Aug 20, 2012

• Revenue from financing rises 14.4% and default falls to 0.12%

The BNDES posted a net income of R$ 2.7 billion in the first half of 2012. In a period marked by the instability of financial markets and the weak performance of the stock markets, the fixed income segment was the main factor that contributed to the result.

Primarily comprising earnings from loans and transfers, which amounted to R$ 4 billion, an increase of 14.4% over the first half of 2011, the positive performance was possible despite the BNDES’ drop in interest rates, demonstrating good management of the portfolio. The initiative to reduce interest is in keeping with the government’s efforts to encourage productive investment in the economy against a backdrop of global slowdown.

The increase in earnings in fixed income stems mainly from the 16.3% expansion in the Bank’s loan portfolio, obtained by increasing the volume of transactions performed during the period, especially within the BNDES Investment Maintenance Program (BNDES PSI).

Comparing the first half in 2012 with that in 2011, profit this year was 48% lower than the R$ 5.3 billion posted for the same period last year. The fixed income segment contributed 68.2% to the final result and variable income, 20.3%.

Historically, the operations of BNDESPAR, BNDES’ holding company, contribute significantly to the Bank’s earnings. The international financial crisis and its effects on the domestic market, however, affected the performance of companies, increasing instability on the stock market. Given this scenario, BNDESPAR reduced the sale of assets in its portfolio and, in parallel, felt the impact of reduced earnings from equity equivalence.

“The performance of the stock market caused the variable income segment to achieve a result lower than those from previous years, but we work with a robust portfolio, which has provided us with significant returns over the long term, and our perspective is that these results remain positive,” said the director of the BNDES’ Capital Market Division, Julio Ramundo.

In the first half of 2012, there was a R$ 2.5 billion (67.5%) drop in the variable income earnings, which amounted to R$ 1.2 billion. In the same period in 2011, the amount recorded was R$ 3.7 billion.

The figures for the first half of the year reflected the drop in asset sales, due to the poor performance of stock markets, as well as the fall in the value of the portfolio due to equity equivalence. Income from the sale of stakes in companies was 51% lower in relation to the income for the first half of 2011, and the result of equity equivalence decreased 126.1%, in the same comparison.

It is worthy to note that even under such conditions, the value of hypothetical gains in the share portfolio – the difference between the purchase price of the stock and its price in the first half of the year – was significant at the end of June, equivalent to R$ 18.7 billion (41.7%).

Profit of the BNDES system was also affected by the positive impact of allowances for credit risk in the 2011 earnings, which amounted to revenue of R$ 853 million. This was due to credit recovery of R$ 469 million, plus the positive review on the risk ratings of some customers. In the first half of 2012, there were expenses with allowances for credit risk of R$ 320 million, reflecting the growth of the loan portfolio over the period.

Despite uncertainties in the financial and capital markets, defaults in the BNDES system remained at a very low level, reflecting the soundness of its loan and transfer portfolio. The percentage of default customers was only 0.12% in the first half of the year, lower than that recorded in December 2011 (0.16%) and equal to that recorded in June 2011 (0.12%). The average default in the National Financial System, according to Brazil’s Central Bank, was 3.8% in June 2012.

Low default and the credit profile reflect the consistency of its operational policies. It is a consequence, especially, of the management quality of its loan portfolio, which seeks to make reduced interest rates compatible with the preservation of public assets through continuous loan and guarantee monitoring throughout the duration of the contracts.

Financial position – The BNDES system’s net equity totaled R$ 56 billion, corresponding to a Referential Equity (RE) of R$ 94 billion, lower than the R$ 99 billion achieved on December 31, 2011. The reduction in RE is due mainly to the depreciation of the stock portfolio at fair value (market value) in the period, whose effect is the counterpart for net equity.

The Referential Equity is the base used by Brazil’s Central Bank to set prudent limits to be followed by all financial institutions. The higher the BNDES’ Referential Equity, the greater its ability to provide financing.

The capital adequacy index (Basel Index), recorded by the BNDES System, was 18.5%. This means that, for every R$ 100 financed, the Bank holds 18.5% of the regulatory equity, a comfortable situation regarding the 11% required by Brazil’s Central Bank.

The total assets of the BNDES System amounted to R$ 650.7 billion on June 30, 2012, showing an increase of R$ 25.8 billion (4.1%) in relation to December 31, 2011. The balance of the loan and transfer portfolio reached R$ 441.7 billion on June 30, 2012, of which 83.4% was long-term credits.