OREANDA-NEWS. In 3Q14, we maintained our cautious approach to lending on account of the volatility sweeping the markets prior to the elections, which resulted in an expanded credit portfolio of BRL 4.0 billion, an increase of 1.8% in the quarter and 19.0% from September 2013. During the quarter, we originated loans of BRL 1.5 billion, of which BRL 776 million were loan renewals and BRL 732 million were fresh loans, which goes to prove the tremendous asset generation capacity of our commercial team. Our joint ventures in the agricultural and real estate segments have played a fundamental role in the healthy growth of our loan portfolio since we benefit from the expertise of our partners in the sectors and regions in which they operate and share the credit risk on operations originated in these areas.

Given our focus on better quality loans, 99% of the loans granted in the quarter were rated between AA and B. At the end of 3Q14, the Corporate segment accounted for 62% (59% in June 2014 and 50% in September 2013) of the expanded credit portfolio, while the Emerging Companies segment accounted for 38% (40% in June 2014 and 49% in September 2013). Loans overdue more than 60 days (NPL 60) remained stable at 2.0%, with NPL that we call the "new portfolio", that is, loans granted after March 2011 under the new credit policy adopted in this new phase of the Bank, corresponding to 1.1%. The managerial expenses with allowance for loan losses in 3Q14 (annualized) corresponded to 1.45% of the expanded credit portfolio and 1.07% of the new portfolio. Though this indicator rose during the quarter, note that it was unusually lower in 2Q14 compared to prior periods, and the managerial expenses with allowance for loan losses in the last twelve months came to 1.05%, which is in line with the Management's expectations. Considering only the loans in the new portfolio, managerial expenses with allowance for loan losses in the last twelve months came to a mere 0.62%, which reflects the excellent performance by our credit and commercial areas.

Total deposits, which include agro notes (LCA), real estate notes (LCI) and bank notes (LF) grew 3.9% in the quarter and 56.9% in relation to September 2013. As in previous quarters, we are continuing to diversify our funding mix, especially through the issue of agro notes (LCA), which increased 21.3% in the quarter and 142.0% in twelve months, and through greater fragmentation of the depositor base, which reached a record of over 9,000 depositors at the end of the quarter, through alliances with more than 40 brokers and distributors. Considering that LCAs are exempt from income tax to individuals, we are able to raise funds from the market at a cost equivalent to or lower than the interbank rate (CDI) depending on the term or amount. As a result, the cost of funding in relation to CDI continued to decline and was the lowest ever this quarter.

Revenue from loan operations and agro bonds increased 14.6% in the quarter, mainly due to the growth of the agro bonds portfolio and the higher number of business days than in 2Q14. The increase in foreign exchange revenue was influenced by the foreign exchange variation during the quarter and the growth in trade finance operations which, in dollar terms, increased 5.5% in 3Q14. Though funding costs decreased slightly in 3Q14, financial intermediation expenses before allowance for loan losses increased in the quarter due to the higher funding volume and foreign exchange variation, which was offset by gains in the trade finance portfolio. As a result, financial intermediation result before managerial expense with allowance for loan losses totaled BRL 32.3 million, 25.3% lower than in 2Q14 and 23.9% lower than in 3Q13. Note also that the decrease in this item was mostly impacted by the income from derivative financial instruments, which in turn was negatively affected by the result of equity hedge made by the Cayman branch and the trade finance operations, all of which have no cash effect.

Income from services rendered and tariffs remains healthy, totaling BRL 15.3 million in 3Q14 and BRL 42.1 million in 9M14, growing 79.2% from 3Q13 and 101.7% from 9M13, chiefly driven by revenue from investment banking operations, whose fee revenue totaled BRL 5.4 million in 3Q14 and BRL 16.2 million in 9M14 (BRL 1.5 million in 9M13). During the quarter, we carried out M&A and fixed income operations amounting to BRL 1.1 billion, and the number of asset management proposals/mandates has increased constantly; we currently have 42 ongoing mandates. Notable deals in 3Q14 are the acquisition by our client Lactalis of the dairy assets of LBR, the sale of control of our client Jasmine Comericio de Produtos Alimentfcios to Nutrition et Sante of France, the acquisition by our client Tarpon Investimentos of material interest in Abril Educagao, and the structuring and distribution of certificates of real estate receivables (CRI) by the real estate developer and builder Mota Machado.

Reflecting the continuous cost control measures taken by the Bank, personnel expenses decreased 8.6% in the quarter and 3.0% from 3Q13, while administrative expenses increased 2.4% in the quarter and 5.6% from 3Q13, with the year-on-year increase resulting from the investments made to upgrade our technological infrastructure. At Guide, both personnel and administrative expenses increased as a result of the investments made in that platform.

Guide Investimentos, our investment and distribution arm, has registered significant growth and is already one of the leading distributors of our funding products. It ended 3Q14 with assets under management of BRL 1.5 billion, 50% higher than at the end of 2Q14. During the quarter, it concluded migration of the client portfolios acquired from the brokerages Omar Camargo and Geraldo Correa, and in the coming months, it will migrate the client portfolio of Bullmark, a financial consulting firm focused on asset management services for high net worth individual investors. We are also studying new partnerships with independent agents from all over Brazil, in line with Guide's strategy of expanding its client base and geographical presence throughout the country. It is worth highlighting that since the end of 2Q14, Guide Investimentos has risen 10 positions in the Bovespa ranking in terms of volume, and in October entered the list of the 25 largest brokerages in equity trading volume on the Bovespa.

The quarterly Result was BRL 1.7 million. In recent years, we have shifted the Bank's focus to corporate and investment banking, which provide opportunities for higher growth at a lower risk. Though the entire structure is in full operation, we have not yet attained our revenue generation potential because of: (i) the need for economies of scale, considering our appetite for risk and its direct impact on the spread in loan transactions, and (ii) the negative contribution from Guide Investimentos on account of the recent investments made in it. On the positive side, this quarter we had the nonrecurring effect of the divestment of a fixed asset.