Feb 25, 2013

• Revenue from financing rises 26% and defaults fall to 0.06%

The Brazilian Development Bank (BNDES) posted net profit of R$ 8.2 billion in 2012, a year marked by instability in financial markets and poor performance on stock markets. The most significant contribution to this profit was the earnings from investments financing. Comparing 2012 to 2011, profit was down 9.6% on the previous year, from R$ 9 billion.

The positive performance basically comprises earnings from credit and fixed-income operations, which totaled R$ 9.5 billion. The amount represents a 26% increase in comparison with 2011. This result, within a scenario of lower fees fostered by the BNDES in 2012, is proof of the good management of the portfolio, and that it is in accordance not only with the efforts being made by the government to encourage production investment, but also with the broader and more competitive conditions in the credit market.

The fixed-income segment contributed 67.2% and the treasury (R$ 4 billion), 28.3%, to the BNDES’ gross earnings presented last year. The increase in fixed-income is the result of, mainly, a 15.5% increase in the Bank’s credit portfolio, which, in turn, is a consequence of the higher volume of operations carried out in the period.

In 2012, the BNDES’ disbursements reached R$ 156 billion, spread across 990,000 operations, to 261,000 individuals and companies – record figures. Of the total, some R$ 87 billion was invested outside the Southeast region, thus contributing to decentralizing development.

The result of treasury operations is associated with the sale of federal bonds over the last half so that the BNDES was able to fulfill its disbursement budget. The importance of profitability in financial intermediation operations gained ground owing to the poor performance of the share market in 2012, causing the variable income segment to account for 6.8% of the Bank’s gross earnings.

The fall in profit is also partially due to the positive impact from allowances for credit risk in the 2011 earnings, which totaled revenue of R$ 717 million. This is because of non-recurring events in credit recovery, which generated revenue of R$ 881 million in that year. In 2012, such revenue was not repeated. On the contrary, the Bank recorded expenses with allowances for credit risk to the tune of R$ 320 million, reflecting growth in the financing portfolio in the period.

Last year, variable-income operations, which historically contribute expressively to the profit of the BNDES System, reflected the impact of the international financial crisis on the companies in which it is has a stake.

Throughout 2012, there was a R$ 4.2 billion (81.5%) drop in the gross earnings from variable income, which totaled approximately R$ 1 billion. In 2011, the amount recorded was R$ 5.2 billion. This result was also affected by Resolution Nº 4,175, of 12/27/2012, which was aimed at revealing the accounting differences of investments in accordance with the BNDES’ business model, with emphasis on the long term. In this case, the negative variation of the fair value of specific assets classified as available-for-sale will only be recorded in the results when and if the effective sale is made.

It is important to point out that, even under such circumstances, the amounts of earnings that have not been effectively made from the share portfolio – the difference between the price paid for a share and its price at the end of the fiscal year – was expressive at the end of December, equivalent to R$ 12 billion (17.8%).

Default – Despite uncertainties in financial and capitals markets, default in the BNDES System remained at a low level, reflecting the robustness of the credit and on-lending portfolio. The percentage was a mere 0.06% over the year, lower than that recorded in December 2011 (0.14%) and the lowest in the Bank’s history. Average default in the National Financial System in December 2012, according to Brazil’s Central Bank, was 3.6%.

Low default and the credit profile reflect the consistency of the BNDES’ operational policies. This is the result of, above all, the quality of the management of the credit portfolio, which seeks to make reduced interest rates and loan terms more compatible for long-term projects.

Financial position – The BNDES System’s net worth totaled R$ 52.2 billion, which corresponds to a reference net worth (PR) of R$ 89.6 billion, down from the R$ 99 billion obtained on December 31, 2011.

The fall in PR is due, mainly, to the depreciation in the fair value (market value of the share portfolio) in the period, whose effect is the counterpart to net equity and to the distribution of complementary dividends on profit in 2010 and 2011 but paid in 2012.

The capital adjustment index (Basel Index) recorded by the BNDES System was 15.4%, which is higher than the 11% required by Brazil’s Central Bank.

The total assets of the BNDES System reached R$ 715.5 billion on December 31, 2012, up R$ 90.7 billion (14.5%) in comparison with December 31, 2011. The balance of the credit and on-lending portfolio reached R$ 492.1 billion on December 31, 2012, of which 79.5% corresponds to long-term credit.

BNDESPAR – Profit recorded by BNDESPAR, the BNDES’ equity holding arm, was R$ 298 million in 2012. This result was impacted by the fall in revenue, especially in dividends, from the decrease in the equivalence equity result as well as adjustments for impairment in companies in the BNDESPAR portfolio, and by the effects of the international crisis on the capitals markets.

The impairment represents losses that may or may not be financially achieved in the future, taking into account the long-term profile of BNDESPAR’s share portfolio. Besides this, they are equivalent to approximately 3% of the total value of the share portfolio, which comprises 142 companies, and whose unrecorded gain (the difference between the market price and the accounting costs) remained expressive at the end of 2012.