The main figures of Bradesco in the first quarter of 2013 are presented below:

1.   Adjusted Net Income⁽¹⁾ for the first quarter of 2013 stood at R$2.943 billion (a 3.4% increase compared to the R$2.845 billion recorded in the same period of the previous year), corresponding to earnings per share of R$2.77 and Return on Average Adjusted Shareholders’ Equity⁽²⁾ of 19.5%.

2.   Adjusted Net Income is composed of R$2.013 billion from financial activities, representing 68.4% of the total, and R$930 million from insurance, pension plan and capitalization bond operations, which accounted for 31.6%.

3.   On March 31, 2013, Bradesco’s market capitalization stood at R$145.584 billion⁽³⁾, up 28.8% over the same period in 2012. 

4.   Total Assets stood at R$894.467 billion in March 2013, a 13.3% increase over the same period in 2012. Return on Total Average Assets was 1.3%.

5.   The Expanded Loan Portfolio⁽⁴⁾ stood at R$391.682 billion in March 2013, up 11.6% during the same period in 2012. Operations with individuals totaled R$119.231 billion (up 8.7% from March 2012), while operations with companies totaled R$272.451 billion (up 13.0% from March 2012).

6.   Assets under Management stood at R$1.278 trillion, varying 17.5% from March 2012.

7.   Shareholders’ Equity stood at R$69.442 billion in March 2013, up 19.6% from March 2012. Capital Adequacy Ratio stood at 15.6% in March 2013, 11.0% of which fell under Tier I Capital.

8.   Interest on Shareholders’ Equity were paid and recorded in provision in the amount of R$1.028 billion for the first quarter of 2013, R$226.271 million of which was paid monthly and R$801.431 million was recorded in provision.

9.     Financial Margin stood at R$10.509 billion, up 2.8% in comparison with the first quarter of 2012. 

10. The Delinquency Ratio over 90 days stood at 4.0% on March 31, 2013 (4.1% on March 31, 2012).

11. The Efficiency Ratio⁽⁵⁾ improved by 1.2 p.p. (from 42.7% in March 2012 to 41.5% in March 2013), and the “adjusted-to-risk” efficiency ratio stood at 52.6% (52.6% in March 2012).

12. Insurance Written Premiums, Pension Plan Contributions and Capitalization Bond Income totaled R$10.953 billion in the first quarter of 2013, up 16.3% over 2012. Technical Reserves stood at R$127.367 billion, up 19.1% from March 2012.

13.  Investments in infrastructure, information technology and telecommunications amounted to R$1.078 billion in the first quarter of 2013, up 9.8% over the same period in 2012.

14. Taxes and contributions, including social security, paid or recorded in provision, amounted to R$7.137 billion in the quarter, of which R$1.967 billion referred to taxes withheld and collected from third parties and R$5.170 billion from Bradesco Organization activities, equivalent  to 175.7% of Adjusted Net Income ⁽¹⁾.

15. Bradesco has an extensive customer service network in Brazil, comprising 8,473 Service Points, with 4,687 branches and 3,786 Service Branches - PAs. Customers can also use 1,457 PAEs – ATMs (Automatic Teller Machines) in companies, 43,598 Bradesco Expresso  service points, 34,719 Bradesco Dia & Noite ATMS and 13,306 Banco24Horas  ATMs.

16. Payroll, plus charges and benefits, totaled R$2.623 billion. Social benefits provided to the 102,793 employees of the Bradesco Organization and their dependents amounted to R$657.366 million, while investments in training and development programs totaled
R$12.989 million.

17. Major Awards and Acknowledgments in the period:

·       Bradesco stood out as the most valuable brand in Latin America in the banking sector and ranked 16^th in the overall ranking. In the insurance sector, Bradesco was ranked first, according to The Banker / Brand Finance magazine;

·       It is among the world’s most valuable brands in all sectors of the economy, ranking 66^th, standing out as the best Brazilian brand in the list (consulting firm Brand Finance);

·       Bradesco is Brazil’s most valuable brand (IstoÉ  Dinheiro  magazine – BrandAnalytics/Millward Brown);

·       Bradesco was granted the Selo Paulista da Diversidade (São Paulo Diversity Seal), in Full 2012 category, for the third consecutive year (Labor and Employment Relations Officer of São Paulo State Government);

·       It was considered the most profitable bank among the major financial institutions in Latin America and the United States (Economatica);

·       The Bank stood out in corporate governance and transparency, according to the Guia da Transparência Corporativa (Corporate Transparency Guide) (Brasil Econômico newspaper);

·       It remains among the companies composing the “Carbon Efficient Index (ICO2)” (BM&FBOVESPA and BNDES –Brazilian Development Bank); and

·       Grupo Bradesco Seguros stood out in eight categories of the 10^th Segurador Brasil Award (Brasil Notícias Publisher).

18. With regards to sustainability, Bradesco divides its actions into three pillars: (i) Sustainable Finances, focused on banking inclusion, social and environmental variables for loan approvals and product offerings; (ii) Responsible Management, focused on valuing professionals, improving the workplace and adopting eco-efficient practices; and (iii) Social and Environmental Investments, focused on education, the environment, culture and sports. In this area, we point out Fundação Bradesco, which has a 56-year history of extensive social and educational work, with 40 schools in Brazil. In 2013, an estimated budget of R$460.961 will benefit 106,843 students in its schools, in Basic Education (from Kindergarten to High School and Vocational Training - High School Level), Education for Youth and Adults; and Preliminary and Continuing Qualification focused on the creation of jobs and generation of income. The nearly 47 thousand students in Basic Education are guaranteed free, quality education, uniforms, school supplies, meals and medical and dental assistance. Fundação Bradesco will also assist another 350,000 students through its distance learning programs, found at its e-learning portal “Virtual School.” These students will complete at least one of the many courses offered by the Virtual School. Furthermore, another 68,323 people will benefit from projects and actions in partnerships with CIDs - Digital Inclusion Centers, the Educa+Ação Program and Technology courses (Educar e Aprender – Educate and Learn).

The “adjusted to risk” ER, which reflects the impact of risk associated with loan operations⁽²⁾, reached 52.6% in the first quarter of 2013, a 0.1 p.p. increase over the previous quarter, mainly due to the decrease of delinquency costs in the period.

The ER in the last 12 months⁽¹⁾ remained stable at 41.5% over the previous quarter.

Quarterly ER decreased from 42.5% in the fourth quarter of 2012 to 40.9% in the first quarter of 2013, mainly due to: (i) lower personnel expenses, chiefly as a result of more vacation requests in the quarter; and (ii) lower administrative expenses, mainly due to: (a) the seasonality in the previous quarter, which affected mainly marketing and advertising expenses; and (b) the continuous cost control in the quarter.

The R$403 million decrease between the first quarter of 2013 and the fourth quarter of 2012 was mainly due to lower gains from the: (i) non-interest margin, in the amount of R$234 million, due to lower gains from the market arbitrage; and (ii) interest margin, in the amount of R$169 million, due to lower gains from the “Loan” margin, mainly due to the new interest rate policy for the credit card segment.

Financial margin posted a R$11 million improvement between the first quarter of 2013 and the same period in 2012, driven by: (i) the R$287 million increase in income from interest-earning operations due to an increase in business volume, mainly from “Loan” and “Securities/Other;” and (ii) the lower result from the non-interest margin, in the amount of R$276 million, due to lower gains from the market arbitrage.

In March 2013, Bradesco’s expanded loan portfolio totaled R$391.7 billion, which was up 1.6% in the quarter, due to: (i) a 1.8% growth in Corporations; (ii) a 1.5% growth in Small and Medium-sized Entities (SMEs); and (iii) a 1.4% growth in Individuals.

In the last 12 months, the expanded loan portfolio increased 11.6%, driven by: (i) 15.6% growth in Corporations; (ii) 9.7% growth in SMEs; and (iii) 8.7% growth in Individuals.   

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

In the first quarter of 2013, ALL expenses came to R$3,109 million, down 3.1% from the previous quarter, even considering the 2.4% growth in the loan portfolio – as defined by Bacen in the period. This result was due to the reduction in delinquency level, despite the typical higher delinquency in the first months of the year.

In the year-over-year comparison, this expense remained practically stable, even considering the 10.4% increase in loan operations – as defined by Bacen, resulting from the reduced delinquency level in the last 12 months.

(1)   Includes the recognition of exceeding ALL in the total amount of R$1.0 billion.

Total delinquency ratio, which is based on transactions due over 90 days, was down 0.1 p.p. both in the quarter and in the last twelve months, maintaining an improvement in a gradual downward trend. This decrease was mainly influenced by the 0.2 p.p. improvement in the Individuals indicator.

The following graph presents the changes in coverage ratio of the Allowance for Loan Losses for loans overdue for more than 60 and 90 days. In March 2013, these ratios stood at 146.0% and 179.4%, respectively, pointing to a comfortable level of provisioning.

The ALL, totaling R$21.4 billion in March 2013, was made up of: (i) R$17.4 billion required by Bacen; and (ii) R$4.0 billion in excess provisions.

Net income for the first quarter of 2013 stood at R$930 million (R$964 million in the fourth quarter of 2012) for annualized Return on Adjusted Shareholders’ Equity of 26.5%.

In the year-over-year comparison, net income increased by 2.8% in the first quarter of 2013.

In the year-over-year comparison, issued premiums, pension plan contributions and capitalization bond income increased by 16.3%,

Grupo Bradesco Seguros complies with the regulatory requirements, also complying with global standards (Solvency II), with a leverage of 2.4 times its Shareholders’ Equity in the period.

In the first quarter of 2013, fee and commission income came to R$4,599 million, down R$76 million over the previous quarter, mainly due to the excellent performance of underwriting / financial advisory revenues in the fourth quarter of 2012.

In the year-over-year comparison, the increase of R$481 million, or 11.7%, in the first quarter of 2013 was mainly due to: (i) the performance of the credit card segment, driven by the growth in revenue and transactions; (ii) higher income from checking accounts, which was a result of a better business volume and an increase in the checking account holder base, which posted net growth of 459 thousand active accounts in the period; (iii) greater income from collections; (iv) greater income from fund management, whose volume of assets and portfolios under management increased by 26.2% in the period; (v) greater income from consortium management; and (vi) expansion and modernization of customer service channels, facilitating access and increasing the number of transactions.

In the first quarter of 2013, the R$83 million decrease from the previous quarter was mainly composed of the variation in structural expenses, due to the typical concentration of vacations in the first quarter of each year.

In the year-over-year comparison, the R$181 million increase in the first quarter of 2013 was mainly due to:

·         the R$139 million increase in structural expenses, resulting from greater expenses with salaries, social charges and benefits, due to raise in salary levels, as per collective bargaining agreements; and

·         the R$42 million increase in non-structural expenses, mainly due to greater expenses with: (i) provision for labor claims; and (ii) management and employee profit sharing.

In the first quarter of 2013, the 8.0% decrease in administrative expenses from the previous quarter was mainly due to: (i) the seasonality in the fourth quarter of 2012, which affected: (a) marketing and advertising expenses; and (b) businesses and services volume; and (ii) continuous efforts in cost control, pointing out the actions taken by our Efficiency Committee.

Despite the greater expenses with (i) the opening of 6,769 service points in the period, mainly the opening of 5,533 Bradesco  Expresso  points, for a total of 69,528 service points on March 31, 2013, and (ii) the increase in businesses and service volume in the period, the administrative expenses increased only 1.6% year over year and quarter over quarter, resulting from the Efficiency Committee efforts to control these expenses.

Other operating expenses, net of other operating income, totaled R$1,170 million in the first quarter of 2013, up R$40 million over the previous quarter, and R$174 million in comparison with the same period in 2012.

The abovementioned increases were mainly the result of greater expenses with: (i) operating provisions, particularly those for civil contingencies; (ii) amortization of intangible assets; and (iii) sundry losses.

Income tax and social contribution increased 3.4% in comparison with the previous quarter and 4.8% in the year-over-year comparison, mainly due to the increase in taxable result.

Unrealized gains totaled R$20,326 million in the first quarter of 2013, a R$4,554 million decrease from the previous quarter. This was mainly due to the depreciation of fixed-income securities due to mark-to-market accounting.

The beginning of 2013 was characterized by the significant decrease in financial rupture risks felt throughout the past year. The lower probability of occurring extreme events has a positive influence on the economic agents’ expectations, contributing to the world’s economic activity recovery for the coming quarters. At the same time, however, structural issues not yet definitively addressed are cause for concerns.

The return to normal industrial and retail inventories should permit the resumption of manufacturing production in the coming periods, against a backdrop of strong growth in family consumption, fueled by the expansion of jobs and income. The excellent domestic agricultural and livestock prospects, especially the soybean and corn crops, are also worth emphasizing, as is their positive impact on the economies of small and medium-sized cities. The robust agricultural production tends to bring benefits in terms of balance of trade and inflation.

Brazil continues to make institutional progress, exemplified by the recent adoption of new policies addressing structural issues, such as the infrastructure concession program and production cost reduction. In the coming years, pre-salt exploration and the hosting of major sports events represent a privileged set of opportunities that are only available to a select group of nations, of which Brazil is part.

Given all these favorable prospects, it is vital to maintain the kind of healthy macroeconomic policies whose implementation over the past two decades has resulted in decreased volatility and increased growth, providing for a more equitable income distribution and unprecedented social inclusion. Regarding challenges, quality education is one of Brazil’s priorities in an increasingly competitive global environment and labor shortage in several segments.

Despite the challenges faced by the domestic economy in pursue of higher sustainable growth rate, Bradesco is maintaining its positive long-term outlook for the country. With interest rates at an all-time low levels, the volume of credit is growing at rates that are both sustainable and risk-compatible, a factor that has set the national financial system apart from those in several other countries. As a result of the intense and ongoing upward social mobility of the last years, the prospects for the banking and insurance sectors remain highly favorable. 

R$ million

4Q12

Book Income Statement

Reclassifications

Fiscal Hedge ⁽⁷⁾

Managerial Income Statement

Non-recurring Events ⁽⁸⁾

Adjusted Income Statement

(1)

(2)

(3)

(4)

(5)

(6)

Financial Margin

11,769

(282)

25

(63)

(817)

-

-

125

10,757

352

11,109

ALL

(3,432)

-

-

-

313

(92)

-

-

(3,210)

-

(3,210)

Gross Income from Financial Intermediation

8,337

(282)

25

(63)

(504)

(92)

-

125