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Earnings Release 1Q19

BANCO BMG REPORTS 1Q19 CONSOLIDATED RESULTS

São Paulo, May 09, 2019 – Banco BMG S.A. and its subsidiaries (“BMG” or “Banco”) announce their consolidated

results of the period ended on March 31, 2019 reviewed by PwC (PricewaterhouseCoopers) - independent

external auditors.

In order to provide greater transparency for its customers, investors and general market and always seeking the

best corporate governance practices, Banco BMG’s administration publishes this report highlighting the key

aspects of the bank’s performance in the period.

BMG’s operational and financial information, except if otherwise indicated, are presented based on consolidated

numbers and on Brazilian reais, in accordance to the rules adopted in Brazil applicable to institutions authorized

to operate by the Central Bank of Brazil (Bacen).

HIGHLIGHTS

The Recurring Net Income in the first quarter of 2019

was R$ 99 million, an increase of 86.7% compared to

1Q18, demonstrating strong evolution in the financial

performance of the last 12 months;

The Recurring Return on Average Shareholders'

Equity in the first quarter of 2019 was 17.2% p.a., an

increase of 7.7 p.p. in relation to 1Q18;

Shareholders Equity ended March 31, 2019 with a

R$ 2,673 million balance;

The Basel Ratio reached 12.4% on March 31, 2019,

composed exclusively of Core Capital;

In line with the Notice to the Market published on April

1, 2019, as of today the Bank had raised R$ 87

million in Perpetual and Subordinated Financial

Bills. The funding is in the process of being authorized

by BACEN to be eligible to form Tier I and II capital.

With such funding, the Basel Ratio would be 13.1%;

Investor Relations

Flavio Guimarães Neto

CFO & IRO

Danilo Herculano

Investor Relations

[email protected]

www.bancobmg.com.br/ir

mailto:[email protected]

http://www.bancobmg.com.br/

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As a reflection of the growth of the retail portfolio, the Net Financial Margin reinforced

the growth dynamics presented in previous periods and reached 22.7% p.a. in the first

quarter of 2019;

With a strategy focused on consumer finance, the Retail portfolio reached R$ 8,206

million, representing growth of 17.6% in the last 12 months;

In 1Q19, 67 help! stores were opened, in line with its expansion plan, closing the quarter

with 539 stores;

On April 5, 2019, Banco BMG filled on CVM the cancellation request of its registration as

a securities issuer.

RECOGNITION

Once again, BMG was finalist in the Modern Consumer Prize (Consumidor Moderno),

the main quality service award in Brazil, in the category of Banks and Financial Services;

BMG won the Dialogue Era Award from Grupo Padrão with support from ABRAREC

(Brazilian Customer-Business Relations Association), reinforcing its collaboration for the

reduction of judicial involvement and the harmonization of consumer relations in Brazil;

The Bank received a trophy as the highlight on NICE inContact Interactions 2019 for its

Speech Analytics project, using software that has the ability to monitor the quality of calls

based on voice analysis;

BMG Seguros won the Brazil 2019 Insurer Award in the Best Performance category in

the surety bond segment. The prize is considered a thermometer and point of reference

for the national insurance market.

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CORPORATE PROFILE

With 88 years of solid presence in the financial market, BMG is a retail bank focused on consumer

financing and offers its individual clients the following products through its physical and digital channels:

payroll credit card, direct debit loan, both exclusive to Social Security (INSS) retirees and pensioners

and public sector employees, digital personal credit and retail insurance through a partnership.

Additionally, it offers retail customers a full range of products and services through its digital bank. For

company clients, BMG offers structured financial services, derivative instruments and surety bonds

insurance. BMG provides fixed income investment products for all customers.

FINANCIAL PERFORMANCE

Financial Highlights

Indicators (%) 1Q19 4Q18 1Q/4Q (%) 1Q18 1Q/1Q (%)

Net Income - Recurring 1 99 61 60.9% 53 86.7%

Net Income 77 40 94.4% 31 147.3%

ROAE - Recurring 1 17.2% 10.4% 6.8 p.p 9.5% 7.7 p.p

ROAE 12.1% 6.0% 6.1 p.p 4.9% 7.2 p.p

ROAA 1.8% 0.9% 0.9 p.p 0.8% 1.0 p.p

Basel Ratio 12.4% 12.4% 0.0 p.p 14.1% -1.7 p.p

Net Interest Margin 22.7% 22.6% 0.1 p.p 18.9% 3.8 p.p

Efficiency Ratio 50.6% 45.6% 5.0 p.p 52.8% -2.2 p.p

NPL2 – E-H Portfolio 6.0% 6.6% -0.6 p.p 7.0% -1.0 p.p

NPL3 – Overdue installments 3.6% 3.9% -0.3 p.p 4.0% -0.4 p.p

Balance Sheet (R$ Million) 1Q19 4Q18 1Q/4Q (%) 1Q18 1Q/1Q (%)

Total Credit Portfolio 9,853 9,513 3,6% 8,824 11,7%

Retail Portfolio 4 8,206 7,866 4,3% 6,980 17,6%

Wholesale Portfolio 5 1,314 1,215 8,1% 1,278 2,9%

Run off Portfolio 6 333 432 -22,9% 566 -41,3%

Total Assets 16,830 16,938 -0,6% 16,148 4,2%

Shareholders' Equity 2,673 2,640 1,2% 2,635 1,5%

Total Funding 12,234 12,354 -1,0% 11,822 3,5%

1) Recurring Net Income and ROAE, excluding the effects of goodwill, see "Net Income and Profitability".

2) Methodology: Portfolio classified by E-H/Total Portfolio, including overdue plus falling due installments.

3) Methodology: Installments overdue more than 90 days/Total Portfolio.

4) The retail portfolio includes Payroll Credit Card and Personal Credit.

5) The wholesale portfolio includes structured operations and companies.

6) The run off portfolio includes the payroll loan, lendico, vehicles and home equity loan.

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Financial Margin

The financial margin adjusted to the cost of credit in 1Q19 totaled R$ 438 million, an increase of 25.8%

compared to the same period of the previous year, with the main reference being the increase in

revenues from credit operations coupled with the reduction in the cost of funding.

In comparison with 4Q18, the margin decreased by 3.6%, especially due to the lower growth of the

banking product and treasury margin and consequent higher cost of credit.

In the quarter, the net interest margin was 22.7% p.a., an increase of 3.8 p.p. and 0.1 p.p. compared to

1Q18 and 4Q18, respectively. The continuous improvement in the net interest margin is a reflection of

the portfolio redistribution that has been occurring in recent years, focusing on the payroll credit card

and the lower cost of funding.

13.2%15.7%

19.0%

22.7%

5.6%

9.7%

12.9%14.8%

2016 2017 2018 1Q19

NIM NIM adjusted to the cost of credit

Net Interest Margin Evolution (% p.a.)

Financial margin (R$ Million | % p.a.) 1Q19 4Q18 1Q/4Q (%) 1Q18 1Q/1Q (%)

Banking product and treasury (a) 654 649 0.8% 522 25.4%

Financial interest margin 645 640 0.8% 511 26.3%

Income from services rendered 9 9 3.6% 11 -17.3%

Cost of credit (b) (217) (195) 11.2% (174) 24.6%

Provision expenses net of recovery (98) (91) 7.0% (78) 25.4%

Expenses with agents’ commissions (119) (103) 15.0% (96) 24.1%

Financial margin adjusted to the cost of credit (a+b) 438 454 -3.6% 348 25.8%

Net interest margin (a/c) 22.7% 22.6% 0.1 p.p 18.9% 3.8 p.p

Financial margin adjusted to the cost of credit (a+b/c) 14.8% 15.4% -0.6 p.p 12.3% 2.5 p.p

Average interest-earning assets (c) 12,447 12,438 0.1% 11,781 5.6%

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Other Operating Income and Expenses

In the first quarter of 2019, other operating expenses, net of other operating revenues, increased by

20.8% over the same period of 2018 and by 8.5% compared to the previous quarter.

With the launch of the digital bank at the end of 2018, BMG has strengthened its customer-centricity

and omnichannel strategy and, to this end, invests continuously in marketing and technology aimed at

providing a better customer experience. In the first quarter of 2019, expenses were impacted due to

lower reversal of operating provisions together with higher operating expenses.

Efficiency Ratio

In the first quarter of 2019, efficiency ratio was 50.6%, improvement of 2.2 p.p. in relation to 1Q18 and

increase of 5.0 p.p. compared to 4Q18.

Methodology: Personnel Expenses + Other Administrative Expenses (doesn't consider amortization and depreciation) + Other Operating Expenses (net from operating income)/ Gross Profit from Financial Intermediation before allowance for loan losses + Income from Services Rendered + Tax Expenses

Other Operating Income and Expenses (R$ Million) 1Q19 4Q18 1Q/4Q (%) 1Q18 1Q/1Q (%)

Personnel, Administrative and Operating Expenses (265) (242) 9.4% (216) 22.4%

Personnel expenses (44) (45) -3.0% (37) 17.2%

Administrative expenses without goodwill (135) (139) -2.7% (99) 36.4%

Other operating income/ expense (86) (58) 47.6% (80) 7.4%

Operating Efficiency Ratio (%) 1Q19 4Q18 1Q/4Q (%) 1Q18 1Q/1Q (%)

Efficiency Ratio 50.6% 45.6% 5.0 p.p 52.8% -2.2 p.p

Other Operating Income and Expenses (R$ Million) 1Q19 4Q18 1Q/4Q (%) 1Q18 1Q/1Q (%)

Other operating income and expenses (319) (294) 8.5% (264) 20.8%

Income from services rendered 9 9 3.6% 11 -17.3%

Personnel expenses (44) (45) -3.0% (37) 17.2%

Other administrative expenses (171) (175) -2.1% (135) 26.7%

Goodwill (36) (36) 0.0% (36) 0.0%

Tax expenses (24) (27) -10.8% (24) 1.3%

Equity in the results (3) 3 -203.6% 1 -303.6%

Other operating income/ expense (86) (58) 47.6% (80) 7.4%

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Net Income and Profitability

As expected, the bank's profitability has been growing steadily. Net income for the first quarter of 2019

was R$ 77 million, an increase of 147.3% over the same period of the previous year. Return on average

equity (ROAE) was 12.1% p.a. in 1Q19.

In August 2011, Banco BMG acquired financial institutions, recording goodwill of R$ 1,450 million,

based on the expectation of future profitability. Goodwill is amortized monthly in the amount of R$12

million, therefore, 75.9% already has been amortized, leaving a balance of R$ 350 million to be

amortized by July 2021.

Since all the effects of goodwill have already been fully deducted from reference equity for the

calculation of the Basel Ratio, BMG chose to demonstrate its results excluding the effect of the goodwill

amortization. Accordingly, net income for the first quarter of 2019 would be of R$ 99 million,

shareholders’ equity of R$ 2,463 million as of March 31, 2019 and return on average equity (ROAE) of

17.2% p.a..

In 4Q18, other events occurred, including: (i) a reduction in the social contribution rate, which had a

negative impact of R$ 92 million; and (ii) tax effect on interest on shareholders' equity that had a

positively impact of R$ 56 million.

Net Income and ROAE (R$ Million) Recurring Net Income and ROAE (R$ Million)

3145

5540

77

4.9%6.9% 8.3%

6.0%

12.1%

1Q18 2Q18 3Q18 4Q18 1Q19

Net Income ROAE

5367

7761

999.5%

11.7% 13.1%10.4%

17.2%

1Q18 2Q18 3Q18 4Q18 1Q19

Recurring Net Income Recurring ROAE

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OPERATIONAL PERFORMANCE

Client centricity

Based on long experience in consumer

finance, BMG has developed a client-centricity

philosophy. Product development and delivery

as well as distribution channels are designed

based on the customer needs throughout their

entire life cycle.

The multi-product business model for different

stages of the customer's life cycle gives BMG

low volatility in terms of results over the

country's economic cycles, allowing it to act

sustainably in a continuously expanding

addressable market.

In the first quarter of 2019, BMG reached a total of 3.6 million active customers, an increase of 17.1%

over the last 12 months.

BMG has an average satisfaction rate of 8.67 (on a

scale of 0 to 10), and a Net Promoter Score (NPS) 1

of +58, with 70% of respondents classified as brand

"promoters." This demonstrates the Bank's

commitment to the customer in its various distribution

channels. As a reflection of the high level of customer

engagement with BMG, in 1Q19 the average cross-

selling index remained stable in relation to the

previous quarter, even as the customer base grew.

This indicator encompasses only products and

services that generate revenues.

1 The Net Promoter Score is a methodology for measuring the degree of customer satisfaction and loyalty, in which customers who evaluate the company with a score of 0 to 6 are considered detractors, 7 and 8 are neutral and 9 and 10 are brand promoters who tend to speak well of the company. The research was conducted by IBOPE between August and September 2018.

3.13.3

3.5 3.5 3.6

1Q18 2Q18 3Q18 4Q18 1Q19

Number of clients evolution (Million)

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Distribution Channels

BMG has an omnichannel and asset light distribution network, consisting of banking correspondents,

franchise network of credit stores, branches, call centers and partnerships, which together operate

synergistically with the digital channels. This strategy allows BMG to be present throughout Brazil,

offering clients what is best of both the physical and digital worlds.

Bank Correspondents

The Bank's main physical distribution network is composed of banking correspondents that are

regulated by Resolution No. 3.954, which establishes contracting standards and requires mandatory

certification. The correspondents are supervised by the Bank's administrators to ensure the quality of

the certification process. The channel has more than two thousand banking correspondents, who have

specialized teams capable of originating BMG products. The Bank's competitive advantage in this

channel is based on four main underpinnings: (i) strong brand; (ii) close and long-term relationships;

(iii) better products; and (iv) the best proprietary payroll credit system in the market.

Franchise Network

"help! loja de crédito" is a franchise network of credit stores in Brazil. Focused on the retail segments

of Social Security (INSS) retirees and pensioners and public sector employees, the franchise is

designed to be one-stop shop. The stores are strategically located in easy access points where there

is high flow of target clients. BMG developed a system allowing the bank and the franchisee to share a

horizontal view of the client, enabling sale of products adhering to each client's profile and needs. The

franchise's culture is to be fair to the client, always prioritizing the offer of products at more affordable

rates and, when necessary, offering emergency credit to help the client in a time of financial constraints.

In 1Q19, 67 help! stores were opened, in line with its expansion plan, closing March 31, 2019 with 539

"help! Credit Stores" stores registered and qualified to originate the Bank's products.

The operation is formalized through the complete

biometric profile, integrated to the operating

system, which brings more security in credit quality

and mitigates potential fraud. The biometric profile

also allows greater ease and security for digital

channel services, such as the fingerprint reader for

ATMs, facial biometrics for access via mobile

application and a voice recorder for call center

service.

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Digital Channels

Any time, anywhere, any device

In order to complement its omnichannel strategy, the Bank launched its

full digital banking operation in October 2018. Hence, BMG offers the

native digital client all the usability developed to generate the best

experience through this channel. Furthermore, clients can begin their

relationship with the Bank over its physical network and then continue to

contract the products digitally.

As part of the experience, the digital bank relies on a virtual specialist,

Duda, who makes use of voice recognition and artificial intelligence to

help customers perform banking operations in a simple and intuitive way.

In March 2019, the Bank had over 300 thousand accounts opened and

over 210 thousand traditional cards.

Credit Portfolio Distribution

The total loan portfolio reached R$ 9,853 million in 1Q19, representing an increase of 3.6% in the

quarter and 11.7% in comparison to 1Q18.

In line with the Bank's strategy, the retail portfolio grew by 17.6% in the last 12 months and already

represents 83.3% of the total portfolio.

Distribution of Total Credit Portfolio (R$ Million) 1Q19 4Q18 1Q/4Q (%) 1Q18 1Q/1Q (%)

Retail Portfolio 8,206 7,866 4.3% 6,980 17.6%

Payroll Credit Card 7,316 7,120 2.8% 6,520 12.2%

Personal Credit 890 746 19.3% 460 93.3%

Direct Debit Loan 532 447 19.0% 303 75.8%

BMG Money 358 299 19.9% 158 126.9%

Wholesale Portfolio 1,314 1,215 8.1% 1,278 2.9%

Structured Operations 875 747 17.2% 637 37.5%

Companies 439 469 -6.4% 641 -31.5%

Run off Portfolio 333 432 -22.9% 566 -41.3%

Payroll Loan 216 247 -12.6% 386 -43.9%

Lendico 95 160 -40.6% 141 -32.6%

Home Equity Loan 19 21 -6.1% 25 -22.1%

Vehicles 2 3 -47.6% 14 -88.8%

Total Credit Portfolio 9.853 9.513 3.6% 8.824 11.7%

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Retail Portfolio

Payroll Credit Card

BMG's Payroll Credit Card works as traditional credit card. Due to the

characteristics of the product, the payroll credit card, in addition to not

charging annuity, has the advantage of offering a higher credit limit,

reduced interest rates and extended payment conditions when

compared to traditional credit cards. The main difference is that the

minimum payment is deducted directly from the client's paycheck.

BMG began operations with a payroll credit card in 2005 when it entered into agreements with several

Brazilian state governments. In October, Law No. 10,820 was amended, allowing payroll deductions of

up to a limit of 35% of salaries of the Social Security (INSS) pensioners and retirees, federal government

employees and employees duly registered under the CLT regime (official labor laws), of which 5% to

be used exclusively for the amortization of payroll credit card expenses.

The payroll credit card portfolio’s reached R$ 7,316 million on March 31, 2019, representing a increase

of 12.2% over the same period of the previous year and 2.8% compared to 4Q18. Regarding the

portfolio, 81.7% is concentrated on Social Security (INSS) retirees and pensioners and federal

government employees. In the last 12 months, among the number of transactions made by customers

using payroll credit cards, 94% were for purchases. This indicator has remained stable in recent

quarters.

An increase in the default rate is expected as the product reaches maturity. It is important to emphasize

that, as a product feature, the card’s consignable margin is subordinated to the payroll loan’s margin,

and thus more clearly reflects the product’s technical default. However, the principal loss offenders are

the same for both payroll instruments.

6,520

6,8056,928

7,120

7,316

1T18 2T18 3T18 4T18 1T19

Portfolio Evolution (R$ Million) Credit Quality – NPL Evolution

3.7% 3.9%3.3% 3.1% 3.0%

1T18 2T18 3T18 4T18 1T19

Carteira E-H

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Direct Debit Loan - Personal loan through a checking account debit

In January 2016, the bank launched the Direct Debit Loan: personal credit debited from the checking

account, exclusive for Social Security (INSS) retirees and pensioners and public sector employees. The

product is directly linked to the payroll credit card users and has high cross-selling potential.

BMG participated in auctions that allowed it to be a payer of INSS benefits retirees and pensioners,

which represents an important competitive advantage for the Bank. It leads to higher efficiency when

collecting installments, lower default rates, better credit appraisal, higher cross-selling potential and

greater bargaining power when entering into agreements for debiting instalments of personal credit

debited from the checking account. On March 31, 2019, 38% of the product portfolio referred to clients

who receive the retirement benefit at BMG and for 1Q19 origination this percentage is 51%.

The direct debit loan portfolio at March 31, 2019 reached a balance of R$ 532 million, representing an

increase of 75.8% over the same period of the previous year and of 19.0% compared to 4Q18. Of the

direct debit loan clients, 74% have a BMG payroll credit card.

The default rate of the product can vary according to the credit portfolio profile. New operations tend to

have a higher default than refinancing operations, since in refinancing the Bank has compiled a client

behavior history. Likewise, customers who receive their retirement benefit from BMG tend to have a

better default rate when compared to clients who receive through other banks.

303358 400 447

532

21.3% 21.1% 20.9% 20.7% 20.5%

1Q18 2Q18 3Q18 4Q18 1Q19

credit portfolio interest rate %p.m.


29.8% 28.5%31.1% 32.9%

30.0%

18.3% 17.1% 17.9%20.3% 19.3%

1T18 2T18 3T18 4T18 1T19

Carteira E-H Parcelas vencidas over 90

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BMG Money –Payroll Loans in the United States

Since 2011, Banco BMG shareholders hold the majority stake in a fully licensed consumer finance

company with office in Florida/USA called "BMG Money", focused on payroll loans to public sector

employees, with presence in 27 American states. This transaction is reflected in Banco BMG through

participation agreements entered into between BMG Money and BMG Bank (Cayman) - a wholly-owned

subsidiary of BMG (as a participant). This portfolio ended 1Q19 with R$ 358 million.

Mass Insurance

In January 2016, through partnership with Generali, Banco BMG started to offer to its clients mass

insurance products. BMG offers credit insurance, life insurance and personal injury insurance, including

funeral assistance, pharmaceutical assistance and home assistance to its clients.

This business segment has high cross-selling

potential and in 1Q19 lending insurance showed

a 27% penetration in the Payroll Credit Card

portfolio and 79% in the Direct Debit Loan

product. In 1Q19, R$ 47 million in premiums

were underwritten, which generated R$ 6 million

in service revenues net of commission

expenses. Insurance sales revenues are booked

by BMG using the equity equivalence method

through CMG Corretora, an indirect subsidiary.

158216

266299

358

48 56 66 77 92

1T18 2T18 3T18 4T18 1T19

BMG Money R$ BMG Money US$


5.5% 5.8% 5.6%6.7% 6.8%

1T18 2T18 3T18 4T18 1T19

Carteira E-H

29

49 44

48 47

1Q18 2Q18 3Q18 4Q18 1Q19

Issued Premiums Evolution (R$ Million)

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Meios de Pagamento

Granito, a Brazilian technology company

specialized in electronic payment systems, was

created in 2015 to develop flexible and

customized solutions to the needs of each

segment. In 2018, the Bank acquired 65% of

Granito, with the purpose of bolstering its

product portfolio and increasing its capillarity

with BMG's existing distribution channels.

This strategy is fundamental for BMG to operate in a complete retail ecosystem in Brazil: in addition to

payment solutions, the Bank aims to offer complete banking services for each establishment and their

employees.

Since January 2019, Granito's results are recognized by BMG, through the equity equivalence method.

In the first quarter of 2019, Granito presented a TPV (Total Payment Volume) of R$ 273 million and has

over 11 thousand active customers.

Wholesale Portfolio

The wholesale portfolio reached R$ 1,314 million on March 31, 2019, representing an increase of 2.9%

over the same period of the previous year and 8.1% compared to 4Q18. The wholesale segment is

divided into two: Structured Operations and Companies.

Structured Operations

The portfolio consists of structured operations for banking correspondents and soccer clubs, with

collateral that mitigates the issuers' risks.

The transaction with the correspondents refers to the anticipation of receivables from commissions paid

by BMG over the term of the contracts originated by the correspondents.

The operations with soccer clubs derive substantially from early receivables for the television rights.

The portfolio reached R$ 875 million on March 31, 2019, an increase of 37.5% over the same period of

the previous year and of 17.2% compared to 4Q18.

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Companies

The Companies portfolio consists of financing and of structured financial services for medium and large

companies, focusing on products with low capital allocation through the derivatives desk that offer to

client’s balance sheet protection.

The portfolio reached R$ 439 million on March 31, 2019, representing a decrease of 31.5% in relation

to the same period of the previous year and 6.4% compared to 4Q18.

The default rate has been impacted by a challenging scenario, by the reduction of the loan portfolio and

the deterioration of specific portfolio cases.

BMG Seguros

Created in July 2016, BMG Seguros already is the fourth largest insurance company in Brazil in the

Surety Bond segment. It is a subsidiary of Banco BMG, which result is reflected through equity

equivalence. The Insurance Company offers distinctive financial solutions in the corporate segment,

637 658 686747

875

1Q18 2Q18 3Q18 4Q18 1Q19


1.8% 1,5%1.0%

1.5%2.3%

0.2% 0.1% 0.1% 0.1% 0.2%

1Q18 2Q18 3Q18 4Q18 1Q19

E-H Portfolio Overdue Installments over90

641

537507

469439

1Q18 2Q18 3Q18 4Q18 1Q19


30.9%37.0% 35.2% 32.8%

25.5%

11.0%

18.1% 17.9%14.8%

9.3%

1Q18 2Q18 3Q18 4Q18 1Q19


15


with a structure specialized in assessing corporate credit, speedily offering quality and differentiated

solutions.

The Insurance Company has an own and independent governance structure, with a Board of Directors

consisting of three independent members. It also has an exclusive executive board formed by highly

experienced professionals.

In the first quarter of 2019, R$ 72 million premiums were issued, from which R$ 34 million was retained.

In the same period, the Insurance Company presented a net income of R$ 0.2 million, recognized by

Banco BMG through indirect equity equivalence.

Run Off Portfolio

In addition to the aforementioned products and services offered by the Bank, BMG has the following

run off portfolios: payroll loan, lendico, home equity loan and vehicle financing.

In January 2015, after the conclusion of a business unification agreement with Itaú Unibanco, the Bank

discontinued its payroll loan portfolio. Also, in October 2015 and January 2016, the Bank opted to

discontinue its home equity loan and vehicle financing operations, respectively, due to the low cross-

sell potential. In January 2019, the Bank decided to discontinue its digital personal credit operations via

Lendico and in the course of 1Q19, credit assignments were made without retention of risks and benefits

on part of the portfolio.

The run off portfolio reached R$ 333 million in March 31, 2019, representing a reduction of 41.3% in

relation to the same period of the previous year and of 22.9% in relation to 4Q18.

The default rate of the portfolio in run off has been impacted by an arithmetic effect of reduction in the

portfolio (denominator) at a faster rate than the default rollover (numerator). Loan assignments were

carried out without retention of risks and benefits in significant amounts in the payroll portfolio for 2015

and in the vehicle portfolio in 2017.

566520

479432

333

1Q18 2Q18 3Q18 4Q18 1Q19


12.1% 13.0%14.9% 16.3%

19.2%

2.9% 3.1% 3.6% 3.9% 4.7%

1Q18 2Q18 3Q18 4Q18 1Q19


16


Credit Portfolio Quality

The credit policy is constantly and retroactively reassessed by the Bank’s risk area according to the

economic scenario and the probability of default of each product, thereby seeking permanent alignment

with market characteristics.

Other Assets

In addition to the loan portfolio, BMG has other significant assets: (i) total cash, (ii) tax credits and (iii)

goodwill.

Funding

Total funding ended 1Q19 with a balance of R$ 12,234 million, an increase of 3.5% in relation to 1Q18

and a decrease of 1.0% in relation to the previous quarter.

The Bank works to diversify its funding for institutional and retail clients, seeking sustainable and long-

term lines in order to ensure the best match between its assets and liabilities. BMG operates through

its own funding structure, based on both physical and full digital bank, and also through more than 50

distributors. For retail, BMG seeks to diversify its base and has more than 135 thousand direct and

indirect investors.

7.0% 7.2% 6.7% 6.6% 6.0%

1Q18 2Q18 3Q18 4Q18 1Q19

Total Portfolio

NPL - E-H Portfolio NPL – Overdue installments over90

4.0% 4.5% 3.9% 3.9% 3.6%

1Q18 2Q18 3Q18 4Q18 1Q19

Total Portfolio

Other Assets 1Q19 4Q18 1Q/4Q (%) 1Q18 1Q/1Q (%)

Total Cash 2,736 3,053 -10.4% 2,861 -4.4%

Tax Credit 2,255 2,267 -0.5% 2,351 -4.1%

Arising from loan provision 1,159 1,164 -0.4% 1,171 -1.0%

Other temporary differences 446 449 -0.8% 519 -14.2%

Tax loss 650 654 -0.6% 660 -1.5%

Goodwill 350 386 -9.4% 495 -29.3%

17


In line with the Notice to the Market published on April 1, 2019, the Bank had raised as of today R$ 82

million in Perpetual Financial Bill and R$ 5 million in Subordinated Financial Bill placed with private

professional investors.

External Funding

BMG carried out its first foreign debt issue in 2005 and ever since the Bank has continued accessing

external credit lines and maintaining an active relationship with investors.

Respecting BMG's market risk policy, all external funding lines are hedged through derivative financial

instruments.

Funding Structure (%)

Time Deposit & Financial Bills

79.4%

Credit Assignment

2.1%

External Funding13.4%

Securitization3.6%

Other1.5%

Funding (R$ Million) 1Q19 4Q18 1Q/4Q (%) 1Q18 1Q/1Q (%)

Deposits 9,408 9,415 -0.1% 8,470 11.1%

Time Deposit (CDB) 9,372 9,365 0.1% 8,158 14.9%

Interbank Deposits 36 50 -27.6% 1 2850.2%

DPGE - - n/a 311 -100.0%

External Funding 1,642 1,624 1.1% 1,712 -4.1%

Senior - - n/a 298 -100.0%

Subordinated 1,642 1,624 1.1% 1,414 16.1%

Securitization 441 472 -6.7% 504 -12.6%

Financial Bills 303 381 -20.5% 492 -38.5%

Senior 298 381 -21.8% 492 -39.5%

Subordinated 5 - n/a - n/a

Credit Assignment 259 298 -13.2% 441 -41.3%

LCA & LCI 116 96 21.1% 142 -18.4%

Onlendings 65 69 -4.5% 61 7.6%

Total 12,234 12,354 -1.0% 11,822 3.5%

18


In 1Q19, the external funding balance was US$ 408 million. In November 2019, BMG19 bond matures

in the amount of US$ 243 million.

Shareholders’ Equity

Shareholders' Equity as of March 31, 2019 reached R$ 2,673 million, an increase of 1.2% in relation to

the previous quarter and of 1.5% compared to the same period of the previous year. The main changes

in Shareholders' Equity were due to the net income for the period and the provision for Interest on Equity

in the amount of R$ 45 million occurred in March 2019.

Shareholders’ Equity (R$ Million) and Basel Ratio (%)

1,082 1,284 1,408 1,367 1,442

2,635 2,701 2,757 2,640 2,673

14.1% 13.9% 13.1% 12.4% 12.4%

11.8% 13.9% 13.1% 12.4% 12.4%

1Q18 2Q18 3Q18 4Q18 1Q19

Reference Equity Tier 1 Shareholders' Equity

Basel Ratio Basel Ratio - Tier 1

(USD Million)

Type Notional Issued

Yield (per year)

Principal Payment

Final Maturity

1Q19 4Q18 1Q/4Q (%) 1Q18 1Q/1Q (%)

BMG 18 Senior 300 8.00% Amortizing 04/15/2018 - - n/a 86 -100.0%

BMG 19 Subordinated 300 9.95% Bullet 11/05/2019 243 243 0.0% 247 -1.5%

BMG 20 Subordinated 250 8.875% Bullet 08/05/2020 165 165 0.0% 165 0.0%

Total 850 408 408 0.0% 498 -18.0%

19


Basel Ratio

According to CMN Resolution 4.193/13 and complementary regulations, financial institutions are

obliged to maintain net equity compatible to the risk level of their assets structure, duly weighted by

factors that vary from 0% to 1,250% and a minimum ratio of 8.0% of equity in relation to risk-weighted

assets plus 2.5% of additional of main capital conservation.

Banco BMG's Reference Equity corresponded to 12.4% of risk-weighted assets on March 31, 2019,

being composed exclusively of Core Capital (Tier I Capital).

With the funding of Perpetual Financial Bills and Subordinated Financial Bills occurring as of today the

Basel Index would be 13.1%.

Basel III

Since January 2018, all the prudential adjustments called for in the Basel III standards for core capital

have been carried out and the reference equity Tier I is already 100% fully loaded. Accordingly, the

balance of goodwill to be amortized and excess tax credit arising from tax loss and temporary

differences (except for loan provision) have already been deducted.

The Tier II reference equity was zeroed out in view of the fact that BMG chose to fully deduct the

subordinated debt maturing in October 2019 and August 2020 issued under the former rules of

subordination.

Basel Ratio (R$ Million) 1Q19 4Q18 1Q/4Q (%) 1Q18 1Q/1Q (%)

Reference Equity 1,442 1,367 5.5% 1,301 10.9%

Tier I 1,442 1,367 5.5% 1,082 33.3%

Tier II - - n/a 219 -100.0%

Risk-Weighted Assets 11,628 11,074 5.0% 9,199 26.4%

Credit Risk 10,706 10,414 2.8% 8,529 25.5%

Market Risk 207 1 n/a 16 n/a

Operational Risk 716 659 8.6% 654 9.5%

Basel Ratio 12.4% 12.4% 0.0 p.p 14.1% -1.7 p.p

Minimum required by the Central Bank 8.000% 8.625% 8.625%

Additional of Main Capital Conservation 2.500% 1.875% 1.875%

Tier I 12.4% 12.4% 0.0 p.p 11.8% 0.6 p.p

Minimum required by the Central Bank 6.000% 6.000% 6.000%

Additional of Main Capital Conservation 2.500% 1.875% 1.875%

Tier II - - 0.0 p.p 2.4% -2.4 p.p

20


RATINGS

Agencies Date Rating Perspective

FITCH Ratings

January 2019 Local Currency A-(bra)

Stable Foreign Currency B+

Moody‘s March 2019

Local Currency Baa2.br

Stable Foreign Currency B1

RISKbank May 2019 9.85 Low Risk for

Medium Term 2

21


ANNEX I – Income Statements

INCOME STATEMENTS (R$ Million) 1Q19 4Q18 3Q18 2Q18 1Q18

Income from financial intermediation 822 813 800 772 721

Credit and leasing operations 771 749 750 729 670

Income from credit operations 889 852 859 834 766

Expenses with agents’ commissions (119) (103) (108) (105) (96)

Marketable securities transactions 51 64 49 43 50

Expenses on financial intermediation (296) (276) (346) (348) (306)

Funds obtained in the market (292) (245) (365) (514) (287)

Loans and onlendings (10) (8) (8) (14) (11)

Result with derivative financial instruments 7 (23) 26 181 (8)

Gross profit from financial intermediation before allowance for loan losses

526 537 453 424 415

Provision for impairment of credits (137) (124) (107) (148) (130)

Credit operations recovered 39 33 41 64 52

Gross profit from financial intermediation 428 445 388 340 337

Other operating income (expenses) (319) (294) (298) (267) (264)

Income from services rendered 9 9 9 12 11

Personnel expenses (44) (45) (43) (41) (37)

Other administrative expenses (171) (175) (165) (156) (135)

Tax expenses (24) (27) (26) (22) (24)

Equity in the results of subsidiary and associated companies

(3) 3 (3) 1 1

Other operating income / expenses (86) (58) (70) (61) (80)

Operating profit 109 151 90 74 73

Non-operating results (0) (1) 0 (10) 3

Profit before taxes and profit sharing 109 150 90 64 75

Income tax and social contribution (24) (74) (26) (19) (26)

Statutory and non-controlling participations (8) (37) (9) - (18)

Net Income 77 40 55 45 31

Goodwill expenses net of taxes 22 22 22 22 22

Recurring Net Income 99 61 77 67 53

22


ANNEX II – Balance Sheet

ASSETS (R$ Million) 1Q19 4Q18 3Q18 2Q18 1Q18

Cash and balances at banks 76 47 44 26 32

Interbank investments 126 826 1,472 1,653 1,150

Marketable securities and derivatives 2,825 2,447 1,973 1,302 1,973

Interbank accounts 40 26 144 18 13

Credit and leasing operations 8,991 8,604 8,447 8,283 8,066

Credit and leasing operations 9,510 9,158 8,998 8,842 8,583

Provision for impairment of credits (519) (554) (551) (559) (517)

Other receivables 3,811 4,032 4,002 3,966 3,935

Other assets 266 232 229 248 270

Permanent assets 695 722 646 674 710

Investments 243 233 130 133 132

Property and equipment 102 103 94 83 83

Intangible 350 386 423 459 495

Total assets 16,830 16,938 16,959 16,170 16,148

LIABILITIES AND EQUITY (R$ Million) 1Q19 4Q18 3Q18 2Q18 1Q18

Deposits 9,450 9,452 9,371 8,750 8,505

Funds obtained in the open market 20 - - 3 11

Fund from acceptance and issue of securities 463 526 603 579 949

Interbank accounts 129 123 102 93 94

Borrowings and onlendings 541 537 512 519 513

Derivative financial instruments 105 84 149 120 212

Other liabilities 3,448 3,575 3,465 3,405 3,231

Non-controlling interest 0 0 0 0 0

Shareholders’ equity 2,673 2,640 2,757 2,701 2,635

Total liabilities and equity 16,830 16,938 16,959 16,170 16,148

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