Independent
Auditors’ Report
the key audit matters. We describe these
matters in our auditor’s report, unless law or regulation precludes public disclosure about the matters, or when, in extremely
rare circumstances, we determine a matter should not be communicated in our report because the adverse consequences of doing so
would reasonably be expected to outweigh the public interest benefit of such communication.
Osasco, March 09, 2021
KPMG Auditores Independentes
CRC 2SP-028567/F
Original report in Portuguese signed by
André Dala Pola
Accountant CRC 1SP214007/O-2
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Audit
Committee Report
Bradesco Financial Conglomerate
Audit Committee´s Report on financial statements prepared in accordance with International Financial Reporting Standards
(IFRS)
In addition to the Audit Committee's
Report related to the consolidated financial statements of Banco Bradesco S.A. for the year ended December 31, 2020, issued on
February 3, 2021, we have also analysed the complete set of consolidated statements in accordance with the International
Financial Reporting Standards (IFRS) and the pronouncements issued by the International Accounting Standards Board (IASB).
As mentioned in the report referred
to above, our analysis has taken into consideration the work carried out by independent auditors and the internal controls systems
maintained by the various financial areas of Bradesco financial conglomerate, mainly Internal Audit, Risk Management and Compliance
areas.
Management has the responsibility
of defining and implementing accounting and management information systems that produce the consolidated financial statements of
Bradesco and its subsidiaries, in compliance with Brazilian and international accounting standards.
Management is also responsible for
processes, policies and procedures for internal controls that ensure the safeguarding of assets, timely recognition of liabilities
and risk management for Bradesco Organization transactions.
Independent Auditors are responsible
for auditing the financial statements and for issuing an auditing report on their compliance with applicable accounting principles.
The responsibility of internal auditors
is to assess the quality of Bradesco Organization's internal control systems and the regularity of policies and procedures determined
by Management, including those used to prepare accounting and financial reports.
The Audit Committee is responsible
for evaluating the quality and effectiveness of the internal and independent auditors' work, the effectiveness and adequacy of
the internal control systems, and also for analyzing financial statements in order to issue, when applicable, pertinent recommendations.
Based on the review and discussions mentioned
above, the Audit Committee recommends that the Board of Directors approves the audited financial statements for the year ended
December 31, 2020, prepared in accordance with International Financial Reporting Standards.
Cidade de Deus, Osasco, SP, March 4, 2021.
ALEXANDRE DA SILVA GLÜHER
(Coordinator)
PAULO ROBERTO SIMÕES DA CUNHA
(Financial Expert)
PAULO RICARDO SATYRO BIANCHINI
JOSÉ LUIS ELIAS
10 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Consolidated
Statements of Income
|
R$ thousand
|
Note
|
Years ended December 31
|
2020
|
2019
|
2018
|
Interest and similar income
|
|
119,743,371
|
124,417,705
|
122,053,139
|
Interest and similar expenses
|
|
(48,575,687)
|
(58,617,986)
|
(55,244,669)
|
Net interest income
|
6
|
71,167,684
|
65,799,719
|
66,808,470
|
Fee and commission income
|
7
|
24,936,454
|
25,337,676
|
23,831,590
|
Net gains/(losses) on financial assets and liabilities at fair value through profit or loss
|
8
|
(18,586,403)
|
(1,090,917)
|
(11,676,573)
|
Net gains/(losses) on financial assets at fair value through other comprehensive income
|
9
|
(1,716,879)
|
655,832
|
1,073,563
|
Net gains/(losses) on foreign currency transactions
|
10
|
(1,010,972)
|
323,774
|
1,096,826
|
Net profit from insurance and pension plans
|
11
|
7,578,707
|
8,254,939
|
7,656,872
|
- Insurance and pension income
|
|
68,410,501
|
71,191,410
|
66,270,095
|
- Insurance and pension expenses
|
|
(60,831,794)
|
(62,936,471)
|
(58,613,223)
|
Other operating income
|
|
(13,735,547)
|
8,143,628
|
(1,849,312)
|
Expected loss on loans and advances
|
23
|
(18,711,841)
|
(12,532,133)
|
(15,091,975)
|
Expected loss on other financial assets
|
21 and 24
|
(833,434)
|
(1,472,394)
|
(1,172,860)
|
Personnel expenses
|
12
|
(18,965,477)
|
(21,143,568)
|
(17,581,798)
|
Other administrative expenses
|
13
|
(15,484,126)
|
(16,489,578)
|
(16,873,962)
|
Accumulated depreciation and amortization
|
14
|
(5,921,030)
|
(5,865,768)
|
(4,808,255)
|
Other operating income/(expenses)
|
15
|
(18,822,246)
|
(29,597,586)
|
(15,500,258)
|
Other operating expense
|
|
(78,738,154)
|
(87,101,027)
|
(71,029,108)
|
Income before income taxes and share of profit of associates and joint ventures
|
|
3,630,437
|
12,179,996
|
17,761,640
|
Share of profit of associates and joint ventures
|
26
|
444,858
|
1,201,082
|
1,680,375
|
Income before income taxes and non-controlling interests
|
|
4,075,295
|
13,381,078
|
19,442,015
|
Income taxes
|
16
|
11,958,666
|
7,792,129
|
(2,693,576)
|
Net income for the year
|
|
16,033,961
|
21,173,207
|
16,748,439
|
|
|
|
|
|
Attributable to shareholders:
|
|
|
|
|
Shareholders of the parent
|
|
15,836,862
|
21,023,023
|
16,583,915
|
Non-controlling interest
|
|
197,099
|
150,184
|
164,524
|
|
|
|
|
|
Basic and diluted earnings per share based on the weighted average number of shares (expressed in R$ per share):
|
|
|
|
|
– Earnings per common share
|
17
|
1.71
|
2.27
|
1.79
|
– Earnings per preferred share
|
17
|
1.88
|
2.49
|
1.97
|
The Notes are an integral part of the Consolidated Financial Statements.
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Consolidated
Statements of Comprehensive Income
|
Note
|
R$ thousand
|
Years ended December 31
|
2020
|
2019
|
2018
|
Net income for the year
|
|
16,033,961
|
21,173,207
|
16,748,439
|
|
|
|
|
|
Items that are or may be reclassified to the Consolidated Statement of Income
|
|
|
|
|
Financial assets at fair value through other comprehensive income
|
|
|
|
|
Unrealized gains/(losses)
|
|
(1,529,928)
|
7,752,853
|
(473,594)
|
Gains/(losses) transferred to income
|
9
|
(1,720,958)
|
651,428
|
1,023,299
|
Tax effect
|
|
1,447,558
|
(3,609,375)
|
(209,359)
|
|
|
|
|
|
Unrealized gains/(losses) on hedge
|
20
|
|
|
|
Cash flow hedge
|
|
(335,620)
|
260,397
|
(96,760)
|
Hedge of investment abroad
|
|
(187,629)
|
(119,635)
|
(209,300)
|
Tax effect
|
|
235,462
|
(42,854)
|
122,424
|
|
|
|
|
|
Exchange differences on translations of foreign operations
|
|
|
|
|
Foreign exchange on translations of foreign operations
|
|
235,863
|
73,867
|
113,198
|
|
|
|
|
|
Items that cannot be reclassified to the Consolidated Statement of Income
|
|
|
|
|
Gains/(losses) on equity instruments at fair value through other comprehensive income
|
|
3,573,603
|
1,482,384
|
(756,042)
|
Tax effect
|
|
(1,464,897)
|
(579,763)
|
302,417
|
|
|
|
|
|
Other
|
|
(21,593)
|
(204,538)
|
(92,764)
|
|
|
|
|
|
Total other comprehensive income
|
|
231,861
|
5,664,764
|
(276,481)
|
Total comprehensive income for the year
|
|
16,265,822
|
26,837,971
|
16,471,958
|
|
|
|
|
|
Attributable to shareholders:
|
|
|
|
|
Shareholders of the parent
|
|
16,068,723
|
26,687,787
|
16,307,434
|
Non-controlling interest
|
|
197,099
|
150,184
|
164,524
|
The Notes are an integral part of the Consolidated Financial Statements.
12 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Consolidated
Statements of Financial Position
|
R$ thousand
|
Note
|
On December 31
|
2020
|
2019
|
Assets
|
|
|
|
Cash and balances with banks
|
18
|
107,602,594
|
109,610,999
|
Financial assets at fair value through profit or loss
|
19a
|
275,986,689
|
249,759,777
|
Financial assets at fair value through other comprehensive income
|
21
|
185,841,975
|
192,450,010
|
Financial assets at amortized cost
|
|
|
|
- Loans and advances to financial institutions, net of provision for losses
|
22
|
191,424,731
|
59,083,791
|
- Loans and advances to customers, net of provision for losses
|
23
|
473,637,358
|
423,528,716
|
- Securities, net of provision for losses
|
24
|
179,623,894
|
166,918,360
|
- Other financial assets
|
29
|
52,416,117
|
56,101,781
|
Non-current assets held for sale
|
25
|
1,202,488
|
1,357,026
|
Investments in associates and joint ventures
|
26
|
7,386,840
|
7,635,612
|
Premises and equipment, net
|
27
|
14,071,129
|
14,659,222
|
Intangible assets and goodwill, net
|
28
|
14,669,464
|
14,724,647
|
Taxes to be offset
|
16
|
15,330,420
|
15,685,801
|
Deferred income tax assets
|
16c
|
76,984,262
|
59,570,055
|
Other assets
|
29
|
8,475,829
|
7,441,888
|
Total assets
|
|
1,604,653,790
|
1,378,527,685
|
|
|
|
|
Liabilities
|
|
|
|
Liabilities at amortized cost
|
|
|
|
- Deposits from banks
|
30
|
267,280,167
|
227,819,611
|
- Deposits from customers
|
31
|
545,292,743
|
366,227,540
|
- Securities issued
|
32
|
144,903,825
|
170,727,564
|
- Subordinated debts
|
33
|
53,246,232
|
49,313,508
|
- Other financial liabilities
|
37
|
75,528,047
|
79,121,127
|
Financial liabilities at fair value through profit or loss
|
19c
|
18,697,682
|
14,244,083
|
Provision for Expected Credit Loss
|
|
|
|
- Loan Commitments
|
23
|
3,859,316
|
2,318,404
|
- Financial guarantees
|
23
|
2,318,930
|
1,970,321
|
Insurance technical provisions and pension plans
|
34
|
279,465,384
|
268,302,691
|
Other reserves
|
36
|
25,582,923
|
25,239,929
|
Current income tax liabilities
|
|
1,596,284
|
2,595,277
|
Deferred income tax assets
|
16c
|
1,249,650
|
1,080,603
|
Other liabilities
|
37
|
39,515,233
|
34,023,453
|
Total liabilities
|
|
1,458,536,416
|
1,242,984,111
|
|
|
|
|
Shareholders’ equity
|
38
|
|
|
Capital
|
|
79,100,000
|
75,100,000
|
Treasury shares
|
|
(440,514)
|
(440,514)
|
Capital reserves
|
|
35,973
|
35,973
|
Profit reserves
|
|
58,985,029
|
51,986,423
|
Additional paid-in capital
|
|
70,496
|
70,496
|
Other comprehensive income
|
|
8,103,343
|
7,871,482
|
Retained earnings
|
|
(234,109)
|
475,606
|
Equity attributable to shareholders of the parent
|
|
145,620,218
|
135,099,466
|
Non-controlling interest
|
|
497,156
|
444,108
|
Total equity
|
|
146,117,374
|
135,543,574
|
Total equity and liabilities
|
|
1,604,653,790
|
1,378,527,685
|
The Notes are an integral part of the Consolidated Financial Statements.
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Consolidated
Statements of Changes in Equity
|
R$ thousand
|
Capital
|
Treasury shares
|
Capital reserves
|
Profit reserves
|
Additional paid-in capital
|
Other comprehensive income (1)
|
Retained earnings
|
Equity attributable to shareholders of the parent
|
Non-controlling interest
|
Total
|
Legal
|
Statutory
|
Balance on January 1, 2018
|
59,100,000
|
(440,514)
|
35,973
|
7,540,016
|
41,941,211
|
70,496
|
2,483,199
|
4,536,236
|
115,266,617
|
289,873
|
115,556,490
|
Net income
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
16,583,915
|
16,583,915
|
164,524
|
16,748,439
|
Financial assets at fair value through other comprehensive income
|
-
|
-
|
-
|
-
|
-
|
-
|
(296,915)
|
-
|
(296,915)
|
-
|
(296,915)
|
Foreign currency translation adjustment
|
-
|
-
|
-
|
-
|
-
|
-
|
113,198
|
-
|
113,198
|
-
|
113,198
|
Other
|
-
|
-
|
-
|
-
|
-
|
-
|
(92,764)
|
-
|
(92,764)
|
-
|
(92,764)
|
Comprehensive income
|
-
|
-
|
-
|
-
|
-
|
-
|
(276,481)
|
16,583,915
|
16,307,434
|
164,524
|
16,471,958
|
Increase of non-controlling shareholders’ interest
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
2,265
|
2,265
|
Capital increase with reserves
|
8,000,000
|
-
|
-
|
-
|
(8,000,000)
|
-
|
-
|
-
|
-
|
-
|
-
|
Transfers to reserves
|
-
|
-
|
-
|
954,247
|
10,832,110
|
-
|
-
|
(11,786,357)
|
-
|
-
|
-
|
Interest on equity and dividends
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(7,298,596)
|
(7,298,596)
|
(55,997)
|
(7,354,593)
|
Balance on December 31, 2018
|
67,100,000
|
(440,514)
|
35,973
|
8,494,263
|
44,773,321
|
70,496
|
2,206,718
|
2,035,198
|
124,275,455
|
400,665
|
124,676,120
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance on January 1, 2019
|
67,100,000
|
(440,514)
|
35,973
|
8,494,263
|
44,773,321
|
70,496
|
2,206,718
|
2,035,198
|
124,275,455
|
400,665
|
124,676,120
|
Net income
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
21,023,023
|
21,023,023
|
150,184
|
21,173,207
|
Financial assets at fair value through other comprehensive income
|
-
|
-
|
-
|
-
|
-
|
-
|
5,795,435
|
-
|
5,795,435
|
-
|
5,795,435
|
Foreign currency translation adjustment
|
-
|
-
|
-
|
-
|
-
|
-
|
73,867
|
-
|
73,867
|
-
|
73,867
|
Other
|
-
|
-
|
-
|
-
|
-
|
-
|
(204,538)
|
-
|
(204,538)
|
-
|
(204,538)
|
Comprehensive income
|
-
|
-
|
-
|
-
|
-
|
-
|
5,664,764
|
21,023,023
|
26,687,787
|
150,184
|
26,837,971
|
Increase of non-controlling shareholders’ interest
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
8,750
|
8,750
|
Capital increase with reserves
|
8,000,000
|
-
|
-
|
-
|
(8,000,000)
|
-
|
-
|
-
|
-
|
-
|
-
|
Transfers to reserves
|
-
|
-
|
-
|
1,129,131
|
13,589,708
|
-
|
-
|
(14,718,839)
|
-
|
-
|
-
|
Interest on equity and dividends
|
-
|
-
|
-
|
-
|
(8,000,000)
|
-
|
-
|
(7,863,776)
|
(15,863,776)
|
(115,491)
|
(15,979,267)
|
Balance on December 31, 2019
|
75,100,000
|
(440,514)
|
35,973
|
9,623,394
|
42,363,029
|
70,496
|
7,871,482
|
475,606
|
135,099,466
|
444,108
|
135,543,574
|
The Notes are an integral part of the Consolidated Financial Statements.
14 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Consolidated
Statements of Changes in Equity
|
R$ thousand
|
Capital
|
Treasury shares
|
Capital reserves
|
Profit reserves
|
Additional paid-in capital
|
Other comprehensive income (1)
|
Retained earnings
|
Equity attributable to shareholders of the parent
|
Non-controlling interest
|
Total
|
Legal
|
Statutory
|
Balance on December 31, 2019
|
75,100,000
|
(440,514)
|
35,973
|
9,623,394
|
42,363,029
|
70,496
|
7,871,482
|
475,606
|
135,099,466
|
444,108
|
135,543,574
|
Net income
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
15,836,862
|
15,836,862
|
197,099
|
16,033,961
|
Financial assets at fair value through other comprehensive income
|
-
|
-
|
-
|
-
|
-
|
-
|
17,591
|
-
|
17,591
|
-
|
17,591
|
Foreign currency translation adjustment
|
-
|
-
|
-
|
-
|
-
|
-
|
235,863
|
-
|
235,863
|
-
|
235,863
|
Other
|
-
|
-
|
-
|
-
|
-
|
-
|
(21,593)
|
-
|
(21,593)
|
-
|
(21,593)
|
Comprehensive income
|
-
|
-
|
-
|
-
|
-
|
-
|
231,861
|
15,836,862
|
16,068,723
|
197,099
|
16,265,822
|
Increase of non-controlling shareholders’ interest
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(3,598)
|
(3,598)
|
Capital increase with reserves
|
4,000,000
|
-
|
-
|
-
|
(4,000,000)
|
-
|
-
|
-
|
-
|
-
|
-
|
Transfers to reserves
|
-
|
-
|
-
|
827,328
|
10,171,278
|
-
|
-
|
(10,998,606)
|
-
|
-
|
-
|
Interest on equity and dividends
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(5,547,971)
|
(5,547,971)
|
(140,453)
|
(5,688,424)
|
Balance on December 31, 2020
|
79,100,000
|
(440,514)
|
35,973
|
10,450,722
|
48,534,307
|
70,496
|
8,103,343
|
(234,109)
|
145,620,218
|
497,156
|
146,117,374
|
(1) Mainly composed of financial assets
at fair value through other comprehensive income and gains and losses with cash flow hedge and foreign investment.
The Notes are an integral part of the Consolidated Financial Statements.
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Consolidated
Statements of Cash Flows
|
R$ thousand
|
Years ended December 31
|
2020
|
2019
|
2018
|
Operating activities
|
|
|
|
Income before income taxes and non-controlling interests
|
4,075,295
|
13,381,078
|
19,442,015
|
Adjustments to reconcile income before income tax to net cash flow from operating activities:
|
|
|
|
Expected loss on loans and advances
|
18,711,841
|
12,532,133
|
15,091,975
|
Changes in the insurance technical provisions and pension plans
|
29,983,129
|
32,036,527
|
29,409,222
|
(Gains)/Net realized losses on financial assets at fair value through other comprehensive income
|
1,716,879
|
(655,832)
|
(1,073,563)
|
Expenses with provisions and contingent liabilities
|
3,822,270
|
9,244,967
|
4,306,043
|
Impairment of assets
|
2,162,468
|
3,196,683
|
1,757,981
|
Depreciation
|
2,960,106
|
2,737,383
|
1,460,013
|
Amortization of intangible assets
|
2,960,924
|
3,128,385
|
3,348,242
|
Share of profit of associates and joint ventures
|
(444,858)
|
(1,201,082)
|
(1,680,375)
|
Losses on disposal of non-current assets held for sale
|
130,024
|
277,763
|
516,713
|
Net losses from disposal of property and equipment
|
139,411
|
17,937
|
98,182
|
(Gains)/Losses on the sale of investments in associates
|
(29,829)
|
48,927
|
-
|
Effect of changes in exchange rates in cash and cash equivalents
|
(2,452,395)
|
(752,829)
|
(751,769)
|
Changes in assets and liabilities:
|
|
|
|
(Increase)/Decrease in reserve requirement - Central Bank
|
6,864,805
|
(3,025,422)
|
(20,882,690)
|
(Increase)/decrease in loans and advances to banks
|
(8,449,903)
|
(2,099,605)
|
33,357
|
(Increase)/decrease in loans and advances to customers
|
(125,720,138)
|
(123,571,123)
|
(112,861,770)
|
(Increase)/Reduction in financial assets at fair value through profit or loss
|
(26,226,912)
|
(3,598,627)
|
(3,625,822)
|
(Increase)/decrease in other assets
|
(25,168,411)
|
(33,187,183)
|
(31,884,484)
|
Increase/(decrease) in deposits from banks
|
53,292,918
|
(3,555,713)
|
(20,749,542)
|
Increase/(decrease) in deposits from customers
|
186,793,206
|
36,787,089
|
88,659,514
|
Increase/(Decrease) in financial liabilities at fair value through profit or loss
|
4,453,599
|
(1,908,004)
|
1,877,088
|
Increase/(decrease) in insurance technical provisions and pension plans
|
(18,820,436)
|
(15,312,123)
|
(16,920,525)
|
Increase/(decrease) in other provisions
|
(3,479,276)
|
(3,807,209)
|
(2,994,599)
|
Increase/(decrease) in other liabilities
|
(4,622,104)
|
27,988,377
|
14,167,163
|
|
102,652,613
|
(51,297,503)
|
(33,257,631)
|
Interest received on investing financial assets
|
67,055,576
|
67,523,213
|
61,660,260
|
Interest paid
|
(21,560,365)
|
(27,246,400)
|
(27,813,710)
|
Income tax and social contribution paid
|
(5,715,233)
|
(8,433,279)
|
(7,086,237)
|
Net cash provided by/(used in) operating activities
|
142,432,591
|
(19,453,969)
|
(6,497,318)
|
|
|
|
|
Investing activities
|
|
|
|
(Acquisitions) of subsidiaries, net of cash and cash equivalents paid
|
(3,173,403)
|
-
|
(442,122)
|
(Acquisition) of financial assets at fair value through other comprehensive income
|
(56,013,411)
|
(96,192,725)
|
(103,432,365)
|
Disposal of financial assets at fair value through other comprehensive income
|
54,381,559
|
99,911,819
|
103,897,609
|
Maturity of financial assets at amortized cost
|
53,919,341
|
17,458,880
|
21,759,857
|
(Acquisition) of financial assets at amortized cost
|
(47,169,156)
|
(41,401,367)
|
(70,719,797)
|
Disposal of non-current assets held for sale
|
559,661
|
613,246
|
688,885
|
(Acquisitions) of investments in associates
|
(491,438)
|
-
|
(52,844)
|
Sale of investments in associates
|
130,249
|
17,961
|
-
|
Dividends and interest on shareholders’ equity received
|
296,323
|
720,985
|
1,513,712
|
(Acquisition) of property and equipment
|
(1,795,410)
|
(2,629,435)
|
(2,389,433)
|
Sale of premises and equipment
|
795,560
|
816,907
|
361,240
|
(Acquisition) of intangible assets
|
(2,469,105)
|
(2,696,067)
|
(3,053,156)
|
Interest received on investing financial assets
|
21,491,721
|
8,053,047
|
17,383,392
|
Net cash provided by/(used in) investing activities
|
20,462,491
|
(15,326,749)
|
(34,485,022)
|
|
|
|
|
Financing activities
|
|
|
|
Funds from securities issued
|
61,833,816
|
84,982,152
|
85,963,195
|
Payments on securities issued
|
(84,286,467)
|
(60,215,940)
|
(69,747,110)
|
Issuance of subordinated debt
|
688,186
|
-
|
10,890,606
|
16 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Consolidated
Statements of Cash Flows (continued)
|
R$ thousand
|
Years ended December 31
|
2020
|
2019
|
2018
|
Payments on subordinated debts
|
(1,258,049)
|
(3,207,429)
|
(9,181,501)
|
Leases payment
|
(1,797,408)
|
(1,067,573)
|
-
|
Non-controlling interest
|
(144,051)
|
(106,741)
|
2,265
|
Interest paid
|
(10,009,878)
|
(16,951,569)
|
(16,986,503)
|
Interest on equity and dividends paid
|
(1,432,130)
|
(17,751,148)
|
(6,539,193)
|
Net cash provided by/(used in) financing activities
|
(36,405,981)
|
(14,318,248)
|
(5,598,241)
|
|
|
|
|
(Decrease)/Increase in cash and cash equivalents
|
126,489,101
|
(49,098,966)
|
(46,580,581)
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
At the beginning of the year
|
61,879,493
|
110,225,630
|
156,054,442
|
Effect of changes in exchange rates in cash and cash equivalents
|
2,452,395
|
752,829
|
751,769
|
At the end of the year
|
190,820,989
|
61,879,493
|
110,225,630
|
|
|
|
|
(Decrease)/Increase in cash and cash equivalents
|
126,489,101
|
(49,098,966)
|
(46,580,581)
|
|
|
|
|
Non-cash transactions
|
|
|
|
Credit operations transferred to non-current assets held for sale
|
1,087,055
|
1,934,762
|
1,947,924
|
Dividends and interest on equity declared but not yet paid
|
3,825,613
|
126,755
|
4,876,458
|
(Gains)/losses on financial assets at fair value through other comprehensive income
|
(17,591)
|
(5,795,435)
|
296,915
|
The Notes are an integral part of the Consolidated Financial
Statements.
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
1) General
information
Banco Bradesco S.A. (“Bradesco”,
the “Bank”, the “Company” or the “Organization”) is a publicly-traded company established according
to the laws of the Federative Republic of Brazil with headquarters in the city of Osasco, state of São Paulo, Brazil.
Bradesco is a bank that provides
multiple services within two segments: banking and insurance. The Bank complies with Brazilian banking regulations and operates
throughout all of Brazil. The banking segment includes a range of banking activities, serving individual and corporate customers
in the following operations: investment banking, national and international banking operations, asset management operations and
consortium administration. The insurance segment covers auto, health, life, accident and non-life insurance and pension plans,
real estate ventures and capitalization bonds.
The retail banking products include
demand deposits, savings deposits, time deposits, mutual funds, foreign exchange services and a range of loans and advances, including
overdrafts, credit cards and loans with repayments in installments. The services provided to corporate entities include fund management
and treasury services, foreign exchange operations, corporate finance and investment banking services, hedge and finance operations
including working capital financing, lease and loans with repayments in installments. These services are provided, mainly, in domestic
markets, but also include international services on a smaller scale.
The Organization was originally listed
on the São Paulo Stock Exchange (“B3”) and then subsequently on the New York Stock Exchange (“NYSE”).
The consolidated financial statements,
in accordance with the IFRS, were approved by the Board of Directors on February 25, 2021.
2) Significant
accounting practices
These consolidated financial statements
were prepared in accordance with the International Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board (IASB). The consolidated financial statements include the consolidated statements of financial position, consolidated
statements of income, consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated
statements of cash flows as well as the notes to the consolidated financial statements.
The Organization has classified
its expenses according to their nature.
The consolidated statement of cash
flows shows the changes in cash and cash equivalents during the year arising from operating, investing and financing activities.
Cash and cash equivalents include highly liquid investments. Note 18 details the accounts of the consolidated statement of financial
position that comprise cash and cash equivalents. The consolidated statement of cash flows is prepared using the indirect method.
Accordingly, the income before taxes was adjusted by non-cash items such as provisions, depreciation, amortization and Impairment
losses on loans and advances. The interest and dividend received and paid are classified as operating, financing or investment
cash flows according to the nature of the corresponding assets and liabilities.
The preparation of the consolidated
financial statements requires the use of estimates and assumptions which affect the reported amounts of assets and liabilities,
as well as the disclosure of contingent assets and liabilities at the date of the financial statements, and the profit and loss
amounts for the year. The consolidated financial statements also reflect various estimates and assumptions, including, but not
limited to: adjustments to the provision for expected losses of assets and financial liabilities; estimates of the fair value of
financial instruments; depreciation and amortization rates; impairment losses on assets; the useful life of intangible assets;
evaluation of the realization of tax assets; assumptions for the calculation of technical provisions for insurance, supplemental
pension plans and capitalization bonds; provisions for contingencies and provisions for potential losses arising from fiscal and
tax uncertainties. The areas involving a higher degree of judgment or complexity, or areas where assumptions and
18 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
estimates are significant to the
consolidated financial statements are disclosed in Note 4.
The accounting policies listed below
were used in all the periods presented and by all the companies of the Organization including the equity method investees.
The consolidated financial statements
include the financial statements of Bradesco and those of its direct and indirect subsidiaries, including exclusive mutual funds
and special purpose entities.
The main subsidiaries included in
the consolidated financial statements are as follows:
|
Activity
|
Shareholding interest
|
December 31
|
2020
|
2019
|
Financial Sector – Brazil
|
|
|
|
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 BBI S.A. (1)
|
Investment bank
|
100.00%
|
99.96%
|
Banco Bradesco BERJ S.A.
|
Banking
|
100.00%
|
100.00%
|
Banco Bradesco Financiamentos S.A.
|
Banking
|
100.00%
|
100.00%
|
Banco Losango S.A.
|
Banking
|
100.00%
|
100.00%
|
Bradesco Administradora de Consórcios Ltda.
|
Consortium management
|
100.00%
|
100.00%
|
Bradesco Leasing S.A. Arrendamento Mercantil
|
Leases
|
100.00%
|
100.00%
|
Bradesco-Kirton Corretora de Câmbio S.A.
|
Exchange Broker
|
99.97%
|
99.97%
|
Bradesco S.A. Corretora de Títulos e Valores Mobiliários
|
Brokerage
|
100.00%
|
100.00%
|
BRAM - Bradesco Asset Management S.A. DTVM
|
Asset management
|
100.00%
|
100.00%
|
Kirton Bank S.A.
|
Banking
|
100.00%
|
100.00%
|
Tempo Serviços Ltda.
|
Services
|
100.00%
|
100.00%
|
Financial Sector – Overseas
|
|
|
|
Banco Bradesco Argentina S.A.U. (2)
|
Banking
|
100.00%
|
100.00%
|
Banco Bradesco Europa S.A. (2)
|
Banking
|
100.00%
|
100.00%
|
Banco Bradesco S.A. Grand Cayman Branch (2) (3)
|
Banking
|
100.00%
|
100.00%
|
Banco Bradesco S.A. New York Branch (2)
|
Banking
|
100.00%
|
100.00%
|
Bradesco Securities, Inc. (2)
|
Brokerage
|
100.00%
|
100.00%
|
Bradesco Securities, UK. Limited (2)
|
Brokerage
|
100.00%
|
100.00%
|
Bradesco Securities, Hong Kong Limited (2)
|
Brokerage
|
100.00%
|
100.00%
|
Cidade Capital Markets Ltd. (2)
|
Banking
|
100.00%
|
100.00%
|
Bradescard México, sociedad de Responsabilidad Limitada (4)
|
Cards
|
100.00%
|
100.00%
|
Bac Florida Bank (5)
|
Banking
|
100.00%
|
-
|
Insurance, Pension Plan and Capitalization Bond Sector - In Brazil
|
|
|
|
Atlântica Companhia de Seguros
|
Insurance
|
100.00%
|
100.00%
|
Bradesco Auto/RE Companhia de Seguros
|
Insurance
|
100.00%
|
100.00%
|
Bradesco Capitalização S.A.
|
Capitalization bonds
|
100.00%
|
100.00%
|
Bradesco Saúde S.A.
|
Insurance/health
|
100.00%
|
100.00%
|
Bradesco Seguros S.A.
|
Insurance
|
99.96%
|
99.96%
|
Bradesco Vida e Previdência S.A.
|
Pension plan/Insurance
|
100.00%
|
100.00%
|
Odontoprev S.A. (6)
|
Dental care
|
50.01%
|
50.01%
|
Insurance - Overseas
|
|
|
|
Bradesco Argentina de Seguros S.A. (2) (6)
|
Insurance
|
99.98%
|
99.98%
|
Other Activities - Brazil
|
|
|
|
Andorra Holdings S.A.
|
Holding
|
100.00%
|
100.00%
|
Bradseg Participações S.A.
|
Holding
|
100.00%
|
100.00%
|
Bradescor Corretora de Seguros Ltda.
|
Insurance Brokerage
|
100.00%
|
100.00%
|
BSP Empreendimentos Imobiliários S.A.
|
Real estate
|
100.00%
|
100.00%
|
Cia. Securitizadora de Créditos Financeiros Rubi
|
Credit acquisition
|
100.00%
|
100.00%
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
Columbus Holdings S.A.
|
Holding
|
100.00%
|
100.00%
|
Nova Paiol Participações Ltda.
|
Holding
|
100.00%
|
100.00%
|
Other Activities - Overseas
|
|
|
|
Bradesco North America LLC (2)
|
Services
|
100.00%
|
100.00%
|
Investment Funds (7)
|
|
|
|
Bradesco FI RF Máster II Previdência
|
Investment Fund
|
100.00%
|
100.00%
|
Bradesco FI RF Máster III Previdência
|
Investment Fund
|
100.00%
|
100.00%
|
Bradesco FI Referenciado DI Master
|
Investment Fund
|
100.00%
|
100.00%
|
Bradesco FIC FI RF Athenas PGBL/VGBL
|
Investment Fund
|
100.00%
|
100.00%
|
Bradesco FIC FI RF VGBL - F10
|
Investment Fund
|
100.00%
|
100.00%
|
Bradesco FI RF Máster Previdência
|
Investment Fund
|
100.00%
|
100.00%
|
Bradesco FI RF Referenciado DI União
|
Investment Fund
|
99.99%
|
99.99%
|
Bradesco FI RF Master Previdência
|
Investment Fund
|
100.00%
|
100.00%
|
Bradesco Private FIC de FI RF PGBL/VGBL Ativo-F 08 C
|
Investment Fund
|
100.00%
|
100.00%
|
Bradesco FIC de FI RF Creta
|
Investment Fund
|
100.00%
|
100.00%
|
(1) Acquisition of minority interest in
January 2020;
(2) The functional currency of these companies
abroad is the Real;
(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 acquired on October 30, 2020,
and its functional currency is the US dollar;
(6) Accounting information used with date
lag of up to 60 days; and
(7) The investment funds in which Bradesco
assumes or substantially retains the risks and benefits were consolidated.
Subsidiaries are all of the companies
over which the Organization, has control. The Organization has control over an investee if it is exposed to, or has rights to,
variable returns from its involvement with the investee and has the ability to affect those returns through its power over the
investee. The subsidiaries are fully consolidated from the date at which the Organization obtains control over its activities until
the date this control ceases.
For acquisitions meeting the definition
of a business combination, the acquisition method of accounting is used. The cost of acquisition is measured as the fair value
of the consideration, including assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially
at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest. The excess of the consideration
given over the fair value of the Organization’s share of the identifiable net assets and non-controlling interest acquired
is recorded as goodwill. Any goodwill arising from business combinations is tested for impairment at least once a year and whenever
events or changes in circumstances may indicate the need for an impairment write-down. If the cost of acquisition is less than
the fair value of the Organization’s share of the net assets acquired, the difference is recognized directly in the consolidated
statement of income.
For acquisitions not meeting the
definition of a business combination, the Organization allocates the cost between the individual identifiable assets and liabilities.
The cost of acquired assets and liabilities is determined by (a) recognizing financial assets and liabilities at their fair value
at the acquisition date; and (b) allocating the remaining balance of the cost of purchasing assets and assuming liabilities to
individual assets and liabilities, other than financial instruments, based on their relative fair values of these instruments at
the acquisition date.
20 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
Companies are classified as associates
if the Organization has significant influence, but not control, over the operating and financial management policy decisions. Normally
significant influence is presumed when the Organization holds in excess of 20%, but no more than 50%, of the voting rights. Even
if less than 20% of the voting rights are held, the Organization could still have significant influence through its participation
in the management of the investee or representations on its Board of Directors, providing it has executive power; i.e. voting power.
Investments in associates are recorded
in the Organization’s consolidated financial statements using the equity method and are initially recognized at cost. The
investments in associates include goodwill (net of any impairment losses) identified at the time of acquisition.
The Organization has contractual
agreements in which two or more parties undertake activities subject to joint control. Joint control is the contractual sharing
of control over an activity and it exists only if strategic, financial and operating decisions are made on a unanimous basis by
the parties. A joint venture is an arrangement in which the Group has joint control, whereby the Group has rights to the arrangement,
rather than rights to its assets and obligations for its liabilities. Investments in joint ventures are recorded in the consolidated
financial statements of the Organization using the equity method.
A structured entity is an entity
that has been designed such that voting or similar rights are not the dominant factor in deciding who controls the entity, such
as when any voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual
arrangements.
Structured entities normally have
some or all of the following features or characteristics:
|
•
|
a narrow and well-defined
objective, such as, to effect a specific structure like a tax efficient lease, to perform research and development activities,
or to provide a source of capital or funding to an entity or to provide investment opportunities for investors by passing risks
and rewards associated with the assets of the structured entity to investors;
|
|
•
|
thin capitalization, that
is, the proportion of ‘real’ equity is too small to support the structured entity’s overall activities without
subordinated financial support; and
|
|
•
|
financing in the form
of multiple contractually linked instruments to investors that create concentrations of credit risk or other risks (tranches).
|
|
v.
|
Transactions with
and interests of non-controlling shareholders
|
The Organization applies a policy
of treating transactions with non-controlling interests as transactions with equity owners of the Bank. For purchases of equity
from non-controlling interests, the difference between any consideration paid and the share of the carrying value of net assets
of the subsidiary acquired is recorded in equity. Gains or losses on sales to non-controlling shareholders are also recorded in
equity.
Profits or losses attributable to
non-controlling interests are presented in the consolidated statements of income under this title.
|
vi.
|
Balances and transactions
eliminated in the consolidation
|
Intra-group transactions and balances
(except for foreign currency transaction gains and losses) are eliminated in the consolidation process, including any unrealized
profits or losses resulting from operations between the companies except when unrealized losses indicate an impairment
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
loss of the asset transferred which
should be recognized in the consolidated financial statements. Consistent accounting policies as well as similar valuation methods
for similar transactions, events and circumstances are used throughout the Organization for the purposes of consolidation.
|
b)
|
Foreign currency translation
|
|
i.
|
Functional and presentation currency
|
Items included in the financial statements
of each of the Organization’s entities are measured using the currency of the primary economic environment in which the entity
operates (the functional currency). The consolidated financial statements are presented in Brazilian Reais (R$), which is
the Organization’s presentation currency. The domestic and foreign subsidiaries use the Real as their functional currency,
with the exception of the subsidiary in Mexico, which uses the Mexican Peso as its functional currency, and BAC Florida Bank, whose
functional currency is the US dollar.
|
ii.
|
Transactions and balances
|
Foreign currency transactions, which
are denominated or settled in a foreign currency, are translated into the functional currency using the exchange rates prevailing
on the dates of the transactions.
Monetary items denominated in foreign
currency are translated at the closing exchange rate as at the reporting date. Non-monetary items measured at historical cost denominated
in a foreign currency are translated at exchange rate on the date of initial recognition; non-monetary items in a foreign currency
that are measured at fair value are translated using the exchange rates on the date when the fair value was determined.
Foreign exchange gains and losses
resulting from the settlement of foreign currency transactions and from the translation at each period exchange rates of monetary
assets and liabilities denominated in foreign currencies are recognized in the consolidated statement of income as “Net gains/(losses)
of foreign currency transactions”.
In the case of changes in the fair
value of monetary assets denominated in foreign currency classified as financial assets at fair value through other comprehensive
income, a distinction is made between translation differences resulting from changes in amortized cost of the security and other
changes in the carrying amount of the security. Translation differences related to changes in the amortized cost are recognized
in the consolidated statement of income, and other changes in the carrying amount, except impairment, are recognized in equity.
The results and financial position
of all foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different
from the presentation currency are translated into the presentation currency as follows:
|
·
|
Assets and liabilities
for each consolidated statement of financial position presented are translated at the closing rate at the reporting date;
|
|
·
|
Income and expenses for
each consolidated statement of income are translated at average exchange rates (unless this average is not a reasonable approximation
of the cumulative effect of the rate prevailing on the transaction dates, in which case income and expenses are translated at the
rates in effect on the dates of the transactions); and
|
|
·
|
All resulting exchange
differences are recognized in other comprehensive income.
|
22 IFRS – International Financial Reporting Standards – 2020
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|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
Exchange differences arising from
the above process are reported in equity as “Foreign currency translation adjustment”.
On consolidation, exchange differences
arising from the translation of the net investment in foreign entities are taken to “Other comprehensive income”. If
the operation is a non-wholly owned subsidiary, then the relevant proportion of the transaction difference is allocated to the
non-controlling interest. When a foreign operation is partially sold or disposed, such exchange differences, which were recognized
in equity, are recognized in the consolidated statement of income as part of the gain or loss on sale.
|
c)
|
Cash and cash equivalents
|
Cash and cash equivalents include:
cash, bank deposits, unrestricted balances held with the Central Bank of Brazil and other highly liquid short-term investments,
with original maturities of three months or less and which are subject to insignificant risk of changes in fair value, used by
the Organization to manage its short-term commitments. See Note 18 (b) – “Cash and cash equivalents”.
|
d)
|
Financial assets and liabilities
|
The Organization classifies and measures
financial assets based on the business model for the management of financial assets, as well as on the characteristics of contractual
cash flow of the financial asset.
The Organization classifies financial
assets into three categories: (i) measured at amortized cost; (ii) measured at fair value through other comprehensive income (FVOCI);
and (iii) measured at fair value through profit or loss (FVTPL).
- Business model: it relates
to the way in which the organization manages its financial assets to generate cash flows. The objective (business model) of management
in relation to each portfolio is defined as either: (i) to maintain the assets to receive contractual cash flows; (ii) to maintain
the assets to receive the contractual cash flows and sales; or (iii) any other model. When the financial assets conform to the
business models (i) and (ii) the SPPI test (Solely Payment of Principal and Interest) is applied. Financial assets held under business
model (iii) are measured at FVTPL.
- SPPI Test: the purpose of
this test is to assess the contractual terms of the financial instruments to determine if they give rise to cash flows at specific
dates that conform only to the payment of the principal and interest on the principal amount.
In this context, the principal refers
to the fair value of the financial asset at the initial recognition and interest refers to the consideration for the time value
of money, the credit risk associated with the principal amount outstanding for a specific period of time and other risks and borrowing
costs. Financial instruments that do not meet the SPPI test are measured at FVTPL, such as derivatives.
|
•
|
Measured
at fair value through profit or loss
|
All financial assets that do not meet
the criteria of measurement at amortized cost or at FVOCI are classified as measured at FVTPL, in addition to those assets that
in the initial recognition are irrevocably designated at FVTPL, if this eliminates or significantly reduces asset-liability mismatches.
Financial assets measured at FVTPL
are initially recorded at fair value with subsequent changes to the fair value recognized immediately in profit or loss.
Financial assets are initially recognized
in the consolidated statement of financial position at fair value and the transaction costs are recorded directly in the consolidated
statement of
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
income. Subsequent changes to the
fair value are recognized immediately in profit or loss.
Gains and losses arising from changes
in fair value of non-derivative assets are recognized directly in the consolidated statement of income under “Net gains/(losses)
on financial assets and liabilities at fair value through profit or loss”. Interest income on financial assets measured at
FVTPL is included in “Interest and similar income”. For the treatment of derivative assets see Note 2(d)(iii).
|
·
|
Measured at fair value
through other comprehensive income
|
They are financial assets that meet
the criterion of the SPPI test, which are held in a business model whose objective is both to maintain the assets to receive the
contractual cash flows as well as for sale.
These financial assets are initially
recognized at fair value, plus any transaction costs that are directly attributable to their acquisition or their issuance and
are, subsequently, measured at fair value with gains and losses being recognized in other comprehensive income, except for impairment
losses and foreign exchange gains and losses on debt securities, until the financial asset is derecognized. The expected credit
losses are recorded in the consolidated statement of income.
Interest income is recognized in the
consolidated statement of income using the effective interest method. Dividends on equity instruments are recognized in the consolidated
statement of income in ‘Dividend income’, within “Net Gains/(losses) on financial assets at fair value through
other comprehensive income” when the Organization’s right to receive payment is established. Gains or losses arising
out of exchange variation on investments in debt securities classified as FVOCI are recognized in the consolidated statement of
income. See Note 2(d)(viii) for more details of the treatment of the expected credit losses.
|
·
|
Measured at amortized
cost
|
Financial assets that meet the criterion
of the SPPI test and which are held in a business model whose objective is to maintain the assets to receive the contractual cash
flows.
These financial assets are recognized
initially at fair value including direct and incremental costs, and are subsequently recorded at amortized cost, using the effective
interest rate method.
Interest is recognized in the consolidated
statement of income and presented as “Interest and similar income”. In the case of expected credit loss, it is reported
a deduction from the carrying value of the financial asset and is recognized in the consolidated statement of income.
|
ii.
|
Financial
liabilities
|
The Organization classifies its financial
liabilities as subsequently measured at amortized cost, using the effective interest rate method, except for the following financial
instruments.
|
·
|
Measured
at fair value through profit and loss
|
These financial liabilities are recorded
and measured at fair value and the respective changes in fair value are immediately recognized in the statement of income. These
liabilities can be subdivided into two different classifications upon initial recognition: financial liabilities designated at
fair value through profit and loss and financial liabilities held for trading.
24 IFRS – International Financial Reporting Standards – 2020
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|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
|
-
|
Financial liabilities
designated at FVTPL on initial recognition
|
These are liabilities that on initial
recognition are irrevocably designated at FVTPL, if this eliminates or significantly reduces asset-liability mismatches.
The Organization does not have any
financial liability designated at fair value through profit and loss in income.
|
-
|
Financial liabilities
held for trading
|
Financial liabilities held for trading
recognized by the Organization are derivative financial instruments. For the treatment of derivatives see Note 2(d)(iii).
|
·
|
Financial
guarantee contracts and loan commitments
|
Financial guarantees are contracts
that require the Organization to make specific payments under the guarantee for a loss incurred when a specific debtor fails to
make a payment when due in accordance with the terms of the debt instrument.
Financial guarantees are initially
recognized in the financial statements at fair value on the date the guarantee was given. Subsequent to initial recognition, the
Organization’s obligations under such guarantees are measured by the higher value between (i) the value of the provision
for expected losses and (ii) the value initially recognized, minus, if appropriate, the accumulated value of the revenue from the
service fee. The fee income earned is recognized on a straight-line basis over the life of the guarantee. Any increase in the liability
relating to guarantees is reported in the consolidated statement of income within “Other operating income/ (expenses)”.
The expected credit losses, referring
to loan commitments, are recognized in liabilities and are calculated, as described in Note 3.1.
|
iii.
|
Derivative
financial instruments and hedge transactions
|
Derivatives are initially recognized
at fair value on the date the respective contract is signed and are, subsequently, re-measured at their fair values with the changes
recognized in the statement of income under “Net gains or losses on financial assets at fair value through profit or loss”.
Fair values are obtained from quoted
market prices in active markets (for example, for exchange-traded options), including recent market transactions, and valuation
techniques (for example for swaps and foreign currency transactions), such as discounted cash-flow models and options-pricing models,
as appropriate. In the calculation of fair value, the counterparty’s and the entity’s own credit risk are considered.
Certain derivatives embedded in other
financial instruments are treated as separate derivatives when their economic characteristics and risks are not closely related
to those of the host contract and the host contract is not recorded at fair value through profit or loss. These embedded derivatives
are separately accounted for at fair value, with changes in fair value recognized in the consolidated statement of income.
The Organization has structures of
cash flow hedges, whose objective is to protect the exposure to variability in cash flows attributable to a specific risk associated
with all the assets or liabilities recognized, or a component of it. The details of these structures have been presented in Note
3.3 – Market risk.
Initially, the Organization recognizes
deposits, securities issued and subordinated debts and other financial assets and liabilities on the trade date, in accordance
with the contractual provisions of the instrument.
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
Financial assets are derecognized
when there is no reasonable expectation of recovery, when the contractual rights to receive the cash flows from these assets have
ceased to exist or the assets have been transferred and substantially all the risks and rewards of ownership of the assets are
also transferred. Financial liabilities are derecognized when they have been discharged, paid, redeemed, cancelled or expired.
If a renegotiation or modification of terms of an existing financial asset is such that the cash flows of the modified asset are
substantially different from those of the original unmodified asset, then the original financial asset is derecognized and the
modified financial asset is recognized as a new financial asset and initially measured at fair value.
|
vi.
|
Offsetting
financial instruments
|
Financial assets and liabilities
are offset and the net amount reported in the consolidated statement of financial position when, the Organization has the intention
and the legal enforceable right to offset the recognized amounts on a net basis or realize the asset and settle the liability simultaneously.
|
vii.
|
Determination
of fair value
|
The determination of the fair value
for the majority of financial assets and liabilities is based on the market price or quotes of security dealers for financial instruments
traded in an active market. The fair value for other instruments is determined using valuation techniques. The valuation techniques
which include use of recent market transactions, discounted cash flow method, comparison with other instruments similar to those
for which there are observable market prices and valuation models.
For more commonly used instruments,
the Organization uses widely accepted valuation models that consider observable market data in order to determine the fair value
of financial instruments.
For more complex instruments, the
Organization uses its own models that are usually developed from standard valuation models. Some of the information included in
the models may not be observable in the market and is derived from market prices or rates or may be estimated on the basis of assumptions.
The value produced by a model or
by a valuation technique is adjusted to reflect various factors, since the valuation techniques do not necessarily reflect all
of the factors that market participants take into account during a transaction.
The valuations are adjusted to consider
the risks of the models, differences between the buy and sell price, credit and liquidity risks, as well as other factors. Management
believes that such valuation adjustments are necessary and appropriate for the correct evaluation of the fair value of the financial
instruments recorded in the consolidated statement of financial position.
More details on the calculation of
the fair value of financial instruments are available in Note 3.4.
|
viii.
|
Expected
credit losses
|
The Organization calculates the expected
credit losses for financial instruments measured at amortized cost and at FVOCI (with the exception of investments in equity instruments),
financial guarantees and loan commitments.
Expected credit losses on financial
instruments are measured as follows:
Financial assets: it is the present
value of the difference between contractual cash flows and the cash flows that the Organization expects to recover discounted at
the effective interest rate of the operation;
26 IFRS – International Financial Reporting Standards – 2020
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|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
Financial guarantees: it is the present
value of the difference between the expected payments to reimburse the holder of the guarantee and the values that the Organization
expects to recover discounted at a rate that reflects the market conditions; and
Loan commitments: it is the present
value of the difference between the contractual cash flows that would be due if the commitment was used and the cash flows that
the Organization expects to recover discounted at a rate that reflects the market conditions.
Expected credit losses are measured
on one of the following basis:
− Credit losses expected for
12 months, i.e., credit losses as a result of possible events of delinquency within 12 months after the reporting date; and
− Credit Losses expected for
the whole of lifecycle, i.e., credit losses that result from all possible events of delinquency throughout the expected lifecycle
of a financial instrument.
The measurement of expected losses
for the whole lifecycle is applied when a financial asset, on the reporting date, has experienced a significant increase in credit
risk since its initial recognition and the measurement of expected credit loss for 12 months is applied when the credit risk has
not increased significantly since its initial recognition. The Organization assumes that the credit risk of a financial asset has
not increased significantly when the asset has a low credit risk on the reporting date.
With respect to Brazilian government
bonds, the Organization has internally developed a study to assess the credit risk of these securities, which does not expect any
loss for the next 12 months, that is, no provision is recorded for credit losses.
For loans, the amount of loss is
measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding
future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The
asset’s carrying amount is reduced through provisions and the amount of the loss is recognized in the consolidated statement
of income.
The calculation of the present value
of the estimated future cash flows of a collateralized financial asset reflects the cash flows that may result from foreclosure
less costs for obtaining and selling the collateral.
The methodology and assumptions used
for estimating future cash flows are reviewed regularly to mitigate any differences between loss estimates and actual loss experience.
Following the recognition of expected
credit loss, interest income is recognized using the effective rate of interest which was used to discount the future cash flows,
on the accounting value gross of provision, except for assets with problem of credit recovery, in which, the rate stated is applied
at the net book value of the provision.
The whole or part of a financial
asset is written off against the related credit loss expected when there is no reasonable expectation of recovery. Such loans are
written off after all the relevant collection procedures have been completed and the amount of the loss has been determined. Subsequent
recoveries of amounts previously written off are credited to the consolidated statement of income.
The criteria used to calculate the
expected credit loss and to determine the significantly increased of the credit risk are detailed in Note 3.1.
|
e)
|
Non-current assets held for sale
|
Under certain circumstances, property
is repossessed following foreclosure of loans that are in default. Repossessed properties are measured at the lower of their carrying
amount or fair value less the costs to sell – whichever is the lowest – and are included within “Non-current
assets held for sale”.
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
|
f)
|
Property and equipment
|
|
i.
|
Recognition
and valuation
|
Property and equipment are measured
at cost less accumulated depreciation and accumulated impairment losses (see Note 2(i) below), if any. The cost includes expenses
directly attributable to the acquisition of an asset.
The cost of assets internally produced
includes the cost of materials and direct labor, as well as any other costs that can be directly allocated and that are necessary
for them to function.
When parts of an item have different
useful lives, and separate control is practical, they are recorded as separate items (main components) comprising the property
and equipment.
Useful lives and residual values are
reassessed at each reporting date and adjusted, if appropriate.
Gains and losses from the sale of property
and equipment are determined by comparing proceeds received with the carrying amount of the asset and are recorded in the consolidated
statement of income under the heading “Other operating income/(expenses)”.
Expenditure on maintenance and repairs
of property and equipment items is recognized as an asset when it is probable that future economic benefits associated with the
items will flow to the Organization for more than one year and the cost can be measured reliably. The carrying amount of the replaced
part is derecognized. All other repairs and maintenance costs are charged to the consolidated statement of income during the reporting
period in which they are incurred.
Depreciation is recognized in the consolidated
statement of income using the straight-line basis and taking into consideration the estimated useful economic life of the assets.
The depreciable amount is the gross-carrying amount, less the estimated residual value at the end of the useful economic life.
Land is not depreciated. Useful lives and residual values are reassessed at each reporting date and adjusted, if appropriate.
Intangible assets comprise separately
identifiable non-monetary items, without physical substance due to business combinations, such as goodwill and other purchased
intangible assets, computer software and other such intangible assets. Intangible assets are recognized at cost. The cost of an
intangible asset, acquired in a business combination, is its fair value at the date of acquisition. Intangible assets with a definite
useful life are amortized over their estimated useful economic life. Intangible assets with an indefinite useful life are not amortized.
Generally, the identified intangible
assets of the Organization have a definite useful life. At each reporting date, intangible assets are reviewed for indications
of impairment or changes in estimated future economic benefits – see Note 2(i) below.
Goodwill (or bargain purchase gain)
arises on the acquisition of subsidiaries, associates and joint ventures.
Goodwill reflects the excess of the
cost of acquisition in relation to the Organization’s share of the fair value of net identifiable assets or liabilities of
an acquired subsidiary, associate or joint venture on the date of acquisition. Goodwill originated from the acquisition of subsidiaries
is recognized
28 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
as “Intangible Assets”,
and the goodwill from acquisition of associates and joint ventures is included in the carrying amount of the investment. When the
difference between the cost of acquisition and the Organization’s share of the fair value of net identifiable assets or liabilities
is negative (bargain purchase gain), it is immediately recognized in the consolidated statement of income as a gain on the acquisition
date.
Goodwill is tested annually or whenever
a trigger event has been observed, for impairment (see Note 2(i) below). Gains and losses realized in the sale of an entity include
consideration of the carrying amount of goodwill relating to the entity sold.
Software acquired by the Organization
is recorded at cost, less accumulated amortization and accumulated impairment losses, if any.
Internal software-development expenses
are recognized as assets when the Organization can demonstrate its intention and ability to complete the development, and use the
software in order to generate future economic benefits. The capitalized costs of internally developed software include all costs
directly attributable to development and are amortized over their useful lives. Internally developed software is recorded at its
capitalized cost less amortization and impairment losses (see Note 2(i) below).
Subsequent software expenses are capitalized
only when they increase the future economic benefits incorporated in the specific asset to which it relates. All other expenses
are recorded as expenses as incurred.
Amortization is recognized in the consolidated
statement of income using the straight-line method over the estimated useful life of the software, beginning on the date that it
becomes available for use. The estimated useful life of software is from two to five years. Useful life and residual values are
reviewed at each reporting date and adjusted, if necessary.
|
iii.
|
Other
intangible assets
|
Other intangible assets refer basically
to the customer portfolio and acquisition of banking service rights. They are recorded at cost less amortization and impairment
losses, if any, and are amortized for the period in which the asset is expected to contribute, directly or indirectly, to the future
cash flows.
These intangible assets are reviewed
annually, or whenever events or changes in circumstances occur which could indicate that the carrying amount of the assets cannot
be recovered. If necessary, the write-off or impairment (see Note 2(i) below) is immediately recognized in the consolidated statement
of income.
Until December 31, 2018, the Organization
adopted IAS 17 as accounting practice for recording its leasing transactions, as described below. IFRS 16 – Leases is mandatory
for the fiscal years beginning after January 1, 2019.
Accounting Policy applicable
until December 31, 2018
The Organization has both operating
and finance leases and operates as a lessee and a lessor.
Leases in which a significant part
of the risks and benefits of the asset is borne by the lessor are classified as operating leases. For leases in which a significant
part of the risks and benefits of the asset is borne by the lessee, the leases are classified as financial lease.
Leases under the terms of which
the Organization assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition,
the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments.
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
Subsequent to initial recognition,
the asset is accounted for in accordance with the accounting policy applicable to that asset.
As a lessee, the Organization classifies
its leasing operations mainly as operating leases, and the monthly payments are recognized in the financial statements using the
straight-line method over the term of the lease. Lease incentives received are recognized as an integral part of the total lease
expense, over the term of the lease.
When an operating lease is terminated
before the contract expires, any payment that may be made to the lessor in the form of a penalty is recognized as an expense for
the period.
Minimum lease payments made under
finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense
is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance
of the liability.
Contingent lease payments are accounted
for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed.
As a lessor, the Organization
has substantial finance lease contracts, in value and total number of contracts.
Finance lease assets in the consolidated
statement of financial position are initially recognized in the “loans and advances to customers” account at an amount
equal to the net investment in the lease.
The initial direct costs generally incurred
by the Organization are included in the initial measurement of the lease receivable and recognized as part of the effective interest
rate of the contract, decreasing the amount of income recognized over the lease term. These initial costs include amounts for commissions,
legal fees and internal costs. The costs incurred in relation to the negotiation, structuring and sales of leases are excluded
from the definition of initial direct costs and therefore are recognized as expenses at the beginning of the lease term.
Recognition of financial revenue reflects
a constant rate of return on the net investment made by the Organization.
The estimated non-guaranteed residual
values used in the calculation of the gross investment of the lessor in the lease are reviewed at least annually. If there is a
decrease in the estimated non-guaranteed residual value, the income allocated over the period of the lease is also reviewed periodically
and any decrease in relation to the accumulated values is immediately recognized in the consolidated statement of income.
The lease receivables are subject to
the requirements of Write-off and credit Losses expected, described in the topic above, financial assets and liabilities, items
v and viii, respectively.
The assets leased under operating
leases, where the Organization acts as lessor, are recognized in the consolidated statement of financial position as property and
equipment according to the nature of the item leased.
The initial direct costs incurred
by the Organization are added to the carrying amount of the leased asset and are recognized as expenses over the period of the
lease and on the same basis as the income recognition.
30 IFRS – International Financial Reporting Standards – 2020
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|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
Revenue from lease is recognized
using the straight-line method over the term of the lease, even if the payments are not made on the same basis. Costs, including
depreciation and maintenance, incurred in the generation of income are recognized as expenses.
The depreciation policy for leased
assets is the same as the depreciation policy used by the Organization for similar assets.
Accounting Policy adopted from
January 1, 2019
The Organization assesses at contract
inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified
asset for a period of time in exchange for consideration.
Bradesco applies a single recognition
and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Organization recognizes
lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
At the beginning of a lease, the
Organization recognizes a lease liability and a right of use asset. The expenses with interest on the lease liability and expenses
of depreciation of the right of use asset are recognized separately.
The right of use asset is measured
initially at cost value and is subsequently reduced by the accumulated depreciation and any accumulated impairment losses, when
applicable. The right of use will also be adjusted in case of re-measurement of the lease liability. The depreciation is calculated
in a linear fashion by the term of the leases.
The lease term is defined as the
non-cancellable term of the lease, together with (i) periods covered by the option to extend the lease, if the lessee is reasonably
certain to exercise that option; and (ii) periods covered by the option to terminate the lease, if the lessee is reasonably certain
that it will not exercise that option. The Organization has a descriptive policy for the property lease terms, which considers
the business plan and management expectations, extension options and local laws and regulations.
The lease liability is measured
initially at the present value of the future lease payments, discounted by the incremental rate applied to each contract in accordance
with the leasing term.
The lease payments include fixed
payments, less any lease incentives receivable, and variable lease payments that depend on an index or a rate. Variable lease payments
that do not depend on an index or a rate are recognized as expenses in the period in which the event or condition that triggers
the payment occurs.
The incremental rate applied by
the Organization takes into account the funding rate free of risk adjusted by the credit spread.
Subsequently, the lease liability
is adjusted to reflect the interest levied on the payment flows, re-measured to reflect any revaluation or modifications of leasing
and reduced to reflect the payments made.
Financial charges are recognized
as a “Interest and similar expenses” and are adjusted in accordance with the term of the contracts, considering the
incremental rate.
The contracts and leases of properties
with an indefinite period were not considered in the scope of IFRS 16 because they are leases in which the contract can be terminated
at any time without a significant penalty. In this way, the rental contract was not considered as executable.
Short-term leases and leases
of low-value assets
The Organization applies the short-term
lease recognition exemption to its short-term leases (leases that have a lease term of 12 months or less from the commencement
date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases that
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
are considered to be low value.
Lease payments on short-term leases and leases of low-value assets are recognized as expense over the lease term.
i) Impairment losses on non-financial
assets (except for deferred tax assets)
Assets that have an indefinite useful
life such as goodwill are not subject to amortization and are tested, at least, annually to verify the existence of impairment.
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. Goodwill acquired in a business combination is allocated to CGU or groups of CGUs that are expected to benefit from the
synergies of the combination.
When assessing the value in use,
future profitability based on business plans and budgets are used, and the estimated future cash flows are discounted to their
present value using a discount rate 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 inflows 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.
An impairment of goodwill cannot
be reversed. With regard to other assets, an impairment loss recognized in previous periods is reassessed at each reporting date
for any indications that the impairment has decreased or no longer exists. An impairment loss will be reversed if there has been
a change in the estimates used to determine the recoverable amount or to the extent that the carrying amount of the asset does
not exceed the carrying amount that would have been determined, net of depreciation and amortization, if no impairment had been
recognized.
j) Provisions, contingent assets
and liabilities and legal obligations
A provision is recognized when,
as a result of a past event, the Organization has a present legal or constructive obligation that can be reliably estimated and
it is probable that an outflow of resources will be required to settle the obligation. Provisions are determined by discounting
the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks
specific to the liability.
Provisions were established by Management
whenever it considers that there is a probable loss taking into account the opinion of their legal advisors; the nature of the
actions; the similarity to previous suits; the complexity and the positioning of the Courts.
Contingent liabilities are not recognized,
since their existence will only be confirmed by the occurrence or not of one or more future and uncertain events that are not totally
under the control of
32 IFRS – International Financial Reporting Standards – 2020
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Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
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Notes to the Consolidated Financial Statements
the Management. Contingent liabilities
do not meet the criteria for recognition, since they are considered as possible losses and are disclosed in explanatory notes,
when relevant. Obligations classified as remote are neither provisioned nor disclosed.
Contingent assets are recognized
only when there are actual guarantees or definitive favorable court rulings, over which there are no more resources, characterizing
the gain as practically certain. Contingent assets, whose expectation of success is probable, are only disclosed in the financial
statements, when relevant.
Legal obligations arise from legal
proceedings, the object of which is its legality or constitutionality, which, independently of the assessment of the likelihood
of success, have their amounts fully recognized in the financial statements.
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k)
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Classification of insurance contracts and investments
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An insurance contract is a contract
in which the Organization accepts a significant insurance risk from the policy holder by agreeing to compensate the policyholder
if a specific, uncertain, future event adversely affects the policy holder. Reinsurance contracts are also treated as insurance
contracts because they transfer significant insurance risk. Contracts in the Insurance segment classified as investment contracts
are related to our capitalization bonds, which do not transfer significant insurance risk and are accounted for as financial liabilities
in accordance with IFRS 9 – Financial Instruments.
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l)
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Technical provisions for non-life, life, health and pension insurance
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Non-life insurance contracts include
mainly auto insurance, residential/business insurance and liability insurance whose main objective is to protect the insured's
assets through the payment of an indemnity in the event of an accident, subject to the contractual conditions of each contract.
The Provision for Unearned Premiums
(PPNG) is calculated on a daily pro-rata basis using premiums net of coinsurance premiums, including amounts ceded through reinsurance
operations, and the value registered in the consolidated statement of financial position corresponds to the unexpired risk period
of the insurance contracts. The portion of these reserves corresponding to the estimate for risks in effect but not yet issued
is designated PPNG-RVNE.
Provision for Claims Incurred But Not
Reported (IBNR) is constituted based on the claims incurred and not yet paid (IBNP), subtracting the balance of the Provision for
Claims to be Settled (PSL) at the reporting date. To calculate the IBNP, the final estimate of claims that have not yet been paid
based on semiannual run-off triangles, which consider the historical development of the claims paid in the last 10 six-month periods
for the product group of non-life, in order to establish a future projection by period of occurrence and also considers the estimate
of Claims Incurred But Not Enough Reported (IBNER), reflecting the expectation of alteration of the provisioned amount throughout
the settlement process.
The Provision for Claims to be Settled
(PSL) is determined based on the indemnity payment estimates, considering all administrative and judicial claims existing at the
reporting date, adjusted for inflation or other index, if applicable, net of salvage and payments expected to be received.
The Provision for Related Expenses (PDR)
is constituted to cover the expected expenses related to claims incurred and, for some contract types, yet to occur.
The Complementary Provision for Coverage
(PCC) shall be established when there is insufficiency of the technical provisions required under the legislation, as determined
in the Liability Adequacy Test (see Note 2(v) below). At the reporting date management did not identify the need for PCC on non-life
contracts.
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
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Notes to the Consolidated Financial Statements
Life insurance contracts include individual
and group contracts that aim to guarantee the payment of an indemnity to the insured or its beneficiaries, subject to the contractual
conditions and the contracted guarantees.
The Provision for Unearned Premiums
(PPNG) is calculated on a pro rata basis, based on the net premium for the assignment of coinsurance, corresponding to the period
of risk not arising from insurance contracts. The portion of this provision corresponding to the estimate for Risks in Effect but
Not Issued is recorded in the PPNG-RVNE.
The Mathematical Provision for Benefits
to be Granted (PMBaC) is calculated by the difference between the current value of future benefits and the current value of future
premiums, corresponding to future obligations assumed.
The Provision for Redemptions and other
Amounts to be Settled (PVR) comprises amounts related to redemptions to settle, premium refunds owed and portability (transfer-outs)
requested but not yet transferred to the recipient insurer.
The Provision for Claims Incurred But
Not Reported (IBNR) is calculated based on semiannual run-off triangles, which consider the historical development of claims paid
and outstanding in the last 10 six-month periods, to establish a future projection per period of occurrence. A residual tail study
is carried out to forecast the claims reported after 10 six-month periods of the date of occurrence.
The Provision for Claims to be Settled
(PSL) considers the expected amounts to be settled from all claim notifications received up to the end of the reporting period.
The provision covers administrative and judicial claims indexed to inflation and with interest in the event of judicial claims.
The Complementary Provision for Coverage
(PCC) refers to the amount necessary to complement technical reserves, as calculated through the liability adequacy test (LAT).
LAT is prepared using statistical and actuarial methods based on realistic considerations, taking into account the biometric table
BR-EMS of both genders, adjusted by longevity development criteria compatible with the latest published versions (improvement),
claims, administrative and operating expenses and using a risk free forward interest rate structures (ETTJ) which was prepared
by Fenaprevi and approved by SUSEP. The improvement rate is calculated from automatic updates of the biometric table, considering
the expected increase in future life expectancy.
The Technical Surplus Provision (PET)
corresponds to the difference between the value of the expected cost and the actual cost of claims that occurred during the period
for contracts of individual life insurance with rights to participate in technical surplus.
The Provision for Related Expenses (PDR)
is constituted to cover the expected expenses related to claims incurred and, for some contract types, yet to occur.
The health insurance contracts include
individual and group contracts that aim to guarantee the insured and beneficiaries medical care, outpatient services in a referenced
network or care according to the choice of the insured, subject to the contractual conditions.
The Unearned Premium/Payments Reserve
(PPCNG) is calculated on the currently effective contracts on a daily pro-rata basis based on the portion of health insurance premiums
corresponding to the remaining period of coverage.
The Mathematical Provision for Benefits
to be Granted (PMBaC) is calculated by the difference between the present value of the future benefits and the present value of
the future contributions,
34 IFRS – International Financial Reporting Standards – 2020
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Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
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Notes to the Consolidated Financial Statements
corresponding to the assumed obligations.
For health insurance, the Mathematical
Provision for Benefits to be Granted (PMBaC) is calculated accounting for a discount rate of 3.6% per annum (3.9% on December
31, 2019), the period over which holders are expected to remain in the plan up to their death, and the projected costs of the five-year-period
cover in which no premiums will be received.
For health insurance, the Mathematical
Provision for Benefits Granted (PMBC) is constituted by the obligations arising from the contractual clauses of remission of installments
in cash, regarding the coverage of health assistance and by the premiums through payment of insured persons participating in the
Bradesco Saúde insurance – “GBS Plan”, and considering a discount rate of 3.6% per annum (3.9%
on December 31, 2019).
The Provision for Claims Incurred but
Not Reported (IBNR) is calculated from the final estimate of claims that have already occurred and have not yet been reported,
based on monthly run-off triangles that consider the historical development of claims reported in the last 12 or 18 months for
health insurance, to establish a future projection by occurrence period.
For health insurance, the reserve for
events incurred but not reported in SUS (PEONA-SUS) is calculated from the estimate of the amount of events/claims originating
in the Unified Health System (SUS), which have occurred and which have not been forewarned. The amount is calculated and reported
monthly on the institutional website of the National Agency of Supplementary Health (ANS), its form of accounting being supported
by the Normative Resolution No. 442/18 in force.
The Provision for Claims to be Settled
(PSL) for health insurance, considers all claims received up to the reporting date, including all judicial claims and related costs
adjusted for inflation.
The other technical provisions (OTP)
for the individual health portfolio are constituted to cover differences between the expected present value of claims and related
future costs and the expected present value of future premiums, considering a discount rate of 3.6% per annum (3.9% on December
31, 2019).
Pension plans mainly include VGBL and
PGBL (linked fund products with options to convert into annuities at maturity) and traditional plans (guaranteed return investments
with options to convert to annuities at maturity).
The Provision for Unearned Premiums
(PPNG) is calculated on a daily pro-rata basis, using net premiums and is comprised of the portion corresponding to the remaining
period of coverage. The portion of these reserves corresponding to the estimate for risks in effect but not yet issued is designated
PPNG-RVNE.
The Mathematical Provision for Benefits
to be Granted (PMBaC) is constituted to the participants who have not yet received any benefit. In defined benefit pension plans,
the provision represents the difference between the present value of future benefits and the present value of future contributions,
corresponding to obligations assumed in the form of retirement, disability, pension and annuity plans. The provision is calculated
using methodologies and assumptions set forth in the actuarial technical notes.
In pension plans with variable contribution
characteristic, the Mathematical reserve for unvested benefits (PMBAC) represents the contributions received from participants,
net of costs and other contractual charges, plus the financial return generated through the investment of these amounts in units
of specially constituted investment funds (FIE).
The Provision for Redemptions and other
Amounts to be Settled (PVR) comprises amounts related to redemptions to settle, premium refunds owed and portability (transfer-outs)
requested but not yet transferred to the recipient insurer.
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
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Notes to the Consolidated Financial Statements
The Mathematical Provision for Benefits
Granted (PMBC) is recognized for participants already receiving benefits and corresponds to the present value of future obligations
related to the payment of those on-going benefits.
The Complementary Provision for Coverage
(PCC) refers to the amount necessary to complement technical reserves, as calculated through the Liability Adequacy Test (see Note
2(v)). LAT is prepared using statistical and actuarial methods based on realistic considerations, taking into account the biometric
table BR-EMS of both genders, adjusted by longevity development criteria compatible with the latest published versions (improvement),
claims, administrative and operating expenses and using a risk free forward interest rate structures (ETTJ) which was prepared
by Fenaprevi and approved by SUSEP. The improvement rate is calculated from automatic updates of the biometric table, considering
the expected increase in future life expectancy.
The Provision for Related Expenses (PDR)
is constituted to cover the expected expenses related to claims incurred and, for some contract types, yet to occur. The projections
are performed through the liability adequacy test (LAT).
The Provision for Financial Surplus
(PEF) corresponds to the financial result which exceeds the guaranteed minimum profitability transferred to contracts with a financial
surplus participation clause.
The Provision for Claims Incurred but
Not Reported (IBNR) is calculated based on semiannual run-off triangles, which consider the historical development of claims paid
and outstanding in the last 16 six-month periods to establish a future projection by period of occurrence.
The Provision for Claims to be Settled
(PSL) considers the expected amounts to be settled from all claim notifications received up to the end of the reporting period.
The provision covers administrative and judicial claims indexed to inflation and with interest in the event of judicial claims.
The provision “Other technical
provisions (OPT)” comprises part of the mathematical provisions of benefits to be granted and benefits granted transferred
to this accounting line, as required by SUSEP. This amount refers to the difference between the calculation of mathematical provisions,
carried out with realistic premises at the time, approved by the autarchy in 2004, and the calculation with the technical bases
defined in the technical notes of the product.
The financial charges credited to technical
provisions, and the recording and/or reversal of the financial surplus, are classified as financial expenses, and are presented
under “Net income from insurance and pension plans”.
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v.
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Liability
Adequacy Test (LAT)
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The Organization conducted the liability
adequacy test for all the contracts that meet the definition of an insurance contract according to IFRS 4 – Insurance Contracts
and which are in force on the date of execution of the test. This test is conducted every six months and the liability of insurance
contracts, gross of reinsurance, is calculated as the sum of the carrying amount, deducting the deferred acquisition costs and
the related intangibles. This is compared to the expected cash flows arising from the obligations under commercialized contracts
and certificates.
The test considerers projections of
claims and benefits that have occurred and are to occur, administrative expenses, allocable expenses related to the claims, intrinsic
options and financial surpluses, salvage and recoveries and other income and expense directly related to the insurance contracts.
To calculate the present value of projected
cash flows, the Organization used the risk free forward (ETTJ) rate which was prepared by SUSEP (Danos) and Fenaprevi (Vida
e Previdência) both approved by SUSEP.
36 IFRS – International Financial Reporting Standards – 2020
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Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
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Notes to the Consolidated Financial Statements
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•
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Life
Insurance and Pension Plans
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The contracts are grouped based on
similar risks or when the insurance risk is managed jointly by the Management. The projections follow the methodology and assumptions
described in the preceding paragraphs of this section.
The result of the liability adequacy
test (LAT) presented an insufficiency which was recognized in the Complementary Provision for Coverage (PCC), see Note 34.
The expected present value of cash
flows relating to claims incurred – primarily claims costs and salvage recoveries – was compared to the technical provisions
for claims incurred – PSL and IBNR.
The expected present value of cash
flows relating to claims to be incurred on the policies in force, plus any administrative expenses and other expenses relating
to products in run-off, was compared to the sum of the related technical provisions – PPNG and PPNG-RVNE.
The average projected loss ratio
was 44.11% and the average reinsurance projected in the study, calculated based on the reported claims, was 7.05%.
The result of the liability adequacy
test, for non-life insurance contracts, did not present insufficiency and, consequently, no additional PCC provisions were recorded.
Reinsurance contracts are used in
the normal course of operations with the purpose of limiting potential losses, by spreading risks. Liabilities relating to contracts
that have been reinsured are presented gross of their respective recoveries, which are booked as assets since the existence of
the reinsurance contract does not nullify the Organization’s obligations with the insured parties.
As required by the regulators, reinsurance
companies with headquarters abroad must have a minimum rating, assessed by a credit rating agency, to operate in the country, whereby
all other reinsurance operations must be performed with local reinsurers. In this way, impairment risks are reduced. If there are
indications that the amounts recorded will not be realized by its carrying amount, these assets will be adjusted for impairment.
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n)
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Deferred acquisition costs
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These comprise deferred acquisition
costs including commissions and brokers’ fees related to the sale of insurance policies. Deferred commissions are recognized
in the consolidated statement of income over the life of the respective policies and pension plan contracts or over an average
period of 12 months. Expenses relating to insurance agency operations relating to the sale of health plans are amortized over a
24 month period.
It also includes the deferred acquisition
costs relating to the exclusivity agreement with the retail network, for the marketing of extended warranty insurance for the initial
period of 12 years, with the extension of more than 4 years of contract, totaling 16 years.
Bradesco recognizes, prospectively
the surplus or deficit of its defined benefit plans and post-retirement plans as an asset or an obligation in its consolidated
statement of financial position, and recognizes the changes in the financial condition during the year in which the changes occurred,
in profit or loss.
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
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Notes to the Consolidated Financial Statements
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i.
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Defined
contribution plan
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Bradesco and its subsidiaries sponsor
pension plans for their employees and Management. Contribution obligations for defined contribution pension plans are recognized
as expenses in profit or loss as incurred. Once the contributions are paid, Bradesco, in the capacity of employer, has no obligation
to make any additional payment.
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ii.
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Defined
benefit plans
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The Organization’s net obligation,
in relation to the defined benefit plans, refers exclusively to institutions acquired and is calculated separately for each plan,
estimating the future defined benefit that the employees will be entitled to after leaving the Organization or at the time of retirement.
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 at its current value and is presented net of the
fair value of any plan assets.
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 accounting
rule.
Remeasurement of the net obligation,
which include: actuarial gains and losses, the return of the assets of the plan other than the expectation (excluding interest)
and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other comprehensive income.
Net interest and other expenses related
to defined benefit plans are recognized in the statement of income.
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iii.
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Termination
benefits
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Severance benefits are accrued when
the employment relationship is terminated by the Organization before the employee’s normal date of retirement or whenever
the employee accepts voluntary redundancy in return for such benefits.
Benefits which are payable 12 months
or more after the reporting date are discounted to their present value.
Benefits such as wages, salaries, social
security contributions, paid annual leave and paid sick leave, profit sharing and bonuses (if payable within 12 months of the reporting
date) and non-monetary benefits such as health care, etc. are recorded as expenses in the consolidated statement of income, without
any discount to present value, if the Organization has a present legal or constructive obligation to pay the amount as a result
of past service provided by the employee and the obligation can be reliably estimated.
The liability for capitalization
bonds is registered in the line “Other liabilities”. Financial liabilities and revenues from capitalization bonds are
recognized at the time bonds are issued.
The bonds are issued according to
the types of payments, monthly or in a single payment. Each bond has a nominal value, which is capitalized monthly by the Referential
Rate index - TR and by interest rates defined in the plan until the redemption or cancellation of the bond. Amounts payable are
recognized in the item “Other Liabilities – Capitalizations Bonds”.
Capitalization bond beneficiaries
are eligible for a prize draw. At the end of a certain period that is
38 IFRS – International Financial Reporting Standards – 2020
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Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
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Notes to the Consolidated Financial Statements
determined at the time the capitalization
bond is issued, a beneficiary may redeem the nominal value paid plus the referential rate (TR), even if they have not won in the
draw. These products are regulated by the insurance regulator in Brazil; however, they do not meet the definition of an insurance
contract in accordance with IFRS 4 and, therefore, are classified as financial liabilities.
Unclaimed amounts from “capitalization
plans” are derecognized when the obligation legally expires.
Expenses for placement of “capitalization
plans”, are recognized as they are incurred.
Income from financial assets measured
at amortized cost and at FVOCI, except instruments of equity and interest costs from liabilities classified at amortized cost are
recognized on an accrual basis in the consolidated statement of income using the effective interest rate method. The effective
interest rate is the rate that discounts estimated future cash payments and receipts throughout the expected life of the financial
asset or liability (or, when appropriate, a shorter period) to the carrying amount of the financial asset or liability. When calculating
the effective rate, the Organization estimates future cash flows considering all contractual terms of the financial instrument,
but not future credit losses.
The calculation of the effective
interest rate includes all commissions, transaction costs, discounts or bonuses which are an integral part of such rate. Transaction
costs are incremental costs directly attributable to the acquisition, issuance or disposal of a financial asset or liability.
Fees and commission income and expense
which are part of and are directly allocable to the effective interest rate on a financial asset or liability are included in the
calculation of the effective interest rate.
Other fee and commission income,
substantially composed by account service fees, asset management fees, credit card annual charges, and collection and consortium
fees are recognized, according to the requirements of IFRS 15 - Revenue from Contracts with Customers, to the extent that the obligations
of performance are fulfilled. The price is allocated to the provision of the monthly service, and the revenue is recognized in
the result in the same manner. When a loan commitment is not expected to result in the drawdown of a loan, the related commitment
fees are recognized on a straight-line basis over the commitment period. Other fees and commissions expense relate mainly to transaction
as the services are received.
Insurance and coinsurance premiums,
net of premiums transferred through coinsurance and reinsurance and related commissions are recognized as income upon issuance
of the respective policies/certificates/endorsements and invoices or at the beginning of the risk period for cases in which the
cover begins before issue date, and accounted for on a straight-line basis, over the duration of the policies, through the upfront
recognition and subsequent reversal of the provision for unearned premiums and the deferred acquisition costs. Income from premiums
and the acquisition costs related to risks already assumed whose respective policies have not yet been issued are recognized in
the consolidated statement of income at the start of the risk coverage period on an estimated basis.
The health insurance premiums are
recorded in the premium account (result) or Unearned Premium or Contribution Provision (PPCNG), according to the coverage period
of the contracts in effect at the balance sheet date.
Revenues and expenses related to
“DPVAT” insurance operations are recorded on the basis of information received from the Seguradora Líder dos
Consórcios do Seguro DPVAT S.A.
Accepted co-insurance contracts
and retrocession operations are recorded on the basis of information received from the lead co-insurer and IRB – Brasil Resseguros
S.A. (IRB), respectively.
Reinsurance operations are recorded
based on the provision of accounts, which are subject to review
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
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Notes to the Consolidated Financial Statements
by reinsurers. The deferral of
these operations is carried out in a manner consistent with the related insurance premium and/or reinsurance contract.
The acquisition costs relating to
the commission of insurance are deferred and adapted to the result in proportion to the recognition of the earned premium.
The receipts from insurance agency
operations are deferred and recognized in income linearly, for a period of 24 months in health insurance operations and by the
term of 12 months in the other operations.
Contributions to pension plans and
life insurance premiums with survivor coverage are recognized in income upon their effective receipt.
The management fee income is appropriated
to the income on an accrual basis, according to contractually established rates.
Financial revenues include interest
income on assets of the funds invested (including financial assets available for sale), income from dividends, gains from the disposal
of financial assets available for sale, changes in the fair value of financial assets measured at fair value through profit or
loss, accrued income in the calculation of the cost value of securities held to maturity and reclassifications of gains previously
recognized in other comprehensive income. The income from interest is recognized in the results through the effective interest
method.
Financial expenses cover losses
in the disposal of assets available for sale, changes in the fair value of financial assets measured at fair value through profit
or loss, losses by impairment recognized in the financial assets (except receivables).
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t)
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Income tax and social contribution
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Income taxes in Brazil consist of
Company Income Tax (IRPJ) and Social Contribution on Profit (CSLL).
The provision for income tax is
calculated at 15% of taxable income plus a 10% surcharge. For financial companies, financial company equivalent and of the insurance
industry, the social contribution on profit was calculated until August 2015, considering the rate of 15%. For the period between
September 2015 and December 2018, the rate was changed to 20%, according to Law No. 13,169/15, and returned to the rate of 15%
as from January 2019. In November 2019 the Constitutional Amendment No. 103 was promulgated, which establishes in article 32, the
increase in the rate of the social contribution on profit of “Banks” from 15% to 20%, with effect from March 2020.
For the other companies, the social contribution is calculated considering the rate of 9%.
Income tax and social contribution
expense comprises current and deferred tax. Current and deferred tax are recorded in the consolidated statement of income except
when the result of a transaction is recognized directly in equity, in which case the related tax effect is also recorded in equity
or in other comprehensive income.
Current tax assets are amounts of
taxes to be recovered through restitution or offset with taxes due from excess of taxes paid in relation to the current and/or
previous period.
Current tax expenses are the expected
amounts payable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date,
and any adjustment to tax payable in respect of previous years.
Income tax and social contribution
deferred tax assets, calculated on carry-forward income tax losses, carry-forward social contribution losses and temporary differences,
are recorded in “Assets – Deferred Taxes” and the deferred tax liabilities on tax differences in lease depreciation
(applicable only for income tax), fair value adjustments on securities, restatement of judicial deposits, among others, are recorded
in “Liabilities – Deferred Taxes”. All deferred tax liabilities are recognized.
40 IFRS – International Financial Reporting Standards – 2020
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Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
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Notes to the Consolidated Financial Statements
Deferred tax assets on temporary
differences are realized when the difference between the accounting treatment and the tax treatment reverses. Deferred tax assets
on carry-forward 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. A deferred tax asset is recognized to the extent that it is probable that future taxable
profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date based on
current expectations of realization considering technical studies and analyses carried out by Management and are reduced to the
extent that it is no longer probable that the related tax benefit will be realized.
Deferred tax is recognized in respect
of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amount used
for taxation purposes. Deferred tax is not recognized for:
|
·
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temporary differences
on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither
accounting nor taxable profit or loss;
|
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·
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temporary differences
related to investments in subsidiaries, associates and jointly controlled entities to the extent that it is probable that they
will not reverse in the foreseeable future; and
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|
·
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taxable temporary differences
arising on the initial recognition of goodwill.
|
Deferred tax is measured at the
tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted
or substantively enacted by the reporting date.
The Organization assesses its uncertain
tax positions and considers whether it is probable that additional taxes and interest may be due. The Organization believes that
its provisions for tax liabilities are adequate for all open fiscal years, based on its assessment of several factors, including
interpretations of tax legislation and previous experience. This assessment are based on estimates and assumptions and may involve
judgments about future events. New information may be made available that will lead the Organization to change its judgment regarding
the adequacy of existing tax obligations, such changes in tax obligations will impact tax expense in the period in which such determination
is made.
Deferred tax assets and liabilities
are offset, if there is a legal right to offset current tax liabilities and assets, and they relate to income taxes levied by the
same tax authority on the same entity subject to taxation or on different tax entities, but they intend to settle current tax assets
and liabilities on a net basis or their assets and liabilities will be realized simultaneously.
A deferred income tax and social
contribution asset is recognized for unused tax losses, tax credits and deductible temporary differences when it is probable that
future taxable profits will be available and against which they will be used. Deferred income tax and social contribution assets
are reviewed at each reporting date and are reduced to the extent that their realization is no longer probable.
Information for operating segments
is consistent with the internal reports provided to the Executive Officers (being the Chief Operating Decision Makers), which are
comprised by the Chief Executive Officer, Executive Vice-Presidents, Managing Officers and Deputy Officers. The Organization operates
mainly in the banking and insurance segments. The banking operations include operations in retail, middle market and corporate
activities, lease, international bank operations, investment banking and private banking. The Organization’s banking activities
are performed through its own branches located throughout the country, in branches abroad and through subsidiaries, as well as
by means of our shareholding interest in other companies. The insurance segment consists of insurance operations, supplementary
pension plans and capitalization plans which are undertaken through a subsidiary, Bradesco Seguros S.A., and its subsidiaries.
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
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Notes to the Consolidated Financial Statements
Preferred shares have no voting
rights, but have priority over common shares in reimbursement of capital, in the event of liquidation, up to the amount of the
capital represented by such preferred shares, and the right to receive a minimum dividend per share that is ten percent (10%) higher
than the dividend distributed per share to the holders of common shares.
Incremental costs directly attributable
to the issuance of shares are shown net of taxes in shareholders’ equity, thus reducing the initial share value.
The Organization presents basic and
diluted earnings per share data. Basic earnings per share is calculated by allocating the net income attributable to shareholders
between that attributable to common shareholders and that attributable to preferred shareholders and dividing this by the weighted
average number of common and preferred shares, respectively, outstanding during the year, excluding the average number of shares
purchased by the Organization and held as treasury shares. Diluted earnings per share are the same as basic earnings per share,
as there are no potentially dilutive instruments.
Dividends
on shares are paid and provisioned during the year. In the Shareholders’ Meeting are approved at least the equivalent of
30% of the annual adjusted net income, in accordance with the Company’s Bylaws.
Dividends approved and declared after the reporting date of the
financial statements, are disclosed in the notes as subsequent events.
Capital transactions are transactions
between shareholders. These transactions modify the equity held by the controlling shareholder in a subsidiary. If there is no
loss of control, the difference between the amount paid and the fair value of the transaction is recognized directly in the shareholders’
equity.
3) Risk
Management
The risk management activity is highly
strategic due to the increasing complexity of products and services and the globalization of the Organization's business. The dynamism
of the markets leads the Organization to constantly seek to improve this activity.
Covid-19 Pandemic
Bradesco, due to the serious pandemic
scenario caused by Covid-19, which brought several adverse effects on people's lives and business, remains focused on supporting
its customers and employees. Despite this adverse scenario, some learnings were incorporated into our operations, for example,
how to relate to our supplier customers and the intensification of the Organization's home office. With these advances, Bradesco,
through the Collective Labor Agreement carried out with the Banking Union Movement at the national level, was the first large bank
to assume the commitment to adopt remote work after the pandemic.
Bradesco's Crisis Committee, formed
by the Chief Executive Officer, all Vice-Presidents and the CRO (Chief Risk Officer), is evaluating the scenario of pandemic and
reporting to the Board of Directors about the assessments of the evolution of the pandemic and its impact on our operations and
society. In addition, we have a Risk Committee, which plays an important role in verifying various points and the scope of these
actions in the Organization. The Organization has triggered the Business Continuity Plan (PCN), intensified internal and external
actions, adopted the rotation of employees from the branch
42 IFRS – International Financial Reporting Standards – 2020
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Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
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Notes to the Consolidated Financial Statements
network and throughout the pandemic
period, optimization opportunities were identified due to the migration to remote work, prevailing a mentality focused on the digital
environment in a consistent and timely manner, with the aim of minimizing the impacts involved.
The Organization adjusted Bradesco's
governance and policies to the current situation.
• Credit Policies: In
relation to Bradesco’s credit policies, the main focus prevails in supporting the customers, with the assessment of the risks
assumed. The Organization mapped the exposure to the most fragile sectors and companies and maintains a constant line of communication
with companies throughout the relationship. The Organization maintained active credit recovery teams and focused on finding solutions
for customers who need them. The Organization have incorporated new risk variables into the credit models in the current scenario,
in order to correctly assess the situation;
• Capital and Liquidity:
The Organization maintained its regulatory capital above the required amounts and a margin of adequate liquidity to meet customer
needs, as well as business sustainability. In addition, the measures implemented by the Central Bank in 2020 (mainly in the second
and third quarters) further favored the system's liquidity and solvency;
• Risk Governance: The
Organization has constantly monitored and adjusted the operational limits and risk appetite, promoting the review and timely adaptation
of scenarios in the current context. In addition to the internal monitoring activities, a follow-up with the Organization's relevant
suppliers was implemented to ensure that the continuity strategy adopted by the companies, in fact, corresponded to the needs of
the processes, to maintain the deliveries to customers.
Scope of Risk Management
The Organization risk management
scope works with a wide view of the Economic Financial Consolidated risks. The Corporate Process of Risk Management, based on those
guidelines, develop its activities, whose approach is based on three lines of defense:
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·
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First line of defense,
represented by the business areas and areas of support, responsible for identifying, assessing, reporting and managing the inherent
risks as part of the day-to-day activities. In addition, they are responsible for the execution of controls, in response to the
risks, and/or for the definition and implementation of action plans to ensure the effectiveness of the internal control environment,
while keeping risks within acceptable levels;
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·
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Second line of defense,
represented by the areas of supervision, responsible for establishing policies and procedures of risk management and compliance
for the development and/or monitoring of controls in the first line of defense. In this line, we highlight the Departments of Integrated
Risk Control, Compliance, Conduct and Ethics, Legal, and Corporate Security, among others;
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·
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Third line of defense,
represented by the General Inspectorate Department (Internal Audit), which is responsible for assessing independently the effectiveness
of the risk management and internal controls, including the form by which the first and second lines of defense accomplish their
goals, reporting the results of their work to the Board of Directors, the Audit Committee, Fiscal Council and senior management.
|
Risk Appetite Statement (RAS)
The risk appetite refers to the types
and levels of risks that the Organization is willing to accept in the conduct of its business and purposes. The Risk Appetite Statement
– RAS is an important instrument that summarizes the risk culture of the Organization.
At the same time, RAS emphasizes
the existence of an efficient process of assignments in the operational risk management and in the performance of control functions,
as well as for mitigation and disciplinary actions and processes of scheduling and reporting to Senior Management upon breach of
the risk limits or control processes established.
The Risk Appetite Statement is reviewed
on annual basis1, or whenever necessary, by the Board of
1 The
Risk Committee, in relation to the RAS, has the following attributions: to assess the risk appetite levels set out in the Risk
Appetite Statement (RAS) and the strategies for its management, taking risks into account individually and in an integrated manner;
and b) to supervise compliance, by the institution’s Board of Executive Officers, with the terms of the RAS.
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
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Notes to the Consolidated Financial Statements
Directors and permanently monitored
by forums of the Senior Management and business and control areas.
RAS reinforces the dissemination
of the risk culture by disclosing the main aspects of risk appetite of the Organization to all its members.
For the many types of risks, whether
measurable or not, the Organization established control approaches, observing the main global dimensions:
Capital: the Organization
seeks to maintain, permanently, a solid capital base to support the development of activities and cope with the risks incurred
(in normal situations or of stress), as well as to support any losses arising from non-measurable risks and make possible strategic
acquisitions. To meet this goal, capital buffers were established, which are part of the framework of risk appetite, which are
defined and approved by the Board of Directors.
The Organization has established
that the Indexes of Basel, Level I, of Common Equity and Leverage Ratio should correspond at least to the regulatory cap, plus
the current Equity buffer. In the same sense, Grupo Bradesco Seguros (GBS) must maintain the minimum Solvency Index above the regulatory
framework, in the consolidated view, according to the buffers defined.
Liquidity: the Organization
aims to effectively comply with its obligations through diversified and low cost sources of funding to provide a cash structure
compatible with the size of its obligations; thus, ensuring survival even in adverse scenarios without affecting its daily operations
and incurring significant losses.
For this dimension, indicators were
established for short- and long-term monitoring. The Short-Term Liquidity Coverage Ratio (LCR) corresponds to the ratio between
the stock of High-Quality Liquidity Assets (HQLA) and the total number of outflows of cash, calculated according to the standardized
stress by the Central Bank of Brazil. Now the Indicator of Long-Term Liquidity – NSFR (Net Stable Funding Ratio) corresponds
to the ratio between the stable funding available and the stable funding necessary. For Grupo Bradesco Seguros, the control of
liquidity risk consists in the sizing of the Minimum Reserve of Liquidity (RML), represented by the amount of resources needed
to settle the obligations in situations of stress during the period of turbulence (30 days) and their relation with the Cash Available,
which is composed predominantly by high-quality net assets.
Profitability: the Organization
prioritizes diligence for the sustainable growth of its business and results and for the adequate remuneration of its equity, seeking
to cover the remuneration expectation of its shareholders in relation to the risks assumed in their business.
The Organization periodically monitors
key performance indicators of the results by line of business, segments and products. On the basis of these monitoring, analyses,
projections and studies are made in order to inform the business areas and Senior Management about the individual and consolidated
results, thus allowing conscious decision making and strategic reviews.
Loan: the Organization focus
on domestic customers, on diversified and dispersed manner, in terms of products and segments, aiming at the security and quality
of the portfolio, with guarantees consistent with the risks assumed, considering the amounts, purposes and terms of loans granted,
maintaining proper levels of provisions and concentrations.
The monitoring of credit risk is
accomplished through continuous monitoring of portfolios and exhibitions, with assessment of the evolution of their volumes, delinquency,
provisioning, studies of harvests, and equity, among others. Additionally, the Organization has a structured process of governance
of limits of liability for approval of credit operations and recovery.
In relation to the risk appetite,
metrics were defined to monitor the concentration limits of operations for the Economic Group, Sector and Transfer (concentration
per country). In addition to the indicators of concentration, a specific indicator was established for the level of delinquencies
above 90 days for Individuals (PF), an indicator of Margin of Economic Capital of Credit Risk, in order to monitor and track the
capital in the economic and regulatory visions, and an indicator of the percentage of Troubled Assets.
44 IFRS – International Financial Reporting Standards – 2020
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Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
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Notes to the Consolidated Financial Statements
Market: the Organization
aims to align the exposures to the strategic guidelines, with specific limits established on independent basis and with risks mapped,
measured and classified as to the probability and magnitude.
The Organization monitors and controls
the possibility of financial losses due to fluctuating prices and interest rates of the financial instruments, as its asset and
liability portfolios may have mismatched maturities, currencies and indexes. Considering the dynamics of this type of risk and
the characteristics of each investment portfolio, various limits of risks and results were established.
For
the Trading portfolio the indicators of Value at Risk (VaR), Stress Scenarios for a month and of Monthly and Quarterly Result are
part of the risk appetite. For the Banking portfolio, the DEVE
Internal Model, DEVE Outlier
Test, DNII Internal Model
and the Evolution of the Positions Evaluated at Market Value are monitored. Now for Grupo Bradesco Seguros, the indicators are
the VaR for variable income and the interest rate risk (EVE).
Operational: the Organization
aims to provide assurance with regard to appropriately carrying out its business in accordance with laws regulations and policies,
ensuring that processes are covered by efficient controls.
In view of the wide range of products
and services offered, as well as the significant volume of activities and operations made, the Organization can incur operating
losses resulting from flaws, deficiency or inadequacy of internal processes, people and systems, or from external events.
In this sense, in the context of
the Prudential Conglomerate, the Organization established limits of appetite and tolerance for operating losses, which are monitored
on a monthly basis. Additionally, an indicator for monitoring the availability of the main channels of customer service and systems
has been defined, aiming to provide continuous readiness in the customer service.
Reputation: the Organization
monitors its reputation as perceived by customers, employees, regulatory authority, investors and the market in general, aiming
to ensure the timely identification and assessment of potential sources of this risk and act preventively to mitigate them.
The control of reputation risk aims
to ensure that the Organization evaluates and monitors the perception of various stakeholders in order to identify potential sources
of risk in reputation and act in a timely manner to mitigate it.
The control of this risk is performed
by means of a Consolidated Index of Reputation, which is subdivided into dimensions under which it is possible to determine the
reputation of the Organization as perceived by customers, employees, regulatory authority, investors and the market in general.
Model: the Organization uses
models to support the decision-making, preparation of financial reports and regulations, and to provide predictive information
in several areas of the business. In this context, the Organization recognizes the existence of the risk associated with the use
of the models and importance of its management process.
The Organization carries out the
management and control of the model risk by means of assessment, inventory and classification of relevance and model risk, backed
by processes of governance.
Qualitative Risk: in addition
to the risks described above, the Organization is exposed to the risks of Third Party, Strategy, Socio-environmental, Underwriting,
Cyber and Compliance. These risks are managed by means of processes and a governance structure that is composed of Departmental
Committees, executive committees and Senior Management. The management of these risks has the backing of policies, standards and
procedures that contribute to their proper management and control.
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
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Notes to the Consolidated Financial Statements
Risk and Capital Management Structures
Risk and capital management structures
also comprise various committees, commissions and departments that support the Board of Directors, the Chief Executive Officer,
the Chief Risk Officer and the Board of Executive Officers of the Organization in decision-making.
The Organization has the Integrated
Risk and Capital Allocation Management Committee – COGIRAC, whose duty is advise the Board of Directors in performing its
duties, related to the management policy and to the risk exposure limits policy, and assure, within the scope of the Organization,
the fulfillment of the processes, policies, related rules, and regulations and laws applicable to the Organization.
COGIRAC are supported by the following
executive committees: a) Risk Monitoring, b) Risk Management, c) PLDFT/Sanctions and Information Security/Cyber Executive Committee
and d) Risk Management, Actuarial Control and Compliance of Bradesco Seguros. In addition, it also is supported by the Products
and Services Executive Committee and the executive committees in business areas, which, among other duties, suggest exposure thresholds
for their respective risks and prepare mitigation plans to be submitted to COGIRAC and to the Board of Directors.
In the governance structure it is
also notable the Risk Committee, whose main purpose is to assess the structure of the Organization’s risk management and
occasionally propose improvements.
COGIRAC
and the Risk Committee advise the Board of Directors in the performance of its assignments related to the management and control
of risks, capital, internal controls and compliance.
In this structure, the Integrated
Risk Control Department (DCIR), whose mission is to promote and to implement risk control and capital allocation through robust
practices and certification of existence, execution and effectiveness of controls which assure acceptable risk levels in the Organization’s
processes, independently, consistently, on a transparent and integrated manner stands out. This Department is also responsible
for complying with the Central Bank of Brazil rules for risk management activities.
Stress Test Program
The risk management structure has
a stress test program defined as a coordinated set of processes and routines, containing own methodologies, documentation and governance,
whose principal purpose is to identify potential vulnerabilities of the institution. Stress tests are exercises of prospective
evaluation of the potential impacts of adverse events and circumstances on capital, on liquidity or on the value of a portfolio
of the Organization.
In the Program of Stress Tests, the
scenarios are designed by the Department of Research and Economic Studies – DEPEC and discussed with the Business areas,
DCIR, Department of Controllership, among other areas. Stress testing results are discussed and approved in a specific Departmental
Commission. Subsequently, they are submitted to the COGIRAC and Board of Directors, that, in addition to the scenarios and results
of stress tests are also responsible for the approval of the program and guidelines to be followed.
Stress tests are used as a tool for
managing risks: in its identification, measurement, evaluation, monitoring, control and mitigation of risks of the institution.
The results of stress tests are used for evaluation of capital and liquidity levels of the institution, for preparation of the
respective contingency plans, for evaluation of the capital adequacy and for the recovery plan. Similarly, the results are considered
in the decisions related to strategic guidelines, definition of the levels and limits of risk appetite applied to the management
of risks and capital, as well as in the definition of governance actions aimed at mitigation of risks identified by aligning them
to the risk appetite of the Organization.
46 IFRS – International Financial Reporting Standards – 2020
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Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
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Notes to the Consolidated Financial Statements
Capital Management Corporate
Process
The Capital Management provides
the conditions required to meet the Organization’s strategic goals to support the risks inherent to its activities. In this
way, it adopts a forward-looking stance when elaborating its capital plan, anticipating the need for capital for the next three
(3) years, as well as establishing procedures and contingency actions to be considered in adverse scenarios.
The Organization manages capital
in line with the strategic guidelines, involving the control and business areas, in accordance with the guidelines of the Board
of Executive Officers and Board of Directors. The structure of Capital Management Governance, Internal Capital Adequacy Assessment
Process (ICAAP) and Recovery Plan is composed by Commissions, Committees and its highest-level body is the Board of Directors.
The Controllership Department ensures
compliance with the stipulations of the Central Bank of Brazil pertaining to capital management activities and assistance to the
Senior Management by providing analyses and projections of capital requirements and availability, identifying threats and opportunities
that help plan the sufficiency and optimization of capital levels.
The Organization also has a Recovery
Plan, delivered to the Central Bank of Brazil in December of each year and approved by the Board of Directors in accordance with
CMN Resolution No. 4,502, of June 30, 2016, establishing procedures for the preparation of recovery plans, in order to maintain
adequate levels of capital and liquidity in situations of severe stress in financial institutions considered systemically important.
Reference Equity Adequacy
The Reference Equity (RE) adequacy
is verified daily to ensure that the Organization maintains a solid capital base in normal situations or in extreme market conditions
and complying with regulatory requirements.
The objective of the Central Bank
of Brazil is that the financial institutions permanently maintain capital and additional Reference Equity Tier I (Conservation,
Systemic and Countercyclical) compatible with the risks from their activities. The risks are represented by Risk-Weighted Assets
(RWA), which is calculated based on, at least, the sum of credit, market and operational risk components.
Additionally, the Organization must
maintain enough RE to meet the interest rate risk from operations not included in the trading portfolio (Banking Portfolio’s
interest rate risk).
Capital Sufficiency
The capital management process is
aligned with the strategic planning and is forward looking, anticipating any changes in the economic and commercial environment
conditions in which the Organization operates.
The Organization’s capital
management aims at permanently ensuring a sound capital composition to support the development of its activities and to ensure
adequate coverage of risks incurred. The Organization maintains a managerial capital margin (buffer), which is added to the minimum
regulatory requirements.
The management buffer is defined
according to the market practices and the regulatory requirements, observing aspects such as additional impacts generated by stress
scenarios, qualitative risks and risks not captured by the regulatory model.
The Organization’s regulatory
capital sufficiency is monitored by periodically calculating the Basel Ratio, Tier I Ratio and Common Equity Ratio.
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
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Notes to the Consolidated Financial Statements
Capital Forecast
The capital management area is responsible
for making simulations and projections of the Organization’s capital, in accordance with the strategic guidelines, the impacts
arising from variations and trends of the economic and business environment as well as regulatory changes. The results from the
projections are submitted to the Senior Management, pursuant to the governance established.
The projections for the next three
years have adequate levels of Capital Ratios, considering the incorporation of net income and the evolution of the need for capital.
Analysis of Reference Equity
(RE), Capital Ratios and Liquidity
The following table presents the
main metrics established by prudential regulation, such as regulatory capital, leverage ratio and liquidity indicators:
Calculation basis - Basel Ratio
|
R$ thousand
|
Basel III
|
On December 31
|
2020
|
2019
|
Prudential
|
Regulatory capital - values
|
|
|
Common equity
|
108,982,064
|
91,271,701
|
Level I
|
118,281,835
|
100,831,668
|
Reference Equity - RE
|
135,723,674
|
125,275,405
|
Excess of resources invested in permanent assets
|
-
|
-
|
RE Highlight
|
-
|
-
|
Risk-weighted assets (RWA) - amounts
|
|
|
Total RWA
|
858,692,912
|
759,051,325
|
Regulatory capital as a proportion of RWA
|
|
|
Index of Common equity - ICP
|
12.7%
|
12.0%
|
Level 1 Index
|
13.8%
|
13.3%
|
Basel Ratio
|
15.8%
|
16.5%
|
Additional Principal Capital (ACP) as a proportion of RWA
|
|
|
Additional Principal Capital Conservation - ACPConservation (1)
|
1.25%
|
2.50%
|
Additional Contracyclic Principal Capital - ACPContracyclic
|
0.00%
|
0.00%
|
Additional Systemic Importance of Principal Capital - Systemic ACPS
|
1.00%
|
1.00%
|
Total ACP
|
2.25%
|
3.50%
|
Excess Margin of Principal Capital
|
5.94%
|
4.02%
|
Leverage Ratio (AR)
|
|
|
Total exposure
|
1,436,809,012
|
1,228,715,207
|
AR
|
8.2%
|
8.2%
|
Short Term Liquidity Indicator (LCR)
|
|
|
Total High Quality Liquid Assets (HQLA)
|
244,827,538
|
112,872,809
|
Total net cash outflow
|
137,247,662
|
78,493,191
|
LCR
|
178.4%
|
143.8%
|
Long Term Liquidity Indicator (NSFR)
|
|
|
Available stable funding (ASF)
|
744,316,530
|
635,623,931
|
Stable resources required (RSF)
|
618,540,418
|
551,731,471
|
NSFR
|
120.3%
|
115.2%
|
(1) CMN Resolution No. 4,783/20, from April
2020, establishes the reduction of the Common Equity Additional for Conservation (ACPConservação) from 2.5% to 1.25%,
for the term of one year and after this period, the requirement will gradually be restored until March 31, 2022 to the level of
2.5%.
48 IFRS – International Financial Reporting Standards – 2020
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Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
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Notes to the Consolidated Financial Statements
Breakdown of Risk-Weighted Assets
(RWA)
The following table presents information
on the amount of RWA used to determine the minimum RE requirement, as established in art. 4 of CMN Resolution No. 4,193/13:
RWA
|
R$ thousand
|
|
RWA
|
Minimum RE requirement (3)
|
|
On December 31, 2020
|
On December 31, 2019
|
On December 31, 2020
|
On December 31, 2019
|
|
|
Credit Risk - treatment using a standardized approach
|
779,588,539
|
680,907,696
|
62,367,083
|
54,472,614
|
|
Credit risk in the strict sense (1)
|
642,582,738
|
596,741,812
|
51,406,619
|
47,739,345
|
|
Counterparty credit risk (CCR)
|
35,625,687
|
24,919,371
|
2,850,055
|
1,993,549
|
|
- Of which: through standardized approach to counterparty credit risk (SA-CCR)
|
23,851,517
|
15,295,904
|
1,908,121
|
1,223,672
|
|
- Of which: using the EMC approach
|
-
|
-
|
-
|
-
|
|
- Of which: using other approaches
|
11,774,170
|
9,623,467
|
941,934
|
769,877
|
|
Increase related to the adjustment associated with the variation in the value of derivatives due to the variation in the credit quality of the counterparty (CVA)
|
14,687,826
|
6,519,630
|
1,175,026
|
521,570
|
|
Unconsolidated fund shares - underlying assets identified
|
3,960,234
|
5,217,631
|
316,819
|
417,410
|
|
Unconsolidated fund shares - underlying assets inferred according to fund regulations
|
-
|
-
|
-
|
-
|
|
Unconsolidated fund shares - unidentified underlying assets
|
-
|
3,989,766
|
-
|
319,181
|
|
Securitization exposures - requirement calculated using standardized approach
|
2,791,550
|
2,173,417
|
223,324
|
173,873
|
|
Values referring to exposures not deducted in the calculation of PR (2)
|
79,940,504
|
41,346,069
|
6,395,240
|
3,307,686
|
|
Market Risk (3)
|
14,690,553
|
13,571,488
|
1,175,244
|
1,085,719
|
|
- Of which: requirement calculated using standardized approach (RWAMPAD)
|
8,805,006
|
16,029,113
|
704,400
|
1,282,329
|
|
- Of which: requirement calculated using internal model (RWAMINT)
|
14,690,553
|
13,571,488
|
1,175,244
|
1,085,719
|
|
Operational Risk
|
64,413,820
|
64,572,141
|
5,153,106
|
5,165,771
|
|
Total
|
858,692,912
|
759,051,325
|
68,695,433
|
60,724,104
|
|
(1) It does not include Counterparty Credit Risk
operations;
(2) As defined in Resolution No. 4,192/13, 3,
art. 4; and
(3) Composed of a maximum of 80% of the standardized
model (RWAMPAD) and internal model (RWAMINT), according to Circular No. 3,646 and No. 3,674.
Credit risk refers to the possibility
of losses associated with the borrower’s or counterparty’s failure to comply with their financial obligations under
the terms agreed, as well as the fall in value of loan agreements resulting from deterioration in the borrower’s risk rating,
the reduction in gains or remunerations, benefits granted to borrowers in renegotiations, recovery costs and other costs related
to the counterparty’s noncompliance with the financial obligations. Additionally, it includes the concentration risk and
the country/transfer risk.
Credit risk management in the Organization
is a continuous and evolving process of mapping, development, assessment and diagnosis through the use of models, instruments and
procedures that require a high degree of discipline and control during the analysis of transactions in order to preserve the integrity
and autonomy of the processes.
The Organization controls the exposure
to credit risk which comprises mainly loans and advances, loan commitments, financial guarantees provided, securities and derivatives.
With the objective of not compromising
the quality of the portfolio, all aspects inherent to credit concession, concentration, guarantee requirements and terms, among
others, are observed.
The Organization continuously maps
all the activities that could possibly generate exposure to credit risk, classifying them by their probability and magnitude, identifying
their managers and mitigation plans.
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
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Notes to the Consolidated Financial Statements
Counterparty Credit Risk
The counterparty credit risk to
which the Organization is exposed includes the possibility of losses due to the non-compliance by counterparties with their obligations
relating to the settlement of financial asset trades, including the settlement of derivative financial instruments. Counterparty
credit risk also includes the risk related to a downgrade in the counterparty’s credit standing.
The Organization exercises complete
control over its net position (the difference between purchase and sale agreements) and potential future exposures from operations
where there is counterparty risk. Each counterparty’s exposure to risk is treated in the same way and is part of general
credit limits granted by the Organization’s to its customers.
In short, the Counterparty Credit
Risk management covers the modeling and monitoring (i) of the consumption of the credit limit of the counterparties, (ii) of the
portion of the adjustment at fair value of the portfolio of credit derivatives (CTF – Credit Value Adjustment) and (iii)
of the respective regulatory and economic capital. The methodology adopted by the Organization establishes that the credit exposure
of the portfolio to certain counterparty can be calculated based on the Replacement Cost (RC) of its operations in different scenarios
of the financial market, which is possible through the Monte Carlo simulation process.
In the context of risk management,
the Organization performs the calculation of economic capital for credit risk, in order to contemplate the portfolio of derivatives
that is consolidated by the counterpart both for the definition of the EAD (Exposure At Default) and the CVA (Credit Value Adjustment).
Also in this context, the Organization
conducts studies of projection of capital, for example of the Stress Test of the ICAAP (Evaluation of Capital Adequacy) and TEBU
(Bottom-Up Stress Test). These are multidisciplinary programs involving minimally the areas of Business and Economic Departments,
of Budget/Result and Risk.
Regarding the forms of mitigating
the counterparty credit risk that the Organization is exposed to, the most usual is the composition of guarantees as margin deposits
and disposal of public securities, which are made by the counterparty with the Organization or with other trustees, whose counterparty’s
risks are also appropriately evaluated.
Additionally, from June 2019, the
calculation of the value of the exposure relating to credit risk of the counterpart arising from operations with derivative instruments
subject to the calculation of the capital requirement through the standardized approach (RWACPAD) has been updated following
the Central Bank of Brazil’s Circular No. 3,904/18.
Credit-Risk Management Process
The credit risk management process
is conducted in a corporation-wide manner. This process involves several areas with specific duties, ensuring an efficient structure.
Credit risk measurement and control are conducted in a centralized and independent manner.
Both the governance process and
limits are validated by the Integrated Risk and Capital Allocation Management Committee, submitted for approval by the Board of
Directors, and reviewed at least once a year.
The structure of credit risk management
is part of the second line of defense of the Organization, several areas actively participate in improving the client risk rating
models.
This structure continuously reviews
the internal processes, including the roles and responsibilities and it training and requirements, as well as conducts periodical
reviews of risk evaluation processes to incorporate new practices and methodologies.
50 IFRS – International Financial Reporting Standards – 2020
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|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
Credit Concession
The variety of business models allows
direct and convenient channels customer services in the various regions of Brazil. The segments strategies corroborate, both for
Individuals and Companies, to a good customer relationship and to the assertive offer of products and services.
The Organization’ strategy
is to maintain a wide client base and a diversified credit portfolio, both in terms of products and segments, commensurate with
the risks undertaken and appropriate levels of provisioning and concentration.
Under the responsibility of the
Credit Department, lending procedures are based on the Organization’s credit policy emphasizing the security, quality and
liquidity of the lending. The process is guided by the risk management governance and complies with the rules of the Central Bank
of Brazil.
The methodologies adopted value
business agility and profitability, with targeted and appropriate procedures oriented to the granting of credit transactions and
establishment of operating limits.
In the evaluation and classification
of customers or economic groups, the quantitative (economic and financial indicators) and qualitative (personal data and behaviors)
aspects associated with the customers capacity to honor their obligations are considered.
All business proposals are subject
to operational limits, which are included in the Loan Guidelines and Procedures. At branches, the delegation of power to grant
a loan depends on its size, the total exposure to the Organization, the guarantees offered, the level of restriction and their
credit risk score/rating. Business proposals with risks beyond these limits are subject to technical analysis and approval of by
the Credit Department.
In its turn, the Executive Credit
Committee was created to decide, within its authority, on queries about the granting of limits or loans proposed by business areas,
previously analyzed and with opinion from the Credit Department. According to the size of the operations/limits proposed, this
Committee, may then submit the proposal for approval by the Board of Directors, depending on the values involved.
Loan proposals pass through an automated
system with parameters set to provide important information for the analysis, granting and subsequent monitoring of loans, minimizing
the risks inherent in the operations.
There are exclusive Credit and Behavior
Scoring systems for the assignment of high volume, low principal loans in the Retail segment, meant to provide speed and reliability,
while standardizing the procedures for loan analysis and approval.
Business is diversified wide-spread
and aimed at individuals and legal entities with a proven payment capacity and solvency, seeking to support them with guarantees
that are adequate to the risk assumed, considering the amounts, objectives and the maturities of loan granted.
Credit Risk Rating
The Organization has a process of
Governance practices and follow-ups. Practices include the Governance of Concession Limits and Credit Recovery, which, depending
on the size of the operation or of the total exposure of the counterpart, require approval at the level of the Board of Directors.
In addition, follow-ups are made frequently of the portfolio, with evaluations as to their evolution, delinquency, provisions,
vintage studies, and capital, among others.
In addition to the process and governance
of limits for approval of credit and recovery, in the risk appetite defined by the Organization, the concentration limits of operations
for the Economic Group, Sector and Transfer (concentration per countries) are monitored. In addition to the indicators of concentration,
a specific indicator was established for the level of delinquencies above 90 days for Individuals (PF), the indicator of problem
asset and an indicator of Margin of Economic Capital of Credit Risk, in order to monitor and track the capital in the economic
and regulatory visions.
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
The credit risk assessment methodology,
in addition to providing data to establish the minimum parameters for lending and risk management, also enables the definition
of Special Credit Rules and Procedures according to customer characteristics and size. Thus, the methodology provides the basis
not only for the correct pricing of operations, but also for defining the appropriate guarantees.
The methodology used also follows
the requirements established by the Resolution No. 4,327 of the National Monetary Council and includes analysis of social and environmental
risk in projects, aimed at evaluating customers’ compliance with related laws and the Equator Principles, a set of rules
that establish the minimum social and environmental criteria which must be met for lending.
In accordance with its commitment
to the continuous improvement of methodologies, the credit risk rating of operations contracted by the Organization’s economic
groups/ customers (Rating Operação Final – ROF) is distributed on a graduation scale in levels. This
ensures greater adherence to the requirements set forth in the Basel Capital Accord and preserves the criteria established by Resolution
No. 2,682 of the National Monetary Council for the constitution of the applicable provisions.
In a simplified manner, the risk
classifications of the operations are determined on the basis of the credit quality of economic groups/ customers defined by the
Customer Rating, warranties relating to the contract, modality of the credit product, behavior of delinquencies in the payment
and value of credit contracted.
Customer Rating for economic groups
(legal entities) are based on standardized statistical and judgmental procedures, and on quantitative and qualitative information.
Classifications are carried out by economic group and periodically monitored in order to preserve the quality of the loan portfolio.
For individuals, in general, Customer
Rating are based on personal data variables, such as income, assets, restrictions and indebtedness, in addition to the history
of their relationship with the Organization, and statistical credit evaluation models.
Customer rating is used in the analysis
for granting and/or renewing operations and credit limits, as well as for the monitoring of the economic-financial situation of
a company and its capacity to repay the loans contracted.
Control and Monitoring
The credit risk of the Organization
has its control and corporate follow-up performed in the Credit Risk area of the Integrated Risk Control Department – DCIR.
The Department advises the Executive Committee on Risk Management, where methodologies for measuring credit risk are discussed
and formalized. Significant issues discussed in this Committee are reported to the Integrated Risk and Capital Allocation Management
Committee, which is subordinate to the Board of Directors.
In addition to committee meetings,
the area holds monthly meetings with all product and segment executives and officers, with a view to inform them about the evolution
of the loan portfolio, delinquency, credit recoveries, gross and net losses, limits and concentrations of portfolios, allocation
of economic and regulatory capital, among others. This information is also reported to the Audit Committee on a monthly basis.
The area also monitors any internal
or external event that may cause a significant impact on the Organization’s credit risk, such as spin-offs, bankruptcies
and crop failures, in addition to monitoring economic activity in the sectors to which the company has significant risk exposures.
Internal Report
Credit risk is monitored on a daily
basis in order to maintain the risk levels within the limits established by the Organization. Managerial reports on risk control
are provided to all levels of business, from branches to Senior Management.
52 IFRS – International Financial Reporting Standards – 2020
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Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
With the objective of highlighting
the risk situations that could result in the customers’ inability to honor its obligations as contracted, the credit risk
monitoring area provides daily reports, to the branches, business segments, as well as the lending and loan recovery areas. This
system provides timely information about the loan portfolios and credit bureau information of customers, in addition to enabling
comparison of past and current information, highlighting points requiring a more in-depth analysis by managers, such as assets
by segment, product, region, risk classification, delinquency and expected and unexpected losses, among others, providing both
a macro-level and detailed view of the information, and also enabling a specific loan operation to be viewed.
The information is viewed and delivered
via dashboards, allowing queries at several levels such as business segment, divisions, managers, regions, products, employees
and customers, and under several aspects (asset, delinquency, provision, write-off, restriction levels, guarantees, portfolio quality
by rating, among others).
Measurement of Credit Risk
Periodically, the Organization evaluates
the expected credit losses from financial assets by means of quantitative models, considering the historical experience of credit
losses of the different types of portfolio (which can vary from 2 to 7 years), the current quality and characteristics of customers,
operations, and mitigating factors, according to processes and internal governance.
The actual loss experience has been
adjusted to reflect the differences between the economic conditions during the period in which the historical data was collected,
current conditions and the vision of the Organization about future economic conditions, which are incorporated into the measurement
by means of econometric models that capture the current and future effects of estimates of expected losses. The main macroeconomic
variables used in this process are the Brazilian interest rates, unemployment rates, inflation rates and economic activity indexes.
The estimate of expected loss of
financial assets is divided into three categories (stages):
|
·
|
Stage 1: Financial assets with no significant
increase in credit risks;
|
|
·
|
Stage 2: Financial assets with significant
increase in credit risks; and
|
|
·
|
Stage 3: Financial assets that are credit
impaired.
|
The significant increase of credit
risk is evaluated based on different indicators for classification in stages according to the customers’ profile, the product
type and the current payment status, as shown below:
Retail Portfolio:
|
·
|
Stage 1: Financial assets
whose obligations are current or less than 30 days past due and which have a low internal credit risk rating;
|
|
·
|
Stage 2 (Significant increase
in credit risk): Financial assets that are overdue obligations between 31 and 90 days or whose internal credit risk rating migrated
from low risk to medium or high risk;
|
|
·
|
Stage 3 (Defaulted or
“impaired”): Financial assets whose obligations are overdue for more than 90 days or that present bankruptcy events,
judicial recovery and restructuring of debt;
|
|
·
|
Re-categorization from
stage 3 to stage 2: Financial assets that bring current the values overdue and whose internal ratings migrated to medium risk;
and
|
|
·
|
Re-categorization from
stage 2 to stage 1: Financial assets that bring current the values overdue and whose internal ratings migrated to low risk.
|
Wholesale Portfolio:
|
·
|
Stage 1: Financial assets
whose obligations are current or less than 30 days past due and which have a low internal credit risk rating;
|
|
·
|
Stage 2 (Significant increase
in credit risk): Financial assets whose obligations are overdue between 31 and 90 days or whose internal rating of customers migrated
from low risk to medium or high risk;
|
|
·
|
Stage 3 (Defaulted or
“impaired”): Financial assets whose relevant obligations are overdue by up to 90 days or that present
bankruptcy events, judicial recovery, restructuring of debt or need for execution of guarantees;
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
|
·
|
Re-categorization from
stage 3 to stage 2: Financial assets that no longer have any of the stage 3 criteria and whose internal ratings migrated to medium
risk; and
|
|
·
|
Re-categorization from
stage 2 to stage 1: Financial assets that bring current the values overdue and whose internal ratings migrated to low risk.
|
The expected losses are based on
the multiplication of credit risk parameters: Probability of default (PD), Loss due to default (LGD) and Exposure at default (EAD).
The PD parameter refers to the probability
of default perceived by the Organization regarding the customer, according to the internal models of evaluation, which, in retail,
use statistical methodologies based on the characteristics of the customer, such as the internal rating and business segment, and
the operation, such as product and guarantee and, in the case of wholesale, they use specialist models based on financial information
and qualitative analyses.
The LGD refers to the percentage
of loss in relation to exposure in case of default, considering all the efforts of recovery, according to the internal model of
evaluation that uses statistical methodologies based on the characteristics of the operation, such as product and guarantee. Customers
with significant exposure have estimates based on individual analyses, which are based on the structure of the operation and expert
knowledge, aiming to capture the complexity and the specifics of each operation.
EAD is the exposure (gross book
value) of the customer in relation to the Organization at the time of estimation of the expected loss. In the case of commitments
or financial guarantees provided, the EAD will have the addition of the expected value of the commitments or financial guarantees
provided that they will be converted into credit in case of default of the loan or credit rather than the customer.
Credit Risk Exposure
We present below the credit
risk exposure of the financial instruments:
|
R$ thousand
|
On December 31, 2020
|
On December 31, 2019
|
|
Gross value
|
Expected credit loss
|
Gross value
|
Expected credit loss
|
Financial assets
|
|
|
|
|
Cash and balances with banks (Note 18)
|
107,602,594
|
-
|
109,610,999
|
-
|
Financial assets at fair value through profit or loss (Note 19)
|
275,986,689
|
-
|
249,759,777
|
-
|
Financial assets at fair value through other comprehensive income (Note 21) (1)
|
185,841,975
|
-
|
192,450,010
|
-
|
Loans and advances to banks (Note 22)
|
191,425,663
|
(932)
|
59,083,791
|
(44,465)
|
Loans and advances to customers (Note 23)
|
513,216,763
|
(39,579,405)
|
457,392,375
|
(33,863,659)
|
Securities at amortized cost (Note 24)
|
185,179,363
|
(5,555,469)
|
171,551,837
|
(4,633,477)
|
Other financial assets (Note 29)
|
52,416,117
|
-
|
56,101,781
|
-
|
Provision for Expected Credit Loss
|
|
|
|
|
Loan commitments (Notes 23 and 40)
|
255,953,637
|
(3,859,316)
|
249,866,767
|
(2,318,404)
|
Financial guarantees (Notes 23 and 40)
|
80,236,602
|
(2,318,930)
|
78,231,145
|
(1,970,321)
|
Total risk exposure
|
1,847,859,403
|
(51,314,052)
|
1,624,048,482
|
(42,830,326)
|
(1) Financial assets measured at fair value
through other comprehensive income are not reduced by the allowance for losses.
The Organization’s maximum
credit risk exposure was R$1,847,859,403 thousand in 2020, which was an increase of 13.8% compared to 2019.
Of this exposure, R$107,602,594
thousand, or 5.8% is related to cash and bank deposits composed mainly of funds deposited with the Central Bank of Brazil that
are assessed to have low credit risk.
Financial assets at fair value through
profit or loss (14.9% of total exposure) are mostly low credit risk, composed mainly of Brazilian government securities at fair
value and also include derivative financial instruments.
54 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
Financial assets at fair value through
other comprehensive income amounted to R$185,841,975 thousand (10.1% of total exposure), are recorded at fair value with changes
in ECL recognized in profit or loss and are represented mostly by Brazilian government securities, for details of these assets,
see Note 21.
Loans and advances to financial
institutions, which are 10.4% of the total, consist basically of reverse repurchase agreements which have a low credit risk.
Loans and advances to customers
represent 27.8% of the total exposure, for details of these assets and the expected loss, see Note 23 for details.
Financial assets at amortized cost
represent 10.0% of the total, for details of these assets, see Note 24.
Operations classified as “Other
financial assets” represent 2.8% of the total and are basically comprised of foreign exchange operations and escrow deposits.
In 2020, items not recorded in the
consolidated balance sheet regarding loan commitments and financial guarantees (recorded in memorandum accounts) totaled R$336,190,239
thousand, representing 18.2% of total exposure.
Loans and advances to customers
Concentration of credit risk
|
On December 31
|
2020
|
2019
|
Largest borrower
|
2.1%
|
1.9%
|
10 largest borrowers
|
7.5%
|
7.7%
|
20 largest borrowers
|
10.9%
|
11.3%
|
50 largest borrowers
|
15.7%
|
16.7%
|
100 largest borrowers
|
19.2%
|
20.1%
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
By Economic Activity Sector
The credit-risk concentration analysis
presented below is based on the economic activity sector in which the counterparty operates.
|
On December 31 - R$ thousand
|
2020
|
%
|
2019
|
%
|
Public sector
|
11,810,973
|
2.3
|
8,899,863
|
1.9
|
Oil, derivatives and aggregate activities
|
10,661,873
|
2.1
|
8,870,762
|
1.9
|
Production and distribution of electricity
|
1,074,867
|
0.2
|
3,032
|
-
|
Other industries
|
74,233
|
-
|
26,069
|
-
|
Private sector
|
501,405,790
|
97.7
|
448,492,512
|
98.1
|
Companies
|
244,976,110
|
47.7
|
218,076,522
|
47.7
|
Real estate and construction activities
|
20,092,249
|
3.9
|
21,695,592
|
4.7
|
Retail
|
36,498,461
|
7.1
|
35,521,621
|
7.8
|
Services
|
30,108,475
|
5.9
|
20,136,089
|
4.4
|
Transportation and concession
|
23,662,184
|
4.6
|
20,807,687
|
4.5
|
Automotive
|
15,625,309
|
3.0
|
12,723,830
|
2.8
|
Food products
|
13,378,255
|
2.6
|
11,067,069
|
2.4
|
Wholesale
|
16,479,704
|
3.2
|
14,327,816
|
3.1
|
Production and distribution of electricity
|
6,979,203
|
1.4
|
2,868,563
|
0.6
|
Siderurgy and metallurgy
|
10,036,586
|
2.0
|
9,022,956
|
2.0
|
Sugar and alcohol
|
6,878,558
|
1.3
|
6,191,961
|
1.4
|
Other industries
|
65,237,126
|
12.7
|
63,713,338
|
13.9
|
Individuals
|
256,429,680
|
50.0
|
230,415,990
|
50.4
|
Total portfolio
|
513,216,763
|
100.0
|
457,392,375
|
100.0
|
Impairment of loans and advances
|
(39,579,405)
|
|
(33,863,659)
|
|
Total of net loans and advances to customers
|
473,637,358
|
|
423,528,716
|
|
Credit Risk Mitigation
Potential credit losses are mitigated
by the use of a variety of types of collateral formally stipulated through legal instruments, such as conditional sales, liens
and mortgages, by guarantees such as third-party sureties or guarantees, and also by financial instruments such as credit derivatives.
The efficiency of these instruments is evaluated considering the time to recover and realize an asset given as collateral, its
market value, the guarantors’ counterparty risk and the legal safety of the agreements. The main types of collateral include:
term deposits; financial investments and securities; residential and commercial properties; movable properties such as vehicles,
aircraft. Additionally, collateral may include commercial bonds such as invoices, checks and credit card bills. Sureties and guarantees
may also include bank guarantees.
Credit derivatives are bilateral
contracts in which one counterparty hedges credit risk on a financial instrument – its risk is transferred to the counterparty
selling the hedge. Normally, the latter is remunerated throughout the period of the transaction. In the case default by the borrower,
the buying party will receive a payment intended to compensate for the loss in the financial instrument. In this case, the seller
receives the underlying asset in exchange for said payment.
56 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
The table below shows the fair value
of guarantees of loans and advances to customers.
|
R$ thousand
|
2020
|
2019
|
Book value (1)
|
Fair Value Guarantees
|
Book value (1)
|
Fair Value Guarantees
|
Companies
|
256,810,316
|
89,481,169
|
230,415,990
|
139,878,361
|
Stage 1
|
217,561,123
|
75,882,476
|
199,384,194
|
127,231,341
|
Stage 2
|
13,960,366
|
5,035,349
|
19,594,716
|
10,277,550
|
Stage 3
|
25,288,827
|
8,563,344
|
11,437,080
|
2,369,470
|
|
|
|
|
|
Individuals
|
256,406,447
|
150,298,522
|
226,976,385
|
90,693,689
|
Stage 1
|
195,239,164
|
126,281,157
|
195,924,808
|
77,930,093
|
Stage 2
|
38,023,532
|
18,408,513
|
13,106,024
|
6,546,880
|
Stage 3
|
23,143,751
|
5,608,852
|
17,945,553
|
6,216,716
|
Total
|
513,216,763
|
239,779,691
|
457,392,375
|
230,572,050
|
(1) Of the total balance of loan operations,
R$354,814,000 (2019 – R$311,522,000 thousand) refers to operations without guarantees.
Market risk is represented by the
possibility of financial loss due to fluctuating prices and market interest rates of the Organization’s financial instruments,
such as our asset and liability transactions that may have mismatched amounts, maturities, currencies and indexes.
Market risk is identified, measured,
mitigated, controlled and reported. The Organization’s exposure to market risk profile is in line with the guidelines established
by the governance process, with limits monitored on a timely basis independently of the business areas.
All transactions that expose the
Organization to market risk are mapped, measured and classified according to probability and magnitude, and the whole process is
approved by the governance structure.
In compliance with the best Corporate
Governance practices, to preserve and strengthen our Management of market risk of the Organization, as well as to meet the requirements
of Resolution No. 4,557, of the National Monetary Council, the Board of Directors approved the Market and Liquidity Risk Management
Policy, which is reviewed at least annually by the relevant Committees and by the Board of Directors itself, and provides the main
guidelines for acceptance, control and management of market risk.
In addition to the policy, the Organization
has specific rules to regulate the market risk management process, as follows:
|
·
|
Classification of Operations;
|
|
·
|
Reclassification of Operations;
|
|
·
|
Trading of Public or Private
Securities;
|
|
·
|
Use of Derivatives; and
|
Market Risk Management Process
The market risk management process
is a corporation wide process, comprising from business areas to the Board of Directors; it involves various areas, each with specific
duties in the process, thereby ensuring an efficient structure. The measurement and control of market risk is conducted in a centralized
and independent manner. This process permits that the Organization be the first financial institution in the country authorized
by the Central Bank of Brazil to use its internal market risk models to calculate regulatory capital requirements since January
2013. This process is also revised at least once a year by the Committees and approved the Board of Directors itself.
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
Determination of Limits
Proposed market-risk limits are
validated by specific Committees and submitted for approval by the Integrated Risk and Capital Allocation Management Committee,
and then for approval by the Board of Directors. Based on the business’ characteristics, they are segregated into the following
Portfolios:
Trading Portfolio: it comprises
all operations involving financial instruments, held-for-trading, including derivatives, or used to hedge other instruments in
the Trading Portfolio, which have no trading restrictions. Held-for-trading operations are those intended for resale, to obtain
benefits from actual or expected price variations, or for arbitrage.
The Trading Portfolio is monitored
with the following limits:
|
·
|
Stress Analysis (measurement
of negative impact of extreme events, based on historical and prospective scenarios);
|
|
·
|
Financial Exposure/Concentration.
|
Banking Portfolio: it comprises
operations not classified in the Trading Portfolio, arising from Organization’s other businesses and their respective hedges.
Portfolio risks in these cases are monitored by:
|
·
|
Variation of economic
value due to the variation in the interest rate – ∆EVE (Economic Value of Equity); and
|
|
·
|
Variation of the net revenue
of interest due to the variation in the rate of interest – ∆NII (Net Interest Income).
|
Market-Risk Measurement
Models
Market risk is measured and controlled
using Stress, Value at Risk (VaR), Economic Value Equity (EVE), Net Interest Income (NII) and Sensitivity Analysis methodologies,
as well as limits for the Management of Results and Financial Exposure. Using several methodologies to measure and evaluate risks
is of great importance, because they can complement each other and their combination allows for analysis of different scenarios
and situations.
Trading and Regulatory Portfolio
Trading Portfolio risks are mainly
controlled by the Stress and VaR methodologies. The Stress methodology quantifies the negative impact of extreme economic shocks
and events that are financially unfavorable to the Organization’s positions. The analysis uses stress scenarios prepared
by the Market Risk area and the Organization’s economists based on historical and prospective data for the risk factors in
which the Organization portfolio.
The methodology adopted to calculate
VaR is the Delta-Normal, with a confidence level of 99% and considering the number of days necessary to unwind the existing exposures.
The methodology is applied to the Trading and Regulatory Portfolio (Trading Portfolio positions plus Banking Portfolio foreign
currency and commodities exposures). It should be noted that for the measurement of all the risk factors of the portfolio of options
are applied the historical simulation models and Delta-Gamma-Vega, prevailing the most conservative between the two. A minimum
252-business-day period is adopted to calculate volatilities, correlations and historical returns.
For regulatory purposes, the capital
requirements relating to shares held in the Banking Portfolio of Prudential Conglomerate are determined on a credit risk basis,
as per Central Bank of Brazil resolution, i.e., are not included in the market risk calculation.
58 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
Risk of Interest Rate in the
Banking Portfolio
The measurement and control of the
interest-rate risk in the Banking Portfolio area is mainly based on the Economic Value of Equity (EVE) and Net Interest Income
(NII) methodologies, which measure the economic impact on the positions and the impact in the Organization’s income, respectively,
according to scenarios prepared by the Organization’s economists. These scenarios determine the positive and negative movements
of interest rate curves that may affect Organization’s investments and capital-raising.
The EVE methodology consists of
repricing the portfolio exposed to interest rate risk, taking into account the scenarios of increases or decreases of rates, by
calculating the impact on present value and total term of assets and liabilities. The economic value of the portfolio is estimated
on the basis of market interest rates on the analysis date and of scenarios projected. Therefore, the difference between the values
obtained for the portfolio will be the Delta EVE.
In the case of the NII – Interest
Earning Portion, the methodology intends to calculate the Organization’s variation in the net revenue interest (gross margin)
due to eventual variations in the interest rate level, that is, the difference between the calculated NII in the base scenario
and the calculated NII in the scenarios of increase or decrease of the interest rate will be Delta NII.
For the measurement of interest
rate risk in the Banking Portfolio, behavioral premises of the customers are used whenever necessary. As a reference, in the case
of deposits and savings, which have no maturity defined, studies for the verification of historical behaviors are carried out as
well as the possibility of their maintenance. Through these studies, the stable amount (core portion) as well as the criterion
of allocation over the years are calculated.
Financial Instrument Pricing
To adopt the best market prices
related to the assessment of financial instruments’ fair value, the Mark-to-Market Commission (CMM), which is responsible
for approving or submitting mark-to-market models to the Market and Liquidity Risk Commission was established. CMM is composed
of business, back-office and risk representatives. The risk area is responsible for the coordination of the Commission and for
the submission the matters to the Executive Committee for Risk Management for reporting or approval, whichever is the case.
Whenever possible, the Bank uses
prices and quotes from by the securities, commodities and futures exchange and the secondary markets. Failing to find such market
references, prices made available by other sources (such as Bloomberg, Reuters and Brokerage Firms) are used. As a last resort,
proprietary models are used to price the instruments, which also follow the same CMM approval procedure and are submitted to the
Organization’s validation and assessment processes.
Mark-to-market criteria are periodically
reviewed, according to the governance process, and may vary due to changes in market conditions, creation of new classes of instruments,
establishment of new sources of data or development of models considered more appropriate.
The financial instruments to be
included in the Trading Portfolio must be approved by the Treasury Executive Committee or the Product and Service Executive Committee
and their pricing criteria must be defined by the CMM.
The following principles for the
fair value process are adopted by the Organization:
|
·
|
Commitment: the Organization
is committed to ensuring that the prices used reflect the market value of the operations. Should information not be found, the
Organization uses its best efforts to estimate the market value of the financial instruments;
|
|
·
|
Frequency: the formalized
mark-to-market criteria are applied on a daily basis;
|
|
·
|
Formality: the CMM is
responsible for ensuring the methodological quality and the formalization of the mark-to-market criteria;
|
|
·
|
Consistency: the process
to gather and apply prices should be carried out consistently, to guarantee equal prices for the same instrument within the Organization;
and
|
|
·
|
Transparency: the methodology
must be accessible by the Internal and External Audit, Independent Model Validation Areas – AVIM and by Regulatory Agencies.
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
In December 2014, the National Monetary
Council published Resolution No. 4,389, which amended Resolution No. 4,277. These resolutions set forth the basic procedures that
entities must follow in pricing financial instruments valued at market value and guidelines for the application of prudential adjustments
for such instruments. The Organization aligned with these resolutions’ guidelines, including applying due prudential adjustments
required by the regulation.
Control and Follow-Up
Market risk is controlled and monitored
by an independent area, the DCIR, which, on a daily basis, measures the risk of outstanding positions, consolidates results and
prepares reports required by the existing governance process.
In addition to daily reports, Trading
Portfolio positions are discussed once every fifteen days by the Treasury Executive Committee, while Banking Portfolio positions
and liquidity reports are examined by the Asset and Liability Management Treasury Executive Committee.
At both meetings, results and risks
are assessed and strategies are discussed. Both the governance process and the existing thresholds are ratified by the Integrated
Risk Management and Capital Allocation Management Committee and submitted to approval of the Board of Directors, which are revised
at least once a year.
Should any threshold controlled
by the DCIR be exceeded, the head of the business area responsible for the position is informed that threshold was reached, and
the Integrated Risk and Capital Allocation Management Committee is called in timely fashion to make a decision. If the Committee
decides to raise the threshold and/or maintain the positions, the Board of Directors is called to approve the new threshold or
revise the position strategy.
Internal Communication
The market risk department provides
daily managerial control reports on the positions to the business areas and Senior Management, in addition to weekly reports and
periodic presentations to the Board of Directors.
Reporting is conducted through an
alert system, which determines the addressees of risk reports as previously determined risk threshold percentage is reached; therefore,
the higher the risk threshold consumption, more Senior Management members receive the reports.
Hedging and Use of Derivatives
In order to standardize the use
of financial instruments as hedges of transactions and the use of derivatives by the Treasury Department, the Organization created
specific procedures that were approved by the competent Committees.
The hedge transactions executed
by Bradesco’s Treasury Department must necessarily cancel or mitigate risks related to unmatched quantities, terms, currencies
or indexes of the positions in the Treasury books, and must use assets and derivatives authorized to be traded in each of their
books to:
|
·
|
control and classify the
transactions, respecting the exposure and risk limits in effect;
|
|
·
|
alter, modify or revert
positions due to changes in the market and to operational strategies; and
|
|
·
|
reduce or mitigate exposures
to transactions in inactive markets, in conditions of stress or of low liquidity.
|
For derivatives classified in the
“hedge accounting” category, there is a monitoring of: (i) strategy effectiveness, through prospective and retrospective
effectiveness tests, and (ii) mark-to-market of hedge instruments.
60 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
Cash flow Hedge
On December 31, 2020, Bradesco maintained
cash flow hedges. See more details in Note 20.
Standardized and “Continuous
Use” Derivatives
Organization’s Treasury Department
may use standardized (traded on an exchange) and “continuous use” (traded over-the-counter) derivatives for the purpose
of obtaining income or as hedges. The derivatives classified as “continuous use” are those habitually traded over-the-counter,
such as vanilla swaps (interest rates, currencies, CDS – Credit Default Swap, among others), forward operations (currencies,
for example) and vanilla options (currency, Bovespa Index), among others. Non-standardized derivatives that are not classified
as “continuous use” or structured operations cannot be traded without the authorization of the applicable Committee.
Evolution of Exposures
In this section are presented the
evolution of financial exposure, the VaR calculated using the internal model and its backtesting and the Stress Analysis.
Financial Exposure – Trading
Portfolio (Fair Value)
Risk factors
|
R$ thousand
|
On December 31
|
2020
|
2019
|
Assets
|
Liabilities
|
Assets
|
Liabilities
|
Fixed rates
|
20,597,165
|
18,949,022
|
15,619,889
|
12,954,739
|
IGP-M (General Index of market pricing) / IPCA (Consumer price index)
|
5,151,508
|
2,598,754
|
889,026
|
1,476,167
|
Exchange coupon
|
348,315
|
336,868
|
221,069
|
1,135,449
|
Foreign Currency
|
485,660
|
402,441
|
759,320
|
1,437,774
|
Equities
|
801,588
|
794,455
|
461,860
|
427,778
|
Sovereign/Eurobonds and Treasuries
|
7,373,381
|
3,973,859
|
3,783,134
|
5,007,199
|
Other
|
449,161
|
186,396
|
384,269
|
25,793
|
Total
|
35,206,778
|
27,241,795
|
22,118,567
|
22,464,899
|
VaR Internal Model – Trading
Portfolio
The 1-day VaR of Trading Portfolio
net of tax effects was R$12,207 thousand in the end of 2020, with Equities as the largest risk factor participation of the portfolio.
Risk factors
|
R$ thousand
|
On December 31
|
2020
|
2019
|
Fixed rates
|
5,014
|
1,614
|
IGPM/IPCA
|
3,645
|
2,774
|
Exchange coupon
|
342
|
415
|
Foreign Currency
|
4,704
|
5,327
|
Sovereign/Eurobonds and Treasuries
|
7,477
|
3,834
|
Equities
|
2,422
|
707
|
Other
|
154
|
2,122
|
Correlation/diversification effect
|
(11,551)
|
(6,820)
|
VaR at the end of the year
|
12,207
|
9,973
|
|
|
|
Average VaR in the year
|
38,522
|
10,263
|
Minimum VaR in the year
|
8,140
|
6,469
|
Maximum VaR in the year
|
104,811
|
15,309
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
VaR
Internal Model – Regulatory Portfolio
The capital is calculated by the
normal delta VaR model based in Regulatory Portfolio, composed by Trading Portfolio and the Foreign Exchange Exposures and the
Commodities Exposure of the Banking Portfolio. In addition, the historical simulation and the Delta–Gamma–Vega models
of risk are applied to measure all risk factors to an options portfolio, whichever is the most conservative, whereby this risk
of options is added to the VaR of the portfolio. In this model, risk value is extrapolated to the regulatory horizon2
(the highest between 10 days and the horizon of the portfolio) by the ‘square root of time’ method. VaR and Stressed
VaR shown below refer to a ten-day horizon and are net of tax effects.
Risk factors
|
R$ thousand
|
On December 31
|
2019
|
2018
|
VaR
|
Stressed
|
VaR
|
Stressed
|
Interest rate
|
14.662
|
58.629
|
8.131
|
47.851
|
Exchange rate
|
34.638
|
104.429
|
5.666
|
20.959
|
Commodity price (Commodities)
|
465
|
1.637
|
8.194
|
14.704
|
Equities
|
2.766
|
3.772
|
3.355
|
4.844
|
Correlation/diversification effect
|
(9.959)
|
(29.875)
|
(7.569)
|
33.180
|
VaR at the end of the year
|
42.572
|
138.592
|
17.777
|
121.538
|
|
|
|
|
|
Average VaR in the year
|
43.294
|
106.636
|
69.852
|
117.946
|
Minimum VaR in the year
|
16.606
|
34.838
|
17.777
|
57.523
|
Maximum VaR in the year
|
122.507
|
298.703
|
252.797
|
231.080
|
Note: Ten-day horizon VaR net of tax
effects.
To calculate regulatory capital
requirement according to the internal model, it is necessary to take into consideration the rules described by Central Bank Circular
Letters No. 3,646/13 and No. 3,674/13, such as the use of VaR and Stressed VaR net of tax effects, the average in the last 60 days
and its multiplier.
VaR Internal Model – Backtesting
The risk methodology applied is
continuously assessed using backtesting techniques, which compare the one-day period VaR with the hypothetical P&L, obtained
from the same positions used in the VaR calculation, and with the effective P&L, also considering the intraday operations for
which VaR was estimated.
The main purpose of backtesting
is to monitor, validate and assess the adherence of the VaR model, and the number of exceptions that occurred must be compatible
with the number of exception accepted by the statistical tests conducted and the confidence level established. Another objective
is to improve the models used by the Organization, through analyses carried out with different observation periods and confidence
levels, both for Total VaR and for each risk factor.
The daily results corresponding
to the last 250 business days, in the hypothetical and effective views, exceeded the respective VaR with a 99% confidence level
five times in 2020 and, in 2019 the daily results corresponding to the last 250 business days did not exceed their VaR with a 99%
confidence level.
According to the document published
by the Basel Committee on Banking Supervision,3 exceptions are classified as
being due to “either bad luck or the markets did not behave as expected by the model”, i.e. volatility was significantly
higher than expected and, in certain situations, the correlations differed from those forecast by the model.
2 The
maximum amount between the book’s holding period and ten days, which is the minimum regulatory horizon required by Central
Bank of Brazil, is adopted.
3 The
Basel Committee on Banking Supervision is an organization that brings together banking supervisory authorities in order to strengthen
the soundness of financial systems.
62 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
Stress Analysis – Trading
Portfolio
The Organization also assesses on
a daily basis, the possible impacts on positions in stress scenarios for the next 20 business days, with limits established in
the governance process. Thus, considering the effect of diversification between the risk factors and the tax effects, the average
of the possible loss estimates in a stress situation would be R$187,519 thousand in 2020 (2019 – R$160,661 thousand),
and the maximum estimated loss in the year of 2020 would be R$380,446 thousand (2019 – R$286,273 thousand).
|
R$ thousand
|
On December 31
|
2020
|
2019
|
At the end of the year
|
90,071
|
103,444
|
Average in the year
|
187,519
|
160,661
|
Minimum in the year
|
56,369
|
67,675
|
Maximum in the year
|
380,446
|
286,273
|
Note: Values net of tax effects.
Sensitivity Analysis
The Trading Portfolio is also monitored
daily by sensitivity analyses that measure the effect of movements of market and price curves on our positions. Furthermore, a
sensitivity analysis of the Organization’s financial exposures (Trading and Banking Portfolios) is performed on a quarterly
basis, in compliance with CVM Rule No. 475/08.
The sensitivity analyses were carried
out based on the scenarios prepared for the respective dates, always taking into consideration market inputs available at the time
and scenarios that would adversely impact our positions, in accordance with the scenarios below:
Scenario 1: Based
on market information (B3, Anbima, etc.), stresses were applied for 1 basis point on the interest rate and 1.0% variation on prices.
For example: for a Real/US dollar exchange rate of R$5.18 a scenario of R$5.23 was used, while for a 1-year fixed interest rate
of 2.86%, a scenario of 2.87% was applied;
Scenario 2: 25.0%
stresses were determined based on market information. For example: for a Real/US dollar exchange rate of R$5.18 a scenario of R$6.47
was used, while for a 1-year fixed interest rate of 2.86%, a 3.57% scenario was applied. The scenarios for other risk factors also
accounted for 25.0% stresses in the respective curves or prices; and
Scenario 3: 50.0%
stresses were determined based on market information. For example: for a Real/US dollar quote of R$5.18 a scenario of R$7.77 was
used, while for a 1-year fixed interest rate of 2.86%, a 4.29% scenario was applied. The scenarios for other risk factors also
account for 50.0% stresses in the respective curves or prices.
The results show the impact for
each scenario on a static portfolio position. The dynamism of the market and portfolios means that these positions change continuously
and do not necessarily reflect the position demonstrated here. In addition, the Organization has a continuous market risk management
process, which is always searching for ways to mitigate the associated risks, according to the strategy determined by Management.
Therefore, in cases of deterioration indicators in a certain position, proactive measures are taken to minimize any potential negative
impact, aimed at maximizing the risk/return ratio for the Organization.
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
Sensitivity Analysis – Trading Portfolio
|
R$ thousand
|
Trading Portfolio (1)
|
On December 31
|
2020
|
2019
|
Scenarios
|
Scenarios
|
1
|
2
|
3
|
1
|
2
|
3
|
Interest rate in Reais
|
Exposure subject to variations in fixed interest rates and interest rate coupons
|
(105)
|
(11,776)
|
(23,317)
|
(97)
|
(14,128)
|
(27,256)
|
Price indexes
|
Exposure subject to variations in price index coupon rates
|
(1,788)
|
(41,702)
|
(84,093)
|
(904)
|
(29,440)
|
(56,245)
|
Exchange coupon
|
Exposure subject to variations in foreign currency coupon rates
|
(32)
|
(3,256)
|
(6,485)
|
(10)
|
(689)
|
(1,373)
|
Foreign currency
|
Exposure subject to exchange rate variations
|
(1,597)
|
(39,926)
|
(79,852)
|
(2,772)
|
(74,695)
|
(149,390)
|
Equities
|
Exposure subject to variation in stock prices
|
(354)
|
(8,856)
|
(17,712)
|
(228)
|
(5,710)
|
(11,420)
|
Sovereign/Eurobonds and Treasuries
|
Exposure subject to variations in the interest rate of securities traded on the international market
|
(167)
|
(11,955)
|
(23,430)
|
(699)
|
(29,099)
|
(56,736)
|
Other
|
Exposure not classified in other definitions
|
-
|
(41)
|
(82)
|
-
|
(26)
|
(52)
|
Total excluding correlation of risk factors
|
(4,043)
|
(117,512)
|
(234,971)
|
(4,710)
|
(153,787)
|
(302,472)
|
Total including correlation of risk factors
|
(2,647)
|
(73,605)
|
(147,689)
|
(2,617)
|
(72,476)
|
(145,411)
|
(1) Values net of taxes.
64 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
Presented below, the Sensitivity
Analysis – Trading and Banking Portfolios.
Sensitivity Analysis – Trading and
Banking Portfolios
|
R$ thousand
|
Trading and Banking Portfolios (1)
|
On December 31
|
2020
|
2019
|
Scenarios
|
Scenarios
|
1
|
2
|
3
|
1
|
2
|
3
|
Interest rate in Reais
|
Exposure subject to variations in fixed interest rates and interest rate coupons
|
(12,180)
|
(1,553,493)
|
(2,974,461)
|
(14,670)
|
(1,895,973)
|
(3,775,039)
|
Price indexes
|
Exposure subject to variations in price index coupon rates
|
(27,143)
|
(2,227,123)
|
(4,031,341)
|
(16,840)
|
(1,312,832)
|
(2,397,962)
|
Exchange coupon
|
Exposure subject to variations in foreign currency coupon rates
|
(2,277)
|
(71,852)
|
(141,860)
|
(1,035)
|
(71,631)
|
(139,560)
|
Foreign currency
|
Exposure subject to exchange rate variations
|
(2,202)
|
(65,746)
|
(131,493)
|
(3,136)
|
(71,103)
|
(142,206)
|
Equities
|
Exposure subject to variation in stock prices
|
(43,353)
|
(1,083,824)
|
(2,167,648)
|
(28,808)
|
(720,192)
|
(1,440,384)
|
Sovereign/Eurobonds and Treasuries
|
Exposure subject to variations in the interest rate of securities traded on the international market
|
(1,339)
|
(14,019)
|
(27,608)
|
(1,399)
|
(52,962)
|
(104,190)
|
Other
|
Exposure not classified in other definitions
|
(30)
|
(748)
|
(1,496)
|
(66)
|
(1,660)
|
(3,320)
|
Total excluding correlation of risk factors
|
(88,524)
|
(5,016,805)
|
(9,475,907)
|
(65,954)
|
(4,126,353)
|
(8,002,661)
|
Total including correlation of risk factors
|
(73,350)
|
(4,168,903)
|
(7,883,903)
|
(42,209)
|
(3,038,149)
|
(5,919,579)
|
(1) Values net of taxes.
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
The Liquidity Risk is represented
by the possibility of the institution not being able to efficiently meet its obligations, without affecting its daily operations
and incurring significant losses, as well as the possibility of the institution to fail to trade a position at market price, due
to its larger size as compared to the volume usually traded or in view of any market interruption.
The understanding and monitoring
of this risk are crucial to enable the Organization to settle operations in a timely manner.
Liquidity Risk Management Process
The liquidity risk management is
executed by the Organization at the corporate level and permeates all layers of governance. The following are the responsibilities
of the departments responsible for the management and control of liquidity risk:
Treasury Department
|
☐
|
Perform the day-to-day management of cash and liquidity;
|
☐
|
Propose limits for the indicators of control of the liquidity risk, as well as the levels for the flagging alerts;
|
☐
|
Meet the strategic and operational limits established;
|
☐
|
Report on matters related to the management of liquidity of the Asset and Liability Management Treasury Executive Committee;
|
Integrated Risk Control Department
|
☐
|
Propose the metrics of control of liquidity and concentration, considering its appropriate approval in the process of governance established;
|
☐
|
Calculate and disclose the indicators for monitoring and control of liquidity periodically;
|
☐
|
Provide tools for simulation of the main indicators implemented;
|
☐
|
Report on matters related to the control and monitoring of the liquidity risk in the committees and executive committees where the theme is addressed;
|
Support Areas
(Shares and Custody
Department, International and Foreign Exchange Department and Department of Controllership)
|
☐
|
Execute the projection of cash flows for the monitoring of liquidity, including intraday;
|
☐
|
Prepare the cash flows provided up to the horizon of 12 months and refer to the areas of interest;
|
☐
|
Check and ensure consistency, integrity and completeness of the database available daily to managers and controllers of the liquidity risk;
|
☐
|
Provide management information on the cash flow to the Treasury Department, as well as any significant changes in the levels of reserves of the Banks of the Conglomerate;
|
☐
|
Provide management information on the mismatch mapping of the Treasury Department.
|
Policies and Standards
The process of managing the liquidity
risk is composed of policies and standards that establish criteria related to our diversification of funding sources of the Organization.
The Liquidity Risk Management Policy
ensures that there are rules, procedures and controls that ensure to the Organization the appropriate level of liquidity and diversification
of its funding.
In turn, the Liquidity Risk Standard
for the Prudential Conglomerate describes procedures and controls of the Organization for the liquidity risk, among them, the control
of concentration of raising
66 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
funds by product and counterpart.
In the executive committees of the
Organization concentrations of funding from product, counterpart and deadlines are reported.
Control and Monitoring
The liquidity risk management of
the Organization is performed using tools developed on platforms and validated by independent areas of the Organization. Among
the key metrics and indicators considered in the framework of liquidity risk, are:
|
·
|
Information on the
Liquidity Coverage Ratio (LCR): A measure of the sufficiency of liquid instruments to honor the cash outflows of the Organization
within the next thirty days in a scenario of stress;
|
|
·
|
Net Stable Funding
Ratio (NSFR): A measure of the sufficiency of structural funding to finance long-term assets in the balance sheet of the Organization;
|
|
·
|
Loss of deposits to different
time horizons;
|
|
·
|
Maps of concentration
of funding in different visions (product, term and counterpart); and
|
|
·
|
Integrated stress exercises
where different dimensions of risk are addressed.
|
Limits were established for the
main metrics, which can be strategic (approved up to the level of the Board of Directors) or operational (approved by the Treasury
Executive Committee for Asset and Liability Management), based on flags, which trigger different levels of governance according
to the percentage of use (consumption) of their respective limits.
Liquidity Risk Mitigation
The governance established for the
liquidity risk management includes a series of recommendations to mitigate the risk of liquidity, among the main strategies, are:
|
·
|
Diversification of funding
as to the counterpart, product and term;
|
|
·
|
Adoption of managerial
limits of liquidity, in addition to those required by the regulator;
|
|
·
|
Prior analysis of products
which may affect the liquidity before their implementation; and
|
|
·
|
Simulations of stress
of liquidity of the portfolio.
|
Stress Tests
Due to the dynamics and criticality
of this theme, the management and control of liquidity risk should happen every day and be based on stress scenarios. In this way,
the main metric used for the monitoring of the liquidity risk of the Prudential Conglomerate is the Short-term Liquidity Coverage
Ratio (LCR), which measures the adequacy of liquid resources to honor the commitments in the next thirty days considering a scenario
of stress. Therefore, the daily management is performed through the stress test.
In addition to the LCR and other
metrics of monitoring, simulations of stress scenarios in the long-term are performed, within the integrated stress test program
(ICAAP for example), also to evaluate a possible deterioration of liquidity indicators for different time horizons.
Contingency Plan
According to Article 38, paragraph
II of Central Bank of Brazil’s Resolution No. 4,557 of February 23, 2017, all institutions should have a liquidity contingency
plan. The liquidity contingency plan of the Organization covers the following points:
|
·
|
Group of crisis management;
|
|
·
|
Key responsibilities of
the group of crisis management;
|
|
·
|
Indicators for monitoring;
|
|
·
|
Actions to mitigate the
crisis; and
|
|
·
|
Frequency of revision
of the plan.
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
Internal communication
Internal communication about liquidity
risk, both between departments and between the different layers of internal governance is done through internal reports and committees
involving both areas (Treasury and DCIR) and the Organization's senior management.
Additionally, reports are distributed
daily to the areas involved in management and control, as well as to senior management. Several analysis instruments are part of
this process and are used to monitor liquidity, such as:
• Daily distribution of liquidity
control instruments;
• Automatic intraday update
of liquidity reports for the proper management of the Treasury Department;
• Preparation of reports with
past and future movements, based on scenarios;
• Daily verification of compliance
with the minimum liquidity level;
• Preparation of complementary
reports in which the concentration of funding is presented by type of product, term and counterparty; and
• Weekly reports to senior
management with behavior and expectations regarding the liquidity situation.
The liquidity risk management process
has an alert system, which determines the appropriate level of reporting of risk reports according to the percentage of use of
the established limits. Thus, the lower the liquidity ratios, the higher levels of the Organization receive the reports.
LCR – Liquidity Coverage
Ratio
The Liquidity Coverage Ratio (LCR)
is designed to ensure that the Organization maintains a sufficient level of liquid assets to cover liquidity needs in an eventual
stress scenario. The LCR is the ratio between the stock of High Quality Liquid Assets (HQLA) and total net cash outflow, calculated
based on a generic stress scenario. The formula shows the main components of the indicator as follows:
In accordance with the LCR implantation
schedule defined by Basel, the level of the ratio between High Quality Liquid Assets and total net cash outflows must comply with
the following schedule:
Year
|
2016
|
2017
|
2018
|
As of 2019
|
% Required
|
70%
|
80%
|
90%
|
100%
|
The stress scenarios parameterization
was conducted by the Regulator to capture idiosyncratic and market shocks, considering the period of 30 days. The items below show
some of the shocks included in the methodology:
|
·
|
The partial loss of retail
and uncollateralized wholesale funding, as well as short-term funding capacity;
|
|
·
|
The additional outflow
of funds, contractually foreseen, due to the downgrading of the institution’s credit rating by up to three levels, including
eventual additional collateral requirements;
|
|
·
|
An increase in the volatility
of factors that impact collateral quality or the potential future exposure of derivative positions, resulting in the application
of larger collateral discounts or a call for additional collateral or in other liquidity requirements;
|
|
·
|
Withdrawals of higher
than expected amounts from credit/liquidity lines granted; and
|
|
·
|
The potential need to
repurchase debt or honor non-contractual obligations in order to mitigate reputational risk.
|
68 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
High Quality Liquid Assets (HQLA)
HQLA are assets that maintain their
market liquidity in periods of stress and that meet the minimum requirements established by the Central Bank of Brazil, such as,
among others, being free of any legal impediment or restriction; suffering little or no loss in market value when converted into
cash; having a low credit risk; easy and accurate pricing; and being traded in an active and important market, with little difference
between the purchase and sale price, high traded volume and a large number of participants. These assets are subject to weighting
factors which may reduce their value, for example, in accordance with the risk rating of their issuer or the historic variation
in their market price, among other requirements.
Cash Outflows and Inflows
Cash outflows are the result of
a reduction in deposits and funding; the maturity of securities issued; scheduled contractual obligations for the next 30 days;
margin adjustments and calls in derivative operations; the utilization/withdrawal of credit and liquidity lines granted by the
Bank; and contingent cash outflows.
Cash inflows for the next 30 days
correspond to the expected receipt of loans and financings; deposits; securities; and margin adjustments and easing in derivative
operations.
The following table shows information
of the Short-term Liquidity Coverage Ratio – LCR, relating to the cash inflows and outflows, as well as stock of High Quality
Liquid Assets (HQLA), according to definitions and calculation methodology set out in Circular No. 3,749/15.
R$ thousand
|
Information on the Liquidity Coverage Ratio (LCR)
|
Number of Lines
|
|
On December 31 (1)
|
On December 31 (2)
|
2020
|
2019
|
Average Amount (3)
|
Weighted Average Amount (4)
|
Average Amount (3)
|
Weighted Average Amount (4)
|
|
High Quality Liquid Assets (HQLA)
|
|
|
|
|
1
|
Total High Quality Liquid Assets (HQLA)
|
|
244,827,538
|
|
112,872,809
|
|
Cash Outlows
|
|
|
|
|
2
|
Retail funding:
|
325,354,419
|
29,651,389
|
239,379,478
|
21,636,196
|
3
|
Stable funding
|
170,521,207
|
8,526,060
|
129,085,762
|
6,454,288
|
4
|
Less stable funding
|
154,833,212
|
21,125,329
|
110,293,716
|
15,181,908
|
5
|
Non-collateralized wholesale funding:
|
235,478,141
|
97,681,458
|
132,504,666
|
53,070,146
|
6
|
Operating deposits (all counterparties) and affiliated cooperative deposits
|
12,635,960
|
631,798
|
9,638,912
|
481,946
|
7
|
Non-operating deposits (all counterparties)
|
220,227,439
|
94,434,918
|
121,673,837
|
51,396,283
|
8
|
Other non-collateralized wholesale funding
|
2,614,742
|
2,614,742
|
1,191,917
|
1,191,917
|
9
|
Collateralized wholesale funding
|
-
|
4,581,792
|
-
|
3,828,662
|
10
|
Additional requirements:
|
109,487,520
|
14,836,353
|
113,180,204
|
14,729,075
|
11
|
Related to exposure to derivatives and other collateral requirements
|
11,778,909
|
6,330,665
|
14,457,167
|
6,617,026
|
12
|
Related to funding losses through the issue of debt instruments
|
1,085,406
|
1,085,406
|
765,093
|
765,093
|
13
|
Related to lines of credit and liquidity
|
96,623,205
|
7,420,282
|
97,957,944
|
7,346,956
|
14
|
Other contractual obligations
|
36,339,264
|
34,400,518
|
37,020,644
|
35,080,897
|
15
|
Other contingent obligations
|
131,523,849
|
5,164,538
|
132,713,942
|
5,420,129
|
16
|
Total cash outflows
|
-
|
186,316,048
|
-
|
133,765,105
|
|
Cash Inflows
|
|
|
|
|
17
|
Collateralized loans
|
201,944,617
|
1,425,648
|
65,979,377
|
896,126
|
18
|
Outstanding loans whose payments are fully up-to-date
|
28,197,590
|
16,599,016
|
32,730,607
|
20,645,466
|
19
|
Other cash inflows
|
38,376,788
|
31,043,722
|
41,453,133
|
33,730,321
|
20
|
Total cash inflows
|
268,518,995
|
49,068,386
|
140,163,117
|
55,271,913
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
R$ thousand
|
|
|
|
Total Adjusted Amount (5)
|
|
Total Adjusted Amount (5)
|
21
|
Total HQLA
|
|
244,827,538
|
|
112,872,809
|
22
|
Total net cash outflow
|
|
137,247,662
|
|
78,493,191
|
23
|
LCR (%) (5)
|
|
178.4%
|
|
143.8%
|
(1) Calculated based on the simple daily average of the months that
compose the fourth quarter (63 observations);
(2) Calculated based on the simple daily average of the months that
compose the fourth quarter (61 observations);
(3) Corresponds to the total balance related to the item of cash inflows
or outflows;
(4) Corresponds to the value after application of the weighting factors;
and
(5) Corresponds to the calculated value after the application of weighting
factors and limits.
The amount of net assets (HQLA)
resulted in an average of R$244.8 billion in the fourth quarter of 2020, compared to an average of R$112.9 billion in the fourth
quarter of 2019.
Related to the cash outflows, based
on the regulatory stress scenario (line 16), about 68.3% are redemptions and non-renewals of retail and wholesale funding without
collateral (unsecured), as shown on lines 2 and 5 of the table.
Another relevant group is the item
“Other contractual obligations” (line 14), which mainly includes the output streams of onlending operations, credit
cards and trade finance.
Regarding cash inflows, corresponding
to an average of R$49.1 billion in the fourth quarter of 2020, most significant are the receipts of loans operations (partial renewal),
the inflows of Trade Finance operations, cash and cash equivalents and redemptions of securities in addition to the inflow of transfer
and credit card operations.
Net Stable Funding Ratio
The Net Stable Funding Ratio (NSFR)
aims to assess if the Organization is financing its activities (assets) from more stable sources of funding (liabilities). The
NSFR corresponds to the ratio between the Available Stable Funding (ASF) and the Required Stable Funding (RSF), which are defined
according to the structures of assets and liabilities of the institution that are weighted according to the definitions of the
Regulator.
The following figure shows the main
components of the indicator:
Available Stable Funding (ASF)
The available stable funding is
represented by the Liabilities and Shareholders’ Equity, which are weighted according to their stability, in which the resources
considered as more stable are determined mainly by behavioral aspects of the customers, also considering their relationship with
the institution, legal aspects and other variables implied.
Required Stable Funding (RSF)
The required stable funding is determined
according to the assets in the balance sheet and other financial instruments, for example, credit limits provided and guarantees
given, which are weighted by aspects related to the type of operation, maturity, and counterparty, among others.
The following table provides information
regarding the Net Stable Funding Ratio (NSFR) and its components, as set forth in Circular No. 3,869/17:
70 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
R$ thousand
|
Information on the Long-term Indicator (NSFR)
|
Number of Lines
|
|
On December 31, 2020 (1)
|
Weighted Average (2)
|
Amount per effective term of residual maturity
|
Without expiration
|
Less than 6 months
|
Greater than or equal to 6 months and less than one year
|
Greater than or equal to one year
|
|
Available stable funding (ASF)
|
|
|
|
|
|
1
|
Capital
|
170,608,338
|
-
|
-
|
18,313,273
|
188,921,611
|
2
|
Reference Equity, gross of regulatory deductions
|
170,608,338
|
-
|
-
|
-
|
170,608,338
|
3
|
Other instruments not included in line 2
|
-
|
-
|
-
|
18,313,273
|
18,313,273
|
4
|
Retail funding:
|
162,839,765
|
179,861,858
|
803,877
|
2,236,352
|
320,279,728
|
5
|
Stable funding
|
98,174,559
|
79,593,950
|
-
|
-
|
168,880,084
|
6
|
Less stable funding
|
64,665,206
|
100,267,908
|
803,877
|
2,236,352
|
151,399,644
|
7
|
Wholesale Funding, of which:
|
40,091,080
|
503,793,771
|
36,532,855
|
82,124,727
|
231,014,206
|
8
|
Operating deposits and deposits of affiliated cooperatives
|
13,264,244
|
-
|
-
|
-
|
6,632,122
|
9
|
Other wholesale fundings
|
26,826,836
|
503,793,771
|
36,532,855
|
82,124,727
|
224,382,084
|
10
|
Operations in which the institution acts exclusively as an intermediary, assuming no rights or obligations, even if contingent
|
-
|
28,703,455
|
2,570,541
|
128,837
|
-
|
11
|
Other liabilities, of which:
|
67,492,309
|
49,383,786
|
-
|
-
|
4,100,984
|
12
|
Derivatives whose replacement value is less than zero
|
-
|
17,816,827
|
-
|
-
|
-
|
13
|
Other liabilities or shareholders' equity not included in the previous items
|
67,492,309
|
31,566,959
|
-
|
-
|
4,100,984
|
14
|
Total of Available Stable Funding (ASF)
|
-
|
-
|
-
|
-
|
744,316,530
|
15
|
Total High Quality Liquid Assets (HQLA)
|
-
|
-
|
-
|
-
|
12,066,027
|
16
|
Operating deposits held in other financial institutions
|
-
|
-
|
-
|
-
|
-
|
17
|
Securities, securities and transactions with financial institutions, non-financial institutions and central banks, of which:
|
6,869,747
|
334,657,624
|
78,329,704
|
322,434,714
|
393,088,895
|
18
|
Transactions with financial institutions collateralized by Level 1 HQLA
|
-
|
19,755,276
|
-
|
-
|
1,975,528
|
19
|
Transactions with financial institutions collateralized by HQLA Level 2A, Level 2B or without collateral
|
-
|
174,506,606
|
3,808,402
|
6,103,626
|
10,717,167
|
20
|
Loans and financing granted to wholesale, retail, central government and central bank operations, of which:
|
-
|
121,625,294
|
59,029,816
|
196,243,241
|
262,649,323
|
21
|
Operations with a Risk Weighting Factor (FPR) of less than or equal to 35%, pursuant to Circular No. 3644, of 2013
|
-
|
-
|
-
|
228,587
|
149,060
|
22
|
Residential real estate financing, of which:
|
-
|
3,040,642
|
2,778,993
|
42,524,930
|
33,760,904
|
23
|
Operations that comply with the provisions of Circular No. 3644, of 2013, art. 22
|
-
|
3,040,642
|
2,778,993
|
42,524,930
|
33,760,904
|
24
|
Securities not eligible for HQLA, including shares traded on the stock exchange
|
6,869,747
|
15,729,806
|
12,712,493
|
77,334,330
|
83,836,913
|
25
|
Operations in which the institution acts exclusively as an intermediary, assuming no rights or obligations, even if contingent
|
-
|
29,448,146
|
1,627,240
|
92,779
|
-
|
26
|
Other assets, of which:
|
210,548,649
|
45,074,927
|
(369,026)
|
8,192,910
|
201,162,188
|
27
|
Operations with gold and commodities, including those with a forecast of physical settlement
|
-
|
-
|
-
|
-
|
-
|
28
|
Assets
provided as a result of the deposit of initial guarantee margin in operation with derivatives and participation inmutualized
guarantee funds of clearing houses and clearing and settlement service providers that are interposed as central
counterparty
|
-
|
-
|
-
|
4,080,085
|
3,468,072
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
R$ thousand
|
29
|
Derivatives whose replacement value is greater than or equal to zero
|
-
|
23,905,679
|
-
|
-
|
-
|
30
|
Derivatives whose replacement value is less than zero, gross of the deduction of any guarantee provided as a result of the margin deposit
|
-
|
-
|
-
|
-
|
7,345,256
|
31
|
Other assets not included in the previous lines
|
210,548,649
|
21,169,248
|
(369,025)
|
4,112,825
|
190,348,860
|
32
|
Transactions not recorded in the statement of financial position
|
-
|
337,046,292
|
-
|
-
|
12,223,309
|
33
|
Total Required Stable Funding (RSF)
|
-
|
-
|
-
|
-
|
618,540,418
|
34
|
NSFR (%)
|
|
|
|
|
120.3%
|
(1) Corresponding to the total statement of financial position; and
(2) Corresponding to the value after applying the weighting factors.
The NSFR long-term indicator presented
a volume weighted for available stable funding resources much higher to that of required stable funding resources, with a surplus
weighted balance of R$125,776,112 thousand, resulting in an indicator of 120.3%.
The amount of available stable funding
(ASF) is formed largely by the funding of customers considering the level of stability as the main factor for the contribution
of the ASF. The calculation of December 2020 for the ASF presented a participation of 43% from the funding of Retail and 31% from
the funding of Wholesale.
The values of required stable funding
(RSF) are constituted by the asset items and by items not recognized on the statement of financial position. These statement of
financial position items are weighted according to their respective liquidity profile, therefore, the items related to loans and
other assets, with low or no liquidity, feature prominently in the RSF (high weighting factors), while highly liquid assets, such
as, for example unpledged federal public securities, receive low weighting factors. On December 31, 2020, the loan operations (line
20) accounted for 42% of the total RSF, while other assets (line 31) participated in 31% of the RSF.
Undiscounted cash flows of financial
liabilities
The table below presents the cash
flows payable for non-derivative financial liabilities, covering the remaining contractual period to maturity as from the date
of the consolidated statement of financial position. The values disclosed in this table represent the undiscounted contractual
cash flows.
|
R$ thousand
|
|
On December 31, 2020
|
|
Up to 1 month
|
From 1 to 3 months
|
From 3 months to 1 year
|
From 1 to 5 years
|
More than 5 years
|
Total
|
|
|
Deposits from banks
|
261,441,379
|
13,437,266
|
16,745,882
|
8,378,815
|
15,317,318
|
315,320,660
|
|
Deposits from customers
|
193,450,578
|
22,163,986
|
85,235,469
|
256,887,231
|
9,364
|
557,746,628
|
|
Securities issued
|
739,423
|
17,449,438
|
47,790,440
|
66,068,592
|
1,961,667
|
134,009,560
|
|
Subordinated debt
|
2,535
|
5,971
|
68,945
|
33,230,835
|
13,590,851
|
46,899,137
|
|
Other financial liabilities (1)
|
49,615,853
|
5,797,460
|
9,883,756
|
7,970,731
|
2,260,247
|
75,528,047
|
|
Total liabilities
|
505,249,768
|
58,854,121
|
159,724,492
|
372,536,204
|
33,139,447
|
1,129,504,032
|
|
72 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
|
R$ thousand
|
|
On December 31, 2019
|
|
Up to 1 month
|
From 1 to 3 months
|
From 3 months to 1 year
|
From 1 to 5 years
|
More than 5 years
|
Total
|
|
|
Deposits from banks
|
211,933,285
|
7,951,703
|
17,687,715
|
16,148,899
|
5,095,470
|
258,817,072
|
|
Deposits from customers
|
155,375,679
|
5,905,668
|
50,655,420
|
152,739,946
|
12,720
|
364,689,433
|
|
Securities issued
|
5,525,148
|
15,106,936
|
64,755,163
|
105,451,340
|
7,777,040
|
198,615,627
|
|
Subordinated debt
|
756
|
34,732
|
33,848
|
15,617,690
|
33,705,500
|
49,392,526
|
|
Other financial liabilities (1)
|
49,689,795
|
13,312,723
|
4,436,523
|
9,071,260
|
2,610,826
|
79,121,127
|
|
Total liabilities
|
422,524,663
|
42,311,762
|
137,568,669
|
299,029,135
|
49,201,556
|
950,635,785
|
|
(1) Include, mainly, credit card transactions,
foreign exchange transactions, negotiation and intermediation of securities, leases and capitalization bonds.
The assets available to meet all
the obligations and cover the outstanding commitments include cash and cash equivalents, financial assets, loans and advances.
Management may also cover unexpected cash outflows by selling securities and by having access to sources of additional funds, such
as asset-backed-markets.
The previous table shows the undiscounted
contractual cash flows of the financial liabilities of the Organization. The cash flows that the Organization estimates for these
instruments may vary significantly from those presented. For example, it is expected that demand deposits of customers will maintain
a stable or increasing balance, and it is not expected that these deposits will be withdrawn immediately.
The gross cash outflows presented
in the previous table refer to the undiscounted contractual cash flow related to the financial liability.
In the Organization, liquidity-risk
management involves a series of controls, mainly related to the establishment of technical limits, with the ongoing evaluation
of the positions assumed and the financial instruments used.
Undiscounted cash flows for derivatives
All the derivatives of the Organization
are settled at net value, and include:
|
·
|
Foreign currency derivatives
– over-the-counter currency options, currency futures, and currency options traded on an exchange; and
|
|
·
|
Interest rate derivatives
– interest rate swaps, forward rate contracts, interest rate options, other interest rate contracts, interest rate futures
traded on an exchange and interest rate options traded on an exchange.
|
The table below analyzes the derivative
financial liabilities that will be settled at net value, grouped based on the period remaining from the reporting date to the respective
maturity date. The values disclosed in the table are undiscounted cash flows.
|
R$ thousand
|
|
On December 31, 2020
|
|
Up to 1 month
|
From 1 to 3 months
|
From 3 months to 1 year
|
From 1 to 5 years
|
More than 5 years
|
Total
|
|
|
Differential of swaps payable
|
205,379
|
185,993
|
4,125,850
|
6,097,591
|
249,009
|
10,863,822
|
|
Non-deliverable forwards
|
1,020,584
|
252,454
|
571,226
|
89,059
|
-
|
1,933,323
|
|
• Purchased
|
477,415
|
140,329
|
274,623
|
84,010
|
-
|
976,377
|
|
• Sold
|
543,169
|
112,125
|
296,603
|
5,049
|
-
|
956,946
|
|
Premiums of options
|
1,143,498
|
80,198
|
250,664
|
1,043,564
|
592,180
|
3,110,104
|
|
Other
|
362,780
|
251,689
|
564,300
|
81,637
|
2,062
|
1,262,468
|
|
Adjustment payables - future
|
19,366
|
-
|
-
|
-
|
-
|
19,366
|
|
Total of derivative liabilities
|
2,751,607
|
770,334
|
5,512,040
|
7,311,851
|
843,251
|
17,189,083
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
|
R$ thousand
|
|
On December 31, 2019
|
|
Up to 1 month
|
From 1 to 3 months
|
From 3 months to 1 year
|
From 1 to 5 years
|
More than 5 years
|
Total
|
|
|
Differential of swaps payable
|
2,464,064
|
385,676
|
510,465
|
7,826,017
|
730,510
|
11,916,732
|
|
Non-deliverable forwards
|
90,835
|
115,400
|
151,731
|
67,247
|
-
|
425,213
|
|
• Purchased
|
79,986
|
80,476
|
129,615
|
66,498
|
-
|
356,575
|
|
• Sold
|
10,849
|
34,924
|
22,116
|
749
|
-
|
68,638
|
|
Premiums of options
|
361,740
|
33,437
|
114,228
|
956,353
|
66,493
|
1,532,251
|
|
Other
|
153,047
|
115,947
|
150,988
|
62,388
|
-
|
482,370
|
|
Adjustment payables - future
|
23,676
|
-
|
-
|
-
|
-
|
23,676
|
|
Total of derivative liabilities
|
3,093,362
|
650,460
|
927,412
|
8,912,005
|
797,003
|
14,380,242
|
|
74 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
Statement of financial position
by maturities
The tables below show the financial
assets and liabilities of the Organization segregated by maturities used for the management of liquidity risks, in accordance with
the remaining contractual maturities on the reporting date:
|
R$ thousand
|
|
On December 31, 2020
|
|
Current
|
Non-current
|
Total
|
|
1 to 30 days
|
31 to 180 days
|
181 to 360 days
|
1 to 5 years
|
More than 5 years
|
No stated maturity
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash and balances with banks
|
107,602,594
|
-
|
-
|
-
|
-
|
-
|
107,602,594
|
|
Financial assets at fair value through profit or loss
|
16,514,868
|
23,110,617
|
21,495,431
|
165,166,660
|
36,104,212
|
13,594,901
|
275,986,689
|
|
Financial assets at fair value through other comprehensive income
|
17,130,008
|
26,482,001
|
16,341,164
|
67,419,613
|
43,319,150
|
15,150,039
|
185,841,975
|
|
Loans and advances to customers, net of impairment
|
48,686,483
|
114,058,384
|
65,199,454
|
245,684,709
|
8,328
|
|
473,637,358
|
|
Loans and advances to banks, net of impairment
|
168,750,356
|
14,027,853
|
2,915,463
|
5,731,059
|
-
|
-
|
191,424,731
|
|
Securities, net of provision for losses
|
126,822
|
20,225,202
|
16,938,842
|
79,727,828
|
62,605,200
|
|
179,623,894
|
|
Other financial assets (1)
|
36,952,129
|
733,796
|
318,706
|
11,575,832
|
2,835,654
|
|
52,416,117
|
|
Total financial assets
|
395,763,260
|
198,637,853
|
123,209,060
|
575,305,701
|
144,872,544
|
28,744,940
|
1,466,533,358
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Financial liabilities at amortized cost
|
|
|
|
|
|
|
|
|
Deposits from banks
|
221,467,747
|
18,319,819
|
9,944,641
|
17,547,960
|
-
|
-
|
267,280,167
|
|
Deposits from customers (2)
|
202,956,338
|
50,518,912
|
54,368,623
|
237,448,870
|
-
|
-
|
545,292,743
|
|
Securities issued
|
2,461,435
|
33,338,441
|
34,365,862
|
74,738,087
|
-
|
-
|
144,903,825
|
|
Subordinated debt
|
8,307,884
|
22,838
|
383,673
|
34,971,870
|
-
|
9,559,967
|
53,246,232
|
|
Other financial liabilities (3)
|
49,615,853
|
14,456,376
|
1,224,840
|
7,970,731
|
2,260,247
|
-
|
75,528,047
|
|
Financial liabilities at fair value through profit or loss
|
5,462,495
|
1,063,954
|
937,849
|
11,233,384
|
-
|
-
|
18,697,682
|
|
Provision for Expected Credit Loss
|
|
|
|
|
|
|
|
|
Loan Commitments
|
-
|
-
|
-
|
3,859,316
|
-
|
-
|
3,859,316
|
|
Financial guarantees
|
-
|
-
|
-
|
2,318,930
|
-
|
-
|
2,318,930
|
|
Insurance technical provisions and pension plans (2)
|
234,914,602
|
-
|
-
|
44,550,782
|
-
|
-
|
279,465,384
|
|
Total financial liabilities
|
725,186,354
|
117,720,340
|
101,225,488
|
434,639,930
|
2,260,247
|
9,559,967
|
1,390,592,326
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
|
R$ thousand
|
|
On December 31, 2019
|
|
Current
|
Non-current
|
Total
|
|
1 to 30 days
|
31 to 180 days
|
181 to 360 days
|
1 to 5 years
|
More than 5 years
|
No stated maturity
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash and balances with banks
|
109,610,999
|
-
|
-
|
-
|
-
|
-
|
109,610,999
|
|
Financial assets at fair value through profit or loss
|
238,533,342
|
1,656,694
|
697,750
|
6,739,576
|
2,132,415
|
-
|
249,759,777
|
|
Financial assets at fair value through other comprehensive income
|
10,143,306
|
21,137,632
|
9,604,834
|
100,201,043
|
41,411,881
|
9,951,314
|
192,450,010
|
|
Loans and advances to customers, net of impairment
|
58,050,113
|
106,578,634
|
66,089,533
|
149,779,180
|
43,031,256
|
-
|
423,528,716
|
|
Loans and advances to banks, net of impairment
|
48,010,255
|
5,636,401
|
3,219,405
|
2,217,730
|
-
|
-
|
59,083,791
|
|
Securities, net of provision for losses
|
34,408,860
|
21,261,680
|
16,049,734
|
46,629,975
|
48,568,111
|
-
|
166,918,360
|
|
Other financial assets (1)
|
42,308,091
|
115,534
|
500,348
|
10,564,411
|
2,613,397
|
-
|
56,101,781
|
|
Total financial assets
|
541,064,966
|
156,386,575
|
96,161,604
|
316,131,915
|
137,757,060
|
9,951,314
|
1,257,453,434
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Financial liabilities at amortized cost
|
|
|
|
|
|
|
|
|
Deposits from banks
|
174,921,285
|
21,892,194
|
11,484,874
|
19,521,258
|
-
|
-
|
227,819,611
|
|
Deposits from customers (2)
|
163,312,671
|
20,878,485
|
41,249,228
|
140,787,156
|
-
|
-
|
366,227,540
|
|
Securities issued
|
5,533,584
|
37,545,964
|
43,156,796
|
84,491,220
|
-
|
-
|
170,727,564
|
|
Subordinated debt
|
2,079
|
38,097
|
281,141
|
39,432,224
|
-
|
9,559,967
|
49,313,508
|
|
Other financial liabilities (3)
|
49,689,795
|
13,312,723
|
4,436,523
|
9,071,260
|
2,610,826
|
-
|
79,121,127
|
|
Financial liabilities at fair value through profit or loss
|
2,940,618
|
794,723
|
471,835
|
10,036,907
|
-
|
-
|
14,244,083
|
|
Provision for Expected Credit Loss
|
|
|
|
|
|
|
|
|
Loan Commitments
|
-
|
-
|
-
|
2,318,404
|
-
|
-
|
2,318,404
|
|
Financial guarantees
|
-
|
-
|
-
|
1,970,321
|
-
|
-
|
1,970,321
|
|
Insurance technical provisions and pension plans (2)
|
228,230,978
|
2,373,787
|
1,035,302
|
36,662,624
|
-
|
-
|
268,302,691
|
|
Total financial liabilities
|
624,631,010
|
96,835,973
|
102,115,699
|
344,291,374
|
2,610,826
|
9,559,967
|
1,180,044,849
|
|
(1) It includes mainly foreign exchange transactions, debtors for
guarantee deposits and negotiation and intermediation of securities;
(2) Demand and savings deposits and technical provisions for insurance
and pension plans comprising VGBL and PGBL products are classified as up to 30 days, without considering average historical turnover;
and
(3) It includes mainly credit card transactions, foreign exchange
transactions, negotiation and intermediation of securities, finance lease and capitalization bonds.
76 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
The tables below show the assets
and liabilities of the Organization segregated by current and non-current, in accordance with the remaining contractual maturities
on the reporting date:
|
R$ thousand
|
On December 31, 2020
|
Current
|
Non-current
|
Total
|
Assets
|
|
|
|
Total financial assets
|
717,610,173
|
748,923,185
|
1,466,533,358
|
Non-current assets held for sale
|
1,202,488
|
|
1,202,488
|
Investments in associated companies
|
-
|
7,386,840
|
7,386,840
|
Premises and equipment, net
|
-
|
14,071,129
|
14,071,129
|
Intangible assets and goodwill, net
|
-
|
14,669,464
|
14,669,464
|
Taxes to be offset
|
6,586,660
|
8,743,760
|
15,330,420
|
Deferred income tax assets
|
-
|
76,984,262
|
76,984,262
|
Other assets
|
7,352,617
|
1,123,212
|
8,475,829
|
Total non-financial assets
|
15,141,765
|
122,978,667
|
138,120,432
|
Total assets
|
732,751,938
|
871,901,852
|
1,604,653,790
|
|
|
|
|
Liabilities
|
|
|
|
Total financial liabilities
|
944,132,182
|
446,460,144
|
1,390,592,326
|
Other reserves
|
5,361,434
|
20,221,489
|
25,582,923
|
Current income tax liabilities
|
1,596,284
|
-
|
1,596,284
|
Deferred income tax assets
|
-
|
1,249,650
|
1,249,650
|
Other liabilities
|
39,323,338
|
191,895
|
39,515,233
|
Total non-financial liabilities
|
46,281,056
|
21,663,034
|
67,944,090
|
Total equity
|
-
|
146,117,374
|
146,117,374
|
Total equity and liabilities
|
990,413,238
|
614,240,552
|
1,604,653,790
|
|
R$ thousand
|
On December 31, 2019
|
Current
|
Non-current
|
Total
|
Assets
|
|
|
|
Total financial assets
|
793,613,145
|
463,840,289
|
1,257,453,434
|
Non-current assets held for sale
|
1,357,026
|
-
|
1,357,026
|
Investments in associated companies
|
-
|
7,635,612
|
7,635,612
|
Premises and equipment, net
|
-
|
14,659,222
|
14,659,222
|
Intangible assets and goodwill, net
|
-
|
14,724,647
|
14,724,647
|
Taxes to be offset
|
11,569,545
|
4,116,256
|
15,685,801
|
Deferred income tax assets
|
-
|
59,570,055
|
59,570,055
|
Other assets
|
7,042,105
|
399,783
|
7,441,888
|
Total non-financial assets
|
19,968,676
|
101,105,575
|
121,074,251
|
Total assets
|
813,581,821
|
564,945,864
|
1,378,527,685
|
|
|
|
|
Liabilities
|
|
|
|
Total financial liabilities
|
823,582,682
|
356,462,167
|
1,180,044,849
|
Other reserves
|
5,525,041
|
19,714,888
|
25,239,929
|
Current income tax liabilities
|
2,595,277
|
-
|
2,595,277
|
Deferred income tax assets
|
-
|
1,080,603
|
1,080,603
|
Other liabilities
|
31,246,562
|
2,776,891
|
34,023,453
|
Total non-financial liabilities
|
39,366,880
|
23,572,382
|
62,939,262
|
Total equity
|
-
|
135,543,574
|
135,543,574
|
Total equity and liabilities
|
862,949,562
|
515,578,123
|
1,378,527,685
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
|
3.5.
|
Fair value of financial
assets and liabilities
|
For financial instruments that are
measured at fair value, disclosure of measurements is required according to the following hierarchical levels of fair value:
Quoted prices in active markets for
identical assets or liabilities. Level 1 assets and liabilities include debt and equity securities and derivative contracts that
are traded in an active market, as well as Brazilian government securities that are highly liquid and are actively traded in over-the-counter
markets.
Valuation uses observable inputs other
than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or
other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets
or liabilities. Level 2 assets and liabilities include derivative contracts whose value is determined using a pricing model with
inputs that are observable in the market or can be derived principally from or corroborated by observable market data, including
but not limited to yield curves, interest rates, volatilities, equity or debt prices and foreign exchange rates.
Valuation uses unobservable inputs that
are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3
assets and liabilities normally include financial instruments whose value is determined using pricing models, discounted cash flow
methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant Management
judgment or estimation. This category generally includes certain corporate and bank debt securities and certain derivative contracts.
The main non-observable data used in the determination of the fair value are the spreads of credit that vary between 2% and 9%.
To fair value securities which have
no consistent, regulatory updated, public price source, Bradesco uses models defined by the mark-to-market Commission and documented
in the mark-to-mark manual for each security type. Through the use of methods and both mathematical and financial models which
capture the effects and variations in the prices of marked-to-market assets, or similar instruments, Bradesco is able to ascertain
in a clear and consistent manner the determination of fair value of its Level 3 assets and liabilities.
78 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
The tables below present the composition
of the financial assets and liabilities measured at fair value, classified using the hierarchical levels:
|
R$ thousand
|
On December 31, 2020
|
Level 1
|
Level 2
|
Level 3
|
Fair Value
|
Brazilian government securities
|
209,599,900
|
6,345,101
|
3
|
215,945,004
|
Corporate debt and marketable equity securities
|
12,413,353
|
3,956,920
|
319,431
|
16,689,704
|
Bank debt securities
|
1,717,037
|
8,951,480
|
-
|
10,668,517
|
Mutual funds
|
6,516,477
|
-
|
-
|
6,516,477
|
Foreign governments securities
|
626,079
|
-
|
-
|
626,079
|
Brazilian sovereign bonds
|
725,515
|
-
|
-
|
725,515
|
Financial assets at fair value through profit or loss
|
231,598,361
|
19,253,501
|
319,434
|
251,171,296
|
Derivative financial instruments (assets)
|
138,708
|
24,657,390
|
19,295
|
24,815,393
|
Derivative financial instruments (liabilities)
|
(67,427)
|
(18,383,783)
|
(246,472)
|
(18,697,682)
|
Derivatives
|
71,281
|
6,273,607
|
(227,177)
|
6,117,711
|
Brazilian government securities
|
143,467,979
|
-
|
30,463
|
143,498,442
|
Corporate debt securities
|
1,128,700
|
3,627,146
|
138,187
|
4,894,033
|
Bank debt securities
|
5,576,877
|
496,598
|
53,830
|
6,127,305
|
Brazilian sovereign bonds
|
9,572,373
|
-
|
-
|
9,572,373
|
Foreign governments securities
|
6,508,218
|
-
|
-
|
6,508,218
|
Mutual funds
|
2,950,583
|
-
|
-
|
2,950,583
|
Marketable equity securities and other stocks
|
11,153,243
|
1,104,155
|
33,623
|
12,291,021
|
Financial assets at fair value through other comprehensive income
|
180,357,973
|
5,227,899
|
256,103
|
185,841,975
|
Total
|
412,027,615
|
30,755,007
|
348,360
|
443,130,982
|
|
R$ thousand
|
On December 31, 2019
|
Level 1
|
Level 2
|
Level 3
|
Fair Value
|
Brazilian government securities
|
195,987,017
|
4,848,858
|
3
|
200,835,878
|
Corporate debt and marketable equity securities
|
7,911,149
|
4,772,477
|
707,392
|
13,391,018
|
Bank debt securities
|
1,466,695
|
13,517,702
|
-
|
14,984,397
|
Mutual funds
|
5,518,833
|
-
|
-
|
5,518,833
|
Foreign governments securities
|
471,153
|
-
|
-
|
471,153
|
Brazilian sovereign bonds
|
47,308
|
-
|
-
|
47,308
|
Financial assets at fair value through profit or loss
|
211,402,155
|
23,139,037
|
707,395
|
235,248,587
|
Derivative financial instruments (assets)
|
107,388
|
14,392,323
|
11,479
|
14,511,190
|
Derivative financial instruments (liabilities)
|
(52,334)
|
(14,152,623)
|
(39,126)
|
(14,244,083)
|
Derivatives
|
55,054
|
239,700
|
(27,647)
|
267,107
|
Brazilian government securities
|
161,031,769
|
-
|
35,132
|
161,066,901
|
Corporate debt securities
|
2,344,002
|
2,541,288
|
600,387
|
5,485,677
|
Bank debt securities
|
5,098,002
|
414,477
|
-
|
5,512,479
|
Brazilian sovereign bonds
|
1,746,932
|
-
|
-
|
1,746,932
|
Foreign governments securities
|
6,454,894
|
-
|
-
|
6,454,894
|
Mutual funds
|
2,231,810
|
-
|
-
|
2,231,810
|
Marketable equity securities and other stocks
|
7,192,221
|
2,638,655
|
120,441
|
9,951,317
|
Financial assets at fair value through other comprehensive income
|
186,099,630
|
5,594,420
|
755,960
|
192,450,010
|
Total
|
397,556,839
|
28,973,157
|
1,435,708
|
427,965,704
|
Derivative Assets and Liabilities
The Organization’s derivative
positions are determined using quantitative models that require the use of multiple inputs including interest rates, prices and
indices to generate continuous yield or pricing curves and volatility factors. The majority of market inputs are observable and
can be obtained, from B3 (principal source) and the secondary market. Exchange traded derivatives valued using quoted prices are
classified within Level 1 of the valuation hierarchy. However, few classes of
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
derivative contracts are listed
on an exchange; those are classified as Level 2 or Level 3.
The yield curves are used to determine
the fair value by the method of discounted cash flow, for currency swaps and swaps based on other risk factors. The fair value
of futures and forward contracts is also determined based on quoted markets prices on the exchanges for exchanges-traded derivatives
or using similar methodologies to those described for swaps. The fair value of options is determined using external quoted prices
or mathematical models, such as Black-Scholes, using yield curves, implied volatilities and the fair value of the underlying asset.
Current market prices are used to determine the implied volatilities. The fair values of derivative assets and liabilities also
include adjustments for market liquidity, counterparty credit quality and other specific factors, where appropriate.
The majority of these models do
not contain a high level of subjectivity as the methodologies used in the models do not require significant judgment and inputs
to the model are readily observable from active quoted markets. Such instruments are generally classified within Level 2 of the
valuation hierarchy.
Derivatives that have significant
unobservable inputs to their valuation models are classified within Level 3 of the valuation hierarchy.
The table below presents a reconciliation
of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during
the years 2020 and 2019:
|
R$ thousand
|
|
Financial assets at fair value through profit or loss
|
Financial assets at fair value through other comprehensive income
|
Assets Derivatives
|
Liabilities Derivatives
|
Total
|
|
|
Balance on December 31, 2018
|
418,561
|
3,508,546
|
36,595
|
(23,901)
|
3,939,801
|
|
Included in profit or loss
|
(31,773)
|
(66,250)
|
-
|
-
|
(98,023)
|
|
Included in other comprehensive income
|
-
|
(226,873)
|
-
|
-
|
(226,873)
|
|
Acquisitions
|
132,408
|
318,623
|
-
|
(15,225)
|
435,806
|
|
Write-offs
|
(396,260)
|
(2,869,742)
|
(25,116)
|
-
|
(3,291,118)
|
|
Maturities
|
-
|
(21,680)
|
-
|
-
|
(21,680)
|
|
Transfer levels (1)
|
584,459
|
113,336
|
-
|
-
|
697,795
|
|
Balance on December 31, 2019
|
707,395
|
755,960
|
11,479
|
(39,126)
|
1,435,708
|
|
Included in profit or loss
|
10,571
|
(322,991)
|
-
|
-
|
(312,420)
|
|
Included in other comprehensive income
|
-
|
47,606
|
-
|
-
|
47,606
|
|
Acquisitions
|
54,015
|
90,000
|
7,816
|
(207,346)
|
(55,515)
|
|
Write-offs
|
(106,643)
|
(172,135)
|
-
|
-
|
(278,778)
|
|
Maturities
|
(8,902)
|
(1,502)
|
-
|
-
|
(10,404)
|
|
Transfer with categories
|
(27,152)
|
27,152
|
-
|
-
|
-
|
|
Transfer levels (1)
|
(309,850)
|
(167,987)
|
-
|
-
|
(477,837)
|
|
Balance on December 31, 2020
|
319,434
|
256,103
|
19,295
|
(246,472)
|
348,360
|
|
(1) These papers were reclassified between levels
2 and 3, as there was an increase in credit risk and the spread curve has unobservable parameters. When there is a reduction in
this credit risk, the papers are transferred from level 3 to level 2.
80 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
The tables below show the gains/(losses)
due to changes in fair value, including the realized and unrealized gains and losses, recorded in the consolidated statement of
income for Level 3 assets and liabilities during the years 2020, 2019 and 2018:
|
R$ thousand
|
|
Year ended December 31, 2020
|
|
Financial assets at fair value through profit or loss
|
Financial assets at fair value through other comprehensive income
|
Total
|
|
|
Interest and similar income
|
9,230
|
92,123
|
101,353
|
|
Net trading gains/(losses) realized and unrealized
|
1,341
|
(367,508)
|
(366,167)
|
|
Total
|
10,571
|
(275,385)
|
(264,814)
|
|
|
R$ thousand
|
|
Year ended December 31, 2019
|
|
Financial assets at fair value through profit or loss
|
Financial assets at fair value through other comprehensive income
|
Total
|
|
|
Interest and similar income
|
54,132
|
18,114
|
72,246
|
|
Net trading gains/(losses) realized and unrealized
|
(85,905)
|
(311,237)
|
(397,142)
|
|
Total
|
(31,773)
|
(293,123)
|
(324,896)
|
|
|
R$ thousand
|
|
Year ended December 31, 2018
|
|
Financial assets held for trading
|
Financial assets available for sale
|
Total
|
|
|
Interest and similar income
|
8,415
|
79,579
|
87,994
|
|
Net trading gains/(losses) realized and unrealized
|
15,727
|
(454,243)
|
(438,516)
|
|
Total
|
24,142
|
(374,664)
|
(350,522)
|
|
Sensitivity analysis for
financial assets classified as Level 3
|
R$ thousand
|
On December 31, 2020
|
Impact on income (1)
|
Impact on shareholders’ equity (1)
|
1
|
2
|
3
|
1
|
2
|
3
|
Interest rate in Reais
|
(25)
|
(3,672)
|
(6,971)
|
(4)
|
(504)
|
(992)
|
Price indexes
|
(4)
|
(83)
|
(165)
|
-
|
-
|
-
|
Equities
|
(582)
|
(14,548)
|
(29,097)
|
(185)
|
(4,623)
|
(9,246)
|
|
R$ thousand
|
On December 31, 2019
|
Impact on income (1)
|
Impact on shareholders’ equity (1)
|
1
|
2
|
3
|
1
|
2
|
3
|
Interest rate in Reais
|
(44)
|
(6,489)
|
(12,504)
|
(12)
|
(1,798)
|
(3,436)
|
Price indexes
|
(10)
|
(383)
|
(761)
|
-
|
-
|
-
|
Equities
|
(2,019)
|
(50,472)
|
(100,944)
|
(978)
|
(24,456)
|
(48,913)
|
(1) Values net of taxes.
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
The sensitivity analyses were carried
out based on the scenarios prepared for the dates shown, always taking into consideration market inputs available at the time and
scenarios that would adversely impact our positions, in accordance with the scenarios below:
Scenario 1: Based
on market information (B3, Anbima, etc.), stresses were applied for 1 basis point on the interest rate and 1.0% variation on prices.
For example: for a Real/US dollar exchange rate of R$5.18 a scenario of R$5.23 was used, while for a 1-year fixed interest rate
of 2.86%, a 2.87% scenario was applied;
Scenario 2: 25.0%
stresses were determined based on market information. For example: for a Real/US dollar exchange rate of R$5.18 a scenario of R$6.47
was used, while for a 1-year fixed interest rate of 2.86%, a 3.57% scenario was applied. The scenarios for other risk factors also
had 25.0% stresses in the respective curves or prices; and
Scenario 3: 50.0%
stresses were determined based on market information. For example: for a Real/US dollar quote of R$5.18 a scenario of R$7.77 was
used, while for a 1-year fixed interest rate of 2.86%, a 4.29% scenario was applied. The scenarios for other risk factors also
had 50.0% stresses in the respective curves or prices.
82 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
Financial instruments not measured
at fair value
The table below summarizes the carrying
amounts and the fair values of the financial assets and liabilities that were not presented in the consolidated statements of financial
position at their fair value, classified using the hierarchical levels:
|
R$ thousand
|
On December 31, 2020
|
Fair Value
|
Book value
|
Level 1
|
Level 2
|
Level 3
|
Total
|
Financial assets (1)
|
|
|
|
|
|
Loans and receivables
|
|
|
|
|
|
· Banks
|
-
|
191,473,570
|
-
|
191,473,570
|
191,424,731
|
· Customers
|
-
|
-
|
478,250,100
|
478,250,100
|
473,637,358
|
Securities at amortized cost
|
105,223,797
|
69,644,416
|
9,138,672
|
184,006,885
|
179,623,894
|
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
Deposits from banks
|
-
|
-
|
267,240,795
|
267,240,795
|
267,280,167
|
Deposits from customers
|
-
|
-
|
545,341,621
|
545,341,621
|
545,292,743
|
Securities issued
|
-
|
-
|
143,988,723
|
143,988,723
|
144,903,825
|
Subordinated debt
|
-
|
-
|
54,192,090
|
54,192,090
|
53,246,232
|
|
R$ thousand
|
On December 31, 2019
|
Fair Value
|
Book value
|
Level 1
|
Level 2
|
Level 3
|
Total
|
Financial assets (1)
|
|
|
|
|
|
Loans and receivables
|
|
|
|
|
|
· Banks
|
-
|
59,091,251
|
-
|
59,091,251
|
59,083,791
|
· Customers
|
-
|
-
|
428,641,947
|
428,641,947
|
423,523,411
|
Securities at amortized cost
|
102,851,594
|
64,025,403
|
11,638,647
|
178,515,644
|
166,918,360
|
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
Deposits from banks
|
-
|
-
|
227,880,098
|
227,880,098
|
227,819,611
|
Deposits from customers
|
-
|
-
|
366,023,072
|
366,023,072
|
366,227,540
|
Securities issued
|
-
|
-
|
169,488,130
|
169,488,130
|
170,727,564
|
Subordinated debt
|
-
|
-
|
50,108,020
|
50,108,020
|
49,313,508
|
(1) Amounts of loans and receivables
are presented net of the provision for impairment losses.
Below we list the methodologies
used to determine the fair values presented above:
Loans and receivables
Fair values were estimated for groups
of similar loans based upon type of loan, credit quality and maturity. Fair value for fixed-rate transactions was determined by
discounted cash flow estimates using interest rates approximately equivalent to our rates for new transactions based on similar
contracts. Where credit deterioration has occurred, estimated cash flows for fixed and floating-rate loans have been reduced to
reflect estimated losses.
The fair values for performing loans
are calculated by discounting scheduled principal and interest cash flows through maturity using market discount rates and yield
curves that reflect the credit and interest rate risk inherent to the loan type at each reporting date. The fair values for impaired
loans are based on discounting cash flows or the value of underlying collateral.
The non-performing loans were allocated
into each loan category for purposes of calculating the fair-value disclosure. Assumptions regarding cash flows and discount rates
are based on available market information and specific borrower information.
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
Bonds and securities at amortized
cost
Financial assets are carried at
amortized cost. Fair values are estimated according to the assumptions described in Note 2(d). See Note 24 for further details
regarding the amortized cost.
Deposits from banks and customers
The fair value of fixed-rate deposits
with stated maturities was calculated using the contractual cash flows discounted with current market rates for instruments with
similar maturities and terms. For floating-rate deposits, the carrying amount was considered to approximate fair value.
Funds from securities issued
The carrying values of funds from
securities issued approximate the fair values of these instruments.
Subordinated debt
Fair values for subordinated debts
were estimated using a discounted cash flow calculation that applies interest rates available in the market for similar maturities
and terms.
|
3.6.
|
Independent Model Validation
|
The main purpose of the Independent
Model Validation Area – AVIM is to verify if the models operate according to the objectives envisaged, as well as if its
results are suitable for the uses for which they are intended.
The Independent Model Validation
Area adopts a methodology that includes quantitative and qualitative dimensions, assessing the adequacy of processes of governance,
construction of models and their assumptions, and use and monitoring of the models.
|
3.7.
|
Insurance risk/underwriting
risk
|
Underwriting risk is the risk related
to a possible loss event that may occur in the future and for which there is uncertainty over the amount of damages that result
from it. The risk arises from an economic situation not matching the Organization’s expectations at the time of drafting
its underwriting policy with regard to the uncertainties existing both in the definition of actuarial assumptions and in the constitution
of technical provisions as well as for pricing and calculating premiums and contributions. In short, it refers to the risk of the
frequency or severity of loss events or benefits exceeding the Organization’s estimates Historical experience shows that
the bigger the group of contracts of similar risks, the lower the variability on the cash flows that the Organization incurs to
cope with events of claims. In that way, the risk management process seeks to diversify insurance operations, aiming to excel at
balancing the portfolio, and is based on the grouping of risks with similar characteristics in order to reduce the impact of individual
risks.
Risk underwriting management is
carried out by the Technical Superintendence and the policies of underwriting and acceptance of risks are periodically evaluated.
In addition, the Board of Risk Management, Internal Controls, Compliance, Data Management, Organization & Project and
Ombudsman, an integral part of the framework of risk management, have as one of their main tasks, the structuring of internal models
for underwriting risk and the calculation of regulatory capital for these businesses, and to certify the technical provisions,
in addition to evaluating the impact of new products in the risk capital of the Organization.
Uncertainties over estimated
future claim payments
Claims are due as they occur and
the Organization must indemnify all covered claims that occurred during the contract period, even if the notification occurs after
the end of its term. However, claims are reported over a period and a significant portion of these claims are accounted for in
the Provisions for Claims Incurred but Not Reported (IBNR). The estimated cost of claims includes direct expenses
84 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
to be incurred when settling them.
In this way, giving the uncertainties
inherent to the process for estimating claims provisions, the final settlement may be different from the original technical provision.
Asset and liability management
(ALM)
The Organization periodically analyzes
future cash flows on assets and liabilities held in portfolio ALM – Asset Liability Management. The method used for ALM analysis
is to observe the sufficiency or insufficiency of the present value of the stream of assets in relation to the present value of
the stream of liabilities, and the duration of assets in relation to that of liabilities. The aim is to verify that the situation
of the portfolio of assets and liabilities is balanced in order to honor the Organization’s future commitments to its insured
persons.
The actuarial assumptions used to
generate the flow of liabilities are in line with international actuarial practices and also with the characteristics of the Organization’s
product portfolio.
Risk management by product
The continuous monitoring the insurance
contract portfolio enables us to track and adjust premiums practiced, as well as to assess the need for alterations. Other monitoring
tools in use include: (i) sensitivity analysis, and (ii) algorithmic checks and corporate system notifications (underwriting, issuance
and claims).
The main risks associated with
non-life insurance
The risks associated with non-life
insurance include, among others:
|
·
|
Oscillations in the incidence,
frequency and severity of the claims and the indemnifications of claims in relation to the expectations;
|
|
·
|
Unpredictable claims arising
from an isolated risk;
|
|
·
|
Inaccurate pricing or
inadequate underwriting of risks;
|
|
·
|
Inadequate reinsurance
policies or risk transfer techniques; and
|
|
·
|
Insufficient or excessive
technical provisions.
|
Generally, the non-life insurance
underwritten by the Organization is of short duration. The underwriting strategies and goals are adjusted by management and informed
through internal guidelines and practice and procedure manuals.
The main risks inherent to the main
non-life insurance business lines are summarized as follows:
|
·
|
Auto insurance includes,
among other things, physical damage to the vehicle, loss of the insured vehicle, third-party liability insurance for vehicles and
personal accident for passengers; and
|
|
·
|
Business, home and miscellaneous
insurance includes, among other things, fire risks (e.g. fire, explosion and business interruption), natural disasters (e.g., earthquakes,
storms and floods), as well as liability insurance.
|
Non-life insurance risk management
The Board for Risk Management monitors
and evaluates risk exposure and undertakes the development, implementation and revision of guidelines related to underwriting.
The implementation of these guidelines, the treatment of claims, the reinsurances and the constitution of technical provisions
for insurance purposes of these risks are carried out by the technical departments of each risk area. The Technical Departments
has developed mechanisms such as the analysis of possible risk accumulations based on monthly reports that identify, quantify and
manage accumulated exposures in order to keep them within the limits defined in the internal guidelines.
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
The main risks associated with
life insurance and private pension plans
Life insurance and private pension
plans are generally long-term in nature and, accordingly, various actuarial assumptions are used to manage and estimate the risks
involved, such as: assumptions about returns on investments, longevity, mortality and persistence rates in relation to each business
unit. Estimates are based on historical experience and on actuarial expectations.
The risks associated with life insurance
and private pension plans include:
|
·
|
Biometric risks, which
includes mortality experience, adverse morbidity, longevity and disability. The mortality risk may refer to policyholders living
longer than expected (longevity) or passing away before expected. This is because some products pay a lump sum if the person dies,
and others pay regular amounts while the policyholder is alive;
|
|
·
|
Policyholder’s behavior
risks, which includes persistence rate experience. Low persistence rates for certain products may result in less policies/private
pension plan agreements remaining contracted to help cover fixed expenses and may reduce future positive cash flows of the underwritten
business. A low persistence rate may affect liquidity of products which carry a redemption benefit;
|
|
·
|
Group life-insurance risk
results from exposure to mortality and morbidity rates and to operational experience worse than expected on factors such as persistence
levels and administrative expenses; and
|
|
·
|
Some Life and Pension
Plan products have pre-defined yield guarantees, and thereby face risk from changes in financial markets, returns on investments
and interest rates that are managed as a part of market risk.
|
Life insurance and private pension
plan risk management
The Board for Risk Management monitors
and assesses risk exposure and is responsible for developing, implementing and reviewing policies relating to underwriting. The
implementation of these guidelines, the processing claims and the technical reserves for insurance purposes of these risks are
carried out by the Technical Department; The Technical Department has developed mechanisms, such as the analysis of possible risk
accumulations based on monthly reports that identify, quantify and manage accumulated exposures to keep them within limits defined
by internal policies.
Longevity risks are monitored in
relation to the most recent data and to the trends in the environments in which the Organization operates. Management monitors
exposure to this risk and the capital implications of it in order to manage the possible impacts, as well as to ensure that business
has the capital that it may require. The Management adopts improvement assumptions in its calculation of technical provisions in
order to predict and thus be covered for possible impacts generated by the improvement in life expectancy of the insured/assisted
population.
Mortality and morbidity risks are
partially mitigated through reinsurance contracts for catastrophes.
Persistency risk is managed through
frequent monitoring of the Organization’s historic experience. Management has also defined rules on the management and monitoring
of persistence and the implementation of specific initiatives to improve, when appropriate, the renewal of policies that expire.
The risk of a high level of expenses
is primarily monitored through the evaluation of the profitability of the business units and the frequent monitoring of expense
levels.
The main risks associated with
health insurance
The risks associated with health
insurance include, among others:
|
·
|
Variations in cause, frequency
and severity of indemnities of claims compared to expectations;
|
|
·
|
Unforeseen claims resulting
from isolated risk;
|
|
·
|
Incorrect pricing or inadequate
subscription of risks; and
|
|
·
|
Insufficient or overvalued
technical provisions.
|
86 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
For individual health insurance,
for which certain provisions are calculated based on expected future cash flows (difference between expected future claims and
expected future premiums), there are a number of risks, in addition to those cited above, such as biometric risk, including mortality
and longevity experience and the insured’s behavioral risk, which covers persistency experience, as well as interest-rate
risk that is managed as a part of market risk.
Management of health insurance
risk
The Board for Risk Management
monitors and evaluates risk exposure and is responsible for the development, implementation and review of policies that cover subscription,
treatment of claims and technical insurance provisions. The implementation of these policies and management of risks are supported
by the Superintendent of Actuary and Statistics. The Superintendent of Actuary and Statistics has developed mechanisms, such as
statistical reports and performance by type that identify, quantify and manage accumulated exposure in order to keep it within
the limits defined by internal policies.
Longevity risk is carefully monitored
using the most recent data and tendencies of the environment in which the Organization operates. Management monitors exposure to
this risk and its capital implications in order to manage possible impacts, as well as the funding that the future business needs.
Persistency risk is managed through
the frequent management of the Organization’s experience. Management has also established guidelines for the management of
persistency in order to monitor and implement specific initiatives, when necessary, to improve retention of policies.
The risk of elevated expenses
is primarily monitored through the evaluation of the profitability of business units and the frequent monitoring of expense levels.
Risk Concentration
The Organization operates throughout
the national territory, so that potential exposures to the concentration of risks are monitored by management reports where the
results of the contracts sold within the scope of the business of the main product groups are observed. The table below shows the
concentration of risks, based on the amounts of premiums written net of reinsurance, cancellations and social security contributions:
Product group
|
R$ thousand
|
On December 31
|
2020
|
2019
|
Non-Life
|
5,421,704
|
5,716,063
|
Pension plans
|
26,118,492
|
29,518,767
|
Life insurance
|
8,275,557
|
8,588,733
|
Sensitivity test
The objective of the sensitivity
test is to measure the impact on the result and shareholders’ equity of the Organization, if isolated reasonably possible
changes occur, in assumptions inherent to their operations that might be affected due to the process of risk underwriting and that
are considered relevant to the balance sheet date.
As risk factors, the following significant
assumptions were identified:
|
·
|
Risk-free interest rate
– represents the minimum level of return expected by the Organization of pension products. The test evaluated the impact
of a reduction in the curve of the related interest free of risk;
|
|
·
|
Longevity (Improvement)
– represents the life expectancy of an individual, based on the year of their birth, current age and other demographic factors,
including sex. The test evaluated the impact of an increase on the estimate of improvement in life expectancy for annuity contracts;
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
|
·
|
Conversion into income
– The test evaluated the impact of an increase on the rate of conversion of pension products into income for annuity contracts;
and
|
|
·
|
Claims ratio – is
the main indicator of insurance contracts and is equivalent to the ratio between expenses and income that the Organization received
by contract. The test evaluated the impact of an increase on the claims ratio.
|
Results of sensitivity testing
The sensitivity test for life insurance
and pension plans was carried out considering the same bases and groupings of the LAT test with the applications of the variations
shown in the table below.
|
R$ thousand
|
|
On December 31, 2020
|
|
Interest rate
|
Longevity (improvement)
|
Conversion to income
|
|
Percentage adjustment to each assumption:
|
Variation of -5%
|
0.2%
|
+ 5 p.p.
|
|
|
Total
|
(166,933)
|
(83,624)
|
(41,036)
|
|
For non-life, life and health insurance,
the table below shows the result of the premium issued (net of reinsurance, cancellations and social security contributions), if
there was an increase in the loss ratio by 1 percentage point in the last twelve months of the calculation base date:
Product group
|
R$ thousand
|
Gross of reinsurance
|
Net of reinsurance
|
On December 31
|
2020
|
2019
|
2020
|
2019
|
Non-Life
|
(33,524)
|
(34,211)
|
(33,253)
|
(33,922)
|
Life
|
(27,073)
|
(31,701)
|
(26,967)
|
(31,549)
|
Health
|
(139,863)
|
(128,555)
|
(139,863)
|
(128,555)
|
Limitations of sensitivity analysis
Sensitivity analyses show the effect
of a change in an important premise while other premises remain unchanged. In real situations, premises and other factors may be
correlated. It should also be noted that these sensitivities are not linear and therefore greater or lesser impacts should not
be interpolated or extrapolated from these results.
Sensitivity analyses do not take
account of the fact that assets and liabilities are highly managed and controlled. Additionally, the Organization’s financial
position may vary with any movement occurring in the market. For example, the risk management strategy aims to manage exposure
to fluctuations in the market. As investment markets move through various levels, management initiatives may include sales of investments,
altered portfolio allocations, and other protective measures.
Other limitations of the sensitivity
analyses include the use of hypothetical market movements to show the potential risk, which only represents Management’s
view of possible market changes in the near future, which cannot be foreseen with certainty, and they also assume that all interest
rates move in the same manner.
Credit risk
Credit risk consists of the possible
incurrence of losses in value of financial assets and reinsurance assets, as a consequence of noncompliance, by the counterparty,
of its financial obligations according to agreed terms with the Organization.
This risk may materialize in different
ways, among others.
88 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
|
·
|
Losses arising from delinquency,
due to lack of payment of the premium or of the installments by the insured person;
|
|
·
|
Possibility of any issuer
of financial asset not making the payment on the due date or the amortizations provided for each security; and
|
|
·
|
Inability or unfeasibility
of recovery of commissions paid to brokers when policies are canceled.
|
Credit risk management
The Organization performs various
sensitivity analyses and stress tests as tools for management of financial risks. The results of these analyses are used for risk
mitigation and to understand the impact on the results and the shareholders’ equity of the Organization in normal conditions
and in conditions of stress. These tests take into account historical scenarios and scenarios of market conditions provisioned
for future periods, and their results are used in the process of planning and decision making, as well as the identification of
specific risks arising on financial assets and liabilities held by the Organization. The management of credit risk for reinsurance
operations includes monitoring of exposures to credit risk of individual counterparts in relation to credit ratings by risk assessment
companies, such as Am Best, Fitch Ratings and Standard & Poor’s and Moody’s. The reinsurers are subject to a process
of analysis of credit risk on an ongoing basis to ensure that the goals of the mitigation of credit risk will be achieved.
In that sense, credit risk management
in the Organization is a continuous and evolving process including the mapping, development, evaluation and diagnosis of existing
models, instruments and procedures that requires a high level of discipline and control in the analysis of operations to preserve
the integrity and independence of processes. It is a process carried out at the corporate level using structured, independent internal
procedures based on proprietary documentation and reports, assessed by the risk management structures of the Organization and Banco
Bradesco, and based on the gradual deployment of internal models for the determination, measurement and calculation of capital.
Meetings are held quarterly of the
Executive Committee for Risk Management of Grupo Bradesco Seguros, of the Executive Committee of Investments and, monthly, of the
Internal Meeting of Asset Allocation by the area of Investment Management of Bradesco Seguros S.A. for the deliberative negotiations,
possessing all the functions, which are necessary for the regulatory/improvement requirement in the processes of management.
Reinsurance policy
No matter how conservative and selective
insurers are in the choice of their partners, the purchase of reinsurance presents, naturally embedded in its operation, a credit
risk. However, in Brazil this risk has relatively decreased due to current legal laws and regulations, once insurers should operate
with reinsurers registered with SUSEP that are classified as local, admitted or occasional. Reinsurers classified as admitted and
occasional, headquartered abroad, must meet specific minimum requirements set forth in current legislation.
The Bradesco Organization’s
policy for purchasing reinsurance and approval of reinsurers are the responsibility of the Board of Executive Officers, observing
to the minimum legal requirements and regulations, some of them aimed at minimizing the credit risk intrinsic to the operation,
and considering the shareholders’ equity consistent with amounts transferred.
Another important aspect of managing
reinsurance operations is the fact that the Organization aims to work within its contractual capacity, thereby avoiding the frequent
purchases of coverages in optional agreements and higher exposures to the credit risk.
Practically, all property damage
portfolios, except automotive, are hedged by reinsurance which, in most cases, is a combination of proportional and non-proportional
plans by risk and/or by event.
Currently, part of the reinsurance
contracts (proportional and non-proportional) are transferred to IRB Brasil Resseguros S.A. Some admitted reinsurers participate
with lower individual percentages, but all have minimum capital and rating higher than the minimum established by the Brazilian
legislation, which, in Management’s judgment, reduces the credit risk.
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
Exposure to insurance credit
risk
Management believes that maximum
exposure to credit risk arising from premiums to be paid by insured parties is low, since, in some cases, coverage of claims may
be canceled (under Brazilian regulations), if premiums are not paid by the due date. Exposure to credit risk for premium receivables
differs between risks yet to be incurred and risks incurred, since there is higher exposure on incurred-risk lines for which coverage
is provided in advance of payment of the insurance premium.
The Organization is exposed to concentrations
of risk with individual reinsurance companies, due to the nature of the reinsurance market and strict layer of reinsurance companies
with acceptable loan ratings. The Organization manages the exposures of its reinsurance counterparties, limiting the reinsurance
companies that may be used, and regularly assessing the default impact of the reinsurance companies.
Operational risk is represented
by the possibility of incurring losses arising from failures, deficiencies or the inadequacy of internal processes, people, systems
and external events. This includes legal risk, associated with the activities we carry out.
Operational Risk Management
Process
The Organization have adopted the
Three Lines of Defense model, which consists of identifying and assigning specific responsibilities to the Departments so that
essential operational risk management tasks are performed in an integrated and coordinated manner. Accordingly, the following procedures
are carried out:
|
·
|
Identifying, evaluate
and monitor the operational risks inherent to the Organization's activities;
|
|
·
|
Assessing the operational
risks inherent in new products and services, in order to promote their adequacy to the legislation, procedures and controls;
|
|
·
|
Mapping and addressing
records of operational losses to make up an internal data base;
|
|
·
|
Provide analyses that
offer quality information to Departments, aimed at improving operational risk management;
|
|
·
|
Evaluating the scenarios
and indicators for the purposes of economic capital composition and improvement of the Organization's risk maps;
|
|
·
|
Assessing and calculating
regulatory and economic capital needs in connection with the operational risk; and
|
|
·
|
Preparing reports on the
operational risk and its main aspects in order to support the strategic decisions of the Organization.
|
These procedures are supported by
a number of internal controls, validated on an independent basis in relation to their effectiveness and operations, in order to
meet the risk appetite limits established by the Organization.
Operational Risk Measurement
Methodology
In compliance with the provisions
of Circular No. 3,640 of the Central Bank of Brazil, the Organization adopted the Alternative Standardized Approach to calculate
the portion of assets weighted by risk related to Operational Risk (RWAopad).
In addition, the Organization uses
internal data on operating losses, which are elements for determining the economic capital of operational risk based on an internal
model. In this context, the Organization classifies operational risk events as:
90 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
Operational Risk Events
|
n Internal Fraud
|
n External Events
|
n External Fraud
|
n Information Technology
|
n Human Resources
|
n Processes
|
n Commercial Relations
|
n Interruption of Activities
|
|
|
Another component that is part of
the calculation of economic capital, and which are used to analyze scenarios and compare operational loss events against large
global banks, is external data and, therefore, the Organization makes use of the operating loss database of a worldwide consortium
called Operational Riskdata Exchange (ORX).
Control and Monitoring
Operational risk is primarily controlled
and followed up by an independent area, the Integrated Risk Control Department, and is supported by a number of areas that integrate
the management process of this risk.
4) Estimates
and judgments
The Organization makes estimates
and judgments that can affect the reported amount of assets and liabilities within the next year. All estimates and judgments are
best estimates undertaken in accordance with the applicable standard. Such estimates and judgments are continually evaluated and
based in our historical experience and a number of other factors including future event expectations, regarded as reasonable, under
the current circumstances.
The estimates and judgments that
have a significant risk and might have a relevant impact on the amounts of assets and liabilities within the next year are disclosed
below. The actual results may be different from those established by these estimates and judgments.
Fair value of financial instruments
Financial instruments recognized
at fair value in our consolidated financial statements consist primarily of financial assets measured at fair value through profit
or loss, including derivatives and financial assets classified as measured at fair value through other comprehensive income. The
fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participant at the reporting.
These financial instruments are categorized
within a hierarchy based on the lowest level of input that is significant to the fair value measurement. For instruments classified
as level 3, we have to apply a significant amount of our own judgment in arriving at the fair value measurement. We base our judgment
decisions on our knowledge and observations of the markets relevant to the individual assets and liabilities, and those judgments
may vary based on market conditions. In applying our judgment, we look at a range of third-party prices and transaction volumes
to understand and assess the extent of market benchmarks available and the judgments or modeling required in third-party processes.
Based on these factors, we determine whether the fair values are observable in active markets or whether the markets are inactive.
Imprecision in estimating unobservable
market inputs can impact the amount of revenue or loss recorded for a particular position. Furthermore, while we believe our valuation
methods are appropriate and consistent with those of other market participants, the use of different methodologies or assumptions
to determine the fair value of certain financial instruments could result in a different estimate of fair value on the reporting
date. For a detailed discussion of the determination of fair value of financial instruments, see Note 3.4.
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
Expected credit loss
The measurement of the provision
for expected credit losses on loans for financial assets measured at amortized cost and FVOCI requires the use of complex quantitative
models and assumptions about future economic conditions and loan behavior.
Several significant judgments are
also required to apply the accounting requirements for the measurement of the expected credit loss, such as:
|
·
|
Determine the criteria
in order to establish the significant increase of credit risk;
|
|
·
|
Select quantitative models
and assumptions suitable for the measurement of the expected credit loss;
|
|
·
|
Establish several prospective
scenarios and assumptions;
|
|
·
|
Group similar financial
assets for purposes of measuring the expected credit loss; and
|
|
·
|
Define the expected time
frame of exposure to credit risk for instruments without the contractual maturity defined.
|
The process to determine the level
of provision for expected credit loss requires estimates and the use of judgment; it is possible that actual losses presented in
subsequent periods will differ from those calculated according to current estimates and assumptions.
The explanation of assumptions and
estimation techniques used in the measurement of expected credit loss is further detailed in Note 3.1.
Impairment of intangible
assets and goodwill
The Organization analyzes, at least
annually, whether the carrying value of intangible assets and goodwill (includes goodwill identified in the acquisition of associates)
was impaired. The first step of the process requires the identification of independent Cash-Generating Units and the allocation
of goodwill to these units. The carrying amount of the CGU, including the allocated goodwill, is compared to its recoverable amount
to determine whether any impairment exists. If the value in use of a cash-generating unit is less than its carrying value, goodwill
will be impaired. Detailed calculations may need to be carried out taking into consideration changes in the market in which a business
operates (e.g., competitive activity, regulatory change). The value in use is based upon discounting expected pre-tax cash flows
at a risk-adjusted interest rate appropriate to the operating unit, the determination of both requires one to exercise one’s
judgment. While forecasts are compared with actual performance and external economic data, expected cash flows naturally reflect
the Organization’s view of future performance.
Income tax
The determination of the amount
of our income tax liability is complex, and our assessment is related to our analysis of our deferred tax assets and liabilities
and income tax payable. In general, our evaluation requires that we estimate future amounts of current and deferred taxes. Our
assessment of the possibility that deferred tax assets are realized is subjective and involves assessments and assumptions that
are inherently uncertain in nature. The underlying support for our assessments and assumptions could change over time as a result
of unforeseen events or circumstances, affecting our determination of the amount of our tax liability.
Significant judgment is required
in determining whether it is more likely than not that an income tax position will be sustained upon examination, even after the
outcome of any related administrative or judicial proceedings based on technical merits. Further judgment is then required to determine
the amount of benefit eligible for recognition in our consolidated financial statements.
In addition, we have monitored the
interpretation of tax laws by, and decisions of, the tax authorities and Courts so that we can adjust any prior judgment of accrued
income taxes. These adjustments may also result from our own income tax planning or resolution of income tax controversies, and
may be material to our operating results for any given period. For additional information about income tax, see Note 16.
92 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
Technical insurance provisions
Insurance technical provisions (reserves)
are liabilities representing estimates of the amounts that will become due at a future date, to or on behalf of our policyholders
– see Note 2(l). Expectations of loss ratio, mortality, longevity, length of stay and interest rate are used. These assumptions
are based on our experience and are periodically reviewed against industry standards to ensure actuarial credibility.
Contingent liabilities
The Provisions are regularly reviewed
and constituted, where the loss is deemed probable, based on the opinion of the legal counsel, the nature of the lawsuit, similarity
to previous lawsuits, complexity and the courts standing. Contingencies classified as Probable Loss are recorded in the Consolidated
Statements of Financial Position under “Other Provisions”.
5) Operating
segments
The Organization operates mainly
in the banking and insurance segments. Our banking operations include operations in the retail, middle-market and corporate sectors,
lease, international bank operations, investment bank operations and as a private bank. The Organization also conducts banking
segment operations through its branches located throughout the country, in branches abroad and through subsidiaries as well as
by means of shareholding interests in other companies. Additionally, we are engaged in insurance, supplemental pension plans and
capitalization bonds through our subsidiary, Bradesco Seguros S.A. and its subsidiaries.
The following segment information
was prepared based on reports made available to Management to evaluate performance and make decisions regarding the allocation
of resources for investments and other purposes. Our Management uses a variety of accounting information, which includes the proportional
consolidation of associates and joint ventures. Accordingly, the information of the segments shown in the following tables was
prepared in accordance with the specific procedures and other provisions of the Financial Institutions Accounting Plan and the
total amounts, which correspond to the consolidated information, were prepared in accordance with IFRS, issued by the IASB.
The main assumptions for the segmentation
of income and expenses include (i) surplus cash invested by the entities operating in insurance, supplemental pension and capitalization
bonds are included in this segment, resulting in an increase in net interest income; (ii) salaries and benefits and administrative
costs included in the insurance, supplemental pension and capitalization bonds segment consist only of cost directly related to
these operations, and (iii) costs incurred in the banking operations segment related to the infrastructure of the branch network
and other general indirect expenses have not been allocated between segments.
Our operations are substantially
conducted in Brazil. Additionally, as of December 31, 2020, we have one branch in New York, one branch in Grand Cayman, and one
branch in London, mainly to complement our banking services and assist in import and export operations for Brazilian customers.
Moreover we also have subsidiaries abroad, namely: Banco Bradesco Argentina S.A.U. (Buenos Aires), Banco Bradesco Europa S.A. (Luxembourg),
Bradesco North America LLC (New York), Bradesco Securities, Inc. (New York), Bradesco Securities UK Limited (London), Cidade Capital
Markets Ltd. (Grand Cayman), Bradesco Securities Hong Kong Limited (Hong Kong), Bradesco Trade Services Limited (Hong Kong), Bradescard
Mexico, Sociedad de Responsabilidad Limitada (Mexico) and BAC Florida Bank.
No income from transactions with
a single customers or counterparty abroad represented 10% of the Organization’s income in the period of 2020, 2019 and 2018.
All transactions between operating
segments are conducted on an arm’s length basis, with intra-segment revenue and costs being eliminated in “Other operations,
adjustments and eliminations”. Income and expenses directly associated with each segment are included in determining business-segment
performance.
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
|
On December 31, 2020 - R$ thousand
|
|
Banking
|
Insurance, pension and capitalization bonds
|
Other Activities
|
Eliminations
|
Managerial Income Statement
|
Proportionately consolidated (1)
|
Consolidation adjustments (2)
|
Adjustments (3)
|
Consolidated in accordance with IFRS
|
|
|
Revenue from financial intermediation
|
74,335,609
|
22,444,253
|
109,663
|
(111,074)
|
96,778,451
|
484,720
|
(3,521,128)
|
4,687,074
|
98,429,117
|
Expenses from financial intermediation (4)
|
(23,937,104)
|
(18,341,232)
|
(455)
|
118,931
|
(42,159,860)
|
(40,645)
|
1,051,877
|
(7,427,059)
|
(48,575,687)
|
Financial margin
|
50,398,505
|
4,103,021
|
109,208
|
7,857
|
54,618,591
|
444,075
|
(2,469,251)
|
(2,739,985)
|
49,853,430
|
Expected Credit Loss Associated with Credit Risk expense
|
(25,268,087)
|
-
|
-
|
-
|
(25,268,087)
|
(104,072)
|
-
|
5,826,884
|
(19,545,275)
|
Gross income from financial intermediation
|
25,130,418
|
4,103,021
|
109,208
|
7,857
|
29,350,504
|
340,003
|
(2,469,251)
|
3,086,899
|
30,308,155
|
Other income from insurance, pension plans and capitalization bonds
|
-
|
8,074,969
|
-
|
23,773
|
8,098,742
|
-
|
-
|
-
|
8,098,742
|
Fee and commission income and income from banking fees
|
30,307,248
|
1,875,701
|
448,292
|
(203,830)
|
32,427,411
|
4,031,391
|
2,164,111
|
(13,686,459)
|
24,936,454
|
Personnel expenses
|
(17,714,158)
|
(1,903,919)
|
(174,340)
|
62
|
(19,792,355)
|
(631,755)
|
-
|
1,458,633
|
(18,965,477)
|
Other administrative expenses (5)
|
(19,349,706)
|
(1,524,278)
|
(340,464)
|
674,656
|
(20,539,792)
|
(1,442,189)
|
218,055
|
358,770
|
(21,405,156)
|
Tax expenses
|
(5,476,957)
|
(1,038,918)
|
(74,502)
|
-
|
(6,590,377)
|
(541,474)
|
-
|
1,082,949
|
(6,048,902)
|
Share of profit (loss) of unconsolidated and jointly controlled companies
|
(271)
|
98,937
|
16,222
|
-
|
114,888
|
(634,424)
|
-
|
964,394
|
444,858
|
Other operating income / expenses
|
(15,634,441)
|
(1,033,754)
|
102,438
|
(502,518)
|
(17,068,275)
|
(678,421)
|
87,085
|
4,861,111
|
(12,798,500)
|
Operating profit/(loss)
|
(2,737,867)
|
8,651,759
|
86,854
|
-
|
6,000,746
|
443,131
|
-
|
(1,873,703)
|
4,570,174
|
Non-operating income/(expense)
|
(284,469)
|
(197,204)
|
1,100
|
-
|
(480,573)
|
(14,306)
|
-
|
-
|
(494,879)
|
IT/SC (Income Tax/Soc. Contrib.) and non-controlling interests
|
14,508,637
|
(3,425,110)
|
(57,123)
|
-
|
11,026,404
|
(428,825)
|
-
|
1,361,087
|
11,958,666
|
Net income in 2020
|
11,486,301
|
5,029,445
|
30,831
|
-
|
16,546,577
|
-
|
-
|
(512,616)
|
16,033,961
|
Total assets
|
1,435,481,875
|
338,923,828
|
5,658,304
|
(135,259,892)
|
1,644,804,115
|
(9,364,134)
|
(44,400,937)
|
13,614,746
|
1,604,653,790
|
Investments in associates and joint ventures
|
77,091,501
|
1,856,796
|
60,271
|
(77,139,456)
|
1,869,112
|
5,177,598
|
-
|
340,130
|
7,386,840
|
Total liabilities
|
1,291,779,235
|
338,923,828
|
5,658,304
|
(135,259,892)
|
1,501,101,475
|
(9,364,134)
|
(44,400,937)
|
11,200,012
|
1,458,536,416
|
(1) It refers to: adjustments of consolidation,
originating from proportionally consolidated companies (Grupo Cielo, Grupo Alelo, Crediare, etc.) for management purposes;
(2) Adjustments of consolidation originating
from the “non-consolidation” of exclusive funds;
(3) Adjustments due to the differences of the
accounting standards used in the management reports and in the financial statements of the Organization that were prepared in accordance
with IFRS. The main adjustments refer to the loss expected from financial assets, business models, effective interest rate and
business combinations;
(4) It includes, in the Consolidated IFRS, the
balances referring to “Net gains / (losses) on financial assets and liabilities at fair value through profit or loss”,
“Net gains / (losses) on financial assets at fair value through other comprehensive income” and “Net gains /
(losses) from operations in foreign currency”; and
(5) It includes, in the Consolidated IFRS, the
balances referring to depreciation and amortization.
94 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
|
On December 31, 2019 - R$ thousand
|
|
Banking
|
Insurance, pension and capitalization bonds
|
Other Activities
|
Eliminations
|
Managerial statement of income
|
Proportionately consolidated (1)
|
Consolidation adjustments (2)
|
Adjustments (3)
|
Consolidated in accordance with IFRS
|
|
|
Revenue from financial intermediation
|
113,402,430
|
22,936,178
|
228,386
|
(2,651,701)
|
133,915,293
|
(818,428)
|
125,364
|
(8,915,835)
|
124,306,394
|
Expenses from financial intermediation (4)
|
(49,683,456)
|
(16,930,146)
|
-
|
2,651,701
|
(63,961,901)
|
104,508
|
2,404,402
|
2,835,005
|
(58,617,986)
|
Financial margin
|
63,718,974
|
6,006,032
|
228,386
|
-
|
69,953,392
|
(713,920)
|
2,529,766
|
(6,080,830)
|
65,688,408
|
Expected Credit Loss Associated with Credit Risk expense
|
(18,891,493)
|
-
|
-
|
-
|
(18,891,493)
|
170,961
|
-
|
4,716,005
|
(14,004,527)
|
Gross income from financial intermediation
|
44,827,481
|
6,006,032
|
228,386
|
-
|
51,061,899
|
(542,959)
|
2,529,766
|
(1,364,825)
|
51,683,881
|
Other income from insurance, pension plans and capitalization bonds
|
-
|
8,935,610
|
-
|
33,355
|
8,968,965
|
(6,840)
|
-
|
13,680
|
8,975,805
|
Fee and commission income and income from banking fees
|
31,135,507
|
2,028,371
|
306,865
|
(136,176)
|
33,334,567
|
(4,128,937)
|
(2,254,425)
|
(1,613,529)
|
25,337,676
|
Personnel expenses
|
(23,072,600)
|
(2,030,224)
|
(390,706)
|
-
|
(25,493,530)
|
710,807
|
-
|
256,405
|
(24,526,318)
|
Other administrative expenses (5)
|
(20,327,502)
|
(1,495,894)
|
(194,265)
|
611,500
|
(21,406,161)
|
1,419,119
|
(249,173)
|
(2,119,131)
|
(22,355,346)
|
Tax expenses
|
(6,203,188)
|
(1,110,470)
|
(72,662)
|
-
|
(7,386,320)
|
528,090
|
-
|
-
|
(6,858,230)
|
Share of profit (loss) of unconsolidated and jointly controlled companies
|
12,921
|
276,165
|
8,046
|
-
|
297,132
|
906,399
|
-
|
(2,449)
|
1,201,082
|
Other operating income / expenses
|
(21,082,041)
|
(734,635)
|
99,071
|
(508,679)
|
(22,226,284)
|
663,471
|
(26,168)
|
2,012,421
|
(19,576,560)
|
Operating profit/(loss)
|
5,290,578
|
11,874,955
|
(15,265)
|
-
|
17,150,268
|
(450,850)
|
-
|
(2,817,428)
|
13,881,990
|
Non-operating income/(expense)
|
(537,428)
|
26,800
|
133
|
-
|
(510,495)
|
(9,583)
|
-
|
19,166
|
(500,912)
|
IT/SC (Income Tax/Soc. Contrib.) and non-controlling interests
|
10,431,415
|
(4,490,945)
|
2,372
|
-
|
5,942,842
|
460,433
|
-
|
1,388,854
|
7,792,129
|
Net Income in 2019
|
15,184,565
|
7,410,810
|
(12,760)
|
-
|
22,582,615
|
-
|
-
|
(1,409,408)
|
21,173,207
|
Total assets
|
1,264,627,391
|
325,767,085
|
5,014,369
|
(186,104,068)
|
1,409,304,777
|
(8,436,501)
|
(41,729,208)
|
19,388,617
|
1,378,527,685
|
Investments in associates and joint ventures
|
106,628,723
|
2,261,867
|
6,603
|
(106,710,041)
|
2,187,152
|
5,103,609
|
-
|
344,851
|
7,635,612
|
Total liabilities
|
1,064,606,520
|
287,062,911
|
1,167,684
|
(79,394,027)
|
1,273,443,088
|
(7,333,871)
|
(41,729,208)
|
18,604,102
|
1,242,984,111
|
(1) It refers to: adjustments of consolidation,
originating from proportionally consolidated companies (Grupo Cielo, Grupo Alelo, Crediare, etc.) for management purposes;
(2) Adjustments of consolidation originating
from the “non-consolidation” of exclusive funds;
(3) Adjustments due to the differences of the
accounting standards used in the management reports and in the financial statements of the Organization that were prepared in accordance
with IFRS. The main adjustments refer to the loss expected from financial assets, business models, effective interest rate and
business combinations;
(4) It includes, in the Consolidated IFRS, the
balances referring to “Net gains / (losses) on financial assets and liabilities at fair value through profit or loss”,
“Net gains / (losses) on financial assets at fair value through other comprehensive income” and “Net gains /
(losses) from operations in foreign currency”; and
(5) It includes, in the Consolidated IFRS, the
balances referring to depreciation and amortization.
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
|
On December 31, 2018 - R$ thousand
|
|
Banking
|
Insurance, pension and capitalization bonds
|
Other Activities
|
Eliminations
|
Managerial statement of income
|
Proportionately consolidated (1)
|
Consolidation adjustments (2)
|
Adjustments (3)
|
Consolidated in accordance with IFRS
|
|
|
Revenue from financial intermediation
|
110,639,034
|
18,612,108
|
256,364
|
(1,727,080)
|
127,780,426
|
(1,084,631)
|
(1,084,034)
|
(13,064,806)
|
112,546,955
|
Expenses from financial intermediation (4)
|
(52,958,441)
|
(13,365,526)
|
-
|
1,727,080
|
(64,596,887)
|
88,764
|
3,729,581
|
5,533,873
|
(55,244,669)
|
Financial margin
|
57,680,593
|
5,246,582
|
256,364
|
-
|
63,183,539
|
(995,867)
|
2,645,547
|
(7,530,933)
|
57,302,286
|
Expected Credit Loss Associated with Credit Risk expense
|
(18,319,973)
|
-
|
-
|
-
|
(18,319,973)
|
94,494
|
-
|
1,960,644
|
(16,264,835)
|
Gross income from financial intermediation
|
39,360,620
|
5,246,582
|
256,364
|
-
|
44,863,566
|
(901,373)
|
2,645,547
|
(5,570,289)
|
41,037,451
|
Other income from insurance, pension plans and capitalization bonds
|
-
|
8,320,676
|
-
|
39,858
|
8,360,534
|
-
|
-
|
-
|
8,360,534
|
Fee and commission income and income from banking fees
|
30,022,769
|
2,169,807
|
354,734
|
(221,722)
|
32,325,588
|
(4,578,360)
|
(2,527,231)
|
(1,388,407)
|
23,831,590
|
Personnel expenses
|
(18,102,452)
|
(1,643,734)
|
(239,461)
|
-
|
(19,985,647)
|
854,580
|
-
|
259,605
|
(18,871,462)
|
Other administrative expenses (5)
|
(19,126,128)
|
(1,609,750)
|
(204,736)
|
649,851
|
(20,290,763)
|
971,706
|
(119,519)
|
(2,243,641)
|
(21,682,217)
|
Tax expenses
|
(5,660,519)
|
(960,453)
|
(73,649)
|
-
|
(6,694,621)
|
597,722
|
-
|
-
|
(6,096,899)
|
Share of profit (loss) of unconsolidated and jointly controlled companies
|
6,620
|
206,272
|
(14,879)
|
-
|
198,013
|
1,420,804
|
-
|
61,558
|
1,680,375
|
Other operating income / expenses
|
(11,943,485)
|
(998,070)
|
193,794
|
(467,967)
|
(13,215,728)
|
891,788
|
1,203
|
4,376,193
|
(7,946,544)
|
Operating profit/(loss)
|
14,557,425
|
10,731,330
|
272,167
|
20
|
25,560,942
|
(743,133)
|
-
|
(4,504,981)
|
20,312,828
|
Non-operating income/(expense)
|
(929,396)
|
32,145
|
2,406
|
(20)
|
(894,865)
|
24,052
|
-
|
-
|
(870,813)
|
IT/SC (Income Tax/Soc. Contrib.) and non-controlling interests
|
(1,134,166)
|
(4,374,553)
|
(72,405)
|
-
|
(5,581,124)
|
719,081
|
-
|
2,168,467
|
(2,693,576)
|
Net Income in 2018
|
12,493,863
|
6,388,922
|
202,168
|
-
|
19,084,953
|
|
|
(2,336,514)
|
16,748,439
|
Total assets
|
1,251,749,713
|
304,004,114
|
5,966,071
|
(175,709,936)
|
1,386,009,962
|
(8,731,352)
|
(89,986,505)
|
18,251,609
|
1,305,543,714
|
Investments in associates and joint ventures
|
97,416,676
|
2,617,258
|
60,894
|
(97,903,242)
|
2,191,586
|
5,619,603
|
-
|
314,610
|
8,125,799
|
Total liabilities
|
1,068,861,135
|
270,540,773
|
1,148,139
|
(77,806,694)
|
1,262,743,353
|
(7,630,632)
|
(89,986,505)
|
15,741,378
|
1,180,867,594
|
(1) It refers to: adjustments of consolidation,
originating from proportionally consolidated companies (Grupo Cielo, Grupo Alelo, Crediare, etc.) for management purposes;
(2) Adjustments of consolidation originating
from the “non-consolidation” of exclusive funds;
(3) Adjustments due to the differences of the
accounting standards used in the management reports and in the financial statements of the Organization that were prepared in accordance
with IFRS. The main adjustments refer to the impairment of loans and advances, effective interest rate and business combinations;
(4) It includes, in the Consolidated IFRS, the
balances related to “Net gains/(losses) on financial assets and liabilities at fair value through income”, “Net
gains/(losses) on financial assets at fair value through other comprehensive income” and “Net gains/(losses) on foreign
currency transactions”; and
(5) It includes, in the Consolidated IFRS, the
balances referring to depreciation and amortization.
96 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
6) Net
interest income
|
R$ thousand
|
Years ended December 31
|
2020
|
2019
|
2018
|
Interest and similar income
|
|
|
|
Loans and advances to banks
|
6,802,466
|
6,874,429
|
9,546,878
|
Loans and advances to customers:
|
|
|
|
- Loans
|
67,443,078
|
67,807,238
|
61,949,949
|
- Leases
|
152,978
|
256,455
|
250,791
|
Financial assets:
|
|
|
|
- At fair value through profit or loss
|
13,982,931
|
19,436,407
|
17,538,227
|
- Fair value through other comprehensive income
|
13,632,071
|
12,567,751
|
16,666,298
|
- At amortized cost
|
15,698,407
|
13,139,371
|
12,120,868
|
Compulsory deposits with the Central Bank
|
2,017,605
|
4,304,875
|
3,916,299
|
Other financial interest income
|
13,835
|
31,179
|
63,829
|
Total
|
119,743,371
|
124,417,705
|
122,053,139
|
|
|
|
|
Interest and similar expenses
|
|
|
|
Deposits from banks:
|
|
|
|
- Interbank deposits
|
(28,232)
|
(267,636)
|
(137,154)
|
- Funding in the open market
|
(8,423,041)
|
(11,784,845)
|
(15,094,786)
|
- Borrowings and onlending
|
(5,907,385)
|
(4,400,636)
|
(3,176,469)
|
Deposits from customers:
|
|
|
|
- Savings accounts
|
(3,049,149)
|
(4,568,663)
|
(4,646,528)
|
- Time deposits
|
(5,634,342)
|
(7,707,131)
|
(6,252,440)
|
Securities issued
|
(4,786,206)
|
(9,250,005)
|
(9,054,699)
|
Subordinated debt
|
(2,403,327)
|
(3,708,924)
|
(3,517,067)
|
Technical provisions for insurance, pension plans and capitalization bonds
|
(18,344,005)
|
(16,930,146)
|
(13,365,526)
|
Total
|
(48,575,687)
|
(58,617,986)
|
(55,244,669)
|
|
|
|
|
Net interest income
|
71,167,684
|
65,799,719
|
66,808,470
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
7) Fee
and commission income
|
R$ thousand
|
Years ended December 31
|
2020
|
2019
|
2018
|
Fee and commission income
|
|
|
|
Credit card income
|
6,754,319
|
7,397,305
|
6,951,609
|
Current accounts
|
7,927,357
|
7,702,319
|
7,165,667
|
Collections
|
2,150,007
|
1,935,353
|
1,982,037
|
Guarantees
|
1,259,236
|
1,257,771
|
1,463,423
|
Asset management
|
1,348,214
|
1,582,733
|
1,525,280
|
Consortium management
|
1,921,206
|
1,921,082
|
1,683,942
|
Custody and brokerage services
|
1,200,729
|
1,134,630
|
916,083
|
Underwriting/ Financial Advisory Services
|
1,150,460
|
1,014,607
|
815,242
|
Payments
|
462,535
|
475,393
|
448,416
|
Other
|
762,391
|
916,483
|
879,891
|
Total
|
24,936,454
|
25,337,676
|
23,831,590
|
8) Net
gains/(losses) on financial assets and liabilities at fair value through profit or loss
|
R$ thousand
|
|
Year ended December 31
|
|
2020
|
2019
|
2018
|
|
Fixed income securities
|
784,649
|
544,554
|
(1,360,349)
|
|
Derivative financial instruments
|
(19,188,022)
|
(1,197,059)
|
(10,543,169)
|
|
Equity securities
|
(183,030)
|
(438,412)
|
226,945
|
|
Total
|
(18,586,403)
|
(1,090,917)
|
(11,676,573)
|
|
9) Net
gains/(losses) on financial assets at fair value through other comprehensive income
|
R$ thousand
|
Year ended December 31
|
2020
|
2019
|
2018
|
Fixed income securities
|
887,809
|
78,455
|
345,987
|
Equity securities
|
(2,608,767)
|
572,973
|
677,312
|
Dividends received
|
4,079
|
4,404
|
50,264
|
Total
|
(1,716,879)
|
655,832
|
1,073,563
|
10) Net
gains/(losses) on foreign currency transactions
Net gains and losses on foreign currency
transactions primarily consists mainly of gains or losses from currency trading and translation of monetary items from a foreign
currency into the functional currency.
98 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
11) Income
from insurance and pension plans
|
R$ thousand
|
Years ended December 31
|
2020
|
2019
|
2018
|
Written premiums
|
65,335,387
|
67,835,874
|
62,736,288
|
Supplemental pension plan contributions
|
3,390,768
|
3,954,904
|
4,441,813
|
Ceded coinsurance premiums
|
(66,647)
|
(62,903)
|
(47,232)
|
Refunded premiums
|
(179,660)
|
(467,546)
|
(769,311)
|
Reinsurance premiums paid
|
(69,347)
|
(68,919)
|
(91,463)
|
Written premiums net of reinsurance and coinsurance
|
68,410,501
|
71,191,410
|
66,270,095
|
|
|
|
|
Changes in the provision for insurance
|
(27,442,202)
|
(29,047,959)
|
(25,837,488)
|
Changes in the provision for private pension plans
|
(2,540,927)
|
(2,988,568)
|
(3,571,734)
|
Changes in the insurance technical provisions and pension plans
|
(29,983,129)
|
(32,036,527)
|
(29,409,222)
|
|
|
|
|
Reported indemnities
|
(27,333,375)
|
(28,009,648)
|
(26,463,800)
|
Claims expenses
|
(32,153)
|
(117,705)
|
(67,298)
|
Recovery of ceded coinsurance
|
150,456
|
160,443
|
117,703
|
Recovery of reinsurance
|
17,595
|
50,237
|
18,786
|
Salvage recoveries
|
530,509
|
589,906
|
491,559
|
Changes in the IBNR provision
|
(979,399)
|
(324,069)
|
(121,320)
|
Retained claims
|
(27,646,367)
|
(27,650,836)
|
(26,024,370)
|
|
|
|
|
Commissions on premiums
|
(2,779,012)
|
(2,728,176)
|
(2,655,101)
|
Recovery of commissions
|
5,073
|
5,855
|
12,411
|
Fees
|
(319,105)
|
(422,952)
|
(353,139)
|
Brokerage expenses - private pension plans
|
(133,786)
|
(101,626)
|
(125,770)
|
Changes in deferred commissions
|
24,532
|
(2,209)
|
(58,032)
|
Selling expenses for insurance and pension plans
|
(3,202,298)
|
(3,249,108)
|
(3,179,631)
|
|
|
|
|
Gross profit from insurance and pension plans
|
7,578,707
|
8,254,939
|
7,656,872
|
12) Personnel
expenses
|
R$ thousand
|
Years ended December 31
|
2020
|
2019
|
2018
|
Salaries
|
(9,280,777)
|
(9,768,305)
|
(8,350,461)
|
Benefits
|
(4,659,876)
|
(5,911,496)
|
(4,383,644)
|
Social security charges
|
(3,404,017)
|
(3,470,191)
|
(2,997,889)
|
Employee profit sharing
|
(1,533,955)
|
(1,803,545)
|
(1,682,868)
|
Training
|
(86,852)
|
(190,031)
|
(166,936)
|
Total
|
(18,965,477)
|
(21,143,568)
|
(17,581,798)
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
13) Other
administrative expenses
|
R$ thousand
|
Years ended December 31
|
2020
|
2019
|
2018
|
Outsourced services
|
(4,768,664)
|
(4,808,331)
|
(4,598,748)
|
Communication
|
(1,333,127)
|
(1,570,224)
|
(1,541,742)
|
Data processing
|
(2,150,048)
|
(2,145,226)
|
(2,398,676)
|
Advertising and marketing
|
(1,052,083)
|
(1,300,468)
|
(1,136,062)
|
Asset maintenance
|
(1,299,441)
|
(1,231,596)
|
(1,112,508)
|
Financial system
|
(1,119,697)
|
(1,135,964)
|
(1,009,209)
|
Rental (1)
|
(142,448)
|
(180,648)
|
(1,142,408)
|
Security and surveillance
|
(698,206)
|
(744,036)
|
(748,577)
|
Transport
|
(651,238)
|
(773,208)
|
(749,685)
|
Water, electricity and gas
|
(373,056)
|
(440,613)
|
(412,789)
|
Advances to FGC (Deposit Guarantee Association)
|
(588,093)
|
(433,369)
|
(408,335)
|
Supplies
|
(139,371)
|
(191,362)
|
(216,768)
|
Travel
|
(77,433)
|
(302,170)
|
(286,731)
|
Other
|
(1,091,221)
|
(1,232,363)
|
(1,111,724)
|
Total
|
(15,484,126)
|
(16,489,578)
|
(16,873,962)
|
(1) As of January 1, 2019, the IFRS 16 standard changed the accounting
for leases, eliminating rental expenses and instead requiring the recognition of depreciation of the right-of-use asset (underlying
assets) and interest expense on the leases (Notes 2h, 27 and 37).
14) Depreciation
and amortization
|
R$ thousand
|
Years ended December 31
|
2020
|
2019
|
2018
|
Amortization expenses
|
(2,960,924)
|
(3,128,385)
|
(3,348,242)
|
Depreciation expenses
|
(2,960,106)
|
(2,737,383)
|
(1,460,013)
|
Total
|
(5,921,030)
|
(5,865,768)
|
(4,808,255)
|
15) Other
operating income/(expenses)
|
R$ thousand
|
Years ended December 31
|
2020
|
2019
|
2018
|
Tax expenses
|
(6,048,902)
|
(6,858,230)
|
(6,096,899)
|
Legal provision
|
(2,016,778)
|
(4,435,942)
|
(1,836,429)
|
Income from sales of non-current assets, investments, and property and equipment, net
|
(239,606)
|
(344,627)
|
(614,895)
|
Card marketing expenses
|
(2,858,522)
|
(3,207,559)
|
(3,381,586)
|
Other (1)
|
(7,658,438)
|
(14,751,228)
|
(3,570,449)
|
Total
|
(18,822,246)
|
(29,597,586)
|
(15,500,258)
|
(1) In the year ended December 31, 2020, it includes:
(i) impairment losses: in the acquisition of the right to provide financial services, in the amount of R$320,726 thousand (R$519,749
thousand in 2019 and R$162 thousand in 2018); software/hardware, in the amount of R$258,998 thousand (R$222,024 thousand in 2019
and R$386,265 thousand in 2018); and investment goodwill, in the amount of R$726,419 thousand (R$255,301 thousand in 2019 and there
were no impairment losses in 2018); (ii) expenses with provision for restructuring, in the amount of R$980,978 thousand, mainly
related to the branch network and staff and other provisions in the amount of R$102,200 thousand (R$696,469 thousand in 2019).
In the year ended December 31, 2019, it also included expenses with provision for contingencies, related to FCVS, in the amount
of R$342,155 thousand.
100 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
16) Income
tax and social contribution
|
a)
|
Calculation of income tax and social contribution
charges
|
|
R$ thousand
|
Years ended December 31
|
2020
|
2019
|
2018
|
Income before income tax and social contribution
|
4,075,295
|
13,381,078
|
19,442,015
|
Total burden of income tax and social contribution at the current rates (Note 2t)
|
(1,833,883)
|
(5,352,431)
|
(8,748,907)
|
Effect of additions and exclusions in the tax calculation:
|
|
|
|
Earnings (losses) of associates and joint ventures
|
200,186
|
480,433
|
756,169
|
Interest on shareholders’ equity
|
2,496,587
|
2,949,143
|
3,284,368
|
Other amounts (1)
|
11,095,776
|
9,714,984
|
2,014,794
|
Income tax and social contribution for the period
|
11,958,666
|
7,792,129
|
(2,693,576)
|
Effective rate
|
293.4%
|
58.2%
|
13.9%
|
(1) Primarily, includes: (i) the exchange
variation of assets and liabilities, derived from investments abroad, in the amount of R$10,047,819 thousand (R$934,897 thousand
in 2019 and R$3,735,509 thousand in 2018); (ii) in 2019 the amount of R$6,403,185 thousand, referring to the increase in the social
contribution rate on banks' net income from 15% to 20% on temporary differences and negative basis, as established in Constitutional
Amendment no. 103 enacted in November 2019; (iii) the equalization of the effective rate of non-bank financial companies and companies
in the insurance industry, as of 2020, and of non-financial companies, in relation to that shown; and (iv) the deductions encouraged.
|
b)
|
Composition of income
tax and social contribution in the consolidated statement of income
|
|
R$ thousand
|
Years ended December 31
|
2020
|
2019
|
2018
|
Current taxes:
|
|
|
|
Income tax and social contribution payable
|
(4,632,251)
|
(7,097,696)
|
(7,623,800)
|
Deferred taxes:
|
|
|
|
Constitution/realization in the period on temporary additions and exclusions
|
5,863,870
|
13,686,499
|
3,254,601
|
Use of opening balances of:
|
|
|
|
Social contribution loss
|
(63,150)
|
(107,984)
|
(313,223)
|
Income tax loss
|
(79,842)
|
(186,773)
|
(343,791)
|
Addition on:
|
|
|
|
Social contribution loss
|
4,813,120
|
1,174,988
|
870,717
|
Income tax loss
|
6,056,919
|
323,095
|
1,461,920
|
Total deferred tax expense
|
16,590,917
|
14,889,825
|
4,930,224
|
Income taxes
|
11,958,666
|
7,792,129
|
(2,693,576)
|
|
c)
|
Deferred income tax
and social contribution presented in the consolidated statement of financial position
|
|
R$ thousand
|
Balance on December 31, 2019
|
Amount recorded
|
Realized / Decrease
|
Balance on December 31, 2020
|
Provisions for credit losses
|
39,656,446
|
11,625,279
|
(5,531,450)
|
45,750,275
|
Provision for contingencies
|
10,462,850
|
1,803,110
|
(1,842,064)
|
10,423,896
|
Impairment of securities and investments
|
2,789,316
|
1,607,701
|
(646,514)
|
3,750,503
|
Adjustment to fair value of securities
|
1,346,668
|
633,811
|
(989,410)
|
991,069
|
Other
|
6,376,906
|
3,611,893
|
(3,417,972)
|
6,570,827
|
Total deductible taxes on temporary differences
|
60,632,186
|
19,281,794
|
(12,427,410)
|
67,486,570
|
Income tax and social contribution losses in Brazil and overseas
|
7,882,821
|
10,870,039
|
(142,992)
|
18,609,868
|
Total deferred tax assets (1)
|
68,515,007
|
30,151,833
|
(12,570,402)
|
86,096,438
|
Deferred tax liabilities (1)
|
10,025,555
|
3,071,916
|
(2,735,645)
|
10,361,826
|
Net deferred taxes (1)
|
58,489,452
|
27,079,917
|
(9,834,757)
|
75,734,612
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
|
R$ thousand
|
Balance on December 31, 2018
|
Amount recorded (2)
|
Realized / Decrease
|
Balance on December 31, 2019
|
Provisions for credit losses
|
31,642,800
|
14,212,786
|
(6,199,140)
|
39,656,446
|
Provision for contingencies
|
7,534,723
|
4,790,532
|
(1,862,405)
|
10,462,850
|
Impairment of securities and investments
|
1,889,028
|
1,967,811
|
(1,067,523)
|
2,789,316
|
Adjustment to fair value of securities
|
2,198,742
|
1,339,401
|
(2,191,475)
|
1,346,668
|
Other
|
3,336,145
|
5,025,820
|
(1,985,059)
|
6,376,906
|
Total deductible taxes on temporary differences
|
46,601,438
|
27,336,350
|
(13,305,602)
|
60,632,186
|
Income tax and social contribution losses in Brazil and overseas
|
6,679,495
|
1,498,083
|
(294,757)
|
7,882,821
|
Total deferred tax assets (1)
|
53,280,933
|
28,834,433
|
(13,600,359)
|
68,515,007
|
Deferred tax liabilities (1)
|
5,798,953
|
5,011,070
|
(784,468)
|
10,025,555
|
Net deferred taxes (1)
|
47,481,980
|
23,823,363
|
(12,815,891)
|
58,489,452
|
(1) Deferred income and social contribution tax
assets and liabilities are offset in the statement of financial position by taxable entity, and were R$9,112,176 thousand in 2020
(R$8,944,952 thousand in 2019); and
(2) It includes the effect of R$6,403,185 thousand,
referring to the increase in the social contribution rate on banks’ net income from 15% to 20% on temporary differences and
negative basis, as established in Constitutional Amendment No. 103 promulgated in November 2019.
|
d)
|
Expected realization
of deferred tax assets on temporary differences, tax loss and negative basis of social contribution
|
|
R$ thousand
|
|
Temporary differences
|
Carry-forward tax losses
|
Total
|
|
Income tax
|
Social contribution
|
Income tax
|
Social contribution
|
|
|
2021
|
9,037,091
|
7,077,160
|
207,207
|
167,457
|
16,488,915
|
|
2022
|
8,600,523
|
6,801,509
|
177,515
|
144,305
|
15,723,852
|
|
2023
|
8,412,841
|
6,568,376
|
252,134
|
203,715
|
15,437,066
|
|
2024
|
7,423,699
|
5,892,039
|
207,162
|
184,877
|
13,707,777
|
|
2025
|
3,410,326
|
2,530,929
|
1,607,787
|
1,294,024
|
8,843,066
|
|
2026
|
821,069
|
652,097
|
2,060,938
|
1,716,355
|
5,250,459
|
|
2027
|
138,800
|
109,690
|
2,285,541
|
1,896,055
|
4,430,086
|
|
2028
|
5,789
|
4,632
|
2,214,619
|
1,828,733
|
4,053,773
|
|
2029
|
-
|
-
|
836,633
|
1,324,811
|
2,161,444
|
|
Total
|
37,850,138
|
29,636,432
|
9,849,536
|
8,760,332
|
86,096,438
|
|
|
e)
|
Deferred tax liabilities
|
|
R$ thousand
|
Balance on December 31, 2019
|
Amount recorded
|
Realized/Decrease
|
Balance on December 31, 2020
|
Fair value adjustment to securities and derivative financial instruments
|
8,732
|
890,275
|
(8,732)
|
890,275
|
Difference in depreciation
|
237,400
|
15,080
|
(19,632)
|
232,848
|
Judicial deposit
|
2,154,003
|
113,429
|
(82,569)
|
2,184,863
|
Other
|
2,579,556
|
193,260
|
(110,597)
|
2,662,219
|
Total deferred liabilities on temporary exclusions
|
4,979,691
|
1,212,044
|
(221,530)
|
5,970,205
|
Adjustment to fair value of available-for-sale securities
|
5,045,864
|
1,859,872
|
(2,514,115)
|
4,391,621
|
Total deferred tax expense
|
10,025,555
|
3,071,916
|
(2,735,645)
|
10,361,826
|
102 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
|
R$ thousand
|
Balance on December 31, 2018
|
Amount recorded
|
Realized/Decrease
|
Balance on December 31, 2019
|
Fair value adjustment to securities and derivative financial instruments
|
58,082
|
3,187
|
(52,537)
|
8,732
|
Difference in depreciation
|
242,571
|
3,969
|
(9,140)
|
237,400
|
Judicial deposit
|
1,841,678
|
326,879
|
(14,554)
|
2,154,003
|
Other
|
2,493,111
|
364,126
|
(277,681)
|
2,579,556
|
Total deferred liabilities on temporary exclusions
|
4,635,442
|
698,161
|
(353,912)
|
4,979,691
|
Adjustment to fair value of available-for-sale securities
|
1,163,511
|
4,557,141
|
(674,788)
|
5,045,864
|
Total deferred tax expense
|
5,798,953
|
5,255,302
|
(1,028,700)
|
10,025,555
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
|
f)
|
Income tax and social contribution on adjustments
recognized directly in other comprehensive income
|
|
R$ thousand
|
On December 31, 2020
|
On December 31, 2019
|
On December 31, 2018
|
Before tax
|
Tax (expense)/ benefit
|
Net of tax
|
Before tax
|
Tax (expense)/ benefit
|
Net of tax
|
Before tax
|
Tax (expense)/ benefit
|
Net of tax
|
Financial assets at fair value through other comprehensive income
|
(200,532)
|
218,123
|
17,591
|
10,027,427
|
(4,231,992)
|
5,795,435
|
(512,397)
|
215,482
|
(296,915)
|
Exchange differences on translations of foreign operations
|
235,863
|
-
|
235,863
|
73,867
|
-
|
73,867
|
113,198
|
-
|
113,198
|
Other
|
(39,523)
|
17,930
|
(21,593)
|
(371,887)
|
167,349
|
(204,538)
|
(154,607)
|
61,843
|
(92,764)
|
Total
|
(4,192)
|
236,053
|
231,861
|
9,729,407
|
(4,064,643)
|
5,664,764
|
(553,806)
|
277,325
|
(276,481)
|
104 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
17) Earnings
per share
|
a)
|
Basic earnings per
share
|
The basic earnings per share was
calculated based on the weighted average number of common and preferred shares outstanding, as shown in the calculations below:
|
Years ended December 31
|
2020
|
2019 (1)
|
2018 (1)
|
Net earnings attributable to the Organization’s common shareholders (R$ thousand)
|
7,560,015
|
10,035,723
|
7,916,635
|
Net earnings attributable to the Organization’s preferred shareholders (R$ thousand)
|
8,276,847
|
10,987,300
|
8,667,280
|
Weighted average number of common shares outstanding (thousands)
|
4,428,587
|
4,428,587
|
4,428,587
|
Weighted average number of preferred shares outstanding (thousands)
|
4,407,728
|
4,407,728
|
4,407,728
|
Basic earnings per share attributable to common shareholders of the Organization (in Reais)
|
1.71
|
2.27
|
1.79
|
Basic earnings per share attributable to preferred shareholders of the Organization (in Reais)
|
1.88
|
2.49
|
1.97
|
(1) All share amounts presented for prior
periods have been adjusted to reflect the bonus share issue approved at the Special Shareholders’ Meeting held on March 10,
2020, in the proportion of one new share for every 10 shares held.
|
b)
|
Diluted earnings per
share
|
Diluted earnings per share are the
same as basic earnings per share since there are no potentially dilutive instruments.
18) Cash,
balances with banks and cash equivalents
|
a)
|
Cash and balances with banks
|
|
R$ thousand
|
On December 31
|
2020
|
2019
|
Cash and due from banks in domestic currency
|
17,747,628
|
14,802,308
|
Cash and due from banks in foreign currency
|
6,096,396
|
4,185,462
|
Compulsory deposits with the Central Bank (1)
|
83,757,533
|
90,622,337
|
Investments in gold
|
1,037
|
892
|
Total
|
107,602,594
|
109,610,999
|
(1) Compulsory deposits with the Central
Bank of Brazil refer to a minimum balance that financial institutions must maintain at the Central Bank of Brazil based on a percentage
of deposits received from third parties.
|
b)
|
Cash and cash equivalents
|
|
R$ thousand
|
On December 31
|
2020
|
2019
|
Cash and due from banks in domestic currency
|
17,747,628
|
14,802,308
|
Cash and due from banks in foreign currency
|
6,096,396
|
4,185,462
|
Interbank investments (1)
|
166,975,928
|
42,890,831
|
Investments in gold
|
1,037
|
892
|
Total
|
190,820,989
|
61,879,493
|
(1) It refers to operations with maturity
date on the effective date of investment equal to or less than 90 days and insignificant risk of change in the fair value. Of
this amount, R$125,241,658 thousand (2019 – R$38,451,100 thousand) refers to financial assets pledged as collateral.
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
19) Financial
assets and liabilities at fair value through profit or loss
|
a)
|
Financial assets at fair value through profit or
loss
|
|
R$ thousand
|
On December 31
|
2020
|
2019
|
Financial assets (1)
|
|
|
Brazilian government securities
|
215,945,004
|
200,835,878
|
Bank debt securities
|
10,668,517
|
14,984,397
|
Corporate debt and marketable equity securities
|
16,689,704
|
13,391,018
|
Mutual funds
|
6,516,477
|
5,518,833
|
Brazilian sovereign bonds
|
725,515
|
47,308
|
Foreign governments securities
|
626,079
|
471,153
|
Derivative financial instruments
|
24,815,393
|
14,511,190
|
Total
|
275,986,689
|
249,759,777
|
(1) In 2020 and 2019, no reclassifications were made of Financial
Assets at fair value through profit or loss for other categories of financial assets.
|
R$ thousand
|
On December 31
|
2020
|
2019
|
Maturity of up to one year
|
60,438,153
|
22,695,708
|
Maturity of one to five years
|
165,430,418
|
162,184,205
|
Maturity of five to 10 years
|
28,103,378
|
44,090,948
|
Maturity of over 10 years
|
7,828,437
|
8,537,678
|
No stated maturity
|
14,186,303
|
12,251,238
|
Total
|
275,986,689
|
249,759,777
|
The financial instruments pledged
as collateral classified as “Financial assets at fair value through profit or loss”, totaled R$6,060,344 thousand on
December 31, 2020 (2019 – R$8,040,216 thousand), being composed primarily of Brazilian government bonds.
Unrealized net gains/ (losses) included
in securities and trading securities totaled R$5,284,677 thousand on December 31, 2020 (2019 – R$1,386,484 thousand). Net
variation in unrealized gains/(losses) from trading securities totaled R$3,898,193 thousand in 2020 (2019 – R$2,453,078 thousand).
|
c)
|
Liabilities at fair
value through profit or loss
|
|
R$ thousand
|
On December 31
|
2020
|
2019
|
Derivative financial instruments
|
18,697,682
|
14,244,083
|
Total
|
18,697,682
|
14,244,083
|
106 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
20) Derivative
financial instruments
The Organization enters into transactions
involving derivative financial instruments with a number of customers for the purpose of mitigating their overall risk exposure
as well as managing risk exposure. The derivative financial instruments most often used are highly-liquid instruments traded on
the futures market (B3).
Foreign currency and interest rate
swaps are agreements to exchange one set of cash flows for another and result in an economic exchange of foreign currencies or
interest rates (for example fixed or variable) or in combinations (i.e., foreign currency and interest rate swaps). There is no
exchange of the principal except in certain foreign currency swaps. The Organization’s foreign currency risk reflects the
potential cost of replacing swap contracts and whether the counterparties fail to comply with their obligations. This risk is continually
monitored in relation to the current fair value, the proportion of the notional value of the contracts and the market liquidity.
The Organization, to control the level of credit risk assumed, evaluates the counterparties of the contracts using the same techniques
used in its loan operations.
|
(ii)
|
Foreign exchange options
|
Foreign exchange options are contracts
according to which the seller (option issuer) gives to the buyer (option holder) the right, but not the obligation, to buy (call
option) or sell (put option) on a certain date or during a certain period, a specific value in foreign currency. The seller receives
from the buyer a premium for assuming the exchange or interest-rate risk. The options can be arranged between the Organization
and a customer. The Organization is exposed to credit risk only on purchased options and only for the carrying amount, which is
the fair market value.
|
(iii)
|
Foreign currency and interest rate futures
|
Foreign currency and interest rate
futures are contractual obligations for the payment or receipt of a net amount based on changes in foreign exchange and interest
rates or the purchase or sale of a financial instrument on a future date at a specific price, established by an organized financial
market. The credit risk is minimal, since the future contracts are guaranteed in cash or securities and changes in the value of
the contracts are settled on a daily basis. Contracts with a forward rate are interest-rate futures operations traded individually
which require settlement of the difference between the contracted rate and the current market rate over the value of the principal
to be paid in cash at a future date.
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
|
(iv)
|
Forward transactions
|
A forward operation is a contract
of purchase or sale, at a fixed price, for settlement on a certain date. Because it is a futures market, in which the purchase
of the share will only be made on the date of maturity, a margin deposit is necessary to guarantee the contract. This margin can
be in cash or in securities. The value of the margin varies during the contract according to the variation of the share involved
in the operation, to the changes of volatility and liquidity, besides the possible additional margins that the broker could request.
The breakdown of the notional and/or
contractual values and the fair value of derivatives held for trading by the Organization is as follows:
|
On December 31 - R$ thousand
|
2020
|
2019
|
Nominal value
|
Net amount value (3)
|
Original amortized cost
|
Mark-to-market adjustment
|
Fair value
|
Nominal value
|
Net amount value (3)
|
Original amortized cost
|
Mark-to-market adjustment
|
Fair value
|
Futures contracts
|
|
|
|
|
|
|
|
|
|
|
Purchase commitments:
|
84,467,021
|
-
|
24,535
|
-
|
24,535
|
140,426,077
|
|
20,290
|
-
|
20,290
|
- Interbank market
|
40,651,059
|
-
|
10,050
|
-
|
10,050
|
108,149,874
|
-
|
12,659
|
-
|
12,659
|
- Foreign currency
|
39,875,542
|
-
|
10,832
|
-
|
10,832
|
30,351,663
|
-
|
5,560
|
-
|
5,560
|
- Other
|
3,940,420
|
2,807,910
|
3,653
|
-
|
3,653
|
1,924,540
|
777,414
|
2,071
|
-
|
2,071
|
Sale commitments:
|
316,512,537
|
|
(19,366)
|
-
|
(19,366)
|
231,911,105
|
|
(23,676)
|
-
|
(23,676)
|
- Interbank market (1)
|
263,958,439
|
223,307,380
|
(15,899)
|
-
|
(15,899)
|
153,544,202
|
45,394,328
|
(18,640)
|
-
|
(18,640)
|
- Foreign currency (2)
|
51,421,588
|
11,546,046
|
(1,371)
|
-
|
(1,371)
|
77,219,777
|
46,868,114
|
(1,840)
|
-
|
(1,840)
|
- Other
|
1,132,510
|
-
|
(2,096)
|
-
|
(2,096)
|
1,147,126
|
-
|
(3,196)
|
-
|
(3,196)
|
|
|
|
|
|
|
-
|
|
|
|
|
Option contracts
|
|
|
|
|
|
-
|
|
|
|
|
Purchase commitments:
|
326,423,643
|
|
2,456,611
|
895,667
|
3,352,278
|
145,317,995
|
|
1,489,325
|
310,565
|
1,799,890
|
- Interbank market
|
311,472,364
|
-
|
1,504,181
|
193,326
|
1,697,507
|
130,179,263
|
-
|
617,942
|
153,980
|
771,922
|
- Foreign currency
|
13,878,682
|
-
|
854,484
|
701,089
|
1,555,573
|
14,233,062
|
1,019,989
|
808,235
|
131,756
|
939,991
|
- Other
|
1,072,597
|
282,563
|
97,946
|
1,252
|
99,198
|
905,670
|
-
|
63,148
|
24,829
|
87,977
|
Sale commitments:
|
331,145,703
|
|
(2,520,903)
|
(589,180)
|
(3,110,083)
|
253,288,998
|
|
(1,519,642)
|
(12,609)
|
(1,532,251)
|
- Interbank market
|
314,999,693
|
3,527,329
|
(1,640,039)
|
(194,670)
|
(1,834,709)
|
238,999,513
|
108,820,250
|
(891,953)
|
(130,183)
|
(1,022,136)
|
- Foreign currency
|
15,355,976
|
1,477,294
|
(619,545)
|
(363,298)
|
(982,843)
|
13,213,073
|
-
|
(545,433)
|
124,936
|
(420,497)
|
- Other
|
790,034
|
-
|
(261,319)
|
(31,212)
|
(292,531)
|
1,076,412
|
170,742
|
(82,256)
|
(7,362)
|
(89,618)
|
|
|
|
|
|
|
-
|
|
|
|
|
Forward contracts
|
|
|
|
|
|
-
|
|
|
|
|
Purchase commitments:
|
76,011,205
|
|
4,696,246
|
14,818
|
4,711,064
|
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
|
4,694,840
|
-
|
4,694,840
|
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
|
108 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
|
On December 31 - R$ thousand
|
2020
|
2019
|
Nominal value
|
Net amount value (3)
|
Original amortized cost
|
Mark-to-market adjustment
|
Fair value
|
Nominal value
|
Net amount value (3)
|
Original amortized cost
|
Mark-to-market adjustment
|
Fair value
|
- 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):
|
66,137,265
|
|
11,195,415
|
3,591,785
|
14,787,200
|
70,032,236
|
|
9,668,531
|
987,011
|
10,655,542
|
- Interbank market
|
4,095,567
|
-
|
106,827
|
215,527
|
322,354
|
7,703,103
|
3,424,228
|
118,969
|
85,416
|
204,385
|
- Fixed rate
|
33,427,359
|
19,386,846
|
4,160,018
|
26,030
|
4,186,048
|
38,714,923
|
19,364,909
|
8,253,671
|
(515,320)
|
7,738,351
|
- 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
|
-
|
432,390
|
22,676
|
455,066
|
670,554
|
-
|
124,132
|
118,554
|
242,686
|
- Other
|
3,608,719
|
-
|
326,603
|
276,135
|
602,738
|
3,197,284
|
-
|
139,072
|
231,870
|
370,942
|
Liabilities (unrestricted position):
|
50,475,079
|
|
(10,838,073)
|
(2,653,090)
|
(13,491,163)
|
52,232,961
|
|
(9,044,701)
|
(3,161,114)
|
(12,205,815)
|
- Interbank market
|
7,350,385
|
3,254,818
|
(103,984)
|
(27,012)
|
(130,996)
|
4,278,875
|
-
|
(179,169)
|
76,722
|
(102,447)
|
- Fixed rate
|
14,040,513
|
-
|
(2,431,630)
|
(1,448,120)
|
(3,879,750)
|
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
|
836,307
|
199,726
|
(536,192)
|
(48,393)
|
(584,585)
|
893,000
|
222,446
|
(167,300)
|
(170,755)
|
(338,055)
|
- Other
|
5,056,098
|
1,447,379
|
(647,251)
|
(328,466)
|
(975,717)
|
6,227,704
|
3,030,420
|
(400,758)
|
(445,801)
|
(846,559)
|
Total
|
1,273,909,082
|
|
4,862,389
|
1,255,322
|
6,117,711
|
925,302,656
|
|
2,144,093
|
(1,876,986)
|
267,107
|
Derivatives include operations maturing in D+1.
(1) It includes: (i) accounting cash flow hedges to protect DI-indexed funding totaling R$128,431,775 thousand (in December 2019
– R$76,405,734 thousand); and (ii) accounting cash flow hedges to protect DI-indexed investments totaling R$12,942,667 thousand
(in December 2019 – R$21,015,183 thousand (Note 20 (iv));
(2) It includes specific hedges to protect assets and liabilities, arising from foreign investments. Investments abroad totaling
the amount of R$29,678,043 thousand (in December 2019 – R$64,376,717 thousand), contemplating the capital reduction carried
out in the first half of 2020, in the amount of R$59,546,684 thousand; and
(3) It reflects the net balance between the Asset and Liability position.
Swaps are contracts of interest
rates, foreign currency and cross currency and interest rates in which payments of interest or the principal or in one or two different
currencies are exchanged for a contractual period. The risks of swap contracts refer to the potential inability or unwillingness
of the counterparties to comply with the contractual terms and the risk associated with changes in market conditions due to changes
in the interest rates and the currency exchange rates.
The interest rate and currency futures
and the forward contracts of interest rates call for subsequent delivery of an instrument at a specific price or specific profitability.
The reference values constitute a nominal value of the respective instrument whose variations in price are settled daily. The credit
risk associated with futures contracts is minimized due to these daily settlements. Futures contracts are also subject to risk
of changes in interest rates or in the value of the respective instruments.
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
Credit Default Swap – CDS
In general, these represent a bilateral
contract in which one of the counterparties buys protection against a credit risk of a particular financial instrument (its risk
is transferred). The counterparty that sells the protection receives a remuneration that is usually paid linearly over the life
of the operation.
In the event of a default, the counterparty
who purchased the protection will receive a payment, the purpose of which is to compensate for the loss of value in the financial
instrument. In this case, the counterparty that sells the protection normally will receive the underlying asset in exchange for
said payment.
|
On December 31 - R$ thousand
|
2020
|
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.
The Organization has the following
hedge accounting transactions:
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 operating
results 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) 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 statement of income.
Strategy
|
On December 31 - 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 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 2019
|
97,420,917
|
97,069,508
|
119,653
|
65,809
|
(1) It refers to the DI interest rate risk, using
DI Futures contracts in B3 and Swaps, with the maturity dates until 2025, making the cash flow fixed; and
(2) It refers to the DI interest rate risk,
using DI Futures contracts in B3 and Swaps, with maturity dates in 2023, making the cash flow fixed.
110 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
For the next 12 months, the gains/(losses)
related to the inefficiency of the cash flow hedge, which we expect to recognize in the statement of income, amount to R$(75,173)
thousand.
There were no gains/(losses) related
to the inefficiency of the cash flow hedge recorded in the statement of income in the years ended on December 2020 and 2019.
Hedge of investments abroad
The financial instruments classified
in this category, have the objective of reducing the exposure to foreign exchange variation of investments abroad, whose functional
currency is different from the national currency, which impacts the result of the Organization. The effective portion of the valuations
or devaluations of these instruments is recognized in a separate account of shareholders’ equity, net of tax effects and
is only transferred to income in two situations: (i) hedge ineffectiveness; or (ii) in the disposal or partial sale of the foreign
operation. The ineffective portion of the respective hedge is recognized directly in the statement of income.
Strategy
|
On December 31 - R$ 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 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 2019
|
1,919,177
|
925,820
|
(388,674)
|
(213,771)
|
(1) Whose functional currency is different from
the Real, using Forward and Futures contracts of US dollar, with the object of hedging the foreign investment referenced
to MXN (Mexican Peso) and US$ (American Dollar).
For the next 12 months, the gains/(losses)
related to the inefficiency of the hedge of investments abroad, which we expect to recognize in the result, amount to R$307 thousand.
The gains/(losses) related to the
inefficiency of the hedge of investments abroad, recorded in income accounts, in the year ended on December 31, 2020 was R$(12,697)
thousand (2019 R$(15,750) thousand).
Unobservable gains on initial
recognition
When the valuation depends on unobservable
data any initial gain or loss on financial instruments is deferred over the life of the contract or until the instrument is redeemed,
transferred, sold or the fair value becomes observable. All derivatives which are part of the hedge relationships are valued on
the basis of observable market data.
The nominal values do not reflect
the actual risk assumed by the Organization, since the net position of these financial instruments arises from compensation and/or
combination thereof. The net position is used by the Organization especially to protect interest rates, the price of the underlying
assets or exchange risk. The result of these financial instruments are recognized in “Net gains and losses of financial assets
held for trading”, in the consolidated statement of income.
Offsetting of financial
assets and liabilities
In accordance with IFRS 7,
Bradesco must present the amounts related to financial instruments subject to master clearing agreements or similar agreements.
A financial asset and a financial liability are offset and their net value presented in the Statement of Financial Position when,
and only when, there is a legally enforceable right to offset the amounts recognized and the Bank intends to settle them in a liquid
basis, or to realize the asset and settle the liability simultaneously.
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
The table below presents financial
assets and liabilities subject to settlement:
|
R$ thousand
|
On December 31, 2020
|
On December 31, 2019
|
Gross amount
|
Related amount offset in the statement of financial position
|
Net amount
|
Gross amount
|
Related amount offset in the statement of financial position
|
Net amount
|
Financial assets
|
|
|
|
|
|
|
Interbank investments
|
179,729,420
|
-
|
179,729,420
|
48,278,561
|
-
|
48,278,561
|
Derivative financial instruments
|
24,815,393
|
-
|
24,815,393
|
14,511,191
|
-
|
14,511,191
|
|
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
|
Securities sold under agreements to repurchase
|
217,108,353
|
-
|
217,108,353
|
174,100,023
|
-
|
174,100,023
|
Derivative financial instruments
|
18,697,682
|
-
|
18,697,682
|
14,244,083
|
-
|
14,244,083
|
On December 31, 2020 and 2019, Bradesco
does not offset any financial assets and financial liabilities in its Statement of Financial Position.
21) Financial
assets at fair value through other comprehensive income
|
a)
|
Financial assets at fair value through other comprehensive
income
|
|
R$ thousand
|
Amortized cost
|
Gross unrealized gains
|
Gross unrealized losses
|
Fair value
|
Brazilian government securities
|
134,289,029
|
9,310,390
|
(100,977)
|
143,498,442
|
Corporate debt securities
|
4,828,945
|
162,121
|
(97,033)
|
4,894,033
|
Bank debt securities
|
6,637,552
|
745,867
|
(1,256,114)
|
6,127,305
|
Brazilian sovereign bonds
|
9,222,104
|
608,077
|
(257,808)
|
9,572,373
|
Foreign governments securities
|
6,501,034
|
7,184
|
-
|
6,508,218
|
Mutual funds
|
2,939,361
|
14,770
|
(3,548)
|
2,950,583
|
Marketable equity securities and other stocks
|
9,895,440
|
2,631,980
|
(236,399)
|
12,291,021
|
Balance on December 31, 2020 (1)
|
174,313,465
|
13,480,389
|
(1,951,879)
|
185,841,975
|
|
|
|
|
|
Brazilian government securities
|
149,536,012
|
11,531,621
|
(732)
|
161,066,901
|
Corporate debt securities
|
5,293,589
|
318,798
|
(126,710)
|
5,485,677
|
Bank debt securities
|
5,606,859
|
534,907
|
(629,287)
|
5,512,479
|
Brazilian sovereign bonds
|
1,696,120
|
69,616
|
(18,804)
|
1,746,932
|
Foreign governments securities
|
6,449,559
|
5,335
|
-
|
6,454,894
|
Mutual funds
|
2,236,877
|
10,049
|
(15,116)
|
2,231,810
|
Marketable equity securities and other stocks
|
8,938,066
|
1,069,846
|
(56,595)
|
9,951,317
|
Balance on December 31, 2019
|
179,757,082
|
13,540,172
|
(847,244)
|
192,450,010
|
(1) In June 2020, Management decided to reclassify
the Securities measured at fair value through other comprehensive income to be measured at amortized cost, in the amount of R$20,009,471
thousand. This reclassification was the result of the alignment of risk and capital management. Without considering this reclassification
of the securities it would have been recognized in other comprehensive income fair value changes in the amount of R$1,794,263 thousand.
112 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
|
R$ thousand
|
|
On December 31, 2020
|
On December 31, 2019
|
|
Amortized cost
|
Fair value
|
Amortized cost
|
Fair value
|
|
Due within one year
|
60,234,322
|
59,892,379
|
33,240,423
|
33,247,822
|
|
From 1 to 5 years
|
64,073,593
|
67,388,842
|
97,066,063
|
101,397,630
|
|
From 5 to 10 years
|
14,913,201
|
15,784,368
|
21,003,150
|
22,423,476
|
|
Over 10 years
|
22,257,548
|
27,534,782
|
17,272,504
|
23,197,955
|
|
No stated maturity
|
12,834,801
|
15,241,604
|
11,174,942
|
12,183,127
|
|
Total
|
174,313,465
|
185,841,975
|
179,757,082
|
192,450,010
|
|
The financial instruments pledged
as collateral, classified as Financial assets at fair value through other comprehensive income, totalled R$35,548,882 thousand
on December 31, 2020 (2019 – R$71,964,109 thousand), being composed mostly of Brazilian government bonds.
|
c)
|
Investments in equity instruments designated at
fair value through other comprehensive income
|
|
R$ thousand
|
Cost
|
Adjustments to Fair Value
|
Fair Value
|
Marketable equity securities and other stocks
|
9,895,440
|
2,395,581
|
12,291,021
|
Total in December 31, 2020
|
9,895,440
|
2,395,581
|
12,291,021
|
The Organization adopted the option
of designating equity instruments at fair value through other comprehensive income due to the particularities of a given market.
|
d)
|
Reconciliation of expected
losses of financial assets at FVOCI:
|
|
R$ thousand
|
Stage 1
|
Stage 2
|
Stage 3
|
Total
|
Expected loss of financial assets at FVOCI on December 31, 2018
|
14,712
|
162,061
|
160,733
|
337,506
|
New assets originated or purchased/Assets settled or paid
|
25,128
|
(149,362)
|
(14,810)
|
(139,044)
|
Expected loss of financial assets at FVOCI on December 31, 2019
|
39,840
|
12,699
|
145,923
|
198,462
|
Transferred to Stage 1
|
-
|
(306)
|
-
|
(306)
|
Transferred to Stage 2
|
(1,088)
|
-
|
-
|
(1,088)
|
Transfer from Stage 1
|
-
|
1,088
|
-
|
1,088
|
Transfer from Stage 2
|
306
|
-
|
-
|
306
|
New assets originated or purchased/Assets settled or paid
|
58,906
|
(10,305)
|
(137,159)
|
(88,558)
|
Expected loss of financial assets to VJORA on December 31, 2020
|
97,964
|
3,176
|
8,764
|
109,904
|
22) Loans
and advances to financial institutions
|
R$ thousand
|
On December 31
|
2020
|
2019
|
Repurchase agreements (1)
|
179,729,419
|
48,278,561
|
Loans to financial institutions
|
11,696,244
|
10,849,695
|
Expected credit loss
|
(932)
|
(44,465)
|
Total
|
191,424,731
|
59,083,791
|
(1) In 2020, it included investments in repo
operations given in guarantee, in the amount of R$125,241,658 thousand (2019 - R$38,451,100 thousand).
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
23) Loans
and advances to customers
|
R$ thousand
|
On December 31
|
2020
|
2019
|
Companies
|
256,810,316
|
226,976,385
|
Financing and On-lending
|
108,461,841
|
104,138,378
|
Financing and export
|
51,461,844
|
47,484,556
|
Housing loans
|
18,538,907
|
16,822,185
|
Onlending BNDES/Finame
|
16,691,762
|
16,643,236
|
Vehicle loans
|
13,589,893
|
12,040,355
|
Import
|
5,696,949
|
8,398,252
|
Leases
|
2,482,486
|
2,749,794
|
Borrowings
|
140,384,792
|
111,327,898
|
Working capital
|
91,405,458
|
57,887,358
|
Rural loans
|
4,956,707
|
5,525,886
|
Other
|
44,022,627
|
47,914,654
|
Limit operations (1)
|
7,963,683
|
11,510,109
|
Credit card
|
3,966,504
|
4,000,712
|
Overdraft for corporates/Individuals
|
3,997,179
|
7,509,397
|
|
|
|
Individuals
|
256,406,447
|
230,415,990
|
Financing and On-lending
|
93,134,830
|
78,615,264
|
Housing loans
|
59,064,431
|
44,175,642
|
Vehicle loans
|
27,818,022
|
28,350,727
|
Onlending BNDES/Finame
|
6,105,589
|
5,872,331
|
Other
|
146,788
|
216,564
|
Borrowings
|
118,655,689
|
105,427,418
|
Payroll-deductible loans
|
69,897,126
|
63,144,951
|
Personal credit
|
24,033,559
|
24,338,888
|
Rural loans
|
8,419,040
|
8,543,433
|
Other
|
16,305,964
|
9,400,146
|
Limit operations (1)
|
44,615,928
|
46,373,308
|
Credit card
|
41,229,795
|
41,353,388
|
Overdraft for corporates/Individuals
|
3,386,133
|
5,019,920
|
Total portfolio
|
513,216,763
|
457,392,375
|
(1) It refers to outstanding operations with
pre-established limits linked to current account and credit card, whose limits are automatically recomposed as the amounts used
are paid.
Financial Leases Receivables
Loans and advances to customers include
the following financial lease receivables.
|
R$ thousand
|
On December 31
|
2020
|
2019
|
Gross investments in financial leases receivable:
|
|
|
Up to one year
|
1,013,244
|
1,076,955
|
From one to five years
|
1,489,536
|
1,658,449
|
Over five years
|
143,658
|
122,111
|
Impairment loss on finance leases
|
(70,468)
|
(160,382)
|
Net investment
|
2,575,970
|
2,697,133
|
|
|
|
Net investments in finance leases:
|
|
|
Up to one year
|
987,530
|
1,012,714
|
From one to five years
|
1,446,058
|
1,563,529
|
Over five years
|
142,382
|
120,890
|
Total
|
2,575,970
|
2,697,133
|
114 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
Reconciliation of the gross book
value of loans and advances to customers
Stage 1
|
R$ thousand
|
|
Balance on December 31, 2019
|
Transfer to Stage 2
|
Transfer to Stage 3
|
Transfer from Stage 2
|
Transfer from Stage 3
|
Amortization
|
Originated
|
Constitution/ (Reversal) (1)
|
(Write off)
|
Balance on December 31, 2020
|
|
|
|
Companies
|
193,236,364
|
(2,206,226)
|
(1,490,046)
|
330,715
|
67,187
|
(9,770,601)
|
149,850,120
|
(112,456,390)
|
-
|
217,561,123
|
|
- Financing
|
91,632,329
|
(1,266,291)
|
(1,000,667)
|
99,463
|
41,167
|
(4,828,945)
|
48,408,504
|
(38,854,293)
|
-
|
94,231,267
|
|
- Borrowings
|
91,448,563
|
(543,880)
|
(294,077)
|
193,710
|
21,172
|
(4,941,656)
|
99,438,789
|
(68,522,416)
|
-
|
116,800,205
|
|
- Revolving
|
10,155,472
|
(396,055)
|
(195,302)
|
37,542
|
4,848
|
-
|
2,002,827
|
(5,079,681)
|
-
|
6,529,651
|
|
Individuals
|
199,384,196
|
(14,601,213)
|
(4,693,118)
|
1,217,269
|
580,355
|
(14,887,045)
|
105,059,308
|
(76,820,588)
|
-
|
195,239,164
|
|
- Financing
|
72,998,157
|
(5,142,405)
|
(587,237)
|
492,025
|
25,325
|
(8,377,986)
|
41,562,050
|
(19,637,553)
|
-
|
81,332,376
|
|
- Borrowings
|
88,176,321
|
(6,647,911)
|
(1,926,044)
|
456,863
|
13,417
|
(6,509,059)
|
55,442,719
|
(49,792,950)
|
-
|
79,213,356
|
|
- Revolving
|
38,209,718
|
(2,810,897)
|
(2,179,837)
|
268,381
|
541,613
|
-
|
8,054,539
|
(7,390,085)
|
-
|
34,693,432
|
|
Total
|
392,620,560
|
(16,807,439)
|
(6,183,164)
|
1,547,984
|
647,542
|
(24,657,646)
|
254,909,428
|
(189,276,978)
|
-
|
412,800,287
|
|
Stage 2
|
R$ thousand
|
|
Balance on December 31, 2019
|
Transfer to Stage 1
|
Transfer to Stage 3
|
Transfer from Stage 1
|
Transfer from Stage 3
|
Amortization
|
Originated
|
Constitution/ (Reversal) (1)
|
(Write off)
|
Balance on December 31, 2020
|
|
|
|
Companies
|
13,106,024
|
(330,715)
|
(1,385,968)
|
2,206,226
|
77,803
|
(2,378,718)
|
8,504,101
|
(5,838,387)
|
-
|
13,960,366
|
|
- Financing
|
5,732,352
|
(99,463)
|
(693,154)
|
1,266,291
|
57,520
|
(1,380,199)
|
2,906,774
|
(911,790)
|
-
|
6,878,331
|
|
- Borrowings
|
6,758,152
|
(193,710)
|
(630,399)
|
543,880
|
17,128
|
(998,519)
|
5,352,796
|
(4,519,348)
|
-
|
6,329,980
|
|
- Revolving
|
615,520
|
(37,542)
|
(62,415)
|
396,055
|
3,155
|
-
|
244,531
|
(407,249)
|
-
|
752,055
|
|
Individuals
|
19,594,715
|
(1,217,269)
|
(2,071,615)
|
14,601,213
|
794,308
|
(12,773,924)
|
29,573,277
|
(10,477,173)
|
-
|
38,023,532
|
|
- Financing
|
4,567,302
|
(492,025)
|
(220,419)
|
5,142,405
|
140,369
|
(5,444,290)
|
8,404,759
|
(1,442,111)
|
-
|
10,655,990
|
|
- Borrowings
|
12,019,579
|
(456,863)
|
(1,161,812)
|
6,647,911
|
62,719
|
(7,329,634)
|
20,588,030
|
(7,587,442)
|
-
|
22,782,488
|
|
- Revolving
|
3,007,834
|
(268,381)
|
(689,384)
|
2,810,897
|
591,220
|
-
|
580,488
|
(1,447,620)
|
-
|
4,585,054
|
|
Total
|
32,700,739
|
(1,547,984)
|
(3,457,583)
|
16,807,439
|
872,111
|
(15,152,642)
|
38,077,378
|
(16,315,560)
|
-
|
51,983,898
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
Stage 3
|
R$ thousand
|
|
Balance on December 31, 2019
|
Transfer to Stage 1
|
Transfer to Stage 2
|
Transfer from Stage 1
|
Transfer from Stage 2
|
Amortization
|
Originated
|
Constitution/ (Reversal) (1)
|
(Write off)
|
Balance on December 31, 2020
|
|
|
|
Companies
|
20,633,998
|
(67,187)
|
(77,803)
|
1,490,046
|
1,385,968
|
(2,680,887)
|
14,626,196
|
(4,801,095)
|
(5,220,409)
|
25,288,827
|
|
- Financing
|
6,773,700
|
(41,167)
|
(57,520)
|
1,000,667
|
693,154
|
(1,211,218)
|
2,056,572
|
(584,841)
|
(1,277,104)
|
7,352,243
|
|
- Borrowings
|
13,121,182
|
(21,172)
|
(17,128)
|
294,077
|
630,399
|
(1,469,669)
|
12,159,563
|
(3,896,608)
|
(3,546,037)
|
17,254,607
|
|
- Revolving
|
739,116
|
(4,848)
|
(3,155)
|
195,302
|
62,415
|
-
|
410,061
|
(319,646)
|
(397,268)
|
681,977
|
|
Individuals
|
11,437,078
|
(580,355)
|
(794,308)
|
4,693,118
|
2,071,615
|
(3,953,496)
|
19,547,102
|
2,528,559
|
(11,805,562)
|
23,143,751
|
|
- Financing
|
1,049,805
|
(25,325)
|
(140,369)
|
587,237
|
220,419
|
(813,396)
|
1,085,403
|
(376,824)
|
(440,486)
|
1,146,464
|
|
- Borrowings
|
5,231,519
|
(13,417)
|
(62,719)
|
1,926,044
|
1,161,812
|
(3,140,100)
|
16,349,733
|
1,491,101
|
(6,284,128)
|
16,659,845
|
|
- Revolving
|
5,155,754
|
(541,613)
|
(591,220)
|
2,179,837
|
689,384
|
-
|
2,111,966
|
1,414,282
|
(5,080,948)
|
5,337,442
|
|
Total
|
32,071,076
|
(647,542)
|
(872,111)
|
6,183,164
|
3,457,583
|
(6,634,383)
|
34,173,298
|
(2,272,536)
|
(17,025,971)
|
48,432,578
|
|
Consolidated - 3 stages
|
R$ thousand
|
|
Balance on December 31, 2019
|
Amortization
|
Originated
|
Constitution/ (Reversal) (1)
|
(Write off)
|
Balance on December 31, 2020
|
|
|
|
Companies
|
226,976,386
|
(14,830,206)
|
172,980,417
|
(123,095,872)
|
(5,220,409)
|
256,810,316
|
|
- Financing
|
104,138,381
|
(7,420,362)
|
53,371,850
|
(40,350,924)
|
(1,277,104)
|
108,461,841
|
|
- Borrowings
|
111,327,897
|
(7,409,844)
|
116,951,148
|
(76,938,372)
|
(3,546,037)
|
140,384,792
|
|
- Revolving
|
11,510,108
|
-
|
2,657,419
|
(5,806,576)
|
(397,268)
|
7,963,683
|
|
Individuals
|
230,415,989
|
(31,614,465)
|
154,179,687
|
(84,769,202)
|
(11,805,562)
|
256,406,447
|
|
- Financing
|
78,615,264
|
(14,635,672)
|
51,052,212
|
(21,456,488)
|
(440,486)
|
93,134,830
|
|
- Borrowings
|
105,427,419
|
(16,978,793)
|
92,380,482
|
(55,889,291)
|
(6,284,128)
|
118,655,689
|
|
- Revolving
|
46,373,306
|
-
|
10,746,993
|
(7,423,423)
|
(5,080,948)
|
44,615,928
|
|
Total
|
457,392,375
|
(46,444,671)
|
327,160,104
|
(207,865,074)
|
(17,025,971)
|
513,216,763
|
|
(1) Composed of advanced settlements, maturities
and changes.
116 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
Stage 1
|
R$ thousand
|
|
Balance on December 31, 2018
|
Transfer to Stage 2
|
Transfer to Stage 3
|
Transfer from Stage 2
|
Transfer from Stage 3
|
Amortization
|
Originated
|
Constitution/ (Reversal) (1)
|
(Write off)
|
Balance on December 31, 2019
|
|
|
|
Companies
|
174,823,333
|
(3,530,473)
|
(1,047,643)
|
1,740,309
|
99,605
|
(14,129,128)
|
126,296,922
|
(91,016,561)
|
-
|
193,236,364
|
|
- Financing
|
87,491,428
|
(2,665,550)
|
(216,644)
|
793,644
|
56,979
|
(6,599,164)
|
48,322,133
|
(35,550,497)
|
-
|
91,632,329
|
|
- Borrowings
|
77,801,046
|
(788,067)
|
(771,301)
|
932,838
|
34,874
|
(7,529,964)
|
70,778,365
|
(49,009,228)
|
-
|
91,448,563
|
|
- Revolving
|
9,530,859
|
(76,856)
|
(59,698)
|
13,827
|
7,752
|
-
|
7,196,424
|
(6,456,836)
|
-
|
10,155,472
|
|
Individuals
|
164,711,763
|
(3,830,157)
|
(2,331,304)
|
1,939,655
|
323,117
|
(15,271,291)
|
126,773,073
|
(72,930,660)
|
-
|
199,384,196
|
|
- Financing
|
62,636,298
|
(2,196,138)
|
(567,081)
|
843,573
|
62,471
|
(8,742,813)
|
31,123,133
|
(10,161,286)
|
-
|
72,998,157
|
|
- Borrowings
|
69,241,572
|
(1,524,297)
|
(1,697,183)
|
1,027,710
|
154,480
|
(6,528,478)
|
62,155,926
|
(34,653,409)
|
-
|
88,176,321
|
|
- Revolving
|
32,833,893
|
(109,722)
|
(67,040)
|
68,372
|
106,166
|
-
|
33,494,014
|
(28,115,965)
|
-
|
38,209,718
|
|
Total
|
339,535,096
|
(7,360,630)
|
(3,378,947)
|
3,679,964
|
422,722
|
(29,400,419)
|
253,069,995
|
(163,947,221)
|
-
|
392,620,560
|
|
Stage 2
|
R$ thousand
|
|
Balance on December 31, 2018
|
Transfer to Stage 1
|
Transfer to Stage 3
|
Transfer from Stage 1
|
Transfer from Stage 3
|
Amortization
|
Originated
|
Constitution/ (Reversal) (1)
|
(Write off)
|
Balance on December 31, 2019
|
|
|
|
Companies
|
21,750,671
|
(1,740,309)
|
(4,150,902)
|
3,530,473
|
604,824
|
(1,537,738)
|
5,702,723
|
(11,053,718)
|
-
|
13,106,024
|
|
- Financing
|
11,855,797
|
(793,644)
|
(3,637,599)
|
2,665,550
|
183,776
|
(640,153)
|
768,132
|
(4,669,507)
|
-
|
5,732,352
|
|
- Borrowings
|
9,449,412
|
(932,838)
|
(510,021)
|
788,067
|
415,621
|
(897,585)
|
4,445,528
|
(6,000,032)
|
-
|
6,758,152
|
|
- Revolving
|
445,462
|
(13,827)
|
(3,282)
|
76,856
|
5,427
|
-
|
489,063
|
(384,179)
|
-
|
615,520
|
|
Individuals
|
15,354,577
|
(1,939,655)
|
(1,100,985)
|
3,830,157
|
622,122
|
(1,616,061)
|
11,754,505
|
(7,309,945)
|
-
|
19,594,715
|
|
- Financing
|
4,130,401
|
(843,573)
|
(292,952)
|
2,196,138
|
70,757
|
(550,578)
|
693,061
|
(835,952)
|
-
|
4,567,302
|
|
- Borrowings
|
9,122,134
|
(1,027,710)
|
(691,602)
|
1,524,297
|
479,625
|
(1,065,483)
|
8,288,437
|
(4,610,119)
|
-
|
12,019,579
|
|
- Revolving
|
2,102,042
|
(68,372)
|
(116,431)
|
109,722
|
71,740
|
-
|
2,773,007
|
(1,863,874)
|
-
|
3,007,834
|
|
Total
|
37,105,248
|
(3,679,964)
|
(5,251,887)
|
7,360,630
|
1,226,946
|
(3,153,799)
|
17,457,228
|
(18,363,663)
|
-
|
32,700,739
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
Stage 3
|
R$ thousand
|
|
Balance on December 31, 2018
|
Transfer to Stage 1
|
Transfer to Stage 2
|
Transfer from Stage 1
|
Transfer from Stage 2
|
Amortization
|
Originated
|
Constitution/ (Reversal) (1)
|
(Write off)
|
Balance on December 31, 2019
|
|
|
|
Companies
|
22,370,956
|
(99,605)
|
(604,824)
|
1,047,643
|
4,150,902
|
(552,471)
|
4,249,360
|
(3,941,465)
|
(5,986,498)
|
20,633,998
|
|
- Financing
|
6,325,568
|
(56,979)
|
(183,776)
|
216,644
|
3,637,599
|
(237,542)
|
422,843
|
(1,756,639)
|
(1,594,018)
|
6,773,700
|
|
- Borrowings
|
15,363,975
|
(34,874)
|
(415,621)
|
771,301
|
510,021
|
(314,929)
|
3,175,691
|
(1,928,627)
|
(4,005,755)
|
13,121,182
|
|
- Revolving
|
681,413
|
(7,752)
|
(5,427)
|
59,698
|
3,282
|
-
|
650,826
|
(256,199)
|
(386,725)
|
739,116
|
|
Individuals
|
12,481,355
|
(323,117)
|
(622,122)
|
2,331,304
|
1,100,985
|
(1,010,738)
|
6,655,466
|
1,502,563
|
(10,678,618)
|
11,437,078
|
|
- Financing
|
1,094,697
|
(62,471)
|
(70,757)
|
567,081
|
292,952
|
(372,611)
|
215,265
|
(117,483)
|
(496,868)
|
1,049,805
|
|
- Borrowings
|
5,604,645
|
(154,480)
|
(479,625)
|
1,697,183
|
691,602
|
(638,127)
|
2,679,383
|
1,146,472
|
(5,315,534)
|
5,231,519
|
|
- Revolving
|
5,782,013
|
(106,166)
|
(71,740)
|
67,040
|
116,431
|
-
|
3,760,818
|
473,574
|
(4,866,216)
|
5,155,754
|
|
Total
|
34,852,311
|
(422,722)
|
(1,226,946)
|
3,378,947
|
5,251,887
|
(1,563,209)
|
10,904,826
|
(2,438,902)
|
(16,665,116)
|
32,071,076
|
|
Consolidated - 3 stages
|
R$ thousand
|
|
Balance on December 31, 2018
|
Amortization
|
Originated
|
Constitution/ (Reversal) (1)
|
(Write off)
|
Balance on December 31, 2019
|
|
|
|
Companies
|
218,944,960
|
(16,219,337)
|
136,249,005
|
(106,011,744)
|
(5,986,498)
|
226,976,386
|
|
Financing and on-lending
|
105,672,793
|
(7,476,859)
|
49,513,108
|
(41,976,643)
|
(1,594,018)
|
104,138,381
|
|
Borrowings
|
102,614,433
|
(8,742,478)
|
78,399,584
|
(56,937,887)
|
(4,005,755)
|
111,327,897
|
|
Revolving
|
10,657,734
|
-
|
8,336,313
|
(7,097,214)
|
(386,725)
|
11,510,108
|
|
Individuals
|
192,547,695
|
(17,898,090)
|
145,183,044
|
(78,738,042)
|
(10,678,618)
|
230,415,989
|
|
Financing and on-lending
|
67,861,396
|
(9,666,002)
|
32,031,459
|
(11,114,721)
|
(496,868)
|
78,615,264
|
|
Borrowings
|
83,968,351
|
(8,232,088)
|
73,123,746
|
(38,117,056)
|
(5,315,534)
|
105,427,419
|
|
Revolving
|
40,717,948
|
-
|
40,027,839
|
(29,506,265)
|
(4,866,216)
|
46,373,306
|
|
Total
|
411,492,655
|
(34,117,427)
|
281,432,049
|
(184,749,786)
|
(16,665,116)
|
457,392,375
|
|
(1) Composed of advanced settlements, maturities and changes.
118 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
Reconciliation of expected losses
from loans and advances to customers
Stage 1
|
R$ thousand
|
|
Balance on December 31, 2019
|
Transfer to Stage 2
|
Transfer to Stage 3
|
Transfer from Stage 2
|
Transfer from Stage 3
|
Remeasurement
|
Originated
|
Constitution/ (Reversal)
|
(Write off)
|
Balance on December 31, 2020
|
|
|
|
Companies
|
5,248,063
|
(123,246)
|
(75,367)
|
60,005
|
61,068
|
(903,698)
|
3,371,617
|
(2,980,502)
|
-
|
4,657,940
|
|
- Financing
|
1,705,068
|
(49,907)
|
(27,696)
|
16,574
|
31,255
|
(333,242)
|
658,126
|
(565,632)
|
-
|
1,434,546
|
|
- Borrowings
|
3,176,569
|
(53,547)
|
(37,344)
|
39,733
|
22,403
|
(570,456)
|
2,410,885
|
(2,239,660)
|
-
|
2,748,583
|
|
- Revolving
|
366,426
|
(19,792)
|
(10,327)
|
3,698
|
7,410
|
-
|
302,606
|
(175,210)
|
-
|
474,811
|
|
Individuals
|
7,818,574
|
(697,750)
|
(395,724)
|
131,913
|
735,688
|
(528,786)
|
1,675,794
|
(2,476,657)
|
-
|
6,263,052
|
|
- Financing
|
939,390
|
(119,136)
|
(18,889)
|
63,780
|
9,837
|
(269,484)
|
497,334
|
(338,900)
|
-
|
763,932
|
|
- Borrowings
|
2,253,045
|
(210,380)
|
(79,140)
|
28,887
|
8,422
|
(259,302)
|
1,653,102
|
(1,316,920)
|
-
|
2,077,714
|
|
- Revolving
|
4,626,139
|
(368,234)
|
(297,695)
|
39,246
|
717,429
|
-
|
(474,642)
|
(820,837)
|
-
|
3,421,406
|
|
Total
|
13,066,637
|
(820,996)
|
(471,091)
|
191,918
|
796,756
|
(1,432,484)
|
5,047,411
|
(5,457,159)
|
-
|
10,920,992
|
|
Stage 2
|
R$ thousand
|
|
Balance on December 31, 2019
|
Transfer to Stage 1
|
Transfer to Stage 3
|
Transfer from Stage 1
|
Transfer from Stage 3
|
Remeasurement
|
Originated
|
Constitution/ (Reversal)
|
(Write off)
|
Balance on December 31, 2020
|
|
|
|
Companies
|
1,890,105
|
(60,005)
|
(265,984)
|
123,246
|
38,907
|
(204,168)
|
1,255,949
|
(1,232,383)
|
-
|
1,545,667
|
|
- Financing
|
216,936
|
(16,574)
|
(37,785)
|
49,907
|
17,910
|
(16,975)
|
346,847
|
(60,772)
|
-
|
499,494
|
|
- Borrowings
|
1,610,244
|
(39,733)
|
(221,113)
|
53,547
|
15,372
|
(187,193)
|
840,047
|
(1,133,519)
|
-
|
937,652
|
|
- Revolving
|
62,925
|
(3,698)
|
(7,086)
|
19,792
|
5,625
|
-
|
69,055
|
(38,092)
|
-
|
108,521
|
|
Individuals
|
2,745,182
|
(131,913)
|
(421,879)
|
697,750
|
538,366
|
15,143
|
4,766,938
|
(1,414,664)
|
-
|
6,794,923
|
|
- Financing
|
603,412
|
(63,780)
|
(29,919)
|
119,136
|
62,383
|
400,501
|
2,185,389
|
(172,335)
|
-
|
3,104,787
|
|
- Borrowings
|
1,647,973
|
(28,887)
|
(246,523)
|
210,380
|
36,954
|
(385,358)
|
2,714,098
|
(1,009,214)
|
-
|
2,939,423
|
|
- Revolving
|
493,797
|
(39,246)
|
(145,437)
|
368,234
|
439,029
|
-
|
(132,549)
|
(233,115)
|
-
|
750,713
|
|
Total
|
4,635,287
|
(191,918)
|
(687,863)
|
820,996
|
577,273
|
(189,025)
|
6,022,887
|
(2,647,047)
|
-
|
8,340,590
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
Stage 3
|
R$ thousand
|
|
Balance on December 31, 2019
|
Transfer to Stage 1
|
Transfer to Stage 2
|
Transfer from Stage 1
|
Transfer from Stage 2
|
Remeasurement
|
Originated
|
Constitution/ (Reversal)
|
(Write off)
|
Balance on December 31, 2020
|
|
|
|
Companies
|
12,248,924
|
(61,068)
|
(38,907)
|
75,367
|
265,984
|
298,005
|
8,314,816
|
(1,566,331)
|
(5,220,409)
|
14,316,381
|
|
- Financing
|
2,996,708
|
(31,255)
|
(17,910)
|
27,696
|
37,785
|
970,922
|
1,224,427
|
123,928
|
(1,277,104)
|
4,055,197
|
|
- Borrowings
|
8,700,237
|
(22,403)
|
(15,372)
|
37,344
|
221,113
|
(672,917)
|
6,627,728
|
(1,561,378)
|
(3,546,037)
|
9,768,315
|
|
- Revolving
|
551,979
|
(7,410)
|
(5,625)
|
10,327
|
7,086
|
-
|
462,661
|
(128,881)
|
(397,268)
|
492,869
|
|
Individuals
|
8,201,536
|
(735,688)
|
(538,366)
|
395,724
|
421,879
|
(405,497)
|
11,224,590
|
5,421,072
|
(11,805,562)
|
12,179,688
|
|
- Financing
|
530,122
|
(9,837)
|
(62,383)
|
18,889
|
29,919
|
(45,990)
|
589,605
|
16,122
|
(440,486)
|
625,961
|
|
- Borrowings
|
3,733,550
|
(8,422)
|
(36,954)
|
79,140
|
246,523
|
(359,507)
|
7,443,890
|
2,829,081
|
(6,284,128)
|
7,643,173
|
|
- Revolving
|
3,937,864
|
(717,429)
|
(439,029)
|
297,695
|
145,437
|
-
|
3,191,095
|
2,575,869
|
(5,080,948)
|
3,910,554
|
|
Total
|
20,450,460
|
(796,756)
|
(577,273)
|
471,091
|
687,863
|
(107,492)
|
19,539,406
|
3,854,741
|
(17,025,971)
|
26,496,069
|
|
Consolidated - 3 stages
|
R$ thousand
|
|
Balance on December 31, 2019
|
Remeasurement
|
Originated
|
Constitution/ (Reversal)
|
(Write off)
|
Balance on December 31, 2020
|
|
|
|
Companies
|
19,387,092
|
(809,861)
|
12,942,382
|
(5,779,216)
|
(5,220,409)
|
20,519,988
|
|
- Financing
|
4,918,712
|
620,705
|
2,229,400
|
(502,476)
|
(1,277,104)
|
5,989,237
|
|
- Borrowings
|
13,487,050
|
(1,430,566)
|
9,878,660
|
(4,934,557)
|
(3,546,037)
|
13,454,550
|
|
- Revolving
|
981,330
|
-
|
834,322
|
(342,183)
|
(397,268)
|
1,076,201
|
|
Individuals
|
18,765,292
|
(919,140)
|
17,667,322
|
1,529,751
|
(11,805,562)
|
25,237,663
|
|
- Financing
|
2,072,924
|
85,027
|
3,272,328
|
(495,113)
|
(440,486)
|
4,494,680
|
|
- Borrowings
|
7,634,568
|
(1,004,167)
|
11,811,090
|
502,947
|
(6,284,128)
|
12,660,310
|
|
- Revolving
|
9,057,800
|
-
|
2,583,904
|
1,521,917
|
(5,080,948)
|
8,082,673
|
|
Total (1)
|
38,152,384
|
(1,729,001)
|
30,609,704
|
(4,249,465)
|
(17,025,971)
|
45,757,651
|
|
(1) Consider expected losses on loans, commitments
to be released and financial guarantees provided.
120 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
Stage 1
|
R$ thousand
|
|
Balance on December 31, 2018
|
Transfer to Stage 2
|
Transfer to Stage 3
|
Transfer from Stage 2
|
Transfer from Stage 3
|
Remeasurement
|
Originated
|
Constitution/ (Reversal)
|
(Write off)
|
Balance on December 31, 2019
|
|
|
|
Companies
|
3,443,204
|
(94,861)
|
(67,862)
|
160,068
|
67,150
|
(699,827)
|
3,512,364
|
(1,072,173)
|
-
|
5,248,063
|
|
- Financing
|
1,122,680
|
(37,774)
|
(8,497)
|
41,914
|
34,652
|
4,017
|
775,161
|
(227,085)
|
-
|
1,705,068
|
|
- Borrowings
|
1,945,637
|
(52,890)
|
(57,437)
|
116,806
|
23,010
|
(703,844)
|
2,515,926
|
(610,639)
|
-
|
3,176,569
|
|
- Revolving
|
374,887
|
(4,197)
|
(1,928)
|
1,348
|
9,488
|
-
|
221,277
|
(234,449)
|
-
|
366,426
|
|
Individuals
|
7,273,362
|
(164,394)
|
(157,138)
|
177,609
|
251,008
|
(750,372)
|
5,812,053
|
(4,623,554)
|
-
|
7,818,574
|
|
- Financing
|
901,119
|
(66,512)
|
(34,051)
|
78,516
|
28,735
|
(257,642)
|
476,691
|
(187,466)
|
-
|
939,390
|
|
- Borrowings
|
2,053,854
|
(79,136)
|
(107,024)
|
84,208
|
94,472
|
(492,730)
|
1,716,160
|
(1,016,759)
|
-
|
2,253,045
|
|
- Revolving
|
4,318,389
|
(18,746)
|
(16,063)
|
14,885
|
127,801
|
-
|
3,619,202
|
(3,419,329)
|
-
|
4,626,139
|
|
Total
|
10,716,566
|
(259,255)
|
(225,000)
|
337,677
|
318,158
|
(1,450,199)
|
9,324,417
|
(5,695,727)
|
-
|
13,066,637
|
|
Stage 2
|
R$ thousand
|
|
Balance on December 31, 2018
|
Transfer to Stage 1
|
Transfer to Stage 3
|
Transfer from Stage 1
|
Transfer from Stage 3
|
Remeasurement
|
Originated
|
Constitution/ (Reversal)
|
(Write off)
|
Balance on December 31, 2019
|
|
|
|
Companies
|
2,547,908
|
(160,068)
|
(953,343)
|
94,861
|
212,921
|
(355,917)
|
1,218,315
|
(714,572)
|
-
|
1,890,105
|
|
- Financing
|
1,445,950
|
(41,914)
|
(835,870)
|
37,774
|
29,175
|
(205,170)
|
51,560
|
(264,569)
|
-
|
216,936
|
|
- Borrowings
|
1,047,715
|
(116,806)
|
(117,292)
|
52,890
|
178,660
|
(150,747)
|
1,117,295
|
(401,471)
|
-
|
1,610,244
|
|
- Revolving
|
54,243
|
(1,348)
|
(181)
|
4,197
|
5,086
|
-
|
49,460
|
(48,532)
|
-
|
62,925
|
|
Individuals
|
1,831,813
|
(177,609)
|
(173,561)
|
164,394
|
384,088
|
(100,890)
|
1,672,251
|
(855,304)
|
-
|
2,745,182
|
|
- Financing
|
405,730
|
(78,516)
|
(38,370)
|
66,512
|
30,577
|
209,080
|
94,304
|
(85,905)
|
-
|
603,412
|
|
- Borrowings
|
1,097,633
|
(84,208)
|
(116,067)
|
79,136
|
271,118
|
(309,970)
|
1,195,503
|
(485,172)
|
-
|
1,647,973
|
|
- Revolving
|
328,450
|
(14,885)
|
(19,124)
|
18,746
|
82,393
|
-
|
382,444
|
(284,227)
|
-
|
493,797
|
|
Total
|
4,379,721
|
(337,677)
|
(1,126,904)
|
259,255
|
597,009
|
(456,807)
|
2,890,566
|
(1,569,876)
|
-
|
4,635,287
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
Stage 3
|
R$ thousand
|
|
Balance on December 31, 2018
|
Transfer to Stage 1
|
Transfer to Stage 2
|
Transfer from Stage 1
|
Transfer from Stage 2
|
Remeasurement
|
Originated
|
Constitution/ (Reversal)
|
(Write off)
|
Balance on December 31, 2019
|
|
|
|
Companies
|
10,860,724
|
(67,150)
|
(212,921)
|
67,862
|
953,343
|
2,832,030
|
1,938,037
|
1,863,497
|
(5,986,498)
|
12,248,924
|
|
- Financing
|
2,681,912
|
(34,652)
|
(29,175)
|
8,497
|
835,870
|
727,234
|
242,132
|
158,908
|
(1,594,018)
|
2,996,708
|
|
- Borrowings
|
7,635,874
|
(23,010)
|
(178,660)
|
57,437
|
117,292
|
2,104,796
|
1,162,299
|
1,829,964
|
(4,005,755)
|
8,700,237
|
|
- Revolving
|
542,938
|
(9,488)
|
(5,086)
|
1,928
|
181
|
-
|
533,606
|
(125,375)
|
(386,725)
|
551,979
|
|
Individuals
|
8,419,460
|
(251,008)
|
(384,088)
|
157,138
|
173,561
|
1,339,621
|
4,773,024
|
4,652,446
|
(10,678,618)
|
8,201,536
|
|
- Financing
|
619,474
|
(28,735)
|
(30,577)
|
34,051
|
38,370
|
154,279
|
107,267
|
132,861
|
(496,868)
|
530,122
|
|
- Borrowings
|
3,411,114
|
(94,472)
|
(271,118)
|
107,024
|
116,067
|
1,185,342
|
1,818,298
|
2,776,829
|
(5,315,534)
|
3,733,550
|
|
- Revolving
|
4,388,872
|
(127,801)
|
(82,393)
|
16,063
|
19,124
|
-
|
2,847,459
|
1,742,756
|
(4,866,216)
|
3,937,864
|
|
Total
|
19,280,184
|
(318,158)
|
(597,009)
|
225,000
|
1,126,904
|
4,171,651
|
6,711,061
|
6,515,943
|
(16,665,116)
|
20,450,460
|
|
Consolidated - 3 stages
|
R$ thousand
|
|
Expected loss on December 31, 2018
|
Remeasurement
|
Originated
|
Constitution/ (Reversal)
|
(Write off)
|
Loss expected on December 31, 2019
|
|
|
|
Companies
|
16,851,836
|
1,776,286
|
6,668,716
|
76,752
|
(5,986,498)
|
19,387,092
|
|
Financing and on-lending
|
5,250,542
|
526,081
|
1,068,853
|
(332,746)
|
(1,594,018)
|
4,918,712
|
|
Borrowings
|
10,629,226
|
1,250,205
|
4,795,520
|
817,854
|
(4,005,755)
|
13,487,050
|
|
Revolving
|
972,068
|
-
|
804,343
|
(408,356)
|
(386,725)
|
981,330
|
|
Individuals
|
17,524,635
|
488,359
|
12,257,328
|
(826,412)
|
(10,678,618)
|
18,765,292
|
|
Financing and on-lending
|
1,926,323
|
105,717
|
678,262
|
(140,510)
|
(496,868)
|
2,072,924
|
|
Borrowings
|
6,562,601
|
382,642
|
4,729,961
|
1,274,898
|
(5,315,534)
|
7,634,568
|
|
Revolving
|
9,035,711
|
-
|
6,849,105
|
(1,960,800)
|
(4,866,216)
|
9,057,800
|
|
Total (1)
|
34,376,471
|
2,264,645
|
18,926,044
|
(749,660)
|
(16,665,116)
|
38,152,384
|
|
(1) Consider expected losses on loans, commitments to be released
and financial guarantees provided.
122 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
Sensitivity analysis
The measurement of the expected
credit loss incorporates prospective information from projections of economic scenarios that are developed by a team of experts
and approved according to the risk governance of the Organization. The projections are reviewed at least annually, being more timely
in cases of relevant events that may materially change the future prospects.
In order to determine possible
oscillations of expected loss arising from the economic projections, simulations were made by changing the weighting of the scenarios
used in the calculation of the expected loss. In the table below, we show the probabilities assigned to each scenario and the impacts:
|
On December 31, 2020 - R$ thousand
|
|
Weighting
|
Constitution/ (Reversal)
|
|
Base Scenario
|
Optimistic Scenario*
|
Pessimistic Scenario**
|
|
|
Simulation 1
|
100%
|
-
|
-
|
(300,652)
|
|
Simulation 2
|
-
|
100%
|
-
|
(502,242)
|
|
Simulation 3
|
-
|
-
|
100%
|
1,226,712
|
|
* Scenario in which the economy grows more than expected.
** Scenario in which the economy grows less than expected.
Expected loss on loans and advances
|
Years ended December 31 - R$ thousand
|
2020
|
2019
|
Amount recorded
|
24,631,238
|
20,441,029
|
Amount recovered
|
(5,919,397)
|
(7,908,896)
|
Expected loss on loans and advances
|
18,711,841
|
12,532,133
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
Loans and advances to customers renegotiated
The total balance of “Loans
and advances to customers renegotiated” includes renegotiated loans and advances to customers. Such loans contemplate extension
of loan payment terms, grace periods, reductions in interest rates, and/or, in some cases, the forgiveness (write-off) of part
of the loan principal amount.
Renegotiations may occur after debts
are past due or when the Company has information about a significant deterioration in the client’s creditworthiness. The
purpose of such renegotiations is to adapt the loan to reflect the client’s actual payment capacity.
The following table shows changes
made and our analysis of our portfolio of renegotiated loans and advances to customers:
|
R$ thousand
|
On December 31
|
2020
|
2019
|
Opening balance
|
19,030,657
|
17,143,212
|
Additional renegotiated amounts, including interest
|
34,683,660
|
20,283,735
|
Payments received
|
(19,448,835)
|
(13,363,684)
|
Write-offs
|
(4,508,342)
|
(5,032,606)
|
Closing balance
|
29,757,140
|
19,030,657
|
Expected loss on loans and advances
|
(10,659,899)
|
(8,021,445)
|
Total renegotiated loans and advances to customers, net of impairment at the end of the year
|
19,097,241
|
11,009,212
|
|
|
|
Impairment on renegotiated loans and advances as a percentage of the renegotiated portfolio
|
35.8%
|
42.2%
|
Total renegotiated loans and advances as a percentage of the total loan portfolio
|
5.8%
|
4.2%
|
Total renegotiated loans and advances as a percentage of the total loan portfolio, net of impairment
|
3.7%
|
2.6%
|
At the time a loan is modified,
Management considers the new loan’s conditions and renegotiated maturity and it is no longer considered past due. From the
date of modification, renegotiated interest begins to accrue, using the effective interest rate method, taking into consideration
the client’s capacity to pay the loan based on the analysis made by Management. If the customer fails to maintain the new
negotiated terms, management considers ceasing accrual from that point.
Additionally, any balances related
to renegotiated loans and advances to customers that have already been written off and recorded in memorandum accounts, as well
as any gains from renegotiations, are recognized only when received.
124 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
24) Bonds
and securities at amortized cost
|
R$ thousand
|
Amortized cost
|
Gross unrealized gains (2)
|
Gross unrealized losses (2)
|
Fair value
|
Securities:
|
|
|
|
|
Brazilian government securities
|
91,884,693
|
6,795,851
|
(8,422)
|
98,672,122
|
Corporate debt securities
|
87,739,201
|
291,387
|
(2,695,825)
|
85,334,763
|
Balance on December 31, 2020 (1)
|
179,623,894
|
7,087,238
|
(2,704,247)
|
184,006,885
|
|
|
|
|
|
Securities:
|
|
|
|
|
Brazilian government securities
|
89,114,107
|
11,814,621
|
(538,480)
|
100,390,248
|
Corporate debt securities
|
77,804,253
|
970,671
|
(649,528)
|
78,125,396
|
Balance on December 31, 2019 (1)
|
166,918,360
|
12,785,292
|
(1,188,008)
|
178,515,644
|
(1) In 2020 and 2019, no reclassifications were
made of Financial Assets at amortized cost – Bonds and securities for other categories of financial assets; and
(2) Unrealized gains and losses on amortized
costs assets have not been recognized in comprehensive income.
Maturity
|
R$ thousand
|
On December 31, 2020
|
On December 31, 2019
|
Amortized cost
|
Fair value
|
Amortized cost
|
Fair value
|
Due within one year
|
37,272,651
|
37,799,094
|
51,513,100
|
52,049,525
|
From 1 to 5 years
|
77,744,401
|
78,452,236
|
53,600,975
|
56,134,668
|
From 5 to 10 years
|
34,641,933
|
32,852,519
|
31,572,806
|
31,489,480
|
Over 10 years
|
29,964,909
|
34,903,036
|
30,231,479
|
38,841,971
|
Total
|
179,623,894
|
184,006,885
|
166,918,360
|
178,515,644
|
The financial instruments pledged
as collateral, classified as financial assets at amortized cost, totalled R$38,224,516 thousand at December 31, 2020 (2019 –
R$47,129,734 thousand), being composed mostly of Brazilian government bonds.
Reconciliation of expected losses
of financial assets at amortized cost:
|
R$ thousand
|
Stage 1
|
Stage 2
|
Stage 3
|
Total (1)
|
Expected loss of financial assets at amortized cost on December 31, 2018
|
178,207
|
789,021
|
2,054,811
|
3,022,039
|
Transferred to Stage 1
|
-
|
(12,246)
|
-
|
(12,246)
|
Transferred to Stage 2
|
(42,073)
|
-
|
(67,004)
|
(109,077)
|
Transferred to Stage 3
|
-
|
(474,161)
|
-
|
(474,161)
|
Transfer from Stage 1
|
-
|
42,073
|
-
|
42,073
|
Transfer from Stage 2
|
12,246
|
-
|
474,161
|
486,407
|
Transfer from Stage 3
|
-
|
67,004
|
-
|
67,004
|
Assets originated or purchased/Assets settled/Reversal
|
150,962
|
280,647
|
1,179,829
|
1,611,438
|
Expected loss of financial assets at amortized cost on December 31, 2019
|
299,342
|
692,338
|
3,641,797
|
4,633,477
|
Transferred to Stage 1
|
-
|
(69,057)
|
-
|
(69,057)
|
Transferred to Stage 2
|
(34,918)
|
-
|
-
|
(34,918)
|
Transferred to Stage 3
|
(26,365)
|
(79,871)
|
-
|
(106,236)
|
Transfer from Stage 1
|
-
|
34,918
|
26,365
|
61,283
|
Transfer from Stage 2
|
69,057
|
-
|
79,871
|
148,928
|
Transfer from Stage 3
|
-
|
-
|
-
|
-
|
New assets originated or purchased/Assets settled or paid
|
(11,688)
|
544,691
|
388,989
|
921,992
|
Expected loss of financial assets at amortized cost as of December 31, 2020
|
295,428
|
1,123,019
|
4,137,022
|
5,555,469
|
(1) The expected loss expense is recorded as
“Expected Loss on Other Financial Assets” in the Consolidated Statement of Income.
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
25) Non-current
assets held for sale
|
R$ thousand
|
On December 31
|
2020
|
2019
|
Assets not for own use
|
|
|
Real estate
|
995,614
|
1,133,572
|
Vehicles and similar
|
205,347
|
223,051
|
Machinery and equipment
|
1,487
|
362
|
Other
|
40
|
41
|
Total
|
1,202,488
|
1,357,026
|
The properties or other non-current
assets received in total or partial settlement of the payment obligations of debtors are considered as non-operating assets held
for sale in auctions, which normally occur in up to one year. Non-current assets held for sale are those for which selling expectation,
in their current condition, is highly probable to occur within a year.
126 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
26) Investments
in associates and joint ventures
|
a)
|
Breakdown of investments in associates and joint ventures
|
Companies
|
R$ thousand
|
|
Equity interest
|
Shareholding interest with voting rights
|
Investment book value
|
Equity in net income (loss)
|
Associates and joint ventures current assets
|
Associates and joint ventures non - current assets
|
Associates and joint ventures current liabilities
|
Associates and joint ventures non - current liabilities
|
Revenue (1)
|
Associates and joint ventures net income (loss) for the year
|
|
|
Cielo S.A. (2)
|
30.06%
|
30.06%
|
3,885,336
|
(157,556)
|
75,507,836
|
16,299,562
|
66,942,947
|
10,806,367
|
11,186,013
|
(347,338)
|
|
IRB - Brasil Resseguros S.A. (3)
|
-
|
-
|
-
|
53,454
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Fleury S.A. (4) (5)
|
22.47%
|
22.47%
|
1,206,372
|
42,158
|
1,990,891
|
3,632,868
|
1,201,313
|
2,622,634
|
2,930,975
|
220,692
|
|
Haitong Banco de Investimento do Brasil S.A.
|
20.00%
|
20.00%
|
106,085
|
4,384
|
5,492,157
|
1,410,680
|
4,265,660
|
2,107,953
|
1,070,232
|
20,221
|
|
Cia. Brasileira de Gestão e Serviços S.A.
|
41.85%
|
41.85%
|
130,641
|
(2,196)
|
207,631
|
136,107
|
25,451
|
6,112
|
154,225
|
(5,248)
|
|
Tecnologia Bancária S.A. (4)
|
24.32%
|
24.32%
|
166,044
|
35,285
|
685,459
|
1,796,631
|
716,566
|
1,089,234
|
2,680,429
|
130,596
|
|
Swiss Re Corporate Solutions Brasil (4)
|
40.00%
|
40.00%
|
332,244
|
(2,651)
|
2,499,009
|
1,446,089
|
2,809,293
|
305,194
|
991,491
|
(6,627)
|
|
Gestora de Inteligência de Crédito S.A. (4)
|
20.00%
|
20.00%
|
28,680
|
(19,064)
|
199,844
|
1,063,455
|
138,933
|
980,967
|
40,598
|
(95,260)
|
|
Other (4)
|
|
|
96,001
|
52,811
|
|
|
|
|
|
|
|
Total investments in associates
|
|
|
5,951,403
|
6,625
|
86,582,827
|
25,785,392
|
76,100,163
|
17,918,461
|
19,053,963
|
(82,964)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Elo Participações Ltda. (6)
|
50.01%
|
50.01%
|
1,435,437
|
434,313
|
892,035
|
2,704,326
|
262,501
|
151,629
|
18,223
|
864,391
|
|
Crediare S.A. – Crédito, Financiamento e Investimento (7)
|
-
|
-
|
-
|
3,920
|
-
|
-
|
-
|
-
|
-
|
-
|
|
MPO - Processadora de Pagamentos Móveis S.A. (8)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Total investments in joint ventures
|
|
|
1,435,437
|
438,233
|
892,035
|
2,704,326
|
262,501
|
151,629
|
18,223
|
864,391
|
|
Total on December 31, 2020
|
|
|
7,386,840
|
444,858
|
87,474,862
|
28,489,718
|
76,362,664
|
18,070,090
|
19,072,186
|
781,427
|
|
(1) Income from financial intermediation or fee and commission;
(2) Brazilian company, services provider related to credit and debit
cards and other means of payment. In 2020, the Organization received R$20,797 thousand of dividends and interest on shareholders’
equity of this investment. In its financial statements, Cielo S.A. presented R$51,779 thousand of other comprehensive income;
(3) Equity method discontinued after the loss of significant influence
resulting from the resignation of the chair on the institution’s board of directors, in April 2020, being classified as marketable
securities in the category at fair value through other comprehensive income;
(4) Companies for which the equity accounting adjustments are calculated
using statements of financial position and statements of income with lag in relation to the reporting date of these consolidated
financial statements;
(5) Participation in Fleury S.A. (i) company considered using equity
method as Bradesco has significant influence due its participation on the Board of the Directors and other Committees;
(6) Brazilian company, holding company that consolidates joint business
related to electronic means of payment. In 2020, the Organization received R$228,125 thousand of dividends from this investment;
(7) Company sold in July 2020; and
(8) Company merged in November 2020.
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
Companies
|
R$ thousand
|
|
Equity interest
|
Shareholding interest with voting rights
|
Investment book value
|
Equity in net income (loss)
|
Associates and joint ventures current assets
|
Associates and joint ventures non - current assets
|
Associates and joint ventures current liabilities
|
Associates and joint ventures non - current liabilities
|
Revenue (1)
|
Associates and joint ventures net income (loss) for the year
|
|
|
Cielo S.A. (2)
|
30.06%
|
30.06%
|
4,012,423
|
475,194
|
80,584,265
|
13,924,371
|
74,467,296
|
8,648,722
|
5,300,681
|
1,583,827
|
|
IRB - Brasil Resseguros S.A. (3) (4)
|
15.23%
|
15.23%
|
668,833
|
225,137
|
10,900,366
|
6,029,558
|
11,222,870
|
1,334,052
|
7,842,177
|
1,472,003
|
|
Fleury S.A. (3) (5)
|
16.28%
|
16.28%
|
703,401
|
37,312
|
990,578
|
3,707,962
|
685,626
|
2,210,530
|
3,047,851
|
327,279
|
|
Aquarius Participações S.A.
|
49.00%
|
49.00%
|
44,535
|
12,155
|
914
|
90,013
|
39
|
-
|
-
|
24,805
|
|
Haitong Banco de Investimento do Brasil S.A.
|
20.00%
|
20.00%
|
104,420
|
3,824
|
2,769,583
|
1,501,644
|
3,018,405
|
732,665
|
3,933,691
|
16,642
|
|
Cia. Brasileira de Gestão e Serviços S.A.
|
41.85%
|
41.85%
|
135,005
|
9,328
|
245,624
|
106,351
|
25,873
|
3,491
|
188,407
|
22,550
|
|
NCR Brasil Indústria de Equipamentos para Automação S.A. (6)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Tecnologia Bancária S.A. (3)
|
24.32%
|
24.32%
|
130,759
|
15,327
|
561,182
|
1,646,932
|
448,857
|
1,256,342
|
2,478,999
|
44,698
|
|
Swiss Re Corporate Solutions Brasil (3)
|
40.00%
|
40.00%
|
345,825
|
9,056
|
2,206,395
|
1,487,009
|
2,522,673
|
317,259
|
1,167,924
|
22,641
|
|
Gestora de Inteligência de Crédito S.A. (3)
|
20.00%
|
20.00%
|
47,744
|
(11,354)
|
202,904
|
323,845
|
38,512
|
249,519
|
17
|
(73,143)
|
|
Other (3)
|
-
|
-
|
54,021
|
98,959
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Total investments in associates
|
|
|
6,246,966
|
874,938
|
98,461,811
|
28,817,685
|
92,430,151
|
14,752,580
|
23,959,747
|
3,441,302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Elo Participações S.A. (7)
|
50.01%
|
50.01%
|
1,338,973
|
314,644
|
1,385,306
|
1,835,595
|
199,891
|
29,192
|
38,605
|
627,367
|
|
Crediare S.A. – Crédito, Financiamento e Investimento
|
50.00%
|
50.00%
|
49,673
|
11,482
|
448,568
|
4,738
|
353,962
|
-
|
135,746
|
23,498
|
|
MPO - Processadora de Pagamentos Móveis S.A. (8)
|
100.00%
|
100.00%
|
-
|
18
|
2,676
|
1,423
|
4,187
|
-
|
150
|
44
|
|
Total investments in joint ventures
|
|
|
1,388,646
|
326,144
|
1,836,550
|
1,841,756
|
558,040
|
29,192
|
174,501
|
650,909
|
|
Total on December 31, 2019 (9)
|
|
|
7,635,612
|
1,201,082
|
100,298,361
|
30,659,441
|
92,988,191
|
14,781,772
|
24,134,248
|
4,092,211
|
|
(1) Income from financial intermediation or fee and commission;
(2) Brazilian company, services provider related to credit and debit
cards and other means of payment. In 2019, the Organization received R$448,291 thousand of dividends and interest on shareholders’
equity of this investment. In its financial statements, Cielo S.A. presented R$45,693 thousand of other comprehensive income;
(3) Companies for which the equity accounting adjustments are calculated
using statements of financial position and statements of income with lag in relation to the reporting date of these consolidated
financial statements;
(4) Bradesco has a board member at IRB-Brasil with voting rights,
which results in significant influence;
(5) Participation in Fleury S.A. (i) company considered using equity
method as Bradesco has significant influence due its participation on the Board of the Directors and other Committees;
(6) In 2019, there was the divestiture of the company NCR Brasil Indústria
de Equipamentos para Automação S.A.;
(7) Brazilian company, holding company that consolidates joint business
related to electronic means of payment. In 2019, the Organization received R$72,215 thousand of dividends from this investment.
In its financial statements, Elo Participações S.A. presented R$22 thousand of other comprehensive income;
(8) In December 2019, we began to consolidate the company MPO –
Processadora de Pagamentos Móveis S.A., after the shareholding acquisition; and
(9) In 2019, impairment losses were recorded in “associates
and jointly controlled entities” in the amount of R$727,235 thousand.
128 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
Companies
|
R$ thousand
|
|
Equity interest
|
Shareholding interest with voting rights
|
Investment book value
|
Equity in net income (loss)
|
Associates and joint ventures current assets
|
Associates and joint ventures non - current assets
|
Associates and joint ventures current liabilities
|
Associates and joint ventures non - current liabilities
|
Revenue (1)
|
Associates and joint ventures net income (loss) for the year
|
|
|
Cielo S.A. (2)
|
30.06%
|
30.06%
|
4,679,589
|
1,011,125
|
65,967,300
|
16,595,791
|
56,802,838
|
10,890,157
|
1,883,033
|
3,341,909
|
|
IRB - Brasil Resseguros S.A. (3) (4)
|
15.23%
|
15.23%
|
606,161
|
174,277
|
10,265,219
|
5,417,377
|
10,845,420
|
873,938
|
7,036,160
|
1,139,542
|
|
Fleury S.A. (3) (5)
|
16.28%
|
16.28%
|
699,927
|
38,805
|
1,510,304
|
2,482,580
|
640,899
|
1,570,942
|
2,642,751
|
238,558
|
|
Aquarius Participações S.A. (6)
|
49.00%
|
49.00%
|
43,030
|
130,769
|
19,096
|
86,626
|
17,907
|
-
|
-
|
266,876
|
|
Haitong Banco de Investimento do Brasil S.A.
|
20.00%
|
20.00%
|
100,597
|
602
|
2,587,712
|
1,503,374
|
2,210,690
|
1,880,396
|
6,362,896
|
3,010
|
|
Cia. Brasileira de Gestão e Serviços S.A. (3)
|
41.85%
|
41.85%
|
127,677
|
8,895
|
230,503
|
100,052
|
22,207
|
3,258
|
174,816
|
21,254
|
|
NCR Brasil Indústria de Equipamentos para Automação S.A. (3)
|
49.00%
|
49.00%
|
52,571
|
6,689
|
305,278
|
30,249
|
207,894
|
-
|
9,601
|
13,651
|
|
Técnologia Bancária S.A. (3)
|
24.32%
|
24.32%
|
115,433
|
(8,492)
|
471,119
|
1,488,542
|
511,883
|
1,035,574
|
2,225,362
|
(34,918)
|
|
Swiss Re Corporate Solutions Brasil (3) (7)
|
40.00%
|
40.00%
|
345,036
|
(10,998)
|
2,110,050
|
1,479,827
|
2,509,280
|
246,060
|
973,422
|
(27,494)
|
|
Gestora de Inteligência de Crédito S.A. (3)
|
20.00%
|
20.00%
|
59,098
|
(6,466)
|
165,299
|
173,083
|
42,894
|
-
|
13,726
|
(32,330)
|
|
Other (3)
|
-
|
-
|
35,083
|
33,788
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Total investments in associates
|
|
|
6,864,202
|
1,378,994
|
83,631,880
|
29,357,501
|
73,811,912
|
16,500,325
|
21,321,767
|
4,930,058
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Elo Participações S.A. (8)
|
50.01%
|
50.01%
|
1,191,343
|
288,938
|
718,623
|
1,981,596
|
170,683
|
8,220
|
28,938
|
573,968
|
|
Crediare S.A. – Crédito, Financiamento e Investimento
|
50.00%
|
50.00%
|
70,254
|
12,473
|
330,042
|
66,980
|
161,458
|
-
|
136,193
|
24,946
|
|
MPO - Processadora de Pagamentos Móveis S.A.
|
50.00%
|
50.00%
|
-
|
(30)
|
2,284
|
1,696
|
4,112
|
-
|
154
|
(60)
|
|
Total investments in joint ventures
|
|
|
1,261,597
|
301,381
|
1,050,949
|
2,050,272
|
336,253
|
8,220
|
165,285
|
598,854
|
|
Total on December 31, 2018
|
|
|
8,125,799
|
1,680,375
|
84,682,829
|
31,407,773
|
74,148,165
|
16,508,545
|
21,487,052
|
5,528,912
|
|
(1) Income from financial intermediation or fee and commission;
(2) Brazilian company, services provider related to credit and debit
cards and other means of payment. In 2018, the Organization received R$1.204.069 thousand of dividends and interest on shareholders’
equity of this investment. In its financial statements, Cielo S.A. presented R$6,948 thousand of other comprehensive income;
(3) Companies for which the equity accounting adjustments are calculated
using statements of financial position and statements of income with lag in relation to the reporting date of these consolidated
financial statements;
(4) Bradesco has a board member at IRB-Brasil with voting rights,
which results in significant influence;
(5) Participation in Fleury S.A. (i) company considered using equity
method as Bradesco has significant influence due its participation on the Board of the Directors and other Committees;
(6) In 2018, occurred the partial spin-off and consolidation of Fidelity
Processadora S.A., controlled by Aquarius Participações S.A.;
(7) In 2018, impairment losses were recorded in “associates
and jointly controlled entities” in the amount of R$107,000 thousand; and
(8) Brazilian company, holding company that consolidates joint business
related to electronic means of payment. In 2018, the Organization received R$38,278 thousand of dividends from this investment.
In its financial statements, Elo Participações S.A. presented R$44 thousand of other comprehensive income.
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
In 2020, with the exception of Cielo
S.A. and Fleury S.A., the other investments mentioned in the previous table were not regularly traded on any stock exchange. The
fair value of investments totaled R$5,002,162 thousand (2019 - R$14,815,109 thousand). The Organization does not have contingent
liabilities for investments in associates, which is responsible in part or in whole.
|
R$ thousand
|
2020
|
2019
|
Initial balances
|
7,635,612
|
8,125,799
|
Acquisitions (1)
|
491,438
|
-
|
Spin-off of associates (2)
|
(102,282)
|
(66,889)
|
Equity in net income of associates
|
444,858
|
1,201,082
|
Dividends/Interest on equity
|
(405,791)
|
(729,654)
|
Impairment
|
-
|
(727,235)
|
Other (3)
|
(676,995)
|
(167,491)
|
At the end of the year
|
7,386,840
|
7,635,612
|
(1) In 2020, there was a stake increase
in the company Fleury S.A., after the approval of BACEN;
(2) In 2020, there was the divestiture of
the companies Aquarius Participações S.A., Crediare S.A. Crédito, Financiamento e Investimento and EBP - Estrutura
Brasileira de Projetos (Brazilian Structure of Projects); and
(3) Balance refers mainly to the investment
of IRB-Brasil Resseguros S.A., which ceased to be an investment in an associate, in April 2020, and is now treated as marketable
securities at fair value through other comprehensive income.
27) Property
and equipment
|
a)
|
Composition of property and equipment by class
|
|
R$ thousand
|
Annual depreciation rate
|
Cost
|
Accumulated depreciation
|
Net
|
Buildings
|
4%
|
8,767,456
|
(2,597,842)
|
6,169,614
|
Land
|
-
|
1,021,594
|
-
|
1,021,594
|
Installations, properties and equipment for use
|
10%
|
6,706,990
|
(3,459,963)
|
3,247,027
|
Security and communication systems
|
10%
|
388,588
|
(236,324)
|
152,264
|
Data processing systems
|
20%
|
10,137,875
|
(6,780,155)
|
3,357,720
|
Transportation systems
|
20%
|
213,691
|
(90,781)
|
122,910
|
Balance on December 31, 2020 (1)
|
|
27,236,194
|
(13,165,065)
|
14,071,129
|
|
|
|
|
|
Buildings
|
4%
|
7,847,887
|
(1,365,046)
|
6,482,841
|
Land
|
-
|
967,928
|
-
|
967,928
|
Installations, properties and equipment for use
|
10%
|
6,690,473
|
(2,965,884)
|
3,724,589
|
Security and communication systems
|
10%
|
375,712
|
(221,860)
|
153,852
|
Data processing systems
|
20%
|
9,167,330
|
(5,977,994)
|
3,189,336
|
Transportation systems
|
20%
|
211,510
|
(70,834)
|
140,676
|
Balance on December 31, 2019 (1)
|
|
25,260,840
|
(10,601,618)
|
14,659,222
|
(1) It includes underlying assets identified
in lease contracts recognized under the scope of IFRS 16.
We enter into lease agreements as
a lessee for data processing equipment and properties, which are recorded as buildings and equipment leased in property, plant
and equipment. See Note 37 for disclosure of the obligation.
130 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
|
b)
|
Change in property and equipment by class
|
|
R$ thousand
|
Buildings
|
Land
|
Installations, properties and equipment for use
|
Security and communications systems
|
Data processing systems
|
Transportation systems
|
Total
|
Balance on December 31, 2018
|
2,131,206
|
976,869
|
3,162,832
|
142,806
|
2,381,480
|
31,643
|
8,826,836
|
Initial adoption - IFRS 16
|
4,136,603
|
-
|
31,215
|
-
|
-
|
8,793
|
4,176,611
|
Adjusted balance on January 1, 2019
|
6,267,809
|
976,869
|
3,194,047
|
142,806
|
2,381,480
|
40,436
|
13,003,447
|
Additions
|
1,321,052
|
18,380
|
1,898,293
|
43,111
|
1,913,392
|
113,816
|
5,308,044
|
Write-offs
|
(59,792)
|
(27,321)
|
(786,791)
|
(6,291)
|
(8,359)
|
(861)
|
(889,415)
|
Impairment
|
-
|
-
|
(2,123)
|
(1,806)
|
(21,499)
|
(43)
|
(25,471)
|
Depreciation
|
(1,046,228)
|
-
|
(578,837)
|
(23,968)
|
(1,075,678)
|
(12,672)
|
(2,737,383)
|
Balance on December 31, 2019
|
6,482,841
|
967,928
|
3,724,589
|
153,852
|
3,189,336
|
140,676
|
14,659,222
|
Additions
|
1,411,771
|
46,213
|
1,262,493
|
24,315
|
1,250,334
|
5,970
|
4,001,096
|
Write-offs
|
(709,254)
|
(23,530)
|
(893,576)
|
(1,440)
|
(11,588)
|
-
|
(1,639,388)
|
Impairment
|
(11)
|
30,983
|
-
|
(2,505)
|
(17,903)
|
(258)
|
10,306
|
Depreciation
|
(1,015,733)
|
-
|
(846,479)
|
(21,958)
|
(1,052,459)
|
(23,478)
|
(2,960,107)
|
Balance on December 31, 2020 (1)
|
6,169,614
|
1,021,594
|
3,247,027
|
152,264
|
3,357,720
|
122,910
|
14,071,129
|
(1) It includes underlying assets
identified in lease contracts recognized under the scope of IFRS 16.
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
28) Intangible
assets and goodwill
a) Change
in intangible assets and goodwill by class
|
R$ thousand
|
Goodwill
|
Intangible Assets
|
Acquisition of financial service rights (1)
|
Software (1)
|
Customer portfolio (1)
|
Other (1)
|
Total
|
Balance on December 31, 2018
|
5,576,068
|
4,795,136
|
3,241,280
|
2,494,003
|
22,061
|
16,128,548
|
Additions/(reductions)
|
7,134
|
1,525,833
|
1,195,049
|
(43,589)
|
11,640
|
2,696,067
|
Impairment (2)
|
(255,301)
|
(519,749)
|
(196,533)
|
-
|
-
|
(971,583)
|
Amortization
|
-
|
(1,313,322)
|
(1,112,408)
|
(697,655)
|
(5,000)
|
(3,128,385)
|
Balance on December 31, 2019
|
5,327,901
|
4,487,898
|
3,127,388
|
1,752,759
|
28,701
|
14,724,647
|
Additions/(reductions)
|
1,765,643
|
791,047
|
1,373,474
|
-
|
314,917
|
4,245,081
|
Impairment (2)
|
-
|
(320,726)
|
(258,998)
|
(759,616)
|
-
|
(1,339,340)
|
Amortization
|
-
|
(1,326,371)
|
(720,992)
|
(625,253)
|
(288,308)
|
(2,960,924)
|
Balance on December 31, 2020
|
7,093,544
|
3,631,848
|
3,520,872
|
367,890
|
55,310
|
14,669,464
|
(1) Rate of amortization: acquisition of banking
rights – in accordance with contract agreement; software – 20%; Customer portfolio – up to 20%; and others –
20%; and
(2) Impairment losses were recognized in the
consolidated statement of income, within “Other operating income/(expenses)”.
132 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
|
b)
|
Composition of goodwill by segment
|
|
R$ thousand
|
On December 31
|
2020
|
2019
|
Banking
|
6,601,162
|
4,835,519
|
Insurance
|
492,382
|
492,382
|
Total
|
7,093,544
|
5,327,901
|
The Cash Generation Units (UGCs) allocated
to the banking segment and the insurance, pension and capitalization bonds segment are tested annually for impairment of goodwill.
We did not incur any goodwill impairment losses in 2020, 2019 and 2018.
The recoverable amount from the Banking
Segment has been determined based on a value-in-use calculation. The calculation uses cash-flow projections based on financial
budgets approved by Management, with a terminal growth rate of 6.1% p.a. (2019 – 6.6% p.a.). The forecast cash flows have
been discounted at a rate of 12.6% p.a. (2019 – 11.5% p.a.).
The key assumptions described above
may change as economic and market conditions change. The Organization estimates that reasonably possible changes in these assumptions
within the current economic environment are not expected to cause the recoverable amount of either unit to decline below the carrying
amount.
29) Other
assets
|
R$ thousand
|
On December 31
|
2020
|
2019
|
Financial assets (4) (5)
|
52,416,117
|
56,101,781
|
Foreign exchange transactions (1)
|
25,754,975
|
30,952,382
|
Debtors for guarantee deposits (2)
|
18,489,500
|
18,695,102
|
Securities trading
|
6,111,610
|
4,659,791
|
Trade and credit receivables
|
759,677
|
164,467
|
Receivables
|
1,300,355
|
1,630,039
|
Other assets
|
8,475,829
|
7,441,888
|
Deferred acquisition cost (insurance) - Note 34e
|
1,020,567
|
983,999
|
Other debtors
|
3,475,850
|
3,218,639
|
Prepaid expenses
|
1,019,578
|
847,197
|
Interbank and interdepartmental accounts
|
444,023
|
467,540
|
Other (3)
|
2,515,811
|
1,924,513
|
Total
|
60,891,946
|
63,543,669
|
(1) Mainly refers to purchases in foreign
currency made by the institution on behalf of customers and rights in the institution’s domestic currency, resulting from
exchange sale operations;
(2) It refers to deposits resulting from
legal or contractual requirements, including guarantees provided in cash, such as those made for the filing of appeals in departments
or courts and those made to guarantee services of any nature;
(3) It includes basically trade and credit
receivables, material supplies, other advances and payments to be reimbursed;
(4) Financial assets are recorded at amortized
cost; and
(5) In 2020, there were no losses for impairment
of other financial assets.
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
30) Deposits
from banks
Financial liabilities called “Deposits
from banks” are initially measured at fair value and, subsequently, at amortized cost, using the effective interest rate
method.
Composition by nature
|
R$ thousand
|
On December 31
|
2020
|
2019
|
Demand deposits
|
1,593,170
|
1,606,079
|
Interbank deposits
|
797,216
|
369,982
|
Securities sold under agreements to repurchase
|
217,108,353
|
174,100,023
|
Borrowings
|
23,966,470
|
29,272,183
|
Onlending
|
23,814,958
|
22,471,344
|
Total
|
267,280,167
|
227,819,611
|
31) Deposits
from customers
Financial liabilities called “Deposits
from customers” are initially measured at fair value and subsequently at amortized cost, using the effective interest rate
method.
Composition by nature
|
R$ thousand
|
On December 31
|
2020
|
2019
|
Demand deposits
|
50,247,334
|
37,283,988
|
Savings deposits
|
136,698,248
|
114,177,799
|
Time deposits
|
358,347,161
|
214,765,753
|
Total
|
545,292,743
|
366,227,540
|
32) Funds
from securities issued
|
a)
|
Composition by type
of security issued and location
|
|
R$ thousand
|
On December 31
|
2020
|
2019
|
Instruments Issued – Brazil:
|
|
|
Real estate credit notes
|
27,601,333
|
27,019,439
|
Agribusiness notes
|
14,694,484
|
13,149,546
|
Financial bills
|
81,588,961
|
120,518,300
|
Letters property guaranteed
|
7,930,718
|
5,540,086
|
Subtotal - Securities purchased under agreements to resell
|
131,815,496
|
166,227,371
|
Securities – Overseas:
|
|
|
Euronotes
|
2,113,000
|
1,407,888
|
Securities issued through securitization – (item (b))
|
9,112,256
|
1,967,746
|
Subtotal - Securities purchased under agreements to resell
|
11,225,256
|
3,375,634
|
Structured Operations Certificates
|
1,863,073
|
1,124,559
|
Total
|
144,903,825
|
170,727,564
|
|
b)
|
Securities issued through
securitization
|
Since 2003, Bradesco uses certain
arrangements to optimize its activities of funding and liquidity management by means of a Specific Purpose Entity (SPE). This SPE,
which is called International Diversified Payment Rights Company, is financed with long-term bonds which are settled with the future
134 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
cash flow of the corresponding
assets, basically comprising current and future flow of payment orders sent by individuals and legal entities abroad to beneficiaries
in Brazil for whom Bradesco acts as payer.
The long-term instruments issued
by the SPE and sold to investors will be settled with funds from the payment orders flows. The Organization is required to redeem
the instruments in specific cases of default or upon closing of the operations of the SPE.
The funds deriving from the sale
of current and future payment orders flows, received by the SPE, must be maintained in a specific bank account until they reach
a given minimum level.
|
c)
|
Net financial activity
in the issuance of securities
|
|
R$ thousand
|
2020
|
2019
|
Opening balance on December 31
|
170,727,564
|
148,029,018
|
Issuance
|
61,833,816
|
84,982,152
|
Interest
|
5,576,416
|
9,233,505
|
Settlement and interest payments
|
(93,179,856)
|
(71,781,695)
|
Exchange variation and others
|
(54,115)
|
264,584
|
Closing balance on December 31
|
144,903,825
|
170,727,564
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
33) Subordinated
debt
|
a)
|
Composition of subordinated debt
|
Maturity
|
R$ thousand
|
Original term in years
|
Nominal amount
|
On December 31, 2020
|
On December 31, 2019
|
In Brazil:
|
|
|
|
|
Financial bills:
|
|
|
|
|
2020
|
7
|
-
|
-
|
3,288
|
2022
|
7
|
4,305,011
|
6,662,957
|
6,426,671
|
2023
|
7
|
1,347,452
|
2,011,986
|
1,958,936
|
2024
|
7
|
67,450
|
93,765
|
87,316
|
2025
|
7
|
5,425,906
|
6,126,601
|
5,943,283
|
2027
|
8
|
401,060
|
403,352
|
-
|
2020
|
8
|
-
|
-
|
64,624
|
2021
|
8
|
1,236
|
2,565
|
2,364
|
2023
|
8
|
1,699,346
|
2,798,899
|
2,671,282
|
2024
|
8
|
136,695
|
196,932
|
186,376
|
2025
|
8
|
6,193,653
|
6,340,117
|
6,424,128
|
2026
|
8
|
694,800
|
783,605
|
952,807
|
2028
|
8
|
55,437
|
55,702
|
-
|
2021
|
9
|
7,000
|
15,460
|
14,999
|
2024
|
9
|
4,924
|
9,347
|
8,375
|
2025
|
9
|
370,344
|
507,771
|
525,232
|
2027
|
9
|
89,700
|
104,782
|
159,920
|
2021
|
10
|
19,200
|
56,608
|
49,621
|
2022
|
10
|
54,143
|
128,910
|
118,117
|
2023
|
10
|
688,064
|
1,318,725
|
1,225,020
|
2025
|
10
|
284,137
|
596,797
|
518,242
|
2026
|
10
|
196,196
|
329,699
|
523,687
|
2027
|
10
|
256,243
|
338,894
|
319,582
|
2028
|
10
|
248,300
|
308,959
|
282,192
|
2030
|
10
|
134,500
|
139,596
|
-
|
2026
|
11
|
3,400
|
5,477
|
5,009
|
2027
|
11
|
47,046
|
65,771
|
62,776
|
2028
|
11
|
74,764
|
100,369
|
91,899
|
Perpetual
|
|
9,290,255
|
9,389,642
|
9,559,967
|
Subtotal in Brazil (1)
|
|
|
38,893,288
|
38,185,713
|
Overseas:
|
|
|
|
|
2021
|
11
|
8,314,720
|
8,539,366
|
6,619,620
|
2022
|
11
|
5,716,370
|
5,813,578
|
4,508,175
|
Subtotal overseas
|
|
|
14,352,944
|
11,127,795
|
Total
|
|
|
53,246,232
|
49,313,508
|
(1) It includes the amount of R$26,741,610 thousand
(in December 2019 – R$34,003,704 thousand), referring to subordinated debts recognized in “Eligible Debt Capital Instruments”
for regulatory capital purpose.
|
b)
|
Net movement of subordinated debt
|
|
R$ thousand
|
2020
|
2019
|
Opening balance on December 31
|
49,313,508
|
53,643,444
|
Issuance
|
688,186
|
-
|
Interest
|
2,403,327
|
3,708,924
|
Settlement and interest payments
|
(2,374,538)
|
(8,593,243)
|
Exchange variation
|
3,215,749
|
554,383
|
Closing balance on December 31
|
53,246,232
|
49,313,508
|
136 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
34) Insurance
technical provisions and pension plans
|
a)
|
Technical provisions by account
|
|
R$ thousand
|
Non-Life and Health (1) (3)
|
Life and Pension (2)(3)
|
Total
|
On December 31
|
On December 31
|
On December 31
|
2020
|
2019
|
2020
|
2019
|
2020
|
2019
|
Current and long-term liabilities
|
|
|
|
|
|
|
Mathematical reserve for unvested benefits (PMBAC)
|
1,225,279
|
1,462,699
|
237,436,250
|
230,996,998
|
238,661,529
|
232,459,697
|
Mathematical reserve for vested benefits (PMBC)
|
612,835
|
410,410
|
10,403,722
|
8,895,571
|
11,016,557
|
9,305,981
|
Reserve for claims incurred but not reported (IBNR)
|
4,040,072
|
3,655,551
|
945,744
|
938,466
|
4,985,816
|
4,594,017
|
Unearned premium reserve
|
4,381,913
|
4,454,214
|
1,719,098
|
1,042,959
|
6,101,011
|
5,497,173
|
Reserve for unsettled claims (PSL)
|
4,893,477
|
4,432,487
|
1,677,216
|
1,533,696
|
6,570,693
|
5,966,183
|
Reserve for financial surplus (PET)
|
-
|
-
|
783,786
|
622,703
|
783,786
|
622,703
|
Other technical provisions
|
3,404,474
|
2,028,532
|
7,941,518
|
7,828,405
|
11,345,992
|
9,856,937
|
Total reserves
|
18,558,050
|
16,443,893
|
260,907,334
|
251,858,798
|
279,465,384
|
268,302,691
|
(1) “Other technical provisions” – Insurance includes
substantially the Provision for Insufficient Premiums (PIP) of R$3,044,169 thousand;
(2) The “Other technical provisions” line of Life and
Pension Plan substantially includes “Provision for redemptions and other amounts to be settled” in the amount of R$2,822,392
thousand, “Provision of related expenses” of R$633,768 thousand, “Complementary Provision for Coverage (PCC)”
in the amount of R$3,161,509 thousand and” Other technical provisions” of R$1,305,127 thousand; and
(3) It includes the Provision for unearned Provision for unearned
premiums for risks not yet issued (PPNG-RVNE) in the amount of R$172,706 thousand, of which R$132,078 thousand for Insurance and
R$40,628 thousand for Life and Pension Plans.
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
|
b)
|
Technical provisions by product
|
|
R$ thousand
|
Non-Life and Health
|
Life and pension plans
|
Total
|
On December 31
|
On December 31
|
On December 31
|
2020
|
2019
|
2020
|
2019
|
2020
|
2019
|
Health
|
13,906,115
|
11,132,262
|
-
|
-
|
13,906,115
|
11,132,262
|
Non-Life
|
4,651,935
|
5,311,631
|
-
|
-
|
4,651,935
|
5,311,631
|
Life
|
-
|
-
|
16,186,345
|
13,539,168
|
16,186,345
|
13,539,168
|
Pension plans
|
-
|
-
|
244,720,989
|
238,319,630
|
244,720,989
|
238,319,630
|
Total technical provisions
|
18,558,050
|
16,443,893
|
260,907,334
|
251,858,798
|
279,465,384
|
268,302,691
|
138 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
|
c)
|
Changes in the insurance and pension technical provisions
|
|
(i)
|
Insurance – Non-Life,
Life and Health Insurance
|
|
R$ thousand
|
Years ended December 31
|
2020
|
2019
|
At the beginning of the year
|
29,983,376
|
27,272,042
|
(-) DPVAT insurance
|
(559,843)
|
(602,842)
|
Subtotal at beginning of the year
|
29,423,533
|
26,669,200
|
Additions, net of reversals
|
37,778,695
|
31,792,068
|
Payment of claims, benefits and redemptions
|
(33,359,738)
|
(29,523,868)
|
Adjustment for inflation and interest
|
870,195
|
482,598
|
Constitution of judicial provision
|
29,288
|
3,535
|
Subtotal at end of the period
|
34,741,973
|
29,423,533
|
(+) DPVAT insurance
|
2,423
|
559,843
|
At the end of the year
|
34,744,396
|
29,983,376
|
|
(ii)
|
Insurance – Pension Plans
|
|
R$ thousand
|
Years ended December 31
|
2020
|
2019
|
At the beginning of the year
|
238,319,314
|
224,707,223
|
Receipt of premiums net of fees
|
25,979,731
|
29,325,335
|
Payment of benefits
|
(1,124,913)
|
(1,068,408)
|
Payment of redemptions
|
(26,326,995)
|
(24,183,246)
|
Adjustment for inflation and interest
|
11,942,820
|
15,831,077
|
Others
|
(4,068,969)
|
(6,292,667)
|
At the end of the year
|
244,720,988
|
238,319,314
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
|
d)
|
Guarantees for the technical provisions
|
|
R$ thousand
|
Insurance
|
Life and pension plans
|
Total
|
On December 31
|
On December 31
|
On December 31
|
2020
|
2019
|
2020
|
2019
|
2020
|
2019
|
Total technical provisions
|
18,558,050
|
16,443,893
|
260,907,334
|
251,858,798
|
279,465,384
|
268,302,691
|
(-) Commercialization surcharge – extended warranty
|
-
|
(10,051)
|
-
|
-
|
-
|
(10,051)
|
(-) Portion corresponding to contracted reinsurance
|
(21,617)
|
(110,759)
|
(13,114)
|
(11,713)
|
(34,731)
|
(122,472)
|
(-) Premiums receivables
|
(1,502,349)
|
(1,166,691)
|
-
|
-
|
(1,502,349)
|
(1,166,691)
|
(-) Unearned premium provision – Health and dental insurance (1)
|
(1,656,290)
|
(1,527,337)
|
-
|
-
|
(1,656,290)
|
(1,527,337)
|
(-) Provisions from DPVAT agreements
|
-
|
(558,021)
|
-
|
-
|
-
|
(558,021)
|
(-) Other
|
-
|
-
|
-
|
-
|
-
|
-
|
Technical provisions to be covered
|
15,377,794
|
13,071,034
|
260,894,220
|
251,847,085
|
276,272,014
|
264,918,119
|
|
|
|
|
|
|
|
Investment fund quotas (VGBL and PGBL) (2)
|
-
|
-
|
211,617,915
|
210,044,616
|
211,617,915
|
210,044,616
|
Investment fund quotas (excluding VGBL and PGBL)
|
4,367,527
|
4,477,721
|
29,465,654
|
27,689,439
|
33,833,181
|
32,167,160
|
Government securities
|
13,470,796
|
11,326,945
|
29,871,219
|
24,422,182
|
43,342,015
|
35,749,127
|
Private securities
|
34,580
|
34,403
|
79,114
|
138,043
|
113,694
|
172,446
|
Total assets guarantee portfolio (3)
|
17,872,903
|
15,839,069
|
271,033,902
|
262,294,280
|
288,906,805
|
278,133,349
|
(1) Deduction provided for in Article 4 of ANS Normative Resolution
No. 392/15;
(2) The investment funds “VGBL” and “PGBL”
were consolidated in the financial statements; and
(3) These guarantor assets may be settled only to cover the liabilities
to which they are related.
140 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
|
e)
|
Changes in deferred acquisition cost (insurance assets)
|
|
R$ thousand
|
Years ended December 31
|
2020
|
2019
|
At the beginning of the year
|
983,999
|
925,884
|
Additions
|
1,335,881
|
1,542,179
|
Amortizations
|
(1,299,313)
|
(1,484,064)
|
At the end of the year
|
1,020,567
|
983,999
|
|
f)
|
Changes in reinsurance assets
|
|
R$ thousand
|
Years ended December 31
|
2020
|
2019
|
At the beginning of the year
|
168,225
|
176,324
|
Additions
|
7,795
|
124,337
|
Amortization and reversal of provisions
|
-
|
(85,777)
|
Recovered insurance losses
|
(55,953)
|
(24,969)
|
Reversal/Monetary update
|
(37,980)
|
3,658
|
Other
|
4,949
|
(25,348)
|
At the end of the year
|
87,036
|
168,225
|
The purpose of the table below is to
show the inherent insurance risk, comparing the insurance claims paid with their provisions. Starting from the year in which the
claim was reported, the upper part of the table shows the changes in the provision over the years. The provision varies as more
precise information concerning the frequency and severity of the claims is obtained. The lower part of the table shows the reconciliation
of the amounts with the amounts presented in the financial statements.
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
Non-life – Gross Claims (1)
|
R$ thousand
|
Year claims were notified
|
Until 2010
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
2017
|
2018
|
2019
|
2020
|
Total
|
Amount estimated for the claims:
|
|
|
|
|
|
|
|
|
|
|
|
|
· In the year after notification
|
2,592,573
|
2,859,480
|
3,348,274
|
3,224,788
|
3,914,716
|
4,428,926
|
4,109,825
|
3,749,457
|
3,448,593
|
3,300,264
|
3,082,054
|
-
|
· One year after notification
|
2,562,789
|
2,824,610
|
3,240,688
|
3,041,662
|
3,652,423
|
4,277,245
|
3,912,436
|
3,740,543
|
3,422,386
|
3,341,699
|
-
|
-
|
· Two years after notification
|
2,561,264
|
2,809,879
|
3,233,150
|
3,009,371
|
3,666,041
|
4,232,474
|
3,923,389
|
3,754,077
|
3,418,592
|
-
|
-
|
-
|
· Three years after notification
|
2,577,663
|
2,812,812
|
3,256,062
|
3,044,232
|
3,654,223
|
4,260,118
|
3,932,335
|
3,733,681
|
-
|
-
|
-
|
-
|
· Four years after notification
|
2,595,369
|
2,811,587
|
3,292,376
|
3,034,096
|
3,669,148
|
4,275,952
|
3,923,772
|
-
|
-
|
-
|
-
|
-
|
· Five years after notification
|
2,607,212
|
2,840,368
|
3,113,580
|
3,049,171
|
3,679,488
|
4,276,245
|
-
|
-
|
-
|
-
|
-
|
-
|
· Six years after notification
|
2,611,105
|
2,837,693
|
3,128,386
|
3,058,018
|
3,690,793
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
· Seven years after notification
|
2,599,521
|
2,850,912
|
3,133,871
|
3,064,089
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
· Eight years after notification
|
2,608,176
|
2,852,787
|
3,137,466
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
· Nine years after notification
|
2,607,504
|
2,848,411
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
· Ten years after notification
|
2,635,488
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Estimate of claims on the reporting date (2020)
|
2,635,488
|
2,848,411
|
3,137,466
|
3,064,089
|
3,690,793
|
4,276,245
|
3,923,772
|
3,733,681
|
3,418,592
|
3,341,699
|
3,082,054
|
37,152,290
|
Payments of claims
|
(2,601,000)
|
(2,837,189)
|
(3,119,145)
|
(3,047,445)
|
(3,657,992)
|
(4,228,044)
|
(3,875,106)
|
(3,689,771)
|
(3,355,539)
|
(3,237,332)
|
(2,436,327)
|
(36,084,890)
|
Outstanding Claims
|
34,488
|
11,222
|
18,321
|
16,644
|
32,801
|
48,201
|
48,666
|
43,910
|
63,053
|
104,367
|
645,727
|
1,067,400
|
142 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
Non-Life – Claims Net of Reinsurance Ceded (1)
|
R$ thousand
|
Year claims were notified
|
Until 2010
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
2017
|
2018
|
2019
|
2020
|
Total
|
Amount estimated for net claims for reinsurance:
|
|
|
|
|
|
|
|
|
|
|
|
|
· In the year after notification
|
2,439,011
|
2,653,641
|
3,022,457
|
3,021,084
|
3,738,619
|
4,074,519
|
3,960,519
|
3,710,845
|
3,410,760
|
3,281,789
|
2,345,716
|
-
|
· One year after notification
|
2,404,646
|
2,617,957
|
2,908,173
|
2,849,909
|
3,516,057
|
3,954,939
|
3,796,535
|
3,702,199
|
3,386,329
|
2,831,845
|
-
|
-
|
· Two years after notification
|
2,406,805
|
2,609,034
|
2,915,173
|
2,832,016
|
3,534,208
|
3,900,981
|
3,803,980
|
3,715,400
|
3,389,058
|
-
|
-
|
-
|
· Three years after notification
|
2,426,310
|
2,629,288
|
2,927,529
|
2,874,862
|
3,525,610
|
3,921,156
|
3,813,890
|
3,695,185
|
-
|
-
|
-
|
-
|
· Four years after notification
|
2,445,507
|
2,639,629
|
2,957,403
|
2,868,888
|
3,539,001
|
3,933,030
|
3,808,429
|
-
|
-
|
-
|
-
|
-
|
· Five years after notification
|
2,460,692
|
2,670,472
|
2,963,901
|
2,884,539
|
3,550,642
|
3,926,061
|
-
|
-
|
-
|
-
|
-
|
-
|
· Six years after notification
|
2,472,476
|
2,673,132
|
2,978,029
|
2,893,423
|
3,554,010
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
· Seven years after notification
|
2,471,407
|
2,686,379
|
2,983,500
|
2,894,891
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
· Eight years after notification
|
2,479,351
|
2,688,317
|
2,981,996
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
· Nine years after notification
|
2,478,498
|
2,683,677
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
· Ten years after notification
|
2,506,052
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Estimate of claims on the reporting date (2020)
|
2,506,052
|
2,683,677
|
2,981,996
|
2,894,891
|
3,554,010
|
3,926,061
|
3,808,429
|
3,695,185
|
3,389,058
|
2,831,845
|
2,345,716
|
34,616,920
|
Payments of claims
|
(2,475,046)
|
(2,672,460)
|
(2,964,025)
|
(2,878,351)
|
(3,521,235)
|
(3,878,291)
|
(3,759,915)
|
(3,651,613)
|
(3,326,619)
|
(2,727,836)
|
(1,703,417)
|
(33,558,808)
|
Net outstanding unsettled claims
|
31,006
|
11,217
|
17,971
|
16,540
|
32,775
|
47,770
|
48,514
|
43,572
|
62,439
|
104,009
|
642,299
|
1,058,112
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
Non-Life, Life and Pension -
Claims Net of Reinsurance Ceded (1)
|
R$ thousand
|
Year claims were notified
|
Until 2010
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
2017
|
2018
|
2019
|
2020
|
Total
|
Amount estimated for net claims for reinsurance:
|
|
|
|
|
|
|
|
|
|
|
|
|
· In the year after notification
|
3,446,862
|
3,844,686
|
4,257,561
|
4,326,906
|
5,069,079
|
5,490,043
|
5,453,855
|
5,248,319
|
4,848,787
|
4,768,287
|
4,136,182
|
-
|
· One year after notification
|
3,419,740
|
3,806,221
|
4,134,444
|
4,148,519
|
4,889,217
|
5,380,728
|
5,287,974
|
5,190,160
|
4,802,426
|
4,317,355
|
-
|
-
|
· Two years after notification
|
3,428,088
|
3,797,808
|
4,151,462
|
4,158,528
|
4,902,783
|
5,304,496
|
5,272,711
|
5,218,931
|
4,844,993
|
-
|
-
|
-
|
· Three years after notification
|
3,437,538
|
3,826,913
|
4,163,604
|
4,184,738
|
4,802,886
|
5,244,592
|
5,263,080
|
5,214,282
|
-
|
-
|
-
|
-
|
· Four years after notification
|
3,467,643
|
3,834,708
|
4,191,766
|
4,165,035
|
4,781,938
|
5,243,035
|
5,270,597
|
-
|
-
|
-
|
-
|
-
|
· Five years after notification
|
3,480,339
|
3,871,555
|
4,197,799
|
4,189,183
|
4,775,574
|
5,226,808
|
-
|
-
|
-
|
-
|
-
|
-
|
· Six years after notification
|
3,490,242
|
3,873,835
|
4,218,005
|
4,193,407
|
4,774,017
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
· Seven years after notification
|
3,481,343
|
3,896,069
|
4,224,281
|
4,210,256
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
· Eight years after notification
|
3,496,367
|
3,886,942
|
4,230,263
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
· Nine years after notification
|
3,497,445
|
3,889,088
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
· Ten years after notification
|
3,623,080
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Estimate of claims on the reporting date (2020)
|
3,623,080
|
3,889,088
|
4,230,263
|
4,210,256
|
4,774,017
|
5,226,808
|
5,270,597
|
5,214,282
|
4,844,993
|
4,317,355
|
4,136,182
|
49,736,921
|
Payments of claims
|
(3,485,784)
|
(3,843,593)
|
(4,168,436)
|
(4,137,134)
|
(4,675,857)
|
(5,078,047)
|
(5,106,558)
|
(5,003,584)
|
(4,581,466)
|
(3,984,520)
|
(2,939,037)
|
(47,004,016)
|
Net outstanding unsettled claims
|
137,296
|
45,495
|
61,827
|
73,122
|
98,160
|
148,761
|
164,039
|
210,698
|
263,527
|
332,835
|
1,197,145
|
2,732,905
|
(1) “Retrocession” R$16,965 thousand, “Health”
R$3,619,299 thousand, estimate of salvages and redresses in the amount of R$137,689 thousand and incurred but not enough reported
(IBNER) claims in the amount of R$(329,925) thousand were not considered in the claims development.
144 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
35) Supplementary
pension plans
Bradesco and its subsidiaries sponsor
a private defined contribution pension for employees and managers, that allows financial resources to be accumulated by participants
throughout their careers by means of employee and employer contributions and invested in an Exclusive Investment Fund (FIE). The
plan is managed by Bradesco Vida e Previdência S.A. and BRAM – Bradesco Asset Management S.A. DTVM is responsible for
the financial management of the FIEs funds.
The supplementary pension plan counts
on contributions from employees and managers of Bradesco and its subsidiaries equivalent to at least 4% of the salary by employees
and, 5% of the salary, plus the percentage allocated to covers of risk benefits (invalidity and death) by the company. Actuarial
obligations of the defined contribution plan are fully covered by the plan assets of the corresponding FIE. In addition to the
plan, in 2001, participants who chose to migrate from the defined benefit plan are guaranteed a proportional deferred benefit,
corresponding to their accumulated rights in that plan. For the active participants, retirees and pensioners of the defined benefit
plan, now closed to new members, the present value of the actuarial obligations of the plan is fully covered by guarantee assets.
Following the merger of Banco Alvorada
S.A. (successor from the spin-off of Banco Baneb S.A.) into Kirton Bank S.A. Banco Múltiplo, on April 30, 2019, Kirton Bank
S.A. Banco Múltiplo maintains variable contribution and defined benefit retirement plans, through Fundação
Baneb de Seguridade Social – Bases related to the former employees of Baneb.
Banco Bradesco S.A. sponsors both
variable benefit and defined contribution retirement plans, through Caixa de Assistência e Aposentadoria dos Funcionários
do Banco do Estado do Maranhão (Capof), to employees originating from Banco BEM S.A.
Banco Bradesco S.A. sponsors a defined
benefit plan through Caixa de Previdência Privada Bec – Cabec for employees of Banco do Estado do Ceará
S.A.
Kirton Bank S.A. Banco Múltiplo,
Bradesco Capitalização S.A., Kirton Corretora de Seguros S.A., Bradesco-Kirton Corretora de Câmbio S.A. and
Bradesco Seguros S.A. sponsor a defined benefit plan called APABA for employees originating from Banco Bamerindus do Brasil S.A.,
and Kirton Administração de Serviços para Fundos de Pensão Ltda. sponsors for its employees a defined
contribution plan, known as the Kirton Prev Benefits Plan (Plano de Benefícios Kirton Prev), both managed by MultiBRA
– Pension Fund.
Banco Losango S.A. Banco Múltiplo,
Kirton Bank S.A. Banco Múltiplo and Credival – Participações, Administração e Assessoria
Ltda. sponsor three pension plans for its employees, which are: Losango I Benefits Plan – Basic Part, in the defined benefit
mode, Losango I – Supplementary Part and PREVMAIS Losango Plan, the last two in the form of contribution variable, all managed
by MultiBRA – Settlor – Multiple Fund.
Banco Bradesco S.A. also took on
the obligations of Kirton Bank S.A. Banco Múltiplo with regard to Life Insurance, Health Insurance Plans, and Retirement
Compensation for employees coming from Banco Bamerindus do Brasil S.A., as well as complementing Retirement and Health Plan of
employees from Lloyds.
Risk factors
|
On December 31
|
2020
|
2019
|
Nominal discount rate
|
3.25% - 7.26% p.a.
|
6.45% - 7.45% p.a.
|
Nominal rate of future salary increases
|
3.25% p.a.
|
3.8% p.a.
|
Nominal growth rate of social security benefits and plans
|
3.25% p.a.
|
3.8% p.a.
|
Initial rate of growth of medical costs
|
7.38% - 8.41% p.a.
|
7.95% - 8.99% p.a.
|
Inflation rate
|
3.25% p.a.
|
3.8% p.a.
|
Biometric table of overall mortality
|
AT 2000 and BR-SEM
|
AT 2000 and BR-SEM
|
Biometric table of entering disability
|
Per plan
|
Per plan
|
Expected turnover rate
|
-
|
-
|
Probability of entering retirement
|
100% in the 1ª eligibility to a benefit by the plan
|
100% in the 1ª eligibility to a benefit by the plan
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
Considering the above assumptions,
the present value of the actuarial obligations of the benefit plans and of its assets to cover these obligations, is represented
below:
|
On December 31 – R$ thousand
|
|
Retirement Benefits
|
Other post-employment benefits
|
|
2020
|
2019
|
2020
|
2019
|
(i) Projected benefit obligations:
|
|
|
|
|
At the beginning of the year
|
3,065,146
|
2,530,590
|
917,870
|
669,093
|
Cost of current service
|
546
|
179
|
-
|
-
|
Interest cost
|
212,033
|
224,508
|
66,772
|
60,185
|
Participant’s contribution
|
556
|
819
|
-
|
-
|
Actuarial gain/(loss) (1)
|
123,504
|
516,333
|
13,671
|
224,683
|
Past service cost - plan changes
|
-
|
(3,920)
|
-
|
-
|
Early elimination of obligations
|
-
|
-
|
-
|
(1,613)
|
Benefit paid
|
(219,657)
|
(203,363)
|
(31,883)
|
(34,478)
|
At the end of the year
|
3,182,128
|
3,065,146
|
966,430
|
917,870
|
|
|
|
|
|
(ii) Plan assets at fair value:
|
|
|
|
|
At the beginning of the year
|
2,716,865
|
2,363,009
|
-
|
-
|
Balance from an acquired institution
|
|
|
|
|
Expected earnings
|
187,531
|
209,252
|
-
|
-
|
Actuarial gain/(loss) (1)
|
59,071
|
332,368
|
-
|
-
|
Contributions received:
|
|
|
|
|
Employer
|
15,150
|
14,763
|
-
|
-
|
Employees
|
556
|
819
|
-
|
-
|
Benefit paid
|
(219,428)
|
(203,346)
|
-
|
-
|
At the end of the year
|
2,759,745
|
2,716,865
|
-
|
-
|
|
|
|
|
|
(iii) Changes in the unrecoverable surplus:
|
|
|
|
|
At the beginning of the year
|
36,155
|
54,025
|
-
|
-
|
Interest on irrecoverable surplus
|
2,736
|
4,981
|
-
|
-
|
Change in irrecoverable surplus (1)
|
(38,581)
|
(22,851)
|
-
|
-
|
At the end of the year
|
310
|
36,155
|
-
|
-
|
|
|
|
|
|
(iv) Financed position:
|
|
|
|
|
Deficit plans (2)
|
422,693
|
384,436
|
966,430
|
917,870
|
Net balance
|
422,693
|
384,436
|
966,430
|
917,870
|
(1) In the year ended December 31, 2020, the
remeasurement effects recognized in Shareholders' Equity, in Other Comprehensive Income totaled R $ 21,593 thousand (2019 - R $
212,188 thousand), net of tax effects; and
(2) Bradesco and its subsidiaries, as sponsors
of said plans, considering an economic and actuarial study, calculated their actuarial commitments and recognize in their financial
statements the actuarial obligation due.
The net cost/(benefit) of the pension
plans recognized in the consolidated statement of income includes the following components:
|
R$ thousand
|
Years ended December 31
|
2020
|
2019
|
2018
|
Projected benefit obligations:
|
|
|
|
Cost of service
|
546
|
(2,689)
|
151
|
Cost of interest on actuarial obligations
|
278,805
|
282,997
|
273,893
|
Expected earnings from the assets of the plan
|
(187,531)
|
(208,122)
|
(225,060)
|
Interest on recoverable surplus
|
2,736
|
4,981
|
20,327
|
Net cost/(benefit) of the pension plans
|
94,556
|
77,167
|
69,311
|
146 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
Maturity profile of the present
value of the obligations of the benefit plans defined for the next years:
|
On December 31, 2020 - R$ thousand
|
Retirement Benefits
|
Other post-employment benefits
|
Weighted average duration (years)
|
10.07
|
12.84
|
2021
|
229,641
|
44,375
|
2022
|
234,469
|
46,487
|
2023
|
239,025
|
49,937
|
2024
|
243,650
|
53,408
|
2025
|
247,303
|
57,139
|
After 2026
|
1,279,375
|
337,370
|
In 2021, contributions to defined-benefit
plans are expected to total R$24,820 thousand.
The long-term rate of return on plan
assets is based on the following:
- Medium to long-term expectations
of the asset managers; and
- Public and private securities,
with short to long-term maturities which represent a significant portion of the investment portfolios of our subsidiaries, the
return on which is higher than inflation plus interest.
The assets of pension plans are invested
in compliance with the applicable legislation (government securities and private securities, listed company shares and real estate
properties) and the weighted-average allocation of the pension plan’s assets by category is as follows:
|
On December 31
|
Assets of the Alvorada Plan
|
Assets of the Bradesco Plan
|
Assets of the Kirton Plan
|
Assets of the Losango Plan
|
2020
|
2019
|
2020
|
2019
|
2020
|
2019
|
2020
|
2019
|
Asset categories
|
|
|
|
|
|
|
|
|
Equities
|
-
|
-
|
3.8%
|
9.6%
|
-
|
-
|
-
|
18.5%
|
Fixed income
|
91.3%
|
93.5%
|
91.9%
|
86.6%
|
100.0%
|
100.0%
|
100.0%
|
78.9%
|
Real estate
|
5.6%
|
5.3%
|
2.6%
|
1.9%
|
-
|
-
|
-
|
-
|
Other
|
3.1%
|
1.2%
|
1.7%
|
1.9%
|
-
|
-
|
-
|
2.6%
|
Total
|
100.0%
|
100.0%
|
100.0%
|
100.0%
|
100.0%
|
100.0%
|
100.0%
|
100.0%
|
Below is the sensitivity analysis
of the benefits plan obligations, showing the impact on the actuarial exposure (8.5% – 10.0% p.a.) assuming a change in the
discount rate and medical inflation by 1 p.p.:
Rate
|
Discount rate/Medical inflation rate
|
Sensitivity Analysis
|
Effect on actuarial liabilities
|
Effect on the present value of the obligations
|
Discount rate
|
6.87% - 8.26%
|
Increase of 1 p.p.
|
reduction
|
(393,887)
|
Discount rate
|
4.87% - 6.26%
|
Decrease of 1 p.p.
|
increase
|
470,116
|
Medical Inflation
|
8.38% - 9.41%
|
Increase of 1 p.p.
|
increase
|
113,797
|
Medical Inflation
|
6.38% - 7.41%
|
Decrease of 1 p.p.
|
reduction
|
(95,008)
|
Total expenses related to contributions
in the year ended December 31, 2020 were R$959,220 thousand (2019 – R$997,446 thousand).
In addition to this benefit, Bradesco
and its subsidiaries offer other benefits to their employees and Management, including health insurance, dental care, life and
personal accident insurance, and professional training. These expenses, including the aforementioned contributions, totaled, in
the year ended December 31, 2020, R$4,746,728 thousand (2019 – R$6,101,527 thousand).
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
36) Provisions,
Contingents Assets and Liabilities and Legal Obligations – Tax and Social Security
Contingent assets are not recognized
in the financial statements. There are ongoing proceedings where the chance of success is considered probable, such as: a) Social
Integration Program (PIS), Bradesco has made a claim to offset PIS against Gross Operating Income, paid under Decree-Laws No. 2,445/88
and No. 2,449/88, regarding the payment that exceeded the amount due under Supplementary Law No. 07/70 (PIS Repique);
and b) other taxes, the legality and/or constitutionality of which is being challenged, where the decision may lead to reimbursement
of amounts and such amounts are recorded as receivable only when collection is considered certain.
|
b)
|
Provisions classified
as probable losses and legal obligations – tax and social security
|
The Organization is a party to a
number of labor, civil and tax lawsuits, arising from the normal course of business.
Management recognized provisions
where, based on their opinion and that of their legal counsel, the nature of the lawsuit, similarity to previous lawsuits, complexity
and the courts standing, the loss is deemed probable.
Management considers that the provision
is sufficient to cover the future losses generated by the respective lawsuits.
Provisions related to legal obligations
are maintained until the conclusion of the lawsuit, represented by judicial decisions with no further appeals or due to the statute
of limitation.
These are claims
brought by former employees and outsourced employees seeking indemnifications, most significantly for unpaid “overtime”,
pursuant to Article 224 of the Consolidation of Labor Laws (CLT). Considering that the proceedings database is basically composed
by proceedings with similar characteristics and for which there has been no official court decision, the provision is recognized
considering the following factors, among others: date of receipt of the proceedings (before or after the labor reform of November
2017), the average calculated value of payments made for labor complaints settled in the past 12 months before and after the labor
reform, and inflation adjustment on the average calculated values.
Overtime is monitored
by using electronic time cards and paid regularly during the employment contract, so that the claims filed by Bradesco’s
former employees do not represent individually relevant amounts.
These are claims for pain and suffering
and property damages, related to banking products and services, the inclusion of information about debtors in the credit restriction
registry and the replacement of inflation adjustments excluded as a result of government economic plans. These lawsuits are individually
controlled using a computer-based system and provisioned whenever the loss is deemed as probable, considering the opinion of the
legal advisors, the nature of the lawsuits, similarity with previous lawsuits, complexity and positioning of the courts. Most of
these lawsuits involve the Special Civil Court (JEC), in which the claims are limited to 40 minimum wages.
In relation to the legal claims that
are pleading alleged differences in the adjustment of inflation on savings account balances and due to the implementation of economic
plans that were part of the federal government’s economic policy to reduce inflation in the 80s and 90s, Bradesco, despite
complying with the law and regulation in force at the time, has provisioned certain proceedings, taking into consideration the
claims in which they were mentioned and the perspective of loss of each demand, in view of the decisions and subjects still under
analysis in
148 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
the Superior Court of Justice (STJ),
such as, for example, the application of interest in executions arising from Public Civil Actions and succession.
In December 2017, with the mediation
of the Attorney’s General Office (AGU), the entities representing the bank and the savings accounts, entered into an agreement
related to litigation of economic plans, with the purpose of closing these claims, in which conditions and schedule were established
for savings accounts holders to accede to the agreement. This agreement was approved by the Federal Supreme Court (STF) on March
1, 2018. On March 11, 2020, the signatory entities signed an amendment extending the collective agreement for a period of five
(5) years, the Federal Supreme Court approved the extension of the agreement for 30 months, an opportunity in which it will evaluate
the results and may extend it for another 30 months. As this is a voluntary agreement, Bradesco is unable to predict how many savings
account holders will choose to accept the settlement offer. It is important to note that provisions were recognized to cover the
claims eligible under this agreement. The proceedings that are not in the scope of the agreement, including those related to merged
banks are individually revaluated based on the procedural stage they are in.
Note that, regarding disputes relating
to economic plans, the Federal Supreme Court (STF) suspended the prosecution of all lawsuits at the cognizance stage, until the
Court issues a final decision on the right under litigation.
|
III
|
-
Provision for tax risks
|
The Organization is disputing the
legality and constitutionality of certain taxes and contributions in court, for which provisions have been recorded in full, although
there is good chance of a favorable outcome, based on the opinion of the legal counsel. The processing of these legal obligations
and the provisions for cases for which the risk of loss is deemed as probable is regularly monitored. During or after the conclusion
of each case, a favorable outcome may arise for the Organization, resulting in the reversal of the related provisions.
The main cases are:
|
-
|
PIS and COFINS –
R$2,702,641 thousand (on December 31, 2019 – R$2,632,829 thousand): a request for authorization to calculate and pay contributions
to PIS and COFINS only on the sale of goods/rendering of services (billing), excluding from the calculation bases financial income;
|
|
-
|
Pension Contributions
– R$1,785,787 thousand (on December 31, 2019 - R$1,799,047 thousand): official notifications related to the pension contributions
made to private pension plans, considered by the authorities to be employee compensation subject to the incidence of mandatory
pension contributions and to an isolated fine for not withholding IRRF on such financial contributions;
|
|
-
|
IRPJ/CSLL on losses of
credits – R$1,262,225 thousand (on December 31, 2019 - R$1,264,448 thousand): we are requesting to deduct from income tax
and social contributions payable (IRPJ and CSLL, respectively) amounts of actual and definite loan losses related to unconditional
discounts granted during collections, regardless of compliance with the terms and conditions provided for in Articles 9 to 14 of
Law No. 9,430/96 that only apply to temporary losses;
|
|
-
|
IRPJ/CSLL on MTM - R$635,802
thousand (on December 31, 2019 - R$626,341 thousand): assessment received in December 2018 challenging the deduction of certain
mark-to-market gains from securities in the calculation of IRPJ and CSLL in 2007;
|
|
-
|
INSS – Contribution
to SAT – R$440,524 thousand (on December 31, 2019 - R$432,873 thousand): in an ordinary lawsuit filed by the Brazilian Federation
of Banks – Febraban, since April 2007, on behalf of its members, is questioned the classification of banks at the highest
level of risk, with respect to Occupational Accident Risk – RAT, which eventually raised the rate of the respective contribution
from 1% to 3%, in accordance with Decree No. 6,042/07;
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
|
-
|
PIS and COFINS –
R$415.785 thousand (on December 31, 2019 - R$370.997 thousand): seeks to ensure companies the right to collect contributions to
PIS and COFINS by the cumulative regime (3.65% rate on sales of goods / installment services); and
|
|
-
|
INSS Autonomous Brokers
– R$333,852 thousand (on December 31, 2019 - R$490,651 thousand): the Bradesco Organization is questioning the charging of
social security contribution on remunerations paid to third-party service providers, established by Supplementary Law No. 84/96
and subsequent regulations/amendments, at 20.0% with an additional of 2.5%, on the grounds that services are not provided to insurance
companies but to policyholders, thus being outside the scope of such a contribution as provided for in item I, Article 22 of Law
No. 8,212/91, as new wording in Law No. 9,876/99.
|
In general, the provisions relating
to lawsuits are classified as long-term, due to the unpredictability of the duration of the proceedings in the Brazilian justice
system. For this reason, the estimate has not been disclosed with relation to the specific year in which these lawsuits will be
closed.
|
IV
|
-
Changes in other provision
|
|
R$ thousand
|
Labor
|
Civil
|
Tax
|
Balance on December 31, 2018
|
5,983,603
|
5,614,362
|
8,204,206
|
Adjustment for inflation
|
682,600
|
645,001
|
431,394
|
Provisions, net of (reversals and write-offs)
|
3,382,750
|
4,330,466
|
(227,244)
|
Payments
|
(2,702,886)
|
(1,904,036)
|
(18,271)
|
Balance on December 31, 2019
|
7,346,067
|
8,685,793
|
8,390,085
|
Adjustment for inflation
|
960,812
|
696,997
|
147,683
|
Provisions, net of (reversals and write-offs)
|
663,547
|
1,609,720
|
(256,489)
|
Payments
|
(2,079,928)
|
(1,900,089)
|
(10,167)
|
Balance on December 31, 2020
|
6,890,498
|
9,092,421
|
8,271,112
|
|
c)
|
Contingent liabilities
classified as possible losses
|
The Organization maintains a system
to monitor all administrative and judicial proceedings in which the institution is plaintiff or defendant and, based on the opinion
of legal counsel, classifies the lawsuits according to the expectation of loss. Case law trends are periodically analyzed and,
if necessary, the related risk is reclassified. In this respect, contingent lawsuits deemed to have a possible risk of loss are
not recognized as a liability in the financial statements and totaled, on December 31, 2020, R$7,222,015 thousand (on December
31, 2019 - R$6,272,466 thousand) for civil claims and R$35,761,167 thousand (on December 31, 2019 - R$33,474,303 thousand) for
tax proceedings.
The main tax proceedings with this
classification are:
|
-
|
IRPJ and CSLL deficiency
note – 2013 to 2015 – R$9,431,944 thousand (on December 31, 2019 - R$9,216,012 thousand): due to the disallowance of
interest expenses (CDI), related to certain investments and deposits between the companies of the Organization;
|
|
-
|
IRPJ and CSLL –
2006 to 2017 – R$7,251,952 thousand (on December 31, 2019 - R$7,169,765 thousand): relating to goodwill amortization being
disallowed on the acquisition of investments;
|
|
-
|
COFINS – 1999 to
2005 – R$5,354,315 thousand (on December 31, 2019 - R$5,172,183 thousand): fines and disallowances of Cofins loan compensations,
released after a favorable decision in a judicial proceeding, where the unconstitutionality of the expansion of the intended calculation
base was discussed for revenues other than those from billing (Law No. 9,718/98);
|
150 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
|
-
|
Leasing companies’
Tax on Services of any Nature (ISSQN) – R$2,485,745 thousand (on December 31, 2019 - R$2,537,997 thousand): which relates
to the municipal tax demands from municipalities other than those in which the company is located and where, under law, tax is
collected;
|
|
-
|
Social Security Contribution
Taxes –2014 to 2016 – R$2,079,650 thousand (on December 31, 2019 – R$1,268,227 thousand): related to food and
meal allowance made available to employees, according to the Worker’s Food Program – PAT, through card and not “in
natura”;
|
|
-
|
PIS and COFINS notifications
and disallowances of compensations – R$1,444,586 thousand (on December 31, 2019 - R$1,490,269 thousand): related to the unconstitutional
extension of the basis of calculation intended for other income other than the billing (Law No. 9,718/98), from acquired companies;
|
|
-
|
IRPJ and CSLL deficiency
note – 2000 to 2014 – R$848,605 thousand (on December 31, 2019 - R$1,187,411 thousand): relating to disallowance of
exclusions and expenses, differences in depreciation expenses, insufficient depreciation expenses, expenses with depreciation of
leased assets, operating expenses and income and disallowance of tax loss compensation;
|
|
-
|
IRPJ and CSLL deficiency
note – 2005 to 2013 – R$834,272 thousand (on December 31, 2019 - R$925,806 thousand): relating to disallowance of expenses
with credit losses;
|
|
-
|
IRPJ and CSLL deficiency
note – 2008 to 2013 – R$649,441 thousand (on December 31, 2019 - R$608,860 thousand): relating to profit of subsidiaries
based overseas; and
|
|
-
|
PLR – Profit Sharing
Program – 2009 to 2011 – R$463,501 thousand (on December 31, 2019 – R$401,417 thousand): notifications for requirement
of social security contribution on amounts paid to employees as profit sharing program, allegedly not complying with the rules
contained in Law No. 10,101/00 originating from acquired businesses.
|
37) Other
liabilities
|
R$ thousand
|
On December 31
|
2020
|
2019
|
Financial liabilities
|
75,528,047
|
79,121,127
|
Credit card transactions (1)
|
23,522,792
|
21,595,677
|
Foreign exchange transactions (2)
|
26,365,058
|
31,546,034
|
Loan assignment obligations
|
6,098,991
|
6,594,471
|
Capitalization bonds
|
8,570,919
|
8,837,770
|
Securities trading
|
5,877,144
|
4,822,215
|
Lease liabilities (Note 37a)
|
5,093,143
|
5,724,960
|
|
|
|
Other liabilities
|
39,515,233
|
34,023,453
|
Third party funds in transit (3)
|
7,873,642
|
7,296,234
|
Provision for payments
|
7,876,749
|
9,172,457
|
Sundry creditors
|
4,435,990
|
3,778,494
|
Social and statutory
|
3,747,682
|
933,003
|
Other taxes payable
|
2,257,376
|
2,176,673
|
Liabilities for acquisition of assets and rights
|
1,582,134
|
1,493,329
|
Other
|
11,741,660
|
9,173,263
|
Total
|
115,043,280
|
113,144,580
|
(1) It refers to amounts payable to merchants;
(2) Primarily refers to Bradesco’s sales
in foreign currency to customers and its rights in domestic currency, resulting from exchange sale operations; and
(3) Primarily refers to payment orders issued
domestically and the amount of payment orders in foreign currency coming from overseas.
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
R$ thousand
|
|
Opening balance on December 31, 2018 - IAS 17
|
827,574
|
|
Initial adoption - IFRS 16
|
4,176,611
|
|
Adjusted balance on January 1, 2019
|
5,004,185
|
|
Remeasurement and new contracts
|
1,362,692
|
|
Payments
|
(1,067,573)
|
|
Appropriation of financial charges
|
410,195
|
|
Exchange variation
|
15,461
|
|
Closing balance on December 31, 2019
|
5,724,960
|
|
Remeasurement and new contracts
|
622,085
|
|
Payments
|
(1,797,408)
|
|
Appropriation of financial charges
|
476,215
|
|
Exchange variation
|
67,291
|
|
Final balance on December 31, 2020
|
5,093,143
|
|
Maturity of the leases
The maturity of these financial
liabilities as of December 31, 2020 is divided as follows: R$942,039 thousand up to one year (R$1,037,679 thousand up to 1 year
as of December 31, 2019), R$2,760,546 thousand between 1 and 5 years (R$3,007,071 thousand between one to five years as of December
31, 2019) and R$1,575,473 thousand over 5 years (R$1,680,210 thousand for more than five years as of December 31, 2019).
Impacts on the statement of income
As of the adoption of IFRS 16 on
January 1, 2019, lease payments that were previously recorded as expenditure on rent in the line of “Other Administrative
Expenses” in the statement of income, began to be recorded as “Expenses of depreciation” and “Interest
and similar expenses”.
The impact on the income for 2020
was: “Expenses of depreciation” – R$839,177 thousand (R$854,620 thousand in 2019), “Interest and similar
expenses” – R$398,210 thousand (R$393,879 thousand in 2019) and “Expenses of the foreign exchange variation”
– R$67,291 thousand (R$15,461 thousand in 2019), totaling R$1,304,678 thousand in expenses (R$1,263,960 thousand in 2019).
Expenses for 2020 with short-term
contracts were R$1,695 thousand (R$11,732 thousand in 2019).
Other information
In compliance with CVM Circular
Letter No. 02/19, the Organization performed the lease calculations considering the update of cash flows for inflationary expectations
and discounted at a nominal rate (real x nominal model). The Organization evaluated that the real x nominal model when compared
to the nominal x nominal model (discounted cash flow at a nominal rate) does not present material differences.
152 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
38) Shareholders’
Equity
|
a)
|
Capital and shareholders’
rights
|
|
i.
|
Composition of share
capital in number of shares
|
The share capital, which is fully subscribed
and paid, is divided into registered shares with no par value.
|
On December 31
|
2020
|
2019
|
Common
|
4,435,106,575
|
4,031,915,068
|
Preferred
|
4,435,106,111
|
4,031,914,646
|
Subtotal - Securities purchased under agreements to resell
|
8,870,212,686
|
8,063,829,714
|
Treasury (common shares)
|
(7,307,259)
|
(6,642,963)
|
Treasury (preferred shares)
|
(27,378,542)
|
(24,889,584)
|
Total outstanding shares
|
8,835,526,885
|
8,032,297,167
|
|
ii.
|
Changes in share capital,
in number of shares
|
|
Common
|
Preferred
|
Total
|
Number of outstanding shares as at December 31, 2019
|
4,025,272,105
|
4,007,025,062
|
8,032,297,167
|
Increase of capital stock with issuing of shares – bonus of 10% (1)
|
403,191,507
|
403,191,465
|
806,382,972
|
Increase of shares in treasury – bonus of 10%
|
(664,296)
|
(2,488,958)
|
(3,153,254)
|
Number of outstanding shares as at December 31, 2020
|
4,427,799,316
|
4,407,727,569
|
8,835,526,885
|
1) It benefited the shareholders registered
in the records of Bradesco on April 13, 2020.
In the Special Shareholders’
Meeting held on March 12, 2018, the approval was proposed by the Board of Directors to increase the share capital by R$8,000,000
thousand, increasing it from R$59,100,000 thousand to R$67,100,000 thousand, with a bonus in shares, through the capitalization
of part of the balance of the account “Profit Reserves – Statutory Reserve”, in compliance with the provisions
in Article 169 of Law No. 6,404/76, by issuing 610,896,190 new nominative-book entry shares, with no nominal value, whereby 305,448,111
are common shares and 305,448,079 are preferred shares, attributed free-of-charge to the shareholders as bonus, to the ratio of
1 new share for every 10 shares of the same type that they own on the base date.
In the Special Shareholders’
Meeting held on March 11, 2019, the approval was proposed by the Board of Directors to increase the share capital by R$8,000,000
thousand, increasing it from R$67,100,000 thousand to R$75,100,000 thousand, with a bonus in shares, through the capitalization
of part of the balance of the account “Profit Reserves – Statutory Reserve”, in compliance with the provisions
in Article 169 of Law No. 6,404/76, by issuing 1,343,971,619 new nominative-book entry shares, with no nominal value, whereby 671,985,845
are common shares and 671,985,774 are preferred shares, attributed free-of-charge to the shareholders as bonus, to the ratio of
2 new shares for every 10 shares of the same type that they own on the base date, was approved by Bacen on March 19, 2019.
In the Special Shareholders’
Meeting held on March 10, 2020, the Board of Directors’ proposal to increase the share capital by R$4,000,000 thousand was
approved, increasing it from R$75,100,000 thousand to R$79,100,000 thousand, with bonus shares, through the capitalization of part
of the balance of the “Profit Reserves - Statutory Reserve” account, in accordance with the provisions of Article 169
of Law No. 6,404/76, with the issuance of 806,382,972 new registered-book-entry shares, with no par value, being 403,191,507 common
and 403,191,465 preferred shares, which were attributed free of charge to shareholders in the proportion of 1 new share for every
10 shares of the same type that they held on the base date, approved by Bacen on March 30, 2020.
All of the shareholders are entitled
to receive, in total, a mandatory dividend of at least 30% of Bradesco’s annual net income, as shown in the statutory accounting
records, adjusted by transfers to reserves. The Organization has no obligation that is exchangeable for or convertible into shares.
As a result, its diluted earnings per share is the same as the basic earnings per share.
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
As defined in Central Bank Resolution
No. 4,820/20, as amended by Resolution No. 4,885/20, the payout in 2020 was limited to the percentage indicated in the statutory
accounting records.
In occurring any operation that
changes the number of shares, simultaneously with the transaction in the Brazilian Market, and with the same timeframes, an identical
procedure is adopted in the International Market, for the ADRs/GDRs traded in New York, USA, and Madrid, Spain.
Treasury shares are recorded at
cost, which is approximately equivalent to the market prices on the date they are acquired. Cancellation of treasury shares is
recorded as a reduction of unappropriated retained earnings. Treasury shares are acquired for subsequent sale or cancellation.
Capital reserves
The capital reserve consists mainly
of premiums paid by the shareholders upon subscription of shares. The capital reserve is used for (i) absorption of any losses
in excess of accumulated losses and revenue reserves, (ii) redemption, reimbursement of purchase of shares, (iii) redemption of
founders’ shares, (iv) transfer to share capital, and (v) payment of dividends to preferred shares, when this privilege is
granted to them.
Revenue reserves
In accordance with Corporate Legislation,
Bradesco and its Brazilian subsidiaries must allocate 5% of their annual statutory net income, after absorption of accumulated
losses, to a legal reserve, the distribution of which is subject to certain limitations. The reserve can be used to increase capital
or to absorb losses, but cannot be distributed in the form of dividends.
The Statutory Reserve aims to maintain
an operating margin that is compatible with the development of the Organization’s active operations and may be formed by
up to 100% of net income remaining after statutory allocations if proposed by the Board of Executive Officers, approved by the
Board of Directors and ratified at the Shareholders’ Meeting, with the accumulated value limited to 95% of the Organization’s
paid-in capital share amount.
|
c)
|
Interest on shareholders’
equity/Dividends
|
Interest on equity are calculated
on the net income as determined in the financial statements prepared in accordance with Brazilian generally accepted accounting
principles (BR GAAP) applicable to financial institutions authorized to operate by the Central Bank of Brazil. The dividends are
paid in Reais and can be converted into US dollars and remitted to shareholders abroad, provided that the equity participation
of the non-resident shareholder is registered with the Central Bank of Brazil. Brazilian companies may pay interest on equity to
shareholders based on the shareholders’ equity and treat these payments as deductible expenses in the Brazilian income tax
and social contribution calculations. The interest cost is treated for accounting purposes as a deduction from shareholders’
equity in a manner similar to dividends. Withholding income tax is levied and paid at the time that the interest on equity is paid
to the shareholders.
In a meeting of the Board of Directors
on June 28, 2019, the Board of Directors proposal was approved for the payment to shareholders of intermediary interest on equity,
related to the first half of 2019, amounting to R$1,455,000 thousand, which equates to R$0.172536471 per common share and R$0.189790118
per preferred share, payment of which was made on July 15, 2019.
In a meeting held on October 17,
2019, the Board of Directors approved the payment, on October 23, 2019, of extraordinary dividends from profit reserves, in the
amount of R$8,000,000 thousand, which represents R$0.948654134 per common share and R$1.043519547 per preferred share.
In a meeting of the Board of Directors
on December 19, 2019, the Board of Executive Officers ‘proposal for payment of complementary interest on shareholders’
equity for the year of 2019 was approved, in
154 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
the amount of R$4,245,000 thousand,
of which R$0.503379600 per common share and R$0.553717560 per preferred share, payment of which was made on December 30, 2019.
In a meeting of the Board of Directors
on December 16, 2020, the proposal of the Board of Executive Officers was approved for payment to shareholders of supplementary
interest on shareholders’ equity related to the fiscal year of 2020, to the value of R$3,502,000 thousand, of which R$0.377521225
was offered per common share and R$0.415273347, per preferred share, whose payment will be made on January 7, 2021.
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
39) Transactions
with related parties
Related-party transactions (direct
and indirect) are disclosed according to IAS 24, the Organization has a Transaction Policy with related parties. The transactions
are carried out under conditions and at rates consistent with those entered into with third parties at that time. The transactions
are as follows:
|
R$ thousand
|
Shareholders of the parent (1)
|
Associates and Jointly controlled companies (2)
|
Key Management Personnel (3)
|
Total
|
On December 31
|
2020
|
2019
|
2020
|
2019
|
2020
|
2019
|
2020
|
2019
|
Assets
|
|
|
|
|
|
|
|
|
Loans and advances to banks
|
-
|
-
|
186,504
|
577,906
|
-
|
-
|
186,504
|
577,906
|
Securities and derivative financial instruments
|
62,326
|
20,721
|
649,932
|
287,849
|
-
|
-
|
712,258
|
308,570
|
Loans and other assets
|
16
|
9
|
334,746
|
109,766
|
119,659
|
88,750
|
454,421
|
198,525
|
Liabilities
|
|
|
|
|
|
|
|
|
Customer and financial institution resources
|
2,129,974
|
2,137,714
|
677,839
|
3,181,766
|
143,815
|
393,475
|
2,951,628
|
5,712,955
|
Securities and subordinated debt securities
|
11,480,275
|
13,697,802
|
-
|
-
|
702,417
|
891,211
|
12,182,692
|
14,589,013
|
Derivative financial instruments
|
32,219
|
-
|
-
|
7,264
|
-
|
-
|
32,219
|
7,264
|
Other liabilities (4)
|
1,195,928
|
217,765
|
10,808,025
|
11,665,639
|
18,594
|
6,735
|
12,022,547
|
11,890,139
|
|
R$ thousand
|
Shareholders of the parent (1)
|
Associates and Jointly controlled companies (2)
|
Key Management Personnel (3)
|
Total
|
Years ended December 31
|
2020
|
2019
|
2018
|
2020
|
2019
|
2018
|
2020
|
2019
|
2018
|
2020
|
2019
|
2018
|
Revenues and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
(448,376)
|
(857,937)
|
(778,829)
|
(181,754)
|
(6,508)
|
(11,814)
|
(45,003)
|
(58,353)
|
(55,045)
|
(675,133)
|
(922,798)
|
(845,688)
|
Other revenues
|
109
|
105
|
334
|
98,556
|
342,793
|
315,832
|
119
|
359
|
247
|
98,784
|
343,257
|
316,413
|
Other expenses
|
58,434
|
54,471
|
50,745
|
(1,644,088)
|
(1,899,818)
|
(2,635,494)
|
89,582
|
288,187
|
323,130
|
(1,496,072)
|
(1,557,160)
|
(2,261,619)
|
(1) Cidade de Deus Cia. Coml. de Participações,
Fundação Bradesco, NCF Participações S.A., BBD Participações S.A. and Nova Cidade de
Deus Participações S.A.;
(2) Companies listed in Note 26;
(3) Members of the Board of Directors and
the Board of Executive Officers; and
(4) It includes interest on equity and dividends
payable.
156 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
|
a)
|
Remuneration of key management personnel
|
The following is established each
year at the Annual Shareholders’ Meeting:
|
·
|
The annual total amount
of management compensation, set forth at the Board of Directors’ Meeting, to be paid to Board members and members of the
Board of Executive Officers, as determined by the Company’s Bylaws; and
|
|
·
|
The amount allocated to
finance Management pension plans, within the Employee and Management pension plan of the Bradesco Organization.
|
For 2020, the maximum amount of
R$871,589 thousand was determined for the remuneration of the Directors, and part of this refers to the social security contribution
to the INSS, which is an obligation of the Organization, and R$515,650 thousand to cover supplementary pension plan defined contributions.
The current policy on Management
compensation sets forth that 50% of net variable compensation, if any, must be allocated to the acquisition of PNB shares issued
by BBD Participações S.A. and/or PN shares issued by Banco Bradesco S.A., which vest in three equal, annual and successive
installments, the first of which is in the year following the payment date. This procedure complies with CMN Resolution No. 3,921/10,
which sets forth a Management compensation policy for financial institutions.
Short-term benefits for Management
|
R$ thousand
|
Years ended December 31
|
2020
|
2019
|
2018
|
Salaries
|
534,696
|
852,862
|
485,949
|
Total
|
534,696
|
852,862
|
485,949
|
Post-employment benefits
|
R$ thousand
|
Years ended December 31
|
2020
|
2019
|
2018
|
Defined contribution supplementary pension plans
|
513,082
|
468,079
|
474,378
|
Total
|
513,082
|
468,079
|
474,378
|
The Organization has no long-term
benefits or for the termination of employment contracts or for remuneration based on shares for its key Management personnel.
Together directly, members of the Board
of Directors and the Board of the Executive Officers had the following shareholding in Bradesco:
|
On December 31
|
2020
|
2019
|
Common shares
|
0.53%
|
0.55%
|
Preferred shares
|
0.91%
|
1.04%
|
Total shares (1)
|
0.72%
|
0.79%
|
(1) On December 31, 2020, direct and indirect
shareholding of the members of the Board of Directors and the Board of Executive Officers in Bradesco totaled 2.65% of common shares,
0.95% of preferred shares and 1.80% of all shares (on December 31, 2019 – 2.48% of common shares, 1.07% of preferred shares
and 1.78% of all shares).
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
40) Off-balance
sheet commitments
The table below summarizes the total
risk represented by off-balance sheet commitments:
|
R$ thousand
|
On December 31
|
2020
|
2019
|
Commitments to extend credit (1)
|
254,897,024
|
248,455,570
|
Financial guarantees (2)
|
80,236,602
|
78,231,145
|
Letters of credit for imports
|
1,056,613
|
1,411,197
|
Total
|
336,190,239
|
328,097,912
|
(1) It includes available lines of credit,
limits for credit cards, personal loans, housing loans and overdrafts; and
(2) It refers to guarantees mostly provided for
Corporate customers.
Financial guarantees are conditional
commitments for loans issued to ensure the performance of a customer in an obligation to a third party. There is usually the right
of recourse against the customer to recover any amount paid under these guarantees. Moreover, we can retain cash or other highly-liquid
funds to counter-guarantee these commitments.
The contracts are subject to the same
credit evaluations as other loans and advances. Standby letters of credit are issued mainly to endorse public and private debt
issue agreements including commercial paper, securities financing and similar transactions. The standby letters of credit are subject
to customer credit evaluation by the Management.
We issue letters of credit in connection
with foreign trade transactions to guarantee the performance of a customer with a third party. These instruments are short-term
commitments to pay the third-party beneficiary under certain contractual terms for the shipment of products. The contracts are
subject to the same credit evaluation as other loans and advances.
158 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
41) New
standards and amendments and interpretations of existing standards
Standards, amendments and interpretations
of new standards for the year ended December 31, 2020
|
·
|
Conceptual Framework –
The Conceptual Framework for Financial Reporting describes the purpose and concepts of general purpose financial reporting. Among
the changes in definitions contained in this document, the new definition of assets and liabilities stands out, being active, “a
present economic resource controlled by the entity as a result of past events” and a liability, a present obligation of the
entity to transfer an economic resource as a result of past events. The new Conceptual Framework came into effect for the period
beginning on January 1, 2020. An analysis of the new Conceptual Framework has been carried out and no material impacts have been
identified on the Organization.
|
|
·
|
IFRS 16 – Leases
– This is a practical expedient that allows tenants not to consider as an amendment to the contract, those leases that they
receive as concession, due to the Covid-19 pandemic. The Organization has opted not to use the practical expedient, therefore,
there was no impact on the Financial Statements.
|
Reform of interest rates used as
market benchmarks (IBOR - Interbank Offered Rate) - Phase I - Changes in IFRS 9 - Financial Instruments, IAS 39 - Financial Instruments:
Recognition and Measurement and IFRS 7 - Financial Instruments: Disclosures - These are changes in the aforementioned standards,
due to the uncertainties caused by the IBOR reform project that may impact hedge accounting relationships. The changes aim to minimize
such impacts. These changes are effective for years beginning on January 1, 2020. No impacts were identified on the Organization.
Standards, amendments and interpretation
of standards applicable to future periods
|
·
|
IFRS 17 – Insurance
Contracts. Establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts within
the scope of the Standard. The purpose of IFRS 17 is to ensure that an entity provides relevant information that faithfully represents
those contracts. The general model of IFRS 17 requires insurers and reinsurers to measure their insurance contracts at the initial
time by the estimated total cash flow, adjusted for the time value of money and the explicit risk related to non-financial risk,
in addition to of the contractual margin of the service. This estimated value is then remeasured at each base date. The unrealized
profit (corresponding to “the contractual margin of the service) is recognized over the term of the contracted coverage.
Apart from this general model, IFRS 17 provides, as a way of simplifying the process, the award allocation approach. This simplified
model is applicable to certain insurance contracts, including those with coverage of up to one year. This information provides
a basis for accounting firm users to evaluate the effect that insurance contracts have on the financial position, financial performance
and the Company’s cash flows. IFRS 17 is effective for annual periods beginning on or after January 1, 2023. The Company
is in the process of assessing the impact of the new standard.
|
Reform of interest rates used as
market references (IBOR) - Phase II. Impacts on IFRS 4 - Insurance Contracts, IFRS 7 - Financial Instruments: Disclosures, IFRS
9 - Financial Instruments, IFRS 16 - Leases and IAS 39 - Financial Instruments: Recognition and Measurement. The main changes are:
(i) permission to replace the effective interest rate on financial instruments with a compatible rate, without derecognizing the
transaction, as long as it is a consequence of the reform; (ii) Recognition as a result of the ineffective portion of hedge accounting,
due to the end of the exemptions provided for in Phase I of the project. The standard is effective as of the year beginning on
January 1, 2021. The Company is assessing the impacts arising from Phase II.
42) Other
information
-
Since March 11, 2020 the World Health Organization
(WHO) declared Covid-19, which originated in China at the end of 2019 and spread throughout the world, a pandemic resulting in
a significant increase in the restrictions of national and international travel, downtime for many businesses and services in virtually all countries, government orders of social isolation to slow the spread of the virus, among other restrictions, generating an environment of strong financial volatility and increasing uncertainties, in addition to social, economic and employment instability. The Covid-19 pandemic has brought great challenges and uncertainties to the whole world, being considered the largest pandemic ever seen, according to the WHO. The crisis caused as a result of the pandemic can be observed from the beginning of March 2020 generating certain negative impacts on the Brazilian economy, such as (i) higher risk aversion, with pressures on the exchange rate; (ii) greater difficulties in foreign trade; and (iii) increase in the uncertainties of economic agents.
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
In order to mitigate the impacts of
this crisis, governments and central banks around the world have intervened in the economy of their countries and have adopted
unconventional measures, like the closing of non-essential economic activity and actions of monetary stimulus, with the practice
of zero interest in addition to fiscal expansion.
In Brazil, various measures have been
adopted, including some directly impacting the liquidity of the financial markets, the credit markets, monetary and fiscal policy
and exchange rates. In this context, in addition to the various measures taken by the Monetary Policy Committee (COPOM) and the
Central Bank of Brazil, such as reducing the interest rate on August 2020, to 2.0% p.a., the National Monetary Council and the
Federal Government approved, in extraordinary meetings, various measures to help the Brazilian economy tackle the adverse effects
caused by the virus.
The Executive and Legislative Powers
have tried to approve Bills that minimize the repercussion of Covid-19, including proposing the temporary suspension of taxes (such
as the relaxation of the IOF on loans and the deferral of payment of PIS/COFINS) and granting tax benefits to the sectors of the
economy/workers most affected.
We cannot control, and nor can we predict
what measures or policies the government may adopt in response to the current or future economic situation in Brazil, nor how the
intervention or government policies will affect the Brazilian economy and how they will affect our operations. Below we highlight
the main items of our statement of financial position which may potentially be impacted:
|
•
|
Financial instruments:
whose market value may vary significantly given the price volatility of these assets, especially those issued by private companies
that have a higher credit risk;
|
|
•
|
Loans: expenses for expected loss
on loans and advances increased 49% in relation to 2019, reaching R$18,711,841 thousand in 2020, mainly reflecting the effects
caused by the pandemic. It is worth noting that there was a worsening of the economic situation, as well as the updating of prospective
scenarios in order to capture the current and future events resulting from the pandemic, increasing the risk of credit operations,
resulting in migration between the stages and, consequently, a higher level provisioning;
|
|
•
|
Deferred tax assets: whose recoverability
depends on future taxable income, which may be affected depending on the consequences of the pandemic event if it extends over
a long period of time;
|
|
•
|
Intangible assets: may have their
recoverable amount impacted on the basis of the changes caused by the crisis to their main assumptions of realization, such as
the rates of returns initially expected;
|
|
•
|
Funding: volatility, as well as
uncertainties in credit and capital markets, generally reduces liquidity, which could result in an increase in the cost of funds
for financial institutions, which may impact our ability to replace, appropriately and at reasonable costs, obligations that are
maturing and/or the access to new resources to execute our growth strategy;
|
|
•
|
Technical provisions of insurance and
pension resources: that depending on the evolution of the crisis can be impacted negatively given the possible increase in
the level of claims, mainly in the “life” segment and a higher frequency of claims from “health” policyholders
with the increased use of hospitals, furthermore, we may experience higher demand for early redemptions by pension plan participants,
which would impact our revenues through a reduction in the management fees we charge; and
|
|
•
|
Civil and labor provisions: the
number of labor lawsuits may increase as a result of third party suppliers that go bankrupt as we may be considered co-responsible
in these lawsuits. It is also
|
160 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
possible that we could
experience a greater volume of civil processes, mainly involving reviews and contract renewals.
Our activities are operating at
full capacity, since the beginning of the pandemic, and our actions have taken into account the guidelines of the Ministry of Health.
We have established a crisis committee which is formed by the CEO, all the Vice-presidents and by the CRO (Chief Risk Officer),
which meets daily and reports periodically, to the Board of Directors, evaluations on the evolution of Covid-19 and their reflections
on the operations. In addition, we have a Risk Committee, which plays an important role in verifying the various points and scope
of these actions in the Organization. We launched the Business Continuity Plan (“BCP”) and since the second half of
March 2020, we intensified the internal and external actions, in a consistent and timely manner, with the objective of minimizing
the impacts involved, which we highlight include:
|
•
|
giving leave to employees at-risk groups
for an indefinite period of time;
|
|
•
|
increasing the number of employees working
from home, with approximately 90% of our employees from the headquarters and offices and 50% of the branch employees working from
home;
|
|
•
|
definition of the accompanying protocol,
together with health professionals, for employees and family members who have symptoms of Covid-19;
|
|
•
|
intensification of the communication with
our branches, providing guidance to our customers and employees about the prevention measures and the remote means of customer
service;
|
|
•
|
making Covid-19 tests available to all
employees for free; and
|
|
•
|
anticipation of the flu vaccine for all
employees and dependents.
|
One of the main objectives of
our risk management structure is to monitor the allocation of capital and liquidity, aiming to maintain the levels of risk in accordance
with the limits established and, in addition, monitor the economic scenarios actively (national and international), as well as
the evolution of the Covid-19 pandemic and will make every effort to maintain the fullness of our operations, the services to the
population, and the stability of the national financial system.
We offer emergency lines of credit
to companies, such as funds for financing of payrolls, as well as the extension of the installments of loan operations to individuals
for which the amounts in question, up to the date of approval of these financial statements, were immaterial.
The measurements of the future
financial and economic impacts related to the pandemic will continue to be assessed, although, they possess a certain level of
uncertainty and depend on the development of the pandemic, since, part of the impact of the pandemic is already reflected in the
level of provisioning, however, its duration or deterioration cannot yet be predicted, which could continue adversely affecting
the global and local economy for an indefinite period of time, which negatively affects the results of financial institutions and,
consequently, the performance of our operations.
|
2.
|
On May 6, 2019, Bradesco
announced to the market, that it has entered into a Share Purchase Agreement (“Agreement”) with the controlling shareholders
of BAC Florida Bank (“BAC Florida”), the bank that has offered various financial services in the United States for
46 years, especially to non-resident high net worth Individuals.
|
On September
10, 2019, the Central Bank of Brazil authorized Bradesco to: (i) hold up to 100% of the capital of BAC Florida Bank and its subsidiaries
- the securities brokerage firm BAC Florida Investments Corp. and the non-financial corporations BAC Global Advisors Inc., 5551
Luckett Road, Inc. and Representaciones Administrativas Internacionales S.A., the latter located in Guatemala and the others located
in the United States.
On October 8, 2020, all regulatory
authorizations were granted for the acquisition of 100% of the share capital of BAC Florida Bank by Bradesco.
Upon completion of the acquisition,
on October 30, 2020, Bradesco:
|
•
|
has assumed the operations of BAC Florida,
with the main objective of expanding the offering of investments in the USA to its high net worth customers (Prime) and Private
Bank, in addition to other banking services, such as checking accounts, credit card and real estate financing; and
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
|
Notes to the Consolidated Financial Statements
|
•
|
this transaction will also provide Bradesco
with the opportunity to expand business related to corporate and institutional customers.
|
We present below, the composition
of the values of acquisition of BAC Florida and its subsidiaries and goodwill in the acquisition of shares as provisionally determined:
R$ thousand
|
Payment to BAC Florida
|
3,105,557
|
Total cost of acquisition
|
3,105,557
|
|
|
Fair value of net assets acquired (provisional amount)
|
1,346,061
|
|
|
Goodwill on the acquisition of shares
|
1,759,496
|
Bradesco hired a specialized and
independent company to conduct the study of the purchase price allocation (“PPA”), for the initial allocation of the
fair value of the assets acquired and liabilities assumed by Bac Florida. Due to the complexity of operations and their relevance,
the final allocation may undergo changes and enhancements until the end of the study, which is estimated in up to 12 months from
the date of its acquisition.
We present the provisional amounts
for the assets and liabilities acquired on October 30, 2020 base date of the acquisition:
|
R$ thousand
|
|
BAC Florida Bank
|
|
|
|
Assets
|
|
|
Cash and due from banks
|
4,366,118
|
|
Financial instruments
|
10,292,617
|
|
- Securities and derivative financial instruments
|
1,209,024
|
|
- Loans
|
9,080,574
|
|
- Other financial instruments
|
3,019
|
|
Investments in Associates
|
56,863
|
|
Premises and equipment
|
6,133
|
|
Other assets
|
364,956
|
|
Total assets
|
15,086,687
|
|
|
|
|
Liabilities
|
|
|
Deposits and other financial liabilities
|
13,603,913
|
|
- Deposits from customers
|
12,952,310
|
|
- Securities issued
|
642,661
|
|
- Other financial liabilities
|
8,942
|
|
Other liabilities
|
136,713
|
|
Shareholders’ equity
|
1,346,061
|
|
Total
|
15,086,687
|
|
If the acquisition
had taken place on January 1, 2020, Management estimates that net income from the year would have been R$15,928,549 thousand. For
the determination of this amount, Management considered that the fair value adjustments, provisionally determined on the acquisition
date, would have been the same if the acquisition had occurred on January 1, 2020.
|
3.
|
On January 15, 2020, Banco
Bradesco announced that it sold the entire shareholding held in Chain Serviços e Contact Center S.A. (“Chain”)
to Almaviva do Brasil Telemarketing e Informática S.A.
|
162 IFRS – International Financial Reporting Standards – 2020
|
|
|
Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)
|
|
|
Notes to the Consolidated Financial Statements
|
4.
|
On January 27, 2020, Bradesco
issued US$1.6 billion of senior notes in the international market, composed of two tranches of US$800 million, maturing in January
2023 and January 2025, with remuneration at fixed interest rates 2.85% and 3.20% p.a., respectively.
|
|
5.
|
On October 1, 2020, Cielo
announced to the market that it had signed a contract for the sale of all of its shares in Companhia Brasileira de Gestão
de Serviços (“Orizon”), representing 40.95% of the share capital of Orizon, to Bradseg Participações
S.A. for the sum of R$128,992 thousand. The closing of the Operation is subject to the fulfillment of certain precedent conditions,
including approval by the Central Bank of Brazil and by the Administrative Council for Economic Defense – CADE.
|
|
6.
|
On July 29, 2020, Law
No. 14,031 was sanctioned, amending, from the fiscal year of 2021, the tax treatment incident on the exchange rate variation of
the portion with risk coverage (hedge) of the value of the investment made by financial institutions and other institutions, authorized
to operate by the Central Bank of Brazil, in a subsidiary, associated company, branch or agency located abroad, registered in accordance
with the regime of competence, which should be computed in determining the real income and on the base of the Social Contribution
on Net Profit (CSLL) of the investing legal entity, domiciled in Brazil, in the ratio of: (i) 50%, in 2021; and 100%, from the
fiscal year of 2022.
|
|
7.
|
Due to the so-called “Operação
Zelotes” (“Zealots Operation”), which investigates the alleged improper performance of members of CARF –
Administrative Council of Tax Appeals, a criminal proceeding against two former members of Bradesco’s Board of Executive
Officers was opened in 2016 and received by the 10th Federal Court of Judicial Section of the Federal District. The
investigation phase of the process was already completed, and is currently waiting for the decision of the first-degree court.
|
The Company’s Management conducted
an internal evaluation of records and documents related to the matter and found no evidence of any illegal conduct practiced by
its former representatives. Bradesco provided all of the information to the authorities and competent regulatory bodies, both in
Brazil and abroad.
As a result of the news about the
Operação Zelotes, a Class Action was filed against Bradesco and members of its Board of Executive Officers
before the District Court of New York (“Court”), on June 3, 2016, based on Sections 10 (b) and 20 (a) of the Securities
Exchange Act of 1934. On July 1, 2019, Bradesco and the Lead Plaintiff made an agreement (“Agreement”) to terminate
the Class Action, with the payment of US$14.5 million by Bradesco. The Agreement was finally approved by the Court on November
18, 2019 and the case was closed in relation to Bradesco and to the members of its Executive Board of Directors. The Agreement
made does not represent the recognition of guilt or admission of liability by Bradesco, but its intent is to avoid uncertainties,
costs and onus related to the progression of the Class Action.
Also as a result of Operação
Zelotes, the Corregedoria Geral do Ministério da Fazenda (General Internal Affairs of the Ministry of Finance)
began an investigative administrative procedure to verify the need for the establishment of an Administrative Accountability Process
(“PAR”). The filing decision of the related procedure was published in Section 2 of the Diário Oficial da
União (Federal Official Gazette) on February 3, 2020. The decision given by the Official of the Ministry of Economy
accepted in full the Final Report of the Processing Committee, the Opinion of the National Treasury Attorney General’s Office
and the Joint Order of the General Coordination of Management and Administration, and of the Leadership of the Advisory and Judgment
Division, which confirmed, expressly recognizing, the lack of evidence that Bradesco had promised, offered or given, directly or
indirectly, an unfair advantage to public agents involved in the related operation, in accordance with the provisions laid down
in Article 5, section I, of Law No. 12,846/13.
|
8.
|
On March 1, 2021, Provisional Measure No.
1,034 / 2021 was issued, which increased the Social Contribution rate on Net Income by five percent, effective for the period from
July 1, 2021 to December 31, 2021 , for financial institutions and private insurance companies, capitalization companies and credit
unions, the impacts of this Provisional Measure are being assessed.
|
For further
information,
please contact:
Leandro Miranda
Executive Deputy Officer and
Investor Relations
Officer
Carlos
Wagner Firetti
Market Relations
Officer
Phone:
+55 11 2194-0922
investidores@bradesco.com.br
Cidade
de Deus,
s/nº
– Prédio
Vermelho
– 3º andar
Osasco
– SP
Brazil
banco.bradesco/ri
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 9, 2021
BANCO BRADESCO S.A.
|
|
By:
|
|
/S/Leandro de Miranda Araujo
|
|
|
Leandro de Miranda Araujo
Executive Deputy Officer and
Investor Relations Officer.
|
FORWARD-LOOKING STATEMENTS
This press release may contain forward-looking statements. These statements are statements that are not historical facts, and are based on management's current view and estimates of future economic circumstances, industry conditions, company performance and financial results. The words "anticipates", "believes", "estimates", "expects", "plans" and similar expressions, as they relate to the company, are intended to identify forward-looking statements. Statements regarding the declaration or payment of dividends, the implementation of principal operating and financing strategies and capital expenditure plans, the direction of future operations and the factors or trends affecting financial condition, liquidity or results of operations are examples of forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected events, trends or results will actually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.
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