Banco do Brasil

Brazil | Outperform
March 21, 2024 | Company Update

The Movie Continues; Reiterate OP

We reiterate the positive view on Banco do Brasil and suggest recent weakness as an entry Ticker (local) BBAS3
point. Strong results throughout 2024 (including already in 1Q24) should alleviate concerns that Target Price - BRL(YE24) 65.00
the name is past peak earnings on NII, or that agro will hurt. BB is executing credit volume
growth above peers with sustained profitability, working well for all stakeholders. Its +20% ROEs
do not come from high client spreads, today the lowest in a decade. Its earnings power is
coming from superior credit quality, funding, efficiency, and overall NII – all hard to change by Stock Data
the swipe of a pen. We expect better NII and lower cost of risk to drive double-digit EPS growth Current price BRL 56.43
in 2024E and a ~10% dividend yield, and 4x P/E’24 or 0.8x P/B; the best value proposition in
Upside (YE24) % 15.24
our coverage. As time goes by, results are accumulated onto equity and lower uncertainty
should drive a re-rating to our 1x P/B’24 or YE24 of BRL 65. 52 Week high/low BRL 59.91/36.7
Shares outstanding th 2,865,417
• Strong and consistent earnings to alleviate market concerns. Part of the valuation
discount comes from markets expecting that ROEs will eventually decline from today’s 21%. Market capitalization BRL m 165,048
The year should already kick off on a strong note (BRL 9.5 billion) to dispel this fear, in our 3-mth avg daily vol. BRL m 524
view. More than offsetting NII headwinds from Argentina FX and a lower Selic on its treasury Performance (%) 1m 12m
results. BB has growth in loan book and equity base, better credit spread dynamics on its
Absolute 0.9 63.8
fixed-rate portfolio, and a shift into credit within total earning assets. While total NII grows
Vs. Ibovespa 2.4 34.6
along the year, efficiency continues and provision expenses decline 5% YoY from a high
base of 2H23. We lay at the higher end of FY24 guidance at BRL 38.9 billion, ~10% YoY
growth and 21% ROE.
• A fruitful combo for all stakeholders. The policy risk discussion comes and goes with BB,
Company x Ibovespa
180
usually proving to be entry points. We see a very balanced growth/profit situation for all 160
stakeholders, with good numbers for all sides. It is already the fastest-growing big bank in 140

credit for the third year now in 2024E. Its rates are competitive, and managerial credit 120
100
spreads are the lowest in ten years. At the same time, it is growing earnings and being able
80
to increase its dividend payout to now 45%. BB’s 20% ROE is coming from pillars such as 60

Sep-23
Aug-23
Jul-23
Jun-23

Jan-24
Mar-23

Apr-23

Oct-23

Nov-23

Dec-23
May-23

Mar-24
Feb-24
efficiency, funding base, cost of risk, and yield on non-credit assets. Management execution
has been consistently positive. These drivers are either structural or have greater
IBOV BBAS3
governance around; essentially sustaining ROEs well above the cost of capital. Source: Itaú BBA
• Addressing agro concerns. Agro harvest breaks and corporate defaults making media
headlines should have a very limited impact on BB’s volumes and NPLs, in our view. The
buffer from specific cases and regions comes from both its geographic and product
diversification. Most (~2/3) of its crop credits are also insured against climate breaks.
Noteworthy, historical data shows little correlation between harvest productivity drops and
BB’s NPL levels (see agro section on pages 7).
• Relatively more attractive dividend yields. Banco do Brasil offers a ~10% dividend yield
at current prices and the mid-point of profit guidance, which places the bank as a top 3
dividend payer in the Ibov (see pages 4-5), along with BB Seguridade. BB is the only out-
perform rated amongst both, also the one with the best mid-term earnings outlook. Capital
is ample. This dividend growth profile protects value and attracts flows in a lower rate
environment, re-rating shares. Our Strategy team led by Daniel Gewehr has BB amongst
their top picks (see report) and ESG strategist Victor Natal, in his portfolio (report). The
name scores well in competitive advantages, ESG, growth/value, and in dividends.
• Reiterate outperform; top pick in large banks. This will be the third year in a row of above BANKING & FINANCIAL
20% ROEs, demonstrating solid management transition and consistent execution despite
SERVICES TEAM
numerous market adversities. On paper, shares should trade well above book value.
Markets will rerate it based on delivery over time. Our year-end 2024 fair value of BRL Pedro Leduc, CNPI
65/share implies 0.95x P/B for 2024 or a forward-looking 0.9x from December 2024 at the +55-11-3073-3243
pedro.leduc@itaubba.com
2025 estimated P/B, which could be considered conservative. Among other large banks we
cover, Santander Brasil and Bradesco, Banco do Brasil remains the only OP rated with the Mateus Raffaelli, CNPI
best profit dynamic both via NII and Credit risk. The upcoming 1Q24 should reinforce the +55-11-3073-3474
mateus.raffaelli@itaubba.com
positive tone for Banco do Brasil. The P/B discount may have narrowed, but not the P/E
given the surplus ROE. BB, BTG, and NU are our top picks within the banking sector. William Barranjard, CNPI
+55-11-3073-3348
Please refer to page 15 of this report for important disclosures, analyst certifications and additional information. Itaú BBA does and seeks to do business with william.barranjard@itaubba.com
Companies covered in this research report. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of
this report. Investors should not consider this report as the sole factor in making their investment decision. Itaú Corretora de Valores S.A. is the securities
arm of Itaú Unibanco Group. Itaú BBA is a registered mark used by Itaú Corretora de Valores S.A.
Banco do Brasil. – March 21, 2024

Loan book. This year should mark the third year of consecutive loan book growth above market
for BB. This expansion is coming at adequate NIMs post Cost of Risk (see page 8). Credit
spreads for the portfolio have been falling along with mix, more than offset by better credit
quality. Loan book growth outlook is for 8-12%. We anticipate that this combination of improved
yields and reduced provisions in 2024 will drive profits.

NII with net positive forces has been mostly driven by market NII in recent years. The bank
has accumulated excess liquidity parked in Brazilian treasuries, whose yield has risen well
above the cost of funding. This piece becomes a headwind in 2024. The client NII piece, in turn,
becomes a tailwind. Most of BB’s loans are originated at fixed rates, while funding costs drop
with lower SELIC. Over time, this is passed through, but there is an immediate NIM effect on the
credit inventory. Moreover, there is a pick-up in overall NIMs as the asset mix shifts towards
credit vs. risk-free securities.

Loan Book Growth vs. Peers (YoY; %) BB – Loan Book & Credit Spread (BRL in millions; %)

1,200,000 8.5%
25%
20% 1,000,000
20% 18% 18% 18% 8.0%
17%
15% 800,000
15% 14%
11% 12%
11% 11% 11% 7.5%
10% 10% 10% 10%
10%
9%
8% 7% 8%9%8% 8% 600,000
6% 7.0%
5% 4% 3% 400,000

6.5%
0% 200,000

-3% -2%
-5% - 6.0%
BB Incumbent 1 Incumbent 2 Incumbent 3
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
1Q19
2Q19
3Q19
4Q19
1Q20
2Q20
3Q20
4Q20
1Q21
2Q21
3Q21
4Q21
1Q22
2Q22
3Q22
4Q22
1Q23
2Q23
3Q23
4Q23
2018 2019 2020 2021 2022 2023 2024E Expanded loan book Credit spreads - total

Credit & Securities Yield vs. Funding Cost (p.a.%) – Credit

Earning Assets Breakdown (%) – Credit Should Gain Share Spreads Expansion Should Compensate Lower Treasury
Over Securities, Driving Total Portfolio Yields Higher Spreads

18.0%
100% 4% 4% 5% 4% 4% 3% 3% 4% 4%
16.0%
90%
14.0%
80%
46% 43% 44% 46% 12.0%
70% 53% 51% 49% 48%
57% 10.0%
60%
50% 8.0%
40% 6.0%
30% 4.0%
49% 53% 52% 49% 47%
20% 42% 43% 46%
38% 2.0%
10%
0.0%
0%
1Q15
2Q15
3Q15

1Q16
2Q16
3Q16

1Q17
2Q17
3Q17

1Q18
2Q18
3Q18

1Q19
2Q19
3Q19

1Q20
2Q20
3Q20

1Q21
2Q21
3Q21

1Q22
2Q22
3Q22

2Q23
3Q23
4Q23
2015

2016

2017

2018

2019

2020

2021

2022
1Q23
2015 2016 2017 2018 2019 2020 2021 2022 2023

Total funding cost Credit yield Securities & interbank yield

Securities + Interbank Investments Loans Remunerated Compulsory Deposits Other Earning Assets

Credit Spreads per Segment (%) NII Breakdown & Total NIM (BRL in billions; %)

7.0% 18% 5.1%

6.5% 17% 120 4.9%

16% 102.7
6.0% 93.5 4.7%
100
15%
5.5%
4.5%
14% 73.4
80 45.0
4.3%
5.0% 13% 48.1
56.5 59.3
60 55.0 52.9 53.9 4.1%
4.5% 12% 49.0 50.1 34.4
42.4 12.3 12.1 15.9
11% 8.3 11.3 11.1 14.8 3.9%
4.0% 40 7.2
10% 3.7%
57.7
3.5% 9% 20 40.8 42.7 41.6 39.0 39.1 44.4 43.4 39.0 45.4
35.2 3.5%
3.0% 8%
0 3.3%
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
1Q19
2Q19
3Q19
4Q19
1Q20
2Q20
3Q20
4Q20
1Q21
2Q21
3Q21
4Q21
1Q22
2Q22
3Q22
4Q22
1Q23
2Q23
3Q23
4Q23

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024e

Companies Agribusiness Individuals (right)

Credit Treasury NIM reported

Source:IBBA, Company. Credit Spreads per segment chart considers the company’s managerial Source:IBBA, Company.
spreads.

BB has been offering competitive and rational rates. The weekly surveys published by the
Brazilian Central Bank show that BB’s credit origination rates are moving in line with those of its
main peers, demonstrating competitiveness and rationality.

Itaú BBA | 2
 0.7%
0.9%
1.1%
1.3%
1.5%
1.7%
1.9%
2.1%

0.8%
1.3%
1.8%
2.3%
2.8%
3.3%

2%
4%
6%
8%
10%
12%
14%
16%
18%

0.8%
1.3%
1.8%
2.3%
2.8%
Mar-21 Mar-21
Mar-21 Mar-21
Apr-21 Apr-21
Apr-21 Apr-21
May-21 May-21
May-21 May-21
Jun-21 Jun-21
Jun-21 Jun-21

BB
Jul-21 Jul-21

Source:IBBA, BCB
Source:IBBA, BCB
Source:IBBA, BCB
Source:IBBA, BCB
Jul-21 Jul-21
Aug-21 Aug-21
Aug-21 Aug-21

Bradesco
Sep-21 Sep-21
Sep-21 Sep-21
Oct-21 Oct-21
Oct-21 Oct-21
Nov-21 Nov-21
Nov-21 Nov-21
Dec-21 Dec-21

Bradesco
Dec-21 Dec-21
Jan-22 Jan-22
Jan-22 Jan-22
Feb-22 Feb-22

Santander
Feb-22

BB
Feb-22
Mar-22 Mar-22

BB
Mar-22 Mar-22

Bradesco
Apr-22 Apr-22 Apr-22
Apr-22
May-22 May-22 May-22
May-22
Banco do Brasil. – March 21, 2024

Jun-22 Jun-22 Jun-22

Jun-22

BB
Jul-22 Jul-22 Jul-22
Jul-22
Aug-22 Aug-22 Aug-22

Santander
Aug-22
Sep-22 Sep-22 Sep-22

Bradesco
Sep-22
Oct-22 Oct-22 Oct-22

Santander
Oct-22
Nov-22 Nov-22 Nov-22

Santander
Nov-22

Inter
Dec-22 Dec-22 Dec-22 Dec-22

Jan-23 Jan-23 Jan-23 Jan-23

Feb-23 Feb-23 Feb-23 Feb-23

Caixa
Inter
Monthly Interest Rates – Public Payroll (%)

Mar-23 Mar-23 Mar-23 Mar-23

Monthly Interest Rates – Vehicle Loans (%)

Nubank
Apr-23 Apr-23 Apr-23

Pan
Apr-23
May-23 May-23 May-23 May-23
Jun-23 Jun-23 Jun-23 Jun-23
Jul-23 Jul-23 Jul-23 Jul-23
Aug-23 Aug-23 Aug-23 Aug-23

Monthly Interest Rates – Credit Card Revolving (%)

Sep-23 Sep-23 Sep-23 Sep-23

Nubank
BV
Oct-23
Oct-23 Oct-23 Oct-23
Nov-23
Nov-23 Nov-23 Nov-23

Monthly Interest Rates – Prepayment of Receivables (%)

Dec-23 Dec-23 Dec-23
Dec-23
Jan-24 Jan-24 Jan-24
Jan-24

0.4%
0.9%
1.9%
2.4%

1.4%
1.2%
1.4%
1.6%
1.8%
2.2%

2.0%

2%
4%
6%
8%
10%
12%
14%
0%
1%
2%
3%
4%
5%
6%
7%
8%

Mar-21 Mar-21 Mar-21 Mar-21

Apr-21 Apr-21 Apr-21 Apr-21
May-21 May-21 May-21 May-21
Jun-21 Jun-21 Jun-21 Jun-21
Jul-21 Jul-21 Jul-21 Jul-21

Source:IBBA, BCB
Source:IBBA, BCB
Source:IBBA, BCB
Source:IBBA, BCB

BB
Aug-21 Aug-21 Aug-21
Bradesco

Aug-21
Sep-21 Sep-21 Sep-21 Sep-21

Bradesco
Oct-21 Oct-21 Oct-21 Oct-21
Nov-21 Nov-21 Nov-21 Nov-21
Dec-21 Dec-21 Dec-21 Dec-21
BB

Jan-22 Jan-22 Jan-22 Jan-22

Bradesco
Feb-22 Feb-22 Feb-22 Feb-22
Mar-22 Mar-22 Mar-22 Mar-22
BB

Santander
Apr-22 Apr-22 Apr-22 Apr-22
May-22 May-22 May-22 May-22

BB
Jun-22 Jun-22 Jun-22 Jun-22
Jul-22 Jul-22 Jul-22 Jul-22
Santander

Aug-22 Aug-22 Aug-22 Aug-22

Sep-22 Sep-22 Sep-22 Sep-22
Oct-22 Oct-22 Oct-22 Oct-22
Santander

Bradesco
Nov-22 Nov-22 Nov-22 Nov-22
Pan

Dec-22

Santander
Dec-22 Dec-22 Dec-22
Jan-23 Jan-23 Jan-23 Jan-23
Feb-23 Feb-23 Feb-23 Feb-23
Monthly Interest Rates – INSS Payroll (%)

Mar-23 Mar-23 Mar-23 Mar-23

Apr-23 Apr-23 Apr-23 Apr-23
Caixa

Inter
Monthly Interest Rates – Personal Loans (%)

May-23

Caixa
May-23 May-23 May-23
Nubank

Jun-23 Jun-23 Jun-23 Jun-23

Jul-23 Jul-23 Jul-23 Jul-23
Aug-23 Aug-23 Aug-23 Aug-23
Sep-23 Sep-23 Sep-23 Sep-23
Monthly Interest Rates – Credit Card Installments (%)

Oct-23 Oct-23 Oct-23 Oct-23

Nubank

Nov-23 Nov-23 Nov-23 Nov-23

Nubank
Dec-23 Dec-23 Dec-23 Dec-23

Monthly Interest Rates – Working Capital > 365 Days (%)

Jan-24 Jan-24 Jan-24 Jan-24

Itaú BBA | 3
Banco do Brasil. – March 21, 2024

Funding advantage is structural. BB has a very competitive funding set-up, especially when
interbank lending rates (CDI) are as high as they are today. There is a significant chunk coming
from savings deposits, whose cost today is roughly ~8%. The large cost-free demand-deposit
base also stands out. This is likely due to the profile of its clients, hence unlikely to change.
There is also an elevated level of judicial deposits, which are cheaper than time deposits. BB is
by far the most well-established player to retain these deposits. As Selic drops, the relative
advantage to other banks reduces, but does not go away. This competitive advantage is key for
BB to keep growing amidst ever more competitive credit markets.

Banco do Brasil’s Commercial Funding Mix (%) BB vs. Peers 4Q23 Funding Mix (%)

10% 7% 7% 5% 4%
12% 10%
11% 14% 15%

10% 13% 18%

12% 10% 44%

23% 23% 23% 82% 76%

25% 26% 84%

26%
23%
30% 28% 20%
29% 10%
9%
7% 5%
24% 21% 20%
13% 16% 18% 9% 13% 15%

2020 2020 2021 2022 2023 Banco do Brasil Incumbent 2 Incumbent 1 Incumbent 3

Time Deposits Savings Deposits Judicial Deposits

Securities Issued Demand Deposits Other Savings Deposits Demand Deposits Judicial Deposits Time deposits & other instruments

Source:IBBA, Company Source:IBBA, Company

Itaú BBA | 4
Banco do Brasil. – March 21, 2024

DIVIDENDS
Attractive dividend yield secured. Banco do Brasil offers a ~10% dividend yield at current
prices and the mid-point of profit guidance, positioning the bank as a top 3 dividend payer in
the Ibov (see sensitivities below), along with BB Seguridade. BB is the only outperform-rated
between the two, and also has the best mid-term earnings outlook. Capital is ample. This
dividend growth profile protects value and attracts flows, helping shares re-rate. Our Strategy
team, led by Daniel Gewehr, has BB among their top picks, and ESG strategist Victor Natal, in
his. The name scores well in sustainable growth advantages, ESG, value, and for its semi-
sovereign bond proxy profile. As shown in the table below, BB’s capital ratios can easily
accommodate the increased payout (and perhaps more), even considering a ~10% yearly loan
book expansion and all possible capital headwinds such as operational RWA, the CGPE in
2026, IFRS in 2025, and devolutions from the hybrid instrument to the treasury.
Top 15 Large Cap 2024E Dividend Yields in the Ibovespa Top 15 Large Cap 2025E Dividend Yields in the Ibovespa
(%) (%)

13.0% 14.0%
10.6% 11.6%
11.0% 10.3% 12.0%
9.6% 10.7% 10.4% 10.3%
9.2%
8.8% 8.7% 8.7% 9.4%
9.0% 8.3% 10.0%
8.4% 8.3% 8.2% 8.1%
7.1% 6.9% 6.8% 6.8% 7.9% 7.8% 7.5%
6.6% 6.5% 6.5% 8.0% 7.5% 7.4% 7.4%
7.0%

5.0% 6.0%

4.0%
3.0%

2.0%
1.0%
0.0%
-1.0%
BBAS3

BBSE3

KLBN11

CXSE3
PRIO3

CPFE3

TIMS3

VIVT3
TAEE11

EGIE3

TRPL4

CMIN3

BBDC4
VALE3

B3SA3
BBAS3

BBSE3

CXSE3
CPFE3

PETR4

TIMS3
TAEE11

TRPL4

CIEL3

VIVT3

BBDC4

CMIG4
CMIN3

VALE3

B3SA3

Source:IBBA, Bloomberg. Considers companies with market cap > USD 2 billion and coverage of at Source:IBBA, Bloomberg. Considers companies with market cap > USD 2 billion and coverage of at
least 8 analysts. For Petro and Banco do Brasil we considered ours and IBBA’s Oil & Gas estimates least 8 analysts. For Petro and Banco do Brasil we considered ours and IBBA’s Oil & Gas estimates
for the dividend yield. Itaú was not considered in the charts. for the dividend yield. Itaú was not considered in the charts.

Dividend Yield Sensitivity According to Net Income & Share Price – Gray Area Indicates Recent Price Bands and Guidance
Ranges

P/E YE24 .1x 45 48 50 53 55 58 60 63 65 68 70

35,179 12.3% 11.6% 11.0% 10.5% 10.0% 9.6% 9.2% 8.8% 8.5% 8.2% 7.9%
36,081 12.6% 11.9% 11.3% 10.8% 10.3% 9.9% 9.4% 9.1% 8.7% 8.4% 8.1%
Net profits (BRL mn)

37,006 12.9% 12.2% 11.6% 11.1% 10.6% 10.1% 9.7% 9.3% 8.9% 8.6% 8.3%
37,955 13.2% 12.5% 11.9% 11.4% 10.8% 10.4% 9.9% 9.5% 9.2% 8.8% 8.5%
38,928 13.6% 12.9% 12.2% 11.6% 11.1% 10.6% 10.2% 9.8% 9.4% 9.1% 8.7%
39,901 13.9% 13.2% 12.5% 11.9% 11.4% 10.9% 10.4% 10.0% 9.6% 9.3% 9.0%
40,899 14.3% 13.5% 12.8% 12.2% 11.7% 11.2% 10.7% 10.3% 9.9% 9.5% 9.2%
41,921 14.6% 13.9% 13.2% 12.5% 12.0% 11.4% 11.0% 10.5% 10.1% 9.8% 9.4%
42,969 15.0% 14.2% 13.5% 12.9% 12.3% 11.7% 11.2% 10.8% 10.4% 10.0% 9.6%

Source:IBBA.

Itaú BBA | 5
Banco do Brasil. – March 21, 2024

Capital Simulation (BRL in Millions) Shows Comfortable Ratios Even with the Payout Increase

Capital Ratios 2021 2022 2023 2024E 2025E 2026E Comment

Reference Equity (RE) 165,648 178,689 174,033 190,264 209,592 217,029
Tier I 141,353 158,153 156,431 175,302 196,875 206,219
CET1 111,338 128,803 136,356 155,302 176,875 186,219
Shareholders Equity 134,523 153,963 163,827 185,202 207,775 230,119
Instruments Eligible to Capital 8,100 7,100 6,100 5,100 4,100 3,100 Considers 7-year devolutions to the National Treasury of BRL 1 billion per year
Prudential Adjustments -31,286 -32,260 -33,571 -35,000 -35,000 -47,000 Assumes 70-bp adverse impact from CGPE in 2026
AT1 30,015 29,350 20,075 20,000 20,000 20,000
Tier II 24,295 20,536 17,602 14,962 12,718 10,810 Mostly FCO; should run off in ~10 years
RWA Breakdown 2021 2022 2023 2024E 2025E 2026E
Risk-Weighted Assets (RWA) 932,461 1,072,894 1,124,754 1,234,401 1,409,539 1,652,536
Credit Risk (RWACPAD) 789,739 917,092 938,287 1,032,115 1,153,586 1,335,343
Implicit Weight factor % 90% 91% 85% 85% 86% 91% Assumes 20-bp adverse impact from IFRS on credit weight factors in FY25
Market Risk (RWAMPAD) 36,080 26,975 28,285 28,285 36,771 36,771 Assumes 10-bp adverse impact from IFRS on securities weight factors in FY25
Operational Risk (RWAOPAD) 106,642 128,827 158,182 174,001 219,181 280,422 Assumes 25-bp adverse impact from RWA op both in FY25 and FY26
as % of credit RWA 14% 14% 17% 17% 19% 21%
Ratios 2021 2022 2023 2024E 2025E 2026E
CET1 ratio % 11.9% 12.0% 12.1% 12.6% 12.5% 11.3% Comfortable at 11%-12%
Tier 1 ratio % 15.2% 14.7% 13.9% 14.2% 14.0% 12.5%
BIS ratio % 17.8% 16.7% 15.5% 15.4% 14.9% 13.1%
Assumptions 2021 2022 2023 2024E 2025E 2026E
Expanded Loan Book 874,906 1,004,607 1,108,578 1,219,436 1,341,379 1,475,517
yoy % 18% 15% 10% 10% 10% 10%
Net Profit 20,970 31,810 35,565 38,864 41,040 40,626
yoy % 51% 52% 12% 9% 6% -1%
ROE 15.6% 20.7% 21.7% 21.0% 19.8% 17.7%
Payout 36% 37% 37% 45% 45% 45%
Source:IBBA, Company.

Itaú BBA | 6
Banco do Brasil. – March 21, 2024

PAYROLL SECTION
Healthy origination spreads and volumes in payroll loans. Interest rates charged by Banco
do Brasil on the origination of public payroll loans have recently trended down slightly, as have
its main competitors’, according to Central Bank data. We estimate that origination spreads
remain healthy when crossing the absolute levels with cost of funding. These healthy origination
margins are coming together with a growing loan book in recent quarters, particularly relative to
large incumbent players. Representing ~40% of BB’s individual credit portfolio, this is one the
market’s most competitive credit lines. This combo of volumes and spreads speaks highly of the
bank’s execution capacity.

BB – Total Loan Book Breakdown (BRL in Millions) BB – Individuals Loan Book Breakdown (BRL in Millions)

20,952
2,398
49,368

56,940

126,375
313,119
355,305

47,330

390,786 15,365 22,940

18,206
Payroll Loan Salary Loans Consumer Finance Auto Loans

Individuals Companies Agribusiness Abroad Mortgage Credit Card Overdraft Account Other

Source: Itaú BBA, company. Companies portfolio includes government loans. Source: Itaú BBA, company

BBAS Public Payroll Rates and 2-Year-Forward CDI BBAS Public Payroll Spread Over 2-Year-Forward CDI
(% p.a.) (% p.a.)

27% 14%
25% 13%
23%
12%
21%
19% 11%
17% 10%
15%
9%
13%
11% 8%
9% 7%
7% 6%
May-22

May-23
Mar-22
Apr-22

Jul-22

Oct-22

Feb-23
Mar-23
Apr-23

Jul-23
Nov-22
Dec-22

Oct-23

Feb-24
Mar-24
Nov-23
Dec-23
Jun-22

Aug-22
Sep-22

Jan-23

Jun-23

Aug-23
Sep-23

Jan-24

Feb-23

Feb-24
Apr-22
May-22

Jul-22

Mar-23
Apr-23
May-23

Jul-23

Mar-24
Oct-22
Nov-22
Dec-22

Oct-23
Nov-23
Dec-23
Jun-22

Aug-22
Sep-22

Jan-23

Jun-23

Aug-23
Sep-23

Jan-24
CDI 2 years p.a BBAS - public payroll rates p.a

Source: Itaú BBA, Bloomberg, BCB Source: Itaú BBA, Bloomberg, BCB. Assumes cost of funding as 100% of CDI.

Payroll Loan Book – Banco do Brasil's has Grown Steadily BBAS’ Market-Share Within the Total Payroll Market Has
(BRL in Millions) Recently Improved Again (%)

140,000 23%

120,000 21%
19%
100,000
17%
80,000 15%
60,000 13%
11%
40,000
9%
20,000
7%
- 5%
Dez/19 Jun/20 Dez/20 Jun/21 Dez/21 Jun/22 Dez/22 Jun/23 Dec-23 Dez/19 Jun/20 Dez/20 Jun/21 Dez/21 Jun/22 Dez/22 Jun/23 Dec-23

BB Incumbent 1 Incumbent 2 Incubment 3 BB Incumbent 1 Incumbent 2 Incumbent 3

Source: Itaú BBA, BCB, company Source: Itaú BBA, BCB, company

Itaú BBA | 7
Banco do Brasil. – March 21, 2024

AGRO SECTION
Recent climate impacts on Brazilian crop production have raised investors’ concerns about
Banco do Brasil’s agribusiness portfolio. We found the concerns not to be valid – this section
shows why.

Agro portfolio has performed well even with crop-productivity declines. The charts below
show very little correlation between grain-crop failures and BB’s NPLs in Agro. In the
2015/2016 crop failure, we saw Agro NPLs rising by a mere 20 bps. When productivity picked
up materially in the 2016/2017 crop, NPLs then rose by 50 bps. Essentially, we find that NPLs
for BB Agro are not much related to grain productivity. We found a few reasons for this, the
main ones being portfolio diversification and insurance structure. Crops affected by the current
adverse climate conditions are mostly corn and soybean, which are roughly 20% of the total
agro portfolio (BRL 66 billion out of a total BRL 320 billion). Even so, we believe that more than
half of this exposure is insured. On top of that, the geographical diversification should buffer
potential crop failures’ impact on the overall portfolio (Midwest accounts for ~50% of the
national grain production). The large BB Agro swings are, rather, related to disruptions in
volumes from large consumer markets, which somehow limit exports or reduce the ability of
the farmer to profit from a previously made investment, as production stops or sanitary barriers
ban export. There is also the case in which the farmer temporarily holds production to wait for
better commodity prices. In this situation, we can see NPL upticks, which should normalize
once the production is sold – something we believe could be happening now. A client with late
payments becomes restricted from obtaining credit under the subsidized credit program (Plano
Safra), which encourages credit to be due by ~mid-year. Agro NPLs for BB are at abnormally
low levels, and we do expect them to increase gradually. However, we are far from concerned
about significant NPL upswings caused by the recent harvest issues in the Midwest.

Agro Loan Book Breakdown (BRL in Billions) Agro Loan Book Breakdown per Client Size (BRL in Billions)

14
14
13 76

31 108
68

61

240
75

Agricultural Costs Agricultural Investment Pronaf FCO Rural Pronamp Agricultural Selling Other Medium and Large Small Companies Agroindustrial Cooperatives

Source: Itaú BBA, company Source: Itaú BBA, company

Agro Purpose Loan Book Breakdown (BRL in Billions) Agro Item Loan Book Breakdown (BRL in Billions)
2.6
14.4 4.7 2.4

79.9 78.8

133.0

12.8
163.1 14.1 46.7

57.9
19.6
10.6

Working Capital for Input Purchase Investment Crop Trading Agroindustry Industrial Other Livestock Soybean Corn Coffee Machinery and Equipment Agricultural Storage Soil Improvement Other

Source: Itaú BBA, company Source: Itaú BBA, company

Itaú BBA | 8
Banco do Brasil. – March 21, 2024

Corn Productivity & BBAS Agro NPL (Kgs/Hectare; %) Soybean Productivity & BBAS Agro NPL (Kgs/Hectare; %)

9,000 2.0% 2.0%

5,000
8,000 1.8% 1.8% 1.8%
1.8% 1.8% 1.8% 1.8%
7,000 1.4% 1.8% 1.6% 3,392 1.6%
4,000 3,507 3,526 3,507 3,501
5,719 5,925 1.4% 3,337 3,379 1.4%
6,000 5,396 5,562 5,537 5,538
5,057 5,242 3,025 3,026
4,857 1.2% 2,856 2,878 1.4% 1.2%
5,000 4,367 3,000
4,178 1.0% 1.0%
4,000
0.9% 0.8% 2,000 0.9% 0.8%
3,000
0.7% 0.6% 0.6%
0.7% 0.7% 0.7%
2,000 0.4%
0.6% 0.6% 1,000 0.6% 0.6% 0.4%
1,000 0.5% 0.5%
0.2% 0.2%
0 0.0% - 0.0%
2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24
Forecast Forecast
Corn productivity BBAS - agro NPL %
Soybean productivity BBAS - agro NPL %

Source: Itaú BBA, company, Conab Source: Itaú BBA, company, Conab

Brazil’s Grains Production & BBAS Agro NPL Midwest Grains Production & BBAS Agro NPL
(Millions of Tons; %) (Millions of Tons; %)

400,000 2.5% 2.5%

200,000
350,000
301,290 2.0% 1.8% 1.8% 1.8% 162,468 2.0%
1.8% 1.8% 1.8%
300,000 284,122
272,641
257,016 256,739 150,000 138,128 137,948
238,623 231,656 246,834 1.4% 123,867 118,604
250,000 1.5%
1.5% 113,706
208,636 103,943 101,614
193,674 186,873
200,000 1.4% 100,000 88,221 75,537
81,743 1.0%
1.0% 0.7% 0.7%
150,000 0.6%
0.6% 0.9%
0.9% 0.5%
50,000
100,000 0.5%
0.7% 0.7% 0.5%
50,000 0.6% 0.6%
0.5%
0 0.0%
0 0.0% 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24
2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 forecast
forecast (¹)
(¹) Midwest - Grains production BBAS Agro NPL

Brazil - Grains production BBAS Agro NPL

Source: Itaú BBA, company, Conab Source: Itaú BBA, company, Conab

Itaú BBA | 9
Banco do Brasil. – March 21, 2024

COST OF CREDIT
Cost of risk low on client quality, mix and stronger recoveries. BB’s consolidated NPLs,
at 2.9% as of 4Q23, come primarily from a larger and stronger agro portfolio, but also from
good retail and corporate metrics. Its individual metrics are also better, which we attribute both
to a strong credit model and to a strong client mix. BB’s retail portfolio is mostly payroll to public
employees. A different credit appetite could change origination hurdles or channels, but not
change the reality of the bank’s clients, channels, expertise, or where its competitive
advantages are most significant (as in agro). Overall, we see a low chance of cost of risk
materially changing earnings levels in the foreseeable future. We also note a significant
improvement in terms of credit recovery helping to reduce BB’s cost of risk. This is a structural
business improvement that has no reason to revert.

BB Total and Segment NPL (%) NII Post Cost of Risk and Cost of Risk (BRL in billions, %)

8%
100 3.1% 3.3% 3.3%
7% 3.0%
90 2.8% 2.8%
6% 2.5% 73.8
80 2.4% 2.4%
70 2.1% 63.0
5%
56.6
60
4% 46.3
50
39.0
3% 40 34.5 34.6
28.0 31.2
26.5
2% 30
20
1%
10
0% 0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024E

Total Retail Corporate Agro

NII Post Cost of Risk NIM post cost of risk %

Source:IBBA, Company Source:IBBA, Company

Net Provision Result Between Credit Risk, Recovery and Others & Cost of Risk
(BRL in Billions; %)

68 3.8%

58 3.1% 3.1%
2.7% 2.9%
2.5%
48 2.3% 2.2%
1.6% 1.8% 30.5 29.0
38 28.5
21.9
21.0 21.7 16.7
28 15.6 14.9 13.1
18 32.2
31.6 30.6
23.7 25.3 25.6 23.5
8 19.6 19.7 17.9

-2 -3.7 -4.6 -5.2 -6.0 -6.7 -7.4 -7.8 -7.8

-8.8 -8.3
-12
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024E

Credit Risk Credit Recovery Others Cost of Risk (%)

Source:IBBA, Company

SG&A
A more efficient BB. BB’s SG&A efficiency ratio is today the best in over a decade, and ahead
of several private peers. This has come via both higher revenue growth and a total SG&A
pacing below inflation. We believe there to be a true understanding that efficiency is needed to
remain competitive in the long run. At the current low levels of client spreads but with the old
SG&A efficiency ratio of 40%, ROE would today be at ~15% and not 20%. Key metrics such
as revenue per employee or per branch have been rising. Our estimates consider increased
spending personnel and technology, for a total 7% YoY increase in SG&A vs. 8% for revenues.

Itaú BBA | 10
Banco do Brasil. – March 21, 2024

SG&A Yearly Growth vs. Revenues Yearly Growth (%)

25%
20%
15%
10%
5%
0%
-5%
-10%
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024E

Revenues YoY Growth (%) SG&A YoY Growth (%)

Source:IBBA, Company

Historical SG&A Efficiency Ratio (%) Banco do Brasil and Peers – Total Efficiency Ratio (%)

0 70%
-5,000 60%
51%
-10,000 45% 45%
45% 50%
-15,000 37%
42% 40%
-20,000 40%
39% 38% 37% 30%
-25,000 36%
20%
-30,000
32% 31% 31%
-35,000 -31,646 -30,468 -30,679 -31,537 -31,583 10%
-32,817 -32,026
-33,828
-40,000 -36,331 0%
-38,701
BB Incumbent 1 Incumbent 2 Incumbent 3
-45,000
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024E

BB Incumbent 1 Incumbent 2 Incumbent 3

SG&A SG&A Efficiency Ratio

Source:IBBA, Company Source:IBBA, Company. Total efficiency ratio considers all costs but taxes.

Itaú BBA | 11
Banco do Brasil. – March 21, 2024

ESTIMATES & VALUATION

BBAS – New vs. Old

Banco do Brasil Estim ates New Old Change

BRL m illion 2024e 2025e 2024e 2025e 2024e 2025e
Loan portfolio expanded 1,234,508 1,350,667 1,228,719 1,344,203 0% 0%
Net Interest Incom e 102,731 107,046 103,018 106,556 0% 0%
Client NII 57,652 68,087 55,565 66,195 4% 3%
Client NIM-% 5.02% 5.38% 4.86% 5.25% 16 bps 13 bps
Market NII 45,079 38,959 47,454 40,361 -5% -3%
Fee Incom e 34,859 36,597 35,755 38,430 -3% -5%
Provision expenses -28,954 -27,263 -26,105 -29,175 11% -7%
% of Loan Book -2.5% -2.1% -2.2% -2.3% -23 bps 16 bps
NPL Ratio (90 days) 2.5% 2.2% 2.4% 2.3% 10 bps -8 bps
Coverage ratio - % 208% 215% 218% 228% -10 p.p. -13 p.p.
Adm in/Personal expenses -38,701 -40,636 -39,287 -41,251 -1% -1%
Efficiency Ratio - % -28.1% -28.3% -28.3% -28.5% 18 bps 16 bps
Other expenses -11,509 -12,008 -12,980 -13,199 -11% -9%
Profit before taxes 58,426 63,737 60,402 61,362 -3% 4%
Income taxes -11,040 -13,965 -13,475 -13,634 -18% 2%
Statutory profit sharing -5,058 -5,518 -5,154 -5,236 -2% 5%
Minority income -3,400 -3,200 -3,200 -3,200 6% 0%
Majority net incom e 38,928 41,053 38,572 39,292 1% 4%
Shareholder equity 194,930 217,395 194,696 214,086 0% 2%
ROE 21.2% 19.9% 20.9% 19.2% 30 bps 69 bps

Source:IBBA

BBAS – Estimates

BBAS Summary (BRL in millions) 2022 2023 2024E 2025E 2026E

Total revenues 105,725 127,327 137,590 143,643 148,400
NII 73,392 93,496 102,731 107,046 109,618
Services 32,333 33,831 34,859 36,597 38,782
Loan book exp. 1,004,607 1,108,578 1,234,508 1,350,667 1,482,670
y/y 15% 10% 11% 9% 10%
NPL 2.5% 2.9% 2.5% 2.2% 2.2%
Provision expenses (16,747) (30,531) (28,954) (27,263) (30,499)
Cost of risk -1.8% -2.9% -2.5% -2.1% -2.2%
Opex (33,828) (36,331) (38,701) (40,636) (42,667)
y/y 6% 7% 7% 5% 5%
Net Profits 31,810 35,565 38,928 41,053 40,743
y/y 52% 12% 9% 5% -1%
EPS 11.10 12.41 13.59 14.33 14.22
Equity 164,014 173,076 194,930 217,395 240,262
ROE 20.6% 21.1% 21.2% 19.9% 17.8%
P/B .98x .93x .82x .74x .67x
P/E 5.x 4.5x 4.1x 3.9x 3.9x
Div. Yield 7% 8% 11% 12% 11%
Source:IBBA, company. Multiples consider BRL 56/BBAS3.

Itaú BBA | 12
Banco do Brasil. – March 21, 2024

Stock Price Sensitivity According to Book Value & Price to Book Ratio

P/BV YE24 0.40x 0.48x 0.56x 0.64x 0.72x 0.80x 0.88x 0.96x 1.04x 1.12x 1.20x
176,156 24.6 29.5 34.4 39.3 44.3 49.2 54.1 59.0 63.9 68.9 73.8
180,673 25.2 30.3 35.3 40.4 45.4 50.4 55.5 60.5 65.6 70.6 75.7
Book Value (BRL mn)

185,305 25.9 31.0 36.2 41.4 46.6 51.7 56.9 62.1 67.3 72.4 77.6
190,057 26.5 31.8 37.1 42.4 47.8 53.1 58.4 63.7 69.0 74.3 79.6
194,930 27.2 32.7 38.1 43.5 49.0 54.4 59.9 65.3 70.7 76.2 81.6
199,803 27.9 33.5 39.0 44.6 50.2 55.8 61.4 66.9 72.5 78.1 83.7
204,798 28.6 34.3 40.0 45.7 51.5 57.2 62.9 68.6 74.3 80.0 85.8
209,918 29.3 35.2 41.0 46.9 52.7 58.6 64.5 70.3 76.2 82.1 87.9
215,166 30.0 36.0 42.1 48.1 54.1 60.1 66.1 72.1 78.1 84.1 90.1
Source:IBBA.

Stock Price Sensitivity According to Net Income & Price to Earnings Ratio

P/E YE24 20.9x 2.0x 2.4x 2.8x 3.2x 3.6x 4.0x 4.4x 4.8x 5.2x 5.6x 6.0x
35,179 24.6 29.5 34.4 39.3 44.2 49.1 54.0 58.9 63.8 68.8 73.7
36,081 25.2 30.2 35.3 40.3 45.3 50.4 55.4 60.4 65.5 70.5 75.6
Net profits (BRL mn)

37,006 25.8 31.0 36.2 41.3 46.5 51.7 56.8 62.0 67.2 72.3 77.5
37,955 26.5 31.8 37.1 42.4 47.7 53.0 58.3 63.6 68.9 74.2 79.5
38,928 27.2 32.6 38.0 43.5 48.9 54.3 59.8 65.2 70.6 76.1 81.5
39,901 27.9 33.4 39.0 44.6 50.1 55.7 61.3 66.8 72.4 78.0 83.6
40,899 28.5 34.3 40.0 45.7 51.4 57.1 62.8 68.5 74.2 79.9 85.6
41,921 29.3 35.1 41.0 46.8 52.7 58.5 64.4 70.2 76.1 81.9 87.8
42,969 30.0 36.0 42.0 48.0 54.0 60.0 66.0 72.0 78.0 84.0 90.0
Source:IBBA.

BBAS – 12-Month-Forward P/BV BBAS – 12-Month-Forward P/E

1.6x 12.0x
1.4x 10.0x
1.2x 8.0x
1.x
6.0x
.8x
4.0x
.6x
.4x 2.0x
.2x 0.0x
Mar-13

Mar-14

Mar-15

Mar-16

Mar-17

Mar-18

Mar-19

Mar-20

Mar-21

Mar-22

Mar-23

Mar-24
Sep-13

Sep-14

Sep-15

Sep-16

Sep-17

Sep-18

Sep-19

Sep-20

Sep-21

Sep-22

Sep-23

May-12

May-13

May-14

Jul-19

Feb-22
Jul-18

Jul-20
Feb-21

Feb-23

Mar-24
Oct-11

Nov-12

Nov-13

Dec-14

Dec-15

Dec-16
Jun-15

Jun-16

Jun-17
Jan-18

Jan-19

Jan-20

Aug-21

Aug-22

Sep-23

P/E avg. ´+ 1 std. Dev. ´- 1 std. Dev.

P/B avg. ´- 1 std. Dev. ´+ 1 std. Dev.

Source: Itaú BBA, company, Bloomberg Source: Itaú BBA, company, Bloomberg

BBAS – Net Income Estimates Revisions (BRL in Millions)

44,000

39,000

34,000

29,000

24,000

19,000

14,000
Jun-21

Oct-21

Dec-21

Jun-22

Dec-22

Jun-23

Dec-23
Apr-21

Aug-21

Apr-22

Aug-22

Oct-22

Apr-23

Aug-23

Oct-23
Feb-22

Feb-23

Feb-24

Consensus 2024E Consensus 2025E IBBA 2024E IBBA 2025E

Source: Itaú BBA, Bloomberg consensus.

Itaú BBA | 13
Banco do Brasil. – March 21, 2024

INVESTMENT THESIS
Outperform; top-pick value play in Brazil banks. We’ve had Banco do Brasil as a core
holding for a while now and we continue to like the stock, even throughout the easing cycle.
We are slightly above consensus and calling for another round of double-digit earnings growth
this year. We expect it to be the large bank to deliver the most loan-book growth in 2024 (11%
YoY), with at least similar growth in NII post cost of risk and further efficiency gains. We view
fears about the effect of lower Selic rates on its NII, and hence 2024 earnings, as overblown.
In this 2023 BB report (link), we reviewed each of BB’s asset buckets and their funding costs.
We are less concerned with Patagonia’s results (management sees high-single-digit earnings
expansion with less contribution from the Argentinian bank). Agro NPLs, as discussed
throughout this report, are not a significant concern either. Overall, we see BB sequentially
posting elevated ROEs on a structurally lower cost of risk, funding and permanent efficiency
gains. This sustained above-industry ROE, along with falling country/equity risk premium and
recognition of enhanced governance, should warrant a rerating. In our YE24 fair value of BRL
65 share, we call for 0.95x P/B ’24 vs. the current 0.8x, likely with room for more as this story
materializes. We reiterate BB as outperform and our top pick in the large-banks bucket. The
~10% dividend yield is an additional value protection.

Coverage Summary – Banks

20/03/2024
BZ banks (BRL bn) 22A 23E 24E 22A 23E 24E 22A 23E 24E 22A 23E 24E 22A 23E 24E 22A 23E 24E 22E 23E 24E 22A 23E 24E 22A 23E 24E 22A 23E 24E
Share price 14.3 28.6 56.4 37.3 12.1 6.2 9.2 24.6 16.7 16.7
Market cap 152 107 162 143 280 12 11 6 2 7
Rating Market Perform Market Perform Outperform Outperform Outperform Market Perform Outperform Market Perform Outperform Market Perform
Fair value/share YE24 15.5 27 65 43 13 6 13 24 18 16
upside to spot 9% -7% 14% 15% 5% -3% 42% -4% 5% -7%
div. yield 5.7% 6.3% 7.1% 7.6% 5.6% 6.1% 7.4% 8.1% 10.6% 1.8% 2.1% 2.5% n.a n.a n.a n.a n.a n.a 2.8% 1.5% 5.0% 5.5% 5.5% 5.5% 37.8% 36.6% 41.9% 5.3% 6.5% 10.8%
P/Digital client (BRL'000) n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 3.74 2.98 2.83 0.50 0.50 0.40 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
P/Revenues 1.3x 1.3x 1.2x 1.5x 1.4x 1.3x 1.5x 1.3x 1.2x 8.3x 6.6x 5.3x 16.7x 9.3x 6.2x 3.5x 2.5x 2.x 1.34 1.3x 1.2x 2.3x 2.1x 2.x 4.5x 4.x 3.4x 1.x .9x .8x
P/E 7.4x 9.4x 8.5x 8.3x 11.3x 8.2x 5.1x 4.5x 4.2x 17.2x 13.8x 11.3x n.a 54x 25x n.a 37x 14.4x 12.5x 12.9x 8.7x 7.x 6.7x 6.9x 12.3x 11.2x 9.5x 8.6x 7.4x 4.5x
P/B 1.0x .9x .9x 1.3x 1.2x 1.2x 1.0x .9x .83x 3.4x 2.9x 2.5x 10.8x 9.0x 6.6x 1.7x 1.6x 1.5x 1.5x 1.4x 1.3x 1.1x 1.0x .9x 2.3x 2.1x 1.9x .7x .7x .7x
Credit portfolio 892 877 943 590 643 696 1,005 1,109 1235 144 169 214 59 88 120 25 31 39 39 41 46 26 25 28 n.a. 49 54 61
y/y 10% -2% 7% 8% 9% 8% 15% 10% 11% 35% 17% 27% 62% 49% 36% 40% 26% 25% 12% 4% 14% 15% 6% 11% 20% 11% 12%
Digital bank clients n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 75 94 99 25 31 33 18.2 20 0 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Total Revenues 116.8 118.7 125.5 71.1 74.3 84.0 105.7 127.3 137.6 17.2 21.7 26.7 16.8 29.9 45.1 3.6 4.8 6.2 8.4 8.5 9.4 2.4 2.6 2.8 0.4 0.4 0.5 6.8 7.9 8.7
y/y 7% 2% 6% -5% 4% 13% 19% 20% 8% 24% 26% 23% 133% 79% 51% 60% 36% 27% 14% 0% 11% 34% 9% 7% 17% 12% 19% -1% 16% 11%
Net Interest Income 66.4 65.2 68.6 51.8 54.2 62.7 73.4 93.5 102.7 10.4 22.0 34.8 2.3 3.2 4.1 7.4 7.3 8.1 2.0 2.2 2.3 4.7 5.7 6.4
y/y 4% -2% 5% -7% 5% 16% 24% 27% 10% 183% 112% 58% 47% 39% 27% 11% -2% 11% 38% 11% 5% -4% 22% 13%
Service income 35.7 35.6 37.3 19.3 20.1 21.3 32.3 33.8 34.9 n.a. 6.4 7.9 10.3 1.2 1.6 2.0 1.0 1.2 1.3 0.4 0.4 0.5 n.a. 2.1 2.2 2.3
y/y 5% 0% 5% 2% 4% 6% 10% 5% 3% 82% 24% 29% 94% 30% 28% 40% 15% 11% 18% -2% 20% 6% 4% 7%
Other Income 15 18 20 - - - - - - - - - - - - - - - - 0.8 0.7 1
y/y 29% 21% 9% - - - - - - - - - - - - - - - - - - -
Provision Exp. -32.3 -39.5 -38.2 -23.9 -25.2 -25.4 -16.7 -30.5 -29.0 -7.3 -11.4 -15.3 -1.1 -1.6 -1.7 -2.4 -2.3 -2.4 -0.2 -0.3 -0.3 -1.0 -1.5 -1.1
y/y 115% 22% -4% 73% 5% 1% 28% 82% -5% 180% 57% 34% 82% 50% 4% 32% -4% 8% 36% 43% -11% 23% 53% -24%
cost of risk -3.8% -4.5% -4.2% -4.2% -4.1% -3.8% -1.8% -2.9% -2.5% n.a. -15.1% -15.4% -14.6% -5.3% -6.0% -4.9% -6.0% -5.6% -5.3% -0.9% -1.3% -1.1% n.a. -2.0% -2.7% -1.8%
NPL 90 days 4.3% 5.2% 4.7% 3.1% 3.1% 2.7% 2.5% 2.9% 2.5% 5.2% 6.1% 6.3% 4.1% 4.6% 4.2% 7.1% 8.2% 6.9% 0.5% 1.8% 1.7% 1.6% 2.2% 2.0%
Coverage ratio 204% -165% -193% 230% 222% 240% 227% 197% 208% 231% 235% 237% 132% 132% 132% 83% 81% 93% 543% 190% 220% 315% 235% 250%
Total Expenses -49.1 -54.2 -58.5 -22.7 -24.4 -25.6 -33.8 -36.3 -38.7 -7.8 -9.3 -11.2 -9.3 -10.8 -13.3 -2.6 -2.7 -3.2 -4.4 -4.3 -4.5 -0.9 -1.0 -1.1 -0.1 -0.2 -0.2 -5.9 -5.9 -6.4
y/y 5% 10% 8% 7% 8% 5% 6% 7% 7% 36% 20% 21% 68% 17% 23% 43% 4% 17% 12% -1% 5% 108% 11% 11% 27% 26% 22% 13% 0% 8%
as % of Revs. -42% -46% -47% -32% -33% -30% -32% -29% -28% -45% -43% -42% -55% -36% -29% -74% -57% -52% -52% -51% -48% -37% -37% -39% -37% -42% -43% -70% -61% -59%
Net profit adj. 20.7 16.3 17.9 12.9 9.5 13.1 31.8 35.6 38.9 8.3 10.3 12.6 -1.9 5.1 11.3 0.0 0.3 0.9 0.9 0.9 1.3 0.8 0.8 0.8 0.1 0.2 0.2 0.8 0.9 1.5
y/y -21% -21% 10% -21% -27% 38% 52% 12% 9% 28% 24% 22% n.a n.a n.a n.m. n.m. n.m. -1% -3% 50% 40% 4% -3% 4% 9% 18% -20% 16% 66%
Dividends/IOC 8.6 9.6 10.7 8.1 6.0 6.5 11.8 13.0 17.1 2.6 3.1 3.5 4.5 4.5 -0.5 -0.4 -0.3 0.3 0.2 0.3 0.3 0.3 0.3 0.7 0.6 0.7 0.4 0.4 0.7
Book value 154.3 161.2 168.3 82.1 86.1 92.6 164.0 173.1 194.9 42.4 48.9 57.4 25.8 31.1 42.4 7.1 7.5 8.4 7.7 8.1 8.9 5.2 5.5 5.9 0.8 0.8 0.9 9.4 9.4 10.2
ROE adj. 13.7% 10.3% 10.9% 16.4% 11.4% 14.8% 20.6% 21.1% 21.2% 20.5% 22.5% 23.4% n.a 18.1% 30.6% n.a 4.6% 10.8% 11.7% 11.0% 15.2% 16.2% 15.5% 14.1% 18.5% 19.5% 21.1% 8.8% 9.7% 15.4%

Source: Itaú BBA, company. Prices as of March 20.

Itaú BBA | 14
Banco do Brasil. – March 21, 2024

DISCLAIMER

Itaú BBA is a registered trademark used by Itaú Unibanco S.A.

Ratings: Definitions, Dispersion and Banking Relations

Ratings (1) Definition (2) Coverage (3) Banking Relation (4)

The analyst expects the stock to perform better than

Outperform 56% 62%
market average.

The analyst expects the stock to perform in line with

Market Perform 36% 40%
market average.

The analyst expects the stock to perform below market

Underperform 8% 8%
average.

1. The ratings employed in this document (Outperform, Market Perform, and Underperform) basically correspond to
Purchase, Hold, and Sell, respectively.
2. The ratings represent the analyst’s assessment of the medium-term share price performance relative to the market
average. These ratings may be reviewed by the analyst based on new developments or simply due to variations in share
prices (such changes may occur at any time). Companies are grouped into sectors, based on similar characteristics.
Sectors: (i) Banks and Financial Services; (ii) Consumer Goods & Retail + Food & Beverage (iii) Healthcare + Education;
(iv) Steel & Mining + Pulp & Paper; (v) Oil, Gas & Petrochemicals + Agribusiness; (vi) Real Estate & Construction; (vii)
Telecommunications, Media and Technology; (viii) Transportation, Capital Goods and Logistics; (ix) Public Utility Services;
and (x) Strategy.
3. Percentage of companies covered by Itaú Unibanco S.A. in this rating category.
4. Percentage of companies included in this rating category that were provided services by Itaú Unibanco S.A. or any of its
affiliated companies.

Third-Party Disclosures

Companies REC Disclosure Items

Ticker Recent Price
Mentioned 1 2 3 4 5 6 7
Banco Do Brasil S.A. BBAS3 56.43 OP X X

1. Itaú Unibanco, its subsidiaries, controllers and/or companies under common control rendered services, including
investment services and investment banking services, to the company(ies) surveyed in this report over the previous 12
months, and/or effectively received (or expect to receive) due compensation for such services over the previous 12
months.
2. Itaú Unibanco, its subsidiaries, controllers and/or companies under common control acted as a market-maker until the
date on which this report was issued, rendering services for the companies surveyed herein.
3. Itaú Unibanco, its subsidiaries, controllers and/or companies under common control hold securities of issuers surveyed in
this report, in addition to substantial ownership of such issuers’ share capital.
4. Itaú Unibanco, its subsidiaries, controllers and/or companies under common control, in the regular course of their
business, (i) have granted and may eventually grant loans and/or (ii) render and may eventually render financial services
to the issuers surveyed in this report, as well as related persons, receiving due compensation for such.
5. The issuers surveyed in this report, their subsidiaries, controllers and/or companies under common control hold substantial
ownership of Itaú Unibanco, its subsidiaries, controllers and/or companies under common control. (1)

6. Itaú Unibanco owns a net long position exceeding 0.5 % of the total issued share capital of the issuer.

7. Itaú Unibanco owns a net short position exceeding 0.5 % of the total issued share capital of the issuer.

(1)
Substantial ownership is defined as direct or indirect shareholding interest of over 5% (five percent) of any type or class of stock representing the
share capital of issuers surveyed in this report.

Material Information
1. This report was prepared by Itaú Unibanco, a company regulated by the Securities and Exchange Commission (CVM), and distributed by Itaú
Unibanco, Itaú Corretora de Valores S.A. and Itaú BBA. Itaú BBA is a brand used by Itaú Unibanco. This report was prepared by a securities analyst
from Itaú Unibanco and is subject to Resolution 20 of the Securities and Exchange Commission (CVM).
2. This report does not constitute an offer to buy or sell any financial instrument or to participate in any particular trading strategy under any jurisdiction.
The information herein was deemed reasonable on the date of publication and was obtained from reliable public sources. Neither Itaú Unibanco
nor any of its affiliated companies (“Grupo Itaú Unibanco”) ensure or guarantee, either expressly or implicitly, that the information contained herein
is accurate or complete. Furthermore, this report is not a complete or summarized representation of investment strategies, markets or developments
thereof. The opinions, estimates and/or forecasts provided in this report reflect the current opinion of the analyst responsible for the content herein
on the date of publication and are, therefore, subject to change without notice. The prices and availability of the financial instruments are merely
indicative and subject to change beyond the control of Itaú Unibanco. The prices used for the production of this report were obtained as of the close
of the relevant market. Neither Itaú Unibanco nor any of its affiliated companies are obligated to update, amend or otherwise alter this report, or to
inform readers of any changes in its content, except upon termination of coverage of the securities issuers discussed herein.
3. The analyst responsible for preparing this document, highlighted in bold, hereby certifies that all opinions expressed in this report
accurately, solely and exclusively reflect his/her personal views and opinions regarding all of the issuers and securities analyzed herein,
provided in this document independently and autonomously, including from Itaú Unibanco, Itaú Corretora, Itaú BBA, and any of their
affiliated companies. Whereas the personal opinions of the analyst may diverge, Itaú Unibanco, Itaú Corretora, Itaú BBA and/or any of
their affiliated companies may have published or eventually publish other reports that are inconsistent and/or reach different conclusions
than those provided herein.

Itaú BBA | 15
Banco do Brasil. – March 21, 2024

4. The analyst responsible for preparing this report is not registered and/or not qualified as a survey analyst at the NYSE or FINRA, nor is such analyst
in any way associated with Itau BBA USA Securities, Inc. and is, therefore, not subject to the provisions of Rule 2242 on communications with
researched companies, public appearances and transactions involving securities held in a research analyst account.
5. Part of the analysts’ compensation is determined based on the total top line of Itaú Unibanco and some of its affiliated companies, including revenues
arising from investment services and investment bank services. Nonetheless, the analyst responsible for the content in this report hereby certifies
that no part of his/her compensation is or will be directly or indirectly conditioned to any specific recommendations or opinions herein.
6. The financial instruments and strategies discussed in this document may not be suitable for all investors and certain investors may not be eligible
to purchase or participate in some or all of them. This report does not take under consideration the specific investment objectives, financial situation
or needs of any particular investor. Investors who intend to purchase or trade the securities covered in this report must seek out the applicable
information and documents in order to decide whether to invest in such securities. Investors must independently seek out financial, accounting,
legal, economic and market guidance, based on their personal characteristics, before making any investment decision regarding the securities of
the issuers analyzed in this report. Each investor must make the final investment decision based on a range of related risks, fees and commissions.
In the event that a financial instrument is expressed in currencies other than the one used by the investor, exchange rate variations may adversely
affect the price, value or profitability. Financial instrument yields may vary, ultimately increasing or decreasing the price or value of financial
instruments, either directly or indirectly. Past performance is not necessarily indicative of future results, and this report does not ensure or guarantee,
either expressly or implicitly, any possible future performance or any other aspect thereof. Itaú Unibanco and its affiliated companies may not be
held liable for eventual losses, either direct or indirect, arising from the use of this report or its content. Upon using the content herein, investors
undertake to irrevocably and irreparably hold Itaú Unibanco and/or any of its affiliated companies harmless against any claims, complaints, and/or
losses.
7. This report may not be reproduced or redistributed to third parties, either in whole or in part, for any reason whatsoever, without prior written consent
from Itaú Unibanco. This report and its contents are confidential.
8. In accordance with the rules of the Brazilian Securities and Exchange Commission, the analysts responsible for this report have described scenarios
of potential conflict of interest in the “Relevant Information” chart below.
9. Itaú Unibanco is not party to an agreement with the issuer(s) relating to the production of this report.
10. The description of the internal organizational and administrative arrangements and of the information barriers in place for the prevention and
avoidance of conflicts of interest with respect to the production of research reports are available at www.itaucorretora.com.br.
11. Material information regarding the proprietary models used by Itaú Unibanco are available at Itaú BBA Bloomberg page.
12. Other important regulatory information is available at https://disclosure.cloud.itau.com.br

Additional note for reports distributed in the (i) United Kingdom: This material has been prepared by Itau Unibanco S.A. for informational
purposes only and it does not constitute or should be construed as a proposal for request to enter into any financial instrument or to participate in
any specific business trading strategy. The financial instruments discussed in this material may not be suitable for all investors and are directed
solely at Eligible Counterparties and Professional Clients, as defined by the Financial Conduct Authority. This material does not take into
consideration the objectives, financial situation or specific needs of any particular client. Clients must independently obtain financial, legal, tax,
accounting, economic, credit, and market advice on an individual basis, based on their personal characteristics and objectives, prior to making any
decision based on the information contained herein. By accessing this material, you confirm that you are aware of the laws in your jurisdiction
relating to the provision and sale of financial service products. You acknowledge that this material contains proprietary information and you are
required to keep this information confidential. Itau BBA International plc (IBBAInt) exempts itself from any liability for any losses, whether direct or
indirect, which may arise from the use of this material and is under no obligation to update the information contained in this material. Additionally,
you confirm that you understand the risks related to the financial instruments discussed in this material. Due to international regulations, not all
financial services/instruments may be available to all clients. You should be aware of and observe any such restrictions when considering a potential
investment decisions. Past performance and forecast are not a reliable indicator of future results. The information contained herein has been
obtained from internal and external sources, and is believed to be reliable as of the date in which this material was issued, however IBBAInt does
not make any representation or warranty as to the completeness, reliability or accuracy of information obtained by third parties or public sources.
Additional information relative to the financial products discussed in this material is available upon request. Itau BBA International plc has its
registered offices at 100 Liverpool Street, Level 2, London, EC2M 2AT, United Kingdom, and is authorised by the Prudential Regulation Authority
and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (FRN 575225). For any queries please contact your
relationship manager; (ii) European Economic Area: this report is distributed in the EEA by Itaú BBA Europe, S.A. (“IBBA Europe”), an affiliate
of Itaú Unibanco with registered offices at Rua Tierno Galvan, Torre III, 11 piso, Lisbon, Portugal, authorised as a credit institution by the Bank of
Portugal (registration number 195), and as a financial intermediary by the Portuguese Securities Market Commission – CMVM (registration number
396). This material is informational only and shall not be construed as a proposal to trade with financial instruments, nor any kind of personal
recommendation of advice. This material is directed solely at Professional Clients and Eligible Counterparties (as defined by Article 4, 1, (10) and
Article 30 of Directive 2014/65/EU - MiFID II), who possess the experience, knowledge and expertise to make its own investment decisions and
properly assess the risks that they incur. Relevant information regarding conflicts of interest contained in this material apply to IBBA Europe as an
affiliate of Itaú Unibanco. IBBA Europe does not exercise discretion as to the selection of the research reports to disseminate and exempts itself
from any liability for any losses, whether direct or indirect, which may arise from the use of this material and/or its content and has no obligation to
update the information contained in this material. The financial instruments/services discussed in this material may not be available to all clients
and/or in their respective jurisdictions. Additional information about the financial instruments discussed in this material are available upon request
(iii) USA: Itaú BBA USA Securities, Inc., a FINRA registered Broker Dealer and an SIPC member, is responsible for distributing this report and the
content herein. Any U.S. investor who receives this report and intends to trade any of the securities addressed herein must do so through Itau BBA
USA Securities, Inc. at 540 Madison Avenue, 24th Floor, New York, NY 10022; (iv) Brazil: Itaú Corretora de Valores S.A., a subsidiary of Itaú
Unibanco S.A., is authorized by the Central Bank of Brazil and sanctioned by the CVM to distribute this report. Contact the Customer Service
channel for more information: 4004-3131* (capital and metropolitan regions) or 0800-722-3131 (other locations) during business hours (BRT). If
additional service is required after contacting the aforementioned channels, contact: 0800-570-0011 (business hours) or write to P.O. Box 67.600,
São Paulo – SP, CEP (Postal Code) 03162-971.* (local costs apply); v) México: This research report is distributed in Mexico by Itaú Unibanco,
S.A., and by third parties that may be authorized by Itaú Unibanco, S.A., from time to time. This research report shall not be construed to constitute
any of the following activities under the jurisdiction of Mexico: (a) issue, market, advertise, commercialize, offer advice, recommend, solicitate
and/or promote financial products and/or services of [Itaú Unibanco, S.A., its affiliates and/or subsidiaries], and/or of any third party, (b) offer to buy
or sell any financial instrument or security, (c) participate in any particular trading strategy, and/or (d) intend to carry out any activity or service
reserved to regulated entities by the Mexican financial laws. This research report has not been reviewed and/or approved by the Mexican National
Banking and Securities Commission (Comisión Nacional Bancaria y de Valores). By reviewing this research report, you accept that you (a) are the
sole responsible for taking any action or omitting to take any action in connection with the relevant securities, including but not limited to stocks,
bonds, derivatives, warrants, options, and swaps, (b) must conduct your own independent appraisal regarding the relevant securities, and (c)
release [Itaú Unibanco, S.A., its affiliates and/or subsidiaries] from any and all liability in connection with any action taken or omitted to be taken by
you, in connection with the relevant securities.

Relevant Information – Analysts

Disclosure Items
Analysts CNPI*
1 2 3 4
Pedro Leduc OK
Mateus Raffaelli OK
William Barranjard OK
*Analyst Certification

1. The securities analyst(s) involved in preparing this report are associated with individuals who work for the issuers addressed herein.
2. The securities analyst(s) spouse(s) or partner(s) hold, either directly or indirectly, on their own behalf or on behalf of third parties, stock and/or
other securities discussed in this report.
3. The securities analyst(s), spouse(s) or partner(s) are directly or indirectly involved in the purchase, sale or intermediation of the securities
discussed in this report.
4. The securities analyst(s), respective spouse(s) or partner(s) hold, either directly or indirectly, any financial interest related to the securities
issuers analyzed in this report.

Itaú BBA | 16