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Strategy and Competitive Advantages

Strategy

Banrisul seeks to implement the following strategies:

- Growth of Banrisul’s loan portfolio in a prudent and sustainable manner while maintaining sound levels of profitability. Banrisul seeks to expand its loan portfolio by taking advantage of its diversified sources of funding, the growth of the Brazilian banking sector and the increased use of banking services by low-income segments of the population. Banrisul expects to continue to be able to access funds at relatively low costs from its diversified funding sources in order to expand its loan portfolio consistently with attractive returns, while maintaining its leverage level low.

- Consolidate and maintain its leadership position in Rio Grande do Sul. Banrisul intends to remain with Rio Grande do Sul as the principal geographic focus of its activities. Besides its extensive presence throughout the state, Banrisul has an ability to expand the participation in its current client base by increasing the services used by its clients, the strong and widespread brand recognition, and the support of the state government.

- Strengthen Banrisul’s relationship with state governmental agencies and consolidate its presence in the public sector. Because Banrisul’s controlling shareholder is the state of Rio Grande do Sul, a significant part of its business strategy includes providing banking services and loans to state and municipal employees. The Bank benefits from this strategy of providing these services, because, beyond the revenue from the services, there is the possibility to offer additional services to government employees, particularly payroll-deduction loans, other loans and other banking services.

- Invest in technology to reduce costs, obtain economies of scale, promote productivity and expand the range of products offered. Banrisul has invested continuously in technology, principally to modernize its computer hardware and software. These investments have allowed the Bank to adapt its network to its new business model and to expand the processing capacity. The expected benefits from these investments, which have yet to be fully reaped, include standardized processes, lower operating costs, greater economies of scale, easy monitoring of Banrisul’s operations, operational efficiency.

Competitive Advantages

Banrisul believes its principal strengths and competitive advantages are the following:

- Record of growth and low cost of funding. Banrisul’s record of growth puts the Bank among the 7 major Brazilian banks in number of branches and among the 8 in total deposits, over the past three years, according to Central Bank of Brazil data. Additionally, the diversified funding sources, with time deposits corresponding to 52% of total funds raised and under management, allow the Bank to obtain funding at competitive costs and below the average of the Brazilian banking system.

- A service network with potential to generate new business and flexibility to expand Banrisul’s credit volume and distribution of financial products and services. The Bank’s service network, including the Vero Network, grants Banrisul access to a broad and diversified customer base (individuals and corporations, especially micro-, small- and medium-sized companies), enabling the Bank to generate new businesses. This access provides the Bank a competitive advantage by positioning it to take advantage of the acquiring, insurance, pension plans and capitalization markets, in order to consolidate fees generation.

- Strong presence and brand recognition in Brazil’s southern region, especially in Rio Grande do Sul. Banrisul’s geographical area is the Southern Region of Brazil, especially the state of Rio Grande do Sul, where it is headquartered. The state has a nominal Gross Domestic Product (GDP) of R$331.3 billion and a per capita GDP that was 12.5% higher than the national average, according to IBGE data. In 2015, Banrisul’s service Network reached 1,279 points distributed in 536 branches (491 in Rio Grande do Sul, 30 in Santa Catarina, 13 in other Brazilian states and two overseas), 202 service stations and 541 electronic service stations.

- Conservative lending policies. The delinquency rate over 60 days reached 5.00% of total loans in December 2015, 1.17 pp higher than the same period last year. NPLs over 90 days reached 4.32% at the end of December 2015, 0.93 pp higher than in the end of December 2014. Banrisul has a balanced risk exposure by customer concentrations and quality, with credit transactions classified from AA to C (normal risk) accounting for 90.1% of the credit portfolio.

- Longstanding relationship with governmental entities. Banrisul is the official bank and principal financial agent of the state of Rio Grande do Sul, its controlling shareholder. By law and contract, the Bank is responsible for the collection of taxes and the transfer of part of them to the state’s municipalities and the administration of payments to state public servants, retirees and suppliers. Besides the state itself, the Bank also provides services to state governmental entities and to the majority of Rio Grande do Sul’s municipal governments.

- Management model focused on results, accountability and a commitment to transparency and operational controls. Banrisul has developed a business model that is focused on measuring the profitability of each transaction and its overall profitability, based on the specific goals for its employees, each of its branches and its business as a whole. Banrisul aims to increase its profitability from each of its clients by simulations that demonstrate all the additional services that can be offered to them. Banrisul’s goals meet directly on its employees’ compensation that is set based upon the profit margin, history and potential of each department’s customers.


Contact IR

Phone: +55 51 3215-3232
E-mail: ri@banrisul.com.br

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