7,549 16,526

Financing 2,506,171 2,800,917 3,014,334

Proger Urbano Investimento 18/2005 2,067,892 2,302,862 2,498,499

FAT Taxista 02/2009 327,289 352,767 348,850

FAT Turismo - Investimento 01/2012 84,211 100,930 119,630

Proger Exportação 27/2005 26,676 44,292 47,355

Proger Urbano Empreendedor Popular 01/2006 103 66 --

Rural and agribusiness financing 55,023 66,570 91,826

Pronaf Investimento 05/2005 45,278 55,267 72,939

Proger Rural Investimento 13/2005 7,288 8,490 11,683

Pronaf Custeio 04/2005 1,949 2,298 2,511

Proger Rural Custeio 02/2006 450 454 642

Giro Rural - Aquisição de Títulos 03/2005 58 61 4,051

Total 3,597,656 3,637,637 3,122,692

(1) TADE - Allocation Term of Special Deposits.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

54

11 - FOREIGN EXCHANGE PORTFOLIO

a) Breakdown

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Other receivables

Exchange purchases pending settlement 16,017,373 16,896,594 18,774,008

Bills of exchange and time drafts in foreign currency 40,838 40,232 40,098

Receivables from sales of foreign exchange 13,499,847 20,428,130 19,933,758

(Advances received in national/foreign currency) (12,523,009) (20,178,005) (19,198,715)

Foreign currency receivables 436 887 1,334

Income receivable on advances granted and on financed imports 252,269 283,707 250,219

Total 17,287,754 17,471,545 19,800,702

Current assets 17,001,540 17,188,751 18,854,747

Non-current assets 286,214 282,794 945,955

Other liabilities

Exchange sales pending settlement 13,465,426 18,739,249 18,376,250

(Financed imports) (904) (4,561) (17,465)

Exchange purchase liabilities 15,743,441 17,513,179 20,759,788

(Advances on exchange contracts) (12,924,888) (13,115,132) (17,597,845)

Foreign currency payables 52,859 54,017 55,872

Unearned income on advances granted 10,273 14,537 11,470

Total 16,346,207 23,201,289 21,588,070

Current liabilities 10,332,885 17,879,212 18,160,037

Non-current liabilities 6,013,322 5,322,077 3,428,033

Net foreign exchange portfolio 941,547 (5,729,744) (1,787,368)

Memorandum accounts

Credit opened for imports 561,188 270,106 1,025,129

Confirmed export credit 249,940 218,348 203,830

b) Foreign exchange results

1st half/2017 1st half/2016

Exchange income 3,722,102 10,198,797

Exchange expenses (3,272,077) (8,651,895)

Foreign exchange result 450,025 1,546,902

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

55

- OTHER RECEIVABLES

a) Specific credits

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Extension of rural credits - National Treasury 398,769 377,698 354,793

Other 540 541 716

Total 399,309 378,239 355,509

b) Sundry

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Deferred tax asset - tax credit (Note 24.e) 42,835,892 42,883,504 43,853,106

Sundry debtors from escrow deposits - contingencies (Note 27.g.1) 34,058,669 33,121,209 30,309,783

Credit card operations (Note 10.a) 22,829,591 23,510,421 21,526,694

Sundry debtors from escrow deposits - lawsuit (Note 27.h.1) 17,868,745 17,431,080 16,911,249

Credit linked to acquired operations (Note 10.a) (1) 11,459,443 14,983,588 16,969,731

Fund of allocation of surplus - Previ (Note 26.f) 9,615,869 9,562,010 9,501,682

Income tax and social contribution to offset 9,581,064 12,813,584 11,137,929

Receivables - other 6,129,091 6,268,085 5,283,961

Sundry debtors - domestic 2,574,957 2,779,446 2,426,088

National Treasury - interest rate equalization - agricultural crop - Law 8,427/1992 2,783,417 3,418,200 2,767,454

Receivables - non-financial companies 999,865 1,482,045 1,195,844

Sundry debtors - foreign 334,907 238,213 519,077

Receivables - National Treasury (2) 1,017,409 940,330 958,173

Receivables – ECT – Banco Postal 752,480 854,546 799,869

Rights for acquisition of royalties and government credits 577,424 661,559 917,654

Advances to cards transactions processing’s companies 588,956 22,583 123,834

Receivables acquisition 409,493 958,678 3,244,115

Salary advances and other advances 205,616 1,732,680 215,840

Actuarial assets (Note 26.e) 159,786 151,828 186,398

Sundry debtors from escrow deposits - other 1,023,054 74,103 54,365

Sundry debtors for purchasing assets 7,204 12,674 24,898

Other 340,865 324,871 703,963

Total 166,153,797 174,225,237 169,631,707

Current assets 99,374,659 107,887,734 101,215,592

Non-current assets 66,779,138 66,337,503 68,416,115

(1) Refers to the portfolios of payroll loans and vehicle financing granted to individuals, acquired by the Bank through assignments with full recourse to the transferor, accounted for in accordance with CMN Resolution 3,533/2008.

(2) Refers mainly to amounts from subsidies in operations with MCR 6-2 resources, MCR 6-4 (Rural credit manual) and they are supported by specific legislation, like the CMN resolutions, the Program of Bahia's Cocoa Farming Recovery (CMN Resolution No. 2,960/2002) and the regional funds (FDNE, FDA and FDCO).

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

56

- OTHER ASSETS

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Assets not for own use 297,118 277,417 267,107

Assets in special regime 176,251 172,116 167,726

Real estate 52,875 41,849 43,466

Residential properties 48,080 40,125 23,072

Machinery and equipment 2,923 3,138 3,630

Vehicles 428 508 509

Other 16,561 19,681 28,704

Materials in stock 57,373 61,885 61,358

Subtotal 354,491 339,302 328,465

(Impairment) (1) (148,531) (137,564) (124,846)

Prepaid expenses 281,689 269,633 320,244

Personnel expenses and other administrative expenses 139,637 172,844 168,940

Entities abroad 86,528 74,787 77,260

Tax expenses 38,149 31 31,363

Unearned insurance premiums 10,011 14,323 18,291

Rent 5,734 5,718 5,764

Promotion and public relations -- -- 14,397

Premiums for purchased payroll credits (2) 541 815 2,864

Other 1,089 1,115 1,365

Total 487,649 471,371 523,863

Current assets 459,450 454,562 512,074

Non-current assets 28,199 16,809 11,789

(1) The Bank recognized, in the 1st half/2017, allowance expenses for impairment losses of assets not in use in the amount of R$ (11,816) thousand (allowance expenses in the amount of R$ (6,091) thousand in the 1st half/2016).

(2) The amounts are amortized over the maturity of the installments of loans acquired from other financial institutions.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

57

- INVESTMENTS

a) Changes in associates and joint ventures

Share capital

Adjusted shareholders’

equity

Net income/(loss) - 1st half/2017

Number of shares (in thousands) Ownership interest in share

capital %

Book value Changes - 1st half/2017 Book value Equity income

Common Preferred Dec 31, 2016 Dividends Other events (1) Equity income Jun 30, 2017 Jun 30, 2016 1st half/2016

Domestic 16,631,072 (1,758,295) (364,254) 2,014,963 16,523,486 16,230,179 2,115,208

Banco Votorantim S.A. (2) 8,130,372 8,508,176 272,565 43,114,693 9,581,043 50.00% 4,212,970 -- (95,141) 136,086 4,253,915 4,139,311 104,089

Cateno Gestão de Contas de Pagamento S.A. (3) 414,000 12,176,510 297,011 2,397,200 1,198,600 30.00% 3,654,804 (90,955) -- 89,104 3,652,953 3,630,487 77,092

Cielo S.A. (4) 4,700,000 10,714,790 1,982,270 648,600 -- 28.69% 2,604,974 (84,023) (94,382) 555,422 2,981,991 2,211,858 553,982

Brasilprev Seguros e Previdência S.A. (4)(5) 1,193,539 2,588,086 475,049 572 1,145 75.00% 1,775,368 (215,657) (23,720) 382,548 1,918,539 1,924,164 348,493

BB Mapfre SH1 Participações S.A. (4)(5) 2,050,198 2,204,643 810,292 1,039,908 2,079,400 74.99% 2,138,636 (1,095,976) (5,303) 616,037 1,653,394 2,087,505 606,617

Mapfre BB SH2 Participações S.A. (4)(5) 1,968,380 3,507,578 57,589 369,163 384,231 50.00% 1,786,095 (51,485) (109,039) (48,336) 1,577,235 1,744,987 80,618

Brasilcap Capitalização S.A. (4)(5) 231,264 433,365 148,296 107,989 107,989 66.66% 300,698 (110,671) -- 98,854 288,881 359,713 158,443

Other investments 2,887,992 (109,528) 2,484 185,248 2,966,196 2,833,068 185,874

Goodwill/(bargain) purchase on acquisition of investments 530,222 -- (96,621) -- 433,601 618,866 --

Unrealized results (6) (3,260,687) -- 57,468 -- (3,203,219) (3,319,780) --

Overseas 72,657 -- (10,934) (169) 61,554 120,645 --

Other equity abroad -- -- 169 (169) -- -- --

Goodwill on acquisition of investments abroad 72,657 -- (11,103) -- 61,554 120,645 --

Total investments in subsidiaries and associates

16,703,729 (1,758,295) (375,188) 2,014,794 16,585,040 16,350,824 2,115,208

(Provision for losses) (11,213) -- -- -- (11,213) (9,018) --

(1) These basically refer to the and prior fiscal year adjustments and equity valuation adjustments of available-for-sale securities and the foreign exchange variation on investments abroad. Includes the initial adoption of Resolution CMN 4,512/16, in the amount of R$ 58,275 thousand, in the Banco Votorantim S.A.

(2) Excluded unrealized result arising from transactions with the Banco do Brasil. (3) Indirect interest of the Bank in Cateno, through its subsidiary BB Elo Cartões Participações S.A. The total share of the Bank is 50.08% (Cielo S.A. holds 70% of direct interest in Cateno). (4) Refers to the percentage of the equity interest, considering the acquisition of shares by the invested entity held in treasury. (5) Equity interest held by BB Seguros Participações S.A. It includes harmonization adjustments in accounting practices. (6) Unrealized profit arising from a new strategic partnership between BB Elo Cartões Participações S.A. and Cielo S.A., forming Cateno Gestão de Contas de Pagamento S.A.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

58

b) Summarized financial information of associates and joint ventures, not adjusted for the equity interest percentage held by the Bank

Balance sheet

Jun 30, 2017

Brasilprev Seguros e

Previdência S.A.

Banco Votorantim S.A.

Cateno Gestão de Contas de

Pagamento S.A.

BB Mapfre SH1 Participações

S.A.

Mapfre BB SH2 Participações

S.A. Cielo S.A. (1) Other Total

Total assets 219,240,244 102,473,731 12,875,783 13,134,469 13,677,631 74,077,379 40,751,531 476,230,768

Cash and cash equivalents 5,053 134,899 22 17,811 102,171 13,454 193,827 467,237

Short-term interbank investments -- 17,941,940 970,863 -- -- 371,806 6,124,102 25,408,711

Securities and derivative financial instruments 217,009,053 29,726,106 670,738 6,118,045 4,592,734 9,091,524 10,356,003 277,564,203

Loan operations -- 40,975,602 -- -- -- -- 46,460 41,022,062

Other credits and other assets 2,013,038 12,752,390 561,122 6,579,904 8,618,208 54,017,329 10,411,527 94,953,518

Permanent assets 213,100 942,794 10,673,038 418,709 364,518 10,583,266 13,619,612 36,815,037

Total liabilities 216,652,158 93,965,558 430,301 10,929,826 10,170,050 63,362,590 25,411,378 420,921,861

Deposits, securities, loans, derivative financial intruments and outhers onlendings -- 72,801,220 -- -- -- 6,922,573 1,486,352 81,210,145

Other liabilities 216,652,158 21,164,338 430,301 10,929,826 10,170,050 56,440,017 23,925,026 339,711,716

Technical provisions for insurance, pension plans and capitalization 208,478,371 -- -- 8,333,098 7,609,141 -- 18,355,271 242,775,881

Subordinated debts and equity and debt hybrid securities -- 4,868,605 -- -- -- -- -- 4,868,605

Other 8,173,787 16,295,733 430,301 2,596,728 2,560,909 56,440,017 5,569,755 92,067,230

Shareholders' equity 2,588,086 8,508,173 12,445,482 2,204,643 3,507,581 10,714,789 15,340,153 55,308,907

% of Total Share 75.00% 50.00% 30.00% 74.99% 50.00% 28.69% -- --

Shareholders' equity (proportional to the equity interest) 1,940,935 4,254,087 3,733,645 1,653,262 1,753,791 3,075,369 3,390,100 19,801,189

Goodwill/(bargain) purchase on acquisition of investments (1,563) 30,567 -- -- -- 366,005 38,592 433,601

Other amounts (2) (22,394) (172) (80,692) 132 (176,556) (93,378) (3,276,690) (3,649,750)

Balance of the investment 1,916,978 4,284,482 3,652,953 1,653,394 1,577,235 3,347,996 152,002 16,585,040

(1) Increase in assets and liabilities arising from changes in the accounting disclosure of Cielo S.A., after adherence to the Chart of Accounts for Financial Institutions - Cosif, after operating license issued by Bacen on April 27, 2017. (2) It refers, mainly, to unrealized results, harmonization in accounting practices and prior fiscal year adjustments of non-financial companies to Chart of Accounts for Financial Institutions - Cosif.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

59

Statements of income

1st half/2017

Brasilprev Seguros e

Previdência S.A.

Banco Votorantim S.A.

Cateno Gestão de Contas de

Pagamento S.A.

BB Mapfre SH1 Participações S.A.

Mapfre BB SH2 Participações S.A.

Cielo S.A. Other Total

Income from financial intermediation 200,931 1,560,808 -- 299,549 235,065 -- 1,279,189 3,575,542

Service fee income 1,146,751 270,287 1,366,414 -- 3,786 3,719,784 479,628 6,986,650

Other administrative expenses (119,680) (564,180) (461,265) (117,502) (252,155) (434,717) (407,778) (2,357,277)

Other operating income/expenses (323,487) (722,075) (455,061) 1,106,790 101,349 (573,383) 113,303 (752,564)

Non-operating income (2,200) (16,932) -- 244 669 (3,736) 15,384 (6,571)

Result before tax 902,315 527,908 450,088 1,289,081 88,714 2,707,948 1,479,726 7,445,780

Tax about profit and profit sharing (393,739) (255,343) (153,093) (467,589) (31,125) (725,678) (348,137) (2,374,704)

Net income 508,576 272,565 296,995 821,492 57,589 1,982,270 1,131,589 5,071,076

% of Total Share 75.00% 50.00% 30.00% 74.99% 50.00% 28.69% -- --

Net income (proportional to the equity interest) 381,406 136,282 89,098 616,037 28,795 568,751 339,117 2,159,486

Other amounts (1) 1,142 (196) 6 -- (77,131) (13,329) (55,184) (144,692)

Result in the equity method investments 382,548 136,086 89,104 616,037 (48,336) 555,422 283,933 2,014,794

(1) It refers, mainly, to unrealized results, harmonization in accounting practices and prior fiscal year adjustments of non-financial companies to Chart of Accounts for Financial Institutions - Cosif.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

60

Balance sheet

Jun 30, 2016

Brasilprev Seguros e

Previdência S.A.

Banco Votorantim S.A.

Cateno Gestão de Contas de

Pagamento S.A.

BB Mapfre SH1 Participações

S.A.

Mapfre BB SH2 Participações

S.A.

Neoenergia S.A.

Cielo S.A. Other Total

Total assets 175,665,563 108,091,839 12,510,093 14,188,884 14,191,416 11,893,420 21,512,344 30,911,369 388,964,928

Cash and cash equivalents 3,786 141,137 -- 107,590 167,962 136 3,458 203,159 627,228

Interbank investments -- 19,855,391 914,730 -- -- -- 6,999 592,682 21,369,802

Securities and derivative financial instruments 173,801,541 31,689,370 -- 6,380,130 4,728,932 194,413 71,005 17,549,424 234,414,815

Loan operations -- 41,394,671 -- -- -- -- -- -- 41,394,671

Other credits and other assets 1,661,678 14,392,570 536,795 7,319,390 8,859,302 615,292 11,164,834 10,022,197 54,572,058

Permanent assets 198,558 618,700 11,058,568 381,774 435,220 11,083,579 10,266,048 2,543,907 36,586,354

Total liabilities 173,065,410 99,809,421 409,708 11,405,348 10,700,534 1,959,729 13,810,164 24,163,880 335,324,194

Deposits, securities, loans, derivative financial intruments and outhers onlendings -- 41,777,991 -- -- -- -- -- -- 41,777,991

Other liabilities 173,065,410 58,031,430 409,708 11,405,348 10,700,534 1,959,729 13,810,164 24,163,880 293,546,203

Technical provisions for insurance, pension plans and capitalization 171,816,005 -- -- 8,486,569 7,963,607 -- -- 19,689,151 207,955,332

Subordinated debts and equity and debt hybrid securities -- 5,451,069 -- -- -- -- -- -- 5,451,069

Other 1,249,405 52,580,361 409,708 2,918,779 2,736,927 1,959,729 13,810,164 4,474,729 80,139,802

Shareholders' equity 2,600,153 8,282,418 12,100,385 2,783,536 3,490,882 9,933,691 7,702,180 6,747,489 53,640,734

% of Total Share 75.00% 50.00% 30.00% 74.99% 50.00% 11.99% 28.72% -- --

Shareholders' equity (proportional to the equity interest)

1,949,985 4,141,209 3,630,116 2,087,374 1,745,441 1,190,761 2,211,858 2,079,282 19,036,026

Goodwill/(bargain) purchase on acquisition of investments (1,561) 91,364 -- -- -- -- 481,598 168,110 739,511

Other amounts (1) (25,821) (1,898) 371 131 (454) (15,372) -- (3,381,670) (3,424,713)

Balance of the investment 1,922,603 4,230,675 3,630,487 2,087,505 1,744,987 1,175,389 2,693,456 (1,134,278) 16,350,824

(1) It refers, mainly, to unrealized results, harmonization in accounting practices and prior fiscal year adjustments of non-financial companies to Chart of Accounts for Financial Institutions - Cosif.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

61

Statements of income

1st half/2016

Brasilprev Seguros e

Previdência S.A.

Banco Votorantim S.A.

Cateno Gestão de Contas de

Pagamento S.A.

BB Mapfre SH1 Participações

S.A.

Mapfre BB SH2 Participações

S.A. Neoenergia S.A. Cielo S.A. Other Total

Income from financial intermediation 281,259 1,614,449 -- 400,734 380,977 -- -- 787,189 3,464,608

Service fee income 904,512 236,271 1,349,699 -- 4,294 -- 4,032,324 68,312 6,595,412

Other administrative expenses (103,575) (576,624) (501,651) (119,939) (241,561) (7,919) (431,115) (172,293) (2,154,677)

Other operating income/expenses (234,938) (583,288) (458,711) 1,065,913 155,342 332,307 (781,347) 595,251 90,529

Non-operating income 85 5,503 -- 4,093 746 2,024 (19,627) 16,882 9,706

Result before tax 847,343 696,311 389,337 1,350,801 299,798 326,412 2,800,235 1,295,341 8,005,578

Tax about profit and profit sharing (382,655) (501,901) (132,363) (541,870) (138,562) (420) (876,590) (383,230) (2,957,591)

Net income 464,688 194,410 256,974 808,931 161,236 325,992 1,923,645 912,111 5,047,987

% of Total Share 75.00% 50.00% 30.00% 74.99% 50.00% 11.99% 28.72% -- --

Net income (proportional to the equity interest) 348,493 97,205 77,092 606,617 80,618 39,077 552,419 356,294 2,157,815

Other amounts (1) -- 6,884 -- -- -- (9,385) 1,563 (41,669) (42,607)

Result in the equity method investments 348,493 104,089 77,092 606,617 80,618 29,692 553,982 314,625 2,115,208

(1) It refers, mainly, to unrealized results, harmonization in accounting practices and prior fiscal year adjustments of non-financial companies to Chart of Accounts for Financial Institutions - Cosif.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

62

c) Other investments

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Tax incentive investments 38,462 38,462 35,189

Equity securities 57 57 57

Stocks and shares 49,414 48,930 88,486

Other investments 4,092 4,038 7,868

Other equity abroad 79,610 78,911 76,512

Total (1) 171,635 170,398 208,112

(Provision for losses) (7,923) (7,908) (45,234)

(1) Includes, in Banco do Brasil, the amount of R$ 5,536 thousand as of June 30, 2016 and, in BB Consolidated, R$ 4,797 thousand of June 30, 2017 and R$ 9,090 thousand as of June 30, 2016 related of accumulated impairment.

d) Goodwill arising on acquisition of investments

Changes of goodwill 1st half/2017 1st half/2016

Opening balance 604,440 889,903

Amortizations (1) (105,676) (103,748)

Foreign exchange fluctuation (2) (2,046) (45,083)

Closing balance 496,718 741,072

(1) Recorded in other administrative expenses. (2) Levied on the goodwill from Banco do Brasil Americas e do Banco Patagonia.

e) Expected goodwill amortization

2nd half/2017 2018 2019 After 2019 Total

Banco do Brasil 39,518 18,237 18,601 15,765 92,121

Banco Votorantim 30,567 -- -- -- 30,567

Banco Patagonia 8,951 18,237 18,601 15,765 61,554

Tax effects (1) (17,783) (8,207) (8,370) (7,094) (41,454)

Net total 21,735 10,030 10,231 8,671 50,667

Other investments

BB-BI 61,759 141,696 162,550 -- 366,005

Cielo 61,759 141,696 162,550 -- 366,005

BB Seguros 12,268 11,040 10,028 5,256 38,592

Brasilcap 4,297 8,780 7,659 -- 20,736

IRB-Brasil Resseguros S.A. 7,971 2,260 2,369 5,256 17,856

BB Consolidated 113,545 170,973 191,179 21,021 496,718

Tax effects (1) (49,745) (75,724) (84,927) (8,881) (219,277)

Net total 63,800 95,249 106,252 12,140 277,441

(1) 25% of income tax and 20% of social contribution for financial companies and for non-financial companies of insurance, private pension plan and capitalization, and 25% of income tax and 9% of social contribution for other non-financial companies.

The expected amortization of goodwill arising on the acquisition of investments is based on the projections of results made at the time of the purchase, prepared by specialized firms or technical departments within the Bank, and considers the timing of the estimates and discount rates used in calculating the net present value of expected cash flows.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

63

f) Goodwill impairment test

The recoverable amount of goodwill arising on acquisition of investments is determined by the value in use, which is the discounted value of the cash flow projections of the invested entity (cash-generating unit). For the evaluation of the banks, the free cash flow for shareholders discounted by the cost of equity capital calculated for each institution was used.

Assumptions used to project these cash flows are based on public information, budgets and / or business plans of the purchased entities. These assumptions consider current and past performance, as well as expected market and macroeconomic growth.

The cash flow of the entities below were actively projected for ten years and considered perpetual from the eleventh year with fixed growth rates. For the periods that exceed the terms of the budget or business plan, the growth estimates are in line with those adopted by the entities. The nominal discount rate is determined annually based on the CAPM (Capital Asset Pricing Model) adjusted for the market and the currency of each country.

Entity (cash-generating unit) Growth rate p.a. (1) Discount rate p.a. (2)

Banco Votorantim 4.2% 14.2%

Banco do Brasil Americas 2.0% 8.6%

Banco Patagonia 19.0% 27.7%

(1) Nominal growth in perpetuity. (2) Geometric average used in economic evaluations.

According to the sensitivity analysis performed, there is no indication that changes in the assumptions would cause the book value of the cash-generating units to exceed the recoverable amount, except for Banco do Brasil Americas.

The recoverable amount of the goodwill arising on the acquisition of Cielo, as well as of the goodwill recognized in the BB Seguros/BB Seguridade, is determined by the net realizable value through sale, based on the share price of the companies on BM&FBovespa.

Entity (cash-generating unit) Share price (1)

BB Seguridade (BBSE3) R$ 29.88

Cielo (CIEL3) R$ 32.51

(1) Share price quoted at September 30, 2016.

In the first half 2017 and in the first half 2016, there was no impairment loss on goodwill arising on the acquisition of investments.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

64

15- PROPERTY AND EQUIPMENT

Dec 31, 2016 1st half/2017 Jun 30, 2017 Jun 30, 2016

Book value Changes Depreciation Cost value Accumulated Depreciation

Accumulated impairment

Book value Book value

Buildings 3,511,189 1,463 (177,683) 7,525,139 (4,172,835) (17,335) 3,334,969 3,675,748

Furniture and equipment in use 1,635,334 65,696 (142,868) 3,660,254 (2,101,967) (125) 1,558,162 1,426,655

Data processing systems 1,108,424 174,834 (211,464) 4,064,464 (2,992,670) -- 1,071,794 1,082,059

Facilities 174,558 1,536 (16,209) 987,073 (827,188) -- 159,885 190,650

Land 198,906 (1,388) -- 197,518 -- -- 197,518 200,348

Security systems 165,617 4,353 (15,112) 418,932 (264,074) -- 154,858 165,064

Constructions in progress 641,145 169,856 -- 811,001 -- -- 811,001 281,945

Communication systems 113,195 19,200 (10,845) 304,985 (183,435) -- 121,550 108,472

Transport systems 7,392 320 (891) 14,844 (8,023) -- 6,821 8,170

Furniture and equipment in stock 1,718 (53) -- 1,665 -- -- 1,665 1,718

Total 7,557,478 435,817 (575,072) 17,985,875 (10,550,192) (17,460) 7,418,223 7,140,829

- INTANGIBLE ASSETS

a) Changes and breakdown

Dec 31, 2016 1st half/2017 Jun 30, 2017 Jun 30, 2016

Book value Acquisitions Exchange fluctuation

Write offs Amortization Cost value Accumulated amortization

Accumulated impairment

Book value Book value

Rights to manage payroll (1) 5,596,439 140 -- -- (885,514) 10,569,150 (5,808,345) (49,740) 4,711,065 4,400,620

Goodwill on acquisition of absorbed company (2) 1,007,459 -- -- -- (503,729) 4,961,028 (4,457,298) -- 503,730 1,457,537

Softwares 1,839,214 352,944 2,362 (1,114) (127,188) 3,911,827 (1,845,609) -- 2,066,218 1,737,130

Other intangible assets 272,148 -- -- -- (54,057) 560,043 (341,952) -- 218,091 329,165

Total 8,715,260 353,084 2,362 (1,114) (1,570,488) 20,002,048 (12,453,204) (49,740) 7,499,104 7,924,452

(1) The values of acquisitions and write-offs include contracts renegotiated in the period, in which the new contract value is recorded and the past contract value is written-off without impact on Statement of Income.

(2) Refers to the goodwill from the merger of Banco Nossa Caixa on November 2009.

b) Estimate for amortization

2nd half/2017 2018 2019 2020 2021 After 2021 Total

Amounts to be amortized 1,520,190 1,891,190 1,363,263 915,838 650,758 1,157,865 7,499,104

c) Impairment test

The impairment test of goodwill on the acquisition of Banco Nossa Caixa, which was merged into Banco do Brasil, considers the value in use of Banco do Brasil´s operations in the state of São Paulo (cash-generating unit). Cash flows are based on cash-generating unit results in 2016, and in the 2017 budgets and internal projections of results from 2018 to 2021.

The assumptions adopted for the calculation are based on Banco do Brasil's Corporate Strategy and macroeconomic scenario. They consider the current and past performance and expected growth in the market segment.

Cash flows were discounted by the Bank’s cost of own capital. The nominal discount rate is measured annually based on the Capital Asset Pricing Model – CAPM adapted for the Brazilian market and referenced in Reais (R$).

Entity (cash-generating unit) Growth rate p.a Discount rate p.a.

Banco do Brasil - state of São Paulo - goodwill Banco Nossa Caixa (1)(2) 2.7% 14.6%

(1) Nominal growth in perpetuity. (2) Geometric average of five years of projections.

According to the sensitivity analysis performed, there is no indication that changes in the assumptions would cause the book value of the cash-generating unit to exceed its recoverable amount.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

65

In the first half 2017 and first half 2016, there was no impairment loss on goodwill on merged company.

- DEPOSITS AND SECURITIES SOLD UNDER REPURCHASE AGREEMENTS

a) Deposits

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Demand deposits 62,384,828 69,349,186 62,549,870

Individuals 32,251,148 33,991,206 29,142,429

Corporations 18,297,375 22,205,568 20,065,846

Restricted 8,236,303 7,546,026 9,471,591

Government 1,664,449 2,622,497 1,488,770

Financial system institutions 503,815 568,135 398,904

Foreign currency 344,597 691,111 705,597

Related companies 526,172 875,450 734,568

National Treasury Special 335,101 349,606 302,398

Domiciled abroad 111,576 70,856 86,528

Other 114,292 428,731 153,239

Saving deposits 150,982,353 151,763,344 148,367,610

Individuals 143,115,541 143,469,320 139,228,546

Corporations 7,504,813 7,964,554 8,754,939

Related companies 347,714 313,852 367,514

Financial system institutions 14,285 15,618 16,611

Interbank deposits 18,961,724 20,664,801 27,472,505

Time deposits 210,379,551 204,150,246 202,458,585

Judicial 130,513,708 121,969,028 116,654,650

National currency 50,069,291 52,691,661 60,079,689

Foreign currency 23,709,204 22,475,927 20,385,582

Fundo de Amparo ao Trabalhador - FAT (Note 17.e) 4,050,535 5,187,817 3,741,432

Funproger (Note 17.f) 345,805 324,120 302,697

Other 1,691,008 1,501,693 1,294,535

Other deposits 103,565 53,111 29,962

Total 442,812,021 445,980,688 440,878,532

Current liabilities 393,217,907 394,668,312 383,520,384

Non-current liabilities 49,594,114 51,312,376 57,358,148

b) Deposits by liability date

Without maturity Up to 3 months 3 to 12 months 1 to 3 years Over 3 years Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Time deposits (1) 136,683,643 19,949,371 7,427,002 18,903,381 27,416,154 210,379,551 204,150,246 202,458,585

Saving deposits 150,982,353 -- -- -- -- 150,982,353 151,763,344 148,367,610

Demand deposits 62,384,828 -- -- -- -- 62,384,828 69,349,186 62,549,870

Interbank deposits -- 6,967,988 8,719,157 943,901 2,330,678 18,961,724 20,664,801 27,472,505

Other deposits 103,565 -- -- -- -- 103,565 53,111 29,962

Total 350,154,389 26,917,359 16,146,159 19,847,282 29,746,832 442,812,021 445,980,688 440,878,532

(1) Includes the amount of R$ 48,326 thousand (R$ 51,068 thousand as of Dec 31, 2016 and R$ 57,911 thousand as of Jun 30, 2016), of time deposits with early repurchase clause (liquidity commitment), classified based on the contractual maturity dates.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

66

c) Securities sold under repurchase agreements

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Own portfolio 46,641,005 59,207,850 50,808,346

Corporate bonds 24,897,641 25,591,345 30,415,000

Treasury financial bills 18,516,660 32,718,983 19,241,233

Securities abroad 3,226,704 897,522 1,152,113

Third-party portfolio 403,180,745 315,426,182 361,160,289

National Treasury bills 57,667,980 45,709,377 138,623,309

Treasury financial bills 302,182,120 219,552,794 137,924,351

National Treasury notes 43,330,629 50,163,996 84,612,628

Securities abroad 16 15 1

Total 449,821,750 374,634,032 411,968,635

Current liabilities 437,069,635 358,409,319 379,837,556

Non-current liabilities 12,752,115 16,224,713 32,131,079

d) Deposits and securities sold under repurchase agreements expenses

1st half/2017 1st half/2016

Deposits (9,755,955) (17,942,769)

Saving deposits (5,311,341) (6,000,428)

Judicial deposits (5,830,354) (5,886,330)

Time deposits (3,278,086) (4,231,748)

Interbank deposits 4,663,826 (1,824,263)

Securities sold under repurchase agreements (22,989,168) (22,264,217)

Third-party portfolio (20,378,350) (18,923,692)

Own portfolio (2,610,818) (3,340,525)

Funds from acceptance and issuance of securities (1) (8,640,408) (11,323,454)

Agribusiness letters of credit (5,459,177) (7,814,270)

Financial bills (1,702,952) (1,972,745)

Securities issued abroad (648,566) (585,117)

Letters of credit – real estate (829,713) (951,322)

Subordinated debt abroad (2) (271,880) (274,345)

Equity and debt hybrid securities (3) (918,649) (973,305)

Other (336,760) (377,125)

Total (42,912,820) (53,155,215)

(1) Funds from acceptance and issuance of securities are disclosed in Note 18. (2) Subordinated debt abroad are disclosed in Note 20.c. (3) Equity and debt hybrid securities are disclosed in Note 20.d.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

67

e) Fund for worker's assistance (Fundo de Amparo ao Trabalhador – FAT)

Program Resolution/TADE (1)

Repayment of FAT Funds Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Type(2) Initial date Available

TMS(3) Invested TJLP(4)

Total Available

TMS(3) Invested TJLP(4)

Total Available

TMS(3) Invested TJLP(4)

Total

Proger Rural and Pronaf 10,834 47,500 58,334 13,409 57,761 71,170 18,503 78,120 96,623

Pronaf Custeio 04/2005 RA 11/2005 232 1,170 1,402 127 1,440 1,567 91 1,705 1,796

Pronaf Investimento 05/2005 RA 11/2005 9,834 41,965 51,799 12,187 51,238 63,425 17,054 69,457 86,511

Rural Custeio 02/2006 RA 11/2005 6 220 226 57 246 303 84 369 453

Rural Investimento 13/2005 RA 11/2005 762 4,145 4,907 1,038 4,837 5,875 1,274 6,589 7,863

Proger Urbano 548,435 2,943,843 3,492,278 1,531,783 2,914,158 4,445,941 667,719 2,341,018 3,008,737

Urbano Investimento 18/2005 RA 11/2005 278,560 1,921,297 2,199,857 481,056 2,150,447 2,631,503 316,799 2,341,018 2,657,817

Urbano Capital de Giro 01/2016 RA 06/2016 269,875 1,022,546 1,292,421 1,050,727 763,711 1,814,438 350,920 -- 350,920

Other 75,291 424,632 499,923 182,140 488,566 670,706 115,339 520,733 636,072

Exports 27/2005 RA 11/2005 14,309 23,069 37,378 15,768 41,379 57,147 13,973 45,324 59,297

FAT Taxista 02/2009 RA 09/2009 48,447 320,751 369,198 149,178 348,576 497,754 62,814 346,391 409,205

FAT Turismo Investimento 01/2012 RA 08/2012 12,281 80,750 93,031 15,777 97,990 113,767 13,053 117,735 130,788

FAT Turismo Capital de Giro 02/2012 RA 08/2012 254 62 316 1,417 621 2,038 25,499 11,283 36,782

Total 634,560 3,415,975 4,050,535 1,727,332 3,460,485 5,187,817 801,561 2,939,871 3,741,432

(1) TADE - Allocation Term of Special Deposits. (2) RA - Automatic Return (monthly, 2% of the total balance). (3) Funds remunerated by the Taxa Média Selic (average selic rate - TMS). (4) Funds remunerated by Taxa de Juros de Longo Prazo (long-term interest rate - TJLP).

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

68

FAT is a special accounting and financial fund, established by Law 7,998/1990, associated with the Ministério do Trabalho e Emprego (Ministry of Labor and Employment) and managed by the Executive Council of the Fundo de Amparo ao Trabalhador (Fund for Workers’ Assistance) - Codefat. Codefat is a collective, tripartite, equal level organization, composed of representatives of workers, employers and government.

The main actions to promote employment using FAT funds are structured around the Employment and Earnings Generating Program (Proger), which resources are invested through special deposits, established by Law 8,352/1991, in official federal financial institutions. These programs include, among others, the urban Proger program (Investment and Working Capital) and the rural Proger program and the National Program for Strengthening Family Farming - Pronaf, in addition to the special lines such as FAT Integrar – Rural e Urbano, FAT Giro Setorial – Micro e Pequenas Empresas (micro and small-sized companies), FAT Giro Setorial – Médias e Grandes Empresas (medium and large-sized companies), FAT Giro Setorial Veículos – Micro e Pequenas Empresas (micro and small-sized companies), FAT Giro Setorial Veículos – Médias e Grandes Empresas (medium and large-sized companies), FAT Fomentar – Micro e Pequenas Empresas (micro and small-sized companies), FAT Fomentar – Médias e Grandes Empresas (medium and large-sized companies), FAT Giro Agropecuário, FAT Inclusão Digital (digital inclusion), FAT Taxista (taxi), FAT Turismo Investimento and FAT Turismo Capital de Giro.

The FAT special deposits invested in Banco do Brasil are daily accrued the Average Selic Rate (TMS), when not lent out. When disbursed as loans, the interest rate is swapped to the Long-term Interest Rate (TJLP) until maturity. The accruals are paid to FAT on a monthly basis, as established in Codefat Resolutions 439/2005 and 489/2006.

f) Endorsement fund for the generation of employment and income (Funproger)

The Endorsement fund for the generation of employment and income (Funproger) is a special accounting fund established on November 23, 1999 by Law 9,872/1999, amended by Law 10,360/2001 and by Law 11,110/2005 and regulated by Codefat Resolution 409/2004, and its amendments. It is managed by Banco do Brasil under the supervision of Codefat/MTE and the balance at June 30, 2017 is R$ 345,805 thousand (R$ 324,120 thousand as of December 31, 2016 and R$ 302,697 thousand as of June 30, 2016).

The objective of Funproger is to provide endorsement to entrepreneurs who do not have the necessary guarantees to contract financing by Proger Urbano and Programa Nacional de Microcrédito Produtivo Orientado, through the payment of a commission. The Funproger equity where incorporated from the spread between TMS and TJLP accrued over FAT special deposits. Other sources of funds are the operations accruals and the income paid by Banco do Brasil, the fund manager.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

69

- FUNDS FROM ACCEPTANCE AND ISSUANCE OF SECURITIES

Funding Currency Issued value Remuneration p.a. Issue date Maturity Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Banco do Brasil 142,698,312 162,208,660 171,588,774

Global Medium - Term Notes Program 6,917,582 6,421,430 6,566,303

R$ 350,000 9.75% 2007 2017 365,461 364,455 355,080 USD 500,000 6.00% 2010 2020 1,695,270 1,669,293 1,643,530 EUR 1,000,000 3.75% 2013/2014 2018 3,908,568 3,496,582 3,667,774 CHF 275,000 2.50% 2013 2019 948,283 891,100 899,919

"Senior Notes" 5,998,866 7,561,835 7,442,474

USD 500,000 3.88% 2011 2017 -- 1,656,809 1,630,511 USD 1,809,700(1) 3.88% 2012 2022 5,998,866 5,905,026 5,811,963

Structured notes 69,217 63,632 64,857

EUR 18,400 2.18% to 3.55% 2021 69,217 63,632 64,857 Certificates of deposits (2) 5,828,391 3,388,669 1,637,263

Short term 0.85% to 4.60% 5,636,234 3,169,956 1,508,173 Long term 2.57% to 4.60% 2020 192,157 218,713 129,090

Certificates of structured operations 201,499 102,312 136,797

Short term 124,714 -- -- Long term 2020 76,785 102,312 136,797

Letters of credit - real estate 20,131,501 17,073,622 18,066,485

Short term 135,098 39,344 9,235,106 Long term 2026 19,996,403 17,034,278 8,831,379

Letters of credit agribusiness 100,665,142 124,965,334 135,418,026

Short term 90,288,297 62,584,051 48,530,625 Long term 2020 10,376,845 62,381,283 86,887,401

Financial letters 2,886,114 2,631,826 2,256,569

Long term

98.50% to 104.00% DI IPCA + 5.30% p.a

Fixed 9.54% p.a. to 14.00% p.a.

2020 2,886,114 2,631,826 2,256,569

Banco Patagonia (3) 385,395 325,553 284,625

Short term ARS 203,981 247,691 130,600 Long term ARS 2020 181,414 77,862 154,025

Special Purpose Entities − SPE abroad (4) 2,805,000 2,801,840 2,796,517

Securitization of future flow of payment orders from abroad (4) USD 24,000(1) 5.25% 2008 2018 79,582 117,580 154,401

Structured notes (4) USD 500,000 Libor 6m+2.50% 2014/2015 2034 1,664,755 1,639,455 1,613,402 USD 320,000 Libor 6m+3.25% 2015 2030 1,060,663 1,044,805 1,028,714

Eliminated amount on consolidation (5) (67,167) (169,700) (161,191)

Total 145,821,540 165,166,353 174,508,725

Current liabilities 96,826,343 68,052,214 60,873,824 Non-current liabilities 48,995,197 97,114,139 113,634,901

(1) Refers to the outstanding value since partial repurchases ocurred. (2) Securities issued abroad in USD, AUD and EUR. (3) Securities issued with rates from 22.50% p.a. to 24.00% p.a. and from Badlar+325 pts. to Badlar+425 pts. (4) The Special Purpose Entities (SPE) "Dollar Diversified Payment Rights Finance Company" and "Loans Finance Company Limited" were organized

under the laws of the Cayman Islands. The liabilities arising from securities issued by these entities are paid using the funds accumulated in their accounts. The SPE declare that have no relevant asset or liability other than the rights and duties originating from the contracts for issue of securities. The Bank is not a shareholder, the owner, or a beneficiary of any of the results of operations of the SPE.

The Dollar Diversified Payment Rights Finance Company was organized for the following purposes: a) fund raising by issuance of securities in the international market; (b) use of resources obtained by issuing securities to pay for the purchase, with the Bank, of the rights to payment orders issued by banking correspondents located in the U.S. and by the agency of BB New York, in U.S. dollars, for any agency in Brazil (Rights on Consignment); and (c) making payments of principal and interest on securities issued and other payments defined in the contract of issuance of these securities.

The Loans Finance Company Limited was organized for the following purposes: a) fund raising by issuance of securities in the international market; (b) closing and booking repurchase agreements with the Bank; (c) purchasing of protection against credit risk of the Bank through a credit derivative, which is actionable only in case of Bank's default in any of the obligations assumed in repurchase agreements; and (d) making payments of principal and interest on securities issued and other payments defined in the contract of issuance of these securities.

(5) Refers to securities issued by Banco do Brasil Conglomerate, which are in possession of overseas subsidiaries/entities.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

70

- BORROWINGS AND ONLENDINGS

a) Borrowings

up to 90 days from 91 to 360 days

from 1 to 3 years

from 3 to 5 years

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Overseas 5,572,589 10,405,336 3,478,060 284,660 19,740,645 20,409,348 22,762,981

Borrowings from bankers abroad 5,544,248 10,335,191 3,445,901 282,437 19,607,777 20,345,736 22,586,697

Imports 26,794 54,709 32,159 2,223 115,885 63,612 102,951

Exports 1,547 15,436 -- -- 16,983 -- 73,333

Total 5,572,589 10,405,336 3,478,060 284,660 19,740,645 20,409,348 22,762,981

Current liabilities 15,977,925 17,997,094 18,577,980

Non-current liabilities 3,762,720 2,412,254 4,185,001

b) Onlendings

Domestic - official institutions

Programs Finance charges Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

National Treasury - rural credit 163,552 149,248 165,578

Pronaf TMS (if available)

Fixed 0.50% p.a. to 5.50% p.a. (if applied)

42,830 30,766 36,674

Cacau (cocoa) IGP-M + 8.00% p.a. or TJLP + 0.60% p.a. or 6.35% p.a.

98,917 98,243 96,737

Recoop Fixed 5.75% p.a. to 8.25% p.a. or

IGP-DI + 1.00% p.a. or IGP-DI + 2.00% p.a.

13,134 16,096 19,877

Other 8,671 4,143 12,290

BNDES

Fixed 0.00% p.a. to 9.50% p.a. TJLP + 0.00% p.a. to 5.40% p.a. IPCA + 3.72% p.a. to 9.41% p.a. Selic + 0.40% p.a. to 2.50% p.a.

FX Variation + 0.90% p.a. to 3.00% p.a.

29,776,717 32,086,856 35,323,513

Caixa Econômica Federal Fixed 5.24% p.a. (average) 25,009,178 23,758,043 21,648,278

Finame

Fixed 0.00% p.a. to 11.00% p.a. TJLP + 0.50% p.a. to 5.50% p.a.

FX Variation + 0.90% p.a. to 3.00% p.a. Selic + 2.08% p.a. to 2.33% p.a.

22,466,643 24,765,860 27,532,146

Other official institutions 2,036,531 2,322,686 1,933,121

Special supply - deposits (Note 9.b) 1,874,492 1,874,492 1,643,753

Funcafé TMS (if available)

Fixed 8.75% p.a. to 11.25% p.a. (if applied)

162,011 448,167 289,341

Other 28 27 27

Total 79,452,621 83,082,693 86,602,636

Current liabilities 39,332,945 39,463,427 38,264,763

Non-current liabilities 40,119,676 43,619,266 48,337,873

Overseas

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Special Fund for Support to Small and Medium Manufacturing Companies 477 477 477

Total 477 477 477

Current liabilities 95 95 95

Non-current liabilities 382 382 382

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

71

c) Expense on borrowings and onlendings

1st half/2017 1st half/2016

Borrowings expenses (1) (1,151,864) 6,604,983

Onlendings expenses (1) (2,752,060) 2,972,447

Foreign (1) (569,693) 5,395,127

BNDES (1,120,160) (1,298,342)

Caixa Econômica Federal (732,994) (726,023)

Finame (239,754) (291,557)

National Treasury (37,507) (49,722)

Other (51,952) (57,036)

Expenses for obligations with bankers abroad (1) (46,485) 3,490,657

Expenses for financial and development funds liabilities (1) (584,904) 806,363

Foreign exchange profit/(loss) on overseas investments 275,703 (2,540,229)

Total (4,259,610) 11,334,221

(1) The credit balances presented arise from the negative exchange variation of the period (the appreciation of the Real against the Dollar).

- OTHER LIABILITIES

a) Taxes and social security

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Legal liabilities (Note 27.h1) (1) 6,571,673 6,571,673 6,571,673

Deferred tax liabilities (Note 24.d) 1,993,464 2,088,502 2,348,411

Provision for taxes and contributions on net income 1,592,009 481,286 4,909,677

Taxes and contributions payable 1,214,662 1,412,098 1,355,457

Taxes and contributions on net income payable 396,360 5,472,488 425,088

Total 11,768,168 16,026,047 15,610,306

Current liabilities 11,188,234 15,293,551 14,877,176

Non-current liabilities 579,934 732,496 733,130

(1) The provision for restatement of judicial deposit classified under "Other liabilities - Taxes and social security - Legal liabilities" was reclassified to "Other liabilities - Sundry - Legal liabilities – Provision for tax risks ", according to Bacen Circular Letter No. 3.782/2016.

b) Financial and development funds

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Marinha Mercante 8,053,441 8,190,785 7,667,223

Pasep (1) 2,632,693 2,632,348 2,661,846

Fundo de Desenvolvimento do Nordeste - FDNE 2,077,529 2,070,560 2,123,251

Fundo de Desenvolvimento do Centro Oeste - FDCO 1,078,309 893,803 275,598

Funds from Governo do Estado de São Paulo 776,463 761,340 744,582

Fundo Nacional de Aviação Civil - FNAC 63,998 64,926 77,652

Other 154,833 176,763 190,968

Total 14,837,266 14,790,525 13,741,120

Current liabilities 8,946,766 9,055,620 8,606,530

Non-current liabilities 5,890,500 5,734,905 5,134,590

(1) The Bank is administrator of the Public Servant Heritage Formation Program (Pasep), guaranteeing a minimum return equal to the Long-Term Interest Rate - TJLP.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

72

c) Subordinated debts

Funding Issued value Remuneration p.a. Issue date Maturity Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Banco do Brasil

FCO – Resources from Fundo Constitucional do Centro-Oeste

26,591,388 25,237,153 23,841,572

Funds applied (1) 23,457,135 22,219,924 21,599,707

Resources available (2) 3,134,253 3,017,229 2,241,865

Subordinated debt abroad 9,821,086 9,668,175 9,516,527

USD 660,000 5.38% 2010 2021 2,231,534 2,197,183 2,163,114

USD 1,500,000 5.88% 2011 2022 5,056,889 4,977,616 4,899,001

USD 750,000 5.88% 2012 2023 2,532,663 2,493,376 2,454,412

Subordinated letters of credit 25,924,064 27,100,626 25,296,723

700,000 111.00% of CDI 2011 2017 1,358,765 3,918,702 3,641,211

4,844,900

111.50% of CDI

1.06% to 1.11% + CDI

5.24% to 5.56% + IPCA

Fixed 10.51%

2012 2018 8,548,842 8,120,026 7,663,825

215,000 112.00% of CDI 2012 2019 390,660 367,374 341,133

4,680,900 111.00% of CDI 2013 2019 8,036,260 7,561,372 7,025,938

150,500 112.50% of CDI

5.45% + IPCA 2012 2020 274,146 258,947 241,746

377,100 112.00% to 114.00% of CDI 2014 2020 560,561 526,593 488,362

163,523 112.00% to 114.00% of CDI 2014 2020 249,921 234,894 217,972

1,594,580 113.00% to 115.00% of CDI 2014 2021 2,352,260 2,208,470 2,046,731

2,273,804 113.00% to 115.00% of CDI 2014 2021 3,523,598 3,309,117 3,067,795

400,000 8.08% + IPCA 2014 2022 629,051 595,131 562,010

Total subordinated debt from Banco do Brasil

62,336,538 62,005,954 58,654,822

Eliminated amount on consolidation (30,950) (30,203) (7,135)

Total subordinated debt consolidated (3)(4) 62,305,588 61,975,751 58,647,687

Current liabilities 8,331,154 4,158,742 2,448,477

Non-current liabilities 53,974,434 57,817,009 56,199,210

(1) Remunerated at the rates on the loans funded with these amounts less the del credere of the financial institution, according to article 9 of Law 7,827/1989.

(2) Remunerated based on extra-market rate announced by the Banco Central do Brasil (Bacen), according to article 9 of Law 7,827/1989. (3) R$ 39,425,703 thousand (40,181,808 thousand as of Dec 31, 2016 and 38,904,584 thousand as of Jun 30, 2016) of the total balance is considered tier

II of the Referential Equity (RE). (4) Includes the amount of R$ 7,315,391 thousand, relating to subordinated debt recorded in the line Debt Instruments eligible as capital.

d) Equity and debt hybrid securities

Funding Issued value(1) Remuneration

p.a. Issue date Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Perpetual bonds

USD 1,498,500 8.50% 10/2009 5,031,761 4,954,884 4,878,634

USD 1,398,727 9.25% 01 and 03/2012 4,802,446 4,731,512 4,661,142

USD 1,988,000 6.25% 01/2013 6,640,695 6,539,293 6,438,716

R$ 8,100,000 5.50%(2) 09/2012 8,145,172 8,175,552 8,146,227

USD 2,169,700 9.00% 06/2014 7,175,246 7,065,637 6,956,920

Total Banco do Brasil 31,795,320 31,466,878 31,081,639

Eliminated amount on consolidation (42,591) (1,252) (13,876)

Total reclassified to shareholders' equity (Note 23.c) (8,100,000) (8,100,000) (8,100,000)

Total BB Consolidated 23,652,729 23,365,626 22,967,763

Current liabilities 86,508 279,308 74,600

Non-current liabilities 23,566,221 23,086,318 22,893,163

(1) Refers in funding in US dollars, the outstanding value, as occurred partial repurchases of these instruments. (2) Since August.28, 2014, the remuneration is fully variable (Note 23.c).

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

73

R$ 22,909,285 thousand of the Perpetual Bonds is included in the Referential Equity (R$ 22,565,112 thousand as of December 31, 2016, and R$ 22,223,710 thousand as of June 30, 2016). Of this amount, R$ 18,112,395 thousand are recorded in debt instruments eligible as capital (Note 28.b).

The bonds of USD 1,500,000 thousand (outstanding value USD 1,498,500 thousand), issued in October 2009, have the option of redemption at the discretion of the Bank from 2020 or on each subsequent, semi-annual interest payment date, as long as it has been previously authorized by Banco Central do Brasil (Bacen). In case the Bank does not exercise the option to redeem on October 2020, the interest on the bonds will be adjusted on this date to 7.782% plus the traded rate on 10 year North American Treasury bonds. Thereafter, every 10 years, the interest on the bonds will be adjusted by taking into account the traded rate of the 10 year North American Treasury bonds.

The bonds issued in January 2012 and March 2012 (reopening), of USD 1,000,000 thousand (outstanding value USD 650,000 thousand) and USD 750,000 thousand (outstanding value USD 748,727 thousand) respectively, and the bonds issued in January 2013 of USD 2,000,000 thousand (outstanding value USD 1,988,000 thousand), had their terms and conditions modified on September 27, 2013, in order to adjust them to the rules of Bacen through Resolution No. 4,192 of March 1, 2013, which regulates the implementation of Basel III in Brazil. The changes were effective from October 1, 2013, when the instruments were submitted to Bacen to obtain authorization to be included in the Supplementary Capital (Tier I) of the Bank. The authorization was granted on October 30, 2013.

The bonds issued in June 2014 of USD 2,500,000 thousand (outstanding value USD 2,169,700 thousand), have the option of redemption at the discretion of the Bank from June 18, 2024 or on each subsequent, semi-annual interest payment date, as long as it has been previously authorized by the Central Bank of Brazil. If the Bank did not exercise the option to redeem in June 2024, the interest on the bonds will be adjusted to 6.362% plus the traded rate on 10 year North American Treasury bonds.

If the Bank does not exercise the redemption option in April 2023 for the bonds issued in 2012, in April 2024 for the bonds issued in 2013, and in June 2024 for the bonds issued in 2014, the rate of bond interest is adjusted on that date and every 10 years according to the 10 year North American Treasury bondsat the time plus the initial credit spread. The bonds have the following options of redemption, subject to prior authorization of Bacen:

(i) the Bank may, at its option, redeem the bonds in whole but not in part in April 2023 for the bonds issued in 2012, in April 2024 for the bonds issued in 2013, and in June 2024 for the bonds issued in 2014, and on each subsequent, semi-annual interest payment date, at the base redemption price;

(ii) the Bank may, at its option, redeem the bonds in whole, but not in part, after five years from the date of issue, as long as it is before April 2023, for the bonds issued in 2012, before April 2024 for the bonds issued in 2013, and before April 2024 for the bonds issued in 2014, as a result of a tax event, at the base redemption price;

(iii) the Bank may, at its option, redeem the bonds in whole but not in part, after five years from the date of issue, as long as it is before April 2023, for the bonds issued in 2012, and in April 2024 for the bonds issued in 2013, on the occurrence of a regulatory event, at the higher value between the base redemption price and the Make-whole amount;

(iv) the Bank may, at its option, redeem the bonds in whole but not in part, after five years from the date of issue as long as it is before June 2024 for the bonds issued in 2014, on the occurrence of a regulatory event at the base redemption price.

The bonds issued in October 2009 determine that the Bank suspends the semi-annual payments of interest and / or accessories on those securities issued (which will not be due or accrued) if:

(i) the Bank does not comply or the payment of such charges does not allow the bank to comply with the levels of capital adequacy, operating limits, or its financial indicators are under the minimum level required by Brazilian regulations applicable to banks;

(ii) Bacen or the regulatory authorities determine the suspension of payment of such charges; (iii) any event of insolvency or bankruptcy occurs; (iv) a default occurs; or (v) the Bank has not distributed dividends or interest on equity to common shareholders for the period of

calculation of such interest and / or accessories.

The bonds issued in January and March 2012, in January 2013 and in June 2014 determine that the Bank suspend the semi-annual payments of interest and/or accessories on those securities issued (which will not be due or accrued) if:

(i) distributable income for the period are not sufficient for making the payment (discretionary condition of the Bank);

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

74

(ii) the Bank does not comply or the payment of such charges does not allow the Bank to comply with the levels of capital adequacy, operating limits, or its financial indicators are under the minimum level required by Brazilian regulations applicable to banks;

(iii) Bacen or the regulatory authorities determine the suspension of payment of such charges; (iv) any event of insolvency or bankruptcy occurs; or (v) a default occurs.

According to Basel III rules, the bonds issued in January 2012, March 2012, in January 2013 and in June 2014 have mechanisms of loss absorption. Moreover, if the item (i) occurs, the payment of dividends by Bank to its shareholders will be limited to the minimum required determined by applicable law until the semi-annual interest payments and / or accessories on those titles have been resumed in full. Finally, these bonds will expire permanently and at the minimum value corresponding to the balance recorded in the Tier I capital of the Bank if:

(i) the main capital of the Bank is less than 5.125% of the amount of risk-weighted assets (RWA); (ii) the decision to make a capital injection from the public sector or an equivalent capital contribution to the Bank

is taken, in order to maintain the bank’s viability; (iii) the Bank, on a discretionary assessment regulated by the CMN, sets out, in writing, the expiration of the

bonds to enable the continuity of the Bank.

e) Sundry

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Credit/debit card operations 19,844,445 21,471,614 19,170,677

Actuarial liabilities (Note 26.e) 13,452,483 12,527,486 14,546,091

Legal liabilities – Provision for tax risks (Note 27.h1) (1) 9,443,223 8,869,908 8,062,268

Provisions for civil claims (Note 27.e1) 6,666,100 6,897,180 6,811,150

Sundry creditors - domestic 6,068,414 8,196,248 7,250,687

Provisions for pending payments 4,463,837 6,181,130 5,374,592

Funds linked to loan operations 3,247,789 4,523,775 4,058,376

Provision for labor claims (Note 27.e1) 2,559,471 2,508,268 2,598,301

Liabilities for rendering payment services 2,177,467 1,815,374 2,087,537

Liabilities for official agreements 1,285,684 1,217,719 1,218,125

Sundry creditors - abroad 991,197 864,820 817,678

Liabilities for premiums granted under customer loyalty schemes 569,725 637,623 792,490

Liabilities for operations linked to assignments 550,176 612,132 664,086

Liabilities for assets acquisition 537,818 470,607 259,882

Creditors of resources to be disbursed 495,836 434,927 536,989

Provisions for guarantees provided (Note 20.f) 366,209 442,300 525,327

Provision for tax litigation (Note 27.e1) (2) 273,105 276,015 267,932

Provision for losses with the Fundo de Compensação de Variação Salarial - FCVS 165,038 159,601 299,913

Liabilities for shares in investment funds 108,165 97,049 101,391

Guarantees on credits assigment 778 729 866

Other 638,843 617,653 604,304

Total 73,905,803 78,822,158 76,048,662

Current liabilities 69,640,329 73,694,320 71,594,252

Non-current liabilities 4,265,474 5,127,838 4,454,410

(1) Refers to the provision for restatement of judicial deposit, according to Bacen Circular Letter No. 3.782/2016. (2) According to Bacen Circular Letter No. 3,782/2016, “Provision for tax litigation” were reclassified from “Other liabilities - Taxes and social security” to

“Other liabilities - Sundry".

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

75

f) Financial Guarantees

Jun 30, 2017

Guaranteed values Allowance(1)

Guarantees related to bidding, auctions, service rendering or execution of works 1,448,843 125,346

Sureties or guarantees in lawsuits and in tax-based administrative proceedings 998,581 42,985

Linked to the distribution of TVM by public offering 86,961 435

Guarantees related to the supply of goods 17,159 --

Other financial guarantees provided (2) 1,555,070 195,286

Other bank guarantees 623,513 2,157

Other guarantees 1,321 --

Total 4,731,448 366,209

(1) Calculated in accordance with Resolution CMN 2,682/1999. (2) Refers mainly to guarantees provided in foreign currency.

- OTHER OPERATING INCOME/EXPENSES

a) Service fee income and bank fee income

1st half/2017 1st half/2016

Account fee 3,309,202 2,969,100

Fund management 2,631,499 2,079,633

Insurance, pension plans and capitalization commissions 1,428,744 1,532,275

Loans and guarantees provided 962,532 804,267

Billing 754,942 840,200

Card income 740,196 663,194

Collection 542,956 517,380

Capital market income 349,551 319,906

National Treasury and official funds management 338,003 281,807

Consortium management fees 335,636 238,002

Interbank 80,653 89,150

Other 937,494 949,714

Total 12,411,408 11,284,628

b) Personnel expenses

1st half/2017 1st half/2016

Wages and salaries (4,790,057) (4,937,729)

Social charges (1,551,444) (1,598,049)

Benefits (1,527,057) (1,331,643)

Personnel administrative provisions (1,174,764) (1,437,535)

Labor lawsuits (790,330) (767,079)

Pension plans (406,227) (387,484)

Training (22,387) (28,345)

Director's and officer's remuneration (22,318) (24,366)

Total (10,284,584) (10,512,230)

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

76

c) Other administrative expenses

1st half/2017 1st half/2016

Amortization (1,680,987) (1,676,746)

Rent (803,471) (680,231)

Expenses with outsourced services (707,065) (750,845)

Security services (610,339) (562,162)

Communications (576,845) (579,417)

Depreciation (575,072) (561,993)

Transport (502,093) (547,500)

Data processing (407,848) (394,052)

Financial system services (359,031) (393,649)

Maintenance and upkeep (352,152) (328,407)

Specialized technical services (265,516) (195,517)

Water, electricity and gas (256,307) (295,657)

Advertising and marketing (122,999) (125,973)

Materials (58,858) (58,998)

Promotion and public relations (56,889) (120,592)

Domestic travel (48,677) (40,188)

Other (308,474) (288,857)

Total (7,692,623) (7,600,784)

d) Other operating income

1st half/2017 1st half/2016

Update of deposits in guarantee 1,466,183 1,437,288

Recovery of charges and expenses 1,013,052 1,016,171

Cards transactions 442,958 429,830

Income on receivables 414,570 449,468

Surplus allocation update - Previ Plan 1 (Note 26.f) 322,469 689,502

From non-financial subsidiaries 164,251 157,513

Reversal of provisions - administrative and personnel expenses 103,215 79,042

Adjustment of tax recoverable 87,797 68,461

Income from specific credits and special operations - National Treasury 21,842 46,099

Dividends received 9,886 --

Subsidy of the National Treasury - MPO 3,140 3,233

Royalties and special participation -- 39,102

Other 303,908 471,004

Total 4,353,271 4,886,713

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

77

e) Other operating expenses

1st half/2017 1st half/2016

Discounts granted on renegotiations (735,360) (641,217)

Actuarial liabilities update (702,077) (730,656)

Cards transactions (657,932) (732,787)

Adjustment of the provision for deposit in court (Note 27.h) (573,315) (557,871)

Business relationship bonus (455,311) (260,453)

Civil and tax claims (404,654) (179,390)

From non-financial subsidiaries (207,990) (207,252)

Failures/frauds and other losses (197,758) (164,050)

ATM Network (182,135) (178,280)

Compensation for transactions of Banco Postal (114,236) (607,459)

Compliance bonus (110,383) (149,787)

INSS - Social Security (78,271) (49,678)

Life insurance premium - consumer credit (66,523) (77,761)

Other expenses - provisions of non-financial subsidiaries (21,672) (18,105)

Proagro Expenses (10,121) (11,155)

Update of interest on own capital/dividends (7,896) (9,575)

Fees for the use of Sisbacen - Banco Central do Brasil System (1,647) (6,294)

Other (338,091) (343,454)

Total (4,865,372) (4,925,224)

- NON-OPERATING INCOME

1st half/2017 1st half/2016

Non-operating income 150,883 152,810

Capital gains 112,577 106,243

Profit on disposal of assets 15,740 13,308

Rental income 4,960 4,283

Reversal of provision for devaluation of other assets 5,369 2,410

Profit on disposal of investments/equity interest 311 --

Interest and inflation adjustment of debtors from disposal of property 631 1,499

Other non-operating income 11,295 25,067

Non-operating expenses (46,293) (44,530)

Devaluation of other assets (17,185) (8,501)

Loss on disposal of assets (7,476) (820)

Capital losses (20,391) (34,433)

Other non-operating expenses (1,241) (776)

Total 104,590 108,280

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

78

- SHAREHOLDERS' EQUITY

a) Book value and market value per common share

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Shareholders' equity - Banco do Brasil 79,741,790 76,218,169 72,586,421

Book value per share (R$) (1) 28.63 27.37 26.07

Market value per share (R$) 26.80 28.09 17.18

Shareholders' equity - consolidated (2) 90,783,362 87,193,752 83,449,338

(1) Calculated based on the equity of Banco do Brasil. (2) Conciled with the equity of Banco do Brasil (Note 23.h).

b) Capital

Banco do Brasil’s share capital of R$ 67,000,000 thousand (R$ 67,000,000 thousand on December 31, 2016 and on

June 30, 2016) is fully subscribed and paid-in and consists of 2,865,417,020 book-entry common shares with no par value. The Federal Government is the largest shareholder and holds a majority of the Bank’s voting shares.

The Bank may, even without amending its by-laws, if approved by the Meeting of Shareholders, and in the conditions established therein, increase its capital up to the limit of R$ 120,000,000 thousand by issuing common shares, for which shareholders should be granted preference in the subscription in proportion to the number of shares held.

c) Instruments Qualifying to Common Equity Tier 1 Capital

The Bank signed a loan agreement with the federal government on September 26, 2012, with R$ 8,100,000 thousand in funds available. There is no maturity date, a fixed interest rate and semi-annual interest payments. The funding was used to finance agribusiness.

Up to August 27, 2014, Bacen had authorized the instrument to be included in Tier I referential equity (additional Tier I capital) subject to the limitations set forth in Article 28 of CMN Resolution 4,192 of March 01, 2013 (Note 28.b).

The Bank signed an amendment to the contract on August 28, 2014, under the terms of Law 12,793 of April 02, 2013. The purpose of the amendment was to allow the instrument to qualify as common equity in Tier I capital, under Article 16 of CMN Resolution 4,192/2013.

As a result of the amendment, the interest rate was changed to a variable rate, and the interest period was changed to match the Bank’s fiscal year (January 1 to December 31). Each years’ interest is paid in a single annual installment,

adjusted by the Selic rate up to the effective payment date. Payment must be made within 30 calendar days after the dividend payment for the fiscal year.

The interest payment must be made from profits or profit reserves available for distribution at the end of the fiscal year preceding the calculation date. Payment is at Management’s discretion. Unpaid interest does not accumulate. If the

payment or dividend distribution is not made (including in the form of interest on own capital) prior to the end of the subsequent fiscal year, the accrued interest is no longer owed.

If the Bank’s retained earnings, profit reserves (including the legal reserve) and capital reserve cannot fully absorb losses calculated at the end of a fiscal year, no interest will be paid on the loan. The Bank will apply the accrued interest and principal balance, in this order, to offset any remaining losses. This will be considered a pay-down of the instrument.

The instrument does not have a maturity date. It is only payable if the Bank is dissolved or Bacen authorizes the repurchase of the instrument. If the Bank is dissolved, the payment of principal and interest is subordinated to payment of the Bank’s other liabilities.

There will be no preferred interest on the loan under any circumstances, including in relation to other equity instruments included in Reference Equity.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

79

Bacen formally approved the instrument as common equity in Tier I capital on September 22, 2014, under CMN Resolution 4,192/2013 of August 28, 2014. So the instrument mentioned was reclassified to the Shareholders` Equity for purposes of disclosure.

d) Revaluation reserves

The revaluation reserves, totaling R$ 2,407 thousand (R$ 2,660 thousand as of December 31, 2016 and 2,695 thousand as of June 30, 2016), refer to revaluations of assets made by the associates/subsidiaries.

In the first half of 2017, there was a reserve realization of R$ 253 thousand (R$ 35 thousand as of June 30, 2016), due to depreciation, transferred to Retained Earnings (Accumulated Losses), net of taxes. In accordance with CMN Resolution 3,565/2008, the remaining amount will be maintained until the date of its effective realization.

e) Capital and profit reserves

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Capital reserves 12,436 15,509 15,509

Profit reserves 31,120,094 27,646,569 25,402,333

Legal reserve 6,818,337 6,570,147 6,411,237

Statutory reserves 24,301,757 21,076,422 18,991,096

Operating margin 20,626,041 17,567,395 15,591,154

Equalization of dividends 3,675,716 3,509,027 3,399,942

The legal reserve ensures the adequacy of the Bank’s capital structure and can only be used to offset losses or increase

capital. Five percent of net income, before any other allocations, is transferred to the legal reserve. The amount of the reserve cannot exceed 20% of the share capital.

The operating margin statutory reserve ensures the adequacy of the Bank’s operating margins in accordance with its

business activities. The reserve consists of up to 100% of net income after allocation to legal reserve (including dividends) and is limited to 80% of the share capital.

The dividend equalization statutory reserve provides funds for the payment of dividends. The reserve consists of up to 50% of net income after allocation to legal reserve (including dividends) and is limited to 20% of the share capital.

f) Earnings per share

1st half/2017 1st half/2016

Net income (R$ thousand) 5,017,709 4,751,915

Weighted average number of shares (basic and diluted) 2,784,856,177 2,790,389,280

Earnings per share (basic and diluted) (R$) 1.80 1.70

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

80

g) Interest on own capital/dividends and destination of the income

Calculation base of dividends are shown below, as well as destination of the income of the period:

1st half/2017 1st half/2016

1) Net income - Banco do Brasil 5,017,709 4,751,915

Brazil 4,528,772 5,476,783

Abroad 488,937 (724,868)

2) Interest on instrument elegible to common equity tier 1 45,172 46,227

3) Calculation base of dividends (item 1 + item 2) 5,062,881 4,798,142

Dividends - payout 1,489,082 1,411,218

Minimum required dividend 1,178,899 1,129,727

Additional dividend 310,183 281,491

4) Allocation:

Net income 5,017,709 4,751,915

Retained earnings/(losses) (53,923) 4,589

Distributed income 4,963,784 4,756,504

Legal reserve 248,189 237,595

Dividends and interest on own capital 1,489,082 1,411,218

Statutory reserves 3,226,513 3,107,691

Introducing payment schedule of interest on own capital and dividends:

Amount Amount per share (R$) Base date of payment Payment date

1st quarter/2017

Interest on own capital paid (1) 200,824 0.072 Mar 13, 2017 Mar 31, 2017

Complementary Interest on own capital paid (1) 509,477 0.183 May 22, 2017 May31, 2017

2nd quarter/2017

Interest on own capital paid (1) 218,823 0.079 Jun 12, 2017 Jun 30, 2017

Complementary Interest on own capital payable (1) 559,958 0.201 Ago 21, 2016 Ago 31, 2017

Total destined to shareholders 1,489,082 0.535

(1) Amounts subject to the rate of 15% Income Tax Withholding.

Amount Amount per share (R$) Base date of payment Payment date

1st quarter/2016

Interest on own capital paid (1) 274,466 0.098 Mar 11, 2016 Mar 31, 2016

Complementary Interest on own capital paid (1) 372,273 0.133 May 23, 2016 May 31, 2016

2nd quarter/2016

Interest on own capital paid (1) 383,614 0.138 Jun 13, 2016 Jun 30, 2016

Complementary Interest on own capital paid (1) 380,865 0.138 Ago 22, 2016 Ago 31, 2016

Total destined to shareholders 1,411,218 0.507

(1) Amounts subject to the rate of 15% Income Tax Withholding.

In accordance with Laws 9,249/1995 and 9,430/1996 and the Bank's Bylaws, Management decided on the payment of Interest on own capital to its shareholders.

The interest on own capital is calculated based on adjusted net equity value and is limited on a pro rata die basis to the variation of long-term interest rate, as long as there is profit (before the deduction of interest on own capital) or reserves for retained earnings and profit reserves of at least twice its value.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

81

To comply with the Income Tax legislation, the amount of interest on own capital was recorded as "Financial expenses" and, for purposes of disclosure in these financial statements, reclassified to "Retained earnings". The total interest on own capital in the first quarter of 2017, provided an expense reduction on tax charges totaling R$ 670,087 thousand (R$ 635,048 thousand in the first half of 2016).

h) Reconciliation of net income and shareholders' equity

Net income Shareholders’ equity

1st half/2017 1st half/2016 Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Banco do Brasil 5,017,709 4,751,915 79,741,790 76,218,169 72,586,421

Instruments qualifying to common equity tier 1 capital (1) 45,172 46,227 8,100,000 8,100,000 8,100,000

Unrealized gains (2) (1,178) 25,957 (338,562) (337,385) (339,318)

Non-controlling interests -- -- 3,280,134 3,212,968 3,102,235

BB Consolidated 5,061,703 4,824,099 90,783,362 87,193,752 83,449,338

(1) The instrument qualifying as CET1 was registered in the liabilities in the Individual Financial Statements and its interest recognized as expenses with securities sold under repurchase agreements. This Instrument was reclassified to Shareholder’s Equity in the consolidated financial statements, aiming to improve the quality and transparency of these financial statements (Notes 3 and 23.c).

(2) Refers to the realization of unrealized results arising from the assignment of credits from the Bank to Ativos S.A.

i) Accumulated Other Comprehensive Income

1st half/2017 1st half/2016

Opening

balance Net change Tax effects Closing balance

Opening

balance Net change Tax effects Closing balance

Securities available for sale

Banco do Brasil (1,453,578) 913,222 (344,789) (885,145) (2,760,383) 1,696,514 (363,622) (1,427,491)

Subsidiary abroad 29,480 13,748 (353) 42,875 (12,780) 52,021 (976) 38,265

Associates and subsidiaries (5,555) (46,428) 31,562 (20,421) (351,322) 382,453 (122,864) (91,733)

Cash flow hedge

Associates and subsidiaries (8,300) (2,839) 2,368 (8,771) -- (10,082) 4,537 (5,545)

Investment Hedge Abroad

Associates and subsidiaries -- (368) -- (368) -- -- -- --

Foreign Exchange Variation

in Investments Abroad

Subsidiary abroad -- (30,926) -- (30,926) -- -- -- --

Actuarial gains/(losses) on

pension plans (15,491,252) (812,840) 325,182 (15,978,910) (13,918,186) (4,856,506) 1,942,511 (16,832,181)

Total (16,929,205) 33,569 13,970 (16,881,666) (17,042,671) (2,735,600) 1,459,586 (18,318,685)

j) Noncontrolling interests

Shareholders’ equity

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Banco Patagonia S.A. 796,727 822,165 851,794

Besc Distribuidora de Títulos e Valores Mobiliários S.A. 27 27 27

BB Tecnologia e Serviços 33 32 57

BB Seguridade S.A. 2,483,347 2,390,744 2,250,357

Non-controlling interest 3,280,134 3,212,968 3,102,235

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

82

k) Shareholdings (number of shares)

Number of shares issued by the Bank to shareholders which, directly or indirectly, hold more than 5% of the shares:

Sharedholders Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Shares % Total Shares % Total Shares % Total

Federal government 1,545,811,215 53.9 1,558,511,715 54.4 1,558,511,715 54.4

Tesouro Nacional 1,453,487,115 50.7 1,453,487,115 50.7 1,453,487,115 50.7

Fundo Fiscal de Investimento e Estabilização 92,324,100 3.2 105,024,600 3.7 105,024,600 3.7

Caixa de Previdência dos Funcionários do Banco do Brasil - Previ

264,297,814 9.2 281,209,714 9.8 286,025,314 10.0

Treasury shares (1) 80,463,476 2.8 80,668,497 2.8 80,666,466 2.8

Other shareholders 974,844,515 34.1 945,029,094 33.0 940,213,525 32.8

Total 2,865,417,020 100.0 2,865,417,020 100.0 2,865,417,020 100.0

Resident shareholders 2,254,245,767 78.7 2,275,634,163 79.4 2,297,735,034 80.2

Non resident shareholders 611,171,253 21.3 589,782,857 20.6 567,681,986 19.8

(1) Includes, in the first half of 2017, 40,900 shares of the Bank held by BB DTVM (50,100 on December 31, 2016 and in the first half of 2016).

Number of shares issued by the Bank, held by the Board of Directors, the Executive Board and the Audit Committee:

Commom shares (ON) (1)

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Board of Directors (except for Bank’s CEO, listed in the Bank’s Executive

Committee) 144 144 145

Executive Committee 158,336 166,334 239,685

Audit Committee 10,075 10,075 10,075

(1) The shareholding interest of the Board of Directors, Executive Committee, Fiscal Council and Audit Committee represents approximately 0.006% of the Bank's capital stock.

l) Movement of shares outstanding/free float

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Total % Total % Total %

Free float at the period date 1,226,072,321 42.8 1,139,037,581 39.8 1,139,037,581 39.8

Disposal of shares by Caixa F1 Garantia Construção Naval

-- 87,368,167 87,368,167

Disposal of shares by FGO - shares investments -- 7,500,000 7,500,000

Disposal of shares by FFIE - Fundo Fiscal de Investmento e Estabilização

12,700,500 -- --

Shares received in order to comply with operations secured by the FGCN – Fundo Garantidor da Construção Naval

-- (8,075,350) (8,075,350)

Other changes (1) 284,340 241,923 168,602

Free float at the period end date (2) 1,239,057,161 43.2 1,226,072,321 42.8 1,225,999,000 42.8

Outstanding shares 2,865,417,020 100.0 2,865,417,020 100.0 865,417,020 100.0

(1) Refers mainly to changes coming from Technical and Advisory Bodies. (2) According to the Law 6,404/1976 and the regulation of BM&FBovespa's New Market. The shares held by the Board of Directors and Executive

Committee are not included. The shares held by the Caixa de Previdência dos Funcionários do Banco do Brasil - Previ compose the free float shares.

m) Treasury shares

The Board of Directors approved a repurchase program for up to 50 million shares on July 13, 2012, within 180 days from that date, with the objective of acquiring shares to be held in treasury for subsequent sale or withdrawal without further capital reduction, aiming to generate value for shareholders. This program was concluded on January 8, 2013, with the acquisition of 20,200,000 shares in the amount of R$ 461,247 thousand. The minimum, average and maximum price per share under the program was R$ 18.28, R$ 22.83 e R$ 26.78 respectively.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

83

The Board of Directors approved a repurchase program for up to 50 million shares on June 13, 2013. The conditions were the same as the previous program however, valid for up to 365 days from that date. The program concluded on June 6, 2014, with the acquisition of 43,126,700 shares in the amount of R$ 1,014,504 thousand. The minimum, average and maximum price per share under the program was R$ 18.84, R$ 23.52 and R$ 28.67 respectively. A total of 353,756 shares acquired under the program were used for the Bank’s variable compensation program.

The Board of Directors approved a repurchase program for up to 50 million shares on June 06, 2014. The conditions were the same as the previous program related to 2013. The program concluded on May 18, 2015, with the acquisition of 6,021,900 shares in the amount of R$ 155,481 thousand. The minimum, average and maximum price per share under the program was R$ 22.66, R$ 25.82 and R$ 29.27, respectively. A total of 318,633 shares acquired under the program were used for the Bank’s variable compensation program.

The Board of Directors approved a repurchase program of up to 50 million shares on May 18, 2015, under the same conditions as the previous program. Up to December 31, 2015, the Bank had acquired 3,623,700 shares in the amount of R$ 67,902 thousand. The minimum, average and maximum price per share under the program was R$ 17.90, R$ 18.74 and R$ 21.10, respectively. None of the shares acquired in this program were used for variable compensation programs.

The Bank had 80,463,476 shares in treasury on June 30, 2017, representing R$ 1,850,043 thousand of which 71,861,516 of the shares were acquired in repurchase programs, 8,075,350 shares received in order to comply with operations secured by the FGCN - Fundo Garantidor da Construção Naval, 526,547 related to share-based payment and 63 shares were from mergers.

n) Share-based payment

The program of variable remuneration was based on the CMN Resolution 3,921 of November 25, 2010, which governs compensation policies for executives of financial institutions. The resolution establishes that at least 50% of variable compensation should be paid in shares or share-based instruments, of which at least 40% should be deferred for future payment over a period of at least three years, defined according to the risks and activities overseen by the executive. BB DTVM, as a result of this resolution, also adopted variable remuneration policy for its directors, directly acquiring treasury shares of the Banco do Brasil. All shares acquired are BBAS3 and its fair value is the quoted market price on the date of grant.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

84

We present the statement of acquired shares, its distribution and its transfer schedule:

Total Program

Shares

Average

Cost

Shares Distributed (1)

Shares to

Distribute

Estimated

Schedule Transfers

2013 Program Banco do Brasil 353,800 20.36 259,674 71,488 Mar 2018 Total shares to be distributed 71,488

BB DTVM 24,546 23.83 19,639 4,907 Apr 2017 Total shares to be distributed 4,907

2014 Program

Banco do Brasil 318,633 24.08 166,755 64,030 Feb 2018 64,029 Feb 2019 Total shares to be distributed 128,059

BB DTVM 27,063 22.98 16,239 5,412 Apr 2018 5,412 Apr 2019 Total shares to be distributed 10,824

2015 Program

Banco do Brasil 342,240 19.92 109,634 68,705 Mar 2018

68,703 Mar 2019

68,703 Mar 2020 Total shares to be distributed 206,111

BB DTVM 26,109 19.92 10,449 5,220 Mar 2018

5,220 Mar 2019

5,220 Mar 2020 Total shares to be distributed 15,660

2016 Program

Banco do Brasil 99,348 33.78 19,902 19,863 Mar 2018 19,861 Mar 2019 19,861 Mar 2020 19,861 Mar 2021 Total shares to be distributed 79,446

BB DTVM 10,397 32.84 2,085 2,078 Mar 2018 2,078 Mar 2019 2,078 Mar 2020 2,078 Mar 2021 Total shares to be distributed 8,312

(1) Due to the negative variation in the profit of Banco do Brasil between 2012 and 2016, the totality of the shares related to these periods were not distributed to the Directors, of which 1,197 were related to BB DTVM and 91,333 shares referring to the Bank.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

85

- TAXES

a) Breakdown of income tax (IR) and social contribution expenses (CSLL)

1st half/2017 1st half/2016

Current values (1,991,452) (5,318,459)

Domestic income tax and social contribution (1,725,478) (5,092,385)

Foreign income tax (265,974) (226,074)

Deferred values 16,268 2,813,953

Deferred tax liabilities 11,872 62,424

Leasing transactions - portfolio adjustment and accelerated depreciation 12,113 (3,836)

Mark to Market (MTM) 255,200 424,985

Actuarial gains -- 109,855

Interest and inflation adjustment of fiscal judicial deposits (187,791) (219,692)

Foreign profits (50,714) (201,953)

Transactions carried out on the futures market (122) 37,981

Recovered term credits (16,814) (84,916)

Deferred tax assets 4,396 2,751,529

Temporary differences 371,184 2,037,485

Tax losses/CSLL negative bases (4,987) (121,588)

Mark to Market (MTM) (355,812) 835,632

Transactions carried out on the futures market (5,989) --

Total (1,975,184) (2,504,506)

b) Reconciliation of income tax and social contribution charges

1st half/2017 1st half/2016

Profit before taxation and profit sharing 8,476,869 8,782,460

Total charges of IR (25%) and CSLL (20%) (3,814,591) (3,952,107)

Charges upon interest on own capital 670,087 635,048

Equity in subsidiaries and joint ventures 906,657 951,844

Employee profit sharing 286,560 275,996

Other amounts (23,897) (415,287)

Income tax and social contribution (1,975,184) (2,504,506)

c) Tax expenses

1st half/2017 1st half/2016

Cofins (1,677,492) (1,837,638)

ISSQN (518,257) (470,259)

PIS/Pasep (282,004) (305,845)

Other (245,294) (208,781)

Total (2,723,047) (2,822,523)

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

86

d) Deferred tax liabilities

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Arising from mark-to-market 797,123 998,782 1,118,573

Arising from interest and inflation adjustment of fiscal judicial deposits 566,744 546,393 522,221

Arising from recovered term credits 367,653 350,838 293,310

Overseas entities 71,124 67,052 59,587

Arising from leasing portfolio adjustment 67,317 79,430 86,868

Related to foreign profit 50,714 -- 201,953

Arising from positive adjustments of benefits plans 41,434 42,146 62,493

Arising from futures market transactions 135 -- 1,374

Other 31,220 3,861 2,032

Total deferred tax liabilities 1,993,464 2,088,502 2,348,411

Income tax 844,840 914,441 1,067,602

Social contribution 587,033 611,497 728,029

Cofins 483,089 483,926 475,509

PIS/Pasep 78,502 78,638 77,271

e) Deferred tax assets (Tax credit)

Dec 31, 2016 1st half/2017 Jun 30, 2017 Jun 30, 2016

Balance Constitution Write off Balance Balance

Temporary differences 42,004,953 8,580,982 (9,328,794) 41,257,141 42,951,184

Allowance for loan losses 24,419,134 6,575,033 (5,961,058) 25,033,109 24,132,994

Provisions 9,650,754 1,391,188 (1,594,158) 9,447,784 9,466,154

Negative adjustments of benefits plans 3,721,796 324,471 (120,875) 3,925,392 4,886,263

Mark to Market (MTM) 1,643,604 169,608 (657,118) 1,156,094 1,676,105

Other provisions 2,569,665 120,682 (995,585) 1,694,762 2,789,668

CSLL written to 18% (MP 2,158/2001) 694,371 -- (64,192) 630,179 704,108

Tax losses/excess depreciation 127,317 -- (21,908) 105,409 135,625

Tax losses/negative bases 56,863 870,007 (83,707) 843,163 62,189

Total deferred tax assets 42,883,504 9,450,989 (9,498,601) 42,835,892 43,853,106

Income tax 24,529,862 5,334,630 (4,777,603) 25,086,889 24,704,928

Social contribution 18,202,275 4,099,009 (4,659,129) 17,642,155 18,998,902

Cofins 130,209 14,925 (53,221) 91,913 128,409

PIS/Pasep 21,158 2,425 (8,648) 14,935 20,867

f) Deferred tax assets (Tax credit - not recorded)

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Overseas tax credits 1,436,157 1,067,634 1,069,620

Portion of tax losses/negative bases 6,810 4,581 1,492

Temporary differences 115 160 89

Total tax credits 1,443,082 1,072,375 1,071,201

Income tax 902,690 670,756 669,675

Social contribution 540,392 401,619 401,526

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

87

Realization expectative

The expectation of realization of the deferred tax assets (tax credits) is based on a technical study, prepared in June 30, 2017, and the present value is determined based on the average rate of funding of Banco do Brasil.

Future value Present value

In 2017 4,935,938 4,606,743

In 2018 9,908,318 8,968,635

In 2019 9,808,087 8,611,318

In 2020 9,963,875 8,466,907

In 2021 7,647,701 6,289,639

In 2022 133,756 103,173

In 2023 118,262 89,533

In 2024 131,561 77,430

In 2025 91,932 46,926

In 2026 45,233 22,942

In 2027 51,229 34,881

Total tax credits on Jun 30, 2017 42,835,892 37,318,127

In the first half 2017 it was possible to observe the realization of tax credits at Banco do Brasil, in the amount of R$ 9,256,338 thousand corresponding to 92.66% of the projection of use for the period of 2017 contained in the technical study prepared on December 31, 2016.

The realization of the nominal value of tax credits registered, considering the recovery of those written-off during the lawsuits (Note 27.h), based on a technical study conducted by Banco do Brasil on June 30, 2017, is projected for 10 years in the following proportions:

Tax losses/CSLL

recoverable (1) Diferences

intertemporary (2)

In 2017 16% 11%

In 2018 33% 23%

In 2019 19% 23%

In 2020 20% 23%

In 2021 12% 18%

From 2022 -- 2%

(1) Projected consumption linked to the capacity to generate IR and CSLL taxable amounts in subsequent periods. (2) The consumption capacity results from the movements of provisions (expectation of reversals, write offs and uses).

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

88

- RELATED PARTY TRANSACTIONS

a) Bank’s key management personnel

Salaries and other benefits paid the Bank’s key management personnel (Executive Board, Audit Committee, Board of Directors and Fiscal Council) are as follows:

1st half/2017 1st half/2016

Short-term benefits 26,510 27,751

Fees and social charges 18,049 18,842

Executive Board 16,273 17,027

Audit Committee 1,380 1,345

Board of Directors 214 259

Fiscal council 182 211

Variable remuneration (cash) and social charges 7,162 7,444

Other (1) 1,299 1,465

Benefits motivated by cessation of tenure 409 490

Share-based payment benefits 12,140 7,260

Total 39,059 35,501

(1) Includes contributions to pension plan and complementary healthy plan, housing and relocation benefits, group insurance, among others.

The Bank's variable compensation policy (developed in accordance with CMN Resolution 3,921/2010) requires variable compensation for the Executive Directors to be paid partially in shares (Note 23.n).

The Bank does not offer post-employment benefits to its key management personnel, except for those who are part of the staff of the Bank.

Bacen prohibits all financial institutions from granting loans to key management personnel.

b) Details of related party transactions

The Bank's policy of related party transactions was approved by the Board of Directors and disclosed to the market. The policy aims to establish rules to assure that all decisions, especially those involving related party and other situations potentially conflicted, are made observing the interests of the Bank and its shareholders. It is applicable to all stakeholders and directors of the company.

The policy forbids to conduct related party transactions under conditions other than those applicable to the market or that may adversely affect the Bank's interest. Therefore, the transactions are conducted under normal market conditions. The terms and conditions reflect comparable transactions with unrelated parties (including interest rates and collateral requirements). These transactions do not involve unusual payment risks.

The transactions between the consolidated companies are eliminated in the consolidated financial statements.

Intercompany transactions with these related parties consist of interest bearing and non-interest bearing deposits loans, sale and repurchase transactions, acquisitions of loan portfolios, provision of services and guarantees.

The most important transactions involving the National Treasury include rural loans granted by the Bank under CMN Resolution 2,238/1996 and receivables from the National Treasury for interest rate equalization under Federal Government programs (Law 8,427/1992). Interest rate equalization represents an economic subsidy for rural credit, which provides borrowers with discounted interest rates compared to the Bank’s normal funding costs (including administrative and tax expenses). The equalization payment is updated by the Selic rate in accordance with the National Treasury’s budgeting process (as defined by law) and is designed to preserve the Bank’s earnings.

Some transactions are disclosure in other notes: the resources applied in federal government securities are listed in Note 8; and additional information about the Bank’s contributions and other transactions with sponsored entities are listed in Note 26.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

89

Fundação Banco do Brasil (FBB) promotes, encourages and sponsors actions in the areas of education, culture, health, social welfare, recreation and sports, science, technology and community development. In the 1st half/2017, the Bank’s contributions to FBB totaled R$ 26,813 thousand (R$ 24,644 thousand in the 1st half /2016).

c) Acquisition of portfolio of loans transferred by Banco Votorantim

1st half/2017 1st half/2016

Assignment with substantial retention of risks and rewards (with co-obligation) 1,171,140 4,922,158

Unrealized result, net of tax effects (balance) 172 1,898

d) Summary of related party transactions

Jun 30, 2017

Controller (1) Joint ventures and

associates (2) Key management

personnel (3) Other related

parties (4) Total

Assets

Interbank deposits -- 499,148 -- -- 499,148

Securities -- 3,476,033 -- 740,169 4,216,202

Loan operations (5) -- 13,940,130 -- 31,820,178 45,760,308

Receivables from related companies -- 153,918 -- 194 154,112

Other assets (6) 4,995,112 1,160,569 -- 431,455 6,587,136

Guarantees received -- 2,415,617 -- 4,601,060 7,016,677

Liabilities

Demand deposits 339,878 86,301 1,288 659,780 1,087,247

Saving deposits -- -- 1,698 310,806 312,504

Remunerated time deposits -- 20,110 528 10,030,945 10,051,583

Securities sold under repurchase agreements -- 697,463 -- 3,307,517 4,004,980

Borrowings and onlendings 2,200,082 -- -- 77,251,931 79,452,013

Other liabilities 348,646 1,350,114 -- 773,985 2,472,745

Guarantees given and other coobligations (7) -- 6,812,807 -- 719,859 7,532,666

1st half/2017

Income from interest, services and other income 2,889,413 3,470,381 -- 2,220,739 8,580,533

Expenses from raising funds (37,507) (290,234) (74) (2,585,580) (2,913,395)

(1) National Treasury. (2) Mainly refer to Banco Votorantim, Cielo, BB Mapfre SH1, Mapfre BB SH2, Brasilprev, Brasilcap, Alelo, Cateno and Tecban. (3) Board of Directors, Executive Board, Audit Committee and Fiscal Council. (4) Includes the most significant transactions with state-owned companies and private companies controlled by the Federal Government, such as:

Petrobras, CEF, BNDES, Eletrobras, Fundo de Amparo ao Trabalhador – FAT, Fundo de Aval para Geração de Emprego e Renda – Funproger. In addition, entities linked to employees and sponsored entities: Cassi, Previ and others.

(5) The Bank constituted the amount of R$ 97,413 thousand as allowance for losses on loans on transactions with other related parties. The expense for allowance for losses was R$ 34,953 thousand in the 1st half/2017.

(6) The transactions with the Controller refer mainly to Extension of rural credits – National Treasury transactions (Note 12.a), interest rate equalization – agricultural crop and receivables – National Treasury (Note 12.b).

(7) Includes Contract of Opening of a Revolving Interbank Credit Line with Banco Votorantim.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

90

Jun 30, 2016

Controller (1) Joint ventures and

associates (2) Key management

personnel (3) Other related

parties (4) Total

Assets

Interbank deposits -- 394,493 -- -- 394,493

Securities -- 3,539,878 -- 487,463 4,027,341

Loan operations -- 16,271,520 -- 31,232,158 47,503,678

Receivables from related companies -- 244,530 -- 34,126 278,656

Other assets (5) 4,550,183 1,331,924 -- 208,625 6,090,732

Liabilities

Demand deposits 310,263 27,639 1,079 2,002,029 2,341,010

Saving deposits -- -- 747 334,014 334,761

Remunerated time deposits -- 3,856 506 10,936,597 10,940,959

Securities sold under repurchase agreements -- 3,863,625 -- 2,946,497 6,810,122

Borrowings and onlendings 2,098,699 -- -- 84,504,325 86,603,024

Other liabilities 254,766 1,226,639 -- 676,187 2,157,592

Guarantees and other coobligations (6) -- 6,800,000 -- 664,121 7,464,121

1st half 2016

Income from interest, services and other income 2,879,694 3,977,171 -- 2,327,547 9,184,412

Expenses from raising funds (49,722) (201,203) (152) (2,863,464) (3,114,541)

(1) National Treasury. (2) Mainly refer to Banco Votorantim, Cielo, BB Mapfre SH1, Mapfre BB SH2, Brasilprev, Brasilcap, Alelo, Cateno and Tecban. (3) Board of Directors, Executive Board, Audit Committee and Fiscal Council. (4) Includes the most significant transactions with state-owned companies and private companies controlled by the Federal Government, such as:

Petrobras, CEF, BNDES, Eletrobras, Fundo de Amparo ao Trabalhador – FAT, Fundo de Aval para Geração de Emprego e Renda – Funproger. In addition, entities linked to employees and sponsored entities: Cassi, Previ and others.

(5) The transactions with the Controller refer mainly to Extension of rural credits – National Treasury transactions (Note 12.a), interest rate equalization – agricultural crop and receivables – National Treasury (Note 12.b).

(6) Includes Contract of Opening of a Revolving Interbank Credit Line with Banco Votorantim.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

91

- EMPLOYEE BENEFITS

Banco do Brasil sponsors the following pension and health insurance plans for its employees:

Plans Benefits Classification

Previ - Caixa de Previdência dos Funcionários do Banco do Brasil

Previ Futuro Retirement and Pension Defined contribution

Plano de Benefícios 1 Retirement and Pension Defined benefit

Plano Informal Retirement and Pension Defined benefit

Cassi - Caixa de Assistência dos Funcionários do Banco do Brasil Plano de Associados Health Care Defined benefit

Economus – Instituto de Seguridade Social

Prevmais Retirement and Pension Variable contribution

Regulamento Geral Retirement and Pension Defined benefit

Regulamento Complementar 1 Retirement and Pension Defined benefit

Grupo B’ Retirement and Pension Defined benefit

Plano Unificado de Saúde - PLUS Health Care Defined benefit

Plano Unificado de Saúde - PLUS II Health Care Defined benefit

Plano de Assistência Médica Complementar - PAMC Health Care Defined benefit

Fusesc - Fundação Codesc de Seguridade Social Multifuturo I Retirement and Pension Variable contribution

Plano de Benefícios I Retirement and Pension Defined benefit

SIM - Caixa de Assistência dos Empregados dos Sistemas Besc e Codesc, do Badesc e da Fusesc Plano de Saúde Health Care Defined contribution

Prevbep - Caixa de Previdência Social Plano BEP Retirement and Pension Defined benefit

Number of participants covered by benefit plans sponsored by the Bank

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Number of participants Number of participants Number of participants

Active Retired/users Total Active Retired/users Total Active Retired/users Total

Retirement and pension plans 102,516 118,778 221,294 106,110 116,432 222,542 113,565 109,845 223,410

Plano de Benefícios 1 - Previ 10,817 99,056 109,873 11,268 99,037 110,305 18,388 92,405 110,793

Plano Previ Futuro 78,123 1,448 79,571 78,886 1,084 79,970 79,224 1,017 80,241

Plano Informal -- 3,173 3,173 -- 3,267 3,267 -- 3,385 3,385

Other plans 13,576 15,101 28,677 15,956 13,044 29,000 15,953 13,038 28,991

Health care plans 103,652 106,122 209,774 105,364 106,429 211,793 114,393 99,571 213,964

Cassi 92,731 98,960 191,691 93,283 99,245 192,528 102,019 92,350 194,369

Other plans 10,921 7,162 18,083 12,081 7,184 19,265 12,374 7,221 19,595

Bank’s contributions to benefit plans

1st half/2017 1st half/2016

Retirement and pension plans 713,078 676,933

Plano de Benefícios 1 - Previ (1) 268,610 267,741

Plano Previ Futuro 285,376 256,895

Plano Informal 86,369 88,597

Other plans 72,723 63,700

Health care plans 607,966 592,466

Cassi 533,556 521,365

Other plans 74,410 71,101

Total 1,321,044 1,269,399

(1) Refers to the contributions relating to participants subject to Agreement 97 and Plan 1, whereby these contributions occur by the realization of Fundo Paridade and Fundo de Utilização (Note 26.f). Agreement 97 aims to regulate the funding required to constitute a portion equivalent to 53.7% of guaranteed amount relating to the supplementary pension due to the participants who joined the Bank up to April 14, 1967 and who have retired or will retire after the aforementioned date, except for those participants who are part of the Plano Informal.

The Bank estimates that contributions to benefit plans (post-employment) in the first half of 2017 will be approximately R$ 788,943 thousand.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

92

Values recognized in income

1st half/2017 1st half/2016

Retirement and pension plans (668,160) (631,532)

Plano de Benefícios 1 - Previ (230,220) (219,711)

Plano Previ Futuro (285,376) (256,895)

Plano Informal (66,025) (86,646)

Other plans (86,539) (68,280)

Health care plans (759,939) (800,056)

Cassi (694,345) (729,915)

Other plans (65,594) (70,141)

Total (1,428,099) (1,431,588)

a) Retirement and pension plans

Previ Futuro (Previ)

Participants in this plan include Bank employees hired after December 24, 1997. Depending on time of service and salary, active participants may contribute between 7% and 17% of their salary (retired participants do not contribute). The plan sponsor matches participants’ contributions up to 14% of their salaries.

Plano de Benefícios 1 (Previ)

Participants in this plan include Bank employees hired prior to December 23, 1997. Active and retired participants may contribute between 1.8% and 7.8% of their salary or pension.

Prior to December 15, 2000, the Bank contributed 2/3 of the total amount to this plan. As from December 16, 2000, considering the Federal Constitutional Amendment nº 20, the Bank and the participants started to make equal contributions. As a result of this contributive parity, the Parity Fund was set-up in December 2000, and its funds are being used to offset the Bank’s contributions (Note 26.f).

Plano Informal (Previ)

Banco do Brasil is fully responsible for this plan. The Bank’s contractual obligations include to:

(i) providing retirement benefits to the initial group of participants and pension payments to the beneficiaries of participants who died prior to April 14, 1967;

(ii) paying additional retirement benefits to plan participants who retired prior to April 14, 1967, or had the right to retire based on time of service and at least 20 years of service with the Bank; and

(iii) increasing retirement and pension benefits due to judicial and administrative decisions related to changes in the Bank’s career, salary and incentive plans (in excess of the plan’s original benefits).

The Bank and Previ formalized an agreement on December 31, 2012. Under the agreement, Banco do Brasil paid 100% of the mathematical reserves for the so-called Grupo Especial (for which it was fully liable) using funds from the Fundo Paridade. As a result, this group migrated from the Plano Informal to Plano de Benefícios 1. The Grupo Especial included participants from Plano de Benefícios 1 (Previ) listed in the paragraph of first clause of the contract signed on December 24, 1997. These participants received additional retirement benefits due to administrative and/or judicial decisions (Note 26.f).

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

93

Prevmais (Economus)

Participants in this plan include employees of Banco Nossa Caixa (a bank acquired by Banco do Brasil on November 30, 2009) who enrolled after August 01, 2006, or were part of the Regulamento Geral benefit plan and opted to receive their vested account balances. The sponsor and participants make equal contributions, which may not exceed 8% of participants’ salaries. The plan provides additional risk coverage, including supplemental health, work-related accident, disability and death benefits.

Regulamento Geral (Economus)

Participants in this plan include employees of Banco Nossa Caixa who enrolled prior to July 31, 2006. This plan is closed to new members. The sponsor and participants contribute equally.

Regulamento Complementar 1 (Economus)

Participants in this plan include employees of Banco Nossa Caixa. This plan offers supplemental health benefits and annuities upon death or disability. The sponsor, participants and retired/other beneficiaries fund the plan.

Grupo B' (Economus)

Participants in this plan include employees of Banco Nossa Caixa admitted between January 22, 1974, and May 13, 1974, and their beneficiaries. This plan is closed to new members. Benefit levels are based on the fulfillment of certain conditions outlined in the plan regulation.

Multifuturo I (Fusesc)

Participants in this plan include employees of the State Bank of Santa Catarina – Besc (acquired by Banco do Brasil on September 30, 2008) who enrolled after January 12, 2003, or were part of the Plano de Benefícios I (Fusesc) and chose to participate in this plan. Participants may contribute from 2.33% to 7% of their salaries. The plan sponsor matches these contributions.

Plano de Benefícios I (Fusesc)

Participants in this plan include employees of Besc who enrolled prior to January 11, 2003. This plan is closed to new members. The sponsor and participants contribute equally.

Plano BEP (Prevbep)

Participants in this plan include employees of the State Bank of Piauí – BEP (acquired by Banco do Brasil on November 30, 2008). The sponsor and participants contribute equally.

b) Health Care Plans

Plano de Associados (Cassi)

The Bank sponsors a health care plan managed by Cassi. The plan covers health care services related to prevention, protection, recovery and rehabilitation for participants and their beneficiaries. Each month, the Bank contributes 4.5% of participants’ salaries or pension benefits. Monthly contributions by participants and pensioners total 3% of their salary or

pension, in addition to copayments for certain hospital procedures. Moreover, as a result of the amendment to the Cassi Statute in November 2016, it was approved the extraordinary monthly contribution of 1% for the participants until December 2019.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

94

Plano Unificado de Saúde - PLUS (Economus)

Participants in this plan include employees from Banco Nossa Caixa. Participation in this plan requires a direct payroll deduction of 1.5%, providing coverage for employees and certain preferred dependents. An additional 10% copayment is required for each medical visit and low-cost exam performed by employees and their dependents (both preferred and non-preferred).

Plano Unificado de Saúde - PLUS II (Economus)

Participants in this plan include employees from Banco Nossa Caixa. Participation in this plan requires a direct payroll deduction of 1.5%, providing coverage for employees and certain preferred dependents. An additional 10% copayment is required for each medical visit and low-cost exam performed by employees and their dependents and adult children. This plan does not cover non-preferred dependents.

Plano de Assistência Médica Complementar - PAMC (Economus)

Participants in this plan include employees of Banco Nossa Caixa located in the state of São Paulo. The plan serves disabled employees under the Complementar and Regulamento Geral and their dependents. Participant costs vary based on usage and in accordance with a progressive salary table.

Plano de Saúde (SIM)

Participants in this plan include employees of Besc and other sponsors of the plan (including Badesc, Codesc, Bescor, Fusesc and SIM). For active members, monthly contributions total 3.44% of salary, including their 13th salary. For inactive members, monthly contributions total 8.86% of salary, while the plan sponsors contribute 5.42%. Beneficiaries also contribute 0.75% per dependent. The plan requires a copayment for ambulatory care procedures.

c) Risk factors

The Bank may need to make unplanned contributions to Previ, Economus, Fusesc and Prevbep, which could

negatively affect operating income.

Determination of the Bank’s obligations to these entities is based on long-term actuarial and financial estimates and the application and interpretation of current regulatory standards. Inaccuracies inherent to the estimation process could result in differences between recorded amounts and the actual obligations in the future. This could have a negative impact on the Bank’s operating results.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

95

d) Actuarial valuations

Actuarial evaluations are performed every six months. The information contained in the below tables refers to the calculations at June 30, 2017, December 31, 2016 and June 30, 2016.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

96

d.1) Changes in present value of defined benefit actuarial obligations

Plano 1 - Previ Plano Informal - Previ Plano de Associados - Cassi Other plans

1st half/2017 2016 1st half/2016 1st half/2017 2016 1st half/2016 1st half/2017 2016 1st half/2016 1st half/2017 2016 1st half/2016

Opening balance (148,349,574) (121,329,915) (121,329,915) (965,470) (909,280) (909,280) (7,948,422) (6,248,098) (6,248,098) (7,609,949) (6,301,921) (6,301,921)

Interest cost (8,139,876) (17,069,298) (9,095,589) (50,994) (121,736) (66,578) (455,851) (941,398) (491,828) (415,213) (860,756) (470,692)

Current service cost (223,265) (455,492) (224,731) -- -- -- (50,215) (85,735) (39,524) (12,776) (26,616) (14,451)

Past service cost -- -- -- (15,031) (38,228) (20,068) -- -- -- -- -- --

Benefits paid net of retirees contributions 6,375,224 10,350,474 5,178,484 86,369 184,002 88,597 345,276 624,614 322,802 304,794 585,425 263,619

Remeasurements of actuarial gain/(losses) (1,451,633) (19,845,343) (14,235,442) 10,271 (80,228) (79,526) (175,279) (1,297,805) (1,062,240) (156,240) (1,006,081) (328,670)

Experience adjustment 778,709 (1,749,063) (1,566,291) 24,510 (8,380) (24,296) (61,041) (293,184) (379,749) (6,966) 259,022 506,886

Changes to biometric assumptions -- -- -- -- -- -- -- -- -- (31,019) (78,102) (64,339)

Changes to financial assumptions (2,230,342) (18,096,280) (12,669,151) (14,239) (71,848) (55,230) (114,238) (1,004,621) (682,491) (118,255) (1,187,001) (771,217)

Closing balance (151,789,124) (148,349,574) (139,707,193) (934,855) (965,470) (986,855) (8,284,491) (7,948,422) (7,518,888) (7,889,384) (7,609,949) (6,852,115)

Present value of actuarial liabilities with surplus (146,597,375) (143,946,397) (129,888,116) -- -- -- -- -- -- (5,720,000) (5,731,092) (5,595,762)

Present value of actuarial liabilities without surplus (5,191,749) (4,403,177) (9,819,077) (934,855) (965,470) (986,855) (8,284,491) (7,948,422) (7,518,888) (2,169,384) (1,878,857) (1,256,353)

d.2) Changes in fair value of plan assets

Plano 1 - Previ Plano Informal - Previ Plano de Associados - Cassi Other plans(1)

1st half/2017 2016 1st half/2016 1st half/2017 2016 1st half/2016 1st half/2017 2016 1st half/2016 1st half/2017 2016 1st half/2016

Opening balance 143,946,397 118,378,747 118,378,747 -- -- -- -- -- -- 5,731,092 5,394,014 5,394,014

Interest income 7,902,703 16,291,315 8,880,898 -- -- -- -- -- -- 313,740 725,014 405,153

Contributions received 268,610 575,569 267,742 86,369 184,002 88,597 345,276 624,614 322,802 102,113 177,830 79,768

Benefits paid net of retirees contributions (6,375,224) (10,350,474) (5,178,484) (86,369) (184,002) (88,597) (345,276) (624,614) (322,802) (304,794) (585,425) (263,619)

Actuarial gain/(loss) on plan assets 854,889 19,051,240 7,539,213 -- -- -- -- -- -- (122,151) 19,659 (19,554)

Closing balance 146,597,375 143,946,397 129,888,116 -- -- -- -- -- -- 5,720,000 5,731,092 5,595,762

(1) Refers to the following plans: Regulamento Geral (Economus), Prevmais (Economus), Regulamento Complementar 1 (Economus), Multifuturo I (Fusesc), Plano I (Fusesc) and Plano BEP (Prevbep).

d.3) Amounts recognized in the balance sheet

Plano 1 - Previ Plano Informal - Previ Plano de Associados - Cassi Other plans

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

1) Fair value of the plan assets 146,597,375 143,946,397 129,888,116 -- -- -- -- -- -- 5,720,000 5,731,092 5,595,762

2) Present value of actuarial liabilities (151,789,124) (148,349,574) (139,707,193) (934,855) (965,470) (986,855) (8,284,491) (7,948,422) (7,518,888) (7,889,384) (7,609,949) (6,852,115)

3) Surplus/(deficit) (1+2) (5,191,749) (4,403,177) (9,819,077) (934,855) (965,470) (986,855) (8,284,491) (7,948,422) (7,518,888) (2,169,384) (1,878,857) (1,256,353)

4) Net actuarial (liability)/asset (1) (2,595,875) (2,201,588) (4,909,538) (934,855) (965,470) (986,855) (8,284,491) (7,948,422) (7,518,888) (1,477,476) (1,260,178) (944,412)

(1) Refers to the portion of the surplus/(deficit) due from the sponsor.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

97

d.4) Maturity profile of defined benefit actuarial obligations

Duration(1) Expected benefit payments(2)

Up to 1 year 1 to 2 years 2 to 3 years Over 3 years Total

Plano 1 (Previ) 9.26 13,344,410 13,219,075 13,061,423 246,144,573 285,769,481

Plano Informal (Previ) 5.53 152,052 139,861 124,753 928,435 1,345,101

Plano de Associados (Cassi) 9.85 751,895 741,758 727,067 15,356,803 17,577,523

Regulamento Geral (Economus) 10.16 449,826 450,453 450,497 10,574,767 11,925,543

Regulamento Complementar 1 (Economus) 11.98 2,457 2,575 2,742 106,446 114,220

Plus I e II (Economus) 6.53 72,764 68,701 63,599 629,584 834,648

Grupo B' (Economus) 8.72 16,208 16,122 15,987 281,046 329,363

Prevmais (Economus) 12.38 19,680 19,814 19,917 686,502 745,913

Multifuturo I (Fusesc) 10.27 6,132 6,095 6,043 139,836 158,106

Plano I (Fusesc) 9.08 42,141 41,949 41,646 782,060 907,796

Plano BEP (Prevbep) 11.62 3,863 4,181 4,393 137,228 149,665

(1) Weighted average duration, in years, of the defined benefit actuarial obligation. (2) Amounts considered without discounting at present value.

d.5) Breakdown of the amounts recognized in statement of income relating to defined benefit plans

Plano 1 - Previ Plano Informal - Previ Plano de Associados - Cassi Other plans

1st half/2017 1st half/2016 1st half/2017 1st half/2016 1st half/2017 1st half/2016 1st half/2017 1st half/2016

Current service cost (111,633) (112,365) -- -- (50,215) (39,524) (6,388) (7,242)

Interest cost (4,069,938) (4,547,794) (50,994) (66,578) (455,850) (491,828) (224,546) (253,932)

Expected yield on plan assets 3,951,351 4,440,448 -- -- -- -- 156,567 202,201

Unrecognized past service cost -- -- (15,031) (20,068) -- -- -- --

Expense with active employees -- -- -- -- (188,280) (198,563) (81,004) (82,895)

Other adjustments/reversals -- -- -- -- -- -- 3,238 3,447

(Expense)/income recognized in the Statement of income (230,220) (219,711) (66,025) (86,646) (694,345) (729,915) (152,133) (138,421)

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

98

d.6) Composition of the plan assets

Plano 1 - Previ Other plans

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Fixed income 65,558,346 58,053,582 55,618,091 4,824,522 4,831,482 4,692,337

Floating income(1) 64,854,679 70,648,892 59,683,589 266,256 294,651 294,664

Real estate investments 9,866,003 9,126,202 8,728,481 196,359 194,858 211,968

Loans and financing 5,468,082 5,254,043 5,117,592 113,047 100,183 97,135

Other 850,265 863,678 740,363 319,816 309,918 299,658

Total 146,597,375 143,946,397 129,888,116 5,720,000 5,731,092 5,595,762

Amounts listed in fair value of plan assets

In the entity’s own financial instruments 10,972,344 11,631,219 8,516,001 29,579 23,926 23,270

In properties or other assets used by the entity 156,184 156,758 150,823 7,746 7,848 8,996

(1) Includes, in Plano de Benefícios 1 from Previ, the amount of R$ 32,966,823 thousand (R$ 30,265,763 thousand on December 31, 2016 and R$ 23,151,174 thousand on June 30, 2016), related to the assets that are not quoted in active markets.

d.7) Main actuarial assumptions adopted

Plano 1 - Previ Plano Informal - Previ Plano de Associados - Cassi Other plans(1)

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Inflation rate (p.a.) 4.87% 5.41% 5.44% 4.74% 5.29% 5.54% 4.88% 5.43% 5.43% 4.87% 5.40% 5.44%

Real discount rate (p.a.) 5.60% 5.77% 6.20% 5.55% 5.84% 6.18% 5.61% 5.75% 6.20% 5.60% 5.77% 6.20%

Nominal rate of return on investments (p.a.) 10.74% 11.49% 11.98% -- -- -- -- -- -- 10.73% 11.48% 11.98%

Real rate of expected salary growth (p.a.) 1.04% 1.04% 1.01% -- -- -- -- -- -- 0.92% 0.92% 0.95%

Actuarial life table Soft AT-2000 (reduced by 10%) Soft AT-2000 (reduced by 10%) Soft AT-2000 (reduced by 10%) AT-2000 / AT-83 AT-2000

Capitalization method Projected credit unit Projected credit unit Projected credit unit Projected credit unit

(1) As of June 2017 Regulamento Complementar 1 and Grupo B' started to use actuarial life table AT-83.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

99

In order to determine the values for the defined benefit plans, the Bank uses methods and assumptions different from those submitted by the entities sponsored.

CPC 33 (R1) prescribes the accounting, as well as the effects that occurred or that will occur in the entities that sponsor employee benefits plans. However, the sponsored entities themselves must comply with the rules issued by the Ministério da Previdência Social, through the Conselho Nacional de Previdência Complementar (CNPC) and the Superintendência Nacional de Previdência Complementar (Previc). The most significant differences are in the definition of the assumptions used in Plano 1 – Previ.

d.8) Differences in assumptions of the Plano 1 - Previ

Bank Previ

Real discount rate (p.a.) 5.60% 5.00%

Evaluation of assets - exclusive funds Market Value or Discounted Cash Flow Discounted Cash Flow

Capitalization method Projected credit unit Aggregate method

d.9) Reconciliation of amounts calculated in Plan 1 - Previ/Bank

Plan assets Actuarial liabilities Effect in surplus/(deficit)

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Value determined - Previ 130,022,056 130,196,465 124,456,775 (145,664,160) (144,371,339) (142,474,276) (15,642,104) (14,174,874) (18,017,501)

Incorporation of values from agreement 97 13,877,279 14,251,784 14,531,967 (13,877,279) (14,251,784) (14,531,967) -- -- --

Incorporation of values from Grupo Especial 1,125,311 1,145,314 1,162,458 (1,125,311) (1,145,314) (1,162,458) -- -- --

Adjustment in the value of plan assets

(1) 1,572,729 (1,647,166) (10,263,084) -- -- -- 1,572,729 (1,647,166) (10,263,084)

Adjustment in the liabilities - discount rate/capitalization method -- -- -- 8,877,626 11,418,863 18,461,508 8,877,626 11,418,863 18,461,508

Value determined - Bank 146,597,375 143,946,397 129,888,116 (151,789,124) (148,349,574) (139,707,193) (5,191,749) (4,403,177) (9,819,077)

(1) Refers mainly to adjustments made by the Bank in determining the fair value of the investments in Litel, Neoenergia and in securities held to maturity.

d.10) Sensitivity analysis

The sensitivity analysis is performed for changes in a single assumption while maintaining all others constant. This is unlikely in reality, since some of the assumptions are correlated.

The same methodology was used to perform the sensitivity analysis in each of the periods presented. However, the discount rate was updated to reflect market conditions.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

100

Jun 30, 2017 Life table Salary increase Interest rate

+1 age -1 age +0.25% -0.25% +0.25% -0.25%

Plano 1 (Previ) Present value of defined benefit

actuarial obligations 151,789,124 148,382,478 155,157,470 151,837,089 151,741,159 148,459,521 155,257,747

Surplus/(deficit) in the plan (5,191,749) (1,785,103) (8,560,095) (5,239,714) (5,143,784) (1,862,146) (8,660,372)

Plano Informal (Previ) Present value of defined benefit

actuarial obligations 934,855 900,820 969,648 -- -- 922,652 947,411

Surplus/(deficit) in the plan (934,855) (900,820) (969,648) -- -- (922,652) (947,411)

Plano de Associados (Cassi) Present value of defined benefit

actuarial obligations 8,284,491 8,096,030 8,470,384 8,287,060 8,281,922 8,091,049 8,486,742

Surplus/(deficit) in the plan (8,284,491) (8,096,030) (8,470,384) (8,287,060) (8,281,922) (8,091,049) (8,486,742)

Regulamento Geral (Economus)

Present value of defined benefit actuarial obligations 6,112,260 6,002,660 6,218,635 -- -- 5,967,253 6,263,441

Surplus/(deficit) in the plan (1,808,750) (1,699,150) (1,915,125) -- -- (1,663,743) (1,959,931)

Regulamento Complementar 1 (Economus)

Present value of defined benefit actuarial obligations 43,815 45,447 42,223 -- -- 42,291 45,418

Surplus/(deficit) in the plan (1,204) (2,836) 388 -- -- 320 (2,806)

Plus I e II (Economus) Present value of defined benefit

actuarial obligations 473,326 455,341 491,505 -- -- 466,123 480,461

Surplus/(deficit) in the plan (473,326) (455,341) (491,505) -- -- (466,123) (480,461)

Grupo B' (Economus) Present value of defined benefit

actuarial obligations 205,676 201,757 209,469 -- -- 200,996 210,549

Surplus/(deficit) in the plan (205,676) (201,757) (209,469) -- -- (200,996) (210,549)

Prevmais (Economus) Present value of defined benefit

actuarial obligations 301,880 300,896 302,916 304,402 299,401 293,242 310,984

Surplus/(deficit) in the plan 86,010 86,994 84,974 83,488 88,489 94,648 76,905

Multifuturo I (Fusesc) Present value of defined benefit

actuarial obligations 78,494 77,547 79,410 -- -- 76,603 80,471

Surplus/(deficit) in the plan 123,154 124,101 122,238 -- -- 125,045 121,177

Plano I (Fusesc) Present value of defined benefit

actuarial obligations 606,399 596,634 615,978 -- -- 595,877 617,332

Surplus/(deficit) in the plan 64,860 74,625 55,280 -- -- 75,382 53,926

Plano BEP (Prevbep) Present value of defined benefit

actuarial obligations 67,534 66,545 68,489 67,697 67,373 65,710 69,445

Surplus/(deficit) in the plan 45,548 46,537 44,593 45,385 45,709 47,372 43,637

e) Overview of actuarial asset/(liability) recorded by the Bank

Actuarial assets Actuarial liabilities

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Plano 1 (Previ) -- -- -- (2,595,875) (2,201,588) (4,909,538)

Plano Informal (Previ) -- -- -- (934,855) (965,470) (986,855)

Plano de Associados (Cassi) -- -- -- (8,284,491) (7,948,422) (7,518,888)

Regulamento Geral (Economus) -- -- -- (957,833) (829,730) (561,393)

Regulamento Complementar 1 (Economus) -- -- -- (427) (2,659) (2,656)

Plus I e II (Economus) -- -- -- (473,326) (409,315) (399,431)

Grupo B' (Economus) -- -- -- (205,676) (170,302) (167,330)

Prevmais (Economus) 43,005 36,846 41,485 -- -- --

Multifuturo I (Fusesc) 61,577 57,514 52,896 -- -- --

Plano I (Fusesc) 32,430 33,586 68,955 -- -- --

Plano BEP (Prevbep) 22,774 23,882 23,062 -- -- --

Total 159,786 151,828 186,398 (13,452,483) (12,527,486) (14,546,091)

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

101

f) Allocations of the Surplus - Plano 1

1st half/2017 2016 1st half/2016

Fundo Paridade

Opening balance 129,900 120,378 120,378

Restatement 4,665 14,065 9,163

Contributions to Plano 1 - Agreement 97 (4,472) (4,543) (4,543)

Closing balance 130,093 129,900 124,998

Fundo de Utilização

Opening balance 9,432,110 8,959,543 8,959,543

Contributions to Plano 1 (264,138) (571,026) (263,198)

Restatement 317,804 1,043,593 680,339

Closing balance 9,485,776 9,432,110 9,376,684

Total funds allocated surplus 9,615,869 9,562,010 9,501,682

f.1) Fundo Paridade

In 2000, the cost of switching to equal contributions was based on the Plano de Benefícios 1’s surplus at the time. The agreement (between Banco do Brasil and participants) allowed the Bank to recognize an asset of R$ 2,227,254 thousand in Allocation funds surplus. The asset is recalculated each month based on the actuarial goal: INPC (the National Consumer Price Index published by the Brazilian Institute of Geography and Statistics – IBGE) + 5% p.a..

Since January 2007, the asset has been used to offset financial liabilities related to the agreement signed with Previ in 1997. This agreement granted additional benefits to participants in Plano 1 (Previ) who joined the plan prior to April 14, 1967, and had not yet retired.

f.2) Fundo de Utilização

This fund contains resources transferred from the Allocation Fund (because of the plan’s surplus), which the Bank can

use for repayments or to reduce future contributions (after first meeting all applicable legal requirements). The Fundo de Utilização is recalculated based on the actuarial target (INPC + 5% p.a.).

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

102

- PROVISIONS, CONTINGENT ASSETS AND LIABILITIES, LEGAL LIABILITIES – TAXES AND SOCIAL SECURITY

a) Contingent assets

Contingent assets are not recognized in the financial statements according to CPC 25 – Provisions, Contingent Liabilities and Contingent Assets.

b) Labor lawsuits

The Bank is a party to labor claims involving mainly former employees and banking industry unions. The provision for probable losses covers a variety of different types of claims, including compensation, overtime, incorrect working hours, and additional functions, among others.

c) Tax lawsuits

The Bank, in spite of its conservative profile, may receive tax inquiries during inspections by the tax authorities, which could lead to the issuance of tax notices. These notices relate to the calculation base for income/social contribution taxes (mainly regarding deductibility) and matters involving payment of other taxes (based upon the occurrence of certain events). Most claims arising from the notices relate to service tax (ISSQN), income tax, social contribution (CSLL), the Social Integration Program (PIS), Contribution to Social Security Financing (Cofins), Tax on Financial Transactions (IOF), and Employer Social Security Contributions (INSS). As a guarantee in some of these cases, the Bank has pledged collateral in the form of cash, bonds, real estate or judicial deposits when necessary, preventing the Bank to be included in restrictive registration, as well as not to obstruct the semiannual renewal of its tax regularity certificate.

d) Civil lawsuits

Civil lawsuits relate mainly to claims from customers and users of the Bank’s network. In most cases, they are requesting

indemnification for material or moral damages arising from banking products or services and Economic Plans (Bresser Plan, Verão Plans and Collor Plans I and II).

Indemnifications for material and moral damages are based on consumer protection laws and generally settled in specific civil courts. The awards are limited to forty times the minimum wage.

The Bank is a defendant in claims seeking the payment and refunding the overpayment of the difference between the actual inflation rate and the inflation rate used for the adjustment of financial investments and rural credit when Economic Plans were implemented in the late 1980’s and early 1990’s.

Although it complied with prevailing laws and regulations at the time, the Bank set-up provisions for these lawsuits. The provisions consider claims brought against the Bank in which the risk of loss is considered probable. Loss probabilities are determined after an analysis of each claim considering the most recent decisions in the Superior Courts of Justice (STJ).

With respect to cases involving the financial investments related to Economic Plans, the Federal Supreme Court (STF) suspended prosecution of all cases after the discovery phase. This will be the case until the court issues a definitive ruling.

e) Provisions for labor, tax and civil claims – probable loss

The Bank recorded a provision for labor, tax and civil demands with risk of loss probable, quantified using individual or aggregated methodology (includes processes with the author's probability of success equal to remote, possible or probable), according to the nature and / or process value.

The estimates of outcome and financial effect are determined by the nature of the claims, the management's judgment, by the opinion of legal counsel on the basis of process elements, complemented by the complexity and the experience of similar demands.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

103

The Management considers to be sufficient the provision for losses of labor, tax and civil claims.

e.1) Changes in the provisions for civil, tax and labor claims classified as probable

1st half/2017 1st half/2016

Labor lawsuits

Opening balance 2,508,268 2,169,106

Addition 587,508 844,790

Reversal of the provision (133,793) (23,703)

Write off (525,923) (515,150)

Inflation correction and exchange rate changes 123,411 123,258

Closing balance 2,559,471 2,598,301

Tax lawsuits

Opening balance 276,015 245,695

Addition 30,602 96,955

Reversal of the provision (27,555) (74,390)

Write off (18,513) (7,993)

Inflation correction and exchange rate changes 12,556 7,665

Closing balance 273,105 267,932

Civil lawsuits

Opening balance 6,897,180 7,150,581

Addition 763,107 1,758,017

Reversal of the provision (432,728) (1,515,478)

Write off (707,572) (774,173)

Inflation correction and exchange rate changes 146,113 192,203

Closing balance 6,666,100 6,811,150

Total labor, tax and civil 9,498,676 9,677,383

e.2) Expected outflows of economic benefits

Labor Tax Civil

Up to 5 years 2,494,443 145,399 5,432,750

From 5 to 10 years 64,940 97,978 1,204,644

Over 10 years 88 29,728 28,706

Total 2,559,471 273,105 6,666,100

The scenario of unpredictability of the duration of proceedings, and the possibility of changes in the case law of the courts, make values and the expected outflows of economic benefits uncertain.

f) Contingent liabilities – possible loss

The labor, tax and civil lawsuits for which the risk of loss is considered possible do not require provisions when the final outcome of the process is unclear and when the probability of losing is less than more-likely-than-not and higher than the remote.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

104

f.1) The balances of contingent liabilities classified as possible loss

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Labor lawsuits 191,349 171,422 196,858

Tax lawsuits (1) 11,912,158 10,702,278 9,767,803

Civil lawsuits 2,138,382 1,975,843 2,385,644

Total 14,241,889 12,849,543 12,350,305

(1) The main contingencies originate from (i) notices of labor infraction form the National Social Security Institute (INSS) aiming at the payment of contributions applicable on year-end bonuses paid under the collective agreements in the period from 1995 to 2006, in the amount of R$ 3,476,644 thousand, public transport pay and use of private car by employees of Banco do Brasil, in the amount of R$ 300,891 thousand and employee profit sharing corresponding to the period from April 2001 to October 2003, in the amount of R$ 912,135 thousand; and (ii) notices of tax assessment drawn by the Treasuries of the Municipalities, which amounts R$ 1,694,639 thousand.

g) Deposits in guarantee

g.1) Deposits given in guarantee of contingencies

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Labor lawsuits 5,281,600 5,126,635 4,842,040

Tax lawsuits 7,968,553 7,720,456 7,138,443

Civil lawsuits 21,775,451 20,274,118 18,329,300

Total 35,025,604 33,121,209 30,309,783

h) Legal liabilities

The Bank has a record in Legal liabilities – tax and social security and Other liabilities – sundry the amount of R$ 16,014,896 thousand (R$ 15,441,581 thousand on December 31, 2016 and R$ 14,633,941 thousand on June 30, 2016) relating to the following action:

In 1998, the Bank requested full compensation of the accumulated tax losses of income tax and the negative calculation bases of social contribution. Since then, the Bank has fully offset tax losses and negative bases with the due amount of income tax and social contribution, making a full deposit of the amount due (70% of the amount offset), which led to the court order, determining the Suspension of the enforceability of said taxes. Currently, the Bank is awaiting the judgment of an extraordinary appeal (RE 591.340-SP) in which there was recognition of the general repercussion of the matter by the STF. As a result, RE 354.322-DF, floated by the Bank, will be overwritten in the TRF 1ª Region, until judgment of the general repercussion.

The offsetting of tax loss carry forward and recoverable social contribution has resulted in the write-off of deferred tax assets, observing the limitation of 30%.

Deferred taxes including corporate income tax and social contribution on the interest / inflation restatements of judicial deposits are being offset with the tax credits resulting from the provision related to that judicial deposit, in accordance with article 1, item II, paragraph 2 of CMN Resolution 3,059/2002, with no impact on income.

Based on the hypothesis of a successful outcome to this lawsuit, in September 2005 and January 2009, the Bank would have consumed the entire stock of tax loss carry forward and recoverable social contribution. Therefore, since October 2005 and February 2009, the amounts of income tax and social contribution are being paid in full. Moreover, there would be a reclassification of resources from the account used to record judicial deposits to that of cash and cash equivalents. Tax assets related to judicial deposits (main value) would be written-off against the liabilities of income tax and social contribution and would be reversed against income, the provision for tax risks related to the restatement of the deposits amounts to R$ 9,443,223 thousand.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

105

In the other hand, based on the hypethesis of an unsuccessful in its lawsuit (situation in which the amounts deposited judicially would be converted into income in favor of the Fazenda Nacional (Federal Tax Authority)), the portions of income tax, tax assests on tax losses and social contribution to offset would be reclassified to the representative asset account income tax recoverable and social contribution recoverable, that could be used since the accrual period starting October 2005 and February 2009, observing the limitation of 30%. The taxes recoverable, which would result from the adjustments to prior year Statements of economic-fiscal information of businesses, corresponds to R$ 6,016,371 thousand as of June 30, 2017 and updating by the Selic rate results in a further recoverable amount of R$ 3,902,295 thousand. This sum adjusts the provision for tax risks with respect to the updating of court deposits so that it will be sufficient to fully cancel the risk of a loss.

h.1) The amounts related to this matter

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Judicial deposits 17,868,745 17,431,080 16,911,249

Amount realized (70%) 7,817,011 7,817,011 7,817,011

Inflation corrections 10,051,734 9,614,069 9,094,238

Legal obligations – provision for lawsuit 16,014,896 15,441,581 14,633,941

Tax losses of income tax 3,002,033 3,002,033 3,002,033

Social contribution negative bases/social contribution recoverable 3,569,640 3,569,640 3,569,640

Provision for tax risks (restatement of deposit) 9,443,223 8,869,908 8,062,268

- RISK AND CAPITAL MANAGEMENT

a) Risk management process

For Banco do Brasil, risk management is one of the most important elements of the decision-making process.

The Institution has a process of identification of risks that will be part of the Institution's risks inventory, performed by analysing the business segments that are explored, direct and indirectly, considering the Entities Related to Banco do Brasil.

Once the risk inventory and its respective concepts are defined, the relevance of the risks is determined based on quantitative and qualitative criteria specified in the Corporate Manual. The risks below are part of Banco do Brasil's Financial Conglomerate Relevant Risks Corporate Range:

a) Credit Risk; b) Counterparty Credit Risk; c) Concentration Risk; d) Liquidity Risk; e) Operational Risk; f) Market Risk; g) Banking Book Interest Rate Risk; h) Strategic Risk; i) Reputational Risk; j) Environmental Risk; k) Legal Risk; l) Contagion Risk; m) Complementary Pension Fund Entities and Private Health Insurance Plan Operators for Employees Risk; n) Model Risk; and o) Compliance Risk.

In the Bank, the collegiate risk management is performed segregated from the business units. Risk management policies are approved by the Board of Directors. The Global Risk Superior Committee (CSRG), a forum composed of Vice-Presidents, is responsible for implementation and monitoring of these policies. The guidelines issued by the CSRG are conducted by specific executive committees (credit, market, liquidity and operational), which are groups formed by Directors.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

106

To learn more about the risk management process in Banco do Brasil, visit the information available in the Risk Management Report at the website bb.com.br/ri.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

107

Financial instruments - fair value

Financial instruments recorded in balance sheet accounts, compared to fair value:

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Unrealized gain/loss, net of tax effects

Book value Fair value Book value Fair value Book value Fair value On income On shareholders’ equity

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Assets

Short-term interbank investments 448,416,690 447,179,697 405,711,672 405,651,496 414,470,966 414,494,598 (1,236,993) (60,176) 23,632 (1,236,993) (60,176) 23,632

Securities 132,877,209 132,319,890 119,656,119 119,005,358 117,493,986 117,204,954 (1,530,370) (2,623,471) (3,662,800) (557,319) (650,761) (289,032)

Adjustment of securities available for sale (Note 8.a) -- -- -- -- -- -- (973,051) (1,972,710) (3,373,768) -- -- --

Adjustment of securities held to maturity (Note 8.a) -- -- -- -- -- -- (557,319) (650,761) (289,032) (557,319) (650,761) (289,032)

Derivative financial instruments 1,389,541 1,389,541 1,612,563 1,612,563 3,256,272 3,256,272 -- -- -- -- -- --

Loan operations 556,755,655 514,954,691 564,923,340 550,716,970 597,578,161 586,642,639 (41,800,964) (14,206,370) (10,935,522) (41,800,964) (14,206,370) (10,935,522)

Liabilities

Interbank deposits 18,961,724 19,166,318 20,664,801 21,238,847 27,472,505 28,005,024 (204,594) (574,046) (532,519) (204,594) (574,046) (532,519)

Time deposits 210,379,551 210,342,256 204,150,246 204,053,427 202,458,585 202,259,403 37,295 96,819 199,182 37,295 96,819 199,182

Liabilities related to repurchase agreement 449,821,750 448,613,777 374,634,032 373,070,084 411,968,635 410,326,239 1,207,973 1,563,948 1,642,396 1,207,973 1,563,948 1,642,396

Borrowings and onlendings 99,193,742 99,528,764 103,492,518 103,735,064 109,366,094 109,667,224 (335,022) (242,546) (301,130) (335,022) (242,546) (301,130)

Derivative financial instruments 1,969,959 1,969,959 1,870,391 1,870,391 3,018,900 3,018,900 -- -- -- -- -- --

Other liabilities 209,593,555 210,606,314 220,141,891 220,036,070 215,134,937 215,788,300 (1,012,759) 105,821 (653,363) (1,012,759) 105,821 (653,363)

Unrealized gain/(loss), net of tax effects (44,875,434) (15,940,021) (14,220,124) (43,902,383) (13,967,311) (10,846,356)

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

108

Determination of fair value of financial instruments

Short-term interbank investments: The fair value was obtained by discounting future cash flows, using interest rates traded by the market in similar operations on the balance sheet date.

Securities: Securities are accounted for by market value, as allowed for in Bacen Circular No. 3,068/2001, except for securities held to maturity. The fair value of the securities, including those held to maturity, is obtained from rates practised in the market.

Loan operations: The fair value of fixed rate operations has been estimated through the future cash flow discount method, considering the interest rates utilized by the Bank when originating similar operations at the balance sheet date. For operations that are remunerated by floating rates, the fair value was equivalent to the book value itself.

Interbank deposits: The fair value has been calculated by the discount of the future cash flows using rates currently applicable in the market for fixed rate deposits. In case of floating operations the maturities of which are less than 30 days, the book value was deemed approximately equivalent to the fair value.

Time deposits: The same criteria adopted for interbank deposits are utilized in the determination of the fair value.

Liabilities related to repurchase agreement: For operations at fixed rates, the fair value was determined calculating the discount of the estimated cash flows adopting a discount rate equivalent to the rates applied in contracting similar operations on the last trading day. For floating operations, book values have been deemed approximately equivalent to market value.

Borrowing and onlendings: Such operations are exclusive to the Bank with no similar operations in the market. Given their specific characteristics, the exclusive rates for each fund, the inexistence of an active market or similar traded instruments, the fair values of such operations are considered equivalent to the book value.

Other liabilities: Fair values have been determined by the discounted cash flow method, which takes into account interest rates offered in the market for obligations with similar maturities, risks and terms.

Derivatives financial instruments: According to Bacen Circular No. 3,082/2002, derivatives are recorded at market value. The market value of derivatives was estimated in accordance with internal pricing models, with the use of the rates disclosed for transactions with similar terms and indices on the last business day of the period.

Other financial instruments: Included or not in the balance sheet, fair value is approximately equivalent to the corresponding book value.

Source of information regarding assets and liabilities measured at fair value in the balance sheet

The Bank’s fair value measurements consider the following input levels:

Level 1 – Price quotations are derived from active markets for identical financial instruments. Financial instruments are considered to be quoted in an active market if prices are readily available and are based on regularly occurring arm’s length transactions.

Level 2 – Requires the use of information obtained from the market that is not Level 1. This includes prices quoted in non-active markets for similar assets and liabilities and information that can be corroborated in the market.

Level 3 – Requires the use of information not obtained from the market to measure fair value. When there is not an active market for an instrument, the Bank uses valuation techniques that incorporate internal data. The Bank’s methodologies are consistent with commonly used techniques for pricing financial instruments.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

109

Assets and liabilities measured at fair value in the balance sheet

Balance at Jun 30,

2017 Level 1 Level 2 Level 3

Assets 129,115,770 93,903,920 35,211,850 --

Trading securities, measured by market value 8,253,419 6,680,419 1,573,000 --

Derivative financial instruments 1,389,541 -- 1,389,541 --

Available-for-sale securities, measured by market value 119,472,810 87,223,501 32,249,309 --

Liabilities (2,335,420) -- (2,335,420) --

Hedge funding (365,461) -- (365,461) --

Derivative financial instruments (1,969,959) -- (1,969,959) --

Balance at Dec 31,

2016 Level 1 Level 2 Level 3

Assets 115,673,071 77,497,818 38,175,253 --

Trading securities, measured by market value 6,074,220 4,798,108 1,276,112 --

Derivative financial instruments 1,612,563 -- 1,612,563 --

Available-for-sale securities, measured by market value 107,986,288 72,699,710 35,286,578 --

Liabilities (2,232,014) -- (2,232,014) --

Hedge funding (361,623) -- (361,623) --

Derivative financial instruments (1,870,391) -- (1,870,391) --

Balance at Jun 30,

2016 Level 1 Level 2 Level 3

Assets 119,909,696 72,134,443 47,775,253 --

Trading securities, measured by market value 6,224,897 4,949,084 1,275,813 --

Derivative financial instruments 3,256,272 -- 3,256,272 --

Available-for-sale securities, measured by market value 110,428,527 67,185,359 43,243,168 --

Liabilities (3,373,980) -- (3,373,980) --

Hedge funding (355,080) -- (355,080) --

Derivative financial instruments (3,018,900) -- (3,018,900) --

Sensitivity analysis (CVM Instruction No. 475/2008)

Banco do Brasil manages its risks in a dynamic process, identifying, assessing, monitoring, and controlling market risk exposure arising on its positions. In this context, the Bank takes into account the risk limits defined by the Strategic Committees and possible scenarios, to act in a timely manner to reverse any adverse results.

In accordance with CMN Resolution No. 3,464/2007 and with Bacen Circular No. 3,354/2007, to manage more efficiently its transactions exposed to market risks, Banco do Brasil separates its transactions, including derivative financial instruments, as follows:

1) Trading Book: consisting of own positions held for trading or as a hedge for its trading portfolio, for which there is an intention of trading prior to their contractual expiry, subject to normal market conditions and that do not have a non-trading clause.

2) Banking Book: consisting of transactions not classified in the Trading Book whose feature is held to maturity.

The sensitivity analysis for all the operations with assets and liabilities of the Balance Sheet, in compliance with CVM Instruction No. 475/2008 does not adequately reflect the market risk management process or the accounting practices adopted by the Bank.

In order to determine the sensitivity of the Bank's capital to the impacts of market volatility, simulations were performed with three likely scenarios, two of which assume adverse movements for the Bank. The scenarios used are set out below:

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

110

Scenario I: Likely situation, which reflects the perception of the Bank’s senior management, the scenario most likely to

occur for a 3-month horizon, considering macroeconomic factors and market information (BM&FBovespa, Anbima, etc.). Assumptions: exchange rate real/dollar of R$ 3.33 and reduction the Selic rate to 8.75% per annum based on market conditions observed on June 30, 2017.

Scenario II: Possible situation. Assumptions adopted: parallel shock of 25.00% in the risk variables, based on market conditions observed on June 30, 2017 considering the worst losses by risk factor and, therefore, ignoring the dynamics of correlation between macroeconomic factors.

Scenario III: Possible situation. Assumptions adopted: parallel shock of 50.00% in the risk variables, based on market conditions observed on June 30, 2017 considering the worst losses by risk factor and thus ignoring the dynamics of correlation between macroeconomic factors.

The tables below summarize the results for the Trading Portfolio (Trading), composed of public and private securities, derivative financial instruments and funds obtained through repurchase agreements:

Risk factor Concept

Scenario I

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Variation of rates

Income/ (expense)

Variation of rates

Income/ (expense)

Variation of rates

Income/ (expense)

Prefixed rate Risk of variation

of prefixed interest rates

Increase 89,219 Decrease (18,120) Maintenance --

TMS and CDI indices Risk of variation of interest rate

indices Maintenance -- Increase 1 Maintenance --

IPCA index Risk of variation of inflation indices Increase 6,935 Decrease 11,344 Maintenance --

Exchange rates variation Risk of variation

of foreign exchange rates

Increase 2,842 Increase 5,883 Increase 2,657

Risk factor Concept

Scenario II

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Variation of rates

Income/ (expense)

Variation of rates

Income/ (expense)

Variation of rates

Income/ (expense)

Prefixed rate Risk of variation

of prefixed interest rates

Decrease (130,708) Decrease (36,332) Decrease (7,529)

IPCA index Risk of variation

of inflation indices

Decrease (5,838) Increase (8,876) Increase (837)

Exchange rates variation Risk of variation

of foreign exchange rates

Decrease (116,085) Decrease (100,430) Decrease (81,115)

Risk factor Concept

Scenario III

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Variation of rates

Income/ (expense)

Variation of rates

Income/ (expense)

Variation of rates

Income/ (expense)

Prefixed rate Risk of variation

of prefixed interest rates

Decrease (245,388) Decrease (86,516) Decrease (17,978)

IPCA index Risk of variation

of inflation indices

Decrease (11,317) Increase (16,402) Increase (1,642)

Exchange rates variation Risk of variation

of foreign exchange rates

Decrease (232,171) Decrease (200,859) Decrease (162,231)

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

111

For transactions classified in the Banking Book, appreciations or depreciations resulting from changes in interest rates practiced in the market do not imply in a significant financial or accounting impact on the Bank's income as a result of the portfolio composition which is principally: loan operations (consumer credit, agribusiness, working capital, etc.); retail funding (demand, time, and savings deposits), and securities, which are recorded in the books using the contracted interest rates. In addition, it should be pointed out that these portfolios, except the securities available for sale, have as their principal characteristic the intention to hold the respective operations to maturity and, hence they are not subject to the effects of fluctuating interest rates, or the fact that such transactions are naturally related to other instruments (natural hedge), hence minimizing the impacts of a stress scenario.

The tables below show a summary of the Trading Portfolio (Trading) and Non Trading (Banking) for the financial and non-financial entities controlled by the bank:

Risk factor Concept

Scenario I

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Variation of rates

Income/ (expense)

Variation of rates

Income/ (expense)

Variation of rates

Income/ (expense)

Prefixed rate Risk of variation

of prefixed interest rates

Decrease 7,338,043 Decrease 6,022,914 Maintenance --

TR Risk of variation of interest rate

indices

Decrease (3,230,518) Decrease (4,647,926) Decrease (170,950)

TBF Increase 803 Decrease (13,544) Decrease (851)

TJLP Decrease (28,652) Decrease 28,296 Maintenance --

TMS and CDI Increase 7,999 Increase 68,490 Increase 9,152

IGP-M Risk of variation

of inflation indices

Decrease (267,755) Decrease (151,412) Maintenance --

IGP-DI Maintenance -- Decrease 203 Maintenance --

INPC Decrease 219,520 Decrease 207,437 Maintenance --

IPCA Decrease 1,339,119 Decrease 1,199,604 Maintenance --

Foreign currency rates

Risk of variation of foreign currency indices

Increase 884,188 Increase 886,493 Increase 712,241

Exchange rate Risk of variation

of foreign exchange rates

Increase 11,333 Increase 42,445 Increase 26,237

Risk factor Concept

Scenario II

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Variation of rates

Income/ (expense)

Variation of rates

Income/ (expense)

Variation of rates

Income/ (expense)

Prefixed rate Risk of variation

of prefixed interest rates

Increase (10,902,206) Increase (10,146,913) Increase (11,111,628)

TR Risk of variation of interest rate

indices

Decrease (6,058,990) Decrease (6,064,945) Decrease (6,853,809)

TBF Decrease (2,259) Decrease (2,522) Decrease (2,809)

TJLP Increase (19,752) Increase (43,223) Decrease (11,212)

TMS and CDI Decrease (10,368) Decrease (5,060) Increase (3,463)

IGP-M Risk of variation

of inflation indices

Increase (462,500) Decrease (147,832) Increase (4,760)

IGP-DI Maintenance -- Increase (231) Increase (150)

INPC Increase (198,039) Increase (210,708) Increase (190,502)

IPCA index Increase (1,093,161) Increase (1,024,907) Increase (1,152,899)

Foreign currency rates

Risk of variation of foreign currency indices

Decrease (989,398) Decrease (1,070,351) Decrease (856,285)

Exchange rate Risk of variation

of foreign exchange rates

Decrease (462,869) Decrease (724,627) Decrease (801,123)

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

112

Risk factor Concept

Scenario III

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Variation of rates

Income/(expense)

Variation of rates

Income/(expense)

Variation of rates

Income/(expense)

Prefixed rate Risk of variation

of prefixed interest rates

Increase (20,845,236) Increase (19,332,178) Increase (21,091,958)

TR Risk of variation of interest rate

indices

Decrease (12,211,999) Decrease (12,265,979) Decrease (14,004,507)

TBF Decrease (4,536) Decrease (5,066) Decrease (5,644)

TJLP Increase (41,752) Increase (87,006) Decrease (23,628)

TMS and CDI Decrease (20,736) Decrease (10,119) Increase (6,924)

IGP-M Risk of variation

of inflation indices

Increase (1,010,335) Decrease (364,349) Increase (28,291)

IGP-DI Maintenance -- Increase (461) Increase (299)

INPC Increase (388,541) Increase (412,498) Increase (373,327)

IPCA index Increase (2,059,087) Increase (1,926,332) Increase (2,173,384)

Foreign currency rates

Risk of variation of foreign currency indices

Decrease (2,040,811) Decrease (2,210,173) Decrease (1,768,895)

Exchange rate Risk of variation

of foreign exchange rates

Decrease (925,739) Decrease (1,449,254) Decrease (1,602,247)

The scenarios used for preparing the framework for sensitivity analysis must use situations of deterioration of at least 25% and 50% of the variable risks, on an individualized basis, as determined by CVM Instruction No. 475/2008. Thus, the combined analysis of the results does not reflect real expectations, for example, simultaneous shocks of increase in the prefixed interest rate and reduction of the TR rate are not consistent from the macroeconomic perspective.

The derivative transactions classified in the Banking Book, do not represent a relevant market risk to Banco do Brasil, as these positions are usually originated with the following objectives:

Swapping the index of funding and lending transactions performed to meet customer needs; Hedging market risk, the purpose and effectiveness of which are described in Note 8.d. Also in this

transaction, the interest and exchange rate variations have no effects on the Bank's income.

On June 30, 2017, the Banco do Brasil did not enter into any transaction classified as an exotic derivative, as described in CVM Instruction No. 475/2008 - Attachment II.

b) Capital management

On June 30, 2011, Bacen issued a resolution requiring financial institutions to implement a capital management structure in accordance with Pillar II of Basel. In the Bank, such structure includes the Accounting, Risk Management, Controllership and Finance areas. In addition, the Board of Directors indicated the Controller as having overall responsibility for capital management.

The Bank’s organizational structure allows it to identify and evaluate significant risks incurred, including Pillar I risks not covered by MRER. The Bank’s policies, strategies and capital plan enable it to maintain capital at a level that is consistent with the risks it faces. Stress tests are performed on a monthly basis, with the impacts evaluated from a capital perspective. The corporate units and strategic committees receive capital adequacy management reports. These reports support the decision-making process of the Bank’s senior management team.

The above mentioned resolution also required implementation of an Internal Capital Adequacy Assessment Process (ICAAP), which was formally established by the Bank on June 30, 2013. The Risk Management area is responsible for coordinating ICAAP, and the Internal Controls unit, which is independent from capital management, is responsible for validating ICAAP. Finally, Internal Audit is responsible for performing an annual evaluation of the overall capital management process.

To learn more about the capital management at Banco do Brasil, visit the website bb.com.br/ri.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

113

Capital adequacy ratio

The Bank calculated the Capital Adequacy Ratio in accordance with criteria established by Bacen. This criteria requires the calculation of Referential Equity (RE) and MRER as a percentage of Risk Weighted Assets (RWA).

Basel III became effective on October 01, 2013 in Brazil. Recommend by the Basel Committee on Banking Supervision, Basel III represents a new set of regulations governing the capital structure of financial institutions. The new rules establish the following:

a new methodology for calculating regulatory capital, which continues to be divided into Tier I and Tier II. Tier I consists of Common Equity Tier I Capital – CET1 (net of regulatory adjustments) and Additional Tier I Capital;

a new methodology for calculating capital requirements, establishing minimum requirements for Referential Equity, Tier I and CET1, and introducing the Additional CET1.

From January 1, 2017, the percentage of deduction of prudential adjustments listed below increased to 80%:

goodwill; intangible assets recognized after October 01, 2013; actuarial assets related to defined benefit pension plans, net of deferred tax liabilities; non-controlling interests; direct or indirect investments of greater than 10% in non-consolidated entities similar to financial institutions,

insurance companies, reinsurance companies, capitalization companies and open-ended pension funds; deferred tax assets on temporary differences that rely on the generation of future taxable profits or income to

be realized; deferred tax assets resulting from tax losses on excess depreciation; and deferred tax assets resulting from tax losses and negative social contribution base on net income.

In accordance with CMN Resolution No. 4,192/2013, these deductions will be implemented gradually between 2014 and 2018 at the rate of 20% per year. However, deferred tax assets on debt issued by financial institutions are an exception, since they have been fully deducted since October 2013.

On August 28, 2014, Bacen authorized the R$ 8,100,000 thousand perpetual bond included in Additional Tier I Capital to be considered Common Equity Tier I Capital.

According to Bacen Resolution No. 4,192/2013 and No. 4,193/2013, from January 2015, the calculation of the Regulatory Equity (RE) and the amount of Risk-Weighted Assets (RWA) should be elaborated based on Prudential Conglomerate.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

114

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

RE - Referential equity 127,047,617 130,453,208 125,073,657

Tier I 87,643,046 90,283,551 86,188,277

Common Equity Tier 1 Capital (CET1) 64,733,761 67,718,439 63,964,567

Shareholders' equity 80,199,982 76,702,977 73,098,924

Instrument qualifying as CET1 8,100,000 8,100,000 8,100,000

Regulatory adjustments (23,566,221) (17,084,538) (17,234,357)

Additional Tier 1 Capital (AT1) 22,909,285 22,565,112 22,223,710

Hybrid instruments authorized in accordance with CMN Resolution No. 4,192/2013 18,112,395 17,840,287 17,570,370

Hybrid instruments authorized in accordance with regulations preceding the CMN Resolution No. 4,192/2013 (1) 4,796,890 4,724,825 4,653,340

Tier II 39,404,571 40,169,657 38,885,380

Subordinated debt qualifying as capital 39,425,703 40,181,808 38,904,584

Subordinated debt authorized in accordance with CMN Resolution No. 4,192/2013 - Financial bills 4,935,513 5,466,093 5,584,450

Subordinated Debt authorized in accordance with regulations preceding the CMN Resolution No. 4,192/2013 34,490,190 34,715,715 33,320,134

Funds obtained from the FCO (2) 26,591,388 25,237,153 23,841,572

Funds raised in financial bills and CD (3) 7,898,802 9,478,562 9,478,562

Deduction from tier II (21,132) (12,151) (19,204)

Funding instruments issued by financial institution (21,132) (12,151) (19,204)

Risk Weighted Assets (RWA) 705,412,467 705,851,280 760,102,037

Credit risk (RWACPAD) 633,781,384 643,214,021 702,885,694

Market risk (RWAMPAD) 16,644,771 18,844,349 25,507,869

Operational risk (RWAOPAD) 54,986,312 43,792,910 31,708,474

Minimum referential equity requirements (4) 65,250,653 69,702,814 75,060,076

Margin on the minimum referential equity required 61,796,964 60,750,394 50,013,581

Tier I Ratio (Tier I/RWA) 12.42% 12.79% 11.34%

Common Equity Tier 1 Capital Ratio (CET1/RWA) 9.18% 9.59% 8.42%

Capital Adequacy Ratio (RE/RWA) 18.01% 18.48% 16.45%

(1) On June 30, 2017, based on the orientation of Bacen, it was considered the balance of the hybrid capital and debt instrument authorized by Bacen to compose the Tier 1 Capital of the Referential Equity according CMN Resolution 3,444/2007 and do not meet the relevant entry criteria, also related with the orientation established on article 28, sections I to X of CMN Resolution 4,192/2013.

(2) According to CMN Resolution No. 4,192/2013, balances of the FCO are eligible to compose the RE. (3) On June 30, 2017, it was considered the balance of subordinated debt instruments that composed the RE in December 31, 2012, applying on it the

limit of 50%, as determined by CMN Resolution No. 4,192/2013. (4) According to CMN Resolution No. 4,193/2013, corresponds to the application of the "F" factor to the amount of RWA, where "F" equals: 11%, from

October 1, 2013 to December 31, 2015; 9.875% from January 1, 2016 to December 31, 2016; 9.25%, from January 1, 2017 to December 31, 2017; 8.625% from January 1, 2018 to December 31, 2018 and 8%, from January 1, 2019.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

115

Regulatory adjustments deducted from CET1:

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Significant investments and tax credits resulting from temporary differences that rely on the generation of future taxable profits or revenues for their realization (amount exceeding the 15% threshold) (1) (2)

(9,148,813) (4,636,849) (4,588,770)

Intangible assets constituted after October 2013 (1) (5,104,774) (4,258,360) (3,245,920)

Tax credits resulting from temporary differences that rely on the generation of future taxable profits or revenues for its realization (amount above 10% threshold) (1)

(4,852,491) (6,099,094) (6,886,540)

Superior investments (excess of 10%) (1) (1,757,550) -- --

Tax credits resulting from tax losses and negative base for social contribution on net income (1) (1,159,676) (500,439) (440,004)

Goodwill (1) (3) (726,506) (954,281) (1,393,609)

Non-controlling interests (1) (637,403) (493,315) (511,093)

Tax credits resulting from tax loss of excess depreciation (1) (84,327) (76,391) (81,375)

Actuarial assets related to defined benefit pension funds net of deferred tax liabilities (1) (94,681) (65,809) (74,342)

Deferred assets -- -- (12,704)

Total (23,566,221) (17,084,538) (17,234,357)

(1) Regulatory Adjustments subject to phase-in, according to the CMN Resolution No. 4,192/2013. (2) On June 30, 2017, related to the investment Financial Institutions (Banco Votorantim and CBSS Bank), R$ 2,353,039 thousand were integrally

deductec from the Referential Equity and R$ 2,106,257 thousand were risk-weighted at 250%. (3) The base value for calculating the goodwill is composed of: R$ 404,403 thousand in the investment line and R$ 503,729 thousand in the intangible

assets line. The value in Intangible assets refers to the goodwill paid for the acquisition of Banco Nossa Caixa, merged in November/2009.

c) Fixed asset ratio

On June 30, 2017, the Fixed Asset Ratio for the Prudential Conglomerate, totalized 16.56% (15.52% on December 31, 2016 and 15.59% on June 30, 2017), and it was calculated in compliance with CMN Resolutions No. 4,192/2013 and No. 2,669/1999.

- STATEMENT OF COMPREHENSIVE INCOME

1st half/2017 1st half/2016

Net income presented in the statement of income 5,061,703 4,824,099

Other comprehensive income

Accumulated other comprehensive income (Note 23.i) 33,569 (2,735,600)

Banco do Brasil 100,382 (3,159,992)

Subsidiaries abroad (17,178) 52,021

Associates and subsidiaries (49,635) 372,371

Income and social contribution taxes related to unrealized (gains)/losses (Note 23.i) 13,970 1,459,586

Other comprehensive income, net of income and social contribution taxes 47,539 (1,276,014)

Comprehensive income 5,109,242 3,548,085

Comprehensive income - non-controlling interests 789,621 827,086

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

116

- OTHER INFORMATION

a) Distribution of dividends and interest on own capital

During a meeting held on November 28, 2016, the Board of Directors approved the maintenance of the payout rate equivalent to the minimum of 25% of net income for the year 2017, fulfilling the policy for payment of dividends yield and/or interest on own capital on a quarterly basis, pursuant to article 45 of the Bank's By-Laws.

b) Investiment funds management

Funds managed by BB Gestão de Recursos - Distribuidora de Títulos e Valores Mobiliários S.A.:

Numbers of funds/portfolios (in Units) Balance

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016 Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Managed funds 675 655 639 816,440,506 730,923,136 660,474,425

Investment funds 664 644 628 800,548,014 715,704,598 646,055,633

Managed portfolios 11 11 11 15,892,492 15,218,538 14,418,792

c) Details in relation to overseas branches, subsidiaries and associates

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Assets

BB Group 73,764,567 72,334,393 75,063,782

Third parties 87,455,931 89,816,739 97,036,060

TOTAL ASSETS 161,220,498 162,151,132 172,099,842

Liabilities

BB Group 15,157,741 18,929,408 25,992,326

Third parties 134,103,177 131,980,721 136,155,458

Shareholders' equity 11,959,580 11,241,003 9,952,058

Attributable to parent company 11,162,853 10,418,838 9,100,264

Non-controlling interests 796,727 822,165 851,794

TOTAL LIABILITIES 161,220,498 162,151,132 172,099,842

1st half/2017 2016 1st half/2016

Net income 290,746 (213,834) (585,029)

Attributable to parent company 218,432 (500,841) (724,996)

Non-controlling interest 72,314 287,007 139,967

d) Consortium funds

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Monthly forecast of Purchase Pool Members receivable funds 242,343 227,953 201,944

Obligations of the groups due to contributions 11,669,315 10,633,440 8,534,729

Purchase pool members - assets to be delivered 10,576,634 9,601,023 7,568,252

(In units)

Quantity of groups managed 375 469 540

Quantity of active purchase pool members 650,970 665,495 623,503

Quantity of assets deliverable to members (drawn or winning offer) 55,353 60,858 59,204

1st half/2017 1st half/2016

Quantity of assets (in units) delivered in the period 57,635 52,874

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

117

e) Assignment of employees to outside agencies

Federal government assignments are regulated by Law 10,470/2002 and Decree No. 4,050/2001.

1st half/2017 1st half/2016

Quantiy of employees Ceded(1)

Cost in the period Quantiy of employees

Ceded (1) Cost in the period

With costs for the Bank

Labor unions 210 18,292 220 18,629

Other organizations/entities 2 466 2 413

Subsidiaries and associates 2 716 2 660

Without cost to the Bank

Federal, state and municipal governments 222 -- 265 --

External organizations (Cassi, Previ, Economus, Fusesc and PrevBep) 533 -- 580 --

Employee entities 69 -- 82 --

Subsidiaries and associates 568 -- 592 --

Total 1,606 19,474 1,743 19,702

(1) Balance on the last day of the period.

f) Remuneration of employees and managers

Monthly wages paid to employees and Directors of the Banco do Brasil (in Reais):

Jun 30, 2017 Dec 31, 2016 Jun 30, 2016

Lowest salary 2,645.97 2,645.97 2,449.98

Highest salary 44,271.65 44,271.65 40,992.27

Average salary 7,079.13 7,056.03 6,908.61

Management

President 68,781.86 68,781.86 68,781.86

Vice-president 61,564.83 61,564.83 61,564.83

Director 52,177.45 52,177.45 52,177.45

Council members

Fiscal council 5,490.96 5,948.54 5,948.54

Board of Directors 5,490.96 5,948.54 5,948.54

Audit Committee - member 46,959.71 46,959.71 46,959.71

g) Insurance policy of assets

Despite the reduced level of risk to which its assets are subject, the Bank contracts insurance cover for its assets in amounts considered to be sufficient to cover any losses.

Insurance contracted by the Bank in force on June 30, 2017

Covered risks Amounts covered Value of the premium

Property insurance for the relevant fixed assets 1,154,938 6,198

Life insurance and collective personal accident insurance for the Executive Board (1) 15,080 77

Other 2,700 4,212

Total 1,172,718 10,487

(1) Refers to individual coverage for members of the Executive Board.

Consolidated Financial Statements

1st half 2017

In thousands of Reais, unless otherwise stated

118

h) Extraordinary Retirement Incentive Plan – PEAI

In accordance with the 4th paragraph of article 157 from Law 6,404/1976, the Extraordinary Retirement Incentive Plan - PEAI was released in November 2016 for employees with the necessary conditions to retire. The plan was closed on December 09, 2016 and it had 9,409 members. Expenses with incentive payments totaled R$ 1,400,800 thousand in 2016.

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KPMG Auditores Independentes SBS - Qd. 02 - Bl. Q - Lote 03 - Salas 708 a 711 Edifício João Carlos Saad 70070-120 - Brasília/DF - Brasil Caixa Postal 8587 - CEP 70312-970 - Brasília/DF - Brasil Telefone +55 (61) 2104-2400, Fax +55 (61) 2104-2406 www.kpmg.com.br

Independent auditor’s reports on the consolidated

financial statements To The Board of Directors, Shareholders, and Directors of Banco do Brasil S.A. Brasília-DF

Opinion

We have audited the consolidated financial statements of Banco do Brasil S.A. (“Bank”), comprising the balance sheet as of June 30, 2017 and the respective statements of income, comprehensive income, changes in shareholders’ equity and cash flows, for the six month period then ended, and notes, comprising the summary of the significant accounting practices.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of Banco do Brasil S.A. as of June 30, 2017, the consolidated performance of its operations and its consolidated cash flows, for the six month period then ended, in accordance with the accounting practices adopted in Brazil applicable to institutions authorized to operate by the Central Bank of Brazil.

Basis for opinion We conducted our audit in accordance with Brazilian and international standards on auditing. Our responsibilities, under those standards, are further described in the “Auditor's responsibilities for the audit of the consolidated financial statements”. We are independent of the Bank, in accordance with the ethical requirements established in the Accountant’s

Professional Ethics Code and the professional standards issued by the Federal Accounting Council (CFC), and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matters

Key audit matters are those that, in our professional judgment, were the most significant in our current six month period audit. These matters were addressed in the context of our audit of consolidated financial statements as a whole, and in forming our opinion on these consolidated financial statements and, therefore, we did not express a separate opinion on these matters.

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Allowance for loan losses As disclosed in notes 4g and 10 of the consolidated financial statements, for purpose of measuring the allowance for loan losses, the Bank classifies its credit, lease, and advances on foreign exchange contracts and other other receivables with credit characteristics into nine risk levels, taking into consideration factors and assumptions such as late payments, financial-economic situation, indebtedness level, sector of economic activity, characteristics of guarantees and other factors and assumptions provided for in CMN (National Monetary Council) Resolution no. 2.682/1999, being “AA” minimum risk and “H” maximum risk. Initially, the Bank applies loss percentages determined by the Resolution to each risk level for purpose of calculating the allowance for loan losses and, when necessary, supplements its estimates based on internal assessment studies. Classification of credit transactions into risk levels involves the Bank´s assumptions and judgments based on its internal methodologies for risk classification, and the allowance for loan losses represents the Banks’s best estimate of portfolio losses. Due to the relevance of credit operations, leases, advances on foreign exchange contracts, other receivables with credit characteristics and to the degree of judgment related to the estimate of allowance for loan losses, we consider this as a key audit matter. How our audit conducted this matter We reviewed the design and effectiveness of the relevant internal controls and with the assistance of our information technology specialists we evaluate the general controls of information technology and automated key controls related to the processes of classification, approval, recognition and adjustment processes that support internal ratings evaluation methodologies for credit transaction, lease, advance for foreign exchange contracts and other receivables with credit characteristics, as well as main assumptions used to calculate the allowance for loan losses. We also evaluated, based on samples, if the Bank complied with minimum requirements established by CMN Resolution No. 2.682/1999 referring to determination of allowance for loan losses. We also analyzed if disclosures of consolidated financial statements, described in notes 4g and 10, are in accordance with applicable rules.

Based on the evidence obtained from the procedures described above, we consider adequate, the level of provisioning and disclosures in the context of the consolidated financial statements taken as a whole.

Market value of financial instruments The Bank has relevant balances of derivative financial instruments andsecurities classified as available for sale and trading, recorded at market value, in accordance with Brazilian Central Bank Circular Letters 3,068/2001 and 3,082/2002 and information disclosed in notes 4e, 4f and 8 of consolidated financial statements. For financial instruments that are not actively traded and for which market prices and parameters are not available, determination of market value is subject to a significant judgment of the Bank to estimate those amounts. The use of specific valuation techniques and assumptions may result in significantly different market value estimates. Therefore, we consider measurement of these financial instruments’ market value as a key audit matter. How our audit conducted this matter

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We evaluated the design and effectiveness of the relevant internal controls and with the assistance of our information technology specialists, we evaluate the general controls of information technology and automated key controls conducted by the Bank to mitigate the risk of misstatements in the consolidated financial statements deriving from judgment in measurement financial instruments’ market value, mainly those that depend on the Bank’s

internal models. In addition, we analyzed the Bank’s process to approve the assumptions used for mark-to-market, and calculations made for measurement of amounts. For a sample, with the technical support of our specialists in financial instruments, we evaluated the models developed by the Bank to determine market values and the reasonableness of data, parameters and information included in used pricing models, and we recalculated the amounts of the operations. We also analyzed if the disclosures of consolidated financial statements, described in notes 4e, 4f and 8, are in accordance with applicable rules.

Based on the evidence obtained from the procedures described above, we consider adequate, the market value measurement of the financial instruments in the context of the consolidated financial statements taken as a whole.

Provisions and contingent liabilities - labor, civil and tax As disclosed in notes 4n and 27 of the consolidated financial statements, the Bank recorded a provision for labor, civil and tax lawsuits deriving from past events, when it is probable that a financial disbursement will be required and the amount may be reliably estimated. Estimates of outcome and financial effect are determined according to the nature of the lawsuit and the Bank’s judgment, with the aid of internal and external legal advisors, based on lawsuit elements supplemented by experience with similar claims. As this evaluation carried out by the Bank involves complex estimates that are relevant for measurement of provisions and determination of disclosures for contingent liabilities, we consider this as a key audit matter. How our audit conducted this matter We evaluated the design and effectiveness of the relevant internal controls and with the

assistance of our information technology specialists, we evaluate the general controls of information technology and automated key controls related to the processes of registration, evaluation of proceedings risk, calculation of massified provision, and conduction of closing processes and stages. In this area, our procedures included analysis, based on samples, of adequacy of measurement and recognition of provision and contingent liabilities regarding recognition, reversals, proceedings risk of lawsuits referring to relevant matters and values, sufficiency of provision, as well as historic data and information. We analyzed changes in estimates comparing to prior periods. We analyzed lawsuits conducted by external lawyers contracted by the Bank based on external confirmation procedures. We also evaluated if the disclosures in consolidated financial statements, described in note 4n and 27, are in accordance with applicable rules and provide information on the nature, exposure and amounts provisioned or disclosed related to the main lawsuits to which the Bank is involved.

Based on the evidence obtained from the procedures described above, we consider adequate, the level of provisioning and disclosures in the context of the consolidated financial statements taken as a whole. Employee benefits As disclosed in notes 4l and 26 of consolidated financial statements, the Bank sponsors complementary pension fund entities and supplementary health plans that ensure

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supplementation of retirement and health care benefits to its employees. A relevant portion of these entities’ pension plans is classified as defined benefit plans, and the amounts deriving from the Bank’s sponsor to these plans are recorded in accordance with CVM Resolution no. 695/2012. These plans’ obligations are calculated based on several actuarial assumptions, including discount rate, inflation and mortality rate. Due to the complexity and judgment involved in treatment and measurement of these assumptions, and to the material impact that possible changes would have on financial statements, we consider this is a key audit matter.

How our audit conducted this matter We evaluated the design and implementation of the Bank’s internal controls regarding determination of assumptions used for measurement of actuarial obligations, as well as the Bank’s evaluation of adherence to such assumptions. With the assistance of our actuaries, we analyzed reasonableness and sensitivity of main assumptions used and informed in actuarial reports of relevant benefit plans, as well as adequacy of actuarial liability amounts and database used in calculations performed by external actuaries. We analyzed recording of transactions involving pension plans and adequacy of disclosures in the consolidated financial statements, specifically in relation to sensitivity analysis of net defined benefit liability amount in relation to actuarial assumptions used and other applicable rules.

Based on the evidence obtained from the procedures described above, we consider adequate the measurement of actuarial obligations in the context of the consolidated financial statements taken as a whole.

Projection of future profitability for realization of assets Consolidated financial statements include assets related to tax credits (notes 4h, 24 and 24f) and goodwill derived from acquisition of merged organization (notes 4k and 16c), whose realization is supported by estimated future profitability based on the business plan and budget prepared by the Bank. To prepare projections of future earnings, the Bank adopts assumptions based on its corporate strategies and on macroeconomic scenario, considering current and past performances and expected growth in operation market. Due to relevance of estimates of future profitability and of impact that possible changes in these estimates assumptions could have on consolidated financial statements, we consider this area a key audit matter.

How our audit conducted this matter We evaluated the design and implementation of internal controls related to the Bank’s

process for determination and approval of assumptions used for projection of profitability, used for realization of assets. We analyzed, with technical support from our valuation specialists, the adequacy of income projections, financial-economic evaluations that backed business purchase price, evaluation of Cash Generating Units (CGU) income present value calculation and earnings growth assumptions. We evaluated reasonableness of assumptions used by the Bank and whether they were consistent with evaluation methodologies normally used in the market. We evaluated the determination bases to which prevailing tax rates are applied and deferred tax assets (tax credits) realization capacity. We also evaluated if disclosures in consolidated financial statements, are in accordance with applicable rules. Based on the evidence obtained from the procedures described above, we consider adequate the measure the recoverable amounts of the assets specified above in the context of the consolidated financial statements taken as a whole.

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Ownership interest As disclosed in notes 3a, 5 and 14 of the consolidated financial statements, the Bank has shareholding interest in several entities and business segments, with specific investment structures that are controlled through Corporate Governance structures. Considering that these investees are subject to different structures and their own regulatory requirements, existence of related-party transactions, the necessity of harmonizing different accounting practices, interpretations and judgments involved in each investment model, we consider this as a key audit matter.

How our audit conducted this matter

Our audit procedures included understanding internal controls defined by the Bank and intended mainly for the management of the Bank’s shareholding interests process, and harmonization of accounting practices in consolidation. We also included planning and communication of scope of the work, discussion of material misstatement risks and sending of instructions to relevant investees’ auditor, holding meetings with auditor responsible for relevant investees, and evaluation and review of work done. We evaluated the design and effectiveness of the relevant internal controls and with the assistance of our information technology specialists we evaluate the general controls of information technology and automated key controls related to the processes of consolidation, as well as, we tested identification, disclosure and elimination of related-party transactions, and determination of equity income of investees. We also evaluated if disclosures in consolidated financial statements are in accordance with applicable rules.

Based on the evidence obtained from the procedures described above, we consider adequate, the accounting treatment of shareholdings and disclosures in the context of the consolidated financial statements taken as a whole. Other matters - Statement of value added

The consolidated statements of value added (DVA) for the six month period ended June 30, 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, 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 consolidated financial statements taken as a whole. Individual financial statements The Bank prepared a complete set of individual financial statements of Banco do Brasil S.A. for the six month period ended June 30, 2017 in accordance with accounting practices adopted in Brazil applicable to institutions authorized to operate by the Central Bank of Brazil that were presented separately, over which we issued a separate independent audit report, without any modification, dated August 9, 2017. Other information that accompany consolidated financial statements and the auditor report

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The Bank’s management is responsible for other information included in Management’s Report. Our opinion on consolidated financial statements does not cover Management’s Report and we did not issue any assurance conclusion on such report. In connection with audit of consolidated financial statements, our responsibility is to read Management’s Report and, in doing so, consider if such report is inconsistent with consolidated financial statements or with knowledge obtained during audit, or otherwise seems to be significantly misstated. If, based on work carried out, we conclude that Management’s Report is materially misstated, we must communicate this fact. We have nothing to report in this regard. Responsibilities of management and those in charge with governance for the

consolidated financial statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the accounting practices adopted in Brazil, applicable to institutions authorized to operate by the Central Bank of Brazil, and the internal controls as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatements whether due to fraud or error. In preparing the consolidated financial statements, management is responsible for assessing the Bank’s 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 Banks and its subsidiaries or to cease operations, or there has no realistic alternative but to do so. Those charged with governance are those responsible for overseeing the Bank and the subsidiaries financial reporting process. Auditor's responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements, as a whole, are free from material misstatement, whether due to fraud or error, and to issue an auditor´s 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 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 aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with Brazilian and International Standards on Auditing, we exercise professional judgment and maintain professional skepticism during the audit. We also:

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

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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 and its subsidiaries internal control.

Evaluate the appropriateness of the 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 ability to continue as going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements, or if such disclosures are inadequate to modify our opinion. Our conclusions are based on the audit evidences obtained up to the date of our auditor’s report. However, future events or conditions may cause the Bank and its subsidiaries to cease to continue as a going concern.

Evaluate the overall presentation, structure and content of the financial statements, including the disclosures and whether the 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 Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of 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 and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also 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 though to bear our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determined those matters that were of most significance in the audit of the consolidated financial statements of the current period, and are therefore the key audit matters. We describe these matters in our auditor’s report, unless law or regulation precludes public disclosure about the matters, or when, in extremely rare circumstances, we determine 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. Brasília, August 09, 2017 KPMG Auditores Independentes CRC SP-014428/O-6 F-DF Original report in Portuguese signed by

Marcelo Faria Pereira Accountant CRC RJ-077911/O-2

Consolidated Financial Statements

1st half 2017

SUMMARY OF THE AUDIT COMMITTEE REPORT

Introduction

The Audit Committee of Banco do Brasil is a statutory advisory body of the Board of Directors, and has its assignments

defined by Law 13.303/2016, decree 8.945/2016 and CMN Resolution 3.198/2004, besides other attributions designated

by the Board of Directors.

The Committee’s activities cover the Banco do Brasil and the following subsidiaries: BB DTVM Gestão de Recursos -

Distribuidora de Títulos e Valores Mobiliários S.A., BB Banco de Investimento S.A., BB Leasing S.A. – Arrendamento

Mercantil, BB Administradora de Consórcios S.A., BB Administradora de Cartões de Crédito S.A. and Besc Distribuidora

de Títulos e Valores Mobiliários S.A.

Officers of Banco do Brasil and its subsidiaries are responsible for preparing and assuring the integrity of the financial

statements, managing risks, maintaining effective internal control systems and for ensuring compliance with applicable

legal and regulatory requirements.

Internal Audit is responsible for periodic works, focusing on the main risks to which the Conglomerate is exposed,

evaluating, with independence, the actions of management of these risks and the adequacy of internal controls and

governance, through the verification of its quality, sufficiency, compliance and effectiveness.

KPMG Auditores Independentes is responsible for auditing the financial statements of the Banco do Brasil and of the

subsidiaries covered by the Audit Committee, in addition to other companies that integrate Banco do Brasil

Conglomerate. The independent auditors also evaluate, in the context of the audit services on the financial statements,

the quality and adequacy of the internal control systems and compliance with the legal and regulatory requirements.

Internal regulations of the Audit Committee and a channel of communication for receiving information about violation of

internal regulations, codes, legal and regulatory devices applicable to the institution are available at the website

www.bb.com.br/ir.

Main Activities

The Audit Committee realized 105 meetings, in compliance with its work plan, with the Board of Directors, Supervisory

Board, Banco Central do Brasil, representatives of the Board of Officers and executives of the main business, besides

the internal activities.

At these meetings, the attention was focused on subjects related to the internal control systems, accounting issues, loan

portfolio, provisions, operational losses, risk and capital management processes, combatting money laundering and

terrorist financing, actuarial result, related parties, business ethics ombudsman, branches abroad, related entities, and

recommendations issued by the internal audit, independent auditors and by external inspection bodies. Where

suggestions for improvement were observed, recommendations were made.

The Committee maintained a dialogue with the internal audit and independent audit teams, verifying the accomplishment

of their planning, got acquainted about the results of their main works and examined their conclusions and

recommendations.

The Committee revised the management report, financial statements and notes to the financial statements and

discussed with independent auditor his report dated August 09, 2017, with a non-qualified opinion.

Consolidated Financial Statements

1st half 2017

Conclusions

Based on the activities developed in the period and considering the duties and limitations inherent to the scope of its

activities, the Audit Committee concluded that:

a. The internal control system is appropriate to the size and complexity of the Conglomerate’s business and it is subject to permanent attention from the management; b. Internal Audit is effective and performs its functions with independence, objectivity and quality; c. Independent audit is effective and there was no occurrences that could compromise its independence; d. The financial statements, ended on June 30, 2017 were prepared in compliance to legal requirements and accounting practices adopted in Brazil, applicable to the institutions authorized to operate by the Brazilian Central Bank, and reflect, in all material aspects, the patrimonial and financial situation in that period.

.

Brasília-DF, August 09, 2017.

Egidio Otmar Ames

Antônio Carlos Correia Elvio Lima Gaspar Luiz Serafim Spinola Santos

Consolidated Financial Statements

1st half 2017

DECLARATION OF THE EXECUTIVE BOARD MEMBERS ABOUT THE FINANCIAL STATEMENTS

According to the article 25, item VI, of CVM Instruction No. 480 of December 07, 2009, we declare that the Financial

Statements of the Banco do Brasil S.A. related to the period ended June 30, 2017 were reviewed and, based on

subsequent discussions, we agree that such statement fairly reflects, in all material facts, the financial position for the

periods presented.

Brasília (DF), August 08, 2017.

Paulo Rogério Caffarelli

President

Alberto Monteiro de Queiroz Netto

Antonio Mauricio Maurano

Vice-president of Financial Management and Investors Relations

Vice-president of Whosale

Carlos Hamilton Vasconcelos Araújo

Antonio Gustavo Matos do Vale

Vice-president of Services, Infrastructure and Operations

Vice-president of Technology

José Eduardo Pereira Filho

Marcelo Augusto Dutra Labuto

Vice-president of Government Affairs Vice-president of Retail Services

Márcio Hamilton Ferreira

Tarcísio Hübner

Vice-president of Internal Controls and Risk Vice-president of Agribusiness

Walter Malieni Junior

Vice-president of Retail, Distribution and Human Resources

Consolidated Financial Statements

1st half 2017

DECLARATION OF THE EXECUTIVE BOARD MEMBERS ABOUT THE REPORT OF INDEPENDENT AUDITORS

According to article 25, item V, of CVM Instruction No. 480 of December 07, 2009, we affirm based on our knowledge, on

auditor’s plan and on discussions about the audit results, that we agree, with no dissent, to the opinions expressed in the

Report of Independent Auditors for Financial Statements of August 09, 2017.

Brasília (DF), August 09, 2017.

Paulo Rogério Caffarelli

President

Alberto Monteiro de Queiroz Netto

Antonio Mauricio Maurano

Vice-president of Financial Management and Investors Relations

Vice-president of Whosale

Carlos Hamilton Vasconcelos Araújo

Antonio Gustavo Matos do Vale

Vice-president of Services, Infrastructure and Operations

Vice-president of Technology

José Eduardo Pereira Filho

Marcelo Augusto Dutra Labuto

Vice-president of Government Affairs Vice-president of Retail Services

Márcio Hamilton Ferreira

Tarcísio Hübner

Vice-president of Internal Controls and Risk Vice-president of Agribusiness

Walter Malieni Junior

Vice-president of Retail, Distribution and Human Resources

Consolidated Financial Statements

1st half 2017

MEMBERS OF MANAGEMENT

PRESIDENT Paulo Rogério Caffarelli VICE-PRESIDENTS Alberto Monteiro de Queiroz Netto Antonio Gustavo Matos do Vale Antonio Mauricio Maurano Carlos Hamilton Vasconcelos Araújo José Eduardo Pereira Filho Marcelo Augusto Dutra Labuto Márcio Hamilton Ferreira Tarcísio Hübner Walter Malieni Junior DIRECTORS Adriano Meira Ricci Alexandre Alves de Souza Carlos Alberto Araujo Netto Carlos Renato Bonetti Cícero Przendsiuk Edmar José Casalatina Edson Pascoal Cardozo Edson Rogério da Costa Eduardo Cesar Pasa Fabiano Macanhan Fontes Fernando Florêncio Campos Gustavo de Souza Fosse João Pinto Rabelo Júnior José Caetano de Andrade Minchillo José Eduardo Moreira Bergo Leonardo Silva de Loyola Reis Lucinéia Possar Márcio Luiz Moral Marco Antonio Ascoli Mastroeni Marco Túlio de Oliveira Mendonça Marco Túlio Moraes da Costa Márvio Melo Freitas Nilson Martiniano Moreira Reinaldo Kazufumi Yokoyama Rogério Magno Panca Simão Luiz Kovalski Wilsa Figueiredo

BOARD OF DIRECTORS Beny Parnes Fabrício da Soller Daniel Sigelmann Fabiano Felix do Nascimento Júlio César Costa Pinto Luiz Serafim Spinola Santos Paulo Rogério Caffarelli FISCAL COUNCIL Aldo César Martins Braido Christianne Dias Ferreira Felipe Palmeira Bardella Giorgio Bampi Mauricio Graccho de Severiano Cardoso AUDIT COMMITTEE Antonio Carlos Correia Egidio Otmar Ames Elvio Lima Gaspar Luiz Serafim Spinola Santos ACCOUNTING DEPT. Eduardo Cesar Pasa General Accountant Contador CRC-DF 017601/O-5 CPF 541.035.920-87 Daniel André Stieler Accountant CRC-DF 013931/O-2 CPF 391.145.110-53