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, 2017
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____
.
This page intentionally left blank.
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
|
2017
|
Current
|
562,964,568
|
Cash and due from banks (Note 4)
|
13,267,198
|
Interbank investments (Notes 3d and 5)
|
176,167,466
|
Securities purchased under agreements to resell
|
171,012,283
|
Interbank investments
|
5,168,014
|
Allowance for losses
|
(12,831)
|
Securities and derivative financial instruments (Notes 3e, 3f and 6)
|
84,119,799
|
Own portfolio
|
32,393,862
|
Subject to repurchase agreements
|
27,049,772
|
Derivative financial instruments (Notes 3f and 6d II)
|
14,933,662
|
Given in guarantee to the Brazilian Central Bank
|
83,599
|
Given in guarantee
|
8,959,878
|
Securities under resale agreements with free movement
|
699,026
|
Interbank accounts
|
68,909,482
|
Unsettled payments and receipts
|
1,351,244
|
Reserve requirement (Note 7):
|
|
- Reserve requirement - Brazilian Central Bank
|
67,472,257
|
- SFH - housing finance system
|
23,406
|
Correspondent banks
|
62,575
|
Interdepartmental accounts
|
110,732
|
Internal transfer of funds
|
110,732
|
Loans (Notes 3g and 8)
|
137,070,625
|
Loans:
|
|
- Public sector
|
1,075,740
|
- Private sector
|
156,717,195
|
Loans transferred under an assignment with recourse
|
984,481
|
Allowance for loan losses (Notes 3g, 8f, 8g and 8h)
|
(21,706,791)
|
Leasing (Notes 3g and 8)
|
(55,821)
|
Leasing operations and sublease receivables
|
|
- Private sector
|
1,065,272
|
Unearned income from leasing
|
(1,023,583)
|
Allowance for leasing losses (Notes 3g, 8f, 8g and 8h)
|
(97,510)
|
Other receivables
|
80,683,242
|
Receivables on sureties and guarantees honored (Note 8a-3)
|
416,316
|
Foreign exchange portfolio (Note 9a)
|
17,402,106
|
Receivables
|
8,626,784
|
Securities trading
|
1,029,205
|
Specific receivables
|
18,947
|
Sundry (Note 9b)
|
55,068,046
|
Allowance for other loan losses (Notes 3g, 8f, 8g and 8h)
|
(1,878,162)
|
Other assets (Note 10)
|
2,691,845
|
Other assets
|
2,825,909
|
Provision for losses
|
(1,308,260)
|
Prepaid expenses (Notes 3i and 10b)
|
1,174,196
|
Long-term receivables
|
355,128,897
|
Interbank investments (Note 3d and 5)
|
1,128,277
|
Interbank investments
|
1,128,277
|
Securities and derivative financial instruments (Notes 3e, 3f and 6)
|
137,953,090
|
Own portfolio
|
99,330,844
|
Subject to repurchase agreements
|
27,455,297
|
Derivative financial instruments (Notes 3f and 6d II)
|
90,818
|
Privatization rights
|
46,517
|
Securities under resale agreements with free movement
|
8,091,153
|
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
|
2017
|
Interbank accounts
|
802,502
|
Reserve requirement (Note 7):
|
|
- SFH - housing finance system
|
802,502
|
Loans (Notes 3g and 8)
|
158,974,066
|
Loans:
|
|
- Public sector
|
2,000,000
|
- Private sector
|
163,361,536
|
Loans transferred under an assignment with recourse
|
7,292,471
|
Allowance for loan losses (Notes 3g, 8f, 8g and 8h)
|
(13,679,941)
|
Leasing (Notes 3g and 8)
|
(65,579)
|
Leasing receivables:
|
|
- Private sector
|
1,181,855
|
Unearned income from leasing
|
(1,181,538)
|
Allowance for leasing losses (Notes 3g, 8f, 8g and 8h)
|
(65,896)
|
Other receivables
|
55,497,458
|
Securities trading
|
374,153
|
Sundry (Note 9b)
|
55,231,709
|
Allowance for other loan losses (Notes 3g, 8f, 8g and 8h)
|
(108,404)
|
Other assets (Note 10)
|
839,083
|
Prepaid expenses (Notes 3i and 10b)
|
839,083
|
Permanent assets
|
68,392,931
|
Investments (Notes 3j and 11)
|
46,106,004
|
Earnings of
Affiliates and
Subsidiaries
|
|
- In Brazil
|
45,772,613
|
- Overseas
|
288,457
|
Other investments
|
176,206
|
Allowance for losses
|
(131,272)
|
Premises and equipment (Notes 3k and 12)
|
4,388,986
|
Premises
|
697,236
|
Other premises and equipment
|
8,680,387
|
Accumulated depreciation
|
(4,988,637)
|
Leased premises and equipment (Note 12)
|
4,084,545
|
Leased Assets
|
7,065,726
|
Accumulated depreciation
|
(2,981,181)
|
Intangible assets (Notes 3m and 13)
|
13,813,396
|
Intangible Assets
|
24,000,817
|
Accumulated amortization
|
(10,187,421)
|
Total
|
986,486,396
|
The accompanying Notes are an integral part of these Financial Statements.
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
|
2017
|
Current
|
600,022,596
|
Deposits (Notes 3o and 14a)
|
157,832,902
|
Demand deposits
|
30,886,127
|
Savings deposits
|
95,736,763
|
Interbank deposits
|
481,914
|
Time deposits (Note 14a)
|
30,728,098
|
Securities sold under agreements to repurchase (Notes 3o and 14b)
|
242,686,056
|
Own portfolio
|
87,107,624
|
Third-party portfolio
|
144,238,406
|
Unrestricted portfolio
|
11,340,026
|
Funds from issuance of securities (Note 14c)
|
72,477,559
|
Mortgage and real estate notes, letters of credit and others
|
71,479,699
|
Securities issued overseas
|
671,060
|
Structured Operations Certificates
|
326,800
|
Interbank accounts
|
1,526,011
|
Unsettled payments and receipts
|
76,305
|
Correspondent banks
|
1,449,706
|
Interdepartmental accounts
|
4,800,663
|
Third-party funds in transit
|
4,800,663
|
Borrowing (Note 15a)
|
21,508,622
|
Borrowing overseas
|
21,508,622
|
On-lending in Brazil - official institutions (Note 15b)
|
11,224,756
|
National treasury
|
64,143
|
BNDES
|
4,597,299
|
FINAME
|
6,561,724
|
Other institutions
|
1,590
|
Derivative financial instruments (Notes 3f and 6d II)
|
13,864,795
|
Derivative financial instruments
|
13,864,795
|
Other liabilities
|
74,101,232
|
Payment of taxes and other contributions
|
3,243,238
|
Foreign exchange portfolio (Note 9a)
|
7,105,535
|
Social and statutory
|
2,444,258
|
Tax and social security (Note 18a)
|
1,792,375
|
Securities trading
|
2,049,142
|
Financial and development funds
|
1,297
|
Subordinated debts (Note 17)
|
14,250,427
|
Sundry (Note 18b)
|
43,214,960
|
Long-term liabilities
|
279,232,005
|
Deposits (Notes 3o and 14a)
|
103,853,673
|
Interbank deposits
|
48,459
|
Time deposits (Note 14a)
|
103,805,214
|
Securities sold under agreements to repurchase (Notes 3o and 14b)
|
13,784,487
|
Own portfolio
|
13,784,487
|
Funds from issuance of securities (Note 14c)
|
71,156,684
|
Mortgage and real estate notes, letters of credit and others
|
68,749,426
|
Securities issued overseas
|
2,334,319
|
Structured Operations Certificates
|
72,939
|
Borrowing (Note 15a)
|
1,920,137
|
Borrowing overseas
|
1,920,137
|
On-lending in Brazil - official institutions (Note 15b)
|
21,888,871
|
BNDES
|
9,825,810
|
FINAME
|
12,063,061
|
Derivative financial instruments (Notes 3f and 6d II)
|
160,578
|
Derivative financial instruments
|
160,578
|
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
|
2017
|
Other liabilities
|
66,467,575
|
Tax and social security (Note 18a)
|
2,734,255
|
Subordinated debts (Note 17)
|
16,818,082
|
Eligible Debt Capital Instruments (Note 17)
|
22,622,595
|
Sundry (Note 18b)
|
24,292,643
|
Deferred income
|
406,567
|
Deferred income
|
406,567
|
Non-controlling interests in subsidiaries (Note 19)
|
17,715
|
Shareholders' equity (Note 20)
|
106,807,513
|
Capital:
|
|
- Domiciled in Brazil
|
58,361,528
|
- Domiciled overseas
|
738,472
|
Capital reserves
|
11,441
|
Profit reserves
|
47,620,614
|
Asset valuation adjustments
|
515,972
|
Treasury shares (Note 20d)
|
(440,514)
|
Total
|
986,486,396
|
The accompanying Notes are an integral part of these Financial Statements.
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Statement of Income of the Prudential Conglomerate on June 30 –
In thousands of Reais
|
2017
|
Revenue from financial intermediation
|
65,964,517
|
Loans (Note 8j)
|
37,650,145
|
Leasing (Note 8j)
|
995,021
|
Operations with securities (Note 6h)
|
22,631,430
|
Income from derivative financial instruments (Note 6h)
|
813,640
|
Foreign exchange operations (Note 9a)
|
1,197,531
|
Reserve requirement (Note 7b)
|
2,683,447
|
Sale or transfer of financial assets
|
(6,697)
|
|
|
Expenses from financial intermediation
|
50,748,568
|
Retail and professional market funding (Note 14d)
|
32,270,669
|
Borrowing and on-lending (Note 15c)
|
2,837,408
|
Leasing (Note 8j)
|
850,335
|
Allowance for loan losses (Notes 3g, 8g and 8h)
|
14,790,156
|
|
|
Gross income from financial intermediation
|
15,215,949
|
|
|
Other operating income (expenses)
|
(6,771,352)
|
Fee and commission income (Note 21)
|
11,653,990
|
Other fee and commission income
|
7,935,901
|
Income from banking fees
|
3,718,089
|
Payroll and related benefits (Note 22)
|
(8,729,274)
|
Other administrative expenses (Note 23)
|
(10,568,598)
|
Tax expenses (Note 24)
|
(2,320,263)
|
Equity in the earnings (losses) of Affiliates and
Subsidiaries
(Note 11)
|
4,174,776
|
Other operating income (Note 25)
|
6,179,795
|
Other operating expenses (Note 26)
|
(7,161,778)
|
Operating income
|
8,444,597
|
Non-operating income (loss) (Note 27)
|
(291,239)
|
Income before income tax and social contribution and non-controlling interests
|
8,153,358
|
Income tax and social contribution (Notes 31a and 31b)
|
(169,824)
|
Non-controlling interests in subsidiaries
|
(1,364)
|
Net income
|
7,982,170
|
The accompanying Notes are an integral part of these Financial Statements.
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 adjustments
|
Treasury shares
|
Retained earnings
|
Total
|
Paid in Capital
|
Share premium
|
Legal
|
Statutory
|
Bradesco
|
Subsidiaries
|
Balance on January 1st, 2017
|
51,100,000
|
11,441
|
6,807,128
|
43,641,474
|
(403,160)
|
(273,956)
|
(440,514)
|
-
|
100,442,413
|
Capital increase with reserves
|
8,000,000
|
-
|
-
|
(8,000,000)
|
-
|
-
|
-
|
-
|
-
|
Asset valuation adjustments
|
-
|
-
|
-
|
-
|
766,716
|
426,372
|
-
|
-
|
1,193,088
|
Net income
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
7,982,170
|
7,982,170
|
Allocations:
|
|
|
|
|
|
|
|
|
|
- Reserves
|
-
|
-
|
399,109
|
4,772,903
|
-
|
-
|
-
|
(5,172,012)
|
-
|
- Interest on Shareholders’ Equity Paid and/or provisioned
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(2,810,158)
|
(2,810,158)
|
Balance on June 30, 2017
|
59,100,000
|
11,441
|
7,206,237
|
40,414,377
|
363,556
|
152,416
|
(440,514)
|
-
|
106,807,513
|
|
The accompanying Notes are an integral part of these Financial Statements.
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Statement of Added Value of the Prudential Conglomerate on June 30 – In thousands of Reais
Description
|
2017
|
%
|
1 – Revenue
|
61,561,445
|
302.1
|
1.1) Financial intermediation
|
65,964,517
|
323.7
|
1.2) Fees and commissions
|
11,653,990
|
57.2
|
1.3) Allowance for loan losses
|
(14,790,156)
|
(72.6)
|
1.4) Other
s
(Includes private social investments (Note 32c))
|
(1,266,906)
|
(6.2)
|
2 – Financial intermediation expenses
|
(35,958,412)
|
(176.5)
|
3 – Inputs acquired from third-parties
|
(6,861,761)
|
(33.7)
|
Outsourced services
|
(2,081,568)
|
(10.2)
|
Data processing
|
(1,036,592)
|
(5.1)
|
Communication
|
(779,067)
|
(3.8)
|
Asset maintenance
|
(554,354)
|
(2.7)
|
Financial system services
|
(506,509)
|
(2.5)
|
Security and surveillance
|
(416,863)
|
(2.0)
|
Transport
|
(375,843)
|
(1.8)
|
Material, water, electricity and gas
|
(324,511)
|
(1.6)
|
Advertising and marketing
|
(288,524)
|
(1.4)
|
Travel
|
(84,944)
|
(0.4)
|
Others (Includes private social investments (Note 32c))
|
(412,986)
|
(2.0)
|
4 – Gross value added (1-2-3)
|
18,741,272
|
92.0
|
5 – Depreciation and amortization
|
(2,538,858)
|
(12.5)
|
6 – Net value added produced by the entity (4-5)
|
16,202,414
|
79.5
|
7 – Value added received through transfer
|
4,174,776
|
20.5
|
Equity in the earnings (losses) of unconsolidated and jointly controlled companies
|
4,174,776
|
20.5
|
8 – Value added to distribute (6+7)
|
20,377,190
|
100.0
|
9 – Value added distributed
|
20,377,190
|
100.0
|
9.1) Personnel
|
7,687,326
|
37.7
|
Salaries
|
4,031,983
|
19.8
|
Benefits
|
2,007,521
|
9.9
|
Government Severance Indemnity Fund for Employees (FGTS)
|
447,396
|
2.2
|
Other
|
1,200,426
|
5.9
|
9.2) Tax, fees and contributions
|
3,532,035
|
17.3
|
Federal
|
3,124,725
|
15.3
|
State
|
5,139
|
-
|
Municipal
|
402,171
|
2.0
|
9.3) Remuneration for providers of capital
|
1,174,295
|
5.8
|
Rental
|
825,306
|
4.1
|
Asset leasing
|
348,989
|
1.7
|
9.4) Value distributed to shareholders
|
7,983,534
|
39.2
|
Interest on Shareholders’ Equity Dividends paid and/or provisioned
|
2,810,158
|
13.8
|
Retained earnings
|
5,172,012
|
25.4
|
Non-controlling interests in retained earnings
|
1,364
|
-
|
The accompanying Notes are an integral part of these Financial Statements.
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Statement of Cash Flow of the Prudential Conglomerate on June 30 –
In thousands of Reais
|
2017
|
Cash flow from operating activities:
|
|
Income before income tax and social contribution and non-controlling interests
|
8,153,358
|
Adjustments to net income before income tax and social contribution
|
16,132,280
|
Effect of Changes in Exchange Rates in Cash and Cash equivalents
|
(349,403)
|
Allowance for loan losses
|
14,790,156
|
Depreciation and amortization
|
2,538,858
|
Impairment losses of financial assets
|
833,283
|
Expenses with civil, labor and tax provisions
|
1,142,230
|
Equity in the earnings (losses) of Af
f
iliates and Subsidiaries
|
(4,174,776)
|
(Gain)/loss on sale of fixed assets
|
16,440
|
(Gain)/loss on sale of foreclosed assets
|
246,582
|
Foreign exchange variation of assets and liabilities overseas/Other
|
1,088,910
|
Net income before taxes after adjustments
|
24,285,638
|
(Increase)/Decrease in interbank investments
|
1,865,412
|
(Increase)/Decrease in trading securities and derivative financial instruments
|
(2,947,966)
|
(Increase)/Decrease in interbank and interdepartmental accounts
|
(2,142,507)
|
(Increase)/Decrease in loan and leasing
|
(1,291,145)
|
(Increase)/Decrease in other receivables and other assets
|
(2,499,477)
|
(Increase)/Decrease in reserve requirement - Central Bank
|
(9,435,726)
|
Increase/(Decrease) in deposits
|
26,214,926
|
Increase/(Decrease) in securities sold under agreements to repurchase
|
(1,269,903)
|
Increase/(Decrease) in funds from issuance of securities
|
(18,579,343)
|
Increase/(Decrease) in borrowings and on-lending
|
(1,657,775)
|
Increase/(Decrease) in other liabilities
|
(2,493,073)
|
Increase/(Decrease) in deferred income
|
(45,519)
|
Income tax and social contribution paid
|
(2,791,383)
|
Net cash provided by/(used in) operating activities
|
7,212,159
|
Cash flow from investing activities:
|
|
(Increase)/Decrease in held-to-maturity securities
|
510,345
|
Sale of/maturity of and interest on available-for-sale securities
|
57,511,609
|
Proceeds from sale of foreclosed assets
|
333,127
|
Sale of premises and equipment
|
758,789
|
Purchases of available-for-sale securities
|
(59,011,665)
|
Investment acquisitions
|
(2,001,400)
|
Purchase of premises and equipment
|
(790,870)
|
Intangible asset acquisitions
|
(760,957)
|
Dividends and interest on shareholders’ equity received
|
209,421
|
Net cash provided by/(used in) investing activities
|
(3,241,601)
|
Cash flow from financing activities:
|
|
Increase/(decrease) in subordinated debts
|
1,062,239
|
Interest on Shareholders’ Equity Paid
|
(4,720,677)
|
Non-controlling interest
|
(313)
|
Net cash provided by/(used in) financing activities
|
(3,658,751)
|
Net increase/(decrease) in cash and cash equivalents
|
311,807
|
Cash and cash equivalents - at the beginning of the period
|
181,119,377
|
Effect of Changes in Exchange Rates in Cash and Cash equivalents
|
349,403
|
Cash and cash equivalents - at the end of the period
|
181,780,587
|
Net increase/(decrease) in cash and cash equivalents
|
311,807
|
The accompanying Notes are an integral part of these Financial Statements.
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Financial Statements of the Prudential Conglomerate
Notes to Financial Statements of the Prudential Conglomerate are as follows:
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 the types of banking activities for which it has authorization. The Bank is involved in a number of other activities, either directly or indirectly, through its subsidiaries, specifically leasing, investment banking, brokerage, consortium management, credit cards, real estate projects, insurance, pension plans and capitalization bonds. All these activities are undertaken by the various companies in the Bradesco Organization (Organization), working together in an integrated manner in the market.
2)
PRESENTATION OF THE 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 were applied when consolidating the financial statements of Bradesco, its foreign branches, subsidiaries and investment funds, as requested by Resolution No. 4,280/13. These requirements are not necessarily the same as those established by corporate law.
For the preparation of these consolidated financial statements, equity interests, balances of balance sheet accounts, revenues, expenses and unrealized gains were eliminated and net income and shareholders’ equity attributable to the non-controlling shareholders were accounted for in a separate line. Investments in companies in which shareholding control is shared with other shareholders are accounted for using the equity method. Goodwill on acquisitions of investments in subsidiaries / affiliates and jointly controlled companies is presented in investments and intangible assets (Note 13a).
Bradesco opted for the provision in Article 5 of CMN Resolution No. 4,517/16, which affirms that, as for January 1, 2017, equity holdings in jointly controlled companies must be accounted for using the equity method of accounting and no longer using the proportional consolidation method. In addition, paragraph 2 of Article 5 of said Resolution does not require comparable information for companies that changed their accounting policies as a consequence of these dispositions. Then, consolidated financial statements of the prudential conglomerate are not comparable with previous periods.
The financial statements include estimates and assumptions, such as: the calculation of estimated loan losses; fair value estimates of certain financial instruments; civil, tax and labor provisions; impairment losses of securities classified as available-for-sale and held-to-maturity securities and non-financial assets; 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 on august
28,
2017.
Below are the significant directly and indirectly owned companies and investment funds included in the financial statements of the Prudential Conglomerate:
|
On June 30
|
Activity
|
Equity interest
|
2017
|
Financial Institutions
|
|
|
Ágora Corretora de Títulos e Valores Mobiliários S.A.
|
Brokerage
|
100.00%
|
Banco Alvorada S.A.
|
Banking
|
99.99%
|
Banco Boavista Interatlântico S.A.
|
Banking
|
100.00%
|
Banco Bradescard S.A.
|
Cards
|
100.00%
|
Banco Bradesco Argentina S.A.
|
Banking
|
99.99%
|
Banco Bradesco BBI S.A.
|
Investment bank
|
99.81%
|
Banco Bradesco BERJ S.A.
|
Banking
|
100.00%
|
Banco Bradesco Cartões S.A.
|
Cards
|
100.00%
|
Banco Bradesco Europa S.A.
|
Banking
|
100.00%
|
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
|
2017
|
Banco Bradesco Financiamentos S.A.
|
Banking
|
100.00%
|
Banco Bradesco S.A. New York Branch
|
Banking
|
100.00%
|
Banco Bradesco S.A. Grand Cayman Branch (1)
|
Banking
|
100.00%
|
Banco Losango S.A.
|
Banking
|
100.00%
|
Bradesco Kirton Corretora de Títulos e Valores Mobiliários S.A.
|
Brokerage
|
99.97%
|
Bradesco Leasing S.A. Arrendamento Mercantil
|
Leasing
|
100.00%
|
Bradesco S.A. Corretora de Títulos e Valores Mobiliários
|
Brokerage
|
100.00%
|
Bradesco Securities Hong Kong
|
Brokerage
|
100.00%
|
Bradesco Securities, Inc.
|
Brokerage
|
100.00%
|
Bradesco Securities, UK.
|
Brokerage
|
100.00%
|
Bradescard México, Sociedad de Responsabilidad Limitada
|
Cards
|
100.00%
|
BRAM - Bradesco Asset Management S.A. DTVM
|
Asset management
|
100.00%
|
BEC - Distribuidora de Títulos e Valores Mobiliários Ltda.
|
Asset management
|
100.00%
|
BEM - Distribuidora de Títulos e Valores Mobiliários Ltda.
|
Asset management
|
100.00%
|
BMC Asset Management - DTVM Ltda.
|
Asset management
|
100.00%
|
Everest Leasing S.A. Arrendamento Mercantil
|
Leasing
|
100.00%
|
Kirton Bank Brasil S.A.
|
Banking
|
100.00%
|
Nova Marília Administração de Bens Móveis e Imóveis Ltda.
(2)
|
Asset management
|
100.00%
|
Serel Participações em Imóveis S.A. (2)
|
Asset management
|
100.00%
|
Tibre Distribuidora de Títulos e Valores Mobiliários Ltda.
|
Asset management
|
100.00%
|
Consortium Management
|
|
|
Bradesco Administradora de Consórcios Ltda.
|
Consortium management
|
100.00%
|
Payment Institutions
|
|
|
Alvorada Administradora de Cartões Ltda.
|
Services
|
100.00%
|
Bankpar Consultoria e Serviços Ltda.
(2)
|
Services
|
100.00%
|
Cidade Capital Markets Limited
|
Banking
|
100.00%
|
Tempo Serviços Ltda.
|
Services
|
100.00%
|
Securitization Companies
|
|
|
Alvorada Cia. Securitizadora de Créditos Financeiros
|
Credit acquisition
|
100.00%
|
Alvorada Serviços e Negócios Ltda.
|
Credit acquisition
|
100.00%
|
BCN - Consultoria, Adm. Bens, Serv. e Publicidade Ltda.
|
Credit acquisition
|
100.00%
|
Cia. Securitizadora de Créditos Financeiros Rubi
|
Credit acquisition
|
100.00%
|
Promosec Cia. Securitizadora de Créditos
|
Credit acquisition
|
100.00%
|
Investment Funds (3)
|
|
|
Alpha FI Mult. Cred. Priv. Inv. no Exterior
|
Investment Fund
|
100.00%
|
Bradesco F.I.C.F.I. R.F. DI Galáxia
|
Investment Fund
|
100.00%
|
Bradesco FI Mult. Cred. Priv. Inv. Exterior Andromeda
|
Investment Fund
|
100.00%
|
Bradesco FI Mult. Cred. Priv. Inv. Exterior Pioneiro
|
Investment Fund
|
100.00%
|
Bradesco FI Referenciado DI Performance
|
Investment Fund
|
100.00%
|
Bradesco FI Referenciado DI União
|
Investment Fund
|
99.66%
|
FI Mult. Inv. no Exterior Tellus
|
Investment Fund
|
100.00%
|
FIP Mult. Plus
|
Investment Fund
|
100.00%
|
FI RF DI GJ
|
Investment Fund
|
100.00%
|
FII - FI RF Cred. Privado
|
Investment Fund
|
100.00%
|
(1) 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;
(2) In accordance with CMN Resolution No. 4,280/13, it is now consolidated; and
(3) The investment funds in which Bradesco assumes or substantially retains the risks and benefits were consolidated.
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 translated into Brazilian reais using the appropriate currency exchange rate, to comply with accounting practices adopted in Brazil. Foreign currency translation gains and losses arising are recognized in the period’s statement of income in the lines “Derivative Financial Instruments” and “Borrowing and On-lending”.
b)
Income and expense recognition
Income and expenses are recognized on an accrual basis in order to determine the net income for the period to which they relate, regardless of when the funds are received or paid.
Fixed rate contracts are recognized at their redemption value with the income or expense relating to future periods being recognized as a deduction from the corresponding asset or liability. Finance income and costs are recognized daily on a pro-rata basis and calculated using the compounding method, except when they relate to discounted notes or to foreign transactions, which are calculated using the straight-line method.
Floating rate and foreign-currency-indexed contracts are adjusted for interest and foreign exchange rates applicable at the reporting date.
c)
Cash and cash equivalents
Cash and cash equivalents include: funds available in currency, investments in gold, securities sold under agreements to repurchase and interest-earning deposits in other banks, maturing in 90 days or less, from the time of the acquisition, which are exposed to insignificant risk of change in fair value. These funds are used by Bradesco to manage its short-term commitments.
Cash and cash equivalents detailed balances are presented in Note 4.
d)
Interbank investments
Unrestricted repurchase and reverse repurchase agreements are stated at their fair value. All other interbank investments are stated at cost, plus income earned up to the end of the reporting period, net of any devaluation allowance, if applicable.
The breakdown, terms and proceeds relating to interbank investments are presented in Note 5.
e)
Securities – Classification
·
|
Trading securities – securities acquired for the purpose of being actively and frequently traded. They are recognized at cost, plus income earned and adjusted to fair value with changes recognized in the Statement of Income for the period;
|
·
|
Available-for-sale securities – securities that are not specifically intended for trading purposes or to be held to maturity. They are recognized at cost, plus income earned, which is recognized in profit or loss in the period and adjusted to fair value with changes recognized in shareholders’ equity, net of tax, which will be transferred to the Statement of Income only when effectively realized; and
|
·
|
Held-to-maturity securities – securities for which there is positive intent and financial capacity to hold to maturity. They are recognized at cost, plus income earned recognized in the Statement of Income for the period.
|
Securities classified as trading and available-for-sale, as well as derivative financial instruments, are recognized in the consolidated statement of financial position at their fair value. Fair value is generally based on quoted market prices or quotations for assets or liabilities with similar characteristics. If market prices are not available, fair values are based on traders’ quotations, pricing models,
discounted cash flows or similar techniques to determine the fair value and may require judgment or significant estimates by Management.
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)
Derivative instruments are classified based on the objective for which the underlying instrument was acquired at the date of purchase, taking into consideration its use for possible hedging purposes.
Operations involving derivative financial instruments are designed to meet the Bank’s own needs in order to manage overall exposure, as well as to meet customer requests to manage their positions. The gains or losses are recognized in the statement of income or shareholders’ equity.
Derivative financial instruments used to mitigate risk deriving from exposure to variations in the fair value of financial assets and liabilities are designated as hedges when they meet the criteria for hedge accounting and are classified according to their nature:
·
Market risk hedge: the gains and losses, realized or not, of the financial instruments classified in this category as well as the financial assets and liabilities, that are the object of the hedge, are recognized in the Statement of Income; and
·
Cash flow hedge: the effective portion of valuation or devaluation of the financial instruments classified in this category is recognized, net of taxes, in a specific account in shareholders’ equity. The ineffective portion of the hedge is recognized directly in the Statement of Income.
A breakdown of amounts included as derivative financial instruments, in the statement of financial position and off-balance-sheet accounts, is disclosed in Note 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 is also considered in the rating of customer risk as per CMN Resolution No. 2,682/99, as follows:
Past-due period (1)
|
Customer rating
|
● from 15 to 30 days
|
B
|
● from 31 to 60 days
|
C
|
● from 61 to 90 days
|
D
|
● from 91 to 120 days
|
E
|
● from 121 to 150 days
|
F
|
● from 151 to 180 days
|
G
|
● more than 180 days
|
H
|
(1)
For transactions with terms of more than 36 months, past-due periods are doubled, as permitted by CMN Resolution No. 2,682/99.
Interest and inflation adjustments on past-due transactions are only recognized in the Statement of Income up to the 60
th
day that they are past due.
H-rated past-due transactions remain at this level for six months, after which they are written-off against the existing allowance and controlled in off-balance-sheet accounts for at least five years.
Renegotiated operations are maintained at least at the same rating in which they were classified.
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Financial Statements of the Prudential Conglomerate
Renegotiations already written-off against the allowance and that were recognized in off-balance-sheet accounts, are rated as level “H” and any possible gains derived from their renegotiation are recognized only when they are effectively received. When there is a significant repayment on the operation or when new material facts justify a change in the level of risk, the loan may be reclassified to a lower risk category.
The estimated allowance for loan losses is calculated to sufficiently cover probable losses, according to CMN and Bacen standards and instructions, together with Management’s assessment of the credit risk.
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).
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)
Deferred tax assets, calculated on income tax losses, social contribution losses and temporary differences, are recognized in “Other Receivables - Sundry” and the deferred tax liabilities on tax differences in leasing depreciation (applicable only for income tax), fair value adjustments on securities, inflation adjustment of judicial deposits, among others, are recognized in “Other Liabilities - Tax and Social Security”, in which for the differences in leasing depreciation only the income tax rate is applied.
Deferred tax assets on temporary differences are realized when the difference between the accounting treatment and the income tax treatment reverses. Deferred tax assets on income tax and social contribution losses are realizable when taxable income is generated, up to the 30% limit of the taxable profit for the period. Deferred tax assets are recognized based on current expectations of realization considering technical studies and analyses carried out by Management.
The provision for income tax is calculated at 15% of taxable income plus a 10% surcharge. For financial companies, for companies considered as such and for the insurance industry, the social contribution on the profit was calculated until August 2015, considering the rate of 15%. For the period between September 2015 and December 2018, the rate was changed to 20%, according to Law No. 13,169/15 and the rate will be 15% again as from January 2019. For the other companies, the social contribution is calculated considering the rate of 9%.
Due to the amendment of the rate, Organization recognized, in September 2015, an incremental amount to the deferred tax of social contribution, considering the annual expectations of realization and their respective rates in force in each period, according to the technical study produced.
Provisions were recognized for other income tax and social contribution in accordance with specific applicable legislation.
The breakdown of income tax and social contribution, showing the calculations, the origin and expected use of deferred tax assets, as well as unrecognized deferred tax assets, is presented in Note 31.
i)
Prepaid expenses
Prepaid expenses consist of funds already disbursed for future benefits or services, which are recognized in the profit or loss on an accrual basis.
Incurred costs relating to assets that will generate revenue in subsequent periods are recognized in the Statement of Income according to the terms and the amount of expected benefits and directly recognized in the Statement of Income when the corresponding assets or rights are no longer part of the institution’s assets or when future benefits are no longer expected.
In the case of the remuneration paid for the origination of credit operations or leasing to the banking correspondents related to credit operations originated during 2015 and 2016, Bradesco opted to recognize part of the total value of compensation, pursuant to the provisions of Bacen Circular No. 3,738/14. As of 2017, the remuneration mentioned is fully recognized as an expense.
Prepaid expenses are shown in detail in Note 10b.
j)
Investments
Investments in unconsolidated and jointly controlled companies, where Bradesco has significant influence over the investee or holds at least 20% of the voting rights, are accounted for using the equity method.
Tax incentives and other investments are stated at cost, less allowance for losses/impairment, where applicable.
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Financial Statements of the Prudential Conglomerate
Subsidiaries are consolidated – the composition of the main companies are disclosed in Note 2. The composition of unconsolidated and jointly controlled companies, as well as other investments, are disclosed in Note 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 unrecognized surplus value for real estate and the fixed asset ratios, are disclosed in Note 12.
l)
Intangible assets
Relates to the right over intangible assets used by the Bank in its activities.
Intangible assets comprise:
·
Future profitability/acquired client portfolio and acquisition of right to provide banking services: they are recognized and amortized over the period in which the asset will directly and indirectly contribute to future cash flows and adjusted for impairment, where applicable; and
·
Software: stated at cost less amortization calculated on a straight-line basis over the estimated useful life (20% p.a.), from the date it is available for use and adjusted for impairment, where applicable. Internal software development costs are recognized as an intangible asset when it is possible to show the intent and ability to complete and use the software, as well as to reliably measure costs directly attributable to the intangible asset. These costs are amortized during the software’s estimated useful life, considering the expected future economic benefits.
Intangible assets and the movement in these balances by class are presented in Note 13.
m)
Impairment
Financial and non-financial assets are tested for impairment.
Objective evidence of impairment may comprise the non-payment or payment delay by the debtor, possible bankruptcy process or the significant or extended decline in an asset value.
An impairment loss of a financial or non-financial asset is recognized in the profit or loss for the period if the carrying amount of an asset or cash-generating unit exceeds its recoverable value. Impairment losses are presented in Notes 6c(6) and 6g.
n)
Securities sold under agreements to repurchase
These are recognized at the value of the liabilities and include, when applicable, related charges up to the end of the reporting period, calculated on a daily pro-rata basis.
A breakdown of the contracts recognized in deposits and securities sold under agreements to repurchase, as well as terms and amounts recognized in the statement of financial position and statement of income, is presented in Note 14.
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Financial Statements of the Prudential Conglomerate
o)
Provisions, contingent assets and liabilities and legal obligations – tax and social security
Provisions, contingent assets and liabilities, and legal obligations, as defined below, are recognized, measured and disclosed in accordance with the criteria set out in CPC 25, approved by CMN Resolution No. 3,823/09 and CVM Resolution No. 594/09:
·
|
Contingent Assets: these are not recognized in the financial statements, except to the extent that there are real guarantees or favorable judicial decisions, to which no further appeals are applicable, and it is considered virtually certain that cash inflows will flow to Bradesco. Contingent assets with a chance of probable success are disclosed in the notes to the financial statements;
|
·
|
Provisions: these are recognized taking into consideration the opinion of legal counsel, the nature of the lawsuits, similarity with previous lawsuits, complexity and positioning of the courts, whenever an entity has a present obligation (legal or constructive) as a result of a past even, it is probable that an outflow of resources will be required to settle the obligation and when the amount can be reliably measured;
|
·
|
Contingent Liabilities: according to CPC 25, the term “contingent” is used for liabilities that are not recognized because their existence will only be confirmed by the occurrence of one or more uncertain future events beyond Management’s control. Contingent liabilities do not meet the criteria for recognition because they are considered as possible losses should only be disclosed in the notes when relevant. Obligations deemed remote are not recognized as a provision nor disclosed; and
|
·
|
Legal Obligations – Provision for Tax Risks: results from judicial proceedings, which contest the applicability of tax laws on the grounds of legality or constitutionality, which, regardless of the assessment of the probability of success, are fully provided for in the financial statements.
|
Details on lawsuits, as well as segregation and changes in amounts recognized, by type, are presented in Note 16.
p)
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).
q)
Subsequent events
These refer to events occurring between the reporting date and the date the financial statements are authorized to be issued.
They comprise the following:
·
Events resulting in adjustments: events relating to conditions already existing at the end of the reporting period; and
·
Events not resulting in adjustments: events relating to conditions not existing at the end of the reporting period.
Subsequent events, if any, are described in Note 32.
4)
CASH AND CASH EQUIVALENTS
|
On June 30 - R$ thousand
|
2017
|
Cash and due from banks in domestic currency
|
9,437,231
|
Cash and due from banks in foreign currency
|
3,829,774
|
Investments in gold
|
193
|
Total cash and due from banks
|
13,267,198
|
Interbank investments (1)
|
168,513,389
|
Total cash and cash equivalents
|
181,780,587
|
(1)
It refers to operations that mature in 90 days or less from the date they were effectively invested and with insignificant risk of change in fair value
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
|
31 to 180
|
181 to 360
|
More than 360
|
2017
|
days
|
days
|
days
|
days
|
Securities purchased under agreements to resell:
|
|
|
|
|
|
Own portfolio position
|
24,377,707
|
-
|
-
|
-
|
24,377,707
|
● Financial treasury bills
|
6,956,328
|
-
|
-
|
-
|
6,956,328
|
● National treasury notes
|
11,662,272
|
-
|
-
|
-
|
11,662,272
|
● National treasury bills
|
5,716,014
|
-
|
-
|
-
|
5,716,014
|
● Other
|
43,093
|
-
|
-
|
-
|
43,093
|
Funded position
|
143,424,397
|
931,775
|
-
|
-
|
144,356,172
|
● National treasury notes
|
56,017,547
|
881,724
|
-
|
-
|
56,899,271
|
● Financial treasury bills
|
58,174,544
|
-
|
-
|
-
|
58,174,544
|
● National treasury bills
|
29,232,306
|
50,051
|
-
|
-
|
29,282,357
|
Short position
|
1,400,541
|
877,863
|
-
|
-
|
2,278,404
|
● National treasury bills
|
1,400,541
|
877,863
|
-
|
-
|
2,278,404
|
Subtotal
|
169,202,645
|
1,809,638
|
-
|
-
|
171,012,283
|
Interest-earning deposits in other banks:
|
|
|
|
|
|
● Interest-earning deposits in other banks:
|
2,495,317
|
1,725,520
|
947,177
|
1,128,277
|
6,296,291
|
● Provision for losses
|
(155)
|
(4,316)
|
(8,360)
|
-
|
(12,831)
|
Subtotal
|
2,495,162
|
1,721,204
|
938,817
|
1,128,277
|
6,283,460
|
Total in 2017
|
171,697,807
|
3,530,842
|
938,817
|
1,128,277
|
177,295,743
|
%
|
96.9
|
2.0
|
0.5
|
0.6
|
100.0
|
b)
Income from interbank investments
Classified in the statement of income as income from operations with securities.
|
Accrued on June 30 - R$ thousand
|
2017
|
Income from investments in purchase and sale commitments:
|
|
• Own portfolio position
|
265,245
|
• Funded position
|
9,476,507
|
• Short position
|
358,857
|
Subtotal
|
10,100,609
|
Income from interest-earning deposits in other banks
|
239,555
|
Total (Note 6g)
|
10,340,164
|
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Financial Statements of the Prudential Conglomerate
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
|
2017
|
%
|
Trading securities
|
54,131,681
|
24.4
|
- Government securities
|
29,887,721
|
13.5
|
- Corporate securities
|
9,219,480
|
4.2
|
- Derivative financial instruments (1) (5)
|
15,024,480
|
6.7
|
Available-for-sale securities
|
155,678,967
|
70.1
|
- Government securities
|
96,630,216
|
43.5
|
- Corporate securities
|
59,048,751
|
26.6
|
Held-to-maturity securities (2)
|
12,262,241
|
5.5
|
- Government securities
|
29,038
|
-
|
- Corporate securities
|
12,233,203
|
5.5
|
Total
|
222,072,889
|
100.0
|
|
|
|
- Government securities
|
126,546,975
|
57.0
|
- Corporate securities
|
95,525,914
|
43.0
|
Total
|
222,072,889
|
100.0
|
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
|
2017
|
1 to 30
|
31 to 180
|
181 to 360
|
More than 360
|
Fair/book value (3) (4)
|
Amortized cost
|
Fair Value Adjustment
|
days
|
days
|
days
|
days
|
Financial treasury bills
|
-
|
318,749
|
1,674,359
|
12,827,095
|
14,820,203
|
14,821,284
|
(1,081)
|
National treasury notes
|
799
|
-
|
117,969
|
6,634,952
|
6,753,720
|
6,606,927
|
146,793
|
Financial bills
|
655,172
|
1,291,260
|
184,354
|
567,248
|
2,698,034
|
2,689,430
|
8,604
|
Debentures
|
21,453
|
179,920
|
359
|
1,639,770
|
1,841,502
|
2,083,722
|
(242,220)
|
National treasury bills
|
89,428
|
21,788
|
101,514
|
7,762,693
|
7,975,423
|
7,956,875
|
18,548
|
Derivative financial instruments (1) (5)
|
14,707,535
|
138,868
|
87,259
|
90,818
|
15,024,480
|
21,473,803
|
(6,449,323)
|
Other
|
2,666,534
|
434,058
|
219,376
|
1,698,351
|
5,018,319
|
5,071,347
|
(53,028)
|
Total
|
18,140,921
|
2,384,643
|
2,385,190
|
31,220,927
|
54,131,681
|
60,703,388
|
(6,571,707)
|
Derivative financial instruments (liabilities) (5)
|
(13,264,721)
|
(433,922)
|
(166,152)
|
(160,578)
|
(14,025,373)
|
(10,699,632)
|
(3,325,741)
|
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 (6)
|
On June 30 - R$ thousand
|
2017
|
|
|
|
|
Fair/book value (3) (4)
|
Amortized cost
|
Fair Value Adjustment
|
1 to 30
|
31 to 180
|
181 to 360
|
More than 360
|
days
|
days
|
days
|
days
|
National treasury bills
|
1,018,605
|
427,492
|
18,789,162
|
61,642,123
|
81,877,382
|
80,434,870
|
1,442,512
|
Debentures
|
406,283
|
650,283
|
1,106,830
|
35,967,016
|
38,130,412
|
38,920,085
|
(789,673)
|
National treasury notes
|
-
|
-
|
-
|
10,306,348
|
10,306,348
|
9,933,627
|
372,721
|
Foreign corporate securities
|
181,871
|
51,163
|
625,264
|
10,264,465
|
11,122,763
|
11,332,816
|
(210,053)
|
Shares
|
6,648,800
|
-
|
-
|
-
|
6,648,800
|
7,382,305
|
(733,505)
|
Certificates of real estate receivables
|
29,180
|
-
|
-
|
1,038,923
|
1,068,103
|
1,107,459
|
(39,356)
|
Brazilian foreign debt notes
|
11,897
|
-
|
1,501
|
572,586
|
585,984
|
567,229
|
18,755
|
Financial treasury bills
|
-
|
12,150
|
111,127
|
2,138,579
|
2,261,856
|
2,261,345
|
511
|
Other
|
1,433,278
|
1,247,177
|
767,550
|
229,314
|
3,677,319
|
3,653,009
|
24,310
|
Subtotal
|
9,729,914
|
2,388,265
|
21,401,434
|
122,159,354
|
155,678,967
|
155,592,745
|
86,222
|
Hedge - cash flow (Note 6f)
|
-
|
-
|
-
|
-
|
-
|
-
|
21,282
|
Securities reclassified to “Held-to-maturity securities”
|
-
|
-
|
-
|
-
|
-
|
-
|
(307,494)
|
Total
|
9,729,914
|
2,388,265
|
21,401,434
|
122,159,354
|
155,678,967
|
155,592,745
|
(199,990)
|
III) Held-to-maturity securities
Securities (2)
|
On June 30 - R$ thousand
|
2017
|
1 to 30
|
31 to 180
|
181 to 360
|
More than 360
|
Amortized cost (3)
|
Fair value (4)
|
Gain (loss) not accounted for
|
days
|
days
|
days
|
days
|
Certificates of real estate receivables
|
-
|
5,601
|
5,021
|
12,222,581
|
12,233,203
|
11,726,479
|
(506,724)
|
Other
|
-
|
-
|
-
|
29,038
|
29,038
|
29,216
|
178
|
Total
|
-
|
5,601
|
5,021
|
12,251,619
|
12,262,241
|
11,755,695
|
(506,546)
|
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
|
31 to 180
|
181 to 360
|
More than 360
|
2017 (3) (4)
|
days
|
days
|
days
|
days
|
Own portfolio
|
13,097,756
|
4,546,178
|
5,618,190
|
108,462,582
|
131,724,706
|
Fixed income securities
|
5,642,114
|
4,546,178
|
5,618,190
|
108,462,582
|
124,269,064
|
● National treasury notes
|
799
|
-
|
112,139
|
10,938,968
|
11,051,906
|
● Financial treasury bills
|
-
|
262,894
|
1,205,170
|
11,743,154
|
13,211,218
|
● National treasury bills
|
1,108,034
|
430,424
|
1,960,167
|
25,676,765
|
29,175,390
|
● Debentures
|
427,736
|
830,202
|
1,107,189
|
37,606,786
|
39,971,913
|
● Financial bills
|
655,172
|
1,291,260
|
184,354
|
567,248
|
2,698,034
|
● Certificates of real estate receivables
|
29,180
|
5,601
|
5,021
|
13,295,260
|
13,335,062
|
● Foreign corporate securities
|
938,482
|
131,182
|
135,711
|
6,731,473
|
7,936,848
|
● Brazilian foreign debt securities
|
12,113
|
-
|
3,275
|
592,938
|
608,326
|
● Bank deposit certificates
|
67,883
|
347,362
|
9
|
-
|
415,254
|
● Other
|
2,402,715
|
1,247,253
|
905,155
|
1,309,990
|
5,865,113
|
Equity securities
|
7,455,642
|
-
|
-
|
-
|
7,455,642
|
● Shares of listed companies
|
7,455,642
|
-
|
-
|
-
|
7,455,642
|
Restricted securities
|
65,544
|
93,463
|
18,086,196
|
48,288,321
|
66,533,524
|
Subject to repurchase agreements
|
55,878
|
11,387
|
14,823,245
|
39,614,559
|
54,505,069
|
● National treasury bills
|
-
|
4,781
|
14,172,772
|
35,066,915
|
49,244,468
|
● Foreign corporate securities
|
55,878
|
6,606
|
569,541
|
4,064,446
|
4,696,471
|
● National treasury notes
|
-
|
-
|
327
|
303,469
|
303,796
|
● Financial treasury bills
|
-
|
-
|
80,605
|
176,154
|
256,759
|
● Other
|
-
|
-
|
-
|
3,575
|
3,575
|
Brazilian Central Bank
|
-
|
14,075
|
69,524
|
-
|
83,599
|
● National treasury bills
|
-
|
14,075
|
69,524
|
-
|
83,599
|
Privatization rights
|
-
|
-
|
-
|
46,517
|
46,517
|
Guarantees provided
|
9,666
|
68,001
|
3,193,427
|
8,627,245
|
11,898,339
|
● National treasury notes
|
-
|
-
|
5,504
|
3,972,561
|
3,978,065
|
● National treasury bills
|
-
|
-
|
2,688,213
|
1,877,721
|
4,565,934
|
● Financial treasury bills
|
-
|
68,001
|
499,710
|
2,776,963
|
3,344,674
|
● Other
|
9,666
|
-
|
-
|
-
|
9,666
|
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Financial Statements of the Prudential Conglomerate
Securities
|
On June 30 - R$ thousand
|
1 to 30
|
31 to 180
|
181 to 360
|
More than 360
|
2017 (3) (4)
|
days
|
days
|
days
|
days
|
Derivative financial instruments (1) (5)
|
14,707,535
|
138,868
|
87,259
|
90,818
|
15,024,480
|
Securities subject to unrestricted repurchase agreements
|
-
|
-
|
-
|
8,790,179
|
8,790,179
|
● National treasury bills
|
-
|
-
|
-
|
6,783,414
|
6,783,414
|
● National treasury notes
|
-
|
-
|
-
|
1,734,684
|
1,734,684
|
● Financial treasury bills
|
-
|
-
|
-
|
272,081
|
272,081
|
Total
|
27,870,835
|
4,778,509
|
23,791,645
|
165,631,900
|
222,072,889
|
%
|
12.6
|
2.1
|
10.7
|
74.6
|
100.0
|
(1) Consistent with the criteria in Bacen Circular Letter No. 3,068/01 and due to the characteristics of the securities, we are classifying the derivative financial instruments, except those considered as cash flow hedges in the category Trading Securities;
(2) In compliance with Article 8 of Bacen Circular Letter No. 3,068/01, Bradesco declares that it has the financial capacity and intention to maintain held-to-maturity securities until their maturity dates;
(3) The number of days to maturity was based on the contractual maturity of the instruments, regardless of their accounting classification;
(4) The fair value of securities is determined based on the market price available at the end of the reporting period. If no market price quotation is available at the end of the reporting period, amounts are estimated based on the prices quoted by dealers, pricing models, quotation models or price quotations for instruments with similar characteristics. For investment funds, the original amortized cost reflects the fair value of the respective quotas;
(5) Includes hedge for protection of assets and liabilities, denominated in or indexed to foreign currency, primarily, arising from foreign investments, eliminating the effects of exchange variation of these assets and liabilities. For a better analysis of these items, consider the net exposure (Note 6d II); and
(6) Includes, there were Impairment losses of financial assets in the amount of R$833,283 thousand, related to securities classified in the category "Available-for-Sale Securities".
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Financial Statements of the Prudential Conglomerate
d)
Derivative financial instruments
Bradesco carries out transactions involving derivative financial instruments, which are recognized in the statement of financial position or in off-balance-sheet accounts, to meet its own needs in managing its global exposure, as well as to meet its customer’s requests, in order to manage their exposure. These operations involve a range of derivatives, including interest rate swaps, currency swaps, futures and options. Bradesco’s risk management policy is based on the utilization of derivative financial instruments mainly to mitigate the risks from operations carried out by the Bank and its subsidiaries.
Securities classified as trading and available-for-sale, as well as derivative financial instruments, are recognized in the consolidated statement of financial position at their fair value. Fair value is generally based on quoted market prices or quotations for assets or liabilities with similar characteristics. Should market prices not be available, fair values are based on dealer quotations, pricing models, discounted cash flows or similar techniques for which the determination of fair value may require judgment or significant estimates by Management.
Quoted market prices are used to determine the fair value of derivative financial instruments. The fair value of swaps is determined by using discounted cash flow modeling techniques that use yield curves, reflecting adequate risk factors. The information to build yield curves is mainly obtained from Securities, Commodities and Futures Exchange (B3), and the domestic and international secondary market. These yield curves are used to determine the fair value of currency swaps, interest rate and other risk factor swaps. The fair value of forward and futures contracts is also determined based on market price quotations for derivatives traded on an exchange or using methodologies similar to those outlined for swaps. The fair values of credit derivative instruments are determined based on market price quotation or from specialized entities. The fair value of options is determined based on mathematical models, such as Black & Scholes, using yield curves, implied volatilities and the fair value of corresponding assets. Current market prices are used to calculate volatility.
Derivative financial instruments in Brazil mainly refer to swaps and futures and are registered at B3.
Operations involving forward contracts of interest rates, indexes and currencies are contracted by Management to hedge Bradesco’s overall exposures and to meet customer needs.
Foreign derivative financial instruments refer to swap, forward, options, credit and futures operations and are mainly carried out at the stock exchanges in Chicago and New York, as well as the over-the-counter (OTC) markets.
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 recognized in off-balance-sheet accounts
|
On June 30 - R$ thousand
|
2017
|
Reference value
|
Net amount
|
Futures contracts
|
|
|
Purchase commitments:
|
146,458,963
|
-
|
- Interbank market
|
93,823,273
|
47,752,744
|
- Foreign currency
|
52,586,084
|
-
|
- Other
|
49,606
|
-
|
Sale commitments:
|
107,620,159
|
-
|
- Interbank market (1)
|
46,070,529
|
-
|
- Foreign currency (2)
|
61,471,487
|
8,885,403
|
- Other
|
78,143
|
28,537
|
|
|
|
Option contracts
|
|
|
Purchase commitments:
|
23,223,824
|
-
|
- Interbank market
|
11,885,179
|
10,554,362
|
- Foreign currency
|
11,222,031
|
1,583,692
|
- Other
|
116,614
|
-
|
Sale commitments:
|
19,674,655
|
-
|
- Interbank market
|
1,330,817
|
-
|
- Foreign currency
|
9,638,339
|
-
|
- Other
|
8,705,499
|
8,588,885
|
|
|
|
Forward contracts
|
|
|
Purchase commitments:
|
12,297,961
|
-
|
- Foreign currency
|
11,784,574
|
-
|
- Other
|
513,387
|
13,868
|
Sale commitments:
|
16,254,153
|
-
|
- Foreign currency
|
15,754,634
|
3,970,060
|
- Other
|
499,519
|
-
|
|
|
|
Swap contracts
|
|
|
Assets (long position):
|
73,627,402
|
-
|
- Interbank market
|
7,936,976
|
5,611,958
|
- Fixed rate
|
51,922,671
|
21,065,185
|
- Foreign currency
|
12,440,983
|
-
|
- IGPM
|
437,700
|
-
|
- Other
|
889,072
|
-
|
Liabilities (short position):
|
49,899,424
|
-
|
- Interbank market
|
2,325,018
|
-
|
- Fixed rate
|
30,857,486
|
-
|
- Foreign currency (2)
|
13,846,145
|
1,405,162
|
- IGPM
|
710,000
|
272,300
|
- Other
|
2,160,775
|
1,271,703
|
Derivatives include operations maturing in D+1.
(1) Includes, cash flow hedges to protect CDI-related funding totaling R$4,603,132 thousand (Note 6f); and
(2) Includes specific hedges to protect assets and liabilities, arising from foreign investments, totaling R$48,677,787 thousand.
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Financial Statements of the Prudential Conglomerate
II)
Breakdown of derivative financial instruments (assets and liabilities) shown at original amortized cost and fair value
|
On June 30 - R$ thousand
|
2017
|
Original amortized cost
|
Mark-to-market adjustment
|
Fair value
|
Adjustment receivable - swaps (1)
|
19,749,295
|
(6,396,785)
|
13,352,510
|
Adjustment receivable - future
|
975
|
-
|
975
|
Receivable forward purchases
|
654,841
|
-
|
654,841
|
Receivable forward sales
|
626,747
|
-
|
626,747
|
Premiums on exercisable options
|
441,945
|
(52,538)
|
389,407
|
Total assets (A)
|
21,473,803
|
(6,449,323)
|
15,024,480
|
Adjustment payables - swaps
|
(8,528,256)
|
(3,348,041)
|
(11,876,297)
|
Adjustment payables - future
|
(1,880)
|
-
|
(1,880)
|
Payable forward purchases
|
(1,001,656)
|
-
|
(1,001,656)
|
Payable forward sales/other
|
(677,528)
|
-
|
(677,528)
|
Premiums on written options
|
(490,312)
|
22,300
|
(468,012)
|
Total liabilities (B)
|
(10,699,632)
|
(3,325,741)
|
(14,025,373)
|
|
|
|
|
Net Effect (A-B)
|
10,774,171
|
(9,775,064)
|
999,107
|
(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
|
91 to 180
|
181 to 360
|
More than 360
|
2017
|
days
|
days
|
days
|
days
|
Futures contracts (1)
|
73,051,315
|
6,998,150
|
127,858,711
|
46,170,946
|
254,079,122
|
Option contracts
|
21,605,846
|
9,777,747
|
7,820,177
|
3,694,709
|
42,898,479
|
Forward contracts
|
16,738,216
|
5,522,309
|
4,178,617
|
2,112,972
|
28,552,114
|
Swap contracts (1)
|
5,200,967
|
12,779,541
|
7,637,459
|
97,908,859
|
123,526,826
|
Total in 2017
|
116,596,344
|
35,077,747
|
147,494,964
|
149,887,486
|
449,056,541
|
(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
|
2017
|
Government securities
|
|
National treasury notes
|
4,614,789
|
National treasury bills
|
2,994,173
|
Total
|
7,608,962
|
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
|
2017
|
Swap contracts (1)
|
276,690
|
Forward contracts
|
(295,828)
|
Option contracts
|
(160,013)
|
Futures contracts (1)
|
992,791
|
Total (Note 6g)
|
813,640
|
(1) Includes the gain (loss) and the respective adjustment to the market capitalization of the hedge for protection of the assets and liabilities, designated and/or indexed in foreign currency, primarily, arising from foreign investments.
VI)
Reference values of derivative financial instruments, by trading location and counterparts
|
On June 30 - R$ thousand
|
2017
|
B3 (stock exchange)
|
231,500,270
|
B3 (over-the-counter)
|
166,198,389
|
Overseas (stock exchange) (1)
|
44,100,246
|
Overseas (over-the-counter) (1)
|
7,257,636
|
Total
|
449,056,541
|
(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, 2017, Bradesco had credit default swaps (CDS) with the following characteristics: the risk received in credit swaps whose underlying assets are “debt securities issued by companies" in the amount of R$220,210 thousand and “bonds of the Brazilian public debt” in the amount of R$363,902 thousand and the risk transferred in credit swaps whose underlying assets are “derivatives of the Brazilian public debt” in the amount of R$(16,541) thousand,
achieving
a total net credit risk value of R$567,571 thousand, with an effect on the calculation of required shareholders’ equity of R$23,122 thousand. The contracts related to credit derivatives transactions described above are due in 2022. The mark-to-market of the protection rates that remunerates the counterparty that received the risk totaled R$(616) thousand. There were no credit events, as defined in the agreements, during the period.
f)
Cash flow hedge
On June 30, 2017, Bradesco used cash flow hedges to protect the cash flow from receipts of interest on investments in securities, related to the risk of a variable interest rate of the DI, using DI Futures contracts in B3, amounting to R$16,383,339 thousand, having as object of hedge the securities backed in DI, to the sum of R$18,046,986 thousand, maturing in 2018, making the cash flow fixed in advance. The adjustment to fair value of these operations recognized in the shareholders’ equity was R$204,456 thousand, net of tax effects was R$122,674 thousand. On June 30, 2017, Bradesco constituted hedge
accounting, with the aim of protecting its cash flows from payment of interest rates on funds, regarding the floating interest rate of DI, being traded DI Future contracts on B3 totaling R$4,603,132 thousand, having as object of hedge captures linked to DI, totaling R$4,594,907 thousand and maturities between 2018 and 2020, converting to fixed cash flows. The adjustment to fair value of these operations recognized in the shareholders’ equity was R$(28,839) thousand, net of tax effects was R$(17,303) thousand. The effectiveness of the hedge portfolio was assessed in accordance with Bacen Circular Letter No. 3,082/02
.
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Financial Statements of the Prudential Conglomerate
g)
Income from securities, insurance and derivative financial instruments
|
Accrued on June 30 - R$ thousand
|
2017
|
Fixed income securities (1)
|
11,562,160
|
Interbank investments (Note 5b)
|
10,340,164
|
Equity securities
|
729,106
|
Subtotal
|
22,631,430
|
Income from derivative financial instruments (Note 6d V)
|
813,640
|
Total
|
23,445,070
|
(1)
Includes the losses through impairment of financial assets (primarily debentures) in the amount of R$833,283 thousand.
7)
INTERBANK ACCOUNTS – RESERVE REQUIREMENT
a)
Reserve requirement
|
On June 30 - R$ thousand
|
Remuneration
|
2017
|
Compulsory deposit – demand deposits
|
not remunerated
|
4,820,146
|
Compulsory deposit – savings deposits
|
savings index
|
19,270,779
|
Compulsory deposit – time deposits
|
Selic rate
|
38,155,072
|
Additional compulsory deposit – savings deposits
|
Selic rate
|
5,226,260
|
Reserve requirement – SFH
|
TR + interest rate
|
825,908
|
Total
|
|
68,298,165
|
b)
Revenue from reserve requirement
|
Accrued on June 30 - R$ thousand
|
2017
|
Reserve requirement – Bacen (Compulsory deposit)
|
2,654,557
|
Reserve requirement – SFH
|
28,890
|
Total
|
2,683,447
|
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Consolidated Financial Statements
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
|
31 to 60
|
61 to 90
|
91 to 180
|
181 to 360
|
More than 360
|
Total in 2017 (A)
|
% (5)
|
days
|
days
|
days
|
days
|
days
|
days
|
Discounted trade receivables and loans (1)
|
18,357,443
|
11,966,859
|
9,202,609
|
19,142,073
|
25,566,463
|
67,205,519
|
151,440,966
|
36.0
|
Financing
|
4,164,908
|
3,221,427
|
3,455,867
|
12,418,686
|
17,325,073
|
87,021,571
|
127,607,532
|
30.4
|
Agricultural and agribusiness loans
|
2,389,711
|
1,406,708
|
972,500
|
3,773,231
|
3,977,710
|
9,130,009
|
21,649,869
|
5.2
|
Subtotal
|
24,912,062
|
16,594,994
|
13,630,976
|
35,333,990
|
46,869,246
|
163,357,099
|
300,698,367
|
71.6
|
Leasing
|
120,222
|
109,226
|
105,470
|
279,925
|
457,111
|
1,083,851
|
2,155,805
|
0.5
|
Advances on foreign exchange contracts (2)
|
1,357,514
|
1,662,347
|
1,693,846
|
2,764,299
|
2,218,085
|
-
|
9,696,091
|
2.3
|
Subtotal
|
26,389,798
|
18,366,567
|
15,430,292
|
38,378,214
|
49,544,442
|
164,440,950
|
312,550,263
|
74.4
|
Other receivables (3)
|
11,407,693
|
6,712,548
|
2,624,346
|
4,863,575
|
4,109,381
|
1,077,331
|
30,794,874
|
7.3
|
Total loans
|
37,797,491
|
25,079,115
|
18,054,638
|
43,241,789
|
53,653,823
|
165,518,281
|
343,345,137
|
81.7
|
Sureties and guarantees (4)
|
4,554,023
|
1,639,721
|
1,545,815
|
6,406,379
|
13,138,864
|
46,459,066
|
73,743,868
|
17.6
|
Loan assignment - real estate receivables certificate
|
39,325
|
39,323
|
39,321
|
113,167
|
168,891
|
567,825
|
967,852
|
0.2
|
Acquisition of credit card receivables
|
729,278
|
400,819
|
212,049
|
227,290
|
69,574
|
-
|
1,639,010
|
0.4
|
Loans available for import (4)
|
60,264
|
92,711
|
99,772
|
37,071
|
9,309
|
-
|
299,127
|
0.1
|
Confirmed exports loans (4)
|
121
|
377
|
1,071
|
496
|
40,000
|
-
|
42,065
|
-
|
Co-obligation from assignment of rural loan (4)
|
-
|
-
|
-
|
-
|
-
|
88,696
|
88,696
|
-
|
Total in 2017
|
43,180,502
|
27,252,066
|
19,952,666
|
50,026,192
|
67,080,461
|
212,633,868
|
420,125,755
|
100.0
|
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Consolidated Financial Statements
|
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 2017 (B)
|
% (5)
|
Discounted trade receivables and loans (1)
|
1,568,384
|
1,327,854
|
1,154,614
|
3,126,071
|
4,643,301
|
11,820,224
|
83.0
|
Financing
|
320,099
|
291,772
|
157,958
|
320,290
|
270,204
|
1,360,323
|
9.6
|
Agricultural and agribusiness loans
|
21,210
|
27,260
|
35,185
|
50,282
|
118,559
|
252,496
|
1.8
|
Subtotal
|
1,909,693
|
1,646,886
|
1,347,757
|
3,496,643
|
5,032,064
|
13,433,043
|
94.4
|
Leasing
|
9,073
|
8,500
|
6,973
|
15,260
|
10,210
|
50,016
|
0.4
|
Advances on foreign exchange contracts (2)
|
24,531
|
4,129
|
218,991
|
18,370
|
2,298
|
268,319
|
1.9
|
Subtotal
|
1,943,297
|
1,659,515
|
1,573,721
|
3,530,273
|
5,044,572
|
13,751,378
|
96.7
|
Other receivables (3)
|
6,219
|
198,818
|
136,215
|
34,725
|
96,985
|
472,962
|
3.3
|
Total in 2017
|
1,949,516
|
1,858,333
|
1,709,936
|
3,564,998
|
5,141,557
|
14,224,340
|
100.0
|
|
On June 30 - R$ thousand
|
Non-performing loans
|
Installments not yet due
|
1 to 30
|
31 to 60
|
61 to 90
|
91 to 180 days
|
181 to 360
|
More than 360
|
Total in 2017 (C)
|
% (5)
|
days
|
days
|
days
|
days
|
days
|
days
|
Discounted trade receivables and loans (1)
|
727,234
|
648,555
|
603,915
|
1,457,216
|
2,436,953
|
5,949,919
|
11,823,792
|
67.6
|
Financing
|
240,262
|
209,759
|
196,959
|
542,101
|
875,099
|
3,163,351
|
5,227,531
|
29.9
|
Agricultural and agribusiness loans
|
1,431
|
2,999
|
3,781
|
16,679
|
40,162
|
183,638
|
248,690
|
1.4
|
Subtotal
|
968,927
|
861,313
|
804,655
|
2,015,996
|
3,352,214
|
9,296,908
|
17,300,013
|
98.9
|
Leasing
|
8,839
|
9,107
|
7,782
|
22,856
|
35,730
|
74,360
|
158,674
|
0.9
|
Subtotal
|
977,766
|
870,420
|
812,437
|
2,038,852
|
3,387,944
|
9,371,268
|
17,458,687
|
99.8
|
Other receivables (3)
|
3,909
|
3,166
|
2,913
|
7,262
|
9,917
|
14,935
|
42,102
|
0.2
|
Total in 2017
|
981,675
|
873,586
|
815,350
|
2,046,114
|
3,397,861
|
9,386,203
|
17,500,789
|
100.0
|
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Consolidated Financial Statements
|
On June 30 - R$ thousand
|
Total
|
Total in 2017 (A+B+C)
|
% (5)
|
Discounted trade receivables and loans (1)
|
175,084,982
|
38.8
|
Financing
|
134,195,386
|
29.7
|
Agricultural and agribusiness loans
|
22,151,055
|
4.9
|
Subtotal
|
331,431,423
|
73.4
|
Leasing
|
2,364,495
|
0.5
|
Advances on foreign exchange contracts (2) (Note 9a)
|
9,964,410
|
2.2
|
Subtotal
|
343,760,328
|
76.1
|
Other receivables (3)
|
31,309,938
|
6.9
|
Total loans
|
375,070,266
|
83.0
|
Sureties and guarantees (4)
|
73,743,868
|
16.3
|
Loan assignment - real estate receivables certificate
|
967,852
|
0.2
|
Acquisition of credit card receivables
|
1,639,010
|
0.4
|
Loans available for import (4)
|
299,127
|
0.1
|
Confirmed exports loans (4)
|
42,065
|
-
|
Co-obligation from assignment of rural loan (4)
|
88,696
|
-
|
Total in 2017
|
451,850,884
|
100.0
|
(1) Including credit card loans and advances on credit card receivables of R$16,
466
,
738
thousand;
(2) Advances on foreign exchange contracts are classified as a deduction from “Other Liabilities”;
(3) The item “Other Receivables” comprises receivables on sureties and guarantees honored, receivables on sale of assets, securities and credits receivable, income receivable from foreign exchange contracts and export contracts and credit card receivables (cash and installment purchases at merchants) totaling R$24,
404
,
890
thousand;
(4) Recognized in off-balance sheet accounts; and
(5) Percentage of each type in relation to the total loan portfolio, including sureties and guarantee, loan assignment and acquisition of receivables.
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Consolidated Financial Statements
b) By type and levels of risk
|
On June 30 - R$ thousand
|
Levels of risk
|
AA
|
A
|
B
|
C
|
D
|
E
|
F
|
G
|
H
|
Total in 2017
|
% (1)
|
Discounted trade receivables and loans
|
22,664,824
|
75,885,386
|
12,946,966
|
27,524,492
|
8,093,444
|
5,488,154
|
3,129,247
|
2,693,176
|
16,659,293
|
175,084,982
|
46.7
|
Financing
|
78,266,352
|
21,847,814
|
18,066,160
|
8,370,940
|
2,924,310
|
1,270,677
|
527,000
|
464,146
|
2,457,987
|
134,195,386
|
35.8
|
Agricultural and agribusiness loans
|
6,379,302
|
3,748,223
|
9,001,774
|
1,823,069
|
690,642
|
217,061
|
37,036
|
21,757
|
232,191
|
22,151,055
|
5.9
|
Subtotal
|
107,310,478
|
101,481,423
|
40,014,900
|
37,718,501
|
11,708,396
|
6,975,892
|
3,693,283
|
3,179,079
|
19,349,471
|
331,431,423
|
88.4
|
Leasing
|
326,459
|
458,145
|
1,263,058
|
81,695
|
61,383
|
33,921
|
9,771
|
25,633
|
104,430
|
2,364,495
|
0.6
|
Advances on foreign exchange contracts (2)
|
3,446,765
|
1,768,648
|
1,891,833
|
2,289,177
|
218,438
|
259,914
|
18,678
|
1,522
|
69,435
|
9,964,410
|
2.7
|
Subtotal
|
111,083,702
|
103,708,216
|
43,169,791
|
40,089,373
|
11,988,217
|
7,269,727
|
3,721,732
|
3,206,234
|
19,523,336
|
343,760,328
|
91.7
|
Other receivables
|
4,040,693
|
19,599,418
|
2,596,348
|
3,507,881
|
327,179
|
90,581
|
92,274
|
48,563
|
1,007,001
|
31,309,938
|
8.3
|
Total in 2017
|
115,124,395
|
123,307,634
|
45,766,139
|
43,597,254
|
12,315,396
|
7,360,308
|
3,814,006
|
3,254,797
|
20,530,337
|
375,070,266
|
100.0
|
%
|
30.7
|
32.9
|
12.2
|
11.6
|
3.3
|
2.0
|
1.0
|
0.9
|
5.5
|
100.0
|
|
(1) Percentage of each type in relation to the total loan portfolio, excluding sureties and guarantees, loan assignments, acquisition of receivables and co-obligation in rural loan assignments; and
(2) Note
9a.
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Consolidated Financial Statements
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 2017
|
% (1)
|
Installments not yet due
|
-
|
-
|
1,099,964
|
3,037,103
|
2,430,722
|
1,756,920
|
1,417,256
|
1,539,861
|
6,218,963
|
17,500,789
|
100.0
|
1 to 30
|
-
|
-
|
144,897
|
180,799
|
111,994
|
75,545
|
66,036
|
65,895
|
336,509
|
981,675
|
5.6
|
31 to 60
|
-
|
-
|
111,366
|
157,990
|
99,015
|
65,586
|
66,519
|
57,352
|
315,758
|
873,586
|
5.0
|
61 to 90
|
-
|
-
|
92,743
|
142,223
|
98,631
|
63,020
|
59,141
|
54,973
|
304,619
|
815,350
|
4.7
|
91 to 180
|
-
|
-
|
161,775
|
339,445
|
261,782
|
200,289
|
164,514
|
147,260
|
771,049
|
2,046,114
|
11.7
|
181 to 360
|
-
|
-
|
218,786
|
525,835
|
427,820
|
428,978
|
366,773
|
240,073
|
1,189,596
|
3,397,861
|
19.4
|
More than 360
|
-
|
-
|
370,397
|
1,690,811
|
1,431,480
|
923,502
|
694,273
|
974,308
|
3,301,432
|
9,386,203
|
53.6
|
Past-due installments (2)
|
-
|
-
|
677,179
|
1,016,774
|
1,175,537
|
1,123,879
|
1,163,259
|
1,062,315
|
8,005,397
|
14,224,340
|
100.0
|
1 to 14
|
-
|
-
|
262,098
|
124,916
|
103,443
|
101,676
|
26,299
|
62,697
|
210,582
|
891,711
|
6.3
|
15 to 30
|
-
|
-
|
407,836
|
227,152
|
102,330
|
59,363
|
40,738
|
30,996
|
189,390
|
1,057,805
|
7.4
|
31 to 60
|
-
|
-
|
7,245
|
646,949
|
277,523
|
120,112
|
142,835
|
71,665
|
592,004
|
1,858,333
|
13.1
|
61 to 90
|
-
|
-
|
-
|
12,999
|
665,973
|
319,990
|
150,196
|
83,049
|
477,729
|
1,709,936
|
12.0
|
91 to 180
|
-
|
-
|
-
|
4,758
|
26,268
|
507,059
|
778,259
|
785,646
|
1,463,008
|
3,564,998
|
25.1
|
181 to 360
|
-
|
-
|
-
|
-
|
-
|
15,679
|
24,932
|
28,262
|
4,976,587
|
5,045,460
|
35.4
|
More than 360
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
96,097
|
96,097
|
0.7
|
Subtotal
|
-
|
-
|
1,777,143
|
4,053,877
|
3,606,259
|
2,880,799
|
2,580,515
|
2,602,176
|
14,224,360
|
31,725,129
|
|
Specific provision
|
-
|
-
|
17,772
|
121,616
|
360,626
|
864,240
|
1,290,257
|
1,821,524
|
14,224,360
|
18,700,395
|
|
(1) Percentage of maturities by type of installment; and
(2) For transactions with terms of more than 36 months, past-due periods are doubled, as permitted by Resolution No. 2,682/99.
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Consolidated Financial Statements
|
On June 30 - R$ thousand
|
Levels of risk
|
Performing loans
|
AA
|
A
|
B
|
C
|
D
|
E
|
F
|
G
|
H
|
Total in 2017
|
% (1)
|
Installments not yet due
|
115,124,395
|
123,307,634
|
43,988,996
|
39,543,377
|
8,709,137
|
4,479,509
|
1,233,491
|
652,621
|
6,305,977
|
343,345,137
|
100.0
|
1 to 30
|
7,100,205
|
17,997,117
|
4,211,340
|
6,271,224
|
704,507
|
574,226
|
114,410
|
66,125
|
758,337
|
37,797,491
|
11.0
|
31 to 60
|
5,284,283
|
10,971,879
|
3,360,738
|
4,340,875
|
420,496
|
180,288
|
60,192
|
37,020
|
423,344
|
25,079,115
|
7.3
|
61 to 90
|
4,999,149
|
7,255,106
|
1,887,510
|
3,159,161
|
293,567
|
78,275
|
36,440
|
27,470
|
317,960
|
18,054,638
|
5.3
|
91 to 180
|
13,487,792
|
16,755,828
|
5,331,163
|
5,663,121
|
648,570
|
535,146
|
93,935
|
168,018
|
558,216
|
43,241,789
|
12.6
|
181 to 360
|
15,823,655
|
21,040,368
|
6,262,839
|
6,932,955
|
1,433,233
|
759,405
|
285,778
|
108,947
|
1,006,643
|
53,653,823
|
15.6
|
More than 360
|
68,429,311
|
49,287,336
|
22,935,406
|
13,176,041
|
5,208,764
|
2,352,169
|
642,736
|
245,041
|
3,241,477
|
165,518,281
|
48.2
|
Generic provision
|
-
|
616,532
|
439,890
|
1,186,301
|
870,914
|
1,343,853
|
616,746
|
456,835
|
6,305,977
|
11,837,048
|
|
Total in 2017 (2)
|
115,124,395
|
123,307,634
|
45,766,139
|
43,597,254
|
12,315,396
|
7,360,308
|
3,814,006
|
3,254,797
|
20,530,337
|
375,070,266
|
|
Existing provision
|
-
|
695,855
|
502,747
|
1,483,406
|
1,892,416
|
5,452,993
|
3,762,098
|
3,131,564
|
20,530,337
|
37,451,416
|
|
Minimum required provision
|
-
|
616,532
|
457,662
|
1,307,917
|
1,231,540
|
2,208,093
|
1,907,003
|
2,278,359
|
20,530,337
|
30,537,443
|
|
Excess provision (3)
|
-
|
79,323
|
45,085
|
175,489
|
660,876
|
3,244,900
|
1,855,095
|
853,205
|
-
|
6,913,973
|
|
(1) Percentage of maturities by type of installment;
(2) The total includes performing loans of R$343.345.137 thousand and non-performing loans of R$31.725.129 thousand; and
(3) The allocation of the excess provision gives preference to the operations that are in the highest risk ratings, limited to 100% of the risk value.
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Financial Statements of the Prudential Conglomerate
d)
Concentration of loans
|
On June 30 - R$ thousand
|
2017
|
% (1)
|
Largest borrower
|
8,08
1
,
522
|
2.2
|
10 largest borrowers
|
30,854,198
|
8.2
|
20 largest borrowers
|
47,158,666
|
12.6
|
50 largest borrowers
|
69,048,720
|
18.4
|
100 largest borrowers
|
86,436,740
|
23.0
|
(1)
Percentage on total portfolio (as defined by Bacen).
e)
By economic sector
|
On June 30 - R$ thousand
|
2017
|
%
|
Public sector
|
8,081,522
|
2.2
|
Oil, derivatives and aggregate activities
|
8,081,522
|
100.0
|
Private sector
|
366,988,744
|
97.8
|
Companies
|
196,663,815
|
52.4
|
Real estate and construction activities
|
29,665,326
|
15.1
|
Retail
|
21,528,041
|
10.9
|
Services
|
17,825,244
|
9.1
|
Transportation and concession
|
14,735,277
|
7.5
|
Automotive
|
12,865,841
|
6.5
|
Food products
|
10,469,874
|
5.3
|
Wholesale
|
9,726,602
|
4.9
|
Production and distribution of electricity
|
7,865,649
|
4.0
|
Iron and steel industry
|
7,566,006
|
3.8
|
Sugar and alcohol
|
7,004,304
|
3.6
|
Holding
|
5,835,271
|
3.0
|
Capital goods
|
4,493,802
|
2.3
|
Pulp and paper
|
3,881,806
|
2.0
|
Chemical
|
3,683,140
|
1.9
|
Cooperative
|
3,911,770
|
2.0
|
Financial
|
3,396,929
|
1.7
|
Leisure and tourism
|
2,812,210
|
1.4
|
Textiles
|
2,374,860
|
1.2
|
Agriculture
|
2,498,668
|
1.3
|
Oil, derivatives and aggregate activities
|
2,348,986
|
1.2
|
Other industries
|
22,174,209
|
11.3
|
Individuals
|
170,324,929
|
45.4
|
Total
|
375,070,266
|
100.0
|
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)
|
% 2017 YTD (2)
|
Installments past due
|
Installments not yet due
|
Total - non-performing loans
|
AA
|
-
|
-
|
-
|
115,124,395
|
115,124,395
|
30.6
|
30.6
|
A
|
-
|
-
|
-
|
123,307,634
|
123,307,634
|
32.9
|
63.5
|
B
|
677,179
|
1,099,964
|
1,777,143
|
43,988,996
|
45,766,139
|
12.2
|
75.7
|
C
|
1,016,774
|
3,037,103
|
4,053,877
|
39,543,377
|
43,597,254
|
11.6
|
87.3
|
Subtotal
|
1,693,953
|
4,137,067
|
5,831,020
|
321,964,402
|
327,795,422
|
87.3
|
|
D
|
1,175,537
|
2,430,722
|
3,606,259
|
8,709,137
|
12,315,396
|
3.3
|
90.6
|
E
|
1,123,879
|
1,756,920
|
2,880,799
|
4,479,509
|
7,360,308
|
2.0
|
92.6
|
F
|
1,163,259
|
1,417,256
|
2,580,515
|
1,233,491
|
3,814,006
|
1.0
|
93.6
|
G
|
1,062,315
|
1,539,861
|
2,602,176
|
652,621
|
3,254,797
|
0.9
|
94.5
|
H
|
8,005,397
|
6,218,963
|
14,224,360
|
6,305,977
|
20,530,337
|
5.5
|
100.0
|
Subtotal
|
12,530,387
|
13,363,722
|
25,894,109
|
21,380,735
|
47,274,844
|
12.7
|
|
Total in 2017
|
14,224,340
|
17,500,789
|
31,725,129
|
343,345,137
|
375,070,266
|
100.0
|
|
%
|
3.8
|
4.7
|
8.5
|
91.5
|
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.
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
|
Existing
|
% 2017 YTD (1)
|
Specific
|
Generic
|
Total
|
Installments past due
|
Installments not yet due
|
Total specific
|
AA
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
A
|
0.5
|
-
|
-
|
-
|
616,532
|
616,532
|
79,323
|
695,855
|
0.5
|
B
|
1.0
|
6,772
|
11,000
|
17,772
|
439,890
|
457,662
|
45,085
|
502,747
|
1.1
|
C
|
3.0
|
30,503
|
91,113
|
121,616
|
1,186,301
|
1,307,917
|
175,489
|
1,483,406
|
3.4
|
Subtotal
|
|
37,275
|
102,113
|
139,388
|
2,242,723
|
2,382,111
|
299,897
|
2,682,008
|
0.8
|
D
|
10.0
|
117,554
|
243,072
|
360,626
|
870,914
|
1,231,540
|
660,876
|
1,892,416
|
15.4
|
E
|
30.0
|
337,164
|
527,076
|
864,240
|
1,343,853
|
2,208,093
|
3,244,900
|
5,452,993
|
74.1
|
F
|
50.0
|
581,629
|
708,628
|
1,290,257
|
616,746
|
1,907,003
|
1,855,095
|
3,762,098
|
98.6
|
G
|
70.0
|
743,621
|
1,077,903
|
1,821,524
|
456,835
|
2,278,359
|
853,205
|
3,131,564
|
96.2
|
H
|
100.0
|
8,005,397
|
6,218,963
|
14,224,360
|
6,305,977
|
20,530,337
|
-
|
20,530,337
|
100.0
|
Subtotal
|
|
9,785,365
|
8,775,642
|
18,561,007
|
9,594,325
|
28,155,332
|
6,614,076
|
34,769,408
|
73.5
|
Total in 2017
|
|
9,822,640
|
8,877,755
|
18,700,395
|
11,837,048
|
30,537,443
|
6,913,973
|
37,451,416
|
10.0
|
%
|
|
26.2
|
23.7
|
49.9
|
31.6
|
81.5
|
18.5
|
100.0
|
-
|
(1) Percentage of existing provision in relation to total portfolio, by level of risk.
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
|
R$ thousand
|
2017
|
- Specific provision (1)
|
22,468,102
|
- Generic provision (2)
|
10,754,621
|
- Excess provision (3)
|
7,490,351
|
- Loans
|
4,429,361
|
- Guarantees provided
|
3,060,990
|
Opening balance on January 1st
|
40,713,074
|
Accounting for allowance for loan losses (4)
|
14,790,156
|
Accounting for/reversal of provisions for guarantees provided (5)
|
(3,060,990)
|
Net write-offs/other
|
(14,990,824)
|
Closing balance on June 30
|
37,451,416
|
- Specific provision (1)
|
18,700,395
|
- Generic provision (2)
|
11,837,048
|
- Excess provision (3)
|
6,913,973
|
- Loans
|
6,913,973
|
-
Guarantees provided
|
-
|
|
|
(1) For contracts with installments past due for more than 14 days;
(2) Recognized based on the customer/transaction classification and therefore not included in the preceding item;
(3) The excess provision is recognized based on Management’s experience and the expectation in relation to the loan portfolio, to determine the total provision deemed sufficient to cover specific and general credit risk, when considered together with the provision calculated based on levels of risk and the corresponding minimum percentage in the provision established by Resolution No. 2,682/99. The excess provision per customer was classified according to the level of risk (Note 8f);
(4) Includes, the formation of allowance for loan losses, in the amount of R$2,456,367 thousand, as a result of the adequacy of the provision for guarantees provided, already mentioned in the previous item; and
(5) The opening balance, as of January 1, 2017, included the constitution of provision for guarantees provided, encompassing sureties, guarantees, credit letters, and standby letter of credit, which comprises the concept of “excess” provision that totaled R$3,060,990 thousand. In accordance with Resolution No. 4,512/16, in January 2017, part of this balance (R$604,623 thousand) was allocated to a specific account under "Other Liabilities - Sundry" (Note 18b), and the remaining balance (R$2,456,367 thousand) was allocated to “Excess Provision”.
h)
Allowance for Loan Losses expense net of amounts recovered
Expenses with the allowance for loan losses, net of credit write-offs recovered, are as follows.
|
Accrued on June 30 - R$ thousand
|
2017
|
Amount recognized (1)
|
12,333,789
|
Amount recovered (2) (3)
|
(3,611,047)
|
Allowance for Loan Losses expense net of amounts recovered
|
8,722,742
|
(1) Refers, to the formation of allowance for loan losses, in the amount of R$14,790,
156
thousand, excluding the portion related to the adequacy of the provision for guarantees provided, in the amount of R$2,456,367 thousand (Note 8g);
(2) Classified in income from loans (Note 8j); and
(3) In the period, credit was granted for operations already written-off for losses, without the retention of risks and benefits, in the amount of R$3,324,546 thousand, with effect on income in the amount of R$35,393 thousand.
i)
Changes in the renegotiated portfolio
|
R$ thousand
|
2017
|
Opening balance on January 1st
|
17,501,423
|
Amount renegotiated
|
8,967,012
|
Amount received
|
(5,246,690)
|
Write-offs
|
(3,025,781)
|
Closing balance on June 30
|
18,195,964
|
Allowance for loan losses
|
13,710,615
|
Percentage on renegotiated portfolio
|
75.3%
|
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
|
2017
|
Discounted trade receivables and loans
|
24,660,019
|
Financing
|
8,541,308
|
Agricultural and agribusiness loans
|
837,771
|
Subtotal
|
34,039,098
|
Recovery of credits charged-off as losses
|
3,611,047
|
Subtotal
|
37,650,145
|
Leasing, net of expenses
|
144,686
|
Total
|
37,794,831
|
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
|
2017
|
Financial Leases Receivables
|
2,247,127
|
Unearned income from leasing
|
(2,205,121)
|
Financial leased assets, plus lease losses (net)
|
6,739,863
|
Accrued depreciation on asset finance leasing:
|
(2,655,318)
|
- Accumulated depreciation
|
(3,967,732)
|
Difference in depreciation
|
1,312,414
|
Prepaid guaranteed residual value (Note 18b)
|
(1,762,056)
|
Total present value
|
2,364,495
|
9)
OTHER RECEIVABLES
a)
Foreign exchange portfolio
Balances
|
On June 30 - R$ thousand
|
|
2017
|
Assets – other receivables
|
|
Exchange purchases pending settlement
|
13,857,981
|
Foreign exchange and forward documents in foreign currencies
|
17,894
|
Exchange sale receivables
|
3,568,514
|
(-) Advances in domestic currency received
|
(202,110)
|
Income receivable on advances granted
|
159,827
|
Total
|
17,402,106
|
Liabilities – other liabilities
|
|
Exchange sales pending settlement
|
3,591,982
|
Exchange purchase payables
|
13,475,321
|
(-) Advances on foreign exchange contracts
|
(9,964,410)
|
Other
|
2,642
|
Total
|
7,105,535
|
Net foreign exchange portfolio
|
10,296,571
|
Off-balance-sheet accounts:
|
|
- Loans available for import
|
299,127
|
- Confirmed exports loans
|
42,065
|
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
|
2017
|
Foreign exchange income
|
1,197,531
|
Adjustments:
|
|
- Income on foreign currency financing (1)
|
87,591
|
- Income on export financing (1)
|
1,141,892
|
- Income on foreign investments (2)
|
22,838
|
- Expenses of liabilities with foreign bankers (3) (Note 16c)
|
(670,637)
|
- Funding expenses (4)
|
(898,476)
|
- Other (5)
|
(13,719)
|
Total adjustments
|
(330,511)
|
Adjusted foreign exchange income
|
867,020
|
(1) Recognized in “Income from loans”;
(2) Recognized in “Income from operations with securities”;
(3) Related to funds for financing of advances on foreign exchange contracts and import financing, recognized in “Borrowing and on-lending expenses”;
(4) Refers to funding expenses of investments in foreign exchange; and
(5) Primarily includes the exchange rate variations of resources invested in foreign currency.
b)
Sundry
|
On June 30 - R$ thousand
|
2017
|
Deferred tax assets (Note 31c)
|
50,600,905
|
Credit card operations
|
26,043,900
|
Debtors for escrow deposits
|
15,314,414
|
Trade and credit receivables (1)
|
6,908,796
|
Prepaid taxes
|
5,977,989
|
Other debtors
|
3,811,583
|
Payments to be reimbursed
|
725,772
|
Receivables from sale of assets
|
145,409
|
Other
|
770,987
|
Total
|
110,299,755
|
(1)
Primarily includes receivables from the acquisition of financial assets from loans and advances on receivables.
10)
OTHER ASSETS
a)
Foreclosed assets/other
|
On June 30 - R$ thousand
|
Cost
|
Provision for losses
|
Cost net of provision
|
2017
|
Real estate
|
1,564,374
|
(289,446)
|
1,274,928
|
Goods subject to special conditions
|
624,637
|
(624,637)
|
-
|
Vehicles and similar
|
581,249
|
(364,123)
|
217,126
|
Inventories/warehouse
|
21,324
|
-
|
21,324
|
Machinery and equipment
|
12,982
|
(11,662)
|
1,320
|
Other
|
21,343
|
(18,392)
|
2,951
|
Total in 2017
|
2,825,909
|
(1,308,260)
|
1,517,649
|
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Financial Statements of the Prudential Conglomerate
b)
Prepaid expenses
|
On June 30 - R$ thousand
|
2017
|
Commission on the placement of loans and financing (1)
|
477,827
|
Advertising and marketing expenses (2)
|
57,349
|
Other (3)
|
1,478,103
|
Total
|
2,013,279
|
(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, principally, (i) anticipation of commissions concerning the operational agreement to offer credit cards and other products and (ii) card issue costs.
Bradesco
4
3
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 recognized in the statement of income, under "Equity in the Earnings (Losses) of Affiliates and Subsidiaries", and correspond, in the first semester of 2017 to R$4,174,776 thousand and the investments under the entry "Earnings of Affiliates and Subsidiaries", correspond to R$46,061,070 thousand.
Companies (1)
|
Accrued on June 30 - R$ thousand
|
Capital
|
Shareholders’ equity adjusted
|
Number of shares/quotas held (in thousands)
|
Equity interest in capital
|
Adjusted income
|
Book value
|
Equity accounting adjustments (2)
|
Ordinary
(ON)
|
Preferential
(PN)
|
Quotas
|
On June 30, 2017
|
1st semester of 2017
|
Bradseg Participações S.A.
|
11,950,000
|
27,983,104
|
8
|
-
|
-
|
97.13%
|
2,426,236
|
27,181,029
|
2,356,693
|
Quixaba Empreendimentos e Participações Ltda.
|
8,650,772
|
9,817,131
|
-
|
-
|
865,077,202
|
100.00%
|
495,757
|
9,817,131
|
495,757
|
Kirton Seguros S.A.
|
554,865
|
1,143,811
|
17,153
|
9,598
|
-
|
98.08%
|
125,038
|
1,121,889
|
122,637
|
Tibre Holdings Ltda.
|
310,000
|
584,415
|
-
|
-
|
310,000
|
100.00%
|
23,862
|
584,415
|
23,862
|
Bradescard Elo Participações S.A.
|
790,000
|
1,289,531
|
4,167,605
|
-
|
-
|
100.00%
|
112,073
|
1,289,531
|
112,073
|
Embaúba Holdings Ltda.
|
326,000
|
463,292
|
-
|
-
|
285,905
|
87.70%
|
110,088
|
406,311
|
96,548
|
BF Promotora de Vendas Ltda.
|
1,426,220
|
1,248,626
|
-
|
-
|
1,426,220
|
100.00%
|
2,793
|
1,248,626
|
2,793
|
Haitong Banco de Investimento do Brasil S.A.
|
420,000
|
584,075
|
12,734
|
12,734
|
-
|
20.00%
|
(52,720)
|
116,815
|
(10,544)
|
Credival - Participações Administração e Assessoria Ltda.
|
1,021,027
|
1,088,737
|
-
|
-
|
2,011,709
|
100.00%
|
41,470
|
1,088,737
|
41,470
|
Bankpar Brasil Ltda.
|
290,000
|
566,586
|
-
|
-
|
290,000
|
100.00%
|
35,912
|
566,586
|
35,912
|
Other (3)
|
|
|
|
|
|
|
|
2,640,000
|
198,125
|
Foreign exchange gain/loss of branches abroad
|
|
|
|
|
|
|
|
-
|
699,450
|
Earnings of Affiliates and Subsidiaries
|
|
|
|
|
|
|
|
46,061,070
|
4,174,776
|
(1)
Data related to June 30, 2017;
(2)
The
adjustment considers income calculated periodically by the companies and includes equity variations recognized by the investees not recognized in profit or loss, as well as alignment of accounting practice adjustments, where applicable
; and
(3)
Basically, earnings of affiliates and subsidiaries overseas and investments in the following companies:
Ganant Corretora de Seguros Ltda., Miramar Holdings S.A., Neon Holdings S.A., Imagra Imobiliária e Agrícola Ltda
.
e Kirton Participações e Investimentos Ltda
.
4
4
June 2017
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
|
Cost
|
Depreciation
|
Cost net of depreciation
|
2017
|
Property and equipment:
|
|
|
|
|
- Buildings
|
4%
|
316,642
|
(46,803)
|
269,839
|
- Land
|
-
|
380,594
|
-
|
380,594
|
Facilities, furniture and premises and equipment
|
10%
|
4,493,289
|
(2,279,011)
|
2,214,278
|
Security and communication systems
|
10%
|
294,905
|
(175,475)
|
119,430
|
Data processing systems
|
20 to 40%
|
3,806,865
|
(2,443,910)
|
1,362,955
|
Transportation systems
|
20%
|
85,328
|
(43,438)
|
41,890
|
Subtotal
|
|
9,377,623
|
(4,988,637)
|
4,388,986
|
Leased premises and equipment
|
|
7,065,726
|
(2,981,181)
|
4,084,545
|
Total in 2017
|
|
16,443,349
|
(7,969,818)
|
8,473,531
|
The fixed assets to shareholders’ equity ratio is 39.6% when considering only the companies and payment institutions within the economic group (the “Prudential Conglomerate”), where the maximum limit is 50.0%
.
13)
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
|
2017
|
Acquisition of financial services rights
|
Contract
|
4,009,832
|
(2,250,344)
|
1,759,488
|
Software (2)
|
20%
|
8,088,555
|
(5,406,389)
|
2,682,166
|
Goodwill (3)
|
Up to 20%
|
11,902,430
|
(2,530,688)
|
9,371,742
|
Total in 2017
|
|
24,000,817
|
(10,187,421)
|
13,813,396
|
(1) Intangible assets are amortized over an estimated period of economic benefit and recognized in “other administrative expenses” and “other operating expenses”, where applicable;
(2) Software acquired and/or developed by specialized companies; and
(3) On June 30, 2017, primarily composed of goodwill on the acquisition of equity interest in Bradescard - R$625,478 thousand, Bradescard Mexico - R$17,510 thousand, Bradesco BBI S.A. - R$120,899 thousand; and Kirton Bank - R$7,762,386 thousand.
b)
Changes in intangible assets by type
|
On June 30 - R$ thousand
|
Balance on January 1
st
, 2017
|
Additions / (reductions)
|
Amortization for the period
|
Balance on June 30, 2017
|
Acquisition of financial services rights
|
1,893,406
|
355,994
|
(489,912)
|
1,759,488
|
Software
|
2,750,949
|
404,226
|
(473,009)
|
2,682,166
|
Goodwill – Future profitability (1)
|
5,430,608
|
26,936
|
(470,778)
|
4,986,766
|
Goodwill – Based on intangible assets and other reasons (1)
|
3,481,962
|
-
|
(466,774)
|
3,015,188
|
Goodwill – Difference in fair value of assets/liabilities (1)
|
1,599,927
|
-
|
(230,139)
|
1,369,788
|
Total in 2017
|
15,156,852
|
787,156
|
(2,130,612)
|
13,813,396
|
(1)
Include, basically, the effects of the final report on purchase price allocation (“PPA”) from the acquisition of HSBC Brasil.
Bradesco
45
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Financial Statements of the Prudential Conglomerate
14)
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
|
2017
|
● Demand deposits (1)
|
30,886,127
|
-
|
-
|
-
|
30,886,127
|
● Savings deposits (1)
|
95,736,763
|
-
|
-
|
-
|
95,736,763
|
● Interbank deposits
|
281,779
|
183,512
|
16,623
|
48,459
|
530,373
|
● Time deposits (2)
|
8,286,637
|
12,995,258
|
9,446,203
|
103,805,214
|
134,533,312
|
Total in 2017
|
135,191,306
|
13,178,770
|
9,462,826
|
103,853,673
|
261,686,575
|
%
|
51.7
|
5.0
|
3.6
|
39.7
|
100.0
|
(1) Classified as 1 to 30 days, not considering average historical turnover; and
(2) Considers the actual maturities of the investments.
b)
Securities sold under agreements to repurchase
|
On June 30 - R$ thousand
|
1 to 30 days
|
31 to 180 days
|
181 to 360 days
|
More than 360 days
|
2017
|
Own portfolio
|
56,338,784
|
18,683,379
|
12,085,461
|
13,784,487
|
100,892,111
|
● Government securities
|
48,803,121
|
123,550
|
28,562
|
-
|
48,955,233
|
● Debentures of own issuance
|
2,484,510
|
18,323,133
|
11,650,585
|
13,254,438
|
45,712,666
|
● Foreign
|
5,051,153
|
236,696
|
406,314
|
530,049
|
6,224,212
|
Third-party portfolio (1)
|
144,238,406
|
-
|
-
|
-
|
144,238,406
|
Unrestricted portfolio (1)
|
9,974,173
|
1,365,853
|
-
|
-
|
11,340,026
|
Total in 2017
|
210,551,363
|
20,049,232
|
12,085,461
|
13,784,487
|
256,470,543
|
%
|
82.1
|
7.8
|
4.7
|
5.4
|
100.0
|
(1)
Represented by government securities.
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
|
2017
|
Securities – Brazil:
|
|
|
|
|
|
- Financial bills
|
3,902,052
|
23,513,983
|
18,757,145
|
60,832,606
|
107,005,786
|
- Letters of credit for real estate
|
1,756,375
|
6,684,858
|
10,822,564
|
6,621,509
|
25,885,306
|
- Letters of credit for agribusiness
|
1,822,343
|
3,493,555
|
726,824
|
1,295,311
|
7,338,033
|
Subtotal
|
7,480,770
|
33,692,396
|
30,306,533
|
68,749,426
|
140,229,125
|
Securities – Overseas:
|
|
|
|
|
|
- Securitization of future flow of money orders received from overseas
|
9,383
|
239,254
|
392,258
|
2,077,897
|
2,718,792
|
- MTN Program Issues (1)
|
1,714
|
-
|
28,451
|
256,422
|
286,587
|
Subtotal
|
11,097
|
239,254
|
420,709
|
2,334,319
|
3,005,379
|
Structured Operations Certificates
|
46,975
|
200,451
|
79,374
|
72,939
|
399,739
|
Total in 2017
|
7,538,842
|
34,132,101
|
30,806,616
|
71,156,684
|
143,634,243
|
%
|
5.2
|
23.8
|
21.4
|
49.6
|
100.0
|
(1)
Issuance of securities on the international market to invest in foreign exchange transactions, pre-export financing, import financing and working capital financing, predominately in the medium and long-term
.
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
|
2017
|
Savings deposits
|
3,053,831
|
Time deposits
|
4,442,221
|
Securities sold under agreements to repurchase
|
13,261,217
|
Funds from issuance of securities
|
8,352,376
|
Subordinated debts (Note 17)
|
2,877,207
|
Other funding expenses
|
283,817
|
Total
|
32,270,669
|
15)
BORROWING AND ON-LENDING
a)
Borrowing
|
On June 30 - R$ thousand
|
1 to 30
|
31 to 180
|
181 to 360
|
More than 360
|
2017
|
days
|
days
|
days
|
days
|
Overseas
|
4,598,372
|
11,453,977
|
5,456,273
|
1,920,137
|
23,428,759
|
Total in 2017
|
4,598,372
|
11,453,977
|
5,456,273
|
1,920,137
|
23,428,759
|
%
|
19.6
|
48.9
|
23.3
|
8.2
|
100.0
|
b)
On-lending
|
On June 30 - R$ thousand
|
1 to 30
|
31 to 180
|
181 to 360
|
More than 360
|
2017
|
days
|
days
|
days
|
days
|
In Brazil
|
1,324,226
|
4,490,188
|
5,410,342
|
21,888,871
|
33,113,627
|
- FINAME
|
637,986
|
2,952,936
|
2,970,802
|
12,063,061
|
18,624,785
|
- BNDES
|
685,968
|
1,537,252
|
2,374,079
|
9,825,810
|
14,423,109
|
- National Treasury
|
-
|
-
|
64,143
|
-
|
64,143
|
- Other institutions
|
272
|
-
|
1,318
|
-
|
1,590
|
Total in 2017
|
1,324,226
|
4,490,188
|
5,410,342
|
21,888,871
|
33,113,627
|
%
|
4.0
|
13.6
|
16.3
|
66.1
|
100.0
|
c)
Borrowing and on-lending expenses
|
Accrued on June 30 - R$ thousand
|
2017
|
Borrowing:
|
|
- In Brazil
|
354,516
|
- Overseas
|
861,778
|
Subtotal borrowing
|
1,216,294
|
On-lending in Brazil:
|
|
- BNDES
|
594,927
|
- FINAME
|
352,380
|
- National Treasury
|
3,146
|
- Other institutions
|
24
|
On-lending overseas:
|
|
- Payables to foreign bankers (Note 9a)
|
670,637
|
Subtotal on-lending
|
1,621,114
|
Total
|
2,837,408
|
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Financial Statements of the Prudential Conglomerate
16)
PROVISIONS, CONTINGENT ASSETS AND LIABILITIES AND LEGAL OBLIGATIONS – TAX AND SOCIAL SECURITY
a)
Contingent assets
Contingent assets are not recognized in the financial statements. However, there are ongoing proceedings where the chance of success is considered probable, but the amounts are not material, such as: a) Social Integration Program (PIS), Bradesco has made a claim to offset PIS against Gross Operating Income, paid under Decree-Laws No. 2,445/88 and No. 2,449/88, regarding the payment that exceeded the amount due under Supplementary Law No. 07/70 (PIS Repique); and b) other taxes, the legality and/or constitutionality of which is being challenged, where the decision may lead to reimbursement of amounts paid.
b)
Provisions classified as probable losses and legal obligations – tax and social security
The Organization is a party to a number of labor, civil and tax lawsuits, arising from the normal course of business.
Management recognized provisions where, based on their opinion and that of their legal counsel, the nature of the lawsuit, similarity to previous lawsuits, complexity and the courts standing, the loss is deemed probable.
Management considers that the provision is sufficient to cover the future losses generated by the respective lawsuits.
Provisions related to legal obligations are maintained until the conclusion of the lawsuit, represented by judicial decisions with no further appeals or due to the statute of limitation.
I -
Labor claims
These are claims brought by former employees and outsourced employees seeking indemnifications, most significantly for unpaid “overtime”, pursuant to Article 224 of the Consolidation of Labor Laws (CLT). In proceedings in which a judicial deposit is used to guarantee the execution of the judgment, the labor provision is made considering the estimated loss of these deposits. For proceedings with similar characteristics and for which there has been no official court decision, the provision is recognized based on the average calculated value of payments made for labor complaints settled in the past 12 months; and for proceedings originating from acquired banks, with unique characteristics, the calculation and assessment of the required balance is conducted periodically, based on the updated recent loss history.
Overtime is monitored by using electronic time cards and paid regularly during the employment contract and, accordingly, the claims filed by former employees do not represent significant amounts.
II -
Civil claims
These are claims for pain and suffering and property damages, mainly relating to protests, returned checks, the inclusion of information about debtors in the credit restriction registry and the replacement of inflation adjustments excluded as a result of government economic plans. These lawsuits are individually controlled using a computer-based system and provisioned whenever the loss is deemed as probable, considering the opinion of Management and their legal counsel, the nature of the lawsuits, similarity with previous lawsuits, complexity and positioning of the courts.
Most of these lawsuits are brought to the Special Civil Court (JEC), in which the claims are limited to 40 times the minimum wage and do not have a significant impact on the Organization’s financial position.
Bradesco
49
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Financial Statements of the Prudential Conglomerate
There are a significant number of legal claims pleading alleged differences in adjustment for inflation on savings account balances due to the implementation of economic plans that were part of the federal government’s economic policy to reduce inflation in the ‘80s and ‘90s.
Although Bradesco complied with the law and regulation in force at the time, these lawsuits have been recognized in provisions, taking into consideration the claims where Bradesco is the defendant and the perspective of loss, which is considered after the analysis of each demand, based on the current decision of the Superior Court of Justice (STJ).
Note that, regarding disputes relating to economic plans, the Federal Supreme Court (STF) suspended the prosecution of all lawsuits at the cognizance stage, until the Court issues a final decision on the right under litigation.
III -
Legal obligations – provision for tax risks
The Organization is disputing the legality and constitutionality of certain taxes and contributions in court, for which provisions have been recognized in full, although there is a good chance of a favorable outcome, based on the opinion of Management and their legal counsel. The processing of these legal obligations and the provisions for cases for which the risk of loss is deemed as probable is regularly monitored in the legal court. During or after the conclusion of each case, a favorable outcome may arise for the Organization, resulting in the reversal of the related provisions.
The main cases are:
-
|
PIS and COFINS – R$2,393,577 thousand: 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$1,818,351 thousand: we are requesting to deduct from income tax and social contributions payable (IRPJ and CSLL, respectively) amounts of actual and definite loan losses related to unconditional discounts granted during collections, regardless of compliance with the terms and conditions provided for in Articles 9 to 14 of Law No. 9,430/96 that only apply to temporary losses;
|
-
|
Pension Contributions – R$1,334,221 thousand: official notifications related to the pension contributions on financial contributions in private pension plans, considered by the authorities to be compensatory sums subject to the incidence of pension contributions and to an isolated fine for not withholding IRRF on the financial contributions;
|
-
|
INSS – Contribution to SAT – R$389,895 thousand: in an ordinary lawsuit filed by the Brazilian Federation of Banks – Febraban, since April 2007, on behalf of its members, is questioned the classification of banks at the highest level of risk, with respect to Work Accident Risk – RAT, which eventually raised the rate of the respective contribution from 1% to 3%, in accordance with Decree No. 6,042/07; and
|
-
|
PIS – R$152,322 thousand: the Bradesco Organization is requesting authorization to offset overpaid amounts in 1994 and 1995 as PIS contribution, already compensated, provisioned upon granting of the preliminary injunction, corresponding to the surplus paid over that calculated on the tax base established in the Constitution, i.e., gross operating income, as defined in the income tax legislation set out in Article 44 of Law No. 4,506/64, which excludes interest income.
|
In general, the provisions relating to lawsuits are classified as non-current, due to the unpredictability of the duration of the proceedings in the Brazilian justice system. For this reason, the estimate has not been disclosed with relation to the specific year in which these lawsuits will be finalized.
50
June 2017
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Financial Statements of the Prudential Conglomerate
IV Provisions by nature
|
On June 30 - R$ thousand
|
2017
|
Labor claims
|
5,110,756
|
Civil claims
|
4,261,771
|
Provision for tax risks
|
6,669,058
|
Total (Note 18b)
|
16,041,585
|
V Changes in provisions
|
R$ thousand
|
2017
|
Labor
|
Civil
|
Tax (1) (2)
|
Balance on January 1st, 2017
|
4,764,013
|
4,106,200
|
6,816,301
|
Adjustment for inflation
|
308,547
|
241,012
|
241,066
|
Provisions, net of (reversals and write-offs)
|
405,762
|
332,392
|
(386,549)
|
Payments
|
(367,566)
|
(417,833)
|
(1,760)
|
Balance on June 30, 2017
|
5,110,756
|
4,261,771
|
6,669,058
|
(1) Mainly include legal obligations; and
(2) Includes, in the first semester of 2017, reversals of provisions relating to: (i) PIS proceeding, related to the offset of amounts unduly paid in the amount of R$191,492 thousand; and (ii) IRPJ/CSLL on loan losses, in the amount of R$181,266 thousand.
c)
Contingent liabilities classified as possible losses
The Organization maintains a system to monitor all administrative and judicial proceedings in which the institution is plaintiff or defendant and, based on the opinion of legal counsel, classifies the lawsuits according to the expectation of loss. Case law trends are periodically analyzed and, if necessary, the related risk is reclassified. In this respect, contingent lawsuits deemed to have a possible risk of loss are not recognized as a liability in the financial statements. The main proceedings in this category are the following: a) 2006 to 2013 income tax and social contribution, relating to goodwill amortization being disallowed on the acquisition of investments, for the amount of R$4,788,245 thousand; b) Fines and disallowances of Cofins loan compensations, released after a favorable decision in a judicial proceeding, where the unconstitutionality of the expansion of the intended calculation base was discussed for revenues other than those from billing (Law No. 9,718/98), in the amount of R$2,495,215 thousand; c) Leasing companies’ Tax on Services of any Nature (ISSQN), total lawsuits correspond to R$2,263,348 thousand which relates to the municipal tax demands from municipalities other than those in which the company is located and where, under law, tax is collected; d) IRPJ and CSLL deficiency note relating to disallowance of exclusions of revenues from the mark-to-market of securities from 2007 to 2012, differences in depreciation expenses, insufficient depreciation expenses, expenses with depreciation of leased assets, operating expenses and income and disallowance of tax loss compensation, in the amount of R$1,650,518 thousand; e) Notifications and disallowances of compensations of PIS and Cofins related to the unconstitutional extension of the basis of calculation intended for other income other than the billing (Law No 9,718/98), from acquired companies, amounting to R$1,358,577 thousand; and f) IRPJ and CSLL deficiency notice relating to the disallowance of loan loss deductions, for the amount of R$711,345 thousand.
d) Other matters
I.
On May 31, 2016, Bradesco became aware of the indictment of three members of its
Board of Executive Officers by the Brazilian Federal Police under the so-called “Operation Zelotes.” On July 28, 2016, the Public Prosecutor's Office filed charges against the three members of the Board of Executive Officers and a former member of its Board of Directors, that was received by the Judge of the 10th Federal Court of the Federal District Judiciary Section. The Management conducted a thorough internal evaluation of the records and documents related to the indictment and found no evidence of any illegality committed by its representatives. The executives of
Bradesco have already submitted their respective defenses in the criminal proceedings, pointing out the facts and evidence demonstrating their innocence.
Bradesco
51
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Financial Statements of the Prudential Conglomerate
In parallel to his defense, the Chairman of the Board of Executive Officers of Bradesco, Mr. Luiz Carlos Trabuco Cappi, presented a petition for
habeas corpus
to the Regional Federal Court (
Tribunal Federal Regional
) – 1st Region. After processing the motion for
habeas corpus
, the 4
th
Panel of the aforementioned Court,
in a session held on June 13, 2017,
by unanimous decision, excluded him from criminal proceedings, due to lack of just cause.
Bradesco is cooperating with the relevant authorities and regulatory bodies, furnishing the requested information in Brazil and abroad. Moreover, Bradesco was summoned by the General´s Office of the Ministry of Finance on the filing of an Administrative Proceeding ("PAR"). This process, which is in the pre-trial phase, may entail the possibility of application of a fine and/or mention on public lists, which may eventually lead to restrictions on business with public agencies.
On account of the news published in the media, on the indictment in the "Operation Zealots", a class action was filed in the District Court of New York, on June 3, 2016. On September 1, 2016, Bradesco spontaneously attended the proceedings of the Class Action and agreed with the plaintiff a term for the submission of the revocation of the suit until December 23, 2016. On October 21, 2016, the Plaintiff Leader presented the addendum of the Initial Petition, appointing as defendants Bradesco and three members of its Board of Executive Officers. According to the demand, investors who purchased preferred American Depository Shares (“ADS”) of Bradesco between April 30, 2012 and July 27, 2016 would have suffered losses provoked by Bradesco due to a supposed violation regarding the American law of capital markets, according to communication to the Market on May 31, June 8 and July 28, 2016. On December 23, 2016, Bradesco filed a motion to dismiss, which – following a reply from the Lead Plaintiff and a rejoinder from Bradesco – is awaiting a decision. Considering that the demand is in a preliminary stage, it is not possible at present to make a risk rating, and there is not yet evidence to support an assessment of the value of the respective risk
.
II.
The wholly-owned subsidiaries of Bradesco, BEM - Distribuidora de Títulos e Valores Mobiliários Ltda. and BRAM - Bradesco Asset Management S.A. Distribuidora de Títulos e Valores Mobiliários, as well as two of its Managers, were mentioned in the scope of the so-called "Greenfield operation" of the Federal Police, because they were responsible for the administration and management of the Fund in Equity - FIP (Equity Investment Fund), respectively. Besides providing the documents, the Federal Court has ruled, in the course of this Operation, the blocking of these companies’ values. As a result of this, a Commitment was signed, approved by the 10th Federal Court of the Federal District, to release the values through the provision of guarantees of up to R$104 million, without the recognition of any civil or criminal liability on the part of companies or administrators of the Organization. In the scope of this commitment, managers and officers of the Organization committed to provide any clarifications to the authorities responsible for conducting this investigation, regardless of a formal subpoena. Additionally, the internal evaluations indicate that there has been no illegality in conducting these activities according to communication to the Market on September 20, 2016. So far, there is no indication that the investigations could result in the accountability of these companies.
5
2
June 2017
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Financial Statements of the Prudential Conglomerate
17)
SUBORDINATED DEBT
|
On June 30 - R$ thousand
|
Original term in years
|
Nominal amount
|
2017
|
In Brazil:
|
|
|
|
Subordinated CDB:
|
|
|
|
2019
|
10
|
20,000
|
59,165
|
Financial bills:
|
|
|
|
2017
|
6
|
2,763,476
|
4,137,605
|
2018
|
6
|
8,262,799
|
10,020,338
|
2019
|
6
|
21,858
|
34,794
|
2017
|
7
|
20,100
|
48,988
|
2018
|
7
|
141,050
|
303,367
|
2019
|
7
|
3,172,835
|
3,430,347
|
2020
|
7
|
1,700
|
2,704
|
2022
|
7
|
4,305,011
|
5,357,935
|
2023
|
7
|
1,359,452
|
1,620,946
|
2024
|
7
|
67,450
|
70,671
|
2018
|
8
|
50,000
|
113,780
|
2019
|
8
|
12,735
|
26,632
|
2020
|
8
|
28,556
|
52,066
|
2021
|
8
|
1,236
|
1,962
|
2023
|
8
|
1,706,846
|
2,151,832
|
2024
|
8
|
136,695
|
152,059
|
2025
|
8
|
6,193,653
|
6,346,344
|
2021
|
9
|
7,000
|
12,558
|
2024
|
9
|
4,924
|
6,217
|
2025
|
9
|
400,944
|
443,762
|
2021
|
10
|
19,200
|
38,747
|
2022
|
10
|
54,143
|
95,355
|
2023
|
10
|
688,064
|
1,041,595
|
2025
|
10
|
284,137
|
366,674
|
2026
|
10
|
361,196
|
417,858
|
2027
|
10
|
254,743
|
259,033
|
2026
|
11
|
3,400
|
3,998
|
2027
|
11
|
47,046
|
51,577
|
Perpetual
|
-
|
5,000,000
|
5,373,689
|
Subtotal in Brazil
|
|
|
42,042,598
|
Overseas:
|
|
|
|
2019
|
10
|
1,333,575
|
2,523,950
|
2021
|
11
|
2,766,650
|
5,424,522
|
2022
|
11
|
1,886,720
|
3,700,034
|
Subtotal overseas
|
|
|
11,648,506
|
Total (1) (2)
|
|
|
53,691,104
|
(1) It includes the amount of R$22,622,595 thousand, referring to subordinated debts recognized in “Eligible Debt Capital Instruments”; and
(2) The information on results are presented on
(
Note 14d).
Bradesco
5
3
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Financial Statements of the Prudential Conglomerate
18)
OTHER LIABILITIES
a)
Tax and social security
|
On June 30 - R$ thousand
|
2017
|
Provision for deferred income tax (Note 31f)
|
2,586,978
|
Taxes and contributions on profit payable
|
978,950
|
Taxes and contributions payable
|
960,702
|
Total
|
4,526,630
|
b)
Sundry
|
On June 30 - R$ thousand
|
2017
|
Credit card operations
|
23,048,505
|
Civil, tax and labor provisions (Note 16b IV) (1)
|
16,041,585
|
Loan assignment obligations
|
8,276,329
|
Provision for payments
|
5,473,418
|
Sundry creditors
|
5,220,464
|
Obligations by quotas of investment funds
|
3,440,779
|
Creditors - prepayment of residual value
|
1,762,056
|
Liabilities for acquisition of assets and rights
|
553,052
|
Other (2)
|
3,691,415
|
Total
|
67,507,603
|
(1) According to Bacen Circular Letter No. 3,782/16, “Provisions for tax risks” were reclassified from “Other liabilities - Tax and social security” to “Other liabilities - Sundry"; and
(2) Includes a specific provision for financial guarantees provided, pursuant to Resolution No. 4,512/16 (Note 8g).
c)
Financial guarantees
Financial guarantees provided are contracts requiring the Organization to make specific payments to the holder of the financial guarantee for a loss it will incur when a specific debtor fails to make the payment under the terms of the debt instrument. The provision for financial guarantees provided is formed based on the best estimate of the non-recoverable amount of the guarantee, if such disbursement is likely. The provisioning parameters are established based on the internal credit risk management models. In case of retail operations, these models use historical information, while in wholesale operations, in addition to historical information, we adopted simulation processes to capture unobserved events. Any increase in liabilities related to financial guarantees is recognized in the statement of income under “Other operating income/expenses”.
The amounts guaranteed as of June 30, 2017 were as follows: (i) R$681,788 thousand, referring to guarantees related to international trade of goods, with a provision of R$1,620 thousand; (ii) R$2,050,546 thousand, referring to guarantees related to bidding, auctions, service rendering or execution of works, with a provision of R$7,645 thousand; (iii) R$561,489 thousand, referring to guarantees related to the supply of goods, with a provision of R$45,808 thousand; (iv) R$30,716,184 thousand, referring to sureties or guarantees in judicial and administrative proceedings of tax nature, with a provision of R$156,113 thousand; and (
v) R$39,733,861 thousand,
referring to other bank guarantees, with a provision of R$382,611 thousand (Note 18b)
.
54
June 2017
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Financial Statements of the Prudential Conglomerate
19)
NON-CONTROLLING INTERESTS IN SUBSIDIARIES
|
On June 30 - R$ thousand
|
2017
|
Banco Bradesco BBI S.A.
|
17,490
|
Other
|
225
|
Total
|
17,715
|
20)
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
|
2017 (1)
|
Common
|
3,054,481,112
|
Preferred
|
3,054,480,793
|
Subtotal
|
6,108,961,905
|
Treasury (common shares)
|
(5,032,549)
|
Treasury (preferred shares)
|
(18,855,746)
|
Total outstanding shares
|
6,085,073,610
|
(1) Includes effect of bonus of shares of 10%.
b)
Transactions of capital stock involving quantities of shares
|
Common
|
Preferred
|
Total
|
Number of outstanding shares on January 1st, 2017
|
2,772,225,966
|
2,759,659,133
|
5,531,885,099
|
Increase of capital stock with issuing of shares – bonus of 10% (1)
|
277,680,101
|
277,680,072
|
555,360,173
|
Increase of shares in treasury – bonus of 10%
|
(457,504)
|
(1,714,158)
|
(2,171,662)
|
Number of outstanding shares as at June 30, 2017
|
3,049,448,563
|
3,035,625,047
|
6,085,073,610
|
(1) It benefited the shareholders registered in the records of Bradesco on April 28, 2017.
In the Extraordinary General Meeting of March 10, 2017, the approval was proposed by the Board of Directors to increase the capital stock by R$8,000,000 thousand, increasing it from R$51,100,000 thousand to R$59,100,000 thousand, with a bonus in shares, through the capitalization of part of the balance of the account “Profit Reserves - Statutory Reserve”, in compliance with the provisions in Article 169 of Law No. 6,404/76, by issuing 555,360,173 new nominative-book entry shares, with no nominal value, whereby 277,680,101 are common and 277,680,072 are preferred shares, attributed free-of-charge to the shareholders as bonus, to the ratio of 1 new share for every 10 shares of the same type that they own on the base date.
c)
Interest on Shareholders’ Equity
Bradesco’s capital remuneration policy aims to distribute interest on shareholders’ equity at the maximum amount calculated under current legislation, and this is included, net of Withholding Income Tax (IRRF), in the calculation for mandatory dividends for the year under the Company’s Bylaws.
The Board of Directors’ Meeting held on June 30, 2017, approved the Board of Executive Officers’ proposal to pay to the shareholders intermediary interest on shareholder’s equity for the first
semester of 2017, to the value of R$1,102,000 thousand, of which R$0.172493781 are per common share and R$0.189743160 per preferred share, whose payment was made on July 17, 2017.
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Financial Statements of the Prudential Conglomerate
Interest on shareholders’ equity for the first semester of 2017 is calculated as follows:
|
R$ thousand
|
% (1
)
|
Net income for the period
|
7,982,170
|
|
(-) Legal reserve
|
399,109
|
|
Adjusted calculation basis
|
7,583,061
|
|
Monthly, intermediaries and supplementary interest on shareholders’ equity (gross), paid and/or provisioned
|
2,810,158
|
|
Withholding income tax on interest on shareholders' equity
|
(421,523)
|
|
Interest on shareholders' equity (net) accumulated in 2017
|
2,388,635
|
31.50
|
(1) Percentage of interest on shareholders’ equity after adjustments.
Interest on shareholders’ equity were paid or recognized in provisions, as follows:
Description
|
R$ thousand
|
Per share (gross)
|
Gross amount paid/ recognized in provision
|
Withholding Income Tax (IRRF) (15%)
|
Net amount paid/recognized in provision
|
Common
|
Preferred
|
Monthly interest on shareholders’ equity paid
|
0.103499
|
0.113849
|
621,136
|
93,170
|
527,966
|
Intermediary interest paid on shareholders’ equity (1)
|
0.172494
|
0.189743
|
1,102,000
|
165,300
|
936,700
|
Supplementary interest on shareholders’ equity provisioned
|
0.170149
|
0.187164
|
1,087,022
|
163,053
|
923,969
|
Total accrued on June 30, 2017
|
0.446142
|
0.490756
|
2,810,158
|
421,523
|
2,388,635
|
(1) Paid on July 17, 2017.
d)
Treasury shares
A total of 5,032,549 common shares and 18,855,746 preferred shares, with the share bonus effect of 10%, had been acquired, totaling R$440,514 thousand until June 30, 2017, and remain in treasury. The minimum, average and maximum cost per common share is R$19.34962, R$24.55863 and R$27.14350, and per preferred share is R$19.37456, R$26.98306 and R$33.12855, respectively. The fair value was R$27.60 per common share and R$28.15 per preferred share on June 30, 2017.
21)
FEE AND COMMISSION INCOME
|
Accrued on June 30 - R$ thousand
|
2017
|
Credit card income
|
3,268,885
|
Checking account
|
3,249,275
|
Loans
|
1,505,321
|
Collections
|
952,933
|
Consortium management
|
747,669
|
Asset management
|
767,132
|
Custody and brokerage services
|
412,911
|
Underwriting/ Financial Advisory Services
|
333,597
|
Payments
|
208,659
|
Other
|
207,608
|
Total
|
11,653,990
|
56
June 2017
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Financial Statements of the Prudential Conglomerate
22)
PAYROLL AND RELATED BENEFITS
|
Accrued on June 30 - R$ thousand
|
2017
|
Salaries
|
4,031,983
|
Benefits
|
2,007,521
|
Social security charges
|
1,489,344
|
Employee profit sharing
|
706,747
|
Provision for labor claims
|
426,175
|
Training
|
67,504
|
Total
|
8,729,274
|
23)
OTHER ADMINISTRATIVE EXPENSES
|
Accrued on June 30 - R$ thousand
|
2017
|
Outsourced services
|
2,081,568
|
Depreciation and amortization
|
2,532,542
|
Data processing
|
1,036,592
|
Communication
|
779,067
|
Rental
|
825,306
|
Asset maintenance
|
554,354
|
Financial system services
|
506,509
|
Security and surveillance
|
416,863
|
Transport
|
375,843
|
Advertising and marketing
|
288,524
|
Water, electricity and gas
|
201,658
|
Supplies
|
122,853
|
Travel
|
84,944
|
Other
|
761,975
|
Total
|
10,568,598
|
24)
TAX EXPENSES
|
Accrued on June 30 - R$ thousand
|
2017
|
Contribution for Social Security Financing (COFINS)
|
1,552,318
|
Social Integration Program (PIS) contribution
|
256,904
|
Tax on Services (ISSQN)
|
325,001
|
Municipal Real Estate Tax (IPTU) expenses
|
75,271
|
Other
|
110,769
|
Total
|
2,320,263
|
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Financial Statements of the Prudential Conglomerate
25)
OTHER OPERATING INCOME
|
Accrued on June 30 - R$ thousand
|
2017
|
Other interest income
|
811,375
|
Reversal of other operating provisions (1)
|
4,474,785
|
Revenues from recovery of charges and expenses
|
170,662
|
Other
|
722,973
|
Total
|
6,179,795
|
(1)
Include, basically, reversals of: (i) generic provision for guarantees provided, encompassing sureties, guarantees, credit letters, and standby letter of credit, pursuant to Resolution No. 4,512/16 (Note 8h); (ii) provision for tax risks regarding the PIS process, to offset overpaid amounts; and (iii) provision for tax risks related to IRPJ/CSLL on credit losses (Note 16b V).
.
26)
OTHER OPERATING EXPENSES
|
Accrued on June 30 - R$ thousand
|
2017
|
Other finance costs
|
1,705,877
|
Sundry losses
|
840,620
|
Discount granted
|
675,539
|
Commissions on loans and financing
|
495,988
|
Intangible assets amortization
|
6,316
|
Other (1)
|
3,437,438
|
Total
|
7,161,778
|
(1)
Includes, basically, a specific provision for guarantees provided, encompassing sureties, guarantees and credit letters, pursuant to Resolution No. 4,512/16 (Note 8h).
27)
NON-OPERATING INCOME (LOSS)
|
Accrued on June 30 - R$ thousand
|
2017
|
Gain/loss on sale and write-off of assets and investments
|
(263,022)
|
Recording/reversal of non-operating provisions (1)
|
(80,094)
|
Other
|
51,877
|
Total
|
(291,239)
|
(1)
Represented mainly by an allowance for losses on non-use assets (BNDU)
.
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Financial Statements of the Prudential Conglomerate
28)
RELATED-PARTY TRANSACTIONS
a)
Related-party transactions (direct and indirect) are carried out under conditions and at rates consistent with those entered into with third parties, when applicable, and effective on the dates of the operations. The transactions are as follows:
|
On June 30 - R$ thousand
|
Controllers (1)
|
Affiliates and Jointly controlled companies (2)
|
Key management personnel (3)
|
Total
|
Assets
|
|
|
|
|
Interbank investments
|
-
|
644,567
|
-
|
644,567
|
Receivable from affiliates companies
|
-
|
2,361,758
|
-
|
2,361,758
|
Other assets
|
-
|
6,215
|
-
|
6,215
|
Liabilities
|
|
|
|
|
Demand deposits/Savings accounts
|
23
|
287,564
|
16,383
|
303,970
|
Time deposits
|
1,345,381
|
1,344,488
|
79,084
|
2,768,953
|
Securities sold under agreements to repurchase
|
753,868
|
214,798
|
11,953
|
980,619
|
Funds from issuance of securities
|
6,153,422
|
12,335,991
|
820,496
|
19,309,909
|
Derivative financial instruments
|
24,554
|
-
|
-
|
24,554
|
Interest on own capital and dividends payable
|
752,326
|
-
|
-
|
752,326
|
Other liabilities
|
-
|
91,861
|
-
|
91,861
|
|
Accrued on June 30 - R$ thousand
|
Controllers (1)
|
Affiliates and Jointly controlled companies (2)
|
Key management personnel (3)
|
Total
|
Income from financial intermediation
|
-
|
30,950
|
-
|
30,950
|
Financial intermediation expenses
|
(471,449)
|
(737,399)
|
(49,558)
|
(1,258,406)
|
Income from services provided
|
-
|
199,023
|
-
|
199,023
|
Expenses in operations with derivatives
|
(23,906)
|
-
|
-
|
(23,906)
|
Administrative Expenses
|
(1,281)
|
(255,442)
|
-
|
(256,723)
|
Other expenses net of other operating revenues
|
-
|
(183,564)
|
-
|
(183,564)
|
(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 11; and
(3) Members of the Board of Directors and the Board of Executive Officers
.
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Financial Statements of the Prudential Conglomerate
b)
Remuneration of key management personnel
Each year, the Annual Shareholders’ Meeting approves:
·
|
The annual total amount of Management compensation, set forth at the Board of Directors Meetings, to be paid to board members and members of the Board of Executive Officers, as determined by the Company’s Bylaws; and
|
·
|
The amount allocated to finance Management pension plans, within the Employee and Management pension plan of the Organization.
|
For 2017, the maximum amount of R$466,400 thousand was set for Management compensation and R$486,400 thousand to finance defined contribution pension plans.
The current policy on Management compensation sets forth that 50% of net variable compensation, if any, must be allocated to the acquisition of preferred shares of Bradesco, which vest in three equal, annual and successive installments, the first of which is in the year following the payment date. This procedure complies with Resolution No. 3,921/10, which sets forth a management compensation policy for financial institutions.
Short-term Management benefits
|
Accrued on June 30 - R$ thousand
|
2017
|
Salaries
|
220,074
|
Total
|
220,074
|
Post-employment benefits
|
Accrued on June 30 - R$ thousand
|
2017
|
Defined contribution supplementary pension plans
|
224,201
|
Total
|
224,201
|
Bradesco does not offer its Key Management Personnel long-term benefits related to severance pay or share-based compensation, pursuant to CPC 10 – Share-Based Payment, approved by Resolution No. 3,989/11.
Shareholding
Together, members of the Board of Directors and Board of Executive Officers had the following shareholding in Bradesco:
|
On June 30
|
2017
|
● Common shares
|
0.69%
|
● Preferred shares
|
1.13%
|
● Total shares (1)
|
0.91%
|
(1) On June 30, 2017, direct and indirect shareholding of the members of Bradesco’s Board of Directors and Board of Executive Officers amounted to 3.12% of common shares, 1.17% of preferred shares and 2.15% of all shares.
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Financial Statements of the Prudential Conglomerate
29)
FINANCIAL INSTRUMENTS
Below is the statement of financial position by currency
|
On June 30 - R$ thousand
|
2017
|
Balance
|
Local
|
Foreign (1) (2)
|
Assets
|
|
|
|
Current and long-term assets
|
918,093,465
|
849,846,587
|
68,246,878
|
Cash and due from banks
|
13,267,198
|
9,437,424
|
3,829,774
|
Interbank investments
|
177,295,743
|
176,046,120
|
1,249,623
|
Securities and derivative financial instruments
|
222,072,889
|
206,916,578
|
15,156,311
|
Interbank and interdepartmental accounts
|
69,822,716
|
69,822,716
|
-
|
Loans and leasing
|
295,923,291
|
262,821,095
|
33,102,196
|
Other receivables and assets
|
139,711,628
|
124,802,654
|
14,908,974
|
Permanent assets
|
68,392,931
|
68,355,075
|
37,856
|
Investments
|
46,106,004
|
46,106,004
|
-
|
Premises and equipment and leased assets
|
8,473,531
|
8,449,482
|
24,049
|
Intangible assets
|
13,813,396
|
13,799,589
|
13,807
|
Total
|
986,486,396
|
918,201,662
|
68,284,734
|
|
|
|
|
Liabilities
|
|
|
|
Current and long-term liabilities
|
879,254,601
|
814,261,651
|
64,992,950
|
Deposits
|
261,686,575
|
250,858,796
|
10,827,779
|
Securities sold under agreements to repurchase
|
256,470,543
|
250,246,331
|
6,224,212
|
Funds from issuance of securities
|
143,634,243
|
138,997,273
|
4,636,970
|
Interbank and interdepartmental accounts
|
6,326,674
|
2,933,608
|
3,393,066
|
Borrowing and on-lending
|
56,542,386
|
32,752,137
|
23,790,249
|
Derivative financial instruments
|
14,025,373
|
13,771,718
|
253,655
|
Other liabilities:
|
|
|
|
- Subordinated debts
|
53,691,104
|
42,042,598
|
11,648,506
|
- Others
|
86,877,703
|
82,659,190
|
4,218,513
|
Deferred income
|
406,567
|
406,567
|
-
|
Non-controlling interests in subsidiaries
|
17,715
|
17,715
|
-
|
Shareholders’ equity
|
106,807,513
|
106,807,513
|
-
|
Total
|
986,486,396
|
921,493,446
|
64,992,950
|
|
|
|
|
Net position of assets and liabilities
|
|
|
3,291,784
|
Net position of derivatives (2)
|
|
|
(48,596,015)
|
Other net off-balance-sheet accounts (3)
|
|
|
149,875
|
Net exchange position (liability)
|
|
|
(45,154,356)
|
(1) Amounts originally recognized and/or indexed mainly in USD;
(2) Excluding operations maturing in D+1, to be settled at the rate on the last day of the month; and
(3) Other commitments recognized in off-balance-sheet accounts.
Bradesco
61
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Financial Statements of the Prudential Conglomerate
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
|
433,563,635
|
94,462,247
|
65,404,515
|
324,663,068
|
-
|
918,093,465
|
Cash and due from banks
|
13,267,198
|
-
|
-
|
-
|
-
|
13,267,198
|
Interbank investments (1)
|
172,629,634
|
2,599,068
|
938,818
|
1,128,223
|
-
|
177,295,743
|
Securities and derivative financial instruments (1) (2)
|
105,208,273
|
2,457,296
|
6,920,005
|
107,487,315
|
-
|
222,072,889
|
Interbank and interdepartmental accounts
|
69,020,214
|
-
|
-
|
802,502
|
-
|
69,822,716
|
Loans and leasing
|
26,983,098
|
64,345,260
|
45,686,446
|
158,908,487
|
-
|
295,923,291
|
Other receivables and assets
|
46,455,218
|
25,060,623
|
11,859,246
|
56,336,541
|
-
|
139,711,628
|
Permanent assets
|
4,297,753
|
1,663,362
|
1,787,167
|
14,158,051
|
46,486,598
|
68,392,931
|
Investments
|
-
|
-
|
-
|
-
|
46,106,004
|
46,106,004
|
Premises and equipment
|
4,025,224
|
309,037
|
370,845
|
3,387,831
|
380,594
|
8,473,531
|
Intangible assets
|
272,529
|
1,354,325
|
1,416,322
|
10,770,220
|
-
|
13,813,396
|
Total on June 30, 2017
|
437,861,388
|
96,125,609
|
67,191,682
|
338,821,119
|
46,486,598
|
986,486,396
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
Current and long-term liabilities
|
435,846,643
|
88,658,153
|
75,517,800
|
279,232,005
|
-
|
879,254,601
|
Deposits (3)
|
135,191,306
|
13,178,770
|
9,462,826
|
103,853,673
|
-
|
261,686,575
|
Securities sold under agreements to repurchase (1)
|
210,551,363
|
20,049,232
|
12,085,461
|
13,784,487
|
-
|
256,470,543
|
Funds from issuance of securities
|
7,538,842
|
34,132,101
|
30,806,616
|
71,156,684
|
-
|
143,634,243
|
Interbank and interdepartmental accounts
|
6,326,674
|
-
|
-
|
-
|
-
|
6,326,674
|
Borrowing and on-lending
|
5,922,598
|
15,944,165
|
10,866,615
|
23,809,008
|
-
|
56,542,386
|
Derivative financial instruments
|
13,264,721
|
433,922
|
166,152
|
160,578
|
-
|
14,025,373
|
Other liabilities:
|
|
|
|
|
|
|
- Subordinated debts
|
427,571
|
4,012,252
|
9,810,604
|
39,440,677
|
-
|
53,691,104
|
- Others
|
56,623,568
|
907,711
|
2,319,526
|
27,026,898
|
-
|
86,877,703
|
Deferred income
|
406,567
|
-
|
-
|
-
|
-
|
406,567
|
Non-controlling interests in subsidiaries
|
-
|
-
|
-
|
-
|
17,715
|
17,715
|
Shareholders’ equity
|
-
|
-
|
-
|
-
|
106,807,513
|
106,807,513
|
Total on June 30, 2017
|
436,253,210
|
88,658,153
|
75,517,800
|
279,232,005
|
106,825,228
|
986,486,396
|
|
|
|
|
|
|
|
Net assets accumulated on June 30, 2017
|
1,608,178
|
9,075,634
|
749,516
|
60,338,630
|
|
|
(1) Repurchase agreements are classified according to the maturity of the transactions;
(2) Investments in investment funds are classified as 1 to 30 days; and
(3)
Demand and savings deposits are classified as 1 to 30 days, without considering average historical turnover
.
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
|
2017
|
Tier I capital
|
77,322,435
|
Common equity
|
71,948,746
|
Shareholders’ equity
|
106,807,513
|
Non-controlling / Other
|
39,089
|
Prudential adjustments (1)
|
(34,897,856)
|
Additional capital
|
5,373,689
|
Tier II capital
|
25,727,605
|
Subordinated debts (Resolution No. 4,192/13)
|
16,998,232
|
Subordinated debts (previous to CMN Resolution No. 4,192/13)
|
8,729,373
|
Reference Equity (a)
|
103,050,040
|
|
|
- Credit risk
|
550,858,207
|
- Market risk
|
20,530,346
|
- Operational risk
|
47,222,493
|
Risk-weighted assets – RWA (b)
|
618,611,046
|
|
|
Basel ratio (a/b)
|
16.7%
|
Tier I capital
|
12.5%
|
- Principal capital
|
11.6%
|
- Additional capital
|
0.9%
|
Tier II capital
|
4.2%
|
(1)
As from January 2017, the factor applied to prudential adjustments went from 60% to 80%, according to the timeline for application of deductions of prudential adjustments, defined in Article 11 of Resolution No. 4,192/13.
a)
Capital Management
The Basel Index is part of the set of indicators that are monitored and evaluated in the process of Capital Management, and is intended to measure the sufficiency of capital in relation to the exposure to risks. The table above shows the composition of the Reference Equity and of the Risk Weighted Assets, according to the standards of Bacen. During the period, Bradesco has fulfilled all the minimum regulatory requirements.
30)
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.
Bradesco
6
3
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Financial Statements of the Prudential Conglomerate
Banco Alvorada S.A. (successor from the spin-off of Banco Baneb S.A.) maintains defined contribution and defined benefit retirement plans, through Fundação Baneb de Seguridade Social – Bases (related to the former employees of Baneb).
Bradesco’s sponsors both defined benefit and defined contribution retirement plans, through Caixa de Assistência e Aposentadoria dos Funcionários do Banco do Estado do Maranhão (Capof), to employees originating from Banco BEM S.A.
Bradesco sponsors a defined benefit plan through Caixa de Previdência Privada Bec – Cabec for employees of Banco do Estado do Ceará S.A.
With the acquisition of HSBC Bank Brasil S.A. (current Kirton Bank Brasil S.A.), the open pension plan, which was offered to employees of that institution, in the modality of defined contribution, has been discontinued. From October 2016, the employees transferred can adhere to the Pension Plan offered to the employees of Bradesco.
Kirton Bank Brasil S.A., Kirton Capitalização S.A., Kirton Corretora de Seguros S.A., Kirton Corretora de Títulos e Valores Mobiliários S.A. and Kirton Seguros S.A. sponsor a defined benefit plan called APABA to employees originating from Banco Bamerindus do Brasil S.A., and Kirton Administração de Serviços para Fundos de Pensão Ltda. sponsors to its employees the Kirton Prev Benefits Plan (
Plano de Benefícios Kirton Prev)
), both managed by MultiBRA – Pension Fund.
Banco Losango S.A., Kirton Bank Brasil S.A. and Credival – Participações, Administração e Assessoria Ltda. sponsor three pension plans for its employees, which are: Losango I Benefits Plan – Basic Part, Losango I – Supplementary Part and PREVMAIS Losango Plan, all managed by MultiBRA – Settlor – Multiple Fund.
Bradesco also took on the obligations of Kirton Bank Brasil S.A. with regard to Life Insurance, Health Insurance Plans, and Retirement Compensation for employees coming from Banco Bamerindus do Brasil S.A.
Bradesco, in its offices abroad, provides pension plans for its employees and administrators, in accordance with the standards established by the local authorities, which allows the accrual of financial resources during the professional career of the participant.
Expenses related to contributions made during the first semester of 2017 totaled R$417.004 thousand.
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$2.075.025 thousand in the first semester of 2017.
31)
INCOME TAX AND SOCIAL CONTRIBUTION
a)
Calculation of income tax and social contribution charges
|
Accrued on June 30 - R$ thousand
|
2017
|
Income before income tax and social contribution
|
8,153,358
|
Total burden of income tax and social contribution at the current rates (1)
|
(3,669,011)
|
Effect on the tax calculation:
|
|
Earnings of affiliates and subsidiaries
|
1,878,649
|
Net non-deductible expenses of nontaxable income
|
214,987
|
Interest on shareholders’ equity (paid and payable)
|
1,264,571
|
Other amounts (2)
|
140,980
|
Income tax and social contribution for the period
|
(169,824)
|
(1) Current rates: (i) 25% for income tax; (ii) 15% for the social contribution to financial and companies, and 20%, from September 2015 to December 2018, in accordance with Law No. 13,169/15; and (iii) of 9% for the other companies (Note 3h); and
(2) Primarily, 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.
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Financial Statements of the Prudential Conglomerate
b)
Breakdown of income tax and social contribution in the statement of income
|
Accrued on June 30 - R$ thousand
|
2017
|
Current taxes:
|
|
Income tax and social contribution payable
|
(3,165,374)
|
Deferred taxes:
|
|
Amount recorded/realized in the period on temporary differences
|
4,053,497
|
Use of opening balances of:
|
|
Social contribution loss
|
(496,275)
|
Income tax loss
|
(599,093)
|
Constitution in the period on:
|
|
Social contribution loss
|
27,892
|
Income tax loss
|
9,529
|
Total deferred tax assets
|
2,995,550
|
Income tax and social contribution for the period
|
(169,824)
|
c)
Deferred income tax and social contribution
|
R$ thousand
|
Balance on January 1st, 2017
|
Amount recorded
|
Amount realized
|
Balance on 30.6.2017
|
Allowance for loan losses
|
25,279,237
|
7,115,425
|
2,672,797
|
29,721,865
|
Civil provisions
|
1,829,057
|
268,876
|
326,610
|
1,771,323
|
Tax provisions
|
2,604,158
|
115,305
|
194,561
|
2,524,902
|
Labor provisions
|
1,985,377
|
362,114
|
362,780
|
1,984,711
|
Provision for devaluation of securities and investments
|
163,198
|
69,520
|
69,396
|
163,322
|
Provision for devaluation of foreclosed assets
|
535,785
|
140,323
|
100,573
|
575,535
|
Adjustment to fair value of trading securities
|
4,863,195
|
971,284
|
1,206,693
|
4,627,786
|
Amortization of goodwill
|
411,701
|
25,707
|
34,496
|
402,912
|
Provision for interest on own capital (1)
|
-
|
489,170
|
-
|
489,170
|
Other
|
4,086,417
|
1,498,069
|
2,034,390
|
3,550,096
|
Total deductible taxes on temporary differences
|
41,758,125
|
11,055,793
|
7,002,296
|
45,811,622
|
Income tax and social contribution losses in Brazil and overseas
|
5,477,576
|
37,421
|
1,095,368
|
4,419,629
|
Subtotal (2)
|
47,235,701
|
11,093,214
|
8,097,664
|
50,231,251
|
Adjustment to fair value of available-for-sale securities (2)
|
873,412
|
106,950
|
610,708
|
369,654
|
Total deferred tax assets (Note 9b)
|
48,109,113
|
11,200,164
|
8,708,372
|
50,600,905
|
Deferred tax liabilities (Note 32f)
|
2,190,432
|
706,102
|
309,556
|
2,586,978
|
Deferred tax assets, net of deferred tax liabilities
|
45,918,681
|
10,494,062
|
8,398,816
|
48,013,927
|
(1) Tax credit on interest on shareholders’ equity is calculated up to the tax limit allowed; and
(2) Deferred tax assets from financial companies and similar companies, and insurance companies were calculated considering the increase in the social contribution rate, determined by Law No. 11,727/08 and Law No. 13,169/15 (Note 3h). With regard to the temporary effects produced by the adoption of Law No. 13,169/15, which raised the rate of the social contribution to 20%, the respective tax credits, are calculated based on the expected implementation.
Bradesco
65
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Financial Statements of the Prudential Conglomerate
d)
Expected realization of deferred tax assets on temporary differences, tax loss and negative basis of social contribution
|
R$ thousand
|
Temporary differences
|
Income tax and social contribution losses
|
Total
|
Income tax
|
Social contribution
|
Income tax
|
Social contribution
|
2017
|
3,941,724
|
2,489,804
|
48,195
|
30,224
|
6,509,947
|
2018
|
6,979,128
|
5,067,471
|
178,787
|
334,540
|
12,559,926
|
2019
|
7,121,036
|
4,781,252
|
497,894
|
249,668
|
12,649,850
|
2020
|
5,907,187
|
3,447,382
|
93,322
|
221,852
|
9,669,743
|
2021
|
1,770,100
|
1,205,600
|
1,147,524
|
768,524
|
4,891,748
|
After 2021
|
1,795,547
|
1,305,391
|
288,213
|
560,886
|
3,950,037
|
Total
|
27,514,722
|
18,296,900
|
2,253,935
|
2,165,694
|
50,231,251
|
The projected realization of deferred tax assets is an estimate and it is not directly related to the expected accounting income.
On June 30, 2017, the present value of deferred tax assets, calculated based on the average funding interest rate, net of tax effects, amounts to R$47,40
4
,
193
thousand, of which R$43,35
8
,
257
thousand relates to temporary differences, R$4,045,936 thousand to tax losses and negative basis of social contribution.
e)
Unrecognized deferred tax assets
On June 30, 2017, deferred tax assets of R$11,607
thousand were not recognized, and will only be registered when they meet the regulatory requirements and/or present prospects of realization according to technical studies and analyses prepared by the Management and in accordance with Bacen regulations.
f)
Deferred tax liabilities
|
On June 30 - R$ thousand
|
2017
|
Fair value adjustment to securities and derivative financial instruments
|
257,039
|
Difference in depreciation
|
328,103
|
Judicial deposit and others
|
2,001,836
|
Total
|
2,586,978
|
The deferred tax liabilities of companies in the financial were established considering the increased social contribution rate, established by Law No. 11,727/08 and Law No. 13,169/15 (Note 3h).
32)
OTHER INFORMATION
a)
The Organization manages investment funds and portfolios with net assets which, on June 30, 2017, amounted to R$776,647,165 thousand.
b)
Social and environmental risk
(supplementary information)
The social and environmental risk is represented by potential damages that an economic activity can cause to society and to the environment. The social and environmental risks associated with financial institutions are mostly indirect and stem from business relationships, including those with the supply chain and with customers, through financing and investment activities.
The social and environmental risk management process has a robust governance structure, comprised of committees, policies, standards and procedures, allowing the risk to be properly identified, measured, mitigated, monitored and reported. This process complies with Resolution No. 4,327/14 of the Central Bank and observes the principles of relevance and proportionality, which is necessary in view of the complexity of the financial products and the profile of Organization’s activities.
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Financial Statements of the Prudential Conglomerate
The Organization seeks to constantly incorporate and improve the criteria for managing the social and environmental risk arising from business relations with customers, through loan and financing operations, guarantees, suppliers and investments, which comprise the scope of analysis reflected in the
Organization Social and Environmental Risk Standard
(available at
www.bradescosustentabilidade.com.br/site/
).
The Organization has made several commitments related to environmental and social aspects, such as the Carbon Disclosure Project (CDP), the Principles for Responsible Investment (PRI), the Business Charter for Human Rights and Promotion of Decent Work (Ethos), the United Nations Environment Program (UNEP-FI), the Global Compact, among others.
Moreover, the Organization has been a signatory of the Equator Principles since 2004, and among the requirements evaluated are as follows: the working conditions, impacts to the community and the environment of projects financed by the Organization, pursuant to the Brazilian legislation and the standards and guidelines of the International Finance Corporation (IFC), besides the World Bank Group's Health, Safety and Environment Guidelines. During the credit granting process, transactions under Equator Principles undergo a social and environmental risk analysis.
The following table presents the loan operation that is in accordance with the Equator Principles contracted in the first semester of 2017:
|
Number of operation by category (Equator Principles)
|
A
(High risk)
|
B
(Medium risk)
|
C
(Low risk)
|
Sector
|
|
|
|
Electricity
|
-
|
1
|
-
|
Region
|
|
|
|
Northeast
|
-
|
1
|
-
|
|
R$ thousand
|
Total project value
|
570,900
|
Bradesco's participation (loan)
|
285,450
|
c)
Private Social Investment
During the first half of 2017, the Private Social Investments made by Bradesco and other companies in the Prudential Conglomerate amounted to R$ 44,797 thousand.
d)
Consortium funds
|
On June 30 - R$ thousand
|
2017
|
Credits available to consortium members
|
5,796,239
|
Off-balance-sheet
|
|
Monthly estimate of funds receivable from consortium members
|
607,210
|
Contributions payable by the group
|
30,245,004
|
Consortium members - assets to be included
|
26,388,770
|
|
In units
|
2017
|
Number of groups managed
|
3,610
|
Number of active consortium members
|
1,384,333
|
Number of assets to be included
|
629,062
|
e)
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. Until the year 2015, the accounting pronouncements approved by CMN and adopted by Bradesco were as follows:
·
Resolution No. 3,566/08 – Impairment of Assets (CPC 01);
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Financial Statements of the Prudential Conglomerate
·
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.
f)
In the first semester of 2017, seeking to reduce the costs of Financial Institutions regarding compulsory deposit requirements, Bacen simplified its rules, as follows:
Description
|
Standard before amendment
|
Amended standard
|
Funds from savings deposits (Rural)
|
The payment was 15.5% on the balance of rural savings (
poupança rural
).
|
Starting July 10, 2017, payment increased to 21% on the rural savings balance.
|
For the additional reserve requirements, the payment was 5.5% on the rural savings balance.
|
Starting July 10, 2017, these reserve requirements were terminated.
|
Demand deposits
|
Up to May 5, 2017, the compulsory deposit collection began on the Wednesday of the week following the end of the calculation period and ended on the Tuesday of the second subsequent week (period of 10 business days).
|
As of May 8, 2017, the compulsory deposit collection period began on Monday of the second week following the end of the calculation period, and ended on the Friday of the following week (period of 10 business days).
|
Time deposits
|
Up to May 5, 2017, compulsory collection begins on the Friday of the week following the end of the calculation period, or on the next business day, if Friday is not a business day, and ends on the following Thursday.
|
As of May 8, 2017, the compulsory deposit collection period will begin on Monday of the second week following the end of the calculation period, and will end on the Friday of the following week.
|
Up to May 5, 2017, the additional rate for compulsory deposit collection on time deposits is 11%.
The normal rate for compulsory deposit collection on time deposits is 25%.
|
As of May 8, 2017, the rate for compulsory deposit collection on time deposits was unified to 36%, i.e., there is no additional rate.
|
Up to May 5, 2017, the percentages deducted from the calculation basis are as follows:
- R$3 billion for financial institutions with RE lower than R$2 billion;
- R$2 billion for financial institutions with RE between R$2 billion and R$5 billion, and
- R$1 billion for financial institutions with RE between R$5 billion and R$7 billion.
|
As of May 8, 2017, the percentages deducted from the calculation basis were as follows:
- R$3 billion for financial institutions with RE lower than R$3 billion;
- R$2 billion for financial institutions with RE between R$3 billion and R$10 billion; and
- R$1 billion for financial institutions with RE between R$10 billion and R$15 billion.
|
Deduction for Time Deposits
|
Up to February 2, 2017, compliance was assured with deduction of financial bills; acquisitions of assignments, vehicles and motorcycles.
|
The “time base value”* was established as a reduction as of February 3, 2017, as follows:
I - 100% of the “time base value” up to the period beginning on 12.29.2017;
II - 50% of the “time base value” in the period from January 2, 2018 to December 28, 2018; and
III - 30% "of the “time base value” in the period from December 31, 2018 to December 27, 2019.
Deductions are no longer allowed for new purchases as of February 3, 2017.
* the “time base value” corresponds to the amount of deduction considered for compliance on January 20, 2017.
|
Deduction for demand deposits
|
Up to February 21, 2017, the compliance was assured with deduction of financing granted according to Law 12,096/09 (Export Credit Notes - NCE).
|
The “demand base value”* was established as a reduction as of February 22, 2017, as follows:
I - 100% of the “demand base value” up to the period beginning on December 29, 2017;
II - 50% of the “demand base value” in the period from January 2, 2018 to December 28, 2018;
III - 30% of the “demand base value” in the period from December 31, 2018 to December 27, 2019; and
IV - 0% as of December 30, 2019.
* “demand base value” corresponds to the amount of deduction considered for compliance on January 25, 2017.
|
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Financial Statements of the Prudential Conglomerate
g)
Bradesco Seguros S.A. ("Bradesco Seguros")
indirect investment of Bradesco
and Swiss Re Corporate Solutions Ltd.
("Swiss Re Corso") completed a transaction disclosed in October 2016 upon execution of a shareholder agreement dated July 2017 whereby: (i) Swiss Re Corporate Solutions Brasil Seguros S/A ("Swiss Re Corporate Solutions Brasil") will assume part of insurance operations of P&C (Property and Casualty) such as Aeronautical, Marine, Civil Liability segments and of transport of Bradesco Seguros ("Large Risks Insurance"), to have exclusive access to Bradesco clients to exploit the marketing of Large Risks Insurance; and (ii) Bradesco Seguros will hold an equity interest of 40% in Swiss Re Corporate Solutions Brasil and the other 60% interest will remain with its controlling shareholder Swiss Re Corso.
The transaction was approved by Susep, the Administrative Council for Economic Defense (Cade) and the Central Bank.
h)
In May 2017, Bradesco – as an indirect holder of equity interest in IRB, announced to shareholders that had authorized IRB to submit: (i) application for registration as a publicly-held company and for authorization of initial public offering of IRB, pursuant to CVM Instructions 400/03 and 480/09; and (ii) application for registration of secondary public distribution of common shares issued by IRB, pursuant to CVM Instruction 400/03.
In July 2017, Bradesco announced that the documents were filed in compliance with the requirements formulated by CVM in the context of the Secondary Public Offering of IRB’s common shares.
i)
In June 2017, Bradesco signed final documents 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 standards. Control of the company will be shared, with each party holding 20% of its capital. The required contribution of capital occurred in July 2017.
j)
In July 2017, Bradesco launched a Special Voluntary Retirement Plan, which may be used by the Organization’s employees who fulfill the requirements established in the regulations of the respective plan
.
Marcos Aparecido Galende
|
Accountant - CRC 1SP201309/O-6
|
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Independent Auditors´ Report on the Consolidaded Financial Statements of Prudential Conglomerate
To
The
Board
of
Directors
and
Shareholders
of
Banco
Bradesco
S.A.
Osasco
–
SP
Opinion
We
have
audited
the
consolidated
financial
statements
of
the
Prudential
Conglomerate
of
Banco
Bradesco S.A.
(“Bradesco”),
which
comprises
the
consolidated
statement
of
financial
position
as
of
June
30,
2017
and
the
respective
consolidated
statements
of
income,
changes
in
shareholders’
equity
and
cash
flows
for
the
six-month
period
then
ended,
and
notes,
comprising
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
2
to
the
financial
statements.
In
our
opinion,
the
accompanying
consolidated
financial
statements
of
the
Prudential
Conglomerate
present
fairly,
in all material
respects,
the consolidated
financial
position
of
the
Prudential
Conglomerate
of
Bradesco
as
of
June
30,
2017,
the
consolidated
performance
of
its
operations
and
its
consolidated
cash
flows
statement,
for
the
six-month
period
then
ended,
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
2
to
the
financial
statements.
Basis
for
opinion
We
conducted
our
audit
in
accordance
with
Brazilian
and
International
Standards
on
Auditing
(ISAs).
Our
responsibilities
under
those
standards,
are
further
described
in
the
“
The
Auditor’s
responsibilities
for
the
audit
of
the
consolidated
financial
statements
”
section
of
our
report
.
We
are
independent
of
Bradesco
and
its
subsidiaries,
in
accordance
with
the
ethical
requirements
established
in
the
Accountant´s
Professional
Ethics
Code
and
the
professional
standards
issued
by
the
Federal
Accounting
Council,
and
we
have
fulfilled
our
other
ethical
responsibilities
in
accordance
with
these
requirements.
We
believe
that
the
audit
evidence
we
have
obtained
is
sufficient
and
appropriate
to
provide
a
basis
for
our
opinion.
Emphasis
We
draw
attention
to
note
2
to
the
consolidated
financial
statements
that
disclose
that
the consolidated
financial statements of the Prudential Conglomerate
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. Our opinion is not modified in relation to this topic.
As informed in note 2, article 5 of Resolution No. 4,517 / 16 of the National Monetary Council stipulates that, as of January 1, 2017, equity investments in jointly controlled companies must be accounted for using the equity method and no longer through proportional consolidation, as previously required. Additionally, the paragraph 2 of article 5, of the aforementioned resolution, waived the presentation of comparative information for institutions that had a change in accounting policy as a consequence of this theme. Accordingly, the consolidated financial statements of the Prudential Conglomerate as of June 30, 2017 are not presented in a comparative basis, with the six-month period ended June 30, 2016.
70
June 2017
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Key
Audit
Matters
Key
audit
matters
are
those
that,
in
our
professional
judgment,
were
of
most
significance
in
our
audit
of
the
six-month
period
ended
on
June
30, 2017.
These
matters
were
addressed
in
the
context
of
our
audit
of
the
consolidated
financial
statements
of
the
Prudential
Conglomerate
as
a
whole,
and
in
forming
our
opinion
thereon,
and,
we
do
not
express
a
separate
opinion
on
these
matters.
·
Allowance for doubtful accounts
As
disclosed
in
Notes
3g
and
8,
for
purposes
of
measuring
the
allowance
for
doubtful
accounts,
which
total
amount
shown
in
the
consolidated
financial
statements
of
Prudential
Conglomerate
is
R$
37,451,416
thousand,
Bradesco
classifies
its
loans
(which
comprise
loans,
leasing,
advances
on
foreign
exchange
contracts,
other
receivables
with
credit
characteristics),
into
nine
risk
levels,
taking
into
account
inputs
and
assumptions
such
as
late
payments,
economic
and
financial
position,
indebtedness
level,
sector
of
the
economy,
guarantee
characteristics,
and
the
other
factors
and
assumptions
described
in
CMN
Resolution
No.
2.682/1999,
with
rating
“AA”
being
the
minimum
risk
level,
and
“H”
the
maximum
risk
level.
Bradesco
initially
applies
the
loss
percentages
established
in
such
Resolution
for
each
risk
level
for
purposes
of
calculating
the
allowance
and
further
increases
the
allowance,
when
necessary,
based
on
additional
internal
evaluations
(excess
provision).
The
classification
of
loans
into
risk
levels
as
well
as
the
loss percentages
related
to
each
risk
level
requires
Bradesco
to
make
assumptions
and
judgments,
based
on
its
internal
risk
classification
methodologies,
and
the
allowance
for
doubtful
accounts
represent
Bradesco’s
best
estimate
of
the
portfolio
losses.
Due
to
the
relevance
of
loans
and
the
uncertainties
related
to
the
estimate
of
the
allowance
for
doubtful
accounts,
we
considered
this
as
a
significant
matter
in
our
audit
.
How
our
audit
addressed
this
matter
We
evaluated
the
design,
implementation
and
operating
effectiveness
of
the
internal
controls
related
to
the
processes
of
approval,
recording
and
accrual
of
loans
as
well
as
the
internal
risk
rating
methodologies
that
support
the
classification
of
transactions,
the
main
assumptions
used
for
calculation
and
the
arithmetic
accuracy
of
the
allowance
for
doubtful
accounts.
We
also
evaluated,
on
a
sampling
basis,
whether
Bradesco
met
the
minimum
requirements
established
by
the
CMN
Resolution
No.
2.682/1999,
related
to
the
determination
of
the
allowance
for
doubtful
accounts.
We
also
analyzed
whether
the
disclosures
made
in
the
consolidated
financial
statements
of
Prudential
Conglomerate,
described
in
Notes
3g
and
9
are
in
accordance
with
the
applicable
accounting
practices.
Based
on
the
evidence
obtained
from
the
procedures
described
above,
we
consider
the
level
of
provisioning
and
disclosures
to
be
adequate
in
the
context
of
the
consolidated
financial
statements
of
Prudential
Conglomerate
taken
as
a
whole.
·
Market
value
of
financial
instruments
As
disclosed
in
the
Notes
3e,
3f
and
6,
derivative
financial
instruments
amount
to
R$
15,024,480
thousand
(assets)
and
R$
(14,025,373)
thousand
(liabilities),
available-for-sale
securities
amount
to
R$
155,678,967
thousand
and
trading
securities
amount
to
R$
39,107,201
thousand.
These
instruments,
measured
at
market
value,
are
relevant
to
the
consolidated
financial
statements
of
Prudential
Conglomerate
of
Bradesco.
For
the
financial
instruments
that
are
actively
traded
and
those
which
market
prices
and
parameters
are
available,
there
is
a
higher
objectivity
level
in
the
determination
of
market
values.
However,
when
the
market
prices
or
parameters
are
not
observable,
the
determination
of
the
market
values
is
subject
to a higher uncertainty level, to the extent Bradesco makes significant judgments to estimate such amounts. In addition, financial assets classified in the "Available for Sale" category are subject to Bradesco's judgmental assessment of impairment loss evidence indicators. Therefore, we considered the market
value
measurement
of
these
financial
instruments
as
a
significant matter
in
our
audit.
How
our
audit
addressed
this
matter
As
part
of
our
procedures,
we
evaluated
the
design,
implementation,
and
operating
effectiveness
of
the
internal
controls
implemented
by
Bradesco
to
mitigate
the
risk
of
material
misstatement
in
the
consolidated
financial
statements
of
Prudential
Conglomerate
arising
from
uncertainties
in
the
market
value
measurement
of
financial
instruments.
For
a
sample
of
financial
instruments
for
which
market
value
measurement
parameters
are
not
observable,
with
the
technical
support
of
our professionals with knowledge of financial instruments, we evaluated the models developed by Bradesco for determining market values and the reasonableness of data, the parameters and information included in the pricing models used, and we recalculated the amount of operations. Our procedures also included the evaluation of the disclosures made by Bradesco in the consolidated financial statements of Prudential Conglomerate in Notes 3e, 3f and 6.
Bradesco
71
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Based
on
the
evidence
obtained
from
the
procedures
described
above,
we
consider
the
market
value
measurement
of
financial
instruments
and
disclosures
to
be
adequate
in
the
context
of
the
consolidated
financial
statements
of
Prudential
Conglomerate
taken
as
a
whole.
·
Provisions
and
contingent
liabilities
-
tax,
civil
and
labor
As
described
in
Notes
3o
and
16,
Bradesco
is
defendant
in
lawsuits
of
tax,
civil
and
labor
nature,
related
to
the
normal
course
of
its
activities,
which
total
provision
recognized
in
the
consolidated
financial
statements
of
Prudential
Conglomerate
amounts
to
R$
6,669,058
thousand,
R$
4,261,771
thousand,
and
R$
5,110,756
thousand,
respectively.
Some
laws
and
regulations
in
Brazil
have
high
complexity
levels,
and,
therefore,
the
measurement,
recognition
and
disclosure
of
Provisions
and
Contingent
Liabilities,
related
to
lawsuits,
and/or,
in
certain
cases,
adherence
to
laws
and
regulations,
require
Bradesco’s
professional
judgment.
Due
to
the
relevance,
complexity
and
judgment
involved
in
the
evaluation,
measurement,
definition
of
recognition
and
disclosures
related
to
Provisions
and
Contingent
Liabilities,
we
considered
this
as
a
significant
matter
in
our
audit.
How
our
audit
addressed
this
matter
Our
audit
procedures
included
the
evaluation
of
the
design,
implementation
and
operating
effectiveness
of
the
internal
controls
related
to
the
identification,
evaluation,
measurement
and
disclosure
of
Provisions
and
Contingent
Liabilities,
as
well
as
those
related
to
the
compliance
with
laws
and
regulations.
Additionally,
on
a
test
basis,
we
evaluated
the
sufficiency
of
the
recognized
provisions
and
disclosed
contingency
amounts,
by
evaluating
the
criteria
and
assumptions
adopted
in
the
measurement
methodology,
also
considering
the
assessment
of
the
internal
and
external
legal
advisors
of
Bradesco,
as
well
as
historical
data
and
information.
This
work
included
the
involvement
of
our
legal
experts
in
the
evaluation
of
the
likelihood
of
unfavorable
outcome
and
of
the
documentation
and
information
related
to
the
main
tax,
civil
and
labor
matters
involving
Bradesco.
We
also
evaluated
whether
the
disclosures
made
in
the
consolidated
financial
statements
of
Prudential
Conglomerate
are
in
accordance
with
the
applicable
accounting
practices
and
provide
information
on
the
nature,
exposure
and
amounts
of
provisions
or
disclosures
related
to
the
main
tax,
civil
and
labor
matters
in
which
Bradesco
is
involved.
Based
on
the
evidence
obtained
from
the
procedures
described
above,
we
consider
the
level
of
provisioning
and
disclosures
to
be
adequate
in
the
context
of
the
consolidated
financial
statements
of the Prudential Conglomerate
taken
as
a
whole.
·
Impairment of assets
The
consolidated
financial
statements
of
Prudential
Conglomerate
include
deferred
tax
assets
in
the
amount
of
R$
50,600,905
thousand
(Note
31c)
and
goodwill
in
the
amount
of
R$
9,371,742
thousand
(Note
13a).
The
realization
of
these
assets
depends
on
future
profitability
based
on
business
plans and
budgets
prepared
by
Bradesco
and
which
are
supported
by
several
economic
and
business
assumptions,
among
others.
Since
they
require
the
exercise
of
judgment,
such
estimates
are
prepared
and
reviewed
internally
according
to
Bradesco’s
governance
framework.
As
described
in
Notes
3h,
3l
and
3m,
considering
the
frequent
changes
that
occur
in
the
economic
or
regulatory
environment
of
the
markets
where
it
operates,
Bradesco
continuously
evaluate
the
assumptions
and
estimates
of
taxable
profit,
profitability
of
the
cash
generating
units
(CGU)
to
which
goodwill
and
intangible
assets
are
allocated,
growth
rates,
discount
rates,
and
cash
flow
projections.
In
view
of
the
relevance
of
the
future
profitability
estimates
made
and
the
impact
that
changes
in
the
assumptions
of
such
estimates
would
have
on
the
consolidated
financial
statements
of
Prudential
Conglomerate,
we
considered
this
area
relevant
to
our
audit.
How
our
audit
addressed
this
matter
On a sampling basis, we tested the design, implementation and operating effectiveness of the relevant internal controls related to Bradesco´s assessment of indicators that the related assets may have suffered devaluation. Additionally, we evaluated, with the technical support of our corporate finance specialists, the reasonableness and consistency of the data and assumptions used for preparing this assessment. We also made the analysis of the reasonableness of the mathematical calculations included in the technical study to support the tax credits. Our procedures also included the evaluation of the disclosures made by Bradesco in the consolidated financial statements of the Prudential Conglomerate.
72
June 2017
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Based on the evidence obtained from the procedures described above, we considered the assessment of indicators of devaluation adequate in the context of the consolidated financial statements of the Prudential Conglomerate taken as a whole.
·
Technical
Provisions
–
Insurance
and
Pension
Plans
–
recorded
as
investments
measured
under
the
equity
method
As mentioned
in
Notes
3j
and
11,
Bradesco
invests
in
insurance
controlling
subsidiaries
.
These
subsidiaries
have
liabilities
related
to
insurance
and
pension
plans
contracts
denominated
Technical
Provisions,
in
the
amount
of
R$
226,283,070
thousand,
which
may
significantly
affect
the
net
income
presented
in
consolidated
financial
statements of the Prudential Conglomerate.
In
view
of
the
uncertainties
and
subjectivity
inherent
in
insurance
and
pension
plans
contracts,
the
liability
adequacy
test
and
the
process
of
determination
and
measurement
of
technical
reserves
involve
a
high
judgment
level.
Bradesco´s
subsidiaries
continuously
evaluate
methodologies
and
assumptions,
which
include,
among
others,
expectations
of
loss
ratio,
mortality,
longevity,
persistency,
and
interest
rates.
In
view
of
the
involved
relevance
and
uncertainty,
and
the
impact
that
any
change
in
assumptions
would
have
the
amount
of
Technical
Provisions
and,
consequently,
on
the
net
income
of
the
consolidated
financial
statements of the Prudential Conglomerate,
we
considered
this
matter
relevant
to
our
audit.
How
our
audit
addressed
this
matter
Our
procedures
included
planning
and
communication
of
the
audit
scope
to
the
controlling
subsidiaries,
discussion
of
the
risks
of
significant
misstatements
to
instruct
the
auditors
of
these
subsidiaries.
We
met
with
these
auditors,
reviewed
and
evaluated
their
work,
which
considered,
among
others,
the
matters
described
above
that
could
significantly
affect
the
net
income
of
the
consolidated
financial
statements of the Prudential Conglomerate.
We
also
evaluated
the
audit
evidence
obtained
and
the
documentation
of
the
specialists
involved
by
the
auditor
of
the
subsidiaries,
as
well
as
the
procedures
performed
and
conclusions
obtained,
specifically
the
determination
of
materiality,
the
effect
of
unadjusted
audit
differences
and
the
procedures
performed
to
address
the
risks.
We
also
evaluated
the
adequacy
of
the
disclosures
made
by
Bradesco
on
the
consolidated
financial
statements of the Prudential Conglomerate.
Based
on
evidence
obtained
from
the
procedures
described
above,
we
consider
the
level
of
provisioning
in
the
subsidiaries
and
disclosures
to
be
adequate
in
the
context
of
the
consolidated
financial
statements
of the Prudential Conglomerate
taken
as
a
whole.
·
Application
controls
and
information
technology
general
controls
Bradesco
has
a
technology
structure
for
conducting
its
businesses,
as
well
as
continuous
investment
plans
aimed
at
the
improvement
and
maintenance
of
access
management
and
changes
in
the
relevant
system
and
applications,
development
of
new
programs,
and
automated
controls
and/or
controls
with
automated
components
in
relevant
processes.
In
order
to
maintain
its
operations,
Bradesco
provides
its
employees
with
access
to
systems
and
applications,
taking
into
account
the
duties
performed
by
them
and
within
its
organizational
structure.
The
controls
to
authorize,
monitor,
restrict,
and/or
revoke
the
respective
accesses
to
this
environment
are
important
to
ensure
that
the
accesses
and
information
updates
are
appropriately
performed
and
by
the
appropriate
professionals, to
mitigate
the
potential
risk
of fraud or error
arising from
inappropriate
access
or
change
in
a
system
or
information,
and
to
guarantee
the
integrity
of
the
financial
information
and
accounting
records.
In
view
of
the
high
investment
level
and
heavy
dependence
of
Bradesco
on
its
technology
systems,
the
high
daily
volume
of
processed
transactions,
as
well
as
the
importance
of
access
controls
and
the
management
of
changes
in
its
systems
and
applications,
we
considered
that
this
area
is
relevant
to
our
audit.
How
our
audit
addressed
this
matter
The design, implementation, and operating effectiveness of access controls, such as authorization of new users, timely revocation of terminated users, and periodic monitoring of active users were tested, on a sample basis, during our audit with the assistance of our information technology specialists, whenever we plan to rely on specific information extracted from a certain system considered relevant for the purpose of preparing the financial statements. In areas where our judgment is highly dependent on information technology, our tests included assessing password policies, security settings, and control over developments and changes in systems and applications. In addition, when we identify key internal controls for the financial reporting process and other relevant fully automated processes or with some component dependent on systems and applications, we tested, with the assistance of our information technology specialists, the design, implementation and operating effectiveness of these controls.
Bradesco
73
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
The
evidence
from
the
control
tests
described
above
allowed
us
to
consider
information
from
certain
systems
to
plan
the
nature,
time
and
extension
of
our
substantive
tests
in
the
context
of
the
consolidated
financial
statements
of
Prudential
Conglomerate
taken
as
a
whole.
Other
matters
Bradesco prepared a set of general purpose financial statements for the six-month period ended June 30, 2017, 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 audit report without modifications dated July 26, 2017.
Statements of value added
The consolidated statement of value added (DVA) for the six-month period ended June 30, 2017, prepared under the responsibility of the Bradesco’s management, and presented herein as supplementary information in relation to the special purpose 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), has been subject to audit procedures jointly performed with the audit of the consolidated financial statements of the Prudential Conglomerate of Bradesco. In order to form our opinion, we assessed whether those statements are reconciled with the consolidated financial statements of the Prudential Conglomerate and accounting records, as applicable, and whether their format and contents are in accordance with criteria determined in the Technical Pronouncement 09 (CPC 09) - Statement of Value Added issued by the Committee for Accounting Pronouncements (CPC). In our opinion, the statement of value added has been fairly prepared, in all material respects, in accordance with the criteria determined by the aforementioned Technical Pronouncement, and is consistent with the overall consolidated financial statements of the Prudential Conglomerate taken as whole.
Responsibilities
of
management
and
those
in
charge
with
governance
for
the
consolidated
financial
statements of the Prudential Conglomerate
Management
is responsible
for
the
preparation
and
fair
presentation
of
the
consolidated financial
statements
of
the
Prudential
Conglomerate
in
accordance
with
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
the
internal
controls
as
management
determines
is
necessary
to
enable
the
preparation
of
consolidated
financial
statements
of
the
Prudential
Conglomerate
that
are
free
from
material
misstatement
whether
due
to
fraud
or
error.
In
preparing
the
consolidated
financial
statements
of
the
Prudential
Conglomerate,
management
is
responsible
for
assessing
Bradesco’s
ability
to
continue
as
going
concern,
disclosing,
as
applicable,
matters
related
to
going
concern
and
using
the
going
concern
basis
of
accounting,
unless
management
either
intends
to
liquidate
Bradesco
and
its
subsidiaries
or
to
cease
operations,
or
there
has
no
realistic
alternative
but
to
do
so.
Those
charged
with
governance
are
those
responsible
for
overseeing
Bradesco´s
financial
reporting
process.
Auditor’s
responsibilities
for
the
audit
of
the
consolidated
financial
statements of the Prudential Conglomerate
Our
objectives
are
to
obtain
reasonable
assurance
about
whether
the
consolidated
financial
statements
of
the
Prudential
Conglomerate,
prepared
by
the
management
in accordance
with
Resolution
no
4,280/13
of CMN,
and
supplementary
regulations
of
BACEN,
as
a
whole
are
free
from
material
misstatement,
whether
due
to
fraud
or
error,
and
to
issue
an
auditor´s
report
that
includes
our
opinion.
Reasonable
assurance
is
a
high
level
of
assurance,
but
is
not
a
guarantee
that
an
audit
conducted
in
accordance
with
the
Brazilian
and
International
Standards
on
Auditing
will
always
detect
a
material
misstatement
when
it
exists.
Misstatements
can
arise
from
fraud or error
and
are
considered
material
if,
individually or
in
aggregate, they
could
reasonably
be
expected
to
influence
the
economic
decisions
of users
taken
on
the
basis
of these
consolidated
financial
statements
of
Prudential
Conglomerate.
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
As
part
of
an
audit
in
accordance
with
the
Brazilian
and
International
Standards
on
Auditing,
taking
into
account
NBC
TA
800
(Special
Conditions
-
Auditing
of
Financial
Statements
according
to
Special
Purpose
Accounting
Structures),
we
exercise
professional
judgment,
and
maintain
professional
skepticism
throughout
the
audit.
We
also:
•
Identify
and
assess
the
risks
of
material
misstatement
of
the
consolidated
financial
statements,
independently
whether
due
to
fraud
or
error,
design
and
perform
audit
procedures
responsive
to
those
risks,
and
obtained
audit
evidence
that
is
sufficient
and
appropriate
to
provide
a
basis
for
our
opinion.
The
risk
of
not
detecting
material
misstatement
resulting
from
fraud
is
higher
than
for
the
one
resulting
from
error,
as
fraud
may
involve
collusion,
forgery,
intentional
omission
or
misrepresentations,
or
the
override
of
internal
controls.
•
Obtain
an
understanding
of
internal
control
relevant
to
the
audit
to
design
audit
procedures
that
are
appropriate
in
the
circumstances, but
not
for
the
purpose
of
expressing an opinion
on the effectiveness
of
Bradesco
and
its
subsidiaries
internal
control.
•
Evaluate
the
appropriateness
of
the
accounting
policies
used
and
the
reasonableness
of
accounting
estimates
and
related
disclosures
made
by
management.
•
Conclude
on
the
appropriateness
of
management’s
use
of
the
going
concern
basis
of
accounting,
and,
based
on
the
audit
evidence
obtained,
whether
material
uncertainty
exists
related
to
events
or
conditions
that
may
cast
significant
doubt
on
Bradesco’s
and
its
subsidiaries
ability
to
continue
as
going
concern.
If
we
conclude
that
a
material
uncertainty
exists,
we
are
required
to
draw
attention
in
our
auditor’s
report
to
the
related
disclosures
in
the
consolidated
financial
statements,
or
if
such
disclosures
are
inadequate
to
modify
our
opinion.
Our
conclusions
are
based
on
the
audit
evidences
obtained
up
to
the
date
of
our
auditor’s
report.
However,
future
events
or
conditions
may
cause
Bradesco
and
its
subsidiaries
to
cease
to
continue
as
a
going
concern.
•
Evaluate
the
overall
presentation,
structure
and
content
of
the
consolidated
financial
statements
of
Prudential
Conglomerate
,
including
the
disclosures
and
whether
the
consolidated
financial
statements
of
Prudential
Conglomerate
represent
the
underlying
transactions
and
events
in
a
manner
that
achieves
fair
presentation.
•
Obtain
sufficient
appropriate
audit
evidence
regarding
the
financial
information
of
the
entities
or
business
activities
within
the
Group
to
express
an
opinion
on
the
consolidated
financial
statements
of
Prudential
Conglomerate.
We
are
responsible
for
the
direction,
supervision
and
performance
of
group
audit.
We
remain
solely
responsible
for
our
audit
opinion.
We
communicate
with
those
charged
with
governance
regarding,
among
other
matters,
the
planned
scope
and
timing
and
significant
audit
findings,
including
any
significant
deficiencies
in
internal
control
that
we
identify
during
our
audit.
We
also
provided
those
charged
with
governance
with
a
statement
that
we
have
complied
with
the
relevant
ethical
requirements
regarding
independence,
and
communicate
with
them
all
relationships
and
other
matters
that
may
reasonably
be
thought
to
bear
our
independence,
and
where
applicable,
related
safeguards.
From
the
matters
communicated
with
those
charged
with
governance,
we
determined
those
matters
that
were
of
most
significance
in
the
audit
of
the
consolidated
financial
statements
of
Prudential
Conglomerate
of
the
current
for
the
six-month
period
then
ended,
and
are
therefore
the
key
audit
matters.
We
describe
these
matters
in
our
auditor’s
report,
unless
law
or
regulation
precludes
public
disclosure
about
the
matters,
or
when,
in
extremely
rare
circumstances,
we
determine
a
matter
should
not
be
communicated
in
our
report
because
the
adverse
consequences
of
doing
so
would
reasonably
be
expected
to
outweigh
the
public
interest
benefit
of
such
communication.
Osasco,
August
28,
2017
KPMG
Auditores
Independentes
CRC
2SP028567/O-1
F
SP
Original
report
in
Portuguese
signed
by
Rodrigo
de
Mattos
Lia
Accountant
CRC
1SP252418/O-3
Bradesco
75
This page intentionally left blank,
76
June 2017
Bradesco
77
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 23, 2017
BANCO BRADESCO S.A.
|
|
By:
|
|
/S/
Alexandre da Silva Glüher
|
|
|
Alexandre da Silva Glüher
Executive Vice President 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.
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