(1) It includes the amount of R$26,741,610 thousand (R$34,003,704
thousand in December, 2019), refers to subordinated debts recognized as “Eligible Debt Capital Instruments” for regulatory
capital purpose – see note 33b; and
(2) The information on results is presented
on Note 15e, cost for market funding and inflation.
Consolidated Financial Statement of the Prudential Conglomerate
Financial Statements
|
b)
Movement of subordinated debts
|
R$ thousand
|
2020
|
2019
|
Opening balance on exercise
|
49,318,062
|
53,652,855
|
Issuance
|
688,186
|
-
|
Interest
|
2,403,327
|
3,708,924
|
Settlement and interest payments
|
(2,374,538)
|
(8,593,243)
|
Exchange variation
|
3,220,364
|
549,526
|
Closing balance on December 31
|
53,255,401
|
49,318,062
|
19)
OTHER FINANCIAL LIABILITIES
|
R$ thousand
|
|
On December 31, 2020
|
On December 31, 2019
|
|
|
Interbank and interdepartmental accounts
|
36,652,214
|
34,895,068
|
|
Foreign exchange portfolio (Note 10a)
|
18,757,631
|
15,488,770
|
|
Obligations for operations linked to assignment
|
6,098,991
|
6,594,471
|
|
Securities trading
|
5,742,052
|
4,730,301
|
|
Total
|
67,250,888
|
61,708,610
|
|
20)
PROVISIONS
a)
Other reserves
|
R$ thousand
|
|
On December 31, 2020
|
On December 31, 2019
|
|
|
Provision for contingencies (Note 21b IV)
|
21,310,181
|
21,359,797
|
|
Provision for Financial guarantees provided (I)
|
2,219,444
|
1,972,008
|
|
Other
|
6,735,885
|
8,046,647
|
|
Total
|
30,265,510
|
31,378,452
|
|
Financial guarantees
provided are contracts requiring the Organization to make specific payments to the holder of the financial guarantee for a loss it will
incur when a specific debtor fails to make the payment under the terms of the debt instrument. The provision for financial guarantees
provided is formed based on the best estimate of the non-recoverable amount of the guarantee, if such disbursement is likely. The provisioning
parameters are established based on the internal credit risk management models. In the case of retail operations, quantitative models
are adopted, while in wholesale the combination of quantitative models with individualized analyzes is adopted.
|
R$ thousand
|
On December 31, 2020
|
On December 31, 2019
|
Guaranteed Values
|
Provisions
|
Guaranteed Values
|
Provisions
|
Surety and guarantees in judicial and administrative proceedings of a fiscal nature
|
36,166,993
|
(856,200)
|
37,696,763
|
(848,477)
|
Bank sureties
|
43,056,379
|
(1,353,020)
|
39,593,910
|
(1,099,140)
|
Others
|
1,013,324
|
(10,224)
|
940,590
|
(24,391)
|
Total
|
80,236,696
|
(2,219,444)
|
78,231,263
|
(1,972,008)
|
Consolidated Financial Statement of the Prudential Conglomerate
Financial Statements
|
21)
PROVISIONS, CONTINGENT ASSETS AND LIABILITIES AND LEGAL OBLIGATIONS
– TAX AND SOCIAL SECURITY
a)
Contingent assets
Contingent assets are not recognized
in the financial statements. However, there are ongoing proceedings where the chance of success is considered probable, such as: a) Social
Integration Program (PIS), Bradesco has made a claim to offset PIS against Gross Operating Income, paid under Decree-Laws No. 2,445/88
and No. 2,449/88, regarding the payment that exceeded the amount due under Supplementary Law No. 07/70 (PIS Repique); and b)
other taxes, the legality and/or constitutionality of which is being challenged, where the decision may lead to reimbursement of amounts
paid.
b)
Provisions classified as probable losses and legal obligations – tax
and social security
The Organization is a party
to a number of labor, civil and tax lawsuits, arising from the normal course of business.
Management recognized provisions
where, based on their opinion and that of their legal counsel, the nature of the lawsuit, similarity to previous lawsuits, complexity
and the courts standing, the loss is deemed probable.
Management considers that the
provision is sufficient to cover the future losses generated by the respective lawsuits.
Provisions related to legal
obligations are maintained until the conclusion of the lawsuit, represented by judicial decisions with no further appeals or due to the
statute of limitation.
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
Consolidated Financial Statement of the Prudential Conglomerate
Financial Statements
|
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 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 5 (five) 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 Bradesco understands that the provisioning was made to cover the eligible
proceedings to the related 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 recognized in full, although
there is a good chance of a favorable outcome, based on the opinion of Management and their legal counsel. The processing of these legal
obligations and the provisions for cases for which the risk of loss is deemed as probable is regularly monitored in the legal court. During
or after the conclusion of each case, a favorable outcome may arise for the Organization, resulting in the reversal of the related provisions.
The main cases are:
|
-
|
PIS and COFINS – R$2,697,431 thousand (R$2,627,647
thousand in December 2019): claims to calculate and collect 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$1,660,787 thousand
(R$1,646,464 thousand in December 2019): official notifications related to the pension contributions on financial contributions in private
pension plans, considered by the authorities to be compensatory sums subject to the incidence of pension contributions and to an isolated
fine for not withholding IRRF on the financial contributions;
|
|
-
|
IRPJ/CSLL on losses of credits – R$1,262,225
thousand (R$1,264,448 thousand in December 2019): 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;
|
Consolidated Financial Statement of the Prudential Conglomerate
Financial Statements
|
|
-
|
IRPJ/CSLL on MTM – R$635,802 thousand (R$626,341
thousand in December 2019): IRPJ and CSLL deficiency note related to the exclusions of revenues marking Securities at fair value in 2007;
and
|
|
-
|
INSS – Contribution to SAT – R$440,524
thousand (R$432,873 thousand in December 2019): in an ordinary lawsuit filed by the Brazilian Federation of Banks – Febraban, since
April 2007, on behalf of its members, is questioned the classification of banks at the highest level of risk, with respect to Work Accident
Risk – RAT, which eventually raised the rate of the respective contribution from 1% to 3%, in accordance with Decree No. 6,042/07.
|
In general, the provisions
relating to lawsuits are classified as non-current, due to the unpredictability of the duration of the proceedings in the Brazilian justice
system. For this reason, the estimate has not been disclosed with relation to the specific year in which these lawsuits will be finalized.
|
IV
|
-
Provisions by nature
|
|
R$ thousand
|
On December 31, 2020
|
On December 31, 2019
|
Labor claims
|
6,472,878
|
6,832,207
|
Civil claims
|
7,591,658
|
7,393,985
|
Provision for tax risks
|
7,245,645
|
7,133,605
|
Total (Note 20a)
|
21,310,181
|
21,359,797
|
|
V
|
-
Changes in provisions – Provision expenses
|
|
R$ thousand
|
Labor
|
Civil
|
Tax
|
Balance on December 31, 2019
|
6,832,207
|
7,393,985
|
7,133,605
|
Adjustment for inflation
|
778,469
|
602,366
|
120,799
|
Provisions, net of (reversals and write-offs)
|
577,487
|
1,137,717
|
1,279
|
Payments
|
(1,715,285)
|
(1,542,410)
|
(10,038)
|
Balance on December 31, 2020
|
6,472,878
|
7,591,658
|
7,245,645
|
|
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$6,718,086 thousand (R$5,880,007 thousand in December 2019)
for civil claims and R$28,453,423 thousand (R$26,404,605 thousand in December 2019) for tax proceedings.
The main fiscal proceedings
in this category are:
|
-
|
IRPJ and CSLL deficiency note –
2013 to 2015 – R$9,431,944 thousand (R$9,216,012 thousand in December 2019): due to the disallowance of interest expenses (CDI),
related to certain investments and deposits between the companies of the Organization;
|
|
-
|
COFINS – 1999 and 2005 – R$5,353,592 thousand (R$5,172,183 thousand in december 2019): 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);
|
|
-
|
IRPJ and CSLL – 2006 to 2017 – R$2,970,591
thousand (R$2,809,612 thousand in December 2019), relating to goodwill amortization being disallowed on the acquisition of investments;
|
Consolidated Financial Statement of the Prudential Conglomerate
Financial Statements
|
|
-
|
Leasing companies’ Tax on Services of any Nature (ISSQN), R$2,485,745 thousand (R$2,537,997 thousand
in December 2019) 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 (R$1,268,227 thousand in December 2019): related to food and meal allowance made available to employees,
according to the Worker's Food Program – PAT, through card and not "in natura";
|
|
-
|
IRPJ and CSLL deficiency note – 2000 to 2014
– R$848,605 thousand (R$1,187,411 thousand in December 2019): 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; and
|
|
-
|
IRPJ and CSLL deficiency note – 2005 to 2013 – R$834,272 thousand
(R$925,806 thousand on December 31, 2019): relating to disallowance of expenses with credit losses;
|
|
-
|
PLR - Profit Sharing - Base years from 2009 to 2011 - R $ 462,516 thousand (In
December 2019 - R $ 399,745 thousand): assessments for the requirement of social security contribution on amounts paid to employees as
profit sharing, for alleged disregard of the rules contained in Law No. 10,101 / 00 from acquired companies; and
|
|
-
|
PIS
and COFINS notifications and disallowances of compensations – R$274,311 thousand (R$372,494 thousand in December 2019): 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.
|
d)
Other matters
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$14.5 million by Bradesco. The Agreement was finally approved by the Court on November 18, 2019 and the case was closed
in relation to Bradesco and to the members of its Executive Board of Directors. The Agreement made does not represent the recognition
of guilt or admission of liability by Bradesco, but
its intent is to avoid uncertainties, costs and onus related to the progression of the Class Action.
Consolidated Financial Statement of the Prudential Conglomerate
Financial Statements
|
Also as a result of Operação
Zelotes, the Corregedoria Geral do Ministério da Fazenda (General Internal Affairs of the Ministry of Finance) began an investigative
administrative procedure to verify the need for the establishment of an Administrative Accountability Process ("PAR"). The filing
decision of the related procedure was published in Section 2 of the Diário Oficial da União (Federal Official Gazette) on
February 3, 2020. The decision given by the Official of the Ministry of Economy accepted in full the Final Report of the Processing Committee,
the Opinion of the National Treasury Attorney General's Office and the Joint Order of the General Coordination of Management and Administration,
and of the Leadership of the Advisory and Judgment Division, which confirmed, expressly recognizing, the lack of evidence that Bradesco
had promised, offered or given, directly or indirectly, an unfair advantage to public agents involved in the related operation, in accordance
with the provisions laid down in Article 5, section I, of Law No. 12,846/13.
|
R$ thousand
|
On December 31, 2020
|
On December 31, 2019
|
Sundry creditors
|
4,973,529
|
4,801,199
|
Payment of taxes and other contributions
|
550,328
|
571,032
|
Credit card operations
|
3,337,914
|
3,613,443
|
Taxes and contributions payable
|
2,736,994
|
2,549,738
|
Liabilities for acquisition of assets and rights
|
677,370
|
659,089
|
Social and statutory
|
3,646,975
|
895,728
|
Obligations for quotas of investment funds
|
2,194,442
|
1,620,225
|
Other
|
8,219,538
|
6,357,276
|
Total
|
26,337,090
|
21,067,730
|
|
23)
|
SHAREHOLDERS’ EQUITY (PARENT
COMPANY)
|
a)
Capital stock in number of shares
Fully subscribed and paid-in
capital stock comprises non-par, registered, book-entry shares.
|
|
On December 31, 2020
|
On December 31, 2019
|
Common
|
4,435,106,575
|
4,031,915,068
|
Preferred
|
4,435,106,111
|
4,031,914,646
|
Subtotal
|
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
|
b)
Transactions of capital stock involving quantities 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 Extraordinary General
Meeting of March 10, 2020, the approval was proposed by the Board of Directors to increase the capital stock by R$ 4,000,000 thousand,
increasing it from R$ 75,100,000 thousand to R$ 79,100,000 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 806,382,972 new nominative-book entry shares, with no nominal value, whereby 403,191,507
are common and 403,191,465 are preferred shares, that will be assigned 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, and was approved by the Bacen on March 30, 2020.
Consolidated Financial Statement of the Prudential Conglomerate
Financial Statements
|
c)
Interest on Shareholders’ Equity/dividends
Bradesco’s capital remuneration
policy aims to distribute interest on shareholders’ equity at the maximum amount calculated under current legislation, and this
is included, net of Withholding Income Tax (IRRF), in the calculation for mandatory dividends for the year under the Company’s Bylaws.
At the Board of Directors’
meeting of December 16, 2020, the proposal by the Board of Executive Officers for payment to the shareholders of interest on own capital
was approved, for 2020, in the sum of R$3,502,000 thousand, of which R$0.377521225 would be paid per common share and R$0.415273347 per
preferred share, whose payment was made on January 7, 2021.
At a meeting of the Board of
Directors on February 3, 2021, the Executive Board's proposal was approved to pay supplementary interest on shareholders' equity to the
Company's shareholders, in the total amount of R $ 184,020 thousand, of which R $ 0.019837530 per common share and R $ 0.021821283 per
preferred share, paid on March 8, 2021.
Interest on shareholders’
equity/dividends for the year ended in December 31, 2020 is calculated as follows:
|
R$ thousand
|
% (1)
|
Net income for the period
|
16,546,577
|
|
(-) Legal reserve
|
827,328
|
|
Adjusted calculation basis
|
15,719,249
|
|
Monthly, intermediaries and supplementary interest on shareholders’ equity (gross), paid
|
5,547,971
|
|
Withholding income tax on interest on shareholders' equity
|
(832,196)
|
|
Interest on Shareholders’ Equity (net) accumulated in December 31, 2020
|
4,715,775
|
30.00
|
Interest on shareholders' equity (net) and total dividends accumulated in December 31, 2019
|
14,757,847
|
68.79
|
(1) Percentage of interest on shareholders’
equity/dividends after adjustments. The total percentage of net distribution in 2019 considers the payment of extraordinary dividends
in the amount of R$8 billion, which occurred on October 23, 2019, using part of the “Profit Reserve – Statutory” balance
of the account.
Interest on shareholders’
equity were paid, as follows:
Description
|
R$ thousand
|
Per share (gross)
|
Gross amount paid
|
Withholding Income Tax (IRRF) (15%)
|
Net amount paid
|
Common
|
Preferred
|
Monthly interest on shareholders’ equity paid
|
0.206998
|
0.227698
|
1,672,858
|
250,929
|
1,421,929
|
Intermediary interest on shareholders’ equity paid
|
0.172536
|
0.189790
|
1,455,000
|
218,250
|
1,236,750
|
Supplementary interest on shareholders´ equity paid
|
0.503380
|
0.553718
|
4,245,000
|
636,750
|
3,608,250
|
Extraordinary dividends paid
|
0.948654
|
1.043520
|
8,000,000
|
-
|
8,000,000
|
Supplementary dividends paid
|
0.058214
|
0.064035
|
490,918
|
-
|
490,918
|
Total accrued on December 31, 2019
|
1.889782
|
2.078761
|
15,863,776
|
1,105,929
|
14,757,847
|
|
|
|
|
|
|
Monthly interest on shareholders’ equity paid
|
0.206998
|
0.227698
|
1,861,951
|
279,293
|
1,582,658
|
Supplementary interest on shareholders´ equity paid (1)
|
0.377521
|
0.415273
|
3,502,000
|
525,300
|
2,976,700
|
Interest on Shareholders’ Equity supplementary paid (2)
|
0.019838
|
0.021821
|
184,020
|
27,603
|
156,417
|
Total accrued on December 31, 2020
|
0.604357
|
0.664792
|
5,547,971
|
832,196
|
4,715,775
|
(1) Paid on January 7, 2021.
(1) Paid on March 8, 2021.
Consolidated Financial Statement of the Prudential Conglomerate
Financial Statements
|
d)
Treasury shares
Bradesco acquired a total of
7,307,259 common shares and 27,378,542 preferred shares for a total amount of R$ 440,514 thousand until December 31, 2020, which all remain
in treasury. The minimum, average and maximum cost per common share is R$19.34962, R$24.55863 and R$27.14350, and per preferred share
is R$19.37456, R$26.98306 and R$33.12855, respectively. The fair value was R$24.20 per common share and R$27.14 per preferred share on
December 31, 2020.
24)
NON-CONTROLLING INTERESTS IN SUBSIDIARIES
As of December 31, 2020, the
balance of minority interests in subsidiaries was R $ 4,957 thousand (December 31, 2019 - R $ 62,467 thousand), after the total acquisition
of minority interest in Banco Bradesco BBI, in January 2020 , the balance of minority interest in subsidiaries is now basically represented
by Odontoprev.
|
25)
|
FEE AND COMMISSION INCOME
|
|
R$ thousand
|
2nd semester
|
Accrued on December 31
|
2020
|
2020
|
2019
|
Credit card income
|
3,362,724
|
6,727,510
|
7,390,357
|
Checking account
|
4,026,628
|
7,928,761
|
7,705,774
|
Loans
|
1,294,165
|
2,672,745
|
3,034,923
|
Collections
|
911,591
|
1,821,765
|
1,935,353
|
Consortium management
|
991,889
|
1,921,206
|
1,921,082
|
Asset management
|
734,449
|
1,535,133
|
1,787,603
|
Custody and brokerage services
|
643,164
|
1,287,208
|
1,136,054
|
Underwriting/ Financial Advisory Services
|
726,336
|
1,150,459
|
1,014,609
|
Payments
|
226,962
|
462,535
|
475,392
|
Other
|
344,498
|
645,345
|
559,688
|
Total
|
13,262,406
|
26,152,667
|
26,960,835
|
26)
PAYROLL AND RELATED BENEFITS
|
R$ thousand
|
2nd semester
|
Accrued on December 31
|
2020
|
2020
|
2019
|
Salaries
|
4,206,478
|
8,589,246
|
9,184,091
|
Benefits
|
2,058,898
|
4,179,896
|
5,491,089
|
Social security charges
|
1,597,771
|
3,096,489
|
3,167,924
|
Employee profit sharing
|
793,213
|
1,427,278
|
1,666,197
|
Training
|
28,614
|
77,516
|
172,231
|
Total
|
8,684,974
|
17,370,425
|
19,681,532
|
|
27)
|
OTHER ADMINISTRATIVE EXPENSES
|
|
R$ thousand
|
2nd semester
|
Accrued on December 31
|
2020
|
2020
|
2019
|
Accumulated depreciation and amortization
|
2,490,124
|
4,899,306
|
4,922,256
|
Outsourced services
|
2,177,112
|
4,233,050
|
4,375,330
|
Data processing
|
1,284,022
|
2,397,835
|
2,372,240
|
Rental
|
848,396
|
1,717,723
|
1,715,899
|
Communication
|
616,845
|
1,257,484
|
1,455,629
|
Asset maintenance
|
632,485
|
1,235,898
|
1,165,523
|
Financial system services
|
537,363
|
1,040,912
|
1,055,683
|
Security and surveillance
|
327,380
|
698,206
|
744,033
|
Advertising and marketing
|
490,529
|
896,502
|
1,119,654
|
Transport
|
309,909
|
643,168
|
760,270
|
Asset leases
|
294,422
|
678,666
|
695,278
|
Water, electricity and gas
|
165,163
|
359,087
|
420,741
|
Consolidated Financial Statement of the Prudential Conglomerate
Financial Statements
|
Supplies
|
66,769
|
137,795
|
186,108
|
Travel
|
10,937
|
58,166
|
242,937
|
Other
|
494,625
|
1,011,704
|
1,122,293
|
Total
|
10,746,081
|
21,265,502
|
22,353,874
|
|
R$ thousand
|
2nd semester
|
Accrued on December 31
|
2020
|
2020
|
2019
|
Contribution for Social Security Financing (COFINS)
|
2,132,758
|
2,851,626
|
3,496,380
|
Social Integration Program (PIS) contribution
|
351,692
|
473,247
|
577,739
|
Tax on Services (ISSQN)
|
551,886
|
1,088,286
|
1,187,109
|
Municipal Real Estate Tax (IPTU) expenses
|
31,652
|
117,350
|
123,887
|
Other
|
54,928
|
366,054
|
236,728
|
Total
|
3,122,916
|
4,896,563
|
5,621,843
|
29)
OTHER OPERATING INCOME
|
R$ thousand
|
2nd semester
|
Accrued on December 31
|
2020
|
2020
|
2019
|
Other interest income
|
373,407
|
1,183,130
|
1,768,623
|
Reversal of other operating provisions
|
897,887
|
2,073,253
|
1,584,448
|
Revenues from recovery of charges and expenses
|
109,892
|
318,220
|
487,444
|
Other
|
798,191
|
1,276,874
|
1,636,254
|
Total
|
2,179,377
|
4,851,477
|
5,476,769
|
30)
OTHER OPERATING EXPENSES
|
R$ thousand
|
2nd semester
|
Accrued on December 31
|
2020
|
2020
|
2019
|
Other finance costs
|
487,888
|
806,834
|
2,592,968
|
Sundry losses
|
187,461
|
350,490
|
416,971
|
Discount granted
|
1,446,004
|
2,728,750
|
1,769,300
|
Commissions on loans and financing
|
291,085
|
518,944
|
663,530
|
Card marketing expenses
|
1,310,881
|
2,858,522
|
3,207,559
|
Other
|
4,690,878
|
7,363,325
|
7,748,523
|
Total
|
8,414,197
|
14,626,865
|
16,398,851
|
31)
NON-OPERATING INCOME (LOSS)
|
R$ thousand
|
2nd semester
|
Accrued on December 31
|
2020
|
2020
|
2019
|
Gain/loss on sale and write-off of assets and investments
|
(183,839)
|
(223,769)
|
(352,669)
|
Recording/reversal of non-operating provisions (1)
|
(36,457)
|
(70,406)
|
(203,363)
|
Other
|
(14,983)
|
25,178
|
58,633
|
Total
|
(235,279)
|
(268,997)
|
(497,399)
|
|
(1)
|
Includes primarily allowance for non-use assets (BNDU).
|
Consolidated Financial Statement of the Prudential Conglomerate
Financial Statements
|
|
32)
|
RELATED-PARTY TRANSACTIONS
|
|
a)
|
Related-party transactions (direct
and indirect) are carried out according to CMN Resolution No. 4,636/18 and CVM Resolution No. 642/10. The Organization has a Transaction
Policy with related parts disclosed on the Investor Relations website. 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)
|
Affiliates, controlled and shared control (2)
|
Key Management Personnel (3)
|
Total
|
On December 31, 2020
|
On December 31, 2019
|
On December 31, 2020
|
On December 31, 2019
|
On December 31, 2020
|
On December 31, 2019
|
On December 31, 2020
|
On December 31, 2019
|
Assets
|
|
|
|
|
|
|
|
|
Interbank investments
|
-
|
-
|
186,504
|
364,217
|
-
|
-
|
186,504
|
364,217
|
Securities and derivative financial instruments
|
62,326
|
20,721
|
644,796
|
237,863
|
-
|
-
|
707,122
|
258,584
|
Loans and other assets
|
16
|
9
|
1,605,223
|
2,104,111
|
119,659
|
88,750
|
1,724,898
|
2,192,870
|
Liabilities
|
|
|
|
|
|
|
|
|
Demand deposits/Savings accounts
|
164,651
|
109,767
|
105,727
|
47,176
|
17,685
|
20,428
|
288,063
|
177,371
|
Time deposits
|
1,289,430
|
1,802,883
|
2,869,377
|
5,509,715
|
126,130
|
373,047
|
4,284,937
|
7,685,645
|
Securities sold under agreements to repurchase
|
675,893
|
225,064
|
247,825
|
304,008
|
-
|
-
|
923,718
|
529,072
|
Funds from issuance of securities and subordinated debts
|
11,480,275
|
13,697,802
|
8,741,750
|
15,525,288
|
702,417
|
891,211
|
20,924,442
|
30,114,301
|
Derivative financial instruments
|
32,219
|
-
|
2,431
|
7,264
|
-
|
-
|
34,650
|
7,264
|
Interest on own capital and dividends payable
|
1,195,928
|
217,765
|
-
|
-
|
-
|
-
|
1,195,928
|
217,765
|
Other liabilities
|
-
|
-
|
10,834,610
|
11,584,185
|
18,594
|
6,735
|
10,853,204
|
11,590,920
|
|
Accrued on December 31 - R$ thousand
|
|
Shareholders of the parent (1)
|
Affiliates, controlled and shared control (2)
|
Key Management Personnel (3)
|
Total
|
|
|
2020
|
2019
|
2020
|
2019
|
2020
|
2019
|
2020
|
2019
|
|
Income from financial intermediation
|
40,506
|
4,871
|
58,946
|
52,223
|
-
|
-
|
99,452
|
57,094
|
|
Financial intermediation expenses
|
(488,882)
|
(862,808)
|
(601,196)
|
(1,095,773)
|
(45,003)
|
(58,353)
|
(1,135,081)
|
(2,016,934)
|
|
Income from services provided
|
109
|
105
|
105,084
|
345,094
|
119
|
359
|
105,312
|
345,558
|
|
Other expenses net of other operating revenues
|
58,434
|
54,471
|
(2,185,506)
|
(2,146,118)
|
89,582
|
288,187
|
(2,037,490)
|
(1,803,460)
|
|
(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 11; and
(3) Members of the Board of Directors and the Board of Executive Officers.
Consolidated Financial Statement of the Prudential Conglomerate
Financial Statements
|
|
b)
|
Remuneration of key management personnel
|
Each year, the Annual Shareholders’
Meeting approves:
|
·
|
The annual total amount of Management compensation,
set forth at the Board of Directors Meetings, to be paid to board members and members of the Board of Executive Officers, as determined
by the Company’s Bylaws; and
|
|
·
|
The amount allocated to finance Management pension
plans, within the Employee and Management pension plan of the Organization Bradesco.
|
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$515,650 thousand to cover supplementary pension plan defined contributions.
The current policy on Management
compensation sets forth that 50% of net variable compensation, if any, must be allocated to the acquisition of preferred class b shares
issued by BBD Participações S.A. and / or preferred shares issued by Banco Bradesco S.A., which vest in three equal, annual
and successive installments, the first of which is in the year following the payment date. This procedure complies with CMN Resolution
No. 3,921/10, which sets forth a management compensation policy for financial institutions.
Short and medium term remuneration to Managers
|
R$ thousand
|
2nd semester
|
Accrued on December 31
|
2020
|
2020
|
2019
|
Remuneration and Social Security Contribution to the INSS
|
224,001
|
534,696
|
852,862
|
Total
|
224,001
|
534,696
|
852,862
|
Post-employment benefits
|
R$ thousand
|
2nd semester
|
Accrued on December 31
|
2020
|
2020
|
2019
|
Defined contribution supplementary pension plans
|
295,348
|
513,082
|
468,079
|
Total
|
295,348
|
513,082
|
468,079
|
Bradesco does not offer its
Key Management Personnel long-term benefits related to severance pay or share-based compensation, pursuant to CPC 10 – Share-Based
Payment, approved by Resolution No. 3,989/11.
Shareholding
Together, members of the Board
of Directors and Board of Executive Officers had the following shareholding in Bradesco:
Direct ownership
|
On December 31, 2020
|
On December 31, 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 Bradesco’s Board of Directors and Board of Executive Officers amounted to 2.65% of common shares, 0.95% of preferred
shares and 1.80% of all shares (2.48% of common shares, 1.07% of preferred shares and 1.78% of all shares in 2019).
Consolidated Financial Statement of the Prudential Conglomerate
Financial Statements
|
|
33)
|
RISK AND CAPITAL MANAGEMENT
|
a)
Risk Management
Bradesco carries out a corporate
risk control in an integrated and independent manner, preserving and giving value to a collective decision-making environment, developing
and implementing methodologies, models and tools for measurement and control. It promotes the dissemination of the risk culture to all
employees, at all hierarchical levels, from the business areas to the Board of Directors.
The risk management and capital
structures have policies, rules and procedures, ensuring that the Organization maintains controls compatible with the nature of its operations,
the complexity of its products and services, activities, processes, systems and the size of its exposure to risks. These structures are
also composed of various committees, commissions and departments that subsidize the Board of Directors, the Chief Executive Officer, the
Chief Risk Officer (CRO) and the Executive Board of the Organization in decision making, including:
|
·
|
Integrated Risk Management and Capital Allocation
Committee, whose purpose is to advise the Board of Directors in the performance of its duties related to the management policies and limits
of exposure to risks and ensure within the scope of the Organization compliance with the related processes, policies, related standards
and compliance with regulations and legislation applicable to the Organization; and
|
|
·
|
Risk Committee, whose main objective is to evaluate
the Organization's risk management framework and, eventually, to propose improvements.
|
Both advise the Board of Directors
in the performance of its duties in the management and control of risks, capital, internal controls and compliance.
Detailed information on risk
management process, reference equity and also Bradesco's risks exposures may be found in Risk Management Report – Pillar 3, available
on the Investors Relations website (bradescori.com.br – Market Information - Risk management).
b)
Capital Management
The Basel Ratio is part of
the set of indicators that are monitored and evaluated in the process of Capital Management, and is intended to measure the sufficiency
of capital in relation to the exposure to risks. The table below shows the composition of the Reference Equity and of the Risk Weighted
Assets, according to the standards of Bacen. During the period, Bradesco has fulfilled all the minimum regulatory requirements.
Consolidated Financial Statement of the Prudential Conglomerate
Financial Statements
|
Below is the Basel Ratio:
Calculation basis - Basel Ratio
|
R$ thousand
|
Prudential Conglomerate
|
On December 31, 2020
|
On December 31, 2019
|
Tier I capital
|
118,281,835
|
100,831,668
|
Common equity
|
108,982,064
|
91,271,701
|
Shareholders’ equity
|
143,702,640
|
133,723,221
|
Non-controlling interest / Other
|
164,088
|
106,302
|
Prudential adjustments
|
(34,884,664)
|
(42,557,822)
|
Additional capital
|
9,299,771
|
9,559,967
|
Tier II capital
|
17,441,839
|
24,443,737
|
Subordinated debts (Resolution No. 4,192/13)
|
16,274,254
|
21,324,281
|
Subordinated debts (prior to CMN Resolution No. 4,192/13)
|
1,167,585
|
3,119,456
|
Reference Equity (a)
|
135,723,674
|
125,275,405
|
|
|
|
- Credit risk
|
779,588,540
|
680,907,697
|
- Market risk
|
14,690,553
|
13,571,488
|
- Operational risk
|
64,413,820
|
64,572,141
|
Risk-weighted assets – RWA (b)
|
858,692,913
|
759,051,326
|
|
|
|
Basel ratio (a/b)
|
15.8%
|
16.5%
|
Tier I capital
|
13.8%
|
13.3%
|
- Principal capital
|
12.7%
|
12.0%
|
- Additional capital
|
1.1%
|
1.3%
|
Tier II capital
|
2.0%
|
3.2%
|
c) Indicator of Global Systemic
Importance (IAISG)
According to Bacen Circular
Letter No 3,751/15, Bradesco calculated the indicators for the evaluation of global systemic importance (IAISG), disclosed in Investor
Relations website (bradescori.com.br - Market Information - Risk Management – Global Systemic Importance Index – Annex I and
II).
d)
Social and environmental risk
The social and environmental
risk is represented by potential damages that an economic activity can cause to society and to the environment. The social and environmental
risks associated with financial institutions are mostly indirect and stem from business relationships, including those with the supply
chain and with customers, through financing and investment activities.
The social and environmental
risk management process has a robust governance structure, comprised of committees, policies, standards and procedures, allowing the risk
to be properly identified, measured, mitigated, monitored and reported. This process complies with Resolution No. 4,327/14 of the Central
Bank and observes the principles of relevance and proportionality, which is necessary in view of the complexity of the financial products
and the profile of Organization’s activities.
The Organization seeks to constantly
incorporate and improve the criteria for managing the social and environmental risk arising from business relations with customers, through
loan and financing operations, guarantees, suppliers and investments, which comprise the scope of analysis reflected in the Organization
Social and Environmental Risk Standard.
The Organization has made several
commitments related to environmental and social aspects, such as the Carbon Disclosure Project (CDP), the Principles for Responsible Investment
(PRI), the Business Charter for Human Rights and Promotion of Decent Work (Ethos), the United Nations Environment Program (UNEP-FI), the
Global Compact, among others.
Consolidated Financial Statement of the Prudential Conglomerate
Financial Statements
|
Moreover, the Organization
has been a signatory of the Equator Principles since 2004, and among the requirements evaluated are as follows the working conditions,
impacts to the community and the environment, and recently the impacts of climate change of projects financed by the Organization, pursuant
to the Brazilian legislation and the standards and guidelines of the International Finance Corporation (IFC), besides the World Bank Group's
Health, Safety and Environment Guidelines. During the credit granting process, transactions under Equator Principles undergo a social
and environmental risk analysis.
In the year ended in December
31, 2020 and 2019, there was no hiring Advisory Service and Financing Project Finance and Corporate Loan to projects classified under
the criteria of the Equator Principles.
e)
Below is the statement of financial position by currency and maturity
I – The statement of financial position
by currency
|
R$ thousand
|
On December 31, 2020
|
On December 31, 2019
|
Balance
|
Local currency
|
Foreign currency (1) (2)
|
Foreign currency (1) (2)
|
Assets
|
|
|
|
-
|
Cash and due from banks
|
22,978,342
|
15,189,079
|
7,789,263
|
3,945,862
|
Financial instruments
|
1,182,097,164
|
1,091,960,705
|
90,136,459
|
80,444,627
|
- Interbank investments
|
190,604,202
|
188,605,973
|
1,998,229
|
2,758,183
|
- Compulsory deposits with the Brazilian Central Bank
|
83,757,533
|
83,695,875
|
61,658
|
46,662
|
- Securities
|
328,704,315
|
295,783,733
|
32,920,582
|
22,719,137
|
- Derivative financial instruments
|
23,905,679
|
23,205,061
|
700,618
|
594,548
|
- Loans
|
445,665,923
|
411,725,906
|
33,940,017
|
30,162,221
|
- Other financial instruments
|
109,459,512
|
88,944,157
|
20,515,355
|
24,163,876
|
Leases
|
2,646,438
|
2,646,438
|
-
|
-
|
Expected credit loss associated with credit risk
|
(45,199,423)
|
(42,425,982)
|
(2,773,441)
|
(1,505,929)
|
- Loans
|
(42,233,636)
|
(39,460,209)
|
(2,773,427)
|
(1,505,929)
|
- Leases
|
(70,468)
|
(70,468)
|
-
|
-
|
- Other receivables
|
(2,895,319)
|
(2,895,305)
|
(14)
|
-
|
Deferred tax assets
|
82,102,508
|
82,078,336
|
24,172
|
8,427
|
Investments in subsidiaries/affiliates and jointly controlled entities
|
54,216,070
|
53,755,034
|
461,036
|
339,926
|
Premises and equipment, net
|
11,297,277
|
11,121,875
|
175,402
|
110,521
|
Intangible assets
|
30,725,354
|
30,549,375
|
175,979
|
133,289
|
Depreciation and amortization
|
(27,189,565)
|
(26,899,750)
|
(289,815)
|
(195,511)
|
- Premises and equipment
|
(6,444,355)
|
(6,303,983)
|
(140,372)
|
(81,295)
|
- Intangible assets
|
(20,745,210)
|
(20,595,767)
|
(149,443)
|
(114,216)
|
Other assets
|
32,246,419
|
31,375,198
|
871,221
|
1,287,911
|
Accumulated Impairment of Assets
|
(3,385,680)
|
(3,380,239)
|
(5,441)
|
(6)
|
Total assets
|
1,342,534,904
|
1,245,970,069
|
96,564,835
|
84,569,117
|
|
|
|
|
|
Liabilities
|
|
|
|
-
|
Deposits and other financial liabilities
|
1,138,080,543
|
1,028,285,614
|
109,794,929
|
83,250,614
|
- Deposits from banks
|
297,754,653
|
267,610,528
|
30,144,125
|
37,430,978
|
- Deposits from customers
|
548,238,035
|
513,996,934
|
34,241,101
|
19,259,442
|
- Securities issued
|
153,764,739
|
142,532,226
|
11,232,513
|
3,390,047
|
- Subordinated debts
|
53,255,401
|
38,893,287
|
14,362,114
|
11,132,349
|
- Derivative financial instruments
|
17,816,827
|
13,260,433
|
4,556,394
|
1,457,142
|
- Other financial liabilities
|
67,250,888
|
51,992,206
|
15,258,682
|
10,580,656
|
Provisions
|
30,265,510
|
30,131,197
|
134,313
|
88,174
|
- Other reserves
|
30,265,510
|
30,131,197
|
134,313
|
88,174
|
Deferred income tax assets
|
4,144,164
|
3,822,971
|
321,193
|
157,751
|
Consolidated Financial Statement of the Prudential Conglomerate
Financial Statements
|
Other liabilities
|
26,337,090
|
25,356,247
|
980,843
|
383,984
|
Total liabilities
|
1,198,827,307
|
1,087,596,029
|
111,231,278
|
83,880,523
|
Shareholders’ equity
|
|
|
|
|
Equity attributable to shareholders of the parent
|
143,702,640
|
143,702,640
|
-
|
-
|
Non-controlling interest
|
4,957
|
4,957
|
-
|
-
|
Total Shareholders’ equity
|
143,707,597
|
143,707,597
|
-
|
-
|
Total Liability and Shareholders’ equity
|
1,342,534,904
|
1,231,303,626
|
111,231,278
|
83,880,523
|
Net position of assets and liabilities
|
|
|
(14,666,443)
|
688,594
|
Net position of derivatives (2)
|
|
|
(4,216,783)
|
(65,993,860)
|
Other net off-balance-sheet accounts (3)
|
|
|
3,144,242
|
(4,208)
|
Net foreign exchange position (passive) (4)
|
|
|
(15,738,984)
|
(65,309,474)
|
(1) Amounts originally recognized and/or indexed mainly in USD;
(2) Excluding operations maturing in D+1, to be settled at the rate on the last day of the month;
(3) Other commitments recognized in off-balance-sheet accounts; and
(4) Assets, liabilities and results of foreign investments and
dependencies are translated into Brazilian reais at the local currency exchange rates, and the effects resulting from the conversion process
totaled in the year ended in December 31, 2020 R$22,394,431 thousand (R$2.375.463 thousand in 2019) were recorded in the result. These
effects were neutralized by the results obtained by the financial instruments used to hedge the effects of the exchange variation produced
by our investments abroad. For investments abroad that have a functional currency different from the real, the effects of the conversion
are recorded in Shareholders' Equity in the Balance for Valuation Adjustments.
Consolidated Financial Statement of the Prudential Conglomerate
Financial Statements
|
II - The statement of financial
position by maturity
|
R$ thousand
|
1 to 30 days
|
31 to 180 days
|
181 to 360 days
|
More than 360 days
|
No stated maturity
|
Total
|
Assets
|
|
|
|
|
|
|
Cash and due from banks
|
22,978,342
|
-
|
-
|
-
|
-
|
22,978,342
|
Financial instruments
|
536,821,053
|
161,493,250
|
85,787,261
|
397,995,600
|
-
|
1,182,097,164
|
- Interbank investments
|
168,207,318
|
14,027,885
|
2,915,463
|
5,453,536
|
-
|
190,604,202
|
- Compulsory deposits with the Brazilian Central Bank
|
83,695,875
|
61,658
|
-
|
-
|
-
|
83,757,533
|
- Securities
|
185,693,245
|
27,753,664
|
12,002,817
|
103,254,589
|
-
|
328,704,315
|
- Derivative financial instruments
|
3,714,657
|
3,615,432
|
966,893
|
15,608,697
|
-
|
23,905,679
|
- Loans
|
29,318,649
|
90,369,025
|
65,326,318
|
260,651,931
|
-
|
445,665,923
|
- Other financial instruments
|
66,191,309
|
25,665,586
|
4,575,770
|
13,026,847
|
-
|
109,459,512
|
Leases
|
2,644,489
|
1,477
|
357
|
115
|
-
|
2,646,438
|
Expected credit loss associated with credit risk
|
(9,463,586)
|
(7,526,990)
|
(6,022,590)
|
(22,186,257)
|
-
|
(45,199,423)
|
- Loans
|
(8,221,085)
|
(6,311,620)
|
(5,762,962)
|
(21,937,969)
|
-
|
(42,233,636)
|
- Leases
|
(5,162)
|
(9,380)
|
(11,173)
|
(44,753)
|
-
|
(70,468)
|
- Other receivables
|
(1,237,339)
|
(1,205,990)
|
(248,455)
|
(203,535)
|
-
|
(2,895,319)
|
Deferred tax assets
|
38,814
|
8,248,524
|
7,432,945
|
66,382,225
|
-
|
82,102,508
|
Investments in associates and jointly controlled entities
|
-
|
-
|
-
|
-
|
54,216,070
|
54,216,070
|
Premises and equipment, net
|
140,727
|
703,640
|
844,368
|
3,109,457
|
54,730
|
4,852,922
|
Intangible assets
|
446,340
|
2,239,565
|
2,688,061
|
4,412,070
|
194,107
|
9,980,144
|
Other assets
|
17,773,571
|
2,613,954
|
2,739,461
|
9,119,433
|
-
|
32,246,419
|
Accumulated Impairment of Assets
|
(3,385,509)
|
-
|
(171)
|
-
|
-
|
(3,385,680)
|
Total in December 31, 2020
|
567,994,241
|
167,773,420
|
93,469,692
|
458,832,643
|
54,464,907
|
1,342,534,904
|
Total in December 31, 2019
|
503,184,631
|
129,199,543
|
97,781,716
|
337,872,714
|
62,026,293
|
1,130,064,897
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
Deposits and other financial liabilities
|
517,159,667
|
117,347,220
|
103,435,388
|
390,748,626
|
9,389,642
|
1,138,080,543
|
- Deposits from banks
|
251,942,233
|
18,319,819
|
9,944,641
|
17,547,960
|
-
|
297,754,653
|
- Deposits from customers
|
204,044,551
|
50,745,362
|
55,180,239
|
238,267,883
|
-
|
548,238,035
|
- Securities issued
|
2,461,437
|
33,338,439
|
34,365,862
|
83,599,001
|
-
|
153,764,739
|
- Subordinated debts
|
8,317,052
|
22,838
|
383,673
|
35,142,196
|
9,389,642
|
53,255,401
|
- Derivative financial instruments
|
4,581,521
|
1,063,954
|
937,849
|
11,233,503
|
-
|
17,816,827
|
- Other financial liabilities
|
45,812,873
|
13,856,808
|
2,623,124
|
4,958,083
|
-
|
67,250,888
|
Provisions
|
7,926,328
|
1,145,559
|
1,451,646
|
19,741,977
|
-
|
30,265,510
|
- Other reserves
|
7,926,328
|
1,145,559
|
1,451,646
|
19,741,977
|
-
|
30,265,510
|
Deferred income tax assets
|
24,732
|
11,707
|
13,482
|
4,094,243
|
-
|
4,144,164
|
Other liabilities
|
23,183,892
|
934,752
|
171,026
|
2,047,420
|
-
|
26,337,090
|
Consolidated Financial Statement of the Prudential Conglomerate
Financial Statements
|
|
|
|
|
|
|
|
Shareholders’ equity
|
|
|
|
|
|
|
Equity attributable to shareholders of the parent
|
-
|
-
|
-
|
-
|
143,702,640
|
143,702,640
|
Non-controlling interest
|
-
|
-
|
-
|
-
|
4,957
|
4,957
|
Total Shareholders’ equity
|
-
|
-
|
-
|
-
|
143,707,597
|
143,707,597
|
Total in December 31, 2020
|
548,294,619
|
119,439,238
|
105,071,542
|
416,632,266
|
153,097,239
|
1,342,534,904
|
Total in December 31, 2019
|
462,267,610
|
84,095,716
|
99,013,511
|
341,342,405
|
143,345,655
|
1,130,064,897
|
|
|
|
|
|
|
|
Net assets accumulated on December 31, 2020
|
19,699,622
|
68,033,805
|
56,431,955
|
98,632,332
|
|
|
Net assets accumulated on December 31, 2019
|
40,917,021
|
86,020,848
|
84,789,053
|
81,319,362
|
|
|
(1) Repurchase agreements are classified according to the maturity
of the transactions;
(2) Investments in investment funds are classified as 1 to 30 days; and
(3) Demand and savings deposits are classified as 1 to 30 days, without considering average historical turnover.
Consolidated Financial Statement of the Prudential Conglomerate
Financial Statements
|
Bradesco and its subsidiaries
sponsor a private defined contribution pension for employees and directors, that allows financial resources to be accumulated by participants
throughout their careers by means of employee and employer contributions and invested in an Exclusive Investment Fund (FIE). The plan
is managed by Bradesco Vida e Previdência S.A. and BRAM – Bradesco Asset Management S.A. DTVM is responsible for the financial
management of the FIEs funds.
The supplementary pension plan
counts on contributions from employees and administrators of Bradesco and its subsidiaries equivalent to at least 4% of the salary by
employees and, 5% of the salary, plus the percentage allocated to covers of risk benefits (invalidity and death) by the company. Actuarial
obligations of the defined contribution plan are fully covered by the plan assets of the corresponding FIE. In addition to the plan, in
2001, participants who chose to migrate from the defined benefit plan are guaranteed a proportional deferred benefit, corresponding to
their accumulated rights in that plan. For the active participants, retirees and pensioners of the defined benefit plan, now closed to
new members, 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 Lloyds employees.
In accordance with CPC 33 (R1)
- Employee Benefits, approved by CMN Resolution No. 4,424/15, Bradesco and its subsidiaries, as sponsors of these plans, considering the
economic and actuarial study, have calculated their actuarial commitments using real interest rates and recognize the obligation due in
these consolidated financial statements. The assets of the pension plans are invested in accordance with the relevant legislation (public
and private securities, shares of listed companies and properties). Below are the main assumptions used by the independent actuary in
the actuarial assessment of our plans, based on CPC 33 (R1):
Consolidated Financial Statement of the Prudential Conglomerate
Financial Statements
|
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
|
Considering the above assumptions,
in accordance with CPC 33 (R1), the present value of the actuarial obligations of the benefit plans and the fair value of its assets to
cover these obligations, is represented below:
|
R$ thousand
|
Retirement Benefits
|
Other post-employment benefits
|
Accrued on December 31
|
Accrued on December 31
|
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
|
-
|
-
|
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 the 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
|
The net cost/(benefit) of the
pension plans, recognized in the income statement, include the following components:
Consolidated Financial Statement of the Prudential Conglomerate
Financial Statements
|
|
R$ thousand
|
Accrued on December 31
|
2020
|
2019
|
Projected benefit obligations:
|
|
|
Cost of service
|
546
|
(2,689)
|
Cost of interest on actuarial obligations
|
278,805
|
282,997
|
Expected earnings from the assets of the plan
|
(187,531)
|
(208,122)
|
Interest on irrecoverable surplus
|
2,736
|
4,981
|
Net cost/(benefit) of the pension plans
|
94,556
|
77,167
|
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
|
Contributions to defined-benefit
plans are expected to total R$24,820 thousand in 2021.
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,
a significant portion of the investments portfolio of our subsidiaries, the return on which is higher than inflation plus interest, with
short to long-term maturities.
The assets guaranteeing the
pension plans are invested in accordance with the relevant legislation (public and private securities, shares of listed companies and
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%
|
The sensitivity analysis of
the benefit plan obligations in the table below, shows the impact on actuarial exposure (8.5% - 10.0% p.a.) by means of the amendment
in the premise regarding 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)
|
Consolidated Financial Statement of the Prudential Conglomerate
Financial Statements
|
Bradesco, in its offices abroad,
provides pension plans for its employees and administrators, in accordance with the standards established by the local authorities, which
allows the accrual of financial resources during the professional career of the participant.
Total expenses with contributions
made in the second half of 2020 were R$406,175 thousand (R$447,113 thousand in 2019) and in the year ended in December 31, 2020, were
R$825,362 thousand (R$877,308 thousand in 2019).
In addition to this benefit,
Bradesco and its subsidiaries offer their employees and administrators other benefits, including: health insurance, dental assistance,
life and personal accident insurance and professional training, the amount of which, including the aforementioned contributions, totaled,
in the second half of 2020, the amount of R$2,087,512 thousand (R$3,466,343 thousand in 2019) and in the year ended in December 31, 2020,
the amount of R$4,257,412 thousand (R$5,663,320 thousand in 2019).
|
35)
|
INCOME TAX AND SOCIAL CONTRIBUTION
|
|
a)
|
Calculation of income tax and social contribution charges
|
|
R$ thousand
|
2nd semester
|
Accrued on December 31
|
2020
|
2020
|
2019
|
Income before income tax and social contribution
|
12,867,228
|
1,370,723
|
11,259,119
|
Total burden of income tax and social contribution at the current rates
|
(5,790,253)
|
(616,825)
|
(4,503,648)
|
Effect on the tax calculation:
|
|
|
|
Earnings of Associates and Subsidiaries
|
767,716
|
12,749,106
|
4,422,520
|
Net non-deductible expenses of non-taxable income
|
43,059
|
39,049
|
683,653
|
Interest on shareholders’ equity (paid and payable)
|
1,457,287
|
2,496,586
|
2,949,143
|
Other amounts (1)
|
323,158
|
525,306
|
7,787,366
|
Income tax and social contribution for the period
|
(3,199,033)
|
15,193,222
|
11,339,034
|
(1) Primarily, includes: (i) the exchange rate variation of assets
and liabilities, derived from investments abroad; (ii) the equalization of the effective rate of non-bank financial companies and insurance
companies, starting in 2020, and of non-financial companies, in relation to that shown; and (iii) incentive deductions.
|
b)
|
Breakdown of income tax and social contribution in the statement of income
|
|
R$ thousand
|
2nd semester
|
Accrued on December 31
|
2020
|
2020
|
2019
|
Current taxes:
|
|
|
|
Income tax and social contribution payable
|
(227,633)
|
(1,407,164)
|
(2,077,871)
|
Deferred taxes:
|
|
|
|
Constitution/realization in the period on temporary additions and exclusions
|
2,447,966
|
5,920,830
|
12,237,189
|
Use of opening balances of:
|
|
|
|
Social contribution loss
|
(38,467)
|
(63,048)
|
(107,068)
|
Income tax loss
|
(48,192)
|
(79,556)
|
(184,233)
|
Constitution in the period on:
|
|
|
|
Social contribution loss
|
(2,378,001)
|
4,800,399
|
1,167,978
|
Income tax loss
|
(2,954,706)
|
6,021,761
|
303,039
|
Total deferred tax expense
|
(2,971,400)
|
16,600,386
|
13,416,905
|
Income tax and social contribution for the period
|
(3,199,033)
|
15,193,222
|
11,339,034
|
Consolidated Financial Statement of the Prudential Conglomerate
Financial Statements
|
|
c)
|
Deferred income tax and social contribution
|
|
R$ thousand
|
|
Balance on December 31, 2019
|
Amount recorded
|
Realized / Decrease
|
Balance on December 31, 2020
|
|
|
Allowance for loan losses expense
|
37,994,398
|
11,350,094
|
(5,276,188)
|
44,068,304
|
|
Civil provisions
|
3,321,217
|
665,590
|
(578,810)
|
3,407,997
|
|
Tax provisions
|
2,932,775
|
79,138
|
(22,353)
|
2,989,560
|
|
Labor provisions
|
3,061,381
|
827,537
|
(977,751)
|
2,911,167
|
|
Provision for devaluation of securities and investments
|
2,743,561
|
1,429,215
|
(893,774)
|
3,279,002
|
|
Provision for devaluation of foreclosed assets
|
831,686
|
224,544
|
(205,747)
|
850,483
|
|
Adjustment to fair value of trading securities
|
1,339,411
|
625,562
|
(989,410)
|
975,563
|
|
Amortization of goodwill
|
378,400
|
27,449
|
(92,865)
|
312,984
|
|
Other
|
4,707,708
|
2,957,574
|
(2,818,742)
|
4,846,540
|
|
Total deductible taxes on temporary differences
|
57,310,537
|
18,186,703
|
(11,855,640)
|
63,641,600
|
|
Income tax and social contribution losses in Brazil and overseas
|
7,742,774
|
10,822,160
|
(142,604)
|
18,422,330
|
|
Subtotal
|
65,053,311
|
29,008,863
|
(11,998,244)
|
82,063,930
|
|
Adjustment to fair value of available-for-sale securities
|
9,993
|
28,590
|
(5)
|
38,578
|
|
Total deferred tax assets (Note 3h)
|
65,063,304
|
29,037,453
|
(11,998,249)
|
82,102,508
|
|
Deferred tax liabilities (Note 35e)
|
4,618,629
|
1,029,843
|
(1,504,308)
|
4,144,164
|
|
Deferred tax assets, net of deferred tax liabilities
|
60,444,675
|
28,007,610
|
(10,493,941)
|
77,958,344
|
|
The accounting record of the
deferred tax assets was made using the rates applicable to the period projected for its realization and is based on the projection of
future results and on a technical analysis. On December 31, 2020, no deferred tax assets were constituted, substantially, on temporary
differences, in the amount of R$10,613 thousand (R$10,567 thousand in December 2019), which will be recorded upon the effective perspectives
of realization, according to the technical study and analyses made by the Board and by the Standards of Bacen.
|
d)
|
Expected realization of deferred tax assets on
temporary differences, tax loss and negative basis of social contribution
|
|
R$ thousand
|
Temporary differences
|
Carry-forward tax losses
|
Total
|
Income tax
|
Social contribution
|
Income tax
|
Social contribution
|
2021
|
8,449,399
|
6,712,794
|
206,121
|
167,001
|
15,535,315
|
2022
|
8,248,414
|
6,575,171
|
173,961
|
143,026
|
15,140,572
|
2023
|
7,952,241
|
6,314,668
|
236,381
|
198,044
|
14,701,334
|
2024
|
7,190,551
|
5,730,691
|
189,591
|
178,551
|
13,289,384
|
2025
|
2,659,880
|
2,104,102
|
1,546,083
|
1,271,817
|
7,581,882
|
2026
|
807,721
|
641,291
|
2,045,261
|
1,710,568
|
5,204,841
|
2027
|
136,553
|
107,875
|
2,271,131
|
1,890,789
|
4,406,348
|
2028
|
5,694
|
4,555
|
2,207,132
|
1,825,430
|
4,042,811
|
2029
|
-
|
-
|
836,632
|
1,324,811
|
2,161,443
|
Total
|
35,450,453
|
28,191,147
|
9,712,293
|
8,710,037
|
82,063,930
|
The projected realization of
deferred tax assets is an estimate and it is not directly related to the expected accounting income.
On December 31, 2020, the present
value of deferred tax assets, calculated based on the average funding interest rate, net of tax effects, amounts to R$77,862,336 thousand
(R$62,299,843 thousand in December 2019), of which: R$61,355,105 thousand (R$55,166,007 thousand in December 2019) relates to temporary
differences and R$16,507,231 thousand (R$7,133,836 thousand in December 2019) to tax losses and negative basis of social contribution.
Consolidated Financial Statement of the Prudential Conglomerate
Financial Statements
|
|
e)
|
Deferred tax liabilities
|
|
R$ thousand
|
Balance on December 31, 2019
|
Amount recorded
|
Realized/Decrease
|
Balance on December 31, 2020
|
Fair value adjustment to securities and derivative financial instruments
|
3,363
|
687,135
|
(3,363)
|
687,135
|
Difference in depreciation
|
237,400
|
15,081
|
(19,632)
|
232,849
|
Judicial deposit
|
1,942,762
|
86,942
|
(26,515)
|
2,003,189
|
Other
|
806,362
|
49,165
|
(87,686)
|
767,841
|
Total deferred liabilities on temporary exclusions
|
2,989,887
|
838,323
|
(137,196)
|
3,691,014
|
Adjustment to fair value of available-for-sale securities
|
1,628,742
|
191,520
|
(1,367,112)
|
453,150
|
Total deferred tax expense (Note 35c)
|
4,618,629
|
1,029,843
|
(1,504,308)
|
4,144,164
|
a) Fair
value of financial assets and liabilities
The carrying amounts and the
fair values of the financial assets and liabilities are:
|
R$ thousand
|
|
On December 31, 2020
|
On December 31, 2019
|
|
|
Book value
|
Fair Value
|
Book value
|
Fair Value
|
|
Assets
|
|
|
|
|
|
Interbank investments
|
190,604,202
|
190,653,041
|
58,230,763
|
58,238,223
|
|
Compulsory deposits with the Brazilian Central Bank
|
83,757,533
|
83,757,533
|
90,622,338
|
90,622,338
|
|
Securities:
|
|
|
|
|
|
- Trading securities
|
54,486,599
|
54,486,599
|
10,121,313
|
10,121,313
|
|
- Available-for-sale securities
|
208,948,127
|
208,948,127
|
211,309,387
|
211,309,387
|
|
- Held-to-maturity securities
|
65,269,589
|
67,184,763
|
67,096,679
|
69,560,716
|
|
Derivative financial instruments
|
23,905,679
|
23,905,679
|
14,340,061
|
14,340,061
|
|
Loans (1)
|
509,329,055
|
513,941,797
|
453,386,192
|
458,504,728
|
|
Other financial instruments
|
57,540,757
|
57,450,757
|
61,043,232
|
61,043,232
|
|
Liabilities
|
|
|
|
|
|
Deposits from banks
|
297,754,653
|
297,715,281
|
256,655,914
|
256,716,401
|
|
Deposits from customers
|
548,238,035
|
548,286,913
|
369,758,747
|
369,554,279
|
|
Securities issued
|
153,764,739
|
152,849,637
|
186,297,851
|
185,058,417
|
|
Subordinated debt
|
53,255,401
|
54,201,259
|
49,318,062
|
50,112,574
|
|
Derivative financial instruments
|
17,816,827
|
17,816,827
|
14,104,410
|
14,104,410
|
|
Other financial liabilities
|
67,250,888
|
69,770,927
|
61,708,610
|
61,708,610
|
|
For financial instruments that
are measured at fair value, the disclosure of the measurements is required according to the following hierarchical levels of fair value:
·
Level 1
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.
·
Level 2
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.
Consolidated Financial Statement of the Prudential Conglomerate
Financial Statements
|
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.
·
Level 3
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 unobservable inputs
used in the determination of the fair value are the credit spreads that vary between 2% and 9%.
To fair value securities which
have no consistent, regularly updated, public price source, Bradesco uses models defined by the Fair Value Commission and documented in
the fair value 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 assets at fair value, 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.
The table below presents the
composition of the securities and derivative financial instruments measured at fair value, classified using the hierarchical levels:
|
R$ thousand
|
On December 31, 2020
|
On December 31, 2019
|
Level 1
|
Level 2
|
Level 3
|
Fair Value
|
Level 1
|
Level 2
|
Level 3
|
Fair Value
|
Trading securities
|
47,058,649
|
7,108,516
|
319,434
|
54,486,599
|
33,090,866
|
5,979,642
|
707,395
|
39,777,903
|
Financial treasury bills
|
14,038,511
|
-
|
-
|
14,038,511
|
16,943,056
|
-
|
-
|
16,943,056
|
National treasury notes
|
16,472,705
|
6,345,101
|
-
|
22,817,806
|
2,704,122
|
4,848,858
|
-
|
7,552,980
|
Financial bills
|
-
|
242,524
|
-
|
242,524
|
-
|
499,332
|
-
|
499,332
|
National treasury bills
|
9,182,993
|
-
|
-
|
9,182,993
|
7,992,245
|
-
|
-
|
7,992,245
|
Debentures
|
180,311
|
479,006
|
174,753
|
834,070
|
378,019
|
133,014
|
287,713
|
798,746
|
Brazilian foreign debt securities
|
725,515
|
-
|
-
|
725,515
|
47,308
|
-
|
-
|
47,308
|
Other
|
6,458,614
|
41,885
|
144,681
|
6,645,180
|
5,026,116
|
498,438
|
419,682
|
5,944,236
|
Derivatives
|
58,389
|
6,257,640
|
(227,177)
|
6,088,852
|
21,240
|
394,958
|
(180,547)
|
235,651
|
Derivative financial instruments (assets)
|
98,393
|
23,787,991
|
19,295
|
23,905,679
|
86,716
|
14,241,866
|
11,479
|
14,340,061
|
Derivative financial instruments (liabilities)
|
(40,004)
|
(17,530,351)
|
(246,472)
|
(17,816,827)
|
(65,476)
|
(13,846,908)
|
(192,026)
|
(14,104,410)
|
Available-for-sale securities
|
130,216,973
|
68,185,691
|
10,545,463
|
208,948,127
|
138,140,329
|
60,772,047
|
12,397,011
|
211,309,387
|
National treasury notes
|
28,820,737
|
-
|
-
|
28,820,737
|
35,425,784
|
-
|
-
|
35,425,784
|
Debentures
|
6,302,933
|
48,378,732
|
9,577,824
|
64,259,489
|
2,461,345
|
44,923,130
|
10,636,268
|
58,020,743
|
National treasury bills
|
65,371,659
|
-
|
-
|
65,371,659
|
79,985,441
|
-
|
-
|
79,985,441
|
Shares
|
2,296,700
|
1,104,155
|
1,362
|
3,402,217
|
926,802
|
2,638,655
|
1,362
|
3,566,819
|
Foreign government bonds
|
6,508,218
|
-
|
-
|
6,508,218
|
6,454,894
|
-
|
-
|
6,454,894
|
Foreign corporate securities
|
6,653,994
|
-
|
-
|
6,653,994
|
7,442,003
|
-
|
-
|
7,442,003
|
Promissory Notes
|
-
|
7,167,074
|
-
|
7,167,074
|
-
|
2,368,766
|
501,512
|
2,870,278
|
Certificates of real estate receivables
|
-
|
1,567,572
|
119,124
|
1,686,696
|
-
|
1,468,891
|
382,581
|
1,851,472
|
Other
|
14,262,732
|
9,968,158
|
847,153
|
25,078,043
|
5,444,060
|
9,372,605
|
875,288
|
15,691,953
|
Total
|
177,334,011
|
81,551,847
|
10,637,720
|
269,523,578
|
171,252,435
|
67,146,647
|
12,923,859
|
251,322,941
|
Public
|
153,108,209
|
6,345,101
|
30,466
|
159,483,776
|
153,185,653
|
4,848,858
|
35,135
|
158,069,646
|
Private
|
24,225,802
|
75,206,746
|
10,607,254
|
110,039,802
|
18,066,785
|
62,297,787
|
12,888,723
|
93,253,295
|
Consolidated Financial Statement of the Prudential Conglomerate
Financial Statements
|
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 indexes
to generate continuous yield or pricing curves and volatility factors. The majority of market inputs are observable and can be obtained
mainly from B3 and the secondary market. Exchange traded derivatives valued using quoted prices are classified within Level 1 of the valuation
hierarchy. However, few classes of derivative contracts are listed on an exchange; all others 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 market 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 are valued
based using significant unobservable market parameters and that are not actively traded are classified within Level 3 of the valuation
hierarchy.
The table below presents a reconciliation
of all securities and derivative financial instruments measured at fair value on a recurring basis using significant unobservable inputs
(Level 3):
|
R$ thousand
|
Trading securities
|
Assets Derivative
|
Liabilities Derivatives
|
Available-for-sale securities
|
Total
|
Balance on December 31, 2019
|
707,395
|
11,479
|
(39,126)
|
12,396,971
|
13,076,719
|
Recognized in income
|
10,571
|
-
|
-
|
(145,613)
|
(135,042)
|
Recognized in other comprehensive income
|
-
|
-
|
-
|
(2,493,228)
|
(2,493,228)
|
Acquisitions
|
54,015
|
7,816
|
(207,346)
|
5,379,568
|
5,234,053
|
Disposals
|
(106,643)
|
-
|
-
|
(3,227,136)
|
(3,333,779)
|
Maturities
|
(8,902)
|
-
|
-
|
(565,198)
|
(574,100)
|
Transfer to other levels (1)
|
(309,850)
|
-
|
-
|
(827,053)
|
(1,136,903)
|
Transfer between categories
|
(27,152)
|
-
|
-
|
27,152
|
-
|
Balance on December 31, 2020
|
319,434
|
19,295
|
(246,472)
|
10,545,463
|
10,637,720
|
Consolidated Financial Statement of the Prudential Conglomerate
Financial Statements
|
Sensitivity analysis for financial assets
classified as Level 3 (unobservable inputs):
|
Scenarios
|
R$ thousand
|
On December 31, 2020
|
On December 31, 2019
|
Impact on income
|
Impact on shareholders’ equity
|
Impact on income
|
Impact on shareholders’ equity
|
Interest rate in Reais
|
1
|
(25)
|
(177)
|
(16)
|
(282)
|
2
|
(3,672)
|
(29,423)
|
(2,263)
|
(45,522)
|
3
|
(6,971)
|
(59,072)
|
(4,407)
|
(82,962)
|
Price indexes
|
1
|
(4)
|
-
|
(10)
|
-
|
2
|
(83)
|
-
|
(383)
|
-
|
3
|
(165)
|
-
|
(761)
|
-
|
Exchange coupon
|
1
|
-
|
-
|
-
|
(6)
|
2
|
-
|
(8)
|
-
|
(354)
|
3
|
-
|
(17)
|
-
|
(701)
|
Foreign currency
|
1
|
-
|
(22)
|
-
|
(523)
|
2
|
-
|
(608)
|
-
|
(13,069)
|
3
|
-
|
(1,216)
|
-
|
(26,138)
|
Equities
|
1
|
(671)
|
(7)
|
(1,836)
|
(8)
|
2
|
(15,373)
|
(187)
|
(45,889)
|
(204)
|
3
|
(33,542)
|
(375)
|
(91,778)
|
(409)
|
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 applied, 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 applied,
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% 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$7.77 was applied, while
for a 1-year fixed interest rate of 2.86%, a 4.29% scenario was applied. The scenarios for other risk factors also accounted for 50% stresses
in the respective curves or prices.
Consolidated Financial Statement of the Prudential Conglomerate
Financial Statements
|
Financial instruments
not measured at fair value
The table below summarizes the
carrying amounts and the fair values of the financial assets and liabilities that were not measured at fair value in the statement of
financial position, classified using the hierarchical levels:
|
R$ thousand
|
On December 31, 2020
|
On December 31, 2019
|
Level 1
|
Level 2
|
Level 3
|
Fair Value
|
Book value
|
Level 1
|
Level 2
|
Level 3
|
Fair Value
|
Book value
|
Assets
|
|
|
|
|
|
|
|
|
|
|
Interbank investments
|
-
|
190,653,041
|
-
|
190,653,041
|
190,604,202
|
-
|
58,238,223
|
-
|
58,238,223
|
58,230,763
|
Securities held to maturity
|
60,391,701
|
6,557,341
|
235,721
|
67,184,763
|
65,269,589
|
60,193,737
|
8,218,245
|
1,148,734
|
69,560,716
|
67,096,679
|
Loans
|
-
|
-
|
513,941,797
|
513,941,797
|
509,329,055
|
-
|
-
|
458,504,728
|
458,504,728
|
453,386,192
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
Deposits from banks
|
-
|
-
|
297,715,281
|
297,715,281
|
297,754,653
|
-
|
-
|
256,716,401
|
256,716,401
|
256,655,914
|
Deposits from customers
|
-
|
-
|
548,286,913
|
548,286,913
|
548,238,035
|
-
|
-
|
369,554,279
|
369,554,279
|
369,758,747
|
Securities issued
|
-
|
-
|
152,849,637
|
152,849,637
|
153,764,739
|
-
|
-
|
185,058,417
|
185,058,417
|
186,297,851
|
Subordinated debt
|
-
|
-
|
54,201,259
|
54,201,259
|
53,255,401
|
-
|
-
|
50,112,574
|
50,112,574
|
49,318,062
|
Below we list the methodologies
used to determine the fair values presented above:
Interbank investments:
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.
Held-to-maturity securities:
Financial assets are carried at amortized cost. Fair values are estimated according to the assumptions described in Note 3(d). See Note
8(bIII) for further details regarding held-to-maturity securities.
Loan: 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 type of loan at each reporting date. The fair values
for non-performing loans are based on discounting cash flows or the value of underlying collateral.
Consolidated Financial Statement of the Prudential Conglomerate
Financial Statements
|
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.
Deposits from banks and clients:
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.
b)
Recurring and non-recurring net income
According to BCB Resolution
no. 2/2020 (Article 34) and Bradesco Organization's policy for evaluating and measuring non-recurring events, we present below the recurring
and non-recurring net income for the periods:
Our consolidated net income
in 2020 was R$16,546 million, the recurring net income was R$19,458 million and the non-recurring net income was R$(2,912) million, which
is not expected to occur in future years, below we detail:
Non-recurring events 2020:
i. Provision for Restructuring R$(540) million: Process of restructuring part of the businesses (resizing in the branch network and departments)
of Bradesco Organization; ii. Impairment of Non-Financial Assets - R$(574) million: payroll, goodwill, systems and hardware; iii. Contingent
Liabilities - R$(353) million: civil lawsuits with relevant and atypical individual values that we do not expect to happen
in the next two years; and iv. Amortization of Goodwill - R$(1,446) million: Amortization of goodwill due to expected future profitability,
related to the atypical acquisition for the Organization's businesses considering the history of other acquisitions of the Organization,
where we do not expect to have these effects beyond the next two years.
Our net income in 2019
was R$22,582 million, the recurring net income was R$25,887 million and the non-recurring net income was R$(3,305) million, net of taxes.
The non-recurring net income for 2019 was determined according to the criteria established by Management in its process of preparing the
Economic and Financial Analysis Report and is not expected to occur in future years, which we list below:
Non-recurring events
2019: i. Voluntary Severance Program 2019 – (“PDV”) - R$(1,091) million: Adjustment of the structure of branches and
departments; ii. Impairment of Non-Financial Assets - R$(1,080) million: Payroll, goodwill, systems and hardware; iii. Tax Credit - R$6,403
million: Increase in the CSLL rate of banks from 15% to 20% on temporary differences and negative basis, established in Constitutional
Amendment No. 103/19; iv. Contingent Liabilities - R$(3,524) million: atypical constitution of civil, labor provisions, for FCVS and for
pension funds; v. Provision for guarantees and other provisions - R$(2,468) million: provision for guarantees - sureties and guarantees
and other atypical provisions; saw. Amortization of Goodwill - R$(1,545) million: Amortization of goodwill for expected future profitability,
related to the atypical acquisition considering the history of other acquisitions of the Organization.
Consolidated Financial Statement of the Prudential Conglomerate
Financial Statements
|
c)
Investment funds and portfolios
The Organization manages investment
funds and portfolios with net assets which, on December 31, 2020, amounted to R$1.023.287.047 thousand (R$1,000,818,236 thousand in December
2019).
d)
Private Social Investment
During the year of 2020, the
Private Social Investments made by Bradesco and other companies in the Prudential Conglomerate amounted to R$231,117 thousand (R$160,464
thousand in 2019).
e)
Consortium funds
|
R$ thousand
|
On December 31, 2020
|
On December 31, 2019
|
Monthly estimate of funds receivable from consortium members
|
639,242
|
670,865
|
Contributions payable by the group
|
35,489,135
|
35,317,947
|
Consortium members - assets to be included
|
31,182,122
|
31,268,865
|
Credits available to consortium members
|
7,069,000
|
6,251,300
|
|
In units
|
On December 31, 2020
|
On December 31, 2019
|
Number of groups managed
|
3,436
|
3,537
|
Quantity of assets pending delivery
|
144,368
|
119,223
|
Quantity of total delivered assets
|
2,211,946
|
1,937,381
|
Quantity of total active consortium members
|
1,529,142
|
1,616,675
|
Quantity of total dropouts and cancellations
|
1,457,884
|
1,347,640
|
Default rate
|
3.38%
|
3.79%
|
|
In units
|
2nd semester
|
Accrued on December 31
|
2020
|
2020
|
2019
|
Quantity of assets delivered in the semester
|
107,627
|
199,544
|
230,237
|
Quantity of active consortium members in the semester
|
149,496
|
217,741
|
189,539
|
Quantity of dropouts and cancellations in the semester
|
143,989
|
208,867
|
204,443
|
Consolidated Financial Statement of the Prudential Conglomerate
Financial Statements
|
f)
In 2020, there were changes in the rules of compulsory
collection as follows:
Description
|
Previous Rule
|
Current Rule
|
Resources from Savings Deposits
|
Circular No. 3,975 of January 8, 2020
Regarding compulsory deposits required:
- Rate of 20% on the basis of calculation
determined;
- Period of Transactions: Beginning on
Monday of the second week following the period of calculation and ending on Friday of the same week.
|
Circular No. 4,033 of June 24, 2020
It amends Circular No. 3,975 to establish
deduction on the chargeability of the compulsory collection from the operations below:
- Balance of loan operations for financing
of the working capital;
- Balance of investments in Term Deposits
with Special Guarantee (DPGE);
- Period: Operations contracted and the
investments made from June 22, 2020 to December 31, 2020; and
- Limited to 30% of the chargeability of
the compulsory collections.
|
Circular No. 3,975 of January 8, 2020
Art. 5 A - Deductions will apply to required
payments related to loan operations for financing working capital for companies whose annual revenues are up to R$50 million, and the
balances of investments in DPGE (Term Deposits with Special Guarantee) from institutions that do not pertain to the conglomerate itself.
|
Circular No. 4,035 of July 1, 2020
It amended Circular No. 3,975, including
deductions on the collectability of the balance of interbank transfers made by cooperative banks to individual cooperatives that belong
to this loan cooperative system in order to grant loan operations for financing working capital for companies with annual sales of up
to R$50 million, excluding refinancing.
|
Time Deposits
|
Circular No. 3,916 of November 22, 2018
Regarding compulsory deposits required:
- Rate of 17% on the basis of calculation
determined;
- Rate of 25% on the basis of calculation
determined from the calculation period beginning on November 30, 2020 until December 4, 2020;
- Period of Transactions: Beginning on
Monday of the second week following the period of calculation and ending on Friday of the same week.
|
Circular No. 3,997 of April 6, 2020
It amends Circular No. 3,916 and establishes
deductions on the chargeability of the compulsory collection from the operations below:
- 15% of the debit balance of funding granted
by the Emergency Employment Support Program, MP No. 944 of April 3, 2020;
Circular No. 4,001 of April 13, 2020
It amends Circular No. 3,916 and establishes
deductions on the chargeability of the compulsory collection from the operations below:
- Balance of Financial Bills of own issue
repurchased by the issuing financial institution;
- Limited to 15% of the chargeability of
the compulsory collection.
|
Circular No. 3,993, of March 23, 2020 (Revoked)
It amends Circular No. 3,916 Art. 4 - The
chargeability of the compulsory collection is established by applying the following rates on the basis of calculation provisioned in Art.
3:
I - 17% until the period of calculation,
which starts on November 23, 2020 and ends on November 27, 2020; and
II - 25% from the calculation period which
starts on November 30, 2020 and ends on December 4, 2020.
|
BCB Resolution No. 21, of October
2, 2020
It amends Circular No. 3,916
"Art. 4 - The chargeability of the compulsory collection is established by applying the following rates on the basis of calculation
provisioned in Art. 3:
I - 17% until the period of calculation
which starts on March 15, 2021 and ends on March 19, 2021; and
II - 20% from the calculation period which
starts on March 22, 2021 and ends on March 26, 2021.
|
g)
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 Statement of the Prudential Conglomerate
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 in August, 2020, to 2.0%, the National Monetary Council and the Federal Government
approved, in extraordinary meetings, measures to help the Brazilian economy tackle the adverse effects caused by the virus.
The Executive and Legislative
Powers acted 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: which we expect an increase in our level
of arrears in the payment of loans, including loans that were renegotiated and extended in the context of the crisis, to the extent that
the economic situation will deteriorate further, as well as facing significant challenges to take possession and realize the collateral
resulting from guarantees related to loans in default;
|
|
·
|
Deferred tax assets: whose recoverability depends
on future taxable profits, 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 Bradesco may be considered co-responsible in these lawsuits.
It is also possible that we could experience
a greater volume of civil processes, mainly involving reviews and contract renewals.
|
Consolidated Financial Statement of the Prudential Conglomerate
Financial Statements
|
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 lauched the Business Continuity Plan (BCP) and in late March 2020, we intensified the internal/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.
|
h)
|
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.
Consolidated Financial Statement of the Prudential Conglomerate
Financial Statements
|
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
|
|
·
|
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
|
Payment Commission and Insurance
|
44,851
|
Total cost of acquisition
|
3,150,408
|
|
|
Shareholders’ equity acquired
|
1,398,083
|
Adjustments of shareholders of the parent (1)
|
(13,033)
|
Shareholders’ equity adjusted
|
1,385,050
|
|
|
Goodwill on the acquisition of shares
|
1,765,358
|
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
|
10,468,202
|
- Securities and derivative financial instruments
|
1,209,024
|
- Loans
|
9,256,159
|
- Other financial instruments
|
3,019
|
Expected credit loss associated with credit risk
|
(96,764)
|
- Loans
|
(96,764)
|
Investments in Associates and Subsidiaries
|
56,863
|
Premises and equipment, net
|
36,188
|
Depreciation Property, Plant and Equipment
|
(24,085)
|
Accumulated Impairment of Assets
|
(5,970)
|
Other assets
|
347,742
|
Total assets
|
15,148,294
|
|
|
Liabilities
|
|
Deposits and other financial liabilities
|
13,603,913
|
Consolidated Financial Statement of the Prudential Conglomerate
Financial Statements
|
- Deposits from customers
|
12,952,310
|
- Securities issued
|
642,661
|
- Other financial liabilities
|
8,942
|
Other liabilities
|
136,713
|
Shareholders’ equity
|
1,407,668
|
Total
|
15,148,294
|
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.
i)
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..
j)
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 of 2.85% and 3.20% p.a., respectively.
|
k)
|
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.
|
|
l)
|
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.
|
|
m)
|
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.
|
Marcelo da Silva Rego
|
Accountant - CRC 1SP301478/O-1
|
Consolidated Financial Statement of the Prudential Conglomerate
Independent Auditors’ Report
|
To
Shareholders
and the Board of Directors of
Banco
Bradesco S.A.
Osasco
– SP
Opinion
We have audited the consolidated financial
statements of the Prudential Conglomerate of Banco Bradesco S.A. (“Bradesco”), which comprise the consolidated balance sheet
as of December 31, 2020 and the respective consolidated statements of income, changes in shareholders’ equity and cash flows for
the six-month period and year then ended, as well as the related explanatory notes, including a summary of the main accounting policies.
These special purpose financial statements have been prepared in accordance with specific procedures established by Resolution 4280, dated
October 31, 2013, of the National Monetary Council (CMN) and supplementary regulations of the Central Bank of Brazil (BACEN), described
in the note 2 – Presentation of the financial statements.
In our opinion, the accompanying
consolidated financial statements of the Prudential Conglomerate present fairly, in all material respects, the consolidated financial
position of the Prudential Conglomerate of Banco Bradesco S.A. as of December 31, 2020, the consolidated performance of its operations
and its respective consolidated cash flows, for the for the six-month period and year then ended, in accordance with Resolution 4280/13
of CMN, and supplementary regulations of Central Bank of Brazil (BACEN), for the preparation of special purpose consolidated financial
statements, as described in the note 2 to financial statements.
Basis for opinion
We conducted our audit in accordance
with Brazilian and International Standards on Auditing (ISAs). Our responsibilities under those standards, are further described in the
“The Auditors’ responsibilities for the audit of the consolidated financial statements of the Prudential Conglomerate”
section of our report. We are independent of Bradesco and its subsidiaries, in accordance with the ethical requirements established
in the Accountant´s Professional Ethics Code and the professional standards issued by the Federal Accounting Council, and we have
fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our opinion.
Emphasis
We draw attention to note 2 to the
consolidated financial statements that disclose that the consolidated financial statements of the Prudential Conglomerate of Bradesco
were prepared by Bradesco´s management to meet the requirements of Resolution 4280/13 of CMN, and supplementary regulations of BACEN.
Consequently, our report on these consolidated financial statements has been prepared solely for meeting these specific requirements and
thus may not be appropriate for other purposes. Our opinion is not modified in relation to this topic.
Key Audit Matters
Key audit matters are those that,
in our professional judgment, were of most significance in our audit of the current year. These matters were treated in the context of
our audit of the consolidated financial statements of the Prudential Conglomerate as a whole, and in forming our opinion thereon, and,
we do not express a separate opinion on these matters.
Evaluation of the measurement of the
allowance for loan losses
As disclosed in notes 3e and 9, Bradesco
recorded a provision of R$ 45,199,423 thousand for allowance for loan losses (which comprise loans, leasing, advances on foreign exchange
contracts and other receivables with credit characteristics) as of December 31, 2020.
Consolidated Financial Statement of the Prudential Conglomerate
Independent Auditors’ Report
|
To determine the allowance for loan losses,
Bradesco classifies credit operations in nine risk levels ("ratings"), taking into account factors and assumptions of customers
and operations, such as economic and financial situation, indebtedness level, economic sector, collateral characteristics, late payments
and other factors and assumptions provided for in CMN Resolution No. 2,682/99, with “AA” being the minimum risk and “H”
being the maximum risk, applying the respective loss percentages established in such Resolution for each risk level.
Additionally, Bradesco complements its
estimates (supplementary provision) through internal evaluation based on statistical models that capture historical and prospective information,
in order to reflect its expected losses in different economic scenarios (positive, expected and adverse).
We consider the measurement of the allowance
for loan losses as a key audit matter, due to the significant judgment, accentuated by the effects of the current economic situation resulting
from the Covid-19 pandemic, involved in the assessment of the assumptions used in the classification of loans operations and in determining
the supplementary provision.
How our audit approached this matter
The primary procedures we performed to
address the matter significant to our audit is summarized below.
We tested the design and operational effectiveness
of certain internal controls related to the processes of (i) development, approval and application of internal methodologies for assessing
risk levels ("ratings") of clients that support the classification of operations; (ii) the definition, approval and application
of the main assumptions used in assigning the ratings, including those related to the individual review of the credit risk analysis and
the governance established for the respective approval.
Additionally, for individually assessed
clients, we analyze, based on sampling (by statistical criteria and specific items), the data that support the definition and review of
customer ratings by Bradesco, such as the loan proposal, financial and registration information, restructuring operational and / or financial,
guarantees and judicial reorganization plan, verifying the adherence of this rating assignment in relation to Bradesco's internal policies.
For massively assessed clients, we tested the allocation of provisioning percentages according to the internal methodologies for assessing
the risk levels of each client. We also evaluated the methodologies and assumptions used to determine the supplementary provision, which
include Bradesco's assessment of the impacts generated by the Covid-19 pandemic, such as increased delinquency in certain sectors, increase
in the unemployment rate, among others.
We analyzed, by statistical sampling, the
arithmetic calculation of the allowance for loan losses, considering the assessment of compliance with the requirements established by
CMN Resolution No. 2,682/99, as minimum ratings in relation to days past due, assigning the worst rating for the same economic group and
maintenance of the previous rating for cases of renegotiation / loan recovery. We also evaluated the disclosures made in the consolidated
financial statements.
Based on the evidence obtained through
the procedures summarized above, we consider the measurement of the allowance for loan losses adequate, in the context of the consolidated
financial statements taken as a whole for the six-month period and year ended December 31, 2020.
Evaluation of the measurement of securities
of private issuers
As mentioned in notes 3d, 7 e 36a to the
consolidated financial statements, the amount of securities of private issuers is R$ 101,405,869 thousand, which includes securities measured
at market value, whose prices or market parameters are not observable (levels 2 and 3 of the fair value hierarchy).
The determination of the market values
of securities of private issuers, whose prices or market parameters are not observable, is subject to a greater level of
uncertainty, as Bradesco makes significant judgments in determining the methods and assumptions used, such as interest rates and credit
spreads. The securities of private issuers classified in the categories “Available
for sale” and “Held to maturity” are also evaluated for indications of evidence of impairment, which also involves a
high level of judgment in their determination considering the methodologies and assumptions used, such as assessing credit risk and guarantees.
Consolidated Financial Statement of the Prudential Conglomerate
Independent Auditors’ Report
|
We consider the measurement of market value
and the evaluation of indicative of impairment of securities of private issuers as a significant matter for our audit, due to the degree
of judgment, accentuated by the current economic scenario of pandemic due to the Covid-19, involved in determining the methods and assumptions
used.
How our audit approached this matter
The primary procedures we performed to
address the matter significant to our audit is summarized below.
We tested the design and operational effectiveness
of certain internal controls related to the processes of (i) defining, approving and applying the models used to measure the market value
of securities of private issuers; (ii) capture of relevant data to measure the market value; (iii) evaluation of adherence to the calculations
of the market value of certain financial instruments by independent department; (iv) definition and application of the assumptions used
in the evaluation of the indicative of impairment of the securities of private issuers, such as the credit risk of the counterparty and
the evaluation of guarantees.
For a statistical sample of securities
of private issuers, whose parameters for measuring market value are not observable, we evaluated, with the involvement of our pricing
professionals of financial instruments with knowledge and experience in the sector, the models developed by Bradesco for the determination
of market values, through the use of independent parameters.
Additionally, based on sampling (by statistical
criteria and specific items), we evaluate the assumptions considered in the analysis of the credit spread used in the pricing of certain
financial instruments of private issuers, as well as those considered in the evaluation of the indicative and in the measurement of impairment,
including the possible effects linked to the new pandemic scenario due to Covid-19, such as the increase in defaults in certain sectors,
increase in the unemployment rate, among others.
Our procedures also included the assessment
of the disclosures made by Bradesco in the consolidated financial statements.
Based on the evidence obtained through
the procedures summarized above, we consider adequate the measurement of securities of private issuers, in the context of the consolidated
financial statements taken as a whole for the six-month period and year ended December 31, 2020.
Evaluation of the measurement of provisions
and the disclosure of contingent liabilities - Tax, civil and labor
As described in notes 3m and 21, Bradesco
is defendant in lawsuits of tax, civil and labor nature, related to the normal course of its activities, with the respective provisions
recorded in the consolidated financial statements in the amounts of R$ 7,245,645 thousand, R$ 7,591,658 thousand and R$ 6,472,878 thousand,
respectively.
For certain tax and civil lawsuits, such
as those related to the legality and constitutionality of certain taxes, indemnity for moral and property damage, relating to banking
products and services, insertion of information about debtors in the credit restrictions register, monetary correction adjustments of
the balances savings accounts due to the implementation of economic plans by the Federal Government, and some other specific civil actions,
it took significant judgment to determine the likelihood of loss and estimate the amount involved. For labor lawsuits, Bradesco used a
model, based on data from similar lawsuits closed, segregating the lawsuits in relation to the entry date versus the date of implementation
of the labor reform (Nov/2017), calculating the average loss for each group of lawsuits.
We consider the measurement of provisions
and the disclosure of contingent liabilities as a key audit matter.
Consolidated Financial Statement of the Prudential Conglomerate
Independent Auditors’ Report
|
How our audit approached this matter
The primary procedures we performed to
address the matter significant to our audit is summarized below.
We tested the design and operational effectiveness
of certain internal controls related to the evaluation and measurement of the provisions and disclosures of contingent liabilities, including
controls related to (i) the evaluation of information received from external and internal legal advisors on tax, civil and labor lawsuits;
and (ii) evaluation of the models and assumptions used to measure the provision and contingent labor liabilities.
For certain civil and tax lawsuits, we
analyze the recognized provisions and the amounts disclosed, considering the assessment of internal and external legal advisors, as well
as historical data and information/jurisprudence related to the lawsuits in question and other similar processes. We involved our tax
professionals with knowledge and experience in the sector who assisted us in the assessment of certain tax processes in relation to technical
merits and the supporting documentation for Bradesco's assessment of the likelihood and estimate of loss. We involve our legal professionals
with knowledge and experience in the sector who have helped us in the assessment of the likelihood of loss in certain specific civil cases.
We obtained and evaluated the letters received
directly from Bradesco's external legal advisors for tax lawsuits, which included an assessment of the likelihood of loss and an estimate
of the amount of the loss, as well as assessments of the likelihood of loss and risk measurement received from internal legal advisors.
for certain civil processes. We compared these assessments and estimates with those used by Bradesco and assessed the adequacy of the
disclosures related to civil and tax contingencies in relation to these matters.
For labor claims, the main procedures comprised:
(i) evaluation of the model used by Bradesco, through the analysis of different simulated scenarios, comparing with the results obtained
by the Bradesco model; (ii) analysis of the segregations used in the models, by the nature of the processes, including the time of entry
(pre or post labor reform) and the author's characteristics (ex-employees or third parties); (iii) test on the mathematical precision
of the calculations made by Bradesco to determine the provision for labor claims based on the loss history of the last years in similar
cases.
We also evaluated, for civil and labor
claims, the sufficiency of the provision through the history of disbursement in relation to the respective provision amounts, intensifying
the analyzes in relation to the understanding of specific cases that have diverged from the average of historical disbursements.
Based on the evidence obtained through
the procedures summarized above, we consider the measurement of provisions and the disclosure of tax, civil and labor contingent liabilities
adequate, in the context of the consolidated financial statements taken as a whole for the six-month period and year ended on December
31, 2020.
Assessment of the recoverability of
deferred tax assets arising from carry-forward tax losses
The consolidated financial statements include
assets related to deferred tax assets arising from carry-forward tax losses in the amount of R$ 82,102,508 thousand (notes 3f and 35c)
whose realization is based on estimates of future profitability.
These projections are based on the business
plans and budgets prepared by Bradesco and require the adoption of a series of assumptions related to future events and conditions. Changes
in certain assumptions about the future, such as interest rates, foreign exchange rates and applicable tax rates, could have a significant
impact on projections and, consequently, on the recoverability of deferred tax assets arising from carry-forward tax losses.
We consider the assessment of the recoverability
of deferred tax assets arising from carry-forward tax losses as a key audit matter due to the degree of judgment necessary to evaluate
the projections of future taxable profits and the main underlying key assumptions, especially accentuated of possible effects on the economic
situation resulting from the Covid-19 pandemic.
Consolidated Financial Statement of the Prudential Conglomerate
Independent Auditors’ Report
|
How our audit approached this matter
The primary procedures we performed to
address the matter significant to our audit is summarized below:
We tested the design and operational effectiveness
of certain internal controls over the Bradesco process to assess the recoverability of deferred tax assets arising from carry forward
tax losses, including controls related to the development and approval of key assumptions for the budget and the final projections of
taxable profits by Bradesco.
We involved corporate finance professionals
with knowledge and experience in the sector who assisted us on the assessment of assumptions, including growth rates for the main business
lines, future interest rates, foreign exchange rates and applicable tax rates underlying Bradesco's projections of future taxable profits,
including the possible effects on its projections of future taxable profits linked to the current economic situation resulting from the
Covid-19 pandemic.
In addition, we tested the mathematical
calculations included in the technical study of realization of the respective deferred tax assets and the disclosures made by Bradesco
in the consolidated financial statements.
Based on the evidence obtained through
the procedures summarized above, we consider adequate the assessment of recoverability of deferred tax assets arising from carry forward
tax losses in the context of the consolidated financial statements taken as a whole for the six-month period and year ended on December
31, 2020.
Evaluation of the impairment testing
of intangible assets
As mentioned in notes 3i, 3k and 13, the
consolidated financial statements include intangible assets, which comprise goodwill on the acquisition of investments in the amount of
R$ 4,874,282 thousand and other intangible assets in the amount of R$ 4,014,696 thousand.
Bradesco performs impairment tests at least
annually or when there are events or circumstances that indicate that the book value may not be recoverable. As part of the impairment
test of these assets, Bradesco estimated recoverable amounts of the relevant “CGU” Cash Generating Units and
investments based on the present value of future cash flows. Future cash flow projections consider business plans and budgets and require
a series of business and economic assumptions.
We consider the evaluation of the impairment
testing of intangible assets as a key audit matter, due to the high degree of subjectivity, especially accentuated by the current social
and economic scenario resulting from the pandemic state due to Covid-19, in determining significant assumptions, including the growth
rates for different businesses, revenue and expense flows, and the discount rates used.
How our audit approached this matter
The primary procedures we performed to
address the matter significant to our audit is summarized below.
We tested the design and operational effectiveness
of certain internal controls over Bradesco's analysis of the impairment testing of intangible assets, including controls related to (i)
review of the budget process; (ii) the development, review and approval of the key assumptions used in the analysis, such as growth rates
and discount rates; and (iii) independent review of the calculation methodology to perform the impairment test.
We involve our corporate finance professionals
with knowledge and experience in the sector who assisted us in: (i) evaluating the assumptions used, such as growth rates used for different
businesses, estimated revenue and expense flows, comparing them with information obtained from internal and external sources, including
the possible effects on the premises generated by the current social and economic scenario resulting from the pandemic state due to Covid-19;
(ii) evaluation of the discount rates used in the impairment test, comparing them with the discount rate ranges that were developed independently,
using public market data available to comparable entities; (iii) evaluation of the adherence of the revised projections in relation to
the realized cash flows; and (iv) evaluation of the mathematical precision of certain stages of the calculation of the present value.
Consolidated Financial Statement of the Prudential Conglomerate
Independent Auditors’ Report
|
Our procedures also included the assessment
of the disclosures made by Bradesco in the consolidated financial statements in relation to this matter.
Based on the evidence obtained through
the procedures summarized above, we consider the evaluation of the impairment testing of intangible assets adequate in the context of
the consolidated financial statements taken as a whole for the six-month period and year ended December 31, 2020.
Application controls and general information
technology controls
Bradesco's technology environment has processes
for managing access and changes in systems and applications, for developing new programs, besides automated controls and/or controls with
automated components in the several relevant processes. In order to maintain its operations, Bradesco provides its employees with access
to systems and applications, taking into account the duties performed by them and within its organizational structure. The controls to
authorize, monitor, restrict and/or revoke the respective accesses to this environment aim to assure that the accesses and information
updates are appropriately performed and by the appropriate professionals, to mitigate the potential risk of fraud or error arising from
inappropriate access or change in a system or information, and to ensure the integrity of financial information and accounting records.
We consider this area as significant for
our audit due to Bradesco's high dependence on its technology systems, the high volume of transactions processed daily, and the importance
of access controls and change management in its systems and applications to plan the nature, timing and extent of our audit procedures.
How our audit approached this matter
The primary procedures we performed to
address the matter significant to our audit is summarized below.
With the assistance of our information
technology professionals with experience and knowledge in the sector, we performed the following procedures:
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(i)
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We tested the design and operational effectiveness
of certain key access controls, such as authorizing new users, revoking disconnected users and reviewing active users;
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(ii)
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We carry out tests, based on sampling, since we plan
to rely on specific information, on information extracted from certain systems, considered relevant for the purposes of preparing the
consolidated financial statements;
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(iii)
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In areas where, in our judgment, there is a high dependence
on information technology, our tests also included the assessment of password policies, security settings and controls on developments
and changes in systems and applications;
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(iv)
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When we identify key internal controls for the financial
reporting process and other relevant processes that are fully automated or with any component dependent on systems and applications, we
test the design and operational effectiveness of these controls.
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The evidence obtained through the procedures
summarized above allowed us to consider application controls and general information technology controls to plan the nature, timing and
extent of our audit procedures in the context of the consolidated financial statements taken as whole for the six-month period and year
ended December 31, 2020.
Other matters
Bradesco prepared a set of general-purpose
consolidated financial statements for the year ended December 31, 2020, in accordance with accounting practices adopted in Brazil applicable
to institutions authorized to operate by the Central Bank of Brazil, on which we
issued an audit report without modifications dated February 03, 2021.
Consolidated Financial Statement of the Prudential Conglomerate
Independent Auditors’ Report
|
Statement of added value
The consolidated statement of added value
for the for the six-month period and year ended December 31, 2020, prepared under the responsibility of Bradesco's management, and presented
as supplementary information in relation to the special purpose required by Resolution 4,280, dated October 31, 2013, of the National
Monetary Council (CMN) and supplementary regulations of the Central Bank of Brazil (BACEN), was subjected to audit procedures performed
in conjunction with the audit of Bradesco's financial statements of the Prudential Conglomerate of Bradesco. For the purposes of forming
our opinion, we assess whether these statements are reconciled with the financial statements of Prudential Conglomerate and accounting
records, as applicable, and if their form and content are in accordance with the criteria set forth in Technical Pronouncement CPC 09
- Statement of Value Added. In our opinion, these consolidated statements of value added have been properly prepared, in all material
respects, in accordance with the criteria set forth in this Technical Pronouncement and are consistent with the consolidated financial
statements of Prudential Conglomerate taken as a whole.
Responsibilities of management and those
in charge with governance for the consolidated financial statements of the Prudential Conglomerate
Management is responsible for
the preparation and fair presentation of the consolidated financial statements of the Prudential Conglomerate in accordance with the Resolution
4280/13 of CMN, and supplementary regulations of BACEN, which main criteria and accounting practices adopted in Brazil, applicable to
institutions authorized to operate by the Central Bank of Brazil, and the internal controls as management determines is necessary to enable
the preparation of consolidated financial statements of the Prudential Conglomerate that are free from material misstatement whether due
to fraud or error.
In preparing the consolidated
financial statements of the Prudential Conglomerate, management is responsible for assessing Bradesco’s ability to continue as going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting, unless management
either intends to liquidate Bradesco and its subsidiaries or to cease operations, or there has no realistic alternative but to do so.
Those charged with governance
are those responsible for overseeing Bradesco´s financial reporting process in preparing the consolidated financial statements of
the Prudential Conglomerate.
Auditors’ responsibilities
for the audit of the consolidated financial statements of the Prudential Conglomerate
Our objectives are to obtain reasonable
assurance about whether the consolidated financial statements of the Prudential Conglomerate, prepared by the management in accordance
with Resolution 4280/13 of CMN, and supplementary regulations of BACEN, as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor´s report that includes our opinion. Reasonable assurance is a high level of assurance but
is not a guarantee that an audit conducted in accordance with the Brazilian and International Standards on Auditing will always detect
a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements
of Prudential Conglomerate.
As part of an audit in accordance
with the Brazilian and International Standards on Auditing, taking into account NBC TA 800 (Special Conditions - Auditing of Financial
Statements according to Special Purpose Accounting Structures), we exercise professional judgment, and maintain professional skepticism
throughout the audit. We also:
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·
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Identify and assess the risks of material
misstatement of the consolidated financial statements, whether due to fraud or error, design and performed audit procedures
responsive to those risks, and obtained audit evidence that is sufficient and appropriate to provide a basis for our opinion. The
risk of not detecting material misstatement
resulting from fraud is higher than for the one resulting from error, as fraud may involve collusion, forgery, intentional omission or
misrepresentations, or the override of internal controls.
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Consolidated Financial Statement of the Prudential Conglomerate
Independent Auditors’ Report
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·
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Obtain an understanding of internal control relevant
to the audit to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of Bradesco and its subsidiaries internal control.
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·
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Evaluate the appropriateness of the accounting policies
used and the reasonableness of accounting estimates and related disclosures made by Bradesco.
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·
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Conclude on the appropriateness of management’s
use of the going concern basis of accounting, and, based on the audit evidence obtained, whether material uncertainty exists related to
events or conditions that may cast significant doubt on Bradesco’s ability to continue as going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial
statements, or if such disclosures are inadequate to modify our opinion. Our conclusions are based on the audit evidences obtained up
to the date of our auditor’s report. However, future events or conditions may cause Bradesco and its subsidiaries to cease to continue
as a going concern.
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·
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Evaluate the overall presentation, structure and content
of the consolidated financial statements of Prudential Conglomerate, including the disclosures and whether the consolidated financial
statements of Prudential Conglomerate represent the underlying transactions and events in a manner that achieves fair presentation.
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·
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Obtain sufficient appropriate audit evidence regarding
the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial
statements of Prudential Conglomerate. We are responsible for the direction, supervision and performance of group audit. We remain solely
responsible for our audit opinion.
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We communicate with those charged
with governance regarding, among other matters, the planned scope and timing and significant audit findings, including any significant
deficiencies in internal control that we identify during our audit.
We also provided those charged
with governance with a statement that we have complied with the relevant ethical requirements regarding independence, and communicate
with them all relationships and other matters that may reasonably be though to bear our independence, and where applicable, related safeguards.
From the matters communicated
with those charged with governance, we determined those matters that were of most significance in the audit of the consolidated financial
statements of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report, unless
law or regulation precludes public disclosure about the matters, or when, in extremely rare circumstances, we determine a matter should
not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefit of such communication.
Osasco, March 29, 2021
KPMG
Auditores Independentes
CRC
2SP-028567/F
Original
report in Portuguese signed by
André
Dala Pola
Accountant
CRC 1SP214007/O-2
This page intentionally left blank.
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 31, 2021
BANCO BRADESCO S.A.
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By:
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/S/Leandro de Miranda Araujo
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Leandro de Miranda Araujo
Executive Deputy Officer and
Investor Relations Officer.
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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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