Business Context and Reporting Period
This Form 6-K filing by Banco Bradesco S.A. (Bank Bradesco) covers the financial results for the second quarter and first half of 2009, ending June 30, 2009. The report details the bank's performance amidst the global financial crisis, highlighting a recovery in the Brazilian economy and the bank's strategic positioning through asset sales and acquisitions.
Key Financial Metrics
| Metric | Value (R$) | Notes |
|---|---|---|
| Net Income (1H09) | 4.020 billion | 2.8% increase vs. 1H08 adjusted |
| Net Income (2Q09) | 2.297 billion | 33.3% increase vs. 1Q09 |
| Total Assets | 482.478 billion | 19.7% increase vs. 2008 |
| Total Loan Portfolio | 212.768 billion | 18.1% increase vs. 2Q08 |
| Shareholders' Equity | 37.277 billion | 10.6% increase vs. 2Q08 |
| Assets Under Management | 647.574 billion | 17.6% increase vs. 2Q08 |
| Market Capitalization | 81.301 billion | As of June 30, 2009 |
| Capital Adequacy Ratio | 17.0% | Basel II; Tier I at 14.3% |
| Efficiency Ratio | 42.0% | Improved from 42.6% in 2Q08 |
| Return on Average Equity | 23.7% | Annualized |
Material Changes vs. Prior Period
- Profitability: Net income for 2Q09 rose 33.3% quarter-over-quarter to R$2.297 billion, driven largely by a R$2.034 billion non-operating gain from the partial sale of VisaNet Brasil. Excluding this one-time gain, operating income declined 49.6% quarter-over-quarter due to higher provisions.
- Loan Loss Provisions: Provision for Loan Losses (PLL) expenses surged 50.4% quarter-over-quarter to R$4.421 billion, reflecting increased delinquency and additional provisions for cyclical risks. The PLL balance reached R$13.871 billion.
- Delinquency: The delinquency ratio for loans overdue more than 90 days increased to 4.6% (up 0.4 percentage points q-o-q), while the coverage ratio for these loans improved to 169.1%.
- Revenue Mix: Net Interest Income grew 27.1% year-over-year in 1H09, aided by higher spreads and securities gains. Fees and Commissions grew 5.3% year-over-year.
- Costs: Personnel expenses increased 5.4% year-over-year due to wage agreements and network expansion, while administrative expenses rose 13.1%.
Guidance, Outlook, and Management Commentary
Management Commentary
Management notes that while the worst of the global crisis appears to be overcome, uncertainty remains regarding the pace of recovery. The Brazilian economy is viewed as a benchmark for recovery, with signs of overcoming recession in mid-2009. The bank highlighted a strategic shift in 2Q09, including the partial sale of VisaNet Brasil and the initiation of an acquisition of Banco ibi S.A. for approximately R$1.4 billion.
2009 Guidance (Updated)
- Loan Portfolio Growth: Revised down to 8-12% (previously 13-17%).
- Individual Loans: 9-12% growth (previously 11-15%).
- Corporate Loans: 7-11% growth (previously 14-18%).
- Net Interest Income: 18-22% growth (unchanged).
- Fees and Commissions: 6-10% growth (previously 7-11%).
- Operating Expenses: 6-11% growth (previously 9-14%).
Risks and Contingencies
- Economic Slowdown: Continued impact on client payment capacity, leading to higher delinquency levels.
- Regulatory/Tax: Increase in the CSLL tax rate from 9% to 15% impacted 1H09 results by R$96 million.
- Market Volatility: Uncertainty in asset prices and foreign exchange markets, particularly regarding the U.S. dollar and commodity prices.
Key Facts for Investor Verification
- One-Time Gains: Verify the sustainability of earnings by excluding the R$2.0 billion non-operating gain from the VisaNet Brasil sale in 2Q09.
- Asset Quality: Monitor the trend of the delinquency ratio (>90 days) which rose to 4.6%, and the adequacy of the R$13.871 billion provision balance.
- Acquisition Integration: Track the regulatory approval and integration progress of the Banco ibi S.A. acquisition.
- Guidance Revision: Note the significant downward revision in loan portfolio growth guidance for 2009, reflecting a more cautious outlook on credit demand.
- Tax Impact: Confirm the full-year impact of the increased CSLL tax rate on net income.