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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 6-K
 
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE
SECURITIES EXCHANGE ACT OF 1934
 
For the month of October, 2003

Commission File Number 1-15250
 
 

BANCO BRADESCO S.A.
(Exact name of registrant as specified in its charter)
 

BANK BRADESCO
(Translation of Registrant's name into English)
 

Cidade de Deus, s/n, Vila Yara
06029-900 - Osasco - SP
Federative Republic of Brazil
(Address of principal executive office)
 

 

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____

.



















Report on Economic and
Financial Analysis


SEPTEMBER 2003



















Financial Market Indicators (%)
Index 2002
2003
 
2nd Qtr. 
3rd Qtr. 
Accumulated to September
2nd Qtr. 
3rd Qtr. 
Accumulated to September
CDI 4.28 4.42 13.45 5.78 5.61 18.06
IBOVESPA – Average (15.96) (22.60) (36.50) 15.07 23.42 42.08
USD – Commercial rate 22.41 36.93 67.85 (14.35) 1.79 (17.26)
IGP-M 2.95 6.82 10.54 (0.35) 1.14 7.10
IPCA – IBGE 1.43 2.58 5.60 1.43 1.32 8.05
TJLP 2.29 2.41 7.29 2.87 2.87 8.62
TR 0.60 0.71 1.88 1.31 1.29 3.93
 
U.S. dollar (closing price – sell)
USD – Commercial rate (in reais) 2.8444 3.8949 3.8949 2.8720 2.9234 2.9234

Compulsory Deposit Rates (%)
Index 2002
2003
 
2nd Qtr. 
3rd Qtr. 
2nd Qtr. 
3rd Qtr. 
Demand deposits (1) 45  45  60  45 
Additional (2) -  3  8  8 
Time deposits (3) 15  15  15  15 
Additional (2) -  3  8  8 
Savings deposits (4) 20  20  20  20 
Additional (2) -  5  10  10 

(1)

Cash deposit – no remuneration.

(2)

Cash deposit – SELIC rate.

(3)

Deposit in Government Securities.

(4)

Cash deposit – Reference Rate (TR) + interest of 6.17% p.a.


Rates and Limits (%)
Index 2002
2003
 
2nd Qtr. 
3rd Qtr. 
2nd Qtr. 
3rd Qtr. 
Income tax 25  25  25  25 
Social contribution 9  9  9  9 
PIS 0.65  0.65  0.65  0.65 
COFINS (*) 3  3  3  4 
Legal reserve on net income 5  5  5  5 
Maximum fixed assets (**) 60  60  50  50 
Minimum capital – Basel (***) 11  11  11  11 

(*)

Changed to 4% p.a. in September 2003.

(**)

On reference equity.

(***)

Reference equity may not be lower than 11% of weighted assets.

Forward-Looking Statements

This Report on Economic and Financial Analysis contains forward-looking statements relating to our business which are based on management’s current expectations, estimates and projections about future events and financial trends which could affect our business. Words such as: “believes”, “anticipates”, “plans”, “expects”, “intends”, “aims”, “evaluates”, “predicts”, “foresees”, “projects”, “guidelines”, “should” and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and involve risks and uncertainties which are difficult to predict and which could be beyond our control. Furthermore, certain forward-looking statements are based on assumptions which future events may prove to be inaccurate. Therefore, actual results may differ materially from the plans, objectives, expectations, projections and intentions expressed or implied in such forward-looking statements.

Factors which could cause actual results to differ materially include, among others, changes in regional, national and international commercial and economic conditions; inflation rates, increases in customer default and any other delays in credit operations; increases in the allowance for loan loss; loss of funding capacity; loss of clientele or revenues; our capacity to sustain and improve performance; changes in interest rates which could, among others, have an adverse effect on our margins; competition in the banking sector, in financial services, credit card services, insurance, asset management and other related sectors; government regulations and fiscal matters; disputes or adverse legal proceedings or ruling; as well as credit risks and other loan and investment activity risks.

Accordingly, the reader should not place undue reliance on these forward-looking statements. In all cases, these forward-looking statements are valid only as at the date they are made. Except as required under applicable legislation, we assume no obligation whatsoever to update these statements, whether as a result of new information, future events or any other motive.

Contents

1 – Analysis of Consolidated Results


2 – Consolidated Equity Analysis

3 – Consolidated Information for the Period and Operating Structure

4 – Consolidated Balance Sheets and Statements of Income – 1998 to 2003

5 – Financial Statements, Report of the Audit Committee and Independent Auditor’ Report

Certain figures included in this document have been subject to rounding
adjustments. Accordingly, figures shown as totals in certain tables may not be an
arithmetic aggregation of the figures which precede them.

1 – Analysis of Consolidated Results

Bradesco reported net income of R$ 1.591 billion for the period from January to September 2003, corresponding to R$ 1.00 per thousand shares and a return of 16.7% on stockholders’ equity, annualized, and 18.2% on average stockholders’ equity.

From January to September 2003, net income increased by 20.1%, compared to the same period in 2002.

Net income for the third quarter of 2003 (3Q03) was R$ 564 million, an increase of 8.7% in comparison with the second quarter of 2003 (2Q03).

The annualized return on total assets was 1.3%.
  Accumulated to September 2002 Accumulated to September 2003 %
Var. 		2nd. Qtr.
2003 		3rd. Qtr.
2003 		%
Var.
INCOME FROM LENDING AND TRADING ACTIVITIES 28,830  20,097  (30.3) 5,099  7,915  55.2
Credit operations 14,207  9,136  (35.7) 2,688  3,508  30.5
Leasing operations 334  229  (31.4) 66  86  30.3
Securities 10,240  5,098  (50.2) 995  2,312  132.4
Financial income on insurance, private pension plans and savings bonds 1,874  3,948  110.7 1,172  1,335  13.9
Derivative financial instruments (2,381) 46  (101.9) (361) 33  (109.1)
Foreign exchange transactions 4,287  543  (87.3) 169  275  62.7
Compulsory deposits 269  1,097  307.8 370  366  (1.1)
 
EXPENSES 22,538  12,950  (42.5) 3,068  5,357  74.6
Interest and charges on:
Deposits 10,999  7,930  (27.9) 1,826  3,434  88.1
Price-level restatement and interest on technical reserves for insurance, private pension plans and savings bonds 1,262  2,419  91.7 756  761  0.7
Borrowings and onlendings 8,028  593  (92.6) (103) 555  (638.8)
Leasing operations 9  10  11.1 3  4  33.3
Provision for loan losses 2,240  1,998  (10.8) 586  603  2.9
 
INCOME FROM FINANCIAL INTERMEDIATION 6,292  7,147  13.6 2,031  2,558  25.9
 
OTHER OPERATING INCOME (EXPENSES) (4,641) (4,480) (3.5) (1,172) (1,890) 61.3
Commissions and fees 2,721  3,272  20.2 1,080  1,179  9.2
Income on insurance premiums 3,643  4,181  14.8 1,395  1,472  5.5
Income on private pension plan contributions 2,567  3,775  47.1 1,213  1,355  11.7
Income on savings bonds 681  842  23.6 301  292  (3.0)
Variation in technical reserves for insurance (83) (233) 180.7 (89) (86) (3.4)
Variation in technical reserves for pension plans (1,138) (2,280) 100.4 (615) (736) 19.7
Variation in technical reserves for savings bonds (80) (107) 33.8 (33) (73) 121.2
Claims – insurance operations (2,677) (3,181) 18.8 (1,098) (1,111) 1.2
Savings bond redemptions (552) (704) 27.5 (254) (252) (0.8)
Insurance product selling expenses (396) (458) 15.7 (148) (152) 2.7
Pension plan selling expenses (92) (96) 4.3 (35) (39) 11.4
Expenses with pension plan benefits and redemptions (1,180) (1,793) 51.9 (600) (756) 26.0
Personnel expenses (3,029) (3,507) 15.8 (1,148) (1,306) 13.8
Other administrative expenses (2,917) (3,486) 19.5 (1,153) (1,232) 6.9
Tax expenses (590) (761) 29.0 (238) (255) 7.1
Equity in the earnings of associated companies 32  (26) (181.3) (28) 7  (125.0)
Other operating income 1,392  1,895  36.1 837  401  (52.1)
Other operating expenses (2,943) (1,813) (38.4) (559) (598) 7.0
 
OPERATING INCOME 1,651  2,667  61.5 859  668  (22.2)
 
NON-OPERATING INCOME 132  (768) (681.8) (95) 9  (109.5)
 
INCOME BEFORE TAXES AND PROFIT SHARING 1,783  1,899  6.5 764  677  (11.4)
 
PROVISION FOR INCOME TAX AND SOCIAL CONTRIBUTION (466) (301) (35.4) (243) (111) (54.3)
 
MINORITY INTEREST 8  (7) (187.5) (2) (2) - 
 
NET INCOME 1,325  1,591  20.1 519  564  8.7
 
ANNUALIZED RETURN ON STOCKHOLDERS’ EQUITY (%) 17.2  16.7  -  17.6  18.6  - 

Income from Credit and Leasing Operations
Nine-month Period
2003
2002
2003
% Variation
2nd Qtr.
3rd Qtr.
% Variation
14,532 9,355 (35.6) 2,751 3,590 30.5

This decrease mainly reflects negative exchange variation of 17.3% for the first nine months of 2003 (period/03), against positive exchange variation of 67.9% for the first nine months of 2002 (period/02), impacting U.S. dollar-denominated or dollar-indexed operations, which comprise 24.1% of total credit and leasing operations

This increase mainly reflects positive exchange variation of 1.8% in 3Q03 against negative variation of 14.3% in 2Q03, impacting U.S. dollar-indexed operations.


Results of Securities and Derivative Financial Instrument Operations
Nine-month Period
2003
2002
2003
% Variation
2nd Qtr.
3rd Qtr.
% Variation
7,859 5,144 (34.5) 634 2,345 269.9

The variation for the period was mainly due to: (i) negative exchange variation of 17.3% for the period/03 against positive exchange variation of 67.9% for the period/02, impacting dollar-indexed and/or denominated securities; and partially offset by (ii) the increase in financial volume.

The increase for the quarter was mainly due to: (i) positive exchange variation of 1.8% in 3Q03, compared to negative variation of 14.3% in 2Q03, impacting securities denominated or indexed in U.S. dollars and derivative financial instruments, used to hedge operations; and (ii) an increase in financial volume.

Financial Income on Insurance, Private Pension Plans and Savings Bonds
Nine-month Period
2003
2002
2003
% Variation
2nd Qtr.
3rd Qtr.
% Variation
1,874 3,948 110.7 1,172 1,335 13.9

The increase for the period reflects (i) the growth in volume of securities subject to technical reserves, especially VGBL; and (ii) improved interest rates.

The variation reflects mainly the growth in volume of securities subject to technical reserves.

Results of Foreign Exchange Transactions
Nine-month Period
2003
2002
2003
% Variation
2nd Qtr.
3rd Qtr.
% Variation
4,287 543 (87.3) 169 275 62.7

This account should be analyzed net of foreign funding expenses used to finance import/export operations, as described in Note 13a to the financial statements. Net of these deductions, results would total R$ 325 for the period/02 and R$ 247 for the period/03, affected by the fall in the volume of the fx portfolio and negative exchange variation.

This account should be analyzed net of foreign funding expenses used to finance import/export operations, as described in Note 14a to the financial statements. Net of these deductions, results would total R$ 106 in 2Q03 and R$ 69 in 3Q03, affected by the fall in the volume of the fx portfolio.


Results of Compulsory Deposits
Nine-month Period
2003
2002
2003
% Variation
2nd Qtr.
3rd Qtr.
% Variation
269 1,097 307.8 370 366 (1.1)

This variation was mainly due to: (i) the creation of an additional rate of 8% for demand and time deposits and of 10% for savings account deposits, both remunerated based on the SELIC rate from 3Q02; (ii) the increase in the TR reference rate used to remunerate savings account deposits, from 1.9% for period/02 to 3.9% for the period/03; and (iii) increase in the average volume of deposits.

The slight variation reflects the drop in the SELIC rate from 5.8% in 2Q03 to 5.6% in 3Q03 and was offset by the increase in the volume of deposits.

Interest and Charges on Deposits
Nine-month Period
2003
2002
2003
% Variation
2nd Qtr.
3rd Qtr.
% Variation
10,999 7,930 (27.9) 1,826 3,434 88.1

This decrease mainly reflects: negative exchange variation of 17.3% for the period/03 against positive exchange variation of 67.9% for the period/02, particularly impacting securities issued abroad, offset by an increase in real-denominated deposit volume /rates.

This increase mainly reflects positive exchange variation of 1.8% in 3Q03, compared with negative variation of 14.3% in 2Q03, particularly impacting securities issued abroad.


Price-level Restatement and Interest on Technical Reserves for Insurance, Private Pension Plans and Savings Bonds
Nine-month Period
2003
2002
2003
% Variation
2nd Qtr.
3rd Qtr.
% Variation
1,262 2,419 91.7 756 761 0.7

The increase for the period reflects: (i) the increase in the volume of technical reserves; and (ii) the increase in the interest rates of assets to technical reserves, reflected accordingly.

The slight variation reflects the increase in the volume of technical reserves.

Expenses for Borrowings and Onlendings
Nine-month Period
2003
2002
2003
% Variation
2nd Qtr.
3rd Qtr.
% Variation
8,028 593 (92.6) (103) 555 (638.8)

This decrease is mainly due to negative exchange variation of 17.3% for the period/03 against positive exchange variation of 67.9% for the period/02, affecting the transactions with foreign loans and onlendings.

This variation was mainly generated by positive exchange variation of 1.8% in 3Q03 compared to negative variation of 14.3% in 2Q03, affecting foreign borrowings and onlendings.


Financial Margin
Nine-month Period
2003
2002
2003
% Variation
2nd Qtr.
3rd Qtr.
% Variation
8,532 9,145 7.2 2,617 3,161 20.8

Margin growth reflects increased volume in funding and interest rates, partially offset by the negative exchange variation of 17.3% for the period/03 against positive variation of 67.9% for the period/02. The annualized financial margin on average total assets decreased from 9.3% for the period/02 to 8.1% for the period/03. Adjusting the additional provision for market risk fluctuation recorded/reversed for these periods, the annualized financial margin would be 7.8% and 8.6%, respectively.

The variation in this margin reflects the positive exchange variation of 1.8% in 3Q03, against negative variation of 14.3% in 2Q03 and the decrease in the compulsory deposit for demand deposits from 60% to 45%. The annualized financial margin on average total assets increased from 7.2% in 2Q03 to 8.2% in 3Q03. Adjusting the additional provision for market risk fluctuation recorded/reversed for these quarters, the annualized financial margin would be 8.1% and 8.2%, respectively.

Expenses for Provision for Loan Losses
Nine-month Period
2003
2002
2003
% Variation
2nd Qtr.
3rd Qtr.
% Variation
2,240 1,998 (10.8) 586 603 2.9

Excluding the additional provisions of R$ 193 and R$ 317, recorded for the period/02 and for the period/03, respectively, the decrease of R$ 366 in this expense reflects the Bank’s selective credit granting policy, resulting from the ongoing improvement of its credit rating and granting instruments.

Excluding the additional provisions of R$ 14 and R$ 5, recorded in 2Q03 and 3Q03, respectively, the increase of just R$ 26 reflects the maintenance of the Bank’s selective credit granting policy, resulting from the ongoing improvement of its credit rating and granting instruments.


Income on Commissions and Fees
Nine-month Period
2003
2002
2003
% Variation
2nd Qtr.
3rd Qtr.
% Variation
2,721 3,272 20.2 1,080 1,179 9.2

This growth reflects increased revenue from: (i) credit cards – R$ 138; (ii) checking accounts – R$ 136, principally maintenance charges; (iii) credit operations – R$107, mainly from contracting and opening of credit; (iv) managed funds – R$ 45; (v) collection – R$ 23; and (vi) the consolidation of BBV Banco – R$ 52.

Growth for the quarter reflects increased revenue from: (i) fund management – R$ 28; (ii) checking accounts – R$ 15, mainly maintenance charges; (iii) credit cards – R$ 9; (iv) collection – R$ 5; and (v) credit operations – R$ 3, mainly from contracting and opening of credit; and (vi) the consolidation of BBV Banco – R$ 26.


Retained premiums for Insurance, Private Pension Plans and Savings Bonds
Nine-month Period
2003
2002
2003
% Variation
2nd Qtr.
3rd Qtr.
% Variation
6,891 8,798 27.7 2,909 3,119 7.2

The variation for the period is shown below:

The variation for the period is shown below:


A) Income on Insurance Premiums
Nine-month Period
2003
2002
2003
% Variation
2nd Qtr.
3rd Qtr.
% Variation
3,643 4,181 14.8 1,395 1,472 5.5

This variation was mainly derived from increases in the sales of Auto and Health-line products.

This variation was mainly derived from increases in the sales of Auto and Health-line products.


B) Income on Private Pension Plan Contributions
Nine-month Period
2003
2002
2003
% Variation
2nd Qtr.
3rd Qtr.
% Variation
2,567 3,775 47.1 1,213 1,355 11.7

This variation was mainly derived from increases in the sales of VGBL and PGBL products.

This variation was mainly derived from increases in the sales of VGBL and PGBL products.


C) Income on Savings Bonds
Nine-month Period
2003
2002
2003
% Variation
2nd Qtr.
3rd Qtr.
% Variation
681 842 23.6 301 292 (3.0)

The increase reflects the growth in the sales of single payment bonds of R$ 5 thousand and the re-investment of savings bond certificates maturing during the period.

The decrease was generated by single payment bonds maturing during the quarter.


Variation in Technical Reserves for Insurance, Private Pension Plans and Savings Bonds
Nine-month Period
2003
2002
2003
% Variation
2nd Qtr.
3rd Qtr.
% Variation
(1,301) (2,620) 101.4 (737) (895) 21.4

The variation for the period is shown below:

The variation for the period is shown below:


A) Variation in Technical Reserves for Insurance
Nine-month Period
2003
2002
2003
% Variation
2nd Qtr.
3rd Qtr.
% Variation
(83) (233) 180.7 (89) (86) (3.4)

The increase in this reserve is directly related to production (premium), with the greatest variations occurring in the Auto and Health-line portfolios.

This account remained practically stable for the quarter.


B) Variation in Technical Reserves for Pension Plans
Nine-month Period
2003
2002
2003
% Variation
2nd Qtr.
3rd Qtr.
% Variation
(1,138) (2,280) 100.4 (615) (736) 19.7

This variation was mainly derived from the increase in VGBL and PGBL product sales, and the recording of the corresponding reserves.

This variation was mainly derived from the increase in VGBL and PGBL product sales, and the recording of the corresponding reserves.


C) Variation in Technical Reserves for Savings Bonds
Nine-month Period
2003
2002
2003
% Variation
2nd Qtr.
3rd Qtr.
% Variation
(80) (107) 33.8 (33) (73) 121.2

This variation reflects the increase in the mathematical reserve, derived from the sale of single payment bonds of R$ 5 thousand.

This variation partially reflects the increase in mathematical reserves, redemptions and draws.


Insurance Claims
Nine-month Period
2003
2002
2003
% Variation
2nd Qtr.
3rd Qtr.
% Variation
(2.677) (3,181) 18.8 (1,098) (1,111) 1.2

The increase in claims was mainly generated by: (i) increased Auto and Life insurance premium redemptions; and (ii) the change in methodology for calculating the provision for claims incurred but not reported (IBNR) in compliance with ANS legislation.

Claims remained practically stable as compared to the prior quarter.


Savings Bond Redemptions
Nine-month Period
2003
2002
2003
% Variation
2nd Qtr.
3rd Qtr.
% Variation
(552) (704) 27.5 (254) (252) (0.8)

This growth directly reflects the increase in the volume of single payment bonds maturing during the period/03 and which were redeemed.

Redemptions remained almost stable for the quarter.


Insurance and Pension Plan Selling Expenses
Nine-month Period
2003
2002
2003
% Variation
2nd Qtr.
3rd Qtr.
% Variation
(448) (554) 13.5 (183) (191) 4.4

The variation for the period is shown below:

The variation for the period is shown below:



A) Insurance Product Selling Expenses
 
Nine-month Period
  2003
2002
2003
% Variation
  2nd Qtr.
3rd Qtr.
% Variation
(396) (458) 15.7   (148) (152) 2.7
 

This increase was generated for the most part by growing Auto and Basic line insurance sales, maintaining the ratio of sales to premiums consistent with the prior period.

 

Selling expenses remained practically stable for the quarter.

 

B) Pension Plan Selling Expenses
 
Nine-month Period
  2003
2002
2003
% Variation
  2nd Qtr.
3rd Qtr.
% Variation
(92) (96) 4.3   (35) (39) 11.4
 

The increase in this expense reflects the growth in the VGBL product sales.

 

The increase in this expense reflects the growth in the VGBL product sales.

 

Expenses with Pension Plan Benefits and Redemptions
 
Nine-month Period
  2003
2002
2003
% Variation
  2nd Qtr.
3rd Qtr.
% Variation
(1,180) (1,793) 51.9   (600) (756) 26.0
 

The variation in this account was mainly due to the increase in the payment of pension plan redemptions as a result of specific VGBL and PGBL plan features.

 

The variation in this account was mainly due to the increase in the payment of pension plan redemptions as a result of specific VGBL and PGBL plan features.

 

Personnel Expenses
 
Nine-month Period
  2003
2002
2003
% Variation
  2nd Qtr.
3rd Qtr.
% Variation
(3,029) (3,507) 15.8   (1,148) (1,306) 13.8
 

This increase was mainly generated by: (i) salary increases, pursuant to trade-union agreements (September/02) – R$ 177 from October 2002; (ii) appropriation of the collective labor agreement of September/03 – R$ 171, including the bonus (single payment) of R$ 98; and (iii) an increase in the number of employees, subsequent to the acquisition of BBV Banco in 2Q03 – R$ 107.

 

This increase was generated mainly by: (i) appropriation of the collective labor agreement of September/03 – R$ 171, including the bonus (single payment) of R$ 98; (ii) an increase in the number of employees, following the acquisition of BBV Banco in June/03 growing by R$ 27 in 2Q03 and by R$ 80 in 3Q03, a variation of R$ 53.

 

Other Administrative Expenses
 
Nine-month Period
  2003
2002
2003
% Variation
  2nd Qtr.
3rd Qtr.
% Variation
(2,917) (3,486) 19.5   (1,153) (1,232) 6.9
 

The increase in this expense mainly reflects expansion in the customer service network, in particular: (i) depreciation and amortization – R$ 86; (ii) third-party services – R$ 61; (iii) rents – R$ 55, mainly relating to branches which were auctioned subsequent to June 2002; (iv) leasing – R$ 55; (v) communications – R$ 43; (vi) expenses for transport – R$ 40; and (vii) consolidation of BBV Banco R$ 100.

 

The increase for this quarter reflects increased expenses for: (i) leasing – R$ 17; (ii) third-party services – R$ 11; (iii) communications – R$ 6; and (iv) consolidation of BBV Banco – R$ 50.

 

Tax Expenses
 
Nine-month Period
  2003
2002
2003
% Variation
  2nd Qtr.
3rd Qtr.
% Variation
(590) (761) 29.0   (238) (255) 7.1
 

The growth rate mainly reflects increases in expenses for PIS/COFINS, consistent with taxable income growth for the period.

  

The variation in this quarter mainly reflects the increase in the COFINS rate from 3% to 4% – R$ 12.

  

Equity in the Earnings of Associated Companies
 
Nine-month Period
  2003
2002
2003
% Variation
  2nd Qtr.
3rd Qtr.
% Variation
32 (26) (181.3)   (28) 7 (125.0)
 

This variation was mainly generated by (i) equity in earnings determined in IRB Brasil Resseguros S.A. of R$ 33 for the period/02, against equity in loss of R$ (8) for the period/03; and (ii) equity in loss in U.G.B. of R$ (4) for the period/02, against equity in loss of R$ (25) for the period/03.

  

This variation was mainly generated by (i) equity in loss determined in IRB Brasil Resseguros S.A. of R$ (27) for 2Q03, against equity in earnings of R$ 20 for 3Q03; and (ii) equity in loss in U.G.B. of R$ (8) for 2Q03, against equity in loss of R$ (12) for 3Q03.

  

Other Operating Income
 
Nine-month Period
  2003
2002
2003
% Variation
  2nd Qtr.
3rd Qtr.
% Variation
1,392 1,895 36.1   837 401 (52.1)
 

The increase for the period is mainly due to reversal of the provision for exchange variation – R$ 504 in 2003.

  

The variation reflects mainly reversal of the provision for exchange variation – R$ 338 in 2Q03.

  

Other Operating Expenses
 
Nine-month Period
  2003
2002
2003
% Variation
  2nd Qtr.
3rd Qtr.
% Variation
(2,943) (1,813) (38.4)   (559) (598) 7.0
 

The variation is mainly due to a provision for exchange variation recorded in the amount of R$ 948 for the period/02.

  

The variation for the quarter is mainly due to: (i) greater financial expense – R$ 15; and (ii) expense with cost of services rendered – R$ 26.

  

Operating Income
 
Nine-month Period
  2003
2002
2003
% Variation
  2nd Qtr.
3rd Qtr.
% Variation
1,651 2,667 61.5   859 668 (22.2)
 

This growth is mainly derived from: (i) the positive variation in financial margin – R$ 613; (ii) the change in the provision for exchange variation, with amounts of R$ 948 and R$ 504 recorded and reversed for the nine-month periods of 2002 and 2003, respectively; (iii) increase in income from commissions and fees – R$ 551; partially offset by (iv) lower income from insurance (not considering financial income) - R$ 748; and by (v) an increase in personnel and administrative expenses – R$ 1,048.

  

This fluctuation is mainly derived from: (i) reversal of provisions, mainly for exchange variation in 2Q03 - R$ 338; (ii) an increase in personnel and administrative expenses – R$ 238; offset by (iii) the positive variation in financial margin – R$ 544; and (iv) the increase in income from commissions and fees – R$ 99.

  

Non-operating Income
 
Nine-month Period
  2003
2002
2003
% Variation
  2nd Qtr.
3rd Qtr.
% Variation
132 (768) (681.8)   (95) 9 (109.5)
 

The variation for the period is mainly due to: (i) extraordinary amortization of goodwill of Banco Mercantil – R$ 681; and (ii) less income determined from the auction of branches – R$ 36. N.B. Goodwill held by Boavista DTVM in Banco Mercantil, following the merger approved on March 31, 2003, was amortized on an extraordinary basis pursuant to BACEN Circular 3017/2000.

  

The variation for the quarter mainly reflects income determined from the auction of branches – R$ 98.

  

Income Tax and Social Contribution
 
Nine-month Period
  2003
2002
2003
% Variation
  2nd Qtr.
3rd Qtr.
% Variation
(466) (301) (35.4)   (243) (111) (54.3)
 

The variation in income tax and social contribution expense reflects tax charges on pre-tax income adjusted by permanent additions and exclusions, as described in Note 35 to the financial statements.

  

The variation in income tax and social contribution expense reflects tax charges on pre-tax income adjusted by permanent additions and exclusions.

  

  Accumulated to September 2003
  Financial
Insurance Group
Other Amount Total
  Local
Foreign
Local
Foreign
Activities
Eliminated
Consolidated
Income from financial intermediation 5,371  227  1,532  1  17  (1) 7,147 
Other operating income (expenses) (4,453) (63) (1,081) 1  39  1  (5,556)
Commissions and fees 2,943  5  128  -  396  (200) 3,272 
Personnel expenses (3,029) (18) (329) -  (131) -  (3,507)
Other administrative expenses (3,146) (43) (388) (3) (141) 235  (3,486)
Other revenue (expenses) (1,221) (7) (492) 4  (85) (34) (1,835)
Net income 918  164  451  2  56  -  1,591 
(*)

Composition: Premiums and contributions, net of variations in technical reserves for insurance, private pension plans and savings bonds, less claims, redemptions, benefits and commissions, not including financial income on insurance activities and price-level restatement and interest on technical reserves which are included in financial margin.

(*)

Composition: Premiums and contributions, net of variations in technical reserves for insurance, private pension plans and savings bonds, less claims, redemptions, benefits and commissions, not including financial income on insurance activities and price-level restatement and interest on technical reserves which are included in financial margin.

(1)

Including income on credit operations + income on leasing operations + adjustments to income on foreign exchange transactions (Note 13a);

 
(2)

Includes interest and charges on deposits + expenses for borrowings and onlendings + income on compulsory deposits + price-level restatement and interest on technical reserves for insurance, private pension plans and savings bonds + adjustments to income on foreign exchange transactions (Note 13a);

 
(3)

Includes income on securities transactions + financial income on insurance, private pension plans and savings bonds + income on derivative financial instruments + adjustments to income on foreign exchange transactions (Note 13a); and

 
(4)

Includes income on foreign exchange transactions + adjustments to income on foreign exchange transactions (Note 13a).

 

Credit Operations x Income

  Accumulated to September 2002 Accumulated to September 2003 2nd Qtr. 2003 3rd Qtr. 2003
 
Credit operations 42,276  43,575  43,398  44,660 
Leasing operations 1,763  1,496  1,481  1,480 
Advances on foreign exchange contracts 5,426  5,799  5,773  5,991 
1 – Total – Average balance (quarterly) 49,465  50,869  50,652  52,131 
2 – Income (*) 18,818  9,898  2,918  3,866 
3 – Average return annualized exponentially (2/1) 53.7% 26.8% 25.1% 33.1%
(*)

Includes income from credit operations, net results from leasing operations and results on foreign exchange transactions.

Securities x Income on Security Transactions

  Accumulated to September 2002 Accumulated to September 2003 2nd Qtr. 2003 3rd Qtr. 2003
 
Securities 38,741  40,534  38,613  45,351 
Interbank investments 6,773  23,609  22,203  24,777 
Subject to repurchase agreements (10,800) (17,998) (16,456) (20,819)
Derivative financial instruments (603) (389) (325) (321)
4 – Total – Average balance (quarterly) 34,112  45,755  44,036  48,988 
5 – Income on security transactions (net of expenses for repurchase agreements) 8,403  6,146  992  2,562 
6 – Average rate annualized exponentially (5/4) 34.1% 18.3% 9.3% 22.6%

Total Assets x Income from Financial Intermediation

  Accumulated to September 2002 Accumulated to September 2003 2nd Qtr. 2003 3rd Qtr. 2003
 
7 – Total assets – Average balance (quarterly) 123,548  151,659  149,745  159,426 
8 – Income from financial intermediation 28,830  20,097  5,098  7,915 
9 – Average rate annualized exponentially (8/7) 32.3% 18.0% 14.3% 21.4%

Funding x Expenses

 
  Accumulated to September Accumulated to September 2nd Qtr. 3rd Qtr.
  2002 2003 2003 2003
 
Deposits 48,434 56,601 55,847 57,584
Funds from acceptance and issuance of securities 5,152 4,946 5,354 5,843
Interbank and interdepartmental accounts 992 1,744 1,779 1,604
Subordinated debt 1,714 3,383 3,365 3,410
Securitization of future financial flows - 489 - 977
10 – Total funding – Average balance (quarterly) 56,292 67,163 66,344 69,418
11 – Expenses (*) 9,399  3,887  642  1,951 
12 – Average rate annualized exponentially (11/10) 22.9% 7.8% 3.9% 11.7%

(*) Funding expenses without repurchase agreements less income on compulsory deposits.


Technical Reserves for Insurance, Private Pension Plans and Savings Bonds x Expenses

 
  Accumulated to September Accumulated to September 2nd Qtr. 3rd Qtr.
  2002 2003 2003 2003
 
13 – Technical Reserves for Insurance, Private Pension Plans and Savings Bonds 15,047 21,850 21,891 23,597
14 – Expenses (*) 1,262 2,419 756 761
15 – Average rate annualized exponentially (14/13) 11.3% 15.0% 14.5% 13.5%

(*) Price-level restatement and interest on technical reserves for insurance, private pension plans and savings bonds.

Borrowings and Onlendings (Local and Foreign) x Expenses

 
  Accumulated to September Accumulated to September 2nd Qtr. 3rd Qtr.
  2002 2003 2003 2003
 
Borrowings 9,749  8,663  8,570  7,917 
Onlendings 6,352  6,943  6,831  6,962 
16 – Total borrowings and onlendings – Average balance (quarterly) 16,101  15,607  15,401  14,879 
17 – Expenses for borrowings and onlendings 8,028  593  (104) 555 
18 – Average rate annualized exponentially (17/16) 71.5% 5.1% (2.7%) 15.8%

Total Assets x Financial Margin

 
  Accumulated to September Accumulated to September 2nd Qtr. 3rd Qtr.
  2002 2003 2003 2003
 
19 – Total assets – Average balance (quarterly) 123,548  151,659  149,745  159,426 
20 – Financial margin (*) 8,532  9,145  2,617  3,161 
21 – Average rate annualized exponentially (20/19) 9.3% 8.1% 7.2% 8.2%

(*) Income from financial intermediation excluding provision for loan losses (PDD).

Financial Market Indicators


Analysis of the Adjusted Financial Margin – Published

Bradesco’s consolidated financial margin (before PDD) totaled R$ 9.1 billion for the period accumulated to September/03, a 7.2% increase compared to the same period in 2002 (R$ 8.5 billion). The financial margin for this quarter (3Q03) totaled R$ 3.2 billion, a 21% increase compared with 2003 (R$ 2.6 billion).

Even after the cut in the basic interest rate for the quarter (CDI/SELIC) and the fall in lending rates, Bradesco obtained an increase in financial margin as mentioned above.

Similarly, the annualized financial margin (obtained by dividing the lending and trading margin, excluding PDD, by the average balance of total assets) increased from 7.2% in 2Q03 to 8.2% for 3Q03, a 1 percentage point increase.

However, for the first nine months of 2003, the annualized financial margin dropped in comparison with the same period in 2002, from 9.3% to 8.1%.


Analysis of the Adjusted Financial Margin – Adjusted

Adjusting the additional provision for market risk fluctuation recorded/reversed (exchange provision), the annualized financial margin for the quarter would be 8.2%, compared to 8.1% in 2Q03. On the other hand, for the first nine months of 2003, the annualized rate would total 8.6%, compared with 7.8% for the same period in 2002.

We highlight below the events generating both published and adjusted financial margin:


Provision for Loan Losses

Movement of allowance for loan losses

 
  In millions of reais
 
  2002   2003
 
  2nd Qtr. 3rd Qtr. Accumulate to September 2nd Qtr. 3rd Qtr. Accumulate to September
 
Credit portfolio 52,576 53,599 53,599 53,048 52,776 52,776
 
Opening balance 3,480 3,529 2,941 3,902 4,109 3,665
 
Amount recorded
Amount written off		 711
(694)		 896
(607)		 2,240
(1,597)		 587
(551)		 603
(561)		 1,998
(1,683)
Balance derived from acquired institutions 32 - 234 171 - 171
 
Closing balance 3,529 3,818 3,818 4,109 4,151 4,151
 
Specific provisions 2,231 2,125 2,125 2,006 1,939 1,939
Generic provisions 1,009 1,269 1,269 1,286 1,390 1,390
Additional provision 289 424 424 817 822 822
 
Credit recoveries 98 108 277 109 128 326

Allowance for Loan Losses (PDD) on Credit and Leasing Operations

 
  In millions of reais
 
  December   2003
 
  1998 1999 2000 2001 2002 June September
 
Allowance for loan losses – PDD 1,215 1,908 2,507 2,941 3,665 4,109 4,151
(A)
Credit operations (B) 25,095 27,559 38,872 44,444 50,801 53,048 52,776
PDD on credit operations (A/B) 4.8% 6.9% 6.5% 6.6% 7.2% 7.7% 7.9%

Ratio of PDD coverage to abnormal course credits (D to H)

 
  In millions of reais
 
  2002   2003
 
  2nd Qtr. 3rd Qtr. 2nd Qtr. 3rd Qtr.
 
(1) – Total provisions 3,529 3,818 4,109 4,151
(2) – Abnormal course credits (D to H) 3,088 2,944 2,871 2,922
PDD coverage ratio (1/2) 114.3% 129.7% 143.1% 142.1%

Commissions and Fees

 
  In millions of reais
 
  2002   2003
 
  2nd Qtr. 3rd Qtr. Accumulated to September 2nd Qtr. 3rd Qtr. Accumulated to September
 
Checking account 220 217 644   264 287 796
Collection 138 144 409 146 155 440
Fund management 130 105 359 135 168 414
Credit card 149 163 458 193 203 598
Credit operations 97 110 294 139 146 409
Interbank charges 65 65 187 61 65 189
Collection of taxes 43 44 125 46 48 138
Custody and brokerage services 9 11 29 10 10 28
Other 74 75 216 86 97 260
Total 925 934 2,721 1,080 1,179 3,272

Administrative and Personnel Expenses

 
In millions of reais
2002   2003
2nd Qtr. 3rd Qtr. Accumulated to September 2nd Qtr. 3rd Qtr. Accumulated to September
Third-party services 170 182 493   190 210 572
Communications 133 146 398 148 161 455
Depreciation and amortization 108 105 303 138 137 403
Financial system services 84 88 246 85 92 260
Leasing 52 60 154 62 79 209
Transport 74 76 220 90 93 266
Data processing 61 55 170 65 73 199
Publicity and advertising 76 92 233 81 83 233
Rents 48 52 139 66 72 206
Maintenance and repairs 55 55 159 61 60 174
Materials 37 39 108 43 47 129
Water, electricity and gas 24 22 64 28 27 83
Travel 16 16 43 15 17 46
Other 72 75 187 81 82 251
Administrative expenses 1,010 1,063 2,917 1,153 1,233 3,486
Remuneration 512 536 1,490 577 632 1,734
Bonus (single payment) - 76 76 - 98 98
Benefits 182 186 537 240 265 706
Social charges 182 216 558 206 196 587
Training 13 13 34 20 16 46
Employee profit sharing 33 36 99 38 48 128
Other 74 81 235 67 51 208
Personnel expenses 996 1,144 3,029 1,148 1,306 3,507
Total 2,006 2,207 5,946   2,301 2,539 6,993

Human Resources

At September 30, 2003, Bradesco’s employees, including staff at the subsidiaries, totaled 77,154. The increase compared with December 2002 was generated mainly by the acquisition of BBV Banco in June 2003, with 4,677 employees, incorporated into Bradesco’s headcount for September 2003. The following table presents the growth of Bradesco’s headcount.

  Year   2003
1998 1999 2000 2001 2002 June September
Banco Bradesco 47,233 47,521 49,177 51,633 53,732 56,808 60,604
Subsidiaries 7,501 7,301 6,575 6,943 8,729 9,298 9,403
  Subtotal Bradesco 54,734 54,822 55,752 58,576 62,461 66,106 70,007
 
Banco BCN 5,024 4,784 4,780 5,857 6,105 5,729 5,460
Subsidiaries 1,408 1,099 1,172 1,280 1,504 1,636 1,687
  Subtotal BCN 6,432 5,883 5,952 7,137 7,609 7,365 7,147
 
Banco Baneb - 2,756 2,514 - - - -
Subsidiaries - 50 - - - - -
  Subtotal Baneb - 2,806 2,514 - - - -
 
Banco Boavista - - 1,564 - - - -
Subsidiaries - - 22 - - - -
  Subtotal Boavista - - 1,586 - - - -
 
Banco Mercantil - - - - 3,970 - -
Subsidiaries - - - - 353 - -
  Subtotal Mercantil - - - - 4,323 - -
 
BBV Banco - - - - - 4,638 -
Subsidiaries - - - - - 39 -
  Subtotal BBV Banco - - - - - 4,677 -
Total 61,166 63,511 65,804 65,713 74,393 78,148 77,154

N.B. In June 2002, 751 Banco Cidade employees were incorporated by Banco BCN and 706 Banco BEA employees were incorporated by Banco Bradesco.

Human Resources - September 2003
BY AGE BY GENDER BY EDUCATIONAL BACKGROUND BY YEARS OF SERVICE WITH BRADESCO BY MANAGERIAL POSITION
Younger than 30   45%   Less than 5 years   42%  
  High School   31%  
From 31 to 40   38% Men   55%   From 6 to 10 years   9% Non-managerial   50%
  University   68%  
From 41 to 50   15% Women   45%   From 11 to 20 years   39% Managerial   50%
  Other   1%  
Older than 50   2%   More than 20 years   10% 

Personnel Expenses

At September 30, 2003, Bradesco’s accumulated personnel expenses totaled R$ 3.5 billion, including expenses for remuneration, social charges, benefits, training, employee profit sharing, bonus (single payment) and others.

Benefits offered by Bradesco to its employees include health insurance and dental care, as well as a supplementary retirement pension plan.

The following pie graph presents the percentage share of each item in relation to total Bradesco personnel expenditure:

Composition of Personnel Expenses September 2003

Personnel Expenses by Business Segment September 2003

Training

Bradesco’s staff training activities are tuned to its organizational strategies, to the ongoing improvement of its customer service quality and to its capacity to produce results.

Accordingly, the Training Program uses tailor-made methodologies, offering in-class or self-training courses to all its staff, designed to meet both their professional and personal development needs.

The most innovative of these training methodologies, permitting the rapid inclusion of a considerable number of employees, is the ‘TreiNet’, online training program which was used for the period from January to September 2003 by 184,808 participants for courses in Integration and Basic Banking, Financial Mathematics, Business Accounting and Balance Sheet Analysis, Financial Market and Investments, Loans and Financing, Business Support Platforms, Convenience Services, Internal Control Systems, Savings Bonds, Vida e Previdência pension plans, Cashier Training, Written Communication and Performance Management and Decision-making Support (GDAD).

Through the important partnerships entered into with Consulting Firms, Universities and Business Schools, such as USP, FGV and IBMEC, the Bank qualifies its professional staff to operate in the Organization’s diverse specialist segments, such as Bradesco Empresas (Middle Market), Corporate and Private Banking, Prime and Consortium.

Particular emphasis should also be given to the specialization courses offered at post-graduate level. Four groups have been formed for courses such as: Business Process Management and Foreign Trade and International Operations and Banking Business, given at the following institutions, FIA, FIPE and FGV.

Bradesco’s compliance culture was also strengthened through distance learning courses, via manuals and TreiNet programs available to all the Organization’s employees.

During the period from January to September of 2003, 993 courses were given, in 12,345 groups, with 302,886 employee participations and a total of 5,983,841 hours spent in training, as well as investments to the order of R$ 46 million.

Increase in Employee Training Participation
Thousand Participants

Total Amount Invested in Training
In millions of reais

Operating Efficiency

  In millions of reais
 
  Year  
 
 
  1998 1999 2000 2001 2002 September 2003
Acc. 12 months(*)
 
Personnel expenses 2,642 2,784 3,221 3,549 4,076 4,554
Employee profit sharing (87) (104) (112) (160) (140) (168)
Other administrative expenses 2,159 2,567 2,978 3,436 4,028 4,597
Total (1) 4,714 5,247 6,087 6,825 7,964 8,983
Financial margin = Gross income from financial intermediation (-) PDD 6,087 7,494 7,839 10,109 11,472 12,086
Commissions and fees 1,775 2,100 3,043 3,473 3,712 4,263
Income from retained insurance premiums, private pension plans and savings bonds 5,015 5,975 6,920 8,959 10,135 12,042
Variation in technical reserves for insurance, private pension plans and savings bonds (1,392) (2,342) (3,001) (3,492) (2,785) (4,104)
  
Claims – insurance operations and savings bond redemptions (2,631) (2,844) (2,866) (3,996) (4,336) (4,991)
Insurance and pension plan selling expenses (518) (635) (645) (689) (667) (734)
Expenses with pension plan benefits and redemptions (423) (558) (913) (1,370) (1,689) (2,302)
Equity in the earnings of associated companies 157 127 156 71 65 7
Other operating expenses (813) (1,296) (1,376) (1,831) (3,148) (2,018)
Other operating income 560 1,070 903 1,326 1,321 1,824
Total (2) 7,817 9,092 10,060 12,560 14,080 16,073
Efficiency ratio (%) = (1/ 2) 60.3 57.7 60.5 54.3 56.6 55.9

(*) For comparison purposes, amounts for September 2003 are accumulated over the prior 12-month period.

Operating Efficiency (%)

The variation in the operating efficiency ratio is motivated by acquisitions made by the Bradesco Organization in the prior 2 years. We stress that the synergy process of these acquisitions is still in progress.

Activity-Based Costing

As part of the Organization’s ongoing pursuit to optimize its results and performance, our cost management model will be supported by Activity-Based Costing (ABC) methodology which has already provided, among others, support for studies relating to the formation and negotiation of banking charges, costing information for performance and decision-making support management and for customer profitability purposes, and for the formation of a database for analyses regarding the unification and rationalization of the Bank’s different units.

The Organization is currently implementing ABM (Activity-Based Management) methodology which will rapidly lead to cost prevention practices and a pro-active approach as regards the identification of opportunities. Thus, at the same time as we improve our processes, we are also able to seamlessly integrate operating performance with strategic objectives, in the pursuit to create and/or sustain competitive advantages and value for both our customers and stockholders.

Accordingly, the future mission of the activity-based management model is to provide ongoing support for planning and controlling the Bank’s business processes and to promote the permanent improvement of operating and tactical issues and to provide a firm basis for their strategic gearing.

2 – Consolidated Equity Analysis

    Currency
  Balance Sheet
    Local Foreign(1)
 
ASSETS
Current and long-term receivables 159,294  133,063  26,231 
Funds available 2,234  1,578  656 
Interbank investments 28,558  25,519  3,039 
Securities and derivative financial instruments 47,906  41,389  6,517 
Interbank and interdepartmental accounts 13,253  13,248  5 
Credit and leasing operations 41,863  35,334  6,529 
Other receivables and assets 25,480  15,995  9,485 
Permanent assets 5,069  5,055  14 
Investments 504  504  - 
Property and equipment in use and leased assets 2,613  2,601  12 
Deferred charges 1,952  1,950  2 
Total assets 164,363  138,118  26,245 
 
LIABILITIES
Current and long-term liabilities 130,166  104,338  25,828 
Deposits 58,346  53,670  4,676 
Deposits received under security repurchase agreements 23,069  22,167  902 
Funds from acceptance and issuance of securities 5,941  888  5,053 
Interbank and interdepartmental accounts 1,474  777  697 
Borrowings and onlendings 15,186  6,427  8,759 
Derivative financial instruments 331  330  1 
Other liabilities
Subordinated debt 3,482  2,629  853 
Other 22,337  17,450  4,887 
Technical reserves for insurance, savings bonds and
private pension plans 21,089  21,089  - 
Deferred income 30  30  - 
Minority interest in subsidiaries 111  111  - 
Stockholders' equity 12,967  12,967  - 
Total 164,363  138,535  25,828 
 
Net position of assets and liabilities -  -  417 
Net position of derivatives (2) (3) -  -  2,412 
Other memorandum accounts, net (4) -  -  (533)
Net exchange position (asset) (5) -  -  2,296 

(1) Amounts expressed and/or indexed mainly in USD;
(2) Excluding derivative operations maturing in D +1, to be settled in currency at September 30, 2003 price levels;
(3) Derivatives are adjusted to market value;
(4) Leasing commitments and others controlled in memorandum accounts;
(5) Excluding investments in foreign branches and subsidiaries (Note 15a), the net exchange position would be negative in the amount of R$ 1,577 million (liability).
Up to
30 days 		From 31
to 180
days 		From 181
to 360
days 		More than
360 days 		Indeterminate Total
ASSETS            
Current assets and long-term receivables 103,937  17,184  11,256  26,917  -  159,294 
Funds available 2,234  -  -  -  -  2,234 
Interbank investments 27,655  383  307  213  -  28,558 
Securities and derivative financial instruments(1) 36,926 1,571  2,576  6,833  -  47,906 
Interbank and interdepartmental accounts 12,950  5  6  292  -  13,253 
Credit and leasing operations 8,446  13,825  6,401  13,191  -  41,863 
Other receivables and other assets 15,726  1,400  1,966  6,388  -  25,480 
Permanent assets 51  254  305  3,351  1,108  5,069 
Investments -  -  -  -  504  504 
Property and equipment in use and leased assets 21  106  127  1,755  604  2,613 
Deferred charges 30  148  178  1,596  -  1,952 
Total 103,988  17,438  11,561  30,268  1,108  164,363 
 
LIABILITIES
Current and long-term liabilities 77,228  12,316  9,319  31,303  -  130,166 
Deposits (2) 37,511  3,769  3,398  13,668  -  58,346 
Deposits received under security repurchase agreements 21,704  18  33  1,314  -  23,069 
Funds from the acceptance and issuance of securities 1,016  2,106  1,665  1,154  -  5,941 
Interbank and interdepartmental accounts 1,474  -  -  -  -  1,474 
Borrowings and onlendings 1,567  4,770  3,116  5,733  -  15,186 
Derivative financial instruments 206  18  23  84  -  331 
Other liabilities: - 
- Subordinated debt 31  35  -  3,416  -  3,482 
- Other 13,719  1,600  1,084  5,934  -  22,337 
Technical reserves for insurance, private pension
plans and savings bonds -  -  -  21,089  -  21,089 
Deferred income 29  1  -  -  -  30 
Minority interest in subsidiaries -  -  -  -  111  111 
Stockholders' equity -  -  -  -  12,967  12,967 
Total 77,257  12,317  9,319  52,392  13,078  164,363 
Accumulated net assets 26,731  31,852  34,094  11,970  -  - 

(1) Investment fund applications are classified as up to 30 days.
(2) Demand and savings account deposits are classified as up to 30 days without considering average historical turnover.
ASSETS September
2002 		September
2003 		%
Variation 		June
2003 		September
2003 		%
Variation
Current assets and long-term receivables 134,481  159,294  18.5 149,316  159,294  6.7
Funds available 2,548  2,234  (12.3) 1,773  2,234  26.0
Interbank investments 12,380  28,558  130.7 20,996  28,558  36.0
Securities and derivative financial instruments 37,590  47,906  27.4 42,796  47,906  11.9
Interbank and interdepartmental accounts 10,798  13,253  22.7 15,024  13,253  (11.8)
Restricted deposits:
Brazilian Central Bank 9,298  12,069  29.8 13,792  12,069  (12.5)
Other 1,500  1,184  (21.1) 1,232  1,184  (3.9)
Credit and leasing operations 43,729  41,863  (4.3) 42,519  41,863  (1.5)
Credit and leasing operations 47,457  45,845  (3.4) 46,436  45,845  (1.3)
Allowance for loan and leasing losses (3,728) (3,982) 6.8 (3,917) (3,982) 1.7
Other receivables and assets 27,436  25,480  (7.1) 26,208  25,480  (2.8)
Foreign exchange portfolio 15,631  11,926  (23.7) 13,131  11,926  (9.2)
Other receivables and assets 11,895  13,724  15.4 13,269  13,724  3.4
Allowance for losses (90) (170) 88.9 (192) (170) (11.5)
Permanent assets 5,670  5,069  (10.6) 5,173  5,069  (2.0)
Investments 566  504  (11.0) 494  504  2.0
Property and equipment in use and leased assets 2,652  2,613  (1.5) 2,666  2,613  (2.0)
Deferred charges 2,452  1,952  (20.4) 2,013  1,952  (3.0)
Deferred charges 453  555  22.5 562  555  (1.2)
Goodwill on acquisition of subsidiaries, net of amortization 1,999  1,397  (30.1) 1,451  1,397  (3.7)
Total 140,151  164,363  17.3 154,489  164,363  6.4

LIABILITIES September
2002 		September
2003 		%
Variation 		June
2003 		September
2003 		%
Variation
Current and long-term liabilities 114,955  130,166  13.2 121,966  130,166  6.7
Deposits 55,871  58,346  4.4 56,822  58,346  2.7
Demand deposits 11,448  11,240  (1.8) 11,525  11,240  (2.5)
Savings deposits 20,116  20,897  3.9 20,736  20,897  0.8
Interbank deposits 24  411  1,612.5 40  411  927.5
Time deposits 24,283  25,798  6.2 24,521  25,798  5.2
Deposits received under security repurchase agreements 7,230  23,069  219.1 18,569  23,069  24.2
Funds from acceptance and issuance of securities 5,839  5,941  1.7 5,745  5,941  3.4
Securities issued abroad 5,074  5,053  (0.4) 5,038  5,053  0.3
Other resources 765  888  16.1 707  888  25.6
Interbank and interdepartmental accounts 1,386  1,474  6.3 1,735  1,474  (15.0)
Borrowings and onlendings 19,355  15,186  (21.5) 14,572  15,186  4.2
Borrowings 12,430  8,123  (34.7) 7,711  8,123  5.3
Onlendings 6,925  7,063  2.0 6,861  7,063  2.9
Derivative financial instruments 1,642  331  (79.8) 310  331  6.8
Other liabilities 23,632  25,819  9.3 24,213  25,819  6.6
Foreign exchange portfolio 8,784  5,966  (32.1) 7,854  5,966  (24.0)
Taxes and social security contributions, social
and statutory payables 3,784  4,912  29.8 4,642  4,912  5.8
Technical reserves for insurance, private pension
plans and savings bonds 2,174  3,372  55.1 2,875  3,372  17.3
Subordinated debt 2,386  3,482  45.9 3,338  3,482  4.3
Sundry 6,504  8,087  24.3 5,504  8,087  46.9
Technical reserves for insurance, private pension
plans and savings bonds 14,426  21,089  46.2 19,857  21,089  6.2
Deferred income 13  30  130.8 37  30  (18.9)
Minority interest in subsidiaries 257  111  (56.8) 107  111  3.7
Stockholders’ equity 10,500  12,967  23.5 12,522  12,967  3.6
Total 140,151  164,363  17.3 154,489  164,363  6.4
Funds Available
 
September   2003
 
2002 2003 % Variation   June September % Variation
 
2,548 2,234 (12.3)   1,773 2,234 26.0
 

The variation mainly reflects the decrease in the volume of foreign currency cash funds as compared to the same period in 2002.

 

The variation for the quarter mainly reflects the increase in the volume of foreign currency cash funds.

 

Interbank Investments
 
September   2003
 
2002 2003 % Variation   June September % Variation
 
12,380 28,558 130.7   20,996 28,558 36.0
 

The variation in the balance of this account reflects the increase in open market investments, principally in the third-party portfolio, which grew from R$ 6,717 in 2002 to R$ 20,826 in 2003.

 

The variation for this quarter mainly reflects the increase in open market investments, both in the own portfolio, up by R$ 2,852, and in the third-party portfolio, up by R$ 4,140.

 

Securities and Derivative Financial Instruments
 
September   2003
 
2002 2003 % Variation   June September % Variation
 
37,590 47,906 27.4   42,796 47,906 11.9
 

The variation in this account balance reflects mainly: (i) additional funds derived from the increase in funding, particularly technical reserves; (ii) the consolidation of BBV Banco; and (iii) adjustments in securities; partially mitigated by (iv) redemption/maturity of securities during the period and (v) by negative exchange variation of 17.3% in 2003.

 

The variation reflects: (i) additional funds derived from the increase in funding, particularly technical reserves; and (ii) redemption/maturity of securities during the quarter.

 

Interbank and Interdepartmental Accounts
 
September   2003
 
2002 2003 % Variation   June September % Variation
 
10,798 13,253 22.7   15,024 13,253 (11.8)
 

The variation mainly reflects the increase in compulsory Brazilian Central Bank deposits as a result of: (i) the increase in the additional rate from 3% to 8% for compulsory time deposits and from 5% to 10% for compulsory savings account deposits; and (ii) the increase in the volume of deposits for the period.

 

The variation for the quarter was mainly generated by the cut in the compulsory deposit rate on demand deposits from 60% in 2Q03 to 45% in 3Q03.

 

Credit and Leasing Operations
 
September   2003
 
2002 2003 % Variation   June September % Variation
 
53,599 52,776 (1.5)   53,048 52,776 (0.5)
 

The variation in the credit portfolio for the period is mainly due to: (i) contract settlements; (ii) negative exchange variation of 17.3%, in 2003, affecting foreign currency indexed or denominated contracts; (iii) less credit demand for the period and as a result of greater credit granting selectivity; and offset by: (iv). the consolidation of BBV Banco; and (v) by the price-level restatement of the other contracts. N.B. Includes advances on foreign exchange contracts, other receivables and does not consider the allowance for loan losses, as described in Note 12 to the financial statements.

 

The variation in the credit portfolio for the quarter is mainly due to: (i) contract settlements; (ii) less credit demand for the quarter and as a result of greater credit granting selectivity; and was offset by: (iii) the price-level restatement of the other contracts. N.B. Includes advances on foreign exchange contracts, other receivables and does not consider the allowance for loan losses.

 

Allowance for Loan Losses (PDD)
 
September   2003
 
2002 2003 % Variation   June September % Variation
 
3,818 4,151 8.7   4,109 4,151 1.0
 

The nominal increase in PDD for the period was 8.7%, however, if we disregard the additional provisions of R$ 424 in 2002 and of R$ 822 in 2003, the allowance would present a decrease of 1.9%. Total PDD on credit operations increased from 7.1% in 2002 to 7.9% in 2003. The total allowance on the abnormal course credit portfolio, rated from D to H, increased from 129.7% in 2002 to 142.1% in 2003.

 

Total PDD on credit operations increased from 7.7% in 2Q03 to 7.9% in 3Q03. On the other hand, the total allowance on the abnormal course credit portfolio, rated from D to H, increased from 143.1% in 2Q03 to 142.1% in 3Q03.

 

Other Receivables and Assets
 
September   2003
 
2002 2003 % Variation   June September % Variation
 
26,815 24,886 (7.2)   25,602 24,886 (2.8)
 

The variation is mainly due to a drop in the volume of the foreign exchange portfolio; partially offset by the consolidation of BBV Banco. N.B. This total is less (net of corresponding PDD) an amount of R$ 620 in 2002 and R$ 594 in 2003, allocated to the “credit and leasing operations” and “allowance for loan losses” accounts.

 

The variation is mainly due to a drop in the volume of the foreign exchange portfolio. N.B. This total is less (net of corresponding PDD) of an amount of R$ 607 in 2Q03 and of R$ 594 in 3Q03, allocated to the “credit and leasing operations” and “allowance for loan losses” accounts.

 

Permanent Assets
 
September   2003
 
2002 2003 % Variation   June September % Variation
 
5,670 5,069 (10.6)   5,173 5,069 (2.0)
 

The decrease for the period was mainly generated by (i) sale of branches by auction; and (ii) amortization of goodwill in subsidiary companies; partially offset by (iii) the consolidation of BBV Banco.

 

The decrease for the quarter was mainly generated by (i) sale of branches by auction; and (ii) amortization of goodwill in subsidiary companies.

 

Deposits
 
September   2003
 
2002 2003 % Variation   June September % Variation
 
55,871 58,346 4.4   56,822 58,346 2.7
 

The variation for the period reflects: (i) the consolidation of BBV Banco; and (ii) the growth in time deposits abroad.

 

This variation mainly reflects the growth in the volume of time deposits abroad.

 

Deposits Received Under Security Repurchase Agreements
 
September   2003
 
2002 2003 % Variation   June September % Variation
 
7,230 23,069 219.1   18,569 23,069 24.2
 

The increase in the account balance for the period was due to greater demand for this type of funding, reflecting the interest for investments in assets with greater liquidity during the period.

 

The increase in this account balance for the quarter was due to greater demand for this type of funding, reflecting the interest for investments in assets with greater liquidity during the quarter.

 

Funds from Acceptance and Issuance of Securities
 
September   2003
 
2002 2003 % Variation   June September % Variation
 
5,839 5,941 1.7   5,745 5,941 3.4
 

This increase mainly reflects: (i) new securities issued abroad, net of payments; (ii) the consolidation of BBV Banco; partially mitigated by: (iii) negative exchange variation of 17.3% in 2003.

 

This increase mainly reflects new securities issued abroad, in excess of settlements.

 

Interbank and Interdepartmental Accounts
 
September   2003
 
2002 2003 % Variation   June September % Variation
 
1,386 1,474 6.3   1,735 1,474 (15.0)
 

This growth is mainly derived from the increase in the volume of collection and money orders, following the increase in the number of customers and in the customer service network.

 

The variation is mainly due to a decrease in the volume of collection and money orders in 3Q03.

 

Borrowings and Onlendings
 
September   2003
 
2002 2003 % Variation   June September % Variation
 
19,355 15,186 (21.5)   14,572 15,186 4.2
 

The decrease for the period is mainly due to: (i) the settlement of a number of overdue and non-renewable operations, indexed or denominated in foreign currency; and (ii) negative exchange variation of 17.3% in 2003.

 

The increase reflects mainly the price-level restatement of contracts during the quarter.

 

Other Liabilities and Derivative Financial Instruments
 
September   2003
 
2002 2003 % Variation   June September % Variation
 
28,532 28,946 1.5   27,462 28,946 5.4
 

This oscillation was mainly generated by: (i) issuance of subordinated debt in local currency; (ii) funds obtained from abroad, through the securitization of the future flow of receivables; (iii) the consolidation of BBV Banco; and was partially offset by (iv) less volume in the fx portfolio, and (v) negative exchange variation of 17.3% in 2003. N.B. Excluding advances on foreign exchange contracts of R$ 5,432 and R$ 6,168, allocated to credit operations and technical reserves of R$ 2,174 and R$ 3,372, allocated to a specific account in 2002 and 2003, respectively.

 

The oscillation for the quarter reflects mainly: (i) funds obtained from abroad, through the securitization of the future flow of receivables and was partially offset by (ii) the decrease in the volume of the fx portfolio. N.B. Excluding advances on foreign exchange contracts of R$ 5,814 and R$ 6,168, allocated to credit operations and technical reserves of R$ 2,875 and R$ 3,372, allocated to a specific account in 2Q03 and 3Q03, respectively.

 

Technical Reserves for Insurance, Private Pension Plans and Savings Bonds
 
September
  2003
2002
2003
% Variation
  June
September
% Variation
16,600 24,461 47.4   22,732 24,461 7.6
 

This variation was derived principally from an ongoing strengthening of reserves arising from the increased sales of private pension plans and insurance policies, in particular, VGBL products. N.B. Includes technical reserves of R$ 2,174 and R$ 3,372 in 2002 and 2003, respectively, classified in “other liabilities”.

  

This variation was derived principally from an ongoing strengthening of reserves arising from the increased sales of private pension plans and insurance policies, in particular, VGBL products. N.B. Includes technical reserves of R$ 2,875 and R$ 3,372 in 2Q03 and 3Q03, respectively, classified in “other liabilities”.

  

Minority Interest in Subsidiaries
 
September
  2003
2002
2003
% Variation
  June
September
% Variation
257 111 (56.8)   107 111 3.7
 

This decrease was mainly due to the incorporation of all the minority stockholders of Banco Mercantil.

  

The increase was mainly due to minority interest in results determined for the quarter.

  

Stockholders’ Equity
 
September
  2003
2002
2003
% Variation
  June
September
% Variation
10,500 12.967 23.5   12,522 12,967 3.6
 

This variation reflects: (i) capital increase - R$ 1,290; (ii) appropriation of net income for the period - R$ 2,289; (iii) share premium - R$ 7; (iv) mark-to-market adjustment of securities and derivatives - R$ 515; offset by: (v) interest attributed to own capital, paid and accrued – R$ 1,630; and (vi) acquisition of treasury stock – R$ 4.

  

This variation reflects: (i) appropriation of net income for 3Q03 – R$ 564; and (ii) the increase in the reserve for mark-to-market adjustment of securities and derivatives - R$ 247; and was offset by: (iii) interest attributed to own capital, paid and accrued - R$ 366.

  

Consolidated Portfolio Composition by Issuer (1)

September 2003
Securities Up to 30 days From 31 to 180 days From 181 to 360 days More than 360 days Market/ Book value (2), (3) and (4) Restated
Cost 		Unrealized Gain (loss) Unrealized Gain (loss), net of tax effects
GOVERNMENT SECURITIES 563  2,986  7,265  30,619  41,433  41,414  19  12 
Financial Treasury Notes 382  1,622  4,932  14,440  21,376  21,340  36  24 
National Treasury Bonds 23  4  1,756  6,591  8,374  8,343  31  20 
Federal Treasury Notes 20  541  233  6,740  7,534  7,529  5  3 
Brazilian foreign debt notes 101  -  95  2,673  2,869  2,883  (14) (9)
Central Bank Notes -  792  226  56  1,074  1,074  -  - 
Other 37  27  23  119  206  245  (39) (26)
 
CORPORATE BONDS 2,585  179  316  3,392  6,472  5,883  589  389 
Shares 2,023  -  -  -  2,023  1,582  441  291 
Debentures 37  15  78  1,450  1,580  1,622  (42) (28)
Certificates of Bank
Deposit 165  60  9  816  1,050  1,050  -  - 
Derivative financial
instruments 185  74  164  308  731  583  148  98 
Promissory notes 15  16  -  -  31  31  -  - 
Foreign securities 78  3  53  517  651  598  53  35 
Other 82  11  12  301  406  417  (11) (7)
 
Total 3,148  3,165  7,581  34,011  47,905  47,297  608  401 

Composition by Maturity (1)

  September 2003
 
  Up to 30 days From 31 to 180 days From 181 to 360 days More than 360 days Market/ Book value (2), (3) and (4) Cost
value 		Unrealized gain (loss)
 
TRADING SECURITIES 954  2,181  6,960  27,226  37,321  37,233  88 
Financial Treasury Notes 324  1,583  4,741  13,958  20,606  20,558  48 
National Treasury Bonds 23  4  1,756  6,591  8,374  8,343  31 
Federal Treasury Notes 20  541  124  3,680  4,365  4,363  1 
Debentures 10  1  78  962  1,051  1,051  - 
Certificates of Bank Deposit 9  9  7  773  798  798  - 
Brazilian foreign debt notes 38  -  82  805  925  916  9 
Central Bank Notes -  -  118  -  118  118  - 
Shares 373  -  -  -  373  373  - 
Other 157  43  54  457  711  713  (1)
SECURITIES AVAILABLE FOR SALE 1,982  118  240  2,776  5,116  4,744  372 
Shares 1,650  -  -  -  1,650  1,209  441 
Financial Treasury Notes 59  38  191  482  770  781  (12)
Debentures 27  14  -  487  528  570  (42)
Certificates of Bank Deposit 156  51  2  43  252  253  (1)
Promissory notes 15  -  -  -  15  15  - 
Brazilian foreign debt notes 35  -  13  920  968  992  (23)
Federal Treasury Notes -  -  -  307  307  304  3 
Other 40  15  34  537  626  620  6 
SECURITIES HELD TO MATURITY 27  792  217  3,701  4,737  4,737  - 
Federal Treasury Notes -  -  109  2,753  2,862  2,862  - 
Brazilian foreign debt notes 27  -  -  948  975  975  - 
Central Bank Notes -  792  108  -  900  900  - 
DERIVATIVE FINANCIAL INSTRUMENTS 185  74  164  308  731  583  148 
Derivative financial instruments 185  74  164  308  731  583  148 
Total 3,148  3,165  7,581  34,011  47,905  47,297  608 

(1)

Applications in investments fund quotas were distributed based on the securities comprising their portfolios maintaining the fund category classification.

(2)

The number of days to maturity was based on the maturity of the securities, regardless of accounting classification.

(3)

This column reflects book value subsequent to mark-to-market adjustment, except for securities held to maturity, whose market value is higher than book value by R$ 296 million, net of tax effects.

(4)

The market value of securities is determined based on the market price practiced on the balance sheet date. In the event no market prices are available, amounts are estimated based on the prices quoted by dealers, on price definition models, quotation models or quotations for instruments with similar characteristics.

Summary of the Classification of Securities at September 30, 2003

  Financial Insurance/
Savings Bonds 		Private Pension Plan Other
Activities 		Total %
 
Trading securities 16,185  2,861  18,211  64  37,321  77.9
Securities available for sale 2,306  1,441  1,301  68  5,116  10.7
Securities held to maturity 2,064  -  2,673  -  4,737  9.9
Derivative financial instruments 730  -  -  1  731  1.5
 
Total in 2003 21,285  4,302  22,185  133  47,905  100.0
 

We present below the composition of the credit portfolio by type of operation and economic activity sector.

Credit Portfolio by Type of Operation - In millions of reais

 
  2002 2003
 
  June September June September
 
Discount of trade receivables and other loans 23,928  24,859  24,826  24,481 
Financings 16,616  17,237  16,082  15,721 
Rural and agribusiness loans 3,303  3,621  4,007  4,204 
Leasing operations 1,881  1,739  1,521  1,439 
Advances on foreign exchange contracts 6,339  5,403  5,814  6,168 
Advances in foreign currency granted -  29  -  - 
Total credit operations 52,067  52,888  52,250  52,013 
Other receivables 509  711  798  763 
Total for the period 52,576  53,599  53,048  52,776 
 
Sureties and guarantees recorded in memorandum accounts 3,434  4,163  5,581  6,433 

Credit Portfolio by Economic Activity Sector - In millions of reais

  2003
 
  June % September %
 
Public Sector 196  0.4 202  0.4
Private Sector 52,852  99.6 52,574  99.6
Manufacturing 17,150  32.4 17,615  33,4 
Commerce 8,617  16.3 7,711  14.6
Financial intermediation 605  1.1 521  1.0
Services 11,248  21.0 11,161  21.1
Agriculture, livestock raising, fishing, forest 826  1.6 826  1.6
development and management
Consumers 14,406  27.2 14,740  27.9
TOTAL 53,048  100.0 52,776  100.0

At the end of the third quarter of 2003, 99.6% of the credit portfolio was directed to the private sector, with no significant movement compared with the prior quarter. By economic activity sector, manufacturing maintained the majority of credit volume, with a 33.4% share of total operations, particularly food and beverages, steel, metal products and mechanics. Credits directed to the service sector, including financial intermediaries, comprised 22.1%, whereas commerce and farming/livestock activities recorded a 14.6% and 1.6% portfolio share, respectively. Loans to consumers comprised 27.9% of the portfolio.

Portfolio Performance

Analyzed on an overall basis, the credit portfolio performance for the quarter continued to reflect the disappointing conditions prevailing in the domestic economic scenario during the period, reflected mainly by a slacking economy and shrinking wages. Within this context, even though the process designed to introduce a more flexible monetary policy resulted in successive interest rate cuts from June onwards, the demand for credit in the third quarter continued slack, indicating that the economic agents are postponing consumption and investment decisions, in the expectation of obtaining more favorable conditions in the future for new financing contracts.

As a result, albeit to a smaller degree compared with the movement registered in prior quarters, the total volume of credit operations at the end of September again showed a decline, totaling R$ 52.8 billion on a consolidated basis, corresponding to a decrease of 0.5% compared to June or 1.5% when analyzed in relation to the prior twelve months.

Credit market activity is expected to pick up in the final quarter and if the stable economic scenario is confirmed and the current trend towards interest rate cuts continues, we anticipate that both companies and individual consumers will resume the contracting of new bank credit in the forthcoming months on more consistent basis.

Composition of the Credit Portfolio by Risk Levels

The classification and quality of the credit portfolio by risk level, at September 30, 2003, remained stable in comparison with the first quarter. The operations concentrated from levels AA to C, classified by BACEN as normal course operations, totaled 90.4% of the accumulated balance. 2.8% of operations were classified at risk administration level D and will remain so until this risk is reduced or guarantees with greater liquidity are obtained. Only 6.8% were considered to be abnormal course operations, subject to partial loss after the application of customary recovery procedures. The maintenance of these rates reflects the Bank’s permanent use of credit assessment and monitoring instruments.

Rating - In millions of reais

At September 30, 2003
Minimum Requirement
Risk Level Portfolio Balance Accumulated Percentage(1) Specific (2)
Generic (3) Total Additional Allowance(4) Existing Allowance
Past Due Falling Due
AA 14,833  28.1 -  -  -  -  -  - 
A 19,200  64.5 -  -  96  96  50  146 
B 4,379  72.8 1  4  39  44  14  58 
C 9,324  90.4 5  17  258  280  227  507 
D 1,460  93.2 16  42  88  146  267  413 
E 550  94.2 57  51  57  165  89  254 
F 596  95.3 76  100  122  298  98  396 
G 447  96.2 81  61  171  313  77  390 
H 1,987  100.0 982  446  559  1,987  -  1,987 
Total at September 30, 2003 52,776  -  1,218  721  1,390  3,329  822  4,151 
Total at June 30, 2003 53,048  -  1,177  828  1,286  3,292  817  4,109 

(1)

On total portfolio.

(2)

For operations with installments overdue by more than 14 days.

(3)

Recorded based on the customer/transaction classification.

(4)

The additional provision is recorded based on management's experience and expected collection of the credit portfolio to determine the total allowance deemed sufficient to cover specific and general portfolio risks, as well as the provision calculated based on risk level ratings and the corresponding minimum provision requirements established by CMN Resolution 2,682. The additional provision per customer was classified in the above table according to the corresponding risk levels.

The volume of the allowance for loan losses for the third quarter of 2003 totaled R$ 4,151 million, corresponding to 7.9% of total credit operations. However, of this amount, only 46.7% effectively comprises overdue operations (past due and falling due) compared to 48.8% in June and the remaining portion is recorded as a precaution only, based on the customers' internal classification or to cover specific and general portfolio risks.

Movement of the Portfolio between September 2002 and September 2003 - In millions of reais

The performance of the consolidated credit portfolio for the prior twelve months ended September 30, 2003, despite the low level of economic activity, evidences the maintenance of the quality of the assets, in particular as a result of new borrowers, corresponding to an increases of 19.3%, compared to the balance of the credit portfolio in September 2002.

  Portfolio Movement between September 2002 and September 2003
 
  Borrowers remaining
from September 2002 		New borrowers between
September 2002 and
September 2003 		Total credit at
September30, 2003
 
 
Level In millions
of reais 		% In millions
of reais 		% In millions
of reais 		%
 
AA to C 37,993  89.6 9,743  94.0 47,736  90.4
D to H 4,420  10.4 620  6.0 5,040  9.6
Total 42,413  100.0 10,363  100.0 52,776  100.0

As a result, the quality of the credits granted to new borrowers in annual terms is proving to be satisfactory and accordingly the percentage of credit operations classified as normal course (from AA to C) maintained its customary high level, totaling 90.4% at the end of the third quarter.

Concentration of Credit Portfolio
  2002 2003
Specification June September June September
  In millions
of reais 		% In millions
of reais 		% In millions
of reais 		% In millions
of reais 		%
Largest borrower 963  1.8 514  1.0 784  1.5 771  1.5
10 largest borrowers 4,718  9.0 4,452  8.3 4,871  9.2 5,060  9.6
20 largest borrowers 7,231  13.8 7,595  14.2 7,926  14.9 8,111  15.4
50 largest borrowers 11,875  22.6 12,636  23.6 13,265  25.0 13,500  25.6
100 largest borrowers 15,436  29.4 16,158  30.1 17,305  32.6 17,493  33.1

Credit Portfolio Indicators

To facilitate the analysis of the Bank's credit portfolio performance, we present below, on a consolidated basis, a comparative summary of the main parameters, based on the rules established by BACEN for recording provisions.

In millions of reais
2002 2003
Items September June September
Total Credit Operations 53,599  53,048  52,776 
- Consumer 13,974  14,406  14,740 
- Corporate 39,625  38,642  38,036 
Existing Allowance 3,818  4,109  4,151 
- Specific 2,125  2,006  1,939 
- Generic 1,269  1,286  1,390 
- Additional 424  817  822 
Existing Allowance/Specific Allowance (%) 179.7  204.9  214.1 
Existing Allowance/Total Credit Operations (%) 7.1  7.7  7.9 
 
Normal Course Operations (from AA to C)/Total Credit Operations (%) 90.7  90.2  90.4 
Operations under risk management (D)/Total Credit Operations (%) 2.5  3.4  2.8 
Abnormal Course Operations (from E to H)/Total Credit Operations (%) 6.8  6.4  6.8 
Credit Operations (D) 1,334  1,841  1,460 
Existing Allowance (D) 261  520  413 
Allowance/Credit Operations (D) (%) 19.6  28.2  28.3 
Credit Operations (from E to H) 3,642  3,375  3,580 
Existing Provision (from E to H) 3,130  2,939  3,027 
Allowance/Credit Operations (from E to H) (%) 85.9  87.1  84.6 

The figures at the end of September 2003 continue to confirm the low credit risk of the Bradesco portfolio, as a result of its comfortable coverage levels and moreover that the Organization's credit granting strategy is being applied on a secure, selective and consistent basis.

Deposits by Maturity - In millions of reais

2003
June September
Days to maturity Total Up to 30 days From 31 to
180 days 		From 181
to 360 days 		More than
360 days 		Total
Demand 11,525  11,240  -  -  -  11,240 
Savings 20,736  20,897  -  -  -  20,897 
Interbank 40  403  5  3  -  411 
Time 24,521  4,971  3,764  3,395  13,668  25,798 
TOTAL 56,822  37,511  3,769  3,398  13,668  58,346 

Demand Deposits - In billions of reais


Savings Accounts

The balance of Bradesco Organization Savings Accounts, at the end of the third quarter of 2003, totaled R$ 20.9 billion in deposits, comprising an 18.8% market share of the Brazilian Savings and Loan System (SBPE).

Savings Account Deposits - In billions of reais

Savings Accounts - Share of SBPE (Brazilian Savings and Loan System) - %

Savings Accounts
Million Accounts

Bradesco rated Top Fund Manager for the second year running in 2003

Bradesco was rated Best Fund Manager in Brazil in 2003 for the second time in a row by Exame magazine.

The Exame magazine’s Best Investment Fund Guide is one of the most complete and well-respected analyses in this sector, published in partnership with the Finance Study Center at the São Paulo Business Administration School of Fundação Getulio Vargas. The study covered the 12-month period from July 2002 to June 2003.

We present below the categories in which Bradesco’s performance was highlighted:

Overall Ranking – Best Fund Manager
1st place in Retail Funds
1st place in Leveraged Funds
2nd place in Share Funds
19 5-star rated Funds

According to Standard & Poor’s Bradesco Funds are the Best

Bradesco Investment Funds were highlighted in the Valor Investe magazine supplement of the Valor Econômico newspaper, published on September 18, 2003. Three Bradesco funds received the quality Select Fund seal given by S&P (Standard & Poor’s), the well-known credit rating agency. According to this supplement, these Funds present a rare combination of performance, profitability, management transparency and trustworthy asset management.

A number of Bradesco funds also comprise S&P’s Star Ranking which rates the best investment funds, based on strict international classification criteria.

The magazine also stressed the fact that Bradesco has won important awards in asset management and is Brazil’s largest private fund manager.

Bradesco leads the Best Share Fund ranking published by Investidor Individual magazine

Bradesco was ranked leader by Investidor Individual magazine (July/August 2003) among Brazil’s Best Share Funds.

This ranking, prepared by the Risk Office, shows the most successful variable income share and multimarket funds for the first five months of 2003.

BRAM-Bradesco Asset Management, the company responsible for managing Bradesco’s Investment Funds was ranked 1st place with 19 funds selected. The 2nd ranked company had 8 funds selected.

  Net Assets – In millions of reais
 
  2002 2003
 
  June September June September
 
Fixed return funds 42,325  40,925  59,706  65,200 
Floating rate funds 1,907  1,580  1,939  2,338 
Total net assets of funds 44,232  42,505  61,645  67,538 
Fixed return customer portfolios 13,141  10,905  16,198  16,275 
Floating rate customer portfolios 3,568  5,655  5,517  6,850 
Total net assets of portfolios 16,709  16,560  21,715  23,125 
Total 60,941  59,065  83,360  90,663 

Funds under Management - In millions of reais

Funds and Portfolios

Funds Number 
Fixed return 287 
Floating rate 135 
Total 422 
Quotaholders
Fixed return 933,311 
Floating rate 1,808,120 
Total 2,741,431 
Portfolios 164 
Portfolio Customers 164 

3 – Consolidated Information for the Period and Operating Structure

 
  In millions of reais
  2002
2003
  June 
September
June 
September
Total assets 124,702  140,151  154,489  164,363 
Securities, derivative financial instruments and interbank investments 43,311  49,970  63,792  76,464 
Credit and leasing operations 52,576  53,599  53,048  52,776 
Total deposits 50,849  55,871  56,822  58,346 
Demand deposits 10,005  11,448  11,525  11,240 
Time deposits 21,791  24,283  24,521  25,798 
Savings deposits 18,901  20,116  20,736  20,897 
Interbank deposits 152  24  40  411 
Subordinated debt 1,990  2,386  3,338  3,482 
Technical reserves for insurance, private pension plans and
savings bonds 15,212  16,600  22,732  24,461 
Stockholders' equity 10,119  10,500  12,522  12,967 
 
  In millions of reais
  2002
2003
  2nd Qtr.
3rd Qtr.
Accumulated to September
2nd Qtr.
3rd Qtr.
Accumulated to September
Net income 479  420  1,325  519  564  1,591 
Financial margin 2,337  3,831  8,532  2,617  3,161  9,145 
Gross profit from financial intermediation 1,626  2,935  6,292  2,031  2,558  7,147 
Commissions and fees 925  935  2,721  1,080  1,179  3,272 
 
  In reais
  2002
2003
  2nd Qtr.
3rd Qtr.
Accumulated to September
2nd Qtr.
3rd Qtr.
Accumulated to September
Net income 0.33 0.29 0.93 0.33 0.36 1.00
JCP/dividends - ON (before income tax) 0.055 -  0.210 0.204 0.221 0.609
JCP/dividends - ON (net of income tax) 0.046 -  0.178 0.173 0.188 0.518
JCP/dividends - PN (before income tax) 0.060 -  0.231 0.224 0.244 0.670
JCP/dividends - PN (net of income tax) 0.051 -  0.196 0.191 0.207 0.570

JCP – Interest attributed to own capital (paid and accrued)

ON - Common stock

PN - Preferred stock

 
  In reais
  2002
2003
  June 
September
June 
September
Number of shares (million) (ON/PN) 1,437,151  1,428,352  1,585,879  1,585,879 
Net book value (ON/PN) 7.04 7.35 7.90 8.18
Average last day price (ON/PN) 10.21 7.35 9.96 10.60
Average last day price (ON) 9.13 6.90 9.12 9.47
Average last day price (PN) 11.29 7.79 10.79 11.72

Market Value (Number of shares x average last-day price for the period)- In millions of reais


 
  In millions of reais
  2002
2003
 
 2nd Qtr.
3rd Qtr.
Accumulated to September
2nd Qtr.
3rd Qtr.
Accumulated to September
Net income 479  420  1,325  519  564  1,591 
Equity in earnings of associated companies (21) (9) (32) 28  (7) 26 
Exchange gain (loss) (447) (231) (415) 150  (61) 88 
Allowance for loan losses 711  896  2,240  586  603  1,998 
Technical reserves for insurance, private pension plans and savings bonds 633  1,393  2,563  1,493  1,656  5,039 
(Reversal of) allowance for mark-to-market 96  (2) 104  16  (1) 30 
Depreciation and amortization 131  121  345  150  179  470 
Amortization of goodwill
 58 
 74 
 170 
 62 
 62 
 862 
Total
1,640 
2,662 
6,300 
3,004 
2,995 
10,104 
  Common
Stock
Preferred
Stock
Total
Number of shares held at December 31, 2002 719,343  708,537  1,427,880
Shares subscribed and allocated for the period 79,597  78,402  157,999 
Number of shares held at September 30, 2003 798,940  786,939  1,585,879
 
  %
  2002
2003
  2nd Qtr.
3rd Qtr.
Accumulated to September
2nd Qtr.
3rd Qtr.
Accumulated to September
Return on stockholders’ equity (total) 20.3 17.0 17.2 17.6 18.6 16.7
Return on stockholders’ equity (average) 20.7 17.3 18.0 18.8 19.0 18.2
Return on assets (total) 1.5 1.2 1.3 1.4 1.4 1.3

N.B.

Return on stockholders’ equity (total) = Net income/Closing stockholders' equity annualized exponentially.

Return on stockholders’ equity (average) = Net income/average (daily) stockholders' equity annualized exponentially.





 
  %
  2002
2003
  2nd Qtr.
3rd Qtr.
2nd Qtr.
3rd Qtr.
Capital adequacy ratio - financial consolidated(1) 14.7 15.6 16.4 18.4
Capital adequacy ratio - total consolidated(1) 13.0 13.7 14.5 15.9
Permanent assets to stockholders' equity - financial consolidated(2) 56.1 52.9 43.9 44.3
Permanent assets to stockholders' equity - total consolidated(2) 46.6 42.4 31.6 29.9

(1)

Reference equity may not be lower than 11% of weighted assets.

(2)

At September 30, 2003, the ratio of permanent assets to stockholders’ equity is limited to 50% of reference equity.

Other Indicators


Activities and Structure

At Bradesco, risk management is seen as a competitive advantage, adding value to the Bradesco name and at the same time supporting the diverse business areas, facilitating a stable environment and ensuring that resources yield maximum benefits and that capital is allocated to the benefit of stockholders and society as a whole.

Bradesco adopts an ongoing strategy designed to enhance its risk management activities, in the pursuit to keep abreast of the best market practices adopted worldwide. These activities have become increasingly important not only as a result of the global economy, but also on account of the complex nature of the products and services offered to the community.

The independence of the risk management area is essential for achieving the successful management of market, liquidity, credit and operating risks. This activity together with others including money-laundering prevention, internal controls and compliance are managed by the Risk Management and Compliance Department, under the direct control of the Statutory Department Director, who in turn is subordinated to an Executive Director, reporting directly to the Institution’s President:



This organizational structure is designed not only to guarantee area independence but also to place greater focus on these important value-added activities, confirming the Organization’s commitment to the implementation of best corporate governance practices, using every available resource, whether human, technical or financial, to ensure that this area meets the conditions required to manage risk across the Group. In particular, because Bradesco is now extending its risk analysis strategy to encompass not only its banking business but also its associated companies, including Bradesco Vida e Previdência (private pensions), Bradesco Saúde (healthcare insurance), Bradesco Seguros (insurance), BRAM (asset management) and Bradesco Capitalização (savings bonds) as regards actuarial and market risks, consolidating its risk management culture on an Organization-wide basis.

The Risk Management and Compliance Department is also responsible for coordinating compliance with the regulations determined by the Brazilian Central Bank, particularly those relating to the New Capital Accord (Basel II) to be published in the near future by the Basel Committee.

Within this context, Bradesco is proud to inform that it was rated Best Bank for Risk Management in the Treasury area (Latin America 2003), by Global Finance magazine.

Credit Risk Management

As part of its credit risk management enhancement process(1), Bradesco is working uninterruptedly to improve the procedures for gathering and controlling portfolio information, develop new loss calculation models, enhance and prepare rating inventories used in the various sectors in which the Bank operates, oversee credit analysis, granting and settlement processes, monitor credit concentration and to define the dividing line between operating risks and credit risks.

As part of this ongoing enhancement process, during the third quarter of 2003 (3Q03), important efforts were made to prepare the Bank for the introduction of more advanced risk management techniques, based on the recommendations of the New Capital Accord to be introduced by the Basel Committee, among which we highlight the following:

(1)

Credit risk is the risk arising from the possibility of loss due to the non-receipt of amounts contracted with counterparties and related creditors. Credit risk management requires strict discipline and control over the analyses of the transactions carried out, safeguarding, at the same time, process integrity and independence.

Credit Policy

Designed to ensure maximum security, quality and liquidity in the investment of assets, minimizing risks inherent to all types of credit operation, the Organization's Credit Policy also seeks to offer agile and profitable business, applying appropriate methodology for each of the Bank’s business segments, set forth in the following topic, as well as directing the establishment of operating limits and the granting of credit.

Credit is granted based on a highly automated and efficient approvals system, supported by assessment policies which are geared by constantly improving technical parameters designed to ensure proper support for credit decisions.

As part of this system, the Branches operate within varying limits depending on the size and type of guarantee offered, while specialized credit scoring systems maximize the speed and security of the approvals process, based on strict protection standards.

The credit committees located at the Bank's headquarters also play an important role, centralizing, analyzing and authorizing credit operations at amounts above the branch limits and managing this core strategic activity.

Operations are diversified, non-selective and focused on consumer and corporate customers with sound payment capacity and proven creditworthiness. Care is taken to ensure that the underlying guarantees are sufficient to cover the risks assumed, considering the purpose and terms of the credit granted.

Credit Granting


Market Segmentation

Bradesco operates on a segmented service basis, seeking to match its different products and services to the different profiles and size of its target public. In line with a world market trend, Bradesco’s structure permits the grouping together of customers with similar profiles facilitating superior quality customer service, extending business opportunities with a greater focus on relationship actions.



Major corporations with annual billings in excess of R$ 180 million are served since June 1999 by Bradesco Corporate Banking which provides a range of sophisticated financial solutions, enhancing its service structure through the use of the Asian and Euro Desks, focused on prospecting new business in these regions.

Middle market companies, with annual billings from R$ 15 million to R$ 180 million, are served by Bradesco Empresas which came into operation in January 2002 designed to offer a differentiated service in exclusive VIP areas, tailored to the specific needs of this type of customer, who in general prefer the use of alternative channels such as the telephone, ATMs and the Internet, instruments in which Bradesco technology is outstanding.

In the consumer customer area, the first step in terms of customer segmentation was taken via Bradesco Private Banking, focused on the personalized management of high-income customer accounts with funds available for investment in excess of R$ 1 million, which commenced operations in November 2000.

More recently in May 2003, following the incorporation of Banco Mercantil de São Paulo, the Bradesco Prime service was launched targeting consumer customers with monthly incomes of more than R$ 4 thousand or investments in excess of R$ 50 thousand. Through exclusive branches, or specifically reserved areas in traditional branches, this public receives a high standard of personalized customer service with a wide range of products and services, including diverse credit lines, insurance policies and private pension plans.

Other customers are classified on a retail basis as companies or consumers. Bradesco’s activities in this segment were strengthened through the partnership entered into last year with the Brazilian Postal and Telegraph Company – Correios for the purpose of creating Banco Postal, the post-office bank. Dedicated to extending banking service access to low-income bracket consumers, particularly those who live in the country’s remote interior regions, Bradesco is now present in all of Brazil’s states.

Methodology used for Credit Portfolio classification

In addition to supporting the establishment of minimum parameters for granting credit and managing risk, the credit risk scoring system established by the Brazilian Central Bank also facilitates the definition of differentiated credit policies based on the customer's specific, characteristics and size, providing a basis for the correct pricing of operations and for establishing the most appropriate guarantees for each situation.

In accordance with internal policy, Bradesco customer risk ratings are established on a corporate basis and are permanently reviewed to maintain the quality of the credit portfolio. These ratings are segmented as follows:

Classification – Corporate    
Rating
Bradesco
% Provision
Concept
AA Excellent 0.0 Premium company/group, with size, tradition and market leadership, with excellent reputation and economic and financial position.
A Very Good 0.5 Company/group with size, sound economic and financial position, acting in markets with good prospects and/or potential for expansion.
B Good 1.0 Company/group which, regardless of size, has a good economic and financial position.
C Acceptable 3.0 Company/group with a satisfactory economic and financial situation but with performance subject to economic scenario variations.
D Fair 10.0 Company/group with economic and financial position in decline or unsatisfactory accounting information, under risk management.
E Deficient 30.0
F Bad 50.0 Abnormal course credit operations, classified based on expected loss as per percentage shown.
G Critical 70.0
H Uncollectible 100.0

In the case of consumer customers, the above risk ratings are mainly defined based on their registered reference variables which include: income, equity, restrictions and indebtedness, as well as performance and past relationship with the Bank.

Market Risk Management

Market risk is related to the possibility of the loss of income from fluctuating rates caused by mismatched maturities, currencies and indices of the Institution's asset and liability portfolios. This risk is monitored on a strict basis by the financial market to avoid losses for institutions.

At Bradesco, market risks are managed through methodologies and models which are consistent with local and international market realities, ensuring that the Organization's strategic decisions are implemented with speed and a high level of reliability.

The Organization adopts a conservative policy regarding market risk exposure; VaR (Value at Risk) limits are defined by Senior Management, and compliance is monitored daily by an area which is independent from portfolio management. The methodology used to determine VaR has a reliability level of 97.5%. The volatilities and correlations used by the models are calculated on statistical bases, whereas future prospects are calculated based on economic studies. The methodology applied and current statistical models are validated daily using backtesting techniques.

We present below the VaR of the Own Portfolio positions (Treasury):

 
Risk Factors
  		In thousands of reais
  2002
2003
June
September
December
March
June
September
Prefixed 4,881  7,108  5,407  6,293  6,541  12,658 
Exchange coupon 48,259  23,041  33,142  9,662  14,717  19,000 
Foreign currency 8,422  1,988  2,876  1,807  439  184 
Floating rate 14  75  11  105  10  13 
Correlated effect (15,809) (8,008) (4,014) (3,803) (3,243) (3,395)
VaR 45,767  24,204  37,422  14,064  18,464  28,460 

In addition, a daily Gap Analysis is performed to measure the effect of the movement in the internal interest rate and foreign exchange coupon curves (interest spread paid above the foreign exchange variation) on the portfolio.

Complementing the market risk monitoring, control and management structure and in accordance with Central Bank regulations, a daily verification is made of the values at risk for the fixed and foreign exchange positions of the Organization’s entire portfolio and of minimum capital requirements.

Operating Risk Management

Operating risks are those inherent to activities which provide support for transactions in which the Organization participates and may occur as a result of the interruption of business, system failures, errors, omission, fraud or external events impacting the results of the Institution and of its customers.

Following recent guidelines issued by the Basel Committee, the Organization is working to adapt its processes to comply with possible future Central Bank demands, complementing its present capital management policies, based on an analysis of operating losses.

Operating risk is managed at Bradesco based on the dissemination of its culture, disclosure of its policies and development of own methodologies, models and tools designed to permit, among other factors, decreases in the cost of regulatory capital to be subscribed and at the same time increases in operating efficiency.

Bradesco, through its Operating Risk Management area, prepared a plan designed to achieve full compliance with the 10 principles of good operating-risk-management practice determined by the Basel Committee.

In line with the definition and development of the methodology and accounting and management criteria used for managing operating risk, the area is now implementing a specific Internal Management System for streamlining this information, designed to manage, enhance and increase the knowledge used to administrate operating loss events, facilitating an in-depth assessment, based on either management or accounting controls.

The cutting-edge nature of this internal operating risk management process can be regarded as a benchmark of Bradesco’s important status within Brazil’s financial scenario, increasing its competitive edge as a result of greater operating efficiency and adding stockholder value, as well as extending its relationship of trust with customers, the market and regulatory bodies.

Liquidity Risk Management

Liquidity risk management is designed to control the different mismatched liquidation terms of the Institution's rights and obligations, as well as the liquidity of the financial instruments used to manage the financial positions.

Knowledge and monitoring of this risk are critical since they enable the Organization to settle transactions on a timely and secure basis.

At Bradesco, liquidity risk management involves a series of controls, mainly, the establishment of technical limits and an ongoing assessment of the positions assumed and financial instruments used.

Capital Risk Management

The Organization's capital is managed to optimize the risk-return ratio, minimizing losses through the implementation of well-defined business strategies and maximizing efficiency in the combination of factors which impact the Capital Adequacy Ratio (Basel).

Capital Adequacy Ratio (Basel) – September 2003 - In millions of reais

Calculation    
Calculation Basis Consolidated Financial (1) Total Consolidated (2)
 
Stockholders’ equity 12,967  12,967 
Minority interest 11  111 
 
Reference equity – Level I 12,978  13,078 
Reference equity – Level II (subordinated debt) 3,416  3,416 
Total reference equity (Level I + Level II) 16,394  16,494 
 
Risk-weighted assets 89,262  103,645 
 
Capital adequacy ratio (%) 18.37% 15.91%

(1)

Financial companies only.

(2)

Financial and non-financial companies.


Movement (%)    
Ratio in September 2002 15.55 13.68
Subordinated Debt:
- Local 1.55 1.23
- Foreign (0.28) (0.09)
Increase in assets (0.91) (1.36)
Other (results and acquisition of treasury stock, JCP, minority interest and risks) 2.46 2.45
Ratio in September 2003 18.37 15.91

Internal Controls

Complementing its operating risk control and management activities, the Organization has developed a number of systems, policies and internal controls over the years to mitigate possible potential losses generated by its exposure to this type of risk.

Aware of the importance of these controls, Bradesco has developed and implemented certain tools designed to optimize these processes and procedures, among which we highlight the following:



 
  In millions of reais
  2002
2003
  2nd Qtr.
3rd Qtr.
Accumulated to September
2nd Qtr.
3rd Qtr.
Accumulated to September
ADDED VALUE (A+B+C) 1,811  1,846  5,510  2,191  2,395  6,835 
A – Gross profit from financial intermediation 1,626  2,935  6,292  2,031  2,558  7,147 
B – Commissions and fees 925  935  2,721  1,080  1,179  3,272 
C – Other operating expenses (740) (2,024) (3,503) (920) (1,342) (3,584)
DISTRIBUTION OF ADDED VALUE (D+E+F+G) 1,811  1,846  5,510  2,191  2,395  6,835 
D – Employees 801  916  2,437  922  1,094  2,873 
E – Government 531  510  1,748  750  737  2,371 
F – JCP/Dividends to stockholders (paid and accrued) 81  -  316  343  367  1,000 
G – Reinvestment of profits 398  420  1,009  176  197  591 


Consumer and Corporate Customers - September 2003


Increase in Checking Accounts - (million)



Increase in Savings Accounts - (million)




 
  2002 2003
 
  September June September
 
 
 
Branches
 
PABs/PAEs (1)
Branches
 
PABs/PAEs (1)
Branches
 
PABs/PAEs (1)
Consolidated 2,928  1,775  3,362  1,936  3,033  1,958 
Bradesco 2,482  1,409  2,700  1,678  2,811  1,763 
BCN 226  179  222  193  221  195 
Banco Finasa (formerly Continental Banco) 1  -  1  -  1  - 
Mercantil de São Paulo 219  187  -  -  -  - 
BBV Banco -  -  439  65  -  - 
 
Banco Postal 1,033  2,830  3,144 
 
ATMs - Bradesco Day and Night (BDN) 21,114  21,491  21,585 
 
Finasa Promotora de Vendas (formerly Continental Promotora de Vendas) 51  55  53 
 

(1)

PABs (banking service post) and PAEs (electronic service outlet) are installed exclusively in companies. PABs have at least one on-site bank clerk.

 

 

N.B.

368 BBV Banco branches were incorporated by Bradesco.

71 now operate under the Bradesco banner.

21 PABs were transferred from BBV Banco to Bradesco.

24 PAEs were transferred from BBV Banco to Bradesco.

Customer Service Network (Branches)



Bradesco and Market Share

REGION BRADESCO BCN (2) TOTAL CONSOLIDATED TOTAL BANKS IN MARKET (1) MARKET SHARE (%)
 
North
Acre 5  -  5  25  20.0
Amazonas 56  2  58  129  45.0
Amapá 4  -  4  17  23.5
Pará 48  1  49  253  19.4
Rondônia 18  -  18  73  24.7
Roraima 2  -  2  14  14.3
Tocantins 13  1  14  71  19.7
Total 146  4  150  582  25.8
 
Northeast
Alagoas 10  2  12  112  10.7
Bahia 231  3  234  726  32.2
Ceará 27  2  29  340  8.5
Maranhão 26  1  27  248  10.9
Paraíba 17  -  17  153  11.1
Pernambuco 63  3  66  436  15.1
Piauí 10  -  10  106  9.4
Rio Grande do Norte 13  1  14  129  10.9
Sergipe 12  1  13  148  8.8
Total 409  13  422  2,398  17.6
 
Central West
Federal District 29  4  33  292  11.3
Goiás 102  5  107  548  19.5
Mato Grosso 58  1  59  215  27.4
Mato Grosso do Sul 53  3  56  219  25.6
Total 242  13  255  1,274  20.0
 
Southeast
Espírito Santo 36  2  38  306  12.4
Minas Gerais 274  15  289  1,854  15.6
Rio de Janeiro 244  36  280  1,659  16.9
São Paulo 1,046  115  1,161  5,554  20.9
Total 1,600  168  1,768  9,373  18.9
 
South
Paraná 163  10  173  1,263  13.7
Rio Grande do Sul 153  9  162  1,375  11.8
Santa Catarina 98  5  103  806  12.8
Total 414  24  438  3,444  12.7
 
TOTAL 2,811  222  3,033  17,071  17.8

(1)

Source: CADINF-DEORF/COPEC - July 2003.

(2)

Includes 1 branch of Banco Finasa.


Customer Service Network (Branches) - Market Share - July/2003



Customer to Branch Ratio - Thousand



Bradesco offers its products and services under the name of Banco Postal in partnership with Empresa Brasileira de Correios e Telégrafos – Correios (Brazil’s Postal Service Company).

Through the Correios post-office branches installed nationwide, Bradesco provides online real-time transactions using a latest-generation technology model.

The Correios personnel are trained by Bradesco to provide the customary top-quality services typical of both institutions.

Through Banco Postal, Bradesco is encouraging the socio-economic development of low-income bracket consumers, contributing towards the positive transformations currently taking place in Brazil. This post-office bank provides access to a wide range of products and services, which include, among others, the opening of checking and savings accounts, granting of loans, issue of check books, receipt of utility bill payments and others, all of which distinguish Banco Postal from among the market’s other banking correspondents. More products are soon to be introduced, designed to provide customers with an increasing range of options for carrying out their banking business at locations which are closer to their homes.

We stress that out of a total of 1,627 municipalities with no previous access to banking services, some 1,000 can now take advantage of the services offered by Banco Postal, providing benefits to a population of more than 9.6 million people.

The quarter was marked by the start-up, on September 26, of operations in post-office bank branch #3,000, on the island of Fernando de Noronha. On this occasion, account number 1,000,000 was opened and the first 2 loans, under the new microcredit line, were granted, structured in conformity with the federal government’s plan to increase Brazilian economic activity through the granting of credit to low-income consumers.

At the same time, Bradesco is forging other important partnerships in the Correspondent Banking segment with major retailing networks, including supermarket and drugstore chains, increasing the number of outlets offering its products and services.

Transactions Carried Out (monthly)



Units Installed (accumulated)



As well as the traditional Customer Service Network (Branches), Bradesco customers are able to consult their banking transactions, carry out financial transactions and purchase products and services deployed via state-of-the-art technology through the following alternative channels: Self-service (Auto-Atendimento), Easy Phone (Fone Fácil) and Internet Banking.

Bradesco Day and Night – Self-Service ATM Network

Brazil’s largest Private-Sector Self-service Network, with 22,462 ATMs (Bradesco - 21,585 and BCN - 877).

Located in bank branches and in all areas of important economic agglomeration: Shopping Malls, Hypermarkets, Supermarkets, Airports, Service Stations, Bus Terminals etc.

Bradesco Self-Service Network Distribution – Monthly Productivity – September 2003

Bradesco Day and Night – Easy Phone Service

Nationwide 24-hour access, 7 days a week, with Electronic Voice Response (EVR) technology and personalized calls in 69 regions.

Personalized calls are routed via Bradesco’s Data and Voice Network to call centers in São Paulo – Santa Cecília and Osasco –Headquarters.

The Easy Phone service is widely used as a result of the large number of fixed and mobile telephones now in use throughout Brazil.

Bradesco Day and Night – Internet Banking

The Bradesco Portal contains links to 22 related websites and to the Banco BCN and Finasa bank websites. Bradesco Internet Banking (www.bradesco.com.br) online since May 31, 1996 is a worldwide benchmark for Home Banking services.

Since it was first launched, Bradesco Internet Banking has focused on innovating and deploying the largest number of online services possible for its customers.

At present, Bradesco Internet Banking offers its customers more than 210 different services, which can be accessed 24 hours a day, seven days a week anywhere on earth.

Main Available Channel Services and Products

- Consultations - Checking/savings accounts
- Account balances and statements: summarized, or in detail, by period
- Credit card balances and statements
- Investment balances and statements
- Bank charges and credit limits

- Payments/scheduling of payments

- Dockets
- Public utility bills
- Taxes, fees and contributions
- Mobile phone credits
- Direct debit

- Transfers

- Between Bradesco accounts
- Other banks – DOC D; DOC E and TED
- Donations

- Requests

- Changes to credit card limit
- Checkbook
- Revolving credit
- Change of address

- Withdrawals/Deposits

- Checking/savings accounts
- Salary/INSS account
- Card

- Other services

- Unblocking of cards
- Travelers Checks - Financial investments
- Re-issue of payment receipts
- Personal loans/instant credit
- Advance receipt (Orpags)
- PIN substitution
- Sale of products and services

Bradesco Day and Night – Self-Service ATM Network

Growth:

  2002   2003
  1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.   1st Qtr. 2nd Qtr. 3rd Qtr.
BDN network terminals 20,429  20,779  21,114  21,210    21,285  21,491  21,585 
Banking service outlets in the BDN nationwide network 5,104  5,376  5,549  5,640    5,762  5,845  6,172 
Outplaced terminals (excluding branches, PABs and PAEs) 1,386  1,560  1,664  1,662    1,755  1,772  1,842 
BDN network cash withdrawal transactions (million) 83.3  83.2  87.7  96.1    92.5  95.6  98.9
 
Deposit transactions (million) 48.5  50.4  52.0  51.0    47.0  47.6  48.4
 
Inter-account transfers (million) 4.4  4.3  4.7  4.8    4.5  4.6  4.8
 
Express checkbooks issued (million) 2.6  2.6  2.7  2.8    2.5  2.6  2.6
 
Balance consultations (million) 89.3  90.4  95.4  102.0    99.5  102.2  115.3
Financial volume of BDN network transactions (in billions of reais) 18.3  18.5  29.2  49.9    45.3  45.4  44.9

Third-quarter highlights for 2003:

Number of ATMs - Bradesco

Bradesco Day and Night – Easy Phone Service

Integrated Call Centers

Bradesco Cards Banco Bradesco
Card sales   Bradesco Prime
Card collection   Bradesco Internet Banking support
Advance receipts   Finasa
Outgoing telemarketing   Digital Bradesco
Private pension plans   Digital BCN
Telecollection   BCN Live Line (Linha Viva)
Bradesco Consortium Plans

Increase in Number of Calls (million)

Growth in Financial Volume - In millions of reais

Third-quarter highlights for 2003:

Bradesco Day and Night – Internet Banking Service

Internet Banking – Bradesco and BCN - Registered users(*) - thousand


Internet Banking

Thousand transactions

Bradesco Internet Banking

Bradesco online services were created to facilitate the day-to-day life of its customers, offering access to the transactions available through the branch network from any point on the globe.

The internet is an important and profitable customer relationship channel, generating benefits for both customers and stockholders.

ShopInvest Bradesco

In March 1999, Bradesco launched ShopInvest (www.shopinvest.com.br), the first Brazilian retail bank broker to operate in BOVESPA's online Home Broker.

Through ShopInvest, investors can access a variety of different information and trade shares in BOVESPA, even if they are not Bradesco account holders. All of these services are provided free-of-charge and comply with the same rules applicable to bricks-and-mortar trading.

ShopInvest stands out for its wide range of investment options, available in nine Investment Rooms: Shares; Savings Bonds; CDB; Funds; Real Estate; BM&F; Savings Accounts; Vida e Previdência (Private Pension Plans) and Insurance.

ShopCredit

In May 2001, Bradesco launched ShopCredit (www.shopcredit.com.br), the Bank’s Financing and Loan website, which offers a complete portfolio of Bradesco's credit lines. The products are grouped together for purchase by consumer or corporate customers with full details on each option and visitors can use a simulator to calculate amounts and terms in the Personal Credit, Consumer Financing (CDC), Leasing, Housing Loans and Finame (Moderfrota, Prefixado and Proleite) modes. ShopCredit visitors can also request instant personal credit, quickly and securely.

Bradesco Net Empresa

On September 18, 2001, Bradesco launched its new corporate banking website.

With Bradesco Net Empresa, companies gained a new ally for optimizing the financial management of their businesses. Through this website, companies can operate bank accounts, make payments and collections and perform other transactions online without having to visit a bricks-and-mortar branch.

B2C (Business to Consumer)

Bradesco Electronic Trade was created in 1998 and soon became a successful hallmark. In the wake of this success, ShopFácil was launched in 2000, offering, among other services, “Meios de Pagamento Eletrônico Bradesco” (Bradesco Online Payment Methods) – the safest, most practical and economic way to shop online.

Bradesco is currently the only Bank in the world to date to receive ISO 9001:2000 accreditation for its Online Commercial Payment Methods.

Bradesco Electronic Payment Methods comprise: Electronic Wallet (Bradesco debit cards, PoupCard and Bradesco Visa and MasterCard Credit Cards), Pagamento Fácil (Easy Payment), Boleto Bancário (Online Dockets), Interaccount Transfers and Bradesco Online Credit.

B2B (Business to Business)

In the B2B area, emphasis should be given to the business solutions offered by Bradesco comprising the following: a security and limits module, B2B payment methods, management tools (buyer, seller and bank) and a financial reconciliation module for the seller.

At present, the Bank offers the following B2B Payment Methods:

Third-quarter highlights for 2003:

Services Position in 2003 up to September 30

Bradesco Internet Banking

5.6 million registered users.
233.7 million transactions carried out (a 19.9% increase compared to the same period in 2002).

BCN Net Internet Banking

229.8 thousand registered users.

ShopInvest Bradesco

777 thousand registered users.
427 thousand transactions carried out (a 98.6% increase compared to the same period in 2002).

ShopCredit

411 thousand transactions/operations carried out (a 51.1% increase compared to the same period in 2002).

Bradesco Net Empresa

157 thousand registered companies with 116 thousand in operation.
4.1 million transactions/operations conducted (a 192.8% increase compared to the same period in 2002).

B2C

544 thousand transactions/sales posted.
1,818 stores operating with Bradesco Online Payment Methods.

Bradesco Internet Banking for the Visually Impaired

2,870 registered users.

Web Point

112 terminals installed.

Bradesco Net Express

1,884 companies connected.
7.6 million transactions carried out.

Infoemail

134 thousand registered users.

Infocelular

3,451 registered customers.

Mobile Banking (WAP)

864 thousand transactions carried out.

Fale com o Bradesco (Talk to Bradesco)

The Bank offers an online communications channel through which customers can clarify doubts and send suggestions or complaints regarding Bradesco products and services.

Donations

Aware of its social responsibility, Bradesco offers customers the opportunity to make online donations to a number of different philanthropic entities and institutions.

WebTA

Through this system data files can be transmitted over the internet with maximum security.

Boleto Fácil (Easy Bill Payment)

Customers can use the Bradesco free Infoemail service to receive bills for payment via e-mail, as well as balance information, financial market news and other interesting information.

Other Bradesco Organization Websites:

Websites, Products and Services under Construction:



  Million
  2002   2003
  2nd Qtr. 3rd Qtr. Accumulated
to September 		  2nd Qtr. 3rd Qtr. Accumulated
to September
Number of Cards 31.8  33.3  33.3    36.9  39.1  39.1 
Credit 5.3  5.7  5.7    6.5  6.8  6.8 
Debit 26.5  27.6  27.6    30.4  32.3  32.3 
Average amount billed – In reais 2,802.3  3,121.6  8,533.7    3,698.7  4,005.6  11,354.6 
Credit 1,945.3  2,139.9  5,899.8    2,330.1  2,483.4  7,164.4 
Debit 857.0  981.7  2,633.9    1,368.6  1,522.2  4,190.2 
Number of transactions 54.9  60.9  167.0    69.9  76.9  215.1 
Credit 32.3  35.2  97.9    35.9  38.7  111.1 
Debit 22.6  25.7  69.1    34.0  38.2  104.0 

Credit Cards

The number of Bradesco credit cards increased by 19.3% in the third quarter compared with the same period in 2002, while the Visa and Mastercard market grew by some 7.9%. This growth rate expanded our market share from 14.4% in 2002 to 16.1% in 2003.

Third-quarter billings totaled R$ 2.5 billion, a growth rate of 16.1% as compared to the same period in 2002, with a 9.9% increase in the number of transactions.

These results include the addition of 64.8 thousand credit cards to Bradesco’s card base, following the incorporation of BBV Banco.

Debit Cards (Electron)

The number of debit cards increased by 17.0% in the third quarter of 2003, compared to the same period in 2002, strengthened by the acquisition of BBV Banco, with some 360 thousand cards, confirming Bradesco’s leadership of the Visa Electron market.

In terms of billings, this increase totaled 55.1%. These two indicators demonstrate clearly that Brazilians are changing their payment habits, substituting checks and cash for the use of debit cards. The commercial establishments are our allies in this market, since debit cards are preferred for their guaranteed liquidity, security and easy operation.

Acquiring Market

The network of commercial establishments in Brazil, accredited by the Visa system, is administered by Companhia Brasileira de Meios de Pagamentos - Visanet, in which Bradesco has a direct capital holding of 39.7%. From January to September 2003, Visanet processed some R$ 38.6 billion in transactions, including both credit and debit card billings, a 34.0% increase over the same period in 2002. At present, Visanet has 699 thousand associated establishments nationwide. The Visa network is preferred by customers precisely because of the card’s wide market acceptance.

Growth

Credit Card Base - Million



Credit Card Billings – In millions of reais



Market Share



Debit Card Base (Electron) – Million



Debit Card Billings – In millions of reais



Since its creation in 1999, Bradesco Corporate Banking has focused on enhancing its specialized structures designed to provide the best possible service to 1,159 Economic Groups comprising its target market, segmented as follows:

Corporate - The structure devised to conduct the Bank’s relationship with Brazil’s major corporations is growing and improving year by year. Every effort is made to ensure that the related-area professionals have a thorough working knowledge of the corresponding economic sectors and companies and as a result are able to offer complete solutions and genuine added value, developing solutions in the areas of cash management, private pension plans, asset management, overseas trade and risk management.

Agribusiness - A team of specialists formed to attend companies in this important economic segment, providing product and service solutions in line with their specific needs.

Asian Desk - A partnership entered into with the UFJ Bank for the purpose of developing financial solutions, in the role of economic and financial advisor and main banker for companies interested in the commercial and financial flows between Brazil/Japan and Brazil/Asia.

Euro Desk - Following the conclusion of the acquisition of BBV Banco, the Euro Desk is now under implementation. Focused on the management of customers of Spanish origin and the development of financial solutions for Bradesco Corporate companies, fostering business synergies with BBVA in Europe, the U.S. and Latin America.

Bradesco’s middle market segment, Bradesco Empresas, was created in April 2002, designed to offer quality corporate customer service for companies all over Brazil.

This segment targets middle market companies with annual billings from R$ 15 million to R$ 180 million.

The Bank’s traditional Branch customers who are compatible with this profile are invited to join the Bradesco Empresas segment.

The Bradesco Empresas service offers exclusively reserved Branches for its corporate customers in this segment, located in strategic areas.

By September 2003, this segment had 44 service outlets in São Paulo, Rio de Janeiro, Minas Gerais, Paraná and Rio Grande do Sul with 6,746 customers from the different production chain sectors.

The personalized service offered by Bradesco Empresas prompted significant investments in this area, including specific training for our Relationship Managers and the restructuring of the IT structure, designed to provide added value and increase the Bank’s share of this segment.

Since they are responsible for a maximum portfolio of 25 to 30 organizations, each Relationship Manager is able to focus on increasing business in the following areas: Loans, Investments, Foreign Trade, Derivatives, Cash Management and Structured Transactions.

The recent mergers of other financial institutions by Bradesco have had a positive effect, increasing the Bank’s product portfolio and market share.

Up to the end of December 2003, there will be a total of 66 Middle Market Branches.

Bradesco Private Banking, through the deployment of its exclusive line of ISO 9001:2000 accredited products and services, provides expert advice to its customers through qualified professionals, on the best local and international capital market investment options designed to increase their wealth, on a one-to-one basis with the discretion, privacy and security required by this customer service.

As part of the segmentation strategy implemented by the Organization in 1999, Bradesco Prime commenced activities on May 19, 2003 and now boasts a Network of 142 Branches distributed nationwide and which is expected to increase to 175 by February 2004.

Bradesco Prime’s target public comprises consumer customers with a monthly income of more than R$ 4,000.00 or with investments in excess of R$ 50,000.00.

Bradesco Prime coordinates the Bank’s commercial relationship with these segment customers, providing VIP facilities and personalized attendance by Relationship Managers, as well as bespoke products and services.

The Bradesco Prime Relationship Manager is a high-caliber professional capable of catering to all the financial needs of his/her customers. Since customer portfolios are kept small, managers are able to dedicate special attention to each one.

Bradesco Prime Customers have access to the extensive Bradesco customer service network, comprising its nationwide branches and self-service network.

Structure

This area operates with support of its 17 specialized units operating in Brazil (Bradesco – 12 and BCN - 5), 1 Branch in New York (Bradesco), 4 Branches in Grand Cayman (Bradesco, BCN, Boavista and Mercantil), 2 Branches in Nassau (BBV Banco and Boavista), 1 subsidiary in Buenos Aires, Banco Bradesco Argentina S.A., 1 subsidiary in Nassau, Boavista Banking Limited, 1 subsidiary in Luxembourg, Banco Bradesco Luxembourg S.A., 1 subsidiary in Tokyo, Bradesco Services Co., Ltd. and 1 subsidiary in Grand Cayman, Cidade Capital Markets Ltd.

In the International Area, emphasis should be given to the important support offered by the Bradesco Organization designed to foster Brazilian foreign trade, with a balance at the end of the third quarter of some US$ 6.7 billion in export and import financing, as well as for onlending to local customers.

Foreign trading for exports through August 2003 totaled US$ 9.4 billion, a growth rate of 11.2% compared to the same period in 2002. We also highlight the 40.8% increase recorded in foreign exchange trading for imports, which totaled US$ 3.8 billion as compared to US$ 2.7 billion for the period from January to August 2002.

Volume of Foreign Currency Trade -
In billions of U.S. dollars



Export Market



Import Market



We present below the foreign trade portfolio balances at September 30, 2003:

  In millions of
U.S. dollars 		In millions of
reais
Export financing
Advance on Foreign Exchange Contracts - undelivered bills 1,652.3 4,829.0
Advance on Export Contracts – delivered bills 501.5 1,465.7
Exchange discounted in advance 27.3 79.8
Prepayments 692.8 2,025.2
Loans according to Export Incentive Program (Proex) 0.1 0.3
Onlending of funds borrowed from BNDES/EXIM 51.8 151.4
Documentary drafts and bills of exchange in foreign currency 13.5 39.4
Indirect exports 5.9 17.5
Total export financing 2,945.2 8,608.3
Import financing
Foreign currency import loans 246.4 720.1
Exchange discounted in advance 81.9 239.4
Open import credit 34.6 101.1
Total import financing 362.9 1,060.6
Guarantees
International guarantees 107.7 314.7
Total international guarantees 107.7 314.7
Total export and import financing 3,415.8 9,983.6

The foreign exchange portfolio is financed by credit lines obtained from correspondent banks. The Bank also has a Commercial Paper program in the United States in the amount of US$ 190 million, as well as two foreign trade finance facilities, one with the Inter American Development Bank - IDB (US$ 110 million) and the other with the International Finance Corporation - IFC (US$ 70 million).

At the end of the third quarter, approximately 100 American, European and Asian Banks had extended credit lines to Bradesco.

  In millions of U.S. dollars
  September 30, 2003
  Assets Stockholders' equity
Foreign Branches and Subsidiaries
Bradesco New York 697.9  139.1 
Bradesco Grand Cayman 4,207.5  378.2 
BCN Grand Cayman 443.4  135.6 
Boavista Grand Cayman, Nassau and Banking Ltd. – Nassau 619.8  73.1 
Cidade Capital Markets Ltd. - Grand Cayman 29.8  29.8 
Bradesco Services Co., Ltd – Tokyo Japan 0.4  0.4 
Mercantil Grand Cayman 132.8  132.5 
Banco Bradesco Argentina 20.6  16.1 
Banco Bradesco Luxembourg S.A. 246.5  123.8 
BBV Banco – Nassau 387.6  265.9 

The core objective of the foreign branches and subsidiaries is to obtain funds in the international market for onlending to customers, principally through the financing of Brazilian foreign trade.

The main activity of the subsidiary Banco Bradesco Luxembourg S.A. is to provide additional services to private banking customers and to increase foreign trade operations.

In the first nine months of 2003, as well as short-term funds obtained from correspondent banks for foreign trade financing, loans of US$ 2.064 billion on a consolidated basis were raised through public and private placements in the international capital market, earmarked for foreign trade financing and working capital loans.

This amount corresponds to a 254% increase over the same period in 2002, when the Organization obtained some US$ 583 million.

In the same context, emphasis should be given to the conclusion of the Payment Order Securitization Program, with funds obtained, on August 20, 2003, in two tranches for the total amount of US$ 400 million, under a 7-year term, with principal and interest paid quarterly and a 2-year grace period for amortization of the principal. As well as this program, Bradesco Grand Cayman obtained on July 10, 2003, an amount of US$ 270 million relating to the transaction concerning the Securitization of Visanet Credit Card Receivables in the amount of US$ 500 million, with an 8-year term.

Profile of Public and Private Placements Abroad – Consolidated Bradesco

Funds Obtained Abroad

ISSUES CURRENCY AMOUNT DATE ISSUED MATURITY
2000 – PUBLIC ISSUES - US$ 950m
FxRN US$ 200,000,000.00  2.8.2000  2.8.2002 
FxRN US$ 100,000,000.00  5.12.2000  5.13.2002 
USCP US$ 300,000,000.00  6.19.2000  6.18.2001 
FxRN US$ 200,000,000.00  7.10.2000  7.10.2001 
FxRN US$ 150,000,000.00  11.17.2000  11.18.2002 
- PRIVATE ISSUES - US$ 250m
 
2001 – PUBLIC ISSUES - US$ 1.075bn
FxRN US$ 175,000,000.00  2.22.2001  2.22.2002 
FxRN US$ 100,000,000.00  4.25.2001  10.25.2002 
FxRN US$ 100,000,000.00  6.18.2001  6.18.2003 
USCP US$ 250,000,000.00  6.18.2001  6.17.2002 
FxRN US$ 100,000,000.00  7.24.2001  7.24.2002 
FxRN US$ 200,000,000.00  10.24.2001  10.18.2002 
SUBORDINATED DEBT US$ 150,000,000.00  12.17.2001  12.15.2011 
- PRIVATE ISSUES – US$ 150m
 
2002 – PUBLIC ISSUES - US$ 708m
FxRN US$ 150,000,000.00  3.5.2002  3.5.2004 
SUBORDINATED DEBT US$ 133,181,126.13  4.25.2002  4.17.2012 
USCP US$ 150,000,000.00  6.17.2002  6.16.2003 
FxRN US$ 100,000,000.00  9.18.2002  12.19.2002 
FxRN US$ 175,000,000.00  12.17.2002  6.17.2003 
PRIVATE ISSUES – US$ 160m
 
2003 - PUBLIC ISSUES - US$ 1.647bn
FxRN US$ 250,000,000.00  1.14.2003  10.14.2003 
FxRN (EUR 70m) US$ 75,456,500.00  2.12.2003  8.12.2003 
FxRN US$ 150,000,000.00  2.19.2003  12.19.2003 
FxRN US$ 250,000,000.00  4.15.2003  7.02.2004 
FxRN (EUR 100m) US$ 106,820,000.00  4.16.2003  12.16.2003 
FxRN US$ 75,000,000.00  5.15.2003  11.16.2004 
USCP US$ 190,000,000.00  6.16.2003  6.15.2004 
FxRN US$ 150,000,000.00  6.17.2003  12.20.2004 
Securitization MT 100 – Fixed US$ 200,000,000.00  8.20.2003  8.20.2010 
Securitization MT 100 – Floating US$ 200,000,000.00  8.20.2003  8.20.2010 
 
2003 - PRIVATE ISSUES – US$ 417m

SPREAD OVER TBILL



Bradesco has the following programs:

Type Currency Amount
EURO CP PROGRAM (Grand Cayman) US$ 300,000,000.00
EURO CD PROGRAM (Grand Cayman) US$ 100,000,000.00
EURO CD PROGRAM (Grand Cayman) US$ 1,000,000,000.00
MTN PROGRAM US$ 2,500,000,000.00
USCP US$ 190,000,000.00
TERM LOAN FACILITY US$ 100,000,000.00
TRADE FINANCE FACILITY (IDB/IFC) US$ 180,000,000.00
Total US$ 4,370,000,000.00

Underwriting Transactions

Up to September 2003, Bradesco coordinated transactions with stock, debentures and promissory notes which totaled R$ 3.879 billion, comprising 59.97% of all issues registered at the Brazilian Securities Commission (CVM).



Of the total number of floating and fixed-return transactions registered at CVM up to September, 2003, Bradesco participated in 17% of the primary and secondary stock issues and in 20% of debenture issues and 38% of promissory notes issues.

Bradesco's Share of the Issues Market - In millions of reais



Origination and distribution - ANBID Ranking - August 2003

Origination

Stock Ranking (1) Fixed Income Ranking (2) General Ranking (1+2)
2002 August 2003 2002 August 2003 2002 August 2003
1st BBA 1st Merrill Lynch 1st Unibanco 1st BB 1st Unibanco 1st BB
2nd CEF 2nd Santander 2nd Itaú 2nd Bradesco 2nd Itaú 2nd Santander
3rd UBS 3rd Bradesco 3rd Bradesco 3rd ItaúBBA 3rd Bradesco 3rd Bradesco
4th Itaú 4th BB 4th BBA 4th ABCBrasil 4th BBA 4th ItaúBBA

Distribution

Stock Ranking (1) Fixed Income Ranking (2) General Ranking (1+2)
2002 August 2003 2002 August 2003 2002 August 2003
1st BBA 1st Merrill Lynch 1st Unibanco 1st BB 1st Unibanco 1st BB
2nd CEF 2nd Santander 2nd Itaú 2nd Bradesco 2nd Bradesco 2nd Santander
3rd UBS 3rd Bradesco 3rd Bradesco 3rd ItaúBBA 3rd Banco do Brasil 3rd Bradesco
4th Merrill Lynch 4th BB 4th BBA 4th ABCBrasil 4th Itaú 4th ItaúBBA

Mergers, Acquisitions, Project Finance, Corporate Reorganization and Privatizations

Confirming its dynamic approach in the prospecting of new business, Bradesco ended the first half of 2003 with 7 operations in the Mergers and Acquisitions segment.

Bradesco’s presence is also notable in Project Finance operations, acting as a financial advisor to major corporations operating in electric power generation and co-related projects.

Launched on June 23, 2003, this service area is part of the Organization’s strategy to strengthen its positions, considering the highly competitive scenario produced by the policies of recent governments in their pursuit for economic stability.

Designed principally to attend customers from Bradesco Corporate Banking and Bradesco Empresas, this service is focused on developing personalized solutions for customer needs in the following areas: project financing, securitization of assets, loan syndication, etc. which are known in the financial market as structured transactions.

The third quarter was mainly dedicated to area implementation, in particular, structural issues, the selection and transfer of staff from other areas and associated companies to form the Department’s basis, as well as the definition of processes relating to the approval, contracting and processing of transactions.

At the same time, efforts were made to disseminate the activities of this new area across the Bradesco Empresas and Corporate Banking Branches with the approval and recognition of the first structured transactions.

Collection

Bradesco Collection strengthens its position yearly as an authentic partner in the management of corporate business. Combining high standards of efficiency with latest-generation IT resources, Bradesco collection services are an efficient and secure tool for use by a universe of corporate entities.

Bradesco’s computer-recorded Collection services, transmitting and receiving data on a direct computer-to-computer basis, rely on one of the most advanced banking technology systems available, offering important productivity gains to companies by permitting the streamlining of services. The available services include electronic collection (computer-recorded) permitting online information consultation by user companies. This system processes approximately 98% of all documents recorded in the Bradesco collection portfolio.

Pag-For Bradesco facilitates the management of Trade Accounts Payable for more than 42 thousand companies.

Tax and Utility Collections

Developed based on high standards of efficiency and quality, Bradesco’s tax and utility collections serve a dual purpose. On the one hand, they seek to provide customer satisfaction with appropriate and innovative solutions for the settlement of taxes, duties and contributions. On the other, they effectively interact with the different Government Departments in the federal, state and municipal spheres and with public utility concessionaires.

Bradesco’s tax and utility collection services are noted for the speed and security of the data transmitted and amounts collected.

  In billions of reais
  2002 2003
  2nd Qtr. 3rd Qtr. Accumulated
to September 		2nd Qtr. 3rd Qtr. Accumulated
to September
Corporate collections (1) 137.3  142.5  424.3  167.0  174.2  501.5 
Pag-For 50.7  58.9  151.9  68.9  71.7  205.4 
Corporate collections + Pag-For 188.1  201.4  576.2  235.9  245.9  706.9 
Taxes 16.5  18.5  52.3  19.0  20.6  58.7 
Water, electricity, telephone, gas 3.0  3.1  8.9  3.8  4.1  11.4 
Social security payments 3.0  3.3  9.2  3.7  4.4  11.4 
Tax + utility collections 22.5  24.9  70.4  26.5  29.1  81.5 

  Number of transactions (million)
  2002 2003
  2nd Qtr. 3rd Qtr. Accumulated
to September 		2nd Qtr. 3rd Qtr. Accumulated
to September
Corporate collections (1) 160.7  165.1  484.5  175.4  177.9  518.9 
Pag-For 15.8  17.2  47.1  18.0  19.7  54.9 
Corporate collections + Pag- 176.6  182.3  531.6  193.4  197.6  573.9 
Taxes 11.3  14.8  39.8  15.5  15.7  46.0 
Water, electricity, telephon 26.2  26.9  78.7  28.5  29.9  85.8 
Social Security payments (2) 11.6  11.9  35.2  10.7  11.3  31.3 
Tax + utility collections 49.1  53.6  153.7  54.7  56.9  163.1 
(1)

Total movement (funds obtained, used, credits, etc.).

(2)

Total beneficiaries: more than 3.885 million retirees and pensioners (corresponding to 18.44% of all those registered with the Brazilian Institute of Social Security - INSS). Payment via direct debit
36.432 million – January to September 2002
36.911 million – January to September 2003

Growth in Collection and Pag-For



Growth in Tax and Utility Collections/Payments



Bradesco offers its customers the following quality services using an appropriate infrastructure and specialized personnel: custody of securities, controllership, DR-Depositary Receipt, BDR-Brazilian Depositary Receipt, as well as bookkeeping services for stocks, debentures and investment fund quotas. All these services are fully accredited by ISO 9001:2000

- Bookkeeping of Assets

168 

Companies comprise the Bradesco computer-registered share system, with 5.6 million shareholders.

28 

Companies comprise the Bradesco computer-registered debenture system, which totals R$ 13.1 billion.

13 

Investment Funds comprise the Bradesco computer-registered quota system, which totals R$ 921.3 million.

2 

Registered BDR Programs, with a market value of R$ 230.4 million.

Custody and Controllership

R$ 88.9 billion

In assets under custody for 477 customers who use the Bradesco Custody services (Funds, Portfolios and DR).

 
R$ 120.0 billion

Comprises the total equity of the 705 investment funds and managed portfolios using the Bradesco Constrollership services.

 
9

Registered DR Programs, with a market value of R$ 15.6 billion.


Growth of Customers and Assets under Custody



The investments for expanding operating capacity, infrastructure, IT and telecommunications at the Bradesco Organization are designed to maintain a modern, practical and secure customer service network, characterizing the Bank as one of the world's most contemporary companies and creating added value for its customers and users at home and abroad.

Investment Growth

 
  In millions of reais
 
  1998 1999 2000 2001 2002 Accumulated
to September
2003
 
Infrastructure 205  215  227  509  613  377 
IT/Telecommunications 317  553  617  743  947  875 
Total 522  768  844  1,252  1,560  1,252 

Consolidated Balance Sheet - In millions of reais

  2002  2003 
 
  June September June September
 
ASSETS
Current assets and long-term receivables 20,575  22,702  23,469  22,480 
Funds available 761  1,056  122  135 
Interbank investments 298  1,012  5,424  5,030 
Securities and derivative financial instruments 5,993  4,862  3,700  2,942 
Interbank and interdepartmental accounts 503  688  935  798 
Credit and leasing operations 10,636  12,471  10,989  11,246 
Other receivables and other assets 2,384  2,613  2,299  2,329 
Permanent assets 556  539  524  502 
Total 21,131  23,241  23,993  22,982 
LIABILITIES
Current and long-term liabilities 19,745  21,771  21,728  19,155 
Demand, time and interbank deposits 10,192  11,820  12,035  9,080 
Savings account deposits 710  757  768  778 
Deposits received under security repurchase agreements and funds from the issuance of securities 3,471  2,468  4,181  4,312 
Interbank and interdepartmental accounts 55  299  133  122 
Borrowings and onlendings 3,247  3,731  2,068  2,235 
Derivative financial instruments 242  783  58  48 
Other liabilities 1,828  1,913  2,485  2,580 
Deferred income 5  5  24  19 
Minority interest in subsidiaries -  -  513  537 
Stockholders' equity 1,381  1,465  1,728  3,271 
Total 21,131  23,241  23,993  22,982 

Consolidated Statement of Income - In millions of reais

  2002 2003
 
  2nd Qtr. 3rd Qtr. Accumulated
to September 		2nd Qtr. 3rd Qtr. Accumulated
to September
 
Income from lending and trading activities 1,514  1,794  4,304  1,172  1,356  3,878 
Expenses for lending and trading activities (1,123) (1,561) (3,293) (679) (863) (2,381)
Gross profit from financial intermediation 391  233  1,011  493  493  1,497 
Other operating income (expenses), net (301) (183) (761) (343) (345) (1,064)
Operating income 90  50  250  150  148  433 
Non-operating income (expenses), net 7  7  19  (6) (6) (13)
Income before taxes on income 97  57  269  144  142  420 
Income tax and social contribution (17) 9  (51) (51) (48) (15)
Minority interest in subsidiaries -  -  -  (22) (19) (49)
Net income 80  66  218  71  75  356 

Banco BCN S.A. is recognized in the market as the RELATIONSHIP BANK for its highly segmented customer service, which provides products and services developed on a personalized basis in accordance with the customers’ specific needs.

Customer Service

The customer service network comprised 219 traditional Branches distributed nationwide; 2 BCN Digital Branches (in São Paulo and Rio de Janeiro) offering an advanced concept in phonebank services, through which products and services are sold by management teams and delivered by courier service with no need for customers to leave their homes or the office; 1 Branch abroad in Grand Cayman and a further 99 Banking Service Posts and 96 Online Service Outlets installed on corporate customer premises. As well as the branches and service post and outlets, customers had access to 877 BCN ATMs and 2,159 ATMs comprising the 24-Hour Bank Network, as well as 11,007 Bradesco Day and Night ATMs, which can be used by BCN customers and to the services offered by BCN Office Banking and BCNNet Internet Banking. Another phone service, the BCN Live Line, is also available to branch customers throughout Brazil.

At the end of September, BCN had 869 thousand customers, – 730 thousand account holders and 139 thousand non-account holders – and had issued a total of 230 thousand credit cards.

Banco Finasa S.A., a wholly owned subsidiary of BCN, had 1 Branch in Brazil and operates through Finasa Promotora de Vendas Ltda. The Promotora, responsible for securing customers and receiving and forwarding consumer financing proposals, had 53 Branches at the end of the quarter and was present in 12,777 new and used vehicle dealerships and 804 stores selling furniture and home decor, IT related equipment and software, tourism and finishing materials, among others. Customers served by Banco Finasa S.A. totaled 862 thousand.

Corporate Reorganization

In the pursuit for a greater degree of competitiveness and productivity and the consequent rationalization and reduction of administrative and legal costs, on September 30, based on the balance sheets at June 30, 2003, Bancocidade Distribuidora de Títulos e Valores Mobiliários Ltda. and BCN S.A. Distribuidora de Títulos e Valores Mobiliários, subsidiaries of Banco BCN S.A. were incorporated into Finasa Distribuidora de Títulos e Valores Mobiliários S.A., and as a result BCN now holds 80.0% of this company’s capital. On the same date, also based on the balances sheets at June 30, BCN Corretora de Títulos e Valores Mobiliários S.A., formerly CLSA-BCN Corretora de Títulos e Valores Mobiliários S.A., incorporated Bancocidade Corretora de Valores Mobiliários e de Câmbio Ltda.

Social Actions

The Bank continues its important support of sports activities through the BCN Sports program, which focuses on the formation, maintenance and dissemination of women’s basketball and volleyball at 81 training centers, 49 for volleyball and 32 for basketball. At these centers, some 4,300 young women athletes from 10 to 15 years of age have access to courts, uniforms, sports material, instructors and all the infrastructure required to practice these sports, completely free of charge. The girls must be able to prove continuous and consecutive attendance at school to participate in this program, which also includes counseling on citizenship issues, personal hygiene, nutrition and prevention of teenage pregnancy and drug abuse.

Operating Performance

Net Income and Stockholders’ Equity

BCN reported third-quarter net income of R$ 75.2 million, an increase of 14.5% compared to R$ 65.7 million for the same period in 2002.

Stockholders’ equity for the third quarter of 2003, grew by R$ 1.5 billion following the capital increase in August and totaled R$ 3.3 billion at the end of September, after adjustments for dividends of R$ 21.6 million, projected for the period.

The Bank’s accumulated net income for the nine-month period totaled R$ 356.1 million, corresponding to an average annualized return of 24.2% on stockholders’ equity.

In the first half of 2003, non-recurring income was recorded in the amount of R$ 132.5 million in Potenza Leasing S.A. Arrendamento Mercantil, a wholly owned subsidiary of the Bank, derived from deferred tax assets recorded on prior-year tax losses and negative bases of social contribution. Disregarding this effect, net income for the nine-month period totaled R$ 223.6 million and the average annualized return on stockholders’ equity was 15.8%, after adjustment.

Funding and Portfolio Administration

At September 30, 2003, the overall funds obtained and managed totaled R$ 23.5 billion, a 3.3% increase compared with the same period in 2002. Deposits, the Bank’s main source of funds, totaled R$ 9.9 billion. Total funds include an amount of R$ 3.0 billion in Investment Funds, obtained by BCN Branches, managed by BRAM – Bradesco Asset Management Ltda. and administrated by Banco Bradesco S.A.

Total Assets and Credit Operations

Total assets remained stable as compared to September 2002, at R$ 23.0 billion. Of this amount 53.7%, or R$ 12.3 billion, was allocated to credit operations, including leasing operations and advances on foreign exchange contracts and 34.7%, or R$ 8.0 billion, was allocated to short-term interbank accounts and securities and derivative financial instruments.

Consolidated Balance Sheet - In millions of reais

  2002  2003 
 
  June September June September
 
ASSETS
Current assets and long-term receivables 3,092  4,166  4,260  4,841 
Funds available 1  -  -  3 
Interbank investments 46  48  28  25 
Securities and derivative financial instruments 11  10  14  15 
Interbank accounts 11  19  42  20 
Credit and leasing operations 2,816  3,847  3,908  4,461 
Other receivables and other assets 207  242  268  317 
Permanent assets 6  7  11  12 
Total 3,098  4,173  4,271  4,853 
LIABILITIES
Current and long-term liabilities 2,924  3,978  3,988  4,557 
Demand, time and interbank deposits 2,636  3,600  3,624  4,128 
Deposits received under security repurchase agreements
and funds from the issuance of securities 13  4  3  3 
Interbank accounts 1  -  2  - 
Borrowings and onlendings 2  64  101  124 
Derivative financial instruments 55  55  81  92 
Other liabilities 217  255  177  210 
Deferred income 3  4  22  18 
Stockholders’ equity 171  191  261  278 
Total 3,098  4,173  4,271  4,853 

Consolidated Statement of Income - In millions of reais

  2002 2003
 
  2nd Qtr. 3rd Qtr. Accumulated
to September 		2nd Qtr. 3rd Qtr. Accumulated
to September
 
Income from lending and trading activities 267  314  838  395  408  1,165 
Expenses for lending and trading activities (167) (175) (500) (237) (239) (689)
Gross profit from financial intermediation 100  139  338  158  169  476 
Other operating income (expenses), net (76) (99) (256) (115) (133) (355)
Operating income 24  40  82  43  36  121 
Non-operating income (expenses), net -  (1) (2) (3) -  (5)
Income before taxes on income 24  39  80  40  36  116 
Income tax and social contribution (9) (14) (29) (14) (13) (40)
Net income 15  25  51  26  23  76 

Banco Finasa S.A., a wholly owned subsidiary of Banco BCN S.A., is focused on the consumer customer segment and operates mainly in the financing of new and used vehicles, consumer durables and services through Finasa Promotora de Vendas Ltda., which is responsible for securing new customers and receiving and forwarding consumer financing proposals. In 2003, the Promotora continued consolidating its structure, absorbing staff from Finasa S.A., C.F.I., in 2002 and from BBV Banco, in September this year, preparing to give leverage to the transactions in the areas under focus. The strategy for growth includes the implementation of different sales channels and partnerships such as those entered into with Ford Serviços and Microsoft in 2002 and with ABRAPAR, after approval by the Brazilian Association of Fiat Automobile Dealerships – ABRACAF, in the first half of 2003, for supporting the financing of vehicles sold by the associated dealerships. Facing market competition accordingly, by extending the distribution channels and increasing market share.

At the end of September, Finasa Promotora de Vendas operated through its 53 Branches and was present in 12,777 new and used vehicle dealership outlets and 804 stores selling furniture and home decor, IT related equipment and software, tourism and finishing materials, among others.

Customers served by Banco Finasa totaled some 862 thousand.

Net Income and Stockholders’ Equity

The Bank reported third-quarter net income of R$ 23.2 million, totaling R$ 76.1 million for the nine-month period, an increase of 46.7% compared to the same period in 2002. With stockholders’ equity, at September 30, of R$ 278.9 million, after adjustments for the quarterly dividend of R$ 5.5 million, the average annualized return from January to September was 38.0%.

Assets

At the end of September 2003, assets totaled R$ 4.9 billion, an increase of 16.3% over the same period in 2002. Of this amount, R$ 4.4 billion comprised funds for new and used auto financing, an increase of 17.7%, as compared to the same period in 2002.

Auto-financing production for the first nine months of 2003 totaled R$ 2.7 billion, growing by 89.8% compared to R$ 1.4 billion produced for the same period in 2002.

Insurance (1)

Consolidated Balance Sheet – In millions of reais

  2002  2003 
 
  June September June September
 
ASSETS        
Current assets and long-term receivables 3,237  3,242  3,789  3,943 
Securities 1,512  1,554  1,935  2,136 
Insurance transactions and other accounts receivable 1,725  1,688  1,854  1,807 
Permanent assets 2,084  2,065  2,304  2,646 
Total 5,321  5,307  6,093  6,589 
LIABILITIES
Current and long-term liabilities 3,060  3,071  3,154  3,290 
Tax and social security contributions 528  544  573  593 
Insurance-related payables 258  202  371  319 
Other liabilities 796  787  378  459 
Technical reserves 1,478  1,538  1,832  1,919 
Minority interest 85  89  51  51 
Stockholders’ equity of the parent company 2,176  2,147  2,888  3,248 
Total 5,321  5,307  6,093  6,589 

Consolidated Statement of Income - In millions of reais

  2002 2003
 
  2nd Qtr. 3rd Qtr. Accumulated
to September 		2nd Qtr. 3rd Qtr. Accumulated
to September
 
Earned premiums 1,263  1,220  3,639  1,471  1,601  4,400 
Retained claims (918) (913) (2,692) (1,231) (1,313) (3,579)
Selling expenses (144) (147) (422) (160) (168) (484)
Other operating income (expenses) (6) 4  (1) 16  26  59 
Contribution margin 195  164  524  96  146  396 
Administrative costs (171) (167) (476) (181) (183) (533)
Taxes (10) (13) (41) (17) (19) (60)
Financial results 82  78  245  106  132  354 
Operating income 96  62  252  4  76  157 
Non-operating income (8) 16  (15) (14) (28) (49)
Results on investments in subsidiary and
associated companies 104  128  357  87  143  322 
Minority interest (5) (1) (6) -  1  1 
Income before income tax and social contribution 187  205  588  77  192  431 
Income tax and social contribution (11) (12) (50) 17  -  8 
Net income 176  193  538  94  192  439 
N.B.

Includes insurance premiums issued by Bradesco Vida e Previdência S.A. (with VGBL).

(1)

Includes: Bradesco Seguros, Indiana Seguros, Bradesco Saúde, União Novo Hamburgo de Seguros and Finasa Seguradora S.A.

Performance Ratios

  % 
 
  2002  2003 
 
  1st Half Accumulated
to September 		1st Half Accumulated
to September
 
Claims ratio (1) 70.9 71.5 71.6 69.8
Selling ratio (2) 11.4 11.6 11.3 11.0
Combined ratio (3) 98.8 99.6 104.8 104.2
Expanded combined ratio (4) 91.9 92.9 96.8 96.2
Administrative expense ratio (5) 12.6 12.9 12.2 11.9
(1)

Retained claims (excluding withdrawals on life insurance from 2002 and withdrawals on VGBL from 2003)/earned premiums.

(2)

Selling expenses/earned premiums.

(3)

(Retained claims + Selling expenses + Administrative costs + Taxes + Other operating expenses)/earned premiums.

(4)

(Retained claims + Selling expenses + Administrative costs + Taxes + Other operating expenses)/(Earned premiums + Financial result on earned premiums).

(5)

Administrative expenses/earned premiums.

Insurance Premium Market Share (%)



Bradesco Seguros secured R$ 6.0 billion in premiums and maintained its industry leadership with a 25.5% market share. An amount of R$ 23.6 billion was secured in premiums by this sector up to August 2003.

Growth in Technical Reserves
In millions of reais



Growth in Guaranteeing Assets of Technical Reserves
In millions of reais



Earned Premiums by Insurance Line

  In millions of reais
 
  2002 2003
 
Insurance 2nd Qtr. 3rd Qtr. Accumulated
to September 		2nd Qtr. 3rd Qtr. Accumulated
to September
 
Health 582  572  1,711  630  666  1,914 
Auto/RCF (a) 313  300  887  346  349  1,022 
Life/AP(b)/VGBL(c) 255  238  716  381  481  1,127 
Basic Lines 88  77  231  89  84  254 
DPVAT(d) 25  33  94  25  21  83 
Total 1,263  1,220  3,639  1,471  1,601  4,400 
(a)

Optional third-party liability.

(b)

Personal accident.

(c)

Long-term life products.

(d)

Compulsory vehicle insurance.

In September 2003, the Company’s earned premiums grew by 20.9% compared to the same period in 2002.

Earned Premiums by Insurance Line - Accumulated to September (%)



Retained Claims by Insurance Line

  In millions of reais
 
  2002 2003
 
Insurance 2nd Qtr. 3rd Qtr. Accumulated
to September 		2nd Qtr. 3rd Qtr. Accumulated
to September
 
Health 502  499  1,459  588  601  1,711 
Auto/RCF 220  217  659  270  274  793 
Life/AP/VGBL 121  130  372  295  375  858 
Basic Lines 49  43  127  57  42  147 
DPVAT 26  24  75  21  21  70 
Total 918  913  2,692  1,231  1,313  3,579 

Total Claims Ratio - Accumulated over the prior 12 months (%)



N.B. Retained claims (from 2002, excluding life redemptions and from 2003 VGBL redemptions)/Earned premiums

Selling Expenses by Insurance Line

  In millions of reais
 
  2002 2003
 
Insurance 2nd Qtr. 3rd Qtr. Accumulated
to September 		2nd Qtr. 3rd Qtr. Accumulated
to September
 
Health 18  18  54  19  22  60 
Auto/RCF 55  56  160  64  64  189 
Life/AP/VGBL 60  61  177  61  67  189 
Basic Lines 11  12  31  16  15  46 
Total 144  147  422  160  168  484 

Number of Policyholders - Thousand



Up to September 30, 2003, the average number of customers grew by 4.4% compared to the same period in 2002.

Bradesco Saúde continues to maintain its outstanding market position, especially in the corporate health insurance segment. Brazilian consumers are increasingly convinced that Health and Dental Insurance are the best alternatives for meeting their medical, hospital and dental care needs. At present, Bradesco Saúde has more than 2.3 million customers.

The increasing number of policyholders employed by micro, small and medium companies, as well as major corporations that have contracted Bradesco Saúde, confirms the company’s high level of expertise and personalization in Corporate Insurance services, a distinct advantage in the Health Insurance market.

Approximately 11 thousand companies in Brazil have acquired Bradesco Health Insurance. Out of the 100 largest companies in Brazil, 35 are Bradesco clients in the Health and Dental Health lines and out of the country’s 10 largest companies, 60% are Bradesco Saúde clients.

Emphasis should also be given to the practical nature of the Bradesco Saúde Portal (http://www.bradescosaude.com.br), which, in addition to providing information on available products, also offers a number of services to policyholders, prospects and brokers.

The Bradesco Insurance Group occupies a leadership position in the Basic Line Brazilian market, which comprises the following main types of insurance, named and operating risks, national and international transport, oil risks, engineering risks, third-party liability and aircraft risks, among others.

In the mass market insurance segment, focusing on consumer and small and medium corporate customers, the results achieved from policy sales continue significant, particularly Bradesco Seguro Residencial Simplificado (Bradesco Simplified Residential Insurance).

In the Corporate Insurance area, the Group consolidated its leadership position, by insuring business conglomerates operating in the automobile, mining, steel, oil, electrical power, agribusiness, paper and pulp, chemical, aluminum and aircraft industries, confirming the Bradesco Insurance Group’s significant presence among Brazil’s major corporations.

The Automotive and RCF (Optional Third Party Liability) line posted an important increase in the number of policyholders and the technically correct pricing policy was maintained. Emphasis should also be given to the implementation of the differentiated services which add value to products, such as discounts given through the nationwide customer service networks and the increase in the number of relationships with brokers which are carried out exclusively online via the Internet.

In June, Bradesco Seguros launched a new product called Garantia Plus, which secured 43 thousand customers in only 4 months of operation. The Bradesco Seguros’ Garantia Plus offers coverage for personal accident (death and invalidity) and 6 more events comprising serious illnesses: heart surgery and angioplasty, cancer, strokes (CVA), chronic kidney disease, transplants, as well as assistance such as second opinions from abroad and funeral and personal expenses.

Awards

1.

On April 25, Bradesco Seguros won the Top de Marketing 2003 award given by the Brazilian Association of Sales and Marketing Directors – ADVB with the following case: “Bradesco Seguros. Liderança de ponta a ponta é isso: 1ª em share of market, e agora também a 1ª em top of mind”.

 
2.

The Bradesco Seguros website, which had already won the iBEST internet award in the Insurance and Revelation categories in 2002, also won this year’s Grand Prix “internet oscar” awarded by popular vote and the site was also rated best Insurance category site by the Academy and popular votes.

 
3.

In July, Bradesco Seguros was ranked first place at the eighth edition of the Top of Mind awards – Marcas de Sucesso – Minas Gerais. The event was organized by the business economy magazine Mercado Comum to reveal outstanding brand awareness among consumers. Bradesco Seguros won the award in the Insurance Company Leadership category. The study was carried out by the Instituto de Perfil, with more than 1,221 household interviews carried out in nine different regions throughout the state.

 
4.

Also in July, Bradesco Seguros was considered as most remembered mark in the state of Alagoas winning the Prêmio Marcas 2003, in the category Top of Mind – First remembered brand category. The award was given by the Tribuna de Alagoas newspaper based on a poll carried out by the Harrop Institute. The study revealed that 12.9% of those interviewed replied “Bradesco Seguros”, when asked which brand comes to mind first when insurance is mentioned. This percentage was double that achieved by the 2nd ranked company.

Balance Sheet – In millions of reais

  2002  2003 
 
  June September June September
 
ASSETS        
Current assets and long-term receivables 13,655  14,974  20,783  22,719 
Funds available 32  30  24  36 
Interbank investments 17  17  19  19 
Securities 13,231  14,389  20,355  22,197 
Insurance operations and other accounts receivable 375  538  385  467 
Permanent assets 315  300  256  253 
Total 13,970  15,274  21,039  22,972 
LIABILITIES
Current and long-term liabilities 12,793  14,176  19,695  21,404 
Tax and social security contributions 285  365  402  503 
Operating liabilities for Insurance and Private Pension Plans 73  103  91  124 
Other liabilities 94  122  32  44 
Technical reserves 12,341  13,586  19,170  20,733 
Stockholders' equity 1,177  1,098  1,344  1,568 
Total 13,970  15,274  21,039  22,972 

Statement of Income - In millions of reais

  2002 2003
 
  2nd Qtr. 3rd Qtr. Accumulated
to September 		2nd Qtr. 3rd Qtr. Accumulated
to September
 
Retained premiums 572  876  1,670  916  1,201  2,885 
Variations in premium reserves (354) (664) (1,028) (555) (735) (1,796)
Earned premiums 218  212  642  361  466  1,089 
Retained claims (108) (116) (344) (284) (362) (835)
Selling expenses – Insurance (49) (49) (144) (54) (60) (171)
Other operating income (expenses) 17  25  61  35  45  116 
Income from net contributions 389  340  1,027  387  311  850 
Expenses with benefits/matured plans (344) (413) (1,106) (463) (559) (1,422)
Selling expenses - Pension Plans (23) (22) (75) (24) (24) (73)
Administrative expenses (47) (46) (136) (47) (53) (148)
Tax expenses (8) (5) (18) (5) (3) (11)
Financial income 360  669  1,504  973  1,081  3,295 
Financial expenses (254) (499) (1,027) (736) (701) (2,261)
Equity income and expenses 2  -  5  2  4  7 
Non-operating income (2) 8  5  (1) 4  4 
Income before taxes and contributions 151  104  394  144  149  440 
Taxes and contributions on income (45) (33) (124) (42) (42) (132)
Net income 106  71  270  102  107  308 
(1)

Including BBV Previdência e Seguradora Brasil S.A. from June 2003.


Income from Plans – Market Share (%)


Since its foundation in 1981, Bradesco Vida e Previdência has recorded consistently high levels of growth, confirming its leadership of a sector which from the early nineties has shown considerable potential for expansion.

Income from its private pension plans has grown some 43.3% per year over the last five years, enabling the company to maintain its leadership position with 38.3% of the market, the result of a sound product development policy structured around innovative and flexible options.

Products bearing the Bradesco Vida e Previdência hallmark reflect the company's efforts to remain ahead of its time, sensitive to future trends.

Growth in Technical Reserves - In millions of reais



Providing a secure option for participants, policyholders and beneficiaries, Bradesco Vida e Previdência has recorded an increasing growth rate in the volume of its technical reserves. During the period, technical reserves presented an increase of 30.4% over the same period in 2002, highlighting the company's capacity to meet the commitments assumed.

Bradesco Vida e Previdência's unquestionable commitment to providing a care-free future for its participants has ensured its ranking as Brazil's largest listed supplementary pension plan company.

Growth in Guaranteeing Assets of Technical Reserves - In millions of reais



Private Pension Plan and VGBL Investment Portfolio - Market Share (%)


Reflecting the growth in income from private pension plans, Bradesco Vida e Previdência ended the third quarter of 2003 with a high level of capitalization. The investment portfolio presents an ongoing growth in financial volume and results, well above the required volume of technical reserves.

The company's success and commitment to the implementation of its policies are confirmed by its 50.8% share of this segment, one of most important market indicators.

Increase in Number of Participants - Thousand



During the nine-month period, Bradesco Vida e Previdência signed new contracts for individual and company plans, which accounted for a 5.8% increase in the number of participants compared to the performance recorded for the same period in 2002. Total plan participants surpassed the 1.3 million mark.

Balance Sheet – In millions of reais

  2002  2003 
 
  June September June September
 
ASSETS        
Current assets and long-term receivables 1,532  1,573  1,946  2,152 
Securities 1,446  1,453  1,871  2,059 
Accounts receivable and other accounts receivable 86  120  75  93 
Permanent assets 366  378  294  329 
Total 1,898  1,951  2,240  2,481 
LIABILITIES
Current and long-term liabilities 1,580  1,616  1,906  2,033 
Tax and social security contributions 169  183  195  238 
Other liabilities 46  5  13  16 
Technical reserves 1,365  1,428  1,698  1,779 
Stockholders' equity 318  335  334  448 
Total 1,898  1,951  2,240  2,481 

Statement of Income - In millions of reais

  2002 2003
 
  2nd Qtr. 3rd Qtr. Accumulated
to September 		2nd Qtr. 3rd Qtr. Accumulated
to September
 
Income from savings bonds 230  259  681  301  292  842 
Variation in technical reserves (30) (68) (97) (40) (73) (148)
Redemption of bonds (191) (180) (552) (256) (253) (706)
Bonds redeemed (184) (176) (526) (253) (246) (690)
Winning bonds (7) (4) (26) (3) (7) (16)
Financial income 56  41  152  81  110  249 
Administrative expenses (18) (20) (54) (20) (18) (55)
Equity results 16  33  60  6  35  43 
Non-operating income -  1  1  -  1  1 
Income before taxes 63  66  191  72  94  226 
Income tax and social contribution (15) (11) (43) (21) (20) (60)
Net income 48  55  148  51  74  166 
(1) Includes: Bradesco Capitalização and Atlântica Capitalização (formerly BCN Capitalização).

Bradesco Capitalização’s outstanding position in the premium bond market is the result of its transparent operating policy, which is focused on the deployment of products in line with potential consumer demand.

The company is consolidating its outstanding position in diverse regions and holds a leadership position in two Brazilian states, according to the latest figures for August published by SUSEP. The company’s market share in these states was as follows: 27.1% in Amazonas and 23.5% in São Paulo.

In pursuit of a bond which is suited to its customers’ different profiles and budgets, the company developed a number of products varying in accordance with the type of payment (single or monthly), contribution terms, regularity of draws (weekly or monthly) and related prize amounts. This phase brought the company closer to the general public and consolidated the success of its “Pé Quente” (Lucky Bond) savings bond series.

Bradesco Capitalização was the first private savings bond company in Brazil to receive ISO9002 accreditation and in December 2002 this certificate was upgraded to the 2000 Version ISO 9001:2000. This accreditation from Fundação Vanzolini attests to the management quality of Bradesco savings bonds and confirms the principles on which their creation was based: good products, good services and continuous growth.


Income from Plans - Market Share (%)


Technical Reserves - Market Share (%)


Growth in Technical Reserves - In millions of reais



With its fast-growing volume of technical reserves, Bradesco Capitalização surpassed the mark of R$ 1.8 billion up to September, presenting a growth rate of 24.6% compared to the same period in 2002. According to data from SUSEP for August 2003, the company has 21.8% of the total market volume of technical reserves.

These results transmit confidence and confirm the company’s financial soundness and capacity to honor the commitments assumed with its customers.

Growth in Assets guaranteeing Technical Reserves - In millions of reais




Number of Customers - Thousand



Outstanding Savings Bonds - Thousand


In line with its customer loyalty building policy focused on customer service and the offer of innovative products, the number of Bradesco Capitalização customers increased by 23.4% up to September 2003, compared to the same period in 2002, totaling 2.8 million. The outstanding savings bond portfolio also presented a significant 227.6% increase over the same period in 2002, reaching a total of 21.4 million outstanding bonds.

Highlights

Bradesco Capitalização was highlighted in an article published in the April edition of the Conjuntura Econômica magazine, and ranked as leader of its corresponding sector, based on a study conducted by Austin Rating. The methodology used to rank the best companies considered indicators such as stockholders’equity, liquidity and profitability.

Awards

Bradesco Capitalização received the Top de Marketing 2003 award, given by the Brazilian Association of Sales and Marketing Directors - ADVB for the following case: “Título de Capitalização Pé Quente Reserva Especial em proeza inédita: quebra paradigma e conquista público de alta renda”. This award is designed to give proper recognition for the work of organizations which demonstrate excellence in sustaining their products, services or trademarks through innovative and consistent marketing tactics.

Balance Sheet - In millions of reais

  2002  2003 
 
  June September June September
 
ASSETS        
Current assets and long-term receivables 140  283  154  188 
Interbank investments and securities 69  75  89  96 
Other receivables and other assets 71  208  65  92 
Permanent assets 17  18  19  20 
Total 157  301  173  208 
LIABILITIES
Current and long-term liabilities 80  220  79  109 
Other liabilities 80  220  79  109 
Stockholders' equity 77  81  94  99 
Total 157  301  173  208 

Statement of Income - In millions of reais

  2002 2003
 
  2nd Qtr. 3rd Qtr. Accumulated
to September 		2nd Qtr. 3rd Qtr. Accumulated
to September
 
Income from lending and trading activities 3  5  11  5  5  14 
Gross profit from financial intermediation 3  5  11  5  5  14 
Other operating income (expenses), net (1) 1  2  -  1  2 
Operating income 2  6  13  5  6  16 
Income before taxes on income 2  6  13  5  6  16 
Income tax and social contribution (1) (2) (5) (1) (2) (5)
Net income 1  4  8  4  4  11 

Bradesco Corretora ended the third quarter among the 10 most important brokerage firms, out of more than 90 operating in the São Paulo Stock Exchange (BOVESPA). During this period, services were provided to 17,025 investors and 74,128 buy and sell orders were carried out for a total financial volume of R$ 3.1 billion. The Corretora participates with BOVESPA in the “Bovespa vai até você” campaign in an important effort to raise public awareness regarding the benefits of investing in the stock market.

Bradesco Corretora negotiated 652.8 thousand contracts in the Mercantile and Futures Exchange (BM&F) for a financial volume of R$ 72.1 billion, ranking the Corretora 21st among the most important brokerage firms, out of more than 90 participants. The Corretora has centered its efforts on the continued expansion of its business, as well as promoting the futures market. For example, in the agricultural area it acts directly in the country’s main production centers, through visits, seminars and participation in agricultural fairs and expos. In conjunction with the BM&F, the company sponsored visits to the exchange and Bradesco Corretora in São Paulo by investors from all over the country. At the same time, the company hosted numerous visits by farmers, teachers, opinion-makers and brokers from the physical commodities market.

Online web trading for the three-month period totaled 44,296 orders with a financial volume of R$ 248.6 million, representing 4.4% of all Home-Broker operations carried out in BOVESPA and placing the Corretora fourth in the overall ranking. The customer base increased by 6.6% with more than 1,057 new customers registered during the quarter and more than 10,481 e-mails received.

As a result of its role in Public Offerings of Share Purchases, Special Operations, Stock Swapping Auctions and Privatization Auctions, Bradesco Corretora continues in its important market position, with financial volume of R$ 95.3 million for the quarter.

Net income recorded for the quarter totaled R$ 3.6 million.

Stockholders' equity at the end of the quarter increased to R$ 99.3 million, corresponding to 47.6% of total assets of R$ 208.6 million.

Information - Trading at BM&F and BOVESPA

  2002 2003
 
  2nd Qtr. 3rd Qtr. Accumulated
to September 		2nd Qtr. 3rd Qtr. Accumulated
to September
 
BM&F            
Ranking 6th  22nd  6th  19th  21st  20th 
Contracts traded (million) 2.0 0.5 6.0 0.6 0.6 1.6
Financial volume (in billions of reais) 202.3 55.9 646.1 73.7 72.1 199.7
Stock Exchange
Ranking 10th  7th  7th  13th  10th  10th 
Number of investors 17,164  15,831  40,834  16,408  17,025  39,119 
Number of orders executed 41,862  60,985  141,451  66,380  74,128  191,300 
Volume traded (in billions of reais) 2.0 3.2 7.7 2.5 3.1 7.5
Home Broker
Ranking 2nd  3rd  2nd  4th  4th  4th 
Registered customers 11,821  13,161  13,161  16,025  17,082  17,082 
Orders executed 22,236  36,222  80,451  40,311  44,296  115,061 
Volume traded (in millions of reais) 110.2 172.8 411.4 224.0 248.6 640.2

Balance Sheet - In thousands of reais

  2002  2003 
 
  June September June September
 
ASSETS        
Current assets and long-term receivables 3,150  4,215  59,207  61,366 
Funds available 568  747  344  408 
Interbank investments -  -  17,739  2,885 
Securities and derivative financial instruments 2,564  3,440  41,086  58,036 
Other receivables and other assets 18  28  38  37 
Permanent assets 138  172  96  84 
Total 3,288  4,387  59,303  61,450 
LIABILITIES
Current and long-term liabilities 61  127  110  141 
Other liabilities 61  127  110  141 
Stockholders' equity 3,227  4,260  59,193  61,309 
Total 3,288  4,387  59,303  61,450 

Statement of Income - In thousands of reais

  2002 2003
 
  2nd Qtr. 3rd Qtr. Accumulated
to September 		2nd Qtr. 3rd Qtr. Accumulated
to September
 
Gross profit (loss) from financial intermediation 26  36  84  (196) 1,332  1,145 
Other operating income (expenses), net (475) (468) (1,256) (319) (294) (1,143)
Operating expense (449) (432) (1,172) (515) 1,038  2 
Net income (loss) (449) (432) (1,172) (515) 1,038  2 

Bradesco Securities, Inc., a wholly owned subsidiary of Bradesco, operates as a broker dealer in the United States. The company's activities are focused on the intermediation of share purchases and sales, with emphasis on ADR operations. The company is also authorized to operate with Bonds, Commercial Paper and Certificates of Deposit, among others, and to provide Investment Advisory services. This Bradesco initiative was motivated by more than 90 programs involving ADRs of Brazilian companies traded in New York and by the growing interest of foreign investors in the emerging markets and is designed to offer support for global economy investors who invest part of this flow in countries such as Brazil.

Designed to provide leverage to its brokerage transactions abroad, Bradesco Securities, Inc. increased company capital in the amount of US$ 20 million in May 2003.

At September 30, 2003, the Bradesco Organization had the following leasing companies: Bradesco BCN Leasing S.A. Arrendamento Mercantil, Boavista S.A. Arrendamento Mercantil, Potenza Leasing S.A. Arrendamento Mercantil, Bancocidade Leasing Arrendamento Mercantil S.A. and BBV Leasing Brasil S.A.

Balance Sheet in aggregate - In millions of reais

  2002  2003 
 
  June September June September
 
ASSETS        
Current assets and long-term receivables 2,800  2,737  4,950  4,989 
Funds available 9  7  6  6 
Interbank investments 806  841  3,081  2,105 
Securities and derivative financial instruments 34  24  12  1,096 
Leasing operations 1,759  1,669  1,477  1,405 
Allowance for leasing losses (153) (168) (127) (122)
Other receivables and other assets 345  364  501  499 
Permanent assets 44  42  40  40 
Total 2,844  2,779  4,990  5,029 
LIABILITIES
Current and long-term liabilities 1,904  1,823  3,012  2,994 
Demand, time and interbank deposits 356  314  117  3 
Securities received under security repurchase agreements
and funds received from issuance of securities 144  134  1,523  1,593 
Borrowings and onlendings 330  271  256  256 
Derivative financial instruments 24  16  10  10 
Subordinated debt 626  627  635  635 
Other liabilities 424  461  471  497 
Stockholders' equity 940  956  1,978  2,035 
Total 2,844  2,779  4,990  5,029 

Statement of Income - In millions of reais

  2002 2003
 
  2nd Qtr. 3rd Qtr. Accumulated
to September 		2nd Qtr. 3rd Qtr. Accumulated
to September
 
Income from lending and trading activities 273  160  533  242  283  723 
Expenses for lending and trading activities (225) (106) (383) (132) (161) (378)
Gross profit from financial intermediation 48  54  150  110  122  345 
Other operating income (expenses), net (18) (15) (44) (12) (20) (57)
Operating income 30  39  106  98  102  288 
Non-operating income 6  2  11  -  -  3 
Income before taxes on income 36  41  117  98  102  291 
Income tax and social contribution (14) (18) (45) (34) (33) 34 
Net income (loss) 22  23  72  64  69  325 

The Organization seeking to achieve higher levels of competitiveness and productivity and consequently the rationalization and reduction of operating, administrative and legal costs, is concentrating its leasing operations in Bradesco BCN Leasing S.A. Arrendamento Mercantil, formerly BCN Leasing Arrendamento Mercantil S.A., following the incorporation, in February, of Bradesco Leasing S.A. Arrendamento Mercantil. In April, the Organization incorporated Finasa Leasing Arrendamento Mercantil S.A. and on September 22, it acquired BBV Leasing Brasil S.A.’s portfolio.

The increase in stockholders’ equity between 2002 and 2003 was mainly derived from a capital increase of R$ 500 million in Potenza Leasing S.A. Arrendamento Mercantil and of R$ 180 million in Boavista S.A. Arrendamento Mercantil, in November 2002. Moreover, an amount of R$ 132.5 million in non-recurring income was recognized in March 2003, in Potenza Leasing, derived from deferred tax assets recorded on prior-year tax losses and negative bases of social contribution.

Leasing Performance – Consolidated Bradesco

Bradesco's leasing operations are carried out through its subsidiaries: Bradesco BCN Leasing S.A. Arrendamento Mercantil and Banco Finasa S.A.

At the end of the third quarter, leasing operations brought to present value totaled R$ 1,438.7 million, with a balance of R$ 22.6 million receivable in operating leases.

According to the Brazilian Association of Leasing Companies (ABEL), the Bradesco Organization is leader of this sector, with a 17.5% market share (base date: August 2003). This sound performance is a direct result of its action plan which is fully integrated with the Branch Network and the maintenance of its diversified business strategies in various market segments, as well as the implementation of operating agreements with major industries, particularly in the heavy vehicle and machinery/equipment sectors.

The following pie graph presents the composition of Bradesco's consolidated leasing portfolio by types of asset.


Portfolio by Types of Asset at September 30, 2003


Administradora (management company)

Balance Sheet – In thousands of reais

  2003 
 
  June September
 
ASSETS    
Current assets and long-term receivables 22,521  19,956 
Permanent assets 726  731 
Total 23,247  20,687 
LIABILITIES
Current and long-term liabilities 11,446  6,456 
Stockholders’ equity 11,801  14,231 
Total 23,247  20,687 

Statement of Income – In thousands of reais

  2003 
 
  1st Qtr. 2nd Qtr. 3rd Qtr. Accumulated
to September
 
Income 611  4,368  9,078  14,057 
Operating income 562  4,331  9,028  13,921 
Other income 49  37  50  136 
Expenses (3,990) (3,481) (6,657) (14,128)
Operating expenses (5,627) (2,960) (5,409) (13,996)
Income tax and social contribution 1,637  (521) (1,248) (132)
Net income (loss) (3,379) 887  2,421  (71)

Consortium Groups

Balance Sheet – In thousands of reais

  2003 
 
  June September
 
ASSETS    
Current assets and long-term receivables 19,341  49,809 
Amount offset 1,465,377  2,750,813 
Total 1,484,718  2,800,622 
LIABILITIES
Current and long-term liabilities 233  1,595 
Stockholders’ equity 19,108  48,214 
Amount offset 1,465,377  2,750,813 
Total 1,484,718  2,800,622 

Operations

On December 9, 2002, Bradesco Consórcios commenced the sale of consortium quotas to Bradesco employees and on January 21, 2003 these sales were extended to the account holders and non-account holders of all of its financial institutions and included as part of the Organization’s product portfolio.

The first online internet meeting of Bradesco Consortium holders was held on February 26, 2003 and by September 30, 2003, 25 meetings had been held.

At September 30, 2003, a total of 47 thousand consortium quotas had been sold, with billings in excess of R$ 1.6 billion, 2,388 participants had been selected by bid or draw and 1,054 items had been delivered to members comprising 218 groups.

The company uses all the facilities of the Bradesco Organization customer service network to commercialize the products offered.

Mission

The company’s mission is to manage consortium plans and groups for consumer and corporate purchasers regardless of whether they are Bradesco account holders or not, and to operate in the light and heavy vehicle (including cars, trucks, tractors and combine harvesters) and real estate segments, maintaining excellent standards in the quality of the services offered and in consortium system practice, pursuant to regulations determined by the Brazilian Central Bank and in line with the Bradesco Organization’s philosophy.

Segmentation

The Bradesco Organization’s entry into this segment is part of its strategy to offer the most complete range of product and services possible to its customers.

Providing all income brackets with the opportunity to purchase items through the consortium quota system, filling a market lacuna at accessible prices and considering inclusive, regarding in particular real estate products, the country’s present housing deficit.

The Consortium segment is a complementary niche to regular banking activities and at present there are 3 million (*) consortium group members nationwide. According to information gathered, only 15% (*) of vehicles sold in Brazil are sold via the Consortium method.

The automobile consortium group system ended the first half of the year growing by 11.9%.

At present, an average 64.3 thousand (*) participants receive items monthly through this purchase method as compared to 61.3 thousand 12 months ago, an increase of 4.7% (*), including first homes and new cars and more than 20 other products sold through the consortium quota system.

In the first half of 2003, 45 thousand residential housing consortium quotas were sold in Brazil, a 29% increase over sales for the same period in 2002.

Representation

Within this segment, Bradesco plays a central role in providing Brazilians with the opportunity to acquire consumer durables and real estate.

At September 30, 2003, Bradesco Consórcios had sold more than 47 thousand quotas, leading us to project strong medium and long-term results, with positive effects on our capacity to secure new customers.

(*) Source: ABAC – Brazilian Association of Consortium Group Management Companies.

FITCH ATLANTIC RATINGS   MOODY´S INVESTORS SERVICE AUSTIN RATING
International Sale National Sale   International Sale National Sale Financial Quality National Sale
Individual Support Foreign Country Local Currency National   Foreign Currency Deposit Foreign Currency Debt Local Currency Deposit Deposits Financial Soundness
Long-Term Short-Term Long-Term Short-Term Long-Term Short-Term   Long-Term Short-Term Long-Term Short-Term Long-Term Short-Term Long-Term Short-Term
A 1 AAA F1 AAA F1 AAA(bra) F1+(bra)   Aaa P-1 Aaa P-1 Aaa P-1 Aaa.br BR-1 A AAA
A/B 2 AA+ F2 AA+ F2 AA+(bra) F1(bra)   Aa1 P-2 Aa1 P-2 Aa1 P-2 Aa1.br BR-2 A- AA
B 3 AA F3 AA F3 AA(bra) F2(bra)   Aa2 P-3 Aa2 P-3 Aa2 P-3 Aa2.br BR-3 B+ A
B/C 4 AA- B AA- B AA-(bra) F3(bra)   Aa3 NP Aa3 NP Aa3 NP Aa3.br BR-4 B BBB
C 5 A+ C A+ C A+(bra) B(bra)   A1   A1   A1   A1.br   B- BB
C/D   A D A D A(bra) C(bra)   A2   A2   A2   A2.br   C+ B
D   A-   A-   A-(bra) D(bra)   A3   A3   A3   A3.br   C CCC
D/E   BBB+   BBB+   BBB+(bra)     Baa1   Baa1   Baa1   Baa1.br   C- CC
E   BBB   BBB   BBB(bra)     Baa2   Baa2   Baa2   Baa2.br   D+ C
    BBB-   BBB-   BBB-(bra)     Baa3   Baa3   Baa3   Baa3.br   D  
    BB+   BB+   BB+(bra)     Ba1   Ba1   Ba1   Ba1.br   D-  
    BB   BB   BB(bra)     Ba2   Ba2   Ba2   Ba2.br   E+  
    BB-   BB-   BB-(bra)     Ba3   Ba3   Ba3   Ba3.br   E  
    B+   B+   B+(bra)     B1   B1   B1   B1.br      
    B   B   B(bra)     B2   B2   B2   B2.br      
    B-   B-   B-(bra)     B3   B3   B3   B3.br      
    CCC   CCC   CCC(bra)     Caa1   Caa1   Caa1   Caa1.br      
    CC   CC   CC(bra)     Caa2   Caa2   Caa2   Caa2.br      
    C   C   C(bra)     Caa3   Caa3   Caa3   Caa3.br      
    DDD   DDD   DDD(bra)     Ca   Ca   Ca   Ca.br      
    DD   DD   DD(bra)     C   C   C   C.br      
    D   D   D(bra)                        

N.B. Bradesco's risk ratings are among the highest attributed to Brazilian Banks.
      Fitch Ratings and Atlantic Rating were merged in the first half of 2003.

Risk Ratings – Insurance and Savings Bond Companies

Insurance
Savings Bond
FITCH ATLANTIC
RATINGS
STANDARD
& POOR'S
SR RATING
STANDARD
& POOR'S
National Scale
International Scale
National Scale
International Scale
National Scale
National Scale
AAA(bra) AAA brAAA AAASR brAAA brAAA
AA+(bra) AA+ brAA+ AA+SR brAA+ brAA+
AA(bra) AA brAA AASR brAA brAA
AA-(bra) AA- brAA- AA-SR brAA- brAA-
A+(bra) A+ brA+ A+SR brA+ brA+
A(bra) A brA ASR brA brA
A-(bra) A- brA- A-SR brA- brA-
BBB+(bra) BBB+ brBBB+ BBB+SR brBBB+ brBBB+
BBB(bra) BBB brBBB BBBSR brBBB brBBB
BBB-(bra) BBB- brBBB- BBB-SR brBBB- brBBB-
BB+(bra) BB+ brBB+ BB+SR brBB+ brBB+
BB(bra) BB brBB BBSR brBB brBB
BB-(bra) BB- brBB- BB-SR brBB- brBB-
B+(bra) B+ brB+ B+SR brB+ brB+
B(bra) B brB BSR brB brB
B-(bra) B- brB- B-SR brB- brB-
CCC(bra) CCC brCCC CCCSR brCCC brCCC
CC(bra) CC brCC CCSR brCC brCC
C(bra) C brC CSR brC brC
  DDD brD DSR brD brD
  DD        
  D        
Source
Criteria
Position
Forbes “International 500”
 Overall/Revenue
 166th (Worldwide)
Forbes “International 500”
 Banks/Revenue
 1st (Brazil)
26th (Worldwide)
Fortune “Global 500”
 Banks/Revenue
 1st (Brazil)
46th (Worldwide)
Fortune “Global 500”
 Overall/Revenue
 337th (Worldwide)
Ranking - Bradesco Seguros
 
Global Finance Best Insurance Companies - Property 1st (Latin America)
 
 Insurer
  

During the period, Bradesco was rated Best Local Partner in Brazil for carrying out business and for its capacity to meet customer demands by Euromoney magazine. Bradesco also received the Best Listed Company in 2002 award, from the Association of Capital Market Investment Analysts and Players - Apimec Nacional. This award is the result of a poll carried out by members based on, among other criteria, the quality of the information released to the market, as well its accuracy and timeliness.

For the third time running, Bradesco was rated Best Retail Bank in Brazil by the consultancy Austin Asis and the Conjuntura Econômica magazine published by Fundação Getulio Vargas. The Bank also received the Best Consumer Internet Bank award given by Global Finance magazine. The same magazine also rated Bradesco as Best Consumer Integrated Site and Best Corporate Institutional Integrated Site in Latin America, in terms of products offered, marketing and design.

In the 2003 Best Investment Fund Guide (Guia Melhores Fundos de Investimentos 2003) issued by Exame magazine, Bradesco appears for the second time in a row as Best Private Fund Manager in Brazil. The Guide also rates Bradesco as Best Retail Fund Manager and Best Leveraged Fund Manager, as well as rating 19 of the Organization’s funds as five star, the highest grade awarded by this Guide.

During the third quarter of 2003, Bradesco gave important support to 222 social projects nationwide. These comprised cultural, regional, sector or professional venues, including trade fairs, seminars, congresses and community events.

On the cultural scene, Bradesco took part as a sponsor at the Japanese Community Festival, the Folklore Festival in Olímpia and at the San Gennaro Festivities organized by São Paulo’s Italian Community, as well as at the Nippo/Brazilian Festival in Paraná. Bradesco also sponsored the Expoagro Fair, in Minas Gerais, providing important incentives to agricultural development in Brazil’s interior regions.

During the period, emphasis should also be given to the events sponsored by Bradesco Seguros, which include the International Bienal of Architecture and Design, held in São Paulo, at which the insurance company acted as sponsor and official insurer, the exhibition of religious art Sant’Ana – Coleção Ângela Gutierrez, the French Cinema Festival and the entire series of the Dell’Arte International Classical Concerts in Rio de Janeiro.

In the educational area, the Bradesco Foundation commenced the construction of its 40th school in the town of Osasco, São Paulo. The new unit which should be opened in 2004 is designed to attend two thousand students from the local community. During the quarter, the students, parents, teachers and support staff at five foundation schools took part together in a number of different voluntary efforts, offering among others, handicraft courses and free medical and dental check-ups, benefiting hundreds of people from underprivileged communities.

MAJOR STOCKHOLDERS



(1) No single stockholder hold more than 4% of capital.
(2) Bradesco Management (Board of Executive Officers and Board of Directors) is a member of the Governing Board of the Bradesco Foundation, the Entity’s most senior deliberative organ.
Base date: October 3, 2003.
ON = Commom Stock PN = Prefered Stock

MAIN SUBSIDIARIES AND ASSOCIATED COMPANIES





Background

The Bradesco Foundation, a not-for-profit entity, headquartered at Cidade de Deus, Osasco (SP), was founded in 1956 and declared to be of Federal Public Utility by Decree 86,238, on July 30, 1981.

Convinced that education lies at the roots of equal opportunity and personal and collective fulfillment, the Bradesco Foundation currently maintains 39 schools installed as priority in the country’s most underprivileged regions, in all of Brazil’s states and in the Federal District.

Objectives and Goals

Through its pioneer action in private social investment, the Bradesco Foundation’s chief mission is to provide formal, quality education to children, young people and adults ensuring that they receive the qualifications required to achieve personal fulfillment through their work and the exercising of their rights and duties as citizens.

Accordingly, the Foundation has expanded its activities yearly, increasing the number of students matriculated in its schools from 13,080 to more than 103,000 over the last twenty-three years. The Bradesco Foundation schools offer education free-of-charge at pre, junior and high school levels, as well as basic professional and technical training in IT, electronics, industry, management and agriculture and livestock raising. Distance learning is also offered as part of its Youth and Adult Education programs.

Important Events

The 39th Bradesco Foundation School, in the city of Boa Vista, Roraima, opened its doors on February 6 this year with modern facilities and the capacity to attend more than 1,200 students.

On March 9, all the Foundation Schools took part in Brazil’s “National Voluntary Action Day”. More than 190 thousand people benefited from activities promoted in the leisure and entertainment, education, culture, sports, healthcare, community development and citizenship action areas. Four thousand volunteers participated, including students, parents, support staff, teachers and professionals from partner organizations, providing more than 200 quality services to community members residing in the vicinity of the Foundation schools.

On August 12, the Bradesco Foundation received the Order of Merit from the Supreme Labor Court at a ceremony held at the high court in Brasília, in the Federal District.

On September 3, a stone was laid to mark the foundation of the new school which is to be built in the town of Osasco, SP. Located in the Jardim Conceição neighborhood, the school will have the capacity to attend some 2,000 students from the local community.

School Locations

The majority of the Foundation's educational units are located on the outskirts of major cities or in rural areas where there is a significant lack of educational and welfare assistance. Thousands of students in all four corners of Brazil are given the opportunity to study at the Foundation schools.

School
Students
School
Students
School
Students
Aparecida de Goiânia - GO 2,527 Itajubá - MG 2,147  
Bagé - RS 1,833 Jaboatão - PE 2,330  
Boa Vista - RR 1,869 João Pessoa - PB 2,124  
Bodoquena - MS 1,187 Laguna - SC 2,042 Basic Professional Education
Cacoal - RO 1,849 Macapá - AP 2,253 Rural Area - Artificial Insemination
Campinas - SP 3,359 Maceió - AL 2,443  
Canuanã - TO 1,207 Manaus - AM 3,303  
Caucaia - CE 2,440 Marília - SP 3,877 Cáceres - MT 200
Ceilândia - DF 3,445 Natal - RN 2,265 Campinas - SP 390
Cidade de Deus - Osasco, SP   Paragominas - PA 2,066 Campo Grande - MS 250
Unit I 4,152 Paranavaí - PR 2,148 Goiânia - GO 200
Unit II 2,816 Pinheiro - MA 2,067 Igarapé - MG 200
Basic Supplementary Propriá - SE 2,152 Uberaba - MG 440
Education Telecenters 8,567        
in companies 6,068 Registro - SP 2,165  
Professional Training   Rio Branco - AC 2,020 Subtotal 1,680
 Centers Rio de Janeiro - RJ 4,518    
Conceição do Araguaia - PA 1,944 Rosário do Sul - RS 940  
Cuiabá - MT 1,905 Salvador - BA 2,119  
Feira de Santana-BA 488 São João Del Rei - MG 2,124 Total (*)
105,151
Garanhuns-PE 550 São Luis - MA 2,492  
Gravataí - RS 3,123 Teresina - PI 2,250 (*) Projected for 2003.
Irecê - BA 2,222 Vila Velha - ES 2,075

The Bradesco Foundation – An Education Project the Size of Brazil.



Financing

The Bradesco Foundation activities are funded exclusively by resources from its own income and donations made by the Bradesco Organization Companies.

Investments in 2002
Budget for 2003
R$ 123.3 million
 R$ 128.9 million

Courses – Grades – Forecast for 2003

  Students
% of Total
Infant 3,388 3.22
Junior and Middle 29,709 28.25
High School and Technical Training 16,366 15.57
Youth and Adult Education 20,734 19.72
Basic Professional Training 34,954 33.24
Total 105,151 100.0

Student Profile



Increase in Student Numbers



1) Calculation Basis 2003 (in thousands of reais) 2002 (in thousands of reais)
Net revenue (RL) (1) 7,146,488  6,291,308 
Operating income (RO) 2,666,360  1,650,730 
Gross payroll (FPB) 3,507,428  3,028,520 

2) Internal Social Indicators In Thousand of reais % of FPB % of RL In Thousand of reais % of FPB % of RL
Meals 287,035  8.2 4.0 250,631  8.3 4.0
Compulsory social charges 587,385  16.7 8.2 557,959  18.4 8.9
Private pension plans 226,633  6.5 3.2 96,816  3.2 1.5
Healthcare insurance 139,424  4.0 2.0 138,322  4.6 2.2
Safety and medical care in the workplace -  -  -  -  -  - 
Education -  -  -  -  -  - 
Culture -  -  -  -  -  - 
Professional qualification and training 45,916  1.3 0.6 33,664  1.1 0.5
On-site child care/child care benefit 21,791  0.6 0.3 22,456  0.7 0.4
Employee profit sharing 127,966  3.6 1.8 99,293  3.3 1.6
Other 31,216  0.9 0.4 28,893  0.9 0.4
Total – Internal social indicators 1,467,366  41.8 20.5 1,228,034  40.5 19.5

3) External social indicators In Thousand of reais % of RO % of RL In Thousand of reais % of RO % of RL
Education 44,295  1.7 0.7 44,575  2.7 0.7
Culture 7,954  0.3 0.1 8,337  0.5 0.1
Health and basic sanitation 2,296  0.1 -  999  0.1 - 
Sports 5,991  0.2 0.1 3,817  0.2 0.1
Prevention of hunger and food security 532  -  -  124  -  - 
Other 7,874  0.3 0.1 9,228  0.6 0.2
Total contribution to society 68,942  2.6 1.0 67,080  4.1 1.1
Taxes (excluding social charges) 1,784,105  66.9 24.9 1,190,041  72.1 18.9
Total – External social indicators 1,853,047  69.5 25.9 1,257,121  76.2 20.0

4) Environmental Indicators In Thousand of reais % of RO % of RL In Thousand of reais % of RO % of RL
Investments related to company production/operation - - - - - -
Investments in external programs/projects - - - - - -
Total investments in environment protection - - - - - -

As regards the establishment of “annual goals” for ( ) has no established goals ( ) has no established goals
minimizing waste, general production/operation ( ) complies (0% to 50%) ( ) complies (0% to 50%)
consumption and the efficient use of natural resources, ( ) complies (51% to 75%) ( ) complies (51% to 75%)
the company: ( ) complies (76% to 100%) ( ) complies (76% to 100%)

5) Employee Indicators 2003 2002
Employees at the end of the period 77,154  73,943 
Admissions during the period 11,994  9,702 
Outsourced employees 7,228  7,969 
Trainees/interns 488  605 
Employees older than 45 5,283  4,788 
Women employees 34,534  33,293 
% of management positions held by women 18.3% 17.2%
Black employees (2) N/A  N/A 
% of management positions held by blacks N/A  N/A 
Disabled employees or employees with special needs 637  599 

6) Significant information regarding the level of corporate citizenship   2003   Goals for nine months periods - 2004
Ratio between maximum and minimum salary   N/A   N/A
Total number of accidents in the workplace   297   N/A
The company’s social and environmental projects were established by: ( ) directors ( x ) directors and managers ( ) all employees ( ) directors ( x ) directors and managers ( ) all employees
Workplace safety and health standards were defined by: ( ) directors ( ) all employees ( x ) all + CIPA (3) ( ) directors ( ) all employees ( x ) all + CIPA (3)
As regards freedom of trade union activities, collective bargaining rights and internal employee representation. the company: ( x ) does not interfere ( ) complies with OIT(4) rules ( ) encourages activities and complies OIT rules ( x ) does not interfere ( ) complies with OIT rules ( ) encourages activities and complies OIT rules
Private pension plans are offered to: ( ) directors ( ) directors and managers ( x ) all employees ( ) directors ( ) directors and managers ( x ) all employees
The company’s profit sharing plan is distributed to: ( ) directors ( ) directors and managers ( x ) all employees ( ) directors ( ) directors and managers ( x ) all employees
When selecting suppliers, the ethical, social and environmental responsibility standards adopted by the company: ( ) are not considered ( ) are suggested ( x ) are required ( ) are not considered ( ) are suggested ( x ) are required
As regards the participation of employees in voluntary work programs, the company: ( x ) does not interfere ( ) gives support ( ) organizes and encourages participation ( x ) does not interfere ( ) gives support ( ) organizes and encourages participation
Total number of consumer complaints: at the company N/A at Procon (5) N/A at Court level N/A at the company N/A at Procon N/A at Court level N/A
% of complaints resolved: at the company N/A at Procon N/A at Court level N/A at the company N/A at Procon N/A at Court level N/A
Total Added Value to be Distributed (in thousands of reais) 2003: R$ 6,836,819 2002: R$ 5,509,648
Distribution of Added Value (DVA): 34.7% government 42.0% employees 31.7% government 44.2% employees
  14.6% stockholders 8.7% retained 5.8% stockholders 18.3% retained

7) Other Information

(1)

Net revenue (RL) corresponds to Income from Financial Intermediation.

(2)

N/A: not available.

(3)

Internal Accident Prevention Committee.

(4)

International Labor Organization.

(5)

Consumer Protection Agency.

Independent auditors’ report on supplementary account information

To
The Administrative Council and Stockholders
Banco Bradesco S.A.
Osasco - SP

We have performed special review, in accordance with the specific rules established by the Brazilian Institute of Independent Auditors (IBRACON), jointly with the Brazilian Federal Accounting Council, of the consolidated interim report of Banco Bradesco S.A. and its subsidiaries for the nine-month periods ended September 30, 2003 and 2002 and have issued an unqualified report, dated October 21, 2003.

Our review was performed for the purpose of reviewing the consolidated interim report of Banco Bradesco S.A. and its subsidiaries, taken as a whole. In connection with our special review, we have performed a review of the supplementary account information included in the Report on Economic and Financial Analysis that is presented exclusively for the purpose of additional analysis and is not a required part of the financial statements.

Based on our special review, we are not aware of any significant modifications that should be made to the supplementary account information for it to be presented adequately, in all material respects, in relation to the interim report taken as a whole.




October 21, 2003

KPMG Auditores Independentes
CRC 2SP014428/O-6

Walter Iório Cláudio Rogélio Sertório
Accountant CRC 1SP084113/O-5 Accountant CRC 1SP212059/O-0

4 – Consolidated Balance Sheets and Statements of Income – 1998 to 2003

Banco Bradesco S.A
Consolidated Balance Sheet - In thousands of reais (A free translation of the original in Portuguese prepared in conformity with accounting practices adopted in Brazil)
    DECEMBER
 
ASSETS 09/2003 2002 2001 2000 1999 1998
 
CURRENT ASSETS AND LONG-TERM RECEIVABLES 159,293,855  137,301,711  105,767,892  90,693,025  75,136,910  62,635,794 
FUNDS AVAILABLE 2,234,099  2,785,707  3,085,787  1,341,653  827,329  709,803 
INTERBANK INVESTMENTS 28,558,460  21,472,756  3,867,319  2,308,273  2,590,599  5,167,038 
Open market investments 24,506,656  19,111,652  2,110,573  1,453,461  1,890,828  4,449,356 
Interbank deposits 4,051,857  2,370,345  1,760,850  854,815  699,771  718,125 
Provision for losses (53) (9,241) (4,104) (3) -  (443)
SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS 47,905,478  37,003,454  40,512,688  33,119,843  29,196,857  19,705,200 
Own portfolio 40,431,477  29,817,033  27,493,936  21,743,924  20,950,342  12,821,409 
Subject to repurchase agreements 1,229,222  1,497,383  9,922,036  10,822,637  5,987,713  5,759,959 
Subject to negotiation and intermediation of securities -  -  526,219  9,394  157  295 
Restricted deposits - Brazilian Central Bank 3,349,815  3,536,659  1,988,799  421,727  2,359,466  1,214,811 
Privatization currencies 85,546  77,371  25,104  9,526  7,241  5,839 
Subject to collateral provided 2,078,231  1,836,169  715,858  783,501  449,536  108,200 
Derivative financial instruments 731,187  238,839  581,169  -  -  - 
Allowance for mark-to-market -  -  (740,433) (670,866) (557,598) (205,313)
INTERBANK ACCOUNTS 13,070,766  12,943,432  5,141,940  5,060,628  6,454,553  5,536,959 
Unsettled payments and receipts 590,644  16,902  10,118  6,920  7,635  189,329 
Restricted deposits:
- Brazilian Central Bank 12,068,842  12,519,635  4,906,502  4,848,668  6,184,959  5,194,724 
- National Treasury - Rural funding 578  578  712  660  599  779 
- National Housing System - SFH 388,856  374,177  217,518  197,191  142,653  149,826 
Interbank onlendings -  -  -  2,024  116,733  1 
Correspondent banks 21,846  32,140  7,090  5,165  1,974  2,300 
INTERDEPARTMENTAL ACCOUNTS 181,780  191,739  176,073  111,636  49,018  38,661 
Internal transfer of funds 181,780  191,739  176,073  111,636  49,018  38,661 
CREDIT OPERATIONS 40,546,623  39,705,279  35,131,359  30,236,106  21,535,633  20,794,541 
Credit operations:
- Public sector 201,684  254,622  199,182  275,479  154,266  111,141 
- Private sector 44,204,034  42,842,693  37,689,671  32,244,482  22,848,128  21,553,453 
Allowance for loan losses (3,859,095) (3,392,036) (2,757,494) (2,283,855) (1,466,761) (870,053)
LEASING OPERATIONS 1,316,217  1,431,166  1,567,927  1,914,081  1,712,343  1,688,761 
Leasing receivables:
- Public sector -  45  138  160  800  1,667 
- Private sector 2,906,314  3,141,724  3,248,050  3,813,369  3,515,396  3,410,990 
Unearned lease income (1,467,579) (1,560,278) (1,557,642) (1,760,305) (1,490,803) (1,485,780)
Allowance for leasing losses (122,518) (150,325) (122,619) (139,143) (313,050) (238,116)
OTHER RECEIVABLES 24,296,913  20,690,054  15,685,433  16,226,725  12,420,787  8,491,994 
Receivables on guarantees honored 749  1,577  1,131  2,020  -  645 
Foreign exchange portfolio 11,925,580  10,026,298  5,545,527  6,417,431  3,375,563  2,488,263 
Income receivable 287,864  249,849  187,910  191,873  109,734  113,814 
Negotiation and intermediation of securities 257,114  175,185  761,754  497,655  839,758  320,821 
Specific credits -  -  146,919  124,776  206,952  164,770 
Insurance premiums receivable 891,216  718,909  995,662  818,773  994,718  825,162 
Sundry 11,103,661  9,640,966  8,107,714  8,258,402  7,021,988  4,685,384 
Allowance for other losses (169,271) (122,730) (61,184) (84,205) (127,926) (106,865)
OTHER ASSETS 1,183,519  1,078,124  599,366  374,080  349,791  502,837 
Other assets 693,208  679,515  415,484  409,771  406,910  513,407 
Allowance for losses (249,942) (243,953) (164,290) (171,876) (166,447) (199,753)
Prepaid expenses 740,253  642,562  348,172  136,185  109,328  189,183 
PERMANENT ASSETS 5,069,492  5,483,319  4,348,014  4,185,458  5,186,682  4,702,082 
INVESTMENTS 504,392  512,720  884,773  830,930  2,453,425  2,306,500 
Investments in associated companies:
- Local 369,876  395,006  742,586  689,002  2,044,120  1,400,144 
Other investments 510,764  439,342  452,871  525,316  753,901  1,148,977 
Allowance for losses (376,248) (321,628) (310,684) (383,388) (344,596) (242,621)
PROPERTY AND EQUIPMENT IN USE 2,588,535  2,523,949  2,152,680  2,017,093  1,683,069  1,562,430 
Buildings in use 1,610,835  1,748,409  1,475,581  1,491,847  1,415,720  1,395,530 
Other fixed assets 3,735,878  3,459,950  2,988,008  2,705,577  2,285,918  2,169,300 
Accumulated depreciation (2,758,178) (2,684,410) (2,310,909) (2,180,331) (2,018,569) (2,002,400)
LEASED ASSETS 24,301  34,323  46,047  10,688  17,026  22,351 
Leased assets 50,475  51,198  51,214  19,421  18,451  38,860 
Accumulated depreciation (26,174) (16,875) (5,167) (8,733) (1,425) (16,509)
DEFERRED CHARGES 1,952,264  2,412,327  1,264,514  1,326,747  1,033,162  810,801 
Organization and expansion costs 1,151,730  1,037,559  874,970  731,717  477,058  553,354 
Accumulated amortization (596,751) (568,525) (481,127) (391,417) (190,510) (207,627)
Goodwill on acquisition of subsidiaries, net of amortization 1,397,285  1,943,293  870,671  986,447  746,614  465,074 
 
T O T A L 164,363,347  142,785,030  110,115,906  94,878,483  80,323,592  67,337,876 

Banco Bradesco S.A
Consolidated Balance Sheet - In thousands of reais (A free translation of the original in Portuguese prepared in conformity with accounting practices adopted in Brazil)
    DECEMBER
 
LIABILITIES AND STOCKHOLDERS' EQUITY 09/2003 2002 2001 2000 1999 1998
 
CURRENT AND LONG-TERM LIABILITIES 130,166,634  114,859,776  87,352,076  77,006,572  66,345,011  56,020,611 
DEPOSITS 58,346,228  56,363,163  41,083,979  36,468,659  34,723,630  28,249,838 
Demand deposits 11,240,025  13,369,917  8,057,627  7,500,518  6,803,429  4,976,836 
Savings deposits 20,896,669  20,730,683  18,310,948  17,835,745  17,244,520  16,171,727 
Interbank deposits 411,304  23,848  40,446  568,416  468,950  136,955 
Time deposits 25,798,230  22,238,715  14,674,958  10,563,980  10,206,731  6,964,320 
DEPOSITS RECEIVED UNDER SECURITY REPURCHASE AGREEMENTS 23,069,022  16,012,965  14,057,327  12,108,350  7,814,288  9,307,113 
Own portfolio 2,279,499  915,946  12,178,855  10,696,199  5,973,260  5,729,892 
Third-party portfolio 20,789,523  12,188,054  1,878,472  1,412,151  1,841,028  3,577,221 
Unrestricted portfolio -  2,908,965  -  -  -  - 
FUNDS FROM ACCEPTANCE AND ISSUANCE OF SECURITIES 5,940,596  3,136,842  4,801,410  4,111,171  4,628,344  2,067,118 
Exchange acceptances -  1,214  -  -  -  2 
Mortgage notes 867,934  384,727  780,425  741,248  452,379  262,165 
Debentures 19,580  100,369  48,921  1,039  1,043,125  44,800 
Securities issued abroad 5,053,082  2,650,532  3,972,064  3,368,884  3,132,840  1,760,151 
INTERBANK ACCOUNTS 320,874  606,696  192,027  107,129  59,607  42,839 
Interbank onlendings 348  35,686  4,519  1,059  10,016  28,191 
Correspondent banks 320,526  571,010  187,508  106,070  49,591  14,648 
INTERDEPARTMENTAL ACCOUNTS 1,152,934  1,337,729  762,505  904,188  879,592  573,526 
Third-party funds in transit 1,152,934  1,337,729  762,505  904,188  879,592  573,501 
Internal transfer of funds -  -  -  -  -  25 
BORROWINGS 8,122,886  9,390,630  7,887,154  6,463,555  4,864,414  4,035,313 
Local borrowings - official institutions 2,009  3,368  2,979  9,737  10,178  5,147 
Local borrowings - other institutions 177,453  216,812  230,468  170,775  138,279  31,932 
Foreign currency borrowings 7,943,424  9,170,450  7,653,707  6,283,043  4,715,957  3,998,234 
LOCAL ONLENDINGS - OFFICIAL INSTITUTIONS 7,034,585  7,000,046  5,830,633  5,096,604  4,123,486  3,571,562 
National treasury 51,665  62,187  -  -  -  - 
National Bank for Economic and Social Development (BNDES) 3,052,416  3,437,319  3,067,220  2,589,284  1,650,243  987,997 
Federal Savings Bank (CEF) 464,126  453,803  433,381  405,264  388,109  331,010 
Government Agency for Machinery and Equipment Financing (FINAME) 3,464,674  3,045,176  2,321,508  2,090,374  2,064,153  2,238,674 
Other institutions 1,704  1,561  8,524  11,682  20,981  13,881 
FOREIGN ONLENDINGS 29,012  47,677  316,283  108,178  185,774  1,094,207 
Foreign onlendings 29,012  47,677  316,283  108,178  185,774  1,094,207 
DERIVATIVE FINANCIAL INSTRUMENTS 331,245  576,697  111,600  -  -  - 
OTHER LIABILITIES 25,819,252  20,387,331  12,309,158  11,638,738  9,065,876  7,079,095 
Collection of taxes and other contributions 983,768  108,388  181,453  128,785  113,693  135,394 
Foreign exchange portfolio 5,965,773  5,002,132  1,343,769  2,439,657  1,029,963  1,045,553 
Social and statutory payables 672,573  666,409  572,265  560,533  603,405  382,676 
Taxes and social security contributions 4,238,396  4,376,031  3,371,127  3,094,628  2,665,681  2,168,827 
Negotiation and intermediation of securities 2,201,342  109,474  1,307,385  592,395  914,127  506,767 
Technical reserves for insurance, private pension plans and savings bonds 3,371,590  2,362,861  1,005,793  689,891  659,450  529,288 
Subordinated debt 3,481,653  3,321,597  969,842  -  -  - 
Sundry 4,904,157  4,440,439  3,557,524  4,132,849  3,079,557  2,310,590 
TECHNICAL RESERVES FOR INSURANCE, PRIVATE PENSION PLANS AND SAVINGS BONDS 21,089,275  16,792,618  12,847,633  9,648,174  6,904,469  4,740,741 
DEFERRED INCOME 29,627  15,843  9,020  34,632  17,543  33,195 
Deferred income 29,627  15,843  9,020  34,632  17,543  33,195 
MINORITY INTEREST IN SUBSIDIARY COMPANIES 110,991  271,064  139,231  96,903  287,350  222,330 
STOCKHOLDERS' EQUITY 12,966,820  10,845,729  9,767,946  8,092,202  6,769,219  6,320,999 
Capital:
- Local residents 6,383,081  4,960,425  4,940,004  5,072,071  4,206,644  3,659,692 
- Foreign residents 616,919  239,575  259,996  74,429  58,856  50,626 
Unpaid capital -  -  -  (400,500) (465,500) (246,000)
Capital reserves 7,902  7,435  7,435  19,002  5,643  11,756 
Revenue reserves 5,717,767  5,629,142  4,560,511  3,327,200  2,963,576  2,844,925 
Mark-to-market adjustment - securities and derivatives 241,151  9,152  -  -  -  - 
 
STOCKHOLDERS' EQUITY MANAGED BY THE PARENT COMPANY 13,077,811  11,116,793  9,907,177  8,189,105  7,056,569  6,543,329 
 
T O T A L 164,363,347  142,785,030  110,115,906  94,878,483  80,323,592  67,337,876 

The accompanying notes are an integral part of these financial statements

Banco Bradesco S.A
Consolidated Statement of Income - In thousands of reais (A free translation of the original in Portuguese prepared in conformity with accounting practices adopted in Brazil)
  YEAR
 
  2002 2001 2000 1999 1998
 
INCOME FROM LENDING AND TRADING ACTIVITIES 31,913,379  21,411,673  15,519,008  18,286,815  11,935,162 
 
Credit operations 15,726,929  11,611,236  7,787,745  9,602,701  6,623,789 
Leasing operations 408,563  420,365  512,962  730,929  425,321 
Security transactions 9,527,663  7,367,600  6,122,486  5,875,823  3,823,626 
Financial income on insurance, private pension plans and savings bonds 3,271,913  -  -  -  - 
Derivative financial instruments (2,073,247) (270,572) -  -  - 
Foreign exchange transactions 4,456,594  2,045,092  872,234  1,776,925  572,104 
Compulsory deposits 594,964  237,952  223,581  300,437  490,322 
 
EXPENSES 23,259,783  13,312,726  9,132,137  12,821,198  7,441,180 
Interest and charges on:
Deposits 10,993,328  6,986,027  5,521,407  4,954,854  4,430,881 
Price-level restatement and interest on technical reserves for insurance, private pension plans and saving 2,241,282  -  -  -  - 
Borrowings and onlendings 7,194,161  4,316,682  2,158,725  5,819,063  1,414,272 
Leasing operations 12,486  -  93  18,852  2,985 
Provision for loan losses 2,818,526  2,010,017  1,451,912  2,028,429  1,593,042 
 
INCOME FROM FINANCIAL INTERMEDIATION 8,653,596  8,098,947  6,386,871  5,465,617  4,493,982 
 
OTHER OPERATING INCOME (EXPENSES) (6,343,850) (5,324,166) (4,647,041) (4,404,370) (3,390,095)
 
Commissions and fees 3,711,736  3,472,560  3,042,699  2,099,937  1,774,624 
Retained insurance premiums, private pension plans and savings bonds 10,134,873  8,959,259  6,919,942  5,975,488  5,014,830 
Change in technical reserves for insurance, private pension plans and savings bonds (2,784,647) (3,492,217) (3,001,118) (2,341,648) (1,392,136)
Claims - insurance operations and savings bond redemptions (4,335,895) (3,996,108) (2,866,389) (2,844,171) (2,631,300)
Insurance and pension plan selling expenses (667,527) (689,352) (645,020) (635,351) (518,390)
Expenses with pension plan benefits and redemptions (1,688,639) (1,369,424) (912,784) (557,608) (422,756)
Personnel expenses (4,075,613) (3,548,805) (3,220,607) (2,783,627) (2,641,801)
Other administrative expenses (4,028,377) (3,435,759) (2,977,665) (2,566,657) (2,158,685)
Tax expenses (847,739) (790,179) (670,138) (651,801) (319,537)
Equity in the earnings of associated companies 64,619  70,764  156,300  127,100  157,223 
Other operating income 1,320,986  1,326,459  902,807  1,069,562  560,319 
Other operating expenses (3,147,627) (1,831,364) (1,375,068) (1,295,594) (812,486)
 
OPERATING INCOME 2,309,746  2,774,781  1,739,830  1,061,247  1,103,887 
 
NON-OPERATING INCOME (EXPENSES), NET 186,342  (83,720) (123,720) (224,874) (263,696)
 
INCOME BEFORE TAXES AND PROFIT SHARING 2,496,088  2,691,061  1,616,110  836,373  840,191 
 
PROVISION FOR INCOME TAX AND SOCIAL CONTRIBUTION (460,263) (502,257) (258,776) 307,186  240,203 
 
NON-RECURRING/EXTRAORDINARY INCOME -  -  400,813  -  - 
 
MINORITY INTEREST IN SUBSIDIARIES (13,237) (18,674) (17,982) (38,753) (67,974)
 
NET INCOME 2,022,588  2,170,130  1,740,165  1,104,806  1,012,420 
 
RETURN ON STOCKHOLDERS' EQUITY 18.65% 22.22% 21.50% 16.32% 16.02%

The accompanying notes are an integral part of these financial statements.

Banco Bradesco S.A
Consolidated Statement of Income - In thousands of reais (A free translation of the original in Portuguese prepared in conformity with accounting practices adopted in Brazil)
  2003 2002 2001
 
  3rd. QTR. 2nd. QTR. 1st. QTR. 4th. QTR. 3rd. QTR. 2nd. QTR. 1st. QTR. 4th. QTR.
 
INCOME FROM LENDING AND TRADING ACTIVITIES 7,915,112  5,098,432  7,083,258  3,083,730  15,811,393  8,521,386  4,496,870  2,604,301 
 
Credit operations 3,508,139  2,687,485  2,940,061  1,519,950  7,344,652  4,426,505  2,435,822  1,189,535 
Leasing operations 85,952  65,777  77,386  74,886  127,240  116,028  90,409  62,021 
Security transactions 2,312,036  995,040  1,790,954  (712,805) 6,319,688  3,276,536  644,244  (400,625)
Financial income on insurance, private pension plans and savings bonds 1,334,756  1,172,214  1,441,042  1,398,046  770,981  471,149  631,737  - 
Derivative financial instruments 33,158  (360,489) 373,646  307,885  (1,585,879) (1,120,268) 325,015  1,586,750 
Foreign exchange transactions 275,508  168,153  99,498  169,630  2,706,668  1,271,208  309,088  103,954 
Compulsory deposits 365,563  370,252  360,671  326,138  128,043  80,228  60,555  62,666 
 
EXPENSES 5,357,189  3,068,353  4,524,772  721,442  12,877,250  6,895,132  2,765,959  182,949 
Interest and charges on:
Deposits 3,434,326  1,826,314  2,669,686  (5,215) 6,049,300  3,430,308  1,518,935  53,292 
Price-level restatement and interest on technical reserves for insurance, private pension plans and savings bonds 761,148  755,950  902,060  978,808  519,325  461,387  281,762  - 
Borrowings and onlendings 555,389  (103,670) 141,355  (834,266) 5,409,418  2,289,540  329,469  (489,948)
Leasing operations 3,187  3,194  3,202  3,204  3,097  3,071  3,114  - 
Provision for loan losses 603,139  586,565  808,469  578,911  896,110  710,826  632,679  619,605 
 
INCOME FROM FINANCIAL INTERMEDIATION 2,557,923  2,030,079  2,558,486  2,362,288  2,934,143  1,626,254  1,730,911  2,421,352 
 
OTHER OPERATING INCOME (EXPENSES) (1,890,634) (1,170,982) (1,418,512) (1,703,272) (2,439,061) (1,087,706) (1,113,811) (1,512,249)
 
Commissions and fees 1,178,864  1,080,345  1,012,644  991,101  934,418  925,649  860,568  874,001 
Retained insurance premiums, private pension plans and savings bonds 3,118,778  2,908,922  2,770,492  3,243,557  2,678,997  2,262,775  1,949,544  2,641,322 
Change in technical reserves for insurance, private pension plans and saving bonds (895,092) (737,031) (988,335) (1,484,011) (874,013) (171,237) (255,386) (1,310,005)
Claims - insurance operations and savings bond redemptions (1,363,109) (1,352,060) (1,170,222) (1,106,755) (1,098,887) (1,086,640) (1,043,613) (1,068,032)
Insurance and pension plan selling expenses (190,761) (182,499) (180,521) (179,671) (167,297) (160,390) (160,169) (169,032)
Expenses with pension plan benefits and redemptions (756,108) (599,554) (436,958) (508,501) (419,728) (411,115) (349,295) (415,859)
Personnel expenses (1,306,415) (1,147,838) (1,053,175) (1,047,093) (1,144,413) (996,105) (888,002) (936,519)
Other administrative expenses (1,232,614) (1,152,697) (1,100,913) (1,111,005) (1,062,951) (1,010,760) (843,661) (896,004)
Tax expenses (254,650) (238,429) (267,852) (257,997) (185,527) (200,145) (204,070) (209,624)
Equity in the earnings of associated companies 7,218  (27,989) (4,725) 32,855  8,660  20,864  2,240  55,230 
Other operating income 401,214  836,658  657,403  (70,632) 731,764  385,839  274,015  435,891 
Other operating expenses (597,959) (558,810) (656,350) (205,120) (1,840,084) (646,441) (455,982) (513,618)
 
OPERATING INCOME 667,289  859,097  1,139,974  659,016  495,082  538,548  617,100  909,103 
 
NON-OPERATING INCOME (EXPENSES), NET 9,854  (95,872) (681,563) 54,804  140,964  19,901  (29,327) (36,188)
 
INCOME BEFORE TAXES AND PROFIT SHARING 677,143  763,225  458,411  713,820  636,046  558,449  587,773  872,915 
 
PROVISION FOR INCOME TAX AND SOCIAL CONTRIBUTION (111,614) (242,190) 52,776  5,271  (231,215) (68,457) (165,862) (261,664)
 
MINORITY INTEREST IN SUBSIDIARIES (1,638) (1,325) (3,586) (21,058) 15,486  (10,960) 3,295  (1,412)
 
NET INCOME 563,891  519,710  507,601  698,033  420,317  479,032  425,206  609,839 

The accompanying notes are an integral part of these financial statements.

5 - Financial Statements, Report of the Audit Committee and Independent Auditors’ Report

Directors’ Report

To Our Stockholders,

We are pleased to present the financial statements for the quarter ended September 30, 2003, of Banco Bradesco S.A., as well as the consolidated financial statements, prepared in accordance with the requirements of Brazilian corporate legislation.

Among the important events for the quarter at the Bradesco Organization, we highlight the conclusion of the incorporation process of Banco Bilbao Vizcaya Argentaria Brasil S.A. into Bradesco on September 22, with the transformation of the BBV Banco Branches into Bradesco Branches. This initiative has optimized resources, drawing together staff expertise and dedication to offer customers maximum quality in products and services.

For the period from January 1 to September 30, 2003, Bradesco reported net income of R$ 1.591 billion, corresponding to R$ 1.00 per thousand shares, an annualized return of 16.69% on closing stockholders’ equity and of 18.22% on average stockholders’ equity.

Taxes and contributions, including social security contributions, payable or accrued on the main activities carried out by the Bradesco Organization, for the first nine months of the year, amounted to R$ 2.371 billion, or 149.03% of net income.

At the end of the quarter, paid-up capital of R$ 7 billion, plus reserves of R$ 5.967 billion comprised the total stockholders’ equity of R$ 12.967 billion, an increase of 23.49% compared with the same period in 2002. Net equity per thousand shares was equivalent to R$ 8.18.

Managed stockholders’ equity corresponds to 7.96% of consolidated assets which totaled R$ 164.363 billion, a 17.28% growth rate compared to September 2002. As a result, the capital adequacy ratios were 18.37% on a consolidated financial basis and 15.91% on a consolidated economic and financial basis, accordingly, above the 11% required minimum established by National Monetary Council Resolution 2099 of August 17, 1994, in conformity with the Basel Accord. At the end of the quarter, the ratio of permanent assets to stockholders’ equity, in relation to consolidated reference equity was 44.32% on a consolidated financial basis and 29.95% on a consolidated economic and financial basis, accordingly, within the maximum 50% limit.

In compliance with the provisions of Article 8 of Brazilian Central Bank Circular 3068, of November 8, 2001, Bradesco declares that it has both the financial capacity and the intention to hold to maturity the securities classified in the ‘securities held to maturity’ category.

With a growth rate of 31.23% over the same period in 2002, overall funding obtained by the Bradesco Organization amounted to R$ 238.060 billion, at September 30 and comprised the following :

In the housing loan area, Bradesco provided funds during the first nine months of the year for the construction and purchase of residential housing in the amount of R$ 838.101 million, comprising 13.223 properties.

With an active presence in the Capital Market Area, Bradesco was an important intermediary in the public placement of shares, debentures and promissory notes, with a total volume of R$ 3.879 billion recorded since the beginning of the year, corresponding to 59.97% of all issues registered with the Brazilian Securities Commission (CVM). The Bank also gained recognition for its activities in the area of mergers and acquisitions, project finance and as an advisor in corporate and financial restructuring.

The Bradesco Insurance Group, with an important role in the insurance, private pension plan and savings bond areas, reported net income of R$ 439.358 million at September 30, 2003. The overall premium income attained R$ 9.304 billion, a growth rate of 27.55% in comparison with the same period in 2002. Some 30 thousand attendants at concessionaires and brokers are available to serve the Group’s policyholders.

Structured to offer top-quality standards of comfort, ease and security, the Bradesco Organization Customer Service Network offered its customers and other users access to 10,043 service outlets at the end of the quarter, including 21,585 ATMs in the BDN – Bradesco Day and Night Self-service Network, 14,867 of which also operate at weekends and on bank holidays:

3,033 Branches in Brazil (Bradesco – 2,811, BCN - 221 and Banco Finasa - 1).
7 Branches abroad, 1 in New York (Bradesco), 4 in Grand Cayman (Bradesco, BCN, Mercantil and Banco Boavista) and 2 in Nassau, Bahamas (Boavista and Banco Alvorada, formerly BBV Banco).
6 Subsidiaries abroad (Banco Bradesco Argentina S.A. in Buenos Aires, Banco Bradesco Luxembourg S.A. in Luxembourg, Boavista Banking Ltd. in Nassau, Bradesco Securities, Inc. in New York, Bradesco Services Co. Ltd. in Tokyo and Cidade Capital Markets Ltd. in Grand Cayman).
3,144 Banco Postal branches.
1,958 Banking service posts and outlets in companies (Bradesco – 1,763 and BCN - 195).
1,842 Outplaced terminals in the BDN– Bradesco Day and Night Network.
53 Branches of Finasa Promotora de Vendas, present in 12,777 vehicle dealerships and 804 stores selling furniture and home decor, IT related equipment, tourism and travel and finishing materials, among others.

In compliance with CVM Instruction 381, the Bradesco Organization declares that, during the quarter, no non-audit services were contracted or rendered by KPMG Auditores Independentes for an amount which exceeds 5% of the total external audit costs. This policy complies with internationally accepted principles designed to maintain the independence of external auditors. In accordance with these principles: auditors should not audit their own work, or exercise management functions for their clients or promote the interests of such clients. Each external audit is contracted for a maximum five-year period pursuant to Brazilian Central Bank recommendations.

In the social area, the Organization continues its important efforts, principally through its educational and welfare programs developed by Fundação Bradesco (the Bradesco Foundation), which maintains 39 schools, installed as a priority in Brazil’s most socially and economically deprived regions, across all of its states and in the Federal District. More than 105 thousand students receive education, completely free-of-charge, including youth and adult education courses and basic professional training. More than 49 thousand students enrolled on its infant, junior, middle/high and technical school courses receive free meals, uniforms, school materials and medical/dental care from the Foundation.

In the Human Resources Area, Bradesco enhances its training programs yearly, specifically designed to foster the professional skills and development of its staff. Based on an across-the-board view of current business demands and permanent education, the Organization has achieved increasingly positive results as regards the improvement in customer service and the efficiency of its products and services. For the period from January to September, 993 courses were given with 302,886 participations. The benefit plans designed to guarantee the well-being, better life quality and security of employees and their dependents, covered 191,051 people at the end of the quarter.

The results accomplished to date reflect the importance of the strategy developed by the Bradesco Organization, which is based on the concepts of quality and efficiency. Grateful for the success achieved, we would like to thank our stockholders and customers for their support and confidence and our staff and other stakeholders for their dedication.

Cidade de Deus, October 24, 2003
Board of Directors
and Board of Executive Officers

Banco Bradesco S.A.
Consolidated Balance Sheet at September 30 - In thousands of reais (A free translation of the original in Portuguese prepared in conformity with accounting practices adopted in Brazil)
ASSETS
 		 2003
 2002
CURRENT ASSETS 132,377,005 110,578,213
FUNDS AVAILABLE (Note 8) 2,234,099 2,547,938
INTERBANK INVESTMENTS (Notes 3b and 9) 28,345,525 12,268,495
Open market investments 24,506,656 8,990,823
Interbank deposits 3,838,922 3,282,910
Provision for losses (53) (5,238)
SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS (Notes 3c, 10, 33b and 33c) 41,072,126 31,495,420
Own portfolio 34,708,520 25,472,475
Subject to repurchase agreements 507,073 448,971
Restricted deposits - Brazilian Central Bank 3,330,355 4,007,798
Privatization currencies 85,546 26,750
Subject to collateral provided 2,017,794 1,185,377
Derivative financial instruments (Notes 3d and 33c) 422,838 354,049
INTERBANK ACCOUNTS (Note 11) 12,778,895 10,293,777
Unsettled payments and receipts 590,644 879,208
Restricted deposits:
- Brazilian Central Bank 12,068,842 9,298,237
- National Treasury - Rural funding 578 578
- National Housing System - SFH 96,985 98,835
Correspondent banks 21,846 16,919
INTERDEPARTMENTAL ACCOUNTS 181,780 201,908
Internal transfer of funds 181,780 201,908
CREDIT OPERATIONS (Notes 3e, 12 and 33b) 27,894,561 29,185,348
Credit operations:
- Public sector 23,952 34,082
- Private sector 30,628,142 31,661,785
Allowance for loan losses (Notes 3e, 12f and 12g) (2,757,533) (2,510,519)
LEASING OPERATIONS (Notes 2, 3e, 12 and 33b) 777,811 1,045,417
Leasing receivables:
- Public sector - 65
- Private sector 1,717,690 2,163,328
Unearned lease income (865,658) (1,011,422)
Allowance for leasing losses (Notes 3e, 12f and 12g) (74,221) (106,554)
OTHER RECEIVABLES 18,229,108 22,803,354
Receivables on guarantees honored (Note 12a-2) 749 1,490
Foreign exchange portfolio (Note 13a) 11,925,580 15,631,092
Income receivable 285,100 222,434
Negotiation and intermediation of securities 256,927 442,993
Specific credits - 1,709
Insurance premiums receivable (Note 4a) 890,543 785,446
Sundry (Note 13b) 4,997,829 5,802,644
Allowance for loan losses (Notes 3e, 12f and 12g) (127,620) (84,454)
OTHER ASSETS (Note 14) 863,100 736,556
Other assets 658,987 631,321
Allowance for losses (242,621) (190,844)
Prepaid expenses (Notes 4a and 14b) 446,734 296,079
LONG-TERM RECEIVABLES 26,916,850 23,902,878
INTERBANK INVESTMENTS (Notes 3b and 9) 212,935 111,688
Interbank deposits 212,935 120,867
Provision for losses - (9,179)
SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS (Notes 3c, 10, 33b and 33c) 6,833,352 6,094,233
Own portfolio 5,722,957 4,857,831
Subject to repurchase agreements 722,149 334,852
Restricted deposits - Brazilian Central Bank 19,460 329,904
Privatization currencies - 16,983
Subject to collateral provided 60,437 461,623
Derivative financial instruments (Notes 3d and 33c) 308,349 93,040
INTERBANK ACCOUNTS (Note 11) 291,871 302,480
Restricted deposits:
- National Housing System - SFH 291,871 302,480
CREDIT OPERATIONS (Notes 3e, 12 and 33b) 12,652,062 12,975,630
Credit operations:
- Public sector 177,732 265,383
- Private sector 13,575,892 13,756,037
Allowance for loan losses (Notes 3e, 12f and 12g) (1,101,562) (1,045,790)
LEASING OPERATIONS (Notes 2, 3e, 12 and 33b) 538,406 522,786
Leasing receivables:
- Private sector 1,188,624 1,245,183
Unearned lease income (601,921) (657,594)
Allowance for leasing losses (Notes 3e, 12f and 12g) (48,297) (64,803)
OTHER RECEIVABLES 6,067,805 3,519,302
Income receivable 2,764 -
Negotiation and intermediation of securities 187 148
Insurance premiums receivable 673 -
Sundry (Note 13b) 6,105,832 3,524,816
Allowance for losses (Notes 3e, 12f and 12g) (41,651) (5,662)
OTHER ASSETS (Note 14) 320,419 376,759
Other assets 34,221 67,756
Allowance for losses (7,321) (34,692)
Prepaid expenses (Notes 4a and 14b) 293,519 343,695
PERMANENT ASSETS 5,069,492 5,669,959
INVESTMENTS (Notes 3h, 15 and 33b) 504,392 566,288
Investments in associated companies - local 369,876 436,067
Other investments 510,764 447,077
Allowance for losses (376,248) (316,856)
PROPERTY AND EQUIPMENT IN USE (Notes 3i and 16) 2,588,535 2,615,481
Buildings in use 1,610,835 1,855,749
Other fixed assets (Note 4a) 3,735,878 3,425,611
Accumulated depreciation (Note 4a) (2,758,178) (2,665,879)
LEASED ASSETS (Note 16) 24,301 36,757
Leased assets 50,475 50,487
Accumulated depreciation (26,174) (13,730)
DEFERRED CHARGES 1,952,264 2,451,433
Organization and expansion costs (Notes 4a and 17b) 1,151,730 997,314
Accumulated amortization (Note 4a) (596,751) (544,379)
Goodwill on acquisition of subsidiaries, net of amortization (Notes 3j and 17a) 1,397,285 1,998,498

T O T A L
164,363,347
140,151,050

The accompanying notes are an integral part of these financial statements

Banco Bradesco S.A.
Consolidated Balance Sheet at September 30 - In thousands of reais (A free translation of the original in Portuguese prepared in conformity with accounting practices adopted in Brazil)
LIABILITIES AND STOCKHOLDERS' EQUITY
 		 2003
 2002
CURRENT LIABILITIES 98,863,914  89,648,806 
DEPOSITS (Notes 3k and 18a) 44,678,414  43,531,329 
Demand deposits 11,240,025  11,448,077 
Savings deposits 20,896,669  20,116,539 
Interbank deposits 411,298  22,986 
Time deposits (Note 33b) 12,130,422  11,943,727 
DEPOSITS RECEIVED UNDER SECURITY REPURCHASE AGREEMENTS (Notes 3k and 18a) 21,754,827  7,227,948 
Own portfolio 965,304  506,560 
Third-party portfolio 20,789,523  6,721,388 
FUNDS FROM ACCEPTANCE AND ISSUANCE OF SECURITIES (Notes 18b and 33b) 4,787,507  4,835,086 
Exchange acceptances -  1,631 
Mortgage notes 839,382  570,109 
Debentures 18,260  94,101 
Securities issued abroad 3,929,865  4,169,245 
INTERBANK ACCOUNTS 320,874  481,406 
Interbank onlendings 348  11,108 
Correspondent banks 320,526  470,298 
INTERDEPARTMENTAL ACCOUNTS 1,152,934  904,497 
Third-party funds in transit 1,152,934  904,497 
BORROWINGS (Notes 19a and 33b) 7,238,221  10,747,239 
Local borrowings - official institutions 2,009  3,280 
Local borrowings - other institutions 72,364  120,532 
Foreign currency borrowings 7,163,848  10,623,427 
LOCAL ONLENDINGS - OFFICIAL INSTITUTIONS (Notes 19b and 33b) 2,190,904  2,418,975 
National treasury 51,665  71,526 
National Bank for Economic and Social Development (BNDES) 852,397  1,330,277 
Federal Savings Bank (CEF) 66,967  19,403 
Government Agency for Machinery and Equipment Financing (FINAME) 1,218,171  989,247 
Other institutions 1,704  8,522 
FOREIGN ONLENDINGS (Notes 19b and 33b) 24,130  55,382 
Foreign onlendings 24,130  55,382 
DERIVATIVE FINANCIAL INSTRUMENTS (Notes 3d and 33) 247,444  1,273,402 
OTHER LIABILITIES 16,468,659  18,173,542 
Collection of taxes and other contributions 983,768  1,191,919 
Foreign exchange portfolio (Note 13a) 5,965,773  8,784,284 
Social and statutory payables 664,850  163,231 
Taxes and social security contributions 1,325,584  1,100,230 
Negotiation and intermediation of securities 246,626  558,071 
Technical reserves for insurance, private pension plans and savings bonds (Note 3g, 4a and 23) 3,371,590  2,174,334 
Subordinated debt (Note 21 and 33b) 65,520  72,031 
Sundry (Note 22) 3,844,948  4,129,442 
LONG-TERM LIABILITIES 31,302,720  25,305,834 
DEPOSITS (Notes 3k and 18a) 13,667,814  12,340,125 
Interbank deposits 6  760 
Time deposits (Note 33b) 13,667,808  12,339,365 
DEPOSITS RECEIVED UNDER SECURITY REPURCHASE AGREEMENTS (Notes 3k and 18a) 1,314,195  1,864 
Own portfolio 1,314,195  1,864 
FUNDS FROM ACCEPTANCE AND ISSUANCE OF SECURITIES (Notes 18b and 33b) 1,153,089  1,003,927 
Mortgage notes 28,552  23,412 
Debentures 1,320  75,417 
Securities issued abroad 1,123,217  905,098 
BORROWINGS (Notes 19a and 33b) 884,665  1,683,023 
Local borrowings - Other institutions 105,089  138,671 
Foreign currency borrowings 779,576  1,544,352 
LOCAL ONLENDINGS - OFFICIAL INSTITUTIONS (Notes 19b and 33b) 4,843,681  4,430,562 
BNDES 2,200,019  2,155,339 
CEF 397,159  428,500 
FINAME 2,246,503  1,846,723 
FOREIGN ONLENDINGS (Notes 19b and 33b) 4,882  19,634 
Foreign onlendings 4,882  19,634 
DERIVATIVE FINANCIAL INSTRUMENTS (Notes 3d and 33) 83,801  368,442 
OTHER LIABILITIES 9,350,593  5,458,257 
Social and statutory payables 7,723  7,927 
Taxes and social security contributions 2,912,812  2,513,092 
Negotiation and intermediation of securities 1,954,716  - 
Subordinated debt (Notes 21 and 33b) 3,416,133  2,313,815 
Sundry (Note 22) 1,059,209  623,423 
TECHNICAL RESERVES FOR INSURANCE, PRIVATE PENSION PLANS AND SAVINGS BONDS (Notes 3g, 4a and 23) 21,089,275  14,426,084 
DEFERRED INCOME 29,627  13,445 
Deferred income 29,627  13,445 
MINORITY INTEREST IN SUBSIDIARY COMPANIES (Note 24) 110,991  256,870 
STOCKHOLDERS' EQUITY (Note 25) 12,966,820  10,500,011 
Capital:
- Local residents 6,383,081  4,904,346 
- Foreign residents 616,919  295,654 
Capital reserves 7,902  7,435 
Revenue reserves 5,717,767  5,648,018 
Mark-to-market adjustment - securities and derivatives 241,151  (273,237)
Treasury stock -  (82,205)
 
STOCKHOLDERS’ EQUITY MANAGED BY THE PARENT COMPANY 13,077,811  10,756,881 
 

T O T A L
164,363,347 
140,151,050 

The accompanying notes are an integral part of these financial statements

Banco Bradesco S.A.
Consolidated Statement of Income for the Period from
January 1 to September 30 - In thousands of reais 		(A free translation of the original in Portuguese prepared in conformity with accounting practices adopted in Brazil)

 		 2003
 2002
INCOME FROM LENDING AND TRADING ACTIVITIES 20,096,802  28,829,649 
 
Credit operations (Note 12i) 9,135,685  14,206,979 
Leasing operations (Note 12i) 229,115  333,677 
Security transactions (Notes 4a and 10f) 5,098,030  10,240,468 
Financial income on insurance, private pension plans and saving
bonds (Notes 4a and 10f) 3,948,012  1,873,867 
Derivative financial instruments (Notes 4a and 33c V) 46,315  (2,381,132)
Foreign exchange transactions (Notes 4a and 13a) 543,159  4,286,964 
Compulsory deposits (Note 11b) 1,096,486  268,826 
 
EXPENSES 12,950,314  22,538,341 
Interest and charges on:
Deposits (Notes 18c) 7,930,326  10,998,543 
Price-level restatement and interest on technical reserves for insurance,
private pension plans and saving bonds (Notes 4a and 18c) 2,419,158  1,262,474 
Borrowings and onlendings (Note 19c) 593,074  8,028,427 
Leasing operations (Note 12i) 9,583  9,282 
Provision for loan losses (Notes 3e, 12f and 12g) 1,998,173  2,239,615 
 
INCOME FROM FINANCIAL INTERMEDIATION 7,146,488  6,291,308 
 
OTHER OPERATING INCOME (EXPENSES) (4,480,128) (4,640,578)
 
Commissions and fees (Note 26) 3,271,853  2,720,635 
Retained insurance premiums, private pension plans and savings
bonds (Notes 3g and 23c) 8,798,192  6,891,316 
Change in technical reserves for insurance, private pension
plans and savings (Notes 3g and 4a) (2,620,458) (1,300,636)
Claims - insurance operations (Note 3g) (3,181,428) (2,677,503)
Savings bond redemptions (Note 3g) (703,963) (551,637)
Insurance and pension plan selling expenses (Note 3g) (553,781) (487,856)
Expenses with pension plan benefits and redemptions (Note 3g) (1,792,620) (1,180,138)
Personnel expenses.(Notes 4a and 27) (3,507,428) (3,028,520)
Other administrative expenses (Note 28) (3,486,224) (2,917,372)
Tax expenses (760,931) (589,742)
Equity in the earnings of associated companies (Note 15c) (25,496) 31,764 
Other operating income (Notes 4a and 29) 1,895,275  1,391,618 
Other operating expenses (Notes 4a and 30) (1,813,119) (2,942,507)
 
OPERATING INCOME 2,666,360  1,650,730 
 
NON-OPERATING INCOME (EXPENSES), NET (Note 31) (767,581) 131,538 
 
INCOME BEFORE TAXES AND PROFIT SHARING 1,898,779  1,782,268 
 
PROVISION FOR INCOME TAX AND SOCIAL CONTRIBUTION (Notes 35a and 35b) (301,028) (465,534)
 
MINORITY INTEREST IN SUBSIDIARIES (6,549) 7,821 
 
NET INCOME 1,591,202  1,324,555 

The accompanying notes are an integral part of these financial statements

Banco Bradesco S.A.
Statement of Changes in Financial Position for the Nine-month
Period Ended September 30 - In thousands of reais 		(A free translation of the original in Portuguese prepared in conformity with accounting practices adopted in Brazil)

 		 2003
 2002
FINANCIAL RESOURCES WERE PROVIDED BY : 26,175,144  41,845,489 
NET INCOME 1,591,202  1,324,555 
ADJUSTMENTS TO NET INCOME 1,391,694  459,458 
Depreciation and amortization 470,032  345,170 
Amortization of goodwill 861,596  170,228 
Change in provision for investments 39,383  436 
Equity in the earnings of associated companies 25,496  (31,764)
Other (4,813) (24,612)
Technical Reserves for Insurance, Savings Bonds and Private Pension Plans 4,296,657  2,688,586 
Change in Deferred Income 13,784  4,425 
Change in Minority Interest (160,073) 117,639 
STOCKHOLDERS 1,296,793  - 
Capital increase through subscription 501,000  - 
Capital increase through incorporation of shares 788,735  - 
Capital Reserves 12  - 
Share premium 7,046  - 
FISCAL INCENTIVE INVESTMENTS 844  - 
THIRD PARTIES:
- Increase in liabilities 17,251,959  32,770,214 
 Deposits 1,983,065  14,787,475 
 Deposits received under security repurchase agreements 7,056,057  - 
 Funds from acceptance and issuance of securities 2,803,754  1,037,603 
 Interbank accounts -  289,379 
 Interdepartmental accounts -  141,992 
 Borrowings and onlendings -  5,320,745 
 Derivative financial instruments -  1,530,244 
 Technical reserves for insurance, private pension plans and saving bonds 1,008,729  58,406 
 Other liabilities 4,400,354  9,604,370 
- Decrease in assets 124,908  3,718,967 
 Securities and derivative financial instruments -  3,648,071 
 Interdepartmental accounts 9,959  - 
 Leasing operations 114,949  - 
 Insurance premiums receivable -  70,896 
- Sale (write-off) of assets and investments 345,502  737,283 
 Non-operating assets 139,470  93,601 
 Property and equipment in use and leased assets 142,822  224,612 
 Investments 33,627  415,617 
 Sale (write-off) of deferred charges 29,583  3,453 
- Interest attributed to own capital and dividends received from associated companies 21,874  24,362 
TOTAL FUNDS PROVIDED 26,726,752  42,383,338 
INTEREST ATTRIBUTED TO OWN CAPITAL AND DIVIDENDS PAID AND/OR DECLARED 999,747  316,249 
ACQUISITION OF OWN SHARES -  115,114 
INVESTMENTS IN: 832,802  1,517,594 
Non-operating assets 128,251  173,827 
Property and equipment in use and leased assets 614,655  882,126 
Investments 89,896  461,641 
DEFERRED CHARGES 544,834  1,452,521 
INCREASE IN ASSETS 22,381,430  32,154,345 
Interbank investments 7,085,704  8,512,864 
Securities and derivative financial instruments 10,670,025  - 
Interbank accounts 127,334  5,454,317 
Interdepartmental accounts -  25,835 
Credit operations 841,344  7,029,619 
Leasing operations -  276 
Other receivables 3,434,552  10,847,439 
Insurance premiums receivable 172,307  - 
Other assets 50,164  283,995 
DECREASE IN LIABILITIES 1,967,939  6,827,515 
Deposits received under security repurchase agreements -  6,827,515 
Interbank accounts 285,822  - 
Interdepartmental accounts 184,795  - 
Borrowings and onlendings 1,251,870  - 
Derivative financial instruments 245,452  - 
DECREASE IN FUNDS AVAILABLE (551,608) (537,849)
CHANGES IN At the beginning of the period 2,785,707  3,085,787 
FINANCIAL At the end of the period 2,234,099  2,547,938 
POSITION Decrease in funds available (551,608) (537,849)

The accompanying notes are an integral part of these financial statements

BANCO BRADESCO S.A.

Notes to the Financial Statements

(A free translation of the original in Portuguese prepared in conformity with accounting practices adopted in Brazil)

Index

The notes to the Financial Statements of Banco Bradesco S.A. are subdivided as follows:

1)  OPERATIONS

2)  PRESENTATION OF THE FINANCIAL STATEMENTS

3)  SIGNIFICANT ACCOUNTING POLICIES

4)  INFORMATION FOR COMPARISON PURPOSES

5)  ADJUSTED BALANCE SHEET AND STATEMENT OF INCOME BY BUSINESS SEGMENT

6)  BALANCE SHEET BY CURRENCY AND EXCHANGE EXPOSURE

7)  BALANCE SHEET BY MATURITY

8)  FUNDS AVAILABLE

9)  INTERBANK INVESTMENTS

10)  SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS

11)  INTERBANK ACCOUNTS – RESTRICTED DEPOSITS

12)  CREDIT OPERATIONS

13)  OTHER RECEIVABLES

14)  OTHER ASSETS

15)  INVESTMENTS

16)  PROPERTY AND EQUIPMENT IN USE AND LEASED ASSETS

17)  DEFERRED CHARGES

18)  DEPOSITS, DEPOSITS RECEIVED UNDER SECURITY REPURCHASE AGREEMENTS AND FUNDS FROM ACCEPTANCE AND ISSUANCE OF SECURITIES

19)  BORROWINGS AND ONLENDINGS

20)  CONTINGENT LIABILITIES

21)  SUBORDINATED DEBT

22)  OTHER LIABILITIES – SUNDRY

23)  INSURANCE OPERATIONS, PRIVATE PENSION PLANS AND SAVINGS BONDS

24)  MINORITY INTEREST IN SUBSIDIARIES

25)  STOCKHOLDERS’ EQUITY (PARENT COMPANY)

26)  COMMISSIONS AND FEES

27)  PERSONNEL EXPENSES

28)  ADMINISTRATIVE EXPENSES

29)  OTHER OPERATING INCOME

30)  OTHER OPERATING EXPENSES

31)  NON-OPERATING INCOME

32)  TRANSACTIONS WITH SUBSIDIARY AND ASSOCIATED COMPANIES (DIRECT AND INDIRECT)

33)  FINANCIAL INSTRUMENTS

34)  EMPLOYEE BENEFITS

35)  INCOME TAX AND SOCIAL CONTRIBUTION

36)  OTHER INFORMATION

1)  OPERATIONS

Banco Bradesco S.A. is a private-sector open-capital company which, operating as a multiple bank, carries out all types of authorized banking activities including foreign exchange transactions through its commercial, investment, consumer financing, housing loan and credit card portfolios. The Bank also operates in a number of other activities through its direct and indirect subsidiary companies, particularly in leasing, consortium management, insurance, savings bond and private pension plan activities. Operations are conducted within the context of the companies comprising the Bradesco Group, which are jointly active in the market.

2)  PRESENTATION OF THE FINANCIAL STATEMENTS

The financial statements of Banco Bradesco S.A. include the financial statements of Banco Bradesco S.A., its foreign branches and its direct and indirect subsidiaries and jointly controlled investments.

The financial statements of Banco Bradesco S.A. were prepared based on accounting policies determined by Brazilian Corporation Law for the recording of operations, as well as the rules and instructions of the National Monetary Council (CMN), Brazilian Central Bank (BACEN), Brazilian Securities Commission (CVM) and Superintendency of Private Insurance (SUSEP), and comprise the financial statements of the leasing companies based on the capital leasing method of accounting, which requires the reclassification of leasing operations to the current-asset and long-term-receivable accounts.

Accordingly, upon consolidation, intercompany investments, account balances, revenue, expenses and unrealized income were eliminated from the financial statements and, in the case of investments which are jointly controlled with other stockholders, asset, liability and income components are included in the consolidated financial statements in proportion to the parent company's percentage capital ownership of each investee. Goodwill on the acquisition of investments in subsidiaries is presented in deferred assets and minority interests in net income and stockholders’ equity are separately disclosed. Exchange variation arising from permanent investments in subsidiaries and foreign branches was allocated to the statement of income accounts in accordance with the corresponding assets and liabilities from which it originated.

The financial statements include estimates and assumptions, such as the calculation of the allowance for loan losses, the estimation of the fair value of certain financial instruments, the quantification of technical reserves for insurance, pension plans and savings bonds and the determination of the useful economic life of specific assets. Actual results could differ from these estimates and assumptions.

We present below the main direct and indirect subsidiaries, including their foreign branches and subsidiaries and jointly controlled investments:

  Activity Area % Ownership
 
  2003 2002
 
 
Financial area – Local
Banco Baneb S.A. (1) Banking 99.94% 99.97%
Banco BCN S.A. Banking 100.00% 100.00%
Banco BEA S.A. (2) Banking - 88.68%
Banco Bilbao Vizcaya Argentaria Brasil S.A. (BBV Banco) (3) (20) Banking 100.00% -
Banco Boavista Interatlântico S.A. Banking 100.00% 100.00%
Banco de Crédito Real de Minas Gerais S.A. Banking 99.99% 99.99%
Banco Finasa de Investimento S.A. (4) (5) Investment Banking 97.40% 81.68%
Banco Finasa S.A. Banking 100.00% 100.00%
Banco Mercantil de São Paulo S.A. (4) Banking 100.00% 84.19%
Bradesco BCN Leasing S.A. Arrendamento Mercantil (6) (7) Leasing 99.97% 99.94%
Bradesco Consórcios Ltda. Consortium Management 99.99 % 99.99%
Bradesco Leasing S.A. Arrendamento Mercantil (8) Leasing - 100.00%
Bradesco S.A. Corretora de Títulos e Valores Mobiliários Brokerage 99.99% 99.99%
BRAM – Bradesco Asset Management Ltda. Asset Management 99.99% 99.99%
Companhia Brasileira de Meios de Pagamento – VISANET (9) (10) (11) (12) Services 39.71% 38.97%
Finasa Leasing Arrendamento Mercantil S.A. (13) Leasing - 84.18%
 
Financial area – Foreign
Banco Bradesco Argentina S.A. (10) (11) Banking 99.99% 99.99%
Banco Bradesco Luxembourg S.A. Banking 99.99% 99.99%
Banco Mercantil de São Paulo International S.A. (4) (10) Banking 100.00% 84.15%
BCN Grand Cayman Banking 100.00% 100.00%
Boavista Grand Cayman Banking 100.00% 100.00%
Bradesco Grand Cayman Banking 100.00% 100.00%
Bradesco New York Banking 100.00% 100.00%
Bradesco Securities, Inc. Brokerage 100.00% 100.00%
Mercantil Grand Cayman (4) Banking 100.00% 84.19%
Mercantil London (10) (14) Banking - 84.19%
BBV Banco Nassau (3) (20) Banking 100.00% -
 
Insurance, pension plan and savings bond area
Atlântica Capitalização S.A. (15) Savings Bonds 99.70% 99.66%
Áurea Seguros S.A. (9) (10) (11) (15) Insurance 27.42% 27.41%
Bradesco Argentina de Seguros S.A. (15) Insurance 99.47% 99.43%
Bradesco Capitalização S.A. (15) Savings Bonds 99.69% 99.65%
Bradesco Saúde S.A. (15) Insurance 99.70% 99.66%
Bradesco Seguros S.A. (15) Insurance 99.70% 99.66%
Bradesco Vida e Previdência S.A. (15) Pension Plans/Insurance 99.69% 99.65%
Finasa Seguradora S.A. (15) (16) Insurance 99.45% 99.37%
Indiana Seguros S.A. (15) Insurance 39.88% 39.86%
Seguradora Brasileira de Crédito à Exportação S.A. (9) (10) (11) Insurance 12.05% 12.05%
União Novo Hamburgo Seguros S.A. (15) (17) Insurance 91.41% 91.19%
 
Other activities
ABS – Empreendimentos Imobiliários, Participações e Serviços S.A. (15) Real Estate 99.12% 99.09%
Bradescor Corretora de Seguros Ltda. Insurance Brokerage 99.99% 99.99%
Cibrasec - Companhia Brasileira de Securitização (9) (10) (11) (12) Credit Acquisition 12.50% 10.00%
CPM Holdings Limited (9) (10) (11) Holding Company 49.00% 49.00%
Latasa S.A. (9) (10) (11) (17) Metal Products 39.74% 39.12%
Pevê Prédios S.A. (18) Real Estate - 76.40%
Scopus Tecnologia S.A. (10) Information Technology 99.99% 99.99%
Serasa S.A. (9) (10) (11) (12) Services 26.31% 20.57%
Smart Club do Brasil Ltda. (9) (19) Services 36.36% 20.00%
União de Comércio e Participações Ltda. Holding Company 99.99% 99.99%

(1)  Percentage ownership decreased following the merger of Banco BEA S.A. in April 2003.

(2)  Became a subsidiary of Banco Baneb S.A. in March 2003 and was merged in April 2003.

(3)  Company and branch acquired in June 2003.

(4)  Percentage ownership increased through acquisition and incorporation of shares of minority stockholders of Banco Mercantil de São Paulo S.A.

(5)  Became a direct subsidiary of Banco Bradesco in May 2003.

(6)  Percentage ownership increased as a result of the merger of Bradesco Leasing in February 2003 and of Finasa Leasing in April 2003 into BCN Leasing.

(7)  Formerly BCN Leasing Arrendamento Mercantil S.A.

(8)  Merged into Bradesco BCN Leasing in February 2003.

(9)  Proportionally consolidated in accordance with CMN Resolution 2723 and CVM Instruction 247.

(10)  Companies audited by other independent auditors in 2002.

(11)  Companies audited by other independent auditors in 2003.

(12)  Percentage ownership increased through acquisition of BBV Banco in June 2003.

(13)  Merged into Bradesco BCN Leasing in April 2003 (see item 7).

(14)  Merged into Mercantil Grand Cayman in November 2002.

(15)  Percentage ownership increased through cancellation of treasury stock of Bradesco Seguros.

(16)  Became a direct subsidiary of Bradesco Seguros in April 2003.

(17)  Percentage ownership increased through acquisition of shares.

(18)  Merged into Banco Mercantil in January 2003.

(19)  Percentage ownership increased through acquisition of quotas in October 2002:

(20)  BBV Banco changed its name to Banco Alvorada in October 2003.

3) SIGNIFICANT ACCOUNTING POLICIES

a) Determination of net income

Income and expenses are recorded on the accrual basis and are prorated daily when of a financial nature. Transactions with prefixed rates are recorded at their redemption amounts and income and expenses for the future period are recorded as a discount to the corresponding asset and liability accounts. Post-fixed or foreign-currency-indexed transactions are adjusted to the balance sheet date. Income and expenses of a financial nature are calculated based on the exponential method, except when relating to discounted notes or to cross-border transactions which are calculated on the straight-line method.

The insurance and coinsurance premiums and income on commissions, net of premiums assigned in coinsurance and reinsurance and corresponding expenses for commission, are appropriated to results upon issuance of the corresponding insurance policies and are deferred for appropriation on a straight-line basis over the terms of the policies, through the recording and reversal of a provision for unearned premiums and deferred selling expenses. The accepted coinsurance and retrocession operations are recorded based on the information received from other companies and the Brazilian Institute of Reinsurers (IRB), respectively.

The revenue from savings bond plans is recognized at the time it is effectively received. The expenses for placement of bonds, classified as “Selling Expenses”, are recorded as they are incurred. Brokerage expenses are recorded at the time the savings bond plan contributions are effectively received. The payment of prizes on winning bonds is recorded as an expense in the month in which the draw takes places.

The private pension plan contributions are recorded in income at the time they are effectively received.

b) Interbank investments

These are recorded at purchase cost, including accrued income up to the balance sheet date, net of loss accrual, where applicable.

c) Securities

Pursuant to BACEN Circular 3068/2001, as from June 30, 2002, securities are classified and recorded as presented below:

Up to June 2002, securities were valued at cost of acquisition, plus accrued earnings and less of the provision for adjustment to probable realizable value.

d) Derivative financial instruments (assets and liabilities)

Pursuant to BACEN Circular 3082/2002 and complementary regulations, the derivative financial instruments are classified based on management’s intended use thereof on the date of the operation and whether it was carried out for hedging purposes or not.

The derivative financial instruments which do not comply with the hedging criteria established by BACEN, particularly derivatives used to manage general exposure to risk, are recorded at market values, with the corresponding mark-to-market adjustments taken directly to income for the period.

The derivative financial instruments used for protection against exposure to risk or for changing the characteristics of financial assets and liabilities and which are: (i) significantly co-related in relation to the adjustment of their market value to the market value of the hedged item, at both the start and over the duration of the contract; and (ii) considered to be effective in mitigating the risk associated with the exposure which is to be protected, are classified as hedges in accordance with their specific nature:

e) Credit and leasing operations and allowance for loan and leasing losses

The credit and leasing operations are classified in compliance with: (i) the parameters established by CMN Resolution 2682/1999 at nine levels from “AA” (minimum risk) to “H” (maximum risk); and (ii) management’s risk level assessment. This assessment, which is carried out on a periodic basis, considers current economic conditions, and past loan loss experience, as well as specific and general risks relating to operations, borrowers and guarantors. The length of the delay in payment defined in CMN Resolution 2682/1999 is also taken into account for customer risk classification purposes as follows:
Length of Delay Customer Classification
• No delay AA
• Up to 14 days A
• From 15 to 30 days B
• From 31 to 60 days C
• From 61 to 90 days D
• From 91 to 120 days E
• From 121 to 150 days F
• From 151 to 180 days G
• More than 180 days H

The accrual of credit operations past due up to 60 days is recorded in income on credit operations and subsequent to the 61st day, in unearned income.

Past-due operations classified at “H” level remain at this level for six months, subsequent to which time they are written off against the existing allowance and controlled over a five-year period in memorandum accounts and no longer presented in the balance sheet.

Renegotiated operations are maintained with a maximum classification equal to their prior classification. Renegotiated operations, already written off against the allowance and which are recorded in memorandum accounts are classified at “H” level and any gains derived from their renegotiation are recognized as revenue only when they are effectively received.

In the case of mortgage loans, the contractual capitalization period (monthly or quarterly) for income appropriation purposes complies with applicable legislation and end-borrower financings are adjusted to the present value of the installments receivable.

The allowance for loan losses is recorded at an amount considered sufficient to cover estimated losses and is based upon current economic conditions, past loan loss experience, specific and general portfolio risks and on BACEN requirements and instructions (Note 12 f, g).

f) Income tax and social contribution (asset and liability)

Deferred income tax and social contribution calculated on tax losses, negative basis of social contribution and temporary additions are recorded in “Other receivables - sundry”, and the provision for deferred income tax on excess depreciation and mark-to-market adjustments is recorded in “Other liabilities – taxes and social security contributions”. Only deferred tax assets which have already acquired tax deductibility rights are recorded on amortization of goodwill.

Deferred tax assets on temporary additions are realized upon use and/or reversal of the corresponding provisions on which they were recorded. Deferred tax assets on tax losses and negative basis of social contribution will be realized as taxable income is generated (Note 35).

The provision for federal income tax is calculated at the standard rate of 15% of taxable income, plus an additional rate of 10% for income over established limits. The provision for social contribution is recorded at the rate of 9% of pre-tax income. Provisions were recorded for other taxes and social contributions in accordance with specific applicable legislation.

g) Technical reserves relating to insurance, pension plan and savings bond activities

Provision for unearned premiums

These are recorded at the amount of that portion of the insurance premiums issued/retained corresponding to the unexpired risk periods of the insurance contracts, in accordance with the criteria determined by SUSEP standards.

Benefits to be granted and benefits granted

Mathematical reserves comprise the amount of the liabilities assumed under the form of income, pension and savings plans and are calculated based on the financial method determined in the contract under the responsibility of a legally qualified actuary registered with the Brazilian Institute of Actuaries (IBA). The mathematical reserves comprise the present value of future benefits estimated based on actuarial methods and assumptions. The provision for benefits to be granted comprises participants whose receipt of benefits has not yet commenced and the provision for benefits granted comprises participants who are currently receiving benefits.

Savings Bonds – mathematical reserves

These are recorded in conformity with the technical notes approved by SUSEP, based on a variable percentage applicable to the amounts effectively received.

Unsettled claims and IBNR

The provision for payment of unsettled claims is recorded based on estimated probable payments, net of recoveries and adjusted for price-level restatement up to the balance sheet date. The reserve for claims incurred but not reported (IBNR) is calculated on an actuarial basis to quantify the volume and amount of the claims incurred, but which have not yet been reported to the insurance companies by the policyholders/beneficiaries.

h) Investments

Significant investments in subsidiaries, associated companies and jointly controlled investments are recorded on the equity method. The financial statements of the foreign branches and subsidiaries are adjusted to comply with the accounting practices adopted in Brazil, translated into reais and their related effects recognized in income for the period.

The exchange membership certificates of Stock Exchanges, the Center for the Financial Clearance and Custody of Private Securities (CETIP) and the Mercantile and Futures Exchange (BM&F) were recorded at net book value and fiscal incentives and other investments were recorded at cost, plus restatements through December 31, 1995, net of the provision for loss, where applicable.

i) Property and equipment in use

Property and equipment in use is stated at cost plus restatements through December 31, 1995, net of the corresponding accumulated depreciation, calculated on the straight-line method at annual rates which take into consideration the economic useful lives of the assets as follows: buildings in use - 4%; furniture and fixtures and machinery and equipment - 10%; data processing systems - 20% to 50%; and transport systems - 20%.

j) Deferred charges

Deferred charges are recorded at cost of acquisition or formation, net of the corresponding accumulated amortization of 20% to 50% per annum, calculated on the straight-line method.

Goodwill on the acquisition of investments in subsidiary companies, based on expected future results, is amortized at rates of 10% to 20% per annum and is presented within deferred charges.

k) Deposits and deposits received under security repurchase agreements

These are stated at the amount of the liabilities and include related charges up to the balance sheet date, on a daily pro rata basis.

l) Other assets and liabilities

The assets are stated at their realizable amounts, including, where applicable, related income and monetary (on a daily pro rata basis) and exchange variations, less provisions when deemed appropriate. The liabilities include known or estimated amounts, plus related charges and monetary (on a pro rata basis) and exchange variations.

4) INFORMATION FOR COMPARISON PURPOSES

a) Reclassification

In order to facilitate comparison of the financial statements, certain September 30, 2002 account balances were reclassified in line with the accounting procedures/classification used at September 30, 2003.

At September 30, 2002 - In thousands of reais
 
BALANCE SHEET Prior disclosure Reclassification Reclassified balance
 
ASSETS
Current assets and long-term receivables 134,481,091 - 134,481,091
Other receivables 26,518,248 (195,592) 26,322,656
Insurance premiums receivables (1) 981,038 (195,592) 785,446
Other assets 917,723 195,592 1,113,315
Prepaid expenses (1) 444,182 195,592 639,774
Permanent assets 5,669,959 - 5,669,959
Property and equipment in use 2,602,555 12,926 2,615,481
Other fixed assets (2) 3,406,510 19,101 3,425,611
Accumulated depreciation (2) (2,659,704) (6,175) (2,665,879)
Deferred charges 2,464,359 (12,926) 2,451,433
Organization and expansion costs (2) 1,016,415 (19,101) 997,314
Accumulated amortization (2) (550,554) 6,175 (544,379)
Total assets 140,151,050 - 140,151,050
 
LIABILITIES
Current and long-term liabilities (3) 113,844,505 1,110,135 114,954,640
Other liabilities (3) 22,521,664 1,110,135 23,631,799
Technical reserves for insurance, private pension plans and savings bonds (3) 1,064,199 1,110,135 2,174,334
Technical reserves for insurance, private pension plans and savings bonds (3) 15,536,219 (1,110,135) 14,426,084
Total liabilities 140,151,050 - 140,151,050



Nine-month period – In thousands of reais
 
STATEMENT OF INCOME Prior disclosure Reclassification Reclassified balance
 
Income from lending and trading activities 28,892,974 (63,325) 28,829,649
Income on security transactions (4) (8) 12,106,952 (1,866,484) 10,240,468
Financial income on insurance, private pension plans and savings bonds (8) - 1,873,867 1,873,867
Derivative financial instruments (4) (2,373,749) (7,383) (2,381,132)
Foreign exchange transactions (5) 4,350,289 (63,325) 4,286,964
 
Expenses 21,275,867 1,262,474 22,538,341
Price-level restatement and interest on technical reserves of insurance, private pension plans and savings bonds (6) - 1,262,474 1,262,474
 
Income from financial intermediation 7,617,107 (1,325,799) 6,291,308
 
Other operating income (expenses) (5,867,084) 1,226,506 (4,640,578)
Change in technical reserves for insurance, private pension plans and savings bonds (6) (2,563,110) 1,262,474 (1,300,636)
Personnel expenses (7) (2,929,227) (99,293) (3,028,520)
Other operating income (5) 1,330,552 61,066 1,391,618
Other operating expenses (5) (2,944,766) 2,259 (2,942,507)
 
Operating income (expense) 1,750,023 (99,293) 1,650,730
 
Income before taxes and profit sharing 1,881,561 (99,293) 1,782,268
Employee profit sharing (7) (99,293) 99,293 -
Net income 1,324,555 - 1,324,555

(1)  Transfer of other receivables – insurance premiums receivable, to other assets – prepaid expenses, related to the deferral of insurance brokerage commission.

(2)  Transfer of expenses for leasehold improvements and corresponding accumulated amortization from deferred charges to property and equipment in use.

(3)  Reclassified in compliance with SUSEP’s new plan of accounts.

(4)  Transfer of income on securities’ transactions to income on derivative financial instruments, pursuant to BACEN Circulars 3068 and 3082.

(5)  Transfer of income from price-level restatement of assets of Banco Bradesco Argentina S.A.

(6)  Transfer of price-level restatement of technical reserves for insurance, private pension plans and savings bonds to expenses for price-level restatement and interest on technical reserves of insurance, private pension plans and savings bonds.

(7)  Transfer of expenses for employee profit sharing to personnel expenses.

(8)  New opening for financial income on insurance, private pension plans and savings bonds.

b)  During the first half of 2003, Bradesco acquired the share control of BBV Banco and its subsidiaries. On September 19, 2003, Bradesco and BBV entered into an agreement for the transfer of assets and rights and assumption of debt, whereby Bradesco received assets in the amount of R$ 3,274,079 thousand and assumed liabilities in the amount of R$ 4,683,169 thousand. We present below the main balance sheet of the Bank and its subsidiaries at June 30, 2003:

  In thousands of reais
 
  BBV Banco
and subsidiaries
 
  June 30, 2003
 
ASSETS  
Current assets and long-term receivables 9,875,795
Funds available 64,420
Interbank investments 3,215,674
Securities and derivative financial instruments 1,706,620
Interbank and interdepartmental accounts 410,034
Credit and leasing operations 3,371,270
Other receivables and other assets 1,107,777
Permanent assets 194,356
- Investments 41,842
- Property and equipment in use 149,827
- Deferred charges 2,687
Total 10,070,151
LIABILITIES
Current and long-term liabilities 7,754,018
Demand, time and interbank deposits 2,887,114
Savings deposits 581,557
Deposits received under security repurchase agreements and funds from acceptance and issuance of securities 2,371,948
Interbank and interdepartmental accounts 20,646
Borrowings and onlendings 1,253,927
Derivative financial instruments 13,929
Other liabilities 624,897
Deferred income 2,053
Stockholders' equity 2,314,080
Total 10,070,151

5) ADJUSTED BALANCE SHEET AND STATEMENT OF INCOME BY BUSINESS SEGMENT

The consolidated balance sheet and statement of income, by business segment, are presented below at September 30, 2003 in accordance with the Chart of Accounts for National Financial System Institutions (COSIF).

a) Balance sheet

  At September 30 - In thousands of reais
 
  Financial (1) (2) Insurance Group (2) (3) Other activities (2) Amount eliminated (4) Total consolidated
 
  Local Foreign Local Foreign  
 
 
ASSETS
Current assets and long-term receivables 119,763,719 16,295,382 29,123,959 46,073 667,469 (6,602,747) 159,293,855
Funds available 2,072,457 77,612 142,871 2,456 6,830 (68,127) 2,234,099
Interbank investments 25,655,946 2,972,585 36,931 - - (107,002) 28,558,460
Securities and derivative financial instruments 17,621,686 5,192,120 26,527,104 38,013 159,060 (1,632,505) 47,905,478
Interbank and interdepartmental accounts 13,247,630 4,916 - - - - 13,252,546
Credit and leasing operations 38,707,543 7,835,079 - - - (4,679,782) 41,862,840
Other receivables and other assets 22,458,457 213,070 2,417,053 5,604 501,579 (115,331) 25,480,432
Permanent assets 11,224,098 13,146 829,629 440 525,892 (7,523,713) 5,069,492
Investments (5) 7,639,867 - 359,628 - 28,610 (7,523,713) 504,392
Property and equipment in use and leased assets 1,889,567 11,390 298,270 435 413,174 - 2,612,836
Deferred charges 1,694,664 1,756 171,731 5 84,108 - 1,952,264
Total 130,987,817 16,308,528 29,953,588 46,513 1,193,361 (14,126,460) 164,363,347
LIABILITIES
Current and long-term liabilities 117,978,242 12,498,568 5,667,042 31,014 594,515 (6,602,747) 130,166,634
Deposits 53,828,064 4,716,031 - - - (197,867) 58,346,228
Deposits received under security repurchase agreements 22,166,581 902,441 - - - - 23,069,022
Funds from the acceptance and issuance of securities 7,711,854 645,214 - - 1,320 (2,417,792) 5,940,596
Interbank and interdepartmental accounts 1,473,003 805 - - - - 1,473,808
Borrowings and onlendings 15,501,699 3,373,722 - - 172,431 (3,861,369) 15,186,483
Derivative financial instruments 314,006 623 - - 16,616 - 331,245
Other liabilities:
- Subordinated debt 2,628,915 852,738 - - - - 3,481,653
- Other 14,354,120 2,006,994 5,667,042 31,014 404,148 (125,719) 22,337,599
Technical reserves for insurance, private pension plans and savings bonds - - 21,089,275 - - - 21,089,275
Deferred income 29,513 65 - - 49 - 29,627
Minority interest and stockholders’ equity in subsidiaries 13,242 3,809,895 3,197,271 15,499 598,797 (7,523,713) 110,991
Stockholders' equity of the parent company 12,966,820 - - - - - 12,966,820
Total in 2003 130,987,817 16,308,528 29,953,588 46,513 1,193,361 (14,126,460) 164,363,347
Total in 2002 115,907,954 17,003,443 22,377,187 64,324 1,657,009 (16,858,867) 140,151,050

b) Statement of income

  At September 30 - In thousands of reais
 
  Financial (1) (2) Insurance Group (2) (3) Other activities (2) Amount eliminated (4) Total consolidated
 
  Local Foreign Local Foreign  
 
 
Income from lending and trading activities 15,837,124 499,984 3,951,532 1,212 17,322 (210,372) 20,096,802
Expenses for lending and trading activities 10,467,452 272,877 2,419,158 - (164) (209,009 12,950,314
Income from financial intermediation 5,369,672 227,107 1,532,374 1,212 17,486 (1,363) 7,146,488
Other operating income (expenses) (5) (3,670,107) (62,898) (815,150) 760 65,234 2,033 (4,480,128)
Operating income (expenses) 1,699,565 164,209 717,224 1,972 82,720 670 2,666,360
Non-operating income (expenses), net (740,120) 3,485 (36,513) (10) 6,247 (670) (767,581)
Income before taxes and profit sharing 959,445 167,694 680,711 1,962 88,967 - 1,898,779
Provision for income tax and social contribution (37,854) (3,694) (227,981) (73) (31,426) - (301,028)
Minority interest in subsidiaries (3,983) - (1,250) - (1,316) - (6,549)
Net income in 2003 917,608 164,000 451,480 1,889 56,225 - 1,591,202
Net income in 2002 169,219 615,759 535,218 (4,757) 9,116 - 1,324,555


(1)  The financial segment comprises financial institutions and holding companies which are mainly responsible for managing financial resources, as well as credit card administration and asset management companies.

(2)  Asset and liability and income and expense account balances are eliminated between companies from the same segment.

(3)  The Insurance Group segment comprises insurance, private pension plan and savings bond companies.

(4)  Amounts eliminated between companies from different segments.

(5)  Investments and equity in earnings of associated companies are allocated to the segment to which the companies pertain.


6) BALANCE SHEET BY CURRENCY AND EXCHANGE EXPOSURE

We present below the consolidated account balances by currency and exchange exposure, at September 30, 2003:

  At September 30 - In thousands of reais
 
  Balance Sheet Currency
 
  Local Foreign (1)
 
ASSETS
Current assets and long-term receivables 159,293,855 133,062,737 26,231,118
Funds available 2,234,099 1,578,507 655,592
Interbank investments 28,558,460 25,519,677 3,038,783
Securities and derivative financial instruments 47,905,478 41,388,092 6,517,386
Interbank and interdepartmental accounts 13,252,546 13,247,630 4,916
Credit and leasing operations 41,862,840 35,333,853 6,528,987
Other receivables and other assets 25,480,432 15,994,978 9,485,454
Permanent assets 5,069,492 5,055,906 13,586
Investments 504,392 504,392 -
Property and equipment in use and leased assets 2,612,836 2,601,011 11,825
Deferred charges 1,952,264 1,950,503 1,761
Total 164,363,347 138,118,643 26,244,704
LIABILITIES
Current and long-term liabilities 130,166,634 104,338,767 25,827,867
Deposits 58,346,228 53,670,040 4,676,188
Deposits received under security repurchase agreements 23,069,022 22,166,581 902,441
Funds from acceptance and issuance of securities 5,940,596 887,514 5,053,082
Interbank and interdepartmental accounts 1,473,808 777,190 696,618
Borrowings and onlendings 15,186,483 6,427,660 8,758,823
Derivative financial instruments 331,245 330,622 623
Other liabilities:
- Subordinated debt 3,481,653 2,628,915 852,738
- Other 22,337,599 17,450,245 4,887,354
Technical reserves for insurance, private pension plans and savings bonds 21,089,275 21,089,275 -
Deferred income 29,627 29,627 -
Minority interest in subsidiaries 110,991 110,991 -
Stockholders' equity 12,966,820 12,966,820 -
Total 164,363,347 138,535,480 25,827,867
Net position of assets and liabilities 416,837
Net position of derivatives (2) (3) 2,411,431
Other memorandum accounts, net (4) (532,433)
Net exchange position (asset) (5) 2,295,835

(1)  Amounts expressed and/or indexed mainly in USD.

(2)  Excluding derivative operations maturing in D +1, to be settled in currency at September 30, 2003 price levels.

(3)  Derivatives are adjusted to market value.

(4)  Leasing commitments and others controlled in memorandum accounts.

(5)  Excluding investments in foreign branches and subsidiaries (Note 15a), the net exchange position would be negative in the amount of R$ 1,576,766 thousand (liability).

7) BALANCE SHEET BY MATURITY

We present below the consolidated balance sheet at September 30, 2003, by days to maturity, based on accounting classification:

  At September 30 - In thousands of reais
 
Up to 30 days From 31 to 180 days From 181 to 360 More than 360 days Indeterminate Total
ASSETS
Current assets and long-term receivables 103,936,933 17,184,005 11,256,067 26,916,850 - 159,293,855
Funds available 2,234,099 - - - - 2,234,099
Interbank investments 27,655,089 383,071 307,365 212,935 - 28,558,460
Securities and derivative financial instruments (1) 36,925,528 1,570,509 2,576,089 6,833,352 - 47,905,478
Interbank and interdepartmental accounts 12,949,865 4,875 5,935 291,871 - 13,252,546
Credit and leasing operations 8,446,434 13,825,475 6,400,463 13,190,468 - 41,862,840
Other receivables and other assets 15,725,918 1,400,075 1,966,215 6,388,224 - 25,480,432
Permanent assets 50,839 254,191 305,029 3,351,558 1,107,875 5,069,492
Investments - - - - 504,392 504,392
Property and equipment in use and leased assets 21,158 105,788 126,945 1,755,462 603,483 2,612,836
Deferred charges 29,681 148,403 178,084 1,596,096 - 1,952,264
Total 103,987,772 17,438,196 11,561,096 30,268,408 1,107,875 164,363,347
 
LIABILITIES
Current and long-term liabilities 77,228,268 12,316,956 9,318,690 31,302,720 - 130,166,634
Deposits (2) 37,510,657 3,770,213 3,397,544 13,667,814 - 58,346,228
Deposits received under security repurchase agreements 21,704,247 17,498 33,082 1,314,195 - 23,069,022
Funds from the acceptance and issuance of securities 1,016,466 2,105,692 1,665,349 1,153,089 - 5,940,596
Interbank and interdepartmental accounts 1,473,808 - - - - 1,473,808
Borrowings and onlendings 1,566,552 4,770,371 3,116,332 5,733,228 - 15,186,483
Derivative financial instruments 206,385 18,443 22,616 83,801 - 331,245
Other liabilities:
- Subordinated debt 31,112 34,408 - 3,416,133 - 3,481,653
- Other 13,719,041 1,600,331 1,083,767 5,934,460 - 22,337,599
Technical reserves for insurance, private pension plans and savings bonds - - - 21,089,275 - 21,089,275
Deferred income 28,826 801 - - - 29,627
Minority interest in subsidiaries - - - - 110,991 110,991
Stockholders' equity - - - - 12,966,820 12,966,820
Total in 2003 77,257,094 12,317,757 9,318,690 52,391,995 13,077,811 164,363,347
 
Accumulated net assets in 2003 26,730,678 31,851,117 34,093,523 11,969,936 - -
Accumulated net assets in 2002 15,324,055 19,363,938 22,018,170 5,086,922 - -

(1) Investment fund applications are classified as up to 30 days.

(2) Demand and savings account deposits are classified as up to 30 days without considering average historical turnover.

8) FUNDS AVAILABLE

a) Funds available are comprised by:

At September 30 – In thousands of reais
 
  2003 2002
 
Local currency 1,577,679 1,291,851
Foreign currency 655,592 1,255,477
Investments in gold 828 610
Total 2,234,099 2,547,938

b) Statement of cash flows

As additional information for readers, we present below the statement of cash flows prepared based on the indirect method. The information is presented in conformity with the definitions set forth in the Chart of Accounts for National Financial System Institutions (COSIF).

Nine-month period - In thousands of reais
 
  2003 2002
 
OPERATING ACTIVITIES
NET INCOME 1,591,202  1,324,555 
ADJUSTMENTS TO RECONCILE NET INCOME TO CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
Provision for loan losses 1,998,173  2,239,615 
(Reversal of) Provision for losses on short-term interbank investments, securities and
investments 30,195  103,569 
Variation, price-level restatement and interest in technical reserves for insurance, private
pension plans and savings bonds 5,039,616  2,563,110 
Depreciation and amortization 470,032  345,170 
Amortization of goodwill (Notes 30 and 31) 861,596  170,228 
Results of investments accounted for by the equity method 25,496  (31,764)
Other (4,813) (24,612)
CHANGE IN ASSETS AND LIABILITIES:
Decrease (increase) in short-term interbank investments (7,076,516) (8,523,177)
Decrease (increase) in securities and derivative financial instruments (10,915,477) 5,085,495 
Decrease (increase) in interbank accounts (863,949) (773,203)
Decrease (increase) in interdepartmental accounts (174,836) 116,157 
Decrease (increase) in credit operations (1,181,341) (7,626,537)
Decrease (increase) in leasing operations 146,414  (23,245)
Decrease (increase) in insurance premiums receivable (172,307) 70,896 
Decrease (increase) in other receivables (3,441,076) (10,869,948)
Decrease (increase) in other assets (50,164) (283,995)
Amounts written off against the allowance for loan losses (1,683,117) (1,597,219)
Increase (decrease) in technical reserves for insurance, private pension plans and savings
bonds 265,770  183,882 
Increase (decrease) in other liabilities 4,400,354  9,604,370 
Increase (decrease) in deferred income 13,784  4,425 
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (10,720,964) (7,942,228)
INVESTING ACTIVITIES
Decrease (increase) in compulsory deposits – Brazilian Central Bank 450,793  (4,391,735)
Sale of non-operating assets 139,470  93,601 
Sale of investments 33,627  415,617 
Sale of property and equipment in use and leased assets 142,822  224,612 
Decrease in deferred charges 29,583  3,453 
Acquisition of non-operating assets (128,251) (173,827)
Acquisition of investments (89,896) (461,641)
Acquisition of property and equipment in use and leased assets (614,655) (882,126)
Deferred charges (544,834) (1,452,521)
Interest attributed to own capital / dividends received 21,874  24,362 
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (559,467) (6,600,205)
FINANCING ACTIVITIES
Increase (decrease) in deposits 1,983,065  14,787,475 
Increase (decrease) in deposits received from security repurchase agreements 7,056,057  (6,827,515)
Increase (decrease) in funds from issuance of securities 2,803,754  1,037,603 
Increase (decrease) in borrowings and onlendings (1,251,870) 5,320,745 
Capital increase through subscription 501,000  - 
Capital increase through incorporation of shares 788,735  - 
Capital reserves 12  - 
Share premium 7,046  - 
Fiscal incentive investments 844  - 
Interest attributed to own capital and dividends paid and/or accrued (999,747) (316,249)
Acquisition of own shares -  (115,114)
Variation in minority interest (160,073) 117,639 
 
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 10,728,823  14,004,584 
DECREASE IN FUNDS AVAILABLE, NET (551,608) (537,849)

CHANGE IN FUNDS
AVAILABLE, NET 		At the beginning of the period 2,785,707  3,085,787 
At the end of the period 2,234,099  2,547,938 
Decrease in funds available, net (551,608) (537,849)

9) INTERBANK INVESTMENTS

a) Interbank investments are presented below with their corresponding days to maturity:

At September 30 - In thousands of reais
 
Up to
30 days 		From 31 to
180 days 		From 181 to
360 days 		More than
360 days 		Total
 
Securities purchased under resale agreements:          
Own portfolio position 3,679,855  -  -  -  3,679,855 
• National Treasury Bonds 1,723,896  -  -  -  1,723,896 
• Financial Treasury Notes 1,955,228  -  -  -  1,955,228 
• Others 731  -  -  -  731 
Third-party portfolio position 20,826,801  -  -  -  20,826,801 
• National Treasury Bonds 10,020,331  -  -  -  10,020,331 
• Financial Treasury Notes 10,806,470  -  -  -  10,806,470 
Subtotal 24,506,656  -  -  -  24,506,656 
 
Interbank deposits:
• Interbank deposits 3,148,439  383,117  307,366  212,935  4,051,857 
• Provision for loss (6) (46) (1) -  (53)
Subtotal 3,148,433  383,071  307,365  212,935  4,051,804 
 
Total in 2003 27,655,089  383,071  307,365  212,935  28,558,460 
% 96.8  1.3  1.1  0.8  100.0 
Total in 2002 11,667,328  363,524  237,643  111,688  12,380,183 
% 94.3  2.9  1.9  0.9  100.0 

b) Income from interbank investments

We present below income from interbank investments, classified in the statement of income as income on security transactions:

Nine-month period – In thousands of reais
----------------------------
  2003 2002
Income on investments in purchase and sale commitments:
Own position 293,555  17,364 
Third-party position 2,839,442  458,658 
Subtotal 3,132,997  476,022 
 
Interbank deposits 232,583  158,042 
 
Total (Note 10f) 3,365,580  634,064 

10) SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS

a) Summary of the consolidated classification of securities by business segment and issuer

At September 30 - In thousands of reais
Financial Insurance/
Savings bond 		Pension plan Other
activities 		2003 % 2002 %
Trading Securities 16,184,471  2,861,254  18,211,396  63,989  37,321,110  77.9 18,947,000  50.4
- Government securities 14,109,449  2,643,889  17,766,922  44,969  34,565,229  72.1 17,628,654  46.9
- Corporate bonds 2,075,022  217,365  444,474  19,020  2,755,881  5.8 1,318,346  3.5
Securities available for sale 2,305,572  1,441,031  1,300,976  68,606  5,116,185  10.7 7,357,563  19.6
- Government securities 1,189,439  941,549  -  -  2,130,988  4.5 3,732,602  9.9
- Corporate bonds 1,116,133  499,482  1,300,976  68,606  2,985,197  6.2 3,624,961  9.7
Securities held to maturity 2,064,290  -  2,672,706  -  4,736,996  9.9 10,838,001  28.8
- Government securities 2,064,290  -  2,672,706  -  4,736,996  9.9 10,838,001  28.8
Derivative financial instruments 730,328  -  -  859  731,187  1.5 447,089  1.2
- Corporate bonds 730,328  -  -  859  731,187  1.5 447,089  1.2
 
Total in 2003 21,284,661  4,302,285  22,185,078  133,454  47,905,478  100.0 37,589,653  100.0
- Government securities 17,363,178  3,585,438  20,439,628  44,969  41,433,213  86.5 32,199,257  85.7
- Corporate bonds 3,921,483  716,847  1,745,450  88,485  6,472,265  13.5 5,390,396  14.3

b) Consolidated portfolio composition by issuer

At September 30 - In thousands of reais
SECURITIES (1) Up to
30 days 		From 31 to
180 days 		From 181 to
360 days 		More than
360 days 		Market/book
value (2)(3)(4) 		Retated Cost Unrealized
gain (loss) 		Unrealized gain (loss), net of tax effects
GOVERNMENT SECURITIES 563,519  2,986,066  7,264,808 30,618,820 41,433,213  41,414,426  18,787  12,400 
Financial Treasury Notes 382,642  1,621,770  4,931,803 14,439,731 21,375,946  21,339,850  36,096  23,824 
National Treasury Bonds 22,611  4,224  1,756,307  6,591,126  8,374,268  8,343,478  30,790  20,322 
Federal Treasury Notes 19,873  540,898  233,229  6,739,443  7,533,443  7,528,719  4,724  3,118 
Brazilian Foreign Debt Notes 100,727  42  95,000  2,673,121  2,868,890  2,882,659  (13,769) (9,088)
Central Bank Notes -  792,343  225,573  56,115  1,074,031  1,074,341  (310) (205)
Other 37,666  26,789  22,896  119,284  206,635  245,379  (38,744) (25,571)
 
CORPORATE BONDS 2,584,482  179,045  316,431  3,392,307  6,472,265  5,882,854  589,411  389,011 
Shares 2,022,814  -  -  -  2,022,814  1,581,658  441,156  291,163 
Debentures 36,899  14,652  77,867  1,450,313  1,579,731  1,621,796  (42,065) (27,763)
Certificates of Bank Deposit 165,166  59,636  9,288  815,749  1,049,839  1,050,247  (408) (269)
Derivative financial instruments 184,463  74,126  164,249  308,349  731,187  583,119  148,068  97,725 
Foreign Securities 77,694  3,283  53,303  516,625  650,905  597,646  53,259  35,151 
Promissory Notes 14,815  16,245  -  -  31,060  31,206  (146) (97)
Other 82,631  11,103  11,724  301,271  406,729  417,182  (10,453) (6,899)
 
TOTAL in 2003 3,148,001  3,165,111  7,581,239 34,011,127 47,905,478  47,297,280  608,198  401,411 
 
TOTAL in 2002 9,308,500  8,747,076  4,145,381 15,388,696 37,589,653  38,354,302  (764,649) (504,669)

c) Consolidated classification by category, days to maturity and business segment

At September 30 - In thousands of reais
SECURITIES (1) Up to
30 days 		From 31 to
180 days 		From 181 to
360 days 		More than
360 days 		Market/book
value (2)(3)(4) 		Retated Cost Unrealized
gain (loss) 		Unrealized gain (loss), net of tax effects
I . TRADING SECURITIES 953,886  2,181,147  6,960,013  27,226,064  37,321,110  37,233,133  87,977  58,065 
 
- Financial 296,239  691,635  2,297,094  12,899,503  16,184,471  16,106,483  77,988  51,472 
 
National Treasury Bonds 16,248  4,205  1,746,796  5,921,020  7,688,269  7,657,479  30,790  20,322 
Financial Treasury Notes 66,056  102,024  97,693  3,667,592  3,933,365  3,895,450  37,915  25,024 
Federal Treasury Notes 19,871  540,898  123,952  584,034  1,268,755  1,267,516  1,239  818 
Debentures 6,234  521  74,601  919,036  1,000,392  1,000,392  -  - 
Brazilian Foreign Debt Notes 37,736  -  82,178  805,147  925,061  915,809  9,252  6,106 
Certificates of Bank Deposit 3,804  1,118  1,494  765,689  772,105  772,105  -  - 
Foreign securities 69,422  3,276  53,303  120,324  246,325  209,488  36,837  24,312 
Other 76,868  39,593  117,077  116,661  350,199  388,244  (38,045) (25,110)
 
- Insurance and Savings Bond 303,876  508,002  372,571  1,676,805  2,861,254  2,861,208  46  30 
 
Financial Treasury Notes 129,218  506,174  362,591  939,689  1,937,672  1,937,626  46  30 
National Treasury Bonds 2,305  19  7,389  670,106  679,819  679,819  -  - 
Shares 137,667  -  -  -  137,667  137,667  -  - 
Other 34,686  1,809  2,591  67,010  106,096  106,096  -  - 
 
- Private Pension Plan 322,118  970,441  4,281,137  12,637,700  18,211,396  18,201,460  9,936  6,558 
 
Financial Treasury Notes 119,518  964,405  4,272,964  9,339,104  14,695,991  14,686,055  9,936  6,558 
Federal Treasury Bonds 2  -  359  3,069,168  3,069,529  3,069,529  -  - 
Shares 199,502  -  -  -  199,502  199,502  -  - 
Other 3,096  6,036  7,814  229,428  246,374  246,374  -  - 
 
- Other activities 31,653  11,069  9,211  12,056  63,989  63,982  7  5 
 
Financial Treasury Notes 9,138  10,865  7,532  11,699  39,234  39,227  7  5 
Funds of other institutions 17,167  -  -  74  17,241  17,241  -  - 
Other 5,348  204  1,679  283  7,514  7,514  -  - 
 
II. SECURITIES AVAILABLE FOR SALE 1,982,598  117,495  240,271  2,775,821  5,116,185  4,744,032  372,153  245,621 
 
- Financial 526,234  61,839  47,367  1,670,132  2,305,572  2,272,838  32,734  21,604 
 
Brazilian Foreign Debt Notes 35,937  42  12,822  919,685  968,486  991,507  (23,021) (15,194)
Shares 439,303  -  -  -  439,303  335,608  103,695  68,439 
Foreign securities 8,272  7  -  396,301  404,580  388,158  16,422  10,838 
Federal Treasury Notes -  -  -  134,455  134,455  137,069  (2,614) (1,725)
Debentures 2,292  2,647  -  74,372  79,311  112,390  (33,079) (21,832)
Certificates of Bank Deposit 27,618  43,866  -  4,879  76,363  76,773  (410) (271)
Other 12,812  15,277  34,545  140,440  203,074  231,333  (28,259) (18,651)
 
- Insurance and Savings Bond 473,214  38,465  191,629  737,723  1,441,031  1,336,908  104,123  68,721 
 
Financial Treasury Notes 58,518  37,569  191,023  481,647  768,757  763,738  5,019  3,312 
Shares 386,935  -  -  -  386,935  285,078  101,857  67,226 
Federal Treasury Notes -  -  -  172,784  172,784  166,685  6,099  4,025 
Other 27,761  896  606  83,292  112,555  121,407  (8,852) (5,842)
 
- Private Pension Plan 954,916  16,293  -  329,767  1,300,976  1,065,575  235,401  155,365 
 
Shares 823,188  -  -  -  823,188  587,654  235,534  155,453 
Debentures 6  10,985  -  329,767  340,758  340,891  (133) (88)
Other 131,722  5,308  -  -  137,030  137,030  -  - 
 
- Other activities 28,234  898  1,275  38,199  68,606  68,711  (105) (69)
 
Certificates of Bank Deposit 19,597  898  1,275  38,199  59,969  59,969  -  - 
Other 8,637  -  -  -  8,637  8,742  (105) (69)
 
III. SECURITIES HELD TO MATURITY  27,054  792,343  216,706  3,700,893  4,736,996  4,736,996  -  -
 
- Financial 27,054  792,343  216,706  1,028,187  2,064,290  2,064,290  -  - 
 
Brazilian Foreign Debt Notes 27,054  -  -  948,289  975,343  975,343  -  - 
Central Bank Notes -  792,343  107,788  -  900,131  900,131  -  - 
Federal Treasury Notes -  -  108,918  79,898  188,816  188,816  -  - 
 
- Private Pension Plan -  -  -  2,672,706  2,672,706  2,672,706  -  - 
 
Federal Treasury Notes -  -  -  2,672,706  2,672,706  2,672,706  -  - 
 
IV. DERIVATIVE FINANCIAL INSTRUMENTS (ASSETS) 184,463  74,126  164,249  308,349  731,187  583,119  148,068  97,725 
 
- Financial 183,604  74,126  164,249  308,349  730,328  582,260  148,068  97,725 
 
Derivative financial instruments 183,604  74,126  164,249  308,349  730,328  582,260  148,068  97,725 
 
- Other activities 859  -  -  -  859  859  -  - 
 
Derivative financial instruments 859  -  -  -  859  859  -  - 
 
Total in 2003 3,148,001  3,165,111  7,581,239  34,011,127  47,905,478  47,297,280  608,198  401,411 
 
Total in 2002 9,308,500  8,747,076  4,145,381  15,388,696  37,589,653  38,354,302  (764,649) (504,669)
 
DERIVATIVE FINANCIAL INSTRUMENTS (LIABILITIES)
In 2003 (206,385) (18,443) (22,616) (83,801) (331,245) (301,858) (29,387) (19,395)
(1)

Investment fund applications were distributed based on the securities comprising their portfolios, maintaining the fund category classification.

(2)

The number of days to maturity was based on the maturity of the securities, regardless of accounting classification.

(3)

This column reflects book value subsequent to mark-to-market, adjustment, except for securities held to maturity, whose market value is higher than book value by R$ 295,584 thousand, net of tax effects.

(4)

The market value of securities is determined based on the market price practiced on the balance sheet date. In the event no market prices are available, amounts are estimated based on the prices quoted by dealers, on price definition models, quotation models or quotations for instruments with similar characteristics.

d) Composition of the portfolios by account:

At September 30 - In thousands of reais
Up to
30 days 		From 31 to
180 days 		From 181 to
360 days 		More than
360 days 		Total
Own Portfolio 2,913,086  1,867,969  5,797,926  29,852,496  40,431,477 
Fixed income securities 892,659  1,867,969  5,797,926  29,852,496  38,411,050 
Financial Treasury Notes 370,426  1,574,774  4,864,860  12,417,404  19,227,464 
National Treasury Bonds 22,611  3,834  649,739  6,315,767  6,991,951 
Federal Treasury Notes 19,872  -  359  6,314,683  6,334,914 
Brazilian Foreign Debt Notes 64,986  42  95,000  1,608,586  1,768,614 
Debentures 36,899  14,652  77,867  1,450,313  1,579,731 
Certificates of Bank Deposit 165,166  59,636  9,288  815,749  1,049,839 
Foreign securities 77,694  3,284  53,302  515,943  650,223 
Central Bank Notes -  157,611  35,711  56,115  249,437 
Other 135,005  54,136  11,800  357,936  558,877 
 
Equity securities 2,020,427  -  -  -  2,020,427 
Shares of listed companies (technical reserve) 1,118,185  -  -  -  1,118,185 
Shares and quotas (other) 902,242  -  -  -  902,242 
 
Subject to commitments 234,915  1,297,142  1,783,313  4,158,631  7,474,001 
Purchase and sale agreements 35,741  6,311  115,918  1,071,252  1,229,222 
Brazilian Foreign Debt Notes 35,741  -  -  1,064,535  1,100,276 
Federal Treasury Notes -  -  108,918  -  108,918 
Financial Treasury Notes -  4,989  649  6,717  12,355 
National Treasury Bonds -  -  5,454  -  5,454 
Central Bank Notes -  1,322  897  -  2,219 
 
Brazilian Central Bank 608  1,179,386  336,793  1,833,028  3,349,815 
Financial Treasury Notes 608  5,744  49,218  1,465,000  1,520,570 
Federal Treasury Notes -  540,898  123,952  364,323  1,029,173 
Central Bank Notes -  632,744  107,086  -  739,830 
National Treasury Bonds -  -  56,537  3,705  60,242 
 
Privatization currencies 108  -  22,821  62,617  85,546 
 
Collateral provided 13,995  37,319  1,143,532  883,385  2,078,231 
National Treasury Bonds -  390  1,044,577  271,654  1,316,621 
Financial Treasury Notes 11,608  36,263  17,076  550,611  615,558 
Central Bank Notes -  666  81,879  -  82,545 
Federal Treasury Notes -  -  -  60,438  60,438 
Other 2,387  -  -  682  3,069 
Derivative financial instruments 184,463  74,126  164,249  308,349  731,187 
 
Total at September 30, 2003 3,148,001  3,165,111  7,581,239  34,011,127  47,905,478 
% 6.6  6.6  15.8  71.0  100.0 
 
Total in 2002 9,308,500  8,747,076  4,145,381  15,388,696  37,589,653 
% 24.8  23.3  11.0  40.9  100.0 

Investment fund applications were distributed based on the securities comprising their portfolios.

The number of days to maturity was based on the maturity of the securities, regardless of accounting classification.

e) At June 30, 2003, an amount of R$ 1,521,134 thousand of investment fund applications was reclassified from “securities available for sale” to “trading securities” and an amount of R$ 215,137 thousand of Brazilian foreign debt notes from “securities held to maturity” to “securities available for sale”. These reclassifications decreased stockholders’ equity by R$ 53,757 thousand with no effect, however, on income. The reclassifications were based on Management’s reassessment of the new profile of the securities portfolio following the acquisition of BBV Banco.

f) Income on security transactions, financial income on insurance, private pension plans and savings bonds and derivative financial instruments

We present below the composition of the results of transactions with securities and derivative financial instruments:

Nine-month period – In thousands of reais
 
Revenue 2003 2002
Fixed income securities (1) 2,412,559  6,193,588 
Interbank investments (2) 3,365,580  634,064 
Allocation of exchange variation of foreign branches (676,097) 3,453,854 
Equity securities (3,977) (41,315)
Other (35) 277 
Subtotal 5,098,030  10,240,468 
 
Financial income on insurance, private pension plans and savings bonds
Fixed income securities 3,738,682  1,706,009 
Equity securities 209,330  167,858 
Subtotal 3,948,012  1,873,867 
 
Transactions with derivatives (3) 46,315  (2,381,132)
Total 9,092,357  9,733,203 
(1) Includes foreign securities.
(2) Note 9b.
(3) Note 33c -V.

11) INTERBANK ACCOUNTS – RESTRICTED DEPOSITS

a) We present below the “Restricted Deposits” account:

At September 30 - In thousands of reais
 
2003 2002
 
Compulsory deposits – demand deposits (1) 3,550,943  3,471,714 
Compulsory deposits – savings account deposits (2) 4,195,784  3,984,056 
Additional compulsory deposits (3) 4,322,115  1,842,467 
Restricted deposits – National Housing System (4) 388,856  401,315 
Funds from agricultural loans (4) 578  578 
Total 12,458,276  9,700,130 

(1) Without remuneration.
(2) Remunerated at the same rate as savings account deposits.
(3) Additional compulsory deposit on demand, savings and time deposits remunerated based on the variation in the Brazilian Central Bank reference rate (SELIC).
(4) Remunerated based on the reference rate (TR).

b) Income on compulsory deposits

We present below income on restricted deposits:

Nine-month period - In thousands of reais
 
2003 2002
 
Restricted deposits – BACEN (compulsory deposits) 1,061,907  247,419 
Restricted deposits – National Housing System (SFH) 34,579  21,407 
Total 1,096,486  268,826 

12) CREDIT OPERATIONS

The information relating to credit operations including advances on foreign exchange contracts, leasing operations and other receivables is presented as follows:

a) Credit operations by type and maturity.
b) Credit operations arising from new acquisitions.
c) Credit operations by type and risk level.
d) Concentration of credit operations.
e) Credit operations by activity sector.
f) Composition of credit operations and allowance for loan losses.
g) Movement of the allowance for loan losses.
h) Recovery and renegotiation of credit operations.
i) Income on credit operations.

a) Credit operations by type and maturity

At September 30 - In thousands of reais
Normal Course
Up to
30 days 		From 31 to
60 days 		From 61 to
90 days 		From 91 to
180 days 		From 181 to
360 days 		More than
360 days 		Total in
2003(A) 		% Total in
2002(A) 		%
Discount of trade receivables and other loans 6,621,877  3,855,690  2,547,671  2,540,498  2,783,710  3,569,579  21,919,025  39.8 22,376,495  41.9
Financings 1,121,501  931,020  1,019,968  2,114,625  2,412,835  6,748,954  14,348,903  26.1 15,714,581  29.4
Rural and agribusiness loans 340,849  155,675  130,894  334,126  611,723  2,594,004  4,167,271  7.6 3,572,782  6.7
Subtotal 8,084,227  4,942,385  3,698,533  4,989,249  5,808,268  12,912,537  40,435,199  73.5 41,663,858  78.0
Leasing operations 102,213  72,904  77,953  203,529  321,335  551,621  1,329,555  2.4 1,539,060  2.9
Advances on foreign exchange contracts (1) 1,317,756  1,065,932  824,242  1,900,761  1,022,120  -  6,130,811  11.1 5,351,898  10.0
Advances in foreign currency granted (1) -  -  -  -  -  -  -  -  29,206  0.1
Subtotal 9,504,196  6,081,221  4,600,728  7,093,539  7,151,723  13,464,158  47,895,565  87.0 48,584,022  91.0
Other receivables (2) 98,893  37,097  18,257  61,300  88,571  392,811  696,929  1.3 680,068  1.3
Total credit operations 9,603,089  6,118,318  4,618,985  7,154,839  7,240,294  13,856,969  48,592,494  88.3 49,264,090  92.3
Sureties and guarantees (3) 397,893  485,331  480,048  542,552  459,043  4,068,540  6,433,407  11.7 4,111,396  7.7
Total in 2003 10,000,982  6,603,649  5,099,033  7,697,391  7,699,337  17,925,509  55,025,901  100.0
Total in 2002 13,457,525  6,129,084  4,047,107  7,096,919  7,721,282  14,923,569       53,375,486  100.0

At September 30 - In thousands of reais
Abnormal Course
Past Due Installments
Up to
30 days 		From 31 to
60 days 		From 61 to
90 days 		From 91 to
180 days 		From 181 to
720 days 		Total in
2003(B) 		% Total in
2002(B) 		%
Discount of trade receivables and other loans 222,900  236,099  183,137  359,390  495,530  1,497,056  79.6 1,466,468  73.6
Financings 65,461  63,017  21,747  57,544  51,425  259,194  13.8 315,606  15.8
Rural and agribusiness loans 1,912  1,594  840  5,139  18,386  27,871  1.5 39,454  2.0
Subtotal 290,273  300,710  205,724  422,073  565,341  1,784,121  94.9 1,821,528  91.4
Leasing operations 5,873  3,942  2,394  5,989  5,769  23,967  1.2 44,395  2.2
Advances on foreign exchange contracts (1) 13,445  7,399  4,353  5,189  6,966  37,352  2.0 50,910  2.6
Advances in foreign currency granted (1) -  -  -  -  -  -  -  -  - 
Subtotal 309,591  312,051  212,471  433,251  578,076  1,845,440  98.1 1,916,833  96.2
Other receivables (2) 2,918  2,071  930  5,687  23,321  34,928  1.9 24,065  1.2
Total credit operations 312,509  314,123  213,401  438,938  601,397  1,880,368  100.0 1,940,898  97.4
Sureties and guarantees (3) -  -  -  -  -  -  -  51,385  2.6
Total in 2003 312,509  314,123  213,401  438,938  601,397  1,880,368  100.0
Total in 2002 351,737  292,425  265,730  431,215  651,176       1,992,283  100.0

Total
  At September 30 - In thousands of reais
 
  Abnormal Course
  Installments Falling Due
Total
Up to 30 days 31 to 60 days 61 to 90 days 91 to 180 days 181 to 360 days More than 360 days Total in 2003 (C) % Total in 2002 (C) % In 2003 (A+B+C) % In 2002 (A+B+C) %
Discount of trade receivables and other loans 142,936 83,230 68,701 190,530 263,745 315,551 1,064,693 46.2 1,016,510 42.4 24,480,774 41.3 24,859,473 43.0
Financings 84,194 58,613 56,297 152,108 241,233 520,860 1,113,305 48.3 1,206,480 50.4 15,721, 26.6 17,236,667 29.8
Rural and agribusiness loans 755 504 171 562 1,732 4,676 8,400 0.4 8,911 0.4 4,203,542 7.1 3,621,147 6.3
Subtotal 227,885 142,347 125,169 343,200 506,710 841,087 2,186,398 94.9 2,231,901 93.2 44,405,718 75.0 45,717,287 79.1
Leasing operations 6,193 5,274 5,166 13,661 19,837 35,082 85,213 3.7 155,346 6.5 1,438,735 2.4 1,738,801 3.0
Advances on foreign exchange contracts (1) - - - - - - - - - - 6,168,163 10.4 5,402,808 9.4
Advances in foreign currency granted (1) - - - - - - - - - - - - 29,206 0.1
Subtotal 234,078 147,621 130,335 356,861 526,547 876,169 2,271,611 98.6 2,387,247 99.7 52,012,616 87.8 52,888,102 91.6
Other receivables (2) 21,608 1,230 613 2,567 3,791 2,139 31,948 1.4 6,321 0.3 763,805 1.3 710,454 1.2
Total credit operations 255,686 148,851 130,948 359,428 530,338 878,308 2,303,559 100.0 2,393,568 100.0 52,776,421 89.1 53,598,556 92.8
Sureties and guarantees (3) - - - - - - - - - - 6,433,407 10.9 4,162,781 7.2
Total in 2003 255,686 148,851 130,948 359,428 530,338 878,308 2,303,559 100.0 59,209,828 100.0
Total in 2002 213,895 156,698 138,894 382,749 544,240 957,092 2,393,568 100.0 57,761,337 100.0

(1) Advances on foreign exchange contracts and advances in foreign currency granted are recorded as a reduction of “Other Liabilities”.
(2) “Other Receivables” comprise receivables on guarantees honored, receivables on purchase of assets, credit instruments receivable; income receivable on foreign exchange contracts and receivables arising from export contracts.
(3) Recorded in memorandum accounts.

b) Credit operations arising from new acquisitions.

We present below credit operations arising from the acquisition of BBV Banco:

At June 30, 2003 – In thousands of reais
Credit operations 3,398,505 
Leasing operations 146,433 
Other receivables 168,761 
Advances on foreign exchange contracts 270,849 
Total 3,984,548 
Normal course 3,799,923 
Abnormal course 184,625 

c) Credit operations by type and risk level

At September 30 - In thousands of reais
RISK LEVEL
CREDIT OPERATIONS AA A B C D E F G H Total in 2003 % Total in 2002 %
Discount of trade receivables and other loans 6,549,284  9,533,206  1,593,167  3,483,923  899,604  400,505  374,520  185,876  1,460,689  24,480,774  46.4 24,859,473  46.4
Financings 3,543,248  7,146,655  1,432,256  2,727,699  298,365  70,452  94,601  50,310  357,816  15,721,402  29.8 17,236,667  32.1
Rural and agribusiness loans 374,473  937,881  311,285  2,122,399  132,726  57,619  11,703  201,152  54,304  4,203,542  8.0 3,621,147  6.8
Subtotal 10,467,005  17,617,742  3,336,708  8,334,021  1,330,695  528,576  480,824  437,338  1,872,809  44,405,718  84.2 45,717,287  85.3
Leasing operations 40,926  469,563  209,398  551,403  35,796  9,874  55,707  8,447  57,621  1,438,735  2.7 1,738,801  3.2
Advances on foreign exchange contracts 4,124,631  884,784  751,090  293,370  84,052  5,332  5,578  485  18,841  6,168,163  11.7 5,402,808  10.1
Advances in foreign currency granted -  -  -  -  -  -  -  -  -  -  -  29,206  0.1
Subtotal 14,632,562  18,972,089  4,297,196  9,178,794  1,450,543  543,782  542,109  446,270  1,949,271  52,012,616  98.6 52,888,102  98.7
Other receivables 200,880  227,655  81,452  145,441  9,191  5,730  54,252  1,081  38,123  763,805  1.4 710,454  1.3
Total credit operations in 2003 14,833,442  19,199,744  4,378,648  9,324,235  1,459,734  549,512  596,361  447,351  1,987,394  52,776,421  100.0
% 28.1 36.4 8.3 17.7 2.8 1.0 1.1 0.8 3.8 100.0
Total credit operations in 2002 16,960,346  18,131,915  5,363,121  8,167,074  1,333,996  394,174  678,187  521,179  2,048,564       53,598,556  100.0
% 31.6 33.8 10.0 15.2 2.5 0.8 1.3 1.0 3.8     100.0

d) Concentration of credit operations

At September 30 - In thousands of reais
  2003 2002
Largest borrower 770,962  513,779 
Percentage of total credit operation portfolio 1.5% 1.0%
10 largest borrowers 5,060,036  4,452,078 
Percentage of total credit operation portfolio 9.6% 8.3%
20 largest borrowers 8,111,043  7,595,081 
Percentage of total credit operation portfolio 15.4% 14.2%
50 largest borrowers 13,499,957  12,635,830 
Percentage of total credit operation portfolio 25.6% 23.6%
100 largest borrowers 17,493,885  16,157,738 
Percentage of total credit operation portfolio 33.1% 30.1%

e) Credit operations by activity sector

At September 30 – In thousands of reais
  2003 % 2002 %
PUBLIC SECTOR 201,864  0.4 299,647  0.5
 
FEDERAL GOVERNMENT 201,684  0.4 299,536  0.5
Petrochemical 201,684  0.4 299,536  0.5
 
MUNICIPAL GOVERNMENT 180  -  111  - 
Direct administration 180  -  111  - 
 
PRIVATE SECTOR 52,574,557  99.6 53,298,909  99.5
 
MANUFACTURING 17,615,792  33.3 17,223,505  32.1
Food and beverage 3,825,049  7.3 4,233,631  7.9
Steel, metallurgical and mechanical 3,479,204  6.6 3,591,820  6.7
Light and heavy vehicles 1,635,812  3.1 719,159  1.3
Chemical 1,543,129  2.9 1,862,062  3.4
Paper and pulp 1,130,648  2.1 1,016,236  1.9
Textiles and clothing 763,755  1.4 865,320  1.6
Rubber and plastic articles 697,229  1.3 498,096  0.9
Electro-electronics 592,379  1.1 780,228  1.5
Publishing, printing and reproduction 619,460  1.2 744,203  1.4
Furniture and wood products 474,431  0.9 467,686  0.9
Extraction of metallic and non-metallic ores 414,519  0.8 459,898  0.9
Automotive parts and accessories 392,615  0.7 328,173  0.6
Leather articles 301,377  0.6 272,211  0.5
Oil refining and production of alcohol 322,602  0.6 379,361  0.7
Non-metallic materials 242,292  0.5 215,791  0.4
Other industries 1,181,291  2.2 789,630  1.5
 
COMMERCE 7,710,753  14.5 8,844,571  16.5
Speciality store products 1,397,969  2.5 1,752,592  3.3
Food, beverages and tobacco products 1,171,426  2.2 966,236  1.8
General merchandise wholesalers 992,540  1.9 657,255  1.2
Waste material and scrap 547,402  1.0 410,813  0.8
Non-specialized retailers 527,649  1.0 484,942  0.9
Vehicles 457,276  0.9 922,447  1.7
Clothing and footwear 393,027  0.7 364,864  0.7
Articles for personal use and for use in the home 354,384  0.7 264,321  0.5
Fuel 293,153  0.6 216,240  0.4
Commercial intermediary 268,398  0.5 429,583  0.8
Repairs, parts and accessories for vehicles 262,967  0.5 239,663  0.4
Agricultural products 214,116  0.4 244,281  0.5
Other commerce 830,446  1.6 1,891,334  3.5
 
FINANCIAL INTERMEDIATION 520,863  1.0 865,867  1.6
 
SERVICES 11,160,886  21.3 11,492,103  21.5
Telecommunications 2,107,784  4.0 2,913,406  5.5
Transport and storage 1,857,454  3.5 1,661,400  3.1
Civil construction 1,595,298  3.0 1,623,461  3.1
Production and distribution of electric power, gas and water 1,504,177  2.9 1,042,791  1.9
Real estate activities, rents and corporate services 1,473,691  2.8 1,239,967  2.3
Holdings, legal, accounting and business advisory services 661,970  1.3 538,316  1.0
Social services, education, health, defense and social security 580,973  1.1 433,930  0.8
Clubs, leisure, cultural and sports activities 358,800  0.7 407,173  0.8
Hotel and catering 201,648  0.4 227,082  0.4
Other services 819,091  1.6 1,404,577  2.6
 
AGRICULTURE, LIVESTOCK RAISING, FISHING, FOREST DEVELOPMENT AND MANAGEMENT 826,397  1.6 899,254  1.7
 
INDIVIDUALS 14,739,866  27.9 13,973,609  26.1
 
TOTAL 52,776,421  100.0 53,598,556  100.0

f) Composition of the credit operation portfolio and the allowance for loan losses

At September 30 – In thousands of reais
Portfolio Balance
Risk
Level 		Abnormal Course Normal
Course 		Total % % Accumulated
2003 		% Accumulated
2002
Past Due Falling Due Total Abnormal Course
AA -  -  -  14,833,442  14,833,442  28.1 28.1 31.6
A -  -  -  19,199,744  19,199,744  36.3 64.4 65.4
B 105,564  434,361  539,925  3,838,723  4,378,648  8.3 72.7 75.4
C 176,674  545,485  722,159  8,602,076  9,324,235  17.7 90.4 90.6
Subtotal 282,238  979,846  1,262,084  46,473,985  47,736,069  90.4
 
D 159,176  419,449  578,625  881,109  1,459,734  2.8 93.2 93.1
E 188,885  171,188  360,073  189,439  549,512  1.0 94.2 93.9
F 151,775  199,620  351,395  244,966  596,361  1.1 95.3 95.2
G 116,750  87,015  203,765  243,586  447,351  0.8 96.1 96.2
H 981,544  446,441  1,427,985  559,409  1,987,394  3.9 100.0 100.0
Subtotal 1,598,130  1,323,713  2,921,843  2,118,509  5,040,352  9.6
 
Total in 2003 1,880,368  2,303,559  4,183,927  48,592,494  52,776,421  100.0
% 3.5 4.4 7.9 92.1 100.00
Total in 2002 1,940,898  2,393,568  4,334,466  49,264,090  53,598,556 
% 3.6 4.5 8.1 91.9 100.0
At September 30 - In thousands of reais
Allowance
Minimum Requirement Additional Existing % (1)
2003 		% (1)
2002
Risk
Level 		% Minimum
Required Provision 		Specific Generic Total
Past Due Falling Due Total Specific
AA 0.0 -  -  -  -  -  -  -  -  - 
A 0.5 -  -  -  95,953  95,953  49,964  145,917  0.8 0.5
B 1.0 1,055  4,218  5,273  38,451  43,724  14,114  57,838  1.3 1.4
C 3.0 5,300  16,364  21,664  258,056  279,720  227,555  507,275  5.4 3.2
Subtotal   6,355 20,582 26,937 392,460 419,397 291,633 711,030 1.5 0.9
 
D 10.0 15,917  41,944  57,861  88,109  145,970  266,832  412,802  28.3 19.6
E 30.0 56,665  51,356  108,021  56,831  164,852  88,671  253,523  46.1 38.9
F 50.0 75,887  99,809  175,696  122,483  298,179  97,558  395,737  66.4 62.8
G 70.0 81,725  60,910  142,635  170,508  313,143  77,255  390,398  87.3 96.4
H 100.0 981,544  446,441  1,427,985  559,409  1,987,394  -  1,987,394  100.0 100.0
Subtotal   1,211,738 700,460 1,912,198 997,340 2,909,538 530,316 3,439,854 68.3 68.2
 
Total in 2003   1.218.093 721,042 1,939,135 1,389,800 3,328,935 821,949 4,150,884 7.9
%   29.3 17.4 46.7 33.5 80.2 19.8 100.0
Total in 2002   1.283.172 841,507 2,124,679 1,269,055 3,393,734 424,048 3,817,782   7.1
%   33.6 22.1 55.7 33.2 88.9 11.1 100.0
(1) Existing provision in relation to portfolio, by risk level.

g) Movement of allowance for loan losses

In thousands of reais
At December 31, 2001 2,941,297 
Amount recorded 2,239,615 
Amount written off (1,597,219)
Balance derived from acquired institutions (1) 234,089 
At September 30, 2002 3,817,782 
Specific provision (2) 2,124,679 
Generic provision (3) 1,269,055 
Additional provision (4) 424,048 
At December 31, 2002 3,665,091 
Specific provision (2) 1,943,451 
Generic provision (3) 1,217,036 
Additional provision (4) 504,604 
Amount recorded 1,998,173 
Amount written off (1,683,117)
Balance derived from acquired institutions (5) 170,737 
At September 30, 2003 4,150,884 
Specific provision (2) 1,939,135 
Generic provision (3) 1,389,800 
Additional provision (4) 821,949 
(1)

Including Banco Mercantil de São Paulo S.A. – R$ 195,110 thousand; Banco BEA S.A. – R$ 6,696 thousand; Banco Cidade S.A. – R$ 16,600 thousand; and Potenza Leasing S.A. - R$ 15,683 thousand.

(2) For operations with installments overdue by more than 14 days.
(3) Recorded based on the customer/transaction classification and accordingly not included in the preceding item.
(4)

The additional provision is recorded based on management's experience and expected collection of the credit portfolio, to determine the total allowance deemed sufficient to cover specific and general portfolio risks, as well as the provision calculated based on risk level ratings and the corresponding minimum provision requirements established by CMN Resolution 2682. The additional provision per customer was classified (Note 12f) according to the corresponding risk levels.

(5) BBV Banco.

h) Recovery and renegotiation of credit operations:

Expense for provision for loan losses, net of recoveries of written-off credits:

Nine-month period - In thousands of reais
 
  2003 2002
 
Amount recorded for the period 1,998,173  2,239,615 
Amount recovered (1) (325,984) (277,166)
Expense net of recoveries 1,672,189  1,962,449 
(1) These recoveries are classified in income on credit operations.

The total renegotiated operations for the period are presented below:

Nine-month period - In thousands of reais
 
  2003 2002
 
Amount renegotiated 1,222,351  1,682,598 
Amount received and written off (1,520,187) (1,367,089)
Total net renegotiations for the period (297,836) 315,509 

i) Income on credit operations

Nine-month period - In thousands of reais
 
  2003 2002
 
Discount of trade receivables and other loans 6,045,536  7,326,737 
Financings 2,779,940  4,181,857 
Rural and agribusiness loans 356,754  279,186 
Subtotal 9,182,230  11,787,780 
Recovery of credits written off as loss 325,984  277,166 
Allocation of exchange variation of foreign branches (372,529) 2,142,033 
Subtotal 9,135,685  14,206,979 
Leasing, net of expenses 219,532  324,395 
Total 9,355,217  14,531,374 

13) OTHER RECEIVABLES

a) Foreign exchange portfolio

Balance sheet accounts

At September 30 - In thousands of reais
 
  2003 2002
 
Assets – other receivables    
Exchange purchases pending settlement 9,107,502  12,295,752 
Foreign exchange acceptances and term documents in
foreign currencies 39,389  36,399 
Exchange sale receivables 2,846,099  4,115,188 
Less – Advances in local currency received (153,450) (271,821)
Less – Advances in foreign currency granted -  (694,948)
Income receivable on advances granted 86,040  150,522 
Total 11,925,580  15,631,092 
 
Liabilities - Other liabilities
Exchange sales pending settlement 2,761,901  4,630,514 
Exchange purchase payables 9,353,326  9,583,609 
Less – Advances on foreign exchange contracts (6,168,163) (5,402,808)
Less – Advances in foreign currency granted -  (29,206)
Other 18,709  2,175 
Total 5,965,773  8,784,284 
 
Net exchange portfolio 5,959,807  6,846,808 
 
Memorandum accounts
Open import credits 101,046  111,128 

Foreign exchange transactions:

We present below the composition of foreign exchange transactions adjusted to improve the presentation of the effective results:

Nine-month period - In thousands of reais
 
  2003 2002
 
Income on exchange transactions 9,407,603  11,574,963 
 
Expenses for exchange transactions (8,864,444) (7,287,999)
 
Foreign exchange transactions 543,159  4,286,964 
 
Adjustments:
- Income on export financing (1) 15,723  14,710 
- Income on foreign currency financing (1) 146,260  1,105,622 
- Income on foreign investments (2) 12,886  73,059 
- Expenses for foreign securities (3) (6,069) (6,523)
- Expenses for payables to foreign bankers (4) (464,661) (5,148,542)
Total adjustments (295,861) (3,961,674)
Adjusted foreign exchange transactions 247,298  325,290 

(1) Income on export financing and foreign currency financing classified as income on credit operations.
(2) Income on foreign investments classified as income on securities transactions.
(3) Expenses for foreign securities, classified as expenses for interest and charges on deposits.
(4) Expenses for payables to foreign bankers relating to funds for financing advances on foreign exchange contracts and import financing, classified as expenses for borrowings and onlendings.

b) Sundry

At September 30 - In thousands of reais
 
  2003 2002
 
Deposits in guarantee 1,693,609  1,347,100 
Deferred tax assets (Note 35c) 5,965,147  5,075,056 
Sundry receivables 1,310,148  974,419 
Payments to be reimbursed 419,088  298,338 
Credit instruments receivable 345,137  262,285 
Prepaid taxes 814,153  1,012,932 
Receivables on purchase of assets 455,004  270,281 
Other 101,375  87,049 
Total 11,103,661  9,327,460 

14) OTHER ASSETS

a) Non-operating assets/other

  At September 30 - In Thousand of reais
  Cost 
Provision for loss
Residual Value
Property 413,576  (174,363) 239,213 
Vehicles and similar 76,986  (42,613) 34,373 
Machinery and equipment 13,949  (7,273) 6,676 
Goods subject to special conditions 24,915  (24,752) 163 
Inventories/stores 87,106  -  87,106 
Other 76,676  (941) 75,735 
Total in 2003 693,208  (249,942) 443,266 
Total in 2002 699,077  (225,536) 473,541 

b) Prepaid expenses

These comprise mainly expenses for insurance, prepaid financial expenses, auto sales commission, deferred selling expenses and expenses for the contract to provide banking services at Post Office network bank branches, which are amortized on a straight-line basis according to the contract terms.

15) INVESTMENTS

a) We present below the movement of investments in foreign branches and direct and indirect subsidiaries, which were fully eliminated upon consolidation of the financial statements:

In thousands of reais
Investments in foreign branches and subsidiaries
Balance at December 31, 2002
Movement for the period (3)
Exchange Variation
Equity accounting
Balance at September 30, 2003
Balance at September 30, 2002
Bradesco – New York 483,437  -  (83,448) 6,516  406,505  527,582 
Bradesco – Grand Cayman 1,201,263  56,753  (210,816) 58,374  1,105,574  1,235,541 
Bradesco Securities, Inc. 3,432  60,820  (2,944) 1  61,309  4,260 
BCN – Grand Cayman 447,864  -  (77,308) 26,042  396,598  468,847 
Cidade Capital Markets Limited 104,166  -  (17,981) 796  86,981  126,971 
Boavista (Nassau, Grand Cayman and Banking) 155,860  -  (26,905) 50,144  179,099  153,885 
Banco Bradesco Argentina S.A. 57,058  -  (1,511) (8,454) 47,093  60,511 
Bradesco Argentina de Seguros S.A. 12,974  -  (543) 2,177  14,608  8,957 
Mercantil – Grand Cayman 502,447  (37,868) (86,853) 9,741  387,467  409,185 
Mercantil – London (1) -  -  -  -  -  72,748 
Finasa Holding S.A. (2) -  -  -  -  -  306,999 
Banco Mercantil de São Paulo International S.A. 335,919  (4,012) (49,443) 13,032  295,496  - 
BBV Banco – Nassau -  780,731  (11,369) 8,005  777,367  - 
Bradesco International Health Service, Inc. 966  365  (180) (294) 857  1,096 
G.E.BÊ Vidigal (Luxembourg) S.A. (2) -  -  -  -  -  4,634 
Banco Bradesco Luxembourg S.A. 134,848  1,771  (23,277) 305  113,647  148,087 
Subtotal 3,440,234  858,560  (592,578) 166,385  3,872,601  3,529,303 
Provision for exchange variation (504,160) -  504,160  -  -  (948,617)
Total 2,936,074  858,560  (88,418) 166,385  3,872,601  2,580,686 

(1)

Merged into the Mercantil Grand Cayman Branch in November 2002.

(2)

Company wound up in December 2002.

(3)

Includes acquisition, capital increase and mark-to-market adjustment of securities available for sale.

b) Composition of investments in the consolidated financial statements:

  At September 30 - In thousands of reais
ASSOCIATED COMPANIES (total percentage ownership) 2003 
2002 
  • IRB - Brasil Resseguros S.A. - (21.24%)
 229,373  200,986 
  • CP Cimento e Participações S.A. - (12.48%)
 48,578  48,578 
  • Marlim Participações S.A. - (11.84%)
 21,820  25,787 
  • NovaMarlim Participações S.A. - (17.17%)
 22,100  22,100 
  • American Bank Note Ltda. - (22.50%)
 16,449  16,449 
  • BES Investimentos do Brasil S.A. - BI (19.99%) (1)
 16,897  - 
  • Tigre S.A. - Tubos e Conexões (2)
 -  102,646 
  • Other associated companies
 14,659  19,521 
Total in associated companies 369,876  436,067 
 
  • Other investments
 171,172  157,340 
  • Fiscal incentives
 339,592  289,737 
  • Provision for:
- Fiscal incentives (283,410) (233,779)
 
- Other investments (92,838) (83,077)
 
Total consolidated investments 504,392  566,288 

(1)

No longer proportionally consolidated as from the 2nd half of 2002.

(2)

Sold in the 2nd quarter of 2003.

c) Equity accounting was recorded in income under 'equity in the earnings of subsidiary and associated companies’ and totals R$ (25,496 thousand) (2002 – R$ 31,764 thousand) on an unconsolidated basis and is presented as follows:

In thousands of reais
Company Capital Adjusted net equity Number of shares/ quotas held (thousand) Percentage ownership Adjusted net income (loss) Book value (unconsolidated) Equity accounting adjustment (19)
      Common Preferred Quotas September 30, 2003 September 30, 2003 September 30, 2002
I – CONSOLIDATED SUBSIDIARIES                    
A) Financial area                 469,659  1,730,297 
BCN and subsidiaries 2,270,089  3,292,404  12  -  -  100.000% 356,670  3,434,030  262,641  261,156 
Banco BCN S.A. (1) (2)                 (200,082) (162,142)
Bancocidade – Corretora de Valores Mobiliários e de Câmbio Ltda. (3)                 5,195  2,280 
Bancocidade Leasing Arrendamento Mercantil S.A. (2)                 5,063  (3,200)
Banco das Nações S.A. (4)                 -  3,527 
Banco de Crédito Real de Minas Gerais S.A. (2)                 199,764  100,962 
Banco Finasa S.A. (2)                 80,828  50,903 
BCN Cons., Adm. de Bens, Serv. e Publ. Ltda. (2)                 (2,213) 4,424
Boavista S.A. Arrendamento Mercantil (2)                 20,668  925 
Bradesco BCN Leasing S.A. Arrendamento Mercantil (2) (5)                 51,701  31,246 
Finasa Promotora de Vendas Ltda. (2)                 449  1,019 
Potenza Leasing S.A. Arrendamento Mercantil (2) (6)                 186,057 2,103
Foreign branches – Exchange gains (loss) (2)                 (95,289) 214,280 
Other subsidiaries                 10,500  14,829 
Banco Mercantil and subsidiaries 3,881,053  4,015,497  24,931,096  -  -  100.000% 90,565  4,101,147  (38,642) 220,139 
Banco Mercantil de São Paulo S.A. (1) (2)                 75,094  (154,935)
Banco Finasa de Investimento S.A. (2)                 5,999  (824)
Banco Mercantil de São Paulo International S.A. (2)                 12,181  6,143 
Candelária Empreendimentos e Participações Ltda. (7)                 -  4,810 
Finasa Leasing Arrendamento Mercantil S.A. (8)                 3,733  3,293 
Foreign branches – Exchange gains (loss) (2)                 (137,584) 372,135 
Other subsidiaries                 1,935  (10,483)
BBV Banco and subsidiaries 2,686,572  2,499,742  6,217,482  -  -  100.000% 209,341  2,692,624  196,476  - 
BBV Banco (1) (2) (9)                 195,740  - 
BBV Administradora de Cartões Ltda. (2) (9)                 1,212  - 
BBV Corretora de Câmbio e Valores Mobiliários Ltda. (2) (9)                 3,898  - 
BBV Leasing Brasil S.A. Arrendamento Mercantil (2) (9)                 4,850 -
Foreign branches/subsidiaries – Exchange gains (loss) (2)                 (11,369) - 
Other subsidiaries                 2,145  - 
Other financial companies                 49,184  1,249,002 
Banco Baneb S.A. (1) (2) 1,475,556  1,699,139  50,995,859  77,366,227  -  99.940% 181,364  1,770,353  180,825  75,537 
Banco BEA S.A. (10) -  -  -  -  -  -  -  -  4,910  28,504 
Banco Boavista Interatlântico S.A. and subsidiaries (1) (2) 152,000  639,194  1,649,136  -  -  100.000% 585,476  958,863  588,938  289,556 
Banco Bradesco Argentina S.A. (1) (2) 66,384  47,093  29,999  -  -  99.999% (8,455) 47,093  (8,454) (7,372)
Banco Bradesco Luxembourg S.A. (1) (2) 82,878  111,877  28  -  -  99.999% 305  113,647  305  (642)
Banco Finasa de Investimento S.A. (1) (2) (11) 319,047  356,690  1,749,742  -  -  97.403% 30,115  347,430  22,932  - 
Boavista S.A. D.T.V.M. (12) (13) -  -  -  -  -  -  -  -  (471,845) (16,443)
Bradesco BCN Leasing S.A. Arrendamento Mercantil (1) (2) (5) 697,221  1,013,024  262  -  -  52.386% 99,948  578,998  46,603  - 
Bradesco Leasing S.A. Arrendamento Mercantil (14) -  -  -  -  -  -  -  -  3,612  37,624 
Bradesco S.A. Corretora de Títulos e Valores Mobiliários (1) (2) 45,000  99,394  375,999  -  -  99.999% 12,866  99,393  12,866  9,217 
Bradesco Securities, Inc. (1) (2) 64,315  61,309  11  -  -  100.000% 1  61,309  1  (1,172)
BRAM – Bradesco Asset Management Ltda. and subsidiary (1) (2) 51,911  54,370  -  -  51,911  99.999% 127  54,370  127  8,091 
Cia. Brasileira de Meios de Pagamento – VISANET (15)                 17,265  32,450 
Foreign branches/subsidiaries – Exchange gains (loss) (2)                 (348,901) 793,619 
Other financial companies                 -  33 
B) Insurance and Pension Plan area                 458,325  462,925 
Bradesco Seguros S.A. (1) (2) 1,301,000  3,152,977  625  -  -  99.697% 452,586  3,143,435  (31,837) 9,282 
ABS–Empreendimentos Imobiliários, Participações e Serviços S.A. (2)                 47,928  51,350 
Atlântica Capitalização S.A. (2)                 1,027  574 
Bradesco Argentina de Seguros S.A. (2)                 2,170  11,697 
Bradesco Capitalização S.A. (2)                 120,790  88,563 
Bradesco Saúde S.A. (2)                 4,347  47,709 
Bradesco Vida e Previdência S.A. (2)                 314,935  269,383 
Finasa Seguradora S.A. (2)                 10,291  5,107 
União Novo Hamburgo Seguros S.A. (2)                 (12,083) (5,546)
Foreign subsidiaries – Exchange gains (loss) (2)                 (721) (15,828)
Other subsidiaries                 1,478  634 
C) Other activities                 14,663  (8,176)
União de Comércio e Participações Ltda. (1) (2) 295,876  366,115  -  -  2,959  99.999% (15,813) 366,111  (60,584) (14,750)
Átria Participações S.A. (2)                 1,474  28,480 
BUS Holding S.A. (16)                 -  2,044 
Latasa S.A. (15)                 43,870  34,955 
Nova Paiol Participações S.A. (2)                 (1,696) 1,586 
Other subsidiaries                 31,599  (60,491)
Total consolidated subsidiaries                 942,647  2,185,046 
II – Unconsolidated
BES Investimento do Brasil S.A. – Banco de Investimento (15)                 3,978  - 
IRB-Brasil Resseguros S.A. (15)                 (8,133) 32,542 
Tigre S.A. – Tubos e Conexões (17)                 -  9,506 
UGB Participações S.A. (18)                 (25,331) (4,412)
Other associated companies               43,875  3,990  (5,872)
Total unconsolidated                 (25,496) 31,764 
Subtotal               17,812,678  917,151  2,216,810 
(Reversal of) Provision for exchange variation                 504,160  (948,617)
Total               17,812,678  1,421,311  1,268,193 

(1)

Direct subsidiary.

(2)

Information at September 30, 2003.

(3)

Merged into BCN Corretora de Títulos e Valores Mobiliários S.A. in September 2003.

(4)

Merged into Banco BCN S.A. in July 2002.

(5)

Formerly BCN Leasing Arrendamento Mercantil S.A.

(6)

Formerly Ford Leasing S.A. – Arrendamento Mercantil.

(7)

Merged into Banco Finasa de Investimento S.A. in November 2002.

(8)

Merged into Bradesco BCN Leasing S.A. Arrendamento Mercantil in April 2003.

(9)

Acquired in June 2003.

(10)

Merged into Banco Baneb S.A. in April 2003.

(11)

Became a direct subsidiary of Banco Bradesco S.A. in May 2003.

(12)

Merged into Banco Mercantil de São Paulo S.A. in February 2003.

(13)

Including extraordinary amortization of goodwill in Mercantil, net of taxes (Note 31).

(14)

Merged into BCN Leasing in February 2003.

(15)

Information at August 31, 2003.

(16)

Sold in November 2002.

(17)

Sold in the 2nd quarter of 2003.

(18)

Information at July 31, 2003.

(19)

Equity accounting considers results determined by the companies subsequent to acquisition and includes equity variations in the investees not derived from results, as well as adjustments arising from the equalization of accounting principles, where applicable.

16) PROPERTY AND EQUIPMENT IN USE AND LEASED ASSETS

These are stated at cost plus restatements through December 31, 1995. Depreciation is calculated on the straight-line method at annual rates which take into consideration the economic useful lives of the assets. We present below the composition of property and equipment in use and leased assets:

  At September 30 - In thousands of reais
 
  Rate Cost Depreciation Residual
value
 
Land and buildings in use:        
-Buildings 4% 1,072,021  (557,177) 514,844 
-Land -  538,814  -  538,814 
Installations, furniture and equipment in use 10% 2,122,744  (1,068,801) 1,053,943 
Security and communications systems 10% 138,202  (71,282) 66,920 
Data processing systems 20 to 50%  1,382,293  (1,048,115) 334,178 
Transport systems 20% 27,971  (12,803) 15,168 
Other -  64,668  -  64,668 
Subtotal -  5,346,713  (2,758,178) 2,588,535 
Leased assets -  50,475  (26,174) 24,301 
Total in 2003 -  5,397,188  (2,784,352) 2,612,836 
Total in 2002 -  5,331,847  (2,679,609) 2,652,238 

Land and buildings in use of the Bradesco Organization present an unrecorded increment of R$ 833,984 thousand, based on appraisal reports prepared by independent experts in 2002.

The permanent assets to stockholders’ equity ratio in relation to consolidated reference equity is 29.95% on a consolidated basis and 44.32% on a consolidated financial basis, within the maximum 50% limit.

17) DEFERRED CHARGES

a) Goodwill

Goodwill on the acquisition of investments, based on future profitability, mainly results from goodwill on the acquisition of BCN – R$ 141,626 thousand (2002 - R$ 175,617 thousand); Credireal – R$ 51,801 thousand (2002 – R$ 64,233 thousand); Baneb – R$ 72,228 thousand (2002 – R$ 84,789 thousand); Boavista – R$ 319,668 thousand (2002 – R$ 364,798 thousand); BEA – R$ 58,348 thousand (2002 – R$ 61,512 thousand); Mercantil - R$ 85,650 thousand (2002 – R$ 728,449 thousand); Banco Cidade - R$ 142,871 thousand (2002 – R$ 181,836 thousand); BBV Banco - R$ 192,882 thousand; and Bradesco BCN Leasing S.A. Arrendamento Mercantil in the amount of R$ 48,315 thousand (2002 – R$ 55,516 thousand). Amortization of goodwill for the period totaled R$ 861,596 thousand (2002 – R$ 170,228 thousand), of which R$ 680,759 thousand comprises extraordinary amortization of goodwill in Banco Mercantil de São Paulo S.A. (Note 31). Remaining goodwill will be amortized over a period varying from 4 to 10 years.

b) Other deferred charges

We present below the composition of other deferred charges

  At September 30 – In thousands of reais
 
  Cost Amortization Residual
value
 
Systems development 899,105  (486,269) 412,836 
Other deferred charges 252,625  (110,482) 142,143 
Total in 2003 1,151,730  (596,751) 554,979 
Total in 2002 997,314  (544,379) 452,935 

18) DEPOSITS, DEPOSITS RECEIVED UNDER SECURITY REPURCHASE AGREEMENTS AND FUNDS FROM ACCEPTANCE AND ISSUANCE OF SECURITIES

a) Deposits and deposits received under security repurchase agreements

At September 30 – In thousands of reais
Up to 30 days From 31 to 60 days From 61 to 90 days From 91 to 180 days From 181 to 360 days From 1 to 3 years More than 3 years Total
•  Demand deposits (1) 11,240,025  -  -  -  -  -  -  11,240,025 
• Savings deposits (1) 20,896,669  -  -  -  -  -  -  20,896,669 
• Interbank deposits 402,856  5,337  287  110  2,708  6  -  411,304 
• Time deposits 4,971,107  899,415  944,274  1,920,790  3,394,836  13,520,916  146,892  25,798,230 
• Deposits received under
security repurchase
agreements 21,704,247  16,010  -  1,488  33,082  1,312,517  1,678  23,069,022 
Total in 2003 59,214,904  920,762  944,561  1,922,388  3,430,626  14,833,439  148,570  81,415,250 
Total in 2002 41,813,591  1,367,824 1,814,223  2,016,188  3,747,451  12,107,217  234,772  63,101,266 
(1)

Demand and savings deposits are classified as up to 30 days, without considering the average historical turnover.

b) Funds from acceptance and issuance of securities

At September 30 – In thousands of reais
Up to 30 days From 31 to 60 days From 61 to 90 days From 91 to 180 days From 181 to 360 days From 1 to 3 years More than 3 years Total
Securities – Local                
•  Mortgage notes 59,606  51,029  42,320  85,225  601,202  28,552  -  867,934 
•  Debentures 3,889  3,589  4,166  6,616  -  1,320  -  19,580 
Subtotal 63,495  54,618  46,486  91,841  601,202  29,872  -  887,514 
Securities – Foreign: (1)
•  Commercial paper -  280,427  -  24  294,975  -  -  575,426 
•  Eurobonds 813,697  -  747,340  684,298  565,756  869,442  -  3,680,533 
•  Euronotes 91,862  -  146,130  29,226  189,969  -  -  457,187 
•  Fixed-rate euronotes 134  -  6,892  2,227  13,447  224,541  -  247,241 
•  Promissory notes 29,782  -  -  -  -  29,234  -  59,016 
•  Euro CD issued 17,496  3,992  4,561  7,630  -  -  -  33,679 
Subtotal 952,971  284,419  904,923  723,405  1,064,147  1,123,217  -  5,053,082 
Total in 2003 1,016,466  339,037  951,409  815,246  1,665,349  1,153,089  -  5,940,596 
% 17.1 5.7 16.0 13.8 28.0 19.4 - 100.0
Total in 2002 2,631,728  749,705  718,715  116,150  618,788  947,597  56,330  5,839,013 
% 45.1 12.8 12.3 2.0 10.6 16.2 1.0 100.0
(1)

These consist of funds obtained from banks abroad and official institutions from the issuance of notes in the international market (Eurobonds) and under National Monetary Council (CMN) Resolution 2770/2000 for (i) onlending to local customers, repayable monthly through 2006, with interest payable semiannually at LIBOR or prime rate, plus a spread, and (ii) for financing exchange operations for customers, through purchase and sale of foreign currencies, discounts of export bills, pre-financing of exports and financing of imports, mainly on a short-term basis.

c) Expenses with funding and price-level restatement and interest on technical reserves for insurance, private pension plans and savings bonds.

We present below the composition of expenses:

Nine-month period - In thousands of reais
 
  2003 2002
 
Savings deposits 1,603,974  1,133,245 
Time deposits 3,692,450  2,236,734 
Deposits received under security repurchase agreements 2,946,672  1,329,752 
Funds from issuance of securities (81,328) 2,839,031 
Allocation of exchange variation of foreign branches (420,679) 3,276,832 
Expenses for price-level restatement and interest on technical
reserves for insurance, private pension plans and savings bonds 2,419,158  1,262,474 
Other funding expenses 189,237  182,949 
Total 10,349,484  12,261,017 

19) BORROWINGS AND ONLENDINGS

a) Borrowings

At September 30 – In thousands of reais
Up to 30 days From 31 to 60 days From 61 to 90 days From 91 to 180 days From 181 to 360 days From 1 to 3 years More than 3 years Total
Local:                
•  Official institutions 2,009  -  -  -  -  -  -  2,009 
•  Other institutions 72,364  -  -  -  -  105,089  -  177,453 
Foreign 1,194,897  457,196  1,223,620  2,304,686  1,983,449  776,623  2,953  7,943,424 
Total in 2003 1,269,270  457,196  1,223,620  2,304,686  1,983,449  881,712  2,953  8,122,886 
% 15.6 5.6 15.1 28.4 24.4 10.9 - 100.0
Total in 2002 3,081,375  1,297,129  1,430,394  2,429,458  2,508,883  1,674,663  8,360  12,430,262 
% 24.8 10.4 11.5 19.5 20.2 13.5 0.1 100.0

b) Onlendings:

At September 30 – In thousands of reais
Up to 30 days From 31 to 60 days From 61 to 90 days From 91 to 180 days From 181 to 360 days From 1 to 3 years More than 3 years Total
Local:                
•  National Treasury -  -  -  -  51,665  -  -  51,665 
•  National Bank for Economic and Social Development – BNDES 122,540  50,545  64,628  174,031  440,653  1,270,972  929,047  3,052,416 
•  Federal Savings Bank – CEF 18,353  4,363  4,374  13,191  26,686  110,941  286,218  464,126 
•  Government Agency for Machinery and Equipment Financing – FINAME 132,268  101,186  97,664  274,824  612,229  1,576,566  669,937  3,464,674 
•  Other institutions 1,704  -  -  -  -  -  -  1,704 
Foreign:
•  For onlending to housing loan borrowers 22,417  26  35  2  1,650  4,882  -  29,012 
Total in 2003 297,282  156,120  166,701  462,048 1,132,883 2,963,361  1,885,202  7,063,597 
% 4.2  2.2  2.4  6.5  16.0  42.0  26.7  100.0 
Total in 2002 886,275  282,095  138,310  390,673  777,004  2,338,823  2,111,373  6,924,553 
% 12.8  4.1  2.0  5.6  11.2  33.8  30.5  100.0 

c) Expenses for borrowings and onlendings

We present below the composition of expenses for borrowings and onlendings:

Nine-month period - In thousands of reais
 
  2003 2002
 
Loans:    
• Local 2,179  38,829 
• Foreign 69,832  148,563 
Subtotal 72,011  187,392 
Local onlendings:
• National Treasury 2,425  512 
• BNDES 153,268  760,275 
• CEF 29,773  18,938 
• FINAME 233,907  276,112 
• Other institutions 13  111 
Foreign onlendings:
• Payables to foreign bankers 240,306  5,719,924 
• Other expenses for foreign onlendings (83,951) 243,868 
Subtotal 575,741  7,019,740 
 
Allocation of exchange variation of foreign subsidiaries (54,678) 821,295 
Total 593,074  8,028,427 

20) CONTINGENT LIABILITIES

The Bradesco Organization is currently a defendant in a number of legal suits in the labor, civil and tax spheres, arising from the normal course of its business activities.

The provisions were recorded based on the opinion of the Organization’s legal advisors, the types of lawsuit, similarity with previous suits and complexity, available jurisprudence and court sentences, whenever loss was deemed probable.

The Organization’s Management considers that the provision recorded for contingencies is sufficient to cover probable losses generated by the corresponding legal proceedings.

Labor Claims

Labor claims are generated by normal employee turnover matters and mostly comprise claims for unpaid overtime.

From 1992, employee hours are controlled electronically and accordingly claims on an individual basis are, for the most part, no longer significant.

Civil Suits

These arise during the normal course of certain work routines and comprise claims for pain and suffering and pecuniary damages, mainly protests, bounced checks and the inclusion of names in the restricted credit registry.

In general, these claims do not comprise facts which could cause a significant effect on financial results.

Tax Proceedings

The Bradesco Organization is disputing the legality of certain taxes and contributions, for which provisions have been recorded in full, despite the likelihood of a successful medium and long-term outcome based on the opinion of their legal advisors.

The provisions recorded, segregated by legal sphere are as follows:

At September 30 - In thousands of reais
 
  2003 2002
 
Labor claims 866,097  589,375 
Civil suits 364,107  295,582 
Subtotal (1) 1,230,204  884,957 
Tax proceedings (2) 2,651,578  2,169,090 
Total 3,881,782  3,054,047 
(1)

See Note 22.

(2)

Recorded under “Other Liabilities – Taxes and Social Security Contributions”.

21) SUBORDINATED DEBT

Subordinated debt has the following characteristics:

At September 30 - In thousands of reais
Notes Date issued Transaction amount Maturity Remuneration Consolidated book value in 2003 Consolidated book value in 2002
Subordinated debt December/2001 353,700  2011 U.S. debt notes
+ 5.5% p.a.		 445,394  592,563 
 
Subordinated debentures December/2001 600,000  2008 100.0% of
CDI + 0.75% p.a.		 630,457  626,757 
 
Subordinated CDB March/2002 549,000  2012 100.0% of
DI - CETIP		 714,616  576,597 
 
Subordinated debt (1) April/2002 315,186  2012 4.05% rate p.a. 407,344  546,369 
 
Subordinated CDB July/2002 41,201  2012 100.0% of
CDI + 0.75% p.a.		 54,397  43,560 
 
Subordinated CDB October/2002 200,000  2012 102.5% of CDI 246,240  - 
 
Subordinated CDB October/2002 500,000  2012 100.0% of
CDI + 0.87% p.a.		 617,069  - 
 
Subordinated CDB October/2002 33,500  2012 101.5% of CDI 41,099  - 
 
Subordinated CDB October/2002 65,150  2012 101.0% of CDI 79,651  - 
 
Subordinated CDB November/2002 66,550  2012 101.0% of CDI 81,170  - 
 
Subordinated CDB November/2002 134,800  2012 101.5% of CDI 164,216  - 
 
Total   2,859,087      3,481,653  2,385,846 
(1)

This rate increases to 10.15% p.a. when swap to U.S. dollar cost is included.

22) OTHER LIABILITIES – SUNDRY

At September 30 - In thousands of reais
 
  2003 2002
 
Provision for accrued liabilities 1,323,164  894,344 
Provision for contingent liabilities (civil and labor)(1) 1,230,204  884,957 
Sundry creditors 1,761,802  1,496,743 
Provision for exchange variation -  948,617 
Acquisition of assets and rights 219,673  234,606 
Official operating agreements 152,451  123,931 
Other 216,863  169,667 
Total 4,904,157  4,752,865 
(1)

See Note 20.

23) INSURANCE OPERATIONS, PRIVATE PENSION PLANS AND SAVINGS BONDS

a) Technical reserves

At September 30 - In thousands of reais
Insurance
Private Pension Plans
Savings Bonds
TOTAL
  2003
2002
2003
2002
2003
2002
2003
2002
Technical reserves – Current:
Unearned premiums 1,012,587  848,674  26,615  22,847  -  -  1,039,202  871,521 
Unsettled claims 336,400  298,161  139,783  71,710  -  -  476,183  369,871 
Loss reserve –IBNR 579,361  423,334  144,561  83,654  -  -  723,922  506,988 
Mathematical reserve for benefits granted -  -  278,996  216,087  513,727  5,438  792,723  221,525 
Provision for redemptions -  -  52,618  28,003  -  -  52,618  28,003 
Provision for draws and redemptions -  -  -  -  170,330  127,274  170,330  127,274 
Other reserves 20,285  15,744  28,959  10,526  67,368  22,882  116,612  49,152 
Subtotal 1,948,633  1,585,913  671,532  432,827  751,425  155,594  3,371,590  2,174,334 
Technical reserves:
Reserve for financial/technical excess -  -  183,158  192,441  -  -  183,158  192,441 
Reserve for risk/financial fluctuation -  -  2,296,856  1,788,043  -  -  2,296,856  1,788,043 
Mathematical reserve of benefits to be granted -  - 15,819,075  9,758,030  1,027,456  1,272,235  16,846,531  11,030,265 
Mathematical reserve for benefits granted -  -  1,758,564  1,410,845  -  -  1,758,564  1,410,845 
Other reserves -  -  4,166  4,490  -  -  4,166  4,490 
Subtotal -  - 20,061,819 13,153,849 1,027,456 1,272,235 21,089,275 14,426,084
Total 1,948,633  1,585,913 20,733,351 13,586,676 1,778,881 1,427,829 24,460,865 16,600,418

b) Guarantee of technical reserves for insurance, private pension plans and savings bonds

We present below the amounts of the assets and rights offered as coverage of technical reserves for insurance, private pension plans and savings bonds:

At September 30 - In thousands of reais
Insurance
Private Pension Plans
Savings Bonds
TOTAL
  2003
2002
2003
2002
2003
2002
2003
2002
Government securities and corporate bonds 1,689,939  1,042,671  20,993,247  12,947,995  1,717,829  1,197,946  24,401,015  15,188,612 
Listed company stock 65,026  194,892  814,913  991,591  238,246  223,621  1,118,185  1,410,104 
Credit rights 354,810  329,923  -  -  -  -  354,810  329,923 
Real estate 35,497  78,291  1,561  34,043  5,870  16,023  42,928  128,357 
Total 2,145,272  1,645,777  21,809,721  13,973,629  1,961,945  1,437,590  25,916,938  17,056,996 

c) Premiums retained for insurance, private pension plans and savings bonds

We present below the composition of income on insurance premiums, private pension plan contributions and savings bond certificates.

Nine-month period - In thousands of reais
 
  2003 2002
 
Premiums issued 7,234,791  5,367,781 
Premiums reimbursed (128,466) (108,945)
Coinsurance premiums assigned (239,913) (159,341)
Private pension plan contributions 1,595,910  1,513,960 
Income on savings bond certificates 842,028  680,545 
Overall net revenue 9,304,350  7,294,000 
Reinsurance premiums assigned (506,158) (402,684)
Premiums retained for insurance, private pension plans and savings bonds 8,798,192  6,891,316 

24) MINORITY INTEREST IN SUBSIDIARIES

At September 30 - In thousands of reais
 
  2003 2002
 
Financial area:    
Banco Finasa de Investimento S.A. 9,260  8,409 
Bradesco Templeton Asset Management Ltda. 2,217  1,901 
Banco Baneb S.A. (1) 1,013  462 
Banco BEA S.A. (1) -  15,721 
Banco Mercantil de São Paulo S.A. (1) -  101,124 
Other minority interest 350  752 
Subtotal 12,840  128,369 
Insurance and pension plan area:
Indiana de Seguros S.A. 32,254  28,795 
União Novo Hamburgo Seguros S.A. 10,664  12,393 
Bradesco Seguros S.A. 9,541  7,180 
Other minority interest 2,575  2,546 
Subtotal 55,034  50,914 
Other activities:
Sete Quedas Empreendimentos Imobiliários e Participações Ltda. 40,729  40,551 
Baneb Corretora de Seguros S.A. 2,365  2,029 
Pevê Prédios S.A. (2) -  20,583 
Pevê Finasa Participações e Prédios S.A. (2) -  11,386 
Other minority interest 23  3,038 
Subtotal 43,117  77,587 
Total 110,991  256,870 
(1)

Acquisition/incorporation of shares of minority stockholders.

(2)

Merged into Banco Mercantil de São Paulo S.A. in January 2003.

25) STOCKHOLDERS' EQUITY (PARENT COMPANY)

a) Composition of capital stock

Fully subscribed and paid-up capital comprises nominative-registered shares, with no par value, as follows:

    At September 30, 2003
 
  Total Treasury Stock Outstanding Shares
 
Common stock 798,940,057,872  - 798,940,057,872 
Preferred stock 786,939,365,428  - 786,939,365,428 
Total 1,585,879,423,300  - 1,585,879,423,300 

    At September 30, 2003
 
  Total Treasury Stock Outstanding Shares
 
Common stock 729,140,590,385  9,326,200,000  719,814,390,385 
Preferred stock 708,537,611,452  -  708,537,611,452 
Total 1,437,678,201,837  9,326,200,000  1,428,352,001,837 

b) We present below the movement of capital stock

  Total Shares  
 
  Common Stock Preferred Stock Total
 
At September 30, 2002 729,140,590,385  708,537,611,452  1,437,678,201,837 
Cancellation of shares for the period (9,797,900,000) -  (9,797,900,000)
Subscription of shares for the period 33,652,745,021  33,147,254,979  66,800,000,000 
Allocation of shares to minority stockholders of
Banco Mercantil 10,462,433,059  10,305,279,290  20,767,712,349 
Allocation of shares to minority stockholders of
BBV Banco 35,482,189,407  34,949,219,707  70,431,409,114 
At September 30, 2003 798,940,057,872  786,939,365,428  1,585,879,423,300 

At the Extraordinary General Meeting held on January 10, 2003, approval was given for the cancellation of 9,797,900,000 common nominative-registered shares, of the Bank’s own capital, with no par value, held in treasury, without decreasing capital, which were acquired by the Bank by decision of the Board of Directors at the meetings held on April 1, July 11 and November 26, 2002.

At the Extraordinary General Meeting held on March 10, 2003, approval was given to increase capital by R$ 399,000 thousand to R$ 5,599,000 thousand, through the capitalization of the balance of the following reserve: “Capital reserve – Share premium” - R$ 7,435 thousand and a portion of the “Revenue reserve – Statutory” account - R$ 391,565 thousand, with no new issue of shares pursuant to Clause One of Article 169 of Law 6404/76.

At the Extraordinary General Meeting held on March 31, 2003, approval was given to ratify the capital increase approved at the Extraordinary General Meeting held on January 10, 2003 in the amount of R$ 501,000 thousand from R$ 5,599,000 thousand to R$ 6,100,000 thousand, through the subscription of 66,800,000,000 new nominative-registered shares with no par value, of which 33,652,745,021 are common and 33,147,254,979 are preferred shares.

At the Extraordinary General Meeting held on March 31, 2003, approval was given for a capital increase in the amount of R$ 158,735 thousand, from R$ 6,100,000 thousand to R$ 6,258,735 thousand, through the issue of 20,767,712,349 new nominative-registered shares with no par value, of which 10,462,433,059 are common and 10,305,279,290 are preferred shares, in the proportion of 23.94439086 Bradesco shares for each Banco Mercantil share, of which 12.06279162 are common and 11.88159924 are preferred shares, to be attributed to the minority stockholders of Banco Mercantil, regardless of the type of shares held by them in Mercantil. At the same meeting, approval was given to increase capital by R$ 41,265 thousand to R$ 6,300,000 thousand through the capitalization of a portion of the account balance of “Revenue reserve – Statutory”, with no new issue of shares.

At the Extraordinary General Meeting held on June 9, 2003, approval was given for a capital increase of R$ 630,000 thousand, from R$ 6,300,000 thousand to R$ 6,930,000 thousand, through the issue of 70,431,409,114 new nominative-registered shares, with no par value, of which 35,482,189,407 are common and 34,949,219,707 are preferred shares, in the proportion of 44.422475667 Bradesco shares for each BBV Banco share, of which 22.379315072 are common and 22.043160595 are preferred shares, to be attributed to the minority stockholders of BBV Banco, regardless of the type of shares held by them in BBV Banco. At the same meeting, approval was given to increase capital by R$ 70,000 thousand to R$ 7,000,000 thousand, through the capitalization of a portion of the account balance of “Revenue reserve – Statutory”, with no new issue of shares.

At the Extraordinary General Meeting held on August 6, 2003, approval was given for the acquisition of up to 40 billion nominative-registered shares, with no par value, of which 15 billion are common and 25 billion are preferred shares, to be held in treasury and subsequently sold or cancelled, with no capital decrease. Up to September 30, 2003, no shares had been acquired.

c) Interest attributed to own capital

Non-voting preferred shares are entitled to all rights and benefits attributed to common shares and in conformity with the Bank’s statutes have priority to repayment of capital and 10% additional interest attributed to own capital and/or dividends, in accordance with the provisions of paragraph 1, item II of Article 17 of Law 6404/76, as amended by Law 10303/2001.

In conformity with the Bank’s statutes, stockholders are entitled to interest attributed to own capital and/or dividends which total at least 30% of net income for the period, adjusted in accordance with Brazilian corporate legislation.

Interest attributed to own capital is calculated based on the stockholders' equity accounts and limited to the variation in the long-term interest rate (TJLP), subject to the existence of profits, computed prior to the deduction thereof, or of retained earnings and revenue reserves in amounts that are equivalent to or exceed twice the amount of such interest.

At the Board of Directors meeting held on March 5, 2003, approval was given to increase monthly interest attributed to own capital, paid in advance to stockholders, by 20%, from R$ 0.0117650 to R$ 0.0141180, per thousand common shares and from R$ 0.0129415 to R$ 0.0155298, per thousand preferred shares, effective as from March 2003.

It is the Bank’s policy to distribute, during the year, all the interest attributed to own capital, determined in conformity with the above criteria and to compute this interest for the minimum compulsory dividend, net of withholding tax (IRRF).

Interest attributed to own capital – January 1 to September 30, 2003

In thousands of reais
Details Per thousand shares (Gross) Amount paid/accrued gross  Withholding tax - IRRF (15%)  Amount paid/accrued net 
 
Common Preferred
Monthly 0.1223560 0.1345916 192,224  28,834  163,390 
Interim (1) 0.1411800 0.1552980 231,915  34,787  197,128 
Accrued 0.3457993 0.3803792 575,608  86,341  489,267 
Total 0.6093353 0.6702688 999,747  149,962  849,785 
(1)

Declared on June 30, 2003 and paid on July 31, 2003.

The movement of stockholders’ equity for the period from January 1 to September 30, may be summarized as follows:

In thousands of reais
 
  2003 2002
 
Opening balance 10,845,729  9,767,946 
Capital increase 1,289,735  - 
Prior year adjustments – securities -  218,249 
Share premium, acquisition of own shares and others 7,902  (115,114)
Mark-to-market adjustment – securities and derivatives 231,999  (379,376)
Net income 1,591,202  1,324,555 
Interest attributed to own capital (paid and accrued) (999,747) (316,249)
Closing balance 12,966,820  10,500,011 

26) COMMISSIONS AND FEES

Nine-month period - In thousands of reais
 
  2003 2002
 
Checking account 796,447  643,531 
Collection 439,695  409,004 
Fund management services 414,364  358,659 
Credit cards 597,720  458,369 
Credit operations 409,548  294,145 
Interbank charges 188,921  186,513 
Receipt of taxes 138,149  124,960 
Custody and brokerage services 28,106  29,475 
Other 258,903  215,979 
Total 3,271,853  2,720,635 

27) PERSONNEL EXPENSES

Nine-month period - In thousands of reais
 
  2003 2002
 
Remuneration 1,733,789  1,490,488 
Single payment bonus 97,774  75,012 
Benefits 706,099  537,118 
Social charges 587,385  557,959 
Training 45,916  33,664 
Employee profit sharing 127,966  99,293 
Other 208,499  234,986 
Total 3,507,428  3,028,520 

28) ADMINISTRATIVE EXPENSES

Nine-month period - In thousands of reais
 
  2003 2002
 
Third-party services 571,817  493,180 
Communications 454,603  397,985 
Depreciation and amortization 403,439  302,874 
Financial system services 260,352  245,724 
Leasing 208,897  154,074 
Transport 266,225  220,503 
Data processing 198,766  169,786 
Advertising and publicity 232,806  232,876 
Rents 205,846  138,799 
Maintenance and repairs 174,328  159,366 
Materials 129,194  107,752 
Water, electricity and gas 83,113  64,505 
Travel 46,155  43,266 
Other 250,683  186,682 
Total 3,486,224  2,917,372 

29) OTHER OPERATING INCOME

Nine-month period - In thousands of reais
 
  2003 2002
 
Other financial revenue 321,766  639,165 
Reversal of other operating provisions (1) 1,066,189  334,497 
Recovery of charges and expenses 97,632  93,177 
Income on sale of goods 125,185  105,813 
Other 284,503  218,966 
Total 1,895,275  1,391,618 
(1)

Includes reversal of provision for exchange variation.

30) OTHER OPERATING EXPENSES

Nine-month period - In thousands of reais
 
  2003 2002
 
Other financial expenses 863,949  1,123,159 
Sundry losses 223,432  216,024 
Amortization of goodwill 180,837  170,228 
Cost of sales and services 299,436  223,980 
Other operating provisions 42,741  39,654 
Provision for exchange variation -  948,617 
Other 202,724  220,845 
Total 1,813,119  2,942,507 

31) NON-OPERATING INCOME

Nine-month period - In thousands of reais
 
  2003 2002
 
Extraordinary amortization of goodwill (1) (680,759) - 
Profit (loss) on sale and write-off of assets and investments (98,683) (50,875)
Income on sale of branches at auctions 97,848  134,046 
Non-operating provisions recorded/reversed (70,567) (12,577)
Other (15,420) 60,944 
Total (767,581) 131,538 
(1)

Goodwill held by Boavista DTVM in Banco Mercantil de São Paulo S.A., following the merger approved on March 31, 2003, was amortized on an extraordinary basis pursuant to BACEN Circular 3017/2000.

32) TRANSACTIONS WITH SUBSIDIARY AND ASSOCIATED COMPANIES (DIRECT AND INDIRECT)

The main transactions with subsidiary and associated companies were carried out at average market terms and prices at the time of the transactions and are summarized below:

  At September 30 - In thousands of reais
 
  2003 2002
 
  Assets Income Assets Income
  (liabilities) (expenses) (liabilities) (expenses)
 
Interest attributed to own capital and dividends (a):
Bradesco Seguros S.A. 86,883  -  504,294  - 
Banco Baneb S.A. 70,650  -  14,525  - 
Banco BCN S.A. 80,380  -  45,491  - 
Banco Boavista Interatlântico S.A. 376,852  -  31,202  - 
Other subsidiary and associated companies 11,468  -  11,738  - 
 
Exchange purchases pending settlement (b):
Banco BCN S.A. 36,739  1,901  92,745  2,626 
Other subsidiary and associated companies -  2,167  6,171  1,731 
 
Pre-export operations (c):
Banco BCN S.A. – foreign 167,393  3,121  343,409  5,415 
Other subsidiary and associated companies -  301  -  17 
 
Exchange purchase payables (d):
Banco BCN S.A. (36,894) (1,106) (93,525) (3,841)
Other subsidiary and associated companies -  -  (6,093) (733)
 
Demand deposits:
Banco BCN S.A. – foreign (23,684) -  (14,823) - 
Banco Boavista Interatlântico S.A. – foreign (6,770) -  -  - 
Banco Mercantil de São Paulo S.A. – foreign (2,233) -  (13,800) - 
Banco BCN Leasing S.A. Arrendamento Mercantil (1,282) -  (2,267) - 
Bradesco Vida e Previdência S.A. (34,446) -  (29,308) - 
Cidade Capital Markets Limited (697) -  (164,457) - 
Other subsidiary and associated companies (13,166) -  (14,871) - 
 
Time deposits:
ABS-Empreend. Imob., Partic. e Serviços S.A. (60,738) (6,164) -  - 
Átria Participações S.A. -  (2,716) (41,280) (1,280)
Bradesco Seguros S.A. (2,583) (626) (30,215) (2,720)
Bradesco Argentina de Seguros S.A. (183) (450) (52,221) (503)
Banco Mercantil de São Paulo S.A. (1,411) (119) (53,750) (174)
Other subsidiary and associated companies (25,562) (4,635) (21,624) (3,315)
 
Deposits/Interbank deposits (e):
Deposits:
Banco BCN S.A. (664,752) (17,137) (248,474) (24,417)
Banco BEA S.A. -  (7,670) (100,918) (5,084)
Banco Boavista Interatlântico S.A. (6,982) (46,706) (401,617) (4,942)
Boavista Banking Limited (100,298) (991) (75,841) (521)
Boavista S.A. - Arrendamento Mercantil (15,202) (30,331) -  - 
Banco de Crédito Real de Minas Gerais S.A. -  (31,292) -  (19,347)
Bradesco BCN Leasing S.A. Arrendamento Mercantil (1,954,592) (328,658) (721,936) (86,135)
BBV Banco -  (73,664) -  - 
Banco Mercantil de São Paulo S.A. (205,305) (21,493) (86,794) (1,795)
Banco Finasa de Investimentos S.A. (77,805) (12,390) -  - 
Cidade Capital Markets Limited (86,259) (572) -  - 
Pontenza Leasing S.A. Arrendamento Mercantil (39,190) (76,856) -  - 
Other subsidiary and associated companies (20,306) (15,898) -  (370)
 
Interbank deposits:
Banco BCN S.A. 80,513  405,572  1,658,269  170,719 
Banco Boavista Interatlântico S.A. 693,643  31,924  959,121  26,059 
Banco Finasa S.A. 4,127,952  599,289  3,600,207  345,313 
Banco Mercantil de São Paulo S.A. -  88,915  396,495  54,466 
Other subsidiary and associated companies 17,543  536  102,982  7,127 
 
Deposits received under security repurchase agreements/
open market investments (f):
Deposits received under security repurchase agreements:
 
Bradesco S.A. – CTVM (18,195) (6,375) (47,490) (5,634)
Banco Baneb S.A. (405,182) (54,576) -  (85)
Banco BCN S.A. (634,236) (58,854) (617,164) (15,751)
BBV Banco (309,100) (4,390) -  - 
Banco Boavista Interatlântico S.A. (1,423,185) (169,833) (13,019) (923)
Banco de Crédito Real de Minas Gerais S.A. (2,800) (92,529) (3,330) (134)
Banco Finasa S.A. (24,400) (5,172) (47,500) (3,852)
Banco Mercantil de São Paulo S.A. (23,300) (41,926) (343,099) (21,334)
Other subsidiary and associated companies (13,734) (1,397) -  (873)
 
Open market investments:
Banco BCN S.A. -  4,062  -  140,292 
Banco Baneb S.A. 397,725  45,343  22,699  9,886 
Banco BEA S.A. -  11,409  158,558  20,968 
Banco Boavista Interatlântico S.A. 1,400,615  181,025  -  250 
Banco Mercantil de São Paulo S.A. 115,354  23,689  -  - 
Other subsidiary and associated companies -  12,054  -  7,633 
 
Derivative financial instruments (swap) (g):
BBV Banco (5,584) (6,953) -  - 
Banco BCN S.A. 1,407  91,407  (43) (30,971)
Bradesco BCN Leasing S.A. Arrendamento Mercantil 361  279  (8,772) (14,834)
Banco Mercantil de São Paulo S.A. -  (46,476) -  8,402 
Other subsidiary and associated companies (117) (117) -  (4,716)
 
Borrowings and onlendings – foreign (h):
Banco BCN S.A. (40,610) (2,418) (405,774) (7,772)
Banco Bradesco Luxembourg S.A. (29,597) (839) (39,394) (339)
Banco Boavista Interatlântico S.A. (23,155) (447) (34,366) (267)
Banco Mercantil de São Paulo S.A. -  (213) (32,230) (214)
Other subsidiary and associated companies (8,549) (907) (9,730) (125)
 
Reimbursement of costs (i):
Bradesco BCN Leasing S.A. Arrendamento Mercantil 121  945  88  818 
 
Services rendered (j):
Scopus Tecnologia S.A. (945) (68,705) (750) (55,690)
CPM S.A. (272) (22,354) (220) (28,383)
Other subsidiary and associated companies (15) 341  (9) 113 
 
Branch rents:
ABS-Empreend. Imob., Partic. e Serviços S.A. -  (29,259) -  (38,075)
Bradesco Vida e Previdência S.A. -  (4,566) -  (6,066)
Bradesco Seguros S.A. -  (1,943) -  (3,865)
Banco Mercantil de São Paulo S.A. -  (5,987) -  - 
Other subsidiary and associated companies -  (7,033) -  (6,287)
 
Foreign securities (k):
Banco BCN S.A. 45,682  1,099  100,190  23,021 
Other subsidiary and associated companies -  25  2,427  42 
 
Securities:
Bradesco BCN Leasing S.A. Arrendamento Mercantil 1,571,447  196,997  -  - 
Cibrasec – Companhia Brasileira de Securitização 620  -  951  - 
 
Securities issued abroad:
BBV Banco (54,135) (473) -  - 
Bradesco Securities Inc. (21,100) (225) -  - 
Other subsidiary and associated companies (738) (206) -  (89)
 
Interbank onlendings (l):
Banco BCN S.A. -  -  (25,283) (499)
Other subsidiary and associated companies -  (492) -  (1,975)
 
Accrued liabilities:
BBV – Administradora de Cartões Ltda. (5,131) -  -  - 
 
Healthcare plans (m):
Bradesco Saúde S.A. -  (103,899) -  (88,943)
 
Private pension plans (n):
Bradesco Vida e Previdência S.A. -  (170,038) -  (74,658)

a)

Interest attributed to own capital/dividends declared/paid by the companies.

 
b)

Foreign exchange portfolio transactions in the interbank market for ready settlement.

 
c)

Foreign credit lines for export financing in Brazil, subject to exchange variations and interest at rates practiced in the international market.

 
d)

These payables are recorded as a counter-entry to exchange purchases pending settlement.

 
e)

Short-term interbank investments - interbank deposits of related companies at CDI rate (Certificate of Interbank Deposit).

 
f)

Repurchase and/or resale commitments pending settlement, guaranteed by government securities at normal market rates.

 
g)

Differences between amounts receivable and payable on swaps.

 
h)

Foreign currency loans for financing of exports subject to exchange variation and bearing interest at international market rates.

 
i)

Costs reimbursed by Bradesco BCN Leasing S.A. Arrendamento Mercantil to Banco Bradesco S.A. on account of the use of its Branch network facilities for contracting lease operations.

 
j)

Contract with Scopus Tecnologia S.A. for IT equipment maintenance services and the contract with CPM S.A. for data processing systems maintenance services.

 
k)

Investments in foreign securities, fixed rate notes and eurobonds subject to exchange variations and carrying interest at rates used for securities placed in the international market.

 
l)

Payables on interbank onlendings - funds from rural loans bearing interest and charges corresponding to normal rates practiced for this type of transaction.

 
m)

Payments made by Banco Bradesco S.A. for healthcare plans of employees and their dependents.

 
n)

Contributions made by Banco Bradesco S.A. to private pension plans for employees and directors.

33) FINANCIAL INSTRUMENTS

a) Risk and risk management

The main risks related to financial instruments, arising from the business carried out by the Bank and its subsidiaries are as follows: credit risk; market risk; liquidity risk; and capital risk. The process used to manage these risks involves the Organization's diverse levels and embraces a range of different policies and strategies. The risk management policies are generally conservative and seek to limit absolute loss to a minimum.

Credit Risk

Credit risk is the risk arising from the possibility of loss due to the non-receipt of amounts contracted with borrowers and their related creditors. Credit risk management requires a strictly disciplined control over all analyses and transactions carried out, safeguarding process integrity and independence. Bradesco's credit policy is designed to ensure maximum security, quality and liquidity in the investment of assets, as well as flexible and profitable business, minimizing risks inherent to this type of operation and directing the establishment of operating limits and the granting of credit. Accordingly, the Credit Department and Committees located at the Bank's Headquarters are critical to policy implementation since they are responsible for gearing and managing this core strategic activity. The Branches work within varying limits, according to the size and types of underlying guarantee, subject to a centralized evaluation and accordingly in line with the Organization’s credit and risk management policy. Operations involving less significant amounts are subject to specialized automated credit scoring systems, maximizing the speed and security of the approvals process, based on strict protection standards. Operations are diversified, non-selective and focused on Consumer and Corporate customers with sound payment capacity and proven creditworthiness. Care is taken to ensure that related guarantees are sufficient to cover the risks assumed, considering the purpose and terms of the credit granted.

Market Risk

Market risk is related to the possibility of the loss of income from fluctuating rates caused by the unhedged terms, currencies and indices of the Bank's asset and liability portfolio. At Bradesco, market risks are managed through methodologies and models which are consistent with local and international market reality, ensuring that the Organization's strategic decisions are implemented with speed and a high level of reliability. The Organization adopts a conservative policy regarding market risk exposure and VaR (Value at Risk) limits are defined by Senior Management, and compliance is monitored daily by an area which is independent from portfolio management. The methodology used to determine VaR has a reliability level of 97.5%. The fluctuations and correlations used by the models are calculated on statistical bases and future prospects are calculated based on economic studies. The methodology applied and current statistical models are validated daily using backtesting techniques. We present below the VaR of the Consolidated Own Portfolio positions (Treasury):

At September 30, 2003 - In thousands of reais
 
Risk Factors 2003 2002
 
Prefixed 12,658  7,108 
Exchange coupon 19,000  23,041 
Foreign currency 184  1,988 
Floating rate 13  75 
Correlated effect (3,395) (8,008)
 
VaR (Value at Risk) 28,460  24,204 

In addition, a daily Gap Analysis is performed to measure the effect of the movement in the internal interest rate and foreign exchange coupon curves (interest spread paid above the foreign exchange variation) on the portfolio. Complementing the market risk monitoring, control and management structure and in accordance with Central Bank regulations, a daily verification is made of the values at risk for the fixed and foreign exchange positions of the Organization’s entire portfolio and of minimum capital requirements.

Liquidity Risk

Liquidity risk management is designed to control the different unhedged liquidation terms of the Bank's rights and obligations as well as the liquidity of the financial instruments used to manage the financial positions. Knowledge and monitoring of this risk is critical since it enables the Organization to settle transactions on a timely and secure basis. At Bradesco, liquidity risk management involves a series of controls, mainly, the establishment of technical limits and an ongoing assessment of the positions assumed and financial instruments used.

Capital Risk

The Organization's capital is managed to optimize the risk-return ratio, minimizing losses through the implementation of well-defined business strategies and maximizing efficiency in the combination of factors which impact the Capital Adequacy Ratio (Basel).

In thousands of reais
 
Calculation Basis - Capital Adequacy Ratio (Basel): Financial(1) Economic-
Financial (2)
 
Stockholders’ equity 12,966,820  12,966,820 
Minority interest 11,170  110,991 
 
Reference equity - Level I 12,977,990  13,077,811 
Reference equity - Level II (Subordinated Debt) 3,416,133  3,416,133 
 
Total reference equity (Level I + Level II) 16,394,123  16,493,944 
 
Risk-weighted assets 89,262,170  103,644,845 
 
Capital adequacy ratio at September 30, 2003 (3) 18.37% 15.91%
 
Capital adequacy ratio at September 30, 2002 15.55% 13.68%
(1)

Financial companies only.

(2)

Financial and non-financial companies.

(3)

Following the issuance of subordinated debt in October 2003, in the amount of R$ 1,397,385 thousand, the capital adequacy ratios, on a consolidated financial and economic and financial basis, were 19.93% and 17.26%, respectively.

b) Market Value

The book value, net of allowances for mark-to-market, of the main financial instruments and their corresponding market value at September 30, 2003 are summarized as follows:

At September 30, 2003 - In thousands of reais
 
  Book value Market value Potential gain (loss) Potential gain (loss), net of tax effects
 
Assets:        
Securities and derivative financial instruments 47,905,478  48,172,351  266,873  176,136 
Credit and leasing operations 52,776,421  53,067,726  291,305  192,261 
Investments (1) 504,392  507,843  3,451  2,278 
 
Liabilities:
Time deposits 25,798,230  25,817,398  (19,168) (12,651)
Funds from acceptance and issuance of securities 5,940,596  6,018,030  (77,434) (51,106)
Borrowings and onlendings 15,186,483  15,293,431  (106,948) (70,586)
Subordinated debt 3,481,653  3,493,890  (12,237) (8,076)
Total -  -  345,842  228,256 

(1)

Not including increment in investments in associated companies.

Determination of market value of financial instruments:

c) Derivatives

Bradesco carries out transactions involving financial instruments, which are recorded in balance sheet or memorandum accounts, for its own account and for customers. The derivative financial instruments are used by the Bank to hedge its asset and liability positions against the effect of exchange variations. The derivatives generally represent future commitments for exchanging currencies or indices, or purchasing and selling other financial instruments according to the terms and dates set forth in the contracts. Under the option contracts, the purchaser is entitled, but not obliged, to purchase or sell a financial instrument at a specific strike price in the future.

(I) The amounts of the instruments recorded in balance sheet and memorandum accounts at September 30, 2003 are summarized below:

In thousands of reais
 
  Overall
amount 		Net amount
 
Futures contracts
Purchase commitments: 11,236,046 
- Interbank market 2,069,658  - 
- Foreign currency 9,166,388  3,662,297 
Sale commitments: 11,756,524 
- Interbank market 6,252,433  4,182,775 
- Foreign currency 5,504,091  - 
 
Option contracts
Sale commitments: 68,185 
- Foreign currency 42,345  42,345 
- Other 25,840  25,840 
 
Forward contracts
Purchase commitments: 272,171 
- Foreign currency 272,171  - 
Sale commitments: 1,333,032 
- Foreign currency 1,333,032  1,060,861 
 
Swap contracts
Asset position: 11,386,429 
- Interbank market 4,062,288  - 
- Pre-fixed 455,399  - 
- Foreign currency 4,988,520  215,899 
- Reference rate (TR) 773,936  772,449 
- SELIC (Special Clearance and Custody System) 1,041,982  1,023,153 
- IGP-M (General Price Index – Market) 59,680  - 
- Other 4,624  - 
 
Liability position: 10,977,717 
- Interbank market 5,122,231  1,059,943 
- Pre-fixed 893,477  438,078 
- Foreign currency 4,772,621  - 
- Reference rate (TR) 1,487  - 
- SELIC 18,829  - 
- IGP-M 163,386  103,706 
- Other 5,686  1,062 

Derivatives include operations falling due in D+1 to be settled in currency at September 30, 2003 price levels.

Amounts relating to swap contracts are recorded in securities - derivative financial instruments and related outstanding amounts receivable total R$ 551,649 thousand and amounts payable, classified in liabilities – derivative financial instruments, total R$ 142,937 thousand.

(II) We present below the composition of derivative financial instruments (assets and liabilities) stated at restated cost and market value:

At September 30, 2003 – In thousands of reais
 
  Restated Cost Adjustment to
Market Value 		Market Value
Derivatives – Adjustment receivable 583,119  148,068  731,187 
Derivatives – Adjustment payable (301,858) (29,387) (331,245)
Total 281,261  118,681  399,942 

(III) Futures, option, forward and swap contracts fall due as follows:

At September 30 - In thousands of reais
 
  Up to 90
days 		From 91 to
180 days 		From 181 to
360 days 		More than
360 days 		2003 2002
 
Futures contracts 9,491,572  3,710,794  4,435,849  5,354,355  22,992,570  10,791,682 
Option contracts 68,185  -  -  -  68,185  22,452 
Forward contracts 1,427,212  130,008  47,983  -  1,605,203  772,068 
Swap contracts 2,308,381  1,638,261  3,074,800  3,813,338  10,834,780  9,841,165 
Total in 2003 13,295,350  5,479,063  7,558,632  9,167,693  35,500,738 
Total in 2002 8,518,440  3,038,384  2,994,207  6,876,336     21,427,367 

(IV) We present below the type of margin given as collateral for derivative financial instruments, comprising mainly futures contracts and corresponding amounts:

At September 30, 2003 - In thousands of reais
 
  2003 2002
 
Government Securities:
Central Bank Notes 1,935  942,422 
Federal Treasury Notes 6,689  246,601 
National Treasury Bonds 1,105,904  153,624 
Financial Treasury Notes 349,191  50,199 
Total 1,463,719  1,392,846 

V) We present below the amounts of net revenue and expense recorded in income for the period ended September 30:

Nine-month period - In thousands of reais
 
  2003 2002
 
Futures contracts (584,486) (450,764)
Option contracts 19,618  1,471 
Forward contracts 15,484  (20,571)
Swap contracts 595,699  (1,911,268)
Total 46,315  (2,381,132)

(VI) We present below the overall amounts of the derivative financial instruments, separated by place of trading:

At September 30, 2003 - In thousands of reais
 
  2003 2002
 
CETIP (counter) 7,804,361  10,033,515 
BM&F (floor) 27,696,377  11,393,852 
Total 35,500,738  21,427,367 

34) EMPLOYEE BENEFITS

Banco Bradesco and its subsidiaries sponsor a supplementary retirement pension plan for employees and directors. The unrestricted benefits generating plan (PGBL) is of the defined contribution type, which permits the accumulation of savings by participants over their professional careers through contributions paid by themselves and the sponsoring company. The related resources are invested in an Exclusive Financial Investment Fund – FIFE.

The program is managed by Bradesco Vida e Previdência S.A. and BRAM - Bradesco Asset Management Ltda. is responsible for the financial administration of the FIFE funds.

The contributions paid by employees and by Bradesco and its subsidiaries total 4% of salary, except for participants who in 2001 opted to migrate to the PGBL plan from the defined benefits plan and whose contributions to the PGBL plan were maintained at the levels in force for the defined benefits plan at the time of migration, respecting nevertheless the 4% minimum.

The actuarial liabilities of the defined contribution plan (PGBL) at September 30, 2003 total R$ 849,304 thousand and are fully covered by the net equity of the corresponding FIFE fund.

As well as the aforementioned defined contribution plan (PGBL), former participants of the defined benefits plan are guaranteed a proportional deferred benefit, corresponding to their accumulated rights in the latter plan. For participants of the defined benefits plan, transferred or not to the PGBL plan, retired participants and pensioners, the present value of the plan’s actuarial liabilities at September 30, 2003 totals R$ 1,573,983 thousand and is fully covered by guaranteeing assets.

The subsidiary Banco Baneb S.A. (into which Banco BEA S.A. was merged – Note 2) maintains a supplementary pension plan managed by Caixa de Previdência dos Funcionários do BEA – CABEA, which is currently undergoing a sponsorship withdrawal process, with base date established at November 30, 2002 and whose sponsor’s contributions ceased from December 1, 2002. The participants ceased to contribute as from the same date. The plan’s actuarial liabilities are fully covered by the net asset of the plans.

The subsidiary Banco Baneb S.A. and its subsidiaries are sponsors of supplementary pension plans of the defined contribution and defined benefits type, through Fundação Baneb de Seguridade Social – BASES (for former Baneb employees). The actuarial liabilities of the defined contribution and defined benefit plans are fully covered by the net assets of the plans.

The funds guaranteeing the private pension plans are invested in compliance with applicable legislation (government securities and corporate bonds, listed company stock and real estate).

Expenses with contributions made during the period totaled R$ 221,367 thousand (2002 - R$ 100,983 thousand).

In addition, Bradesco and its subsidiaries offer their employees and directors a number of other benefits including: healthcare insurance, dental care, group life and personal accident insurance, as well as professional training, the expenses for which, including the aforementioned contributions, totaled R$ 752,015 thousand (2002 - R$ 570,782 thousand) for the period.

35) INCOME TAX AND SOCIAL CONTRIBUTION

a) Calculation of income tax and social contribution charges:

Nine-month period - In thousands of reais
 
  2003 2002
 
Income before income tax and social contribution 1,898,779  1,782,268 
Composite income tax and social contribution at the statutory rates of 25% and 9%, respectively (645,585) (605,971)
Effect of additions and exclusions on tax calculation:
Equity in the earnings of subsidiary and associated companies (38,731) 179,473 
Non-deductible expenses, net of non-taxable income (117,535) (75,518)
Deferred tax assets recorded in prior-years 137,978  - 
Interest attributed to own capital (paid and accrued) 339,914  107,525 
Interest attributed to own capital (received) -  (2,326)
Other amounts 22,931  (68,717)
Income tax and social contribution benefit (expense)
for the period (301,028) (465,534)

b) Statement of income tax and social contribution benefit (expense)

Nine-month period - In thousands of reais
 
  2003 2002
 
Deferred tax assets    
Amount recorded/realized for the period on temporary additions 547,835  229,007 
Amount recorded/offset on opening balances:
Negative basis of social contribution (6,112) (10,060)
Tax loss (142,301) (71,549)
Prior-year deferred tax assets were recorded on:
Negative basis of social contribution 12,793  - 
Tax loss 119,696  - 
Temporary additions 5,489  - 
Recorded for the period on:
Negative basis of social contribution 41,929  92,850 
Tax loss 107,726  152,636 
Subtotal 687,055  392,884 
Current taxes
Income tax and social contribution payable (988,083) (858,418)
Provision for income tax and social contribution for the period (301,028) (465,534)

c) Statement of deferred income tax and social contribution assets

In thousands of reais
 
  Balance at December 31, 2002 Opening
balance -
Acquisitions 		Recorded Realized Balance at September 30, 2003
 
Allowance for loan losses 2,109,843  79,406  820,476  548,497  2,461,228 
Provision for civil contingencies 80,464  10,067  19,982  9,603  100,910 
Provision for tax contingencies 562,986  15,509  82,750  176,963  484,282 
Provision for labor claims 200,212  65,854  73,581  50,860  288,787 
Allowance for mark-to-market of securities and investments 126,502  9,880  32,815  24,620  144,577 
Provision for loss on non-operating assets 86,524  3,280  45,846  53,092  82,558 
Mark-to-market adjustment of trading securities 78,298  -  29,601  39,949  67,950 
Amortization of goodwill 29,664  -  255,939  38,613  246,990 
Provision for interest attributed to own capital -  -  195,707  -  195,707 
Other 137,342  88,899  94,460  155,636  165,065 
Total deferred tax assets on temporary differences 3,411,835  272,895  1,651,157  1,097,833  4,238,054 
Tax losses and negative basis of social contribution 443,461  164,035  282,144  148,413  741,227 
Subtotal 3,855,296  436,930  1,933,301  1,246,246  4,979,281 
Mark-to-market adjustment of securities available for sale 152,570  -  45,796  148,113  50,253 
Social contribution – Provisional Measure 2158-35 of August 24, 2001 952,445  -  -  16,832  935,613 
Total deferred tax assets (Note 13b) 4,960,311  436,930  1,979,097  1,411,191  5,965,147 
 
Deferred tax liabilities 473,684  6,088  -  32,497  447,275 
 
Deferred tax assets net of deferred tax liabilities 4,486,627  430,842  1,979,097  1,378,694  5,517,872 
 
- Percentage of net deferred tax assets on total reference equity (Note 33a) 31.1%       33.4%
- Percentage of net deferred tax assets on total assets 3.1%       3.4%

d) Expected realization of deferred tax assets on temporary differences, tax losses and negative basis of social contribution

In thousands of reais
 
  Temporary difference Tax loss and negative basis  
 
  Income tax Social
contribution 		Income tax Social
contribution 		Total
 
2003 (4th Qtr.) 404,894  141,579  76,879  25,149  648,501 
2004 1,120,373  392,291  88,671  26,392  1,627,727 
2005 1,213,112  359,101  90,872  32,539  1,695,624 
2006 403,196  137,720  144,004  44,977  729,897 
2007 39,284  13,982  122,268  21,708  197,242 
2008 (up to 3rd Qtr.) 9,237  3,285  60,425  7,343  80,290 
Total 3,190,096  1,047,958  583,119  158,108  4,979,281 

  In thousands of reais
 
  Deferred tax assets and social contribution - Provisional Measure 2158 – 35
 
  2003  2004  2005  2006  2007  2008 to
2012 		2013 to
2014 		Total 
 
Amount 33,890  35,306  39,899  45,097  49,879  579,545  151,997  935,613 

Projected realization of deferred tax assets is estimated and not directly related to expected book income.

The present value of deferred tax assets, calculated based on the average funding rate, net of tax effects totals R$ 5,169,539 thousand, of which R$ 3,864,557 thousand comprises temporary differences, R$ 641,586 thousand comprises tax losses and negative basis of social contribution and R$ 663,396 thousand comprises deferred social contribution assets (MP 2158-35).

e) Unrecorded deferred tax assets

Deferred tax assets were not recorded in the amount of R$ 265,180 thousand.

f) Deferred tax liabilities

The Bradesco Organization has deferred tax liabilities in the amount of R$ 447,275 thousand relating to: income tax and social contribution on mark-to-market adjustments of securities and derivative financial instruments - R$ 262,562 thousand; excess depreciation - R$ 143,019 thousand; revaluation reserve - R$ 24,429 thousand; and others – R$ 17,265 thousand.

36) OTHER INFORMATION

a) The net assets of the investment funds and portfolios managed by the Bradesco Organization at September 30, 2003 totaled R$ 90,662,922 thousand (2002 – R$ 59,064,831 thousand).

b) Other liabilities – Negotiation and intermediation of securities includes mainly amounts relating to the securitization of the future flow of payment orders received from abroad in the amount of R$ 1,164,210 thousand and securitization of the future flow of receivables on credit card invoices of customers resident abroad in the amount of R$ 799,960 thousand.

Report of the Audit Committee

Banco Bradesco S.A.

The undersigned members of the Audit Committee of Banco Bradesco S.A., in the performance of their legal and statutory duties, having reviewed the Directors‘ Report and the Financial Statements for the nine-month period ended September 30, 2003, and based on the unqualified report of KPMG Auditores Independentes, declare that said documents, based on the corporate legislation in force, present fairly the financial position of the Company, recommending the approval thereof by the Board of Directors.


Cidade de Deus, Osasco, SP, October 21, 2003
Ricardo Abecassis E. Santo Silva Sócrates Fonseca Guimarães Oswaldo de Moura Silveira

Independent auditors’ report on special review

To
The Administrative Council and Stockholders
Banco Bradesco S.A.
Osasco -SP

We have performed special review of the consolidated interim report of Banco Bradesco S.A. and its subsidiaries for the nine-month periods ended September 30, 2003 and 2002, comprising the balance sheets, the statements of income and changes in financial position and the respective notes to the consolidated interim report, which were prepared in conformity with accounting practices adopted in Brazil.

Our review was performed in conformity with the specific rules established by the Brazilian Institute of Independent Auditors (IBRACON), jointly with the Brazilian Federal Accounting Council, and consisted mainly of: (a) inquiries and discussions with the managers responsible for the accounting, financial and operational areas of the Bank and its subsidiaries, regarding to the principal criteria adopted in the preparation of the interim reports; and (b) review of information and subsequent events that have or may have a significant effect on the financial position and operations of Banco Bradesco S.A. and its subsidiaries.

Based on our special review, we are not aware of any significant modifications that should be made to the aforementioned consolidated interim report for it to be in conformity with accounting practices adopted in Brazil.

October 21, 2003

KPMG Auditores Independentes
CRC 2SP014428/O-6



Walter Iório Cláudio Rogélio Sertório
Accountant CRC 1SP084113/O-5 Accountant CRC 1SP212059/O-0

For further information. please contact:

Board of Executive Officers

José Luiz Acar Pedro - Executive Vice-President
and Director of Investor Relations

Phone: (# 55 11) 3681 – 4011

e-mail: 4000.acar@bradesco.com.br

General Secretariat – Investor Relations

Jean Philippe Leroy – Investor Relations Executive General Manager

Phone: (#55 11) 3684-9229 and 3684-9231
Fax: (#55 11) 3684-4570 and 3684-4630
e-mail: 4260.jean@bradesco.com.br

Cidade de Deus – Prédio Novo – 5º andar
Osasco – SP - 06029-900
BRAZIL

www.bradesco.com.br

 

 
SIGNATURE
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: November 03, 2003

 
BANCO BRADESCO S.A.
By:
  
/S/  José Luiz Acar Pedro
   
José Luiz Acar Pedro
Executive Vice President and Investor Relations Director
 

 
FORWARD-LOOKING STATEMENTS

This press release may contain forward-looking statements. These statements are statements that are not historical facts, and are based on management's current view and estimates of future economic circumstances, industry conditions, company performance and financial results. The words "anticipates", "believes", "estimates", "expects", "plans" and similar expressions, as they relate to the company, are intended to identify forward-looking statements. Statements regarding the declaration or payment of dividends, the implementation of principal operating and financing strategies and capital expenditure plans, the direction of future operations and the factors or trends affecting financial condition, liquidity or results of operations are examples of forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected events, trends or results will actually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.