Earnings Summary 3Q17

Transcription

1 Earnings Summary Adjusted Net Income of R$7.9 billion Banco do Brasil delivered R$7.9 billion in 9M17, an increase of 45.1% in the period. This performance was primarily due to the increase in fee income, the decrease in ALL and administrative expenses, compared to the same period in the previous year. Table 1. Net Income R$ million Chg. % Chg. % 3Q16 2Q17 3Q17 On 3Q16 On 2Q17 9M16 9M17 On 9M16 Total Operating Income (Banking Product) 24,370 24,009 23,631 (3.0) (1.6) 71,431 71,371 (0.1) Operating Income 24,299 23,939 23,570 (3.0) (1.5) 70,787 71, Net Interest Income 15,099 14,606 14,247 (5.6) (2.5) 44,008 43,330 (1.5) Fee Income 5,972 6,432 6, ,476 19, Eq. Interest of Subsidiaries and Affiliates 1,064 1,062 1,005 (5.6) (5.4) 3,153 3,019 (4.2) Other Operating Income 2,163 1,839 1,756 (18.8) (4.5) 6,149 5,554 (9.7) Previ - Plano de Benefícios 1 (141) (59) (66) (53.0) 11.5 (248) (185) (25.6) Previ - Fundo de Utilização Restatement (40.0) (1.5) (50.1) Total Operating Expenses (13,655) (12,680) (13,078) (4.2) 3.1 (39,729) (38,607) (2.8) Administrative Expenses (8,419) (7,864) (7,915) (6.0) 0.7 (24,201) (23,553) (2.7) Personnel Expenses (5,283) (4,817) (4,679) (11.4) (2.9) (15,028) (14,173) (5.7) Other Administrative Expenses (3,137) (3,047) (3,236) (9,173) (9,380) 2.3 Legal Risk (629) (516) (819) (2,000) (2,086) 4.3 Other Tax Expenses (121) (128) (128) (330) (373) 13.3 Taxes on Revenues (1,274) (1,231) (1,258) (1.3) 2.2 (3,788) (3,751) (1.0) Other Operating Expenses (3,212) (2,941) (2,957) (7.9) 0.6 (9,410) (8,843) (6.0) Non-Operating Income (38.7) (43.2) (15.3) Pre-Tax and Pre-Provision Earnings 10,770 11,389 10,587 (1.7) (7.0) 31,865 32, Allowance for Loan Losses (6,644) (6,658) (6,257) (5.8) (6.0) (24,065) (19,628) (18.4) Other/Taxes (1,789) (2,082) (1,622) (9.3) (22.1) (2,376) (5,403) Adjusted Net Income 2,337 2,649 2, ,424 7, One-Off Items (91) (30) , (98.1) Net Income 2,246 2,619 2, ,070 7, The table below presents the following ROE concepts: a) ROE: calculated based on the income statement; b) Market ROE: reflects the metric that the main market analysts use to project results; c) Adjusted ROE: the ratio between adjusted net income and average adjusted shareholders equity. Adjusted ROE was included in the projections until 2016; and d) Shareholders ROE: return to BB s shareholders. The core capital eligible instrument is not taken into account in the calculation of this indicator because the payment of compensation is made with funds from accumulated earnings and profit reserves. 1

2 Table 2. ROE Concepts R$ million 3Q16 2Q17 3Q17 9M16 9M17 ROE - (a)/(b) % a) Net Income 2,246 2,619 2,841 7,070 7,903 b) Shareholders' Equity - Average 84,587 90,302 92,174 83,630 90,379 Market ROE - (c)/(b-d) % c) Adjusted Net Income 2,337 2,649 2,708 5,424 7,872 d) Minority Interest - Average 3,231 3,429 3,480 3,244 3,446 Adjusted ROE - (c)/(b-d-e) % e) Benefit Plans - Average (16,832) (15,736) (15,979) (15,375) (15,736) Shareholders' ROE - (c)/(b-d-f) % f) Instruments Qualifying to CET1 Capital - Average 8,100 8,100 8,100 8,100 8,100 Market Indicators The increase in the adjusted earnings per share stands out, with an increase from R$1.95 in 9M16 to R$2.83 in 9M17. Table 3. Market Indicators 9M16 9M E¹ Earnings per Share - R$ Adjusted Earnings per Share - R$ Dividend Yield² - % Price/Earnings 12 months Price/Book Value Bloomberg estimate, on November 08, 2017, based on the average projections of market analysts. BB takes no responsibility for this information. 2 Dividends and Interest on Shareholders Equity (12 months) / Market Capitalization. Fee Income increased by 9.9% Supported by the evolution of BB s digital strategy and by the use of new technologies for the checking accounts qualification and to improve the relationship with the clients, BB s fee income increased by 9.9% compared to 9M16. The asset management line stands out (26.6%) due to the increase in funds under management from R$674.7 billion in September/16 to R$852.3 billion in September/17 (26.3%). Table 4. Fee Income R$ million Chg. % Chg. % 3Q16 2Q17 3Q17 On 3Q16 On 2Q17 9M16 9M17 On 9M16 Fee Income 5,972 6,432 6, ,476 19, Checking Account 1,600 1,712 1, ,569 5, Asset Management 1,119 1,336 1, ,198 4, Insurance, P. Plans and Premium Bonds ,283 2,237 (2.0) Credit/Debit Cards¹ ,342 1, Loan Fees (26.8) 1,179 1, Collections (16.3) (4.8) 1,264 1,109 (12.2) Consortium Other 1,245 1,309 1, ,641 3, Series revised in 3Q17 in accordance with Bacen Circular Letter No /

3 11, 00 9,000 7,000 5,000 3,000 1,000 (1, 00) Earnings Summary 3Q17 Figure 1. Main Components of Fee Income 100 Base Q16 4Q16 1Q17 2Q17 3Q17 Insurance, P. Plans and Premium Bonds Asset Management Checking Account Administrative Expenses decrease by 2.7% The Bank consistently seeks to improve its operating efficiency and productivity, keeping a strict control of administrative expenses. The cost-to-income ratio was 38.5% in 3Q17, decrease of 40 bps in the quarter and 120 bps in one year. Figure 2. Administrative Expenses R$ million ,283 5,210 4,677 4,817 4,679 3,137 3,406 3,096 3,047 3,236 3Q16 4Q16 1Q17 2Q17 3Q17 Personnel Expenses Other Administrative Expenses Cost-to-Income Ratio 12m - % ¹ 1 Cost-to-Income ratio: Administrative Expenses/Operating Revenues. Data from Income Statement with Reallocations. Percentage of transactions on Mobile and Internet is record Banco do Brasil's automated service channels offer a wide range of services and products to customers, as well as is an important drive to cost control. Considering only the Mobile and Internet channels, the total reached 72.1%. Currently, more than 21 million customers (individuals and companies) use these channels, growth of 89% in 6 years. 3

4 Figure 3. Transactions by channels (%) and number of users (millions) - Monthly series mar-11 set-11 mar-12 set-12 mar-13 set-13 mar-14 set-14 mar-15 set-15 mar-16 set-16 mar-17 set-17 Users Internet and Mobile Transactions Other transactions Funding expenses decreases by 22.1% In the 9M17/9M16 comparison the NII decreased by 1.5%. Further analysis can be found in chapter 5 of the MD&A. Figure 4. Net Interest Income R$ million 44,008 7, ,330 (9,697) Net Interest Income 9M16 Loan Operations income Funding Expenses Financial Expense for Institutional Funding Recovery of Write-offs Treasury Income Net Interest Income 9M17 4

5 Figure 5. NIM and Loans Average Balance R$ billion Q16 4Q16 1Q17 2Q17 3Q17 Loans¹ NIM - %² 1 Average balances of loans operations, leasing and acquired loan portfolio. 2 NIM - NII/Earning Assets average, annualized. The managerial net interest margin is calculated as the managerial financial income divided by the average balances of the loan portfolios, annualized. In the case of fixed rates transactions, the managerial net interest margin takes into account the cost of funding at the time the loan was signed, and it is not affected by the variation in the Selic rate. Figure 6. Managerial net interest margin by Segment % Q16 4Q16 1Q17 2Q17 3Q17 Individuals Loan Operations Companies¹ Agribusiness 1 It does not include transactions with the Government. Tier 1 Capital Ratio came to 10.0% The tier 1 capital ratio came to 10.0%, an increase of 80bps in the quarter and 90bps in one year. The BIS III index was 19.1% growth of 150 bps from September/16 due to an increase in Shareholders Equity and a decrease in Risk Weighted Asset (RWA). 5

6 Figure 7. Basel % Full application of Basel III rules Tier I Tier II CET1 The following figure simulates the full application of Basel III and its impacts on the Bank s CET1. It takes into account the capital base on September 29, 2017 and has three stages: A B C First stage: the calculation of the regulatory adjustments takes into account the assumptions of (i) anticipation of the deduction schedule (phase-in) and (ii) use of goodwill and intangible assets that were not amortized by 2017; Second stage: the calculation takes into account the effects of the first stage combined with the anticipation of Factor F (from 9.25% to 8.0%) for operating and market risks; and Third stage: the calculation takes into account all the effects of the previous stages combined with the usage of tax credits from temporary differences of 11% and tax losses of 16%, both in accordance with the usage estimates disclosed by the Bank in the Notes to the Consolidated Financial Statements. Figure 8. Tier 1 Capital Ratio Simulation with the Full Application of Basel III (%) (0.70) (0.20) Common Equity Tier I (CET) Sep/17 Deductions Schedule Anticipation RWA Rules Anticipation Use of Tax Credits Simulated CET under Full Basel III Rules Loan Portfolio and Commercial Funding The loan portfolio (expanded view) decreased by 7.9% in 12 months. The corporate loan portfolio decreased by 15.5% in the same period, due to the decrease in working capital transactions (11.5%) and R$13.6 billion in private securities and guarantees (25.6%). 6

7 1, , , , , Earnings Summary 3Q17 The individuals organic portfolio increased by 1.2% in 12 months, as a result of the positive performance of payroll loans (R$2.8 billion) and a 6.1% increase in mortgage (R$2.5 billion). The agribusiness portfolio registered a positive performance of 0.8% in the year-on-year comparison, especially the rural credit portfolio (R$7.8 billion growth), which was offset by the R$ 6.3 billion decrease in loans to companies in the agro segment (20.7%). Figure 9. Loan Portfolio (Expanded View) R$ billion (6.9) (11.3) (11.4) (7.6) (7.9) Companies Individuals Agribusiness Abroad 12m Growth - % In line with the behavior of the loan portfolio, commercial funding decreased by 7.7% in 12 months. The decrease came mainly from agribusiness letters of credit (R$38.6 billion or 29.0%), repurchase agreements with private securities (R$9.6 billion or 30.4%) and time deposits in R$7.9 billion (9.4%). Figure 10. Commercial Funding R$ billion (6.1) (8.3) (8.5) (5.8) (7.7) Time Deposits¹ Agrib. Letters of Credit and Mortgage Bonds Saving Deposits Demand Deposits Other 12m Growth - % 1 Includes Judicial Deposits. 7

8 Earnings Summary 3Q17 Quality of the Portfolio The ALL expenses in the quarter was R$6.3 billion, decrease by 5.8% over 3Q16 and 6.0% over the 2Q17. In the nine months comparison, decrease of R$4.4 billion or 18.4%. Figure 11. ALLL Expenses by Segment R$ million 7,486 6, ,713 6,658 6, (336) 3Q16 4Q16 1Q17 2Q17 3Q Agribusiness Abroad Companies Individuals The coverage of Banco do Brasil increased from 143.3% in June/17 to 152.3% in September/17. Figure 12. Coverage Ratios % ALLL/NPL + 90d % - BB Consolidated ALLL/NPL + 90d % - Ex-specific cases² ALLL/NPL + 90d % - BI¹ 1 Indicator prepared based on the Average Risk Index, available at the Time Series Management System (Sistema Gerenciador de Séries Temporais SGS) of the Central Bank of Brazil 2 Simulation excluding the effect of specific cases. 8

9 Figure 13. Coverage¹ by Segment % Individuals Companies Agribusiness 1 Ratio between the total balance of the provision (required plus additional) and the balance of operations more than 90 days overdue. The average risk of the Bank (ratio between the required provision and the classified loan portfolio) remains below that of the Brazilian Banking Industry (BI). Figure 14. Average Risk % Average Risk - BI Average Risk - BB The NPL +90d (ratio between transactions more than 90 days overdue and the classified loan portfolio balance) was 3.94% in September/2017. Excluding a specific case the NPL +90d would have been 3.52%. 9

10 Earnings Summary 3Q17 Figure 15. NPL +90 days % NPL +90d - BB NPL +90d - ex-specific cases NPL +90d - BI The following table shows the renegotiated loan portfolio. It does not include the renegotiated transactions of the agribusiness portfolio. In 3Q17, 24.2% of new renegotiations included transactions more than 90 days past due, and 11.2% included written off transactions. Table 5. Credits Renegotiated When Past Due R$ million Chg. % 3Q16 2Q17 3Q17 On 3Q16 On 2Q17 Credits Renegotiated When Past Due 25,694 27,042 25, (4.3) Initial Balance 25,050 26,618 27, New Transactions 2,758 3,622 1,870 (32.2) (48.4) Amortization Net of Interest¹ (744) (1,211) (773) 3.9 (36.2) Write-Off (1,370) (1,986) (2,273) ALLL / Loan Portfolio - % NPL + 90 days / Loan Portfolio - % ALLL Balance/NPL + 90 days - % Credits Renegotiated/Classified Portfolio - % Principal and interest payments net of interest accrued in the period. 10