Aug 14, 2020

 The Brazilian Development Bank (BNDES) registered net income of R$ 5 million in the first half of 2020. The performance was presented on Friday, 14, along with a balance of emergency measures to address the crisis arising from Covid-19. Actions due to the pandemic already add R$ 59.3 billion and helped 171,000 companies employing 5.2 million people. 

In the quarter, results were affected by the crisis scenario, leading to a recurring result, which excludes the volatility of the variable income portfolio and the adjustments in the provision for credit risk, of R$ 1.32 billion, and an accounting loss of R$ 582 million. The loss was motivated by negative equity adjustments in investee companies and by provisions for credit risk to cover any losses arising from the Covid-19 pandemic scenario. In the first half, the recurring profit was R$ 3.77 billion.

The result from financial intermediation in the first half was R$ 7.1 billion, a 11% decrease compared to the same period last year, reflecting the decrease in the credit and transfer portfolio and and a drop in the Selic rate, which remunerates our cash assets.

Equity sales in the half year contributed positively by R$ 8.0 billion to BNDES’s results, especially on the public offering of Petrobras shares in February. 

BNDES recorded an equity expense of R$ 1.29 billion in the half year, mainly influenced by the loss recorded by JBS. It is worth noting that, despite this negative result, JBS contributed positively to BNDES’s equity by recording foreign exchange gains with foreign controlled company directly in the Bank’s equity. 

Administrative and personnel expenses fell 8.3%, from R$ 1,214 million in the first half of 2019 to R$ 1,113 million in the first half of 2020.

Assets – BNDES System assets totaled R$ 747.9 billion on June 30, 2020, showing an R$ 19.7 billion (2.7%) increase in the semester. The increase resulted mainly from the inflow of resources from the National Treasury (R$ 17 billion), under PESE (Emergency Program for Job Support), in addition to the appropriation of exchange rate change and interest on the credit and transfer portfolio (R$ 30.3 billion). These factors were mitigated by the transfer of R$ 20 billion from the PIS-Pasep fund to emergency withdrawals by workers via FGTS and by the devaluation of the non-affiliated portfolio by R$ 13.3 billion.

The credit operations and transfer portfolio, net of provision, totaled R$ 444.3 billion, same level as the previous quarter, and represented 59.4% of total assets as of June 30, 2020. The Bank’s expanded credit portfolio reached R$ 457.6 billion.

Default over 90 days decreased in the semester, from 0.84% on December 31, 2019 to 0.46% on June 30, 2020, below SFN’s average default (2.88%).

The renegotiation index reached 37.99% on June 30, 2020, strongly impacted by renegotiations under the Standstill Covid-19. This measure, which allowed to suspend interest and principal payment for a period of six months, benefited R$ 1 for every R$ 3 of BNDES’s credit portfolio. 

In the second quarter, when the crisis set in, the number of hires was R$ 20.7 billion, 129% above the same period in 2019. 

The equity portfolio totaled R$ 77.3 billion on June 30, 2020. The position represents a 32.4% decrease in the first half, due to sales (R$ 23.8 billion), especially from Petrobras, and the devaluation of investments in nonaffiliated companies (R$ 13.3 billion), highlighting Petrobras, Eletrobras and Vale.

Funding sources – On March 30, the Worker’s Assistance Fund (FAT) and the National Treasury accounted respectively for 40.6% and 28.8% of BNDES funding sources.

The amount owed by BNDES to the National Treasury reached R$ 211.1 billion on June 30, 2020, an 5.7% increase compared to December 31, 2019, due to the inflow of resources from the National Treasury under PESE. Ordinary payments to the Treasury totaled R$ 7.6 billion and there were no early settlements in the semester.

Liabilities with external funding totaled R$ 37.8 billion on June 30, 2020 (a 31.4% increase in the semester, mainly due to the exchange rate effect).

Prudential limits – The basis for calculating the prudential limits established by the Central Bank of Brazil (BCB), the reference equity totaled R$ 180.3 billion on June 30, 2020 (compared to R$ 191.7 billion on December 31, 2019). The Basel Index remained comfortable, going from 36.8% at the end of December 2019 to 37.0% in June 2020, above the 9.25% required by the BCB.

Subsequent events – Some initiatives in July and August will impact the Bank’s future balance sheets, mainly the return of not transferred funds from the first version of the PESE (R$ 13.22 billion), the auction of Vale shares in the amount of R$ 8.14 billion and the sale of 73.8 million units issued by AES Tietê Energia S.A. owned by BNDESPAR.

The complete financial statements of BNDES and its subsidiaries will be available at the end of the presentation of results on the BNDES Investor Relations Portal.

BNDES against Covid-19 – Until August 13, the BNDES emergency measures to combat the crisis resulting from the new coronavirus pandemic totaled R$ 59.3 billion in approvals, benefiting 171,000 companies, 99.7% of them micro-, small- or medium-sized (MSME). It is estimated that these companies employ 5.2 million workers. The initiatives have been announced since March 22 and seek to preserve the companies’ economic activities during this period, besides enabling investments in the health sector. Below is a summary of the main measures:

• The working capital line for MSMEs exceeded the initial estimate of R$ 5 billion and has already approved R$ 6.4 billion, supporting a total of 19,600 enterprises.
• The selection of credit funds to MSMEs by alternative channels (such as fintechs or digital payment systems) is underway, expanding access to financing. BNDES will fund up to R$ 4 billion in total.
• In May, BNDES concluded a R$ 20 billion transfer from the PIS-Pasep fund to the FGTS, enabling immediate withdrawals by workers.
• PESE has already made it possible to pay the salaries of employees of 114,000 companies.
• The suspension of financing payments totaled R$ 12.4 billion, benefiting 28,500 MSMEs and 430 large companies.
• With a R$ 4 billion budget, emergency actions aimed at the public sector totaled R$ 3.9 billion in suspensions of payments. In addition, BNDES accelerated the release of financing contracted by states in the amount of R$ 455 million.
• Together with 15 other financial institutions, BNDES made available R$ 14.84 billion net to finance the electricity industry, as to avoid an immediate increase in tariffs.
• BNDES and the Ministry of Economy offered guarantees to 8,500 companies via the Emergency Credit Access Program, totaling R$ 8.8 billion.
• Matchfunding Salvando Vidas (i.e., Matchfunding Saving Lives), a crowdfunding action, raised R$ 70.6 million (half of this amount funded by BNDES) to purchase materials, supplies and equipment for santas Casas and philanthropic hospitals.
• Approvals of the Emergency Support Program to Combat the Coronavirus Pandemic totaled R$ 293 million for the purchase of equipment used in ICUs and diagnostic kits.
• As a result of the government’s discussion with the National Congress, more emergency actions are being structured, including the expansion of the PESE for companies with annual revenues above R$ 10 million, and the provision of R$ 10 billion for credit granting for micro- and small- companies by electronic payment machine operators.

You can monitor the emergency measures to combat the effects of the crisis caused by the pandemic on the Bank’s website.

Triennial Plan and Service Bank – Aside the emergency actions, BNDES works to meet the goals established in its Triennial Plan 2020-2022. The main highlights of the first half were the healthcare industry, with the construction/modernization of units of the Unified Health System (SUS) in 25 of the 27 states of the Federation; the energy industry, enabling the generation of 0.42 GW, enough to serve more than 980,000 households; and the logistics industry, with the auction of 1,300 km of highways in São Paulo. Between January and June 2020, BNDES disbursements for implementing fixed investments guaranteed 367,600 jobs.

BNDES ended the first half with mandates of 74 privatization projects (31 federal, 30 state and 13 municipal) that should generate investments of approximately R$ 172 billion. Some actions, such as the public lighting PPPs of Porto Alegre and Teresina have already been contracted. Regarding basic sanitation, three auctions are expected to be held this year (Rio de Janeiro, Alagoas and Cariacica) and at least five in 2021 (Amapá, Acre, Rio Grande do Sul, Porto Alegre and Ceará). Considering also the project from Minas Gerais (still without auction date), these actions should benefit 36 million people and enable R$ 55 billion in investments.