Banks. Banco BMG S.A. Banks / Brazil. Full Rating Report. Key Rating Drivers. Rating Sensitivities. Ratings

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1 Banco BMG S.A. Full Rating Report Banks / Brazil Ratings Foreign Currency Long-Term IDR BB Short-Term IDR B Viability Rating bb Long-Term National Rating A(bra) Support Rating 5 Long-Term Sub Debt due 2019 and 2020 B Sovereign Risk Foreign-Currency Long-Term IDR BB Local-Currency Long-Term IDR BB IDR Issuer Default Rating. Outlooks Foreign Currency Long-Term IDR Long-Term National Rating Sovereign Foreign Currency Long-Term IDR Financial Data Negative Negative Negative Banco BMG S.A. (BRL Mil.) 9/30/16 12/31/15 Total (USD Mil.) 5,214 4,392 Total 16,804 17,152 Total Equity 3,055 3,145 Operating Profit (506.0) (114.3) Net Income Operating ROAA (%) (4.0) (0.7) Operating ROAE (%) (22.1) (3.5) Fitch Core Capital Ratio (%) Internal Capital Generation (%) (3.4) 1.5 Tangible Common Equity/ Tangible (%) Tier 1 Regulatory Capital Ratio (%) Related Research 2017 Outlook: Brazilian Banks (Macro Picture Seemingly Stabilizing, but Banking Sector Not Out of the Woods Yet) (December 2016) Brazil - November 2016 Global Economic Outlook Forecast (November 2016) Fitch Affirms Banco BMG s IDR at BB, Outlook Remains Negative (December 2016) Analysts Robert Stoll robert.stoll@fitchratings.com Pedro Gomes pedro.gomes@fitchratings.com Key Rating Drivers Ratings Driven by Viability Rating: The recent affirmation of Banco BMG S.A. s Viability Rating (VR), Issuer Default Ratings (IDRs) and National Ratings reflect Fitch Ratings view on the expected improvement in funding and capitalization due to the sale of BMG s 40% share of its joint venture partnership (JV) with Itau Unibanco (IU) in the payroll deductible lending business (consignado). The sale concluded on Dec. 28, Partnership with IU: BMG and IU will maintain an association, despite IU now owning 100% of the JV, through a new 10-year agreement for the distribution of Itau BMG Consignado and its affiliates payroll loans, on an exclusive basis, through certain channels linked to BMG and its affiliates. BMG will continue to focus on credit card lending backed by payroll deduction (cartao de credito consignado) and commercial lending. Satisfactory Capitalization: Regulatory Tier I capital over the past three years declined significantly due to prudential adjustments. BMG s strategic shift in its business model over the same period resulted in a reduction of risk assets that resulted in a stronger Fitch Core Capital (FCC).The sale of the JV, along with the retention of a portion of the BRL1.46 billion proceeds of the sale, are expected to further improve the bank s Common Equity Tier I ratio. Adequate Asset Quality: The ratings also reflect the difficulty BMG faces in maintaining its asset quality during the challenging operating scenario. BMG s impaired loan ratio saw a slight deterioration; however, there was a slight improvement in the coverage ratios. Further improvements are expected with the growth of the credit card consignado business and the exit of its noncore businesses. Weak Profitability: Operational profitability remained very weak during 9M16 due in part to a non-recurring accounting expense related to upfront recognition of commissions. However net income in 2016 was boosted by nonrecurring income. Profitability is expected to be muted in 2017 by the weak operating environment and prudential regulations. Increased Funding Diversification: BMG has seen significant progress expanding its funding options and reducing concentrations following its partnership with IU. The excess liquidity from conservative underwriting has enabled the prepayment of higher-cost funding. A significant growth of new credit exposure would be comfortably managed given existing funding programs and current liquidity levels, which have been enhanced with the proceeds of the JV sale. Rating Sensitivities Positive Drivers: A relevant improvement in the bank s operating profit and improved asset quality metrics, combined with the continuation of strong capitalization and liquidity metrics, could lead to a higher rating. However, such uplift could be constrained by negative changes to the sovereign rating, which currently has a Negative Outlook. Negative Drivers: A significant deterioration in asset quality, such as a 90-day nonperforming loan (NPL) ratio remaining over 3%, and weak performance, such as a continued negative operating profit and/or deterioration in FCC ratio below 12%, could trigger a rating action. A further downgrade of the sovereign rating may also affect BMG s ratings.

2 Operating Environment Continued by Deep Recession Sovereign Rating Fitch downgraded Brazil s long-term IDRs from BBB to BB in three successive rating actions since April The latest downgrade in May 2016 reflected the deeper-than-anticipated economic contraction, failure of the government to stabilize the outlook for public finances, and the sustained legislative gridlock and elevated political uncertainty that are sapping domestic confidence and undermining governability, as well as policy effectiveness. The maintenance of the Negative Outlook reflected continued uncertainty surrounding the outlook for growth, public finances and the government debt trajectory. Fitch affirmed Brazil s Sovereign rating on Nov. 16, 2016, although challenges remain. Economic Environment Brazil continues to be mired in one of its worst recessions in decades. Annual real GDP growth was negative 3.8% in 2015, and Fitch forecasts a further contraction of 3.3% for 2016 and only a modest recovery in 2017 and The inflation rate has fallen to approximately 6.3% at Jan. 31, 2017, which is significantly below the rate of 10.7% at January 2016 but still above the upper range of the Central Bank s target. The unemployment rate rose to approximately 12% at year-end 2016, while the benchmark SELIC interest rate was lowered on Jan. 11, 2017 but is still at a relatively high rate of 13%. Financial Market Development The Brazilian banking system is developed and highly concentrated. However, lending and asset quality have come under pressure from the weak operating environment of the past four years. Domestic capital markets are relatively deep. The bulk of the liquidity comes from Treasury securities, but the private debt market is growing gradually. Regulatory Framework The infrastructure supporting the financial system is adequate and well established. The regulatory environment is generally considered to be strong. The two main regulators, the Central Bank and Brazilian Securities and Exchange Commission, have good reputations for their level of sophistication, controls, monitoring capacity and flexibility, and capacity to react to adverse situations quickly. Enforcement of legislation also is adequate. Company Profile Family-Owned Bank Related Criteria Global Bank Rating Criteria (November 2016) National Scale Rating Criteria (October 2013) BMG is a privately owned financial institution controlled by Flávio Pentagna Guimarães and his family. The bank has an 87-year history operating in various business segments, such as vehicle finance, commercial lending and principally payroll-secured lending, known locally as consignado. The family also holds interests in the real estate, agriculture, service and food processing sectors, among other industrial activities. BMG is currently the family s main business, and is managed independently from all other Guimarães family businesses. The family s banking activities date back to 1930, and the bank has operated as a multiple bank since Together, the bank and its subsidiaries represent approximately 60% of the group s equity. BMG employed nearly 700 employees as of September The bank s headquarters are located in Sao Paulo. Banco BMG S.A. 2

3 Closed Capital-Private National Control Total Held by Shares (%) Flávio Pentagna Guimarães BMG Participações S.A Regina Annes Guimarães 6.50 Ricardo Annes Guimarães 6.50 João Annes Guimarães 6.50 Angela Annes Guimarães 6.50 Others 4.70 Source: Banco BMG S.A. BMG's Credit Portfolio (September 2016) Run-Off Payroll Loans and Other 11% Vehicle Finance 9% Credit Card Loans 57% Source: Banco BMG. Commercial Loans 21% Personal Credit 2% BMG operates through 14 branches and has nearly 400 help! loja de crédito outlets, a network of stores focused on the retail segment of INSS (Social Security recipients) retirees, pensioners and public servants. The bank has approximately 4 million clients, with nearly 2,800 depositors that provide funding either through time deposits or similar banking deposit instruments. BMG reported total assets of BRL16.8 billion as of Sept. 30, 2016, and shareholder s equity was BRL3 billion. The core credit portfolio reached BRL6.9 billion and the run-off portfolio fell to BRL1.8 billion for a total portfolio of BRL8.7 billion. The credit exposure of the credit card segment backed by payroll/pension assignments has grown 175% over the past 12 months reaching nearly BRL5 billion. Slightly over 70% of that BRL5 billion portfolio is concentrated with retirees and pensioners that receive income from the INSS (social security agency) and federal public servants in line with the bank s strategy of focusing on agreements with the lower-risk federal institutions. The remaining 30% relates to state and municipal workers. BMG was one of the founders of the payroll lending product that catered to the lower income segment marketing its payroll/pension payment-backed lending business quite profitably, while holding the largest market share in this segment. The largest private sector banks have become interested in this market niche due to the secured nature of the business. BMG entered into a JV relationship with Brazil s largest private-sector banking group about four years ago and gradually transferred its traditional consignado business to the JV. BMG sold its 40% ownership to Itau Unibanco in late December 2016 in exchange of nearly BRL1.5 billion. BMG also continued the exit of its noncore businesses in 2016, such as vehicle finance. BMG announced the creation of BMG Seguros in mid- 2016, which focuses on the surety bond market. The bank also announced an agreement with the Italian insurance company, Grupo Generali, during third-quarter 2016, which will increase revenues in exchange for a 20-year exclusive right contract to distribute Grupo Generali s insurance products through BMG s business channels. Management Seasoned Management BMG s management team is seasoned and well regarded in the industry. Challenged by the country s deep recession, they have responded with a conservative underwriting strategy. They have been agile in finding market opportunities, where larger banks and other competitors pulled back. The bank s executive committee, which meets on a weekly basis, comprises board members, the CEO, Antonio Hermann, the vice president and executive directors that set and monitor business strategy and risk policies. The audit committee meets monthly while the asset and liability committee meets weekly. The bank s three independent board members are well respected in the industry, while the other four board members are Guimarães family members. The board meetings take place on a monthly basis. The bank s external auditors are PricewaterhouseCoopers. Conservative Strategy BMG s credit card business, which is secured through pension or payroll deductible agreements, is expected to experience continued growth in In addition to its commercial lending and corporate client servicing business, the bank will also focus on growing its help! credit shop franchise business, which was launched in January 2016 to increase its revenue diversification. This is a relatively new product and services distribution channel through Banco BMG S.A. 3

4 physical stores. BMG opened their own stores and then began selling franchises, which focus on providing financial and other services to retirees that receive pension and social security payments, and extends credit backed by the monthly receivables. The stores also can crosssell other products that generate interest, fees or commissions. Thus far there are over 400 stores in operation and BMG s goal is to open 2,600 more by Risk Appetite Credit Risk Continues to Be the Main Risk BMG s risk appetite is expected to remain conservative and is supported by the secured nature of the consignado credit card business and the selective underwriting used in the commercial lending segment, which mitigates nonpayment risk. The vehicle finance portfolio continues to operate on a run-off basis and may be sold to a third party during first-quarter BMG still faces risks similar to the traditional consignado business, such as interest rate risk, despite the semi-secured nature of the consignado-backed credit card business. However, this credit risk is mitigated by BMG s ability to fund itself at reasonable costs. There is a lower probability of unemployment in the public sector, despite the weak operating environment, and the majority of the contracts involve retirees and public sector employees that benefit from very high job security. BMG s treasury department is operated on a conservative basis with modest exposure limits. The treasury uses the value-at-risk methodology, with a 99% confidence level interval. The Asset and Liability committee meets weekly to review its position and strategy. One of the challenges of BMG s business model was its consignado lending is usually done on a fixedrate basis subject to regulatory caps, while a significant portion of its funding is sourced on a floating-rate basis. The bank is also subject to tenor risk, as the consignado portfolio is usually one of long-term lending. The bank has access to long-term funding as well, as its subordinated debt issuances mature in late 2019 and The bank has invested heavily in management information systems, which identify internal and external risks and have a sophisticated contingency system in place to protect data and allow the bank to continue operations at back-up sites with minimal delays. Financial Profile Asset Quality Satisfactory Level of Impairments in Core Segments Credit risk is concentrated principally in the bank s total loan exposure, which is lower than the average of previous years due to the transfer of assets to the JV and the lower commercial credit risk appetite, and the exit strategy of the vehicle segment. In addition, the bank reported a smaller securities portfolio of BRL3.7 billion, of which there is a predominance of government securities. Loan concentration is satisfactory, as the 20 largest exposures only account for 5.5% of total assets and 10.6% of the total credit portfolio as of Sept. 30, While consignado-related loans are widely disbursed, given the fragmented nature of the bank s direct borrower base, the ultimate credit risk, in effect, is concentrated in the sources of the payrolls and social security payments from which payroll deductions are made. These, in turn, are concentrated among public sector entities. Past efforts to further diversify the loan portfolio resulted in some growth of other credit products, such as commercial lending to small corporates and mid-sized companies and vehicle financing. However, these were affected by the effects of the long-drawn out recession of the last four years. Banco BMG S.A. 4

5 The recent growth in the consignado credit card segment has helped stabilize the loan impairment ratios. The impaired loans/total loans ratio improved to 7.6% at September 2016 and coverage also rose to nearly 80%. Net chargeoffs fell significantly to 3.6% from 8.1% nine months earlier. The bank s over 90-day NPL ratios for the core portfolio was 4.8% at Sept. 30, 2017 and the overdue installments for both the total portfolio and the core portfolio were 3%. For the credit card portfolio alone, the over 90-day ratio was only 2.3%. These levels compare well with the banking system averages. NPL E-H Portfolio (%) NPL Nonperforming loans. Source: Banco BMG S.A. Total Portfolio Core Portfolio 3Q15 4Q15 1Q16 2Q16 3Q16 Earnings and Profitability Weak Profitability BMG found itself with a lower level of earning assets as a result of the transfer of the bulk of its legacy consignado portfolio, the continued exit of the vehicle segment and the reduced risk appetite in the commercial lending portfolio. The change in prudential regulations also affected the amount of income coming from its equity in the earnings of the JV. Profitability was affected by the need for higher loan loss provisions during 2016, higher operational costs related to the growth in the credit card and help! segments and run-off expenses of the vehicle division. These factors resulted in the bank posting negative operating profits. This challenging situation led the bank to move forward with the sale of its share of the JV to also boost its capital and funding position. The bank was able to report a positive net income due to the receipt of a nonoperational fee of EUR45 million from Grupo Generali and a nonrecurring gain of BRL360 million from the Fundo Garantidor de Credito related to a former acquisition. Profitability is expected to improve during 2017 and 2018 as the bank completes its strategic exits and strengthens its core segments. Fitch expects small GDP growth of 1.2% in However, regulations regarding the recognition of commission expenses in its credit card business will mute earnings of its credit card business. Capitalization and Leverage Stronger Metrics Through Deleveraging Total Portfolio (ex-100% provisioned) Core Portfolio (ex-100% provisioned) BMG reinvested BRL99 million of interest on its own capital during third-quarter 2016 to meet regulatory Tier I minimums. The bank s FCC saw a small decline between December 2015 and September 2016 to BRL1.5 billion but the FCC/risk-weighted assets rose to 16.15%, the highest ratio of the last five years. The improvement was driven by a 13% decrease in riskweighted assets. The JV sale proceeds are also expected to further improve the bank s Banco BMG S.A. 5

6 Common Equity Tier I ratio, as the sale eliminates some prudential requirements. The retention of a portion of the sale proceeds should enable BMG s capitalization ratios to comfortably remain above the regulatory minimums and allow for further loan growth. Funding and Liquidity Comfortable Liquidity Levels BMG has made progress diversifying its unsecured sources of funding since December 2013, when the bank s major sources of funding were more concentrated and had greater reliance on credit assignments. The bank aims to further diversify funding through its BMG Invest platform, a fixed-income platform directed to individuals and companies that allows BMG to have a greater number of clients in its database with a lower average deposit size, resulting in a smaller liquidity risk. In the last 12 months the number of funding clients increased by nearly 15%. The bank s funding position as of Sept. 30, 2016 consisted primarily of time deposits (51.6%); subordinated debt (14%); credit assignments (13.1%); external funding (9.3%); and financial bills (7.4%). The bank used its excess liquidity to prepay a portion of its more expensive debt during The bank has been successful increasing the percentage of clean lending and also has the option of asset sales through FIDCs, should asset growth exceed expectations. Percentage of Clean Funding Growth (2013 3Q16) (%) Source: Banco BMG S.A. Peer Analysis BMG is a leader in the credit card consignado business, with an estimated 60% market share. Other smaller lenders have mostly left the business and larger players have avoided it to prevent from cannibalizing their existing card business. As a result, it is difficult to find similar peers rated by Fitch. Debt Ratings Clean-Funding Guaranteed Funding Q16 Fitch rates two subordinated debt issuances by BMG that mature in 2019 and These are rated three notches below the parent IDR rating due to the subordinated status Banco BMG S.A. 6

7 Income Statement Banco BMG S.A. Sept. 30, 2016 a (BRL Mil., Year End As of Dec.31) Nine Months Third Quarter 2015 a 2014 a 2013 a 2012 a (USD Mil.) Earning Earning Earning Earning Earning Audited Audited Qualified Qualified Qualified Qualified Interest Income on Loans , , , , , Other Interest Income (143.8) (463.4) (5.08) 1, Dividend Income Gross Interest and Dividend Income , , , , Interest Expense on Customer Deposits , , , , Other Interest Expense Total Interest Expense , , , , Net Interest Income , , , Net Gains\(Losses) on Trading and Derivatives Net Gains\(Losses) on Other Securities Net Gains\(Losses) on at Fair Value Through Income Statement Net Insurance Income Net Fees and Commissions Other Operating Income (25.2) (81.1) (0.89) (64.8) (0.52) (310.6) (2.42) (95.7) (0.42) (1,101.4) (5.41) Total Non-Interest Operating Income (12.1) (39.0) (0.43) (218.2) (1.70) (16.5) (0.07) (1,015.9) (4.99) Personnel Expenses Other Operating Expenses , Total Non-Interest Expenses , Equity-Accounted Profit/Loss Operating (19.0) (0.09) Pre-Impairment Operating Profit (58.6) (188.9) (2.07) , (408.6) (2.01) Loan Impairment Charge Securities and Other Credit Impairment Charges Operating Profit (157.0) (506.0) (5.55) (114.3) (0.92) (1,134.7) (5.58) Equity-Accounted Profit/Loss - Non-Operating Nonrecurring Income Nonrecurring Expense Change in Fair Value of Own Debt Other Non-Operating Income and Expenses Pretax Profit (112.6) (0.91) (1,138.3) (5.59) Tax Expense (4.5) (14.4) (0.16) (301.4) (2.42) (26.7) (0.21) (558.3) (2.74) Profit/Loss from Discontinued Operations Net Income (580.0) (2.85) Change in Value of AFS Investments Revaluation of Fixed Currency Translation Differences Remaining OCI Gains/(Losses) Fitch Comprehensive Income (580.0) (2.85) Memo: Profit Allocation to Noncontrolling Interests Memo: Net Income after Allocation to Noncontrolling Interests (580.0) (2.85) Memo: Common Dividends Relating to the Period Memo: Preferred Dividends Related to the Period a Exchange rate: 2016 USD1 = BRL ; 2015 USD1 = BRL ; 2014 USD1 = BRL ; 2013 USD1 = BRL ; 2012 USD1 = BRL AFS Available for sale. OCI Other comprehensive income. Source: Fitch. Banco BMG S.A. 7

8 Balance Sheet Banco BMG S.A. Sept. 30, 2016 a Nine Months Third Quarter 2015 a 2014 a 2013 a 2012 a (BRL Mil., Year End as of Dec. 31) (USD Mil.) Loans Residential Mortgage Loans Other Mortgage Loans Other Consumer/Retail Loans 2, , , , , , Corporate and Commercial Loans , , , , , Other Loans Less: Reserves for Impaired Loans Net Loans 2, , , , , , Gross Loans 2, , , , , , Memo: Impaired Loans Included Above , , Memo: Loans at Fair Value Included Above Other Earning Loans and Advances to Banks Reverse Repos and Cash Collateral , Trading Securities and at Fair Value Through Income Derivatives Available for Sale Securities Held to Maturity Securities , , , , Equity Investments in Associates , Other Securities Total Securities 1, , , , , , Memo: Government Securities Included Above , , , , , Memo: Total Securities Pledged Investments in Property Insurance Other Earning Total Earning 3, , , , , , Non-Earning Cash and Due From Banks Memo: Mandatory Reserves Included Above Foreclosed Real Estate Fixed Goodwill , , Other Intangibles Current Tax Deferred Tax , , , , , Discontinued Operations Other , , , , , Total 5, , , , , , Liabilities and Equity Interest-Bearing Liabilities Customer Deposits Current Customer Deposits Savings Customer Deposits Term 1, , , , , , Total Customer Deposits 1, , , , , , Deposits from Banks Repos and Cash Collateral Commercial Paper and Short-Term Borrowings , , , , Total Money Market and Short-Term Funding 2, , , , , , Senior Unsecured Debt (Original Maturity > One Year) , , , , , Subordinated Borrowing , , , , , Covered Bonds Other Long-Term Funding Total Long-Term Funding (Original Maturity > One Year) , , , , , Derivatives Trading Liabilities Total Funding 3, , , , , , a Exchange rate: 2016 USD1 = BRL ; 2015 USD1 = BRL ; 2014 USD1 = BRL ; 2013 USD1 = BRL ; 2012 USD1 = BRL Continued on the next page. Source: Fitch. Banco BMG S.A. 8

9 Balance Sheet Banco BMG S.A. (Continued) Sept. 30, 2016 a Nine Months Third Quarter 2015 a 2014 a 2013 a 2012 a (BRL 000, Year End Dec. 31) (USD Mil.) Liabilities and Equity Non-Interest-Bearing Liabilities Fair Value Portion of Debt Credit Impairment Reserves Reserves for Pensions and Other Current Tax Liabilities Deferred Tax Liabilities Other Deferred Liabilities Discontinued Operations Insurance Liabilities Other Liabilities , , , , , Total Liabilities 4, , , , , , Hybrid Capital Preferred Shares and Hybrid Capital Accounted for as Debt Preferred Shares and Hybrid Capital Accounted for as Equity Equity Common Equity , , , , , Non-Controlling Interest Securities Revaluation Reserves (2.5) (8.2) (0.05) (6.7) (0.04) (4.5) (0.03) (15.7) (0.06) (42.4) (0.16) Foreign Exchange Revaluation Reserves Fixed Asset Revaluations and Other Accumulated Other Comprehensive Income Total Equity , , , , , Total Liabilities and Equity 5, , , , , , Memo: Fitch Core Capital , , , , a Exchange rate: 2016 USD1 = BRL ; 2015 USD1 = BRL ; 2014 USD1 = BRL ; 2013 USD1 = BRL ; 2012 USD1 = BRL Source: Fitch. Banco BMG S.A. 9

10 Summary Analytics Banco BMG S.A. (%, Year End Dec. 31) 9/30/ Interest Ratios Interest Income on Loans/Average Gross Loans Interest Expense on Customer Deposits/Average Customer Deposits Interest Income/Average Earning Interest Expense/Average Interest-Bearing Liabilities Net Interest Income/ Average Earning Net Int. Including Less Loan Impairment Charges/Av. Earning Net Interest Including Less Preferred Stock Dividend/ Average Earning Other Operating Profitability Ratios Non-Interest Income/Gross Revenues (10.15) 5.55 (13.86) (0.82) (83.86) Non-Interest Expense/Gross Revenues Non-Interest Expense/Average Pre-Impairment Operating Profit/Average Equity (8.24) (12.63) Pre-Impairment Operating Profit/Average Total (1.50) (1.90) Loans and Securities Impairment Charges/Pre-Impairment Operating Profit (167.87) (177.70) Operating Profit/Average Equity (22.08) (3.53) (35.08) Operating Profit/Average Total (4.02) (0.66) (5.27) Operating Profit/Risk-Weighted (7.26) (1.07) (3.64) Other Profitability Ratios Net Income/Average Total Equity (17.93) Net Income/Average Total (2.69) Fitch Comprehensive Income/Average Total Equity (17.93) Fitch Comprehensive Income/Average Total (2.69) Taxes/Pretax Profit (53.93) (10.03) Net Income/Risk-Weighted (1.86) Capitlization FCC/FCC-Adjusted Risk-Weighted Tangible Common Equity/Tangible Tier 1 Regulatory Capital Ratio Total Regulatory Capital Ratio Common Equity Tier 1 Capital Ratio n.a. Equity/Total Cash Dividends Paid & Declared/Net Income (23.90) Internal Capital Generation (3.36) (24.38) Loan Quality Growth of Total (2.03) 0.83 (39.48) Growth of Gross Loans (0.39) (10.14) (51.70) Impaired Loans/ Gross Loans Reserves for Impaired Loans/Gross Loans Reserves for Impaired Loans/Impaired Loans Impaired loans less Reserves for Impaired Loans/Fitch Core Capital Impaired Loans less Reserves for Impaired Loans/Equity Loan Impairment Charges/Average Gross Loans Net Chargeoffs/Average Gross Loans Impaired Loans + Foreclosed / Gross Loans + Foreclosed Funding and Liquidity Loans/ Customer Deposits Interbank /Interbank Liabilities , Customer Deposits/Total Funding (Excluding Derivatives) Liquidity Coverage Ratio N.A. N.A. N.A. N.A. N.A. Net Stable Funding Ratio N.A. N.A. N.A. N.A. N.A. Note: The Brazilian published chart of accounts for banks according to Bacen's (the Brazilian Central Bank) COSIF do not allow a segregation of "Interest on Customer Deposits" only. Therefore this item also includes several other funding expenses. However, this ratio is comparable for all banks and, therefore, serves as a relative indicator of a bank's aggregate retail and wholesale funding costs. Source: Fitch. Banco BMG S.A. 10

11 Reference Data Banco BMG S.A. Sept. 30, 2016 a Nine Months Third Quarter 2015 a 2014 a 2013 a 2012 a (BRL Mil., Year End as of Dec. 31) (USD Mil.) Off-Balance Sheet Items Managed Securitized Reported Off Balance Sheet , , Other Off-Balance Sheet Exposure to Securitizations , Guarantees Acceptances and Documentary Credits Reported Off Balance Sheet Committed Credit Lines Other Contingent Liabilities Total Under Management 5, , , , , , Average Balance Sheet Average Loans 2, , , , , , Average Earning 3, , , , , , Average 5, , , , , , Average Managed Securitized Off-Balance Sheet , , , Average Interest-Bearing Liabilities 3, , , , , , Average Common Equity , , , , , Average Equity , , , , , Average Customer Deposits 1, , , , , , Maturities Asset Maturities Loans and Advances < 3 Months 1, , , , , , Loans and Advances 3 12 Months , , , , , Loans and Advances 1 5 Years , , , , , Loans and Advances > 5 Years Debt Securities < 3 Months Debt Securities 3 12 Months Debt Securities 1 5 Years , , , , , Debt Securities > 5 Years Loans and Advances to Banks < 3 Months Loans and Advances to Banks 3 12 Months Loans and Advances to Banks 1 5 Years Loans and Advances to Banks > 5 Years Liability Maturities Retail Deposits < 3 Months Retail Deposits 3 12 Months Retail Deposits 1 5 Years Retail Deposits > 5 Years Other Deposits < 3 Months , , Other Deposits 3 12 Months , , , , , Other Deposits 1 5 Years 1, , , , , , Other Deposits > 5 Years Deposits from Banks < 3 Months Deposits from Banks 3 12 Months Deposits from Banks 1 5 Years Deposits from Banks > 5 Years Senior Debt Maturing < 3 Months Senior Debt Maturing 3 12 Months , , Senior Debt Maturing 1 5 Years , , , , , Senior Debt Maturing > 5 Years Total Senior Debt on Balance Sheet , , , , , Fair Value Portion of Senior Debt Subordinated Debt Maturing < 3 Months Subordinated Debt Maturing 3 12 Months Subordinated Debt Maturing 1 5 Years , , , , , Subordinated Debt Maturing > 5 Years Total Subordinated Debt on Balance Sheet , , , , , Fair Value Portion of Subordinated Debt a Exchange rate: 2016 USD1 = BRL ; 2015 USD1 = BRL ; 2014 USD1 = BRL ; 2013 USD1 = BRL ; 2012 USD1 = BRL Continued on the next page. Source: Fitch. Banco BMG S.A. 11

12 Reference Data Banco BMG S.A. (Continued) Sept. 30, 2016 a Nine Months Third Quarter 2015 a 2014 a 2013 a 2012 a (BRL Mil., Year End as of Dec. 31) (USD Mil.) Risk-Weighted Risk-Weighted 2, , , , , , Fitch Core Capital Adjustments for Insurance and Securitization Risk-Weighted Fitch Core Capital Adjusted Risk-Weighted 2, , , , , , Other Fitch Adjustments to Risk-Weighted , Fitch Adjusted Risk-Weighted 2, , , , , , Equity Reconciliation Equity , , , , , Add: Preferred Shares and Hybrid Capital Accounted for as Equity Add: Other Adjustments Published Equity , , , , , Fitch Eligible Capital Reconciliation Total Equity as Reported Including Noncontrolling Interests , , , , , Fair Value Effect Included in Own Debt/ Borrowings at Fair Value on the Balance Sheet Credit Component Only Nonloss-Absorbing Noncontrolling Interests Goodwill , , Other Intangibles Deferred Tax Deduction Net Asset Value of Insurance Subsidiaries First Loss Tranches of Off Balance Sheet Securitizations Fitch Core Capital , , , , a Exchange rate: 2016 USD1 = BRL ; 2015 USD1 = BRL ; 2014 USD1 = BRL ; 2013 USD1 = BRL ; 2012 USD1 = BRL Source: Fitch. Banco BMG S.A. 12

13 The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. 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