Table of Contents

In 2017, Net Income totaled R$5.534 billion, in line with the Net Income recorded in the same period of previous year (R$5.551 billion), with an annualized return on Adjusted Shareholders’ Equity of 19.1%.

Net Income for fourth quarter of 2017 totaled R$1.407 billion, a decrease of 5.1% compared to the previous quarter, and recorded an annualized return on Shareholders’ Equity of 19.4%.

Press Release

Summarized Analysis of Recurring Income

In the annual comparison, net interest income decreased by 2.8%, or R$1,720 million, due to: (i) effect of impairment of financial assets, which increased by R$1,255 million; and (ii) lower result with of (a) “interest” margins, in the amount of R$284 million and (b) “non-interest” margins in the amount of R$181 million. These increases were partly impacted by the consolidation of HSBC Brasil as of the third quarter of 2016.

In the comparison between the fourth quarter of 2017 and the previous quarter, net interest income increased by 2.9%, or R$426 million, reflecting: (i) the higher income obtained from the “interest” margin, in the amount of R$225 million, especially the “Securities/Other” margin, in the amount of R$248 million; and (ii) the lower effect of impairment of financial assets, which decreased by R$183 million in comparison with the previous quarter.

Payroll-Deductible Loans

Real Estate Financing

Real estate financing operations totaled R$60,866 million in December 2017, showing an increase in the “Individuals” portfolio of 4.3%, or R$1,389 million, in the comparison of December with the last year, and an increase of 1.1%, or R$382 million in the quarter. Operations with Companies decreased by 7.8%, or R$2,287 million, compared to December of the previous year, and 1.9%, or R$533 million, compared to the previous quarter.

In the fourth quarter of 2017, the origination of real estate financing registered R$1,977 million (R$1,611 million by borrowers and R$366 million by builders), representing 8,040 properties in the quarter. In 2017, total origination reached R$7,888 million, representing 32,976 properties.

Vehicle financing

In December 2017, vehicle financing operations totaled R$31,009 million, a decrease in the annual comparison, and an increase in the quarterly comparison. Of the total vehicle portfolio, 83.2% corresponds to "CDC", 14.9% to “Finame” and 1.9% to "Leasing".

The evolution in operations with Individuals is noteworthy, which totaled R$21,142 million in December 2017, up 4.3% compared to September 2017 and 3.1% compared to December 2016. The decline in operations with Companies was driven by a reduction in “Finame” operations, which declined 43.0% in twelve months and 16.9% in the quarterly comparison.

Expanded Loan Portfolio – By Currency

The balance of borrowings and indexed onlending and/or denominated forms in foreign currency (excluding ACCs) totaled R$40.9 billion in December 2017, showing a 3.8% increase in the quarter and a 6.8% decrease in the last 12 months.

In December 2017, total loans in reais reached R$452.1 billion, presenting a 1.0% decrease in the quarterly comparison and a decrease of 4.0% in the last 12 months.

The loan portfolio by flow of maturities of operations has, as one of its features, a longer profile, mainly due to the presence of real estate financing and payroll-deductible loans. It must be noted that, due to their guarantees and characteristics, these operations are not only exposed to lower risk, but they also provide favorable conditions to gain customer loyalty.

Loan Portfolio – Delinquency Ratio ⁽¹⁾  

90-day Delinquency Ratio

15-90 Day Delinquency Ratio

Short-term delinquency, encompassing operations past due from 15 to 90 days, closed out December 2017 with a rate of 3.97%, the lowest level in the period analyzed. This positive effect occurred for both Individuals and “Large Corporates. In Micro, Small and Medium-Sized Enterprises, the increase observed in this quarter is concentrated in the Medium-Sized Enterprises, not representing a change of trend.

In addition to the allowance for loan losses required by Bacen, Bradesco has excess ALL to support potential stress scenarios, as well as other operations/commitments carrying credit risks.

Allowance for Loan Losses totaled  R$36.5 billion in December 2017, representing 9.9% of the total loan portfolio, comprising of: (i) generic provision (customer rating and/or operation); (ii) specific provision (non-performing loans); and (iii) excess provision (internal criteria).

Provisioning levels are deemed appropriate and sufficient to support possible changes in scenarios, such as higher delinquency levels and/or changes in the loan portfolio profile.

(1) As defined by Bacen; and

(2) Up to December 2016, included the Allowance for Guarantees Provided, encompassing sureties, guarantees, credit letters, and standby letter of credit, which comprises the concept of excess provision”.

It is important to highlight the robustness of the provisioning criteria adopted, which can be demonstrated by: (i) historical data analysis of recorded allowances for loan losses; and (ii) effective losses in the subsequent 12-month period. When analyzed in terms of credit losses, net of recoveries, for an existing provision of 10.4% of the portfolio⁽¹⁾, in December 2016, the net loss in the subsequent 12 months was 5.0%, representing an effective coverage of 208.9%, and based on the estimated net loss for the next 12 months, this indicates an effective coverage ratio of approximately 249% in December 2017.

(1) As defined by Bacen; and

(2) Up to March 2017, includes allowance for guarantees provided.

Coverage Ratio

The graph below presents the behavior of the ratios covering the allowance for loan losses in relation to default credits exceeding 60 and 90 days. In December 2017, these ratios showed very comfortable levels, reaching coverages of 175.0% and 211.4%, respectively.

Besides the allowance for loan losses required by Bacen, Bradesco has an excess provision of R$6.9 billion, to cover possible adverse scenarios, as well as other operations/commitments with credit risk.

In order to analyze Loans in relation to Funding, the following should be deducted from the total customer funding: (i) the amount committed to reserve requirements made at the Central Bank; (ii) the amount of cash and cash equivalents held for the operation of the service units, as well as adding: (iii) resources from domestic and foreign lines, which provide funding to meet the demands of credit and financing.

Bradesco shows low dependency on interbank deposits and foreign lines of credit, given its effective obtainment of funds from customers. This efficiency is a result: (i) of the prominent position of the Customer Service Points; (ii) the broad diversity of products offered; and (iii) the market’s confidence in the Bradesco brand.

Note that the use of funds provides a comfortable margin. It proves that Bradesco is capable of meeting demands for loans through its own funding.

The balance of demand deposits totaled R$34,082 million in December 2017, showing an increase not only in the annual comparison, with a variation of 2.0%, or R$662 million, but also compared to September 2017, with a variation of 12.4%, or R$3,758 million.

(1) Additional installment is not included.

Savings deposits totaled R$103,333 million in December 2017, showing an increase of 6.4% or R$6,244 million in the annual comparison, and 5.2% or R$5,109 million, in the comparison with September 2017, mainly due to: (i) an increase in the volume raised; (ii) the evolution of the base of savers, which in the last twelve months showed a net evolution of 1.3 million new savings accounts; and (iii) remuneration of inventory.

 (1) Additional installment is not included. Starting in July 2017, the compulsory benefit that allowed the deduction of financing contracted under the conditions of the Housing Financial System (SFH), up to 18% of the Reserve Requirements on Savings Deposits, was terminated.

In December 2017, the balance of time deposits totaled R$125,615 million, an increase of 21.8% or R$22,499 million, compared to the previous year.

In the comparison between December 2017 and September 2017, there was a reduction of 2.9% or R$3,806 million, mainly reflecting the interest rate fluctuations during the period and the investment alternatives offered to customers.

In December 2017, debentures  totaled
R$44,453 million, a reduction of 48.3% or R$41,611 million, as compared to the same period of previous year, mainly due to the compliance with Resolution No. 4,527/16, which changed the use of these securities issued by institutions linked to the conglomerate as a collateral for repo operations.

Compared to September 2017, the increase of 2.5%, or R$1,065 milliona, refers mainly to the placement of these securities, which are also used as backing for repo operations.

Borrowing and Onlending

In December 2017, the balance of borrowing and onlendings recorded R$51,669 million, showing a reduction both in the annual comparison and compared to September 2017. Such changes are explained by the reduction: (i) in the volume of funds raised through borrowing and onlending in Brazil, mainly through Finame operations; and (ii) in the volume of funds raised abroad.

(1) Considers: Letters of credit for agribusiness, MTN Program Issues, Securitization of Payment Order Flow, Cost of issuances over funding and Structured Operations Certificate.

In 2017, the net “interest” margin with “Insurance” totaled R$5,637 million, a reduction of R$258 million in the annual comparison, due to: (i) the reduction of the average spread, in the amount of R$1,306 million, impacted by the interest rate behavior; and offset by: (ii) the increase in the volume of operations, in the amount of R$1,048 million.

In the comparison between the fourth quarter of 2017 and the previous quarter, there was a reduction in the net “interest” margin with “Insurance” operations, in the amount of R$43 million, reflecting: (i) the reduction of the average spread, in the amount of R$86 million, mainly due to the performance of multimarket funds; and partially offset by: (ii) the increase in the volume of operations, in the amount of R$43 million.

Net income of 2017 was 7.4% higher compared with the results from the same period of previous year, influenced by the following factors: (i) increase of 8.7% in revenue; (ii) improvement of 4.1 p.p. in the claims ratio; (iii) the 0.3 p.p. downslide in the expense ratio; (iv) improvement of the administrative efficiency ratio; and partially impacted by: (v) the decrease in the financial result, reflecting the behavior of the economic–financial indices in the period.

The performance of net income for the fourth quarter of 2017 reflects: (i) of increase of 29.9% in revenue; (ii) the decrease of 0.7 p.p. in the claims ratio; (iii) the decrease of 0.3 p.p. in expense ratio; and (iv) the improvement in financial results, which were partially impacted by: (v) higher general and administrative expenses in the quarter.

In December 2017, technical reserves for Bradesco Vida e Previdência, totaled R$224.3 billion, made up of R$190.8 billion from "Pension Plans and VGBL" and R$33.5 billion from "Life, Personal Accidents and other lines", resulting in an increase of 11.6% in December 2016.

In December 2017, the number of Bradesco Vida e Previdência customers exceeded the 2.8 million mark of “Pension Plans and VGBL” participants, and 34.4 million “Life and Personal Accident” policyholders. Such expressive growth is fueled by the strength of the Bradesco brand and the  improvement in selling and management policies.

Net income of 2017 recorded a decrease of 15.2% compared with the results calculated in the same period of previous year mainly due to: (i) the increase of 0.6 p.p. in the claims ratio; (ii) the decrease in the financial income, due to the behavior of the economic–financial indices; and partially offset by: (iii) the increase of 7.0% in revenue; (iv) the reduction of 0.6 p.p. in the expense ratio; (v) the improvement of the administrative efficiency ratio; and (vi) the increase in equity income.

Net income for the fourth quarter of 2017 increased by 43.6% in relation to the results calculated for the previous quarter, mainly due to: (i) of increase of 1.2% in revenue; (ii) the improvement of 0.9 p.p. in the claims ratio; (iii) improvement in the expense ratio; (iv) the increase in the financial result; and partially impacted by, (v) the reduction in equity income.

In December 2017, Bradesco Saúde and Mediservice maintained a strong market position in the corporate sector (source: ANS).

Approximately 139 thousand companies in Brazil have Bradesco Saúde insurance and Mediservice plans.

Of the 100 largest companies in Brazil in terms of billing, 37 are Bradesco Saúde and Mediservice customers (source: Exame Magazine - “Melhores e Maiores” of August 2017).

The two companies together have approximately 3.7 million customers. The reduction observed throughout the periods is mainly due to the economic scenario of 2017. The large share of corporate insurance in this portfolio (95.9% in December 2017) is proof of its high level of specialization and customization in providing group coverage plans.

R$ million (unless otherwise stated)

4Q17

3Q17

2Q17

1Q17

4Q16

3Q16

2Q16

1Q16

Net Income

         117

          128

         112

         124

         107

         118

         111

         133

Capitalization Bond Income

      1,461

       1,582

      1,563

      1,446

      1,516

      1,579

      1,425

      1,343

Technical Provisions

      7,563

       7,420

      7,357

      7,431

      7,502

      7,469

      6,725

      6,820

Customers (in thousands)

      2,911

       2,966

      3,012

      3,064

      3,011

      3,135

      2,995

      3,076

Premium Income Market Share (%) ⁽¹⁾

        30.0

         30.3

        30.8

        30.0

        27.8

        28.0

        27.1

        27.5

Net income for 2017 increased by 2.6% compared to the previous year, basically influenced by: (i) growth of 3.2% in revenue; (ii) increase in operating income; and partially impacted by: (iii) the decrease in the financial income, due to the behavior of the economic–financial indices.

Concerned with providing products that better fit the most varied profiles and budgets of its customers, Bradesco Capitalização has a product portfolio, which ranges in payment method (lump sum or monthly), contribution term, periodicity and value of premiums that meet the requirements and expectations of the customers.

The portfolio consists of 23.3 million active securities. Of this total, 31.6% are represented by “Traditional Securities” marketed in the Network of Branches and through the Digital Channels. The other 68.4% of the portfolio is represented by “Incentive” securities (assignment of lottery rights), such as the partnerships with Bradesco Vida e Previdência and Bradesco Auto/RE. The purpose of this type of capitalization bond is to add value to the partner company’s product or even encourage customer payment performance. The securities have reduced validity and grace periods and a low marketing unit value.

Net income for 2017 was 65.6% higher than the result recorded in the same period of 2016, due to: (i) the decrease of 3.7 p.p. in the expense ratio; partially impacted by: (ii) the 2.2% decrease in sales revenue; (iii) the increase of 1.3 p.p. in the claims ratio; and (iv) the decrease in the financial result, due to the behavior of the economic–financial indices.

Net income for the fourth quarter of 2017 recorded a decrease of 5.3% over the previous quarter due to: (i) decrease of 16.6% in revenue; (ii) the 0.4 p.p. rise in the expense ratio; and partially offset by: (iii) the improvement of 1.5 p.p. in the claims ratio; and (iv) the increase in the financial result.

Bradesco Auto/RE is present in 40 of the 100 largest groups in the country, as the insurance company of its equities and, to ensure the retention of customers, the company has invested in the revision of its internal processes, mainly, in the areas dedicated to customer service and the analysis and regulation of claims, in search of greater efficiency and quality in the provision of services.

Mass market insurance is aimed at individuals, self-employed professionals, and small and medium-sized companies.

The insured fleet of the automobile insurance line remained stable, confirming the effectiveness of Bradesco Auto/RE retention strategies.

The simplified products of the residential and business lines stand out for the significant contribution to the results of Company.

Assistência Dia e Noite Application

Serviço Anjo da Guarda (“Guardian Angel” Service)

Maintenance of network activity of the automotive centers with 33 units throughout the entire country and offers policyholders access to a varied range of services in a single place.

Card Income

Card income revenues amounted to R$11,025 million in 2017, and R$2,949 million in the fourth quarter of 2017, an increase of 6.3%, or R$651 million, in the annual comparison, and 5.7% or R$160 million compared to the third quarter of 2017, mainly reflecting: (i) increased financial volume transacted; and (ii) increased quantity of transactions in the period. Note in the annual comparison, the effect of the consolidation of HSBC Brasil as of the third quarter of 2016.

Checking account revenues totaled R$6,658 million in 2017, and R$1,727 million in the fourth quarter of 2017, with increases of 10.7%, or R$646 million, in the annual comparison, and 2.9%, or R$48 million compared to the third quarter of 2017, originating mainly form the expansion of the portfolio of services and increased business volume. Note in the annual comparison, the effect of the consolidation of HSBC Brasil as of the third quarter of 2016

Asset Management

In the annual comparison, revenues from asset management increased 20.7%, or R$641 million, mostly reflecting: (i) increase in the volume of funds raised and managed, which grew 10.3% over the period, investments in fixed income funds being notable, that increased 7.5%; and (ii) the consolidation of HSBC Brasil as of the third quarter of 2016.

In the fourth quarter of 2017, revenue from asset management totaled R$944 million, down 3.4% or R$33 million from the previous quarter, mainly due to the lower number of business days in the quarter.

Revenues from loans recorded an increase of 6.2% or R$173 million in the annual comparison, and 6.0% or R$43 million compared to the previous quarter, basically stemming from the increase in income from guarantees, which rose 10.1% and 13.7%, respectively, largely reflecting the new operations of sureties and guarantees that occurred in the quarter.

Cash Management Solutions (Payments and Collections)

Custody and Brokerage Services

In the annual comparison, revenues from custody and brokerage services increased 21.1%, or R$153 million, reflecting: (i) the increase in the total assets under custody, in the amount of R$181 billion; and (ii) higher volumes traded on the B3.

In the fourth quarter of 2017, revenues totaled R$226 million, remaining practically stable compared to the previous quarter.

Underwriting/Financial Advisory Services

Revenue from underwriting / financial advisory services totaled R$801 million in 2017 and R$245 million in the fourth quarter of 2017, an increase of 7.5% or R$56 million compared to the same period of previous year, and 10.4% or R$23 million compared to the third quarter of 2017, mainly due to the greater activity of the capital markets in the period.

It is important to note that variations recorded in these revenues derive from the capital market’s volatile performance.

Personnel Expenses

In the annual comparison, the increase of 10.6%, or R$1,863 million, is justified by variations in the installments: (i) “structural,” which increased 11.7%, or R$1,685 million, brought on by the increase in expenses related to salaries, social charges and benefits, impacted by: (a) the effect of consolidation of HSBC Brasil, starting in the third quarter of 2016; and (b) increase in salary levels, under the 2016/2017 collective bargaining agreements; and (ii) “non-structural,” which increased by 5.5% or R$178 million, a reflection of higher expenses on provision for labor claims.

Considering the “pro forma” information, where the results of the first semester of 2016 for HSBC Brasil compose the total expenses, the amount of expenses on personnel remained stable, noting that the “structural” portion would present a 1.0% reduction even with the impact of salary increases under the 2016/2017 collective bargaining agreements.

In the fourth quarter of 2017, administrative expenses totaled R$5,340 million, up 6.2% or R$310 million in comparison to the previous quarter, a reflection of the increase in business volume and services concentrated in the period, which resulted in higher expenses on (i) advertising and marketing in the amount of R$ 136 million, mainly relating to year-end institutional campaigns and brand positioning; (ii) data processing, the amount of R$ 50 million; and (iii) outsourced services in the amount of R$45 million.

In the fourth quarter of 2017, the accumulated coverage ratio in the last twelve months was 77.8%, improving 1.9 p.p. compared to the previous quarter.

Improving this indicator during the quarter and maintaining it at high levels stems essentially from the following: (i) the ongoing efforts to control expenses, including (a) actions of our Efficiency Committee, among which we highlight as a target for this year, the capture of synergies and economies of scale resulting from the merger of HSBC Brasil, and (b) investments in Information Technology (IT), which in 2017 totaled R$6.037 billion; and (ii) actions with focused on increasing the offer of goods and services to the entire customer base. Also noteworthy are the partial effects of the Special Voluntary Severance Program Scheme (PDVE).

(1) Fee and Commission Income/Administrative and Personnel Expenses (in the last 12 months).

Bradesco’s Management is made up of the Board of Directors, currently comprised of six directors, and its Board of Executive Officers, both with their own regulations, with the accumulation of positions of the Chairman of the Board of Directors and Chief Executive Officer, due to the succession process in October 10, 2017, which shall last until the first meeting of the Board to be held after the 2018 Annual General Meeting, when the Company’s new Chief Executive Officer will be elected, in order to comply with the provisions of the Articles of Association, Article 7, § 1, regarding the non-cumulativeness of positions.

The Board of Directors is assisted by eight committees: a) Statutory: (i) Audit; and (ii) Compensation; b) Non-statutory: (iii) Ethical Conduct; (iv) Risks; (v) Internal Controls and Compliance; (vi) Integrated Risk Management and Capital Allocation – COGIRAC; (vii) Sustainability; and (viii) Succession and Appointment. Several executive committees assist the activities of the Board of Executive Officers, all of which are regulated by their own regulations. The Fiscal Council, the permanent supervisory body, is composed of five permanent members and their respective alternates. Two permanent members and their deputy members are appointed by the minority preferred shareholders and by non-controlling shareholders holding common shares. In addition to the Fiscal Council and the Audit Committee, Bradesco has the Internal Audit, subordinated to the Board of Directors.

In 2001, Bradesco voluntarily adhered to Level 1 Corporate Governance of B3, as well as to the Code of Self-Regulation and Best Practices for Publicly Held Companies, issued by the Brazilian Association of Publicly Held Companies (ABRASCA), in 2011.

In compliance with best corporate governance practices, the Bradesco Organization adopts its own integrity program, comprised of a set of policies, standards and procedures aimed at preventing, monitoring, detecting and responding to harmful acts provided for in Law No.12,846/13 and in international legislation, especially the Foreign Corrupt Practices Act and the United Kingdom Bribery Act.

Further information is available on Bradesco’s Investor Relations website (bradescori.com.br – Corporate Governance Section).

Senior Management and all employees are committed to complying with laws and regulations applicable to their activities, and to conduct business observing high standards of conduct and ethics. There are policies, standards, processes and systems in force for monitoring conduct, complaint handling channels and mechanisms, as well as an area designated to respond for the entire program aiming to ensure these commitments.

Such components are backed by Committees linked to the Board of Directors, such as the Ethical Conduct, Integrated Management of Risks and Allocation of Capital, Internal Controls and Compliance, and supported by training actions developed by UniBrad – Bradesco Corporate University for all professionals, covering the issues of Conduct, Controls and Compliance.

Bradesco is part of the 2018 Corporate Sustainability Index

For the 13th consecutive year, Bradesco is included in the B3’s Corporate Sustainability Index (ISE), as part of a select group of companies with consistency in financial results coupled with the adoption of sustainable management principles. The Index is developed through a rigorous process of assessing the performance of companies regarding economic-financial, social, environmental, and corporate governance aspects. Being part of the ISE ratifies Bradesco’s strategy to promote the alignment of its business to the corporate sustainability agenda, as a way to strengthen the outlook for creating value in the long run.

The new portfolio, which will be in effect from January 2018 to January 2019, consists of 30 companies from 12 sectors, amounting to R$1.3 trillion in market capitalization, equivalent to 41.5% of the total worth of companies whose shares are traded on the B3.

Bradesco Advances to the Leadership Category in the CDP

Bradesco participates in the CDP 2006 climate change program and, since then, has been working toward the improvement of its management strategy. This year, roughly 300 companies in the financial sector participated in the process of responding to the CDP, nine of which are Brazilian.

Released every six months since June 2015, the latest edition of the ranking listed the 100 companies that have obtained the highest scores for indicators such as human rights, decent jobs, environmental protection, corporate governance, business ethics and contribution to economic and social development in the areas in which they operate, belonging to 27 different sectors and responsible for the employment of more than five million people.

Currently in its 18th edition, the EXAME Sustainability Guide is a survey conducted by Exame magazine, which features the best sustainable practices that make up companies’ business strategies. It is prepared annually and uses a methodology developed by the Center for Sustainability Studies of the Getulio Vargas Foundation (GVCes), which analyzes the three dimensions of sustainability (economic, environmental and social) to select the best performances.

Bradesco’s Education and Christmas Program

With performances spanning a nine-day period, the show attracted more than 260,000 spectators in 2017. To put on the show, more than 400 people were involved in the production, including 150 Bradesco employees and trainees and their family members, who acted as “Christmas Angels,” voluntarily accompanying the children during the rehearsals and performances.

The graph shows the change in Bradesco’s preferred shares, taking into account the reinvestment of dividends (it includes Interest on Shareholders’ Equity), compared to the Ibovespa. If, in late December 2007, R$100 were invested in Bradesco’s shares, they would be worth approximately R$258 at the end of December 2017,

Market analysts issue periodical recommendations on Bradesco’s preferred shares (BBDC4). In January 2018, we analyzed eleven reports prepared by these analysts.

Their recommendations and general consensus on the target price for December 2018 can be found below: