Risk Factors

An investment in securities involves a high degree of risk. All investors should carefully consider the following factors in addition to the other information in this investor relations website before investing in Banrisul’s securities. In general, investing in the securities of issuers in emerging market countries, such as Brazil, involves a higher degree of risk than investing in the securities of U.S. issuers or issuers in other countries with highly developed capital markets. Banrisul’s business, financial condition, results of operations and prospects may be materially adversely affected by any of these risks. Additional risks unknown by Banrisul or irrelevant may also affect its business.

1) Risks Relating to the Bank and to the Brazilian Banking Industry

  • Changes in interest rates set by the Central Bank could adversely affect Banrisul’s results of operations and profitability
  • The increasingly competitive Brazilian banking industry and the regulatory limitations imposed on Brazilian public banks may negatively affect Banrisul’s business prospects
  • Measures adopted to increase competition in the banking sector may negatively affect Banrisul
  • Changes in the minimum levels of real estate and agricultural sector loans dictated by the Central Bank may negatively affect Banrisul’s profitability
  • Changes in federal and state legislation and/or Central Bank regulations may adversely affect Banrisul
  • Changes in tax laws and regulations may negatively affect Banrisul
  • The application of the Código de Defesa do Consumidor (Consumer Defense Code) to banks and the application of a cap on bank loan interest rates may have an adverse effect on Banrisul’s revenue from interest and its ability to extend loans
  • Minimum capital requirement limits imposed on Brazilian financial institutions may negatively affect the results of Banrisul’s operations and its financial situation
  • Monetary regulations imposed by the Central Bank and changes in bank reserve and compulsory deposit limits may adversely affect Banrisul

2) Risks Relating to Banrisul’s operations

  • A deterioration of Banrisul’s credit/risk rating may increase its funding costs
  • A substantial percentage of Banrisul’s assets are securities issued by the Brazilian government that are subject to market fluctuations and which may have a significant impact on its results of operations
  • Payroll-deduction loans are subject to changes in laws and regulations, judicial interpretations and/or the policies of public entities
  • Any mismatch between Banrisul’s loan portfolio and its sources of funding may adversely affect the Bank’s results of operations and its ability to expand its loan portfolio
  • Banrisul cannot assure that time deposits, an important source of funds to us, will continue to be available on favorable terms
  • The growth of Banrisul’s loan portfolio may result in increased loan defaults
  • The performance of the economy in the state of Rio Grande do Sul has a significant impact on Banrisul’s activities and results of operations
  • Banrisul is controlled by the state of Rio Grande do Sul, and its controlling shareholder’s interests may conflict with the interests of its other shareholders
  • The state of Rio Grande do Sul may breach its obligations under the social security plan Banrisul offers its employees, and it may be required to make such payments in its place
  • Changes in Banrisul’s management team, including as a result of a change in the governmental administration of the state of Rio Grande do Sul, may result in changes in its administration and could have an adverse effect on its financial condition and operating results.
  • The loss of Banrisul’s position as official bank and principal financial agent of the state of Rio Grande do Sul could have an adverse effect on its results of operations
  • Banrisul may not be able to implement its business strategy
  • Adverse decisions in one or more lawsuits to which Banrisul is a party may adversely affect its results and the price of its Class B preferred shares

3) Risks Relating to Macroeconomic Factors

  • The Brazilian government has exercised, and continues to exercise, significant influence over the Brazilian economy. This involvement, as well as Brazilian political and economic conditions, could adversely affect Banrisul’s business and the market price of its Class B preferred shares
  • Inflation and efforts by the Brazilian government to combat inflation may contribute significantly to economic uncertainty in Brazil and could harm Banrisul’s business, results of operations and the market value of its Class B preferred shares
  • The market value of the securities issued by Brazilian companies is influenced by the perception of risk in Brazil and other emerging economies, which may have a negative effect on the market price of Banrisul’s shares and may restrict its access to international capital markets

4) Risks Related to the Banrisul’s Class B Preferred Shares

  • An active and liquid market for Banrisul’s Class B preferred shares may not develop and this may limit your ability to resell preferred shares at a desired price and time
  • The relative volatility and lack of liquidity of the Brazilian capital markets may materially limit the ability of investors to sell Banrisul’s Class B preferred shares at a desired price and time
  • The sale of a significant number of Banrisul’s Class B preferred shares after this offering may adversely affect the price of its Class B preferred shares, and the issuance of new Class B preferred shares will dilute the ownership of all other shareholders
  • Holders of Banrisul’s Class B preferred shares might not receive any dividends
  • Holders of Banrisul’s Class B preferred shares do not have voting rights
  • Banrisul may need additional capital in the future, which may not be available at the time. By obtaining additional capital through the issuance of new Class B preferred shares may dilute the ownership of all other shareholders
  • The legality of Banrisul’s and the state of Rio Grande do Sul’s adherence to arbitration as the method for settling controversies can be questioned