bbdfsprudential2q16_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 August, 2016
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____

 .


 
 

 

 

 


 
 

 

 

 

 

 

 

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Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

 

Statement of Financial Position of the Prudential Conglomerate on June 30 – In thousands of Reais

 

Assets

2016

2015

Current assets

513,690,529

502,523,672

Cash and due from banks (Note 4)

32,273,678

11,509,470

Interbank investments (Notes 3d and 5)

138,410,386

175,733,034

Securities purchased under agreements to resell

131,485,783

171,328,788

Interbank investments

6,935,913

4,423,388

Allowance for losses

(11,310)

(19,142)

Securities and derivative financial instruments (Notes 3e, 3f and 6)

82,007,067

55,919,999

Own portfolio

37,076,247

31,078,844

Subject to unrestricted repurchase agreements

11,528,071

14,104,427

Derivative financial instruments (Notes 3f and 6d II)

21,907,004

6,195,652

Given in guarantee to the Brazilian Central Bank

64,738

20,096

Given in guarantee

8,196,374

4,520,980

Subject to unrestricted repurchase agreements

3,234,633

-

Interbank accounts

49,278,025

50,083,694

Unsettled payments and receipts

1,044,852

1,074,734

Reserve requirement (Note 7):

 

 

- Reserve requirement - Brazilian Central Bank

48,164,352

48,913,046

- SFH

5,046

8,828

Correspondent banks

63,775

87,086

Interdepartmental accounts

102,653

167,646

Internal transfer of funds

102,653

167,646

Loans (Notes 3g and 8)

125,438,364

144,305,268

Loans:

 

 

- Public sector

235,771

2,936,020

- Private sector

144,068,217

156,489,283

Loans transferred under an assignment with recourse

751,501

132,808

Allowance for loan losses (Notes 3g, 8f, 8g and 8h)

(19,617,125)

(15,252,843)

Leasing (Notes 3g and 8)

(19,679)

(77,181)

Lease and Sublease Operations receivable:

 

 

- Private sector

1,182,374

1,622,983

Unearned income from leasing

(1,092,329)

(1,562,597)

Allowance for leasing losses (Notes 3g, 8f, 8g and 8h)

(109,724)

(137,567)

Other receivables

83,830,218

62,811,434

Receivables on sureties and guarantees honored (Note 8a-3)

140,621

59,143

Foreign exchange portfolio (Note 9a)

33,575,617

16,245,509

Receivables

9,876,773

6,563,772

Securities trading

1,630,042

822,730

Specific receivables

7,807

5,623

Sundry (Note 9b)

39,782,857

39,970,500

Allowance for other loan losses (Notes 3g, 8f, 8g and 8h)

(1,183,499)

(855,843)

Other assets (Note 10)

2,369,817

2,070,308

Other assets

2,367,321

1,775,744

Provision for losses

(939,109)

(708,946)

Prepaid expenses (Notes 3i and 10b)

941,605

1,003,510

Long-term receivables

316,535,941

290,096,565

Interbank investments (Notes 3d and 5)

295,645

526,925

Interbank investments

295,645

526,925

Securities and derivative financial instruments (Notes 3e, 3f and 6)

109,007,627

93,730,645

Own portfolio

81,471,617

62,740,963

Subject to unrestricted repurchase agreements

22,303,905

27,230,099

Derivative financial instruments (Notes 3f and 6d II)

79,199

826,204

Privatization rights

50,565

55,667

Given in guarantee

3,615,291

2,555,115

Subject to unrestricted repurchase agreements

1,487,050

322,597

 

Bradesco     3


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Statement of Financial Position of the Prudential Conglomerate on June 30 – In thousands of Reais

 

Assets

2016

2015

Interbank accounts

715,319

626,090

Reserve requirement (Note 7):

 

 

- SFH

715,319

626,090

Loans (Notes 3g and 8)

152,387,985

156,053,261

Loans:

 

 

- Public sector

3,000,000

3,002,840

- Private sector

151,105,631

152,910,506

Loans transferred under an assignment with recourse

7,312,944

7,073,084

Allowance for loan losses (Notes 3g, 8f, 8g and 8h)

(9,030,590)

(6,933,169)

Leasing (Notes 3g and 8)

(60,255)

(84,013)

Leasing receivables:

 

 

- Private sector

1,128,429

1,824,488

Unearned income from leasing

(1,127,930)

(1,822,840)

Allowance for leasing losses (Notes 3g, 8f, 8g and 8h)

(60,754)

(85,661)

Other receivables

53,179,651

38,529,595

Securities trading

659,808

419,437

Sundry (Note 9b)

52,536,266

38,134,236

Allowance for other loan losses (Notes 3g, 8f, 8g and 8h)

(16,423)

(24,078)

Other assets (Note 10)

1,009,969

714,062

Prepaid expenses (Notes 3i and 10b)

1,009,969

714,062

Permanent assets

49,778,908

52,148,877

Investments (Notes 3j and 11)

32,372,436

33,024,130

Equity in the earnings (losses) of unconsolidated companies:

 

 

- In Brazil

32,029,577

32,709,517

- Overseas

289,950

262,682

Other investments

177,745

195,545

Allowance for losses

(124,836)

(143,614)

Premises and equipment (Notes 3k and 12)

3,343,768

2,896,521

Premises

44,871

44,535

Other premises and equipment

8,104,135

7,461,126

Accumulated depreciation

(4,805,238)

(4,609,140)

Leased assets (Note 12)

5,019,261

6,971,207

Leased assets

7,877,802

10,785,477

Accumulated depreciation

(2,858,541)

(3,814,270)

Deferred (Notes 3l and 13)

14,992

49,431

Expenses with Organization and Expansion

1,492,067

1,731,053

Accumulated amortization

(1,477,075)

(1,681,622)

Intangible assets (Notes 3m and 14)

9,028,451

9,207,588

Intangible Assets

16,425,393

15,174,943

Accumulated amortization

(7,396,942)

(5,967,355)

Total

880,005,378

844,769,114

 

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

 

4   June 2016


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Statement of Financial Position of the Prudential Conglomerate on June 30 – In thousands of Reais

 

Liabilities

2016

2015

Current liabilities

538,306,156

554,260,814

Deposits (Notes 3o and 15a)

137,599,345

156,533,864

Demand deposits

23,612,306

26,369,826

Savings deposits

87,209,226

91,008,482

Interbank deposits

512,837

518,527

Time deposits (Note 15a)

26,264,976

38,637,029

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

201,215,106

252,409,551

Own portfolio

79,351,701

94,476,502

Third-party portfolio

117,213,232

155,869,230

Unrestricted portfolio

4,650,173

2,063,819

Funds from issuance of securities (Note 15c)

69,885,771

44,634,746

Mortgage and real estate notes, letters of credit and others

65,912,036

40,552,530

Securities issued overseas

3,617,986

3,830,280

Structured Operations Certificates

355,749

251,936

Interbank accounts

1,283,234

1,263,042

Unsettled payments and receipts

73,835

77,608

Correspondent banks

1,209,399

1,185,434

Interdepartmental accounts

3,629,539

3,392,800

Third-party funds in transit

3,629,539

3,392,800

Borrowing (Note 16a)

19,113,335

18,582,527

Borrowing overseas

19,113,335

18,582,527

On-lending in Brazil - official institutions (Note 16b)

10,104,784

13,155,180

National treasury

44,438

30,931

BNDES

2,684,048

4,543,794

FINAME

7,373,289

8,567,451

Other institutions

3,009

13,004

On-lending overseas (Note 16b)

1,250

3,738

On-lending overseas

1,250

3,738

Derivative financial instruments (Notes 3f and 6d II)

17,770,588

5,456,372

Derivative financial instruments

17,770,588

5,456,372

Other liabilities

77,703,204

58,828,994

Payment of taxes and other contributions

3,331,097

3,323,685

Foreign exchange portfolio (Note 9a)

25,425,824

8,142,031

Social and statutory

2,725,986

2,720,099

Tax and social security (Note 19a)

2,477,841

3,780,230

Securities trading

2,534,221

2,103,983

Financial and development funds

1,277

1,512

Subordinated debts (Note 18)

4,417,921

2,345,301

Sundry (Note 19b)

36,789,037

36,412,153

Long-term liabilities

244,845,247

203,149,882

Deposits (Notes 3o and 15a)

42,525,409

40,601,084

Interbank deposits

-

212,502

Time deposits (Note 15a)

42,525,409

40,388,582

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

43,177,570

18,062,442

Own portfolio

43,177,570

18,062,442

Funds from issuance of securities (Note 15c)

51,285,445

54,902,439

Mortgage and real estate notes, letters of credit and others

48,492,572

50,468,750

Securities issued overseas

2,711,830

4,281,704

Structured Operations Certificates

81,043

151,985

Borrowing (Note 16a)

4,663,817

3,537,195

Borrowing overseas

4,663,817

3,537,195

On-lending in Brazil - official institutions (Note 16b)

23,646,199

26,073,014

BNDES

8,496,979

6,955,178

FINAME

15,149,220

19,114,996

Other institutions

-

2,840

 

Bradesco     5


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Statement of Financial Position of the Prudential Conglomerate on June 30 – In thousands of Reais

 

Liabilities

2016

2015

Derivative financial instruments (Notes 3f and 6d II)

157,173

126,448

Derivative financial instruments

157,173

126,448

Other liabilities

79,389,634

59,847,260

Tax and social security (Note 19a)

13,607,323

7,356,713

Subordinated debts (Note 18)

32,677,397

35,104,386

Eligible Debt Capital Instruments (Note 18)

13,876,948

-

Sundry (Note 19b)

19,227,966

17,386,161

Deferred income

480,824

373,141

Deferred income

480,824

373,141

Non-controlling interests in subsidiaries (Note 20)

15,265

13,711

Shareholders' equity (Note 21)

96,357,886

86,971,566

Capital:

 

 

- Domiciled in Brazil

50,460,500

42,559,829

- Domiciled overseas

639,500

540,171

Capital reserves

11,441

11,441

Profit reserves

47,689,760

44,995,397

Asset valuation adjustments

(2,002,801)

(764,260)

Treasury shares (Note 21d)

(440,514)

(371,012)

Total

880,005,378

844,769,114

 

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

 

6      June 2016


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Statement of Income Accumulated the Prudential Conglomerate on June 30 – In thousands of Reais

 

 

2016

2015

Revenue from financial intermediation

67,721,335

55,485,507

Loans (Note 8j)

34,643,127

31,804,841

Leasing (Note 8j)

1,113,192

1,585,222

Operations with securities (Note 6h)

20,459,331

20,554,406

Derivative financial instruments (Note 6h)

12,893,167

(1,588,147)

Foreign exchange operations (Note 9a)

(3,828,709)

1,252,434

Reserve requirement (Note 7b)

2,574,665

2,035,409

Sale or transfer of financial assets

(133,438)

(158,658)

 

 

 

Financial intermediation expenses

31,369,582

47,517,053

Retail and professional market funding (Note 15d)

31,131,839

27,875,027

Borrowing and on-lending (Note 16c)

(11,352,661)

10,352,614

Leasing (Note 8j)

952,448

1,316,318

Allowance for loan losses (Notes 3g, 8g and 8h)

10,637,956

7,973,094

 

 

 

Gross income from financial intermediation

36,351,753

7,968,454

 

 

 

Other operating income (expenses)

(18,249,872)

(387,743)

Fee and commission income (Note 22)

11,802,500

10,706,553

- Other fee and commission income

8,628,087

8,033,989

Income from banking fees

3,174,413

2,672,564

Payroll and related benefits (Note 23)

(6,722,411)

(6,200,104)

Other administrative expenses (Note 24)

(8,719,765)

(8,162,844)

Tax expenses (Note 25)

(2,986,140)

(2,035,422)

Equity in the Earnings (Losses) of Affiliates and Subsidiary (Note 11)

(6,807,698)

9,215,106

Other operating income (Note 26)

3,105,367

3,213,835

Other operating expenses (Note 27)

(7,921,725)

(7,124,867)

Operating income

18,101,881

7,580,711

Non-operating income (loss) (Note 28)

(51,927)

(137,147)

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

18,049,954

7,443,564

Income tax and social contribution (Notes 32a and 32b)

(9,792,587)

1,274,575

Non-controlling interests in subsidiaries

(2,058)

(785)

Net profit

8,255,309

8,717,354

 

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

Bradesco     7


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Statement of Changes in Shareholders' Equity – In thousands of Reais

 

Events

Capital

Capital reserves

Profit reserves

Asset valuation adjustment

Treasury shares

Retained earnings

Total

Paid in Capital

Unpaid Capital

Share premium

Legal

Statutory

Bradesco

Subsidiaries

Balance on December 31, 2014

38,100,000

-

11,441

5,193,467

38,992,668

(405,477)

(85,834)

(298,015)

-

81,508,250

Capital increase with reserves

5,000,000

-

-

-

(5,000,000)

-

-

-

-

-

Acquisition of treasury shares

-

-

-

-

-

-

-

(72,997)

-

(72,997)

Asset valuation adjustments

-

-

-

-

-

(421,620)

148,671

-

-

(272,949)

Net income

-

-

-

-

-

-

-

-

8,717,354

8,717,354

Allocations:

-   Reserves

-

-

-

435,867

5,373,395

-

-

-

(5,809,262)

-

 

-   Interest on Shareholders’ Equity Paid

-

-

-

-

-

-

-

-

(1,996,092)

(1,996,092)

 

-   Interim Dividends Paid

-

-

-

-

-

-

-

-

(912,000)

(912,000)

Balance on June 30, 2015

43,100,000

-

11,441

5,629,334

39,366,063

(827,097)

62,837

(371,012)

-

86,971,566

 

 

 

 

 

 

 

 

 

 

 

Balance on December 31, 2015

46,100,000

(3,000,000)

11,441

6,052,949

44,287,857

(1,231,603)

(2,882,952)

(431,048)

-

88,906,644

Cancellation of Capital Increase by Subscription of Shares

(3,000,000)

3,000,000

-

-

-

-

-

-

-

-

Capital increase with reserves

8,000,000

-

-

-

(8,000,000)

-

-

-

-

-

Acquisition of treasury shares

-

-

-

-

-

-

-

(9,466)

-

(9,466)

Asset valuation adjustments

-

-

-

-

-

456,523

1,655,231

-

-

2,111,754

Net income

-

-

-

-

-

-

-

-

8,255,309

8,255,309

Allocations:

-   Reserves

-

-

-

412,765

4,936,189

-

-

-

(5,348,954)

-

 

-   Interest on Shareholders’ Equity Paid and/or provisioned

-

-

-

-

-

-

-

-

(2,906,355)

(2,906,355)

Balance on June 30, 2016

51,100,000

-

11,441

6,465,714

41,224,046

(775,080)

(1,227,721)

(440,514)

-

96,357,886

 

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

 

8      June 2016


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Statement of Cash Flow Accumulated of the Prudential Conglomerate on June 30 In thousands of Reais

 

 

2016

2015

Cash flow from operating activities:

 

 

Net profit before income tax and social contribution

18,049,954

7,443,564

Adjustments to net profit before income tax and social contribution

19,715,669

7,525,732

Effect of Changes in Exchange Rates in Cash and Cash equivalents

6,045,045

193,272

Allowance for loan losses

10,637,956

7,973,094

Depreciation and amortization

1,368,061

1,453,942

Write-offs through Impairment

108,294

-

Expenses with civil, labor and tax provisions

1,941,782

1,694,629

Equity in the (earnings/losses) of unconsolidated and jointly subsidiaries

6,807,698

(9,215,106)

(Gain)/loss on sale of investments

(162,665)

137

(Gain)/loss on sale of fixed assets

19,379

10,838

(Gain)/loss on sale of foreclosed assets

152,293

120,056

Foreign exchange variation of assets and liabilities overseas/Other

(7,202,174)

5,294,870

Adjusted net profit before taxes

37,765,623

14,969,296

(Increase)/decrease in interbank investments

2,184,529

1,564,157

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

(8,787,109)

5,461,526

(Increase)/decrease in interbank and interdepartmental accounts

(2,466,248)

(2,186,891)

(Increase)/decrease in loan and leasing

15,180,320

(16,067,502)

(Increase)/decrease in other receivables and other assets

(49,484,226)

(3,414,097)

(Increase)/decrease in reserve requirement - Brazilian Central Bank

6,627,542

2,011,860

(Increase)/decrease in deposits

(16,911,117)

(15,372,328)

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

(5,702,436)

(30,473,103)

(Increase)/decrease in funds from issuance of securities

3,835,506

9,835,669

(Increase)/decrease in borrowings and on-lending

(12,805,590)

2,371,346

(Increase)/decrease in other liabilities

54,809,459

7,790,514

Increase/(decrease) in deferred income

(20,576)

83,807

Income tax and social contribution paid

(3,173,039)

(2,924,336)

Net cash provided by/(used in) by operating activities

21,052,638

(26,350,082)

Cash flow from investing activities:

 

 

(Increase)/decrease in held-to-maturity securities

(127,990)

(72,500)

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

49,069,346

26,879,495

Proceeds from sale of foreclosed assets

299,467

305,870

Sale of investments

162,665

2,914,000

Sale of premises and equipment of use

1,226,102

1,857,841

Purchases of available-for-sale securities

(44,481,810)

(25,415,325)

Foreclosed assets received

(900,079)

(667,577)

Investment acquisitions

(271,121)

(109,069)

Sale of premises and equipment of use

(1,149,290)

(2,164,319)

Intangible asset acquisitions

(738,062)

(4,040,965)

Dividends and interest on shareholders’ equity received

846,999

1,359,769

Net cash provided by/(used in) investing activities

3,936,227

847,220

Cash flow from financing activities:

 

 

Increase/(decrease) in subordinated debts

661,917

1,605,332

Dividends and interest on shareholders’ equity paid

(4,087,439)

(3,416,771)

Non-controlling interest

(3,440)

4,816

Acquisition of own shares

(9,466)

(72,997)

Net cash provided by/(used in) financing activities

(3,438,428)

(1,879,620)

Net increase/(decrease) in cash and cash equivalents

21,550,437

(27,382,482)

Cash and cash equivalents - at the beginning of the period

147,275,456

204,669,142

Effect of Changes in Exchange Rates in Cash and Cash equivalents

(6,045,045)

(193,272)

Cash and cash equivalents - at the end of the period

162,780,848

177,093,388

Net increase/(decrease) in cash and cash equivalents

21,550,437

(27,382,482)

 

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

Bradesco     9


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Index of Notes

 

Notes to Bradesco’s Financial Statements of the Prudential Conglomerate of Bradesco are as follows:

 

Page

 

1) 

OPERATIONS 

11 

2) 

PRESENTATION OF THE FINANCIAL STATEMENTS 

11 

3) 

SIGNIFICANT ACCOUNTING PRACTICES 

13 

4) 

CASH AND CASH EQUIVALENTS 

19 

5) 

INTERBANK INVESTMENTS 

20 

6) 

SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS 

21 

7) 

INTERBANK ACCOUNTS – RESERVE REQUIREMENT 

29 

8) 

LOANS 

30 

9) 

OTHER RECEIVABLES 

41 

10) 

OTHER ASSETS 

43 

11) 

INVESTMENTS 

44 

12) 

PREMISES AND EQUIPMENT AND LEASED ASSETS 

45 

13) 

DEFERRED 

45 

14) 

INTANGIBLE ASSETS 

46 

15) 

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

47 

16) 

BORROWING AND ON-LENDING 

49 

17) 

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

50 

18) 

SUBORDINATED DEBT 

53 

19) 

OTHER LIABILITIES 

54 

20) 

NON-CONTROLLING INTERESTS IN SUBSIDIARIES 

54 

21) 

SHAREHOLDERS’ EQUITY (PARENT COMPANY) 

54 

22) 

FEE AND COMMISSION INCOME 

56

23) 

PAYROLL AND RELATED BENEFITS 

56

24) 

OTHER ADMINISTRATIVE EXPENSES 

57

25) 

TAX EXPENSES 

57

26) 

OTHER OPERATING INCOME 

57

27) 

OTHER OPERATING EXPENSES 

57

28) 

NON-OPERATING INCOME (LOSS) 

58

29) 

RELATED-PARTY TRANSACTIONS (DIRECT AND INDIRECT) 

59

30) 

FINANCIAL INSTRUMENTS 

61

31) 

EMPLOYEE BENEFITS 

63

32) 

INCOME TAX AND SOCIAL CONTRIBUTION 

64

33) 

OTHER INFORMATION 

66

 

                                                                                                                               

10   June 2016


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

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 types of banking activities which it is authorised to. The Bank is involved in a number of other activities, either directly or indirectly, through its subsidiaries, specifically leasing, investment banking, brokerage, consortium management, credit cards, real estate projects, insurance, pension plans and capitalization bonds. All these activities are undertaken by the various companies in the Organização Bradesco (Organization), working together in an integrated fashion in the market.

 

2)      PRESENTATION OF THE FINANCIAL STATEMENTS

 

The Financial Statements of the Prudential Conglomerate were prepared to comply with the requirements of Resolution No. 4,280/13, of the National Monetary Council (CMN) and additional rules of the Brazilian Central Bank (Bacen). Thus, specific requirements in the consolidation and/or combination of the entities listed in Resolution No. 4,280/13 determined by the CMN and Bacen were observed, which are not necessarily the same established by the corporate law and by the CMN or Bacen for other types of consolidation. In this sense, they cover the financial statements of Bradesco, and foreign branches, subsidiaries and investment funds, as requested in Resolution No. 4,280/13.

 

In the preparation of these Financial Statements of the Prudential Conglomerate intercompany transactions, including investments, assets and liabilities, revenue, expenses and unrealized profit were eliminated and net income and shareholders’ equity attributable to the non-controlling interests were accounted for in a separate line. For jointly controlled investments with other shareholders, assets, liabilities and income and loss were included in the consolidated financial statements of the Prudential Conglomerate according to the interest held in the shareholders’ equity of each investee. Goodwill on the acquisition of investments in subsidiary/associate companies or jointly controlled entities is presented in the investments and intangible assets lines (Note 14a).

 

The financial statements include estimates and assumptions, such as: the calculation of estimated loan losses; fair market 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; and the determination of the useful life of specific assets. Actual results may differ from those based on estimates and assumptions.

 

Bradesco’s financial statements of the Prudential Conglomerate were approved by the Board of Executive Officers and by the Disclosure Committee on August 29, 2016.

 

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

 

  

On June 30

Activity

Equity interest

2016

2015

Instituições Financeira

 

 

 

Banco Bradesco S.A.

Banking

Controlador

Controlador

Banco Alvorada S.A.

Banking

99.99%

99.99%

Banco Bradesco Financiamentos S.A.

Banking

100.00%

100.00%

BMC Asset Management - DTVM Ltda.

Asset management

100.00%

100.00%

Banco Bradesco BBI S.A. (1)

Investment bank

99.81%

99.80%

Banco Boavista Interatlântico S.A.

Banking

100.00%

100.00%

Banco CBSS S.A. (2)

Banking

50.01%

100.00%

Banco Bradesco Cartões S.A.

Cards

100.00%

100.00%

Banco Bradesco BERJ S.A.

Banking

100.00%

100.00%

Bradesco Leasing S.A. Arrendamento Mercantil

Leasing

100.00%

100.00%

Bradesco S.A. Corretora de Títulos e Valores Mobiliários

Brokerage

100.00%

100.00%

BEC - Distribuidora de Títulos e Valores Mobiliários Ltda.

Asset management

100.00%

100.00%

BEM - Distribuidora de Títulos e Valores Mobiliários Ltda.

Asset management

100.00%

100.00%

BRAM - Bradesco Asset Management S.A. DTVM

Asset management

100.00%

100.00%

Ágora Corretora de Títulos e Valores Mobiliários S.A.

Brokerage

100.00%

100.00%

 

Bradesco     11


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

 

 

  

On June 30

Activity

Equity interest

2016

2015

Banco Bradescard S.A.

Cards

100.00%

100.00%

Crediare S.A. - Crédito, Financiamento e Investimento

Banking

50.00%

50.00%

Everest Leasing S.A. Arrendamento Mercantil

Leasing

100.00%

100.00%

Tibre Distribuidora de Títulos e Valores Mobiliários Ltda.

Asset management

100.00%

100.00%

Banco Bradesco Argentina S.A.

Banking

99.99%

99.99%

Banco Bradesco Europa S.A.

Banking

100.00%

100.00%

Banco Bradesco S.A. Grand Cayman Branch (3)

Banking

100.00%

100.00%

Banco Bradesco New York Branch

Banking

100.00%

100.00%

Bradesco Securities, Inc.

Brokerage

100.00%

100.00%

Bradesco Securities, UK.

Brokerage

100.00%

100.00%

Bradesco Securities Hong Kong

Brokerage

100.00%

100.00%

Bradescard México, Sociedad de Responsabilidad Limitada

Cards

100.00%

100.00%

Administradora de Consórcios

 

 

 

Bradesco Administradora de Consórcios Ltda.

Consortium management

100.00%

100.00%

Instituições de Pagamento

 

 

 

Cielo S.A. (4)

Fees and commissions

30.06%

30.06%

Cia. Brasileira de Soluções e Serviços - Alelo (4)

Fees and commissions

50.01%

50.01%

Tempo Serviços Ltda.

Fees and commissions

100.00%

100.00%

Paggo Soluções e Meios de Pagamentos S.A.

Fees and commissions

15.03%

15.03%

Braspag – Tecnologia em Pagamentos

Fees and commissions

30.06%

30.06%

Cielo Inc.

Fees and commissions

30.06%

30.06%

Merchant E-Solutions

Fees and commissions

30.06%

30.06%

Cateno Gestão de Contas de Pagamentos S.A.

Fees and commissions

21.04%

21.04%

Cidade Capital Markets Limited

Banking

100.00%

100.00%

Farly Participações Ltda.

Fees and commissions

50.01%

50.01%

Stelo S.A.

Fees and commissions

44.02%

44.02%

Elo Holding Financeira S.A.

Fees and commissions

50.01%

50.01%

Leader S.A. Administradora de Cartões de Crédito (5)

Fees and commissions

100.00%

50.00%

MPO Processadora de Pagamentos Móveis S.A.

Fees and commissions

50.00%

50.00%

IBI Promotora de Vendas Ltda.

Fees and commissions

50.00%

50.00%

Alvorada Administradora de Cartões Ltda.

Fees and commissions

50.01%

50.01%

Securitizadoras

 

 

 

Cia. Securitizadora de Créditos Financeiros Rubi

Credit acquisition

100.00%

100.00%

Alvorada Cia. Securitizadora de Créditos Financeiros

Credit acquisition

100.00%

100.00%

Promosec Cia. Securitizadora de Créditos

Credit acquisition

100.00%

100.00%

BCN – Consultoria, Adm. Bens, Serv. e Publicidade Ltda.

Credit acquisition

100.00%

100.00%

Alvorada Serviços e Negócios Ltda.

Credit acquisition

100.00%

100.00%

Fundos de Investimento (6)

 

 

 

Bradesco FI Mult. Cred. Priv. Inv. Exterior Andromeda

Investment Fund

100.00%

100.00%

Bradesco FI Mult. Cred. Priv. Inv. Exterior Pioneiro

Investment Fund

100.00%

100.00%

Bradesco FI Referenciado DI Performance

Investment Fund

100.00%

100.00%

Bradesco FI Referenciado DI União (7)

Investment Fund

82.19%

72.82%

Bradesco FIC FI Mult. Cred. Priv. Inv. Exterior – RV Local (8)

Investment Fund

100.00%

100.00%

Bradesco FIC FI Referenciado DI Carnaúba

Investment Fund

50.01%

50.01%

Bradesco FIC FI Referenciado DI Galáxia

Investment Fund

100.00%

100.00%

FII - FI RF Cred. Privado

Investment Fund

100.00%

100.00%

FIP Mult. Plus

Investment Fund

100.00%

100.00%

Strong FI Renda em Cotas Mult.

Investment Fund

100.00%

100.00%

(1)  Increased participation through the subscription of shares in June 2016;

(2)  Company partially sold to the Alelo Group;

(3)  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;

(4)  Company proportionally consolidated, pursuant to CMN Rule No. 4,280/13;

(5)  Increase in equity interest through share acquisition in April 2016;

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

(7)  Increased participation in June of 2016; and

(8)  New corporate name of Fundo FIC FI Mult. Cristal II.

 

12   June 2016


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

3)   SIGNIFICANT ACCOUNTING PRACTICES

 

a)   Functional and presentation currencies

 

Financial statements of Prudential Conglomerate 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 converted into Brazilian reais using the appropriate currency exchange rate to comply with accounting practices adopted in Brazil. Foreign currency conversion gains and losses arising are recognized in the period’s income statement in the lines “Derivative Financial Instruments” and “Borrowing and On-lending”.

 

b)   Income and expense recognition

 

The result is calculated according to the regime of competence, which establishes that the revenues and expenses should be included in the calculation of the results for the periods in which they occur, always simultaneously to when they are correlated, regardless of being a receipt or payment.

 

Fixed rate contracts are recorded at their redemption value with the income or expense relating to future periods being recorded as a deduction from the corresponding asset or liability. Finance income and costs are 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 to the interest and foreign exchange rates applicable at the end of the reporting period.

 

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, which are exposed to insignificant risk of change in fair market value. These funds are used by Bradesco to manage its short-term commitments.

 

Cash and cash equivalents detailed balances are presented in Note 4.

 

d)   Interbank investments

 

Unrestricted repurchase and reverse repurchase agreements are stated at their fair market 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 5.

 

e)   Securities – Classification

 

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

 

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

 

·       Held-to-maturity securities – securities for which there is positive intent and financial capacity to hold to maturity. They are recorded at cost, plus income earned recognized in the Income Statement 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 market value. Fair market value is generally based on quoted market prices or quotations for assets or liabilities with similar characteristics. If market prices are not available, fair market values are based on traders’ quotations, pricing models, discounted cash flows or similar techniques to determine the fair market value and may require judgment or significant estimates by Management.

 

Bradesco     13         


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

Classification, breakdown and segmentation of securities are presented in Note 6 (a to c).

 

f)    Derivative financial instruments (assets and liabilities)

 

Derivate instruments are classified based on the objective for which the underlying instrument was acquired at the date of purchase, taking into consideration its use for possible hedging purposes.

 

Operations involving derivative financial instruments are designed to meet the Bank’s own needs in order to manage overall exposure, as well as to meet customer requests to manage their positions. The gains or losses are recorded in profit-and-loss and shareholders’ equity accounts.

 

Derivative financial instruments used to mitigate risk deriving from exposure to variations in the fair market value of financial assets and liabilities are designated as hedges when they meet the criteria for hedge accounting and are classified according to their nature:

 

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

 

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

 

A breakdown of amounts included as derivative financial instruments, in the balance sheet and off-balance-sheet accounts, is disclosed in Note 6 (d to g).

 

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

 

Loans and leasing, advances on foreign exchange contracts and other receivables with credit characteristics are classified by risk level, based on: (i) the parameters established by CMN Resolution No. 2,682/99, which requires risk ratings to have nine levels, from “AA” (minimum risk) to “H” (maximum risk); and (ii) Management’s assessment of the risk level. This assessment, which is carried out regularly, considers current economic conditions and past experience with loan losses, as well as specific and general risks relating to operations, debtors and guarantors. Moreover, the days past due are also considered in the rating of customer risk as per CMN Resolution No. 2,682/99, as follows:

 

Past-due period (1)

Customer rating

·  from 15 to 30 days

B

·  from 31 to 60 days

C

·  from 61 to 90 days

D

·  from 91 to 120 days

E

·  from 121 to 150 days

F

·  from 151 to 180 days

G

·  more than 180 days

H

 

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

 

Interest and inflation adjustments on past due transactions are only recognized on the Income Statement up to 59 days past the due date. As from the 60th day, they are recognized on off-balance sheet accounts and are only recognized when the Income Statement has been received.

 

14   June 2016


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

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 transactions are held at the same rating as on the date of the renegotiation or classified in a higher risk rating. Renegotiations which have already been written-off against the allowance and that were recorded in off-balance-sheet accounts, are rated as level “H” and any possible gains derived from their renegotiation are recognized only when they are effectively received. When there is a significant repayment on the operation or when new material facts justify a change in the level of risk, the operation may be reclassified to a lower risk category.

 

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

 

Type, values, terms, levels of risk, concentration, economic sector of client’s activity, renegotiation and income from loans, as well as the breakdown of expenses and statement of financial position accounts for the allowance for loan losses are presented in Note 8.

 

Leasing

 

The portfolio of leasing operations consists of contracts firmed with the support of Decree No. 140/84, of the Ministry of Finance, which contains clauses of: (a) non-cancellation; (b) purchase option; and c) post-fixed or fixed restatement and are accounted for in accordance with the standards established by Bacen, as follows:

 

I-      Leases receivable

 

Reflect the balance of installments receivable, restated according to the indexes and criteria established by contractual agreement.

 

II-    Unearned income from leasing and Guaranteed Residual Value (GRV)

 

Recorded at the contractual amount, conversely to adjusted accounts of unearned revenues from leasing and Residual value to balance, both submitted through negotiated conditions. The GRV received in advance is recorded in Other Liabilities – Creditors by Anticipation of the Residual Value until the date of contractual termination. The adjustment at present value of the lease payments and the GRV receivable from the financial leasing operations is recognized as excessive/insufficient depreciation on leased assets, in order to reconcile the accounting practices. In operations whose delays are equal to or greater than 60 days, the appropriation to the result occurs upon receipt of contractual installments, in accordance with CMN Resolution No. 2,682/99.

 

III-  Leased fixed assets

 

It is recorded at acquisition cost, minus the accrued depreciations. The depreciation is calculated using the linear method, with the benefit of a 30% reduction in the normal life cycle of the asset, provisioned in the current legislation. The main annual rates of depreciation used, as base for this reduction, are the following: vehicles and the like, 20%; furniture and utensils, 10%; machinery and equipment, 10%; and other assets, 10% and 20%.

 

IV-  Losses on leases

 

The losses recorded in the sale of leased assets are deferred and amortized over the remaining normal life cycle of assets, and are shown along with the Leased Fixed Assets (Note 8k).

 

V-    Excessive (insufficient) depreciation

 

The accounting records of leasing operations are maintained as legal requirements, specific for this type of operation. The procedures adopted and summarized in items "II" to "IV" above differ from the accounting practices provisioned in Brazilian corporate law, especially concerning the regime of competence in the record of revenues and expenses related to lease contracts. As a result, in accordance with Bacen Circular No. 1,429/89, the present value of outstanding leasing installments was calculated, using the internal rate of return of each contract, recording a leasing revenue or expenditure, conversely to the entries of excessive or insufficient depreciation, respectively, recorded in Permanent Assets, with the objective of adapting the leasing operations to the regime of competence (Note 8k).

 

 

Bradesco     15         


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

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

 

Income tax and social contribution deferred tax assets, calculated on income tax losses, social contribution losses and temporary differences, are recorded in “Other Receivables - Sundry” and the deferred tax liabilities on tax differences in leasing depreciation (applicable only for income tax),
mark-to-market adjustments on securities, restatement of judicial deposits, among others, are recorded 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 recorded 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, equated and of the insurance industry, the social contribution on the profit was calculated until August 2015, considering the rate of 15%. For the period between September 2015 and December 2018, the rate was changed to 20%, according to Law No. 13,169/15, returning to the rate of 15% 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 Organização Bradesco constituted, in September 2015, a supplement to the tax credit of social contribution, considering the annual expectations of achievement and their respective rates in force in each period, according to the technical study conducted.

 

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

 

Changes in the criteria to recognize revenue, costs and expenses included in the net profit for the period, enacted by Law No. 11,638/07 and subsequent amendments were made fiscally by the new regime of the taxation in force instituted by Law No. 12,973/14.

 

The breakdown of income tax and social contribution, showing the calculations, the origin and expected use of deferred tax assets, as well as unrecorded deferred tax assets, are presented in Note 32.

 

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 recorded in the Income Statement according to the terms and the amount of expected benefits and directly written-off in the Income Statement when the corresponding assets or rights are no longer part of the institution’s assets or when future benefits are no longer expected.

 

In the case of the remuneration paid for the origination of credit operations or leasing to the banking correspondents related to credit operations originated during 2015 and 2016, Bradesco opted to recognize part of the total value of compensation, pursuant to the provisions of Bacen Circular No. 3,738/14.

 

Prepaid expenses are shown in detail in Note 10b.

 

16   June 2016


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

j)    Investments

 

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

 

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

 

Subsidiaries are consolidated – the composition of the main companies can be found in Note 2. The composition of unconsolidated and jointly controlled companies, as well as other investments, can be found in Note 11.

 

k)   Premises and equipment

 

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

 

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

 

The breakdown of asset costs and their corresponding depreciation, as well as the unrecorded surplus value for real estate and the fixed asset ratios, are presented in Note 12.

 

l)    Deferred assets

 

It is recorded at cost of acquisition or composition, net of their accrued depreciation of 20% per annum, calculated using the linear method. Since December 2008, the new operations have been recorded in intangible assets, in accordance with Circular Letter No. 3,357/08 of Bacen.

 

The composition of deferred assets is shown in Note 13.

 

m) Intangible assets

 

Corresponds to the acquired rights whose subjects are intangible assets intended for the maintenance of the company or exercised for this purpose.

 

Intangible assets comprise of:

 

·       Future profitability/acquired client portfolio and acquisition of right to provide banking services: they are recorded 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.

 

n)   Impairment

 

Financial and non-financial assets are tested for impairment.

 

Impairment evidence may comprise the non-payment or payment delay by the debtor, possible bankruptcy process or the significant or extended dec line in an asset value.

 

Bradesco     17         


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

An impairment loss of a financial or non-financial asset is recognized in the profit or loss for the period if the book value of an asset or cash-generating unit exceeds its recoverable value.

 

Impairment losses are presented in Note 6c(7) and 6h(1).

 

o)   Securities sold under agreements to repurchase

 

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

 

A breakdown of the contracts recorded in deposits and securities sold under agreements to repurchase, as well as terms and amounts recognized in the statement of financial position and income statement, is presented in Note 15.

 

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 confirmation of the capacity of the counterparty to pay or the ability of Bradesco to realize the asset via compensation against another liability upon which the gain is considered practically certain. Contingent assets with a chance of probable success are disclosed in the notes to the financial statements;

 

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

 

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

 

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

 

q)   Other assets and liabilities

 

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

 

r)    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

 

18   June 2016


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

·       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 33.

                                                             

4)     CASH AND CASH EQUIVALENTS

 

 

On June 30 - R$ thousand

2016

2015

Cash and due from banks in domestic currency

7,391,169

7,806,499

Cash and due from banks in foreign currency (1)

24,882,312

3,702,847

Investments in gold

197

124

Total cash and due from banks

32,273,678

11,509,470

Interbank investments (2)

130,507,170

165,583,918

Total cash and cash equivalents

162,780,848

177,093,388

 

(1)  On June 30, 2016, it includes availability in foreign currency on the purchase and sale of shares agreement, for which payment was made on July 1, 2016 (Note 33f); and

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

 

 

Bradesco     19         


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

5)      INTERBANK INVESTMENTS

 

a)    Breakdown and maturity

 

 

On June 30 - R$ thousand

1 to 30

days

31 to 180

days

181 to 360

days

More than 360 days

2016

2015

Securities purchased under agreements to resell:

 

 

 

 

 

 

Own portfolio position

13,789,758

-

-

-

13,789,758

12,908,132

● Financial treasury bills

150,461

-

-

-

150,461

1,397,200

● National treasury notes

9,027,767

-

-

-

9,027,767

6,848,787

● National treasury bills

4,387,268

-

-

-

4,387,268

4,459,495

● Bank deposit certificates

195,559

-

-

-

195,559

-

● Debentures

28,703

-

-

-

28,703

1,879

● Other

-

-

-

-

-

200,771

Funded position

116,640,272

609,047

-

-

117,249,319

156,349,446

● Financial treasury bills

18,253,786

-

-

-

18,253,786

24,316,890

● National treasury notes

56,842,472

609,047

-

-

57,451,519

51,914,405

● National treasury bills

41,544,014

-

-

-

41,544,014

80,118,151

Short position

295,125

151,581

-

-

446,706

2,071,210

● National treasury bills

295,125

151,581

-

-

446,706

2,071,210

Subtotal

130,725,155

760,628

-

-

131,485,783

171,328,788

Interest-earning deposits in other banks:

 

 

 

 

 

 

● Interest-earning deposits in other banks:

4,812,225

1,886,616

237,072

295,645

7,231,558

4,950,313

● Provision for losses

(2,239)

(6,589)

(2,482)

-

(11,310)

(19,142)

Subtotal

4,809,986

1,880,027

234,590

295,645

7,220,248

4,931,171

Total in 2016

135,535,141

2,640,655

234,590

295,645

138,706,031

 

%

97.7

1.9

0.2

0.2

100.0

 

Total in 2015

165,893,185

7,522,109

2,317,740

526,925

 

176,259,959

%

94.1

4.3

1.3

0.3

 

100.0

 

20   June 2016


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

b)   Income from interbank investments

 

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

 

  

Accrued on June 30 - R$ thousand

2016

2015

Income from investments in purchase and sale commitments:

 

 

Own portfolio position

237,655

148,224

Funded position

9,579,930

10,293,911

Short position

139,624

187,010

Subtotal

9,957,209

10,629,145

Income from interest-earning deposits in other banks

412,436

214,081

Total (Note 6h)

10,369,645

10,843,226

 

6)     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 June 30 - R$ thousand

 

2016

2015

 

Financial

Other Activities

Total

%

Total

%

Trading securities

55,626,453

36,991

55,663,444

29.2

34,537,469

23.1

- Government securities

21,888,919

1,553

21,890,472

11.5

12,095,083

8.1

- Corporate securities

11,751,331

35,438

11,786,769

6.2

15,420,530

10.3

- Derivative financial instruments (1) (6)

21,986,203

-

21,986,203

11.5

7,021,856

4.7

Available-for-sale securities (3)

122,627,484

2,932

122,630,416

64.2

102,583,579

68.6

- Government securities

69,446,741

-

69,446,741

36.4

57,966,477

38.8

- Corporate securities

53,180,743

2,932

53,183,675

27.8

44,617,102

29.8

Held-to-maturity securities (3)

12,720,737

-

12,720,737

6.6

12,458,024

8.3

- Government securities

27,175

-

27,175

-

39,021

-

- Corporate securities

12,693,562

-

12,693,562

6.6

12,419,003

8.3

Subtotal

190,974,674

39,923

191,014,597

100.0

149,579,072

100.0

Purchase and sale commitments (2)

97

-

97

 

71,572

 

Grand total

190,974,771

39,923

191,014,694

 

149,650,644

 

 

 

 

 

 

 

 

- Government securities

91,362,835

1,553

91,364,388

47.9

70,100,581

47.0

- Corporate securities

99,611,839

38,370

99,650,209

52.1

79,478,491

53.0

Subtotal

190,974,674

39,923

191,014,597

100.0

149,579,072

100.0

Purchase and sale commitments (2)

97

-

97

 

71,572

 

Grand total

190,974,771

39,923

191,014,694

 

149,650,644

 

 

Bradesco     21         


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

b)      Consolidated classification by category, maturity and operating segment

 

I)    Trading securities

 

Securities

On June 30 - R$ thousand

2016

2015

1 to 30

days

31 to 180

days

181 to 360

days

More than

360 days

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

Original amortized cost

Mark-to-market

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

Mark-to-market

- Financial

25,256,778

2,369,289

3,714,044

24,286,342

55,626,453

66,312,944

(10,686,491)

34,537,469

(5,523,468)

National treasury bills

466,731

36,371

19,743

503,462

1,026,307

1,025,220

1,087

3,009,267

(7,111)

Financial treasury bills

-

10,162

2,481

13,228,589

13,241,232

13,244,646

(3,414)

5,504,925

(220)

Bank deposit certificates

33,464

320,980

-

-

354,444

354,444

-

456,842

-

Derivative financial instruments (1) (6)

20,933,615

737,597

235,791

79,199

21,986,202

32,578,042

(10,591,840)

7,021,856

(5,445,716)

Debentures

30,580

42,905

119,740

2,103,127

2,296,352

2,444,842

(148,490)

3,863,266

(9,108)

National treasury notes

-

156,233

160,950

5,495,753

5,812,936

5,735,728

77,208

2,588,311

(25,579)

Financial bills

587,909

590,405

1,380,478

2,024,557

4,583,349

4,576,641

6,708

5,200,375

3,922

Other

3,204,479

474,636

1,794,861

851,655

6,325,631

6,353,381

(27,750)

6,892,627

(39,656)

- Other activities

35,386

-

52

1,553

36,991

51,641

(14,650)

-

-

Other

35,386

-

52

1,553

36,991

51,641

(14,650)

-

-

Subtotal

25,292,164

2,369,289

3,714,096

24,287,895

55,663,444

66,364,585

(10,701,141)

34,537,469

(5,523,468)

Purchase and sale commitments - Financial (2)

97

-

-

-

97

97

-

71,572

-

Grand total

25,292,261

2,369,289

3,714,096

24,287,895

55,663,541

66,364,682

(10,701,141)

34,609,041

(5,523,468)

Derivative financial instruments (liabilities) (6)

(17,030,805)

(518,993)

(220,790)

(157,173)

(17,927,761)

(16,127,829)

(1,799,932)

(5,582,820)

(245,851)

 

22   June 2016


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

II)   Available-for-sale securities

Securities (7)

On June 30 - R$ thousand

2016

2015

1 to 30

days

31 to 180

days

181 to 360

days

More than

360 days

Fair/book value

(5) (6) (7)

Original amortized cost

Mark-to-market

Fair/book value

(5) (6) (7)

Mark-to-market

- Financial

9,756,717

5,951,299

9,172,577

97,746,891

122,627,484

126,380,125

(3,752,641)

102,580,499

(1,532,479)

National treasury bills

1,865,967

2,071,552

3,855,708

20,874,506

28,667,733

28,610,675

57,058

20,349,416

(551,456)

Brazilian foreign debt securities

-

-

11,084

513,960

525,044

509,047

15,997

202,181

(21,266)

Foreign corporate securities

169,102

189,711

37,208

10,172,514

10,568,535

12,270,583

(1,702,048)

10,879,312

(657,769)

National treasury notes

-

190,027

4,485,311

32,996,419

37,671,757

37,912,664

(240,907)

35,412,291

(679,334)

Financial treasury bills

-

-

-

640,527

640,527

640,751

(224)

563,392

839

Debentures

228,830

684,588

582,115

31,453,348

32,948,881

33,782,238

(833,357)

28,861,554

494,517

Shares

6,127,034

-

-

-

6,127,034

6,939,174

(812,140)

1,776,936

(29,700)

Certificates of real estate receivables

20,717

-

-

944,232

964,949

1,200,081

(235,132)

1,180,335

(96,925)

Other

1,345,067

2,815,421

201,151

151,385

4,513,024

4,514,912

(1,888)

3,355,082

8,615

- Other activities

2,932

-

-

-

2,932

2,938

(6)

3,080

14

Other

2,932

-

-

-

2,932

2,938

(6)

3,080

14

Subtotal

9,759,649

5,951,299

9,172,577

97,746,891

122,630,416

126,383,063

(3,752,647)

102,583,579

(1,532,465)

Hedge - cash flow (Note 6f)

-

-

-

-

-

-

122,649

-

299,179

Securities reclassified to “Held-to-maturity securities” (3)

-

-

-

-

-

-

(338,514)

-

(370,136)

Grand total

9,759,649

5,951,299

9,172,577

97,746,891

122,630,416

126,383,063

(3,968,512)

102,583,579

(1,603,422)

III) Held-to-maturity securities

 

Títulos (3)

On June 30 - R$ thousand

2016

2015

1 to 30

days

31 to 180

days

181 to 360

days

More than 360 days

Amortized cost (3)

Fair Value

(4)

Gain (loss) not accounted for

Amortized cost

(3)

Gain not accounted for

- Financeiras

-

-

-

12,720,737

12,720,737

10,851,221

(1,869,516)

12,458,024

7,549

Títulos da dívida externa brasileira

-

-

-

27,175

27,175

29,054

1,879

39,021

4,756

Certificados de recebíveis imobiliários

-

-

-

12,693,562

12,693,562

10,822,167

(1,871,395)

12,419,003

2,793

Total geral

-

-

-

12,720,737

12,720,737

10,851,221

(1,869,516)

12,458,024

7,549

 

Bradesco     23         


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

c)      Breakdown of the portfolios by financial statement classification

Securities

On June 30 - R$ thousand

1 to 30

days

31 to 180

days

181 to 360

days

More than

360 days

Total in 2016

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

Total in 2015

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

Own portfolio

11,709,486

6,665,835

6,949,811

93,222,732

118,547,864

93,819,807

Fixed income securities

5,095,855

6,665,835

6,949,811

93,222,732

111,934,233

90,484,007

● Financial treasury bills

-

9,530

1,390

10,644,562

10,655,482

3,622,965

● National treasury notes

-

346,204

2,592,761

24,539,309

27,478,274

15,933,446

● Brazilian foreign debt securities

-

-

1,390,420

78,263

1,468,683

1,159,835

● Bank deposit certificates

57,719

320,980

52

12,452

391,203

491,861

● National treasury bills

86,738

1,349,657

241,443

7,052,434

8,730,272

6,296,509

● Foreign corporate securities

22,988

222,010

341,226

826,150

1,412,374

4,432,292

● Debentures

259,410

727,493

701,855

33,556,475

35,245,233

32,726,095

● Certificates of real estate receivables

21,054

-

-

13,665,785

13,686,839

13,635,224

● Financial bills

587,909

656,527

1,380,478

2,024,557

4,649,471

5,257,737

● Purchase and sale commitments (2)

97

-

-

-

97

71,572

● Other

4,059,940

3,033,434

300,186

822,745

8,216,305

6,856,471

Equity securities

6,613,631

-

-

-

6,613,631

3,335,800

● Shares of listed companies

6,613,631

-

-

-

6,613,631

3,335,800

Restricted securities

2,408,807

192,499

3,191,095

39,966,543

45,758,944

48,486,384

Repurchase agreements

2,400,630

164,404

14,073

31,252,869

33,831,976

41,334,526

● National treasury bills

2,245,959

6,146

685

10,626,741

12,879,531

15,122,363

● Financial treasury bills

-

-

-

1,038,483

1,038,483

233,162

● National treasury notes

-

57

918

9,689,119

9,690,094

18,810,799

● Foreign corporate securities

154,671

158,201

1,617

9,394,056

9,708,545

7,168,202

● Other

-

-

10,853

504,470

515,323

-

Brazilian Central Bank

-

27,463

27,966

9,309

64,738

20,096

● National treasury bills

-

27,463

27,966

4,233

59,662

20,096

● Other

-

-

-

5,076

5,076

-

Privatization rights

-

-

-

50,565

50,565

55,667

Guarantees provided

8,177

632

3,149,056

8,653,800

11,811,665

7,076,095

● National treasury bills

-

-

2,498,329

2,377,952

4,876,281

1,597,118

● Financial treasury bills

-

632

1,091

2,186,267

2,187,990

2,215,252

● National treasury notes

-

-

649,636

4,089,581

4,739,217

3,256,357

● Other

8,177

-

-

-

8,177

7,368

Derivative financial instruments (1) (6)

20,933,617

737,597

235,790

79,199

21,986,203

7,021,856

Securities subject to unrestricted repurchase agreements

-

724,657

2,509,977

1,487,049

4,721,683

322,597

● National treasury bills

-

724,657

1,107,029

1,316,605

3,148,291

322,597

● Financial treasury bills

-

-

1,402,948

170,444

1,573,392

-

Grand total

35,051,910

8,320,588

12,886,673

134,755,523

191,014,694

149,650,644

%

18.3

4.4

6.7

70.6

100.0

100.0

 

24  June 2016


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

(1)    Consistent with the criteria in Bacen Circular Letter No. 3,068/01 and due to the characteristics of the securities, we are classifying the derivative financial instruments, except those considered as cash flow hedges in the category Trading Securities;

(2)    These refer to investment fund and managed portfolio resources invested  in  purchase contracts with a commitment to re-sell with Bradesco, whose owners are consolidated subsidiaries, included in the consolidated financial statements of the Prudential Conglomerate;

(3)    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.  The mark-to-market of securities, which were transferred from the category "Securities Available for Sale" to the category of "Securities Held to Maturity", in June 2015 and in December 2013, was maintained in the shareholders’ equity and will be recognized in the results for the remaining term of these securities, according to Bacen Circular No. 3,068/01;

(4)    The number of days to maturity was based on the contractual maturity of the instruments, regardless of their accounting classification;

(5)    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;

(6)    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 6d II); and

(7)    In the first semester of 2016, there was constitution of provision for impairment losses in the amount of R$108,294 thousand, related to the heading “Variable Income Securities" (first semester of 2015 there was no constitution of provision for impairment losses).

 

d)      Derivative financial instruments

 

Bradesco carries out transactions involving derivative financial instruments, which are recorded 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 market value. Fair market value is generally based on quoted market prices or quotations for assets or liabilities with similar characteristics. Should market prices not be available, fair market values are based on dealer quotations, pricing models, discounted cash flows or similar techniques for which the determination of fair market value may require judgment or significant estimates by Management.

 

Quoted market prices are used to determine the fair market value of derivative financial instruments. The fair market value of swaps is determined by using discounted cash flow modeling techniques that use yield curves, reflecting adequate risk factors. The information to build yield curves is mainly obtained from the Securities, Commodities and Futures Exchange (BM&FBOVESPA) and the domestic and international secondary market. These yield curves are used to determine the fair market value of currency swaps, interest rate and other risk factor swaps.

 

The fair market value of forward and futures contracts is also determined based on market price quotations for derivatives traded at the exchange or using methodologies similar to those outlined for swaps. The fair market values of credit derivative instruments are determined based on market price quotations or from specialized entities. The fair market value of options is determined based on mathematical models, such as Black & Scholes, using yield curves, implied volatilities and the fair market value of corresponding assets, Current market prices are used to calculate volatility.

 

Derivative financial instruments in Brazil mainly refer to swaps and futures and are registered at the OTC Clearing House (Cetip) and BM&FBOVESPA.

 

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

 

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

Bradesco     25         


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

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

 

 

On June 30 - R$ thousand

2016

2015

Grand total amount

Net amount

Grand total amount

Net amount

Futures contracts

 

 

 

 

Purchase commitments:

102,113,392

-

95,904,792

-

- Interbank market

74,234,553

52,106,905

75,090,259

49,021,972

- Foreign currency

27,863,377

-

20,546,198

-

- Other

15,462

10,155

268,335

107,446

Sale commitments:

85,522,641

-

60,760,147

-

- Interbank market (1)

22,127,648

-

26,068,287

-

- Foreign currency (2)

63,389,686

35,526,309

34,530,971

13,984,773

- Other

5,307

-

160,889

-

 

 

 

 

 

Option contracts

 

 

 

 

Purchase commitments:

14,000,864

-

40,472,694

-

- Interbank market

8,214,937

132,362

38,705,347

-

- Foreign currency

5,785,927

3,840,657

1,751,740

2,493

- Other

-

-

15,607

-

Sale commitments:

10,027,891

-

70,020,081

-

- Interbank market

8,082,575

-

62,898,795

24,193,448

- Foreign currency

1,945,270

-

1,749,247

-

- Other

46

46

5,372,039

5,356,432

 

 

 

 

 

Forward contracts

 

 

 

 

Purchase commitments:

20,342,333

-

10,832,256

-

- Foreign currency

16,927,882

5,521,851

10,665,967

-

- Other

3,414,451

1,997,865

166,289

-

Sale commitments:

12,822,617

-

12,577,142

-

- Foreign currency

11,406,031

-

12,130,743

1,464,776

- Other

1,416,586

-

446,399

280,110

 

 

 

 

 

Swap contracts

 

 

 

 

Assets (long position):

73,776,538

-

46,125,744

-

- Interbank market

18,651,884

5,207,386

20,684,270

1,595,138

- Fixed rate

43,907,461

18,799,095

9,856,510

-

- Foreign currency

8,964,476

1,580,632

12,573,163

-

- IGPM

1,121,950

-

1,111,200

-

- Other

1,130,767

-

1,900,601

-

Liabilities (short position):

50,553,903

-

64,571,507

-

- Interbank market

13,444,498

-

19,089,132

-

- Fixed rate

25,108,366

-

12,860,082

3,003,572

- Foreign currency

7,383,844

-

28,492,693

15,919,530

- IGPM

1,223,500

101,550

1,377,500

266,300

- Other

3,393,695

2,262,928

2,752,100

851,499

 

Derivatives include operations maturing in D+1.

 

(1)  Includes cash flow hedges to protect CDI-related funding, totaling R$1,171,885 thousand (R$20,814,738 thousand in 2015) (Note 6f); and

(2)  Includes specific hedges to protect assets and liabilities, arising from foreign investments, totaling R$45,106,549 thousand (R$43,909,631 thousand in 2015).

 

26   June 2016


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

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

 

 

On June 30 - R$ thousand

2016

2015

Original amortized cost

Mark-to-market adjustment

Fair market value

Original amortized cost

Mark-to-market adjustment

Fair market value

Adjustment payables - swaps (1)

20,204,175

(10,605,802)

9,598,373

10,626,097

(5,477,349)

5,148,748

Adjustment receivable - future

4,193,357

-

4,193,357

6,649

-

6,649

Receivable forward purchases

5,279,291

-

5,279,291

1,225,943

-

1,225,943

Receivable forward sales

2,693,312

-

2,693,312

419,321

-

419,321

Premiums on exercisable options

207,908

13,962

221,870

189,562

31,633

221,195

Total assets (A)

32,578,043

(10,591,840)

21,986,203

12,467,572

(5,445,716)

7,021,856

Adjustment payables - swaps

(5,857,832)

(1,794,671)

(7,652,503)

(4,088,655)

(241,374)

(4,330,029)

Adjustment receivable - future

(4,207,599)

-

(4,207,599)

(10,935)

-

(10,935)

Payable forward purchases

(4,321,914)

-

(4,321,914)

(548,133)

-

(548,133)

Payable forward sales/other

(1,554,787)

-

(1,554,787)

(549,085)

-

(549,085)

Premiums on written options

(185,697)

(5,261)

(190,958)

(140,161)

(4,477)

(144,638)

Total liabilities (B)

(16,127,829)

(1,799,932)

(17,927,761)

(5,336,969)

(245,851)

(5,582,820)

 

 

 

 

 

 

 

Net Effect (A-B)

16,450,214

(12,391,772)

4,058,442

7,130,603

(5,691,567)

1,439,036

 

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

 

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

 

 

On June 30 - R$ thousand

1 to 90

days

91 to 180

days

181 to 360

days

More than 360 days

2016

2015

Futures contracts (1)

84,828,514

4,526,714

45,212,808

53,067,997

187,636,033

156,664,939

Option contracts

19,377,033

620,878

1,905,529

2,125,315

24,028,755

110,492,775

Forward contracts

19,484,751

4,573,516

3,249,424

5,857,259

33,164,950

23,409,398

Swap contracts (1)

28,462,871

9,397,724

4,763,346

81,706,500

124,330,441

110,697,251

Total in 2016

152,153,169

19,118,832

55,131,107

142,757,071

369,160,179

 

Total in 2015

190,066,617

65,683,019

71,495,299

74,019,428

 

401,264,363

 

(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.

 

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

 

 

On June 30 - R$ thousand

2016

2015

Government securities

 

 

National treasury notes

4,999,565

3,620,092

National treasury bills

1,625,552

-

Financial treasury bills

50,407

5,691

Total

6,675,524

3,625,783

 

Bradesco     27         


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

V)  Revenues and expenses, net

 

 

Accrued on June 30 - R$ thousand

2016

2015

Swap contracts (1)

1,412,950

104,186

Forward contracts

391,220

(413,980)

Option contracts

(281,437)

44,001

Futures contracts (1) (2)

11,370,434

(1,322,354)

Total (Note 6h)

12,893,167

(1,588,147)

 

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

(2)  Includes, on June 30, 2016, the results and respective adjustment to the market value of the hedge of the firm commitment, concerning the purchase and sale of shares agreement, which was offset, completely, by the adjustment of the market value of the hedge object (Nota 33e).

 

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

 

 

On June 30 - R$ thousand

2016

2015

CETIP (over-the-counter)

125,207,553

91,936,669

BM&FBOVESPA (stock exchange)

213,347,392

275,038,635

Overseas (over-the-counter) (1)

18,840,877

16,934,059

Overseas (stock exchange) (1)

11,764,357

17,355,000

Total

369,160,179

401,264,363

(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 June 30, 2016, Bradesco had credit default swaps (CDS) with the following characteristics: the risk received in credit swaps whose underlying assets are: (a) “debt securities issued by companies", in the amount of R$128,392 thousand and (b) “public debt bonds issued by the Brazilian government”, in the amount of R$144,441 thousand (in 2015 – (i) the amount of risk transferred under credit swaps whose underlying assets are “securities – securities of foreign government debt” is negative R$(1,326,900) thousand; and (ii) the risk received in credit swaps whose underlying assets are “derivative with companies” is R$81,071 thousand, amounting to a total net credit risk value of negative R$(1,245,829) thousand), with an effect on the calculation of required shareholders’ equity of negative R$(14,123) thousand ((R$64,062) thousand in 2015). The contracts related to credit derivatives transactions described above are due in 2021. The mark-to-market of the protection, rates that remunerates the counterparty that received the risk, totaled R$90 thousand. There were no credit events, as defined in the agreements, during the period.

 

f)       Cash flow hedge

 

Bradesco uses cash flow hedges to protect: i) its cash flows from payment of interest rates on funds,  regarding the floating interest rate of DI, being traded DI Future contracts on BM&FBOVESPA  totaling R$1,171,885 thousand (R$20,814,738 thousand in 2015), having as object of hedge captures linked to DI, totaling R$1,242,274 thousand (R$21,133,663 thousand in 2015), converting to fixed cash flows; and ii) the cash flow receipts of interest on investments in securities, regarding the floating interest rate of DI through DI Future contracts, totaling R$19,962,802 thousand, having as object of hedge DI-backed securities , totaling R$19,588,712 thousand, converting to fixed cash flows. The adjustment to market value of these operations recorded in the net worth is R$(4,447) thousand (R$299,179 thousand in 2015), net of tax effects is R$(2,668) thousand (R$179,507 thousand in 2015) and R$127,096 thousand, net of tax effects is R$76,257 thousand, respectively. The effectiveness of the hedge portfolio was assessed in accordance with Bacen Circular Letter No. 3,082/02.

28  June 2016


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

g)      Hedge against market risk

 

Bradesco constituted a hedge against market risk using the futures contracts and, later, with cash in foreign currencies (Note 5) which generated R$(3,588,875) thousand, for protection from the effects of the exchange rate variation of the firm commitment, related to the contract for the purchase and sale of shares (Note 33f), which produced an adjustment at market value of R$3,551,597 thousand. The effect of these operations resulted in the revenue of R$(37,278) thousand. The effectiveness of the hedge portfolio was assessed in accordance with Bacen Circular Letter No. 3,082/02.

h)      Income from securities and derivative financial instruments

 

 

Accrued on June 30 - R$ thousand

2016

2015

Fixed income securities

10,157,227

9,681,337

Interbank investments (Note 5b)

10,369,645

10,843,226

Equity securities (1)

(67,541)

29,843

Subtotal

20,459,331

20,554,406

Income from derivative financial instruments (Note 6d V)

12,893,167

(1,588,147)

Total

33,352,498

18,966,259

 

(1)  In the first semester of 2016, it includes the losses through impairment to the sum of R$108,294 thousand.

 

7)      INTERBANK ACCOUNTS – RESERVE REQUIREMENT

 

a)       Reserve requirement

 

 

On June 30 - R$ thousand

Remuneration

2016

2015

Reserve requirement – demand deposits

not remunerated

4,022,563

5,064,554

Reserve requirement – savings deposits

savings index

17,476,005

21,918,497

Reserve requirement – time deposits

Selic rate

13,472,464

8,301,343

Additional reserve requirement – savings deposits

Selic rate

4,784,372

4,968,442

Additional reserve requirement – time deposits

Selic rate

8,408,948

8,660,210

Reserve requirement – SFH

TR + interest rate

720,365

634,918

Total

 

48,884,717

49,547,964

 

b)       Revenue from reserve requirement

 

 

Accrued on June 30 - R$ thousand

2016

2015

Reserve requirement – Bacen

2,551,760

2,026,427

Reserve requirement – SFH

22,905

8,982

Total

2,574,665

2,035,409

 

Bradesco     29         


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

8)      LOANS

 

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

 

a)   By type and maturity

 

 

On June 30 - R$ thousand

Performing loans

1 to 30

days

31 to 60

days

61 to 90

days

91 to 180

days

181 to 360

days

More than

360 days

Total in

2016 (A)

% (5)

Total in

2015 (A)

% (5)

Discounted trade receivables and loans (1)

19,910,674

12,565,021

8,416,191

16,922,555

21,283,464

61,913,191

141,011,096

37.2

153,080,078

37.8

Financing

3,498,732

3,395,563

3,113,265

7,901,265

15,538,985

81,986,321

115,434,131

30.4

122,057,831

30.2

Agricultural and agribusiness loans

1,859,623

1,677,949

723,976

3,514,028

2,756,272

8,841,785

19,373,633

5.1

22,456,953

5.6

Subtotal

25,269,029

17,638,533

12,253,432

28,337,848

39,578,721

152,741,297

275,818,860

72.7

297,594,862

73.6

Leasing

130,308

172,727

109,263

309,125

489,451

1,041,136

2,252,010

0.6

3,381,637

0.8

Advances on foreign exchange contracts (2)

2,214,142

1,015,149

767,544

2,028,503

2,353,343

-

8,378,681

2.2

7,795,886

1.9

Subtotal

27,613,479

18,826,409

13,130,239

30,675,476

42,421,515

153,782,433

286,449,551

75.5

308,772,385

76.3

Other receivables (3)

8,071,981

5,315,507

2,152,614

3,931,636

3,386,118

1,360,822

24,218,678

6.4

20,848,408

5.2

Total loans

35,685,460

24,141,916

15,282,853

34,607,112

45,807,633

155,143,255

310,668,229

81.9

329,620,793

81.5

Sureties and guarantees (4)

2,858,099

729,967

949,855

4,300,138

8,984,887

48,656,776

66,479,722

17.5

71,957,740

17.8

Loan assignment - real estate receivables certificate

44,506

44,505

44,503

128,079

191,146

642,648

1,095,387

0.3

1,274,278

0.3

Co-obligation from assignment of rural loan (4)

-

-

-

-

-

92,179

92,179

-

102,510

-

Loans available for import (4)

8,049

13,171

5,347

39,682

-

-

66,249

-

276,225

0.1

Confirmed exports loans (4)

4,004

2,550

964

22,297

58,687

2,499

91,001

-

70,619

-

Acquisition of credit card receivables

421,758

253,325

154,978

176,254

48,055

-

1,054,370

0.3

1,283,166

0.3

Grand total in 2016

39,021,876

25,185,434

16,438,500

39,273,562

55,090,408

204,537,357

379,547,137

100.0

 

 

Grand total in 2015

40,817,525

27,911,633

18,098,560

46,519,620

59,911,072

211,326,921

 

 

404,585,331

100.0

 

 

30  June 2016


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

 

On June 30 - R$ thousand

Non-performing loans

Past-due installments

1 to 30

days

31 to 60

days

61 to 90

days

91 to 180

days

181 to 540

days

Total in

2016 (B)

% (5)

Total in

2015 (B)

% (5)

Discounted trade receivables and loans (1)

2,842,212

1,497,476

1,226,650

2,932,876

3,883,330

12,382,544

89.4

9,302,049

87.8

Financing

294,397

202,294

131,884

207,811

132,721

969,107

7.0

914,229

8.6

Agricultural and agribusiness loans

33,098

38,997

23,285

30,118

62,318

187,816

1.4

150,244

1.4

Subtotal

3,169,707

1,738,767

1,381,819

3,170,805

4,078,369

13,539,467

97.8

10,366,522

97.8

Leasing

11,373

9,310

7,050

10,998

8,269

47,000

0.3

63,335

0.6

Advances on foreign exchange contracts (2)

8,074

14,018

6,486

11,405

603

40,586

0.3

39,565

0.4

Subtotal

3,189,154

1,762,095

1,395,355

3,193,208

4,087,241

13,627,053

98.4

10,469,422

98.8

Other receivables (3)

27,049

36,517

53,480

82,577

21,967

221,590

1.6

123,762

1.2

Grand total in 2016

3,216,203

1,798,612

1,448,835

3,275,785

4,109,208

13,848,643

100.0

 

 

Grand total in 2015

1,959,232

1,497,045

1,200,760

2,825,263

3,110,884

 

 

10,593,184

100.0

 

 

 

On June 30 - R$ thousand

Non-performing loans

Installments not yet due

1 to 30

days

31 to 60

days

61 to 90

days

91 to 180

days

181 to 360 days

More than

360 days

Total in

2016 (C)

% (5)

Total in

2015 (C)

% (5)

Discounted trade receivables and loans (1)

835,482

719,961

633,084

1,624,463

2,329,806

5,387,951

11,530,747

66.6

9,621,581

65.1

Financing

234,860

212,439

209,180

601,990

983,091

3,082,838

5,324,398

30.8

4,689,453

31.7

Agricultural and agribusiness loans

1,221

1,901

1,810

10,493

38,678

206,489

260,592

1.5

272,123

1.8

Subtotal

1,071,563

934,301

844,074

2,236,946

3,351,575

8,677,278

17,115,737

98.9

14,583,157

98.6

Leasing

10,592

10,018

9,407

25,963

39,836

72,274

168,090

1.0

214,559

1.4

Subtotal

1,082,155

944,319

853,481

2,262,909

3,391,411

8,749,552

17,283,827

99.9

14,797,716

100.0

Other receivables (3)

1,046

1,005

1,024

2,924

4,318

8,166

18,483

0.1

7,365

-

Grand total in 2016

1,083,201

945,324

854,505

2,265,833

3,395,729

8,757,718

17,302,310

100.0

 

 

Grand total in 2015

1,034,514

848,736

783,032

1,936,972

2,964,981

7,236,846

 

 

14,805,081

100.0

 

Bradesco     31         


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

 

On June 30 - R$ thousand

Grand total

Total in 2016

(A+B+C)

% (5)

Total in 2015

(A+B+C)

% (5)

Discounted trade receivables and loans (1)

164,924,387

40.2

172,003,708

40.0

Financing

121,727,636

29.6

127,661,513

29.7

Agricultural and agribusiness loans

19,822,041

4.8

22,879,320

5.3

Subtotal

306,474,064

74.6

322,544,541

75.0

Leasing

2,467,100

0.6

3,659,531

0.9

Advances on foreign exchange contracts (2) (Note 9a)

8,419,267

2.0

7,835,451

1.8

Subtotal

317,360,431

77.2

334,039,523

77.7

Other receivables (3)

24,458,751

6.0

20,979,535

4.9

Total loans

341,819,182

83.2

355,019,058

82.6

Sureties and guarantees (4)

66,479,722

16.2

71,957,740

16.7

Loan assignment - real estate receivables certificate

1,095,387

0.3

1,274,278

0.3

Co-obligation from assignment of rural loan (4)

92,179

-

102,510

-

Loans available for import (4)

66,249

-

276,225

0.1

Confirmed exports loans (4)

91,001

-

70,619

-

Acquisition of credit card receivables

1,054,370

0.3

1,283,166

0.3

Grand total in 2016

410,698,090

100.0

 

 

Grand total in 2015

 

 

429,983,596

100.0

 

(1)  Including credit card loans and advances on credit card receivables of R$16,602,784 thousand (R$17,004,023 thousand in 2015);

(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$20,036,092 thousand (R$18,189,532 thousand in 2015);

(4)  Recorded 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.

 

32   June 2016


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

b) By type and levels of risk

 

 

On June 30 - R$ thousand

Levels of risk

 

AA

A

B

C

D

E

F

G

H

Total in

2016

% (1)

Total in

2015

% (1)

Discounted trade receivables and loans

22,244,673

77,567,129

10,950,787

22,824,628

7,712,260

4,187,208

2,825,320

2,260,940

14,351,442

164,924,387

48.2

172,003,708

48.5

Financing

49,850,220

20,945,276

37,495,565

8,584,192

1,645,106

776,431

430,616

322,677

1,677,553

121,727,636

35.6

127,661,513

36.0

Agricultural and agribusiness loans

2,674,691

2,519,942

7,931,863

5,673,314

585,860

219,015

39,920

48,739

128,697

19,822,041

5.8

22,879,320

6.4

Subtotal

74,769,584

101,032,347

56,378,215

37,082,134

9,943,226

5,182,654

3,295,856

2,632,356

16,157,692

306,474,064

89.6

322,544,541

90.9

Leasing

411,488

388,046

1,378,105

45,030

59,076

23,332

23,678

37,067

101,278

2,467,100

0.7

3,659,531

1.0

Advances on foreign exchange contracts (2)

3,413,525

2,809,194

1,141,564

878,420

100,726

42,865

3,406

4,766

24,801

8,419,267

2.5

7,835,451

2.2

Subtotal

78,594,597

104,229,587

58,897,884

38,005,584

10,103,028

5,248,851

3,322,940

2,674,189

16,283,771

317,360,431

92.8

334,039,523

94.1

Other receivables

2,853,128

15,941,026

1,786,258

2,981,423

176,309

82,450

63,125

84,311

490,721

24,458,751

7.2

20,979,535

5.9

Grand total in 2016

81,447,725

120,170,613

60,684,142

40,987,007

10,279,337

5,331,301

3,386,065

2,758,500

16,774,492

341,819,182

100.0

 

 

%

23.8

35.2

17.7

12.0

3.0

1.6

1.0

0.8

4.9

100.0

 

 

 

Grand total in 2015

77,579,344

139,848,553

62,857,710

46,069,401

7,167,490

3,845,964

3,582,843

2,144,065

11,923,688

 

 

355,019,058

100.0

%

21.9

39.4

17.7

13.0

2.0

1.1

1.0

0.6

3.3

 

 

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)  See Note 9a.

Bradesco     33         


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

c)     Maturity ranges and levels of risk

 

On June 30 - R$ thousand

Levels of risk

Non-performing loans

 

AA

A

B

C

D

E

F

G

H

Total in 2016

% (1)

Total in 2015

% (1)

Installments not yet due

-

-

1,897,359

3,336,831

2,941,242

2,053,715

1,266,464

1,116,863

4,689,836

17,302,310

100.0

14,805,081

100.0

1 to 30

-

-

175,581

261,113

147,164

87,602

72,239

59,606

279,896

1,083,201

6.3

1,034,514

7.0

31 to 60

-

-

133,919

212,003

135,371

102,900

65,909

51,808

243,414

945,324

5.5

848,736

5.7

61 to 90

-

-

115,935

165,627

121,756

90,837

63,332

49,680

247,338

854,505

4.9

783,032

5.3

91 to 180

-

-

205,320

419,630

345,635

349,979

169,653

135,978

639,638

2,265,833

13.1

1,936,972

13.1

181 to 360

-

-

300,799

632,325

539,954

388,162

260,919

273,101

1,000,469

3,395,729

19.6

2,964,981

20.0

More than 360

-

-

965,805

1,646,133

1,651,362

1,034,235

634,412

546,690

2,279,081

8,757,718

50.6

7,236,846

48.9

Past-due installments (2)

-

-

514,635

1,205,206

1,369,060

1,175,782

1,116,046

1,061,693

7,406,221

13,848,643

100.0

10,593,184

100.0

1 to 14

-

-

24,101

124,352

85,458

83,107

65,880

74,764

1,370,338

1,828,000

13.2

682,267

6.4

15 to 30

-

-

479,147

322,933

170,089

139,972

50,963

34,426

190,673

1,388,203

10.0

1,276,965

12.1

31 to 60

-

-

11,387

737,163

386,461

164,283

99,604

83,973

315,741

1,798,612

13.0

1,497,045

14.1

61 to 90

-

-

-

16,474

671,441

201,885

119,284

89,616

350,135

1,448,835

10.5

1,200,760

11.3

91 to 180

-

-

-

4,284

55,611

575,396

757,284

757,575

1,125,635

3,275,785

23.7

2,825,263

26.8

181 to 360

-

-

-

-

-

11,139

23,031

21,339

3,978,046

4,033,555

29.1

2,990,327

28.2

More than 360

-

-

-

-

-

-

-

-

75,653

75,653

0.5

120,557

1.1

Subtotal

-

-

2,411,994

4,542,037

4,310,302

3,229,497

2,382,510

2,178,556

12,096,057

31,150,953

 

25,398,265

 

Specific provision

-

-

24,120

136,261

431,030

968,849

1,191,255

1,524,989

12,096,057

16,372,561

 

12,698,256

 

 

(1)  Percentage of maturities by type of installment; and

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

 

34   June 2016


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

 

On June 30 - R$ thousand

Levels of risk

Performing loans

 

AA

A

B

C

D

E

F

G

H

Total in

2016

% (1)

Total in

2015

% (1)

Installments not yet due

81,447,725

120,170,613

58,272,148

36,444,970

5,969,035

2,101,804

1,003,555

579,944

4,678,435

310,668,229

100.0

329,620,793

100.0

1 to 30

7,163,925

16,860,008

3,617,171

6,183,430

696,009

369,776

132,948

73,574

588,619

35,685,460

11.5

37,443,074

11.4

31 to 60

4,478,869

11,547,473

2,509,184

4,456,897

559,490

193,853

50,786

67,590

277,774

24,141,916

7.8

26,708,668

8.1

61 to 90

3,871,786

6,733,143

1,707,825

2,461,588

169,066

59,409

51,920

53,643

174,473

15,282,853

4.9

16,917,243

5.1

91 to 180

9,003,457

13,512,989

4,431,407

5,629,627

371,383

164,019

121,366

72,368

1,300,496

34,607,112

11.1

39,925,031

12.1

181 to 360

13,923,062

19,406,562

5,633,285

5,240,527

573,578

375,237

110,009

73,596

471,777

45,807,633

14.8

49,995,851

15.2

More than 360

43,006,626

52,110,438

40,373,276

12,472,901

3,599,509

939,510

536,526

239,173

1,865,296

155,143,255

49.9

158,630,926

48.1

Generic provision

-

601,639

582,721

1,093,349

596,904

630,541

501,777

405,961

4,678,435

9,091,327

 

7,098,189

 

Grand total in 2016 (2)

81,447,725

120,170,613

60,684,142

40,987,007

10,279,337

5,331,301

3,386,065

2,758,500

16,774,492

341,819,182

 

 

 

Existing provision

-

872,366

848,812

2,603,886

3,068,218

2,656,792

2,363,528

2,686,288

16,774,492

31,874,382

 

 

 

Minimum required provision

-

601,639

606,841

1,229,610

1,027,934

1,599,390

1,693,032

1,930,950

16,774,492

25,463,888

 

 

 

Excess provision (3)

-

270,727

241,971

1,374,276

2,040,284

1,057,402

670,496

755,338

-

6,410,494

 

 

 

Grand total in 2015 (2)

77,579,344

139,848,553

62,857,710

46,069,401

7,167,490

3,845,964

3,582,843

2,144,065

11,923,688

 

 

355,019,058

 

Existing provision

-

746,995

689,516

2,090,389

2,036,534

1,904,361

2,288,401

2,120,673

11,923,688

 

 

23,800,557

 

Minimum required provision

-

699,292

628,577

1,382,081

716,749

1,153,789

1,791,422

1,500,847

11,923,688

 

 

19,796,445

 

Excess provision (3)

-

47,703

60,939

708,308

1,319,785

750,572

496,979

619,826

-

 

 

4,004,112

 

 

(1)   Percentage of maturities by type of installment;

(2)   The grand total includes performing loans of R$310,668,229 thousand (R$329,620,793 thousand in 2015) and non-performing loans of R$31,150,953 thousand (R$25,398,265 thousand in 2015); and

(3)   On June 30, 2016, it includes a provision for guarantees provided, comprising sureties, letters of credit and standby letter of credit, which is presented here within the balance for  the excess provision, and totals R$1,856,267 thousand (R$511,396 thousand in 2015) (Note 19b).

Bradesco     35         


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

d)    Concentration of loans

 

 

On June 30 - R$ thousand

2016

% (1)

2015

% (1)

Largest borrower

8,329,219

2.4

10,487,111

3.0

10 largest borrowers

30,349,969

8.9

30,940,260

8.7

20 largest borrowers

45,140,006

13.2

44,833,721

12.6

50 largest borrowers

65,199,798

19.1

64,535,133

18.2

100 largest borrowers

79,677,403

23.3

78,955,517

22.2

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

 

e)     By economic sector

 

 

On June 30 - R$ thousand

2016

%

2015

%

Public sector

8,331,289

2.4

10,501,385

3.0

Federal government

8,329,219

2.4

10,487,111

3.0

Petrochemical

8,329,219

2.4

10,487,111

3.0

State government

2,070

-

14,274

-

Production and distribution of electricity

2,070

-

14,274

-

Private sector

333,487,893

97.6

344,517,673

97.0

Manufacturing

56,002,155

16.3

60,439,431

17.0

Food products and beverages

11,894,117

3.5

13,197,221

3.7

Steel. metallurgy and mechanics

9,717,853

2.8

10,249,347

2.9

Light and heavy vehicles

8,127,333

2.4

6,695,148

1.9

Pulp and paper

4,318,828

1.3

4,132,986

1.2

Chemical

3,172,113

0.9

4,726,080

1.3

Rubber and plastic articles

2,481,221

0.7

2,824,796

0.8

Textiles and apparel

2,480,670

0.7

3,206,813

0.9

Extraction of metallic and non-metallic ores

2,310,935

0.7

2,295,786

0.6

Automotive parts and accessories

2,042,977

0.6

2,073,083

0.6

Non-metallic materials

1,831,101

0.5

2,063,372

0.5

Furniture and wood products

1,809,580

0.5

2,150,036

0.6

Oil refining and production of alcohol

1,230,881

0.4

1,710,494

0.5

Leather articles

883,652

0.3

836,662

0.2

Electric and electronic products

802,681

0.2

1,332,202

0.4

Publishing. printing and reproduction

458,823

0.1

537,606

0.2

Other industries

2,439,390

0.7

2,407,799

0.7

Commerce

36,299,850

10.5

41,283,922

11.6

Merchandise in specialty stores

6,905,409

2.0

7,869,890

2.2

Non-specialized retailer

4,540,792

1.3

5,519,345

1.5

Food products. beverages and tobacco

4,273,878

1.3

4,856,149

1.4

Clothing and footwear

2,904,007

0.8

3,057,929

0.9

Waste and scrap

2,831,642

0.8

3,626,012

1.0

Automobile

2,747,575

0.8

3,101,390

0.9

Motor vehicle repairs. parts and accessories

2,590,635

0.8

2,905,800

0.8

Agricultural products

1,875,368

0.5

2,536,933

0.7

Grooming and household articles

1,822,872

0.5

2,109,805

0.6

Fuel

1,656,070

0.5

1,859,280

0.5

Wholesale of goods in general

946,248

0.3

1,036,086

0.3

 

36  June 2016


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

 

On June 30 - R$ thousand

2016

%

2015

%

Trading intermediary

835,470

0.2

974,347

0.3

Other commerce

2,369,884

0.7

1,830,956

0.5

Financial intermediaries

2,648,302

0.8

2,647,761

0.7

Services

87,605,973

25.8

94,448,183

26.6

Civil construction

22,544,707

6.6

23,144,521

6.5

Transportation and storage

16,022,150

4.7

17,174,880

4.8

Real estate activities. rentals and corporate services

13,365,041

3.9

12,716,032

3.6

Holding companies. legal. accounting and business advisory services

7,127,961

2.1

7,010,479

2.0

Clubs. leisure. cultural and sport activities

5,166,934

1.5

5,329,362

1.5

Production and distribution of electric power. gas and water

4,429,341

1.3

4,929,125

1.4

Social services. education. health. defense and social security

2,982,320

0.9

2,968,776

0.9

Hotels and catering

2,836,159

0.8

2,872,518

0.8

Telecommunications

307,456

0.1

754,612

0.2

Other services

12,823,904

3.9

17,547,878

4.9

Agriculture. cattle raising. fishing. forestry and timber industry

3,020,419

0.9

3,466,653

1.0

Individuals

147,911,194

43.3

142,231,723

40.1

Total

341,819,182

100.0

355,019,058

100.0

 

 

Bradesco     37         


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

f)   Breakdown of loans and allowance for loan losses

Level of risk

On June 30 - R$ thousand

Portfolio balance

Non-performing loans

Performing loans

Total

% (1)

%

2016 YTD (2)

%

2015 YTD (2)

Installments past due

Installments not yet due

Total - non-performing loans

AA

-

-

-

81,447,725

81,447,725

23.8

23.8

21.9

A

-

-

-

120,170,613

120,170,613

35.2

59.0

61.3

B

514,635

1,897,359

2,411,994

58,272,148

60,684,142

17.7

76.7

79.0

C

1,205,206

3,336,831

4,542,037

36,444,970

40,987,007

12.0

88.7

92.0

Subtotal

1,719,841

5,234,190

6,954,031

296,335,456

303,289,487

88.7

 

 

D

1,369,060

2,941,242

4,310,302

5,969,035

10,279,337

3.0

91.7

94.0

E

1,175,782

2,053,715

3,229,497

2,101,804

5,331,301

1.6

93.3

95.1

F

1,116,046

1,266,464

2,382,510

1,003,555

3,386,065

1.0

94.3

96.1

G

1,061,693

1,116,863

2,178,556

579,944

2,758,500

0.8

95.1

96.7

H

7,406,221

4,689,836

12,096,057

4,678,435

16,774,492

4.9

100.0

100.0

Subtotal

12,128,802

12,068,120

24,196,922

14,332,773

38,529,695

11.3

 

 

Grand total in 2016

13,848,643

17,302,310

31,150,953

310,668,229

341,819,182

100.0

 

 

%

4.0

5.1

9.1

90.9

100.0

 

 

 

Grand total in 2015

10,593,184

14,805,081

25,398,265

329,620,793

355,019,058

100.0

 

 

%

3.0

4.2

7.2

92.8

100.0

 

 

 

 

(1)  Percentage of level of risk in relation to the total portfolio; and

(2)  Cumulative percentage of level of risk on total portfolio.

 

38   June 2016


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

Level of risk

On June 30 - R$ thousand

Provision

% Minimum

provisioning

required

Minimum required

 

Excess (2)

 

Existing

%

2016 YTD (1)

%

2015 YTD (1)

Specific

Generic

Total

Installments past due

Installments not yet due

Total specific

AA

-

-

-

-

-

-

-

-

-

-

A

0,5

-

-

-

601,639

601,639

270,727

872,366

0.7

0.5

B

1,0

5,146

18,974

24,120

582,721

606,841

241,971

848,812

1.4

1.1

C

3,0

36,156

100,105

136,261

1,093,349

1,229,610

1,374,276

2,603,886

6.4

4.5

Subtotal

 

41,302

119,079

160,381

2,277,709

2,438,090

1,886,974

4,325,064

1.4

1.1

D

10,0

136,906

294,124

431,030

596,904

1,027,934

2,040,284

3,068,218

29.8

28.4

E

30,0

352,735

616,114

968,849

630,541

1,599,390

1,057,402

2,656,792

49.8

49.5

F

50,0

558,023

633,232

1,191,255

501,777

1,693,032

670,496

2,363,528

69.8

63.9

G

70,0

743,185

781,804

1,524,989

405,961

1,930,950

755,338

2,686,288

97.4

98.9

H

100,0

7,406,221

4,689,836

12,096,057

4,678,435

16,774,492

-

16,774,492

100.0

100.0

Subtotal

 

9,197,070

7,015,110

16,212,180

6,813,618

23,025,798

4,523,520

27,549,318

71.5

70.7

Grand total in 2016

 

9,238,372

7,134,189

16,372,561

9,091,327

25,463,888

6,410,494

31,874,382

9.3

 

%

 

29.0

22.4

51.4

28.5

79.9

20.1

100.0

 

 

Grand total in 2015

 

6,606,203

6,092,053

12,698,256

7,098,189

19,796,445

4,004,112

23,800,557

 

6.7

%

 

27.8

25.6

53.4

29.8

83.2

16.8

100.0

 

 

 

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

(2)  On June 30, 2016, it includes a provision for guarantees provided, comprising sureties, letters of credit and standby letter of credit, which is presented here within the balance for excess provision, and totals R$1,856,267 thousand (R$511,396 thousand in 2015) (Note 19b).

 

Bradesco     39         


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

g)    Changes in allowance for loan losses

 

 

Accrued on June 30 - R$ thousand

2016

2015

Opening balance

29,497,977

23,087,243

- Specific provision (1)

14,273,631

11,946,960

- Generic provision (2)

8,814,824

7,134,243

- Excess provision (3) (4)

6,409,522

4,006,040

Additions (Note 8h-1)

11,800,040

8,062,894

Write-offs/other

(9,423,635)

(7,349,580)

Closing balance

31,874,382

23,800,557

- Specific provision (1)

16,372,561

12,698,256

- Generic provision (2)

9,091,327

7,098,189

- Excess provision (3) (4)

6,410,494

4,004,112

 

(1)  For contracts with installments past due for more than 14 days;

(2)  Recorded based on the customer/transaction classification and therefore not included in the preceding item;

(3)  The additional provision is recorded 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 in Note 8f; and

(4)  On June 30, 2016, it includes the provision for guarantees provided, comprising sureties, letters of credit and standby letter of credit, which is presented here within the balance for excess provision, and totals R$1.856.267 thousand (R$511,396 thousand in 2015) (Note 19b).

 

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 June 30 - R$ thousand

2016

2015

Amount recorded (1)

11,800,041

8,062,894

Amount recovered (2)

(2,335,465)

(1,890,432)

Allowance for Loan Losses expense net of amounts recovered

9,464,576

6,172,462

               

(1)  In the first semester of 2016, includes amount recorded of the provision of guarantees offered, comprising sureties, guarantees, letters of credit and standby letter of credit, which are presented in the “excess” provision, totaling R$1,162,084 thousand (R$89,800 thousand in 2015); and

(2)  Classified in income from loans (Note 8j).

 

i)       Changes in the renegotiated portfolio

 

 

Accrued on June 30 - R$ thousand

2016

2015

Opening balance

12,732,277

10,777,178

Amount renegotiated

7,204,903

6,251,970

Amount received

(3,515,909)

(3,415,276)

Write-offs

(2,537,620)

(2,047,629)

Closing balance

13,883,651

11,566,243

Allowance for loan losses

9,090,214

7,138,455

Percentage on renegotiated portfolio

65.5%

61.7%

 

40  June 2016


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

j)      Income from loans and leasing

 

 

Accrued on June 30 - R$ thousand

2016

2015

Discounted trade receivables and loans

23,792,396

21,953,463

Financing

7,601,597

7,234,773

Agricultural and agribusiness loans

913,669

726,173

Subtotal

32,307,662

29,914,409

Recovery of credits charged-off as losses

2,335,465

1,890,432

Subtotal

34,643,127

31,804,841

Leasing, net of expenses

160,744

268,904

Total

34,803,871

32,073,745

 

k)     Conciliation of the composition of the portfolio of financial leasing, at present value, with the accounting balances (Notes 3g and 8b):

 

 

Accrued on June 30 - R$ thousand

2016

2015

Financial leases receivable

2,310,803

3,447,471

Income to be appropriated for financial leases receivable

(2,220,258)

(3,385,437)

Financial leased assets plus the losses in leases (net)

7,877,802

10,785,477

Accrued depreciation on asset finance leasing:

(2,858,542)

(3,814,271)

- Accumulated depreciation

(4,953,168)

(6,557,448)

- Difference in depreciation

2,094,626

2,743,177

Anticipated guaranteed residual value (Note 19b)

(2,642,705)

(3,373,709)

Total of the present value

2,467,100

3,659,531

 

9)      OTHER RECEIVABLES

 

a)      Foreign exchange portfolio

 

Balances

 

 

On June 30 - R$ thousand

2016

2015

Assets – other receivables

 

 

Exchange purchases pending settlement

8,658,659

12,307,567

Exchange sale receivables

25,208,159

4,316,796

(-) Advances in domestic currency received

(392,366)

(452,988)

Income receivable on advances granted

101,165

74,134

Total

33,575,617

16,245,509

Liabilities – other liabilities

 

 

Exchange sales pending settlement

24,411,712

4,361,675

Exchange purchase payables

9,422,529

11,611,070

(-) Advances on foreign exchange contracts

(8,419,267)

(7,835,451)

Other

10,850

4,737

Total

25,425,824

8,142,031

Net foreign exchange portfolio

8,149,793

8,103,478

Off-balance-sheet accounts:

 

 

-  Loans available for import

66,249

276,225

-  Confirmed exports loans

91,001

70,619

 

Bradesco     41         


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

Foreign exchange results

 

Adjusted foreign exchange results for presentation purposes

 

 

Accrued on June 30 - R$ thousand

2016

2015

Foreign exchange income

(3,828,709)

1,252,434

Adjustments:

 

 

- Income on foreign currency financing (1)

66,736

139,402

- Income on export financing (1)

989,057

685,895

- Income on foreign investments (2)

1,772

26,940

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

66,308

(769,822)

- Funding expenses (4)

(806,526)

(424,604)

- Other

4,270,806

(408,682)

Total adjustments

4,588,153

(750,871)

Adjusted foreign exchange income

759,444

501,563

 

(1)  Recognized in “Income from loans”;

(2)  Recognized in “Income from security transactions”;

(3)  Related to funds for financing of advances on foreign exchange contracts and import financing, recognized in “Borrowing and on-lending expenses”; and

(4)  Refers to funding expenses of investments in foreign exchange.

 

b)   Sundry

 

 

On June 30 - R$ thousand

2016

2015

Deferred tax assets (Note 32c) Parte superior do formulário

43,620,754

33,721,507

Credit card operations

21,090,462

19,472,698

Debtors for escrow deposits

10,900,630

9,760,269

Trade and credit receivables (1)

5,447,864

3,605,496

Prepaid taxes

5,031,490

4,785,597

Other debtors

4,789,910

5,483,531

Payments to be reimbursed

776,566

651,931

Receivables from sale of assets

90,357

87,578

Other Parte inferior do formulário

571,090

536,129

Total

92,319,123

78,104,736

 

(1)  Primarily includes receivables from the acquisition of loans without substantial transfer of risks and benefits.

 

 

 

42   June 2016


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

10)    OTHER ASSETS

 

a)     Foreclosed assets/other

 

 

On June 30 - R$ thousand

Cost

Provision

for losses

Cost net of provision

2016

2015

Real estate

1,359,440

(221,782)

1,137,658

792,931

Vehicles and similar

583,996

(353,433)

230,563

219,016

Goods subject to special conditions

327,352

(327,352)

-

-

Inventories/warehouse

43,075

-

43,075

44,564

Machinery and equipment

27,692

(18,025)

9,667

4,501

Other

25,766

(18,517)

7,249

5,786

Total in 2016

2,367,321

(939,109)

1,428,212

 

Total in 2015

1,775,744

(708,946)

 

1,066,798

 

b)    Prepaid expenses

 

 

On June 30 - R$ thousand

2016

2015

Commission on the placement of loans and financing (1)

536,610

1,055,567

Advertising and marketing expenses (2)

139,898

104,403

Other (3)

1,275,066

557,602

Total

1,951,574

1,717,572

 

(1)  Commissions paid to storeowners, car dealers and correspondent banks – payroll-deductible loans;

(2)  Prepaid expenses of future advertising and marketing campaigns on media; and

(3)  It includes, basically, (i) anticipation of commissions concerning the operational agreement to offer credit cards and other products and (ii) card issue costs.

 

 

Bradesco     43         


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

11)    INVESTMENTS

 

The income/expense from the equity method accounting of investments was recorded in the income statement, under “Equity in the Earnings (Losses) of Unconsolidated and Jointly Controlled Companies”, and correspond in the first semester of 2016 to R$(6,807,698) thousand (R$9,215,106 thousand in 2015) and the investments under the entry "Earnings of Affiliates and Subsidiaries" and correspond to R$32,319,527 thousand (R$32,972,199 thousand in 2015).

 

Companies (1)

R$ thousand

Capital

Stock

Shareholders’ equity adjusted

Number of shares/ quotas held

(in thousands)

Equity interest consolidated on capital stock

Adjusted income

Book value

Equity accounting adjustments (2)

Common

Preferred

Quotas

June 30,

2016

1st semester of 2016

1st semester of 2015

Bradseg Participações S.A. (3)

11,440,979

24,028,758

7,542,117

-

-

97.11%

2,525,209

23,335,350

2,452,364

2,426,435

Rubi Holdings Ltda.

5,815,169

4,008,511

-

-

5,815,169

99.92%

475,885

4,005,304

475,504

461,469

Tibre Holdings Ltda.

275,000

529,558

-

-

275,000

100.00%

28,693

529,558

28,693

24,056

BF Promotora de Vendas Ltda.

426,220

279,275

-

-

426,220

100.00%

(22,249)

279,275

(22,249)

(7,441)

Embaúba Holdings Ltda.

326,000

287,959

-

-

285,905

87.70%

14,342

252,540

12,578

39,746

Haitong Banco de Investimento do Brasil S.A.

420,000

655,640

12,734

12,734

-

20.00%

17,725

131,128

3,545

(6,957)

Bradescard Elo Participações S,A,

669,200

337,128

4,167,605

-

-

100.00%

20,813

337,128

20,813

7,695

Earnings of Affiliates and Subsidiaries Abroad

 

 

 

 

 

 

 

289,950

(3,156)

(4,867)

Other (4)

 

 

 

 

 

 

 

3,159,294

(2,929)

165,149

Foreign exchange gain/loss of branches abroad

 

 

 

 

 

 

 

 

(9,772,861)

6,109,821

Total Earnings of Affiliates and Subsidiaries

 

 

 

 

 

 

 

32,319,527

(6,807,698)

9,215,106

 

(1)  Data related to June 30, 2016;

(2)  The adjustment considers income calculated periodically by the companies and includes equity variations recorded by the investees not recognized in profit or loss, as well as alignment of accounting practice adjustments, where applicable;

(3)  Increased capital in March 2016, amount to R$241 milion; and

(4)  Basically, investments in the enterprises: Serel Participações em Imóveis S.A., Bankpar Consultoria e Serviços Ltda., Caetê Holdings Ltda., Ganant Corretora de Seguros Ltda., Miramar Holdings S.A., Neon Holdings S.A. and Imagra Imobiliária e Agrícola Ltda.

 

 

 

44   June 2016


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

12)    PREMISES AND EQUIPMENT AND LEASED ASSETS

 

 

On June 30 - R$ thousand

Annual rate of depreciation

Cost

Depreciation

Cost net of depreciation

2016

2015

Property and equipment:

 

 

 

 

 

- Buildings

4%

39,358

(25,944)

13,414

14,267

- Land

-

5,513

-

5,513

5,514

Facilities, furniture and equipment in use

10%

4,378,214

(2,363,428)

2,014,786

1,937,374

Security and communication systems

10%

238,681

(165,057)

73,624

61,512

Data processing systems

20 to 50%

3,387,891

(2,213,343)

1,174,548

832,621

Transportation systems

20%

98,850

(37,466)

61,384

44,850

Fixed Assets in Course

 

499

-

499

383

Subtotal

 

8,149,006

(4,805,238)

3,343,768

2,896,521

Leased assets

 

7,877,802

(2,858,541)

5,019,261

6,971,207

Grand total in 2016

 

16,026,808

(7,663,779)

8,363,029

 

Grand total in 2015

 

18,291,138

(8,423,410)

 

9,867,728

 

The fixed assets to net worth ratio is 33.8% when considering only the companies and payment institutions within the economic group (the “Prudential Conglomerate”), where the maximum limit is 50.0%.

 

13)    DEFERRED

 

 

On June 30 - R$ thousand

Cost

Amortization

Cost net of amortization

2016

2015

Development of systems

1,492,067

(1,477,075)

14,992

49,431

Grand total in 2016

1,492,067

(1,477,075)

14,992

 

Grand total in 2015

1,731,053

(1,681,622)

 

49,431

 

 

 

Bradesco     45         


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

14)    INTANGIBLE ASSETS

 

a)   Intangible assets

 

Acquired intangible assets consist of:

 

 

On June 30 - R$ thousand

Rate of Amortization (1)

Cost

Amortization

Cost net of amortization

2016

2015

Acquisition of financial services rights

Contract (4)

4,393,360

(2,535,105)

1,858,255

1,598,930

Software (2)

20%

6,288,952

(3,316,429)

2,972,523

2,996,473

Future profitability/ client porffolio (3)

Up to 20%

2,760,664

(889,647)

1,871,017

1,954,912

Other (5)

Contract

2,982,417

(655,761)

2,326,656

2,657,273

Total in 2016

 

16,425,393

(7,396,942)

9,028,451

 

Total in 2015

 

15,174,943

(5,967,355)

 

9,207,588

 

(1)  Intangible assets are amortized over an estimated period of economic benefit and recognized in “other administrative expenses” and “other operating expenses”, where applicable;

(2)  Software acquired and/or developed by specialized companies;

(3)  Composed of goodwill on the acquisition of equity interest in Banco Bradescard - R$692,634 thousand, Cielo/Investees - R$1,019,467 thousand and Banco Bradesco BBI S.A. - R$137,200 thousand;

(4)  Based on the pay-back of each agreement; and

(5)  Includes the operational agreement between Cielo, our jointly-controlled subsidiary and Banco do Brasil, which created an association, to manage the transactions originating from credit card operations, which will be amortized within up to 30 years.

 

b)   Changes in intangible assets by type

 

 

 

 

R$ thousand

Acquisition of banking rights

Software

Future profitability/

client portfolio

Other

2016

2015

Initial balance

2,151,827

2,902,352

2,005,832

2,367,237

9,427,248

6,228,514

Additions (reductions)

142,707

536,528

(97,064)

95,152

677,323

4,120,143

Amortization for the period

(436,279)

(466,357)

(37,751)

(135,733)

(1,076,120)

(1,141,069)

Closing balance

1,858,255

2,972,523

1,871,017

2,326,656

9,028,451

9,207,588

 

 

46   June 2016


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

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

 

a)   Deposits

 

 

On June 30 - R$ thousand

 

1 to 30 days

31 to 180 days

181 to 360 days

More than 360 days

2016

2015

● Demand deposits (1)

23,612,306

-

-

-

23,612,306

26,369,826

● Savings deposits (1)

87,209,226

-

-

-

87,209,226

91,008,482

● Interbank deposits

272,220

240,365

252

-

512,837

731,029

● Time deposits (2)

6,937,181

11,564,968

7,762,827

42,525,409

68,790,385

79,025,611

Grand total in 2016

118,030,933

11,805,333

7,763,079

42,525,409

180,124,754

 

%

65.5

6.6

4.3

23.6

100.0

 

Grand total in 2015

132,915,703

15,310,526

8,307,635

40,601,084

 

197,134,948

%

67.4

7.8

4.2

20.6

 

100.0

 

(1)  Classified as “1 to 30 days”, not considering average historical turnover; and

(2)  Considers the actual maturities of investments.

 

b)   Securities sold under agreements to repurchase

 

 

On June 30 - R$ thousand

 

1 to 30

days

31 to 180

days

181 to 360

days

More than 360 days

2016

2015

Own portfolio

32,051,310

37,150,695

10,149,696

43,177,570

122,529,271

112,538,944

● Government securities

23,517,132

219,324

21,173

5,148

23,762,777

34,040,450

● Debentures of own issuance

2,251,008

34,305,064

10,128,523

41,970,734

88,655,329

71,964,862

● Foreign

6,283,170

2,626,307

-

1,201,688

10,111,165

6,533,632

Third-party portfolio (1)

117,213,232

-

-

-

117,213,232

155,869,230

Unrestricted portfolio (1)

4,500,908

149,265

-

-

4,650,173

2,063,819

Grand total in 2016

153,765,450

37,299,960

10,149,696

43,177,570

244,392,676

 

%

62.8

15.3

4.2

17.7

100.0

 

Grand total in 2015

197,247,919

35,507,790

19,653,842

18,062,442

 

270,471,993

%

72.9

13.1

7.3

6.7

 

100.0

 

(1)  Represented by government securities,

Bradesco     47         


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

c)   Funds from issuance of securities

 

 

On June 30 - R$ thousand

 

1 to 30

days

31 to 180

days

181 to 360

days

More than

360 days

2016

2015

Securities – Brazil:

 

 

 

 

 

 

- Mortgage bonds

-

-

-

-

-

198,635

- Letters of credit for real estate

1,609,698

5,516,291

10,464,786

6,172,101

23,762,876

17,424,426

- Letters of credit for agribusiness

1,932,168

3,805,700

993,899

1,508,986

8,240,753

8,652,898

- Financial bills

425,246

18,797,064

22,367,184

40,811,485

82,400,979

64,745,321

Subtotal

3,967,112

28,119,055

33,825,869

48,492,572

114,404,608

91,021,280

Securities – Overseas:

 

 

 

 

 

 

- MTN Program Issues (1)

67,163

80,078

2,513,781

178,177

2,839,199

5,666,606

- Securitization of future flow of money orders received from overseas

11,039

479,298

466,627

2,533,653

3,490,617

2,445,378

Subtotal

78,202

559,376

2,980,408

2,711,830

6,329,816

8,111,984

Structured operations certificates

52,856

153,129

149,764

81,043

436,792

403,921

Grand total in 2016

4,098,170

28,831,560

36,956,041

51,285,445

121,171,216

 

%

3.4

23.8

30.5

42.3

100.0

 

Grand total in 2015

5,068,354

16,727,462

22,838,930

54,902,439

 

99,537,185

%

5.1

16.8

22.9

55.2

 

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 terms.

 

48  June 2016


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

d)   Cost for market funding and inflation

 

 

Accrued on June 30 - R$ thousand

2016

2015

Savings deposits

3,210,335

3,063,380

Time deposits

3,175,928

4,632,852

Securities sold under agreements to repurchase

14,237,672

14,246,769

Funds from issuance of securities

10,297,090

5,697,530

Other funding expenses

210,814

234,496

Total

31,131,839

27,875,027

 

16)    BORROWING AND ON-LENDING

 

a)  Borrowing

 

 

On June 30 - R$ thousand

1 to 30

days

31 to 180 days

181 to 360 days

More than 360 days

2016

2015

Overseas

3,168,198

9,928,538

6,016,599

4,663,817

23,777,152

22,119,722

Grand total in 2016

3,168,198

9,928,538

6,016,599

4,663,817

23,777,152

 

%

13.3

41.8

25.3

19.6

100.0

 

Grand total in 2015

2,882,463

9,588,642

6,111,422

3,537,195

 

22,119,722

%

13.0

43.3

27.6

16.0

 

100.0

 

b)  On-lending

 

 

On June 30 - R$ thousand

1 to 30

days

31 to 180 days

181 to 360 days

More than 360 days

2016

2015

In Brazil

992,099

4,545,385

4,567,300

23,646,199

33,750,983

39,228,194

- National Treasury

-

44,438

-

-

44,438

30,931

- BNDES

259,570

1,270,400

1,154,078

8,496,979

11,181,027

11,498,972

- FINAME

731,762

3,229,604

3,411,923

15,149,220

22,522,509

27,682,447

- Other institutions

767

943

1,299

-

3,009

15,844

Overseas

-

1,250

-

-

1,250

3,738

Grand total in 2016

992,099

4,546,635

4,567,300

23,646,199

33,752,233

 

%

2.9

13.5

13.5

70.1

100.0

 

Grand total in 2015

1,452,536

5,430,031

6,276,351

26,073,014

 

39,231,932

%

3.7

13.8

16.0

66.5

 

100.0

 

Bradesco     49       


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

c)     Borrowing and on-lending expenses

 

 

Accrued on June 30 - R$ thousand

2016

2015

Borrowing:

 

 

- In Brazil

162,920

11,487

- Overseas

165,350

95,724

Subtotal borrowing

328,270

107,211

On-lending in Brazil:

 

 

- National Treasury

2,865

1,927

- BNDES

445,977

373,773

- FINAME

273,252

391,935

- Other institutions

34

779

On-lending overseas:

 

 

- Payables to foreign bankers (Note 9a)

(66,308)

769,822

- Other expenses with foreign on-lending

(12,336,751)

8,707,167

Subtotal on-lending

(11,680,931)

10,245,403

Total

(11,352,661)

10,352,614

 

17)    PROVISIONS, CONTINGENT ASSETS AND LIABILITIES AND LEGAL LIABILITIES – TAX AND SOCIAL SECURITY

 

a)   Contingent assets

 

Contingent assets are not recognized in the financial statements, However, there are ongoing proceedings where the chance of success is considered probable, such as: a) Social Integration Program (PIS), claiming to offset PIS against Gross Operating Income, paid under Decree-Laws 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

 

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

 

Management recorded 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 not judged, the provision is recorded 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.

 

50  June 2016


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

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 Organização 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 recorded in provisions, taking into consideration the claims where the Bank is the defendant and the perspective of loss, which is considered after the analysis of each demand, based on the current decision of the Superior Court of Justice (STJ).

 

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

 

             III -   Legal obligations – provision for tax risks

 

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

 

The main cases are:

 

-          PIS and Cofins – R$2,190,030 thousand (R$1,991,639 thousand in 2015): 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$1,754,261 thousand (R$2,108,335 thousand in 2015): we are requesting to deduct from income tax and social contributions payable (IRPJ and CSLL, respectively) amounts of actual and definite loan losses related to unconditional discounts granted during collections, regardless of compliance with the terms and conditions provided for in Articles 9 to 14 of Law No. 9,430/96 that only apply to temporary losses;

 

-          PIS – EC 17/97 - R$237,874 thousand (R$229,245 thousand in 2015): for the period from July 1997 to February 1998, request to calculate and pay Pis contributions as established by LC 07/70 (Pis Repique) and not as established by EC 17/97 (Pis on Gross Operating Income).

 

Bradesco     51       


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

-          PIS – R$332,776 thousand (R$318,984 thousand in 2015): we are requesting the authorization to offset overpaid amounts in 1994 and 1995 as Pis contribution, corresponding to the surplus paid over that calculated on the tax base established in the Constitution, i,e,, gross operating income, as defined in the income tax legislation (set out in Article 44 of Law No. 4,506/64), which excludes interest income; and

 

-          Pension Contributions – R$1,035,025 thousand (R$954,991 thousand in 2015): official notifications related to the pension contributions on financial contributions in private pension plans, considered by the audit as compensatory sums subject to the incidence of such financial contributions and isolated fine for not withholding tax of the IRRF on the related financial contributions.

 

            IV -   Provisions by nature

 

 

On June 30 - R$ thousand

2016

2015

Labor claims

2,931,745

2,547,766

Civil claims

3,349,732

3,272,841

Subtotal (1)

6,281,477

5,820,607

Provision for tax risks (2)

7,095,543

6,465,817

Total

13,377,020

12,286,424

 

(1)   Note 19b; and

(2)   Classified under “Other liabilities - tax and social security” (Note 19a).

 

              V -   Changes in provisions

 

 

R$ thousand

Labor (1)

Civil

Tax (2) (3)

Balance on December 31, 2015

2,876,624

3,321,586

6,376,654

Adjustment for inflation

199,850

187,470

272,709

Provisions, net of reversals and write-offs

299,720

495,764

486,269

Payments

(444,449)

(655,088)

(40,089)

Balance on June 30, 2016

2,931,745

3,349,732

7,095,543

 

(1)  Mainly include legal liabilities.

 

c)   Contingent liabilities classified as possible losses

 

The Organização 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 recorded as a liability in the financial statements. The main proceedings in this category are the following: a) leasing companies’ Tax on Services of any Nature (ISSQN), total lawsuits correspond to R$1,993,543 thousand (R$1,872,384 thousand in 2015) 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; b) 2006-2010 income tax and social contribution, relating to goodwill amortization being disallowed on the acquisition of investments, for the amount of R$1,860,074 thousand (R$977,141 thousand in 2015); c) IRPJ and CSLL deficiency notice relating to the disallowance of loan loss deductions, for the amount of R$1,078,527 thousand (R$1,046,158 thousand in 2015); and d) IRPJ and CSLL deficiency note relating to disallowance of exclusions of revenues from the mark-to-market of securities from 2007 to 2010, and differences in depreciation and operating expenses and income, amounting to R$949,232 thousand (R$1,287,426 thousand in 2015).

 

52   June 2016


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

18)    SUBORDINATED DEBT

 

 

On June 30 - R$ thousand

Original term

in years

Amount of

the operation

2016

2015

In Brazil:

 

 

 

 

Subordinated CDB:

 

 

 

 

2015 (1)

6

-

-

2,100,767

2016 (4)

6

-

-

1,046

2019

10

20,000

53,130

45,152

Financial bills:

 

 

 

 

2016 (4)

6

100,879

207,698

180,560

2017

6

8,630,999

10,780,359

10,168,842

2018

6

8,262,799

9,660,366

9,219,976

2019

6

21,858

31,837

28,027

2017

7

40,100

90,400

78,327

2018

7

141,050

278,304

235,261

2019

7

3,172,835

3,402,969

3,331,045

2020

7

1,700

2,511

2,207

2022 (2)

7

4,305,011

4,708,635

-

2023 (5)

7

1,280,502

1,335,741

-

2018

8

50,000

106,835

88,886

2019

8

12,735

23,783

20,773

2020

8

28,556

46,740

40,625

2021

8

1,236

1,825

1,609

2023 (2)

8

1,706,846

1,869,274

-

2024 (5)

8

10,741

11,282

-

2021

9

7,000

10,979

9,484

2024 (2)

9

4,924

5,390

-

2025 (5)

9

22,356

23,768

-

2021

10

19,200

35,392

30,477

2022

10

54,143

86,964

76,026

2023

10

688,064

978,979

871,969

2025 (2)

10

284,137

319,350

-

2026 (5)

10

150,896

157,936

-

2026 (2)

11

3,400

3,739

-

Perpetual (2)

-

5,000,000

5,441,835

-

CDB pegged to loans:

 

 

 

 

2016 (4)

1

-

-

2,170

Subtotal in Brazil

 

  

39,676,021

26,533,229

Overseas:

 

 

 

 

2019

10

1,333,575

2,448,877

2,366,654

2021

11

2,766,650

5,258,519

5,082,457

2022

11

1,886,720

3,588,849

3,467,347

Subtotal overseas

   

11,296,245

10,916,458

Total (3)

   

50,972,266

37,449,687

(1)    Subordinated debt transactions that matured in 2015;

(2)    New issues of financial letters in October, November and December 2015, referring to subordinate debts were recorded under the heading "Eligible Debt Capital Instruments";

(3)    It includes the amount of R$13,876,948 thousand, referring to subordinate debts recorded in “Eligible Debt Capital Instruments”;

(4)    Maturity of operations of subordinate debts in January 2016; and

(5)    New issues of financial letters between January and June 2016, referring to subordinate debts were recorded under the heading " Eligible Debt Capital Instruments".

 

 

Bradesco     53       


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

19)    OTHER LIABILITIES

 

a)   Tax and social security

 

 

On June 30 - R$ thousand

2016

2015

Provision for tax risk (Note 17b IV)

7,095,543

6,465,817

Provision for deferred income tax (Note 32e)

2,454,673

2,202,500

Taxes and contributions on profit payable

5,267,994

1,497,248

Taxes and contributions payable

1,266,954

971,378

Total

16,085,164

11,136,943

 

b)   Sundry

 

 

On June 30 - R$ thousand

2016

2015

Credit card operations

18,670,657

16,749,325

Sundry creditors (1)

9,944,419

10,696,650

Loan assignment obligations

8,063,811

7,206,040

Civil and labor provisions (Note 17b IV)

6,281,477

5,820,607

Provision for payments

3,750,502

3,948,001

Creditors by anticipation of residual value

2,642,705

3,373,709

Obligations by quotas of investment funds

2,586,206

2,994,753

Liabilities for acquisition of assets and rights

103,784

372,194

Other (2)

3,973,442

2,637,035

Total

56,017,003

53,798,314

 

(1)    Includes provision for contingent liabilities, originating from obligations for transfer of credits, totaling R$200,442 thousand (Note 27); and

(2)    Includes provision for guarantees provided, comprising sureties, letters of credit and standby letter of credit, which is presented here within the balance for excess provision, totaling R$1,856,267 thousand (R$511,396 thousand in 2015) (Notes 8g and 27).

 

20)    NON-CONTROLLING INTERESTS IN SUBSIDIARIES

 

 

On June 30 - R$ thousand

2016

2015

Banco Bradesco BBI S,A,

15,170

13,625

Other

95

86

Total

15,265

13,711

 

21)    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 June 30

2016 (1)

2015

Common shares

2,776,801,011

2,524,364,555

Preferred shares

2,776,800,721

2,524,364,292

Subtotal

5,553,601,732

5,048,728,847

Treasury (common shares)

(4,575,045)

(3,669,932)

Treasury (preferred shares)

(17,141,588)

(13,175,162)

Total outstanding shares

5,531,885,099

5,031,883,753

 

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

 

54   June 2016


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

b)   Transactions of share capital involving quantities of shares

 

 

Common

Preferred

Total

Number of outstanding shares as at December 31, 2015

2,520,694,623

2,508,781,030

5,029,475,653

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

252,436,456

252,436,429

504,872,885

Increase of shares in treasury – bonus of 10%

(415,913)

(1,558,326)

(1,974,239)

Shares acquired and not canceled

(489,200)

-

(489,200)

Number of outstanding shares as at June 30, 2016

2,772,225,966

2,759,659,133

5,531,885,099

 

(1)   Benefited the shareholders registered in the records of Bradesco on April 15, 2016.

 

In the Extraordinary General Meeting of March 10, 2016, the approval was proposed by the Board of Directors to increase the capital stock by R$8,000,000 thousand, increasing it from R$43,100,000 thousand to R$51,100,000 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 504,872,885 new nominative-book entry shares, with no nominal value, whereby 252,436,456 are common and 252,436,429 are preferred shares, attributed free-of-charge to the shareholders as bonus, to the ratio of 1 new share for every 10 shares of the same type that they own on the base date.

 

c)   Interest on shareholders’ equity/dividends

 

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

 

The Board of Directors’ Meeting held on June 22, 2016, approved the Board of Executive Officers’ proposal to pay to the shareholders intermediary interest on shareholder’s equity for the first semester of 2016, to the value of R$1,002,000 thousand, of which R$0.172525087 are per common share and R$0.189777596 per preferred share, whose payment was made on July 18, 2016.

 

Interest on shareholders’ equity for the first semester of 2016, is calculated as follows:

 

 

R$ thousand

% (1)

Net income for the period

8,255,309

 

(-) Legal reserve

412,765

 

Adjusted calculation basis

7,842,544

 

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

2,906,355

 

Withholding income tax on interest on shareholders’ equity

(435,953)

 

Interest on own capital (net) accumulated in the first semester of 2016

2,470,402

31.50

Interest on own capital (net)/dividends accumulated in the first semester of 2015

2,608,678

31.50

 

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

 

Bradesco     55       


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

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

 

Description

R$ thousand

Per share (gross)

Gross amount paid/ recorded
in provision

Withholding Income Tax (IRRF) (15%)

Net amount paid/recorded in provision

Common shares

Preferred shares

Monthly interest on shareholders’ equity paid

0.108211

0.119031

522,175

(78,326)

443,849

Supplementary interest paid on own capital

0.278866

0.306753

1,473,917

(221,088)

1,252,829

Interim dividends paid

0.172629

0.189892

912,000

-

912,000

Total accrued on June 30, 2015

0.559706

0.615676

2,908,092

(299,414)

2,608,678

 

 

 

 

 

 

Monthly interest on shareholders’ equity paid

0.103499

0.113849

564,681

(84,702)

479,979

Intermediary interest on shareholders’ equity paid (2)

0.172525

0.189778

1,002,000

(150,300)

851,700

Supplementary interest on shareholders’ equity provisioned

0.230666

0.253733

1,339,674

(200,951)

1,138,723

Total accrued on June 30, 2016

0.506690

0.557360

2,906,355

(435,953)

2,470,402

 

(2)  Paid on July 18, 2016.

 

d)   Treasury shares

 

A total of 4,575,045 common shares and 17,141,588 preferred shares, with the share bonus effect of 10%, had been acquired, totaling R$440,514 thousand until June 30, 2016, and remain in treasury. The minimum, average and maximum cost per common share is R$19.34962, R$24.55863 and R$27.14350, and per preferred share is R$19.37456, R$26.98306 and R$33.12855, respectively. The fair value was R$27.01 per common share and R$25.18 per preferred share on June 30, 2016.

 

22)    FEE AND COMMISSION INCOME

 

 

Accrued on June 30 - R$ thousand

2016

2015

Credit card income

4,685,651

4,358,618

Checking account

2,773,820

2,275,676

Loans

1,365,808

1,332,929

Asset management

811,165

777,549

Collections

528,077

518,592

Consortium management

568,079

498,144

Custody and brokerage services

309,433

263,089

Underwriting / Financial Advisory Services

366,689

298,597

Payments

186,778

196,177

Other

207,000

187,182

Total

11,802,500

10,706,553

 

23)    PAYROLL AND RELATED BENEFITS

 

 

Accrued on June 30 - R$ thousand

2016

2015

Salaries

3,136,578

2,884,760

Benefits

1,429,284

1,297,408

Social security charges

1,169,135

1,105,174

Employee profit sharing

662,168

612,818

Provision for labor claims

281,443

250,178

Training

43,803

49,766

Total

6,722,411

6,200,104

 

 

56   June 2016


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

24)    OTHER ADMINISTRATIVE EXPENSES

 

 

Accrued on June 30 - R$ thousand

2016

2015

Outsourced services

1,985,060

1,853,120

Depreciation and amortization

1,341,297

1,428,891

Data processing

857,665

708,992

Communication

793,058

741,346

Rental

706,345

684,713

Asset maintenance

491,208

499,978

Financial system services

450,342

393,767

Advertising and marketing

423,669

288,207

Transport

325,690

303,919

Security and surveillance

332,261

298,979

Water, electricity and gas

181,869

155,080

Supplies

144,967

154,039

Travel

37,189

44,919

Other

649,145

606,894

Total

8,719,765

8,162,844

 

25)    TAX EXPENSES

 

 

Accrued on June 30 - R$ thousand

2016

2015

Contribution for Social Security Financing (COFINS)

2,152,709

1,379,447

Social Integration Program (PIS) contribution

303,988

270,804

Tax on Services (ISSQN)

359,326

232,927

Municipal Real Estate Tax (IPTU) expenses

58,672

49,755

Other

111,445

102,489

Total

2,986,140

2,035,422

 

26)    OTHER OPERATING INCOME

 

 

Accrued on June 30 - R$ thousand

2016

2015

Other interest income

1,258,397

1,135,170

Reversal of other operating provisions

608,241

985,980

Revenues from recovery of charges and expenses

100,204

94,536

Other (1)

1,138,525

998,149

Total

3,105,367

3,213,835

 

(1)  In the first semester of 2016, it includes, the reversal of the provision for tax contingency, in the amount of R$180,804 thousand (Note 17b (v)).

 

Bradesco     57       


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

27)    OTHER OPERATING EXPENSES

 

 

Accrued on June 30 - R$ thousand

2016

2015

Other finance costs

2,520,823

2,843,220

Sundry losses

858,769

909,097

Discount granted

676,819

705,352

Commissions on loans and financing

545,583

716,224

Intangible assets amortization

26,764

25,051

Other (1)

3,292,967

1,925,923

Total

7,921,725

7,124,867

 

(1)   In the first semester of 2016, it includes: (i) provision for guarantees provided, encompassing guarantees, sureties, letters of credit and standby letter of credit, which is presented here within the balance for excess provision (Note 8h); (ii) provision for contingent liabilities, originating from obligations for transfer of credits – FCVS (Note 19b); and (iii) provision for tax contingency, in the amount of R$665,031 thousand (R$570,835 thousand in 2015) (Note 17b (v)).

 

28)    NON-OPERATING INCOME (LOSS)

 

 

Accrued on June 30 - R$ thousand

2016

2015

Gain/loss on sale and write-off of assets and investments (1)

(9,007)

(131,031)

Recording/reversal of non-operating provisions

(93,638)

(43,003)

Other

50,718

36,887

Total

(51,927)

(137,147)

 

(1)  In the first semester of 2016, it includes primarily the result in divestiture of the shares of Banco CBSS S.A., in the amount of R$162,665 thousand.

 

 

58   June 2016


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

29)    RELATED-PARTY TRANSACTIONS (DIRECT AND INDIRECT)

 

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

 

 

 

 

On June 30 - R$ thousand

 

Controllers (1)

Joint control and associated companies (2)

Key management personnel (3)

Total

 

2016

2015

2016

2015

2016

2015

2016

2015

Assets

 

 

 

 

 

 

 

 

Receivable from associated companies

-

-

982,576

2,207,625

-

-

982,576

2,207,625

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Demand deposits/Savings accounts

41

20

398,879

244,504

14,100

16,220

413,020

260,744

Time deposits

92,725

91,883

303,791

285,317

67,136

61,784

463,652

438,984

Securities sold under repurchase agreements

1,523,845

142,656

4,473,846

5,619,738

18,449

43,008

6,016,140

5,805,402

Securities issued

5,639,266

592,765

8,321,785

4,150,282

714,699

586,171

14,675,750

5,329,218

Derivative financial instruments

15,186

-

-

-

-

-

15,186

-

Interest on own capital and dividends payable

878,212

763,187

-

-

-

-

878,212

763,187

Other liabilities

-

-

14,775

33,311

-

-

14,775

33,311

 

 

Accrued on June 30 - R$ thousand

 

Controllers (1)

Joint control and associated companies (2)

Key management personnel (3)

Total

 

2016

2015

2016

2015

2016

2015

2016

2015

Financial intermediation expenses

(529,010)

(23,049)

(812,484)

(593,237)

(53,469)

(43,510)

(1,394,963)

(659,796)

Income from services provided

-

-

61

55

-

-

61

55

Expenses in operations with derivatives

(15,186)

-

-

-

-

-

(15,186)

-

Expenses administrative

(1,195)

(1,080)

(254,747)

(237,657)

-

-

(255,942)

(238,737)

Other expenses net of other operating revenues

-

-

(180,641)

(184,490)

-

-

(180,641)

(184,490)

(1)   Cidade de Deus Cia. Cial. de Participações, Fundação Bradesco, NCF Participações S.A., Titanium Holdings S.A., BBD Participações S.A. and Nova Cidade de Deus Participações S.A.;

(2)   Companies listed in Note 2; and

(3)   Members of the Board of Directors and Executive Board.

Bradesco     59       


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

b)    Compensation for Key Management Personnel

 

Each year, the Annual Shareholders’ Meeting approves:

 

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

 

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

 

For 2016, the maximum amount of R$441,700 thousand was set for Management compensation and R$248,900 thousand to finance defined contribution pension plans.

 

The current policy on Management compensation sets forth that 50% of net variable compensation, if any, must be allocated to the acquisition of preferred shares of 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 CMN Resolution No. 3,921/10, which sets forth a management compensation policy for financial institutions.

 

Short-term Management benefits

 

  

Accrued on June 30 - R$ thousand

2016

2015

Salaries

218,932

156,530

INSS contributions

49,082

35,143

Total

268,014

191,673

 

Post-employment benefits

 

 

Accrued on June 30 - R$ thousand

2016

2015

Defined contribution supplementary pension plans

126,044

160,110

Total

126,044

160,110

 

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 CMN 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 June 30 - R$ thousand

2016

2015

● Common shares

0.60%

0.72%

● Preferred shares

1.08%

1.05%

● Total shares (1)

0.85%

0.89%

 

(1)  On June 30, 2016, direct and indirect shareholding of the members of Bradesco’s Board of Directors and Board of Executive Officers amounted to 2.92% of common shares, 1.12% of preferred shares and 2.02% of all shares.

 

60   June 2016


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

30)    FINANCIAL INSTRUMENTS

 

Below is the statement of financial position by currency

 

 

On June 30 - R$ thousand

2016

2015

Balance

Local

Foreign (1) (2)

Foreign (1) (2)

Assets

 

 

 

 

Current and long-term assets

830,226,470

740,566,592

89,659,878

78,346,178

Funds available

32,273,678

7,391,366

24,882,312

3,702,847

Interbank investments

138,706,031

134,694,514

4,011,517

1,128,427

Securities and derivative financial instruments

191,014,694

174,730,896

16,283,798

17,443,289

Interbank and interdepartmental accounts

50,095,997

50,095,997

-

-

Loan and leasing

277,746,415

243,943,132

33,803,283

42,137,876

Other receivables and assets

140,389,655

129,710,687

10,678,968

13,933,739

Permanent assets

49,778,908

49,662,542

116,366

122,766

Investments

32,372,436

32,372,436

-

-

Premises and equipment and leased assets

8,363,029

8,338,004

25,025

21,961

Deferred

14,992

14,992

-

-

Intangible assets

9,028,451

8,937,110

91,341

100,805

Total

880,005,378

790,229,134

89,776,244

78,468,944

 

 

 

 

 

Liabilities

 

 

 

 

Current and long-term liabilities

783,151,403

685,528,578

97,622,825

88,585,253

Deposits

180,124,754

164,427,581

15,697,173

30,539,867

Securities sold under agreements to repurchase

244,392,676

234,281,511

10,111,165

6,533,632

Funds from issuance of securities

121,171,216

113,267,854

7,903,362

9,650,737

Interbank and interdepartmental accounts

4,912,773

2,288,890

2,623,883

2,259,647

Borrowing and on-lending

57,529,385

33,375,947

24,153,438

22,508,863

Derivative financial instruments

17,927,761

17,426,615

501,146

1,038,370

Other liabilities:

 

 

 

 

- Subordinated debts

50,972,266

39,695,983

11,276,283

10,868,220

- Other

106,120,572

80,764,197

25,356,375

5,185,917

Deferred income

480,824

480,824

-

-

Non-controlling interests in subsidiaries

15,265

15,265

-

-

Shareholders’ equity

96,357,886

96,357,886

-

-

Total

880,005,378

782,382,553

97,622,825

88,585,253

 

 

 

 

 

Net position of assets and liabilities

 

 

(7,846,581)

(10,116,309)

Net position of derivatives (2)

 

 

(39,258,839)

(25,021,264)

Other net off-balance-sheet accounts (3)

 

 

(92,397)

(963,549)

Net exchange position (liability)

 

 

(47,197,817)

(36,101,122)

 

(1)  Amounts originally recorded and/or indexed mainly in USD;

(2)  Excluding operations maturing in D+1, to be settled at the rate on the last day of the month; and

(3)  Other commitments recorded in off-balance-sheet accounts,

Bradesco     61       


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Consolidated Financial Statements

 

The statement of financial position by maturity is as follows:

 

 

 

On June 30 - 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

394,500,114

79,145,069

61,146,148

295,435,139

-

830,226,470

Funds available

32,273,678

-

-

-

-

32,273,678

Interbank investments (2)

136,146,423

2,031,608

234,589

293,411

-

138,706,031

Securities and derivative financial instruments (1) (2)

89,301,836

5,942,038

7,861,761

87,909,059

-

191,014,694

Interbank and interdepartmental accounts

49,380,678

-

-

715,319

-

50,095,997

Loan and leasing

29,015,878

57,169,135

39,233,672

152,327,730

-

277,746,415

Other receivables and assets

58,381,621

14,002,288

13,816,126

54,189,620

-

140,389,655

Permanent assets

5,120,453

1,278,472

1,253,374

9,748,660

32,377,949

49,778,908

Investments

-

-

-

-

32,372,436

32,372,436

Premises and equipment

4,918,231

270,126

324,151

2,845,008

5,513

8,363,029

Deferred

250

1,249

1,499

11,994

-

14,992

Intangible assets

201,972

1,007,097

927,724

6,891,658

-

9,028,451

Total in 2016

399,620,567

80,423,541

62,399,522

305,183,799

32,377,949

880,005,378

Total in 2015

405,509,087

93,139,992

63,981,893

249,108,498

33,029,644

844,769,114

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Current and long-term liabilities

372,258,468

94,175,995

71,871,693

244,845,247

-

783,151,403

Deposits (3)

118,030,933

11,805,333

7,763,079

42,525,409

-

180,124,754

Securities sold under agreements to repurchase (2)

153,765,450

37,299,960

10,149,696

43,177,570

-

244,392,676

Funds from issuance of securities

4,098,170

28,831,560

36,956,041

51,285,445

-

121,171,216

Interbank and interdepartmental accounts

4,912,773

-

-

-

-

4,912,773

Borrowing and on-lending

4,160,297

14,475,173

10,583,899

28,310,016

-

57,529,385

Derivative financial instruments

17,030,805

518,993

220,790

157,173

-

17,927,761

Other liabilities:

 

 

 

 

 

 

- Subordinated debts

245,552

207,698

3,964,671

46,554,345

-

50,972,266

- Other

70,014,488

1,037,278

2,233,517

32,835,289

-

106,120,572

Deferred income

480,824

-

-

-

-

480,824

Non-controlling interests in subsidiaries

-

-

-

-

15,265

15,265

Shareholders’ equity

-

-

-

-

96,357,886

96,357,886

Total in 2016

372,739,292

94,175,995

71,871,693

244,845,247

96,373,151

880,005,378

Total in 2015

403,279,007

85,095,845

66,259,103

203,149,882

86,985,277

844,769,114

 

 

 

 

 

 

 

Net assets in 2016 YTD

26,881,275

13,128,821

3,656,650

63,995,202

-

-

Net assets in 2015 YTD

2,230,080

10,274,227

7,997,017

53,955,633

-

-

 

(1)  Investments in investment funds are classified as 1 to 30 days;

(2)  Repurchase agreements are classified according to the maturity of the transactions; and

(3)  Demand and savings deposits are classified as 1 to 30 days, without considering average historical turnover,

 

62   June 2016


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

Below is the Basel Ratio:

 

Calculation basis - Basel Ratio

On June 30 - R$ thousand

Prudential Conglomerate

2016

2015

Tier I capital

79,376,929

77,501,950

Common equity

79,376,929

77,501,950

Shareholders’ equity

96,357,886

86,971,566

Minority / Other

17,954

-

Prudential adjustments (1)

(16,998,911)

(9,469,616)

Tier II capital

23,170,917

19,513,015

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

8,374,696

-

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

14,796,221

19,513,015

Reference Equity (a)

102,547,846

97,014,965

 

 

 

- Credit risk

527,253,659

552,851,291

- Market risk

14,813,287

15,257,485

- Operational risk

38,501,528

39,117,366

Risk-weighted assets – RWA (b)

580,568,474

607,226,142

 

 

 

Basel ratio (a/b)

17.7%

16.0%

Tier I capital

13.7%

12.8%

- Principal capital

13.7%

12.8%

Tier II capital

4.0%

3.2%

 

(1)  As from January 2016, the factor applied to prudential adjustments went from 40% to 60%, according to the timeline for application of deductions of prudential adjustments, defined in Article11 of CMN Resolution No. 4,192/13.

 

a)   Capital Management

 

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

 

31)    EMPLOYEE BENEFITS

 

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

 

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

 

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

Bradesco     63       


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

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

 

Bradesco sponsors a defined benefit plan through Caixa de Previdência Privada Bec - Cabec, exclusively for former employees of Banco do Estado do Ceará S.A., having requested the withdrawal of the sponsorship in March 2016, in course.

 

Expenses related to contributions, made in the first semester of 2016, totaled R$244,098 thousand (R$259,273 thousand in 2015).

 

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$1,473,087 thousand in the first semester of 2016 (R$1,347,174 thousand in 2015).

 

32)    INCOME TAX AND SOCIAL CONTRIBUTION

 

a)   Calculation of income tax and social contribution charges

 

 

Accrued on June 30 - R$ thousand

2016

2015

Income before income tax and social contribution

18,049,954

7,443,564

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

(8,122,479)

(2,977,426)

Effect on the tax calculation:

 

 

Earnings (losses) of affiliates and jointly controlled companies

(3,063,464)

3,686,042

Net non-deductible expenses of nontaxable income

427,654

17,812

Interest on shareholders’ equity (paid and payable)

1,307,860

798,437

Other amounts (2)

(342,158)

(250,290)

Income tax and social contribution for the period

(9,792,587)

1,274,575

 

(1)  Current rates: (i) 25% for income tax; and (ii) of 15% for the social contribution to financial and equated companies, and of 20%, from September 2015 to December 2018, in accordance with Law No. 13,169/15; and (iii) of 9% for the other companies (Note 3h); and

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

 

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

 

 

Accrued on June 30 - R$ thousand

2016

2015

Current taxes:

 

 

Income tax and social contribution payable

(7,770,570)

(3,080,486)

Deferred taxes:

 

 

Amount recorded/realized in the period on temporary differences

465,169

4,794,917

Use of opening balances of:

 

 

Social contribution loss

(1,182,580)

(227,245)

Income tax loss

(1,510,896)

(267,503)

Constitution in the period on:

 

 

Social contribution loss

76,904

15,325

Income tax loss

129,386

39,567

Total deferred taxes

(2,022,017)

4,355,061

Income tax and social contribution for the period

(9,792,587)

1,274,575

 

64  June 2016


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

c)   Deferred income tax and social contribution

 

 

R$ thousand

Balance on

12.31.2015

Amount recorded (1)

Amount realized

Balance on

06.30.2016

Balance on

06.30.2015

Allowance for loan losses

23,450,323

4,312,929

3,479,095

24,284,157

18,929,912

Civil provisions

1,467,028

685,222

625,081

1,527,169

1,303,048

Tax provisions

2,004,229

249,941

28,167

2,226,003

1,830,788

Labor provisions

1,228,024

242,934

219,099

1,251,859

1,031,290

Provision for devaluation of securities and investments

89,830

7,818

17,687

79,961

84,690

Provision for devaluation of foreclosed assets

379,176

96,908

62,377

413,707

282,726

Adjustment to fair value of trading securities

6,470,648

38,776

1,887,163

4,622,261

2,334,314

Amortization of goodwill

186,478

5,732

3,856

188,354

192,165

Provision for interest on own capital (1)

-

602,854

-

602,854

589,567

Other

2,911,921

1,432,224

902,354

3,441,791

2,282,080

Total deductible taxes on temporary differences

38,187,657

7,675,338

7,224,879

38,638,116

28,860,580

Income tax and social contribution losses in Brazil and overseas

5,847,494

206,290

2,695,125

3,358,659

3,931,745

Subtotal (2) (3)

44,035,151

7,881,628

9,920,004

41,996,775

32,792,325

Adjustment to fair value of available-for-sale securities (3)

2,235,348

373,765

1,018,897

1,590,216

823,085

Social contribution - Provisional Measure No. 2,158-35/01

106,097

-

72,334

33,763

106,097

Total deferred tax assets (Note 9b)

46,376,596

8,255,393

11,011235

43,620,754

33,721,507

Deferred tax liabilities (Note 32e)

2,153,562

466,695

165,584

2,454,673

2,202,500

Deferred tax assets, net of deferred tax liabilities

44,223,034

7,788,698

10,845,651

41,166,081

31,519,007

 

(1)  The tax credit on the interest on own capital is recognized up to the allowed tax limit;

(2)  By being framed in the condition established by art, 1, subparagraph I of CMN Resolution No. 3,059/02, with amendments introduced by CMN Resolution No. 4,441/15, Banco Bradesco registered with the Bacen, an authorization request for maintenance of inventory and constitution of new tax credits; and

(3)  Deferred tax assets from financial companies and similar companies, were established considering the increase in the social contribution rate, determined by Law No. 11,727/08 and Law No. 13,169/15 (Note 3h).

 

d)   Expected realization of deferred tax assets on temporary differences, tax loss and negative basis of social contribution and deferred social contribution – Provisional Measure No. 2,158-35

 

 

R$ thousand

Temporary differences

Income tax and social contribution losses

Social contribution - Provisional Measure No. 2,158-35

Total

Income tax

Social contribution

Income tax

Social contribution

2016

5,405,763

3,652,607

435,321

504,534

33,763

10,031,988

2017

3,423,560

2,297,654

414,334

454,344

-

6,589,892

2018

3,567,633

2,434,958

193,179

235,365

-

6,431,135

2019

3,213,107

1,992,548

206,199

142,418

-

5,554,272

2020

3,005,559

1,654,187

81,445

56,559

-

4,797,750

After 2020

4,533,506

3,457,034

429,878

205,083

-

8,625,501

Total

23,149,128

15,488,988

1,760,356

1,598,303

33,763

42,030,538

                      

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

 

The present value of deferred tax assets, calculated based on the average funding interest rate, net of tax effects, amounts to R$38,936,880 thousand (R$30,457,815 thousand in 2015), of which R$35,763,463 thousand (R$26,756,228 thousand in 2015) relates to temporary differences, R$3,139,987 thousand (R$3,597,472 thousand in 2015) to tax losses and negative basis of social contribution and R$33,430 thousand (R$104,115 thousand in 2015) to deferred social contribution, Provisional Measure No. 2,158-35.

 

Bradesco     65         


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

e)   Deferred tax liabilities

 

 

On June 30 - R$ thousand

2016

2015

Mark-to-market adjustment to securities and derivative financial instruments

334,783

230,994

Difference in depreciation

523,657

685,794

Judicial deposit and others

1,596,233

1,285,712

Total

2,454,673

2,202,500

 

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

 

33)    OTHER INFORMATION

 

a)   The Organização manages investment funds and portfolios with net assets which, on June 30, 2016, amounted to R$603,447,785 thousand (R$514,728,562 thousand in 2015).

 

b)   Consortium funds

 

 

On June 30 - R$ thousand

2016

2015

Monthly estimate of funds receivable from consortium members

511,283

459,481

Contributions payable by the group

24,199,299

22,078,126

Consortium members - assets to be included

21,577,943

19,805,945

Credits available to consortium members

4,719,394

4,468,878

 

 

In units

2016

2015

Number of groups managed

3,551

3,537

Number of active consortium members

1,216,208

1,126,619

Number of assets to be included

557,071

531,429

 

c)   As part of the convergence process with international accounting standards, the Brazilian Accounting Pronouncements Committee (CPC) issued several accounting pronouncements, as well as their interpretations and guidelines, which are applicable to financial institutions only after approval by CMN. The accounting standards which have been approved by CMN include the following:

 

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

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

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

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

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

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

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

·       Resolution No. 4,144/12 – Conceptual Framework for Preparing and Presenting Financial Statements; and

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

 

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.

 

66   June 2016


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Notes to the Financial Statements of the Prudential Conglomerate

 

d)   In the first semester of 2016, Bacen changed the value of the deduction allowed on the reserve requirement collection on resources in savings deposits, according to the following table:

 

Description

Previous Rule

Current Rule

Resources from savings deposits

Deduction of R$200 million based on the calculation of the Savings Reserve Requirement until June 24, 2016 for Financial Institutions with Reference Assets (PR, in Portuguese), Level I, of less than R$5 billion.

Extending the deduction of R$200 million until December 30, 2016 and the deduction changed to R$100 million from January 2, 2017 to December 29, 2017 for Financial Institutions with Reference Assets (PR), Level I, of less than R$5 billion.

 

e)   In January 2016, Bradesco signed a non-binding Memorandum of Understanding with Banco do Brasil S.A., Banco Santander (Brasil) S.A., Caixa Econômica Federal and Itaú Unibanco S.A., in order to create a holding company of credit intelligence ("GIC"), which will develop a database with the goal of adding, reconciling and handling database and credit-related information, of individuals and legal entities, which expressly authorize their inclusion in the database, as required by the applicable rules.

 

f)    In July, 2016, Bradesco announced to the market the completion of the acquisition of 100% of the equity of HSBC Bank Brasil S.A. - Banco Múltiplo and HSBC Serviços e Participações Ltda. (together, known as "HSBC Brasil"), was completed and the total amount paid to HSBC Latin America Holdings Limited was of R$16.0 billion. This value is subject to adjustment post-closing based on the balance sheet of HSBC Brasil (IFRS based).

 

g)   Bradesco is aware of the publication of news about certain North American law firms, who are looking for plaintiffs for a possible class action for damages allegedly suffered by investors, by virtue of an alleged violation of the American law of capital markets. It is worth noting that, until the date of disclosure of these financial statements, it was not possible to neither measure the amounts involved nor indicate whether this case was assessed as a remote, possible and likely risk, since we have not yet been notified officially and we have not had access to the complete proceedings.

 

h)   There were no subsequent events that need to be adjusted or disclosed in the individual financial statements as of June 30, 2016.

 

 

 

Marcos Aparecido Galende

Accountant - CRC 1SP201309/O-6

 

Bradesco     67         


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Report of Independent Auditors on the Consolidated Financial Statements of the Prudential Conglomerate

 

To

The Board of Directors and Management

Banco Bradesco S.A.

Osasco – SP                                       

 

We have audited the accompanying Prudential Conglomerate consolidated financial statements of Banco Bradesco S.A. (“Bradesco”), which comprise the consolidated statement of financial position of the Prudential Conglomerate as at June 30, 2016, and the respective income statement, statement of changes in equity and cash flow statement for the six-month period then ended, and a summary of significant accounting policies and other explanatory information. These special purpose financial statements have been prepared by Bradesco´s management as required by Resolution no 4,280, dated October 31, 2013, of the National Monetary Council (CMN) and supplementary regulations of the Central Bank of Brazil (BACEN), described in the note no 2 to the financial statements.

 

Management’s Responsibility for the Financial Statements

 

Bradesco´s Management is responsible for the preparation and fair presentation of these Prudential Conglomerate consolidated financial statements in accordance with the Resolution no 4,280/13 of CMN, and supplementary regulations of BACEN, which main criteria and accounting practices are described in note no 2 to the financial statements, and for such internal control as management determines is necessary to enable the preparation of the Prudential Conglomerate consolidated financial statements that are free from material misstatement, whether due to fraud or error.

 

Auditor’s Responsibility

 

Our responsibility is to express an opinion on these Prudential Conglomerate consolidated financial statements prepared by Bradesco´s Management in accordance with the Resolution no 4,280/13, of CMN, and supplementary regulations of BACEN, based on our audit in accordance with Brazilian and International Standards on Auditing, taking into account the NBC TA 800 (ISA 800) - “Special Considerations - Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks”.

 

Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the Prudential Conglomerate consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Bradesco’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

 

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

 

Opinion

 

In our opinion, the Prudential Conglomerate consolidated financial statements of Bradesco referred to above, present fairly, in all material respects, the financial position of Bradesco´s Prudential Conglomerate consolidated financial statements as at June 30, 2016, the financial performance of its operations and its cash flows for the six-month period then ended in accordance with the provisions for preparation of the Prudential Conglomerate consolidated financial statements pursuant to the Resolution no 4,280/13, of CMN, and supplementary regulations of BACEN for the preparation of these consolidated financial statements prepared for special purpose, as described in note no 2 to the financial statements.

 

 

68   June 2016


 
 

Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report

 

Report of Independent Auditors on the Consolidated Financial Statements of the Prudential Conglomerate

 

Emphasis

 

Basis of preparation of the Prudential Conglomerate consolidated financial statements

 

Without modifying our opinion, we draw attention to note no 2 to the financial statements that disclose that the Prudential Conglomerate consolidated financial statements of Bradesco were prepared by Bradesco´s management to meet the requirements of Resolution no 4,280/13, of CMN, and supplementary regulations of BACEN. Consequently, our report on these consolidated financial statements has been prepared solely for meeting these specific requirements and thus may not be appropriate for other purposes.

 

Other Matter

 

Bradesco has prepared a separate set of financial statements for general purposes for the six-month period ended June 30, 2016, in accordance with accounting practices adopted in Brazil applicable to institutions authorized to operate by the Central Bank of Brazil, on which we issued an unqualified auditor’s report on july 27, 2016.

 

 

 

 

 

Osasco, August 29, 2016.

 

 

 

 

 

KPMG Auditores Independentes

CRC 2SP028567/O-1 F-SP

 

Rodrigo de Mattos Lia

Contador CRC 1SP252418/O-3

 

 

 

 

 

 

 

 

 

 

 

 

 

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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: August 30, 2016
 
BANCO BRADESCO S.A.
By:
 
/S/ Luiz Carlos Angelotti

    Luiz Carlos Angelotti 
Executive Managing Officer and
Investor Relations Officer
 
 
FORWARD-LOOKING STATEMENTS

This press release may contain forward-looking statements. These statements are statements that are not historical facts, and are based on management's current view and estimates of future economic circumstances, industry conditions, company performance and financial results. The words "anticipates", "believes", "estimates", "expects", "plans" and similar expressions, as they relate to the company, are intended to identify forward-looking statements. Statements regarding the declaration or payment of dividends, the implementation of principal operating and financing strategies and capital expenditure plans, the direction of future operations and the factors or trends affecting financial condition, liquidity or results of operations are examples of forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected events, trends or results will actually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.