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Commission File Number 1-15250

 

 

 

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.  Form 20-F ___X___ Form 40-F _______

 Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.  

Yes _______ No ___X____

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Table of Contents

 

1 - Press Release	3
Highlights	4
Main Information	6
Ratings	8
Book Net Income vs. Adjusted Net Income	8
Summarized Analysis of Adjusted Income	9
Economic Scenario	23
Main Economic Indicators	24
Guidance	25
Book Income vs. Managerial Income vs. Adjusted Income Statement	26
2 - Economic and Financial Analysis	31
Statement of Financial Position	32
Adjusted Income Statement	33
NII - Interest and Non-Interest Earning Portions	33
– NII – Interest Earning Portion	34
• Credit Margin – Interest Earning Operations	36
• Funding Margin – Interest Earning Operations	51
• Securities/Other Margin - Interest Earning Operations	56
• Insurance Margin - Interest Earning Operations	56
– NII - Non-Interest Earning Portion	57
Insurance, Pension Plans and Capitalization Bonds	58
– Bradesco Vida e Previdência	65
– Bradesco Saúde and Mediservice	67
– Bradesco Capitalização	68
– Bradesco Auto/RE and Atlântica Companhia de Seguros	70
Fee and Commission Income	72
Personnel and Administrative Expenses	78
– Operating Coverage Ratio	81
Tax Expenses	81
Equity in the Earnings (Losses) of Unconsolidated Companies	81
Operating Income	82
Non-Operating Income	82
3 - Return to Shareholders	83
Corporate Governance	84
Investor Relations – IR	84
Sustainability	84
Bradesco Shares	86
Market Capitalization	89
Main Indicators	90
Dividends/Interest on Shareholders’ Equity	91
Weight on Main Stock Indexes	91
4 - Additional Information	93
Market Share of Products and Services	94
Reserve Requirements	95
Investments in Infrastructure, Information Technology and Telecommunications	96
Risk Management	97
Capital Management	98
Capital Adequacy Ratio	99
5 - Independent Auditors’ Report	101
Independent Limited Assurance Report about Supplementary Accounting Information Included within the Economic and Financial Analysis Report	102
6 - Financial Statements, Independent Auditors’ Report on the Consolidated Interim Financial Statements and Fiscal Council’s Report	105

 

 

This Economic and Financial Analysis Report contains forward-looking statements related to our business. Such statements are based on management’s current expectations, estimates and projections concerning future events and financial trends that may affect our business. Words such as “believe”, “anticipate”, “plan”, “expect”, “intend”, “goal”, “estimate”, “forecast”, “predict”, “project”, “guidelines”, “should” and other similar expressions are used to indicate predicting statements. However, forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties that may be beyond our control. In addition, some forward-looking statements are based on assumptions which, depending on future events, may prove not to be accurate. Therefore, actual results may differ significantly from the plans, goals, expectations, projections and intentions expressed or implied in such statements.

The factors that may impact the actual results include, among others, changes in regional, national and international trade and economic policies; inflation; an increased number of defaults by borrowers in loan operations, with a consequent increase in the allowance for losses from loan operations; loss of ability to receive deposits; loss of customers or revenues; our ability to sustain and improve performance; changes in interest rates which may, among other things, adversely affect our margins; competition in the banking industry, financial services, credit card services, insurance, asset management and other related industries; government regulation and fiscal affairs; disputes or adverse legal proceedings or regulations; and credit and other risks involved in lending and investment activities.

As a result, one should not rely excessively on these forward-looking statements. The statements are valid only for the date on which they were drafted. Except as required by applicable law, we do not assume any obligation to update these statements as a result of new information, future developments or any other matters which may arise.

 

 

 

 

 

  2  Report on Economic and Financial Analysis – September 2014

 

 

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The main figures obtained by Bradesco in the first three quarters of 2014 are presented below: 1.   The Adjusted Net Income(1) in the first three quarters of 2014 stood at R$ 11.227 billion (a 24.7% increase compared to the R$ 9.003 billion Adjusted Net Income recorded in the same period of 2013), corresponding to earnings per share of R$ 3.44, and Return of 20.4% on the Average Adjusted Shareholder’s Equity(2). 2.   As for the source, the Adjusted Net Income is composed of R$ 8.057 billion from financial activities, representing 71.8% of the total, and of R$ 3.170 billion from insurance, pension plan and capitalization bond operations, which together account for 28.2%. 3.   On September 30, 2014, Bradesco market value stood at R$ 146.504 billion(3), showing a growth of 7.6% over September 30, 2013. 4.   Total Assets, in September 2014, stood at R$ 987.364 billion, an increase of 8.8% over September 2013 balance. The return on Average Total Assets was 1.6%. 5.   In September 2014, the Expanded Loan Portfolio(4) reached R$ 444.195 billion, up 7.7% over September 2013. Operations with individuals totaled R$ 138.028 billion (increase of 8.6% over September 2013), while corporate segment operations totaled R$ 306.167 billion (up 7.2% over September 2013). 6.   Assets under Management stood at R$ 1.385 trillion, a 10.3% increase from September 2013.   7.   The Shareholders’ Equity totaled R$ 79.242 billion in September 2014, 18.2% more than in September 2013. The Basel Capital Adequacy Ratio stood at 16.3% in September 2014, 12.6% of which was classified as Common Equity/Tier I. 8.   A total of R$ 3.760 billion were paid and recorded in provision to shareholders, as Interest on Equity and Dividends for the first three quarters of 2014, R$ 1.575 billion of which as paid monthly and interim dividends, and R$ 2.185 billion recorded in provision.

9.   The Interest Earning Portion of the Net Interest Income stood at R$ 35.043 billion, up 10.5% compared to the first three quarters of 2013. 10. The Delinquency Ratio over 90 days remained stable in the last twelve months, and stood at 3.6% on September 30, 2014. 11. The Operating Efficiency Ratio (ER)(5) in September 2014 was 39.9%, the best level ever recorded (42.1% in September 2013), while in the “risk-adjusted” concept it stood at 48.7% (52.5% in September 2013). It is worth mentioning that, in the third quarter of 2014, we recorded the best quarterly ER (38.5%) in the past 5 years. 12. Insurance Written Premiums, Pension Plan Contributions and Capitalization Bond Income totaled R$ 38.346 billion in the first three quarters of 2014, up 8.8% over the same period in 2013. Technical Reserves stood at R$ 145.969 billion, an increase of 9.3% compared to September 2013 balance. 13. Investments in infrastructure, information technology and telecommunications amounted to R$ 3.471 billion in the first three quarters of 2014.   14.Taxes and contributions, including social security, paid or recorded in provision, summed R$ 18.438 billion, R$ 7.244 billion of which referred to taxes withheld and collected from third parties, and R$ 11.194 billion calculated based on activities developed by Bradesco Organization, equivalent to 99.7% of the Adjusted Net Income(1).   15. Bradesco has a large Customer Service network in Brazil, with highlight to the 4,659 Branches and 3,497 Service Points – PAs. Customers can also count with 1,159 Electronic Service Points - PAEs, 49,020 Bradesco Expresso points, 31,107 Bradesco Dia & Noite (Day&Night) ATMs, and 16,946 Banco24Horas Network ATMs.

(1) According to the non-recurring events described on page 8 of this Report on Economic and Financial Analysis; (2) Excludes mark-to-market effect of Securities Available for Sale recorded under Shareholders’ Equity; (3) Number of shares (excluding treasury shares) multiplied by the closing price for common and preferred shares on the last trading day of the period; (4) Includes sureties and guarantees, letters of credit, advances of credit card receivables, co-obligations in loan assignments (receivables-backed investment funds and mortgage-backed receivables), co-obligations in rural loan assignments and operations bearing credit risk – commercial portfolio, which includes debentures and promissory notes; and (5) In the last 12 months. 

 

  4  Report on Economic and Financial Analysis – September 2014

 

16.Payroll, plus charges and benefits, totaled R$ 8.670 billion. Social benefits provided to all 98,849 employees of Bradesco Organization and their dependents amounted to R$ 2.140 billion, while investments in education, training and development programs totaled R$ 93.760 million. 17. In July 2014, Bradesco’s internal audit process was awarded the Certificate of Quality by the Institute of Internal Auditors (IIA), institution present in more than 130 countries, qualified to rate and grant Certification of Quality to Internal Audits. 18. In September 2014, for the ninth consecutive year, Bradesco was chosen to join the Dow Jones Sustainability Index (DJSI), in the “Dow Jones Sustainability World Index” and “Dow Jones Sustainability Emerging Markets” portfolios, a short list of the New York Stock Exchange that comprises the top companies for corporate sustainability practices. 19.  Major Awards and Acknowledgments in the period: ·       It was considered the most valuable Bank brand in Latin America and came 5th in the overall ranking among all the segments (BrandAnalytics/Millward Brown consultancy); ·       Bradesco was granted the title in the category “Banks”, and Bradesco Seguros in the category “Insurances”, in the “Anuário Época Negócios 360º”, ranking that listed the top 250 companies in the country (Época Negócios Magazine, in partnership with Dom Cabral Foundation); ·       It was granted the “Technology Awards 2014”, in the category “Social Media”, with the case “F. Banking Bradesco - Investimentos e Crédito” via Facebook; and ·       For the 15th time, it appeared in the annual list of the “130 Melhores Empresas para Trabalhar no Brasil” [130 Top Companies to Work in Brazil] (Época Magazine, with rating by the Great Place to Work Institute).

The Bradesco Organization fully complies with best global sustainability and corporate governance practices, particularly: Global Compact, PRI (Principles for Responsible Investment), Equator Principles, Carbon Disclosure Project and Green Protocol. Our sustainability actions, strategies and guidelines are guided by best corporate governance practices. The Organization’s main activities focus on banking inclusion, social and environmental variables for loan approvals and product offerings, based on social and environmental aspects. Regarding responsible management and engagement with stakeholders, we highlight activities geared towards valuing professionals, improving the workplace, client relations, managing suppliers and adopting environmental management practices. We also highlight the Organization’s role in Brazilian society as one of its leading social investors, supporting education, environment, culture and athletic programs. We point out Bradesco Foundation, which has been developing an extensive social and educational work for 57 years, with 40 schools in Brazil. Its 2014 budget is foreseen at R$ 523.434 million, of which R$ 71.095 million are intended to expand classrooms for High School restructuring and R$ 452.339 million that will allow it to provide free quality education: a) 105,672 students in its Schools, in the following levels: Basic Education (from Kindergarten to High School and Vocational Training), Youth and Adult Education and in Preliminary and Continuing Training focused on creating jobs and income; b) 370,000 students who will complete at least one of the distance-learning courses (EaD) available on the e-learning portal; and c) 21,527 beneficiaries in partnership projects and initiatives, such as the Digital Inclusion Centers (CIDs), the Educa+Ação Program, and in technology courses (Educar e Aprender). In addition to free formal and quality education, the approximately 45 thousand students enrolled in Basic Education are also provided with uniforms, school supplies, food and medical and dental assistance.

Bradesco    5      

 

 

(1) Expanded Loan Portfolio: includes sureties and guarantees, letters of credit, advances of credit card receivables, co-obligations in loan assignments (receivables-backed investment funds and mortgage-backed receivables), co-obligations in rural loan assignments and operations bearing credit risk – commercial portfolio, covering debentures and promissory notes;

(2) Includes provision for guarantees provided, encompassing sureties, guarantees, letters of credit, and standby letter of credit, which comprises the concept of “excess” ALL;

(3) In the last 12 months;

(4) For comparison purposes, shares were adjusted in accordance with bonuses and stock splits;

(5) Excluding mark-to-market effect of Securities Available for Sale recorded under Shareholders’ Equity;

(6) Year-to-Date Adjusted Net Income;

(7) Excludes additional reserves;

(8) Number of shares (excluding treasury shares) multiplied by the closing price for common and preferred shares on the period’s last trading day;

(9) As defined by the Brazilian Central Bank (Bacen);

(10) Delinquent Credits;

(11) Since October 2013, the Capital Adequacy Ratio calculation follows regulatory guidelines set forth in CMN Resolutions No. 4.192/13 and 4.193/13 Capital Adequacy Ratio (Basel III);

(12) PA (Service Branch): a result of the consolidation of PAB (Banking Service Branch), PAA (Advanced Service Branch) and Exchange Branches, according to CMN Resolution No. 4.072/12; and PAEs – ATMs located on a company’s premises;

(13) Including overlapping ATMs within the Bank’s own network and the Banco24Horas Network;

(14) Such reduction relates to the sharing of external network ATM terminals by the Banco24Horas ATM network;

(15) Number of individual customers (Corporate Tax IDs (CNPJs) and Individual Taxpayer IDs (CPFs));

(16) Refers to first and second checking account holders; and

(17) Number of accounts.

 

       Press Release

 

 

 

(1)   In September 2014, the rating agency Standard & Poor’s raised the nationwide short-term rating of Bradesco to the highest level in its scale (brA-1+). This action reflects the update performed by the agency of its rating criterion nationwide.

 

The main non-recurring events that affected Book Net Income in the periods below are presented in the following comparative chart:

 

To provide for better understanding, comparison and analysis of Bradesco results, we use the Adjusted Income Statement for analysis and comments contained in this Report on Economic and Financial Analysis, obtained from adjustments made to the Book Income Statement, detailed at the end of this Press Release, which includes adjustments to non-recurring events shown on the previous page. Note that the Adjusted Income Statement serves as the basis for the analysis and comments made in Chapters 1 and 2 of this report.

(1)   Income from Insurance, Pension Plans and Capitalization Bonds = Insurance, Pension Plan and Capitalization Bond Retained Premiums – Changes in Technical Reserves for Insurance, Pension Plans and Capitalization Bonds – Retained Claims – Capitalization Bond Draws and Redemption – Insurance, Pension Plan and Capitalization Bond Sales Expenses.

Bradesco    9      

 

The return on the Average Adjusted Shareholder’s Equity (ROAE) reached 20.4% in September 2014. Such performance stems from the growth of the adjusted net income, which increased by 3.8% in the quarterly comparison, and 24.7% comparing the first three quarters of 2014 with the same period of the previous year. The main events that affected adjusted net income are detailed below. Adjusted net income came to R$ 3,950 million in the third quarter of 2014, up R$ 146 million compared to the previous quarter, mainly due to (i) higher income from provision of services, resulting from an increased business volume and extended service channels; (ii) higher net interest income, a result of increased income with “interests” earning portion; and partially affected by: (iii) growth of expense with allowance for loan losses; and (iv) increased personal expenses, which mainly results from collective agreement. Year-over-year, adjusted net income for the first three quarters of 2014 increased by R$ 2,224 million, basically reflecting: (i) higher net interest income; (ii) greater fee and commission income; (iii) better operating income of Insurances, Pension Plan and Capitalization Bond; and affected, in part, by: (iv) higher personnel expenses. Shareholders’ Equity stood at R$ 79,242 million in September 2014, up 18.2% over September 2013. The Capital Adequacy Ratio recorded 16.3%, 12.6% of which was classified as Common Equity/Tier I. Total Assets stood at R$ 987,364 million in September 2014, an increase of 8.8% over September 2013, driven by the increased business volume. Return on Average Assets (ROAA) reached 1.6%.

  10  Report on Economic and Financial Analysis – September 2014

 

The ER improved in all calculation criteria presented. Highlight to the ER in the last 12 months(1), reaching 39.9% in the third quarter of 2014, the lowest level ever recorded, with improvement of 1.0 p.p. compared with the previous quarter, and 2.2 p.p. over the same period of 2013, and the quarterly ER that stood at 38.5%. The events that have most contributed to this improvement in the ER were: (i) the income growth, with highlight to (a) provision of services and (b) net interest income - influenced by the increase in the average business volume; and (ii) the behavior of operating expenses, affected by the rigid costs control, even considering the organic growth in the period and the impact of 2013 and 2014 collective agreements, in addition to the benefits of new systems that came into operation in due to the IT upgrading process. The “risk-adjusted” ER, which reflects the risk’s impact associated to loan operations(2), totaled 48.7%, an improvement of 1.3 p.p. and 3.8 p.p. compared to the previous quarter and the same period in 2013, respectively. Such improvement was mostly influenced by the stabilization of the levels of allowances for loan loss expenses in the last 12 months, resulting from the sustained loan portfolio quality, in addition to the aforementioned reasons.

(1)   ER = (Personnel Expenses – Employee Profit Sharing + Administrative Expenses)/(Net Interest Income + Fee and Commission Income + Income from Insurance + Equity in the Earnings (Losses) of Unconsolidated Companies + Other Operating Income – Other Operating Expenses). If we considered the ratio between (i) total administrative costs (Personnel Expenses + Administrative Expenses + Other Operating Expenses + Tax Expenses not related to income generation + Insurance Sales Expenses) and (ii) net income generation of related taxes (not considering Insurance Claims and Sales Expenses), our ER accumulated in the last 12 months in the third quarter of 2014 would be 43.7%; and

(2)   Including ALL expenses, adjusted for discounts granted, loan recovery and sale of foreclosed assets, among others.

 

Bradesco    11      

 

In the quarter-over-quarter comparison, the R$ 215 million growth was mainly due to: (i) higher results obtained with the “interest” margin totaling R$ 384 million, particularly with “Loan” and “Securities/Other”; and offset (ii) by the reduction of the “non-interest” margin totaling R$ 169 million, due to lower gains from the market arbitrage.		Year-over-year, the net interest income for the first three quarters of 2014 rose by R$ 3,287 million, mainly due to: (i) a R$ 3,343 million increase in interest earning operations, due to an increase in business volume, particularly in the Loan and Funding business lines, and in the latter case, cost-reduction management.

  12  Report on Economic and Financial Analysis – September 2014

 

 

 

 

The annualized interest financial margin rate stood at 7.5% in the third quarter of 2014, down 0.2 p.p. on the previous quarter, mainly due to the results obtained from Insurance interest margins.

 

 

Bradesco    13      

 

In September 2014, Bradesco expanded loan portfolio totaled R$ 444.2 billion. The increase of 2.1% in the quarter was a result mostly: (i) of the portfolio of Corporations, which represented a growth of 2.6%; and (ii) of Individuals, whose growth stood at 2.2%. In the last twelve months, the portfolio increased by 7.7%: (i) 10.1% in Corporations; (ii) 8.6% in Individuals; and (iii) 2.7% in SMEs.  In the Corporate segment, the products that posted the strongest growth in the last 12 months were: (i) real estate financing; and (ii) foreign transactions. For Individuals, the highlights were: (i) real estate financing; and (ii) payroll-deductible loan. In the two segments, the higher increase is related to products with lower risk.

(1)   In addition to Bacen loan portfolio, it includes sureties, guarantees, letters of credit, advances of credit card receivables, debentures, promissory notes, co-obligation in receivables-backed investment funds, mortgage-backed receivables, and farm loans.

For more information, see Chapter 2 of this Report.

 

In the third quarter of 2014, allowance for loan losses (ALL) stood at R$ 3,348 million, representing a variation of 6.6% over the previous quarter, basically affected by: (i) the increase of 2.2% in the volume of credit operations - Bacen concept; and (ii) the continued deterioration of the risk level of individual cases, occurred in operations with corporate clients, beginning in the 2nd quarter of 2014. In the comparison between the first three quarters of 2014 and the same period of the previous year, this expense increased by 2.9%, despite the 7.8% increase in loan operations – as defined by Bacen, resulting from the stable delinquency level in the last 12 months. It is important to note that these results reflect the consistency of policy and proceedings for loan granting, of the quality of obtained guarantees, as well as of an enhanced credit recovery process.

(1)   Includes provision for guarantees provided, encompassing sureties, guarantees, letters of credit, and standby letter of credit, which comprises the concept of “excess” ALL.

For more information, see Chapter 2 of this Report.

 

  14  Report on Economic and Financial Analysis – September 2014

 

 

The total delinquency ratio, which comprehends transactions due over 90 days, was stable in the year-over-year comparison . In the quarter-over-quarter comparison, there was a slight increase, mostly due to the slowing of the credit portfolio growth, as well as some specific cases occurring in operations with corporate clients, not representing a change in tendency in the direction of the ratio, which can be demonstrated below in the short-term delinquency chart of 15 to 90 days, indicating stability at this level.

Compared to the last quarter, short-term delinquency, including transactions overdue between 15 and 90 days, decreased for Individuals, and remained stable for Corporations.

 

(1)   As defined by the Brazilian Central Bank (Bacen).

Bradesco    15      

 

Bradesco monitors the development of its loan portfolio, as well as respective risks, by internally applying the expanded portfolio concept. In addition to the allowance for loan losses (ALL) required by Bacen, Bradesco has excess ALL to support potential stress scenarios, as well as other operations/commitments bearing credit risks.

The following graph presents the changes in coverage ratio of the Allowance for Loan Losses for loans overdue for more than 60 and 90 days. In September 2014, these ratios stood at comfortable levels, reaching 154.2% and 187.2%, respectively.

(1)   Includes provision for guarantees provided, encompassing sureties, guarantees, letters of credit, and standby letter of credit, which comprises the concept of “excess” ALL.

 

  16  Report on Economic and Financial Analysis – September 2014

 

Net income for the third quarter of 2014 totaled R$ 1.058 billion, up 20.5% compared to the same period in the previous year (R$ 878 million in the third quarter of 2013), and compared to the second quarter of 2014, which totaled R$ 1.072 billion, the Net Income reduced by 1.3%, and an annualized return on the Adjusted Shareholder’s Equity of 25.4%.

Year to Date Net income for September 2014 stood at R$ 3.170 billion, up 15.7% compared to the same period in the previous year (R$ 2.739 billion), for a return on Adjusted Average Equity of 23.9%.

 

(1)   Excluding additional provisions.

 

 

       Press Release

 

In a comparison between the third quarter of 2014 and the same period of the previous year, there was an increase of 16.6% in written premiums, pension plan contribution and capitalization bond income. As for the second quarter of 2014, it reduced by 7.8%, due to the exceptional growth of 46.2% in the previous quarter of “Life and Pension Plan” products. Cumulatively, production increased by 9.8%, without considering the DPVAT agreement, over the same period of the previous year, influenced by “Auto RE”, “Health” and “Capitalization” products, which grew 30.9%, 21.0% and 17.0%, respectively. The net income in the third quarter of 2014 was 20.5% higher than the result in the same period of the previous year, basically due to: (i) the 16.6% increase in revenue; (ii) improved financial and equity income; (iii) improved administrative efficiency ratio; and (iv) sustained claims ratio.

The net income until September 2014 increased 15.7% in comparison with the net income calculated for the same period of the previous year, due to: (i) increased revenue; (ii) improved financial and equity income; and (iii) claims and sales ratios kept at the same levels calculated until September 2013. The net income of the third quarter of 2014 was 1.3% lower than the figure calculated in the previous quarter, basically due to: (i) the reduction in revenue of 7.8%; (ii) increase of 2.5 p.p. in claims ratio; (iii) the decrease in the financial result; counterbalanced, in part: (iv) by the improvement of 0.7 p.p. in sales; and (v) by the increase in operating incomes and equity result.

According to Resolution CNSP No. 302/13, corporations should have adjusted shareholder’s equity (ASE) equal to or higher than the minimum capital required (MCR). MCR is equivalent to the largest value between the base capital and risk capital. Until the National Council of Private Insurance (CNSP) regulates the market-risk additional capital, the Company is calculating the venture capital based on underwriting, credit and operating risks. For companies regulated by the ANS, Normative Resolution No. 209/09 establishes that corporations should have adjusted shareholder’s equity (ASE) equal to or higher than the Solvency Margin.

The capital adjustment and management process is continuously monitored, and aims to ensure that Grupo Bradesco Seguros keeps a solid capital base to support the development of activities and cope with the risks in any market situation, meeting regulatory requirements and/or Corporate Governance aspects. Companies must permanently maintain a capital compatible with the risks for their activities and transactions, according to the characteristics and peculiarities of each company belonging to Grupo Bradesco Seguros, represented by adequate capital levels. Grupo Bradesco Seguros permanently observes the limits required by the respective regulatory entities. The Minimum Capital Required on September 30, 2014 was R$ 7.082 billion (Aug/14).

  18  Report on Economic and Financial Analysis – September 2014

 

 

 

 

In the third quarter of 2014, provision of services income amounted to R$ 5,639 million, with growth of R$ 311 million or 5.8% over the previous quarter, mainly resulting from increased business volume. The revenues that have most contributed to this result were those coming from: (i) funds management; (ii) credit operations; (iii) card income; and (iv) checking account income. In the comparison between the first three quarters of 2014 and the same period of the previous year, the increase of R$ 1,691 million, or 11.6%, was mostly due to our increased customer base, combined with a higher volume of operations resulting from ongoing investments in customer service channels and technology. It is worth highlighting that the incomes that have most contributed to this result derived from: (i) the good performance of the cards segment, result of (a) increased revenue; (b) increased credit and debit cards base; and (c) the greater volume of transactions made; (ii) the growth of checking account incomes, due to increased business and in the account-holder customers base, which presented a net growth of 177,000 active account-holder customers in the period; (iii) higher incomes from credit operations, resulting from increased volume of contracted operations and sureties and guarantees operations in the period; and increased incomes from: (iv) consortium management; (v) underwriting/financial advising; and (vi) collection.

 

Bradesco    19     

 

 

In the third quarter of 2014, the increase of R$ 116 million or 3.4% over the previous quarter is basically composed of the variation in the “structural” portion, due to increased wage levels and labor obligations updates, in accordance with collective agreement. In the comparison between the first three quarters of 2014 and the same period of the previous year, the R$ 695 million or 7.2% increase was mainly due to: ·         by the growth of R$ 509 million of the “structural” portion, related to higher expenses with payroll, social charges and benefits, affected by increased wage levels, in accordance with 2013 and 2014 collective agreements (readjustments of 8.0% and 8.5%, respectively); and ·         by the “non-structural” portion, totaling R$ 186 million, which resulted mainly from higher expenses with: (i) profit and results sharing of managers and employees; and (ii) termination and charges costs.

Note: Structural Expenses = Salaries + Social Charges + Benefits + Pension Plans.

Non-Structural Expenses = Employee and Management Profit Sharing + Training + Labor Provision + Costs with Termination of Employment Contracts.

 

  20  Report on Economic and Financial Analysis – September 2014

 

In the comparison between the first three quarters of 2014 and the same period of the previous year, total administrative expenses remained stable, with variation of 0.2%, while inflation, IPCA and IGP-M ratios showed variations of 6.75% and 3.54%, respectively. Such behavior reflects the constant control over costs, despite (i) the expansion in business volumes and (ii) the organic growth recorded in the period, with the opening of 2,304 Service Points, with highlight to Bradesco Expresso, for totaling 74,028 Service Points on September 30, 2014. In the third quarter of 2014, the 1.5% increase in administrative expenses compared to the previous quarter resulted mostly from higher business and service volumes in the quarter, which ultimately generated higher expenses with: (i) depreciation and amortization; (ii) outsourced services; (iii) data processing; (iv) marketing and advertising; and offset by smaller expenses with: (v) maintenance and preservation of assets.

 

In the third quarter of 2014, other operating expenses, net of other operating income, totaled R$ 1,311 million, reduction of R$ 22 million over the previous quarter. In the comparison between the first three quarters of 2014 and the same period of the previous year, the R$ 524 million increase basically reflects: (i) higher expenses with operating provisions, mainly contingent liabilities; and (ii) higher expenses with the “Credit Card” product sales.

 

 

Bradesco    21