BBD

Business Context and Reporting Period

This Form 6-K filing by Banco Bradesco S.A. (Bank Bradesco) covers the third quarter of 2002 (ended September 30, 2002) and the accumulated nine-month period (9M02). The filing was submitted in November 2002. Bradesco is Brazil's largest private bank, operating a diversified financial group including banking, insurance, private pension plans, and asset management. Key strategic events during the period included the startup of Banco Finasa S.A., a major consumer financing company, and the acquisition of control over Banco Mercantil, Banco do Estado do Amazonas (Banco BEA), and Banco Cidade.

Key Financial Metrics

Third Quarter 2002 (3Q02)

• Net Income: R$ 420 million (R$ 0.29 per thousand shares), a 12.3% decrease from 2Q02.
• Operating Income: R$ 531 million, down 7.0% from 2Q02.
• Financial Margin: R$ 4,387 million, up 56.5% from 2Q02; annualized margin on average assets was 13.9%.
• Efficiency Ratio: 57.4% (slightly higher than 57.1% in 2Q02).
• Consolidated Assets: R$ 140,151 million, up 12.4% from 2Q02.
• Stockholders' Equity: R$ 10,500 million, up 3.8% from 2Q02.
• Basel Capital Adequacy Ratio: 15.6% (consolidated financial basis) and 13.7% (total consolidated basis).
• Allowance for Loan Losses (PDD): R$ 3,818 million, covering 129.7% of the abnormal credit portfolio.

Nine Months 2002 (9M02)

• Net Income: R$ 1,325 million (R$ 0.93 per thousand shares), a 15.1% decrease from 9M01.
• Operating Income: R$ 1,750 million, down 11.8% from 9M01.
• Financial Margin: R$ 9,857 million, up 39.5% from 9M01.
• Consolidated Assets: R$ 140,151 million, up 30.5% from 9M01.
• Return on Equity (Annualized): 17.2% (down from 22.6% in 9M01).
• Return on Assets (Annualized): 1.3% (down from 1.9% in 9M01).

Material Changes vs. Prior Period

Net income declined in both the quarter and the year-to-date periods compared to prior comparable periods. The 3Q02 net income drop of 12.3% was driven by a 21.0% decrease in financial activity results, partially offset by an 18.8% increase in the Insurance Group's contribution. For the nine-month period, the 15.1% net income decline was attributed to a 24.5% drop in financial activity results, despite a 52.6% surge in Insurance Group results.

Significant growth was observed in the financial margin (56.5% QoQ and 39.5% YoY) and income from financial intermediation, largely driven by exchange rate variations and higher interest rates. However, expenses also rose; the Allowance for Loan Losses increased by 26.0% QoQ and 61.1% YoY, reflecting higher customer defaults due to economic slowdown and portfolio growth from acquisitions. Personnel expenses increased 15.0% QoQ due to collective labor agreements and one-off bonuses.

Guidance, Outlook, and Risks

The filing contains forward-looking statements regarding future dividends, operational strategies, and investment programs, which are subject to risks and uncertainties. Management noted that real results could differ materially from expectations due to changes in macroeconomic conditions, sector competitiveness, and interest rates.

Key Risks and Contingencies:

• Economic Slowdown: Increased customer defaults and higher provisions for loan losses.
• Exchange Rate Volatility: Significant impact on financial margins and expenses due to foreign currency exposure.
• Regulatory Changes: New accounting policies from the Brazilian Central Bank (BACEN) regarding mark-to-market classification of securities.
• Integration Risks: Ongoing integration of recent acquisitions (Mercantil, BEA, Cidade, Finasa).

Management highlighted the successful launch of Banco Finasa and the recognition of the Bradesco website as the best in the world for retail banking by Global Finance magazine as positive operational developments.

Investor Verification Checklist

• Verify the impact of exchange rate fluctuations on the reported financial margin and net income, as these were primary drivers of variance.
• Confirm the quality of the credit portfolio, specifically the 129.7% coverage of the abnormal credit portfolio by the Allowance for Loan Losses.
• Assess the integration progress and financial contribution of recent acquisitions (Banco Mercantil, Banco BEA, Banco Cidade, and Banco Finasa).
• Review the reclassification of R$ 5,904 million in securities from "Available for Sale" to "Held to Maturity" and its impact on future earnings.
• Monitor the efficiency ratio trend, which slightly worsened to 57.4% in 3Q02, and the rising personnel and administrative expenses.