bbdbook3q12_6k.htm - Generated by SEC Publisher for SEC Filing

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

 
FORM 6-K
 
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE
SECURITIES EXCHANGE ACT OF 1934
 
For the month of October, 2012
Commission File Number 1-15250
 

 
BANCO BRADESCO S.A. 
(Exact name of registrant as specified in its charter)
 
BANK BRADESCO
(Translation of Registrant's name into English)
 
Cidade de Deus, s/n, Vila Yara
06029-900 - Osasco - SP
Federative Republic of Brazil
(Address of principal executive office)
 
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.  Form 20-F ___X___ Form 40-F _______

 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____

 .


 

  Table of Contents 
Table of Contents

 

1 -  Press Release  3 
Highlights  4 
Main Information  6 
Ratings  8 
Book Net Income vs. Adjusted Net Income  8 
Summarized Analysis of Adjusted Income  9 
Economic Outlook  22 
Main Economic Indicators  23 
Guidance  24 
Income Statement vs Managerial Income vs Adjusted Income  25 
2 -  Economic and Financial Analysis  29 
Consolidated Statement of Financial Position  30 
Adjusted Income Statement  31 
Financial Margin - Interest and Non-Interest  31 
– Financial Margin - Interest  32 

• Loan Financial Margin - Interest 

34 

• Funding Financial Margin - Interest 

50 

• Securities / Other Financial Margin - Interest 

55 

• Insurance Financial Margin - Interest 

55 
– Financial Margin - Non-Interest  56 
Insurance, Pension Plans and Capitalization Bonds  57 
– Bradesco Vida e Previdência  64 
– Bradesco Saúde e Mediservice  66 
– Bradesco Capitalização  67 
– Bradesco Auto / RE  69 
Fee and Commission Income  71 
Personnel and Administrative Expenses  77 
– Coverage Ratio  80 
Tax Expenses  80 
Equity in the Earnings (Losses) of Unconsolidated Companies  81 
Operating Income  81 
Non-Operating Income  82 
3 -  Return to Shareholders  83 
Sustainability  84 
Investor Relations Area - IR  84 
Corporate Governance  85 
Bradesco Shares  85 
Market Capitalization  88 
Main Indicators  89 
Dividends / Interest on Shareholders’ Equity  90 
Weighting in Main Stock Market Indexes  90 
4 -  Additional Information  91 
Market Share of Products and Services  92 
Compulsory Deposits / Liabilities  93 
Investments in Infrastructure, Information Technology and e Telecommunications  94 
Risk Management  95 
Capital Adequacy Ratio  95 
5 -  Independent Auditors’ Report  97 
Limited assurance report from independent auditors on the supplementary accounting information  98 
6 -  Financial Statements, Independent Auditors’ Report on the Consolidated Interim Financial Statements and Fiscal Council’s Report 101 
  Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report  102 

 

 
 

 

Bradesco 

 1  

 


 
Forward-Looking Statements 

 

This Report on Economic and Financial Analysis contains forward-looking statements relating to our business. Such statements are based on management’s current expectations, estimates and projections about future events and financial trends, which could affect our business. Words such as: “believes,” “anticipates,” “plans,” “expects,” “intends,” “aims,” “evaluates,” “predicts,” “foresees,” “projects,” “guidelines,” “should” and similar expressions are intended to identify forward-looking statements. These statements, however, do not guarantee future performance and involve risks and uncertainties, which could be beyond our control. Furthermore, certain forward-looking statements are based on assumptions that, depending on future events, may prove to be inaccurate. Therefore, actual results may differ materially from the plans, objectives, expectations, projections and intentions expressed or implied in such statements.

Factors which could modify actual results include, among others, changes in regional, national and international commercial and economic conditions; inflation rates; increase in customer delinquency on the account of borrowers in loan operations, with the consequent increase in the allowance for loan losses; loss of funding capacity; loss of customers or revenues; our capacity to sustain and improve performance; changes in interest rates which could, among other events, adversely affect our margins; competition in the banking sector, financial services, credit card services, insurance, asset management and other related sectors; government regulations and fiscal matters; disputes or adverse legal proceedings or rulings; as well as credit risks and other loan and investment activity risks.

Accordingly, the reader should not rely excessively on these forward-looking statements. These statements are valid only as of the date they were prepared. Except as required under applicable legislation, we assume no obligation whatsoever to update these statements, whether as a result of new information, future events or for any other reason.

 

 

 

Few numbers of this Report were submitted to rounding adjustments.
Therefore, amounts indicated as total in certain charts may not correspond to the arithmetic
sum of figures preceding them.

 

 
2 Report on Economic and Financial Analysis – September 2012   

 

 


 
 
 

 

  


 
 
 
Press Release
   
Highlights

 

The main figures obtained by Bradesco in the first nine months of 2012 are presented below:

1.   Adjusted Net Income(1) in the first nine months of 2012 stood at R$8.605 billion (a 2.1% increase compared to the R$8.427 billion recorded in the same period last year), corresponding to earnings per share of R$2.98 in the last 12 months and Return on Average Shareholders’ Equity(2) of 19.9%.

2.   Adjusted Net Income is composed of R$5.982 billion from financial activities, representing 69.5% of the total, and R$2.623 billion from insurance, pension plan and capitalization bond operations, which accounted for 30.5%.

3.   On September 30, 2012, Bradesco’s market capitalization stood at R$113.102 billion(3), up 17.0% over the same period in 2011.

4.   Total Assets stood at R$856.288 billion in September 2012, an 18.6% increase over the same period in 2011. Return on Total Average Assets was 1.4%.

5.   The Expanded Loan Portfolio(4) stood at R$371.674 billion in September 2012, up 11.8% on the same period in 2011. Operations with individuals totaled R$114.536 billion (up 8.7%), while operations with companies totaled R$257.138 billion (up 13.3%).

6.   Assets under Management stood at R$1.172 trillion, up 20.4% on September 2011.

7.   Shareholders’ Equity stood at R$66.047 billion in September 2012, up 22.9% on September 2011. Capital Adequacy Ratio stood at 16.0% in September 2012, 11.3% of which fell under Tier I Capital.

8.  Interest on Shareholders’ Equity and Dividends were paid and recorded in provision to shareholders at the amount of R$2.923 billion in the first nine months of 2012, of which R$1.348 billion was paid as monthly and interim dividends and R$1.575 billion was recorded in provision.

9.   Financial Margin stood at R$32.684 billion, up 12.5% in comparison with the same period in 2011.

10.   The Delinquency Ratio over 90 days stood at 4.1% on September 30, 2012 (3.8% on September 30, 2011).

11.   The Efficiency Ratio(5) improved by 0.6 p.p. (from 42.7% in September 2011 to 42.1% in September 2012), whereas the “adjusted-to-risk” ratio stood at 53.1% (52.4% in September 2011).

12.   Insurance Written Premiums, Pension Plan Contributions and Capitalization Bond Income totaled R$31.092 billion the first nine months of 2012, up 17.3% over the same period in 2011. Technical Reserves stood at R$117.807 billion, up 21.3% on September 2011.

13.     Investments in infrastructure, information technology and telecommunications amounted to R$2.967 billion in the first nine months of 2012, a 5.3% increase on the previous year.

14.   Taxes and contributions, including social security, paid or recorded in provision, amounted to R$17.056 billion, of which R$6.695 billion referred to taxes withheld and collected from third parties and R$10.361 billion from Bradesco Organization activities, equivalent  to 120.4% of Adjusted Net Income(1).

15.   Bradesco has an extensive customer service network in Brazil, comprising 8,439 service points (4,665 branches and 3,774 Service Branches - PAs). Customers can also use 1,456 PAEs - ATMs (Automatic Teller Machines) in companies, 41,713 Bradesco Expresso service points, 35,128 Bradesco Dia & Noite ATMs and 12,414 Banco 24 Horas ATMs.

(1) According to non-recurring events described on page 8 of this Report on Economic and Financial Analysis; (2) Excludes mark-to-market effect of available-for-sale securities recorded under Shareholders’ Equity; (3) R$124.332 billion considering the closing price of preferred shares (most traded share); (4) Includes sureties and guarantees, letters of credit, advances of credit card receivables, co-obligation in loan assignment (receivables-backed investment funds and mortgage-backed receivables), co-obligation in rural loan assignment, and operations bearing credit risk – commercial portfolio, which includes debentures and promissory notes; and (5) In the last 12 months.   

 

 

 
4 Report on Economic and Financial Analysis – September 2012   

 

 


 
 

 

Press Release
   
Highlights

 

16. Payroll, plus charges and benefits, totaled R$7.660 billion. Social benefits provided to the 104,100 employees of the Bradesco Organization and their dependents amounted to R$1.840 billion, while investments in training and development programs totaled R$100.219 million.

17. On August 30, the Organization inaugurated Bradesco Next – the bank of the future – a thoroughly modern space for the presentation and experimentation of new technologies, products and services.

18. On September 13, Bradesco was once again included in the Dow Jones Sustainability Index, a select NYSE trading list that includes only those companies with the best sustainable development practices.

19. Major Awards and Acknowledgments in the period:

·       Bradesco was elected Company of the Year by the Best of Dinheiro 2012 year book, as well as the Best Insurance Company, the Best Health Company and Best Human Resources Management Company (IstoÉ Dinheiro magazine, in association with KPMG, Trevisan and Economatica);

·       For the second consecutive year, Bradesco is the most valuable brand Latin America (Latin America BrandFinance);

·       Bradesco is the most innovative company in customer relations according to a survey conducted by the consultancy DOM Strategy Partners (Consumidor Moderno magazine);

·       Bradesco is one of the 100 Best Companies to Work For in Brazil (Época  magazine, evaluated by the Great Place to Work Institute);

·       Bradesco placed first in the financial segment “Stock Exchange’s Stars” ranking. The study analyzed the performance of all Brazilian companies’ shares listed on São Paulo Stock Exchange and indicated those that created more value to their shareholders (Boston Consulting Group);

·       Bradesco was the only financial institution with a positive performance in the Stock Exchange in 2012 (Valor Econômiconewspaper, data from BM&FBovespa and Economatica);

·       For the sixth consecutive time, Grupo Bradesco Seguros ranked first in the Brazilian insurance company category (2012 Valor 1000 list of Valor Econômiconewspaper); and

·       For the second consecutive year, Grupo Bradesco Seguros was the “Best and major insurance company in Latin America”, in the “Top 100 Insurers” ranking (Latin Trademagazine).

20. With regards to sustainability, Bradesco divides its actions into three pillars:

(i) Sustainable Finances, focused on banking inclusion, social and environmental variables for loan approvals and product offering;
(ii) Responsible Management, focused on valuing professionals, improving the workplace and adopting eco-efficient practices; and
(iii) Social and Environmental Investments, focused on education, the environment, culture and sports. In this area, we point out Fundação Bradesco, which has a 55-year history of extensive social and educational work, with 40 schools in Brazil. In 2012, a projected budget of R$385.473 million will benefit 111,170 students in its schools, in Basic Education (from Kindergarten to High School and Vocational Training - High School Level), Education for Youth and Adults; and Preliminary and Continuing Qualification focused on the creation of jobs and generation of income. The nearly 50 thousand students in Basic Education are guaranteed free, quality education, uniforms, school supplies, meals and medical and dental assistance. Fundação Bradesco also aided another 300,150 students through its distance learning programs, found at its e-learning portal “Virtual School.” These students completed at least one of the many courses offered by the Virtual School. Furthermore, another 83,323 people will benefit from projects and actions in partnerships with Digital Inclusion Centers (CIDs), the
Educa+Ação Program and Technology courses (Educar e Aprender– Teach and Learn).

 
 

 

Bradesco 

 5  

 
 

Press Release
   
Main Information
 
 
 

3Q12

2Q12

1Q12

4Q11

3Q11

2Q11

1Q11

4Q10

Variation %

3Q12 x 2Q12

3Q12 x 3Q11

Income Statement for the Period - R$ million

                   

Book Net Income

2,862

2,833

2,793

2,726

2,815

2,785

2,702

2,987

1.0

1.7

Adjusted Net Income

2,893

2,867

2,845

2,771

2,864

2,825

2,738

2,684

0.9

1.0

Total Financial Margin

10,955

11,034

10,695

10,258

10,230

9,471

9,362

9,018

(0.7)

7.1

Gross Loan Financial Margin

7,460

7,362

7,181

7,162

6,928

6,548

6,180

6,143

1.3

7.7

Net Loan Financial Margin

4,157

3,955

4,087

4,501

4,149

4,111

3,820

3,848

5.1

0.2

Allowance for Loan Losses (ALL) Expenses

(3,303)

(3,407)

(3,094)

(2,661)

(2,779)

(2,437)

(2,360)

(2,295)

(3.1)

18.9

Fee and Commission Income

4,438

4,281

4,118

4,086

3,876

3,751

3,510

3,568

3.7

14.5

Administrative and Personnel Expenses

(6,684)

(6,488)

(6,279)

(6,822)

(6,285)

(5,784)

(5,576)

(5,790)

3.0

6.3

Insurance Written Premiums, Pension Plan Contributions and Capitalization Bond Income

10,104

11,570

9,418

11,138

9,025

9,628

7,845

9,012

(12.7)

12.0

Balance Sheet - R$ million

 

 

 

 

 

 

 

 

 

 

Total Assets

856,288

830,520

789,550

761,533

722,289

689,307

675,387

637,485

3.1

18.6

Securities

319,537

322,507

294,959

265,723

244,622

231,425

217,482

213,518

(0.9)

30.6

Loan Operations (1)

371,674

364,963

350,831

345,724

332,335

319,802

306,120

295,197

1.8

11.8

- Individuals

114,536

112,235

109,651

108,671

105,389

102,915

100,200

98,243

2.1

8.7

- Corporate

257,138

252,728

241,181

237,053

226,946

216,887

205,920

196,954

1.7

13.3

Allowance for Loan Losses (ALL)

(20,915)

(20,682)

(20,117)

(19,540)

(19,091)

(17,365)

(16,740)

(16,290)

1.1

9.6

Total Deposits

212,869

217,070

213,877

217,424

224,664

213,561

203,822

193,201

(1.9)

(5.3)

Technical Reserves

117,807

111,789

106,953

103,653

97,099

93,938

89,980

87,177

5.4

21.3

Shareholders' Equity

66,047

63,920

58,060

55,582

53,742

52,843

51,297

48,043

3.3

22.9

Assets under Management

1,172,008

1,130,504

1,087,270

1,019,790

973,194

933,960

919,007

872,514

3.7

20.4

Performance Indicators (%) on Adjusted Net Income (unless otherwise stated)

 

 

 

 

 

 

 

 

Adjusted Net Income per Share - R$ (2)

2.98

2.97

2.96

2.93

2.91

2.82

2.72

2.61

0.3

2.4

Book Value per Common and Preferred Share - R$

17.30

16.74

15.21

14.56

14.08

13.82

13.42

12.77

3.3

22.9

Annualized Return on Average Shareholders' Equity (3) (4)

19.9

20.6

21.4

21.3

22.4

23.2

24.2

22.2

(0.7) p.p.

(2.5) p.p.

Annualized Return on Average Assets (4)

1.4

1.4

1.5

1.6

1.7

1.7

1.7

1.7

-

(0.3) p.p.

Average Rate - Annualized (Adjusted Financial Margin / Total Average Assets - Purchase and Sale Commitments - Permanent Assets)

7.6

7.9

7.9

7.8

8.0

7.8

8.2

8.3

(0.3) p.p.

(0.4) p.p.

Fixed Assets Ratio - Total Consolidated

19.0

18.2

19.9

21.0

16.7

17.3

17.4

18.1

0.8 p.p.

2.3 p.p.

Combined Ratio - Insurance (5)

86.5

85.0

85.6

83.6

86.2

85.8

86.1

85.1

1.5 p.p

0.3 p.p.

Efficiency Ratio (ER) (2)

42.1

42.4

42.7

43.0

42.7

42.7

42.7

42.7

(0.3) p.p.

(0.6) p.p.

Coverage Ratio (Fee and Commission Income / Administrative and Personnel Expenses) (2)

64.4

63.2

62.9

62.2

62.7

63.5

63.6

64.2

1.2 p.p.

1.7 p.p.

Market Capitalization - R$ million (6)

113,102

104,869

113,021

106,971

96,682

111,770

117,027

109,759

7.9

17.0

Loan Portfolio Quality % (7)

 

 

 

 

 

 

 

 

 

 

ALL / Loan Portfolio

7.4

7.4

7.5

7.3

7.3

6.9

7.0

7.1

-

0.1 p.p.

Non-Performing Loans (>60 days (8) / Loan Portfolio)

5.1

5.1

5.1

4.8

4.6

4.5

4.4

4.3

-

0.5 p.p.

Delinquency Ratio (> 90 days (8) / Loan Portfolio)

4.1

4.2

4.1

3.9

3.8

3.7

3.6

3.6

(0.1) p.p.

0.3 p.p.

Coverage Ratio (> 90 days (8))

179.0

177.4

181.7

184.4

194.0

189.3

193.6

197.6

1.6 p.p

(15.0) p.p.

Coverage Ratio (> 60 days (8))

144.8

144.0

146.6

151.8

159.6

154.0

159.1

163.3

0.8 p.p

(14.8) p.p.

Operating Limits %

 

 

 

 

 

 

 

 

 

 

Capital Adequacy Ratio - Total Consolidated

16.0

17.0

15.0

15.1

14.7

14.7

15.0

14.7

(1.0) p.p.

1.3 p.p.

- Tier I

11.3

11.8

12.0

12.4

12.2

12.9

13.4

13.1

(0.5) p.p.

(0.9) p.p.

- Tier II

4.7

5.2

3.0

2.7

2.5

1.8

1.7

1.7

(0.5) p.p.

2.2 p.p.

- Deductions

-

-

-

-

-

-

(0.1)

(0.1)

-

-

 

 

 
6 Report on Economic and Financial Analysis – September 2012   

 


 
 

 

Press Release
   
Main Information

 

 

Sept12

Jun12

Mar12

Dec11

Sept11

Jun11

Mar11

Dec10

Variation %

Sept12 vs Jun12

Sept12 vs Sept11

Structural Information - Units

 

 

 

 

 

 

 

 

 

 

Service Points

67,225

65,370

62,759

59,721

55,832

53,256

50,977

48,691

2.8

20.4

- Branches

4,665

4,650

4,636

4,634

3,945

3,676

3,651

3,628

0.3

18.3

- PAs (9)

3,774

3,243

2,986

2,962

2,990

2,982

2,978

2,933

16.4

26.2

- PAEs (9)

1,456

1,476

1,497

1,477

1,589

1,587

1,588

1,557

(1.4)

(8.4)

- Outplaced Bradesco Network ATMs (10)

3,954

3,992

3,974

3,913

3,953

3,962

3,921

3,891

(1.0)

-

- Banco24Horas Network ATMs (10)

10,464

10,459

10,583

10,753

10,815

10,856

10,326

9,765

0.1

(3.2)

- Bradesco Expresso (Correspondent Banks)

41,713

40,476

38,065

34,839

31,372

29,263

27,649

26,104

3.1

33.0

- Bradesco Promotora de Vendas

1,186

1,061

1,005

1,131

1,157

919

853

801

11.8

2.5

- Branches / Subsidiaries Abroad

13

13

13

12

11

11

11

12

-

18.2

ATMs

47,542

47,484

47,330

46,971

45,596

45,103

44,263

43,072

0.1

4.3

- Bradesco Network

35,128

35,226

35,007

34,516

33,217

32,714

32,514

32,015

(0.3)

5.8

- Banco24Horas Network

12,414

12,258

12,323

12,455

12,379

12,389

11,749

11,057

1.3

0.3

Credit and Debit Cards - in millions

149.3

150.1

159.9

155.7

153.0

150.4

147.5

145.2

(0.5)

(2.4)

- Credit Cards (11)

93.0

95.3

93.8

91.4

90.1

89.0

87.4

86.5

(2.4)

3.2

- Debit Cards (12)

56.4

54.8

66.1

64.3

62.9

61.4

60.1

58.7

2.9

(10.3)

Employees

104,100

104,531

105,102

104,684

101,334

98,317

96,749

95,248

(0.4)

2.7

Outsourced Employees and Interns

13,013

12,661

12,659

11,699

10,731

10,563

10,321

9,999

2.8

21.3

Customers - in millions

 

 

 

 

 

 

 

 

 

 

Checking accounts

25.6

25.6

25.4

25.1

24.7

24.0

23.5

23.1

-

3.6

Savings Accounts (13)

48.3

45.2

41.3

43.4

40.6

39.7

39.4

41.1

6.9

19.0

Insurance Group

42.4

41.9

40.8

40.3

39.4

38.0

37.0

36.2

1.2

7.6

- Policyholders

36.7

36.3

35.4

35.0

34.3

33.0

32.1

31.5

1.1

7.0

- Pension Plan Participants

2.3

2.2

2.2

2.2

2.1

2.1

2.1

2.0

4.5

9.5

- Capitalization Bond Customers

3.4

3.4

3.2

3.1

3.0

2.9

2.8

2.7

-

13.3

Bradesco Financiamentos

3.7

3.8

3.8

3.8

4.0

4.2

4.5

4.9

(2.6)

(7.5)

 

(1)     Expanded Loan Portfolio: includes sureties and guarantees, letters of credit, advances of credit card receivables, co-obligation in loan assignment (receivables-backed investment funds and mortgage-backed receivables), co-obligation in rural loan assignment and operations bearing credit risk – commercial portfolio, covering debentures and promissory notes;

(2)     In the last 12 months;

(3)     Excluding mark-to-market effect of available-for-sale securities recorded under shareholders’ equity;

(4)     Adjusted net income for the period;

(5)     Excludes additional reserves;

(6)     Number of shares (excluding treasury shares) multiplied by the closing price of common and preferred shares on the period’s last trading day;

(7)     As defined by the Brazilian Central Bank (Bacen);

(8)     Credits overdue;

(9)     PA (Service Branch): a result from the consolidation of PAB (Banking Service Branch), PAA (Advanced Service Branch) and Exchange Branches, according to CMN Resolution 4,072 of April 26, 2012; and PAE: ATM located in the premises of a company;

(10)   Including overlapping ATMs within the Bank’s own network and the Banco24Horas  network: 2,039 in September 2012 ; 2,059 in June 2012; 2,050 in March 2012; 2,019 in December 2011; 2,040 in September 2011; 2,045 in June 2011; 2,024 in March 2011; and 1,999 in December 2010;

(11)   The decreased credit card base in 3Q12 is due to the exclusion of idle cards;

(12)   The decreased debit card base in 2Q12 is due to the exclusion of idle cards; and

(13)   Number of accounts.

 

 

 

Bradesco 

 7  


 

 

 

Press Release
   
Ratings

Main Ratings

 

Fitch Ratings

International Scale

Domestic Scale

Feasibility

Support

Domestic Currency

Foreign Currency

Domestic

a -

2

Long Term

Short Term

Long Term

Short Term

Long Term

Short Term

A -

F1

BBB +

F2

AAA (bra)

F1 + (bra)

               

 

Moody´s Investors Service

R&I Inc.

Financial Strength / Individual

Credit Risk

Profile

International Scale

Domestic Scale

International Scale

C - / baa1

Foreign Currency Debt

Domestic Currency Deposit

Foreign Currency Deposit

Domestic Currency

Issuer Rating

Long Term

Long Term

Short Term

Long Term

Short Term

Long Term

Short Term

BBB

Baa1

A3

P - 2

Baa2

P-2

Aaa.br

BR - 1

 

Standard & Poor's

Austin Rating

International Scale - Issuer's Credit Rating

Domestic Scale

Corporate Governance

Domestic Scale

Foreign Currency

Domestic Currency

Issuer's Credit Rating

Long Term

Short Term

Long Term

Short Term

Long Term

Short Term

Long Term

Short Term

brAA+

brAAA

brA -1

BBB

A - 2

BBB

A - 2

brAAA

brA - 1

                 

 

Book Net Income vs Adjusted Net Income

 

The main non-recurring events that impacted book net income in the periods below are presented in the following comparative chart:

 

R$ million

 

9M12

9M11

3Q12

2Q12

Book Net Income

8,488

8,302

2,862

2,833

 

 

 

 

 

Non-Recurring Events

117

125

31

34

- Earnings from Extended Securities Terms (1)

(2,116)

-

(2,116)

-

- Additional Technical Reserve due to Real Interest Rate Reduction (1)

2,116

-

2,116

-

- Reversal of Provision for Tax Risks

-

(2,126)

-

-

- Additional ALL

-

1,006

-

-

- Labor Provision

-

501

-

-

- Other (2)

195

604

52

57

- Tax Effects

(78)

140

(21)

(23)

Adjusted Net Income

8,605

8,427

2,893

2,867

0

 

 

 

 

ROAE % (3)

19.6

22.0

20.2

20.6

0

 

 

 

 

ADJUSTED ROAE % (3)

19.9

22.4

20.4

20.9


 

(1)  See page 17 – "Income from Insurance, Pension Plans and Capitalization Bonds – Non-Recurring Events."

(2)  Includes civil provision, of which: R$195 million in the first nine months of 2012, R$52 million in the third quarter of 2012 and R$57 million in the second quarter of 2012. The first nine months of 2011 include basically: (i) asset impairment, amounting to R$152 million; and (ii) civil provision, amounting to R$403 million.

      (3)  Annualized.

 

 
8 Report on Economic and Financial Analysis – September 2012   

 

 

 

 

 

 

Press Release
   
Summarized Analysis of Adjusted Income
 

To provide for better understanding, comparison and analysis of Bradesco’s results, we use the Adjusted Income Statement for analysis and comments contained in this Report on Economic and Financial Analysis, obtained from adjustments made to the Book Income Statement, detailed at the end of this

Press Release, which includes adjustments to non-recurring events shown on the previous page. Note that the Adjusted Income Statement serves as the basis for the analysis and comments made in Chapters 1 and 2 of this report.


R$ million

Adjusted Income Statement

9M12

9M11

Variation

3Q12

2Q12

Variation

9M12 x 9M11

3Q12 x 2Q12

Amount

%

Amount

%

Financial Margin

32,684

29,063

3,621

12.5

10,955

11,034

(79)

(0.7)

- Interest

31,343

27,685

3,658

13.2

10,603

10,518

85

0.8

- Non-interest

1,341

1,378

(37)

(2.7)

352

516

(164)

(31.8)

ALL

(9,804)

(7,576)

(2,228)

29.4

(3,303)

(3,407)

104

(3.1)

Gross Income from Financial Intermediation

22,880

21,487

1,393

6.5

7,652

7,627

25

0.3

Income from Insurance, Pension Plans and Capitalization Bonds (1)

2,859

2,437

422

17.3

1,029

953

76

8.0

Fee and Commission Income

12,837

11,137

1,700

15.3

4,438

4,281

157

3.7

Personnel Expenses

(9,044)

(7,921)

(1,123)

14.2

(3,119)

(3,047)

(72)

2.4

Other Administrative Expenses

(10,407)

(9,724)

(683)

7.0

(3,565)

(3,441)

(124)

3.6

Tax Expenses

(3,041)

(2,659)

(382)

14.4

(1,038)

(991)

(47)

4.7

Equity in the Earnings (Losses) of Unconsolidated Companies

104

91

13

14.3

45

19

26

136.8

Other Operating Income / (Expenses)

(3,085)

(2,593)

(492)

19.0

(1,054)

(1,035)

(19)

1.8

Operating Result

13,103

12,255

848

6.9

4,388

4,366

22

0.5

Non-Operating Income

(60)

(1)

(59)

-

(20)

(22)

2

(9.1)

Income Tax / Social Contribution

(4,384)

(3,713)

(671)

18.1

(1,455)

(1,461)

6

(0.4)

Non-controlling Interest

(54)

(114)

60

(52.6)

(20)

(16)

(4)

25.0

Adjusted Net Income

8,605

8,427

178

2.1

2,893

2,867

26

0.9

                 

 

(1)  Income from Insurance, Pension Plans and Capitalization Bonds = Insurance, Pension Plan and Capitalization Bond Retained Premiums - Variation in Technical Reserves of Insurance, Pension Plans and Capitalization Bonds – Retained Claims – Capitalization Bond Draws and Redemptions –Insurance, Pension Plan and Capitalization Bond Selling Expenses.

 

 

 

Bradesco 

 9  

 

 

Press Release
   
Summarized Analysis of Adjusted Income
 

Adjusted Net income and Profitability

 

In the third quarter of 2012, Bradesco posted adjusted net income of R$2,893 million, up 0.9%, or R$26 million, on the previous quarter, mainly driven by: (i) greater fee and commission income arising from the increase in business volume, (ii) lower allowance for loan lossexpenses, (iii) higher operating insurance income, offset by: (iv) higher personnel and administrative expenses, and (v) lower financial margin income, a result of lower income from non-interest portion.

In comparison with the same period a year earlier, adjusted net income increased by R$178 million, or 2.1% in the first nine months of 2012, for Return on Average Shareholders’ Equity (ROAE) of 19.9%.

Shareholders Equity stood at R$66,047 million in September 2012, up 22.9% on the balance of September 2011. This increase is partially due to the surplus value of some securities reclassified from Held to Maturity to Available for Sale for adoption of CPCs 38 and 40 by the Insurance Group. The Capital Adequacy Ratio stood at 16.0%, 11.3% of which fell under Tier I Reference Shareholders’ Equity.

Total Assets came to R$856,288 million in September 2012, up 18.6% over September 2011, driven by the increase in operations and the expansion of business volume. Return on Average Assets (ROAA) reached 1.4%.

 
10 Report on Economic and Financial Analysis – September 2012   

 


 
 

 

Press Release
   
Summarized Analysis of Adjusted Income
 
Efficiency Ratio (ER)

The Efficiency Ratio in the last 12 months(1)improved by 0.3 p.p. for the third consecutive quarter, including the raise in salary levels as determined by the collective bargaining agreement, reaching 42.1% in the third quarter of 2012, lowest recorded in the last nine quarters. The improvement in ER was mainly driven by the growth in financial margin and fee and commission income, which was mainly due to an increase in average business volume, resulting from accelerated organic growth, which began in the second half of 2011, combined with the ongoing cost control efforts and the Efficiency Committee actions.

Quarterly ER was up 1.2 p.p. over the same period in the previous year, as a result of the aforementioned factors, combined with the 19.1% increase in income from insurance, pension plans and capitalization bonds.

The “adjusted to risk” ER, which reflects the impact of risk associated with loan operations(2), remained stable over the previous quarter at 53.1%, thanks to the stable delinquency ratio in the period.

(1) ER = (Personnel Expenses – Employee Profit Sharing + Administrative Expenses) / (Financial Margin + Fee and Commission Income + Income from Insurance + Equity in the Earnings (Losses) of Unconsolidated Companies + Other Operating Income – Other Operating Expenses). Considering the ratio between: (i) total administrative costs (Personnel Expenses + Administrative Expenses + Other Operating Expenses + Tax Expenses not related to revenue generation + Insurance Selling Expenses) and (ii) revenue net of related taxes (not considering Claims and Selling Expenses from the Insurance Group), our ER in the third quarter of 2012 would be 44.9%; and

(2) Including ALL expenses, adjusted for granted discounts, loan recovery and sale of foreclosed assets, among others.

 

 

 

 

Bradesco 

 11  

 


 
 

 

Press Release Press Release
   
Summarized Analysis of Adjusted Income
 
Financial Margin

 

 

The R$79 million decrease between the third quarter of 2012 and the second quarter of 2012 was mainly due to:

·         lower gains from the non-interest margin, in the amount of R$164 million, as a result of lower treasury/security gains; and

offset by:

·         a R$85 million increase in interest-earning operations, mainly due to higher gains with: (i) “Loans”, due to increased volume of transactions in the period, and (ii) “Securities/Other” margins.

Financial margin posted a R$3,621 million improvement between the first nine months of 2012 and the same period in 2011, for growth of 12.5%, mainly driven by:

·      a R$3,658 million increase in income from interest-earning operations due to an increase in business volume, mainly from:
(i) “Loans”; and (ii) “Securities/Other;” and

offset by:

·      lower income from the non-interest margin, in the amount of R$37 million, due to lower “Treasury/Securities” gains.

 

 
12 Report on Economic and Financial Analysis – September 2012   

 


 
 

 

Press Release
   
Summarized Analysis of Adjusted Income
 
Interest Financial Margin – Annualized Average Rates
 



 

 

 

 

 

R$ million

9M12

9M11

Interest

Average

Balance

Average

Rate

Interest

Average

Balance

Average

Rate

Loans

22,003

280,666

10.6%

19,656

250,059

10.6%

Funding

3,228

333,543

1.3%

3,393

295,027

1.5%

Insurance

2,271

110,526

2.7%

2,618

92,422

3.8%

Securities/Other

3,841

288,773

1.8%

2,018

225,793

1.2%

 

 

 

 

 

 

 

Financial Margin

31,343

-

7.4%

27,685

-

7.5%

             

 

 

3Q12

2Q12

Interest

Average

Balance

Average

Rate

Interest

Average

Balance

Average

Rate

Loans

7,460

287,987

10.8%

7,362

281,442

10.9%

Funding

1,019

332,488

1.2%

1,041

336,954

1.2%

Insurance

694

115,647

2.4%

726

110,120

2.7%

Securities/Other

1,430

298,905

1.9%

1,389

283,763

2.0%

 

 

 

 

 

 

 

Financial Margin

10,603

-

7.4%

10,518

-

7.5%


The annualized interest financial margin rate stood at 7.4% in the third quarter of 2012, down 0.1 p.p. on the previous quarter, mainly due to: (i) the reduction in the average “Loan” margin rate, which was impacted by the decrease in interest rates in effect and the change in the loan portfolio mix; and (ii) the shrinkage in the average “Insurance” margin rate, due to the increase of the IGPM in the period, which affected the adjustment for inflation of part of technical reserves.

 

 

 

Bradesco 

 13  

 


 

 

Press Release
   
Summarized Analysis of Adjusted Income
 
Expanded Loan Portfolio(1)

 

In September 2012, Bradesco’s loan operations totaled R$371.7 billion. The 1.8% increase in the quarter was due to growth of: (i) 2.1% in Individuals; (ii) 2.0% in Small and Medium-sized Entities (SMEs); and (iii) 1.5% in Corporations.

Over the last 12 months, the expanded portfolio increased 11.8.%, driven by: (i) 13.3% growth in Corporations; (ii) 13.3% growth in SMEs; and (iii) 8.7% growth in Individuals.  

To the Individuals segment, the products that posted the strongest growth in the last 12 months were: (i) real estate financing; and (ii) payroll-deductible loans. In the Corporate segment, growth was led by: (i) real estate financing – corporate plan; and (ii) export financing.

(1)   Includes sureties, guarantees, letters of credit, advances of credit card receivables, debentures, promissory notes, assignment of receivables-backed investment funds and mortgage-backed receivables and rural loan. For more information, see Chapter 2 of this Report.

 

Allowance for Loan Losses (ALL)

In the third quarter of 2012, ALL expenses stood at R$3,303 million, down 3.1% from the previous quarter, even considering the 1.9% growth in the loan portfolio – as defined by Bacen in the period. This was mainly due to change occurred only in the second quarter of 2012.

In comparison with the first nine months of 2011, ALL expenses in the same period in 2012 came to R$9,804 million, a 29.4% increase, mainly due to: (i) a 9.2% growth in loan operations - as defined by Bacen; and (ii) greater delinquency ratio in the period.

 

 
14 Report on Economic and Financial Analysis – September 2012   

 


 

 

Press Release
   
Summarized Analysis of Adjusted Income
 
Delinquency Ratio > 90 days(1)

 

The delinquency ratio over 90 days was down 0.1 p.p. in the quarter, despite the changes in mix of business. It is worth highlighting Corporations’ lower delinquency ratio.

 

 

 

(1) As defined by Bacen.

 

 

Coverage Ratios(1)

 

The following graph presents the changes in coverage ratio of the ALL for loans overdue for more than 60 and 90 days. In September 2012, these ratios stood at 144.8% and 179.0%, respectively, posting a slight improvement in the period and pointing to a comfortable level of provisioning.

The ALL, totaling R$20.9 billion in September 2012, was made up of: (i) R$16.9 billion required by Bacen; and (ii) R$4.0 billion in excess provisions.

 
 
 

 

Bradesco 

 15  

 


 
 
Press Release
   
Summarized Analysis of Adjusted Income
 

Income from Insurance, Pension Plans and Capitalization Bonds

 

Net income for the third quarter of 2012 stood at R$837 million (R$881 million in the second quarter of 2012), with an annualized Return on Shareholders’ Equity of 24.9%.

Net income totaled R$2.623 billion, up 12.0% in the first nine months of 2012 in comparison with the same period a year earlier (R$2.341 billion), with a 24.6% Return on Shareholders’ Equity.

  

 

 

R$ million (unless otherwise stated)

3Q12

2Q12

1Q12

4Q11

3Q11

2Q11

1Q11

4Q10

Variation %

3Q12 x 2Q12

3Q12 x 3Q11

Net Income

837

881

905

860

780

800

761

779

(5.0)

7.3

Insurance Written Premiums, Pension Plan Contributions and Capitalization Bond Income

10,104

11,570

9,418

11,138

9,025

9,628

7,845

9,012

(12.7)

12.0

Technical Reserves

117,807

111,789

106,953

103,653

97,099

93,938

89,980

87,177

5.4

21.3

Financial Assets (1)

133,738

128,526

122,147

116,774

110,502

106,202

102,316

100,038

4.1

21.0

Claims Ratio

70.4

71.3

71.9

68.6

71.5

72.2

72.0

71.1

(0.9) p.p.

(1.1) p.p.

Combined Ratio

86.5

85.0

85.6

83.6

86.2

85.8

86.1

85.1

1.5 p.p.

0.3 p.p.

Policyholders / Participants and Customers (in thousands)

42,363

41,898

40,785

40,304

39,434

37,972

37,012

36,233

1.1

7.4

Employees

7,545

7,478

7,574

7,608

7,571

7,594

7,544

7,459

0.9

(0.3)

Market Share of Insurance Written Premiums, Pension Plan

Contributions and Capitalization Bond Income (2)

24.5

24.8

23.4

25.6

24.9

25.0

23.2

24.7

(0.3) p.p.

(0.4) p.p.

                     

 

(1) As of the fourth quarter of 2010, held-to-maturity securities were reclassified to available for sale category, for adoption of CPCs 38 and 40; and

(2) The third quarter of 2012 includes the latest data released by Susep (August 12).

Note: For comparison purposes, the non-recurring effects arising from the additional technical reserve due to the real interest rate reduction were not considered in the third quarter ratio.

 

 

 

 
16 Report on Economic and Financial Analysis – September 2012   

 

 


 

 

 

 

Press Release
   
Summarized Analysis of Adjusted Income
 

Below we point out the main non-recurring events in the third quarter of 2012, which, however, had not an impact on Insurance Group’s result:

(i) Financial Assets: Aiming at streamlining our Assets Liability Management – ALM, we extended the terms of some available-for-sale securities covering technical reserves. This resulted in a R$2.1-billion gain in financial revenues; and

(ii) Technical Reserves: Based on economic and actuarial studies, the Insurance Group decided to adapt its long-term technical reserves to the current real interest rates. As a result, we had a R$2.1 billion expense on additional technical reserves.    

Note that, despite the R$2.1 billion expense with available-for-sale securities, this portfolio’s mark-to-market balance increased R$189 million in the third quarter of 2012, totaling R$5.8 billion in September 2012 (June 2012 – R$5.6 billion).

Due to the excellent performance of the Life and Pension Plan segments in the second quarter of 2012 and the known seasonality of the insurance segment, the quarterly revenue stood at R$10.1 billion, lower in a quarter-on-quarter comparison, but up 12.0% when compared to the previous year.

Net income for the third quarter of 2012 was down 5.0% over the previous quarter, mainly due to: (i) the 12.7% decrease in revenue; partially offset by: (ii) the 0.9 p.p. reduction in claims ratio; and (iii) the improved financial and equity income.

Year on year, quarterly net income was up 7.3%, due to: (i) the 12.0% increase in revenue; (ii) 1.1 p.p. drop in claims ratio; (iii) lower general and administrative expenses; partially offset by: (iv) a decreased financial income.

In the first nine months, total revenue increased by 17.3% over the same period in 2011, which was driven by the performance of all segments, that posted an over two-digit growth in the period.

Net income for the first nine months of 2012 was up 12.0% over the same period in 2011, due to: (i) a 17.3% increase in revenue; (ii) the focus on more profitable products; (iii) the 0.7 p.p. drop in claims ratio; (iv) improved equity income; and (v) lower general and administrative expenses, despite the sector’s collective bargaining agreement in January 2012; partially offset by:
(vi) a decreased financial income.

With regards to solvency, Grupo Bradesco de Seguros e Previdência complies with Susep and ANS rules, also complying with global standards (Solvency II), with a leverage of 2.3 times its Shareholders’ Equity in the period.

 

 

 

Bradesco 

 17  

 


 
 

 

Press Release
   
Summarized Analysis of Adjusted Income
 
Fee and Commission Income

 

 

In the third quarter of 2012, fee and commission income came to R$4,438 million, up R$157 million, or 3.7%, over the previous quarter, due to the increase in business volume. This result  was due to: (i) an increase in income from cards; (ii) an increase in income from fund management; (iii) an increase in income from checking accounts; (iv) an increase in income from collections; and partially offset by: (v) lower gains from capital market operations (underwriting / financial advisory).

In comparison with the same period a year earlier, the increase of R$1,700 million, or 15.3%, in fee and commission income in the first nine months of 2012 was mainly due to: (i) the performance of the credit card segment, driven by the growth in credit card base and revenue; (ii) higher income from checking accounts, which was a result of a better business volume and an increase in the checking account holder base, which posted net growth of 945 thousand accounts in the period; (iii) greater income from fund management; (iv) greater gains from capital market operations (underwriting / financial advisory); and (v) greater income from loan operations, resulting from an increase in volume of contracted operations and surety and guarantee operations.

 

 
18 Report on Economic and Financial Analysis – September 2012   

 

 


 
 

 

Press Release
   
Summarized Analysis of Adjusted Income
 
Personnel Expenses

In the third quarter of 2012, the R$72 million increase from the previous quarter was due to the following:

·         structural expenses – up R$112 million, mainly due to raise in salary levels, as determined by the collective bargaining agreement, and adjustments to labor obligations; and

 

·         non-structural expenses – R$40 million decrease, mainly due to lower expenses with: (i) provision for labor claims; and (ii) employee and management profit sharing.

   

In comparison with the same period in 2011, the R$1,123 million increase in the first nine months of 2012 was mainly the result of:

·         R$951 million in structural expenses, resulting from: (i) increased expenses with salaries,  social charges and benefits, due to raise in salary levels (2011 and 2012 collective bargaining agreements); and (ii) the net increase in the number of employees by 2,766 professionals, due to organic growth in the period; and

·         R$172 million in non-structural expenses, basically driven by greater expenses with employee and management profit sharing in the period.

Note: Structural Expenses = Salaries + Social Charges + Benefits + Pension Plans. Non-Structural Expenses = Employee and Management Profit Sharing + Training + Labor Provision + Costs with Termination of Employment Contracts.

 

 

 

Bradesco 

 19  

 
 

 

 

Press Release
   
Summarized Analysis of Adjusted Income
 
Administrative Expenses

In the third quarter of 2012, the 3.6% increase in administrative expenses from the previous quarter was mainly the result of higher expenses with: (i) outsourced services, mainly due to Cards variable expenses; (ii) data processing; and (iii) marketing and advertising, mainly due to the actions taken during the 2012 London Olympic and Paralympic Games, regarding the 2016 Rio Olympics sponsorship rights.

In comparison with the nine months of 2012 and the same period a year earlier, the 7.0% increase in the third quarter of 2012 was mainly due to: (i) the increase in business and services volume; (ii) contractual adjustments; and (iii) the opening of 11,393 service points, mainly the increase to 720 branches and 10,341 Bradesco Expresso points, for a total of 67,225 service points on September 30, 2012; which was partially offset by lower expenses with: (iv) outsourced services; and (v) marketing and advertising.

Other Operating Income and Expenses

 

Other operating expenses, net of other operating income, totaled R$1,054 million in the third quarter of 2012, up R$19 million over the previous quarter, and R$492 million in comparison with the first nine months of 2012.

Compared with the same quarter last year and the previous quarter, the increase in other operating expenses, net of other operating income, was mainly the result of greater expenses with: (i) operating provisions, particularly those for tax and civil contingencies; (ii) sundry losses; and (iii) amortization of intangible assets due to acquisition of banking rights.

 

 
20 Report on Economic and Financial Analysis – September 2012   

 


 
 

 

Press Release
   
Summarized Analysis of Adjusted Income
 
Income Tax and Social Contribution

In the quarter-on-quarter comparison, income tax and social contribution expenses remained practically steady, mainly due to the fact that the taxable result remained the same in the period.

In the year-on-year comparison, the increase in these expenses is mainly the result of: (i) greater taxable result; and (ii) the termination of tax credits resulting from the increase in the social contribution rate from 9% to 15% in the first quarter of 2011.

 

 

Unrealized Gains

 

Unrealized gains totaled R$21,096 million in the third quarter of 2012, a R$448 million decrease from the previous quarter. This was mainly due to: (i) the depreciation of investment in Cielo, whose share value decreased by 14.4% in the quarter; and partially offset by: (ii) the appreciation of fixed-income securities due to mark-to-market accounting.

 

 

 

Bradesco 

 21  

 
 

 

Press Release
   
Economic Outlook

 

The third quarter was marked by a new shift in the global scenario as the concerns that had increased in the previous three months began to abate. In an atypically proactive and decisive manner, the main central banks renewed or increased their commitment to injecting liquidity into the markets, which reacted positively. The ECB - European Central Bank signaled its intention of intervening in the sovereign debt markets, contingent upon the assumption of certain obligations by the beneficiaries. Even if this initiative does not solve the eurozone’s current structural and non-structural problems, it has contributed substantially to reducing the risk of extreme events in the region. At the same time, the Federal Reserve gave the market a pleasant surprise when it inaugurated the third phase of its quantitative easing program (QE3). In addition to announcing a program to purchase mortgage-backed securities, with no definite closing date, it signaled the maintenance of zero interest until mid-2015 and undertook to continue its expansionist measures even after the U.S. economy shows signs of a sustainable recovery. The Japanese central bank also expanded its asset purchase program. 

This series of initiatives should help the recovery of the global economy in the coming quarters, albeit moderately, although they have not eliminated all the existing fears. In particular, there is still a good deal of uncertainty regarding the end of the fiscal stimuli in the United States (the so-called “fiscal cliff”), the degree of commitment of the European nations to adjusting their public finances and, more recently, midterm growth in China, which will be undergoing a political transition in the fourth quarter and whose growth rates are approaching 7.5%.

In Brazil, there was also a shift in the third quarter, this time towards economic activity. The various monetary and fiscal stimuli began to generate more positive results, including an upturn in business confidence. The auto sector measures were particularly effective in that they encouraged sales and reduced inventories to near-normal levels. There are also recent indications suggesting that industrial production is recovering in segments that are not directly related to the auto industry.

Looking forward, it would appear that the recovery is sustainable. The capital goods segment, in particular, should benefit from temporary measures, such as more attractive funding rates and accelerated depreciation, as well as the federal government’s purchase program aimed at the segment. Looking further ahead, investments in general should also benefit from the recent infrastructure concessions. For the economy as a whole, the sector-specific tax breaks and the measures to trim production costs, such as the reduction in electricity tariffs, should make the country more competitive. It is also worth highlighting the excellent prospects for domestic agriculture and cattle-raising, which is already having a positive impact on growth, following the negative shock in the first quarter.

Bradesco is maintaining its positive long-term outlook for Brazil. The country’s ample foreign reserves (US$379 billion, versus US$208 billion in September 2008) and the volume of reserve requirements (R$365 billion, versus R$272 billion four years ago) constitute lines of defense that can be called upon rapidly if necessary – such as the reduction in reserve requirements in September. Pre-salt oil exploration and the major global sporting events scheduled for the coming years constitute unique opportunities for a select group of nations. In addition, the ongoing and intense upward social mobility process has expanded the domestic consumer market, in turn generating excellent prospects for Brazil’s banking system.

The Organization continues to believe that Brazil will achieve a higher potential growth pace more rapidly if fueled by bigger investments in education and infrastructure and by economic reforms that increase the efficiency of the productive sector. Action on these fronts would play a crucial role in giving the private sector a more solid foundation in regard to facing global competition and continuing to grow and create jobs.

 

 
22 Report on Economic and Financial Analysis – September 2012   

 


 
 

 

Press Release
   
Main Economic Indicators

 

Main Indicators (%)

3Q12

2Q12

1Q12

4Q11

3Q11

2Q11

1Q11

4Q10

9M12

9M11

Interbank Deposit Certificate (CDI)

1.91

2.09

2.45

2.67

3.01

2.80

2.64

2.56

6.59

8.70

Ibovespa

8.87

(15.74)

13.67

8.47

(16.15)

(9.01)

(1.04)

(0.18)

4.27

(24.50)

USD – Commercial Rate

0.46

10.93

(2.86)

1.15

18.79

(4.15)

(2.25)

(1.65)

8.25

11.30

General Price Index - Market (IGP-M)

3.79

2.56

0.62

0.91

0.97

0.70

2.43

3.18

7.10

4.15

Extended Consumer Price Index (IPCA) –

Brazilian Institute of Geography and Statistics (IBGE)

1.42

1.08

1.22

1.46

1.06

1.40

2.44

2.23

3.77

4.97

Federal Government Long-Term Interest Rate (TJLP)

1.36

1.48

1.48

1.48

1.48

1.48

1.48

1.48

4.37

4.50

Reference Interest Rate (TR)

0.03

0.07

0.19

0.22

0.43

0.31

0.25

0.22

0.29

0.99

Savings Account (Old Rule) (1)

1.53

1.58

1.70

1.73

1.95

1.82

1.76

1.73

4.89

5.62

Savings Account (New Rule) (1)

1.40

-

-

-

-

-

-

-

1.89

-

Business Days (number)

64

62

63

62

65

62

62

63

189

189

Indicators (Closing Rate)

Sept12

Jun12

Mar12

Dec11

Sept11

Jun11

Mar11

Dec10

Sept12

Sept11

USD – Commercial Selling Rate - (R$)

2.0306

2.0213

1.8221

1.8758

1.8544

1.5611

1.6287

1.6662

2.0306

1.8500

Euro - (R$)

2.6109

2.5606

2.4300

2.4342

2.4938

2.2667

2.3129

2.2280

2.6109

2.4930

Country Risk (points)

166

208

177

223

275

148

173

189

166

275

Basic Selic Rate Copom (% p.a.)

7.50

8.50

9.75

11.00

12.00

12.25

11.75

10.75

7.50

12.00

BM&F Fixed Rate (% p.a.)

7.48

7.57

8.96

10.04

10.39

12.65

12.28

12.03

7.48

10.39

 

(1)  The 3Q12 and 9M12 consider the new savings account remuneration rule, which defines that: (i) the existing deposits up to May 3, 2012 will continue to remunerate at TR + 6.17% p.a.; and (ii) for deposits made as of May 4, 2012, the new rules are:
(a) if the Selic rate is higher than 8.5% p.a., the TR + 6.17% p.a. remuneration will be maintained; and (b) when the Selic rate is equal to or lower than 8.5% p.a., the remuneration will be 70% of Selic rate + TR.

 

 

Projections through 2014

 

%

2012

2013

2014

USD - Commercial Rate (year-end) - R$

2.00  

2.00

2.10

Extended Consumer Price Index (IPCA)

5.40  

5.20

5.00

General Price Index - Market (IGP-M)

7.80  

4.60

4.50

Selic (year-end)

7.25

8.25

8.25

Gross Domestic Product (GDP)

1.60

4.00

4.50

 

 

 

Bradesco 

 23  

 


 
 

 

Press Release
   
Guidance
 

Bradesco’s Outlook for 2012

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 to date.

Loan Portfolio(1)

14% to 18%

Individuals

12% to 16%

Companies

14% to 18%

SMEs

16% to 20%

Corporations

13% to 17%

Products

 

Vehicles

2% to 6%

Cards(2)

10% to 14%

Real Estate Financing (origination)

R$ 14.0 bi

Payroll-Deductible Loans

26% to 30%

Financial Margin(3)

10% to 14%

Fee and Commission Income

10% to 14%

Operating Expenses(4)

8% to 12%

Insurance Premiums

15% to 19%

 

(1)     Expanded Loan Portfolio;

(2)     Does not include the “BNDES Cards” and “Discounts on Advances of Receivables” portfolios;

(3)     Under current criterion, Guidance for Interest Financial Margin; and

(4)     Administrative and Personnel Expenses.

 

 
24 Report on Economic and Financial Analysis – September 2012   

 

 


 
 

 

Press Release
   
Income Statement vs. Managerial Income vs. Adjusted Income
 

Analytical Breakdown of Income Statement vs. Managerial Income vs. Adjusted Income


Third Quarter of 2012
 




R$ million

3Q12

Book Income Statement

Reclassifications

Fiscal Hedge (8)

Managerial Income Statement

Non-Recurring Events (9)

Adjusted Statement of Income

(1)

(2)

(3)

(4)

(5)

(6)

(7)

Financial Margin

13,842

(290)

45

18

(615)

-

-

-

70

13,070

(2,116)

10,955

ALL

(3,552)

-

-

-

348

(99)

-

-

-

(3,303)

-

(3,303)

Gross Income from Financial Intermediation

10,290

(290)

45

18

(267)

(99)

-

-

70

9,767

(2,116)

7,652

Income from Insurance, Pension Plans and Capitalization Bonds (10)

(1,087)

-

-

-

-

-

-

-

-

(1,087)

2,116

1,029

Fee and Commission Income

4,332

-

-

-

-

-

107

-

-

4,438

-

4,438

Personnel Expenses

(3,119)

-

-

-

-

-

-

-

-

(3,119)

-

(3,119)

Other Administrative Expenses

(3,447)

-

-

-

-

-

-

(118)

-

(3,565)

-

(3,565)

Tax Expenses

(1,021)

-

-

-

(10)

-

-

-

(8)

(1,038)

-

(1,038)

Equity in the Earnings (Losses) of Unconsolidated Companies

45

-

-

-

-

-

-

-

-

45

-

45

Other Operating Income/Expenses

(1,639)

290

(45)

(18)

277

20

(107)

118

-

(1,105)

52

(1,054)

Operating Result

4,354

-

-

-

-

(79)

-

-

62

4,337

52

4,388

Non-Operating Income

(99)

-

-

-

-

79

-

-

-

(20)

-

(20)

Income Tax / Social Contribution and Non-controlling Interest

(1,393)

-

-

-

-

-

-

-

(62)

(1,455)

(21)

(1,475)

Net Income

2,862

-

-

-

-

-

-

-

-

2,862

31

2,893

                         

 

(1)      Expenses with Commission on the Placement of Loans and Financing were reclassified from the item “Other Operating Expenses” to the item “Financial Margin;”

(2)      Interest Income/Expenses from the insurance segment were reclassified from the item “Other Operating Income/Expenses” to the item “Financial Margin;”

(3)      Interest Income/Expenses from the financial segment were reclassified from the item “Other Operating Income/Expenses” to the item “Financial Margin;”

(4)      Income from Loan Recovery classified under the item “Financial Margin”, Expenses with Discounts Granted classified under the item “Other Operating Income/Expenses”, and Expenses with Write-offs of Leasing Operations classified under the item “Financial Margin” were reclassified to the item “ALL Expenses - Allowance for Loan Losses”, and Tax Expenses, classified as “Other Operating Expenses, were reclassified under the item “Tax Expenses;”

(5)      Losses/Gains from the Sale of Foreclosed Assets/Investments classified under the item “Non-Operating Result” were reclassified to items “ALL Expenses - Allowance for Loan Losses” / “Other Operating Income/Expenses;”

(6)      Income from Card Fees and Commissions, Insurance Premium Commissions and Insurance Policy Fees classified under the item “Other Operating Income/Expenses” were reclassified to the item “Fee and Commission Income;”

(7)      Credit Card Operation Interchange Expenses classified under the item “Other Operating Income/Expenses” were reclassified to the item “Other Administrative Expenses;”

(8)      Partial result of Derivatives used to hedge investments abroad, which simply cancels the tax effects (Income Tax/Social Contribution (IR/CS) and Social Integration Program/Contribution for Social Security Financing (PIS/Cofins)) of this hedge strategy in terms of Net Income;

(9)      For more information see page 8 of this chapter; and

(10)     Income from Insurance, Pension Plans and Capitalization Bonds = Insurance, Pension Plan and Capitalization Bond Retained Premiums - Variation in Technical Reserves for Insurance, Pension Plans and Capitalization Bonds – Retained Claims – Capitalization Bond Draws and Redemption - Insurance, Pension Plan and Capitalization Bond Selling Expenses.

 

 

 

Bradesco 

 25  

 


 
 

 

Press Release
   
Income Statement vs. Managerial Income vs. Adjusted Income


Second
 Quarter of 2012

 

R$ million

2Q12

Book Income Statement

Reclassifications

Fiscal Hedge (8)

Managerial Income Statement

Non-Recurring Events (9)

Adjusted Statement of Income

(1)

(2)

(3)

(4)

(5)

(6)

(7)

Financial Margin

10,304

(271)

37

22

(618)

-

-

-

1,560

11,034

-

11,034

ALL

(3,650)

-

-

-

342

(98)

-

-

-

(3,407)

-

(3,407)

Gross Income from Financial Intermediation

6,654

(271)

37

22

(276)

(98)

-

-

1,560

7,627

-

7,627

Income from Insurance, Pension Plans and Capitalization Bonds (10)

953

-

-

-

-

-

-

-

-

953

-

953

Fee and Commission Income

4,174

-

-

-

-

-

107

-

-

4,281

-

4,281

Personnel Expenses

(3,047)

-

-

-

-

-

-

-

-

(3,047)

-

(3,047)

Other Administrative Expenses

(3,322)

-

-

-

-

-

-

(119)

-

(3,441)

-

(3,441)

Tax Expenses

(813)

-

-

-

(8)

-

-

-

(170)

(991)

-

(991)

Equity in the Earnings (Losses) of Unconsolidated Companies

19

-

-

-

-

-

-

-

-

19

-

19

Other Operating Income/Expenses

(1,620)

271

(37)

(22)

284

20

(107)

119

-

(1,092)

57

(1,035)

Operating Result

2,998

-

-

-

-

(78)

-

-

1,390

4,310

57

4,366

Non-Operating Income

(100)

-

-

-

-

78

-

-

-

(22)

-

(22)

Income Tax / Social Contribution and Non-controlling Interest

(65)

-

-

-

-

-

-

-

(1,390)

(1,455)

(23)

(1,477)

Net Income

2,833

-

-

-

-

-

-

-

-

2,833

34

2,867

 

(1)      Expenses with Commission on the Placement of Loans and Financing were reclassified from the item “Other Operating Expenses” to the item “Financial Margin;”

(2)      Interest Income/Expenses from the insurance segment were reclassified from the item “Other Operating Income/Expenses” to the item “Financial Margin;”

(3)      Interest Income/Expenses from the financial segment were reclassified from the item “Other Operating Income/Expenses” to the item “Financial Margin;”

(4)      Income from Loan Recovery classified under the item “Financial Margin”, Expenses with Discounts Granted classified under the item “Other Operating Income/Expenses”, and Expenses with Write-offs of Leasing Operations classified under the item “Financial Margin” were reclassified to the item “ALL Expenses - Allowance for Loan Losses”, and Tax Expenses, classified as “Other Operating Expenses, were reclassified under the item “Tax Expenses;”

(5)      Losses/Gains from the Sale of Foreclosed Assets/Investments classified under the item “Non-Operating Result” were reclassified to items “ALL Expenses - Allowance for Loan Losses” / “Other Operating Income/Expenses;”

(6)      Income from Card Fees and Commissions, Insurance Premium Commissions and Insurance Policy Fees classified under the item “Other Operating Income/Expenses” were reclassified to the item “Fee and Commission Income;”

(7)      Credit Card Operation Interchange Expenses classified under the item “Other Operating Income/Expenses” were reclassified to the item “Other Administrative Expenses;”

(8)      Partial result of Derivatives used to hedge investments abroad, which simply cancels the tax effects (Income Tax/Social Contribution (IR/CS) and Social Integration Program/Contribution for Social Security Financing (PIS/Cofins)) of this hedge strategy in terms of Net Income;

(9)      For more information see page 8 of this chapter; and

(10)     Income from Insurance, Pension Plans and Capitalization Bonds = Insurance, Pension Plan and Capitalization Bond Retained Premiums - Variation in Technical Reserves for Insurance, Pension Plans and Capitalization Bonds – Retained Claims – Capitalization Bond Draws and Redemption - Insurance, Pension Plan and Capitalization Bond Selling Expenses.

 

 
26 Report on Economic and Financial Analysis – September 2012   

 

 


 

 

 

 

 
Press Release
   
Income Statement vs. Managerial Income vs. Adjusted Income
 

Nine Months of 2012



 

R$ million

9M12

Book Income Statement

Reclassifications

Fiscal Hedge (8)

Managerial Income Statement

Non-Recurring Events (9)

Adjusted Statement of Income

(1)

(2)

(3)

(4)

(5)

(6)

(7)

Financial Margin

35,921

(747)

141

(30)

(1,748)

29

-

-

1,235

34,801

(2,116)

32,684

ALL

(10,501)

-

-

-

955

(258)

-

-

-

(9,804)

-

(9,804)

Gross Income from Financial Intermediation

25,420

(747)

141

(30)

(793)

(229)

-

-

1,235

24,997

(2,116)

22,880

Income from Insurance, Pension Plans and Capitalization Bonds (10)

743

-

-

-

-

-

-

-

-

743

2,116

2,859

Fee and Commission Income

12,501

-

-

-

-

-

336

-

-

12,837

-

12,837

Personnel Expenses

(9,044)

-

-

-

-

-

-

-

-

(9,044)

-

(9,044)

Other Administrative Expenses

(10,060)

-

-

-

-

-

-

(347)

-

(10,407)

-

(10,407)

Tax Expenses

(2,957)

-

-

-

50

-

-

-

(135)

(3,041)

-

(3,041)

Equity in the Earnings (Losses) of Unconsolidated Companies

104

-

-

-

-

-

-

-

-

104

-

104

Other Operating Income/Expenses

(4,746)

747

(141)

30

743

78

(336)

347

-

(3,279)

195

(3,085)

Operating Result

11,961

-

-

-

-

(151)

-

-

1,100

12,909

195

13,103

Non-Operating Income

(211)

-

-

-

-

151

-

-

-

(60)

-

(60)

Income Tax / Social Contribution and Non-controlling Interest

(3,262)

-

-

-

-

-

-

-

(1,100)

(4,361)

(78)

(4,438)

Net Income

8,488

-

-

-

-

-

-

-

-

8,488

117

8,605

 

(1)      Expenses with Commission on the Placement of Loans and Financing were reclassified from the item “Other Operating Expenses” to the item “Financial Margin;”

(2)      Interest Income/Expenses from the insurance segment were reclassified from the item “Other Operating Income/Expenses” to the item “Financial Margin;”

(3)      Interest Income/Expenses from the financial segment were reclassified from the item “Other Operating Income/Expenses” to the item “Financial Margin;”

(4)      Income from Loan Recovery classified under the item “Financial Margin”, Expenses with Discounts Granted classified under the item “Other Operating Income/Expenses”, and Expenses with Write-offs of Leasing Operations classified under the item “Financial Margin” were reclassified to the item “ALL Expenses - Allowance for Loan Losses”, and Tax Expenses, classified as “Other Operating Expenses, were reclassified under the item “Tax Expenses;”

(5)      Losses/Gains from the Sale of Foreclosed Assets/Investments classified under the item “Non-Operating Result” were reclassified to items “ALL Expenses - Allowance for Loan Losses” / “Other Operating Income/Expenses;”

(6)      Income from Card Fees and Commissions, Insurance Premium Commissions and Insurance Policy Fees classified under the item “Other Operating Income/Expenses” were reclassified to the item “Fee and Commission Income;”

(7)      Credit Card Operation Interchange Expenses classified under the item “Other Operating Income/Expenses” were reclassified to the item “Other Administrative Expenses;”

(8)      Partial result of Derivatives used to hedge investments abroad, which simply cancels the tax effects (Income Tax/Social Contribution (IR/CS) and Social Integration Program/Contribution for Social Security Financing (PIS/Cofins)) of this hedge strategy in terms of Net Income;

(9)      For more information see page 8 of this chapter; and

(10)     Income from Insurance, Pension Plans and Capitalization Bonds = Insurance, Pension Plan and Capitalization Bond Retained Premiums - Variation in Technical Reserves for Insurance, Pension Plans and Capitalization Bonds – Retained Claims – Capitalization Bond Draws and Redemption - Insurance, Pension Plan and Capitalization Bond Selling Expenses.

 

 

 

Bradesco 

 27  

 


 

 

 

 

 
Press Release
   
Income Statements vs. Managerial Income vs. Adjusted Income

Nine Months of 2011

 

R$ million

9M11

Book Income Statement

Reclassifications

Fiscal Hedge (8)

Managerial Income Statement

Non-Recurring Events (9)

Adjusted Statement of Income

(1)

(2)

(3)

(4)

(5)

(6)

(7)

Financial Margin

29,399

(344)

81

(282)

(1,266)

-

-

-

1,475

29,063

-

29,063

ALL

(9,125)

-

-

-

718

(175)

-

-

-

(8,582)

1,006

(7,576)

Gross Income from Financial Intermediation

20,274

(344)

81

(282)

(548)

(175)

-

-

1,475

20,481

1,006

21,487

Income from Insurance, Pension Plans and Capitalization Bonds (10)

2,437

-

-

-

-

-

-

-

-

2,437

-

2,437

Fee and Commission Income

10,815

-

-

-

-

-

322

-

-

11,137

-

11,137

Personnel Expenses

(8,421)

-

-

-

-

-

-

-

-

(8,421)

501

(7,921)

Other Administrative Expenses

(9,444)

-

-

-

-

-

-

(280)

-

(9,724)

-

(9,724)

Tax Expenses

(2,618)

-

-

-

119

-

-

-

(160)

(2,659)

-

(2,659)

Equity in the Earnings (Losses) of Unconsolidated Companies

91

-

-

-

-

-

-

-

-

91

-

91

Other Operating Income/Expenses

(2,061)

344

(81)

282

429

-

(322)

280

-

(1,129)

(1,464)

(2,593)

Operating Result

11,073

-

-

-

-

(175)

-

-

1,315

12,213

43

12,255

Non-Operating Income

(118)

-

-

-

-

175

-

-

-

57

(58)

(1)

Income Tax / Social Contribution and Non-controlling Interest

(2,653)

-

-

-

-

-

-

-

(1,315)

(3,968)

140

(3,827)

Net Income

8,302

-

-

-

-

-

-

-

-

8,302

125

8,427

                         

 

(1)      Expenses with Commission on the Placement of Loans and Financing were reclassified from the item “Other Operating Expenses” to the item “Financial Margin;”

(2)      Interest Income/Expenses from the insurance segment were reclassified from the item “Other Operating Income/Expenses” to the item “Financial Margin;”

(3)      Interest Income/Expenses from the financial segment were reclassified from the item “Other Operating Income/Expenses” to the item “Financial Margin;”

(4)      Income from Loan Recovery classified under the item “Financial Margin”, Expenses with Discounts Granted classified under the item “Other Operating Income/Expenses”, and Expenses with Write-offs of Leasing Operations classified under the item “Financial Margin” were reclassified to the item “ALL Expenses - Allowance for Loan Losses”, and Tax Expenses, classified as “Other Operating Expenses, were reclassified under the item “Tax Expenses;”

(5)      Losses/Gains from the Sale of Foreclosed Assets/Investments classified under the item “Non-Operating Result” were reclassified to items “ALL Expenses - Allowance for Loan Losses” / “Other Operating Income/Expenses;”

(6)      Income from Card Fees and Commissions, Insurance Premium Commissions and Insurance Policy Fees classified under the item “Other Operating Income/Expenses” were reclassified to the item “Fee and Commission Income;”

(7)      Credit Card Operation Interchange Expenses classified under the item “Other Operating Income/Expenses” were reclassified to the item “Other Administrative Expenses;”

(8)      Partial result of Derivatives used to hedge investments abroad, which simply cancels the tax effects (Income Tax/Social Contribution (IR/CS) and Social Integration Program/Contribution for Social Security Financing (PIS/Cofins)) of this hedge strategy in terms of Net Income;

(9)      For more information see page 8 of this chapter; and

(10)     Income from Insurance, Pension Plans and Capitalization Bonds = Insurance, Pension Plan and Capitalization Bond Retained Premiums - Variation in Technical Reserves for Insurance, Pension Plans and Capitalization Bonds – Retained Claims – Capitalization Bond Draws and Redemption - Insurance, Pension Plan and Capitalization Bond Selling Expenses.

 

 
28 Report on Economic and Financial Analysis – September 2012   

 

 

 

 

 

 

 
 

Economic and Financial Analysis
   
Consolidated Statement of Financial Position and Adjusted Income Statement 
 
Statement of Financial Position 
 

 

R$ million

 

Sept12

Jun12

Mar12

Dec11

Sept11

Jun11

Mar11

Dec10

Assets

 

 

 

 

 

 

 

 

Current and Long-Term Assets

840,295

815,063

773,896

746,090

710,238

677,571

663,599

625,783

Cash and Cash Equivalents

12,944

13,997

25,069

22,574

10,018

7,715

6,785

15,738

Interbank Investments

126,772

92,858

84,690

82,303

85,963

86,147

100,159

73,232

Securities and Derivative Financial Instruments

319,537

322,507

294,959

265,723

244,622

231,425

217,482

213,518

Interbank and Interdepartmental Accounts

56,276

62,510

61,576

72,906

71,951

67,033

67,292

66,326

Loan and Leasing Operations

262,748

258,242

250,201

248,719

241,812

231,862

222,404

213,532

Allowance for Loan Losses (ALL)

(20,915)

(20,682)

(20,117)

(19,540)

(19,091)

(17,365)

(16,740)

(16,290)

Other Receivables and Assets

82,933

85,631

77,518

73,405

74,963

70,754

66,217

59,727

Permanent Assets

15,993

15,457

15,654

15,443

12,051

11,736

11,788

11,702

Investments

1,907

1,889

2,076

2,052

1,721

1,699

1,675

1,577

Premises and Leased Assets

4,500

4,523

4,551

4,413

3,812

3,658

3,666

3,766

Intangible Assets

9,586

9,045

9,027

8,978

6,518

6,379

6,447

6,359

Total

856,288

830,520

789,550

761,533

722,289

689,307

675,387

637,485

*

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Current and Long-Term Liabilities

789,036

765,398

730,214

704,664

667,312

635,360

623,069

588,610

Deposits

212,869

217,070

213,877

217,424

224,664

213,561

203,822

193,201

Federal Funds Purchased and Securities Sold under

Agreements to Repurchase

245,538

225,974

213,930

197,448

171,458

164,204

178,989

171,497

Funds from Issuance of Securities

53,810

51,158

48,482

41,522

32,879

29,044

21,701

17,674

Interbank and Interdepartmental Accounts

3,649

3,618

3,231

4,614

2,974

3,037

2,647

3,790

Borrowing and Onlending

45,399

47,895

47,112

53,247

49,057

45,207

41,501

38,196

Derivative Financial Instruments

4,148

3,568

2,703

735

1,724

1,221

2,358

730

Reserves for Insurance, Pension Plans and

Capitalization Bonds

117,807

111,789

106,953

103,653

97,099

93,938

89,980

87,177

Other Liabilities

105,816

104,326

93,926

86,021

87,457

85,148

82,071

76,345

Deferred Income

619

615

646

672

622

505

447

360

Non-controlling Interest in Subsidiaries

586

587

630

615

613

599

574

472

Shareholders' Equity

66,047

63,920

58,060

55,582

53,742

52,843

51,297

48,043

Total

856,288

830,520

789,550

761,533

722,289

689,307

675,387

637,485

 

 
30 Report on Economic and Financial Analysis – September 2012   

 

 


 
 

Economic and Financial Analysis
   
Consolidated Statement of Financial Position and Adjusted Income Statement 
 
Adjusted Income Statement
 

 

 

 

 

 

 

 

 

R$ million

 

3Q12

2Q12

1Q12

4Q11

3Q11

2Q11

1Q11

4Q10

Financial Margin

10,955

11,034

10,695

10,258

10,230

9,471

9,362

9,018

- Interest

10,603

10,518

10,222

9,985

9,669

9,167

8,849

8,553

- Non-interest

352

516

473

273

561

304

513

465

ALL

(3,303)

(3,407)

(3,094)

(2,661)

(2,779)

(2,437)

(2,360)

(2,295)

Gross Income from Financial Intermediation

7,652

7,627

7,601

7,597

7,451

7,034

7,002

6,723

Income from Insurance, Pension Plans

and Capitalization Bonds (1)

1,029

953

877

933

864

788

785

700

Fee and Commission Income

4,438

4,281

4,118

4,086

3,876

3,751

3,510

3,568

Personnel Expenses

(3,119)

(3,047)

(2,878)

(3,140)

(2,880)

(2,605)

(2,436)

(2,533)

Other Administrative Expenses

(3,565)

(3,441)

(3,401)

(3,682)

(3,405)

(3,179)

(3,140)

(3,257)

Tax Expenses

(1,038)

(991)

(1,012)

(1,005)

(866)

(913)

(880)

(858)

Equity in the Earnings (Losses) of Unconsolidated

Companies

45

19

40

53

41

16

34

60

Other Operating Income / (Expenses)

(1,054)

(1,035)

(996)

(808)

(907)

(764)

(922)

(646)

Operating Result

4,388

4,366

4,349

4,034

4,174

4,128

3,953

3,757

Non-Operating Income

(20)

(22)

(18)

4

10

(7)

(4)

10

Income Tax and Social Contribution

(1,455)

(1,461)

(1,468)

(1,241)

(1,304)

(1,271)

(1,138)

(1,059)

Non-controlling Interest

(20)

(16)

(18)

(26)

(16)

(25)

(73)

(24)

Adjusted Net Income

2,893

2,867

2,845

2,771

2,864

2,825

2,738

2,684

(1) Income from Insurance, Pension Plan and Capitalization Bond Operations = Insurance, Pension Plan and Capitalization Bond Retained Premiums – Variation in Technical Reserves for Insurance, Pension Plans and Capitalization Bonds – Retained Claims – Capitalization Bond Draws and Redemption – Insurance, Pension Plan and Capitalization Bond Selling Expenses.

Financial Margin - Interest and Non-Interest

Financial Margin Breakdown

 

 

 

 

 

 

Bradesco 

 31  
 

 

 

 

Economic and Financial Analysis
   
Financial Margin - Interest and Non-Interest
 
Average Financial Margin Rate
 

 

R$ million

Financial Margin

9M12

9M11

3Q12

2Q12

Variation

YTD

Quarter

Interest - due to volume

 

 

 

 

3,982

261

Interest - due to spread

 

 

 

 

(324)

(176)

- Financial Margin - Interest

31,343

27,685

10,603

10,518

3,658

85

- Financial Margin - Non-Interest

1,341

1,378

352

516

(37)

(164)

Financial Margin

32,684

29,063

10,955

11,034

3,621

(79)

Average Margin Rate (1)

7.7%

7.9%

7.6%

7.9%

 

 

             

(1) Average Margin Rate = (Financial Margin / Average Assets – Purchase and Sale Commitments – Permanent Assets) Annualized

In the third quarter of 2012, financial margin was R$10,955 million. Compared with the previous quarter there was a 0.7%, or R$79 million, decrease. This variation was mainly due to: (i) lower non-interest margin, totaling R$164 million, and partially offset by: (ii) higher interest margin, in the amount of R$85 million.

When comparing the nine months of 2012 with the same period last year, financial margin grew by 12.5%, or R$3,621 million as a result of (i) a R$3,658 million increase in interest margin, of which: (a) R$3,982 million corresponds to the increase in volume of operations; partially offset by: (b) a R$324 million decrease in spread; and partially offset by: (ii) decrease in non-interest financial margin, in the amount of R$37 million, due to lower Treasury / Securities gains.

 

Financial Margin - Interest

Interest Financial Margin - Breakdown

 

R$ million

 

Interest Financial Margin Breakdown

 

9M12

9M11

3Q12

2Q12

Variation

 

 

 

 

 

 

YTD

Quarter

Loans

22,003

19,656

7,460

7,362

2,347

98

Funding

3,228

3,393

1,019

1,041

(165)

(22)

Insurance

2,271

2,618

694

726

(347)

(32)

Securities/Other

3,841

2,018

1,430

1,389

1,823

41

Financial Margin

31,343

27,685

10,603

10,518

3,658

85

             


The interest financial margin in the third quarter of 2012 stood at R$10,603 million, versus R$10,518 million in the second quarter of 2012, for an R$85 million increase.
When comparing the nine months of 2012 and the same period in 2011, there was an increase of 13.2%, or R$3,658 million.

 

The business lines that most contributed to the higher interest margin in quarter-on-quarter and year-on-year comparisons were (i) "Loan"; and (ii) and “Securities/Other.”

 
32 Report on Economic and Financial Analysis – September 2012   

 


 
 

 

Economic and Financial Analysis
   
Financial Margin - Interest and Non-Interest
 
Interest Financial Margin - Rates

The annualized interest financial margin rate stood at 7.4% in the third quarter of 2012, posting a slight 0.1 p.p. decrease in relation to the previous quarter, mainly due to (i) the decrease in the Loan margin average rate, which was impacted by lower interest rates, coupled with the change in the mix of the loan portfolio, and (ii) the decrease occurred in the Insurance margin average rate, due to the increase of IGP-M, which impacted on the adjustment to inflation of part of the technical reserves in the period.

Interest Financial Margin - Annualized Average Rates

 

 

 

 

 

 

 

R$ million

 

9M12

9M11

 

Interest

Average

Balance

Average

Rate

Interest

Average

Balance

Average

Rate

Loans

22,003

280,666

10.6%

19,656

250,059

10.6%

Funding

3,228

333,543

1.3%

3,393

295,027

1.5%

Insurance

2,271

110,526

2.7%

2,618

92,422

3.8%

Securities/Other

3,841

288,773

1.8%

2,018

225,793

1.2%

 

 

 

 

 

 

 

Financial Margin

31,343

-

7.4%

27,685

-

7.5%

*

 

 

 

 

 

 

 

3Q12

2Q12

 

Interest

Average

Balance

Average

Rate

Interest

Average

Balance

Average

Rate

Loans

7,460

287,987

10.8%

7,362

281,442

10.9%

Funding

1,019

332,488

1.2%

1,041

336,954

1.2%

Insurance

694

115,647

2.4%

726

110,120

2.7%

Securities/Other

1,430

298,905

1.9%

1,389

283,763

2.0%

 

 

 

 

 

 

 

Financial Margin

10,603

-

7.4%

10,518

-

7.5%

             

 

 

 

 

Bradesco 

 33  

 

 

 

 

Economic and Financial Analysis
   
Loan Financial Margin - Interest
 
Loan Financial Margin - Breakdown
 



R$ million

Financial Margin - Loan

 9M12

9M11

3Q12

2Q12

Variation

YTD

Quarter

Interest - due to volume

   

 

 

2,399

170

Interest - due to spread

   

 

 

(52)

(72)

Interest Financial Margin

22,003

19,656

7,460

7,362

2,347

98

Income

38,875

36,295

12,912

13,318

2,580

(406)

Expenses

(16,872)

(16,639)

(5,452)

(5,956)

(233)

504

             


In the third quarter of 2012, financial margin with loan operations reached R$7,460 million, up R$98 million or 1.3% over the previous quarter. The variation is the result of: (i) the R$170 million increase in average business volume and offset by (ii) the R$72 million decrease in the average spread, reflecting primarily lower interest rates.

Between the first nine months of 2012 and the same period in 2011, there was an increase of 11.9% or R$2,347 million in the loan financial margin, resulting from: (i) a R$2,399 million increase in the volume of operations; and partially offset by: (ii) the decrease in average spread, in the amount of R$52 million, which was basically impacted by the change in the mix of the loan portfolio, due to greater share of the Corporate segment, which has lower margins, with an increase of 13.3% over the past 12 months compared to an 8.7% growth of the Individuals segment in the same period.

 
34 Report on Economic and Financial Analysis – September 2012   

 

 


 

 

 

Economic and Financial Analysis
   
Loan Financial Margin - Interest
 
Loan Financial Margin - Net Margin

 

 

The graph above presents a summary of loan activity. The Gross Margin line refers to interest income from loans, net of opportunity cost (essentially the accrued Interbank Deposit Certificate - CDI over rate in the period).

The ALL curve shows delinquency costs, which are represented by Allowance for Loan Losses - ALL expenses, discounts granted in transactions net of loan recoveries and the result of the sale of foreclosed assets, among other items.

The net margin curve presents the result of loan interest income, net of ALL, which, in the third quarter of 2012, recorded a 5.1% increase compared to the second quarter of 2012, impacted mainly by: (i) the provisioning level adequacy made in the second quarter of 2012 in relation to the expected loss from certain corporate customers, who are in debt restructuring process, and (ii) the increase in business volume. When comparing the nine months of 2012 with the same period last year, net margin was practically stable, due to the increase in business volume, fully offset by the increase of delinquency level in the period.

 

 

Bradesco 

 35  


 
 

Economic and Financial Analysis
   
Loan Financial Margin - Interest
 

Expanded Loan Portfolio (1)

 

The expanded loan portfolio amounted to R$371.7 billion in September 2012, recording a 1.8% growth in the quarter, led by Individuals and SMEs, both of which grew by 2.1% in the period. The expanded loan portfolio increased 11.8%, led by the Corporate portfolios (both Corporations and SMEs had a 13.3% growth).

 

(1) Including sureties, guarantees, letters of credit, advances of credit card receivables, debentures, promissory notes, receivables-backed investment funds - FIDC, mortgage-backed receivables - CRI and rural loans

For further information, refer to page 42 herein.

 

Expanded Loan Portfolio Breakdown by Product and Type of Customer (Individual and Corporate)

 

A breakdown of loan risk products for individuals - expanded portfolio is presented below:

Individuals

R$ million

 

Variation %

 

Sept12

Jun12

Sept11

Quarter

12M

CDC / Vehicle Leasing

31,860

32,195

32,565

(1.0)

(2.2)

Payroll-Deductible Loans (1)

19,956

19,243

17,509

3.7

14.0

Credit Card

18,850

18,545

17,454

1.6

8.0

Personal Loans

14,929

14,465

12,977

3.2

15.0

Real Estate Financing (2)

9,452

8,768

6,372

7.8

48.3

Rural Loans

6,528

6,367

6,414

2.5

1.8

BNDES/Finame Onlending

5,628

5,515

5,177

2.1

8.7

Overdraft Facilities

3,198

3,204

3,035

(0.2)

5.4

Sureties and Guarantees

685

650

690

5.4

(0.8)

Other (3)

3,450

3,282

3,196

5.1

7.9

Total

114,536

112,235

105,389

2.1

8.7

           

Including:

(1) Loan assignment (FIDC): R$265 million in September 2012, R$339 million in June 2012 and R$442 million in September 2011;

(2) Loan assignment (CRI): R$165 million in September 2012, R$182 million in June 2012 and R$232 million in September 2011; and

(3) Loan assignment (FIDC) for the acquisition of assets: R$1 million in September 2012, R$2 million in June 2012 and R$3 million in September 2011; and rural loan assignment: R$111 in September 2012, R$112 million in June 2012 and R$122 million in September 2011.

Operations bearing loan risks for individuals – expanded portfolio grew by 2.1% in the quarter and 8.7% in the last 12 months, respectively. In both quarter and the last 12 months, we highlight these products: (i) real estate financing; and (ii) payroll-deductible loans.

 
36 Report on Economic and Financial Analysis – September 2012   

 


 

 

 

Economic and Financial Analysis
   
Loan Financial Margin - Interest
 
A breakdown of loan risk products in the corporate segment - expanded portfolio is presented below:

Corporate

R$ million

Variation %

Sept12

Jun12

Sept11

Quarter

12M

Working Capital

42,416

42,533

38,590

(0.3)

9.9

BNDES/Finame Onlending

29,160

29,474

29,895

(1.1)

(2.5)

Operations Abroad

24,748

23,615

23,083

4.8

7.2

Credit Card

13,984

14,385

12,962

(2.8)

7.9

Export Financing

12,974

12,408

9,123

4.6

42.2

Real Estate Financing - Corporate Plan (1)

12,059

11,047

8,319

9.2

45.0

Overdraft Account

10,546

10,437

9,989

1.1

5.6

Leasing

6,416

6,722

7,530

(4.6)

(14.8)

Vehicles - CDC

6,677

6,245

5,092

6.9

31.1

Rural Loans

4,553

4,539

4,714

0.3

(3.4)

Sureties and Guarantees (2)

54,048

52,226

43,699

3.5

23.7

Operations bearing Credit Risk - Commercial Portfolio (3)

28,587

28,043

22,799

1.9

25.4

Other (4)

10,970

11,054

11,151

(0.8)

(1.6)

Total

257,138

252,728

226,946

1.7

13.3

           

Including:

(1) Loan assignment (CRI): R$234 million in September 2012, R$239 million in June 2012, R$293 million in September 2011;

(2) A total of 91% of sureties and guarantees from corporate customers were contracted by corporations;

(3) Operations with debentures and promissory notes; and

(4) Letters of credit: R$1,569 million in September 2012, R$1,779 million in June 2012 and R$1,946 million in September 2011.

Operations with loan risk for corporate customers - expanded portfolio, grew by 1.7% in the quarter and 13.3% in the last 12 months. The main highlights in both the quarter and in the last 12 months were: (i) real estate financing - corporate plan; and (ii) export financing.

Expanded Loan Portfolio - Consumer Financing

 

The graph below shows the types of credit related to Consumer Financing of Individual Customers (CDC/vehicle leasing, personal loans, financing of goods, revolving credit card and cash and installment purchases at merchants).

Consumer financing totaled R$86.0 billion, up 1.4% in the quarter and 6.2% in the last 12 months. Growth was led by: (i) vehicle financing (CDC/Leasing) (R$31.9 billion); and (ii) payroll-deductible loans (R$20.0 billion), which together totaled R$51.9 billion, accounting for 60.3% of the consumer financing balance. Given their guarantees and characteristics, these products provide a rather low level of credit risk to this group of operations.

 

 

 

 

Bradesco 

 37  

 

 

 

Economic and Financial Analysis
   
Loan Financial Margin - Interest
 
Breakdown of the Vehicle Portfolio

 

 

R$ million

Variation %

 

Sept12

Jun12

Sept11

Quarter

12M

CDC Portfolio

36,217

35,569

32,646

1.8

10.9

Individuals

29,540

29,324

27,554

0.7

7.2

Corporate

6,677

6,245

5,092

6.9

31.1

Leasing Portfolio

5,492

6,305

9,238

(12.9)

(40.5)

Individuals

2,320

2,871

5,011

(19.2)

(53.7)

Corporate

3,172

3,434

4,227

(7.6)

(25.0)

Finame Portfolio

10,308

10,294

10,173

0.1

1.3

Individuals

989

1,032

1,061

(4.2)

(6.8)

Corporate

9,319

9,262

9,112

0.6

2.3

Total

52,017

52,168

52,057

(0.3)

(0.1)

Individuals

32,849

33,227

33,626

(1.1)

(2.3)

Corporate

19,168

18,941

18,431

1.2

4.0

           


Vehicle financing operations (individual and corporate customers) totaled R$52.0 billion in September 2012, remaining stable both in quarter-on-quarter and year-on-year comparisons. Of the total vehicle portfolio, 69.6% corresponds to CDC, 19.8% to Finame and 10.6% to Leasing. Individuals represented 63.2% of the portfolio, while corporate customers accounted for the remaining 36.8%.

Expanded Loan Portfolio Concentration - by Sector


The expanded loan portfolio by economic sector posted a slight variation. In the quarter, “Industry” posted greater shares, while “Services" posted the greatest growth in the last 12 months.

Activity Sector

R$ million

Sept12

%

Jun12

%

Sept11

%

Public Sector

1,086

0.3

1,770

0.5

1,894

0.6

Private Sector

370,588

99.7

363,193

99.5

330,441

99.4

Corporate

256,052

68.9

250,958

68.8

225,052

67.7

Industry

82,531

22.2

78,798

21.6

75,620

22.8

Commerce

58,786

15.8

57,251

15.7

51,153

15.4

Financial Intermediaries

6,617

1.8

5,746

1.6

5,234

1.6

Services

104,200

28.0

105,188

28.8

88,964

26.8

Agriculture, Cattle Raising, Fishing,

Forestry and Forest Exploration

3,918

1.1

3,975

1.1

4,081

1.2

Individuals

114,536

30.8

112,235

30.8

105,389

31.7

Total

371,674

100.0

364,963

100.0

332,335

100.0

 

 
38 Report on Economic and Financial Analysis – September 2012   

 


 
 

Economic and Financial Analysis
   
Loan Financial Margin - Interest
 
Changes in the Expanded Loan Portfolio
 
Of the R$39.3 billion growth in the loan portfolio over the last 12 months, new borrowers accounted for R$34.3 billion, or 87.1%, representing 9.2% of the portfolio in September 2012.

 

(1) Including credits settled and subsequently renewed in the last 12 months.

 

 

Bradesco 

 39  

 
 

Economic and Financial Analysis
   
Loan Financial Margin - Interest
 
Changes in the Expanded Loan Portfolio - By Rating
 
The chart below shows that both new borrowers and remaining debtors from September 2011 (customers that remained in the loan portfolio for at least 12 months) presented a good level of credit quality (AA-C ratings), demonstrating the adequacy and consistency of the loan policy and processes, as well as the quality of guarantees and the credit ranking instruments used by Bradesco.
 

Changes in the Extended Loan Portfolio by Rating from September 2011 to 2012

Rating

Total Loans as of

September 2012

New Customers from

October 2011 to

September 2012

Remaining Debtors as of
September 2011

R$ million

%

R$ million

%

R$ million

%

AA - C

347,289

93.4

32,832

95.8

314,457

93.2

D

7,274

2.0

447

1.3

6,827

2.0

E - H

17,111

4.6

979

2.9

16,132

4.8

Total

371,674

100.0

34,258

100.0

337,416

100.0

             

 

Expanded Loan Portfolio - By Customer Profile


The table below presents the changes in the expanded loan portfolio by customer profile:

Type of Customer

R$ million

Variation %

 

Sept12

Jun12

Sept11

Quarter

12M

Corporations

146,033

143,830

128,883

1.5

13.3

SMEs

111,106

108,898

98,063

2.0

13.3

Individuals

114,536

112,235

105,389

2.0

8.7

Total Loan Operations

371,674

364,963

332,335

1.8

11.8

           

 

Expanded Loan Portfolio - By Customer Profile and Rating (%)

 

AA-C rated loans remained steady in comparison with the previous quarter and slightly decreased in the year-on-year comparison.

 

By Rating

Type of Customer

Sept12

Jun12

Sept11

 

AA-C

D

E-H

AA-C

D

E-H

AA-C

D

E-H

Corporations

98.8

0.8

0.5

98.6

0.3

1.1

99.0

0.6

0.5

SMEs

91.2

3.1

5.7

91.3

3.0

5.7

92.1

2.5

5.4

Individuals

88.8

2.4

8.8

88.8

2.4

8.8

89.3

2.0

8.7

Total

93.4

2.0

4.6

93.4

1.8

4.8

93.9

1.6

4.5

                   

 

 
40 Report on Economic and Financial Analysis – September 2012   

 

 

 

 

 

Economic and Financial Analysis
   
Loan Financial Margin - Interest
 
Expanded Loan Portfolio - By Business Segment
 
The table below shows growth in the expanded loan portfolio by business segment in the quarter, led by the Prime and Retail segments. Over the last 12 months, Prime, Middle Market and Retail posted the greatest gains.
 

Business Segments

R$ million

Variation %

Sept12

%

Jun12

%

Sept11

%

12M

Retail

104,405

28.1

100,538

27.5

91,412

27.5

14.2

Corporate (1)

152,850

41.1

151,847

41.6

139,899

42.1

9.3

Middle Market

46,693

12.6

45,447

12.5

40,225

12.1

16.1

Prime

14,718

4.0

13,768

3.8

11,432

3.4

28.7

Other / Non-account holders (2)

53,008

14.2

53,365

14.6

49,368

14.9

7.4

Total

371,674

100.0

364,963

100.0

332,335

100.0

11.8

               

(1) Including loans taken out with co-obligation. In the table on page 40, Loan Portfolio - by Customer Profile, these amounts are allocated to Individuals; and

Expanded Loan Portfolio - By Currency


The balance of foreign currency-indexed and/or denominated loan and onlending operations (excluding ACCs - Advances on Foreign Exchange Contracts) totaled US$15.0 billion in September 2012 (US$13.6 billion in June 2012 and US$15.2 billion in September 2011), a 10.3% increase and 1.3% decrease, in dollars, in the quarter and in the last 12 months respectively. In reais, these same foreign currency operations totaled R$30.4 billion in September 2012 (R$27.5 billion in June 2012 and R$28.1 billion in September 2011), a 10.5% growth in the quarter and 8.2% in the last 12 months.

In September 2012, total loan operations, in reais, stood at R$341.3 billion (R$337.4 billion in June 2012 and R$304.2 billion in September 2011), up 1.2% on the previous quarter and 12.2% over the last 12 months.

 
 

 

Bradesco 

 41  


 

 

 

Economic and Financial Analysis
   
Loan Financial Margin - Interest
 
Expanded Loan Portfolio - by Debtor
 

The concentration of credit exposure levels among the 100 largest debtors was down from the previous year. In the quarter: (i) the 100 and 50 largest debtor concentration decreased; and (ii) the largest debtor and the 20 and 10 largest debtor concentration remained stable. The quality of the portfolio of the 100 largest debtors, when evaluated using AA and A ratings, remained stable in the quarter and increased in the last 12 onths.

 

 

Loan Portfolio(1) - By Type

 

The table below presents all operations bearing credit risk by type, in the amount of R$394.6 billion, which increased by 1.9% in the quarter and 13.1% in the last 12 months.

 

R$ million

Variation %

 

Sept12

Jun12

Sept11

Quarter

12M

Loans and Discounted Securities

138,417

135,873

125,883

1.9

10.0

Financing

99,631

97,156

87,952

2.5

13.3

Rural and Agribusiness Financing

15,968

15,624

15,435

2.2

3.5

Leasing Operations

8,731

9,588

12,542

(8.9)

(30.4)

Advances on Exchange Contracts

7,360

7,078

6,185

4.0

19.0

Other Loans

14,258

13,847

12,474

3.0

14.3

Subtotal Loan Operations (2)

284,367

279,166

260,471

1.9

9.2

Sureties and Guarantees Granted (Memorandum Accounts)

54,732

52,876

44,389

3.5

23.3

Operations bearing Credit Risk - Commercial Portfolio (3)

28,587

28,043

22,799

1.9

25.4

Letters of Credit (Memorandum Accounts)

1,569

1,779

1,946

(11.8)

(19.4)

Advances from Credit Card Receivables

1,623

2,207

1,619

(26.5)

0.2

Co-obligation in Loan Assignment FIDC/CRI (Memorandum Accounts)

666

761

969

(12.5)

(31.3)

Co-obligation in Rural Loan Assignment (Memorandum Accounts)

130

131

142

(0.8)

(8.5)

Subtotal of Operations bearing Credit Risk - Expanded Portfolio

371,674

364,963

332,335

1.8

11.8

Other Operations Bearing Credit Risk (4)

22,928

22,284

16,675

2.9

37.5

Total Operations bearing Credit Risk

394,602

387,247

349,010

1.9

13.1

           

(1) In addition to the Expanded Portfolio, it includes other operations bearing credit risk;
(2) As defined by Bacen;
(3) Including debenture and promissory note operations; and
(4) Including CDI operations, international treasury, swaps, forward currency contracts and investments in FIDC and CRI.

 

 
42 Report on Economic and Financial Analysis – September 2012   

 


 

 

 

Economic and Financial Analysis
   
Loan Financial Margin - Interest

 

The charts below refer to the Loan Portfolio, as defined by Bacen.

 

Loan Portfolio(1) - By Flow of Maturities


In September 2012 versus September 2011 and June 2012, performing loan operations presented a longer debt maturity profile, mainly as a result of the increased volume of Brazilian Development Bank - BNDES and real-estate financing operations.

Note that these operations are subject to lower risk, given their guarantees and characteristics, in addition to providing favorable conditions to gain customer loyalty.

     

(1) As defined by Bacen.

 

 

 

Bradesco 

 43  

 
 

Economic and Financial Analysis
   
Loan Financial Margin - Interest
 
Loan Portfolio(1) - Delinquency over 90
 
Total delinquency ratio over 90 days was down 0.1 p.p. in the quarter, despite the changes in mix of business. It is worth highlighting Corporations’ lower delinquency ratio.

 

 

 

 

The graph below details that the total delinquency for operations overdue from 61 to 90 days remained practically stable in the quarter and posted a slight increase over the last twelve months. Loans to individual and corporate customers overdue from 61 to 90 days increased by a mere 0.1 p.p. in twelve months. In the Corporate sector, this index remained practically stable in the last nine months.

 

 

(1) As defined by Bacen.

 

 
44 Report on Economic and Financial Analysis – September 2012   

 

 

 
 

Economic and Financial Analysis
   
Loan Financial Margin - Interest
 
Renegotiated Portfolio - Delinquency over 90 days and ALL(1)
 
The loan portfolio, excluding renegotiation, stood at R$275.1 billion in September 2012, up 1.9% in the quarter. The graph below presents the behavior of the total portfolio and delinquency over 90 days, including and excluding renegotiation, both of which present similar trends, proof that renegotiation does not have a material effect on delinquency.
 

 

In September 2012, the renegotiated portfolio totaled R$9.3 billion, a 1.5% increase in the quarter. The renegotiated share in the total loan portfolio(1) was 3.3% in September 2012 (3.3% in June 2012). Note that, in September 2011, for an existing provision of 62.3% of the portfolio, net loss over the subsequent 12 months was 27.6%, meaning that the existing provision exceeded the loss recorded in the following 12 months by over 125%. Furthermore, the Organization’s provisions remained stable in the period.

 

(1) As defined by Bacen.

 

 

 

Bradesco 

 45

 

 
 

Economic and Financial Analysis
   
Loan Financial Margin - Interest
 
Allowance for Loan Losses (ALL) x Delinquency x Losses (1)
 
An ALL of R$20.9 billion, representing 7.4% of the total portfolio, comprises the generic provision (customer and/or operation rating), the specific provision (non-performing loans) and the excess provision (internal criteria).

 

Bradesco has appropriate provisioning levels that, in our opinion, are also sufficient to support potential changes in scenarios, such as higher delinquency levels and/or changes in the loan portfolio profile.

(1) As defined by Bacen.

 

 
46 Report on Economic and Financial Analysis – September 2012   

 

 


 
 

Economic and Financial Analysis
   
Loan Financial Margin - Interest
 
It is worth mentioning the assertiveness of adopted provisioning criteria, which is proven by: (i) analyzing historical data on recorded allowances for loan losses; and (ii) effective losses in the subsequent twelve-month period. For instance, in September 2011, for an existing provision of 7.3% of the portfolio(1), the effective gross loss in the subsequent twelve-month period was 4.5%, meaning the existing provision exceeded the loss over the subsequent twelve-month period by more than 64%, as shown in the graph below.
 

 

Analysis in terms of loss, net of recovery, shows a significant increase in the coverage margin. In September 2011, for an existing provision of 7.3% of the portfolio(1), the net loss in the subsequent twelve-month period was 3.3%, meaning that the existing provision covered the loss in the subsequent 12 months by more than 119%.

 

(1) As defined by Bacen.

 

 

 

Bradesco 

 47  

 


 
 

 

Economic and Financial Analysis
   
Loan Financial Margin - Interest
 
Allowance for Loan Losses (1)
 
The Non-Performing Loan ratio (operations overdue for over 60 days) remained stable in the quarter-on-quarter comparison. Coverage ratios for the allowance for loans overdue for over 60 and 90 days stood at very comfortable levels.
 

 

(1) As defined by Bacen; and

(2) Loan operations overdue for over 60 days and that do not generate revenue appropriation on an accrual basis.

 

 
48 Report on Economic and Financial Analysis – September 2012   

 

 


 
 

Economic and Financial Analysis
   
Loan Financial Margin - Interest
 
Loan Portfolio(1) - Portfolio Indicators
 
To facilitate the monitoring of the quantitative and qualitative performance of Bradesco’s loan portfolio, a comparative summary of the main figures and indicators is presented below:
 

 

R$ million (except %)

 

Sept12

Jun12

Sept11

Total Loan Operations (1)

284,367

279,166

260,471

- Individuals

113,308

110,952

103,901

- Corporate

171,058

168,215

156,570

Existing Provision

20,915

20,682

19,091

- Specific

10,897

10,809

9,173

- Generic

6,007

5,862

5,909

- Excess

4,011

4,010

4,009

Specific Provision / Existing Provision (%)

52.1

52.3

48.1

Existing Provision / Loan Operations (%)

7.4

7.4

7.3

AA–C Rated Loan Operations / Loan Operations (%)

91.5

91.4

92.2

D Rated Operations under Risk Management / Loan Operations (%)

2.5

2.3

2.0

E–H Rated Loan Operations / Loan Operations (%)

6.0

6.3

5.8

D Rated Loan Operations

7,192

6,356

5,268

Existing Provision for D Rated Loan Operations

1,982

1,738

1,419

D Rated Provision / Loan Operations (%)

27.6

27.3

26.9

D–H Rated Non-Performing Loans

16,262

16,105

13,381

Existing Provision/D–H Rated Non-Performing Loans (%)

128.6

128.4

142.7

E–H Rated Loan Operations

17,032

17,519

14,967

Existing Provision for E–H Rated Loan Operations

14,999

15,084

13,142

E–H Rated Provision / Loan Operations (%)

88.1

86.1

87.8

E–H Rated Non-Performing Loans

13,017

13,166

11,020

Existing Provision/E–H Rated Non-Performing Loan (%)

160.7

157.1

173.2

Non-Performing Loans (2)

14,447

14,365

11,963

Non-Performing Loans (2) / Loan Operations (%)

5.1

5.1

4.6

Existing Provision / Non-Performing Loans (2) (%)

144.8

144.0

159.6

Loan Operations Overdue for over 90 days

11,684

11,662

9,839

Existing Provision/Operations Overdue for over 90 days (%)

179.0

177.4

194.0

(1) As defined by Bacen; and
(2) Loan operations overdue for over 60 days and that do not generate revenue appropriation on an accrual basis

 

 

 

Bradesco 

 49  

 
 

Economic and Financial Analysis
   
Funding Financial Margin- Interest
 
Funding Financial Margin - Breakdown

 

 

R$ million

Financial Margin - Funding

9M12

9M11

3Q12

2Q12

Variation

YTD

Quarter

Interest - due to volume

 

 

 

 

373

(14)

Interest - due to spread

 

 

 

 

(538)

(8)

Interest Financial Margin

3,228

3,393

1,019

1,041

(165)

(22)

             


Comparing the third quarter of 2012 with the second quarter of 2012, the interest funding financial margin decreased 2.1% or R$22 million. The variation was due to: (i) the R$14 million decrease in volume of operations; and (ii) the R$8 million decrease in average spread, reflecting lower interest rate (Selic).

In the first nine months of 2012, the interest funding financial margin posted a result of R$3,228 million against R$3,393 million in the same period of 2011, decreasing by 4.9%, or R$165 million, mainly driven by: (i) the R$538 million decrease in average spread, impacted by lower interest rate (Selic), and partially offset by: (ii) gains from average business volume, totaling R$373 million.



 

 
50 Report on Economic and Financial Analysis – September 2012   

 


 
 

Economic and Financial Analysis
   
Funding Financial Margin - Interest
 
Loans x Funding

To analyze Loan Operations in relation to Funding, it is first necessary to deduct from total customer funding (i) the amount committed to compulsory deposits at Bacen and (ii) the amount of available funds held at customer service network units; as well as (iii) add funds from domestic and foreign lines of credit that finance loan needs.

Bradesco depends little on interbank deposits and foreign lines of credit, given its capacity to effectively obtain funding from customers.  This is a result of: (i) the outstanding position of its service points; (ii) the extensive diversity of products offered; and (iii) the market’s confidence in the Bradesco brand.

Note that the use of funds provides a comfortable margin, which proves that Bradesco is capable of meeting demand for funds for loans using its own funding.

Funding x Investments

R$ million

Variation %

 

Sept12

Jun12

Sept11

Quarter

12M

Demand Deposits

33,627

32,529

31,862

3.4

5.5

Sundry Floating

4,735

4,122

3,660

14.9

29.4

Savings Deposits

65,540

62,308

56,584

5.2

15.8

Time Deposits + Debentures (1)

168,702

177,503

183,374

(5.0)

(8.0)

Financial Bills

31,234

31,124

19,285

0.4

62.0

Other

21,311

19,799

16,594

7.6

28.4

Customer Funds

325,149

327,385

311,359

(0.7)

4.4

(-) Compulsory Deposits/Available Funds (2)

(63,459)

(67,210)

(69,208)

(5.6)

(8.3)

Customer Funds Net of Compulsory Deposits

261,690

260,175

242,151

0.6

8.1

Onlending

31,832

32,122

32,930

(0.9)

(3.3)

Foreign Lines of Credit

16,360

17,018

12,412

(3.9)

31.8

Funding Abroad

45,057

51,411

46,237

(12.4)

(2.6)

Total Funding (A)

354,939

360,726

333,730

(1.6)

6.4

Loan Portfolio/Leasing/Cards (Other Receivables)/Acquired CDI (B) (3)

330,530

322,962

295,146

2.3

12.0

B/A (%)

93.1

89.5

88.4

3.6 p.p.

4.7 p.p.

(1) Debentures mainly used to back purchase and sale commitments;
(2) Excluding government securities tied to savings accounts; and
(3) Comprising amounts relative to card operations (cash and installment purchases at merchants), amounts related to CDI to rebate from compulsory deposits and debentures.

 

 

 

Bradesco 

 51  

 
 

Economic and Financial Analysis
   
Funding Financial Margin - Interest
 
Main Funding Sources

 

The following table presents changes in main funding sources:

 

R$ million

Variation %

 

Sept12

Jun12

Sept11

Quarter

12M

Demand Deposits

33,627

32,529

31,862

3.4

5.5

Savings Deposits

65,540

62,308

56,584

5.2

15.8

Time Deposits

113,379

121,761

135,848

(6.9)

(16.5)

Debentures (1)

55,323

55,742

47,526

(0.8)

16.4

Borrowing and Onlending

45,399

47,895

49,057

(5.2)

(7.5)

Funds from Issuance of Securities (2)

53,810

51,158

32,879

5.2

63.7

Subordinated Debts

34,507

34,091

26,180

1.2

31.8

Total

401,585

405,484

379,936

(1.0)

5.7

           

(1) Considering only debentures used to back purchase and sale commitments; and
(2) Including: Financial Bills, on September 30, 2012, amounting to R$31,234 million (R$31,124 million on June 30, 2012 and R$19,285 million on September 30, 2011).

Demand Deposits


Demand deposits amounted to R$33,627 million in the third quarter of 2012, a 3.4% increase quarter on quarter and 5.5% on the same period in 2011, mainly due to the improved funding, in addition to the increased account holder base.

(1) Additional installment is not included.

 

Savings Deposits

 

Savings deposits increased 5.2% in the quarter-on-quarter comparison and 15.8% in the last 12 months, mainly as a result of: (i) greater funding volume; and (ii) the remuneration of savings account reserve.

The new savings remuneration rule determines that: (i) the existing account savings up to May 3, 2012 will continue to remunerate at TR + 0.5% p.m.; and (ii) for deposits made as of May 4, 2012, the new rules are: (a) if the Selic rate is higher than 8.5% p.a., the TR + 0.5% p.m. remuneration will be maintained; and (b) when the Selic rate is equal to or lower than 8.5% p.a., the remuneration will be 70% of Selic rate + TR.      

Bradesco is always increasing its savings accounts base and posted net growth of 7.7 million new savings accounts over the last 12 months.


(1) Additional installment is not included.

 

 
52 Report on Economic and Financial Analysis – September 2012   

 


 

 

 

Economic and Financial Analysis
   
Funding Financial Margin - Interest
 
Time Deposits

In the third quarter of 2012, time deposits totaled R$113,379 million, decreasing by 6.9% quarter on quarter and 16.5% on same period of the previous year.

Such performance is basically due to the migration of funds to other funding sources, especially Financial Treasury Bills, thereby extending average funding terms, which offset the increase of new funding and the restatement of the deposit portfolio.

                                                                 (1) As defined by Bacen.

 

Debentures

 

On September 30, 2012, Bradesco’s debentures amounted to R$55,323 million, a slight 0.8% decrease in the quarter-on-quarter comparison and a 16.4% increase over the last 12 months.

These variations are mainly due to the placement and maturity of the securities, which are also used to back purchase and sale commitments that are, in turn, impacted by the levels of economic activity.

 

Borrowing and Onlending

 

The quarter-on-quarter R$2,496 million reduction was mainly due to a decreased foreign-currency-denominated and/or indexed borrowing and onlending, from R$12,517 million in June 2012 to R$10,267 million in September 2012, mainly driven by the settlement of operations.

Between the first nine months of 2012 and the same period in 2011, the balance fell 7.5%, or R$3,658 million, due to: (i) a R$621 million decrease in the volume of funds raised through loans and onlending in Brazil, especially through BNDES operations; and (ii) the R$3,037 million decrease in foreign-currency-denominated and/or indexed borrowing and onlending, from R$13,304 million in September 2011 to R$10,267 million in September 2012, mainly due to: (a) the settlement of operations; partially offset by: (b) the exchange gain of 9.5% in the period.

 

 

 

Bradesco 

 53  


 
 

Economic and Financial Analysis
   
Funding Financial Margin - Interest
 
Funds for the Issuance of Securities

Funds from issuance of securities totaled R$53,810 million, a 5.2% or R$2,652 million increase in the quarter is mainly due to: (i) the increased volume of securities issued abroad of R$1,613 million; (ii) the greater volume of Mortgage Bonds, in the amount of R$616 million; and (ii) growth in the volume of Letters of Credit for Agribusiness, in the amount of R$491 million.

When compared to the same period in 2011, the first nine months of the year posted a growth of 63.7%, or R$20,931 million, mainly the result of: (i) new issuances of Financial Bills, up by R$11,949 million, from R$19,285 million in September 2011 to R$31,234 million in September 2012; (ii) the increase in volume of securities issued abroad, in the amount of R$5,846 million, a result of exchange gains of 9.5% and new issuances carried out in the period; (iii) the higher volume of Mortgage Bonds, in the amount of R$2,061 million; and (iv) the higher volume of Letters of Credit for Agribusiness, in the amount of R$1,415 million.

(1) Considering Collateral Mortgage Notes, Mortgage Bonds, Letters of Credit for Agribusiness, Debentures, Medium Term Note - MTN Program Issues and the cost of issuances over funding.

 

 

Subordinated Debt

 

Subordinated Debt totaled R$34,507 million in September 2012 (R$8,715 million abroad and R$25,792 million in Brazil). In the last 12 months, Bradesco issued R$10,675 million (R$2,008 million abroad and R$8,667 million in Brazil).

Additionally, note that, in the third quarter of 2012, the Brazilian Central Bank authorized the use of Subordinated Financial Bills amounting to R$273 million (R$7,878 million in the second quarter of 2012) to compose Tier II of the Capital Adequacy Ratio, of which only R$24,842 million of total subordinated debt is used to calculate the Capital Adequacy Ratio, given their maturity terms.

 

 

 
54 Report on Economic and Financial Analysis – September 2012   

 


 
 

Economic and Financial Analysis
   
Securities / Other Financial Margin - Interest
 
Securities / Other Financial Margin - Breakdown

 

 

R$ million

Financial Margin - Securities / Other

9M12

9M11

3Q12

2Q12

Variation

YTD

Quarter

Interest - due to volume

 

 

 

 

838

72

Interest - due to spread

 

 

 

 

985

(31)

Interest Financial Margin

3,841

2,018

1,430

1,389

1,823

41

Income

24,758

25,723

7,110

9,049

(965)

(1,939)

Expenses

(20,917)

(23,705)

(5,680)

(7,660)

2,788

1,980

             


In the comparison between the third quarter of 2012 and the previous quarter, the interest financial margin from Securities/Other was up by R$41 million, mainly due to: (i) the increase in volume, which accounted for R$72 million, and offset by: (ii) R$31 million decrease in average spread.

 

In the first nine months of 2012, the interest financial margin with Securities/Other stood at R$3,841 million, versus R$2,018 million recorded in the same period a year earlier, up 90.3% or R$1,823 million. This result was due to: (i) a R$985 million increase in the average spread, and (ii) an increase in the volume of operations which affected the result in R$838 million.

Insurance Financial Margin - Interest

Insurance Financial Margin - Breakdown

R$ million

Financial Margin - Insurance

9M12

9M11

3Q12

2Q12

Variation

YTD

Quarter

Interest - due to volume

 

 

 

 

372

33

Interest - due to spread

 

 

 

 

(719)

(65)

Interest Financial Margin

2,271

2,618

694

726

(347)

(32)

Income

8,546

7,419

3,206

2,265

1,127

941

Expenses

(6,275)

(4,801)

(2,512)

(1,539)

(1,474)

(973)

             


In the quarter-on-quarter comparison, interest financial margin from insurance operations posted a decrease of R$32 million, or 4.4%, mainly due to: (i) a R$65 million decrease in average spread, due to the increase of IGP-M, which impacted the adjustment of part of the period`s technical reserves, and offset by: (ii) the increase in the volume of operations, amounting to R$33 million

Between the first nine months of 2012 and the same period of 2011, interest financial margin from insurance operations was down 13.3%, or R$347 million, due to: (i) the R$719 million loss in average spread, and (ii) the increase in volume of operations, amounting to R$372 million.

 

 

Bradesco 

 55  

 

 


 

 

 

Economic and Financial Analysis
   
Financial Margin - Non-Interest
 
Non-Interest Financial Margin - Breakdown
 

 

R$ million

Non-Interest Financial Margin

9M12

9M11

3Q12

2Q12

Variation

YTD

Quarter

Funding

(218)

(219)

(72)

(73)

1

1

Insurance

266

142

84

19

124

65

Securities/Other

1,293

1,455

340

570

(162)

(230)

Total

1,341

1,378

352

516

(37)

(164)

             

 

The non-interest financial margin in the third quarter of 2012 stood at R$352 million versus R$516 million in the second quarter of 2012. Margin was down R$37 million in the first nine months of 2012 when compared to the same period a year earlier. Main variations in the non-interest financial margin were due to:

·       “Insurance,” basically represented by gains/loss from equity securities, and the variations in the periods are associated with market conditions, which enable a greater/lower opportunity of obtaining gains; and

 

·       “Securities / Other,” a R$230 million decrease in the quarter-on-quarter comparison and a R$162 million decrease in the year-on-year comparison, reflecting the lower gains from Treasury/Securities.


 

 
56 Report on Economic and Financial Analysis – September 2012   

 


 
 

Economic and Financial Analysis
   
Insurance, Pension Plans and Capitalization Bonds
 
Below is the analysis of the Statement of Financial Position and Income Statement of Grupo Bradesco Seguros e Previdência:

 

Consolidated Statement of Financial Position

 

R$ million

 

Sept12

Jun12

Sept11

Assets

 

 

 

Current and Long-Term Assets

142,288

137,008

117,988

Securities

133,738

128,526

110,502

Insurance Premiums Receivable

1,995

2,009

1,748

Other Loans

6,555

6,473

5,738

Permanent Assets

3,456

3,312

2,616

Total

145,744

140,320

120,604

Liabilities

 

 

 

Current and Long-Term Liabilities

127,194

122,494

105,422

Tax, Civil and Labor Contingencies

2,266

2,179

1,950

Payables on Insurance, Pension Plan and Capitalization Bond Operations

340

362

367

Other Liabilities

6,781

8,163

6,006

Insurance Technical Reserves

10,217

8,705

7,982

Life and Pension Plan Technical Reserves

102,425

98,199

84,788

Capitalization Bond Technical Reserves

5,165

4,886

4,329

Non-controlling Interest

631

624

646

Shareholders' Equity

17,919

17,202

14,536

Total

145,744

140,320

120,604

 

 

Consolidated Income Statement

 

Below we point out the main non-recurring events in the third quarter of 2012 which, however, had not an impact on Insurance Group’s result: (i) Financial Assets: Aiming at streamlining our Assets Liability Management - ALM, we extended the terms of some available-for-sale securities covering technical reserves. This resulted in a R$2.1-billion gain in financial revenues; and (ii) Technical Reserves: Based on economic and actuarial studies, the Insurance Group decided to adapt its long-term technical reserves for pension and health plans to the current real interest rates. As a result, we had a R$2.1 billion expense on additional technical reserves. Note that, despite the R$2.1 billion expense with available-for-sale securities, this portfolio’s mark-to-market balance increased R$189 million in the third quarter of 2012, totaling
R$5.8 billion in September 2012 (June 2012 - R$5.6 billion).

 

 

 

 

 

R$ million

 

9M12

9M11

3Q12

2Q12

Insurance Written Premiums, Pension Plan Contributions and Capitalization Bond Income

31,092

26,498

10,104

11,570

Premiums Earned f rom Insurance, Pension Plan Contribution and Capitalization Bond (1)

16,388

14,063

5,763

5,413

Financial Result f rom the Operation (1)

2,452

2,584

757

722

Sundry Operating Income

815

773

203

356

Retained Claims

(9,470)

(8,317)

(3,282)

(3,108)

Capitalization Bond Draws and Redemptions

(2,400)

(1,926)

(891)

(800)

Selling Expenses

(1,738)

(1,384)

(592)

(552)

General and Administrative Expenses

(1,441)

(1,559)

(519)

(498)

Other Operating Income/Expenses

(211)

(211)

(64)

(47)

Tax Expenses

(346)

(339)

(108)

(123)

Operating Result

4,049

3,684

1,268

1,363

Equity Result

313

186

127

90

Non-Operating Income

(29)

(27)

(10)

(10)

Income before Taxes and Profit Sharing

4,333

3,843

1,385

1,443

Income Tax and Contributions

(1,592)

(1,338)

(506)

(525)

Profit Sharing

(58)

(44)

(19)

(19)

Non-controlling Interest

(60)

(120)

(23)

(18)

Net Income

2,623

2,341

837

881

(1) For comparison purposes, 3Q12 non-recurring events were not considered.

 

 

 

Bradesco 

 57  

 


 

 

 

Economic and Financial Analysis
   
Insurance, Pension Plans and Capitalization Bonds
 
Income Distribution of Grupo Bradesco Seguros e Previdência
 

 

R$ million

 

3Q12

2Q12

1Q12

4Q11

3Q11

2Q11

1Q11

4Q10

Life and Pension Plans

493

494

493

535

486

470

442

485

Health

133

148

151

181

132

200

201

177

Capitalization Bonds

86

91

104

87

86

79

86

63

Basic Lines and Other

125

148

157

57

76

51

32

54

Total

837

881

905

860

780

800

761

779

 

Performance Ratios

 

 

 

 

 

 

 

 

 

%

 

3Q12

2Q12

1Q12

4Q11

3Q11

2Q11

1Q11

4Q10

Claims Ratio (1)

70.4

71.3

71.9

68.6

71.5

72.2

72.0

71.1

Expense Ratio (2)

11.3

11.1

11.1

11.1

10.5

10.8

10.0

10.8

Administrative Expenses Ratio (3)

5.0

4.3

5.0

4.5

5.8

5.4

6.1

5.8

Combined Ratio (4) (5)

86.5

85.0

85.6

83.6

86.2

85.8

86.1

85.1

(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) Excluding additional reserves.
Note: For comparison purposes, the non-recurring effects arising from the additional technical reserve due to the real interest rate reduction were not considered in the third quarter ratio.

 

Written Premiums, Pension Plan Contributions and Capitalization Bond Income

 

 

In view of the excellent performance of "Life and Pension Plan” and “Capitalization Bond” products in the second quarter of 2012 and the insurance segment seasonality in the period, the R$10.1 billion revenue in the third quarter of 2012 was lower than that of the previous quarter, but up 12.0% when compared to the third quarter of 2011. 

Production in the first nine months of 2012 posted a 17.3% increase comparing to the same period in the previous year, mainly driven by the performance of all segments, which had more than a two-digit growth.

 

 

 
58 Report on Economic and Financial Analysis – September 2012   

 


 

 

 

Economic and Financial Analysis
   
Insurance, Pension Plans and Capitalization Bonds
 
Written Premiums, Pension Plan Contributions and Capitalization Bond Income

 


 

 


 

 

 

 

Bradesco 

 59  


 
 

Economic and Financial Analysis
   
Insurance, Pension Plan and Capitalization Bonds
 
Retained Claims by Insurance Line
  

 

 

 

 
60 Report on Economic and Financial Analysis – September 2012   

 

 


 
 

Economic and Financial Analysis
   
Insurance, Pension Plan and Capitalization Bonds
 
Insurance Expense Ratio by Insurance Line
 

 


 

 

 

 

 

Bradesco 

 61  


 
 

 

Economic and Financial Analysis
   
Insurance, Pension Plans and Capitalization Bonds
 
Efficiency Ratio 

 

 

General and Administrative Expenses/Revenue

Year on year, the efficiency ratio decreased 0.8 p.p. in the third quarter of 2012 due to: (i) the 12.0% increase in revenue for the period; and (ii) the 4.6% decrease in general and administrative expenses, even considering the collective bargaining agreement, which occurred in January 2012.

 

 
62 Report on Economic and Financial Analysis – September 2012   

 

 


 
 

Economic and Financial Analysis
   
Insurance, Pension Plans and Capitalization Bonds
 
Insurance Technical Reserves

 

 


 

 

 

 

Bradesco 

 63  


 
 

 

Economic and Financial Analysis
   
Bradesco Vida e Previdência
 

 

R$ million (unless otherwise stated)

 

3Q12

2Q12

1Q12

4Q11

3Q11

2Q11

1Q11

4Q10

Net Income

493

494

493

535

486

470

442

485

Premium and Contribution Income (1)

5,002

6,737

5,009

6,886

4,708

5,493

4,059

5,385

- Income from Pension Plans and VGBL

3,988

5,816

4,090

5,926

3,829

4,713

3,317

4,617

- Income from Life/Personal Accidents Insurance Premiums

1,014

921

919

960

879

780

742

768

Technical Reserves

102,425

98,199

93,861

91,008

84,788

81,991

78,547

76,283

Investment Portfolio

110,182

106,102

100,366

96,047

91,806

88,255

85,182

82,786

Claims Ratio

34.6

43.5

41.3

38.3

44.4

47.4

43.6

44.1

Expense Ratio

21.2

19.2

21.3

19.1

18.5

19.2

19.2

19.5

Combined Ratio

60.8

68.4

70.8

66.1

71.3

75.4

71.9

74.7

Participants / Policyholders (in thousands)

25,295

25,257

24,534

24,582

24,051

23,109

22,698

22,186

Premium and Contribution Income Market Share (%) (2)

28.9

29.9

27.5

33.1

31.6

32.0

28.1

31.2

Life/AP Market Share - Insurance Premiums (%) (2)

17.7

17.4

17.3

17.6

16.9

16.3

16.0

17.3

                 

(1) Life/VGBL/PGBL/Traditional; and
(2) 3Q12 includes the latest data released by Susep (August 2012).
Note: For comparison purposes, the non-recurring effects arising from the additional technical reserve due to the real interest rate reduction were not considered in the third quarter ratio.

 

Due to its solid structure, a policy of product innovation and customer trust, Bradesco Vida e Previdência leads the segment with a 28.9% market share in terms of pension plan and VGBL (Susep) income in the period.

Net income for the third quarter of 2012 remained stable when comparing to the previous quarter, influenced by: (i) the “Life/AP” product performance, with a 10.1% increase in sales in the period; (ii) the decreased claims ratio; and offset by: (iii) a decrease in the financial result.

Net income for the first nine months of 2012 was up 5.9% from that of the same period in 2011, mainly resulting from: (i) the 17.4% increase in revenue; (ii) a 5.6 p.p. decrease in “Life” product claims ratio; (iii) the decrease in general and administrative expenses, even when accounting for the collective bargaining agreement in January 2012; and partially offset by: (iv) a decrease in the financial result.

 

 

 
64 Report on Economic and Financial Analysis – September 2012   

 

 


 
 

Economic and Financial Analysis
   
Bradesco Vida e Previdência


Bradesco Vida e Previdência's technical reserves stood at R$102.4 billion in September 2012, made up of R$97.4 billion from the “Pension Plans and VGBL” product and R$5.0 billion from “Life,” “Personal Accidents” and “Other Lines” products, up 20.8% over September 2011.

The Pension Plan and VGBL Investment Portfolio totaled R$105.1 billion in August 2012, equal to 33.6% of all market funds (source: Fenaprevi).

 

 

Growth of Participants and Life and Personal Accident Policyholders

 


In September 2012, the number of Bradesco Vida e Previdência customers grew by 5.2% compared to September 2011, surpassing a total of 2.2 million pension plan and VGBL plan participants 

and 23.0 million personal accident participants. This impressive growth was fueled by the strength of the Bradesco brand and the improvement of selling and product management policies.

 

 

 

 

Bradesco 

 65  


 
 

 

Economic and Financial Analysis
   
Bradesco Saúde and Mediservice
 

 

R$ million (unless otherwise stated)

 

3Q12

2Q12

1Q12

4Q11

3Q11

2Q11

1Q11

4Q10

Net Income

133

148

151

181

132

200

201

177

Net Written Premiums

2,498

2,338

2,251

2,170

2,114

2,016

1,940

1,808

Technical Reserves

5,466

4,128

4,072

3,984

3,942

3,848

3,708

3,481

Claims Ratio

86.9

86.1

86.4

83.4

87.3

87.7

87.6

84.0

Expense Ratio

5.0

4.9

4.8

4.7

4.4

4.3

4.2

4.2

Combined Ratio

99.9

96.9

97.9

96.1

98.9

99.6

100.0

100.2

Policyholders (in thousands)

3,873

3,707

3,627

3,458

3,384

3,244

3,144

3,100

Written Premiums Market Share (%) (1)

47.4

46.9

46.7

47.9

47.5

47.4

49.4

49.5

                 

(1) 3Q12 considers the latest data released by ANS (August 2012).
Note: For comparison purposes, the non-recurring effects arising from the additional technical reserve due to the real interest rate reduction were not considered in the third quarter ratio.

 

Revenue posted a 6.8% growth comparing with the previous quarter. Net income for the third quarter of 2012 decreased 10.1% quarter on quarter, mainly due to: (i) the 0.8% p.p. increase in claims ratio, driven by: (a) the seasonality of medical and hospital expenses; and (b) more business days for claims payment.

The result for the first nine months of 2012 was down 18.9% over the same period of the previous year, due to: (i) the decrease in financial result, driven by the payment of dividends amounting to R$900 million in December 2011; (ii) the decrease in equity income, partially offset by: (iii) the 16.8% increase in revenue; (iv) the 1.0 p.p. decrease in the claims ratio; and (v) lower general and administrative expenses.

In September 2012, Bradesco Saúde and Mediservice maintained strong market position in the corporate segment (source: ANS).

Approximately 50 thousand companies in Brazil have Bradesco Saúde insurance and Mediservice plans. Of the 100 largest companies in Brazil in terms of revenue, 50 are Bradesco Saúde and Mediservice customers (source: Exame  magazine’s Best and Major Companies (Melhores e Maiores) ranking, July 2012).

 

 
66 Report on Economic and Financial Analysis – September 2012   

 


 
 

Economic and Financial Analysis
   
Bradesco Saúde and Mediservice
 
Number of Policyholders at Bradesco Saúde and Mediservice

Together, the two companies have over 3.8 million customers. The high share of corporate policies in the overall portfolio (94.9% in September 2012) shows the companies’ high level of specialization and customization in the corporate segment, a major advantage in today’s supplementary health insurance market.

Bradesco Capitalização

 

R$ million (unless otherwise stated)

 

3Q12

2Q12

1Q12

4Q11

3Q11

2Q11

1Q11

4Q10

Net Income

86

91

104

87

86

79

86

63

Capitalization Bond Income

1,013

937

795

798

849

751

649

706

Technical Reserves

5,165

4,886

4,663

4,571

4,329

4,096

3,891

3,724

Customers (in thousands)

3,426

3,358

3,228

3,097

3,024

2,888

2,794

2,691

Premium Income Market Share (%) (1)

22.6

22.2

21.2

21.6

21.4

21.3

21.2

21.1

                 

(1) 3Q12 considers the latest data released by Susep (August 2012).

 

Revenues from capitalization bonds for the third quarter of 2012 grew by 8.1% when compared to the previous quarter. Net income for the quarter was 5.5% lower than that of the second quarter of 2012, influenced by an increase in the reserve for redemptions/draws.

Net income for the first nine months of 2012 grew by 12.0% when compared to the same period of the previous year, mainly due to: (i) the 22.1% increase in revenues from capitalization bonds; (ii) an improved management efficiency ratio; and partially offset by: (iii) the decrease in the financial result, driven by the payment of dividends amounting to R$300 million in December 2011.

 

 

 

Bradesco 

 67  

 


 
 

 

Economic and Financial Analysis
   
Bradesco Capitalização

Bradesco Capitalização ended the third quarter of 2012 leading the capitalization bond companies ranking, due to its policy of transparency and of adjusting its products based on potential consumer demand.

In order to offer the capitalization bond that best fits the profile and budget of each customer, Bradesco Capitalização has developed several products that vary in accordance with payment method (lump-sum or monthly), contribution term, frequency of draws and premium amounts. This phase was mainly marked by a closer relationship with the public by consolidating Pé Quente Bradesco products.

Among these products, it is worth pointing out the performance of the social and environmental products, from which a part of the profit is allocated to socially responsible projects, while also allowing the customer to create a financial reserve. Bradesco Capitalização currently has partnerships with the following social and environmental institutions: (i) Fundação SOS Mata Atlântica (contributes to the conservation of biological and cultural diversity of the Atlantic Forest, stimulating social and environmental citizenship); (ii) Instituto Ayrton Senna (contributes to education and human development, reducing illiteracy rates, school failure and drop-out rates); (iii) Fundação Amazonas Sustentável (contributes to the sustainable development, environmental preservation and improvement to the quality of life of communities that benefit from the preservation centers in the state of Amazonas); (iv) the Brazilian Cancer Control Institute (contributes to the development of projects for the prevention, early diagnosis and treatment of breast cancer in Brazil); and (v) Projeto Tamar (created to save sea turtles).

Bradesco Capitalização S.A. is the first capitalization bond company in Brazil to receive the ISO. In 2009, it was certified with the ISO 9001:2008 for Management of Bradesco Capitalization Bonds. This certification, granted by Fundação Vanzolini, attests to the quality of its internal processes and confirms the principle that underpins Bradesco Capitalization Bonds: good products, services and continuous growth.

The portfolio is composed of 21.2 million active bonds, of which: 38.3% are Traditional Bonds sold in the branch network and at Bradesco Dia & Noite service channels, up 17.1% over September 2011; and 61.7% are incentive bonds (assignment of drawing rights), such as partnerships with Bradesco Vida e Previdência and Bradesco Auto/RE, which were up 1.3% over September 2011. Given that the purpose of this type of capitalization bond is to add value to the associated company or even encourage the performance of its customers, bonds have reduced maturity and grace terms and a lower sale price.

 

 

 
68 Report on Economic and Financial Analysis – September 2012   

 

 


 
 

Economic and Financial Analysis
   
Bradesco Auto/RE
 

 

R$ million (unless otherwise stated)

 

3Q12

2Q12

1Q12

4Q11

3Q11

2Q11

1Q11

4Q10

Net Income

42

26

49

33

50

44

39

58

Net Written Premiums

1,239

1,208

967

983

1,042

1,061

871

865

Technical Reserves

4,508

4,345

4,148

3,920

3,853

3,828

3,688

3,554

Claims Ratio

63.9

64.2

64.7

65.9

61.3

61.0

68.1

69.3

Expense Ratio

18.7

18.8

18.4

18.2

17.4

17.6

17.2

17.6

Combined Ratio

105.8

104.1

107.4

108.2

104.1

97.9

110.2

106.9

Policyholders (in thousands)

3,968

3,826

3,801

3,694

3,632

3,567

3,330

3,337

Premium Income Market Share (%) (1)

10.6

10.5

9.8

10.1

10.4

10.5

9.7

10.6

(1) 3Q12 considers the latest data released by Susep (August 2012).

Net income for the third quarter of 2012 was up by 61.5% from the previous quarter, due to: (i) a 0.3 p.p. decrease in claims ratio, impacted by: (a) a 2.5 p.p. decrease in “Auto” segment, due to increased risk premium; and offset by (b) a 8.7 p.p. growth in “Basic Lines” segment, due to high claims ratio in transport and certain claims; (ii) an increase in the financial result; and (iii) higher equity result.

Net income for the first nine months of 2012 was 12.0% lower than that posted in the same period of 2011, due to: (i) a decrease in the financial result; (ii) the 0.8 p.p. increase in claims ratio, resulting from: (a) a 2.6 p.p. growth in “Auto” segment, boosted by higher average claims ratio and the increase in frequency of theft/robbery in Brazil’s main capital cities; and mitigated by: (b) a 4.6 p.p. decrease in “Basic Lines” segment, driven by the increase in “Residential” portfolio; partially offset by: (iii) the improved equity result; and (iv) lower general and administrative expenses, even with the raise in salary set out in the collective bargaining agreement in January 2012.    

In the Property Insurance segment, the focus on “Bradesco Corporate” large brokers and customers was maintained. This results in renewal of the main accounts, whether in leadership or participation in co-insurance. Also note the excellent performance of “Engineering Risks” segment: the partnership with Banco Bradesco’s Real Estate Loan area has enabled new insurance contracts from its customer base

In Aviation and Maritime Hull insurance, the increased exchange with Bradesco Corporate and Bradesco Empresas has been drawn on extensively, taking full advantage of the stronger sales of new aircraft and those of the maritime segment.

 The transportation segment is still the primary focus, with essential investments made to leverage new business, especially in the renewal of reinsurance agreements, which gives insurers the power to assess and cover risk, and consequently increase competitiveness in more profitable businesses such as international transportation insurance for shipping companies involved in international trade.

Despite strong competition in the Auto/RCF line, the insurer has increased its customer base, mainly due to improvements to current products and the creation of products for a specific target-public. Among them, it is worth noting the launch of the First Vehicular Protection of Bradesco Seguro (Bradesco Seguro Primeira Proteção Veicular), an exclusive product to Bradesco’s account holders, which helps, through the Day and Night Support services, vehicles from 3 to 10 years of use.

For better service, Bradesco Auto/RE currently has 22 Bradesco Auto Centers (BAC), which offer policyholders the greatest variety of services in a single place, including: auto claims services, reserve rental cars, installation of anti-theft equipment, preventative maintenance checks, glass repairs or replacement and environmental vehicle inspections.

 

 

 

Bradesco 

 69  

 


 

 

 

Economic and Financial Analysis
   
Bradesco Auto/RE
 
Number of Policyholders at Auto/RE


Mass insurance targets individuals, self-employed professionals and SMEs. The launch of new products combined with the continuous improvement to methods and systems has contributed to growth in the customer base, which increased by 9.3% in the last 12 months, to a total of 4.0 million customers.

It is worth pointing out that we continued with a strong strategy for the Residential Insurance segment, with a 32% growth in premiums from January to August (higher than the market growth), totaling more than 2 million insured homes.

 

 

 
70 Report on Economic and Financial Analysis – September 2012   

 

 


 
 
 
Economic and Financial Analysis
   
Fee and Commission Income

 

A breakdown of the variation in Fee and Commission Income for the respective periods is presented below:

Fee and Commission Income

R$ million

9M12

9M11

3Q12

2Q12

Variation

 

YTD

Quarter

Card Income

4,373

3,691

1,527

1,456

682

71

Checking Account

2,378

2,039

826

805

339

21

Fund Management

1,622

1,451

562

535

171

27

Loan Operations

1,563

1,455

538

524

108

14

Collection

974

893

338

322

81

16

Consortium Management

452

389

159

150

63

9

Custody and Brokerage Services

359

318

122

119

41

3

Underwriting / Financial Advisory Services

318

209

94

115

109

(21)

Payments

238

231

80

80

7

-

Other

561

462

193

175

99

18

Total

12,837

11,137

4,438

4,281

1,700

157

             

 

Explanations of the main items that influenced the variation in Fee and Commission Income between periods can be found below.

 

 

 

Bradesco 

 71  

 
Economic and Financial Analysis
   
Fee and Commission Income
 
Card Income
 

Card income stood at R$1,527 million in the third quarter of 2012, up 4.9% from the previous quarter, mainly due to the increase in the number of transactions in the period and growth of revenue.

In comparison with the same period a year earlier, card service revenues stood at R$4,373 million, up 18.5% or R$682 million in relation to the same period last year, mainly due to an increase in revenue from purchases and services, resulting from the increase in card revenue, active base and amount of transactions in the period.

In addition, the debit and credit card base decreased in the second and third quarters, respectively, due to the exclusion of idle cards.

 
72 Report on Economic and Financial Analysis – September 2012   

 

 


 
Economic and Financial Analysis
   
Fee and Commission Income
 
Checking Account

In the third quarter of 2012, fee and commission income from checking accounts increased 2.6% in comparison with the previous quarter, mainly due to: (i) the net increase of 69 thousand new checking accounts (12 thousand individual accounts and 57 thousand corporate customer accounts); and (ii) the expansion of the portfolio of services provided to our customers. 

In comparison with the same period a year earlier, income grew by R$339 million, or 16.6%, in the first nine months of 2012, mainly due to: (i) the expansion of the checking account customer base, which posted a net increase of 945 thousand current accounts (796 thousand individual customers and 149 thousand corporate customers); and (ii) the expansion of the service portfolio to our customers.

Loan Operations

 

In the third quarter of 2012, income from loan operations amounted to R$538 million, up 2.7% in comparison with the previous quarter, mainly due to the greater volume of loan operations in the period, mainly “Sureties and Guarantees” operations, up 3.5% on the second quarter of 2012.

In comparison with the same period a year earlier, the 7.4% increase in the first nine months of the year was mainly the result of: (i) greater income from collateral, up 20.2%, mainly deriving from the 23.3% growth in the volume of Sureties and Guarantees; and (ii) an increase in volume of other operations in the period.

 

 

 

Bradesco 

 73  

 


 
Economic and Financial Analysis
   
Fee and Commission Income
 
Fund Management
 

In the third quarter of 2012, income from fund management stood at R$562 million, up R$27 million from the previous quarter, mainly due to a 5.4% growth in the volume of funds and portfolios raised and managed.

Year on year, the R$171  million or 11.9% increase in the first nine months of 2012 was mainly due to: (i) increases in funds and portfolios, which grew by 26.6%; and (ii) the 13.1% increase in the Ibovespa index in the period, impacting income from managed funds and portfolios pegged to equities.

The highlight was the investments in fixed-rate funds, which grew by 25.2% in the period, followed by equity securities, up 20.4%.

 

Shareholders' Equity

R$ million

Variation %

 

Sept12

Jun12

Sept11

Quarter

12M

Investment Funds

366,451

358,881

293,578

2.1

24.8

Managed Portfolios

29,924

17,691

17,633

69.1

69.7

Third-Party Fund Quotas

8,068

7,017

8,240

15.0

(2.1)

Total

404,443

383,589

319,451

5.4

26.6

x

x

x

x

x

x

Asset Distribution

R$ million

Variation %

 

Sept12

Jun12

Sept11

Quarter

12M

Investment Funds – Fixed Income

338,495

331,421

270,354

2.1

25.2

Investment Funds – Equities

27,956

27,460

23,224

1.8

20.4

Investment Funds – Third-Party Funds

6,854

5,739

7,102

19.4

(3.5)

Total - Investment Funds

373,305

364,620

300,680

2.4

24.2

x

 

 

 

 

 

Managed Portfolios – Fixed Income

21,305

10,228

10,403

108.3

104.8

Managed Portfolios – Equities

8,619

7,463

7,230

15.5

19.2

Managed Portfolios – Third-Party Funds

1,214

1,278

1,138

(5.0)

6.7

Total - Managed Funds

31,138

18,969

18,771

64.2

65.9

x

 

 

 

 

 

Total Fixed Income

359,800

341,649

280,757

5.3

28.2

Total Equities

36,575

34,923

30,454

4.7

20.1

Total Third-Party Funds

8,068

7,017

8,240

15.0

(2.1)

Overall Total

404,443

383,589

319,451

5.4

26.6

           

 

 
74 Report on Economic and Financial Analysis – September 2012   

 


 
Economic and Financial Analysis
   
Fee and Commission Income
 
Cash Management Solutions (Payments and Collection)

 

In the third quarter of 2012, income from payments and collection was up 4.0% from the previous quarter, mainly due new businesses and increase in the number of processed documents in the period. 

In comparison with the same period a year earlier, the 7.8% or R$88 million increase in revenue from payments and collection in the first nine months of 2012 was mainly the result of the greater volume of processed documents, up from 1,297 million in the first nine months of 2011 to a total of 1,422 million in the first nine months 2012.

 

 

Consortium Management

 

In the third quarter of 2012, income from consortium management increased by 6.0% over the previous quarter, mainly due to the segment expansion. On September 30, 2012, Bradesco had 707 thousand active quotas (676 thousand active quotas on June 30, 2012), ensuring a leading position in all the segments it operates (real estate, auto and trucks/tractors).

Year on year, there was a 16.2% increase in income in the first nine months of 2012, resulting from: (i) the growth in the volume of bids and advances; and (ii) the increase in sales of new quotas, from 548 thousand net quotas sold on September 30, 2011 to 707 thousand active quotas on September 30, 2012, an increase of 159 thousand net quotas.

Bradesco’s purpose is to offer the most complete portfolio of products and services to its customers. Therefore, the Organization provides consortium plans for all income groups, covering the different market demands, in real estate and automobile segments. To sell the consortium plans, Bradesco has the strength and expertise of several managers, who operate together with customers in all Brazilian cities.

Bradesco remains being leader in the three segments due to planning and synergy with the Branch Network, together with stability and security of the Bradesco brand.

 

 

 

 

Bradesco 

 75  

 
Economic and Financial Analysis
   
Fee and Commission Income
 
Custody and Brokerage Services


In the third quarter of 2012, total custody and brokerage service income increased by R$3 million, remaining virtually stable in relation to the previous quarter. 

In comparison with the same period a year earlier, the 12.9% increase in income in the first nine months of 2012 was mainly due to the increase in custody services, with a R$129 billion gain in assets under custody.

 

Underwriting / Financial Advisory Services

 

The R$21 million decrease in the quarter-on-quarter comparison mainly refers to increased gains with capital market operations in the second quarter of 2012, particularly underwriting operations. Furthermore, changes in this income are often the result of volatile performance of capital markets.

From the first nine months of 2011 to the same period in 2012, there was an increase of R$109 million, mainly as a result of a higher business volume in underwriting and financial advisory operations.

 

 
76 Report on Economic and Financial Analysis – September 2012   

 


 
Economic and Financial Analysis
   
Personnel and Administrative Expenses
 

 

 

R$ million

Personnel and Administrative Expenses

9M12

9M11

3Q12

2Q12

Variation

 

 

 

 

 

 

YTD

Quarter

Personnel Expenses

 

 

 

 

 

 

Structural

7,335

6,384

2,548

2,436

951

112

Payroll/Social Charges

5,509

4,821

1,916

1,824

688

92

Benefits

1,826

1,563

632

612

263

20

Non-Structural

1,709

1,537

571

611

172

(40)

Management and Employee Profit Sharing

993  

822

328

341

171

(13)

Provision for Labor Claims

499

518

167

188

(19)

(21)

Training

100

108

38

41

(8)

(3)

Termination Costs

117

89

38

41

28

(3)

Total

9,044

7,921

3,119

3,047

1,123

72

x

 

 

 

 

 

 

Administrative Expenses

 

 

 

 

 

 

Outsourced Services

2,561

2,649

897

832

(88)

65

Communication

1,241

1,177

416

415

64

1

Depreciation and Amortization

915

814

306

308

101

(2)

Data Processing

808

691

277

268

117

9

Transportation

641

560

215

215

81

-

Rental

571

490

192

196

81

(4)

Advertising and Marketing

523

607

208

162

(84)

46

Financial System Services

488

370

162

163

118

(1)

Asset Maintenance

439

400

148

145

39

3

Security and Surveillance

317

240

112

105

77

7

Leased Assets

284

259

87

96

25

(9)

Materials

245

281

75

77

(36)

(2)

Water, Electricity and Gas

188

168

58

65

20

(7)

Trips

101

113

34

33

(12)

1

Other

1,087

905

377

361

182

16

Total

10,407

9,724

3,565

3,441

683

124

x

 

 

 

 

 

 

Total Personnel and Administrative Expenses

19,451  

17,645

6,684

6,488

1,806

196

x

 

 

 

 

 

 

Employees

104,100

101,334

104,100

104,531

2,766

(431)

Service Points

67,225

55,832

67,225

65,370

11,393

1,855

 

In the third quarter of 2012, total Personnel and Administrative Expenses came to R$6,684 million, up 3.0% in comparison with the previous quarter. In the first nine months of 2012, Personnel and Administrative Expenses amounted to R$19,451 million, up 10.2% over the same period of the previous year.

 

Personnel Expenses

 

In the third quarter of 2012, personnel expenses came to R$3,119 million, a 2.4% variation, or R$72 million, from the previous quarter.

The R$112 million growth in the structural portion was mainly the result of raise in salaries, as determined by the collective bargaining agreement and labor adjustments, totaling R$107 million, of which R$38 million refer to monthly payroll increase as of September 2012.

 

The R$40 million decrease in the non-structural portion was mainly due to lower expenses with: (i) provision for labor claims, amounting to R$21 million; and (ii) management and employee profit sharing, in the amount of R$13 million.

 

 

Bradesco 

 77  
 

 

 

Economic and Financial Analysis
   
Personnel and Administrative Expenses
 
Personnel Expenses
 

In comparison with the same period a year earlier, the R$1,123 million increase in the first nine months of 2012 reflects: (i) the structural expenses of R$951 million related to: (a) the increase in expenses with payroll, social charges and benefits, impacted by salary increases (2011 and 2012 collective bargaining agreements); and (b) the net increase in staff, hiring 2,766 employees in the period, driven by investments to expand service points and improve business segmentation; and (ii) the R$172 million gain in the non-structural expenses mainly due to higher expenses with management and employee profit sharing.

 

 
78 Report on Economic and Financial Analysis – September 2012   

 


 
Economic and Financial Analysis
   
Personnel and Administrative Expenses

 

 

 

Administrative Expenses

 

In the third quarter of 2012, administrative expenses came to R$3,565 million, up 3.6%, or R$124 million from the previous quarter, mainly due to higher expenses with: (i) outsourcing, mainly “Cards” product variable; (ii) data processing; and (iii) marketing and advertising, mainly due to the actions taken during the 2012 London Olympic and Paralympic Games, regarding the 2016 Rio Olympics sponsorship rights.

In comparison with the same period a year earlier, the R$683 million, or 7.0%, increase in the first nine months of 2012 was mainly due to higher expenses with: (i) increase in the volume of businesses and services;

(ii) contractual adjustments; and (iii) organic growth expenses, leading to an increase of 11,393 service points, mainly the increase of 720 Branches and 10,341 Bradesco Expresso points, totaling 67,225 service points on September 30, 2012; partially offset by lower expenses with: (iv) outsourcing, mainly related to the end of the partnership with Empresa Brasileira de Correios e Telégrafos - ECT in December 2011 (Postal Bank); and (v) marketing and advertising. In the last 12 months, the inflation rates Extended Consumer Price Index (IPCA) and General Market Price Index (IGP-M) stood at 5.3% and 8.1% respectively.

 

 

 

Bradesco 

 79  

 
Economic and Financial Analysis
   

Operating Coverage Ratio (1)

 

In the quarter, the coverage ratio in the last 12 months maintained its improvement with a 1.2 p.p. growth, mainly due to an increase in fee and commission income, combined with ongoing cost control efforts, including actions of our Efficiency Committee in the period.

It is worth noting that 64.4% is the best rate over the last eight quarters.

(1) Fee and Commission Income / Administrative and Personnel Expenses (over the last 12 months).

 

Tax Expenses


The addition of R$47 million to tax expenses, in comparison with the previous quarter, was mainly due to the increase in taxable income impacting the calculation basis of PIS/Cofins expenses.

In comparison with the same period a year earlier, the R$382 million increase in the first nine months of 2012 was mainly the result of higher PIS/Cofins expenses, basically reflecting the increase in taxable income, especially financial margin and fee and commission income.

 

 
80 Report on Economic and Financial Analysis – September 2012   

 


 
Economic and Financial Analysis
   
Equity in the Earnings (Losses) of Unconsolidated Companies
 

In the third quarter of 2012, equity in the earnings (losses) of unconsolidated companies stood at R$45 million. The R$26 million increase from the previous quarter was mainly due to higher results from the unconsolidated company Integritas.

Year on year, the R$13 million increase recorded in the first nine months of 2012 was mainly due to greater results from unconsolidated company “IRB - Brasil Resseguros,” partially mitigated by lower results with the unconsolidated company Integritas.

 

Operating Income

 

Operating income in the third quarter of 2012 was R$4,388 million, up R$22 million, from the previous quarter, mainly impacted by (i) the increase in fee and commission income, amounting to R$157 million; (ii) a decrease in the allowance for loan loss expenses, in the amount of R$104 million; (iii) the increase in operating income from Insurance, Pension Plans and Capitalization Bonds in the amount of R$76 million; offset by: (iv) the R$196 million increase in personnel and administrative expenses; (v) lower financial margin, amounting to R$79 million; and (vi) higher tax expenses, in the amount of R$47 million.

In comparison with the same period a year earlier, the R$848 million, or 6.9%, increase in the first nine months of 2012 is basically a result of: (i) the R$3,621 million increase in financial margin; (ii) the R$1,700 million increase in fee and commission income; (iii) the R$422 million increase in operating income from Insurance, Pension Plans and Capitalization Bonds, partially offset by: (iv) a R$2,228 million increase in allowance for loan loss expenses; (v) a R$1,806 million increase in administrative and personnel expenses; (vi) a R$492 million increase in other operating expenses (net of other revenues); and (vii) a R$382 million increase in tax expenses.

 

 

 

Bradesco 

 81  

 


 
Economic and Financial Analysis
   
Non-Operating Income


In the third quarter of 2012, non-operating income posted a loss of R$20 million, down R$2 million from the previous quarter and down R$59 million from the same period in 2011, due to greater non-operating expenses in the period.

 

 
82 Report on Economic and Financial Analysis – September 2012   

 

 


 



 

Return to Shareholders   
Sustainability 
 
Bradesco remains in the Dow Jones Sustainability World Index 2012/2013 

For one more year, Bradesco was selected to join the Dow Jones Sustainability World Index, which considers the world companies’ financial and environmental performance, such as corporate governance, risk management, climate change mitigation and management, human capital development and standards for the supply chain.

Since 1999, the capital market has recognized the Dow Jones Sustainability World Index as the first global index that assigns differentiated value to companies that consistently demonstrate their long-term initiatives and strategies towards corporate sustainability.

 
Época magazine’s 2012 Green Company Award
 

For the fifth consecutive year, Bradesco is one of the winners of the Época’s Green Company Award for being an outstanding company in terms of Good Environmental Practices. Promoted by Época Magazine, the award aims to highlight companies' environmental strategy, such as

initiatives towards climate change, biodiversity impact, use of renewable raw materials, conscientious water usage, waste disposal, energy efficiency and innovative development of processes and products.

 
Investor Relations (IR) 
 

In the third quarter of 2012, as a sequence of the cycle of 2012 Apimec Meetings, Bradesco carried out seven events in the cities of Fortaleza, Belo Horizonte, Porto Alegre, Brasília, Rio de Janeiro, São Paulo and Recife. These meetings were attended by more than 2.3 thousand people including analysts, shareholders, customers and investors. All meetings were broadcast live over the internet with simultaneous translation into English and the participation of approximately 3.7 thousand internet users. São Paulo's event was also broadcasted in Libras (Brazilian sign language) to reinforce the democratization of information. The summary of all events and the full São Paulo's meeting can be watched at www.bradesco.com.br/ri.

The Investor Relations Area, in partnership with Ágora and Bradesco Corretora, participated in the

ExpoMoneys in Brasília and São Paulo, where lectures on various topics were held, such as "Building Knowledge in Stocks," "Macroeconomic Scenario," "Personal Finance," "Diversifying Investments,” "Be the Owner of Your Strategy", "Fundamental Analysis," among others. Also, visitors clarified their doubts and took a quiz on financial literacy, Bradesco numbers, sustainability practices and Olympics.

The area also attended eight conferences and road shows in Brazil and abroad, serving more than 240 analysts and investors. In this period, 37 meetings, 54 conference calls, 4 institutional presentations and 3 events were held in Brazil.

In addition, the Investor Relations team frequently keeps contact with shareholders, investors and analysts via telephone, email, or in person at Bradesco's headquarters.

 
84 Report on Economic and Financial Analysis – September 2012   

 

 

 

  Return to Shareholders 
 
Corporate Governance

 

The Bank’s Management is made up of the Board of Directors, which is composed of nine members (seven external members, one internal member and one independent member), and the Board of Executive Officers. Members of the Board of Directors are elected on an annual basis by the Annual Shareholders’ Meeting, which elect members of the Board of Executive Officers internally.

Within its Corporate Governance structure, Bradesco’s Board of Directors is supported by five Statutory Committees (Ethical Conduct, Audit, Internal Controls and Compliance, Compensation and Integrated Risk Management and Capital Allocation), in addition to 44 Executive Committees that assist the Board of Executive Officers in performing its duties.

Shareholders are entitled to 100% tag-along rights for common shares, 80% for preferred shares and to a minimum mandatory dividend of 30% of adjusted net income.

Preferred shares are also entitled to dividends 10% greater than those paid to common shares.

In 2001, Bradesco voluntarily adhered to Level 1 Corporate Governance of BM&FBovespa -Securities, Commodities and Futures Exchange.

In 2011, it also voluntarily adhered to the Code of Self-Regulation and Best Practices for Publicly-Held Companies, issued by the Brazilian Association of Publicly-Held Companies (Abrasca) based on the best corporate governance practices adopted in Brazil and abroad.

Bradesco ranked AA+ (Excellent Corporate Governance Practices) by Austin Rating.

On March 9, 2012, all of the matters proposed to the Shareholders’ Meetings were approved.

For more information, visit www.bradescori.com.br - Corporate Governance.

Bradesco Shares 
 
Number of Shares - Common and Preferred Shares (1) 

 

      In thousands 
Sept12  Jun12  Sept11 
Common Shares  1,909,762  1,909,839  1,909,911 
Preferred Shares  1,907,611  1,907,931  1,907,931 
Subtotal – Outstanding Shares  3,817,373  3,817,770  3,817,842 
Treasury Shares  7,422  7,025  6,953 
Total  3,824,795  3,824,795  3,824,795 
(1) Stock bonus and splits during the periods were not included.       

 

On September 30, 2012, Bradesco’s capital stock stood at R$30.1 billion, composed of 3,824,795 thousand no-par, book-entry shares, of which 1,912,398 thousand were common shares and 1,912,397 thousand were preferred shares. The largest shareholder is the holding company Cidade de Deus Cia. Comercial de Participações, which directly holds 48.7% of voting capital and 24.4% of total capital.

Cidade de Deus Cia. Comercial de Participações is controlled by the Aguiar Family, Fundação Bradesco and another holding company, Nova Cidade de Deus Participações S.A., which is in turn controlled by Fundação Bradesco and BBD Participações S.A., whose majority of shareholders are members of Bradesco’s Board of Directors, Statutory Board of Executive Officers and management-level employees.

 

 

 

Bradesco 

 85  

 

Return to Shareholders
 
Bradesco Shares
 
Number of Shareholders - Domiciled in Brazil and Abroad
 
  Sept12  %  Ownership of
Capital (%)
Sept11 %  Ownership of
Capital (%)
Individuals  329,141  89.77  23.22  338,462  89.90  23.75 
Companies  36,558  9.97  46.01  37,147  9.87  46.85 
Subtotal Domiciled in Brazil  365,699  99.74  69.23  375,609  99.77  70.60 
Domiciled Abroad  969  0.26  30.77  867  0.23  29.40 
Total  366,668  100.00  100.00  376,476  100.00  100.00 

On September 30, 2012, there were 365,699 shareholders domiciled in Brazil, accounting for 99.74% of total shareholders and holding 69.23%

of all shares, while a total of 969 shareholders are domiciled abroad, accounting for 0.26% of shareholders and holding 30.77% of shares.

 
Average Daily Trading Volume of Shares (1) 

 

Bradesco shares are traded on BM&FBovespa and NYSE. Since November 21, 2001, Bradesco trades its ADRs backed by preferred shares on NYSE. As of March 13, 2012, it has also traded ADRs backed by common shares.

In the first nine months of 2012, the average daily trading volume of ADRs was R$288 million,

representing 57.0% of the total average daily trading volume of Bradesco shares. In the same period, the average daily trading volume of common and preferred shares on BM&FBovespa reached R$218 million, representing 43.0% of the total average daily trading volume of Bradesco shares.

 

(1) Average daily trading volume of shares listed on BM&FBovespa (BBDC3-ON and BBDC4-PN) and NYSE (BBD-ADR PN and BBDO-ADR ON).

 
86 Report on Economic and Financial Analysis – September 2012   

 

 


 

  Return to Shareholders 
Bradesco Shares   
 
Appreciation of Preferred Shares - BBDC4 (1)   

 

The graph shows the change in preferred shares due to Bradesco’s dividend reinvestment, compared to the Ibovespa and the CDI - Interbank Deposit Rate. If R$100 were invested in

December 2001, Bradesco shares would be worth R$896 at the end of September 2012, an appreciation above Ibovespa and CDI rates in the same period.

 

(1) Dividend reinvestment is considered.

Share and ADR Performance (1)             
 
  In R$ (unless otherwise stated) 
3Q12  2Q12   Variation %   9M12  9M11   Variation % 
Adjusted Net Income per Share  0.76  0.75  1.3  2.25  2.21  1.8 
Dividends/Interest on Shareholders' Equity - Common Share (after Income Tax) 0.214  0.212  0.9  0.633  0.620  2.1 
Dividends/Interest on Shareholders' Equity - Preferred Share (after Income Tax) 0.235  0.233  0.9  0.696  0.681  2.2 
 
 
  In R$ (unless otherwise stated) 
Sept12  Jun12      Variation %  Sept12  Sept11  Variation % 
Book Value per Common and Preferred Share  17.30  16.74  3.3  17.30  14.08  22.9 
Last Trading Day Price - Common Shares  26.69  25.00  6.8  26.69  22.94  16.3 
Last Trading Day Price - Preferred Shares  32.57  29.94  8.8  32.57  27.71  17.5 
Last Trading Day Price - ADR ON (US$) (2)  13.57  12.31  10.2  13.57  -  - 
Last Trading Day Price - ADR PN (US$)  16.07  14.87  8.1  16.07  14.79  8.7 
Market Capitalization (R$ million) (3)  113,102  104,869  7.9  113,102  96,682  17.0 
Market Capitalization (R$ million) - Most Traded Share (4)  124,332  114,304  8.8  124,332  105,792  17.5 
(1) Adjusted for corporate events in the periods;             
(2) In March 2012, Bradesco launched a program of Level II ADRs backed by common shares;         
(3) Number of shares (excluding treasury shares) x closing price for common and preferred shares on the last trading day of the period; and 
(4) Number of shares (excluding treasury shares) x closing price for preferred shares on the last trading day of the period.   

 

 

 

Bradesco 

 87  

 


 

Return to Shareholders   
Bradesco Shares 
 
Recommendation of Market Analysts - Target Price 

 

Market analysts issue periodical recommendations on Bradesco preferred shares (BBDC4). We had access to ten reports prepared by these analysts on October 17, 2012. Below are

recommendations and a consensus on the target price.

 
Recommendations %  Target Price in R$ for Dec13 
Buy  50.0  Average  39.32 
Keep  50.0  Standard Deviation  3.91 
Sell  -  Higher  45.80 
Under Analysis  -  Low er  33.00 

For more information on target price and recommendation of each market analyst that monitors the performance of Bradesco shares,

visit the IR section at www.bradescori.com.br > Information to Shareholders > Analysts’ Consensus.

 
Market Capitalization 

 

On September 30, 2012, Bradesco’s market capitalization, considering the closing prices of common and preferred shares, was R$113.1 billion, up 7.9% over the previous quarter. Considering the closing price for preferred shares (most traded share), on the

same date, Bradesco’s market capitalization was R$124.3 billion, an increase of 8.8% over the previous quarter. In the quarter-on-quarter comparison, the Ibovespa increase was equivalent to the Bradesco’s market capitalization (considering the most traded share), that is, 8.8%.


 
88 Report on Economic and Financial Analysis – September 2012   

 

 


 

  Return to Shareholders 
Main Indicators

 

Market Capitalization (Common and Preferred Shares) / Net Income (1): indicates a possible number of years that the investor would recover the capital invested, based on the closing prices of common and preferred shares.

(1) In the last 12 months.

 
     
 

Market Capitalization (Common and Preferred Shares) / Shareholders' Equity: indicates the multiple by which Bradesco’s market capitalization exceeds its book shareholders’ equity.

 

(1) Note the increase of R$4,105 million in shareholders’ equity from the surplus value of some securities reclassified from “Held to Maturity” to “Available for Sale”, due to the adoption of CPCs 38 and 40 by the Insurance Group.

 
     

Dividend Yield: 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 income.

 

 

 

Bradesco 

 89  

 


 

Return to Shareholders   
 
Dividends/Interest on Shareholders’ Equity 

 

In the first nine months of 2012, a total of R$2,923 million was allocated to shareholders as Interest on Shareholders’ Equity and Dividends. In the last 12 months, total Interest on Shareholders’ Equity

 

and Dividends allocated to shareholders corresponded to 35.9% of book net income, considering withholding income tax of 31.5% thereof.

 

(1) In the last 12 months.

Weight on Main Stock Indexes 

 

Bradesco shares comprises Brazil’s main stock indexes, including IBrX-50 (index that measures the total return of a theoretical portfolio comprising 50 shares selected among the most traded shares on BM&FBovespa), ISE (Corporate Sustainability Index), ITAG (Special Tag-Along Stock Index), IGC (Special Corporate Governance Stock Index), IFNC (Financial Index which comprises banks, insurance and financial companies), and ICO2 (index comprising shares of the companies that are part of the IBrX-50 index and that accepted

to take part in this initiative by adopting transparent greenhouse gas emission practices).

Abroad, Bradesco shares are listed on NYSE’s Dow Jones Sustainability World Index and the FTSE Latibex Brasil Index of Madrid Stock Exchange.

Sept12  In % (1) 
Ibovespa  3.2 
IBrX-50  7.6 
IBrX  7.6 
IFNC  21.0 
ISE  5.2 
IGC  6.1 
ITAG  11.4 
ICO2  11.8 

(1) Represents Bradesco’s weight on the portfolio of main Brazilian stock market indexes.

 
 
90 Report on Economic and Financial Analysis – September 2012   

 

 


 



 

Additional Information   
 
Market Share of Products and Services 

 

Market shares held by the Organization in the Banking and Insurance industries and in the Customer Service Network are presented below.

 

  Sept12  Jun12  Sept11  Jun11 
Banks - Source : Brazilian Central Bank (Bacen)         
Demand Deposits  N/A  16.6  16.8  17.6 
Savings Deposits  N/A  13.8  13.8  14.1 
Time Deposits  N/A  12.8  14.7  14.3 
Loan Operations  11.7 (1) (3)  11.8 (1)  12.3  12.6 
Loan Operations - Vehicles Individuals (CDC + Leasing)  15.8 (1) (3)  15.9 (1)  16.3  16.8 
Payroll-Deductible Loans  10.9 (1) (3)  11.0 (1)  11.2  11.3 
Bradesco Collection (Balance)  N/A  25.7  26.3  26.7 
Number of Branches  21.7  21.9  19.7  18.7 
Banks - Source: Federal Revenue Service / Brazilian Data Processing Service (Serpro)         
Federal Revenue Collection Document (DARF)  N/A  20.6  22.0  21.8 
Brazilian Unified Tax Collection System Document (DAS)  N/A  16.4  17.3  17.2 
Banks - Source: Social Security National Institute (INSS) / Dataprev         
Social Pension Plan Voucher (GPS)  N/A  14.4  14.6  14.2 
Benefit Payment to Retirees and Pensioners  24.4  24.1  23.4  22.9 
Banks - Source: Anbima         
Investment Funds + Portfolios  18.3  18.0  16.7  16.6 
Insurance, Pension Plans and Capitalization Bonds – Source: Insurance Superintendence (Susep) and National Agency for Supplementary Healthcare (ANS)        
Insurance, Pension Plan and Capitalization Bond Premiums  24.5 (3)  24.8  24.9  25.0 
Insurance Premiums (including Long-Term Life Insurance - VGBL)  24.3 (3)  24.8  25.0  25.0 
Life Insurance and Personal Accident Premiums  17.7 (3)  17.4  16.9  16.3 
Auto/Basic Lines (RE) Insurance Premiums  10.6 (3)  10.5  10.4  10.5 
Auto/Optional Third-Party Liability (RCF) Insurance Premiums  13.7 (3)  13.9  14.1  14.0 
Health Insurance Premiums  47.4 (3)  46.9  47.5  47.4 
Income from Pension Plan Contributions (excluding VGBL)  30.0 (3)  29.3  29.2  28.8 
Capitalization Bond Income  22.6 (3)  22.2  21.4  21.3 
Technical Reserves for Insurance, Pension Plans and Capitalization Bonds  29.6 (3)  29.5  30.1  30.2 
Insurance and Pension Plans - Source: National Federation of Life and Pension Plans (Fenaprevi)        
Income from VGBL Premiums  28.9 (3)  30.0  32.5  32.8 
Income from Unrestricted Benefits Generating Plans (PGBL) Contributions  26.7 (3)  25.3  25.2  24.8 
Pension Plan Investment Portfolios (including VGBL)  33.6 (3)  33.9  33.9  34.2 
Leasing - Source: Brazilian Association of Leasing Companies (ABEL)         
Lending Operations  19.2 (3)  19.2  18.5  18.5 
Consortia - Source: Bacen         
Real Estate  29.7 (2)  29.3  26.6  26.9 
Auto  25.6 (2)  25.6  24.8  25.4 
Trucks, Tractors and Agricultural Implements  18.0 (2)  17.7  16.5  16.9 
International Area - Source: Bacen         
Export Market  19.7  19.3  20,9  22,1 
Import Market  17.2  17.8  17.8  17.9 
(1) Bacen data for June 2012 and August 2012 are preliminary;         
(2) Reference date: July 2012; and         
(3) Reference date: August 2012.         
N/A - Not available.         

 

 
92 Report on Economic and Financial Analysis – September 2012   

 

 


 

  Additional Information 
 
Market Share of Products and Services
 
Branch Network

 

 Region Sept12  Market  Sept11  Market
Share
Bradesco  Market  Share  Bradesco  Market 
North  279  1,028  27.1%  192  864  22.2% 
Northeast  844  3,334  25.3%  586  2,884  20.3% 
Midw est  346  1,641  21.1%  318  1,523  20.9% 
Southeast  2,417  11,320  21.4%  2,191  10,848  20.2% 
South  779  4,130  18.9%  658  3,859  17.1% 
Total  4,665  21,453  21.7%  3,945  19,978  19.7% 

 

Compulsory Deposits/Liabilities 

 

%  Sept12  Jun12  Mar12  Dec11  Sept11  Jun11  Mar11  Dec10 
Demand Deposits                 
Rate (2) (6)  44  43  43  43  43  43  43  43 
Additional (3)  -  12  12  12  12  12  12  12 
Liabilities (1)  34  28  28  28  28  29  29  29 
Liabilities (Microfinance)  2  2  2  2  2  2  2  2 
Free  20  15  15  15  15  14  14  14 
Savings Deposits                 
Rate (4)  20  20  20  20  20  20  20  20 
Additional (3)  10  10  10  10  10  10  10  10 
Liabilities  65  65  65  65  65  65  65  65 
Free  5  5  5  5  5  5  5  5 
Time Deposits                 
Rate (3) (5)  20  20  20  20  20  20  20  20 
Additional (3)  12  12  12  12  12  12  12  12 
Free  68  68  68  68  68  68  68  68 

 

(1) Liabilities are applied to Rural Loans;
(2) Collected in cash and not remunerated;
(3) Collected in cash with the Special Clearance and Custody System (Selic) rate;
(4) Collected in cash with the Reference Interest rate (TR) + interest of 6.17% p.a. for deposits made until May 3, 2012. For deposits made as from May 4, 2012, the Bank will collect (i) TR + interest of 6.17% p.a., if the Selic rate is higher than 8.5% p.a., or (ii) TR + 70% of the Selic rate, when the Selic rate is equal to or lower than 8.5% p.a.;
(5) As of the calculation period from March 29, 2010 to April 1, 2010, with compliance on April 9, 2010, liabilities are now exclusively in cash, and may be paid with credits acquired as provided for by legislation in force; and
(6) FGC was prepaid 60 times in August 2008, as of the calculation period from October 20, 2008 to October 31, 2008, with compliance as of October 29, 2008
.

 

 

 

Bradesco 

 93  

 

Additional Information   
 
Investments in Infrastructure, Information Technology and Telecommunication 

 

Bradesco is one of the Brazilian banks that invest the most in Information Technology, in order to provide its customers increasingly convenience and easiness through services that meet their needs and, more than that, their desires.

In addition to owning one of the largest banking service networks, the Bank offers its customers various electronic media, thereby strengthening the relationship between them and the Bank.

Among the channels, we highlight the F.Banking, the first Brazilian application and one of the first in the world to provide access to bank account through Facebook, Brazil's largest social network. With this application customers can view account information and carry out payment of bills. We ensure total security; data are not at risk of being accessed by third parties, because the system used to access the account is the same as Internet Banking, which is hosted in a secure Bradesco environment.

Besides social networks, we also launched the mobile version of the Bradesco Universitários website, which offers convenience and fast browsing among content available and designed specifically for university students. It features information about products and services, interviews with personalities and renowned professionals, audio podcasts, Bradesco Radio, and internship and résumé tips.

Another highlight in the period is Bradesco Next. The "Bank of the Future" is a conceptual agency unveiled at the JK Iguatemi Mall in São Paulo. The environment, where technology fits customer needs and not the other way round, provides a unique experience with the Bank's products and services through innovative solutions such as biometric wall, in which customers and non-customers can know and experience in practice the use of biometrics through an on-site registration, which allows interaction with agency’s other tools. It also features Bradesco Dia & Noite equipment, or ATMs Next, which have touchscreen and allow some transactions without card. In the "Bank of the Future" you can use an

interactive table called "Life Cycles,” also exclusive to Bradesco customers. A series of cards bring purchase goals, such as buying a house, a car or a trip. By placing a card on the table, it automatically analyzes your account holder profile and tells you what to do to reach the goal.

Concerning IT Improvements, a total of 80% of the Systems Architecture is already developed, bringing significant results, such as a 25% reduction in business processes and back-office activities, greater agility in the design and development of new products, around 50%, and a 10% reduction in development costs with component reuse.

For these and other pioneering initiatives and avant-garde attitude, Bradesco was considered the most innovative company in customer relationship according to a study by DOM Strategy Partners, a consultancy, which was published in the Consumidor Moderno magazine. Moreover, Bradesco won in the Banking & Insurance category the 100+ Innovative Companies in IT Award promoted by IT Media.

We have an up-to-date technological environment, duly controlled and prepared to meet the demands of the growing volume of our customers’ business transactions. In 2012, Bradesco’s processing capacity increased by 7.2% in view of the daily volume of 265 million transactions. Data storage capacity increased by 16%, allowing the Bank to offer more services and information to its customers.

As a prerequisite for its continuous expansion, Bradesco invested R$2,967 million in Infrastructure, Information Technology and Telecommunications up to the third quarter of 2012. The total amount invested over recent years, including infrastructure (facilities, restorations, improvements, furniture and fixtures), can be found below.

          R$ million 
9M12  2011  2010  2009  2008 
Infrastructure  421  1,087  716  630  667 
Information Technology and Telecommunication  2,546  3,241  3,204  2,827  2,003 
Total  2,967  4,328  3,920  3,457  2,670 

 

 
94 Report on Economic and Financial Analysis – September 2012   

 

 


 

  Additional Information 
  
Risk Management   

 

Risk management is a strategic activity due to the increasing complexity of products and services offered and the globalization of the Organization’s business. Therefore, Bradesco is constantly enhancing its process.

The Organization’s decisions are based on factors that combine return on previously identified, measured and assessed risks, providing the conditions required to meet strategic goals while working to strengthen the Organization.

The Organization exercises the corporate control of risks in an integrated and independent manner,

unifying policies, processes, criteria and methodology for risk control through a statutory body, the Integrated Risk Management and Capital Allocation Committee, which is supported by specific committees and risk management policies approved by the Board of Directors.

Detailed information on the risk management process, reference shareholders’ equity and required reference shareholders’ equity, as well as the Organization’s risk exposure, can be found in the Risk Management Report on the Investor Relations website, at www.bradescori.com.br.

 
Capital Adequacy Ratio 

 

In September 2012, Bradesco's Reference Shareholders' Equity amounted to R$91,149 million, versus a Required Reference Shareholders' Equity of R$62,851 million, resulting in a R$28,298 million capital margin. This figure was mostly impacted by the credit risk portion (PEPR), representing 86.3% of the risk-weighted assets.

The Capital Adequacy Ratio decreased by 1.0 p.p., from 17.0% in June 2012 to 16.0% in September 2012, mainly due to: (i) the decrease due to maturity of subordinated debts eligible to Tier II capital; (ii) the increase in credit risk, partially caused by the loan portfolio expansion; and (iii) the increase in market risk, partially caused by the effects of Bacen Circular Letter No. 3,568/11.

 
Calculation Basis R$ million 
Sept12  Jun12  Mar12  Dec11  Sept11  Jun11  Mar11  Dec10 

Reference Shareholders' Equity 

91,149  90,201  75,705  71,476  68,806  62,524  59,923  56,147 

Tier I 

64,265  62,418  60,580  58,714  56,876  55,110  53,240  49,897 

Shareholders' Equity 

66,047  63,920  58,059  55,582  53,742  52,843  51,297  48,043 

Mark-to-Market Adjustments 

(2,150)  (1,865)  2,126  2,765  2,781  1,947  1,660  1,678 

Reduction of Deferred Assets 

(218)  (224)  (235)  (248)  (260)  (279)  (291)  (296) 

Non-controlling Interest/Other 

586  587  630  615  613  599  574  472 

Tier II 

26,992  27,890  15,231  12,865  12,063  7,544  6,809  6,373 

Mark-to-Market Adjustments 

2,150  1,865  (2,126)  (2,765)  (2,781)  (1,947)  (1,660)  (1,678) 

Subordinated Debt 

24,842  26,025  17,357  15,630  14,844  9,491  8,469  8,051 

Deduction of Funding Instruments 

(108)  (107)  (107)  (103)  (134)  (130)  (126)  (123) 

Risk-weighted Assets 

571,377  531,871  505,934  474,173  467,206  426,007  398,443  380,844 

Required Reference Shareholders' Equity 

62,851  58,506  55,653  52,159  51,393  46,861  43,829  41,892 

Credit Risk 

54,213  52,050  48,718  47,422  47,183  43,324  40,775  38,938 

Operating Risk 

3,432  3,313  3,313  2,810  2,810  2,690  2,690  2,574 

Market Risk 

5,207  3,143  3,622  1,927  1,400  847  364  380 

Margin (Excess/ Reference Shareholders' Equity Insufficiency) 

28,298  31,695  20,052  19,317  17,413  15,663  16,094  14,255 

Leverage Margin 

257,255  288,136  182,293  175,609  158,303  142,393  146,309  129,591 

Capital Adequacy Ratio 

16.0%  17.0%  15.0%  15.1%  14.7%  14.7%  15.0%  14.7% 

 

 

 

Bradesco 

 95  

 


 



 

Independent Auditors’ Report  
Limited assurance report from independent auditor on the supplementary accounting information 

 

To the Directors of
Banco Bradesco S.A.
Osasco
SP

Introduction

We were engaged to apply limited assurance procedures for the supplementary accounting information included in the Economic and Financial Analysis Report of Banco Bradesco S.A. ("Bradesco") as of and for the three and nine month periods ended September 30, 2012. Management is responsible for the preparation and fair presentation of this supplementary accounting information. Our responsibility is to issue a Limited Assurance Report on such supplementary accounting information.

Scope, procedures applied and limitations

The limited assurance procedures were performed in accordance with standard NBC TO 3000 Assurance Engagement Other than Audit and Review, issued by the Brazilian Federal Accounting Council (CFC Conselho Federal de Contabilidade) and the ISAE 3000 -International Standard on Assurance Engagements issued by the International Auditing and Assurance Standards Board - IASB, both for assurance engagements other than audits or reviews of historical financial information.

The limited assurance procedures comprised: (a) the planning of the work, considering the relevance of the supplementary financial information and the internal controls systems that served as a basis for the preparation of the Economic and Financial Analysis Report of Bradesco, (b) the understanding of the calculation methodology and the consolidation of indicators through interviews with the management responsible for the preparation of the supplementary accounting information, and (c) the comparison of the financial and accounting indicators with the interim information disclosed at this date and.

The procedures that were applied do not constitute an audit or review in accordance with Brazilian and international auditing and review standards, as well as these procedures and the obtained evidence are more limited than for reasonable assurance procedures. Additionally, our report does not offer limited assurance on the scope of future information (such as goals, expectations and ambitions) and descriptive information that is subject to subjective assessment.

Criteria for preparation of the supplementary accounting information

The additional accounting information disclosed in the Economic and Financial Analysis Report as of and for the three and nine month periods ended September 30, 2012 were prepared by Management of Bradesco, based on the consolidated financial information contained in the interim financial information and on the criteria described in the Economic and Financial Analysis Report, in order to provide additional analysis, but without being part of the interim financial information available in this date.

 
 
98 Report on Economic and Financial Analysis – September 2012   

 

 


 

Independent Auditors’ Report
 
Limited assurance report from independent auditor on the supplementary accounting information 

 

Conclusion

Based on our review, we are not aware of any facts that would lead us to believe that the supplementary accounting information in the Economic and Financial Analysis Report as of and for the three and nine month periods ended September 30, 2012 is inconsistent, in all material respects, with regard to interim accounting information referred to in the paragraph of criteria for the preparation of supplementary accounting information.

 

Osasco, October 19, 2012

Original report in Portuguese signed by
KPMG Auditores Independentes
CRC 2SP014428/O-6

     Cláudio Rogélio Sertório
Accountant CRC 1SP212059/O-0

 

 

Bradesco 

 99  

 


 

 



 

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. for the period ended September 30, 2012, pursuant to the accounting practices adopted in Brazil and applicable to institutions authorized to operate by the Brazilian Central Bank.

The main central banks have adopted and reinforced measures to prevent exceptional events in the international scenario. The wider-scale injection of liquidity and the maintenance of expansionist initiatives should contribute to the recovery of the global economy. This outlook is likely to heighten the effects of the domestic economic policy stimuli, strengthening the perception that Brazil's economy has entered into a sustained period of higher growth.

The Bradesco Organization's third-quarter highlights are listed below:

R$6.695 billion corresponded to taxes withheld and collected from third parties, and R$10.361 billion to taxes levied on the activities of Bradesco Organization, equivalent to 122.07% of Net Income.

Paid-in Capital Stock totaled R$30.100 billion at the end of the quarter. Together with Equity Reserves of R$35.947 billion, Shareholders Equity came to R$66.047 billion, 22.90% up on the same period in 2011 and equivalent to a book value of R$17.30 per share.

On September 30, 2012, Bradesco's Market Capitalization, calculated based on its stock price, came to R$113.102 billion, equivalent to 1.71 times Shareholders Equity.

Managed Shareholders Equity represents 7.78% of consolidated Assets, which came to R$856.288 billion, 18.55% more than in September 2011. Thus the Capital Adequacy Ratio came to 15.87% in the consolidated financial result and 15.95% in the consolidated economic and financial result, higher than the 11% minimum established by National Monetary Council Resolution 2,099/94, in compliance with the Basel Committee. At the close of the quarter, the fixed asset ratio in relation to Consolidated Reference Assets was 45.02% in the consolidated financial result and 18.95% in the consolidated economic and financial result, well within the 50% limit.

In compliance with Article 8 of Brazilian Central Bank Circular Letter 3,068/01, Bradesco declares that it has the financial capacity and the intention of holding to maturity those securities classified under “held-to-maturity securities”. Bradesco further declares that the operations of Banco Bradescard S.A., the current name of Banco Ibi S.A., its subsidiary, are sufficient to cover the strategic goals defined in the business plan, in compliance with  Article 11 of National Monetary Council Resolution 4,122/12.

On September 30, 2012, total funding and assets under management came to R$1.172 trillion, 20.43% up on the same period in 2011, broken down as follows:
 

·

On August 30, the Organization inaugurated Bradesco Nextthe bank of the futurea thoroughly modern space for the presentation and experimentation of new products and services. In Bradesco Next, technology and innovation are adapted to the needs of its customers, who can take advantage of a fully digital and multi-touch environment, financial advisory services with an interactive panel, and an ATM that sends transaction receipts via email and enables customers to withdraw money using biometric technology (using the palm of their hand only, with no recourse to cards), among other benefits; and

·

On September 13, Bradesco was once again included in the Dow Jones Sustainability Index, a select NYSE trading list that includes only those companies with the best sustainable development practices.

From January 1 to September 30, 2012, Bradesco posted Net Income of R$8.488 billion, corresponding to earnings per share of R$2.22 and a return on average Shareholders Equity(*) of 19.59%. The annualized return on average Total Assets stood at 1.40%.

A total of R$2.923 billion was allocated to shareholders as Dividends and Interest on Shareholders Equity, of which R$1.348 billion was paid as monthly and interim dividends and R$1.575 billion was provisioned.

R$458.407

billion in demand deposits, time deposits, interbank deposits, open market and savings accounts, up by 15.72%;

 R$404.443

billion in assets under management, comprising investment funds, managed portfolios and third-party fund quotas, a 26.61% improvement;

In the first nine months, taxes and contributions, including social security contributions, paid or provisioned, totaled R$17.056 billion, of which 

 

102 Report on Economic and Financial Analysis – September 2012   

 

 

 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Management Report

 

 

R$168.639

billion in the exchange portfolio, borrowings and onlendings, working capital, payment and collection of taxes and related charges, funds from security and subordinated debt issues in Brazil and other funding operations, a 15.69% increase;

led the semi-annual M&A, fixed income and equities rankings. In the first nine months of 2012, it executed operations worth over R$96.401 billion.

On September 30, 2012, Grupo Bradesco Seguros e Previdência, one of the leaders in the insurance, pension plan and capitalization bond segments, posted Net Income of R$2.623 billion and Shareholders Equity of R$17.919 billion. Net written insurance premiums, pension contributions and capitalization bond income came to R$31.092 billion, up 17.34% on the same period in 2011.

On September 30, 2012, Bradesco Organization's Customer Service Network, which is at the disposal of customers and users, comprised 55,575 service points, as well as 35,128 terminals in the Bradesco Dia & Noite Network, 34,619 of which also operating on weekends and holidays, in addition to 12,414 terminals in the Banco24Horas network, available to Bradesco's customers to make withdrawals, obtain statements, check balances, solicit loans, and make payments and transfers. In the payroll-deductible loan segment, the network had 1,186 Bradesco Promotora correspondent branches and, in the vehicles segment, 16,674 Bradesco Financiamento points of sale:

R$117.807

billion in technical reserves for insurance, pension plans and capitalization bonds, a 21.33% expansion; and

R$22.712

billion in foreign funding, through public and private issues, subordinated debt and the securitization of future financial flows, equivalent to US$11.185 billion.

At the end of the period, consolidated loans stood at R$371.674 billion, 11.84% higher than in September 2011, broken down as follows:

R$7.361

billion in advances on exchange contracts, giving a total export financing portfolio of US$14.346 billion;

US$3.758

billion in import financing in foreign currency;

8,439

Branches and PAs (Service Branches) in Brazil (Branches: Bradesco 4,641, Banco Bradesco Financiamentos 19, Bankpar 2, Banco Bradesco BBI 1, Banco
Bradesco Cartões 1 and Banco Alvorada 1; and PAs: 3,774); 

R$8.731

billion in leasing;

R$15.968 

billion in rural lending;

R$85.987

billion in consumer financing, including R$11.571 billion in credit card receivables;

3

Overseas Branches, 1 in New York, and 2 in Grand Cayman; 

R$54.732

billion in sureties and guarantees; and

10

Overseas Subsidiaries (Banco Bradesco Argentina S.A. in Buenos Aires, Banco Bradesco Europa S.A. in Luxembourg, Bradesco North America LLC and Bradesco Securities Inc. in New York, Bradesco Securities UK Limited in London, Bradesco Securities Hong Kong Limited and Bradesco Trade Services Limited in Hong Kong, Bradesco Services Co. Ltd. in Tokyo, Cidade Capital Markets Ltd., in Grand Cayman, and Bradescard México, Sociedad de Responsabilidad Limitada in Mexico);

R$30.416

billion in operations involving the onlending of foreign and domestic funds, mainly from the BNDES Brazilian evelopment Bank, operating as one of the country's main onlending agents. 

In the real estate segment, between January and September 2012, Bradesco Organization allocated R$11.152 billion to the construction and acquisition of homes, comprising 58,083 properties.

Bradesco BBI, Bradesco Organization's investment bank, advises customers on share issues, mergers  and acquisitions and the structuring and distribution of debt instruments, including debentures, promissory notes, CRIs, mortgage-backed investment funds, receivables-backed investment funds (FIDCs) and bonds in Brazil and abroad, in addition to structured financing operations for companies and project finance. In a survey  conducted by the Brazilian Association of Financial and Capital Market Entities (Anbima), Bradesco BBI 

41,713 

Bradesco Expresso service points; 

1,456

PAEs - in-company electronic service branches; and

3,954

External terminals in the Bradesco Dia & Noite ATM network and 10,464 ATMs in the Banco24Horas network, with terminals shared by both networks.

 

 

 

Bradesco 

 103  

 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Management Report

 

In accordance with CVM Rule 381/03, in the period the Bradesco Organization did not contract nor was  provided services unrelated to the external audit by KPMG Auditores Independentes that exceeded 5% of the total external auditing fees. The additional services provided by the external auditors comprised previously agreed upon procedures for revising financial and control information and providing support for complying with fiscal requirements, diagnosis of processes and technology and trainings.

In the Human Resources Area, Bradesco maintained its strategy of promoting the professional development of its employees by investing heavily in training programs, seeking to increase the quality and efficiency of its services. Between January and September 2012, 2,249 courses were administered to 1,665,778 employees. Benefits aimed at promoting the quality of life, well-being and security of its staff and their dependents covered 207,852 employees at the end of the period.

Most of the Organization's social initiatives are handled by Fundação Bradesco, which maintains 40 schools located in all Brazilian states and the Federal District, with a special emphasis on socially and economically underprivileged regions. The budget of R$385,473 million will provide free, high-quality education to: a) 111,170 students enrolled in the following levels: basic education (kindergarten to high school and vocational training/high-school), youth and adult education, and preliminary and continuing vocational training, which focuses on creating jobs and income; b) around 300 thousand students who will conclude at least one of the various distance-learning courses (EaD) available on the e-learning portal; and c) 83 thousand beneficiaries in partnership projects and initiatives, including the Digital Inclusion Centers (CIDs), the Educa+Ação Program and technology courses (Educar e Aprender). The more than 50 thousand basic education students receive meals, medical and dental assistance, school supplies and uniforms free of charge.

The Bradesco Sports and Education Program maintains 17 Training and Specialist Centers in thecity of Osasco, SP, for teaching women's volleyball and basketball in its Sports Development Center, Fundação Bradesco schools, schools in the city's public school system, private schools and sports centers. Currently around 2 thousand girls, aged between 8 and 18, are taking part in the program, reinforcing Bradesco's social commitment to defending a country that is giving increasing value to recognizing talent, effort and the full exercise of citizenship, combining health, sports and education. 

Bradesco received the following important honors in the period:
 

·

Elected the most valuable brand in Latin America, for the second consecutive year, by a survey conducted by Latin America Brand Finance;
 

·

Elected the Best Bank in Latin America, according to study prepared by América Economia magazine;
 

·

Elected Company of the Year by the Best of Dinheiro 2012 year book in a survey conducted by IstoÉ Dinheiro magazine in association with KPMG, Trevisan and Economatica. The Bradesco Organization was also elected Best Insurance Company, Best Health Company and Best Human Resources Management Company;
 

·

Ranked first in the Banks category by the Best of Brazil 2012 year book, promoted by Brasil Econômico newspaper, in a survey by the consulting firm, Austin Rating;
 

·

Elected the most innovative company in customer relations, according to a survey conducted by DOM Strategy Partners, published in Consumidor Moderno magazine;
 

·

Elected one of the 100 Best Companies to Work For in Brazil, according to a survey by Época magazine, evaluated by the Great Place to Work Institute;
 

·

Elected one of the 150 Best Companies to Work For, according to Guia 2012 Você S/A in, in a study conducted by Management Institute Foundation - FIA;
 

·

Highlighted by the Valor 1000 year book, published by Valor Econômico newspaper, which elected Grupo Bradesco Seguros e Previdência as Brazil's best insurance company;
 

·

Granted the Best Relations with Financial Sector Investors Award, promoted by IR magazine together with Revista RI and the Brazilian Investor Relations Institute (IBRI); and
 

·

Granted the 2012 Brazil Ombudsman Award, based on a survey by the Brazilian Ombudsmans Association, the Brazilian Corporate-Customer Relations Association and Consumidor Moderno magazine.

 

104 Report on Economic and Financial Analysis – September 2012   

 


 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Management Report

 

These results are confirmation of the Bradesco Organization's efforts and strategies for meeting and exceeding customers' expectations, with efficiency and first-class products and services. For these achievements and for all our other advances, we would like to thank our shareholders and customers for their support and confidence and our employees and other personnel for their efficient and dedicated efforts.

 

Cidade de Deus, October 19, 2012
Board of Directors and Board of Executive Officers

 

(*) Excludes the mark-to-market effect of available-for-sale securities recorded under shareholders equity.

 

 

 

Bradesco 

 105  

 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Consolidated Statement of Financial Position - R$ thousand

 

Assets

2012

2011

September

June

September

Current assets

612,443,567

600,201,144

523,934,140

Cash and due from banks (Note 6)

12,943,991

13,997,224

10,018,083

Interbank investments (Notes 3d and 7)

125,892,805

90,879,341

84,183,100

Investments in federal funds purchased and securities sold under agreements to repurchase

117,856,744

82,255,293

76,028,087

Interbank deposits

8,037,180

8,624,548

8,156,717

Allowance for loan losses

(1,119)

(500)

(1,704)

Securities and derivative financial instruments (Notes 3e, 3f, 8 and 32b)

241,899,736

254,725,288

194,946,379

Own portfolio

176,499,275

177,386,354

125,507,723

Subject to repurchase agreements

57,957,328

69,663,742

64,860,406

Derivative financial instruments (Notes 3f, 8e II and 32b)

2,585,305

2,790,138

2,630,271

Subject to the Brazilian Central Bank

-

-

1,901

Underlying guarantee provided

4,008,664

3,310,813

1,887,281

Securities subject to unrestricted repurchase agreements

849,164

1,574,241

58,797

Interbank accounts

55,071,776

61,081,583

70,741,214

Unsettled payments and receipts

768,037

643,934

976,599

Restricted credit (Note 9):

     

- Compulsory deposits - Brazilian Central Bank

54,222,409

60,369,358

69,707,946

- National treasury - rural loans

578

578

578

- National Housing System (SFH)

2,243

4,738

1,763

Correspondent banks

78,509

62,975

54,328

Interdepartmental accounts

654,931

886,060

688,693

Internal transfer of funds

654,931

886,060

688,693

Loans (Notes 3g, 10 and 32b)

121,870,197

119,765,169

109,423,126

Loans:

     

- Public sector

338,055

321,422

959,838

- Private sector

134,108,179

131,898,333

119,643,000

Allowance for loan losses (Notes 3g, 10f, 10g and 10h)

(12,576,037)

(12,454,586)

(11,179,712)

Leasing (Notes 2, 3g, 10 and 32b)

4,370,926

4,771,440

5,840,364

Leasing receivables:

     

- Public sector

-

1,379

6,810

- Private sector

8,516,508

9,223,613

11,146,582

Unearned income from leasing

(3,663,648)

(3,941,539)

(4,675,714)

Allowance for leasing losses (Notes 3g, 10f, 10g and 10h)

(481,934)

(512,013)

(637,314)

Other receivables

47,273,435

51,278,262

46,523,599

Receivables on sureties and guarantees honored (Note 10a-3)

7,230

8,553

8,944

Foreign exchange portfolio (Note 11a)

11,243,408

14,026,676

13,999,732

Receivables

678,519

645,354

608,478

Securities trading

3,309,379

4,003,933

1,861,361

Specific loans

2,503

2,429

2,226

Insurance premiums receivable

2,780,945

2,766,572

2,347,850

Sundry (Note 11b)

29,976,066

30,535,432

28,321,699

Allowance for other loan losses (Notes 3g, 10f, 10g and 10h)

(724,615)

(710,687)

(626,691)

Other assets (Note 12)

2,465,770

2,816,777

1,569,582

Other assets

1,259,762

1,162,736

676,040

Provision for losses

(621,824)

(580,793)

(221,693)

Prepaid expenses (Notes 3i and 12b)

1,827,832

2,234,834

1,115,235

Long-term receivables

227,852,187

214,861,717

186,303,873

Interbank investments (Notes 3d and 7)

879,572

1,978,788

1,779,775

The accompanying Notes are an integral part of these Consolidated Financial Statements.

 

106 Report on Economic and Financial Analysis – September 2012   

 

 


 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Consolidated Statement of Financial Position - R$ thousand

Assets

2012

2011

September

June

September

Interbank investments

879,572

1,978,788

1,779,775

Securities and derivative financial instruments (Notes 3e, 3f, 8 and 32b)

77,637,517

67,781,988

49,675,235

Own portfolio

51,751,401

38,744,376

28,992,647

Subject to repurchase agreements

24,498,921

27,790,998

19,836,301

Derivative financial instruments (Notes 3f, 8e II and 32b)

514,354

361,803

173,735

Privatization currencies

75,222

77,905

82,397

Underlying guarantees provided

797,619

641,690

590,155

Securities subject to unrestricted repurchase agreements

-

165,216

-

Interbank accounts

549,063

542,574

521,249

Restricted credits (Note 9):

     

- SFH

549,063

542,574

521,249

Loans (Notes 3g, 10 and 32b)

112,785,040

109,806,071

102,441,369

Loans:

     

- Public sector

138,620

161,514

440,743

- Private sector

119,431,942

116,272,505

108,226,547

Allowance for loan losses (Notes 3g, 10f, 10g and 10h)

(6,785,522)

(6,627,948)

(6,225,921)

Leasing (Notes 2, 3g, 10 and 32b)

3,537,135

3,933,203

5,645,598

Leasing receivables:

     

- Private sector

7,865,903

8,644,461

11,625,666

Unearned income from leasing

(3,987,493)

(4,339,656)

(5,561,638)

Allowance for leasing losses (Notes 3g, 10f, 10g and 10h)

(341,275)

(371,602)

(418,430)

Other receivables

30,832,996

29,588,352

25,470,895

Receivables

39,265

40,177

27,085

Securities trading

131,178

227,419

333,316

Sundry (Note 11b)

30,668,041

29,325,945

25,113,336

Allowance for loan losses (Notes 3g, 10f, 10g and 10h)

(5,488)

(5,189)

(2,842)

Other assets (Note 12)

1,630,864

1,230,741

769,752

Other assets

164

392

565

Prepaid expenses (Notes 3i and 12b)

1,630,700

1,230,349

769,187

Permanent assets

15,992,229

15,457,567

12,051,355

Investments (Notes 3j, 13 and 32b)

1,907,178

1,889,084

1,721,028

Equity interest in unconsolidated companies - In Brazil

1,415,539

1,392,154

1,192,374

Other investments

765,592

771,421

791,664

Allowance for losses

(273,953)

(274,491)

(263,010)

Premises and equipment (Notes 3k and 14)

4,499,596

4,523,337

3,811,582

Premises

1,289,384

1,268,346

1,179,256

Other assets

9,252,973

9,061,663

7,927,748

Accumulated depreciation

(6,042,761)

(5,806,672)

(5,295,422)

Leased assets (Note 14)

-

-

1,058

Leased assets

-

-

8,946

Accumulated depreciation

-

-

(7,888)

Intangible assets (Notes 3l and 15)

9,585,455

9,045,146

6,517,687

Intangible assets

16,094,453

15,275,328

11,932,227

Accumulated amortization

(6,508,998)

(6,230,182)

(5,414,540)

Total

856,287,983

830,520,428

722,289,368

The accompanying Notes are an integral part of these Consolidated Financial Statements.

 

 

 

Bradesco 

 107  

 


 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Consolidated Statement of Financial Position - R$ thousand
 

Liabilities

2012

2011

September

June

September

Current liabilities

565,085,672

535,059,752

433,890,594

Deposits (Notes 3n and 16a)

140,689,185

139,504,779

139,898,063

Demand deposits

33,627,630

32,529,401

31,861,863

Savings deposits

65,540,064

62,308,096

56,583,682

Interbank deposits

252,806

412,796

367,653

Time deposits (Notes 16a and 32b)

41,268,685

44,254,486

51,084,865

Federal funds purchased and securities sold under agreements to repurchase (Notes 3n and 16b)

222,559,493

200,285,905

135,493,085

Own portfolio

113,035,061

126,572,857

95,349,584

Third-party portfolio

97,004,669

65,861,245

36,250,448

Unrestricted portfolio

12,519,763

7,851,803

3,893,053

Funds from issuance of securities (Notes 16c and 32b)

28,364,747

25,103,651

9,942,359

Mortgage and real estate notes, letters of credit and others

23,388,301

21,651,406

9,403,322

Securities issued abroad

4,976,446

3,452,245

539,037

Interbank accounts

902,062

699,350

479,448

Correspondent banks

902,062

699,350

479,448

Interdepartmental accounts

2,747,108

2,919,179

2,494,774

Third-party funds in transit

2,747,108

2,919,179

2,494,774

Borrowing (Notes 17a and 32b)

9,248,622

11,312,452

11,724,375

Borrowing in Brazil - other institutions

2,140

6,063

88

Borrowing abroad

9,246,482

11,306,389

11,724,287

Onlending in Brazil - official institutions (Notes 17b and 32b)

13,792,651

12,983,528

11,709,671

National treasury

116,773

117,484

67,642

Brazilian Development Bank (BNDES)

5,093,958

6,019,023

5,011,301

Caixa Econômica Federal - Federal savings bank (CEF)

19,789

19,156

17,529

Fund for financing the acquisition of industrial machinery and equipment (Finame)

8,560,879

6,826,614

6,613,199

Other institutions

1,252

1,251

-

Onlending abroad (Notes 17b and 32b)

124,399

131,540

64,292

Onlending abroad

124,399

131,540

64,292

Derivative financial instruments (Notes 3f, 8e II and 32b)

3,418,049

2,928,294

1,581,784

Derivative financial instruments

3,418,049

2,928,294

1,581,784

Technical reserves for insurance, pension plans and capitalization bonds (Notes 3o and 21)

93,179,728

89,472,808

75,871,532

Other liabilities

50,059,628

49,718,266

44,631,211

Collection of taxes and other contributions

3,228,428

3,155,094

3,021,262

Foreign exchange portfolio (Note 11a)

3,765,147

6,733,556

7,091,181

Social and statutory

1,748,713

1,727,091

1,920,747

Tax and social security (Note 20a)

5,857,307

5,536,874

5,193,410

Securities trading

4,880,677

4,231,607

2,532,060

Financial and development funds

1,230

1,671

323

Subordinated debts (Notes 19 and 32b)

4,397,055

3,961,648

3,081,126

Sundry (Note 20b)

26,181,071

24,370,725

21,791,102

Long-term liabilities

223,949,769

230,338,330

233,420,961

Deposits (Notes 3n and 16a)

72,180,416

77,565,155

84,765,897

Interbank deposits

69,878

58,765

2,269

Time deposits (Notes 16a and 32b)

72,110,538

77,506,390

84,763,628

Federal funds purchased and securities sold under agreements to repurchase (Notes 3n and 16b)

22,978,124

25,688,347

35,964,490

 

The accompanying Notes are an integral part of these Consolidated Financial Statements.

 
108 Report on Economic and Financial Analysis – September 2012   

 

 


 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Consolidated Statement of Financial Position - R$ thousand
 

Liabilities

2012

2011

September

June

September

Own portfolio

22,978,124

25,683,210

35,948,008

Unrestricted portfolio

-

5,137

16,482

Funds from issuance of securities (Notes 16c and 32b)

25,445,465

26,054,278

22,936,291

Mortgage and real estate notes, letters of credit and others

16,424,785

17,122,483

15,323,987

Securities issued abroad

9,020,680

8,931,795

7,612,304

Borrowing (Notes 17a and 32b)

902,896

1,072,206

1,515,502

Borrowing in Brazil - other institutions

7,277

2,011

678

Borrowing abroad

895,619

1,070,195

1,514,824

Onlending in Brazil - official institutions (Notes 17b and 32b)

21,329,874

22,394,552

24,043,635

BNDES

7,124,721

6,665,410

8,467,336

CEF

40,962

44,381

53,622

FINAME

14,163,607

15,684,180

15,522,046

Other institutions

584

581

631

Derivative financial instruments (Notes 3f, 8e II and 32b)

729,662

639,791

142,661

Derivative financial instruments

729,662

639,791

142,661

Technical reserves for insurance, pension plans and capitalization bonds (Notes 3o and 21)

24,627,726

22,316,296

21,227,239

Other liabilities

55,755,606

54,607,705

42,825,246

Tax and social security (Note 20a)

20,199,624

19,302,197

14,970,770

Subordinated debts (Notes 19 and 32b)

30,109,686

30,129,473

23,099,334

Sundry (Note 20b)

5,446,296

5,176,035

4,755,142

Deferred income

619,391

615,363

622,272

Deferred income

619,391

615,363

622,272

Non-controlling interests in subsidiaries (Note 22)

586,073

586,895

613,440

Shareholders' equity (Note 23)

66,047,078

63,920,088

53,742,101

Capital:

     

- Domiciled in Brazil

29,721,739

29,721,761

29,696,304

- Domiciled abroad

378,261

378,239

403,696

Capital reserves

11,441

11,441

11,441

Profit reserves

32,297,034

30,442,327

24,908,925

Asset valuation adjustments

3,835,904

3,551,255

(1,095,156)

Treasury shares (Notes 23d and 32b)

(197,301)

(184,935)

(183,109)

Attributable to equity holders of the Parent Company

66,633,151

64,506,983

54,355,541

Total

856,287,983

830,520,428

722,289,368

 

The accompanying Notes are an integral part of these Consolidated Financial Statements.

 

 

Bradesco 

 109  
 

 


 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Consolidated Income Statement - R$ thousand

 

 

2012

2011

3rd Quarter

2nd Quarter

September

September

Revenue from financial intermediation

25,956,186

23,807,426

73,910,239

67,457,397

Loans (Note 10j)

12,681,584

12,803,365

37,656,167

34,047,731

Leasing (Note 10j)

292,705

294,714

949,731

1,199,608

Operations with securities (Note 8h)

6,956,975

8,192,519

22,679,170

19,630,435

Financial income from insurance, pension plans and capitalization bonds (Note 8h)

5,329,082

2,202,039

10,682,664

7,346,667

Derivative financial instruments (Note 8h)

(371,606)

(1,239,251)

(2,222,182)

(468,783)

Foreign exchange operations (Note 11a)

136,219

513,472

919,606

1,056,034

Compulsory deposits (Note 9b)

893,897

1,021,987

3,170,405

4,581,711

Sale or transfer of financial assets

37,330

18,581

74,678

63,994

 

 

 

 

 

Financial intermediation expenses

15,665,742

17,153,234

48,489,992

47,184,073

Federal funds purchased and securities sold under agreements to repurchase (Note 16e)

8,968,770

9,221,738

27,911,151

29,905,506

Adjustment for inflation and interest on technical reserves for insurance, pension plans and capitalization bonds (Note 16e)

2,479,917

1,496,462

6,173,700

4,667,434

Borrowing and onlending (Note 17c)

665,198

2,784,628

3,904,454

3,483,085

Leasing (Note 10j)

-

-

150

2,933

Allowance for loan losses (Notes 3g, 10g and 10h)

3,551,857

3,650,406

10,500,537

9,125,115

 

 

 

 

 

Gross income from financial intermediation

10,290,444

6,654,192

25,420,247

20,273,324

 

 

 

 

 

Other operating income (expenses)

(5,936,204)

(3,656,379)

(13,458,920)

(9,200,290)

Fee and commission income (Note 24)

4,331,544

4,174,080

12,500,913

10,815,721

- Other fee and commission income

3,362,954

3,205,187

9,656,513

8,377,029

- Income from banking fees

968,590

968,893

2,844,400

2,438,692

Insurance, pension plan and capitalization bond retained premiums (Notes 3o and 21d)

10,029,124

11,492,157

30,870,015

26,305,969

- Net premiums written

10,104,104

11,570,205

31,091,862

26,497,919

- Reinsurance premiums

(74,980)

(78,048)

(221,847)

(191,950)

Variation in technical reserves for insurance, pension plans and capitalization bonds (Note 3o)

(6,203,858)

(6,078,714)

(16,419,439)

(12,242,315)

Retained claims (Note 3o)

(3,462,263)

(3,109,635)

(9,652,124)

(8,317,284)

Capitalization bond draws and redemptions (Note 3o)

(891,488)

(799,815)

(2,399,993)

(1,926,422)

Insurance, pension plan and capitalization bond selling expenses
(Note 3o)

(559,255)

(551,293)

(1,656,432)

(1,383,748)

Payroll and related benefits (Note 25)

(3,118,878)

(3,047,277)

(9,044,412)

(8,419,094)

Other administrative expenses (Note 26)

(3,447,141)

(3,321,881)

(10,059,508)

(9,443,921)

Tax expenses (Note 27)

(1,021,103)

(813,295)

(2,956,775)

(2,618,659)

Equity in the earnings (losses) of unconsolidated companies (Note 13b)

44,590

18,610

103,367

90,732

Other operating income (Note 28)

801,042

767,200

2,453,998

7,261,592

Other operating expenses (Note 29)

(2,438,518)

(2,386,516)

(7,198,530)

(9,322,861)

Operating income

4,354,240

2,997,813

11,961,327

11,073,034

Non-operating income (Note 30)

(99,349)

(99,600)

(211,585)

(119,751)

Income before income tax and social contribution and non-controlling interests

4,254,891

2,898,213

11,749,742

10,953,283

Income tax and social contribution (Notes 34a and 34b)

(1,372,221)

(49,196)

(3,207,801)

(2,537,269)

Non-controlling interests in subsidiaries

(20,293)

(16,049)

(54,060)

(113,431)

Net income

2,862,377

2,832,968

8,487,881

8,302,583

 

The accompanying Notes are an integral part of these Consolidated Financial Statements.

 

110 Report on Economic and Financial Analysis – September 2012   

 

 

 


 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Statement of Changes in Shareholders’ Equity - R$ thousand

Events

Paid-in Capital

Capital reserves

Profit reserves

Asset valuation adjustment

Treasury shares

Retained earnings

 

Total

Capital

stock

Unpaid capital

Share premium

Other

Legal

Statutory

Bradesco

Subsidiaries

Balances on December 31, 2010

30,000,000

(1,500,000)

56,465

6,149

2,755,385

16,726,601

172,294

(163,995)

(10,049)

-

48,042,850

Capital increase through reserves

100,000

-

(56,465)

(6,149)

(37,386)

-

-

-

-

-

-

Capital increase through share subscription

-

1,500,000

-

-

-

-

-

-

-

-

1,500,000

Acquisition of treasury shares

-

-

-

-

-

-

-

-

(173,060)

-

(173,060)

Share premium

-

-

11,441

-

-

-

-

-

-

-

11,441

Asset valuation adjustments

-

-

-

-

-

-

(377,797)

(725,658)

-

-

(1,103,455)

Net income

-

-

-

-

-

-

-

-

-

8,302,583

8,302,583

Allocations:

Reserves

-

-

-

-

415,129

5,049,196

-

-

-

(5,464,325)

-

 

Interest on shareholders’ equity paid

-

-

-

-

-

-

-

-

-

(2,358,063)

(2,358,063)

 

Dividends paid

-

-

-

-

-

-

-

-

-

(480,195)

(480,195)

Balances on September 30, 2011

30,100,000

-

11,441

-

3,133,128

21,775,797

(205,503)

(889,653)

(183,109)

-

53,742,101

 

 

 

 

 

 

 

 

 

 

 

 

Balances on March 31, 2012

30,100,000

-

11,441

-

3,409,039

25,163,748

(4,362)

(435,872)

(184,935)

-

58,059,059

Asset valuation adjustments

-

-

-

-

-

-

244,836

3,746,653

-

-

3,991,489

Net income

-

-

-

-

-

-

-

-

-

2,832,968

2,832,968

Allocations:

Reserves

-

-

-

-

141,648

1,727,892

-

-

-

(1,869,540)

-

 

Interest on shareholders’ equity paid and/or provisioned

-

-

-

-

-

-

-

-

-

(771,080)

(771,080)

 

Dividends paid

-

-

-

-

-

-

-

-

-

(192,348)

(192,348)

Balances on June 30, 2012

30,100,000

-

11,441

-

3,550,687

26,891,640

240,474

3,310,781

(184,935)

-

63,920,088

Acquisition of treasury shares

-

-

-

-

-

-

-

-

(12,366)

-

(12,366)

Asset valuation adjustments

-

-

-

-

-

-

46,222

238,427

-

-

284,649

Net income

-

-

-

-

-

-

-

-

-

2,862,377

2,862,377

Allocations:

Reserves

-

-

-

-

143,119

1,711,588

-

-

-

(1,854,707)

-

 

Interest on shareholders’ equity paid and/or provisioned

-

-

-

-

-

-

-

-

-

(1,007,670)

(1,007,670)

Balances on September 30, 2012

30,100,000

-

11,441

-

3,693,806

28,603,228

286,696

3,549,208

(197,301)

-

66,047,078

 

 

 

 

 

 

 

 

 

 

 

 

Balances on December 31, 2011

30,100,000

-

11,441

-

3,269,412

23,463,119

(328,343)

(750,856)

(183,109)

-

55,581,664

Acquisition of treasury shares

-

-

-

-

-

-

-

-

(14,192)

-

(14,192)

Asset valuation adjustments

-

-

-

-

-

-

615,039

4,300,064

-

-

4,915,103

Net income

-

-

-

-

-

-

-

-

-

8,487,881

8,487,881

Allocations:

Reserves

-

-

-

-

424,394

5,140,109

-

-

-

(5,564,503)

-

 

Interest on shareholders’ equity paid and/or provisioned

-

-

-

-

-

-

-

-

-

(2,556,170)

(2,556,170)

 

Dividends paid

-

-

-

-

-

-

-

-

-

(367,208)

(367,208)

Balances on September 30, 2012

30,100,000

-

11,441

-

3,693,806

28,603,228

286,696

3,549,208

(197,301)

-

66,047,078

The accompanying Notes are an integral part of these Consolidated Financial Statements.

 
 

 

Bradesco 

 111  

 


 

Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Value Added Statement - R$ thousand
 

 

Description

2012

2011

3rd Quarter

%

2nd Quarter

%

September

%

September

%

1) Revenue

24,208,317

281.8

23,836,763

342.6

72,521,635

298.0

70,120,905

311.7

1.1) Financial intermediation

25,956,186

302.2

23,807,426

342.2

73,910,239

303.8

67,457,397

299.9

1.2) Fees and commissions

4,331,544

50.4

4,174,080

60.0

12,500,913

51.4

10,815,721

48.1

1.3) Allowance for loan losses

(3,551,857)

(41.4)

(3,650,406)

(52.5)

(10,500,537)

(43.2)

(9,125,115)

(40.6)

1.4) Other

(2,527,556)

(29.4)

(494,337)

(7.1)

(3,388,980)

(14.0)

972,902

4.3

2) Financial intermediation expenses

(12,113,885)

(141.0)

(13,502,828)

(194.1)

(37,989,455)

(156.1)

(38,058,958)

(169.2)

3) Inputs acquired from third-parties

(2,849,203)

(33.1)

(2,721,217)

(39.1)

(8,277,539)

(34.0)

(7,881,918)

(35.0)

Material, water, electricity and gas

(133,301)

(1.6)

(141,518)

(2.0)

(432,170)

(1.8)

(449,510)

(2.0)

Outsourced services

(896,884)

(10.4)

(832,281)

(12.0)

(2,561,582)

(10.5)

(2,649,019)

(11.8)

Communication

(416,444)

(4.8)

(415,221)

(6.0)

(1,241,179)

(5.1)

(1,176,619)

(5.2)

Financial system services

(161,728)

(1.9)

(162,944)

(2.3)

(488,069)

(2.0)

(364,733)

(1.6)

Advertising and marketing

(208,268)

(2.4)

(162,191)

(2.3)

(522,969)

(2.1)

(607,001)

(2.7)

Transport

(214,615)

(2.5)

(214,702)

(3.1)

(641,641)

(2.6)

(560,319)

(2.5)

Data processing

(277,484)

(3.2)

(267,944)

(3.9)

(807,632)

(3.3)

(691,211)

(3.1)

Maintenance and repairs

(148,196)

(1.7)

(145,141)

(2.1)

(438,953)

(1.8)

(400,039)

(1.8)

Security and surveillance

(111,999)

(1.3)

(104,772)

(1.5)

(317,011)

(1.3)

(239,520)

(1.1)

Travel

(34,050)

(0.4)

(33,566)

(0.5)

(100,542)

(0.4)

(112,751)

(0.5)

Other

(246,234)

(2.9)

(240,937)

(3.4)

(725,791)

(3.1)

(631,196)

(2.7)

4)    Gross value added (1-2-3)

9,245,229

107.7

7,612,718

109.4

26,254,641

107.9

24,180,029

107.5

5)    Depreciation and amortization

(700,276)

(8.2)

(673,855)

(9.7)

(2,028,827)

(8.3)

(1,781,210)

(7.9)

6)    Net value added produced by the entity (4-5)

8,544,953

99.5

6,938,863

99.7

24,225,814

99.6

22,398,819

99.6

7)    Value added received through transfer

44,590

0.5

18,610

0.3

103,367

0.4

90,732

0.4

Equity in the earnings (losses) of unconsolidated companies

44,590

0.5

18,610

0.3

103,367

0.4

90,732

0.4

8)    Value added to distribute (6+7)

8,589,543

100.0

6,957,473

100.0

24,329,181

100.0

22,489,551

100.0

9)    Value added distributed

8,589,543

100.0

6,957,473

100.0

24,329,181

100.0

22,489,551

100.0

9.1) Personnel 

2,696,417

31.6

2,641,467

38.0

7,828,526

32.3

7,370,834

32.8

Payroll

1,464,803

17.1

1,401,945

20.2

4,220,312

17.3

3,668,231

16.3

Benefits

637,108

7.4

616,593

8.9

1,839,552

7.6

1,585,476

7.0

Government Severance Indemnity Fund for Employees (FGTS)

133,319

1.6

129,744

1.9

384,358

1.6

329,407

1.5

Other

461,187

5.5

493,185

7.0

1,384,304

5.8

1,787,720

8.0

9.2) Tax, fees and contributions

2,815,785

32.7

1,268,301

18.2

7,380,462

30.3

6,204,188

27.6

Federal

2,672,710

31.1

1,132,576

16.3

6,962,144

28.6

5,862,448

26.1

State

4,088

-

1,947

-

7,680

-

3,974

-

Municipal

138,987

1.6

133,778

1.9

410,638

1.7

337,766

1.5

9.3) Value distributed to providers of capital

194,671

2.2

198,688

2.8

578,252

2.3

498,515

2.2

Rentals

191,955

2.2

195,702

2.8

570,172

2.3

489,756

2.2

Asset leasing

2,716

-

2,986

-

8,080

-

8,759

-

9.4) Value distributed to shareholders

2,882,670

33.5

2,849,017

41.0

8,541,941

35.1

8,416,014

37.4

Interest on shareholders’ equity

1,007,670

11.7

771,080

11.1

2,556,170

10.5

2,358,063

10.5

Dividends

-

-

192,348

2.8

367,208

1.5

480,195

2.1

Retained earnings

1,854,707

21.6

1,869,540

26.9

5,564,503

22.9

5,464,325

24.3

Non-controlling interests in retained earnings

20,293

0.2

16,049

0.2

54,060

0.2

113,431

0.5

 

The accompanying Notes are an integral part of these Consolidated Financial Statements.

 

112 Report on Economic and Financial Analysis – September 2012   

 


 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Consolidated Statement of Cash Flows - R$ thousand
 

 

2012

2011

3rd Quarter

2nd Quarter

September

September

Cash flow from operating activities:

 

 

 

 

Net Income before income tax and social contribution

4,254,891

2,898,213

11,749,742

10,953,283

Adjustments to net income before income tax and social contribution

7,692,437

6,823,546

21,728,025

20,103,456

Allowance for loan losses

3,551,857

3,650,406

10,500,537

9,125,115

Depreciation and amortization

700,276

673,855

2,028,827

1,781,210

Losses from/provisions for asset impairment

-

-

-

152,881

Expenses with civil, labor and tax provisions

916,845

878,092

2,846,728

4,320,572

Expenses with adjustment for inflation and interest on technical reserves for insurance, pension plans and capitalization bonds

2,479,917

1,496,462

6,173,700

4,667,434

Equity in the earnings (losses) of unconsolidated companies

(44,590)

(18,610)

(103,367)

(90,732)

(Gain)/loss on sale of investments

1,147

(5,361)

(33,419)

(55,999)

(Gain)/loss on sale of fixed assets

454

1,892

6,992

4,190

(Gain)/loss on sale of foreclosed assets

50,412

45,114

145,881

179,605

Other

36,119

101,696

162,146

19,180

Adjusted net income before taxes

11,947,328

9,721,759

33,477,767

31,056,739

(Increase)/decrease in interbank investments

(13,864,897)

10,146,122

13,081,022

(13,138,115)

(Increase) in trading securities and derivative financial instruments

(18,500,401)

(12,613,127)

(5,515,055)

(37,117,025)

(Increase)/decrease in interbank and interdepartmental accounts

118,140

444,067

(1,323,538)

(1,929,324)

(Increase) in loan and leasing

(7,819,043)

(11,121,829)

(23,144,554)

(34,577,257)

(Increase) in insurance premiums receivable

(14,373)

(273,531)

(455,829)

(430,788)

Increase in technical reserves for insurance, pension plans and capitalization bonds

3,538,433

3,339,510

7,980,762

5,254,246

Increase/(decrease) in deferred income

4,028

(30,743)

(51,938)

261,917

(Increase)/decrease in other receivables and other assets

3,785,847

(6,209,857)

(5,677,072)

(12,063,767)

(Increase)/decrease in compulsory deposits in the Brazilian Central Bank

6,146,949

(990,407)

16,988,347

(4,510,927)

Increase/(decrease) in deposits

(4,200,333)

3,193,384

(4,554,626)

31,463,361

Increase/(decrease) in federal funds purchased and securities sold under agreements to repurchase

19,563,366

12,044,214

48,089,391

(39,585)

Increase in funds from issuance of securities

2,652,282

2,675,581

12,288,049

15,204,699

Increase/(decrease) in borrowings and onlending

(2,495,836)

782,034

(7,848,496)

10,861,250

Increase/(decrease) in other liabilities

(1,483,802)

3,949,169

8,719,902

6,565,696

Income tax and social contribution paid

(814,075)

(746,093)

(5,241,759)

(4,858,173)

Net cash provided by/(used in) operating activities

(1,436,387)

14,310,253

86,812,373

(7,997,053)

Cash flow from investing activities:

 

 

 

 

(Purchases)/proceeds from available-for-sale securities

22,333,285

(9,379,757)

(39,329,988)

7,606,152

(Purchases)/proceeds from held-to-maturity securities

26,388

(666,064)

(592,086)

(1,557,592)

Proceeds from sale of foreclosed assets

83,343

6,061

140,562

160,916

Sale of investments

14,748

83,120

130,964

7,836

Proceeds from the sale of premises and equipment and operating leased assets

63,521

96,629

328,133

16,060

Foreclosed asset acquisitions

(230,253)

(211,634)

(592,276)

(461,296)

Investment acquisitions

(7,247)

(824)

(9,480)

(132,620)

Premise and equipment and operating leased asset acquisitions

(314,015)

(348,391)

(1,209,325)

(878,261)

Intangible asset acquisitions

(966,638)

(414,618)

(1,809,198)

(1,105,271)

Dividends and interest on shareholders' equity received

17,179

44,732

71,511

65,656

Net cash provided by/(used in) investing activities

21,020,311

(10,790,746)

(42,871,183)

3,721,580

Cash flow from financing activities:

 

 

 

 

Increase/(decrease) in subordinated debts

415,621

3,968,869

7,596,650

(134,486)

Capital increase in cash and share premium

-

-

-

1,511,441

Dividends and interest on shareholders’ equity paid

(969,327)

(186,518)

(3,520,120)

(3,083,649)

Non-controlling interest

(21,115)

(59,418)

(83,245)

28,473

Acquisition of own shares

(12,366)

-

(14,192)

(173,060)

Net cash provided by/(used in) financing activities

(587,187)

3,722,933

3,979,093

(1,851,281)

Net increase/(decrease) in cash and cash equivalents

18,996,737

7,242,440

47,920,283

(6,126,754)

Cash and cash equivalents - at the beginning of the period

65,783,698

58,541,258

36,860,152

36,240,382

Cash and cash equivalents - at the end of the period

84,780,435

65,783,698

84,780,435

30,113,628

Net increase/(decrease) in cash and cash equivalents

18,996,737

7,242,440

47,920,283

(6,126,754)

The accompanying Notes are an integral part of these Consolidated Financial Statements.

 
 

 

Bradesco 

 113  

 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Table of Contents of the Notes to the Consolidated Financial Statements
 

Notes to the Consolidated Financial Statements of Bradesco are as follows:

Page

1) OPERATIONS

115

2) PRESENTATION OF THE FINANCIAL STATEMENTS

115

3) SIGNIFICANT ACCOUNTING POLICIES

117

4) INFORMATION FOR COMPARISON PURPOSES

126

5) STATEMENT OF FINANCIAL POSITION AND INCOME STATEMENT ADJUSTED BY OPERATING SEGMENT

127

6) CASH AND CASH EQUIVALENTS

128

7) INTERBANK INVESTMENTS

129

8) SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS

130

9) INTERBANK ACCOUNTS - COMPULSORY DEPOSITS

145

10) LOANS

146

11) OTHER RECEIVABLES

159

12) OTHER ASSETS

160

13) INVESTMENTS

161

14) PREMISES AND EQUIPMENT AND LEASED ASSETS

163

15) INTANGIBLE ASSETS

164

16) DEPOSITS, FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND FUNDS FROM ISSUANCE OF SECURITIES

165

17) BORROWING AND ONLENDING

170

18) PROVISIONS, CONTINGENT ASSETS AND LIABILITIES AND LEGAL LIABILITIES - TAX AND SOCIAL SECURITY

171

19) SUBORDINATED DEBT

175

20) OTHER LIABILITIES

178

21) INSURANCE, PENSION PLANS AND CAPITALIZATION BONDS

179

22) NON-CONTROLLING INTERESTS IN SUBSIDIARIES

182

23) SHAREHOLDERS’ EQUITY (PARENT COMPANY)

182

24) FEE AND COMMISSION INCOME

185

25) PAYROLL AND RELATED BENEFITS

185

26) OTHER ADMINISTRATIVE EXPENSES

186

27) TAX EXPENSES

186

28) OTHER OPERATING INCOME

186

29) OTHER OPERATING EXPENSES

187

30) NON-OPERATING INCOME

187

31) RELATED-PARTY TRANSACTIONS (DIRECT AND INDIRECT)

188

32) FINANCIAL INSTRUMENTS

190

33) EMPLOYEE BENEFITS

200

34) INCOME TAX AND SOCIAL CONTRIBUTION

201

35) OTHER INFORMATION

204

 

114 Report on Economic and Financial Analysis – September 2012   

 


 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

1) OPERATIONS

Banco Bradesco S.A. (Bradesco) is a private-sector publicly traded company and Universal Bank that carries out all types of banking activities that it is authorized to do so through its commercial, foreign exchange, consumer financing and housing loan portfolios. The Bank has a number of other activities, either directly or indirectly, through its subsidiaries, particularly in leasing, investment banking, brokerage, consortium management, credit cards, real estate projects, insurance, pension plans and capitalization bonds. Operations are conducted within the context of the companies within the Bradesco Organization, working together in the market.

2) PRESENTATION OF THE FINANCIAL STATEMENTS

Bradesco's consolidated financial statements include the financial statements for Banco Bradesco, its foreign branches, subsidiaries and jointly-controlled entities, in Brazil and abroad, including SPEs (Special Purpose Entities). They were prepared based on accounting practices issued by Laws 4,595/64 (Brazilian Financial System Law) and 6,404/76 (Brazilian Corporate Law), along with amendments introduced by Laws 11,638/07 and 11,941/09 relating to the accounting of operations, associated with rules and instructions of the National Monetary Council (CMN) and 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), and consider the financial statements of leasing companies classified as financial leases, whereby leased fixed assets are classified as operating leases less the residual value paid in advance.

In the preparation of these consolidated financial statements, intercompany transactions, including investments, assets and liabilities, revenue, expenses and unrealized profit were eliminated and net income and shareholders equity attributable to the non-controlling interests were accounted for on a separate line. For jointly-controlled investments with other shareholders, assets, liabilities and income and loss were proportionally consolidated in the consolidated financial statements according to the Interest on shareholders equity of each investee. Goodwill calculated on the acquisition of investments in the subsidiary/unconsolidated companies or jointly-controlled entity is included in investments and intangible assets (Note 15a). The foreign exchange variation from foreign branch or subsidy transactions is presented in the income statement accounts together with changes in the value of the derivative financial instrument, borrowing or onlending operation to eliminate the effect of these investment hedge instruments.

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 and non-financial assets; other provisions; the calculation of technical reserves for insurance, pension plans and capitalization bonds; and the determination of the useful life of specific assets. Actual results may differ from those established by estimates and assumptions.

Bradesco's consolidated financial statements were approved by the Board of Directors on October 19, 2012.

 

 

 

Bradesco 

 115  
 

 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

 Below are the main direct or indirectly owned companies in consolidation:

 

Activity

Equity interest

2012

2011

September 30

June 30

September 30

Financial Area - Brazil

 

     

Alvorada Cartões, Crédito, Financiamento e Investimento S.A.

Banking

100.00%

100.00%

100.00%

Banco Alvorada S.A.

Banking

99.95%

99.95%

99.95%

Banco Bradesco Financiamentos S.A.

Banking

100.00%

100.00%

100.00%

Banco Bankpar S.A.

Banking

100.00%

100.00%

100.00%

Banco Bradesco BBI S.A.

Investment bank

98.35%

98.35%

98.35%

Banco Boavista Interatlântico S.A.

Banking

100.00%

100.00%

100.00%

Bankpar Arrendamento Mercantil S.A.

Leasing

100.00%

100.00%

100.00%

Banco Bradesco Cartões S.A.

Cards

100.00%

100.00%

100.00%

Bradesco Administradora de Consórcios Ltda.

Consortium management

100.00%

100.00%

100.00%

Banco BERJ S.A. (1)

Banking

100.00%

100.00%

-

Bradesco Leasing S.A. Arrendamento Mercantil

Leasing

100.00%

100.00%

100.00%

Bradesco S.A. Corretora de Títulos e Valores Mobiliários

Brokerage

100.00%

100.00%

100.00%

BRAM - Bradesco Asset Management S.A. DTVM

Asset management

100.00%

100.00%

100.00%

Ágora Corretora de Títulos e Valores Mobiliários S.A.

Brokerage

100.00%

100.00%

100.00%

Banco Bradescard S.A. (2)

Cards

100.00%

100.00%

100.00%

Cielo S.A. (3)

Services

28.65%

28.65%

28.65%

Cia. Brasileira de Soluções e Serviços - Alelo (3)

Services

50.01%

50.01%

50.01%

Tempo Serviços Ltda.

Services

100.00%

100.00%

100.00%

Financial Area - Abroad

 

     

Banco Bradesco Argentina S.A.

Banking

99.99%

99.99%

99.99%

Banco Bradesco Europa S.A.

Banking

100.00%

100.00%

100.00%

Banco Bradesco S.A. Grand Cayman Branch (4)

Banking

100.00%

100.00%

100.00%

Banco Bradesco New York Branch

Banking

100.00%

100.00%

100.00%

Bradesco Securities, Inc.

Brokerage

100.00%

100.00%

100.00%

Bradesco Securities, UK.

Brokerage

100.00%

100.00%

100.00%

Insurance, Pension Plan and Capitalization Bond Area

 

     

Atlântica Capitalização S.A.

Capitalization bonds

100.00%

100.00%

100.00%

Bradesco Argentina de Seguros S.A.

Insurance

99.90%

99.90%

99.90%

Bradesco Auto/RE Companhia de Seguros

Insurance

100.00%

100.00%

100.00%

Bradesco Capitalização S.A.

Capitalization bonds

100.00%

100.00%

100.00%

Bradesco Saúde S.A.

Insurance/health

100.00%

100.00%

100.00%

Odontoprev S.A.

Dental care

43.50%

43.50%

43.50%

Bradesco Seguros S.A.

Insurance

100.00%

100.00%

100.00%

Bradesco Vida e Previdência S.A.

Pension plan/insurance

100.00%

100.00%

100.00%

Atlântica Companhia de Seguros

Insurance

100.00%

100.00%

100.00%

Other Activities

 

     

Andorra Holdings S.A.

Holding

100.00%

100.00%

100.00%

Bradseg Participações S.A.

Holding

100.00%

100.00%

100.00%

Bradescor Corretora de Seguros Ltda.

Insurance brokerage

100.00%

100.00%

100.00%

Bradesplan Participações Ltda.

Holding

100.00%

100.00%

100.00%

BSP Empreendimentos Imobiliários S.A. (5)

Real estate

100.00%

100.00%

-

Cia. Securitizadora de Créditos Financeiros Rubi

Credit acquisition

100.00%

100.00%

100.00%

Columbus Holdings S.A.

Holding

100.00%

100.00%

100.00%

Nova Paiol Participações Ltda.

Holding

100.00%

100.00%

100.00%

Scopus Tecnologia Ltda.

Information technology

100.00%

100.00%

100.00%

União Participações Ltda.

Holding

100.00%

100.00%

100.00%

 

116 Report on Economic and Financial Analysis – September 2012   

 


 

 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

(1)   Company acquired at a Rio de Janeiro State Government auction in May 2011 and consolidated from November 2011, after approval by Bacen;

(2)   Current name of Banco Ibi S.A;

(3)   Company proportionally consolidated, pursuant to CMN Resolution 2,723/00 and CVM Rule 247/96;

(4)   The special purpose entity International Diversified Payment Rights Company is being consolidated. The company takes part in the securitization operation of future flow of payment orders received from overseas (Note 16d); and

(5)   Company incorporated in October 2011.

3)   SIGNIFICANT ACCOUNTING POLICIES

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 income or losses 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 reclassified to the period’s income statement under items “Derivative Financial Instruments” and “Borrowing and Onlending.”

b)   Income and Expense Recognition

Income and expenses are recognized on an accrual basis together to determine the net income for the period to which they relate, regardless of receipt or payment of funds.

Fixed rate transactions are recorded at their redemption value with the income or expense relating to future periods being recorded as a deduction from the corresponding asset or liability. Finance income and costs are prorated daily and calculated based on the exponential method, except when they relate to discounted notes or to foreign transactions which are calculated using the straight-line method.

Floating rate or foreign-currency-indexed transactions are adjusted for inflation at the end of the reporting period.

Insurance and coinsurance premiums, net of premiums assigned to coinsurance and reinsurance and corresponding commissions, are recognized as income after the corresponding insurance policies and invoices have been issued, and recognized on a straight-line basis during the policies’ effective period through accrual and reversal of the unearned premium reserve and deferred selling expense (deferred acquisition costs). Revenues from premiums and the corresponding selling expense (deferred acquisition costs), relating to existing risk but with no policy issued, are recorded in the income statement at the beginning of the risk coverage, based on estimated figures.

Income and expenses  arising from DPVAT insurance operations are recorded based on information provided by the Seguradora Líder dos Consórcios do Seguro DPVAT S.A.

Accepted coinsurance and retrocession operations are recorded based on the information received from other companies and IRB - Brasil Resseguros S.A., respectively. Reinsurance operations with IRB are recorded based on operating and financial transactions sent by IRB whereas operations with other reinsurance companies are recorded based on their financial records. Deferral of reinsurance premiums granted is consistent to the corresponding reinsurance premium and/or reinsurance contract.

Brokerage and obtainment of new insurance operations are deferred and recorded in the income statement over a 12-month period on a straight-line basis.

 

Pension plan contributions and life insurance premiums with life cover are recognized in the income statement as they are received. Income from management fees paid by special-purpose investment funds are recognized on the accrual basis at agreed taxes.

 

Income from capitalization bonds are recognized when they are effectively received. Income from expired capitalization plans are recorded after the statute of limitation, under Article 206 of the Brazilian Civil Code. The expenses for placement of capitalization bonds, classified as “Acquisition Costs,” are recognized when they are incurred. Payments of prize draw amounts are recorded as expenses in the month they are made.

 

The expenses for technical reserves for pension plans and capitalization bonds are recorded when the corresponding revenues are recognized.

 
 

 

Bradesco 

 117  

 
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Notes to the Consolidated Financial Statements

 

c)   Cash and cash equivalents

Cash and cash equivalents include: cash in domestic and foreign currency, investments in gold, investments in federal funds purchases and securities sold under agreements to repurchase and interest-earning deposits in other banks, maturing in 90 days or less and present an insignificant risk of change in fair value, that are used by Bradesco to manage its short-term commitments.

A breakdown of liquidity and investments in cash and cash equivalents is shown in Note 6.

d)   Interbank investments

Unrestricted purchase and sale commitments are stated at their fair value. Other 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 stated at cost, plus income earned and adjusted to market value in the income statement for the period;

·       Available-for-sale securities - securities that are not specifically intended for trading purposes or to be held to maturity. They are stated at cost, plus income earned, which is recorded in profit or loss in the period and adjusted to market value within shareholders' equity, net of tax, which will be recognized in profit or loss only when effectively disposed; and

·       Held-to-maturity securities - securities intended and for the financial capacity to be held in the portfolio up to maturity. They are stated at cost, plus earnings recognized in profit or loss for the period.

Securities classified as trading or available-for-sale, as well as derivative financial instruments, are stated at their estimated fair value in the consolidated statement of financial position. The fair value is generally based on 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 the Management.

 

Classification, breakdown and segmentation of securities are presented in Note 8 (a to d).


 
118 Report on Economic and Financial Analysis – September 2012   

 



 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

f)   Derivative financial instruments (assets and liabilities)

Classified according to intended use by Management, on the date that the operation was entered into and considering if it was intended for hedging purposes or not.

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. Gains and losses are recorded in income or expenses accounts of the respective financial instruments.

Derivative financial instruments used to mitigate risk deriving from exposure to variations in the market value of financial assets and liabilities are designated as hedges and are classified according to their nature:

·       Market risk hedge: for financial instruments classified in this category as well as the hedge-related financial assets and liabilities, gains and losses, realized or not, are recorded in the income statement; and

·       Cash flow hedge: the effective portion of valuation or devaluation of financial instruments classified in this category is recorded, net of tax, in a specific account in shareholders’ equity. The ineffective portion of the respective hedge is directly recognized in the income statement.

A breakdown of amounts included in derivative financial instruments, in balance sheet and memorandum accounts, is disclosed in Note 8 (e to h).

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 according to their corresponding levels of risk in compliance with: (i) the parameters established by CMN Resolution 2,682/99, with nine levels of risk from “AA” (minimum risk) to “H” (maximum risk); and (ii) Management’s level of risk assessment. 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 period of late payment defined in CMN Resolution 2,682/99 is also considered to rate customer risk 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 operations with terms of more than 36 months, past-due periods are doubled, as allowed under CMN Resolution 2,682/99.

Interest and inflation adjustments on past-due transactions are only recognized up to the 59th day that they are past due. As from the 60th day, they are recognized in deferred income.

H-rated past-due operations remain at this level for six months, after which they are written-off against the existing allowance and controlled in memorandum accounts for at least five years.

 

 

 

Bradesco 

 119  

 
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Notes to the Consolidated Financial Statements
 

Renegotiated operations are maintained at least at the same level as previously classified. Renegotiations already written-off against the allowance and that were recorded in memorandum 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 payment 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, considering CMN and Bacen standards and instructions, together with Management assessment to determine credit risk.

Type, values, terms, levels of risk, concentration, economic sector of the activity, renegotiation and income from loans, as well as the breakdown of expenses and balance sheet accounts for the allowance for loan losses are presented in Note 10.

h)   Income tax and social contribution (assets and liabilities)

Deductible income tax and social contribution, calculated on income tax losses, social contribution losses and temporary additions are recorded in “Other Receivables - Sundry” and the provisions for deferred tax liabilities on tax differences in leasing depreciation and mark-to-market adjustments on securities are recorded in “Other Liabilities - Tax and Social Security”. The income tax rate only applies to tax differences in leasing depreciation.

Deductible tax on temporary additions are used and/or reversed against the corresponding provision. Deductible tax on tax and social contribution losses are used when taxable income is generated, under the 30% limit of the taxable profit for the period. Such deductible taxes are recorded based on current expectations on when the deduction can be used, considering technical studies and analyses carried out by the Management.

The provision for income tax is calculated at 15% of taxable income plus a 10% surcharge. Social contribution on net income is calculated at 15% for financial institutions and insurance companies and at 9% for other companies.

Provisions were recorded for other income tax and social contribution in accordance with specific applicable legislation.

Pursuant to Law 11,941/09, changes in the criteria to recognize for revenue, costs and expenses included in the net income for the period, enacted by Law 11,638/07 and by Articles 37 and 38 of Law 11,941/09, shall not affect taxable income, and, for tax purposes, accounting methods and criteria in force on December 31, 2007 are considered. For accounting purposes, the tax effects of adopting the aforementioned laws are recorded in the corresponding deferred tax assets and liabilities.

The breakdown of income tax and social contribution, showing the calculations, the origin and expected use of deductible taxes, as well as unrecorded deductible taxes, are presented in Note 34.

i)   Prepaid expenses

Prepaid expenses are represented by use of funds for future benefits or services, which are recognized in the profit or loss on an accrual basis.

Incurred costs relating to corresponding assets that will generate revenue in subsequent periods are recorded in the profit or loss according to the terms and the amount of expected benefits and directly written-off in the profit or loss when the corresponding assets or rights are no longer part of the institution’s assets or expected future benefits may no longer be realized.

Prepaid expenses are shown in details in Note 12b.

 

120 Report on Economic and Financial Analysis – September 2012   

 



 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements
 

j)   Investments 

Investments in unconsolidated companies, with significant influence over the investee or has at least 20% of the voting rights, under the equity method of accounting.

Tax incentives and other investments are stated at cost, less allowance for losses/impairment, where applicable.  

Subsidiaries’ and jointly-controlled companies are consolidated , and a list of the main companies can be found in Note 2. A list of the unconsolidated companies, as well as other investments, is shown in Note 13.

k)   Premises and equipment

Relates to the tangible assets used by the Bank in its activities or used for that purpose, including those transactions which transfer risks, benefits and controls of the assets to the entity.  

Fixed assets are stated at cost, net of the accumulated depreciation, calculated using the straight-line method according to the estimated economic useful life of the asset, as follows: premises - 4% p.a.; furniture and fixtures, machinery and equipment - 10% p.a.; transport systems - 20% p.a.; and data processing systems - 20% to 50% p.a., and adjusted for impairment, where applicable.

The breakdown of asset costs and their corresponding depreciation, including those arising from operating leases, as well as the unrecorded surplus value for real estate and fixed asset ratios, is presented in Note 14.

l)   Intangible assets

Relates to the right over that intangible asset used by the Bank in its activities or used for that purpose.

Intangible assets comprise:

·       Future profitability/customer portfolio acquired and acquiring the right to provide banking services: is recorded and amortized, as applicable, over the period in which the asset will directly and indirectly contribute to future cash flows and adjusted through impairment , where applicable; and

·       Software: stated at cost less amortization calculated on a straight-line basis over the estimated useful life (20% to 50% p.a.), from the date it is available for use and adjusted through impairment, where applicable. Internal software development costs are recognized as an intangible asset when it is possible to show the intention and ability to complete such development, as well as reliably measure costs directly attributable to the software, which will be amortized during its estimated useful life, considering the future economic benefits generated.

Goodwill and other intangible assets, including their changes by class, are broken down in Note 15.

m)   Impairment  

Securities classified as available-for-sale and held-to-maturity, as well as non-financial assets, except other assets and deductible tax are tested at least once a year for impairment. If an impairment loss is detected, it must be recognized in the profit or loss for the period when the book value of an asset exceeds its recoverable value calculated by: (i) the potential sale value or realization value less the respective expenses or (ii) the value in use calculated by the cash generating unit, whichever is highest.

A cash generating unit is the smallest identifiable group of assets that generates cash flows substantially independent from other assets and groups.

 

Impairment losses, when applicable, are presented in Note 15 (b and c).

 

 

 

Bradesco 

 121  

 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements
 

n)   Deposits and federal funds purchased and securities sold under agreements to repurchase

These are stated at the value of the liabilities and include, when applicable, related charges up to the end of the reporting period, on a daily prorated basis.

A breakdown of securities recorded in deposits and federal funds purchased and securities sold under agreements to repurchase, as well as terms and amounts recognized in the statement of financial position and income statement, is presented in Note 16.

o)   Technical reserves relating to insurance, pension plans and capitalization bonds

·       Damage, health and group insurance lines, except individual life:

-        The unearned premium reserve (PPNG) is calculated on a daily pro-rata basis, based on premiums net of coinsurance assignment, but including reinsurance transfer operations, consists of the portion corresponding to the period of risk not arising from insurance policies, and includes estimates for risks in effect but not issued (RVNE);

-        The complementary reserve for premium (PCP) is recorded on a monthly basis to complement the PPNG and includes estimates for the risks in effect but not issued (RVNE);

-        The premium deficiency reserve is recorded when there is insufficient unearned premium reserves to cover incurred claims, considering expected indemnities and related expenses, throughout periods to be incurred relating to risk in effect on the reference date of the calculation. For individual life insurance, the reserve is recorded to cover differences between the expected present value of indemnities and related future expenses and the expected present value from future premiums;

-        The mathematical reserve for unvested benefits (PMBaC) is calculated by the difference between the current amount of future benefits and the current amount of future contributions, corresponding to the obligation;

-        The reserve for unvested benefits relating to the individual health care plan portfolio covers the holder’s dependents for five years upon death, and it is calculated based on the time dependants are expected to remain in the plan up to the end of this five-year period; after this, it is calculated based on costs on the five-year-period plan, excluding payment of premiums;

-        The reserve for vested benefits relating to the individual health care plan portfolio comprises obligations under the terms of the contract relating to coverage of the health care plan , based on the present value of estimated future expenses with health care provided to dependents whose holders already deceased, as provided for in Normative Resolution 75/04 of ANS;

-        The reserve for redemptions and other amounts to be settled (PROVR) comprises all amounts relating to redemptions to be settled, premium refunds and portabilities requested not yet transferred to the recipient;

-        The reserve for claims incurred but not reported (IBNR) is calculated based on an estimate of claims that have already incurred but have not yet been reported to the insurance company; and

-        The reserve for unsettled claims (PSL) considers all loss notices received up to the end of the reporting period and related costs, such as loss adjustment of claims, loss of suit, among others. The reserve is adjusted for inflation and includes all claims under litigation;

Other reserves are set for the individual health care portfolio to cover differences between the present value of expected future claims and related expenses and the present value of future premiums. Regarding damage insurance, other technical reserves refer to extended warranty premiums which are still under warranty

 

122 Report on Economic and Financial Analysis – September 2012   

 


 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

 

·       Individual life insurance, excluding variable insurance contribution for life cover:

 

-        The unexpired risks reserve (PRNE) is calculated on a daily pro-rata  basis, using premiums net of coinsurance assignment, but including reinsurance transfer operations, is comprised of the portion corresponding to periods of risk not arising from insurance policies, and includes an estimate for risks in effect but not issued (RVNE);

 

-        The supplementary premium reserve (PCP) is recorded monthly to complement the PRNE and includes estimates to risks in effect but not issued (RVNE);

 

-        The mathematical reserve for unvested benefits (PMBaC) is calculated by the difference between the current amount for future benefits and the current amount for future contributions, corresponding to the obligation;

 

-        The reserve for redemptions and other amounts to be settled (PROVR) comprises figures related to redemptions to be settled, premium refunds and portability requested not yet transferred to the recipient;

 

-        The reserve for benefits incurred but not reported (IBNR) is calculated based on the estimate of claims that have already incurred but have not been reported to the insurance company yet;

 

-        The reserve for benefit adjustment (PBR) considers all notices of claims received up to the end of the reporting period and related costs, such as loss adjustment expenses, loss of suit, among others. The reserve is adjusted for inflation and includes all claims under litigation;

 

-        The reserve for risk fluctuation (POR) is recognized to cover any statistical deviation between expected and observed events; and

 

-        The reserve for financial fluctuation (POF) consists of up to 15% of the mathematical reserve for benefits to be granted relating to pension plans in the category of variable contribution with a guarantee of earnings to cover possible financial fluctuations.

 

·       Pension plans and life insurance with life cover:

 

-        The unearned premiums reserve (PRNE) is calculated on a daily pro-rata  basis, using premiums net of coinsurance assignment, but including reinsurance transfer operations, and is comprised of the portion corresponding to periods of risks not arising from insurance policies, and includes an estimate for risks in effect but not issued (RVNE);

 

-        The mathematical reserve for unvested benefits (PMBaC) refers to participants who have not yet received any benefit. In defined benefit pension plans, reserve represents the difference between the current value of future benefits and the current value of future contributions, corresponding to obligations in the form of retirement plans, disability, pension and annuity. The reserve is calculated using methodologies and assumptions set forth in the actuarial technical notes;

 

-        Mathematical reserves for unvested benefits related to life insurance and unrestricted benefit pension plans (VGBL and PGBL), apart from the defined contribution plans, show the value of participant contributions, net of costs and other contractual charges, plus income from investment in Exclusive Investment Funds (FIEs);

 

-        The reserve for redemptions and other amounts to be settled (PROVR) comprises figures related to redemptions to settle, refund premiums or portability requested not yet transferred to the recipient;

 

-    The mathematical reserve for vested benefits (PMBC) refers to participants already benefiting and corresponds to the present value of future obligations related to the payment of ongoing benefits;

 

 

 

Bradesco 

 123  

 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

-        The contribution deficiency reserve (PIC) is established to deal with any unfavorable fluctuations in technical risks taken in the mathematical reserve for benefits to be granted, considering that the participants are likely to have a longer life expectancy. In plans covering life expectancy, the reserve is calculated on an actuarial basis and takes into consideration the actuarial tables AT-2000 Male (normalized) for males and AT-2000 Female (normalized) for females, with an improvement rate of 1.5% p.a. and actual interest rate of 3.5% p.a. In disability plans covering life expectancy risk, the provision takes into consideration the AT-49 Male biometric table and real interest rate of 3.5% p.a. The improvement rate is calculated from automatic updates of the life expectancy table, considering the expected increase in future life expectancy;

-        The reserve for administrative expenses (PDA) is recorded to cover future administrative expenses of the defined benefit, defined contribution and variable contribution plans. The calculation assumptions are similar to those considered in the calculation of PIC, including the benefit payment expenses;

 

-       The reserve for technical surplus (PET) corresponds to the difference between the expected and the actual amounts for events in the period for pension plans that have a technical surplus in the participation clause;

-        The reserve for events incurred but not reported (IBNR), relating to pension plans, is recorded in compliance with Susep Circular Letter 448/12;

-        The provision for benefit adjustment (PBR) considers all loss notices received up to the end of the reporting period and related costs, such as expenses with loss adjustment, loss of suit, among others. The reserve is adjusted for inflation and includes all claims under litigation;

-        The reserve for risk fluctuation (POR) is recognized to cover any statistical deviation between expected and actual events; and

-        The financial fluctuation reserve (POF) consists of up to 15% of the mathematical reserve for unvested benefits relating to variable contribution pension plans with an earnings guarantee to cover possible financial fluctuations.

·       Capitalization bonds:

-        The mathematical reserve for redemptions is recorded for each active or suspended capitalization bond during the estimated term set forth in the general conditions of the plan, and is calculated according to the methodology set forth in the actuarial technical notes;

-        The reserves for redemptions are established from capitalization bonds overdue or not yet due where early redemption has been requested by the customer. Reserves are adjusted for inflation based on the indexes provided in each plan;

-        The reserves for draws not yet taken place and their payables are recorded to cover premiums for future draws (not yet taken place) and also for prize money from draws where customers have already been chosen (payable);

 

-    The reserve for contingencies is recorded to cover possible shortfalls related to payments of redemptions requested and/or prizes from draws; and

 

124 Report on Economic and Financial Analysis – September 2012   

 


 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements
 

-        The reserve for administrative expenses is recorded to cover placement and promotion of the plan as well as brokerage and other expenses. The reserve complies with the methodology set forth in an actuarial technical note.

Technical reserves are shown by account, product and segment, as well as amounts and details of plan assets covering these technical reserves, and are shown in Note 21.

p)   Provisions, contingent assets and liabilities and legal liabilities - tax and social security

Provisions, contingent assets and liabilities, and legal liabilities are recognized, measured and disclosed in accordance with the criteria set out in CPC 25, approved by CMN Resolution 3,823/09 and CVM Resolution 594/09:

·       Contingent assets: these are not recognized in the financial statements, except when Management has control over the situation or when there are real guarantees or favorable judicial decisions, to which no further appeals are applicable, classifying the gain as practically certain by confirming the expectation of receipt or compensation against another liability. Contingent assets with a chance of probable success are disclosed in the notes to the financial statements;

·       Provisions: these are recorded taking into consideration the opinion of legal counsel, the nature of the lawsuits, similarity with previous lawsuits, complexity and positioning of the courts, whenever the loss is deemed probable which would cause a probable outflow of funds to settle the obligation and when amounts 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 considered as possible losses should only be disclosed in the notes when relevant. Obligations deemed remote are not recorded as a provision nor disclosed; and

·       Legal obligations - provision for tax risks: results from judicial proceedings, being contested on the grounds of legality or constitutionality, which, regardless of the assessment of the probability of success, are fully recognized in the financial statements.

Details on lawsuits, as well as segregation and changes in amounts recorded, by type, are presented in Note 18.

q)   Funding expenses

Expenses related to funding transactions involving the issuance of securities are recognized in the profit or loss over the term of the transaction and reduces the corresponding liability. 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 monetary 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 monetary and exchange variations (on a daily prorated basis).

 

 

 

Bradesco 

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Notes to the Consolidated Financial Statements

a)   Subsequent events

These refer to events occurring from the end of the reporting period of the financial statements to the date they 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 of the financial statements; and

·       Events not resulting in adjustments: events relating to conditions not existing at the end of the reporting period of the financial statements.

There were no subsequent events that need to be adjusted or disclosed for the consolidated financial statements as of September 30, 2012.

4)   INFORMATION FOR COMPARISON PURPOSES

Reclassifications

There were no reclassifications or other relevant information for previous periods that affect the comparability of the financial statements for the period ended September 30, 2012.

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Notes to the Consolidated Financial Statements
 

5) STATEMENT OF FINANCIAL POSITION AND INCOME STATEMENT ADJUSTED BY OPERATING SEGMENT

a) Statement of financial position

 

R$ thousand

Financial (1) (2)

Insurance Group (2) (3)

Other Activities (2)

Eliminations

(4)

Total Consolidated

Brazil

Abroad

Brazil

Abroad

Assets

 

 

 

 

 

 

 

Current and long-term assets

658,999,384

83,621,177

142,281,863

5,867

944,909

(45,557,446)

840,295,754

Cash and due from banks

9,021,175

5,287,693

229,751

330

7,715

(1,602,673)

12,943,991

Interbank investments

126,100,069

672,308

-

-

-

-

126,772,377

Securities and derivative financial instruments

175,295,402

11,077,395

133,504,064

3,351

462,978

(805,937)

319,537,253

Interbank and interdepartmental accounts

56,275,770

-

-

-

-

-

56,275,770

Loan and leasing

217,480,993

65,908,149

-

-

-

(40,825,844)

242,563,298

Other receivables and other assets

74,825,975

675,632

8,548,048

2,186

474,216

(2,322,992)

82,203,065

Permanent assets

53,502,299

59,293

3,455,793

166

315,641

(41,340,963)

15,992,229

Investments

41,298,537

15,205

1,763,760

150

170,489

(41,340,963)

1,907,178

Premises and equipment and leased assets

3,684,520

16,605

758,073

16

40,382

-

4,499,596

Intangible assets

8,519,242

27,483

933,960

-

104,770

-

9,585,455

Total on September 30, 2012

712,501,683

83,680,470

145,737,656

6,033

1,260,550

(86,898,409)

856,287,983

Total on June 30, 2012

692,501,903

79,331,988

140,310,352

6,465

1,189,426

(82,819,706)

830,520,428

Total on September 30, 2011

602,966,902

70,219,424

117,336,456

10,018

1,110,746

(69,354,178)

722,289,368

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

Current and long-term liabilities

645,723,651

61,211,806

127,210,450

1,746

445,234

(45,557,446)

789,035,441

Deposits

188,829,034

25,670,226

-

-

-

(1,629,659)

212,869,601

Federal funds purchased and securities sold under agreements to repurchase

240,071,509

5,476,342

-

-

-

(10,234)

245,537,617

Funds from issuance of securities

40,828,996

13,997,126

-

-

-

(1,015,910)

53,810,212

Interbank and interdepartmental accounts

3,648,652

518

-

-

-

-

3,649,170

Borrowing and onlending

79,342,671

6,657,673

-

-

-

(40,601,902)

45,398,442

Derivative financial instruments

4,003,246

144,465

-

-

-

-

4,147,711

Technical reserves from insurance, pension plans and capitalization bonds

-

-

117,806,277

1,177

-

-

117,807,454

Other liabilities:

 

 

 

 

 

 

 

- Subordinated debts

25,792,188

8,714,553

-

-

-

-

34,506,741

- Other

63,207,355

550,903

9,404,173

569

445,234

(2,299,741)

71,308,493

Deferred income

600,055

-

-

-

19,336

-

619,391

Non-controlling interests in subsidiaries

130,899

22,468,664

18,527,206

4,287

795,980

(41,340,963)

586,073

Shareholders’ equity

66,047,078

-

-

-

-

-

66,047,078

Total on September 30, 2012

712,501,683

83,680,470

145,737,656

6,033

1,260,550

(86,898,409)

856,287,983

Total on June 30, 2012

692,501,903

79,331,988

140,310,352

6,465

1,189,426

(82,819,706)

830,520,428

Total on September 30, 2011

602,966,902

70,219,424

117,336,456

10,018

1,110,746

(69,354,178)

722,289,368

 

 

 

 

 

Bradesco 

 127  

 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

b) Income statement
 

 

 

 

R$ thousand

Financial (1) (2)

Insurance Group

(2) (3)

Other Activities (2)

Eliminations

(4)

Total Consolidated

Brazil

Abroad

Brazil

Abroad

Revenues from financial intermediation

62,214,699

1,352,318

10,681,900

-

28,125

(366,803)

73,910,239

Expenses from financial intermediation

41,577,253

1,106,073

6,173,700

-

-

(367,034)

48,489,992

Gross income from financial intermediation

20,637,446

246,245

4,508,200

-

28,125

231

25,420,247

Other operating income/expenses

(13,342,995)

27,274

(202,788)

(362)

60,182

(231)

(13,458,920)

Operating income

7,294,451

273,519

4,305,412

(362)

88,307

-

11,961,327

Non-operating income

(186,946)

5,100

(29,224)

-

(515)

-

(211,585)

Income before taxes and non-controlling interest

7,107,505

278,619

4,276,188

(362)

87,792

-

11,749,742

Income tax and social contribution

(1,574,514)

(5,331)

(1,606,136)

(33)

(21,787)

-

(3,207,801)

Non-controlling interests in subsidiaries

(6,695)

-

(47,138)

-

(227)

-

(54,060)

Net income for September 30, 2012 YTD

5,526,296

273,288

2,622,914

(395)

65,778

-

8,487,881

Net income for September 30, 2011 YTD

5,417,906

435,987

2,341,193

(36)

107,533

-

8,302,583

Net income for the 3rd quarter of 2012

1,777,101

222,634

837,042

(181)

25,781

-

2,862,377

Net income for the 2nd quarter of 2012

1,838,769

89,957

881,006

(83)

23,319

-

2,832,968

(1) The “Financial” segment comprises: financial institutions; holding companies (which are mainly responsible for managing financial resources); as well as 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) Related to amounts eliminated among companies from different segments, as well as among operations carried out in Brazil and abroad.

6) CASH AND CASH EQUIVALENTS

 

R$ thousand

2012

2011

September 30

June 30

September 30

Funds available in domestic currency

7,079,302

9,320,776

5,665,775

Funds available in foreign currency

5,864,567

4,676,339

4,352,206

Investments in gold

122

109

102

Total cash and due from banks

12,943,991

13,997,224

10,018,083

Short-term interbank investments (1)

71,836,444

51,786,474

20,095,545

Total cash and cash equivalents

84,780,435

65,783,698

30,113,628

 

(1) Refer to operations which mature 90 days or less from the date they were effectively invested and with insignificant risk of change in fair value.
 
 
128 Report on Economic and Financial Analysis – September 2012   

 



 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

 7) INTERBANK INVESTMENTS
 
     a) Breakdown and maturity
 

 

R$ thousand

2012

2011

1 to 30 days

31 to 180 days

181 to 360 days

More than 360 days

September 30

June 30

September 30

Investments in federal funds purchased and securities sold under agreements to repurchase:

 

 

 

 

 

 

 

Own portfolio position

21,059

9,442,985

-

-

9,464,044

10,559,899

36,209,956

National treasury notes

-

3,178,221

-

-

3,178,221

6,647,183

25,675,882

National treasury bills

-

6,264,764

-

-

6,264,764

3,911,788

10,248,291

Other 

21,059

-

-

-

21,059

928

285,783

Funded position

71,453,913

25,517,209

-

-

96,971,122

65,680,676

36,048,997

Financial treasury bills

11,639,022

-

-

-

11,639,022

128,443

9,017,348

National treasury notes

34,346,345

19,585,291

-

-

53,931,636

44,552,134

17,425,398

National treasury bills

25,468,546

5,931,918

-

-

31,400,464

21,000,099

9,606,251

Short position

7,090

11,414,488

-

-

11,421,578

6,014,718

3,769,134

National treasury bills

7,090

11,414,488

-

-

11,421,578

6,014,718

3,769,134

Subtotal

71,482,062

46,374,682

-

-

117,856,744

82,255,293

76,028,087

Interest-earning deposits in other banks

 

 

 

 

 

 

 

● Interest-earning deposits in other banks

3,499,727

2,532,347

2,005,106

879,572

8,916,752

10,603,336

9,936,492

Provision for losses

(311)

(533)

(275)

-

(1,119)

(500)

(1,704)

Subtotal

3,499,416

2,531,814

2,004,831

879,572

8,915,633

10,602,836

9,934,788

Total on September 30, 2012

74,981,478

48,906,496

2,004,831

879,572

126,772,377

 

 

%

59.1

38.6

1.6

0.7

100.0

 

 

Total on June 30, 2012

73,109,897

15,818,559

1,950,885

1,978,788

 

92,858,129

 

%

78.8

17.0

2.1

2.1

 

100.0

 

Total on September 30, 2011

31,316,643

51,435,917

1,430,540

1,779,775

 

 

85,962,875

%

36.4

59.8

1.7

2.1

 

 

100.0

b) Income from interbank investments

Classified in the income statement as income on securities transactions.

 

R$ thousand

2012

2011

 

3rd Quarter

2nd Quarter

September 30 YTD

September 30 YTD

Income from investments in purchase and sale commitments:

 

 

 

 

·    Own portfolio position

277,291

329,993

1,062,456

2,745,952

·    Funded position

1,703,122

1,371,859

4,583,974

3,625,278

·    Short position

360,562

280,696

804,927

737,840

Subtotal

2,340,975

1,982,548

6,451,357

7,109,070

Income from interest-earning deposits in other banks

154,458

193,205

596,108

823,261

Total (Note 8h)

2,495,433

2,175,753

7,047,465

7,932,331

 

 
 
 

 

Bradesco 

 129  


 
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 business segment and issuer

 

R$ thousand

2012

2011

Financial

Insurance/

capitalization bonds

Pension

plans

Other

activities

September 30

%

June 30

%

September 30

%

Trading securities

106,322,657

3,359,582

35,519,720

352,784

145,554,743

60.1

161,157,845

57.6

131,605,875

66.0

- Government securities

66,050,503

1,198,752

11,842

231,027

67,492,124

27.8

78,085,516

27.9

71,219,378

35.7

- Corporate securities

37,172,495

2,160,830

569,191

121,757

40,024,273

16.6

38,280,319

13.7

29,772,322

15.0

- Derivative financial instruments (1)

3,099,659

-

-

-

3,099,659

1.3

3,151,941

1.1

2,804,006

1.4

- PGBL/VGBL restricted bonds

-

-

34,938,687

-

34,938,687

14.4

41,640,069

14.9

27,810,169

13.9

Available-for-sale securities

50,321,398

13,928,108

28,624,671

6,783

92,880,960

38.3

114,879,346

41.0

36,669,578

18.4

- Government securities

32,723,598

12,227,850

26,865,007

-

71,816,455

29.6

94,689,828

33.8

20,900,163

10.5

- Corporate securities

17,597,800

1,700,258

1,759,664

6,783

21,064,505

8.7

20,189,518

7.2

15,769,415

7.9

Held-to-maturity securities (4)

327,604

-

3,611,404

-

3,939,008

1.6

3,940,421

1.4

31,190,535

15.6

- Government securities

327,604

-

3,611,404

-

3,939,008

1.6

3,940,421

1.4

30,752,274

15.4

- Corporate securities

-

-

-

-

-

-

-

-

438,261

0.2

Subtotal

156,971,659

17,287,690

67,755,795

359,567

242,374,711

100.0

279,977,612

100.0

199,465,988

100.0

Purchase and sale commitments (2)

28,643,596

6,018,197

42,411,307

89,442

77,162,542

 

42,529,664

 

45,155,626

 

Overall total

185,615,255

23,305,887

110,167,102

449,009

319,537,253

 

322,507,276

 

244,621,614

 

- Government securities

99,101,705

13,426,602

30,488,253

231,027

143,247,587

59.1

176,715,765

63.1

122,871,815

61.6

- Corporate securities

57,869,954

3,861,088

2,328,855

128,540

64,188,437

26.5

61,621,778

22.0

48,784,004

24.5

- PGBL/VGBL restricted bonds

-

-

34,938,687

-

34,938,687

14.4

41,640,069

14.9

27,810,169

13.9

Subtotal

156,971,659

17,287,690

67,755,795

359,567

242,374,711

100.0

279,977,612

100.0

199,465,988

100.0

Purchase and sale commitments (2)

28,643,596

6,018,197

42,411,307

89,442

77,162,542

 

42,529,664

 

45,155,626

 

Overall total

185,615,255

23,305,887

110,167,102

449,009

319,537,253

 

322,507,276

 

244,621,614

 

 

 
130 Report on Economic and Financial Analysis – September 2012   

 



 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

     b) Breakdown of the consolidated portfolio by issuer
 

Securities (3)

R$ thousand

2012

2011

September 30

June 30

September 30

1 to 30 days

31 to 180 days

181 to 360 days

More than 360 days

Fair/book value

(5) (6) (7)

Restated cost

Mark-to-market

Fair/book value

(5) (6) (7)

Mark-to-market

Fair/book value

(5) (6) (7)

Mark-to-market

Government securities

3,397,310

12,927,126

13,883,008

113,040,143

143,247,587

134,950,083

8,297,504

176,715,765

9,050,655

122,871,815

1,522,346

Financial treasury bills

563,552

665,128

770,746

6,164,057

8,163,483

8,155,424

8,059

7,926,795

3,408

7,486,986

(60,236)

National treasury bills

2,745,412

5,987,324

12,238,806

40,948,560

61,920,102

61,241,874

678,228

89,674,484

1,415,406

43,598,975

907,920

National treasury notes

2,614

6,266,097

374,530

65,363,879

72,007,120

64,556,377

7,450,743

77,743,301

7,474,623

69,912,609

569,835

Brazilian foreign debt notes

17,823

-

496,239

488,095

1,002,157

860,907

141,250

1,209,892

143,641

1,692,298

91,779

Privatization currencies

-

-

-

75,222

75,222

62,556

12,666

77,905

12,898

82,397

13,285

Foreign government securities

67,909

-

-

88

67,997

67,997

-

67,317

10

88,465

9

Other

-

8,577

2,687

242

11,506

4,948

6,558

16,071

669

10,085

(246)

Corporate securities

15,731,022

5,182,790

1,179,055

42,095,570

64,188,437

64,288,737

(100,300)

61,621,778

(834,365)

48,784,004

(1,504,278)

Bank deposit certificates

265,050

1,341,300

66,924

904,863

2,578,137

2,578,137

-

2,993,108

-

1,970,071

-

Shares

6,081,238

-

-

-

6,081,238

7,491,168

(1,409,930)

5,100,498

(1,741,196)

4,112,133

(1,603,813)

Debentures

17,772

1,528,637

530,604

25,398,892

27,475,905

27,526,289

(50,384)

27,249,281

(57,004)

22,882,462

1,098

Promissory notes

5,289

1,394,540

67

-

1,399,896

1,403,322

(3,426)

1,188,641

(4,494)

360,387

(3,204)

Foreign corporate securities

138,740

13,774

293,338

7,600,388

8,046,240

7,543,268

502,972

7,290,858

270,902

4,204,801

34,019

Derivative financial instruments (1)

2,066,430

401,783

117,092

514,354

3,099,659

2,717,128

382,531

3,151,941

245,584

2,804,006

(9,603)

Other

7,156,503

502,756

171,030

7,677,073

15,507,362

15,029,425

477,937

14,647,451

451,843

12,450,144

77,225

PGBL/VGBL restricted bonds

4,155,834

2,770,205

2,161,692

25,850,956

34,938,687

34,938,687

-

41,640,069

-

27,810,169

-

Subtotal

23,284,166

20,880,121

17,223,755

180,986,669

242,374,711

234,177,507

8,197,204

279,977,612

8,216,290

199,465,988

18,068

Purchase and sale commitments (2)

74,104,330

3,024,455

33,757

-

77,162,542

77,162,542

-

42,529,664

-

45,155,626

-

Hedge - cash flow (Note 8g)

-

-

-

-

-

-

(687,346)

-

(948,962)

-

(841,509)

Overall total

97,388,496

23,904,576

17,257,512

180,986,669

319,537,253

311,340,049

7,509,858

322,507,276

7,267,328

244,621,614

(823,441)

 

 

 

Bradesco 

 131  


 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report

   

Notes to the Consolidated Financial Statements

 
    c) Consolidated classification by category, maturity and business segment

        I) Trading securities

Securities (3)

R$ thousand

2012

2011

September 30

June 30

September 30

1 to 30 days

31 to 180 days

181 to 360 days

More than 360 days

Fair/ book value
(5) (6) (7)

Restated cost

Mark-to-market

Fair/ book value
(5) (6) (7)

Mark-to-market

Fair/
book value (5) (6) (7)

Mark-to-market

- Financial

11,698,524

16,526,746

13,798,479

64,298,908

106,322,657

105,217,230

1,105,427

115,241,271

1,346,917

100,237,598

984,853

National treasury bills

2,029,116

5,560,700

11,996,991

21,990,964

41,577,771

41,127,975

449,796

54,299,372

935,683

31,888,077

693,972

Financial treasury bills

563,552

543,078

641,917

4,625,110

6,373,657

6,365,845

7,812

6,143,696

2,649

6,294,047

(53,606)

Bank deposit certificates

221,825

586,019

58,565

254,308

1,120,717

1,120,717

-

1,078,714

-

532,194

-

Derivative financial instruments (1)

2,066,430

401,783

117,092

514,354

3,099,659

2,717,128

382,531

3,151,941

245,584

2,804,006

(9,603)

Debentures

5,302

1,528,366

530,186

24,558,781

26,622,635

26,702,030

(79,395)

25,745,817

(80,228)

21,464,492

(1,428)

Promissory notes

-

1,387,208

67

-

1,387,275

1,390,701

(3,426)

1,143,306

(4,494)

309,631

(3,203)

National treasury notes

1,806

6,260,112

373,082

11,393,174

18,028,174

17,625,481

402,693

16,188,614

256,645

31,689,455

362,051

Foreign corporate securities

697

9,110

24,020

24,288

58,115

57,882

233

60,999

(174)

42,370

900

Foreign government securities

67,909

-

-

88

67,997

67,997

-

67,317

10

88,465

9

Shares

1,383,055

-

-

-

1,383,055

1,437,587

(54,532)

843,424

(8,350)

142,571

(4,148)

Other

5,358,832

250,370

56,559

937,841

6,603,602

6,603,887

(285)

6,518,071

(408)

4,982,290

(91)

- Insurance companies and capitalization bonds

1,212,986

194,405

62,458

1,889,733

3,359,582

3,359,582

-

3,360,876

-

2,416,594

-

Financial treasury bills

-

90,210

54,448

977,323

1,121,981

1,121,981

-

1,041,492

-

448,483

-

National treasury bills

-

-

308

11,646

11,954

11,954

-

35,568

-

28,928

-

Bank deposit certificates

8,733

9,968

4,868

109,973

133,542

133,542

-

667,624

-

284,335

-

National treasury notes

-

-

1,447

63,371

64,818

64,818

-

41,103

-

398,133

-

Other

1,204,253

94,227

1,387

727,420

2,027,287

2,027,287

-

1,575,089

-

1,256,715

-

- Pension plans

4,646,175

2,770,205

2,161,692

25,941,648

35,519,720

35,518,154

1,566

42,235,781

1,176

28,612,565

413

National treasury notes

-

-

-

11,842

11,842

10,276

1,566

12,394

1,176

48,790

413

PGBL/VGBL restricted bonds

4,155,834

2,770,205

2,161,692

25,850,956

34,938,687

34,938,687

-

41,640,069

-

27,810,169

-

Other

490,341

-

-

78,850

569,191

569,191

-

583,318

-

753,606

-

 

 

 
132 Report on Economic and Financial Analysis – September 2012   

 



 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

 

Securities (3)

R$ thousand

2012

2011

September 30

June 30

September 30

1 to 30 days

31 to 180 days

181 to 360 days

More than 360 days

Fair/ book value
(5) (6) (7)

Restated cost

Mark-to-market

Fair/ book value
(5) (6) (7)

Mark-to-market

Fair/
book value (5) (6) (7)

Mark-to-market

- Other activities

69,570

49,492

25,808

207,914

352,784

352,784

-

319,917

-

339,117

-

Financial treasury bills

-

23,769

19,134

160,170

203,073

203,073

-

218,474

-

243,697

-

Bank deposit certificates

31

6,491

3,491

13,663

23,676

23,676

-

28,050

-

6,808

-

National treasury bills

11,997

-

845

7,477

20,319

20,319

-

19,977

-

8,043

-

Debentures

-

270

-

3,915

4,185

4,185

-

5,335

-

7,157

-

National treasury notes

808

5,985

-

842

7,635

7,635

-

4,199

-

41,395

-

Other

56,734

12,977

2,338

21,847

93,896

93,896

-

43,882

-

32,017

-

Subtotal

17,627,255

19,540,848

16,048,437

92,338,203

145,554,743

144,447,750

1,106,993

161,157,845

1,348,093

131,605,874

985,266

Purchase and sale commitments (2)

73,575,484

3,024,455

33,757

-

76,633,696

76,633,696

-

41,950,576

-

45,155,626

-

Financial/other

28,728,158

4,880

-

-

28,733,038

28,733,038

-

2,050,123

-

2,576,221

-

Insurance companies and capitalization bonds

5,542,610

5

-

-

5,542,615

5,542,615

-

6,509,689

-

5,866,712

-

Pension plans  

39,304,716

3,019,570

33,757

-

42,358,043

42,358,043

-

33,390,764

-

36,712,693

-

- PGBL/VGBL

39,232,255

3,019,570

33,757

-

42,285,582

42,285,582

-

32,712,232

-

34,677,879

-

- Funds

72,461

-

-

-

72,461

72,461

-

678,532

-

2,034,814

-

Overall total

91,202,739

22,565,303

16,082,194

92,338,203

222,188,439

221,081,446

1,106,993

203,108,421

1,348,093

176,761,500

985,266

Derivative financial instruments (liabilities)

(2,972,104)

(228,450)

(217,495)

(729,662)

(4,147,711)

(3,639,627)

(508,084)

(3,568,085)

(583,586)

(1,724,445)

(88,291)


 
 

 

Bradesco 

 133  

 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

     II) Available-for-sale securities

Securities (3)

R$ thousand

2012

2011

September 30

June 30

September 30

1 to 30 days

31 to 180 days

181 to 360 days

More than 360 days

Fair/ book value
(5) (6) (7)

Restated cost

Mark-to-market

Fair/ book value
(5) (6) (7)

Mark-to-market

Fair/ book value
(5) (6) (7)

Mark-to-market

- Financial

2,432,525

1,332,278

901,057

45,655,538

50,321,398

48,992,512

1,328,886

76,351,495

1,299,185

33,596,070

324,549

National treasury bills

704,300

426,624

240,661

18,938,474

20,310,059

20,081,626

228,433

35,319,567

479,723

11,645,587

213,949

Brazilian foreign debt securities

8,782

-

221,979

443,793

674,554

533,303

141,251

886,012

143,641

782,632

91,794

Foreign corporate securities

114,253

4,665

269,319

7,576,097

7,964,334

7,461,592

502,742

7,223,957

271,076

4,156,463

33,119

National treasury notes

-

-

-

11,273,861

11,273,861

10,879,733

394,128

23,000,123

385,169

7,892,227

207,354

Financial treasury bills

-

1,076

55,247

325,008

381,331

381,208

123

432,500

546

402,305

(6,761)

Bank deposit certificates

33,063

738,822

-

526,920

1,298,805

1,298,805

-

1,216,672

-

1,076,707

-

Debentures

-

-

-

552,819

552,819

552,819

-

721,540

68

705,247

196

Shares

1,526,294

-

-

-

1,526,294

2,000,749

(474,455)

1,552,806

(478,643)

1,367,778

(339,266)

Privatization currencies

-

-

-

75,222

75,222

62,556

12,666

77,905

12,898

82,397

13,285

Other

45,833

161,091

113,851

5,943,344

6,264,119

5,740,121

523,998

5,920,413

484,707

5,484,727

110,879

- Insurance companies and capitalization bonds

1,591,416

75

-

12,336,617

13,928,108

13,333,228

594,880

11,686,873

1,264,642

1,472,116

(554,875)

Financial treasury bills

-

75

-

16,680

16,755

16,752

3

16,831

21

19,284

-

National treasury notes

-

-

-

12,211,066

12,211,066

11,276,120

934,946

10,085,842

1,778,071

-

-

Shares

1,566,900

-

-

-

1,566,900

1,887,758

(320,858)

1,316,485

(496,619)

1,247,480

(528,909)

Debentures

9,786

-

-

103,055

112,841

96,480

16,361

241,093

11,235

181,810

2,268

Other

14,730

-

-

5,816

20,546

56,118

(35,572)

26,622

(28,066)

23,542

(28,234)

- Pension plans

1,617,146

6,920

-

27,000,605

28,624,671

23,461,320

5,163,351

26,782,855

4,304,370

1,555,222

(736,872)

Shares

1,599,571

-

-

-

1,599,571

2,163,471

(563,900)

1,382,815

(757,583)

1,350,386

(731,491)

Financial treasury bills

-

6,920

-

59,767

66,687

66,565

122

67,997

193

72,361

133

National treasury notes

-

-

-

26,798,320

26,798,320

21,080,909

5,717,411

24,794,485

5,053,578

-

-

Debentures

2,684

-

-

142,518

145,202

131,828

13,374

522,827

11,920

77,976

60

Other

14,891

-

-

-

14,891

18,547

(3,656)

14,731

(3,738)

54,499

(5,574)

 

 
134 Report on Economic and Financial Analysis – September 2012   

 



 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

Securities (3)

R$ thousand

2012

2011

September 30

June 30

September 30

1 to 30 days

31 to 180 days

181 to 360 days

More than 360 days

Fair/ book value
(5) (6) (7)

Restated cost

Mark-to-market

Fair/ book value
(5) (6) (7)

Mark-to-market

Fair/ book value
(5) (6) (7)

Mark-to-market

- Other activities

6,783

-

-

-

6,783

3,689

3,094

58,123

-

46,170

-

Bank deposit certificates

1,397

-

-

-

1,397

1,397

-

2,050

-

3,835

-

Other

5,386

-

-

-

5,386

2,292

3,094

56,073

-

42,335

-

Subtotal

5,647,870

1,339,273

901,057

84,992,760

92,880,960

85,790,749

7,090,211

114,879,346

6,868,197

36,669,578

(967,198)

Purchase and sale
commitments (2)

528,846

-

-

-

528,846

528,846

-

579,088

-

-

-

Insurance companies and capitalization bonds

475,582

-

-

-

475,582

475,582

-

535,853

-

-

-

Pension plans

53,264

-

-

-

53,264

53,264

-

43,235

-

-

-

- Funds

53,264

-

-

-

53,264

53,264

-

43,235

-

-

-

Subtotal

6,176,716

1,339,273

901,057

84,992,760

93,409,806

86,319,595

7,090,211

115,458,434

6,868,197

36,669,578

(967,198)

Hedge - cash flow (Note 8g)

-

-

-

-

-

-

(687,346)

-

(948,962)

-

(841,509)

Overall total

6,176,716

1,339,273

901,057

84,992,760

93,409,806

86,319,595

6,402,865

115,458,434

5,919,235

36,669,578

(1,808,707)

 
 

 

 

 

Bradesco 

 135  

 

 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

    III) Held-to-maturity securities

Securities (3)

R$ thousand

2012

2011

September 30

June 30

September 30

1 to 30

days

31 to 180 days

181 to 360

days

More than 360 days

Restated cost (5) (6)

Restated cost (5) (6)

Restated cost (5) (6)

Financial

9,041

-

274,261

44,302

327,604

323,880

891,133

Brazilian foreign debt notes

9,041

-

274,261

44,302

327,604

323,880

891,133

Insurance companies and capitalization bonds

-

-

-

-

-

-

7,972,455

Debentures

-

-

-

-

-

-

28,924

National treasury notes

-

-

-

-

-

-

7,943,531

Pension plans

-

-

-

3,611,404

3,611,404

3,616,541

22,326,947

Debentures

-

-

-

-

-

-

409,337

National treasury notes

-

-

-

3,611,404

3,611,404

3,616,541

21,917,610

Overall total (4)

9,041

-

274,261

3,655,706

3,939,008

3,940,421

31,190,535

 

 

 
136 Report on Economic and Financial Analysis – September 2012   

 



 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

 d) Breakdown of the portfolios by financial statement classification
 

Securities

R$ thousand

2012

2011

1 to 30

days

31 to 180 days

181 to 360

days

More than 360 days

Total on

September 30

(3) (5) (6) (7)

Total on
June 30

(3) (5) (6) (7)

Total on

September 30

(3) (5) (6) (7)

Own portfolio

95,237,187

11,186,557

11,536,333

110,290,599

228,250,676

216,130,730

154,500,370

Fixed income securities

89,155,949

11,186,557

11,536,333

110,290,599

222,169,438

211,030,232

150,388,237

● Financial treasury bills

563,552

595,943

374,442

4,526,107

6,060,044

5,553,722

4,894,960

● Purchase and sale commitments (2)

74,104,330

3,024,455

33,757

-

77,162,542

42,529,664

45,155,626

● National treasury notes

2,614

6,326

1,828

42,712,718

42,723,486

46,916,449

30,619,251

● Brazilian foreign debt securities

2,308

-

12,984

195,914

211,206

741,655

489,036

● Bank deposit certificates

265,050

1,341,300

66,924

904,863

2,578,137

2,993,108

1,970,071

● National treasury bills

2,745,412

44

8,016,010

517,886

11,279,352

20,828,904

2,295,200

● Foreign corporate securities

69,376

13,774

164,308

2,505,860

2,753,318

6,657,900

1,362,381

● Debentures

17,772

1,528,637

530,604

25,398,892

27,475,905

27,249,281

22,882,462

● Promissory notes

5,289

1,394,540

67

-

1,399,896

1,188,641

360,387

● Foreign government securities

67,909

-

-

88

67,997

67,317

88,465

● PGBL/VGBL restricted bonds

4,155,834

2,770,205

2,161,692

25,850,956

34,938,687

41,640,069

27,810,169

● Other

7,156,503

511,333

173,717

7,677,315

15,518,868

14,663,522

12,460,229

Equity securities

6,081,238

-

-

-

6,081,238

5,100,498

4,112,133

● Shares of listed companies (technical provision)

1,748,139

-

-

-

1,748,139

1,531,810

1,602,228

● Shares of listed companies (other)

4,333,099

-

-

-

4,333,099

3,568,688

2,509,905

Restricted securities

84,879

12,105,394

5,604,087

69,543,394

87,337,754

101,485,148

87,258,441

Repurchase agreements

84,879

11,904,044

5,063,221

65,404,105

82,456,249

97,454,740

84,696,707

● National treasury bills

-

5,628,720

4,055,369

37,286,931

46,971,020

65,308,865

41,070,709

● Brazilian foreign debt securities

15,515

-

483,255

292,181

790,951

468,237

1,203,262

● Financial treasury bills

-

15,553

22,865

265,159

303,577

528,575

300,774

● National treasury notes

-

6,259,771

372,702

22,465,306

29,097,779

30,516,105

39,279,542

● Foreign corporate securities

69,364

-

129,030

5,094,528

5,292,922

632,958

2,842,420

Brazilian Central Bank

-

-

-

-

-

-

1,901

● National treasury bills

-

-

-

-

-

-

1,901

 
 

 

Bradesco 

 137  

 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

 

Securities

R$ thousand

2012

2011

1 to 30

days

31 to 180 days

181 to 360

days

More than 360 days

Total on

September 30

(3) (5) (6) (7)

Total on
June 30

(3) (5) (6) (7)

Total on

September 30

(3) (5) (6) (7)

Privatization currencies

-

-

-

75,222

75,222

77,905

82,397

Guarantees provided

-

201,350

540,866

4,064,067

4,806,283

3,952,503

2,477,436

? National treasury bills

-

147,718

167,427

2,523,587

2,838,732

1,815,118

223,022

? Financial treasury bills

-

53,632

373,439

1,354,625

1,781,696

1,826,638

2,254,414

? National treasury notes

-

-

-

185,855

185,855

310,747

-

Derivative financial instruments (1)

2,066,430

401,783

117,092

514,354

3,099,659

3,151,941

2,804,006

Securities subject to unrestricted repurchase agreements

-

210,842

-

638,322

849,164

1,739,457

58,797

? National treasury bills

-

210,842

-

620,156

830,998

1,721,597

8,143

? Financial treasury bills

-

-

-

18,166

18,166

17,860

36,838

? National treasury notes

-

-

-

-

-

-

13,816

Overall total

97,388,496

23,904,576

17,257,512

180,986,669

319,537,253

322,507,276

244,621,614

%

30.5

7.5

5.4

56.6

100.0

100.0

100.0


(1)  Consistent with the criterion adopted by Bacen Circular Letter 3,068/01 and due to the characteristics of the securities, we are considering the derivative financial instruments, except those considered as cash flow hedges under the category “Trading Securities”;

(2)  These refer to investment fund resources and managed portfolios applied on purchase and sale commitments with Bradesco, whose owners are consolidated subsidiaries, included in the consolidated financial statements;

(3)  The investment fund quotas were distributed according to the instruments composing their portfolios and maintaining the fund category classification;

(4)  In compliance with the provisions of Article 8 of Bacen Circular Letter 3,068/01, Bradesco declares that it has both the financial capacity and the intention to hold the securities to maturity classified as ‘held-to-maturity.’ This financial capacity is proven in Note 32a, which presents the maturity of asset and liability operations.

(5)  The number of days to maturity was based on the maturity of the securities, regardless of their accounting classification;

(6)  This column reflects book value after mark-to-market in accordance with item (7), except for held-to-maturity securities, whose market value is higher than the restated cost for the amount of R$2,484,697 thousand (R$2,221,338 thousand on June 30, 2012 and R$4,403,399 thousand on September 30, 2011); and

(7)  The market 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 restated cost reflects the market value of the respective quotas.

 

138 Report on Economic and Financial Analysis – September 2012   

 



 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements
 

e)   Derivative financial instruments

Bradesco carries out transactions involving derivative financial instruments, which are recorded in the statement of financial position or in memorandum 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 series 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 estimated 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 the 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 the Securities, Commodities and Futures Exchange (BM&FBovespa) 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 factors swaps. The fair value of forward and futures contracts is also determined based on market price quotations for derivatives traded at the stock exchange or using methodologies similar to those outlined for swaps. The fair values of loan 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 swap and futures operations and are registered at the OTC Clearing House (Cetip) and BM&FBovespa.

Operations involving forward contracts of 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 of Chicago and New York, as well as the over-the-counter markets.

 

 

Bradesco 

 139  


 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

     I) Amount of derivative financial instruments recorded in balance sheet and memorandum accounts
 

 

R$ thousand

2012

2011

September 30

June 30

September 30

Overall amount

Net

amount

Overall amount

Net

amount

Overall amount

Net

amount

Futures contracts

 

 

 

 

 

 

Purchase commitments:

88,984,078

 

51,433,234

 

13,885,590

 

- Interbank market

75,350,210

-

40,918,242

-

9,859,303

-

- Foreign currency

13,602,498

-

10,504,659

-

4,026,287

-

- Other

31,370

-

10,333

-

-

-

Sale commitments

454,440,256

 

234,555,190

 

191,145,519

 

- Interbank market (1) 

414,762,926

339,412,716

199,271,376

158,353,134

169,549,948

159,690,645

- Foreign currency (2) 

38,369,038

24,766,540

34,158,916

23,654,257

20,299,719

16,273,432

- Other 

1,308,292

1,276,922

1,124,898

1,114,565

1,295,852

1,295,852

 

 

 

 

 

 

 

Option contracts

 

 

 

 

 

 

Purchase commitments:

56,582,443

 

52,988,139

 

91,244,797

 

- Interbank market

55,513,695

-

51,627,400

-

90,465,381

-

- Foreign currency

461,033

-

617,196

-

124,066

54,570

- Other 

607,715

-

743,543

-

655,350

-

Sale commitments:

74,550,857

 

67,411,635

 

93,502,836

 

- Interbank market

73,062,914

17,549,219

65,521,650

13,894,250

91,940,800

1,475,419

- Foreign currency

527,174

66,141

823,684

206,488

69,496

-

- Other 

960,769

353,054

1,066,301

322,758

1,492,540

837,190

 

 

 

 

 

 

 

Forward contracts

 

 

 

 

 

 

Purchase commitments:

28,500,273

 

24,897,454

 

11,096,520

 

- Foreign currency

27,678,801

19,286,759

23,924,878

9,216,756

10,558,527

1,929,248

- Other 

821,472

-

972,576

-

537,993

153,235

Sale commitments:

10,403,618

 

15,967,216

 

9,014,037

 

- Foreign currency

8,392,042

-

14,708,122

-

8,629,279

-

- Other 

2,011,576

1,190,104

1,259,094

286,518

384,758

-

 

 

 

 

 

 

 

Swap contracts

 

 

 

 

 

 

Assets (long position):

35,514,483

 

36,744,376

 

23,477,837

 

- Interbank market

7,622,947

-

7,380,073

-

3,329,522

-

- Fixed rate

3,935,344

2,064,278

2,035,035

-

609,368

-

- Foreign currency (3)

21,092,590

-

23,241,531

-

16,394,122

4,393,336

- Reference Interest Rate (TR)

962,662

947,109

15,000

-

15,000

-

- Special Clearance and Custody System Rate (Selic)

83

-

21,273

21,012

24,681

11,269

- General Price Index - Market (IGP-M)

943,351

-

2,102,500

1,300,776

1,888,833

1,430,773

- Other

957,506

-

1,948,964

968,518

1,216,311

724,031

Liabilities (short position):

35,699,787

 

37,042,035

 

22,523,286

 

- Interbank market

7,658,651

35,704

7,676,179

296,106

7,298,960

3,969,438

- Fixed rate

1,871,066

-

3,128,402

1,093,367

993,630

384,262

- Foreign currency (3)

21,528,936

436,346

23,343,946

102,415

12,000,786

-

- TR

15,553

-

1,111,077

1,096,077

1,266,158

1,251,158

- Selic

21,171

21,088

261

-

13,412

-

- IGP-M

2,391,720

1,448,369

801,724

-

458,060

-

- Other

2,212,690

1,255,184

980,446

-

492,280

-


Derivatives include operations maturing in D+1.     

 

(1)  Includes cash flow hedges to protect CDI-related funding, for the amount of R$28,790,922 thousand (R$43,208,629 thousand on June 30, 2012 and R$76,368,739 thousand on September 30, 2011) (Note 8g);

(2)  Includes specific hedges to protect foreign investments totaling R$22,434,605 thousand (R$22,039,753 thousand on June 30, 2012 and R$19,994,041 thousand on September 30, 2011); and

(3)  Includes credit derivative operations (Note 8f).

 

To obtain greater payment assurance for operations with financial institutions and customers, Bradesco established compensation and settlement agreements for liabilities within the National Financial System, in accordance with CMN Resolution 3,263/05.

 
 

 

 
140 Report on Economic and Financial Analysis – September 2012   

 



 
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 restated cost and market value
 

 

R$ thousand

2012

2011

September 30

June 30

September 30

Restated cost

Mark-to-market adjustment

Market

value

Restated cost

Mark-to-market adjustment

Market

value

Restated cost

Mark-to-market adjustment

Market

value

Adjustment receivables - swaps

567,325

308,218

875,543

522,409

174,587

696,996

1,390,247

8,001

1,398,248

Receivable forward purchases

1,085,101

-

1,085,101

1,393,852

-

1,393,852

1,116,804

-

1,116,804

Receivable forward sales

1,009,626

-

1,009,626

927,406

-

927,406

279,345

-

279,345

Premiums on exercisable options

55,076

74,313

129,389

62,690

70,997

133,687

27,213

(17,604)

9,609

Total assets

2,717,128

382,531

3,099,659

2,906,357

245,584

3,151,941

2,813,609

(9,603)

2,804,006

Adjustment payables - swaps

(598,389)

(462,459)

(1,060,848)

(458,288)

(536,367)

(994,655)

(317,472)

(126,225)

(443,697)

Payable forward purchases

(903,637)

-

(903,637)

(1,044,245)

-

(1,044,245)

(548,116)

-

(548,116)

Payable forward sales

(2,056,218)

-

(2,056,218)

(1,389,447)

-

(1,389,447)

(682,456)

-

(682,456)

Premiums on written options

(81,383)

(45,625)

(127,008)

(92,519)

(47,219)

(139,738)

(88,110)

37,934

(50,176)

Total liabilities

(3,639,627)

(508,084)

(4,147,711)

(2,984,499)

(583,586)

(3,568,085)

(1,636,154)

(88,291)

(1,724,445)

III) Futures, options, forward and swap contracts - (Notional)

 

 

R$ thousand

2012

2011

1 to 90 days

91 to 180 days

181 to 360 days

More than

360 days

Total on

September 30

Total on

June 30

Total on

September 30

Futures contracts

62,776,951

328,393,493

13,967,584

138,286,306

543,424,334

285,988,424

205,031,109

Option contracts

1,987,460

128,826,263

144,631

174,946

131,133,300

120,399,774

184,747,633

Forward contracts

29,270,547

2,141,062

3,408,007

4,084,275

38,903,891

40,864,670

20,110,557

Swap contracts

8,930,932

13,437,702

2,920,740

9,349,565

34,638,939

36,047,380

22,079,589

Total on September 30, 2012

102,965,890

472,798,520

20,440,962

151,895,092

748,100,464

 

 

Total on June 30, 2012

129,464,594

20,893,788

189,395,520

143,546,346

 

483,300,248

 

Total on September 30, 2011

233,986,408

81,035,751

27,167,166

89,779,563

 

 

431,968,888

 

 

 

 

 

Bradesco 

 141  

 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

    IV) Types of margin offered for guarantee for derivative financial instruments, mainly futures contracts
 

 

R$ thousand

2012

2011

September 30

June 30

September 30

Government securities

 

 

 

National treasury notes

3,126,530

3,001,541

718,825

Financial treasury bills

35,374

34,700

32,265

National treasury bills

2,716,542

3,553,173

3,972,455

Total

5,878,446

6,589,414

4,723,545

   V) Revenues and expenses, net

 

 

R$ thousand

 

2012

2011

 

3rd Quarter

2nd Quarter

September 30 YTD

September 30 YTD

Swap contracts

(100,967)

(444,133)

(645,234)

(85,660)

Forward contracts

55,675

218,510

132,795

270,320

Option contracts

(7,076)

34,797

54,464

18,564

Futures contracts

(330,738)

(1,428,884)

(2,058,213)

(206,211)

Foreign exchange variation of investments abroad

11,500

380,459

294,006

(465,796)

Total

(371,606)

(1,239,251)

(2,222,182)

(468,783)

 

    VI) Total value of derivative financial instruments, broken down by trading location and counter parties

 

 

R$ thousand

2012

2011

September 30

June 30

September 30

Cetip (over-the-counter)

49,209,296

42,990,316

24,377,441

BM&FBovespa (stock exchange)

660,123,142

398,868,005

384,778,750

Abroad (over-the-counter) (1)

25,667,435

35,763,455

19,034,665

Abroad (stock exchange) (1)

13,100,591

5,678,472

3,778,032

Total

748,100,464

483,300,248

431,968,888

 

(1) Comprise operations carried out on the Chicago and New York Stock Exchanges and over-the-counter markets.

A total of 95% of counterparties are corporate entities and 5% are financial institutions on September 30, 2012.

 
142 Report on Economic and Financial Analysis – September 2012   

 



 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

 f) Credit Default Swaps (CDS)

In general, these represent bilateral agreements in which one of the parties purchases protection against the credit risk of a certain financial instrument (the risk is transferred). The selling counterparty receives remuneration that is usually paid linearly over the term of the agreement.

In the case of a default, the purchasing counterparty will receive a payment to offset the loss incurred on the financial instrument. In this case, the selling counterparty usually receives the underlying asset of the agreement in exchange for the payment.

 

R$ thousand

Credit risk amount

Effect on the calculation of the

shareholders’ equity required

2012

2011

2012

2011

September 30

June 30

September 30

September 30

June 30

September 30

Sold protection

 

 

 

 

 

 

Credit swaps whose underlying assets are

 

 

 

 

 

 

Securities - Brazilian public debt

(324,896)

(323,408)

(537,776)

-

-

-

Derivatives with companies

(4,061)

(4,043)

(3,709)

(223)

(222)

(204)

Purchased protection  

 

 

 

 

 

 

Credit swaps whose underlying assets are

 

 

 

 

 

 

Securities - Brazilian public debt

304,590

656,922

751,032

-

-

-

● Derivatives with companies

26,398

26,277

5,563

2,904

2,890

612

Total

2,031

355,748

215,110

2,681

2,668

408

Deposited margin

5,077

5,053

7,551

 

 

 

 

Bradesco carries out operations involving credit derivatives to better manage its risk exposure and its assets. Contracts related to credit derivatives operations described above have several maturities up to 2013. The mark-to-market rates to protect counterparty risk though remuneration totaled R$(873) thousand (R$505 thousand on June 30, 2012 and R$(1,010) thousand on September 30, 2011). There was no default to trigger events in the contracts during the period.

 

 

Bradesco 

 143  

 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

 g) Cash flow hedge

Bradesco uses cash flow hedges to protect its cash flows from payment of interest rates on funds indexed to Bank Deposit Certificates (CDB), related to variable interest rate risk of Interbank Deposit Rate (DI Cetip), thus registering fixed cash flows.

Bradesco has traded DI Future contracts at BM&FBovespa since 2009, using them as cash flow hedges for funding linked to DI. The following table presents the DI Future position, where:

 

R$ thousand

 

2012

2011

 

September 30

June 30

September 30

DI Future with maturity between 2013 and 2017

28,790,922

43,208,629

76,368,739

Funding indexed to CDI

27,387,491

41,691,552

75,127,294

Mark-to-market adjustment recorded in shareholders’ equity (1)  

(687,346)

(948,962)

(841,509)

Ineffective market value recorded in the income statement

(56)

(56)

(32)

 

(1) The adjustment in shareholders equity is R$(412,408) thousand, net of tax (R$(569,377) thousand on June 30, 2012 and R$(504,905) thousand on September 30, 2011).

The effectiveness of the hedge portfolio was assessed in accordance with Bacen Circular Letter 3,082/02.

h) Income from securities, insurance, pension plans and capitalization bonds and derivative financial instruments

 

R$ thousand

2012

2011

 

3rd Quarter

2nd Quarter

September 30 YTD

September 30 YTD

Fixed income securities

4,563,501

6,016,083

15,717,966

11,687,445

Interbank investments (Note 7b)

2,495,433

2,175,753

7,047,465

7,932,331

Equity securities

(101,959)

683

(86,261)

10,659

Subtotal

6,956,975

8,192,519

22,679,170

19,630,435

Financial result from insurance, pension plans and capitalization bonds (1)

5,329,082

2,202,039

10,682,664

7,346,667

Income from derivative financial instruments (Note 8e V)

(371,606)

(1,239,251)

(2,222,182)

(468,783)

Total

11,914,451

9,155,307

31,139,652

26,508,319

 

(1) The third quarter of 2012 and the nine months of 2012 consider the gain from extend terms of Insurance Group’s available-for-sale securities, amounting to R$2,115,963 thousand.

 

 

 

144 Report on Economic and Financial Analysis – September 2012   

 



 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

 9) INTERBANK ACCOUNTS - COMPULSORY DEPOSITS
    
     a) Compulsory reserve
 

 

R$ thousand

Remuneration

2012

2011

September 30

June 30

September 30

Reserve requirements - demand deposits

not remunerated

8,870,316

8,524,372

6,624,826

Reserve requirements - savings deposits

savings index

13,033,172

12,348,150

11,295,694

Time reserve requirements (1)

Selic rate

10,716,402

15,059,103

22,797,819

Collection of funds from rural loan (2)

not remunerated

536

-

-

Additional reserve requirements

Selic rate

21,601,983

24,437,733

28,989,607

·     Savings deposits

 

6,514,538

6,173,067

5,647,847

·     Demand deposits (1)

 

2,125,654

4,092,235

3,890,236

·     Time deposits (1)

 

12,961,791

14,172,431

19,451,524

Restricted deposits - National Housing System (SFH)

TR + interest rate

551,306

547,312

523,012

Funds from rural loan

not remunerated

578

578

578

Total

 

54,774,293

60,917,248

70,231,536

(1) For more information on new rules on compulsory deposits, see Note 35c; and

(2) Pursuant to Bacen's Circular Letter 3,460/09, the banks must collect funds from rural loan (on demand deposits) not lent as of August 2010, to be delivered in August 2013.

    b) Revenue from compulsory deposits

 

R$ thousand

 

2012

2011

 

3rd Quarter

2nd Quarter

September 30 YTD

September 30 YTD

Compulsory deposits - Bacen (reserves requirement)

887,406

1,015,338

3,150,007

4,559,660

Restricted deposits - SFH  

6,491

6,649

20,398

22,051

Total

893,897

1,021,987

3,170,405

4,581,711

 

 

 

 

 

Bradesco 

 145  


 
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

 

R$ thousand

Performing loans

1 to 30 days

31 to 60 days

61 to 90 days

91 to 180 days

181 to 360 days

More than 360 days

2012

2011

Total on

September 30

(A)

 

%

(6)

Total on

June 30

(A)

 

%

(6)

Total on

September 30

(A)

 

%

(6)

Discounted trade receivables and loans (1)

17,469,667

13,139,416

9,713,099

16,605,841

18,594,716

47,938,982

123,461,721

38.5

121,290,565

38.7

113,704,380

39.1

Financing

3,620,271

3,556,987

3,569,988

8,501,055

15,862,365

58,523,319

93,633,985

29.2

91,111,983

29.0

83,382,856

28.7

Agricultural and agribusiness financing

1,100,696

982,580

725,232

1,610,558

4,615,477

6,668,480

15,703,023

4.9

15,303,391

4.9

15,133,936

5.2

Subtotal

22,190,634

17,678,983

14,008,319

26,717,454

39,072,558

113,130,781

232,798,729

72.6

227,705,939

72.6

212,221,172

73.0

Leasing

483,159

382,078

388,148

1,087,248

1,727,589

3,508,313

7,576,535

2.4

8,294,242

2.6

10,867,448

3.7

Advances on foreign exchange contracts (2) 

992,837

979,852

923,809

1,954,617

2,498,703

-

7,349,818

2.3

7,070,297

2.2

6,168,459

2.1

Subtotal

23,666,630

19,040,913

15,320,276

29,759,319

43,298,850

116,639,094

247,725,082

77.3

243,070,478

77.4

229,257,079

78.8

Other receivables (3)

5,372,079

2,768,155

1,383,126

2,367,966

1,631,385

670,168

14,192,879

4.4

13,780,854

4.4

12,416,852

4.3

Total Loans

29,038,709

21,809,068

16,703,402

32,127,285

44,930,235

117,309,262

261,917,961

81.7

256,851,332

81.8

241,673,931

83.1

Sureties and guarantees (4)

1,824,199

755,048

1,858,768

3,255,568

4,302,229

42,736,480

54,732,292

17.1

52,876,150

16.8

44,388,714

15.3

Loan assignment (5)  

22,771

21,589

20,541

56,068

82,089

63,117

266,175

0.1

340,431

0.1

444,788

0.2

Loan assignment - real estate receivables certificate

16,237

16,236

16,235

46,726

69,734

234,452

399,620

0.1

420,704

0.1

524,473

0.2

Co-obligation in rural loan assignment (4)

-

-

-

-

-

130,458

130,458

-

130,734

-

141,618

-

Loans available for import (4)

147,929

122,704

45,093

159,363

554,778

525,657

1,555,524

0.5

1,689,760

0.5

1,865,374

0.6

Confirmed export credits (4)

5,628

878

1,850

868

3,198

1,103

13,525

-

89,428

-

80,310

-

Acquisition of credit card receivables

432,454

192,865

137,383

357,468

404,768

97,868

1,622,806

0.5

2,206,793

0.7

1,619,206

0.6

Overall total on September 30, 2012

31,487,927

22,918,388

18,783,272

36,003,346

50,347,031

161,098,397

320,638,361

100.0

 

 

 

 

Overall total on June 30, 2012

31,054,388

24,606,297

17,812,373

36,109,330

47,811,130

157,211,814

 

 

314,605,332

100.0

 

 

Overall total on September 30, 2011

28,670,795

22,978,989

18,032,202

31,851,016

43,387,566

145,817,846

 

 

 

 

290,738,414

100.0

 

 

 

146 Report on Economic and Financial Analysis – September 2012   

 



 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

 

 

R$ thousand

Non-performing loans

Installments past due

1 to 30 days

31 to 60 days

61 to 90 days

91 to 180

days

181 to 540

days

2012

2011

Total on

September 30

(B)

 

%

(6)

Total on

June 30

(B)

 

%

(6)

Total on

September 30

(B)

 

%

(6)

Discounted trade receivables and loans (1)

1,062,414

957,276

882,497

1,778,302

2,482,440

7,162,929

83.7

7,210,696

84.0

6,506,562

84.9

Financing

229,646

192,133

115,480

230,705

225,004

992,968

11.6

955,133

11.1

700,644

9.1

Agricultural and agribusiness financing

17,212

21,542

13,710

20,800

21,336

94,600

1.1

98,502

1.1

101,064

1.3

Subtotal

1,309,272

1,170,951

1,011,687

2,029,807

2,728,780

8,250,497

96.4

8,264,331

96.2

7,308,270

95.3

Leasing

63,408

49,139

29,915

56,653

43,733

242,848

2.8

258,526

3.0

288,600

3.8

Advances on foreign exchange contracts (2)  

5,019

5,548

-

-

-

10,567

0.1

7,441

0.1

17,018

0.2

Subtotal

1,377,699

1,225,638

1,041,602

2,086,460

2,772,513

8,503,912

99.3

8,530,298

99.3

7,613,888

99.3

Other receivables (3)  

2,844

2,390

666

9,021

48,374

63,295

0.7

64,344

0.7

54,499

0.7

Overall total on September 30, 2012

1,380,543

1,228,028

1,042,268

2,095,481

2,820,887

8,567,207

100.0

 

 

 

 

Overall total on June 30, 2012

1,376,154

1,265,670

1,061,560

2,157,956

2,733,302

 

 

8,594,642

100.0

 

 

Overall total on September 30, 2011

1,191,732

1,072,227

905,433

1,872,180

2,626,815

 

 

 

 

7,668,387

100.0

 

 

 

Bradesco 

 147  


 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

 

 

R$ thousand

Non-performing loans

Outstanding Installments

1 to 30 days

31 to 60 days

61 to 90 days

91 to 180 days

181 to 360 days

More than 360 days

2012

2011

Total on

September 30

(C)

 

%

(6)

Total on

June 30

(C)

 

%

(6)

Total on

September 30

(C)

 

%

(6)

Discounted trade receivables and loans (1)

741,134

573,205

468,652

1,038,717

1,517,450

3,453,229

7,792,387

56.1

7,372,234

53.8

5,672,353

50.9

Financing

220,952

201,821

203,392

570,162

959,856

2,848,167

5,004,350

36.1

5,088,827

37.1

3,868,180

34.8

Agricultural and agribusiness financing

6,111

768

1,301

5,264

19,004

138,385

170,833

1.2

222,443

1.6

200,153

1.8

Subtotal

968,197

775,794

673,345

1,614,143

2,496,310

6,439,781

12,967,570

93.4

12,683,504

92.5

9,740,686

87.5

Leasing

57,554

51,454

52,838

147,560

232,384

370,097

911,887

6.6

1,035,490

7.5

1,385,658

12.5

Subtotal

1,025,751

827,248

726,183

1,761,703

2,728,694

6,809,878

13,879,457

100.0

13,718,994

100.0

11,126,344

100.0

Other receivables (3)  

103

98

94

231

401

1,052

1,979

-

1,400

-

2,493

-

Overall total on September 30, 2012

1,025,854

827,346

726,277

1,761,934

2,729,095

6,810,930

13,881,436

100.0

 

 

 

 

Overall total on June 30, 2012

937,326

796,784

691,451

1,758,400

2,742,840

6,793,593

 

 

13,720,394

100.0

 

 

Overall total on September 30, 2011

787,944

666,435

590,780

1,425,819

2,221,497

5,436,362

 

 

 

 

11,128,837

100.0

 

 

148 Report on Economic and Financial Analysis – September 2012   

 



 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

 

 

R$ thousand

Overall total

 

2012

2011

 

Total on September 30

(A+B+C)

%

(6)

Total on June 30
(A+B+C)

%

(6)

Total on September 30

(A+B+C)

%

(6)

Discounted trade receivables and loans (1)

138,417,037

40.3

135,873,495

40.4

125,883,295

40.8

Financing

99,631,303

29.0

97,155,943

28.9

87,951,680

28.4

Agricultural and agribusiness financing

15,968,456

4.7

15,624,336

4.6

15,435,153

5.0

Subtotal

254,016,796

74.0

248,653,774

73.9

229,270,128

74.2

Leasing

8,731,270

2.5

9,588,258

2.8

12,541,706

4.1

Advances on foreign exchange contracts (2) - Note 11a

7,360,385

2.1

7,077,738

2.1

6,185,477

2.0

Subtotal

270,108,451

78.6

265,319,770

78.8

247,997,311

80.3

Other receivables (3)  

14,258,153

4.2

13,846,598

4.1

12,473,844

4.0

Total Loans   

284,366,604

82.8

279,166,368

82.9

260,471,155

84.3

Sureties and guarantees (4)

54,732,292

16.0

52,876,150

15.7

44,388,714

14.3

Loan assignment (5)  

266,175

0.1

340,431

0.1

444,788

0.1

Loan assignment - real estate receivables certificate

399,620

0.1

420,704

0.1

524,473

0.2

Co-obligation in rural loan assignment (4)

130,458

-

130,734

-

141,618

-

Loans available for imports (4) 

1,555,524

0.5

1,689,760

0.5

1,865,374

0.6

Confirmed exports loans (4)

13,525

-

89,428

-

80,310

-

Acquisition of credit card receivables

1,622,806

0.5

2,206,793

0.7

1,619,206

0.5

Overall total on September 30, 2012

343,087,004

100.0

 

 

 

 

Overall total on June 30, 2012

 

 

336,920,368

100.0

 

 

Overall total on September 30, 2011

 

 

 

 

309,535,638

100.0

 

(1)  Including credit card loans and advances on credit card receivables for the amount of R$18,402,052 thousand (R$18,141,175 thousand on June 30, 2012 and R$17,110,437 thousand on September 30, 2011);

(2)  Advances on foreign exchange contracts are classified as a deduction from “Other Liabilities”;

(3)  Item “Other Receivables” comprises receivables on sureties and guarantees honored, receivables on sale of assets, trade and credit receivables, income from foreign exchange contracts and export contracts receivables and credit card receivables (cash and installment purchases at merchants) for the amount of R$12,809,844 thousand (R$12,582,104 thousand on June 30, 2012 and R$11,686,662 thousand on September 30, 2011);

(4)  Recorded in memorandum accounts;

(5)  Restated amount of loan assignment up to September 30, 2012, June 30, 2012 and September 30, 2011, respectively, net of installments received; and

(6)  Percentage of each type against total loan portfolio, including sureties and guarantee, loan assignment and acquisition of receivables.

 

 

Bradesco 

 149  

 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

 b) By type and levels of risk
 

 

R$ thousand

Levels of risk

AA

A

B

C

D

E

F

G

H

2012

2011

Total on

September 30

%

(1)

Total on

June 30

%

(1)

Total on

September 30

%

(1)

Discounted trade receivables and loans

26,942,568

59,402,481

9,069,063

25,584,254

4,879,136

1,771,671

1,443,904

1,353,664

7,970,296

138,417,037

48.7

135,873,495

48.7

125,883,295

48.3

Financings

18,247,518

40,162,235

23,006,759

13,927,735

1,324,706

517,561

416,583

338,535

1,689,671

99,631,303

35.0

97,155,943

34.8

87,951,680

33.8

Agricultural and agribusiness financings

2,063,534

3,449,336

4,465,673

5,307,184

350,608

97,062

155,462

20,892

58,705

15,968,456

5.6

15,624,336

5.6

15,435,153

5.9

Subtotal

47,253,620

103,014,052

36,541,495

44,819,173

6,554,450

2,386,294

2,015,949

1,713,091

9,718,672

254,016,796

89.3

248,653,774

89.1

229,270,128

88.0

Leasing

79,320

1,881,366

1,508,756

4,054,324

453,271

118,422

95,766

75,746

464,299

8,731,270

3.1

9,588,258

3.4

12,541,706

4.8

Advances on foreign exchange contracts (2)

3,923,121

1,303,233

1,331,375

722,135

57,285

6,787

66

-

16,383

7,360,385

2.6

7,077,738

2.5

6,185,477

2.4

Subtotal

51,256,061

106,198,651

39,381,626

49,595,632

7,065,006

2,511,503

2,111,781

1,788,837

10,199,354

270,108,451

95.0

265,319,770

95.0

247,997,311

95.2

Other receivables

231,333

10,384,985

435,636

2,658,837

126,656

36,766

26,893

20,915

336,132

14,258,153

5.0

13,846,598

5.0

12,473,844

4.8

Overall total on September 30, 2012

51,487,394

116,583,636

39,817,262

52,254,469

7,191,662

2,548,269

2,138,674

1,809,752

10,535,486

284,366,604

100.0

 

 

 

 

%

18.1

41.0

14.0

18.4

2.6

0.9

0.8

0.6

3.6

100.00

 

 

 

 

 

Overall total on June 30, 2012

53,112,363

112,241,494

39,112,363

50,824,333

6,356,320

3,273,315

2,235,542

1,838,017

10,172,621

 

 

279,166,368

100.0

 

 

%

19.1

40.2

14.0

18.2

2.3

1.2

0.8

0.7

3.5

 

 

100.0

 

 

 

Overall total on September 30, 2011

48,136,991

108,058,101

23,433,936

60,607,430

5,267,690

2,304,896

1,849,241

1,555,410

9,257,460

 

 

 

 

260,471,155

100.0

%

18.5

41.5

9.0

23.3

2.0

0.9

0.7

0.6

3.5

 

 

 

 

100.0

 


(1) Percentage of each type against total loan portfolio, excluding sureties and guarantee, loan assignment, acquisition of receivables and co-obligation in rural loan assignment; and
(2) See Note 11a.
 
 
 
150 Report on Economic and Financial Analysis – September 2012   

 



 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

     c) Maturity ranges and levels of risk
 
 

 

R$ thousand

Levels of risk

Non-performing loans

 

AA

A

B

C

D

E

F

G

H

2012

2011

 

Total on September 30

%

(1)

Total on

June 30

%

(1)

Total on

September 30

%

(1)

Outstanding installments

-

-

1,778,800

3,076,932

2,386,887

1,208,367

973,814

809,378

3,647,258

13,881,436

100.0

13,720,394

100.0

11,128,837

100.0

1 to 30

-

-

169,018

258,183

221,168

63,825

49,081

44,804

219,775

1,025,854

7.4

937,326

6.8

787,944

7.1

31 to 60

-

-

131,365

226,827

108,082

60,629

47,933

40,819

211,691

827,346

6.0

796,784

5.8

666,435

6.0

61 to 90

-

-

121,994

170,237

97,747

55,740

45,177

38,184

197,198

726,277

5.2

691,451

5.0

590,780

5.3

91 to 180

-

-

230,405

386,870

260,424

146,264

119,531

102,009

516,431

1,761,934

12.7

1,758,400

12.8

1,425,819

12.8

181 to 360

-

-

352,132

586,638

421,411

227,621

183,961

161,057

796,275

2,729,095

19.7

2,742,840

20.0

2,221,497

20.0

More than 360

-

-

773,886

1,448,177

1,278,055

654,288

528,131

422,505

1,705,888

6,810,930

49.0

6,793,593

49.6

5,436,362

48.8

Past due installments (2)

-

-

415,500

915,327

858,063

683,694

656,005

681,067

4,357,551

8,567,207

100.0

8,594,642

100.0

7,668,387

100.0

1 to 14

-

-

52,609

136,662

75,755

32,745

23,035

32,738

100,651

454,195

5.3

437,916

5.1

280,821

3.7

15 to 30

-

-

340,494

224,334

137,687

44,430

30,345

24,233

124,825

926,348

10.8

938,238

10.9

910,911

11.9

31 to 60

-

-

22,397

521,188

242,578

106,813

66,945

45,861

222,246

1,228,028

14.3

1,265,670

14.7

1,072,227

14.0

61 to 90

-

-

-

22,931

370,942

157,804

100,834

67,216

322,541

1,042,268

12.2

1,061,560

12.4

905,433

11.8

91 to 180

-

-

-

10,212

31,101

330,397

410,843

466,660

846,268

2,095,481

24.5

2,157,956

25.1

1,872,180

24.4

181 to 360

-

-

-

-

-

11,505

24,003

44,359

2,638,986

2,718,853

31.7

2,637,041

30.7

2,487,963

32.4

More than 360

-

-

-

-

-

-

-

-

102,034

102,034

1.2

96,261

1.1

138,852

1.8

Subtotal

-

-

2,194,300

3,992,259

3,244,950

1,892,061

1,629,819

1,490,445

8,004,809

22,448,643

 

22,315,036

 

18,797,224

 

Specific provision

-

-

21,943

119,768

324,496

567,618

814,909

1,043,311

8,004,809

10,896,854

 

10,809,196

 

9,173,336

 

                               

(1) Percentage of maturities against type of installment; and
(2) Operations maturing after 36 months have their past-due periods multiplied by two, as allowed by CMN Resolution 2,682/99.

 

 

 

Bradesco 

 151  

 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

 

 

R$ thousand

Levels of risk

Performing loans

AA

A

B

C

D

E

F

G

H

2012

2011

Total on

September 30

%

(1)

Total on

June 30

%

(1)

Total on

September 30

%

(1)

Outstanding installments

51,487,394

116,583,636

37,622,962

48,262,210

3,946,712

656,208

508,855

319,307

2,530,677

261,917,961

100.0

256,851,332

100.0

241,673,931

100.0

1 to 30

4,079,559

16,181,602

2,121,066

5,702,371

391,343

85,119

53,959

43,793

379,897

29,038,709

11.1

28,641,296

11.2

26,933,610

11.1

31 to 60

3,297,716

11,177,947

2,113,308

4,629,820

231,365

48,003

32,038

25,991

252,880

21,809,068

8.3

23,485,502

9.1

21,671,229

9.0

61 to 90

3,258,053

7,718,740

1,824,854

3,479,760

196,088

34,532

21,730

16,758

152,887

16,703,402

6.4

16,118,983

6.3

16,766,273

6.9

91 to 180

6,084,580

14,931,845

3,869,783

6,295,732

439,736

71,888

45,185

37,964

350,572

32,127,285

12.3

32,152,894

12.5

28,685,775

11.9

181 to 360

10,225,916

19,850,521

5,682,216

8,001,177

579,052

99,865

61,310

50,825

379,353

44,930,235

17.2

41,997,469

16.4

38,154,842

15.8

More than 360

24,541,570

46,722,981

22,011,735

20,153,350

2,109,128

316,801

294,633

143,976

1,015,088

117,309,262

44.7

114,455,188

44.5

109,462,202

45.3

Generic provision

-

582,914

376,230

1,447,866

394,671

196,862

254,428

223,515

2,530,677

6,007,163

 

5,862,498

 

5,908,620

 

Overall total on September 30, 2012 (2)

51,487,394

116,583,636

39,817,262

52,254,469

7,191,662

2,548,269

2,138,674

1,809,752

10,535,486

284,366,604

 

 

 

 

 

Existing provision

-

584,941

404,105

2,944,703

1,982,150

1,239,155

1,450,459

1,773,872

10,535,486

20,914,871

 

 

 

 

 

Minimum required provision

-

582,914

398,173

1,567,634

719,167

764,480

1,069,337

1,266,826

10,535,486

16,904,017

 

 

 

 

 

Excess provision

-

2,027

5,932

1,377,069

1,262,983

474,675

381,122

507,046

-

4,010,854

 

 

 

 

 

Overall total on June 30, 2012 (2)

53,112,363

112,241,494

39,112,363

50,824,333

6,356,320

3,273,315

2,235,542

1,838,017

10,172,621

 

 

279,166,368

 

 

 

Existing provision

-

563,235

396,919

2,900,057

1,737,991

1,601,637

1,512,240

1,797,325

10,172,621

 

 

20,682,025

 

 

 

Minimum required provision

-

561,209

391,123

1,524,730

635,633

981,995

1,117,771

1,286,612

10,172,621

 

 

16,671,694

 

 

 

Excess provision

-

2,026

5,796

1,375,327

1,102,358

619,642

394,469

510,713

-

 

 

4,010,331

 

 

 

Overall total on September 30, 2011 (2)

48,136,991

108,058,101

23,433,936

60,607,430

5,267,690

2,304,896

1,849,241

1,555,410

9,257,460

 

 

 

 

260,471,155

 

Existing provision

-

541,775

239,509

3,749,331

1,418,620

1,113,053

1,248,335

1,522,827

9,257,460

 

 

 

 

19,090,910

 

Minimum required provision

-

540,290

234,338

1,818,222

526,770

691,468

924,620

1,088,788

9,257,460

 

 

 

 

15,081,956

 

Excess provision

-

1,485

5,171

1,931,109

891,850

421,585

323,715

434,039

-

 

 

 

 

4,008,954

 

 

(1)   Percentage of maturities against type; and

(2)   The overall total includes performing loans for the amount of R$261,917,961 thousand (R$256,851,332 thousand on June 30, 2012 and R$241,673,931 thousand on September 30, 2011) and non-performing loans of R$22,448,643 thousand (R$22,315,036 thousand on June 30, 2012 and R$18,797,224 thousand on September 30, 2011).

 

 

152 Report on Economic and Financial Analysis – September 2012   

 



 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

    d) Concentration of loans
 

 

R$ thousand

2012

2011

September 30

% (1)

June 30

% (1)

September 30

% (1)

Largest borrower

2,645,817

0.9

2,695,001

1.0

2,400,490

0.9

10 largest borrowers

15,099,201

5.3

15,034,781

5.4

14,567,125

5.6

20 largest borrowers

24,011,491

8.4

23,849,797

8.5

23,529,678

9.0

50 largest borrowers

38,103,908

13.4

37,099,425

13.3

37,557,724

14.4

100 largest borrowers

49,377,994

17.4

48,492,619

17.4

47,917,263

18.4

(1) In relation to total of Bacen portfolio.

    e) By economic sector

 

R$ thousand

2012

2011

September 30

%

June 30

%

September 30

%

Public sector

476,675

0.2

484,315

0.2

1,407,391

0.5

Federal Government

267,205

0.1

264,059

0.1

1,077,849

0.4

Petrochemical

267,205

0.1

262,680

0.1

1,071,039

0.4

Financial intermediaries

-

-

1,379

-

6,810

-

State Government

209,470

0.1

220,256

0.1

329,542

0.1

Production and distribution of electricity

209,470

0.1

220,256

0.1

329,542

0.1

Private sector

283,889,929

99.8

278,682,053

99.8

259,063,764

99.5

Manufacturing

54,479,456

19.2

53,708,416

19.2

51,430,587

19.7

Food products and beverages

13,542,844

4.8

13,031,279

4.6

12,964,638

5.0

Steel, metallurgy and mechanics

8,741,915

3.1

8,437,376

3.0

8,689,172

3.3

Chemical

4,346,824

1.5

3,867,776

1.4

3,463,407

1.3

Pulp and paper

4,118,333

1.4

4,182,487

1.5

3,909,816

1.5

Oil refining and production of alcohol

3,668,168

1.3

3,614,232

1.3

3,312,713

1.3

Textiles and apparel

3,181,096

1.1

3,109,838

1.1

3,170,915

1.2

Rubber and plastic articles

2,769,131

1.0

2,604,477

0.9

2,608,400

1.0

Light and heavy vehicles

2,522,051

0.9

2,722,629

1.0

2,781,897

1.1

Furniture and wood products

2,059,756

0.7

1,962,424

0.7

1,901,059

0.7

Extraction of metallic and non-metallic ores

1,883,402

0.7

1,910,812

0.7

1,567,574

0.6

Electric and electronic products

1,873,618

0.7

2,156,191

0.8

2,099,509

0.8

Non-metallic materials

1,737,880

0.6

1,755,485

0.6

1,543,097

0.6

Automotive parts and accessories

986,222

0.3

1,191,660

0.4

1,085,706

0.4

Leather articles

753,651

0.3

775,091

0.3

575,461

0.2

Publishing, printing and reproduction

750,206

0.3

721,043

0.3

660,484

0.3

Other industries

1,544,359

0.5

1,665,616

0.6

1,096,739

0.4

Commerce

44,272,247

15.5

43,517,495

15.6

40,859,935

15.7

Merchandise in specialty stores

12,163,859

4.3

11,973,098

4.3

10,551,239

4.1

Food products, beverages and tobacco

5,101,171

1.8

5,143,131

1.8

5,002,391

1.9

Non-specialized retailer

4,428,277

1.6

4,272,247

1.5

4,000,675

1.5

Clothing and footwear

3,286,916

1.2

3,347,543

1.2

3,323,054

1.3

Automobile

3,262,242

1.1

3,124,580

1.1

3,387,420

1.3

Motor vehicle repairs, parts and accessories

3,136,848

1.1

3,107,987

1.1

2,822,564

1.1

Grooming and household articles

2,755,170

1.0

2,496,040

0.9

2,647,925

1.0

Waste and scrap

2,136,696

0.8

2,094,463

0.8

1,861,631

0.7

 

 

 

 

Bradesco 

 153  

 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

 

 

R$ thousand

2012

2011

September 30

%

June 30

%

September 30

%

Fuel

1,867,896

0.7

1,840,109

0.7

1,843,528

0.7

Trade intermediary

1,580,972

0.6

1,587,697

0.6

1,615,444

0.6

Agricultural products

1,560,901

0.5

1,472,555

0.5

1,115,535

0.4

Wholesale of goods in general

1,502,587

0.5

1,556,220

0.6

1,397,319

0.5

Other commerce

1,488,712

0.3

1,501,825

0.5

1,291,210

0.6

Financial intermediaries

1,566,510

0.6

1,364,037

0.5

688,405

0.3

Services

66,654,102

23.4

65,475,800

23.5

58,398,110

22.4

Civil construction

17,099,439

6.0

16,522,200

5.8

14,551,505

5.6

Transportation and storage

15,089,836

5.3

15,408,340

5.5

14,854,957

5.7

Real estate activities, rentals and corporate services

11,409,373

4.0

11,115,340

4.0

10,214,750

3.9

Production and distribution of electric power, gas and water

5,045,713

1.8

5,016,796

1.8

4,824,328

1.9

Holding companies, legal, accounting and business advisory services

2,834,435

1.0

3,028,824

1.1

2,334,367

0.9

Hotels and catering

2,547,015

0.9

2,460,979

0.9

2,153,860

0.8

Social services, education, health, defense and social security

2,186,997

0.8

2,120,646

0.8

2,007,467

0.8

Clubs, leisure, cultural and sport activities

2,020,641

0.7

2,196,741

0.8

1,659,290

0.6

Telecommunications

549,670

0.2

459,474

0.2

518,440

0.2

Other services

7,870,983

2.7

7,146,460

2.6

5,279,146

2.0

Agriculture, cattle raising, fishing, forestry and timber industry

3,609,323

1.3

3,664,469

1.3

3,785,721

1.5

Individuals

113,308,291

39.8

110,951,836

39.7

103,901,006

39.9

Total

284,366,604

100.0

279,166,368

100.0

260,471,155

100.0


 
154 Report on Economic and Financial Analysis – September 2012   

 



 
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
 

Levels of risk

R$ thousand

Portfolio balance

Non-performing loans

Performing loans

Total

%

(1)

2012

2011

Past due

Outstanding

Total - non-performing loans

%
September 30
YTD (2)

%
June 30
YTD (2)

%
September 30
YTD (2)

AA

-

-

-

51,487,394

51,487,394

18.1

18.1

19.1

18.5

A

-

-

-

116,583,636

116,583,636

41.0

59.1

59.3

60.0

B

415,500

1,778,800

2,194,300

37,622,962

39,817,262

14.0

73.1

73.3

69.0

C

915,327

3,076,932

3,992,259

48,262,210

52,254,469

18.4

91.5

91.5

92.3

Subtotal

1,330,827

4,855,732

6,186,559

253,956,202

260,142,761

91.5

 

 

 

D

858,063

2,386,887

3,244,950

3,946,712

7,191,662

2.6

94.1

93.8

94.3

E

683,694

1,208,367

1,892,061

656,208

2,548,269

0.9

95.0

95.0

95.2

F

656,005

973,814

1,629,819

508,855

2,138,674

0.8

95.8

95.8

95.9

G

681,067

809,378

1,490,445

319,307

1,809,752

0.6

96.4

96.5

96.5

H

4,357,551

3,647,258

8,004,809

2,530,677

10,535,486

3.6

100.0

100.0

100.0

Subtotal

7,236,380

9,025,704

16,262,084

7,961,759

24,223,843

8.5

 

 

 

Overall total on September 30, 2012

8,567,207

13,881,436

22,448,643

261,917,961

284,366,604

100.0

 

 

 

%

3.0

4.9

7.9

92.1

100.0

 

 

 

 

Overall total on June 30, 2012

8,594,642

13,720,394

22,315,036

256,851,332

279,166,368

 

 

 

 

%

3.1

4.9

8.0

92.0

100.0

 

 

 

 

Overall total on September 30, 2011

7,668,387

11,128,837

18,797,224

241,673,931

260,471,155

 

 

 

 

%

2.9

4.3

7.2

92.8

100.0

 

 

 

 

(1) Percentage of level of risk against total portfolio; and

(2) Accumulated ratio between level of risk and the total portfolio.

 

 

 

Bradesco 

 155  


 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

 

Level of risk  

 

R$ thousand

Allowance

 

Minimum required

Excess

Existing

2012

2011

Minimum required

provision

Specific

Generic

Total

%
September 30
YTD (1)

%
June 30
YTD (1)

%
September 30
YTD (1)

Past due

Outstanding

Total specific

AA

-

-

-

-

-

-

-

-

-

-

-

A

0.5

-

-

-

582,914

582,914

2,027

584,941

0.5

0.5

0.5

B

1.0

4,155

17,788

21,943

376,230

398,173

5,932

404,105

1.0

1.0

1.0

C

3.0

27,460

92,308

119,768

1,447,866

1,567,634

1,377,069

2,944,703

5.6

5.7

6.2

Subtotal

 

31,615

110,096

141,711

2,407,010

2,548,721

1,385,028

3,933,749

1.5

1.5

1.9

D

10.0

85,807

238,689

324,496

394,671

719,167

1,262,983

1,982,150

27.6

27.3

26.9

E

30.0

205,108

362,510

567,618

196,862

764,480

474,675

1,239,155

48.6

48.9

48.3

F

50.0

328,002

486,907

814,909

254,428

1,069,337

381,122

1,450,459

67.8

67.6

67.5

G

70.0

476,747

566,564

1,043,311

223,515

1,266,826

507,046

1,773,872

98.0

97.8

97.9

H

100.0

4,357,551

3,647,258

8,004,809

2,530,677

10,535,486

-

10,535,486

100.0

100.0

100.0

Subtotal

 

5,453,215

5,301,928

10,755,143

3,600,153

14,355,296

2,625,826

16,981,122

70.1

70.5

72.0

Overall total on September 30, 2012

 

5,484,830

5,412,024

10,896,854

6,007,163

16,904,017

4,010,854

20,914,871

7.4

 

 

%

 

26.2

25.9

52.1

28.7

80.8

19.2

100.0

 

 

 

Overall total on June 30, 2012

 

5,425,569

5,383,627

10,809,196

5,862,498

16,671,694

4,010,331

20,682,025

 

7.4

 

%

 

26.2

26.1

52.3

28.3

80.6

19.4

100.0

 

 

 

Overall total on  

September 30, 2011

 

4,941,241

4,232,095

9,173,336

5,908,620

15,081,956

4,008,954

19,090,910

 

 

7.3

%

 

25.9

22.2

48.1

30.9

79.0

21.0

100.0

 

 

 

(1) Ratio between existing allowance and total portfolio by level of risk.
 
 
156 Report on Economic and Financial Analysis – September 2012   

 



 
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

 

2012

2011

 

3rd Quarter

2nd Quarter

September 30 YTD

September 30 YTD

Opening balance

20,682,025

20,117,439

19,540,448

16,289,671

- Specific provision (1)

10,809,196

10,575,790

9,875,415

7,898,327

- Generic provision (2)

5,862,498

5,530,127

5,654,244

5,389,925

- Excess provision (3)

4,010,331

4,011,522

4,010,789

3,001,419

Additions

3,551,857

3,650,406

10,500,537

9,125,115

Reductions

(3,319,011)

(3,085,820)

(9,126,114)

(6,323,876)

Closing balance

20,914,871

20,682,025

20,914,871

19,090,910

- Specific provision (1)

10,896,854

10,809,196

10,896,854

9,173,336

- Generic provision (2)

6,007,163

5,862,498

6,007,163

5,908,620

- Excess provision (3)

4,010,854

4,010,331

4,010,854

4,008,954

 

(1)  For operations with overdue installments for more than 14 days;

(2)  Recorded based on the customer/transaction classification and therefore not included in the preceding item; and

(3)  The additional provision is recorded based on Management's experience and the expectation of the loan portfolio, to determine the total provision deemed sufficient to cover specific and general credit risk, together with the provision calculated based on levels of risk and the corresponding minimum percentage in the provision established by CMN Resolution 2,682/99. The excess provision per customer was classified according to the corresponding level of risk (Note 10f).

 

h)   Allowance for loan losses (ALL) expenses net of amounts recovered

Expenses with the allowance for loan losses, net of credit write offs recovered, are as follows.

 

R$ thousand

2012

2011

 

3rd Quarter

2nd Quarter

September 30 YTD

September 30 YTD

Amount recorded

3,551,857

3,650,406

10,500,537

9,125,115

Amount recovered (1)

(749,642)

(784,939)

(2,187,766)

(2,051,092)

ALL expense net of amounts recovered

2,802,215

2,865,467

8,312,771

7,074,023


  
(1) Classified in income from loans (Note 10j).

 

 

 

Bradesco 

 157  

 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

    i) Changes in the renegotiated portfolio
 

 

R$ thousand

2012

2011

 

3rd Quarter

2nd Quarter

September 30 YTD

September 30 YTD

Opening balance

9,139,017

8,888,112

8,658,167

6,911,604

Amount renegotiated

2,126,321

2,180,440

6,204,863

5,834,659

Amount received

(781,998)

(1,034,493)

(2,787,442)

(2,608,743)

Write-offs

(1,205,704)

(895,042)

(2,797,952)

(1,847,645)

Closing balance

9,277,636

9,139,017

9,277,636

8,289,875

Allowance for loan losses

5,841,680

5,816,314

5,841,680

5,168,704

Percentage on renegotiated portfolio

63.0%

63.6%

63.0%

62.3%

 
    j) Income on loans and leasing
 

 

R$ thousand

2012

2011

 

3rd Quarter

2nd Quarter

September 30 YTD

September 30 YTD

Discounted trade receivables and loans

8,429,584

8,483,685

25,101,167

23,150,131

Financings

3,186,185

3,248,724

9,522,958

8,068,215

Agricultural and agribusiness loans

316,173

286,017

844,276

778,293

Subtotal

11,931,942

12,018,426

35,468,401

31,996,639

Recovery of credits charged-off as loss

749,642

784,939

2,187,766

2,051,092

Subtotal

12,681,584

12,803,365

37,656,167

34,047,731

Leasing, net of expenses

292,705

294,714

949,581

1,196,675

Total

12,974,289

13,098,079

38,605,748

35,244,406

 

 

 
158 Report on Economic and Financial Analysis – September 2012   

 



 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report

   

Notes to the Consolidated Financial Statements

11) OTHER RECEIVABLES
 
     a) Foreign exchange portfolio
 
         Balances
 

 

R$ thousand

2012

2011

September 30

June 30

September 30

Assets - other receivables

 

 

 

Exchange purchases pending settlement

9,504,538

10,976,235

10,612,982

Exchange sale receivables

1,934,434

3,430,285

3,488,401

(-) Advances in local currency received

(297,717)

(485,561)

(165,716)

Income receivable on advances granted

102,153

105,717

64,065

Total

11,243,408

14,026,676

13,999,732

Liabilities - other liabilities

 

 

 

Exchange sales pending settlement

1,939,452

3,419,671

3,514,895

Exchange purchase payables

9,180,925

10,384,938

9,756,448

(-) Advances on foreign exchange contracts

(7,360,385)

(7,077,738)

(6,185,477)

Other

5,155

6,685

5,315

Total

3,765,147

6,733,556

7,091,181

Net foreign exchange portfolio

7,478,261

7,293,120

6,908,551

Memorandum accounts:

 

 

 

- Loans available for imports

1,555,524

1,689,760

1,865,374

- Confirmed exports loans

13,525

89,428

80,310

         Foreign exchange results

         Adjusted foreign exchange results for presentation purposes

 

R$ thousand

2012

2011

3rd Quarter

2nd Quarter

September 30 YTD

September 30 YTD

Foreign exchange results

136,219

513,472

919,606

1,056,034

Adjustments:

 

 

 

 

- Income on foreign currency financing (1)  

9,872

53,092

102,268

146,775

- Income on export financing (1)  

143,591

200,863

468,881

395,237

- Income on foreign investments (2)  

713

22,297

66,412

313,001

- Expenses of liabilities with foreign bankers (3) (Note 17c)

(64,951)

(646,786)

(1,034,502)

(1,099,189)

- Funding expenses (4)  

(90,807)

(85,456)

(255,992)

(216,700)

- Other

33,155

159,426

267,524

(144,691)

Total adjustments

31,573

(296,564)

(385,409)

(605,567)

Adjusted foreign exchange results

167,792

216,908

534,197

450,467

 

(1) Recognized in “Income from loans;”
(2) Recognized in “Income from security transactions;”
(3) Related to funds for financing of advances on foreign exchange contracts and import financing, recognized in “Borrowing and onlending expenses;” and
(4) Refer to funding expenses of investments in foreign exchange.
 
    b) Sundry
 
 

 

Bradesco 

 159  


 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

 

R$ thousand

2012

2011

 

September 30

June 30

September 30

Deductible taxes (Note 34c)

23,530,620

23,105,852

21,659,214

Credit card operations

14,432,649

14,788,897

13,305,868

Debtors for escrow deposits

10,734,851

10,332,319

9,097,143

Prepaid taxes

5,123,178

5,626,396

4,300,796

Other debtors

3,484,493

2,788,909

2,571,916

Trade and credit receivables (1)

2,233,365

2,003,918

1,197,615

Advances for Deposit Guarantee Fund (FGC)

213,104

258,770

395,765

Payments to be reimbursed

524,794

494,626

510,726

Receivables from sale of assets

55,846

59,285

66,334

Other

311,207

402,405

329,658

Total

60,644,107

59,861,377

53,435,035

(1) Include receivables from the acquisition of financial assets from loans without substantial transfer of risks and benefits.

12) OTHER ASSETS

     a) Foreclosed assets/other

 

R$ thousand

Cost

Provision for losses

Cost net of provision

2012

2011

September 30

June 30

September 30

Real estate

613,518

(336,966)

276,552

242,781

127,981

Goods subject to special conditions

48,341

(48,341)

-

-

-

Vehicles and similar

453,093

(210,536)

242,557

229,988

256,533

Inventories/warehouse

108,357

-

108,357

97,180

59,519

Machinery and equipment

17,141

(7,424)

9,717

11,329

9,904

Other

19,476

(18,557)

919

1,057

975

Total on September 30, 2012

1,259,926

(621,824)

638,102

 

 

Total on June 30, 2012

1,163,128

(580,793)

 

582,335

 

Total on September 30, 2011

676,605

(221,693)

 

 

454,912

 

     b) Prepaid expenses
 

 

R$ thousand

2012

2011

September 30

June 30

September 30

Commission on the placement of loans and financing (1)  

1,787,851

1,715,706

1,028,403

Deferred insurance acquisition costs (2)

1,178,271

1,153,224

561,158

Advertising and marketing expenses (3) 

49,843

126,060

73,524

Other (4)

442,567

470,193

221,337

Total

3,458,532

3,465,183

1,884,422

(1)  Commissions paid to storeowners, car dealers and correspondent banks - payroll-deductible loans;

(2)  Commissions paid to brokers and representatives on sale of insurance, pension plans and capitalization bond products;

(3)  Prepaid expenses of future advertising and marketing campaigns on media; and

(4)  Mainly related to card issue costs.

 
160 Report on Economic and Financial Analysis – September 2012   

 



 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

13) INVESTMENTS

     a) Changes in investments in the consolidated financial statements

Affiliates

R$ thousand

2012

2011

September 30

June 30

September 30

- IRB-Brasil Resseguros S.A.

523,700

487,030

465,643

- Integritas Participações S.A.

503,346

505,494

455,594

- BES Investimento do Brasil S.A.

108,080

107,052

99,274

- Other

280,413

292,578

171,863

Total investment in affiliates - in Brazil

1,415,539

1,392,154

1,192,374

- Tax incentives

239,542

239,542

239,646

- Other investments

526,050

531,879

552,018

Provision for:

 

 

 

- Tax incentives

(212,055)

(211,555)

(211,578)

- Other investments

(61,898)

(62,936)

(51,432)

Overall total investments

1,907,178

1,889,084

1,721,028

 

 
 

 

Bradesco 

 161  

 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements
 


b)
   The resultant adjustments from the equity method valuation of investments were recorded in the income statement, under “Equity in the Earnings (Losses) of Unconsolidated Companies,” and correspond to R$103,367 thousand on September 30, 2012 YTD (R$90,732 thousand on September 30, 2011) and R$44,590 thousand in the third quarter of 2012 (R$18,610 thousand in the second quarter of 2012).

Companies

R$ thousand

Capital
stock

Adjusted shareholders’ equity

Number of shares/quotas held (thousands)

Consolidated ownership on capital stock

Adjusted net income

Equity accounting adjustments (1) 

2012

2011

Common

Preferred

3rd Quarter

2nd Quarter

September 30 YTD

September 30 YTD

IRB-Brasil Resseguros S.A. (2)

1,350,000

2,465,631

-

212

21.24%

446,897

36,425

24,035

94,921

49,430

BES Investimento do Brasil S.A. - Banco de Investimento

320,000

540,400

10,745

10,745

20.00%

42,715

1,028

2,218

8,543

10,041

Integritas Participações S.A. (2)

57,406

881,685

22,581

-

22.32%

(122,133)

535

(27,678)

(27,260)

6,575

Other (2)

 

 

 

 

 

 

6,602

20,035

27,163

24,686

Equity in the earnings (losses) of unconsolidated companies

 

 

 

 

 

 

44,590

18,610

103,367

90,732

(1)  The resultant adjustment considers income calculated periodically by the companies and includes equity variations by the investees not coming from profit or loss, as well as accounting practice adjustments, where applicable; and

(2)  Based on financial information from previous months.

 

162 Report on Economic and Financial Analysis – September 2012   

 



 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

 14) PREMISES AND EQUIPMENT AND LEASED ASSETS
 

 

R$ thousand

Annual rate of depreciation

Cost

Depreciation

Cost net of depreciation

2012

2011

September 30

June 30

September 30

Property and equipment:

 

 

 

 

 

 

- Buildings

4%

889,026

(370,472)

518,554

497,771

447,285

- Land

-

400,358

-

400,358

403,227

364,920

Facilities, furniture and equipment in use

10%

4,734,922

(2,473,934)

2,260,988

2,229,149

1,728,401

Security and communication systems

10%

260,484

(146,352)

114,132

105,587

85,008

Data processing systems

20 to 50%

4,201,799

(3,022,333)

1,179,466

1,260,532

1,157,785

Transportation systems

20%

55,768

(29,670)

26,098

27,071

28,183

Subtotal

 

10,542,357

(6,042,761)

4,499,596

4,523,337

3,811,582

Leased assets

 

-

-

-

-

1,058

Total on September 30, 2012

 

10,542,357

(6,042,761)

4,499,596

 

 

Total on June 30, 2012

 

10,330,009

(5,806,672)

 

4,523,337

 

Total on September 30, 2011

 

9,115,950

(5,303,310)

 

 

3,812,640

 

The Bradesco Organization's premises and equipment shows an unrecorded surplus of R$3,363,214 thousand (R$3,029,696 thousand on June 30, 2012 and R$2,978,978 thousand on September 30, 2011). This is due to an increase in their market price, based on valuations by independent experts in 2012, 2011 and 2010.

The total consolidated fixed assets to net worth ratio, which includes all Group entities, is 18.95% (18.19% on June 30, 2012 and 16.74% on September 30, 2011), and the consolidated finance fixed assets to net worth ratio, which only includes the Group's financial institutions (e.g.: banks, securities, etc.), is 45.02% (43.49% on June 30, 2012 and 44.11% on September 30, 2011), whereas the maximum limit is 50%.

The difference between the total consolidated and consolidated finance fixed assets to net worth ratios is due to non-financial subsidiaries which have high liquidity and low fixed assets to net worth ratio, with the consequent increase in the consolidated finance fixed assets to net worth ratio. Whenever necessary, we may reallocate funds to the financial companies through the payment of dividends/interest on shareholders equity to financial companies or a corporate restructuring between the financial and non-financial companies, so improving the ratio.

 

 

Bradesco 

 163  

 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

 15) INTANGIBLE ASSETS

a) Goodwill

Goodwill from the acquisition of investments amounted to R$3,856,619 thousand, net of accumulated amortization, where applicable, of which: (i) R$579,499 thousand represents the difference between the carrying amount and the market value of the shares recorded in Permanent Assets -Investments (BM&FBovespa and Integritas/Fleury shares), amortized when disposed; and (ii) R$3,277,120 thousand for future performance/customer portfolio, which is amortized over 20 years, net of accumulated amortization, where applicable.

In September 30, 2012 YTD, goodwill amortization amounted to R$199,674 thousand (R$198,481 thousand on September 30, 2011) and R$66,944 thousand in the third quarter of 2012 (R$66,945 thousand in the second quarter of 2012) (Note 29).

b) Intangible assets

Acquired intangible assets consist of:

 

R$ thousand

Amortization
rate

(1)

Cost

Amortization

Cost net of amortization

2012

2011

September 30

June 30

September 30

Acquisition of banking services rights

Contract (4)

5,487,004

(2,647,003)

2,840,001

2,917,369

1,824,425

Software (2)

20% to 50%

5,876,932

(2,987,227)

2,889,705

2,754,352

2,349,894

Future profitability/customer portfolio (3)  

Up to 20%

4,118,438

(841,318)

3,277,120

3,341,606

2,312,208

Other (5)

Contract

612,079

(33,450)

578,629

31,819

31,160

Total on September 30, 2012

 

16,094,453

(6,508,998)

9,585,455

 

 

Total on June 30, 2012

 

15,275,328

(6,230,182)

 

9,045,146

 

Total on September 30, 2011

 

11,932,227

(5,414,540)

 

 

6,517,687

 

(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;

(3)  Mainly composed of goodwill on the acquisition of equity interest in Banco Bradescard (currently Banco Ibi) - R$891,218 thousand, Odontoprev - R$310,546 thousand, Ágora Corretora - R$90,117 thousand, Bradescard Mexico (currently Ibi México) - R$23,908 thousand, Europ Assistance Serviços de Assistência Personalizados - R$20,338 thousand, Alelo (CBSS) - R$120,695 thousand, Cielo - R$408,014 thousand and Banco Berj - R$1,155,674 thousand, net of accumulated amortization, where applicable;  

(4)  Based on the pay-back of each agreement; and

(5)  Mainly refers to the 2016 Olympic Games sponsorship program.

 

 

 
164 Report on Economic and Financial Analysis – September 2012   

 



 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

 c) Changes in intangible assets by type
 

 

 

 

R$ thousand

Acquisition of banking service rights

Software

Future profitability/

customer portfolio

Other

Total

Balance on December 31, 2011

3,064,089

2,535,979

3,353,106

24,389

8,977,563

Additions/reductions (1)

388,281

715,782

123,688

574,859

1,802,610

Amortization for the period

(612,369)

(362,056)

(199,674)

(20,619)

(1,194,718)

Balance on September 30, 2012

2,840,001

2,889,705

3,277,120

578,629

9,585,455

(1) “Others” mainly refers to the 2016 Olympic Games sponsorship program.

16) DEPOSITS, FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND FUNDS FROM ISSUANCE OF SECURITIES

     a) Deposits

 

R$ thousand

2012

2011

1 to 30 days

31 to 180 days

181 to 360 days

More than 360 days

September 30

June 30

September 30

● Demand deposits (1)

33,627,630

-

-

-

33,627,630

32,529,401

31,861,863

● Savings deposits (1)

65,540,064

-

-

-

65,540,064

62,308,096

56,583,682

● Interbank deposits

113,779

121,293

17,734

69,878

322,684

471,561

369,922

● Time deposits (2)

12,773,077

16,820,799

11,674,809

72,110,538

113,379,223

121,760,876

135,848,493

Overall total on September 30, 2012

112,054,550

16,942,092

11,692,543

72,180,416

212,869,601

 

 

%

52.6

8.0

5.5

33.9

100.0

 

 

Overall total on June 30, 2012

110,540,043

16,527,298

12,437,438

77,565,155

 

217,069,934

 

%

51.0

7.6

5.7

35.7

 

100.0

 

Overall total on September 30, 2011

110,604,416

18,947,541

10,346,106

84,765,897

 

 

224,663,960

%

49.3

8.4

4.6

37.7

 

 

100.0

 

(1) Classified as “1 to 30 days”, not considering average historical turnover; and
(2) Considers the actual maturities of investments.
 
 

 

Bradesco 

 165  


 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

     b) Federal funds purchased and securities sold under agreements to repurchase
 

 

R$ thousand

2012

2011

1 to 30 days

31 to 180 days

181 to 360 days

More than 360 days

September 30

June 30

September 30

Own portfolio

81,414,222

22,606,771

9,014,068

22,978,124

136,013,185

152,256,067

131,297,592

● Government securities

74,832,761

129,829

244,693

6,883

75,214,166

95,338,120

79,940,286

Debentures of own issuance

1,736,352

22,476,942

8,769,375

22,340,009

55,322,678

55,741,992

47,525,689

● Foreign

4,845,109

-

-

631,232

5,476,341

1,175,955

3,831,617

Third-party portfolio (1)  

93,914,480

3,090,189

-

-

97,004,669

65,861,245

36,250,448

Unrestricted portfolio (1)  

805,262

11,714,501

-

-

12,519,763

7,856,940

3,909,535

Overall total on September 30, 2012 (2)

176,133,964

37,411,461

9,014,068

22,978,124

245,537,617

 

 

%

71.7

15.2

3.7

9.4

100.0

 

 

Overall total on June 30, 2012 (2)

165,986,004

24,790,614

9,509,287

25,688,347

 

225,974,252

 

%

73.4

11.0

4.2

11.4

 

100.0

 

Overall total on September 30, 2011 (2)

117,997,546

9,268,249

8,227,290

35,964,490

 

 

171,457,575

%

68.8

5.4

4.8

21.0

 

 

100.0

(1)  Represented by government securities; and

(2)  Includes R$77,162,542 thousand (R$42,529,664 thousand on June 30, 2012 and R$45,155,626 thousand on September 30, 2011) of investment funds in purchase and sale commitments with Bradesco, whose quotaholders are subsidiaries included in the consolidated financial statements (Notes 8a, b, c and d). 

 

 

 

 
166 Report on Economic and Financial Analysis – September 2012   

 



 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

 c) Funds from the issuance of securities
 

 

R$ thousand

2012

2011

1 to 30

days

31 to 180

days

181 to 360 days

More than

360 days

September 30

June 30

September 30

Securities - Brazil:

 

 

 

 

 

 

 

- Mortgage bonds

172,630

402,668

402,769

21,062

999,129

1,175,739

1,339,341

- Letters of credit for real estate

240,919

1,264,212

2,245,787

60,600

3,811,518

3,195,845

1,749,294

- Letters of credit for agribusiness

425,754

1,121,673

1,696,666

524,672

3,768,765

3,278,002

2,354,019

- Financial bills

296,915

7,891,296

7,227,012

15,818,451

31,233,674

31,124,303

19,284,655

Subtotal

1,136,218

10,679,849

11,572,234

16,424,785

39,813,086

38,773,889

24,727,309

Securities - abroad:

 

 

 

 

 

 

 

- MTN Program Issues (1)

290,510

2,162,056

1,776,310

6,203,362

10,432,238

8,655,602

4,397,615

- Securitization of future flow of money orders received from abroad (Note 16d)

7,698

366,310

373,562

2,839,458

3,587,028

3,752,347

3,780,196

- Issuance costs

-

-

-

(22,140)

(22,140)

(23,909)

(26,470)

Subtotal

298,208

2,528,366

2,149,872

9,020,680

13,997,126

12,384,040

8,151,341

Overall total on September 30, 2012

1,434,426

13,208,215

13,722,106

25,445,465

53,810,212

 

 

%

2.7

24.5

25.5

47.3

100.0

 

 

Overall total on June 30, 2012

1,395,571

8,958,166

14,749,914

26,054,278

 

51,157,929

 

%

2.8

17.5

28.8

50.9

 

100.0

 

Overall total on September 30, 2011

445,481

2,338,283

7,158,595

22,936,291

 

 

32,878,650

%

1.4

7.1

21.7

69.8

 

 

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, significantly in the medium and long terms.

 

 

 

 

Bradesco 

 167  


 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements
 

d)   Since 2003, Bradesco has used certain agreements to optimize its funding and liquidity management activities by using SPEs - Special Purpose Entities. An SPE, also known as a Diversified Payment Rights Company outside Brazil, is financed with long-term debt and settled through future cash flows from underlying assets which basically include flows from current payment orders and future remittances made by individuals and companies located abroad to beneficiaries in Brazil for which the Bank acts as a paying agent.

Long-term securities issued by the SPE and sold to investors are settled with proceeds from the payment order flows. Bradesco is obliged to redeem these securities in specific cases of delinquency or if the SPE discontinues operations.

Funds from the sale of current and future payment order flows, received by the SPE, must be maintained in a specific bank account until a minimum amount has been reached.

Below are the main features of the notes issued by SPEs:

 

 

R$ thousand

Date of

issue

Transaction amount

Maturity

Total

2012

2011

September 30

June 30

September
30

Securitization of future flow of payment orders received from abroad

07.28.2004

305,400

08.20.2012 (1)

-

-

27,568

06.11.2007

481,550

05.20.2014

190,174

220,837

289,516

06.11.2007

481,550

05.20.2014

190,074

220,723

289,378

12.20.2007

354,260

11.20.2014(2)

-

-

222,206

12.20.2007

354,260

11.20.2014

162,180

181,603

222,206

03.06.2008

836,000

05.22.2017

912,349

958,629

926,097

12.19.2008

1,168,500

02.20.2019

1,013,637

1,008,830

925,764

12.17.2009

133,673

11.20.2014

101,168

113,287

138,674

12.17.2009

133,673

02.20.2017

135,213

142,577

138,172

12.17.2009

89,115

02.20.2020

100,841

100,350

92,091

08.20.2010

307,948

08.21.2017

336,499

352,614

323,609

09.29.2010

170,530

08.21.2017

192,319

201,527

184,915

 

11.16.2011(3)

88,860

11.20.2018

100,124

99,658

-

 

11.16.2011(4)

133,290

11.22.2021

152,450

151,712

-

Total

 

5,038,609

 

3,587,028

3,752,347

3,780,196

 

(1)    Security settled in advance;

(2)    Security repurchased on March 29, 2012;

(3)    Issuance of securities abroad totaling US$50,000 thousand; and

(4)  Issuance of securities abroad totaling US$75,000 thousand

 

 

 

168 Report on Economic and Financial Analysis – September 2012   

 



 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

     e) Cost for market funding and inflation and interest adjustments of technical reserves for insurance, pension plans and capitalization bonds
 

 

R$ thousand

 

2012

2011

 

3rd Quarter

2nd Quarter

September 30 YTD

September 30 YTD

Savings deposits

893,475

890,728

2,726,590

2,807,542

Time deposits

2,363,827

2,589,702

7,858,546

10,252,503

Federal funds purchased and securities sold under agreements to repurchase

4,590,871

4,431,171

13,701,955

14,325,743

Funds from issuance of securities

1,029,687

1,211,013

3,336,609

2,220,555

Other funding expenses

90,910

99,124

287,451

299,163

Subtotal

8,968,770

9,221,738

27,911,151

29,905,506

Cost for inflation and interest adjustment of technical reserves of insurance, pension plans and capitalization bonds

2,479,917

1,496,462

6,173,700

4,667,434

Total

11,448,687

10,718,200

34,084,851

34,572,940

 

 

 

Bradesco 

 169  


 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements


17) BORROWING AND ONLENDING

     a) Borrowing

 

R$ thousand

2012

2011

1 to 30 days

31 to 180 days

181 to 360 days

More than 360 days

September 30

June 30

September 30

In Brazil - other institutions

2,140

-

-

7,277

9,417

8,074

766

Abroad

1,233,527

5,495,857

2,517,098

895,619

10,142,101

12,376,584

13,239,111

Overall total on September 30, 2012

1,235,667

5,495,857

2,517,098

902,896

10,151,518

 

 

%

12.2

54.1

24.8

8.9

100.0

 

 

Overall total on June 30, 2012

1,987,611

5,637,175

3,687,666

1,072,206

 

12,384,658

 

%

16.0

45.5

29.8

8.7

 

100.0

 

Overall total on September 30, 2011

1,586,609

6,118,779

4,018,987

1,515,502

 

 

13,239,877

%

12.0

46.2

30.4

11.4

 

 

100.0

 

    b) Onlending
 

 

R$ thousand

2012

2011

1 to 30 days

31 to 180 days

181 to 360 days

More than 360 days

September 30

June 30

September 30

In Brazil

2,630,508

4,396,646

6,765,497

21,329,874

35,122,525

35,378,080

35,753,306

- National Treasury

-

-

116,773

-

116,773

117,484

67,642

- BNDES

428,675

1,468,709

3,196,574

7,124,721

12,218,679

12,684,433

13,478,637

- CEF

1,786

8,183

9,820

40,962

60,751

63,537

71,151

- FINAME

2,200,047

2,918,502

3,442,330

14,163,607

22,724,486

22,510,794

22,135,245

- Other institutions

-

1,252

-

584

1,836

1,832

631

Abroad

124,399

-

-

-

124,399

131,540

64,292

Overall total on September 30, 2012

2,754,907

4,396,646

6,765,497

21,329,874

35,246,924

 

 

%

7.8

12.5

19.2

60.5

100.0

 

 

Overall total on June 30, 2012

1,295,623

5,137,474

6,681,971

22,394,552

 

35,509,620

 

%

3.6

14.5

18.8

63.1

 

100.0

 

Overall total on September 30, 2011

1,333,212

4,775,497

5,665,254

24,043,635

 

 

35,817,598

%

3.8

13.3

15.8

67.1

   

100.0

 

170 Report on Economic and Financial Analysis – September 2012   

 



 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

     c) Borrowing and onlending expenses
 

 

R$ thousand

2012

2011

 

3rd Quarter

2nd Quarter

September 30 YTD

September 30 YTD

Borrowing:

 

 

 

 

- In Brazil

4,424

6,521

11,498

1,675

- Abroad

32,116

42,135

107,440

73,470

Subtotal borrowing

36,540

48,656

118,938

75,145

Onlending in Brazil:

 

 

 

 

- National Treasury

2,013

390

2,618

986

- BNDES

197,149

202,416

608,468

569,978

- CEF

1,095

1,176

3,598

4,552

- FINAME

276,201

339,162

918,776

772,420

- Other institutions

136

17

162

16

Onlending abroad:

 

 

 

 

- Payables to foreign bankers (Note 11a)

64,951

646,786

1,034,502

1,099,189

- Other expenses with foreign onlending

168,958

3,251,134

2,573,891

3,395,227

- Exchange variation from investments abroad

(81,845)

(1,705,109)

(1,356,499)

(2,434,428)

Subtotal onlending

628,658

2,735,972

3,785,516

3,407,940

Total

665,198

2,784,628

3,904,454

3,483,085

 

18)      PROVISIONS, CONTINGENT ASSETS AND LIABILITIES AND LEGAL LIABILITIES - TAX AND SOCIAL SECURITY

a)   Contingent assets

Contingent assets are not recognized in the financial statements; however, there are ongoing proceedings where the chance of success is considered probable, such as: a) Social Integration Program (PIS), claiming to offset PIS against Gross Operating Income, paid under Decree-Laws 2,445/88 and 2,449/88, regarding the payment that exceeded the amount due under Supplementary Law 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 Bradesco Organization is party to a number of labor, civil and tax lawsuits, arising from the normal course of business.

Management set provisions based on the opinion of their legal counsel, the nature of the lawsuit, similarity to previous lawsuits, complexity and the courts standing, where the loss is deemed probable.

Management considers that the provision is sufficient to cover losses generated by the respective lawsuit.

           Liability related to litigation is held until a definitive successful outcome to the lawsuit, represented by favorable judicial decisions, with no further appeals or due to the statute of limitation.

 

 

 

Bradesco 

 171  


 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements
 

               I -   Labor claims

These are claims brought by former employees seeking indemnifications, especially for unpaid overtime, according 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 other proceedings, the provision is based on the average of payments made for claims settled over the last 12 months.

Overtime is monitored by using electronic time cards and paid regularly during the employment contract so claims filed by former employees are not material.

              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, and 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 cause significant impact on the financial position.

Note that a significant number of legal claims pleading the incidence of inflation rates, which were excluded from inflation adjustments on savings account balances due to economic plans, were part of federal government’s economic policy to reduce inflation. Although the Bank complied with the legal requirements in force at the time, these lawsuits have been recorded as provisions, taking into consideration claims effectively notified and the evaluation of the perspective of the loss, considering the current judicial decision of the Superior Court of Justice (STJ).

Two points are worth noting regarding disputes relating to economic plans: a) the Bank does not expect any significant provisions to be recorded in excess of what has been provided for, as legal new claims cannot be made; and b) the Federal Supreme Court (STF) suspended the analysis of all appeals up until a final decision issued by the court.

             III -   Legal obligations - provision for tax risks

The Bradesco Organization is disputing the legality and constitutionality of certain taxes and contributions in court, for which provisions have been recorded in full, although there is good chance of a favorable outcome in the medium to long term, based on the opinion of Management and their legal counsel.

The main issues are:

-   Cofins - R$7,450,590 thousand: a request for authorization to calculate and pay Cofins, from October 2005, based on effective income, as set forth in Article 2 of Supplementary Law 70/91, removing the unconstitutional increase in the calculation introduced by paragraph 1 of Article 3 of Law 9,718/98;

- INSS Autonomous Brokers - R$1,100,748 thousand: questions the impact of social security contribution on remunerations paid to third-party service providers, established by Supplementary Law 84/96 and subsequent regulations/amendments, at the 20% rate and additionally 2.5%, on the grounds that services are not provided to insurance companies but to policyholders, thus being outside the incidence of the contribution provided for in item I, Article 22, of Law 8,212/91,as new wording in Law 9,876/99;

172 Report on Economic and Financial Analysis – September 2012   

 



 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

-   IRPJ/Loan Losses - R$762,590 thousand: are requested to be deducted from income tax and social contributions payable (IRPJ and CSLL, respectively), total or partial amounts of actual and definite loan losses upon receipt of claims incurred, regardless if they comply with the terms and conditions provided for in Articles 9 to 14 of Law 9,430/96 that only apply to temporary losses;

-   CSLL - Deductibility on IRPJ calculation basis - R$673,782 thousand: income tax calculated and paid for 1997 and subsequent years , excluding CSLL in the calculation, under Article 1, of Law 9,316/96, since this contribution represents an effective, necessary and mandatory expense to the Company; and

-    PIS - R$300,310 thousand: request authorization to offset overpaid amounts in 1994 and 1995 as PIS contribution, corresponding to the surplus on the calculation established in the Constitution, i.e., gross operating income, as defined in the income tax legislation - set out in Article 44 of Law 4,506/64, excluding interest income.

     IV - Provisions by nature

 

R$ thousand

2012

2011

September 30

June 30

September 30

Labor claims

2,459,580

2,427,101

2,254,882

Civil claims

3,609,648

3,499,173

3,123,697

Subtotal (1)

6,069,228

5,926,274

5,378,579

Provision for tax risks (2)

14,061,296

13,609,925

11,641,721

Total

20,130,524

19,536,199

17,020,300

(1)  Note 20b; and

(2)  Classified under “Other liabilities - tax and social security” (Note 20a).

 

     V - Changes in provisions
 

 

R$ thousand

2012

Labor

Civil

Tax (1)

Balance on December 31, 2011

2,315,859

3,345,225

12,463,489

Adjustment for inflation

197,802

320,765

658,356

Provisions, net of reversals and write-offs

388,121

317,823

963,861

Payments

(442,202)

(374,165)

(24,410)

Balance on September 30, 2012

2,459,580

3,609,648

14,061,296

(1)  Mainly include legal liabilities.

 

 

Bradesco 

 173  


 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements
 

c)   Contingent liabilities classified as possible losses

The Bradesco 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 with the risk of a possible loss are not recorded as a liability in the financial statements. The main lawsuits classified as such are the following: a) leasing companies’ Tax on Services of any Nature (ISSQN), total lawsuits correspond to R$1,102,267 thousand which discusses the municipal tax demands other than those where the company is not located and where, under law, tax is collected; b) 2006-2009 income tax and social contribution, relating to goodwill amortization being disallowed on the acquisition of investments, for the amount of R$709,665 thousand; and c) IRPJ and CSLL deficiency notice relating to disallowance of loan loss expenses, for the amount of R$295,717 thousand.


 
174 Report on Economic and Financial Analysis – September 2012   

 



 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

 19) SUBORDINATED DEBT
 
 

R$ thousand

 

2012

2011

Maturity

Original term in years

Amount of the operation

Currency

Remuneration

September 30

June 30

September 30

In Brazil:

     

 

     

Subordinated CDB:

     

 

     
       

100.0% of CDI rate + (0.3440% p.a.- 0.4914% p.a.) or

     

 2012 (1)

5

1,419,126

R$

IPCA + (7.1019% p.a.- 7.632% p.a.)

2,411,641

2,358,911

2,631,102

       

100.0% of CDI rate + (0.3440% p.a.- 1.0817% p.a.) or

     

 2013

5

575,000

R$

IPCA + (7.74% p.a.- 8.1863% p.a.)

950,695

929,156

856,275

2014

6

1,000,000

R$

112.0% of CDI rate

1,525,232

1,493,171

1,378,507

       

IPCA + (6.92% p.a.- 8.55% p.a.)

     

 2015

6

1,274,696

R$

108% to 112.0% of CDI rate

1,952,563

1,893,044

1,713,963

2016

6

500

R$

IPCA + 7.1292% p.a.

707

686

627

       

100.0% of CDI rate + 0.87% p.a.

     

 2012 (2)

10

228,029

R$

101.5% of CDI rate

908,369

889,422

1,968,839

2019

10

20,000

R$

IPCA + (7.76% p.a.)

30,074

29,154

26,485

Financial bills:

             

2012 (3)

5

-

R$

103.0% of CDI rate

-

-

1,594,863

       

IGP-M rate + 6.3874% p.a.

     

 

 

 

 

IPCA + (6.7017% p.a.- 6.8784% p.a.)

     

 

 

 

 

100% fixed rate + 13.0949% p.a.

 

 

 

 2016

6

102,018

R$

108% to 110.0% of CDI rate

127,333

124,106

113,845

 

 

 

 

100% of CDI rate + (1.2685%p.a.- 1.3656% p.a.)

 

 

 

 

 

 

 

IGP-M rate + (5.7745% p.a.- 6.9588% p.a.)

 

 

 

 

 

 

 

IPCA + (5.6030% p.a.- 7.5482% p.a.)

 

 

 

 

 

 

 

Fixed rate of (11.7493% p.a.- 13.8609% p.a.)

 

 

 

 2017 (4)

6

8,630,999

R$

104% to 112.5% of CDI rate

9,038,822

9,443,896

8,430,435

 

 

 

 

100% of CDI rate + (0.7855%p.a.- 1.3061% p.a.)

 

 

 

 

 

 

 

IGP-M rate + (4.2109% p.a.- 6.2626% p.a.)

 

 

 

 

 

 

 

IPCA + (4.2011% p.a.- 6.2822% p.a.)

 

 

 

 

 

 

 

100% fixed rate + (9.8108% p.a.- 12.1754% p.a.)

 

 

 

 

 

 

 

Bradesco 

 175  

 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

 
 

R$ thousand

 

2012

2011

Maturity

Original term in years

Amount of the operation

Currency

Remuneration

September 30

June 30

September 30

 2018 (5)

6

8,108,437

R$

105% to 112% of CDI rate

8,360,073

7,820,813

-

 

 

 

 

IPCA + 7.4163% p.a.

 

 

 

 2017

7

40,100

R$

Fixed rate + 13.1763% p.a.

54,018

52,390

47,679

 

 

 

 

IGP-M rate + 6.6945% p.a.

 

 

 

2018

7

141,050

R$

IPCA + (5.9081% p.a.- 7.3743% p.a.)

165,296

158,499

143,904

2018

8

50,000

R$

IGP-M rate + 7.0670% p.a.

63,936

60,553

55,207

 

 

 

 

IPCA + (4.4144% p.a.- 6.1757% p.a.)

 

 

 

 

 

 

 

Fixed rate 10.1304% p.a.- 11.7550% p.a.

 

 

 

2019 (6)

7

82,919

R$

110.5% to 111.0% of CDI rate

85,857

56,223

-

 

 

 

 

IGP-M rate + 5.8351% p.a.

 

 

 

 

 

 

 

IPCA + (5.8950% p.a.- 6.3643% p.a.)

 

 

 

2019

8

12,735

R$

Fixed rate + 13.3381% p.a.

14,598

14,146

8,691

 

 

 

 

IGP-M rate + 5.5341% p.a.

 

 

 

 

 

 

 

IPCA + (4.6595% p.a.- 6.1386% p.a.)

 

 

 

 

 

 

 

Fixed rate of 11.1291% p.a.- 11.8661% p.a.

 

 

 

2020

8

22,055

R$

110.75% of CDI rate

23,711

21,838

-

2021

9

7,000

R$

111.0% of CDI rate

7,151

7,003

-

2012

10

 

 

100% to 101.5% of CDI rate

-

-

591,046

 

 

 

 

IGP-M rate + (6.0358% p.a.- 6.6244% p.a.)

 

 

 

 

 

 

 

IPCA + (5.8789% p.a.- 7.1246% p.a.)

 

 

 

 

 

 

 

100% fixed rate + 12.7513% p.a.

 

 

 

2021

10

19,200

R$

109.0% of CDI rate

21,419

20,778

4,289

 

 

 

 

IGP-M rate + (3.9270% p.a.- 4.1239% p.a.)

 

 

 

 

 

 

 

IPCA + (4.5564% p.a.- 6.0358% p.a.)

 

 

 

 

 

 

 

Fixed rate of 10.3587% p.a.- 12.4377% p.a.

 

 

 

2022 (7)

10

42,485

R$

110% to 111.25% of CDI rate

43,634

26,840

-

CDB pegged to loans:

 

 

 

 

 

 

 

2012 to 2016

2 to 5

6,413

R$

100% of CDI rate

7,059

7,339

8,314

Subtotal in Brazil

 

 

 

 

25,792,188

25,407,968

19,574,071


 
176 Report on Economic and Financial Analysis – September 2012   

 



 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

 
 

R$ thousand

 

2012

2011

Maturity

Original term in years

Amount of the operation

Currency

Remuneration

September 30

June 30

September 30

Abroad:

 

 

 

 

 

 

 

2011 (8)

10

-

US$

Rate of 10.25% p.a.

-

-

286,456

2012 (3)

10

-

Yen

Rate of 4.05% p.a.

-

-

429,055

2013

10

1,434,750

US$

Rate of 8.75% p.a.

1,053,162

1,026,023

925,636

2014

10

801,927

Euro

Rate of 8.00% p.a.

607,785

584,342

579,880

2019

10

1,333,575

US$

Rate of 6.75% p.a.

1,574,921

1,542,126

1,426,703

2021

11

2,766,650

US$

Rate of 5.90% p.a.

3,280,021

3,313,162

2,988,211

2022 (9)

11

1,886,720

US$

Rate of 5.75% p.a.

2,237,638

2,259,148

-

Issuance costs on funding

 

 

 

 

(38,974)

(41,648)

(29,552)

Subtotal abroad

 

 

 

 

8,714,553

8,683,153

6,606,389

Overall total

 

 

 

 

34,506,741

34,091,121

26,180,460


(1)  Early settlement of subordinated debt amounting to R$461.505 thousand in February 2012;

(2)  Early settlement of subordinated debt amounting to R$1,065,699 thousand in February 2012, and subordinated debt operations amounting to R$570,470 thousand, that matured in March 2012;

(3)  Subordinated debt operations that matured in April 2012;

(4)  Issue of financial bills, of which were issued as follows: (i) R$27,250 thousand in October 2011; (ii) R$260,442 thousand in November 2011; and (iii) R$95,986 thousand in December 2011, maturing in 2017;

(5)  Issue of financial bills, of which were issued as follows: (i) R$362,979 thousand in January 2012; (ii) R$2,030,486 thousand in February 2012; (iii) R$859,438 thousand in March 2012; (iv) R$789,635 thousand in April 2012; (v) R$3,926,706 thousand in May 2012; (vi) R$16,008 thousand in June 2012; (vii) R$56,300 thousand in July 2012; (viii) R$30,060 thousand in August 2012; and (ix) R$36,825 thousand in September 2012, maturing in 2018;

(6)  Issue of financial bills, of which were issued as follows: (i) R$23,633 thousand in July 2012; and (ii) R$4,025 thousand in August 2012, maturing in 2019;

(7)  Issue of financial bills, of which were issued as follows: (i) R$8,000 thousand in July 2012; and (ii) R$7,223 thousand in August 2012, maturing in 2022;

(8)  Subordinated debt operations that matured in December 2011; and

(9)  In March 2012, subordinated debts totaling US$1,100,000 thousand was issued abroad with a 5.75% p.a. rate, maturing in January 2022.

 

 

 

Bradesco 

 177  

 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

20) OTHER LIABILITIES

      a) Tax and social security

 

R$ thousand

2012

2011

September 30

June 30

September 30

Provision for tax risk (Note 18b IV)

14,061,296

13,609,925

11,641,721

Provision for deferred income tax (Note 34f)

7,276,170

7,532,884

5,147,014

Taxes and contributions on profit payable

3,676,197

2,610,252

2,527,811

Taxes and contributions payable

1,043,268

1,086,010

847,634

Total

26,056,931

24,839,071

20,164,180

 

     b) Sundry
 

 

R$ thousand

2012

2011

September 30

June 30

September 30

Credit card operations

12,731,148

12,149,223

11,151,857

Provision for payments

5,142,469

4,500,664

4,476,922

Civil and labor provisions (Note 18b IV)

6,069,228

5,926,274

5,378,579

Sundry creditors

3,920,112

3,409,162

2,966,476

Liabilities for acquisition of assets and rights

1,869,645

1,947,510

1,067,891

Liabilities for official agreements

329,603

299,038

286,043

Other

1,565,162

1,314,889

1,218,476

Total

31,627,367

29,546,760

26,546,244

 

 

178 Report on Economic and Financial Analysis – September 2012   

 



 
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 reserves by account

 

R$ thousand

Insurance (1)

Life and pension plans (2) (3)

Capitalization bonds

Total

2012

2011

2012

2011

2012

2011

2012

2011

September 30

June 30

September 30

September 30

June 30

September 30

September 30

June 30

September 30

September 30

June 30

September 30

Current and long-term liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Mathematical reserve for unvested benefits

814,580

627,589

699,696

87,108,269

84,005,788

71,786,074

-

-

-

87,922,849

84,633,377

72,485,770

Mathematical reserve for vested benefits

170,036

143,756

137,157

5,867,678

5,660,877

5,279,332

-

-

-

6,037,714

5,804,633

5,416,489

Mathematical reserve for redemptions

-

-

-

-

-

-

4,447,917

4,196,721

3,632,751

4,447,917

4,196,721

3,632,751

Reserve for claims incurred but not reported (IBNR)

1,364,104

1,154,261

986,690

906,594

867,054

736,552

-

-

-

2,270,698

2,021,315

1,723,242

Unearned premium reserve

2,207,390

2,099,448

1,962,905

173,046

168,472

137,622

-

-

-

2,380,436

2,267,920

2,100,527

Contribution deficiency
reserve
(4)  

-

-

-

4,995,905

3,805,376

3,632,135

-

-

-

4,995,905

3,805,376

3,632,135

Reserve for unsettled claims

2,839,064

2,903,036

2,464,992

1,029,862

1,029,881

938,355

-

-

-

3,868,926

3,932,917

3,403,347

Reserve for risk fluctuation

-

-

-

150,510

607,032

625,230

-

-

-

150,510

607,032

625,230

Premium deficiency reserve

-

-

-

480,070

404,326

539,990

-

-

-

480,070

404,326

539,990

Reserve for financial surplus

-

-

-

383,858

392,748

374,898

-

-

-

383,858

392,748

374,898

Reserve for draws and redemptions

-

-

-

-

-

-

541,309

514,849

528,834

541,309

514,849

528,834

Reserve for administrative expenses

-

-

-

118,665

102,200

100,020

165,613

164,395

158,714

284,278

266,595

258,734

Provision for contingencies

-

-

-

-

-

-

9,697

9,565

8,263

9,697

9,565

8,263

Other reserves (5)

2,822,711

1,776,723

1,730,280

1,210,576

1,155,007

638,281

-

-

-

4,033,287

2,931,730

2,368,561

Total reserves

10,217,885

8,704,813

7,981,720

102,425,033

98,198,761

84,788,489

5,164,536

4,885,530

4,328,562

117,807,454

111,789,104

97,098,771

(1)  “Other reserves” - Insurance basically refers to the technical reserves of the “personal health” portfolio to cover the differences of future premium adjustments and those required for the portfolio technical balance;

(2)  Includes personal insurance and pension plans;

(3)  “Other reserves” - Life and Pension Plan basically refers to “Reserve for unvested benefits (Life)”, “Reserve for redemption and other amounts to be settled,” and “Reserve for benefits to be settled,” “Additional premiums reserve;”

(4)  The contribution deficiency reserve for retirement and pension plans is calculated according to the normalized biometric table AT-2000, 1.5% p.a. improvement, considering males separated from females, who have a longer life expectancy, and an interest rate of 3.5% p.a. (4.0% p.a. on June 30, 2012 and 4.0% p.a. on September 30, 2011). For disability plans, the provision is also actuarially calculated according to the biometric AT-49 male table and the 3.5% p.a. interest rate (June 30, 2012 - 4.0% p.a. and September 30, 2011 - 4.0% p.a.); and

(5)  Based on technical and actuarial studies, the discount rate of reserves for unvested and vested benefits and other reserves was adjusted so as to reflect the current scenario.

 

 

 

Bradesco 

 179  

 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

 b) Technical reserves by product
 

 

R$ thousand

Insurance

Life and pension plans

Capitalization bonds

Total

2012

2011

2012

2011

2012

2011

2012

2011

September 30

June 30

September 30

September 30

June 30

September 30

September 30

June 30

September 30

September 30

June 30

September 30

Health

5,528,534

4,180,157

3,990,822

-

-

-

-

-

-

5,528,534

4,180,157

3,990,822

Auto/RCF

2,775,797

2,682,107

2,414,945

-

-

-

-

-

-

2,775,797

2,682,107

2,414,945

DPVAT/Retrocession

163,975

163,478

120,669

362,199

360,474

293,003

-

-

-

526,174

523,952

413,672

Life

17,247

15,824

17,462

4,630,786

4,333,314

3,763,638

-

-

-

4,648,033

4,349,138

3,781,100

Basic lines

1,732,332

1,663,247

1,437,822

-

-

-

-

-

-

1,732,332

1,663,247

1,437,822

Unrestricted Benefits Generating Plan - PGBL to be granted

-

-

-

16,987,593

16,092,687

14,429,373

-

-

-

16,987,593

16,092,687

14,429,373

Long-Term Life Insurance - VGBL - to be granted

-

-

-

60,236,676

58,259,616

48,058,675

-

-

-

60,236,676

58,259,616

48,058,675

Pension plans

-

-

-

20,207,779

19,152,670

18,243,800

-

-

-

20,207,779

19,152,670

18,243,800

Capitalization bonds

-

-

-

-

-

-

5,164,536

4,885,530

4,328,562

5,164,536

4,885,530

4,328,562

Total technical reserves

10,217,885

8,704,813

7,981,720

102,425,033

98,198,761

84,788,489

5,164,536

4,885,530

4,328,562

117,807,454

111,789,104

97,098,771

 

 
180 Report on Economic and Financial Analysis – September 2012   

 



 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

 c) Guarantees for technical reserves
 

 

R$ thousand

Insurance

Life and pension plans

Capitalization bonds

Total

2012

2011

2012

2011

2012

2011

2012

2011

September 30

June 30

September 30

September 30

June 30

September 30

September 30

June 30

September 30

September 30

June 30

September 30

Total technical reserves

10,217,885

8,704,813

7,981,720

102,425,033

98,198,761

84,788,489

5,164,536

4,885,530

4,328,562

117,807,454

111,789,104

97,098,771

(-) Portion corresponding to contracted reinsurance

(853,813)

(847,453)

(660,851)

(11,604)

(9,185)

(8,102)

-

-

-

(865,417)

(856,638)

(668,953)

(-) Deposits retained at IRB and court deposits

(23,614)

(18,500)

(22,620)

(60,668)

(62,887)

(71,664)

-

-

-

(84,282)

(81,387)

(94,284)

(-) Receivables

(863,821)

(906,533)

(787,025)

-

-

-

-

-

-

(863,821)

(906,533)

(787,025)

(-) Reserves from DPVAT agreements

(157,280)

(156,554)

(113,638)

(358,842)

(357,185)

(289,453)

-

-

-

(516,122)

(513,739)

(403,091)

To be insured

8,319,357

6,775,773

6,397,586

101,993,919

97,769,504

84,419,270

5,164,536

4,885,530

4,328,562

115,477,812

109,430,807

95,145,418

Investment fund quotas (VGBL and PGBL)

-

-

-

77,224,269

74,352,303

62,488,048

-

-

-

77,224,269

74,352,303

62,488,048

Investment fund quotas (excluding VGBL and PGBL)

3,253,651

7,030,957

6,639,552

13,669,265

16,794,830

15,713,558

3,392,262

4,463,478

3,980,085

20,315,178

28,289,265

26,333,195

Government securities

5,460,538

-

-

9,619,474

4,968,760

4,573,592

1,513,166

-

-

16,593,178

4,968,760

4,573,592

Private securities

102,836

39,774

45,142

221,369

598,425

564,466

108,843

238,504

215,943

433,048

876,703

825,551

Shares

3,775

3,248

2,593

1,444,057

1,254,973

1,267,064

300,307

273,589

332,571

1,748,139

1,531,810

1,602,228

Total guarantees of technical reserves

8,820,800

7,073,979

6,687,287

102,178,434

97,969,291

84,606,728

5,314,578

4,975,571

4,528,599

116,313,812

110,018,841

95,822,614

 

 

 

Bradesco 

 181  


 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

    d) Insurance, pension plan contribution and capitalization bond retained premiums
 

 

R$ thousand

2012

2011

 

3rd Quarter

2nd Quarter

September 30 YTD

September 30 YTD

Written premiums

5,193,551

4,902,162

14,719,264

12,633,498

Pension plan contributions (including VGBL)

3,987,647

5,815,679

13,893,650

11,858,395

Capitalization bond income

1,013,696

936,303

2,745,492

2,248,866

Granted coinsurance premiums

(56,278)

(53,085)

(169,717)

(139,074)

Refunded premiums

(34,512)

(30,854)

(96,827)

(103,766)

Net written premiums

10,104,104

11,570,205

31,091,862

26,497,919

Reinsurance premiums

(74,980)

(78,048)

(221,847)

(191,950)

Insurance, pension plan and capitalization bond retained premiums  

10,029,124

11,492,157

30,870,015

26,305,969

22) NON-CONTROLLING INTERESTS IN SUBSIDIARIES

 

 

R$ thousand

2012

2011

September 30

June 30

September 30

Banco Bradesco BBI S.A.

122,411

120,690

114,442

Other (1)

463,662

466,205

498,998

Total

586,073

586,895

613,440

 

 

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.

 

2012

2011

September 30

June 30

September 30

Common shares

1,912,397,390

1,912,397,390

1,912,397,390

Preferred shares

1,912,397,191

1,912,397,191

1,912,397,191

Subtotal

3,824,794,581

3,824,794,581

3,824,794,581

Treasury (common shares)

(2,635,100)

(2,559,000)

(2,487,000)

Treasury (preferred shares)

(4,786,700)

(4,466,400)

(4,466,400)

Total outstanding shares

3,817,372,781

3,817,769,181

3,817,841,181

 

b)   Changes in capital stock in number of shares

 

 

Common

Preferred

Total

Number of outstanding shares on December 31, 2011

1,909,910,390

1,907,930,791

3,817,841,181

Shares acquired and not cancelled

(148,100)

(320,300)

(468,400)

Number of outstanding shares as of September 30, 2012

1,909,762,290

1,907,610,491

3,817,372,781

 

 
182 Report on Economic and Financial Analysis – September 2012   

 



 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements
 

c)   Interest on shareholders’ equity/dividends

Preferred shares have no voting rights, but are entitled to all other rights and advantages given to common shares and, in compliance with Bradesco’s Bylaws, have priority for repayment of capital and an additional ten percent (10%) interest on shareholders’ equity and/or dividends, in accordance with the provisions of Paragraph 1, item II, of Article 17 of Law 6,404/76, amended by Law 10,303/01.

According to Bradesco’s Bylaws, shareholders are entitled to interest on shareholders’ equity and/or dividends amounting to at least 30% of the net income for the year, adjusted in accordance with Brazilian Corporate Law.

Interest on shareholders’ equity is calculated based on the shareholders’ equity limited to the variation in the Federal Government Long-Term Interest Rates (TJLP), subject to available profits before deductions, or transfer to retained earnings or profit reserves for the amounts equivalent or greater than twice its value.

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, in the calculation for mandatory dividends for the year under the Company’s Bylaws.

The Board of Directors’ meeting held on December 12, 2011 approved the Board of Executive Officers’ proposal to pay shareholders supplementary interest on shareholders’ equity for 2011, for the amount of R$2,309,800 thousand, at R$0.576206221 (net of 15% withholding income tax - R$0.489775288) per common share and R$0.633826844 (net of 15% withholding income tax - R$0.538752817) per preferred share, which was paid on March 8, 2012.

The Board of Directors’ meeting held on February 10, 2012 approved the Board of Executive Officers’ proposal to pay shareholders dividends in addition to interest on shareholders' equity and dividends for 2011, for the amount of R$151,291 thousand, at R$0.037741866 per common share and R$0.041516054 per preferred share, which was paid on March 8, 2012.

The Board of Directors’ Meeting held on March 7, 2012 approved the Board of Executive Officers’ proposal to increase the value of monthly dividends by 10%, paid in advance to shareholders, under the Monthly Compensation Methodology, from R$0.014541175 to R$0.015995293 for common shares, and from R$0.015995293 to R$0.017594822 for preferred shares, effective from dividends relating to April 2012 which were paid as of May 2, 2012.

The Board of Directors’ Meeting held on June 20, 2012 approved the Board of Executive Officers’ proposal to pay Company’s shareholders monthly interest on shareholders’ equity, replacing monthly dividends. Shareholders now receive R$0.018817992 (net of 15% withholding income tax - R$0.015995293) per common share and R$0.020699791 (net of 15% withholding income tax - R$0.017594822) per preferred share, in effect from July 2012, to be paid as of August 1, 2012.

The Board of Directors’ meeting held on June 27, 2012 approved the Board of Executive Officers’ proposal to pay shareholders interim interest on shareholders’ equity for the first half of 2012, for the amount of R$754,300 thousand, at R$0.188184678 (net of 15% withholding income tax - R$0.159956976) per common share and R$0.207003146 (net of 15% withholding income tax - R$0.175952674) per preferred share, which was paid on July 18, 2012.

 

 

Bradesco 

183  


 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

       Interest on shareholders equity and dividends related to the nine-month period ended September 30, 2012 is calculated as follows:
 

 

R$ thousand

% (1)

Net income for the period

8,487,881

 

(-) Legal reserve

(424,394)

 

Adjusted calculation basis

8,063,487

 

Supplementary and interim interest on shareholders’ equity (gross), paid and/or provisioned

2,556,170

 

Withholding income tax on interest on shareholders’ equity

(383,425)

 

Interest on shareholders’ equity (net)

2,172,745

 

Monthly dividends paid

367,208

 

Interest on shareholders’ equity (net) and dividends on September 30, 2012 YTD

2,539,953

31.50

Interest on shareholders’ equity (net) and dividends on September 30, 2011 YTD

2,484,549

31.50

(1)  Percentage of interest on shareholders’ equity/dividends after adjustments.

     Interest on shareholders equity and dividends were paid or recorded in provision, as follows:

Description

R$ thousand

Per share (gross)

Gross amount paid / recorded
in provision

Withholding Income Tax (IRRF)

(15%)

Net amount paid / recorded in provision

Common shares

Preferred

shares

Supplementary interest on shareholders’ equity paid

0.432246

0.475471

1,733,863

260,079

1,473,784

Interim interest on shareholders’ equity paid

0.155521

0.171073

624,200

93,630

530,570

Monthly dividends paid

0.120295

0.132325

480,195

-

480,195

Total on September 30, 2011 YTD

0.708062

0.778869

2,838,258

353,709

2,484,549

Supplementary interest on shareholders’ equity provisioned

0.392709

0.431980

1,575,583

236,337

1,339,246

Interim interest on shareholders’ equity paid (1)

0.188185

0.207003

754,300

113,145

641,155

Interest on shareholders’ equity paid

0.056454

0.062099

226,287

33,943

192,344

Monthly dividends paid

0.091610

0.100770

367,208

-

367,208

Total on September 30, 2012 YTD

0.728958

0.801852

2,923,378

383,425

2,539,953

(1)     Paid on July 18, 2012.

 

 

d)   Treasury shares

The Board of Directors’ meeting held on December 20, 2010 authorized a share buyback of up to 15,000,000 no-par, registered book-entry shares issued by Bradesco, of which 7,500,000 are common shares and 7,500,000 are preferred shares, to be held in treasury and later sold or cancelled, without reducing capital stock. It was valid until June 21, 2011. The Board of Directors’ meeting held on June 20, 2011 approved the renewal of the share buyback term based on the same previous conditions. It was valid up to December 22, 2011. The Board of Directors’ meeting held on December 21, 2011 resolved to renew the term for the share buyback, based on the same previous conditions. It was valid up to June 23, 2012. The Board of Directors’ meeting held on June 21, 2012 resolved to renew the term for the share buyback, based on the same previous conditions. It is valid until December 25, 2012.

A total of 2,635,100 common shares and 4,786,700 preferred shares had been acquired, totaling R$197,301 thousand up to September 30, 2012, and remain in treasury. The minimum, average and maximum cost per common share is R$23.62221, R$25.41203 and R$27.14350, respectively, and R$26.20576, R$27.22915 and R$33.12855 per preferred share, respectively. The market value was R$26.69 per common share and R$32.57 per preferred share at September 30, 2012.

 

184 Report on Economic and Financial Analysis – September 2012   

 



 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

 24) FEE AND COMMISSION INCOME
 

 

R$ thousand

2012

2011

 

3rd Quarter

2nd Quarter

September 30 YTD

September 30 YTD

Credit card income

1,456,609

1,383,914

4,174,354

3,527,066

Checking account

825,581

804,934

2,378,496

2,038,644

Asset management

561,501

534,646

1,622,241

1,450,812

Loans

540,080

527,226

1,571,860

1,477,893

Collections

337,922

322,346

973,725

893,179

Consortium management

159,215

149,579

452,406

389,073

Custody and brokerage services

122,448

119,408

358,783

318,066

Underwriting / financial advisory services

94,033

115,198

318,301

208,947

Payments

79,626

79,809

237,619

231,331

Other

154,529

137,020

413,128

280,710

Total

4,331,544

4,174,080

12,500,913

10,815,721

25)      PAYROLL AND RELATED BENEFITS

 

 

R$ thousand

2012

2011

 

3rd Quarter

2nd Quarter

September 30 YTD

September 30 YTD

Payroll

1,464,803

1,401,945

4,220,312

3,668,231

Benefits

637,108

616,593

1,839,552

1,585,476

Social security charges

555,780

535,554

1,600,244

1,377,667

Employee profit sharing

256,433

264,504

786,258

662,404

Provision for labor claims (1)

167,134

188,047

497,827

1,017,048

Training

37,620

40,634

100,219

108,268

Total

3,118,878

3,047,277

9,044,412

8,419,094

(1) Includes the improved calculation methodology, in the amount of R$500,185 thousand, on September 30 YTD.

 

 

 

Bradesco 

185  

 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements


26) OTHER ADMINISTRATIVE EXPENSES

 

R$ thousand

2012

2011

 

3rd Quarter

2nd Quarter

September 30 YTD

September 30 YTD

Outsourced services

896,884

832,281

2,561,582

2,649,019

Communication

416,444

415,221

1,241,179

1,176,619

Depreciation and amortization

403,267

401,976

1,203,717

1,063,488

Data processing

277,484

267,944

807,632

691,211

Advertising and marketing

208,268

162,191

522,969

607,001

Transport

214,615

214,702

641,641

560,319

Rental

191,955

195,702

570,172

489,756

Asset maintenance

148,196

145,141

438,953

400,039

Financial system services

161,728

162,944

488,069

364,733

Supplies

75,368

76,576

243,826

281,172

Security and surveillance

111,999

104,772

317,011

239,520

Water, electricity and gas

57,933

64,942

188,344

168,338

Travel

34,050

33,566

100,542

112,751

Other

248,950

243,923

733,871

639,955

Total

3,447,141

3,321,881

10,059,508

9,443,921

 

27)      TAX EXPENSES

 

 

R$ thousand

2012

2011

 

3rd Quarter

2nd Quarter

September 30 YTD

September 30 YTD

Contribution for Social Security Financing (Cofins)

711,418

536,793

1,984,023

1,678,345

Social Integration Program (PIS) contribution

120,318

91,354

335,307

304,744

Tax on Services (ISS)

121,165

115,548

346,053

302,461

Municipal Real Estate Tax (IPTU) expenses

9,877

10,238

39,834

34,421

Other

58,325

59,362

251,558

298,688

Total

1,021,103

813,295

2,956,775

2,618,659

 

28)      OTHER OPERATING INCOME

 

 

R$ thousand

2012

2011

 

3rd Quarter

2nd Quarter

September 30 YTD

September 30 YTD

Other interest income

358,191

400,701

1,191,005

784,600

Reversal of other operating provisions (1)

134,768

84,177

331,522

2,394,426

Gains on sale of goods

17,895

18,384

51,270

34,035

Revenues from recovery of charges and expenses

20,297

17,961

143,802

171,167

Other (2)

269,891

245,977

736,399

3,877,364

Total

801,042

767,200

2,453,998

7,261,592

 

(1)   Includes (i) reversal of provision for tax risks, for the amount of R$2,911,634 thousand, and (ii) tax provision, for the amount of R$785,920 thousand on September 30, 2011 YTD; and

(2)   Includes revenue from deductible tax to offset for the amount of R$2,911,634 thousand on September 30, 2011 YTD.

 
 
186 Report on Economic and Financial Analysis – September 2012   

 



 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

29)      OTHER OPERATING EXPENSES

 

R$ thousand

2012

2011

 

3rd Quarter

2nd Quarter

September 30 YTD

September 30 YTD

Other finance costs

951,479

950,172

2,813,589

2,086,374

Sundry losses

395,350

398,236

1,138,484

986,565

Commissions on loans and financing

289,715

271,208

747,179

343,226

Discount granted

251,808

262,491

751,206

603,778

Intangible assets amortization

230,065

204,934

625,436

519,241

Goodwill amortization (Note 15a)

66,944

66,945

199,674

198,481

Other (1)

253,157

232,530

922,962

4,585,196

Total

2,438,518

2,386,516

7,198,530

9,322,861

(1)   The third quarter of 2012 includes provision for civil contingencies - economic plans – amounting to R$51,856 thousand (R$56,878 thousand in the second quarter of 2012); the first nine months of 2012 - R$194,901 thousand and the first nine months of 2011 include (i) provision for civil contingency - economic plans - R$232,419 thousand, (ii) impairment expenses, and (iii) provision for tax risks - R$2,911,634 thousand.

30)      NON-OPERATING INCOME (LOSS)

 

R$ thousand

2012

2011

 

3rd Quarter

2nd Quarter

September 30 YTD

September 30 YTD

Gain/loss on sale and write-off of assets and investments (1)

(52,013)

(41,645)

(119,454)

(127,796)

Recording/reversal of non-operating provisions

(57,176)

(75,334)

(127,760)

(21,198)

Others

9,840

17,379

35,629

29,243

Total

(99,349)

(99,600)

(211,585)

(119,751)

(1)  Including: income from the sale of Cetip shares on September 30, 2012 YTD for R$29,205 thousand; and income from the partial sale of IBI Promotora de Vendas Ltda. shares on September 30, 2011 YTD for R$55,356 thousand.

 

 

Bradesco 

 187  


 
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:

 

R$ thousand

2012

2011

2012

2011

 

September 30

June 30

September 30

3rd Quarter

2nd Quarter

September 30 YTD

September 30 YTD

Assets (liabilities)

Assets (liabilities)

Assets (liabilities)

Revenues (expenses)

Revenues (expenses)

Revenues (expenses)

Revenues (expenses)

Interest on shareholders’ equity and dividends

(505,457)

(497,097)

(550,921)

-

-

-

-

Cidade de Deus Companhia Comercial de Participações

(372,268)

(366,111)

(405,752)

-

-

-

-

Fundação Bradesco

(133,189)

(130,986)

(145,169)

-

-

-

-

Demand deposits/Savings accounts:

(18,969)

(18,130)

(17,948)

(116)

(103)

(342)

(389)

Fundação Bradesco

(121)

(197)

(241)

-

-

-

-

BBD Participações S.A.

(6)

(9)

(4)

-

-

-

-

Nova Cidade de Deus Participações S.A.

(3)

(3)

(1)

-

-

-

-

Cidade de Deus Companhia Comercial de Participações

(3)

(5)

(21)

-

-

-

-

Key Management Personnel

(18,836)

(17,916)

(17,681)

(116)

(103)

(342)

(389)

Time deposits:

(169,878)

(154,020)

(162,716)

(2,408)

(2,603)

(8,453)

(11,338)

Cidade de Deus Companhia Comercial de Participações

(30,042)

(24,302)

(13,725)

(141)

(19)

(171)

(63)

Key Management Personnel

(139,836)

(129,718)

(148,991)

(2,267)

(2,584)

(8,282)

(11,275)

Federal funds purchased and securities sold under agreements to repurchase:

(249,182)

(268,568)

(270,684)

(5,138)

(5,814)

(17,819)

(23,533)

Key Management Personnel

(249,182)

(268,568)

(270,684)

(5,138)

(5,814)

(17,819)

(23,533)

Funds from issuance of securities:

(394,679)

(398,177)

(322,236)

(7,017)

(8,956)

(23,896)

(21,642)

Key Management Personnel

(394,679)

(398,177)

(322,236)

(7,017)

(8,956)

(23,896)

(21,642)

Rental of branches:

-

-

-

(326)

(325)

(977)

(383)

Fundação Bradesco

-

-

-

(326)

(325)

(977)

(383)

Subordinated debts:

(15,621)

(15,324)

(58,584)

(298)

(318)

(2,171)

(13,627)

Cidade de Deus Companhia Comercial de Participações

-

-

(20,889)

-

-

(633)

(8,636)

Fundação Bradesco

(15,621)

(15,324)

(37,695)

(298)

(318)

(1,538)

(4,991)

 

 

 

188 Report on Economic and Financial Analysis – September 2012   

 



 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

 a) Compensation for key Management personnel

Each year, the Annual Shareholders Meeting approves:

· The annual overall 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 2012, the maximum amount of R$344,400 thousand was set for Management compensation and R$334,000 thousand to finance defined contribution pension plans.

   Short-term Management benefits

 

R$ thousand

2012

2011

 

3rd Quarter

2nd Quarter

September 30 YTD

September 30 YTD

Salaries

82,398

79,671

255,424

210,652

INSS contributions

18,439

17,866

57,269

47,186

Total

100,837

97,537

312,693

257,838

 

Post-employment benefits

 

 

R$ thousand

2012

2011

 

3rd Quarter

2nd Quarter

September 30 YTD

September 30 YTD

Defined contribution supplementary pension plans

80,559

80,108

218,694

179,418

Total

80,559

80,108

218,694

179,418

 

Bradesco does not offer long-term benefits related to severance pay or share-based compensation to its key Management personnel.

Other information

I)    Under current law, financial institutions are not allowed to grant loans or advances to:

a)   Officers and members of the advisory, administrative, fiscal or similar councils, as well as to their respective spouses and family members up to the second degree;

b)   Individuals or corporations that own more than 10% of their capital; and

c)   Corporations of which the financial institution itself, any officers or administrators of the institution, as well as their spouses and respective family members up to the second degree own more than 10%.

    Therefore, no loans or advances are granted by financial institutions to any subsidiary, members of the Board of Directors or Board of Executive Officers and their relatives.

 

 

 

Bradesco 

 189  


 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

 II) Shareholding

     Together, Members of the Board of Directors and Board of Executive Officers had the following shareholding in Bradesco:

 

2012

2011

September 30

June 30

September 30

● Common shares

0.73%

0.74%

0.74%

● Preferred shares

1.01%

0.99%

1.03%

● Total shares (1)

0.87%

0.86%

0.89%

(1)   On September 30, 2012, direct and indirect shareholding of the members of Bradesco’s Board of Directors and Board of Executive Officers amounted to 3.02% of common shares, 1.06% of preferred shares and 2.04% of all shares.

32)      FINANCIAL INSTRUMENTS

a)      Risk management

Risk management is highly strategic due to the increasing complexity of services and products and the globalization of the Organization’s business, whose processes are constantly improved.

 

Decisions made by the Organization are guided by factors that account for return on risk that has previously been identified, measured and evaluated, making the achievement of strategic objectives possible and ensuring the strengthening of the Institution.

 

The Organization controls risk management in an integrated and independent manner, unifying policies, processes, criteria and methodologies to control risk through a statutory body, the Integrated Risk Management and Capital Allocation Committee, which is supported by specific committees and risk management policies is approved by the Board of Directors.

Credit risk management

Credit risk refers to the possibility of losses associated to the non-compliance by the borrower or counterparty for their respective financial obligations under agreed terms, as well as to the reduction of the value of a loan agreement resulting from a deterioration of the borrower’s risk rating, reduced earnings or remuneration, the advantages in renegotiation, recovery costs and other values related to the counterparty’s non-compliance with its financial obligations.

 

Credit risk management in the Organization is a continuous and evolving process of mapping, development, assessment and diagnosis through the use of models, instruments and procedures that require a high degree of discipline and control during the analysis of operations to preserve the integrity and autonomy of the processes.

The Organization carefully controls its exposure to credit risk, which mainly results from loans, securities and derivative financial instruments. Credit risk also stems from financial obligations related to loan commitments or financial guarantees.

Market risk management

 

Market risk is represented by the possibility of financial losses due to fluctuating prices and interest rates of the Organization’s financial assets as its asset and liability portfolios may have mismatched maturities, currencies and indexes.

Market risk is carefully identified, mapped, measured, mitigated and managed. The Organization has a conservative exposure profile to market risk, with the guidelines and limits monitored independently on a daily basis.

 

190 Report on Economic and Financial Analysis – September 2012   

 



 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

Market risk is controlled for all of the Organization's companies in a corporate and centralized manner. All activities exposed to market risk are mapped, measured and classified by probability and importance, with their respective mitigation plans duly approved by the corporate governance structure.

Below is the statement of financial position by currency:

  R$ thousand 
2012 2011 
September 30 June 30  September 30 
Balance  Local  Foreign
(1) (2)
Foreign
(1) (2)
Assets           
Current and long-term assets  840,295,754  784,706,701  55,589,053  55,794,337  53,111,971 
Funds available  12,943,991  7,079,424  5,864,567  4,676,339  4,352,206 
Interbank investments  126,772,377  125,289,207  1,483,170  3,216,008  3,311,438 
Securities and derivative financial instruments  319,537,253  307,707,992  11,829,261  11,162,326  9,057,385 
Interbank and interdepartmental accounts  56,275,770  56,275,770  -  -   
Loans and leasing  242,563,298  216,356,341  26,206,957  24,991,152  24,776,783 
Other receivables and assets  82,203,065  71,997,967  10,205,098  11,748,512  11,614,159 
Permanent assets  15,992,229  15,947,806  44,423  45,165  43,004 
Investments  1,907,178  1,906,859  319  312   
Premises and equipment and leased assets  4,499,596  4,482,975  16,621  17,302  15,256 
Intangible assets  9,585,455  9,557,972  27,483  27,551  27,484 
Total  856,287,983  800,654,507  55,633,476  55,839,502  53,154,975 
           
Liabilities           
Current and long-term liabilities  789,035,441  721,612,255  67,423,186  67,961,420  61,832,948 
Deposits  212,869,601  188,664,854  24,204,747  26,985,653  23,820,905 
Federal funds purchased and securities sold under agreements to repurchase  245,537,617  240,061,275  5,476,342  1,175,955  3,831,616 
Funds from issuance of securities  53,810,212  39,813,086  13,997,126  12,384,041  8,151,341 
Interbank and interdepartmental accounts  3,649,170  1,993,733  1,655,437  1,781,048  1,648,148 
Borrowing and onlending  45,398,442  34,867,560  10,530,882  12,785,342  13,682,715 
Derivative financial instruments  4,147,711  3,879,136  268,575  257,021  100,465 
Technical reserve for insurance, pension plans and capitalization bonds  117,807,454  117,806,277  1,177  1,085  1,129 
Other liabilities:           
- Subordinated debt  34,506,741  25,792,188  8,714,553  8,683,153  6,606,389 
- Other  71,308,493  68,734,146  2,574,347  3,908,122  3,990,240 
Deferred income  619,391  619,391  -  -   
Non-controlling interests in subsidiaries  586,073  586,073  -  -   
Shareholders’ equity  66,047,078  66,047,078  -  -   
Total  856,287,983  788,864,797  67,423,186  67,961,420  61,832,948 
Net position of assets and liabilities      (11,789,710)  (12,121,918)  (8,677,973) 
Net position of derivatives (2)      (6,332,245)  (7,129,571)  (8,106,311) 
Other net memorandum accounts (3)      198,472  (147,416)  (133,216) 
Net exchange position (liability)      (17,923,483)  (19,398,905)  (16,917,500) 
 
(1)  Amounts expressed 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 recorded in memorandum accounts.

 

 

 

Bradesco 

 191  


 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

VaR Internal Model - Trading Portfolio

 
Risk factors R$ thousand 
 2012 2011 
September 30  June 30  September 30 
Fixed rates  127,015  120,806  35,157 
Exchange coupon  16,737  19,751  23,252 
Foreign currency  14,430  32,825  52,912 
IGP-M/IPCA  117,583  101,845  101,671 
Equities  9,497  24,247  19,999 
Sovereign/Eurobonds and Treasuries  20,645  18,836  16,627 
Other  3,536  9,576  4,648 
Correlation/diversification effect  (88,704)  (81,852)  (102,226) 
VaR (Value at Risk)  220,739  246,034  152,040 

Sensitivity analysis

The Trading Portfolio is also monitored daily by sensitivity analyses that measure the effect of 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 475/08.

Note that the impact of the financial exposure on the Banking Portfolio (notably interest rates and price indexes) do not necessarily represent a potential accounting loss for the Organization because a portion of loans held in the Banking Portfolio are financed by demand and/or savings deposits, which are “natural hedges” for future variations in interest rates; moreover, interest rate variations do not represent a material impact on the Institution's result, as Loans are held to maturity. Also, thanks to the Bradescos greater share in insurance and pension plan segments, most of its assets are adjusted for price indexes, linked to corresponding technical reserves.

 

192 Report on Economic and Financial Analysis – September 2012   

 



 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

Sensitivity Analysis - Trading and Banking Portfolios

  R$ thousand 
Trading and Banking portfolios (1)
2012 2011
September 30 June 30 September 30
1  2  3  1  2  3  1  2  3 
Interest rate in Reais Exposure subject to variations in fixed
interest rates and interest rate
coupons
(13,466)  (2,725,809)  (5,278,555)  (8,822)  (1,830,479)  (3,540,762)  (4,749)  (1,362,030)  (2,554,838) 
Price indexes Exposure subject to variations in
price index coupon rates 
(18,997)  (1,787,571)  (3,222,822)  (12,238)  (1,261,830)  (2,323,495)  (10,663)  (1,353,094)  (2,449,531) 
Exchange coupon Exposure subject to variations in
foreign currency
coupon rates
(763)  (69,951)  (131,006)  (1,030)  (96,445)  (180,994)  (155)  (14,607)  (28,723) 
Foreign currency Exposure subject to exchange
variations
(3,742)  (93,553)  (187,106)  (5,378)  (134,442)  (268,884)  (14,785)  (369,634)  (739,268) 
Equities Exposure subject to variation in stock
prices
(17,078)  (426,958)  (853,915)  (15,493)  (387,323)  (774,646)  (15,814)  (395,355)  (790,710) 
Sovereign/
Eurobonds and
Treasuries
Exposure subject to variations in the
interest rate of securities traded on
the international market
(1,032)  (39,215)  (74,808)  (4,950)  (124,966)  (249,429)  (1,182)  (35,259)  (70,987) 
Other Exposure not classified in previous
definitions
(62)  (1,560)  (3,120)  (99)  (2,502)  (5,004)  (24)  (588)  (1,176) 
Total excluding correlation of risk factors (55,140)  (5,144,617)  (9,751,332)  (48,010)  (3,837,987)  (7,343,214)  (47,372)  (3,530,567)  (6,635,233) 
Total including correlation of risk factors (32,238)  (4,049,217)  (7,654,738)  (28,009)  (3,021,183)  (5,765,838)  (31,478)  (2,685,283)  (5,012,448) 
 
(1) Amounts net of tax.

 

 

 

Bradesco 

 193  


 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

The sensitivity analysis of the Trading Portfolio, which represents exposures that may have a material impact on the Organization's results, is presented below. Note that results show the impact for each scenario on a static portfolio position. The market dynamism results in continuous changes in these positions and does not necessarily reflect the current position. Moreover, as previously mentioned, we have an ongoing process of market risk management, which constantly looks for market dynamism to mitigate/minimize related risks according to the strategy determined by Senior Management. Therefore, in cases of deterioration indicators in a certain position, proactive measures are taken to minimize any potential negative impact, aimed at maximizing the risk/return ratio for the Organization.

Sensitivity Analysis - Trading Portfolio

  R$ thousand 
Trading portfolio (1)
2012 2011
September 30 June 30 September 30
1  2  3  1  2  3  1  2  3 
Interest rate in
Reais 
Exposure subject to variations in fixed
interest rates and interest rate
coupons 
(3,947)  (759,846)  (1,485,438)  (1,786)  (366,463)  (707,358)  (679)  (179,733)  (342,539) 
Price indexes  Exposure subject to variations in price
index coupon rates 
(2,505)  (242,361)  (461,637)  (1,870)  (186,281)  (360,669)  (1,792)  (226,537)  (439,604) 
Exchange coupon  Exposure subject to variations in
foreign currency
coupon rates 
(735)  (66,978)  (125,370)  (939)  (88,703)  (166,028)  (24)  (2,413)  (4,706) 
Foreign currency  Exposure subject to exchange
variations 
(6,960)  (174,006)  (348,012)  (9,745)  (243,627)  (487,254)  (10,618)  (265,441)  (530,883) 
Equities  Exposure subject to variation in stock
prices 
(1,039)  (25,980)  (51,961)  (2,137)  (53,423)  (106,846)  (1,718)  (42,946)  (85,892) 
Sovereign/
Eurobonds and
Treasuries 
Exposure subject to variations in the
interest rate of securities traded on the
international market 
(1,124)  (39,529)  (74,873)  (4,427)  (114,687)  (228,605)  (616)  (20,093)  (39,778) 
Other  Exposure not classified in previous
definitions 
(26)  (658)  (1,317)  (89)  (2,251)  (4,502)  -  (1)  (3) 
Total excluding correlation of risk factors  (16,336)  (1,309,358)  (2,548,608)  (20,993)  (1,055,435)  (2,061,262)  (15,447)  (737,164)  (1,443,405) 
Total including correlation of risk factors  (9,433)  (949,418)  (1,846,745)  (11,711)  (660,095)  (1,281,204)  (11,512)  (515,113)  (1,004,878) 
 
(1) Amounts net of tax.

 

194 Report on Economic and Financial Analysis – September 2012   

 



 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements
 

Sensitivity analyses were carried out based on scenarios prepared for 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 (BM&FBovespa, Anbima, etc.), stresses were applied for 1 basis point on the interest rate and 1% variation on prices. For example, in the scenario applied to positions on September 28, 2012, the Real/Dollar exchange rate was R$2.05. The rate applied on the positions on September 28, 2012 was 7.51% p.a. for the 1-year fixed interest rate scenario; 

 
Scenario 2: 

25% stresses were determined based on market information. For instance, in the scenario applied to positions on September 28, 2012, the Real/Dollar exchange rate was R$2.53. For the interest rate scenario, the 1-year fixed interest rate applied to positions on September 28, 2012 was 9.38% p.a. Scenarios for other risk factors also represented a 25% stress on the respective curves or prices; and 

 
Scenario 3: 

50% stresses were determined based on market information. For instance, in the scenario applied to positions on September 28, 2012, the Real/Dollar exchange rate was R$3.04. For the interest rate scenario, the 1-year fixed interest rate applied to positions on September 28, 2012 was 11.25% p.a. Scenarios for other risk factors also represented a 50% stress on the respective curves or prices. 

 
Liquidity Risk 
 

The Liquidity Risk is the possibility of not having sufficient financial resources to enable the Organization to meet its commitments due to the mismatch of payments and receipts, considering different currencies and settlement terms of their rights and obligations. 

 

The Organization has a liquidity policy that not only defines the minimum levels that must be observed, taking into account stress scenarios, but also in which type of financial instruments the resources must remain invested, as well as the business strategy to be triggered in case of need. 

 

The liquidity risk is managed by daily monitoring of the composition of available resources, compliance with the minimum level of liquidity and contingency plans for stress situations. Positions are controlled and monitored centrally. 

 

 

 

Bradesco 

 195  


 
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:

  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  451,600,669  125,206,858  59,482,887  204,005,340  -  840,295,754 
Funds available  12,943,991  -  -  -  -  12,943,991 
Interbank investments  74,981,478  48,906,496  2,004,831  879,572  -  126,772,377 
Securities and derivative financial instruments (1) (2)  250,712,714  4,497,404  10,536,465  53,790,670  -  319,537,253 
Interbank and interdepartmental accounts  55,726,707  -  -  549,063  -  56,275,770 
Loan and leasing  25,271,603  60,043,914  40,925,606  116,322,175  -  242,563,298 
Other receivables and assets  31,964,176  11,759,044  6,015,985  32,463,860  -  82,203,065 
Permanent assets  333,356  1,487,779  1,260,747  9,039,123  3,871,224  15,992,229 
Investments  -  -  -  -  1,907,178  1,907,178 
Premises and equipment and leased assets  56,360  281,786  338,143  3,422,949  400,358  4,499,596 
Intangible assets  276,996  1,205,993  922,604  5,616,174  1,563,688  9,585,455 
Total on September 30, 2012  451,934,025  126,694,637  60,743,634  213,044,463  3,871,224  856,287,983 
Total on June 30, 2012  484,367,299  92,394,486  53,524,409  196,378,235  3,855,999  830,520,428 
Total on September 30, 2011  373,356,347  126,441,623  46,098,100  173,899,336  2,493,962  722,289,368 
             
Liabilities             
Current and long-term liabilities  430,183,712  87,564,487  47,337,473  223,949,769  -  789,035,441 
Deposits (3)  112,054,550  16,942,092  11,692,543  72,180,416  -  212,869,601 
Federal funds purchased and securities sold under agreements to repurchase (2)  176,133,964  37,411,461  9,014,068  22,978,124  -  245,537,617 
Funds from issuance of securities  1,434,426  13,208,215  13,722,106  25,445,465  -  53,810,212 
Interbank and interdepartmental accounts  3,649,170  -  -  -  -  3,649,170 
Borrowing and onlending  3,990,574  9,892,503  9,282,595  22,232,770  -  45,398,442 
Derivative financial instruments  2,972,104  228,450  217,495  729,662  -  4,147,711 
Technical reserves for insurance, pension plans and capitalization bonds (3)  88,790,165  3,050,901  1,338,662  24,627,726  -  117,807,454 
Other liabilities:             
- Subordinated debts  1,163,297  2,811,571  422,187  30,109,686  -  34,506,741 
- Other  39,995,462  4,019,294  1,647,817  25,645,920  -  71,308,493 
Deferred income  619,391  -  -  -  -  619,391 
Non-controlling interests in subsidiaries  -  -  -  -  586,073  586,073 
Shareholders’ equity  -  -  -  -  66,047,078  66,047,078 
Total on September 30, 2012  430,803,103  87,564,487  47,337,473  223,949,769  66,633,151  856,287,983 
Total on June 30, 2012  414,354,804  69,393,150  51,927,161  230,338,330  64,506,983  830,520,428 
Total on September 30, 2011  345,689,490  47,545,877  41,277,499  233,420,961  54,355,541  722,289,368 
Net assets on September 30, 2012 YTD  21,130,922  60,261,072  73,667,233  62,761,927  -  - 
Net assets on June 30, 2012 YTD  70,012,495  93,013,831  94,611,079  60,650,984  -  - 
Net assets on September 30, 2011 YTD  27,666,857  106,562,603  111,383,204  51,861,579  -  - 
 
(1) Investments in investment funds are classified as 1 to 30 days;
(2) Repurchase agreements are classified according to the maturity of the operation; and
(3) Demand and savings deposits and technical reserves for insurance, pension plans and capitalization bonds comprising VGBL and PGBL products are classified as 1 to 30 days, without considering average historical turnover.

 

196 Report on Economic and Financial Analysis – September 2012   

 


 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

Operational Risk

Operational risk is represented by losses from internal processes, personnel and inadequate systems or failures and external events. This definition includes legal risk, but excludes strategic and reputational risk.

Operational risk management is essential to generate added value. Risk is controlled centrally through identification, measurement, mitigation plans and monitoring, on a consolidated basis and for each of the Organization's companies.

Among plans to mitigate operational risk, the most important is business continuity management, which consists of formal plans to be adopted during moments of crisis to guarantee the recovery and continuation of business as well as preventing loss.

Capital Management

The capital management process is performed to provide the conditions necessary to meet the Organization's strategic objectives, considering the economic and commercial environment in which it operates. This process is compatible with the nature of operations, complexity of service and products and extent of the Organization's exposure to risks.

Under Bacen regulations, financial institutions must permanently maintain capital (Reference Shareholders Equity) consistent with the risks of their activities, represented by Required Reference Shareholders Equity(PRE). The PRE calculation considers, at least, the sum of credit risk, market risk and operating risk.

Adjusting to Reference Shareholders' Equity is done daily and aims to ensure that the Organization has a solid capital base to support development of activities and cope with risk, either in normal or in extreme market conditions, as well as meeting capital regulatory requirements.

 

 

Bradesco 

 197  


 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

 The Capital Adequacy Ratio is shown below:

 
Calculation basis - Capital Adequacy Ratio R$ thousand 
2012 2011
September 30  June 30  September 30 
 Financial Economic- financial  Financial Economic- financial  Financial Economic- financial
Shareholders’ equity 66,047,078  66,047,078  63,920,088  63,920,088  53,742,101  53,742,101 
Reduction of deferred assets - CMN Resolution 3,444/07 (130,667)  (218,299)  (139,872)  (223,833)  (182,700)  (259,744) 
Decrease in gains/losses of mark-to-market adjustments in available for sale and derivatives - CMN Resolution 3,444/07 (2,150,068)  (2,150,068)  (1,865,419)  (1,865,419)  2,780,991  2,780,991 
Non-controlling interests/other 186,345  586,073  187,211  586,895  181,619  613,440 
Reference shareholders’ equity - Tier I 63,952,688  64,264,784  62,102,008  62,417,731  56,522,011  56,876,788 
Total of gains/losses of adjustments to market value in available for sale and derivatives - CMN Resolution 3,444/07 2,150,068  2,150,068  1,865,419  1,865,419  (2,780,991)  (2,780,991) 
Subordinated debt/other 24,842,348  24,842,348  26,025,344  26,025,344  14,844,275  14,844,275 
Reference shareholders’ equity - Tier II 26,992,416  26,992,416  27,890,763  27,890,763  12,063,284  12,063,284 
Total reference shareholders’ equity (Tier I + Tier II) 90,945,104  91,257,200  89,992,771  90,308,494  68,585,295  68,940,072 
Deduction of instruments for funding - CMN Resolution 3,444/07 (108,080)  (108,080)  (107,052)  (107,052)  (99,269)  (134,078) 
Reference shareholders’ equity (a) 90,837,024  91,149,120  89,885,719  90,201,442  68,486,026  68,805,994 
Capital allocation (by risk)            
- Credit risk 55,221,654  54,212,999  53,055,883  52,050,305  46,956,944  47,182,731 
- Market risk 5,206,827  5,206,827  3,142,932  3,142,932  1,399,717  1,399,717 
- Operational risk 2,543,272  3,431,636  2,543,458  3,312,555  2,004,420  2,810,237 
Required reference shareholders’ equity (b) 62,971,753  62,851,462  58,742,273  58,505,792  50,361,081  51,392,685 
Margin (a-b) 27,865,271  28,297,658  31,143,446  31,695,650  18,124,945  17,413,309 
Risk-weighted assets (c) 572,470,483  571,376,930  534,020,665  531,870,834  457,828,008  467,206,228 
Capital adequacy ratio (a/c) 15.87%  15.95%  16.83%  16.96%  14.96%  14.73% 

 

198 Report on Economic and Financial Analysis – September 2012   

 



 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

b) Market value

    The book value, net of loss provisions on the main financial instruments is shown below:

Portfolios R$ thousand
Unrealized gain/(loss) without tax effects
Book
value 
Market
value 
In income statement  In shareholders’ equity 
2012  2012 2011  2012 2011 
 September 30 September 30  June 30 September 30   September 30    June 30 September 30
Securities and derivative financial instruments (Notes 3e, 3f and 8)  319,537,253  322,021,950  8,887,562  8,140,573  2,594,692  2,484,697  2,221,338  4,403,399 
- Adjustment of available-for-sale securities (Note 8 cII)      6,402,865  5,919,235  (1,808,707)  -  -  - 
- Adjustment of held-to-maturity securities (Note 8d item 6)      2,484,697  2,221,338  4,403,399  2,484,697  2,221,338  4,403,399 
Loan and leasing (Notes 2, 3g and 10) (1)  284,366,604  285,860,897  1,494,293  1,536,523  (431,366)  1,494,293  1,536,523  (431,366) 
Investments (Notes 3j and 13) (2)  1,907,178  13,759,383  11,852,205  12,710,628  7,801,406  11,852,205  12,710,628  7,801,406 
Treasury shares (Note 23d)  197,301  226,234  -  -  -  28,933  12,764  (2,293) 
Time deposits (Notes 3n and 16a)  113,379,223  113,183,829  195,394  177,450  195,630  195,394  177,450  195,630 
Funds from issuance of securities (Note 16c)  53,810,212  54,033,360  (223,148)  (263,296)  (186,038)  (223,148)  (263,296)  (186,038) 
Borrowing and onlending (Notes 17a and 17b)  45,398,442  45,316,881  81,561  90,355  486,445  81,561  90,355  486,445 
Subordinated debts (Note 19)  34,506,741  35,698,220  (1,191,479)  (848,547)  (1,404,075)  (1,191,479)  (848,547)  (1,404,075) 
Unrealized gains excluding tax      21,096,388  21,543,686  9,056,694  14,722,456  15,637,215  10,863,108 

(1) Includes advances on foreign exchange contracts, leases and other receivables with lending characteristics; and
(2) Essentially includes the surplus of interest in subsidiaries and affiliates (Cielo, Odontoprev, Serasa and Fleury) and other investments (BM&FBovespa).

 
 

 

Bradesco 

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Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

Determination of the market value of financial instruments:

                  ·  Securities and derivative financial instruments, investments, subordinated debts and treasury shares are based on the market price at the end of the reporting period. If no quoted market price is available, estimate amounts are 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 Bradesco Organization for new contracts with similar features. These rates are consistent with the market at the end of the reporting period; and

                  ·  Time deposits, funds from issuance of securities, borrowing and onlending were calculated by discounting the difference between the cash flows under the contract terms and the prevailing market rates at the end of the reporting period.

33) EMPLOYEE BENEFITS

Bradesco and its subsidiaries sponsor a unrestricted benefit pension plan (PGBL) for employees and directors which is a private defined contribution pension plan that allows financial resources to be accumulated by participants throughout their careers by means of employee and employer contributions and being invested in an Exclusive Investment Fund (FIE).

The PGBL is managed by Bradesco Vida e Previdência S.A. and BRAM - Bradesco Asset Management S.A. The Securities Dealer Company (DTVM) is responsible for the financial management of FIE.

Contributions made by employees and directors of Bradesco and its subsidiaries are for the equivalent of at least 4% of their salary, except for participants who chose to migrate from the defined benefit plan to a defined contribution plan (PGBL) in 2001, whose contributions to the PGBL were maintained at the levels that prevailed for the defined benefit plan when they migrated, always respecting the 4% minimum.

Actuarial obligations of the defined contribution plan (PGBL) are fully covered by the plan assets of the corresponding FIE.

Besides the aforementioned plan (PGBL), participants who chose to migrate from the defined benefit plan are guaranteed a proportional deferred benefit, corresponding to their accumulated rights in the plan. For participants of the defined benefit plan, whether they migrated to the PGBL plan or not, for retirees and pensioners, the present value of the actuarial plan obligation is fully covered by the plan assets.

Banco Alvorada S.A. (successor from the 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). The actuarial obligations of the defined contribution and benefit plans are fully covered by the plan assets.

Banco Bradesco BBI S.A. (formally Banco BEM S.A.) sponsor both defined benefit and defined contribution retirement plans, through Caixa de Assistência e Aposentadoria dos Funcionários do BEM (Capof).

Alvorada Cartões, Crédito, Financiamento e Investimento S.A. (Alvorada CCFI) (merging company of Banco BEC S.A.) sponsors a defined benefit plan through Caixa de Previdência Privada do BEC - Cabec.

Pension plan assets are invested under the applicable legislation (government securities and private securities, listed company shares and real estate properties).

200 Report on Economic and Financial Analysis – September 2012   

 



 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

Bradesco's foreign branches and subsidiaries provide their employees and directors with a pension plan in accordance with standards set locally by the authorities so accumulating funds throughout the participant's career.

Expenses relating to contributions made in the nine-month period ended September 30, 2012 totaled R$409,748 thousand (R$334,789 thousand on September 30, 2012) and R$146,488 thousand in the third quarter of 2012 (R$146,186 thousand in the second quarter of 2012).

In addition to this benefit, Bradesco and its subsidiaries offer their employees and management other benefits including: health insurance, dental care, life and personal accident insurance, as well as professional training, whose expenses, including the aforementioned contributions, amounted to R$1,939,771 thousand in the nine-month period ended September 30, 2012 (R$1,693,744 thousand on September 30, 2011) and R$674,728 thousand in the third quarter of 2012 (R$657,227 thousand in the second quarter of 2012).

34) INCOME TAX AND SOCIAL CONTRIBUTION

a) Calculation of income tax and social contribution charges

  R$ thousand 
2012 2011 
3rd Quarter  2nd Quarter  September
30 YTD
September
30 YTD
Income before income tax and social contribution  4,254,891  2,898,213  11,749,742  10,953,283 
Total income tax and social contribution at rates of 25% and 15%, respectively (1)  (1,701,956)  (1,159,285)  (4,699,897)  (4,381,313) 
Effect on the tax calculation:         
Equity in the earnings (losses) of unconsolidated companies  17,836  7,444  41,347  36,293 
Non-deductible expenses, net of non-taxable income  (150,893)  (101,732)  (371,007)  (270,598) 
Interest on shareholders equity (2)  314,775  308,432  985,551  880,432 
Other amounts (3)  148,017  895,945  836,205  1,197,917 
Income tax and social contribution for the period  (1,372,221)  (49,196)  (3,207,801)  (2,537,269) 
(1)  The social contribution rate for companies of the financial and insurance sectors was increased to 15%, according to Law 11,727/08, remaining at 9% for other companies (Note 3h);
(2)  Includes paid and payable interest on shareholders equity; and 
(3)  Essentially includes the exchange variation on investments made abroad and bringing the effective social contribution rate to the 40% rate.
 

 

 

 

Bradesco 

 201  


 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

b) Breakdown of income tax and social contribution in the income statement

  R$ thousand 
2012 2011 
3rd Quarter  2nd Quarter  September
30 YTD
September
30 YTD
Current taxes:         
Income tax and social contribution payable  (1,841,419)  (1,883,074)  (6,294,774)  (6,185,463) 
Deferred taxes:         
Amount recorded/realized in the period on temporary additions  574,874  1,798,374  3,259,001  3,962,088 
Use of opening balances of:         
Social contribution loss  (48,073)  34,075  (90,592)  (114,814) 
Income tax loss  (11,149)  (8,003)  (116,802)  (261,526) 
Recording/utilization in the period on:         
Social contribution loss  (35,378)  22,979  12,322  21,098 
Income tax loss  (11,076)  (13,547)  23,044  41,348 
Total deferred taxes  469,198  1,833,878  3,086,973  3,648,194 
Income tax and social contribution for the period  (1,372,221)  (49,196)  (3,207,801)  (2,537,269) 

 

c) Origin of deductible tax from deferred income tax and social contribution

  R$ thousand 
Balance on
 12.31.2011
 
Amount
 recorded
 
Amount
realized
 
Balance on
9.30.2012
 
Balance on
6.30.2012
 
Balance on
9.30.2011
 
Allowance for loan losses  10,983,555  4,698,997  3,171,915  12,510,637  12,382,967  11,347,415 
Civil provisions  1,284,877  263,229  147,557  1,400,549  1,351,121  1,238,166 
Tax provisions  4,087,345  673,775  67,503  4,693,617  4,500,571  3,878,966 
Labor provisions  915,778  277,819  221,396  972,201  959,945  892,908 
Provision for devaluation of securities and investments  406,068  12,090  2,876  415,282  414,735  105,077 
Provision for devaluation of foreclosed assets  93,539  91,376  65,177  119,738  104,501  96,324 
Adjustment to market value of trading securities  16,195  111  3,694  12,612  14,857  20,398 
Amortization of goodwill  411,617  1,367  59,178  353,806  372,692  768,601 
Provision for interest on shareholders equity (1)  -  593,297  -  593,297  317,680  630,756 
Other  1,191,621  849,542  463,306  1,577,857  1,655,653  1,317,345 
Total deductible tax on temporary differences  19,390,595  7,461,603  4,202,602  22,649,596  22,074,722  20,295,956 
Income tax and social contribution losses in Brazil and abroad  513,396  35,366  207,394  341,368  447,044  425,559 
Subtotal (2)  19,903,991  7,496,969  4,409,996  22,990,964  22,521,766  20,721,515 
Adjustment to fair value of available-for- sale securities (2)  841,421  226,354  668,961  398,814  443,244  793,056 
Social contribution - Provisional Measure 2,158-35/01 (3)  144,643  -  3,801  140,842  140,842  144,643 
Total deductible tax (Note 11b)  20,890,055  7,723,323  5,082,758  23,530,620  23,105,852  21,659,214 
Deferred tax liabilities (Note 34f)  4,824,991  3,708,147  1,256,968  7,276,170  7,532,884  5,147,014 
Tax credits net of deferred tax liabilities  16,065,064  4,015,176  3,825,790  16,254,450  15,572,968  16,512,200 
- Percentage of net deductible tax on reference shareholders’ equity (Note 32a)  22.5%      17.8%  17.3%  24.0% 
- Percentage of net tax credits over total assets  2.1%      1.9%  1.9%  2.3% 
 
(1)      Deductible tax on interest on shareholders equity is recorded up to the authorized tax limit;
(2)      Deductible tax from companies in the financial and insurance sectors were recorded considering the increase in the social contribution rate, established by Law 11,727/08 (Note 3h); and
(3)      The amount of R$31,072 thousand is expected to be realized by the end of the year, which will be accounted when it will be effectively used (item d).
 
 
202 Report on Economic and Financial Analysis – September 2012   

 



 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

d) Expected realization of deductible tax on temporary differences, income tax and social contribution losses and deductible social contribution - Provisional Measure 2,158-35

 
  R$ thousand 
Temporary differences  Income tax and social
contribution losses
Total
Income
tax 
Social
contribution 
Income
tax 
Social
contribution 
2012  2,097,216  1,199,673  15,218  7,171  3,319,278 
2013  4,563,430  2,678,567  35,573  26,038  7,303,608 
2014  4,735,169  2,805,777  36,263  19,997  7,597,206 
2015  1,528,085  880,880  40,582  31,211  2,480,758 
2016  1,249,967  654,126  47,817  81,122  2,033,032 
2017 (nine months)  159,710  96,996  292  84  257,082 
Total  14,333,577  8,316,019  175,745  165,623  22,990,964 

 

  R$ thousand 
Deductible social contribution - Provisional Measure 2,158-35
2012  2013  2014  2015  2016  Total 
Total  31,072  2,505  4,188  47,374  55,703  140,842 

The projected realization of deductible taxes is an estimate and it is not directly related to the expected accounting income.

The present value of deductible taxes, calculated based on the average funding rate, net of tax effects, amounts to R$22,080,701 thousand (R$21,544,937 thousand on June 30, 2012 and R$19,642,629 thousand on September 30, 2011), of which R$21,633,221 thousand (R$20,999,136 thousand on June 30, 2012 and R$19,105,710 thousand on September 30, 2011) refers to temporary differences, R$316,968 thousand (R$416,172 thousand on June 30, 2012 and R$396,253 thousand on September 30, 2011) to income tax and social contribution losses and R$130,512 thousand (R$129,629 thousand on June 30, 2012 and R$140,666 thousand on September 30, 2011) of deductible social contribution, pursuant to Provisional Measure 2,158-35.

e) Unrecognized deductible tax

Deductible tax of R$1,466,070 thousand (R$1,478,186 thousand on June 30, 2012 and R$2,555 thousand on September 30, 2011) has not been recorded in the financial statements, and will be recorded when they meet with regulatory demands and/or present the probable prospects to be realized according to studies and analyses prepared by the Management and in accordance with Bacen regulations. The balance as at September 30, 2012 includes R$1,464,111 thousand (R$1,476,229 thousand on June 30, 2012), which refers to unrecorded deductible tax from the acquisition of Banco BERJ, which was consolidated from November 2011.

f) Deferred tax liabilities

  R$ thousand 
 2012 2011 
September 30  June 30  September 30 
Mark-to-market adjustment of derivative financial instruments  3,299,822  3,312,670  555,675 
Difference in depreciation  2,648,338  2,925,560  3,591,787 
Judicial deposit and others  1,328,010  1,294,654  999,552 
Total  7,276,170  7,532,884  5,147,014 

The deferred tax liabilities of companies in the financial and insurance sector were established considering the increased social contribution rate, established by Law 11,727/08 (Note 3h). 

 

 

Bradesco 

 203  

 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

35) OTHER INFORMATION

a) The Organization manages investment funds and portfolios with net assets of R$404,442,213 thousand as at September 30, 2012 (R$383,588,580 thousand on June 30, 2012 and R$319,451,263 thousand on September 30, 2011).

b) Consortia funds

  R$ thousand 
2012 2011 
September 30  June 30  September 30 
Monthly estimate of funds receivable from consortium members  284,353  274,134  263,790 
Contributions payable by the group  14,863,508  14,367,536  14,575,983 
Consortium members - assets to be included  13,287,433  12,846,148  13,120,384 
Credits available to consortium members  3,195,231  3,326,158  2,922,425 
 
  In units 
2012 2011 
September 30  June 30  September 30 
Number of groups managed  2,772  2,735  2,651 
Number of active consortium members  706,752  676,087  548,097 
Number of assets to be included  189,141  187,526  140,113 

 

c) In the third quarter of 2012, Bacen amended and redefined the regulations relating to compulsory deposits on funds repayable on demand and in installments with the purpose of making flexible the collection of compulsory deposits and reducing financial intermediation costs, as well as stimulating the motorcycles sale. It showed the following effects:

Description  Previous regulation  Current regulation 
Collection of compulsory
deposits on funds
repayable in installments

Bacen will remunerate the lesser of the following amounts:
I - liabilities minus deductions of up to 64%;
II - liabilities limited by the percentage of:

- 64% from June 22, 2012 to February 20, 2014;
- 73% from February 21, 2014 to April 24, 2014;
- 82% from April 25, 2014 to June 19, 2014; and
- 100% as from June 20, 2014.

Bacen now remunerates the lesser of the followingamounts:
I - liabilities minus deductions of up to 50%;
II - liabilities limited by the percentage of:
- 64% from June 22, 2012 to October 25, 2012;
- 50% from October 26, 2014 to February 20, 2014;
- 64% from February 21, 2014 to April 24, 2014;
- 73% from April 25, 2014 to June 19, 2014;
- 82% from June 20, 2014 to August 21, 2014; and
- 100% as of August 20, 2014.
Operations eligible for
deduction in compulsory
deposits on funds for
vehicles financing
Balance of loan operations for financing
and leasing of automobiles and light
commercial vehicles.
Balance of loan operations for financing and leasing
of motorcycles.
Additional rate on
demand funds
- 6%  - reduced to 0%. 
 Collectible amount criteria Collectible amount must be daily adjusted
based on the checks, the credit documents
and the billing slips due on the immediate
day after the collection or payment and that
demand transfer between bank reserve
accounts of financial institutions.


This criterion was revoked.
 

 

d) As part of the convergence process with international accounting standards, the Brazilian Accounting Pronouncements Committee (CPC) issued certain accounting pronouncements, their interpretations and orientations, which are applicable to financial institutions only after approval by CMN.

The accounting standards which have been approved by CMN include the following:

204 Report on Economic and Financial Analysis – September 2012   

 



 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Notes to the Consolidated Financial Statements

·    Resolution 3,566/08 - Impairment of Assets (CPC 01);

·    Resolution 3,604/08 - Statement of Cash Flows (CPC 03);

·    Resolution 3,750/09 - Related Party Disclosures (CPC 05);

·    Resolution 3,823/09 - Provisions, Contingent Liabilities and Contingent Assets (CPC 25);

·    Resolution 3,973/11 - Subsequent Events (CPC 24);

·    Resolution 3,989/11 - Share-based Payment (CPC 10);

·    Resolution 4,007/11 - Accounting Policies, Changes in Accounting Estimates and Errors (CPC 23); and

·    Resolution 4,144/12 - Basic Conceptual Pronouncement (R1).

Presently, it is not possible to estimate when the CMN will approve the other CPC pronouncements or if they will be used prospectively or retrospectively

CMN Resolution 3,786/09 and Bacen Circular Letters 3,472/09 and 3,516/10 establishes 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, as from December 31, 2010, annually prepare and publish their consolidated financial statements in up to 90 days from the reference date December 31, prepared under the International Financial Reporting Standards (IFRS), in compliance with standards issued by the International Accounting Standards Board (IASB).
As required by CMN Resolution, on March 30, 2012, Bradesco published its consolidated financial statements on its website for December 31, 2011 and 2010, in accordance with IFRS standards.
According to Management, reconciliations between net income and shareholders equity as of September 30, 2012 are consistent with those reconciliations as of December 31, 2011.

 

 

Bradesco 

 205  

 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Management Bodies 

Reference Date: October 9, 2012
 
Board of Directors Department Directors (continued) Audit Committee
  Fernando Roncolato Pinho  Carlos Alberto Rodrigues Guilherme - Coordinator 
Chairman  Frederico William Wolf  José Lucas Ferreira de Melo 
Lázaro de Mello Brandão  Glaucimar Peticov  Romulo Nagib Lasmar 
  Guilherme Muller Leal  Osvaldo Watanabe 
Vice-Chairman  João Albino Winkelmann   
Antônio Bornia  João Carlos Gomes da Silva  Compliance and Internal Control Committee 
  Joel Antonio Scalabrini  Mário da Silveira Teixeira Júnior - Coordinator 
Members  Jorge Pohlmann Nasser  Carlos Alberto Rodrigues Guilherme 
Mário da Silveira Teixeira Júnior  José Luis Elias  Milton Matsumoto 
João Aguiar Alvarez  José Luiz Rodrigues Bueno  Domingos Figueiredo de Abreu 
Denise Aguiar Alvarez  José Ramos Rocha Neto  Marco Antonio Rossi 
Luiz Carlos Trabuco Cappi  Júlio Alves Marques  Alexandre da Silva Glüher 
Carlos Alberto Rodrigues Guilherme  Laércio Carlos de Araújo Filho  Clayton Camacho 
Milton Matsumoto  Layette Lamartine Azevedo Júnior  Frederico William Wolf 
Ricardo Espírito Santo Silva Salgado  Lúcio Rideki Takahama  Roberto Sobral Hollander 
  Luiz Alves dos Santos  Rogério Pedro Câmara 
Board of Executive Officers  Luiz Carlos Brandão Cavalcanti Junior   
  Marcos Aparecido Galende  Executive Disclosure Committee 
Executive Officers  Marcos Bader  Luiz Carlos Angelotti - Coordinator 
  Marcos Daré  Julio de Siqueira Carvalho de Araujo 
Chief Executive Officer  Marlene Morán Millan  Domingos Figueiredo de Abreu 
Luiz Carlos Trabuco Cappi  Nobuo Yamazaki  Marco Antonio Rossi 
  Octavio Manoel Rodrigues de Barros  Alexandre da Silva Glüher 
Executive Vice-Presidents  Paulo Aparecido dos Santos  Moacir Nachbar Junior 
Julio de Siqueira Carvalho de Araujo  Paulo Faustino da Costa  Antonio José da Barbara 
Domingos Figueiredo de Abreu  Roberto Sobral Hollander  Marcos Aparecido Galende 
José Alcides Munhoz  Rogério Pedro Câmara  Paulo Faustino da Costa 
Aurélio Conrado Boni  Waldemar Ruggiero Júnior  Haydewaldo R, Chamberlain da Costa 
Sérgio Alexandre Figueiredo Clemente  Walkiria Schirrmeister Marquetti  Marcelo Santos Dall' Occo 
Marco Antonio Rossi     
  Directors  Ethical Conduct Committee 
Managing Directors  Antonio Chinellato Neto  Milton Matsumoto - Coordinator 
Candido Leonelli  Cláudio Borges Cassemiro  Carlos Alberto Rodrigues Guilherme 
Maurício Machado de Minas  João Sabino  Julio de Siqueira Carvalho de Araujo 
Alexandre da Silva Glüher  Osmar Roncolato Pinho  Domingos Figueiredo de Abreu 
Alfredo Antônio Lima de Menezes  Paulo Manuel Taveira de Oliveira Ferreira  Marco Antonio Rossi 
André Rodrigues Cano  Roberto de Jesus Paris  Alexandre da Silva Glüher 
Josué Augusto Pancini  Vinicius José de Almeida Albernaz  André Rodrigues Cano 
Luiz Carlos Angelotti    Josué Augusto Pancini 
Marcelo de Araújo Noronha    Clayton Camacho 
Nilton Pelegrino Nogueira  Regional Officers  Frederico William Wolf 
  Alex Silva Braga  Glaucimar Peticov 
Deputy Directors  Almir Rocha  José Luiz Rodrigues Bueno 
Altair Antônio de Souza  Antonio Gualberto Diniz  Júlio Alves Marques 
André Marcelo da Silva Prado  Antonio Piovesan  Rogério Pedro Câmara 
Denise Pauli Pavarina  Carlos Alberto Alástico   
Luiz Fernando Peres  Delvair Fidêncio de Lima  Integrated Risk Management and Capital Allocation Committee 
Moacir Nachbar Junior  Francisco Aquilino Pontes Gadelha  Julio de Siqueira Carvalho de Araujo - Coordinator 
Octávio de Lazari Júnior  Francisco Assis da Silveira Junior  Domingos Figueiredo de Abreu 
  Geraldo Dias Pacheco  José Alcides Munhoz 
Department Directors  João Alexandre Silva  Aurélio Conrado Boni 
Adineu Santesso  José Sergio Bordin  Sérgio Alexandre Figueiredo Clemente 
Amilton Nieto  Leandro José Diniz  Marco Antonio Rossi 
André Bernardino da Cruz Filho  Luis Carlos Furquim Vermieiro  Alexandre da Silva Glüher 
Antonio Carlos Melhado  Mauricio Gomes Maciel  Alfredo Antônio Lima de Menezes 
Antonio de Jesus Mendes  Volnei Wulff  Luiz Carlos Angelotti 
Antonio José da Barbara  Wilson Reginaldo Martins  Antonio de Jesus Mendes 
Arnaldo Nissental    Roberto Sobral Hollander 
Aurélio Guido Pagani  Compensation Committee   
Cassiano Ricardo Scarpelli  Lázaro de Mello Brandão - Coordinator  Fiscal Council 
Clayton Camacho  Antônio Bornia  Sitting Members 
Diaulas Morize Vieira Marcondes Junior  Mário da Silveira Teixeira Júnior  Domingos Aparecido Maia - Coordinator 
Douglas Tevis Francisco  Luiz Carlos Trabuco Cappi  Nelson Lopes de Oliveira 
Edilson Wiggers  Carlos Alberto Rodrigues Guilherme  Ricardo Abecassis Espírito Santo Silva 
Eurico Ramos Fabri  Milton Matsumoto  Deputy Members 
Fernando Antônio Tenório  Sérgio Nonato Rodrigues  João Batistela Biazon 
    Jorge Tadeu Pinto de Figueiredo 
    Renaud Roberto Teixeira 
 
General Accounting Department   
Marcos Aparecido Galende  Ombudsman Department 
Accountant-CRC 1SP201309/O-6  Júlio Alves Marques - Ombudsman 

 

206 Report on Economic and Financial Analysis – September 2012   

 



 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Report on the Review of the Interim Consolidated Financial Information

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 September 30, 2012 and the related consolidated statements of income, changes in shareholders' equity and cash flows for the three and nine month periods then ended, as well as the summary of significant accounting policies and other explanatory notes (“the consolidated interim financial statements”).

Management’s Responsibility for the interim consolidated 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 Brazilian Central Bank (Bacen). Our responsibility is to express a conclusion on these 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 score 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 interim consolidated financial information 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 Brazilian Central Bank.

Other matters

Interim consolidated statements of value added

We also reviewed the interim consolidated statements of value added for the three and nine month periods ended September 30, 2012, which were prepared under Bradesco's Management responsibility and presented as supplemental information. These aforementioned statements were 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 they were not prepared, in all material respects, in relation to the other interim consolidated financial information taken as a whole.

 

Osasco, October 19, 2012

 

Original report in Portuguese signed by
KPMG Auditores Independentes
CRC 2SP014428/O-6

Cláudio Rogélio Sertório
Accountant CRC 1SP212059/O-0

 

 

 

Bradesco 

 207  

 
Financial Statements, Independent Auditors' Report and Fiscal Council's Report
   
Fiscal Council’s Report

The undersigned members of the Fiscal Council of Banco Bradesco S.A., in the exercise of their legal and statutory duties, having examined the Management Report and the Financial Statements related to the third quarter of 2012, and the technical feasibility study of taxable income generation, brought at present value, which has the purpose of recording the Deferred Tax Assets pursuant to the CVM Rule 371/02, CMN Resolution 3,059/02, and Bacen Circular Letter 3,171/02, and in view of the unqualified report prepared by KPMG Auditores Independentes, are of the opinion that the aforementioned documents, based on the accounting practices adopted in Brazil, applicable to entities that the Brazilian Central Bank authorizes to operate, fairly reflect the Company's equity and financial position.

 

 

 

Cidade de Deus, Osasco, São Paulo, October 19, 2012
 

     Domingos Aparecido Maia

Nelson Lopes de Oliveira

Ricardo Abecassis E. Santo Silva

208 Report on Economic and Financial Analysis – September 2012   

 



 

For further information, please contact:

 

Board of Executive Officers

 Luiz Carlos Angelotti

Managing Director and Investor Relations Officer

Phone: (11) 3681-4011

Fax: (11) 3684-4630

4000.diretoria@bradesco.com.br

 

Market Relations Department

Paulo Faustino da Costa

Phone: (11) 2178-6201

Fax: (11) 2178-6215

 

Avenida Paulista, 1.450 1º andar

CEP 01310-917 São Paulo-SP

Brazil

www.bradesco.com.br/ir

 



 
SIGNATURES
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: October 25, 2012
 
BANCO BRADESCO S.A.
By:
 
/S/ Luiz Carlos Angelotti

    Luiz Carlos Angelotti 
Executive Managing Officer and
Investor Relations Officer
 
 
FORWARD-LOOKING STATEMENTS

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.