Nov 12, 2020

 The Brazilian Development Bank (BNDES) registered net income of R$ 8,73 billion in the third quarter of 2020. The performance, presented on Thursday, 12, was strongly influenced by the result obtained from shares in other companies, among them: the sale of shares issued by Vale, which contributed a net profit of R$ 4.0 billion; equity income of associated companies, with R$ 1.2 billion; and revenue from dividends and JCP, of R$ 938 million. Besides financial profit, BNDES sought in the period to offer positive social return to the country, for example, with emergency measures to protect jobs and lives before the Covid-19 pandemic crisis. These measures, which totaled R$ 136.6 billion, already helped support 267,000 companies, which employ 8.8 million people.

From January to September, BNDES reported net income of R$ 13.7 billion. This performance was impacted by the public offering of Petrobras shares in February, which contributed a net profit of R$ 4.1 billion and mitigated by constituting a credit risk provision of R$ 1.8 billion (R$ 1.0 billion net of taxes). The result of the same period of 2019 (R$ 16.5 billion) had been positively influenced by Fibria’s merger by Suzano (R$ 5.7 billion net of taxes), in addition to the sale of shares issued by Petrobras, Vale and Rede.

The third quarter registered a gross reversal of R$ 469 million in provisions due to the positive evolution of provisioned credits. In the first nine months of the year, the expenditure with credit risk provision was R$ 1.8 billion, impacted by the revision of ratings of companies in the sectors most affected by the COVID-19 pandemic.  The financial intermediation product reached R$ 3.9 billion in the third quarter of 2020, representing a 31% increase compared with the second quarter.

BNDES also improved its recurring results, which reached R$ 2.43 billion in the third quarter, compared to R$ 1.32 billion in the previous quarter. The recurring result excludes the volatility brought by the variable income portfolio and the adjustments in the credit risk provision.

In the year, personnel expenses showed stability from R$ 1.502 billion (2019) to R$ 1.505 billion (2020), when comparing the first nine months. The Retirement Income Plan (PEA), implemented in the second half of 2020, received membership of 137 employees, resulting in a total expenditure of R$ 43 million. The membership represents for BNDES a reduction of 5.2% in the staff and a reduction of 6.8% in the payroll, corresponding to a recurring annual saving of R$ 100 million.

Assets – BNDES System assets totaled R$ 764.4 billion as of September 30, 2020, with a R$ 36.2 billion (5.0%) increase in the first nine months of the year. The increase resulted mainly from the inflow of resources from the National Treasury (R$ 22 billion in total, of which R$ 4.8 billion has already been applied), under the Emergency Program for Job Support (PESE) and the Emergency Credit Access Program (PEAC), in addition to the appropriation of exchange rate and interest on the credit and transfer portfolio of R$ 39 billion. These factors were mitigated by transferring the entire balance of R$ 20.7 billion from the PIS-Pasep Fund to FGTS in the second quarter, which enabled emergency withdrawals by workers, and by devaluating the portfolio of non-associated companies by R$ 11.5 billion.

The credit and transfer portfolio, net of provision, totaled R$ 452.3 billion at the end of the third quarter, representing 59.2% of total assets as of September 30, 2020, implying a 2.4% increase over the balance of December 31, 2019.  

Delinquency above 90 days decreased from 0.84% in December 31, 2019 (disregarding operations with Union’s honor) to 0.18% in September 30, 2020, returning to the 2015 level and remaining well below the average delinquency of the National Financial System (2.43% on September 30, 2020). The renegotiation index reached 47.36% on September 30, 2020, strongly impacted by the temporary standstill of operations contracted with BNDES, due to the pandemic in the second quarter.

The equity portfolio in associated and non-associated companies totaled R$ 71.2 billion in September 30. The position represents a 37.8% decrease in the nine months, due to the devaluation of investments in non-associated companies (R$ 11.5 billion), highlighting Petrobras and Eletrobras, and the sale of shares (R$ 33.8 billion), notably from Petrobras and Vale. The disinvestments made during the third quarter totaled a gross result of R$ 7 billion (R$ 4.4 billion net).

Funding Sources – On March 30, FAT and National Treasury accounted for 40.1% and 27.9%, respectively, of BNDES funding sources. The amount due by BNDES to the National Treasury reached R$ 213 billion, representing a 6.7% increase compared to the end of 2019. The increase resulted from the intake of funds from the National Treasury (R$ 22 billion, of which R$ 4.8 billion has already been invested). There were no advance settlements in 2020, only ordinary payments in the amount of R$ 11.5 billion.

Liabilities with external borrowings totaled R$ 34.9 billion in September, representing a 21.2% increase compared to December 2019, mainly due to exchange rate effect, mitigated by amortizations at maturity.

Owners’ equity – BNDES’s equity remained at the same level, reaching R$ 104.5 billion in the third quarter. The negative equity valuation adjustment (notably shares in non-associated companies) of R$ 14 billion net was offset by net income of R$ 13.7 billion.

Prudential Limits – Basis for calculating the prudential limits established by the Central Bank, the BNDES’s Reference Equity totaled R$ 186.1 billion in September (compared to R$ 191.7 billion in December 31, 2019). The Basel Index remained comfortable, from 36.8% at the end of December 2019 to 40.1% in September 2020, above the 9.25% required by the Central Bank.

Subsequent Events – Some initiatives in October and November will impact BNDES’s future balance sheets, mainly the full sale by BNDESPar of R$ 6.9 billion in Suzano common shares, the raising of R$ 1 billion from the issuance of Green Financial Letter (LFV), the extension of standstill and the return to the Treasury of R$ 6.1 billion of unapplied PESE funding.

The complete financial statements of BNDES and its subsidiaries are on the BNDES Investor Relations Portal.

BNDES against Covid-19 – Until Monday (November 9), BNDES emergency measures to combat the crisis resulting from the new coronavirus totaled R$ 136.6 billion in approvals, benefiting 267,000 companies that employ 8.8 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, thus preserving lives and jobs.

Among the programs announced, the Emergency Credit Access Program (PEAC) deserves highlighting. Jointly launched by BNDES and the Ministry of Economy, the measure has already offered guarantees to financing operations for 96,000 small and medium-sized enterprises, totaling R$ 81 billion contracted financings until November 9.

On the other hand, standstill reached R$ 12.4 billion in suspensions for direct and indirect operations in its first phase. The initiative, originally aimed at companies with revenues from R$ 360,000 to R$ 10 million, began to include in the second round of applications (open until November 30) companies that make up to R$ 50 million, in specific sectors, and microentrepreneurs in microcredit operations. Also included are states and municipalities that have automatic operations contracted with BNDES via partner financial institutions.

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

Banking Service — The main highlights among the privatizations structured by BNDES in the period were the basic sanitation and public lighting sectors. A first block of the concession of water and sewage services to the 102 municipalities of Alagoas was auctioned on September 30 and, on October 20, the auction for the sewage concession of Cariacica (ES) took place.  In the public lighting sector, the PPP auction of Macapá (AP) was held on October 7 and the PPP contract of Vila Velha (ES) signed on October 20.

BNDES Banking Service also includes the following sanitation projects in progress and expected to be auctioned in 2021: Acre, Amapá, Ceará, Porto Alegre (RS), Rio de Janeiro and Rio Grande do Sul. Together, sanitation actions should benefit 36 million people and enable investments of R$ 55 billion.

Other projects highlighted in the Banking Service portfolio are privatizations in energy distribution: CEEE D – Companhia Estadual de Distribuição de Energia Elétrica (auction in the first quarter of 2021) and CEB – Companhia Energética de Brasília (auction to be held on 11/27/20).