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____.
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Statement of Financial Position of the Prudential Conglomerate – In thousands of Reais
Assets |
June 30 | |
2015 |
2014 | |
Current assets |
502,523,632 |
453,158,987 |
Cash and due from banks (Note 4) |
11,509,470 |
11,281,058 |
Interbank investments (Notes 3d and 5) |
175,733,034 |
136,983,859 |
Securities purchased under agreements to resell |
171,328,788 |
125,321,861 |
Interbank investments |
4,423,388 |
11,675,372 |
Allowance for losses |
(19,142) |
(13,374) |
Securities and derivative financial instruments (Notes 3e, 3f, 6 and 30b) |
55,919,999 |
55,647,530 |
Own portfolio |
31,078,844 |
33,060,877 |
Subject to unrestricted repurchase agreements |
14,104,427 |
15,382,529 |
Derivative financial instruments (Notes 3f, 6e II and 30b) |
6,195,652 |
4,744,983 |
Given in guarantee to the Brazilian Central Bank |
20,096 |
- |
Given in guarantee |
4,520,980 |
2,205,341 |
Subject to unrestricted repurchase agreements |
- |
253,800 |
Interbank accounts |
50,083,694 |
55,273,364 |
Unsettled payments and receipts |
1,074,734 |
1,635,920 |
Reserve requirement (Note 7): |
|
|
- Reserve requirement - Brazilian Central Bank |
48,913,046 |
53,501,826 |
- SFH |
8,828 |
4,249 |
Correspondent banks |
87,086 |
131,369 |
Interdepartmental accounts |
167,646 |
320,342 |
Internal transfer of funds |
167,646 |
320,342 |
Loans (Notes 3g, 8 and 30b) |
144,305,268 |
131,953,838 |
Loans: |
|
|
- Public sector |
2,803,212 |
31,779 |
- Private sector |
156,622,091 |
145,465,606 |
Loans transferred under an assignment with recourse |
132,808 |
11,897 |
Allowance for loan losses (Notes 3g, 8f, 8g and 8h) |
(15,252,843) |
(13,555,444) |
Leasing (Notes 3g, 8 and 30b) |
(77,181) |
(153,336) |
Lease and Sublease Operations receivable: |
|
|
- Private sector |
1,622,983 |
2,180,797 |
Unearned income from leasing |
(1,562,597) |
(2,103,807) |
Allowance for leasing losses (Notes 3g, 8f, 8g and 8h) |
(137,567) |
(230,326) |
Other receivables |
62,811,394 |
59,786,230 |
Receivables on sureties and guarantees honored (Note 8a-3) |
59,143 |
30,304 |
Foreign exchange portfolio (Note 9a) |
16,245,509 |
11,476,110 |
Receivables |
6,563,732 |
6,187,200 |
Securities trading |
822,730 |
1,846,928 |
Specific receivables |
5,623 |
3,292 |
Sundry (Note 9b) |
39,970,500 |
40,985,266 |
Allowance for other loan losses (Notes 3g, 8f, 8g and 8h) |
(855,843) |
(742,870) |
Other assets (Note 10) |
2,070,308 |
2,066,102 |
Other assets |
1,775,744 |
1,571,132 |
Provision for losses |
(708,946) |
(632,520) |
Prepaid expenses (Notes 3i and 10b)) |
1,003,510 |
1,127,490 |
Long-term receivables |
290,096,605 |
278,344,373 |
Interbank investments (Notes 3d and 5) |
526,925 |
669,821 |
Interbank investments |
526,925 |
669,821 |
Securities and derivative financial instruments (Notes 3e, 3f, 6 and 30b) |
93,730,645 |
104,742,255 |
Own portfolio |
62,740,963 |
50,603,267 |
Subject to unrestricted repurchase agreements |
27,230,099 |
46,272,105 |
Derivative financial instruments (Notes 3f, 6e II and 30b) |
826,204 |
1,001,858 |
Given in guarantee to the Brazilian Central Bank |
- |
19,008 |
Privatization rights |
55,667 |
62,237 |
Given in guarantee |
2,555,115 |
5,958,108 |
Subject to unrestricted repurchase agreements |
322,597 |
825,672 |
Bradesco 3
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Statement of Financial Position of the Prudential Conglomerate – In thousands of Reais
Assets |
June 30 | |
2015 |
2014 | |
Interbank accounts |
626,090 |
599,801 |
Reserve requirement (Note 7): |
|
|
- SFH |
626,090 |
599,801 |
Loans (Notes 3g, 8 and 30b) |
156,053,261 |
145,031,278 |
Loans: |
|
|
- Public sector |
492,281 |
1,919,401 |
- Private sector |
155,421,065 |
145,510,575 |
Loans transferred under an assignment with recourse |
7,073,084 |
4,205,713 |
Allowance for loan losses (Notes 3g, 8f, 8g and 8h) |
(6,933,169) |
(6,604,411) |
Leasing (Notes 3g, 8 and 30b) |
(84,013) |
(155,681) |
Leasing receivables: |
|
|
- Private sector |
1,824,488 |
2,528,723 |
Unearned income from leasing |
(1,822,840) |
(2,528,065) |
Allowance for leasing losses (Notes 3g, 8f, 8g and 8h) |
(85,661) |
(156,339) |
Other receivables |
38,529,635 |
26,408,307 |
Receivables |
40 |
52 |
Securities trading |
419,437 |
126,860 |
Sundry (Note 9b) |
38,134,236 |
26,331,256 |
Allowance for other loan losses (Notes 3g, 8f, 8g and 8h) |
(24,078) |
(49,861) |
Other assets (Note 10) |
714,062 |
1,048,592 |
Prepaid expenses (Notes 3i and 10b) |
714,062 |
1,048,592 |
Permanent assets |
52,148,877 |
47,447,014 |
Investments (Notes 3j, 11 and 30b) |
33,024,130 |
29,115,241 |
Earnings (losses) of affiliates |
|
|
- In Brazil |
32,709,517 |
27,942,510 |
- Overseas |
262,682 |
871,508 |
Other investments |
195,545 |
443,835 |
Allowance for losses |
(143,614) |
(142,612) |
Premises and equipment (Notes 3k and 12) |
2,896,521 |
2,798,250 |
Premises |
44,535 |
189,028 |
Other premises and equipment |
7,461,126 |
7,141,817 |
Accumulated depreciation |
(4,609,140) |
(4,532,595) |
Leased assets (Note 12) |
6,971,207 |
9,496,169 |
Leased assets |
10,785,477 |
14,506,855 |
Accumulated depreciation |
(3,814,270) |
(5,010,686) |
Deferred (Notes 3l and 13) |
49,431 |
60,693 |
Expenses with Organization and Expansion |
1,731,053 |
1,736,294 |
Accumulated amortization |
(1,681,622) |
(1,675,601) |
Intangible assets (Notes 3m and 14) |
9,207,588 |
5,976,661 |
Intangible Assets |
15,240,150 |
9,883,007 |
Accumulated amortization |
(6,032,562) |
(3,906,346) |
Total |
844,769,114 |
778,950,374 |
The accompanying Notes are an integral part of these Financial Statements.
4 Prudential – June 2015
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Statement of Financial Position of the Prudential Conglomerate – In thousands of Reais
Liabilities |
June 30 | |
2015 |
2014 | |
Current liabilities |
554,260,814 |
510,463,367 |
Deposits (Notes 3o and 15a) |
156,533,864 |
165,799,445 |
Demand deposits |
26,369,826 |
36,421,103 |
Savings deposits |
91,008,482 |
84,318,918 |
Interbank deposits |
518,527 |
332,802 |
Time deposits (Notes 15a and 30b) |
38,637,029 |
44,726,622 |
Securities sold under agreements to repurchase (Notes 3o and 15b) |
252,409,551 |
215,014,630 |
Own portfolio |
94,476,502 |
105,045,917 |
Third-party portfolio |
155,869,230 |
108,520,557 |
Unrestricted portfolio |
2,063,819 |
1,448,156 |
Funds from issuance of securities (Notes 15c and 30b) |
44,634,746 |
36,898,189 |
Mortgage and real estate notes, letters of credit and others |
40,552,530 |
33,703,331 |
Securities issued overseas |
3,830,280 |
3,043,455 |
Structured operations certificates |
251,936 |
151,403 |
Interbank accounts |
1,263,042 |
1,988,364 |
Unsettled payments and receipts |
77,608 |
77,934 |
Correspondent banks |
1,185,434 |
1,910,430 |
Interdepartmental accounts |
3,392,800 |
3,762,883 |
Third-party funds in transit |
3,392,800 |
3,762,883 |
Borrowing (Notes 16a and 30b) |
16,909,856 |
12,867,545 |
Borrowing overseas |
16,909,856 |
12,867,545 |
On-lending in Brazil - official institutions (Notes 16b and 30b) |
13,155,180 |
11,860,115 |
National treasury |
30,931 |
1,109 |
BNDES |
4,543,794 |
3,261,698 |
CEF |
11,420 |
16,388 |
FINAME |
8,567,451 |
8,579,662 |
Other institutions |
1,584 |
1,258 |
On-lending overseas (Notes 16b and 30b) |
1,676,409 |
212,745 |
On-lending overseas |
1,676,409 |
212,745 |
Derivative financial instruments (Notes 3f, 6e II and 30b) |
5,456,372 |
3,990,507 |
Derivative financial instruments |
5,456,372 |
3,990,507 |
Other liabilities |
58,828,994 |
58,068,944 |
Payment of taxes and other contributions |
3,323,685 |
3,639,962 |
Foreign exchange portfolio (Note 9a) |
8,142,031 |
5,551,655 |
Social and statutory |
2,720,099 |
2,329,907 |
Tax and social security (Note 19a) |
3,780,230 |
4,659,619 |
Securities trading |
2,103,983 |
3,004,188 |
Financial and development funds |
1,512 |
1,236 |
Subordinated debts (Notes 18 and 30b) |
2,345,301 |
2,678,856 |
Sundry (Note 19b) |
36,412,153 |
36,203,521 |
Long-term liabilities |
203,149,882 |
191,364,182 |
Deposits (Notes 3o and 15a) |
40,601,084 |
48,442,416 |
Interbank deposits |
212,502 |
191,281 |
Time deposits (Notes 15a and 30b) |
40,388,582 |
48,251,135 |
Securities sold under agreements to repurchase (Notes 3o and 15b) |
18,062,442 |
26,812,933 |
Own portfolio |
18,062,442 |
26,812,933 |
Funds from issuance of securities (Notes 15c and 30b) |
54,902,439 |
38,747,732 |
Mortgage and real estate notes, letters of credit and others |
50,468,750 |
33,650,611 |
Securities issued overseas |
4,281,704 |
5,038,363 |
Structured operations certificates |
151,985 |
58,758 |
Borrowing (Notes 16a and 30b) |
3,537,195 |
843,258 |
Borrowing overseas |
3,537,195 |
843,258 |
Bradesco 5
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Statement of Financial Position of the Prudential Conglomerate – In thousands of Reais
Liabilities |
June 30 | |
2015 |
2014 | |
On-lending in Brazil - official institutions (Notes 16b and 30b) |
26,073,014 |
28,340,766 |
BNDES |
6,955,178 |
8,124,315 |
CEF |
2,840 |
13,515 |
FINAME |
19,114,996 |
20,202,564 |
Other institutions |
- |
372 |
Derivative financial instruments (Notes 3f, 6e II and 30b) |
126,448 |
741,053 |
Derivative financial instruments |
126,448 |
741,053 |
Other liabilities |
59,847,260 |
47,436,024 |
Tax and social security (Note 19a) |
7,356,713 |
7,989,464 |
Subordinated debts (Notes 18 and 30b) |
35,104,386 |
32,734,624 |
Sundry (Note 19b) |
17,386,161 |
6,711,936 |
Deferred income |
373,141 |
220,623 |
Deferred income |
373,141 |
220,623 |
Non-controlling interests in subsidiaries (Note 20) |
13,711 |
101,924 |
Shareholders' equity (Note 21) |
86,971,566 |
76,800,278 |
Capital: |
|
|
- Domiciled in Brazil |
42,559,829 |
37,622,310 |
- Domiciled overseas |
540,171 |
477,690 |
Capital reserves |
11,441 |
11,441 |
Profit reserves |
44,995,397 |
38,976,929 |
Asset valuation adjustments |
(764,260) |
9,923 |
Treasury shares (Notes 21d and 30b) |
(371,012) |
(298,015) |
Total |
844,769,114 |
778,950,374 |
The accompanying Notes are an integral part of these Financial Statements.
6 Prudential – June 2015
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Income Statement of the Prudential Conglomerate – In thousands of Reais
|
Semesters ended June 30 | |
2015 |
2014 | |
Finance Intermediation Income |
55,485,507 |
48,850,730 |
Loans (Note 8j) |
31,804,841 |
27,916,278 |
Leasing (Note 8j) |
1,585,222 |
2,852,550 |
Operations with securities (Note 6h) |
20,554,406 |
14,690,186 |
Derivative financial instruments (Note 6h) |
(1,588,147) |
1,063,382 |
Foreign exchange operations (Note 9a) |
1,252,434 |
66,122 |
Reserve requirement (Note 7b) |
2,035,409 |
2,221,748 |
Sale or transfer of financial assets |
(158,658) |
40,464 |
|
|
|
Financial intermediation expenses |
47,517,053 |
29,318,558 |
Retail and professional market funding (Note 15e) |
27,875,027 |
21,571,497 |
Borrowing and on-lending (Note 16c) |
10,352,614 |
(1,613,434) |
Leasing (Note 8j) |
1,316,318 |
2,510,322 |
Allowance for loan losses (Notes 3g, 8g and 8h) |
7,973,094 |
6,850,173 |
|
|
|
Gross income from financial intermediation |
7,968,454 |
19,532,172 |
|
|
|
Other operating income/expenses |
(387,743) |
(8,583,701) |
Fee and commission income (Note 22) |
10,706,553 |
8,916,574 |
Other fee and commission income |
8,033,989 |
6,577,968 |
Income from banking fees |
2,672,564 |
2,338,606 |
Payroll and related benefits (Note 23) |
(6,200,104) |
(5,698,685) |
Other administrative expenses (Note 24) |
(8,162,844) |
(7,471,583) |
Tax expenses (Note 25) |
(2,035,422) |
(1,814,080) |
Equity in the earnings (losses) of subsidiaries and affiliates (Nota 11a) |
9,215,106 |
804,207 |
Other operating income (Note 26) |
3,213,835 |
2,109,990 |
Other operating expenses (Note 27) |
(7,124,867) |
(5,430,124) |
Operating income |
7,580,711 |
10,948,471 |
Non-operating income (loss) (Note 28) |
(137,147) |
(216,639) |
Income before taxes and non-controlling interest |
7,443,564 |
10,731,832 |
Income tax and social contribution (Notes 32a and 32b) |
1,274,575 |
(3,505,229) |
Non-controlling interests in subsidiaries |
(785) |
(5,673) |
Net income |
8,717,354 |
7,220,930 |
The accompanying Notes are an integral part of these Financial Statements.
Bradesco 7
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Statement of Changes in Shareholders’ Equity – In Reais
Events |
Paid- up Capital |
Capital reserves |
Profit reserves |
Asset valuation adjustment |
Treasury shares |
Retained earnings (accumulated losses) |
Total | |||
Share premium |
Legal |
Statutory |
Bradesco |
Subsidiaries | ||||||
Balance on December 31, 2013 |
38,100,000 |
11,441 |
4,439,025 |
29,712,872 |
(865,373) |
(189,070) |
(269,093) |
- |
70,939,802 | |
Acquisition of treasury shares |
- |
- |
- |
- |
- |
- |
(28,922) |
- |
(28,922) | |
Asset valuation adjustments |
- |
- |
- |
- |
587,419 |
476,947 |
- |
- |
1,064,366 | |
Net income |
- |
- |
- |
- |
- |
- |
- |
7,220,930 |
7,220,930 | |
Allocations: |
- Reserves |
- |
- |
361,047 |
4,463,985 |
- |
- |
- |
(4,825,032) |
- |
|
- Interest on Shareholders’ Equity Paid |
- |
- |
- |
- |
- |
- |
- |
(1,566,898) |
(1,566,898) |
|
- Interim Dividends Paid |
- |
- |
- |
- |
- |
- |
- |
(829,000) |
(829,000) |
Balance on June 30, 2014 |
38,100,000 |
11,441 |
4,800,072 |
34,176,857 |
(277,954) |
287,877 |
(298,015) |
- |
76,800,278 | |
|
|
|
|
|
|
|
|
|
| |
Balance on December 31, 2014 |
38,100,000 |
11,441 |
5,193,467 |
38,992,668 |
(405,477) |
(85,834) |
(298,015) |
- |
81,508,250 | |
Increase of capital stock with reserves |
5,000,000 |
- |
- |
(5,000,000) |
- |
- |
- |
- |
- | |
Acquisition of treasury shares |
- |
- |
- |
- |
- |
- |
(72,997) |
- |
(72,997) | |
Asset valuation adjustments |
- |
- |
- |
- |
(421,620) |
148,671 |
- |
- |
(272,949) | |
Net income |
- |
- |
- |
- |
- |
- |
- |
8,717,354 |
8,717,354 | |
Allocations: |
- Reserves |
- |
- |
435,867 |
5,373,395 |
- |
- |
- |
(5,809,262) |
- |
|
- Interest on Shareholders’ Equity Paid and/or provisioned |
- |
- |
- |
- |
- |
- |
- |
(1,996,092) |
(1,996,092) |
|
- Interim Dividends Provisioned |
- |
- |
- |
- |
- |
- |
- |
(912,000) |
(912,000) |
Balance on June 30, 2015 |
43,100,000 |
11,441 |
5,629,334 |
39,366,063 |
(827,097) |
62,837 |
(371,012) |
- |
86,971,566 |
The accompanying Notes are an integral part of these Financial Statements.
8 Prudential – June 2015
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Statement of Cash Flows of the Prudential Conglomerate – In Reais
|
June 30 | |
2015 |
2014 | |
Cash flow from operating activities: |
|
|
Net Income before income tax and social contribution |
7,443,564 |
10,731,832 |
Adjustments to net income before income tax and social contribution |
7,624,778 |
10,238,632 |
Allowance for loan losses |
7,973,094 |
6,850,173 |
Depreciation and amortization |
1,746,259 |
1,464,838 |
Expenses with civil, labor and tax provisions |
1,694,629 |
1,319,963 |
Equity in the earnings (losses) of subsidiaries and associated companies |
(9,215,106) |
(804,207) |
Loss on sale of investments |
138 |
- |
Loss on sale of fixed assets |
10,838 |
9,316 |
Loss on sale of foreclosed assets |
120,056 |
147,463 |
Other |
5,294,870 |
1,251,086 |
Adjusted net income before taxes |
15,068,342 |
20,970,464 |
Decrease in interbank investments |
1,564,157 |
14,555,560 |
Decrease/(Increase) in trading securities and derivative financial instruments |
5,461,526 |
(5,750,678) |
(Increase) in interbank and interdepartmental accounts |
(2,186,891) |
(2,189,615) |
(Increase) in loan and leasing |
(16,067,502) |
(12,743,372) |
Increase/(decrease) in deferred income |
83,807 |
(367,063) |
Decrease/(Increase) in other receivables and other assets |
(3,414,097) |
2,706,309 |
Decrease in reserve requirement - Brazilian Central Bank |
2,011,860 |
1,879,164 |
(Decrease) in deposits |
(15,372,328) |
(4,781,567) |
(Decrease) in securities sold under agreements to repurchase |
(30,473,103) |
(960,966) |
Increase in funds from issuance of securities |
9,835,669 |
12,867,171 |
Increase/(Decrease) in borrowings and on-lending |
2,371,346 |
(1,961,273) |
Increase in other liabilities |
7,790,513 |
4,945,209 |
Income tax and social contribution paid |
(2,924,336) |
(2,182,215) |
Net cash provided by operating activities |
(26,251,037) |
26,987,128 |
Cash flow from investing activities: |
|
|
(Increase) in held-to-maturity securities |
(72,500) |
(7,159) |
Sale of/maturity of and interests on available-for-sale securities |
26,879,495 |
18,656,571 |
Proceeds from sale of foreclosed assets |
305,870 |
268,005 |
Sale of investments |
(2,913,999) |
- |
Disposal of premises and equipment and leased assets |
1,565,524 |
447,215 |
Purchases of available-for-sale securities |
(25,415,325) |
(24,957,104) |
Foreclosed assets received |
(667,577) |
(655,410) |
Investment acquisitions |
(109,069) |
(18,382) |
Acquisition of premises and equipment and leased assets |
(2,164,319) |
(1,471,051) |
Intangible asset acquisitions |
(4,040,965) |
(216,749) |
Dividends and interest on shareholders’ equity received |
1,359,769 |
106,888 |
Net cash (used in) investing activities |
(554,902) |
(7,847,176) |
Cash flow from financing activities: |
|
|
Increase/(decrease) in subordinated debts |
1,605,332 |
(505,235) |
Dividends and interest on shareholders’ equity paid |
(3,416,771) |
(2,595,321) |
Non-controlling interest |
4,817 |
(29,361) |
Acquisition of own shares |
(72,997) |
(28,922) |
Net cash provided by/(used in) financing activities |
(1,879,619) |
(3,158,839) |
Net increase in cash and cash equivalents |
(27,575,754) |
15,981,113 |
Cash and cash equivalents - at the beginning of the period |
204,669,142 |
117,680,012 |
Cash and cash equivalents - at the end of the period |
177,093,388 |
133,661,125 |
Net increase in cash and cash equivalents |
(27,575,754) |
15,981,113 |
The accompanying Notes are an integral part of these Financial Statements.
Bradesco 9
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Index of Explanatory Notes from Management
We have presented the Explanatory Notes that integrate the set of Consolidated Financial Statements of the Prudential Conglomerate of Bradesco, distributed as follows:
Page
1) | OPERATIONS | 11 |
2) | PRESENTATION OF THE FINANCIAL STATEMENTS | 11 |
3) | SIGNIFICANT ACCOUNTING PRACTICES | 13 |
4) | CASH AND CASH EQUIVALENTS | 19 |
5) | INTERBANK INVESTMENTS | 20 |
6) | SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS | 21 |
7) | INTERBANK ACCOUNTS - RESERVE REQUIREMENT | 32 |
8) | LOANS | 34 |
9) | OTHER RECEIVABLES | 45 |
10) | OTHER ASSETS | 47 |
11) | INVESTMENTS | 48 |
12) | PREMISES AND EQUIPMENT AND LEASED ASSETS | 49 |
13) | DEFERRED | 49 |
14) | INTANGIBLE ASSETS | 50 |
15) | DEPOSITS, SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND FUNDS FROM ISSUANCE OF SECURITIES51 | 51 |
16) | BORROWING AND ON-LENDING | 53 |
17) | PROVISIONS, CONTINGENT ASSETS AND LIABILITIES AND LEGAL LIABILITIES – TAX AND SOCIAL SECURITY | 54 |
18) | SUBORDINATED DEBT | 57 |
19) | OTHER LIABILITIES | 60 |
20) | NON-CONTROLLING INTERESTS IN SUBSIDIARIES | 60 |
21) | SHAREHOLDERS’ EQUITY (PARENT COMPANY) | 60 |
22) | FEE AND COMMISSION INCOME | 63 |
23) | PAYROLL AND RELATED BENEFITS | 63 |
24) | OTHER ADMINISTRATIVE EXPENSES | 63 |
25) | TAX EXPENSES | 64 |
26) | OTHER OPERATING INCOME | 64 |
27) | OTHER OPERATING EXPENSES | 64 |
28) | NON-OPERATING INCOME (LOSS) | 64 |
29) | RELATED-PARTY TRANSACTIONS (DIRECT AND INDIRECT) | 65 |
30) | FINANCIAL INSTRUMENTS | 67 |
31) | EMPLOYEE BENEFITS | 73 |
32) | INCOME TAX AND SOCIAL CONTRIBUTION | 74 |
33) | OTHER INFORMATION | 76 |
10 Prudential – June 2015
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 that it is authorized to do so. 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 Organização Bradesco, working together in an integrated fashion in the market.
2) PRESENTATION OF THE FINANCIAL STATEMENTS
The Financial Statements of the Prudential Conglomerate were prepared to comply with the requirements of Resolution No. 4.280/13, of the National Monetary Council (CMN) and additional rules of the Central Bank of Brazil (Bacen). Thus, specific requirements in the consolidation and/or combination of the entities listed in Resolution No. 4.280/13 determined by the CMN and Bacen were observed, which are not necessarily the same established by the corporate law and by the CMN or Bacen for other types of consolidation. In this sense, they cover the financial statements of Banco Bradesco, and foreign branches, subsidiaries and investment funds, as requested in Resolution No. 4.280/13.
In the preparation of these Financial Statements of the Prudential Conglomerate intercompany transactions, including investments, assets and liabilities, revenue, expenses and unrealized profit were eliminated and net income and shareholders’ equity attributable to the non-controlling interests were accounted for in a separate line. For jointly controlled investments with other shareholders, assets, liabilities and income and loss were proportionally consolidated in the consolidated financial statements of the Prudential Conglomerate according to the interest held in the shareholders’ equity of each investee. Goodwill on the acquisition of investments in subsidiary/associate companies or jointly controlled entities is presented in the investments and intangible assets lines (Note 14a).
The financial statements include estimates and assumptions, such as: the calculation of estimated loan losses; fair value estimates of certain financial instruments; civil, tax and labor provisions; impairment losses of securities classified as available-for-sale and held-to-maturity securities and non-financial assets; and the determination of the useful life of specific assets. Actual results may differ from those based on estimates and assumptions.
Bradesco’s financial statements of the Prudential Conglomerate were approved by the Board of Executive Officers and by the Disclosure Committee on July 29, 2015.
Bradesco 11
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Financial Statements of the Prudential Conglomerate
Below are the directly and indirectly owned companies included in the financial statements of the Prudential Conglomerate:
|
June 30 | ||
Activity |
Equity interest | ||
2015 |
2014 | ||
Financial Institutions |
|
|
|
Banco Bradesco S.A. |
Banking |
Parent Company |
Parent Company |
Banco Alvorada S.A. |
Banking |
99.99% |
99.99% |
Banco Bradesco Financiamentos S.A. |
Banking |
100.00% |
100.00% |
BMC Asset Management - DTVM Ltda. |
Asset management |
100.00% |
100.00% |
Banco Bradesco BBI S.A. (1) |
Investment bank |
99.80% |
98.35% |
Banco Boavista Interatlântico S.A. |
Banking |
100.00% |
100.00% |
Banco CBSS S.A. |
Banking |
100.00% |
100.00% |
Banco Bradesco Cartões S.A. |
Cards |
100.00% |
100.00% |
Banco Bradesco BERJ S.A. |
Banking |
100.00% |
100.00% |
Bradesco Leasing S.A. Arrendamento Mercantil |
Leasing |
100.00% |
100.00% |
Bradesco S.A. Corretora de Títulos e Valores Mobiliários |
Brokerage |
100.00% |
100.00% |
BEC - Distribuidora de Títulos e Valores Mobiliários Ltda. |
Asset management |
100.00% |
100.00% |
BEM - Distribuidora de Títulos e Valores Mobiliários Ltda. |
Asset management |
100.00% |
100.00% |
BRAM - Bradesco Asset Management S.A. DTVM |
Asset management |
100.00% |
100.00% |
Ágora Corretora de Títulos e Valores Mobiliários S.A. |
Brokerage |
100.00% |
100.00% |
Banco Bradescard S.A. |
Cards |
100.00% |
100.00% |
Crediare S.A. - Crédito, Financiamento e Investimento |
Banking |
50.00% |
50.00% |
Everest Leasing S.A. Arrendamento Mercantil |
Leasing |
100.00% |
100.00% |
Tibre Distribuidora de Títulos e Valores Mobiliários Ltda. |
Asset management |
100.00% |
100.00% |
Banco Bradesco Argentina S.A. |
Banking |
99.99% |
99.99% |
Banco Bradesco Europa S.A. |
Banking |
100.00% |
100.00% |
Banco Bradesco S.A. Grand Cayman Branch (2) |
Banking |
100.00% |
100.00% |
Banco Bradesco S.A. Grand Cayman Branch II (3) |
Banking |
- |
100.00% |
Banco Bradesco New York Branch |
Banking |
100.00% |
100.00% |
Bradesco Securities, Inc. |
Brokerage |
100.00% |
100.00% |
Bradesco Securities, UK. |
Brokerage |
100.00% |
100.00% |
Bradesco Securities Hong Kong |
Brokerage |
100.00% |
100.00% |
Bradescard México, Sociedad de Responsabilidad Limitada |
Cards |
100.00% |
100.00% |
Consortium management |
|
|
|
Bradesco Administradora de Consórcios Ltda. |
Consortium management |
100.00% |
100.00% |
Payment Institutions |
|
|
|
Cielo S.A. (4) (5) |
Services |
30.06% |
28.65% |
Cia. Brasileira de Soluções e Serviços - Alelo (5) |
Services |
50.01% |
50.01% |
Tempo Serviços Ltda. (6) |
Services |
100.00% |
- |
Paggo Soluções e Meios de Pagamentos S.A. (6) |
Services |
15.03% |
- |
Braspag – Tecnologia em Pagamentos (6) |
Services |
30.06% |
- |
Cielo Inc. (6) |
Services |
30.06% |
- |
Merchant E-Solutions (6) |
Services |
30.06% |
- |
Cateno Gestão de Contas de Pagamentos S.A. (6) |
Services |
21.04% |
- |
Cidade Capital Markets Limited |
Banking |
100.00% |
100.00% |
Farly Participações Ltda. (6) |
Services |
50.01% |
- |
Livelo S.A. (6) |
Services |
50.01% |
- |
Stelo S.A. (6) |
Services |
44.02% |
- |
Elo Holding Financeira S.A. (6) |
Services |
50.01% |
- |
Leader S.A. Administradora de Cartões de Crédito (6) |
Services |
50.00% |
- |
MPO Processadora de Pagamentos Móveis S.A. (6) |
Services |
50.00% |
- |
IBI Promotora de Vendas Ltda. (6) |
Services |
50.01% |
- |
Alvorada Administradora de Cartões Ltda. (6) |
Services |
100.00% |
- |
Securitization Companies |
|
|
|
Cia. Securitizadora de Créditos Financeiros Rubi |
Credit acquisition |
100.00% |
100.00% |
Alvorada Cia. Securitizadora de Créditos Financeiros |
Credit acquisition |
100.00% |
100.00% |
Promosec Cia. Securitizadora de Créditos |
Credit acquisition |
100.00% |
100.00% |
BCN – Consultoria, Adm. Bens, Serv. e Publicidade Ltda. (6) |
Credit acquisition |
100.00% |
- |
Alvorada Serviços e Negócios Ltda. (6) |
Credit acquisition |
100.00% |
- |
Investment funds (9) |
|
|
|
Bradesco FI MULT Cred. Priv. Inv. Exterior Pioneiro |
Investment funds |
100.00% |
100.00% |
Bradesco F.I.C. F.I. Referenciado DI Galáxia |
Investment funds |
100.00% |
100.00% |
Bradesco FI Multimercado Cred. Privado Apolo |
Investment funds |
100.00% |
100.00% |
F II - Fundo de Investimento RF Cred. Privado |
Investment funds |
100.00% |
100.00% |
FIDC Hiper (7) |
Investment funds |
- |
100.00% |
FIP Multisetorial Plus |
Investment funds |
100.00% |
100.00% |
BMC FIDC - Crédito Consignado INSS Subordinada (8) |
Investment funds |
- |
100.00% |
Bradesco FI Referenciado DI União |
Investment funds |
100.00% |
94.12% |
Bradesco F.I. Referenciado DI Performance |
Investment funds |
100.00% |
100.00% |
BRAD FI Mult. Cred. Priv. Inv. Exterior Andromeda |
Investment funds |
100.00% |
100.00% |
Strong Fundo de Inv. em Cotas FUN Inv. Multimercado |
Investment funds |
100.00% |
100.00% |
Fundo Inv. em Participações Multisetorial Plus II |
Investment funds |
100.00% |
100.00% |
Bradesco FIC Fundo Inv. Referenciado DI Carnaúba |
Investment funds |
50.01% |
50.01% |
Bradesco FIC FI Multimercado Cristal II (6) |
Investment funds |
100.00% |
- |
Bradesco FIC FI Multimercado Performance Liquidez (6) |
Investment funds |
100.00% |
- |
Bradesco Private FIC FI RF IRF – M Ativo (6) |
Investment funds |
100.00% |
- |
Bradesco 11
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Financial Statements of the Prudential Conglomerate
|
June 30 | ||
Activity |
Equity interest | ||
2015 |
2014 | ||
Investment funds (9) |
|
|
|
Bradesco FI MULT Cred. Priv. Inv. Exterior Pioneiro |
Investment funds |
100.00% |
100.00% |
Bradesco F.I.C. F.I. Referenciado DI Galáxia |
Investment funds |
100.00% |
100.00% |
Bradesco FI Multimercado Cred. Privado Apolo |
Investment funds |
100.00% |
100.00% |
F II - Fundo de Investimento RF Cred. Privado |
Investment funds |
100.00% |
100.00% |
FIDC Hiper (7) |
Investment funds |
- |
100.00% |
FIP Multisetorial Plus |
Investment funds |
100.00% |
100.00% |
BMC FIDC - Crédito Consignado INSS Subordinada (8) |
Investment funds |
- |
100.00% |
Bradesco FI Referenciado DI União |
Investment funds |
100.00% |
94.12% |
Bradesco F.I. Referenciado DI Performance |
Investment funds |
100.00% |
100.00% |
BRAD FI Mult. Cred. Priv. Inv. Exterior Andromeda |
Investment funds |
100.00% |
100.00% |
Strong Fundo de Inv. em Cotas FUN Inv. Multimercado |
Investment funds |
100.00% |
100.00% |
Fundo Inv. em Participações Multisetorial Plus II |
Investment funds |
100.00% |
100.00% |
Bradesco FIC Fundo Inv. Referenciado DI Carnaúba |
Investment funds |
50.01% |
50.01% |
Bradesco FIC FI Multimercado Cristal II (6) |
Investment funds |
100.00% |
- |
Bradesco FIC FI Multimercado Performance Liquidez (6) |
Investment funds |
100.00% |
- |
Bradesco Private FIC FI RF IRF – M Ativo (6) |
Investment funds |
100.00% |
- |
(1) Increase in equity interest through share acquisition in December 2014;
(2) The special purpose entity International Diversified Payment Rights Company is being consolidated. The company is part of a structure set up for the securitization of the future flow of payment orders received overseas (Note 15d);
(3) Company incorporated by Banco Bradesco S.A. Grand Cayman Branch in November 2014;
(4) Increase in equity interest through share acquisition in February and March 2015;
(5) Company proportionally consolidated, pursuant to CMN Rule No. 4.280/13;
(6) They have been part of the Prudential Conglomerate since January 2015;
(7) Ended in January 2015;
(8) Ended in May 2014; and
(9) The Investment Funds in which Bradesco substantially assumes or retains risks and benefits were consolidated.
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 income statement in the lines “Derivative Financial Instruments” and “Borrowing and On-lending”.
b) Income and Expense Recognition
The result is calculated according to the regime of competence, which establishes that the revenues and expenses should be included in the calculation of the results for the periods in which they occur, always simultaneously when they are correlated, regardless of being a receipt or payment.
Fixed rate contracts are recorded at their redemption value with the income or expense relating to future periods being recorded as a deduction from the corresponding asset or liability. Finance income and costs are recognized daily on a pro-rata basis and calculated using the compounding method, except when they relate to discounted notes or to foreign transactions, which are calculated using the straight-line method.
Floating rate and foreign-currency-indexed contracts are adjusted for interest and foreign exchange rates applicable at the end of the reporting period.
Bradesco 13
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Financial Statements of the Prudential Conglomerate
c) Cash and cash equivalents
Cash and cash equivalents include: funds available in currency, investments in gold, securities sold under agreements to repurchase and interest-earning deposits in other banks, maturing in 90 days or less, which are exposed to insignificant risk of change in fair 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 recorded at cost, plus income earned and adjusted to fair value with movements recognized in the Income Statement for the period;
· Available-for-sale securities – securities that are not specifically intended for trading purposes or to be held to maturity. They are recorded at cost, plus income earned, which is recorded in profit or loss in the period and adjusted to fair value with movements recognized in shareholders’ equity, net of tax, which will be transferred to the Income Statement only when effectively realized; and
· Held-to-maturity securities – securities for which there is positive intent and financial capacity to hold to maturity. They are recorded at cost, plus income earned recognized in the Income Statement for the period.
Securities classified as trading and available-for-sale, as well as derivative financial instruments, are recognized in the consolidated statement of financial position at their fair value. Fair value is generally based on quoted market prices or quotations for assets or liabilities with similar characteristics. If market prices are not available, fair values are based on traders’ quotations, pricing models, discounted cash flows or similar techniques to determine the fair value and may require judgment or significant estimates by Management.
Classification, breakdown and segmentation of securities are presented in Note 6 (a to d).
f) Derivative financial instruments (assets and liabilities)
Derivate instruments are classified based on the objective for which the underlying instrument was acquired at the date of purchase, taking into consideration its use for possible hedging purposes.
Operations involving derivative financial instruments are designed to meet the Bank’s own needs in order to manage overall exposure, as well as to meet customer requests to manage their positions. The gains or losses are recorded in profit-and-loss and shareholders’ equity accounts.
Derivative financial instruments used to mitigate risk deriving from exposure to variations in the fair value of financial assets and liabilities are designated as hedges when they meet the criteria for hedge accounting and are classified according to their nature:
· Market risk hedge: the gains and losses, realized or not, of the financial instruments classified in this category as well as the financial assets and liabilities, that are the object of the hedge, are recorded in the Income Statement; and
14 Prudential – June 2015
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Financial Statements of the Prudential Conglomerate
· Cash flow hedge: the effective portion of valuation or devaluation of the financial instruments classified in this category is recorded, net of taxes, in a specific account in shareholders’ equity. The ineffective portion of the hedge is recognized directly in the Income Statement.
A breakdown of amounts included as derivative financial instruments, in the balance sheet and off-balance-sheet accounts, is disclosed in Note 6 (e 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 Income Statement up to the 59th day that they are past due. As from the 60th day, they are recognized in off-balance sheet accounts and are only recognized in the Income Statement when received.
H-rated past-due transactions remain at this level for six months, after which they are written-off against the existing allowance and controlled in off-balance-sheet accounts for at least five years.
Renegotiated transactions are held at the same rating as on the date of the renegotiation or classified in a higher risk rating. Renegotiations already written-off against the allowance and that were recorded in off-balance-sheet accounts, are rated as level “H” and any possible gains derived from their renegotiation are recognized only when they are effectively received. When there is a significant repayment on the operation or when new material facts justify a change in the level of risk, the operation may be reclassified to a lower risk category.
The estimated allowance for loan losses is calculated to sufficiently cover probable losses, considering CMN and Bacen standards and instructions, together with 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 operations
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:
Bradesco 15
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Financial Statements of the Prudential Conglomerate
I- Leases receivable
Reflect the balance of installments receivable, restated according to the indexes and criteria established by contractual agreement.
II- Unearned revenues from leases 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 in arrears equal to or greater than 60 days, the appropriation to the result occurs upon receipt of contractual installments, in accordance with Resolution No. 2.682/99 of the CMN.
III- Fixed assets for leasing operations
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 related, 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).
h) Income tax and social contribution (assets and liabilities)
Income tax and social contribution deferred tax assets, calculated on income tax losses, social contribution losses and temporary differences, are recorded in “Other Receivables - Sundry” and the deferred tax liabilities on tax differences in leasing depreciation (applicable only for income tax),
mark-to-market adjustments on securities, restatement of judicial deposits, among others, are recorded in “Other Liabilities - Tax and Social Security”.
Deferred tax assets on temporary differences are realized when the difference between the accounting treatment and the income tax treatment reverses. Deferred tax assets on income tax and social contribution losses are realizable when taxable income is generated, up to the 30% limit of the taxable profit for the period. Deferred tax assets are recorded based on current expectations of realization considering technical studies and analyses carried out by Management.
16 Prudential – June 2015
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Financial Statements of the Prudential Conglomerate
The provision for income tax is calculated at 15% of taxable income plus a 10% surcharge. Social contribution on net income is calculated at 15% for financial companies and similar companies and for insurance companies, and at 9% for other companies.
Provisions were recorded for other income tax and social contribution in accordance with specific applicable legislation.
The changes in the criteria for recognition of revenues, costs and expenses computed in the calculation of the net profit for the period, introduced by Law No. 11.638/07 and subsequent amendments were made fiscally by the new regime of the taxation in force instituted by Law No. 12.973/14.
The breakdown of income tax and social contribution, showing the calculations, the origin and expected use of deferred tax assets, as well as unrecorded deferred tax assets, are presented in Note 32.
i) Prepaid expenses
Prepaid expenses consist of funds already disbursed for future benefits or services, which are recognized in the profit or loss on an accrual basis.
Incurred costs relating to assets that will generate revenue in subsequent periods are recorded in the Income Statement according to the terms and the amount of expected benefits and directly written-off in the Income Statement when the corresponding assets or rights are no longer part of the institution’s assets or when future benefits are no longer expected.
In the case of the remuneration paid by the origination of credit operations to the banking correspondents related to credit operations originated during 2015, Bradesco opted to recognize 2/3 of the total value of compensation, pursuant to the provisions of Bacen Circular No. 3.738/14.
Prepaid expenses are shown in detail in Note 10b.
j) Investments
Investments in affiliates, where Bradesco has significant influence over the investee or holds at least 20% of the voting rights, are accounted for using the equity method.
Tax incentives and other investments are stated at cost, less allowance for losses/impairment, where applicable.
Subsidiaries and jointly controlled entities are consolidated - the composition of the main companies can be found in Note 2. The composition of affiliates, as well as other investments, can be found in Note 11.
k) Premises and equipment
Relates to the tangible assets used by the Bank in its activities, including those resulting from transactions that transfer risks, benefits and control of the assets to the Bank.
Premises and equipment are stated at acquisition cost, net of accumulated depreciation, calculated by the straight-line method based on the assets’ estimated economic useful life, using the following rates: real estate - 4% per annum; furniture and utensils and machinery and equipment - 10% per annum; transport systems - 20% per annum; and data-processing systems - 20% to 50% per annum, and adjusted for impairment, when applicable.
The breakdown of asset costs and their corresponding depreciation, as well as the unrecorded surplus value for real estate and the fixed asset ratios, are presented in Note 12.
Bradesco 17
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Financial Statements of the Prudential Conglomerate
l) Deferred assets
It is recorded at cost of acquisition or composition, net of their accrued depreciation of 20% per annum, calculated using the linear method. Since December 2008, the new operations have been recorded in intangible assets, in accordance with Circular Letter No. 3.357/08 of Bacen.
The composition of fixed assets is shown in Note 13.
m) 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 recorded and amortized over the period in which the asset will directly and indirectly contribute to future cash flows and adjusted for impairment, where applicable; and
· Software: stated at cost less amortization calculated on a straight-line basis over the estimated useful life (20% to 50% 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.
Goodwill and other intangible assets and the movement in these balances by class, are presented in Note 14.
n) Impairment
Financial and non-financial assets are tested for impairment.
Impairment evidence may comprise the non-payment or payment delay by the debtor, possible bankruptcy process or the significant or extended 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 book value of an asset or cash-generating unit exceeds its recoverable value.
Impairment losses are presented in Note 6d(10).
o) Securities sold under agreements to repurchase
These are recognized at the value of the liabilities and include, when applicable, related charges up to the end of the reporting period, calculated on a daily pro-rata basis.
A breakdown of the contracts recorded in deposits and securities sold under agreements to repurchase, as well as terms and amounts recognized in the statement of financial position and income statement, is presented in Note 15.
p) Provisions, contingent assets and liabilities and legal obligations – tax and social security
Provisions, contingent assets and liabilities, and legal obligations, as defined below, are recognized, measured and disclosed in accordance with the criteria set out in CPC 25, approved by
CMN Resolution No. 3.823/09 and CVM Resolution No. 594/09:
· Contingent assets: these are not recognized in the financial statements, except to the extent that there are real guarantees or favorable judicial decisions, to which no further appeals are applicable, and confirmation of the capacity of the counterparty to pay or the ability of Bradesco to realize the asset via compensation against another liability upon which the gain is considered practically certain. Contingent assets with a chance of probable success are disclosed in the notes to the financial statements;
18 Prudential – June 2015
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Financial Statements of the Prudential Conglomerate
· Provisions: these are recorded taking into consideration the opinion of legal counsel, the nature of the lawsuits, similarity with previous lawsuits, complexity and positioning of the courts, whenever the loss is deemed probable, it requires a probable outflow of funds to settle the obligation and when the amount can be reliably measured;
· Contingent liabilities: according to CPC 25, the term “contingent” is used for liabilities that are not recognized because their existence will only be confirmed by the occurrence of one or more uncertain future events beyond Management’s control. Contingent liabilities considered as possible losses should only be disclosed in the notes when relevant. Obligations deemed remote are not recorded as a provision nor disclosed; and
· Legal obligations – provision for tax risks: results from judicial proceedings, which contest the applicability of tax laws on the grounds of legality or constitutionality, which, regardless of the assessment of the probability of success, are fully provided for in the financial statements.
Details on lawsuits, as well as segregation and changes in amounts recorded, by type, are presented in Note 17.
q) Other assets and liabilities
Assets are stated at their realizable amounts, including, when applicable, related income and inflation and exchange variations (on a daily prorated basis), less provision for losses, when deemed appropriate. Liabilities include known or measurable amounts, including related charges and inflation and exchange variations (on a daily prorated basis).
r) Subsequent events
These refer to events occurring between the reporting date and the date the financial statements are authorized to be issued.
They comprise the following:
· Events resulting in adjustments: events relating to conditions already existing at the end of the reporting period; and
· Events not resulting in adjustments: events relating to conditions not existing at the end of the reporting period.
Subsequent events, if any, are described in Note 33.
4) CASH AND CASH EQUIVALENTS
June 30 - R$ thousand | ||
2015 |
2014 | |
Cash and due from banks in domestic currency |
7,806,499 |
7,418,517 |
Cash and due from banks in foreign currency |
3,702,847 |
3,862,442 |
Investments in gold |
124 |
99 |
Total cash and due from banks |
11,509,470 |
11,281,058 |
Interbank investments (1) |
165,583,918 |
122,380,067 |
Total cash and cash equivalents |
177,093,388 |
133,661,125 |
(1) Refers to operations that mature in 90 days or less from the date they were effectively invested and with insignificant risk of change in fair value.
Bradesco 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
June 30 - R$ thousand | ||||||
1 to 30 days |
31 to 180 days |
181 to 360 days |
More than 360 days |
2015 |
2014 | |
Securities purchased under agreements to resell: |
|
|
|
|
|
|
Own portfolio position |
12,880,043 |
28,089 |
- |
- |
12,908,132 |
16,792,543 |
● Financial treasury bills |
1,397,200 |
- |
- |
- |
1,397,200 |
- |
● National treasury notes |
6,848,787 |
- |
- |
- |
6,848,787 |
7,409,561 |
● National treasury bills |
4,459,495 |
- |
- |
- |
4,459,495 |
9,370,767 |
● Debentures |
1,879 |
- |
- |
- |
1,879 |
- |
● Other |
172,682 |
28,089 |
- |
- |
200,771 |
12,215 |
Funded position |
151,916,843 |
4,432,603 |
- |
- |
156,349,446 |
107,872,543 |
● Financial treasury bills |
24,316,890 |
- |
- |
- |
24,316,890 |
76,294 |
● National treasury notes |
47,982,718 |
3,931,687 |
- |
- |
51,914,405 |
70,246,714 |
● National treasury bills |
79,617,235 |
500,916 |
- |
- |
80,118,151 |
37,549,535 |
Short position |
454,697 |
1,616,513 |
- |
- |
2,071,210 |
656,775 |
● National treasury bills |
454,697 |
1,616,513 |
- |
- |
2,071,210 |
656,775 |
Subtotal |
165,251,583 |
6,077,205 |
- |
- |
171,328,788 |
125,321,861 |
Interest-earning deposits in other banks: |
|
|
|
|
|
|
● Interest-earning deposits in other banks |
645,603 |
1,452,830 |
2,324,955 |
526,925 |
4,950,313 |
12,345,193 |
● Provision for losses |
(4,001) |
(7,926) |
(7,215) |
- |
(19,142) |
(13,374) |
Subtotal |
641,602 |
1,444,904 |
2,317,740 |
526,925 |
4,931,171 |
12,331,819 |
Total in 2015 |
165,893,185 |
7,522,109 |
2,317,740 |
526,925 |
176,259,959 |
|
% |
94.1 |
4.3 |
1.3 |
0.3 |
100.0 |
|
Total in 2014 |
125,002,098 |
7,337,099 |
4,644,662 |
669,821 |
|
137,653,680 |
% |
90.8 |
5.3 |
3.4 |
0.5 |
|
100.0 |
20 Prudential – June 2015
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Financial Statements of the Prudential Conglomerate
b) Income from interbank investments
Classified in the income statement as income from operations with securities.
Semesters ended June 30 - R$ thousand | ||
2015 |
2014 | |
Finance Intermediation Income: |
|
|
• Own portfolio position |
148,224 |
149,568 |
• Funded position |
10,293,911 |
5,632,855 |
• Short position |
187,010 |
148,220 |
Subtotal |
10,629,145 |
5,930,643 |
Income from interest-earning deposits in other banks |
214,081 |
326,512 |
Total (Note 6h) |
10,843,226 |
6,257,155 |
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
|
June 30 - R$ thousand | |||||
Financial |
Other Activities |
2015 |
% |
2014 |
% | |
Trading securities |
34,537,469 |
- |
34,537,469 |
23.1 |
53,447,761 |
33.3 |
- Government securities |
12,095,083 |
- |
12,095,083 |
8.1 |
31,081,999 |
19.4 |
- Private securities |
15,420,530 |
- |
15,420,530 |
10.3 |
16,618,921 |
10.4 |
- Derivative financial instruments (1) (8) |
7,021,856 |
- |
7,021,856 |
4.7 |
5,746,841 |
3.5 |
Available-for-sale securities (4) |
102,580,499 |
3,080 |
102,583,579 |
68.6 |
106,905,267 |
66.7 |
- Government securities |
57,965,123 |
1,354 |
57,966,477 |
38.8 |
58,655,424 |
36.6 |
- Private securities |
44,615,376 |
1,726 |
44,617,102 |
29.8 |
48,249,843 |
30.1 |
Held-to-maturity securities (4) |
12,458,024 |
- |
12,458,024 |
8.3 |
36,757 |
- |
- Government securities |
39,021 |
- |
39,021 |
- |
36,757 |
- |
- Private securities |
12,419,003 |
- |
12,419,003 |
8.3 |
- |
- |
Subtotal |
149,575,992 |
3,080 |
149,579,072 |
100.0 |
- |
- |
Purchase and sale commitments (2) |
71,572 |
- |
71,572 |
- |
- |
- |
Grand total |
149,647,564 |
3,080 |
149,650,644 |
100.0 |
160,389,785 |
100.0 |
- Government securities |
70,099,227 |
1,354 |
70,100,581 |
47.0 |
89,774,180 |
56.0 |
- Private securities |
79,476,765 |
1,726 |
79,478,491 |
53.0 |
70,615,605 |
44.0 |
Subtotal |
149,575,992 |
3,080 |
149,579,072 |
100.0 |
- |
- |
Purchase and sale commitments (2) |
71,572 |
- |
71,572 |
- |
- |
- |
Grand total |
149,647,564 |
3,080 |
149,650,644 |
100.0 |
160,389,785 |
100.0 |
Bradesco 21
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Financial Statements of the Prudential Conglomerate
b) Breakdown of the consolidated portfolio by issuer
Securities (3) |
June 30 - R$ thousand | ||||||||
2015 |
2014 | ||||||||
1 to 30 days |
31 to 180 days |
181 to 360 days |
More than 360 days |
Fair/book value (5) (6) (7) |
Original amortized cost |
Mark-to-market |
Fair/book value (5) (6) (7) |
Mark-to-market | |
Government securities |
64,399 |
4,829,968 |
18,678,748 |
46,527,466 |
70,100,581 |
71,417,022 |
(1,316,441) |
89,774,180 |
(39,127) |
Financial treasury bills |
1,893 |
1,635,751 |
- |
4,432,027 |
6,069,671 |
6,069,038 |
633 |
8,422,792 |
1,183 |
National treasury bills |
4,745 |
1,750,139 |
18,678,748 |
2,925,052 |
23,358,684 |
23,917,250 |
(558,566) |
25,147,017 |
(705,762) |
National treasury notes |
- |
- |
- |
38,000,602 |
38,000,602 |
38,705,515 |
(704,913) |
53,914,739 |
639,649 |
Brazilian foreign debt securities |
46,427 |
- |
- |
1,113,408 |
1,159,835 |
1,202,726 |
(42,891) |
313,746 |
14,717 |
Privatization rights |
- |
- |
- |
55,667 |
55,667 |
46,043 |
9,624 |
62,237 |
10,662 |
Other |
11,334 |
1,444,078 |
- |
710 |
1,456,122 |
1,476,450 |
(20,328) |
1,913,649 |
424 |
Private securities |
13,309,751 |
4,020,788 |
3,818,051 |
58,329,901 |
79,478,491 |
85,217,983 |
(5,739,492) |
70,615,605 |
545,510 |
Bank deposit certificates |
98,242 |
325,816 |
16,321 |
51,482 |
491,861 |
491,861 |
- |
637,778 |
- |
Shares |
3,335,800 |
- |
- |
- |
3,335,800 |
3,365,499 |
(29,699) |
3,769,072 |
132,721 |
Debentures (9) |
187,344 |
1,599,956 |
1,424,150 |
29,514,645 |
32,726,095 |
32,240,687 |
485,408 |
32,486,525 |
(167,719) |
Promissory notes |
- |
289,934 |
568,518 |
- |
858,452 |
852,312 |
6,140 |
983,766 |
(8,452) |
Foreign corporate securities |
169,776 |
177,325 |
448,247 |
10,805,146 |
11,600,494 |
12,259,495 |
(659,001) |
8,582,871 |
119,862 |
Derivative financial instruments (1) (8) |
5,618,755 |
475,203 |
101,694 |
826,204 |
7,021,856 |
12,467,572 |
(5,445,716) |
5,746,841 |
636,883 |
Other |
3,899,834 |
1,152,554 |
1,259,121 |
17,132,424 |
23,443,933 |
23,540,557 |
(96,624) |
18,408,752 |
(167,785) |
Subtotal |
13,374,150 |
8,850,756 |
22,496,799 |
104,857,367 |
149,579,072 |
156,635,005 |
(7,055,933) |
160,389,785 |
506,383 |
Purchase and sale commitments (2) |
60,579 |
10,609 |
384 |
- |
71,572 |
71,572 |
- |
- |
- |
Hedge - cash flow (Note 6g) |
- |
- |
- |
- |
- |
- |
299,179 |
- |
(20,725) |
Securities reclassified to “Held-to-maturity securities” (4) |
- |
- |
- |
- |
- |
- |
(370,136) |
- |
- |
Grand total |
13,434,729 |
8,861,365 |
22,497,183 |
104,857,367 |
149,650,644 |
156,706,577 |
(7,126,890) |
160,389,785 |
485,658 |
22 Prudential – June 2015
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Financial Statements of the Prudential Conglomerate
c) Consolidated classification by category, maturity and operating segment
I) Trading securities
Securities (3) |
June 30 - R$ thousand | ||||||||
2015 |
2014 | ||||||||
1 to 30 days |
31 to 180 days |
181 to 360 days |
More than 360 days |
Fair/book value (5) (6) (7) |
Original amortized cost |
Mark-to-market |
Fair/book value (5) (6) (7) |
Mark-to-market | |
- Financial |
10,109,531 |
6,014,024 |
3,031,279 |
15,382,635 |
34,537,469 |
40,060,937 |
(5,523,468) |
53,000,480 |
761,498 |
National treasury bills |
4,744 |
1,750,139 |
973,217 |
281,167 |
3,009,267 |
3,016,378 |
(7,111) |
4,748,893 |
(720) |
Financial treasury bills |
- |
1,635,751 |
- |
3,869,174 |
5,504,925 |
5,505,145 |
(220) |
8,068,623 |
1,028 |
Bank deposit certificates |
78,287 |
325,816 |
16,321 |
36,418 |
456,842 |
456,842 |
- |
595,513 |
|
Derivative financial instruments (1) (8) |
5,618,755 |
475,203 |
101,694 |
826,204 |
7,021,856 |
12,467,572 |
(5,445,716) |
5,746,841 |
636,883 |
Debentures (9) |
- |
260,931 |
391,066 |
3,211,269 |
3,863,266 |
3,872,374 |
(9,108) |
5,934,287 |
(59,382) |
Promissory notes |
- |
230,362 |
- |
- |
230,362 |
229,974 |
388 |
153,605 |
(376) |
National treasury notes |
- |
- |
- |
2,588,311 |
2,588,311 |
2,613,890 |
(25,579) |
16,350,827 |
210,589 |
Other |
4,407,745 |
1,335,822 |
1,548,981 |
4,570,092 |
11,862,640 |
11,898,762 |
(36,122) |
11,401,891 |
(26,524) |
- Other Activities |
- |
- |
- |
- |
- |
- |
- |
447,280 |
- |
Financial treasury bills |
- |
- |
- |
- |
- |
- |
- |
447,280 |
- |
Subtotal |
10,109,531 |
6,014,024 |
3,031,279 |
15,382,635 |
34,537,469 |
40,060,937 |
(5,523,468) |
- |
- |
Purchase and sale commitments (2) |
60,579 |
10,609 |
384 |
- |
71,572 |
71,572 |
- |
- |
- |
Financial |
60,579 |
10,609 |
384 |
- |
71,572 |
71,572 |
- |
- |
- |
Grand total |
10,170,110 |
6,024,633 |
3,031,663 |
15,382,635 |
34,609,041 |
40,132,509 |
(5,523,468) |
53,447,760 |
761,498 |
Derivative financial instruments (liabilities) (8) |
(5,126,990) |
(221,543) |
(107,839) |
(126,448) |
(5,582,820) |
(5,336,969) |
(245,851) |
4,731,559 |
284,085 |
Bradesco 23
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 (3) (10) |
June 30 - R$ thousand | ||||||||
2015 |
2014 | ||||||||
1 to 30 days |
31 to 180 days |
181 to 360 days |
More than 360 days |
Fair/book value (5) (6) (7) |
Original amortized cost |
Mark-to-market |
Fair/book value (5) (6) (7) |
Mark-to-market | |
- Financial (4) |
3,262,893 |
2,836,732 |
19,465,520 |
77,015,354 |
102,580,499 |
104,112,978 |
(1,532,479) |
106,902,496 |
(255,117) |
National treasury bills |
- |
- |
17,705,531 |
2,643,885 |
20,349,416 |
20,900,872 |
(551,456) |
20,398,123 |
(705,041) |
Brazilian foreign debt securities |
7,815 |
- |
- |
194,366 |
202,181 |
223,447 |
(21,266) |
276,989 |
14,717 |
Foreign corporate securities |
158,660 |
54,845 |
74,064 |
10,591,743 |
10,879,312 |
11,537,081 |
(657,769) |
8,515,351 |
120,000 |
National treasury notes |
- |
- |
- |
35,412,291 |
35,412,291 |
36,091,625 |
(679,334) |
37,563,911 |
429,059 |
Financial treasury bills |
1,893 |
- |
- |
561,499 |
563,392 |
562,553 |
839 |
351,398 |
153 |
Bank deposit certificates |
19,528 |
- |
- |
15,065 |
34,593 |
34,593 |
- |
42,264 |
- |
Debentures (9) |
186,069 |
1,339,025 |
1,033,084 |
26,303,376 |
28,861,554 |
28,367,037 |
494,517 |
26,552,239 |
(108,337) |
Shares |
1,776,936 |
- |
- |
- |
1,776,936 |
1,806,636 |
(29,700) |
1,931,432 |
139,671 |
Other |
1,111,992 |
1,442,862 |
652,841 |
1,293,129 |
4,500,824 |
4,589,134 |
(88,310) |
11,270,789 |
(145,339) |
- Other Activities |
1,726 |
- |
- |
1,354 |
3,080 |
3,066 |
14 |
2,771 |
2 |
Financial treasury bills |
- |
- |
- |
1,354 |
1,354 |
1,340 |
14 |
2,771 |
2 |
Other |
1,726 |
- |
- |
- |
1,726 |
1,726 |
- |
- |
- |
Subtotal |
3,264,619 |
2,836,732 |
19,465,520 |
77,016,708 |
102,583,579 |
104,116,044 |
(1,532,465) |
106,905,267 |
(255,115) |
Hedge - cash flow (Note 6g) |
- |
- |
- |
- |
- |
- |
299,179 |
- |
(20,725) |
Securities reclassified to “Held-to-maturity securities” (4) |
- |
- |
- |
- |
- |
- |
(370,136) |
- |
- |
Grand total |
3,264,619 |
2,836,732 |
19,465,520 |
77,016,708 |
102,583,579 |
104,116,044 |
(1,603,422) |
106,905,267 |
(275,840) |
24 Prudential – June 2015
Financial Statements of the Prudential Conglomerate and Independent Auditor’s Report
Notes to the Financial Statements of the Prudential Conglomerate
III) Held-to-maturity securities
Securities (3) |
June 30 - R$ thousand | |||||
2015 |
2014 | |||||
1 to 30 days |
31 to 180 days |
181 to 360 days |
More than 360 days |
Original amortized cost (6) (7) |
Original amortized cost (6) (7) | |
Financial |
- |
- |
- |
12,458,024 |
12,458,024 |
36,757 |
Brazilian foreign debt securities |
- |
- |
- |
39,021 |