BNDES - Brazilian Development Bank

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Performance in 2010

The Evolution of the BNDES’ Disbursements in 2010

R$ billion
The Evolution of the BNDES’ Disbursements

The BNDES’ disbursements reached R$ 168.4 billion in 2010, a 23% increase when compared to the previous year. The result takes into consideration Petrobras’ R$ 24.7 billion capitalization operation. When this operation – a one-off and non-recurring – is not considered, the Bank’s disbursements ended 2010 at R$ 143.7 billion, a 5% increase when compared to 2009, growth which is compatible with previously made projections.

Industry accounted for 47% of the Bank’s total disbursements, followed by Infrastructure, with 31% presence, and by Trade and Services, at 16%. In all areas of activity (agriculture, industry, infrastructure, trade and services) disbursements grew in 2010, resulting mostly from the successful Investment Maintenance Program (PSI). Launched in July 2009 and expected to last until next March 31, 2011, PSI guaranteed the return of investment to the country amidst the global financial and economic crisis.

The PSI’s financing portfolio exceeded R$ 120 billion in 2010, of which R$ 87 billion was in disbursements. The program has raised and diversified the demand for industrial machinery and equipment, so much so that Finame disbursements alone grew 119% last year, totaling R$ 52.7 billion. This means that Brazil has resumed its sustained growth due to the expansion of investments.

The positive performance was also reflected in the BNDES’ level of approvals, reaching R$ 200.7 billion (up 18% when compared to 2009), and the level of consultations, which reached R$ 255.9 billion (a 14% increase). These indicators determine the future behavior for Bank disbursements.

In addition, the BNDES ended 2010 with a record volume in credit operations. Approximately 610,000 operations were carried out, some 56% higher than last year’s result. Of that total, 93% (568,000) were carried out with micro, small and medium-sized companies as well as individuals (MPMEs), revealing greater access and a wider reach for the BNDES’ financing.

In 2010, financing to MPMEs, some R$ 45.7 billion, nearly doubled in size in relation to the previous year. Once again, PSI, with its highly competitive interest fees and focus on financing the acquisition of machinery and equipment, played a prominent role in investments into smaller companies.

The BNDES Card was also one of the highlights of 2010, with 320,000 operations performed (84% more in relation to 2009) and R$ 4.3 billion disbursed (an expansion of 74%). Specifically aimed at MPMEs, the BNDES Card is an important instrument for democratizing credit. Last year, it covered 75% of Brazil’s municipalities.

Similarly, Procaminhoneiro (for self-employed truck drivers and micro-companies with truck delivery), with interest rates fixed at 4.5% per year, registered a record performance in the sum of approved financing (R$ 6.6 billion, a 470% increase) and in the volume of operations (37,500 operations). With this, the program has contributed to renewing the country’s truck fleet.

Trade and services has also gained relative importance in the BNDES’ disbursements. With R$ 27.1 billion in 2010, disbursements to this segment rose 56%.

The Evolution of the BNDES’ Net Profit in 2010

R$ billion
The Evolution of the BNDES’ Net Profit

The Brazilian Development Bank (BNDES) registered a net profit of R$ 9.9 billion for the business year of 2010. The result corresponds to a 47.2% increase when compared to that obtained in 2009, which was R$ 6.7 billion.

The main factors that contributed to the BNDES’ performance in 2010 include: revenue from Reversal of Credit Risk, some R$ 2.9 billion; increased earnings from Equity Investments, totaling R$ 2.2 billion (54.4%); and the expansion of the Financial Intermediation Gross Product to R$ 1.2 billion (20.9%).

The positive impact of revenue from reversal of provisions in 2010 was due to the credit recovery, totaling R$ 2.3 billion. In the business year of 2009, the BNDES recorded a R$ 6 million expense in provisions for loan losses.

The increase in earnings from Equity Investments, in 2010, resulted mainly from the 179.5% growth in the result from disposals of shares, which went from R$ 1.2 billion in 2009 to R$ 3.2 billion in 2010. Such increase was possible due to the improvement in market conditions, when compared to 2009, which enabled working capital operations in the equity investment portfolio. The positive performance also reflects the quality of BNDESPAR’s portfolio, the BNDES’ branch for shares.

As for the Gross Product from Financial Operations in 2010, its growth was influenced, mainly, by the expansion of the loan and securities portfolio. The BNDES managed financial performance that is compatible with its activities as a development bank, reaching a loan portfolio of approximately R$ 362 billion, 27.5% higher than that posted at the end of 2010.

Financial position – The BNDES system’s net worth amounted to R$ 65.9 billion on December 31, 2010, corresponding to a reference capital of R$ 83.1 billion, higher than the R$ 54 billion obtained in 2009. The reference capital (PR) is the base used by the Central Bank to define prudent limits that must be followed by all financial institutions. The larger the reference capital of the BNDES, the greater its capacity to offer financing.

The PR growth in 2010 resulted basically from the evaluation for a fair value of the equity investment portfolio on non-related companies (those on which the BNDESPAR does not exert any influence) in accordance with the international process of accounting convergence.

The capital adequacy index (Basel Index) registered by the BNDES system was 18.6%, a comfortable situation in relation to the 11% required by the Central Bank.

The BNDES’ default rate represented 0.15% of the total portfolio, a drop when compared to the 0.20% registered on the December 2009 balance sheet. The quality of the Bank’s portfolio is demonstrated in its credit risk profile: 98.5% of total loans granted were classified between AA and C risk levels on December 31, 2010, a level of quality that is higher than the average for the national Financing System, which was 92.6% on that same date.

The quality of credit is the result of consistency in the Bank’s policies. Financing granted by the BNDES is the subject to continuous follow-up and requires guarantees to cover the debtor’s position for the term of the contract.

The BNDES’ total assets amounted to R$ 549 billion on December 31, 2010, presenting 42% growth in relation to that same period in 2009. Such an increase was possible due to the National Treasury funding, which totaled R$ 105 billion in 2010.

On 12/31/10, with the approval of the new CVM norms, the investments in corporate stakes in the BNDESPAR portfolio in non-related companies began to be assessed at fair value (an amount by which the asset would be included on the date the balance sheet is released), generating a R$ 45 billion increase in relation to the old methodology, which reflected the cost of acquisition. The same accounting treatment was applied to the BNDES System, in compliance with Document Nº. 3,068/01 of the Central Bank.

IFRS Implementation/ International Accounting Norms -  On December 31, 2010, the BNDES concluded its first set of financial statements prepared according to the international accounting norms, the IFRS, or International Financial Reporting Standards. The new norms have been implemented in compliance with the Central Bank’s determination, valid for all financial institution from 2010 onwards.

It was a challenge that required concerted efforts not only by the institution’s employees, but also its independent consultants and auditors (respectively, PricewaterhouseCoopers and Deloitte).  

The result of this work, as expected, was favorable to the BNDES. Analyzing the balance sheets from December 31, 2010, the bank’s net worth (R$ 69.8 billion), presented a R$ 3.9 billion (5.9%) increase due to, mainly, the two following factors.

The first was the difference in the criteria for calculating the provisions for credit risk, with a R$ 2.4 billion positive impact. The calculations started to include losses that actually incurred and that affected the future cash flow of the operation, and not expected losses.

The second factor was the transference of the discount on the acquisition of assets totaling R$ 2.3 billion (net R$ 1.5 billion from related tax effects) for the result, which represents a gain in investment acquisitions. 

Total assets (R$ 553.8 billion) showed a R$ 4.7 billion increase (0.9%), also influenced by the difference in the calculation of the provision for credit risk (R$ 2.4 billion) and by the discount transfer (R$ 2.3 billion), both detailed above.

Regarding net profit, there was a R$ 1.0 billion reduction compared to the Central Bank’s accounting standards, as a counterpart to the provision reversal for credit risk (mentioned in the net equity analysis). This results from the fact that part of the profit in the business year of 2010 (R$ 2.9 billion) was generated by provision reversal. In the IFRS, an R$ 848 million portion of that reversal was attributed to previous years. 

Applying the IFRS better reflects the result of the institution’s operations since the profits or losses, be they economical or financial, are immediately identified in financial statements. Besides this, they represent a significant gain in the quality of information, providing more transference to the market and facilitating the comparison with other institutions, be they national or international, which also prepare their statements according to the international standards.

The BNDES, due to its commitment to promote good practices in the Brazilian market, will make efforts towards encouraging Brazilian companies to make use of the IFRS to improve Brazilian capitals market transparency. It will also promote initiatives so that small and medium-sized companies can adopt the IFRS, in its simplified version.

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