Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes _______ No ___X____.
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The main figures reported by Bradesco in the first quarter of 2017, with emphasis on the consolidation, from July 1, 2016, of HSBC Bank Brasil S.A. and its subsidiaries (HSBC Brasil): 1. Adjusted Net Income(1) for the first quarter of 2017 stood at R$4.648 billion (a 13.0% increase compared to the Adjusted Net Income of R$4.113 billion recorded in the first quarter of 2016), corresponding to earnings per share of R$3.19 and return on Average Adjusted Shareholders’ Equity(2) of 18.3%(2). 2. As for the source, the Adjusted Net Income is composed of R$3.274 billion from financial activities, representing 70.4% of the total, and of R$1.374 billion from insurance, pension plans and capitalization bond operations, which together account for 29.6%. 3. In March 2017, Bradesco’s market capitalization stood at R$178.208 billion(3), showing a growth of 24.0% over March 2016. 4. Total Assets, in March 2017, stood at R$1.294 trillion, an increase of 17.5% over the March 2016 balance. The return on Average Total Assets was 1.4%. 5. In March 2017, the Expanded Loan Portfolio(4) reached R$502.714 billion, an increase of 8.5% over March 2016. Operations with individuals totaled R$171.820 billion (an increase of 16.3% over March 2016), while operations with companies totaled R$330.894 billion (a 4.9% increase over March 2016). 6. Assets under Management stood at R$1.944 trillion, a 22.3% increase over March 2016. 7. Shareholders’ Equity totaled R$104.558 billion in March 2017, 12.0% higher than in March 2016. The Basel III Ratio, based on the Prudential Conglomerate stood at 15.3%, 12.0% of which is Tier I Capital. 8. The sum of R$1,845 billion was paid and provisioned to shareholders as Interest on Shareholders’ Equity for the profit generated in the first quarter of 2017, R$300.551 million of which were paid in the form of monthly installments, and R$1.544 billion were provisioned. 9. The Interest-Earning Portion reached R$15.900 billion in the first quarter of 2017, exhibiting growth of 7.9% compared to the first quarter of 2016. 10. The 90-day Delinquency Ratio stood at 5.6% in March 2017, being reduced to 5.2% disregarding a specific corporate client that was already fully provisioned (5.5% in December 2016 and 4.2% in March 2016). 11. The Efficiency Ratio (ER)(5) in March 2017 was 40.8% (37.2% in March 2016), while the “risk adjusted” efficiency ratio stood at 53.1% (47.1% in March 2016). 12. Insurance Written Premiums, Pension Plan Contributions and Capitalization Bond Income totaled R$17.948 billion in the first quarter of 2017, up 18.2% when compared with the same period of 2016. Technical provisions stood at R$229.433 billion, an increase of 25.4% compared with the balance in March 2016. 13. Investments in infrastructure, information technology and telecommunications amounted to R$1.408 billion in the first quarter of 2017, up 1.3% over the first quarter of 2016. 14. Taxes and contributions paid or recorded in provision, including social security, totaled R$9.700 billion in the first quarter of 2017, of which R$3.531 billion was related to taxes withheld and collected from third parties, and R$6.169 billion, was calculated based on activities developed by the Bradesco Organization, equivalent to 132.7% of the Adjusted Net Income(1). 15. Bradesco has an extensive Customer Service Network in Brazil, with 5,122 Branches and 3,971 Customer Service Points (PAs). The following are also available to Bradesco clients: 1,004 ATMs located on company premises (PAEs), 38,525 Bradesco Expresso customer service points, 36,095 Bradesco ATMs, and 20,584 Banco24Horas Network ATMs. 16. Payroll, plus charges and benefits totaled R$4.244 billion in the first quarter of 2017. Social benefits provided to all 106,644 employees of the Bradesco Organization and their dependents amounted to R$1.133 billion, while investments in education, training and development programs totaled R$31.451 million.
4 Economic and Financial Analysis Report – March 2017
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17. Major Awards and Acknowledgments in the period: |
Bradesco Organization is fully committed to the socio-economic development of the country. We set our business guidelines and strategies with a view of incorporating the best corporate sustainability practices, considering the context and the potential of each region, thus contributing to the generation of shared value in the long term. To reinforce this position, we emphasized adherence to globally recognized business initiatives, such as: Global Compact, Equator Principles, CDP (Carbon Disclosure Program), Principles for Responsible Investment (PRI), GHG Protocol Program (Brazilian Greenhouse Gas Emissions Program) and Companies for Climate Change (EPC). Our governance structure includes the Sustainability Committee, comprised by member of the Board of Directors and Vice-Presidents, which is responsible for advising the Board of Directors on establishing guidelines and corporate actions for this area, and with the Executive Multi-departmental Committee responsible for coordinating the strategy’s implementation. Excellence in business management is recognized by the main indexes of Sustainability, such as the Dow Jones Sustainability Index (DJSI) – “Emerging Markets”, of the New York Stock Exchange, the Corporate Sustainability Index (ISE), and the Carbon Efficient Index (ICO2), both from B3 (current name of BM&FBovespa and CETIP). With a broad social and educational program put in place 60 years ago, Fundação Bradesco operates 40 schools across Brazil. In 2017, a budget of R$625.944 million will benefit approximately 104,228 students enrolled in its schools at the following levels: Basic Education (from Kindergarten to High School and Higher Secondary Technical-Professional Education), youth and adult education; and preliminary and continued vocational training, focused on creating jobs and income. In addition to the guarantee of free, quality education, the students enrolled in the Basic Education system, numbering over 43 thousand, also receive uniforms, school supplies, meals, and medical and dental assistance. Fundação also expects to benefit 630 thousand students via distance learning (EaD), through its e-Learning portal “Escola Virtual” (Virtual School). where students can conclude at least one of the courses offered in its schedule. Another 15,040 students are taking part in projects and actions in partnership with the Program Educa+Ação and in Technology courses. | |
· it enjoyed pride of place in the "IT Executive of the Year" award, in the Banking category, with the case entitled “BIA - Bradesco Artificial Intelligence – Branch Service Center - with Watson (Study by IT Mídia in partnership with Korn Ferry); · UniBrad won the international award "GlobalCCU Awards 2017" for best corporate university in the world (Global Council of Corporate Universities); · It was one of the winners in the “2016 Information Technology Professional” award, in the Banking segment (Informática Hoje Magazine); · Bradesco BBI was awarded as “Best Investment Bank in Brazil in 2017" and appeared, in 2017 and YTD, in first place in the ranking of mergers and acquisitions, domestic debt, international debt and equity (Best Investment Banks in the World Edition - Global Finance Magazine); · BRAM was rated AMP-1 (very strong) by the agency Standard & Poor’s, which is considered the highest on the management quality scale of S&P Global Ratings; · BRAM features in a prominent position in the report on small-cap stock funds, for having the most profitable funds of 2017 (IstoÉ Magazine); · Bradesco Seguros Group won two trophies in three categories in the “Brazil Insurer Award”: Best Performance, Best Sales Growth and Global Market Leader (Editora Brasil Notícias); · Bradesco Seguros Group won the "Outstanding Companies" award in the Insurance, Health, Pension and Capitalization segment (Centro de Inteligência Padrão – CIP (Standard Intelligence Center), in partnership with Consumidor Moderno magazine); and · Bradesco became the leader of the Capitalization Bond market in 2016 (Superintendence of Private Insurance – Susep). |
(1) According to the non-recurring events described on page 8 of this Economic and Financial Analysis Report; (2) As of the first quarter of 2016, the annualized profitability has been calculated on a linear basis, and also, it excludes mark-to-market effect of Available-for-Sale Securities recorded under Shareholders’ Equity; (3) Number of shares (excluding treasury shares) multiplied by the closing price for common and preferred shares on the last trading day of the period; (4) Includes sureties and guarantees, letters of credit, advances on credit card receivables, co-obligations in loan assignments (receivables-backed investment funds and mortgage backed receivables), co-obligations in rural loan assignments and operations bearing credit risk – commercial portfolio, which includes debentures and promissory notes; and (5) In the last 12 months.
Bradesco 5
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R$ million |
1Q17 |
4Q16 |
3Q16 |
2Q16 |
1Q16 |
4Q15 |
3Q15 |
2Q15 |
Variation % | |
1Q17 x 4Q16 |
1Q17 x 1Q16 | |||||||||
Income Statement for the Period | ||||||||||
Book Net Income |
4,071 |
3,592 |
3,236 |
4,134 |
4,121 |
4,353 |
4,120 |
4,473 |
13.3 |
(1.2) |
Adjusted Net Income |
4,648 |
4,385 |
4,462 |
4,161 |
4,113 |
4,562 |
4,533 |
4,504 |
6.0 |
13.0 |
Total Net Interest Income |
15,616 |
15,669 |
16,931 |
14,962 |
14,892 |
14,512 |
13,735 |
13,541 |
(0.3) |
4.9 |
Gross Credit Intermediation Margin |
12,567 |
13,403 |
13,600 |
11,408 |
11,486 |
11,313 |
10,806 |
10,427 |
(6.2) |
9.4 |
Net Credit Intermediation Margin |
7,705 |
7,878 |
7,858 |
6,384 |
6,038 |
7,121 |
6,954 |
6,877 |
(2.2) |
27.6 |
Allowance for Loan Losses (ALL) Expenses |
(4,862) |
(5,525) |
(5,742) |
(5,024) |
(5,448) |
(4,192) |
(3,852) |
(3,550) |
(12.0) |
(10.8) |
Fee and Commission Income |
7,430 |
7,545 |
7,450 |
6,624 |
6,405 |
6,597 |
6,380 |
6,118 |
(1.5) |
16.0 |
Administrative and Personnel Expenses |
(9,676) |
(10,482) |
(10,267) |
(8,152) |
(7,870) |
(8,413) |
(7,997) |
(7,544) |
(7.7) |
22.9 |
Insurance Written Premiums, Pension Plan Contributions and Capitalization Bond Income |
17,948 |
21,247 |
17,733 |
17,253 |
15,186 |
19,130 |
15,125 |
16,723 |
(15.5) |
18.2 |
Statement of Financial Position |
|
|
|
|
|
|
|
|
|
|
Total Assets (1) |
1,294,139 |
1,293,559 |
1,270,139 |
1,105,244 |
1,101,763 |
1,079,755 |
1,050,983 |
1,029,762 |
- |
17.5 |
Securities |
549,700 |
549,873 |
509,184 |
437,580 |
414,926 |
407,584 |
364,472 |
356,115 |
- |
32.5 |
Loan Operations (2) |
502,714 |
514,990 |
521,771 |
447,492 |
463,208 |
474,027 |
474,488 |
463,406 |
(2.4) |
8.5 |
- Individuals |
171,820 |
172,045 |
171,067 |
148,919 |
147,759 |
147,749 |
145,234 |
143,461 |
(0.1) |
16.3 |
- Companies |
330,894 |
342,945 |
350,704 |
298,573 |
315,449 |
326,278 |
329,253 |
319,945 |
(3.5) |
4.9 |
Allowance for Loan Losses (ALL) (3) |
(39,181) |
(40,714) |
(40,416) |
(31,875) |
(30,497) |
(29,499) |
(28,670) |
(23,801) |
(3.8) |
28.5 |
Total Deposits |
235,432 |
234,214 |
239,937 |
179,436 |
189,192 |
195,760 |
203,637 |
195,926 |
0.5 |
24.4 |
Technical Provisions |
229,433 |
223,342 |
213,608 |
190,649 |
182,973 |
177,835 |
168,629 |
164,566 |
2.7 |
25.4 |
Shareholders' Equity |
104,558 |
100,442 |
98,550 |
96,358 |
93,330 |
88,907 |
86,233 |
86,972 |
4.1 |
12.0 |
Assets under Management |
1,943,687 |
1,904,912 |
1,865,755 |
1,589,319 |
1,589,307 |
1,510,396 |
1,452,528 |
1,443,989 |
2.0 |
22.3 |
Performance Indicators (%) |
|
|
|
|
|
|
|
|
|
|
Adjusted Net Income per Share - R$ (4) (5) |
3.19 |
3.09 |
3.13 |
3.14 |
3.20 |
3.23 |
3.15 |
3.05 |
3.1 |
(0.3) |
Book Value per Common and Preferred Share - R$ (5) |
18.90 |
18.16 |
17.81 |
17.42 |
16.87 |
16.07 |
15.59 |
15.71 |
4.1 |
12.0 |
Annualized Return on Average Equity (6) (7) |
18.3 |
17.6 |
17.6 |
17.4 |
17.5 |
20.5 |
20.7 |
20.8 |
0.7 p.p. |
0.8 p.p. |
Annualized Return on Average Assets (7) |
1.4 |
1.5 |
1.5 |
1.5 |
1.5 |
1.7 |
1.7 |
1.7 |
(0.1) p.p. |
(0.1) p.p. |
12-month Net Interest Margin - NIM = Adjusted Net Interest Income /Average Assets – Repos – Permanent Assets |
7.3 |
7.5 |
7.6 |
7.5 |
7.5 |
7.5 |
7.6 |
7.6 |
(0.2) p.p. |
(0.2) p.p. |
Fixed Asset Ratio (13) |
42.3 |
44.8 |
44.4 |
33.8 |
34.0 |
35.2 |
38.6 |
39.6 |
(2.5) p.p. |
8.3 p.p. |
Combined Ratio - Insurance (8) |
85.2 |
85.9 |
90.0 |
89.6 |
86.1 |
86.5 |
86.9 |
86.5 |
(0.7) p.p. |
(0.9) p.p. |
Efficiency Ratio (ER) (4) |
40.8 |
39.5 |
38.2 |
37.4 |
37.2 |
37.5 |
37.9 |
37.9 |
1.3 p.p. |
3.6 p.p. |
Coverage Ratio (Fee and Commission Income/Administrative and Personnel Expenses) (4) |
75.3 |
76.2 |
78.0 |
80.2 |
80.1 |
80.0 |
79.1 |
78.7 |
(0.9) p.p. |
(4.8) p.p. |
Market Capitalization - R$ million (9) |
178,208 |
160,813 |
160,472 |
144,366 |
143,720 |
100,044 |
113,288 |
142,098 |
10.8 |
24.0 |
Loan Portfolio Quality % (10) |
|
|
|
|
|
|
|
|
|
|
ALL / Loan Portfolio (3) |
10.3 |
10.4 |
10.1 |
9.3 |
8.6 |
8.0 |
7.8 |
6.7 |
(0.1) p.p. |
1.7 p.p. |
Non-performing Loans (> 60 days (11) / Loan Portfolio) |
6.7 |
6.5 |
6.4 |
5.8 |
5.3 |
5.0 |
4.7 |
4.6 |
0.2 p.p. |
1.4 p.p. |
Delinquency Ratio (> 90 days (11) / Loan Portfolio) |
5.6 |
5.5 |
5.4 |
4.6 |
4.2 |
4.1 |
3.8 |
3.7 |
0.1 p.p. |
1.4 p.p. |
Coverage Ratio (> 90 days (11)) (3) |
182.1 |
188.4 |
189.1 |
201.0 |
204.2 |
198.0 |
205.7 |
180.4 |
(6.3) p.p. |
(22.1) p.p. |
Coverage Ratio (> 60 days (11)) (3) |
154.0 |
158.8 |
158.3 |
160.7 |
162.9 |
161.7 |
168.4 |
146.5 |
(4.8) p.p. |
(8.9) p.p. |
Operating Limits % |
|
|
|
|
|
|
|
|
|
|
Basel Ratio - Total (12) (13) |
15.3 |
15.4 |
15.3 |
17.7 |
16.9 |
16.8 |
14.5 |
16.0 |
(0.1) p.p. |
(1.6) p.p. |
Tier I Capital |
12.0 |
12.0 |
11.9 |
13.7 |
12.9 |
12.7 |
11.4 |
12.8 |
- |
(0.9) p.p. |
- Common Equity |
11.2 |
11.2 |
11.1 |
13.7 |
12.9 |
12.7 |
11.4 |
12.8 |
- |
(1.7) p.p. |
- Additional Capital |
0.8 |
0.8 |
0.8 |
- |
- |
- |
- |
- |
- |
0.8 p.p. |
Tier II Capital |
3.3 |
3.4 |
3.4 |
4.0 |
4.0 |
4.1 |
3.0 |
3.2 |
(0.1) p.p. |
(0.7) p.p. |
6 Economic and Financial Analysis Report – March 2017
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Mar17 |
Dec16 |
Sept16 |
June16 |
Mar16 |
Dec15 |
Sept15 |
June15 |
Variation % | |
Mar17 x Dec16 |
Mar17 x Mar16 | |||||||||
Structural Information - Units |
|
|
|
|
|
|
|
|
|
|
Customer Service Points (14) |
60,570 |
60,610 |
62,535 |
61,565 |
63,552 |
65,851 |
71,738 |
74,270 |
(0.1) |
(4.7) |
- Branches |
5,122 |
5,314 |
5,337 |
4,483 |
4,509 |
4,507 |
4,593 |
4,628 |
(3.6) |
13.6 |
- PAs (15) |
3,971 |
3,821 |
3,902 |
3,485 |
3,535 |
3,511 |
3,496 |
3,463 |
3.9 |
12.3 |
- PAEs (15) |
1,004 |
1,013 |
1,049 |
726 |
739 |
736 |
845 |
980 |
(0.9) |
35.9 |
- Offsite ATM Network - Bradesco (16) (17) |
97 |
186 |
280 |
342 |
435 |
627 |
874 |
1,112 |
(47.8) |
(77.7) |
- Banco24Horas Network (16) |
10,960 |
10,972 |
11,147 |
11,127 |
11,298 |
11,721 |
11,917 |
12,127 |
(0.1) |
(3.0) |
- Bradesco Expresso (Correspondent Banks) |
38,525 |
38,430 |
39,885 |
40,452 |
41,953 |
43,560 |
48,175 |
50,042 |
0.2 |
(8.2) |
- Bradesco Promotora |
815 |
797 |
857 |
936 |
1,069 |
1,175 |
1,824 |
1,904 |
2.3 |
(23.8) |
- Losango |
63 |
63 |
63 |
- |
- |
- |
- |
- |
- |
- |
- Branches / Subsidiaries Abroad |
13 |
14 |
15 |
14 |
14 |
14 |
14 |
14 |
(7.1) |
(7.1) |
ATMs |
56,679 |
56,110 |
53,814 |
50,836 |
50,435 |
50,467 |
50,113 |
49,410 |
1.0 |
12.4 |
- Onsite Network - Bradesco |
36,095 |
36,119 |
34,230 |
31,761 |
31,668 |
31,527 |
31,495 |
31,132 |
(0.1) |
14.0 |
- Banco24Horas Network (16) |
20,584 |
19,991 |
19,584 |
19,075 |
18,767 |
18,940 |
18,618 |
18,278 |
3.0 |
9.7 |
Employees |
106,644 |
108,793 |
109,922 |
89,424 |
91,395 |
92,861 |
93,696 |
93,902 |
(2.0) |
16.7 |
Outsourced Employees and Interns |
16,472 |
16,702 |
16,790 |
12,978 |
13,009 |
13,223 |
13,333 |
13,111 |
(1.4) |
26.6 |
. |
|
|
|
|
|
|
|
|
|
|
Active Account Holders (18) (19) |
26.6 |
26.8 |
27.2 |
25.2 |
25.6 |
26.0 |
26.4 |
26.5 |
(0.7) |
3.9 |
Savings Accounts (20) |
58.1 |
62.1 |
58.8 |
55.4 |
55.7 |
60.1 |
57.0 |
57.6 |
(6.4) |
4.3 |
Insurance Group |
50.4 |
51.3 |
49.9 |
49.6 |
50.6 |
49.8 |
48.2 |
47.8 |
(1.8) |
(0.4) |
- Policyholders |
44.7 |
45.7 |
44.2 |
44.2 |
45.1 |
44.2 |
42.5 |
42.0 |
(2.2) |
(0.9) |
- Pension Plan Participants |
2.6 |
2.6 |
2.6 |
2.4 |
2.4 |
2.4 |
2.4 |
2.4 |
- |
8.3 |
- Capitalization Bond Customers |
3.1 |
3.0 |
3.1 |
3.0 |
3.1 |
3.2 |
3.3 |
3.4 |
3.3 |
- |
Bradesco Financiamentos (18) |
1.3 |
2.6 |
2.6 |
2.6 |
2.7 |
2.8 |
2.8 |
2.9 |
(50.0) |
(51.9) |
(1) For more information, please see note 5 – Managerial Statement of Financial Position and Income Statement by Operating Segment, in chapter 6 of this report;
(2) Expanded Loan Portfolio: includes sureties and guarantees, credit letters, advances on credit card receivables, co-obligations in loan assignments (receivables-backed investment funds and mortgage-backed receivables), co-obligations in rural loan assignments and operations bearing credit risk – commercial portfolio, covering debentures and promissory notes;
(3) Up to December 2016, it Includes provision for guarantees provided, encompassing sureties, guarantees, credit letters, and standby letter of credit, which comprises the concept of “excess” provision. In the third quarter of 2015, it includes an excess provision/ratings downgrade, considered as a non-recurring event, totaling R$3,704 million, whose balance of the excess provision went from R$4,004 million, in June 2015, to R$6,409 million, in September 2015. In September 2016, the excess provision totaled R$7,491 million, impacted, partially, by the effect of the consolidation of HSBC Brasil, which occurred in the third quarter of 2016. In March 2017, pursuant to Resolution No. 4,512/16, regarding treatment of financial guarantees provided, balance of excess provision went from R$7,491 million to R$6,907 million;
(4) In the last 12 months;
(5) For comparison purposes, shares were adjusted in accordance with bonuses and stock splits;
(6) Excluding mark-to-market effect of Available-for-Sale Securities recorded under Shareholders’ Equity;
(7) Year-to-Date Adjusted Net Income. As of the first quarter of 2016, the Annualized Returns have been calculated on a linear basis and for the best effect of comparability, the previous periods have been readjusted;
(8) Excludes additional reserves;
(9) Number of shares (excluding treasury shares) multiplied by the closing price for common and preferred shares on the period’s last trading day;
(10) As defined by the Brazilian Central Bank (Bacen);
(11) Overdue loans;
(12) Since October 2013, the Basel Ratio calculation has followed regulatory guidelines set forth in Resolutions No. 4,192/13 and No. 4,193/13 (Basel III);
(13) As of March 2015, the calculated ratio based on the Prudential Conglomerate is included, as set forth in Resolution No. 4,192/13. It is important to note that the Prudential Conglomerate is calculated in accordance with the regulatory guidelines set forth in Resolution No. 4,280/13;
(14) The decrease observed from 2015 is related to: (i) the migration of “Offsite ATM Network – Bradesco)” to “Banco24Horas Network”; (ii) the deactivation of ATMs from “Banco24Horas Network”; and (iii) the decrease of Bradesco Expresso (Correspondent Banks).
(15) PA (Service Branch): a result of the consolidation of PAB (Banking Service Branch), PAA (Advanced Service Branch) and Exchange Branches, according to Resolution No. 4,072/12; and PAEs – ATMs located on a company’s premises;
(16) Including overlapping ATMs and customer service points within the Bank’s own network and the Banco24Horas Network, reason for which the ATMs and customer service points of Banco24Horas relating to the consolidation of HSBC Brasil were not segregated;
(17) This decrease is related to the sharing of the offsite ATM network with the Banco24Horas Network;
(18) Number of individual clients (National Registry of Legal Entities (CNPJ) and Individual Taxpayer Registry (CPF));
(19) Refers to first and second checking account holders; and
(20) Number of accounts.
Bradesco 7
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The main non-recurring events that affected Book Net Income in the periods below are presented in the following comparative chart:
R$ million |
1Q17 |
4Q16 |
1Q16 |
Book Net Income |
4,071 |
3,592 |
4,121 |
Non-recurring events (net of tax effects) |
577 |
793 |
(8) |
- Goodwill amortization (Gross) |
554 |
342 |
- |
- Contingent Liabilities (1) |
23 |
257 |
25 |
- Impairment of Non-Financial Assets (2) |
- |
157 |
57 |
- Other (3) |
- |
37 |
(90) |
Adjusted Net Income |
4,648 |
4,385 |
4,113 |
(1) In the fourth quarter of 2016, it is largely related to provision for contingent liabilities, originating from loan assignment liabilities - FCVS, in the amount of R$235 million;
(2) Impairment loss was recorded in the fourth quarter of 2016 in: (i) data processing systems/others, in the amount of R$137 million; and (ii) shares, in the amount of R$20 million (R$57 million, in the first quarter of 2016); and
(3) Refers to: (i) in the fourth quarter of 2016, to other non-recurring expenses, such as costs with migration/takeover of HSBC Brasil; and (ii) in the first quarter of 2016, to earnings in the partial disposal of investments.
Summarized Analysis of Adjusted Income
To provide a better understanding and for comparison purposes of Bradesco results, in chapters 1 and 2 of this report we use the Adjusted Income Statement, which is obtained from adjustments made to the Managerial Income Statement, detailed at the end of this Press Release.
It should be noted that, for the accounts of the Adjusted Income Statement, effects of the consolidation of HSBC Brasil are covered, from July 1, 2016, and as additional information, we are present, at the end of chapter 2 of this report, a comparison of the Financial Statements, taking into account consolidated "pro forma" financial information, including the consolidation of HSBC Brasil in the first quarter of 2016, for comparison purposes.
Adjusted Income Statement - R$ million |
1Q17 |
4Q16 |
Variation |
1Q17 |
1Q16 |
Variation | ||
Amount |
% |
Amount |
% | |||||
Net Interest Income |
15,616 |
15,669 |
(53) |
(0.3) |
15,616 |
14,892 |
724 |
4.9 |
- NII - Interest Earning Portion |
15,900 |
16,743 |
(843) |
(5.0) |
15,900 |
14,734 |
1,166 |
7.9 |
- NII - Non-Interest Earning Portion |
136 |
190 |
(54) |
(28.4) |
136 |
158 |
(22) |
(13.9) |
- Impairment of Financial Assets |
(420) |
(1,264) |
844 |
(66.8) |
(420) |
- |
(420) |
- |
ALL Expenses |
(4,862) |
(5,525) |
663 |
(12.0) |
(4,862) |
(5,448) |
586 |
(10.8) |
Gross Income from Financial Intermediation |
10,754 |
10,144 |
610 |
6.0 |
10,754 |
9,444 |
1,310 |
13.9 |
Income from Insurance Premiums, Pension Plans and Capitalization bonds, net of Variation of Technical Provisions, Retained Claims and others (1) |
1,627 |
1,680 |
(53) |
(3.2) |
1,627 |
1,625 |
2 |
0.1 |
Fee and Commission Income |
7,430 |
7,545 |
(115) |
(1.5) |
7,430 |
6,405 |
1,025 |
16.0 |
Personnel Expenses |
(4,822) |
(5,071) |
249 |
(4.9) |
(4,822) |
(3,754) |
(1,068) |
28.4 |
Other Administrative Expenses |
(4,854) |
(5,411) |
557 |
(10.3) |
(4,854) |
(4,116) |
(738) |
17.9 |
Tax Expenses |
(1,772) |
(1,703) |
(69) |
4.1 |
(1,772) |
(1,418) |
(354) |
25.0 |
Equity in the earnings (losses) of unconsolidated and jointly |
58 |
48 |
10 |
20.8 |
58 |
40 |
18 |
45.0 |
Other Operating Income / (Expenses) |
(1,833) |
(1,634) |
(199) |
12.2 |
(1,833) |
(1,669) |
(164) |
9.8 |
Operating Income |
6,588 |
5,598 |
990 |
17.7 |
6,588 |
6,557 |
31 |
0.5 |
Non-Operating Income |
(52) |
(13) |
(39) |
- |
(52) |
(87) |
35 |
(40.2) |
Income Tax / Social Contribution |
(1,839) |
(1,157) |
(682) |
58.9 |
(1,839) |
(2,311) |
472 |
(20.4) |
Non-controlling interests in subsidiaries |
(49) |
(43) |
(6) |
14.0 |
(49) |
(46) |
(3) |
6.5 |
Adjusted Net Income |
4,648 |
4,385 |
263 |
6.0 |
4,648 |
4,113 |
535 |
13.0 |
8 Economic and Financial Analysis Report – March 2017
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Adjusted Net Income and Profitability
The Return on Average Adjusted Shareholders’ Equity (ROAE), which is calculated on a linear basis, registered 18.3% in March 2017. Adjusted net income totaled R$4,648 million in the first quarter of 2017, up 13.0%, or R$535 million, over the same prior-year period, largely due to: (i) the increase in (a) fee and commission income and (b) net interest income; even with the effect of impairment of financial assets (previously marked in the shareholders’ equity) carried out in the first quarter of 2017; (ii) the reduction in allowance for loan losses expenses, and (iii) lower expenses with income tax and social contribution; partially offset by: (iv) higher personnel and administrative expenses. It should be noted that all the results of the annual comparison were impacted by the effect of the consolidation of HSBC Brasil, which began in the third quarter of 2016. In the comparison between the first quarter of 2017 and the previous quarter, adjusted net income grew R$263 million, or 6.0%, due to lower: (i) personnel and administrative expenses, with special emphasis on the synergy and gains of scale resulting from the incorporation of HSBC Brasil activities in October 2016; and (ii) allowance for loan losses expenses, due to (a) the slowdown of the loan portfolio - Bacen concept; and (b) the reduction of delinquency in micro, small and medium-sized enterprises and individuals; being partially offset by: (iii) the higher expense with income tax and social contribution; (iv) the increase in other operating expenses, net; and (v) lower fees and commission income, impacted by year-end seasonality. The Return on Average Assets (ROAA) recorded 1.4%, calculated on a linear basis. Total Assets amounted to R$1.294 trillion in March 2017, growth of 17.5% in comparison to March 2016. Note that part of this growth is related to the consolidation of HSBC Brasil, which occurred as of the third quarter of 2016. |
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Bradesco 9
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Efficiency Ratio (ER)
The quarterly Efficiency Ratio (ER) reached 40.6% In the first quarter of 2017, registering an improvement of 2.6 p.p. compared to the previous quarter, due mainly to: (i) lower impairment of financial assets in the amount of R$844 million; (ii) the reduction of operating expenses, personnel and administrative, which was affected by (a) year-end seasonality and (b) synergies and economies of scale resulting from the incorporation of HSBC Brasil activities; this was offset by the lower income, influenced by the year-end seasonal effect, resulting in lower volumes of business and services, affecting: (iii) fee and commission income; and (iv) income from insurance premiums, pension plans and capitalization bonds, net of technical provisions, retained claims and others. The 12-month ER(1) reached 40.8%, a 1.3 p.p. increase compared to the previous quarter and a 3.6 p.p. increase in the annual comparison. The main contributors to this performance were: (i) the increase in operating expenses, impacted mainly by the consolidation effect of HSBC Brasil, which occurred as of the third quarter of 2016; and offset by: (ii) the growth of (a) fee and commission income and (b) net interest income. The "risk-adjusted" ER, which reflects the impact of risk associated with loan operations(2), reached 53.1%. |
Disregarding the impacts of HSBC Brasil’s consolidation, the ER performance reflects the strategy of sustainable growth, which includes, among other things, (i) the availability of appropriate products and services for clients through the segmentation of the base and the digital channels, (ii) the optimization of the customer service network, and (iii) the strict control of operating expenses, arising from the actions of the Efficiency Committee, among which we highlight as a target for this year, the capture of synergies and scale gains from the merger of HSBC Brasil and (b) of investments in Information Technology, to the amount of R$1.408 billion in the first quarter of 2017. |
(1) ER = (Personnel Expenses – Employee Profit Sharing + Administrative Expenses)/ (Net Interest Income + Fee and Commission Income + Income from Insurance + Equity in the Earnings (Losses) of Unconsolidated Companies + Other Operating Income – Other Operating Expenses); and
(2) Including ALL expenses, adjusted for granted discounts, credit recovery and sale of foreclosed assets, among others.
10 Economic and Financial Analysis Report – March 2017
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NII (Net Interest Income)
In the comparison between the first quarter of 2017 and the previous quarter, net interest income remained stable, with the following factors contributing to this performance: (i) decreased (a) “interest-earning portion of the NII, in the amount of R$843 million, due to a lower credit intermediation margin, resulting from fewer calendar days in the quarter, what caused lower accrual of income from loan operations, q-o-q, as well as higher business days in the quarter, bringing higher accrual of funding expenses, due to the higher credit participation in portfolios with lower spread and lower risk, and the decreased volume of operations, and (b) “non interest” margins, in the amount of R$54 million; and (ii) lower expenses from the impairment of financial assets (previously marked in the shareholders’ equity), in the amount of R$844 million. In the annual comparison, net interest income was up R$724 million, or 4.9%, reflecting the growth in operating income: (i) the interest-earning portion of the NII, in the amount of R$1,166 million, particularly “Credit Intermediation"; partly offset by HSBC Brasil’s consolidation, as from the third quarter of 2016; and partially offset: (ii) the effect of financial assets impairment (previously marked in the Shareholders’ Equity), in the amount of R$420 million, and (iii) the lower Non-Interest Earning Portion result, in the amount of R$22 million.
Interest-Earning Portion of the NII – 12-Month Average Rates
R$ million |
1Q17 |
1Q16 | ||||
Interest Earning Portion |
Average Balance |
Average Rate |
Interest Earning Portion |
Average Balance |
Average Rate | |
Credit Intermediation |
12,567 |
386,537 |
13.2% |
11,486 |
370,414 |
12.0% |
Insurance |
1,481 |
227,358 |
2.8% |
1,475 |
180,970 |
3.3% |
Securities/Other |
1,852 |
454,522 |
1.6% |
1,773 |
411,992 |
1.6% |
0 |
|
|
|
|
|
|
NII - Interest-Earning Portion |
15,900 |
- |
7.4% |
14,734 |
- |
7.5% |
0 |
||||||
R$ million |
1Q17 |
4Q16 | ||||
Interest Earning Portion |
Average Balance |
Average Rate |
Interest Earning Portion |
Average Balance |
Average Rate | |
Credit Intermediation |
12,567 |
386,537 |
13.2% |
13,403 |
398,804 |
13.0% |
Insurance |
1,481 |
227,358 |
2.8% |
1,471 |
218,715 |
3.0% |
Securities/Other |
1,852 |
454,522 |
1.6% |
1,869 |
468,281 |
1.7% |
0 |
|
|
|
|
|
|
NII - Interest-Earning Portion |
15,900 |
- |
7.4% |
16,743 |
- |
7.5% |
In the first quarter of 2017, the 12-month net interest margin (NII - interest-earning portion – 12-month average rate) was 7.4%, recording a decrease of 0.1 p.p. in the quarterly comparison and in the annual comparison.
Bradesco 11
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Expanded Loan Portfolio (1)
In March 2017, the expanded loan portfolio of Bradesco totaled R$502.7 billion, representing a 2.4% decrease in comparison with December 2016, reflecting the low demand for credit, due to the economic scenario. Compared to December 2016, the decrease in the business segments was as follows: (i) 0.1% for Individuals; (ii) 2.5% for Large Corporates; and (iii) 5.9% for Micro, Small and Medium-sized Enterprises. In the last 12 months, the portfolio increased 8.5%, considering the consolidation of HSBC Brasil as of the third quarter of 2016. Companies registered a growth of 4.9%, impacted by the segment of Large Corporates, while Loans to Individuals grew 16.3%. For Individuals, the products that had the strongest growth in the last 12 months were: (i) real estate financing; (ii) credit card; (iii) personal loans; and (iv) payroll-deductible loans. For Companies, the main highlights were: (i) export financing; (ii) operations bearing credit risk – commercial portfolio; (iii) rural loans; and (iv) working capital. |
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(1) In addition to Bacen loan portfolio, it includes sureties, guarantees, letters of credit, advances on credit card receivables, debentures, promissory notes, co-obligation in mortgage-backed receivables, and rural loans.
For more information about the Expanded Loan Portfolio, see Chapter 2 of this Report.
12 Economic and Financial Analysis Report – March 2017
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Allowance for Loan Losses (ALL) Expenses
In the first quarter of 2017, allowance for loan losses expenses totaled R$4,862 million, down 10.8%, or R$586 million from the same prior-year period, resulting from: (i) the reinforcement of the credit granting policies and quality of guarantees obtained; (ii) the results of the improvement of the credit recovery processes that contributed to the higher income from credit recovery this quarter; partially offset by: (iii) the effect of the consolidation of HSBC Brasil as of the third quarter of 2016. In comparison with the previous quarter, expenses with allowance for loan losses expenses were down 12.0%, or R$663 million, basically due to the improvement in the delinquency ratio of Individuals and Micro, Small and Medium-Sized Enterprises. |
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Bradesco 13
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Delinquency Ratio (1)
90-day Delinquency Ratio The increase in the delinquency ratio, comprising operations overdue for more than 90 days in the Total Portfolio, grew in the quarter due to a specific client in the Large Corporates segment, fully provisioned, and to the reduction in the loan portfolio. In nominal terms, we highlight the reduction of delinquent loans. Disregarding these events, the delinquency would have declined, highlighting the improvement of Micro, Small and Medium Enterprises and of the Individuals segment. In the first quarter of 2017, credit assignments without retention of risks and benefits were carried out, already written off for losses, totaling R$2.0 billion, which did not alter the rates of delinquency in the period, as well as did not impact the results in a material manner. |
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15-90 Day Delinquency Ratio Short-term delinquency, including operations overdue between 15 and 90 days, decreased in the quarter, partially due to a fully provisioned client of the Large Corporate segment having migrated from a delinquency range to another. The increase in the delinquency of Individuals reflects the seasonal aspects of the first quarter, but at lower levels if compared with the same prior-year period. |
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Provisioning, Delinquency, ALL and Effective Coverage Ratio The strength of the provisioning criteria adopted must be mentioned, which is proven by: (i) historical data analysis of recorded allowances for loan losses; and (ii) effective losses in the subsequent 12-month period. When analyzed in terms of credit losses, net of recoveries, for an existing provision of 8.6% of the portfolio(1), in March 2016, the net loss in the subsequent 12 months was 4.2%, representing an effective coverage of 206.2%. It should be highlighted that, considering the losses expected for one year (dotted part), there is an effective coverage ratio of 214.6% for March 2017. |
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14 Economic and Financial Analysis Report – March 2017
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NPL Creation 90 days x Write-offs
The total NPL creation reached R$6,695 million in the first quarter of 2017, representing 1.8% of the Bacen loan portfolio, and remaining stable compared to the previous quarter. Disregarding the case of a fully provisioned specific client, the ratio would be 1.5%, with a decrease of 0.3 p.p..
The breakdown of the NPL Creation by business segment is shown below.
Bradesco 15
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Income from Insurance, Pension Plans and Capitalization Bonds
Net Income for the first quarter of 2017 totaled R$1,374 billion (R$1,505 billion in the fourth quarter of 2016), down 8.7% from the previous quarter, and recorded an annualized return on Adjusted Shareholders’ Equity of 20.2%(1). |
In the comparison between the first quarter of 2017 and the same prior-year period, Net Income remained in line with the result presented in the same period of the previous year, (R$1,380 billion). |
R$ million (unless otherwise stated) |
1Q17 |
4Q16 |
3Q16 |
2Q16 |
1Q16 |
4Q15 |
3Q15 |
2Q15 |
Variation % | |
1Q17 x 4Q16 |
1Q17 x 1Q16 | |||||||||
Net Income |
1,374 |
1,505 |
1,502 |
1,164 |
1,380 |
1,405 |
1,317 |
1,284 |
(8.7) |
(0.4) |
Insurance Written Premiums, Pension Plan Contributions and Capitalization Bond Income |
17,948 |
21,247 |
17,733 |
17,253 |
15,186 |
19,130 |
15,125 |
16,723 |
(15.5) |
18.2 |
Technical Provisions |
229,433 |
223,342 |
213,608 |
190,649 |
182,973 |
177,835 |
168,629 |
164,566 |
2.7 |
25.4 |
Financial Assets |
251,140 |
242,063 |
230,787 |
205,230 |
200,016 |
191,921 |
182,391 |
179,129 |
3.7 |
25.6 |
Claims Ratio (%) |
73.7 |
72.8 |
77.1 |
76.8 |
72.1 |
71.9 |
73.1 |
71.4 |
0.9 p.p. |
1.6 p.p. |
Combined Ratio (%) |
85.2 |
85.9 |
90.0 |
89.6 |
86.1 |
86.5 |
86.9 |
86.5 |
(0.7) p.p. |
(0.9) p.p. |
Policyholders / Participants and Customers (in thousands) |
50,421 |
51,266 |
49,880 |
49,576 |
50,570 |
49,806 |
48,185 |
47,758 |
(1.6) |
(0.3) |
Number of Employees |
7,148 |
7,120 |
6,625 |
6,713 |
6,959 |
7,023 |
7,052 |
7,074 |
0.4 |
2.7 |
Market Share of Insurance Written Premiums, Pension Plan |
25.7 |
25.4 |
24.9 |
24.3 |
24.8 |
25.5 |
24.7 |
24.8 |
0.3 p.p. |
0.9 p.p. |
(1) Calculated on a linear basis;
(2) Excluding additional provisions; and
(3) The first quarter of 2017 includes the latest data released by SUSEP (February/17).
Note: For comparison purposes, we disregarded non-recurring events from the calculation.
16 Economic and Financial Analysis Report – March 2017
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Income from Insurance, Pension Plans and Capitalization Bonds
In the first quarter of 2017, revenues grew 18.2% in comparison with the same period of the previous year, influenced by "Life and Pension”, “Health”, “Capitalization Bonds” and “Auto/P&C” products, which presented increases of 29.2%, 10.6%, 7.7% and 2.6%, respectively. Due to the concentration of private pension plan contributions, which historically occur in the last quarter of the year revenues in the first quarter of 2017 did not perform as well as in the fourth quarter of 2016. |
Net income in the first quarter of 2017 was lower than in the fourth quarter of 2016, mainly due to: (i) the reduction of 15.5% in revenues caused by year-end seasonality; (ii) the increase of 0.9 p.p. in the claims ratio; (iii) the reduction in equity results; and partially offset by: (iv) the downslide of the expense ratio; (v) the maintenance of the administrative efficiency ratio; and (vi) the effect of R$101.9 million arising from the review of the extended warranty operation’s business plan in the fourth quarter of 2016. Net income for the first quarter of 2017 remained in line with the same period of the previous year, basically originating from: (i) the increase of 18.2% in revenue; (ii) the maintenance of the expense ratio; (iii) the increase in the administrative efficiency ratio; (iv) the maintenance of financial and equity results; and partially offset by: (v) the increase of 1.6 p.p. in the claims ratio in the "Health" segment. |
Minimum Capital Required – Grupo Bradesco Seguros According to CNSP Resolution No. 321/15, corporations should demonstrate the adjusted shareholders’ equity (ASE) equal to or higher than the minimum capital required (MCR). MCR is equivalent to the base capital or the risk capital, whichever is higher. For companies regulated by the ANS, Normative Resolution No. 373/15 establishes that corporations should demonstrate the adjust shareholders’ equity (ASE) equal to or higher than the Solvency Margin. The capital adjustment and management process is continuously monitored and aims to ensure that Grupo Bradesco Seguros keeps a solid capital base to support the development of activities and cope with the risks in any market situation, in compliance with regulatory requirements and/or Corporate Governance principles. Companies must permanently maintain capital compatible with the risks for their activities and operations, according to the characteristics and peculiarities of each company belonging to Grupo Bradesco Seguros, represented by adequate capital levels. Grupo Bradesco Seguros permanently observes the limits required by the respective regulatory entities. The Minimum Capital Required in February 2017 was R$9.7 billion.
Bradesco 17
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Fee and Commission Income
In the comparison between the first quarter of 2017 and the same prior-year period, the increase of R$1,025 million, or 16.0%, in fee and commission income was due to: (i) an increase in the volume of operations arising from continuous investment in service channels and in technology, coupled with the growth provided by the consolidation of HSBC Brasil in the third quarter of 2016; and (ii) an advance in the client segmentation process improving the ability to offer products and services. It must be noted that the sources that have significantly contributed to this result were derived from: (i) the increase in income from asset management; (ii) an increase in checking account fees, due to an improvement in the client segmentation process; (iii) the good performance of the card business, as a result of (a) the increase in financial volume traded; and (b) the highest volume of transactions performed; and increased fees arising from: (iv) consortium management; (v) collections; (vi) loan operations, particularly income from guarantees provided; and (vii) custody and brokerage services. |
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Personnel Expenses
In the comparison between the first quarter of 2017 and the same prior-year period, the increase of R$1,068 million, or 28.4%, in personnel expenses is justified by the following variations: (i) "structural" portion due to the increase in expenses with payroll, social charges and benefits, impacted by (a) higher salaries, in accordance with the 2016 collective bargaining agreement; and (b) the effect of the consolidation of HSBC Brasil as of the third quarter of 2016; and (ii) "non-structural" portion, due to higher expenses with (a) employment termination costs and (b) employee and management profit sharing.
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Total personnel expenses amounted to R$4,822 million in the first quarter of 2017, showing a decrease of R$249 million, or 4.9% in comparison with the previous quarter, due to: (i) the reduction in the "structural" portion, in the amount of R$311 million, or 7.3%, related to lower expenses with payroll/social charges and benefits, partially impacted by the greater concentration of vacations in the period, a characteristic of the first quarter of each year; and partially offset by: (ii) the increase in the “non-structural” portion, in the amount of R$62 million, or 7.6%, mainly due to higher expenses with (a) termination costs and (b) management and employee profit sharing (PLR). |
Note: Structural expenses = Salaries + Social Charges + Benefits + Pension Plans.
Non-Structural expenses = Employee and Management Profit Sharing + Training + Labor Provision + Employment Termination Costs.
18 Economic and Financial Analysis Report – March 2017
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Administrative Expenses
In the comparison between the first quarter of 2017 and the same prior-year period, administrative expenses showed an increase of 17.9%, or R$738 million, reflecting the increase in expenses due to: (i) a growth in the business volume and services within the period, (ii) the effect of the consolidation of HSBC Brasil as of the third quarter of 2016; and (iii) contractual adjustments. Total administrative expenses amounted to R$4,854 million in the first quarter of 2017, showing a decrease of 10.3%, or R$557 million, in comparison with the previous quarter, mainly due to: (i) the synergy and gains of scale resulting from the incorporation of HSBC Brasil activities in October 2016, leading to lower expenses with (a) outsourced services, and (b) asset maintenance, and (ii) the year-end seasonality that resulted in (a) the lower volume of business and services, and (b) lower expenses with advertising and marketing. |
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Other Operating Income and Expenses
In the first quarter of 2017, other operating expenses, net, totaled R$1,833 million, up R$164 million, or 9.8%, over the same prior-year period, and R$199 million, or 12.2%, in comparison with the previous quarter, basically due to: (i) higher (a) contingent liabilities, net of reversals and (b) insurance activities; (ii) sundry losses; and (iii) the effect of the consolidation of HSBC Brasil as of the third quarter of 2016.
Bradesco 19
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Income Tax and Social Contribution
In the first quarter of 2017, in comparison with the same period of the previous year, income tax and social contribution expenses decreased by R$472 million, or 20.4%, impacted: (i) the deductibility of goodwill amortization in the acquisition of HSBC Brasil as of the fourth quarter of 2016; and (ii) the greater use of the tax benefit on interest on shareholders’ equity. In the previous quarter comparison, income tax and social contribution expenses increased by R$682 million, or 58.9%, due to: (i) the events that occurred in the fourth quarter of 2016, such as (a) the effect of provision for supplementary interest on shareholders’ equity and (b) the realization of assets, in view of the spin-off and incorporation of assets and liabilities of HSBC Brasil, which occurred in October 2016; and (ii) the increase in taxable income in the first quarter of 2017. |
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Unrealized Gains
Unrealized gains totaled R$23,321 million at the end of the first quarter of 2017, an increase of R$6,030 million, or 34.9%, over the previous quarter. This variation was mainly due to the fair value adjustment of fixed-income securities. |
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20 Economic and Financial Analysis Report – March 2017
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Basel Ratio
In March 2017, the Reference Equity of the Prudential Conglomerate reached the amount of R$92,920 million, compared to risk-weighted assets of R$607,464 million. The Basel Ratio decreased 0.1 p.p., from 15.4% in December 2016 to 15.3% in March 2017, and Tier I Capital Ratio totaled 12.0% in March 2017, remaining stable compared to December 2016.
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The table below shows the main events that impacted the Tier I Capital ratio in the first quarter of 2017:
It must be noted that the reduction impact due to the change in the application of prudential adjustments, as defined in Resolution No. 4,192/13, which increased from 60% in December 2016 to 80% in January 2017, was offset: (i) by the reduction of weighted assets; and (ii) by the net income for the first quarter of 2017. |
Full Impact – Basel III
We calculated a Basel III simulation, considering some of the main future adjustments, which include: (i) deductions of 100% according to the schedule of phase-in arrangements; (ii) the allocation of resources, obtained via payment of dividends, by our Insurance Group; (iii) the use of tax credits; (iv) the decrease in the market and operational risk multiplier (early adoption), from 9.250% to 8%; and (v) the impact of the acquisition of HSBC Brasil (amortization of goodwill/ intangible assets and synergies in the process of integration), reaching a Tier I Capital ratio of 12.4%, which, added to potential funding obtained via subordinated debt, may reach a Tier I Capital ratio of approximately 13.1% at the end of 2018. |
(1) Published (Schedule 80%);
(2) Effect of the full impact. Also includes, the Goodwill / Intangible assets stock paid for the acquisition of HSBC Brasil, net of amortizations and the allocation of resources, obtained via payment of dividends, by the Insurance Group;
(3) Considers the decrease in the market and operational risks multiplier (early adoption), from 9.250% to 8% in 2019;
(4) If there were a possible issuance of additional capital by 2018, according to Management decisions and depending on market conditions, Tier I Capital Ratio would be 13.1%, 0.7 p.p higher; and
(5) Refers to the required minimums, in accordance with Resolution No. 4,193/13, added to the additional capital installments established by Circular Letters No. 3,768/15 and No. 3,769/15.
Bradesco 21
Press Release |
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|
The growth of the global economy became more intense in the first quarter of the year. There were positive surprises in several parts of the world with the performance of economic activity indicators. As a consequence of this resumption of demand, commodity prices rose significantly (except for oil, which was more strongly affected by the supply constraints). Another important effect of the more heated global activity was a recovery in international trade, which started to grow more sustainably after several months of near-zero or negative fluctuations. Global inflation accelerated moderately and could lead to an acceleration in the pace of monetary normalization in the major economies further ahead. Nonetheless, the US Federal Reserve maintained the moderate tone of its discourse, after the interest rate hike in March, and thereby managed to prevent further increase of long term interest rates in the USA. The scenario for the Brazilian economy, in early 2017, has been marked by a more favorable macroeconomic environment, with a slowdown in inflation and a sharper fall in interest rates, which helped improve players’ expectations, with higher rates of confidence among households and businesses. The process of disinflation of the economy, already in progress, has accelerated and has disseminated even more among the different sectors. Accordingly, expectations for inflation are systematically falling, and are around 0.5 p.p. below the center of the inflation target for 2017 (4.5%). With this, the conditions for intensifying the easing of the monetary policy have already been given are still in force. Thus, we expect the Selic rate to reach 8.5% in 2017, a level that will be maintained in 2018. Although the political risk persists, we believe that the likelihood of approving a thinly diluted pension reform is very high. In fact, this factor – coupled with the sharper drop in interest rates – has led to a sharp decline in country risk measures, with a direct impact on the exchange rate. The terms-of-trade gains also boosted exchange rate appreciation and favored the bottom line in foreign trade. The trade balance reached a record level in the quarter, due to the significant increase in exports and the moderate increase in imports. It is worth mentioning that foreign sales grew due to the increase in prices, but also in quantities, particularly for oil, ore, soybeans and automobiles. The GDP, after falling for eight consecutive quarters, should have shown its first increase in the margin in the first quarter of this year, albeit modest and resulting from a relevant contribution from the agricultural sector. The recovery in services and trade, on the other hand, has been slower, indicating that growth will recover gradually. Therefore, we are projecting a 0.3% growth in GDP for 2017. Under these conditions, in addition to the current fiscal adjustments, the microeconomic agenda takes on greater importance, contributing directly toward growth. With the macroeconomic adjustments made, additional actions of a structural nature that can affect potential future growth continue to be essential. The constant search for excellence in education is Brazil’s top priority in its struggle to become more competitive and to expedite its efforts to upgrade infrastructure. Investments will tend to play an increasingly important role in the composition of growth in coming years, especially in the process of the recovery of economic activity. This would benefit more from greater participation of the capital market in financing these projects. Bradesco maintains a positive outlook towards Brazil, with favorable perspectives for its operating sections. Credit volume is evolving at risk-compatible rates, even when faced with a cyclical upswing in delinquency rates, due to the reduction of activity and the increase of the unemployment rate this year. The circumstances are still very promising for Brazilian banking and insurance sectors in the medium and long term.
22 Economic and Financial Analysis Report – March 2017
Press Release |
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|
Main Indicators (%) |
1Q17 |
4Q16 |
3Q16 |
2Q16 |
1Q16 |
4Q15 |
3Q15 |
2Q15 |
Interbank Deposit Certificate (CDI) |
3.03 |
3.25 |
3.47 |
3.37 |
3.27 |
3.37 |
3.43 |
3.03 |
Ibovespa |
7.90 |
3.19 |
13.27 |
2.94 |
15.47 |
(3.79) |
(15.11) |
3.77 |
USD – Commercial Rate |
(2.78) |
0.40 |
1.13 |
(9.81) |
(8.86) |
(1.71) |
28.05 |
(3.29) |
General Market Price Index (IGP-M) |
0.73 |
0.67 |
0.53 |
2.86 |
2.96 |
3.95 |
1.93 |
2.27 |
Extended Consumer Price Index (IPCA) |
0.96 |
0.74 |
1.04 |
1.75 |
2.62 |
2.82 |
1.39 |
2.26 |
Federal Government Long-Term |
1.82 |
1.82 |
1.82 |
1.82 |
1.82 |
1.72 |
1.59 |
1.48 |
Reference Interest Rate (TR) |
0.35 |
0.49 |
0.58 |
0.49 |
0.45 |
0.53 |
0.61 |
0.40 |
Savings Account |
1.87 |
2.00 |
2.09 |
2.00 |
1.96 |
2.05 |
2.13 |
1.92 |
Business Days (#) |
63 |
62 |
65 |
63 |
61 |
63 |
65 |
61 |
Indicators (Closing Rate) |
Mar17 |
Dec16 |
Sept16 |
June16 |
Mar16 |
Dec15 |
Sept15 |
June15 |
USD – Commercial Selling Rate - (R$) |
3.1684 |
3.2591 |
3.2462 |
3.2098 |
3.5589 |
3.9048 |
3.9729 |
3.1026 |
Euro - (R$) |
3.3896 |
3.4384 |
3.6484 |
3.5414 |
4.0539 |
4.2504 |
4.4349 |
3.4603 |
Country Risk (points) |
269 |
327 |
319 |
349 |
409 |
521 |
442 |
304 |
Selic - Base Interest Rate (% p.a.) |
12.25 |
13.75 |
14.25 |
14.25 |
14.25 |
14.25 |
14.25 |
13.75 |
BM&F Fixed Rate (% p.a.) |
9.67 |
11.56 |
12.50 |
13.36 |
13.81 |
15.86 |
15.56 |
14.27 |
Projections up to 2019
% |
2017 |
2018 |
2019 |
USD - Commercial Rate (year-end) - R$ |
3.10 |
3.25 |
3.35 |
Extended Consumer Price Index (IPCA) |
3.91 |
4.49 |
4.50 |
General Market Price Index (IGP-M) |
4.48 |
5.00 |
5.00 |
Selic (year-end) |
8.50 |
8.50 |
8.50 |
Gross Domestic Product (GDP) |
0.30 |
2.50 |
3.00 |
Guidance
Bradesco's Perspectives for 2017
This guidance contains forward-looking statements that are subject to risks and uncertainties, as they are based on Management’s expectations and assumptions and information available to the market as of the date hereof.
"Pro-forma" (1) |
|
Published | ||
Expanded Loan Portfolio |
|
1 to 5% |
1 to 5% | |
NII - Interest-Earning Portion |
|
-4 to 0% |
|
3 to 7% |
Fee and Commission Income |
|
7 to 11% |
|
12 to 16% |
Operating Expenses |
|
-1 to 3% |
|
10 to 14% |
Insurance Premiums |
|
4 to 8% |
|
6 to 10% |
ALL Expenses |
|
R$21.0 bi to R$24.0 bi |
|
R$21.0 bi to R$24.0 bi |
Bradesco 23
Press Release |
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Analytical Breakdown of Managerial Income Statement (1) vs. Adjusted Income Statement (3)
First Quarter of 2017 and Fourth Quarter of 2016
R$ million |
First Quarter of 2017 |
x |
Fourth Quarter of 2016 | ||||||
Managerial Income Statement (1) |
Reclassifications (2) |
Non-Recurring Events |
Adjusted Income Statement (3) |
Managerial Income Statement (1) |
Reclassifications (2) |
Non-Recurring Events |
Adjusted Income Statement (3) | ||
Net Interest Income |
18,558 |
(2,942) |
- |
15,616 |
17,348 |
(1,679) |
- |
15,669 | |
ALL Expenses |
(8,308) |
3,446 |
- |
(4,862) |
(6,236) |
711 |
- |
(5,525) | |
Gross Income from Financial Intermediation |
10,250 |
504 |
- |
10,754 |
11,112 |
(967) |
- |
10,144 | |
Income from Insurance, Pension Plans and Capitalization Bonds |
1,627 |
- |
- |
1,627 |
1,680 |
- |
- |
1,680 | |
Fee and Commission Income |
7,439 |
(9) |
- |
7,430 |
7,584 |
(39) |
- |
7,545 | |
Personnel Expenses |
(4,822) |
- |
- |
(4,822) |
(5,071) |
- |
- |
(5,071) | |
Other Administrative Expenses |
(4,852) |
(2) |
- |
(4,854) |
(5,457) |
- |
46 |
(5,411) | |
Tax Expenses |
(1,771) |
(1) |
- |
(1,772) |
(1,684) |
(19) |
- |
(1,703) | |
Equity in the earnings (losses) of unconsolidated and jointly |
58 |
- |
- |
58 |
48 |
- |
- |
48 | |
Other Operating Income / Expenses |
(693) |
(1,736) |
596 |
(1,833) |
(3,807) |
1,309 |
864 |
(1,634) | |
Operating Income |
7,236 |
(1,244) |
596 |
6,588 |
4,405 |
284 |
909 |
5,598 | |
Non-Operating Income |
(134) |
82 |
- |
(52) |
(438) |
176 |
249 |
(13) | |
Income Tax / Social Contribution and |
(3,031) |
1,162 |
(19) |
(1,888) |
(375) |
(460) |
(365) |
(1,200) | |
Net Income |
4,071 |
- |
577 |
4,648 |
3,592 |
- |
793 |
4,385 |
(1) For more information, please see note 5 – Managerial Statement of Financial Position and Income Statement by Operating Segment, in chapter 6 of this report;
(2) Includes management reclassifications between the lines of the income statement, which do not affect the Net Income, but allow a better analysis of the lines of business, highlighting (i) the tax hedge adjustment, which represents the partial result of the derivatives used for the purposes of hedging investments Abroad, which in terms of Net Income simply annuls the tax effect (IR/CS and PIS/COFINS) of this hedge strategy, to the sum of R$1,175 million in the first quarter of 2017 and R$132 million in the fourth quarter of 2016; and (ii) that, in the first quarter of 2017, included the reclassification (a) of the reversal of provision for guarantees provided, encompassing sureties, guarantees, credit letters, and standby letter of credit, in the amount of R$2,456 million, which was recorded under “Other Operating Income”, as described in Note 28 and (b) in this same amount; “Excess provision” was formed, being recorded in “ALL Expenses” and not impacting income for the period. It is important to note that, as of December 31, 2016, the “Excess provision” concept included the provision for guarantees provided, encompassing sureties, guarantees, credit letters, and standby letter of credit, in the amount of R$3,061 million. In accordance with Resolution No. 4,512/16, in the first quarter of 2017, part of this balance, in the amount of (a) R$605 million, was allocated to a specific account of provision for guarantees provided encompassing sureties, guarantees and credit letters under “Other Liabilities - Sundry”, and the remaining balance, in the amount of (b) R$2,456 million, as already mentioned, was allocated to “Excess Provision”; and
(3) It refers to Managerial Income Statement (1) with the reclassifications between lines, which do not affect the Net Income, and without the non-recurring events of the period.
24 Economic and Financial Analysis Report – March 2017
Press Release |
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|
Analytical Breakdown of Managerial Income Statement (1) vs. Adjusted Income Statement (3)
First Quarter of 2017 and First Quarter of 2016
R$ million |
First Quarter of 2017 |
x |
First Quarter of 2016 | ||||||
Managerial Income Statement (1) |
Reclassifications (2) |
Non-Recurring Events |
Adjusted Income Statement (3) |
Managerial Income Statement (1) |
Reclassifications (2) |
Non-Recurring Events |
Adjusted Income Statement (3) | ||
Net Interest Income |
18,558 |
(2,942) |
- |
15,616 |
20,397 |
(5,613) |
108 |
14,892 | |
ALL Expenses |
(8,308) |
3,446 |
- |
(4,862) |
(5,919) |
471 |
- |
(5,448) | |
Gross Income from Financial Intermediation |
10,250 |
504 |
- |
10,754 |
14,478 |
(5,142) |
108 |
9,444 | |
Income from Insurance, Pension Plans and Capitalization Bonds |
1,627 |
- |
- |
1,627 |
1,625 |
- |
- |
1,625 | |
Fee and Commission Income |
7,439 |
(9) |
- |
7,430 |
6,404 |
1 |
- |
6,405 | |
Personnel Expenses |
(4,822) |
- |
- |
(4,822) |
(3,754) |
- |
- |
(3,754) | |
Other Administrative Expenses |
(4,852) |
(2) |
- |
(4,854) |
(4,116) |
- |
- |
(4,116) | |
Tax Expenses |
(1,771) |
(1) |
- |
(1,772) |
(1,829) |
416 |
(5) |
(1,418) | |
Equity in the earnings (losses) of unconsolidated and jointly |
58 |
- |
- |
58 |
40 |
- |
- |
40 | |
Other Operating Income / Expenses |
(693) |
(1,736) |
596 |
(1,833) |
(2,418) |
704 |
45 |
(1,669) | |
Operating Income |
7,236 |
(1,244) |
596 |
6,588 |
10,430 |
(4,021) |
148 |
6,557 | |
Non-Operating Income |
(134) |
82 |
- |
(52) |
92 |
(16) |
(163) |
(87) | |
Income Tax / Social Contribution and |
(3,031) |
1,162 |
(19) |
(1,888) |
(6,401) |
4,037 |
7 |
(2,357) | |
Net Income |
4,071 |
- |
577 |
4,648 |
4,121 |
- |
(8) |
4,113 |
(1) For more information, please see note 5 – Managerial Statement of Financial Position and Income Statement by Operating Segment, in chapter 6 of this report;
(2) Includes management reclassifications between the lines of results, which do not affect the Net Income, but allow a better analysis of the lines of business, highlighting (i) the tax hedge adjustment, which represents the partial result of the derivatives used for the effect of hedging investments Abroad, which in terms of Net Income simply annuls the tax effect (IR/CS and PIS/COFINS) of this hedge strategy, to the sum of R$1,175 million in the first quarter of 2017 and R$4,429 million in the first quarter of 2016; and (ii) that, in the first quarter of 2017, included the reclassification (a) of the reversal of provision for guarantees provided, encompassing sureties, guarantees, credit letters, and standby letter of credit, in the amount of R$2,456 million, which was recorded under “Other Operating Income”, as described in Note 28 and (b) in this same amount; “Excess provision” was formed, being recorded in “ALL Expenses” and not impacting income for the period. It is important to note that, as of December 31, 2016, the “Excess provision” concept included the provision for guarantees provided, encompassing sureties, guarantees, credit letters, and standby letter of credit, in the amount of R$3,061 million. In accordance with Resolution No. 4,512/16, in the first quarter of 2017, part of this balance, in the amount of (a) R$605 million, was allocated to a specific account of provision for guarantees provided encompassing sureties, guarantees and credit letters under “Other Liabilities - Sundry”, and the remaining balance, in the amount of (b) R$2,456 million, as already mentioned, was allocated to “Excess Provision”; and
(3) It refers to Managerial Income Statement (1) with the reclassifications between lines, which do not affect the Net Income, and without the non-recurring events of the period.
Bradesco 25
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26 Economic and Financial Analysis Report – March 2017
Economic and Financial Analysis |
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Consolidated Statement of Financial Position and Statement of Adjusted Income
Below is an analysis of Bradesco’ statement of financial position and statement of income. From July 2016, we began to consolidate the financial statements of HSBC Brasil.
Statement of Financial Position (1)
R$ million |
Mar17 |
Dec16 |
Sept16 |
June16 |
Mar16 |
Dec15 |
Sept15 |
June15 |
Variation % | |
Mar17 x Dec16 |
Mar17 x Mar16 | |||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
Current and Long-Term Assets |
1,263,948 |
1,262,273 |
1,239,479 |
1,085,880 |
1,082,132 |
1,059,768 |
1,031,888 |
1,010,599 |
0.1 |
16.8 |
Funds available |
12,029 |
14,697 |
13,013 |
32,449 |
18,660 |
17,457 |
12,917 |
11,677 |
(18.2) |
(35.5) |
Interbank Investments |
188,117 |
177,685 |
177,168 |
138,817 |
165,523 |
140,457 |
153,370 |
176,268 |
5.9 |
13.7 |
Securities and Derivative Financial Instruments |
549,700 |
549,873 |
509,184 |
437,580 |
414,926 |
407,584 |
364,472 |
356,115 |
- |
32.5 |
Interbank and Interdepartmental Accounts |
63,596 |
59,007 |
64,721 |
50,022 |
51,474 |
55,728 |
54,179 |
50,800 |
7.8 |
23.5 |
Loan and Leasing Operations |
339,269 |
347,489 |
356,419 |
308,940 |
320,417 |
333,854 |
336,628 |
326,204 |
(2.4) |
5.9 |
Allowance for Loan Losses (ALL) (2) |
(39,181) |
(37,653) |
(38,148) |
(30,019) |
(29,734) |
(28,805) |
(27,952) |
(23,290) |
4.1 |
31.8 |
Other Receivables and Assets |
150,418 |
151,175 |
157,122 |
148,091 |
140,866 |
133,493 |
138,274 |
112,825 |
(0.5) |
6.8 |
Permanent Assets |
30,191 |
31,286 |
30,660 |
19,364 |
19,631 |
19,987 |
19,095 |
19,163 |
(3.5) |
53.8 |
Investments |
1,726 |
1,778 |
1,638 |
1,538 |
1,520 |
1,587 |
1,710 |
1,669 |
(2.9) |
13.6 |
Premises and Equipment and Leased Assets |
7,802 |
7,965 |
6,931 |
5,682 |
5,779 |
5,772 |
5,000 |
4,940 |
(2.0) |
35.0 |
Intangible Assets |
20,663 |
21,543 |
22,091 |
12,144 |
12,332 |
12,628 |
12,385 |
12,554 |
(4.1) |
67.6 |
Total |
1,294,139 |
1,293,559 |
1,270,139 |
1,105,244 |
1,101,763 |
1,079,755 |
1,050,983 |
1,029,762 |
- |
17.5 |
* |
|
|
||||||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
Current and Long-Term Liabilities |
1,187,569 |
1,191,094 |
1,169,589 |
1,006,877 |
1,006,426 |
988,833 |
962,811 |
940,910 |
(0.3) |
18.0 |
Deposits |
235,432 |
234,214 |
239,937 |
179,436 |
189,192 |
195,760 |
203,637 |
195,926 |
0.5 |
24.4 |
Securities sold under agreements to repurchase |
351,263 |
349,070 |
320,556 |
287,117 |
297,350 |
279,726 |
257,847 |
293,730 |
0.6 |
18.1 |
Funds from Issuance of Securities |
142,751 |
150,807 |
153,976 |
112,817 |
112,617 |
109,547 |
110,987 |
95,387 |
(5.3) |
26.8 |
Interbank and Interdepartmental Accounts |
5,755 |
7,089 |
5,621 |
4,838 |
5,181 |
6,384 |
5,463 |
4,578 |
(18.8) |
11.1 |
Borrowings and Onlendings |
56,417 |
58,197 |
62,805 |
57,532 |
62,849 |
70,338 |
69,654 |
61,369 |
(3.1) |
(10.2) |
Derivative Financial Instruments |
13,936 |
12,398 |
11,189 |
13,720 |
7,664 |
13,785 |
14,860 |
4,832 |
12.4 |
81.8 |
Technical provisions for insurance, pension plans and capitalization bonds |
229,433 |
223,342 |
213,608 |
190,649 |
182,973 |
177,835 |
168,629 |
164,566 |
2.7 |
25.4 |
Other liabilities |
152,582 |
155,977 |
161,897 |
160,768 |
148,600 |
135,458 |
131,734 |
120,522 |
(2.2) |
2.7 |
Deferred Income |
426 |
477 |
473 |
503 |
488 |
529 |
459 |
399 |
(10.7) |
(12.7) |
Non-controlling Interest in Subsidiaries |
1,586 |
1,546 |
1,527 |
1,506 |
1,519 |
1,486 |
1,480 |
1,481 |
2.6 |
4.4 |
Shareholders' Equity |
104,558 |
100,442 |
98,550 |
96,358 |
93,330 |
88,907 |
86,233 |
86,972 |
4.1 |
12.0 |
Total |
1,294,139 |
1,293,559 |
1,270,139 |
1,105,244 |
1,101,763 |
1,079,755 |
1,050,983 |
1,029,762 |
- |
17.5 |
(1) For more information, please see note 5 – Managerial Statement of Financial Position and Income Statement, in chapter 6 of this report; and
(2) Up to December 31, 2016, included the constitution of provision for guarantees provided, encompassing sureties, guarantees, credit letters, and standby letter of credit, which comprises the concept of “excess” provision that totaled R$3,060,090 thousand. In accordance with Resolution No. 4,512/16, in the first quarter of 2017, part of this balance (R$604,623 thousand) was allocated to a specific account under "Other Liabilities - Sundry" (Note 20b - chapter 6 of this report), and the remaining balance (R$2,456,367 thousand) was allocated to “Excess Provision".
28 Economic and Financial Analysis Report – March 2017
Economic and Financial Analysis |
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Consolidated Statement of Financial Position and Statement of Adjusted Income
Statement of Adjusted Income
R$ million |
1Q17 |
4Q16 |
3Q16 |
2Q16 |
1Q16 |
4Q15 |
3Q15 |
2Q15 |
Variation % | |
1Q17 x 4Q16 |
1Q17 x 1Q16 | |||||||||
Net Interest Income |
15,616 |
15,669 |
16,931 |
14,962 |
14,892 |
14,512 |
13,735 |
13,541 |
(0.3) |
4.9 |
NII - Interest Earning Portion |
15,900 |
16,743 |
16,799 |
14,783 |
14,734 |
14,380 |
13,709 |
13,415 |
(5.0) |
7.9 |
NII - Non-Interest Earning Portion |
136 |
190 |
132 |
179 |
158 |
132 |
26 |
126 |
(28.4) |
(13.9) |
- Impairment of Financial Assets |
(420) |
(1,264) |
- |
- |
- |
- |
- |
- |
(66.8) |
- |
ALL Expenses |
(4,862) |
(5,525) |
(5,742) |
(5,024) |
(5,448) |
(4,192) |
(3,852) |
(3,550) |
(12.0) |
(10.8) |
Gross Income from Financial Intermediation |
10,754 |
10,144 |
11,189 |
9,938 |
9,444 |
10,320 |
9,883 |
9,991 |
6.0 |
13.9 |
Income from Insurance Premiums, Pension Plans and Capitalization bonds, net of Variation of Technical Provisions, Retained Claims and others (1) |
1,627 |
1,680 |
1,280 |
1,084 |
1,625 |
1,493 |
1,411 |
1,311 |
(3.2) |
0.1 |
Fee and Commission Income |
7,430 |
7,545 |
7,450 |
6,624 |
6,405 |
6,597 |
6,380 |
6,118 |
(1.5) |
16.0 |
Personnel Expenses |
(4,822) |
(5,071) |
(4,930) |
(3,882) |
(3,754) |
(3,839) |
(3,797) |
(3,618) |
(4.9) |
28.4 |
Other Administrative Expenses |
(4,854) |
(5,411) |
(5,337) |
(4,270) |
(4,116) |
(4,574) |
(4,200) |
(3,926) |
(10.3) |
17.9 |
Tax Expenses |
(1,772) |
(1,703) |
(1,601) |
(1,326) |
(1,418) |
(1,650) |
(1,330) |
(1,351) |
4.1 |
25.0 |
Equity in the earnings (losses) of unconsolidated and jointly |
58 |
48 |
108 |
22 |
40 |
93 |
38 |
33 |
20.8 |
45.0 |
Other Operating Income / (Expenses) |
(1,833) |
(1,634) |
(1,698) |
(2,015) |
(1,669) |
(1,586) |
(1,604) |
(1,606) |
12.2 |
9.8 |
Operating Income |
6,588 |
5,598 |
6,461 |
6,175 |
6,557 |
6,854 |
6,781 |
6,952 |
17.7 |
0.5 |
Non-Operating Income |
(52) |
(13) |
(24) |
(56) |
(87) |
(68) |
(92) |
(55) |
- |
(40.2) |
Income Tax and Social Contribution |
(1,839) |
(1,157) |
(1,948) |
(1,921) |
(2,311) |
(2,183) |
(2,124) |
(2,351) |
58.9 |
(20.4) |
Non-controlling interests in subsidiaries |
(49) |
(43) |
(27) |
(37) |
(46) |
(41) |
(32) |
(42) |
14.0 |
6.5 |
Adjusted Net Income |
4,648 |
4,385 |
4,462 |
4,161 |
4,113 |
4,562 |
4,533 |
4,504 |
6.0 |
13.0 |
(1) “Other”, includes: Capitalization bond prize draws and redemptions; and Selling expenses from insurance, pension plans and capitalization bonds.
NII – Interest-Earning and Non-Interest Earning Portions
Net Interest Income Breakdown
Bradesco 29
Economic and Financial Analysis |
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NII – Interest-Earning and Non-Interest Earning Portions
Average Net Interest Income Rate
R$ million |
1Q17 |
4Q16 |
1Q16 |
Variation | |
Quarter |
12 months | ||||
Net Interest Income |
|
|
|
|
|
NII - Interest-earning portion - due to volume |
|
|
|
(398) |
1,000 |
NII - Interest-earning portion - due to spread |
|
|
|
(445) |
166 |
- NII - Interest Earning Portion |
15,900 |
16,743 |
14,734 |
(843) |
1,166 |
- NII - Non-Interest Earning Portion |
136 |
190 |
158 |
(54) |
(22) |
- Impairment of Financial Assets |
(420) |
(1,264) |
- |
844 |
(420) |
Net Interest Income |
15,616 |
15,669 |
14,892 |
(53) |
724 |
Average NIM (1) |
7.3% |
7.5% |
7.5% |
|
|
(1) Average Rate in 12 months = (Net Interest Income/ Total Average Assets – Repos – Permanent Assets)
In the comparison between the first quarter of 2017 and the previous quarter, net interest income remained stable, with the following factors contributing to this performance: (i) decreased (a) “interest-earning portion of the NII, in the amount of R$843 million, due to a lower credit intermediation margin, resulting from fewer calendar days in the quarter, what caused lower accrual of income from loan operations, q-o-q, as well as higher business days in the quarter, bringing higher accrual of funding expenses, due to the higher credit participation in portfolios with lower spread and lower risk, and the decreased volume of operations, and (b) “non interest” margins, in the amount of R$54 million; and (ii)lower expenses from the impairment of financial assets (previously marked in the shareholders’ equity), in the amount of R$844 million. |
In the annual comparison, net interest income was up R$724 million, or 4.9%, reflecting the growth in operating income: (i) the interest-earning portion of the NII, in the amount of R$1,166 million, particularly “Credit Intermediation"; partly offset by HSBC Brasil’s consolidation, as from the third quarter of 2016; and partially offset: (ii) the effect of financial assets impairment (previously marked in the shareholders’ equity), in the amount of R$420 million, and (iii) the lower Non-Interest Earning Portion result, in the amount of R$22 million. |
R$ million |
1Q17 |
4Q16 |
1Q16 |
Variation | |
Quarter |
12 months | ||||
NII - Interest-earning Portion Breakdown |
|
|
|
|
|
Credit Intermediation |
12,567 |
13,403 |
11,486 |
(836) |
1,081 |
Insurance |
1,481 |
1,471 |
1,475 |
10 |
6 |
Securities/Other |
1,852 |
1,869 |
1,773 |
(17) |
79 |
NII - Interest-Earning Portion |
15,900 |
16,743 |
14,734 |
(843) |
1,166 |
The interest-earning portion of the NII stood at R$15,900 million in the first quarter of 2017, a decrease of R$843 million compared with the last quarter, mainly due to lower results in “Credit Intermediation”, in the amount of R$836 million; |
In the annual comparison, the interest-earning portion of the NII recorded a R$1,166 million growth, or 7.9%, with an emphasis on “Credit Intermediation” in the amount of R$1,081 million partly offset by HSBC Brasil’s consolidation, as from the third quarter of 2016. |
30 Economic and Financial Analysis Report – March 2017
Economic and Financial Analysis |
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NII - Interest-Earning Portion
Interest-Earning Portion – Rates
In the first quarter of 2017, the NII - interest-earning portion rate in the last 12 months was 7.4%, recording a decrease of 0.1 p.p. in the quarterly comparison and in the annual comparison.
Interest-Earning Portion – Average Rates (12 months)
Bradesco 31
Economic and Financial Analysis |
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Interest-Earning Portion of Credit Intermediation
Interest-Earning Portion of Credit Intermediation – Breakdown
In the first quarter of 2017, the NII - the interest-earning portion of “Credit Intermediation” reached R$12,567 million, a decrease of R$836 million or 6.2%, compared with the previous quarter. The variation was the result of: (i) the decrease in the average spread, in the amount of R$438 million, impacted by (a) the lower number of consecutive days in this quarter, reflecting the lower appropriation of loan operation income in relation to the previous quarter, (b) the higher number of business days also in this quarter, which generated a greater appropriation of funding expenses, and (c) the higher credit participation in portfolios with lower spread and lower risk; and (ii) a R$398 million decrease in the average business volume. |
(1) Without the effect of the leveling of provisioning from one specific corporate client; and (2) If we ignore the effect of the leveling of provisioning from one specific corporate client, net margin, in the second quarter of 2016 would be R$6,749 million, and in the first quarter of 2016 would be R$6,874 million. | |
Net Earning Portion of Credit Intermediation |
||
The graph to the right presents a summary of “Credit Intermediation” activity. The gross margin line refers to interest income from loans, deducted from the client acquisition costs. The bar relating to the ALL shows delinquency costs, which are represented by Allowance for Loan Losses (ALL) Expenses, plus discounts granted in net transactions of loan recoveries arising from the sale of foreclosed assets, among others. In the first quarter of 2017, the bar relating to the net margin, which presents the result of the net revenue from credit interest of the ALL, decreased R$173 million, or 2.2%, due to: (i) the reduction in (a) the average spread and (b) the average business volume; and offset by: (ii) the reduction in expenses with ALL in the quarter. In the annual comparison, there was a 27.6% variation, or R$1,667 million, in the net credit margin, mainly due to: (i) the increase in (a) the average spread and (b) the average turnover, justified in part by the consolidation of HSBC Brasil, starting in the third quarter of 2016; (ii) the reduction in expenses with ALL. In the annual comparison, there was an increase of 9.4% or R$1,081 million, due to the following increases: (i) average spread, amounting to R$557 million, due to improved management in investment resources and funding operations; and (ii) the average business volume in the amount of R$524 million, partially due to HSBC Brasil’s consolidation as of the third quarter of 2016. |
32 Economic and Financial Analysis Report – March 2017
Economic and Financial Analysis |
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Interest-Earning Portion of Credit Intermediation
Expanded Loan Portfolio (1)
In March 2017, Bradesco’s expanded loan portfolio stood at R$502.7 billion, presenting a 2.4% decrease compared with the previous quarter and a 8.5% increase in the last 12 months. It is worth noting the expansion of loans to Individuals and Large Companies in the last 12 months is largely due to the consolidation of HSBC Brasil as of the third quarter of 2016.
(1) In addition to Bacen loan portfolio, it includes sureties, guarantees, letters of credit, advances of credit card receivables, debentures, promissory notes, co-obligation (receivables-backed investment funds, mortgage-backed receivables, and rural loans).
Expanded Loan Portfolio Breakdown by Product and Type of Client (Individuals and Companies)
A breakdown of expanded loan portfolio products for the Individuals section is presented below:
Operations in the Individuals section decreased 0.1% in the quarter and increased 16.3% over the last 12 months, influenced by the effect of HSBC Brasil’s consolidation. The categories highlighted in the 12-month period were: (i) “real estate financing”; (ii) “credit card”; (iii) “personal loans”; and (iv) “payroll-deductible loans”.
Bradesco 33
Economic and Financial Analysis |
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Interest-Earning Portion of Credit Intermediation
A breakdown of expanded loan portfolio products for Companies is presented below:
(1) Includes debentures and promissory note operations.
Companies’ operations decreased by 3.5% in the quarter and increased by 4.9% in the last 12 months, due to the effect of HSBC Brasil’s consolidation. In the annual comparison, the categories highlighted were as follows: (i) “export financing”; (ii) operations bearing credit risk – debentures”; (iii) “rural loans”; and (iv) “working capital”.
Expanded Loan Portfolio – Consumer Financing(1)
The graph below shows the types of credit related to Consumer Financing of the Individuals section, which stood at R$112.2 billion, in March 2017, representing a 1.4% decrease over the quarter and a 12.4% increase over the last 12 months, partly due to the effect of HSBC Brasil’s consolidation.
The following modalities are highlighted in March 2017: (i) personal loans, including payroll-deductible loans, totaling R$57.7 billion; and (ii) credit card, totaling R$34.0 billion.
(1) Includes vehicle CDC/Leasing, personal loans, revolving credit card and cash, and installment purchases at merchants operations.
34 Economic and Financial Analysis Report – March 2017
Economic and Financial Analysis |
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Interest-Earning Portion of Credit Intermediation
Payroll-deductible Loans
In March 2017, payroll-deductible loans operations totaled R$39,937 million, showing an increase of R$1,133 million in the quarterly comparison, or 2.9%, and, in comparison with March of the previous year, an increase in the amount of R$4,434 million, or 12.5%. Payroll-deductible loans operations represented, in March 2017, 69.2% of total personal loans operations. |
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Real Estate Financing |
||
Real estate financing operations totaled R$61,201 million in March 2017, presenting an increase in the Individuals portfolio of R$291 million, or 0.9%, in the quarter, and R$8,750 million, or 36.7%, in comparison with March of the previous year. Companies’ operations decreased R$854 million, or 2.9%, in the quarter, and increased R$1,982 million, or 7.4%, in comparison with March of the previous year. In the first quarter of 2017, the origination of real estate financing registered R$1,974 million (R$1,376 million by individuals and R$598 million by builders), representing 8,798 properties in the period. |
![]() | |
Vehicle financing |
||
In March 2017, vehicle financing operations totaled R$32,215 million, showing a decrease in the quarterly comparison and in the annual comparison. Of the total vehicle portfolio, 75.4% corresponds to "CDC", 22.4% to “Finame” and 2.2% to "Leasing". The variations presented in the portfolio are reflective of a reduced financing market and of Bradesco’s search for lower risk and more profitable operations, due to the demand for the higher entry value for these financing operations. |
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Bradesco 35
Economic and Financial Analysis |
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Interest-Earning Portion of Credit Intermediation
Expanded Loan Portfolio Concentration – By Economic Sector
The expanded loan portfolio by the economic activity sector remained stable in the share of the sectors that it comprises. We highlight an increase in the participation of "Individuals" in the periods analyzed.
Interest-Earning Portion of Credit Intermediation
Expanded Loan Portfolio – Distribution per Business Sector
The expanded loan portfolio showed an increase of 8.5% in the annual comparison due to effect of the consolidation of HSBC Brasil, and a decrease of 2.4% in the last quarter. We positively highlight the evolution of the "Prime" sector in the quarter.
(1) It consists, mostly, of non-account holders, originating from the financing activities of vehicles, credit cards and payroll-deductible loans.
Expanded Loan Portfolio – Per Currency |
||
The balance of borrowings and indexed on-lending and/or denominated forms in foreign currency (excluding ACCs) totaled R$42.2 billion in March 2017, showing a 3.9% decrease in the quarter and a 11.2% decrease in the last 12 months. In March 2017, the total number of credit operations in reais reached R$460.5 billion, presenting a 2.3% decrease in the quarterly comparison and an increase of 10.8% in the last 12 months. |
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36 Economic and Financial Analysis Report – March 2017
Economic and Financial Analysis |
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Interest-Earning Portion of Credit Intermediation
Changes to the Expanded Loan Portfolio
New borrowers in the expanded loan portfolio, mainly due to the effect of HSBC Brasil’s consolidation, were responsible for the R$43.6 billion growth in the loan portfolio over the last 12 months, and accounted for 8.7% of the portfolio in March 2017.
(1) Includes new loans contracted in the last 12 months by clients with operations in March 2016.
Changes in the Expanded Loan Portfolio – By Rating
The chart below shows that the majority of new borrowers and clients that have remained in the loan portfolio since March 2016 received ratings between AA and C, demonstrating the suitability and consistency of the loan policy and processes (assignment and monitoring), as well as the quality of guarantees.
(1) Partly due to the consolidation of HSBC Brasil.
Expanded Loan Portfolio – By Client Profile and Rating (%)
The range represented by credits classified between AA and C remained at comfortable levels.
Bradesco 37
Economic and Financial Analysis |
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Interest-Earning Portion of Credit Intermediation
Expanded Loan Portfolio – By Debtor
All concentration ranges remained stable compared to the previous quarter. The classification of ratings is aligned to the context of the current economic scenario.
Loan Portfolio (1) – By Type
All operations carrying credit risk amounted to R$528.2 billion, showing a decrease of 2.9% in the quarter and an increase of 6.7% in the last 12 months, due to the consolidation of HSBC Brasil.
(1) In addition to the Expanded Portfolio, it includes other operations bearing credit risk;
(2) As defined by Bacen;
(3) Includes debentures and promissory note operations; and
(4) Includes CDI operations, rural DI, international treasury, swap, non-deliverable forward transaction and investments in FIDC, Certificate of Agribusiness Credit Rights (CDCA) and Certificates of Real Estate Receivables (CRI).
38 Economic and Financial Analysis Report – March 2017
Economic and Financial Analysis |
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Interest-Earning Portion of Credit Intermediation
The charts below refer to the Loan Portfolio, as defined by Bacen:
Loan Portfolio (1) – By Flow of Maturities (2)
The loan portfolio by flow of maturities of operations has, as one of its features, a longer profile, mainly due to the presence of real estate financing and payroll-deductible loans operations. It must be noted that, due to their guarantees and characteristics, these operations are not only exposed to lower risk, but they also provide favorable conditions to gain client loyalty. |
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Loan Portfolio – Delinquency Ratio (1) |
||
90-day Delinquency Ratio The increase in the delinquency ratio, comprising operations delayed for more than 90 days in the Total Portfolio, grew in the quarter due to a specific client in the Large Corporates segment, that was fully provisioned, and to the reduction in the loan portfolio. In nominal terms, we highlight the reduction of delinquent loans. Disregarding these events, the delinquency would record a decline, highlighting the improvement of Micro, Small and Medium Enterprises and of the Individuals segment. In the first quarter of 2017, credit assignments without retention of risks and benefits were carried out, already written off for losses, totaling R$2.0 billion, which did not alter the rates of delinquency in the period, as well as did not impact the results in a material manner. |
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15-90 Day Delinquency Ratio |
||
Short-term delinquency, including operations between 15 and 90 days overdue, decreased in the quarter, partially due to a fully provisioned client of the Large Corporate segment having migrated from a delinquency range to another. The increase in the delinquency of Individuals reflects the seasonal aspects of the first quarter, but at levels lower than the same period of previous year.
(1) As defined by Bacen; and (2) Only performing loans. |
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Bradesco 39
Economic and Financial Analysis |
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Interest-Earning Portion of Credit Intermediation
Allowance for Loan Losses (ALL) vs. Delinquency vs. Losses (1)
Composition of the Provision
Bradesco monitors the development of its loan portfolio, as well as respective risks, by internally applying the expanded portfolio concept. In addition to the allowance for loan losses required by Bacen, Bradesco has excess ALL to support potential stress scenarios, as well as other operations/commitments carrying credit risks. Allowance for Loan Losses totaled R$39.2 billion in March 2017, representing 10.3% of the total loan portfolio, comprising of: (i) generic provision (customer and/or operation rating); (ii) specific provision (non-performing loans); and (iii) excess provision (internal criteria). Provisioning levels are deemed appropriate and sufficient to support possible changes in scenarios, such as higher delinquency levels and/or changes in the loan portfolio profile. |
(1) As defined by Bacen; and (2) Up to December 2016, includes the Allowance for Guarantees Provided, encompassing sureties, guarantees, credit letters, and standby letter of credit, which comprises the concept of “Excess Provision”. | |
Provisioning, Delinquency, ALL and Effective Coverage Ratio |
||
The strength of the provisioning criteria adopted must be mentioned, which is proven by: (i) historical data analysis of recorded allowances for loan losses; and (ii) effective losses in the subsequent 12-month period. When analyzed in terms of net loss of recovery, for an existing provision of 8.4% of the portfolio(1), in March 2016, the net loss in the subsequent 12-month period was 4.2%, representing an effective coverage of 206.2%. It should be highlighted that, considering the losses expected for one year (dotted part), there is an effective coverage ratio of 214.6% for March 2017. |
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40 Economic and Financial Analysis Report – March 2017
Economic and Financial Analysis |
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Interest-Earning Portion of Credit Intermediation
Coverage Ratio
The graph below presents the behavior of the ratios covering the provision for doubtful accounts in relation to default credits exceeding 60 and 90 days, considering HSBC Brasil, as of September 2016. In March 2017, these ratios showed very comfortable levels, reaching coverages of 154.0% and 182.1%, respectively. |
Besides the provision for doubtful accounts required by Bacen, Bradesco has an excess provision of R$6.9 billion, to cover possible adverse scenarios, as well as other operations/commitments with credit risk. |
NPL Creation 90 days vs Write-offs
The total NPL creation reached R$6,695 million in the first quarter of 2017, representing 1.8% of the Bacen loan portfolio, and remaining stable compared to the previous quarter. Disregarding the case of a specific client, fully provisioned, the ratio would be 1.5%, with a decrease of 0.3 p.p.. |
|
(1) Effect of a specific corporate client.
Bradesco 41
Economic and Financial Analysis |
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Interest-Earning Portion of Credit Intermediation
Loan Portfolio – Portfolio Indicators
With the aim of facilitating the monitoring of the quantitative and qualitative performance of Bradesco’s loan portfolio, emphasizing that as of July 2016, it includes consolidation of HSBC Brasil, a comparative summary of the main figures and indicators is presented below:
(1) As defined by Bacen; and
(2) Up to December 31, 2016, included the constitution of provision for guarantees provided, encompassing sureties, guarantees, credit letters, and standby letter of credit, which comprises the concept of “excess” provision that totaled R$3,060,090 thousand. In accordance with Resolution No. 4,512/16, in the first quarter of 2017, part of this balance (R$604,623 thousand) was allocated to a specific account under "Other Liabilities - Sundry" (Note 20b - chapter 6 of this report), and the remaining balance (R$2,456,367 thousand) was allocated to “Excess Provision".
42 Economic and Financial Analysis Report – March 2017
Economic and Financial Analysis |
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Interest-Earning Portion of Credit Intermediation
Loans vs. Funding
In order to analyze Loan Operations in relation to Funding, the following should be deducted from the total client funding: (i) the amount committed to reserve requirements at Bacen, (ii) the amount of available funds within the customer service network, along with the addition of, (iii) funds from domestic and foreign lines of credit that finance the demand for loans. Bradesco shows low dependency on interbank deposits and foreign lines of credit, given its This efficiency results in: (i) of the prominent position of the Client Service Points; (ii) the broad diversity of products offered; and (iii) the market’s confidence in the Bradesco brand. |
Note that the use of funds provides a comfortable margin. It proves that Bradesco is capable of meeting demands for loan operations through its own funding. |
(1) Debentures mainly used as collateral for repo operations; and
(2) Considers: Real Estate Credit Notes, Agribusiness Notes, Financial Bills and Structured Operations Certificate.
Bradesco 43
Economic and Financial Analysis |
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Interest-Earning Portion of Credit Intermediation
Main Funding Sources
The following table presents the changes in these sources:
(1) Mostly considers debentures used as collateral for repo operations; and
(2) Includes: Financial Bills, in March 2017, totaling R$104,710 million (R$108,475 million in December 2016 and R$72,612 million in March 2016).
Demand Deposits
Demand deposits totaled R$30,564 million in March 2017, showing a decrease in the amount of R$2,856 million, or 8.5%, in the quarterly comparison, mainly driven by: (i) the business opportunities offered to clients, basically due to the fluctuations of interest rates during the period; (ii) the use of these funds by our clients for the payment of specific expenses at the beginning of the year (e.g.: motor-vehicle tax (IPVA) and municipal real estate tax (IPTU)); combined: (iii) the seasonality of the fourth quarter, which contributes to a greater volume of funds, due to the payment of the 13th salary. An increase of R$7,974 million, or 35.3%, in the annual comparison, was mainly due to the increase in the client base in the period, partially due to the effect of the consolidation of HSBC Brasil, which occurred in the third quarter of 2016. |
![]() (1) Additional installment is not included. | |
Savings Deposits |
||
Savings deposits totaled R$94,353 million in March 2017, showing a decrease in the amount of R$2,736 million, or 2.8%, in the quarterly comparison, due to: (i) the reduction in the base of savings accounts; and (ii) the business opportunities offered to clients, due to the fluctuations of interest rates during the period. In the annual comparison, the increase of R$6,092 million, or 6.9%, was due to: (i) the expansion of the base of savings accounts, which showed a net growth of 2.4 million new savings accounts, partially due to the effect of the consolidation of HSBC Brasil, which occurred in the third quarter of 2016; and (ii) the remuneration of stock. |
(1) Additional installment is not included. |
44 Economic and Financial Analysis Report – March 2017
Economic and Financial Analysis |
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Interest-Earning Portion of Credit Intermediation
Time Deposits
In March 2017, the balance of time deposits totaled R$109,944 million, an increase of R$6,828 million, or 6.6%, and in comparison with the first quarter of the previous year, and increase of R$32,190 million, or 41.4% in the annual comparison, partly due to: (i) the effect of the consolidation of HSBC Brasil as of the third quarter of 2016; and (ii) the interest rate oscillations occurring in the period. The performance of these movements is mainly due to interest rate oscillations occurring in the period and to the investment alternatives available to clients. |
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Debentures |
||
In March 2017, the balance of debentures totaled R$73,904 million, a decrease of R$12,160 million, or 14.1%, when compared to the previous quarter, and R$11,570 million, or 13.5%, in the annual comparison. Such variations refer mainly to the placement of these financial instruments, which are also used as collateral for repo operations. |
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Borrowing and Onlending |
||
In March 2017, the balance of borrowing and onlending registered at R$56,417 million, a decrease of R$1,780 million, or 3.1%, compared with the previous quarter, mainly due to a decrease in the volume of funds raised by borrowings and onlending in the country, mainly in the form of Finame and BNDES operations. In the comparison between March 2017 and March 2016, the balance of borrowings and on-lending recorded a decrease of R$6,432 million, or 10.2%, due to: (i) a decrease of R$5,062 million, or 18.7%, in borrowings and onlending denominated and/or indexed in foreign currency, whose balance changed from R$27,140 million in March 2016 to R$22,078 million, in March 2017, partly due to the negative exchange rate variation of 11.0% in the period; (ii) the reduction in the volume of funds raised by borrowings and on-lending in Brazil, mainly through Finame operations; and partially compensated: (iii) the increase in the volume of funds raised through BNDES operations. |
|
Bradesco 45
Economic and Financial Analysis |
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Interest-Earning Portion of Credit Intermediation
Funds from Issuance of Securities
In March 2017, funds from issuance of securities totaled R$142,751 million, presenting a decrease in the amount of R$8,056 million, or 5.3%, compared with the previous quarter, mainly due to the decrease: (i) the decreased inventory of Financial Bills, in the amount of R$3,765 million; (ii) from the inventory of MTN Program Issues, in the amount of R$2,542 million and (iii) of the inventory of Real Estate Credit Notes, in the amount of R$1,333 million. In the comparison between March 2017 and March 2016, the increase in the amount of R$30,134 million, or 26.8%, was mainly due to: (i) the increase in the inventory of Financial Bills, whose balance went from R$72,612 million in March 2016 to R$104,710 million in March 2017, basically due to the new issues that occurred in the period; and (ii) the effect of the consolidation of HSBC Brasil as of the third quarter of 2016. |
(1) Considers: Mortgage Notes, Agribusiness Notes, MTN Program Issues, Securitization of Payment Order Flow, Cost of issuances over funding, Certificate of Deposit and Structured Operations Certificate. | |
Subordinated Debts |
||
Subordinated debts totaled R$50,846 million in March 2017, showing a decrease in the amount of R$1,765 million, or 3.4%, in the quarterly comparison, driven by the maturity of debts. In the annual comparison, the balances remained stable, and the new issues offset the maturities that occurred in the periods. |
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46 Economic and Financial Analysis Report – March 2017
Economic and Financial Analysis |
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Interest-Earning Portion of Insurance
Earning Portion of Insurance – Breakdown
Comparing the first quarter of 2017 with the previous quarter, the interest-earning portion of insurance operations recorded a R$10 million increase, which was due to: (i) an increase in the volume of operations, totaling R$56 million, and partially offset by: (ii) a R$46 million decrease in the average spread. |
In the year-over-year comparison, net interest income increased by R$6 million, as a result of: (i) an increased volume of operations, in the amount of R$301 million, partly due to the effect of the consolidation of HSBC Brasil as of the third quarter of 2016, offset by: (ii) a R$295 million decrease in the average spread. |
Interest-Earning Portion of Securities/Other
Earning Portion of Securities/Other – Breakdown
In the comparison between the first quarter of 2017 and the previous quarter, there was an decrease of R$17 million in the NII - interest-earning portion of “Securities/Other”, including asset and liability management (ALM), mainly due to: (i) decrease in the average volume of operations, totaling R$56 million, and partially offset by: (ii) the average spread increase, impacted by positions in the fixed-income portfolios, in the amount of R$39 million. |
In the year-over-year comparison, net interest income of “interest” with “Securities/Others” increased by R$79 million, primarily due to: (i) an increase in the volume of operations, resulting in R$174 million; and partly offset by: (ii) a R$95 million decrease in the average spread. |
Non-Interest-Earning Portion
Non-Interest-Earning Portion – Breakdown
Non-interest-earning portion of the NII totaled R$136 million in the first quarter of 2017, showing a R$54 million decrease in comparison with the same period of previous year, and a R$22 million decrease in comparison with the same period of previous year due to lower gains with arbitration of markets.
Bradesco 47
Economic and Financial Analysis |
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Insurance, Pension and Capitalization
Below is an analysis of Grupo Bradesco Seguros’ statement of financial position and statement of income. From July 2016, we began to consolidate the financial statements of companies of the insurance segment of HSBC Brasil.
Consolidated Statement of Financial Position
(1) Considering the shareholders’ equity of Bradesco Seguros S.A, which controls the operating companies (insurance, pension plans and capitalization bonds), it would amount to R$17,647 million in March 2017.
Consolidated Income Statement
Note: For comparison purposes, effects of non-recurring events are not considered.
48 Economic and Financial Analysis Report – March 2017
Economic and Financial Analysis |
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Insurance, Pension and Capitalization
Income Distribution of Grupo Bradesco Seguros e Previdência
Performance Ratios
(1) Retained Claims/Earned Premiums;
(2) Selling expenses/Earned Premiums;
(3) Administrative Expenses/Net Written Premiums;
(4) (Retained Claims + Selling Expenses + Other Operating Income and Expenses)/Earned Premiums + (Administrative Expenses + Taxes)/Net Written Premiums; and
(5) Excludes additional reserves.
Note: For comparison purposes, effects of non-recurring events are not considered.
Written Premiums, Pension Plan Contributions and Capitalization Bond Income
Due to the concentration of private pension contributions, which historically occur in the last quarter of the year, revenues did not show the same performance when compared to the fourth quarter of 2016.
In the first quarter of 2017, the production recorded a growth of 18.2% in comparison with the same period of the previous year, influenced by "Life and Pension”, “Health”, “Capitalization Bonds” and “Auto/P&C” products, which presented an increase of 29.2%, 10.6%, 7.7% and 2.6%, respectively.
Bradesco 49
Economic and Financial Analysis |
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Insurance, Pension and Capitalization
Indexes of Claims Ratio per Industry
50 Economic and Financial Analysis Report – March 2017
Economic and Financial Analysis |
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Insurance, Pension and Capitalization
Administrative Efficiency Ratio
General and Administrative Expenses / Billing.
Maintenance of administrative efficiency ratio, in the comparison between the first quarter of 2017 and the previous quarter, is due to the benefits generated with the rationalization of expenditures.
The decrease in the administrative efficiency ratio, in the comparison between the first quarter of 2017 and the same period in the previous year, is a reflection of: (i) the benefits generated by the streamlining of expenditures; and (ii) the 18.2% increase in sales revenue for the period.
Technical Provisions
Bradesco 51
Economic and Financial Analysis |
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Life and pension plans
(1) Life/VGBL/PGBL/Traditional; and
(2) The first quarter of 2017 includes the latest data released by SUSEP (February/17).
Note: For comparison purposes, effects of non-recurring events are not considered.
Revenue, which for the segment is historically concentrated in the last quarter of the year, did not show the same performance when compared to the fourth quarter of 2016. Net income for the first quarter of 2017 was 19.3% lower compared with the results of the previous quarter, influenced by: (i) the reduction in financial income, reflecting the behavior of the economic–financial indices in the period; and compensated, in part: (ii) the decrease of 2.9 p.p. in the claims ratio index; (iii) by the reduction of 1.1% in the marketing index; and (iv) by the maintaining of the administrative efficiency index. |
Net income of the first quarter of 2017 was 1.1% higher compared with the results from the same period of previous year, influenced by the following factors: (i) an increase of 29.2% in revenue; (ii) maintaining of the claim rate; (iii) the improvement of the administrative efficiency index; and partially offset by: (iv) the increase of 1.7 p.p. in the commercialization index. In March 2017, technical provisions for Bradesco Life and Pension Plans, stood at R$207.1 billion, made up of R$197.2 billion from "Pension Plans and VGBL" and R$9.9 billion from "Life, Personal Accidents and other lines", resulting in an increase of 27.4% in March 2016. | |
Growth of Participants and Life and Personal Accident Policyholders | ||
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In March 2017, the number of Bradesco Life and Pension Plans clients exceeded the 2.6 million mark of “Pension Plans and VGBL” participants, and 31.3 million “Life and Personal Accident” policyholders. Such performance is fueled by the strength of the Bradesco brand and the improvement in selling and management policies. |
52 Economic and Financial Analysis Report – March 2017
Economic and Financial Analysis |
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Health
(1) The first quarter of 2017 includes the latest data released by ANS (February/17).
Note: For comparison purposes, effects of non-recurring events are not considered.
Net income for the first quarter of 2017 decreased by 14.4% in relation to the results calculated for the previous quarter, mainly due to: (i) of the increase of 2.6% in the claim rate; compensated, in part: (ii) the increase of 0.8% in revenue; (iii) the decrease of the commercialization index; (iv) a decrease of 0.6 p.p in the administrative efficiency index and (v) the improvement in equity and financial results. |
In March 2017, Bradesco Saúde and Mediservice maintained a strong market position in the corporate sector (source: ANS). | |
Net income of the first quarter of 2017 recorded a decrease of 26.0% compared with the results calculated in the same period of the previous year primarily due to: (i) the increase of 3.8 p.p. in the claims ratio; (ii) of the decrease in financial income, due to the behavior of the economic–financial indices; compensated, in part: (iii) an increase of 10.9% in revenue; (iv) by the 0.6% reduction in the marketing index; and (v) by the maintaining of the administrative efficiency index. |
Approximately 140 thousand companies in Brazil have Bradesco Saúde insurance and Mediservice plans. Of the 100 largest companies in Brazil in terms of billing, 42 are Bradesco Saúde and Mediservice customers (source: Exame magazine – "Melhores e Maiores" ranking, July 2016). | |
Number of Bradesco Saúde and Mediservice Policyholders |
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These two companies have a combined total of more than 3.9 million clients. The large share of corporate insurance in this portfolio (96.0% in March 2017) is proof of its high level of specialization and customization in providing group coverage plans.
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Bradesco 53
Economic and Financial Analysis |
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Capitalization bonds
(1) The first quarter of 2017 includes the latest data released by SUSEP (February/17).
Net income for the first quarter of 2017 recorded a decrease of 15.9% over the previous quarter primarily due to: (i) by the improvement in operating income; (ii) the maintenance in the administrative efficiency ratio and partly offset by: (iii) a decrease of 4.6% in revenue. Net income of the first quarter of 2017 recorded a decrease of 6.8% compared with the results calculated in the same period of the previous year primarily due to: (i) of the decrease in the financial income, due to the behavior of the economic–financial indices; compensated, in part: (ii) the 7.7% increase in sales revenue, which influenced the improvement in operating income; and (iii) by the improvement of the administrative efficiency index. Bradesco Capitalização reached a 7.7% growth in revenue in 2017, in the first quarter of 2017 in relation to the same period of 2016, thanks to its transparency policy and by adjusting its products based on potential consumer demand, consistent with market changes. Concerned with providing products that better fit the most varied profiles and budgets of its clients, Bradesco Capitalização has a product portfolio, which ranges in payment method (lump or monthly), contribution term, periodicity and value of premiums that meet the requirements and expectations of the clients. By combining a pioneering spirit and a strategic vision of the business, Bradesco Capitalização launched products geared toward social and environmental causes, where a portion of the funds raised is earmarked for projects having this purpose. In addition to making it possible for the client to establish a financial reserve, the Capitalization Bonds with a social and environmental profile seek to make clients aware of the importance of this issue and allow them to participate on behalf of this noble and beneficial cause to society, as well as reshaping its products with the launch of the “Max Prêmios Bradesco” family, offering products with monthly payment and single payments, ranging from R$20.00 (monthly) to R$5,000.00 (single). Currently, Bradesco Capitalização maintains a partnership with the SOS Mata Atlântica Foundation, which promotes conservation of the biological and cultural diversity of the Atlantic Forest Biome, stimulating social and environmental civic awareness and actions. |
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54 Economic and Financial Analysis Report – March 2017
Economic and Financial Analysis |
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Automobile and Property & Casualty
(1) The first quarter of 2017 includes the latest data released by SUSEP (February/17).
Note: In August 2015, we transferred the investment in the IRB – Brasil Resseguro S.A. to Bradesco Seguros.
The result of the Property & Casualty operation in the first quarter of 2017 was due to: (i) the effect of R$101.9 million arising from the review of the extended warranty operation’s business plan in the fourth quarter of 2016; (ii) the decrease of 1.0 p.p. in the claims ratio index; (iii) the maintenance in the commercialization index; (iv) the increase of 2.6 p.p. in the administrative efficiency index; (v) an improvement in financial results; and partly offset by: (vi) a decrease of 2.6% in revenue. Net income for the first quarter of 2017 was 10.9% lower than the income recorded in the same period of the previous year, mainly as a result of: (i) the decrease in financial income, due to the behavior of the economic-financial indices; compensated, in part: (ii) the increase of 2.6% in revenue; (iii) the decrease of 3.7 p.p. in the claims ratio; (iv) the decrease in the commercialization index; and (v) maintaining of the administrative efficiency index. Bradesco Auto/P&C is present in 40 of the 100 largest groups in the country, as the insurer of its equities. And, to ensure the retention of clients, the company has invested in the revision of its internal processes, mainly, in the areas dedicated to customer service and the analysis and regulation of claims, in search of greater efficiency and quality in the provision of services. In order to give clients more freedom to customize their Automobile insurance according to their needs, Bradesco Auto/P&C has been investing in the flexibility of contracting coverage and services. The heavy investment in technology, particularly in the online services, has aided the simplification of internal processes, making the purchase of mass market insurance of Property & Casualty more agile. In Auto, we highlight the new functions of the “Day and Night Assistance for Policyholders” and the implementation of new functionalities in the follow-up to claims through digital channels, for Policyholders and Brokers, and the inclusion of monitoring for third parties. In Property Casualty and Others, an online chat service was launched for follow-up to claims for Brokers, and improvements were implemented in the follow-up procedures for the claim process, through the website of the Policyholder and the “100% Corretor” web portal. Despite strong competition in the “Auto/RCF” branches, the insurance company preserved its fleet of approximately 1.5 million items, confirming the maintenance of competitiveness. This was due mainly to more refined and segmented pricing, which helped reduce the rate of accidents/claims and increase the margin. The network activity of the automotive centers of Bradesco Auto Center (BAC), with 30 units throughout the entire country, offers policyholders access to a varied range of services in a single place. Since 2007, there have been more than 500 thousand assistances, between claims, provision of spare cars, installation of anti-theft equipment, prior inspections performed, preventative maintenance checks and glass repairs. |
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Economic and Financial Analysis |
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Fee and Commission Income
A breakdown of the variation in Fee and Commission Income for the respective periods is presented below:
Credit card income
Credit card income amounted to R$2,637 million in the first quarter of 2017, showing a decrease of R$161 million, or 5.8% in comparison with the previous quarter, due to the seasonality of year-end purchases. In the comparison of the first quarter of 2017 and the same period of the previous year, the growth was R$216 million or 8.9% primarily due to: (i) the increase in the financial volume traded; and (ii) the increased amount of transactions carried out in the period; partly influenced by the effect of the consolidation of HSBC Brasil, as of the third quarter of 2016. |
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56 Economic and Financial Analysis Report – March 2017
Economic and Financial Analysis |
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Fee and Commission Income
Checking Account
In the first quarter of 2017, revenues from checking account services totaled R$1,601 million, a reduction of R$22 million, or 1.4%, in relation to the previous quarter, primarily due to the seasonal effect of the fourth quarter, a period in which there is a substantial increase in the volume of services provided to our clients. Comparing the first quarter of 2017 and the same period of the previous year, these revenues increased by R$237 million, or 17.4%, mainly a reflection of: (i) the expansion of the portfolio of services rendered; (ii) the increase in the volume of business; and (iii) the effect of the consolidation of HSBC Brasil as of the third quarter of 2016. |
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Asset Management |
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In the first quarter of 2017, fund management income totaled R$912 million, showing an increase of R$61 million, or 7.2%, compared with the previous quarter mainly due to higher business days in the quarter. In the comparison between the first quarter of 2017 and the same period in the previous year, there was an increase of R$238 million, or 35.3%, a reflection, in large part, of the following: (i) increase in the volume of funds raised and managed, which grew 31.8% over the period, investments in fixed income funds being notable, that increased 31.2%; and (ii) the effect of the consolidation of HSBC Brasil, as of the third quarter of 2016. |
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Bradesco 57
Economic and Financial Analysis |
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Fee and Commission Income
Loan Operations
Revenues from credit operations increased by 7.8%, or R$53 million in the quarterly comparison, and by 11.4%, or R$75 million, compared to the same period in the previous year, primarily resulting from the increase in income with guarantees provided, which increased by 7.1% and 29.1%, respectively. |
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Cash Management Solutions (Payments and Collection) |
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In the first quarter of 2017, revenues from collections and payments amounted to R$586 million, an increase of R$15 million, or 2.6%, compared to the previous quarter, primarily due to the larger number of business days in the quarter. Comparing the first quarter of 2017 and the same period in the previous year, there was an increase of R$90 million, or 18.1%, due to: (i) the greater volume of processed documents, up from 562 million in the first quarter of 2016 to 673 million in first quarter of 2017; and (ii) the effect of the consolidation of HSBC Brasil as of the third quarter of 2016. |
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58 Economic and Financial Analysis Report – March 2017
Economic and Financial Analysis |
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Fee and Commission Income
Consortium Management
In the first quarter of 2017, income from consortium management increased by R$6 million, or 1.7%, compared with the previous quarter, which had 1,375 thousand active quotas, ensuring a leading position in all the sectors in which it operates (real estate, auto and trucks/machinery and equipment). In the comparison between the first quarter of 2017 and the same period of the previous year, there was an increase of R$91 million or 32.7% in income from consortium management, due to a higher volume of: (i) received bids; (ii) average ticket; and (iii) billing of sales, ranging from 1,212 thousand active quotas, in March 2016, to 1,375 thousand active quotas in March 2017, generating an increase of 163 thousand net quotas. |
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Custody and brokerage services |
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In the first quarter of 2017, revenues from custody and brokerage services increased by R$8 million, or 3.9%, compared to the previous quarter, mainly due to: (i) an increase of R$66 billion in custody assets; and (ii) the higher business days in the quarter. In the comparison between the first quarter of 2017 and the same period of the previous year, these revenues increased R$61 million, or 40.7%, due to the increase in total assets in custody in the amount of R$316 billion, partly impacted by the effect of the consolidation of HSBC Brasil as of the third quarter of 2016. |
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Underwriting/Financial Advisory Services |
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In the quarterly comparison, the decrease of R$52 million, or 22.4%, refers, mostly, to the lower activity on the capital market in the period. Comparing the first quarter of 2017 and the same period in the previous year, revenues from underwriting / financial advisory services increased by R$18 million, or 11.1%. It is important to note that variations recorded in this income derive from the capital market’s volatile performance. |
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Bradesco 59
Economic and Financial Analysis |
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Personnel and Administrative Expenses
(1) This reduction refers to: (i) the migration of “External ATM Network Points – Bradesco” to “Banco24Horas Network”; (ii) the deactivation of ATMs from “Banco24Horas Network”; and (iii) the decrease of Bradesco Expresso (Correspondent Banks).
Total Personnel and Administrative Expenses amounted to R$9,676 million in the first quarter of 2017, showing a decrease of 7.7%, or R$806 million, in comparison with the previous quarter. In the comparison with the same period of the previous year, total Personnel and Administrative Expenses showed an increase of 22.9%, or R$1,806 million, partly impacted by the effect of the consolidation of HSBC Brasil as of the third quarter of 2016.
Personnel Expenses |
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Total personnel expenses amounted to R$4,822 million in the first quarter of 2017, showing a decrease of R$249 million, or 4.9% in comparison with the previous quarter, due to: (i) a reduction of R$311 million, or 7.3%, in the “structural” portion, related to lower expenses, with payroll/social charges and benefits partially impacted by the higher concentration of paid vacation time in the period, a characteristic of the first quarter of each year; and compensated, in part: (ii) by the increase in the “non-structural” portion, in the amount of R$62 million, or 7.6%, mainly a reflection of higher expenses on (a) terminations, in the amount of R$55 million, and (b) management and employee profit sharing, in the amount of R$20 million. |
60 Economic and Financial Analysis Report – March 2017
Economic and Financial Analysis |
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Personnel and Administrative Expenses
In the comparison between the first quarter of 2017 and the same period in the previous year, the increase of R$1,068 million, or 28.4%, in expenses on personnel, is explained by variations in the portions: (i) "structural" portion in the amount of R$921 million or 30.4% due to the increase in expenses with payroll, social charges and benefits, impacted by (a) higher salaries, in accordance with the 2016 collective bargaining agreement; and (b) the effect of the consolidation of HSBC Brasil as of the third quarter of 2016; and (ii) "non-structural" portion in the amount of R$148 million or 20.3%, a result, partially due to higher expenses with (a) employment termination costs totaling R$73 million and (b) employee and management profit sharing totaling R$55 million. |
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Administrative Expenses |
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Total administrative expenses amounted to R$4,854 million in the first quarter of 2017, showing a decrease of 10.3%, or R$557 million, in comparison with the previous quarter, mainly due to: (i) the synergies and economies of scale resulting from the incorporation of HSBC Brasil activities in October 2016, leading to lower expenses with (a) outsourced services, in the amount of R$211 million and (b) asset maintenance, in the amount of R$37 million; and (ii) the year-end seasonality that resulted in (a) the lower volume of business and services, and (b) lower expenses with advertising and marketing, in the amount of R$183 million. In the first quarter of 2017, administrative expenses increased 17.9%, or R$738 million, a reflection of the increase in expenses originating from: (i) a growth in the business volume and services within the period; (ii) the effect of the consolidation of HSBC Brasil as of the third quarter of 2016; and (iii) contractual adjustments. |
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Operating Coverage Ratio (1)
In the first quarter of 2017, the coverage ratio over the last 12 months recorded 75.3%, mainly impacted by the increase in operating expenses due to the effect of the consolidation of HSBC Brasil as of the third quarter of 2016. Nevertheless, it should be noted that the maintenance of this high-level indicator is mainly caused by ongoing cost control efforts, including (a) the Efficiency Committee’s initiatives; among which we highlight as a target for the year 2017, the capture of synergies and scale gains from the merger of HSBC Brasil (b) investments in Information Technology, which totaled R$1.408 billion in the first quarter of 2017; and (c) measures applied to increase the offer of products and services available to the entire client base. |
(1) Fee and Commission Income/Administrative and Personnel Expenses (in the last 12 months). |
Bradesco 61
Economic and Financial Analysis |
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Tax Expenses
Tax expenses totaled R$1,772 million in the first quarter of 2017, showing an increase of R$69 million, or 4.1%, in relation to the previous quarter, primarily due to the: (i) the increase in taxable income in the period; and (ii) the increase in IPTU (property tax) expenses, due to the early payment of this tax. In the comparison between the first quarter of 2017 and the same period of the previous year, such expenses increased by R$354 million, or 25.0%, primarily due to the increase in expenses with PIS/ISS/Cofins, derived from the increase in taxable income in the period, mainly of fee and commission income and net interest income. |
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Equity in the Earnings (Losses) of Affiliates
In the first quarter of 2017, equity in the earnings (losses) of affiliates was R$58 million, an increase of R$10 million, or 20.8%, compared with the previous quarter, and an increase of R$18 million, or 45.0%, in relation to the same period of the previous year. These variations are primarily due to the equity in the earnings (losses) obtained with the “IRB - Brasil Resseguros" affiliate. |
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Non-Operating Income
In the first quarter of 2017, non-operating income recorded a loss of R$52 million, showing an increase of R$39 million, in comparison with the previous quarter, and an increase of R$35 million, or 40.2%, in the annual comparison, essentially due to the variation of non-operating expenses (such as losses on sale and write-off of assets and investments/other) and partly offset by the effect of the consolidation of HSBC Brasil as of the third quarter of 2016. |
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62 Economic and Financial Analysis Report – March 2017
Economic and Financial Analysis |
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Additional Information – HSBC Brasil Historical Series
Adjusted Statement of Financial Position
(1) In September 2016, the effect of adjustments to the accounting criteria adopted by Bradesco is included.
Statement of Adjusted Income
(1) “Other”, includes: Capitalization bond prize draws and redemptions; and Selling expenses from insurance, pension plans and capitalization bonds.
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Economic and Financial Analysis |
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Additional Information – Comparison of March 2017 and 2016 “Pro-forma”
From the third quarter of 2016, HSBC Brasil has been consolidated into our financial statements, and in order to provide comparability of assets/liabilities and income compared regarding March 2017 and 2016, below we present pro forma consolidated financial information, i.e., the combined assets/liabilities and income of Bradesco and HSBC Brasil for the year 2016. This pro forma consolidated financial information includes all income statement and balance sheet items from HSBC Brasil, and the income of HSBC Brasil not computed to Bradesco is included under the heading “non-controlling interests/others”, referring to periods prior to the actual acquisition, given that the proposal is to retroactively demonstrate the effect of a transaction that occurred at a later date, and thus, we stress that the data was provided for mere illustrative purposes.
Adjusted Statement of Financial Position
Statement of Adjusted Income
(1) “Other”, includes: Capitalization bond prize draws and redemptions; and Selling expenses from insurance, pension plans and capitalization bonds.
64 Economic and Financial Analysis Report – March 2017
Return to Shareholders |
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Corporate Governance
Bradesco’s Management is made up of the Board of Directors and the Statutory Board of Executive Officers. The Board of Directors is composed of eight members, being seven external members and one internal. These members were elected at the Annual Shareholders’ Meeting and are eligible for reelection. Currently, seven committees advise the Board of Directors, whereby two are statutory (Audit and Remuneration) and five non-statutory (Ethical Conduct, Internal Controls and Compliance, Integrated Management of Risks and Allocation of Capital, Succession Planning and Nomination, and Sustainability). There are also several executive committees that assist the activities of the Executive Board. |
Bradesco also makes use of the permanent Fiscal Council, elected by the shareholders, and the Audit Committee, which reports to the Board of Directors, as the main oversight agencies of its administrative/operational structure. In 2001, Bradesco voluntarily adhered to Level 1 Corporate Governance of B3, as well as to the Code of Self-Regulation and Best Practices for Publicly Held Companies, issued by the Brazilian Association of Publicly Held Companies (ABRASCA), in 2011. Further information is available on Bradesco’s Investor Relations website (bradescori.com.br – Corporate Governance Section). |
Investor Relations area – IR
The commitment to transparency, democratization of information, punctuality and the pursuit of the best practices are essential factors and are constantly reinforced by Bradesco’s Investor Relations area. In the first quarter of 2017, there were 92 events promoted with national and international investors, through conferences, meetings, conference calls and institutional presentations, assisting 1,295 investors. |
The schedule of events in Brazil in the first quarter also promoted the Bradesco APIMEC Meeting Brasília, comprising an audience of over 140 participants in loco. |
Bradesco Shares
Number of Shares – Common and Preferred Shares
In thousands |
Mar17 (1) |
Dec16 |
Mar16 |
Common Shares |
3,049,449 |
2,772,226 |
2,772,226 |
Preferred Shares |
3,035,625 |
2,759,659 |
2,759,659 |
Subtotal – Outstanding Shares |
6,085,074 |
5,531,885 |
5,531,885 |
Treasury Shares |
23,889 |
21,717 |
21,717 |
Total |
6,108,962 |
5,553,602 |
5,553,602 |
(1) Includes effect of bonus of shares of 10% with incorporation to shareholders’ position as of May 4, 2017.
In March 2017, Bradesco’s Capital stood at R$59.1 billion, composed of 6,108,962 thousand shares, made up of 3,054,481 thousand common shares and 3,054,481 thousand preferred shares, as book entries and without par value. Cidade de Deus Cia. Comercial de Participações is Bradesco’s largest shareholder, which directly holds 48.5% of the voting capital and 24.3% of the total capital. |
Shareholders of Cidade de Deus Cia. Comercial de Participações belong to the Aguiar Family, Fundação Bradesco and another holding company, Nova Cidade de Deus Participações S.A., a company controlled by Fundação Bradesco and by BBD Participações S.A., whose shareholders constitute the majority of the members of the Board of Directors of the Statutory Board of Executive Officers of Bradesco and more senior officers. |
66 Economic and Financial Analysis Report – March 2017
Return to Shareholders |
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Bradesco Shares
Number of Shareholders – Domiciled in Brazil and Abroad
|
Mar17 |
% |
Ownership of Capital (%) |
Mar16 |
% |
Ownership of Capital (%) |
Individuals |
322,571 |
89.8 |
20.7 |
326,146 |
89.9 |
21.0 |
Companies |
35,446 |
10.0 |
45.7 |
35,744 |
9.8 |
45.0 |
Subtotal - Domiciled in Brazil |
358,017 |
99.6 |
66.4 |
361,890 |
99.7 |
66.0 |
Domiciled Abroad |
1,266 |
0.4 |
33.6 |
1,188 |
0.3 |
34.0 |
Total |
359,283 |
100.0 |
100.0 |
363,078 |
100.0 |
100.0 |
In March 2017, Bradesco had 359,283 shareholders, 358,017 residing in Brazil, representing 99.6% of the total number of shareholders holders of 66.4% of its capital. The amount of shareholders domiciled abroad was 1,266, representing 0.4% of the number of shareholders with 33.6% of its share capital. | ||
Daily Average Trading Volume of Shares |
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During the first three months of 2017, the average daily trading volume of our shares on the New York Stock Exchange (NYSE) and B3 reached R$658 million. This figure was 6.5% lower than the average daily volume traded in the previous year, mainly driven by the 8.0% reduction in the average daily trading volume of Bradesco shares on the NYSE. |
(1) BBDC3 “Common Shares” and BBDC4 “Preferred Shares”; and
(2) BBD “Preferred Shares” and BBDO “Common Shares” (as of March 2012).
Bradesco 67
Return to Shareholders |
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Bradesco Shares
Appreciation of Preferred Shares – BBDC4
The graph shows the change in Bradesco’s preferred shares, taking into account the reinvestment of dividends (it includes Interest on the Stockholders’ Equity), compared to the Ibovespa. |
If, in late December 2007, R$100 were invested, Bradesco’s shares would be worth approximately R$216 at the end of March 2017, which is an appreciation approximately two times higher compared to that which was presented by the Ibovespa within the same period. |
Share and ADR Performance (1)
(1) Adjusted for corporate events in the periods; and
(2) Number of shares (excluding treasury shares) vs. closing price for common and preferred shares on the last trading day of the period.
68 Economic and Financial Analysis Report – March 2017
Return to Shareholders |
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Bradesco Shares
Recommendation of Market Analysts – Target Price
Market analysts issue periodical recommendations on Bradesco’s preferred shares (BBDC4). In April 2017, we analyzed eleven reports prepared by these analysts. Their recommendations and general consensus on the target price for December 2017 can be found below: |
For more information on the target price and the recommendations of each market analyst that monitors the performance of Bradesco’s shares. |
Such information is available at: bradescori.com.br > Information to Shareholders > Analysts’ Consensus. |
Fair value
In March 2017, Bradesco’s market capitalization, in view of the closing prices of Common and Preferred shares, was R$178.2 billion, an increase of 10.8% compared with December 2016. It is mention worthy that, in the same period, Ibovespa grew by 7.9%. |
Bradesco 69
Return to Shareholders |
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Main Indicators
Price/Earnings Ratio(1): Indicates the possible number of years within which the investor would recover the capital invested, based on the closing prices of common and preferred shares. |
(1) Twelve-month adjusted net income. | |
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Price to Book Ratio: Indicates the multiple by which Bradesco’s market capitalization exceeds its book value. |
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Dividend Yield (1) (2): The ratio between share price and dividends and/or interest on shareholders’ equity paid to shareholders in the last 12 months, which indicates the return on investment represented by the allocation of net profit. |
(1) Source: Economatica; and |
70 Economic and Financial Analysis Report – March 2017
Return to Shareholders |
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Dividends/Interest on Shareholders’ Equity – JCP
In the first quarter of 2017, R$1.845 million was assigned to shareholders as interest on shareholders’ equity (JCP) and the total JCP assigned to shareholders accounted for 51.6% of the net income for the 12-month period and, considering income tax deduction and JCP allocations, it was equivalent to 43.9% of the net income.
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(1) In the last 12 months.
Weight on Main Stock Indexes
Bradesco shares are listed on Brazil’s main stock indexes, including IBrX-50 and IBrX-100 (indexes that measure the total return of a theoretical portfolio composed of 50 and 100 shares, respectively, selected from among the most traded shares on B3), IBrA (Broad Brazil Index), IFNC (Financial Index, composed of banks, insurance companies and financial institutions), ISE (Corporate Sustainability Index), IGCX (Special Corporate Governance Stock Index), IGCT (Corporate Governance Trade Index), ITAG (Special Tag-Along Stock Index), ICO2 (index composed of shares of the companies listed on the IBrX-50 index and that choose to adopt transparent greenhouse gas emission practices in order to take part in this initiative) and the Mid-Large Cap Index – MLCX (which measures the return of a portfolio composed of the highest capitalization companies listed).
Abroad, Bradesco shares are listed on the NYSE’s Dow Jones Index, in the Dow Jones Sustainability Emerging Markets portfolio and on the Madrid Stock Exchange’s FTSE Latibex Brazil Index.
(1) Represents Bradesco shares’ weight on Brazil’s main stock indexes.
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72 Economic and Financial Analysis Report – March 2017
Additional Information |
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Market Share of Products and Services
Market shares held by Bradesco in the Banking and Insurance industries and in the Customer Service Network are presented below:
(1) SFN data is preliminary;
(2) Reference date: Feb/17; and
(3) Reference date: Jan/17.
N/A – Not available.
74 Economic and Financial Analysis Report – March 2017
Additional Information |
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Market Share of Products and Services
Branch Network
Ratings
Reserve Requirements
(1) Collected in cash and not remunerated;
(2) Collected in cash with the Special Clearance and Custody System (Selic) rate;
(3) At Bradesco, reserve requirements are applied to Rural Loans; and
(4) Collected in cash with the Reference Interest Rate (TR) + interest of 6.17% p.a. for deposits made until May 03, 2012, and TR + 70% of the Selic rate for deposits made as of May 4, 2012, when the Selic rate is equal to or lower than 8.5% p.a.
Bradesco 75
Additional Information |
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Investments in Infrastructure, Information Technology and Telecommunications
In the year that Bradesco celebrates its 74th anniversary, the pioneering bank in the use and availability of innovative technologies remains at the forefront, enhancing its digital solutions to improve its clients' experience in the use of banking products and services: · at ATMs, all transactions can henceforth be carried out without a card, using only authentication through biometrics, available at 100% of the ATMs of the Onsite network - Bradesco and Banco24Horas network; · Bradesco was the first Brazilian bank to allow its clients to buy Euros through the ATMs. In addition to Euros, clients can buy US Dollars, with no need to be accompanied by a bank employee, and extended hours to meet the needs of our clients, quickly and securely. ATMs that already have this feature are available at strategic locations in São Paulo: Praça Panamericana, Nova Central, JK Iguatemi, and Praça Oswaldo Cruz; · “Bradesco Celular” has gained new features and allows Individual clients access investment fund options to make their first investment. Other facilities are investments in CDs and savings, request total or partial redemption, consult balances and returns, carry out transactions between accounts, send application and redemption receipts, schedule specialized consulting services, and carry out an Investor Profile Analysis, or “API”; · another new feature of this channel is the contracting of payroll-deductible loans for the acquisition of new personal loans or refinancing for social security (INSS) beneficiaries, public servants, and employees of private companies; · a new convenience for customers is the ability to activate, re-register or exchange the physical security device for a mobile phone Token directly at ATMs. The step-by-step instructions are very explanatory and the client can complete the process in just three steps, with or without a credit card; · improvements were made to the website for companies (“Net Empresa”), such as simplification of the process of inclusion and approvals, making it possible to view the balance of more than one company at a time, generate a single corporate access profile for the conglomerate, include users in more than one company and enable them to make their own changes to access type, as well as the alert for user proxy expiration and digital validation of transactions with mobile phone token (QR Code); |
· Bradesco account holders can use the Internet to carry out their transactions from anywhere in the world. There are more than 20 options for sending and receiving funds abroad, such as living expenses for residents, pensions, salaries, transfer of assets, educational purposes, and health care; · as part of the process of ongoing improvement, and to meet the increasing volume of transactions, we highlight the fact that the Bank reached a total of 3,910 branches equipped with Wi-Fi networks for digital activation of clients and use of Bradesco apps. The data transmission capacity at the Branches has been expanded, providing speedier service; · throughout the period, the open innovation program called “InovaBra Startup” received 504 applications, 284 of which were qualified to participate in the program, 52 were approved for the immersion phase, and 21 participated in Demo Day, where they had the opportunity to show their proposals and to answer questions by executives from the business areas, of which 10 were selected for the project development phase. The selection criteria were the percentage of approval, degree of innovation, potential for return, and strategic adherence; and · in the area of environmental sustainability, in March 2017, we disposed of technological waste, collecting 16,692 kg of work stations, notebooks, ultrabooks and monitors, which had their hard disks removed for adequate disposal, following applicable Brazilian standards. The initiative will bring gains by deactivating outdated equipment that required high energy consumption and maintenance. As a necessary condition for its continuous growth, Bradesco invested, in the first quarter of 2017, a total of R$1,408 million in Infrastructure, Information Technology and Telecommunications. |
76 Economic and Financial Analysis Report – March 2017
Additional Information |
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Risk Management
Risk management activity is highly strategic due to the increasing complexity of services and products and the globalization of Bradesco’s business. The market’s dynamism encourages Bradesco to engage in the continuous improvement of this activity in pursuit of better practices, leading Bradesco to use its internal market risk models, which have been used to calculate regulatory capital since January 2013. Bradesco controls corporate risk management in an integrated and independent manner, preserving and valuing the Board's decisions, developing and implementing methodologies, models and measurement and control tools. |
It also provides training for employees at every level of the Organization, from business areas to the Board of Directors. The management process results in the proactive identification, measurement, mitigation, monitoring and reporting of risks, which is necessary when taking into account Bradesco’s complex financial products and activity profile. Detailed information on the risk management process, regulatory capital, as well as Bradesco’s risk exposure, can be found in the Risk Management Report, available on the Investor Relations website: bradescori.com.br. |
Capital Management
The Capital Management structure aims to provide conditions for capital monitoring and control, contributing to the achievement of goals set in the strategic objectives defined by Bradesco, through adequate capital sufficiency planning. This structure is comprised of Executive Committees and one Non-Statutory Committee, which assist the Board of Directors and Board of Executive Officers in the decision-making process. In addition to the Committee structure, Bradesco has a department responsible for capital management centralization, named Capital Management, Internal Capital Adequacy Assessment Process (ICAAP) and Recovery Plan, subordinated to the Department of Planning, Budget and Control, which acts jointly with the Integrated Risk Control Department, associated companies, business areas and Bradesco’s supporting areas. On an annual basis, the capital plan is devised by Bradesco, which is approved by the Board of Executive Officers and Board of Directors. It is also aligned with the strategic plan and encompasses a prospective outlook of at least three years. The process of developing this plan considers threats and opportunities, market share and development goals, capital requirement projections based on risks, as well as capital held by Bradesco. Such projections are constantly monitored and controlled by the capital management area. |
With the implementation of the capital management (ICAAP) Recovery Plan structure, an internal process has been established to assess capital adequacy (ICAAP), which provides conditions to assess capital sufficiency in accordance with the base and stress scenarios, in a prospective outlook to identify capital and contingency actions to be taken in the respective scenarios. Capital adequacy and sufficiency information represent essential tools to manage and support the decision-making process. Additional information on the capital management structure is available in the Risk Management Report – Pillar 3, and in the Integrated Report, on the Investor Relations website: bradescori.com.br. |
Bradesco 77
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Basel Ratio
In March 2017, the Reference Equity of the Prudential Conglomerate reached the amount of R$92,920 million, compared to assets weighted by the risk of R$607,464 million. The Basel Ratio decreased 0.1 p.p., from 15.4% in December 2016 to 15.3% in March 2017, and Tier I Capital totaled 12% in March 2017, remaining stable compared to December 2016. |
It must be noted that the reduction impact due to the change in the application of prudential adjustments, as defined in Resolution No. 4,192/13, which increased from 60% in December 2016 to 80% in January 2017, was offset: (i) by the reduction of weighted assets; and (ii) by the net income for the first quarter of 2017. |
(1) Criteria used, as of October 2013 by Resolution No. 4,192/13 (including subsequent amendment); and
(2) In September 2016, considers subordinated debt authorized by Central Bank, in November 2016, to compose Tier I Capital.
78 Economic and Financial Analysis Report – March 2017
Independent Auditors’ Report |
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Limited Assurance Report about Supplementary Accounting information included within the Economic and Financial Analysis Report
To
Directors of
Banco Bradesco S.A.
Osasco – SP
We were engaged by Banco Bradesco S.A. ("Bradesco") to report on the consolidated supplementary accounting information of Banco Bradesco S.A. as of March 31, 2017 and for the three month period then ended, in the form of a limited assurance conclusion if, based on our engagement performed, nothing has come to our attention that causes us to believe that the supplementary accounting information included within the Economic and Financial Analysis Report are not presented, in all material respects, based on the information referred to in the “Criteria for preparing the supplementary accounting information” paragraph.
Responsibilities of the Management of Bradesco
Management of Bradesco is responsible for preparing and adequately presenting the consolidated supplementary accounting information included within the Economic and Financial Analysis Report based on the criteria for the preparation of the supplementary accounting information described below, and for other information contained within this report, as well as the design, implementation and maintenance of internal controls that management determined as necessary to allow for such information that is free from material misstatement, whether due to fraud or error.
Independent Auditor´s Responsibility
Our responsibility is to review the supplementary accounting information included within the Economic and Financial Analysis Report prepared by Bradesco and to report thereon in the form of a limited assurance conclusion based on the evidence obtained. We conducted our engagement in accordance with the NBC TO 3000 - Assurance Engagement Other than Audit and Review (ISAE 3000). That standard requires that we comply with ethical requirements, including independence requirements, and plan and perform our procedures to obtain a meaningful level of limited assurance about whether we did not became aware of any fact that could lead us to believe that the supplementary accounting information included within the Economic and Financial Analysis Report are not presented, in all material respects, to the information referred to in the “Criteria for preparing the supplementary accounting information” paragraph.
The procedures selected were based on our understanding of the consolidated supplementary accounting information included within the Economic and Financial Analysis Report, as well as other circumstances of our work and our consideration of other areas that may contain material misstatements, regardless of whether they are caused by fraud or error. However, such procedures do not include investigation or detection of fraud or error.
Limited assurance is less than absolute assurance and reasonable assurance. Procedures to gather information to a limited assurance engagement are more limited than to a reasonable assurance engagement and, therefore, we obtain less assurance than a reasonable assurance engagement; consequentely, we do not express neither an audit opinion nor a reasonable assurance over the supplementary accounting information included within the Economic and Financial Analysis Report.
80 Economic and Financial Analysis Report – March 2017
Independent Auditors’ Report |
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Limited Assurance Report about Supplementary Accounting information included within the Economic and Financial Analysis Report
Our conclusion does not contemplate aspects related to any prospective information contained within the Economic and Financial Analysis Report, nor offers any guarantee if the assumptions used by Management to provide a reasonable basis for the projections presented. Therefore, our report does not offer any type of assurance on the scope of future information (such as goals, expectations and ambitions) and descriptive information that is subject to subjective assessment.
Criteria for Preparing the Supplementary Accounting Information
The consolidated supplementary accounting information disclosed within the Economic and Financial Analysis Report, as of March 31, 2017 and for the three month period then ended has been prepared by the Management of Bradesco, based on the information contained in the March 31, 2017 intermediate consolidated financial statements and the accounting criteria described within the Economic and Financial Analysis Report, in order to facilitate additional analysis, without, however, being part of the intermediate consolidated financial statements disclosed on this date.
Conclusion
Our conclusion has been formed on the basis of, and is limited to the matters outlined in this report.
Based on the procedures performed we did not became aware of any fact that lead us to believe that the consolidated supplementary accounting information included within the Economic and Financial Analysis Report are not presented accurately, in all material respects, in accordance with the information referred to in the “Criteria for preparing the supplementary accounting information” paragraph.
Osasco, April 26, 2017
KPMG Auditores Independentes
CRC 2SP028567/O-1 F SP
Original report in Portuguese signed by
Rodrigo de Mattos Lia
Accountant CRC 1SP252418/O-3
Bradesco 81
82 Economic and Financial Analysis Report – March 2017
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Management Report
Dear Shareholders,
We hereby present the Consolidated Financial Statements of Banco Bradesco S.A related to the period ended on March 31, 2017, prepared in accordance with the accounting practices used in Brazil and applicable to institutions authorized to operate by the Brazilian Central Bank.
The beginning of 2017 was marked by a more favorable domestic macroeconomic environment, with lower inflation and falling interest rates, which contributed to improve expectations on the resumption of the country’s economy. In fact, such elements contributed to the sharp reduction of country risk, impacting the exchange rate. Internationally, the world growth in the quarter was positive, favoring higher commodity prices and improved terms of trade.
In the quarter, Bradesco recorded Net Income of R$ 4.071 billion, equivalent to R$ 0.74 per share and a profitability of 16.0% over the average Shareholders' Equity(*). The annualized return on Average Total Assets was 1.4%.
A gross interest on shareholders’ equity, of R$ 1.845 billion were allocated to shareholders in the period from January to March 2017, of which R$ 300.551 million were paid monthly and R$ 1.544 billion were provisioned.
Taxes and contributions paid or recorded in provision, including social security, totaled R$9.700 billion in the period, of which R$3.531 billion was related to taxes withheld and collected from third parties, and R$6.169 billion was calculated based on activities developed by the Bradesco Organization, equivalent to 151.6% of Net Income.
At the end of the quarter, Paid-up Capital totaled R$ 59.100 billion, including an increase of R$ 8 billion, with 10.0% with a bonus in shares, through the use of a portion of the balance of the account “Profit Reserves - Statutory Reserve “, approved at the Extraordinary General Meeting held on March 10, 2017, and approved by the Central Bank of Brazil on April 18. As a result, the monthly interest on shareholders’ equity for the month of May 2017, to be paid on June 1, 2017, will be increased by 10.0%. Added to the Equity Reserves of R$ 45.458 billion, it resulted in a Shareholders' Equity of R$ 104.558 billion, a 12.0% increase over the same period of previous year, corresponding to a net asset value per share of R$ 18.90.
On March 31, 2017, based on the price of its shares on the stock exchange, the Fair Value of Bradesco reached R$178.208 billion, equivalent to 1.7 times the Accounting Shareholders’ Equity. |
It is worth highlighting that Managed Shareholders' Equity is equivalent to 8.8% of Consolidated Assets, which totaled R$ 1.189 trillion, growth of 12.0% over March 2016. Thus, the solvency index was 15.3%, higher than the minimum of 10.8% regulated by Resolution no. 4,193/13 of the National Monetary Council, according to the Basel Committee. At the end of the quarter, the immobilization index reached 42.3% in the Prudential Consolidation, thus falling under the maximum limit of 50%.
In compliance with Article 8 of the Brazilian Central Bank Circular Letter No. 3,068/01, Bradesco declares that it has the financial capacity and the intention of holding to maturity the securities classified under “held to maturity securities”.
The total resources funded and managed in the Bradesco Organization as of March 31, 2017 totaled R$1.844 trillion, 19.6% higher than the same period of previous year, as follows:
R$ 490.235 billion in Demand Deposits, Time Deposits, Interbank Deposits, Savings Accounts and Securities Sold Under Agreements to Repurchase;
R$ 786.139 billion in assets under management, comprising Investment Funds, Managed Portfolios and Third-Party Fund Quotas, a 31.8% increase.
R$ 301.705 billion in the Exchange Portfolio, Borrowings and On-lendings in Brazil, Working Capital, Tax Payments and Collection and Related Charges, Funds From Issuance of Securities in Brazil, and Subordinated Debt in Brazil, a growth of 9.7%;
R$ 229.433 billion in Technical Reserves for Insurance, Pension Plans and Capitalization Bonds, up by 25.4%; and R$ 36.018 billion in Foreign Funding, through public and private issues, Subordinated Debt Overseas, Securitization of Future Financial Flows and Borrowings and On-lendings Overseas, equivalent to US$ 11.368 billion.
Consolidated credit operations, in the expanded concept, totaled R$ 502.131 billion at the end of the quarter, including:
R$ 112.527 billion in Consumer Financing, which includes R$ 24.481 billion in credits receivable from Credit Cards and R$ 39.937 billion in Payroll-Deductible Loans; |
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Management Report
R$ 75.951 billion in Sureties and Guarantees;
R$ 27.604 billion referring to internal and external on-lending operations, originating mainly from Brazilian Development Bank (BNDES), standing out as one of the main on-lending agents;
R$ 2.533 billion in Leasing;
R$ 22.190 billion in Rural Area businesses;
R$ 10.162 billion in Advances on Exchange Contracts, for a total Export Financing portfolio of US$14.805 billion; and
US$ 1.195 billion in Import Finance in Foreign Currencies.
In the quarter, Bradesco Organization allocated funds totaling R$ 51.795 billion in Real Estate Credit for the construction and acquisition of own homes, comprising 164,237 properties.
BBI, an Investment Bank of the Organization, advises clients in primary and secondary issuing of shares, merger transactions, purchase and sale of assets, structuring and distributing debt instruments, such as debentures, promissory notes, CRIs, CRAs, real estate funds, FIDCs and bonds, among others, besides structured corporate finance operations and the financing of projects under the modality of Project Finance. In the quarter, it carried out transactions with a volume greater than R$ 125.368 billion.
BRAM-Bradesco Asset Management, the largest private holding of investment funds in the country, offers solutions of differentiated and appropriate investments to all profiles of customers, ensuring the highest standard of quality in services. Among its clients are the main segments of Bradesco, Grupo Bradesco Seguros, Institutional Investors in Brazil and Abroad, and various family offices. In the first three months of the year, it accumulated R$ 628.414 million under its management.
On March 31, 2017, Grupo Bradesco Seguros, reaffirming its outstanding market position in the areas of Insurance, Capitalization Bonds and Supplementary Open Pensions, recorded Net Income of R$ 1.374 billion and Shareholders' Equity of R$ 28.942 billion. Net written premiums of insurance, pension plan contributions and capitalization bond income totaled R$ 17.948 billion, an increase of 18.2% compared to the same period of previous year.
On March 31, 2017, the Service Network of the Bradesco Organization, present throughout the national territory and in some localities abroad, consisted of 60,570 service points, as follows: |
9,093 Branches and PAs (Service Branches) in Brazil (Branches: 5,116 Bradesco, 2 Banco Bradesco Cartões, one Banco Bradesco Financiamentos, one Banco Bradesco BBI, one Banco Bradesco BERJ, one Banco Alvorada; and PAs: 3,971);
3 Branches abroad, with one Bradesco in New York, one Bradesco in Grand Cayman and one subsidiary Banco Bradesco Europa in London;
10 Overseas Subsidiaries (Banco Bradesco Argentina S.A. in Buenos Aires; Banco Bradesco Europa S.A. in Luxembourg; Bradesco North America LLC, Bradesco Securities, Inc., and BRAM US LLC in New York; Bradesco Securities UK Limited in London; Bradesco Securities Hong Kong Limited; Bradesco Trade Services Limited in Hong Kong; Cidade Capital Markets Ltd. in Grand Cayman; and Bradescard Mexico, Sociedad de Responsabilidad Limitada in Mexico);
815 Correspondents of Bradesco Promotora, in the segment of consigned credit;
38,525 Bradesco Expresso service points;
1,004 PAEs – in-company electronic service branches;
63 Losango service points;
97 External Terminals in the Bradesco Network; and
10,960 ATMs in the Banco24Horas Network, with 50 terminals shared by both networks.
At the same time, there were 36,095 Bradesco self-service machines, strategically distributed throughout the country, of which 35,602 in operation, including weekends and holidays, besides 20,584 ATMs from Banco24Horas Network. It also had, in the vehicles segment, the presence of Bradesco Financiamentos at 11,797 points of resale.
Through the Digital Channels, such as Internet Banking, Bradesco Celular, Fone Fácil and Social Networks, clients have access to the Bank's several products and services, at any place and time, with convenience, practicality and security.
Complementing its Service Network, Bradesco currently has two large Digital Platforms, which serve clients from the Exclusive and Prime |
Bradesco 85
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Management Report
Segments, with a profile of relationship primarily digital. It also offers the Digital Branch Bradesco Private Bank, directed to the Private public, enabling clients to centralize their checking account and investments in a single place.
In accordance with Instruction N
In Human Resources, the Organization maintains a strategy aimed at training and professional development of its employees, emphasizing the evolution of the training programs of UniBrad – Bradesco's Corporate University, keeping them in permanent harmony with the market, increasingly demanding and competitive. In the quarter, 937 courses were held, with 190,669 people attending them. The assistance benefits for the period comprised 241,620 people, ensuring the well-being, improving the quality of life and safety of employees and their dependents.
The main focus of the Organization's social actions is in the educational and assistance programs developed through Fundação Bradesco, which maintains 40 own Schools installed mainly in regions of high socio-economic deprivation, in all the Brazilian states and Federal District. This year, its budget is estimated at R$ 625.944 million, of which R$ 554.505 million is destined to the costing of Activities Expenses and R$ 71.439 million to investments in Infrastructure and Educational Technology, which will allow it to offer free and quality education to: a) 104,228 students enrolled in its schools at Basic Education (Kindergarten to High School) and Vocational Training (High School level); Youth and Adult Education; and Preliminary and Continuing Vocational Training, focused on creating jobs and income; b) 630 thousand students who must complete at least one of the several courses offered in their programming, in the modality of distance learning (EaD), through its e-Learning portal, and c) 15,040 people who will benefit through partnership projects and initiatives, including the Educa+Ação program and Technology courses. The more than 43 thousand students in Basic Education also receive free meals, medical-dental assistance, school material and uniforms. |
The Bradesco Sports and Education Program (Programa Bradesco Esportes e Educação) has Training and Specialist Centers in the Municipality of Osasco, São Paulo, to support the development of children and teenagers through the teaching of women's volleyball and basketball. The activities are held in their own Sports Development Center, in Fundação Bradesco’s schools, in Municipal and State Sports Centers, private schools in an Unified Center of Arts and Sports - CEU and in a leisure club. Annually, two thousand girls take part, from 8 years old, reaffirming the Organization’s social commitment and displaying how it values talent, citizenship, as well as education, sport and health.
We recorded major acknowledgments to Bradesco in the quarter, of which we highlight:
· UniBrad received the GlobalCCU Awards 2017 in Paris, at the Global Council of Corporate Universities, which elects, every two years, the best practices and programs of corporate education in the world;
· The Bank received the IT Executive of the Year award in the Banking category with the case BIA – Bradesco Artificial Intelligence – Branch Service Center – with Watson. The award is a result of the IT Media study in partnership with Korn Ferry, which highlights the professionals who succeeded in demonstrating in 2016 that IT is a strong ally of companies to reach their goals;
· Highlight in the Information Technology Professional Award in the Banking segment. The award, promoted by Informática Hoje magazine, was given due to the relevance of the IT projects implemented in the Bradesco Organization;
· Bradesco BBI was considered Brazil’s Best Investment Bank in 2017, in the edition of Global Finance magazine’s World’s Best Investment Banks;
· Bram won the Leadership in Responsible Investment Award, reaching first place in ALAS 20. It also ranks among the best financial institutions in the categories Corporate Governance Leadership and Sustainability Research. Is also received the level AMP-1 (very strong) from Standard & Poor’s, which is the highest in the scale of quality management of S&P Global Ratings; |
86 Economic and Financial Analysis Report – March 2017
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Management Report
· Bradesco Corretora has the most profitable portfolio for the year, achieving the best profitability in 2016 for its stock index portfolio in the Value Portfolio of the Valor Econômico newspaper;
· Bradesco Seguros wins the Outstanding Companies award in the Insurance, Health, Pension Plan and Capitalization Bond segments. It also stands out in the Value dimension, being awarded by the Centro de Inteligência Padrão (CIP), in partnership with the Consumidor Moderno magazine, and
· ShopFácil.com wins the award E-commerce Best Companies of Ebit, receiving the award Best Diamond Executive as the first Brazilian e-commerce retailer to launch a Chatbot on Facebook Messenger, providing, through this channel, the clarification of doubts, searches of Products and purchases. |
The record of results achieved in the first quarter reaffirms Bradesco's commitment to exceed expectations and offer efficiency, quality and safety and guarantee the best service. We are grateful for the support and confidence of our shareholders and clients, and the dedicated work of our employees and other collaborators.
Cidade de Deus, April 26, 2017
Board of Directors and Board of Executive Officers
(*) Excluding fair value effect of Available-for-sale Securities recognized under Shareholders’ Equity. |
Bradesco 87
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Consolidated Statement of Financial Position on March 31 – In thousand of Reais
Assets |
2017 |
2016 |
Current assets |
764,165,786 |
667,917,945 |
Cash and due from banks (Note 6) |
11,831,164 |
18,527,203 |
Interbank investments (Notes 3d and 7) |
187,590,965 |
165,338,697 |
Securities purchased under agreements to resell |
182,028,577 |
155,733,284 |
Interbank investments |
5,576,121 |
9,622,604 |
Allowance for losses |
(13,733) |
(17,191) |
Securities and derivative financial instruments (Notes 3e, 3f, 8 and 32b) |
275,995,932 |
223,433,839 |
Own portfolio |
234,369,260 |
187,108,058 |
Subject to repurchase agreements |
8,681,101 |
15,106,592 |
Derivative financial instruments (Notes 3f, 8d II and 32b) |
18,801,187 |
12,696,499 |
Given in guarantee to the Brazilian Central Bank |
77,083 |
64,227 |
Given in guarantee |
12,197,912 |
8,386,067 |
Securities under resale agreements with free movement |
1,869,389 |
72,396 |
Interbank accounts |
62,661,301 |
50,670,568 |
Unsettled payments and receipts |
958,925 |
694,148 |
Reserve requirement (Note 9): |
|
|
- Reserve requirement - Brazilian Central Bank |
61,637,022 |
49,920,036 |
- SFH |
17,012 |
6,486 |
Correspondent banks |
48,342 |
49,898 |
Interdepartmental accounts |
141,800 |
99,513 |
Internal transfer of funds |
141,800 |
99,513 |
Loans (Notes 3g, 10 and 32b) |
138,911,292 |
133,630,283 |
Loans: |
|
|
- Public sector |
441,675 |
2,442,647 |
- Private sector |
160,919,391 |
149,719,985 |
Loans transferred under an assignment with recourse |
767,011 |
720,441 |
Allowance for loan losses (Notes 3g, 10f, 10g and 10h) |
(23,216,785) |
(19,252,790) |
Leasing (Notes 2, 3g, 10 and 32b) |
1,213,509 |
1,377,758 |
Leasing receivables: |
|
|
- Private sector |
2,425,511 |
2,684,085 |
Unearned income from leasing |
(1,114,941) |
(1,204,893) |
Allowance for leasing losses (Notes 3g, 10f, 10g and 10h) |
(97,061) |
(101,434) |
Other receivables |
81,937,817 |
70,565,517 |
Receivables on sureties and guarantees honored (Note 10a-3) |
1,272,587 |
166,703 |
Foreign exchange portfolio (Note 11a) |
20,244,451 |
26,533,077 |
Receivables |
1,451,150 |
1,067,496 |
Securities trading |
1,103,820 |
1,940,777 |
Specific receivables |
15,349 |
7,156 |
Insurance and reinsurance receivables and reinsurance assets – technical provisions |
4,869,730 |
4,479,902 |
Sundry (Note 11b) |
55,696,102 |
37,467,821 |
Allowance for other loan losses (Notes 3g, 10f, 10g and 10h) |
(2,715,372) |
(1,097,415) |
Other assets (Note 12) |
3,882,006 |
4,274,567 |
Other assets |
3,015,711 |
2,354,342 |
Provision for losses |
(1,292,310) |
(926,476) |
Prepaid expenses (Notes 3i and 12b) |
2,158,605 |
2,846,701 |
Long-term receivables |
394,872,846 |
337,473,737 |
Interbank investments (Notes 3d and 7) |
417,018 |
384,858 |
Interbank investments |
417,018 |
384,858 |
Securities and derivative financial instruments (Notes 3e, 3f, 8 and 32b) |
172,514,409 |
120,143,281 |
Own portfolio |
143,574,637 |
110,734,402 |
Subject to repurchase agreements |
19,559,139 |
7,154,834 |
88 Economic and Financial Analysis Report – March 2017
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Consolidated Statement of Financial Position on March 31 – In thousand of Reais
Assets |
2017 |
2016 |
Derivative financial instruments (Notes 3f, 8d II and 32b) |
90,381 |
103,536 |
Privatization rights |
47,667 |
51,517 |
Given in guarantee |
3,840,581 |
1,286,593 |
Securities under resale agreements with free movement |
5,402,004 |
812,399 |
Interbank accounts |
792,351 |
703,669 |
Reserve requirement (Note 9): |
|
|
- SFH |
792,351 |
703,669 |
Loans (Notes 3g, 10 and 32b) |
161,173,329 |
155,155,548 |
Loans: |
|
|
- Public sector |
3,000,000 |
3,000,000 |
- Private sector |
163,712,997 |
154,315,961 |
Loans transferred under an assignment with recourse |
7,436,120 |
6,901,266 |
Allowance for loan losses (Notes 3g, 10f, 10g and 10h) |
(12,975,788) |
(9,061,679) |
Leasing (Notes 2, 3g, 10 and 32b) |
1,158,028 |
1,204,550 |
Leasing receivables: |
|
|
- Private sector |
2,476,968 |
2,524,671 |
Unearned income from leasing |
(1,254,833) |
(1,261,416) |
Allowance for leasing losses (Notes 3g, 10f, 10g and 10h) |
(64,107) |
(58,705) |
Other receivables |
57,426,870 |
58,671,531 |
Receivables |
17,688 |
14,092 |
Securities trading |
546,902 |
708,666 |
Sundry (Note 11b) |
56,879,897 |
57,970,953 |
Allowance for other loan losses (Notes 3g, 10f, 10g and 10h) |
(17,617) |
(22,180) |
Other assets (Note 12) |
1,390,841 |
1,210,300 |
Prepaid expenses (Notes 3i and 12b) |
1,390,841 |
1,210,300 |
Permanent assets |
30,342,236 |
18,582,556 |
Investments (Notes 3j, 13 and 32b) |
7,302,621 |
6,174,390 |
Equity in the earnings (losses) of unconsolidated and jointly controlled companies: |
|
|
- In Brazil |
7,151,965 |
6,031,866 |
- Overseas |
- |
2,816 |
Other investments |
405,409 |
390,792 |
Allowance for losses |
(254,753) |
(251,084) |
Premises and equipment (Notes 3k and 14) |
7,567,273 |
5,522,537 |
Premises |
2,626,916 |
1,896,427 |
Other premises and equipment |
12,339,805 |
10,488,024 |
Accumulated depreciation |
(7,399,448) |
(6,861,914) |
Intangible assets (Notes 3l and 15) |
15,472,342 |
6,885,629 |
Intangible Assets |
26,690,889 |
16,262,352 |
Accumulated amortization |
(11,218,547) |
(9,376,723) |
Total |
1,189,380,868 |
1,023,974,238 |
The accompanying Notes are an integral part of these Consolidated Financial Statements.
Bradesco 89
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Consolidated Statement of Financial Position on March 31 – In thousand of Reais
Liabilities |
2017 |
2016 |
Current liabilities |
816,905,150 |
660,273,647 |
Deposits (Notes 3n and 16a) |
158,683,331 |
146,829,202 |
Demand deposits |
30,564,866 |
22,590,729 |
Savings deposits |
94,352,635 |
88,261,256 |
Interbank deposits |
513,281 |
543,806 |
Time deposits (Notes 16a and 32b) |
33,252,549 |
35,433,411 |
Securities sold under agreements to repurchase (Notes 3n and 16b) |
237,622,407 |
185,831,083 |
Own portfolio |
83,224,613 |
69,905,479 |
Third-party portfolio |
145,111,284 |
114,955,640 |
Unrestricted portfolio |
9,286,510 |
969,964 |
Funds from issuance of securities (Notes 16c and 32b) |
90,469,564 |
58,139,460 |
Mortgage and real estate notes, letters of credit and others |
89,817,333 |
52,057,741 |
Securities issued overseas |
341,967 |
5,657,815 |
Structured Operations Certificates |
310,264 |
423,904 |
Interbank accounts |
1,306,802 |
965,790 |
Correspondent banks |
1,306,802 |
965,790 |
Interdepartmental accounts |
4,447,819 |
4,215,354 |
Third-party funds in transit |
4,447,819 |
4,215,354 |
Borrowing (Notes 17a and 32b) |
19,333,284 |
21,739,704 |
Borrowing in Brazil - other institutions |
3,817 |
9,266 |
Borrowing overseas |
19,329,467 |
21,730,438 |
On-lending in Brazil - official institutions (Notes 17b and 32b) |
10,841,989 |
10,901,417 |
National treasury |
118,317 |
80,766 |
BNDES |
3,777,711 |
2,894,652 |
FINAME |
6,944,374 |
7,918,808 |
Other institutions |
1,587 |
7,191 |
On-lending overseas (Notes 17b and 32b) |
- |
1,210 |
On-lending overseas |
- |
1,210 |
Derivative financial instruments (Notes 3f, 8d II and 32b) |
15,487,259 |
10,279,658 |
Derivative financial instruments |
15,487,259 |
10,279,658 |
Technical provisions for insurance, pension plans and capitalization bonds (Notes 3o and 21) |
200,600,838 |
157,123,342 |
Other liabilities |
78,111,857 |
64,247,427 |
Payment of taxes and other contributions |
4,489,835 |
5,125,998 |
Foreign exchange portfolio (Note 11a) |
10,963,570 |
17,358,002 |
Social and statutory |
1,793,571 |
1,387,906 |
Tax and social security (Note 20a) |
2,489,552 |
2,633,764 |
Securities trading |
3,255,987 |
2,994,666 |
Financial and development funds |
1,465 |
1,270 |
Subordinated debts (Notes 19 and 32b) |
12,805,716 |
2,204,294 |
Sundry (Note 20b) |
42,312,161 |
32,541,527 |
Long-term liabilities |
267,004,015 |
269,460,963 |
Deposits (Notes 3n and 16a) |
76,772,007 |
42,381,690 |
Interbank deposits |
57,634 |
42,707 |
Time deposits (Notes 16a and 32b) |
76,714,373 |
42,338,983 |
Securities sold under agreements to repurchase (Notes 3n and 16b) |
17,157,119 |
38,233,741 |
Own portfolio |
17,157,119 |
38,233,741 |
Funds from issuance of securities (Notes 16c and 32b) |
49,833,289 |
54,477,668 |
Mortgage and real estate notes, letters of credit and others |
47,168,406 |
51,132,505 |
Securities issued overseas |
2,624,632 |
3,263,347 |
Structured Operations Certificates |
40,251 |
81,816 |
90 Economic and Financial Analysis Report – March 2017
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Consolidated Statement of Financial Position on March 31 – In thousand of Reais
Liabilities |
2017 |
2016 |
Borrowing (Notes 17a and 32b) |
2,755,840 |
5,417,726 |
Borrowing in Brazil - other institutions |
7,963 |
9,181 |
Borrowing overseas |
2,747,877 |
5,408,545 |
On-lending in Brazil - official institutions (Notes 17b and 32b) |
23,486,325 |
24,789,068 |
BNDES |
10,496,158 |
8,463,873 |
FINAME |
12,990,167 |
16,325,195 |
Derivative financial instruments (Notes 3f, 8d II and 32b) |
217,953 |
115,702 |
Derivative financial instruments |
217,953 |
115,702 |
Technical provisions for insurance, pension plans and capitalization bonds (Notes 3o and 21) |
28,831,706 |
25,849,586 |
Other liabilities |
67,949,776 |
78,195,782 |
Tax and social security (Note 20a) |
4,880,715 |
6,615,685 |
Subordinated debts (Notes 19 and 32b) |
22,239,890 |
35,566,258 |
Eligible Debt Capital Instruments (Notes 19 and 32b) |
15,800,022 |
12,413,000 |
Sundry (Note 20b) |
25,029,149 |
23,600,839 |
Deferred income |
426,172 |
487,785 |
Deferred income |
426,172 |
487,785 |
Non-controlling interests in subsidiaries (Note 22) |
487,081 |
421,715 |
Shareholders' equity (Note 23) |
104,558,450 |
93,330,128 |
Capital: |
|
|
- Domiciled in Brazil |
58,361,600 |
50,460,629 |
- Domiciled overseas |
738,400 |
639,371 |
Capital reserves |
11,441 |
11,441 |
Profit reserves |
44,674,403 |
45,011,238 |
Asset valuation adjustments |
1,213,120 |
(2,352,037) |
Treasury shares (Notes 23d and 32b) |
(440,514) |
(440,514) |
Attributable to equity holders of the Parent Company |
105,045,531 |
93,751,843 |
Total |
1,189,380,868 |
1,023,974,238 |
The accompanying Notes are an integral part of these Consolidated Financial Statements.
Bradesco 91
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Consolidated Statement of Accumulated Income on March 31 – In thousand of Reais
|
2017 |
2016 |
Revenue from financial intermediation |
41,647,914 |
37,541,259 |
Loans (Note 10j) |
19,089,420 |
17,089,433 |
Leasing (Note 10j) |
74,384 |
82,449 |
Operations with securities (Note 8g) |
12,067,080 |
9,818,045 |
Financial income from insurance, pension plans and capitalization bonds (Note 8g) |
10,026,655 |
8,745,312 |
Derivative financial instruments (Note 8g) |
(1,003,312) |
2,405,084 |
Foreign exchange operations (Note 11a) |
39,554 |
(1,920,030) |
Reserve requirement (Note 9b) |
1,360,022 |
1,371,642 |
Sale or transfer of financial assets |
(5,889) |
(50,676) |
|
|
|
Financial intermediation expenses |
30,981,819 |
22,704,481 |
Retail and professional market funding (Note 16d) |
16,619,819 |
14,282,354 |
Adjustment for inflation and interest on technical provisions for insurance, pension plans and capitalization bonds (Note 16d) |
5,972,523 |
5,413,999 |
Borrowing and on-lending (Note 17c) |
108,116 |
(2,875,467) |
Allowance for loan losses (Notes 3g, 10g and 10h) |
8,281,361 |
5,883,595 |
|
|
|
Gross income from financial intermediation |
10,666,095 |
14,836,778 |
|
|
|
Other operating income (expenses) |
(3,609,874) |
(4,598,822) |
Fee and commission income (Note 24) |
5,788,892 |
4,912,817 |
Other fee and commission income |
3,963,452 |
3,351,744 |
Income from banking fees |
1,825,440 |
1,561,073 |
Retained premium from insurance, pension plans and capitalization bonds (Notes 3o and 21c) |
17,894,552 |
15,112,091 |
Net premiums written |
17,947,702 |
15,185,588 |
Reinsurance premiums paid |
(53,150) |
(73,497) |
Variation in technical provisions for insurance, pension plans and capitalization bonds (Note 3o) |
(7,738,291) |
(5,788,949) |
Retained claims (Note 3o) |
(6,313,325) |
(5,617,094) |
Capitalization bond prize draws and redemptions (Note 3o) |
(1,299,791) |
(1,225,561) |
Selling expenses from insurance, pension plans and capitalization bonds (Note 3o) |
(917,365) |
(856,172) |
Payroll and related benefits (Note 25) |
(4,635,886) |
(3,583,135) |
Other administrative expenses (Note 26) |
(4,645,532) |
(3,903,882) |
Tax expenses (Note 27) |
(1,650,878) |
(1,705,229) |
Equity in the earnings (losses) of unconsolidated and jointly controlled companies (Note 13b) |
428,535 |
405,665 |
Other operating income (Note 28) |
4,603,269 |
1,447,024 |
Other operating expenses (Note 29) |
(5,124,054) |
(3,796,397) |
Operating income |
7,056,221 |
10,237,956 |
Non-operating income (loss) (Note 30) |
(132,926) |
95,692 |
Income before income tax and social contribution and non-controlling interests |
6,923,295 |
10,333,648 |
Income tax and social contribution (Notes 34a and 34b) |
(2,816,795) |
(6,178,026) |
Current income tax |
(2,475,858) |
(3,121,596) |
Current Social Contribution |
(1,579,557) |
(2,440,035) |
Deferred Tax Asset |
1,238,620 |
(616,395) |
Non-controlling interests in subsidiaries |
(35,813) |
(34,211) |
Net income |
4,070,687 |
4,121,411 |
The accompanying Notes are an integral part of these Consolidated Financial Statements.
92 Economic and Financial Analysis Report – March 2017
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Capital |
Capital reserves |
Profit reserves |
Asset valuation adjustments |
Treasury shares |
Retained earnings |
Total | ||||
Paid in Capital |
Unpaid Capital |
Share premium |
Legal |
Statutory |
Bradesco |
Subsidiaries | ||||
Balance on December 31, 2015 |
46,100,000 |
(3,000,000) |
11,441 |
6,052,949 |
44,287,857 |
(1,231,603) |
(2,882,952) |
(431,048) |
- |
88,906,644 |
Cancellation of Capital Increase by Subscription of Shares |
(3,000,000) |
3,000,000 |
- |
- |
- |
- |
- |
- |
- |
- |
Capital increase with reserves |
8,000,000 |
- |
- |
- |
(8,000,000) |
- |
- |
- |
- |
- |
Acquisition of treasury shares |
- |
- |
- |
- |
- |
- |
- |
(9,466) |
- |
(9,466) |
Asset valuation adjustments |
- |
- |
- |
- |
- |
448,725 |
1,313,793 |
- |
- |
1,762,518 |
Net income |
- |
- |
- |
- |
- |
- |
- |
- |
4,121,411 |
4,121,411 |
Allocations: |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- Reserves |
- |
- |
- |
206,070 |
2,464,362 |
- |
- |
- |
(2,670,432) |
- |
- Interest on Shareholders’ Equity Paid |
- |
- |
- |
- |
- |
- |
- |
- |
(1,450,979) |
(1,450,979) |
Balance on March 31, 2017 |
51,100,000 |
- |
11,441 |
6,259,019 |
38,752,219 |
(782,878) |
(1,569,159) |
(440,514) |
- |
93,330,128 |
|
||||||||||
Balance on December 31, 2016 |
51,100,000 |
- |
11,441 |
6,807,128 |
43,641,474 |
(403,160) |
(273,956) |
(440,514) |
- |
100,442,413 |
Capital increase with reserves |
8,000,000 |
- |
- |
- |
(8,000,000) |
- |
- |
- |
- |
- |
Asset valuation adjustments |
- |
- |
- |
- |
- |
750,034 |
1,140,202 |
- |
- |
1,890,236 |
Net income |
- |
- |
- |
- |
- |
- |
- |
- |
4,070,687 |
4,070,687 |
Allocations: |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- Reserves |
- |
- |
- |
203,534 |
2,022,267 |
- |
- |
- |
(2,225,801) |
- |
- Interest on Shareholders’ Equity Paid and/or provisioned |
- |
- |
- |
- |
- |
- |
- |
- |
(1,844,886) |
(1,844,886) |
Balance on March 31, 2017 |
59,100,000 |
- |
11,441 |
7,010,662 |
37,663,741 |
346,874 |
866,246 |
(440,514) |
- |
104,558,450 |
The accompanying Notes are an integral part of these Consolidated Financial Statements.
Bradesco 93
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Consolidated Statements of Added Value Accumulated on March 31 – In thousands of Reais
Description |
2017 |
% |
2016 |
% |
1 – Revenue |
40,963,661 |
303.5 |
36,202,162 |
228.4 |
1.1) Financial intermediation |
41,647,914 |
308.5 |
37,541,259 |
236.9 |
1.2) Fees and commissions |
5,788,892 |
42.9 |
4,912,817 |
31.0 |
1.3) Allowance for loan losses |
(8,281,361) |
(61.3) |
(5,883,595) |
(37.1) |
1.4) Other |
1,808,216 |
13.4 |
(368,319) |
(2.3) |
2 – Financial intermediation expenses |
(22,700,458) |
(168.2) |
(16,820,886) |
(106.1) |
3 – Inputs acquired from third-parties |
(3,702,850) |
(27.4) |
(3,140,759) |
(19.8) |
Outsourced services |
(1,225,014) |
(9.1) |
(1,048,819) |
(6.6) |
Data processing |
(493,609) |
(3.7) |
(337,840) |
(2.1) |
Communication |
(434,663) |
(3.2) |
(372,182) |
(2.3) |
Asset maintenance |
(269,760) |
(2.0) |
(206,717) |
(1.3) |
Financial system services |
(259,489) |
(1.9) |
(235,479) |
(1.5) |
Security and surveillance |
(209,986) |
(1.6) |
(165,024) |
(1.0) |
Transport |
(185,591) |
(1.4) |
(163,758) |
(1.0) |
Material, water, electricity and gas |
(184,427) |
(1.4) |
(171,930) |
(1.1) |
Advertising and marketing |
(140,453) |
(1.0) |
(191,097) |
(1.2) |
Travel |
(49,288) |
(0.4) |
(25,621) |
(0.2) |
Other |
(250,570) |
(1.9) |
(222,292) |
(1.4) |
4 – Gross value added (1-2-3) |
14,560,353 |
107.9 |
16,240,517 |
102.5 |
5 – Depreciation and amortization |
(1,489,895) |
(11.0) |
(797,639) |
(5.0) |
6 – Net value added produced by the entity (4-5) |
13,070,458 |
96.8 |
15,442,878 |
97.4 |
7 – Value added received through transfer |
428,535 |
3.2 |
405,665 |
2.6 |
Equity in the earnings (losses) of unconsolidated and jointly controlled companies |
428,535 |
3.2 |
405,665 |
2.6 |
8 – Value added to distribute (6+7) |
13,498,993 |
100.0 |
15,848,543 |
100.0 |
9 – Value added distributed |
13,498,993 |
100.0 |
15,848,543 |
100.0 |
9.1) Personnel |
4,080,520 |
30.2 |
3,154,829 |
19.9 |
Salaries |
2,177,118 |
16.1 |
1,668,606 |
10.5 |
Benefits |
1,097,214 |
8.1 |
788,425 |
5.0 |
Government Severance Indemnity Fund for Employees (FGTS) |
238,369 |
1.8 |
167,325 |
1.1 |
Other |
567,819 |
4.2 |
530,473 |
3.3 |
9.2) Tax, fees and contributions |
5,023,039 |
37.2 |
8,311,561 |
52.4 |
Federal |
4,775,675 |
35.4 |
8,100,901 |
51.1 |
State |
3,749 |
- |
5,394 |
- |
Municipal |
243,615 |
1.8 |
205,266 |
1.3 |
9.3) Remuneration for providers of capital |
288,934 |
2.1 |
226,531 |
1.4 |
Rental |
287,286 |
2.1 |
223,577 |
1.4 |
Asset leasing |
1,648 |
- |
2,954 |
- |
9.4) Value distributed to shareholders |
4,106,500 |
30.4 |
4,155,622 |
26.2 |
Interest on Shareholders’ Equity/Dividends paid and/or provisioned |
1,844,886 |
13.7 |
1,450,979 |
9.2 |
Retained earnings |
2,225,801 |
16.5 |
2,670,432 |
16.8 |
Non-controlling interests in retained earnings |
35,813 |
0.3 |
34,211 |
0.2 |
The accompanying Notes are an integral part of these Consolidated Financial Statements.
94 Economic and Financial Analysis Report – March 2017
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
|
2017 |
2016 |
Cash flow from operating activities: |
|
|
Income before income tax and social contribution and non-controlling interests |
6,923,295 |
10,333,648 |
Adjustments to net income before income tax and social contribution |
17,183,816 |
17,282,365 |
Effect of Changes in Exchange Rates in Cash and Cash equivalents |
375,023 |
3,362,849 |
Allowance for loan losses |
8,281,361 |
5,883,595 |
Depreciation and amortization |
1,489,895 |
797,639 |
Write-offs through Impairment of Financial and non-financial assets |
419,693 |
108,294 |
Expenses with civil, labor and tax provisions |
494,429 |
802,730 |
Expenses with adjustment for inflation and interest on technical provisions for insurance, pension plans and capitalization bonds |
5,972,523 |
5,413,999 |
Equity in the earnings (losses) of unconsolidated and jointly controlled companies |
(428,535) |
(405,665) |
(Gain)/loss on sale of investments |
- |
(162,665) |
(Gain)/loss on sale of fixed assets |
10,862 |
8,774 |
(Gain)/loss on sale of foreclosed assets |
105,208 |
54,983 |
Foreign exchange variation of assets and liabilities overseas/Other |
463,357 |
1,417,832 |
Adjusted net income before taxes |
24,107,111 |
27,616,013 |
(Increase)/Decrease in interbank investments |
1,623,011 |
602,732 |
(Increase)/Decrease in trading securities and derivative financial instruments |
(6,584,819) |
(15,868,267) |
(Increase)/Decrease in interbank and interdepartmental accounts |
(2,322,531) |
(1,819,946) |
(Increase)/Decrease in loan and leasing |
1,317,218 |
8,438,932 |
(Increase)/Decrease in insurance and reinsurance receivables and reinsurance assets |
275,923 |
202 |
(Increase)/Decrease in other receivables and other assets |
1,100,640 |
(9,444,609) |
(Increase)/Decrease in reserve requirement - Central Bank |
(3,600,491) |
4,871,858 |
Increase/(Decrease) in deposits |
1,219,660 |
(6,573,359) |
Increase/(Decrease) in securities sold under agreements to repurchase |
12,800,595 |
1,787,048 |
Increase/(Decrease) in funds from issuance of securities |
(10,504,505) |
3,070,580 |
Increase/(Decrease) in borrowings and on-lending |
(1,778,564) |
(7,488,759) |
Increase/(Decrease) in technical provisions for insurance, pension plans and capitalization bonds |
117,864 |
(275,494) |
Increase/(Decrease) in other liabilities |
(1,131,316) |
13,526,357 |
Increase/(Decrease) in deferred income |
(51,013) |
(35,760) |
Income tax and social contribution paid |
(3,337,493) |
(3,072,503) |
Net cash provided by/(used in) by operating activities |
13,251,290 |
15,335,025 |
Cash flow from investing activities: |
|
|
(Increase)/Decrease in held-to-maturity securities |
(53,945) |
(742,999) |
Sale of/maturity of and interest on available-for-sale securities |
46,307,397 |
32,403,676 |
Proceeds from sale of foreclosed assets |
162,577 |
129,879 |
Sale of investments |
- |
67,452 |
Sale of premises and equipment |
161,713 |
325,861 |
Purchases of available-for-sale securities |
(43,477,016) |
(12,507,676) |
Investment acquisitions |
(1,316) |
- |
Purchase of premises and equipment |
(334,837) |
(553,059) |
Intangible asset acquisitions |
(305,830) |
(405,166) |
Dividends and interest on shareholders’ equity received |
188,112 |
140,751 |
Net cash provided by/(used in) investing activities |
2,646,855 |
18,858,719 |
Cash flow from financing activities: |
|
|
Increase/(decrease) in subordinated debts |
(1,765,435) |
(99,384) |
Dividends and interest on shareholders’ equity paid |
(4,451,737) |
(3,805,108) |
Non-controlling interest |
2,459 |
(7,574) |
Acquisition of own shares |
- |
(9,466) |
Net cash provided by/(used in) financing activities |
(6,214,713) |
(3,921,532) |
Net increase/(decrease) in cash and cash equivalents |
9,683,432 |
30,272,212 |
Cash and cash equivalents - at the beginning of the period |
181,230,427 |
147,261,434 |
Effect of Changes in Exchange Rates in Cash and Cash equivalents |
(375,023) |
(3,362,849) |
Cash and cash equivalents - at the end of the period |
190,538,836 |
174,170,797 |
Net increase/(decrease) in cash and cash equivalents |
9,683,432 |
30,272,212 |
The accompanying Notes are an integral part of these Consolidated Financial Statements.
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Notes to Bradesco’s Consolidated Financial Statements are as follows:
Page
1) |
OPERATIONS |
97 |
2) |
PRESENTATION OF THE CONSOLIDATED FINANCIAL STATEMENTS |
97 |
3) |
SIGNIFICANT ACCOUNTING PRACTICES |
99 |
4) |
INFORMATION FOR THE PURPOSE OF COMPARABILITY |
109 |
5) |
MANAGERIAL STATEMENTS OF FINANCIAL POSITION AND STATEMENT OF INCOME BY OPERATING SEGMENT |
110 |
6) |
CASH AND CASH EQUIVALENTS |
113 |
7) |
INTERBANK INVESTMENTS |
114 |
8) |
SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS |
115 |
9) |
INTERBANK ACCOUNTS RESERVE REQUIREMENT |
125 |
10) |
LOANS |
126 |
11) |
OTHER RECEIVABLES |
136 |
12) |
OTHER ASSETS |
138 |
13) |
INVESTMENTS |
138 |
14) |
PREMISES AND EQUIPMENT |
140 |
15) |
INTANGIBLE ASSETS |
140 |
16) |
DEPOSITS, SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND FUNDS FROM ISSUANCE OF SECURITIES |
142 |
17) |
BORROWING AND ON-LENDING |
144 |
18) |
PROVISIONS, CONTINGENT ASSETS AND LIABILITIES AND LEGAL OBLIGATIONS TAX AND SOCIAL SECURITY |
145 |
19) |
SUBORDINATED DEBT |
149 |
20) |
OTHER LIABILITIES |
150 |
21) |
INSURANCE, PENSION PLANS AND CAPITALIZATION BONDS |
151 |
22) |
NON-CONTROLLING INTERESTS IN SUBSIDIARIES |
153 |
23) |
SHAREHOLDERS EQUITY (PARENT COMPANY) |
153 |
24) |
FEE AND COMMISSION INCOME |
155 |
25) |
PAYROLL AND RELATED BENEFITS |
155 |
26) |
OTHER ADMINISTRATIVE EXPENSES |
155 |
27) |
TAX EXPENSES |
156 |
28) |
OTHER OPERATING INCOME |
156 |
29) |
OTHER OPERATING EXPENSES |
156 |
30) |
NON-OPERATING INCOME (LOSS) |
156 |
31) |
RELATED-PARTY TRANSACTIONS (DIRECT AND INDIRECT) |
157 |
32) |
FINANCIAL INSTRUMENTS |
159 |
33) |
EMPLOYEE BENEFITS |
166 |
34) |
INCOME TAX AND SOCIAL CONTRIBUTION |
167 |
35) |
OTHER INFORMATION |
169 |
96 Economic and Financial Analysis Report – March 2017
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
1) OPERATIONS
Banco Bradesco S.A. (Bradesco) is a private-sector publicly traded company and universal bank that, through its commercial, foreign exchange, consumer financing and housing loan portfolios, carries out all the types of banking activities for which it has authorization. The Bank is involved in a number of other activities, either directly or indirectly, through its subsidiaries, specifically leasing, investment banking, brokerage, consortium management, credit cards, real estate projects, insurance, pension plans and capitalization bonds. All these activities are undertaken by the various companies in the Bradesco Organization (Organization), working together in an integrated manner in the market.
2) PRESENTATION OF THE CONSOLIDATED FINANCIAL STATEMENTS
Bradesco’s consolidated financial statements include the financial statements for Bradesco, its foreign branches and subsidiaries, in Brazil and overseas and SPEs (Special Purpose Entities) and investment funds of which the Organization's companies are the main beneficiaries or holders of the principal obligations, as established by Technical Pronouncement CPC 36 (R3), “Consolidation”. These statements were prepared using accounting practices in compliance with Laws No. 4,595/64 (Brazilian Financial System Law) and No. 6,404/76 (Brazilian Corporate Law), including amendments introduced by Laws No. 11,638/07 and No. 11,941/09, as they relate to the accounting for operations, complemented by the rules and instructions of the National Monetary Council (CMN), the Brazilian Central Bank (Bacen), Brazilian Securities and Exchange Commission (CVM), where applicable, National Private Insurance Council (CNSP), Insurance Superintendence (Susep) and National Supplementary Healthcare Agency (ANS). The financial statements of the leasing companies included in the consolidated financial statements were prepared using the finance lease method, under which the carrying amount of leased premises and equipment less the residual value paid in advance are reclassified.
For the preparation of these consolidated financial statements, the intercompany transactions, balances of equity accounts, revenue, expenses and unrealized profits were eliminated and net income and shareholders’ equity attributable to the non-controlling interests were accounted for in a separate line. Goodwill on the acquisition of investments in subsidiary/associate companies or jointly controlled companies is presented in the investments and intangible assets lines (Note 15a). The foreign exchange variation from foreign branches and investments is presented in the statement of income accounts used for changes in the value of the derivative financial instrument and borrowing and on-lending operations in order to offset these results with the hedges of these investments.
The financial statements include estimates and assumptions, such as: the calculation of estimated loan losses; fair value estimates of certain financial instruments; civil, tax and labor provisions; impairment losses of securities classified as available-for-sale and held-to-maturity securities and non-financial assets; the calculation of technical provisions for insurance, pension plans and capitalization bonds; and the determination of the useful life of specific assets. Actual results may differ from those based on estimates and assumptions.
Bradesco’s consolidated financial statements were approved by the Board of Directors on April 26, 2017.
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Below are the significant directly and indirectly owned companies and investment funds included in the consolidated financial statements:
|
On March 31 | ||
Activity |
Equity interest | ||
2017 |
2016 | ||
Financial Sector – Brazil |
|
|
|
Ágora Corretora de Títulos e Valores Mobiliários S.A. |
Brokerage |
100.00% |
100.00% |
Banco Alvorada S.A. |
Banking |
99.99% |
99.99% |
Banco Boavista Interatlântico S.A. |
Banking |
100.00% |
100.00% |
Banco Bradescard S.A. |
Cards |
100.00% |
100.00% |
Banco Bradesco BBI S.A. (1) |
Investment bank |
99.81% |
99.80% |
Banco Bradesco BERJ S.A. |
Banking |
100.00% |
100.00% |
Banco Bradesco Cartões S.A. |
Cards |
100.00% |
100.00% |
Banco Bradesco Financiamentos S.A. |
Banking |
100.00% |
100.00% |
Banco Losango S.A. (4) |
Banking |
100.00% |
- |
Bradesco Administradora de Consórcios Ltda. |
Consortium management |
100.00% |
100.00% |
Bradesco Leasing S.A. Arrendamento Mercantil |
Leasing |
100.00% |
100.00% |
Bradesco Kirton Corretora de Títulos e Valores Mobiliários S.A. (4) |
Brokerage |
99.97% |
- |
Bradesco S.A. Corretora de Títulos e Valores Mobiliários |
Brokerage |
100.00% |
100.00% |
BRAM - Bradesco Asset Management S.A. DTVM |
Asset management |
100.00% |
100.00% |
Kirton Administradora de Consórcios Ltda. (4) |
Consortium management |
100.00% |
- |
Kirton Bank Brasil S.A. (4) (5) |
Banking |
100.00% |
- |
Tempo Serviços Ltda. |
Services |
100.00% |
100.00% |
Financial Sector – Overseas |
|
|
|
Banco Bradesco Argentina S.A. |
Banking |
99.99% |
99.99% |
Banco Bradesco Europa S.A. |
Banking |
100.00% |
100.00% |
Banco Bradesco S.A. Grand Cayman Branch (2) |
Banking |
100.00% |
100.00% |
Banco Bradesco S.A. New York Branch |
Banking |
100.00% |
100.00% |
Bradesco Securities, Inc. |
Brokerage |
100.00% |
100.00% |
Bradesco Securities, UK. |
Brokerage |
100.00% |
100.00% |
Insurance, Pension Plan and Capitalization Bond Sector |
|
|
|
Atlântica Companhia de Seguros |
Insurance |
100.00% |
100.00% |
Bradesco Argentina de Seguros S.A. (6) |
Insurance |
99.98% |
99.92% |
Bradesco Auto/RE Companhia de Seguros |
Insurance |
100.00% |
100.00% |
Bradesco Capitalização S.A. |
Capitalization bonds |
100.00% |
100.00% |
Bradesco Saúde S.A. |
Insurance/health |
100.00% |
100.00% |
Bradesco Seguros S.A. |
Insurance |
100.00% |
100.00% |
Bradesco Vida e Previdência S.A. |
Pension plan/Insurance |
100.00% |
100.00% |
Kirton Capitalização S.A. (4) |
Capitalization bonds |
99.97% |
- |
Kirton Seguros S.A. (4) |
Insurance |
98.08% |
- |
Kirton Vida e Previdência S.A. (4) |
Pension plan/Insurance |
100.00% |
- |
Odontoprev S.A. |
Dental care |
50.01% |
50.01% |
Other Activities |
|
|
|
Andorra Holdings S.A. |
Holding |
100.00% |
100.00% |
Bradseg Participações S.A. |
Holding |
100.00% |
100.00% |
Bradescor Corretora de Seguros Ltda. |
Insurance Brokerage |
100.00% |
100.00% |
Bradesplan Participações Ltda. |
Holding |
100.00% |
100.00% |
BSP Empreendimentos Imobiliários S.A. |
Real estate |
100.00% |
100.00% |
Cia. Securitizadora de Créditos Financeiros Rubi |
Credit acquisition |
100.00% |
100.00% |
Columbus Holdings S.A. |
Holding |
100.00% |
100.00% |
Kirton Participações e Investimentos Ltda. (4) |
Holding |
100.00% |
- |
Nova Paiol Participações Ltda. |
Holding |
100.00% |
100.00% |
União Participações Ltda. |
Holding |
100.00% |
100.00% |
Investment Funds (3) |
|
|
|
Bradesco FI RF Master Previdência |
Investment Fund |
100.00% |
100.00% |
Bradesco FI RF Master II Previdência |
Investment Fund |
100.00% |
100.00% |
Bradesco FI RF Master IV Previdência (7) |
Investment Fund |
100.00% |
- |
Bradesco FI Referenciado DI União |
Investment Fund |
99.28% |
99.81% |
Bradesco FI Referenciado DI Performance |
Investment Fund |
100.00% |
100.00% |
Bradesco FI RF Crédito Privado Master |
Investment Fund |
100.00% |
100.00% |
Bradesco Private FIC FI RF PGBL/VGBL Ativo |
Investment Fund |
100.00% |
100.00% |
Bradesco F.I.C.F.I. R.F. VGBL F10 |
Investment Fund |
100.00% |
100.00% |
Bradesco F.I.C.F.I. R.F. VGBL F15 |
Investment Fund |
100.00% |
100.00% |
Bradesco F.I.C.F.I. R.F. VGBL Fix |
Investment Fund |
100.00% |
100.00% |
98 Economic and Financial Analysis Report – March 2017
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
(1) Increased participation through the subscription of shares in June 2016;
(2) The special purpose entity International Diversified Payment Rights Company is being consolidated. The company is part of a structure set up for the securitization of the future flow of payment orders received overseas;
(3) The investment funds in which Bradesco assumes or substantially retains the risks and benefits were consolidated;
(4) Companies originating from the acquisition, in July 2016, of HSBC Brasil (Note 35e);
(5) New name of HSBC Brasil (Kirton Bank);
(6) Capital increase in May 2016; and
(7) Consolidation of from April 2016.
3) SIGNIFICANT ACCOUNTING PRACTICES
a) Functional and presentation currencies
Consolidated financial statements are presented in Brazilian reais, which is also Bradesco’s functional currency. Foreign branches and subsidiaries are mainly a continuation of activities in Brazil, and, therefore, assets, liabilities and profit or loss are translated into Brazilian reais using the appropriate currency exchange rate, to comply with accounting practices adopted in Brazil. Foreign currency translation gains and losses arising are recognized in the period’s statement of income in the lines “Derivative Financial Instruments” and “Borrowing and On-lending”.
b) Income and expense recognition
Income and expenses are recognized on an accrual basis in order to determine the net income for the period to which they relate, regardless of when the funds are received or paid.
Fixed rate contracts are recognized at their redemption value with the income or expense relating to future periods being recognized as a deduction from the corresponding asset or liability. Finance income and costs are recognized daily on a pro-rata basis and calculated using the compounding method, except when they relate to discounted notes or to foreign transactions, which are calculated using the straight-line method.
Floating rate and foreign-currency-indexed contracts are adjusted for interest and foreign exchange rates applicable at the reporting date.
Insurance and coinsurance premiums, net of premiums paid for coinsurance and related commissions, are recognized upon the issue of the related policies/certificates/endorsements and invoices, or upon the beginning of the exposure to risk in cases in which the risk begins before the policy issuance, and is recognized on a straight-line basis over the policies’ effective period through the upfront recognition and subsequent reversal through the statement of income of the unearned premium reserve and the deferred acquisition costs. Revenues from premiums and the corresponding deferred acquisition costs, relating to existing risk for which no policy has been issued, are recognized in the statement of income at the beginning of the risk exposure, based on estimated figures.
The health insurance premiums are recognized in the premiums (results) account or provision for unearned premiums/considerations (PPCNG), according to the period of coverage of contracts in force on the reporting date.
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Notes to the Consolidated Financial Statements
Income and expenses arising from Mandatory Insurance For Personal Injury Caused by Motor Vehicles (DPVAT) insurance operations are recognized based on information provided by Seguradora Líder dos Consórcios do Seguro DPVAT S.A.
Accepted coinsurance and retrocession operations are recognized based on the information received from other insurers and IRB - Brasil Resseguros S.A. (IRB), respectively.
Reinsurance operations are recognized based on the premium and claims information provided, which is subject to the analysis of the re-insurers. The deductions of reinsurance premiums granted are consistent with the recognition of the corresponding insurance premium and/or terms of the reinsurance contract.
Contributions and agency fees are deferred and recognized in the statement of income on a straight-line basis over a period of 24 months for health insurance operations, and 12 months for other operations.
Pension plan contributions and life insurance premiums with survival coverage are recognized in the statement of income as they are received.
The revenue of the capitalization bonds is recognized in the month in which they are issued, according to the types of collection, which may be in monthly payments or in a single payment. Each security has a nominal value, which is restated monetarily by the Reference Rate (TR) + 0.5% interest per month. Technical provisions are recognized when the respective revenues are recognized.
The revenues arising from unclaimed and expired capitalization bonds (securities and non-redeemed draws) are recognized after the prescription period, that is, until November 2003, up to 20 years and five years after this date as established by law. The expenses related to commercialization of capitalization bonds are classified as “Acquisition Costs” and are recognized in the statement of income as incurred.
c) Cash and cash equivalents
Cash and cash equivalents include: funds available in currency, investments in gold, securities sold under agreements to repurchase and interest-earning deposits in other banks, maturing in 90 days or less, from the time of the acquisition, which are exposed to insignificant risk of change in fair value. These funds are used by Bradesco to manage its short-term commitments.
Cash and cash equivalents detailed balances are presented in Note 6.
d) Interbank investments
Unrestricted repurchase and reverse repurchase agreements are stated at their fair value. All other interbank investments are stated at cost, plus income earned up to the end of the reporting period, net of any devaluation allowance, if applicable.
The breakdown, terms and proceeds relating to interbank investments are presented in Note 7.
e) Securities – Classification
· Trading securities – securities acquired for the purpose of being actively and frequently traded. They are recognized at cost, plus income earned and adjusted to fair value with changes recognized in the Statement of Income for the period;
· Available-for-sale securities – securities that are not specifically intended for trading purposes or to be held to maturity. They are recognized at cost, plus income earned, which is recognized in profit or loss in the period and adjusted to fair value with changes recognized in shareholders’ equity, net of tax, which will be transferred to the Statement of Income only when effectively realized; and
100 Economic and Financial Analysis Report – March 2017
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Notes to the Consolidated Financial Statements
· Held-to-maturity securities – securities for which there is positive intent and financial capacity to hold to maturity. They are recognized at cost, plus income earned recognized in the Statement of Income for the period.
Securities classified as trading and available-for-sale, as well as derivative financial instruments, are recognized in the consolidated statement of financial position at their fair value. Fair value is generally based on quoted market prices or quotations for assets or liabilities with similar characteristics. If market prices are not available, fair values are based on traders’ quotations, pricing models, discounted cash flows or similar techniques to determine the fair value and may require judgment or significant estimates by Management.
Classification, breakdown and segmentation of securities are presented in Note 8 (a to c).
f) Derivative financial instruments (assets and liabilities)
Derivative instruments are classified based on the objective for which the underlying instrument was acquired at the date of purchase, taking into consideration its use for possible hedging purposes.
Operations involving derivative financial instruments are designed to meet the Bank’s own needs in order to manage overall exposure, as well as to meet customer requests to manage their positions. The gains or losses are recognized in the statement of income or shareholders’ equity.
Derivative financial instruments used to mitigate risk deriving from exposure to variations in the fair value of financial assets and liabilities are designated as hedges when they meet the criteria for hedge accounting and are classified according to their nature:
· Market risk hedge: the gains and losses, realized or not, of the financial instruments classified in this category as well as the financial assets and liabilities, that are the object of the hedge, are recognized in the Statement of Income; and
· Cash flow hedge: the effective portion of valuation or devaluation of the financial instruments classified in this category is recognized, net of taxes, in a specific account in shareholders’ equity. The ineffective portion of the hedge is recognized directly in the Statement of Income.
A breakdown of amounts included as derivative financial instruments, in the statement of financial position and off-balance-sheet accounts, is disclosed in Note 8 (d to g).
g) Loans and leasing, advances on foreign exchange contracts, other receivables with credit characteristics and allowance for loan losses
Loans and leasing, advances on foreign exchange contracts and other receivables with credit characteristics are classified by risk level, based on: (i) the parameters established by CMN Resolution No. 2,682/99, which requires risk ratings to have nine levels, from “AA” (minimum risk) to “H” (maximum risk); and (ii) Management’s assessment of the risk level. This assessment, which is carried out regularly, considers current economic conditions and past experience with loan losses, as well as specific and general risks relating to operations, debtors and guarantors. Moreover, the days-past-due is also considered in the rating of customer risk as per CMN Resolution No. 2,682/99, as follows:
Past-due period (1) |
Customer rating |
● from 15 to 30 days |
B |
● from 31 to 60 days |
C |
● from 61 to 90 days |
D |
● from 91 to 120 days |
E |
● from 121 to 150 days |
F |
● from 151 to 180 days |
G |
● more than 180 days |
H |
(1) For transactions with terms of more than 36 months, past-due periods are doubled, as permitted by CMN Resolution No. 2,682/99.
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Notes to the Consolidated Financial Statements
Interest and inflation adjustments on past-due transactions are only recognized in the Statement of Income up to the 60th day that they are past due.
H-rated past-due transactions remain at this level for six months, after which they are written-off against the existing allowance and controlled in off-balance-sheet accounts for at least five years.
Renegotiated operations are maintained at least at the same level in which they were classified.
Renegotiations already written-off against the allowance and that were recognized in off-balance-sheet accounts, are rated as level “H” and any possible gains derived from their renegotiation are recognized only when they are effectively received. When there is a significant repayment on the operation or when new material facts justify a change in the level of risk, the operation may be reclassified to a lower risk category.
The estimated allowance for loan losses is calculated to sufficiently cover probable losses, according to CMN and Bacen standards and instructions, together with Management’s assessment of the credit risk.
Type, values, terms, levels of risk, concentration, economic sector of client’s activity, renegotiation and income from loans, as well as the breakdown of expenses and statement of financial position accounts for the allowance for loan losses are presented in Note 10.
h) Income tax and social contribution (assets and liabilities)
Deferred tax assets, calculated on income tax losses, social contribution losses and temporary differences, are recognized in “Other Receivables - Sundry” and the deferred tax liabilities on tax differences in leasing depreciation (applicable only for income tax), fair value adjustments on securities, monetary update of judicial deposits, among others, are recognized in “Other Liabilities - Tax and Social Security”, in which for the differences in leasing depreciation only the income tax rate is applied.
Deferred tax assets on temporary differences are realized when the difference between the accounting treatment and the income tax treatment reverses. Deferred tax assets on income tax and social contribution losses are realizable when taxable income is generated, up to the 30% limit of the taxable profit for the period. Deferred tax assets are recognized based on current expectations of realization considering technical studies and analyses carried out by Management.
The provision for income tax is calculated at 15% of taxable income plus a 10% surcharge. For financial companies, for companies considered as such and for the insurance industry, the social contribution on the profit was calculated until August 2015, considering the rate of 15%. For the period between September 2015 and December 2018, the rate was changed to 20%, according to Law No. 13,169/15 and the rate will be 15% again as from January 2019. For the other companies, the social contribution is calculated considering the rate of 9%.
Due to the amendment of the rate, Organization recognized, in September 2015, an incremental amount to the deferred tax of social contribution, considering the annual expectations of realization and their respective rates in force in each period, according to the technical study produced.
Provisions were recognized for other income tax and social contribution in accordance with specific applicable legislation.
The breakdown of income tax and social contribution, showing the calculations, the origin and expected use of deferred tax assets, as well as unrecognized deferred tax assets, is presented in Note 34.
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Notes to the Consolidated Financial Statements
i) Prepaid expenses
Prepaid expenses consist of funds already disbursed for future benefits or services, which are recognized in the profit or loss on an accrual basis.
Incurred costs relating to assets that will generate revenue in subsequent periods are recognized in the Statement of Income according to the terms and the amount of expected benefits and directly written-off in the Statement of Income when the corresponding assets or rights are no longer part of the institution’s assets or when future benefits are no longer expected.
In the case of the remuneration paid for the origination of credit operations or leasing to the banking correspondents related to credit operations originated during 2015 and 2016, Bradesco opted to recognize part of the total value of compensation, pursuant to the provisions of Bacen Circular No. 3,738/14. As of 2017, the remuneration mentioned is fully recognized as an expense.
Prepaid expenses are shown in detail in Note 12b.
j) Investments
Investments in unconsolidated and jointly controlled companies, where Bradesco has significant influence over the investee or holds at least 20% of the voting rights, are accounted for using the equity method.
Tax incentives and other investments are stated at cost, less allowance for losses/impairment, where applicable.
Subsidiaries are consolidated – the composition of the main companies are disclosed in Note 2. The composition of unconsolidated and jointly controlled companies, as well as other investments, are disclosed in Note 13.
k) Premises and equipment
Relates to the tangible assets used by the Bank in its activities, including those resulting from transactions that transfer risks, benefits and control of the assets to the Bank.
Premises and equipment are stated at acquisition cost, net of accumulated depreciation, calculated by the straight-line method based on the assets’ estimated economic useful life, using the following rates: real estate – 4% per annum; installations, furniture, equipment for use, security systems and communications – 10% per annum; transport systems – 20% per annum; and data-processing systems – 20% to 40% per annum, and adjusted for impairment, when applicable.
The breakdown of asset costs and their corresponding depreciation, as well as the unrecognized surplus value for real estate and the fixed asset ratios, are disclosed in Note 14.
l) Intangible assets
Relates to the right over intangible assets used by the Bank in its activities.
Intangible assets comprise:
· Future profitability/acquired client portfolio and acquisition of right to provide banking services: they are recognized and amortized over the period in which the asset will directly and indirectly contribute to future cash flows and adjusted for impairment, where applicable; and
· Software: stated at cost less amortization calculated on a straight-line basis over the estimated useful life (20% p.a.), from the date it is available for use and adjusted for impairment, where applicable. Internal software development costs are recognized as an intangible asset when it is possible to show the intent and ability to complete and use the software, as well as to reliably measure costs directly attributable to the intangible asset. These costs are amortized during the software’s estimated useful life, considering the expected future economic benefits.
Intangible assets and the movement in these balances by class are presented in Note 15.
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Notes to the Consolidated Financial Statements
m) Impairment
Financial and non-financial assets are evaluated in order to verify if there is an objective evidence of impaired carrying amount.
Impairment objective evidence may comprise the non-payment or payment delay by the debtor, possible bankruptcy process or the significant or extended decline in an asset value.
An impairment loss of a financial or non-financial asset is recognized in the profit or loss for the period if the carrying amount of an asset or cash-generating unit exceeds its recoverable value. Impairment losses are presented in Notes 8c(6) and 8g.
n) Securities sold under agreements to repurchase
These are recognized at the value of the liabilities and include, when applicable, related charges up to the end of the reporting period, calculated on a daily pro-rata basis.
A breakdown of the contracts recognized in deposits and securities sold under agreements to repurchase, as well as terms and amounts recognized in the statement of financial position and statement of income, is presented in Note 16.
o) Technical provisions relating to insurance, pension plans and capitalization bonds
· Damage, health and group insurance lines, except life insurance with survival coverage:
- The unearned premium reserve (PPNG) is calculated on a daily pro-rata basis, using premiums net of coinsurance, including amounts ceded through reinsurance, and is comprised of the portion corresponding to the remaining period of coverage less initial contracting costs, except for health and personal insurance. The portion of these reserves corresponding to the estimate for risks in effect but not yet contracted is designated ‘PPNG-RVNE’;
- The unearned premium or contribution reserve (PPCNG) is calculated on a daily pro-rata basis based on the portion of health insurance premiums corresponding to the remaining period of coverage, of the currently effective contracts;
- The mathematical reserve for unvested benefits (PMBaC) is calculated as the difference between the current value of future benefits and the current value of future contributions, on obligations already assumed by Bradesco;
- The mathematical reserve for unvested benefits (PMBaC) relates to the individual health care plan portfolio and covers the risk related to the cover for the holder’s dependents for five years following the death of the holder. It is calculated using a 5.1% annual discount rate, the time holders are expected to remain in the plan up to their death, and the projected costs of the five-year-period cover, excluding payment of premiums;
- For health insurance, the mathematical reserve of benefits granted (PMBC) is constituted by the obligations arising from the contractual clauses of remittance of installments, regarding the coverage of health assistance and by the premiums paid by insured participating in the Bradesco Saúde Insurance Plan - "GBS Plan" considering a discount rate of 5.1% per annum;
- For health insurance, the reserve for claims incurred but not reported (IBNR) is calculated from the final estimate of claims already incurred and still not reported, based on the run-off triangles, monthly that consider the historical development of claims advised in the last 12 months to establish a future projection per period of occurrence;
- For non-life insurance, the reserve for ‘incurred but not reported’ (IBNR) claims is calculated based on incurred but not paid’ (IBNP) claims less the balance of the reserve for ‘unsettled’ claims (PSL) on the calculation date. A final estimate of IBNP is calculated using semi-annual run-off triangles. The run-off triangles consider the historical development of claims paid in the previous 10 semesters to determine a future projection per occurrence period, and considers the estimated claims ‘incurred but not sufficient’ reported (IBNER), reflecting the changing expectation of the amount provisioned along the regulatory process;
104 Economic and Financial Analysis Report – March 2017
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
- For other life insurance, the reserve for ‘incurred but not reported’ (IBNR) claims is calculated based on incurred but not paid (IBNP) claims less the reserve for unsettled claims (PSL) on the calculation date. A final estimate of IBNP claims is calculated using semi-annual run-off triangles. The run-off triangles consider the historical development of claims paid in the previous 16 semesters to determine a future projection per occurrence period;
- For the acquired insurance of persons portfolio, the reserve for ‘incurred but not reported’ (IBNR) claims is constituted to cover the expected values to be settled based on incurred but not reported claims until the base date of calculation. It is calculated by the Bornhuetter-Ferguson method, using as a mathematical model run-off triangles of claims incurred from 2001;
- The reserve for unsettled claims (PSL), for life and health insurance, considers all claim notifications received up to the end of the reporting period, including the legal claims and monetarily restated related costs;
- With respect to the insurance portfolios acquired, the reserve for unsettled claims (PSL) is made based on estimates of indemnities, for events incurred and appropriately reported by the insured and/or beneficiaries until the statement of financial position date. It includes lawsuits related to claims, which are constituted based on the analysis of legal advisers for the assessment of risks related to the sum insured. It also includes an estimate of adjustments of incurred but not sufficiently reported (IBNER) for the aggregate development of claims reported but not yet paid, whose values may be changed throughout the process until their final settlement;
- For non-life insurance, the reserve for unsettled claims (PSL) is determined based on the indemnity payment estimates, considering all administrative and judicial claims existing at the reporting date, restated monetarily, net of the expected payments to be received;
- The reserve for related expenses (PDR) for insurance of persons is recognized to cover expenses related to estimated claims and benefits for products structured in self-funding and partially regimes, the reserve covers claims incurred. For plans structured under a capitalization regime, the reserve is made to cover the expected expenses related to incurred claims and also claims expected to be incurred in the future;
- For damage insurance, the reserve for related expenses is calculated on a monthly basis to cover the expenses related to indemnity payment, and it covers the expenses allocated individually to each claim, as well as expenses related to claims that have not been itemized, that is, those at the level of the portfolio;
- The reserve for redemptions and other amounts to be settled (PVR) comprises figures related to redemptions to settle, premium refunds owed and portability (transfer-outs) requested but not yet transferred to the recipient insurer;
- The complementary reserve for coverage (PCC) refers to the amount necessary to complement technical provisions, as calculated in the Liability Adequacy Test (LAT). The Liability Adequacy Test (LAT), which is prepared using statistical and actuarial methods based on realistic assumptions, taking into account the biometric table BR-EMS of both genders, improvement and forward interest rate curves (ETTJ) free from risk as authorized by SUSEP. The improvement rate is calculated from automatic updates of the biometric table, considering the expected increase in future life expectancy; and
- Other reserves are recognized for the individual health portfolio to address the differences between the expected present value of future premiums and the expected present value of indemnities and related expenses, using an annual discount rate of 5.1%.
Bradesco 105
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
· Pension plans and life insurance with survival coverage:
- The unearned premium reserve (PPNG) is calculated on a daily prorated basis using net contributions, and is comprised of the portion corresponding to the remaining period of coverage and includes an estimate for risks covered but not yet issued (RVNE);
- The mathematical reserve for unvested benefits (PMBaC) is recognized for participants who have not yet received any benefit. In defined benefit pension plans, the reserve represents the difference between the present value of future benefits and the present value of future contributions, corresponding to obligations in the form of retirement, disability, pension and annuity plans. The reserve is calculated using methodologies and assumptions set forth in the actuarial technical notes;
- The mathematical reserve for unvested benefits (PMBaC) related to life insurance and unrestricted benefit pension plans (VGBL and PGBL), as well as the defined contribution plans, shows the value of participant contributions, net of costs and other contractual charges, plus income from investment in specially constituted investment funds (FIEs);
- The reserve for redemptions and other amounts to be settled (PVR) comprises figures related to redemptions to settle, premium refunds owed and portability requested but not yet transferred to the recipient insurer;
- The mathematical reserve for vested benefits (PMBC) is recognized for participants already receiving benefits and corresponds to the present value of future obligations related to the payment of those on-going benefits;
- The complementary reserve for coverage (PCC) refers to the amount necessary to complement technical provisions, as calculated in the Liability Adequacy Test (LAT). The Liability Adequacy Test (LAT), which is prepared semi-annually using statistical and actuarial methods based on realistic assumptions, taking into account the biometric table BR-EMS of both genders, improvement and forward interest rate curves (ETTJ) free from risk as authorized by SUSEP. The improvement rate is calculated from automatic updates of the biometric table, considering the expected increase in future life expectancy;
- The reserve for related expenses (PDR) is recognized to cover expenses related to estimated claims and benefits, for products structured in self-funding and partially regimes. For plans structured under a capitalization regime, the reserve is made to cover the expected expenses related to incurred claims and also claims expected to be incurred in the future;
- The reserve for financial surplus (PEF) corresponds to the portion of income from investment of reserves that exceeds the minimum returns due to policyholders of pension plans that have a profit share clause;
- The reserve for incurred and not reported (IBNR) events is constituted for claims incurred but not reported and is based on run-off triangles, which consider the loss development of claims in the previous 96 months to set forth a future projection by occurrence period; and
- With respect to the insurance portfolios acquired, the provision of incurred but not reported claims (IBNR) is made to cover the expected values to settle for incurred but not reported claims until the base date of calculation. It is calculated in accordance with the criteria defined in SUSEP Circular No. 517/15 (amended by SUSEP Circular No. 521/15);
- The reserve for unsettled claims (PSL) considers all loss notices received up to the end of the reporting period. The provision is updated for inflation and includes all claims in litigation; and
- With respect to the insurance portfolios acquired, the reserve for unsettled claims (PSL) is made based on estimates of indemnities, for events incurred and appropriately reported by the insured and/or beneficiaries until the statement of financial position date. It includes lawsuits related to claims, which are constituted based on the analysis of legal advisers for the assessment of risks related to the sum insured. It also comprises values relating to accrued unpaid rent contained in the PMBC, which are written off and included in the PSL.
106 Economic and Financial Analysis Report – March 2017
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
· Capitalization bonds:
- The mathematical reserve for capitalization bond (PMC) is recognized for each active or suspended capitalization bond over the term set forth in the general conditions of the plan, and is calculated using the capitalization percentage, applicable to each of the payments made, plus the monthly accrual calculated using the inflation index and the interest rate established in the plan until the bond is redeemed or canceled;
- The reserve for redemption (PR) comprises the values of matured and early-terminated capitalization bonds and is calculated by updating the balance of bonds whose terms have expired or canceled using the inflation index until the holder receives the redemption payment;
- Reserve for ‘draws to be held’ (PSR) is recognized to cover premiums for future prize draws, and the balance represents the present value of the draws that have already been funded but have not yet been held. The calculation methodology consists of the accumulation of the prize draw percentage applicable to each payment, as established in the plan, less the amounts related to prize draws that have already occurred. The percentages of payments designated for the prize draws is defined in advance in the actuarial technical note, and is not modified during the term of the bond;
- Reserve for draws payable (PSP) consists of the value of unpaid prize draw amounts, adjusted for inflation for the period between the date of the drawing and its effective settlement; and
- Reserve for administrative expense (PDA) is recognized to cover the cost of maintaining the single payment (PU) capitalization bonds.
Technical provisions shown by account, product and segment, as well as amounts and details of plan assets covering these technical provisions, are shown in Note 21.
p) Provisions, contingent assets and liabilities and legal obligations – tax and social security
Provisions, contingent assets and liabilities, and legal obligations, as defined below, are recognized, measured and disclosed in accordance with the criteria set out in CPC 25, approved by CMN Resolution No. 3,823/09 and CVM Resolution No. 594/09:
· Contingent Assets: these are not recognized in the financial statements, except to the extent that there are real guarantees or favorable judicial decisions, to which no further appeals are applicable, and it is considered virtually certain that cash inflows will flow to Bradesco. Contingent assets with a chance of probable success are disclosed in the notes to the financial statements;
· Provisions: these are recognized taking into consideration the opinion of legal counsel, the nature of the lawsuits, similarity with previous lawsuits, complexity and positioning of the courts, whenever an entity has a present obligation (legal or constructive) as a result of a past even, it is probable that an outflow of resources will be required to settle the obligation and when the amount can be reliably measured;
· Contingent Liabilities: according to CPC 25, the term “contingent” is used for liabilities that are not recognized because their existence will only be confirmed by the occurrence of one or more uncertain future events beyond Management’s control. Contingent liabilities do not meet the criteria for recognition because they are considered as possible losses should only be disclosed in the notes when relevant. Obligations deemed remote are not recognized as a provision nor disclosed; and
Bradesco 107
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
· Legal Obligations – Provision for Tax Risks: results from judicial proceedings, which contest the applicability of tax laws on the grounds of legality or constitutionality, which, regardless of the assessment of the probability of success, are fully provided for in the financial statements.
Details on lawsuits, as well as segregation and changes in amounts recognized, by type, are presented in Note 18.
q) Funding expenses
Expenses related to funding transactions involving the issuance of securities reduce the corresponding liability and are recognized in the profit or loss over the term of the transaction. They are presented in Notes 16c and 19.
r) Other assets and liabilities
Assets are stated at their realizable amounts, including, when applicable, related income and inflation and exchange variations (on a daily prorated basis), less provision for losses, when deemed appropriate. Liabilities include known or measurable amounts, including related charges and inflation and exchange variations (on a daily prorated basis).
s) Subsequent events
These refer to events occurring between the reporting date and the date the financial statements are authorized to be issued.
They comprise the following:
· Events resulting in adjustments: events relating to conditions already existing at the end of the reporting period; and
· Events not resulting in adjustments: events relating to conditions not existing at the end of the reporting period.
Subsequent events, if any, are described in Note 35.
108 Economic and Financial Analysis Report – March 2017
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
4) INFORMATION FOR THE PURPOSE OF COMPARABILITY
From July 2016, Bradesco began consolidating the consolidated financial statements of HSBC Bank Brasil S.A. and its subsidiaries (Note 35e). We presented the main balances of the statement of financial position as of September 30, 2016 and statements of income for the period from July 1, 2016 to September 30, 2016:
|
R$ thousand |
HSBC Brasil | |
Assets |
|
Current and long-term assets |
159,557,794 |
Funds available |
1,773,609 |
Interbank investments |
17,455,233 |
Securities and derivative financial instruments |
46,082,476 |
Interbank and interdepartmental accounts |
17,041,653 |
Loan and leasing |
45,196,643 |
Other receivables |
31,687,126 |
Other assets |
321,054 |
Permanent |
1,718,679 |
Investments |
44,244 |
Premises and equipment |
1,208,058 |
Intangible assets |
466,377 |
Total |
161,276,473 |
Liabilities |
|
Current and long-term liabilities |
153,474,429 |
Demand, term and other deposits |
64,876,504 |
Securities sold under agreements to repurchase |
5,008,704 |
Funds from Acceptances and Issue of Securities |
37,570,595 |
Interbank and interdepartmental accounts |
1,261,678 |
Borrowing and on-lending |
5,701,777 |
Derivative financial instruments |
2,246,825 |
Provisions for insurance, pension plans and capitalization bonds |
15,296,887 |
Other liabilities |
21,511,459 |
Deferred income |
6,010 |
Non-controlling interest in associated and controlled companies |
19,633 |
Shareholders’ equity |
7,776,401 |
Total |
161,276,473 |
|
R$ thousand |
HSBC Brasil | |
Income from financial intermediation |
6,026,518 |
Expenses from financial intermediation |
(3,819,971) |
Financial margin |
2,206,547 |
Allowance for Loan Losses (ALL) |
(1,187,495) |
Gross income from financial intermediation |
1,019,052 |
Income from insurance, pension plans and capitalization bonds |
96,930 |
Fee and commission income |
702,731 |
Personnel expenses |
(1,136,594) |
Other administrative expenses |
(767,014) |
Tax expenses |
(242,233) |
Equity in associated and jointly controlled companies |
30,215 |
Other operating income / expenses |
393,999 |
Operating income |
97,086 |
Non-operating income |
(67,388) |
IT/SC (Income Tax/Soc. Contrib.) and non-controlling interests |
60,124 |
Net income |
89,822 |
In October 2016, approval was granted in an Extraordinary General Meeting for the partial spin-off of HSBC Brasil, through the absorption of portions of its equity by companies of the Organization, enabling progress with the integration of operational and technological platforms, resulting in the replacement of the HSBC brand in its service network, becoming Bradesco. Thus, Bradesco began to operate with a unified platform (branches, ATMs, and systems), to which all clients have access to. From now on, Bradesco will add to the products and services already offered to HSBC Brasil clients, a nationwide service network, a state-of-the-art technology platform, and an even more extensive portfolio of products and services.
Bradesco 109
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
5) MANAGERIAL STATEMENTS OF FINANCIAL POSITION AND STATEMENT OF INCOME BY OPERATING SEGMENT
a) Reconciliation of the Statement of Financial Position and Statement of Income – Accounting vs. Managerial
Management uses a variety of information, including those from financial statements, prepared in accordance with accounting practices adopted in Brazil applicable to institutions authorized to operate by the Central Bank, prepared by consolidation criteria that differ in part from the criteria of CPC 36, as described in Note 2.
The main differences of consolidation criteria are shown below, through the Reconciliation of the Statements of financial position and the Statements of Income – Accounting vs. Managerial:
|
R$ thousand | |||||||
On March 31, 2017 |
On March 31, 2016 | |||||||
Accounting Statement of Financial Position |
Proportional |
Adjustments of |
Managerial Statement of Financial Position |
Accounting Statement of Financial Position |
Proportional |
Adjustments of |
Managerial Statement of Financial Position | |
Assets |
|
|
|
|
|
|
|
|
Current and long-term assets |
1,159,038,632 |
8,652,456 |
96,256,363 |
1,263,947,451 |
1,005,391,682 |
6,455,113 |
70,284,113 |
1,082,130,908 |
Funds available |
11,831,164 |
198,170 |
- |
12,029,334 |
18,527,203 |
132,425 |
- |
18,659,628 |
Interbank investments |
188,007,983 |
674,998 |
(566,440) |
188,116,541 |
165,723,555 |
366,504 |
(567,539) |
165,522,520 |
Securities and derivative financial instruments |
448,510,341 |
4,309,038 |
96,880,799 |
549,700,178 |
343,577,120 |
479,298 |
70,869,766 |
414,926,184 |
Interbank and interdepartmental accounts |
63,595,452 |
- |
- |
63,595,452 |
51,473,750 |
- |
- |
51,473,750 |
Loan and leasing |
338,809,899 |
459,157 |
- |
339,269,056 |
319,842,747 |
574,323 |
- |
320,417,070 |
Allowance for Loan Losses (ALL) |
(39,086,730) |
(94,266) |
- |
(39,180,996) |
(29,594,203) |
(139,568) |
- |
(29,733,771) |
Other receivables and assets |
147,370,523 |
3,105,359 |
(57,996) |
150,417,886 |
135,841,510 |
5,042,131 |
(18,114) |
140,865,527 |
Permanent Assets |
30,342,236 |
(150,436) |
- |
30,191,800 |
18,582,556 |
1,049,190 |
- |
19,631,746 |
Investments |
7,302,621 |
(5,576,220) |
- |
1,726,401 |
6,174,390 |
(4,654,370) |
- |
1,520,020 |
Premises and equipment |
7,567,273 |
235,156 |
- |
7,802,429 |
5,522,537 |
256,785 |
- |
5,779,322 |
Intangible assets |
15,472,342 |
5,190,628 |
- |
20,662,970 |
6,885,629 |
5,446,775 |
- |
12,332,404 |
Total |
1,189,380,868 |
8,502,020 |
96,256,363 |
1,294,139,251 |
1,023,974,238 |
7,504,303 |
70,284,113 |
1,101,762,654 |
110 Economic and Financial Analysis Report – March 2017
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
|
R$ thousand | |||||||
On March 31, 2017 |
On March 31, 2016 | |||||||
Accounting Statement of Financial Position |
Proportional |
Adjustments of |
Managerial Statement of Financial Position |
Accounting Statement of Financial Position |
Proportional |
Adjustments of |
Managerial Statement of Financial Position | |
Liabilities |
|
|
|
|
|
|
|
|
Current and long-term liabilities |
1,083,909,165 |
7,403,378 |
96,256,363 |
1,187,568,906 |
929,734,610 |
6,406,744 |
70,284,113 |
1,006,425,467 |
Deposits |
235,455,338 |
(23,539) |
- |
235,431,799 |
189,210,892 |
(19,414) |
- |
189,191,478 |
Securities sold under agreements to repurchase |
254,779,526 |
- |
96,483,111 |
351,262,637 |
224,064,824 |
- |
73,285,656 |
297,350,480 |
Funds from Issuance of Securities |
140,302,853 |
- |
2,447,825 |
142,750,678 |
112,617,128 |
- |
- |
112,617,128 |
Interbank and interdepartmental accounts |
5,754,621 |
- |
- |
5,754,621 |
5,181,144 |
- |
- |
5,181,144 |
Borrowing and on-lending |
56,417,438 |
- |
- |
56,417,438 |
62,849,125 |
- |
- |
62,849,125 |
Derivative financial instruments |
15,705,212 |
- |
(1,769,438) |
13,935,774 |
10,395,360 |
- |
(2,731,548) |
7,663,812 |
Provisions for insurance, pension plans and capitalization bonds |
229,432,544 |
- |
- |
229,432,544 |
182,972,928 |
- |
- |
182,972,928 |
Other liabilities |
146,061,633 |
7,426,917 |
(905,135) |
152,583,415 |
142,443,209 |
6,426,158 |
(269,995) |
148,599,372 |
Deferred income |
426,172 |
- |
- |
426,172 |
487,785 |
- |
- |
487,785 |
Non-controlling interests in subsidiaries |
487,081 |
1,098,642 |
- |
1,585,723 |
421,715 |
1,097,559 |
- |
1,519,274 |
Shareholders’ equity |
104,558,450 |
- |
- |
104,558,450 |
93,330,128 |
- |
- |
93,330,128 |
Total |
1,189,380,868 |
8,502,020 |
96,256,363 |
1,294,139,251 |
1,023,974,238 |
7,504,303 |
70,284,113 |
1,101,762,654 |
|
R$ thousand | |||||||
Accrued on March 31, 2017 |
Accrued on March 31, 2016 | |||||||
Accounting Statement of Income |
Proportional |
Adjustments of |
Managerial Statement of Income |
Accounting Statement of Income |
Proportional |
Adjustments of |
Managerial Statement of Income | |
Revenue from financial intermediation |
41,647,914 |
299,407 |
1,906,935 |
43,854,256 |
37,541,259 |
107,912 |
1,024,411 |
38,673,582 |
Financial intermediation expenses |
(22,700,458) |
- |
(2,595,982) |
(25,296,440) |
(16,820,886) |
- |
(1,455,079) |
(18,275,965) |
Net Interest Income |
18,947,456 |
299,407 |
(689,047) |
18,557,816 |
20,720,373 |
107,912 |
(430,668) |
20,397,617 |
Allowance for loan losses |
(8,281,361) |
(26,577) |
- |
(8,307,938) |
(5,883,595) |
(35,769) |
- |
(5,919,364) |
Gross income from financial intermediation |
10,666,095 |
272,830 |
(689,047) |
10,249,878 |
14,836,778 |
72,143 |
(430,668) |
14,478,253 |
Income from Insurance, Pension Plans and Capitalization Bonds |
1,625,780 |
- |
- |
1,625,780 |
1,624,315 |
- |
- |
1,624,315 |
Fee and Commission Income |
5,788,892 |
1,083,518 |
566,907 |
7,439,317 |
4,912,817 |
1,046,602 |
445,312 |
6,404,731 |
Personnel Expenses |
(4,635,886) |
(186,517) |
- |
(4,822,403) |
(3,583,135) |
(170,564) |
- |
(3,753,699) |
Other administrative expenses |
(4,645,532) |
(340,955) |
134,270 |
(4,852,217) |
(3,903,882) |
(326,886) |
114,518 |
(4,116,250) |
Tax expenses |
(1,650,878) |
(120,064) |
- |
(1,770,942) |
(1,705,229) |
(124,018) |
- |
(1,829,247) |
Equity in the Earnings (Losses) of Affiliates and jointly controlled companies |
428,535 |
(371,031) |
- |
57,504 |
405,665 |
(366,112) |
- |
39,553 |
Other Operating Income / Expenses |
(520,785) |
(158,760) |
(12,130) |
(691,675) |
(2,349,373) |
60,927 |
(129,162) |
(2,417,608) |
Operating income |
7,056,221 |
179,021 |
- |
7,235,242 |
10,237,956 |
192,092 |
- |
10,430,048 |
Non-Operating Income |
(132,926) |
(1,154) |
- |
(134,080) |
95,692 |
(3,337) |
- |
92,355 |
IT/SC (Income Tax/Soc. Contrib.) and Non-controlling interests |
(2,852,608) |
(177,867) |
- |
(3,030,475) |
(6,212,237) |
(188,755) |
- |
(6,400,992) |
Net income |
4,070,687 |
- |
- |
4,070,687 |
4,121,411 |
- |
- |
4,121,411 |
(1) Refers to the effects of the consolidation adjustments arising from the undertakings consolidated proportionally (Grupo Cielo, Grupo Alelo, Crediare, etc.); and
(2) Refers basically to the effects of the consolidation adjustments arising from the "non-consolidation" of the exclusive funds.
Bradesco 111
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
b) Balance sheet and statements of income by segment – Managerial
In line with CPC 22, the managerial information, hereinafter, was prepared based on reports available to the Management to evaluate the performance and make decisions regarding the allocation of resources for investments and other purposes.
|
On March 31 - R$ thousand | ||||||
Financial (1) (2) |
Insurance Group (2) (3) |
Other Activities (2) |
Eliminations (4) |
Managerial Accounting Statement of Financial Position | |||
Brazil |
Overseas |
Brazil |
Overseas | ||||
Assets |
|
|
|
|
|||
Current and long-term assets |
947,916,119 |
103,007,445 |
265,904,841 |
8,024 |
3,739,177 |
(56,628,155) |
1,263,947,451 |
Funds available |
10,376,784 |
1,653,671 |
353,861 |
7,334 |
143,014 |
(505,330) |
12,029,334 |
Interbank investments |
186,395,685 |
1,720,856 |
- |
- |
- |
- |
188,116,541 |
Securities and derivative financial instruments |
282,670,585 |
14,432,313 |
253,208,371 |
538 |
2,750,649 |
(3,362,278) |
549,700,178 |
Interbank and interdepartmental accounts |
63,595,452 |
- |
- |
- |
- |
- |
63,595,452 |
Loan and leasing |
304,723,487 |
85,161,024 |
- |
- |
- |
(50,615,455) |
339,269,056 |
Allowance for Loan Losses (ALL) |
(37,966,225) |
(1,214,771) |
- |
- |
- |
- |
(39,180,996) |
Other receivables and assets |
138,120,351 |
1,254,352 |
12,342,609 |
152 |
845,514 |
(2,145,092) |
150,417,886 |
Permanent assets |
106,789,603 |
38,451 |
10,402,470 |
1 |
932,501 |
(87,971,226) |
30,191,800 |
Investments |
82,315,846 |
- |
7,173,819 |
- |
207,962 |
(87,971,226) |
1,726,401 |
Premises and equipment |
6,204,735 |
24,152 |
1,542,683 |
1 |
30,858 |
- |
7,802,429 |
Intangible assets |
18,269,022 |
14,299 |
1,685,968 |
- |
693,681 |
- |
20,662,970 |
Total in 2017 |
1,054,705,722 |
103,045,896 |
276,307,311 |
8,025 |
4,671,678 |
(144,599,381) |
1,294,139,251 |
Total in 2016 |
911,267,885 |
140,523,992 |
217,580,811 |
2,510 |
3,346,416 |
(170,958,960) |
1,101,762,654 |
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
Current and long-term liabilities |
947,756,389 |
57,107,774 |
238,257,815 |
1,084 |
1,073,999 |
(56,628,155) |
1,187,568,906 |
Deposits |
216,886,442 |
19,227,483 |
- |
- |
- |
(682,126) |
235,431,799 |
Securities sold under agreements to repurchase |
343,206,595 |
8,068,986 |
- |
- |
- |
(12,944) |
351,262,637 |
Funds from issuance of securities |
142,997,383 |
2,966,599 |
- |
- |
- |
(3,213,304) |
142,750,678 |
Interbank and interdepartmental accounts |
5,754,621 |
- |
- |
- |
- |
- |
5,754,621 |
Borrowing and on-lending |
92,384,711 |
14,737,426 |
- |
- |
- |
(50,704,699) |
56,417,438 |
Derivative financial instruments |
13,764,418 |
171,356 |
- |
- |
- |
- |
13,935,774 |
Technical provisions from insurance, pension plans and capitalization bonds |
- |
- |
229,431,855 |
689 |
- |
- |
229,432,544 |
Other liabilities |
132,762,219 |
11,935,924 |
8,825,960 |
395 |
1,073,999 |
(2,015,082) |
152,583,415 |
Deferred income |
404,026 |
- |
22,146 |
- |
- |
- |
426,172 |
Non-controlling interests in subsidiaries |
1,986,857 |
45,938,122 |
38,027,350 |
6,941 |
3,597,679 |
(87,971,226) |
1,585,723 |
Shareholders’ equity |
104,558,450 |
- |
- |
- |
- |
- |
104,558,450 |
Total in 2017 |
1,054,705,722 |
103,045,896 |
276,307,311 |
8,025 |
4,671,678 |
(144,599,381) |
1,294,139,251 |
Total in 2016 |
911,267,885 |
140,523,992 |
217,580,811 |
2,510 |
3,346,416 |
(170,958,960) |
1,101,762,654 |
112 Economic and Financial Analysis Report – March 2017
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
|
Accrued on March 31 - R$ thousand | ||||||
Financial (1) (2) |
Insurance Group (2) (3) |
Other Activities (2) |
Eliminations (4) |
Managerial Statement of Income | |||
Brazil |
Overseas |
Brazil |
Overseas | ||||
Revenue from financial intermediation |
35,686,549 |
890,883 |
7,498,071 |
- |
66,469 |
(287,716) |
43,854,256 |
Financial intermediation expenses |
(19,226,656) |
(384,977) |
(5,972,523) |
- |
- |
287,716 |
(25,296,440) |
Net Interest Income |
16,459,893 |
505,906 |
1,525,548 |
- |
66,469 |
- |
18,557,816 |
Allowance for loan losses |
(8,156,384) |
(151,554) |
- |
- |
- |
- |
(8,307,938) |
Gross income from financial intermediation |
8,303,509 |
354,352 |
1,525,548 |
- |
66,469 |
- |
10,249,878 |
Income from Insurance, Pension Plans and Capitalization Bonds |
- |
- |
1,625,815 |
(35) |
- |
- |
1,625,780 |
Fee and Commission Income |
6,794,283 |
64,897 |
515,623 |
- |
89,929 |
(25,415) |
7,439,317 |
Personnel Expenses |
(4,404,197) |
(42,679) |
(316,145) |
(138) |
(59,244) |
- |
(4,822,403) |
Other administrative expenses |
(4,451,859) |
(75,508) |
(406,481) |
(77) |
(45,259) |
126,967 |
(4,852,217) |
Tax expenses |
(1,491,996) |
(3,942) |
(254,507) |
(36) |
(20,461) |
- |
(1,770,942) |
Equity in the Earnings (Losses) of Affiliates and jointly controlled companies |
(11,081) |
- |
60,665 |
- |
7,920 |
- |
57,504 |
Other Operating Income / Expenses |
(280,183) |
(29,624) |
(352,419) |
(107) |
72,210 |
(101,552) |
(691,675) |
Operating income |
4,458,476 |
267,496 |
2,398,099 |
(393) |
111,564 |
- |
7,235,242 |
Non-Operating Income |
(137,401) |
2,085 |
1,201 |
- |
35 |
- |
(134,080) |
IT/SC (Income Tax/Soc. Contrib.) and Non-controlling interests |
(1,737,886) |
(233,613) |
(1,024,541) |
(4) |
(34,431) |
- |
(3,030,475) |
Net Income in 2017 |
2,583,189 |
35,968 |
1,374,759 |
(397) |
77,168 |
- |
4,070,687 |
Net Income in 2016 |
3,144,609 |
(439,972) |
1,379,677 |
230 |
36,867 |
- |
4,121,411 |
(1) The financial segment is comprised of financial institutions, holding companies which are mainly responsible for managing financial resources, and credit card, consortium and asset management companies;
(2) The asset, liability, income and expense balances among companies from the same segment are eliminated;
(3) The Insurance Group segment comprises insurance, pension plan and capitalization bond companies; and
(4) Refers to amounts eliminated among companies from different segments, as well as among operations carried out in Brazil and overseas.
6) CASH AND CASH EQUIVALENTS
|
On March 31 - R$ thousand | |
2017 |
2016 | |
Cash and due from banks in domestic currency |
9,603,651 |
7,982,996 |
Cash and due from banks in foreign currency |
2,227,326 |
10,544,003 |
Investments in gold |
187 |
204 |
Total cash and due from banks |
11,831,164 |
18,527,203 |
Interbank investments (1) |
178,707,672 |
155,643,594 |
Total cash and cash equivalents |
190,538,836 |
174,170,797 |
(1) Refers to operations that mature in 90 days or less from the date they were effectively invested and with insignificant risk of change in fair value.
Bradesco 113
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
7) INTERBANK INVESTMENTS
a) Breakdown and maturity
|
On March 31 - R$ thousand | |||||
1 to 30 |
31 to 180 |
181 to 360 |
More than 360 days |
2017 |
2016 | |
Securities purchased under agreements to resell: |
|
|
|
|||
Own portfolio position |
35,841,981 |
35,851 |
- |
- |
35,877,832 |
44,798,417 |
● Financial treasury bills |
17,919,985 |
- |
- |
- |
17,919,985 |
3,910,440 |
● National treasury notes |
13,714,448 |
35,851 |
- |
- |
13,750,299 |
25,079,888 |
● National treasury bills |
3,915,204 |
- |
- |
- |
3,915,204 |
15,431,187 |
● Debentures |
279,878 |
- |
- |
- |
279,878 |
374,469 |
● Other |
12,466 |
- |
- |
- |
12,466 |
2,433 |
Funded position |
143,197,786 |
1,192,825 |
- |
- |
144,390,611 |
110,269,818 |
● National treasury notes |
64,250,203 |
1,048,320 |
- |
- |
65,298,523 |
61,297,863 |
● Financial treasury bills |
48,071,054 |
- |
- |
- |
48,071,054 |
6,767,293 |
● National treasury bills |
30,876,529 |
144,505 |
- |
- |
31,021,034 |
42,204,662 |
Short position |
973,935 |
786,199 |
- |
- |
1,760,134 |
665,049 |
● National treasury bills |
973,935 |
786,199 |
- |
- |
1,760,134 |
665,049 |
Subtotal |
180,013,702 |
2,014,875 |
- |
- |
182,028,577 |
155,733,284 |
Interest-earning deposits in other banks: |
|
|
|
|||
● Interest-earning deposits in other banks: |
2,554,505 |
1,646,319 |
1,375,297 |
417,018 |
5,993,139 |
10,007,462 |
● Provision for losses |
(172) |
(6,493) |
(7,068) |
- |
(13,733) |
(17,191) |
Subtotal |
2,554,333 |
1,639,826 |
1,368,229 |
417,018 |
5,979,406 |
9,990,271 |
Total in 2017 |
182,568,035 |
3,654,701 |
1,368,229 |
417,018 |
188,007,983 |
|
% |
97.1 |
2.0 |
0.7 |
0.2 |
100.0 |
|
Total in 2016 |
158,900,119 |
5,895,448 |
543,130 |
384,858 |
|
165,723,555 |
% |
95.9 |
3.6 |
0.3 |
0.2 |
|
100.0 |
b) Income from interbank investments
Classified in the statement of income as income from operations with securities.
|
Accrued on March 31 - R$ thousand | |
2017 |
2016 | |
Income from investments in purchase and sale commitments: |
|
|
• Own portfolio position |
144,112 |
132,856 |
• Funded position |
5,369,452 |
4,547,260 |
• Short position |
103,954 |
65,268 |
Subtotal |
5,617,518 |
4,745,384 |
Income from interest-earning deposits in other banks |
122,152 |
248,556 |
Total (Note 8g) |
5,739,670 |
4,993,940 |
114 Economic and Financial Analysis Report – March 2017
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
8) SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS
Information on securities and derivative financial instruments is as follows:
a) Summary of the consolidated classification of securities by operating segment and issuer
|
On March 31 - R$ thousand | |||||||
Financial |
Insurance and Capitalization bonds |
Pension plans |
Other Activities |
2017 |
% |
2016 |
% | |
Trading securities |
50,577,553 |
15,870,271 |
162,238,277 |
20,060 |
228,706,161 |
51.0 |
170,566,360 |
49.5 |
- Government securities |
24,959,254 |
12,464,982 |
145,459,776 |
20,060 |
182,904,072 |
40.8 |
110,579,585 |
32.1 |
- Corporate securities |
7,606,463 |
3,370,528 |
15,933,530 |
- |
26,910,521 |
6.0 |
47,186,740 |
13.7 |
- Derivative financial instruments (1) (5) |
18,011,836 |
34,761 |
844,971 |
- |
18,891,568 |
4.2 |
12,800,035 |
3.7 |
Available-for-sale securities |
148,785,289 |
15,503,608 |
12,434,882 |
46,142 |
176,769,921 |
39.4 |
132,267,054 |
38.5 |
- Government securities |
87,910,341 |
13,550,054 |
10,717,928 |
34,277 |
112,212,600 |
25.0 |
73,817,010 |
21.5 |
- Corporate securities |
60,874,948 |
1,953,554 |
1,716,954 |
11,865 |
64,557,321 |
14.4 |
58,450,044 |
17.0 |
Held-to-maturity securities (2) |
12,212,551 |
4,884,948 |
25,936,760 |
- |
43,034,259 |
9.6 |
40,743,706 |
12.0 |
- Government securities |
24,276 |
4,884,948 |
25,936,760 |
- |
30,845,984 |
6.9 |
28,096,867 |
8.3 |
- Corporate securities |
12,188,275 |
- |
- |
- |
12,188,275 |
2.7 |
12,646,839 |
3.7 |
Total |
211,575,393 |
36,258,827 |
200,609,919 |
66,202 |
448,510,341 |
100.0 |
343,577,120 |
100.0 |
|
|
|
|
|
|
|
|
|
- Government securities |
112,893,871 |
30,899,984 |
182,114,464 |
54,337 |
325,962,656 |
72.7 |
212,493,462 |
61.8 |
- Corporate securities |
98,681,522 |
5,358,843 |
18,495,455 |
11,865 |
122,547,685 |
27.3 |
131,083,658 |
38.2 |
Total |
211,575,393 |
36,258,827 |
200,609,919 |
66,202 |
448,510,341 |
100.0 |
343,577,120 |
100.0 |
Bradesco 115
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
b) Consolidated classification by category, maturity and operating segment
I) Trading securities
Securities |
On March 31 - R$ thousand | ||||||||
2017 |
2016 | ||||||||
1 to 30 |
31 to 180 |
181 to 360 |
More than 360 days |
Fair/book value (3) (4) |
Amortized cost |
Fair Value Adjustment |
Fair/book value (3) (4) |
Fair Value Adjustment | |
- Financial |
20,565,121 |
4,010,239 |
2,868,567 |
23,133,626 |
50,577,553 |
57,369,118 |
(6,791,565) |
40,222,681 |
(10,558,299) |
Financial treasury bills |
- |
283,884 |
1,643,935 |
11,338,803 |
13,266,622 |
13,286,299 |
(19,677) |
9,317,797 |
(3,447) |
National treasury notes |
- |
144,994 |
116,587 |
6,155,560 |
6,417,141 |
6,063,868 |
353,273 |
5,798,200 |
135,970 |
Financial bills |
165,851 |
2,167,674 |
260,523 |
228,208 |
2,822,256 |
2,812,313 |
9,943 |
4,510,989 |
(12,360) |
Debentures |
64,943 |
24,853 |
162,212 |
1,611,009 |
1,863,017 |
2,122,525 |
(259,508) |
2,698,197 |
(141,774) |
National treasury bills |
1,246,514 |
526,468 |
412,011 |
2,723,635 |
4,908,628 |
4,871,712 |
36,916 |
637,246 |
7,950 |
Brazilian foreign debt notes |
307 |
- |
- |
11,323 |
11,630 |
11,561 |
69 |
1,039,133 |
4,615 |
Derivative financial instruments (1) (5) |
17,311,428 |
493,344 |
116,683 |
90,381 |
18,011,836 |
24,847,916 |
(6,836,080) |
12,549,055 |
(10,524,154) |
Other |
1,776,078 |
369,022 |
156,616 |
974,707 |
3,276,423 |
3,352,924 |
(76,501) |
3,672,064 |
(25,099) |
- Insurance companies and capitalization bonds |
2,914,635 |
333,323 |
1,208,449 |
11,413,864 |
15,870,271 |
15,866,624 |
3,647 |
13,203,484 |
2,737 |
Financial treasury bills |
90,412 |
38,665 |
235,611 |
10,228,811 |
10,593,499 |
10,593,499 |
- |
7,475,358 |
- |
Financial bills |
- |
122,396 |
277,097 |
2,621 |
402,114 |
402,114 |
- |
636,627 |
- |
Other |
2,824,223 |
172,262 |
695,741 |
1,182,432 |
4,874,658 |
4,871,011 |
3,647 |
5,091,499 |
2,737 |
- Pension plans |
2,601,195 |
5,082,037 |
6,558,380 |
147,996,665 |
162,238,277 |
162,238,277 |
- |
116,571,602 |
- |
Financial treasury bills |
15,825 |
143,908 |
887,004 |
47,184,278 |
48,231,015 |
48,231,015 |
- |
47,065,731 |
- |
National treasury notes |
- |
46,939 |
34,844 |
54,991,546 |
55,073,329 |
55,073,329 |
- |
22,892,111 |
- |
National treasury bills |
- |
93,014 |
116,406 |
41,946,011 |
42,155,431 |
42,155,431 |
- |
15,896,990 |
- |
Financial bills |
- |
4,639,915 |
5,018,634 |
755,278 |
10,413,827 |
10,413,827 |
- |
8,484,692 |
- |
Debentures |
20,831 |
84,564 |
391,199 |
3,014,939 |
3,511,533 |
3,511,533 |
- |
2,373,604 |
- |
Other |
2,564,539 |
73,697 |
110,293 |
104,613 |
2,853,142 |
2,853,142 |
- |
19,858,474 |
- |
- Other activities |
- |
- |
2,496 |
17,564 |
20,060 |
20,077 |
(17) |
568,593 |
13,496 |
Financial treasury bills |
- |
- |
2,496 |
17,564 |
20,060 |
20,077 |
(17) |
41,986 |
- |
Other |
- |
- |
- |
- |
- |
- |
- |
526,607 |
13,496 |
Total |
26,080,951 |
9,425,599 |
10,637,892 |
182,561,719 |
228,706,161 |
235,494,096 |
(6,787,935) |
170,566,360 |
(10,542,066) |
Derivative financial instruments (liabilities) (5) |
(14,732,934) |
(451,346) |
(302,979) |
(217,953) |
(15,705,212) |
(11,883,076) |
(3,822,136) |
(10,395,360) |
(1,895,777) |
116 Economic and Financial Analysis Report – March 2017
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
II) Available-for-sale securities
Securities (6) |
On March 31 - R$ thousand | ||||||||
2017 |
2016 | ||||||||
1 to 30 |
31 to 180 |
181 to 360 |
More than 360 days |
Fair/book value (3) (4) |
Amortized cost |
Fair Value Adjustment |
Fair/book value (3) (4) |
Fair Value Adjustment | |
- Financial |
9,235,015 |
3,910,483 |
1,938,461 |
133,701,330 |
148,785,289 |
148,598,332 |
186,957 |
109,065,247 |
(3,789,215) |
National treasury bills |
- |
10,235 |
712,275 |
69,867,710 |
70,590,220 |
68,919,455 |
1,670,765 |
15,027,975 |
37,256 |
Debentures |
731,948 |
777,305 |
303,177 |
37,647,560 |
39,459,990 |
40,683,956 |
(1,223,966) |
33,198,500 |
(622,721) |
National treasury notes |
- |
2,073,807 |
- |
10,932,599 |
13,006,406 |
12,546,047 |
460,359 |
35,542,996 |
(491,183) |
Foreign corporate securities |
208,366 |
- |
49,050 |
10,607,132 |
10,864,548 |
11,019,755 |
(155,207) |
11,382,300 |
(2,342,830) |
Shares |
6,875,802 |
- |
- |
- |
6,875,802 |
7,441,425 |
(565,623) |
7,167,672 |
(154,457) |
Foreign government bonds |
- |
- |
769,876 |
764,765 |
1,534,641 |
1,546,988 |
(12,347) |
1,831,642 |
(41,134) |
Promissory Notes |
190,841 |
741,988 |
4,075 |
52,180 |
989,084 |
985,246 |
3,838 |
1,842,436 |
9,013 |
Certificates of real estate receivables |
29,231 |
- |
- |
1,051,755 |
1,080,986 |
1,132,052 |
(51,066) |
1,063,412 |
(210,637) |
Other |
1,198,827 |
307,148 |
100,008 |
2,777,629 |
4,383,612 |
4,323,408 |
60,204 |
2,008,314 |
27,478 |
- Insurance companies and capitalization bonds |
1,903,489 |
101,368 |
68,223 |
13,430,528 |
15,503,608 |
15,033,134 |
470,474 |
11,925,136 |
(613,521) |
National treasury notes |
- |
101,368 |
- |
11,842,217 |
11,943,585 |
11,860,235 |
83,350 |
7,395,144 |
(829,339) |
Shares |
1,422,810 |
- |
- |
- |
1,422,810 |
1,081,192 |
341,618 |
1,050,964 |
243,392 |
National treasury bills |
- |
- |
67,162 |
1,486,953 |
1,554,115 |
1,513,294 |
40,821 |
3,410,059 |
(7,143) |
Other |
480,679 |
- |
1,061 |
101,358 |
583,098 |
578,413 |
4,685 |
68,969 |
(20,431) |
- Pension plans |
1,623,330 |
88,132 |
2,183 |
10,721,237 |
12,434,882 |
10,830,486 |
1,604,396 |
11,271,322 |
380,711 |
National treasury notes |
- |
88,132 |
- |
10,584,403 |
10,672,535 |
9,211,404 |
1,461,131 |
9,526,726 |
321,052 |
Shares |
1,623,330 |
- |
- |
- |
1,623,330 |
1,482,397 |
140,933 |
1,265,740 |
70,320 |
Debentures |
- |
- |
- |
93,624 |
93,624 |
91,276 |
2,348 |
90,130 |
(2,768) |
Other |
- |
- |
2,183 |
43,210 |
45,393 |
45,409 |
(16) |
388,726 |
(7,893) |
- Other activities |
5,385 |
- |
23,666 |
17,091 |
46,142 |
40,985 |
5,157 |
5,349 |
5,331 |
Other |
5,385 |
- |
23,666 |
17,091 |
46,142 |
40,985 |
5,157 |
5,349 |
5,331 |
Subtotal |
12,767,219 |
4,099,983 |
2,032,533 |
157,870,186 |
176,769,921 |
174,502,937 |
2,266,984 |
132,267,054 |
(4,016,694) |
Hedge - cash flow (Note 8f) |
- |
- |
- |
- |
- |
- |
115,805 |
- |
209,125 |
Securities reclassified to “Held-to-maturity securities” |
- |
- |
- |
- |
- |
- |
(264,240) |
- |
(123,358) |
Total |
12,767,219 |
4,099,983 |
2,032,533 |
157,870,186 |
176,769,921 |
174,502,937 |
2,118,549 |
132,267,054 |
(3,930,927) |
Bradesco 117
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
III) Held-to-maturity securities
Securities (2) |
On March 31 - R$ thousand | ||||||||
2017 |
2016 | ||||||||
1 to 30 |
31 to 180 |
181 to 360 |
More than 360 days |
Amortized cost (3) |
Fair value (4) |
Gain (loss) not accounted for |
Amortized cost (3) |
Gain (loss) not accounted for | |
- Financial |
- |
- |
15,016 |
12,197,535 |
12,212,551 |
11,505,017 |
(707,534) |
12,675,862 |
(2,074,223) |
Certificates of real estate receivables |
- |
- |
15,016 |
12,173,258 |
12,188,274 |
11,482,108 |
(706,166) |
12,646,839 |
(2,078,426) |
Other |
- |
- |
- |
24,277 |
24,277 |
22,909 |
(1,368) |
29,023 |
4,203 |
- Insurance companies and capitalization bonds |
- |
- |
- |
4,884,948 |
4,884,948 |
5,708,653 |
823,705 |
4,801,149 |
6,217 |
National treasury notes |
- |
- |
- |
4,884,948 |
4,884,948 |
5,708,653 |
823,705 |
4,801,149 |
6,217 |
- Pension plans |
- |
- |
- |
25,936,760 |
25,936,760 |
29,405,505 |
3,468,745 |
23,266,695 |
1,732,943 |
National treasury notes |
- |
- |
- |
25,936,760 |
25,936,760 |
29,405,505 |
3,468,745 |
23,266,695 |
1,732,943 |
Total |
- |
- |
15,016 |
43,019,243 |
43,034,259 |
46,619,175 |
3,584,916 |
40,743,706 |
(335,063) |
118 Economic and Financial Analysis Report – March 2017
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
c) Breakdown of the portfolios by financial statement classification
Securities |
On March 31 - R$ thousand | |||||
1 to 30 |
31 to 180 |
181 to 360 |
More than 360 days |
Total in 2017 |
Total in 2016 | |
(3) (4) |
(3) (4) | |||||
Own portfolio |
19,253,462 |
12,947,372 |
11,808,235 |
333,934,828 |
377,943,897 |
297,842,460 |
Fixed income securities |
6,689,977 |
12,947,372 |
11,808,235 |
333,934,828 |
365,380,412 |
288,194,177 |
● National treasury notes |
- |
2,619,678 |
448,643 |
115,725,298 |
118,793,619 |
93,211,169 |
● Financial treasury bills |
106,244 |
411,988 |
2,342,145 |
66,590,925 |
69,451,302 |
62,383,615 |
● National treasury bills |
- |
611,306 |
1,484,664 |
90,862,493 |
92,958,463 |
24,609,245 |
● Debentures |
817,722 |
894,399 |
904,475 |
42,411,734 |
45,028,330 |
38,490,970 |
● Financial bills |
163,759 |
7,225,285 |
5,556,253 |
992,588 |
13,937,885 |
13,696,030 |
● Certificates of real estate receivables |
23,211 |
- |
15,016 |
13,433,606 |
13,471,833 |
13,915,246 |
● Foreign government bonds |
38,756 |
- |
769,876 |
1,081,159 |
1,889,791 |
2,245,879 |
● Foreign corporate securities |
88,101 |
4,589 |
24,652 |
1,790,605 |
1,907,947 |
8,332,536 |
● Brazilian foreign debt securities |
4,925 |
- |
14,602 |
497,003 |
516,530 |
1,071,707 |
● Promissory Notes |
190,841 |
741,988 |
137,616 |
52,180 |
1,122,625 |
1,842,428 |
● Bank deposit certificates |
10,232 |
438,063 |
110,293 |
35,111 |
593,699 |
2,180,409 |
● Other |
5,246,186 |
76 |
- |
462,126 |
5,708,388 |
26,214,943 |
Equity securities |
12,563,485 |
- |
- |
- |
12,563,485 |
9,648,283 |
● Shares of listed companies (technical provision) |
1,625,708 |
- |
- |
- |
1,625,708 |
1,268,007 |
Shares of other companies |
10,937,777 |
- |
- |
- |
10,937,777 |
8,380,276 |
Restricted securities |
1,403,548 |
84,866 |
760,523 |
42,154,546 |
44,403,483 |
32,049,830 |
Subject to repurchase agreements |
1,372,247 |
2,921 |
104,472 |
26,760,600 |
28,240,240 |
22,261,426 |
● National treasury bills |
1,246,514 |
2,921 |
3,639 |
17,293,996 |
18,547,070 |
7,848,311 |
● Foreign corporate securities |
125,733 |
- |
47,468 |
9,098,181 |
9,271,382 |
3,967,575 |
● National treasury notes |
- |
- |
474 |
181,099 |
181,573 |
10,175,375 |
● Financial treasury bills |
- |
- |
52,891 |
187,324 |
240,215 |
270,165 |
Brazilian Central Bank |
- |
- |
2,911 |
74,172 |
77,083 |
64,227 |
● National treasury bills |
- |
- |
2,911 |
74,172 |
77,083 |
64,227 |
Privatization rights |
- |
- |
- |
47,667 |
47,667 |
51,517 |
Guarantees provided |
31,301 |
81,945 |
653,140 |
15,272,107 |
16,038,493 |
9,672,660 |
● National treasury notes |
- |
- |
11,646 |
9,642,582 |
9,654,228 |
5,411,742 |
● National treasury bills |
- |
15,636 |
142,066 |
2,935,420 |
3,093,122 |
2,314,724 |
Bradesco 119
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
Securities |
On March 31 - R$ thousand | |||||
1 to 30 |
31 to 180 |
181 to 360 |
More than 360 days |
Total in 2017 |
Total in 2016 | |
(3) (4) |
(3) (4) | |||||
● Financial treasury bills |
- |
66,309 |
499,428 |
2,661,217 |
3,226,954 |
1,937,303 |
● Other |
31,301 |
- |
- |
32,888 |
64,189 |
8,891 |
Derivative financial instruments (1) (5) |
18,191,160 |
493,344 |
116,683 |
90,381 |
18,891,568 |
12,800,035 |
Securities subject to unrestricted repurchase agreements |
- |
- |
- |
7,271,393 |
7,271,393 |
884,795 |
● National treasury bills |
- |
- |
- |
5,716,701 |
5,716,701 |
460,053 |
● National treasury notes |
- |
- |
- |
1,293 |
1,293 |
424,742 |
● Financial treasury bills |
- |
- |
- |
1,553,399 |
1,553,399 |
- |
Total |
38,848,170 |
13,525,582 |
12,685,441 |
383,451,148 |
448,510,341 |
343,577,120 |
% |
8.7 |
3.0 |
2.8 |
85.5 |
100.0 |
100.0 |
(1) Consistent with the criteria in Bacen Circular Letter No. 3,068/01 and due to the characteristics of the securities, we are classifying the derivative financial instruments, except those considered as cash flow hedges in the category Trading Securities;
(2) In compliance with Article 8 of Bacen Circular Letter No. 3,068/01, Bradesco declares that it has the financial capacity and intention to maintain held-to-maturity securities until their maturity dates;
(3) The number of days to maturity was based on the contractual maturity of the instruments, regardless of their accounting classification;
(4) The fair value of securities is determined based on the market price available at the end of the reporting period. If no market price quotation is available at the end of the reporting period, amounts are estimated based on the prices quoted by dealers, pricing models, quotation models or price quotations for instruments with similar characteristics. For investment funds, the original amortized cost reflects the fair value of the respective quotas;
(5) Includes hedge for protection of assets and liabilities, denominated in or indexed to foreign currency, primarily, arising from foreign investments, eliminating the effects of exchange variation of these assets and liabilities. For a better analysis of these items, consider the net exposure (Note 8d II); and
(6) In the first quarter of 2017, there were Impairment of financial assets in the amount of R$419,693 thousand, related to securities classified in the category "Available-for-Sale Securities" (R$108,294 thousand in 2016).
120 Economic and Financial Analysis Report – March 2017
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
d) Derivative financial instruments
Bradesco carries out transactions involving derivative financial instruments, which are recognized in the statement of financial position or in off-balance-sheet accounts, to meet its own needs in managing its global exposure, as well as to meet its customer’s requests, in order to manage their exposure. These operations involve a range of derivatives, including interest rate swaps, currency swaps, futures and options. Bradesco’s risk management policy is based on the utilization of derivative financial instruments mainly to mitigate the risks from operations carried out by the Bank and its subsidiaries.
Securities classified as trading and available-for-sale, as well as derivative financial instruments, are recognized in the consolidated statement of financial position at their fair value. Fair value is generally based on quoted market prices or quotations for assets or liabilities with similar characteristics. Should market prices not be available, fair values are based on dealer quotations, pricing models, discounted cash flows or similar techniques for which the determination of fair value may require judgment or significant estimates by Management.
Quoted market prices are used to determine the fair value of derivative financial instruments. The fair value of swaps is determined by using discounted cash flow modeling techniques that use yield curves, reflecting adequate risk factors. The information to build yield curves is mainly obtained from B3 (new name for BM&FBOVESPA and CETIP) and the domestic and international secondary market. These yield curves are used to determine the fair value of currency swaps, interest rate and other risk factor swaps. The fair value of forward and futures contracts is also determined based on market price quotations for derivatives traded on an exchange or using methodologies similar to those outlined for swaps. The fair values of credit derivative instruments are determined based on market price quotation or from specialized entities. The fair value of options is determined based on mathematical models, such as Black & Scholes, using yield curves, implied volatilities and the fair value of corresponding assets. Current market prices are used to calculate volatility.
Derivative financial instruments in Brazil mainly refer to swaps and futures and are registered at B3.
Operations involving forward contracts of interest rates, indexes and currencies are contracted by Management to hedge Bradesco’s overall exposures and to meet customer needs.
Foreign derivative financial instruments refer to swap, forward, options, credit and futures operations and are mainly carried out at the stock exchanges in Chicago and New York, as well as the over-the-counter (OTC) markets.
Bradesco 121
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
I) Amount of derivative financial instruments recognized in off-balance-sheet accounts
|
On March 31 - R$ thousand | |||
2017 |
2016 | |||
Reference value |
Net amount |
Reference value |
Net amount | |
Futures contracts |
|
|
|
|
Purchase commitments: |
84,036,194 |
- |
95,106,049 |
- |
- Interbank market |
28,119,407 |
- |
60,181,739 |
24,901,379 |
- Foreign currency (1) |
55,907,687 |
4,308,061 |
34,899,405 |
- |
- Other |
9,100 |
- |
24,905 |
- |
Sale commitments: |
181,621,985 |
- |
75,114,949 |
- |
- Interbank market (2) |
129,962,770 |
101,843,363 |
35,280,360 |
- |
- Foreign currency (3) |
51,599,626 |
- |
39,341,918 |
4,442,513 |
- Other |
59,589 |
50,489 |
492,671 |
467,766 |
|
|
|
|
|
Option contracts |
|
|
|
|
Purchase commitments: |
16,905,386 |
- |
17,318,975 |
- |
- Interbank market |
5,243,229 |
347,792 |
12,249,804 |
288,309 |
- Foreign currency |
10,735,206 |
- |
5,054,044 |
- |
- Other |
926,951 |
157,935 |
15,127 |
- |
Sale commitments: |
17,727,767 |
- |
22,294,666 |
- |
- Interbank market |
4,895,437 |
- |
11,961,495 |
- |
- Foreign currency |
12,063,314 |
1,328,108 |
10,310,981 |
5,256,937 |
- Other |
769,016 |
- |
22,190 |
7,063 |
|
|
|
|
|
Forward contracts |
|
|
|
|
Purchase commitments: |
14,732,356 |
- |
9,709,781 |
- |
- Foreign currency |
14,205,670 |
- |
9,389,926 |
- |
- Other |
526,686 |
- |
319,855 |
- |
Sale commitments: |
18,826,676 |
- |
14,735,671 |
- |
- Foreign currency |
18,053,430 |
3,847,760 |
14,415,588 |
5,025,662 |
- Other |
773,246 |
246,560 |
320,083 |
228 |
|
|
|
|
|
Swap contracts |
|
|
|
|
Assets (long position): |
78,242,623 |
- |
104,084,917 |
- |
- Interbank market |
13,160,554 |
9,861,749 |
30,716,219 |
5,789,406 |
- Fixed rate |
52,784,176 |
21,496,880 |
44,202,808 |
32,711,443 |
- Foreign currency |
10,213,478 |
329,414 |
25,441,088 |
12,038,211 |
- IGPM |
832,450 |
- |
1,336,950 |
- |
- Other |
1,251,965 |
- |
2,387,852 |
- |
Liabilities (short position): |
47,606,325 |
- |
53,956,297 |
- |
- Interbank market |
3,298,805 |
- |
24,926,813 |
- |
- Fixed rate |
31,287,296 |
- |
11,491,365 |
- |
- Foreign currency (3) |
9,884,064 |
- |
13,402,877 |
- |
- IGPM |
981,000 |
148,550 |
1,445,500 |
108,550 |
- Other |
2,155,160 |
903,195 |
2,689,742 |
301,890 |
Derivatives include operations maturing in D+1.
(1) Includes, in 2016, 2016, cash flow hedge to protect the firm commitment, concerning the contract of purchase and sale of shares, totaling R$ 18,456,455 thousand;
(2) Includes, cash flow hedges to protect CDI-related fundings,totaling R$2,056,240 thousand (R$1,133,572 thousand in 2016) (Note 8f); and
(3) Includes specific hedges to protect assets and liabilities, arising from foreign investments, totaling R$46,022,507 thousand (R$50,099,860 thousand in 2016).
122 Economic and Financial Analysis Report – March 2017
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
II) Breakdown of derivative financial instruments (assets and liabilities) shown at original amortized cost and fair value
|
On March 31 - R$ thousand | |||||
2017 |
2016 | |||||
Original amortized cost |
Mark-to-market adjustment |
Fair value |
Original amortized cost |
Mark-to-market adjustment |
Fair value | |
Adjustment receivable - swaps (1) |
22,302,304 |
(6,778,728) |
15,523,576 |
20,795,347 |
(10,514,559) |
10,280,788 |
Adjustment receivable - future |
18,193 |
- |
18,193 |
263,371 |
- |
263,371 |
Receivable forward purchases |
1,405,369 |
- |
1,405,369 |
440,868 |
- |
440,868 |
Receivable forward sales |
1,546,906 |
- |
1,546,906 |
1,471,423 |
- |
1,471,423 |
Premiums on exercisable options |
454,876 |
(57,352) |
397,524 |
353,180 |
(9,595) |
343,585 |
Total assets (A) |
25,727,648 |
(6,836,080) |
18,891,568 |
23,324,189 |
(10,524,154) |
12,800,035 |
Adjustment payables - swaps |
(8,966,342) |
(3,806,095) |
(12,772,437) |
(6,833,005) |
(1,920,245) |
(8,753,250) |
Adjustment payables - future |
(11,011) |
- |
(11,011) |
(7,914) |
- |
(7,914) |
Payable forward purchases |
(1,433,945) |
- |
(1,433,945) |
(746,025) |
- |
(746,025) |
Payable forward sales/other |
(1,208,796) |
- |
(1,208,796) |
(766,818) |
- |
(766,818) |
Premiums on written options |
(262,982) |
(16,041) |
(279,023) |
(145,821) |
24,468 |
(121,353) |
Total liabilities (B) |
(11,883,076) |
(3,822,136) |
(15,705,212) |
(8,499,583) |
(1,895,777) |
(10,395,360) |
Net Effect (A-B) |
13,844,572 |
(10,658,216) |
3,186,356 |
14,824,606 |
(12,419,931) |
2,404,675 |
(1) Includes receivable adjustments relating to hedge of assets and liabilities, designated and/or indexed in foreign currency, primarily, arising from foreign investments, eliminating the effects of exchange variation of these assets and liabilities.
III) Futures, options, forward and swap contracts – (Reference Value)
|
On March 31 - R$ thousand | |||||
1 to 90 |
91 to 180 |
181 to 360 |
More than 360 days |
2017 |
2016 | |
Futures contracts (1) |
69,392,762 |
12,880,705 |
57,620,346 |
125,764,366 |
265,658,179 |
170,220,998 |
Option contracts |
11,036,264 |
3,777,340 |
15,258,464 |
4,561,085 |
34,633,153 |
39,613,641 |
Forward contracts |
20,088,384 |
6,199,338 |
4,694,625 |
2,576,685 |
33,559,032 |
24,445,452 |
Swap contracts (1) |
6,765,032 |
10,868,849 |
9,955,067 |
98,260,000 |
125,848,948 |
158,041,214 |
Total in 2017 |
107,282,442 |
33,726,232 |
87,528,502 |
231,162,136 |
459,699,312 |
|
Total in 2016 |
182,113,831 |
42,245,312 |
65,424,106 |
102,538,056 |
|
392,321,305 |
(1) Includes contracts relating to hedges for the protection of assets and liabilities, designated and/or indexed in foreign currency, primarily, arising from foreign investments, eliminating the effects of exchange variation of these assets and liabilities.
Bradesco 123
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
IV) Types of margin offered in guarantee of derivative financial instruments, mainly futures contracts
|
On March 31 - R$ thousand | |
2017 |
2016 | |
Government securities |
|
|
National treasury bills |
996,301 |
- |
National treasury notes |
4,389,017 |
2,994,294 |
Total |
5,385,318 |
2,994,294 |
V) Revenues and expenses, net
|
Accrued on March 31 - R$ thousand | |
2017 |
2016 | |
Swap contracts (1) |
699,749 |
855,421 |
Forward contracts |
89,670 |
215,948 |
Option contracts |
39,777 |
63,134 |
Futures contracts (1) (2) |
(1,300,824) |
3,129,300 |
Foreign exchange variation of assets and liabilities overseas |
(531,684) |
(1,858,719) |
Total (Note 8g) |
(1,003,312) |
2,405,084 |
(1) Includes the gain (loss) and the respective adjustment to the market capitalization of the hedge for protection of the assets and liabilities, designated and/or indexed in foreign currency, primarily, arising from foreign investments; and
(2) Includes, in 2016, the results and respective adjustment to the fair value of the hedge of the firm commitment, concerning the purchase and sale of shares agreement, which was offset, completely, by the adjustment of the fair value of the hedge object (Note 35e).
VI) Reference values of derivative financial instruments, by trading location and counterparts
|
On March 31 - R$ thousand | |
2017 |
2016 | |
B3 (stock exchange) |
227,502,265 |
215,827,247 |
B3 (over-the-counter) |
168,364,073 |
138,599,874 |
Overseas (stock exchange) (1) |
56,523,629 |
24,082,700 |
Overseas (over-the-counter) (1) |
7,309,345 |
13,811,484 |
Total |
459,699,312 |
392,321,305 |
(1) Comprised of operations carried out on the Chicago and New York Stock Exchanges and over-the-counter markets.
e) Credit Default Swaps (CDS)
On March 31, 2017, Bradesco had credit default swaps (CDS) with the following characteristics: the risk received in credit swaps whose underlying assets are “debt securities issued by companies" in the amount of R$145,477 thousand (R$124,562 thousand in 2016) and “bonds of the Brazilian public debt” in the amount of R$554,470 thousand and the risk transferred in credit swaps whose underlying assets are “derivatives of the Brazilian public debt” is R$(15,842) thousand, amounting to a total net credit risk value of negative R$684,105 thousand (R$124,562 thousand in 2016), with an effect on the calculation of required shareholders’ equity of negative R$ 15,275 thousand (R$13,702 thousand in 2016). The contracts related to credit derivatives transactions described above are due in 2022. The mark-to-market of the protection rates that remunerates the counterparty that received the risk totaled R$(481) thousand (R$38 thousand in 2016). There were no credit events, as defined in the agreements, during the period.
124 Economic and Financial Analysis Report – March 2017
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
f) Cash flow hedge
On March 31, 2017, Bradesco used cash flow hedges to protect the cash flow from receipts of interest on investments in securities, related to the risk of a variable interest rate of the DI, using DI Futures contracts in B3, amounting to R$ 15,946,347 thousand (R$ 19,254,790 thousand in 2016), having as object of hedge the securities backed in DI, to the sum of R$ 16,002,283 thousand (R$19,260,105 thousand in 2016), making the cash flow fixed in advance. The adjustment to fair value of these operations recognized in the shareholders’ equity was R$ 205,709) thousand (2016 - R$ 205,898 thousand), net of tax effects was R$ 123,425 thousand (R$ 123,539 thousand in 2016). On March 31, 2017, Bradesco constituted hedge accounting, with the aim of protecting its cash flows from payment of interest rates on funds, regarding the floating interest rate of DI, being traded DI Future contracts on B3 totaling R$2,056,240 thousand (R$ 1,133,572 thousand in 2016), having as object of hedge captures linked to DI, totaling R$2,042,724 thousand (R$ 1,197,070 thousand in 2016), converting to fixed cash flows. The adjustment to fair value of these operations recognized in the shareholders’ equity was R$ (20,679) thousand (2016 - R$ 3,227 thousand), net of tax effects was R$ (12,407) thousand (R$ 1,936 thousand in 2016). The effectiveness of the hedge portfolio was assessed in accordance with Bacen Circular Letter No. 3,082/02.
g) Income from securities, insurance, pension plans and capitalization bonds, and derivative financial instruments
|
Accrued on March 31 - R$ thousand | |
2017 |
2016 | |
Fixed income securities (1) |
6,128,886 |
5,165,614 |
Interbank investments (Note 7b) |
5,739,670 |
4,993,940 |
Equity securities (2) |
198,524 |
(341,509) |
Subtotal |
12,067,080 |
9,818,045 |
Income from insurance, pension plans and capitalization bonds |
10,026,655 |
8,745,312 |
Income from derivative financial instruments (Note 8d V) |
(1,003,312) |
2,405,084 |
Total |
21,090,423 |
20,968,441 |
(1) During the first quarter of 2017, it includes the losses through impairment of financial assets (basically debentures) in the amount of R$ 419,693 thousand; and
(2) During the first quarter of 2016, it includes the losses through impairment of financial assets (shares) in the amount of R$ 108,294 thousand.
9) INTERBANK ACCOUNTS – RESERVE REQUIREMENT
a) Reserve requirement
|
On March 31 - R$ thousand | ||
Remuneration |
2017 |
2016 | |
Compulsory deposit – demand deposits |
not remunerated |
6,034,964 |
4,428,714 |
Compulsory deposit – savings deposits |
savings index |
18,937,967 |
17,711,556 |
Compulsory deposit – time deposits |
Selic rate |
20,391,653 |
14,081,761 |
Additional compulsory deposit – savings deposits |
Selic rate |
5,175,153 |
4,848,858 |
Additional compulsory deposit – time deposits |
Selic rate |
11,097,285 |
8,849,147 |
Reserve requirement – SFH |
TR + interest rate |
809,363 |
710,155 |
Total |
|
62,446,385 |
50,630,191 |
b) Revenue from reserve requirement
|
Accrued on March 31 - R$ thousand | |
2017 |
2016 | |
Reserve requirement – Bacen (Compulsory deposit) |
1,343,443 |
1,360,415 |
Reserve requirement – SFH |
16,579 |
11,227 |
Total |
1,360,022 |
1,371,642 |
Bradesco 125
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
10) LOANS
Information relating to loans, including advances on foreign exchange contracts, leasing and other receivables with credit characteristics is shown below:
a) By type and maturity
|
On March 31 - R$ thousand | |||||||||
Performing loans | ||||||||||
1 to 30 |
31 to 60 |
61 to 90 |
91 to 180 |
181 to 360 |
More than 360 days |
Total in 2016 (A) |
% (5) |
Total in 2016 (A) |
% (5) | |
Discounted trade receivables and loans (1) |
20,568,512 |
12,468,159 |
11,250,500 |
16,496,720 |
24,392,008 |
66,812,848 |
151,988,747 |
35.9 |
149,379,728 |
37.8 |
Financing |
4,074,918 |
5,651,160 |
3,805,306 |
9,379,128 |
17,628,912 |
88,571,990 |
129,111,414 |
30.4 |
119,268,428 |
30.1 |
Agricultural and agribusiness loans |
747,365 |
703,804 |
1,029,327 |
4,998,837 |
5,087,811 |
8,981,488 |
21,548,632 |
5.1 |
20,095,136 |
5.1 |
Subtotal |
25,390,795 |
18,823,123 |
16,085,133 |
30,874,685 |
47,108,731 |
164,366,326 |
302,648,793 |
71.4 |
288,743,292 |
73.0 |
Leasing |
146,267 |
117,598 |
113,111 |
306,272 |
491,115 |
1,154,543 |
2,328,906 |
0.5 |
2,530,895 |
0.6 |
Advances on foreign exchange contracts (2) |
1,813,786 |
1,649,050 |
1,048,891 |
3,354,796 |
2,176,070 |
- |
10,042,593 |
2.4 |
9,066,701 |
2.3 |
Subtotal |
27,350,848 |
20,589,771 |
17,247,135 |
34,535,753 |
49,775,916 |
165,520,869 |
315,020,292 |
74.3 |
300,340,888 |
75.9 |
Other receivables (3) |
10,738,635 |
7,231,525 |
2,755,672 |
4,982,170 |
4,110,049 |
1,162,345 |
30,980,396 |
7.3 |
23,877,314 |
6.0 |
Total loans |
38,089,483 |
27,821,296 |
20,002,807 |
39,517,923 |
53,885,965 |
166,683,214 |
346,000,688 |
81.6 |
324,218,202 |
81.9 |
Sureties and guarantees (4) |
3,781,648 |
1,243,451 |
1,985,291 |
7,284,425 |
14,653,839 |
47,002,083 |
75,950,737 |
17.9 |
69,419,569 |
17.5 |
Loan assignment - real estate receivables certificate |
40,698 |
40,696 |
40,694 |
117,117 |
174,786 |
587,645 |
1,001,636 |
0.2 |
1,128,315 |
0.3 |
Acquisition of credit card receivables |
490,099 |
206,360 |
131,469 |
151,035 |
42,401 |
- |
1,021,364 |
0.2 |
1,046,426 |
0.3 |
Loans available for import (4) |
34,743 |
90,064 |
49,556 |
49,698 |
6,416 |
8,358 |
238,835 |
0.1 |
119,277 |
- |
Confirmed exports loans (4) |
3,970 |
11,387 |
20,808 |
316 |
40,475 |
- |
76,956 |
- |
60,180 |
- |
Co-obligation from assignment of rural loan (4) |
- |
- |
- |
- |
- |
88,896 |
88,896 |
- |
92,910 |
- |
Total in 2017 |
42,440,641 |
29,413,254 |
22,230,625 |
47,120,514 |
68,803,882 |
214,370,196 |
424,379,112 |
100.0 |
|
|
Total in 2016 |
39,916,999 |
26,284,028 |
20,445,775 |
41,926,433 |
58,947,525 |
208,564,119 |
|
|
396,084,879 |
100.0 |
126 Economic and Financial Analysis Report – March 2017
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
|
On March 31 - R$ thousand | ||||||||
Non-performing loans | |||||||||
Past-due installments | |||||||||
1 to 30 |
31 to 60 |
61 to 90 |
91 to 180 |
181 to 540 |
Total in 2017 (B) |
% (5) |
Total in 2016 (B) |
% (5) | |
Discounted trade receivables and loans (1) |
1,859,318 |
1,518,198 |
1,316,370 |
3,387,579 |
5,066,132 |
13,147,597 |
79.7 |
10,459,172 |
88.3 |
Financing |
315,611 |
306,168 |
182,505 |
331,840 |
317,109 |
1,453,233 |
8.8 |
938,951 |
7.9 |
Agricultural and agribusiness loans |
25,049 |
48,552 |
17,457 |
126,969 |
141,668 |
359,695 |
2.2 |
215,931 |
1.8 |
Subtotal |
2,199,978 |
1,872,918 |
1,516,332 |
3,846,388 |
5,524,909 |
14,960,525 |
90.7 |
11,614,054 |
98.0 |
Leasing |
10,033 |
10,322 |
7,107 |
13,977 |
8,794 |
50,233 |
0.3 |
48,682 |
0.4 |
Advances on foreign exchange contracts (2) |
27,210 |
11,231 |
9,576 |
64,758 |
6,171 |
118,946 |
0.7 |
19,964 |
0.2 |
Subtotal |
2,237,221 |
1,894,471 |
1,533,015 |
3,925,123 |
5,539,874 |
15,129,704 |
91.7 |
11,682,700 |
98.6 |
Other receivables (3) |
7,195 |
12,268 |
6,160 |
1,168,752 |
175,807 |
1,370,182 |
8.3 |
171,255 |
1.4 |
Total in 2017 |
2,244,416 |
1,906,739 |
1,539,175 |
5,093,875 |
5,715,681 |
16,499,886 |
100.0 |
|
|
Total in 2016 |
2,069,340 |
1,736,270 |
1,329,614 |
2,772,192 |
3,946,539 |
|
|
11,853,955 |
100.0 |
|
On March 31 - R$ thousand | |||||||||
Non-performing loans | ||||||||||
Installments not yet due | ||||||||||
1 to 30 |
31 to 60 |
61 to 90 |
91 to 180 |
181 to 360 |
More than 360 days |
Total in 2017 (C) |
% (5) |
Total in 2016 (C) |
% (5) | |
Discounted trade receivables and loans (1) |
899,795 |
754,646 |
635,068 |
1,626,990 |
2,540,780 |
6,220,832 |
12,678,111 |
67.2 |
11,162,487 |
65.9 |
Financing |
267,238 |
244,328 |
221,572 |
611,458 |
1,002,026 |
3,361,188 |
5,707,810 |
30.3 |
5,305,897 |
31.4 |
Agricultural and agribusiness loans |
1,678 |
3,799 |
3,878 |
13,967 |
57,862 |
200,771 |
281,955 |
1.5 |
274,570 |
1.6 |
Subtotal |
1,168,711 |
1,002,773 |
860,518 |
2,252,415 |
3,600,668 |
9,782,791 |
18,667,876 |
99.0 |
16,742,954 |
98.9 |
Leasing |
9,932 |
8,939 |
7,711 |
22,386 |
37,006 |
67,592 |
153,566 |
0.8 |
162,870 |
1.0 |
Subtotal |
1,178,643 |
1,011,712 |
868,229 |
2,274,801 |
3,637,674 |
9,850,383 |
18,821,442 |
99.8 |
16,905,824 |
99.9 |
Other receivables (3) |
4,406 |
3,734 |
3,267 |
8,162 |
10,710 |
15,243 |
45,522 |
0.2 |
12,705 |
0.1 |
Total in 2017 |
1,183,049 |
1,015,446 |
871,496 |
2,282,963 |
3,648,384 |
9,865,626 |
18,866,964 |
100.0 |
|
|
Total in 2016 |
1,081,501 |
955,017 |
842,324 |
2,115,223 |
3,356,901 |
8,567,563 |
|
|
16,918,529 |
100.0 |
Bradesco 127
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
|
On March 31 - R$ thousand | |||
Total | ||||
Total in 2017 (A+B+C) |
% (5) |
Total in 2016(A+B+C) |
% (5) | |
Discounted trade receivables and loans (1) |
177,814,455 |
38.8 |
171,001,387 |
40.3 |
Financing |
136,272,457 |
29.6 |
125,513,276 |
29.6 |
Agricultural and agribusiness loans |
22,190,282 |
4.8 |
20,585,637 |
4.8 |
Subtotal |
336,277,194 |
73.2 |
317,100,300 |
74.7 |
Leasing |
2,532,705 |
0.6 |
2,742,447 |
0.6 |
Advances on foreign exchange contracts (2) (Note 11a) |
10,161,539 |
2.2 |
9,086,665 |
2.1 |
Subtotal |
348,971,438 |
76.0 |
328,929,412 |
77.4 |
Other receivables (3) |
32,396,100 |
7.0 |
24,061,274 |
5.7 |
Total loans |
381,367,538 |
83.0 |
352,990,686 |
83.1 |
Sureties and guarantees (4) |
75,950,737 |
16.5 |
69,419,569 |
16.4 |
Loan assignment - real estate receivables certificate |
1,001,636 |
0.2 |
1,128,315 |
0.3 |
Acquisition of credit card receivables |
1,021,364 |
0.2 |
1,046,426 |
0.2 |
Loans available for import (4) |
238,835 |
0.1 |
119,277 |
- |
Confirmed exports loans (4) |
76,956 |
- |
60,180 |
- |
Co-obligation from assignment of rural loan (4) |
88,896 |
- |
92,910 |
- |
Total in 2017 |
459,745,962 |
100.0 |
|
|
Total in 2016 |
|
|
424,857,363 |
100.0 |
(1) Including credit card loans and advances on credit card receivables of R$16,393,457 thousand (R$16,195,342 thousand in 2016);
(2) Advances on foreign exchange contracts are classified as a deduction from “Other Liabilities”;
(3) The item “Other Receivables” comprises receivables on sureties and guarantees honored, receivables on sale of assets, securities and credits receivable, income receivable from foreign exchange contracts and export contracts and credit card receivables (cash and installment purchases at merchants) totaling R$ 24,480,516 thousand (R$ 19,385,920 thousand in 2016);
(4) Recognized in off-balance sheet accounts; and
(5) Percentage of each type in relation to the total loan portfolio, including sureties and guarantee, loan assignment and acquisition of receivables.
128 Economic and Financial Analysis Report – March 2017
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
b) By type and levels of risk
|
On March 31 - R$ thousand | ||||||||||||
Levels of risk | |||||||||||||
AA |
A |
B |
C |
D |
E |
F |
G |
H |
Total in 2017 |
% (1) |
Total in 2016 |
% (1) | |
Discounted trade receivables and loans |
21,602,224 |
80,011,754 |
14,925,200 |
23,563,793 |
9,053,239 |
5,422,335 |
3,190,739 |
2,401,588 |
17,643,583 |
177,814,455 |
46.6 |
171,001,387 |
48.4 |
Financing |
78,100,820 |
23,480,425 |
18,896,962 |
7,915,611 |
2,835,952 |
1,504,480 |
414,493 |
419,069 |
2,704,645 |
136,272,457 |
35.7 |
125,513,276 |
35.6 |
Agricultural and agribusiness loans |
5,697,703 |
4,399,480 |
8,888,514 |
1,859,943 |
707,662 |
241,107 |
48,947 |
49,170 |
297,756 |
22,190,282 |
5.8 |
20,585,637 |
5.8 |
Subtotal |
105,400,747 |
107,891,659 |
42,710,676 |
33,339,347 |
12,596,853 |
7,167,922 |
3,654,179 |
2,869,827 |
20,645,984 |
336,277,194 |
88.1 |
317,100,300 |
89.8 |
Leasing |
317,609 |
443,255 |
1,510,646 |
40,674 |
37,519 |
53,021 |
9,056 |
10,702 |
110,223 |
2,532,705 |
0.7 |
2,742,447 |
0.8 |
Advances on foreign exchange contracts (2) |
3,157,176 |
3,305,806 |
1,754,336 |
1,537,764 |
176,945 |
110,383 |
5,486 |
3,672 |
109,971 |
10,161,539 |
2.7 |
9,086,665 |
2.6 |
Subtotal |
108,875,532 |
111,640,720 |
45,975,658 |
34,917,785 |
12,811,317 |
7,331,326 |
3,668,721 |
2,884,201 |
20,866,178 |
348,971,438 |
91.5 |
328,929,412 |
93.2 |
Other receivables |
4,034,085 |
19,600,755 |
2,748,013 |
3,497,403 |
308,321 |
83,223 |
54,593 |
43,153 |
2,026,554 |
32,396,100 |
8.5 |
24,061,274 |
6.8 |
Total in 2017 |
112,909,617 |
131,241,475 |
48,723,671 |
38,415,188 |
13,119,638 |
7,414,549 |
3,723,314 |
2,927,354 |
22,892,732 |
381,367,538 |
100.0 |
|
|
% |
29.6 |
34.4 |
12.8 |
10.1 |
3.4 |
1.9 |
1.0 |
0.8 |
6.0 |
100.0 |
|
|
|
Total in 2016 |
96,707,244 |
119,572,462 |
58,266,048 |
43,210,231 |
8,562,496 |
4,776,497 |
3,161,721 |
3,768,315 |
14,965,672 |
|
352,990,686 |
100.0 | |
% |
27.4 |
33.9 |
16.5 |
12.2 |
2.4 |
1.4 |
0.9 |
1.1 |
4.2 |
|
|
100.0 |
|
(1) Percentage of each type in relation to the total loan portfolio, excluding sureties and guarantees, loan assignments, acquisition of receivables and co-obligation in rural loan assignments; and
(2) Note 11a.
Bradesco 129
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
c) Maturity ranges and levels of risk
|
On March 31 - R$ thousand | ||||||||||||
Levels of risk | |||||||||||||
Non-performing loans | |||||||||||||
AA |
A |
B |
C |
D |
E |
F |
G |
H |
Total in 2017 |
% (1) |
Total in 2016 |
% (1) | |
Installments not yet due |
- |
- |
1,361,168 |
3,152,028 |
2,805,125 |
1,825,431 |
1,605,214 |
1,175,947 |
6,942,051 |
18,866,964 |
100.0 |
16,918,529 |
100.0 |
1 to 30 |
- |
- |
178,255 |
224,829 |
175,081 |
87,371 |
68,202 |
61,818 |
387,493 |
1,183,049 |
6.3 |
1,081,501 |
6.4 |
31 to 60 |
- |
- |
116,058 |
178,102 |
128,176 |
86,880 |
71,412 |
60,560 |
374,258 |
1,015,446 |
5.4 |
955,017 |
5.7 |
61 to 90 |
- |
- |
102,302 |
143,126 |
114,712 |
74,468 |
59,687 |
51,462 |
325,739 |
871,496 |
4.6 |
842,324 |
5.0 |
91 to 180 |
- |
- |
193,833 |
366,253 |
310,792 |
210,639 |
165,833 |
140,879 |
894,734 |
2,282,963 |
12.1 |
2,115,223 |
12.5 |
181 to 360 |
- |
- |
280,926 |
579,483 |
527,503 |
347,506 |
265,342 |
227,750 |
1,419,874 |
3,648,384 |
19.3 |
3,356,901 |
19.8 |
More than 360 |
- |
- |
489,794 |
1,660,235 |
1,548,861 |
1,018,567 |
974,738 |
633,478 |
3,539,953 |
9,865,626 |
52.3 |
8,567,563 |
50.6 |
Past-due installments (2) |
- |
- |
511,366 |
1,246,644 |
1,218,119 |
1,204,633 |
1,006,092 |
1,151,758 |
10,161,274 |
16,499,886 |
100.0 |
11,853,955 |
100.0 |
1 to 14 |
- |
- |
17,315 |
101,698 |
70,556 |
45,680 |
41,524 |
22,424 |
426,876 |
726,073 |
4.4 |
529,527 |
4.5 |
15 to 30 |
- |
- |
483,580 |
308,111 |
163,003 |
182,878 |
48,394 |
39,538 |
292,839 |
1,518,343 |
9.2 |
1,539,813 |
13.0 |
31 to 60 |
- |
- |
10,471 |
820,707 |
249,773 |
143,734 |
91,037 |
68,693 |
522,324 |
1,906,739 |
11.6 |
1,736,270 |
14.6 |
61 to 90 |
- |
- |
- |
11,626 |
701,761 |
215,298 |
115,317 |
65,670 |
429,503 |
1,539,175 |
9.3 |
1,329,614 |
11.2 |
91 to 180 |
- |
- |
- |
4,502 |
33,026 |
603,139 |
686,736 |
929,935 |
2,836,537 |
5,093,875 |
30.9 |
2,772,192 |
23.4 |
181 to 360 |
- |
- |
- |
- |
- |
13,904 |
23,084 |
25,498 |
5,460,141 |
5,522,627 |
33.4 |
3,871,796 |
32.7 |
More than 360 |
- |
- |
- |
- |
- |
- |
- |
- |
193,054 |
193,054 |
1.2 |
74,743 |
0.6 |
Subtotal |
- |
- |
1,872,534 |
4,398,672 |
4,023,244 |
3,030,064 |
2,611,306 |
2,327,705 |
17,103,325 |
35,366,850 |
|
28,772,484 |
|
Specific provision |
- |
- |
18,726 |
131,960 |
402,325 |
909,019 |
1,305,653 |
1,629,394 |
17,103,325 |
21,500,402 |
|
14,240,423 |
|
(1) Percentage of maturities by type of installment; and
(2) For transactions with terms of more than 36 months, past-due periods are doubled, as permitted by Resolution No. 2,682/99.
130 Economic and Financial Analysis Report – March 2017
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
|
On March 31 - R$ thousand | ||||||||||||
Levels of risk | |||||||||||||
Performing loans | |||||||||||||
AA |
A |
B |
C |
D |
E |
F |
G |
H |
Total in 2017 |
% (1) |
Total in 2016 |
% (1) | |
Installments not yet due |
112,909,617 |
131,241,475 |
46,851,137 |
34,016,516 |
9,096,394 |
4,384,485 |
1,112,008 |
599,649 |
5,789,407 |
346,000,688 |
100.0 |
324,218,202 |
100.0 |
1 to 30 |
6,982,252 |
19,104,715 |
3,531,540 |
5,842,289 |
839,292 |
547,052 |
104,053 |
108,290 |
1,030,000 |
38,089,483 |
11.0 |
35,712,373 |
11.0 |
31 to 60 |
6,771,371 |
12,372,821 |
3,560,726 |
3,994,336 |
426,655 |
162,921 |
46,729 |
49,497 |
436,240 |
27,821,296 |
8.0 |
25,707,337 |
7.9 |
61 to 90 |
5,219,707 |
7,924,394 |
2,499,377 |
2,851,985 |
1,025,008 |
175,561 |
33,021 |
25,389 |
248,365 |
20,002,807 |
5.8 |
19,120,404 |
5.9 |
91 to 180 |
10,581,890 |
15,887,668 |
6,363,862 |
4,810,057 |
774,929 |
306,721 |
135,790 |
64,111 |
592,895 |
39,517,923 |
11.4 |
36,614,326 |
11.3 |
181 to 360 |
15,211,142 |
23,526,011 |
7,156,356 |
5,138,919 |
895,012 |
749,094 |
214,530 |
91,074 |
903,827 |
53,885,965 |
15.6 |
48,420,790 |
14.9 |
More than 360 |
68,143,255 |
52,425,866 |
23,739,276 |
11,378,930 |
5,135,498 |
2,443,136 |
577,885 |
261,288 |
2,578,080 |
166,683,214 |
48.2 |
158,642,972 |
49.0 |
Generic provision |
- |
640,820 |
429,424 |
940,490 |
757,529 |
1,182,397 |
534,069 |
405,261 |
5,789,407 |
10,679,397 |
|
9,710,481 |
|
Total in 2017 (2) |
112,909,617 |
131,241,475 |
48,723,671 |
38,415,188 |
13,119,638 |
7,414,549 |
3,723,314 |
2,927,354 |
22,892,732 |
381,367,538 |
|
|
|
Existing provision |
- |
736,662 |
534,473 |
1,328,092 |
2,020,565 |
5,151,727 |
3,510,595 |
2,911,884 |
22,892,732 |
39,086,730 |
|
|
|
Minimum required provision |
- |
640,820 |
448,150 |
1,072,450 |
1,159,854 |
2,091,416 |
1,839,722 |
2,034,655 |
22,892,732 |
32,179,799 |
|
|
|
Excess provision (3) |
- |
95,842 |
86,323 |
255,642 |
860,711 |
3,060,311 |
1,670,873 |
877,229 |
- |
6,906,931 |
|
|
|
Total in 2016 (2) |
96,707,244 |
119,572,462 |
58,266,048 |
43,210,231 |
8,562,496 |
4,776,497 |
3,161,721 |
3,768,315 |
14,965,672 |
|
|
352,990,686 |
|
Existing provision |
- |
730,420 |
667,535 |
3,601,160 |
2,537,188 |
2,331,414 |
2,188,102 |
3,335,582 |
14,965,672 |
|
|
30,357,073 |
|
Minimum required provision |
- |
598,143 |
582,789 |
1,296,389 |
856,259 |
1,432,971 |
1,580,860 |
2,637,821 |
14,965,672 |
|
23,950,904 |
||
Excess provision (4) |
- |
132,277 |
84,746 |
2,304,771 |
1,680,929 |
898,443 |
607,242 |
697,761 |
- |
|
|
6,406,169 |
|
(1) Percentage of maturities by type of installment;
(2) The total includes performing loans of R$ 346,000,688 thousand (R$ 324,218,202 thousand in 2016) and non-performing loans of R$ 35,366,850 thousand (R$ 28,772,484 thousand in 2016);
(3) Up to December 31, 2016, the excess provision was allocated prioritizing the operations with higher risk ratings, limited to the minimum percentage of provisioning of the subsequent rating. As of January 2017, the allocation of the excess provision continues to prioritize the operations that are in the higher risk ratings, but limited to 100% of the risk value; and
(4) Up to December 31, 2016, included the constitution of provision for guarantees provided, encompassing sureties, guarantees, credit letters, and standby letter of credit, which comprises the concept of “excess” provision that totaled R$ 762,870 thousand as of March 31, 2016. Pursuant to Resolution No. 4,512/16, the amount of R$ 604,623 thousand was allocated to a specific account in January 2017.
Bradesco 131
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
d) Concentration of loans
|
On March 31 - R$ thousand | |||
2017 |
% (1) |
2016 |
% (1) | |
Largest borrower |
8,328,075 |
2.2 |
10,393,700 |
2.9 |
10 largest borrowers |
32,249,584 |
8.5 |
32,434,092 |
9.2 |
20 largest borrowers |
48,440,752 |
12.7 |
47,766,867 |
13.5 |
50 largest borrowers |
71,128,705 |
18.7 |
69,261,950 |
19.6 |
100 largest borrowers |
88,904,388 |
23.3 |
84,738,678 |
24.0 |
(1) Percentage on total portfolio (as defined by Bacen).
e) By economic sector
|
On March 31 - R$ thousand | |||
2017 |
% |
2016 |
% | |
Public sector |
8,328,075 |
2.2 |
10,399,314 |
2.9 |
Oil, derivatives and aggregate activities |
8,321,986 |
99.9 |
10,268,321 |
98.7 |
Petrochemical |
6,082 |
0.1 |
125,379 |
1.2 |
Production and distribution of electricity |
7 |
- |
5,614 |
0.1 |
Private sector |
373,039,463 |
97.8 |
342,591,372 |
97.1 |
Companies |
202,879,865 |
53.2 |
196,666,013 |
55.7 |
Real estate and construction activities |
33,523,368 |
16.5 |
32,582,699 |
16.6 |
Retail |
22,605,796 |
11.1 |
24,312,093 |
12.4 |
Services |
18,646,469 |
9.2 |
19,425,330 |
9.9 |
Transportation and concession |
15,907,408 |
7.8 |
16,980,343 |
8.6 |
Automotive |
13,959,690 |
6.9 |
11,544,568 |
5.9 |
Food products |
10,793,423 |
5.3 |
7,424,892 |
3.8 |
wholesale |
9,805,544 |
4.8 |
9,388,193 |
4.8 |
Production and distribution of electricity |
7,795,612 |
3.8 |
8,342,284 |
4.2 |
Iron and steel industry |
7,418,235 |
3.7 |
7,348,580 |
3.7 |
Sugar and alcohol |
6,847,660 |
3.4 |
6,551,795 |
3.3 |
Holding |
6,052,812 |
3.0 |
5,575,483 |
2.8 |
Capital goods |
4,730,412 |
2.3 |
3,207,992 |
1.6 |
Pulp and paper |
3,867,612 |
1.9 |
3,856,758 |
2.0 |
Chemical |
3,636,988 |
1.8 |
4,190,945 |
2.1 |
Cooperative |
3,570,089 |
1.8 |
2,235,342 |
1.1 |
Financial |
3,201,363 |
1.6 |
4,623,979 |
2.4 |
Leisure and tourism |
2,967,400 |
1.5 |
2,945,625 |
1.5 |
Textiles |
2,436,061 |
1.2 |
2,580,369 |
1.3 |
Agriculture |
2,463,316 |
1.2 |
2,136,533 |
1.1 |
Oil, derivatives and aggregate activities |
1,900,947 |
0.9 |
1,790,700 |
0.9 |
Petrochemical |
565,505 |
0.3 |
475,600 |
0.2 |
Other industries |
20,184,155 |
9.9 |
19,145,910 |
9.7 |
Individuals |
170,159,598 |
44.6 |
145,925,359 |
41.3 |
Total |
381,367,538 |
100.0 |
352,990,686 |
100.0 |
132 Economic and Financial Analysis Report – March 2017
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
f) Breakdown of loans and allowance for loan losses
Level of risk |
On March 31 - R$ thousand | |||||||
Portfolio balance | ||||||||
Non-performing loans |
Performing loans |
Total |
% (1) |
% 2017 YTD (2) |
% 2016 YTD (2) | |||
Installments past due |
Installments not yet due |
Total - non-performing loans | ||||||
AA |
- |
- |
- |
112,909,617 |
112,909,617 |
29.6 |
29.6 |
27.4 |
A |
- |
- |
- |
131,241,475 |
131,241,475 |
34.4 |
64.0 |
61.3 |
B |
511,366 |
1,361,168 |
1,872,534 |
46,851,137 |
48,723,671 |
12.8 |
76.8 |
77.8 |
C |
1,246,644 |
3,152,028 |
4,398,672 |
34,016,516 |
38,415,188 |
10.1 |
86.9 |
90.0 |
Subtotal |
1,758,010 |
4,513,196 |
6,271,206 |
325,018,745 |
331,289,951 |
86.9 |
|
|
D |
1,218,119 |
2,805,125 |
4,023,244 |
9,096,394 |
13,119,638 |
3.4 |
90.3 |
92.4 |
E |
1,204,633 |
1,825,431 |
3,030,064 |
4,384,485 |
7,414,549 |
1.9 |
92.2 |
93.8 |
F |
1,006,092 |
1,605,214 |
2,611,306 |
1,112,008 |
3,723,314 |
1.0 |
93.2 |
94.7 |
G |
1,151,758 |
1,175,947 |
2,327,705 |
599,649 |
2,927,354 |
0.8 |
94.0 |
95.8 |
H |
10,161,274 |
6,942,051 |
17,103,325 |
5,789,407 |
22,892,732 |
6.0 |
100.0 |
100.0 |
Subtotal |
14,741,876 |
14,353,768 |
29,095,644 |
20,981,943 |
50,077,587 |
13.1 |
|
|
Total in 2017 |
16,499,886 |
18,866,964 |
35,366,850 |
346,000,688 |
381,367,538 |
100.0 |
|
|
% |
4.3 |
5.0 |
9.3 |
90.7 |
100.0 |
|
|
|
Total in 2016 |
11,853,955 |
16,918,529 |
28,772,484 |
324,218,202 |
352,990,686 |
|
|
|
% |
3.4 |
4.8 |
8.2 |
91.8 |
100.0 |
|
|
|
(1) Percentage of level of risk in relation to the total portfolio; and
(2) Cumulative percentage of level of risk on total portfolio.
Bradesco 133
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Notes to the Consolidated Financial Statements
Level of risk |
On March 31 - R$ thousand | |||||||||
Provision | ||||||||||
% Minimum provisioning required |
Minimum required |
Excess (2) |
Existing |
% 2017 YTD (1) |
% 2016 YTD (1) | |||||
Specific |
Generic |
Total | ||||||||
Installments past due |
Installments not yet due |
Total specific | ||||||||
AA |
- |
- |
- |
- |
- |
- |
- |
- |
- |
- |
A |
0.5 |
- |
- |
- |
640,820 |
640,820 |
95,842 |
736,662 |
0.6 |
0.6 |
B |
1.0 |
5,114 |
13,612 |
18,726 |
429,424 |
448,150 |
86,323 |
534,473 |
1.1 |
1.1 |
C |
3.0 |
37,399 |
94,561 |
131,960 |
940,490 |
1,072,450 |
255,642 |
1,328,092 |
3.5 |
8.3 |
Subtotal |
|
42,513 |
108,173 |
150,686 |
2,010,734 |
2,161,420 |
437,807 |
2,599,227 |
0.8 |
1.6 |
D |
10.0 |
121,812 |
280,513 |
402,325 |
757,529 |
1,159,854 |
860,711 |
2,020,565 |
15.4 |
29.6 |
E |
30.0 |
361,390 |
547,629 |
909,019 |
1,182,397 |
2,091,416 |
3,060,311 |
5,151,727 |
69.5 |
48.8 |
F |
50.0 |
503,046 |
802,607 |
1,305,653 |
534,069 |
1,839,722 |
1,670,873 |
3,510,595 |
94.3 |
69.2 |
G |
70.0 |
806,231 |
823,163 |
1,629,394 |
405,261 |
2,034,655 |
877,229 |
2,911,884 |
99.5 |
88.5 |
H |
100.0 |
10,161,274 |
6,942,051 |
17,103,325 |
5,789,407 |
22,892,732 |
- |
22,892,732 |
100.0 |
100.0 |
Subtotal |
|
11,953,753 |
9,395,963 |
21,349,716 |
8,668,663 |
30,018,379 |
6,469,124 |
36,487,503 |
72.9 |
72.0 |
Total in 2017 |
|
11,996,266 |
9,504,136 |
21,500,402 |
10,679,397 |
32,179,799 |
6,906,931 |
39,086,730 |
10.2 |
|
% |
|
30.7 |
24.3 |
55.0 |
27.3 |
82.3 |
17.7 |
100.0 |
|
|
Total in 2016 |
|
7,341,197 |
6,899,226 |
14,240,423 |
9,710,481 |
23,950,904 |
6,406,169 |
30,357,073 |
|
8.6 |
% |
|
24.2 |
22.7 |
46.9 |
32.0 |
78.9 |
21.1 |
100.0 |
|
|
(1) Percentage of existing provision in relation to total portfolio, by level of risk; and
(2) Up to December 31, 2016, included the constitution of provision for guarantees provided, encompassing sureties, guarantees, credit letters, and standby letter of credit, which comprises the concept of “excess” provision that totaled R$ 762,870 thousand as of March 31, 2016. Pursuant to Resolution No. 4,512/16, the amount of R$ 604,623 thousand was allocated to a specific account under "Other Liabilities - Sundry" (Note 20b), in January 2017. Includes, as of March 31, 2017, the amount of R$ 418,892 thousand, related to the surplus provision of loan operations guaranteed by standby letter of credit.
134 Economic and Financial Analysis Report – March 2017
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
g) Changes in allowance for loan losses
|
R$ thousand | |
2017 |
2016 | |
- Specific provision (1) |
22,386,423 |
14,196,821 |
- Generic provision (2) |
10,737,580 |
8,811,051 |
- Excess provision (3) (4) |
7,490,351 |
6,408,728 |
- Loans |
4,429,361 |
5,714,544 |
- Guarantees provided (4) |
3,060,990 |
694,184 |
Opening balance on December 31 |
40,614,354 |
29,416,600 |
Accounting for allowance for loan losses (5) |
8,281,361 |
5,883,595 |
Accounting for/reversal of provisions for guarantees provided (4) |
(3,060,990) |
68,687 |
Net write-offs/other |
(6,747,995) |
(5,011,809) |
Closing balance on March 31 |
39,086,730 |
30,357,073 |
- Specific provision (1) |
21,500,402 |
14,240,423 |
- Generic provision (2) |
10,679,397 |
9,710,481 |
- Excess provision (3) |
6,906,931 |
6,406,169 |
- Loans |
6,906,931 |
5,643,299 |
- Guarantees provided |
- |
762,870 |
(1) For contracts with installments past due for more than 14 days;
(2) Recognized based on the customer/transaction classification and therefore not included in the preceding item;
(3) The additional provision is recognized based on Management’s experience and the expectation in relation to the loan portfolio, to determine the total provision deemed sufficient to cover specific and general credit risk, when considered together with the provision calculated based on levels of risk and the corresponding minimum percentage in the provision established by Resolution No. 2,682/99. The excess provision per customer was classified according to the level of risk (Note 10f);
(4) Up to December 31, 2016, included the constitution of provision for guarantees provided, encompassing sureties, guarantees, credit letters, and standby letter of credit, which comprises the concept of “excess” provision that totaled R$3,060,990 thousand. In accordance with Resolution No. 4,512/16, in the first quarter of 2017, part of this balance (R$ 604,623 thousand) was allocated to a specific account under "Other Liabilities - Sundry" (Note 20b), and the remaining balance (R$ 2,456,367 thousand) was allocated to “Excess Provision”; and
(5) Includes, in the first quarter of 2017, the formation of allowance for loan losses, in the amount of R$ 2,456,367 thousand, as a result of the adequacy of the provision for guarantees provided, already mentioned in the previous item.
h) Allowance for Loan Losses expense net of amounts recovered
Expenses with the allowance for loan losses, net of credit write-offs recovered, are as follows.
|
Accrued on March 31 - R$ thousand | |
2017 |
2016 | |
Amount recognized (1) (2) |
5,824,994 |
5,952,281 |
Amount recovered (3) (4) |
(1,536,975) |
(1,044,635) |
Allowance for Loan Losses expense net of amounts recovered |
4,288,019 |
4,907,646 |
(1) Up to December 31, 2016, included the constitution of provision for guarantees provided, encompassing sureties, guarantees, credit letters, and standby letter of credit, which comprises the concept of ALL “surplus”;
(2) Refers, in the first quarter of 2017, to the formation of allowance for loan losses, in the amount of R$ 8,281,361 thousand, excluding the portion related to the adequacy of the provision for guarantees provided, in the amount of R$ 2,456.367 thousand (Note 10g);
(3) Classified in income from loans (Note 10j); and
(4) In the first quarter of 2017, credit was granted for operations already written-off for losses, without the retention of risks and benefits, in the amount of R$ 1,955,173 thousand, with effect on income in the amount of R$ 9,789 thousand.
i) Changes in the renegotiated portfolio
|
R$ thousand | |
2017 |
2016 | |
Opening balance on December 31 |
17,501,423 |
12,728,723 |
Amount renegotiated |
4,235,457 |
3,499,449 |
Amount received |
(2,532,743) |
(1,835,622) |
Write-offs |
(1,305,113) |
(1,314,324) |
Closing balance on March 31 |
17,899,024 |
13,078,226 |
Allowance for loan losses |
13,482,952 |
8,598,990 |
Percentage on renegotiated portfolio |
75.3% |
65.8% |
Bradesco 135
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
j) Income from loans and leasing
|
Accrued on March 31 - R$ thousand | |
2017 |
2016 | |
Discounted trade receivables and loans |
12,729,619 |
11,779,971 |
Financing |
4,356,223 |
3,804,280 |
Agricultural and agribusiness loans |
466,603 |
460,547 |
Subtotal |
17,552,445 |
16,044,798 |
Recovery of credits charged-off as losses |
1,536,975 |
1,044,635 |
Subtotal |
19,089,420 |
17,089,433 |
Leasing, net of expenses |
74,384 |
82,449 |
Total |
19,163,804 |
17,171,882 |
11) OTHER RECEIVABLES
a) Foreign exchange portfolio
Balances
|
On March 31 - R$ thousand | |
2017 |
2016 | |
Assets – other receivables |
|
|
Exchange purchases pending settlement |
15,849,423 |
13,585,102 |
Exchange sale receivables |
5,076,161 |
13,098,550 |
(-) Advances in domestic currency received |
(828,579) |
(265,065) |
Income receivable on advances granted |
147,446 |
114,490 |
Total |
20,244,451 |
26,533,077 |
Liabilities – other liabilities |
|
|
Exchange sales pending settlement |
4,991,315 |
12,690,769 |
Exchange purchase payables |
16,128,123 |
13,743,337 |
(-) Advances on foreign exchange contracts |
(10,161,539) |
(9,086,665) |
Other |
5,671 |
10,561 |
Total |
10,963,570 |
17,358,002 |
Net foreign exchange portfolio |
9,280,881 |
9,175,075 |
Off-balance-sheet accounts: |
|
|
- Loans available for import |
238,835 |
119,277 |
- Confirmed exports loans |
76,956 |
60,180 |
136 Economic and Financial Analysis Report – March 2017
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
Foreign exchange results
Adjusted foreign exchange results for presentation purposes
|
Accrued on March 31 - R$ thousand | |
2017 |
2016 | |
Foreign exchange income |
39,554 |
(1,920,030) |
Adjustments: |
|
|
- Income on foreign currency financing (1) |
37,788 |
38,579 |
- Income on export financing (1) |
592,168 |
490,303 |
- Income on foreign investments (2) |
2,367 |
1,074 |
- Expenses of liabilities with foreign bankers (3) (Note 17c) |
(8,591) |
32,679 |
- Funding expenses (4) |
(470,747) |
(400,005) |
- Other (5) |
235,451 |
2,127,371 |
Total adjustments |
388,436 |
2,290,001 |
Adjusted foreign exchange income |
427,990 |
369,971 |
(1) Recognized in “Income from operations with securities”;
(2) Recognized in “Income from operations with securities”;
(3) Related to funds for financing of advances on foreign exchange contracts and import financing, recognized in “Borrowing and on-lending expenses”;
(4) Refers to funding expenses of investments in foreign exchange; and
(5) Primarily includes the exchange rate variations of resources invested in foreign currency.
b) Sundry
|
On March 31 - R$ thousand | |
2017 |
2016 | |
Deferred tax assets (Note 34c) |
51,406,389 |
48,013,193 |
Credit card operations |
25,501,880 |
20,432,346 |
Debtors for escrow deposits |
16,708,663 |
12,758,859 |
Trade and credit receivables (1) |
7,285,871 |
5,107,531 |
Prepaid taxes |
6,940,118 |
5,737,972 |
Other debtors |
3,315,014 |
2,292,546 |
Payments to be reimbursed |
724,717 |
743,513 |
Receivables from sale of assets |
132,221 |
95,835 |
Other |
561,126 |
256,979 |
Total |
112,575,999 |
95,438,774 |
(1) Primarily includes receivables from the acquisition of loans and advances on receivables.
Bradesco 137
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
12) OTHER ASSETS
a) Foreclosed assets/other
|
On March 31 - R$ thousand | |||
Cost |
Provision for losses |
Cost net of provision | ||
2017 |
2016 | |||
Real estate |
1,664,339 |
(305,037) |
1,359,302 |
1,035,660 |
Vehicles and similar |
680,100 |
(353,366) |
326,734 |
321,237 |
Goods subject to special conditions |
599,240 |
(599,240) |
- |
- |
Inventories/warehouse |
29,860 |
- |
29,860 |
54,451 |
Machinery and equipment |
20,828 |
(16,275) |
4,553 |
9,070 |
Other |
21,344 |
(18,392) |
2,952 |
7,448 |
Total in 2017 |
3,015,711 |
(1,292,310) |
1,723,401 |
|
Total in 2016 |
2,354,342 |
(926,476) |
|
1,427,866 |
b) Prepaid expenses
|
On March 31 - R$ thousand | |
2017 |
2016 | |
Deferred insurance acquisition costs (1) |
1,717,568 |
2,030,926 |
Commission on the placement of loans and financing (2) |
558,204 |
701,321 |
Advertising and marketing expenses (3) |
127,039 |
200,835 |
Other (4) |
1,146,635 |
1,123,919 |
Total |
3,549,446 |
4,057,001 |
(1) Commissions paid to brokers and representatives on sale of insurance, pension plans and capitalization bond products;
(2) Commissions paid to storeowners, car dealers and correspondent banks – payroll-deductible loans;
(3)Prepaid expenses of future advertising and marketing campaigns on media; and
(4) It includes, principally, (i) anticipation of commissions concerning the operational agreement to offer credit cards and other products and (ii) card issue costs.
13) INVESTMENTS
a) Composition of investments in the consolidated financial statements
Associates and Jointly Controlled Companies |
On March 31 - R$ thousand | |
2017 |
2016 | |
- Cielo S.A. |
4,141,794 |
3,399,201 |
- Elo Participações S.A. |
967,798 |
829,330 |
- IRB-Brasil Resseguros S.A. |
614,398 |
589,784 |
- Fleury S.A. |
650,133 |
515,309 |
- Aquarius Participações S.A. |
285,560 |
264,103 |
- Haitong Banco de Investimento do Brasil S.A. |
124,189 |
131,307 |
- Others |
368,093 |
305,648 |
Total investment in Associates and Jointly Controlled Companies – in Brazil and Overseas |
7,151,965 |
6,034,682 |
- Tax incentives |
234,717 |
234,717 |
- Other investments |
170,692 |
156,075 |
Provision for: |
|
|
- Tax incentives |
(207,933) |
(207,933) |
- Other investments |
(46,820) |
(43,151) |
Total investments |
7,302,621 |
6,174,390 |
138 Economic and Financial Analysis Report – March 2017
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Notes to the Consolidated Financial Statements
b) The income/expense from the equity method accounting of investments was recognized in the statement of income, under “Equity in the Earnings (Losses) of Unconsolidated and Jointly Controlled Companies”, and correspond, in the first quarter of 2017, to R$ 428,535 thousand (R$ 405,665 thousand in 2016).
Companies |
Accrued on March 31 - R$ thousand | |||||||
Capital Stock |
Shareholders’ equity adjusted |
Number of shares/ quotas held (in thousands) |
Equity interest consolidated on capital stock |
Adjusted income |
Equity accounting adjustments (1) | |||
ON |
PN |
2017 |
2016 | |||||
- Elo Participações S.A. (2) |
800,227 |
1,935,209 |
372 |
- |
50.01% |
96,167 |
48,093 |
58,255 |
- IRB-Brasil Resseguros S.A. (3) |
1,453,080 |
2,995,602 |
63,727 |
- |
20.51% |
226,660 |
46,488 |
37,327 |
- Aquarius Participações S.A. |
518,592 |
582,776 |
254,110 |
- |
49.00% |
44,751 |
21,928 |
9,317 |
- Haitong Banco de Investimento do Brasil S.A. |
420,000 |
620,945 |
12,734 |
12,734 |
20.00% |
(18,180) |
(3,636) |
1,869 |
- Others (4) |
|
|
|
315,662 |
298,897 | |||
Equity in the earnings (losses) of unconsolidated and jointly controlled companies |
|
|
|
|
|
|
428,535 |
405,665 |
(1) The adjustment considers income calculated periodically by the companies and includes equity variations recognized by the investees not recognized in profit or loss, as well as alignment of accounting practice adjustments, where applicable;
(2) Investment in jointly controlled companies;
(3) Based on financial information from the previous month; and
(4) Includes, primarily, the adjustments resulting from the assessment by the equity equivalence method in public company (Cielo S.A. and Fleury S.A.)
Bradesco 139
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
14) PREMISES AND EQUIPMENT
|
On March 31 - R$ thousand | ||||
Annual rate |
Cost |
Depreciation |
Cost net of depreciation | ||
2017 |
2016 | ||||
Property and equipment: |
|
|
|
|
|
- Buildings |
4% |
1,772,585 |
(583,608) |
1,188,977 |
929,037 |
- Land |
- |
854,331 |
- |
854,331 |
448,080 |
Facilities, furniture and premises and equipment |
10% |
4,942,898 |
(2,347,684) |
2,595,214 |
2,228,058 |
Security and communication systems |
10% |
328,970 |
(194,837) |
134,133 |
92,087 |
Data processing systems |
20 to 40% |
6,830,156 |
(4,230,651) |
2,599,505 |
1,672,921 |
Transportation systems |
20% |
86,698 |
(42,668) |
44,030 |
66,436 |
Fixed Assets in course |
- |
151,083 |
- |
151,083 |
85,918 |
Total in 2017 |
|
14,966,721 |
(7,399,448) |
7,567,273 |
|
Total in 2016 |
|
12,384,451 |
(6,861,914) |
|
5,522,537 |
The fixed assets to shareholders’ equity ratio is 42.3% when considering only the companies and payment institutions within the economic group (the “Prudential Conglomerate”), where the maximum limit is 50.0%.
15) INTANGIBLE ASSETS
a) Goodwill
The goodwill recognized from investment acquisitions totaled R$10,998,136 thousand, net of accumulated amortization, as applicable, of which: (i) R$1,740,315 thousand recognized in ‘Permanent Assets – Investments’ represents the acquisition of shares of affiliates and of jointly controlled companies (Cielo/Fleury), which will be amortized as realized; and (ii) R$9,257,821 thousand represented by the acquisition of shares of subsidiaries/shared control, represented by the future profitability/client portfolio, which is amortized in up to twenty years, net of accrued amortizations, if applicable, recognized in Fixed Assets – Intangible Assets.
During the first quarter of 2017, goodwill was amortized totaling R$ 586,206 thousand (R$ 32,530 thousand in 2016) (Note 29).
b) Intangible assets
Acquired intangible assets consist of:
|
On March 31 - R$ thousand | ||||
Rate of Amortization (1) |
Cost |
Amortization |
Cost net of amortization | ||
2017 |
2016 | ||||
Acquisition of financial services rights |
Contract |
4,434,607 |
(2,124,151) |
2,310,456 |
2,087,448 |
Software (2) |
20% |
10,607,264 |
(6,755,284) |
3,851,980 |
3,673,256 |
Goodwill (3) |
Up to 20% |
11,498,665 |
(2,240,844) |
9,257,821 |
1,061,934 |
Other |
Contract |
150,353 |
(98,268) |
52,085 |
62,991 |
Total in 2017 |
|
26,690,889 |
(11,218,547) |
15,472,342 |
|
Total in 2016 |
|
16,262,352 |
(9,376,723) |
|
6,885,629 |
(1) Intangible assets are amortized over an estimated period of economic benefit and recognized in “other administrative expenses” and “other operating expenses”, where applicable;
(2) Software acquired and/or developed by specialized companies; and
(3) On March 31, 2017, mainly composed of goodwill on the acquisition of equity interest in Bradescard - R$638,157 thousand, Odontoprev - R$116,593 thousand, Bradescard Mexico - R$17,847 thousand, Europ Assistance - R$5,811 thousand, Bradesco BBI S.A. - R$124,975 thousand; and Kirton Bank - R$8,327,713 thousand.
140 Economic and Financial Analysis Report – March 2017
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
c) Changes in intangible assets by type
|
On March 31 - R$ thousand | |||
Opening balance |
Additions (reductions) |
Amortization for the period |
Closing balance | |
Acquisition of financial services rights |
2,503,457 |
56,940 |
(249,941) |
2,310,456 |
Software |
3,945,244 |
242,121 |
(335,385) |
3,851,980 |
Goodwill – Future profitability (1) |
4,763,606 |
(1,468) |
(243,529) |
4,518,609 |
Goodwill – Based on intangible assets and other reasons (1) |
3,481,962 |
- |
(233,387) |
3,248,575 |
Goodwill – Difference in fair value of assets/liabilities (1) |
1,599,927 |
- |
(109,290) |
1,490,637 |
Other |
44,589 |
8,237 |
(741) |
52,085 |
Total in 2017 |
16,338,785 |
305,830 |
(1,172,273) |
15,472,342 |
Total in 2016 |
7,072,522 |
377,264 |
(564,157) |
6,885,629 |
(1) It takes into account the effects of the study’s final report on purchase price allocation (“PPA”) from the acquisition of HSBC Brasil.
Bradesco 141
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
16) DEPOSITS, SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND FUNDS FROM ISSUANCE OF SECURITIES
a) Deposits
|
On March 31 - R$ thousand | |||||
1 to 30 |
31 to 180 |
181 to 360 |
More than 360 |
2017 |
2016 | |
● Demand deposits (1) |
30,564,866 |
- |
- |
- |
30,564,866 |
22,590,729 |
● Savings deposits (1) |
94,352,635 |
- |
- |
- |
94,352,635 |
88,261,256 |
● Interbank deposits |
69,022 |
433,928 |
10,331 |
57,634 |
570,915 |
586,513 |
● Time deposits (2) |
8,717,916 |
16,055,292 |
8,479,341 |
76,714,373 |
109,966,922 |
77,772,394 |
Total in 2017 |
133,704,439 |
16,489,220 |
8,489,672 |
76,772,007 |
235,455,338 |
|
% |
56.8 |
7.0 |
3.6 |
32.6 |
100.0 |
|
Total in 2016 |
123,072,282 |
14,611,128 |
9,145,792 |
42,381,690 |
|
189,210,892 |
% |
65.1 |
7.7 |
4.8 |
22.4 |
|
100.0 |
(1) Classified as 1 to 30 days, not considering average historical turnover; and
(2) Considers the actual maturities of the investments.
b) Securities sold under agreements to repurchase
|
On March 31 - R$ thousand | |||||
1 to 30 |
31 to 180 |
181 to 360 |
More than 360 |
2017 |
2016 | |
Own portfolio |
37,935,675 |
27,420,557 |
17,868,381 |
17,157,119 |
100,381,732 |
108,139,220 |
● Government securities |
17,936,805 |
188,709 |
65,234 |
1,810 |
18,192,558 |
18,435,382 |
● Debentures of own issuance |
13,064,221 |
27,231,848 |
17,576,454 |
16,247,666 |
74,120,189 |
86,195,339 |
● Foreign |
6,934,649 |
- |
226,693 |
907,643 |
8,068,985 |
3,508,499 |
Third-party portfolio (1) |
145,111,284 |
- |
- |
- |
145,111,284 |
114,955,640 |
Unrestricted portfolio (1) |
8,487,432 |
799,078 |
- |
- |
9,286,510 |
969,964 |
Total in 2017 |
191,534,391 |
28,219,635 |
17,868,381 |
17,157,119 |
254,779,526 |
|
% |
75.2 |
11.1 |
7.0 |
6.7 |
100.0 |
|
Total in 2016 |
138,205,845 |
39,843,666 |
7,781,572 |
38,233,741 |
|
224,064,824 |
% |
61.6 |
17.8 |
3.5 |
17.1 |
|
100.0 |
(1) Represented by government securities.
142 Economic and Financial Analysis Report – March 2017
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Notes to the Consolidated Financial Statements
c) Funds from issuance of securities
|
On March 31 - R$ thousand | |||||
1 to 30 |
31 to 180 |
181 to 360 |
More than 360 |
2017 |
2016 | |
Securities – Brazil: |
|
|
|
|||
- Financial bills |
6,056,071 |
29,245,906 |
27,544,659 |
39,415,403 |
102,262,039 |
72,611,605 |
- Letters of credit for real estate |
2,206,158 |
10,164,742 |
6,746,053 |
6,505,949 |
25,622,902 |
21,179,524 |
- Letters of credit for agribusiness |
515,304 |
5,227,937 |
2,110,503 |
1,247,054 |
9,100,798 |
9,399,117 |
Subtotal |
8,777,533 |
44,638,585 |
36,401,215 |
47,168,406 |
136,985,739 |
103,190,246 |
Securities – Overseas: |
|
|
|
|
|
|
- Securitization of future flow of money orders received from overseas |
9,392 |
210,472 |
86,377 |
2,442,502 |
2,748,743 |
4,134,977 |
- MTN Program Issues (1) |
35,726 |
- |
- |
207,803 |
243,529 |
4,823,303 |
- Issuance costs |
- |
- |
- |
(25,673) |
(25,673) |
(37,118) |
Subtotal |
45,118 |
210,472 |
86,377 |
2,624,632 |
2,966,599 |
8,921,162 |
Structured Operations Certificates |
12,341 |
238,021 |
59,902 |
40,251 |
350,515 |
505,720 |
Total in 2017 |
8,834,992 |
45,087,078 |
36,547,494 |
49,833,289 |
140,302,853 |
|
% |
6.3 |
32.1 |
26.0 |
35.6 |
100.0 |
|
Total in 2016 |
6,107,073 |
20,609,143 |
31,423,244 |
54,477,668 |
|
112,617,128 |
% |
5.4 |
18.3 |
27.9 |
48.4 |
|
100.0 |
(1) Issuance of securities on the international market to invest in foreign exchange transactions, pre-export financing, import financing and working capital financing, predominately in the medium and long-term.
Bradesco 143
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Notes to the Consolidated Financial Statements
d) Cost for market funding and inflation and interest adjustments of technical provisions for insurance, pension plans and capitalization bonds
|
Accrued on March 31 - R$ thousand | |
2017 |
2016 | |
Savings deposits |
1,603,830 |
1,606,048 |
Time deposits |
2,355,177 |
1,570,269 |
Securities sold under agreements to repurchase |
6,828,979 |
6,212,048 |
Funds from of securities issued |
4,166,466 |
3,211,032 |
Subordinated debts (Note 19) |
1,515,183 |
1,572,505 |
Other funding expenses |
150,184 |
110,452 |
Subtotal |
16,619,819 |
14,282,354 |
Cost for inflation and interest adjustment of technical provisions of insurance, pension plans and capitalization bonds |
5,972,523 |
5,413,999 |
Total |
22,592,342 |
19,696,353 |
17) BORROWING AND ON-LENDING
a) Borrowing
|
On March 31 - R$ thousand | |||||
1 to 30 |
31 to 180 |
181 to 360 |
More than 360 days |
2017 |
2016 | |
In Brazil - Other Institutions |
3,817 |
- |
- |
7,963 |
11,780 |
18,447 |
Overseas |
2,217,809 |
11,242,105 |
5,869,553 |
2,747,877 |
22,077,344 |
27,138,983 |
Total in 2017 |
2,221,626 |
11,242,105 |
5,869,553 |
2,755,840 |
22,089,124 |
|
% |
10.1 |
50.8 |
26.6 |
12.5 |
100.0 |
|
Total in 2016 |
2,923,435 |
10,297,377 |
8,518,892 |
5,417,726 |
|
27,157,430 |
% |
10.8 |
37.9 |
31.4 |
19.9 |
|
100.0 |
b) On-lending
|
On March 31 - R$ thousand | |||||
1 to 30 |
31 to 180 |
181 to 360 |
More than 360 days |
2017 |
2016 | |
In Brazil |
997,761 |
5,043,169 |
4,801,059 |
23,486,325 |
34,328,314 |
35,690,485 |
- FINAME |
651,027 |
3,123,692 |
3,169,655 |
12,990,167 |
19,934,541 |
24,244,003 |
- BNDES |
346,464 |
1,919,477 |
1,511,770 |
10,496,158 |
14,273,869 |
11,358,525 |
- National Treasury |
- |
- |
118,317 |
- |
118,317 |
80,766 |
- Other institutions |
270 |
- |
1,317 |
- |
1,587 |
7,191 |
Overseas |
- |
- |
- |
- |
- |
1,210 |
Total in 2017 |
997,761 |
5,043,169 |
4,801,059 |
23,486,325 |
34,328,314 |
|
% |
2.9 |
14.7 |
14.0 |
68.4 |
100.0 |
|
Total in 2016 |
1,177,674 |
4,846,569 |
4,878,384 |
24,789,068 |
|
35,691,695 |
% |
3.3 |
13.6 |
13.7 |
69.4 |
|
100.0 |
144 Economic and Financial Analysis Report – March 2017
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Notes to the Consolidated Financial Statements
c) Borrowing and on-lending expenses
|
Accrued on March 31 - R$ thousand | |
2017 |
2016 | |
Borrowing: |
|
|
- In Brazil |
294,021 |
2,144 |
- Overseas |
(1,424,174) |
(6,237,052) |
- Exchange variation from assets and liabilities overseas |
763,524 |
3,024,943 |
Subtotal borrowing |
(366,629) |
(3,209,965) |
On-lending in Brazil: |
|
|
- BNDES |
304,418 |
226,308 |
- FINAME |
159,744 |
138,744 |
- National Treasury |
1,981 |
1,830 |
- Other institutions |
11 |
226 |
On-lending overseas: |
|
|
Payables to foreign bankers (Note 11a) |
8,591 |
(32,679) |
- Other expenses with foreign on-lending |
- |
69 |
Subtotal on-lending |
474,745 |
334,498 |
Total |
108,116 |
(2,875,467) |
18) PROVISIONS, CONTINGENT ASSETS AND LIABILITIES AND LEGAL OBLIGATIONS – TAX AND SOCIAL SECURITY
a) Contingent assets
However, there are ongoing proceedings where the chance of success is considered probable, such as: a) Social Integration Program (PIS), Bradesco has made a claim to offset PIS against Gross Operating Income, paid under Decree-Laws No. 2,445/88 and No. 2,449/88, regarding the payment that exceeded the amount due under Supplementary Law No. 07/70 (PIS Repique); and b) other taxes, the legality and/or constitutionality of which is being challenged, where the decision may lead to reimbursement of amounts paid.
b) Provisions classified as probable losses and legal obligations – tax and social security
The Organization is a party to a number of labor, civil and tax lawsuits, arising from the normal course of business.
Management recognized provisions where, based on their opinion and that of their legal counsel, the nature of the lawsuit, similarity to previous lawsuits, complexity and the courts standing, the loss is deemed probable.
Management considers that the provision is sufficient to cover the future losses generated by the respective lawsuits.
Provisions related to legal obligations are maintained until the conclusion of the lawsuit, represented by judicial decisions with no further appeals or due to the statute of limitation.
I - Labor claims
These are claims brought by former employees and outsourced employees seeking indemnifications, most significantly for unpaid “overtime”, pursuant to Article 224 of the Consolidation of Labor Laws (CLT). In proceedings in which a judicial deposit is used to guarantee the execution of the judgment, the labor provision is made considering the estimated loss of these deposits. For proceedings with similar characteristics and for which there has been no official court decision, the provision is recognized based on the average calculated value of payments made for labor complaints settled in the past 12 months; and for proceedings originating from acquired banks, with unique characteristics, the calculation and assessment of the required balance is conducted periodically, based on the updated recent loss history.
Bradesco 145
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
Overtime is monitored by using electronic time cards and paid regularly during the employment contract and, accordingly, the claims filed by former employees do not represent significant amounts.
II - Civil claims
These are claims for pain and suffering and property damages, mainly relating to protests, returned checks, the inclusion of information about debtors in the credit restriction registry and the replacement of inflation adjustments excluded as a result of government economic plans. These lawsuits are individually controlled using a computer-based system and provisioned whenever the loss is deemed as probable, considering the opinion of Management and their legal counsel, the nature of the lawsuits, similarity with previous lawsuits, complexity and positioning of the courts.
Most of these lawsuits are brought to the Special Civil Court (JEC), in which the claims are limited to 40 times the minimum wage and do not have a significant impact on the Organization’s financial position.
There are a significant number of legal claims pleading alleged differences in adjustment for inflation on savings account balances due to the implementation of economic plans that were part of the federal government’s economic policy to reduce inflation in the ‘80s and ‘90s.
Although Bradesco complied with the law and regulation in force at the time, these lawsuits have been recognized in provisions, taking into consideration the claims where the Bradesco is the defendant and the perspective of loss, which is considered after the analysis of each demand, based on the current decision of the Superior Court of Justice (STJ).
Note that, regarding disputes relating to economic plans, the Federal Supreme Court (STF) suspended the prosecution of all lawsuits at the cognizance stage, until the Court issues a final decision on the right under litigation.
III - Legal obligations – provision for tax risks
The Organization is disputing the legality and constitutionality of certain taxes and contributions in court, for which provisions have been recognized in full, although there is a good chance of a favorable outcome, based on the opinion of Management and their legal counsel. The processing of these legal obligations and the provisions for cases for which the risk of loss is deemed as probable is regularly monitored in the legal court. During or after the conclusion of each case, a favorable outcome may arise for the Organization, resulting in the reversal of the related provisions.
The main cases are:
- PIS and COFINS – R$2,368,203 thousand (R$2,179,158 thousand in 2016): a request for authorization to calculate and pay PIS and COFINS based on effective billing, as set forth in Article 2 of Supplementary Law No. 70/91, removing from the calculation base the unconstitutional inclusion of other revenues other than those billed;
- IRPJ/CSLL on losses of credits – R$1,790,415 thousand (R$1,895,099 thousand in 2016): we are requesting to deduct from income tax and social contributions payable (IRPJ and CSLL, respectively) amounts of actual and definite loan losses related to unconditional discounts granted during collections, regardless of compliance with the terms and conditions provided for in Articles 9 to 14 of Law No. 9,430/96 that only apply to temporary losses;
- Pension Contributions – R$1,409,990 thousand (R$1,102,264 thousand in 2016): official notifications related to the pension contributions on financial contributions in private pension plans, considered by the authorities to be compensatory sums subject to the incidence of pension contributions and to an isolated fine for not withholding IRRF on the financial contributions;
146 Economic and Financial Analysis Report – March 2017
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
- INSS Autonomous Brokers – R$935,589 thousand (R$1,852,851 thousand in 2016): The Bradesco Organization is questioning the charging of social security contribution on remunerations paid to third-party service providers, established by Supplementary Law No. 84/96 and subsequent regulations/amendments, at 20.0% with an additional 2.5%, on the grounds that services are not provided to insurance companies but to policyholders, thus being outside the scope of such a contribution as provided for in item I, Article 22 of Law No. 8,212/91, as new wording in Law No. 9,876/99;
- INSS – Contribution to SAT – R$382,662 thousand: in an ordinary lawsuit filed by the Brazilian Federation of Banks – Febraban, since April 2007, on behalf of its members, is questioned the classification of banks at the highest level of risk, with respect to Work Accident Risk – RAT, which eventually raised the rate of the respective contribution from 1% to 3%, in accordance with Decree No. 6,042/07; and
- PIS – R$ 150,999 thousand (2016 – R$ 329,297 thousand): the Bradesco Organization is requesting authorization to offset overpaid amounts in 1994 and 1995 as PIS contribution, already compensated, provisioned upon granting of the preliminary injunction, corresponding to the surplus paid over that calculated on the tax base established in the Constitution, i.e., gross operating income, as defined in the income tax legislation set out in Article 44 of Law No. 4,506/64, which excludes interest income.
In general, the provisions relating to lawsuits are classified as non-current, due to the unpredictability of the duration of the proceedings in the Brazilian justice system. For this reason, the estimate has not been disclosed with relation to the specific year in which these lawsuits will be finalized.
IV - Provisions by nature
|
On March 31 - R$ thousand | |
2017 |
2016 | |
Labor claims |
5,229,181 |
3,069,356 |
Civil claims |
5,109,218 |
4,192,052 |
Provision for tax risks |
7,997,964 |
8,267,684 |
Total (1) |
18,336,363 |
15,529,092 |
(1) Note 20b.
V - Changes in provisions
|
R$ thousand | ||
2017 | |||
Labor |
Civil |
Tax (1) (2) | |
Balance on December 31, 2016 |
5,101,732 |
5,003,440 |
8,187,238 |
Adjustment for inflation |
161,213 |
115,536 |
156,865 |
Provisions, net of (reversals and write-offs) |
190,409 |
214,948 |
(344,542) |
Payments |
(224,173) |
(224,706) |
(1,597) |
Balance on March 31, 2017 |
5,229,181 |
5,109,218 |
7,997,964 |
(1) They are comprised, substantially, by legal obligations; and
(2) In the first quarter of 2017, includes the reversals of provisions regarding: (i) PIS proceeding, related to the offset of amounts unduly paid in the amount of R$ 191,492 thousand; and (ii) IRPJ/CSLL on loan losses, in the amount of R$ 181,266 thousand.
c) Contingent liabilities classified as possible losses
The Organization maintains a system to monitor all administrative and judicial proceedings in which the institution is plaintiff or defendant and, based on the opinion of legal counsel, classifies the lawsuits according to the expectation of loss. Case law trends are periodically analyzed and, if necessary, the related risk is reclassified. In this respect, contingent lawsuits deemed to have a possible risk of loss are not recognized as a liability in the financial statements. The main proceedings in this category are the following: a) 2006 to 2013 income tax and social contribution, relating to goodwill amortization being disallowed on the acquisition of investments, for the amount of R$5,966,078 thousand (R$5,307,025 thousand in 2016); b) Fines and disallowances of Cofins loan compensations, released after a favorable decision in a judicial proceeding, where the unconstitutionality of the expansion of the intended calculation base was discussed for revenues other than those from billing (Law No. 9,718/98), in the amount of R$4,714,179 thousand; c) Leasing companies’ Tax on Services of any Nature (ISSQN), total lawsuits correspond to R$2,440,746 thousand (R$1,942,279 thousand in 2016) which relates to the municipal tax demands from municipalities other than those in which the company is located and where, under law, tax is collected; d) IRPJ and CSLL deficiency note relating to disallowance of exclusions of revenues from the mark-to-market of securities from 2007 to 2012, differences in depreciation expenses, insufficient depreciation expenses, expenses with depreciation of leased assets, operating expenses and income and disallowance of tax loss compensation, in the amount of R$1,620,104 thousand (R$928,066 thousand in 2016); e) Notifications and disallowances of compensations of PIS and Cofins related to the unconstitutional extension of the basis of calculation intended for other income other than the billing (Law No 9,718/98), from acquired companies, amounting to R$1,339,003 thousand; f) IRPJ and CSLL deficiency notice relating to the disallowance of loan loss deductions, for the amount of R$774,768 thousand (R$1,225,277 thousand in 2016); and g) IRPJ and CSLL deficiency note, amounting to R$469,018 thousand (R$430,502 thousand in 2016) relating to profit of subsidiaries based overseas, for the calendar years of 2008 and 2009.
Bradesco 147
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
d) Other matters
I - On May 31, 2016, Bradesco became aware of the indictment of three members of its Board of Executive Officers by the Brazilian Federal Police under the so-called “Operation Zelotes.” On July 28, 2016, the Public Prosecutor's Office filed charges against the three members of the Board of Executive Officers and a former member of its Board of Directors, that was received by the Judge of the 10th Federal Court of the Federal District Judiciary Section. The Management conducted a thorough internal evaluation of the records and documents related to the indictment and found no evidence of any illegality committed by its representatives. The executives of Bradesco have already submitted their respective defenses in the criminal proceedings, pointing out the facts and evidence demonstrating their innocence. Bradesco is cooperating with the relevant authorities and regulatory bodies, furnishing the requested information in Brazil and abroad. Moreover, Bradesco was summoned by the General’s Office of the Ministry of Finance on the filling of an Administrative Proceeding (“PAR”). Such proceeding is in its instruction phase and may represent the likelihood of Bradesco receiving a fine and/or being mentioned in public sanction lists, which eventually may lead to restrictions on making business with public bodies.
On account of the news published in the media, on the indictment in the "Operation Zealots", a class action was filed in the District Court of New York, on June 3, 2016. On September 1, 2016, Bradesco spontaneously attended the proceedings of the Class Action and agreed with the plaintiff a term for the submission of the revocation of the suit until December 23, 2016. On October 21, 2016, the Plaintiff Leader presented the addendum of the Initial Petition, appointing as defendants Bradesco and three members of its Board of Executive Officers. According to the demand, investors who purchased preferred American Depository Shares (“ADS”) of Bradesco between April 30, 2012 and July 27, 2016 would have suffered losses provoked by Bradesco due to a supposed violation regarding the American law of capital markets, according to communication to the Market on May 31, June 8 and July 28, 2016. On December 23, 2016, we filed a motion to dismiss the complaint, which, after the Lead Plaintiff´s reply and Bradesco´s rejoinder, is awaiting decision. Considering that the demand is in a preliminary stage, it is not possible at present to make a risk rating, and there is not yet evidence to support an assessment of the value of the respective risk.
II - The wholly-owned subsidiaries of Bradesco, BEM - Distribuidora de Títulos e Valores Mobiliários Ltda. and BRAM - Bradesco Asset Management S.A. Distribuidora de Títulos e Valores Mobiliários, as well as two of its Managers, were mentioned in the scope of the so-called "Greenfield operation" of the Federal Police, because they were responsible for the administration and management of the Fund in Equity - FIP (Equity Investment Fund), respectively. Besides providing the documents, the Federal Court has ruled, in the course of this Operation, the blocking of these companies’ values. As a result of this, a Commitment was signed, approved by the 10th Federal Court of the Federal District, to release the values through the provision of guarantees of up to R$104 million, without the recognition of any civil or criminal liability on the part of companies or administrators of the Organization. In the scope of this commitment, managers and officers of the Organization committed to provide any clarifications to the authorities responsible for conducting this investigation, regardless of a formal subpoena. Additionally, the internal evaluations indicate that there has been no illegality in conducting these activities according to communication to the Market on September 20, 2016. So far, there is no indication that the investigations could result in the accountability of these companies.
148 Economic and Financial Analysis Report – March 2017
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
19) SUBORDINATED DEBT
|
On March 31 - R$ thousand | |||
Original term in years |
Amount of the operation |
2017 |
2016 | |
In Brazil: |
|
|
||
Subordinated CDB: |
|
|
|
|
2019 |
10 |
20,000 |
57,813 |
51,239 |
Financial bills: |
|
|
|
|
2016 (1) |
6 |
- |
- |
202,822 |
2017 (2) |
6 |
6,688,653 |
8,665,729 |
10,463,760 |
2018 |
6 |
8,262,799 |
10,019,197 |
9,608,992 |
2019 |
6 |
21,858 |
34,195 |
30,924 |
2017 |
7 |
40,100 |
98,714 |
87,419 |
2018 |
7 |
141,050 |
301,346 |
268,258 |
2019 |
7 |
3,172,835 |
3,530,536 |
3,487,504 |
2020 |
7 |
1,700 |
2,665 |
2,442 |
2022 |
7 |
4,305,011 |
5,227,888 |
4,559,612 |
2023 (3) |
7 |
1,359,452 |
1,575,036 |
377,213 |
2024 (3) |
7 |
67,450 |
69,010 |
- |
2018 |
8 |
50,000 |
114,849 |
102,172 |
2019 |
8 |
12,735 |
25,950 |
23,034 |
2020 |
8 |
28,556 |
50,881 |
45,232 |
2021 |
8 |
1,236 |
1,933 |
1,776 |
2023 |
8 |
1,706,846 |
2,087,680 |
1,799,480 |
2024 (3) |
8 |
136,695 |
148,031 |
5,801 |
2025 (3) |
8 |
192,838 |
197,355 |
- |
2021 |
9 |
7,000 |
12,212 |
10,584 |
2024 |
9 |
4,924 |
6,016 |
5,184 |
2025 (3) |
9 |
400,944 |
431,567 |
19,465 |
2021 |
10 |
19,200 |
38,134 |
34,250 |
2022 |
10 |
54,143 |
93,543 |
84,349 |
2023 |
10 |
688,064 |
1,023,933 |
950,631 |
2025 |
10 |
284,137 |
355,206 |
306,981 |
2026 (3) |
10 |
361,196 |
406,109 |
114,288 |
2027 (3) |
10 |
34,358 |
34,952 |
- |
2026 |
11 |
3,400 |
3,881 |
3,594 |
2027 (3) |
11 |
47,046 |
50,169 |
- |
Perpetual |
- |
5,000,000 |
5,207,121 |
5,221,380 |
CDB pegged to loans: |
|
|
||
2016 (1) |
1 |
- |
- |
599 |
Subtotal in Brazil |
|
|
39,871,651 |
37,868,985 |
Overseas: |
|
|
|
|
2019 |
10 |
1,333,575 |
2,377,191 |
2,670,176 |
2021 |
11 |
2,766,650 |
5,119,784 |
5,745,627 |
2022 |
10 |
1,886,720 |
3,493,159 |
3,922,431 |
Issuance costs on funding |
|
|
(16,157) |
(23,667) |
Subtotal overseas |
|
10,973,977 |
12,314,567 | |
Total (4) (5) |
|
|
50,845,628 |
50,183,552 |
(1) Subordinated debt transactions that matured in 2016;
(2) Subordinated debt transactions that matured in 2017;
(3) New issues of financial letters, referring to subordinate debts were recognized under the heading “Eligible Debt Capital Instruments”;
(4) It includes the amount of R$15,800,022 thousand, referring to subordinate debts recognized in “Eligible Debt Capital Instruments”; and
(5) The information on results are presented on Note 16d, cost for market funding and inflation and interest adjustments of technical provisions for insurance, pension plans and capitalization bonds.
Bradesco 149
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
20) OTHER LIABILITIES
a) Tax and social security
|
On March 31 - R$ thousand | |
2017 |
2016 | |
Provision for deferred income tax (Note 34f) |
3,878,233 |
3,533,713 |
Taxes and contributions on profit payable |
2,233,276 |
4,184,378 |
Taxes and contributions payable |
1,258,758 |
1,531,358 |
Total |
7,370,267 |
9,249,449 |
b) Sundry
|
On March 31 - R$ thousand | |
2017 |
2016 | |
Credit card operations |
22,379,118 |
18,483,031 |
Civil and labor provisions (Note 18b IV) (1) |
18,336,363 |
15,529,092 |
Loan assignment obligations |
8,202,522 |
7,621,089 |
Provision for payments |
7,239,581 |
5,140,721 |
Sundry creditors |
5,981,920 |
4,797,679 |
Liabilities for acquisition of assets and rights |
1,411,411 |
765,756 |
Obligations by quotas of investment funds |
602,143 |
787,811 |
Other (2) |
3,188,252 |
3,017,187 |
Total |
67,341,310 |
56,142,366 |
(1) According to Bacen Circular Letter No. 3,782/16, “Provisions for tax risks” were reclassified from “Other liabilities - Tax and social security” to “Other liabilities - Sundry"; and
(2) As of March 31, 2017, it includes a specific provision for financial guarantees provided, pursuant to Resolution No. 4,512/16 (Note 10h).
c) Financial guarantees
Financial guarantees provided are contracts requiring the Organization to make specific payments to the holder of the financial guarantee for a loss it will incur when a specific debtor fails to make the payment under the terms of the debt instrument. The provision for financial guarantees provided is formed based on the best estimate of the non-recoverable amount of the guarantee, if such disbursement is likely. The provisioning parameters are established based on the internal credit risk management models. In case of retail operations, these models use historical information, while in wholesale operations, in addition to historical information, we adopted simulation processes to capture unobserved events. Any increase in liabilities related to financial guarantees is recognized in the statement of income under “Other operating income/expenses”.
The amounts guaranteed as of March 31, 2017 were as follows: (i) R$ 692,758 thousand, referring to guarantees related to international trade of goods, with a provision of R$ 1,552 thousand; (ii) R$ 2,038,700 thousand, referring to guarantees related to bidding, auctions, service rendering or execution of works, with a provision of R$ 4,783 thousand; (iii) R$ 765,563 thousand, referring to guarantees related to the supply of goods, with a provision of R$ 50,288 thousand; (iv) R$ 31,345,622 thousand, referring to sureties or guarantees in judicial and administrative proceedings of tax nature, with a provision of R$ 156,113 thousand; and (v) R$ 41,108,094 thousand, referring to other bank guarantees, with a provision of R$ 382,611 thousand (Note 20b).
150 Economic and Financial Analysis Report – March 2017
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
21) INSURANCE, PENSION PLANS AND CAPITALIZATION BONDS
a) Technical provisions by account
|
On March 31 - R$ thousand | |||||||
Insurance (1) |
Life and pension plans (2) |
Capitalization bonds |
Total | |||||
2017 |
2016 |
2017 |
2016 |
2017 |
2016 |
2017 |
2016 | |
Current and long-term liabilities |
|
|
|
|
|
|
|
|
Mathematical reserve for unvested benefits |
923,274 |
866,645 |
190,595,683 |
148,303,708 |
- |
- |
191,518,957 |
149,170,353 |
Mathematical reserve for vested benefits |
219,715 |
192,709 |
9,120,975 |
8,002,247 |
- |
- |
9,340,690 |
8,194,956 |
Mathematical reserve for capitalization bonds |
- |
- |
- |
- |
6,403,767 |
5,965,026 |
6,403,767 |
5,965,026 |
Reserve for claims incurred but not reported (IBNR) |
2,960,356 |
2,609,201 |
1,279,671 |
1,079,499 |
- |
- |
4,240,027 |
3,688,700 |
Unearned premium reserve |
4,167,185 |
4,108,886 |
544,118 |
358,203 |
- |
- |
4,711,303 |
4,467,089 |
Complementary reserve for coverage |
- |
- |
899,117 |
961,710 |
- |
- |
899,117 |
961,710 |
Reserve for unsettled claims |
4,623,457 |
4,425,016 |
1,649,506 |
1,475,646 |
- |
- |
6,272,963 |
5,900,662 |
Reserve for financial surplus |
- |
- |
533,169 |
531,032 |
- |
- |
533,169 |
531,032 |
Reserve for draws and redemptions |
- |
- |
- |
- |
923,405 |
765,204 |
923,405 |
765,204 |
Other reserves |
2,055,115 |
1,371,280 |
2,430,167 |
1,866,691 |
103,864 |
90,225 |
4,589,146 |
3,328,196 |
Total reserves |
14,949,102 |
13,573,737 |
207,052,406 |
162,578,736 |
7,431,036 |
6,820,455 |
229,432,544 |
182,972,928 |
Bradesco 151
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
b) Guarantees for technical provisions
|
On March 31 - R$ thousand | |||||||
Insurance |
Life and pension plans |
Capitalization bonds |
Total | |||||
2017 |
2016 |
2017 |
2016 |
2017 |
2016 |
2017 |
2016 | |
Total technical provisions |
14,949,102 |
13,573,737 |
207,052,406 |
162,578,736 |
7,431,036 |
6,820,455 |
229,432,544 |
182,972,928 |
(-) Commercialization surcharge – extended warranty |
(207,653) |
(259,715) |
- |
- |
- |
- |
(207,653) |
(259,715) |
(-) Portion corresponding to contracted reinsurance |
(831,490) |
(985,211) |
(38,771) |
(28,599) |
- |
- |
(870,261) |
(1,013,810) |
(-) Deposits retained at IRB and court deposits |
- |
(2,318) |
- |
- |
- |
- |
- |
(2,318) |
(-) Receivables |
(963,629) |
(880,766) |
- |
- |
- |
- |
(963,629) |
(880,766) |
(-) Unearned premium reserve – Health Insurance (3) |
(1,190,172) |
(1,112,112) |
- |
- |
- |
- |
(1,190,172) |
(1,112,112) |
(-) Reserves from DPVAT agreements |
(498,662) |
(383,289) |
- |
- |
- |
- |
(498,662) |
(383,289) |
To be insured |
11,257,496 |
9,950,326 |
207,013,635 |
162,550,137 |
7,431,036 |
6,820,455 |
225,702,167 |
179,320,918 |
|
|
|
|
|
|
|
| |
Investment fund quotas (VGBL and PGBL) |
- |
- |
174,002,444 |
133,015,815 |
- |
- |
174,002,444 |
133,015,815 |
Investment fund quotas (excluding VGBL and PGBL) |
7,130,019 |
6,476,488 |
24,620,629 |
19,805,820 |
2,568,345 |
1,356,959 |
34,318,993 |
27,639,267 |
Government securities |
5,827,030 |
5,473,658 |
16,087,059 |
14,650,874 |
5,731,106 |
5,848,249 |
27,645,195 |
25,972,781 |
Shares |
2,378 |
2,267 |
1,623,330 |
1,265,740 |
- |
- |
1,625,708 |
1,268,007 |
Private securities |
108,078 |
110,562 |
161,595 |
163,527 |
39,707 |
43,804 |
309,380 |
317,893 |
Total technical provision guarantees |
13,067,505 |
12,062,975 |
216,495,057 |
168,901,776 |
8,339,158 |
7,249,012 |
237,901,720 |
188,213,763 |
(1) “Other reserves” - Insurance primarily refers to technical provisions of the “personal health” portfolio;
(2) “Other reserves” - Life and Pension Plan mainly includes the “Reserve for redemption and other amounts to be settled”, “Reserve for related expenses”; and
(3) Deduction set forth in Article 4 of ANS Normative Resolution No. 392/15.
152 Economic and Financial Analysis Report – March 2017
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
c) Insurance, pension plan contribution and capitalization bond retained premiums
|
Accrued on March 31 - R$ thousand | |
2017 |
2016 | |
Written premiums |
8,982,595 |
8,136,853 |
Pension plan contributions (including VGBL) |
7,602,184 |
5,785,569 |
Capitalization bond income |
1,446,268 |
1,343,005 |
Granted coinsurance premiums |
(14,770) |
(20,500) |
Refunded premiums |
(68,575) |
(59,339) |
Net written premiums |
17,947,702 |
15,185,588 |
Reinsurance premiums paid |
(53,150) |
(73,497) |
Insurance, pension plan and capitalization bond retained premiums |
17,894,552 |
15,112,091 |
22) NON-CONTROLLING INTERESTS IN SUBSIDIARIES
|
On March 31 - R$ thousand | |
2017 |
2016 | |
Banco Bradesco BBI S.A. |
16,670 |
14,216 |
Other (1) |
470,411 |
407,499 |
Total |
487,081 |
421,715 |
(1) Primarily relates to the non-controlling interest in the subsidiary “Odontoprev”.
23) SHAREHOLDERS’ EQUITY (PARENT COMPANY)
a) Capital stock in number of shares
Fully subscribed and paid-in capital stock comprises non-par, registered, book-entry shares.
|
On March 31 | |
2017 (1) |
2016 | |
Common shares |
3,054,481,112 |
2,776,801,011 |
Preferred shares |
3,054,480,793 |
2,776,800,721 |
Subtotal |
6,108,961,905 |
5,553,601,732 |
Treasury (common shares) |
(5,032,550) |
(4,575,045) |
Treasury (preferred shares) |
(18,855,747) |
(17,141,588) |
Total outstanding shares |
6,085,073,608 |
5,531,885,099 |
(1) Includes effect of bonus of shares of 10%.
b) Transactions of capital stock involving quantities of shares
|
Common |
Preferred |
Total |
Number of outstanding shares as at December 31, 2016 |
2,772,225,966 |
2,759,659,133 |
5,531,885,099 |
Increase of capital stock with issuing of shares – bonus of 10% (1) |
277,680,101 |
277,680,072 |
555,360,173 |
Increase of shares in treasury – bonus of 10% |
(457,505) |
(1,714,159) |
(2,171,664) |
Number of outstanding shares as at March 31, 2017 |
3,049,448,562 |
3,035,625,046 |
6,085,073,608 |
(1) It will benefit the shareholders registered in the records of Bradesco on April 28, 2017.
In the Extraordinary General Meeting of March 10, 2017, the approval was proposed by the Board of Directors to increase the capital stock by R$8,000,000 thousand, increasing it from R$51,100,000 thousand to R$59,100,000 thousand, with a bonus in shares, through the capitalization of part of the balance of the account “Profit Reserves - Statutory Reserve”, in compliance with the provisions in Article 169 of Law No. 6,404/76, by issuing 555,360,173 new nominative-book entry shares, with no nominal value, whereby 277,680,101 are common and 277,680,072 are preferred shares, attributed free-of-charge to the shareholders as bonus, to the ratio of 1 new share for every 10 shares of the same type that they own on the base date.
Bradesco 153
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
c) Interest on shareholders’ equity/dividends
Bradesco’s capital remuneration policy aims to distribute interest on shareholders’ equity at the maximum amount calculated under current legislation, and this is included, net of Withholding Income Tax (IRRF), in the calculation for mandatory dividends for the year under the Company’s Bylaws.
Interest on shareholders’ equity for the period ended March 31, 2017 is calculated as follows:
|
R$ thousand |
% (1) |
Net income for the period |
4,070,687 |
|
(-) Legal reserve |
203,534 |
|
Adjusted calculation basis |
3,867,153 |
|
Monthly, intermediaries and supplementary interest on shareholders’ equity (gross), paid and/or provisioned |
1,844,886 |
|
Withholding income tax on interest on shareholders' equity |
(276,733) |
|
Interest on shareholders' equity (net) accumulated in 2017 |
1,568,153 |
40.55 |
Interest on shareholders' equity (net) accumulated in 2016 |
1,233,332 |
31.50 |
(1) Percentage of interest on shareholders’ equity after adjustments.
Interest on shareholders’ equity were paid or recognized in provisions, as follows:
Description |
R$ thousand | ||||
Per share (gross) |
Gross amount paid/ recognized in provision |
Withholding Income Tax (IRRF) (15%) |
Net amount paid/ recognized in provision | ||
Common shares |
Preferred shares | ||||
Monthly interest on shareholders’ equity paid |
0.051749 |
0.056924 |
273,240 |
40,986 |
232,254 |
Supplementary interest paid on own capital |
0.223062 |
0.245369 |
1,177,739 |
176,661 |
1,001,078 |
Total accrued on March 31, 2016 |
0.274811 |
0.302293 |
1,450,979 |
217,647 |
1,233,332 |
|
|
|
|
|
|
Monthly interest on shareholders’ equity paid |
0.051749 |
0.056924 |
300,551 |
45,083 |
255,468 |
Supplementary interest on shareholders’ equity provisioned |
0.265905 |
0.292495 |
1,544,335 |
231,650 |
1,312,685 |
Total accrued on March 31, 2017 |
0.317654 |
0.349419 |
1,844,886 |
276,733 |
1,568,153 |
d) Treasury shares
A total of 5,032,550 common shares and 18,855,747 preferred shares, with the share bonus effect of 10%, had been acquired, totaling R$440,514 thousand until March 31, 2017, and remain in treasury. The minimum, average and maximum cost per common share is R$19.34962, R$24.55863 and R$27.14350, and per preferred share is R$19.37456, R$26.98306 and R$33.12855, respectively. The fair value was R$32.05 per common share and R$32.38 per preferred share on March 31, 2017.
154 Economic and Financial Analysis Report – March 2017
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
24) FEE AND COMMISSION INCOME
|
Accrued on March 31 - R$ thousand | |
2017 |
2016 | |
Credit card income |
1,647,921 |
1,457,213 |
Checking account |
1,599,786 |
1,362,939 |
Loans |
730,995 |
655,517 |
Collections |
478,303 |
399,448 |
Consortium management |
369,496 |
277,756 |
Asset management |
341,717 |
234,038 |
Custody and brokerage services |
184,627 |
135,958 |
Underwriting/ Financial Advisory Services |
180,260 |
162,328 |
Payments |
107,939 |
96,770 |
Other |
147,848 |
130,850 |
Total |
5,788,892 |
4,912,817 |
25) PAYROLL AND RELATED BENEFITS
|
Accrued on March 31 - R$ thousand | |
2017 |
2016 | |
Salaries |
2,177,118 |
1,668,606 |
Benefits |
1,097,214 |
788,425 |
Social security charges |
793,735 |
595,631 |
Employee profit sharing |
374,095 |
356,734 |
Provision for labor claims |
163,673 |
157,205 |
Training |
30,051 |
16,534 |
Total |
4,635,886 |
3,583,135 |
26) OTHER ADMINISTRATIVE EXPENSES
|
Accrued on March 31 - R$ thousand | |
2017 |
2016 | |
Outsourced services |
1,225,014 |
1,048,819 |
Depreciation and amortization |
653,748 |
536,592 |
Data processing |
493,609 |
337,840 |
Communication |
434,663 |
372,182 |
Rental |
287,286 |
223,577 |
Asset maintenance |
269,760 |
206,717 |
Financial system services |
259,489 |
235,479 |
Security and surveillance |
209,986 |
165,024 |
Transport |
185,591 |
163,758 |
Advertising and marketing |
140,453 |
191,097 |
Water, electricity and gas |
112,475 |
101,379 |
Supplies |
71,952 |
70,551 |
Travel |
49,288 |
25,621 |
Other |
252,218 |
225,246 |
Total |
4,645,532 |
3,903,882 |
Bradesco 155
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
27) TAX EXPENSES
|
Accrued on March 31 - R$ thousand | |
2017 |
2016 | |
Contribution for Social Security Financing (COFINS) |
1,123,355 |
1,214,791 |
Social Integration Program (PIS) contribution |
185,013 |
199,494 |
Tax on Services (ISSQN) |
168,373 |
145,331 |
Municipal Real Estate Tax (IPTU) expenses |
61,260 |
47,167 |
Other |
112,877 |
98,446 |
Total |
1,650,878 |
1,705,229 |
28) OTHER OPERATING INCOME
|
Accrued on March 31 - R$ thousand | |
2017 |
2016 | |
Other interest income |
506,132 |
619,063 |
Reversal of other operating provisions (1) |
3,453,437 |
245,999 |
Revenues from recovery of charges and expenses |
95,189 |
44,103 |
Gains on sale of goods |
662 |
1,783 |
Other |
547,849 |
536,076 |
Total |
4,603,269 |
1,447,024 |
(1) In the first quarter of 2017, it includes: (i) reversal of generic provision for guarantees provided, encompassing sureties, guarantees, credit letters, and standby letter of credit, pursuant to Resolution No. 4,512/16 (Note 10h); and (ii) reversals of: (a) provision for tax risks regarding the PIS process, to offset overpaid amounts; and (b) provision for tax risks related to IRPJ/CSLL on credit losses (Note 18b V).
29) OTHER OPERATING EXPENSES
|
Accrued on March 31 - R$ thousand | |
2017 |
2016 | |
Other finance costs |
1,417,081 |
1,236,218 |
Sundry losses |
428,338 |
422,716 |
Discount granted |
355,926 |
341,232 |
Commissions on loans and financing |
253,436 |
287,331 |
Intangible assets amortization |
249,941 |
228,517 |
Goodwill amortization (Note 15a) |
586,206 |
32,530 |
Other (1) |
1,833,126 |
1,247,853 |
Total |
5,124,054 |
3,796,397 |
(1) In the 1st quarter of 2017, it includes a specific provision for guarantees provided, encompassing sureties, guarantees and credit letters, pursuant to Resolution No. 4,512/16.
30) NON-OPERATING INCOME (LOSS)
|
Accrued on March 31 - R$ thousand | |
2017 |
2016 | |
Gain/loss on sale and write-off of assets and investments (1) |
(116,070) |
98,908 |
Recording/reversal of non-operating provisions (2) |
(46,238) |
(59,714) |
Other |
29,382 |
56,498 |
Total |
(132,926) |
95,692 |
(1) In the 1st quarter of 2016, it includes the positive result in divestiture of the shares of Banco CBSS S.A.; and
(2) Represented mainly by an allowance for losses on non-use assets (BNDU).
156 Economic and Financial Analysis Report – March 2017
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
31) RELATED-PARTY TRANSACTIONS (DIRECT AND INDIRECT)
a) Related party transactions (direct and indirect) are carried out under conditions and at rates consistent with those entered into with third parties, when applicable, and effective on the dates of the operations. The transactions are as follows:
|
On March 31 - R$ thousand | |||||||
Controllers (1) |
Joint control and associated companies (2) |
Key management personnel (3) |
Total | |||||
2017 |
2016 |
2017 |
2016 |
2017 |
2016 |
2017 |
2016 | |
Assets |
|
|
|
|
|
|
|
|
Interbank investments |
- |
- |
564,496 |
386,106 |
- |
- |
564,496 |
386,106 |
Receivable from associated companies |
- |
- |
2,292 |
2,429 |
- |
- |
2,292 |
2,429 |
Other assets |
- |
- |
5,764 |
7,040 |
- |
- |
5,764 |
7,040 |
Liabilities |
|
|
|
|
|
|
|
|
Demand deposits/Savings accounts |
26 |
45 |
5,670 |
5,396 |
15,811 |
14,651 |
21,507 |
20,092 |
Time deposits |
1,379,643 |
106,015 |
45,143 |
42,393 |
146,635 |
86,522 |
1,571,421 |
234,930 |
Securities sold under agreements to repurchase |
735,234 |
1,574,878 |
414,772 |
1,477,833 |
14,613 |
23,701 |
1,164,619 |
3,076,412 |
Securities issued |
5,966,822 |
5,412,063 |
- |
- |
866,208 |
665,203 |
6,833,030 |
6,077,266 |
Derivative financial instruments |
27,540 |
- |
- |
- |
- |
- |
27,540 |
- |
Interest on own capital and dividends payable |
591,351 |
455,889 |
- |
- |
- |
- |
591,351 |
455,889 |
Other liabilities |
- |
- |
8,759 |
11,064 |
- |
- |
8,759 |
11,064 |
|
Accrued on March 31 - R$ thousand | |||||||
Controllers (1) |
Joint control and associated companies (2) |
Key management personnel (3) |
Total | |||||
2017 |
2016 |
2017 |
2016 |
2017 |
2016 |
2017 |
2016 | |
Revenue from financial intermediation |
- |
- |
16,118 |
12,742 |
- |
- |
16,118 |
12,742 |
Financial intermediation expenses |
(254,062) |
(250,853) |
(13,582) |
(24,175) |
(26,455) |
(22,912) |
(294,099) |
(297,940) |
Income from services provided |
- |
- |
100,383 |
81,514 |
- |
- |
100,383 |
81,514 |
Expenses in operations with derivatives |
(6,859) |
- |
- |
- |
- |
- |
(6,859) |
- |
Other expenses net of other operating revenues |
(640) |
(598) |
(56,413) |
(62,417) |
- |
- |
(57,053) |
(63,015) |
(1) Cidade de Deus Cia. Cial. de Participações, Fundação Bradesco, NCF Participações S.A., Titanium Holdings S.A., BBD Participações S.A. and Nova Cidade de Deus Participações S.A.;
(2) Companies listed in Note 2; and
(3) Members of the Board of Directors and the Board of Executive Officers.
Bradesco 157
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
b) Compensation for Key Management Personnel
Each year, the Annual Shareholders’ Meeting approves:
· The annual total amount of Management compensation, set forth at the Board of Directors Meetings, to be paid to board members and members of the Board of Executive Officers, as determined by the Company’s Bylaws; and
· The amount allocated to finance Management pension plans, within the Employee and Management pension plan of the Bradesco Organization.
For 2017, the maximum amount of R$466,400 thousand was set for Management compensation and R$486,400 thousand to finance defined contribution pension plans.
The current policy on Management compensation sets forth that 50% of net variable compensation, if any, must be allocated to the acquisition of preferred shares of Bradesco, which vest in three equal, annual and successive installments, the first of which is in the year following the payment date. This procedure complies with Resolution No. 3,921/10, which sets forth a management compensation policy for financial institutions.
Short-term Management benefits
|
Accrued on March 31 - R$ thousand | |
2017 |
2016 | |
Salaries |
110,370 |
109,615 |
Total |
110,370 |
109,615 |
Post-employment benefits
|
Accrued on March 31 - R$ thousand | |
2017 |
2016 | |
Defined contribution supplementary pension plans |
101,339 |
54,306 |
Total |
101,339 |
54,306 |
Bradesco does not offer its Key Management Personnel long-term benefits related to severance pay or share-based compensation, pursuant to CPC 10 – Share-Based Payment, approved by Resolution No. 3,989/11.
Shareholding
Together, members of the Board of Directors and Board of Executive Officers had the following shareholding in Bradesco:
|
On March 31 | |
2017 |
2016 | |
● Common shares |
0.68% |
0.60% |
● Preferred shares |
1.13% |
1.08% |
● Total shares (1) |
0.91% |
0.84% |
(1) On March 31, 2017, direct and indirect shareholding of the members of Bradesco’s Board of Directors and Board of Executive Officers amounted to 3.13% of common shares, 1.17% of preferred shares and 2.15% of all shares.
158 Economic and Financial Analysis Report – March 2017
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
32) FINANCIAL INSTRUMENTS
Below is the statement of financial position by currency
|
On March 31 - R$ thousand | |||
2017 |
2016 | |||
Balance |
Local |
Foreign |
Foreign | |
Assets |
|
|
| |
Current and long-term assets |
1,159,038,632 |
1,089,409,138 |
69,629,494 |
88,926,130 |
Funds available |
11,831,164 |
9,603,838 |
2,227,326 |
10,544,002 |
Interbank investments |
188,007,983 |
186,182,329 |
1,825,654 |
3,343,396 |
Securities and derivative financial instruments |
448,510,341 |
434,129,391 |
14,380,950 |
16,905,627 |
Interbank and interdepartmental accounts |
63,595,452 |
63,595,452 |
- |
- |
Loan and leasing |
302,456,158 |
268,373,871 |
34,082,287 |
42,442,850 |
Other receivables and assets |
144,637,534 |
127,524,257 |
17,113,277 |
15,690,255 |
Permanent assets |
30,342,236 |
30,303,784 |
38,452 |
63,579 |
Investments |
7,302,621 |
7,302,621 |
- |
15,040 |
Premises and equipment and leased assets |
7,567,273 |
7,543,120 |
24,153 |
24,333 |
Intangible assets |
15,472,342 |
15,458,043 |
14,299 |
24,206 |
Total |
1,189,380,868 |
1,119,712,922 |
69,667,946 |
88,989,709 |
|
|
|
|
|
Liabilities |
|
|
| |
Current and long-term liabilities |
1,083,909,165 |
1,010,868,006 |
73,041,159 |
94,269,154 |
Deposits |
235,455,338 |
216,161,544 |
19,293,794 |
24,688,850 |
Securities sold under agreements to repurchase |
254,779,526 |
246,710,540 |
8,068,986 |
3,508,499 |
Funds from issuance of securities |
140,302,853 |
137,336,254 |
2,966,599 |
8,921,162 |
Interbank and interdepartmental accounts |
5,754,621 |
2,647,699 |
3,106,922 |
3,022,089 |
Borrowing and on-lending |
56,417,438 |
34,608,867 |
21,808,571 |
27,587,314 |
Derivative financial instruments |
15,705,212 |
15,389,328 |
315,884 |
895,636 |
Technical provision for insurance, pension plans and capitalization bonds |
229,432,544 |
229,431,855 |
689 |
797 |
Other liabilities: |
|
|
|
|
- Subordinated debts |
50,845,628 |
39,871,651 |
10,973,977 |
12,314,567 |
- Others |
95,216,005 |
88,710,268 |
6,505,737 |
13,330,240 |
Deferred income |
426,172 |
426,172 |
- |
- |
Non-controlling interests in subsidiaries |
487,081 |
487,081 |
- |
- |
Shareholders’ equity |
104,558,450 |
104,558,450 |
- |
- |
Total |
1,189,380,868 |
1,116,339,709 |
73,041,159 |
94,269,154 |
|
|
| ||
Net position of assets and liabilities |
|
|
(3,373,213) |
(5,279,445) |
Net position of derivatives (2) |
|
(44,306,742) |
(45,753,512) | |
Other net off-balance-sheet accounts (3) |
|
|
380,378 |
103,956 |
Net exchange position (liability) |
|
|
(47,299,577) |
(50,929,001) |
(1) Amounts originally recognized and/or indexed mainly in USD;
(2) Excluding operations maturing in D+1, to be settled at the rate on the last day of the month; and
(3) Other commitments recognized in off-balance-sheet accounts.
Bradesco 159
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
VaR Internal Model – Trading Portfolio
The Trading Portfolio is composed of all the operations made with financial instruments, including derivatives, retained for negotiation or destined to hedge other instruments of the portfolio itself, and that are not subject to the limitation of their negotiability. The operations detained for negotiation are those destined for resale, to obtain benefits based on the variation of effective or expected prices, or for arbitrage.
Below is the 1-day VaR:
Risk factors |
On March 31 - R$ thousand | |
2017 |
2016 | |
Fixed rates |
12,563 |
13,145 |
IGPM/IPCA |
976 |
1,114 |
Exchange coupon |
1,007 |
924 |
Foreign currency |
977 |
1,874 |
Variable income |
572 |
- |
Sovereign/Eurobonds and Treasuries |
4,072 |
3,947 |
Other |
2 |
7 |
Correlation/diversification effect |
(4,908) |
(4,807) |
VaR (Value at Risk) |
15,261 |
16,204 |
Amounts net of tax.
Sensitivity analysis
The Trading Portfolio is also monitored through daily sensitivity analyses that measure the effect of market movements of market and price curves on our positions. Furthermore, a sensitivity analysis of the Organization’s financial exposures (Trading and Banking Portfolio) is performed on a quarterly basis, in compliance with CVM Rule No. 475/08.
Sensitivity analyses were carried out based on scenarios prepared at the respective dates, always considering market data at the time and scenarios that would adversely affect our positions, according to the examples below:
Scenario 1: Based on market information (B3, Anbima, etc.), stresses were applied for 1 basis point on the interest rate and 1.0% variation on prices. For example: for a Real/US dollar exchange rate of R$3.14 a scenario of R$3.17 was used, while for a 1-year fixed interest rate of 9.66%, a 9.67% scenario was applied;
Scenario 2: 25.0% stresses were determined based on market information. For example: for a Real/US dollar exchange rate of R$3.14 a scenario of R$3.92 was used, while for a 1-year fixed interest rate of 9.66%, a 12.08% scenario was applied. The scenarios for other risk factors also accounted for 25.0% stresses in the respective curves or prices; and
Scenario 3: 50.0% stresses were determined based on market information. For example: for a Real/US dollar exchange rate of R$3.14 a scenario of R$4.70 was used, while for a 1-year fixed interest rate of 9.66%, a 14.50% scenario was applied. The scenarios for other risk factors also account for 50.0% stresses in the respective curves or prices.
The results presented reveal the impacts for each scenario in a static position of the portfolio. The dynamism of the market and portfolios means that these positions change continuously and do not necessarily reflect the position demonstrated here. In addition, the Organization has a continuous market risk management process, which is always searching for ways to mitigate the associated risks, according to the strategy determined by Top Management. Therefore, where there are indicators of deterioration in certain positions, proactive measures are taken to minimize any potential negative impact and maximize the risk/return ratio for the Organization.
160 Economic and Financial Analysis Report – March 2017
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
Sensitivity Analysis – Trading Portfolio
|
On March 31 - R$ thousand | ||||||
Trading Portfolio (1) | |||||||
2017 |
2016 | ||||||
Scenarios |
Scenarios | ||||||
1 |
2 |
3 |
1 |
2 |
3 | ||
Interest rate in Reais |
Exposure subject to variations in fixed interest rates and interest rate coupons |
(801) |
(190,706) |
(374,174) |
(536) |
(179,590) |
(349,928) |
Price indexes |
Exposure subject to variations in price index coupon rates |
(52) |
(6,637) |
(12,743) |
(42) |
(6,317) |
(11,955) |
Exchange coupon |
Exposure subject to variations in foreign currency coupon rates |
(14) |
(749) |
(1,467) |
(18) |
(1,578) |
(3,116) |
Foreign currency |
Exposure subject to exchange rate variations |
(460) |
(11,489) |
(22,979) |
(661) |
(16,529) |
(33,059) |
Equities |
Exposure subject to variation in stock prices |
(167) |
(6,566) |
(4,572) |
- |
- |
- |
Sovereign/Eurobonds and Treasuries |
Exposure subject to variations in the interest rate of securities traded on the international market |
(284) |
(12,261) |
(24,432) |
(122) |
(4,051) |
(8,085) |
Other |
Exposure not classified in other definitions |
- |
(30) |
(60) |
- |
- |
(1) |
Total excluding correlation of risk factors |
(1,778) |
(228,438) |
(440,427) |
(1,379) |
(208,065) |
(406,144) | |
Total including correlation of risk factors |
(1,010) |
(197,939) |
(390,333) |
(652) |
(172,109) |
(335,149) |
(1) Amounts net of tax.
Bradesco 161
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
Presented below are the impacts of the financial exposures also considering the Banking Portfolio (composed of operations not classified in the Trading Portfolio, originating from other business of the Organization and their respective hedges).
Sensitivity Analysis – Trading and Banking Portfolios
|
On March 31 - R$ thousand | ||||||
Trading and Banking Portfolios (1) | |||||||
2017 |
2016 | ||||||
Scenarios |
Scenarios | ||||||
1 |
2 |
3 |
1 |
2 |
3 | ||
Interest rate in Reais |
Exposure subject to variations in fixed interest rates and interest rate coupons |
(9,861) |
(2,588,771) |
(5,026,570) |
(4,505) |
(1,428,765) |
(2,828,529) |
Price indexes |
Exposure subject to variations in price index coupon rates |
(6,152) |
(714,043) |
(1,288,198) |
(8,901) |
(1,355,405) |
(2,532,483) |
Exchange coupon |
Exposure subject to variations in foreign currency coupon rates |
(533) |
(40,481) |
(78,230) |
(655) |
(86,350) |
(160,283) |
Foreign currency |
Exposure subject to exchange rate variations |
(3,099) |
(77,450) |
(154,900) |
(3,153) |
(78,815) |
(157,629) |
Equities |
Exposure subject to variation in stock prices |
(16,016) |
(398,125) |
(805,384) |
(12,399) |
(309,972) |
(619,945) |
Sovereign/Eurobonds and Treasuries |
Exposure subject to variations in the interest rate of securities traded on the international market |
(1,772) |
(47,070) |
(94,672) |
(1,992) |
(59,991) |
(118,201) |
Other |
Exposure not classified in other definitions |
(16) |
(406) |
(812) |
(851) |
(21,265) |
(42,531) |
Total excluding correlation of risk factors |
(37,449) |
(3,866,346) |
(7,448,766) |
(32,456) |
(3,340,563) |
(6,459,601) | |
Total including correlation of risk factors |
(23,737) |
(3,221,829) |
(6,222,763) |
(19,473) |
(2,693,363) |
(5,211,388) |
(1) Amounts net of tax.
162 Economic and Financial Analysis Report – March 2017
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
The statement of financial position by maturity is as follows:
|
On March 31 - R$ thousand | |||||
1 to 30 days |
31 to 180 days |
181 to 360 days |
More than 360 days |
Maturity not stated |
Total | |
Assets |
|
|
|
|
|
|
Current and long-term assets |
664,542,667 |
94,431,181 |
61,773,175 |
338,291,609 |
- |
1,159,038,632 |
Funds available |
11,831,164 |
- |
- |
- |
- |
11,831,164 |
Interbank investments (1) |
182,906,919 |
3,315,818 |
1,368,228 |
417,018 |
- |
188,007,983 |
Securities and derivative financial instruments (1) (2) |
325,094,032 |
5,244,365 |
2,238,772 |
115,933,172 |
- |
448,510,341 |
Interbank and interdepartmental accounts |
62,736,257 |
66,844 |
- |
792,351 |
- |
63,595,452 |
Loan and leasing |
27,647,015 |
65,624,813 |
46,852,973 |
162,331,357 |
- |
302,456,158 |
Other receivables and assets |
54,327,280 |
20,179,341 |
11,313,202 |
58,817,711 |
- |
144,637,534 |
Permanent assets |
360,258 |
1,795,924 |
2,044,546 |
17,984,556 |
8,156,952 |
30,342,236 |
Investments |
- |
- |
- |
- |
7,302,621 |
7,302,621 |
Premises and equipment |
104,520 |
522,598 |
627,117 |
5,458,707 |
854,331 |
7,567,273 |
Intangible assets |
255,738 |
1,273,326 |
1,417,429 |
12,525,849 |
- |
15,472,342 |
Total in March 31, 2017 |
664,902,925 |
96,227,105 |
63,817,721 |
356,276,165 |
8,156,952 |
1,189,380,868 |
Total in March 31, 2016 |
533,632,053 |
85,888,723 |
56,943,418 |
340,887,574 |
6,622,470 |
1,023,974,238 |
Liabilities |
|
|
|
|
|
|
Current and long-term liabilities |
610,964,461 |
121,801,849 |
84,138,839 |
267,004,016 |
- |
1,083,909,165 |
Deposits (3) |
133,704,439 |
16,489,220 |
8,489,672 |
76,772,007 |
- |
235,455,338 |
Securities sold under agreements to repurchase (1) |
191,534,391 |
28,219,635 |
17,868,381 |
17,157,119 |
- |
254,779,526 |
Funds from issuance of securities |
8,834,992 |
45,087,078 |
36,547,494 |
49,833,289 |
- |
140,302,853 |
Interbank and interdepartmental accounts |
5,754,621 |
- |
- |
- |
- |
5,754,621 |
Borrowing and on-lending |
3,219,387 |
16,285,274 |
10,670,612 |
26,242,165 |
- |
56,417,438 |
Derivative financial instruments |
14,732,454 |
451,346 |
303,459 |
217,953 |
- |
15,705,212 |
Technical provisions for insurance, pension plans and capitalization bonds (3) |
190,518,710 |
6,486,915 |
3,595,213 |
28,831,706 |
- |
229,432,544 |
Other liabilities: |
|
|
|
|||
- Subordinated debts |
290,278 |
7,747,266 |
4,768,172 |
38,039,912 |
- |
50,845,628 |
- Others |
62,375,189 |
1,035,115 |
1,895,836 |
29,909,865 |
- |
95,216,005 |
Deferred income |
426,172 |
- |
- |
- |
- |
426,172 |
Non-controlling interests in subsidiaries |
- |
- |
- |
- |
487,081 |
487,081 |
Shareholders’ equity |
- |
- |
- |
- |
104,558,450 |
104,558,450 |
Total in March 31, 2017 |
611,390,633 |
121,801,849 |
84,138,839 |
267,004,016 |
105,045,531 |
1,189,380,868 |
Total in March 31, 2016 |
497,205,275 |
95,819,544 |
67,736,613 |
269,460,963 |
93,751,843 |
1,023,974,238 |
Net assets accumulated on March 31, 2017 |
53,512,292 |
27,937,548 |
7,616,430 |
96,888,579 |
|
|
Net assets accumulated on March 31, 2016 |
36,426,778 |
26,495,957 |
15,702,762 |
87,129,373 |
|
|
(1) Repurchase agreements are classified according to the maturity of the transactions;
(2) Investments in investment funds are classified as 1 to 30 days; and
(3) Demand and savings deposits and technical provisions for insurance, pension plans and capitalization bonds comprising “VGBL” and “PGBL” products are classified as 1 to 30 days, without considering average historical turnover.
Bradesco 163
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
Below is the Basel Ratio:
Calculation basis - Basel Ratio |
On March 31 - R$ thousand | |
Prudential Conglomerate | ||
2017 |
2016 | |
Tier I capital |
73,122,571 |
76,704,327 |
Common equity |
67,915,450 |
76,704,327 |
Shareholders’ equity |
104,558,450 |
93,330,128 |
Non-controlling interests / Other |
33,639 |
- |
Prudential adjustments (1) |
(36,676,639) |
(16,625,801) |
Additional capital |
5,207,121 |
- |
Tier II capital |
19,797,079 |
23,748,161 |
Subordinated debts (Resolution No. 4,192/13) |
10,146,950 |
7,022,720 |
Subordinated debts (previous to CMN Resolution No. 4,192/13) |
9,650,129 |
16,725,441 |
Reference Equity (a) |
92,919,650 |
100,452,488 |
|
|
|
- Credit risk |
546,209,857 |
543,259,586 |
- Market risk |
13,097,005 |
13,995,855 |
- Operational risk |
48,156,699 |
38,501,528 |
Risk-weighted assets – RWA (b) |
607,463,561 |
595,756,969 |
|
|
|
Basel ratio (a/b) |
15.3% |
16.9% |
Tier I capital |
12.0% |
12.9% |
- Principal capital |
11.2% |
12.9% |
- Additional Capital |
0.8% |
- |
Tier II capital |
3.3% |
4.0% |
(1) As from January 2017, the factor applied to prudential adjustments went from 60% to 80%, according to the timeline for application of deductions of prudential adjustments, defined in Article 11 of Resolution No. 4,192/13;
a) Capital Management
The Basel Index is part of the set of indicators that are monitored and evaluated in the process of Capital Management, and is intended to measure the sufficiency of capital in relation to the exposure to risks. The table above shows the composition of the Reference Equity and of the Risk Weighted Assets, according to the standards of Bacen. During the period, Bradesco has fulfilled all the minimum regulatory requirements.
164 Economic and Financial Analysis Report – March 2017
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
b) Fair value
The book value, net of loss provisions of the principal financial instruments is shown below:
Portfolio |
On March 31 - R$ thousand | |||||
Unrealized gain/(loss) without tax effects | ||||||
Book value |
Fair value |
In income statement |
In shareholders’ equity | |||
2017 |
2017 |
2016 |
2017 |
2016 | ||
Securities and derivative financial instruments (Notes 3e, 3f and 8) |
448,510,341 |
452,095,257 |
5,703,465 |
(4,265,990) |
3,584,916 |
(335,063) |
- Adjustment of available-for-sale securities (Note 8bII) |
|
|
2,118,549 |
(3,930,927) |
- |
- |
- Adjustment of held-to-maturity securities (Note 8c item 4) |
|
|
3,584,916 |
(335,063) |
3,584,916 |
(335,063) |
Loan and leasing (Notes 2, 3g and 10) (1) |
381,367,538 |
376,431,260 |
(4,936,278) |
(6,034,246) |
(4,936,278) |
(6,034,246) |
Investments (Notes 3j and 13) (2) |
7,302,621 |
30,283,040 |
22,980,419 |
23,059,668 |
22,980,419 |
23,059,668 |
Treasury shares (Note 23d) |
440,514 |
701,675 |
- |
- |
261,161 |
106,432 |
Time deposits (Notes 3n and 16a) |
109,966,922 |
109,629,624 |
337,298 |
510,200 |
337,298 |
510,200 |
Funds from issuance of securities (Note 16c) |
140,302,853 |
140,240,648 |
62,205 |
(205,189) |
62,205 |
(205,189) |
Borrowing and on-lending (Notes 17a and 17b) |
56,417,438 |
56,682,745 |
(265,307) |
623,022 |
(265,307) |
623,022 |
Subordinated debts (Note 19) |
50,845,628 |
51,406,000 |
(560,372) |
(590,374) |
(560,372) |
(590,374) |
Unrealized gains excluding tax |
|
|
23,321,430 |
13,097,091 |
21,464,042 |
17,134,450 |
(1) Includes advances on foreign exchange contracts, leases and other receivables with lending characteristics; and
(2) Primarily includes the surplus of interest in subsidiaries, associates and jointly controlled companies (Cielo, Odontoprev and Fleury).
Determination of the fair value of financial instruments:
· Securities and derivative financial instruments, investments, subordinated debts and treasury shares are based on the market price at the reporting date. If no quoted market price is available, amounts are estimated based on the dealer quotations, pricing models, quotation models or quotations for instruments with similar characteristics;
· Fixed rate loans were determined by discounting estimated cash flows, using interest rates applied by the Organization for new contracts with similar features. These rates are consistent with the market at the reporting date; and
· Time deposits, funds from issuance of securities, borrowing and on-lending were calculated by discounting the difference between the cash flows under the contract terms and our prevailing market rates for the same product at the reporting date.
Bradesco 165
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
33) EMPLOYEE BENEFITS
Bradesco and its subsidiaries sponsor a private defined contribution pension for employees and directors, that allows financial resources to be accumulated by participants throughout their careers by means of employee and employer contributions and invested in an Exclusive Investment Fund (FIE). The Plan is managed by Bradesco Vida e Previdência S.A. and BRAM – Bradesco Asset Management S.A. DTVM is responsible for the financial management of the FIEs funds.
The Supplementary Pension Plan counts on contributions from employees and administrators of Bradesco and its subsidiaries equivalent to at least 4% of the salary by employees and, 5% of the salary, plus the percentage allocated to covers of risk benefits (invalidity and death) by the company. Actuarial obligations of the defined contribution plan are fully covered by the plan assets of the corresponding FIE. In addition to the plan, in 2001, participants who chose to migrate from the defined benefit plan are guaranteed a proportional deferred benefit, corresponding to their accumulated rights in that plan. For the active participants, retirees and pensioners of the defined benefit plan, now closed to new members, in extinction, the present value of the actuarial obligations of the plan is completely secured by collateral assets.
Banco Alvorada S.A. (successor from the spin-off of Banco Baneb S.A.) maintains defined contribution and defined benefit retirement plans, through Fundação Baneb de Seguridade Social – Bases (related to the former employees of Baneb).
Bradesco’s sponsors both defined benefit and defined contribution retirement plans, through Caixa de Assistência e Aposentadoria dos Funcionários do Banco do Estado do Maranhão (Capof), to employees originating from Banco BEM S.A.
Bradesco sponsors a defined benefit plan through Caixa de Previdência Privada Bec – Cabec for employees of Banco do Estado do Ceará S.A.
With the acquisition of HSBC Bank Brasil S.A. (current Kirton Bank Brasil S.A.), the open pension plan, which was offered to employees of that institution, in the modality of defined contribution, has been discontinued. From October 2016, the employees transferred can adhere to the Pension Plan offered to the employees of Bradesco.
Kirton Bank Brasil S.A., Kirton Capitalização S.A., Kirton Corretora de Seguros S.A., Kirton Corretora de Títulos e Valores Mobiliários S.A. and Kirton Seguros S.A. sponsor a defined benefit plan called APABA to employees originating from Banco Bamerindus do Brasil S.A., and Kirton Administração de Serviços para Fundos de Pensão Ltda. sponsors to its employees the Kirton Prev Benefits Plan (Plano de Benefícios Kirton Prev)), both managed by MultiBRA – Pension Fund.
Banco Losango S.A., Kirton Bank Brasil S.A. and Credival – Participações, Administração e Assessoria Ltda. sponsor three pension plans for its employees, which are: Losango I Benefits Plan – Basic Part, Losango I – Supplementary Part and PREVMAIS Losango Plan, all managed by MultiBRA – Settlor – Multiple Fund.
Bradesco also took on the obligations of Kirton Bank Brasil S.A. with regard to Life Insurance, Health Insurance Plans, and Retirement Compensation for employees coming from Banco Bamerindus do Brasil S.A.
Bradesco, in its offices abroad, provides pension plans for its employees and administrators, in accordance with the standards established by the local authorities, which allows the accrual of financial resources during the professional career of the participant.
Expenses related to contributions made during the first quarter of 2017 totaled R$ 223,803 thousand (R$ 137,171 thousand in 2016).
In addition to this benefit, Bradesco and its subsidiaries offer other benefits to their employees and administrators, including health insurance, dental care, life and personal accident insurance, and professional training. These expenses, including the aforementioned contributions, totaled R$1,127,265 thousand in the first quarter of 2017 (R$804,959 thousand in 2016).
166 Economic and Financial Analysis Report – March 2017
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
34) INCOME TAX AND SOCIAL CONTRIBUTION
a) Calculation of income tax and social contribution charges
|
Accrued on March 31 - R$ thousand | |
2017 |
2016 | |
Income before income tax and social contribution |
6,923,295 |
10,333,648 |
Total burden of income tax and social contribution at the current rates (1) |
(3,115,483) |
(4,650,142) |
Effect on the tax calculation: |
|
|
Earnings (losses) of affiliates and jointly controlled companies |
192,841 |
182,549 |
Net non-deductible expenses of nontaxable income |
(22,370) |
(22,814) |
Interest on shareholders’ equity (paid and payable) |
830,199 |
652,941 |
Other amounts (2) |
(701,982) |
(2,340,560) |
Income tax and social contribution for the period |
(2,816,795) |
(6,178,026) |
(1) Current rates: (i) 25% for income tax; (ii) 15% for the social contribution to financial and companies treated as such, including the insurance segment, and 20%, from September 2015 to December 2018, in accordance with Law No. 13,169/15; and (iii) of 9% for the other companies (Note 3h); and
(2) Includes, basically: (i) the exchange rate variation of assets and liabilities, derived from investments abroad; (ii) the equalization of the effective rate of social contribution in relation to the rate (45%) shown; and (iii) the deduction incentives.
b) Breakdown of income tax and social contribution in the statement of income
|
Accrued on March 31 - R$ thousand | |
2017 |
2016 | |
Current taxes: |
|
|
Income tax and social contribution payable |
(4,055,415) |
(5,561,631) |
Deferred taxes: |
|
|
Amount recorded/realized in the period on temporary differences |
2,134,850 |
663,850 |
Use of opening balances of: |
|
|
Social contribution loss |
(430,200) |
(742,318) |
Income tax loss |
(528,233) |
(956,005) |
Constitution in the period on: |
|
|
Social contribution loss |
26,485 |
178,667 |
Income tax loss |
35,718 |
239,411 |
Total deferred tax assets |
1,238,620 |
(616,395) |
Income tax and social contribution for the period |
(2,816,795) |
(6,178,026) |
Bradesco 167
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Notes to the Consolidated Financial Statements
c) Deferred income tax and social contribution
|
R$ thousand | |||
Balance on |
Amount recorded |
Amount realized |
Balance on 03/31/2017 | |
Allowance for loan losses |
25,816,235 |
3,301,470 |
1,431,352 |
27,686,353 |
Civil provisions |
2,208,008 |
233,410 |
180,736 |
2,260,682 |
Tax provisions |
3,035,395 |
81,978 |
176,110 |
2,941,263 |
Labor provisions |
2,107,829 |
180,152 |
105,257 |
2,182,724 |
Provision for devaluation of securities and investments |
515,339 |
51,535 |
67,854 |
499,020 |
Provision for devaluation of foreclosed assets |
539,220 |
70,723 |
50,035 |
559,908 |
Adjustment to fair value of trading securities |
4,884,247 |
81,087 |
112,115 |
4,853,219 |
Amortization of goodwill |
481,502 |
13,552 |
5,800 |
489,254 |
Provision for interest on own capital (1) |
- |
689,096 |
- |
689,096 |
Other |
4,464,555 |
1,465,704 |
1,904,598 |
4,025,661 |
Total deductible taxes on temporary differences |
44,052,330 |
6,168,707 |
4,033,857 |
46,187,180 |
Income tax and social contribution losses in Brazil and overseas |
5,595,729 |
62,203 |
958,433 |
4,699,499 |
Subtotal (2) |
49,648,059 |
6,230,910 |
4,992,290 |
50,886,679 |
Adjustment to fair value of available-for-sale securities (2) |
1,307,542 |
49,581 |
837,413 |
519,710 |
Total deferred tax assets (Note 11b) |
50,955,601 |
6,280,491 |
5,829,703 |
51,406,389 |
Deferred tax liabilities (Note 34f) |
3,277,050 |
907,099 |
305,916 |
3,878,233 |
Deferred tax assets, net of deferred tax liabilities |
47,678,551 |
5,373,392 |
5,523,787 |
47,528,156 |
- Percentage of net deferred tax assets |
47.1% |
|
|
51.2% |
- Percentage of net deferred tax assets over total assets |
4.6% |
|
|
4.0% |
(1) Tax credit on interest on shareholders’ equity is calculated up to the tax limit allowed; and
(2) Deferred tax assets from financial companies and similar companies, and insurance companies were calculated considering the increase in the social contribution rate, determined by Law No. 11,727/08 and Law No. 13,169/15 (Note 3h). With regard to the temporary effects produced by the adoption of Law no. 13,169/15, which raised the rate of the social contribution to 20%, the respective tax credits, in September 2015, were calculated based on the expected implementation at the time.
d) Expected realization of deferred tax assets on temporary differences, tax loss and negative basis of social contribution
|
R$ thousand | ||||
Temporary differences |
Income tax and social contribution losses |
Total | |||
Income tax |
Social contribution |
Income tax |
Social contribution | ||
2017 |
5,292,290 |
3,331,312 |
99,794 |
69,252 |
8,792,648 |
2018 |
6,758,502 |
4,923,217 |
304,855 |
438,205 |
12,424,779 |
2019 |
6,743,273 |
4,250,716 |
457,543 |
208,773 |
11,660,305 |
2020 |
5,483,644 |
2,962,405 |
118,365 |
230,455 |
8,794,869 |
2021 |
2,037,592 |
1,221,287 |
1,167,734 |
770,319 |
5,196,932 |
After 2021 |
1,766,375 |
1,416,567 |
288,846 |
545,358 |
4,017,146 |
Total |
28,081,676 |
18,105,504 |
2,437,137 |
2,262,362 |
50,886,679 |
The projected realization of deferred tax assets is an estimate and it is not directly related to the expected accounting income.
On March 31, 2017, the present value of tax credits, calculated based on the average funding rate, net of tax effects, amounts to R$47,626,390 thousand (R$40,620,012 thousand in 2016), of which: R$ 43,357,124 thousand (2016 - R$ 36,637,386 thousand) of temporary differences; R$4,269,266 thousand (R$ 3,872,045 thousand in 2016) to tax losses and negative basis of social contribution and (R$110,581 thousand in 2016) to deferred social contribution, Provisional Measure No. 2,158-35.
168 Economic and Financial Analysis Report – March 2017
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
e) Unrecognized deferred tax assets
On March 31, 2017, deferred tax assets of R$20,672 thousand (R$19,631 thousand in 2016) were not recognized, and will only be registered when they meet the regulatory requirements and/or present prospects of realization according to technical studies and analyses prepared by the Management and in accordance with Bacen regulations.
f) Deferred tax liabilities
|
On March 31 - R$ thousand | |
2017 |
2016 | |
Fair value adjustment to securities and derivative financial instruments |
1,399,384 |
1,048,345 |
Difference in depreciation |
348,870 |
560,938 |
Judicial deposit and others |
2,129,979 |
1,924,430 |
Total |
3,878,233 |
3,533,713 |
The deferred tax liabilities of companies in the financial and insurance sectors were established considering the increased social contribution rate, established by Law No. 11,727/08 and Law No. 13,169/15 (Note 3h).
35) OTHER INFORMATION
a) The Organization manages investment funds and portfolios with net assets which, on March 31, 2017, amounted to R$ 786,139,579 thousand (R$596,439,933 thousand in 2016).
b) Consortium funds
|
On March 31 - R$ thousand | |
2017 |
2016 | |
Monthly estimate of funds receivable from consortium members |
596,419 |
504,804 |
Contributions payable by the group |
29,952,349 |
24,265,997 |
Consortium members - assets to be included |
26,301,008 |
21,804,335 |
Credits available to consortium members |
5,673,320 |
4,648,826 |
|
In units | |
2017 |
2016 | |
Number of groups managed |
3,684 |
3,579 |
Number of active consortium members |
1,375,356 |
1,212,300 |
Number of assets to be included |
642,464 |
575,237 |
c) As part of the convergence process with international accounting standards, the Brazilian Accounting Pronouncements Committee (CPC) issued several accounting pronouncements, as well as their interpretations and guidelines, which are applicable to financial institutions only after approval by CMN. The accounting standards which have been approved by CMN include the following:
· Resolution No. 3,566/08 – Impairment of Assets (CPC 01);
· Resolution No. 3,604/08 – Statement of Cash Flows (CPC 03);
· Resolution No. 3,750/09 – Related Party Disclosures (CPC 05);
· Resolution No. 3,823/09 – Provisions, Contingent Liabilities and Contingent Assets (CPC 25);
· Resolution No. 3,973/11 – Subsequent Event (CPC 24);
· Resolution No. 3,989/11 – Share-based Payment (CPC 10);
· Resolution No. 4,007/11 – Accounting Policies, Changes in Estimates and Error Correction (CPC 23);
· Resolution No. 4,144/12 – Conceptual Framework for Preparing and Presenting Financial Statements; and
· Resolution No. 4,424/15 – Employee Benefits (CPC 33).
Bradesco 169
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
Presently, it is not possible to estimate when the CMN will approve the other CPC pronouncements or if they will be applied prospectively or retrospectively.
CMN Resolution No. 3,786/09 and Circular Letters No. 3,472/09 and No. 3,516/10 establish that financial institutions and other entities authorized by Bacen to operate, which are publicly-held companies or which are required to establish an Audit Committee shall, since December 31, 2010, annually prepare and publish in up to 90 days after the reference date of December 31 their consolidated financial statements, prepared under the International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB). As required by Resolution, on February 24, 2017, Bradesco published its consolidated financial statements for December 31, 2015 and 2016 on its website, in accordance with IFRS.
d) In the first quarter of 2017, seeking to reduce the costs of Financial Institutions regarding compulsory deposit requirements, Bacen simplified its rules, as follows:
Description |
Standard before amendment |
Amended standard |
Demand deposits |
Up to May 5, 2017, the compulsory deposit collection shall begin on the Wednesday of the week following the end of the calculation period and end on the Tuesday of the second subsequent week (period of 10 business days). |
As of May 8, 2017, the compulsory deposit collection period will begin on Monday of the second week following the end of the calculation period, and will end on the Friday of the following week (period of 10 business days). |
Time Deposits
|
Up to May 5, 2017, compulsory collection begins on the Friday of the week following the end of the calculation period, or on the next business day, if Friday is not a business day, and ends on the following Thursday. |
As of May 8, 2017, the compulsory deposit collection period will begin on Monday of the second week following the end of the calculation period, and will end on the Friday of the following week. |
Up to May 5, 2017, the additional rate for compulsory deposit collection on time deposits is 11%. The normal rate for compulsory deposit collection on time deposits is 25%. |
As of May 8, 2017, the rate for compulsory deposit collection on time deposits will be unified to 36%, i.e., there will be no additional rate. | |
Up to May 5, 2017, the percentages deducted from the calculation basis are as follows: - R$ 3 billion for financial institutions with RE lower than R$ 2 billion; - R$ 2 billion for financial institutions with RE between R$ 2 billion and R$ 5 billion, and - R$ 1 billion for financial institutions with RE between R$ 5 billion and R$ 7 billion. |
As of May 8, 2017, the percentages deducted from the calculation basis are as follows: - R$ 3 billion for financial institutions with RE lower than R$ 3 billion; - R$ 2 billion for financial institutions with RE between R$ 3 billion and R$ 10 billion, and - R$ 1 billion for financial institutions with RE between R$ 10 billion and R$ 15 billion. | |
Deduction for Time Deposits |
Up to February 2, 2017, compliance was assured with deduction of financial bills; acquisitions of assignments, vehicles and motorcycles. |
The “time base value”* was established as a reduction as of February 3, 2017, as follows: I - 100% of the “time base value” up to the period beginning on 12.29.2017; II - 50% of the “time base value” in the period from January 1, 2018 to December 28, 2018, and III - 30% "of the “time base value” in the period from December 31, 2018 to December 27, 2019. Deductions are no longer allowed for new purchases as of February 3, 2017. * the “time base value” corresponds to the amount of deduction considered for compliance on January 20, 2017. |
Deduction for demand deposits |
Up to February 21, 2017, the compliance was assured with deduction of financing granted according to Law 12,096/09 (Export Credit Notes - NCE). |
The “demand base value”* was established as a reduction as of February 22, 2017, as follows: I - 100% of the “demand base value” up to the period beginning on December 29, 2017; II - 50% of the “demand base value” in the period from January 2, 2018 to December 28, 2018; III - 30% of the “demand base value” in the period from December 31, 2018 to December 27, 2019, and IV - 0% as of December 30, 2019. * “demand base value” corresponds to the amount of deduction considered for compliance on January 25, 2017. |
e) In August, 2015, Bradesco finalized the Purchase and Sale of Shares Agreement with HSBC Latin America Holdings Limited to the acquisition of 100% of the equity of HSBC Bank Brasil S.A. (“HSBC Bank”) and HSBC Serviços e Participações Ltda. (“HSBC Serviços”). In June 2016, the final approval of regulatory agencies was given in compliance with legal formalities. With the conclusion of the acquisition, in July 2016, Bradesco assumed all operations of the HSBC in Brazil, including retail, insurance and asset management, as well as all the branches and clients.
170 Economic and Financial Analysis Report – March 2017
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
We have presented below the composition of the values of the acquisition of HSBC Bank and HSBC Serviços:
|
R$ thousand |
Payment to HSBC Latin America Holding Limited, net of adjustment after closure (1) |
15,665,367 |
Costs incurred in the acquisition, related to the foreign currency hedge (2) |
1,623,103 |
Total cost of acquisition |
17,288,470 |
(1) Considers the IOF collection, and withholding Income Tax; and
(2) Hired with the objective of protecting the effects of exchange rate variation of the firm commitment (Note 8d).
The financial statements of HSBC Bank and HSBC Serviços were, at the date of acquisition, adjusted by the accounting policies adopted by Bradesco.
In December 2016, Bradesco, based on a study report on purchase price allocation ("PPA"), prepared by a contracted specialized and independent company, made the initial allocation of the fair value of assets acquired and liabilities assumed by HSBC Brasil.
The value of the investment recognized by Bradesco includes goodwill in the acquisition of shares in the amount of R$4,221,787 thousand, as follows:
|
R$ thousand |
Shareholders’ equity acquired (I) |
7,639,301 |
Fair value of assets acquired and liabilities assumed (II) |
1,655,708 |
Intangible assets acquired (III) |
3,771,674 |
Goodwill in the acquisition of the "HSBC Bank" and "HSBC Serviços" investments |
4,221,787 |
Total of the acquired values |
17,288,470 |
I) Considers the sum of shareholders’ equity of HSBC Bank and HSBC Serviços adjusted by the accounting criteria of Bradesco;
II) Refers to the allocation of the following fair values: (i) credit operations, net of PDD of R$1,133,985 thousand (term between 1 to 5 years); (ii) debt instruments of (R$64,701 thousand) (term of up to 1 year); (iii) fixed assets of R$573,061 thousand (term of up to 25 years); and (iv) bonds and securities of R$13,363 thousand (term of 34 years), totaling R$1,655,708 thousand; and
III) Refers to the allocation of the following intangible assets: (i) relationship with clients of R$1,799,226 thousand (term of 6 years); (ii) core deposits, of R$1,601,970 thousand (term of 6 years) (iii) Value of Business Acquired “VOBA” (Insurance), of R$316,278 thousand (term between 2 to 28 years); (iv) agreements not to compete with sellers, of R$29,068 thousand (term of 2 years); (v) softwares, of (R$70,387 thousand) (term of up to 5 years); and (vi) other intangible assets, of R$95,519 thousand (term between 2 to 5 years), totaling R$3,771,674 thousand.
In July 2016, there was a total division of HSBC Serviços, with version of equity tranches for HSBC Bank and Credival Participações, Administração e Assessoria Ltda. (Credival), wholly owned subsidiary of HSBC Bank.
In October 2016, approval was granted in an Extraordinary General Meeting for the partial spin-off of HSBC Brasil, through the absorption of portions of its equity by companies of the Organization, enabling progress with the integration of operational and technological platforms, resulting in the replacement of the HSBC brand in its service network, becoming Bradesco. Thus, Bradesco began to operate with a unified platform (branches, ATMs, and systems), to which all clients have access to. From now on, Bradesco will add to the products and services already offered to HSBC Brasil clients, a nationwide service network, a state-of-the-art technology platform, and an even more extensive portfolio of products and services.
Bradesco 171
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Notes to the Consolidated Financial Statements
f) In October 2016, Bradesco Seguros S.A. ("Bradesco Seguros") and Swiss Re Corporate Solutions Ltd. ("Swiss Re Corso") signed a deal whereby: (i) Swiss Re Corporate Solutions Brasil Seguros S/A
("Swiss Re Corporate Solutions Brasil") will assume the insurance operations of P&C (Property and Casualty) and of transport of Bradesco Seguros ("Large Risks Insurance"), to have exclusive access to Bradesco clients to exploit the marketing of Large Risks Insurance; and (ii) Bradesco Seguros will hold an equity interest of 40% in Swiss Re Corporate Solutions Brasil and the other 60% interest will remain with its controlling shareholder Swiss Re Corso. The transaction is subject to approval by the competent authorities and other contractual terms commonly used for this type of transaction.
g) There were no subsequent events that need to be adjusted or disclosed in the consolidated financial statements as of March 31, 2017.
172 Economic and Financial Analysis Report – March 2017
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
Reference date: April 25, 2017 |
|
|
|
|
|
Board of Directors |
Directors |
Integrated Risk Management Committee |
|
Albert Adell Roso |
and Capital Allocation |
Chairman |
Alexandre Cesar Pinheiro Quercia |
Alexandre da Silva Glüher - Coordinator |
Lázaro de Mello Brandão |
Antonio Chinellato Neto |
José Alcides Munhoz |
|
Antonio Daissuke Tokuriki |
Aurélio Conrado Boni |
Vice-Chairman |
Antranik Haroutiounian |
Domingos Figueiredo de Abreu |
Luiz Carlos Trabuco Cappi |
Carlos Henrique Villela Pedras |
Josué Augusto Pancini |
|
Carlos Leibowicz |
Maurício Machado de Minas |
Members |
Edilson Dias dos Reis |
Marcelo de Araújo Noronha |
Denise Aguiar Alvarez |
Edmir José Domingues |
André Rodrigues Cano |
João Aguiar Alvarez |
Fernando Freiberger |
Luiz Carlos Angelotti |
Carlos Alberto Rodrigues Guilherme |
Fernando Honorato Barbosa |
Moacir Nachbar Junior |
Milton Matsumoto |
Gilvandro Matos da Silva |
Gedson Oliveira Santos |
José Alcides Munhoz |
Jefferson Ricardo Romon |
|
Aurélio Conrado Boni |
Juliano Ribeiro Marcílio |
Succession Planning and Nomination |
|
Manoel Guedes de Araújo Neto |
Committee |
Board |
Paulo Eduardo Waack |
Lázaro de Mello Brandão - Coordinator |
Executive Officers |
|
Luiz Carlos Trabuco Cappi |
Chief Executive Officer |
Regional Officers |
Carlos Alberto Rodrigues Guilherme |
Luiz Carlos Trabuco Cappi |
Ademir Aparecido Correa Junior |
Milton Matsumoto |
|
Alberto do Nascimento Lemos |
André Rodrigues Cano |
Executive Vice-Presidents |
Almir Rocha |
Glaucimar Peticov |
Domingos Figueiredo de Abreu |
Altair Naumann |
|
Alexandre da Silva Glüher |
Amadeu Emilio Suter Neto |
Sustainability Committee |
Josué Augusto Pancini |
André Ferreira Gomes |
Luiz Carlos Angelotti - Coordinator |
Maurício Machado de Minas |
Antonio Piovesan |
Luiz Carlos Trabuco Cappi |
Marcelo de Araújo Noronha |
Carlos Alberto Alástico |
Carlos Alberto Rodrigues Guilherme |
André Rodrigues Cano |
César Cabús Berenguer Silvany |
Milton Matsumoto |
|
Delvair Fidêncio de Lima |
Aurélio Conrado Boni |
Managing Directors |
Francisco Aquilino Pontes Gadelha |
Domingos Figueiredo de Abreu |
Luiz Carlos Angelotti |
Francisco Assis da Silveira Junior |
Alexandre da Silva Glüher |
Nilton Pelegrino Nogueira |
Geraldo Dias Pacheco |
Josué Augusto Pancini |
André Marcelo da Silva Prado |
João Alexandre Silva |
Maurício Machado de Minas |
Denise Pauli Pavarina |
João Pedro da Silva Villela |
Marcelo de Araújo Noronha |
Moacir Nachbar Junior |
Joel Queiroz de Lima |
André Rodrigues Cano |
Octavio de Lazari Junior |
José Flávio Ferreira Clemente |
Nilton Pelegrino Nogueira |
Cassiano Ricardo Scarpelli |
José Roberto Guzela |
Denise Pauli Pavarina |
Eurico Ramos Fabri |
Luiz Benoni Passini |
Moacir Nachbar Junior |
Renato Ejnisman |
Nelson Veiga Neto |
Octavio de Lazari Junior |
Walkiria Schirrmeister Marchetti |
Osmar Sanches Biscuola |
Marlos Francisco de Souza Araujo |
Rômulo de Mello Dias |
Paulo Roberto Andrade de Aguiar |
Randal Luiz Zanetti |
|
|
|
Deputy Directors |
Audit Committee |
Executive Disclosure Committee |
Aurélio Guido Pagani |
Milton Matsumoto - Coordinator |
Alexandre da Silva Glüher - Coordinator |
Guilherme Muller Leal |
Paulo Roberto Simões da Cunha |
Domingos Figueiredo de Abreu |
Luiz Carlos Brandão Cavalcanti Junior |
Wilson Antonio Salmeron Gutierrez |
André Rodrigues Cano |
Rogério Pedro Câmara |
|
Luiz Carlos Angelotti |
João Carlos Gomes da Silva |
Compensation Committee |
Moacir Nachbar Junior |
|
Lázaro de Mello Brandão - Coordinator |
Antonio José da Barbara |
Department Directors |
Luiz Carlos Trabuco Cappi |
Carlos Wagner Firetti |
Amilton Nieto |
Carlos Alberto Rodrigues Guilherme |
Marcos Aparecido Galende |
André Bernardino da Cruz Filho |
Milton Matsumoto |
Marcelo Santos Dall’Occo |
Antonio Carlos Melhado |
Valdirene Soares Secato (non-Manager) |
Marlos Francisco de Souza Araujo |
Antonio Gualberto Diniz |
|
Haydewaldo R. Chamberlain da Costa |
Antonio José da Barbara |
Compliance and Internal Control Committee |
|
Bruno D’Avila Melo Boetger |
Milton Matsumoto - Coordinator |
Fiscal Council |
Carlos Wagner Firetti |
Carlos Alberto Rodrigues Guilherme |
Sitting Members |
Clayton Camacho |
Aurélio Conrado Boni |
Ariovaldo Pereira - Coordinator |
Edilson Wiggers |
Domingos Figueiredo de Abreu |
Domingos Aparecido Maia |
Edson Marcelo Moreto |
Alexandre da Silva Glüher |
José Maria Soares Nunes |
Fernando Antônio Tenório |
Josué Augusto Pancini |
João Carlos de Oliveira |
Frederico William Wolf |
Maurício Machado de Minas |
Walter Luis Bernardes Albertoni |
Gedson Oliveira Santos |
Marcelo de Araújo Noronha |
|
Glaucimar Peticov |
André Rodrigues Cano |
Deputy Members |
Hiroshi Obuchi |
Moacir Nachbar Junior |
Jorge Tadeu Pinto de Figueiredo |
João Albino Winkelmann |
Clayton Camacho |
Nilson Pinhal |
Joel Antonio Scalabrini |
Frederico William Wolf |
Renaud Roberto Teixeira |
José Luis Elias |
Gedson Oliveira Santos |
João Sabino |
José Ramos Rocha Neto |
Joel Antonio Scalabrini |
Reginaldo Ferreira Alexandre |
Layette Lamartine Azevedo Júnior |
|
|
Leandro José Diniz |
Ethical Conduct Committee |
Ombudsman Department |
Lucio Rideki Takahama |
Milton Matsumoto - Coordinator |
Nairo José Martinelli Vidal Júnior - Ombudsman |
Marcelo Frontini |
Carlos Alberto Rodrigues Guilherme |
|
Marcelo Santos Dall’Occo |
Domingos Figueiredo de Abreu |
|
Marcio Henrique Araujo Parizotto |
Alexandre da Silva Glüher |
|
Marcos Aparecido Galende |
Josué Augusto Pancini |
|
Marlos Francisco de Souza Araujo |
Maurício Machado de Minas |
|
Mauricio Gomes Maciel |
Marcelo de Araújo Noronha |
|
Paulo Aparecido dos Santos |
André Rodrigues Cano |
|
Paulo Manuel Taveira de Oliveira Ferreira |
André Marcelo da Silva Prado |
|
Roberto de Jesus Paris |
Denise Pauli Pavarina |
|
Waldemar Ruggiero Júnior |
Moacir Nachbar Junior |
|
Wilson Reginaldo Martins |
Octavio de Lazari Junior |
|
|
Randal Luiz Zanetti |
|
|
Clayton Camacho |
|
|
Frederico William Wolf |
|
|
Gedson Oliveira Santos |
|
|
Glaucimar Peticov |
General Accounting Department |
|
Joel Antonio Scalabrini |
Marcos Aparecido Galende |
|
Nairo José Martinelli Vidal Júnior |
Accountant - CRC 1SP201309/O-6 |
Bradesco 173
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
To the Board of Directors and Shareholders of
Banco Bradesco S.A.
Osasco - SP
Introduction
We have reviewed the consolidated statement of financial position of Banco Bradesco S.A. (“Bradesco”) as of March 31, 2017 and the related consolidated statements of income, changes in shareholders' equity and cash flows for the three-month period then ended, as well as the summary of significant accounting policies and other explanatory notes (“the consolidated interim financial information”).
Management is responsible for the preparation and fair presentation of this interim consolidated financial information in accordance with accounting practices adopted in Brazil, applicable to financial institutions authorized to operate by the Central Bank of Brazil. Our responsibility is to express a conclusion on this interim consolidated financial information based on our review.
Scope of review
We conducted our review in accordance with Brazilian and International Standards on Review of Interim Financial Information (NBC TR 2410 - Revisão de Informações Intermediárias Executada pelo Auditor da Entidade and ISRE 2410 - Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with auditing standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Therefore, we do not express an audit opinion.
Conclusion
Based on our review, we are not aware of any facts that would lead us to believe that the consolidated interim financial information mentioned above were not prepared, in all material aspects, in accordance with accounting practices adopted in Brazil applicable to financial institutions authorized to operate by the Central Bank of Brazil.
Other matters
Interim statement of value added
We also reviewed the consolidated statement of value added (DVA) for the three-month period ended as of March 31, 2017, which was prepared under Bradesco’s Management responsibility and which presentation is required under the rules issued by the Securities and Exchange Commission of Brazil (CVM) and is considered a supplementary information in accordance with accounting practices adopted in Brazil applicable to financial institutions authorized to operate by the Central Bank of Brazil that do not require the disclosure of the DVA. This statement was subject to the same review procedures described above and based on our review, we are not aware of any facts that would lead us to believe it was not prepared, in all material respects, consistently with the financial information take as a whole.
Osasco, April 26, 2017
KPMG Auditores Independentes
CRC 2SP028567/O-1 F SP
Original report in Portuguese signed by
Rodrigo de Mattos Lia
Accountant CRC 1SP252418/O-3
174 Economic and Financial Analysis Report – March 2017
Consolidated Financial Statements, Independent Auditors' Report and Fiscal Council’s Report
The members of the Fiscal Council, in the exercise of their legal and statutory attributes, have examined the Management Report and the Financial Statements of Banco Bradesco S.A. for the first quarter of 2017, and the technical feasibility study of generation of taxable profits, restated at present value, in order to establish the Deferred Tax Asset according to CVM Instruction No. 371/02, Resolution No. 3.059/02, of the National Monetary Council and Circular No. 3.171/02, of the Brazilian Central Bank, and in view of the report of KPMG Independent Auditors, presented without reservations, are of the opinion that the stated documents, examined in light of the accounting practices adopted in Brazil, applicable to the institutions authorized to operate by the Brazilian Central Bank, appropriately reflect the assets and liabilities and financial status of the Company.
Cidade de Deus, Osasco, SP, April 26, 2017.
Ariovaldo Pereira – Coordinator
Domingos Aparecido Maia
José Maria Soares Nunes
João Carlos de Oliveira
Walter Luis Bernardes Albertoni
Bradesco 175
BANCO BRADESCO S.A. | ||
By: |
/S/ Alexandre da Silva Glüher
| |
Alexandre da Silva Glüher Executive Managing Officer and Investor Relations Officer |
This press release may contain forward-looking statements. These statements are statements that are not historical facts, and are based on management's current view and estimates of future economic circumstances, industry conditions, company performance and financial results. The words "anticipates", "believes", "estimates", "expects", "plans" and similar expressions, as they relate to the company, are intended to identify forward-looking statements. Statements regarding the declaration or payment of dividends, the implementation of principal operating and financing strategies and capital expenditure plans, the direction of future operations and the factors or trends affecting financial condition, liquidity or results of operations are examples of forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected events, trends or results will actually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.