6-K 1 bbdprudencial2020_6k.htm BBDPRUDENCIAL2020_6K

 
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 March, 2021
Commission File Number 1-15250
 

 
BANCO BRADESCO S.A. 
(Exact name of registrant as specified in its charter)
 
BANK BRADESCO
(Translation of Registrant's name into English)
 
Cidade de Deus, s/n, Vila Yara
06029-900 - Osasco - SP
Federative Republic of Brazil
(Address of principal executive office)
 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.  Form 20-F ___X___ Form 40-F _______

 Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.  

Yes _______ No ___X____

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Consolidated Financial Statement of the Prudential Conglomerate

Statement of Financial Position

 

  Note On December 31, 2020 On December 31, 2019
Assets      
Cash and due from banks  4 22,978,342 18,722,672
Financial instruments   1,182,097,164 970,837,145
- Interbank investments  5 190,604,202 58,230,763
- Compulsory deposits with the Brazilian Central Bank  6 83,757,533 90,622,338
- Securities  7 328,704,315 318,183,969
- Derivative financial instruments  8 23,905,679 14,340,061
- Loans  9 445,665,923 376,438,407
- Other financial instruments  10 109,459,512 113,021,607
Leases  10 2,646,438 2,857,515
Expected credit loss associated with credit risk   (45,199,423) (36,663,729)
- Loans   (42,233,636) (33,440,297)
- Leases   (70,468) (160,382)
- Other receivables   (2,895,319) (3,063,050)
Deferred tax assets  35 82,102,508 65,063,304
Investments in associates and jointly controlled entities  11 54,216,070 61,625,235
Premises and equipment, net  12 11,297,277 11,219,655
Intangible assets  13 30,725,354 29,056,303
Depreciation and amortization   (27,189,565) (24,236,605)
 - Premises and equipment  12 (6,444,355) (5,860,618)
 - Intangible assets  13 (20,745,210) (18,375,987)
Other assets  14 32,246,419 32,900,877
Accumulated Impairment of Assets   (3,385,680) (2,688,279)
Total assets   1,342,534,904 1,128,694,093

 

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

 
3 
 

Consolidated Financial Statement of the Prudential Conglomerate

Statement of Financial Position

 

  Note On December 31, 2020 On December 31, 2019
Liabilities      
Deposits and other financial liabilities   1,138,080,543 937,843,594
- Deposits from banks  15 297,754,653 256,655,914
- Deposits from customers  16 548,238,035 369,758,747
- Securities issued  17 153,764,739 186,297,851
- Subordinated debts  18 53,255,401 49,318,062
- Derivative financial instruments  8 17,816,827 14,104,410
- Other financial liabilities  19 67,250,888 61,708,610
Provisions  20 30,265,510 31,378,452
- Other reserves   30,265,510 31,378,452
Deferred income tax assets  35 4,144,164 4,618,629
Other liabilities  22 26,337,090 21,067,730
Total liabilities   1,198,827,307 994,908,405
Shareholders’ equity  23    
Capital   79,100,000 75,100,000
Treasury shares   (440,514) (440,514)
Capital reserves   11,441 11,441
Profit reserves   59,405,815 52,407,209
Other comprehensive income   5,625,898 6,645,085
Equity attributable to shareholders of the parent   143,702,640 133,723,221
Non-controlling interest  24 4,957 62,467
Total equity   143,707,597 133,785,688
Total equity and liabilities   1,342,534,904 1,128,694,093

 

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

 
4 
 

Consolidated Financial Statement of the Prudential Conglomerate

Income Statement

 

  Note R$ thousand
2nd semester Accrued on December 31
2020 2020 2019
Revenue from financial intermediation   47,532,804 86,079,893 107,957,802
- Loans   35,601,440 72,960,759 75,373,980
- Leases   68,310 155,864 259,682
- Securities and interbank investments   11,441,138 27,494,593 27,534,582
- Net gain or (loss) from derivative financial instruments   (364,968) (20,316,565) (583,031)
- Revenue from financial intermediation – foreign exchange income 10 213,701 4,706,808 2,412,481
- Reserve requirement 7 745,197 2,023,469 4,327,390
- Sale or transfer of financial assets   (172,014) (945,035) (1,367,282)
Expenses from financial intermediation   (9,463,995) (58,205,791) (47,841,374)
- Retail and professional market funding 19 (10,552,960) (26,719,911) (39,792,872)
- Borrowing and on-lending 15 1,088,965 (31,485,880) (8,048,502)
Net revenue from financial intermediation   38,068,809 27,874,102 60,116,428
Expected Credit Loss Associated with Credit Risk expense   (9,679,429) (25,228,742) (18,749,157)
- Loans   (9,000,888) (24,729,502) (16,518,937)
- Leases   36,277 83,986 (34,911)
- Other receivables   (714,818) (583,226) (2,195,309)
Gross income from financial intermediation   28,389,380 2,645,360 41,367,271
Net other operating income (expenses)   (15,286,873) (1,005,640) (29,610,753)
- Fee and commission income 25 9,112,659 17,932,085 18,803,577
- Income from banking fees  25 4,149,747 8,220,582 8,157,258
- Personnel expenses 26 (8,684,974) (17,370,425) (19,681,532)
- Other administrative expenses 27 (10,746,081) (21,265,502) (22,353,874)
- Tax expenses 28 (3,122,916) (4,896,563) (5,621,843)
Result of Investments in Subsidiaries/Associates and Jointly Controlled Companies 11 1,706,034 28,331,346 11,056,301
- Other operating income 29 2,179,377 4,851,477 5,476,769
- Other operating expenses 30 (8,414,197) (14,626,865) (16,398,851)
- Provision (expenses)/reversals   (1,466,522) (2,181,775) (9,048,558)
- Labor   (287,811) (577,487) (3,079,032)
- Tax   5,983 (1,279) 233,076
- Civil   (1,062,554) (1,137,717) (4,318,892)
- Others   (122,140) (465,292) (1,883,710)
Operating profit/(loss)   13,102,507 1,639,720 11,756,518
Non-operating income/(expense) 31 (235,279) (268,997) (497,399)
Income before income taxes and non-controlling interests   12,867,228 1,370,723 11,259,119
Income taxes 35 (3,199,033) 15,193,222 11,339,034
Non-controlling interests in subsidiaries   (9,759) (17,368) (15,538)
Net income   9,658,436 16,546,577 22,582,615
         
Net income attributable to shareholders:        
Shareholders of the parent   9,658,436 16,546,577 22,582,615
Non-controlling interest   9,759 17,368 15,538
         
Basic and diluted earnings per share based on the weighted average number of shares (expressed in R$ per share):        
- Earnings per common share   1.04 1.78 2.43
- Earnings per preferred share   1.15 1.96 2.68

The accompanying Notes are an integral part of these Financial Statements.
 
5 
 

Consolidated Financial Statement of the Prudential Conglomerate

Changes in Shareholders’ Equity

 

Events Capital Capital reserves Profit reserves Other comprehensive income Treasury shares Retained earnings Total  
Share premium Legal Statutory  
Balance on December 31, 2018 67,100,000 11,441 8,494,263 45,194,107 761,572 (440,514) -   121,120,869  
Capital increase with reserves 8,000,000 -   -   (8,000,000) -   -   -   -    
Asset valuation adjustments -   -   -   -   5,883,513 -   -   5,883,513  
Net income -   -   -   -   -   -   22,582,615 22,582,615  
Allocations:                  
   -  Reserves -   -   1,129,131 13,589,708 -   -   (14,718,839) -    
-  Interest on Shareholders’ Equity Paid -   -   -   -   -   -   (7,372,858) (7,372,858)  
- Provisioned dividends -   -   -   (8,000,000) -   -   (490,918) (8,490,918)  
Balance on December 31, 2019 75,100,000 11,441 9,623,394 42,783,815 6,645,085 (440,514) -   133,723,221  
                   
Balance on December 31, 2019 75,100,000 11,441 9,623,394 42,783,815 6,645,085 (440,514) -   133,723,221  
Capital increase with reserves 4,000,000 -   -   (4,000,000) -   -   -   -    
Asset valuation adjustments -   -   -   -   (1,019,187) -   -   (1,019,187)  
Net income -   -   -   -   -   -   16,546,577 16,546,577  
Allocations:                  
   -  Reserves -   -   827,328 10,171,278 -   -   (10,998,606) -    
-  Interest on Shareholders’ Equity Paid and/or Provisioned -   -   -   -   -   -   (5,547,971) (5,547,971)  
Balance on December 31, 2020 79,100,000 11,441 10,450,722 48,955,093 5,625,898 (440,514) -   143,702,640  
                   
Balance on June 30, 2020 79,100,000 11,441 9,967,801 43,017,995 3,476,929 (440,514) -   135,133,652  
Asset valuation adjustments (1) -   -   -   -   2,148,969 -   -   2,148,969  
Net income -   -   -   -   -   -   9,658,436 9,658,436  
Allocations:                  
   -  Reserves -   -   482,921 5,937,098 -   -   (6,420,019) -    
-  Interest on Shareholders’ Equity Paid and/or Provisioned -   -   -   -   -   -   (3,238,417) (3,238,417)  
Balance on December 31, 2020 79,100,000 11,441 10,450,722 48,955,093 5,625,898 (440,514) -   143,702,640  
(1) Includes the effects of exchange rate variations related to the conversion of investments abroad.
The accompanying Notes are an integral part of these Financial Statements.
 
6 
 

Consolidated Financial Statement of the Prudential Conglomerate

Statement of Added Value

 

Description R$ thousand
2nd semester Accrued on December 31
2020 % 2020 % 2019 %
1 – Revenue 43,179,160 167.2 74,777,658 287.2 95,701,441 249.1
1.1) Financial intermediation 47,532,804 184.1 86,079,893 330.6 107,957,802 281.0
1.2) Fees and commissions 13,262,406 51.4 26,152,667 100.5 26,960,835 70.2
1.3) Allowance for loan losses (9,679,429) (37.5) (25,228,742) (96.9) (18,749,157) (48.8)
1.4) Other (7,936,621) (30.7) (12,226,160) (47.0) (20,468,039) (53.3)
2 – Financial intermediation expenses (9,463,995) (36.7) (58,205,791) (223.6) (47,841,374) (124.5)
3 – Inputs acquired from thirdparties (7,113,139) (27.6) (13,969,807) (53.7) (15,570,817) (40.5)
Outsourced services (2,177,112) (8.4) (4,233,050) (16.3) (4,375,330) (11.4)
Data processing (1,284,022) (5.0) (2,397,834) (9.2) (2,372,240) (6.2)
Communication (616,845) (2.4) (1,257,484) (4.8) (1,715,899) (4.5)
Asset maintenance (632,485) (2.4) (1,235,899) (4.7) (1,455,629) (3.8)
Financial system services (537,363) (2.1) (1,040,912) (4.0) (1,055,683) (2.7)
Advertising and marketing (490,529) (1.9) (896,502) (3.4) (744,033) (1.9)
Security and surveillance (327,380) (1.3) (698,206) (2.7) (1,119,654) (2.9)
Transport (309,909) (1.2) (643,169) (2.5) (760,270) (2.0)
Material, water, electricity and gas (231,932) (0.9) (496,881) (1.9) (606,849) (1.6)
Travel (10,937) -   (58,166) (0.2) (242,937) (0.6)
Other (494,625) (1.9) (1,011,704) (3.9) (1,122,293) (2.9)
4 – Gross added value (1-2-3) 26,602,026 103.0 2,602,060 10.0 32,289,250 84.0
5 – Depreciation and amortization (2,490,124) (9.6) (4,899,306) (18.8) (4,922,256) (12.8)
6 – Net added value produced by the entity (4-5) 24,111,902 93.4 (2,297,246) (8.8) 27,366,994 71.2
7 – Added value received through transfer 1,706,034 6.6 28,331,346 108.8 11,056,301 28.8
Share of profit (loss) of unconsolidated and jointly controlled companies 1,706,034 6.6 28,331,346 108.8 11,056,301 28.8
8 – Added value to distribute (6+7) 25,817,936 100.0 26,034,100 100.0 38,423,295 100.0
9 – Added value distributed 25,817,936 100.0 26,034,100 100.0 38,423,295 100.0
9.1) Personnel 7,620,109 29.5 15,194,013 58.4 17,487,513 45.5
Salaries 4,206,478 16.3 8,589,246 33.0 9,184,091 23.9
Benefits 2,058,898 8.0 4,179,896 16.1 5,491,089 14.3
Government Severance Indemnity Fund for Employees (FGTS) 532,906 2.1 920,077 3.5 973,905 2.5
Other 821,827 3.2 1,504,794 5.8 1,838,428 4.8
9.2) Tax, fees and contributions 7,386,814 28.6 (8,120,247) (31.2) (3,523,172) (9.2)
Federal 6,795,219 26.3 (9,334,859) (35.9) (4,856,263) (12.6)
State 6,941 -   7,183 -   15,639 -  
Municipal 584,654 2.3 1,207,429 4.6 1,317,452 3.4
9.3) Remuneration for providers of capital 1,142,818 4.4 2,396,389 9.2 1,860,801 4.8
Rental 848,396 3.3 1,717,723 6.6 1,165,523 3.0
Asset leases 294,422 1.1 678,666 2.6 695,278 1.8
9.4) Added Value distributed to shareholders 9,668,195 37.4 16,563,945 63.6 22,598,153 58.8
Interest on Shareholders’ Equity/Dividends paid and/or provisioned 3,238,417 12.5 5,547,971 21.3 7,863,776 20.5
Retained earnings 6,420,019 24.9 10,998,606 42.2 14,718,839 38.3
Non-controlling interests in retained earnings 9,759 -   17,368 0.1 15,538 -  

 

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

 
7 
 

Consolidated Financial Statement of the Prudential Conglomerate

Statement of Cash Flow

 

  R$ thousand
2nd semester Accrued on December 31
2020 2020 2019
Cash flow from operating activities:      
Income before income taxes and non-controlling interests 12,867,228 1,370,723 11,259,119
Adjustments for: 9,688,960 (4,510,872) 21,379,962
Effect of changes in exchange rates in cash and cash equivalents (407,727) (2,311,598) (730,477)
Allowance for loan losses expense 9,679,429 25,228,742 18,749,157
Accumulated depreciation and amortization 2,490,124 4,899,306 4,922,256
Constitution impairment losses of assets 2,771,478 2,830,980 3,571,012
Expenses with civil, labor and tax provisions 1,943,943 3,218,117 8,621,094
Share of profit (loss) of unconsolidated and jointly controlled companies (1,706,034) (28,331,346) (11,056,301)
(Gain)/loss on sale of investments (29,829) (29,829) 58
Loss on sale of fixed assets 99,815 113,836 2,326
Loss on sale of foreclosed assets 113,853 139,762 350,285
Foreign exchange variation of assets and liabilities overseas/Other (5,266,092) (10,268,842) (3,049,448)
Net income/loss before taxes after adjustments 22,556,188 (3,140,149) 32,639,081
(Increase)/Decrease in interbank investments (7,912,994) (8,099,004) (2,236,758)
(Increase)/Decrease in reserve requirement - Central Bank (2,762,877) 6,864,805 (3,025,422)
(Increase)/Decrease in trading securities and derivative financial instruments (18,382,107) (20,561,897) (8,572,112)
(Increase)/Decrease in loans and leases (22,846,763) (77,146,404) (52,825,966)
(Increase)/Decrease in Deferred income tax assets 1,423,716 61,574 1,072,687
(Increase)/decrease in other assets 75,670 459,806 (24,296,385)
(Increase)/Decrease in Other financial instruments 13,748,412 22,075,486 (1,591,207)
Increase/(Decrease) in Deposits and other financial instruments 57,718,053 211,915,048 32,720,670
Increase/(Decrease) in Deferred income tax liabilities (807,065) (2,382,021) (683,910)
Increase/(Decrease) in Provisions (1,922,097) (4,331,059) (1,944,685)
Increase/(decrease) in other liabilities (2,467,077) 24,729,756 2,573,741
Income tax and social contribution paid (522,181) (1,419,895) (3,909,500)
Net cash provided by/(used in) operating activities 37,898,878 149,026,046 (30,079,766)
Cash flow from investing activities:      
Disposal of subsidiaries, net of cash and cash equivalents, received 80,300 80,300 -  
Maturity of and interest on held-to-maturity securities 14,809,009 44,857,282 4,076,856
Sale of/maturity of and interest on available-for-sale securities 27,063,080 68,681,112 112,319,877
Proceeds from sale of foreclosed assets 340,952 531,208 540,435
Sale of investments -   1,956 6,564
Sale of premises and equipment 357,331 748,382 699,227
Acquisition of subsidiaries, net of cash and cash equivalents acquired, paid (3,163,441) (3,163,441) -  
Purchases of available-for-sale securities (30,087,495) (73,157,005) (125,215,700)
Purchases of held-to-maturity securities -   (18,491,475) -  
Investment acquisitions (411,424) (411,424) (5,000)
Purchase of premises and equipment (537,181) (1,369,479) (2,463,012)
Intangible asset acquisitions (759,336) (1,728,788) (2,892,794)
Dividends and interest on shareholders’ equity received 2,064,664 2,143,963 6,887,852
Net cash provided by/(used in) investing activities 9,756,459 18,722,591 (6,045,695)
Cash flow from financing activities:      
Securities issued 29,975,218 69,043,229 91,173,100
Settlement and interest payments of funds from issuance of securities (48,061,186) (107,408,485) (78,106,264)
Issuance of subordinated debt 688,186 688,186 -  
Settlement and interest payments of subordinated debts (1,274,856) (2,374,538) (8,593,243)
Dividends and interest on shareholders’ equity paid (716,502) (1,432,130) (17,751,148)
Non-controlling interest (13,167) (22,042) (26,331)
Net cash provided by/(used in) financing activities (19,402,307) (41,505,780) (13,303,886)
Net increase/(decrease) in cash and cash equivalents 28,253,030 126,242,857 (49,429,347)
Cash and cash equivalents - at the beginning of the period 161,293,513 61,399,815 110,098,685
Effect of changes in exchange rates in cash and cash equivalents 407,727 2,311,598 730,477
Cash and cash equivalents - at the end of the period 189,954,270 189,954,270 61,399,815
Net increase/(decrease) in cash and cash equivalents 28,253,030 126,242,857 (49,429,347)
       

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

 
8 
 

Consolidated Financial Statement of the Prudential Conglomerate

Index of Notes

 

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

 

Page

 

1)   OPERATIONS 10
2)   PRESENTATION OF THE FINANCIAL STATEMENTS 10
3)   SIGNIFICANT ACCOUNTING PRACTICES 12
4)   CASH AND CASH EQUIVALENTS 20
5)   INTERBANK INVESTMENTS 20
6)   COMPULSORY DEPOSITS WITH THE BRAZILIAN CENTRAL BANK 21
7)   SECURITIES 22
8)   DERIVATIVE FINANCIAL INSTRUMENTS 26
9)   LOANS 33
10)   OTHER FINANCIAL INSTRUMENTS 44
11)   INVESTMENTS IN AFFILIATES/ASSOCIATES AND JOINTLY CONTROLLED ENTITIES 46
12)   PREMISES AND EQUIPMENT 47
13)   INTANGIBLE ASSETS 47
14)   OTHER ASSETS 48
15)   DEPOSITS FROM BANKS 49
16)   DEPOSITS FROM CUSTOMERS 51
17)   SECURITIES ISSUED 51
18)   SUBORDINATED DEBT 52
19)   OTHER FINANCIAL LIABILITIES 53
20)   PROVISIONS 53
21)   PROVISIONS, CONTINGENT ASSETS AND LIABILITIES AND LEGAL OBLIGATIONS – TAX AND SOCIAL SECURITY 54
22)   OTHER LIABILITIES 58
23)   SHAREHOLDERS’ EQUITY (PARENT COMPANY) 58
24)   NON-CONTROLLING INTERESTS IN SUBSIDIARIES 60
25)   FEE AND COMMISSION INCOME 60
26)   PAYROLL AND RELATED BENEFITS 60
27)   OTHER ADMINISTRATIVE EXPENSES 60
28)   TAX EXPENSES 61
29)   OTHER OPERATING INCOME 61
30)   OTHER OPERATING EXPENSES 61
31)   NON-OPERATING INCOME (LOSS) 61
32)   RELATED-PARTY TRANSACTIONS 62
33)   RISK AND CAPITAL MANAGEMENT 64
34)   EMPLOYEE BENEFITS 70
35)   INCOME TAX AND SOCIAL CONTRIBUTION 73
36)   OTHER INFORMATION 75

 

9 

Consolidated Financial Statement of the Prudential Conglomerate

Financial Statements

 

 

1)     OPERATIONS

 

Banco Bradesco S.A. (Bradesco), Institution leading conglomerate Prudential, is a private-sector publicly traded company and universal bank, its headquarters is located in Cidade de Deus, s / n, in the city of Osasco, State of São Paulo, Brazil, 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. These requirements are not necessarily the same as those established by corporate law.

 

In addition, the changes arising from BCB Resolution No. 2/20 were included in the financial statements of Bradesco's Prudential Conglomerate. The main objective of this standard is to bring similarity with the presentation guidelines of the financial statements in accordance with the international accounting standards, International Financial Reporting Standards (IFRS). The main changes implemented were: statement of financial position accounts are presented in order of liquidity and enforceability; statement of financial position balances for the period and the other statements are presented in comparison with the end of the previous fiscal year. The changes implemented by the new standard did not impact Net Income or Shareholders’ Equity.

 

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

 

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 the acquisition of investments in associates, subsidiaries or jointly controlled companies is presented in the intangible assets caption (Note 13a).

 

The financial statements include estimates and assumptions, which are reviewed at least annually, 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. It is worth mentioning that in the 1st semester of 2020, there was a review of assumptions for certain assets due to the current economic scenario impacted by the pandemic caused by Covid-19. 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 March 30, 2021.

 
10 

Consolidated Financial Statement of the Prudential Conglomerate

Financial Statements

 

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

 

  Activity Equity interest
On December 31, 2020 On December 31, 2019
Financial Institutions      
Ágora Corretora de Títulos e Valores Mobiliários S.A. Brokerage 100.00% 100.00%
Banco Bradescard S.A. Cards 100.00% 100.00%
Banco Bradesco Argentina S.A.U (1) Banking 100.00% 100.00%
Banco Bradesco BBI S.A. (2) Investment bank 100.00% 99.96%
Banco Bradesco BERJ S.A. Banking 100.00% 100.00%
Banco Bradesco Europa S.A. (1) Banking 100.00% 100.00%
Banco Bradesco Financiamentos S.A. Banking 100.00% 100.00%
Banco Bradesco S.A. New York Branch (1) Banking 100.00% 100.00%
Banco Bradesco S.A. Grand Cayman Branch (1) (3) Banking 100.00% 100.00%
Banco Losango S.A. Banking 100.00% 100.00%
Bradesco-Kirton Corretora de Câmbio S.A. Exchange Broker 99.97% 99.97%
Bradesco Leasing S.A. Arrendamento Mercantil Leases 100.00% 100.00%
Bradesco S.A. Corretora de Títulos e Valores Mobiliários Brokerage 100.00% 100.00%
Bradesco Securities Hong Kong Limited (1) Brokerage 100.00% 100.00%
Bradesco Securities, Inc. (1) Brokerage 100.00% 100.00%
Bradesco Securities, UK. Limited (1) Brokerage 100.00% 100.00%
Bradescard México, sociedad de Responsabilidad Limitada (4) Cards 100.00% 100.00%
BRAM - Bradesco Asset Management S.A. DTVM Asset management 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%
Cidade Capital Markets Ltd. (1) Banking 100.00% 100.00%
Crediare S.A. Crédito, Financiamento e Investimento (5) Banking - 50.00%
Kirton Bank S.A. Banking 100.00% 100.00%
Nova Marília Administração de Bens Móveis e Imóveis Ltda. Asset management 100.00% 100.00%
Serel Participações em Imóveis S.A. Asset management 100.00% 100.00%
BAC Flórida Bank (6) (7) Banking 100.00% -
BAC Flórida Investments (6) (7) Investment bank 100.00% -
Consortium Management      
Bradesco Administradora de Consórcios Ltda. Consortium management 100.00% 100.00%
Payment Institutions      
Alvorada Administradora de Cartões Ltda. Services 100.00% 100.00%
Bankpar Consultoria e Serviços Ltda. Services 100.00% 100.00%
BCN - Consultoria, Adm. Bens, Serv. e Publicidade Ltda. (8) Services - 100.00%
Tempo Serviços Ltda. Services 100.00% 100.00%
RCB Investimentos S.A. Holding 65.00% 65.00%
RCB Portfolios Ltda. Resource Manager 100.00% 100.00%
Itapeva Recuperação de Créditos Ltda. Credit Recoverer 100.00% 100.00%
MPO Processadora de Pagamentos Móveis S.A. (9) Services - 100.00%
BITZ Serviços Financeiros S.A. (10) Services 100.00% -
Lecce Holdings S.A. (11) Holding 100.00% -
Securitization Companies      
Alvorada Cia. Securitizadora de Créditos Financeiros Credit acquisition 100.00% 100.00%
Alvorada Serviços e Negócios Ltda. Credit acquisition 100.00% 100.00%
Cia. Securitizadora de Créditos Financeiros Rubi Credit acquisition 100.00% 100.00%
Investment Funds (12)      
Bradesco F.I. Referenciado DI Uniao Investment Fund 87.70% 91.63%
Alpha F.I. Mult. Créd. Priv. Inv. no Exterior Investment Fund 100.00% 100.00%
Bradesco F.I.C.F.I. Referenciado DI Galáxia Investment Fund 100.00% 100.00%
Bradesco F.I. Mult. Cred. Priv. Inv. Exterior Pioneiro Investment Fund 100.00% 100.00%
Bradesco F.I. Mult. Cred. Priv. Inv. Exterior Andromeda Investment Fund 100.00% 100.00%
BRAM FI RF Referenciado DI Investment Fund 100.00% 100.00%
 
11 

Consolidated Financial Statement of the Prudential Conglomerate

Financial Statements

 

 

Bradesco Procyon Fund Ltd. Investment Fund 100.00% 100.00%
Bradesco F.I. Referenciado DI Performance Investment Fund 100.00% 100.00%
Fundo de Investimento Referenciado DI GJ Investment Fund 100.00% 100.00%
FI RF Referenciado DI GJ BRA Investment Fund 100.00% 100.00%

(1) The functional currency of these companies abroad is the Real;

(2) Company merged in August 2019 by Banco Bradesco S.A .;

(3) The special purpose entity International Diversified Payment Rights Company is being consolidated. The company is part of a structure set up for the securitization of the future flow of payment orders received overseas;

(4) The functional currency of this company is the Mexican Peso;

(5) Company disposed of in July 2020;

(6) Company acquired on October 30, 2020, its functional currency being the US Dollar;

(7) The functional currency of these companies abroad is the Dollar;

(8) Company merged in May 2020 by Nova Paiol Participações Ltda;

(9) Companies merged in November 2020 by the company Alvorada Serviços e Negócios Ltda .;

(10) Carson Serviços Financeiros S.A. had its corporate name changed to BITZ Serviços Financeiros S.A in August 2020;

(11) Consolidated companies in June 2020; and

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

 

3)     SIGNIFICANT ACCOUNTING PRACTICES

 

a)Functional and presentation currencies

 

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 has the real as functional currency and 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.

 

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.

 
12 

Consolidated Financial Statement of the Prudential Conglomerate

Financial Statements

 
d)Financial instruments

 

I.Interbank investments

 

Repurchase agreements are recorded at acquisition cost, plus income earned up to the balance sheet date, less a provision for devaluation, when applicable.

 

The composition, terms and income earned from interbank investments are presented in Note 5.

 

II.   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.

 

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

 

III.Impairment of Financial Assets

 

The balances of the securities classified in the securities available for sale and securities held to maturity categories are reviewed to determine whether there is any indication of impairment loss - Impairment.

 

When an impairment loss is identified, we recognize an expense in income for the year. This occurs when the book value of the asset exceeds its recoverable value.

 

In order to calculate the recoverable amount, the estimate of loss is made by models using observable data or by judgment based on the experience of our Organization.

 

The composition of Impairment for Securities is presented in Note 7d.

 

 

IV.Derivative financial instruments (assets and liabilities)

 

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

 
13 

Consolidated Financial Statement of the Prudential Conglomerate

Financial Statements

 

The transactions are recorded at their fair value considering the mark-to-market methodologies adopted by Bradesco, and their adjustment can be recorded in the statement of income or equity, depending on the classification as accounting hedge (and the category of accounting hedge) or as an economic hedge.

 

Derivative financial instruments used to mitigate the risks of exposures in currencies, indexes, prices, rates or indexes are considered as hedge instruments, whose objectives are: (i) to ensure exposures remain with risk limits; (ii) change, modify or reverse positions due to market changes and operational strategies; and (iii) reduce or mitigate exposures of transactions in inactive markets, under stress or low liquidity conditions.

 

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

 

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

 

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

 

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

 

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

 

A breakdown of amounts included as derivative financial instruments, in the statement of financial position and off-balance-sheet accounts, is disclosed in Note 8.

 

e)Provisions for expected losses associated with credit risk for loans and leases, advances on foreign exchange contracts, other receivables with credit characteristics

 

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) considering, among other things, the delay levels (as described in table below); and (ii) Management’s assessment of the risk level. This assessment, which is carried out regularly, considers current economic conditions and past experience with loan losses, as well as specific and general risks relating to operations, debtors and guarantors.

 

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.

 
14 

Consolidated Financial Statement of the Prudential Conglomerate

Financial Statements

 

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

 

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

 

Renegotiated operations are maintained at least at the same rating in which they were classified on the date of renegotiation.

 

As permitted by Resolution No. 4,803/20 issued by CMN, as amended by Resolution No. 4,855/20, renegotiated operations from March 1 to December 31, 2020 may be maintained at the same level as they were classified on February 29, 2020, except: (a) operations with a delay of 15 days or more on February 29, 2020; and (b) transactions with evidence of the counterparty's inability to honor the obligation under the new conditions agreed.

 

Considering the provisions of the CMN Resolution No. 4,846/20, for loans in the scope of the Emergency Employment Support Program (PESE) the provision is being calculated only on the portion of the loan whose risk is assumed by the Organization.

 

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 provisions for expected losses associated with credit risk are calculated in an amount sufficient to cover probable losses and are in accordance with the rules and instructions of CMN and Bacen, associated with the assessments carried out by Management in determining credit risks.

 

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

 

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

 

f)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 “Deferred tax assets” 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 “Deferred taxes”, 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, the social contribution on the profit was calculated until August 2015, considering the rate of 15%.

 
15 

Consolidated Financial Statement of the Prudential Conglomerate

Financial Statements

 

 

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 is 15% again as from January 2019. In November 2019, Constitutional Amendment No. 103 was enacted, which establishes in Article 32, the increase in the social contribution rate on the net profit of “Banks” from 15% to 20%, effective from March 2020. For the other companies, the social contribution is calculated considering the rate of 9%.

 

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 35.

 

g)   Investments in affiliates/associates and Jointly Controlled Entities

 

Investments in affiliates and jointly controlled companies, with significant influence or participation of 20% or more in the voting capital, are valued using the equity method.

 

The composition of unconsolidated and jointly controlled companies are disclosed in Note 11.

 

h)Premises and equipment

 

Relates to the tangible assets used by the Bank in its activities.

 

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

 

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

 

i)Intangible assets

 

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

 

Intangible assets comprise:

 

·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;

 

·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; and

 

·Goodwill on acquisition of investments: constituted by the difference between the acquisition cost and the book value of the shares is amortized over the estimated time in which the asset should contribute, directly or indirectly, to the future cash flow.
 
16 

Consolidated Financial Statement of the Prudential Conglomerate

Financial Statements

 

Intangible assets and the movement in these balances by class are presented in Note 13.

 

j)Other assets

 

Other assets include taxes to be offset relating to income tax and social contribution credits from previous years and prepayments made but not yet utilized in the current period.

 

Also classified in this group are prepaid expenses that represent the application of funds in advance payments, whose rights to benefits or provision of services will occur in future periods, being recorded in the income statement on an accrual basis are classified as other assets.

 

Incurred costs relating to assets that will generate revenue in subsequent periods are recognized in the Income Statement according to the terms and the amount of expected benefits and directly recognized 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.

 

Assets not for own use are those received as payment in kind and those that were in use and were deactivated, destined for sale. They are recorded at the lower of the market value and the book value and adjusted through a provision, when applicable.

 

The composition of Other Assets is presented in Note 14.

 

k)   Provisions for Impairment of Assets

 

Assets, which are subject to amortization or depreciation, are reviewed to verify impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized based on the excess the carrying amount of the asset or the cash generating unit (CGU) over its estimated recoverable amount. The recoverable amount of an asset or CGU is the greater of its fair value, less costs to sell, and its value in use.

 

For the purpose of impairment testing, the assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. Subject to a ceiling of the operating segments, for the purpose of goodwill impairment testing, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment testing is performed reflects the lowest level at which goodwill is monitored for internal reporting purposes.

 

When assessing the value in use, projections of future results based on business and budget plans are used, and the estimated future cash flows are discounted to their present value using a discount rate before taxes, that reflects the current market conditions of the time value of money and the specific risks of the asset or CGU.

 

The Organization’s corporate assets do not generate separate cash flows and are utilized by more than one CGU. Corporate assets are allocated to CGUs on a reasonable and consistent basis and tested for impairment as part of the testing of the CGU to which the corporate asset is allocated.

 

Impairment losses are recognized in the consolidated Statement of Income. Impairment losses recognized in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU (or group of CGUs) and then to reduce the carrying amount of the other assets in the CGU (or group of CGUs) on a pro rata basis.

 
17 

Consolidated Financial Statement of the Prudential Conglomerate

Financial Statements

 
l)Deposits and other financial instruments

 

I.Securities sold under agreements to repurchase, borrowing and on-lending, deposits from customers, securities issued and subordinated debt

 

They are measured at cost plus, when applicable, accrued interest recognized on a pro rata basis with the exception of securities sold under agreements to repurchase with no restricions on resale which are measured at fair value.

 

The composition of these accounts is shown in Notes 15, 16, 17 and 18.

 

II.Funding expenses

 

Expenses related to funding transactions involving the issuance of securities reduce the corresponding liability and are recognized in profit or loss over the term of the transaction, according to Note 17.

 

m) 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 - Provisions, contingent liabilities and contingent assets, approved by CMN Resolution No. 3,823/09 and CVM Resolution No. 594/09 and in accordance with Circular Letter nº 3,429/10:

 

·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, is presented in Note 21.

 

n)  Post–employment benefits

 

The recognition, measurement and disclosure of employee benefits are made in accordance with the criteria established by CPC 33 (R1) - Employee Benefits, approved by CMN Resolution No. 4,424/15.

 
18 

Consolidated Financial Statement of the Prudential Conglomerate

Financial Statements

 

Defined Contribution Plans

 

Bradesco and its subsidiaries sponsor supplementary pension plans for their employees and Management. Contributions for these pension plans are recognized as expenses in the Income Statement when they are incurred. Once the contributions are paid, the Organization, in the capacity of employer, has no obligation to make any additional payment.

 

Defined Benefit Plans

 

The Organization’s net obligation, in relation to the defined benefit plans, arises exclusively from institutions acquired and the plans are calculated separately for each plan, estimating the defined future benefit that the employees they will be entitled to post-employment leave when they leave the Organization or when they retire.

 

Bradesco’s net obligation for defined benefit plans is calculated on the basis of an estimate of the value of future benefits that employees receive in return for services rendered in the current and prior periods. This value is discounted to its present value and is presented net of the fair value of any assets of the plan.

 

The calculation of the obligation of the defined benefit plan is performed annually by a qualified actuary using the projected unit credit method as required by the standard accounting.

 

Remeasurement of the net obligation comprise: actuarial gains and losses; the difference between the return on plan assets and the net interest recognized on the defined benefit liability and any change in the effect of the asset ceiling (excluding interest), and is recognized in other comprehensive income.

 

The net interest and other costs related to the defined benefit plans are recognized in the result.

 

Details on employee benefits are presented in Note 34.

 

o)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 36 and are disclosed in accordance with the criteria established by CPC 24 - Subsequent Events, approved by CMN Resolution No. 3,973/11.

 

 

p)  Recurring and non-recurring net income

 

Non-recurring income is the income that is related to the atypical activities of the institution and is not expected to occur with frequency in future years. Recurring revenue corresponds to typical activities of the institution and has the predictability of occurring frequently in future years. Recurring and non-recurring revenues are presented in note 36b.

 
19 

Consolidated Financial Statement of the Prudential Conglomerate

Financial Statements

 

q)  Acquisition of associates and subisidiaries

 

The accounting entry is made at the acquisition cost, broken down into: I - book value in accordance with accounting rules applicable to financial instutitions authorized to operate by Bacen; and II - goodwill or negative goodwill on the acquisition of the investment, which is the difference between the acquisition cost and the book value of the net assets acquired.

 

Based on supporting documentation, the goodwill paid must be allocated between: I - fair value of assets of the associate or subsidiary's assets higher or lower than the cost recorded in the accounting books and records; II - profitability value of the associate or subsidiary, based on the forecast of future results; and III - trade fund, intangibles and other economic reasons.

 

The details of acquisitions of subsidiaires and associates are presented in Note 36g.

 

 

4)CASH AND CASH EQUIVALENTS

 

  R$ thousand
On December 31, 2020 On December 31, 2019
Cash and due from banks in domestic currency 17,408,794 14,727,250
Cash and due from banks in foreign currency 5,568,512 3,994,530
Investments in gold 1,036 892
Total cash and due from banks 22,978,342 18,722,672
Interbank investments (1) 166,975,928 42,677,143
Total cash and cash equivalents 189,954,270 61,399,815
(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.

 

 

 

5)INTERBANK INVESTMENTS

 

a)  Breakdown and maturity

 

  R$ thousand
1 to 30 31 to 180 181 to 360 More than 360 days On December 31, 2020 On December 31, 2019
days days days
Securities purchased under agreements to resell:            
Own portfolio position 21,425,241 7,584,593 -   -   29,009,834 6,635,817
● Financial treasury bills 2,354,661 -   -   -   2,354,661 -  
● National treasury notes 14,281,521 6,055,697 -   -   20,337,218 4,995,674
● National treasury bills 3,484,226 1,528,896 -   -   5,013,122 218,760
● Other 1,304,833 -   -   -   1,304,833 1,421,383
Funded position 142,746,432 1,572,570 -   -   144,319,002 38,615,660
● National treasury notes 30,148,253 1,572,570 -   -   31,720,823 24,467,784
● Financial treasury bills 109,161,526 -   -   -   109,161,526 9,961,815
● National treasury bills 3,436,653 -   -   -   3,436,653 4,186,061
Unrestricted position 1,719,020 4,138,557 -   -   5,857,577 2,859,289
● National treasury bills 1,719,020 4,138,557 -   -   5,857,577 2,859,289
Subtotal 165,890,693 13,295,720 -   -   179,186,413 48,110,766
Interest-earning deposits in other banks:            
● Interest-earning deposits in other banks: 1,146,799 1,902,459 2,915,464 5,457,819 11,422,541 10,120,010
● Allowance for losses -   (468) (1) (4,283) (4,752) (13)
Subtotal 1,146,799 1,901,991 2,915,463 5,453,536 11,417,789 10,119,997
Total in December 31, 2020 167,037,492 15,197,711 2,915,463 5,453,536 190,604,202  
% 87.6 8.0 1.5 2.9 100.0  
Total in December 31, 2019 35,710,944 17,554,267 3,219,405 1,746,147   58,230,763
% 61.3 30.2 5.5 3.0   100.0
 
20 

Consolidated Financial Statement of the Prudential Conglomerate

Financial Statements

 

b)  Income from interbank investments

 

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

 

  R$ thousand
2nd semester Accrued on December 31
2020 2020 2019
Income from investments in purchase and sale commitments:      
• Own portfolio position 521,039 809,953 935,919
• Funded position 1,500,615 3,091,113 4,655,861
• Unrestricted position 856,141 2,329,099 677,860
Subtotal 2,877,795 6,230,165 6,269,640
Income from interest-earning deposits in other banks 160,332 400,508 919,459
Total (Note 8f III) 3,038,127 6,630,673 7,189,099

 

 

6)     COMPULSORY DEPOSITS WITH THE BRAZILIAN CENTRAL BANK

 

a)Reserve requirement

 

  R$ thousand
Remuneration On December 31, 2020 On December 31, 2019
Compulsory deposit – demand deposits not remunerated 9,857,922 7,042,022
Compulsory deposit – savings deposits savings index 19,524,472 22,619,432
Compulsory deposit – time deposits Selic rate 54,375,139 60,960,884
Total   83,757,533 90,622,338

 

For more information on compulsory deposits see Note 36.

 

b)Revenue from reserve requirement

 

  R$ thousand
2nd semester Accrued on December 31
2020 2020 2019
Reserve requirement – Bacen (Compulsory deposit) 742,828 2,017,755 4,304,874
Reserve requirement – SFH (1) 2,369 5,714 22,516
Total 745,197 2,023,469 4,327,390

(1)     Deposits requirement to SFH (Housing Finance System) are recorded under the caption “Other assets”.

 
21 

Consolidated Financial Statement of the Prudential Conglomerate

Financial Statements

 

 

7)SECURITIES

 

Information on securities as follows:

 

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

 

  R$ thousand
On December 31, 2020 % On December 31, 2019 %
Trading securities 54,486,599 16.6 39,777,903 12.5
- Government securities 47,338,471 14.4 32,951,763 10.4
- Corporate securities 7,148,128 2.2 6,826,140 2.1
Available-for-sale securities (2) 208,948,127 63.5 211,309,387 66.4
- Government securities 112,145,304 34.1 125,117,882 39.3
- Corporate securities 96,802,823 29.4 86,191,505 27.1
Held-to-maturity securities (2) 65,269,589 19.9 67,096,679 21.1
- Government securities 58,367,248 17.8 58,708,455 18.5
- Corporate securities 6,902,341 2.1 8,388,224 2.6
Total 328,704,315 100.0 318,183,969 100.0
         
- Government securities 217,851,023 66.3 216,778,100 68.1
- Corporate securities 110,853,292 33.7 101,405,869 31.9
Total 328,704,315 100.0 318,183,969 100.0
 
22 

Consolidated Financial Statement of the Prudential Conglomerate

Financial Statements

 
b)Consolidated classification by category, maturity and operating segment

 

I)Trading securities
Securities R$ thousand  
On December 31, 2020 On December 31, 2019  
1 to 30  
days
31 to 180  
days
181 to 360  
days
More than 360
days
Fair/book value (3) (4) Amortized cost Fair Value Adjustment Fair/book value (3) (4) Fair Value Adjustment  
 
Financial treasury bills -   375,460 4,091,617 9,571,434 14,038,511 14,067,552 (29,041) 16,943,056 1,196  
National treasury notes 10,178,352 356,385 -   12,283,069 22,817,806 22,574,774 243,032 7,552,980 363,104  
Financial bills -   -   135,888 106,637 242,525 292,087 (49,562) 499,332 (4,116)  
Debentures -   300 177 833,593 834,070 1,038,018 (203,948) 798,746 15,809  
National treasury bills -   5,891,458 1,389,188 1,902,347 9,182,993 9,166,195 16,798 7,992,246 41  
Brazilian foreign debt securities 5 -   -   725,510 725,515 701,201 24,314 47,308 1,296,763  
Other 4,051,254 961,802 23,367 1,608,756 6,645,179 6,588,064 57,115 5,944,235 (95,667)  
Total 14,229,611 7,585,405 5,640,237 27,031,346 54,486,599 54,427,891 58,708 39,777,903 1,577,130  

 

II)Available-for-sale securities
Securities (2) R$ thousand  
On December 31, 2020 On December 31, 2019  
1 to 30  
days
31 to 180  
days
181 to 360  
days
More than 360
days
Fair/book value (3) (4) Amortized cost Fair Value Adjustment Fair/book value (3) (4) Fair Value Adjustment  
 
National treasury bills -   20,343,604 11,197,205 33,830,850 65,371,659 63,584,882 1,786,777 79,985,441 2,573,699  
Debentures 101,021 3,868,884 4,461,019 55,828,565 64,259,489 66,680,039 (2,420,550) 58,020,744 (232,586)  
National treasury notes 15,169,152 1,637,703 -   12,013,881 28,820,736 27,758,819 1,061,917 35,425,784 1,902,624  
Foreign corporate securities 48,625 26,077 90,335 6,488,957 6,653,994 6,324,899 329,095 7,442,003 268,637  
Shares 3,402,217 -   -   -   3,402,217 3,516,596 (114,379) 3,566,819 (6,070)  
Foreign government bonds 605,065 2,838,348 2,968,088 96,718 6,508,219 6,501,034 7,185 6,454,894 5,335  
Certificates of real estate receivables -   -   -   1,686,696 1,686,696 1,760,833 (74,137) 1,851,472 44,410  
Brazilian foreign debt securities 759,258 -   -   8,813,115 9,572,373 9,222,104 350,269 1,746,931 50,811  
Financial treasury bills -   613,620 48,615 1,179,619 1,841,854 1,851,573 (9,719) 1,469,698 356  
Promissory Notes -   3,233,001 502,164 3,431,909 7,167,074 7,072,742 94,332 2,870,278 13,026  
Other 2,874,206 1,729,453 1,389,441 7,670,716 13,663,816 13,728,386 (64,570) 12,475,323 57,964  
Subtotal 22,959,544 34,290,690 20,656,867 131,041,026 208,948,127 208,001,907 946,220 211,309,387 4,678,206  
Accounting Hedge (Note 7f II) (1) -   -   -   -   -   -   (792,271) -   (269,021)  
Securities reclassified to “Held-to-maturity securities” -   -   -   -   -   -   1,356,329 -   (545,381)  
Total 22,959,544 34,290,690 20,656,867 131,041,026 208,948,127 208,001,907 1,510,278 211,309,387 3,863,804  
 
23 

Consolidated Financial Statement of the Prudential Conglomerate

Financial Statements

 
III)Held-to-maturity securities
Securities (2) R$ thousand  
On December 31, 2020 On December 31, 2019  
1 to 30 days 31 to 180 days 181 to 360 days More than 360 days Amortized cost (3) Fair value (4) Gain (loss) not accounted for Amortized cost (3) Gain (loss) not accounted for  
 
National treasury bills -   -   10,665,733 29,524,038 40,189,771 41,440,835 1,251,064 57,884,427 1,848,510  
Certificates of real estate receivables -   -   3,284 6,700,118 6,703,402 6,790,623 87,221 8,388,224 489,378  
National treasury notes 99 778 676 18,123,723 18,125,276 18,696,822 571,546 820,887 126,149  
Other -   79,695 26,519 144,926 251,140 256,483 5,343 3,141 -    
Total 99 80,473 10,696,212 54,492,805 65,269,589 67,184,763 1,915,174 67,096,679 2,464,037  

 

c)   Breakdown of the portfolios by financial statement classification

 

Securities R$ thousand
1 to 30  
days
31 to 180  
days
181 to 360  
days
More than 360
days
Total in December 31, 2020 (3) (4) Total in December 31, 2019 (3) (4)
Securities pledged as colateral 37,078,336 20,433,921 16,322,382 151,158,811 224,993,450 142,657,852
Fixed income securities 32,566,163 20,433,921 16,322,382 151,158,811 220,481,277 138,088,767
● National treasury notes 25,347,603 357,163 676 25,826,175 51,531,617 12,316,374
● Financial treasury bills -   285,390 3,775,547 9,503,472 13,564,409 14,748,942
● National treasury bills -   7,053,808 5,973,483 26,546,908 39,574,199 12,574,425
● Debentures 101,021 3,869,184 1,433,593 52,595,778 57,999,576 55,214,774
● Financial bills -   114,803 245,881 311,674 672,358 808,938
● Certificates of real estate receivables -   -   3,290 8,412,091 8,415,381 10,267,775
● Foreign corporate securities 228,746 495,682 123,919 8,138,673 8,987,020 5,981,526
● Brazilian foreign debt securities 759,264 -   -   8,780,576 9,539,840 1,345,186
● Bank deposit certificates -   3,233,001 502,164 3,439,268 7,174,433 404,436
● Promissory Notes -   9 -   125 134 2,870,278
● Other 6,129,529 5,024,881 4,263,829 7,604,071 23,022,310 21,556,113
Equity securities 4,512,173 -   -   -   4,512,173 4,569,085
● Shares of listed companies 4,512,173 -   -   -   4,512,173 4,569,085
Restricted securities 110,918 20,439,168 18,197,006 60,892,551 99,639,643 171,536,343
Subject to repurchase agreements -   15,145,139 17,741,187 53,989,288 86,875,614 152,543,889
● National treasury bills -   13,504,814 14,617,825 37,646,282 65,768,921 119,857,795
● Foreign corporate securities -   -   -   -   -   2,892,331
● National treasury notes -   1,637,700 -   11,492,309 13,130,009 24,998,252
● Financial treasury bills -   2,625 95,758 26,268 124,651 741,742
● Other -   -   3,027,604 4,824,429 7,852,033 4,053,769
Given in guarantee to the Brazilian Central Bank -   4,405,553 30,359 816,491 5,252,403 4,063,388
● National treasury bills -   4,405,553 30,359 -   4,435,912 4,063,388
 
24 

Consolidated Financial Statement of the Prudential Conglomerate

Financial Statements

 
● National treasury notes -   -   -   816,491 816,491 -  
Privatization rights -   -   -   29,532 29,532 34,384
Given in guarantee 110,918 888,476 425,460 6,057,240 7,482,094 14,894,682
● National treasury notes -   4 -   3,771,882 3,771,886 4,594,392
● National treasury bills -   187,408 156,531 1,064,046 1,407,985 7,267,365
● Financial treasury bills -   701,064 268,929 1,221,312 2,191,305 2,925,211
● Other 110,918 -   -   -   110,918 107,714
Securities sold under repurchase agreements - unrestricted -   1,083,479 2,473,928 513,815 4,071,222 3,989,774
● National treasury bills -   1,083,479 2,473,928 -   3,557,407 2,099,139
● National treasury notes -   -   -   513,815 513,815 1,890,635
Total 37,189,254 41,956,568 36,993,316 212,565,177 328,704,315 318,183,969
% 11.3 12.8 11.2 64.7 100.0 100.0

(1) For derivative financial instruments considered as accounting hedges, the category used is "Available-for-Sale 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. At the time of preparation of the consolidated financial statements as at June 30, 2020, Management decided to reclassify Securities Available for Sale to Held to Maturity, in the amount of R$20,009,471 thousand, without any gain or loss, as the gain in the amount of R$1,794,263 thousand, is being retained in shareholders’ equity and will be recognized in income statement over the remaining period of the securities, according to article 5 of said Circular. In the exercise of 2019, there were no sales or reclassifications of securities classified in this category;
(3) The number of days to maturity was based on the contractual maturity of the instruments, regardless of their accounting classification; and
(4) The fair value of securities is determined based on the market price quotation 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.

 

d)  Impairment for Securities

 

In the year ended in December 31, 2020, there was an impairment recognized related to financial assets, mostly debentures, related to securities classified in the categories "Available for Sale" and "Held until Maturity" in the amount of R$2,637,989 thousand (2019 - R$2,058,004 thousand), net of constitution/reversal and which includes the result from a sale or transfer of financial assets and impairment of shares, classified in the category available for sale in the amount of R$188 thousand, totaling R$2,638,177 thousand.

 

In the 2nd semester of 2020, there was an impairment expense, net of reversals, of financial assets, mostly debentures, related to securities classified in the categories "Available for Sale" and "Held to Maturity" in the amount of R$1,993,002 thousand, net of constitution/reversal and which includes the result of a sale or transfer of financial assets.

 
25 

Consolidated Financial Statement of the Prudential Conglomerate

Financial Statements

 

8)     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. To estimate the fair value of the over-the-counter (OTC) financial derivative instruments, the credit quality of each counterparty is also taken into account, relating an expected loss for each derivative portfolio (Credit valuation adjustment).

 

Derivative financial instruments in Brazil mainly refer to swaps and futures and are registered at B3.

 

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.

 

Macro-strategies are defined for the Trading (proprietary) and Banking portfolios. Trading Portfolio transactions, including derivatives, look for gains from directional movements in prices and/or rates, arbitrage, hedge and market-maker strategies that may be fully or partly settled before the originally stipulated maturity date. The Banking Portfolio focuses on commercial transactions and their hedges.

 

Portfolio risk is controlled using information consolidated by risk factor; effective portfolio risk management requires joint use of derivatives with other instruments, including stocks and bonds.

 

The Financial Statements include a Risk Management and Capital Note on the main risk-control metrics and the risk management structure’s key aspects. This Note complements the Securities and Derivatives Note and shows these instruments' exposures under various views, as well as derivatives' revenues and expenses.

 
26 

Consolidated Financial Statement of the Prudential Conglomerate

Financial Statements

 
a)Amount of derivative financial instruments recognized by index

 

  R$ thousand
Total in December 31, 2020 Total in December 31, 2019
Nominal value Net amount value (3) Original amortized cost Fair value adjustment Fair value Nominal value Net amount value (3) Original amortized cost Fair value adjustment Fair value
Futures contracts           -          
Purchase commitments: 66,164,471   1,947 -   1,947 120,822,849   4,468 -   4,468
- Interbank market 24,935,041 -   1,389 -   1,389 89,110,280 -   3,702 -   3,702
- Foreign currency 38,325,935 -   558 -   558 29,788,388 -   764 -   764
- Other 2,903,495 2,506,405 -   -   -   1,924,181 777,242 2 -   2
Sale commitments: 219,975,799   (560) -   (560) 215,476,004   (713) -   (713)
- Interbank market (1) 168,771,042 143,836,001 (2) -   (2) 137,364,779 48,254,499 (30) -   (30)
- Foreign currency (2) 50,807,667 12,481,732 (51) -   (51) 76,964,286 47,175,898 (4) -   (4)
- Other 397,090 -   (507) -   (507) 1,146,939 -   (679) -   (679)
            -          
Option contracts           -          
Purchase commitments: 29,583,214   1,569,236 895,667 2,464,903 72,752,348   1,336,294 310,565 1,646,859
- Interbank market 17,631,050 -   654,888 193,325 848,213 59,025,185 -   490,969 153,980 644,949
- Foreign currency 11,397,301 -   834,129 701,089 1,535,218 13,164,331 989,464 802,818 131,756 934,574
- Other 554,863 21,022 80,219 1,253 81,472 562,832 -   42,507 24,829 67,336
Sale commitments: 33,297,547   (1,658,735) (589,180) (2,247,915) 150,923,632   (1,403,648) (12,609) (1,416,257)
- Interbank market 19,925,808 2,294,758 (811,696) (194,670) (1,006,366) 138,174,393 79,149,208 (780,741) (130,183) (910,924)
- Foreign currency 12,837,898 1,440,597 (594,337) (363,298) (957,635) 12,174,867 -   (542,873) 124,936 (417,937)
- Other 533,841 -   (252,702) (31,212) (283,914) 574,372 11,540 (80,034) (7,362) (87,396)
            -          
Forward contracts           -          
Purchase commitments: 76,011,205   4,696,245 14,818 4,711,063 16,258,721   1,428,434 1,328 1,429,762
- Interbank market 246,269 246,269 1,859 14,818 16,677 232,706 232,706 1,859 1,328 3,187
- Foreign currency 70,345,084 48,576,798 (453) -   (453) 13,794,259 -   (251,175) -   (251,175)
- Other 5,419,852 4,451,509 4,694,839 -   4,694,839 2,231,756 1,563,753 1,677,750 -   1,677,750
Sale commitments: 22,736,629   (132,076) (4,678) (136,754) 15,834,563   125,532 (2,167) 123,365
- Foreign currency (2) 21,768,286 -   (82,681) -   (82,681) 15,166,560 1,372,301 107,747 -   107,747
- Other 968,343 -   (49,395) (4,678) (54,073) 668,003 -   17,785 (2,167) 15,618
            -          
Swap contracts           -          
Assets (long position): 66,137,077   11,193,030 3,594,420 14,787,450 69,969,836   9,666,255 987,011 10,653,266
- Interbank market 4,062,990 -   104,256 216,862 321,118 7,703,103 3,434,228 118,969 85,416 204,385
- Fixed rate 33,427,359 19,386,846 4,160,018 26,031 4,186,049 38,654,923 19,304,909 8,251,750 (515,320) 7,736,430
 
27 

Consolidated Financial Statement of the Prudential Conglomerate

Financial Statements

 

 

- Foreign currency 24,369,039 1,177,263 6,169,577 3,051,417 9,220,994 19,746,372 -   1,032,687 1,066,491 2,099,178
- IGPM 636,581 -   432,391 22,676 455,067 670,554 -   124,132 118,554 242,686
- Other 3,641,108 -   326,788 277,434 604,222 3,194,884 -   138,717 231,870 370,587
Liabilities (unrestricted position): 50,474,891   (10,842,603) (2,648,682) (13,491,285) 52,222,961   (9,043,985) (3,161,114) (12,205,099)
- Interbank market 7,317,810 3,254,820 (103,210) (26,306) (129,516) 4,268,875 -   (178,453) 76,722 (101,731)
- Fixed rate 14,040,513 -   (2,431,630) (1,448,121) (3,879,751) 19,350,014 -   (5,547,009) (2,015,586) (7,562,595)
- Foreign currency 23,191,776 -   (7,119,016) (801,099) (7,920,115) 21,483,368 1,736,996 (2,750,465) (605,694) (3,356,159)
- IGPM 868,696 232,115 (541,495) (44,689) (586,184) 893,000 222,446 (167,300) (170,755) (338,055)
- Other 5,056,096 1,414,990 (647,252) (328,467) (975,719) 6,227,704 3,032,820 (400,758) (445,801) (846,559)
Total 564,380,833   4,826,484 1,262,365 6,088,849 714,260,914   2,112,637 (1,876,986) 235,651

Derivatives include operations maturing in D+1.

(1) Includes: (i) accounting hedges to protect CDI-related funding totaling R$128,431,775 thousand (R$76,405,734 thousand in december 2019); and (ii) accounting cash flow hedges in the amount of R$12,942,667 thousand (R$21,015,183 thousand in December 2019) (note 8 fII);
(2) Includes specific hedges to protect assets and liabilities, arising from foreign investments. Investments abroad totaling the amount of R$29,678,043 thousand (R$64,376,717 thousand in December 2019), contemplating the capital reduction carried out In the six month period ended June 30, 2020, in the amount of R$59,546,684 thousand; and

(3) Reflects the net balance between the Asset and Liability position.

 
28 

Consolidated Financial Statement of the Prudential Conglomerate

Financial Statements

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

 

  R$ thousand
On December 31, 2020 On December 31, 2019
Original amortized cost Fair value adjustment Fair value % 1 to 90 days 91 to 180 days 181 to 360 days More than 360 days Total Total
Adjustment receivable - swaps 11,193,030 3,594,419 14,787,449 61.9 656,297 234,828 190,079 13,706,245 14,787,449 10,653,266
Adjustment receivable - future 1,947 -   1,947 -   1,715 -   2 230 1,947 4,468
Receivable forward purchases 5,684,286 14,878 5,699,164 23.8 3,563,612 1,303,543 579,989 252,020 5,699,164 1,747,792
Receivable forward sales (1) 956,806 (4,590) 952,216 4.0 355,980 164,411 55,397 376,428 952,216 287,676
Premiums on exercisable options 1,569,236 895,667 2,464,903 10.3 399,861 116,807 141,453 1,806,782 2,464,903 1,646,859
Total assets (A) 19,405,305 4,500,374 23,905,679 100.0 4,977,465 1,819,589 966,920 16,141,705 23,905,679 14,340,061
Adjustment payables - swaps (10,842,603) (2,648,680) (13,491,283) 75.8 (890,781) 25,115 (578,097) (12,047,520) (13,491,283) (12,205,099)
Adjustment payables - future (560) -   (560) -   (51) (3) -   (506) (560) (713)
Payable forward purchases (988,040) (60) (988,100) 5.5 (218,570) (462,424) (119,724) (187,382) (988,100) (318,030)
Payable forward sales (1,088,882) (87) (1,088,969) 6.1 (383,834) (170,159) (181,666) (353,310) (1,088,969) (164,311)
Premiums on written options (1,658,735) (589,180) (2,247,915) 12.6 (409,021) (124,818) (206,011) (1,508,065) (2,247,915) (1,416,257)
Total liabilities (B) (14,578,820) (3,238,007) (17,816,827) 100.0 (1,902,257) (732,289) (1,085,498) (14,096,783) (17,816,827) (14,104,410)
                    -  
Net Effect (A-B) 4,826,485 1,262,367 6,088,852   3,075,208 1,087,300 (118,578) 2,044,922 6,088,852 235,651

(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.

 

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

 

  R$ thousand  
1 to 90 days 91 to 180 days 181 to 360 days More than 360 days On December 31, 2020 On December 31, 2019  
 
Futures contracts (1) 113,030,279 22,034,294 31,333,859 119,741,838 286,140,270 336,298,853  
Option contracts 47,958,804 3,547,050 4,686,522 6,688,385 62,880,761 223,675,980  
Forward contracts (1) 46,283,516 18,702,771 29,513,468 4,248,079 98,747,834 32,093,284  
Swap contracts 10,021,090 14,605,270 7,724,745 84,260,863 116,611,968 122,192,797  
On December 31, 2020 217,293,689 58,889,385 73,258,594 214,939,165 564,380,833 714,260,914  
On December 31, 2019 412,479,396 58,947,689 58,054,738 184,779,091   714,260,914  
(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.
 
29 

Consolidated Financial Statement of the Prudential Conglomerate

Financial Statements

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

 

  R$ thousand
On December 31, 2020 On December 31, 2019
Government securities    
National treasury bills -   4,620,246
National treasury notes 4,368,766 5,270,514
Total 4,368,766 9,890,760

 

e)Revenues and expenses, net

 

  R$ thousand
2nd semester Accrued on December 31
2020 2020 2019
Swap contracts 3,168,584 2,351,288 (460,909)
Forward contracts (1) (6,974,776) (5,684,529) 224,200
Option contracts 3,052,660 3,784,741 281,262
Futures contracts (1) 388,564 (20,768,065) (627,584)
Total (Note 6g) (364,968) (20,316,565) (583,031)

(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.

 

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

 

  R$ thousand
Total in December 31, 2020 Total in December 31, 2019
B3 (stock exchange) 325,254,129 528,819,470
B3 (over-the-counter) 203,170,001 143,816,409
- Financial Institutions 44,352,011 62,502,611
- Companies 158,472,601 80,896,730
- Individuals 345,389 417,068
Overseas (stock exchange) (1) 15,256,532 18,292,330
Overseas (over-the-counter) (1) 20,700,171 23,332,705
Total 564,380,833 714,260,914

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

 

I)Credit Default Swaps (CDS)

 

In general, these represent bilateral agreements in which one of the parties purchases protection against the credit risk of a certain financial instrument (the risk is transferred). The selling counterparty receives remuneration that is usually paid linearly over the term of the agreement.

 

In the case of a default, the purchasing counterparty will receive a payment to offset the loss incurred on the financial instrument. In this case, the selling counterparty usually receives the underlying asset of the agreement in exchange for the payment.

 

  R$ thousand
On December 31, 2020 On December 31, 2019
Risk received in credit Swaps: 3,872,939 3,894,982
- Debt securities issued by companies 1,024,244 791,045
- Bonds of the Brazilian public debt 2,580,026 3,056,778
- Bonds of foreign public debt 268,669 47,159
Risk transferred in credit Swaps: (1,304,372) (1,108,443)
- Brazilian public debt derivatives (332,589) (181,382)
- Foreign public debt derivatives (971,783) (927,061)
Total net credit risk value 2,568,567 2,786,539
Effect on Shareholders' Equity 105,226 84,382
Remuneration on the counterparty receiving the risk (26,462) (11,945)

 

The contracts related to credit derivatives transactions described above are due in 2025. There were no credit events, as defined in the agreements, during the period.

 
30 

Consolidated Financial Statement of the Prudential Conglomerate

Financial Statements

 
II)Hedge Accounting

 

On December 31, 2020, Bradesco maintained hedge, in accordance with Bacen's Circular No. 3,082/02, composed by:

 

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

 

Strategy R$ thousand
Hedge instrument nominal value Hedge object accounting value Fair Value Accumulated Adjustments in shareholders' equity (gross of tax effects) Fair Value Accumulated Adjustments in shareholders' equity (net of tax effects)
Hedge of interest receipts from investments in securities (1) 12,942,667 13,197,717 100,114 55,063
Hedge of interest payments on funding (2) 128,431,775 126,398,921 (316,082) (173,845)
Total in December 31, 2020 141,374,442 139,596,638 (215,968) (118,782)
         
Hedge of interest receipts from investments in securities (1) 21,015,183 21,127,503 216,845 119,265
Hedge of interest payments on funding (1) 76,405,734 75,942,005 (97,192) (53,456)
Total in December 31, 2019 97,420,917 97,069,508 119,653 65,809

(1) Referring to the DI interest rate risk, using DI Futures contracts in B3 and Swaps, with the maturity until 2025, making the cash flow prefixed; and

(2) Referring to the DI interest rate risk, using DI Futures contracts in B3 and Swaps, with maturity dates until 2023, making the cash flow prefixed.

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

 

For the next 12 months, the gains/(losses) related to the cash flow hedge, which we expect to recognize in the income statement, amount to R$(75,173) thousand.

 

There were no gains/(losses) related to the ineffectiveness of the cash flow hedge recorded in the income statement in the year ended on December 31, 2020 and 2019.

 

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

 

Strategy R$ thousand
Hedge instrument nominal value Hedge object accounting value Fair Value Accumulated Adjustments in shareholders' equity (gross of tax effects) Fair Value Accumulated Adjustments in shareholders' equity (net of tax effects)
Hedge of exchange variation on future cash flows (1) 4,839,546 2,570,621 (576,303) (316,967)
Total in December 31, 2020 4,839,546 2,570,621 (576,303) (316,967)
         
Hedge of exchange variation on future cash flows (1) 1,919,177 925,820 (388,674) (213,771)
Total in December 31, 2019 1,919,177 925,820 (388,674) (213,771)

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

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

 
31 

Consolidated Financial Statement of the Prudential Conglomerate

Financial Statements

 

For the next 12 months, the gains/(losses) related to the hedge of investments abroad (specifically the over-hedge made to cover tax effects), which we expect to recognize in the result, amount to R$307 thousand.

 

The gains/(losses) related to the hedge of investments abroad, recorded in income accounts, in the second half of 2020, was R$ 2,161 thousand and in the year ended in December 31, 2020, was R$(12,697) thousand (R$(15,750) thousand in 2019).

 

III)Income from securities, insurance and derivative financial instruments

 

  R$ thousand
2nd semester Accrued on December 31
2020 2020 2019
Fixed income securities (1) 9,017,495 22,429,480 20,839,581
Interbank investments (Note 5b) 3,038,127 6,630,673 7,189,099
Equity securities (614,484) (1,565,560) (494,098)
Subtotal 11,441,138 27,494,593 27,534,582
Net gain or (loss) from derivative financial instruments (Note 6d V) (364,968) (20,316,565) (583,031)
Total 11,076,170 7,178,028 26,951,551

(1) In the year ended in December 31, 2020, there were losses due to impairment of financial assets (mostly debentures), in the amount of R$1,960,911 thousand (R$2,058,004 thousand in 2019) and in the second half of 2020, in the amount of R$1,902,875 thousand, net of constitution/reversal. Including the result from a sale or transfer of financial assets, we do have an impairment of R$2,637,989 thousand in the year.

 
32 

Consolidated Financial Statement of the Prudential Conglomerate

Financial Statements

 

 

9)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

 

  R$ thousand  
Performing loans  
1 to 30 days 31 to 60 days 61 to 90 days 91 to 180 days 181 to 360 days More than 360 days Total in December 31, 2020 (A) -4% Total in December 31, 2019 (A) -4%  
 
Discounted trade receivables and loans (1) 16,504,243 12,772,842 12,468,716 28,768,209 35,244,281 123,168,178 228,926,469 39.7 185,572,294 36.1  
Financing and on-lending 4,216,608 4,779,498 5,781,063 18,526,671 20,569,550 121,649,239 175,522,629 30.4 144,537,677 28.0  
Agricultural and agribusiness loans 497,285 568,703 788,290 2,949,000 6,972,491 8,020,863 19,796,632 3.4 20,392,848 4.0  
Subtotal 21,218,136 18,121,043 19,038,069 50,243,880 62,786,322 252,838,280 424,245,730 73.5 350,502,819 68.1  
Leases 95,928 102,608 88,890 249,759 458,425 1,617,083 2,612,693 0.5 2,726,858 0.5  
Advances on foreign exchange contracts (2) 601,388 1,295,796 1,025,335 3,370,463 1,172,258 66,682 7,531,922 1.3 15,684,618 3.0  
Subtotal 21,915,452 19,519,447 20,152,294 53,864,102 64,417,005 254,522,045 434,390,345 75.3 368,914,295 71.6  
Other receivables (3) 23,217,020 10,763,536 6,272,571 8,223,875 4,325,338 347,978 53,150,318 9.2 57,375,862 11.1  
Credit portfolio 45,132,472 30,282,983 26,424,865 62,087,977 68,742,343 254,870,023 487,540,663 84.5 426,290,157 82.7  
Acquisition of credit card receivables 4,290,459 1,408,216 881,802 1,216,901 552,080 -   8,349,458 1.4 9,485,622 1.8  
Subtotal 49,422,931 31,691,199 27,306,667 63,304,878 69,294,423 254,870,023 495,890,121 85.9 435,775,779 84.5  
Sureties and guarantees 641,880 905,295 1,289,829 6,470,156 13,457,806 57,471,730 80,236,696 13.9 78,231,263 15.2  
Guarantee given on rural loans assigned -   -   -   -   9,281 40,054 49,335 -   60,757 -    
Letters of credit for imports 56,059 196,516 109,864 178,379 42,204 473,591 1,056,613 0.2 1,411,197 0.3  
Confirmed exports loans 3,765 4,915 -   -   1,354 -   10,034 -   20,227 -    
Total - Memorandum accounts 701,704 1,106,726 1,399,693 6,648,535 13,510,645 57,985,375 81,352,678 14.1 79,723,444 15.5  
Total on December 31, 2020 50,124,635 32,797,925 28,706,360 69,953,413 82,805,068 312,855,398 577,242,799 100.0      
Total on December 31, 2019 58,898,962 34,594,502 25,653,331 62,195,348 81,188,620 252,968,460     515,499,223 100.0  
 
33 

Consolidated Financial Statement of the Prudential Conglomerate

Financial Statements

 

 

  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 December 31, 2020 (B) -4% Total in December 31, 2019 (B) -4%  
 
Discounted trade receivables and loans (1) 892,874 768,506 596,139 1,635,686 2,908,381 6,801,586 83.3 9,321,134 81.4  
Financing and on-lending 273,498 168,637 78,344 161,282 185,535 867,296 10.6 988,523 8.6  
Agricultural and agribusiness loans 109,429 22,688 22,181 28,388 20,196 202,882 2.5 165,321 1.4  
Subtotal 1,275,801 959,831 696,664 1,825,356 3,114,112 7,871,764 96.4 10,474,978 91.4  
Leases 1,149 652 915 698 464 3,878 -   25,473 0.2  
Advances on foreign exchange contracts (2) 1,793 4,608 69,071 34 -   75,506 0.9 372,646 3.3  
Subtotal 1,278,743 965,091 766,650 1,826,088 3,114,576 7,951,148 97.3 10,873,097 94.9  
Other receivables (3) 38,077 11,447 12,379 62,072 92,749 216,724 2.7 590,180 5.1  
Total on December 31, 2020 1,316,820 976,538 779,029 1,888,160 3,207,325 8,167,872 100.0      
Total on December 31, 2019 1,353,534 1,410,271 1,686,642 2,792,308 4,220,522     11,463,277 100.0  

 

  R$ thousand  
Non-performing loans  
Installments not yet due  
1 to 30 days