Good morning, everyone, and thank you for waiting. Welcome to Banco do Brasil First Quarter 2019 Earnings Conference Call. This event is being recorded and all participants will be a listen-only mode during the company’s presentation. After this, there will be a question-and-answer session. At that time, further instructions will be given. [Operator Instructions] This conference call is also being broadcast live via webcast through Banco do Brasil website at www.bb.com.br/ir, where the presentation is also available. The replay of the conference call will be available through the phone number +55-11-2188-0400 until May 17, 2019, in English and Portuguese. To access the replay, please ask the operator to listen to BB's conference call. Identification will be required. Participants may view the slides in any order they wish. Before proceeding, let me mention that this presentation may include reference and statements, planned, synergies, estimates, projections and forward-looking strategies concerning Banco do Brasil, its associated and affiliated companies and subsidiaries. These expectations are highly dependent on market conditions and on the performance of domestic and international markets, the Brazilian economy and banking system. Banco do Brasil is not responsible for updating any estimate in this presentation. With us today, we have Mr. Carlos Vasconcelos, CFO; and Mr. Daniel Maria, Head of Investor Relations. Mr. Daniel Maria, you may now begin.

Hi, good morning, everyone. First of all, welcome and delighted to the earnings release for the 1Q 2019. Let me start the presentation on page 4, with some earnings highlights. The adjusted net income reached BRL 4.2 billion in the quarter, implying a growth of 40.3% over the same period last year and 10.5% to the 4Q 2018. The return on assets grew 426 basis points in 12 months, reaching 16.8%. Now, this shows a robust cost control with administrative expenses reaching BRL 7.6 billion, a growth of 1.7% in 12 months below inflation. Fee income grew by 3.8% to the same period of last year, reaching BRL 6.8 billion. The cost to income ratio was 36.9%, the batch one in our historical series. The net allowance for loan losses reached BRL 3.1 billion in the quarter, an increase of 26.3% over the same quarter last year. Moving to page 5, we bring profitability that increases consistently. Given the results of payment in the first quarter, we see a reasonable possibility of ending the year on the top end of the guidance for net income. That is between, just reminding, that is between BRL14.5 billion and BRL17.5 billion. Page 6. We present the NII that showed a growth of 1.8% in the quarter and 6.3% in 12 months. Treasury grew by 3.3% in the quarter and 30.4% in 12 months. The profit taking in some treasury position is the main explanation for that performance. In the quarter, the loan income decreased BRL103 million, affected mainly by the reduction of the loans revenues from the agribusiness and portfolios abroad. Having fewer days in the quarter also affected negatively the income of some credit lines. On the other hand, we highlight the growth of revenues from the individual loans, driven by increase of the portfolio, mainly the non-payroll loans, especially consumer finance. Despite the decrease in the company's portfolio, in the quarter, its revenue remained as almost stable when compared to the previous quarter, mainly due to the growth of the balance in revenues from the SME working capital portfolio, showing a positive contribution of the mix change of both portfolios as we have been saying. The funding expenses were impacted positively by fewer working days in the quarter. However, increase in the average balance of the judicial deposits raised due to lower expenses and they were partially offset by the lower average Selic rates. The decrease of the institutional funding expenses was due to maturity of some domestic bonds, without the corresponding renewals. In this quarter, the NII was on the upper section of the guidance, mainly driven by the treasury as I commented. This may not happen again on the upcoming quarters. It is relevant to highlight that the NII, once again, is one of the drivers for our results, mainly due to the mix change on the loan portfolio to more profitable lines, both individuals and companies transactions. Moving to page 7. We represent the fee income growth of 3.8% in 12 months. Just highlighting here the increase of 5.4% in checking accounts, 6.9% in asset management and 33.5% in good credit. We expect the fees performance to converge to the guidance throughout the year. On Slide 8, we bring the administrative expenses and this shows that it's under control, growing 1.7% in 12 months below inflation. As we comment on the information to the market that we've mentioned to the market recently in – as we release on last Wednesday, be it approved, new proposal for changes in the bylaws of Banco Do Brasil employees health can -- healthcare plan. In case it's – of approval by the associate, an additional expense of BRL586 million is expected for 2019. By the way, our guidance was built considering these expenses. On page 9, we bring the loan portfolio on the extended detail that increases 1.9% in the quarter and 0.8% in 12 months. Notice that individuals portfolio increases each shares, on the total portfolio to 29% from 27% in March that was in March 2018. On page 10, we present the loans to individuals, that increased by 1.3% in the quarter and 8.9% in 12 months. Growth in the non-payroll loans especially consumer finance, which grew 85.9% year-on-year, is the main driver for the individuals portfolio. The non-payroll loans increased each shares on the portfolio to 14% from 13% that was in December 2018, in line with our strategy. As the payroll loans grew by 7.4% with the disbursements through mobile growing more than double compared to -- being more than double compared to what we have observed in the first quarter of 2018. The individuals portfolio performance as we expected and should be on the top of the guidance throughout the year. On page 11, we bring the loans to companies on the extended yield that decreased 3.7% in 12 months and 4.8 -- 4.9% in the quarter. Given the guidance approach that we've done -- that we exclude the loans through the government, the portfolio dropped by 7.1% in 12 months. This portfolio reduction can be explained mainly by the repayment of loans on the large corporate segments. This quarter we show a new breakdown, we presented what’s a new break down for the SME segment -- for the SMEs comprising those companies with gross annual revenues up to BRL 200 million. Despite the decrease on the balance of this portfolio -- mainly due to write-offs, we highlight the growth of 22.1% of working capital and receivables. We are correcting the strategy of growing in lines with that average return. The decrease in the large corporate portfolio was expected, but not as fast as it happened this extends performance below the guidance for the company's portfolio. Moving to slide 12. We bring the agribusiness portfolio that grew by 1.5% in 12 months and reduced 0.7% when we compared to December last year. The rural loans, which are considered in our guidance, which is used for our guidance, represent us in this graph by the blue bar were stable in the quarter. In 12 months, this portfolio grew 4.4% near to the middle of the guidance. The agroindustrial portion decreased by 7 -- 4.7% in the quarter. This is -- this can be explained and it was expected in a certain way due to those company have more -- that have larger funding availability, such as capital markets. The B increased it's shares and loans within markets we serve. The disbursement of the 2018, 2019 harvest plan increased by 88% compared to the previous years -- to the previous harvest, I would say. Another highlight I would like to point out here is the growth of 308% of the CPRs. CPRs is a negotiable instrument for agribusiness, that is very common to use as working capital, and it grew 308% in 12 months. On page 13, we show the net allowance for loan losses of BRL3.1 billion in the quarter, as a result of Vera Sílvia vintage. There is a reasonable possibility to the -- to end the year in the lower region of the guidance. The cost of credit is improving quarter-on-quarter, reaching 3.11%. On page 14, we show the credit quality of the total portfolio. NPL over 90 days ended the quarter at 2.59%. The slight increase was due to the reduction in the portfolios since the balance of the NPL remained stable, almost stable over the last quarter. The coverage ratio increased to 214% as the new NPL was 0.69% and coverage ratio reached 109%. Page 15, we bring the credit quality by segments. The NPL over 90 days for the individuals ended the quarter at 3.25% and this can be explained mainly by the mortgages. On the other hand, the salary loans and the payroll loans improved. NPL for companies continues improving, reaching 303 -- 3.03% while the agribusiness reached 1.68%. Coverage ratio for individuals reached 187%, agribusiness 192%, companies 247%. We present a new NPL by segments on the charts on the right-hand side. Page 16, we show the NIM that remained stable in the quarter. The mix change in individual, companies, and agribusiness portfolio helped the NIM. However, the high level of liquid assets to the earning assets offset these improvements. The trend for 2019 is slightly increase in the NIM and basically due to a gradual increase of credit portfolio. Once the loan portfolio tends to gain more relevance into the earning assets, we believe that the intensity to grow. In addition, the improvement is coming from the mix change in the NIM also. Page 17, we bring the spread by segment. The managerial spread for the credit portfolio increased 14 basis points, partially impacted by companies and specialty working capitals portfolio that's helped as well. On the next slide, slide 18, we present the BIS ratio and the changes in the CET during the last quarter. CET reached 10.63% on March, just calling the attention to the fact that with all the phasings and phase-outs of Basel III have already been implemented. And the increase in the CET1 was driven basically by earnings and by lower present or WA. Finally, moving to Page 19, we summarize the performance related to the guidance. We have -- we mentioned about each line along the -- throughout the presentation but just consolidating. Adjusted net income, BRL 4.2 billion; NII growing 6.3% in 12 months; loan portfolio growing 0.9%; and then we have the breakdown. Individuals growing 9%, increase of 7.1% on the company's portfolio, increase up 4.4% in the rural loans. The net allowance for loan losses, reaching BRL 3.1 billion, fee income growing 3.8% and agri strategic expenses growing 1.7%. With that, we conclude our presentation, and we can go to Q&A. Thank you for the attention.

[Operator Instructions] Our first question comes from Gabriel da Nóbrega from Citibank. Gabriel da Nóbrega: Hi, everyone, and thank you for the opportunity to ask questions. I would like to see you answering me the question regarding your NII. During the quarter, we saw that this continued to be supported by your solid results in treasury, which as you already mentioned, cannot be sustainable going forward. In the meantime, while we also saw your improving asset mix growing much strongly in retail loans, we still did not see this really impacting your credit NII as it actually decreased slightly during the quarter. So I wanted to ask you, as if you believe that throughout the year, the improvement in mix could still help you to sustain the NII and thus reach your 2019 guidance or could a fiercer competition beginning to impact spreads?

Gabriel, thank you for the question. We are sure that this change in the mix of the portfolio certainly will help to grow NII, and we have good signs of that, good examples, for instance, the companies portfolio begins, however the income were almost stable. And including these change in the portfolio is important, because although we have more competition, you see that we are maintaining spreads, yes? Then this is quite important for the strategy and we are confident related to reaching the guidance along the year. Gabriel da Nóbrega: Alright. That's very clear. And if you allow me a second question, we see that loan growth continues to be below what you have been guiding. Not -- sorry, loan growth has been below what you have been guiding, however, retail credits have been coming in strong, while corporates are lagging. What I want to know is if there are any strategies that you can be implementing in order to see a turnaround of your corporate loan book?

Okay. Gabriel, actually, we can explain this performance for credit portfolio, mainly due to the large corporates portfolio. It's something we were expecting for this year that some repayments could happen. Actually, it happened much faster than we expected. Then this is the main reason for being lower this quarter. As you can imagine, we are talking about BRL 10 billion. Although we see reactions, we see more disbursements in the medium size and small companies, it takes time for that. Yes? But again, we understand that it's winning to observe, certain there is a flag that we need to follow up with. It's early to say how this will behave. But we are confident that we have space in the medium size -- small and medium-size companies to grow that portfolio. Gabriel da Nóbrega: Got it. Thank you.

[Operator Instructions] Our next question comes from Yuri Fernandes from JPMorgan.

Thank you, gentlemen. I have a question on the legal risks. I recall you have been commenting that for the first half, this may continue to be under pressure. So just would like to know like what’s the normal level of the legal risks. How much would you expect for this line? Thank you.

Okay, Yuri. Thank you for the question. Legal risk actually, we were expecting higher legal risk for this year. In this quarter, and we guided -- we flagged less risk that's the third and the fourth quarter of last year was a good proxy to assume in this quarter. However, we observed a higher amount of legal risk this quarter. And this can be seen positively, because since we are in this process of trying to do agreements, related to thousands of those legal risks, this means that we were able to anticipate for this process that we were expecting, yeah? I would say that for the second quarter, you can estimate something very similar to what you observed in the first quarter, yeah? And then a reduction for the third and fourth quarter, yeah? It's hard to say where it's going to be the inflection point, but it seems to us that the third and the fourth quarter seem reasonable. Still, if you estimate the third and the fourth quarter, I recommend to you to use the third and the fourth quarter last year, yeah? Then please memorize it, yeah? And certainly 2020, going more to in line to what we observed in the previous years.

And I have a second question regarding the time – the judicial deposits you have. It remained very high at 111% versus CDI. What can you do to improve rank, how should we think because given you can improve your sales, with terms deposits, with a much lower cost, why should we continue to see the rise in legal expenses? Thank you.

Okay. Thank you, Yuri. Actually, you know that those agreements that we have with, of course, for judicial deposits, seem to be it's an agreement four, five years, and we have several agreements, yeah? Then what we are doing is exactly renegotiating those agreements. At the moment, we haven’t reported that, and we are negotiating this. We were able to reduce some of that and some; we are working on, yeah? I would say that once you have these agreements of judicial deposits, you need to accept the deposits that you have. Let's assume if you have an increase in any case or any situation, you increase net earnings, the balance of design. Then we are working on this, yeah? And certainly, we tend to show improvements in design.

Do you have like a big contract to be renewed is realized from one of the biggest corporate companies or subsidies? Should we expect to see lower -- a lower average cost for these lines in 2020?

Certainly, yes. That’s correct. Now, it's -- we are negotiating that. Then I cannot give you more details about. But certainly, yes.

Okay. No. Thank you.

Our next question comes from Mr. Carlos Gomez from HSBC New York.

Hello and good morning. I would like to ask about the tax rate. I know you have referred to this in Portuguese call. But recently you changed into guidance quite drastically, so I wanted to confirm that you would now, certainly, to 18% and 23% and that you think that, that will be the sustainable rate going forward. Second, I would like to ask you about the next steps for cashing might be when the new proposal, Daniel, you talked about and where we should have an answer, further updates. Thank you.

Okay. Thank you, Carlos, for all the questions. Starting with the tax, yes, we showed our best guess for the tax rate last earnings release, saying that the range would be from 23% to 27%, as you mentioned. Yes? And certainly we viewed this based on a series of facts, certainly, how much tax credits we are going to activate or we are going to use. And those guidance, should we consider also those yet as we consider also, which are the composition of our revenues and the expenses that could impact the tax -- the effective tax. Yes? And also, the -- to activate tax credits, it depends on a variety of issues, for instance, which is going to be the tax rate, or not the tax rate, but the foreign exchange rate, which is going to be the losses that could be deductible on this. Then we fine-tune all those events, yes, and we understand that 18% to 23% is the best we could look at right now, looking at the information we have. I would say that we are -- we understand that this is sustainable and one way to look at this is do an exercise comparing to 2018. For instance, 2018 to 2019 first quarter is completely different, but there are three main aspects. For instance, payouts in 2014, 40%. Payout in 2018 first quarter, 30%. And certainly, higher payouts reduce the tax rate. Second aspect, last year, we were creating tax credits at 40% and we were consuming those tax credits at 45%. What is the effects on the effective tax rate increases and this year, we are creating and consuming at the same rate, these reduce the tax rate. And thirdly is effectively the social contributions lowering 5%, yes? Then we did an exercise comparing -- trying to emulate those numbers for the first quarter of 2018 and the number is quite similar. Exactly for that reason, we understand that the business is sustainable. And now going to the next question about CUSIP. Yes? The consultation to the employees will start soon, yes? We expect that by the end of this month, we are going to have this concluded, yes? And certainly as soon as we have it, we're going to notice to the market what was the outcome.

Okay. To confirm your guidance for expenses is not affected by whether the CUSIP agreement is accepted or not.

Thank you for reminding me this. You're right, yes, when we built the guidance, we included these expense we were expecting then there is no impact in the guidance.

Thank you so much.

[Operator Instructions] Our next question comes from Mr. Jason Mollin from Scotiabank.

Hello everyone. My question is on the competition on the loan side of the business. Given the largest banks in Brazil have been pushing this year and talking about growing their loan books. Can we see new entrants looking for a robust growth as well? Can you talk about competition on lending rates? Maybe provide some color if Banco do Brasil is offering the lowest rates in the market for similar risks? And maybe address some comments we saw in the media about President Bolsonaro asking Banco do Brasil for lower rates. Thank you.

Okay. Jason. Thank you for the question. First of all, certainly, the market is quite competitive, yes? And when you look at the competition certainly for Banco Do Brasil that we are present in several markets in several regions, you have different levels of competition, yes? Certainly in the large cities, you have all the banks acting there in some states in some state – in some products more specifically. Let me give an example. Payroll loan, it's an environment that is very competitive, interest rates compressed, yes? I would say, I didn't say that we are close to the bottom, but certainly, it's compressed, yeah? Certainly, there are – how we can compensate this. Changing the mix of the portfolio, going to other lines of credit, for that reason, the change of makes is quite important to maintain or even to increase a little bit our stress, yes? As you can observe in the managerial spread that we're showing. There is another aspect also. The depending on the region, we have different levels of competition, yes? And certainly when we have a national-wide portfolio this reduce this reduces the risk of concentrating just one market, yeah? The bank, however, the bank is acting market share. The most important aspect for the bank is profitability, showing the right return on equity, return on assets for our customers and being competitive in the market. Then we are align it with our peers. And certainly, we are working towards having data services using technology to be closer to our customers. For that reason, it's important to have more customers being serviced by a manager, understanding that of the customer and the size of the customer to offer the first the product. Related to the news that you mentioned, I would say that, the bank takes all of decisions related to rates using the corporate governance. We have our risk appetite, we have our margins, we have our synergies that decides which are the interest rate levels and this is the way we are acting. Then I would say that this was very formal comments that that is escalated, but the bank decides definitely how we decide rates.

Very helpful. Thank you.

This concludes today's question-and-answer session. Mr. Daniel Maria to proceed with his closing statements. Please go ahead, sir.

First of all, thank you all for the questions and for participating in the conference call. We are from the bank and especially the Investor Relations team is available for any further questions and thank you for the attention, again. Have a nice one. Have a nice day.

That does conclude Banco do Brasil conference call for today. As a reminder, the material used in this conference call is available on Banco do Brasil Investor Relations website. Thank you very much for your participation, and have a nice day. You may now disconnect.