Business Context and Reporting Period
This Form 6-K filing by Banco Bradesco S.A. (Bradesco) is dated March 9, 2017, and addresses a request for clarification from the Brazilian Securities and Exchange Commission (CVM) regarding a legal judgment. The filing responds to a news report from March 4, 2017, concerning a first-instance court sentence in a Public Civil Lawsuit filed by the Ministry of Labor (MPT).
Key Financial Metrics and Legal Exposure
- Legal Judgment Amount: A first-instance sentence ordered Bradesco to pay approximately R$800 million, calculated as 1% of net income from 2008 to 2012, updated for inflation (IPCA-E).
- 2016 Financial Position (for context):
- Adjusted Net Income: R$17.21 billion
- Total Assets: R$1.294 trillion
- Equity: R$100.42 billion
- Market Value: R$180 billion
- Materiality Threshold: The company previously established a materiality line of R$493 million for disclosure purposes.
Material Changes and Management Commentary
Management asserts that the R$800 million sentence does not constitute a material fact requiring immediate disclosure under CVM Instruction No. 358/2002 for the following reasons:
- Appeal Status: The sentence is at the first instance and is subject to appeals before the Regional Labor Court (TRT), Superior Labor Court (TST), and Federal Supreme Court (STF).
- Jurisprudence Comparison: Legal counsel indicates that previous moral damage sentences in similar cases were significantly lower (TRT max: R$20 million; TST range: R$100,000 to R$1 million). Management believes the likelihood of the R$800 million amount being upheld is remote.
- Financial Impact: Even if the full amount were eventually paid, management concludes it would not affect the company's financial position given its substantial equity and asset base.
Risks and Contingencies
The primary contingency is the outcome of the ongoing appeals process regarding the Public Civil Lawsuit No. 0020218-02.2013.5.04.0020. While the company disputes the magnitude of the penalty, the filing acknowledges the existence of the judgment. The CVM had previously warned of a potential fine of R$1,000 for non-compliance with disclosure requests, though the company maintains its position that the event does not meet the criteria for a material fact disclosure.
Investor Verification Checklist
- Verify the current status of the appeals in the Regional Labor Court (TRT) and Superior Labor Court (TST) regarding the R$800 million judgment.
- Review the company's historical disclosure policy regarding the R$493 million materiality threshold and how it applies to contingent liabilities.
- Monitor future filings for updates on the final resolution of the Public Civil Lawsuit No. 0020218-02.2013.5.04.0020.
- Confirm whether the company has updated its provision for legal contingencies in subsequent quarterly reports.