Aug 14, 2015

• The Bank maintains the lowest default rate in the National Financial System: 0.05%

The Brazilian Development Bank (BNDES) recorded a net income of R$ 3.515 billion in the first half of 2015. The main factor that contributed to this result was the increase in financial intermediation – the Bank’s credit operations – which reached R$ 9.290 billion in the first six months of the year, some 54.9% above the same period in 2014. The result is associated with the fact the Bank maintained the lowest default rate in the National Financial System (0.05%). In comparison to the first half of 2014, when earnings were R$ 5.471 billion, the reduction was 35.8%.

Besides earnings, other indicators in the period are equally positive. Profitability on equity was 8.44% in the semester, and the Basel index reached 17.0%, a comfortable situation against the 11.0% required by the Central Bank and above the 15.9% in December 2014. The index represents the Bank’s financing capacities: for each R$ 100 in credit, the BNDES has 17% equity.

The fall in the half-yearly comparison is the result of a drop in earnings from corporate stakes (shaes), down to R$ 3.598 billion. This drop was caused by factors beyond the Bank’s control. The main cause was the fact that Petrobras did not distribute dividends in the first half of this year. During the first half of 2014, the BNDES obtained revenue from dividends and interest on own capital from Petrobras in the amount of R$ 1.842 billion, which did not happen in 2015.

Another negative factor were provisions for losses (impairment) in the amount of R$ 1.155 billion against expenses of R$ 336 million in the same half of 2014.

The significant increase in earnings form financial intermediation represents not only the higher remuneration in the credit operations portfolio, but also the efficient management of the treasury, by offsetting the decrease in variable income. It is worth highlighting that this result, connected to the low default rate, reflects the BNDES’ good operating management in keeping with the government’s strategic priorities. Additionally, the percentage of renegotiated credits was only 0.71% of the total portfolio on June 30, 2015, which is below the same situation registered in December 2014, at 0.86%.

For the BNDES, it is imperative to ensure the quality of its credit operations portfolio. This is because more than being a public bank, resuming its operations represents the main source of financial support for new investment projects. In the first half of 2015, the Bank’s return to operations represented 93.5% of the resources disbursed in the period.

Auditors – Following the disclosure of Petrobras’ respective financial statements and the updated investment plan, auditors withdraw the exception that limited the scope from the BNDES’ financial statements in December 2014. The validity of the amounts calculated by the Bank was acknowledged, and there is no need for the Bank to make any additional adjustments. The opinion of the Auditors concerning the Financial Statements from 03/31/15 and 06/30/15 no longer mentions that issue.

Concerning the impairment amount acknowledged in the result from the first half of 2015, the BNDES, in its net equity, maintained the amount of R$ 715 million as expenditure in the BNDESPAR statements for the first quarter of the year.

Maintaining the amount in the net equity is due to Resolution Nº. 4,175/12 of the National Monetary Council, which establishes that shares held by the BNDES – stemming from transfers from the federal government to increase the Bank’s capital – have specific conditions to recognize losses. As a result, accounting losses are only reclassified for earnings if there is any sale or transfer of the respective asset. This was mentioned in the report from the independent auditors in the BNDES’ balance sheet.

Financial position – The BNDES System’s net worth totaled R$ 38.0 billion in June 2015, above the R$ 30.7 billion from December 2014. It is worth highlighting the 2015 decision handed down by the Central Bank to reclassify Instruments Eligible for net equity as liabilities in financial institutions benefiting from this type of instrument.

For this reason, retroactive balances were reclassified for comparison following the change mentioned in the auditors’ opinion. Those instruments totaled R$ 36.121 billion on June 30, 2015 and R$ 35.539 billion on December 31, 2014.

The increase in net equity was affected by the recovery in the market value for shares in non-colligated companies (R$ 3.180 billion, after tax) and by the result for the semester. Reference equity (regulatory basis that establishes the financing capacity) reached R$ 110.9 billion on 06/30/15, above the R$ 97.9 billion on 12/31/15.

The BNDES system’s total assets amounted to R$ 911.4 billion on June 30, 2015, an increase of R$ 34.2 billion (3.9%) against December 31, 2014. The balance of the credit and on-lending portfolio, net after provisions for credit risk reached R$ 667.6 billion at the end of the first half of 2015, of which 80.9% correspond to long-term credits.

Detailed financial statements for the BNDES and its subsidiaries (BNDESPAR and FINAME) are available on the Bank’s website and can be accessed here.