bbdbook1q18_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 May, 2018
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____

 .


 

 

 


1 - Press Release  3 
Main Information  4 
Recurring Net Income vs. Book Net Income  5 
Summarized Analysis of Recurring Income  5 
Main Economic Indicators  9 
Guidance  9 
2 - Economic and Financial Analysis  11 
Interest-Earning and Non-Interest Earning Portions  12 
NII Interest Earning Portion  13 
Main Indicators of Loan Portfolio  14 
Loan Portfolio  16 
Expanded Loan Portfolio  17 
Main Funding Sources  21 
Insurance, Pension and Capitalization  22 
Fee and Commission Income  27 
Operating Expenses  28 
Additional Information  29 
Statement of Income Managerial vs. Recurring  31 
Balance Sheet Consolidated  33 
3 - Additional Information  35 
Return to Shareholders  36 
Additional Information  37 
Risk Management  39 
Capital Management  40 
Minimum Capital Required Grupo Bradesco Seguros  40 
Basel Ratio  41 
Corporate Governance  42 
Compliance and Integrity Program  42 
Investor Relations area IR  42 
Sustainability and Social Actions  43 
4 - Independent Auditors Report  45 
Limited Assurance Report about Supplementary Accounting Information included within the   
  46 
Economic and Financial Analysis Report   
5 - Complete Financial Statements  49 

 


 

 

Some numbers included in this Report have been subjected to rounding adjustments.
As a result, some amounts indicated as total amounts in some charts may not be the arithmetic sum of the preceding numbers.
Percentage variations not presented in the framework of this report, are related, in their majority, to the low value balances compared with the other
periods presented.


 



 

 


 


 

 


 

 


 


 


 


 



 
 



 

 

Average Net Interest Income Rate
 
       
R$ million        Variation
  1Q18  4Q17  1Q17  1Q18 x  1Q18 x 
Net Interest Income        4Q17  1Q17 
NII - Interest-earning portion - due to volume        (171)  (507) 
NII - Interest-earning portion - due to spread        3  100 
- NII - Interest Earning Portion  15,493  15,661  15,900  (168)  (407) 
- NII - Non-Interest Earning Portion  193  152  136  41  57 
Net Interest Income  15,686  15,813  16,036  (127)  (350) 
Average Earning Portion Rate (1)  6.6%  6.8%  7.2%     
 
(1) Average rate in the quarter = (Earning Portion / Total Average Assets Repos Permanent Assets).
Interest Earning Portion Average Rates (12 months)
 
  1Q18 1Q17
R$ million NII - Interest
Earning
Portion

Average
Balance

Average
Rate
NII - Interest
Earning
Portion

Average
Balance
Average
Rate
Credit Intermediation (1)  11,690  415,962  11.6%  12,781  432,409  12.0% 
Insurance  1,526  249,299  2.4%  1,481  227,358  2.8% 
ALM /Other (1) (2)  2,277  367,642  2.1%  1,638  408,650  1.6% 
NII - Interest-Earning Portion  15,493  -  6.6%  15,900  -  7.4% 
 
  1Q18 4Q17
R$ million NII - Interest
Earning
Portion 
Average
Balance
Average
Rate
NII - Interest
Earning
Portion 
Average
Balance
Average
Rate
Credit Intermediation (1)  11,690  415,962  11.6%  12,129  418,839  11.7% 
Insurance  1,526  249,299  2.4%  1,460  243,996  2.4% 
ALM /Other (1) (2)  2,277  367,642  2.1%  2,072  390,203  1.9% 
NII - Interest-Earning Portion  15,493  -  6.6%  15,661  -  6.7% 
 
(1) As per this quarter we considered the margin of the financial assets of fixed income, with characteristic of credit (mostly debentures) in the margin of credit intermediation, formerly classified as ALM/other. For the purposes of comparability, the previous periods have been reclassified; and
(2) It reflects, mainy, treasury operations in the assets and liabilities management (ALM).

 

 


 


 

Interest Earning Portion
Volume Variation vs. Spread

o Credit Intermediation the reduction of the average spreads in operations with individuals is in line with the amendment of the mix of loan portfolios, which evolved into products with a lower rate and risk, like: consigned, real estate and CDC vehicles. Highlight to the evolution of the average daily origination for this segment, which grew 3% in the quarter and 35% compared to the daily average of the 1Q17. The behavior of the operations with companies is impacted by the lower credit demand, mainly of the corporate and middle market segments.

o Insurance the performance of the periods benefited from the good performance of the multimarket funds and of shares, highlighting the growth of 11.7% of the Ibovespa index this quarter.

o ALM/Other reflect, mainly, treasury operations in assets and liabilities management (ALM).

       
R$ million        Variation
  1Q18  4Q17  1Q17  1Q18 x  1Q18 x 
Net Interest Income        4Q17  1Q17 
NII - Interest-earning portion - due to volume        (171)  (507) 
NII - Interest-earning portion - due to spread        3  100 
- NII - Interest Earning Portion  15,493  15,661  15,900  (168)  (407) 
- NII - Non-Interest Earning Portion  193  152  136  41  57 
Net Interest Income  15,686  15,813  16,036  (127)  (350) 
Average NIM (1) 6.6%  6.8%  7.2%     

 

           
R$ million Credit Insurance  ALM/Other  NII - Interest-Earning
Intermediation         Portion 
1Q18 x  1Q18 x  1Q18 x  1Q18 x  1Q18 x  1Q18 x  1Q18 x  1Q18 x 
Volume x Spread  4Q17  1Q17  4Q17  1Q17  4Q17  1Q17  4Q17  1Q17 
NII - Interest-earning portion - due to volume  (83)  (486)  32  143  (120)  (164)  (171)  (507) 
NII - Interest-earning portion - due to spread  (356)  (605)  34  (98)  325  803  3  100 
Variation NII - Interest-Earning Portion  (439)  (1,091)  66  45  205  639  (168)  (407) 

Earning Portion of Credit Intermediation vs. ALL (Expanded)

The improvement of the quality of the loan portfolio has reduced the cost of delinquency (Expanded ALL) in the periods, boosting the evolution of the net margin of credit intermediation, offsetting the reduction in the gross margin.

 


 

 

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

Flow of Maturities (1)

The loan portfolio by flow of maturities of operations has, as one of its features, a longer profile, mainly due to the presence of real estate financing and payroll-deductible loans. It must be noted that, due to their guarantees and characteristics, these operations are not only exposed to lower risk but also provide favorable conditions to gain customer loyalty.

(1) Only normal course operations.

 

Delinquency Ratio

Over 90 days

The ratio showed improvement for the fourth consecutive quarter, maintaining the decreasing trend, as presented in the graph, mainly related to the performance of the segments of Micro, Small and Medium-Sized Enterprises and Individuals, which in the last 12 months presented reductions in the balance of non-performing loans, of 30% and 21%, respectively.

 

15-90 days

In the quarter, short-term delinquency presented growth, impacted partly by seasonal issues at the beginning of the year that affected the segment of individuals, and, therefore, do not represent a trend variation, and specific cases of corporate clients. It is highlighted the improvement showed in the last 12 months for Micro, Small and Medium-Sized Enterprises and Individuals.

In the 1Q18, loans were granted (without retention of risks and benefits, already written off as loss, totaling R$5.3 billion), which does not modify the delinquency ratio in the period. The sale value of these portfolios did not impact significantly the outcome.


 


 
Effective Coverage Ratio

Monitoring the continuous improvement of the indicators of delinquency and of the ALL expenses (Expanded), the net losses of recoveries estimated for March 2018 indicates 3.7%, resulting in an effective coverage ratio of 269%.

   
NPL Creation 90 days vs. Write-offs

As a consequence of the strengthening of the policy and of the processes of credit granted, the NPL Creation also follows the trend of decrease, reaching the lowest level of the last ten quarters, boosted by the reduction of delinquent credits in the segments of Micro, Small and Medium-Sized Enterprises and Individuals.

We have demonstrated below the opening of the NPL Creation per business segment.

 

 


 


Coverage Ratio

The adjacent graph presents the behavior of the ratios covering the allowance for loan losses in relation to default credits exceeding 60 and 90 days. In March 2018, ratios showed very comfortable levels. Along with the allowance for loan losses required by Bacen, Bradesco has an excess provision of R$6.9 billion to cover possible adverse scenarios, as well as other operations/ commitments with credit risk.

 

Bacen Portfolio vs. Expanded Portfolio

The loan portfolio performance (Bacen), counts on the evolution of the segment of individuals, with emphasis on the growth of real estate credit, consigned and CDC vehicles. Also in relation to individuals, highlight to the growth in average daily origination, which raised 3% in the quarter and 35% compared to the first quarter of 2017.

The behavior of the operations with companies is impacted by the lower credit demand of the corporate and middle markets segments.

In the expanded portfolio, in addition to the effects mentioned above, the developments in the periods are impacted by the operations with sureties and guarantees, and debentures not renewed, which are almost entirely designed for large corporates.

       
  Mar18  Dec17  Mar17  Variation %
        Quarter  12 months 
Individuals  176,879  174,537  170,726  1.3  3.6 
Companies  194,520  195,542  211,225  (0.5)  (7.9) 
Loan Portfolio - Bacen  371,399  370,079  381,950  0.4  (2.8) 
Sureties and Guarantees  72,676  78,867  75,951  (7.8)  (4.3) 
Operations bearing Credit Risk - Commercial Portfolio (1)  38,336  39,980  42,385  (4.1)  (9.6) 
Other (2)  4,234  4,005  2,428  5.7  74.4 
Expanded Loan Portfolio  486,645  492,931  502,714  (1.3)  (3.2) 
 
(1) It includes debentures operations and promissory notes; and
(2) It considers letter of credit, advances of credit card receivables and co-obligation in the assignment of CRI and rural credit.

 

 


 


 

Expanded Loan Portfolio Breakdown By Customer Profile, Product and Currency
 
R$ million       
  Mar18  Dec17  Mar17  Variation %
Customer Profile        Quarter  12 months 
Individuals  177,814  175,469  171,820  1.3  3.5 
Consumer Financing  117,428  116,066  111,242  1.2  5.6 
Payroll-deductible Loans  45,281  43,968  39,937  3.0  13.4 
Credit Card  32,982  34,437  34,018  (4.2)  (3.0) 
CDC / Vehicle Leasing  21,584  20,784  19,526  3.8  10.5 
Personal Loans  17,581  16,877  17,761  4.2  (1.0) 
Real Estate Financing  34,396  33,687  32,589  2.1  5.5 
Other Products  25,990  25,716  27,989  1.1  (7.1) 
Rural Loans  8,032  7,947  8,306  1.1  (3.3) 
BNDES/Finame Onlendings  6,376  6,394  6,668  (0.3)  (4.4) 
Other  11,582  11,374  13,015  1.8  (11.0) 
Companies  308,831  317,462  330,894  (2.7)  (6.7) 
Working Capital  39,894  40,075  43,807  (0.5)  (8.9) 
Operations Abroad  28,436  29,776  33,671  (4.5)  (15.5) 
Export Financing  30,979  26,335  29,120  17.6  6.4 
Real Estate Financing  25,886  27,179  28,612  (4.8)  (9.5) 
BNDES/Finame Onlendings  21,945  24,261  27,705  (9.5)  (20.8) 
Overdraft Account  6,894  6,566  7,798  5.0  (11.6) 
CDC / Leasing  7,371  7,249  7,295  1.7  1.0 
Rural Loans  6,248  5,618  6,643  11.2  (5.9) 
Sureties and Guarantees  72,060  78,267  75,251  (7.9)  (4.2) 
Operations bearing Credit Risk - Commercial Portfolio  38,336  39,980  42,385  (4.1)  (9.6) 
Other  30,782  32,155  28,608  (4.3)  7.6 
Total Loan Operations  486,645  492,931  502,714  (1.3)  (3.2) 
Domest Currency  451,469  452,075  460,489  (0.1)  (2.0) 
Foreign Currency  35,176  40,856  42,226  (13.9)  (16.7) 

 

Distribution by Business Sector
 
Among the segments of business, Retail and Prime are highlighted, which currently represent 35.8% of the total expanded portfolio and presented evolutions in the periods.
  
R$ million             
  Mar18  %  Dec17  %  Mar17  %  Variation %
Business Segments              Quarter  12 months 
Retail  129,248  26.6  125,470  25.5  121,079  24.2  3.0  6.7 
Prime  45,180  9.3  43,557  8.8  42,870  8.5  3.7  5.4 
Corporate  217,294  44.7  225,993  45.8  236,816  47.1  (3.8)  (8.2) 
Middle Market  44,771  9.2  45,672  9.3  48,917  9.7  (2.0)  (8.5) 
Other / Non-checking account Holders (1)  50,152  10.2  52,240  10.6  53,033  10.5  (4.0)  (5.4) 
Total  486,645  100.0  492,931  100.0  502,714  100.0  (1.3)  (3.2) 
(1) It consists, mostly, of non-account holders, originating from the credit cards, payroll-deductible loans and financing of vehicles activities.         

 


 


 



 

Expanded Loan Portfolio Concentration By Economic Sector
 
R$ million  Mar18  %  Dec17  %  Mar17  % 
Economic Sector             
Public Sector  11,577  2.4  13,518  2.7  12,484  2.5 
Oil, derivatives and aggregate activities  9,632  2.0  11,097  2.3  9,848  2.0 
Production and distribution of electricity  1,194  0.2  1,260  0.3  2,041  0.4 
Other sectors  751  0.2  1,161  0.2  595  0.1 
Private Sector  475,068  97.6  479,413  97.3  490,230  97.5 
Companies  297,254  61.1  303,944  61.7  318,410  63.3 
Real estate and construction activities  35,240  7.2  36,380  7.4  46,429  9.2 
Retail  29,853  6.1  33,565  6.8  34,396  6.8 
Transportation and concession  24,250  5.0  23,159  4.7  27,012  5.4 
Services  26,430  5.4  25,485  5.2  23,435  4.7 
Wholesale  13,920  2.9  13,307  2.7  14,385  2.9 
Automotive  12,691  2.6  13,370  2.7  17,599  3.5 
Food products  10,727  2.2  10,453  2.1  13,414  2.7 
Other sectors  144,143  29.6  148,225  30.1  141,740  28.2 
Individuals  177,814  36.5  175,469  35.6  171,820  34.2 
Total  486,645  100.0  492,931  100.0  502,714  100.0 

Changes in the Expanded Loan Portfolio By Rating

In addition, as a consequence of the reinforcement of the policy and the credit granting processes and risk management, 94.3% of new borrowers were classified ratings from AA to C, presenting improvement of the quality of the loan portfolio.

      New customers between  Remaining customers from 
Changes in Expanded Loan Portfolio by Total Credit on March 2018  April 2017 and  March 2017
Rating between March 2017 and 2018      March 2018    
  R$ million  %  R$ million  %  R$ million  % 
Rating             
AA - C  428,301  88.0  24,220  94.3  404,081  87.6 
D  12,546  2.6  244  0.9  12,302  2.7 
E - H  45,798  9.4  1,229  4.8  44,569  9.7 
Total  486,645  100.0  25,693  100.0  460,952  100.0 

 

Expanded Loan Portfolio By Customer Profile and Rating (%)         
 
The range represented by credits classified between AA and C remained at comfortable levels.       
 
  Mar18 Dec17   Mar17   
Customer Profile  By Rating By Rating   By Rating   
  AA-C  D  E-H  AA-C  D  E-H  AA-C  D  E-H 
Large Corporates  87.9  2.4  9.7  88.4  3.5  8.1  89.4  3.1  7.5 
Micro, Small and Medium-Sized Enterprises  84.8  3.8  11.4  84.0  3.8  12.2  82.4  4.5  13.1 
Individuals  89.9  2.1  8.0  89.3  2.1  8.6  87.7  2.3  10.0 
Total  88.0  2.6  9.4  87.9  3.0  9.1  87.5  3.1  9.4 

 


 


 


Bacen Portfolio Indicators

With the aim of facilitating 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:

        Variation% 
        (unless otherwise stated)
R$ million (except %)  Mar18  Dec17  Mar17  Quarter 12 months
Total Provision  35,763  36,527  39,181  (2.1)  (8.7) 
- Specific  16,499  16,887  21,575  (2.3)  (23.5) 
- Generic  12,365  12,721  10,699  (2.8)  15.6 
- Excess  6,899  6,918  6,907  (0.3)  (0.1) 
Specific Provision / Total Provision (%)  46.1  46.2  55.1  (0.1) p.p.  (9.0) p.p. 
Total Provision / Loans (%)  9.6  9.9  10.3  (0.3) p.p.  (0.7) p.p. 
AA - C Rated Loans / Loans (%)  87.6  87.2  86.9  0.4 p.p.  0.7 p.p. 
D-rated Operations under Risk Management / Loans (%)  3.0  3.5  3.4  (0.5) p.p.  (0.4) p.p. 
E-H rated Loans / Loans(%)  9.4  9.3  9.7  0.1 p.p.  (0.3) p.p. 
D-rated loans  11,137  12,933  13,131  (13.9)  (15.2) 
Provision for D-rated loans  1,710  1,904  2,022  (10.2)  (15.4) 
Provision / D-rated loans (%)  15.4  14.7  15.4  0.7 p.p.  - 
D-H rated Non-Performing Loans  23,205  23,597  29,090  (1.7)  (20.2) 
Total Provision / D-to-H-rated Non-performing Loans (%)  154.1  154.8  134.7  (0.7) p.p.  19.4 p.p. 
E-H Rated Loans  34,901  34,527  37,062  1.1  (5.8) 
Provision for E-H rated loans  31,478  32,113  34,557  (2.0)  (8.9) 
Provision / E-H rated loans (%)  90.2  93.0  93.2  (2.8) p.p.  (3.0) p.p. 
E-H rated Non-Performing Loans  20,191  20,510  25,166  (1.6)  (19.8) 
Total Provision / E-to-H-rated Non-performing Loans (%)  177.1  178.1  155.7  (1.0) p.p.  21.4 p.p. 
          

 


 


 

Funds Raised and Managed 

 

 

 

 

 

 

 

 

 

Variation % 

R$ million 

Mar18 

Dec17 

Mar17 

Quarter 12 months 

Demand Deposits 

33,177 

34,082 

30,564 

(2.7) 

8.5 

Savings Deposits 

101,777 

103,333 

94,353 

(1.5) 

7.9 

Time Deposits 

134,789 

125,615 

109,944 

7.3 

22.6 

Debentures 

22,192 

44,453 

73,904 

(50.1) 

(70.0) 

Borrow ing and Onlending 

50,052 

51,669 

56,417 

(3.1) 

(11.3) 

Funds from Approvals and Issuance of Securities 

142,590 

135,011 

142,751 

5.6 

(0.1) 

Subordinated Debts 

22,993 

27,050 

35,046 

(15.0) 

(34.4) 

Eligible Debt Capital Instruments 

23,155 

23,130 

15,800 

0.1 

46.6 

Subtotal 

530,725 

544,343 

558,779 

(2.5) 

(5.0) 

Securities Sold Under Agreements to Repurchase (1) 

273,738 

269,109 

277,359 

1.7 

(1.3) 

Interbank Deposits 

1,648 

2,247 

571 

(26.7) 

188.6 

Working Capital (Ow n/Managed) 

86,026 

81,720 

75,952 

5.3 

13.3 

Foreign Exchange Portfolio 

15,256 

7,655 

10,964 

99.3 

39.1 

Payment of Taxes and Other Contributions 

3,341 

1,114 

4,490 

199.9 

(25.6) 

Technical Provisions for Insurance, Pension Plans and Capitalization Bonds 

251,231 

246,653 

229,433 

1.9 

9.5 

Funds raised 

1,161,965 

1,152,841 

1,157,548 

0.8 

0.4 

Investment Funds and Managed Portfolios 

841,983 

834,646 

786,139 

0.9 

7.1 

Total Assets under Management 

2,003,948 

1,987,487 

1,943,687 

0.8 

3.1 

(1) Does not consider debentures. 

 

 

 

 

 

 

Loans vs. Funding

In order to analyze Loan Operations in relation to Funding, the following should be deducted from the total client funding the amount committed to reserve requirements at Bacen, the amount of available funds within the customer service network, along with the addition of, funds from domestic and foreign lines of credit that finance the demand for loans. Bradesco shows low dependency on interbank deposits and foreign lines of credit, given its capacity to obtain funding from clients effectively.

This is a result of significant capillarity, the broad diversity of products offered, and the market’s confidence in the Bradesco brand and the important presence in the client’s sector.

Note that the use of funds provides a comfortable margin. It proves that Bradesco is capable of meeting demands for loaning funds through its own funding.


R$ million 

Mar18 

Dec17 

Mar17 

Variation %

 

 

 

 

Quarter 12 months 

Funding vs. Investments 

 

 

 

 

 

Demand Deposits + Sundry Floating 

36,518 

35,203 

35,054 

3.7 

4.2 

Savings Deposits 

101,777 

103,333 

94,353 

(1.5) 

7.9 

Time Deposits + Debentures 

156,981 

170,068 

183,848 

(7.7) 

(14.6) 

Funds from Financial Bills 

139,720 

131,933 

139,784 

5.9 

- 

Customer Funds (1) 

434,996 

440,537 

453,039 

(1.3) 

(4.0) 

(-) Reserve Requirements 

(70,814) 

(66,714) 

(61,637) 

6.1 

14.9 

(-) Available Funds (Real) 

(14,297) 

(13,107) 

(9,801) 

9.1 

45.9 

Customer Funds Net of Reserve Requirements 

349,885 

360,716 

381,601 

(3.0) 

(8.3) 

Borrow ing and Onlending 

50,052 

51,669 

56,417 

(3.1) 

(11.3) 

 

 

 

 

 

 

Other (Securities Abroad + Subordinated Debt + Other Borrow ers - Cards) 

73,940 

79,420 

76,192 

(6.9) 

(3.0) 

 

 

 

 

 

 

Total Funding (A) 

473,877 

491,805 

514,210 

(3.6) 

(7.8) 

Expanded Loan Portfolio (Excluding Sureties and Guarantees) (B) 

413,969 

414,064 

426,763 

- 

(3.0) 

B / A 

87.4% 

84.2% 

83.0% 

3.2 p.p. 

4.4 p.p. 

(1) It considers: Demand deposits, Miscellaneous Floating, Saving deposits, Time deposits, Debentures (with collateral of repo operations) and Credit Notes (considers Mortgage Bonds, Letters of Credit for Agribusiness, Financial Bills and Structured Operations Certificate).

 


 

 

Below is an analysis of Grupo Bradesco Seguro s Balance Sheet and Consolidated Statement of Income.

       

Variation %

R$ million 

Mar18 

Dec17 

Mar17 

Mar18 x Mar18 x

 

 

   

Dec17 

Mar17 

Assets 

 

 

 

 

 

Current and Long-Term Assets 

289,487 

283,405 

263,258 

2.1 

10.0 

Securities 

278,982 

272,612 

251,140 

2.3 

11.1 

Life and Pension Plans 

236,081 

231,887 

214,933 

1.8 

9.8 

Other Lines 

42,901 

40,725 

36,207 

5.3 

18.5 

Insurance Premiums Receivable 

3,431 

3,676 

3,791 

(6.7) 

(9.5) 

Other Loans 

7,073 

7,117 

8,327 

(0.6) 

(15.1) 

Permanent Assets 

6,158 

5,963 

5,039 

3.3 

22.2 

Total 

295,645 

289,368 

268,297 

2.2 

10.2 

 

 

       

Liabilities 

 

   

 

 

Current and Long-Term Liabilities 

261,142 

256,122 

238,753 

2.0 

9.4 

Tax, Civil and Labor Contingencies 

2,298 

2,160 

2,292 

6.4 

0.3 

Payables on Insurance, Pension Plan and Capitalization Bond Operations 

610 

623 

671 

(2.1) 

(9.1) 

Other liabilities 

7,003 

6,686 

6,357 

4.7 

10.2 

Insurance Technical Provisions 

15,260 

14,837 

14,950 

2.9 

2.1 

Life and Pension Plan Technical Provisions 

228,269 

224,253 

207,052 

1.8 

10.2 

Capitalization Bond Technical Provisions 

7,702 

7,563 

7,431 

1.8 

3.6 

Non-controlling Interest 

625 

581 

602 

7.6 

3.8 

Shareholder's Equity (1) 

33,878 

32,665 

28,942 

3.7 

17.1 

Total 

295,645 

289,368 

268,297 

2.2 

10.2 

(1) In March 2018 the shareholders equity of Bradesco Seguros S.A., which controls the operational companies (insurance, pension and capitalization), is of R$16,632 million. 

 

Consolidated Statement of Income 

         
           
       

Variation % 

R$ million 

1Q18 

4Q17 

1Q17 

1Q18 x 1Q18 x 

       

4Q17 

1Q17 

Insurance Written Premiums, Pension Plan Contributions and Capitalization Bond Income 

17,570 

21,192 

17,948 

(17.1) 

(2.1) 

Variation in Technical Provisions for Insurance, Pension Plans and Capitalization Bonds (1) 

(7,710) 

(11,015) 

(7,792) 

(30.0) 

(1.1) 

Premiums Earned from Insurance, Pension Plan Contribution and Capitalization Bond Income 

9,860 

10,177 

10,156 

(3.1) 

(2.9) 

Retained Claims 

(6,253) 

(6,178) 

(6,313) 

1.2 

(1.0) 

Capitalization Bond Draw s and Redemptions 

(1,265) 

(1,321) 

(1,300) 

(4.2) 

(2.7) 

Selling Expenses 

(827) 

(805) 

(916) 

2.7 

(9.7) 

Income from Insurance, Pension Plans and Capitalization Bonds 

1,515 

1,873 

1,627 

(19.1) 

(6.9) 

General and Administrative Expenses 

(690) 

(824) 

(702) 

(16.3) 

(1.7) 

Tax Expenses 

(205) 

(222) 

(247) 

(7.7) 

(17.0) 

Other Operating Income / Expenses 

410 

294 

69 

39.5 

- 

Operating Income 

1,030 

1,121 

747 

(8.1) 

37.9 

Financial Results 

1,612 

1,474 

1,499 

9.4 

7.5 

Equity Results 

157 

155 

194 

1.3 

(19.1) 

Income before Taxes and Profit Sharing 

2,799 

2,750 

2,440 

1.8 

14.7 

Taxes and Contributions 

(1,150) 

(1,312) 

(1,006) 

(12.3) 

14.3 

Profit Sharing 

(26) 

(24) 

(23) 

8.3 

13.0 

Non-controlling interests in subsidiaries 

(60) 

(7) 

(37) 

- 

62.2 

Net Income 

1,563 

1,407 

1,374 

11.1 

13.8 

(1) Includes reinsurance premiums. 

         

Note: For comparison purposes, the effects of non-recurring events are not considered. 

         


 

 

Income Distribution of Grupo Bradesco Seguros e Previdência

 

Written Premiums, Pension Plan Contributions and Capitalization Bond Income

 

In the 1Q18 the turnover did not show the same performance when compared to the previous quarter due to the volume of the private pension contributions, which has an important seasonality, in the last quarter of each year.

In comparison to the 1Q17, the turnover was impacted by the lower performance of the line of “life and pension plans”, decreased 5.4%. In the same period, we highlight the “health” product, which presented a growth of 4.9%.


 

 



 

 

Life and pension plans

The net income for the 1Q18 was in line with the results for the previous quarter. It is worth noting that the maintenance of claims ratio and the efficiency ratio indexes, whose contribution compensated for the decrease of 29.2% in the turnover of the line, was a consequence of the seasonality of the 4Q17, and the decrease in the financial results, a reflection of the behavior of the economic-financial ratios in the period.

In the last 12 months the net income increased 19.9%, due to the increase in the commercialization ratio and maintenance of the administrative efficiency ratio. These factors compensated for the lower turnover, the increase in the claims ratio, and the decrease in the financial results, a reflection of the behavior of the economic-financial behavior in the period.

Evaluation of Participants and Life and Personal Accident Policyholders

Health

The net income of 1Q18 remained stable in the annual comparison and recorded an 14.1% increase in relation to the previous quarter, due to greater revenue, improvement in the efficiency ratio and increase in the financial and equity results.

Number of Bradesco Saúde and Mediservice Policyholders

 
 


 

 

Net income increased in the quarterly and annually comparison. The improvement presented was due to the increase in the operating incomes and administrative efficiency ratio.

The growth of profit reflects the improvement of the claims, efficiency and commercialization ratios, mainly in property & casualty. The transfer of the portfolio of large risks to Swiss RE impacted the decrease in turnover, in comparison to the 1Q17.

 


 


Below is the composition of fee and commission income in the respective periods:

       

Variation % 

As %

1Q18 

R$ million 

1Q18 

4Q17 

1Q17 

1Q18 x 

1Q18 x 

 

 

   

4Q17 

1Q17 

Card Income 

2,763 

2,949 

2,637 

(6.3) 

4.8 

35.3 

Checking Account 

1,748 

1,727 

1,601 

1.2 

9.2 

22.3 

Asset Management 

994 

944 

912 

5.3 

9.0 

12.7 

Loan Operations 

724 

761 

731 

(4.9) 

(1.0) 

9.2 

Collections and Payments 

612 

613 

586 

(0.2) 

4.4 

7.8 

Consortium Management 

383 

389 

369 

(1.5) 

3.8 

4.9 

Custody and Brokerage Services 

234 

226 

211 

3.5 

10.9 

3.0 

Underw riting / Financial Advisory Services 

153 

245 

180 

(37.6) 

(15.0) 

2.0 

Other 

220 

208 

203 

5.8 

8.4 

2.8 

Total 

7,831 

8,062 

7,430 

(2.9) 

5.4 

100.0 

Business Days 

61 

61 

63 

- 

(2) 

- 

 

Highlights

The evolution of the fee and commission income in 12 months reflects the good performance of practically all the lines, even with the lower number of business days in the period. The quarterly behavior reflects the seasonal effect of the end of the year, which impacted mainly on the income from the card activities, and the lower activity of the capital market, which affected the performance of the income from underwriting / financial advice. The results obtained with the fee and commission income shows signs of improvements in the management and the higher offer of products and services, widely available in the digital channels, in addition to the traditional channels, as well as with benefits of the process of segmentation of clients and the gains in synergies related to the acquisition of HSBC Brasil.

Below are some highlights that influence the results of the income from the provision of services:

o Cards – growth in the 12 months resulted in the increase of the volume and of the transactions made in the period and higher income with the annual fee, due to the end of the period of exemptions at the beginning of the relationship.

o Checking account – growth in the periods observed is a reflection of the improvement in the management of the portfolio of services provided, highlighting the continuous improvement process, which aims to improve and expand the variety of products offered to clients according to their segmentation.

o Asset Management – good performance resulting from the increase in the volume of the funds and portfolios managed, highlighting the multimarket funds.

o Loan Operations – this line was impacted by the lower income from commissions on guarantees offered (sureties and guarantees).

o Consortium – good performance due to the increase in the sales made, receipt from bids and average price, ensuring the leadership of Bradesco Consórcios in the segments in which it operates (real estate, auto and trucks/machinery and equipment).

o Custody and Brokerage Services – growth in the quarter and in the 12 months, resulting from the increment of the total assets in custody and higher volumes of securities traded.


 

 

Personnel and Administrative Expenses 

           
             
       

Variation %

As of %

1Q18

R$ million 

1Q18 

4Q17 

1Q17 

1Q18 x 

1Q18 x 

 

 

   

4Q17 

1Q17 

Personnel Expenses 

 

 

 

 

 

 

Structural 

3,879 

4,025 

3,946 

(3.6) 

(1.7) 

40.2 

Payroll/Social Charges 

2,757 

2,882 

2,820 

(4.3) 

(2.2) 

28.6 

Benefits 

1,122 

1,143 

1,126 

(1.8) 

(0.4) 

11.6 

Non-Structural 

950 

853 

876 

11.4 

8.4 

9.9 

Management and Employee Profit Sharing 

466 

486 

506 

(4.1) 

(7.9) 

4.8 

Provision for Labor Claims 

407 

266 

167 

53.0 

143.7 

4.2 

Training 

21 

44 

31 

(52.3) 

(32.3) 

0.2 

Termination Costs 

56 

57 

172 

(1.8) 

(67.4) 

0.6 

Total 

4,829 

4,878 

4,822 

(1.0) 

0.1 

50.1 

Administrative Expenses 

 

 

 

 

 

 

Outsourced Services 

1,143 

1,279 

1,195 

(10.6) 

(4.4) 

11.9 

Depreciation and Amortization 

713 

687 

681 

3.8 

4.7 

7.4 

Data Processing 

570 

636 

563 

(10.4) 

1.2 

5.9 

Communication 

436 

463 

484 

(5.8) 

(9.9) 

4.5 

Rent 

304 

302 

306 

0.7 

(0.7) 

3.2 

Asset Maintenance 

290 

355 

294 

(18.3) 

(1.4) 

3.0 

Advertising and Marketing 

256 

414 

170 

(38.2) 

50.6

2.7 

Financial System Services 

240 

251 

258 

(4.4) 

(7.0) 

2.5 

Security and Surveillance 

195 

198 

211 

(1.5) 

(7.6) 

2.0 

Transportation 

189 

206 

189 

(8.3) 

- 

2.0 

Utilities (Water, Electricity and Gas) 

106 

105 

114 

1.0 

(7.0) 

1.1 

Travel 

54 

92 

51 

(41.3) 

5.9 

0.6 

Materials 

59 

74 

77 

(20.3) 

(23.4) 

0.6 

Other 

255 

278 

261 

(8.3) 

(2.3) 

2.6 

Total 

4,810 

5,340 

4,854 

(9.9) 

(0.9) 

49.9 

Total Operating Expenses 

9,639 

10,218 

9,676 

(5.7) 

(0.4) 

100.0 

Customer Service Points 

74,126 

73,474 

72,726 

0.9 

1.9 

- 

 

Personnel Expenses the reductions observed in the structural part are related, largely, to the effects of the Special Voluntary Severance Program Scheme PDVE, which started in August 2017, accepted by 7,400 employees, we also highlight the impact of the collective agreement in the annual comparison. In the non-structural part, the increase of expenses in the periods observed is a result of the higher expenses with the provision for labor claims, associated in part the high number of lawsuits filed at the end of 2017, probably, anticipating the entry into force of the labor reform.

Administrative Expenses the lower administrative expenses in the last 12 months, recorded in practically all of the lines, even considering inflation of the period, demonstrates the gains in synergy resulting from the acquisition of HSBC Brasil and the strategy of optimization of the points of service.


 

 


The coverage ratio presented an improvement for the third consecutive quarter, capturing the PDVE benefits, the revenue gained from the synergy of the acquisition of HSBC Brasil and the strategy of optimization of the points of service. We also highlight the higher fee and commission income from the provision of services, which have been capturing the positive results of the process of segmentation of clients and the efficiency obtained in the management and offer of products and services.

Other Operating Expenses, Net of Income

Other Operating Expenses, Net of Income presented a growth of 5.9% in the quarter and 11.1% in the last 12 months, due to higher variable expenses, mainly those related to the performance of strategic partnerships of the segment of credit cards and constitution of operating provisions.

Basel Ratio

A large part of the reduction of capital tier I is related to the change in the schedule of application of deductions on the prudential adjustments, which went from 100% in 2018 (80% in 2017). The internal generation capital (net profit), continues with high contribution to the indicator.

 


 

 

 

 

             

Variation % 

R$ million 

1Q18 

4Q17 

3Q17 

2Q17 

1Q17 

4Q16 

3Q16 

2Q16 

1Q18 x

 1Q18 x 

 

 

             

4Q17 

1Q17 

Income Statement for the Period 

 

 

 

 

 

 

 

 

 

 

Recurring Net Income (1) 

5,102 

4,862 

4,810 

4,704 

4,648 

4,385 

4,462 

4,161 

4.9 

9.8 

Total Net Interest Income 

15,686 

15,813 

15,361 

15,892 

16,036 

16,440 

16,931 

14,962 

(0.8) 

(2.2) 

Gross Credit Intermediation Margin 

11,690 

12,129 

12,119 

12,517 

12,781 

13,586 

13,802 

11,570 

(3.6) 

(8.5) 

Net Credit Intermediation Margin 

7,798 

6,724 

7,540 

7,139 

7,499 

7,290 

8,060 

6,546 

16.0 

4.0 

Expanded Allowance for Loan Losses (ALL) Expenses 

(3,892) 

(5,405) 

(4,579) 

(5,378) 

(5,282) 

(6,296) 

(5,742) 

(5,024) 

(28.0) 

(26.3) 

Fee and Commission Income 

7,831 

8,062 

7,822 

7,496 

7,430 

7,545 

7,450 

6,624 

(2.9) 

5.4 

Administrative and Personnel Expenses 

(9,639) 

(10,218) 

(9,863) 

(9,865) 

(9,676) 

(10,482) 

(10,267) 

(8,152) 

(5.7) 

(0.4) 

Insurance Written Premiums, Pension Plan Contributions and Capitalization Bond Income 

17,570 

21,192 

18,637 

18,512 

17,948 

21,247 

17,733 

17,253 

(17.1) 

(2.1) 

Statement of Financial Position 

 

 

 

 

 

 

 

 

 

 

Total Assets (2) 

1,303,842 

1,298,328 

1,311,672 

1,291,184 

1,294,139 

1,293,559 

1,270,139 

1,105,244 

0.4 

0.7 

Securities 

585,837 

584,650 

572,099 

540,106 

549,700 

549,873 

509,184 

437,580 

0.2 

6.6 

Expanded Loans Portfolio 

486,645 

492,931 

486,864 

493,566 

502,714 

514,990 

521,771 

447,492 

(1.3) 

(3.2) 

- Individuals 

177,814 

175,469 

172,207 

172,045 

171,820 

172,045 

171,067 

148,919 

1.3 

3.5 

- Companies 

308,831 

317,462 

314,657 

321,521 

330,894 

342,945 

350,704 

298,573 

(2.7) 

(6.7) 

Allowance for Loan Losses (ALL) 

(35,763) 

(36,527) 

(36,557) 

(37,536) 

(39,181) 

(40,714) 

(40,416) 

(31,875) 

(2.1) 

(8.7) 

Total Deposits 

271,391 

265,278 

259,577 

260,120 

235,432 

234,214 

239,937 

179,436 

2.3 

15.3 

Technical Provisions 

251,231 

246,653 

239,287 

233,640 

229,433 

223,342 

213,608 

190,649 

1.9 

9.5 

Shareholders' Equity 

113,776 

110,457 

110,301 

106,807 

104,558 

100,442 

98,550 

96,358 

3.0 

8.8 

Assets under Management 

2,003,948 

1,987,487 

1,991,708 

1,917,827 

1,943,687 

1,904,912 

1,865,755 

1,589,319 

0.8 

3.1 

Performance Indicators (%) 

 

 

 

 

 

 

 

 

 

 

Recurring Net Income per Share - R$ (3) (4) 

2.91 

2.84 

2.77 

2.72 

2.64 

2.56 

2.58 

2.59 

2.4 

10.3 

Book Value per Common and Preferred Share - R$ (4) 

17.00 

16.50 

16.48 

15.96 

15.62 

15.01 

14.72 

14.40 

3.0 

8.8 

Annualized Return on Average Equity (5) (6) 

18.6 

18.1 

18.1 

18.2 

18.3 

17.6 

17.6 

17.4 

0.5 p.p. 

0.3 p.p. 

Annualized Return on Average Assets (6) 

1.6 

1.5 

1.5 

1.4 

1.4 

1.5 

1.5 

1.5 

0.1 p.p. 

0.2 p.p. 

 

 

                 

12-month Net Interest Margin - NIM = Adjusted Net Interest Income /Average Assets Repos 

6.6 

6.7 

6.9 

7.2 

7.4 

7.6 

7.6 

7.5 

(0.1) p.p. 

(0.8) p.p. 

Permanent Assets 

 

             

 

 

Fixed Asset Ratio (7) 

43.1 

43.4 

38.9 

39.6 

42.3 

44.8 

44.4 

33.8 

(0.3) p.p. 

0.8 p.p. 

Combined Ratio - Insurance (8) 

85.3 

86.1 

86.2 

86.6 

85.2 

85.9 

90.0 

89.6 

(0.8) p.p. 

0.1 p.p. 

Efficiency Ratio (ER) (3) (11) 

40.9 

40.8 

40.7 

40.6 

40.0 

38.9 

38.2 

37.4 

0.1 p.p. 

0.9 p.p. 

Coverage Ratio (Fee and Commission Income/Administrative and Personnel Expenses) (3) 

78.8 

77.8 

75.9 

74.3 

75.3 

76.2 

78.0 

80.2 

1.0 p.p. 

3.5 p.p. 

Market Capitalization - R$ million (9) 

237,219 

200,521 

208,250 

169,618 

178,208 

160,813 

160,472 

144,366 

18.3 

33.1 

Loan Portfolio Quality - % 

 

 

 

 

 

 

 

 

 

 

ALL / Loan Portfolio - Bacen 

9.6 

9.9 

9.9 

10.0 

10.3 

10.4 

10.1 

9.3 

(0.3) p.p. 

(0.7) p.p. 

Non-performing Loans (> 60 days (10) / Loan Portfolio) 

5.4 

5.6 

5.7 

6.0 

6.7 

6.5 

6.4 

5.8 

(0.2) p.p. 

(1.3) p.p. 

Delinquency Ratio (> 90 days (10) / Loan Portfolio) 

4.4 

4.7 

4.8 

4.9 

5.6 

5.5 

5.4 

4.6 

(0.3) p.p. 

(1.2) p.p. 

Coverage Ratio (> 90 days (10)) 

219.3 

211.4 

207.7 

202.5 

182.1 

188.4 

189.1 

201.0 

7.9 p.p. 

37.2 p.p. 

Coverage Ratio (> 60 days (10)) 

179.7 

175.0 

174.6 

167.0 

154.0 

158.8 

158.3 

160.7 

4.7 p.p. 

25.7 p.p. 

Operating Limits % 

 

 

 

 

 

 

 

 

 

 

Basel Ratio - Total (7) 

15.9 

17.1 

17.7 

16.7 

15.3 

15.4 

15.3 

17.7 

(1.2) p.p. 

0.6 p.p. 

Tier I Capital 

12.4 

13.1 

13.4 

12.5 

12.0 

12.0 

11.9 

13.7 

(0.7) p.p. 

0.4 p.p. 

- Common Equity 

11.6 

12.3 

12.5 

11.6 

11.2 

11.2 

11.1 

13.7 

(0.7) p.p. 

0.4 p.p. 

- Additional Capital 

0.8 

0.8 

0.9 

0.9 

0.8 

0.8 

0.8 

- 

- 

- 

Tier II Capital 

3.5 

4.0 

4.3 

4.2 

3.3 

3.4 

3.4 

4.0 

(0.5) p.p. 

0.2 p.p. 

                     

(1)  According to the non-recurring events described on page 5 of this Economic and Financial Analysis Report; 

               

(2)  For more information, please check note 4 Balance Sheet and Managerial Statement of Income, in Complete Financial Statements of this report; 

         

(3)  In the last 12 months; 

                   

(4)  For comparison purposes, shares were adjusted in accordance with bonuses and stock splits of the period; 

               

(5)  Excluding mark-to-market effect of Available-for-Sale Securities recorded under Shareholders Equity; 

                 

(6)  Year-to-Date Adjusted Net Income; 

                   

(7)  Index calculation has followed regulatory guidelines set forth in Resolutions No. 4,192/13 (Prudential Conglomerate) and No. 4,193/13 (Basel III); 

         

(8)  Excludes additional reserves; 

                   

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

         

(10)  Overdue loans; and 

                   

(11)  ER = (Personnel Expenses Employee Profit Sharing + Administrative Expenses)/ (Net Interest Income + Fee and Commission Income + Income from Insurance + Equity in the Earnings 

   

 (Losses) of Unconsolidated and Jointly Controlled Subsidiaries + Other Operating Income Other Operating Expenses). 

               
 


 


Analytical Breakdown of Statement of Income Managerial (1) vs. Recurring (3)

1Q18 x 4Q17 

               

R$ million 

First quarter of 2018

Fourth Quarter of 2017

 

Managerial Income

Statement (1)

Reclassifications (2)

 

Non-Recurring

Events 

DRE

Managerial Income

Statement (1)

 Reclassifications (2)  

Non-Recurring 

Events 

DRE 

Net Interest Income 

17,283 

(1,597) 

- 

15,686 

15,111 

702 

- 

15,813 

Expanded ALL 

(4,599) 

707 

- 

(3,892) 

(5,413) 

8 

- 

(5,405) 

Gross Income from Financial Intermediation 

12,684 

(890) 

- 

11,794 

9,698 

710 

- 

10,408 

Income from Insurance, Pension Plans and 

 

   

 

       

Capitalization Bonds 

1,515 

- 

- 

1,515 

1,873 

- 

- 

1,873 

Fee and Commission Income 

7,835 

(4) 

- 

7,831 

8,080 

(18) 

- 

8,062 

Personnel Expenses 

(4,829) 

- 

- 

(4,829) 

(4,878) 

- 

- 

(4,878) 

Other Administrative Expenses 

(4,810) 

- 

- 

(4,810) 

(5,336) 

(10) 

6 

(5,340) 

Tax Expenses 

(1,671) 

(150) 

- 

(1,821) 

(1,527) 

(307) 

76 

(1,758) 

Equity in the earnings (losses) of unconsolidated 

 

   

 

       

and jointly controlled subsidiaries 

27 

- 

- 

27 

30 

- 

- 

30 

Other Operating Income / Expenses 

(2,789) 

95 

657 

(2,037) 

(3,957) 

1,153 

881 

(1,923) 

Operating Income 

7,962 

(949) 

657 

7,670 

3,983 

1,528 

963 

6,474 

Non-Operating Income 

(214) 

205 

- 

(9) 

(242) 

126 

100 

(16) 

Income Tax / Social Contribution and 

(3,281) 

744 

(22) 

(2,559) 

52 

(1,654) 

6 

(1,596) 

Non-controlling Interest 

 

   

 

       

Net Income 

4,467 

- 

635 

5,102 

3,793 

- 

1,069 

4,862 

(1) For more information, please check note 4 – Balance Sheet and Managerial Statement of Income, in chapter “Complete Financial Statements” of this eeport;

(2) Includes reclassifications in items from the statement of income which do not affect the Net Income, but allow a better analysis of business items, (i) hedge adjustment, which represents the partial result of derivatives used for hedge investments abroad, which in terms of Net Income, simply cancels the tax effect (IR/CS and PIS/COFINS) of this hedge strategy, in the amount of R$206 million in 1Q18 and R$1,812 million in 4Q17; and

(3) It refers to Managerial Statement of Income(1) with the reclassifications between lines, which do not affect the Net Income, and without the extraordinary events of the period.

 


 


Analytical Breakdown of Statement of Income Managerial (1) vs. Recurring (3)

1Q18 x 1Q17 

 

 

 

 

 

 

 

 

 R$ million 

First quarter of 2018 

Fisrt quarter of 2017 

 

Managerial 
Income 
Statement (1) 

Reclassifications (2) 

Non-Recurring
 Events 

DRE 

Managerial 
Income 
Statement (1) 

Reclassifications (2) 

Non-Recurring
 Events 

DRE 

Net Interest Income 

17,283 

(1,597) 

- 

15,686 

18,558 

(2,522) 

- 

16,036 

Expanded ALL 

(4,599) 

707 

- 

(3,892) 

(8,308) 

3,026 

- 

(5,282) 

Gross Income from Financial Intermediation 

12,684 

(890) 

- 

11,794 

10,250 

504 

- 

10,754 

Income from Insurance, Pension Plans and 

 

   

 

       

Capitalization Bonds 

1,515 

- 

- 

1,515 

1,627 

- 

- 

1,627 

Fee and Commission Income 

7,835 

(4) 

- 

7,831 

7,439 

(9) 

- 

7,430 

Personnel Expenses 

(4,829) 

- 

- 

(4,829) 

(4,822) 

- 

- 

(4,822) 

Other Administrative Expenses 

(4,810) 

- 

- 

(4,810) 

(4,852) 

(2) 

- 

(4,854) 

Tax Expenses 

(1,671) 

(150) 

- 

(1,821) 

(1,771) 

(1) 

- 

(1,772) 

Equity in the earnings (losses) of unconsolidated 

 

   

 

       

and jointly controlled subsidiaries 

27 

- 

- 

27 

58 

- 

- 

58 

Other Operating Income / Expenses 

(2,789) 

95 

657 

(2,037) 

(693) 

(1,736) 

596 

(1,833) 

Operating Income 

7,962 

(949) 

657 

7,670 

7,236 

(1,244) 

596 

6,588 

Non-Operating Income 

(214) 

205 

- 

(9) 

(134) 

82 

- 

(52) 

Income Tax / Social Contribution and 

(3,281) 

744 

(22) 

(2,559) 

(3,031) 

1,162 

(19) 

(1,888) 

Non-controlling Interest 

 

   

 

       

Net Income 

4,467 

- 

635 

5,102 

4,071 

- 

577 

4,648 

                 

(1) For more information, please check note 4 – Balance Sheet and Managerial Statement of Income, in chapter “Complete Financial Statements” of this report

(2) Includes reclassifications in items from the statement of income which do not affect the Net Income, but allow a better analysis of business items, particularly hedge adjustment, which represents the partial result of derivatives used for hedge investments abroad, which in terms of Net Income, simply cancels the tax effect (IR/CS and PIS/COFINS) of this hedge strategy, in the amount of R$206 million in 1Q18 and R$1,175 million in 1Q17; and

(3) It refers to Managerial Statement of Income(1) with the reclassifications between lines, which do not affect the Net Income, and without the extraordinary events of the period.

 


 

 

R$ million 

Mar18 

Dec17 

Mar17 

Variation % 

 

 

   

Mar18 x

Mar18 x

Assets 

 

 

 

Dec17 

Mar17 

Current and Long-Term Assets 

1,274,394 

1,267,893 

1,263,948 

0.5 

0.8 

Funds available 

18,098 

15,224 

12,029 

18.9 

50.5 

Interbank Investments 

140,584 

154,270 

188,117 

(8.9) 

(25.3) 

Securities and Derivative Financial Instruments 

585,837 

584,650 

549,700 

0.2 

6.6 

Interbank and Interdepartmental Accounts 

72,287 

68,197 

63,596 

6.0 

13.7 

Loan and Leasing Operations 

325,764 

324,439 

339,269 

0.4 

(4.0) 

Allow ance for Loan Losses (ALL) 

(35,763) 

(36,527) 

(39,181) 

(2.1) 

(8.7) 

Other Receivables and Assets 

167,587 

157,640 

150,418 

6.3 

11.4 

Permanent Assets 

29,448 

30,435 

30,191 

(3.2) 

(2.5) 

Investments 

2,134 

2,182 

1,726 

(2.2) 

23.6 

Premises and Equipment and Leased Assets 

7,994 

7,949 

7,802 

0.6 

2.5 

Intangible Assets 

19,320 

20,304 

20,663 

(4.8) 

(6.5) 

Total 

1,303,842 

1,298,328 

1,294,139 

0.4 

0.7 

Liabilities 

 

 

 

 

 

Current and Long-Term Liabilities 

1,187,998 

1,185,764 

1,187,569 

0.2 

0.0 

Deposits 

271,391 

265,278 

235,432 

2.3 

15.3 

Securities sold under agreements to repurchase 

295,930 

313,562 

351,263 

(5.6) 

(15.8) 

Funds from Issuance of Securities 

142,590 

135,011 

142,751 

5.6 

(0.1) 

Interbank and Interdepartmental Accounts 

26,593 

30,034 

21,126 

(11.5) 

25.9 

Borrow ings and Onlendings 

50,052 

51,669 

56,417 

(3.1) 

(11.3) 

Derivative Financial Instruments 

17,064 

14,084 

13,936 

21.2 

22.4 

Technical provisions for insurance, pension plans and capitalization bonds 

251,231 

246,653 

229,433 

1.9 

9.5 

Other liabilities 

133,147 

129,473 

137,211 

2.8 

(3.0) 

Deferred Income 

370 

410 

426 

(9.8) 

(13.1) 

Non-controlling Interest in Subsidiaries 

1,698 

1,697 

1,586 

0.1 

7.1 

Shareholders' Equity 

113,776 

110,457 

104,558 

3.0 

8.8 

Total 

1,303,842 

1,298,328 

1,294,139 

0.4 

0.7 

(1) For more information, please check note 4 Balance Sheet and Managerial Statement of Income, in chapter Complete Financial Statements of this report. 

           


 

 


 

 

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Service Channels

        Variatio n % 
  Mar18  Dec17  Mar17  M ar18 x  M ar18 x 
        D ec17  M ar17 
Structural Information - Units           
Customer Service Points  74,126  73,474  72,726  0.9  1.9 
- Branches  4,708  4,749  5,122  (0.9)  (8.1) 
- PAs  3,908  3,899  3,971  0.2  (1.6) 
- PAEs  936  928  1,004  0.9  (6.8) 
- Offsite ATM Netw ork - Bradesco  58  63  97  (7.9)  (40.2) 
- Banco24Horas Netw ork  11,160  11,050  10,960  1.0  1.8 
- Bradesco Expresso (Correspondent Banks)  38,856  38,708  38,525  0.4  0.9 
- Bradesco Financiamentos  14,424  14,002  12,971  3.0  11.2 
- Losango  63  63  63  -  - 
- Branches / Subsidiaries Abroad / Representation office  13  12  13  8.3  - 
ATMs  57,168  56,849  56,679  0.6  0.9 
- Onsite Netw ork - Bradesco  35,662  35,590  36,095  0.2  (1.2) 
- Banco24Horas Netw ork  21,506  21,259  20,584  1.2  4.5 
Employees  97,593  98,808  106,644  (1.2)  (8.5) 
Outsourced Employees and Interns  14,888  15,064  16,472  (1.2)  (9.6) 
Customers - In millions           
Total Customers (1)  70.9  70.2  69.8  1.0  1.6 
Account Holders (2)  27.9  27.8  28.5  0.4  (2.1) 
Savings Accounts  57.6  63.4  58.1  (9.1)  (0.9) 
Insurance Group  53.0  53.4  50.4  (0.7)  5.2 
- Policyholders  47.3  47.6  44.7  (0.6)  5.8 
- Pension Plan Participants  2.8  2.9  2.6  (3.4)  7.7 
- Capitalization Bond Customers  2.9  2.9  3.1  -  (6.5) 
Bradesco Financiamentos  1.3  1.3  1.3  -  - 
 
(1) Excludes overlap of clients; and
(2) As per the 1Q18, we started considering the salary accounts. For the effect of comparability the previous periods, presented in this report, have been reclassified. 


Market Share of the Branches

  Mar18  Market  Mar17  Market 
Region  Bradesco  Market  Share  Bradesco  Market  Share 
North  263  1,095  24.0%  282  1,116  25.3% 
Northeast  858  3,378  25.4%  862  3,453  25.0% 
Midwest  384  1,701  22.6%  436  1,759  24.8% 
Southeast  2,446  10,701  22.9%  2,660  11,073  24.0% 
South  757  3,843  19.7%  882  3,990  22.1% 
Total  4,708  20,718  22.7%  5,122  21,391  23.9% 

 


 


Market Share in relation to the Market %

  Mar18  Dec17  Mar17 
Bacen       
Bank       
Demand Deposits  N/A  11.3  11.3 
Savings Deposits  N/A  14.1  14.1 
Time Deposits  N/A  10.8  10.3 
Loans  11.0 (1)  11.0  11.3 
Loans - Private Institutions  24.0 (1)  23.9  25.5 
Loans - Vehicles Individuals (CDC + Leasing)  13.9 (1)  13.8  13.5 
Payroll-Deductible Loans  14.2 (1)  14.1  13.6 
Consortia       
Real Estate  29.3 (1)  29.5  28.1 
Auto  31.7 (1)  31.8  30.5 
Trucks, Tractors and Agricultural Implements  16.2 (1)  16.5  17.4 
Internacional Area       
Export Market  25.6  22.4  22.1 
Import Market  23.0  21.4  20.6 
Insurance Superintendence (Susep), National Agency for Supplementary       
Healthcare (ANS) and National Federation of Life and Pension Plans (Fenaprevi)       
Insurance Premiums, Pension Plan Contributions and Capitalization Bond Income  25.1 (1)  25.8  25.7 
Insurance Premiums (including Long-Term Life Insurance - VGBL)  24.5 (1)  24.9  24.9 
Life/Personal Accident Insurance Premiums  19.2 (1)  20.2  20.8 
Auto/P&C Insurance Premiums  7.8 (1)  8.8  8.6 
Auto/Optional Third-Party Liability Insurance Premiums  10.3 (1)  12.1  11.4 
Health Insurance Premiums  47.7 (1)  48.2  49.5 
Income from Pension Plan Contributions (excluding VGBL)  33.1 (1)  36.6  33.6 
Capitalization Bond Income  28.7 (1)  30.0  30.0 
Technical provisions for insurance, pension plans and capitalization bonds  26.6 (1)  26.8  27.6 
Income from VGBL Premiums  26.6 (1)  25.9  25.6 
Income from Unrestricted Benefits Pension Plans (PGBL) Contributions  29.2 (1)  34.6  29.4 
Pension Plan Investment Portfolios (including VGBL)  28.0 (1)  28.3  29.2 
Anbima       
Investment Funds and Managed Portfolios  20.9  21.5  22.2 
Social Security National Institute (INSS)/Dataprev       
Benefit Payment to Retirees and Pensioners  30.9  31.1  30.2 
Brazilian Association of Leasing Companies (ABEL)       
Lending Operations  N/A  18.7  18.4 
 
(1) Reference Date: Feb/18; and
N/A Not available.

 


 


Ratings

Fitch Ratings    
International Scale (1) National Scale 
Viability  Support  Domestic Currency  Foreign Currency  Domestic 
    Long-term  Short-term  Long-term  Short-term  Long-term  Short-term 
bb  4             
    BB  B  BB  B  AAA(bra)  F1+(bra) 
Moody´s Investors Service    
Global Scale National Scale 
Deposits - Domestic currency  Deposits - Foreign currency  Domestic Currency 
Long-term  Short-term  Long-term  Short-term  Long-term  Short-term 
Ba2  NP  Ba3  NP  Aa1.br  BR-1 
S&P Global (2) Austin Rating
Global Scale - Issuer Credit Rating  National Scale  National Scale
Foreign Currency  Domestic Currency  Issuer Credit Rating 
Long-term  Short-term  Long-term  Short-term  Long-term  Short-term (1)  Long-term  Short-term 
BB-  B  BB-  B  brAA-  brA-1+  brAAA  brA-1 
 
(1) In March 2018 there was a revision of the rating of Brazil, resulting in a downgrade to the long-term ratings, support and viability on an international scale, with an impact on the financial institutions that are evaluated at the sovereign level; and
(2) In January 2018 there was a review of Brazil s rating (sovereign), resulting in a downgrade in the ratings on a long-term global scale, affecting Brazilian banks and insurance companies that are rated at the sovereign level, from BB to BB- .

 


Bradesco controls corporate risk management in an integrated and independent manner, preserving and valuing the Board's decisions, developing and implementing methodologies, models and measurement and control tools. It also provides training to employees at every level of the Organization, from business areas to the Board of Directors.

The risk management activity structure has policies, standards and procedures, ensuring that the Organization maintains control compatible with the nature of its operations and the complexity of its products, services, activities, processes and systems, as well as the extent of its exposure to risk.

It is also composed of committees, commissions and departments that support the Board of Executive Officers and the Board of Directors in decision making. The most notable amongst these are the Integrated Risk Management and Capital Allocation Committee (COGIRAC) and Risk Committee, whose purpose is to advise the Board of Directors in the performance of its duties in the management and control of risks and capital.

Detailed information regarding to risk management process, regulatory capital as well as Bradesco's risk exposures, can be found in the Risk Management Report - Pillar 3, available on the Investors Relations website at bradescori.com.br.

 


 


 

Bradesco has an area responsible for capital management centralization, named Capital Management, subordinated to the Department of Planning, Budget and Control, which acts jointly with the Integrated Risk Control Department, associated companies, business areas and Bradesco’s supporting areas.

Additionally, this Governance is comprised of Executive Committees and one Non-Statutory Committee, which assist the Board of Directors and Board of Executive Officers in the decision-making process.

The Capital Management structure, through adequate capital sufficiency planning, aims to provide conditions for capital monitoring and control, contributing to the achievement of goals set in the strategic objectives defined by Bradesco. In addition to the Committees structure, on an annual basis, the capital plan is devised by Bradesco, which is approved by the Board of Executive Officers and Board of Directors. It is also aligned with the strategic plan and encompasses a prospective outlook of at least three years.

The process of developing this plan considers threats and opportunities, market share and development goals, capital requirement projections based on risks, as well as capital held by Bradesco. Such projections are constantly monitored and controlled by the capital management area. With the implementation of the Capital Management, a Capital Adequacy Assessment Internal Process (ICAAP), which provides conditions to assess capital sufficiency in accordance with the base and stress and extreme crisis scenarios, in a prospective outlook to identify capital and contingency actions to be taken in the respective scenarios. Capital adequacy and sufficiency information represent fundamental tools to manage and support the decision-making process.

Additional information on the capital management structure is available in the Risk Management Report – Pillar 3, and in the Integrated Report, on the Investor Relations website at bradescori.com.br.

 


According to CNSP Resolution No. 321/15, amended by Resolution No. 360/17, corporations should have an adjusted shareholders’ equity (ASE) equal to or higher than the minimum capital required (MCR). MCR is equivalent to the base capital or the risk capital, whichever is higher.

According to CNSP Resolution No. 343/16, the ASE is valued economically, and should be calculated based on shareholders’ equity or net assets, considering the accounting adjustments and adjustments associated with changes in economic values. For companies regulated by the ANS, Normative Resolution No. 373/15 establishes that corporations should have adjusted shareholders’ equity equal to or higher than the Solvency Margin.

The capital adjustment and management process is continuously monitored and aims to ensure that Grupo Bradesco Seguros keeps a solid capital base to support the development of activities and cope with the risks in any market situation, in compliance with regulatory requirements and/or Corporate Governance principles.

Companies must permanently maintain capital compatible with the risks for their activities and operations, according to the characteristics of each company belonging to Grupo Bradesco Seguros, represented by adequate capital levels. Grupo Bradesco Seguros permanently observes the limits required by the respective regulatory entities. The Minimum Capital Required in February 2018 was R$11.3 billion.

 


 
 

The table below shows the composition of the Reference Equity, of the Risk-Weighted Assets and of the Basel Ratio. From January 2018, the timetable for the application of deductions on the prudential adjustments resulted in 100% (2017 80% / 2016 60%).

        Basel III    
        Prudential Conglomerate    
R$ million Mar18 Dec17 Sept17 June17 Mar17 Dec16 Sept16 June16
Calculation Basis                 
Regulatory Capital  100,170  104,673  106,682  103,050  92,920  101,127  100,056  102,548 
Tier I  78,206  80,085  80,889  77,322  73,123  78,763  77,655  79,377 
Common Equity  73,101  75,080  75,363  71,949  67,915  73,747  72,655  79,377 
Shareholders' Equity  113,776  110,457  110,301  106,807  104,558  100,442  98,550  96,358 
Non-controlling/Other  186  69  84  39  34  61  17  18 
Phase-in arrangements provided for Resolution No 4,192/13  (40,861)  (35,446)  (35,022)  (34,898)  (36,677)  (26,756)  (25,912)  (16,999) 
Additional Capital  5,105  5,005  5,526  5,374  5,207  5,016  5,000  - 
Tier II  21,964  24,588  25,793  25,728  19,797  22,364  22,401  23,171 
Subordinated Debt (before Resolution No 4,192/13)  5,651  7,641  8,354  8,730  9,650  12,560  13,693  14,796 
Subordinated Debt (according to Resolution No. 4,192/13)  16,313  16,947  17,438  16,998  10,147  9,804  8,708  8,375 
Risk-Weighted Assets (RWA)  631,159  611,442  604,581  618,611  607,464  656,189  657,148  580,568 
Credit Risk  567,007  554,929  547,411  550,859  546,210  589,977  588,914  527,254 
Operational Risk  53,510  47,605  47,605  47,222  48,157  50,444  50,444  38,502 
Market Risk  10,642  8,908  9,564  20,530  13,097  15,768  17,791  14,813 
Total Ratio  15.9%  17.1%  17.7%  16.7%  15.3%  15.4%  15.3%  17.7% 
Tier I Capital  12.4%  13.1%  13.4%  12.5%  12.0%  12.0%  11.9%  13.7% 
Common Equity  11.6%  12.3%  12.5%  11.6%  11.2%  11.2%  11.1%  13.7% 
Additional Capital  0.8%  0.8%  0.9%  0.9%  0.8%  0.8%  0.8%  - 
Tier II Capital  3.5%  4.0%  4.3%  4.2%  3.3%  3.4%  3.4%  4.0% 
Subordinated Debt (before Resolution No 4,192/13)  0.9%  1.2%  1.4%  1.4%  1.6%  1.9%  2.1%  2.6% 
Subordinated Debt (according to Resolution No. 4,192/13)  2.6%  2.8%  2.9%  2.7%  1.7%  1.5%  1.3%  1.4% 

 


 


 

 

The Management of Banco Bradesco is comprised of the Board of Directors, which is composed of eight directors, and of its Board of Executive Officers, both with their own set of bylaws, with no fulfillment of the posts of Chairman of the Board of Directors and Chief Executive Officer, according to the statutory provision.

Eight committees advise the Board of Directors: a) statutory: (i) Audit; and (ii) Remuneration; and b) non-statutory: (iii) Ethical Conduct; (iv) Risks; (v) Internal Controls and Compliance; (vi) Integrated Risk Management and Capital Allocation – COGIRAC; (vii) Sustainability; and (viii) Succession and Nomination. Various executive committees assist the activities of the Board of Executive Officers, being all regulated by their own set of bylaws.

The Fiscal Council, permanent supervisory body, is composed of five effective members and an equal number of alternate members. Minority preferred shareholders and non-controlling shareholders, holders of common shares are responsible for chosen two effective members and their respective alternates. Besides the Fiscal Council and the Audit Committee, Bradesco is submitted to Internal Audit which reports to the Board of Directors.

In 2001, Bradesco adhered voluntarily to Level 1 of Corporate Governance of B3 and, in 2011, to the Self-Regulation Code and Best Practices of Publicly Traded Companies – ABRASCA. Further information is available on Bradesco’s Investor Relations website (bradescori.com.br – Corporate Governance Section).

 

The Senior Management and all the employees are committed to compliance with the laws and regulations applicable to activities, as well as the conduct of business by observing high standards of conduct and ethics. To ensure these commitments there are policies, standards, processes and systems for the monitoring of conduct, channels and mechanisms for handling complaints, in addition to a specific area for responses throughout the program. These components are supported by Committees linked to the Board of Directors, such as Ethical Conduct, Integrated Risk Management and Capital Allocation, Internal Controls and Compliance and supported by training and capacity building actions developed by Unibrad – Bradesco University for all the professionals, focused on the themes of Conduct, Controls and Compliance.

In meeting the best practices of corporate governance, the Bradesco Organization adopts its own program of integrity which is composed by a set of policies, standards and procedures aimed at for the prevention, monitoring, detection and response in relation to harmful acts foreseen in Law No. 12,846/13 and international laws, especially the Foreign Corrupt Practices Act and the United Kingdom Bribery Act.


The commitment to transparency, democratization of information, punctuality and the pursuit of the best practices are essential factors and are constantly reinforced by Bradesco’s Investor Relations area.

In the first quarter of 2018, there were 34 events promoted with national and international investors, through conferences, meetings, conference calls and institutional presentations, assisting 360 investors. It also held two teleconferences of results to institutional investors.

Also seeking to provide information more dynamically and intuitively, making the navigation in the virtual environment more assertive, Bradesco launched, in January 2018, the new Investor Relations website, which can be accessed on the address banco.bradesco/ri. The new virtual environment also has the characteristic of being responsive, allowing access to the same content through different devices.

Another highlight of the quarter was the publication of the Integrated Report, concerning the year of 2017. This document brings the main practices, results and challenges of the Organization throughout the year, as well as its strategic vision for the future. For the first time, following best market practices, we have created the document in its summarized version, which makes the reading more appealing. The version in the website format that offers even greater detail of indicators and related topics is scheduled for the end of April 2018.



 


 

Bradesco seeks to include sustainability in the business with the aim of increasing its capacity to thrive in the long term in a competitive and dynamic business environment. The perception that we are moving towards a transition to a new economy, more aligned with the development challenges that we face, leads us to incorporate social and environmental aspects in the management of risks and opportunities, in order to ensure positive results and the generation of shared value.

The commitment to sustainability is also reinforced in the establishment of dialogs with various stakeholders, through adherence to corporate initiatives and voluntary commitments, such as: Global Compact Initiatives, Goals of Sustainable Development, Equator Principles, Carbon Disclosure Project – CDP (Climate Initiative), Principles for Responsible Investment (PRI), Businesses for the Climate (EPC), CEBDS (Brazilian Business Center for Sustainable Development), among others.

The main decisions and monitoring of the strategy of sustainability are conducted by the Sustainability Committee, coordinated by the Chairman of the Board of Directors and with the participation of the Chief Executive Officer, as well as members of the Board of Directors and of the Board of Executive Officers.

The Organization also has a Sustainability Committee composed of executives and officers from several areas, responsible for proposing strategies and solutions that promote the application of best practices of sustainability.

The performance of the activities of sustainability of the Organization is reflected in the external assessments of the main indexes of Sustainability, such as the Dow Jones Sustainability Index (DJSI) – “World and Emerging Markets”, the New York Stock Exchange, the Corporate Sustainability Index (ISE), and the Carbon Efficient Index (ICO2), both of B3.

Leader in Sustainability

Banco Bradesco was featured in the Bronze category of the Sustainability Yearbook 2018 of RobecoSAM that highlights the leading banks in sustainability, according to Dow Jones Sustainability Indices. 2,479 companies were evaluated from all over the world, belonging to 60 sectors. In the banking sector, 165 companies have undergone evaluation.

Fundação Bradesco

With a broad social and educational program in place for 61 years, Fundação Bradesco operates 40 schools across Brazil. In 2018, an estimated budget of R$664.717 million will benefit approximately 97,385 students enrolled in its schools at the following levels: basic education (from kindergarten to high school and higher secondary technical-professional education), youth and adult education; and preliminary and continuing vocational training, which focuses on creating jobs and income.  Quality education free of charge, as well as uniforms, school supplies, meals, medical and dental assistance, will be ensured for more than 42 thousand students enrolled in the Basic Education system. It is estimated that more than 630 thousand students will also benefited with distance learning system (EaD), through its e-learning portal "Escola Virtual" (Virtual School). These students will conclude at least one of the various courses offered in its schedule, and another 11,987 students will benefit from projects and initiatives carried out in partnership with the Educa+Ação Program, and from Technology courses.


 

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To

Board of Directors and Shareholders of Banco Bradesco S.A. Osasco SP

We were engaged by Banco Bradesco S.A. ("Bradesco") to report on the consolidated supplementary accounting information of Banco Bradesco S.A. as of March 31, 2018 and for the three month period then ended, in the form of a limited assurance conclusion if, based on our engagement performed, described in this report, nothing has come to our attention that causes us to believe that the supplementary accounting information included within the Economic and Financial Analysis Report are not presented, in all material respects, based on the information referred to in the Criteria for preparing the supplementary accounting information paragraph.

Responsibilities of the Management of Bradesco

Management of Bradesco is responsible for preparing and adequately presenting the consolidated supplementary accounting information included within the Economic and Financial Analysis Report based on the criteria for the preparation of the supplementary accounting information described below, and for other information contained within this report, as well as the design, implementation and maintenance of internal controls that management determined as necessary to allow for such information that is free from material misstatement, whether due to fraud or error.

Independent Auditor´s Responsibility

Our responsibility is to review the supplementary accounting information included within the Economic and Financial Analysis Report prepared by Bradesco and to report thereon in the form of a limited assurance conclusion based on the evidence obtained. We conducted our engagement in accordance with the NBC TO 3000 - Assurance Engagement Other than Audit and Review (ISAE 3000). That standard requires that we comply with ethical requirements, including independence requirements, and plan and perform our procedures to obtain a meaningful level of limited assurance about whether we did not became aware of any fact that could lead us to believe that the supplementary accounting information included within the Economic and Financial Analysis Report are not presented, in all material respects, to the information referred to in the Criteria for preparing the supplementary accounting information paragraph.

The procedures selected were based on our understanding of the consolidated supplementary accounting information included within the Economic and Financial Analysis Report, as well as other circumstances of our work and our consideration of other areas that may contain material misstatements, regardless of whether they are caused by fraud or error. However, such procedures do not include investigation or detection of fraud or error.

Limited assurance is less than absolute assurance and reasonable assurance. Procedures to gather information to a limited assurance engagement are more limited than to a reasonable assurance engagement and, therefore, we obtain less assurance than a reasonable assurance engagement; consequentely, we do not express neither an audit opinion nor a reasonable assurance over the supplementary accounting information included within the Economic and Financial Analysis Report.


 


Our conclusion does not contemplate aspects related to any prospective information contained within the Economic and Financial Analysis Report, nor offers any guarantee if the assumptions used by Management to provide a reasonable basis for the projections presented. Therefore, our report does not offer any type of assurance on the scope of future information (such as goals, expectations and ambitions) and descriptive information that is subject to subjective assessment.

Criteria for Preparing the Supplementary Accounting Information

The consolidated supplementary accounting information disclosed within the Economic and Financial Analysis Report, as of March 31, 2018 and for the three month period then ended has been prepared by the Management of Bradesco, based on the information contained in the March 31, 2018 intermediate consolidated financial statements and the accounting information adjusted to the criteria described in Note 4 of such intermediate consolidated financial statements, in order to facilitate additional analysis, without, however, being part of the intermediate consolidated financial statements disclosed on this date.

Conclusion

Our conclusion has been formed on the basis of, and is limited to the matters outlined in this report.

Based on the procedures performed we did not became aware of any fact that lead us to believe that the consolidated supplementary accounting information included within the Economic and Financial Analysis Report are not presented, in all material respects, in accordance with the information referred to in the Criteria for preparing the supplementary accounting information paragraph.

Osasco, April 25, 2018

 

KPMG Auditores Independentes
CRC 2SP028567/O-1 F SP
Original report in Portuguese signed by

Rodrigo de Mattos Lia
Accountant CRC 1SP252418/O-3


 

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

 

Management Report

 

Dear Shareholders,

We hereby present the Consolidated Financial Statements of Banco Bradesco S.A. related to the year ended on March 31, 2018, prepared in accordance with the accounting practices used in Brazil and applicable to institutions authorized to operate by the Central Bank of Brazil.

The gradual recovery of the Brazilian economy was maintained at the beginning of this year, with an emphasis on household consumption and investments. There was no deterioration in the trajectory of inflation; on the contrary, the benign scenario for prices has generated a downward trend in interest. Despite the recent episodes of volatility, the foundations of the world economy remain solid, with the resumption of investments and the maintenance of the prices of the main commodities at high levels.

Among the major events at Bradesco Organization in the first quarter, the following are the most noteworthy:

On March 13, in the Board of Directors’ Meeting, Mr. Octavio de Lazari Junior, a professional with nearly 40 years of work dedicated to the Organization, assumed the Presidency of the Bank's Board of Executive Officers succeeding Mr. Luiz Carlos Trabuco Cappi who, after 9 years he left the Board of Executive Officers and was reappointed to the Presidency of the Board of Directors in a role for which he had been elected on October 10, 2017.

Bradesco presented, in the first quarter, a Net Income of R$4.467 billion, equivalent to R$0.67 per share and profitability of 16.3% over the average Shareholders’ Equity. The return on Average Total Assets was 1.5%.

In terms of Interest on Own Capital, R$1.788 billion was destined to the shareholders, in gross values, in the period between January and March 2018, wherein R$331 million was paid monthly and R$1.457 billion provisioned.

Taxes and contributions including pensions, paid or provisioned, totaled R$7.976 billion in the quarter, of which R$3.349 billion is related to taxes withheld and collected from third parties and R$4.627 billion calculated based on the activities developed by the Bradesco Organization, equivalent to 103.6% of the Net Income.

At the end of the first quarter this year, the paid-up Share Capital totalled R$67.100 billion, which includes the increase of R$8.0 billion, with a bonus of 10.0% in shares, through the use of part of the balance of the account "Reserves from Profits – Statutory Reserve", decided in the Special Shareholders' Meeting held on March 12, 2018, and approved by the Central Bank of Brazil on March 16.

With this, the interest on own capital related to the month of May 2018, to be paid on June 1, 2018, will be incremented by 10.0%. Added to the Equity Reserves of R$46.676 billion, it resulted in a Shareholders’ Equity of R$113.776 billion, with a growth of 8.8% on the same period of the previous year, corresponding to the equity value of R$17.00 per share.

The Market Value of Bradesco, based on the calculation of the listing of its shares, reached R$237.219 billion on March 31, 2018, equivalent to 2.1 times the Accounting Shareholders’ Equity. 

Managed Shareholders’ Equity is equivalent to 9.3% of the Consolidated Assets, totaling R$1.231 trillion, an increase of 3.5% compared to the same period of the previous year. As consequence, the basel reached 15.9%, higher than the minimum of 11.0% regulated by Resolution No. 4,193/13 of the National Monetary Council, according to the Basel Committee. At the end of the quarter, the immobilization index, compared to the Reference Equity, reached 43.1% in the Prudential Conglomerate, within the maximum limit of 50.0%, established by the Central Bank of Brazil.

As provided by Article 8 of the Circular Letter No. 3,068/01 of the Central Bank of Brazil, Bradesco declares that it has the financial capacity and the intention of holding to maturity the securities classified under “held to maturity securities”.

On March 31, 2018, the resources funded and managed amounted to R$1.933 trillion, 4.9% higher than the previous year,  distributed as:

R$500.543     billion in Demand Deposits, Time Deposits, Interbank Deposits, Savings Accounts and Securities Sold Under Agreements for Repurchase;

R$841.983    billion in assets under management, comprising Investment Funds, Managed Portfolios and Third-Party Fund Quotas, a 7.1% increase;

R$305.498    billion in the Exchange Portfolio, Borrowings and Onlendings in Brazil, Working Capital, Tax Payments and Collection and Related Charges, Funds From Issuance of Securities in Brazil, and Subordinated Debt in Brazil, a 1.3% increase.

 

50  Economic and Financial Analysis Report – March 2018


 
 

 

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

 

Management Report

 

R$251.231   billion in Technical Provisions for Insurance, Pension Plans and Capitalization Bonds, up by 9.5%; and

 

R$33.843      billion in Foreign Funding, through public and private issues, Subordinated Debt Overseas, Securitization of Future Financial Flows and Borrowings and On-lendings Overseas, equivalent to US$10.182 billion.

 

The expanded concept of the consolidated credit operations totaled R$486.645 billion in the end of the quarter, covering:

 

R$117.428     billion in Consumption Finance, which includes R$32.982 billion of credit receivables from Credit Cards and R$45.281 billion in Consigned Loans;

 

R$72.676       billion of Sureties and Guarantees;

 

R$22.253       billion regardingoperations of transfer of internal and external resources, originating mainly from the BNDES - Banco Nacional de Desenvolvimento Econômico e Social (National Bank for Social and Economic Development), excelling as one of the main distributing agents of loans;

 

R$2.114         billion in Leasing;

 

R$21.250       billion in business in the Rural Area;

 

R$11.955       billion in Advance Payments on Exchange Contracts, for a Portfolio in the amount of US$10.263 billion of Financing for Export; and

 

US$1.641      billion of operations in Import Finance in Foreign Currencies.

 

The balance of the Real Estate Credit Portfolio was R$60.282 billion, whereby R$34.396 billion was intended for Individuals and R$25.886 billion for Legal Entities, and a total of 174,090 units financed.

 

 

The consolidated balance of provision for credit losses amounted to R$35.669 billion, equivalent to 9.6% of the total volume of credit operations, with R$6.887 billion of surplus provision in relation to the minimum required by the Central Bank of Brazil.

Operating as an Investment Bank of the Organization, BBI advises clients on primary and secondary issuing of shares, merger transactions, purchase and sale of assets, structuring and distribution of debt instruments, such as debentures, promissory notes, CRIs, CRAs, real estate funds, FIDCs and bonds, among others, besides structured corporate finance operations and the financing of projects under the modality of Project Finance. In the quarter, transactions were made with a volume of over R$33.096 billion.

BRAM - Bradesco Asset Management S.A. DTVM, one of the largest private holding of investment funds in Brazil, offers solutions of differentiated and appropriate investments to all profiles of clients, ensuring the highest standard of quality in services. It has among its biggest clients the main segments of Bradesco, like Prime, Corporate, Private, Varejo (Retail), Bradesco Empresas and Grupo Bradesco Seguros (Insurance Group), in addition to Institutional Investors in Brazil and Abroad, and various Family Offices. In the first three months of the year, R$657.6 billion was accumulated under its management.

Grupo Bradesco Seguros, reaffirming its leading market position in the areas of Insurance, Capitalization and Open Supplementary Pensions, presented on March 31, 2018 a Net Income of R$1.563 billion and Shareholders’ Equity of R$33.878 billion. The net premiums issued for insurance, pension contributions and receipts of capitalization totaled R$17.570 billion, a decrease of 2.1% compared to the previous year.

The Service Network of the Bradesco Organization is present, with an extensive and modern structure, throughout the national territory and in some strategic localities abroad.  At the end of the quarter, there were 74,126 points of service, distributed as follows:

     8,616       Branches and PAs (Service Branches) in Brazil (Branches:  Bradesco – 4,702, Banco Bradesco Cartões - 1, Banco Bradesco Financiamentos - 2, Banco Bradesco BBI - 1, Banco Bradesco BERJ -1 and of Banco Alvorada - 1; and PAs: 3,908);

      3              Branches abroad, with one Bradesco in New York, one Bradesco in Grand Cayman and one subsidiary Banco Bradesco Europa in London;

 

Bradesco  51


 
 

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

 

Management Report


10              Overseas Subsidiaries and Representation Office (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; Cidade Capital Markets Ltd. in Grand Cayman, and Bradescard Mexico, Sociedad de Responsabilidad Limitada in Jalisco; and  Representative Office, in Miami);

 

14,424      Service points of Bradesco Financiamentos, with 1,005 posts for Payroll Loans and 13,419 dealer/reseller posts for Vehicle Financing;

 

38,856      Bradesco Expresso service points;

 

936            In-company electronic service branches;

 

63              Losango service points;

 

58              External Terminals in the Bradesco Network; and

 

11,160      ATMs in the Banco24Horas Network, with 29 terminals shared by the networks.

In parallel, it provided 35,662 ATMs, strategically distributed nationwide, and also has recycling machines with the unprecedented benefit of immediate deposit, aside from the 21,506 ATMs of the Banco24Horas network.

By means of Digital Channels, such as Internet Banking, Bradesco Celular, Fone Fácil(Easy Phone) and Social Networks, clients have access to various products and services of the Bank, at any place and time, with comfort, convenience and security.

And rounding out its Network, Bradesco currently has four major Digital Platforms, which serve clients from the “Exclusive” and “Prime” segments invited by the Bank, and those who have requested migration to the units because their relationship profiles are primarily digital. It also has the Bradesco Private Bank Digital Branch, enabling clients in all regions of Brazil to centralize their relationship both in their investments and in the banking account in a single segment.

The “next” platform, Bradesco’s 100% stand-alone digital platform, launched in 2017, interactively relates to users based on their behavior, and transforms money management into smart pathways toward one’s goals, with the best customer experience. Available to the hyperconnected public, it enables integrated solutions – through mobile applications – ensuring users the freedom to carry out account transactions spontaneously.

The Bradesco Organization, in accordance with Instruction No. 381/03 of the Brazilian Securities and Exchange Commission, declares that, it did not contract nor have services provided by KPMG Auditores Independentes in the quarter that were not related to the external audit at a level greater than 5.0% of the total fees related to external audit services. Other services provided by the external auditors were pre-agreed procedures for review of information substantially financial, fiscal and actuarial. The Bank’s policy is in line with the principles of preserving the auditors’ independence, which is based on generally accepted international criteria, i.e. the auditors should not audit their own work, perform managerial duties for their clients or promote their customers’ interests. It is noteworthy that any eventual services not related to the external audit are submitted prior to the authorization of the Audit Committee.

In the context of Human Capital, the Organization reinforces the strategy directed to the development of programs and solutions for the technical and behavioral training and development of its employees, through UniBrad, Universidade Corporativa Bradesco (Bradesco Corporate University), in order to keep them in constant harmony with the market, increasingly more demanding and competitive. In the quarter, 812 courses were given, with 149,142 participations. The welfare benefits in the period reached 235,919 people, ensuring good wellbeing, the improvement of the quality of life and the safety of employees and their dependents.

The Fundação Bradesco, the main social action of the Organization, which focuses on educational and assistance programs, maintains 40 of its own Schools installed mainly in regions of high socio-economic deprivation, being present in all the Brazilian states and Federal District. This year, its budget is predicted to be R$664.717 million, whereby R$575.071 million is destined to cover Expenses of the Activities and R$89.646 million investments in Infrastructure and Educational Technology, which allows the institution to offer free, quality education to a) 97,385 students enrolled in its schools at the following levels: Basic Education (Kindergarten to High School) and Vocational Training (High School level);

 

52  Economic and Financial Analysis Report – March 2018


 
 

 

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

 

Management Report

 

To support the development of children and teenagers through the teaching of women's volleyball and basketball, the Programa Bradesco Esportes(Bradesco Sports Program) has, in the Municipality of Osasco, SP, Training and Specialist Centers. Activities are held in their own Sports Development Center, in all Fundação Bradesco’s schools, in Municipal Sports Centers, in one Municipal school, in State and private schools and in a leisure club. Annually, two thousand girls take part, from eight years old, reaffirming the Organization’s social commitment and displaying how it values talent, citizenship, as well as education, sport and health.

 

Youth and Adult Education; and Preliminary and Continuing Vocational Training, focused on creating jobs and income; b) 630 thousand students who will complete at least one of the distance-learning courses on offer (EaD), through its e-learning portal “Escola Virtu@l”; and c) 11,987 people who will benefit through partnership projects, such as Programa Educa+Ação, and Technology courses. Food, medical-dental assistance, school materials and uniform are also provided free-of-charge to the more than 42 thousand students in Basic Education.

 

The Bradesco Organization received important recognitions in the quarter, with the following highlights:

 

·        Bradesco topped the ranking of the Latin America Best Managed Banks 2018 Brazil, a survey conducted by the Euromoney magazine, which lists the best managed banks in Latin America;

 

·         For the seventh consecutive year, Bradesco is the most valuable brand in Brazilaccording to the ranking As Marcas Mais Valiosas do Brasil 2018(The Most Valuable Brands in Brazil 2018) prepared by IstoÉ Dinheiro Magazine and Kantar Consulting;

 

·      Highlighted in the award for Best Bank to Invest – MBI, Bradesco conquered first place in the categories of Best Multimarket Manager and Best Retail Manager. It also featured in the categories of Best Manager of Shares and Best Money Market Manager. The survey is conducted by the Center for Studies in Finance from the Fundação Getúlio Vargas in partnership with Fractual Consult, with publication via the Exameportal;

·           BBI was elected, for the fourth time – as third consecutive – as the Best Investment Bank in Braziland, for the first time, the Best Bank of M&A in Latin America in 2018, at the 19th edition of the Best Investment Bank Awards of the Global Finance magazine; and

·           Bram – Bradesco Asset Management – was the management company with the highest number of shareholders in 2017, according to a survey conducted by Economatica. It was also considered the largest private fund manager in 2017 in the ranking prepared by Anbima. It was also featured in the Investidor Institucional magazine, having 38 funds recognized as excellent in the ranking of Best Institutional Funds, drawn up by Morningstar.

In the first quarter we achieved good results, which reaffirm the commitment of Bradesco to surpass expectations and always offer the best. For the successes obtained, we are grateful for the support and trust of our shareholders and clients and the dedicated and efficient work of our employees and other associates.

 

Cidade de Deus, April 25, 2018

 

Board of Directors and

Board of Executive Officers

Bradesco  53


 
 

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

 

Consolidated Statement of Financial Position on March 31 – In thousands of Reais

 

Assets

2018

2017

Current

831,778,924

764,165,786

Cash and due from banks (Note 5)

17,807,399

11,831,164

Interbank investments (Notes 3d and 6)

139,717,892

187,590,965

Securities purchased under agreements to resell

133,540,153

182,028,577

Interbank investments

6,181,956

5,576,121

Allowance for losses

(4,217)

(13,733)

Securities and derivative financial instruments (Notes 3e, 3f, 7 and 34a)

369,727,244

275,995,932

Own portfolio

270,792,078

234,369,260

Subject to repurchase agreements

59,844,304

8,681,101

Derivative financial instruments (Notes 3f, 7d II and 34a)

17,817,291

18,801,187

Given in guarantee to the Brazilian Central Bank

77,083

Given in guarantee

15,212,070

12,197,912

Securities under resale agreements with free movement

6,061,501

1,869,389

Interbank accounts

70,901,622

62,661,301

Unsettled payments and receipts

958,925

Reserve requirement (Note 8):

 

 

- Reserve requirement - Brazilian Central Bank

70,813,903

61,637,022

- SFH - housing finance system

30,398

17,012

Correspondent banks

57,321

48,342

Interdepartmental accounts

177,940

141,800

Internal transfer of funds

177,940

141,800

Loans (Notes 3g, 9 and 34a)

133,666,531

138,911,292

Loans:

 

 

- Public sector

186,707

441,675

- Private sector

151,320,062

160,919,391

Loans transferred under an assignment with recourse

2,277,835

767,011

Allowance for loan losses (Notes 3g, 9f, 9g and 9h)

(20,118,073)

(23,216,785)

Leasing (Notes 2, 3g, 9 and 34a)

957,074

1,213,509

Leasing receivables:

 

 

- Private sector

1,895,410

2,425,511

Unearned income from leasing

(866,329)

(1,114,941)

Allowance for leasing losses (Notes 3g, 9f, 9g and 9h)

(72,007)

(97,061)

Other receivables

95,441,010

81,937,817

Receivables on sureties and guarantees honored (Note 9a-3)

149,906

1,272,587

Foreign exchange portfolio (Note 10a)

26,919,657

20,244,451

Receivables

1,631,542

1,451,150

Securities trading

3,385,334

1,103,820

Specific receivables

29,808

15,349

Insurance and reinsurance receivables and reinsurance assets – technical provisions

3,673,572

4,869,730

Sundry (Note 10b)

61,415,186

55,696,102

Allowance for other loan losses (Notes 3g, 9f, 9g and 9h)

(1,763,995)

(2,715,372)

Other assets (Note 11)

3,382,212

3,882,006

Other assets

2,976,856

3,015,711

Provision for losses

(1,435,481)

(1,292,310)

Prepaid expenses (Notes 3i and 11b)

1,840,837

2,158,605

Long-term receivables

369,527,973

394,872,846

Interbank investments (Notes 3d and 6)

1,152,275

417,018

Interbank investments

1,152,275

417,018

Securities and derivative financial instruments (Notes 3e, 3f, 7 and 34a)

146,831,845

172,514,409

Own portfolio

116,444,588

143,574,637

Subject to repurchase agreements

25,150,992

19,559,139

Derivative financial instruments (Notes 3f, 7d II and 34a)

550,861

90,381

Privatization rights

42,913

47,667

Given in guarantee

4,057,651

3,840,581

Securities under resale agreements with free movement

584,840

5,402,004

Interbank accounts

1,207,779

792,351

Reserve requirement (Note 8):

 

 


54
  Economic and Financial Analysis Report – March 2018

 
 

 

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

 

Consolidated Statement of Financial Position on March 31 – In thousands of Reais

 

Assets

2018

2017

- SFH - housing finance system

1,207,779

792,351

Loans (Notes 3g, 9 and 34a)

155,823,149

161,173,329

Loans:

 

 

- Public sector

4,000,000

3,000,000

- Private sector

159,784,296

163,712,997

Loans transferred under an assignment with recourse

5,616,833

7,436,120

Allowance for loan losses (Notes 3g, 9f, 9g and 9h)

(13,577,980)

(12,975,788)

Leasing (Notes 2, 3g, 9 and 34a)

1,029,404

1,158,028

Leasing receivables:

 

 

- Private sector

2,208,152

2,476,968

Unearned income from leasing

(1,122,763)

(1,254,833)

Allowance for leasing losses (Notes 3g, 9f, 9g and 9h)

(55,985)

(64,107)

Other receivables

62,673,672

57,426,870

Receivables

23,914

17,688

Securities trading

416,758

546,902

Sundry (Note 10b)

62,314,175

56,879,897

Allowance for other loan losses (Notes 3g, 9f, 9g and 9h)

(81,175)

(17,617)

Other assets (Note 11)

809,849

1,390,841

Prepaid expenses (Notes 3i and 11b)

809,849

1,390,841

Permanent assets

30,102,191

30,342,236

Investments (Notes 3j, 12 and 34a)

8,003,779

7,302,621

Equity investment in unconsolidated and jointly controlled companies:

 

 

- In Brazil

7,855,657

7,151,965

Other investments

402,857

405,409

Allowance for losses

(254,735)

(254,753)

Premises and equipment (Notes 3k and 13)

7,811,648

7,567,273

Premises

3,109,800

2,626,916

Other premises and equipment

13,148,770

12,339,805

Accumulated depreciation

(8,446,922)

(7,399,448)

Intangible assets (Notes 3l and 14)

14,286,764

15,472,342

Intangible Assets

29,098,312

26,690,889

Accumulated amortization

(14,811,548)

(11,218,547)

Total

1,231,409,088

1,189,380,868

 

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

 

Bradesco  55


 
 

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

 

Consolidated Statement of Financial Position on March 31 – In thousands of Reais

 

Liabilities

2018

2017

Current

820,529,564

816,905,150

Deposits (Notes 3n and 15a)

166,499,869

158,683,331

Demand deposits

33,186,022

30,564,866

Savings deposits

101,777,091

94,352,635

Interbank deposits

1,607,783

513,281

Time deposits (Notes 15a and 34a)

29,928,973

33,252,549

Securities sold under agreements to repurchase (Notes 3n and 15b)

224,785,922

237,622,407

Own portfolio

104,150,229

83,224,613

Third-party portfolio

110,419,012

145,111,284

Unrestricted portfolio

10,216,681

9,286,510

Funds from issuance of securities (Notes 15c and 34a)

77,106,668

90,469,564

Mortgage and real estate notes, letters of credit and others

75,742,003

89,817,333

Securities issued overseas

1,082,355

341,967

Structured Operations Certificates

282,310

310,264

Interbank accounts

20,729,285

16,678,238

Unsettled payments and receipts

19,461,159

15,371,436

Correspondent banks

1,268,126

1,306,802

Interdepartmental accounts

5,048,262

4,447,819

Third-party funds in transit

5,048,262

4,447,819

Borrowing (Notes 16a and 34a)

18,002,052

19,333,284

Borrowing in Brazil - other institutions

338

3,817

Borrowing overseas

18,001,714

19,329,467

On-lending in Brazil - official institutions (Notes 16b and 34a)

9,633,880

10,841,989

National treasury

72,879

118,317

BNDES

3,948,225

3,777,711

FINAME

5,611,265

6,944,374

Other institutions

1,511

1,587

Derivative financial instruments (Notes 3f, 7d II and 34a)

17,929,526

15,487,259

Derivative financial instruments

17,929,526

15,487,259

Technical provisions for insurance, pension plans and capitalization bonds (Notes 3o and 20)

221,009,762

200,600,838

Other liabilities

59,784,338

62,740,421

Payment of taxes and other contributions

3,340,734

4,489,835

Foreign exchange portfolio (Note 10a)

15,255,138

10,963,570

Social and statutory

1,744,328

1,793,571

Tax and social security (Note 19a)

2,429,059

2,489,552

Securities trading

4,851,997

3,255,987

Financial and development funds

1,299

1,465

Subordinated debts (Notes 18 and 34a)

6,689,788

12,805,716

Sundry (Note 19b)

25,471,995

26,940,725

Long-term liabilities

296,134,877

267,004,015

Deposits (Notes 3n and 15a)

105,158,726

76,772,007

Interbank deposits

40,116

57,634

Time deposits (Notes 15a and 34a)

105,118,610

76,714,373

Securities sold under agreements to repurchase (Notes 3n and 15b)

4,098,070

17,157,119

Own portfolio

4,098,070

17,157,119

Funds from issuance of securities (Notes 15c and 34a)

65,483,158

49,833,289

Mortgage and real estate notes, letters of credit and others

63,533,359

47,168,406

Securities issued overseas

1,787,461

2,624,632

Structured Operations Certificates

162,338

40,251

Borrowing (Notes 16a and 34a)

1,449,775

2,755,840

Borrowing in Brazil - other institutions

1,894

7,963

Borrowing overseas

1,447,881

2,747,877

On-lending in Brazil - official institutions (Notes 16b and 34a)

18,649,050

23,486,325

BNDES

8,343,772

10,496,158


56
  Economic and Financial Analysis Report – March 2018

 
 

 

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

 

Consolidated Statement of Financial Position on March 31 – In thousands of Reais

 

Liabilities

2018

2017

FINAME

10,305,278

12,990,167

Derivative financial instruments (Notes 3f, 7d II and 34a)

347,893

217,953

Derivative financial instruments

347,893

217,953

Technical provisions for insurance, pension plans and capitalization bonds (Notes 3o and 20)

30,221,487

28,831,706

Other liabilities

70,726,718

67,949,776

Tax and social security (Note 19a)

5,245,316

4,880,715

Subordinated debts (Notes 18 and 34a)

16,303,447

22,239,890

Eligible Debt Capital Instruments (Notes 18 and 34a)

23,155,027

15,800,022

Sundry (Note 19b)

26,022,928

25,029,149

Deferred income

369,743

426,172

Deferred income

369,743

426,172

Non-controlling interests in subsidiaries (Note 21)

599,011

487,081

Shareholders' equity (Note 22)

113,775,893

104,558,450

Capital:

 

 

- Domiciled in Brazil

66,261,525

58,361,600

- Domiciled overseas

838,475

738,400

Capital reserves

11,441

11,441

Profit reserves

44,581,197

44,674,403

Asset valuation adjustments

2,523,769

1,213,120

Treasury shares (Notes 22d and 34a)

(440,514)

(440,514)

Attributable to equity holders of the Parent Company

114,374,904

105,045,531

Total

1,231,409,088

1,189,380,868

 

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

                                                                                                          

Bradesco  57


 
 

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

 

Consolidated Statements of Accumulated Income on March 31 – In thousands of Reais

 

 

2018

2017

Revenue from financial intermediation

32,232,127

41,647,914

Loans (Note 9j)

16,669,718

19,089,420

Leasing (Note 9j)

72,851

74,384

Operations with securities (Note 7g)

7,331,682

12,067,080

Financial income from insurance, pension plans and capitalization bonds (Note 7g)

9,074,226

10,026,655

Derivative financial instruments (Note 7g)

(1,689,421)

(1,003,312)

Foreign exchange operations (Note 10a)

(98,572)

39,554

Reserve requirement (Note 8b)

915,561

1,360,022

Sale or transfer of financial assets

(43,918)

(5,889)

 

 

 

Expenses from financial intermediation

18,985,067

30,981,819

Retail and professional market funding (Note 15e)

9,734,119

16,619,819

Adjustment for inflation and interest on technical provisions for insurance, pension plans and capitalization bonds (Note 15e)

3,821,387

5,972,523

Borrowing and on-lending (Note 16c)

849,866

108,116

Allowance for loan losses (Notes 3g, 9g and 9h)

4,579,695

8,281,361

 

 

 

Gross income from financial intermediation

13,247,060

10,666,095

 

 

 

Other operating income (expenses)

(5,486,230)

(3,609,874)

Fee and commission income (Note 23)

6,035,809

5,788,892

Other fee and commission income

4,013,319

3,963,452

Income from banking fees

2,022,490

1,825,440

Retained premium from insurance, pension plans and capitalization bonds (Notes 3o and 20c)

17,551,922

17,894,552

Net written premiums earned

17,570,086

17,947,702

Reinsurance premiums paid

(18,164)

(53,150)

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

(7,691,410)

(7,738,291)

Retained claims (Note 3o)

(6,253,577)

(6,313,325)

Capitalization bond prize draws and redemptions (Note 3o)

(1,264,592)

(1,299,791)

Selling expenses from insurance, pension plans and capitalization bonds (Note 3o)

(827,081)

(917,365)

Payroll and related benefits (Note 24)

(4,635,373)

(4,635,886)

Other administrative expenses (Note 25)

(4,622,687)

(4,645,532)

Tax expenses (Note 26)

(1,510,122)

(1,650,878)

Share of profit (loss) of unconsolidated and jointly controlled companies (Note 12b)

427,845

428,535

Other operating income (Note 27)

1,683,928

4,603,269

Other operating expenses (Note 28)

(4,380,892)

(5,124,054)

Operating income

7,760,830

7,056,221

Non-operating income (loss) (Note 29)

(209,938)

(132,926)

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

7,550,892

6,923,295

Income tax and social contribution (Notes 33a and 33b)

(3,023,446)

(2,816,795)

Current income tax

(1,932,237)

(2,475,858)

Current Social Contribution

(1,171,740)

(1,579,557)

Deferred Tax

80,531

1,238,620

Non-controlling interests in subsidiaries

(60,725)

(35,813)

Net income

4,466,721

4,070,687

                                                                                                                                                                                                

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

                           

58  Economic and Financial Analysis Report – March 2018


 
 

 

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

 

Statements of Changes in Shareholders’ Equity - In thousands of Reais

 

Events

Capital

Capital reserves

Profit reserves

Asset valuation adjustments

Treasury shares

Retained earnings

Total

Share premium

Legal

Statutory

Balance on December 31, 2016

51,100,000

11,441

6,807,128

43,641,474

(677,116)

(440,514)

100,442,413

Capital increase with reserves

8,000,000

(8,000,000)

Asset valuation adjustments

1,890,236

1,890,236

Net income

4,070,687

4,070,687

Allocations:

 

 

 

 

 

 

 

 

   -  Reserves

203,534

2,022,267

(2,225,801)

-  Interest on Shareholders’ Equity Paid

(1,844,886)

(1,844,886)

Balance on March 31, 2017

59,100,000

11,441

7,010,662

37,663,741

1,213,120

(440,514)

104,558,450

 

 

             

Balance on December 31, 2017

59,100,000

11,441

7,540,016

42,361,997

1,884,536

(440,514)

110,457,476

Capital increase with reserves

8,000,000

(8,000,000)

Asset valuation adjustments

639,233

639,233

Net income

4,466,721

4,466,721

Allocations:

 

 

 

 

 

 

 

 

   -  Reserves

223,336

2,455,848

(2,679,184)

-  Interest on Shareholders’ Equity Paid and/or provisioned

(1,787,537)

(1,787,537)

Balance on March 31, 2018

67,100,000

11,441

7,763,352

36,817,845

2,523,769

(440,514)

113,775,893


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

Bradesco  59


 
 

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

 

Consolidated Statement of Added Value Accumulated on March 31 - In thousands of Reais

 

Description

2018

%

2017

%

1 – Revenue

33,176,043

237.2

40,963,661

303.5

1.1) Financial intermediation

32,232,127

230.5

41,647,914

308.5

1.2) Fees and commissions

6,035,809

43.2

5,788,892

42.9

1.3) Allowance for loan losses

(4,579,695)

(32.8)

(8,281,361)

(61.3)

1.4) Other

(512,198)

(3.7)

1,808,216

13.4

2 – Financial intermediation expenses

(14,405,372)

(103.0)

(22,700,458)

(168.2)

3 – Inputs acquired from third-parties

(3,650,952)

(26.1)

(3,702,850)

(27.4)

Outsourced services

(1,171,905)

(8.4)

(1,225,014)

(9.1)

Data processing

(511,878)

(3.7)

(493,609)

(3.7)

Communication

(392,501)

(2.8)

(434,663)

(3.2)

Asset maintenance

(272,070)

(1.9)

(269,760)

(2.0)

Financial system services

(241,084)

(1.7)

(259,489)

(1.9)

Advertising and marketing

(228,117)

(1.6)

(140,453)

(1.0)

Security and surveillance

(193,925)

(1.4)

(209,986)

(1.6)

Transport

(185,474)

(1.3)

(185,591)

(1.4)

Material, water, electricity and gas

(158,266)

(1.1)

(184,427)

(1.4)

Travel

(57,765)

(0.4)

(49,288)

(0.4)

Other

(237,967)

(1.7)

(250,570)

(1.9)

4 – Gross value added (1-2-3)

15,119,719

108.1

14,560,353

107.9

5 – Depreciation and amortization

(1,563,802)

(11.2)

(1,489,895)

(11.0)

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

13,555,917

96.9

13,070,458

96.8

7 – Value added received through transfer

427,845

3.1

428,535

3.2

Share of profit (loss) of unconsolidated and jointly controlled companies

427,845

3.1

428,535

3.2

8 – Value added to distribute (6+7)

13,983,762

100.0

13,498,993

100.0

9 – Value added distributed

13,983,762

100.0

13,498,993

100.0

9.1) Personnel

4,114,252

29.4

4,080,520

30.2

Salaries

2,045,003

14.6

2,177,118

16.1

Benefits

1,094,353

7.8

1,097,214

8.1

Government Severance Indemnity Fund for Employees (FGTS)

179,552

1.3

238,369

1.8

Other

795,344

5.7

567,819

4.2

9.2) Tax, fees and contributions

5,054,689

36.1

5,023,039

37.2

Federal

4,736,459

33.9

4,775,675

35.4

State

1,771

3,749

Municipal

316,459

2.3

243,615

1.8

9.3) Remuneration for providers of capital

287,375

2.1

288,934

2.1

Rental

286,568

2.0

287,286

2.1

Asset leasing

807

1,648

9.4) Value distributed to shareholders

4,527,446

32.4

4,106,500

30.4

Interest on Shareholders’ Equity Dividends paid and/or provisioned

1,787,537

12.8

1,844,886

13.7

Retained earnings

2,679,184

19.2

2,225,801

16.5

Non-controlling interests in retained earnings

60,725

0.4

35,813

0.3

                                                                                                                                                                                      

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

60  Economic and Financial Analysis Report – March 2018


 
 

 

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

 

Consolidated Statement of cash flows accrued on March 31 - In thousands of Reais

 

 

2018

2017

Cash flow from operating activities:

 

 

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

7,550,892

6,923,295

Adjustments to net income before income tax and social contribution

14,076,488

22,384,835

Effect of Changes in Exchange Rates in Cash and Cash equivalents

(167,514)

375,023

Allowance for loan losses

4,579,695

8,281,361

Depreciation and amortization

1,563,802

1,489,895

Impairment losses of assets

192,122

419,693

Expenses/ reversal with civil, labor and tax provisions

1,080,374

494,429

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

3,821,387

5,972,523

Share of profit (loss) of unconsolidated and jointly controlled companies

(427,845)

(428,535)

(Gain)/loss on sale of fixed assets

19,543

10,862

(Gain)/loss on sale of foreclosed assets

161,489

105,208

Foreign exchange variation of assets and liabilities overseas/Other

3,253,435

5,664,376

Net income before taxes after adjustments

21,627,380

29,308,130

(Increase)/Decrease in interbank investments

1,406,357

1,623,011

(Increase)/Decrease in trading securities and derivative financial instruments

6,592,353

(6,584,819)

(Increase)/Decrease in interbank and interdepartmental accounts

(891,505)

(2,322,531)

(Increase)/Decrease in loans and leasing

(7,045,883)

1,317,218

(Increase)/Decrease in insurance and reinsurance receivables and reinsurance assets

243,256

275,923

(Increase)/Decrease in other receivables and other assets

(11,359,869)

(48,633)

(Increase)/Decrease in reserve requirement - Central Bank

(4,099,677)

(3,600,491)

Increase/(Decrease) in deposits

6,451,233

1,219,660

Increase/(Decrease) in securities sold under agreements to repurchase

(4,583,552)

12,800,595

Increase/(Decrease) in borrowings and on-lending

(1,556,250)

(1,778,564)

Increase/(Decrease) in technical provisions for insurance, pension plans and capitalization bonds

757,297

117,864

Increase/(Decrease) in other liabilities

7,195,168

(1,131,315)

Increase/(Decrease) in deferred income

(39,990)

(51,013)

Income tax and social contribution paid

(3,424,500)

(3,337,493)

Net cash provided by/(used in) operating activities

11,271,818

27,807,542

Cash flow from investing activities:

 

 

Maturity of and interest on held-to-maturity securities

1,525,629

1,109,563

Sale of/maturity of and interest on available-for-sale securities

17,909,776

46,307,397

Proceeds from sale of foreclosed assets

175,944

162,577

Sale of premises and equipment

196,248

161,713

Purchases of available-for-sale securities

(35,835,882)

(43,477,016)

Purchases of held-to-maturity securities

(97,389)

(14,235)

Investment acquisitions

(1,316)

Purchase of premises and equipment

(658,920)

(334,837)

Intangible asset acquisitions

(263,263)

(305,830)

Dividends and interest on shareholders’ equity received

422,596

188,112

Net cash provided by/(used in) investing activities

(16,625,261)

3,796,128

Cash flow from financing activities:

 

 

Funds from securities issued

23,551,222

6,848,053

Settlement and Interest payments of Funds from issuance of securities

(18,169,821)

(21,357,191)

Issuance of subordinated debts

294,646

Settlement and Interest payments of subordinated debts

(4,974,473)

(3,256,468)

Interest on Shareholders’ Equity Paid

(4,487,310)

(4,451,737)

Non-controlling interest

(25,115)

2,459

Net cash provided by/(used in) financing activities

(4,105,497)

(21,920,238)

Net increase/(decrease) in cash and cash equivalents

(9,458,940)

9,683,432

Cash and cash equivalents - at the beginning of the period

156,054,442

181,230,427

Effect of Changes in Exchange Rates in Cash and Cash equivalents

167,514

(375,023)

Cash and cash equivalents - at the end of the period

146,763,016

190,538,836

Net increase/(decrease) in cash and cash equivalents

(9,458,940)

9,683,432

 

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

Bradesco  61


 
 

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

 

Index of Notes to the Consolidated Financial Statements

 

The accompanying Notes are an integral part of these Consolidated Financial Statements are distributed as follow:

Page

 

1)

OPERATIONS

63

2)

PRESENTATION OF THE CONSOLIDATED FINANCIAL STATEMENTS

63

3)

SIGNIFICANT ACCOUNTING PRACTICES

65

4)

MANAGERIAL STATEMENTS OF FINANCIAL POSITION AND STATEMENT OF INCOME BY OPERATING SEGMENT

75

5)

CASH AND CASH EQUIVALENTS

78

6)

INTERBANK INVESTMENTS

79

7)

SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS

80

8)

INTERBANK ACCOUNTS – RESERVE REQUIREMENT

91

9)

LOANS

92

10)

OTHER RECEIVABLES

102

11)

OTHER ASSETS

103

12)

INVESTMENTS

103

13)

PREMISES AND EQUIPMENT

105

14)

INTANGIBLE ASSETS

105

15)

DEPOSITS, SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND FUNDS FROM ISSUANCE OF SECURITIES

107

16)

BORROWING AND ON-LENDING

109

17)

PROVISIONS, CONTINGENT ASSETS AND LIABILITIES AND LEGAL OBLIGATIONS – TAX AND SOCIAL SECURITY

110

18)

SUBORDINATED DEBT

114

19)

OTHER LIABILITIES

115

20)

INSURANCE, PENSION PLANS AND CAPITALIZATION BONDS

116

21)

NON-CONTROLLING INTERESTS IN SUBSIDIARIES

118

22)

SHAREHOLDERS’ EQUITY (PARENT COMPANY)

118

23)

FEE AND COMMISSION INCOME

120

24)

PAYROLL AND RELATED BENEFITS

120

25)

OTHER ADMINISTRATIVE EXPENSES

120

26)

TAX EXPENSES

121

27)

OTHER OPERATING INCOME

121

28)

OTHER OPERATING EXPENSES

121

29)

NON-OPERATING INCOME (LOSS)

121

30)

RELATED-PARTY TRANSACTIONS

122

31)

RISK AND CAPITAL MANAGEMENT

124

32)

EMPLOYEE BENEFITS

132

33)

INCOME TAX AND SOCIAL CONTRIBUTION

133

34)

OTHER INFORMATION

136

                                                   

62  Economic and Financial Analysis Report – March 2018


 
 

 

Consolidated 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, through its commercial, foreign exchange, consumer financing and housing loan portfolios, carries out all the types of banking activities for which it has authorization. The Bank is involved in a number of other activities, either directly or indirectly, through its subsidiaries, specifically leases, investment banking, brokerage, consortium management, credit cards, real estate projects, insurance, pension plans and capitalization bonds. All these activities are undertaken by the various companies in the Bradesco Organization (Organization), working together in an integrated manner in the market.

 

2)      PRESENTATION OF THE CONSOLIDATED FINANCIAL STATEMENTS

 

Bradesco’s consolidated financial statements include the financial statements for Bradesco, its foreign branches and subsidiaries, in Brazil and overseas and SPEs (Special Purpose Entities) and investment funds of which the Organization's companies are the main beneficiaries or holders of the principal obligations, as established by Technical Pronouncement CPC 36 (R3), “Consolidation”. These statements were prepared in conformity with accounting practices adopted in Brazil applicable to institutions authorized to operate by the Brazilian Central Bank (Bacen), and are in conformity with accounting guidelines included in Laws No. 4,595/64 (Brazilian Financial System Law) and No. 6,404/76 (Brazilian Corporate Law), including amendments introduced by Laws No. 11,638/07 and No. 11,941/09, as they relate to the accounting for operations, complemented by the rules and instructions of the National Monetary Council (CMN), Bacen, Brazilian Securities and Exchange Commission (CVM), and where applicable, National Private Insurance Council (CNSP), Insurance Superintendence (Susep) and National Supplementary Healthcare Agency (ANS). The financial statements of the lease companies included in the consolidated financial statements were prepared using the finance lease method, under which the carrying amount of leased premises and equipment less the residual value paid in advance are reclassified.

 

Management states that it has disclosed all relevant information in the consolidated financial statements of Bradesco and that the accounting practices described above have been applied in a consistent manner in all years presented.

 

For the preparation of these consolidated financial statements, the intercompany transactions, balances of equity accounts, revenue, expenses and unrealized profits were eliminated and net income and shareholders’ equity attributable to the non-controlling interests were accounted for in a separate line. Goodwill on the acquisition of investments in associates, subsidiaries or jointly controlled companies is presented in the investments and intangible assets lines (Note 14a). The foreign exchange variation from foreign branches and investments is presented in the statement of income accounts used for changes in the value of the derivative financial instrument and borrowing and on-lending operations in order to offset these results with the hedges of these investments.

 

The financial statements include estimates and assumptions, such as: the calculation of estimated loan losses; fair value estimates of certain financial instruments; civil, tax and labor provisions; impairment losses of securities classified as available-for-sale and held-to-maturity securities and non-financial assets; the calculation of technical provisions for insurance, pension plans and capitalization bonds; and the determination of the useful life of specific assets. Actual results may differ from those based on estimates and assumptions.

 

Bradesco’s consolidated financial statements were approved by the Board of Directors on April 25, 2018.

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Notes to the Consolidated Financial Statements

 

Below are the significant directly and indirectly owned companies and investment funds included in the consolidated financial statements:

 

 

On March 31

Activity

Equity interest

2018

2017

Financial Sector – Brazil

 

 

 

Ágora Corretora de Títulos e Valores Mobiliários S.A.

Brokerage

100.00%

100.00%

Banco Alvorada S.A.

Banking

99.99%

99.99%

Banco Boavista Interatlântico S.A.(1)

Banking

-

100.00%

Banco Bradescard S.A.

Cards

100.00%

100.00%

Banco Bradesco BBI S.A.(1)

Investment bank

99.85%

99.81%

Banco Bradesco BERJ S.A.

Banking

100.00%

100.00%

Banco Bradesco Cartões S.A.

Cards

100.00%

100.00%

Banco Bradesco Financiamentos S.A.

Banking

100.00%

100.00%

Banco Losango S.A.

Banking

100.00%

100.00%

Bradesco Administradora de Consórcios Ltda.(2)

Consortium management

100.00%

100.00%

Bradesco Leasing S.A. Arrendamento Mercantil

Leasing

100.00%

100.00%

Bradesco Kirton Corretora de Títulos e Valores Mobiliários S.A.

Brokerage

99.97%

99.97%

Bradesco S.A. Corretora de Títulos e Valores Mobiliários

Brokerage

100.00%

100.00%

BRAM - Bradesco Asset Management S.A. DTVM

Asset management

100.00%

100.00%

Kirton Bank Brasil S.A.

Banking

100.00%

100.00%

Tempo Serviços Ltda.

Services

100.00%

100.00%

Financial Sector – Overseas

 

 

 

Banco Bradesco Argentina S.A.U (3)

Banking

100.00%

99.99%

Banco Bradesco Europa S.A.

Banking

100.00%

100.00%

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

Banking

100.00%

100.00%

Banco Bradesco S.A. New York Branch

Banking

100.00%

100.00%

Bradesco Securities, Inc.

Brokerage

100.00%

100.00%

Bradesco Securities, UK.

Brokerage

100.00%

100.00%

Insurance, Pension Plan and Capitalization Bond Sector

 

 

 

Atlântica Companhia de Seguros

Insurance

100.00%

100.00%

Bradesco Argentina de Seguros S.A. (5)

Insurance

99.98%

99.98%

Bradesco Auto/RE Companhia de Seguros

Insurance

100.00%

100.00%

Bradesco Capitalização S.A.

Capitalization bonds

100.00%

100.00%

Bradesco Saúde S.A.

Insurance/health

100.00%

100.00%

Bradesco Seguros S.A.

Insurance

100.00%

100.00%

Bradesco Vida e Previdência S.A.

Pension plan/Insurance

100.00%

100.00%

Kirton Capitalização S.A. (6)

Capitalization bonds

100.00%

99.97%

Kirton Seguros S.A. (7)

Insurance

98.54%

98.08%

Kirton Vida e Previdência S.A.

Pension plan/Insurance

100.00%

100.00%

Odontoprev S.A. (5)

Dental care

50.01%

50.01%

Other Activities

 

 

 

Andorra Holdings S.A.

Holding

100.00%

100.00%

Bradseg Participações S.A.

Holding

100.00%

100.00%

Bradescor Corretora de Seguros Ltda.

Insurance Brokerage

100.00%

100.00%

Bradesplan Participações Ltda.

Holding

100.00%

100.00%

BSP Empreendimentos Imobiliários S.A.

Real estate

100.00%

100.00%

Cia. Securitizadora de Créditos Financeiros Rubi

Credit acquisition

100.00%

100.00%

Columbus Holdings S.A.

Holding

100.00%

100.00%

Kirton Participações e Investimentos Ltda. (8)

Holding

-

100.00%

Nova Paiol Participações Ltda.

Holding

100.00%

100.00%

União Participações Ltda.

Holding

100.00%

100.00%

Investment Funds (9)

 

 

 

Bradesco FI RF Master II Previdência

Investment Fund

100.00%

100.00%

Bradesco F.I.C.F.I. R.F. VGBL F10

Investment Fund

100.00%

100.00%


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Notes to the Consolidated Financial Statements

 

 

On March 31

Activity

Equity interest

2018

2017

Bradesco F.I. Referenciado DI Performance

Investment Fund

100.00%

100.00%

Bradesco FI RF Master Previdência

Investment Fund

100.00%

100.00%

Brad Firf Master III Prev

Investment Fund

99.86%

99.51%

Bradesco FI RF Master Previdencia

Investment Fund

100.00%

100.00%

Bradesco Private FICFI RF PGBL/VGBL Ativo

Investment Fund

100.00%

100.00%

Bradesco FI Referenciado DI União

Investment Fund

99.46%

99.28%

Bradesco F.I.C. R.F. VGBL FIX

Investment Fund

100.00%

100.00%

Bradesco Private F.I.C.F.I. R.F. PGBL/VGBL Ativo-F 08 C

Investment Fund

100.00%

100.00%

 

(1) In November, 2017, Banco Boavista Interatlântico S.A. was merged into Banco Bradesco BBI S.A. increasing the interest by means of subscription of shares;

(2) In May 2017, Kirton Administradora de Consórcios Ltda. was merged into Bradesco Administradora de Consórcios Ltda.;
(3) Change in the percentage of participation, by assignment of quotas and change of corporate name to unilateral company;

(4) The special purpose entity International Diversified Payment Rights Company is being consolidated. The company is part of a structure set up for the securitization of the future flow of payment orders received overseas;
(5) Based on financial information from the previous month;
(6) Increase in interest, by means of acquisition of shares held by minority shareholders;

(7) Increase in interest by means of subscription of shares in July 2017;

(8) Company merged into Kirton Seguros S.A., in July 2017; and

(9) The investment funds in which Bradesco assumes or substantially retains the risks and benefits were consolidated.

 

3)      SIGNIFICANT ACCOUNTING PRACTICES

 

a)   Functional and presentation currencies

 

Consolidated financial statements are presented in Brazilian reais, which is also Bradesco’s functional currency. Foreign branches and subsidiaries are mainly a continuation of activities in Brazil, and, therefore, assets, liabilities and profit or loss are translated into Brazilian reais using the appropriate currency exchange rate, to comply with accounting practices adopted in Brazil. Foreign currency translation gains and losses arising are recognized in the period’s statement of income in the lines “Derivative Financial Instruments” and “Borrowing and On-lending”.

 

b)   Income and expense recognition

 

Income and expenses are recognized on an accrual basis in order to determine the net income for the period to which they relate, regardless of when the funds are received or paid.

 

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

 

Floating rate and foreign-currency-indexed contracts are adjusted for interest and foreign exchange rates applicable at the reporting date.

 

Insurance and coinsurance premiums, net of premiums paid for coinsurance and related commissions, are recognized upon the issue of the related policies/certificates/endorsements and invoices, or upon the beginning of the exposure to risk in cases in which the risk begins before the policy issuance, and is recognized on a straight-line basis over the policies’ effective period through the upfront recognition and subsequent reversal through the statement of income of the unearned premium reserve and the deferred acquisition costs. Revenues from premiums and the corresponding deferred acquisition costs, relating to existing risk for which no policy has been issued, are recognized in the statement of income at the beginning of the risk exposure, based on estimated figures.

 

The health insurance premiums are recognized in the premiums (results) account or provision for unearned premiums/considerations (PPCNG), according to the period of coverage of contracts in force on the reporting date.

 

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Notes to the Consolidated Financial Statements

 

Income and expenses arising from Mandatory Insurance For Personal Injury Caused by Motor Vehicles (DPVAT) insurance operations are recognized based on information provided by Seguradora Líder dos Consórcios do Seguro DPVAT S.A.

 

Accepted coinsurance and retrocession operations are recognized based on the information received from other insurers and IRB - Brasil Resseguros S.A. (IRB), respectively.

 

Reinsurance operations are recognized based on the premium and claims information provided, which is subject to the analysis of the re-insurers. The deductions of reinsurance premiums granted are consistent with the recognition of the corresponding insurance premium and/or terms of the reinsurance contract.

 

Contributions and agency fees are deferred and recognized in the statement of income on a straight-line basis over a period of 24 months for health insurance operations, and 12 months for other operations.

 

Pension plan contributions and life insurance premiums with survival coverage are recognized in the statement of income as they are received.

 

Revenue from capitalization bonds is recognized in the month in which they are issued, according to the types of collection, which may be in monthly payments or in a single payment. Each security has a nominal value, which is indexed to the Reference Rate (TR) interest rates defined in the plan. Technical provisions are recognized when the respective revenues are recognized.

 

The revenues arising from unclaimed and expired capitalization bonds (securities and non-redeemed draws) are recognized after the prescription period, that is, until November 2003, up to 20 years and five years after this date as established by law. The expenses related to commercialization of capitalization bonds are classified as “Acquisition Costs” and are recognized in the statement of income as incurred.

 

c)   Cash and cash equivalents

 

Cash and cash equivalents include: funds available in currency, investments in gold, securities sold under agreements to repurchase and interest-earning deposits in other banks, maturing in 90 days or less, from the time of the acquisition, which are exposed to insignificant risk of change in fair value. These funds are used by Bradesco to manage its short-term commitments.

 

Cash and cash equivalents detailed balances are presented in Note 5.

                     

d)   Interbank investments

 

Securities purchased under agreements to resell are stated at their fair value. All other interbank investments are stated at cost, plus income earned up to the end of the reporting period, net of any devaluation allowance, if applicable.

 

The breakdown, terms and proceeds relating to interbank investments are presented in Note 6.

 

e)   Securities – Classification

 

·       Trading securities – securities acquired for the purpose of being actively and frequently traded. They are recognized at cost, plus income earned and adjusted to fair value with changes recognized in the Statement of Income for the period;

 

·       Available-for-sale securities – securities that are not specifically intended for trading purposes or to be held to maturity. They are recognized at cost, plus income earned, which is recognized in profit or loss in the period and adjusted to fair value with changes recognized in shareholders’ equity, net of tax, which will be transferred to the Statement of Income only when effectively realized; and

 

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Notes to the Consolidated Financial Statements

 

·       Held-to-maturity securities – securities for which there is positive intent and financial capacity to hold to maturity. They are recognized at cost, plus income earned recognized in the Statement of Income for the period.

 

Securities classified as trading and available-for-sale, as well as derivative financial instruments, are recognized in the consolidated statement of financial position at their fair value. Fair value is generally based on quoted market prices or quotations for assets or liabilities with similar characteristics. If market prices are not available, fair values are based on traders’ quotations, pricing models, discounted cash flows or similar techniques to determine the fair value and may require judgment or significant estimates by Management.

 

Classification, breakdown and segmentation of securities are presented in Note 7.

 

f)    Derivative financial instruments (assets and liabilities)

 

Derivative financial instruments are designed to meet the Company´s own needs to manage Bradesco´s global exposure, as well to meet customer requests, in order to manage its positions.

 

The operations are recorded at their fair value considering the mark-to-market methodologies adopted by Bradesco, and their adjustment can be recorded in the statement of income or equity, depending on the classification between accounting hedge, their categories and economic hedge.

 

Derivative financial instruments used to mitigate the risks of exposures in currencies, indexes, prices, rates or indexes are considered as hedge instruments, whose objectives are: (i) To control and frame operations, respecting exposure limits and current risks; (ii) Change, modify or reverse positions due to market changes and operational strategies; and (iii) Reduce or mitigate exposures of operations in markets that are inoperative, under conditions of stress or of low liquidity.

 

Instruments designated for hedge accounting purposes are classified according to their nature in:

 

·       Market risk hedge: the gains and losses, realized or not, of the financial instruments classified in this category as well as the financial assets and liabilities, that are the object of the hedge, are recognized in the Statement of Income; and

 

·       Cash flow hedge: the effective portion of valuation or devaluation of the financial instruments classified in this category is recognized, net of taxes, in a specific account in shareholders’ equity. The ineffective portion of the hedge is recognized directly in the Statement of Income; and

 

·       Hedge of net investment in foreign operations - the financial instruments classified in this category are intended to hedge the exchange variation of investments abroad, whose functional currency is different from the national currency, and are accounted for in accordance with the accounting procedures applicable to the hedge category of cash flow, that is, with the effective portion recognized in shareholders' equity, net of tax effects, and the non-effective portion recognized in income for the period.

 

For derivatives classified in the hedge accounting category, there is a follow-up of: (i) strategy effectiveness, through prospective and retrospective effectiveness tests, and (ii) mark-to-market of hedge instruments.

 

A breakdown of amounts included as derivative financial instruments, in the statement of financial position and off-balance-sheet accounts, is disclosed in Note 7.

 

g)   Loans and leases, advances on foreign exchange contracts, other receivables with credit characteristics and allowance for loan losses

 

Loans and leases, advances on foreign exchange contracts and other receivables with credit characteristics are classified by risk level, based on: (i) the parameters established by CMN Resolution No. 2,682/99, which requires risk ratings to have nine levels, from “AA” (minimum risk) to “H” (maximum risk)considering, among other things, the delay levels (as described in table below);  and (ii) Management’s assessment of the risk level. This assessment, which is carried out regularly, considers current economic conditions and past experience with loan losses, as well as specific and general risks relating to contract, debtors and guarantors.

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Notes to the Consolidated Financial Statements

 

 

Past-due period (1)

Customer rating

● from 15 to 30 days

B

● from 31 to 60 days

C

● from 61 to 90 days

D

● from 91 to 120 days

E

● from 121 to 150 days

F

● from 151 to 180 days

G

● more than 180 days

H

 

(1)  For transactions with terms of more than 36 months, past-due periods are doubled, as permitted by CMN Resolution No. 2,682/99.     

 

Interest and inflation adjustments on past-due transactions are only recognized in the Statement of Income up to the 60th day that they are past due.

 

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

 

Renegotiated operations are maintained at least at the same rating in which they were classified.

 

Renegotiations of operations had already written-off against the allowance and that were recognized in off-balance-sheet accounts, are rated as level “H” and any possible gains derived from their renegotiation are recognized only when they are effectively received. When there is a significant repayment on the operation or when new material facts justify a change in the level of risk, the loan may be reclassified to a lower risk category.

 

The estimated allowance for loan losses is calculated to sufficiently cover probable losses, according to CMN and Bacen standards and instructions, together with Management’s assessment of the credit risk.

 

The classification of the credit operations of the same economic client or group is defined as the one that presents the highest risk, and, in exceptional cases, different ratings for a particular operation are accepted according to the nature, value, purpose of the operation and characteristics of the guarantees.

 

Type, values, terms, levels of risk, concentration, economic sector of client’s activity, renegotiation and income from loans, as well as the breakdown of expenses and statement of financial position accounts for the allowance for loan losses are presented in Note 9.

 

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

 

Deferred tax assets, calculated on income tax losses, social contribution losses and temporary differences, are recognized in “Other Receivables - Sundry” and the deferred tax liabilities on tax differences in lease asset depreciation (applicable only for income tax), fair value adjustments on securities, inflation adjustment of judicial deposits, among others, are recognized in “Other Liabilities - Tax and Social Security”.

 

Deferred tax assets on temporary differences are realized when the difference between the accounting treatment and the income tax treatment reverses. Deferred tax assets on income tax and social contribution losses are realizable when taxable income is generated, up to the 30% limit of the taxable profit for the period. Deferred tax assets are recognized based on current expectations of realization considering technical studies and analyses carried out by Management.

 

The provision for income tax is calculated at 15% of taxable income plus a 10% surcharge. For financial companies, for companies considered as such and for the insurance industry, the social

 

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Notes to the Consolidated Financial Statements

 

contribution on the profit was calculated until August 2015, considering the rate of 15%. For the period between September 2015 and December 2018, the rate was changed to 20%, according to Law No. 13,169/15 and the rate will be 15% again as from January 2019. For the other companies, the social contribution is calculated considering the rate of 9%.

 

Due to the amendment of the rate, the Organization recognized, in September 2015, an incremental amount to the deferred tax of social contribution, considering the annual expectations of realization and their respective rates in force in each period, according to the technical study produced.

 

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

 

The breakdown of income tax and social contribution, showing the calculations, the origin and expected use of deferred tax assets, as well as unrecognized deferred tax assets, is presented in Note 33.

 

i)    Prepaid expenses

 

Prepaid expenses consist of funds already disbursed for future benefits or services, which are recognized in the profit or loss on an accrual basis.

 

Incurred costs relating to assets that will generate revenue in subsequent periods are recognized in the Statement of Income according to the terms and the amount of expected benefits and directly recognized in the Statement of Income when the corresponding assets or rights are no longer part of the institution’s assets or when future benefits are no longer expected.

 

In the case of the remuneration paid for the origination of credit operations or leases to the banking correspondents related to credit operations originated during 2015 and 2016, Bradesco opted to recognize part of the total value of compensation, pursuant to the provisions of Bacen Circular Letter No. 3,738/14. As of 2017, the remuneration mentioned is fully recognized as an expense.

 

Prepaid expenses are shown in detail in Note 11b.

 

j)    Investments

 

Investments in unconsolidated companies, where Bradesco has significant influence over the investee or holds at least 20% of the voting rights, and jointly controlled companies, are accounted for using the equity method.

 

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

 

Subsidiaries are consolidated – the composition of the main companies are disclosed in Note 2. The composition of unconsolidated and jointly controlled companies, as well as other investments, are disclosed in Note 12.

 

k)   Premises and equipment

 

Relates to the tangible assets used by the Bank in its activities, including those resulting from transactions that transfer risks, benefits and control of the assets to the Bank.

 

Premises and equipment are stated at acquisition cost, net of accumulated depreciation, calculated by the straight-line method based on the assets’ estimated economic useful life, using the following rates: real estate – 4% per annum; installations, furniture, equipment for use, security systems and communications – 10% per annum; transport systems – 10% to 20% per annum; and data processing systems – 20% to 40% per annum, and adjusted for impairment, when applicable.

 

The breakdown of asset costs and their corresponding depreciation, as well as the unrecognized surplus value for real estate and the fixed asset ratios, is disclosed in Note 13.

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Notes to the Consolidated Financial Statements

 

l)    Intangible assets

 

Relates to the right over intangible assets used by the Bank in its activities.

 

Intangible assets comprise:

 

·       Future profitability/acquired client portfolio and acquisition of right to provide banking services: they are recognized and amortized over the period in which the asset will directly and indirectly contribute to future cash flows and adjusted for impairment, where applicable; and

 

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

 

Intangible assets and the movement in these balances by class are presented in Note 14.

 

m)Impairment

 

Financial and non-financial assets are tested for impairment.

 

Objective evidence of impairment may comprise the non-payment or payment delay by the debtor, possible bankruptcy process or the significant or extended decline in an asset value.

 

An impairment loss of a financial or non-financial asset is recognized in the profit or loss for the period if the carrying amount of an asset or cash-generating unit exceeds its recoverable value. Impairment losses are presented in Note 7.

 

n)   Deposits and funds obtained in the open market

 

These are recognized at the value of the liabilities and include, when applicable, related interest accrued at the end of the reporting period, calculated on a daily pro-rata basis.

 

The composition of the securities recorded in deposits and funds obtained in the open market, as well as their maturities and amounts recorded in equity and income accounts, are presented in Note 15.

 

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

 

·       Damage, health and group insurance lines, except life insurance with survival coverage (VGBL):

 

-       The unearned premium reserve (PPNG) is calculated on a daily pro-rata basis, using premiums net of coinsurance, including amounts ceded through reinsurance, and is comprised of the portion corresponding to the remaining period of coverage less initial contracting costs ( for contracts for the previous term to 2017), except for health and personal insurance. The portion of these reserves corresponding to the estimate for risks in effect but not yet contracted is designated ‘PPNG-RVNE’;

 

-       The unearned premium or contribution reserve (PPCNG) is calculated on a daily pro-rata basis based on the portion of health insurance premiums corresponding to the remaining period of coverage, of the currently effective contracts;

 

-       The mathematical reserve for unvested benefits (PMBaC) whose calculation methodology considers, in addition to the discount rate of 4% per year (4.5% in 2017), the difference between the current value of future benefits and the current value of future contributions, on obligations already assumed by Bradesco;

  

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Notes to the Consolidated Financial Statements

 

-        Regarding individual health care plan portfolio, as to the remittance coverage of five years for dependents of the holder, in the event of death of the holder, the mathematical reserve is constituted for unvested benefits (PMBaC) which is calculated using a 4% annual discount rate (4.5% in 2017), the time holders are expected to remain in the plan up to their death, and the projected costs of the five-year-period cover, excluding payment of premiums;

 

-        For health insurance, the mathematical reserve of benefits granted (PMBC) is constituted by the obligations arising from the contractual clauses of remittance of installments, regarding the coverage of health assistance and by the premiums paid by insured participating in the Bradesco Saúde Insurance Plan - "GBS Plan" considering a discount rate of 4% (4.5% in 2017) per annum;

 

-        The reserve for events incurred but not reported (PEONA) is calculated from the final estimate of claims already incurred and still not reported, based on the run-off triangles, monthly that consider the historical development of claims advised in the last 12 months for health insurance and last 18 months for dental care to establish a future projection per period of occurrence;

 

-        For non-life insurance, the reserve for ‘incurred but not reported’ (IBNR) claims is calculated based on incurred but not paid’ (IBNP) claims less the balance of the reserve for ‘unsettled’ claims (PSL) on the calculation date. A final estimate of IBNP is calculated using semi-annual run-off triangles. The run-off triangles consider the historical development of claims paid in the previous 10 semesters and in last 11 quarters to extended warranty segments to determine a future projection per occurrence period, and considers the estimated claims ‘incurred but not sufficient’ reported (IBNER), reflecting the changing expectation of the amount provisioned along the regulatory process;

 

-        For life insurance, the provision of ‘incurred but not reported claims (IBNR) is calculated based on semi-annual run-off triangles, which consider the historical development of claims paid and outstanding in the prior 10 semesters, to establish a future projection per period of occurrence; A residual cause study is performed to forecast the claims reported after 10 semesters that the event occurred;

 

-        The reserve for unsettled claims (PSL), for life and health insurance, considers all claim notifications received up to the end of the reporting period, updated monetarily and includes all claims in litigation;

 

-        For non-life insurance, the reserve for unsettled claims (PSL) is determined based on the indemnity payment estimates, considering all administrative and judicial claims existing at the reporting date, restated monetarily and with interest in case of judicial claims, net of the expected payments to be received;

 

-        The technical surplus reserve (PET) corresponds to the difference between the expected value and the observed value for events occurred in the period for insurance of policyholders with a clause of participation in the technical surplus;

                                             

-        The reserve for related expenses (PDR) for insurance of persons is recognized to cover expenses related to estimated claims and benefits for products structured in self-funding and partially regimes, the reserve covers claims incurred. For plans structured under a capitalization regime, the reserve is made to cover the expected expenses related to incurred claims and also claims expected to be incurred in the future;

 

-        For damage insurance, the reserve for related expenses is (PDR) calculated on a monthly basis to cover the expenses related to indemnity payment, and it covers the expenses allocated individually to each claim, as well as expenses related to claims that have not been itemized, that is, those at the level of the portfolio;

 

-        The reserve for redemptions and other amounts to be settled (PVR) comprises figures related to redemptions to settle, premium refunds owed and portability (transfer-outs) requested but not yet transferred to the recipient insurer;

Bradesco  71


 
 

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

 

Notes to the Consolidated Financial Statements

 

 

-        The complementary reserve for coverage (PCC) for damage insurance shall be recorded when there is an insufficiency in the technical provisions, as calculated in the Liability Adequacy Test (LAT), pursuant to the determinations specified in the regulations in force. As of the base date, there is no need to record complementary reserve for coverage;

 

-        The complementary reserve for coverage (PCC) for life insurance, refers to the amount necessary to complement technical provisions, as calculated in the LAT. The LAT, which is prepared using statistical and actuarial methods based on realistic assumptions, taking into account the biometric table BR-EMS of both genders, adjusted as per longevity development criteria in compliance with the last versions disclosed (improvement), and forward interest rate curves (ETTJ) free from risk as authorized by SUSEP. The improvement rate is calculated from automatic updates of the biometric table, considering the expected increase in future life expectancy;

 

-        The other technical provisions for damage insurance correspond to the provision for administrative expenses (PDA) arising from Personal Injury Caused by Motor Vehicles (DPVAT) insurance operations;

 

-        Other technical provisions are recognized for the individual health portfolio to address the differences between the expected present value of future premiums and the expected present value of indemnities and related expenses, using an annual discount rate of 4% (4.5% in 2017) per annum; and

 

-        In 2018, the amount recorded in other technical provisions includes the transfer of the mathematical reserves of benefits to be granted and benefits granted, upon SUSEP’s authorization. The provision refers to the difference between the calculation of the mathematical provisions with realistic premises approved by authorities and the calculation with the technical bases defined on the technical notes of the product.

 

·       Pension plans and life insurance with survival coverage (VGBL):

 

-    The unearned premium reserve (PPNG) is calculated on a daily prorated basis using net contributions, and is comprised of the portion corresponding to the remaining period of coverage and includes an estimate for risks covered but not yet issued (RVNE);

 

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

 

-        The mathematical reserve for unvested benefits (PMBaC) related to pension plans and life insurance with survival coverage, as well as the defined contribution plans, shows the value of participant contributions, net of costs and other contractual charges, plus income from investment in specially constituted investment funds (FIEs);

 

-        The reserve for redemptions and other amounts to be settled (PVR) comprises figures related to redemptions to settle, premium refunds owed and portability (transfer-outs) requested but not yet transferred to the recipient insurer;

 

-        The mathematical reserve for vested benefits (PMBC) is recognized for participants already receiving benefits and corresponds to the present value of future obligations related to the payment of those on-going benefits;

 

-    The complementary reserve for coverage (PCC) refers to the amount necessary to complement technical provisions, as calculated in the LAT. The LAT, which is prepared semi-annually using statistical and actuarial methods based on realistic assumptions, taking into account the biometric table BR-EMS of both genders, improvement and forward interest

 

72  Economic and Financial Analysis Report – March 2018


 
 

 

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

 

Notes to the Consolidated Financial Statements

 

rate curves (ETTJ) free from risk as authorized by SUSEP. The improvement rate is calculated from automatic updates of the biometric table, considering the expected increase in future life expectancy;

 

-        The reserve for related expenses (PDR) is recognized to cover expenses related to estimated claims and benefits, for products structured in self-funding and partially regimes. For plans structured under a capitalization regime, the reserve is made to cover the expected expenses related to incurred claims and also claims expected to be incurred in the future. The projections are performed through the liability adequacy test (TAP);

 

-        The reserve for financial surplus (PEF) corresponds to the financial income exceeding the minimum assured profitability, transferred to contracts with a financial surplus participation clause;

 

-        The provision for claims incurred but not reported (IBNR) is calculated based on semi-annual run-off triangles, which consider the historical development of claims paid and outstanding in the last 16 semesters for the creation of a new future projection by period of occurrence. As to acquired portfolios, a history of 10 semesters is used;

 

-    The reserve for unsettled claims (PSL) considers all loss notices received up to the end of the reporting period. The provision is updated for inflation and includes all claims in litigation; and

 

-    The financial charges credited to technical provisions, and the recording and/or reversal of the financial surplus, are classified as financial expenses, and are presented under “Financial income from insurance, pension plans and capitalization bonds”.

 

·       Capitalization bonds:

 

-        The mathematical reserve for capitalization bond (PMC) is recognized for each active or suspended capitalization bond over the term set forth in the general conditions of the plan, and is calculated using the capitalization percentage, applicable to each of the payments made, plus the monthly accrual calculated using the inflation index and the interest rate established in the plan until the bond is redeemed or canceled;

 

-        The reserve for redemption (PR) comprises the values of matured and early-terminated capitalization bonds and is calculated by updating the balance of bonds whose terms have expired or canceled using the inflation index until the holder receives the redemption payment;

 

-        Reserve for ‘draws to be held’ (PSR) is recognized to cover premiums for future prize draws, and the balance represents the present value of the draws that have already been funded but have not yet been held. The calculation methodology consists of the accumulation of the prize draw percentage applicable to each payment, as established in the plan, less the amounts related to prize draws that have already occurred. The percentages of payments designated for the prize draws is defined in advance in the actuarial technical note, and is not modified during the term of the bond;

 

-        Reserve for draws payable (PSP) consists of the value of unpaid prize draw amounts, adjusted for inflation for the period between the date of the drawing and its effective settlement; and

 

-        Reserve for administrative expense (PDA) is recognized to cover the cost for maintaining capitalization bonds.

 

Technical provisions shown by account, product and segment, as well as amounts and details of plan assets covering these technical provisions, are shown in Note 20.

 

 

Bradesco  73


 
 

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

 

Notes to the Consolidated Financial Statements

 

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

 

Provisions, contingent assets and liabilities, and legal obligations, as defined below, are recognized, measured and disclosed in accordance with the criteria set out in CPC 25, approved by CMN Resolution No. 3,823/09 and CVM Resolution No. 594/09:

 

·       Contingent Assets: these are not recognized in the financial statements, except to the extent that there are real guarantees or favorable judicial decisions, to which no further appeals are applicable, and it is considered virtually certain that cash inflows will flow to Bradesco. Contingent assets with a chance of probable success are disclosed in the notes to the financial statements;

 

·       Provisions: these are recognized taking into consideration the opinion of legal counsel, the nature of the lawsuits, similarity with previous lawsuits, complexity and positioning of the courts, whenever an the Organization has a present obligation (legal or constructive) as a result of a past even, it is probable that an outflow of resources will be required to settle the obligation and when the amount can be reliably measured;

 

·       Contingent Liabilities: according to CPC 25, the term “contingent” is used for liabilities that are not recognized because their existence will only be confirmed by the occurrence of one or more uncertain future events beyond Management’s control. Contingent liabilities do not meet the criteria for recognition because they are considered as possible losses should only be disclosed in the notes when relevant. Obligations deemed remote are not recognized as a provision nor disclosed; and

 

·       Legal Obligations: Provision for Tax Risks: results from judicial proceedings in which Bradesco is contesting the applicability of tax laws on the grounds of legality or constitutionality, which, regardless of the assessment of the probability of success, are fully provided for in the financial statements.

 

Details on lawsuits, as well as segregation and changes in amounts recognized, by type, are presented in Note 17.

 

q)   Funding expenses

 

Expenses related to funding transactions involving the issuance of securities reduce the corresponding liability and are recognized in the profit or loss over the term of the transaction, according to Notes 15c and 18.

 

r)    Other assets and liabilities

 

Assets are stated at their realizable amounts, including, when applicable, related income and inflation and exchange variations (on a daily prorated basis), less provision for losses, when deemed appropriate. Liabilities are stated at known or measurable amounts, including related charges and inflation and exchange variations (on a daily prorated basis).

 

s)   Subsequent events

 

These refer to events occurring between the reporting date and the date the financial statements are authorized to be issued.

 

They comprise the following:

 

·       Events resulting in adjustments: events relating to conditions already existing at the end of the reporting period; and

 

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

 

Subsequent events, if any, are described in Note 34.

 

74  Economic and Financial Analysis Report – March 2018


 
 

 

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

 

Notes to the Consolidated Financial Statements

 

4)      MANAGERIAL STATEMENTS OF FINANCIAL POSITION AND STATEMENT OF INCOME BY OPERATING SEGMENT

 

a)      Reconciliation of the Statement of Financial Position and Statement of Income – Accounting vs. Managerial

 

Management uses a variety of information, including those from financial statements, prepared in accordance with accounting practices adopted in Brazil applicable to institutions authorized to operate by the Central Bank, prepared by consolidation criteria that differ in part from the criteria of CPC 36, as described in Note 2.

 

The main differences of consolidation criteria are shown below, through the Reconciliation of the Statements of financial position and the Statements of Income – Accounting vs. Managerial:

 

 

On March 31 - R$ thousand

2018

2017

Accounting Statement of Financial Position

Proportionately consolidated
Companies (1)

Adjustments of
Consolidation (2)

Managerial Statement of Financial Position

Accounting Statement of Financial Position

Proportionately consolidated
Companies (1)

Adjustments of
Consolidation (2)

Managerial Statement of Financial Position

Assets

 

 

 

 

 

 

 

 

Current and long-term assets

1,201,306,897

9,450,412

63,637,113

1,274,394,422

1,159,038,632

8,652,456

96,256,363

1,263,947,451

Cash and due from banks

17,807,399

290,667

18,098,066

11,831,164

198,170

12,029,334

Interbank investments

140,870,167

(282,935)

(3,625)

140,583,607

188,007,983

674,998

(566,440)

188,116,541

Securities and derivative financial instruments

516,559,089

5,597,980

63,679,505

585,836,574

448,510,341

4,309,038

96,880,799

549,700,178

Interbank and interdepartmental accounts

72,287,341

72,287,341

63,595,452

63,595,452

Loans and leasing

325,300,203

462,093

325,762,296

338,809,899

459,157

339,269,056

Allowance for Loan Losses (ALL)

(35,669,215)

(93,303)

(35,762,518)

(39,086,730)

(94,266)

(39,180,996)

Other receivables and assets

164,151,913

3,475,910

(38,767)

167,589,056

147,370,523

3,105,359

(57,996)

150,417,886

Permanent Assets

30,102,191

(654,494)

29,447,697

30,342,236

(150,436)

30,191,800

Investments

8,003,779

(5,870,189)

2,133,590

7,302,621

(5,576,220)

1,726,401

Premises and equipment

7,811,648

182,780

7,994,428

7,567,273

235,156

7,802,429

Intangible assets

14,286,764

5,032,915

19,319,679

15,472,342

5,190,628

20,662,970

Total

1,231,409,088

8,795,918

63,637,113

1,303,842,119

1,189,380,868

8,502,020

96,256,363

1,294,139,251

 

Bradesco  75


 
 

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

 

Notes to the Consolidated Financial Statements

 

 

On March 31 - R$ thousand

2018

2017

Accounting Statement of Financial Position

Proportionately consolidated
Companies (1)

Adjustments of
Consolidation (2)

Managerial Statement of Financial Position

Accounting Statement of Financial Position

Proportionately consolidated
Companies (1)

Adjustments of
Consolidation (2)

Managerial Statement of Financial Position

Liabilities

 

 

 

 

 

 

 

 

Current and long-term liabilities

1,116,664,441

7,696,908

63,637,113

1,187,998,462

1,083,909,165

7,403,378

96,256,363

1,187,568,906

Deposits

271,658,595

(267,476)

271,391,119

235,455,338

(23,539)

235,431,799

Securities sold under agreements to repurchase

228,883,992

(2,289)

67,048,200

295,929,903

254,779,526

96,483,111

351,262,637

Funds from Issuance of Securities

142,589,826

142,589,826

140,302,853

2,447,825

142,750,678

Interbank and interdepartmental accounts

25,777,547

815,563

26,593,110

21,126,057

21,126,057

Borrowing and on-lending

47,734,757

2,317,144

50,051,901

56,417,438

56,417,438

Derivative financial instruments

18,277,419

(1,213,470)

17,063,949

15,705,212

(1,769,438)

13,935,774

Technical provisions for insurance, pension plans and capitalization bonds

251,231,249

251,231,249

229,432,544

229,432,544

Other liabilities

130,511,056

4,833,966

(2,197,617)

133,147,405

130,690,197

7,426,917

(905,135)

137,211,979

Deferred income

369,743

369,743

426,172

426,172

Non-controlling interests in subsidiaries

599,011

1,099,010

1,698,021

487,081

1,098,642

1,585,723

Shareholders’ equity

113,775,893

113,775,893

104,558,450

104,558,450

Total

1,231,409,088

8,795,918

63,637,113

1,303,842,119

1,189,380,868

8,502,020

96,256,363

1,294,139,251

 

 

Accrued on March 31 - R$ thousand

2018

2017

Accounting Statement of Income

Proportionately consolidated
Companies (1)

Adjustments of
Consolidation (2)

Managerial Statement of Income

Accounting Statement of Income

Proportionately consolidated
Companies (1)

Adjustments of
Consolidation (2)

Managerial Statement of Income

Revenue from financial intermediation

32,232,127

283,606

(186,556)

32,329,177

41,647,914

299,407

1,906,935

43,854,256

Expenses from financial intermediation

(14,405,372)

(27,329)

(613,402)

(15,046,103)

(22,700,458)

(2,595,982)

(25,296,440)

Financial margin

17,826,755

256,277

(799,958)

17,283,074

18,947,456

299,407

(689,047)

18,557,816

Allowance for loan losses

(4,579,695)

(19,757)

(4,599,452)

(8,281,361)

(26,577)

(8,307,938)

Gross income from financial intermediation

13,247,060

236,520

(799,958)

12,683,622

10,666,095

272,830

(689,047)

10,249,878

Income from insurance, pension plans and capitalization bonds

1,515,262

1,515,262

1,625,780

1,625,780

Fee and commission income

6,035,809

1,130,873

668,384

7,835,066

5,788,892

1,083,518

566,907

7,439,317

Personnel expenses

(4,635,373)

(193,837)

(4,829,210)

(4,635,886)

(186,517)

(4,822,403)

Other administrative expenses

(4,622,687)

(218,533)

31,064

(4,810,156)

(4,645,532)

(340,955)

134,270

(4,852,217)

Tax expenses

(1,510,122)

(160,607)

(1,670,729)

(1,650,878)

(120,064)

(1,770,942)

Equity in the earnings (losses) of unconsolidated and jointly controlled companies

427,845

(400,680)

27,165

428,535

(371,031)

57,504

Other operating income / expenses

(2,696,964)

(192,866)

100,510

(2,789,320)

(520,785)

(158,760)

(12,130)

(691,675)

Operating income

7,760,830

200,870

7,961,700

7,056,221

179,021

7,235,242

Non-operating income

(209,938)

(4,682)

(214,620)

(132,926)

(1,154)

(134,080)

IT/SC (Income Tax/Soc. Contrib.) and non-controlling interests

(3,084,171)

(196,188)

(3,280,359)

(2,852,608)

(177,867)

(3,030,475)

Net income

4,466,721

4,466,721

4,070,687

4,070,687

 

 (1) Refers to the effects of the consolidation adjustments arising from the undertakings consolidated proportionally (Grupo Cielo, Grupo Alelo, Crediare, etc.); and
 (2) Refers primarily to the effects of the consolidation adjustments arising from the "non-consolidation" of the exclusive funds.

 

76  Economic and Financial Analysis Report – March 2018


 
 

 

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

 

Notes to the Consolidated Financial Statements

 

b)      Statement of financial position and statements of income by segment – Managerial

 

In accordance with CPC 22, the managerial information, hereinafter, was prepared based on reports available to the Management to evaluate the performance and make decisions regarding the allocation of resources for investments and other purposes.

 

 

On March 31 - R$ thousand

Financial (1) (2)

Insurance Group (2) (3)

Other Activities (2)

Eliminations (4)

Managerial Accounting Statement of Financial Position

Brazil

Overseas

Brazil

Overseas

Assets

 

 

 

 

 

 

 

Current and long-term assets

938,967,938

97,016,446

289,395,313

18,119

4,959,912

(55,963,306)

1,274,394,422

Cash and due from banks

14,977,836

3,020,596

353,405

7,868

163,292

(424,931)

18,098,066

Interbank investments

139,449,722

1,133,885

140,583,607

Securities and derivative financial instruments

292,550,051

15,519,710

278,300,050

1,824

4,017,663

(4,552,724)

585,836,574

Interbank and interdepartmental accounts

72,287,341

72,287,341

Loans and leasing

296,424,644

77,685,197

(48,347,545)

325,762,296

Allowance for Loan Losses (ALL)

(34,152,971)

(1,609,547)

(35,762,518)

Other receivables and assets

157,431,315

1,266,605

10,741,858

8,427

778,957

(2,638,106)

167,589,056

Permanent assets

111,575,092

33,088

6,314,247

2,209

757,032

(89,233,971)

29,447,697

Investments

88,743,035

2,566,260

58,266

(89,233,971)

2,133,590

Premises and equipment

5,916,817

21,839

2,028,110

337

27,325

7,994,428

Intangible assets

16,915,240

11,249

1,719,877

1,872

671,441

19,319,679

Total in 2018

1,050,543,030

97,049,534

295,709,560

20,328

5,716,944

(145,197,277)

1,303,842,119

Total in 2017

1,054,705,722

103,045,896

276,307,311

8,025

4,671,678

(144,599,381)

1,294,139,251

 

Liabilities

 

 

 

 

 

 

 

Current and long-term liabilities

934,811,819

46,978,261

261,061,210

8,810

1,101,668

(55,963,306)

1,187,998,462

Deposits

259,982,836

12,080,048

(671,765)

271,391,119

Securities sold under agreements to repurchase

286,613,082

9,318,337

(1,516)

295,929,903

Funds from issuance of securities

144,036,140

2,869,816

(4,316,130)

142,589,826

Interbank and interdepartmental accounts

26,593,110

26,593,110

Borrowing and on-lending

88,171,295

10,228,151

(48,347,545)

50,051,901

Derivative financial instruments

16,860,247

203,702

17,063,949

Technical provisions for insurance, pension plans and capitalization bonds

251,225,713

5,536

251,231,249

Other liabilities

112,555,109

12,278,207

9,835,497

3,274

1,101,668

(2,626,350)

133,147,405

Deferred income

347,597

22,146

369,743

Non-controlling interests in subsidiaries

1,607,721

50,071,273

34,626,204

11,518

4,615,276

(89,233,971)

1,698,021

Shareholders’ equity

113,775,893

113,775,893

Total in 2018

1,050,543,030

97,049,534

295,709,560

20,328

5,716,944

(145,197,277)

1,303,842,119

Total in 2017

1,054,705,722

103,045,896

276,307,311

8,025

4,671,678

(144,599,381)

1,294,139,251

 

Bradesco  77


 
 

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

 

Notes to the Consolidated Financial Statements

 

 

Accrued on March 31 - R$ thousand

Financial (1) (2)

Insurance Group (2) (3)

Other Activities (2)

Eliminations (4)

Managerial Statement of Income

Brazil

Overseas

Brazil

Overseas

Revenue from financial intermediation

26,062,708

1,147,928

5,379,603

1,100

64,233

(326,395)

32,329,177

Expenses from financial intermediation

(11,193,799)

(357,312)

(3,821,387)

326,395

(15,046,103)

Financial margin

14,868,909

790,616

1,558,216

1,100

64,233

17,283,074

Allowance for loan losses

(4,285,754)

(313,698)

(4,599,452)

Gross income from financial intermediation

10,583,155

476,918

1,558,216

1,100

64,233

12,683,622

Income from insurance, pension plans and capitalization bonds

1,513,578

1,635

49

1,515,262

Fee and commission income

7,147,066

94,575

538,393

87,769

(32,737)

7,835,066

Personnel expenses

(4,352,411)

(54,353)

(370,187)

(1,185)

(51,074)

(4,829,210)

Other administrative expenses

(4,510,190)

(49,029)

(344,655)

(1,220)

(49,962)

144,900

(4,810,156)

Tax expenses

(1,418,417)

(5,861)

(223,925)

(60)

(22,466)

(1,670,729)

Equity in the earnings (losses) of unconsolidated and jointly controlled companies

3,253

24,089

(177)

27,165

Other operating income / expenses

(2,830,529)

(16,571)

96,366

(215)

73,841

(112,212)

(2,789,320)

Operating income

4,621,927

445,679

2,791,875

55

102,164

7,961,700

Non-operating income

(192,271)

3,786

(25,782)

(353)

(214,620)

IT/SC (Income Tax/Soc. Contrib.) and non-controlling interests

(1,821,383)

(229,689)

(1,203,314)

126

(26,099)

(3,280,359)

Net Income in 2018

2,608,273

219,776

1,562,779

181

75,712

4,466,721

Net Income in 2017

2,583,189

35,968

1,374,759

(397)

77,168

4,070,687

 

(1) The financial segment is comprised of financial institutions, holding companies which are mainly responsible for managing financial resources, and credit card, consortium and asset management companies;
(2) The asset, liability, income and expense balances among companies from the same segment are eliminated;
(3) The Insurance Group segment comprises insurance, pension plan and capitalization bond companies; and
(4) Refers to amounts eliminated among companies from different segments, as well as among operations carried out in Brazil and overseas.

 

5)      CASH AND CASH EQUIVALENTS

 

 

On March 31 - R$ thousand

2018

2017

Cash and due from banks in domestic currency

14,013,030

9,603,651

Cash and due from banks in foreign currency

3,794,104

2,227,326

Investments in gold

265

187

Total cash and due from banks

17,807,399

11,831,164

Interbank investments (1)

128,955,617

178,707,672

Total cash and cash equivalents

146,763,016

190,538,836

 

(1) It refers to operations that mature in 90 days or less from the date they were effectively invested and with insignificant risk of change in fair value.

 

78  Economic and Financial Analysis Report – March 2018


 
 

 

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

 

Notes to the Consolidated Financial Statements

 

6)      INTERBANK INVESTMENTS

 

a)   Breakdown and maturity

 

 

On March 31 - R$ thousand

1 to 30

31 to 180

181 to 360

More than 360

2018

2017

days

days

days

days

Securities purchased under agreements to resell:

 

 

 

 

 

 

Own portfolio position

4,199,925

15,753,321

19,953,246

35,877,832

● National treasury notes

15,753,321

15,753,321

13,750,299

● Financial treasury bills

17,919,985

● National treasury bills

4,146,925

4,146,925

3,915,204

● Debentures

279,878

● Other

53,000

53,000

12,466

Funded position

48,436,179

61,579,939

110,016,118

144,390,611

● National treasury notes

7,603,882

32,649,683

40,253,565

65,298,523

● Financial treasury bills

34,704,107

34,704,107

48,071,054

● National treasury bills

6,128,190

28,930,256

35,058,446

31,021,034

Short position

766,799

2,803,990

3,570,789

1,760,134

● National treasury bills

766,799

2,803,990

3,570,789

1,760,134

Subtotal

53,402,903

80,137,250

133,540,153

182,028,577

Interest-earning deposits in other banks:

 

 

 

 

 

 

● Interest-earning deposits in other banks:

1,945,251

1,639,754

2,596,951

1,152,275

7,334,231

5,993,139

● Provision for losses

(34)

(1,825)

(2,358)

(4,217)

(13,733)

Subtotal

1,945,217

1,637,929

2,594,593

1,152,275

7,330,014

5,979,406

Total in 2018

55,348,120

81,775,179

2,594,593

1,152,275

140,870,167

 

%

39.3

58.1

1.8

0.8

100.0

 

Total in 2017

182,568,035

3,654,701

1,368,229

417,018

 

188,007,983

%

97.1

2.0

0.7

0.2

 

100.0

 

b)   Income from interbank investments

 

Classified in the statement of income as income from operations with securities.

 

 

Accrued on March 31 - R$ thousand

2018

2017

Income from investments in purchase and sale commitments:

 

 

• Own portfolio position

88,310

144,112

• Funded position

2,113,025

5,369,452

• Short position

113,455

103,954

Subtotal

2,314,790

5,617,518

Income from interest-earning deposits in other banks

111,303

122,152

Total (Note 7g)

2,426,093

5,739,670

 

Bradesco  79


 
 

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

 

Notes to the Consolidated Financial Statements

 

7)      SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS

 

Information on securities and derivative financial instruments is as follows:

 

a)   Summary of the consolidated classification of securities by operating segment and issuer

 

 

On March 31 - R$ thousand

Financial

Insurance Group

Other Activities

2018

%

2017

%

Insurance and Capitalization bonds

Pension plans

Trading securities

50,327,131

14,523,570

175,698,582

121,690

240,670,973

46.6

228,706,161

51.0

- Government securities

24,497,466

11,318,047

161,979,894

17,258

197,812,665

38.3

182,904,072

40.8

- Corporate securities

8,456,630

3,177,034

12,752,060

104,432

24,490,156

4.7

26,910,521

6.0

- Derivative financial instruments (1) (5)

17,373,035

28,489

966,628

18,368,152

3.6

18,891,568

4.2

Available-for-sale securities

199,912,278

21,736,755

15,591,490

22,774

237,263,297

45.9

176,769,921

39.4

- Government securities

144,036,557

19,698,725

13,927,095

15,493

177,677,870

34.4

112,212,600

25.0

- Corporate securities

55,875,721

2,038,030

1,664,395

7,281

59,585,427

11.5

64,557,321

14.4

Held-to-maturity securities (2)

11,684,221

5,150,519

21,790,079

38,624,819

7.5

43,034,259

9.6

- Government securities

9,377

5,150,519

21,790,079

26,949,975

5.2

30,845,984

6.9

- Corporate securities

11,674,844

11,674,844

2.3

12,188,275

2.7

Total

261,923,630

41,410,844

213,080,151

144,464

516,559,089

100.0

448,510,341

100.0

 

 

 

 

 

 

 

 

 

- Government securities

168,543,400

36,167,291

197,697,068

32,751

402,440,510

77.9

325,962,656

72.7

- Corporate securities

93,380,230

5,243,553

15,383,083

111,713

114,118,579

22.1

122,547,685

27.3

Total

261,923,630

41,410,844

213,080,151

144,464

516,559,089

100.0

448,510,341

100.0

 

80  Economic and Financial Analysis Report – March 2018


 
 

 

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

 

Notes to the Consolidated Financial Statements

 

b)   Consolidated classification by category, maturity and operating segment

 

I)    Trading securities

 

Securities

On March 31 - R$ thousand

2018

2017

1 to 30 days

31 to 180 days

181 to 360 days

More than 360 days

Fair/book value (3) (4)

Amortized cost

Fair Value Adjustment

Fair/book value (3) (4)

Fair Value Adjustment

- Financial

20,396,153

1,361,354

1,386,687

27,182,937

50,327,131

53,804,619

(3,477,488)

50,577,553

(6,791,565)

Financial treasury bills

546,570

240,824

13,605,218

14,392,612

14,391,388

1,224

13,266,622

(19,677)

National treasury notes

264,737

58,670

8,416,220

8,739,627

8,609,483

130,144

6,417,141

353,273

Financial bills

47,826

200,639

504,244

752,709

752,145

564

2,822,256

9,943

Debentures

46,929

89,014

1,468,297

1,604,240

1,841,319

(237,079)

1,863,017

(259,508)

National treasury bills

108,105

68,593

71,658

671,387

919,743

912,879

6,864

4,908,628

36,916

Brazilian foreign debt notes

2,064

89,154

91,218

88,403

2,815

11,630

69

Derivative financial instruments (1) (5)

16,181,497

164,526

476,151

550,861

17,373,035

20,711,741

(3,338,706)

18,011,836

(6,836,080)

Other

4,057,558

269,102

249,731

1,877,556

6,453,947

6,497,261

(43,314)

3,276,423

(76,501)

- Insurance companies and capitalization bonds

3,010,447

77,637

33,794

11,401,692

14,523,570

14,523,570

15,870,271

3,647

Financial treasury bills

45,865

18,598

9,407,181

9,471,644

9,471,644

10,593,499

Financial bills

4,601

7,792

62,852

75,245

75,245

402,114

Other

3,010,447

27,171

7,404

1,931,659

4,976,681

4,976,681

4,874,658

3,647

- Pension plans

5,034,404

4,493,086

2,143,918

164,027,174

175,698,582

175,698,582

162,238,277

Financial treasury bills

2,269,011

641,582

53,152,546

56,063,139

56,063,139

48,231,015

National treasury notes

89,926

42,883

43,188,892

43,321,701

43,321,701

55,073,329

National treasury bills

98,559

215,623

62,280,872

62,595,054

62,595,054

42,155,431

Financial bills

37,261

1,890,080

792,693

2,013,687

4,733,721

4,733,721

10,413,827

Debentures

74,342

96,091

449,864

3,109,440

3,729,737

3,729,737

3,511,533

Other

4,922,801

49,419

1,273

281,737

5,255,230

5,255,230

2,853,142

- Other activities

104,432

1,424

15,834

121,690

121,691

(1)

20,060

(17)

Financial treasury bills

1,424

15,834

17,258

17,259

(1)

20,060

(17)

Other

104,432

104,432

104,432

Total

28,545,436

5,932,077

3,565,823

202,627,637

240,670,973

244,148,462

(3,477,489)

228,706,161

(6,787,935)

Derivative financial instruments (liabilities) (5)

(17,576,378)

(161,553)

(191,595)

(347,893)

(18,277,419)

(13,916,499)

(4,360,920)

(15,705,212)

(3,822,136)

 

Bradesco  81


 
 

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

 

Notes to the Consolidated Financial Statements

 

II)   Available-for-sale securities

 

Securities (6)

On March 31 - R$ thousand

2018

2017

1 to 30

31 to 180

181 to 360

More than 360

Fair/book value (3) (4)

Amortized cost

Fair Value Adjustment

Fair/book value (3) (4)

Fair Value Adjustment

days

days

days

days

- Financial

22,038,240

9,130,462

49,797,987

118,945,589

199,912,278

198,587,965

1,324,313

148,785,289

186,957

National treasury bills

11,886,037

2,546,604

43,202,127

65,758,253

123,393,021

120,884,394

2,508,627

70,590,220

1,670,765

Debentures

314,580

1,051,120

3,633,581

30,787,031

35,786,312

36,632,982

(846,670)

39,459,990

(1,223,966)

National treasury notes

655

1,622,013

9,705,152

11,327,820

10,798,517

529,303

13,006,406

460,359

Foreign corporate securities

47,704

624,095

552,234

8,358,853

9,582,886

9,540,398

42,488

10,864,548

(155,207)

Shares

7,303,397

7,303,

8,224,528

(921,131)

6,875,802

(565,623)

Foreign government bonds

1,222,987

2,527,798

1,478,229

5,229,014

5,248,602

(19,588)

1,534,641

(12,347)

Promissory Notes

748,613

53,238

801,851

796,061

5,790

989,084

3,838

Certificates of real estate receivables

14,425

1,014,275

1,028,700

1,043,800

(15,100)

1,080,986

(51,066)

Other

1,262,880

10,219

864,153

3,322,025

5,459,277

5,418,683

40,594

4,383,612

60,204

- Insurance companies and capitalization bonds

2,090,875

17,487

415,498

19,212,895

21,736,755

20,664,214

1,072,541

15,503,608

470,474

National treasury notes

13,242,112

13,242,112

12,860,646

381,466

11,943,585

83,350

Shares

1,656,677

1,656,677

1,143,725

512,952

1,422,810

341,618

National treasury bills

105,209

401,502

5,679,459

6,186,170

6,018,335

167,835

1,554,115

40,821

Other

328,989

17,487

13,996

291,324

651,796

641,508

10,288

583,098

4,685

- Pension plans

1,569,504

20,010

11,995

13,989,981

15,591,490

13,511,874

2,079,616

12,434,882

1,604,396

National treasury notes

9,607

13,031,609

13,041,216

11,339,739

1,701,477

10,672,535

1,461,131

Shares

1,569,504

1,569,504

1,221,107

348,397

1,623,330

140,933

Debentures

94,890

94,890

84,834

10,056

93,624

2,348

Other

10,403

11,995

863,482

885,880

866,194

19,686

45,393

(16)

- Other activities

7,094

15,680

22,774

15,653

7,121

46,142

5,157

Other

7,094

15,680

22,774

15,653

7,121

46,142

5,157

Subtotal

25,705,713

9,167,959

50,225,480

152,164,145

237,263,297

232,779,706

4,483,591

176,769,921

2,266,984

Accounting Hedge (Note 7f)

(236,504)

115,805

Securities reclassified to “Held-to-maturity securities”

(378,859)

(264,240)

Total

25,705,713

9,167,959

50,225,480

152,164,145

237,263,297

232,779,706

3,868,228

176,769,921

2,118,549

 

82  Economic and Financial Analysis Report – March 2018


 
 

 

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

 

Notes to the Consolidated Financial Statements

 

III) Held-to-maturity securities

 

Securities (2) (6)

On March 31 - R$ thousand

2018

2017

1 to 30

31 to 180

181 to 360

More than 360

Amortized cost (3)

Fair value (4)

Gain (loss) not accounted for

Amortized cost (3)

Gain (loss) not accounted for

days

days

days

days

- Financial

1,336

1,109

11,681,776

11,684,221

11,686,089

1,868

12,212,551

(707,534)

Certificates of real estate receivables

82

11,674,762

11,674,844

11,676,712

1,868

12,188,274

(706,166)

Other

1,254

1,109

7,014

9,377

9,377

24,277

(1,368)

- Insurance companies and capitalization bonds

5,150,519

5,150,519

5,590,947

440,428

4,884,948

823,705

National treasury notes

5,150,519

5,150,519

5,590,947

440,428

4,884,948

823,705

- Pension plans

17,818

21,772,261

21,790,079

24,454,204

2,664,125

25,936,760

3,468,745

National treasury notes

17,818

21,772,261

21,790,079

24,454,204

2,664,125

25,936,760

3,468,745

Total

19,154

1,109

38,604,556

38,624,819

41,731,240

3,106,421

43,034,259

3,584,916

 

Bradesco  83


 
 

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

 

Notes to the Consolidated Financial Statements

 

c)   Breakdown of the portfolios by financial statement classification

 

Securities

On March 31 - R$ thousand

1 to 30

31 to 180

181 to 360

More than 360

Total in 2018

(3) (4)

Total in 2017

(3) (4)

days

days

days

days

Own portfolio

35,694,982

11,071,486

15,891,872

324,578,326

387,236,666

377,943,897

Fixed income securities

21,513,141

11,071,486

15,891,872

324,578,326

373,054,825

365,380,412

● National treasury notes

394,874

92,024

93,687,390

94,174,288

118,793,619

● Financial treasury bills

2,751,155

1,295,283

74,038,600

78,085,038

69,451,302

● National treasury bills

10,850,967

1,239,588

7,514,882

100,119,197

119,724,634

92,958,463

● Debentures

435,851

1,147,211

4,176,329

35,086,687

40,846,078

45,028,330

● Financial bills

37,261

1,942,508

1,001,124

2,580,899

5,561,792

13,937,885

● Certificates of real estate receivables

82

14,425

12,925,358

12,939,865

13,471,833

● Foreign government bonds

1,224,490

2,527,798

1,478,229

352,760

5,583,277

1,889,791

● Foreign corporate securities

2,010,056

103,581

180,673

4,049,600

6,343,910

1,907,947

● Brazilian foreign debt securities

9,491

967,662

977,153

516,530

● Promissory Notes

748,614

54,510

173,663

976,787

1,122,625

● Bank deposit certificates

241,554

215,609

3,534

52,570

513,267

593,699

● Other

6,703,471

466

80,859

543,940

7,328,736

5,708,388

Equity securities

14,181,841

14,181,841

12,563,485

● Shares of listed companies

1,572,527

1,572,527

1,625,708

● Shares of other companies

12,609,314

12,609,314

10,937,777

Restricted securities

1,379,553

3,582,659

32,030,899

67,314,819

104,307,930

44,403,483

Subject to repurchase agreements

1,157,755

3,395,991

31,548,816

48,892,734

84,995,296

28,240,240

● National treasury bills

1,155,462

1,150,674

30,951,789

33,208,842

66,466,767

18,547,070

● Foreign corporate securities

622,961

540,433

5,331,852

6,495,246

9,271,382

● National treasury notes

1,622,344

264

7,941,711

9,564,319

181,573

● Brazilian foreign debt securities

2,293

902,902

905,195

● Financial treasury bills

12

56,330

1,507,427

1,563,769

240,215

Brazilian Central Bank

77,083

● National treasury bills

77,083

Privatization rights

42,913

42,913

47,667

Guarantees provided

221,798

186,668

482,083

18,379,172

19,269,721

16,038,493

● National treasury notes

655

15,307

10,375

12,220,987

12,247,324

9,654,228

● National treasury bills

92,922

22,974

30,749

3,346,417

3,493,062

3,093,122

● Financial treasury bills

245

148,387

440,959

2,364,566

2,954,157

3,226,954

● Other

127,976

447,202

575,178

64,189

Derivative financial instruments (1) (5)

17,176,614

164,526

476,151

550,861

18,368,152

18,891,568

Securities subject to unrestricted repurchase agreements

300,519

5,393,490

952,332

6,646,341

7,271,393

 

84  Economic and Financial Analysis Report – March 201


 
 

 

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

 

Notes to the Consolidated Financial Statements

 

Securities

On March 31 - R$ thousand

1 to 30

31 to 180

181 to 360

More than 360

Total in 2018

(3) (4)

Total in 2017

(3) (4)

days

days

days

days

● National treasury bills

300,519

5,393,490

5,694,009

5,716,701

● National treasury notes

945,731

945,731

1,293

● Financial treasury bills

6,601

6,601

1,553,399

Total

54,251,149

15,119,190

53,792,412

393,396,338

516,559,089

448,510,341

%

10.5

2.9

10.4

76.2

100.0

100.0

 

(1) Consistent with the criteria in Bacen Circular Letter No. 3,068/01 and due to the characteristics of the securities, we are classifying the derivative financial instruments, except those considered as accounting hedges in the category Trading Securities;
(2) In compliance with Article 8 of Bacen Circular Letter No. 3,068/01, Bradesco declares that it has the financial capacity and intention to maintain held-to-maturity securities until their maturity dates. In the first quarter of 2018 and 2017, there were no sales or reclassifications of securities classified in such category;
(3) The number of days to maturity was based on the contractual maturity of the instruments, regardless of their accounting classification;
(4) The fair value of securities is determined based on the market price available at the end of the reporting period. If no market price quotation is available at the end of the reporting period, amounts are estimated based on the prices quoted by dealers, pricing models, quotation models or price quotations for instruments with similar characteristics. For investment funds, the original amortized cost reflects the fair value of the respective quotas;
(5) Includes hedge for protection of assets and liabilities, denominated in or indexed to foreign currency, primarily, arising from foreign investments, eliminating the effects of exchange variation of these assets and liabilities. For a better analysis of these items, consider the net exposure (Note 7d II); and

(6) In the first quarter of 2018, there were impairment losses on financial assets (mostly debentures), net of reversals, related to securities classified as “Available-for-Sale” and “Held-to-Maturity” in the amount of R$192,122 thousand (R$419,693 thousand in 2017).

 

Bradesco  85


 
 

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

 

Notes to the Consolidated Financial Statements

 

d)   Derivative financial instruments

 

Bradesco carries out transactions involving derivative financial instruments, which are recognized in the statement of financial position or in off-balance-sheet accounts, to meet its own needs in managing its global exposure, as well as to meet its customer’s requests, in order to manage their exposure. These operations involve a range of derivatives, including interest rate swaps, currency swaps, futures and options. Bradesco’s risk management policy is based on the utilization of derivative financial instruments mainly to mitigate the risks from operations carried out by the Bank and its subsidiaries.

 

Securities classified as trading and available-for-sale, as well as derivative financial instruments, are recognized in the consolidated statement of financial position at their fair value. Fair value is generally based on quoted market prices or quotations for assets or liabilities with similar characteristics. Should market prices not be available, fair values are based on dealer quotations, pricing models, discounted cash flows or similar techniques for which the determination of fair value may require judgment or significant estimates by Management.

 

Quoted market prices are used to determine the fair value of derivative financial instruments. The fair value of swaps is determined by using discounted cash flow modeling techniques that use yield curves, reflecting adequate risk factors. The information to build yield curves is mainly obtained from Securities, Commodities and Futures Exchange (B3), and the domestic and international secondary market. These yield curves are used to determine the fair value of currency swaps, interest rate and other risk factor swaps. The fair value of forward and futures contracts is also determined based on market price quotations for derivatives traded on an exchange or using methodologies similar to those outlined for swaps. The fair values of credit derivative instruments are determined based on market price quotation or prices received 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 primarily consist of swaps and futures and are registered at B3.

 

Operations involving forward contracts of interest rates, indexes and currencies are contracted by Management to hedge Bradesco’s overall exposures and to meet customer needs.

 

Foreign derivative financial instruments refer to swap, forward, options, credit and futures operations and primarily out at the stock exchanges in Chicago and New York, as well as the over-the-counter (OTC) markets.

 

86  Economic and Financial Analysis Report – March 201


 
 

 

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

 

Notes to the Consolidated Financial Statements

 

I)    Amount of derivative financial instruments recognized in off-balance-sheet accounts

 

 

On March 31 - R$ thousand

2018

2017

Reference value

Net amount

Reference value

Net amount

Futures contracts

 

 

 

 

Purchase commitments:

117,904,368

84,036,194

- Interbank market

60,412,071

28,119,407

- Foreign currency

57,068,344

55,907,687

4,308,061

- Other

423,953

9,100

Sale commitments:

181,737,217

181,621,985

- Interbank market (1)

122,310,985

61,898,914

129,962,770

101,843,363

- Foreign currency (2)

58,757,867

1,689,523

51,599,626

- Other

668,365

244,412

59,589

50,489

 

 

 

 

 

Option contracts

 

 

 

 

Purchase commitments:

65,037,325

16,905,386

- Interbank market

55,944,776

5,243,229

347,792

- Foreign currency

8,899,340

10,735,206

- Other

193,209

106,593

926,951

157,935

Sale commitments:

105,911,937

17,727,767

- Interbank market

94,938,559

38,993,783

4,895,437

- Foreign currency

10,886,762

1,987,422

12,063,314

1,328,108

- Other

86,616

769,016

 

 

 

 

 

Forward contracts

 

 

 

 

Purchase commitments:

13,616,513

14,732,356

- Foreign currency

12,164,239

14,205,670

- Other

1,452,274

440,015

526,686

Sale commitments:

18,421,371

18,826,676

- Foreign currency (2)

17,409,112

5,244,873

18,053,430

3,847,760

- Other

1,012,259

773,246

246,560

 

 

 

 

 

Swap contracts

 

 

 

 

Assets (long position):

68,675,683

78,242,623

- Interbank market

6,957,213

4,396,707

13,160,554

9,861,749

- Fixed rate

52,450,142

25,532,921

52,784,176

21,496,880

- Foreign currency

7,375,673

10,213,478

329,414

- IGPM

712,450

832,450

- Other

1,180,205

1,251,965

Liabilities (short position):

48,950,888

47,606,325

- Interbank market

2,560,506

3,298,805

- Fixed rate

26,917,221

31,287,296

- Foreign currency

16,216,254

8,840,581

9,884,064

- IGPM

726,000

13,550

981,000

148,550

- Other

2,530,907

1,350,702

2,155,160

903,195

 

Derivatives include operations maturing in D+1.

(1) Includes: (i) accounting hedges to protect CDI-related funding totaling R$4,733,963 thousand (R$2,056,240 in 2017); and (ii) accounting hedges to protect interbank investments, in the amount of R$10,358,828 thousand (R$15,946,347 thousand in 2017) (note 7f); and

(2) Includes specific hedges to protect assets and liabilities, arising from foreign investments, totaling R$50,043,473 thousand (R$46,022,507 thousand in 2017).

 

Bradesco  87


 
 

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

 

Notes to the Consolidated Financial Statements

 

II)   Breakdown of derivative financial instruments (assets and liabilities) shown at original amortized cost and fair value

 

 

On March 31 - R$ thousand

2018

2017

Original amortized cost

Mark-to-market adjustment

Fair value

Original amortized cost

Mark-to-market adjustment

Fair value

Adjustment receivable - swaps

17,187,138

(3,311,378)

13,875,760

22,302,304

(6,778,728)

15,523,576

Adjustment receivable - future

23,190

23,190

18,193

18,193

Receivable forward purchases

1,555,088

1,555,088

1,405,369

1,405,369

Receivable forward sales (1)

1,770,585

1,770,585

1,546,906

1,546,906

Premiums on exercisable options

1,170,857

(27,328)

1,143,529

454,876

(57,352)

397,524

Total assets (A)

21,706,858

(3,338,706)

18,368,152

25,727,648

(6,836,080)

18,891,568

Adjustment payables - swaps

(9,643,657)

(4,449,160)

(14,092,817)

(8,966,342)

(3,806,095)

(12,772,437)

Adjustment payables - future

(106,395)

(106,395)

(11,011)

(11,011)

Payable forward purchases

(2,710,752)

(2,710,752)

(1,433,945)

(1,433,945)

Payable forward sales/other

(486,384)

(486,384)

(1,208,796)

(1,208,796)

Premiums on written options

(969,311)

88,240

(881,071)

(262,982)

(16,041)

(279,023)

Total liabilities (B)

(13,916,499)

(4,360,920)

(18,277,419)

(11,883,076)

(3,822,136)

(15,705,212)

       

   

Net Effect (A-B)

7,790,359

(7,699,626)

90,733

13,844,572

(10,658,216)

3,186,356

 

(1)   Includes receivable adjustments relating to hedge of assets and liabilities, designated and/or indexed in foreign currency, primarily, arising from foreign investments, eliminating the effects of exchange variation of these assets and liabilities.

 

III) Futures, options, forward and swap contracts – (Nominal Value)

 

 

On March 31 - R$ thousand

1 to 90

91 to 180

181 to 360

More than 360

2018

2017

days

days

days

days

Futures contracts (1)

92,998,452

12,224,786

44,530,177

149,888,170

299,641,585

265,658,179

Option contracts

8,879,333

3,094,097

147,310,627

11,665,205

170,949,262

34,633,153

Forward contracts (1)

20,832,076

5,359,826

3,114,797

2,731,185

32,037,884

33,559,032

Swap contracts

6,416,283

10,101,580

9,869,345

91,239,363

117,626,571

125,848,948

Total in 2018

129,126,144

30,780,289

204,824,946

255,523,923

620,255,302

 

Total in 2017

107,282,442

33,726,232

87,528,502

231,162,136

 

459,699,312

 

(1) Includes contracts relating to hedges for the protection of assets and liabilities, designated and/or indexed in foreign currency, primarily, arising from foreign investments, eliminating the effects of exchange variation of these assets and liabilities.

 

88  Economic and Financial Analysis Report – March 2018


 
 

 

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

 

Notes to the Consolidated Financial Statements

 

IV) Types of margin offered in guarantee of derivative financial instruments, primarily futures contracts

 

 

On March 31 - R$ thousand

2018

2017

Government securities

 

 

National treasury bills

1,707,413

996,301

National treasury notes

4,496,860

4,389,017

Total

6,204,273

5,385,318

 

V)  Revenues and expenses, net

 

 

Accrued on March 31 - R$ thousand

2018

2017

Swap contracts

282,139

699,749

Forward contracts (1)

(167,533)

89,670

Option contracts

101,858

39,777

Futures contracts (1)

(2,026,606)

(1,300,824)

Foreign exchange variation of assets and liabilities overseas

120,721

(531,684)

Total (Note 7g)

(1,689,421)

(1,003,312)

 

(1) Includes the gain (loss) and the respective adjustment to the market capitalization of the hedge for protection of the assets and liabilities, designated and/or indexed in foreign currency, primarily, arising from foreign investments.

 

VI) Reference values of derivative financial instruments, by trading location and counterparty

 

 

On March 31 - R$ thousand

2018

2017

B3 (stock exchange)

404,376,605

227,502,265

B3 (over-the-counter)

157,935,249

168,364,073

Overseas (stock exchange) (1)

49,632,494

56,523,629

Overseas (over-the-counter) (1)

8,310,954

7,309,345

Total

620,255,302

459,699,312

 

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

 

e)   Credit Default Swaps (CDS)

 

On March 31, 2018, Bradesco had credit default swaps (CDS) with the following characteristics: the risk received in credit swaps whose underlying assets are “debt securities issued by companies" in the amount of R$503,689 thousand (2017 - R$145,477 thousand) and “bonds of the Brazilian public debt” in the amount of R$964,899 thousand (2017 - R$554,470 thousand), and in 2017 the risk transferred in credit swaps whose underlying assets are Brazilian public debt”, was R$(15,842) thousand amounting to a total net credit risk value of R$1,468,588 thousand (2017 - R$684,105 thousand), with an effect on the calculation of required shareholders’ equity of R$52,887 thousand (2017 - R$15,275 thousand). The contracts related to credit derivatives transactions described above are due in 2023. The mark-to-market of the protection rates that remunerates the counterparty that received the risk totaled R$1,152 thousand (2017 - R$(481) thousand). There were no credit events, as defined in the agreements, during the period.

Bradesco  89


 
 

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

 

Notes to the Consolidated Financial Statements

 

f)    Hedge Accounting

 

On March 31, 2018, Bradesco maintained hedge, in accordance with Bacen's Circular No. 3,082 / 02, composed by:

 

I)  Cash Flow Hedge - the financial instruments classified in this category, aims to reduce exposure to future changes in interest rates, which impact the outcome of the organization. The effective portion of the valuations or devaluations of these instruments is recognized in a separate account of shareholders' equity, net of tax effects and is only transferred to income in two situations: (i) in case of ineffectiveness of the hedge; or (ii) the realization of the hedge object. The ineffective portion of the respective hedge is recognized directly in the income statement.

 

Strategy

On March 31 - R$ thousand

Hedge instrument nominal value

Hedge object accounting value

Adjustment to market recorded in shareholders' equity (gross of tax effects)

Adjustment to market recorded in shareholders' equity (net of tax effects)

Hedge of interest receipts from investments in securities (1)

10,358,828

9,726,704

73,584

44,150

Hedge of interest payments on funding (2)

4,733,963

4,561,735

(153,069)

(91,841)

Total in 2018

15,092,791

14,288,439

(79,485)

(47,691)

*

 

 

 

 

Hedge of interest receipts from investments in securities (1)

15,946,347

16,002,283

205,709

123,425

Hedge of interest payments on funding (2)

2,056,240

2,042,724

(20,679)

(12,407)

Total in 2017

18,002,587

18,045,007

185,030

111,018

(1) Referring to the DI interest rate risk, using DI Futures contracts in B3, with the maturity in 2019, making the cash flow prefixed; and
(2) Referring to the DI interest rate risk, using DI Futures contracts in B3, with maturity dates in 2020, making the cash flow prefixed.

The effectiveness of the hedge portfolio is in accordance with Bacen's Circular No. 3,082 / 02.

 

For the next 12 months, the gains/(losses) related to the cash flow hedge, which we expect to recognize in the income statement, amount to R$ 5,684 thousand.

 

The gains/(losses) related to the cash flow hedge recorded in the income statements in during the first quarter of 2018 were R$ 3,568 thousand.

 

II) Hedge of investments abroad - the financial instruments classified in this category, have the objective of reducing the exposure to foreign exchange variation of investments abroad, whose functional currency is different from the national currency, which impacts the result of the organization. The effective portion of the valuations or devaluations of these instruments is recognized in a separate account of shareholders' equity, net of tax effects and is only transferred to income in two situations: (i) hedge ineffectiveness; or (ii) in the disposal or partial sale of the foreign operation. The ineffective portion of the respective hedge is recognized directly in the income statement.

 

Strategy

On March 31 - R$ thousand

Hedge instrument nominal value

Hedge object accounting value

Adjustment to market recorded in shareholders' equity (gross of tax effects)

Adjustment to market recorded in shareholders' equity (net of tax effects)

Hedge of exchange variation on future cash flows (1)

1,271,022

698,844

(157,019)

(94,211)

Total in 2018

1,271,022

698,844

(157,019)

(94,211)

*

 

 

 

 

Hedge of exchange variation on future cash flows (1)

1,060,485

595,732

(69,225)

(41,535)

Total in 2017

1,060,485

595,732

(69,225)

(41,535)

(1) Whose functional currency is different from the real, using Forward contracts, with the object of hedging the foreign investment referenced to MXN (Mexican Peso).

The effectiveness of the hedge portfolio is in accordance with Bacen's Circular No. 3,082 / 02.

 

For the next 12 months, the gains/(losses) related to the hedge of investments abroad, which we expect to recognize in the result, amount to R$ (546) thousand.

 

Gains/(losses) related to the hedge of investments abroad recorded in income accounts in during the first quarter of 2018 were  R$ (342) thousand.

 

90  Economic and Financial Analysis Report – March 2018

 
 

 

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

 

Notes to the Consolidated Financial Statements

 

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

 

 

Accrued on March 31 - R$ thousand

2018

2017

Fixed income securities (1)

5,028,560

6,128,886

Interbank investments (Note 6b)

2,426,093

5,739,670

Equity securities

(122,971)

198,524

Subtotal

7,331,682

12,067,080

Income from insurance, pension plans and capitalization bonds

9,074,226

10,026,655

Income from derivative financial instruments (Note 7d V)

(1,689,421)

(1,003,312)

Total

14,716,487

21,090,423

 

(1) In the first quarter of 2018, there were losses due to impairment of financial assets (mostly debentures), net of reversals, in the amount of R$192,122 thousand (R$419,693 thousand in 2017).

 

8)      INTERBANK ACCOUNTS – RESERVE REQUIREMENT

 

a)   Reserve requirement

 

 

On March 31 - R$ thousand

Remuneration

2018

2017

Compulsory deposit – demand deposits

not remunerated

6,832,025

6,034,964

Compulsory deposit – savings deposits

savings index

24,762,604

18,937,967

Compulsory deposit – time deposits

Selic rate

39,173,049

20,391,653

Requirement  rural loans funds

not remunerated

46,225

Additional compulsory deposit – savings deposits

Selic rate

5,175,153

Additional compulsory deposit – time deposits

Selic rate

11,097,285

Reserve requirement – SFH

TR + interest rate

1,238,177

809,363

Total

 

72,052,080

62,446,385

 

For more information on compulsory deposits see Note 34.

 

b)   Revenue from reserve requirement

 

 

Accrued on March 31 - R$ thousand

2018

2017

Reserve requirement – Bacen (Compulsory deposit)

903,333

1,343,443

Reserve requirement – SFH

12,228

16,579

Total

915,561

1,360,022

 

Bradesco  91


 
 

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

 

Notes to the Consolidated Financial Statements

 

9)      LOANS

 

Information relating to loans, including advances on foreign exchange contracts, leases and other receivables with credit characteristics is shown below:

     

a)   By type and maturity

 

 

On March 31 - R$ thousand

Performing loans

1 to 30

31 to 60

61 to 90

91 to 180

181 to 360

More than 360

Total in 2018 (A)

% (5)

Total in 2017 (A)

% (5)

days

days

days

days

days

days

Discounted trade receivables and loans (1)

18,803,615

13,014,206

9,710,730

17,981,623

22,237,156

68,329,681

150,077,011

35.8

151,988,747

35.9

Financing

6,526,725

3,400,065

4,171,385

9,439,466

16,419,660

83,979,362

123,936,663

29.6

129,111,414

30.4

Agricultural and agribusiness loans

727,290

664,884

1,188,189

5,034,352

5,369,926

7,741,083

20,725,724

5.0

21,548,632

5.1

Subtotal

26,057,630

17,079,155

15,070,304

32,455,441

44,026,742

160,050,126

294,739,398

70.4

302,648,793

71.4

Leasing

127,242

93,427

90,676

244,402

401,555

1,052,952

2,010,254

0.5

2,328,906

0.5

Advances on foreign exchange contracts (2)

2,461,801

1,951,196

2,000,279

3,763,287

1,636,033

65,079

11,877,675

2.8

10,042,593

2.4

Subtotal

28,646,673

19,123,778

17,161,259

36,463,130

46,064,330

161,168,157

308,627,327

73.7

315,020,292

74.3

Other receivables (3)

11,338,554

7,275,512

2,517,343

5,090,421

4,637,595

2,114,718

32,974,143

7.9

30,980,396

7.3

Total loans

39,985,227

26,399,290

19,678,602

41,553,551

50,701,925

163,282,875

341,601,470

81.6

346,000,688

81.6

Sureties and guarantees (4)

2,854,920

894,901

1,678,340

6,321,169

8,087,856

52,838,611

72,675,797

17.4

75,950,737

17.9

Loan assignment - real estate receivables certificate

35,477

35,476

35,474

102,095

152,366

512,267

873,155

0.2

1,001,636

0.2

Acquisition of credit card receivables

1,000,609

366,004

357,357

617,873

422,792

2,764,635

0.7

1,021,364

0.2

Loans available for import (4)

52,885

125,493

84,348

101,868

51,139

415,733

0.1

238,835

0.1

Confirmed exports loans (4)

370

113

266

22,180

40,000

40,000

102,929

76,956

Co-obligation from assignment of rural loan (4)

77,062

77,062

88,896

Total in 2018

43,929,488

27,821,277

21,834,387

48,718,736

59,456,078

216,750,815

418,510,781

100.0

 

 

Total in 2017

42,440,641

29,413,254

22,230,625

47,120,514

68,803,882

214,370,196

 

 

424,379,112

100.0


92
  Economic and Financial Analysis Report – March 2018


 
 

 

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

 

Notes to the Consolidated Financial Statements

 

 

On March 31 - R$ thousand

Non-performing loans

Past-due installments

1 to 30

31 to 60

61 to 90

91 to 180

181 to 540

Total in 2018 (B)

% (5)

Total in 2017 (B)

% (5)

days

days

days

days

days

Discounted trade receivables and loans (1)

1,179,811

1,470,923

971,461

2,634,619

3,748,002

10,004,816

82.9

13,147,597

79.7

Financing

316,536

245,625

139,981

302,450

223,937

1,228,529

10.2

1,453,233

8.8

Agricultural and agribusiness loans

24,500

32,571

18,188

105,665

80,885

261,809

2.2

359,695

2.2

Subtotal

1,520,847

1,749,119

1,129,630

3,042,734

4,052,824

11,495,154

95.3

14,960,525

90.7

Leasing

5,775

4,241

3,377

7,553

7,134

28,080

0.2

50,233

0.3

Advances on foreign exchange contracts (2)

17,804

46,279

8,724

4,125

25

76,957

0.6

118,946

0.7

Subtotal

1,544,426

1,799,639

1,141,731

3,054,412

4,059,983

11,600,191

96.1

15,129,704

91.7

Other receivables (3)

55,906

7,202

4,950

289,611

117,215

474,884

3.9

1,370,182

8.3

Total in 2018

1,600,332

1,806,841

1,146,681

3,344,023

4,177,198

12,075,075

100.0

 

 

Total in 2017

2,244,416

1,906,739

1,539,175

5,093,875

5,715,681

 

 

16,499,886

100.0

 

 

On March 31 - R$ thousand

Non-performing loans

Installments not yet due

1 to 30

31 to 60

61 to 90

91 to 180

181 to 360

More than 360

Total in 2018 (C)

% (5)

Total in 2017 (C)

% (5)

days

days

days

days

days

days

Discounted trade receivables and loans (1)

715,086

592,020

563,054

1,256,018

2,062,532

5,229,094

10,417,804

61.0

12,678,111

67.2

Financing

271,689

238,613

203,434

592,843

965,886

3,998,851

6,271,316

36.7

5,707,810

30.3

Agricultural and agribusiness loans

1,071

2,538

3,765

55,859

75,770

123,058

262,061

1.5

281,955

1.5

Subtotal

987,846

833,171

770,253

1,904,720

3,104,188

9,351,003

16,951,181

99.2

18,667,876

99.0

Leasing

4,315

3,993

3,800

10,605

20,986

32,437

76,136

0.4

153,566

0.8

Subtotal

992,161

837,164

774,053

1,915,325

3,125,174

9,383,440

17,027,317

99.6

18,821,442

99.8

Other receivables (3)

5,191

4,178

3,754

9,956

13,316

23,413

59,808

0.4

45,522

0.2

Total in 2018

997,352

841,342

777,807

1,925,281

3,138,490

9,406,853

17,087,125

100.0

 

 

Total in 2017

1,183,049

1,015,446

871,496

2,282,963

3,648,384

9,865,626

 

 

18,866,964

100.0


Bradesco
 
93


 
 

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

 

Notes to the Consolidated Financial Statements

 

 

On March 31 - R$ thousand

Total

Total in 2018 (A+B+C)

% (5)

Total in 2017 (A+B+C)

% (5)

Discounted trade receivables and loans (1)

170,499,631

38.1

177,814,455

38.8

Financing

131,436,508

29.4

136,272,457

29.6

Agricultural and agribusiness loans

21,249,594

4.7

22,190,282

4.8

Subtotal

323,185,733

72.2

336,277,194

73.2

Leasing

2,114,470

0.5

2,532,705

0.6

Advances on foreign exchange contracts (2) (Note 10a)

11,954,632

2.7

10,161,539

2.2

Subtotal

337,254,835

75.4

348,971,438

76.0

Other receivables (3)

33,508,835

7.5

32,396,100

7.0

Total loans

370,763,670

82.9

381,367,538

83.0

Sureties and guarantees (4)

72,675,797

16.2

75,950,737

16.5

Loan assignment - real estate receivables certificate

873,155

0.2

1,001,636

0.2

Acquisition of credit card receivables

2,764,635

0.6

1,021,364

0.2

Loans available for import (4)

415,733

0.1

238,835

0.1

Confirmed exports loans (4)

102,929

76,956

Co-obligation from assignment of rural loan (4)

77,062

88,896

Total in 2018

447,672,981

100.0

 

 

Total in 2017

 

 

459,745,962

100.0

 

(1) Including credit card loans and advances on credit card receivables of R$14,340,737 thousand (R$16,393,457 thousand in 2017);
(2) Advances on foreign exchange contracts are classified as a deduction from “Other Liabilities”;
(3) The item “Other Receivables” comprises receivables on sureties and guarantees honored, receivables on sale of assets, securities and credits receivable, income receivable from foreign exchange contracts and export contracts and credit card receivables (cash and installment purchases at merchants) totaling R$25,125,584 thousand (R$24,480,516 thousand in 2017);
(4) Recognized in off-balance sheet accounts; and
(5) Percentage of each type in relation to the total loan portfolio, including sureties and guarantee, loan assignment and acquisition of receivables.

 

94  Economic and Financial Analysis Report – March 2018


 
 

 

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

 

Notes to the Consolidated Financial Statements

 

b) By type and levels of risk

 

 

On March 31 - R$ thousand

Levels of risk

AA

A

B

C

D

E

F

G

H

Total in 2018

% (1)

Total in 2017

% (1)

Discounted trade receivables and loans

19,688,183

77,786,802

13,880,679

25,166,591

7,935,413

5,522,533

3,855,820

2,285,351

14,378,259

170,499,631

46.0

177,814,455

46.6

Financing

78,731,302

19,481,606

14,868,202

9,493,506

2,462,421

2,314,175

1,142,623

293,386

2,649,287

131,436,508

35.5

136,272,457

35.7

Agricultural and agribusiness loans

7,095,741

4,254,028

7,074,282

1,902,146

393,742

238,571

40,236

36,770

214,078

21,249,594

5.7

22,190,282

5.8

Subtotal

105,515,226

101,522,436

35,823,163

36,562,243

10,791,576

8,075,279

5,038,679

2,615,507

17,241,624

323,185,733

87.2

336,277,194

88.1

Leasing

281,365

419,877

1,200,498

50,194

30,658

25,286

10,314

11,879

84,399

2,114,470

0.6

2,532,705

0.7

Advances on foreign exchange contracts (2)

4,949,987

2,637,588

1,824,832

1,994,682

67,234

331,488

1,320

16,881

130,620

11,954,632

3.2

10,161,539

2.7

Subtotal

110,746,578

104,579,901

38,848,493

38,607,119

10,889,468

8,432,053

5,050,313

2,644,267

17,456,643

337,254,835

91.0

348,971,438

91.5

Other receivables

4,568,387

21,110,068

2,874,874

3,591,071

237,162

135,108

50,831

37,560

903,774

33,508,835

9.0

32,396,100

8.5

Total in 2018

115,314,965

125,689,969

41,723,367

42,198,190

11,126,630

8,567,161

5,101,144

2,681,827

18,360,417

370,763,670

100.0

 

 

%

31.1

33.9

11.2

11.4

3.0

2.3

1.4

0.7

5.0

100.0

 

 

 

Total in 2017

112,909,617

131,241,475

48,723,671

38,415,188

13,119,638

7,414,549

3,723,314

2,927,354

22,892,732

 

 

381,367,538

100.0

%

29.6

34.4

12.8

10.1

3.4

1.9

1.0

0.8

6.0

 

 

100.0

 

 

(1) Percentage of each type in relation to the total loan portfolio, excluding sureties and guarantees, loan assignments, acquisition of receivables and co-obligation in rural loan assignments; and
(2) Note 10a.

Bradesco  95


 
 

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

 

Notes to the Consolidated Financial Statements

 

c)   Maturity ranges and levels of risk

 

 

On March 31 - R$ thousand

Levels of risk

Non-performing loans

AA

A

B

C

D

E

F

G

H

Total in 2018

% (1)

Total in 2017

% (1)

Installments not yet due

1,292,367

3,275,669

2,089,086

1,713,915

2,210,017

893,527

5,612,544

17,087,125

100.0

18,866,964

100.0

1 to 30

146,599

192,282

112,853

74,911

72,369

50,432

347,906

997,352

5.8

1,183,049

6.3

31 to 60

118,841

157,742

99,106

64,920

86,746

42,976

271,011

841,342

4.9

1,015,446

5.4

61 to 90

95,596

141,085

83,769

61,805

121,852

38,550

235,150

777,807

4.6

871,496

4.6

91 to 180

181,868

385,132

264,415

173,634

164,190

105,794

650,248

1,925,281

11.3

2,282,963

12.1

181 to 360

257,045

531,986

414,842

307,733

355,321

172,038

1,099,525

3,138,490

18.4

3,648,384

19.3

More than 360

492,418

1,867,442

1,114,101

1,030,912

1,409,539

483,737

3,008,704

9,406,853

55.0

9,865,626

52.3

Past-due installments (2)

453,276

973,263

940,351

906,363

1,388,083

819,813

6,593,926

12,075,075

100.0

16,499,886

100.0

1 to 14

7,389

93,326

49,729

123,805

29,437

13,940

177,226

494,852

4.1

726,073

4.4

15 to 30

436,555

219,578

100,131

51,014

41,760

28,317

228,125

1,105,480

9.2

1,518,343

9.2

31 to 60

9,332

630,063

239,303

121,652

310,880

48,791

446,820

1,806,841

15.0

1,906,739

11.6

61 to 90

14,511

525,529

136,081

94,964

80,355

295,241

1,146,681

9.5

1,539,175

9.3

91 to 180

15,785

25,659

461,801

777,526

624,300

1,438,952

3,344,023

27.7

5,093,875

30.9

181 to 360

12,010

133,516

24,110

3,877,133

4,046,769

33.4

5,522,627

33.4

More than 360

130,429

130,429

1.1

193,054

1.2

Subtotal

1,745,643

4,248,932

3,029,437

2,620,278

3,598,100

1,713,340

12,206,470

29,162,200

 

35,366,850

 

Specific provision

17,456

127,468

302,944

786,084

1,799,050

1,199,338

12,206,470

16,438,810

 

21,500,402

 

 

(1) Percentage of maturities by installment; and
(2) For transactions with terms of more than 36 months, past-due periods are doubled, as permitted by Resolution No. 2,682/99.

96  Economic and Financial Analysis Report – March 2018


 
 

 

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

 

Notes to the Consolidated Financial Statements

 

 

On March 31 - R$ thousand

Levels of risk

Performing loans

AA

A

B

C

D

E

F

G

H

Total in 2018

% (1)

Total in 2017

% (1)

Installments not yet due

115,314,965

125,689,969

39,977,724

37,949,258

8,097,193

5,946,883

1,503,044

968,487

6,153,947

341,601,470

100.0

346,000,688

100.0

1 to 30

8,580,939

20,440,637

3,240,805

5,546,741

635,783

614,824

125,274

80,629

719,595

39,985,227

11.7

38,089,483

11.0

31 to 60

4,914,005

11,927,867

2,780,383

4,247,193

936,930

1,142,783

53,229

70,043

326,857

26,399,290

7.7

27,821,296

8.0

61 to 90

5,632,022

7,847,327

2,251,680

3,303,167

261,477

129,575

37,702

29,323

186,329

19,678,602

5.8

20,002,807

5.8

91 to 180

12,166,978

15,905,396

4,991,414

5,796,063

663,416

1,144,461

145,209

87,391

653,223

41,553,551

12.2

39,517,923

11.4

181 to 360

16,038,865

19,538,699

6,540,641

5,864,284

1,098,476

412,535

166,530

369,800

672,095

50,701,925

14.8

53,885,965

15.6

More than 360

67,982,156

50,030,043

20,172,801

13,191,810

4,501,111

2,502,705

975,100

331,301

3,595,848

163,282,875

47.8

166,683,214

48.2

Generic provision

628,450

399,778

1,138,478

809,720

1,784,065

751,522

677,941

6,153,947

12,343,901

 

10,679,397

 

Total in 2018 (2)

115,314,965

125,689,969

41,723,367

42,198,190

11,126,630

8,567,161

5,101,144

2,681,827

18,360,417

370,763,670

 

 

 

Existing provision

710,158

451,003

1,411,204

1,708,812

5,391,181

4,975,430

2,661,010

18,360,417

35,669,215

 

 

 

Minimum required provision

628,450

417,234

1,265,946

1,112,664

2,570,149

2,550,572

1,877,279

18,360,417

28,782,711

 

 

 

Excess provision

81,708

33,769

145,258

596,148

2,821,032

2,424,858

783,731

6,886,504

 

 

 

Total in 2017 (2)

112,909,617

131,241,475

48,723,671

38,415,188

13,119,638

7,414,549

3,723,314

2,927,354

22,892,732

 

 

381,367,538

 

Existing provision

736,662

534,473

1,328,092

2,020,565

5,151,727

3,510,595

2,911,884

22,892,732

 

 

39,086,730

 

Minimum required provision

640,820

448,150

1,072,450

1,159,854

2,091,416

1,839,722

2,034,655

22,892,732

 

 

32,179,799

 

Excess provision

95,842

86,323

255,642

860,711

3,060,311

1,670,873

877,229

 

 

6,906,931

 

                                                                                                                                                                                                                                               

(1) Percentage of maturities by installment; and
(2) The total includes performing loans of R$341,601,470 thousand (R$346,000,688 thousand in 2017) and non-performing loans of R$29,162,200 thousand (R$35,366,850 thousand in 2017).

Bradesco  97


 
 

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

 

Notes to the Consolidated Financial Statements

 

d)   Concentration of loans

 

 

On March 31 - R$ thousand

2018

% (1)

2017

% (1)

Largest borrower

8,905,999

2.4

8,328,068

2.2

10 largest borrowers

29,579,665

8.0

32,249,584

8.5

20 largest borrowers

43,792,696

11.8

48,440,752

12.7

50 largest borrowers

65,790,253

17.7

71,128,705

18.7

100 largest borrowers

82,332,371

22.2

88,904,388

23.3

 

(1) Percentage on total portfolio (as defined by Bacen).

 

e)   By economic sector

 

 

On March 31 - R$ thousand

2018

%

2017

%

Public sector

9,178,099

2.5

8,328,075

2.2

Oil, derivatives and aggregate activities

8,905,999

2.4

8,328,068

2.2

Production and distribution of electricity

2,589

7

Other industries

269,511

0.1

Private sector

361,585,571

97.5

373,039,463

97.8

Companies

185,239,543

50.0

202,879,865

53.2

Real estate and construction activities

28,407,869

7.7

33,523,368

8.8

Retail

23,441,178

6.3

22,605,796

5.9

Services

17,872,147

4.8

18,646,469

4.9

Transportation and concession

14,993,680

4.0

15,907,408

4.2

Automotive

9,512,839

2.6

13,959,690

3.7

Food products

9,156,100

2.5

10,793,423

2.8

Wholesale

8,923,004

2.4

9,805,544

2.6

Production and distribution of electricity

6,661,671

1.8

7,795,612

2.0

Iron and steel industry

7,029,045

1.9

7,418,235

1.9

Sugar and alcohol

7,025,419

1.9

6,847,660

1.8

Holding

3,673,288

1.0

6,052,812

1.6

Capital goods

3,123,320

0.8

4,730,412

1.2

Pulp and paper

2,743,598

0.7

3,867,612

1.0

Chemical

3,408,867

0.9

3,636,988

1.0

Cooperative

3,390,135

0.9

3,570,089

0.9

Financial

2,655,094

0.7

3,201,363

0.8

Leisure and tourism

2,557,819

0.7

2,967,400

0.8

Textiles

1,788,534

0.5

2,436,061

0.6

Agriculture

1,807,053

0.5

2,463,316

0.6

Oil, derivatives and aggregate activities

2,048,175

0.6

2,466,452

0.6

Other industries

25,020,708

6.7

20,184,155

5.3

Individuals

176,346,028

47.6

170,159,598

44.6

Total

370,763,670

100.0

381,367,538

100.0

 

98  Economic and Financial Analysis Report – March 2018


 
 

 

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

 

Notes to the Consolidated Financial Statements

 

f)    Breakdown of loans and allowance for loan losses

 

Level of risk

On March 31 - R$ thousand

Portfolio balance

Non-performing loans

Performing loans

Total

% (1)

% 2018 YTD (2)

% 2017 YTD (2)

Installments past due

Installments not yet due

Total - non-performing loans

AA

115,314,965

115,314,965

31.1

31.1

29.6

A

125,689,969

125,689,969

33.9

65.0

64.0

B

453,276

1,292,367

1,745,643

39,977,724

41,723,367

11.2

76.2

76.8

C

973,263

3,275,669

4,248,932

37,949,258

42,198,190

11.4

87.6

86.9

Subtotal

1,426,539

4,568,036

5,994,575

318,931,916

324,926,491

87.6

 

 

D

940,351

2,089,086

3,029,437

8,097,193

11,126,630

3.0

90.6

90.3

E

906,363

1,713,915

2,620,278

5,946,883

8,567,161

2.3

92.9

92.2

F

1,388,083

2,210,017

3,598,100

1,503,044

5,101,144

1.4

94.3

93.2

G

819,813

893,527

1,713,340

968,487

2,681,827

0.7

95.0

94.0

H

6,593,926

5,612,544

12,206,470

6,153,947

18,360,417

5.0

100.0

100.0

Subtotal

10,648,536

12,519,089

23,167,625

22,669,554

45,837,179

12.4

 

 

Total in 2018

12,075,075

17,087,125

29,162,200

341,601,470

370,763,670

100.0

 

 

%

3.3

4.6

7.9

92.1

100.0

 

 

 

Total in 2017

16,499,886

18,866,964

35,366,850

346,000,688

381,367,538

 

 

 

%

4.3

5.0

9.3

90.7

100.0

 

 

 

 

(1) Percentage of level of risk in relation to the total portfolio; and
(2) Cumulative percentage of level of risk on total portfolio.

Bradesco  99


 
 

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

 

Notes to the Consolidated Financial Statements

 

Level of risk

On March 31 - R$ thousand

Provision

% Minimum provisioning required

Minimum required

Excess

Existing

% 2018 YTD (1)

% 2017 YTD (1)

Specific

Generic

Total

Installments past due

Installments not yet due

Total specific

AA

-

A

0.5

628,450

628,450

81,708

710,158

0.6

0.6

B

1.0

4,533

12,923

17,456

399,778

417,234

33,769

451,003

1.1

1.1

C

3.0

29,198

98,270

127,468

1,138,478

1,265,946

145,258

1,411,204

3.3

3.5

Subtotal

 

33,731

111,193

144,924

2,166,706

2,311,630

260,735

2,572,365

0.8

0.8

D

10.0

94,035

208,909

302,944

809,720

1,112,664

596,148

1,708,812

15.4

15.4

E

30.0

271,909

514,175

786,084

1,784,065

2,570,149

2,821,032

5,391,181

62.9

69.5

F

50.0

694,041

1,105,009

1,799,050

751,522

2,550,572

2,424,858

4,975,430

97.5

94.3

G

70.0

573,869

625,469

1,199,338

677,941

1,877,279

783,731

2,661,010

99.2

99.5

H

100.0

6,593,926

5,612,544

12,206,470

6,153,947

18,360,417

18,360,417

100.0

100.0

Subtotal

 

8,227,780

8,066,106

16,293,886

10,177,195

26,471,081

6,625,769

33,096,850

72.2

72.9

Total in 2018

 

8,261,511

8,177,299

16,438,810

12,343,901

28,782,711

6,886,504

35,669,215

9.6

 

%

 

23.2

22.9

46.1

34.6

80.7

19.3

100.0

 

 

Total in 2017

 

11,996,266

9,504,136

21,500,402

10,679,397

32,179,799

6,906,931

39,086,730

 

10.2

%

 

30.7

24.3

55.0

27.3

82.3

17.7

100.0

 

 

 

(1) Percentage of existing provision in relation to total portfolio, by level of risk.

 

100  Economic and Financial Analysis Report – March 2018


 
 

 

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

 

Notes to the Consolidated Financial Statements

 

g)   Changes in allowance for loan losses

 

 

R$ thousand

2018

2017

- Specific provision (1)

16,828,454

22,386,423

- Generic provision (2)

12,699,936

10,737,580

- Excess provision (3) (4)

6,895,477

7,490,351

- Loans

6,895,477

4,429,361

- Guarantees provided (4)

3,060,990

Opening balance on December 31

36,423,867

40,614,354

Accounting for allowance for loan losses (Note 9h-1) (5)

4,579,695

8,281,361

Accounting for/reversal of provisions for guarantees provided (4)

(3,060,990)

Net write-offs/other

(5,334,347)

(6,747,995)

Closing balance on March 31

35,669,215

39,086,730

- Specific provision (1)

16,438,810

21,500,402

- Generic provision (2)

12,343,901

10,679,397

- Excess provision (3)

6,886,504

6,906,931

 

(1) For contracts with installments past due for more than 14 days;
(2) Recognized based on the customer/transaction classification and therefore not included in the preceding item;
(3) The excess provision is recognized based on Management’s experience and the expectation in relation to the loan portfolio, to determine the total provision deemed sufficient to cover specific and general credit risk, when considered together with the provision calculated based on levels of risk and the corresponding minimum percentage in the provision established by Resolution No. 2,682/99. The excess provision per customer was classified according to the level of risk (Note 9f);
(4) Up to December 31, 2016, included the constitution of provision for guarantees provided, encompassing sureties, guarantees, credit letters, and standby letter of credit, which comprises the concept of “excess” provision that totaled R$3,060,990 thousand. In accordance with Resolution No. 4,512/16, in the first quarter of 2018, part of this balance (R$604,623 thousand) was allocated to a specific account under "Other Liabilities - Sundry" (Note 20b), and the remaining balance (R$2,456,367 thousand) was allocated to “Excess Provision - Loans”; and
(5) Includes, in the first quarter of 2018, the formation of allowance for loan losses, in the amount of R$2,456,367 thousand, as a result of the adequacy of the provision for guarantees provided, already mentioned in the previous item.

 

h)   Allowance for Loan Losses expense net of amounts recovered

 

Expenses with the allowance for loan losses, net of credit write-offs recovered, are as follows.

 

 

Accrued on March 31 - R$ thousand

2018

2017

Amount recognized (1)

4,579,695

5,824,994

Amount recovered (2) (3)

(1,436,599)

(1,536,975)

Allowance for Loan Losses expense net of amounts recovered

3,143,096

4,288,019

 

(1) In the first quarter of 2017, it refers to the formation of allowance for loan losses, in the amount of R$8,281,361 thousand, excluding the portion related to the adequacy of the provision for guarantees provided, in the amount of R$2,456,367 thousand (Note 9g);

(2) Classified in income from loans (Note 9j); and
(3) In the first quarter of 2018, credit was granted for operations already written-off for losses, without the retention of risks and benefits, in the amount of R$5,323,120 thousand (2017 – R$1,955,173 thousand), whose sale value was R$110,189 thousand (2017 – R$9,789 thousand).

 

i)    Changes in the renegotiated portfolio

 

 

On March 31 - R$ thousand

2018

2017

Opening balance on December 31

17,183,869

17,501,423

Amount renegotiated

3,016,875

4,235,457

Amount received

(2,196,324)

(2,532,743)

Write-offs

(1,527,163)

(1,305,113)

Closing balance on March 31

16,477,257

17,899,024

Allowance for loan losses

12,595,196

13,482,952

Percentage on renegotiated portfolio

76.4%

75.3%

 

Bradesco  101


 
 

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

 

Notes to the Consolidated Financial Statements

 

j)    Income from loans and leases

 

 

Accrued on March 31 - R$ thousand

2018

2017

Discounted trade receivables and loans

11,025,283

12,729,619

Financing

3,775,530

4,356,223

Agricultural and agribusiness loans

432,306

466,603

Subtotal

15,233,119

17,552,445

Recovery of credits charged-off as losses

1,436,599

1,536,975

Subtotal

16,669,718

19,089,420

Leasing, net of expenses

72,851

74,384

Total

16,742,569

19,163,804

 

10)    OTHER RECEIVABLES

 

a)   Foreign exchange portfolio

 

Balances

 

 

On March 31 - R$ thousand

2018

2017

Assets – other receivables

 

 

Exchange purchases pending settlement

19,288,564

15,849,423

Foreign exchange and forward documents in foreign currencies

42,717

Exchange sale receivables

7,861,940

5,076,161

(-) Advances in domestic currency received

(431,493)

(828,579)

Income receivable on advances granted

157,929

147,446

Total

26,919,657

20,244,451

Liabilities – other liabilities

 

 

Exchange sales pending settlement

8,298,649

4,991,315

Exchange purchase payables

18,907,511

16,128,123

(-) Advances on foreign exchange contracts

(11,954,632)

(10,161,539)

Other

3,610

5,671

Total

15,255,138

10,963,570

Net foreign exchange portfolio

11,664,519

9,280,881

Off-balance-sheet accounts:

 

 

-  Loans available for import

415,733

238,835

-  Confirmed exports loans

102,929

76,956

 

Foreign exchange results

 

Adjusted foreign exchange results for presentation purposes

 

 

Accrued on March 31 - R$ thousand

2018

2017

Foreign exchange income

(98,572)

39,554

Adjustments:

 

 

- Income on foreign currency financing (1)

35,552

37,788

- Income on export financing (1)

360,592

592,168

- Income on foreign investments (2)

7,146

2,367

- Expenses of liabilities with foreign bankers (3) (Note 16c)

(145,446)

(8,591)

- Funding expenses (4)

(370,896)

(470,747)

- Other (5)

501,736

235,451

Total adjustments

388,684

388,436

Adjusted foreign exchange income

290,112

427,990

(1) Recognized in “Income from loans”;
(2) Recognized in “Income from operations with securities”;
(3) Related to funds for financing of advances on foreign exchange contracts and import financing, recognized in “Borrowing and on-lending expenses”;
(4) Refers to funding expenses of investments in foreign exchange; and
(5) Primarily includes the exchange rate variations of resources invested in foreign currency.

 

102  Economic and Financial Analysis Report – March 2018


 
 

 

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

 

Notes to the Consolidated Financial Statements

 

b)   Sundry

 

 

On March 31 - R$ thousand

2018

2017

Deferred tax assets (Note 33c)

52,397,447

51,406,389

Credit card operations

27,890,219

25,501,880

Debtors for escrow deposits

17,944,848

16,708,663

Trade and credit receivables

8,160,961

7,285,871

Prepaid taxes

10,668,016

6,940,118

Other debtors

4,933,673

3,315,014

Payments to be reimbursed

792,134

724,717

Receivables from sale of assets

215,199

132,221

Other

726,864

561,126

Total

123,729,361

112,575,999

 

11)    OTHER ASSETS

 

a)   Foreclosed assets/other

 

 

On March 31 - R$ thousand

Cost

Provision for losses

Cost net of provision

2018

2017

Real estate

1,579,784

(348,941)

1,230,843

1,359,302

Vehicles and similar

641,557

(361,903)

279,654

326,734

Goods subject to special conditions

690,742

(690,742)

Inventories/warehouse

28,299

28,299

29,860

Machinery and equipment

13,251

(11,885)

1,366

4,553

Other

23,223

(22,010)

1,213

2,952

Total in 2018

2,976,856

(1,435,481)

1,541,375

 

Total in 2017

3,015,711

(1,292,310)

 

1,723,401

 

b)   Prepaid expenses

 

 

On March 31 - R$ thousand

2018

2017

Deferred insurance acquisition costs (1)

1,032,506

1,717,568

Commission on the placement of loans and financing (2)

413,277

558,204

Advertising and marketing expenses (3)

110,302

127,039

Other (4)

1,094,601

1,146,635

Total

2,650,686

3,549,446

 (1) Commissions paid to brokers and representatives on sale of insurance, pension plans and capitalization bond products;
(2) Commissions paid to storeowners, car dealers and correspondent banks – payroll-deductible loans;
(3) Prepaid expenses of future advertising and marketing campaigns on media; and
(4) It includes, primarily: (i) anticipation of commissions concerning the operational agreement to offer credit cards and other products; and (ii) card issue costs.

 

12)    INVESTMENTS

 

a)   Composition of investments in the consolidated financial statements

 

Associates and Jointly Controlled Companies

On March 31 - R$ thousand

2018

2017

- Cielo S.A.

4,299,960

4,141,794

- Elo Participações S.A.

1,112,249

967,798

- Fleury S.A.

687,796

614,398

- IRB-Brasil Resseguros S.A.

498,769

650,133

- Swiss Re Corporate Solutions Brasil

459,742

- Aquarius Participações S.A.

290,897

285,560

- Haitong Banco de Investimento do Brasil S.A.

107,174

124,189

- Others

399,070

368,093

Total investment in Associates and Jointly Controlled Companies – in Brazil and Overseas

7,855,657

7,151,965

- Tax incentives

234,717

234,717

- Other investments

168,140

170,692

Provision for:

 

 

- Tax incentives

(207,933)

(207,933)

- Other investments

(46,802)

(46,820)

Total investments

8,003,779

7,302,621

 

Bradesco  103


 
 

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

 

Notes to the Consolidated Financial Statements

 

b)    The income/expense from the equity method accounting of investments was recognized in the statement of income, under “Share of profit (loss) of unconsolidated and jointly controlled companies”, and are demonstrated below:

 

Companies

Accrued on March 31 - R$ thousand

Capital

Shareholders’ equity adjusted

Number of shares/quotas held (in thousands)

Equity interest consolidated on capital stock

Adjusted income

Equity accounting adjustments (1)

Ordinary (ON)

Preferential (PN)
Preferential
(PN)

2018

2017

- Elo Participações S.A. (2)

930,000

2,224,053

372

50.01%

135,191

67,609

48,093

- Aquarius Participações S.A.

518,592

593,667

254,110

49.00%

55,649

27,268

21,928

- Haitong Banco de Investimento do Brasil S.A.

420,000

535,870

12,734

12,734

20.00%

4,760

952

(3,636)

- Others (3)

 

 

 

 

 

 

332,016

362,150

Share of profit (loss) of unconsolidated and jointly controlled companies

 

 

 

 

 

 

427,845

428,535

 

(1) The adjustment considers income calculated periodically by the companies and includes equity variations recognized by the investees not recognized in profit or loss, as well as alignment of accounting practice adjustments, where applicable;
(2) Investment in jointly controlled companies; and
(3) Includes, primarily, the adjustments resulting from the assessment by the equity method in public companies (Cielo S.A., Fleury S.A. and IRB-Brasil Resseguros S.A.).

 

104  Economic and Financial Analysis Report – March 2018


 
 

 

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

 

Notes to the Consolidated Financial Statements

 

13)    PREMISES AND EQUIPMENT

 

 

On March 31 - R$ thousand

Annual rate

Cost

Depreciation

Cost net of depreciation

2018

2017

Property and equipment:

 

 

 

 

 

- Buildings

4%

2,284,355

(657,195)

1,627,160

1,188,977

- Land

-

825,445

825,445

854,331

Facilities, furniture and premises and equipment

10%

5,140,659

(2,764,356)

2,376,303

2,595,214

Security and communication systems

10%

354,229

(218,232)

135,997

134,133

Data processing systems

20 to 40%

7,516,771

(4,755,833)

2,760,938

2,599,505

Transportation systems

10 to 20%

88,198

(51,306)

36,892

44,030

Fixed Assets in course

-

48,913

48,913

151,083

Total in 2018

 

16,258,570

(8,446,922)

7,811,648

 

Total in 2017

 

14,966,721

(7,399,448)

 

7,567,273

 

The fixed assets to shareholders’ equity ratio is 43.1% when considering only the companies and payment institutions within the economic group (the “Prudential Conglomerate”), where the maximum limit is 50.0%.

 

14)    INTANGIBLE ASSETS

 

a)   Goodwill

 

The goodwill recognized from investment acquisitions totaled R$8,571,257 thousand, net of accumulated amortization, as applicable, of which: (i) R$1,835,345 thousand recognized in ‘Permanent Assets – Investments’ arose from the acquisition of shares of associates and jointly controlled companies (Cielo/Fleury/Swiss Re), which will be amortized as realized; and (ii) R$6,735,912 thousand arose from the acquisition of shares of subsidiaries/shared control, relating to the future profitability/client portfolio/fair value, which is amortized in up to twenty years, net of accrued amortizations, if applicable, recognized in Fixed Assets – Intangible Assets.

                                                                                                                               

During the first quarter of 2018, goodwill was amortized totaling R$611,513 thousand (R$586,206 thousand in 2017) (Note 28).

 

b)   Intangible assets

 

Acquired intangible assets consist of:

 

 

On March 31 - R$ thousand

Rate of Amortization (1)

Cost

Amortization

Cost net of amortization

2018

2017

Acquisition of financial services rights

Contract

5,913,051

(2,000,105)

3,912,946

2,310,456

Software (2)

20%

11,615,405

(8,011,187)

3,604,218

3,851,980

Goodwill (3)

 Up to 20%

11,492,576

(4,756,664)

6,735,912

9,257,821

Other

 Contract

77,280

(43,592)

33,688

52,085

Total in 2018

 

29,098,312

(14,811,548)

14,286,764

 

Total in 2017

 

26,690,889

(11,218,547)

 

15,472,342

 

(1) Intangible assets are amortized over an estimated period of economic benefit and recognized in “other administrative expenses” and “other operating expenses”, where applicable;
(2) Software acquired and/or developed by specialized companies; and
(3) On March 31, 2018, primarily composed of goodwill on the acquisition of equity interest in Bradescard - R$587,442 thousand, Odontoprev - R$74,909 thousand, Bradescard Mexico - R$16,500 thousand, Europ Assistance - R$2,642 thousand, Bradesco BBI S.A. - R$108,674 thousand; and Kirton Bank - R$5,934,546 thousand.

Bradesco  105


 
 

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

 

Notes to the Consolidated Financial Statements

 

c)   Changes in intangible assets by type

 

 

On March 31 - R$ thousand

Opening balance

Additions / (reductions)

Amortization for the period

Closing balance

Acquisition of financial services rights

4,051,898

128,977

(267,929)

3,912,946

Software

3,790,418

143,414

(329,614)

3,604,218

Goodwill – Future profitability

3,761,412

(215,884)

3,545,528

Goodwill – Based on intangible assets and other reasons

2,548,412

(233,389)

2,315,023

Goodwill – Difference in fair value of assets/liabilities

1,048,717

(11,116)

(162,240)

875,361

Other

32,993

1,989

(1,294)

33,688

Total in 2018

15,233,850

263,264

(1,210,350)

14,286,764

Total in 2017

16,338,785

305,830

(1,172,273)

15,472,342

 

106  Economic and Financial Analysis Report – March 2018


 
 

 

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

 

Notes to the Consolidated Financial Statements

 

15)    DEPOSITS, SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND FUNDS FROM ISSUANCE OF SECURITIES

 

a)   Deposits

 

 

On March 31 - R$ thousand

1 to 30 days

31 to 180 days

181 to 360 days

More than 360 days

2018

2017

● Demand deposits (1)

33,186,022

33,186,022

30,564,866

● Savings deposits (1)

101,777,091

101,777,091

94,352,635

● Interbank deposits

67,872

1,325,288

214,623

40,116

1,647,899

570,915

● Time deposits (2)

8,618,060

9,846,618

11,464,295

105,118,610

135,047,583

109,966,922

Total in 2018

143,649,045

11,171,906

11,678,918

105,158,726

271,658,595

 

%

52.9

4.1

4.3

38.7

100.0

 

Total in 2017

133,704,439

16,489,220

8,489,672

76,772,007

 

235,455,338

%

56.8

7.0

3.6

32.6

 

100.0

 

(1) Classified as 1 to 30 days, not considering average historical turnover; and
(2) Considers the actual maturities of the investments.

 

b)   Securities sold under agreements to repurchase

 

 

On March 31 - R$ thousand

1 to 30 days

31 to 180 days

181 to 360 days

More than 360 days

2018

2017

Own portfolio

89,979,782

3,598,329

10,572,118

4,098,070

108,248,299

100,381,732

● Government securities

76,459,565

187,898

87,787

76,735,250

18,192,558

● Debentures of own issuance

5,386,748

2,764,516

10,451,436

3,592,012

22,194,712

74,120,189

● Foreign

8,133,469

645,915

32,895

506,058

9,318,337

8,068,985

Third-party portfolio (1)

109,937,122

481,890

110,419,012

145,111,284

Unrestricted portfolio (1)

7,259,864

2,956,817

10,216,681

9,286,510

Total in 2018

207,176,768

7,037,036

10,572,118

4,098,070

228,883,992

 

%

90.5

3.1

4.6

1.8

100.0

 

Total in 2017

191,534,391

28,219,635

17,868,381

17,157,119

 

254,779,526

%

75.2

11.1

7.0

6.7

 

100.0

 

(1)  Represented by government securities.

Bradesco  107


 
 

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

 

Notes to the Consolidated Financial Statements

 

c)   Funds from issuance of securities

 

 

On March 31 - R$ thousand

1 to 30 days

31 to 180 days

181 to 360 days

More than 360 days

2018

2017

Securities – Brazil:

 

 

 

 

 

 

- Financial bills

4,031,063

19,725,808

22,010,319

55,860,774

101,627,964

102,262,039

- Letters of credit for real estate

1,805,597

12,170,774

6,441,674

5,937,330

26,355,375

25,622,902

- Letters of credit for agribusiness

627,720

6,067,506

2,861,542

1,735,255

11,292,023

9,100,798

Subtotal

6,464,380

37,964,088

31,313,535

63,533,359

139,275,362

136,985,739

Securities – Overseas:

 

 

 

 

 

 

- Securitization of future flow of money orders received from overseas

9,473

504,901

496,592

1,201,901

2,212,867

2,748,743

- MTN Program Issues (1)

8,322

63,067

604,334

675,723

243,529

- Issuance costs

(18,774)

(18,774)

(25,673)

Subtotal

17,795

567,968

496,592

1,787,461

2,869,816

2,966,599

Structured Operations Certificates

9,366

63,597

209,347

162,338

444,648

350,515

Total in 2018

6,491,541

38,595,653

32,019,474

65,483,158

142,589,826

 

%

4.5

27.1

22.5

45.9

100.0

 

Total in 2017

8,834,992

45,087,078

36,547,494

49,833,289

 

140,302,853

%

6.3

32.1

26.0

35.6

 

100.0

 

(1) Issuance of securities on the international market to invest in foreign exchange transactions, pre-export financing, import financing and working capital financing, predominately in the medium and long-term.

 

108  Economic and Financial Analysis Report – March 2018


 
 

 

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

 

Notes to the Consolidated Financial Statements

 

d)    Net movement of funds from issuance of securities

 

 

R$ thousand

2018

2017

Opening balance on December 31

         135,011,308

          150,807,358

Issuance

            23,551,222

               6,848,053

Interest

              2,182,416

               4,166,466

Settlement and interest payments

         (18,169,821)

          (21,357,191)

Exchange variation

                    14,701

                (161,833)

Closing balance on March 31

         142,589,826

          140,302,853

 

e)   Cost for market funding and inflation and interest adjustments of technical provisions for insurance, pension plans and capitalization bonds

 

 

Accrued on March 31 - R$ thousand

2018

2017

Savings deposits

1,170,820

1,603,830

Time deposits

1,188,934

2,355,177

Securities sold under agreements to repurchase

4,147,952

6,828,979

Funds from issuance of securities

2,182,416

4,166,466

Subordinated debts (Note 18)

887,749

1,515,183

Other funding expenses

156,248

150,184

Subtotal

9,734,119

16,619,819

Cost for inflation and interest adjustment of technical provisions of insurance, pension plans and capitalization bonds

3,821,387

5,972,523

Total

13,555,506

22,592,342

 

16)    BORROWING AND ON-LENDING

 

a)   Borrowing

 

 

On March 31 - R$ thousand

1 to 30 days

31 to 180 days

181 to 360 days

More than 360 days

2018

2017

In Brazil - Other Institutions

338

1,894

2,232

11,780

Overseas

1,839,741

11,684,166

4,477,807

1,447,881

19,449,595

22,077,344

Total in 2018

1,840,079

11,684,166

4,477,807

1,449,775

19,451,827

 

%

9.5

60.1

23.0

7.4

100.0

 

Total in 2017

2,221,626

11,242,105

5,869,553

2,755,840

 

22,089,124

%

10.1

50.8

26.6

12.5

 

100.0

 

b)   On-lending

 

 

On March 31 - R$ thousand

1 to 30 days

31 to 180 days

181 to 360 days

More than 360 days

2018

2017

In Brazil

813,295

4,900,168

3,920,417

18,649,050

28,282,930

34,328,314

- FINAME

539,429

2,559,300

2,512,536

10,305,278

15,916,543

19,934,541

- BNDES

273,674

2,340,868

1,333,683

8,343,772

12,291,997

14,273,869

- National Treasury

72,879

72,879

118,317

- Other institutions

192

1,319

1,511

1,587

Total in 2018

813,295

4,900,168

3,920,417

18,649,050

28,282,930

 

%

2.9

17.3

13.9

65.9

100.0

 

Total in 2017

997,761

5,043,169

4,801,059

23,486,325

 

34,328,314

%

2.9

14.7

14.0

68.4

 

100.0

 

 

Bradesco  109


 
 

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

 

Notes to the Consolidated Financial Statements

                   

c)     Borrowing and on-lending expenses

 

 

Accrued on March 31 - R$ thousand

2018

2017

Borrowing:

 

 

- In Brazil

91,094

294,021

- Overseas

308,756

(1,424,174)

- Exchange variation from assets and liabilities overseas

(105,943)

763,524

Subtotal borrowing

293,907

(366,629)

On-lending in Brazil:

 

 

- BNDES

237,628

304,418

- FINAME

171,619

159,744

- National Treasury

1,265

1,981

- Other institutions

1

11

On-lending overseas:

 

 

- Payables to foreign bankers (Note 10a)

145,446

8,591

Subtotal on-lending

555,959

474,745

Total

849,866

108,116

 

17)    PROVISIONS, CONTINGENT ASSETS AND LIABILITIES AND LEGAL OBLIGATIONS – 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, but the amounts are not material, such as: a) Social Integration Program (PIS), Bradesco has made a claim to offset PIS against Gross Operating Income, paid under Decree-Laws No. 2,445/88 and No. 2,449/88, regarding the payment that exceeded the amount due under Supplementary Law No. 07/70 (PIS Repique); and b) other taxes, the legality and/or constitutionality of which is being challenged, where the decision may lead to reimbursement of amounts paid.

 

b)   Provisions classified as probable losses and legal obligations – tax and social security

 

The Organization is a party to a number of labor, civil and tax lawsuits, arising from the normal course of business.

 

Management recognized provisions where, based on their opinion and that of their legal counsel, the nature of the lawsuit, similarity to previous lawsuits, complexity and the courts standing, the loss is deemed probable.

 

Management considers that the provision is sufficient to cover the future losses generated by the respective lawsuits.

 

Provisions related to legal obligations are maintained until the conclusion of the lawsuit, represented by judicial decisions with no further appeals or due to the statute of limitation.

 

I -      Labor claims

 

These are claims brought by former employees and outsourced employees seeking indemnifications, most significantly for unpaid “overtime”, pursuant to Article 224 of the Consolidation of Labor Laws (CLT). In proceedings in which a judicial deposit is used to guarantee the execution of the judgment, the labor provision is made considering the estimated loss of these deposits. For proceedings with similar characteristics and for which there has been no official court decision, the provision is recognized based on the average calculated value of payments made for labor complaints settled in the past 12 months; and for proceedings originating from acquired banks, with unique characteristics, the calculation and assessment of the required balance is conducted periodically, based on the updated recent loss history.

 

110  Economic and Financial Analysis Report – March 2018


 
 

 

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

 

Notes to the Consolidated Financial Statements

 

Overtime is monitored by using electronic time cards and paid regularly during the employment contract and, accordingly, the claims filed by former employees do not represent significant amounts.

 

II -     Civil claims

 

These are claims for pain and suffering and property damages, mainly relating to protests, returned checks, the inclusion of information about debtors in the credit restriction registry and the replacement of inflation adjustments excluded as a result of government economic plans. These lawsuits are individually controlled using a computer-based system and provisioned whenever the loss is deemed as probable, considering the opinion of Management and their legal counsel, the nature of the lawsuits, similarity with previous lawsuits, complexity and positioning of the courts.

 

Most of these lawsuits are brought to the Special Civil Court (JEC), in which the claims are limited to 40 times the minimum wage and do not have a significant impact on the Organization’s financial position.

 

There are a significant number of legal claims pleading alleged differences in adjustment for inflation on savings account balances due to the implementation of economic plans that were part of the federal government’s economic policy to reduce inflation in the ‘80s and ‘90s.

 

Although Bradesco complied with the law and regulation in force at the time, these lawsuits have been recognized in provisions, taking into consideration the claims where Bradesco is the defendant and the perspective of loss, which is considered after the analysis of each demand, based on the current decision of the Superior Court of Justice (STJ).

 

In December 2017, with the mediation of the Attorney’s General Office (AGU), the entities representing the bank and the savings accounts, entered into an agreement related to litigation of economic plans, with the purpose of closing these claims, in which conditions and schedule were established for savings accounts holders may to accede the agreement. This agreement was approved by the Federal Supreme Court (STF) on March 1, 2018, pending final decision of the approval decision. As this is a voluntary agreement, Bradesco is unable to predict how many savings account holders will choose to accept the settlement offer.

 

Note that, regarding disputes relating to economic plans, the Federal Supreme Court (STF) suspended the prosecution of all lawsuits at the cognizance stage, until the Court issues a final decision on the right under litigation.

 

III -   Legal obligations – provision for tax risks

 

The Organization is disputing the legality and constitutionality of certain taxes and contributions in court, for which provisions have been recognized in full, although there is a good chance of a favorable outcome, based on the opinion of Management and their legal counsel. The processing of these provisions for cases for which the risk of loss is deemed as probable and legal obligations is regularly monitored in the legal court. During or after the conclusion of each case, a favorable outcome may arise for the Organization, resulting in the reversal of the related provisions.

 

The main cases are:

 

-        PIS and COFINS – R$2,514,742 thousand (R$2,368,203 thousand in 2017): a request for authorization to calculate and pay PIS and COFINS based on effective billing, as set forth in Article 2 of Supplementary Law No. 70/91, removing from the calculation base the unconstitutional inclusion of other revenues other than those billed;

 

-        IRPJ/CSLL on losses of credits – R$1,628,319 thousand (R$1,790,415 thousand in 2017): we are requesting to deduct from income tax and social contributions payable (IRPJ and CSLL, respectively) amounts of actual and definite loan losses related to unconditional

Bradesco  111


 
 

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

 

Notes to the Consolidated Financial Statements

                   

discounts granted during collections, regardless of compliance with the terms and conditions provided for in Articles 9 to 14 of Law No. 9,430/96 that only apply to temporary losses;

 

-        Pension Contributions – R$1,511,346 thousand (R$1,409,990 thousand in 2017): official notifications related to the pension contributions on financial contributions in private pension plans, considered by the authorities to be compensatory sums subject to the incidence of pension contributions and to an isolated fine for not withholding IRRF on the financial contributions;

 

-        INSS Autonomous Brokers – R$652,723 thousand (R$935,589 thousand in 2017): The Bradesco Organization is questioning the charging of social security contribution on remunerations paid to third-party service providers, established by Supplementary Law No. 84/96 and subsequent regulations/amendments, at 20.0% with an additional 2.5%, on the grounds that services are not provided to insurance companies but to policyholders, thus being outside the scope of such a contribution as provided for in item I, Article 22 of Law No. 8,212/91, as new wording in Law No. 9,876/99; and

 

-        INSS – Contribution to SAT – R$405,170 thousand (R$382,662 thousand in 2017): in an ordinary lawsuit filed by the Brazilian Federation of Banks – Febraban, since April 2007, on behalf of its members, is questioned the classification of banks at the highest level of risk, with respect to Work Accident Risk – RAT, which eventually raised the rate of the respective contribution from 1% to 3%, in accordance with Decree No. 6,042/07.

 

In general, the provisions relating to lawsuits are classified as non-current, due to the unpredictability of the duration of the proceedings in the Brazilian justice system. For this reason, the estimate has not been disclosed with relation to the specific year in which these lawsuits will be finalized.

 

IV -   Provisions by nature

 

 

On March 31 - R$ thousand

2018

2017

Labor claims

5,760,051

5,229,181

Civil claims

5,381,613

5,109,218

Provision for tax risks

7,700,999

7,997,964

Total (Note 19b)

18,842,663

18,336,363

 

V -    Changes in provisions

 

 

R$ thousand

2018

Labor

Civil

Tax (1)

Balance on December 31,  2017

5,554,796

5,346,563

7,589,368

Adjustment for inflation

176,862

124,799

68,542

Provisions, net of (reversals and write-offs)

403,484

256,299

50,388

Payments

(375,091)

(346,048)

(7,299)

Balance on March 31,  2018

5,760,051

5,381,613

7,700,999

 

(1)   Mainly include legal obligations.

 

c)   Contingent liabilities classified as possible losses

 

The Organization maintains a system to monitor all administrative and judicial proceedings in which the institution is plaintiff or defendant and, based on the opinion of legal counsel, classifies the lawsuits according to the expectation of loss. Case law trends are periodically analyzed and, if necessary, the related risk is reclassified. In this respect, contingent lawsuits deemed to have a possible risk of loss are not recognized as a liability in the financial statements. The main proceedings in this category are the following: a) 2006 to 2013 income tax and social contribution,

 

112  Economic and Financial Analysis Report – March 2018


 
 

 

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

 

Notes to the Consolidated Financial Statements

 

relating to goodwill amortization being disallowed on the acquisition of investments, for the amount of R$6,323,649 thousand (R$5,966,078 thousand in 2017); b) Fines and disallowances of Cofins loan compensations, released after a favorable decision in a judicial proceeding, where the unconstitutionality of the expansion of the intended calculation base was discussed for revenues other than those from billing (Law No. 9,718/98), in the amount of R$4,944,665 thousand (R$4,714,179 thousand in 2017); c) Leasing companies’ Tax on Services of any Nature (ISSQN), total lawsuits correspond to R$2,413,331 thousand (R$2,440,746 thousand in 2017) which relates to the municipal tax demands from municipalities other than those in which the company is located and where, under law, tax is collected; d) IRPJ and CSLL deficiency note relating to disallowance of exclusions of revenues from the mark-to-market of securities from 2007 to 2013, differences in depreciation expenses, insufficient depreciation expenses, expenses with depreciation of leased assets, operating expenses and income and disallowance of tax loss compensation, in the amount of R$2,459,455 thousand (R$1,620,104 thousand in 2017); e) Notifications and disallowances of compensations of PIS and Cofins related to the unconstitutional extension of the basis of calculation intended for other income other than the billing (Law No 9,718/98), from acquired companies, amounting to R$1,410,874 thousand (R$1,339,003 thousand in 2017); f) IRPJ and CSLL deficiency notice relating to the disallowance of loan loss deductions, for the amount of R$569,956 thousand (R$774,768 thousand in 2017); and g) IRPJ and CSLL deficiency note, amounting to R$494,361 thousand (R$469,018 thousand in 2017) relating to profit of subsidiaries based overseas, for the calendar years of 2008 and 2009.

 

d)   Other matters

 

On May 31, 2016, criminal proceedings have been opened against three members of Bradesco’s Board of Executive Officers was carried out by the Brazilian Federal Police under the so-called “Operation Zelotes.”, which investigates the alleged improper performance of members of CARF - Administrative Council of Tax Appeals. On July 28, 2016, the Public Prosecutor's Office filed charges against three members of the Board of Executive Officers and a former member of its Board of Directors that was received by the Judge of the 10th Federal Court of the Federal District Judiciary Section. Currently, only two of the members of Bradesco's Board of Directors remain in the process at that time. They presented their responses in the criminal case, pointing out the facts and evidence demonstrating their innocence. The investigation phase of the process was already completed, and is currently waiting for final allegations and the decision of the first degree court.

 

The Company's management conducted a careful internal evaluation of records and documents related to the matter and found no evidence of any illegal conduct practiced by its representatives. Bradesco provided all the information to the competent regulatory bodies, in Brazil and abroad.

 

On account of the news of Operation Zealots, a class action was filed in the District Court of New York, on June 3, 2016, based on Section 10 (b) and 20 (a) of the Securities Exchange Act of 1934. On October 21, 2016, the plaintiff leader appointed by the court presented the addendum of the (Action Complaint) pointing us as defendants, as well as three members of its Board of Executive Officers. The demand, is based on the allegation that investors who purchased preferred American Depositary Shares (“ADS”) of Bradesco between April 30, 2012 and July 27, 2016 suffered losses caused by alleged violation regarding the American laws of capital markets. On September 29, 2017, the Court limited the proposed class to investors who purchased ADS Bradesco between August 8, 2014 and July 27, 2016. Demand has passed to the discovery phase, so the limitation of the aforementioned class would be maintained. Considering the stage that the demand is, it is not possible, to gauge the exposure and there are insufficient elements to carry out a risk assessment.

 

Bradesco was also summoned by the Corregedoria Geral do Ministério da Fazenda on the opening of an Administrative Accountability Process ("PAR"). This process may imply the application of a fine and / or mention in public lists that may eventually bring restrictions on business with public entities.

 

Bradesco  113


 
 

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

 

Notes to the Consolidated Financial Statements

                   

18)    SUBORDINATED DEBT

 

a)     Composition by maturity

 

 

On March 31 - R$ thousand

Original term in years

Nominal amount

2018

2017

In Brazil:

 

 

 

 

Subordinated CDB:

 

 

 

 

2019

10

20,000

64,090

57,813

Financial bills:

 

 

 

 

2017 (1)

6

6,688,653

8,665,729

2018 (2)

6

5,095,196

6,211,215

10,019,197

2019

6

21,858

36,879

34,195

2017 (1)

7

40,100

98,714

2018 (2)

7

140,650

325,581

301,346

2019

7

3,172,835

3,502,163

3,530,536

2020

7

1,700

2,858

2,665

2022

7

4,305,011

5,705,481

5,227,888

2023

7

1,359,452

1,731,662

1,575,036

2024

7

67,450

75,463

69,010

2018 (2)

8

50,000

114,849

2019

8

12,735

29,016

25,950

2020

8

28,556

55,590

50,881

2021

8

1,236

2,067

1,933

2023

8

1,706,846

2,314,235

2,087,680

2024

8

136,695

162,466

148,031

2025

8

6,193,653

6,316,994

197,355

2021

9

7,000

13,357

12,212

2024

9

4,924

6,808

6,016

2025

9

400,944

464,773

431,567

2021

10

19,200

41,475

38,134

2022

10

54,143

101,525

93,543

2023

10

688,064

1,083,795

1,023,933

2025

10

284,137

406,128

355,206

2026

10

361,196

448,898

406,109

2027

10

258,743

279,293

34,952

2026

11

3,400

4,163

3,881

2027

11

47,046

55,061

50,169

2028 (3)

11

74,764

78,821

Perpetual

 

5,000,000

5,104,783

5,207,121

Subtotal in Brazil

 

 

34,624,640

39,871,651

Overseas:

 

 

 

 

2019

10

1,333,575

2,493,785

2,377,191

2021

11

2,766,650

5,374,841

5,119,784

2022

11

1,886,720

3,666,825

3,493,159

Issuance costs on funding

 

 

(11,829)

(16,157)

Subtotal overseas

 

 

11,523,622

10,973,977

Total (4) (5)

 

 

46,148,262

50,845,628

 

(1) Subordinated debt transactions that matured in 2017;
(2) Transactions of subordinated debt due in the first quarter of 2018;

(3) New issues of financial letters, in 2017, referring to subordinate debts were recognized under the heading “Eligible Debt Capital Instruments”;
(4) It includes the amount of R$23,155,027 thousand (R$15,500,022 thousand in 2017), referring to subordinated debts recognized in “Eligible Debt Capital Instruments”; and
(5) The information on results are presented on Note 15d, cost for market funding and inflation and interest adjustments of technical provisions for insurance, pension plans and capitalization bonds.

 

114  Economic and Financial Analysis Report – March 2018


 
 

 

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

 

Notes to the Consolidated Financial Statements

 

b)    Net movement of subordinated debts

 

 

R$ thousand

2018

2017

Opening balance on December 31

               50,179,401

                52,611,063

Issuance

                              -  

                     294,646

Interest

                    887,749

                  1,515,183

Settlement and interest payments

               (4,974,473)

                (3,256,468)

Exchange variation

                      55,585

                   (318,796)

Closing balance on March 31

               46,148,262

                50,845,628

 

 

19)    OTHER LIABILITIES

                                                                                                          

a)   Tax and social security

 

 

On March 31 - R$ thousand

2018

2017

Provision for deferred income tax (Note 33f)

5,265,594

3,878,233

Taxes and contributions on profit payable

1,303,213

2,233,276

Taxes and contributions payable

1,105,568

1,258,758

Total

7,674,375

7,370,267

 

b)   Sundry

 

 

On March 31 - R$ thousand

2018

2017

Credit card operations (1)

5,460,915

7,007,682

Civil, tax and labor provisions (Note 17b) (2)

18,842,663

18,336,363

Loan assignment obligations

7,894,081

8,202,522

Provision for payments

7,506,586

7,239,581

Sundry creditors

4,191,922

5,981,920

Liabilities for acquisition of assets and rights

1,362,537

1,411,411

Obligations by quotas of investment funds

1,662,013

602,143

Other (3)

4,574,206

3,188,252

Total

51,494,923

51,969,874

 

(1) According to Bacen Circular Letter No. 3,828/17, which changes the accounting in payment arrangements (Credit Card Transactions), in March 2018, part of these transactions were classified under "Interbank accounts" in the amount of R$19,461,159 thousand. For comparison purposes, the balances of prior periods were also reclassified in the amount of R$15,371,436 thousand;

(2) According to Bacen Circular Letter No. 3,782/16, “Provisions for tax risks” were reclassified from “Other liabilities - Tax and social security” to “Other liabilities - Sundry"; and
(3) On March 31, 2018, it includes a specific provision for financial guarantees provided, pursuant to Resolution No. 4,512/16 (Note 9g).

 

c)   Financial guarantees

 

Financial guarantees provided are contracts requiring the Organization to make specific payments to the holder of the financial guarantee for a loss it will incur when a specific debtor fails to make the payment under the terms of the debt instrument. The provision for financial guarantees provided is formed based on the best estimate of the non-recoverable amount of the guarantee, if such disbursement is likely. The provisioning parameters are established based on the internal credit risk management models. In case of retail operations, these models use historical information, while in wholesale operations, in addition to historical information, we adopted simulation processes to capture unobserved events. Any increase in liabilities related to financial guarantees is recognized in the statement of income under “Other operating income/expenses”.

 

The amounts guaranteed as of March 31, 2018 were as follows: (i) R$341,671 thousand, referring to guarantees related to international trade of goods, with a provision of R$2,217 thousand; (ii) R$254,794 thousand, referring to guarantees related to bidding, auctions, service rendering or execution of works, with a provision of R$7,882 thousand; (iii) R$537,974 thousand, referring to guarantees related to the supply of goods, with a provision of R$47,474 thousand; (iv) R$38,300,793 thousand, referring to sureties or guarantees in judicial and administrative proceedings of tax nature, with a provision of R$315,188 thousand; and (v) R$33,240,565 thousand, referring to other bank guarantees, with a provision of R$426,482 thousand (Note 19b).

 

Bradesco  115


 
 

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

 

Notes to the Consolidated Financial Statements

                   

20)    INSURANCE, PENSION PLANS AND CAPITALIZATION BONDS

 

a)   Technical provisions by account

 

 

On March 31 - R$ thousand

Insurance (1)

Life and pension plans (2)

Capitalization bonds

Total

2018

2017

2018

2017

2018

2017

2018

2017

Current and long-term liabilities

 

 

 

 

 

 

 

 

Mathematical reserve for unvested benefits

1,188,185

923,274

210,927,204

190,595,683

212,115,389

191,518,957

Mathematical reserve for vested benefits

326,790

219,715

8,090,020

9,120,975

8,416,810

9,340,690

Mathematical reserve for capitalization bonds

6,679,396

6,403,767

6,679,396

6,403,767

Reserve for claims incurred but not reported (IBNR)

3,348,554

2,960,356

1,029,586

1,279,671

4,378,140

4,240,027

Unearned premium reserve

3,975,460

4,167,185

661,244

544,118

4,636,704

4,711,303

Complementary reserve for coverage

847,593

899,117

847,593

899,117

Reserve for unsettled claims

4,261,582

4,623,457

1,637,005

1,649,506

5,898,587

6,272,963

Reserve for financial surplus

524,314

533,169

524,314

533,169

Reserve for draws and redemptions

915,037

923,405

915,037

923,405

Other reserves (4)

2,159,600

2,055,115

4,552,216

2,430,167

107,465

103,864

6,819,281

4,589,146

Total technical provisions

15,260,171

14,949,102

228,269,182

207,052,406

7,701,898

7,431,036

251,231,251

229,432,544

 

116  Economic and Financial Analysis Report – March 2018


 
 

 

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

 

Notes to the Consolidated Financial Statements

 

b)   Guarantees for technical provisions

 

 

On March 31 - R$ thousand

Insurance

Life and pension plans

Capitalization bonds

Total

2018

2017

2018

2017

2018

2017

2018

2017

Total technical provisions

15,260,171

14,949,102

228,269,182

207,052,406

7,701,898

7,431,036

251,231,251

229,432,544

(-) Commercialization surcharge – extended warranty

(116,101)

(207,653)

(116,101)

(207,653)

(-) Portion corresponding to contracted reinsurance

(156,832)

(831,490)

(21,948)

(38,771)

(178,780)

(870,261)

(-) Receivables

(865,259)

(963,629)

(865,259)

(963,629)

(-) Unearned premium reserve – Health and dental insurance (3)

(1,260,404)

(1,190,172)

(1,260,404)

(1,190,172)

(-) Reserves from DPVAT agreements

(543,659)

(498,662)

(543,659)

(498,662)

To be insured

12,317,916

11,257,496

228,247,234

207,013,635

7,701,898

7,431,036

248,267,048

225,702,167

 

 

 

 

 

 

 

 

 

Investment fund quotas (VGBL and PGBL)

193,861,861

174,002,444

193,861,861

174,002,444

Investment fund quotas (excluding VGBL and PGBL)

4,947,883

7,130,019

22,631,805

24,620,629

1,185,602

2,568,345

28,765,290

34,318,993

Government securities

9,260,169

5,827,030

19,267,104

16,087,059

7,462,085

5,731,106

35,989,358

27,645,195

Shares

3,023

2,378

1,569,504

1,623,330

1,572,527

1,625,708

Private securities

14,668

108,078

154,799

161,595

38,904

39,707

208,371

309,380

Total technical provision guarantees

14,225,743

13,067,505

237,485,073

216,495,057

8,686,591

8,339,158

260,397,407

237,901,720

 

(1) “Other reserves” - Insurance primarily refers to technical provisions of the “individual health plans” portfolio;
(2) “Other reserves” - Life and Pension Plan mainly includes the “Reserve for redemption and other amounts to be settled”, “Reserve for related expenses” and “Other reserves”;
(3) Deduction set forth in Article 4 of ANS Normative Resolution No. 392/15; and

(4) In other technical provisions, of Life and Pension Plans, R$2,007,136 thousand is being considered in mathematical reserves of benefits to be granted and benefits granted, upon SUSEP’s authorization.

Bradesco  117


 
 

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Notes to the Consolidated Financial Statements

 

c)   Insurance, pension plan contribution and capitalization bond retained premiums

 

 

Accrued on March 31 - R$ thousand

2018

2017

Written premiums

9,199,035

8,982,595

Pension plan contributions (including VGBL)

7,056,032

7,602,184

Capitalization bond income

1,425,529

1,446,268

Granted coinsurance premiums

(9,054)

(14,770)

Refunded premiums

(101,456)

(68,575)

Net written premiums earned

17,570,086

17,947,702

Reinsurance premiums paid

(18,164)

(53,150)

Insurance, pension plan and capitalization bond retained premiums

17,551,922

17,894,552

 

21)    NON-CONTROLLING INTERESTS IN SUBSIDIARIES

 

 

On March 31 - R$ thousand

2018

2017

Banco Bradesco BBI S.A.

18,201

16,670

Other (1)

580,810

470,411

Total

599,011

487,081

 

(1)  Primarily relates to the non-controlling interest in the subsidiary “Odontoprev”.

 

22)    SHAREHOLDERS’ EQUITY (PARENT COMPANY)

 

a)   Capital stock in number of shares

 

Fully subscribed and paid-in capital stock comprises non-par, registered, book-entry shares.

 

 

On March 31

2018 (1)

2017

Common

3,359,929,223

3,054,481,112

Preferred

3,359,928,872

3,054,480,793

Subtotal

6,719,858,095

6,108,961,905

Treasury (common shares)

(5,535,803)

(5,032,549)

Treasury (preferred shares)

(20,741,320)

(18,855,746)

Total outstanding shares

6,693,580,972

6,085,073,610

 

(1) Includes effect of bonus of shares of 10%.

 

b)   Transactions of capital stock involving quantities of shares

 

 

Common

Preferred

Total

Number of outstanding shares as at December 31, 2017

3,049,448,563

3,035,625,047

6,085,073,610

Increase of capital stock with issuing of shares – bonus of 10% (1)

305,448,111

305,448,079

610,896,190

Increase of shares in treasury – bonus of 10%

(503,254)

(1,885,574)

(2,388,828)

Number of outstanding shares as at March 31, 2018

3,354,393,420

3,339,187,552

6,693,580,972

 

(1) It benefited the shareholders registered in the records of Bradesco on March 29, 2018.

 

In the Extraordinary General Meeting of March 12, 2018, the approval was proposed by the Board of Directors to increase the capital stock by R$8,000,000 thousand, increasing it from R$59,100,000 thousand to R$67,100,000 thousand, with a bonus in shares, through the capitalization of part of the balance of the account “Profit Reserves - Statutory Reserve”, in compliance with the provisions in Article 169 of Law No. 6,404/76, by issuing 610,896,190 new nominative-book entry shares, with no nominal value, whereby 305,448,111 are common and 305,448,079 are preferred shares, attributed

 

118  Economic and Financial Analysis Report – March 2018


 
 

 

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

 

Notes to the Consolidated Financial Statements

 

free-of-charge to the shareholders as bonus, to the ratio of 1 new share for every 10 shares of the same type that they own on the base date, and was approved by the Bacen on March 16, 2018.

 

c)   Interest on Shareholders’ Equity

 

Bradesco’s capital remuneration policy aims to distribute interest on shareholders’ equity at the maximum amount calculated under current legislation, and this is included, net of Withholding Income Tax (IRRF), in the calculation for mandatory dividends for the year under the Company’s Bylaws.

 

Interest on shareholders’ equity for the year ended March 31, 2018 is calculated as follows:

 

 

R$ thousand

% (1)

Net income for the period

4,466,721

 

(-) Legal reserve

223,336

 

Adjusted calculation basis

4,243,385

 

Monthly, intermediaries and  supplementary interest on shareholders’ equity (gross), paid and/or provisioned

1,787,537

 

Withholding income tax on interest on shareholders' equity

(268,131)

 

Interest on own capital (net) accumulated in March 2018

1,519,406

35.81

Interest on own capital (net) accumulated in March 2017

1,568,153

40.55

 

(1) Percentage of interest on shareholders’ equity after adjustments.

 

Interest on shareholders’ equity were paid or recognized in provisions, as follows:

 

Description

R$ thousand

Per share (gross)

Gross amount paid/ recognized in provision

Withholding Income Tax (IRRF) (15%)

Net amount paid/recognized in provision

Common

Preferred

Monthly interest on shareholders’ equity paid

0.051749

0.056924

300,551

45,083

255,468

Supplementary interest paid on shareholders´ equity

0.265905

0.292495

1,544,335

231,650

1,312,685

Total accrued on March 31, 2017

0.317654

0.349419

1,844,886

276,733

1,568,153

 

 

 

 

 

 

Monthly interest on shareholders’ equity paid

0.051749

0.056924

330,604

49,591

281,013

Supplementary interest on shareholders’ equity provisioned

0.207319

0.228051

1,456,933

218,540

1,238,393

Total accrued on March 31, 2018

0.259068

0.284975

1,787,537

268,131

1,519,406

 

d)   Treasury shares

 

A total of 5,535,803 common shares and 20,741,320 preferred shares, with the share bonus effect of 10%, had been acquired, totaling R$440,514 thousand until March 31, 2018, and remain in treasury. The minimum, average and maximum cost per common share is R$19.34965, R$24.55863 and R$27.14350, and per preferred share is R$19.37456, R$26.98306 and R$33.12855, respectively. The fair value was R$38.47 per common share and R$39.50 per preferred share on March 31, 2018.

Bradesco  119


 
 

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

 

Notes to the Consolidated Financial Statements

 

23)    FEE AND COMMISSION INCOME

 

 

Accrued on March 31 - R$ thousand

2018

2017

Credit card income

1,691,320

1,647,921

Checking account

1,746,519

1,599,786

Loans

724,134

730,995

Collections

499,533

478,303

Consortium management

383,067

369,496

Asset management

410,311

341,717

Underwriting/ Financial Advisory Services

153,512

180,260

Custody and brokerage services

149,068

184,627

Payments

111,715

107,939

Other

166,630

147,848

Total

6,035,809

5,788,892

 

24)    PAYROLL AND RELATED BENEFITS

 

 

Accrued on March 31 - R$ thousand

2018

2017

Salaries

2,045,003

2,177,118

Benefits

1,094,353

1,097,214

Social security charges

700,673

793,735

Employee profit sharing

372,994

374,095

Provision for labor claims

403,484

163,673

Training

18,866

30,051

Total

4,635,373

4,635,886

 

25)    OTHER ADMINISTRATIVE EXPENSES

 

 

Accrued on March 31 - R$ thousand

2018

2017

Outsourced services

1,171,905

1,225,014

Depreciation and amortization

684,360

653,748

Data processing

511,878

493,609

Communication

392,501

434,663

Asset maintenance

272,070

269,760

Rental

286,568

287,286

Financial system services

241,084

259,489

Advertising and marketing

228,117

140,453

Security and surveillance

193,925

209,986

Transport

185,474

185,591

Water, electricity and gas

104,967

112,475

Supplies

53,299

71,952

Travel

57,765

49,288

Other

238,774

252,218

Total

4,622,687

4,645,532

 

120  Economic and Financial Analysis Report – March 2018


 
 

 

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

 

Notes to the Consolidated Financial Statements

 

26)    TAX EXPENSES

 

 

Accrued on March 31 - R$ thousand

2018

2017

Contribution for Social Security Financing (COFINS)

962,668

1,123,355

Social Integration Program (PIS) contribution

159,271

185,013

Tax on Services (ISSQN)

239,560

168,373

Municipal Real Estate Tax (IPTU) expenses

61,741

61,260

Other

86,882

112,877

Total

1,510,122

1,650,878

 

27)    OTHER OPERATING INCOME

 

Accrued on March 31 - R$ thousand

2018

2017

Other interest income

505,449

506,132

Reversal of other operating provisions (1)

501,078

3,453,437

Revenues from recovery of charges and expenses

103,323

95,189

Gains on sale of goods

4,298

662

Other

569,780

547,849

Total

1,683,928

4,603,269

(1) In the first quarter of 2018, it includes: (i) reversal of generic provision for guarantees provided, encompassing sureties, guarantees, credit letters, and standby letter of credit, pursuant to Resolution No. 4,512/16; and (ii) reversals of: (a) provision for tax risks regarding the PIS process, to offset overpaid amounts; and (b) provision for tax risks related to IRPJ/CSLL on credit losses.

 

28)    OTHER OPERATING EXPENSES

 

 

Accrued on March 31 - R$ thousand

2018

2017

Other finance costs

1,020,588

1,417,081

Sundry losses

368,790

428,338

Discount granted

309,778

355,926

Commissions on loans and financing

162,640

253,436

Intangible assets amortization

267,929

249,941

Goodwill amortization (Note 14a)

611,513

586,206

Other (1)

1,639,654

1,833,126

Total

4,380,892

5,124,054

 

(1) In the first quarter of 2017, it includes a specific provision for guarantees provided, encompassing sureties, guarantees and credit letters, pursuant to Resolution No. 4,512/16.

 

29)    NON-OPERATING INCOME (LOSS)

 

 

Accrued on March 31 - R$ thousand

2018

2017

Gain/loss on sale and write-off of assets and investments

(181,032)

(116,070)

Recording/reversal of non-operating provisions (1)

(31,214)

(46,238)

Other

2,308

29,382

Total

(209,938)

(132,926)

 

(1) Includes primarily allowance for non-use assets (BNDU).

Bradesco  121


 
 

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

 

Notes to the Consolidated Financial Statements

 

30)    RELATED-PARTY TRANSACTIONS

                                                                                    

a)   Related-party transactions (direct and indirect) are carried out under conditions and at rates consistent with those entered into with third parties, when applicable, and effective on the dates of the operations. The transactions are as follows:

 

 

On March 31 - R$ thousand

Controllers (1)

Associates and Jointly controlled companies (2)

Key Management Personnel (3)

Total

2018

2017

2018

2017

2018

2017

2018

2017

Assets

 

 

 

 

 

 

 

 

Interbank investments

655,936

564,496

655,936

564,496

Receivable from associates companies

2,752

2,292

2,752

2,292

Other assets

7,703

5,764

7,703

5,764

Liabilities

 

 

 

 

 

 

 

 

Demand deposits/Savings accounts

25

26

12,843

5,670

16,251

15,811

29,119

21,507

Time deposits

922,430

1,379,643

324,107

45,143

89,164

146,635

1,335,701

1,571,421

Securities sold under agreements to repurchase

735,234

5,009

414,772

6,528

14,613

11,537

1,164,619

Funds from issuance of securities

7,580,187

5,966,822

857,494

866,208

8,437,681

6,833,030

Derivative financial instruments

27,800

27,540

27,800

27,540

Interest on own capital and dividends payable

603,235

591,351

603,235

591,351

Other liabilities

7,981,401

8,759

7,981,401

8,759

 

 

 

Accrued on March 31 - R$ thousand

Controllers (1)

Associates and Jointly controlled companies (2)

Key Management Personnel (3)

Total

2018

2017

2018

2017

2018

2017

2018

2017

Income from financial intermediation

10,365

16,118

10,365

16,118

Financial intermediation expenses

(141,228)

(254,062)

(5,265)

(13,582)

(13,834)

(26,455)

(160,327)

(294,099)

Income from services provided

72,309

100,383

72,309

100,383

Expenses in operations with derivatives

(249)

(6,859)

(249)

(6,859)

Other expenses net of other operating revenues

(315)

(640)

(46,983)

(56,413)

(47,298)

(57,053)

 

(1) Cidade de Deus Cia. Coml. de Participações, Fundação Bradesco, NCF Participações S.A., Titanium Holdings S.A., BBD Participações S.A. and Nova Cidade de Deus Participações S.A.;
(2) Companies listed in Note 12; and
(3) Members of the Board of Directors and the Board of Executive Officers.

 

122  Economic and Financial Analysis Report – March 2018


 
 

 

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

 

Notes to the Consolidated Financial Statements

 

b)   Remuneration of key management personnel

 

Each year, the Annual Shareholders’ Meeting approves:

 

·       The annual total amount of Management compensation, set forth at the Board of Directors Meetings, to be paid to board members and members of the Board of Executive Officers, as determined by the Company’s Bylaws; and

 

·       The amount allocated to finance Management pension plans, within the Employee and Management pension plan of the Bradesco Organization.

 

For 2018, the maximum amount of R$479,820 thousand was set for Management compensation and R$491,530 thousand to finance defined contribution pension plans.

 

The current policy on Management compensation sets forth that 50% of net variable compensation, if any, must be allocated to the acquisition of preferred class b shares issued by BBD Participações S.A. and / or preferred shares issued by Banco Bradesco S.A., which vest in three equal, annual and successive installments, the first of which is in the year following the payment date. This procedure complies with Resolution No. 3,921/10, which sets forth a management compensation policy for financial institutions.      

 

Short-term Management benefits

 

 

Accrued on March 31 - R$ thousand

2018

2017

Salaries

105,937

110,370

Total

105,937

110,370

 

Post-employment benefits

 

 

Accrued on March 31 - R$ thousand

2018

2017

Defined contribution supplementary pension plans

114,402

101,339

Total

114,402

101,339

 

Bradesco does not offer its Key Management Personnel long-term benefits related to severance pay or share-based compensation, pursuant to CPC 10 – Share-Based Payment, approved by Resolution No. 3,989/11.

 

Shareholding

 

Together, members of the Board of Directors and Board of Executive Officers had the following shareholding in Bradesco:

 

 

On March 31

2018

2017

● Common shares

0.45%

0.68%

● Preferred shares

1.02%

1.13%

● Total shares (1)

0.73%

0.91%

 

(1) On March 31, 2018, direct and indirect shareholding of the members of Bradesco’s Board of Directors and Board of Executive Officers amounted to 2.27% of common shares, 1.05% of preferred shares and 1.67% of all shares (3.13% of common shares, 1.17% of preferred shares and 2.15% of all shares in 2017).

 

Bradesco  123


 
 

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

 

Notes to the Consolidated Financial Statements

 

31)    RISK AND CAPITAL MANAGEMENT

 

a)     Risk Management

 

Bradesco carries out a corporate risk control in an integrated and independent manner, preserving and giving value to a collective decision-making environment, developing and implementing methodologies, models and tools for measurement and control. Within Bradesco the dissemination of knowledge amongst employees at all hierarchical levels is stimulated, from the business areas to the Board of Directors.

 

Risk and capital management structures have established policies, standards and procedures, ensuring that the Bradesco Organization maintains a control process consistent with the nature of its operations, complexity of its products and services, activities, processes, systems and the extent of its exposure to risks. These structures are also composed by a number of committees, commissions and departments that provide support to the Senior Management and the Board of Directors in decision-making. The most notable amongst these are the Integrated Risk Management and Capital Allocation Committee (COGIRAC) and Risk Committee, whose purpose is to advise the Board of Directors in the performance of its duties in the management and control of risks and capital.

 

Detailed information on risk management process, reference equity and also Bradesco's risk exposures may be found in Investors Relations website at bradescori.com.br – Market Information.

 

b)    Capital Management

 

The Basel Ratio is part of the set of indicators that are monitored and evaluated in the process of Capital Management, and is intended to measure the sufficiency of capital in relation to the exposure to risks. The table below shows the composition of the Reference Equity and of the Risk Weighted Assets, according to the standards of Bacen. During the period, Bradesco has fulfilled all the minimum regulatory requirements.

 

Below is the Basel Ratio:

 

Calculation basis - Basel Ratio

On March 31 - R$ thousand

Prudential Conglomerate

2018

2017

Tier I capital

78,206,022

73,122,571

Common equity

73,101,239

67,915,450

  Shareholders’ equity

113,775,893

104,558,450

  Non-controlling interest / Other

186,400

33,639

  Prudential adjustments (1)

(40,861,054)

(36,676,639)

Additional capital

5,104,783

5,207,121

Tier II capital

21,963,699

19,797,079

  Subordinated debts (Resolution No. 4,192/13)

16,312,783

10,146,950

  Subordinated debts (previous to CMN Resolution No. 4,192/13)

5,650,916

9,650,129

Reference Equity (a)

100,169,721

92,919,650

 

 

 

- Credit risk

567,007,118

546,209,857

- Market risk

10,641,832

13,097,005

- Operational risk

53,509,834

48,156,699

Risk-weighted assets – RWA (b)

631,158,784

607,463,561

 

 

 

Basel ratio (a/b)

15.9%

15.3%

Tier I capital

12.4%

12.0%

- Principal capital

11.6%

11.2%

- Additional capital

0.8%

0.8%

Tier II capital

3.5%

3.3%

 

(1) As from January 2018, the factor applied to prudential adjustments went from 80% to 100%, according to the timeline for application of deductions of prudential adjustments, defined in Article 11 of Resolution No. 4,192/13.

 

124  Economic and Financial Analysis Report – March 2018


 
 

 

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

 

Notes to the Consolidated Financial Statements

 

c) Indicator of Global Systemic Importance (IASG)

 

According to Bacen Circular Letter No 3,751/15, Bradesco calculated the indicators for the evaluation of global systemic importance (IASG), disclosed in Investor Relations website (bradesco.com.br/ri - Market Information - Reports and Spreadsheets - Reports - Risk Management Report – Pillar 3).

 

d) VaR Internal Model – Trading Portfolio

 

The Trading Portfolio is composed of all the operations made with financial instruments, including derivatives, retained for negotiation or destined to hedge other instruments of the portfolio itself, and that are not subject to the limitation of their negotiability. The operations detained for negotiation are those destined for resale, to obtain benefits based on the variation of effective or expected prices, or for arbitrage.

 

Below is the 1-day VaR:

 

Risk factors

On March 31 - R$ thousand

2018

2017

Fixed rates

2,837

12,563

IGPM/IPCA

4,153

976

Exchange coupon

98

1,007

Foreign currency

4,881

977

Equities

205

572

Sovereign/Eurobonds and Treasuries

4,743

4,072

Other

2

2

Correlation/diversification effect

(1,324)

(4,908)

VaR (Value at Risk)

15,595

15,261

Amounts net of tax.

 

e)    Sensitivity analysis

 

The Trading Portfolio is also monitored through daily sensitivity analyses that measure the effect of market movements of market and price curves on our positions. Furthermore, a sensitivity analysis of the Organization’s financial exposures (Trading and Banking Portfolio) is performed on a quarterly basis, in compliance with CVM Rule No. 475/08.

 

Sensitivity analyses were carried out based on scenarios prepared at the respective dates, always considering market data at the time and scenarios that would adversely affect our positions, according to the examples below:

 

Scenario 1: Based on market information (B3, Anbima, etc.), stresses were applied for 1 basis point on the interest rate and 1.0% variation on prices. For example: for a Real/US dollar exchange rate of R$3.34 a scenario of R$3.37 was used, while for a 1-year fixed interest rate of 6.33%, a 6.34% scenario was applied;

 

Scenario 2: 25.0% stresses were determined based on market information. For example: for a Real/US dollar exchange rate of R$3.34 a scenario of R$4.17 was used, while for a 1-year fixed interest rate of 6.33%, a 7.91% scenario was applied. The scenarios for other risk factors also accounted for 25.0% stresses in the respective curves or prices; and

 

Scenario 3: 50.0% stresses were determined based on market information. For example: for a Real/US dollar exchange rate of R$3.34 a scenario of R$5.01 was used, while for a 1-year fixed interest rate of 6.33%, a 9.49% scenario was applied. The scenarios for other risk factors also account for 50.0% stresses in the respective curves or prices.

 

Bradesco  125


 
 

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

 

Notes to the Consolidated Financial Statements

 

The results presented reveal the impacts for each scenario in a static position of the portfolio. The dynamism of the market and portfolios means that these positions change continuously and do not necessarily reflect the position demonstrated here. In addition, the Organization has a continuous market risk management process, which is always searching for ways to mitigate the associated risks, according to the strategy determined by Top Management. Therefore, where there are indicators of deterioration in certain positions, proactive measures are taken to minimize any potential negative impact and maximize the risk/return ratio for the Organization.    

 

126  Economic and Financial Analysis Report – March 2018


 
 

 

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

 

Notes to the Consolidated Financial Statements

 

I - Sensitivity Analysis – Trading Portfolio

 

 

On March 31 - R$ thousand

Trading Portfolio (1)

2018

2017

Scenarios

Scenarios

1

2

3

1

2

3

Interest rate in Reais

Exposure subject to variations in fixed interest rates and interest rate coupons

(95)

(14,225)

(28,389)

(801)

(190,706)

(374,174)

Price indexes

Exposure subject to variations in price index coupon rates

(208)

(22,775)

(42,804)

(52)

(6,637)

(12,743)

Exchange coupon

Exposure subject to variations in foreign currency coupon rates

(5)

(414)

(823)

(14)

(749)

(1,467)

Foreign currency

Exposure subject to exchange rate variations

(2,776)

(69,898)

(139,796)

(460)

(11,489)

(22,979)

Equities

Exposure subject to variation in stock prices

(54)

(1,359)

(2,719)

(167)

(6,566)

(4,572)

Sovereign/Eurobonds and Treasuries

Exposure subject to variations in the interest rate of securities traded on the international market

(134)

(19,447)

(38,611)

(284)

(12,261)

(24,432)

Other

Exposure not classified in other definitions

(2)

(5)

(30)

(60)

Total excluding correlation of risk factors

(3,272)

(128,120)

(253,147)

(1,778)

(228,438)

(440,427)

Total including correlation of risk factors

(2,464)

(45,682)

(91,426)

(1,010)

(197,939)

(390,333)

 

(1) Amounts net of tax.

 

Bradesco  127


 
 

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

 

Notes to the Consolidated Financial Statements

 

Presented below are the impacts of the financial exposures also considering the Banking Portfolio (composed of operations not classified in the Trading Portfolio, originating from other business of the Organization and their respective hedges).

 

II - Sensitivity Analysis – Trading and Banking Portfolios

 

 

On March 31 - R$ thousand

Trading and Banking Portfolios (1)

2018

2017

Scenarios

Scenarios

1

2

3

1

2

3

Interest rate in Reais

Exposure subject to variations in fixed interest rates and interest rate coupons

(15,039)

(2,687,713)

(5,217,110)

(9,861)

(2,588,771)

(5,026,570)

Price indexes

Exposure subject to variations in price index coupon rates

(5,017)

(586,674)

(1,063,304)

(6,152)

(714,043)

(1,288,198)

Exchange coupon

Exposure subject to variations in foreign currency coupon rates

(815)

(71,431)

(138,596)

(533)

(40,481)

(78,230)

Foreign currency

Exposure subject to exchange rate variations

(3,697)

(86,715)

(173,429)

(3,099)

(77,450)

(154,900)

Equities

Exposure subject to variation in stock prices

(16,648)

(416,206)

(832,412)

(16,016)

(398,125)

(805,384)

Sovereign/Eurobonds and Treasuries

Exposure subject to variations in the interest rate of securities traded on the international market

(2,550)

(66,941)

(133,427)

(1,772)

(47,070)

(94,672)

Other

Exposure not classified in other definitions

(31)

(764)

(1,527)

(16)

(406)

(812)

Total excluding correlation of risk factors

(43,797)

(3,916,444)

(7,559,805)

(37,449)

(3,866,346)

(7,448,766)

Total including correlation of risk factors

(29,681)

(3,402,425)

(6,565,404)

(23,737)

(3,221,829)

(6,222,763)

 

(1) Amounts net of tax effects.

 

128  Economic and Financial Analysis Report – March 2018


 
 

 

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

 

Notes to the Consolidated Financial Statements

 

f)     Social and environmental risk

The social and environmental risk is represented by potential damages that an economic activity can cause to society and to the environment. The social and environmental risks associated with financial institutions are mostly indirect and stem from business relationships, including those with the supply chain and with customers, through financing and investment activities.

 

The social and environmental risk management process has a robust governance structure, comprised of committees, policies, standards and procedures, allowing the risk to be properly identified, measured, mitigated, monitored and reported. This process complies with Resolution No. 4,327/14 of the Central Bank and observes the principles of relevance and proportionality, which is necessary in view of the complexity of the financial products and the profile of Organization’s activities.

 

The Organization seeks to constantly incorporate and improve the criteria for managing the social and environmental risk arising from business relations with customers, through loan and financing operations, guarantees, suppliers and investments, which comprise the scope of analysis reflected in the Organization Social and Environmental Risk Standard (available at www.bradescosustentabilidade.com.br/site/).

 

The Organization has made several commitments related to environmental and social aspects, such as the Carbon Disclosure Project (CDP), the Principles for Responsible Investment (PRI), the Business Charter for Human Rights and Promotion of Decent Work (Ethos), the United Nations Environment Program (UNEP-FI), the Global Compact, among others.

 

Moreover, the Organization has been a signatory of the Equator Principles since 2004, and among the requirements evaluated are as follows the working conditions, impacts to the community and the environment of projects financed by the Organization, pursuant to the Brazilian legislation and the standards and guidelines of the International Finance Corporation (IFC), besides the World Bank Group's Health, Safety and Environment Guidelines. During the credit granting process, transactions under Equator Principles undergo a social and environmental risk analysis.

 

The following table sets forth the credit operation framed in the Equator Principles contracted in the last 12 months (from April 2017 to March 2018):

 

 

Number of operation by category (Equator Principles)

A

(High risk)

B

(Medium risk)

C

(Low risk)

Sector

 

 

 

Electricity

-

-

-

Infrastructure

-

1

-

Region

 

 

 

Northeast

-

-

-

Southeast

-

1

-

 

 

R$ thousand

Total project value

826,200

Bradesco's participation (loan)

301,795

 

In the first quarter of 2018 there was no hiring Advisory Service and Financing Project Finance and Corporate Loan to projects classified under the criteria of the Equator Principles III.

 

Bradesco  129


 
 

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

 

Notes to the Consolidated Financial Statements

 

g)    Below is the statement of financial position by currency and maturity

 

I – The statement of financial position by currency

 

 

On March 31 - R$ thousand

2018

2017

Balance

Local

Foreign (1) (2)

Foreign (1) (2)

Assets

 

 

 

 

Current and long-term assets

1,201,306,897

1,123,963,328

77,343,569

69,629,494

Cash and due from banks

17,807,399

14,013,295

3,794,104

2,227,326

Interbank investments

140,870,167

139,677,932

1,192,235

1,825,654

Securities and derivative financial instruments

516,559,089

493,580,903

22,978,186

14,380,950

Interbank and interdepartmental accounts

72,287,341

72,287,341

Loans and leasing

291,476,158

262,660,652

28,815,506

34,082,287

Other receivables and assets

162,306,743

141,743,205

20,563,538

17,113,277

Permanent assets

30,102,191

30,066,894

35,297

38,452

Investments

8,003,779

8,003,779

Premises and equipment and leased assets

7,811,648

7,789,472

22,176

24,153

Intangible assets

14,286,764

14,273,643

13,121

14,299

Total

1,231,409,088

1,154,030,222

77,378,866

69,667,946

 

 

 

 

 

Liabilities

 

 

 

 

Current and long-term liabilities

1,116,664,441

1,048,115,726

68,548,715

73,041,159

Deposits

271,658,595

259,513,669

12,144,926

19,293,794

Securities sold under agreements to repurchase

228,883,992

219,565,655

9,318,337

8,068,986

Funds from issuance of securities

142,589,826

139,720,010

2,869,816

2,966,599

Interbank and interdepartmental accounts

25,777,547

22,360,484

3,417,063

3,106,922

Borrowing and on-lending

47,734,757

27,962,670

19,772,087

21,808,571

Derivative financial instruments

18,277,419

17,642,457

634,962

315,884

Technical provision for insurance, pension plans and capitalization bonds

251,231,249

251,225,713

5,536

689

Other liabilities:

 

 

 

 

- Subordinated debts

46,148,262

34,624,640

11,523,622

10,973,977

- Others

84,362,794

75,500,428

8,862,366

6,505,737

Deferred income

369,743

369,743

Non-controlling interests in subsidiaries

599,011

599,011

Shareholders’ equity

113,775,893

113,775,893

Total

1,231,409,088

1,162,860,373

68,548,715

73,041,159

 

 

 

 

 

Net position of assets and liabilities

 

 

8,830,151

(3,373,213)

Net position of derivatives (2)

 

 

(57,232,695)

(44,306,742)

Other net off-balance-sheet accounts (3)

 

 

(563,970)

380,378

Net exchange position (liability)

 

 

(48,966,514)

(47,299,577)

 

(1) Amounts originally recognized and/or indexed mainly in USD;
(2) Excluding operations maturing in D+1, to be settled at the rate on the last day of the month; and
(3) Other commitments recognized in off-balance-sheet accounts.

 

130  Economic and Financial Analysis Report – March 2018


 
 

 

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

 

Notes to the Consolidated Financial Statements

 

II - The statement of financial position by maturity

 

 

On March 31 - R$ thousand

1 to 30 days

31 to 180 days

181 to 360 days

More than 360 days

Maturity not stated

Total

Assets

 

 

 

 

 

 

Current and long-term assets

671,172,378

114,225,676

71,032,032

344,876,811

1,201,306,897

Cash and due from banks

17,807,399

 

17,807,399

Interbank investments (1)

116,450,430

20,672,869

2,594,593

1,152,275

 

140,870,167

Securities and derivative financial instruments (1) (2)

373,533,272

6,701,933

14,143,201

122,180,683

 

516,559,089

Interbank and interdepartmental accounts

71,024,684

54,878

1,207,779

 

72,287,341

Loans and leasing

27,656,193

63,618,413

43,348,999

156,852,553

 

291,476,158

Other receivables and assets

64,700,400

23,177,583

10,945,239

63,483,521

 

162,306,743

Permanent assets

361,629

1,803,518

2,131,636

16,976,184

8,829,224

30,102,191

Investments

 

 

 

 

8,003,779

8,003,779

Premises and equipment

107,910

539,548

647,457

5,691,288

825,445

7,811,648

Intangible assets

253,719

1,263,970

1,484,179

11,284,896

14,286,764

Total in March 31, 2018

671,534,007

116,029,194

73,163,668

361,852,995

8,829,224

1,231,409,088

Total in March 31, 2017

664,902,925

96,227,105

63,817,721

356,276,165

8,156,952

1,189,380,868

             

Liabilities

 

 

 

 

 

 

Current and long-term liabilities

670,300,722

83,577,245

66,651,597

296,134,877

1,116,664,441

Deposits (3)

143,649,045

11,171,906

11,678,918

105,158,726

 

271,658,595

Securities sold under agreements to repurchase (1)

207,176,768

7,037,036

10,572,118

4,098,070

 

228,883,992

Funds from issuance of securities

6,491,541

38,595,653

32,019,474

65,483,158

 

142,589,826

Interbank and interdepartmental accounts

25,777,547

 

25,777,547

Borrowing and on-lending

2,653,374

16,584,334

8,398,224

20,098,825

 

47,734,757

Derivative financial instruments

17,576,378

161,553

191,595

347,893

 

18,277,419

Technical provisions for insurance, pension plans and capitalization bonds (3)

215,311,227

4,149,838

1,548,697

30,221,487

 

251,231,249

Other liabilities:

 

 

 

 

 

 

- Subordinated debts

1,762,556

4,571,947

355,285

39,458,474

 

46,148,262

- Others

49,902,286

1,304,978

1,887,286

31,268,244

 

84,362,794

Deferred income

369,743

 

369,743

Non-controlling interests in subsidiaries

-

-

-

599,011

599,011

Shareholders’ equity

-

-

 -

113,775,893

113,775,893

Total in March 31, 2018

670,670,465

83,577,245

66,651,597

296,134,877

114,374,904

1,231,409,088

Total in March 31, 2017

611,390,633

121,801,849

84,138,839

267,004,016

105,045,531

1,189,380,868

             

Net assets accumulated on March 31, 2018

863,542

33,315,491

39,827,562

105,545,680

 

 

Net assets accumulated on March 31, 2017

53,512,292

27,937,548

7,616,430

96,888,579

 

 

 

(1) Repurchase agreements are classified according to the maturity of the transactions;
(2) Investments in investment funds are classified as 1 to 30 days; and

(3) Demand and savings deposits and technical provisions for insurance, pension plans and capitalization bonds comprising “VGBL” and “PGBL” products are classified as 1 to 30 days, without considering average historical turnover.

 

Bradesco  131


 
 

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

 

Notes to the Consolidated Financial Statements

 

32)    EMPLOYEE BENEFITS

 

Bradesco and its subsidiaries sponsor a private defined contribution pension for employees and directors, that allows financial resources to be accumulated by participants throughout their careers by means of employee and employer contributions and invested in an Exclusive Investment Fund (FIE). The Plan is managed by Bradesco Vida e Previdência S.A. and BRAM – Bradesco Asset Management S.A. DTVM is responsible for the financial management of the FIEs funds.

 

The Supplementary Pension Plan counts on contributions from employees and administrators of Bradesco and its subsidiaries equivalent to at least 4% of the salary by employees and, 5% of the salary, plus the percentage allocated to covers of risk benefits (invalidity and death) by the company. Actuarial obligations of the defined contribution plan are fully covered by the plan assets of the corresponding FIE. In addition to the plan, in 2001, participants who chose to migrate from the defined benefit plan are guaranteed a proportional deferred benefit, corresponding to their accumulated rights in that plan. For the active participants, retirees and pensioners of the defined benefit plan, now closed to new members, the present value of the actuarial obligations of the plan is fully covered by guarantee assets.

 

Banco Alvorada S.A. (successor from the spin-off of Banco Baneb S.A.) maintains defined contribution and defined benefit retirement plans, through Fundação Baneb de Seguridade Social – Bases related to the former employees of Baneb.

 

Bradesco sponsors both defined benefit and defined contribution retirement plans, through Caixa de Assistência e Aposentadoria dos Funcionários do Banco do Estado do Maranhão (Capof), to employees originating from Banco BEM S.A.

 

Bradesco sponsors a defined benefit plan through Caixa de Previdência Privada Bec – Cabec for employees of Banco do Estado do Ceará S.A.

 

Kirton Bank Brasil S.A., Kirton Capitalização S.A., Kirton Corretora de Seguros S.A., Bradesco Kirton Corretora de Títulos e Valores Mobiliários S.A. and Kirton Seguros S.A. sponsor a defined benefit plan called APABA for employees originating from Banco Bamerindus do Brasil S.A., and Kirton Administração de Serviços para Fundos de Pensão Ltda. sponsors for its employees a defined contribution plan, known as the Kirton Prev Benefits Plan (Plano de Benefícios Kirton Prev), both managed by MultiBRA – Pension Fund.

 

Banco Losango S.A., Kirton Bank Brasil S.A. and Credival – Participações, Administração e Assessoria Ltda. sponsor three pension plans for its employees, which are: Losango I Benefits Plan – Basic Part, in the defined benefit mode, Losango I – Supplementary Part and PREVMAIS Losango Plan, the last two in the form of contribution variable, all managed by MultiBRA – Settlor – Multiple Fund.

 

Bradesco also took on the obligations of Kirton Bank Brasil S.A. with regard to Life Insurance, Health Insurance Plans, and Retirement Compensation for employees coming from Banco Bamerindus do Brasil S.A.

 

Bradesco, in its offices abroad, provides pension plans for its employees and administrators, in accordance with the standards established by the local authorities, which allows the accrual of financial resources during the professional career of the participant.

 

Expenses related to contributions made during the first quarter of 2018 totaled R$260,337 thousand (R$223,803 thousand in 2017).

 

In addition to this benefit, Bradesco and its subsidiaries offer other benefits to their employees and administrators, including health insurance, dental care, life and personal accident insurance, and professional training. These expenses, including the aforementioned contributions, totaled R$ 1,113,219 thousand during the first quarter of 2018 (R$1,127,265 thousand in 2017).

 

132  Economic and Financial Analysis Report – March 2018


 
 

 

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

 

Notes to the Consolidated Financial Statements

 

33)    INCOME TAX AND SOCIAL CONTRIBUTION

 

a)  Calculation of income tax and social contribution charges

 

 

Accrued on March 31 - R$ thousand

2018

2017

Income before income tax and social contribution

7,550,892

6,923,295

Total burden of income tax and social contribution at the current rates (1)

(3,397,901)

(3,115,483)

Effect on the tax calculation:

 

 

Equity investment in unconsolidated and jointly controlled companies

192,530

192,841

Net non-deductible expenses of nontaxable income

11,112

(22,370)

Interest on shareholders’ equity (paid and payable)

804,392

830,199

Other amounts (2)

(633,579)

(701,982)

Income tax and social contribution for the period

(3,023,446)

(2,816,795)

 

(1) Current rates: (i) 25% for income tax; (ii) 20% for the social contribution to financial and companies treated as such, including the insurance segment, and of 9% for the other companies (Note 3h); and

(2) Primarily, includes: (i) the exchange rate variation of assets and liabilities, derived from investments abroad; (ii) the equalization of the effective rate in relation to the rate 45% shown; and (iii) the deduction incentives.

 

b)   Breakdown of income tax and social contribution in the statement of income

 

 

Accrued on March 31 - R$ thousand

2018

2017

Current taxes:

 

 

Income tax and social contribution payable

(3,103,977)

(4,055,415)

Deferred taxes:

 

 

Amount recorded/realized in the period on temporary differences

382,538

2,134,850

Use of opening balances of:

 

 

Social contribution loss

(204,537)

(430,200)

Income tax loss

(195,356)

(528,233)

Constitution in the period on:

 

 

Social contribution loss

66,544

26,485

Income tax loss

31,342

35,718

Total deferred tax assets

80,531

1,238,620

Income tax and social contribution for the period

(3,023,446)

(2,816,795)

 

Bradesco  133


 
 

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

 

Notes to the Consolidated Financial Statements

 

c)   Deferred income tax and social contribution

 

 

R$ thousand

Balance on 12/31/2017

Amount recorded

Realized / Decrease

Balance on 03/31/2018

Allowance for loan losses

29,789,386

2,021,665

1,469,621

30,341,430

Civil provisions

2,191,002

201,471

188,200

2,204,273

Tax provisions

2,874,482

50,945

20,049

2,905,378

Labor provisions

2,160,997

255,588

163,108

2,253,477

Provision for devaluation of securities and investments

239,482

22,062

4,151

257,393

Provision for devaluation of foreclosed assets

607,613

88,025

79,583

616,055

Adjustment to fair value of trading securities

3,704,394

267,771

716,162

3,256,003

Amortization of goodwill

346,069

9,973

6,274

349,768

Provision for interest on own capital (1)

655,628

 

655,628

Other

4,921,716

768,736

1,312,178

4,378,274

Total deductible taxes on temporary differences

46,835,141

4,341,864

3,959,326

47,217,679

Income tax and social contribution losses in Brazil and overseas

5,003,872

97,886

399,893

4,701,865

Subtotal (2)

51,839,013

4,439,750

4,359,219

51,919,544

Adjustment to fair value of available-for-sale securities

557,807

24,368

104,272

477,903

Total deferred tax assets (Note 10b)

52,396,820

4,464,118

4,463,491

52,397,447

Deferred tax liabilities (Note 33f)

4,562,687

2,380,956

1,678,049

5,265,594

Deferred tax assets, net of deferred tax liabilities

47,834,133

2,083,162

2,785,442

47,131,853

- Percentage of net deferred tax assets on capital (Note 31)

45.7%

 

 

47.1%

- Percentage of net deferred tax assets over total assets

3.9%

 

 

3.8%

 

(1) The tax credit on interest on capital is accounted for up to the permitted tax limit; and

(2) Deferred tax assets from financial companies and similar companies, and insurance companies were calculated considering the increase in the social contribution rate, determined by Law No. 11,727/08 and Law No. 13,169/15 (Note 3h). With regard to the temporary effects produced by the adoption of Law No. 13,169/15, which raised the rate of the social contribution to 20%, the deferred tax assets, are calculated based on the expected implementation.

d)   Expected realization of deferred tax assets on temporary differences, tax loss and negative basis of social contribution

 

 

R$ thousand

Temporary differences

Income tax and social contribution losses

Total

Income tax

Social contribution

Income tax

Social contribution

2018

5,737,922

3,958,888

91,150

109,045

9,897,005

2019

6,780,270

4,088,829

94,608

82,348

11,046,055

2020

6,250,924

3,728,777

93,883

79,426

10,153,010

2021

5,089,639

3,043,954

600,744

377,059

9,111,396

2022

2,946,845

1,748,577

740,103

491,650

5,927,175

After 2022

2,406,186

1,436,868

833,506

1,108,343

5,784,903

Total

29,211,786

18,005,893

2,453,994

2,247,871

51,919,544

 

The projected realization of deferred tax assets is an estimate and it is not directly related to the expected accounting income.

 

On March 31, 2018, the present value of deferred tax assets, calculated based on the average funding rate, net of tax effects, amounts to R$48,955,974 thousand (R$47,626,390 thousand in 2017), of which: R$44,731,319 thousand (2017 - R$43,357,124 thousand) of temporary differences; and R$4,224,655 thousand (R$4,269,266 thousand in 2017) to tax losses and negative basis of social contribution.

 

134  Economic and Financial Analysis Report – March 2018


 
 

 

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

 

Notes to the Consolidated Financial Statements

 

e)   Unrecognized deferred tax assets

 

On March 31, 2018, deferred tax assets of R$17,477 thousand (R$20,672 thousand in 2017) were not recognized, and will only be registered when they meet the regulatory requirements and/or present prospects of realization according to technical studies and analyses prepared by the Management and in accordance with Bacen regulations.

 

f)    Deferred tax liabilities

 

 

On March 31 - R$ thousand

2018

2017

Fair value adjustment to securities and derivative financial instruments

2,290,085

1,399,384

Difference in depreciation

272,625

348,870

Judicial deposit and others

2,702,884

2,129,979

Total

5,265,594

3,878,233

 

The deferred tax liabilities of companies in the financial and insurance sectors were established considering the increased social contribution rate, established by Law No. 11,727/08 and Law No. 13,169/15 (Note 3h).

 

Bradesco  135


 
 

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

 

Notes to the Consolidated Financial Statements

 

34)    OTHER INFORMATION

 

a)   Fair value

 

The book value, net of loss provisions of the principal financial instruments is shown below:

 

Portfolio

On March 31 - R$ thousand

Unrealized gain/(loss) without tax effects

Book value

Fair value

In income statement

In shareholders’ equity

2018

2018

2017

2018

2017

Securities and derivative financial instruments (Notes 3e, 3f and 7)

516,559,089

519,049,899

6,359,038

5,703,465

2,490,810

3,584,916

- Adjustment of available-for-sale securities (Note 7bII)

 

 

3,868,228

2,118,549

 

 

- Adjustment of held-to-maturity securities (Note 7c item 4)

 

 

2,490,810

3,584,916

2,490,810

3,584,916

Loan and leases (Notes 2, 3g and 9) (1)

370,763,670

371,264,030

500,360

(4,936,278)

500,360

(4,936,278)

Investments (Notes 3j and 12) (2)

8,003,779

30,578,216

22,574,437

22,980,419

22,574,437

22,980,419

Treasury shares (Note 22d)

440,514

1,032,244

591,730

261,161

Time deposits (Notes 3n and 15a)

135,047,583

134,825,815

221,768

337,298

221,768

337,298

Funds from issuance of securities (Note 15c)

142,589,826

142,289,135

300,691

62,205

300,691

62,205

Borrowing and on-lending (Notes 16a and 16b)

47,734,757

47,894,549

(159,792)

(265,307)

(159,792)

(265,307)

Subordinated debts (Note 18)

46,148,262

46,688,713

(540,451)

(560,372)

(540,451)

(560,372)

Unrealized gains excluding tax

 

 

29,256,051

23,321,430

25,979,553

21,464,042

 

(1) Includes advances on foreign exchange contracts, leases and other receivables with lending characteristics; and
(2) Primarily includes the surplus of interest in subsidiaries, associates and jointly controlled companies (Cielo, Odontoprev and Fleury).

 

Determination of the fair value of financial instruments:

 

·       Securities and derivative financial instruments, investments, subordinated debts and treasury shares are based on the market price at the reporting date. If no quoted market price is available, amounts are estimated based on the dealer quotations, pricing models, quotation models or quotations for instruments with similar characteristics;

 

·       Fixed rate loans were determined by discounting estimated cash flows, using interest rates applied by the Organization for new contracts with similar features. These rates are consistent with the market at the reporting date; and

 

·       Time deposits, funds from issuance of securities, borrowing and on-lending were calculated by discounting the difference between the cash flows under the contract terms and our prevailing market rates for the same product at the reporting date.

 

136  Economic and Financial Analysis Report – March 2018


 
 

 

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

 

Notes to the Consolidated Financial Statements

 

b)    The Organization manages investment funds and portfolios with net assets which, on March 31, 2018, amounted to R$841,982,640 thousand (R$786,139,579 thousand in 2017).

 

c)   Consortium funds

 

 

On March 31 - R$ thousand

2018

2017

Monthly estimate of funds receivable from consortium members

641,083

596,419

Contributions payable by the group

30,574,087

29,952,349

Consortium members - assets to be included

26,576,688

26,301,008

Credits available to consortium members

6,059,983

5,673,320

b)         

 

 

On March 31 - In units

2018

2017

Number of groups managed

3,448

3,684

Number of active consortium members

1,422,020

1,375,356

Number of assets to be included

623,461

642,464

 

d)    As part of the convergence process with international accounting standards, the Brazilian Accounting Pronouncements Committee (CPC) has issued several accounting pronouncements, as well as their interpretations and guidelines, which are applicable to financial institutions only after approval by CMN. Until March 31, 2018, the accounting pronouncements approved by CMN and adopted by Bradesco in prior periods were as follows:

 

·       Resolution No. 3,566/08 – Impairment of Assets (CPC 01);

·       Resolution No. 3,604/08 – Statement of Cash Flows (CPC 03);

·       Resolution No. 3,750/09 – Related Party Disclosures (CPC 05);

·       Resolution No. 3,823/09 – Provisions, Contingent Liabilities and Contingent Assets (CPC 25);

·       Resolution No. 3,973/11 – Subsequent Event (CPC 24);

·       Resolution No. 3,989/11 – Share-based Payment (CPC 10 - R1);

·       Resolution No. 4,007/11 – Accounting Policies, Changes in Estimates and Error Correction (CPC 23);

·       Resolution No. 4,144/12 – Basic Conceptual Pronouncement (R1); and

·       Resolution No. 4,424/15 – Employee Benefits (CPC 33 – R1).

 

Presently, it is not possible to estimate when the CMN will approve the other CPC pronouncements or if they will be applied prospectively or retrospectively.

 

CMN Resolution No. 3,786/09 and Circular Letters No. 3,472/09 and No. 3,516/10 establish that financial institutions and other entities authorized by Bacen to operate, which are publicly-held companies or which are required to establish an Audit Committee shall, since December 31, 2010, annually prepare and publish in up to 90 days after the reference date of December 31 their consolidated financial statements, prepared under the International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB). As required by Resolution, on March 8, 2018, Bradesco published its consolidated financial statements for December 31, 2017 and 2016 on its website, in accordance with IFRS.

 

Bradesco  137


 
 

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Notes to the Consolidated Financial Statements

 

e)     In the first quarter of 2018, in order to adjust the structural levels of compulsory deposits, simplify and improve the rules and induce a reduction in the cost of credit, the Central Bank changed its rules for the collection of compulsory deposits, according to the table below:

 

Description

Standard before amendment

Amended standard

 

Savings deposits

 

The compulsory savings reserve was 24.5% on the calculation basis defined in regulation.

As from May 5, 2018, the compulsory savings savings will be reduced to 20% on the calculation basis defined in regulation.

Savings deposits (Rural)

The reserve requirements on rural savings was 21% on the basis of calculation defined in regulation.

 

As from May 5, 2018, the compulsory payment on rural savings will be reduced to 20% on the calculation basis defined in regulation.

 

Demand deposits

 

The daily verification of compliance with the requirement to pay cash deposits was made in accordance with the sum of the daily closing balance of the Bank Reserves account, the arithmetic mean of the financial institution's deposits recorded under "1.1.1.10.00-6 Cash "of Cosif at the close of each business day of the respective calculation period up to the limit of 40% (forty percent) of the chargeable charge to the institution and of the balance of operations valid for deduction of the compulsory payment on demand, verified in the respective calculation period, considering their respective regulatory limits.

As from May 5, 2018, the daily verification of the fulfillment of demand for payment of demand deposits shall be made according to the sum of the daily closing balance of the Bank Reserves account and the base value-sight, valid for deduction of the withdrawal on demand resources.

The deductibility value of the base calculation of the reserve requirement on demand resources corresponding to the arithmetic average of the RSVs calculated in the calculation period, was R$ 70,000,000.00.

From May 7, 2018, the deductible value of the compulsory reserve on demand resources corresponding to the arithmetic average of the RSVs calculated in the calculation period will be R$ 200,000,000.00.

The compulsory reserve on demand was 40%, based on the calculation basis defined in regulations.

 

As of May 7, 2018, the compulsory reserve on cash resources will be 25%, based on the calculation defined in regulations.

 

138  Economic and Financial Analysis Report – March 2018


 
 

 

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

 

Management Bodies

 

Reference date: April 25, 2018

Board of Directors

 

Chairman

Luiz Carlos Trabuco Cappi

 

Vice-Chairman

Carlos Alberto Rodrigues Guilherme

 

Members

Denise Aguiar Alvarez

João Aguiar Alvarez

Milton Matsumoto

Alexandre da Silva Glüher

Josué Augusto Pancini

Maurício Machado de Minas

 

Board

 

Executive Officers

Chief Executive Officer

Octavio de Lazari Junior

 

Executive Vice-Presidents

Josué Augusto Pancini

Maurício Machado de Minas

Marcelo de Araújo Noronha

André Rodrigues Cano

Cassiano Ricardo Scarpelli

Eurico Ramos Fabri

 

Managing Directors

Denise Pauli Pavarina

Moacir Nachbar Junior

Renato Ejnisman

Walkiria Schirrmeister Marchetti

 

Deputy Directors

Aurélio Guido Pagani

Guilherme Muller Leal

Luiz Carlos Brandão Cavalcanti Junior

Rogério Pedro Câmara

João Carlos Gomes da Silva

Bruno D´Avila Melo Boetger

Glaucimar Peticov

José Ramos Rocha Neto

 

Department Directors

Amilton Nieto

André Bernardino da Cruz Filho

André Ferreira Gomes

Antonio Carlos Melhado

Antonio Daissuke Tokuriki

Antonio Gualberto Diniz

Antonio José da Barbara

Carlos Wagner Firetti

Clayton Camacho

Edilson Wiggers

Edson Marcelo Moreto

Fernando Antônio Tenório

Frederico William Wolf

Hiroshi Obuchi

João Albino Winkelmann

José Sérgio Bordin

Layette Lamartine Azevedo Júnior

Leandro José Diniz

Lucio Rideki Takahama

Marcelo Frontini

Marcelo Santos Dall’Occo

Marcio Henrique Araujo Parizotto

Marcos Aparecido Galende

Marlos Francisco de Souza Araujo

Mauricio Gomes Maciel

Paulo Aparecido dos Santos

Paulo Manuel Taveira de Oliveira Ferreira

Roberto de Jesus Paris

Waldemar Ruggiero Júnior

 

Directors

Albert Adell Roso

Alexandre Cesar Pinheiro Quercia

Antranik Haroutiounian

Carlos Henrique Villela Pedras

Carlos Leibowicz

Edilson Dias dos Reis

Edmir José Domingues

Fernando Freiberger

Fernando Honorato Barbosa

Gilvandro Matos Silva

Jefferson Ricardo Romon

José Augusto Ramalho Miranda

José Gomes Fernandes

Klayton Tomaz dos Santos

Manoel Guedes de Araujo Neto 

Marcos Antônio Martins

Nairo José Martinelli Vidal Júnior

Oswaldo Tadeu Fernandes

Paulo Eduardo Waack

Roberto França

Roberto Medeiros Paula

Victor Rosa Marinho de Queiroz

 

Regional Officers

Ademir Aparecido Correa Junior

Alberto do Nascimento Lemos

Almir Rocha

Altair Luiz Guarda *

Altair Naumann

Amadeu Emilio Suter Neto

Antonio Piovesan

Carlos Alberto Alástico

César Cabús Berenguer Silvany

Delvair Fidêncio de Lima

Francisco Assis da Silveira Junior

Francisco Henrique França Fernandes

Geraldo Dias Pacheco

João Alexandre Silva

João Pedro da Silva Villela

Joel Queiroz de Lima

José Flávio Ferreira Clemente

José Roberto Guzela

Nelson Veiga Neto

Osmar Sanches Biscuola

Paulo Roberto Andrade de Aguiar

 

Committees Subordinated to the Board of Directors

 

Statutory Committees

 

Audit Committee

Milton Matsumoto - Coordinator

Paulo Roberto Simões da Cunha – Financial Expert

Wilson Antonio Salmeron Gutierrez

 

Compensation Committee

Luiz Carlos Trabuco Cappi - Coordinator

Carlos Alberto Rodrigues Guilherme

Milton Matsumoto

Valdirene Soares Secato (non-Manager)

 

Non-Statutory Committees

 

Compliance and Internal Control Committee

Carlos Alberto Rodrigues Guilherme - Coordinator

Milton Matsumoto

Alexandre da Silva Glüher

Josué Augusto Pancini

Maurício Machado de Minas

Marcelo de Araújo Noronha

André Rodrigues Cano

Moacir Nachbar Junior

Clayton Camacho

Edilson Wiggers

Frederico William Wolf

Marlos Francisco de Souza Araujo

 

Ethical Conduct Committee

Carlos Alberto Rodrigues Guilherme - Coordinator

Milton Matsumoto                     

Alexandre da Silva Glüher

Josué Augusto Pancini

Maurício Machado de Minas

Octavio de Lazari Junior

Marcelo de Araújo Noronha

André Rodrigues Cano               

Clayton Camacho

Edilson Wiggers

Frederico William Wolf

Glaucimar Peticov

Nairo José Martinelli Vidal Júnior

 

 

 

* Process is being ratified by Bacen.

 

Integrated Risk Management Committee and Capital Allocation

André Rodrigues Cano - Coordinator

Alexandre da Silva Glüher          

Josué Augusto Pancini              

Maurício Machado de Minas       

Marcelo de Araújo Noronha        

Moacir Nachbar Junior               

Cassiano Ricardo Scarpelli         

Eurico Ramos Fabri   

Marlos Francisco de Souza Araujo

 

Risk Committee

José Alcides Munhoz - Coordinator

Carlos Alberto Rodrigues Guilherme

André Rodrigues Cano

 

Succession Planning and Nomination Committee

Luiz Carlos Trabuco Cappi - Coordinator

Carlos Alberto Rodrigues Guilherme

Milton Matsumoto

Octavio de Lazari Junior

André Rodrigues Cano

Glaucimar Peticov

 

Sustainability Committee

Luiz Carlos Trabuco Cappi - Coordinator

Carlos Alberto Rodrigues Guilherme            

Milton Matsumoto

Alexandre da Silva Glüher

Josué Augusto Pancini

Maurício Machado de Minas

Octavio de Lazari Junior

Marcelo de Araújo Noronha

André Rodrigues Cano

Denise Pauli Pavarina

Moacir Nachbar Junior

Eurico Ramos Fabri

Glaucimar Peticov

Marcos Aparecido Galende

 

Committee to the Chief Executive Officer

 

Executive Disclosure Committee

Denise Pauli Pavarina - Coordinator

Josué Augusto Pancini

Maurício Machado de Minas

Octavio de Lazari Junior

Marcelo de Araújo Noronha

André Rodrigues Cano

Moacir Nachbar Junior

Antonio José da Barbara

Carlos Wagner Firetti

Marcelo Santos Dall’Occo

Marcos Aparecido Galende

Oswaldo Tadeu Fernandes

Haydewaldo Roberto Chamberlain da Costa

 

Fiscal Consil

 

Sitting Members

Ariovaldo Pereira - Coordinator

Domingos Aparecido Maia

José Maria Soares Nunes

João Carlos de Oliveira

Walter Luis Bernardes Albertoni

 

Deputy Members

Jorge Tadeu Pinto de Figueiredo

Nilson Pinhal

Renaud Roberto Teixeira

José Luiz Rodrigues Bueno

Reginaldo Ferreira Alexandre

 

Ombudsman Department

Nairo José Martinelli Vidal Júnior - Ombudsman  

 

 

 

 

 

 

 

 

General Accounting Department

Oswaldo Tadeu Fernandes

Accountant– CRC 1SP271968/O-5

 

Bradesco  139


 
 

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

 

Independent Auditor’s Report on the Consolidated Financial Statements

 

To

Shareholders and the Board of Directors of

Banco Bradesco S.A.

Osasco – SP

 

Introduction

We have reviewed the interim consolidated financial information of Banco Bradesco S.A. ("Bradesco" or "Bank"), which comprise the consolidated balance sheet as of March 31, 2018 and the related consolidated statements of income, changes in shareholders' equity and cash flows for the three-month period then ended, including the explanatory notes.

 

Management of Bradesco is responsible for the preparation and fair presentation of this interim consolidated financial information in accordance with accounting practices adopted in Brazil, applicable to financial institutions authorized to operate by the Central Bank of Brazil. Our responsibility is to express a conclusion on this interim consolidated financial information based on our review.

 

Scope of review

We conducted our review in accordance with Brazilian and International Standards on Review of Interim Financial Information (NBC TR 2410 - Revisão de Informações Intermediárias Executada pelo Auditor da Entidade and ISRE 2410 - Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. The scope of a review is substantially less than an audit conducted in accordance with auditing standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Therefore, we do not express an audit opinion.

 

Conclusion

Based on our review, we are not aware of any facts that would lead us to believe that the consolidated interim financial information mentioned above were not prepared, in all material aspects, in accordance with accounting practices adopted in Brazil applicable to financial institutions authorized to operate by the Central Bank of Brazil.

 

Other matters

Statement of Added Value

The consolidated interim accounting information related to the Statement of Added Value for the three-month period ended March 31, 2018 prepared under the responsibility of Bradesco's management, whose presentation is not required by the accounting practices adopted in Brazil applicable to institutions authorized to operate by the Central Bank of Brazil, were subject to review procedures performed in conjunction with the review of Bradesco's interim consolidated financial information. For our conclusion, we assess whether this statement is reconciled with the interim accounting information and with the accounting records, as applicable, and whether its form and content comply with the criteria set forth in Technical Pronouncement CPC 09 - Statement of Added Value. Based on our review, we are not aware of any fact that would lead us to believe that the Statement of Added Value was not prepared, in all material respects, in a manner consistent with the interim consolidated accounting information taken as a whole.

 

                    

Osasco, April 25, 2018

 

 

KPMG Auditores Independentes

CRC  2SP028567/O-1 F SP

 

Original report in Portuguese signed by

Rodrigo de Mattos Lia

Accountant CRC 1SP252418/O-3

 

140  Economic and Financial Analysis Report – March 2018


 
 

 

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

 

Fiscal Council Report

 

The members of the Audit Committee, in the exercise of their legal and statutory attributes, have examined the Management Report and the Financial Statements of Banco Bradesco S.A. , for the first quarter of 2018, and the technical feasibility study of generation of taxable profits, restated at present value, in order to establish the Deferred Tax Asset according to CVM Instruction No. 371/02, Resolution No. 3.059/02, of the National Monetary Council and Circular No. 3.171/02, of the Brazilian Central Bank, and in view of the report of KPMG Independent Auditors, presented without reservations, are of the opinion that the stated documents, examined in light of the accounting practices adopted in Brazil, applicable to the institutions authorized to operate by the Brazilian Central Bank, appropriately reflect the assets and liabilities and financial status of the Company.

 

Cidade de Deus, Osasco, SP, April 25, 2018.

 

 

 

Ariovaldo Pereira

 

Domingos Aparecido Maia

 

José Maria Soares Nunes

 

João Carlos de Oliveira

 

Walter Luis Bernardes Albertoni

 

 

Bradesco  141

 

 


 

For further information, please contact:

Board of Executive Officers

Denise Pauli Pavar q qina

Executive Managing Officer and Investor Relations Officer

 Phone: (11) 3684-4011

Fax: (11) 3684-4630

diretoria.executiva@bradesco.com.br

 

Market Relations Department

Carlos Wagner Firetti

Phone: (11) 2194-0922

 

Cidade de Deus, s/nº - Prédio Vermelho - 3º andar

Osasco - SP

Brazil

banco.bradesco/ri


 
 

 

 
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: May 2, 2017
 
BANCO BRADESCO S.A.
By:
 
/S/Denise Pauli Pavarina

    Denise Pauli Pavarina
Executive Director Manager 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.