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The Evolution of the BNDES’ Disbursements

R$ billion

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Operating statistics of the Brazilian Development Bank (BNDES) in the first quarter of 2017 reinforce the expectation of improving economic activity, with gradual recovery of the demand for BNDES funds throughout the year. An important sign appears in the numbers of the line BNDES Finame, which finances the acquisition of machinery and equipment. The approvals of this line (step prior to disbursement) increased 32% in the first three months of the year, in comparison with the first quarter of the previous year. R$ 4.6 billion were approved between January and March of this year against R$ 3.4 billion in the first quarter of 2016.

Consultations for financing in the infrastructure area also increased 25% in the first quarter of 2017, with projects totaling R$ 9.3 billion. In the Trade and Services sector, consultations increased 14% compared with the same quarter of the previous year, totaling R$ 5.3 billion. Another positive highlight in the quarter was the increase of 46% of disbursements for innovation, which totaled R$ 590 million.

Global numbers of disbursements, however, for reflecting consultations in previous years, take a little longer to respond. Still reflecting the economic framework of lower demand for financing in the last two years, the total of disbursements in the first three months of this year totaled R$ 15.1 billion, with decrease of 17% compared with the same period last year.

In March BNDES disbursed R$ 5.1 billion with 18% decrease compared with the same month last year, when R$ 6.2 billion was disbursed. Finame disbursements totaled R$ 4.1 billion in the first quarter of this year, 11% below the figure released in the same period last year.

It is noteworthy, however, that the decrease of disbursements is slowing down. In the first half of 2016, disbursements decreased 42% compared with the same period of the previous year. The second half showed milder decrease, 28%, also in relation to the same period of 2015. The decrease of 17% in the first quarter of 2017 confirms this trend.

Working capital and MSME – As a result of the economic context, the BNDES Progeren line, which finances working capital for companies with difficult access to short-term credit, continued as the main highlight in the disbursements of the first quarter. The line disbursed R$ 1.8 billion in the first quarter of the year, an increase of 345% compared with the same period of 2016. In just three months, BNDES Progeren disbursed more than half of the volume of credit released in this line for the whole of last year, which amounted to R$ 2.7 billion. In 12 months the total was R$ 4 billion, an increase of 138% compared with the previous year. About 80% of these funds were for micro, small and medium-sized enterprises (MSME), helping to increase the participation of the segment in the total volume of disbursements from the Bank, and avoiding more companies to enter judicial reorganization or bankruptcy, with the consequent loss of productive assets and jobs.

Between January and March of this year BNDES disbursed R$ 6.2 billion in more than 80 thousand operations with MSME, 41% of everything the Bank lent in the period. It is the largest share achieved by this segment on disbursements from the Bank in a quarter in the last three years. In the first quarter of 2015 and 2016 such participation corresponded to 30% and 39% respectively. In the last 12 months, between April 2016 and March 2017, the segment accounted for 31%.

The growth of the participation of MSME in BNDES disbursements reflects a number of initiatives launched in recent months to expand and simplify the access of this segment to credit from the Bank. Among them, creation of new distribution channels of the BNDES card, maturity increase, greater agility in processes, and the expansion from R$ 90 million to R$ 300 million of the revenue limit for the eligibility of companies in BNDES financing conditions for this segment.

The first quarter of this year had an increase of 27% in releases for medium-sized enterprises but there was stability between small enterprises and 33% decrease of disbursement to micro-enterprises. That explains the 11% decrease of disbursements for MSME in the period, despite the participation advancement of the segment in total disbursement of the Bank. The decrease of disbursements for large companies was nearly twice as high: 20%, compared with the same period of the previous year.

Farming and Cattle Raising – Among economic sectors, Farming and Cattle Raising stands out with R$ 3.3 billion released between January and March of this year, an increase of 6% compared with the same period last year. Motivated by the record crop, the sector was left with little more than 22% of everything that BNDES lent for investment in the first three months of this year, reflecting various agricultural programs of the Federal Government.

The largest share of BNDES disbursements went to Infrastructure, which accounted for 33.5% of the total with little more than R$ 5 billion in the quarter. Despite this cipher meaning a decrease of 13% compared with the first quarter of 2016, three segments of Infrastructure stood out positively. Rail transport and electric power had, respectively, an increase of 106% and 9%. The telecommunications sector amounted to disbursements of R$ 693 million in the first three months of the year, an increase of 929% compared to the same period last year, with a concentration of investments in modernization of networks.

Trade and Services sector stayed with almost 24% of the funds released by BNDES in the first quarter, totaling R$ 3.6 billion (-2%). The largest decline in the comparison with the same quarter of last year was in the Industry (-43%), whose idle capacity has not stimulated investments. R$ 3.1 billion were released, little more than 20% of the total disbursement of BNDES.

Regarding the regions, the release of credit for investments in the Northeast and Midwest increased respectively 14% and 29% in the first quarter, while there was a decrease in other regions in comparison with the same period in 2016. The largest decline was in the South region with a reduction of 35% of disbursements.

The BNDES Performance Bulletin is available here.

Development of BNDES net profit

R$ billion
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The Brazilian Development Bank (BNDES) registered a net income of R$ 1.34 billion in the first quarter of 2017. There was recovery in relation to the same period in 2016, when BNDES had calculated a net loss of R$ 2.17 billion. The gross result with shareholdings – which went from a loss of R$ 4.92 billion between January and June 2016, to a R$ 1.42 billion gain in the same period of 2017 – positively influenced the balance.

The 92.7% reduction of the spending on investment losses and the higher return provided by the variable income portfolio in the form of dividends, equity accounting and disposals, were the main contributions of the result of the shareholdings, originating mostly from the subsidiary of BNDESPAR holdings.

Regarding the roles of JBS, BNDESPAR decided to perform the calculations for verification of the recoverable value (impairment test) in the second half of 2017 only, due to the great volatility in the value of the company’s shares in the recent period.

Credit portfolio – In the net credit operations and transfers portfolio, there was a reduction of 4.6% in the first half of 2017, equivalent to R$ 27.83 billion, due to the fact that the settlements of the operations exceeded the disbursements carried out in the period and also because of the R$ 4.16 billion increase of the provision for credit risk. With that, financial availability grew 58.2% in the first half of 2017.

The financial intermediation product showed a reduction of R$ 3.9 billion in the comparison between the first half of 2016 and the first half of 2017 mainly due to the reduction in the average profitability of the treasury portfolio, in addition to the effect of the fall in the volume of the average credit portfolio.

Provision was made for a R$ 1.4 billion supplementary credit risk at the minimum required by Resolution CMN 2,682/99, aiming at covering additional risks due to the uncertainty of the current economic scenario. Thus, the provision for credit risk in the first half of 2017 reached R$ 17.11 billion, the equivalent to 2.85% of the total portfolio. Defaults for a period greater than 30 days retreated from 2.81% in December 2016 to 2.45% on June 30 this year. The credit operations and transfers portfolio maintained good quality, with 96.2% of its scheduled operations between levels AA and C. This level is higher than the average of 89.6% recorded by the Brazilian Financial System.

Assets and equity – The BNDES system’s assets totaled R$ 883.64 billion in  June 30, 2017, with a R$ 7.5 billion (0.9%) growth in the first half of the year, impacted by the income from the treasury and credit portfolios; FAT’s funds raising and emission of U$ 1 billion in green bonds in May.

In the first half of 2017, the net equity suffered a R$ 5 billion reduction, reflecting the negative equity valuation adjustment of portfolios of holdings in non-affiliated companies and of securities, which reached R$ 4.22 billion, and the payment of complementary dividends relating to the R$ 2.12 billion net profit of 2016. Thus, the total dividends paid to the Brazilian Treasury relating to 2016’s profit amounted to R$ 3.64 billion, reaching the limit of 60% foreseen in the new dividend policy of BNDES approved earlier this year.

The effects above considered, BNDES’s Net Equity totaled R$ 50.17 billion at the end of the first semester of 2017. The Reference Equity, a basis for the calculation of prudential limits established by the Brazilian Central Bank (BACEN), was R$ 126.59 billion in June 2017. The prudential limits of BNDES remained above the minimum required by the BACEN. BNDES’s Basel index in June 2017 reached 22.75%, above the 10.5% required by the BACEN.

The consolidated financial statements of BNDES for the first quarter of 2017 are available here and on the Brazilian Securities and Exchange Commission’s website (CVM).

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