Bradesco(US:BBD)2022-03-30 16:00Consolidated Financial Statements Statement of Financial Position Total assets increased to R$1,398.8 billion in 2021, driven by loans and securities, with liabilities and equity also rising Consolidated Statement of Financial Position (R$ thousand) | Category | On December 31, 2021 | On December 31, 2020 | | :--- | :--- | :--- | | Total Assets | 1,398,797,955 | 1,342,534,904 | | - Financial instruments | 1,243,711,797 | 1,182,097,164 | | - Loans | 509,982,031 | 445,665,923 | | Total Liabilities | 1,251,666,270 | 1,198,827,307 | | - Deposits from customers | 573,321,954 | 548,238,035 | | Total Equity | 147,131,685 | 143,707,597 | | - Equity attributable to shareholders | 147,121,011 | 143,702,640 | Income Statement Net income attributable to shareholders increased 32.6% to R$21.95 billion in 2021, driven by higher net financial intermediation revenue and reduced credit loss expenses Annual Income Statement Highlights (R$ thousand) | Metric | Year ended Dec 31, 2021 | Year ended Dec 31, 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Revenue from financial intermediation | 111,027,074 | 86,079,893 | +29.0% | | Net revenue from financial intermediation | 61,564,608 | 27,874,102 | +120.8% | | Expected Credit Loss Expense | (15,453,199) | (25,228,742) | -38.7% | | Operating profit/(loss) | 27,086,863 | 1,639,720 | +1552.0% | | Net income attributable to shareholders | 21,945,688 | 16,546,577 | +32.6% | | Earnings per common share (R$) | 2.15 | 1.62 | +32.7% | Statement of Comprehensive Income Total comprehensive income was R$13.3 billion in 2021, lower than net income due to R$8.6 billion in negative other comprehensive income, primarily from unrealized securities losses Comprehensive Income Summary (R$ thousand) | Item | Year ended Dec 31, 2021 | Year ended Dec 31, 2020 | | :--- | :--- | :--- | | Net income for the period | 21,968,135 | 16,563,945 | | Other comprehensive income | (8,620,526) | (1,019,187) | | - Securities available for sale | (8,275,592) | (942,992) | | - Cash flow hedge | (276,427) | (184,591) | | Total comprehensive income | 13,347,609 | 15,544,758 | Statement of Changes in Shareholders' Equity Shareholders' equity increased to R$147.1 billion in 2021, driven by R$21.9 billion net income and a R$4.0 billion capital increase, partially offset by distributions and valuation adjustments Changes in Shareholders' Equity 2021 (R$ thousand) | Description | Amount | | :--- | :--- | | Balance on December 31, 2020 | 143,702,640 | | Capital increase with reserves | 4,000,000 | | Asset valuation adjustments | (8,620,526) | | Net income | 21,945,688 | | Interest on Shareholders' Equity Paid | (7,240,089) | | Dividends paid | (2,000,000) | | Balance on December 31, 2021 | 147,121,011 | Statement of Added Value Total added value for distribution more than doubled to R$53.3 billion in 2021, primarily from financial intermediation, with 41.2% allocated to shareholders Distribution of Added Value (R$ thousand) | Category | 2021 | % of Total | 2020 | % of Total | | :--- | :--- | :--- | :--- | :--- | | Added value to distribute | 53,304,741 | 100.0% | 26,034,100 | 100.0% | | Personnel | 16,169,813 | 30.3% | 15,194,013 | 58.4% | | Tax, fees and contributions | 12,800,020 | 24.0% | (8,120,247) | (31.2%) | | Remuneration for providers of capital | 2,366,773 | 4.4% | 2,396,389 | 9.2% | | Added Value distributed to shareholders | 21,968,135 | 41.2% | 16,563,945 | 63.6% | Statement of Cash Flows The company experienced a net cash outflow of R$87.3 billion from operating activities in 2021, a reversal from 2020, resulting in a R$119.4 billion net decrease in cash and equivalents Consolidated Statement of Cash Flows (R$ thousand) | Cash Flow Category | Year ended Dec 31, 2021 | Year ended Dec 31, 2020 | | :--- | :--- | :--- | | Net cash provided by/(used in) operating activities | (87,294,021) | 149,026,046 | | Net cash provided by/(used in) investing activities | (32,415,660) | 18,722,591 | | Net cash provided by/(used in) financing activities | 271,269 | (41,505,780) | | Net increase/(decrease) in cash and cash equivalents | (119,438,411) | 126,242,857 | | Cash and cash equivalents - at the end of the period | 70,695,332 | 189,954,270 | Notes to Financial Statements General Information and Accounting Policies (Notes 1-4)%20General%20Information%20and%20Accounting%20Policies) This section outlines the company's universal banking operations, financial statement preparation under Brazilian Central Bank rules (similar to IFRS), and key accounting estimates for loan losses and fair value - Banco Bradesco S.A. is a universal bank operating directly and through subsidiaries in various financial sectors, including leasing, investment banking, insurance, and credit cards21 - The financial statements are prepared according to Brazilian Central Bank rules, which aim for similarity with International Financial Reporting Standards (IFRS)22 - The preparation of financial statements requires significant management estimates and judgments, particularly for the allowance for credit losses, fair value of financial instruments, impairment of assets, taxes, and contingent provisions5455 Financial Instruments (Notes 8-10)%20Financial%20Instruments) Total securities reached R$392.1 billion in 2021, with 57.6% available-for-sale, and the loan portfolio grew 14.4% to R$510.0 billion, with derivatives showing a net positive fair value Securities Breakdown (R$ thousand) | Category | On Dec 31, 2021 | % of Total | On Dec 31, 2020 | % of Total | | :--- | :--- | :--- | :--- | :--- | | Trading securities | 109,215,563 | 27.9% | 54,486,599 | 16.6% | | Available-for-sale securities | 225,955,035 | 57.6% | 208,948,127 | 63.5% | | Held-to-maturity securities | 56,939,643 | 14.5% | 65,269,589 | 19.9% | | Total | 392,110,241 | 100.0% | 328,704,315 | 100.0% | Loan Portfolio by Type (R$ thousand) | Loan Type | On Dec 31, 2021 | On Dec 31, 2020 | | :--- | :--- | :--- | | Discounted trade receivables and loans | 287,155,646 | 245,753,248 | | Financing and on-lending | 199,312,644 | 179,849,642 | | Agricultural and agribusiness loans | 23,513,741 | 20,063,033 | | Total Loan Subtotal | 509,982,031 | 445,665,923 | - The allowance for expected credit losses stood at R$45.11 billion as of December 31, 2021, slightly down from R$45.20 billion at the end of 2020129 Liabilities and Equity (Notes 16-24)%20Liabilities%20and%20Equity) Customer deposits, a key funding source, increased to R$573.3 billion in 2021, while subordinated debt remained stable, and shareholders' equity saw a R$4.0 billion capital increase and R$9.2 billion in distributions Deposits from Customers (R$ thousand) | Deposit Type | On Dec 31, 2021 | On Dec 31, 2020 | | :--- | :--- | :--- | | Demand deposits | 56,769,951 | 50,909,043 | | Savings deposits | 139,341,042 | 136,698,248 | | Time deposits | 377,210,961 | 360,630,744 | | Total | 573,321,954 | 548,238,035 | Subordinated Debt Movement 2021 (R$ thousand) | Description | Amount | | :--- | :--- | | Opening Balance | 53,255,401 | | Issuance | 9,130,200 | | Settlement and interest payments | (11,165,628) | | Closing Balance | 54,459,518 | - A capital increase of R$4.0 billion was approved in March 2021 through the capitalization of profit reserves, with a bonus share distribution of 1 new share for every 10 held183 Other Disclosures (Notes 33, 34, 35, 36, 37)%20Other%20Disclosures) This section covers risk and capital management, including a 15.8% Basel III ratio, R$81.2 billion in deferred tax assets, COVID-19 impacts, and the acquisition of Banco Digio S.A Basel Ratio | Ratio | On Dec 31, 2021 | On Dec 31, 2020 | | :--- | :--- | :--- | | Basel ratio | 15.8% | 15.8% | | Tier I capital | 13.7% | 13.8% | | Tier II capital | 2.1% | 2.0% | - The COVID-19 pandemic is noted as a significant risk, potentially impacting loans, funding costs, and the valuation of financial instruments. The company has established protocols and is actively monitoring the situation264265 - In October 2021, Bradesco agreed to acquire the remaining 49.99% of Banco Digio S.A. for R$625 million, making it a wholly-owned subsidiary to enhance its digital strategy. The transaction was approved by BACEN in February 2022266 Independent Auditor's Report Opinion and Basis for Opinion KPMG issued an unqualified opinion, affirming that Banco Bradesco S.A.'s consolidated financial statements as of December 31, 2021, are presented fairly in all material respects - The auditor issued an unqualified opinion, concluding that the financial statements present fairly, in all material respects, the consolidated financial position of the company267 - The financial statements were prepared to meet the specific requirements of Resolution 4280/13 of the National Monetary Council (CMN) and may not be suitable for other purposes267 Key Audit Matters Key audit matters included the measurement of allowance for loan losses, valuation of private issuer securities, provisions for contingencies, recoverability of deferred tax assets, intangible asset impairment, and IT controls - Key audit matters included: * Allowance for loan losses: Due to significant judgment in classifying loans and determining the supplementary provision * Valuation of private issuer securities: Due to judgment in methods and assumptions for securities with unobservable market prices (Level 2 and 3) * Provisions for legal contingencies: Uncertainty in measuring provisions for tax, civil, and labor lawsuits * Recoverability of deferred tax assets: Judgment required to evaluate projections of future taxable profits * Impairment of intangible assets: High degree of subjectivity in determining assumptions for impairment tests * IT Controls: High dependence on technology systems and the importance of access and change management controls268269272