bbdbook1q11_6k.htm - Generated by SEC Publisher for SEC Filing
 
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 May, 2011
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____

.

 

Table of Contents 

 

Table of Contents 

 

1 - Press Release  3 
Highlights  4 
Main Infotmation  6 
Ratings  8 
Net Income VS. Adjusted Net Income  8 
Summarized Analysis of Adjusted Income  9 
Economic Scenario  21 
Main Economic Indicators  22 
Guidance  23 
Statement of Income vs. Managerial Income vs. Adjusted Income  24 
2 - Economic and Financial Analysis  27 
Balance Sheet  28 
Adjusted Statement of Income – Consolidated  29 
Financial Margin – Interest and Non-Interest  29 
– Financial Margin - Interest  30 
• Loan Financial Margin - Interest  32 
• Funding Financial Margin - Interest  48 
• Securities/Other Financial Margin - Interest  53 
• Insurance Financial Margin - Interest  53 
– Financial Margin – Non-Interest  54 
Insurance, Private Pension Plans and Savings Bonds  55 
– Bradesco Vida e Previdência  62 
– Bradesco Saúde – Consolidated  64 
– Bradesco Capitalização  65 
– Bradesco Auto/RE  67 
Fee and Commission Income  69 
Administrative and Personnel Expenses  75 
– Coverage Ratio  78 
Tax Expenses  78 
Equity in the Earnings (Losses) of Unconsolidated Companies  79 
Operating Result  79 
Non-Operating Result  80 
3 - Return to Shareholders  81 
Sustainability  82 
Investor Relations Area – RI  82 
Corporate Governance  83 
Bradesco Shares  83 
Main Indicators  85 
Weighting in Main Stock Market Indexes  86 
Dividends / Interest on Shareholders’ Equity – JCP  86 
4 - Additional Information  87 
Products and Services Market Share  88 
Compulsory/Liabilities  89 
Investments in Infrastructure, Information Technology and e Telecommunications  90 
Risk Management  91 
Capital Adequacy Ratio (Basel II)  91 
5 - Independent Auditors’ Report  93 
Limited assurance report from independent auditors on the supplementary accounting information  94 
6 - Financial Statements, Independent Auditor’s Report and Report of the Fiscal Council  95 
Consolidated Financial Statements  96 

 

Bradesco  1 

 

 

  
Forward-Looking Statements 

 

This Report on Economic and Financial Analysis contains forward-looking statements relating to our business. Such statements 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, however, do not guarantee future performance and involve risks and uncertainties, which could be beyond our control. Furthermore, certain forward-looking statements are based on assumptions that, depending on 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 statements.

Factors which could modify actual results include, among others, changes in regional, national and international commercial and economic conditions; inflation rates; increase in customer delinquency on the account of borrowers in loan operations, with the consequent increase in the allowance for loan losses; loss of funding capacity; loss of clients or revenues; our capacity to sustain and improve performance; changes in interest rates which could, among other events, adversely affect our margins; competition in the banking sector, financial services, credit card services, insurance, asset management and other related sectors; government regulations and fiscal matters; disputes or adverse legal proceedings or rulings; as well as credit risks and other loan and investment activity risks.

Accordingly, the reader should not rely excessively on these forward-looking statements. These statements are valid only as of the date they were prepared. 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 for any other reason.

Few numbers of this Report were submitted to rounding adjustments.
Therefore, amounts indicated as total in certain charts may not correspond to the arithmetic 
sum of figures preceding them.

 

2 

Report on Economic and Financial Analysis - March 2011

 

 


 

Highlights 

 

The main figures obtained by Bradesco in the first quarter of 2011 are presented below: 
 

    quarter of 2011, of which R$104 million as monthly dividends paid and R$820 million provisioned.

  1. The Financial Margin reached R$9.362 billion, up 21.8% in comparison to the first quarter of 2010.
  2. The Delinquency Ratio over 90 days stood at 3.6%, down 0.8 p.p. from March 2010.
  3. The Efficiency Ratio(6) stood at 42.7% (41.2% in March 2010) and in the concept of “adjusted-to-risk” ratio stood at 52.1% in March 2011 (55.4% in March 2010).
  4. Insurance Written Premiums, Pension Plan Contributions and Savings Bond Income totaled R$7.850 billion in the first quarter of 2011, up by 9.1% over the same period in 2010. Technical provisions stood at R$89.980 billion, equal to 30.4% of the Brazilian insurance market (reference date: January/11).
  5. Investments in infrastructure, information technology and telecommunication amounted to R$865 million in the first quarter of 2011, for growth of 13.1% when compared to the same period in the previous year.
  6. Taxes and contributions, including social security, paid or provisioned, amounted to R$4.973 billion, of which R$1.745 billion corresponded to taxes withheld and collected from third parties and R$3.228 billion based on the activities of Bradesco Organization, equivalent to 117.9% of Adjusted Net Income(1) .
  7. Banco Bradesco has an extensive distribution network in Brazil, with 6,619 Service Points (3,651 Branches, 1,308 PABs and 1,660 PAAs). Customers can also use 1,588 PAEs, 27,649 Bradesco Expresso service points, 6,218 Banco Postal (Postal Bank) branches, 32,514 own ATMs in the Bradesco Dia&Noite network and 11,749 ATMs shared with other banks(7) .
      1. Adjusted Net Income(1) in the first quarter of 2011 was R$2.738 billion (an increase of 27.5% compared to R$2.147 billion in the same period of 2010), corresponding to earnings per share of R$2.72 in the last 12 months and Return on Average Shareholders’ Equity(2) of 24.2%.
      2. Adjusted Net Income was composed of R$1.977 billion from banking activities, which represented 72% of the total, and R$761 million from insurance, private pension plans and savings bond operations, which accounted for 28% of the total.
      3. On March 31, 2011, Bradesco’s market capitalization stood at R$117.027 billion(3) , while the value of preferred shares rose by 15.7%(4) in the last 12 months, against a 2.5% depreciation of the Ibovespa index.
      4. Total Assets stood at R$675.387 billion in March 2011, an increase of 26.8% from the balance in the same period in 2010. Return on Average Assets was 1.7%.
      5. The Expanded Loan Portfolio(5) stood at R$304.374 billion in March 2011, up 22.6% from the same period in 2010. Operations with individuals totaled R$100.079 billion (up 16.4%), while operations with companies totaled R$204.295 billion (up 25.9%).
      6. Total Assets under Management stood at R$919.007 billion, an increase of 24.2% from March 2010.
      7. Shareholders’ Equity stood at R$51.297 billion in March 2011 and included a capital increase in the amount of R$1.511 billion, up by 19.1% on the balance of March 2010. The Capital Adequacy Ratio (Basel II) stood at 15.0% in March 2011, 13.4% of which under Tier I Capital.
      8. Interest on Shareholders’ Equity and Dividends were paid and provisioned to shareholders, in the amount of R$924 million related to the first 

      (1) According to non-recurring events described on page 08 of this Report on Economic and Financial Analysis; (2) Excludes mark-to-market effect of available-for-sale securities recorded under Shareholders’ Equity; (3) R$ 127.474 billion considering the closing price of preferred shares (most traded share); (4) Includes reinvestment of dividends/interest on shareholders’ equity; (5) Includes sureties and guarantees, advances of credit card receivables and credit assignments (receivables-backed investment funds and mortgage-backed receivables) and operations with Credit Risk – Commercial Portfolio (expanded criteria), which includes debentures and promissory notes; (6) Accumulated over 12 months; and (7) Banco24Horas ATMs + ATM terminals shared among Bradesco, Banco do Brasil and Banco Santander.

       

      4  Report on Economic and Financial Analysis – March 2011 
       

       
      1. Employee payroll, plus charges and benefits, totaled R$2.080 billion. Social benefits provided to the 96,749 employees of the Bradesco Organization and their dependents amounted to R$495.444 million, while investments in training and development programs totaled R$19.282 million.
      2. On April 7, 2011, Fitch raised Bradesco’s long and short-term IDRs, reflecting the Bank’s sound financial strength. Bradesco’s long term foreign currency IDR moved from 'BBB' to 'BBB+, while the long-term domestic currency IDR rating moved from 'BBB +' to 'A -' and the short term IDR in domestic currency increased from 'F2' to 'F1.' Bradesco Seguros’ Issuer Financial Strength (IFS) rating was raised from 'BBB+' to 'A-'.
      3. On March 25, 2011, Bradesco requested authorization by the Brazilian Central Bank to create an ADR program backed by common shares on the American market, which included an increase in the limit on foreign interest that will not change its corporate structure or control.
      4. As of April 4, 2011, Bradesco, Banco do Brasil and Caixa Econômica Federal began to offer cards through the Brazilian brand Elo. The new brand’s goal is to reach 15% of the domestic market in up to 5 years and become the most complete and modern means of payment platform in the country.
      5. Main Awards and Recognitions in the first quarter of 2011:
      • 6th most valuable brand in the global banking sector. This is the first time that a bank from an emerging economy has reached this position (Brand Finance Global Banking 500 – 2011 – The Banker magazine); 
      • The most valuable brand in Brazil, a position Bradesco has held since 2007, according to a survey released by the consultant Brand Finance. In a global ranking of 500 companies,  Bradesco came in 28th ;
      • One of the 100 most sustainable companies in the world, according to the 7th edition of the “Global 100” ranking (Corporate Knights magazine);
      • Bradesco Seguros was the winner of the 18th edition of the “Top of Quality 2010” prize in the “Insurance and Pension Plan” category (Top of Business magazine and CNEP); and
      • Bradesco Asset Management (Bram) received the “Top Management” Prize from ValorInveste magazine, published by the  Valor Econômico newspaper, a recognitionof the best fund managers in the country (Standard & Poor’s).
      1. With Regards to sustainability, Bradesco divides its actions into three pillars: (i) Sustainable Finances, with a focus on banking inclusion, social and environmental variables for loan approvals and the offering of social and environmental products; (ii) Responsible Management, focused on valuing professionals, improving the workplace and adopting eco-efficient practices; and (iii) Social and Environmental Investments, focused on education, the environment, culture and sports. The highlight in this area is Fundação Bradesco, which has been developing an extensive social and educational program that operates 40 schools throughout Brazil. In 2011, a forecasted budget of R$307.994 million will help serve more than 526 thousand people, 111 thousand of which through its own schools, in Basic Education, from Kindergarten to High School and Vocational Training - High School Level; Education for Youth and Adults; and Preliminary and Continued Education. In the Virtual School - Fundação Bradesco’s e- learning portal - , at the CIDs – Digital Inclusion Centers and through programs conducted under strategic partnerships, like Educa+Ação, over 415 thousand students will be served. The more than 50 thousand Basic Education students receive uniforms, school supplies, meals and medical and dental assistance free of charge. For 54 years, Fundação Bradesco has provided more than 2 million students with quality formal education free of charge, who, together with participants in in-class and distance courses, bring the number of participants to over 4 million people. 
         
        Bradesco  5 
         

        Main Information 

         

          1Q11 4Q10 3Q10 2Q10 1Q10 4Q09 3Q09 2Q09 Variation % 
        1Q11 x 4Q10 1Q11 x 1Q10  
        Statement of Income for the Period R$ million                     
        Book Net Income  2,702  2,987  2,527  2,405  2,103  2,181  1,811  2,297  (9.5)  28.5 
        Adjusted Net Income  2,738  2,684  2,518  2,455  2,147  1,839  1,795  1,996  2.0  27.5 
        Total Financial Margin  9,362  9,018  8,302  8,047  7,689  7,492  7,587  7,560  3.8  21.8 
        Gross Loan Financial Margin  6,180  6,143  5,833  5,757  5,630  5,373  5,150  4,979  0.6  9.8 
        Net Loan Financial Margin  3,820  3,848  3,774  3,596  3,442  2,678  2,242  1,861  (0.7)  11.0 
        Expenses w ith Allow ance for Loan Losses  (2,360)  (2,295)  (2,059)  (2,161)  (2,188)  (2,695)  (2,908)  (3,118)  2.8  7.9 
        Fee and Commission Income  3,510  3,568  3,427  3,253  3,124  3,125  2,857  2,911  (1.6)  12.4 
        Administrative and Personnel Expenses  (5,576)  (5,790)  (5,301)  (4,976)  (4,767)  (4,827)  (4,485)  (4,141)  (3.7)  17.0 
        Premiums fromInsurance, Private Pension Plan Contributions and Income fromSavings Bonds  7,850  9,022  7,697  7,163  7,196  8,040  6,685  6,094  (13.0)  9.1 
        Balance Sheet - R$ million                     
        Total Assets  675,387  637,485  611,903  558,100  532,626  506,223  485,686  482,478  5.9  26.8 
        Securities  217,482  213,518  196,081  156,755  157,309  146,619  147,724  146,110  1.9  38.3 
        Loan Operations (1)  284,695  274,227  255,618  244,788  235,238  228,078  215,536  212,768  3.8  21.0 
        - Individuals  100,079  98,122  92,905  89,648  86,012  82,085  75,528  74,288  2.0  16.4 
        - Corporate  184,616  176,105  162,713  155,141  149,226  145,993  140,008  138,480  4.8  23.7 
        Allowance for Loan Losses (ALL)  (16,740)  (16,290)  (16,019)  (15,782)  (15,836)  (16,313)  (14,953)  (13,871)  2.8  5.7 
        Total Deposits  203,822  193,201  186,194  178,453  170,722  171,073  167,987  167,512  5.5  19.4 
        Technical Provisions  89,980  87,177  82,363  79,308  77,685  75,572  71,400  68,828  3.2  15.8 
        Shareholders' Equity  51,297  48,043  46,114  44,295  43,087  41,754  38,877  37,277  6.8  19.1 
        Assets Under Management  919,007  872,514  838,455  767,962  739,894  702,065  674,788  647,574  5.3  24.2 
        Performance Indicators (%) on Adjusted Net Income (except when stated otherwise)                 
        Adjusted Net Income per Share - R$ (2)  2.72  2.61  2.38  2.19  2.07  2.02  2.04  2.06  4.2  31.4 
        Book Value per Share (Common and Preferred) - R$  13.42  12.77  12.26  11.77  11.45  11.10  10.49  10.04  5.1  17.2 
        Annualized Return on Average Shareholders' Equity (3)(4)  24.2  22.2  22.5  22.8  22.2  20.3  21.5  23.3  2.0 p.p  2.0 p.p 
        Annualized Return on Average Assets (4)  1.7  1.7  1.7  1.7  1.7  1.6  1.6  1.7  -  - 
        Average Rate - (Adjusted Financial Margin / Total Average Assets - Purchase and Sale Commitments - Permanent Assets) Annualized  8.2  8.3  7.9  8.2  8.1  8.1  8.3  8.2  (0.1) p.p  0.1 p.p 
        Fixed Assets Ratio - Total Consolidated  17.4  18.1  16.7  20.9  19.8  18.6  15.4  15.1  (0.7) p.p  (2.4) p.p 
        Combined Ratio - Insurance (5)  86.1  85.1  85.3  84.7  85.2  85.3  88.9  85.5  1.0 p.p  0.9 p.p 
        Efficiency Ratio (ER) (2)  42.7  42.7  42.5  42.0  41.2  40.5  40.9  41.5  -  1.5 p.p 
        Coverage Ratio (Fee and Commission Income/Administrative and Personnel Expenses)(2)  63.6  64.2  65.1  64.9  66.0  66.5  66.4  67.3  (0.6) p.p  (2.4) p.p 
        Market Capitalization - R$ million (6)  117,027  109,759  114,510  87,887  100,885  103,192  98,751  81,301  6.6  16.0 
        Loan Portfolio Quality % (7)                     
        ALL / Loan Portfolio  7.0  7.1  7.4  7.6  8.0  8.5  8.3  7.7  (0.1) p.p  (1.0) p.p 
        Non-Performing Loans (>60 days (8) / Loan Portfolio)  4.4  4.3  4.6  4.9  5.3  5.7  5.9  5.6  0.1 p.p  (0.9) p.p 
        Delinquency Ratio (> 90 days (8)/ Loan Portfolio)  3.6  3.6  3.8  4.0  4.4  4.9  5.0  4.6  -  (0.8) p.p 
        Coverage Ratio (> 90 days (8))  193.6  197.6  191.8  188.5  180.8  174.6  166.5  169.1  (4.0) p.p  12.8 p.p 
        Coverage Ratio (> 60 days (8))  159.1  163.3  162.0  155.8  151.3  148.6  139.4  137.9  (4.2) p.p  7.8 p.p 
        Operating Limits %                     
        Capital Adequacy Ratio - Total Consolidated  15.0  14.7  15.7  15.9  16.8  17.8  17.7  17.0  0.3 p.p  (1.8) p.p 
        - Tier I  13.4  13.1  13.5  13.9  14.3  14.8  14.3  14.3  0.3 p.p  (0.9) p.p 
        - Tier II  1.7  1.7  2.3  2.1  2.6  3.1  3.5  2.8  -  (0.9) p.p 
        - Deductions  (0.1)  (0.1)  (0.1)  (0.1)  (0.1)  (0.1)  (0.1)  (0.1)  -  - 
         
        6  Report on Economic and Financial Analysis – March 2011 

         

         
          Mar11 Dec10    Sept10  Jun10  Mar10  Dec09     Sept09   Jun09  Variation % 
        Mar11 x
        Dec10         		 Mar11 x
        Mar10 
        Structural Information Units                     
        Service Points  57,185  54,884  52,015  49,154  46,570  44,577  42,563  41,003  4.2  22.8 
        - Branches 3,651  3,628  3,498  3,476  3,455  3,454  3,419  3,406  0.6  5.7 
        - PAAs (9) 1,660  1,660  1,643  1,592  1,451  1,371  1,338  1,260  -  14.4 
        - PABs (9) 1,308  1,263  1,233  1,215  1,200  1,190  1,194  1,192  3.6  9.0 
        - PAEs (9) 1,588  1,557  1,559  1,565  1,564  1,551  1,539  1,528  2.0  1.5 
        - Outplaced Bradesco ATMNetwork Terminals (10)  3,921  3,891  4,104  3,827  3,664  3,577  3,569  3,516  0.8  7.0 
        - ATM Terminals in the Shared Network (10) (11)  10,326  9,765  8,113  7,358  6,912  6,486  5,980  5,558  5.7  49.4 
        - Banco Postal (Postal Bank)  6,218  6,203  6,194  6,177  6,110  6,067  6,038  6,011  0.2  1.8 
        - Bradesco Expresso (Correspondent Banks)  27,649  26,104  24,887  23,190  21,501  20,200  18,722  17,699  5.9  28.6 
        - Bradesco Promotora de Vendas  853  801  773  743  702  670  753  822  6.5  21.5 
        - Branches / Subsidiaries Abroad (12)  11  12  11  11  11  11  11  11  (8.3)  - 
        ATMs 44,263  43,072  41,007  39,766  38,772  37,957  37,178  36,430  2.8  14.2 
        - Own Network  32,514  32,015  31,759  31,387  30,909  30,657  30,414  30,191  1.6  5.2 
        - Shared Network (11)  11,749  11,057  9,248  8,379  7,863  7,300  6,764  6,239  6.3  49.4 
        Credit and Debit Cards (13) - in million  147.5  145.2  140.7  137.8  135.6  132.9  88.4  86.3  1.6  8.8 
        Employees (14)  96,749  95,248  92,003  89,204  88,080  87,674  85,027  85,871  1.6  9.8 
        Employees and Interns  10,321  9,999  9,796  8,913  9,605  9,589  9,606  9,439  3.2  7.5 
        Foundation Employees (15)  3,788  3,693  3,756  3,734  3,713  3,654  3,696  3,645  2.6  2.0 
        Customers - in millions                     
        Checking Accounts  23.5  23.1  22.5  21.9  21.2  20.9  20.7  20.4  1.7  10.8 
        Savings Accounts (16)  39.4  41.1  38.5  37.1  36.2  37.7  35.1  33.9  (4.1)  8.8 
        Insurance Group  37.0  36.2  34.6  33.9  33.8  30.8  30.3  29.1  2.2  9.5 
        - Policyholders  32.1  31.5  30.0  29.3  29.2  26.3  25.8  24.6  1.9  9.9 
        - Pension Plan Participants  2.1  2.0  2.0  2.0  2.0  2.0  2.0  2.0  5.0  5.0 
        - Savings Bond Customers  2.8  2.7  2.6  2.6  2.6  2.5  2.5  2.5  3.7  7.7 
        Bradesco Financiamentos  2.9  3.3  3.4  3.5  3.8  4.0  4.1  4.0  (12.1)  (23.7) 
         
        (1)  Includes sureties and guarantees, advances of credit card receivables and credit assignments (receivables-backed investment funds and mortgage-backed receivables). If operations with Credit Risk – Commercial Portfolio (expanded criteria) were also included, covering debentures and promissory notes, the balance of the expanded loan portfolio would be R$304,374 million in March 2011, R$293,555 million in December 2010 and R$248,282 million in March 2010;
        (2)  In the last 12 months;
        (3)  Excludes mark-to-market effect of available-for-sale securities recorded under Shareholders’ Equity;
        (4)  Adjusted net income in the period;
        (5)  Excluding additional provisions;
        (6)  Number of shares (less treasury shares) multiplied by the closing price of the common and preferred shares on the period’s last trading day; 
        (7)  Excludes Sureties and Guarantees, advanced payment of credit card receivables and loan assignments (mortgage-backed receivables and receivables-backed investment funds);
        (8)  Credits overdue;
        (9)  PAB: Branch located on the premises of a company and with Bradesco employees; PAE: ATM located on the premises of a company; PAA: service point located in a municipality without a Bank branch;
        (10) 

        Including overlapping ATMs within the Bank’s own and shared network: in March 2011 – 2,024; December 2010 – 1,999, September 2010 – 1,670, June 2010 - 1,547, March 2010 – 1,490, December 2009 – 1,455, September 2009 – 1,452 and June 2009 – 1,431;

        (11)  Shared ATM network: Banco24Horas ATMs + ATM terminals shared among Bradesco, Banco do Brasil and Banco Santander, since November 2010;
        (12)  In January 2011, the Nassau Branch of Banco Bradesco S.A. was merged into Bradesco Grand Cayman branch;
        (13)  Includes pre-paid, Private Label, Banco Ibi as of December 2009 and Ibi México as of December 2010;
        (14)  It started including Ibi Promotora employees as of December 2009;
        (15)  Fundação Bradesco, Digestive System and Nutritional Disorder Foundation (Fimaden) and Bradesco Sports and Recreation Center (ADC Bradesco); and
        (16)  Number of accounts.

         

        Bradesco  7 
         

        Ratings 
        Main Ratings 

         

        Fitch Ratings
        International Scale Domestic Scale 
        Individual  Support  Domestic Currency  Foreign Currency  Domestic 
        B/C 3 Long-Term
        A -         		 Short-Term
        F1         		 Long-Term
        BBB +         		 Short-Term
        F2         		 Long-Term    Short-Term
        AAA (bra)  F1 + (bra) 
        *
        Moody´s Investors Service R&I Inc. 
        Financial Strength  International Scale Domestic Scale  International Scale 
        B - Foreign Currency Debt  Domestic Currency Deposit  Foreign Currency Deposit  Domestic Currency  Issuer Rating 
        Long-Term  Long-Term  Short-Term  Long-Term  Short-Term  Long-Term Short-Term   BBB -
        Baa2  A1  P- 1  Baa3  P-3  Aaa.br BR - 1  
        *
        Standard & Poor's Austin Rating 
        International Scale - Counterparty Rating  Domestic Scale  Corporate
        Governance          		 Corporate
        Governance         		 Domestic Scale 
        Foreign Currency Domestic Currency Counterparty Rating  Long-Term   Short- Term
        Long-Term  Short-Term  Long-Term   Short-Term Long-Term   Short-Term   GAMMA -7
        Score         		 AA AAA A -1
        BBB  A - 3  BBB  A - 3  brAAA  brA - 1 

         

        Net Income vs. Adjusted Net Income

        The main non-recurring events that impacted net income in the periods below are presented in the following comparative chart:

          R$ million 
         1Q11  4Q10  1Q10 
        Book Net Income  2,702  2,987  2,103 
        Non-Recurring Events  36  (303)  44 
        - Partial Divestment (1)  -  (59)  - 
        - ALL - Change in Drag Calculation Parameters  -  (220)  - 
        - Records of Tax Credits  -  (94)  (242) 
        - Provision for Tax Contingencies  -  -  397 
        - Provision for Civil Contingencies - Economic Plans  54  86  36 
        - Other (2)  -  (73)  - 
        - Tax Effects  (18)  57  (147) 
        Adjusted Net Income  2,738  2,684  2,147 
        ROAE % (*)  23.8  28.2  21.7 
        ROAE (ADJUSTED) % (*)  24.2  25.1  22.2 
        (*)  Annualized;       
        (1)  Gross gain related to investments at BM&FBovespa; and       
        (2) 

        In 4Q10: refers to the R$86 million capital gain in Fidelity; and net effect of payment of taxes, through an installment program and payment in one lump sum of tax debt - Law 11,941/09 (REFIS), in the amount of R$14 million, offset by R$27 million in impairment expenses.

         

        8  Report on Economic and Financial Analysis – March 2011 
         

        Summarized Analysis of Adjusted Income 

         

        To provide for better understanding, comparison and analysis of Bradesco’s results, we use the Adjusted Statement of Income for the analyses and comments contained in this Report on Economic and  Financial Analysis, which is obtained from adjustments made to the Book Statement of Income, detailed at the end of this

        Press Release, which includes adjustments to  non-recurring events shown in the previous page. Note that the Adjusted Statement of Income is the basis adopted for the analyses and comments made in chapters 1 and 2 of this report. 

         

          R$ million 
        Adjusted Statement of Income
        1Q11 4Q10 Variation 1Q11 1Q10 Variation
        1Q11 x 4Q10 1Q11 x 1Q10
        Amount  %  Amount  % 
        Financial Margin  9,362  9,018  344  3.8  9,362  7,689  1,673  21.8 
        - Interest  8,849  8,553  296  3.5  8,849  7,406  1,443  19.5 
        - Non-Interest  513  465  48  10.3  513  283  230  81.3 
        ALL  (2,360)  (2,295)  (65)  2.8  (2,360)  (2,188)  (172)  7.9 
        Gross Income from Financial Intermediation  7,002  6,723  279  4.1  7,002  5,501  1,501  27.3 
        Income from Insurance, Private Pension Plan and Savings Bond Operations (*)  785  700  85  12.1  785  583  202  34.6 
        Fee and Commission Income  3,510  3,568  (58)  (1.6)  3,510  3,124  386  12.4 
        Personnel Expenses  (2,436)  (2,533)  97  (3.8)  (2,436)  (2,120)  (316)  14.9 
        Other Administrative Expenses  (3,140)  (3,257)  117  (3.6)  (3,140)  (2,647)  (493)  18.6 
        Tax Expenses  (880)  (858)  (22)  2.6  (880)  (749)  (131)  17.5 
        Equity in the Earnings (Losses) of Unconsolidated Companies  34  60  (26)  (43.3)  34  29  5  17.2 
        Other Operating Income/Expenses  (922)  (646)  (276)  42.7  (922)  (550)  (372)  67.6 
        Operating Income  3,953  3,757  196  5.2  3,953  3,171  782  24.7 
        Non-Operating Income  (4)  10  (14)  -  (4)  4  (8)  - 
        Income Tax / Social Contribution  (1,138)  (1,059)  (79)  7.5  (1,138)  (1,010)  (128)  12.7 
        Minority Interest  (73)  (24)  (49)  204.2  (73)  (18)  (55)  305.6 
        Adjusted Net Income  2,738  2,684  54  2.0  2,738  2,147  591  27.5 
         
        (*) Result of Insurance, Private Pension Plans and Savings Bond Operations = Insurance, Private Pension Plans and Savings Bond Retained Premiums - Variation in the Technical Provisions of Insurance, Private Pension Plans and Savings Bonds – Retained Claims – Drawings and Redemption of Savings Bonds – Selling Expenses with Insurance Plans, Private Pension Plans and Savings Bonds.

         

        Bradesco  9
         

        Summarized Analysis of Adjusted Income 
         
        Adjusted Net Income and Profitability 

         

        In the first quarter of 2011, Bradesco’s adjusted net income stood at R$2,738 million, an increase of 2.0% or R$54 million from the previous quarter, which was primarily impacted by: (i) a growth in financial margin, due to the increased volume of operations; (ii) lower personnel and administrative expenses; offset by: (iii) an increase in the allowance for loan losses; (iv) lower fee and commission income; and (v) an increase in other operating expenses (net of other operating revenue).

        In the first quarter of 2011 versus the same period of previous year, adjusted net income increased R$591 million, or 27.5%. The main reasons for this result are described below in the analysis of the main income statement items.

        Shareholders’ Equitystood at R$51.297 billion in March 2011 and included a capital increase in the amount of R$1.511 billion, up by 19.1% on the balance of March 2010. The Capital Adequacy Ratio stood at 15.0%, of which 13.4% was under Tier I Capital.

        Total assets stood at R$675,387 million in March 2011, up 26.8% over March 2010, driven by the expansion of business volume. Return on Average Assets (ROAA) remained stable, hovering near 1.7%.

        		  

         

        10 Report on Economic and Financial Analysis – March 2011 
         

         
        Efficiency Ratio (ER) 
         

         

             

        The ER calculated on an “adjusted-to-risk” basis to reflect the impact of risk in loan operations(2) dropped for the fifth consecutive quarter, reaching 52.1% in the first quarter of 2011, up 0.3 p.p. compared to the previous quarter and 3.3 p.p. year-on-year. This behavior is in line with the results of previous quarters, mainly due to decreased delinquency.

        The ER – accumulated over 12 months(1) remained stable in relation to the previous quarter.

        The quarterly ER decreased from 44.0% in the fourth quarter of 2010 to 42.0% in the first quarter of 2011, mainly due to: (i) reduced personnel expenses due to vacation periods concentrated in the first quarter; (ii) lower administrative expenses; and (iii) increased financial margin, driven by growth in business volume.

        		  

         

        (1) Efficiency Ratio (ER) = (Personnel Expenses – Employee Profit Sharing (PLR) + Administrative Expenses) / (Financial Margin + Fee and Commission Income + Income from Insurance + Equity in the Earnings (Losses) of Unconsolidated Companies + Other Operating Income – Other Operating Expenses). Considering the ratio between: (i) total administrative costs (Personnel Expenses + Administrative Expenses + Other Operating Expenses + Tax Expenses not related to revenue generation) and (ii) revenue net of related taxes (not considering Claims Expenses from the Insurance Group), our Efficiency Ratio in the first quarter of 2011 would be 43.5%.

        (2) Including ALL expenses, adjusted for granted discounts, loan recovery and sale of foreclosed assets, among others.

             
          Bradesco  11
         

         
        Financial Margin 

         

             

        The R$344 million increase between the first quarter of 2011 and the fourth quarter of 2010 was due to:

        • the increase in income from interest- earning operations by R$296 million, mainly the result of: (i) higher income from funding margin; and (ii) higher income from insurance margin; and
        • higher income from non-interest margin, in the amount of R$48 million.

        The financial margin posted a R$1,673 million improvement between the first quarter of 2011 and the same period in 2010, which corresponds to a 21.8% growth, mainly driven by:

          		  
          • growth in income from interest-earning operations of R$1,443 million, mainly due to (i) higher income from loan operations, resulting from increase in business volumes; (ii) higher income from funding margin; and (iii) higher income from insurance margin; and

          • greater income from the non-interest margin, in the amount of R$230 million, due to higher treasury/securities gains.

           
           

           

               
          12 Report on Economic and Financial Analysis – March 2011   
           

           

          Total Loan Portfolio

           
               

          In March 2011, Bradesco’s loan operations (considering sureties, guarantees, advances of credit card receivables and assignment of receivables-backed investment funds and mortgage-backed receivables) totaled R$284.7 billion. The expansion of 3.8% in the quarter was due to: (i) 5.3% growth in Large Corporate portfolio; (ii) 4.3% in the SME portfolio; and (iii) 2.0% in the Individuals portfolio.

          Year on year, the portfolio expanded by 21.0%, the result of growth of: (i) 29.4% in the SME portfolio, (ii) 19.0% in the Large Corporate portfolio; and (iii) 16.4% in the Individuals portfolio.

          In the Individuals segment, the products that posted the strongest growth in the last twelve months were: (i) real estate financing; (ii) the payroll-deductible loan portfolio; and (iii) BNDES/Finame onlending operations. In the Corporate segment, growth was led by: (i) BNDES/Finame onlending operations; (ii) credit card; and (iii) vehicle financing - CDC.

          		  

          Including other operations bearing credit risk from the Corporate portfolio(1) (expanded criteria), operations with credit risk would have amounted to R$304.4 billion in March 2011 (R$248.3 billion in March 2010), up 3.7% in the quarter and 22.6% over the last 12 months. These operations mainly comprise debentures and promissory notes with Large Corporations.

          (1) For more information, see page 36 of Chapter 2 of this Report.


           
           
           
           
           
           
           
           

           

           
          Allowance for Loan Losses (ALL) 

           

               

          In the first quarter of 2011, expenses with the allowance for loan losses stood at R$2,360 million, up 2.8%. This increase was mainly the result of the 4.0% growth in loan operations – Bacen concept.

          The first quarter of 2011 compared to the same period of 2010, ALL expenses posted a 7.9% increase, causing an expansion of generic provisions and partially offset by a decline in delinquency and higher income from loan recovery of 20.7% in the period, totaling R$613 million. Loan operations – Bacen concept grew by 21.1% in the same period, demonstrating growth accompanied by quality in Bradesco’s loan portfolio.

          		 

           

               
            Bradesco  13
           

           
          Delinquency Ratio > 90 days 

           

               

          After five consecutive quarters in decline, the delinquency ratio over 90 days was stable in the first quarter of 2011.

          		  

           

           
          Coverage Ratios 

           

               

          The graph below presents the evolution of the coverage ratio of the Allowance for Loan Losses for loans overdue more than 60 and 90 days. In March 2011 these ratios reached 159.1% and 193.6%, respectively, providing the Bank with comfortable levels of coverage.

          		  

          The balance of Allowance for Loan Losses (ALL) of R$16.7 billion, in March 2011, was made up of: (i) R$13.7 billion in Brazilian Central Bank requirements; and (ii) R$3.0 billion in additional provisions.

           

           

               
          14 Report on Economic and Financial Analysis – March 2011   
           

           
          Results of Insurance, Private Pension Plans and Savings Bonds Operations 

           

               

          Net Income in the first quarter of 2011 came to R$761 million (R$779 million in the fourth quarter of 2010), posting a 28.3% Return on Average Shareholders’ Equity.

          		  

          In the comparison of the first quarter of 2011 with the same period in 2010, Net Income posted an 8.3% increase.

           

                               
            R$ million (except when indicated otherwise) 
          1Q11  4Q10  3Q10  2Q10  1Q10  4Q09  3Q09  2Q09  Variation % 
           1Q11 x 4Q10   1Q11 x 1Q10 
          Net Income  761  779  721  701  703  602  607  638  (2.3)  8.3 
          Insurance Written Premiums, Private Pension Plan Contributions and Savings Bonds Income (*)  7,850  9,022  7,697  7,163  7,196  8,040  6,685  6,094  (13.0)  9.1 
          Technical Provisions  89,980  87,177  82,363  79,308  77,685  75,572  71,400  68,828  3.2  15.8 
          Financial Assets  99,594  96,548  92,599  88,515  86,928  83,733  79,875  76,451  3.2  14.6 
          Claims Ratio  72.0  71.1  72.4  71.8  73.3  74.3  77.2  73.3  0.9 p.p  (1.3) p.p 
          Combined Ratio  86.1  85.1  85.3  84.7  85.2  85.3  88.9  85.5  1.0 p.p  0.9 p.p 
          Policyholders / Participants and Customers (in thousands)  37,012  36,233  34,632  33,908  33,768  30,822  30,339  29,178  2.1  9.6 
          Market Share fromPremiums fromInsurance, Private Pension Plan Contribution and Income from Savings Bonds (**)  22.4  24.7  24.7  24.8  25.2  24.4  23.5  23.1  (2.3) p.p  (2.8) p.p 
           

          Note: For comparison purposes, excluding the build in Technical Provisions for benefits to be granted – Remission (Health) from the calculation of ratios for the first quarter of 2010, and excluding the effects of RN 206/09 and its effects on health revenues from the calculation of combined ratios.
          (*) Excludes the effects of RN 206/09 (ANS), which as of January 2010 extinguished the PPNG (SES), with income from premiums accounted pro-rata temporis. Note that this accounting change did not affect Earned Premiums; and
          (**) 1Q11 considers the latest data made available by Susep (January 2011).

           

               

          In the first quarter of 2011, income was 9.1% up from the same period in 2010. This increase was fueled by the high performance of Savings Bonds

          		   and Health products, which grew 23.4% and 25.3%, respectively.

           

               
            Bradesco  15
           
           
          Summarized Analysis of Adjusted Income 

           
               

          Due to the concentration of private pension plan contributions that historically occurs in the last quarter of the fiscal year, revenue in the first quarter of 2011 dropped by 13% compared to the previous quarter.

          Net income in the first quarter of 2011 was down 2.3% from the previous quarter, mainly due to: (i) variations in revenues, due to seasonality in the last quarter of the year, directly affecting revenue from pension plans; (ii) a 0.9 p.p. increase in claims; (iii) a drop in equity in the earnings of subsidiaries; and (iv) partially offset by a decrease in administrative and personnel expenses despite the collective bargaining agreement in January 2011.

          Net income for the first quarter of 2011 was 8.3% higher than the one recorded in the same period of last year, mainly due to: (i) 9.1% growth in revenues; (ii) an increase in financial result and equity in the earnings of subsidiaries; and partially offset by: (iii) a increase in personnel expenses, impacted by the collective bargaining agreement in January 2011. 

          		  

          In terms of solvency, Grupo Bradesco de Seguros e Previdência complies with the Susep rules effective as of January 1, 2008, and international standards (Solvency II). The financial leverage ratio stood at 2.6 times Shareholders’ Equity. 

           

               
          16 Report on Economic and Financial Analysis – March 2011   
           

           
          Fee and Commission Income 

           

           

          		    

          In the first quarter of 2011, fee and commission income totaled R$3,510 million, down 1.6% or R$58 million from the previous quarter. This performance was mainly the result of: (i) lower gains from underwriting and financial advisory services; (ii) lower revenue from loan operations.

          In the year-on-year comparison, the 12.4% increase was mainly due to: (i) the performance of the credit card segment, due to the growth in card base and revenues, in addition to the increase in interest held in Visavale and Cielo; (ii) the increase in income from checking accounts, which was driven by growth in business volume and a larger checking account client base, which posted net growth of some 2.3 million accounts in the period; (iii) greater income from loan operations, mainly due to the increase in guarantees and sureties and the higher volume of contracted operations; and (iv) growth in revenue from fund management.

          		  

           

           

               
            Bradesco  17
           
           
          Personnel expenses 

           

               

          In the first quarter of 2011, the R$97 million decrease from the previous quarter was composed of changes in the following portions:

          • “structural” – R$10 million reduction, mainly due to: (i) higher concentration of vacation periods in the first quarter, offset by: (ii) higher expenses with salaries, compulsory social charges and benefits, as a result of the collective bargaining agreement of insurance industry workers in January 2011 and the organic growth in the period, with an increase in the number of service points and the consequent hiring of a net total of 1,501 employees; and
          • “non-structural” – decrease of R$87 million, chiefly related to lower expenses with employee and management profit sharing (PLR).

          Year-on-year growth of R$316 million in the first quarter of 2011 is mainly due to:

          • R$261 million in the “structural” portion from: (i) an increase in expenses related to salaries, compulsory social charges and benefits, due to higher salary levels; (ii) and the net increase of 8,669 employees; and
          		 
          • the R$55 million increase in the “non- structural” portion, basically resulting from higher expenses with management and employee profit sharing (PLR).

           
          Note: Structural Expenses = Salaries + Compulsory Social Charges + Benefits + Private Pension Plans.

          Non-Structural Expenses = Employee Profit Sharing (PLR) + Training + Labor Provision + Severance Expenses.

           

               
          18 Report on Economic and Financial Analysis – March 2011   
           

           
          Administrative Expenses 

           

               

          In the first quarter of 2011, the 3.6% decrease in administrative expenses from the previous quarter is mainly due to lower expenses with: (i) advertising and marketing; (ii) outsourced services, mainly related to legal and corporate consulting services; and (iii) data processing; partially offset by: (iv) increased expenses from the expansion of Service Points by 2,301, of which 23 were branches, 76 PAB/PAE/PAA, 1,545 Bradesco Expresso units and 657 other service points.

          Year on year, the 18.6% increase is the result of greater expenses with: (i) outsourced services, related to: (a) upgrading and expansion of customer service structure and partial outsourcing of credit card processing (Fidelity); and (b) variable expenses related to revenue (e.g. non- bank correspondents); (ii) depreciation and amortization; (iii) advertising and marketing; (iv)

          		  

          increase in business and service volume; and (v) the expansion of the Customer Service Network by 10,615 new units: 196 branches, 341 PAB/PAE/PAA, 6,148 Bradesco Expresso branches and 3,930 other service points, amounting to 57,185 on March 31, 2011.

           

           
          Other Operating Income and Expenses 

           

           

          		    

          Other operating expenses, net of other operating income, totaled R$922 million in the first quarter of 2011, up R$276 million over previous quarter and R$372 million year on year.

          Compared to the same period last year, the increase in other operating expenses net of other operating income, is mainly the result of higher expenses with: (i) the recording of operating provisions, especially those for civil contingencies; and (ii) the recording of provisions to cover fluctuations arising from the revaluation of IBNR provisions and benefits payable – remission of the Health Insurance segment

          		  

           


               
            Bradesco  19
           

           
          Income Tax and Social Contribution 

           

           

          		    

          Growth in tax and social contribution expenses, both quarter-on-quarter and year-on-year, is the result of an increase in taxable income in the first quarter of 2011. It is important to note that the remainder of tax credit was consumed as a result of the increase in the social contribution rate from 9% to 15%.

          		  

           


           
          Unrealized Gains 

           

           

          		    

          Unrealized gains totaled R$9,590 million in the first quarter of 2011, a R$966 million decrease from the previous quarter. This was mainly due to: (i) the decrease in unrealized gains of loan and leasing operations, resulting from an increase in interest rates; (ii) the relative depreciation of mark- to-market of held-to-maturity securities; partially offset by: (iii) the appreciation of investments, especially those in Cielo, the stocks of which appreciated by 7.5%; and (iv) the decrease in unrealized losses in borrowings and onlendings, resulting from increased interest rates.

          		  

           


               
          20 Report on Economic and Financial Analysis – March 2011   
           

           
          Economic Scenario 

           

                     
             

          generated by the sporting events in 2014 and 2016 and the exploration of the pre-salt oil discoveries. Household consumption continues to grow at a robust pace, supported by the buoyant job market, income gains and the generation of formal jobs. Credit, employment and income should continue to grow in 2011, albeit at a more moderate pace. With no signs of excessive commitment of income on the part of borrowers and with continuing social mobility, the outlook for the Brazilian banking system remains favorable, especially in the real estate segment, whose growth has been healthy, with no signs of undue excess.

          The world’s perception of Brazil remains positive, underlined by yet another upgrade from an important risk classification agency. The favorable long-term domestic outlook and the current international scenario have put pressure on the dollar exchange rate, which will tend to remain high. This tendency will be accompanied by the continuing build-up of international reserves, which provide a necessary liquidity buffer in moments of cyclical reversal. The increase in the current account deficit this year should not jeopardize this tendency, as the external accounts will mainly be financed by direct foreign investments, which should reach US$52 billion, a new record.

          Bradesco continues to hold a positive long-term view of Brazil, with no signs of any institutional regressions on the horizon. At the same time, the Organization tends to have a positive bias. It is important to point out that the path to sustainable growth could be considerably shortened by massive investments in education and infrastructure, accompanied by economic reforms to increase the efficiency of the domestic productive sector. Initiatives of this type would make a fundamental contribution to creating more solid conditions for the private sector to confront global competition and continue expanding and generating jobs.

          Two years after the peak of the global financial crisis, inflation is once again a cause for concern due to the recent highs in petroleum prices, partially due to recent restrictions of a geo-political nature. More intense pressure on prices has been reported in a number of emerging economies, whose main task at the moment is to moderate growth rates. Nonetheless, the economic policy response to the pressure triggered by the high degree of uncertainty surrounding the global economy has not been as restrictive as in the pre- crisis years. The developed economies, on the other hand, are facing a number of challenges to sustainable growth, such as weak job markets, high levels of public debt and the impacts of the recent tragedy in Japan. Generally, the international scenario continues to be marked by abundant liquidity, low risk aversion and high commodity prices, which should continue virtually unchanged in the coming months.

          On the domestic front, the international shock caused by commodity prices has worsened thanks to the mismatch between supply and demand and the Brazilian economy’s still high level of indexation. The response to inflationary pressure has been a change in the economic policy mix, combining a moderate increase in basic interest rates and a slowdown in public spending with the adoption of prudential macroeconomic measures. This coordinated response will most likely fail to prevent inflation from reaching around 6.0% this year, but should ensure convergence with the inflationary target throughout 2012, when Brazil’s economic growth should be more moderate than the 7.5% recorded in 2010, the highest figure since 1986. If projections for GDP growth of 3.8% in 2011 prove correct, this convergence will become even more likely.

          Despite the country’s undoubted export strength, its main economic activity driver has been – and will continue to be – domestic demand. Investments have been fueled by the high level of corporate confidence and the opportunities

          		  
           
           
           
           
           
           
           

           

               
            Bradesco  21 
           

           
          Main Economic Indicators 

           

                           
          Main Indicators (%)  1Q11  4Q10  3Q10  2Q10  1Q10  4Q09  3Q09  2Q09 
          Interbank Deposit Certificate (CDI)  2.64  2.56  2.61  2.22  2.02  2.12  2.18  2.37 
          Ibovespa  (1.04)  (0.18)  13.94  (13.41)  2.60  11.49  19.53  25.75 
          USD – Commercial Rate  (2.25)  (1.65)  (5.96)  1.15  2.29  (2.08)  (8.89)  (15.70) 
          General Price Index - Market (IGP-M)  2.43  3.18  2.09  2.84  2.78  (0.11)  (0.37)  (0.32) 
          CPI (IPCA – IBGE)  2.44  2.23  0.50  1.00  2.06  1.06  0.63  1.32 
          Federal Government Long-Term Interest Rate (TJLP)  1.48  1.48  1.48  1.48  1.48  1.48  1.48  1.54 
          Reference Interest Rate (TR)  0.25  0.22  0.28  0.11  0.08  0.05  0.12  0.16 
          Savings Accounts  1.76  1.73  1.79  1.62  1.59  1.56  1.63  1.67 
          Business Days (number)  62  63  65  62  61  63  65  61 
          Indicators (Closing Rate)  Mar11  Dec10  Sept10  Jun10  Mar10  Dec09  Sept09  Jun09 
          USD – Commercial Selling Rate – (R$)  1.6287  1.6662  1.6942  1.8015  1.7810  1.7412  1.7781  1.9516 
          Euro – (R$)  2.3129  2.2280  2.3104  2.2043  2.4076  2.5073  2.6011  2.7399 
          Country Risk (points)  173  189  206  248  185  192  234  284 
          Basic Selic Rate Copom (% p.a.)  11.75  10.75  10.75  10.25  8.75  8.75  8.75  9.25 
          BM&F Fixed Rate (% p.a.)  12.28  12.03  11.28  11.86  10.85  10.46  9.65  9.23 

           

           
          Projections through 2013 

           

                 
          %  2011  2012  2013 
          USD - Commercial Rate (year-end) - R$  1.60  1.70  1.74 
          Extended Consumer Price Index (IPCA)  6.00  4.50  4.50 
          General Price Index - Market (IGP-M)  6.50  4.50  4.50 
          Selic (year-end)  12.25  11.25  10.25 
          Gross Domestic Product (GDP)  3.80  4.70  4.80 

           

               
          22  Report on Economic and Financial Analysis – March 2011   
           

           
          Guidance 
           
          Bradesco's Outlook for 2011 

           

          This guidance contains forward-looking statements that are subject to risks and uncertainties, as they are based on Management’s expectations and assumptions and on information available to the market as of the present date.

               
            Loan Portfolio  15 to 19% 
            Individuals  13 to 17% 
            Corporate  16 to 20% 
            SMEs  20 to 24% 
            Corporate  11 to 15% 
            Products   
            Vehicles  10 to 14% 
            Cards (1)  9 to 13% 
            Real Estate Financing (origination)  R$10.0 bil 
            Payroll Deductible Loans  30 to 34% 
            Financial Margin (2)  18 to 22% 
            Fee and Commission Income  9 to 13% 
            Operating Expenses (3)  11 to 15% 
            Insurance Premiums  10 to 13% 
           
          (1)  Does not include the “BNDES Cards” and “Advances of Receivables” portfolios;   
          (2)  Under current criterion, Guidance for Financial Margin; and   
          (3)  Administrative and Personnel Expenses.   

           

               
            Bradesco  23 
           

           
          Statement of Income vs. Managerial Income vs. Adjusted Income 
           
          Analytical Breakdown of Statement of Income vs. Managerial Income vs. Adjusted Income 

           

          First quarter of 2011

                                     
            R$ million 
          1Q11
          Statement
          of Income          		 Reclassifications Fiscal
          Hedge (8)          		 Managerial
          Statement
          of Income           		 Non-Recurring
          Events (9)          		 Adjusted
          Statement
          of Income 
          (1)  (2)  (3)  (4)  (5)  (6)  (7) 
          Financial Margin  10,131  (91)  33  (102)  (408)  -  -  -  (201)  9,362  -  9,362 
          ALL    (2,534)  -  -  -  225  (51)  -  -  -  (2,360)  -  (2,360) 
          Gross Income from Financial Intermediation  7,597  (91)  33  (102)  (183)  (51)  -  -  (201)  7,002  -  7,002 
          Savings Bond Operations (*)  785  -  -  -  -  -  -  -  -  785  -  785 
          Fee and Commission Income  3,419  -  -  -  -  -  91  -  -  3,510  -  3,510 
          Personnel Expenses  (2,436)  -  -  -  -  -  -  -  -  (2,436)  -  (2,436) 
          Other Administrative Expenses  (3,037)  -  -  -  -  -  -  (103)  -  (3,140)  -  (3,140) 
          Tax Expenses  (895)  -  -  -  (7)  -  -  -  22  (880)  -  (880) 
          Equity in the Earnings (Losses) of Unconsolidated Companies  34  -  -  -  -  -  -  -  -  34  -  34 
          Other Operating Income/Expenses  (1,338)  91  (33)  102  190  -  (91)  103  -  (976)  54  (922) 
          Operating Income  4,129  -  -  -  -  (51)  -  -  (179)  3,899  54  3,953 
          Non-Operating Income  (55)  -  -  -  -  51  -  -  -  (4)  -  (4) 
          Income Tax / Social Contribution and Minority Interest  (1,372)  -  -  -  -  -  -  -  179  (1,193)  (18)  (1,211) 
          Net Income  2,702  -  -  -  -  -  -  -  -  2,702  36  2,738 
           
          (1)  Commission Expenses on the placement of loans and financing were reclassified from the item “Other Operating Expenses” to the item “Financial Margin”;
          (2)  Interest Income/Expenses from the insurance segment were reclassified from the item “Other Operating Revenues/Expenses” to the item “Financial Margin”;
          (3)  Interest Income/Expenses from the financial segment were reclassified from the item “Other Operating Revenues/Expenses” to the item “Financial Margin”;
          (4)  Revenue from Loan Recovery classified under the item “Financial Margin”; Expenses with Discounts Granted classified under the item “Other Operating Revenues/Expenses”; Expenses with Write-offs of Leasing Operations classified under the item “Financial Margin” were reclassified to the item “ALL Expenses - Allowance for Loan Losses” and reclassification of Tax expenses, classified under Other Operating Expenses;
          (5)  Losses from the Sale of Foreclosed Assets (BNDU) classified under the item “Non-Operating Income” were reclassified to the item “ALL Expenses - Allowance for Loan Losses”;
          (6)  Income from Commissions and Credit Card Fees, Insurance Premium Commissions and Insurance Policy Fees classified under the item “Other Operating Revenues/Expenses” were reclassified to the item “Fee and Commission Income”;
          (7)  Credit Card Operation Interchange Expenses classified under the item “Other Operating Revenues/Expenses” were reclassified to the item “Other Administrative Expenses”;
          (8)  The partial result of Derivatives used to hedge investments abroad, which simply cancels the tax effects (IR/CS and PIS/Cofins) of this hedge strategy in terms of Net Income; and
          (9)  For more information see page 08 of this chapter.
           
          (*)  Result of Insurance, Private Pension Plans and Savings Bond Operations = Insurance, Private Pension Plans and Savings Bond Retained Premiums - Variation in the Technical Provisions of Insurance, Private Pension Plans
          and Savings Bonds – Retained Claims – Drawings and Redemption of Savings Bonds – Selling Expenses with Insurance Plans, Private Pension Plans and Savings Bonds.

           

               
          24  Report on Economic and Financial Analysis – March 2011   
           
           
          Statement of Income vs. Managerial Income vs. Adjusted Income 

          Fourth quarter of 2010
                                     
            R$ million 
          4Q10
          Statement
          of Income          		 Reclassifications Fiscal
          Hedge (8)          		 Managerial
          Statement
          of Income           		 Non-Recurring
          Events (9)          		 Adjusted
          Statement
          of Income 
          (1)  (2)  (3)  (4)  (5)  (6)  (7) 
          Financial Margin  9,904  (114)  32  (110)  (492)  -  -  -  (202)  9,018  -  9,018 
          ALL    (2,299)  -  -  -  309  (85)  -  -  -  (2,075)  (220)  (2,295) 
          Gross Income from Financial Intermediation  7,605  (114)  32  (110)  (183)  (85)  -  -  (202)  6,943  (220)  6,723 
          Savings Bond Operations (*)  700  -  -  -  -  -  -  -  -  700  -  700 
          Fee and Commission Income  3,471  -  -  -  -  -  97  -  -  3,568  -  3,568 
          Personnel Expenses  (2,533)  -  -  -  -  -  -  -  -  (2,533)  -  (2,533) 
          Other Administrative Expenses  (3,159)  -  -  -  -  -  -  (98)  -  (3,257)  -  (3,257) 
          Tax Expenses  (872)  -  -  -  (8)  -  -  -  22  (858)  -  (858) 
          Equity in the Earnings (Losses) of Unconsolidated Companies  60  -  -  -  -  -  -  -  -  60  -  60 
          Other Operating Income/Expenses  (1,128)  114  (32)  110  191  -  (97)  98  -  (744)  98  (646) 
          Operating Income  4,144  -  -  -  -  (85)  -  -  (180)  3,879  (122)  3,757 
          Non-Operating Income  70  -  -  -  -  85  -  -  -  155  (145)  10 
          Income Tax / Social Contribution and Minority Interest  (1,227)  -  -  -  -  -  -  -  180  (1,047)  (36)  (1,083) 
          Net Income  2,987  -  -  -  -  -  -  -  -  2,987  (303)  2,684 
           
          (1)  Commission Expenses on the placement of loans and financing were reclassified from the item “Other Operating Expenses” to the item “Financial Margin”;
          (2)  Interest Income/Expenses from the insurance segment were reclassified from the item “Other Operating Revenues/Expenses” to the item “Financial Margin”;
          (3)  Interest Income/Expenses from the financial segment were reclassified from the item “Other Operating Revenues/Expenses” to the item “Financial Margin”;
          (4) 

          Revenue from Loan Recovery classified under the item “Financial Margin”; Expenses with Discounts Granted classified under the item “Other Operating Revenues/Expenses”, Expenses with Write-offs of Leasing Operations classified under the item “Financial Margin” were reclassified to the item “ALL Expenses - Allowance for Loan Losses” and reclassification of Tax expenses, classified under Other Operating Expenses;

          (5)  Losses from the Sale of Foreclosed Assets (BNDU) classified under the item “Non-Operating Income” were reclassified to the item “ALL Expenses - Allowance for Loan Losses”;
          (6) 

          Income from Commissions and Credit Card Fees, Insurance Premium Commissions and Insurance Policy Fees classified under the item “Other Operating Revenues/Expenses” were reclassified to the item “Fee and Commission Income”;

          (7)  Credit Card Operations Interchange Expenses classified under the item “Other Operating Revenues/Expenses” were reclassified to the item “Other Administrative Expenses”;
          (8)  The partial result of Derivatives used to hedge investments abroad, which simply cancels the tax effects (IR/CS and PIS/Cofins) of this hedge strategy in terms of Net Income; and
          (9)  For more information see page 08 of this chapter.
           
          (*) Result of Insurance, Private Pension Plans and Savings Bond Operations = Insurance, Private Pension Plans and Savings Bond Retained Premiums - Variation in the Technical Provisions of Insurance, Private Pension Plans and Savings Bonds – Retained Claims – Drawings and Redemption of Savings Bonds – Selling Expenses with Insurance Plans, Private Pension Plans and Savings Bonds.

           

               
            Bradesco  25 
           
           
          Statement of Income vs. Managerial Income vs. Adjusted Income 

          First quarter of 2010
                                     
            R$ million 
          1Q10
          Statement
          of Income          		 Reclassifications Fiscal
          Hedge (8)          		 Managerial
          Statement
          of Income           		 Non-Recurring
          Events (9)          		 Adjusted
          Statement
          of Income 
          (1)  (2)  (3)  (4)  (5)  (6)  (7) 
          Financial Margin  8,002  (105)  35  (60)  (240)  -  -  -  57  7,689  -  7,689 
          ALL (2,159)  -  -  -  70  (99)  -  -  -  (2,188)  -  (2,188) 
          Gross Income from Financial Intermediation  5,843  (105)  35  (60)  (170)  (99)  -  -  57  5,501  -  5,501 
          Savings Bond Operations (*)  583  -  -  -  -  -  -  -  -  583  -  583 
          Fee and Commission Income  3,080  -  -  -  -  -  44  -  -  3,124  -  3,124 
          Personnel Expenses  (2,120)  -  -  -  -  -  -  -  -  (2,120)  -  (2,120) 
          Other Administrative Expenses  (2,564)  -  -  -  -  -  -  (83)  -  (2,647)  -  (2,647) 
          Tax Expenses  (736)  -  -  -  (7)  -  -  -  (6)  (749)  -  (749) 
          Equity in the Earnings (Losses) of Unconsolidated Companies  29  -  -  -  -  -  -  -  -  29  -  29 
          Other Operating Income/Expenses  (1,329)  105  (35)  60  177  -  (44)  83  -  (983)  433  (550) 
          Operating Income  2,786  -  -  -  -  (99)  -  -  51  2,738  433  3,171 
          Non-Operating Income  (95)  -  -  -  -  99  -  -  -  4  -  4 
          Income Tax / Social Contribution and Minority Interest  (588)  -  -  -  -  -  -  -  (51)  (639)  (389)  (1,028) 
          Net Income  2,103  -  -  -  -  -  -  -  -  2,103  44  2,147 
           
          (1) Commission Expenses on the placement of loans and financing were reclassified from the item “Other Operating Expenses” to the item “Financial Margin”;
          (2) Interest Income/Expenses from the insurance segment were reclassified from the item “Other Operating Revenues/Expenses” to the item “Financial Margin”;
          (3) Interest Income/Expenses from the financial segment were reclassified from the item “Other Operating Revenues/Expenses” to the item “Financial Margin”;
          (4)

          Revenue from Loan Recovery classified under the item “Financial Margin”; Expenses with Discounts Granted classified under the item “Other Operating Revenues/Expenses”, Expenses with Write-offs of Leasing Operations classified under the item “Financial Margin” were reclassified to the item “ALL Expenses - Allowance for Loan Losses” and reclassification of Tax expenses, classified under Other Operating Expenses;

          (5) Losses from the Sale of Foreclosed Assets (BNDU) classified under the item “Non-Operating Income” were reclassified to the item “ALL Expenses - Allowance for Loan Losses”;
          (6)

          Income from Commissions and Credit Card Fees, Insurance Premium Commissions and Insurance Policy Fees classified under the item “Other Operating Revenues/Expenses” were reclassified to the item “Fee and Commission Income”;

          (7) Credit Card Operations Interchange Expenses classified under the item “Other Operating Revenues/Expenses” were reclassified to the item “Other Administrative Expenses”;
          (8) The partial result of Derivatives used to hedge investments abroad, which simply cancels the tax effects (IR/CS and PIS/Cofins) of this hedge strategy in terms of Net Income; and
          (9) For more information see page 08 of this chapter.
           
          (*) Result of Insurance, Private Pension Plans and Savings Bond Operations = Insurance, Private Pension Plans and Savings Bond Retained Premiums - Variation in the Technical Provisions of Insurance, Private Pension Plans and Savings Bonds – Retained Claims – Drawings and Redemption of Savings Bonds – Selling Expenses with Insurance Plans, Private Pension Plans and Savings Bonds.

           

               
          26  Report on Economic and Financial Analysis – March 2011   

           


           

             
          Economic and Financial Analysis   

           

           
          Consolidated Balance Sheet and Adjusted Statement of Income 
           
          Balance Sheet 

           

                           
            R$ million 
          Mar11  Dec10  Sept10  Jun10  Mar10  Dec09  Sept09  Jun09 
          Assets                 
          Current and Long-Term Assets  663,599  625,783  601,180  547,868  522,709  496,028  477,458  474,301 
          Cash and Cash Equivalents  6,785  15,738  9,669  6,877  8,705  6,947  8,571  9,001 
          Interbank Investments  100,159  73,232  92,567  96,478  97,165  110,797  97,487  89,636 
          Securities and Derivative Financial Instruments  217,482  213,518  196,081  156,755  157,309  146,619  147,724  146,110 
          Interbank and Interdepartmental Accounts  67,292  66,326  50,781  50,427  36,674  18,723  17,718  16,620 
          Loan and Leasing Operations  222,404  213,532  200,092  191,248  181,490  172,974  163,699  160,174 
          Allow ance for Loan Losses (ALL)  (16,740)  (16,290)  (16,019)  (15,782)  (15,836)  (16,313)  (14,953)  (13,871) 
          Other Receivables and Assets  66,217  59,727  68,009  61,864  57,202  56,281  57,212  66,631 
          Permanent Assets  11,788  11,702  10,723  10,232  9,917  10,195  8,228  8,177 
          Investments  1,675  1,577  1,616  1,553  1,537  1,549  1,392  1,359 
          Premises and Leased Assets  3,666  3,766  3,401  3,427  3,244  3,418  3,272  3,300 
          Intangible Assets  6,447  6,359  5,706  5,252  5,136  5,228  3,564  3,518 
          Total  675,387  637,485  611,903  558,100  532,626  506,223  485,686  482,478 
                           
          Liabilities                 
          Current and Long-Term Liabilities  623,069  588,610  564,794  512,790  488,431  463,350  446,152  444,574 
          Deposits  203,822  193,201  186,194  178,453  170,722  171,073  167,987  167,512 
          Federal Funds Purchased and Securities Sold under Agreements to Repurchase  178,989  171,497  157,009  131,134  128,172  113,273  102,604  99,710 
          Funds from Issuance of Securities  21,701  17,674  13,749  12,729  8,550  7,482  7,111  7,694 
          Interbank and Interdepartmental Accounts  2,647  3,790  2,451  2,777  2,063  2,950  2,257  1,904 
          Borrow ing and Onlending  41,501  38,196  37,998  35,033  30,208  27,328  27,025  29,081 
          Derivative Financial Instruments  2,358  730  1,878  1,097  2,469  531  1,669  2,599 
          Provisions for Insurance, Private Pension Plans and Savings Bonds 89,980  87,177  82,363  79,308  77,685  75,572  71,400  68,828 
          Other Liabilities  82,071  76,345  83,152  72,259  68,562  65,141  66,098  67,245 
          Deferred Income  447  360  312  337  292  321  297  272 
          Minority Interest in Subsidiaries  574  472  683  678  816  798  360  355 
          Shareholders' Equity  51,297  48,043  46,114  44,295  43,087  41,754  38,877  37,277 
          Total  675,387  637,485  611,903  558,100  532,626  506,223  485,686  482,478 

           

               
          30  Report on Economic and Financial Analysis – March 2011   

           

           

             
            Economic and Financial Analysis 

           

           
          Consolidated Balance Sheet and Adjusted Statement of Income 
           
          Adjusted Statement of Income 

           

                           
            R$ million 
          1Q11  4Q10  3Q10  2Q10  1Q10  4Q09  3Q09  2Q09 
          Financial Margin  9,362  9,018  8,302  8,047  7,689  7,492  7,587  7,560 

          Interest 

          		 8,849  8,553  7,904  7,663  7,406  7,144  6,891  6,771 

          Non-Interest 

          		 513  465  398  384  283  348  696  789 
          ALL  (2,360)  (2,295)  (2,059)  (2,161)  (2,188)  (2,695)  (2,908)  (3,118) 
          Gross Income from Financial Intermediation  7,002  6,723  6,243  5,886  5,501  4,797  4,679  4,442 
          Income from Insurance, Private Pension Plan and Savings Bond Operations (*)  785  700  703  786  583  484  433  529 
          Fee and Commission Income  3,510  3,568  3,427  3,253  3,124  3,125  2,857  2,911 
          Personnel Expenses  (2,436)  (2,533)  (2,411)  (2,238)  (2,120)  (2,081)  (2,126)  (1,908) 
          Other Administrative Expenses  (3,140)  (3,257)  (2,890)  (2,738)  (2,647)  (2,746)  (2,359)  (2,233) 
          Tax Expenses  (880)  (858)  (779)  (734)  (749)  (694)  (639)  (615) 
          Equity in the Earnings (Losses) of Unconsolidated  Companies  34  60  19  19  29  82  39  13 
          Other Operating Revenues and Expenses  (922)  (646)  (598)  (588)  (550)  (539)  (539)  (459) 
          - Other Operating Revenues  370  410  318  294  265  279  209  311 
          - Other Operating Expenses  (1,292)  (1,056)  (916)  (882)  (815)  (818)  (748)  (770) 
          Operating Income  3,953  3,757  3,714  3,646  3,171  2,428  2,345  2,680 
          Non-Operating Income  (4)  10  (10)  (12)  4  (62)  63  37 
          Income Tax and Social Contribution  (1,138)  (1,059)  (1,123)  (1,161)  (1,010)  (519)  (607)  (717) 
          Minority Interest  (73)  (24)  (63)  (18)  (18)  (8)  (6)  (4) 
          Adjusted Net Income  2,738  2,684  2,518  2,455  2,147  1,839  1,795  1,996 

          (*) Results from Insurance, Private Pension Plan and Savings Bonds Operations = Retained Insurance, Private Pension Plan and Savings Bonds Premiums - Variation in Technical Provisions of Insurance, Private Pension Plans and Savings Bonds – Retained Claims – Drawings and Redemption of Savings Bonds – Selling Expenses with Insurance, Private Pension Plans and Savings Bonds.

          Financial Margin – Interest and Non-Interest

           

          Financial Margin Breakdown
               
            Bradesco  31 

           

           

             
          Economic and Financial Analysis   

           

          Financial Margin – Interest and Non-Interest 
           
          Average Financial Margin Rate 

           

                     
            R$ million 
          Financial Margin
          1Q11  4Q10  1Q10  Variation 
          Quarter    12M 
          Interest - due to volume        436  1,547 
          Interest - due to spread        (140)  (104) 
          - Financial Margin - Interest  8,849  8,553  7,406  296  1,443 
          - Financial Margin - Non-Interest  513  465  283  48  230 
          Financial Margin  9,362  9,018  7,689  344  1,673 
          Average Margin Rate (*)  8.2%  8.3%  8.1%     
          (*) Average Margin Rate = (Financial Margin / Average Assets – Purchase and Sale Commitments - Permanent Assets) Annualized 

           

          Financial margin in the first quarter of 2011 was R$9,362 million. Compared with the previous quarter there was a R$344 million, or 3.8% increase mainly from the interest financial margin, which was positively impacted by: (i) the increase in the volume of operations; contributing with R$436 million; and mitigated by (ii) the decrease in the average spread of R$140 million.

          Financial margin grew by 21.8% or R$1,673 million in the first quarter of 2011, compared to the same period in the previous year. This growth is due to (i) the R$1,443 million increase in interest margin, of which: (a) R$1,547 million corresponds to the increase in volume of operations; being partially mitigated by: (b) decrease in the average spread in the amount of R$104 million; and (ii) the increase in “non-interest” financial margin, in the amount of R$230 million, from more treasury/securities gains.

          Financial Margin – Interest 
           
          Interest Financial Margin - Breakdown 

           

                     
            R$ million 
          Interest Financial Margin Breakdown
          1Q11 4Q10 1Q10 Variation
          Quarter  12M 
          Loans  6,180  6,143  5,630  37  550 
          Funding  1,009  916  593  93  416 
          Insurance  999  907  744  92  255 
          Securities/Other  661  587  439  74  222 
          Financial Margin  8,849  8,553  7,406  296  1,443 

           

          The interest financial margin reached R$8,849 million in the first quarter of 2011 versus the R$8,553 million posted in the fourth quarter of 2010, a positive impact of R$296 million. The business lines that contributed the most to results in the quarter were (i) “Funding,” which is explained in further detail in “Funding Financial Margin” – “Interest” and (ii) “Insurance”, which is explained in further detail in “Insurance Financial Margin" -“Interest.”.

          Year on year, interest financial margin posted growth of 19.5%, or R$1,443 million. The business lines that most contributed to this growth were: (i) “Loan,” details of which can be found in "Loan Financial Margin” –“Interest;” and (ii) "Funding," details of which can be found in "Funding Financial Margin” – “Interest.”

               
          32  Report on Economic and Financial Analysis – March 2011   

           

           

            Economic and Financial Analysis 

           

          Financial Margin - Interest 
           
          Interest Financial Margin - Rates 

           


          The annualized ratio of “interest” financial margin to total average assets stood at 7.8% in the first quarter of 2011, stable in comparison with the previous quarter and the first quarter of 2010.

          Interest Financial Margin – Annualized Average Rates 

           

            R$ million 
          1Q11 4Q10
          Interest Average Balance  Average Rate  Interest Average Balance  Average Rate 
          Loans  6,180  239,266  10.74%  6,143  227,368  11.25% 
          Funding  1,009  276,157  1.47%  916  255,634  1.44% 
          Insurance  999  88,818  4.58%  907  85,096  4.33% 
          Securities/Other  661  206,006  1.29%  587  202,244  1.17% 
          Financial Margin  8,849  -  -  8,553  -  - 
           
            1Q11 1Q10
          Interest Average Balance  Average Rate  Interest Average Balance  Average Rate 
          Loans  6,180  239,266  10.74%  5,630  194,704  12.08% 
          Funding  1,009  276,157  1.47%  593  221,851  1.07% 
          Insurance  999  88,818  4.58%  744  76,591  3.94% 
          Securities/Other  661  206,006  1.29%  439  187,381  0.94% 
          Financial Margin  8,849  -  -  7,406  -  - 

           

            Bradesco  33 

           

           

          Economic and Financial Analysis   

           

          Loan Financial Margin - Interest 
           
          Loan Financial Margin – Breakdown 

           

            R$ million 
          Financial Margin - Loan
          1Q11 4Q10 1Q10 Variation 
          Quarter  12M 
          Interest - due to volume        307  1,151 
          Interest - due to spread        (270)  (601) 
          Interest Financial Margin  6,180  6,143  5,630  37  550 
          Revenues  11,056  10,554  9,210  502  1,846 
          Expenses  (4,876)  (4,411)  (3,580)  (465)  (1,296) 

           

          In the first quarter of 2011, the financial margin with loan operations reached R$6,180 million, up 0.6% or R$37 million, over the previous quarter. The variation was mainly the result of: (i) growth in average business volume of R$307 million; offset by: (ii) a R$270 million decrease in the average spread.

          In the first quarter of 2011, financial margin was up 9.8% or R$550 million from the same period last year. This variation was the result of: (i) the positive contribution of R$1,151 million from the increase in the volume of operations; and, partially offset by: (ii) a decrease in average spread by R$601 million.

          It is important to highlight Bradesco’s strategic positioning, which allows it to take advantage of the best opportunities from the upturn in the Brazilian economy, highlighting operations aimed at family consumption and production financing.

          34  Report on Economic and Financial Analysis – March 2011   

           

           

            Economic and Financial Analysis 

           

          Loan Financial Margin - Interest 
           
          Loan Financial Margin – Net Margin 

           

           

          The graph above presents a summary of loan activity. The Gross Margin line refers to interest income from loans, net of opportunity cost (essentially the accrued Interbank Deposit Certificate - CDI over rate in the period), which has gone up due to the increase in volume of operations.

          The ALL curve shows delinquency costs, which are represented by Allowance for Loan Losses (ALL) expenses, discounts granted in negotiations and net of loan recoveries, and the result of the sale of foreclosed assets, among other items.

          The net margin curve presents the result of loan interest income, net of ALL, which in the first quarter of 2011 recorded a decrease from the previous quarter of 0.7%, due to the 2.8% increase in ALL expenses. Year on year, net margin increased by 11.0%, or R$378 million.

            Bradesco  35 

           

           

          Economic and Financial Analysis  

           

          Loan Financial Margin - Interest 
           
          Total Loan Portfolio 

           

          Loan operations (including sureties, guarantees, advances of credit card receivables and assignments of receivables-backed investment funds and mortgage-backed receivables) ended the first quarter of 2011 at R$284.7 billion, an increase of 3.8% in the quarter and 21.0% in the last twelve months.

          The expanded loan portfolio(1) , which also includes the other credit risk operations – commercial portfolio (debentures and promissory notes), amounted to R$304.4 billion in March 2011 (R$293.6 billion in December 2010 and R$248.3 billion in March 2010), recording growth of 3.7% in the quarter and 22.6% in the last twelve months.

          (1) For more information, see page 36 of this chapter.

           

           

          Loan Portfolio Breakdown by Product and Type of Customer (Individuals and Corporate) 

           

          A breakdown of loan products for Individuals is presented below:

          Individuals R$ million Variation %
          Mar11  Dec10  Mar10  Quarter  12M 
          Vehicles - CDC  25,811  24,867  20,609  3.8  25.2 
          Credit Card  16,493  17,184  14,195  (4.0)  16.2 
          Payroll-Deductible Loan (1)  16,123  15,008  11,491  7.4  40.3 
          Personal Loan  12,075  11,493  9,342  5.1  29.3 
          Leasing  6,916  7,954  11,329  (13.1)  (39.0) 
          Rural Loan  5,946  5,798  4,785  2.5  24.3 
          Real Estate Financing (2)  4,879  4,370  3,189  11.6  53.0 
          BNDES/Finame Onlending  4,704  4,394  3,439  7.1  36.8 
          Overdraft Facilities  2,940  2,481  2,635  18.5  11.6 
          Sureties and Guarantees  667  535  551  24.7  20.9 
          Other (3)  3,525  4,037  4,448  (12.7)  (20.7) 
          Total  100,079  98,122  86,012  2.0  16.4 

          Including:
          (1) Credit assignment (FIDC): R$401 million in March 2011, R$408 million in December 2010 and R$360 million in March 2010;
          (2) Credit assignment (CRI): R$268 million in March 2011, R$287 million in December 2010, R$354 million in March 2010; and
          (3) Credit assignment (FIDC) for the acquisition of assets: R$5 million in March 2011, R$8 million in December 2010 and R$18 million in March 2010.

          Operations with Individuals, which recorded growth of 16.4% in the last twelve months, was led by: (i) real estate financing: (ii) the payroll-deductible loans portfolio; and (iii) BNDES/Finame onlending. In the first quarter of 2011, these operations grew by 2.0% when compared to the previous quarter, and the products that most contributed to growth were: (i) real estate financing; (ii) payroll-deductible loans; and (iii) BNDES/Finame onlending.

          36  Report on Economic and Financial Analysis – March 2011   

           

           

             Economic and Financial Analysis

           

          Loan Financial Margin - Interest 

           

          A breakdown of loan products for the Corporate segment is presented below:

           

          Corporate R$ million Variation %
          Mar11  Dec10  Mar10  Quarter  12M 
          Working Capital  36,161  34,729  29,526  4.1  22.5 
          BNDES/Finame Onlending  26,389  25,160  16,762  4.9  57.4 
          Operations Abroad  19,099  17,927  14,017  6.5  36.3 
          Credit Card  11,353  11,073  7,738  2.5  46.7 
          Overdraft Account  9,450  8,387  8,226  12.7  14.9 
          Export Financing  8,500  7,133  8,016  19.2  6.0 
          Leasing  8,091  8,411  8,642  (3.8)  (6.4) 
          Real Estate Financing - Corporate Plan (1)  6,990  6,484  5,119  7.8  36.6 
          Rural Loan  4,380  4,241  4,144  3.3  5.7 
          Vehicles - CDC  4,191  3,936  3,062  6.5  36.9 
          Sureties and Guarantees (2)  41,800  40,231  34,162  3.9  22.4 
          Other  8,212  8,393  9,812  (2.2)  (16.3) 
          Subtotal  184,616  176,105  149,226  4.8  23.7 
          Operations w ith Credit Risk - Commercial Portfolio (3)  19,678  19,328  13,044  1.8  50.9 
          Total  204,295  195,433  162,270  4.5  25.9 

          (1) Mortgage-backed receivables (CRI): Includes R$307 million in March 2011, R$312 million in December 2010 and R$388 million in March 2010;
          (2) 91.6% of surety and guarantees from corporate customers were contracted by corporations; and
          (3) Includes operations with debentures and promissory notes.

           

          The corporate segment grew by 25.9% in the last twelve months and 4.5% in the quarter. The main highlights in the last twelve months were: (i) operations bearing credit risk - commercial portfolio; (ii) BNDES/Finame onlending; (iii) credit card; and (iv) vehicle financing – CDC. In the quarter, the highlights were: (i) export financings; (ii) overdraft accounts; and (iii) real estate financing – corporate plans.

           

          Loan Portfolio – Consumer Financing 

           

          The graph below shows the types of credit related to Individual Consumer Financing (CDC/vehicle leasing, personal loans, financing of goods, revolving credit cards and cash and installment purchases at merchants).

          Consumer financing totaled R$78.2 billion, which corresponded to a 0.8% increase in the quarter and 14.6% in the last twelve months. Growth was led by: (i) vehicle financing (CDC/Leasing); and (ii) payroll-deductible loans, which together totaled R$48.9 billion, accounting for 62.5% of the total consumer financing balance. Given their guarantees and characteristics, they provide operations with an adequate level of credit risk.

           

           

             Bradesco 37 

           

           

          Economic and Financial Analysis   

           

          Loan Financial Margin - Interest
           
          Breakdown of Vehicle Portfolio 

           

            R$ million Variation % 
          Mar11  Dec10  Mar10  Quarter  12M 
          CDC Portfolio  30,002  28,803  23,671  4.2  26.7 
          Individuals  25,811  24,867  20,609  3.8  25.2 
          Corporate  4,191  3,936  3,062  6.5  36.9 
          Leasing Portfolio  11,769  13,151  17,291  (10.5)  (31.9) 
          Individuals  6,916  7,954  11,329  (13.1)  (39.0) 
          Corporate  4,853  5,197  5,962  (6.6)  (18.6) 
          Finame Portfolio  8,766  8,125  3,590  7.9  144.2 
          Individuals  1,002  887  108  13.0  827.8 
          Corporate  7,764  7,238  3,482  7.3  123.0 
          Total  50,537  50,079  44,552  0.9  13.4 
          Individuals  33,729  33,708  32,046  0.1  5.3 
          Corporate  16,808  16,371  12,506  2.7  34.4 

           

          Vehicle financing operations (individuals and corporate customers) totaled R$50.5 billion in March 2011, for an increase of 0.9% on the quarter and 13.4% on the same period last year. Of the total vehicle portfolio, 59.4% corresponds to CDC, 23.3% to Leasing and 17.3% to Finame. Individuals represented 66.7% of the portfolio, while Corporate Customers accounted for the remaining 33.3%.

           

          Loan Portfolio – By Type

          The table below presents all operations with credit risk (including sureties and guarantees, advances on credit card receivables, loan assignments and other operations with some type of credit risk), which increased by 4.1% in the quarter and 23.4% in the last twelve months.

            R$ million Variation % 
          Mar11  Dec10  Mar10  Quarter  12M 
          Loans and Discounted Securities  116,264  110,316  92,366  5.4  25.9 
          Financing  76,869  73,046  56,537  5.2  36.0 
          Rural and Agribusiness Financing  14,262  13,804  12,338  3.3  15.6 
          Leasing Operations  15,008  16,366  20,249  (8.3)  (25.9) 
          Advances on Exchange Contracts  5,728  4,189  5,126  36.7  11.7 
          Other Loans  11,781  12,893  11,491  (8.6)  2.5 
          Total Loan Operations (1)  239,912  230,614  198,107  4.0  21.1 
          Sureties and Guarantees Granted (Memorandum Accounts)  42,466  40,766  34,714  4.2  22.3 
          Other (2)  1,336  1,833  1,298  (27.1)  2.9 
          Total Exposures - Loan Operations  283,714  273,213  234,119  3.8  21.2 
          Loan Assignments (FIDC / CRI)  981  1,014  1,119  (3.3)  (12.3) 
          Total Operations including Loan Assignment  284,695  274,227  235,238  3.8  21.0 
          Operations w ith Credit Risk - Commercial Portfolio (3)  19,678  19,328  13,044  1.8  50.9 
          Total Operations with Credit Risk - Expanded Portfolio  304,374  293,555  248,282  3.7  22.6 
          Other Operations w ith Credit Risk (4)  14,085  12,267  9,784  14.8  44.0 
          Total Operations with Credit Risk  318,459  305,822  258,066  4.1  23.4 

          (1) Concept determined by the Brazilian Central Bank;
          (2) Refers to advances of credit card receivables;
          (3) Includes operations with debentures and promissory notes; and
          (4) Includes operations involving interbank deposit certificates (CDI), international treasury, euronotes, swaps, forward currency contracts and investments in receivables-backed investment funds (FIDC) and mortgage-backed receivables (CRI).

           
          38  Report on Economic and Financial Analysis – March 2011   

           

           

            Economic and Financial Analysis 

           

          Loan Financial Margin - Interest
           
          Credit Portfolio Concentration* – by Sector 

           

          The loan portfolio by sector of economic activity presented slight changes in the segments it comprises, specifically an increase in participation of commerce and services in the last twelve months.

                       
          Activity Sector R$ million
          Mar11  %  Dec10  %  Mar10  % 
          Public Sector  1,008  0.4  973  0.4  1,546  0.8 
          Private Sector  238,904  99.6  229,641  99.6  196,561  99.2 
          Corporate  140,166  58.4  132,757  57.6  111,832  56.4 
          Industry  46,562  19.4  45,268  19.6  39,351  19.9 
          Commerce  37,809  15.8  34,519  15.0  27,004  13.6 
          Financial Intermediaries  716  0.3  566  0.2  788  0.4 
          Services  51,772  21.6  49,496  21.5  42,104  21.2 
          Agriculture, Cattle Raising, Fishing, Forestry and Forest Exploration  3,307  1.4  2,908  1.3  2,585  1.3 
          Individuals  98,738  41.2  96,884  42.0  84,729  42.8 
          Total  239,912  100.0  230,614  100.0  198,107  100.0 
          (*) Concept defined by the Brazilian Central Bank.             

           

          Changes in the Loan Portfolio* 

           

          Out of the R$41.8 billion in growth in the loan portfolio over the last twelve months, new borrowers were responsible for R$24.7 billion, or 59.0% of the growth. New borrowers represented 10.3% of the portfolio on March 31, 2011.

           

          * Concept defined by the Brazilian Central Bank.


            Bradesco  39 

           

           

          Economic and Financial Analysis   

           

          Loan Financial Margin - Interest
           
          Changes in the Loan Portfolio - By Rating 

           

          In the chart below, we show that both new borrowers and remaining debtors from March 2010 presented a good level of credit quality (AA-C rating), demonstrating the adequacy and consistency of credit policy and processes, as well as required guarantees and credit ranking instruments used by Bradesco.

          Breakdown of Portfolio by Rating between March 2010 and 2011
          Rating Total Loans in March 2011 New Customers from
          April 2010 to March 2011           		 Remaining Customers
          from March 2010 
          R$ million  %  R$ million  %  R$ million  % 
          AA - C  221,670  92.4  23,449  95.0  198,221  92.1 
          D  4,751  1.9  406  1.7  4,345  2.0 
          E - H  13,491  5.7  816  3.3  12,675  5.9 
          Total  239,912  100.0  24,671  100.0  215,241  100.0 
          (*) Concept defined by the Brazilian Central Bank.           

           

          Loan Portfolio* – By Customer Profile 

           

          The table below presents the changes in the breakdown of the loan portfolio by customer profile:

          Type of Customer R$ million Variation %
          Mar11  Dec10  Mar10  Quarter   12M
          Corporate  58,334  55,235  50,343  5.6  15.9 
          SMEs  82,840  78,495  63,034  5.5  31.4 
          Individuals  98,738  96,884  84,729  1.9  16.5 
          Total Loan Operations  239,912  230,614  198,107  4.0  21.1 
          (*) Concept defined by the Brazilian Central Bank.

           

          It is worth noting that growth in the Corporate portfolio was impacted by: (i) the appreciation of the Brazilian Real against the US Dollar; as well as by (ii) funds raised on the capital markets, whose balance of operations with credit risk – commercial portfolio, which include debentures and promissory notes, grew by R$6.6 billion in the last twelve months, representing an increase of 50.9% in the period, resulting in lower growth of traditional loan operations for this type of customer.

          Loan Portfolio* – By Customer Profile and Rating (%) 

           

          Regarding the last 12 months, the increase in the share of loans rated “AA – C,” reflects improved economic performance during the period, the ongoing improvement of loan analysis tools and processes and the quality growth of Bradesco’s loan portfolio.

           

          Type of Customer By Rating
          Mar11 Dec10 Mar10
          AA-C  D  E-H  AA-C  D  E-H  AA-C  D  E-H 
          Corporate  97.3  1.6  1.1  97.3  1.6  1.1  97.1  1.2  1.6 
          SMEs  92.2  2.3  5.5  92.3  2.2  5.5  90.8  2.5  6.7 
          Individuals  89.6  1.9  8.5  89.8  1.8  8.4  88.3  2.1  9.6 
          Total  92.4  1.9  5.7  92.4  1.9  5.7  91.4  2.0  6.6 
          (*) Concept defined by the Brazilian Central Bank.               

           

          40  Report on Economic and Financial Analysis – March 2011   

           

           

            Economic and Financial Analysis 

           

          Loan Financial Margin - Interest
           
          Loan Portfolio* - By Business Segment 

           

          The table below shows growth by business segment in Bradesco’s loan portfolio, especially the growth in the assets of the Retail, Prime and Corporate in the quarter. In the year, Prime, Retail and Middle Market were the segments that posted the greatest growth.

          Business Segments R$ million Variation % 
          Mar11  %  Dec10  %  Mar10  %  Quarter  12M 
          Retail  83,622  34.9  78,699  34.1  63,594  32.1  6.3  31.5 
          Corporate (1)  69,842  29.1  66,464  28.8  59,566  30.1  5.1  17.3 
          Middle Market  31,777  13.2  31,049  13.5  24,664  12.4  2.3  28.8 
          Prime  9,410  3.9  8,896  3.9  6,416  3.2  5.8  46.7 
          Other / Non-account holders (2) 45,261  18.9  45,506  19.7  43,866  22.2  (0.5)  3.2 
          Total  239,912  100.0  230,614  100.0  198,107  100.0  4.0  21.1 

          (*) Concept defined by the Brazilian Central Bank.
          (1) Considers credits acquired with recourse. In the table on page 38, Loan Portfolio – by Customer Profile, these amounts are allocated to Individuals; and
          (2) Mainly non-account holders from vehicle financing, cards and payroll-deductible loans.

           

          Loan Portfolio - By Currency 

           

               

          The balance of dollar-indexed and/or denominated loans and onlending operations (excluding ACCs – Advances on Foreign Exchange Contracts) totaled US$12.7 billion, representing strong growth of 8.1% in the quarter and 43.6% in the last twelve months, in terms of U.S. dollars (in terms of Brazilian reais, an increase of 5.7% and 31.3%, respectively). In terms of Brazilian reais, these same foreign currency operations totaled R$20.7 billion (R$19.6 billion in December 2010 and R$15.7 billion in March 2010).

          In March 2011, total loan operations, in Reais, stood at R$219.2 billion (R$211.1 billion in December 2010 and R$182.4 billion in March 2010), up 3.9% from the previous quarter and 20.2% over the last twelve months.

           

            Bradesco  41 

           

           

          Economic and Financial Analysis   

           

          Loan Financial Margin - Interest
            
          Loan Portfolio* - By Debtor 

           

          The credit exposure levels of the largest debtors reduced its concentration in comparison with both the same period in the previous year and the previous quarter. The quality of the portfolio of the one hundred largest debtors, when evaluated using AA and A ratings, improved in the last twelve months but slightly deteriorated in the quarter.

           

          42  Report on Economic and Financial Analysis – March 2011   

           

           

             
            Economic and Financial Analysis 

           

           
          Loan Financial Margin - Interest 
           
          Loan Portfolio* - By Flow of Maturities 

           

          In March 2011, performing loan operations presented a longer debt maturity profile as a result of the focus on BNDES/Finame onlending and real-estate lending. It is worth noting that onlending and real estate lo- 

          		  

          an operations present reduced risk, given their guarantees and characteristics, in addition to providing favorable conditions to gain customer loyalty. 

           

          (*) Concept defined by the Brazilian Central Bank.


               
            Bradesco  43 

           

           

             
          Economic and Financial Analysis   

           

           
          Loan Financial Margin - Interest 
           
          Loan Portfolio* – Delinquency over 90 days 

           

          After five consecutive quarters in decline, in March 2011, the total delinquency rate for loans overdue for over 90 days remained stable when compared with the previous quarter.

           

          The graph below details the decrease in delinquency for operations overdue from 61 to 90 days in comparison with the same period in the previous year and stability in the quarter.

           

          (*) Concept defined by the Brazilian Central Bank.

               
          44  Report on Economic and Financial Analysis – March 2011   

           

           

             
            Economic and Financial Analysis 

           

           
          Loan Financial Margin - Interest 

           

          Analysis of delinquency by type of customer in the quarter shows that operations overdue from 61 to 90 days presented a slight increase for Individuals, as expected for in period of the year.


          For Corporate customers, delinquency of operations overdue from 61 to 90 days remained stable in the quarter.


               
            Bradesco  45 

           

           

             
          Economic and Financial Analysis   

           

           
          Loan Financial Margin - Interest 
           
          Allowance for Loan Losses (ALL) vs. Delinquency vs. Losses 

           

          The volume of Allowance for Loan Losses (ALL) amounted to R$16.7 billion, representing 7.0% of the total portfolio, and is composed of generic provisions (customer and/or operation rating), specific provisions (non-performing operations) and excess provisions (internal criteria).

           

          It is important to highlight the adequacy of adopted provisioning criteria, which can be proven by: (i) analyzing the historical data on recorded allowances for loan losses; and (ii) effective losses in the subsequent twelve-month period. For instance, in March 2010, for an existing provision of 8.0% of the portfolio, the loss in the subsequent twelve months was 4.3%, which means the existing provision covered the loss by an 86% margin, as shown in the graph below.

           

               
          46  Report on Economic and Financial Analysis – March 2011   

           

           

             
            Economic and Financial Analysis 

           

           
          Loan Financial Margin - Interest 

           

          Analysis in terms of loss net of recovery shows a significant increase in the coverage margin. In March 2010, for an existing provision of 8.0% of the portfolio, the net loss in the subsequent twelve months was 2.9%, meaning that the existing provision covered the loss by a 176% margin.


               
            Bradesco  47 

           

           

             
          Economic and Financial Analysis   

           

           
          Loan Financial Margin - Interest 
           
          Allowance for Loan Losses 

           

          Bradesco holds allowances nearly R$3.0 billion in excess of requirements. The current provisioning levels reflect the cautious approach to supporting potential changes in scenarios, such as higher delinquency levels and/or changes in the loan portfolio profile.

           

          The Non-Performing Loan ratio (operations overdue for over 60 days) posted a slight increase in the period, from 4.3% in December 2010 to 4.4% in March 2011. Coverage ratios for the allowance for loans overdue for over 60 and 90 days posted a slight reduction in the quarter, still providing the Bank with a certain measure of comfort.

           

           

               
          48  Report on Economic and Financial Analysis – March 2011   

           

           

             
            Economic and Financial Analysis 

           

           
          Loan Financial Margin - Interest 
           
          Loan Portfolio – Portfolio Indicators 

           

          To facilitate monitoring of the quantitative and qualitative performance of Bradesco’s loan portfolio, a comparative summary of the main figures and indicators is presented below:

                 
            R$ million (except %) 
          Mar11  Dec10  Mar10 
          Total Loan Operations  239,912  230,614  198,107 
          - Individuals  98,738  96,884  84,729 
          - Corporate  141,174  133,730  113,378 
          Existing Provision  16,740  16,290  15,836 
          - Specific  8,298  7,898  8,230 
          - Generic  5,439  5,390  4,601 
          - Excess  3,003  3,002  3,005 
          Specific Provision / Existing Provision (%)  49.6  48.5  52.0 
          Existing Provision / Loan Operations (%)  7.0  7.1  8.0 
          AA - C Rated Loan Operations / Loan Operations (%)  92.4  92.4  91.4 
          D Rated Operations under Risk Management / Loan Operations (%)  1.9  1.9  2.0 
          E - H Rated Loan Operations / Loan Operations (%)  5.7  5.7  6.6 
          D Rated Loan Operations  4,751  4,285  3,961 
          Existing Provision for D Rated Loan Operations  1,258  1,121  1,046 
          D Rated Provision / Loan Operations (%)  26.5  26.2  26.4 
          D - H Rated Non-Performing Loans  11,858  11,172  11,651 
          Existing Provision/D - H Rated Non-Performing Loans (%)  141.2  145.8  135.9 
          E - H Rated Loan Operations  13,491  13,100  13,161 
          Existing Provision for E - H Rated Loan Operations  11,899  11,579  11,622 
          E - H Rated Provison / Loan Operations (%)  88.2  88.4  88.3 
          E - H Rated Non-Performing Loans  9,881  9,403  9,742 
          Existing Provision/E - H Rated Non-Performing Loan (%)  169.4  173.2  162.6 
          Non-Performing Loans (*)  10,520  9,973  10,465 
          Non-Performing Loans (*) / Loan Operations (%)  4.4  4.3  5.3 
          Existing Provision / Non-Performing Loans (*) (%)  159.1  163.3  151.3 
          Loan Operations Overdue for over 90 days  8,648  8,243  8,760 
          Existing Provision / Operations Overdue for Over 90 days (%)  193.6  197.6  180.8 
          (*) Loan operations overdue for over 60 days and do not generate revenue appropriation under the accrual accounting method. 

           

          The table above shows the continuing quality of the loan portfolio, represented by (i) the 92.4% share of loans classified as “AA-C” in March 2011; (ii) the adequate delinquency levels; and (iii) the excellent coverage of operations overdue for over 60 and 90 days.

               
            Bradesco  49 

           

           

             
          Economic and Financial Analysis   

           

           
          Funding Financial Margin - Interest 
           
          Funding Financial Margin - Breakdown 

           

                     
            R$ million 
          Financial Margin - Funding
          1Q11 4Q10 1Q10 Variation 
          Quarter  12M 
          Interest - due to volume        75  198 
          Interest - due to spread        18  218 
          Interest Financial Margin  1,009  916  593  93  416 

           

          Comparing the first quarter of 2011 with the previous one, there was an increase of 10.2% or R$93 million in the interest funding financial margin. This growth was due to: (i) increased operation volume, which contributed to a R$75 million increase; and (ii) average spread gains of R$18 million.

          In the first quarter of 2011, the interest funding financial margin reached R$1,009 million, versus R$593 million in the same period last year, for growth of 70.2% or R$416 million.







           The increase was mainly the result of: (i) greater average spread gains of R$218 million, due to the increase in interest rate (Selic) in the period and the drop in funding costs; and (ii) an increase in average business volume, contributing R$198 million, from the establishing of funding strategies, which led to an increase in the average volume of time and savings deposits, as well as the issuance of financial letters.

           

           

               
          50  Report on Economic and Financial Analysis – March 2011   

           

           

             
            Economic and Financial Analysis 

           

           
          Funding Financial Margin - Interest 
           
          Loans vs. Funding 

           

               

          To analyze Loan Operations in relation to Funding, it is first necessary to deduct, from total customer funding: (i) the amount committed to compulsory deposits at the Brazilian Central Bank; and (ii) the amount of available funds held at units in the customer service network; and to add (iii) the funds from domestic and offshore lines that provide funding to meet loan and financing needs.

          Bradesco presents low reliance on interbank deposits and foreign credit lines, given its capacity to effectively obtain funding from customers. This is a result of: (i) the outstanding position of its service points; (ii) the extensive diversity of 

          		  

          products offered; and (iii) the market’s confidence in the Bradesco brand.

          Despite reduced liquidity from the increase in compulsory deposit rates (in December 2010), we observe that use of funds still showed a comfortable margin in March 2011, practically returning to the same levels seen in March 2010 as a result of increased funding, which proves that Bradesco was capable of meeting demand for resources in loan operations, mainly by raising funds with customers.

           

                     
          Funding vs . Investments   R$ million    Variation % 
          Mar11  Dec10  Mar10  Quarter  12M 
          Demand Deposits  32,891  37,332  32,585  (11.9)  0.9 
          Sundry Floating  5,041  1,870  3,715  169.6  35.7 
          Savings Deposits  54,625  53,436  45,195  2.2  20.9 
          Time Deposits + Debentures (1)  165,169  148,941  134,122  10.9  23.1 
          Other  28,583  23,230  10,851  23.0  163.4 
          Customer Funds  286,310  264,809  226,468  8.1  26.4 
          (-) Compulsory Deposits / Funds Available (2)  (66,716)  (74,329)  (43,462)  (10.2)  53.5 
          Customer Funds Net of Compulsory Deposits  219,594  190,480  183,006  15.3  20.0 
          Onlending  31,411  29,819  20,646  5.3  52.1 
          Foreign Credit Lines  13,392  10,126  14,272  32.3  (6.2) 
          Funding Abroad  30,506  21,785  15,383  40.0  98.3 
          Total Funding (A)  294,903  252,210  233,307  16.9  26.4 
                     
          Loan Portfolio/Leasing/Cards (Other  245,781  233,181  199,449  5.4  23.2 
          Receivables)/Acquired CDI (B) (3)           
          B/A (%)  83.3  92.5  85.5  (9.2) p.p.  (2.1) p.p. 

          (1) Debentures mainly used to back purchase and sale commitments;
          (2) Excludes government bonds tied to savings accounts; and
          (3) Comprises amounts relative to card operations (cash and installment purchases from merchants) and amounts related to interbank deposit certificates (CDI) to debate from the compulsory amount.

               
            Bradesco  51 

           

             
          Economic and Financial Analysis   

           

           
          Funding Financial Margin - Interest 
           
          Main Funding Sources 

           

          The following table presents changes in main funding sources:

           

                     
              R$ million    Variation % 
            Mar11  Dec10  Mar10  Quarter  12M 
          Demand Deposits  32,891  37,332  32,585  (11.9)  0.9 
          Savings Deposits  54,625  53,436  45,195  2.2  20.9 
          Time Deposits  116,055  102,158  92,577  13.6  25.4 
          Debentures (*)  48,351  46,040  40,790  5.0  18.5 
          Borrow ing and Onlending  41,501  38,197  30,208  8.6  37.4 
          Funds from Issuance of Securities  21,701  17,674  8,550  22.8  153.8 
          Subordinated Debts  24,408  26,315  23,541  (7.2)  3.7 
          Total  339,532  321,152  273,446  5.7  24.2 
          (*) Considers only debentures used to back purchase and sale commitments.       

           

           
          Demand Deposits 

           

               

          The R$4,441 million decrease in the first quarter of 2011, when compared to the previous quarter, is mainly due to: (i) the use of funds by customers to pay non-recurring, end-of-year expenses (i.e.
          IPVA and Property Tax - IPTU); and (ii) the seasonality of the fourth quarter, generating a greater volume of funds from the payment of the thirteenth salary.

          The balance of these funds remained stable year on year. 

          		  

           

           
          Savings Deposits 

           

               

          Savings deposits were up by 2.2% in the first quarter versus previous quarter and by 20.9% over the last 12 months, mainly as a result of an increase in the amount of funds raised that exceeded redemptions in the period. The remuneration of balances (TR + 0.5% p.m.) reached 1.7% in the quarter and 7.1% accrued over the last 12 months.

          Bradesco is always increasing its savings accounts base and has seen growth of 8.8% in savings accounts over the last twelve months.

          At the end of the first quarter of 2011, the balance of Bradesco’s savings accounts represented 17.9% of the Brazilian Savings and Loan System (SBPE). 

          		  

           

               
          52  Report on Economic and Financial Analysis – March 2011   

           

           
             
            Economic and Financial Analysis 

           

          Funding Financial Margin - Interest 
           
          Time Deposits 

           

          In the first quarter of 2011, time deposits grew by 13.6% (or R$13,897 million) over the previous quarter, mainly as a result of an increase in funding volume from institutional investors and the branch network due to improved remuneration rates.

          In the first quarter of 2011 versus the same quarter in the previous year, the 25.4% gain was mainly due to increased funding volume from institutional investors and the branch network.

          		  

               

           

           
          Debentures 

           

               

          On March 31, 2011, the balance of Bradesco’s debentures was R$48,351 million, up by 5.0% quarter on quarter and 18.5% over the last twelve months.

          These increases are mainly due to the placement of the securities, which are used to back purchase and sale commitments that are, in turn, impacted by stable levels of economic activity. 

          		  

           

           
          Borrowings and Onlending 

           

               

          The 8.6%, or R$3,304 million increase in the quarter is mainly due to: (i) a R$1,594 million increase in the volume of funds from borrowings and onlending in the country, mainly through Finame operations; and (ii) new funding in the first quarter of 2011, which impacted borrowing and onlending obligations denominated in and/or indexed to foreign currency, which increased from R$7,996 million in December 2010 to R$9,705 million in March 2011.

          The year-on-year increase of 37.4%, or R$11,293 million was mainly due to the R$10,664 million increase in the volume of funds from borrowings and onlending in the country, basically through BNDES and Finame operations. 

          		  

           

               
            Bradesco  53 

           

           

             
          Economic and Financial Analysis   

           

           
          Funding Financial Margin - Interest 
           
          Funds from Security Issuances 

           

               

          The 22.8%, or R$4,027 million increase in the quarter is mainly due to the following: (i) the R$3,701 million increase in the volume of Financial Letters; (ii) the growth of Mortgage Bonds, in the amount of R$420 million; (iii) the higher volume of operations with Letters of Credit for Agribusiness, amounting to R$116 million, and partially offset by: (iv) the negative variation in the foreign exchange rate of 2.3%, which impacted securities issued abroad.

          In the comparison of the first quarter of 2011 with the same period last year, the 153.8% growth, or R$13,151 million, is mainly the result of: (i) new issuances of Financial Letters in the market, beginning in the second quarter of 2010, the balance of which amounted to R$11,521 million in March 2011; (ii) the increase in Mortgage Bonds, in the amount of R$1,196 million; (iii) the increased volume of Letters of Credit for Agribusiness, of R$353 million; (iv) the higher volume of Collateral Mortgage Notes, in the amount of R$298 million; and partially offset by: (v) a negative exchange variation affecting all securities issued abroad.

           

          		  

          (1)     Issued as of the second quarter of 2010; and

          (2)    Considering Collateral Mortgage Notes, Mortgage Bonds, Letters ofCredit for Agribusiness, Debentures, MTN Program Issues and the cost of issues over funding.

           

           
          Subordinated Debt 

           

               

          Subordinated Debt totaled R$24,408 million in March 2011 (R$5,798 million abroad and R$18,610 million in Brazil).

          In the last 12 months, Bradesco issued R$4,686 million in Subordinated Debt (R$2,080 million in Brazil and R$2,606 million abroad), R$2.606 million of which under Tier II of the Capital Adequacy Ratio (Basel II) and maturing in 2021. The issue of subordinated notes stands out with a total of US$1.6 billion in August 2010 and January 2011.

          Note that only R$8,469 million of total subordinated debt is used for calculating the Capital Adequacy Ratio (Basel II), given the maturity of each subordinated debt operation.

          		  

           

               
          54  Report on Economic and Financial Analysis – March 2011   

           
             
          Economic and Financial Analysis   

           

           
            
          Securities/Other Financial Margin - Interest 
           
          Securities/Other Financial Margin - Breakdown 

           

                     
            R$ million 
          Financial Margin - Securities / Other
          1Q11 4Q10 1Q10  Variation
          Quarter  12M 
          Interest - due to volume        12  60 
          Interest - due to spread        62  162 
          Interest Financial Margin  661  587  439  74  222 
          Revenues  5,990  5,913  3,750  77  2,240 
          Expenses  (5,329)  (5,326)  (3,311)  (3)  (2,018) 

           

          In the comparison between the first quarter of 2011 and the previous quarter, the interest financial margin with Securities/Other posted growth of R$74 million. This performance was due to: (i) average spread gains totaling R$62 million; and (ii) the increase in the operation volume, contributing a total of R$12 million.

          In the first quarter of 2011, the interest financial margin with Securities/Other stood at R$661 million, versus R$439 million recorded in the same period in 2010, up 50.6% or R$222 million. This is the result of: (i) greater average spread gains, totaling R$162 million; and (ii) an increase in the volume of operations, which affected the result in R$60 million.

           
          Insurance Financial Margin - Interest 
           
          Insurance Financial Margin - Breakdown 

           

                     
            R$ million 
          Financial Margin - Insurances
          1Q11 4Q10 1Q10  Variation
          Quarter  12M 
          Interest - due to volume        42  138 
          Interest - due to spread        50  117 
          Interest Financial Margin  999  907  744  92  255 
          Revenues  2,744  2,689  2,276  55  468 
          Expenses  (1,745)  (1,782)  (1,532)  37  (213) 

           

          In the first quarter of 2011, interest financial margin from insurance operations posted growth of R$92 million, or 10.1% on the previous quarter, resulting from: (i) greater gains with the average spread, totaling R$50 million; and (ii) a R$42 million increase in average business volume.

          In the comparison of the first quarter of 2011 with the same period in 2010, interest financial margin from insurance operations was up by 34.3%, or R$255 million, mainly due to: (i) the increase in operation volume, amounting to R$138 million; and (ii) average spread gains totaling R$117 million.

               
            Bradesco  55 

           

           

             
          Economic and Financial Analysis   

           

           
          Financial Margin – Non-Interest 
           
          Non-Interest Financial Margin - Breakdown 

           

                     
            R$ million 
          Non-Interest Financial Margin
           1Q11 4Q10 1Q10  Variation
          Quarter  12M 
          Funding  (72)  (68)  (63)  (4)  (9) 
          Insurance  56  136  69  (80)  (13) 
          Securities/Other  529  397  277  132  252 
          Total  513  465  283  48  230 

           

          The “non-interest” financial margin in the first quarter of 2011 stood at R$513 million, versus R$465 million in the fourth quarter of 2010. Year on year, the margin posted growth of R$230 million, or 81.3%. Variations in the “non-interest” financial margin are mainly due to:

          · “Funding,” represented by expenses with the Credit Guarantee Fund (Fundo Garantidor de Crédito –FGC) due to increased funding volume;

          · “Insurance,” the variation of R$80 million in the first quarter of 2011, compared to the previous quarter, basically refers to lower gains from the sale of equity investments; and

          · “Securities/Other,” growth, both quarter-on-quarter and year-on-year, is due to increased treasury/securities gains.

               
          56  Report on Economic and Financial Analysis – March 2011   

           

           

           
          Economic and Financial Analysis 

           

            
          Insurance, Private Pension Plans and Savings Bonds 

           

          Analysis of the balance sheets and income statements of Grupo Bradesco de Seguros, Previdência e Capitalização:

           
          Consolidated Balance Sheet 

           

                 
            R$ million 
          Mar11  Dec10  Mar10 
          Assets       
          Current and Long-Term Assets  106,227  102,707  92,552 
          Securities  99,594  96,548  86,928 
          Insurance Premiums Receivable  1,555  1,375  1,337 
          Other Loans  5,078  4,784  4,287 
          Permanent Assets  2,477  2,302  2,116 
          Total  108,704  105,009  94,668 
          Liabilities       
          Current and Long-Term Liabilities  96,050  92,600  83,494 
          Tax, Civil and Labor Contingencies  1,798  1,737  1,590 
          Payables on Insurance, Private Pension Plan and Savings Bond Operations  303  281  296 
          Other Liabilities  3,969  3,405  3,923 
          Insurance Technical Provisions  7,542  7,170  6,972 
          Technical Provisions for Life and Private Pension Plans  78,547  76,283  67,572 
          Technical Provisions for Savings Bonds  3,891  3,724  3,141 
          Minority Interest  601  496  613 
          Shareholders' Equity  12,053  11,913  10,561 
          Total  108,704  105,009  94,668 

           

           
          Consolidated Statement of Income 

           

                 
            R$ million 
          1Q11  4Q10  1Q10 
          Insurance Written Premiums, Private Pension Plan Contributions and Savings Bonds Income (*)  7,850  9,022  7,196 
          Premiums Earned from Insurance, Private Pension Plan Contribution and Savings Bonds  4,464  4,293  3,672 
          Interest Income of the Operation  927  994  791 
          Sundry Operating Revenues  165  174  261 
          Retained Claims  (2,705)  (2,514)  (2,267) 
          Savings Bonds Draw ing and Redemptions  (549)  (643)  (451) 
          Selling Expenses  (424)  (438)  (372) 
          General and Administrative Expenses  (492)  (526)  (402) 
          Other (Operating Income/Expenses)  (108)  (72)  (17) 
          Tax Expenses  (111)  (103)  (85) 
          Operating Income  1,167  1,165  1,130 
          Equity Result  63  96  55 
          Non-Operating Income  (9)  (12)  (7) 
          Income Before Taxes and Interest  1,221  1,249  1,178 
          Income Tax and Contributions  (368)  (436)  (433) 
          Profit Sharing  (17)  (14)  (27) 
          Minority Interest  (75)  (19)  (15) 
          Net Income  761  779  703 


          (*) Not considering, in all periods, the effect of Normative Resolution of ANS 206/09 (Health), which, as of January 2010, excluded PPNG (SES) and established the accounting of premiums “Pro-rata temporis.” This accounting change did not affect Earned Premiums.

               
            Bradesco  57 

             
          Economic and Financial Analysis   

           

           
          Insurance, Private Pension Plans and Savings Bonds 
           
          Income Distribution of Grupo Bradesco de Seguros e Previdência 

           

                           
            R$ million 
          1Q11  4Q10  3Q10  2Q10  1Q10  4Q09  3Q09  2Q09 
          Life and Private Pension Plans  442  485  450  443  409  394  347  366 
          Health  201  177  131  122  148  129  89  107 
          Savings Bonds  86  63  50  57  65  44  65  58 
          Basic Lines and Other  32  54  90  79  81  35  106  107 
          Total  761  779  721  701  703  602  607  638 

           

           
          Performance Ratios 

           

                           
            % 
          1Q11  4Q10  3Q10  2Q10  1Q10  4Q09  3Q09  2Q09 
          Claims Ratio (1)  72.0  71.1  72.4  71.8  73.3  74.3  77.2  73.3 
          Selling Ratio (2)  10.0  10.8  10.7  10.2  10.6  9.6  9.9  9.9 
          Administrative Expenses Ratio (3)  6.1  5.8  6.3  6.1  5.6  4.6  5.4  5.4 
          Combined Ratio (*) (4)  86.1  85.1  85.3  84.7  85.2  85.3  88.9  85.5 

          (*) Excludes additional provisions.
          (1) Retained Claims/Earned Premiums;
          (2) Selling Expenses/Earned Premiums;
          (3) Administrative Expenses/Net Premiums Written; and
          (4) (Retained Claims + Selling Expenses + Other Operating Revenue and Expenses) / Earned Premiums + (Administrative Expenses + Taxes) / Net Premiums Written.

           

           
          Premiums Written, Pension Plan Contributions and Savings Bond Income (*) 

          (*) Not considering, in all periods, the effect of Normative Resolution of ANS 206/09 (Health), which, as of January 2010, excluded PPNG (SES) and established the accounting of premiums “Pro-rata temporis.” This accounting change did not affect Earned Premiums.

          In the first quarter of 2011, premiums written, pension plan contributions and savings bond income increased by 9.1% on the same quarter of the previous year.

          According to Susep and ANS, in the insurance, private pension plan and savings bonds segment, Bradesco Seguros e Previdência had collected R$2.6 billion up to January 2011, maintaining its position as leader of the ranking with a market share of 22.4%. In the same period, R$11.6 billion were collected by the insurance industry.

               
          58  Report on Economic and Financial Analysis – March 2011   

           

           

             
          Economic and Financial Analysis   

           

            
          Insurance, Private Pension Plans and Savings Bonds 
           
          Premiums Written, Pension Plan Contributions and Savings Bond Income (*) 
           

           

           

           

           
           (*) Not considering, in all periods, the effect of Normative Resolution of ANS 206/09 (Health), which, as of January 2010, excluded PPNG (SES) and established the accounting of premiums “Pro-rata temporis.” This accounting change did not affect Earned Premiums.
               
            Bradesco  59 

           

           
             
          Economic and Financial Analysis   

           

           
          Insurance, Private Pension Plans and Savings Bonds 
           
          Retained Claims by Insurance Line 
           
           
          Note: for comparison purposes, we have excluded Technical Provision complements on benefits to be granted – Remission, from the calculation of claims ratio (Earned Premiums) for the first quarter of 2010, amounting to R$149 million (health insurance).
           
               
          60  Report on Economic and Financial Analysis – March 2011   

           

           

             
          Economic and Financial Analysis   

           

           
            
          Insurance, Private Pension Plans and Savings Bonds 
           
          Insurance Selling Expenses by Insurance Line 


          Note: for comparison purposes, we have excluded Technical Provision complements on benefits to be granted – Remission, from the selling ratio calculation (Earned Premiums) for the first quarter of 2010, amounting to R$149 million (health insurance).

               
            Bradesco  61 

           

           

             
          Economic and Financial Analysis   

           

           
          Insurance, Private Pension Plans and Savings Bonds 
           
          Efficiency Ratio 

           

          General and Administrative Expenses / Revenue

          The efficiency ratio increase of 0.3 p.p. in the first quarter of 2011 over the previous quarter is basically due to seasonality of revenue in the last quarter of each year and the collective bargaining agreement executed in January 2011.

          Year on year, the 0.5 p.p. increase of efficiency ratio in the first quarter of 2011 mainly refers to the collective bargaining agreement executed in January 2011.

               
          62  Report on Economic and Financial Analysis – March 2011   

           

           

             
            Economic and Financial Analysis 

           
          Insurance, Private Pension Plans and Savings Bonds 
           

          Insurance Technical Provisions


               

          The Insurance Group’s technical provisions represented 30.4% of the insurance industry in January 2011,  according to Susep and the National Supplementary Health Agency (ANS). 

           

           

          		  

          Note: 1: According to RN 206/09 (ANS), as of January 2010, provisions for unearned premiums (PPNG) were excluded.

               
            Bradesco  63 

           

           

             
          Economic and Financial Analysis   

           

           
          Bradesco Vida e Previdência 

           

                           
            R$ million (except when indicated otherwise) 
          1Q11  4Q10  3Q10  2Q10  1Q10  4Q09  3Q09  2Q09 
          Net Income  442  485  450  443  409  394  347  366 
          Income from Premiums and Contribution Revenue*  4,059  5,385  4,096  3,690  3,910  4,933  3,697  3,304 
          - Income from Private Pension Plans and VGBL  3,317  4,617  3,403  3,052  3,291  4,295  3,100  2,758 
          - Income from Life/Personal Accidents Insurance Premiums  742  768  693  638  619  638  597  546 
          Technical Provisions  78,547  76,283  71,775  68,975  67,572  65,692  61,918  59,533 
          Investment Portfolio  82,916  80,147  75,974  72,507  70,920  68,780  64,646  61,736 
          Claims Ratio  43.6  44.1  49.8  44.7  45.1  50.9  48.1  43.9 
          Selling Ratio  19.2  19.5  19.8  17.5  18.8  14.4  16.5  17.1 
          Combined Ratio  71.9  74.7  79.9  71.5  73.9  70.6  74.4  69.4 
          Participants / Policyholders (in thousands)  22,698  22,186  21,346  21,109  21,326  21,389  21,206  20,231 
          Premiums and Contributions Revenue Market Share (%)**  28.9  31.2  31.5  32.0  32.7  31.1  31.1  30.4 
          Life/AP Market Share - Insurance Premiums (%)**  15.2  17.3  17.0  16.8  16.8  16.8  16.3  16.0 
          * Life/VGBL/Traditional                 
          **In 1Q11, considers data for January 2011.                 

           

               

          Due to its solid structure, a policy of product innovation and consumer reliance, Bradesco Vida e Previdência maintained its leadership, holding a market share of 28.9% in terms of income from private pension plans and VGBL.

          Revenue in this segment is generally concentrated at the end of the year and was down by 24.6% from the fourth quarter of 2010. This drop impacted the direct revenue from operations. Administrative and personnel expenses posted a decrease from the previous quarter, even considering the collective bargaining agreement in 

          		  

          January 2011. In the period, claims dropped by 0.5 p.p. and selling costs by 0.3 p.p.

          Net income for the first quarter of 2011 was up 8.1% from that of the same period last year, mainly resulting from: (i) the improved financial result; (ii) a 1.5 p.p. decline in claims; and partially offset by: (iii) the increase in administrative and personnel expenses, impacted by the collective bargaining agreement in January 2011. 

           

               
          64  Report on Economic and Financial Analysis – March 2011   

           

           

             
            Economic and Financial Analysis 

           

           
            
          Bradesco Vida e Previdência 

           

               

          Bradesco Vida e Previdência's technical provisions stood at R$78.5 billion in March 2011, made up of R$76.1 billion from the private pension plan segment and VGBL and R$2.4 billion from life, personal accidents and other lines, up 16.2% over March 2010. 

          		  

          The Private Pension Plan and VGBL Portfolio totaled R$78.5 billion in January 2011, equal to 34.8% of all market funds (source: Fenaprevi). 

           

           
          Evolution of Participants and Life and Personal Accident Policyholders 

           


               



          In March 2011, the number of Bradesco Vida e Previdência customers grew by 6.4% compared to March 2010, surpassing a total of 2 million private pension plan and VGBL plan participants and of20.6 million personal accident and life insurance policyholders.

          		  

          This impressive growth was fueled by the strength of the Bradesco brand and the adequate selling and management policies. 

           

               
            Bradesco  65 

           

           

             
          Economic and Financial Analysis   

           

           
          Bradesco Saúde – Consolidated 

           

                           
            R$ million (except when indicated otherwise) 
          1Q11  4Q10  3Q10  2Q10  1Q10  4Q09  3Q09  2Q09 
          Net Income  201  177  131  122  148  129  89  107 
          Net Premiums Issued*  2,136  2,002  1,925  1,845  1,705  1,622  1,573  1,484 
          Technical Provisions  3,737  3,512  3,471  3,453  3,405  3,555  3,479  3,447 
          Claims Ratio  83.3  80.1  80.7  80.6  83.0  85.7  89.2  86.0 
          Selling Ratio  4.7  4.6  4.8  4.6  4.5  4.1  3.9  4.0 
          Combined Ratio  98.1  97.9  96.1  96.2  96.8  96.8  99.4  98.2 
          Policyholders (in thousands)  8,190  8,019  7,468  7,236  7,075  4,310  4,193  4,063 
          Written Premiums Market Share (%)**  50.0  51.7  51.1  50.4  49.4  48.7  48.1  47.4 
          * Not considering the effect of RN 206/09 (ANS) in the total of R$5 million (Health), which, as of January 2010, excluded PPNG (SES) and established the accounting of premiums “Pro-rata temporis.” This accounting change did not affect Earned Premiums.
          **1Q11 considers data for January 2011.
          Note: for comparison purposes, we have excluded build in Technical provisions for benefits to be granted – Remission, from the first quarter of 2010 ratios, amounting to R$149 million.
           
               

          Net income for the first quarter of 2011 was 13.6% greater than that of the previous quarter, mainly due to: (i) a 6.7% increase in revenue; partially offset by: (ii) the 3.2 p.p. increase in claims; and (iii) increased administrative and personnel expenses, impacted by the collective bargaining agreement in January 2011.

          Income for the first quarter of 2011 posted growth of 35.8% in relation to the same period last year, mainly due to: (i) a 25.3% increase in revenue; (ii) steady level of the claims ratio; (iii) the continuation of the selling ratio at the levels seen in the first quarter of 2010; (iv) the improved financial result; and, partially offset by: (v) an increase in administrative and personnel expenses due to the collective bargaining agreement in January 2011.

          		  

          In March 2011, Bradesco Saúde and Mediservice maintained strong market position in the corporate segment (source: ANS).

          Approximately 33.7 thousand companies in Brazil have Bradesco Saúde Insurance and Mediservice plans. Of the 100 largest companies in Brazil, in terms of revenue, 42 are Bradesco Saúde and Mediservice customers (source: Exame Magazine "Melhores e Maiores" ranking, July 2010.)

           

           
          Number of Policyholders of Bradesco Saúde – Consolidated 

           

               

          Bradesco Saúde – Consolidated has nearly 8.2 million customers. The high share of corporate policies in the overall portfolio (93.8% in March 2011) shows the Company’s high level of specialization and customization in the corporate segment, a major advantage in today’s supplementary health insurance market.

          		  

             

           

               
          66  Report on Economic and Financial Analysis – March 2011   

           

           

             
            Economic and Financial Analysis 

           

           
          Bradesco Capitalização 

           

                           
            R$ million (except when indicated otherwise) 
          1Q11  4Q10  3Q10  2Q10  1Q10  4Q09  3Q09  2Q09 
          Net Income  86  63  50  57  65  44  65  58 
          Income from Savings Bonds  649  706  658  594  526  575  520  483 
          Technical Provisions  3,891  3,724  3,483  3,317  3,141  3,024  2,865  2,785 
          Customers (in thousands)  2,794  2,691  2,610  2,583  2,553  2,531  2,507  2,525 
          Market Share from Premiums and Contributions Revenues (%)* 20.3  21.1  20.4  19.7  20.9  19.7  19.4  19.0 
          *1Q11 considers data for January 2011.                 

           

               

          Net income for the first quarter of 2011 posted a 36.5% increase on the previous quarter, mainly a result of: (i) improved financial revenue; (ii) a drop in the redemption of savings bonds and drawing expenses, which are typically greater in the last quarter of the year; partially offset by: (iii) an increase in administrative and personnel expenses, impacted by the collective bargaining agreement in January 2011.

          		  

          The impressive 23.4% increase in income from savings bonds and growth in financial result, which were partially offset by higher administrative and personnel expenses due to the collective bargaining agreement in January 2011, contributed to the 32.3% increase in income for the first quarter of 2011, when compared with net income in the same period last year. 

           

               
            Bradesco  67 

           

           

             
          Economic and Financial Analysis   

           

           
          Bradesco Capitalização 

           

               

          Bradesco Capitalização ended the first quarter of 2011 as a leader of the savings bond industry, due to its policy of transparency and of adjusting its products based on potential consumer demand.

          To offer the savings bond that best fits the profile and budget of each customer, the Bank has developed several products that vary in accordance with payment method (lump-sum or monthly), contribution term, frequency of drawings and premium amounts. This phase was mainly marked by a closer relationship with the public by consolidating the Pé Quente Bradesco family of products.

          Among these, we can point out the performance of our social and environmental products, from which a part of the profit is allocated to social responsibility projects, while also allowing the customer to create a financial reserve. Bradesco Capitalização currently has partnerships with the following social and environmental institutions: (i) Fundação SOS Mata Atlântica, which contributes to the development of reforestation projects; (ii) Instituto Ayrton Senna, which is set apart by transferring a percentage of the amount collected to social projects; (iii) the Brazilian Cancer Control Institute, which contributes to the development of projects for the prevention, early diagnosis and treatment of cancer in Brazil, and, finally, (iv) Fundação Amazonas Sustentável, through which a part of the amount collected is allocated to environmental conservation and sustainable development programs and projects.  

          		  

          Bradesco Capitalização is the first and only savings bonds company in Brazil to receive the ISO certification. In 2009, it was certified with the ISO 9001:2008 for Management of Bradesco Savings Bonds. This certification, granted by Fundação Vanzolini, attests to the quality of its internal processes and confirms the principle that underpins Bradesco Savings Bonds: good products, services and continuous growth. 

           

               
          68  Report on Economic and Financial Analysis – March 2011   

           

           

             
            Economic and Financial Analysis 

           

           
          Bradesco Auto/RE 

           

                           
            R$ million (except when indicated otherwise) 
          1Q11  4Q10  3Q10  2Q10  1Q10  4Q09  3Q09  2Q09 
          Net Income  39  58  28  27  22  43  33  40 
          Net Premiums Issued  871  865  941  952  935  855  812  754 
          Technical Provisions  3,688  3,554  3,525  3,455  3,402  3,162  2,998  2,940 
          Claims Ratio  68.1  69.3  69.7  69.9  70.7  70.2  72.3  65.3 
          Selling Ratio  17.2  17.6  17.3  17.6  17.7  16.6  17.5  16.9 
          Combined Ratio  108.7  106.9  105.2  105.3  104.3  107.8  106.4  99.9 
          Policyholders (in thousands)  3,330  3,337  3,208  2,980  2,814  2,592  2,433  2,359 
          Market Share from Premiums and Contributions Revenues (%)*  8.1  10.6  11.2  11.7  12.1  10.4  10.2  10.1 
          * 1Q11 data considers January 2011.                 

           

               

          Net income in the first quarter of 2011 was down by R$19 million from the previous quarter, due to: (i) increased administrative and personnel expenses resulting from the collective bargaining agreement in January 2011; (ii) a decrease in equity income; and, was partially offset by: (iii) a 1.2 p.p. drop in claims.

          Net income in the first quarter of 2011 posted impressive growth of 77.3% compared to the same period last year, mainly due to: (i) a 2.6 p.p. decrease in claims; (ii) improved financial result and equity income; and, partially offset by: (iii) an increase in administrative and personnel expenses, mainly resulting from the collective bargaining agreement dated January 2011.

          Grupo Bradesco de Seguros e Previdência maintained its leadership position among major insurers of Brazil’s Auto/RCF and Basic Lines Insurance market, holding a market share of 8.1% in January 2011.

          In the Corporate Proprietary Insurance segment, Bradesco Auto/RE has maintained its share in major insurance programs through partnerships 

          		  

          with brokers that specialize in the segment and a close relationship with Bradesco Corporate and Bradesco Empresas (Middle Market). The excellent performance of the Oil industry and recovery of the Civil Construction industry have also contributed to Bradesco Auto/RE's growth in the segment.

          The transportation segment is still the primary focus, with essential investments made to leverage new business, especially in the renewal of Reinsurance Agreements, which gives insurers the power to assess and cover risk, and consequently increase competitiveness in more profitable businesses, such as international transportation insurance for shipping companies involved in international trade.

          Despite strong competition in the Auto/RFC line, the insurer has increased its customer base. The continuous improvement of pricing and creation of online calculation applications has contributed to an increase in the portfolio. 

           

               
            Bradesco  69 

           

           

             
          Economic and Financial Analysis   

           

           
          Bradesco Auto/RE 
           
          Number of Policyholders in Auto/RE 

           

               

          In the mass insurance segment of Basic Lines, where products target individuals, self-employed professionals and SMEs, the launch of new products and the continuous improvement of methods and systems have contributed to growth in the customer base, which increased by 18.3% in the last twelve months to a total of 3.3 million customers. This increase can be observed mainly in residential insurance due to the creation of specific products for customers of Banco Bradesco, such as Residencial Preferencial, in addition to the option of joint hiring of Auto and Residential insurance. Bradesco Bilhete
          Residencial also presented excellent performance in the period.

          		  

           

               
          70  Report on Economic and Financial Analysis – March 2011   

           

           

             
            Economic and Financial Analysis 

           

           
            
          Fee and Commission Income 

           

          A breakdown of the variations in Fee and Commission Income for the respective periods is presented below:

                     
          Fee and Commission Income R$ million 
          1Q11 4Q10 1Q10 Variation 
          Quarter  12M 
          Card Income  1,155  1,157  972  (2)  183 
          Checking Account  649  646  542  3  107 
          Fund Management  471  467  429  4  42 
          Loan Operations  455  465  390  (10)  65 
          Collection  277  286  257  (9)  20 
          Consortium Management  121  119  97  2  24 
          Custody and Brokerage Services  108  108  114  -  (6) 
          Payment  77  74  69  3  8 
          Underwriting / Financial Advising Services  48  91  75  (43)  (27) 
          Other  149  155  179  (6)  (30) 
          Total  3,510  3,568  3,124  (58)  386 

           

          Explanations of the main items that influenced the variation in fee and commission income between periods can be found below.

               
            Bradesco  71 

           

           

             
          Economic and Financial Analysis   

           

           
          Fee and Commission Income 
           
          Card Income 

           

               
          In the first quarter of 2011, fee and commission income from cards stood at R$1,155 million, practically stable in comparison with the previous quarter, mainly due to the steady volume of transactions in the period.

          In the first quarter of 2011, the same figure posted year-on-year growth of 18.8%, or R$183 million, mainly due to an increase in revenue from purchases and services, resulting from expansion in the card base by 8.8%, from 135.6 million in March 2010 to 147.5 million in March 2011. The expansion in the card base led to a 21.4% increase in revenue from credit cards in the period, for a total of R$20,241 million in the
          quarter, as well as a 20.2% increase in the number of transactions, from 215.7 million in March 2010 to 259.3 million in March 2011.

          It is important to note the impact of the increase in shareholding interest in Visavale, from 34.33% to 50.01%, and Cielo, from 26.56% to 28.65%, in the last twelve months.           		  

              (*) Includes prepaid cards, Private Label and Banco IBI as of the fourth quarter of 2009 and Ibi Mexico as of the fourth quarter of 2010
              . 

           

               
          72  Report on Economic and Financial Analysis – March 2011   

           


            Economic and Financial Analysis 

           

          Fee and Commission Income
            
          Checking Account 

           

               

          In the first quarter of 2011, income from checking accounts remained practically stable, mainly due to: (i) a net increase of 416 thousand new checking accounts (403 thousand individual accounts and 13 thousand corporate accounts); (ii) the expansion of the service portfolio provided to the Bank’s customers; (iii) banking fee adjustment; and partially offset by: (iv) the lower volume of services in the quarter when compared to volume at the end of the previous year.

          In the first quarter of 2011 versus the same quarter of the previous year, revenue increased by 19.7% or R$107 million resulting mainly from the expansion of the checking account base, which posted a net increase of 2,312 thousand new accounts (2,214 thousand new individual accounts and 98 thousand new corporate accounts). 

          		  

           

          Loan Operations 

           

          In the first quarter of 2011, income from loan operations amounted to R$455 million, down 2.2% in comparison with the previous quarter, mainly due to: (i) a decrease in the volume of contracted operations, mainly the result of seasonality of the fourth quarter of 2010; partially offset by: (ii) a 4.5% increase in revenue from guarantees provided, from the 4.2% growth in the volume of operations with Sureties and Guarantees.

          The 16.7% growth in the first quarter of 2011 when compared with the same period in the previous year is mainly due to: (i) an increase in income from guarantees, which grew by 25.2%, mainly resulting from the 22.3% increase in the volume of Sureties and Guarantees operations; and (ii) the increased volume of other contracted operations in 2011. 

           

           

            Bradesco  73 

           

           

          Economic and Financial Analysis   

           

          Fee and Commission Income
           
          Asset Management 

           

               

          In the first quarter of 2011, revenue from funds under management was up by R$4 million on the previous quarter, mainly the result of 2.6% growth in total funds raised and under management, partially offset by the lower number of business days in the quarter.

          In the first quarter of 2011 versus the same quarter of the previous year, the R$42 million or 9.8% increase was mainly due to the performance of funds raised, which grew by 17.3%. The highlight was income from fixed-income funds, which grew by 20.6% in the period, followed by growth in equity-investments of 4.0%. 

           

           

                     
          Shareholders' Equity R$ million Variation % 
          Mar11  Dec10  Mar10  Quarter  12M 
          Investment Funds  276,593  269,978  232,854  2.5  18.8 
          Managed Portfolios  19,701  18,930  17,960  4.1  9.7 
          Third-Party Fund Quotas  7,025  6,800  7,749  3.3  (9.3) 
          Total  303,319  295,708  258,563  2.6  17.3 
            
          Asset Distribution R$ million Variation % 
          Mar11  Dec10  Mar10  Quarter  12M 
          Investment Funds – Fixed Income  249,777  242,751  207,081  2.9  20.6 
          Investment Funds – Variable Income  26,816  27,227  25,773  (1.5)  4.0 
          Investment Funds – Third-Party Funds  5,879  5,629  6,433  4.4  (8.6) 
          Total - Investment Funds  282,472  275,607  239,287  2.5  18.0 
                       
          Managed Portfolios - Fixed Income  10,918  10,460  9,102  4.4  20.0 
          Managed Portfolios – Variable Income  8,783  8,470  8,858  3.7  (0.8) 
          Managed Portfolios - Third-Party Funds  1,146  1,171  1,316  (2.1)  (12.9) 
          Total - Managed Funds  20,847  20,101  19,276  3.7  8.2 
          x           
          Total Fixed Income  260,695  253,211  216,183  3.0  20.6 
          Total Variable Income  35,599  35,697  34,631  (0.3)  2.8 
          Total Third-Party Funds  7,025  6,800  7,749  3.3  (9.3) 
          Overall Total  303,319  295,708  258,563  2.6  17.3 

           

               
          74  Report on Economic and Financial Analysis – March 2011   

           

           

            Economic and Financial Analysis 

           

          Fee and Commission Income
           
          Cash Management Solutions (Payments and Collections) 

           

               

          In the first quarter of 2011, revenue from Payment and Collections decreased by 1.7% from the previous quarter, mainly due to a decrease in the volume of documents received and paid, partially offset by the greater volume of taxes collected in the quarter.

          In the first quarter of 2011 versus the same quarter of the previous year, Payment and Collection income grew by 8.6%, or R$28 million, mainly due to an increase in the number of processed documents, which grew from 345 million on March 31, 2010 to R$412 million on March 31, 2011. 

           

           

          Consortium Management 

           

               

          The 3.4% increase in the sale of active quotas in the first quarter of 2011 compared to the fourth quarter of 2010 led Bradesco Consórcios to sell 16,857 net quotas (471,620 active quotas on December 31, 2010), resulting in 1.7% growth in revenue, ensuring Bradesco's leading position in all segments (real estate, auto, trucks/tractors).

          In the first quarter of 2011 versus the same quarter of the previous year, there was a 24.7% increase in revenue, resulting from: (i) growth in the volume of bids; and (ii) the increased sale of new quotas, from 412,507 active quotas sold as of March 31, 2010 to 488,477 as of March 31, 2011, an increase of 75,970 net quotas. 

           

           

            Bradesco  75 

           

           

          Ecopnomic and Financial Analysis   

           

          Fee and Commission Income
           
          Custody and Brokerage Services 

           

               

          In the first quarter of 2011, total revenue from custody and brokerage services remained stable in relation to the previous quarter.

          In the first quarter of 2011 versus the same quarter of the previous year, the 5.3% revenue decrease is mainly related to (i) the volumes traded on the BM&FBovespa, which impacted brokerage revenues; and partially offset: (ii) by the R$168 billion growth in assets under custody. 

           

           

          Underwriting / Financial Advising 

           

               

          The R$43 million decrease in the quarter-on-quarter comparison mainly refers to increased
          gains with capital market operations in the fourth quarter, highlighting the financial advising
          operations.

          The R$27 million decrease between the first quarter of 2011 and the same period last year is the result of a lower business volume in the quarter. 

           

           

          76  Report on Economic and Financial Analysis – March 2011   

           

           

            Economic and Financial Analysis 

           

          Administrative and Personnel Expenses 

           

          Administrative and Personnel Expenses R$ million 
          1Q11 4Q10 1Q10 Variation
          Quarter  12M 
          Administrative Expenses           
          Third-Party Services  839  885  724  (46)  115 
          Communication  377  382  334  (5)  43 
          Depreciation and Amortization  271  258  221  13  50 
          Data Processing  226  261  191  (35)  35 
          Advertising and Marketing  201  285  152  (84)  49 
          Transportation  179  177  142  2  37 
          Rental  157  148  144  9  13 
          Asset Maintenance  123  132  108  (9)  15 
          Financial System Services  109  101  86  8  23 
          Leased Assets  89  92  98  (3)  (9) 
          Materials  81  92  63  (11)  18 
          Security and Surveillance  76  71  66  5  10 
          Water, Electricity and Gas  59  54  55  5  4 
          Trips  35  35  21  -  14 
          Other  317  284  242  33  75 
          Total  3,140  3,257  2,647  (117)  493 
                          
          Personnel Expenses           
          Structural  1,996  2,006  1,735  (10)  261 
          Social Charges  1,508  1,531  1,317  (23)  191 
          Benefits  488  475  418  13  70 
          Non-Structural  440  527  385  (87)  55 
          Management and Employee Profit Sharing (PLR)  267  298  234  (31)  33 
          Provision for Labor Claims  118  165  109  (47)  9 
          Training  19  39  11  (20)  8 
          Termination Costs  36  25  31  11  5 
          Total  2,436  2,533  2,120  (97)  316 
                          
          Total Administrative and Personnel Expenses  5,576  5,790  4,767  (214)  809 

           

          In the first quarter of 2011, Administrative and Personnel Expenses totaled R$5,576 million, a decrease of 3.7% in relation to the previous quarter.

          Personnel Expenses 

           

          In the first quarter of 2011, personnel expenses totaled R$2,436 million, down 3.8% or R$97 million from the previous quarter.

          Within the "structural" portion, lower expenses in the amount of R$10 million is mainly the result of:
          (i) the concentration of vacation in the first quarter of 2011, amounting to R$62 million; and offset by:
          (ii) increased expenses with payroll, social charges and benefits, in the amount of R$52 million, due to: (a) the collective bargaining agreement of the insurance industry in January 2011; and (b) the expansion of Service Points and the improvement of business segmentation, leading to a net gain of 1,501 employees in the period. 

          		  

          In the “non-structural” portion, the R$87 million decrease is basically due to lower expenses with management and employee profit sharing (PLR), amounting to R$31 million.

           

            Bradesco  77 

           

           

          Economic and Financial Analysis   

           

          Administrative and Personnel Expenses
           
          Personnel Expenses 

           

               

          In the first quarter of 2011 versus the same quarter of the previous year, the R$316 million growth reflects: (i) the "structural" portion of R$261 million, mainly related to: (a) the increase in expenses with payroll, charges and benefits, from wage increases; and (b) the net increase in staff by 8,669 employees in the period, arising 

          		  

          from investments in the expansion of service points and improvements in the business segmentation; and (ii) the increase in the “nonstructural” portion of R$55 million, mainly resulting from greater expenses with management and employee profit sharing (PLR), amounting to R$33 million. 

          		  

           

          78  Report on Economic and Financial Anal,ysis – March 2011   

           

           

            Economic and Financial Analysis

           

          Administrative and Personnel Expenses 

          		  


          Administrative Expenses 

           

               

          In the first quarter of 2011, administrative expenses totaled R$3,140 million, down by 3.6%, or R$117 million from the previous quarter. This drop is mainly due to a decrease in expenses with: (i) marketing and advertising, in the amount of R$84 million; (ii) outsourced services, in the amount of R$46 million, mainly regarding legal and corporate consulting services; (iii) data processing, in the amount of R$35 million; and, partially offset by greater expenses with: (iv) the increase by 2,301 Service Points, of which 23 were branches, 76 PAB/PAE/PAA, 1,545 Bradesco Expresso units and 657 other service points.












          The year-on-year growth of R$493 million, or 18.6%, in the first quarter of 2011 is mainly due to greater expenses with: (i) outsourced services, in the amount of R$115 million, related to: (a) the perfection and expansion of customer service structure and the partial outsourcing of credit card processing (Fidelity); and (b) variable expenses tied to revenues (non-bank correspondents); (ii) depreciation and amortization, amounting to R$50 million; (iii) marketing and advertising, in the amount of R$49 million; (iv) an increase in business and service volume; and (v) organic growth and the consequent increase in Service Points (from 46,570 on March 31, 2010 to 57,185 on March 31, 2011).


           


            Bradesco  79 

           

           

          Economic and Financial Analysis   

           

          Operating Coverage Ratio (*) 

           

               

          In the quarter, the coverage ratio accrued over the last twelve months decreased by 0.6 p.p., basically due to: (i) increased personnel and administrative fees, partially resulting from: (a) the impact of the collective bargaining agreement; and (b) greater business volumes from the expansion of the service points, partially offset by: (ii) the growth in fee and commission income. 

           

          * Fee and Commission Income / Administrative and Personnel Expenses (over the last 12 months).

           

          Tax Expenses 

           

               

          The R$22 million growth in tax expenses in the first quarter of 2011, in comparison with the fourth quarter of 2010 is mainly due to: (i) increased expenses with Cofins from higher taxable income in the period, especially financial margin; and (ii) higher property tax (IPTU) expenses.

          In the first quarter of 2011 versus the same quarter of the previous year, tax expenses grew by R$131 million, mainly due to the increase in expenses with ISS/PIS/Cofins taxes reflecting higher taxable income, especially financial margin and fee and commission income. 

          		  

           

          80  Report on Economic and Financial Analysis – March 2011   

           

           

            Economic and Financial Analysis 

           

          Equities in the Earnings of Affiliated Companies 

           

               

          In the first quarter of 2011, equity in the earnings of affiliated companies stood at R$34 million, down R$26 million from the previous quarter as a result of reduced income from affiliates IRB and Integritas Participações.

          Year-on-year, the R$5 million increase was due to growth in the result from IRB. 

          		    

           

          Operating Income 

           

               

          Operating result in the first quarter of 2011 was R$3,953 million, up 5.2% from the fourth quarter of 2010, mainly impacted by: (i) the R$344 million growth in financial margin; (ii) a R$214 million decrease in personnel and administrative expenses; (iii) an R$85 million increase in the operating income from Insurance, Private Pension Plans and Savings Bonds, partially offset by: (iv) growth in other operating expenses (net of other revenue) in the amount of R$276 million; (v) a R$65 million increase in allowance for loan losses expenses; and (vi) a R$58 million drop in fee and commission income.

          Year on year, the R$782 million, or 24.7% increase in operating income is the result of: (i) R$1,673 million growth in financial margin; (ii) a R$386 million increase in fee and commission income; (iii) a R$202 million increase in operating income from Insurance, Private Pension Plans and Savings Bonds; partially offset by: (iv) an 

          		  

          R$809 million growth in personnel and administrative expenses; (v) an increase in other operating expenses (net of other revenue), in the amount of R$372 million; (vi) a greater allowance for loan losses expenses, in the amount of R$172 million; and (vii) a R$131 million increase in tax expenses.

           

            Bradesco  81 

           

           

          Economic and Financial Analysis   

           

          Non-Operating Income 

           

               

          The R$14 million variation between the first quarter of 2011 and the previous quarter is mainly due to the reversal of non-operating provisions in the fourth quarter of 2010.

          Year on year, the variation is mainly the result of greater gains from the sale of assets in the first quarter of 2010. 

          		  

           

          82  Report on Economic and Financial Analysis – March 2011   

           



           

             
          Return to Shareholders   

           

           
          Sustainability 

           

               

          On March 10, 2011 Bradesco released its 2010 Sustainability Report, which, for the fifth consecutive year, adopts Global Reporting Initiative (GRI) guidelines. Among the themes presented in the report are banking inclusion, the Bank’s presence in all Brazilian cities, the inauguration of branches in  underprivileged regions of the country and the creation of special products for low-income customers. The Report is available for download at the Bank of the Planet Portal (www.bancodoplaneta.com.br).

          Bradesco, a signatory of the Equator Principles since 2004, has actively participated in discussions on the revision of IFC Performance Standards – a process that seeks to improve the policies of the Equator Principles to manage the social and environmental risks in project financing. The 3rd Stage of the Open House Consultation occurred in Lima, Peru, on January 25, 2011, and was attended by Bradesco and other national and international stakeholders.

          The Sport Development Center, headquarters of the Bradesco Sports and Education Program in Osasco (São Paulo), received the Leadership in Energy and Environmental Design (LEED® NC GOLD) certification, also known as the Sustainable Building Seal, from the U.S. Green Building Council. 

          		  

          Bradesco was one of the sponsors of the Global Forum on Sustainability, held in the city of Manaus (Amazonas) between March 24 and 26. A number of major businessmen, executives, political leaders and environmental organizations participated in the event that sought to discuss successful practices and methods for sustainable development in the Amazon and the Planet. As co-founder of Fundação Amazonas Sustentável and the first bank to offer riverside communities in Alto Solimões River a floating branch, Bradesco is committed to the sustainable development of the Amazon region.

          Bradesco also released its Promotional Balance Sheet in the quarter, an advertisement aimed at providing customers, investors and shareholders with a plethora of information on the Bank. The information published in the advertisement, in line with our Vision and Mission, laid out a direct connection between Sustainability and the Organization’s business and corporate management.

          For Bradesco, Sustainability is a profoundly important part of the manner in which it conducts business, proven by the promotion of financial education and the insertion of the population in the banking system.

           

           
          Investor Relations Area – IR 

           

               

          Bradesco began its schedule of events for the first quarter of 2011 with the 2nd Bradesco Open Day in Cidade de Deus, an event broadcast live over the internet on the Bank’s Investor Relations website.

          All told, Bradesco participated in a total of 104 events in the first quarter of 2011. In Brazil, we began the 2011 Apimec Meeting Cycle in the city of Campinas and the Annual São Paulo INI 

          		  

          Meeting, attended by investors, shareholders and those interested in capital markets. Internationally, the Bank was a part of five conferences (Miami, Cancun, London, New York and Hong Kong) and four Road Shows (Europe, United States, Middle East and Southeast Asia). Moreover, the Investor Relations Department held discussions with shareholders, investors and analysts by phone, email and at the Company's headquarters. 

           

               
          84  Report on Economic and Financial Analysis – March 2011   

           

           

             
            Return to Shareholders 

           

           
          Corporate Governance 

           

               

          In September 2010, Bradesco received the Gamma-7 (Governance, Accountability, Management Metrics and Analysis) score, assigned on a scale of 1 to 10 by Standard & Poor’s Governance Services, which ratifies the Bank’s sound corporate governance processes and general practices. Bradesco was the first Brazilian company to disclose this rating to the market. It is important to point out that, worldwide, the highest Governance score ever disclosed by Standard and Poor's is 7+. Bradesco was also rated AA (Excellent Corporate Governance Practices) by Austin Rating.

          Regarding Corporate Governance structure, Bradesco’s Board of Directors is supported by five statutory committees (Ethical Conduct, Audit, Internal Controls and Compliance, Compensation and Integrated Risk Management and Capital 

          		  

          Allocation), in addition to 42 Executive Committees that assist the Board of Executive Officers in performing their duties.

          Shareholders are entitled to 100% tag-along rights for common shares, 80% for preferred shares and to a minimum mandatory dividend of 30% of adjusted net income, which is above the 25% minimum established by the Brazilian Corporation Law. Preferred shares are entitled to dividends 10% greater than those attributed to common shares.

          On March 10, 2011, all matters submitted to the Shareholders’ Meetings were approved. For more information, see the corporate governance section of the investor relations website at http://www.bradesco.com.br/ir.

           

           
          Bradesco Shares 
           
          Number of Shares – Common (ON) and Preferred (PN) (*) 

           

                       
            In thousands 
          Mar11  Dec10  Dec09  Dec08  Dec07  Dec06 
          Common Shares  1,909,911  1,880,830  1,710,205  1,534,806  1,009,337  500,071 
          Preferred Shares  1,912,397  1,881,225  1,710,346  1,534,900  1,009,337  500,812 
          Subtotal – Outstanding  3,822,308  3,762,055  3,420,551  3,069,706  2,018,674  1,000,883 
          Treasury Shares  2,487  395  6,535  163  2,246  758 
          Total  3,824,795  3,762,450  3,427,086  3,069,869  2,020,920  1,001,641 
          (*) Stock bonuses and splits during the period were not included.         

           

               

          On March 31, 2011, Bradesco’s total capital stock was R$30.1 billion, composed of 3,824,795 thousand shares (all book-entry shares with no par value), of which 1,912,398 thousand were common shares and 1,912,397 thousand were preferred shares. The largest shareholder is the holding company Cidade de Deus Participações, which directly holds 48.4% of voting capital and 24.2% of total capital. 

          		  

          Cidade de Deus Participações is controlled by the Aguiar Family, Fundação Bradesco and a holding company, Nova Cidade de Deus Participações, which is in turn controlled by Fundação Bradesco and BBD Participações, a majority of the shareholders of which are members of Bradesco’s Board of Directors, Statutory Board of Executive Officers and skilled employees.

           

               
            Bradesco  85 

           

           

             
          Return to Shareholders   

           

           
          Number of Shareholders – Domiciled in Brazil and Abroad 

           

                       
            Mar11 % Ownership of
          Capital (%)           		 Mar10 % Ownership of
          Capital (%) 
          Individuals  341,662  89.95  24.20  346,048  89.81  25.18 
          Corporate  37,295  9.82  43.88  37,537  9.74  44.39 
          Subtotal Domiciled in the Country  378,957  99.77  68.08  383,585  99.56  69.57 
          Domiciled Abroad  874  0.23  31.92  1,705  0.44  30.43 
          Total  379,831  100  100  385,290  100  100 

           

               

          n March 31, 2011, there were 378,957 shareholders domiciled in Brazil, accounting for 99.77% of total shareholders and holding 68.08% 

          		  

          of all shares, while a total of 874 shareholders resided abroad, accounting for 0.23% of shareholders and holding 31.92% of shares. 

           

           
          Share Performance (*) 

           

                       
            In R$ (except when indicated otherwise) 
          1Q11  4Q10    Variation %  1Q11  1Q10  Variation % 
          Net Income per Share  0.72  0.71  1.4  0.72  0.57  26.3 

          Dividends/Interest on Shareholders' Equity – Common Share (after Income Tax - IR) 

          		 0.202  0.225  (10.2)  0.202  0.166  21.7 

          Dividends/Interest on Shareholders' Equity – Preferred Share (after Income Tax - IR) 

          		 0.222  0.247  (10.1)  0.222  0.182  22.0 
          Book Value per Share (Common and Preferred)  13.42  12.77  5.1  13.42  11.45  17.2 
          Last Business Day Price – Common Shares  27.88  25.70  8.5  27.88  23.79  17.2 
          Last Business Day Price – Preferred Shares  33.35  32.65  2.1  33.35  29.70  12.3 
          Market Capitalization (R$ million) (1)  117,027  109,759  6.6  117,027  100,885  16.0 
          Market Capitalization (R$ million) - Most Liquid Share (2)  127,474  122,831  3.8  127,474  112,189  13.6 
          (*) Adjusted for corporate events in the period.             
          (1) Number of shares (less treasury shares) x closing price for common and preferred shares on last day in period; and   
          (2) Number of shares (less treasury shares) x closing price for preferred shares on last day of the period.     

           

               

          In the first quarter of 2011, Bradesco preferred and common shares appreciated by 2.1% and 8.5% respectively, while Ibovespa dropped by 1.0% in the same period. 

          		  

          On March 25, 2011, Bradesco requested authorization by the Brazilian Central Bank to create an ADR (American Depositary Receipt) program backed by common shares on the American market, which included an increase in the limit on foreign interest that will not change its corporate structure or control. 

           

               
          86  Report on Economic and Financial Analysis – March 2011   

           

           

             
            Return to Shareholders 

           

           
          Main Indicators 

           

               

          Market Value: considers the closing price of common and preferred shares multiplied by the respective number of shares (excluding treasury shares).

          Market Value/Shareholders’ Equity: indicates the multiple by which Bradesco’s market value exceeds its book shareholders’ equity.

          Dividend Yield: the ratio between the share price and the dividends and/or interest on shareholders’ equity paid to shareholders in the last twelve months, which indicates the return on investment represented by the allocation of net income.

          Formula used: amount received by shareholders as dividends and/or interest on shareholders’ equity in the last twelve months divided by the closing price of preferred shares on the last trading day in the period. 

          		  

           

               
            Bradesco  87 

           

           

             
          Return to Shareholders   

           

           
          Weighting in Main Stock Market Indexes 

           

               

          Bradesco shares are components of Brazil’s main stock indexes, including the Corporate Sustainability Index (ISE), the Special Tag-Along Stock Index (ITAG) and the Special Corporate Governance Stock Index (IGC). In March 2011, Bradesco had the largest participation in the Financial Index (IFNC), which comprises banks, insurers and financial companies.

          		   Bradesco also participated in the Carbon Efficient Index (ICO2), composed by companies committed to disclosing their annual greenhouse gas (GHG) emissions report.

           

                 
            % Mar11   
            Ibovespa  3.0   
            IB rX - 50  6.8   
            IB rX - 100  7.4   
            Ifinanceiro (IFNC)  21.1   
            ISE  4.7   
            Special Corporate Governance Stock Index (IGC)  6.5   
            Special Tag-Along Stock Index (ITAG)  12.5   
            ICO2  10.3   

           

           
          Dividends/Interest on Shareholders’ Equity 

           

               

          In the first quarter of 2011, R$924 million were paid to shareholders as dividends and interest on shareholders’ equity, equivalent to 31.5% of book net income for the quarter and 31.2% considering the amount accrued over the last 12 months.

          		  

          The amounts allocated in recent years have surpassed the limits mandated by the Brazilian Corporation Law and by the Company’s Bylaws. 

           

           

          (*) Accrued over the last 12 months

           

               
          88  Report on Economic and Financial Analysis – March 2011   

           

           


           

          Additional Information   

           

          Market Share of Products and Services 

           

          The market shares held by the Organization in the Banking and Insurance industries and in the Customer Service Network are presented below.

                   
            Mar11  Dec10  Mar10  Dec09 
          Banks – Source: Brazilian Central Bank (Bacen)         
          Time Deposits  N/A  13.0  13.1  13.3 
          Savings Deposits  N/A  14.3  14.1  14.1 
          Demand Deposits  N/A  18.4  18.6  20.3 
          Loan Operations (1)  12.5(**)  12.4  12.7  12.6 
          Loan Operations - Vehicles Individuals (CDC + Leasing) (1)  17.4(**)  17.7  19.7  19.7 
          Payroll-Deductible Loans (1)  11.1(**)  10.8  9.9  8.8 
          Online Collection (Balance)  N/A  26.7  29.0  28.8 
          Number of Branches  18.7  18.7  17.5  17.2 
          Banks - Source: Federal Revenue Service/ Brazilian Data         
          Processing Service (Serpro)         
          Federal Revenue Collection Document (DARF)  N/A  21.9  22.5  21.2 
          Brazilian Unified Tax Collection System Document (DAS)  N/A  17.3  16.8  16.9 
          Banks – Source: Social Security National Institute (INSS)/Dataprev         
          Social Pension Plan Voucher (GPS)  N/A  14.8  14.5  14.4 
          Benefit Payment to Retirees and Pensioners  N/A  22.0  20.0  19.6 
          Banks – Source: Anbima         
          Investment Funds + Portfolios  16.5  17.0  16.5  16.6 
          Insurance, Private Pension Plans and Savings Bonds – Source:         
          Insurance Superintendence (Susep) and National Agency for         
          Supplementary Healthcare (ANS)         
          Insurance, Private Pension Plan and Savings Bond Premiums  22.4(*)  24.7  25.2  24.4 
          Insurance Premiums (including Long-Term Life Insurance - VGBL)  22.3(*)  24.9  25.7  24.8 
          Life Insurance and Personal Accident Premiums  15.2(*)  17.3  16.8  16.8 
          Auto/Basic Lines (RE) Insurance Premiums  8.1(*)  10.6  12.1  10.4 
          Auto/Optional Third-Party Liability (RCF) Insurance Premiums  11.4(*)  14.1  16.1  13.6 
          Health Insurance Premiums  50,0 (*)  51.7  49.4  48.7 
          Revenues from Private Pension Plan Contributions (excluding VGBL)  25.7(*)  27.2  25.1  25.5 
          Income from Savings Bonds  20.3(*)  21.1  20.9  19.7 

          Technical Provisions for Insurance, Private Pension Plans and Savings Bonds 

          		 30.4(*)  30.6  31.7  32.0 
          Insurance and Private Pension Plans – Source:         
          National Federation of Life and Pension Plans (Fenaprevi)         
          Income on VGBL Premiums  30.1(*)  32.2  34.7  34.0 
          Revenues from Unrestricted Benefits Generating Plans (PGBL) Contributions  20.3(*)  23.3  21.5  20.4 
          Private Pension Plan Investment Portfolios (including VGBL)  34.8(*)  34.8  35.9  35.1 
          Credit Card – Source: Abecs         
          Credit Card Revenue  21.6(***)  21.6  21.4  19.6 
          Leasing – Source: Brazilian Association of Leasing Companies (ABEL)         
          Lending Operations  18.9(**)  19.0  16.7  19.5 
          Consortia – Source: Bacen         
          Real Estate  27.0(**)  29.4  27.2  27.3 
          Auto  24.3(**)  25.4  23.2  23.4 
          Trucks, Tractors and Agricultural Implements  16.9(**)  17.1  14.7  14.6 
          International Area – Source: Bacen         
          Export Market  23.2  24.8  26.6  25.0 
          Import Market  19.1  19.5  21.2  18.4 

          (1) Bacen data for February 2011 and December 2010 are preliminary.
          (*) Reference date: January 2011.
          (**) Reference date: February 2011.
          (***) Projected Market.
          N/A – Not Available.

               
          90  Report on Economic and Financial Analysis – March 2011   

           

             
            Additional Information 

           

           
          Market Share of Products and Services 

           

               

          Bradesco customers enjoy a wide range of options for consulting and carrying out their financial  transactions; in addition to the ability to acquire products and services through high-tech means, such as ATMs, telephone (Bradesco Fone Fácil), the Internet and mobile phones (Bradesco Celular).

          As part of our commitment to social responsibility, people with special needs can rely on a number of
          special services provided by the Bradesco Dia&Noite Customer Service Channels, such as: 

          		  

          • Accessibility to the ATM Network for the visually-impaired and wheelchair users;
          • Internet Banking utility for the visually impaired;
          • Visual Mouse for people with motor impairments; and
          • Personalized assistance for the hearing impaired, by means of digital language in Fone Fácil.

           

           
          Branch Network 

           

                       
           Region Mar11 Market
          Share          		 Mar10 Market
          Share
          Bradesco  Market  Bradesco  Market 
          North  180  827  21.8%  166  793  20.9% 
          Northeast  549  2,809  19.5%  528  2,757  19.2% 
          Midw est  303  1,493  20.3%  289  1,468  19.7% 
          Southeast  2,059  10,655  19.3%  1,948  10,897  17.9% 
          South  560  3,757  14.9%  524  3,783  13.9% 
          Total  3,651  19,541  18.7%  3,455  19,698  17.5% 

           

           
          Compulsory Deposits/Liabilities 

           

                           
          %  Mar11  Dec10  Sept10  Jun10  Mar10  Dec09  Sept09  Jun09 
          Demand Deposits                 
          Rate (1) (5)  43  43  43  42  42  42  42  42 
          Additional (2)  12  12  8  8  8  5  5  5 
          Liabilities*  29  29  29  30  30  30  30  30 
          Liabilities (Microfinance)  2  2  2  2  2  2  2  2 
          Free  14  14  18  18  18  21  21  21 
          Savings Deposits                 
          Rate (3)  20  20  20  20  20  20  20  20 
          Additional (2)  10  10  10  10  10  10  10  10 
          Liabilities  65  65  65  65  65  65  65  65 
          Free  5  5  5  5  5  5  5  5 
          Time Deposits                 
          Rate (2)(4)  20  20  15  15  15  13.5  13.5  15 
          Additional (2)  12  12  8  8  8  4  4  4 
          Free  68  68  77  77  77  82.5  82.5  81 

          * At Banco Bradesco, liabilities are applied to Rural Loans.
          (1) Collected in cash and not remunerated.
          (2) Collected in cash with the Special Clearance and Custody System (Selic) rate.
          (3) Collected in cash with the Reference Interest rate (TR) + interest of 6.17% p.a.
          (4) As of the calculation period from March 29, 2010 to April 1, 2010, with compliance as of April 9, 2010, liabilities are now exclusively in cash, and may be met using credits acquired as provided for by current legislation, and
          (5) FGC was prepaid 60 times in August 2008, as of the calculation period from October 20, 2008 to October 31, 2008, with compliance as of October 29, 2008.

               
            Bradesco  91 

           

           

             
          Additional Information   

           

           
            
          Investments in Infrastructure, Information Technology and Telecommunications 

           

               

          The Bradesco Organization is built on a solid foundation supported by strategic pillars, one of which is Information Technology, enabling it to offer customers with high quality services characterized by speed and security in carrying out operations at all of its service points.

          The Internet Banking and NetEmpresa channels allow thousands of transactions to be made in real time, maximizing comfort for individual and corporate customers. For this very, reason Bradesco is constantly investing in this type of technology, in order to ensure that we are always on the cutting-edge of the market and provide innovative solutions.

          In recognition of its commitment to the quality of services, in January 2011 Bradesco became the first Brazilian bank to obtain the ISO 2000 Certification for its IT Management Services. This standard establishes a global benchmark for quality and is compatible with the Government of England’s IT Infrastructure Library (ITIL). 

          		  

          Guided by best practices and protected against contingencies, Bradesco’s IT infrastructure has central computers with capacity to process over 235,000 Mips (million instructions per second). Every day, an average of 220 million transactions are processed, with availability remaining at 99.76%. This environment is managed in order to transform the complex into the simple and manageable, while maintaining low operating risk and the scalability needed to support the Bank’s growth.

          As a prerequisite for its continuous expansion, in the first quarter of 2011, Bradesco invested R$865 million in Infrastructure and IT in order to update its IT environment, drawing on best practices and existing technologies.

          The total amount invested in recent years, including infrastructure (facilities, furniture and fixtures), can be found below: 

           

                     
            R$ million 
          1Q11  2010  2009  2008  2007 
          Infrastructure  140  716  630  667  478 
          Information Technology and Telecommunication  725  3,204  2,827  2,003  1,621 
          Total  865  3,920  3,457  2,670  2,099 

           

               
          92  Report on Economic and Financial Analysis – March 2011   

           

           

            Additional Information 

           

          Risk Management 

           

               

          Risk management is a highly strategic activity due to the increasing complexity of products and services offered and the globalization of the Organization’s business. Therefore, Bradesco is constantly enhancing its process.

          The Organization’s decisions are based on factors that combine return on previously identified, measured and assessed risks, providing conditions required to meet strategic goals while working to strengthen the Organization.

          The Organization deals with risk management in an integrated manner, providing unique policies, 

           

          processes, criteria and methodology for risk control by means of a statutory body, the Integrated Risk Management and Capital Allocation Committee, which is supported by specific committees and risk management policies approved by the Board of Directors

          Detailed information on the risk management process, reference shareholders’ equity and required reference shareholders’ equity, as well as the Organization’s risk exposure, can be found in the Risk Management Report on the Investor Relations website, at www.bradesco.com.br/ir.

           

          Capital Adequacy Ratio 

           

               

          In March 2011, Bradesco’s Reference Shareholders’ Equity totaled R$59,923 million, versus a Required Reference Shareholders’ Equity of R$43,829 million, with capital margin of R$16,094 million. A majority of the requirement was the result of the credit risk installment, representing 93% of risk-weighted assets, mainly due to the expansion of loan operations. 

          		  

          The Capital Adequacy Ratio increased by 0.3 p.p. from 14.7% in December 2010 to 15.0% in March 2011, mainly impacted by: (i) a capital increase from subscription of shares in the amount of R$1,511 million, under Tier I capital; and (ii) new issue of subordinated debt abroad on January 2011, in the amount of US$500 million and maturing in 2021, offset by the reduced volume of subordinated debt considered under Tier II capital.

           

                           
          Calculation Basis R$ million 
          Mar11  Dec 10  Sept 10  Jun 10  Mar 10  Dec 09  Sept 09  Jun 09 
          Reference Shareholders' Equity (PR)  59,923  56,147  55,920  52,906  56,062  55,928  53,500  50,138 
          Level I  53,240  49,897  48,081  46,284  47,821  46,529  43,305  42,185 
          Shareholders' Equity  51,297  48,043  46,114  44,295  43,087  41,754  38,877  37,277 
          Mark-to-Market Adjustments  1,660  1,678  1,590  1,752  1,347  1,328  1,480  1,975 
          Additional Provision  -  -  -  -  3,005  3,003  2,991  2,992 
          Reduction of Deferred Assets  (291)  (296)  (306)  (441)  (434)  (354)  (260)  (270) 
          Reduction of Tax credits  -  -  -  -  -  -  (143)  (143) 
          Minority/ other  574  472  683  678  816  798  360  354 
          Level II  6,809  6,373  8,079  6,856  8,469  9,623  10,524  8,274 
          Mark-to-Market Adjustments  (1,660)  (1,678)  (1,590)  (1,752)  (1,347)  (1,328)  (1,480)  (1,975) 
          Subordinated Debt  8,469  8,051  9,669  8,608  9,816  10,951  12,004  10,249 
          Deduction of Funding Instruments  (126)  (123)  (240)  (234)  (228)  (224)  (329)  (321) 
          Risk-weighted assets  398,443  380,844  356,103  332,430  334,107  313,719  301,773  294,864 
          Required Reference Shareholders' Equity  43,829  41,892  39,171  36,567  36,752  34,509  33,195  32,435 
          Credit Risk  40,775  38,938  36,426  34,754  34,872  33,046  31,634  30,828 
          Operating Risk  2,690  2,574  2,574  1,678  1,678  1,133  1,133  570 
          Market Risk  364  380  171  135  202  330  428  1,037 
          Margin (excess/ PR insuficiency)  16,094  14,255  16,749  16,339  19,310  21,419  20,305  17,703 
          Leverage Margin  146,309  129,591  152,264  148,536  175,545  194,718  184,591  160,936 
          Capital Adequacy Ratio  15.0%  14.7%  15.7%  15.9%  16.8%  17.8%  17.7%  17.0% 

           

            Bradesco  93 

           

           

           

           

           

           


           

          Independent Auditors’ Report   

           

          Limited assurance report from independent auditors on the supplementary accounting information 

           

          To The Board of Directors of
          Banco Bradesco S.A.
          Osasco - SP

          Introduction

          We were contracted to apply limited assurance procedures for the supplementary accounting information included in the Economic and Financial Analysis Report of Banco Bradesco S.A. ("Bradesco") for the quarter ended on March 31, 2011, prepared under the Bradesco Managament responsability. Our responsibility is to issue a Limited Assurance Report on such supplementary accounting information.

          Scope, procedures applied and limitations

          The limited assurance procedures were performed in accordance with standard NBC TO 3000 – Assurance Engagement Other than Audit and Review, issued by the Brazilian Federal Accounting Council (CFC – Conselho Federal de Contabilidade) and the ISAE 3000 - International Standard on Assurance Engagements issued by the International Auditing and Assurance Standards Board - IASB, both for assurance engagements other than audits or reviews of historical financial information.

          The limited assurance procedures comprised: (a) the planning of the work, considering the relevance of the supplementary financial information and the internal controls systems that served as a basis for the preparation of the Economic and Financial Analysis Report of Bradesco, (b) the understanding of the calculation methodology and the consolidation of indicators through interviews with the management responsible for the preparation of the supplementary accounting information, and (c) the comparison of the financial and accounting indicators with the interim information disclosed at this date and / or accounting records.

          The procedures that were applied do not constitute an audit or review in accordance with Brazilian and international auditing and review standards, as well as these procedures and the obtained evidence are more limited than for reasonable assurance procedures. Additionally, our report does not offer limited assurance on the scope of future information (such as goals, expectations and ambitions) and descriptive information that is subject to subjective assessment.

          Criteria for preparation of the supplementary accounting information

          The additional accounting information disclosed in the Economic and Financial Analysis Report for the quarter ended March 31, 2011 was prepared by management of Bradesco, based on the consolidated financial information contained in the interim financial information and the criteria described in the Economic and Financial Analysis Report, in order to provide additional analysis, but without being part of the interim financial information disclosed in this date.

          Conclusion

          Based on our review, we are not aware of any facts that would lead us to believe that the supplementary accounting information in the Economic and Financial Analysis Report for the quarter ended as of March 31, 2011 is inconsistent, in all material respects, with regard to interim accounting information referred in the criteria for preparation of additional accounting information paragraph.

          Other Information

          The additional accounting information relating to periods prior to March 31, 2011 were reviewed by other independent auditors that issued their report on the date of January 28, 2011 which did not contain any qualification.

          São Paulo, April 26, 2011

           

          Original report signed in Portuguese by
          KPMG Auditores Independentes
          CRC 2SP 014428/O-6
          Cláudio Rogélio Sertório
          Accountant CRC 1SP 212059/O-0

          94  Report on Economic and Financial – March 2011   

           

           

           


           

          Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report   

           

          Management Report 

           

               

          Dear Shareholders,

          We hereby present the consolidated financial statements of Banco Bradesco S.A. for the period ended March 31, 2011, pursuant to the accounting practices adopted in Brazil and applicable to institutions authorized to operate by the Brazilian Central Bank.

          The current scenario of high international liquidity and moderate growth of global GDP will most likely be maintained in the coming months, despite current evaluations of inflationary pressure in a number of countries. This global scenario is still quite favorable for Brazil, which has benefited from the tendancy for high commodity prices and has received a number of excellent evaluations from investors and risk rating agencies. The country's growth in 2011 is set to be more moderate than that seen last year, though long-term outlook is quite promising, with investments and household consumption driving expansion. Bradesco continues to bet on social mobility and gains in economic efficiency, resulting in higher GDP growth.

          Bradesco’s Net Income in the quarter was R$2.702 billion, corresponding to earnings per share of R$0.71 and an annualized return on average Shareholders’ Equity(*) of 23.82%. The annualized return on average Total Assets stood at 1.66%, compared to 1.63% in the same period in the previous year.

          From January and March 2011, a total of R$923.633 million were allocated to shareholders as dividends and interest on shareholders’ equity, of which R$104.430 million were related to the monthly payments and R$819.203 million provisioned.

          Taxes and contributions, including social security, paid or provisioned, totaled R$4.973 billion in the first quarter of 2011, of which R$1.745 billion corresponded to taxes withheld and collected from third parties and R$3.228 billion corresponded to taxes levied on the activities of Bradesco Organization, equivalent to 119.47% of Net Income.

          At the end of the quarter, Paid-in Capital Stock came to R$30.100 billion, which included the capital increase in the amount of R$1.511 billion. Together with Equity Reserves of R$21.197 billion, made up Shareholders’ Equity of R$51.297 billion, up 19.05% from the same period last year and corresponded to a book value per share of R$13.42.

          		  

          Bradesco’s Market Capitalization, calculated based on the price of its shares, came to R$117.027 billion on March 31, equivalent to 2.28 times the net book value, up 16.00% from the R$100.885 billion in the same period in 2010.

          It is worth highlighting that Managed Shareholders’ Equity stood at 7.68% of consolidated Assets, which amounted to R$675.387 billion, for 26.80% growth over March 2010. Thus, the Capital Adequacy Ratio stood at 15.33% in the consolidated financial result and 15.04% in the consolidated economic and financial result, considerably higher than the 11% minimum established by National Monetary Council Resolution 2,099/94, in accordance with the Basel Committee. At the end of the quarter, in relation to Consolidated Reference Shareholders’ Equity, the fixed asset ratio stood at 47.74% in the consolidated financial result and 17.41% in the consolidated economic and financial result, thus, in compliance with the 50% limit.

          In compliance with Article 8 of Circular Letter 3,068/01 by Brazilian Central Bank, Bradesco declares that it has both the financial capacity and intent to hold until maturity those securities classified under “held-to-maturity securities”.

          Assets under management totaled R$919.007 billion as of March 31, up 24.21% over the same period last year, broken down as follows:

          ·  R$382.811 billion in Demand Deposits, Time Deposits, Interbank Deposits, Other Deposits, Open Market and Savings Accounts, 28.08% up on March 2010;

          · R$303.319 billion in assets under management, comprising Investment Funds, Managed Portfolios and Third-Party Fund Quotas, 17.31% up on March 2010;

          · R$131.990 billion in the exchange portfolio, Borrowings and Onlendings, Working Capital, Tax Payment and Collection and Related Taxes, Funds From Issuance of Securities, Subordinated Debt in the Country, and Other Funding, 38.12% up on March 2010;

          · R$89.980 billion in technical provisions for Insurance, Supplementary Private Pension Plans and Savings Bonds, a 15.83% improvement over the same period of previous year; and

          · R$10.907 billion in foreign funding, through public and private issues, Subordinated Debt

           

          96  Report on Economic and Financial Analysis – March 2011   

           

           

            Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report

           

          Management Report 

           

               

          and Securitization of Future Financial Flows, equivalent to US$6.697 billion.

          Consolidated loan operations stood at R$284.695 billion at the end of the period, up 21.02% from March 2010, broken down as follows:

          · R$5.728 billion in Advances on Exchange Contracts, for a total portfolio of US$14.205 billion in Export Financing;

          · US$3.624 billion in Import Financing in Foreign Currency;

          · R$15.008 billion in Leasing;

          · R$14.262 billion in Rural Area business;

          · R$78.191 billion in Consumer Financing, which includes R$9.636 billion in Credit Card receivables;

          · R$42.466 billion in Sureties and Guarantees; and

          · R$27.651 billion in onlending of foreign and domestic funds, originating mainly from the Brazilian Bank of Economic and Social Development (BNDES), one of the main onlending agents.

          With regard to Real Estate financing, the Organization allocated R$3.696 billion in the quarter for the construction and acquisition of own homes, corresponding to a total of 20,804 properties.

          Banco Bradesco BBI, Bradesco Organization’s Investment Bank, advises customers in initial and secondary offers of shares, mergers and acquisitions and structuring and distribution of debt instruments, including debentures, promisory notes, CRIs, mortgage-backed investment funds, FIDCs and bonds in Brazil and abroad, in addition to structured financing operations for companies and Project Finance. In the quarter, Bradesco BBI announced transactions totaling more than R$11 billion.

          Grupo Bradesco de Seguros e Previdência, the largest insurance group in Brazil, stands out in the Insurance, Open Private Pension Plans and Savings Bonds segments. On March 31, it posted
          Net Income of R$761.166 million, with Shareholders’ Equity of R$12.053 billion. Written premiums, net of insurance, pension contributions 

          		  

          and savings bond revenues, totaled R$7.845 billion, up 14.51% from the same period in the previous year.

          Bradesco Organization’s service network is present, direct and indirectly, in 100% of the Brazilian cities and several locations abroad and is structured to offer its clients and users highly efficient, quality products, services and solutions. On March 31, it consisted of 46,006 points, together with 32,514 machines in the Bradesco Dia & Noite Network, 32,001 of which also function on weekends and holidays, in addition to 11,749 machines in the Banco24Horas network and terminals shared by Bradesco, Banco do Brasil and Banco Santander, available to Bradesco Customers for withdrawals, transfers, account statements, checking of balances and applying for loans. In the payroll-deductible loans segment, it had 853 Bradesco Promotora correspondent branches, and in the vehicles segment, 24,323 Bradesco Financiamento points of sale:

          6,619 Branches, PABs (Banking Service Branch) and PAAs (Advanced Service Branch) in Brazil (Branches: Bradesco 3,627, Banco Bradesco Financiamentos 19, Banco Bankpar 2, Banco Bradesco BBI 1, Banco Bradesco Cartões 1 and Banco Alvorada 1; PABs: 1,308; and PAAs: 1,660);

          3 Branches Overseas, with 1 in New York, and 2 in Grand Cayman;

          8 Subsidiaries Overseas (Banco Bradesco Argentina S.A. in Buenos Aires, Banco Bradesco Europa S.A. in Luxembourg, Bradesco Securities, Inc. in New York, Bradesco Securities UK Limited in London, Bradesco Services Co. Ltd. in Tokyo, Bradesco Trade Services Limited in Hong Kong, Cidade Capital Markets Ltd., in grand Cayman, Ibi Services, Sociedad de Responsabilidad Limitada in Mexico);

          6,218 Banco Postal Branches;

          27,649 Bradesco Expresso service points;

          1,588 PAEs – Electronic Service Branches in Companies; and

          3,921 External Terminals of the Bradesco Dia & Noite ATM network and 10,326 Banco24Horas ATM network, and shared information among Bradesco, Banco do 

           

            Bradesco  97 

           

           

          Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report   

           

          Management Report 

           

               

          Brasil and Banco Santander, with 2,024 common points shared by the networks.

          In accordance with CVM Rule 381/03, Bradesco Organization, in this quarter, neither contracted nor was provided services by KPMG Auditores Independentes that were not related to external audit, in an amount exceeding 5% of the total cost of this audit. The policy adopted is in line with the principles of preserving the auditor’s independence, which are based on generally accepted international criteria, i.e., the auditor should not audit its own work, perform managerial duties at his client or promote the interests thereof.

          Through a Human Resources Policy that places emphasis on training and professional development, Bradesco makes good on its belief in the potential of its staff by investing in training programs focused on improving results, as well as the quality and efficiency of the services provided. During the quarter, 894 courses were conducted in which 447,093 employees participated. Assistance benefits, which ensure the well-being of employees, improve the quality of life and safety of employees and their dependents, covered 196,539 lives.

          Fundação Bradesco, the Organization’s pioneer initiative in social investments, has a comprehensive socio-educational program, which includes its 40 own schools installed in socially and economically underprivileged regions, in all the states of Brazil and the Federal District. With a budget of R$307.994 million this year, Fundação Bradesco will provide quality educational services at no charge to 526 thousand people in the various segments in which it operates, of whom 111,639 will be students enrolled in its schools at Basic Education (Kindergarten to High School); Vocational Training - High School; Youth and Adult Education; and Preliminary and Continuing Vocational Training, and other 415 thousand educational events in other on-site and distance courses through the Virtual School - its e-learning portal, the Digital Inclusion Centers (CIDs) and programs made in strategic collaboration, such as Educa+Ação. Meals, medical and dental assistance, uniform and school supplies are provided free to approximately 50 thousand Basic Education students.

          Bradesco Organization sponsors the Bradesco Sports and Education Program, which, in the city of Osasco in São Paulo, has 23 training and specialist centers to teach volleyball and basketball, at the Sports Development center of ADC Bradesco Sports and Education, in 

          		  

          Fundação Bradesco schools, schools in the city’s public school system, private schools and sports centers in the city. Every year, around 2,000 girls aged from 8 to 18 participate in the program, reinforcing the commitment to represent a country that is increasingly open to valuing talent, effort and full exercise of citizenship.

          Bradesco has received a series of ratings in the period, the most important of which being:

          · An AAA+ Rating for Sustainability of Management and Excellence– M&E, covering 592 points in strategic areas. The Bank has maintained the maximum score since it received its first rating in 2006, when it was the first Brazilian bank to be evaluated in areas concerning sustainability; and

          · Fitch Ratings increased the Long-Term Foreign Currency Rating, from “BBB” to “BBB+”, the Domestic Currency Long-Term Rating, from “BBB+” to “A-“, the Domestic Short-Term Rating, from “F2” to “F1”. Bradesco Seguros’s rating of Insurer Financial Strength was also increased from “BBB+” to “A-.“

          Bradesco has also been honored on several
          occasions:

          · The 6th most valuable brand in the global banking industry, according to a survey entitled “Brand Finance Global Banking 500 – 2011” conducted by the consulting firm Brand Finance and published in The Banker magazine. This is the first time that a bank from an emerging economy reaches the position;

          · The most valuable brand in Brazil, a position Bradesco has held since 2007, according to Brand Finance. In the global ranking of 500 companies, the Bank came 28th ;

          · Considered one of the 100 most sustainable companies in the world, according to the 7th edition of the Global 100 ranking, prepared by Corporate Knights magazine;

          · Winner of the 10th edition of the IT Executive of the Year Award, in the IT Governance, and Performance Drivers, Information Security and Adoption of Emerging Technologies categories, organized by Information Week magazine; and

          · BRAM – Bradesco Asset Management won the Prêmio Top Gestão Award from 

           

          98  Report on Economic and Financial Analysis – March 2011   

           

           

            Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report 

           

          Management Report 

           

                  

          ValorInveste magazine of Valor Econômico newspaper in recognition of the best fund management in the country, according to a survey prepared by Standard & Poors, the largest risk rating agency in the world. Bradesco also stood out in the Star Ranking issued in the same edition of the magazine, which points out the best investments funds of the market in the equities, stock and mixed allocation categories.

          The results achieved underline the Bradesco Organization’s commitment to surpassing expectations and always offering efficient and quality products and services. For the success we accomplished, we would like to thank our shareholders and customers for their support and confidence, and our staff and other employees for their dedicated work.

          		  

          Cidade de Deus, April 26, 2011


          Board of Directors
          and Board of Executive Officers

           

          (*) Excludes the mark-to-market effect of available-for-sale securities recorded under shareholders’ equity.

           

            Bradesco  99 

           

           

             
          Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report   

           

          Consolidated Balance Sheet – R$ thousand 

           

                 
          Assets 2011  2010
          March  December  March 
          Current assets  499,118,778  448,412,103  390,746,673 
          Cash and cash equivalents (Note 6)  6,785,081  15,737,880  8,704,665 
          Interbank investments (Notes 3d and 7)  98,516,216  71,941,920  96,260,856 
          Investments in federal funds purchased and securities sold under agreements to       
          repurchase  92,471,087  66,178,702  89,920,738 
          Interbank deposits  6,050,876  5,764,604  6,340,361 
          Allowance for losses  (5,747)  (1,386)  (243) 
          Securities and derivative financial instruments (Notes 3e, 3f, 8 and 32b)  174,158,785  152,314,736  123,602,778 
          Own portfolio  116,931,942  108,767,706  93,883,610 
          Subject to repurchase agreements  52,195,585  39,687,170  19,019,954 
          Derivative financial instruments (Notes 3f, 8e II and 32b)  3,155,559  1,543,924  2,335,357 
          Compulsory deposits - Brazilian Central Bank  -  -  3,413,929 
          Underlying guarantee provided  1,817,919  2,259,646  4,908,201 
          Securities subject to repurchase agreements but not restricted  57,780  56,290  41,727 
          Interbank accounts  66,150,022  65,260,837  35,966,020 
          Unsettled payments and receipts  435,934  52,653  479,187 
          Mandatory reserve (Note 9):       
          - Compulsory deposits - Brazilian Central Bank  65,677,216  65,197,019  35,424,718 
          - National treasury - rural loans  578  578  578 
          - National Housing System (SFH)  4,326  6,094  13,808 
          Correspondent banks  31,968  4,493  47,729 
          Interdepartmental accounts  634,441  563,840  229,728 
          Internal transfer of funds  634,441  563,840  229,728 
          Loan operations (Notes 3g, 10 and 32b)  101,997,037  97,358,996  82,534,333 
          Loan operations:       
          - Public sector  676,917  640,088  1,061,316 
          - Private sector  110,955,075  105,968,093  90,653,338 
          Allowance for loan losses (Notes 3g, 10f, 10g and 10h)  (9,634,955)  (9,249,185)  (9,180,321) 
          Leasing operations (Notes 2, 3g, 10 and 32b)  6,664,022  7,049,715  7,859,584 
          Leasing receivables:       
          - Public sector  8,779  9,553  24,321 
          - Private sector  12,573,437  13,274,780  14,525,660 
          Unearned income from leasing  (5,224,481)  (5,516,071)  (5,901,202) 
          Allowance for leasing losses (Notes 3g, 10f, 10g and 10h)  (693,713)  (718,547)  (789,195) 
          Other receivables  42,819,434  36,799,702  34,044,327 
          Receivables on sureties and guarantees honored (Note 10a-3)  2,853  5,759  21,409 
          Foreign exchange portfolio (Note 11a)  16,208,394  9,445,491  9,953,229 
          Receivables  582,535  480,980  474,547 
          Securities trading  464,014  540,998  1,072,850 
          Specific loans  1,988  1,747  2,105 
          Insurance premiums receivable  2,178,518  1,917,062  1,972,355 
          Sundry (Note 11b)  23,994,071  25,052,823  21,277,120 
          Allowance for other loan losses (Notes 3g, 10f, 10g and 10h)  (612,939)  (645,158)  (729,288) 
          Other assets (Note 12)  1,393,740  1,384,477  1,544,382 
          Other assets  658,533  681,242  775,021 
          Provision for losses  (230,062)  (247,053)  (256,351) 
          Prepaid expenses (Notes 3i and 12b)  965,269  950,288  1,025,712 
          Long-term receivables  164,480,176  177,370,555  131,962,864 
          Interbank investments (Notes 3d and 7)  1,643,153  1,290,114  903,656 
          Interbank investments  1,643,153  1,290,114  903,656 

           

          100 Report on Economic and Financial Analysis – March 2011  

           

           

             
            Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report 

           

           
          Consolidated Balance Sheet – R$ thousand 

           

                 
          Assets 2011  2010
          March  December  March 
          Securities and derivative financial instruments (Notes 3e, 3f, 8 and 32b)  43,322,816  61,203,254  33,705,811 
          Own portfolio  22,050,815  26,423,150  27,320,923 
          Subject to repurchase agreements  20,787,807  34,332,159  743,709 
          Derivative financial instruments (Notes 3f, 8e II and 32b)  100,609  66,461  716,163 
          Compulsory deposits - Brazilian Central Bank  -  -  3,576,475 
          Privatization currencies  85,456  87,658  92,156 
          Underlying guarantees provided  298,129  293,826  1,256,385 
          Interbank accounts  507,003  501,610  478,243 
          Restricted credits (Note 9):       
          - SFH – National Housing System  507,003  501,610  478,243 
          Loan operations (Notes 3g, 10 and 32b)  90,625,045  85,604,960  65,293,407 
          Loan operations:       
          - Public sector  319,920  319,862  450,290 
          - Private sector  95,442,924  90,237,928  69,075,677 
          Allowance for loan losses (Notes 3g, 10f, 10g and 10h)  (5,137,799)  (4,952,830)  (4,232,560) 
          Leasing operations (Notes 2, 3g, 10 and 32b)  6,992,384  7,876,326  10,708,767 
          Leasing receivables:       
          - Public sector  2,442  3,991  9,909 
          - Private sector  14,174,313  15,669,034  20,305,144 
          Unearned income from leasing  (6,526,413)  (7,075,344)  (8,714,484) 
          Allowance for leasing losses (Notes 3g, 10f, 10g and 10h)  (657,958)  (721,355)  (891,802) 
          Other receivables  20,956,251  20,570,618  20,489,553 
          Receivables  7,050  14,006  15,755 
          Securities trading  309,779  324,547  317,927 
          Sundry (Note 11b)  20,642,116  20,234,661  20,168,512 
          Allowance for loan losses (Notes 3g, 10f, 10g and 10h)  (2,694)  (2,596)  (12,641) 
          Other assets (Note 12)  433,524  323,673  383,427 
          Other assets  565  565  553 
          Prepaid expenses (Notes 3i and 12b)  432,959  323,108  382,874 
          Permanent assets  11,787,658  11,702,072  9,916,523 
          Investments (Notes 3j, 4, 13 and 32b)  1,674,688  1,576,790  1,536,687 
          Interest in unconsolidated companies:       
          - Local  1,151,300  1,153,337  1,055,564 
          Other investments  786,514  686,579  762,134 
          Allowance for losses  (263,126)  (263,126)  (281,011) 
          Premises and equipment (Notes 3k and 14)  3,662,771  3,762,070  3,235,933 
          Premises  1,113,543  1,111,812  1,022,909 
          Other assets  7,834,226  7,744,067  6,916,190 
          Accumulated depreciation  (5,284,998)  (5,093,809)  (4,703,166) 
          Leased assets (Note 14)  2,999  4,061  8,334 
          Leased assets  13,231  13,944  20,972 
          Accumulated depreciation  (10,232)  (9,883)  (12,638) 
          Intangible assets (Notes 3l and 15)  6,447,200  6,359,151  5,135,569 
          Intangible assets  11,173,081  10,771,479  8,674,765 
          Accumulated amortization  (4,725,881)  (4,412,328)  (3,539,196) 
          Total  675,386,612  637,484,730  532,626,060 

           
          The Notes are an integral part of the Financial Statements.

           

               
            Bradesco  101 

           

           

             
          Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report   

           

           
          Consolidated Balance Sheet – R$ thousand 

           

                 
          Liabilities 2011  2010
          March  December  March 
          Current liabilities  413,616,722  397,234,106  321,166,083 
          Deposits (Notes 3n and 16a)  127,800,565  125,595,059  103,857,996 
          Demand deposits  31,777,641  36,224,557  31,590,287 
          Savings deposits  54,624,988  53,435,652  45,194,691 
          Interbank deposits  227,200  256,284  329,218 
          Time deposits (Notes 16a and 32b)  40,057,687  34,571,351  25,749,548 
          Other deposits  1,113,049  1,107,215  994,252 
          Federal funds purchased and securities sold under agreements to repurchase (Notes 3n and 16b)  142,564,054  136,886,423  98,260,955 
          Own portfolio  84,365,553  84,891,447  30,582,625 
          Third-party portfolio  50,793,391  44,084,563  66,823,881 
          Unrestricted portfolio  7,405,110  7,910,413  854,449 
          Funds from issuance of securities (Notes 16c and 32b)  5,314,142  4,930,632  3,060,285 
          Mortgage and real estate notes, letters of credit and others  4,266,550  3,646,915  2,420,734 
          Debentures (Note 16c-1)  763,323  742,906  25,852 
          Securities issued abroad  284,269  540,811  613,699 
          Interbank accounts  225,823  40,069  203,613 
          Correspondent banks  225,823  40,069  203,613 
          Interdepartmental accounts  2,421,312  3,749,535  1,859,048 
          Third-party funds in transit  2,421,312  3,749,535  1,859,048 
          Borrowing (Notes 17a and 32b)  8,815,700  7,229,447  7,823,288 
          Borrowing abroad  8,815,700  7,229,447  7,823,288 
          Local onlending - official institutions (Notes 17b and 32b)  9,746,539  9,328,600  6,772,140 
          National treasury  35,016  36,660  62,143 
          National Bank for Economic and Social Development (BNDES)  3,729,634  3,642,975  2,221,555 
          Caixa Econômica Federal – Federal savings bank (CEF)  20,456  46,248  17,341 
          Fund for financing the acquisition of industrial machinery and equipment (Finame)  5,961,433  5,602,717  4,471,101 
          Foreign onlending (Notes 17b and 32b)  13,551  5,663  482,959 
          Foreign onlending  13,551  5,663  482,959 
          Derivative financial instruments (Notes 3f, 8e II and 32b)  2,189,042  596,106  2,361,013 
          Derivative financial instruments  2,189,042  596,106  2,361,013 

          Technical provisions for insurance, private pension plans and savings bonds (Notes 3o and 21) 

          		 69,289,919  67,102,574  59,014,470 
          Other liabilities  45,236,075  41,769,998  37,470,316 
          Collection of taxes and other contributions  4,145,036  300,296  3,015,045 
          Foreign exchange portfolio (Note 11a)  11,059,748  5,632,311  5,452,357 
          Social and statutory  933,728  2,158,225  918,024 
          Tax and social security (Note 20a)  3,702,277  4,607,222  2,455,976 
          Securities trading  1,005,756  1,033,920  1,566,917 
          Financial and development funds  208  270  221 
          Subordinated debts (Notes 19 and 32b)  4,889,404  8,000,110  4,772,011 
          Sundry (Note 20b)  19,499,918  20,037,644  19,289,765 
          Long-term liabilities  209,451,827  191,375,883  167,263,667 
          Deposits (Notes 3n and 16a)  76,021,874  67,605,540  66,863,677 
          Interbank deposits  25,049  19,160  36,540 
          Time deposits (Notes 16a and 32b)  75,996,825  67,586,380  66,827,137 

          Federal funds purchased and securities sold under agreements to repurchase (Notes 3n and 16b) 

          		 36,424,727  34,610,737  29,911,020 
          Own portfolio  36,409,145  34,595,548  29,911,020 
          Unrestricted Portfolio  15,582  15,189  - 

           

               
          102  Report on Economic and Financial Analysis – March 2011   

           

           

             
            Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report 

           

                 
          Consolidated Balance Sheet – R$ thousand
           
          Liabilities 2011  2010
          March  December  March 
          Funds from issuance of securities (Notes 16c and 32b)  16,386,857  12,743,319  5,490,228 
          Mortgage and real estate notes, letters of credit and others  11,561,631  7,926,919  39,108 
          Debentures (Note 16c-1)  224  221  730,163 
          Securities issued abroad  4,825,002  4,816,179  4,720,957 
          Borrowing (Notes 17a and 32b)  876,005  760,460  770,265 
          Borrowing abroad  876,005  760,460  770,265 
          Local onlending - official institutions (Notes 17b and 32b)  22,048,843  20,872,055  14,358,227 
          BNDES  8,247,719  8,116,358  6,114,515 
          CEF  66,421  40,096  71,581 
          FINAME  13,734,079  12,714,980  8,171,480 
          Other institutions  624  621  651 
          Foreign onlending (Notes 17b and 32b)  -  -  865 
          Foreign onlending  -  -  865 
          Derivative financial instruments (Notes 3f, 8e II and 32b)  168,655  133,594  107,726 
          Derivative financial instruments  168,655  133,594  107,726 
          Technical provisions for insurance, private pension plans and savings bonds (Notes 3o and 21)  20,689,616  20,074,517  18,670,521 
          Other liabilities  36,835,250  34,575,661  31,091,138 
          Tax and social security (Note 20a)  13,559,399  12,581,493  11,146,891 
          Subordinated debts (Notes 19 and 32b)  19,518,745  18,314,836  18,768,718 
          Sundry (Note 20b)  3,757,106  3,679,332  1,175,529 
          Deferred income  447,122  360,355  292,397 
          Deferred income  447,122  360,355  292,397 
          Minority interest in subsidiaries (Note 22)  573,978  471,536  816,547 
          Shareholders' equity (Note 23)  51,296,963  48,042,850  43,087,366 
          Capital:       
          - Domiciled in Brazil  29,676,689  29,478,012  25,703,438 
          - Domiciled abroad  423,311  521,988  796,562 
          Paid-up Capital  -  (1,500,000)  - 
          Capital reserves  11,441  62,614  62,614 
          Profit reserves  21,223,006  19,481,986  16,185,632 
          Asset valuation adjustments  25,607  8,299  339,120 
          Treasury shares (Notes 23d and 32b)  (63,091)  (10,049)  - 
          Shareholders’ equity managed by the Parent Company  51,870,941  48,514,386  43,903,913 
          Total  675,386,612  637,484,730  532,626,060 

          The Notes are an integral part of the Financial Statements.

               
            Bradesco  103 

           

           

             
          Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report   

           

           
          Consolidated Statement of Income – R$ thousand 

           

                 
            2011  2010 
          1st Quarter  4th Quarter  1st Quarter 
          Revenues from financial intermediation  20,919,615  20,057,822  15,490,486 
          Loan operations (Note 10j)  10,501,736  10,318,852  8,459,551 
          Leasing operations (Note 10j)  446,003  500,762  641,936 
          Operations with securities (Note 8h)  5,345,137  5,025,415  3,823,475 
          Financial income from insurance, private pension plans and savings bonds (Note 8h)  2,725,934  2,764,781  2,272,263 
          Derivative financial instruments (Note 8h)  371,989  292,209  (38,762) 
          Foreign exchange operations (Note 11a)  129,411  120,216  130,877 
          Compulsory deposits (Note 9b)  1,376,232  1,005,780  184,700 
          Sale or transfer of financial assets  23,173  29,807  16,446 
                 
          Financial intermediation expenses  13,323,658  12,453,271  9,647,594 
          Federal funds purchased and securities sold under agreements to repurchase (Note 16e)  9,100,827  8,195,823  5,511,475 
          Monetary restatement and interest on technical provisions for insurance, private pension plans and savings bonds (Note 16e)  1,703,001  1,754,206  1,493,549 
          Borrowing and onlending (Note 17c)  (15,360)  202,891  481,459 
          Leasing operations (Note 10j)  1,145  1,191  1,824 
          Allowance for loan losses (Notes 3g, 10g and 10h)  2,534,045  2,299,160  2,159,287 
                 
          Gross income from financial intermediation  7,595,957  7,604,551  5,842,892 
                 
          Other operating income/expenses  (3,466,955)  (3,459,385)  (3,057,822) 
          Fee and commission income (Note 24)  3,419,386  3,471,436  3,080,431 
          Other fee and commission income  2,669,093  2,714,172  2,484,218 
          Revenues from banking fees  750,293  757,264  596,213 
          Insurance, private pension plans and savings bonds retained premiums (Notes 3o and 21d)  7,787,348  9,000,340  6,790,967 
          Net premiums written  7,844,640  9,012,295  6,851,334 
          Reinsurance premiums  (57,292)  (11,955)  (60,367) 
          Variation of technical provisions for insurance, private pension plans and savings bonds (Note 3o)  (3,323,739)  (4,707,515)  (3,119,227) 
          Retained claims (Note 3o)  (2,705,338)  (2,514,550)  (2,267,327) 
          Savings bonds drawings and redemptions (Note 3o)  (549,274)  (642,311)  (451,350) 
          Insurance, private pension plans and savings bonds selling expenses (Note 3o)  (424,131)  (437,640)  (371,477) 
          Personnel expenses (Note 25)  (2,435,946)  (2,533,092)  (2,120,571) 
          Other administrative expenses (Note 26)  (3,037,311)  (3,158,859)  (2,564,249) 
          Tax expenses (Note 27)  (895,158)  (872,490)  (735,743) 
          Equity in the earnings of unconsolidated companies (Note 13b)  34,188  60,562  28,755 
          Other operating income (Note 28)  685,956  692,757  654,186 
          Other operating expenses (Note 29)  (2,022,936)  (1,818,023)  (1,982,217) 
          Operating income  4,129,002  4,145,166  2,785,070 
          Non-operating income (Note 30)  (55,522)  68,901  (95,374) 
          Income before taxes on income and minority interest  4,073,480  4,214,067  2,689,696 
          Income taxes and social contribution (Notes 34a and 34b)  (1,297,777)  (1,203,584)  (569,318) 
          Minority interest in subsidiaries  (73,664)  (23,738)  (17,672) 
          Net income  2,702,039  2,986,745  2,102,706 

           

          The Notes are an integral part of the Financial Statements.

               
          104  Report on Economic and Financial Analysis – March 2011   
           
           

             
            Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report 

           

           
          Statement of Changes in Shareholders’ Equity – R$ thousand 

           

                                   
          Events  Paid-up capital  Capital reserves  Profit reserves  Asset valuation adjustments  Treasury shares Retained earnings Total 
          Capital stock Unrealized capital Goodwill from share subscription Other  Legal  Statutory  Bradesco Subsidiaries
          Balances on December 31, 2009  26,500,000  -  56,465  6,149  2,254,302  12,768,368  7,921  349,420  (188,874)  -  41,753,751 
          Acquisition of treasury shares  -  -  -  -  -  -  -  -  (4,740)  -  (4,740) 
          Cancellation of treasury shares  -  -  -  -  -  (193,614)  -  -  193,614  -  - 
          Asset valuation adjustments  -  -  -  -  -  -  50,408  (68,629)  -  -  (18,221) 
          Net income    -  -  -  -  -  -  -  -  -  2,102,706  2,102,706 
          Allocations:  - Reserves  -  -  -  -  105,135  1,251,441  -  -  -  (1,356,576)  - 
            - Interest on shareholders’ equity paid  -  -  -  -  -  -  -  -  -  (608,025)  (608,025) 
            - Dividends paid  -  -  -  -  -  -  -  -  -  (138,105)  (138,105) 
          Balance on March 31, 2010  26,500,000  -  56,465  6,149  2,359,437  13,826,195  58,329  280,791  -  -  43,087,366 
           
          Balance on September 30, 2010  28,500,000  -  56,465  6,149  2,606,048  14,849,550  80,048  15,403  -  -  46,113,663 
          Capital Increase by share subscription  1,500,000  (1,500,000)  -  -  -  -  -  -  -  -  - 
          Acquisition of treasury shares  -  -  -  -  -  -  -  -  (10,049)  -  (10,049) 
          Asset valuation adjustments  -  -  -  -  -  -  92,246  (179,398)  -  -  (87,152) 
          Net income    -  -  -  -  -  -  -  -  -  2,986,745  2,986,745 
          Allocations:  - Reserves  -  -  -  -  149,337  1,877,051  -  -  -  (2,026,388)  - 
            - Interest on shareholders’ equity paid  -  -  -  -  -  -  -  -  -  (488,591)  (488,591) 
            - Dividends paid  -  -  -  -  -  -  -  -  -  (471,766)  (471,766) 
          Balances on December 31, 2010  30,000,000  (1,500,000)  56,465  6,149  2,755,385  16,726,601  172,294  (163,995)  (10,049)  -  48,042,850 
          Capital Increase with reserves  100,000  -  (56,465)  (6,149)  (37,386)  -  -  -  -  -  - 
          Capital increase by share subscription  -  1,500,000  -  -  -  -  -  -  -  -  1,500,000 
          Acquisition of treasury shares  -  -  -  -  -  -  -  -  (53,042)  -  (53,042) 
          Goodwill in share subscription  -  -  11,441  -  -  -  -  -  -  -  11,441 
          Asset valuation adjustments  -  -  -  -  -  -  14,414  2,894  -  -  17,308 
          Net income    -  -  -  -  -  -  -  -  -  2,702,039  2,702,039 
          Allocations:  - Reserves  -  -  -  -  135,102  1,643,304  -  -  -  (1,778,406)  - 
            - Interest on shareholders’ equity provisioned  -  -  -  -  -  -  -  -  -  (766,998)  (766,998) 
            - Dividends paid and/or provisioned  -  -  -  -  -  -  -  -  -  (156,635)  (156,635) 
          Balances on March 31, 2011  30,100,000  -  11,441  -  2,853,101  18,369,905  186,708  (161,101)  (63,091)  -  51,296,963 

           

          The Notes are an integral part of the Financial Statements.

               
            Bradesco  105 

           

           

             
          Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report   

           

           
          Value Added Statement – R$ thousand 

           

                       
          Description  2011 2010
          1st quarter  %  4th quarter  %  1st quarter  % 
          1 – Income  21,419,989  283.1  21,087,494  271.2  15,771,693  277.0 
          1.1) Financial intermediation  20,919,615  276.5  20,057,822  258.0  15,490,486  272.0 
          1.2) Fee and commission  3,419,386  45.2  3,471,435  44.6  3,080,431  54.1 
          1.3) Allowance for loan losses  (2,534,045)  (33.5)  (2,299,160)  (29.6)  (2,159,287)  (37.9) 
          1.4) Other  (384,967)  (5.1)  (142,603)  (1.8)  (639,937)  (11.2) 
          2 – Financial intermediation expenses  (10,789,613)  (142.6)  (10,154,111)  (130.6)  (7,488,307)  (131.5) 
          3 – Inputs acquired from third-parties  (2,519,613)  (33.3)  (2,661,660)  (34.2)  (2,101,504)  (37.0) 
          Materials, water, electricity and gas  (139,578)  (1.8)  (145,967)  (1.9)  (117,417)  (2.1) 
          Third-party services  (839,301)  (11.1)  (885,515)  (11.4)  (724,077)  (12.7) 
          Communication  (377,179)  (5.0)  (382,394)  (4.9)  (334,475)  (5.9) 
          Financial system services  (108,630)  (1.4)  (101,155)  (1.3)  (86,059)  (1.5) 
          Advertising and marketing  (202,385)  (2.7)  (281,681)  (3.6)  (152,363)  (2.7) 
          Transportation  (179,026)  (2.4)  (177,316)  (2.3)  (142,311)  (2.5) 
          Data processing  (225,357)  (3.0)  (260,979)  (3.4)  (190,766)  (3.3) 
          Maintenance and repairs  (122,760)  (1.6)  (131,580)  (1.7)  (107,456)  (1.9) 
          Security and surveillance  (76,080)  (1.0)  (71,130)  (0.9)  (66,143)  (1.2) 
          Travel  (35,221)  (0.5)  (34,723)  (0.4)  (21,154)  (0.4) 
          Other  (214,096)  (2.8)  (189,220)  (2.4)  (159,283)  (2.8) 
          4 – Gross value added (1-2-3)  8,110,763  107.2  8,271,723  106.4  6,181,882  108.5 
          5 – Depreciation, amortization and depletion  (580,244)  (7.7)  (557,502)  (7.2)  (515,261)  (9.0) 
          6 – Net value added produced by the Entity (4-5)  7,530,519  99.5  7,714,221  99.2  5,666,621  99.5 
          7 – Value added received in transfer  34,188  0.5  60,562  0.8  28,755  0.5 
          Equity in earnings (losses) of unconsolidated companies  34,188  0.5  60,562  0.8  28,755  0.5 
          8 – Value added to distribute (6+7)  7,564,707  100.0  7,774,783  100.0  5,695,376  100.0 
          9 – Value added distributed  7,564,707  100.0  7,774,783  100.0  5,695,376  100.0 
          9.1) Personnel  2,108,212  27.9  2,193,996  28.1  1,835,691  32.4 
          Payroll  1,150,536  15.2  1,161,554  14.9  1,000,991  17.6 
          Benefits  495,444  6.5  523,953  6.7  417,442  7.3 
          FGTS (Government Severance Indemnity Fund for  Employees) 106,268  1.4  101,958  1.3  91,561  1.6 
          Other  355,964  4.8  406,531  5.2  325,697  5.9 
          9.2) Taxes, fees and contributions  2,520,669  33.3  2,415,170  31.1  1,589,941  27.8 
          Federal  2,404,589  31.8  2,308,631  29.7  1,483,559  26.0 
          State  1,115  -  205  -  1,806  - 
          Municipal  114,965  1.5  106,334  1.4  104,576  1.8 
          9.3) Third-party capital compensation  160,123  2.1  155,134  2.0  149,366  2.6 
          Rentals  157,090  2.1  147,757  1.9  143,519  2.5 
          Asset leasing  3,033  -  7,377  0.1  5,847  0.1 
          9.4) Shareholders' equity remuneration  2,775,703  36.7  3,010,483  38.8  2,120,378  37.2 
          Interest on shareholders’ equity  766,998  10.1  488,591  6.3  608,025  10.7 
          Dividends  156,635  2.1  471,766  6.1  138,105  2.4 
          Retained earnings  1,778,406  23.5  2,026,388  26.1  1,356,576  23.8 
          Interest of minority shareholders in retained earnings  73,664  1.0  23,738  0.3  17,672  0.3 

           

          The Notes are an integral part of the Financial Statements.

               
          106  Report on Economic and Financial Analysis – March 2011   

           

           

             
            Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report 

           

           
          Consolidated Statement of Cash Flows – R$ thousand 

           

                 
            2011  2010 
          1st Quarter  4th Quarter  1st Quarter 
          Cash flow from operating activities:       
          Net Income before income tax and social contribution  4,073,480  4,214,067  2,689,696 
          Adjustments to net income before taxes  5,774,461  5,731,101  5,387,210 

          Allowance for loan losses 

          		 2,534,045  2,299,160  2,159,287 

          Depreciation and amortization 

          		 580,244  557,502  515,261 

          Losses from/Provisions for Asset Impairment 

          		 4,590  7,422  (2,445) 

          (Reversal)/expenses with civil, labor and tax provisions 

          		 850,196  993,161  1,117,271 

          Expenses with restatement and interest from technical provisions for insurance,  private pension plans and savings bonds

          		 1,703,001  1,754,206  1,493,549 

          Equity in the earnings (losses) of unconsolidated companies 

          		 (34,188)  (60,562)  (28,755) 

          (Gain)/loss on sale of investments 

          		 -  (166,895)  - 

          (Gain)/loss on sale of fixed assets 

          		 966  6,888  (4,240) 

          (Gain)/loss on sale of foreclosed assets 

          		 61,373  103,425  90,660 

          Other 

          		 74,234  236,794  46,622 
          Adjusted net income before taxes  9,847,941  9,945,168  8,076,906 

          (Increase)/decrease in interbank investments 

          		 2,622,016  (16,987,225)  1,059,199 

          (Increase)/decrease in securities and derivative financial instruments 

          		 2,588,550  (14,444,072)  (2,902,350) 

          (Increase)/decrease in interbank and interdepartmental accounts 

          		 (1,627,451)  1,891,543  (1,337,179) 

          (Increase) in loan and leasing operations 

          		 (10,963,644)  (15,409,448)  (11,117,654) 

          (Increase)/decrease in insurance premiums receivable 

          		 (261,456)  71,444  295,236 

          Increase in technical provisions for insurance, private pension plans and savings  bonds

          		 1,099,443  3,060,105  619,521 

          Increase/(decrease) in deferred income 

          		 86,767  48,299  (28,228) 

          (Increase)/decrease in other receivables and other assets 

          		 (5,475,538)  8,601,631  (814,302) 

          (Increase) in reserve requirements in the Brazilian Central Bank 

          		 (480,197)  (16,098,624)  (17,501,089) 

          Increase/(decrease) in deposits 

          		 10,621,840  7,006,341  (351,411) 

          Increase in federal funds purchased and securities sold under agreements to  repurchase

          		 7,491,621  14,488,423  14,898,929 

          Increase in funds from issue of securities 

          		 4,027,048  3,924,567  1,067,929 

          Increase in borrowings and onlendings 

          		 3,304,413  198,235  2,880,008 

          Increase/(decrease) in other liabilities 

          		 8,132,303  (9,758,226)  3,121,873 

          Income tax and social contribution paid 

          		 (2,173,771)  (717,289)  (1,282,026) 
          Net cash provided by/(used in) operating activities  28,839,885  (24,179,128)  (3,314,638) 

          Cash flow from investment activities 

          		      

          (Increase) in available-for-sale securities 

          		 (4,441,564)  (3,384,164)  (4,128,146) 

          (Increase) in held-to-maturity securities 

          		 (465,282)  (844,002)  (1,740,034) 

          Proceeds from sale of foreclosed assets 

          		 41,854  50,695  27,178 

          Divestments 

          		 1,565  104,275  - 

          Proceeds from the sale of premises and equipment and operating leased assets 

          		 8,398  18,919  114,989 

          Acquisition of foreclosed assets 

          		 (127,308)  (184,877)  (221,585) 

          Acquisition of investments 

          		 (119,734)  (5,476)  (701) 

          Acquisition of premises and equipment and operating leased assets 

          		 (186,158)  (687,239)  (170,547) 

          Investment in intangible assets 

          		 (403,339)  (1,122,554)  (181,309) 

          Dividends and interest on shareholders' equity received 

          		 13,350  4,820  5,190 
          Net cash provided by/(used in) investing activities  (5,678,218)  (6,049,603)  (6,294,965) 

          Cash Flow from financing activities: 

          		      

          Increase/(decrease) in subordinated debts 

          		 (1,906,797)  617,703  436,752 

          Capital increase in cash and goodwill in share subscription 

          		 1,511,441  -  - 

          Dividends and interest on shareholders’ equity paid 

          		 (2,141,134)  (396,666)  (1,639,225) 

          Minority interest 

          		 28,778  (235,500)  1,200 

          Acquisition of own shares 

          		 (53,042)  (10,049)  (4,740) 

          Net cash provided by/(used) in financing activities 

          		 (2,560,754)  (24,512)  (1,206,013) 

          Net increase/(decrease) in cash and cash equivalents 

          		 20,600,913  (30,253,243)  (10,815,616) 

          Cash and cash equivalents – At the beginning of the period 

          		 36,240,382  66,493,625  82,720,913 

          Cash and cash equivalents – At the end of the period 

          		 56,841,295  36,240,382  71,905,297 

          Net increase/(decrease) in cash and cash equivalents 

          		 20,600,913  (30,253,243)  (10,815,616) 

           

          The Notes are an integral part of the Financial Statements.

               
            Bradesco  107 

           

           

             
          Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report   

           

           
          Notes to the Consolidated Financial Statements 

           

          We present below the Notes to the Consolidated Financial Statements of Banco Bradesco S.A. subdivided as follows:

               
              Page 
          1)  OPERATIONS  109 
          2)  PRESENTATION OF THE FINANCIAL STATEMENTS  109 
          3)  SIGNIFICANT ACCOUNTING POLICIES  111 
          4)  INFORMATION FOR COMPARISON PURPOSES  118 
          5)  ADJUSTED BALANCE SHEET AND STATEMENT OF INCOME BY BUSINESS SEGMENT  119 
          6)  CASH AND CASH EQUIVALENTS  120 
          7)  INTERBANK INVESTMENTS  121 
          8)  SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS  122 
          9)  INTERBANK ACCOUNTS – RESTRICTED DEPOSITS  136 
          10)  LOAN OPERATIONS  137 
          11)  OTHER RECEIVABLES  149 
          12)  OTHER ASSETS  151 
          13)  INVESTMENTS  151 
          14)  PREMISES AND EQUIPMENT AND LEASED ASSETS  153 
          15)  INTANGIBLE ASSETS  154 
          16)  DEPOSITS, FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND FUNDS FROM ISSUANCE OF SECURITIES  156 
          17)  BORROWING AND ONLENDING  161 
          18)  CONTINGENT ASSETS AND LIABILITIES AND LEGAL LIABILITIES – TAX AND SOCIAL SECURITY  162 
          19)  SUBORDINATED DEBTS  166 
          20)  OTHER LIABILITIES  167 
          21)  INSURANCE, PRIVATE PENSION PLANS AND SAVINGS BONDS OPERATIONS  168 
          22)  MINORITY INTEREST IN SUBSIDIARIES  171 
          23)  SHAREHOLDERS’ EQUITY (PARENT COMPANY)  171 
          24)  FEE AND COMMISSION INCOME  174 
          25)  PERSONNEL EXPENSES  174 
          26)  OTHER ADMINISTRATIVE EXPENSES  175 
          27)  TAX EXPENSES  175 
          28)  OTHER OPERATING INCOME  175 
          29)  OTHER OPERATING EXPENSES  176 
          30)  NON-OPERATING INCOME  176 
          31)  TRANSACTIONS WITH CONTROLLING SHAREHOLDERS (DIRECT AND INDIRECT)  177 
          32)  FINANCIAL INSTRUMENTS  179 
          33)  EMPLOYEE BENEFITS  190 
          34)  INCOME TAX AND SOCIAL CONTRIBUTION  191 
          35)  OTHER INFORMATION  194 

           

               
          108  Report on Economic and Financial Analysis – March 2011   

           

           

             
            Financial Statements, Independent Auditors’ Report, and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

             
          1)  OPERATIONS 
           
           

          Banco Bradesco S.A. (Bradesco) is a private-sector publicly traded company that, operating as a Multiple Service Bank, carries out all types of authorized banking activities through its commercial, foreign exchange, consumer financing and housing loan portfolios. The Bank also operates in a number of other activities through its direct and indirect subsidiaries, particularly in leasing, investment banking, brokerage, consortium management, credit cards, insurance, private pension plans and savings bonds. Operations are conducted within the context of the Bradesco Organization companies, working in an integrated manner in the market.

           
          2)  PRESENTATION OF THE FINANCIAL STATEMENTS 
           
           

          The consolidated financial statements of Bradesco include the financial statements of Banco Bradesco, its foreign branches, direct and indirect subsidiaries and jointly-controlled investments, in Brazil and abroad, including SPEs. They were prepared based on accounting practices determined by Laws 4,595/64 (Brazilian Financial System Law) and 6,404/76 (Brazilian Corporation Law), with the amendments introduced by Laws 11,638/07 and 11,941/09 related to the accounting of operations, as well as the rules and instructions of the Monetary National Council (CMN) and the Brazilian Central Bank (Bacen), Securities and Exchange Commission of Brazil (CVM), when applicable, National Private Insurance Council (CNSP), Insurance Superintendence (Susep) and National Agency for Supplementary Healthcare (ANS), and consider the financial statements of leasing companies based on the finance lease method, whereby leased fixed assets are reclassified to the leasing operations account, less the residual value paid in advance.

           
           

          Accordingly, for preparation purposes, intercompany investments, asset and liability account balances, revenue, expenses and unrealized profit were eliminated from these consolidated financial statements, as well as highlighting the net income and shareholders’ equity due to the minority shareholders. In the case of investments which are jointly controlled with other shareholders, asset, liability and income components were included in the consolidated financial statements in proportion to the interest in the capital stock of each investee. Goodwill determined on acquisition of investments in subsidiaries and jointly-controlled companies is presented under investments and intangible assets (Note 15a). The exchange variation arising from transactions of foreign branches and subsidiaries is presented in the income statement item together with changes in the value of derivative financial instruments, in order to eliminate the effect of these investment hedge instruments.

           
           

          The financial statements include estimates and assumptions, such as the calculation of the allowance for loan losses, estimates of the fair value of certain financial instruments, provision for contingencies, losses from impairment of securities classified as available-for-sale and held-to-maturity and non-financial assets, other provisions, the calculation of technical provisions for insurance, private pension plans and savings bonds and the determination of the useful life of specific assets. Actual results could differ from those established by these estimates and assumptions.

           
           

          Bradesco’s consolidated financial statements were approved by the Board of Directors on April 26, 2011.

           

               
            Bradesco  109 

           

           

             
          Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report   

           

           
          Notes to the Consolidated Financial Statements 

           

          We present below the main direct and indirect investees included in the Consolidated Financial Statements:

                   
            Activity Total ownership
          2011  2010 
          March 31   December 31 March 31 
          Financial Area - Brazil         
          Alvorada Cartões, Crédito, Financiamento e Investimento S.A.  Banking  100.00%  100.00%  100.00% 
          Banco Alvorada S.A. (1)  Banking  99.95%  99.95%  99.94% 
          Banco Bradesco Financiamentos S.A.  Banking  100.00%  100.00%  100.00% 
          Banco Bankpar S.A.  Banking  100.00%  100.00%  100.00% 
          Banco Bradesco BBI S.A.  Investment bank  98.35%  98.35%  98.35% 
          Banco Boavista Interatlântico S.A.  Banking  100.00%  100.00%  100.00% 
          Bankpar Arrendamento Mercantil S.A.  Leasing  100.00%  100.00%  100.00% 
          Banco Bradesco Cartões S.A.  Cards  100.00%  100.00%  100.00% 
          Bradesco Administradora de Consórcios Ltda.  Consortium management  100.00%  100.00%  100.00% 
          Bradesco Leasing S.A. Arrendamento Mercantil  Leasing  100.00%  100.00%  100.00% 
          Bradesco S.A. Corretora de Títulos e Valores Mobiliários  Brokerage  100.00%  100.00%  100.00% 
          BRAM - Bradesco Asset Management S.A. DTVM  Asset management  100.00%  100.00%  100.00% 
          Ágora Corretora de Títulos e Valores Mobiliários S.A.  Brokerage  100.00%  100.00%  100.00% 
          Banco Ibi S.A.  Cards  100.00%  100.00%  100.00% 
          Cielo S.A. (2) (3) (4)  Services  28.65%  28.65%  26.56% 
          Financial Area – abroad         
          Banco Bradesco Argentina S.A.  Banking  99.99%  99.99%  99.99% 
          Banco Bradesco Europa S.A. (6)  Banking  100.00%  100.00%  100.00% 
          Banco Bradesco S.A. Grand Cayman Branch (5)  Banking  100.00%  100.00%  100.00% 
          Banco Bradesco New York Branch  Banking  100.00%  100.00%  100.00% 
          Banco Bradesco S.A. Nassau Branch (9)  Banking  -  100.00%  100.00% 
          Bradesco Securities, Inc.  Brokerage  100.00%  100.00%  100.00% 
          Bradesco Securities, UK.  Brokerage  100.00%  100.00%  100.00% 
          Insurance, Private Pension Plans and Savings Bonds Area         
          Atlântica Capitalização S.A.  Savings bonds  100.00%  100.00%  100.00% 
          Bradesco Argentina de Seguros S.A.  Insurance  99.90%  99.90%  99.90% 
          Bradesco Auto/RE Companhia de Seguros  Insurance  100.00%  100.00%  100.00% 
          Bradesco Capitalização S.A.  Savings bonds  100.00%  100.00%  100.00% 
          Bradesco Saúde S.A.  Insurance/health  100.00%  100.00%  100.00% 
          Bradesco Dental S.A. (7)  Insurance/dental health  -  -  43.50% 
          Odontoprev S.A.  Insurance/dental health  43.50%  43.50%  43.50% 
          Bradesco Seguros S.A.  Insurance  100.00%  100.00%  100.00% 
          Bradesco Vida e Previdência S.A.  Private pension  plans/insurance 100.00%  100.00%  100.00% 
          Atlântica Companhia de Seguros  Insurance  100.00%  100.00%  100.00% 
          Other activities         
          Andorra Holdings S.A. (8)  Holding  100.00%  100.00%  54.01% 
          Bradseg Participações Ltda.  Holding  100.00%  100.00%  100.00% 
          Bradesco Corretora de Seguros Ltda.  Insurance brokerage  100.00%  100.00%  100.00% 
          Bradesplan Participações Ltda.  Holding  100.00%  100.00%  100.00% 
          Cia. Securitizadora de Créditos Financeiros Rubi  Credit acquisition  100.00%  100.00%  100.00% 
          Columbus Holdings S.A.  Holding  100.00%  100.00%  100.00% 
          Nova Paiol Participações Ltda.  Holding  100.00%  100.00%  100.00% 
          Scopus Tecnologia Ltda.  Information technology  100.00%  100.00%  100.00% 
          Tempo Serviços Ltda.  Services  100.00%  100.00%  100.00% 
          União Participações Ltda.  Holding  100.00%  100.00%  100.00% 

           

               
          110  Report on Economic and Financial Analysis – March 2011   

           

           

           
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          Notes to the Consolidated Financial Statements 

           

          (1) Increase in interest by the total subscription of the capital increase in May 2010;
          (2) Company proportionally consolidated, pursuant to CMN Resolution 2,723/00 and CVM Rule 247/96;
          (3) Increase in interest by partial acquisition in July 2010;
          (4) The special purpose entity Brazilian Merchant Voucher Receivables Limited is being consolidated. The company takes part in the securitization operation of the future flow of credit card bills receivables of clients domiciled abroad (Note 16d);
          (5) The special purpose entity International Diversified Payment Rights Company is being consolidated. The company takes part in the securitization operation of future flow of payment orders received from overseas (Note 16d);
          (6) Current name of Banco Bradesco Luxembourg S.A.;
          (7) Company merged by Odontoprev in July 2010;
          (8) Increase of interest by share acquisition in December 2010; and
          (9) Activities discontinued in January 2011 and operations were transferred to Banco Bradesco S.A. Grand Cayman Branch.

          3) SIGNIFICANT ACCOUNTING POLICIES

          a) Functional and Presentation Currencies

          Consolidated financial statements are presented in Reais, which is Bradesco’s functional currency. Operations of foreign branches and subsidiaries are mainly a continuation of activities in Brazil, and therefore, assets, liabilities and results are adjusted to comply with accounting practices adopted in Brazil and translated into Reais using the exchange rate of the applicable currency. Gains and losses arising from this translation process are reallocated in the period’s income to the item “Derivative Financial Instruments”.

          b) Determination of net income

          Net income is determined on the accrual basis of accounting, which establishes that income and expenses should be included in the determination of net income in the period to which they relate, always simultaneously when they are correlated, regardless of receipt or payment.

          Transactions with fixed rates are recorded at their redemption value and unearned income and unexpired expenses are recorded as a deduction from the corresponding assets and liabilities. Financial income and expenses are prorated daily and calculated based on the exponential method, except when relating to discounted notes or to foreign transactions which are calculated based on the straight-line method.

          Floating rate or foreign-currency-indexed transactions are adjusted to the balance sheet date.

          Insurance and coinsurance premiums accepted, net of premiums assigned in coinsurance and reinsurance, as well as corresponding commissions, are appropriated to income over the period of corresponding insurance policies and invoices and are deferred for appropriation on a straight-line basis, during the risk coverage period, by means of accrual and reversal of unearned premiums reserve and deferred selling expenses. Accepted coinsurance and retrocession operations are recorded based on the information received from other companies and reinsurance companies, respectively.

          Supplementary pension plan contributions and life insurance premiums with a survival clause are recognized in income as they are received.

          Revenue from savings bonds is recorded when effectively received, except for pre-printed bonds of fixed amount and lump-sum payment, which are recorded at the time of issue. The expenses for placement of bonds, classified as “Selling Expenses,” are recognized as they are incurred. Brokerage expenses are recorded when the respective savings bond contributions are effectively received. Redemptions and drawings are recorded simultaneously to the accounting for the corresponding revenues.

             
          Bradesco  111 

           

           

           
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          Notes to the Consolidated Financial Statements 

           

          Expenses with technical provisions for private pension plans and savings bonds are recorded at the same time as their corresponding revenues are recognized.

          c) Cash and cash equivalents

          Cash and Cash Equivalents are represented by: cash in domestic and foreign currency, investments in gold, open market investments and deposits in other banks, with maturities on the application date of 90 days or less and present an insignificant risk of change in fair value, used by the Bank to manage its short-term commitments.

          d) Interbank investments

          Purchase and sale commitments with unrestricted movement agreements are adjusted to market value. Other investments are recorded at acquisition cost, plus income earned up to the balance sheet date, net of loss accrual, when applicable.

          e) Securities – Classification:

          • Trading securities – securities acquired for the purpose of being actively and frequently traded. They are recorded at the acquisition cost, plus income earned and adjusted to market value against the income for the period;

          • Available-for-sale securities – securities that are not specifically intended for trading purposes or to be held to maturity. They are recorded at their acquisition cost, plus income earned against the income for the period and adjusted to market value against shareholders' equity, net of tax effects, which will be only recognized in the income when effectively realized; and

          • Held-to-maturity securities – securities for which there is intention and financial capacity to hold in the portfolio up to maturity. They are recorded at acquisition cost, plus earnings recognized against income for the period.

          Securities classified in the trading and available-for-sale categories, as well as derivative financial instruments, are stated at their estimated fair value in the consolidated balance sheet. The fair value is generally based on market prices or quotations for assets or liabilities with similar characteristics. If market prices are not available, fair values are based on traders’ quotations, pricing models, discounted cash flows or similar techniques for which the determination of fair value may require judgment or significant estimates by Management.

          f) Derivative financial instruments (assets and liabilities)

          Classified based on Management’s intended use thereof on the date of the contracting of the operation and whether it was carried out for hedging purposes or not.

          Operations involving derivative financial instruments are designed to meet the Bank’s own needs in order to manage overall exposure, as well as to meet customers’ requests for the management of their positions. Gains and losses are recorded in income or expenses accounts of the respective financial instruments.

          Derivative financial instruments used to mitigate risks deriving from exposure to variations in the market value of financial assets and liabilities are designated as hedges and are classified according to their nature as:

          • Market risk hedge: for financial instruments classified in this category as well as the hedge-related financial assets and liabilities, gains and losses, realized or not, are recorded in the income statement; and

           

             
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          Notes to the Consolidated Financial Statements 

           

          • Cash flow hedge: for financial instruments classified in this category, the effective valuation or devaluation portion is recorded, net of tax effects, in a specific account in shareholders’ equity. The non-effective portion of the respective hedge is directly recognized in the income statement.

          g) Loan and leasing operations, advances on foreign exchange contracts, other receivables with credit characteristics and allowance for loan losses

          Loan and leasing operations, advances on foreign exchange contracts and other receivables with credit characteristics are classified in their corresponding risk levels in compliance with: (i) the parameters established by CMN Resolution 2,682/99, at nine levels of risk from “AA” (minimum risk) to “H” (maximum risk); and (ii) Management’s assessment risk. 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. Moreover, the length of the delay in payment defined in CMN Resolution 2,682/99 is also taken into account for client risk rating purposes as follows:

             
          Past-due period (1)  Client rating 
          Ï from 15 to 30 days  B 
          Ï from 31 to 60 days  C 
          Ï from 61 to 90 days  D 
          Ï from 91 to 120 days  E 
          Ï from 121 to 150 days  F 
          Ï from 151 to 180 days  G 
          Ï more than 180 days  H 

           

          (1) For operations with unexpired term of over 36 months, the past-due periods are doubled, as allowed by CMN Resolution 2,682/99.

          The accrual of revenue from operations past due up to 59 days is recorded in income and subsequent to the 60th day, in unearned income, and it will only be recognized in income upon effective receipt.

          H-rated past-due operations remain at this level for six months, after which they are written-off against the existing allowance and controlled in memorandum accounts for at least five years.

          Renegotiated operations are maintained, at least, at the same classification as their prior rating. Renegotiations already charged-off against the allowance and which were recorded in memorandum accounts are rated as “H” level and any possible revenues derived from their renegotiation are recognized as revenue only when they are effectively received. When there is a significant payment on the operation or when new material facts justify a change in risk level, the operation may be reclassified to a lower risk category.

          The allowance for loan losses is calculated at an amount sufficient to cover probable losses and takes into consideration CMN and Bacen rules and instructions, together with assessments carried out by the Management, in the determination of credit risk.

          h) Income tax and social contribution (assets and liabilities)

          Income tax and social contribution credits, calculated on tax losses, negative basis of social contribution and temporary additions are recorded in “Other Receivables - Sundry” and the provisions for deferred tax liabilities on tax difference in leasing depreciation and mark-to-market

             
          Bradesco  113 

           

           

           
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          Notes to the Consolidated Financial Statements 

           

          adjustments of securities is recorded in “Other Liabilities – Tax and Social Security”. Only income tax rate is applied on tax difference in leasing depreciation.

          Tax credits on temporary additions will be realized upon use and/or reversal of the corresponding provisions to which they refer. Tax credits on tax losses and negative basis of social contribution will be realized as taxable income is generated, considering the 30% limit of the taxable profit of the reference period. Such tax credits are recorded based on current expectations for realization, taking into account the technical studies and analyses carried out by Management.

          The provision for income tax is recorded at a base rate of 15% of taxable income, plus a 10% surcharge. Social contribution on net income is calculated at a 15% rate for financial institutions and insurance companies and at 9% for other companies.

          Tax credits brought forward from previous periods prior to the legislation that increased the social contribution rate to 15% for financial and insurance companies, were recorded up to the limit of the corresponding consolidated tax liabilities (Note 34).

          Provisions were recorded for other income and social contribution taxes in accordance with specific applicable legislation.

          Pursuant to Law 11,941/09, changes in the determination criteria for income, costs and expenses included in the net income for the period, enacted by Law 11,638/07 and by Articles 37 and 38 of Law 11,941/09, shall not have effect on taxable income, and, for tax purposes, accounting methods and criteria in force on December 31, 2007 will be considered. For accounting purposes, the tax effects of adopting the laws abovementioned are recorded in the corresponding deferred tax assets and liabilities.

          i) Prepaid expenses

          Prepaid expenses are payments for future benefits or services, which are registered in the income according to the accrual method of accounting.

          This group is basically represented by: (i) commissions paid to resellers in vehicle financing; (ii) commissions paid to insurance brokers; and (iii) advance payments of advertising and marketing expenses (Note 12b).

          j) Investments

          Investments in subsidiaries, jointly-controlled companies and affiliates, with significant influence over the investee or ownership of 20% or more in voting capital, are evaluated by the equity accounting method.

          Tax incentives and other investments are assessed at acquisition cost, net of the provision for impairment, when applicable.

          k) Fixed assets

          Correspond to tangible assets used in the Bank’s activities or acquired for this purpose, including those deriving from operations which transfer risks, benefits and controls of the assets.

          Fixed assets are stated at acquisition cost, net of the respective accumulated depreciations, calculated on the straight-line method according to the estimated economic useful life of assets, being: premises – 4% p.a.; furniture and fixtures, machinery and equipment – 10% p.a.; transport

             
          114 Report on Economic and Financial Analysis – March 2011 

           

           

           
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          Notes to the Consolidated Financial Statements 

           

          systems – 20% p.a.; and data processing systems – 20% to 50% p.a. and restated by impairment, when applicable.

          l) Intangible assets

          Intangible assets are intangible rights acquired for business activities or exercised with that purpose.

          Intangible assets comprise:

          • Future profitability/client portfolio acquired and acquisition of the right to provide banking services;

          These are recorded and amortized, when applicable, over the period in which the asset will directly and indirectly contribute to the future cash flow and adjusted by impairment, when applicable; and

          • Software

          Software is recorded at cost less amortization on the straight-line method during the estimated useful life (20% to 50% p.a.), as of the date it is available for use and adjusted by impairment, when applicable. Internal software development expenses are recognized as assets when it is possible to demonstrate the intention and ability to complete such development, as well as reliably measuring costs directly attributable to the software, which will be amortized during its estimated useful life, considering the future economic benefits generated.

          m) Asset impairment

          Securities classified as available-for-sale and held-to-maturity, as well as non-financial assets, except other assets and tax credits, are tested, at least annually, for impairment, and if loss is reported, it must be recognized in the income statement for the period when the book value of an asset exceeds its recoverable value (calculated by: (i) the potential sale value or realization value less the respective expenses or (ii) the value in use calculated by the cash-generating unit, whichever the highest).

          A cash generating unit is the smallest identifiable group of assets that generates cash flows materially independent from other assets and groups.

          n) Deposits and federal funds purchased and securities sold under agreements to repurchase

          These are recorded at the amount of the liabilities and include, when applicable, related charges up to the balance sheet date, on a daily prorated basis.

          o) Technical provisions related to insurance, private pension plans and savings bonds activities

          Technical provisions are calculated according to actuarial technical notes as set forth by Susep and ANS, and criteria set forth by CNSP Resolutions 162/06, 181/07, 195/08 and 204/09.

          • Basic, life and health insurance lines:

          - Unearned Premiums Provision (PPNG) comprises retained premiums (except reinsurance assignment, once according to CNSP Resolution 195/08, as of 2009, insurance companies should not deduct the amounts transferred to third parties through reinsurance operations from the calculation of provisions) which are deferred during the term of effectiveness of the insurance policies, determining the daily prorated value of the unearned premium of the

             
          Bradesco  115 

           

           

           
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          Notes to the Consolidated Financial Statements 

           

          unexpired risk period (future risk of policies in effect). According to Resolution 206/09, ANS eliminated PPNG for private healthcare companies and insurance companies, effective as of January 2010. It also established the accounting of “pro-rata temporis” earned premiums against the full reversal of provision;

          - The provision for claims incurred but not reported (IBNR) is calculated on an actuarial basis to quantify the amount of claims occurred and not reported by policyholders/beneficiaries.
          Pursuant to CNSP Resolution 195/08, as of 2009, insurance companies cannot deduct the amounts transferred to third parties through reinsurance operations from calculation of provisions;

          - The provision for unsettled claims is recorded based on indemnity estimates for notices of claims received from policyholders/beneficiaries up to the balance sheet date. The provision is monetarily restated and includes all claims under litigation. In the case of health insurance, according to the technical note approved by ANS, the provision for unsettled claims comprises litigations and complements to IBNR provision;

          - The supplementary premium provision (PCP) is recorded on a monthly basis to complement the PPNG and includes estimates for the risks in effect but not issued (RVNE);

          - The provision for insufficient premiums is recorded when there is insufficiency of the unearned premium provision to cover incurred claims, considering expected indemnities and related expenses, throughout periods to be incurred related to risks in effect on the reference date of calculation;

          - Other technical provisions refer to the provision for future readjustments of premiums and those required for the technical balance of the individual health plan portfolio, adopting a method included in the actuarial technical note approved by ANS. For basic lines, this provision refers to premiums of extended warranty for products whose manufacturer’s guarantee has not ended;

          - The provision for benefits to be granted, of the individual health plan portfolio, refers to a 5-year coverage for dependents if the policyholder is deceased, adopting a formulation included in the actuarial technical note approved by ANS; and

          - The provision for benefits granted of the individual health plan portfolio comprises liabilities arising from payment release contractual clauses referring to health plan coverage, and its accounting complies with Resolution - RN 75/04 of ANS, and premiums for the payment release of Bradesco Saúde policyholders -“Plano GBS”.

          • Supplementary private pension plans and life insurance covering survival:

          - The mathematical provision for benefits to be granted refers to participants whose benefits have yet to begin. In private pension plans known as “traditional”, the provision represents the difference between the current value of future benefits and the current value of future contributions, corresponding to obligations assumed under retirement, disability, pension and regular income plans. The provision is calculated using methodologies and premises set forth in the Actuarial Technical Notes;

          - Mathematical provisions of benefits to be granted pegged to life insurance and unrestricted benefit generating private pension plans (VGBL and PGBL) represent the amount of contributions made by participants, net of carrying costs and other contractual charges, plus financial earnings generated by investments in fund quotas in Exclusive Investment Funds (FIEs);

             
          116 Report on Economic and Financial Analysis – March 2011 

           

           

           
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          Notes to the Consolidated Financial Statements 

           

          - The mathematical provision for benefits granted refers to participants already using the benefits and corresponds to the present value of future obligations related to the payment of ongoing benefits;

          - The contribution insufficiency provision (PIC) is recorded for an eventual unfavorable fluctuation in technical risks taken in the mathematical provision for benefits to be granted, in the mathematical provision for benefits granted, considering that the participants are likely to have a higher survival rate. In plans covering survival, the provision is calculated on an actuarial basis and takes into consideration the actuarial tables AT-2000 Male (normalized) for males and AT-2000 Female (normalized) for females, with improvement of 1.5% p.a. and actual interest rate of 4% p.a. In disability plans covering survival risks, the provision takes into consideration the biometric AT-49 Male table and real interest rate of 4% p.a. Improvement is a technique that automatically updates the survival table, considering the expected increase in future survival rates;

          - The financial fluctuation provision is recorded up to a limit of 15% of the mathematical provision for benefits to be granted related to private pension plans in the category of variable contribution with guarantee of earnings to cover possible financial fluctuations. The real interest rate of 4% p.a. is used to calculate this provision;

          - The provision for administrative expenses is recorded to cover administrative expenses of defined benefit and variable contribution plans, and it is calculated in conformity with the methodology set forth in the actuarial technical note; and

          - The financial excess provision corresponds to the portion of financial revenue from the investment of provisions that exceeds the minimum returns from private pension plans that have a financial excess participation clause.

          • Savings bonds:

          - The mathematical provision for redemptions is recorded for each active or suspended savings bond during the estimated term set forth in the general conditions of the plan, and it is calculated according to the methodology set forth in the actuarial technical notes approved by Susep;

          - The provisions for redemptions are established for the expired savings bonds and unexpired plans where early redemption has been required by the customer. The provisions are monetarily restated based on the indexes determined in each plan;

          - The provisions for unrealized and payable drawings are recorded to cover prizes in future drawings (unrealized) and also for prizes in drawings where customers have already been selected (payable);

          - The provision for contingencies is recorded to cover possible insufficiencies related to payments of redemptions required and/or premiums from drawings; and

          - The provision for administrative expenses is recorded to cover the plan’s disclosure and selling expenses, brokerage and other expenses. The provision complies with the methodology set forth in an Actuarial Technical Note.

             
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          Notes to the Consolidated Financial Statements 

           

          p) Contingent assets and liabilities and legal liabilities – tax and social security

          The recognition, measurement and disclosure of contingent assets and liabilities and legal liabilities is in accordance with the criteria defined in CMN Resolution 3,823/09 and CVM Resolution 594/09:

          • Contingent Assets: are not recognized in the financial statements, except when Management has control over the situation or when there are real guarantees or favorable judicial decisions, to which no further appeals are applicable, characterizing the gain as practically certain and confirmed expectations of receipt or compensation with another liability. Contingent assets with probable chances of success are disclosed in the notes to the financial statements (Note 18a);

          • Contingent Liabilities: are recorded taking into consideration the opinion of legal advisors, the nature of the lawsuits, similarity with previous processes, complexity and positioning of the courts, whenever the loss is evaluated as probable, which would cause a probable outflow of funds for the settlement of liabilities and when the amounts involved are measurable with sufficient reliability. Contingent liabilities classified as possible losses are not recognized in the financial statements, and they must only be disclosed in the notes, when individually material, and those classified as remote do not require provision nor disclosure (Notes 18b and 18c); and

          • Legal Liabilities – Provision for Tax Risks: result from judicial proceedings, being contested on the grounds of legality or constitutionality, which, regardless of the assessment of the probability of success, are fully recognized in the financial statements (note 18b).

          q) Funding expenses

          Expenses related to funding transactions involving the issue of securities are presented as reduction of the liability and are allocated to income over the term of the transaction.

          r) Other assets and liabilities

          Assets are stated at their realizable amounts, including, when applicable, related income and monetary and exchange variations (on a daily prorated basis), and less provision for losses, when deemed appropriate. Liabilities comprise known or measurable amounts, including related charges and monetary and exchange variations (on a daily prorated basis).

          4) INFORMATION FOR COMPARISON PURPOSES

          The balances of March 31, 2010 were reclassified to make easier the comparison with the financial statements of March 31, 2011. Said reclassification refers to R$37,235 thousand reclassified from other investments to interest in domestic affiliates.

             
          118 Report on Economic and Financial Analysis – March 2011 

           

           

           
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          Notes to the Consolidated Financial Statements 

           

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

          a) Balance sheet

                         
            R$ thousand 
            Financial (1) (2)  Insurance group (2) (3)  Other activities  Eliminations  Total 
            Brazil  Abroad  Brazil  Abroad  (2)  (4)  consolidated 
          Assets               
          Current and long-term assets  530,815,375  51,784,971  106,218,422  9,093  1,022,600  (26,251,507)  663,598,954 
          Cash and cash equivalents  5,852,275  900,331  183,938  7,743  8,213  (167,419)  6,785,081 
          Interbank investments  99,128,710  1,030,659  -  -  -  -  100,159,369 
          Securities and derivative financial instruments  111,156,223  6,965,951  99,401,949  35  592,288  (634,845)  217,481,601 
          Interbank and interdepartmental accounts  67,291,466  -  -  -  -  -  67,291,466 
          Loan and leasing operations  187,132,456  42,343,329  -  -  -  (23,197,297)  206,278,488 
          Other receivables and other assets  60,254,245  544,701  6,632,535  1,315  422,099  (2,251,946)  65,602,949 
          Permanent assets  39,295,630  68,403  2,477,160  148  229,369  (30,283,052)  11,787,658 
          Investments  30,251,144  38,362  1,519,086  128  149,020  (30,283,052)  1,674,688 
          Premises and equipment and leased assets  3,273,486  8,936  324,600  20  58,728  -  3,665,770 
          Intangible assets  5,771,000  21,105  633,474  -  21,621  -  6,447,200 
          Total on March 31, 2011  570,111,005  51,853,374  108,695,582  9,241  1,251,969  (56,534,559)  675,386,612 
          Total on December 31, 2010  536,574,702  44,485,862  104,998,085  9,701  1,243,742  (49,827,362)  637,484,730 
          Total on March 31, 2010  441,407,170  35,131,765  94,657,270  11,372  1,215,850  (39,797,367)  532,626,060 
                         
          Liabilities               
          Current and long-term liabilities  518,245,994  34,592,590  96,067,548  1,366  412,558  (26,251,507)  623,068,549 
          Deposits  190,988,239  13,003,361  -  -  -  (169,161)  203,822,439 
          Federal funds purchased and securities sold under agreements to repurchase  174,384,694  4,604,087  -  -  -  -  178,988,781 
          Funds from issuance of securities  17,405,895  5,109,271  -  -  -  (814,167)  21,700,999 
          Interbank and interdepartmental accounts  2,646,614  521  -  -  -  -  2,647,135 
          Borrowing and onlending  58,890,927  5,626,971  -  -  -  (23,017,260)  41,500,638 
          Derivative financial instruments  2,198,901  158,796  -  -  -  -  2,357,697 
          Technical provisions from insurance, private pension plans and savings bonds  -  -  89,978,383  1,152  -  -  89,979,535 
          Other liabilities:               
          - Subordinated debts  18,610,487  5,797,662  -  -  -  -  24,408,149 
          - Other  53,120,237  291,921  6,089,165  214  412,558  (2,250,919)  57,663,176 
          Deferred income  447,122  -  -  -  -  -  447,122 
          Shareholders’ equity/minority interest in subsidiaries  120,926  17,260,784  12,628,034  7,875  839,411  (30,283,052)  573,978 
          Shareholders’ equity - parent company  51,296,963  -  -  -  -  -  51,296,963 
          Total on March 31, 2011  570,111,005  51,853,374  108,695,582  9,241  1,251,969  (56,534,559)  675,386,612 
          Total on December 31, 2010  536,574,702  44,485,862  104,998,085  9,701  1,243,742  (49,827,362)  637,484,730 
          Total on March 31, 2010  441,407,170  35,131,765  94,657,270  11,372  1,215,850  (39,797,367)  532,626,060 

           

             
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          Notes to the Consolidated Financial Statements 

           

          b) Statement of income

                         
            R$ thousand 
            Financial (1) (2)  Insurance group (2) (3)  Other activities  Eliminations  Total 
            Brazil  Abroad  Brazil  Abroad  (2)  (4)  consolidated 
          Revenues from financial intermediation  18,085,838  136,707  2,725,386  -  15,414  (43,730)  20,919,615 
          Expenses from financial intermediation  11,469,489  194,954  1,703,001  -  -  (43,786)  13,323,658 
          Gross income from financial intermediation  6,616,349  (58,247)  1,022,385  -  15,414  56  7,595,957 
          Other operating income/expenses  (3,655,052)  (16,705)  189,115  (45)  15,788  (56)  (3,466,955) 
          Operating income  2,961,297  (74,952)  1,211,500  (45)  31,202  -  4,129,002 
          Non-operating income  (47,703)  1,584  (9,038)  -  (365)  -  (55,522) 
          Income before taxes and minority interest  2,913,594  (73,368)  1,202,462  (45)  30,837  -  4,073,480 
          Income tax and social contribution  (918,617)  (113)  (370,270)  (9)  (8,768)  -  (1,297,777) 
          Minority interest in subsidiaries  (1,726)  (856)  (70,971)  -  (111)  -  (73,664) 
          Net income for 1Q11  1,993,251  (74,337)  761,221  (54)  21,958  -  2,702,039 
          Net income for 4Q10  2,108,884  9,488  793,325  (129)  75,177  -  2,986,745 
          Net income for 1Q10  1,018,168  340,857  704,088  (649)  40,242  -  2,102,706 

           

          (1) The “Financial” segment comprises: financial institutions; holding companies (which are mainly responsible for managing financial resources); as well as credit card and asset management companies;
          (2) The balances of equity accounts, income and expenses among companies from the same segment are being eliminated;
          (3) The “Insurance Group” segment comprises insurance, private pension plans and savings bonds companies; and
          (4)           Amounts eliminated among companies from different segments, as well as operations carried out in Brazil and abroad.

          6) CASH AND CASH EQUIVALENTS

                 
            R$ thousand 
            2011  2010
            March 31  December 31  March 31 
          Funds available in domestic currency  5,753,099  13,915,216  5,209,507 
          Funds available in foreign currency  1,031,900  1,822,578  3,495,086 
          Investments in gold  82  86  72 
          Total cash and due from banks  6,785,081  15,737,880  8,704,665 
          Short-term interbank investments (1)  50,056,214  20,502,502  63,200,632 
          Total cash and cash equivalents  56,841,295  36,240,382  71,905,297 

           

          (1) Refer to operations with maturities on the application date of 90 days or less and with insignificant risk of change in fair value.

             
          120 Report on Economic and Financial Analysis – March 2011 

           

           

           
          Financial Statements, Independent Auditors’ Report, and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 
           

           

          7) INTERBANK INVESTMENTS

          a) Breakdown and maturities

                         
              R$ thousand 
          2011 2010 
          1 to 30 days  31 to 180 days  181 to 360 days  More than 360 days   March 31 December 31  March 31 
          Investments in the open               
          market:               
          Own portfolio position  1,073,338  33,060,407  -  -  34,133,745  14,147,497  22,412,057 
          • Financial treasury bills  964,161  -  -  -  964,161  649,198  1,708,637 
          • National treasury notes  -  21,082,900  -  -  21,082,900  8,846,357  14,994,979 
          • National treasury bills  -  11,977,507  -  -  11,977,507  4,496,381  5,629,507 
          • Other  109,177  -  -  -  109,177  155,561  78,934 
          Funded position  47,608,079  3,377,065  -  -  50,985,144  44,168,250  66,702,272 
          • Financial treasury bills  25,982,423  -  -  -  25,982,423  17,585,733  27,144,804 
          • National treasury notes  3,494,078  3,363,868  -  -  6,857,946  20,171,071  28,858,137 
          • National treasury bills  18,131,578  13,197  -  -  18,144,775  6,411,446  10,699,331 
          Short position  -  7,352,198  -  -  7,352,198  7,862,955  806,409 
          • National treasury bills  -  7,352,198  -  -  7,352,198  7,862,955  806,409 
          Subtotal  48,681,417  43,789,670  -  -  92,471,087  66,178,702  89,920,738 
          Deposits in other banks:               
          • Deposits in other banks  3,318,354  1,254,253  1,478,269  1,643,153  7,694,029  7,054,718  7,244,017 
          • Provisions for losses  (677)  (129)  (4,941)  -  (5,747)  (1,386)  (243) 
          Subtotal  3,317,677  1,254,124  1,473,328  1,643,153  7,688,282  7,053,332  7,243,774 
          Total on March 31, 2011  51,999,094  45,043,794  1,473,328  1,643,153  100,159,369     
          %  51.9  45.0  1.5  1.6  100.0     
          Total on December 31, 2010  27,575,524  43,290,926  1,075,470  1,290,114    73,232,034   
          %  37.6  59.1  1.5  1.8    100.0   
          Total March 31, 2010  69,866,286  25,192,495  1,202,075  903,656      97,164,512 
          %  72.0  25.9  1.2  0.9      100.0 

           

          b) Income from interbank investments

          Classified in the statement of income as income on securities transactions

                 
            R$ thousand 
          2011  2010
          1st Quarter  4th Quarter  1st Quarter 
          Income from investments in purchase and sale commitments:       
          Own portfolio position  705,497  804,575  592,398 
          Funded position  1,255,602  1,139,800  1,442,604 
          Short position  274,876  206,148  58,768 
          Subtotal  2,235,975  2,150,523  2,093,770 
          Income from interest-earning deposits in other banks  143,937  136,802  167,388 
          Total (Note 8h)  2,379,912  2,287,325  2,261,158 

           

             
          Bradesco  121 

           

           

           
          Financial Statements, Independent Auditors’ Report, and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

          8) SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS

          Information on securities and derivative financial instruments is as follows:

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

                               
            R$ thousand 
          2011  2010 
           Financial  Insurance/ Savings bonds  Private pension plans  Other activities   March 31 %  December 31  %   March 31  %
          Trading securities  68,530,426  2,485,574  25,371,060  337,311  96,724,371  54.8  107,796,082  59.0  77,371,885  59.0 
          - Government securities  41,614,897  847,420  283,938  295,266  43,041,521  24.4  48,208,884  26.4  24,737,793  18.9 
          - Corporate bonds  23,659,361  1,638,154  612,060  42,045  25,951,620  14.7  26,237,150  14.3  19,366,674  14.8 
          - Derivative financial instruments (1)  3,256,168  -  -  -  3,256,168  1.8  1,610,385  0.9  3,051,520  2.3 
          - PGBL / VGBL restricted bonds  -  -  24,475,062  -  24,475,062  13.9  31,739,663  17.4  30,215,898  23.0 
          Available-for-sale securities  46,174,910  1,647,740  1,835,439  179,968  49,838,057  28.2  45,379,185  24.8  26,193,843  19.9 
          - Government securities  35,000,294  18,435  75,168  1,805  35,095,702  19.8  33,552,639  18.3  16,546,090  12.6 
          - Corporate bonds  11,174,616  1,629,305  1,760,271  178,163  14,742,355  8.4  11,826,546  6.5  9,647,753  7.3 
          Held-to-maturity securities (4)  784,486  7,754,184  21,418,608  -  29,957,278  17.0  29,491,996  16.2  27,678,618  21.1 
          - Government securities  784,486  7,725,923  20,954,755  -  29,465,164  16.7  29,021,428  15.9  26,973,494  20.6 
          - Corporate bonds  -  28,261  463,853  -  492,114  0.3  470,568  0.3  705,124  0.5 
          Subtotal  115,489,822  11,887,498  48,625,107  517,279  176,519,706  100.0  182,667,263  100.0  131,244,346  100.0 
          Purchase and sale commitments (2)  1,996,744  4,653,451  34,235,927  75,773  40,961,895    30,850,727    26,064,243   
          Overall total  117,486,566  16,540,949  82,861,034  593,052  217,481,601    213,517,990    157,308,589   
          - Government securities  77,399,677  8,591,778  21,313,861  297,071  107,602,387  60.9  110,782,951  60.6  68,257,377  52.0 
          - Corporate bonds  38,090,145  3,295,720  2,836,184  220,208  44,442,257  25.2  40,144,649  22.0  32,771,071  25.0 
          - PGBL / VGBL restricted bonds  -  -  24,475,062  -  24,475,062  13.9  31,739,663  17.4  30,215,898  23.0 
          Subtotal  115,489,822  11,887,498  48,625,107  517,279  176,519,706  100.0  182,667,263  100.0  131,244,346  100.0 
          Purchase and sale commitments (2)  1,996,744  4,653,451  34,235,927  75,773  40,961,895    30,850,727    26,064,243   
          Overall total  117,486,566  16,540,949  82,861,034  593,052  217,481,601    213,517,990    157,308,589   

           

             
          122 Report on Economic and Financial Analysis – March 2011 

           

           

           
          Financial Statements, Independent Auditors’ Report, and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

          b) Breakdown of consolidated portfolio by issuer

                                 
          Securities (3) R$ thousand 
          2011 2010 
          March 31 December 31 March 31
           1 to 30 days  31 to 180 days 181 to 360 days  More than 360 days   Market/ book value (5) (6) (7)   Restated cost   Mark-to- market Market/ book value (5) (6) (7)  Mark-to- market   Market/ book value (5) (6) (7)  Mark-to-market  
          Government securities  712,149  4,827,632  21,082,132  80,980,474  107,602,387  107,968,105  (365,718)  110,782,951  (143,380)  68,257,377  275,403 
          Financial treasury bills  61,145  1,079,066  809,133  6,016,681  7,966,025  8,000,821  (34,796)  8,687,908  (12,395)  18,766,041  (5,573) 
          National treasury bills  64,424  1,277,758  851  32,107,677  33,450,710  33,656,752  (206,042)  34,924,429  (159,657)  7,570,114  (6,449) 
          National treasury notes  361,861  2,450,569  19,771,031  41,788,677  64,372,138  64,572,188  (200,050)  65,432,103  (53,936)  39,455,991  603 
          Brazilian foreign debt notes  29,599  403  498,730  974,364  1,503,096  1,441,875  61,221  1,564,616  69,128  2,001,402  273,811 
          Privatization currencies  -  -  -  85,456  85,456  71,688  13,768  87,658  13,807  92,156  14,685 
          Foreign government securities  195,120  14,154  -  47  209,321  209,327  (6)  71,004  4  351,044  (2,127) 
          Other  -  5,682  2,387  7,572  15,641  15,454  187  15,233  (331)  20,629  453 
          Corporate bonds  12,514,477  2,815,056  3,585,619  25,527,105  44,442,257  44,634,351  (192,094)  40,144,649  (161,745)  32,771,071  461,490 
          Bank deposit certificates  130,506  376,989  36,949  1,152,043  1,696,487  1,696,487  -  1,724,058  -  1,083,111  - 
          Shares  4,131,190  -  -  -  4,131,190  4,518,238  (387,048)  4,097,694  (380,098)  4,332,237  141,598 
          Debentures  2,303  113,912  2,321,051  15,731,037  18,168,303  18,147,434  20,869  16,869,721  40,810  10,592,043  130,009 
          Promissory notes  28,670  1,881,954  -  -  1,910,624  1,913,247  (2,623)  2,863,436  (4,114)  2,995,343  (635) 
          Foreign corporate bonds  60,625  -  1,674  3,695,424  3,757,723  3,660,167  97,556  2,928,013  91,431  2,912,148  110,288 
          Derivative financial instruments (1)  1,873,780  236,163  1,045,616  100,609  3,256,168  3,193,481  62,687  1,610,385  78,556  3,051,520  62,995 
          Other  6,287,403  206,038  180,329  4,847,992  11,521,762  11,505,297  16,465  10,051,342  11,670  7,804,669  17,235 
          PGBL / VGBL restricted bonds  3,385,166  2,903,738  2,097,633  16,088,525  24,475,062  24,475,062  -  31,739,663  -  30,215,898  - 
          Subtotal  16,611,792  10,546,426  26,765,384  122,596,104  176,519,706  177,077,518  (557,812)  182,667,263  (305,125)  131,244,346  736,893 
          Purchase and sale commitments (2)  39,562,714  1,322,542  75,244  1,395  40,961,895  40,961,895  -  30,850,727  -  26,064,243  - 
          Hedge – cash flow (Note 8g)  -  -  -  -  -  -  453,835  -  314,016  -  67,030 
          Overall total  56,174,506  11,868,968  26,840,628  122,597,499  217,481,601  218,039,413  (103,977)  213,517,990  8,891  157,308,589  803,923 

           

             
          Bradesco  123 

           

           

           
          Financial Statements, Independent Auditors’ Report, and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

          c) Consolidated classification by category, maturity and business segment

          I) Trading securities

                                 
          Securities (3)  R$ thousand 
          2011  2010 
          March 31  December 31  March 31 
           1 to 30 days   31 to 180 days   181 to 360 days   More than 360 days  Market/ book value (5) (6) (7)   Restated cost   Mark-to- market  Market/ book value (5) (6) (7)   Mark-to- market  Market/ book value (5) (6) (7)   Mark-to- market 
          - Financial  6,801,509  6,380,213  6,993,258  48,355,448  68,530,428  68,681,685  (151,257)  72,442,708  (15,907)  43,996,110  238,864 
          National treasury bills  22,865  1,274,276  845  21,365,854  22,663,840  22,788,154  (124,314)  24,983,122  (113,253)  1,598,836  31 
          Financial treasury bills  61,145  490,243  653,096  5,113,657  6,318,141  6,350,778  (32,637)  7,078,843  (11,528)  16,399,645  (5,622) 
          Bank deposit certificates  112,818  105,526  1,218  5,087  224,649  224,649  -  301,116  -  770,518  - 
          Derivative financial instruments (1)  1,873,780  236,163  1,045,616  100,609  3,256,168  3,193,481  62,687  1,610,385  78,556  3,051,520  62,995 
          Debentures  2,257  75,196  2,320,894  14,241,731  16,640,078  16,622,624  17,454  15,437,177  36,475  8,829,128  123,856 
          Promissory notes  58  1,881,954  -  -  1,882,012  1,884,635  (2,623)  2,835,423  (4,114)  2,995,168  (635) 
          Brazilian foreign debt notes  713  -  -  17,591  18,304  16,883  1,421  29,714  1,648  33,021  31,984 
          National treasury notes  -  2,294,026  2,968,851  7,129,308  12,392,185  12,466,457  (74,272)  14,534,892  (6,079)  4,896,571  27,240 
          Foreign corporate securities  587  -  1,615  44,099  46,301  45,246  1,055  36,800  1,242  620,986  4,330 
          Foreign government securities  195,120  14,154  -  47  209,321  209,327  (6)  71,004  4  201,426  (425) 
          Shares  80,660  -  -  -  80,660  80,483  177  155,552  1,470  74,218  (1,650) 
          Other  4,451,506  8,675  1,123  337,465  4,798,769  4,798,968  (199)  5,368,680  (328)  4,525,073  (3,240) 
          - Insurance companies and savings bonds  1,031,596  668,753  93,613  691,614  2,485,576  2,485,576  -  2,509,609  -  2,395,723  - 
          Financial treasury bills  -  320,288  93,613  310,531  724,432  724,432  -  683,752  -  1,018,429  - 
          National treasury bills  -  673  -  15,709  16,382  16,382  -  34,015  -  57,059  - 
          Bank deposit certificates  -  268,757  -  183,532  452,289  452,289  -  456,750  -  81,819  - 
          National treasury notes  -  940  -  105,666  106,606  106,606  -  192,936  -  6,686  - 
          Shares  4,182  -  -  -  4,182  4,182  -  3,433  -  32,986  - 
          Debentures  -  -  -  9,053  9,053  9,053  -  9,079  -  5,179  - 
          Foreign private bonds  5,214  -  -  -  5,214  5,214  -  5,371  -  5,208  - 
          Other  1,022,200  78,095  -  67,123  1,167,418  1,167,418  -  1,124,273  -  1,188,357  - 

           

             
          124 Report on Economic and Financial Analysis – March 2011 

           

           

           
          Financial Statements, Independent Auditors’ Report, and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

                                 
          Securities (3) R$ thousand
          2011 2010
          March 31 December 31 March 31
          1 to 30 days  31 to 180days  181 to 360 days  More than 360 days  Market/book value (5) (6) (7) Restated cost  Mark-to-market  Market/book value (5) (6) (7) Mark-to-market  Market/book value(5) (6) (7)  Mark-to-market 
          - Private pension plans  3,923,672  3,109,188  2,103,007  16,235,192  25,371,059  25,370,972  87  32,506,231  321  30,655,515  170 
          Financial treasury bills  -  205,450  5,374  152  210,976  210,976  -  205,539  -  199,005  - 
          National treasury notes  -  -  -  59,283  59,283  59,196  87  63,254  321  12,186  170 
          National treasury bills  -  -  -  13,678  13,678  13,678  -  23,624  -  9,556  - 
          Shares  1,109  -  -  -  1,109  1,109  -  1,244  -  2,745  - 
          PGBL / VGBL restricted bonds  3,385,166  2,903,738  2,097,633  16,088,525  24,475,062  24,475,062  -  31,739,663  -  30,215,898  - 
          Other  537,397  -  -  73,554  610,951  610,951  -  472,907  -  216,125  - 
          - Other activities  49,578  39,647  34,851  213,233  337,309  337,289  20  337,534  -  324,537  - 
          Financial treasury bills  -  24,197  33,974  190,140  248,311  248,291  20  253,020  -  274,871  - 
          Bank deposit certificates  1,957  2,707  -  1,448  6,112  6,112  -  12,889  -  20,951  - 
          National treasury bills  41,559  2,809  -  -  44,368  44,368  -  38,507  -  4,419  - 
          Debentures  -  7,240  156  2,593  9,989  9,989  -  8,782  -  14,737  - 
          National treasury notes  -  -  -  2,586  2,586  2,586  -  3,956  -  7,985  - 
          Other  6,062  2,694  721  16,466  25,943  25,943  -  20,380  -  1,574  - 
          Subtotal  11,806,355  10,197,801  9,224,729  65,495,487  96,724,372  96,875,522  (151,150)  107,796,082  (15,586)  77,371,885  239,034 
          Purchase and sale commitments (2)  39,562,714  1,322,542  75,244  1,395  40,961,895  40,961,895  -  30,850,727  -  26,064,243  - 
          - Financial  2,023,733  46,512  877  1,395  2,072,517  2,072,517  -  1,738,036  -  2,716,146  - 
          - Insurance companies and savings bonds  4,652,642  809  -  -  4,653,451  4,653,451  -  4,468,877  -  4,828,984  - 
          - Private pension plans  32,886,339  1,275,221  74,367  -  34,235,927  34,235,927  -  24,643,814  -  18,519,113  - 
          - PGBL/VGBL  31,344,655  1,275,221  74,367  -  32,694,243  32,694,243  -  23,831,270  -  18,159,236  - 
          - Funds  1,541,684  -  -  -  1,541,684  1,541,684  -  812,544  -  359,877  - 
          Overall total  51,369,069  11,520,343  9,299,973  65,496,882  137,686,267  137,837,417  (151,150)  138,646,809  (15,586)  103,436,128  239,034 
          Derivative financial instruments (liabilities)  (1,898,599)  (174,470)  (115,973)  (168,655)  (2,357,697)  (2,375,036)  17,339  (729,700)  (9,413)  (2,468,739)  5,066 

           

             
          Bradesco  125 

           

           

           
          Financial Statements, Independent Auditors’ Report, and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

          II) Available -for-sale securities

                                 
          Securities (3) (8) R$ thousand 
          2011  2010 
          March 31  December 31  March 31 
          1 to 30 days  31 to 180 days  181 to 360 days  More than 360 days   Market/book value (5) (6) (7)  Restated cost  Mark-to-market  Market/book value (5) (6) (7)  Mark-to-market   Market/book value (5) (6) (7)  Mark-to-market 
          - Financial  1,157,874  306,101  16,986,133  27,724,801  46,174,909  46,279,820  (104,911)  41,563,031  8,796  22,592,707  415,620 
          National treasury bills  -  -  6  10,712,436  10,712,442  10,794,170  (81,728)  9,845,161  (46,404)  5,900,244  (6,480) 
          Brazilian foreign debt securities  9,267  403  -  690,637  700,307  640,507  59,800  720,031  67,480  1,106,553  241,828 
          Foreign corporate securities  54,824  -  59  3,651,325  3,706,208  3,609,707  96,501  2,885,842  90,189  2,285,954  105,958 
          National treasury notes  -  155,604  16,802,179  6,173,173  23,130,956  23,256,823  (125,867)  22,430,659  (48,178)  8,435,081  (26,806) 
          Financial treasury bills  -  27,840  3,015  337,744  368,599  370,906  (2,307)  364,392  (1,013)  472,020  (182) 
          Bank deposit certificates  12,219  -  -  961,976  974,195  974,195  -  910,821  -  206,045  - 
          Debentures  -  -  -  756,361  756,361  756,094  267  763,840  309  862,014  (965) 
          Shares  1,000,467  -  -  -  1,000,467  1,102,798  (102,331)  850,541  (94,636)  1,308,535  53,564 
          Privatization currencies  -  -  -  85,456  85,456  71,688  13,768  87,658  13,807  92,156  14,685 
          Other  81,097  122,254  180,874  4,355,693  4,739,918  4,702,932  36,986  2,704,086  27,242  1,924,105  34,018 
          - Insurance companies and savings bonds  1,436,355  1,380  3,841  206,162  1,647,738  1,758,804  (111,066)  1,734,779  (101,063)  1,752,133  44,162 
          Financial treasury bills  -  1,380  3,841  13,213  18,434  18,435  (1)  18,437  5  153,243  52 
          Shares  1,406,737  -  -  -  1,406,737  1,502,204  (95,467)  1,503,828  (88,383)  1,399,252  51,343 
          Debentures  36  -  -  187,684  187,720  184,547  3,173  180,275  4,025  175,861  7,719 
          Other  29,582  -  -  5,265  34,847  53,618  (18,771)  32,239  (16,710)  23,777  (14,952) 
          - Private pension plans  1,651,554  9,511  51,950  122,425  1,835,440  2,026,125  (190,685)  1,908,267  (197,366)  1,818,986  38,360 
          Shares  1,637,847  -  -  -  1,637,847  1,827,273  (189,426)  1,582,909  (198,643)  1,514,323  38,181 
          Financial treasury bills  -  9,511  16,219  49,438  75,168  75,040  128  82,012  141  234,644  179 
          Bank deposit certificates  -  -  35,731  -  35,731  35,731  -  39,062  -  -  - 
          Debentures  -  -  -  72,987  72,987  73,012  (25)  -  -  -  - 
          Other  13,707  -  -  -  13,707  15,069  (1,362)  204,284  1,136  70,019  - 
          - Other activities  178,164  -  -  1,805  179,969  179,969  -  173,108  94  30,017  160 
          Bank deposit certificates  3,512  -  -  -  3,512  3,512  -  3,420  -  3,778  - 
          Shares  116  -  -  -  116  116  -  112  94  178  160 
          Financial treasury bills  -  -  -  1,805  1,805  1,805  -  1,759  -  -  - 
          Other  174,536  -  -  -  174,536  174,536  -  167,817  -  26,061  - 
          Subtotal  4,423,947  316,992  17,041,924  28,055,193  49,838,056  50,244,718  (406,662)  45,379,185  (289,539)  26,193,843  498,302 
          Hedge – cash flow (Note 8g)  -  -  -  -  -  -  453,835  -  314,016  -  67,030 
          Overall total (8)  4,423,947  316,992  17,041,924  28,055,193  49,838,056  50,244,718  47,173  45,379,185  24,477  26,193,843  565,332 

           

             
          126 Report on Economic and Financial Analysis – March 2011 

           

           

           
          Financial Statements, Independent Auditors’ Report, and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 
           

           

          III) Held-to-maturity securities

                         
          Securities (3) R$ thousand 
          2011 2010
          March 31 December 31  March 31 
          1 to 30 days  31 to 180 days  181 to 360 days  More than 360 days  Restated cost value (5) (6)  Restated cost value (5) (6)  Restated cost value (5) (6) 
          Financial  19,620  -  498,731  266,136  784,487  814,870  875,870 
          Brazilian foreign debt notes  19,620  -  498,731  266,136  784,487  814,870  861,828 
          Financial treasury bills  -  -  -  -  -  -  14,042 
          Insurance companies and savings bonds  361,860  -  -  7,392,323  7,754,183  7,460,918  7,002,164 
          Debentures  -  -  -  28,261  28,261  26,995  - 
          National treasury notes  361,860  -  -  7,364,062  7,725,922  7,433,923  7,002,164 
          Private pension plans  10  31,633  -  21,386,965  21,418,608  21,216,208  19,800,584 
          Debentures  10  31,476  -  432,367  463,853  443,573  705,124 
          National treasury notes  -  -  -  20,954,598  20,954,598  20,772,482  19,095,318 
          Financial treasury bills  -  157  -  -  157  153  142 
          Overall total (4)  381,490  31,633  498,731  29,045,424  29,957,278  29,491,996  27,678,618 

           

             
          Bradesco  127 

           

           

           
          Financial Statements, Independent Auditors’ Report, and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

          d) Breakdown of the portfolios by financial statements classification

                         
          Securities R$ thousand 
          2011 2010
          1 to 30 days  31 to 180 days  181 to 360 days  More than 360 days  Total on March 31 (3) (5) (6) (7)  Total on December 31 (3) (5) (6) (7)  Total on March 31 (3) (5) (6) (7) 
          Own portfolio  54,222,766  8,975,095  5,192,363  70,592,533  138,982,757  135,190,856  121,204,533 
          Fixed income securities  50,091,576  8,975,095  5,192,363  70,592,533  134,851,567  131,093,162  116,872,296 
          • Financial treasury bills  61,145  883,025  468,868  3,693,124  5,106,162  4,740,761  5,669,076 
          • Purchase and sale commitments (2)  39,562,714  1,322,542  75,244  1,395  40,961,895  30,850,727  26,064,243 
          • National treasury notes  361,861  1,832  2,375  28,502,887  28,868,955  28,587,310  26,756,800 
          • Brazilian foreign debt securities  1,136  403  5,094  41,638  48,271  48,756  1,173,836 
          • Bank deposit certificates  130,506  376,989  36,949  1,152,043  1,696,487  1,724,058  1,083,111 
          • National treasury bills  64,424  1,264,826  760  235,985  1,565,995  3,292,018  1,242,816 
          • Foreign corporate securities  11,128  -  1,674  290,288  303,090  239,134  2,902,787 
          • Debentures  2,303  113,912  2,321,051  15,731,037  18,168,303  16,869,721  10,592,043 
          • Promissory notes  28,670  1,881,954  -  -  1,910,624  2,863,436  2,995,343 
          • Foreign government securities  195,120  14,154  -  47  209,321  71,004  351,044 
          • PGBL/VGBL restricted bonds  3,385,166  2,903,738  2,097,633  16,088,525  24,475,062  31,739,663  30,215,898 
          • Other  6,287,403  211,720  182,715  4,855,564  11,537,402  10,066,574  7,825,299 
          Equity securities  4,131,190  -  -  -  4,131,190  4,097,694  4,332,237 
          • Shares of listed companies (technical provision)  1,897,362  -  -  -  1,897,362  1,859,411  426,983 
          • Shares of listed companies (other)  2,233,828  -  -  -  2,233,828  2,238,283  3,905,254 
          Restricted securities  77,960  2,657,710  20,602,649  51,846,577  75,184,896  76,660,459  33,010,809 
          Repurchase agreements  77,960  2,453,801  20,266,271  50,185,360  72,983,392  74,019,329  19,763,663 
          • National treasury bills  -  378  92  31,802,649  31,803,119  31,165,320  3,745,607 
          • Brazilian foreign debt securities  28,463  -  493,637  932,726  1,454,826  1,515,860  827,566 
          • Financial treasury bills  -  4,686  3,887  759,059  767,632  1,804,477  7,037,921 
          • National treasury notes  -  2,448,737  19,768,655  13,285,790  35,503,182  36,844,793  8,143,208 
          • Foreign corporate securities  49,497  -  -  3,405,136  3,454,633  2,688,879  9,361 
          Central Bank  -  -  -  -  -  -  6,990,404 
          • National treasury bills  -  -  -  -  -  -  1,411,074 
          • National treasury notes  -  -  -  -  -  -  2,207,463 
          • Financial treasury bills  -  -  -  -  -  -  3,371,867 

           

             
          128 Report on Economic and Financial Analysis – March 2011 

           

           

           
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          Notes to the Consolidated Financial Statements 
           
                         
          Securities R$ thousand 
          2011 2010
          1 to 30 days  31 to 180 days  181 to 360 days  More than 360 days  Total on March 31 (3) (5) (6) (7)  Total on December 31 (3) (5) (6) (7)  Total on March 31 (3) (5) (6) (7) 
          Privatization currencies  -  -  -  85,456  85,456  87,658  92,156 
          Guarantees provided  -  203,909  336,378  1,575,761  2,116,048  2,553,472  6,164,586 
          • National treasury bills  -  12,554  -  69,043  81,597  467,091  1,170,616 
          • Financial treasury bills  -  191,355  336,378  1,506,718  2,034,451  2,086,381  2,645,450 
          • National treasury notes  -  -  -  -  -  -  2,348,520 
          Derivative financial instruments (1)  1,873,780  236,163  1,045,616  100,609  3,256,168  1,610,385  3,051,520 
          Securities subject to repurchase agreements but not restricted  -  -  -  57,780  57,780  56,290  41,727 
          • Financial treasury bills  -  -  -  57,780  57,780  56,290  41,727 
          Overall total  56,174,506  11,868,968  26,840,628  122,597,499  217,481,601  213,517,990  157,308,589 
          %  25.8  5.5  12.3  56.4  100.0  100.0  100.0 

           

          (1) Consistent with the criterion adopted by Bacen Circular Letter 3,068/02 and due to the characteristics of the securities, we are considering the derivative financial instruments, except those considered as cash flow hedge under the category “Trading Securities”;
          (2) These refer to investment fund resources and managed portfolios applied on purchase and sale commitments with Bradesco, whose owners are consolidated subsidiaries, included in the consolidated financial statements;
          (3) The investment fund quotas were distributed according to the instruments composing their portfolios and preserving the category classification of the funds;
          (4) In           compliance with the provisions of Article 8 of Bacen Circular Letter 3,068/02, Bradesco declares that it has both the financial capacity and the intention to hold to maturity the securities classified as ‘held-to-maturity’ . This financial capacity is evidenced in Note 32a, which presents the maturities of asset and liability operations as of March 31, 2011;
          (5) The           number of days to maturity was based on the maturity of the securities, regardless of their accounting classification;
          (6) This column reflects book value subsequent to mark-to-market according to item (7), except for held-to-maturity securities, whose market value is higher than the restated cost in the amount of R$3,866,748 thousand (December 31, 2010 – R$4,607,874 thousand and March 31, 2010 – R$3,602,028 thousand);
          (7) The market value of securities is determined based on the market price available on the balance sheet date. Should there be no market prices available, amounts are estimated based on the prices quoted by dealers, on pricing models, quotation models or price quotations for instruments with similar characteristics; in case of investment funds, the restated cost reflects the market value of the respective quotas; and
          (8) In the first           quarter of 2011, no other than temporary losses were realized in the amount of 122 thousand (fourth quarter of 2010 – R$429 thousand and in the first quarter of 2010 there were no temporary losses) for the securities classified as “available for sale”.

             
          Bradesco  129 

           

           

           
          Financial Statements, Independent Auditors’ Report, and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

          e) Derivative financial instruments

          Bradesco carries out transactions involving derivative financial instruments, which are recorded in the balance sheet or memorandum accounts, to meet its own needs in managing its global exposure, as well as to meet its client’s requests, in order to manage their exposures. These operations involve a series of derivatives, including interest rate swaps, currency swaps, futures and options. Bradesco’s risk management policy is based on the utilization of derivative financial instruments with a view to mitigating the risks of operations carried out by the Bank and its subsidiaries.

          Securities classified in the trading and available-for-sale categories, as well as derivative financial instruments, are stated in the consolidated balance sheet at their estimated fair value. Fair value is generally based on market prices or quotations for assets or liabilities with similar characteristics. Should market prices not be available, fair values are based on dealer quotations, pricing models, discounted cash flows or similar techniques for which the determination of fair value may require judgment or significant estimates by Management.

          Market price quotations are used to determine the fair value of derivative financial instruments. The fair value of swaps is determined by using discounted cash flow modeling techniques that use yield curves, reflecting adequate risk factors. The information to build yield curves is mainly obtained from BM&FBovespa (Futures and Commodities Exchange) and the domestic and international secondary market. These yield curves are used to determine the fair value of currency swaps, interest rate and other risk factors swaps. The fair value of forward and futures contracts is also determined based on market price quotations for derivatives traded at the stock exchange or using methodologies similar to those outlined for swaps. The fair value of loan derivative instruments is determined based on market price quotation or from specialized entities. The fair value of options is determined based on mathematical models, such as Black & Scholes, using yield curves, implied volatilities and the fair value of corresponding assets. Current market prices are used to price the volatilities.

          Derivative financial instruments in Brazil mainly refer to swap and futures operations and are recorded at Cetip (OTC Clearing House) and BM&FBovespa.

          Operations involving forward contracts of indexes and currencies are contracted by Management to hedge Bradesco’s overall exposures and to meet customer needs.

          Derivative financial instruments abroad refer to swap, forward, options, credit and futures operations and are mainly carried out at the stock exchanges of Chicago and New York, as well as the over-the-counter markets.

             
          130 Report on Economic and Financial Analysis – March 2011 

           

           

          Financial Statements, Independent Auditors’ Report, and Fiscal Council’s Report 

           

          Notes to the Consolidated Financial Statements 
           


          I) Amount of derivative financial instruments recorded in equity and memorandum accounts

                       
            R$ thousand 
          2011 2010
          March 31  December 31  March 31 
          Overall amount  Net amount  Overall amount  Net amount  Overall amount  Net amount 
          Futures contracts             
          Purchase commitments:  4,153,045    6,764,620    26,422,667   
          - Interbank market  3,570,955  -  3,936,872  -  20,889,122  - 
          - Foreign currency  582,090  -  2,827,748  -  5,531,713  - 
          - Other  -  -  -  -  1,832  - 
          Sale commitments:  131,055,411    177,760,310    129,927,454   
          - Interbank market (1)  116,852,636  113,281,681  159,915,878  155,979,006  108,657,000  87,767,878 
          - Foreign currency (2)  14,200,271  13,618,181  17,844,432  15,016,684  21,238,341  15,706,628 
          - Other  2,504  2,504  -  -  32,113  30,281 
                       
          Option contracts             
          Purchase commitments:  42,853,462    85,409,928    44,323,113   
          - Interbank market  42,072,300  -  84,652,580  -  39,392,127  - 
          - Foreign currency  171,082  -  82,119  -  4,209,752  - 
          - Other  610,080  30,517  675,229  16,192  721,234  - 
          Sale commitments:  45,086,929    86,308,930    81,127,781   
          - Interbank market  44,112,150  2,039,850  85,443,870  791,290  74,893,670  35,501,543 
          - Foreign currency  395,216  224,134  206,023  123,904  5,381,028  1,171,276 
          - Other  579,563  -  659,037  -  853,083  131,849 
                       
          Forward contracts             
          Purchase commitments:  6,095,987    5,109,643    4,958,099   
          - Interbank market  1,200,365  739,642  -  -  -  - 
          - Foreign currency  4,884,985  -  5,091,958  -  2,881,248  - 
          - Other  10,637  -  17,685  -  2,076,851  430,214 
          Sale commitments:  7,403,577    6,165,612    5,618,682   
          - Interbank market  460,723  -  -  -  -  - 
          - Foreign currency  6,923,202  2,038,217  6,046,744  954,786  3,972,045  1,090,797 
          - Other  19,652  9,015  118,868  101,183  1,646,637  - 
                       
          Swap contracts             
          Beneficiary:  17,364,047    17,020,121    18,543,044   
          - Interbank market  2,842,028  -  2,662,419  -  5,279,252  1,364,129 
          - Fixed rate  500,205  124,306  681,274  28,412  969,199  - 
          - Foreign currency (3)  11,555,349  4,122,293  11,102,853  4,102,651  9,781,197  - 
          - Reference Interest Rate - TR  15,000  -  928,413  -  1,913,666  1,905,042 
          - Special Clearance and Custody System (Selic)  49,036  16,211  49,476  15,577  46,788  - 
          - General Price Index –Market (IGP-M)  1,611,190  1,337,701  1,148,311  975,489  148,260  - 
          - Other  791,239  358,236  447,375  25,699  404,682  - 
          Guarantor:  16,298,823    15,932,852    17,885,017   
          - Interbank market  6,516,636  3,674,608  6,423,864  3,761,445  3,915,123  - 
          - Fixed rate  375,899  -  652,862  -  1,629,509  660,310 
          - Foreign currency (3)  7,433,056  -  7,000,202  -  11,005,526  1,224,329 
          - TR  1,233,915  1,218,915  1,227,527  299,114  8,624  - 
          - Selic  32,825  -  33,899  -  77,180  30,392 
          - IGP-M  273,489  -  172,822  -  701,445  553,185 
          - Other  433,003  -  421,676  -  547,610  142,928 


          Derivatives include operations maturing in D+1.

          (1) Includes cash flow hedges to protect CDI-related funding in the amount of R$48,448,146 thousand (December 31, 2010 –R$78,103,695 thousand and March 31, 2010 – R$53,418,721 thousand) (Note 8g);
          (2) Includes specific hedges to protect investments abroad that totaled R$17,371,105 thousand (December 31, 2010 – R$17,512,203 thousand and March 31, 2010, R$15,505,354 thousand); and
          (3) Includes derivative credit operations (Note 8f).

          For the purposes of obtaining an increased liquidation guarantee in operations with Financial Institutions and Customers, Bradesco set forth agreements for compensation and liquidation of obligations within the National Financial System, in accordance with CMN Resolution 3,263/05.

          Bradesco  131 

           

           
          Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

          II) Breakdown of derivative financial instruments (assets and liabilities) stated at restated cost and market value

                             
            R$ thousand 
          2011 2010
          March 31 December 31 March 31
          Restated cost  Mark-to-market adjustment  Market value  Restated cost  Mark-to-market adjustment  Market value  Restated cost  Mark-to-market adjustment  Market Value 
          Adjustment receivables – swaps  1,329,804  77,551  1,407,355  1,262,887  71,101  1,333,988  939,357  76,728  1,016,085 
          Receivable forward purchases  1,200,258  -  1,200,258  2,810  -  2,810  1,042,512  (993)  1,041,519 
          Receivable forward sales  624,656  -  624,656  213,684  432  214,116  906,302  (640)  905,662 
          Premiums on exercisable options  38,763  (14,864)  23,899  52,448  7,023  59,471  100,354  (12,100)  88,254 
          Total assets  3,193,481  62,687  3,256,168  1,531,829  78,556  1,610,385  2,988,525  62,995  3,051,520 
          Adjustment payables – swaps  (332,308)  (9,823)  (342,131)  (232,481)  (14,238)  (246,719)  (330,120)  (27,938)  (358,058) 
          Payable forward purchases  (1,476,498)  -  (1,476,498)  (271,865)  -  (271,865)  (1,120,793)  993  (1,119,800) 
          Payable forward sales  (472,518)  -  (472,518)  (106,485)  (432)  (106,917)  (858,580)  640  (857,940) 
          Premiums on written options  (93,712)  27,162  (66,550)  (109,456)  5,257  (104,199)  (164,312)  31,371  (132,941) 
          Total liabilities  (2,375,036)  17,339  (2,357,697)  (720,287)  (9,413)  (729,700)  (2,473,805)  5,066  (2,468,739) 

           

          III) Futures, option, forward and swap contracts – (Notional)

                         
            R$ thousand 
          2011 2010
          1 to 90 days  91 to 180 days  181 to 360 days  More than 360 days  Total on March 31  Total on December 31  Total on March 31 
          Futures contracts  22,438,066  16,368,449  51,208,217  45,193,724  135,208,456  184,524,930  156,350,121 
          Option contracts  81,364,523  4,895,966  1,461,422  218,480  87,940,391  171,718,858  125,450,894 
          Forward contracts  5,694,845  1,676,955  2,343,643  3,784,121  13,499,564  11,275,255  10,576,781 
          Swap contracts  1,555,964  1,410,558  2,954,834  10,035,336  15,956,692  15,686,133  17,526,959 
          Total on March 31, 2011  111,053,398  24,351,928  57,968,116  59,231,661  252,605,103     
          Total on December 31, 2010  178,753,532  99,258,818  19,245,027  85,947,799    383,205,176   
          Total on March 31, 2010  97,000,546  126,328,610  55,773,886  30,801,713      309,904,755 

           

             
          132 Report on Economic and Financial Analysis – March 2011 

           

           

           
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          Notes to the Consolidated Financial Statements 

           

          IV) Types of guarantee margin for derivative financial instruments, mainly futures contracts

                 
            R$ thousand 
          2011  2010
          March 31  December 31  March 31 
          Government securities       
          National treasury notes  1,908,368  1,942,300  2,188,603 
          Financial treasury bills  30,453  29,650  763,341 
          National treasury bills  2,520,527  2,606,763  900,399 
          Total  4,459,348  4,578,713  3,852,343 

           

          V) Revenues and expenses, net

                 
            R$ thousand 
          2011  2010
          1st Quarter  4th Quarter  1st Quarter 
          Swap contracts  170,809  285,178  (75,999) 
          Forward contracts  (87,241)  (21,721)  (24,945) 
          Option contracts  11,617  (177,463)  119,836 
          Futures contracts  545,361  476,866  (134,004) 
          Foreign exchange variation of investments abroad  (268,557)  (270,651)  76,350 
          Total  371,989  292,209  (38,762) 

           

          VI) Overall amounts of derivative financial instruments, broken down by trading place and counter parties

                 
            R$ thousand 
          2011  2010
          March 31  December 31  March 31 
          Cetip - OTC Clearing House (over-the-counter)  21,355,401  7,341,345  10,629,165 
          BM&FBovespa (stock exchange)  219,107,487  364,515,891  287,253,663 
          Foreign (over-the-counter) (1)  9,673,186  8,344,788  6,452,544 
          Foreign (stock exchange) (1)  2,469,029  3,003,152  5,569,383 
          Total  252,605,103  383,205,176  309,904,755 

           

          (1) Comprise operations carried out on the Stock Exchanges of Chicago and New York and the over-the-counter markets.

          On March 31, 2011, counter parties are distributed among corporate entities with 94%, financial institutions with 5% and individuals/others with 1%.

             
          Bradesco  133 

           

           

           
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          Notes to the Consolidated Financial Statements 

           

          f) Credit Default Swaps (CDS)

          In general, these represent bilateral agreements in which one of the parties purchases protection against the credit risk of a certain financial instrument (the risk is transferred) . The selling counterparty receives remuneration that is usually paid in a linear manner during the term of the agreement.

          In the case of a default, the purchasing counterparty will receive a payment to offset the loss incurred on the financial instrument. In this case, the selling counterparty usually receives the underlying asset of the agreement in exchange for the payment.

                       
            R$ thousand 
          Credit risk amount Effect on the calculation of the required shareholders’ equity 
          2011  2010 2011  2010
          March 31  December 31  March 31  March 31  December 31  March 31 
          Sold protection             
          Credit swaps whose underlying assets are:             
          • Securities – Brazilian public debt  (472,323)  (483,198)  (739,115)  -  -  - 
          • Securities – Foreign public debt  -  -  (641,160)  -  -  (35,264) 
          • Derivatives with companies  (3,257)  (3,332)  (3,562)  (179)  (183)  (196) 
          Purchased protection             
          Credit swaps whose underlying assets are:             
          • Securities – Brazilian public debt  496,754  591,501  6,653,816  -  -  - 
          • Derivatives with companies  4,886  13,330  14,248  537  1,466  1,567 
          Total  26,060  118,301  5,284,227  358  1,283  (33,893) 
          Deposited margin  4,072  181,442  352,832       

           

          Bradesco carries out operations involving credit derivatives in order to better manage its risk exposure and assets. Contracts related to the credit derivatives operations described above have several maturities up to 2013. The mark-to-market of protection rates that remunerate the counterparty selling protection amounts to R$1,337 thousand (December 31, 2010 – R$1,712 thousand and March 31, 2010 – R$(2,894) thousand) . There was no credit event related to triggering events as defined in the contracts in the period.

             
          134 Report on Economic and Financial Analysis – March 2011 

           

           

           
          Financial Statements, Independent Auditors’ Report, and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

          g) Cash flow hedge

          Bradesco used cash flow hedges to protect its cash flows from payment of interest rates on funds indexed to Bank Deposit Certificates (CDB), related to variable interest rate risk of Interbank Deposit Rate (DI Cetip), converting variable payments into fixed payments.

          Bradesco trades DI Future contracts at BM&FBovespa as from 2009, used as a cash flow hedge for funding linked to DI. The following table presents the DI Future position, where:

                 
            R$ thousand 
          2011  2010
          March 31  December 31  March 31 
          DI Future with maturity between 2011 and 2017  48,448,146  78,103,695  53,418,721 
          Funding indexed to CDI  48,411,496  77,842,445  53,064,015 
          Mark-to-market adjustment recorded in shareholders’ equity (1)  453,835  314,016  67,030 
          Non-effective market value recorded in income  17  19  11,961 

           

          (1) The adjustment in the shareholders’ equity is R$272,301 thousand net of tax effects (December 31, 2010 - R$188,410 thousand and March 31, 2010 - R$40,218 thousand).

          The effectiveness of the hedge portfolio was assessed in conformity with Bacen Circular Letter 3,082/02.

          h) Income from securities, insurance, private pension plans and savings bonds financial activities and derivative financial instruments

                 
            R$ thousand 
          2011  2010
          1st quarter  4th quarter  1st quarter 
          Fixed income securities  2,969,953  2,765,593  1,550,784 
          Interbank investments (Note 7b)  2,379,912  2,287,325  2,261,158 
          Equity securities  (4,728)  (27,503)  11,533 
          Subtotal  5,345,137  5,025,415  3,823,475 
          Financial result of insurance, private pension plans and savings bonds  2,725,934  2,764,781  2,272,263 
          Income from derivative financial instruments (Note 8e V)  371,989  292,209  (38,762) 
          Total  8,443,060  8,082,405  6,056,976 

           

             
          Bradesco  135 

           

           

           
          Financial Statements, Independent Auditors’ Report, and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

          9) INTERBANK ACCOUNTS – RESTRICTED DEPOSITS

          a) Mandatory reserve

                   
            R$ thousand 
          Remuneration  2011  2010
            March 31  December 31  March 31 
          Reserve requirements – demand deposits  not remunerated  8,385,908  10,944,382  9,139,508 
          Reserve requirements – savings deposits  savings index  10,901,726  10,755,153  9,192,045 
          Time reserve requirements (1)  Selic rate  19,531,331  17,395,554  - 
          Collection of funds from rural loan (2)  not remunerated  39,722  39,722  - 
          Additional reserve requirements (3)  Selic rate  26,818,529  26,062,208  17,093,165 
          • Savings deposits    5,450,864  5,377,577  4,596,022 
          • Demand deposits    4,203,771  4,732,221  2,620,896 
          • Time deposits    17,163,894  15,952,410  9,876,247 
          Restricted deposits – National Housing System (SFH)  TR + interest rate  511,329  507,704  492,051 
          Funds from rural loan  not remunerated  578  578  578 
          Total    66,189,123  65,705,301  35,917,347 

           

          (1) Pursuant to BACEN Circular 3,513/10, as from December 2010, Banks are collecting 20% from time deposits in cash;
          (2) Pursuant to BACEN Circular 3,460/09, as of August 2010, Banks are liable to collect funds from rural loan (on cash funds) that were not loaned, to be refunded in August 2011; and.
          (3) Pursuant to BACEN Circular 3,514/10, as from December 2010, additional liabilities began to be met in cash with the Selic rate at the following rates: demand and time deposits – 12%; and savings deposits – 10%.

          b) Result from compulsory deposits

                 
            R$ thousand 
          2011  2010
          1st Quarter  4th Quarter  1st Quarter 
          Compulsory deposits - Bacen (reserves requirement)  1,369,038  998,705  178,743 
          Restricted deposits - SFH  7,194  7,075  5,957 
          Total  1,376,232  1,005,780  184,700 

           

             
          136 Report on Economic and Financial Analysis – March 2011 

           

           

           
          Financial Statements, Independent Auditors’ Report, and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

          10) LOAN OPERATIONS

          Information related to loan operations, including advances on foreign exchange contracts, leasing operations and other receivables with characteristics of credit, can be found below:

          a) By type and maturity

                                   
              R$ thousand 
          Performing loans
          1 to 30 days  31 to 60 days  61 to 90 days  91 to 180 days  181 to 360 days  More than 360 days  2011 2010
          Total on March 31 (A)  % 
          (6)           		 Total on December 31 (A)  % 
          (6)           		 Total on March 31 (A)  % 
          (6) 
          Discounted trade receivables and loans (1)  16,243,266  11,942,572  8,793,549  12,724,667  15,363,165  40,429,590  105,496,809  39.5  100,887,349  39.0  83,315,958  38.3 
          Financing  3,134,831  2,845,356  2,739,046  6,976,750  11,634,259  45,387,175  72,717,417  27.2  69,399,287  26.9  52,210,843  23.9 
          Agricultural and agribusiness financing  971,890  519,003  820,118  2,724,073  2,941,073  5,908,863  13,885,020  5.2  13,380,273  5.2  11,846,086  5.4 
          Subtotal  20,349,987  15,306,931  12,352,713  22,425,490  29,938,497  91,725,628  192,099,246  71.9  183,666,909  71.1  147,372,887  67.6 
          Leasing operations  716,790  572,975  544,299  1,553,590  2,739,820  6,632,264  12,759,738  4.8  14,057,847  5.4  17,214,169  7.9 
          Advances on foreign exchange contracts (2)  1,119,034  993,178  600,650  1,687,821  1,308,985  -  5,709,668  2.1  4,164,193  1.6  5,072,933  2.3 
          Subtotal  22,185,811  16,873,084  13,497,662  25,666,901  33,987,302  98,357,892  210,568,652  78.8  201,888,949  78.1  169,659,989  77.8 
          Other receivables (3)  4,518,953  2,334,261  1,090,667  2,011,498  1,390,344  324,255  11,669,978  4.4  12,843,223  5.0  11,404,669  5.2 
          Total loan operations  26,704,764  19,207,345  14,588,329  27,678,399  35,377,646  98,682,147  222,238,630  83.2  214,732,172  83.1  181,064,658  83.0 
          Sureties and guarantees (4)  2,155,913  634,583  1,216,552  2,727,296  3,153,179  32,578,729  42,466,252  15.9  40,765,971  15.8  34,713,667  15.9 
          Credit assignment (5)  27,200  25,217  23,631  62,545  103,292  164,535  406,420  0.2  416,193  0.2  377,615  0.2 
          Credit assignment – Real Estate Receivables Certificate  23,365  23,364  23,363  67,240  100,349  337,380  575,061  0.2  598,263  0.2  741,769  0.3 
          Acquisition of credit card receivables  355,953  158,748  113,080  294,232  333,165  80,555  1,335,733  0.5  1,832,999  0.7  1,298,031  0.6 
          Overall total on March 31, 2011  29,267,195  20,049,257  15,964,955  30,829,712  39,067,631  131,843,346  267,022,096  100.0         
          Overall total on December 31, 2010  28,587,770  19,425,610  13,839,372  30,039,334  39,177,818  127,275,694      258,345,598  100.0     
          Overall total on March 31, 2010  26,490,932  17,386,183  13,413,874  26,030,156  32,098,741  102,775,854          218,195,740  100.0 

           

             
          Bradesco  137 

           

           

           
          Financial Statements, Independent Auditors’ Report, and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

                                 
            R$ thousand 
          Non-performing loans
          Installments past due
          1 to 30
          days          		 31 to 60
          days          		 61 to 90
          days          		 91 to 180
          days          		 181 to 540
          days          		 2011 2010
          Total on
          March 31
          (B)           		 %
          (6)          		 Total on
          December 31
          (B)           		 %
          (6)          		 Total on
          March 31
          (B)           		 %
          (6)
          Discounted trade receivables and loans (1)  872,432  900,350  804,026  1,488,983  1,900,664  5,966,455  82.4  5,293,765  81.1  5,107,267  76.3 
          Financing  183,678  138,220  64,904  126,299  148,224  661,325  9.1  636,073  9.8  822,287  12.3 
          Agricultural and agribusiness financing  14,628  15,570  8,750  22,963  27,061  88,972  1.2  109,583  1.7  133,450  2.0 
          Subtotal  1,070,738  1,054,140  877,680  1,638,245  2,075,949  6,716,752  92.7  6,039,421  92.6  6,063,004  90.6 
          Leasing operations  93,049  74,990  39,215  82,631  118,859  408,744  5.6  412,313  6.3  491,298  7.3 
          Advances on foreign exchange contracts (2)  4,602  5,880  1,528  5,978  -  17,988  0.2  24,805  0.4  53,016  0.8 
          Subtotal  1,168,389  1,135,010  918,423  1,726,854  2,194,808  7,143,484  98.5  6,476,539  99.3  6,607,318  98.7 
          Other receivables (3)  4,553  362  258  75,826  25,948  106,947  1.5  45,225  0.7  84,019  1.3 
          Overall total on March 31, 2011  1,172,942  1,135,372  918,681  1,802,680  2,220,756  7,250,431  100.0         
          Overall total on December 31, 2010  978,467  922,163  870,522  1,533,757  2,216,855      6,521,764  100.0     
          Overall total on March 31, 2010  1,120,947  996,479  838,662  1,590,658  2,144,591          6,691,337  100.0 

           

             
          138 Report on Economic and Financial Analysis – March 2011 

           

           

           
          Financial Statements, Independent Auditors’ Report, and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

                                   
            R$ thousand 
          Non-performing loans
          Outstanding Installments
          1 to 30
          days          		 31 to 60
          days          		 61 to 90
          days          		 91 to 180
          days          		 181 to 360
          days          		 More than
          360 days          		 2011 2010
          Total on
          March 31
          (C)           		 %
          (6)          		 Total on
          December 31
          (C)           		 %
          (6)          		 Total on
          March 31
          (C)           		 %
          (6)
          Discounted trade receivables and loans (1)  420,041  412,387  313,292  708,885  1,002,706  1,942,943  4,800,254  46.0  4,134,487  44.1  3,942,348  38.0 
          Financing  173,747  169,563  152,218  434,877  718,514  1,841,729  3,490,648  33.5  3,010,859  32.2  3,504,229  33.9 
          Agricultural and agribusiness financing  6,421  2,253  2,551  11,812  12,355  252,544  287,936  2.8  314,295  3.3  358,153  3.5 
          Subtotal  600,209  584,203  468,061  1,155,574  1,733,575  4,037,216  8,578,838  82.3  7,459,641  79.6  7,804,730  75.4 
          Leasing operations  83,942  72,547  68,941  206,327  389,760  1,018,078  1,839,595  17.6  1,895,783  20.3  2,543,881  24.6 
          Subtotal  684,151  656,750  537,002  1,361,901  2,123,335  5,055,294  10,418,433  99.9  9,355,424  99.9  10,348,611  100.0 
          Other receivables (3)  253  252  252  735  1,296  1,483  4,271  0.1  4,617  0.1  2,209  0.0 
          Overall total on March 31, 2011  684,404  657,002  537,254  1,362,636  2,124,631  5,056,777  10,422,704  100.0         
          Overall total on December 31, 2010  573,765  584,971  468,722  1,210,396  1,923,779  4,598,408      9,360,041  100.0     
          Overall total on March 31, 2010  711,280  553,085  538,586  1,338,233  2,115,167  5,094,469          10,350,820  100.0 

           

             
          Bradesco  139 

           

           

           
          Financial Statements, Independent Auditors’ Report, and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

                       
            R$ thousand 
          Overall total
          2011 2010
          Total on March 31
          (A+B+C)                     		 % 
          (6)                     		 Total on December 31 
          (A+B+C)                     		 % 
          (6)                     		 Total on March 31 
          (A+B+C)                     		 % 
          (6)           
          Discounted trade receivables and loans (1)  116,263,518  40.9  110,315,601  40.2  92,365,573  39.2 
          Financing  76,869,390  27.0  73,046,219  26.6  56,537,359  24.0 
          Agricultural and agribusiness financing  14,261,928  5.0  13,804,151  5.0  12,337,689  5.2 
          Subtotal  207,394,836  72.9  197,165,971  71.8  161,240,621  68.4 
          Leasing operations  15,008,077  5.3  16,365,943  6.0  20,249,348  8.6 
          Advances on foreign exchange contracts (2)  5,727,656  2.0  4,188,998  1.5  5,125,949  2.2 
          Subtotal  228,130,569  80.2  217,720,912  79.3  186,615,918  79.2 
          Other receivables (3)  11,781,196  4.1  12,893,065  4.7  11,490,897  4.9 
          Total loan operations  239,911,765  84.3  230,613,977  84.0  198,106,815  84.1 
          Sureties and guarantees (4)  42,466,252  14.9  40,765,971  14.9  34,713,667  14.8 
          Credit assignment (5)  406,420  0.1  416,193  0.2  377,615  0.2 
          Credit assignment – Real Estate Receivable Certificate  575,061  0.2  598,263  0.2  741,769  0.3 
          Acquisition of credit card receivables  1,335,733  0.5  1,832,999  0.7  1,298,031  0.6 
          Overall total on March 31, 2011  284,695,231  100.0         
          Overall total on December 31, 2010      274,227,403  100.0     
          Overall total on March 31, 2010          235,237,897  100.0 

           

          (1) It includes loans of credit card operations and operations for advances of credit card receivables in the amount of R$15,890,839 thousand (December 31, 2010 – R$14,864,643 thousand and March 31, 2010 – R$11,363,508 thousand);
          (2) Advances on foreign exchange contracts are classified as a deduction from “Other Liabilities”;
          (3) Item “Other Receivables” comprises receivables on sureties and guarantees honored, receivables on sale of assets, securities and credit instruments receivable, income from foreign exchange contracts and export contracts receivables and credit card receivables (cash and credit purchases from storeowners) in the amount of R$10,619,139 thousand (December 31, 2010 – R$11,559,248 thousand and March 31, 2010 - R$9,271,887 thousand);
          (4) Recorded in memorandum accounts;
          (5) Restated amount of credit assignment up to March 31, 2011, net of installments received; and
          (6) Ratio           between each type and the total loan portfolio including sureties and guarantee, credit assignment and acquisition of receivables.

             
          140 Report on Economic and Financial Analysis – March 2011 

           

           

           
          Financial Statements, Independent Auditors’ Report, and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 
           

           

          b) By type and risk level

                                         
              R$ thousand 
          Risk levels
          AA A B C D E F G H 2011 2010
          Total on 
          March 31                     		 % 
          (1)                     		 Total on
          December
          31           		 % 
          (1)                     		 Total on 
          March 31                     		 % 
          (1)           
          Discounted trade receivables and loans  23,728,616  49,097,032  8,996,558  21,808,373  2,961,779  1,327,533  1,107,622  1,022,715  6,213,290  116,263,518  48.5  110,315,601  47.8  92,365,573  46.7 
          Financings  12,432,017  34,034,734  9,315,961  18,510,393  845,296  299,007  230,796  173,509  1,027,677  76,869,390  32.0  73,046,219  31.7  56,537,359  28.5 
          Agricultural and agribusiness financings  1,817,769  3,219,313  1,837,951  6,521,253  452,365  83,743  220,522  30,558  78,454  14,261,928  5.9  13,804,151  6.0  12,337,689  6.2 
          Subtotal  37,978,402  86,351,079  20,150,470  46,840,019  4,259,440  1,710,283  1,558,940  1,226,782  7,319,421  207,394,836  86.4  197,165,971  85.5  161,240,621  81.4 
          Leasing operations  111,416  5,442,178  2,204,799  5,609,557  379,826  171,394  151,805  124,174  812,928  15,008,077  6.3  16,365,943  7.1  20,249,348  10.2 
          Advances on foreign exchange contracts (2)  2,860,645  1,546,870  799,235  465,170  26,705  9,560  4,379  1,140  13,952  5,727,656  2.4  4,188,998  1.8  5,125,949  2.6 
          Subtotal  40,950,463  93,340,127  23,154,504  52,914,746  4,665,971  1,891,237  1,715,124  1,352,096  8,146,301  228,130,569  95.1  217,720,912  94.4  186,615,918  94.2 
          Other receivables  197,528  8,770,847  389,009  1,952,683  84,602  27,531  20,354  15,649  322,993  11,781,196  4.9  12,893,065  5.6  11,490,897  5.8 
          Overall total on March 31, 2011  41,147,991  102,110,974  23,543,513  54,867,429  4,750,573  1,918,768  1,735,478  1,367,745  8,469,294  239,911,765  100.0         
          %  17.2  42.6  9.8  22.9  2.0  0.8  0.6  0.6  3.5  100.0           
          Overall total on December 31, 2010  39,935,375  99,774,282  22,110,084  51,409,501  4,285,133  1,824,257  1,652,872  1,329,007  8,293,466      230,613,977  100.0     
          %  17.3  43.3  9.6  22.3  1.9  0.8  0.6  0.6  3.6      100.0       
          Overall total on March 31, 2010  31,457,209  89,384,330  21,247,711  38,895,060  3,961,348  1,787,581  1,745,041  1,429,575  8,198,960          198,106,815  100.0 
          %  15.9  45.1  10.7  19.7  2.0  0.9  0.9  0.7  4.1          100.0   

           

          (1) Ratio between the type and total of loan portfolio without sureties and guarantee, assignment of loans and acquisition of receivables; and
          (2) Note 11a.

             
          Bradesco  141 

           

           

           
          Financial Statements, Independent Auditors’ Report, and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

          c) Maturity ranges and risk level

                                         
            R$ thousand 
          Risk levels  
          Non-performing loan operations  
          AA A B C D E F G H 2011   2010  
          Total on
          March 31           		 %
          (1)           		 Total on
          December
          31           		 %
          (1)           		 Total on
          March 31           		 %
          (1) 
          Outstanding                               
          installments   -  -  1,948,012  2,472,547  1,262,654  826,395  704,618  557,429  2,651,049  10,422,704  100.0  9,360,041  100.0  10,350,820  100.0 
          1 to 30   -  -  145,408  195,634  75,258  45,722  35,791  30,965  155,626  684,404  6.6  573,765  6.1  711,280  6.9 
          31 to 60   -  -  130,466  185,968  71,894  45,342  35,857  32,093  155,382  657,002  6.3  584,971  6.2  553,085  5.3 
          61 to 90   -  -  110,808  139,487  60,435  38,318  29,941  26,247  132,018  537,254  5.2  468,722  5.0  538,586  5.2 
          91 to 180   -  -  248,070  333,221  159,702  105,194  81,984  72,007  362,458  1,362,636  13.1  1,210,396  12.9  1,338,233  12.9 
          181 to 360   -  -  387,009  505,323  248,765  159,862  127,835  114,719  581,118  2,124,631  20.4  1,923,779  20.6  2,115,167  20.4 
          More than 360   -  -  926,251  1,112,914  646,600  431,957  393,210  281,398  1,264,447  5,056,777  48.4  4,598,408  49.2  5,094,469  49.3 
          Past due installments (2)   -  -  453,320  941,673  713,523  551,589  526,243  532,486  3,531,597  7,250,431  100.0  6,521,764  100.0  6,691,337  100.0 
          1 to 14   -  -  15,404  82,770  34,954  19,118  15,006  12,425  65,442  245,119  3.4  215,260  3.3  249,028  3.7 
          15 to 30    -  395,770  252,798  87,233  36,748  24,714  19,818  110,742  927,823  12.8  763,207  11.7  871,919  13.0 
          31 to 60   -  -  25,859  565,346  181,031  86,711  51,823  39,396  185,206  1,135,372  15.7  922,163  14.1  996,479  14.9 
          61 to 90   -  -  16,287  20,916  392,568  117,772  73,006  54,859  243,273  918,681  12.7  870,522  13.3  838,662  12.5 
          91 to 180   -  -  -  19,843  17,737  284,086  349,309  389,467  742,238  1,802,680  24.8  1,533,757  23.5  1,590,658  23.8 
          181 to 360   -  -  -  -  -  7,154  12,385  16,521  1,974,777  2,010,837  27.7  2,046,713  31.5  2,071,121  31.0 
          More than 360   -  -  -  -  -  -  -  -  209,919  209,919  2.9  170,142  2.6  73,470  1.1 
          Subtotal   -  -  2,401,332  3,414,220  1,976,177  1,377,984  1,230,861  1,089,915  6,182,646  17,673,135    15,881,805    17,042,157   
          Specific provision   -  -  24,013  102,427  197,617  413,396  615,431  762,940  6,182,646  8,298,470    7,898,327    8,230,070   

           

          (1) Ratio between maturities and type of installments; and
          (2) Operations maturing after 36 months have their past-due periods multiplied by two, as allowed by CMN Rule no. 2,682/99.

             
          142 Report on Economic and Financial Analysis – March 2011 

           

           

           
          Financial Statements, Independent Auditors’ Report, and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

                                         
             R$ thousand 
          Risk levels  
          Performing loan operations  
          AA A B C D E F G H 2011   2010  
          Total on 
          March 31                     		 % 
          (1)                     		 Total on
          December
          31           		 % 
          (1)                     		 Total on 
          March 31                     		 % 
          (1)           
          Outstanding installments  41,147,991  102,110,974  21,142,181  51,453,209  2,774,396  540,784  504,617  277,830  2,286,648  222,238,630  100.0  214,732,172  100.0  181,064,658  100.0 
          1 to 30  3,839,362  14,999,002  1,705,539  5,344,211  258,288  67,248  46,659  38,898  405,557  26,704,764  12.0  26,855,930  12.5  24,454,910  13.5 
          31 to 60  3,313,344  10,079,772  1,381,398  3,954,637  148,442  43,295  30,085  23,287  233,085  19,207,345  8.6  18,395,576  8.6  14,672,469  8.1 
          61 to 90  2,984,310  6,684,192  1,363,080  3,274,746  102,133  27,522  18,661  14,034  119,651  14,588,329  6.6  12,750,614  5.9  12,709,605  7.0 
          91 to 180  4,512,976  13,008,910  2,866,375  6,608,163  294,944  63,313  42,878  32,494  248,346  27,678,399  12.5  26,835,424  12.5  23,817,915  13.2 
          181 to 360  6,144,886  16,371,692  3,619,273  8,315,134  389,619  85,683  60,804  41,555  349,000  35,377,646  15.9  34,901,919  16.3  28,321,209  15.6 
          More than 360  20,353,113  40,967,406  10,206,516  23,956,318  1,580,970  253,723  305,530  127,562  931,009  98,682,147  44.4  94,992,709  44.2  77,088,550  42.6 
          Generic provision  -  510,555  211,422  1,543,596  277,440  162,235  252,308  194,481  2,286,648  5,438,685    5,389,925    4,600,769   
          Overall total on March 31, 2011 (2)  41,147,991  102,110,974  23,543,513  54,867,429  4,750,573  1,918,768  1,735,478  1,367,745  8,469,294  239,911,765           
          Existing provision  -  512,065  239,709  2,831,119  1,257,691  927,218  1,164,418  1,338,544  8,469,294  16,740,058           
          Minimum required provision  -  510,555  235,435  1,646,023  475,057  575,631  867,739  957,421  8,469,294  13,737,155           
          Excess provision  -  1,510  4,274  1,185,096  782,634  351,587  296,679  381,123  -  3,002,903           
          Overall total on December 31, 2010 (2)  39,935,375  99,774,282  22,110,084  51,409,501  4,285,133  1,824,257  1,652,872  1,329,007  8,293,466      230,613,977       
          Existing provision  -  500,501  225,205  2,864,393  1,121,002  876,283  1,106,816  1,302,005  8,293,466      16,289,671       
          Minimum required provision  -  498,871  221,101  1,542,285  428,513  547,277  826,435  930,304  8,293,466      13,288,252       
          Excess provision  -  1,630  4,104  1,322,108  692,489  329,006  280,381  371,701  -      3,001,419       
          Overall total on March 31, 2010 (2)  31,457,209  89,384,330  21,247,711  38,895,060  3,961,348  1,787,581  1,745,041  1,429,575  8,198,960          198,106,815   
          Existing provision  -  568,508  226,361  2,373,311  1,045,904  857,719  1,171,629  1,393,415  8,198,960          15,835,807   
          Minimum required provision  -  446,920  212,477  1,166,851  396,135  536,274  872,521  1,000,701  8,198,960          12,830,839   
          Excess provision  -  121,588  13,884  1,206,460  649,769  321,445  299,108  392,714  -          3,004,968   

           

          (1) Ratio between maturities and types; and
          (2) The overall total includes performing loan operations in the amount of R$222,238,630 thousand (December 31, 2010 – R$214,732,172 thousand and March 31, 2010 – R$181,064,658 thousand) and non-performing loan operations of R$17,673,135 thousand (December 31, 2010 – R$15,881,805 thousand and March 31, 2010 – R$17,042,157 thousand)

             
          Bradesco  143 

           

           

           
          Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

          d) Concentration of loan operations

           

                       
            R$ thousand 
          2011 2010
          March 31  %  December 31  %  March 31  % 
          Largest borrower  2,320,839  1.0  2,687,550  1.2  2,328,998  1.2 
          10 largest borrowers  12,644,447  5.3  13,072,697  5.7  12,441,160  6.3 
          20 largest borrowers  19,731,269  8.2  20,477,156  8.9  18,876,402  9.5 
          50 largest borrowers  33,014,477  13.8  32,483,992  14.1  29,905,508  15.1 
          100 largest borrowers  42,363,261  17.7  41,284,361  17.9  37,913,430  19.1 

           

          e) By economic activity sector

           

                       
            R$ thousand 
          2011 2010
          March 31  %  December 31  %  March 31  % 
          Public sector  1,008,058  0.4  973,496  0.4  1,545,836  0.8 
          Federal Government  609,564  0.2  585,520  0.2  1,046,540  0.6 
          Petrochemical  598,343  0.2  571,976  0.2  1,012,311  0.6 
          Financial intermediaries  11,221  -  13,544  -  34,229  - 
          State Government  398,494  0.2  387,976  0.2  499,296  0.2 
          Production and distribution of electricity  398,494  0.2  387,976  0.2  499,296  0.2 
          Private sector  238,903,707  99.6  229,640,481  99.6  196,560,979  99.2 
          Manufacturing  46,561,663  19.4  45,268,088  19.5  39,351,328  19.9 
          Food products and beverages  11,880,625  5.0  11,276,005  4.9  10,615,070  5.4 
          Steel, metallurgy and mechanics  7,946,450  3.3  7,263,943  3.1  6,410,845  3.2 
          Chemical  4,202,933  1.7  4,706,105  2.0  4,277,893  2.2 
          Pulp and paper  3,025,499  1.3  3,115,730  1.4  2,341,076  1.2 
          Textiles and apparel  2,934,453  1.2  2,759,043  1.2  2,122,336  1.1 
          Rubber and plastic articles  2,412,092  1.0  2,312,310  1.0  1,999,239  1.0 
          Light and heavy vehicles  2,164,101  0.9  1,907,383  0.8  1,525,742  0.8 
          Oil refining and production of alcohol  2,150,942  0.9  2,137,583  0.9  2,040,310  1.0 
          Electric and electronic products  1,901,961  0.8  1,923,533  0.8  1,259,123  0.6 
          Extraction of metallic and non-metallic ores  1,700,383  0.7  1,788,928  0.8  1,778,908  0.9 
          Furniture and wood products  1,661,672  0.7  1,635,419  0.7  1,326,766  0.7 
          Non-metallic materials  1,373,244  0.6  1,277,490  0.6  1,012,428  0.5 
          Automotive parts and accessories  993,373  0.4  974,309  0.4  844,099  0.4 
          Publishing, printing and reproduction  590,803  0.2  565,256  0.2  423,772  0.2 
          Leather articles  527,081  0.2  555,662  0.2  458,614  0.2 
          Other industries  1,096,051  0.5  1,069,389  0.5  915,107  0.5 
          Commerce  37,809,367  15.7  34,518,955  15.0  27,003,722  13.6 
          Merchandise in specialty stores  9,616,061  4.0  8,392,430  3.6  7,052,297  3.6 
          Food products, beverages and tobacco  4,249,558  1.8  4,429,259  1.9  3,371,904  1.7 
          Non-specialized retailer  3,687,769  1.5  3,297,315  1.4  2,460,351  1.2 
          Clothing and footwear  3,339,685  1.4  2,792,636  1.2  1,854,531  0.9 
          Automobile  3,093,388  1.3  2,974,855  1.3  2,378,704  1.2 
          Motor vehicle repairs, parts and accessories  2,582,997  1.1  2,445,068  1.1  1,949,643  1.0 
          Grooming and household articles  2,317,831  0.9  2,201,599  1.0  1,673,090  0.8 
          Waste and scrap  1,651,279  0.7  1,600,659  0.7  1,322,063  0.7 

           

           
             
          144 Report on Economic and Financial Analysis – March 2011 

           

           

           
          Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

                       
            R$ thousand 
          2011 2010
          March 31  %  December 31  %  March 31  % 
          Fuel  1,649,099  0.7  1,503,354  0.7  1,221,297  0.6 
          Agricultural products  1,628,063  0.7  1,170,560  0.5  791,080  0.4 
          Trade intermediary  1,447,770  0.6  1,276,445  0.6  1,061,298  0.5 
          Wholesale of goods in general  1,308,477  0.5  1,242,319  0.5  958,315  0.5 
          Other commerce  1,237,390  0.5  1,192,456  0.5  909,149  0.5 
          Financial intermediaries  715,810  0.3  565,607  0.3  787,821  0.4 
          Services  51,771,689  21.6  49,495,659  21.5  42,103,883  21.2 
          Transportation and storage  13,033,801  5.4  12,256,494  5.3  10,046,446  5.0 
          Civil construction  11,990,332  5.0  10,965,582  4.8  8,298,177  4.2 
          Real estate activities, rentals and corporate services  9,829,455  4.1  10,010,920  4.3  8,480,308  4.3 
          Production and distribution of electric power, gas and water  4,765,562  2.0  4,677,929  2.0  4,839,323  2.5 
          Holding companies, legal, accounting and business advisory services  2,422,068  1.0  2,346,211  1.0  2,294,610  1.2 
          Hotels and catering  1,966,105  0.8  1,853,957  0.8  1,484,747  0.7 
          Social services, education, health, defense and social security  1,898,113  0.8  1,900,715  0.8  1,600,175  0.8 
          Clubs, leisure, cultural and sport activities  1,481,353  0.6  1,352,937  0.6  1,116,442  0.6 
          Telecommunications  433,151  0.2  797,783  0.4  586,797  0.3 
          Other services  3,951,749  1.7  3,333,131  1.5  3,356,858  1.6 
          Agriculture, cattle raising, fishing, forestry and timber industry  3,307,018  1.4  2,907,753  1.3  2,584,978  1.3 
          Individuals  98,738,160  41.2  96,884,419  42.0  84,729,247  42.8 
          Total  239,911,765  100.0  230,613,977  100.0  198,106,815  100.0 

           

             
          Bradesco  145 

           

           

           
          Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

          f) Breakdown of loan operations and allowance for loan losses

                             
          Risk level R$ thousand 
          Portfolio balance
          Non-performing loans Performing
          loans          		 Total %
          (1)                     		 2011  2010 
          Past due  Outstanding  Total – non-
          performing           
          loans          		 %
          March 31           
          YTD (2)          		 %
          December 31           
          YTD (2)          		 %
          March 31           
          YTD (2)
          AA  -  -  -  41,147,991  41,147,991  17.2  17.2  17.3  15.9 
          A  -  -  -  102,110,974  102,110,974  42.6  59.8  60.6  61.0 
          B  453,320  1,948,012  2,401,332  21,142,181  23,543,513  9.8  69.6  70.2  71.7 
          C  941,673  2,472,547  3,414,220  51,453,209  54,867,429  22.9  92.5  92.5  91.4 
          Subtotal  1,394,993  4,420,559  5,815,552  215,854,355  221,669,907  92.5       
          D  713,523  1,262,654  1,976,177  2,774,396  4,750,573  2.0  94.5  94.4  93.4 
          E  551,589  826,395  1,377,984  540,784  1,918,768  0.8  95.3  95.2  94.3 
          F  526,243  704,618  1,230,861  504,617  1,735,478  0.6  95.9  95.8  95.2 
          G  532,486  557,429  1,089,915  277,830  1,367,745  0.6  96.5  96.4  95.9 
          H  3,531,597  2,651,049  6,182,646  2,286,648  8,469,294  3.5  100.0  100.0  100.0 
          Subtotal  5,855,438  6,002,145  11,857,583  6,384,275  18,241,858  7.5       
          Overall total on March 31, 2011  7,250,431  10,422,704  17,673,135  222,238,630  239,911,765  100.0       
          %  3.0  4.4  7.4  92.6  100.0         
          Overall total on December 31, 2010  6,521,764  9,360,041  15,881,805  214,732,172  230,613,977         
          %  2.8  4.1  6.9  93.1  100.0         
          Overall total on March 31, 2010  6,691,337  10,350,820  17,042,157  181,064,658  198,106,815         
          %  3.4  5.2  8.6  91.4  100.0         

           

          (1) Ratio between risk level and total portfolio; and
          (2)           Accumulated ratio between risk level and total portfolio.

             
          146 Report on Economic and Financial Analysis – March 2011 

           

           

           
          Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

                                 
          Risk level R$ thousand 
          Allowance
          Minimum required
          provision          		 Minimum required Additional Existing 2011  2010
          Specific Generic Total %
          March 31
          YTD (1)           		 %
          December 31
          YTD (1)           		 %
          March 31
          YTD (1)           
          Past due  Outstanding  Total
          specific           
          AA  -  -  -  -  -  -  -  -  -  -  - 
          A  0.5  -  -  -  510,555  510,555  1,510  512,065  0.5  0.5  0.6 
          B  1.0  4,533  19,480  24,013  211,422  235,435  4,274  239,709  1.0  1.0  1.1 
          C  3.0  28,250  74,177  102,427  1,543,596  1,646,023  1,185,096  2,831,119  5.2  5.6  6.1 
          Subtotal    32,783  93,657  126,440  2,265,573  2,392,013  1,190,880  3,582,893  1.6  1.7  1.8 
          D  10.0  71,352  126,265  197,617  277,440  475,057  782,634  1,257,691  26.5  26.2  26.4 
          E  30.0  165,477  247,919  413,396  162,235  575,631  351,587  927,218  48.3  48.0  48.0 
          F  50.0  263,122  352,309  615,431  252,308  867,739  296,679  1,164,418  67.1  67.0  67.1 
          G  70.0  372,740  390,200  762,940  194,481  957,421  381,123  1,338,544  97.9  98.0  97.5 
          H  100.0  3,531,597  2,651,049  6,182,646  2,286,648  8,469,294  -  8,469,294  100.0  100.0  100.0 
          Subtotal    4,404,288  3,767,742  8,172,030  3,173,112  11,345,142  1,812,023  13,157,165  72.1  73.1  74.0 
          Overall total on March 31, 2011    4,437,071  3,861,399  8,298,470  5,438,685  13,737,155  3,002,903  16,740,058  7.0     
          %    26.5  23.1  49.6  32.5  82.1  17.9  100.0       
          Overall total on December 31, 2010    4,228,196  3,670,131  7,898,327  5,389,925  13,288,252  3,001,419  16,289,671    7.1   
          %    26.0  22.5  48.5  33.1  81.6  18.4  100.0       
          Overall total on March 31, 2010    4,305,352  3,924,718  8,230,070  4,600,769  12,830,839  3,004,968  15,835,807      8.0 
          %    27.2  24.8  52.0  29.0  81.0  19.0  100.0       

           

          (1) Ratio between existing allowance and total portfolio by risk level.

             
          Bradesco  147 

           

           

           
          Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

          g) Breakdown of allowance for loan losses

                 
            R$ thousand 
          2011  2010
          1st Quarter  4th Quarter  1st Quarter 
          Opening balance  16,289,671  16,018,740  16,313,243 
          - Specific provision (1)  7,898,327  7,894,836  8,886,147 
          - Generic provision (2)  5,389,925  5,121,758  4,424,421 
          - Excess provision (3)  3,001,419  3,002,146  3,002,675 
          Additions  2,534,045  2,299,160  2,159,287 
          Reductions  (2,083,658)  (2,028,229)  (2,636,723) 
          Closing balance  16,740,058  16,289,671  15,835,807 
          - Specific provision (1)  8,298,470  7,898,327  8,230,070 
          - Generic provision (2)  5,438,685  5,389,925  4,600,769 
          - Excess provision (3)  3,002,903  3,001,419  3,004,968 

           

          (1) For operations with installments overdue for more than 14 days;
          (2) Recorded based on the customer/transaction classification and, accordingly, not included in the preceding item; and
          (3) The additional provision is recorded based on Management's experience and expected realization of the loan portfolio, to determine the total provision deemed sufficient to cover specific and general credit risks, together with the provision calculated based on risk level ratings and the corresponding minimum percentage of provision established by CMN Resolution 2,682/99. The additional provision per customer was classified according to the corresponding risk levels (Note 10f);

          h) ALL expenses net of amounts recovered

          Expenses with the allowance for loan losses, net of recoveries of written-off credits, are as follows:

                 
            R$ thousand 
          2011  2010
          1st Quarter  4th Quarter  1st Quarter 
          Amount recorded  2,534,045  2,299,160  2,159,287 
          Amount recovered (1)  (613,490)  (722,402)  (508,119) 
          ALL expense net of amounts recovered  1,920,555  1,576,758  1,651,168 

           

          (1) Classified in income from loan operations (Note 10j).

          i) Changes in renegotiated portfolio

                 
            R$ thousand 
          2011  2010
          1st Quarter  4th Quarter  1st Quarter 
          Opening balance  6,911,604  6,671,145  5,546,177 
          Amount renegotiated  1,672,867  1,559,880  1,132,877 
          Amount received  (763,936)  (736,742)  (485,500) 
          Write-offs  (546,989)  (582,679)  (352,928) 
          Closing balance  7,273,546  6,911,604  5,840,626 
          Allowance for loan losses  4,582,520  4,341,572  3,665,188 
          Percentage on renegotiation portfolio  63.0%  62.8%  62.8% 

           

             
          148 Report on Economic and Financial Analysis – March 2011 

           

           

           
          Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

          j) Income on loan and leasing operations

                 
            R$ thousand 
          2011  2010
          1st Quarter  4th Quarter  1st Quarter 
          Discounted trade receivables and loans  7,184,960  6,976,623  5,781,000 
          Financings  2,426,774  2,323,003  1,899,641 
          Agricultural and agribusiness loans  276,512  296,824  270,791 
          Subtotal  9,888,246  9,596,450  7,951,432 
          Recovery of credits charged-off as loss  613,490  722,402  508,119 
          Subtotal  10,501,736  10,318,852  8,459,551 
          Leasing net of expenses  444,858  499,571  640,112 
          Total  10,946,594  10,818,423  9,099,663 

           

          11) OTHER RECEIVABLES

          a) Foreign exchange portfolio

          Balance sheet accounts

                 
            R$ thousand 
          2011  2010
          March 31  December 31  March 31 
          Assets – other receivables       
          Exchange purchases pending settlement  10,984,526  6,702,693  7,921,683 
          Foreign exchange acceptances and term documents in foreign currencies  -  -  2,121 
          Exchange sale receivables  5,590,026  2,936,816  2,467,032 
          (-) Advances in local currency received  (415,051)  (255,129)  (528,962) 
          Income receivable on advances granted  48,893  61,111  91,355 
          Total  16,208,394  9,445,491  9,953,229 
          Liabilities – other liabilities       
          Exchange sales pending settlement  5,573,821  2,922,559  2,450,726 
          Exchange purchase payables  11,206,544  6,893,007  8,121,115 
          (-) Advances on foreign exchange contracts  (5,727,656)  (4,188,998)  (5,125,949) 
          Other  7,039  5,743  6,465 
          Total  11,059,748  5,632,311  5,452,357 
          Net foreign exchange portfolio  5,148,646  3,813,180  4,500,872 
          Memorandum accounts:       
          - Loans available for imports  1,570,061  1,465,018  1,315,406 
          - Confirmed exports loans  35,360  36,271  71,684 

           

             
          Bradesco  149 

           

           

           
          Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

          Foreign exchange results

          Breakdown of foreign exchange transaction results adjusted to facilitate presentation

                 
            R$ thousand 
          2011  2010
          1st Quarter  4th Quarter  1st Quarter 
          Foreign exchange operations result  129,411  120,216  130,877 
          Adjustments:       
          - Income on foreign currency financing (1)  5,103  4,161  19,419 
          - Income on export financing (1)  114,571  102,150  82,464 
          - Income on foreign investments (2)  152  (749)  46,518 
          - Expenses of liabilities with foreign bankers (3) (Note 17c)  (2,955)  (8,369)  (158,341) 
          - Funding expenses (4)  (71,059)  (64,674)  (57,034) 
          - Other  (56,209)  (35,945)  45,439 
          Total adjustments  (10,397)  (3,426)  (21,535) 
          Adjusted foreign exchange operations result  119,014  116,790  109,342 

           

          (1) Classified in item “Income from loan operations;”
          (2) Stated in item “Income on securities transactions;”
          (3) Related to funds for financing advances on foreign exchange contracts and import financing, classified in item “Borrowing and onlending expenses;” and
          (4) Refer to funding expenses of investments on foreign exchange transactions.

          b) Sundry

                 
            R$ thousand 
          2011  2010
          March 31  December 31  March 31 
          Tax credits (Note 34c)  18,419,399  17,447,015  16,557,045 
          Credit card operations  11,954,872  13,392,247  10,569,918 
          Borrowers by escrow deposits  7,858,796  7,545,693  6,609,519 
          Prepaid taxes  1,493,252  1,802,731  2,072,017 
          Sundry borrowers  2,023,793  1,763,707  1,675,178 
          Trade and credit receivables (1)  1,614,387  1,969,457  2,524,335 
          Advances to Fundo Garantidor de Crédito 
            (Deposit Guarantee Fund – FGC)                     		 487,096  532,761  669,757 
          Payments to be reimbursed  501,698  518,885  505,281 
          Receivables from sale of assets  69,542  71,397  67,691 
          Other  213,352  243,591  194,891 
          Total  44,636,187  45,287,484  41,445,632 
           
          (1) Includes receivables from the acquisition of financial assets from loan operations without substantial transfer of risks and benefits.

           

             
          150 Report on Economic and Financial Analysis – March 2011 

           

           

           
          Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

          12) OTHER ASSETS

          a) Foreclosed assets/others

                     
            R$ thousand 
          Cost Provision for
          losses          		 Residual value
          2011  2010
          March 31  December 31  March 31 
          Real estate  149,266  (34,724)  114,542  112,690  143,630 
          Goods subject to special conditions  57,495  (57,495)  -  -  - 
          Vehicles and similar  395,839  (121,655)  274,184  286,805  340,932 
          Inventories/warehouse  28,822  -  28,822  22,628  27,696 
          Machinery and equipment  19,465  (9,081)  10,384  11,495  5,843 
          Others  8,211  (7,107)  1,104  1,136  1,122 
          Total on March 31, 2011  659,098  (230,062)  429,036     
          Total on December 31, 2010  681,807  (247,053)    434,754   
          Total on March 31, 2010  775,574  (256,351)      519,223 

           

          b) Prepaid expenses

                 
            R$ thousand 
          2011  2010
          March 31  December 31  March 31 
          Commission on the placement of financing (1)  675,777  603,957  755,959 
          Insurance selling expenses (2)  481,478  476,082  401,743 
          Advertising and publicity expenses (3)  91,492  65,406  68,636 
          Other  149,481  127,951  182,248 
          Total  1,398,228  1,273,396  1,408,586 

           

          (1) Commissions paid to storeowners and car dealers;
          (2) Commissions paid to brokers for the sale of insurance, private pension plans and savings bond products; and
          (3) Prepaid future advertising and marketing expenses.

          13) INVESTMENTS

          a) Changes in investments in the consolidated financial statements

                 
          Affiliates R$ thousand 
          2011  2010
          March 31  December 31  March 31 
          - IRB-Brasil Resseguros S.A.  444,682  453,109  427,214 
          - Integritas Participações S.A.  444,806  431,894  419,564 
          - Serasa S.A.  83,634  86,558  86,434 
          - BES Investimento do Brasil S.A.  95,612  94,543  84,931 
          - Other  82,566  87,233  37,421 
          Total in affiliates  1,151,300  1,153,337  1,055,564 
          - Tax incentives  240,089  240,089  260,448 
          - Other investments  546,425  446,490  501,686 
          Provision for:       
          - Tax incentives  (213,252)  (213,252)  (231,074) 
          - Other investments  (49,874)  (49,874)  (49,937) 
          Overall total of investments  1,674,688  1,576,790  1,536,687 

           

             
          Bradesco  151 

           

           

           
          Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

          b) The adjustments resulting from the equity accounting for investments were recorded in income accounts, under “Equity in the Earnings (losses) of Unconsolidated Companies” and corresponded to R$34,188 thousand in the first quarter of 2011 (R$60,562 thousand in the fourth quarter of 2010 and R$28,755 thousand in the first quarter of 2010).

                             
          Companies R$ thousand 
          Capital stock Adjusted 
          shareholders’ 
          equity                     		 Number of shares/quotas 
          held (thousands)                     		 Consolidated
          ownership on
          capital stock           		 Adjusted net 
          income          		 Equity Accounting Adjustments (1) 
          2011  2010 
          Common  Preferred  1st Quarter  4th Quarter  1st Quarter 
          IRB-Brasil Resseguros S.A. (2)  1,350,000  2,093,606  -  212  21.24%  127,589  27,100  40,042  10,007 
          BES Investimento do Brasil S.A. – Banco de Investimento (2)  320,000  478,060  10,745  10,745  20.00%  17,895  3,579  2,892  2,720 
          Serasa S.A. (2)  145,000  1,012,518  909  -  8.26%  43,075  3,558  8,397  7,082 
          Integritas Participações S.A.(2)  57,406  619,507  22,581  -  22.32%  (220)  (49)  9,231  8,946 
          Equity in the earnings (losses) of unconsolidated companies              34,188  60,562  28,755 

           

          (1) Equity adjustments comprise participation in the results recorded by the companies as from their acquisition and include equity variations in the investees not derived from results, as well as adjustments arising from the equalization of accounting practices, when applicable; and
          (2) Based on out-of-date           financial information.

             
          152 Report on Economic and Financial Analysis – March 2011 

           

           

           
          Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

          14) PREMISES AND EQUIPMENT AND LEASED ASSETS

          These assets are stated at acquisition cost. Depreciation is calculated based on the straight -line method at annual rates which take into consideration their economic useful lives.

                       
            R$ thousand 
          Annual rate Cost Depreciation Residual value
          2011  2010
          March 31  December 31  March 31 
          Premises and equipment:             
          - Buildings  4%  767,653  (353,584)  414,069  419,315  298,840 
          - Land  -  345,890  -  345,890  345,469  346,214 
          Facilities, furniture and equipment in use  10%  3,643,277  (2,075,738)  1,567,539  1,583,096  1,434,450 
          Security and communication systems  10%  210,867  (129,637)  81,230  81,647  75,045 
          Data processing systems  20 to 50%  1,774,827  (1,177,915)  596,912  674,089  479,165 
          Transportation systems  20%  36,025  (23,571)  12,454  13,396  14,447 
          Financing lease of data processing systems  20 to 50%  2,169,230  (1,524,553)  644,677  645,058  587,772 
          Subtotal    8,947,769  (5,284,998)  3,662,771  3,762,070  3,235,933 
          Leased assets    13,231  (10,232)  2,999  4,061  8,334 
          Total on March 31, 2011    8,961,000  (5,295,230)  3,665,770     
          Total on December 31, 2010    8,869,823  (5,103,692)    3,766,131   
          Total on March 31, 2010    7,960,071  (4,715,804)      3,244,267 

           

             
          Bradesco  153 

           

           

           
          Financial Statements, Independent Auditors’ Report, and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

          Bradesco Organization’s premises and equipment present an unrecorded surplus value of R$2,567,678 thousand (December 31, 2010 – R$2,220,792 thousand and March 31, 2010 – R$1,886,949 thousand), which results in large part from the increase in their market price, based on appraisal reports prepared by independent experts in 2011, 2010 and 2009.

          Bradesco has entered into financial lease agreements, for data processing systems (hardware), which are included in premises and equipment. Under this accounting policy, assets and liabilities are classified in the financial statements and depreciation is calculated according to the depreciation policy adopted for the Bank’s own assets. Interest on the liability is also recognized.

          The fixed asset to reference shareholders’ equity ratio in the “economic-financial consolidated” is 17.41% (December 31, 2010 – 18.14% and March 31, 2010 – 19.85%), and in the “financial consolidated” is 47.74% (December 31, 2010 – 49.71% and March 31, 2010 – 45.06%), whereas the maximum limit is 50%.

          The difference between the fixed assets to shareholders’ equity ratio in the “economic-financial consolidated” and in the “financial consolidated” is due to non-financial subsidiaries which have high liquidity and low fixed assets to shareholders’ equity ratio, with the consequent increase in the fixed assets to shareholders’ equity ratio of the “financial consolidated.” Whenever necessary, we may reallocate the funds to the financial companies through the payment of dividends/interest on shareholders’ equity to financial companies or a corporate reorganization between the financial and non-financial companies, thus improving the ratio.

          15) INTANGIBLE ASSETS

          a) Goodwill

          Goodwill from investment acquisitions amounted to R$2,980,243 thousand, net of accrued amortization, when applicable, of which: (i) R$509,666 thousand represents the difference between book value and market value of shares recorded in Permanent Assets – Investments (BM&FBovespa and Integritas/Fleury shares), to be amortized upon their realization; and (ii) R$2,470,577 thousand representing future profitability/client portfolio, which is amortized over twenty years, net of accrued amortization , when applicable.

          In the first quarter of 2011, goodwill amortization totaled R$65,735 thousand (R$66,513 thousand in the fourth quarter of 2010 and R$58,873 thousand in the first quarter of 2010) (Note 29).

             
          154 Report on Economic and Financial Analysis – March 2011 

           

           

           
          Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

          b) Intangible assets

          Acquired intangible assets comprise:

                       
            R$ thousand 
          Amortization rate (1) Cost Amortization Residual value
          2011  2010
          March 31  December 31  March 31 
          Acquisition of banking services rights  Contract (4)  3,738,743  (1,910,802)  1,827,941  1,909,831  1,504,056 
          Software (2)  20% to 50%  4,414,105  (2,303,908)  2,110,197  1,992,843  1,669,714 
          Future profitability/client portfolio (3)  Up to 20%  2,916,276  (445,699)  2,470,577  2,416,496  1,933,533 
          Other  20%  103,957  (65,472)  38,485  39,981  28,266 
          Total on March 31, 2011    11,173,081  (4,725,881)  6,447,200     
          Total on December 31, 2010    10,771,479  (4,412,328)    6,359,151   
          Total on March 31, 2010    8,674,765  (3,539,196)      5,135,569 

           

          (1) Intangible assets are amortized over the estimated period of economic benefit and charged to other administrative expenses and other operating expenses, when applicable;
          (2) Software acquired and/or developed by specialized companies;
          (3) Mainly composed by goodwill on the acquisition of interest in Banco Ibi - R$994,876 thousand, Odontoprev - R$370,538 thousand, Ágora Corretora - R$237,582 thousand, Ibi México - R$25,929 thousand, Europ Assistance Serviços de Assistência Personalizados - R$24,828 thousand, CBSS – Cia. Brasileira de Soluções e Serviços - R$180,572 thousand and Cielo S.A. - R$408,014 thousand, net of accrued amortization, when applicable; and
          (4) Based on each pay-back           agreement.

          Expenses with research and development of systems totaled R$40,187 thousand in the first quarter of 2011 (R$41,078 thousand in the fourth quarter of 2010 and R$35,693 thousand in the first quarter of 2010).

             
          Bradesco  155 

           

           

           
          Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

          c) Change in intangible assets by type

                     
            R$ thousand 
          Acquisition of banking
          service rights                     		  Software Future profitability/
          client portfolio                     		  Other   Total 
          Balance on December 31, 2010  1,909,831  1,992,843  2,416,496  39,981  6,359,151 
          Additions/reductions  75,044  225,776  119,816  3,412  424,048 
          Amortization for the period  (156,934)  (108,422)  (65,735)  (4,908)  (335,999) 
          Balance on March 31, 2011  1,827,941  2,110,197  2,470,577  38,485  6,447,200 

           

          16) DEPOSITS, FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND FUNDS FROM ISSUANCE OF SECURITIES

          a) Deposits

                         
            R$ thousand 
          2011   2010
          1 to 30 days  31 to 180 days  181 to 360 days  More than 360 days  March 31  December 31  March 31 
          • Demand deposits (1)  31,777,641  -  -  -  31,777,641  36,224,557  31,590,287 
          • Savings deposits (1)  54,624,988  -  -  -  54,624,988  53,435,652  45,194,691 
          • Interbank deposits  32,345  117,624  77,231  25,049  252,249  275,444  365,758 
          • Time deposits (2)  8,014,398  10,577,590  21,465,699  75,996,825  116,054,512  102,157,731  92,576,685 
          • Other – investment deposits (1)  1,113,049  -  -  -  1,113,049  1,107,215  994,252 
          Overall total on March 31, 2011  95,562,421  10,695,214  21,542,930  76,021,874  203,822,439     
          %  46.9  5.2  10.6  37.3  100.0     
          Overall total on December 31, 2010  97,242,257  7,533,178  20,819,624  67,605,540    193,200,599   
          %  50.3  3.9  10.8  35.0    100.0   
          Overall total on March 31, 2010  83,320,280  11,141,547  9,396,169  66,863,677      170,721,673 
          %  48.8  6.5  5.5  39.2      100.0 

           

          (1) Classified as “1 to 30 days”, not considering average historical turnover; and
          (2)           Considers the maturities established in investments.

             
          156 Report on Economic and Financial Analysis – March 2011 

           

           

           
          Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

          b) Federal funds purchased and securities sold under agreements to repurchase

                         
            R$ thousand 
          2011 2010
          1 to 30 days  31 to 180 days  181 to 360 days  More than 360 days  March 31  December 31  March 31 
          Own portfolio  71,520,463  6,854,678  5,990,412  36,409,145  120,774,698  119,486,995  60,493,645 
          • Government securities  66,735,051  318,474  337,933  427,730  67,819,188  69,373,887  18,846,891 
          • Debentures of own issuance  2,765,448  4,857,678  5,316,941  35,411,355  48,351,422  46,040,178  40,789,793 
          • Foreign  2,019,964  1,678,526  335,538  570,060  4,604,088  4,072,930  856,961 
          Third-party portfolio (1)  50,793,391  -  -  -  50,793,391  44,084,563  66,823,881 
          Unrestricted portfolio (1)  -  7,385,043  20,067  15,582  7,420,692  7,925,602  854,449 
          Overall total on March 31, 2011 (2)  122,313,854  14,239,721  6,010,479  36,424,727  178,988,781     
          %  68.3  8.0  3.3  20.4  100.0     
          Overall total on December 31, 2010 (2)  115,794,642  14,174,646  6,917,135  34,610,737    171,497,160   
          %  67.5  8.3  4.0  20.2    100.0   
          Overall total on March 31, 2010 (2)  84,307,565  6,604,654  7,348,736  29,911,020      128,171,975 
          %  65.8  5.2  5.7  23.3      100.0 

           

          (1) Represented by government securities; and
          (2) Includes R$40,961,895 thousand (December 31, 2010 - R$30,850,727 thousand and March 31, 2010 – R$26,064,243 thousand) of investment funds in purchase and sale commitments with Bradesco, whose quotaholders are subsidiaries included in the consolidated financial statements (Notes 8a, b, c and d).

             
          Bradesco  157 

           

           

           
          Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

          c) Funds from issuance of securities

                         
            R$ thousand 
          2011 2010 
           1 to 30 days  31 to 180 days  181 to 360 days  More than 360 days  March 31   December 31  March 31  
          Securities - domestic:               
          - Mortgage bonds  60,682  552,540  678,060  2,742  1,294,024  1,277,455  995,509 
          - Letters of credit for real estate  172,349  531,950  464,488  28,503  1,197,290  776,787  1,093 
          - Letters of credit for agribusiness  104,996  774,848  926,637  9,193  1,815,674  1,699,710  1,463,240 
          - Financial bill  -  -  -  11,521,193  11,521,193  7,819,882  - 
          - Debentures (1)  -  763,323  -  224  763,547  743,127  756,015 
          Subtotal  338,027  2,622,661  2,069,185  11,561,855  16,591,728  12,316,961  3,215,857 
          Securities - foreign:               
          - MTN Program Issues (2)  6,874  -  -  1,628,700  1,635,574  1,682,930  1,337,120 
          - Securitization of future flow of money orders received from abroad (Note 16d)  5,537  129,074  142,512  3,224,718  3,501,841  3,673,572  3,931,748 
          - Securitization of future flow of credit card bill receivables from cardholders resident abroad (Note 16d)  272  -  -  -  272  23,466  94,434 
          - Issuance costs  -  -  -  (28,416)  (28,416)  (22,978)  (28,646) 
          Subtotal  12,683  129,074  142,512  4,825,002  5,109,271  5,356,990  5,334,656 
          Overall total on March 31, 2011  350,710  2,751,735  2,211,697  16,386,857  21,700,999     
          %  1.6  12.7  10.2  75.5  100.0     
          Overall total on December 31, 2010  173,182  2,483,953  2,273,497  12,743,319    17,673,951   
          %  1.0  14.0  12.9  72.1    100.0   
          Overall total on March 31, 2010  172,806  1,153,387  1,734,092  5,490,228      8,550,513 
          %  2.0  13.5  20.3  64.2      100.0 

           

          (1) Refers to issuances of simple debentures not convertible into Bradesco Leasing S.A. Arrendamento Mercantil shares, maturing on May 1, 2011 with 104% of CDI remuneration; and
          (2) Issuance of securities in the foreign market for costumers’ foreign exchange operations, through purchase and sale of foreign currencies, related to discounts of export bills, pre-financing of exports and financing of imports, substantially in the short term.

             
          158 Report on Economic and Financial Analysis – March 2011 

           

           

           
          Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

          d) Since 2003, the Bradesco Organization has been entering into certain agreements designed to optimize its funding and liquidity management activities through the use of SPEs. These SPEs, named International Diversified Payment Rights Company and Brazilian Merchant Voucher Receivables Limited, are financed with long-term debt and settled through future cash flows of the underlying assets, which basically include:

          (i) Current and future flows of money orders remitted by individuals and corporate entities located abroad to beneficiaries in Brazil for which the Bank acts as paying agent; and

          (ii) Current and future flows of credit card receivables arising from expenditures in Brazil by holders of credit cards issued outside Brazil.

          Long-term notes issued by the SPEs and sold to investors are settled through funds derived from the money order flows and credit card bills. Bradesco is obliged to redeem these securities in specific cases of delinquency or if SPEs’ operations are discontinued.

          Funds from the sale of current and future money order flows and credit card receivables, received by the SPEs, must be maintained in a specific bank account until a minimum limit is attained.

          We present below the main features of the notes issued by SPEs:

                       
            R$ thousand 
          Date of
          Issue          		 Transaction
          amount          		 Maturity Total 
          2011  2010 
           March 31  December 31   March 31 
          Securitization of future flow of money orders received from abroad 8.20.2003  595,262  8.20.2010(1)  -  -  20,403 
          7.28.2004  305,400  8.20.2012  38,786  46,299  70,467 
          6.11.2007  481,550  5.20.2014  305,569  338,179  444,691 
          6.11.2007  481,550  5.20.2014  304,956  337,991  444,775 
          12.20.2007  354,260  11.20.2014  227,698  249,570  320,176 
          12.20.2007  354,260  11.20.2014  227,698  249,570  320,176 
          3.6.2008  836,000  5.22.2017(2)  813,412  831,993  889,433 
          12.19.2008  1,168,500  2.20.2019(3)  813,128  831,752  889,926 
          3.20.2009  225,590  2.20.2015(4)  -  -  177,439 
          12.17.2009  133,673  11.20.2014  121,808  124,584  133,208 
          12.17.2009  133,673  2.20.2017  121,304  124,097  132,647 
          12.17.2009  89,115  2.20.2020  80,847  82,708  88,407 
          8.20.2010(5)  307,948  8.21.2017  284,212  290,684  - 
          9.29.2010(6)  170,530  8.21.2017  162,423  166,145  - 
          Total    5,637,311    3,501,841  3,673,572  3,931,748 
          Securitization of future flow of credit card bill receivables from cardholders resident abroad  7.10.2003  800,818  6.15.2011  272  23,466  94,434 
          Total    800,818    272  23,466  94,434 

           

          (1) Security settled on August 20, 2010;
          (2) The maturity date was postponed from May 20, 2015 to May 22, 2017;
          (3) The maturity date was postponed from February 20, 2015 to February 22, 2016 and from February 22, 2016 to February 20, 2019;
          (4) Security presettled on August 20, 2010;
          (5) New issuance of securities abroad due on August 21, 2017 in the amount of US$175,000; and
          (6) New issuance of securities abroad due on August 21, 2017 in the amount of US$100,000.

             
          Bradesco  159 

           

           

           
          Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

          e) Expenses with funding and monetary restatement and interest on technical provisions for insurance, private pension plans and savings bonds:

                 
            R$ thousand 
          2011 2010 
          1st Quarter  4th Quarter  1st Quarter 
          Savings deposits  878,542  816,552  642,672 
          Time deposits  3,104,382  2,840,185  2,187,333 
          Federal funds purchased and securities sold under agreements to repurchase  4,529,373  4,104,383  2,417,849 
          Funds from issuance of securities  499,880  344,678  177,798 
          Other funding expenses  88,650  90,025  85,823 
          Subtotal  9,100,827  8,195,823  5,511,475 
          Expenses for monetary restatement and interest on technical provisions from insurance, private pension plans and savings bonds  1,703,001  1,754,206  1,493,549 
          Total  10,803,828  9,950,029  7,005,024 

           

             
          160 Report on Economic and Financial Analysis – March 2011 

           

           

             
            Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

          17) BORROWING AND ONLENDING

          a) Borrowing

                         
            R$ thousand 
          2011 2010
          1 to 30 days  31 to 180 days  181 to 360 days  More than 360 days  March 31  December 31  March 31 
          Foreign  1,029,848  5,226,114  2,559,738  876,005  9,691,705  7,989,907  8,593,553 
          Overall total on March 31, 2011  1,029,848  5,226,114  2,559,738  876,005  9,691,705     
          %  10.7  53.9  26.4  9.0  100.0     
          Overall total on December 31, 2010  817,959  4,188,363  2,223,125  760,460    7,989,907   
          %  10.3  52.4  27.8  9.5    100.0   
          Overall total on March 31, 2010  1,096,670  4,301,083  2,425,535  770,265      8,593,553 
          %  12.7  50.1  28.2  9.0      100.0 

           

          b) Onlending

                         
            R$ thousand 
          2011 2010
          1 to 30 days  31 to 180 days  181 to 360 days  More than 360 days  March 31  December 31  March 31 
          Local  1,149,726  3,704,082  4,892,731  22,048,843  31,795,382  30,200,655  21,130,367 
          - National Treasury  -  -  35,016  -  35,016  36,660  62,143 
          - BNDES  352,293  1,253,621  2,123,720  8,247,719  11,977,353  11,759,333  8,336,070 
          - CEF  1,905  8,432  10,119  66,421  86,877  86,344  88,922 
          - FINAME  795,528  2,442,029  2,723,876  13,734,079  19,695,512  18,317,697  12,642,581 
          - Other institutions  -  -  -  624  624  621  651 
          Foreign  13,551  -  -  -  13,551  5,663  483,824 
          Overall total on March 31, 2011  1,163,277  3,704,082  4,892,731  22,048,843  31,808,933     
          %  3.7  11.6  15.4  69.3  100.0     
          Overall total on December 31, 2010  1,025,013  3,517,218  4,792,032  20,872,055    30,206,318   
          %  3.4  11.6  15.9  69.1    100.0   
          Overall total on March 31, 2010  1,048,948  2,625,928  3,580,223  14,359,092      21,614,191 
          %  4.9  12.1  16.6  66.4      100.0 

           

               
            Bradesco  161 

           

           

             
          Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report   

           

           
          Notes to the Consolidated Financial Statements 

           

          c) Borrowing and onlending expenses

                 
            R$ thousand 
          2011   2010
          1st Quarter  4th Quarter  1st Quarter 
          Borrowing:       
          - Local  1,023  662  468 
          - Foreign  18,229  16,833  14,643 
          Subtotal borrowing  19,252  17,495  15,111 
          Local onlending:       
          - National Treasury  179  305  1,337 
          - BNDES  181,927  175,221  138,952 
          - CEF  1,749  1,762  1,357 
          - FINAME  222,398  202,062  192,748 
          - Other institutions  5  44  59 
          Foreign onlending:       
          - Payables to foreign bankers (Note 11a)  2,955  8,369  158,341 
          - Other expenses with foreign onlending  (443,825)  (202,367)  (26,446) 
          Subtotal onlending  (34,612)  185,396  466,348 
          Total  (15,360)  202,891  481,459 

           

             
          18)  CONTINGENT ASSETS AND LIABILITIES AND LEGAL LIABILITIES – TAX AND SOCIAL SECURITY 
           
            a) Contingent assets 
           
           

          Contingent assets are not recognized in the financial statements, although there are ongoing proceedings with good prospects of success, such: as a) Social Integration Program (PIS), claiming the compensation of PIS on the Gross Operating Revenue, paid pursuant to Decree Laws 2,445/88 and 2,449/88, over the amount due under the terms of the Supplementary Law 07/70 (PIS Repique); and b) other taxes, the legality and/or constitutionality of which is in question and may lead to the reimbursement of amounts collected. 

           
           

          During the quarter, some of the proceedings showed progress that may result in favorable conditions for the recognition of the respective assets over the year. 

           
            b) Contingent liabilities classified as probable losses and legal liabilities – tax and social security 
           
           

          The Bradesco Organization is currently party to a number of labor, civil and tax lawsuits, arising from the normal course of its business activities. 

           
           

          Provisions were recorded based on the opinion of legal advisors, the type of lawsuit, similarity with previous lawsuits, complexity and positioning of the courts, whenever a loss is deemed probable. 

           
           

          Management considers that the provision recorded is sufficient to cover losses generated by the corresponding proceedings. 

           
           

          Liability related to litigation is held until the definite successful outcome of the lawsuit, represented by favorable judicial decisions, for which appeals can no longer be lodged or due to the statute of limitation. 

           

             
          162 Report on Economic and Financial Analysis – March 2011   

           

           

             
            Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

          I - Labor claims

          These are claims brought by former employees seeking indemnity, especially for unpaid overtime. In proceedings requiring judicial deposit, the amount of labor claims is recorded considering the effective perspective of loss of these deposits. For other proceedings, the provision is recorded based on the average of total payments made for claims settled in the last 12 months, considering the year of the judicial ruling.

          Following more effective control over working hours implemented in 1992, via electronic time cards, overtime is paid regularly during the employment contract and, accordingly, the amount of claims on an individual basis subsequent to 1997 dropped substantially.

          II - Civil claims

          These are claims for pain and suffering and property damages, mainly relating to notarized protests, returned checks, the inclusion of information about debtors in the restricted credit registry and the reincorporation of inflation adjustments excluded as a result of government economic plans. These lawsuits are individually controlled by computer-based systems and provisioned whenever the loss is evaluated as probable, considering the opinion of the legal advisors, the nature of the lawsuits, and similarity with previous lawsuits, complexity and positioning of the courts.

          The issues discussed in lawsuits relating to protests, returned checks and information on debtors in the credit restriction registry usually are not events that cause a significant impact on financial income. Most of these lawsuits are brought to the Special Civil Court (JEC), in which the claims are limited to 40 minimum wages.

          It is worth noting the increase in legal claims pleading the incidence of inflation rates which were excluded from the monetary restatement of savings accounts balances due to Government Economic Plans which were part of the Government economic policy to reduce inflation in the past. Although the Bank complied with the legal requirements in force at the time, these lawsuits have been provisioned taking into consideration claims effectively notified and their assessed loss perspectives, taking into consideration the current judicial decision of the Superior Court of Justice (STJ).

          Regarding the disputes related to Economic Plans, it is worth noting two aspects: a) the inexistence of potential representative liability, given the right to new suits is barred; and b) the “APDF”/165 lawsuit (failure to comply with fundamental concepts) brought by the National Confederation of the Financial System (CONSIF), with a view to suspending all the pending lawsuits about economic plans is pending judgment by the Federal Supreme Court (STF).

               
            Bradesco  163 

           

           

             
          Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report   

           

           
          Notes to the Consolidated Financial Statements 

           

          III - Legal liabilities – provision for tax risks

          The Bradesco Organization is disputing in court the legality and constitutionality of certain taxes and contributions, for which provisions have been recorded in full, although the likelihood of a medium- and long-term favorable outcome is good, based on the opinion of the legal advisors.

          The main issues are:

          - Cofins – R$5,230,061 thousand: a request for authorization to calculate and pay Cofins, as of October 2005, on the effective income, whose concept is in Article 2 of Supplementary Law 70/91, removing the unconstitutional increase in the calculation basis introduced by paragraph 1 of Article 3 of Law 9,718/98;

          - INSS Autonomous Brokers – R$881,715 thousand: it questions the incidence of social security contribution on remunerations paid to autonomous service providers, established by Supplementary Law 84/96 and subsequent regulations/amendments, at the rate of 20% and additional of 2.5%, under the argument that services are not provided to insurance companies, but to policyholders, thus being outside the incidence of the contribution provided for in item I, Article 22, of Law 8,212/91, with new wording given in Law 9,876/99;

          - IRPJ/Loan Losses – R$753,097 thousand: it requests authorization to deduct, for purposes of determination of the calculation basis of IRPJ and CSLL, the amount of effective and definite loan losses, total or partial, suffered in the reference years from 1997 to 2010, regardless of the compliance with the conditions and terms provided for in Articles 9 to 14 of Law 9,430/96 that only apply to temporary losses;

          - CSLL – Deductibility on the IRPJ calculation basis – R$574,506 thousand: it requests to calculate and pay income tax due, related to the reference year of 1997 and on, without adding the CSLL to the respective calculation basis, set forth by Article 1, of Law 9,316/96, since this contribution represents an effective, necessary and mandatory expense to the Company; and

          - PIS – R$284,428 thousand: it requests the authorization to offset amounts overpaid in the reference years of 1994 and 1995 as contribution to PIS, corresponding to the amount above the calculation basis laid down in the Constitution, i.e., gross operating revenue, as defined in the income tax legislation – concept in Article 44 of Law 4,506/64, not including interest income.

          IV - Provisions by nature

                 
            R$ thousand 
          2011  2010
          March 31  December 31  March 31 
          Labor claims  1,630,771  1,580,811  1,599,215 
          Civil claims  2,731,484  2,664,436  2,385,667 
          Subtotal (1)  4,362,255  4,245,247  3,984,882 
          Provision for tax risks (2)  9,714,175  9,234,533  7,902,499 
          Total  14,076,430  13,479,780  11,887,381 


          (1) Note 20b; and
          (2) Classified under “Other liabilities – tax and social security” (Note 20a).

             
          164 Report on Economic and Financial Analysis – March 2011   

           

           

             
            Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

          V - Changes in provisions

                 
            R$ thousand 
          2011
          Labor  Civil  Tax (1) 
          Balance at the beginning of the period  1,580,811  2,664,436  9,234,533 
          Monetary restatement  45,879  87,733  179,791 
          Net reversals and write-offs  108,944  94,920  332,929 
          Payments  (104,863)  (115,605)  (33,078) 
          Balance at the end of the period  1,630,771  2,731,484  9,714,175 

          (1) Comprises, substantially, legal liabilities.                     		      

           

          c) Contingent liabilities classified as possible losses

          The Bradesco Organization maintains a system to monitor all administrative and judicial proceedings in which the institution is plaintiff or defendant and, based on the opinion of legal advisors, classifies the lawsuits according to the expectation of loss. The trends of administrative and judicial proceedings are periodically analyzed and, if necessary, the related risks are reclassified. In this context the contingent proceedings evaluated as having the risk of possible loss are not recognized in the financial statements. The main proceedings with this classification are: a) leasing companies’ Tax on Services of any Nature (ISSQN), the total processes of which correspond to R$247,608 thousand. In this lawsuit, the demand of tax by municipalities other than those where the companies are located and from which the tax is collected in compliance with the law is discussed when recording tax credit; b) Social Security (INSS) on transfers to private pension plans, considered for purposes of oversight as compensation subject to INSS in the amount of R$236,957 thousand, in addition to a one-time fine for the failure to pay Withholding Income Tax on said compensation in the amount of R$144,003 thousand; and c) Corporate Income Tax (IRPJ) and Social Contribution on Net Income (CSLL) on losses that were allegedly used improperly in the assessment of taxable income and in the calculation basis of CSLL, related to the receipt of financial credits set forth in articles 9 and 10 of Law 9,430/96, in the amount of R$228,796 thousand.

               
            Bradesco  165 

           

           

             
          Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report   

           

           
          Notes to the Consolidated Financial Statements 

           

          19) SUBORDINATED DEBT

                         
            R$ thousand 
          2011  2010
           Maturity  Original term in years  Amount of the operation  Currency   Remuneration   March 31   December 31   March 31 
          In Brazil:                 
          Subordinated CDB               
          2011(5)  5  1,623,000  R$  102.5% to 103.0% of CDI rate  2,732,395  7,685,360  7,125,585 
           2012  5  3,236,273  R$  103.0% of CDI rate/
          100.0% of CDI rate + (0.344% p.a. to 0.4914%p.a.) /
          IPCA + (7.102% p.a. – 7.632% p.a.)                     		 4,720,571  4,588,559  4,246,795 
          2013  5  575,000  R$  100.0% of CDI rate + (0.344% p.a. – 1.0817% p.a.)/
          IPCA + (7.74% p.a. – 8.20% p.a.)                     		 804,836  780,335  718,885 
          2014  6  1,000,000  R$  112.0% of CDI rate  1,292,862  1,255,662  1,157,136 
          2015  6  1,274,696  R$  108.0% and 112.0% of CDI rate/
          IPCA + (6.92% p.a. – 8.55% p.a.)                     		 1,604,085  1,537,777  1,396,840 
          2016  6  500  R$  IPCA + (7.1292% p.a.)  590  566  518 
          2012  10  1,569,751  R$  100.0% of DI rate – CETIP/
          100.0% of CDI rate + (0.75% p.a. – 0.87% p.a.)/
          101.0% to 102.5% of CDI rate                     		 5,305,554  5,164,452  4,788,267 
          2019  10  20,000  R$  IPCA + (7.76% p.a.)  24,845  23,828  21,698 
          Financial Letters/other (3):               
          2011 to 2021  up to 10  1,770,632  R$  100.0% to 112.0% of CDI rate  1,801,219  33,269  2,416 
          2010 to 2012 (4)  up to 2  -  R$  9.43% p.a. rate  -  -  228,646 
          2010 to 2017  up to 7  192,293  R$  IPCA + (6.7017% p.a. – 7.4240% p.a.)  199,116  91,881  - 
          2010 to 2017  up to 7  65,600  R$  13.0949% p.a. – 13.1762% p.a. rate  68,755  22,668  - 
          2010 to 2021  up to 11  53,144  R$  IGPM + (6.3874% p.a. – 7.0670% p.a.)  55,659  51,338  - 
          Subtotal in Brazil          18,610,487  21,235,695  19,686,786 
                           
          Abroad:               
          2011  10  353,700  US$  10.25% p.a. rate  251,380  250,656  274,424 
          2012 (1)  10  315,186  Yen  4.05% p.a. rate  349,480  366,237  248,230 
          2013  10  1,434,750  US$  8.75% p.a. rate  812,643  831,186  887,907 
          2014  10  801,927  Euro  8.00% p.a. rate  537,468  507,552  558,729 
          Undetermined (2)  -  720,870  US$  8.875% p.a. rate  -  -  537,988 
          2019  10  1,333,575  US$  6.75% p.a. rate  1,252,861  1,284,805  1,370,483 
          2021 (3)  11  1,600,000  US$  5.90% p.a. rate  2,623,759  1,867,290  - 
          Issuance costs          (29,929)  (28,475)  (23,818) 
          Subtotal abroad          5,797,662  5,079,251  3,853,943 
          Overall total          24,408,149  26,314,946  23,540,729 

          (1) Including the cost of swap to U.S. dollar, the rate increases to 10.15% p.a.;
          (2) In June 2005, perpetual subordinated debt was issued in the amount of US$300,000 thousand, with exclusive redemption option on the part of the issuer, in its totality and upon previous authorization of Bacen, under the following conditions: (i) after 5 years from the issuance date and subsequently on each date of interest maturity; and (ii) at any moment in the event of a change in the tax laws in Brazil or abroad, which may cause an increase in costs for the issuer and if the issuer is notified in writing by Bacen that the securities may no longer be included in the consolidated capital for capital adequacy ratio calculation purposes. On April 14, 2010, Bacen approved the request for this early redemption, which occurred on June 3, 2010, amounting to R$556,834 thousand;
          (3) In August 2010 and in January 2011, subordinated debts in the amount of US$1,100,000 thousand and US$500,000 thousand, respectively, were issued abroad with a 5.90% p.a. rate, due in 2021;
          (4) Refers to the redemptions made in advance in subordinated CDB pegged to loan operations/others on December 21, 2010; and
          (5) Maturity of subordinated debts in the first quarter of 2011, in the amount of US$2,881,022 thousand.

             
          166 Report on Economic and Financial Analysis – March 2011   

           

           

             
            Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

          20) OTHER LIABILITIES

          a) Tax and social security

                 
            R$ thousand 
          2011   2010
          March 31  December 31  March 31 
          Provision for tax risks (Note 18b IV)  9,714,175  9,234,533  7,902,499 
          Provision for deferred income tax (Note 34f)  4,960,599  4,791,462  4,455,906 
          Taxes and contributions on profits payable  1,696,407  2,227,860  654,999 
          Taxes and contributions payable  890,495  934,860  589,463 
          Total  17,261,676  17,188,715  13,602,867 

           

          b) Sundry

                 
            R$ thousand 
          2011   2010
          March 31  December 31  March 31 
          Credit card operations  10,086,133  10,912,930  8,631,474 
          Provision for payments  3,741,552  3,660,082  3,160,088 
          Provision for contingent liabilities (civil and labor) (Note 18b IV)  4,362,255  4,245,247  3,984,882 
          Sundry creditors  2,621,521  2,192,778  2,212,229 
          Liabilities for acquisition of assets – financial leasing (1)  748,785  831,126  821,250 
          Liabilities for acquisition of assets and rights  477,614  588,442  582,695 
          Liabilities for official agreements  275,664  269,477  289,869 
          Other  943,500  1,016,894  782,807 
          Total  23,257,024  23,716,976  20,465,294 

           

          (1) Refer to liabilities for acquisition of data processing systems (hardware) by means of financial leasing operations (Bradesco as lessee).

               
            Bradesco  167 

           

           

             
          Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report   

           

           
          Notes to the Consolidated Financial Statements 

           

          21) INSURANCE, PRIVATE PENSION PLANS AND SAVINGS BONDS OPERATIONS

          a) Provisions by account

                                   
            R$ thousand 
          Insurance (1) Life and Private Pension Plans (3)  Savings bonds Total
          2011  2010  2011  2010  2011  2010  2011  2010 
           March 31  December 31   March 31   March 31  December 31  March 31   March 31  December 31  March 31   March 31  December 31  March 31 
          Current and long-term liabilities                         
          Mathematical provision for benefits                         
          to be granted  680,800  672,023  642,668  66,032,853  64,135,257  56,058,586  -  -  -  66,713,653  64,807,280  56,701,254 
          Mathematical provision for benefits                         
          granted  127,356  126,140  119,651  5,166,975  4,994,380  4,611,792  -  -  -  5,294,331  5,120,520  4,731,443 
          Mathematical provision for                         
          redemptions  -  -  -  -  -  -  3,241,254  3,091,769  2,577,680  3,241,254  3,091,769  2,577,680 
          Provision for incurred but not                         
          reported (IBNR) claims  1,380,431  1,545,602  1,412,500  657,985  607,971  613,648  -  -  -  2,038,416  2,153,573  2,026,148 
          Unearned premiums provision  1,746,578  1,780,573  1,707,619  89,989  84,430  53,738  -  -  -  1,836,567  1,865,003  1,761,357 
          Provision for contribution                         
          insufficiency (4)  -  -  -  3,497,357  3,332,695  3,078,175  -  -  -  3,497,357  3,332,695  3,078,175 
          Provision for unsettled claims  1,950,944  1,410,808  1,436,041  893,690  865,987  724,273  -  -  -  2,844,634  2,276,795  2,160,314 
          Financial fluctuation provision  -  -  -  621,576  650,397  632,082  -  -  -  621,576  650,397  632,082 
          Premium insufficiency provision  -  -  -  542,117  590,545  567,214  -  -  -  542,117  590,545  567,214 
          Financial surplus provision  -  -  -  366,736  357,833  391,588  -  -  -  366,736  357,833  391,588 
          Provision for drawings and                         
          redemptions  -  -  -  -  -  -  504,588  488,514  453,698  504,588  488,514  453,698 
          Provision for administrative                         
          expenses  -  -  -  98,359  110,935  138,085  139,052  136,868  103,395  237,411  247,803  241,480 
          Provision for contingencies  -  -  -  -  -  -  6,048  6,523  6,640  6,048  6,523  6,640 
          Other provisions  1,655,358  1,635,154  1,653,498  579,489  552,687  702,420  -  -  -  2,234,847  2,187,841  2,355,918 
          Total provisions  7,541,467  7,170,300  6,971,977  78,547,126  76,283,117  67,571,601  3,890,942  3,723,674  3,141,413  89,979,535  87,177,091  77,684,991 

           

             
          168 Report on Economic and Financial Analysis – March 2011   

           

           

             
            Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

          b) Technical provisions by product

                                   
            R$ thousand 
          Insurance Life and Private Pension Plans  Savings bonds Total
          2011  2010  2011  2010  2011  2010  2011  2010 
           March 31  December 31  March 31   March 31  December 31   March 31   March 31  December 31   March 31   March 31  December 31  March 31 
          Health (1)  3,736,838  3,511,751  3,405,227  -  -  -  -  -  -  3,736,838  3,511,751  3,405,227 
          Auto/RCF  2,216,067  2,234,174  2,059,361  -  -  -  -  -  -  2,216,067  2,234,174  2,059,361 
          Dpvat  103,172  90,695  147,161  240,162  203,937  148,543  -  -  -  343,334  294,632  295,704 
          Life  13,838  14,043  17,210  3,368,171  3,249,154  2,819,513  -  -  -  3,382,009  3,263,197  2,836,723 
          Basic lines  1,471,552  1,319,637  1,343,018  -  -  -  -  -  -  1,471,552  1,319,637  1,343,018 
          Unrestricted Benefits Generating Plan - PGBL  -  -  -  13,535,192  13,296,405  11,791,264  -  -  -  13,535,192  13,296,405  11,791,264 
          Long-Term Life Insurance - VGBL  -  -  -  43,634,113  42,274,527  36,583,871  -  -  -  43,634,113  42,274,527  36,583,871 
          Traditional plans  -  -  -  17,769,488  17,259,094  16,228,410  -  -  -  17,769,488  17,259,094  16,228,410 
          Savings bonds  -  -  -  -  -  -  3,890,942  3,723,674  3,141,413  3,890,942  3,723,674  3,141,413 
          Total technical provisions  7,541,467  7,170,300  6,971,977  78,547,126  76,283,117  67,571,601  3,890,942  3,723,674  3,141,413  89,979,535  87,177,091  77,684,991 

           

               
            Bradesco  169 

           

           

             
          Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report   

           

           
          Notes to the Consolidated Financial Statements 

           

          c) Guarantees of technical provisions

                                   
            R$ thousand 
          Insurance Life and Private Pension Plans  Savings bonds Total
          2011  2010 2011  2010 2011  2010  2011  2010 
          March 31 December 31 March 31 March 31 December 31 March 31 March 31 December 31 March 31 March 31 December 31 March 31
          Investment fund quotas (VGBL and PGBL)  -  -  -  57,169,305  55,570,933  48,375,134  -  -  -  57,169,305  55,570,933  48,375,134 
          Investment fund quotas (excluding VGBL and PGBL) (2)  6,199,225  6,003,498  5,807,731  14,639,625  14,255,055  15,174,562  3,512,070  3,340,037  2,863,138  24,350,920  23,598,590  23,845,431 
          Government securities  88,653  77,229  -  4,703,143  4,559,723  3,021,687  -  -  -  4,791,796  4,636,952  3,021,687 
          Private securities  51,186  53,428  22,584  610,383  521,584  775,134  221,175  207,233  175,832  882,744  782,245  973,550 
          Shares  2,851  2,840  2,027  1,536,783  1,480,137  202,499  357,728  376,434  222,457  1,897,362  1,859,411  426,983 
          Receivables  684,693  702,588  686,790  -  -  -  -  -  -  684,693  702,588  686,790 
          Deposits retained at IRB and court deposits  38,110  6,658  6,428  60,639  72,449  58,121  -  -  -  98,749  79,107  64,549 
          Reinsurance credits  698,110  608,151  671,710  7,646  6,662  5,349  -  -  -  705,756  614,813  677,059 
          Total guarantees of technical provisions  7,762,828  7,454,392  7,197,270  78,727,524  76,466,543  67,612,486  4,090,973  3,923,704  3,261,427  90,581,325  87,844,639  78,071,183 

          1) “Other provisions” basically refers to the technical provisions of the “individual health” portfolio made in order to cover the differences of future premium adjustments and those necessary to the portfolio technical balance;
          2) In the first quarter of 2011, in compliance with SUSEP Circular 379/08, the Bradesco Insurance Group lengthened the maturity profile of its securities by selling a portion of its held-to-maturity portfolio at the same time as it acquired new instruments, of the same type and category, whose maturities and amounts are greater than those of the securities sold. The effects of this operation did not have significant impact on the Bank’s income, due to the recording of non-technical provisions.
          3) Includes personal insurance and private pension operations; and
          4) The provision for contribution insufficiency for retirement and pension plans is calculated according to the normalized biometric table AT-2000, improved by 1.5% p.a., considering males separated from females, who have a longer life expectancy, and actual real interest rate of 4.0% p.a. For disabilities plans, the provision is also actuarially calculated according to the biometric AT-49 (male) table and the 4.0% p.a. real interest rate.

             
          170 Report on Economic and Financial Analysis – March 2011   

           

           

             
            Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

          d) Retained premiums from insurance, private pension plans contributions and savings bonds

                 
            R$ thousand 
          2011  2010
          1st Quarter  4th Quarter  1st Quarter 
          Premiums written  3,951,405  3,759,670  3,085,812 
          Supplementary private pension plan contributions (including VGBL)  3,316,970  4,617,721  3,290,559 
          Revenues from savings bonds  649,328  705,827  526,192 
          Coinsurance premiums  (41,020)  (33,450)  (27,376) 
          Refunded premiums  (32,043)  (37,473)  (23,853) 
          Net premiums written  7,844,640  9,012,295  6,851,334 
          Reinsurance premiums  (57,292)  (11,955)  (60,367) 
          Retained premiums from insurance, private pension plans and
            savings bonds           		 7,787,348  9,000,340  6,790,967 

           

          22) MINORITY INTEREST IN SUBSIDIARIES

                 
            R$ thousand 
          2011  2010
          March 31  December 31  March 31 
          Andorra Holdings S.A. (1)  -  -  176,087 
          Banco Bradesco BBI S.A.  110,055  108,595  88,374 
          Other (2)  463,923  362,941  552,086 
          Total  573,978  471,536  816,547 

          (1) 100% interest after the acquisition of shares in December 2010; and
          (2) Mainly represented by minority interest in Odontoprev S.A.

          23) SHAREHOLDERS’ EQUITY (PARENT COMPANY)

             a) Breakdown of capital stock in number of shares

                  Fully subscribed and paid-up capital stock comprises non-par, registered, book-entry shares

                 
            2011  2010
          March 31  December 31  March 31 
          Common shares  1,912,397,390  1,881,225,318  1,710,204,835 
          Preferred shares  1,912,397,191  1,881,225,123  1,710,204,658 
          Subtotal  3,824,794,581  3,762,450,441  3,420,409,493 
          Treasury (common shares)  (2,487,000)  (395,300)  - 
          Total outstanding shares  3,822,307,581  3,762,055,141  3,420,409,493 

           

             b) Breakdown of capital stock in number of shares

                 
             Common  Preferred  Total 
          Number of outstanding shares on December 31, 2010  1,880,830,018  1,881,225,123  3,762,055,141 
          Capital stock increase through share subscription  31,172,072  31,172,068  62,344,140 
          Shares acquired and not cancelled  (2,091,700)  -  (2,091,700) 
          Number of outstanding shares on March 31, 2011  1,909,910,390  1,912,397,191  3,822,307,581 

           

               
            Bradesco  171 

           

           

             
          Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report   

           

           
          Notes to the Consolidated Financial Statements 

           

          The Special Shareholders’ Meeting held on December 17, 2010 resolved to increase the Capital Stock by R$1,500,000 thousand, from R$28,500,000 thousand to R$30,000,000 thousand through the issue of 62,344,140 new registered, book-entry shares with no par value, 31,172,072 of which are common shares and 31,172,068 preferred shares, at the price of R$24.06 per share, through private subscription by shareholders from December 29, 2010 to January 31, 2011, at a ratio of 1.657008936% of their shareholding position on the date of the Meeting. Shareholders paid subscribed shares on February 18, 2011,corresponding to 96.53% of all shares. The 3.47% remaining from the offer were sold at an auction held on February 15, 2011 on the BM&FBovespa, with financial settlement on February 18, 2011. The excess of the total amount allocated to the creation of Capital Stock, of R$11,441 thousand, from the difference between the issue price and the sale price of stock at auction was recorded in the “Capital Reserve – Share Premium” account. The process was approved by the Brazilian Central Bank on March 18, 2011.

          The Special Shareholders’ Meeting held on March 10, 2011 resolved to increase Capital Stock by R$100,000 thousand, from R$30,000,000 thousand to R$30,100,000 thousand, through the use of the balance held in  the "Capital Reserve - Fiscal Incentives - Income tax, Restatement of Equity Securities and Share Fractions” account and a portion of the balance of the “Capital Reserve –Share Premium and Profit Reserve – Legal Reserve” account, without the issue of shares. The process was approved by the Brazilian Central Bank on March 18, 2011.

          c) Interest on shareholders’ equity/dividends

          Preferred shares have no voting rights, but are entitled to all other rights and advantages given to common shares and, in compliance with Bradesco’s Bylaws, have priority in repayment of capital and additional ten per cent (10%) of interest on shareholders’ equity and/or dividends, in accordance with the provisions of Paragraph 1, item II, of Article 17 of Law 6,404/76, with the new wording given in Law 10,303/01.

          According to Bradesco’s Bylaws, shareholders are entitled to interest on shareholders’ equity and/or total dividends of at least 30% of the net income for the year, adjusted in accordance with Brazilian Corporation Law.

          Interest on shareholders’ equity is calculated based on the shareholders' equity accounts and is limited to the variation in the Federal Government Long-Term Interest Rate (TJLP), provided there are available profits, calculated prior to the deduction thereof, or retained earnings and profit reserves in amounts equivalent to, or exceeding twice, the amount of such interest.

          Bradesco’s capital remuneration policy aims at distributing interest on shareholders’ equity at the maximum amount calculated pursuant to prevailing laws, and this is included, net of Withholding Income Tax, in the calculation of the mandatory dividends of the year set forth in the Company’s Bylaws.

          The Board of Directors' Meeting held on December 6, 2010 approved Management’s proposal to pay shareholders complementary interest on shareholders’ equity related to the 2010 fiscal year, in the amount of R$1,906,000 thousand, at R$0.482461664 (net of 15% withholding income tax –R$0.410092414) per common share and R$0.530707830 (net of 15% withholding income tax –R$0.451101656) per preferred share, was paid on February 18, 2011.

          The Board of Directors’ Meeting held on February 11, 2011 approved the Board of Executive Officers' proposal for the payment to shareholders of dividends, to complement interest on shareholders’ equity and dividends for the 2010 fiscal year, in the amount of R$315,100 thousand, at a rate of R$0.079771188 per common share and R$0.087748307 per preferred share, the payment of which was made on February 18, 2011.

               
          172 Report on Economic and Financial Analysis – March 2011  

           

           

             
            Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

          Interest on shareholders’ equity and dividends related to the period ended March 31, 2011 and 2010 is calculated as follows:

               
             R$ thousand  % (1) 
          Net income for the quarter  2,702,039   
          (-) Legal reserve  (135,102)   
          Adjusted calculation basis  2,566,937   
          Supplementary interest on shareholders’ equity (gross) provisioned  766,998   
          Withholding income tax on interest on shareholders’ equity  (115,050)   
          Interest on shareholders’ equity (net)  651,948   
          Monthly dividends paid and provisioned  156,635   
          Interest on shareholders’ equity (net) and dividends on March 31, 2011  808,583  31.50 
          Interest on shareholders’ equity (net) and dividends on March 31, 2010  654,926  32.79 
          (1) Percentage of interest on shareholders’ equity/dividends over adjusted calculation basis.     

           

          Interest on shareholders’ equity and dividends were paid and provisioned as follows:

                     
          Description R$ thousand 
          Per share (gross)  Gross paid/
          provisioned
          amount           		 Withholding
          Income Tax
          (IRRF)
          (15%)           		 Net paid/
          provisioned
          amount 
          Common
          shares           		 Preferred
          shares 
          Monthly dividends  0.039658  0.043624  138,105  -  138,105 
          Provisioned supplementary interest on shareholders’ equity   0.169299   0.186229   608,025   91,204   516,821 
          Total on March 31, 2010 YTD  0.208957  0.229853  746,130  91,204  654,926 
          Monthly dividends  0.039658  0.043624  156,635  -  156,635 
          Provisioned supplementary interest on shareholders’ equity   0.191102   0.210213   766,998   115,050   651,948 
          Total on March 31, 2011 YTD  0.230760  0.253837  923,633  115,050  808,583 

           

          d) Treasury shares

          The Board of Directors’ Meeting held on December 20, 2010 resolved to authorize the acquisition of shares issued by Bradesco in the amount of up to 15,000,000 registered, book-entry shares, with no par value, 7,500,000 of which are common shares and 7,500,000 preferred shares, to be held in treasury and later sold or cancelled, without reducing Capital stock. This authorization will be valid until June 21, 2011.

          As of March 31, 2011, 2,487,000 common shares had been acquired for a total of R$63,091 thousand and remain in treasury. The minimum cost, weighted average and maximum cost per share were R$23.62221, R$25.36840 and R$26.83286, respectively. The market value of the shares, as of March 31, 2011, was R$27.88 per common share.

               
            Bradesco  173 

           

           

             
          Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report   

           

           
          Notes to the Consolidated Financial Statements 

           

          24) FEE AND COMMISSION INCOME

                 
            R$ thousand 
          2011  2010
          1st Quarter  4th Quarter  1st Quarter 
          Card income  1,112,954  1,120,955  954,748 
          Checking accounts  649,485  645,934  542,148 
          Loan operations  463,433  476,522  406,909 
          Asset management  470,850  466,791  429,512 
          Collections  277,039  285,739  257,340 
          Custody and brokerage services  108,135  108,203  114,014 
          Consortium management  120,623  119,150  97,252 
          Taxes paid  77,089  74,258  69,018 
          (Underwriting) Financial advisory services  47,627  91,020  76,227 
          Other  92,151  82,864  133,263 
          Total  3,419,386  3,471,436  3,080,431 

           

          25) PERSONNEL EXPENSES

                 
            R$ thousand 
          2011  2010
          1st Quarter  4th Quarter  1st Quarter 
          Payroll  1,150,536  1,161,554  1,000,991 
          Benefits  495,444  523,953  417,442 
          Social security charges  434,002  441,054  376,441 
          Employee profit sharing  218,481  202,748  205,019 
          Provision for labor claims  118,201  164,964  109,209 
          Training  19,282  38,819  11,469 
          Total  2,435,946  2,533,092  2,120,571 

           

               
          174 Report on Economic and Financial Analysis – March 2011  
           
           

             
            Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

          26) OTHER ADMINISTRATIVE EXPENSES

                 
             R$ thousand 
          2011  2010
          1st Quarter  4th Quarter  1st Quarter 
          Third-party services  839,301  885,515  724,077 
          Communication  377,179  382,394  334,475 
          Advertising and publicity  202,385  281,681  152,363 
          Depreciation and amortization  357,575  342,064  313,379 
          Transportation  179,026  177,316  142,311 
          Financial system services  108,630  101,155  86,059 
          Rentals  157,090  147,757  143,519 
          Data processing  225,357  260,979  190,766 
          Asset maintenance and conservation  122,760  131,580  107,456 
          Supplies  80,973  92,113  62,564 
          Security and surveillance  76,080  71,130  66,143 
          Water, electricity and gas  58,605  53,854  54,853 
          Travel  35,221  34,723  21,154 
          Other  217,129  196,598  165,130 
          Total  3,037,311  3,158,859  2,564,249 

           

          27) TAX EXPENSES

                 
            R$ thousand 
          2011  2010
          1st Quarter  4th Quarter  1st Quarter 
          Contribution for Social Security Financing (Cofins)  621,677  603,610  489,804 
          Tax on Services (ISS)  98,382  99,631  88,521 
          Social Integration Program (PIS) contribution  104,318  100,635  82,798 
          Municipal Real Estate Tax (IPTU) expenses  16,583  6,703  16,055 
          Other  54,198  61,911  58,565 
          Total  895,158  872,490  735,743 

           

          28) OTHER OPERATING INCOME

                 
            R$ thousand 
          2011  2010
          1st Quarter  4th Quarter  1st Quarter 
          Other interest income  272,691  261,999  224,548 
          Reversal of other operating provisions  76,761  132,094  94,069 
          Gains on sale of goods  14,619  9,064  13,711 
          Revenues from recovery of charges and expenses  32,294  19,042  13,050 
          Others  289,591  270,558  308,808 
          Total  685,956  692,757  654,186 

           

               
            Bradesco  175 

           

           

             
          Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report   

           

           
          Notes to the Consolidated Financial Statements 

           

          29) OTHER OPERATING EXPENSES

                 
            R$ thousand 
          2011  2010
          1st Quarter  4th Quarter  1st Quarter 
          Other financial expenses  657,411  600,933  646,879 
          Sundry losses  319,508  399,812  305,599 
          Intangible assets amortization – acquisition of banking services rights  156,934  148,925  143,009 
          Expenses with other operating provisions (1)  291,780  262,036  573,379 
          Goodwill amortization (Note 15a)  65,735  66,513  58,873 
          Expenses with impairment testing (Note 15b)  -  26,493  - 
          Other (2)  531,568  313,311  254,478 
          Total  2,022,936  1,818,023  1,982,217 
          (1) Includes: (i) supplementary provision for civil lawsuits –economic plans in the first quarter of 2011 – R$53,546 thousand (R$85,691 thousand in the fourth quarter of 2010 and R$35,661 thousand in the first quarter of 2010); and (ii) provision for tax contingencies in the first quarter of 2010 – R$396,731 thousand/ and
          (2) In the first quarter of 2011, it includes the recording of provisions to cover fluctuations arising from the revaluation of IBNR provisions and benefits payable – remission of the Health Insurance segment.

          30) NON-OPERATING INCOME

                 
            R$ thousand 
          2011  2010
          1st Quarter  4th Quarter  1st Quarter 
          Result on sale and write-off of assets and investments (1)  (62,375)  56,582  (86,420) 
          Non-operating provisions  3,350  6,620  (17,511) 
          Others  3,503  5,699  8,557 
          Total  (55,522)  68,901  (95,374) 

           

          (1) Includes: an R$86,066 thousand capital gain in Fidelity and partial sale of BM&FBovespa in the amount of R$58,473 thousand in the fourth quarter of 2010.

           

               
          176 Report on Economic and Financial Analysis – March 2011  

           

           

             
            Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

          31) TRANSACTIONS WITH CONTROLLING SHAREHOLDERS (DIRECT AND INDIRECT)

          a) Transactions with parent companies (direct and indirect) are carried out in conditions and at rates compatible with the averages practiced with third parties, and effective on the dates of the operations, and are as follows:

                       
             R$ thousand 
          2011  2010 2011  2010
          March 31  December 31  March 31  1st Quarter  4th Quarter  1st Quarter 
          Assets
          (liabilities)           		 Assets
          (liabilities)           		 Assets
          (liabilities)           		 Revenues
          (expenses)           		 Revenues
          (expenses)           		 Revenues
          (expenses) 
          Interest on shareholders’ equity and dividends:  (256,963)  (711,903)  (205,273)  -  -  - 
          Cidade de Deus Companhia Comercial de Participações  (186,106)  (515,598)  (148,670)  -  -  - 
          Fundação Bradesco  (70,857)  (196,305)  (56,603)  -  -  - 
          Demand deposits:  (246)  (78)  (300)  -  -  - 
          Fundação Bradesco  (199)  (30)  (282)  -  -  - 
          BBD Participações S.A.  (19)  (19)  (9)  -  -  - 
          Nova Cidade de Deus Participações S.A.  (18)  (18)  (9)  -  -  - 
          Cidade de Deus Companhia Comercial de Participações  (10)  (11)  -  -  -  - 
          Time deposits:  (34,812)  (30,341)  (8,834)  (24)  (25)  (13) 
          Cidade de Deus Companhia Comercial de Participações  (34,812)  (30,341)  (8,834)  (24)  (25)  (13) 
          Rental of branches:  -  -  -  (123)  (123)  (117) 
          Fundação Bradesco  -  -  -  (123)  (123)  (117) 
          Subordinated debts:  (457,404)  (261,664)  (142,658)  (10,247)  (6,495)  (2,773) 
          Cidade de Deus Companhia Comercial de Participações  (376,708)  (183,044)  (69,570)  (8,171)  (4,532)  (1,336) 
          Fundação Bradesco  (80,696)  (78,620)  (73,088)  (2,076)  (1,963)  (1,437) 

           

               
            Bradesco  177 

           

           

             
          Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report   

           

           
          Notes to the Consolidated Financial Statements 

           

          b) Compensation of key Management personnel

          Each year, the Annual Shareholders’ Meeting approves:

          • The annual overall amount of management compensation, set forth at the Board of Directors Meetings among the board members and members of the Board of Executive Officers, as determined by the Company’s Bylaws; and

          • The amount allocated to finance supplementary private pension plans to Management, within the private pension plan for employees and management of the Bradesco Organization.

          For 2011, the maximum amount of R$359,400 thousand was set for management compensation (salaries and bonuses) and R$340,000 thousand to finance defined contribution supplementary private pension plans.

          Short-term Management benefits

                 
            R$ thousand 
          2011  2010
          1st Quarter  4th Quarter  1st Quarter 
          Salaries  60,532  35,437  35,639 
          Bonuses  11,674  22,116  30,068 
          Subtotal  72,206  57,553  65,707 
          INSS contributions  16,161  12,903  14,688 
          Total  88,367  70,456  80,395 

           

          Post-employment benefits

                 
            R$ thousand 
          2011  2010
          1st Quarter  4th Quarter  1st Quarter 
          Defined contribution supplementary private pension plans  41,964  75,084  35,094 
          Total  41,964  75,084  35,094 

           

                    Bradesco does not offer long-term benefits related to severance pay or share-based compensation to its key Management personnel.

                   Other information

                   I) According to current laws, financial institutions are not allowed to grant loans or advances to:

                   a) Officers and members of the advisory, administrative, fiscal or similar councils, as well as to their respective spouses and family members up to the second degree;

                   b) Individuals or corporations that own more than 10% of their capital; and

                  c) Corporations of which the financial institution itself, any officers or administrators of the institution, as well as their spouses and respective family members up to the second degree own more than 10%;

               
          178 Report on Economic and Financial Analysis – March 2011  

           

           

             
            Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

                            Therefore, no loans or advances are granted by financial institutions to any subsidiary, members of the Board of Directors or Board of Executive Officers and their relatives.

                        II) Shareholding

                        b) Members of the Board of Directors and Board of Executive Officers, jointly, had the following shareholding in Bradesco:

                 
            2011  2010
          March 31  December 31  March 31 
          Ï Common shares  0.74%  0.74%  0.74% 
          Ï Preferred shares  1.03%  1.04%  1.07% 
          Ï Total shares  0.89%  0.89%  0.91% 

           

          32) FINANCIAL INSTRUMENTS

          a) Risk management

          Risk management activity is highly strategic due to the increasing complexity of services and products offered and the globalization of the Organization’s business, reason why its processes are constantly improved.

          Decisions made by the Organization are guided by factors that account for return on risk that has previously been identified, measured and evaluated, making the achievement of strategic objectives possible and ensuring the strengthening of the Institution.

          The Organization approaches risk management in an integrated manner, ensuring unique policies, processes, criteria and methodologies for risk control through a statutory body, the Integrated Risk Management and Capital Allocation Committee, which is supported by specific committees and risk management policies approved by the Board of Directors.

          Detailed information on the risk management process, reference shareholders’ equity, required reference shareholders’ equity and the Organization’s risk exposure can be found in the Risk Management Report at the Investor Relations website, www.bradesco.com.br/ri.

          Credit risk management

          Credit risk refers to the possibility of losses associated to the non-compliance by the borrower or counterparty of their respective financial obligations pursuant to agreed terms, as well as to the reduction of a loan agreement value from decrease in the borrower’s risk rating, to the reduction of gains or compensations, the advantages in renegotiations, recovery costs and other values related to the counterparty’s non-compliance with its financial obligations.

          Credit risk management in the Organization is a continuous and evolving process of mapping, development, assessment and diagnosis through the use of models, instruments and procedures that require a high degree of discipline and control during the analysis of operations in order to preserve the integrity and autonomy of the processes.

          The Organization carefully controls its exposure to credit risk, which mainly results from credit operations, securities and derivative financial instruments. Credit risk also stems from financial obligations related to loan commitments or financial guarantees.

               
            Bradesco  179 

           

           

             
          Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report   

           

           
          Notes to the Consolidated Financial Statements 

           

          Market risk management

          Market risk is represented by the possibility of financial loss due to fluctuating prices and interest rates of the Organization’s financial assets as its asset and liability portfolios may show mismatched maturities, currencies and indexes.

          Market risk is carefully identified, measured, mitigated and managed. The Organization has a conservative exposure profile to market risk, with the guidelines and limits monitored independently on a daily basis.

          Market risk is controlled for all of the Organization’s companies in a corporate and centralized manner. All activities exposed to market risk are mapped, measured and classified by probability and importance, with their respective mitigation plans are duly approved by the corporate governance structure.

               
          180 Report on Economic and Financial Analysis – March 2011  

           

           

             
            Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

          We present below the balance sheet by currency

                     
            R$ thousand 
          2011 2010
          March 31 December 31  March 31 
          Balance  Domestic  Foreign (1) (2)  Foreign (1) (2) 
          Assets           
          Current and long-term assets  663,598,954  621,100,403  42,498,551  36,782,812  37,776,780 
          Funds available  6,785,081  5,753,181  1,031,900  1,822,578  3,495,086 
          Interbank investments  100,159,369  98,840,572  1,318,797  1,205,294  1,775,342 
          Securities and derivative financial instruments  217,481,601  209,474,125  8,007,476  7,137,615  8,129,971 
          Interbank and interdepartmental accounts  67,291,466  67,291,466  -  -  420,080 
          Loan and leasing operations  206,278,488  185,823,441  20,455,047  19,356,040  15,472,497 
          Other receivables and assets  65,602,949  53,917,618  11,685,331  7,261,285  8,483,804 
          Permanent assets  11,787,658  11,757,361  30,297  30,431  6,936 
          Investments  1,674,688  1,674,452  236  132  - 
          Premises and equipment and leased assets  3,665,770  3,656,814  8,956  8,827  6,789 
          Intangible assets  6,447,200  6,426,095  21,105  21,472  147 
          Total  675,386,612  632,857,764  42,528,848  36,813,243  37,783,716 
                     
          Liabilities           
          Current and long-term liabilities  623,068,549  576,681,591  46,386,958  35,811,510  29,104,194 
          Deposits  203,822,439  190,780,835  13,041,604  7,981,321  5,587,141 
          Federal funds purchased and securities sold under agreements to repurchase  178,988,781  174,384,694  4,604,087  4,072,929  856,962 
          Funds from issuance of securities  21,700,999  16,591,728  5,109,271  5,356,989  5,334,656 
          Interbank and interdepartmental accounts  2,647,135  1,040,455  1,606,680  1,591,171  1,074,144 
          Borrowing and onlending  41,500,638  31,471,910  10,028,728  8,316,019  9,364,778 
          Derivative financial instruments  2,357,697  2,132,860  224,837  201,316  211,064 
          Technical provision for insurance, private pension plans and savings bonds  89,979,535  89,978,383  1,152  1,185  1,786 
          Other liabilities:           
          - Subordinated debt  24,408,149  18,610,487  5,797,662  5,079,252  3,853,943 
          - Other  57,663,176  51,690,239  5,972,937  3,211,328  2,819,720 
          Deferred income  447,122  447,122  -  -  - 
          Minority interest in subsidiaries  573,978  573,978  -  -  - 
          Shareholders’ equity  51,296,963  51,296,963  -  -  - 
          Total  675,386,612  628,999,654  46,386,958  35,811,510  29,104,194 
          Net position of assets and liabilities      (3,858,110)  1,001,733  8,679,522 
          Net position of derivatives (2)      (10,088,552)  (13,621,932)  (18,370,200) 
          Other net memorandum accounts (3)      (2,847)  (7,714)  (409,771) 
          Net exchange position (liability)      (13,949,509)  (12,627,913)  (10,100,449) 

           

          (1) Amounts expressed and/or indexed mainly in USD;
          (2) Excluding operations maturing in D+1, to be settled at the rate of the last day of the month; and
          (3) Other commitments recorded in memorandum accounts.

               
            Bradesco  181 

           

           

             
          Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report   

           

           
          Notes to the Consolidated Financial Statements 

           

          VaR Internal Model – Trading Portfolio

                 
          Risk factors R$ thousand 
          2011   2010
          March 31  December 31  March 31 
          Fixed rates  20,502  16,510  3,870 
          Internal exchange coupon  2,706  5,199  729 
          Foreign currency  6,572  6,179  12,789 
          IGP-M  891  1,556  512 
          IPCA  3,042  11,192  1,200 
          Equities  6,266  1,049  3,264 
          Sovereign/Eurobonds and Treasuries  6,570  2,845  2,250 
          Other  3  5  23 
          Correlation/diversification effect  (23,591)  (21,674)  (8,382) 
          VaR (Value at Risk)  22,961  22,861  16,255 

           

          Sensitivity analysis

          The Trading Portfolio is also monitored by daily sensitivity analysis, which measures the effect of movements of market and price curves on our positions. Furthermore, a sensitivity analysis of the Organziation’s financial exposures (Trading and Banking Portfolio) is performed on a quarterly basis, in compliance with CVM Rule 475/08.

          It is worth noting that the impacts of the financial exposure on the Banking Portfolio (notably interest rates and price indexes) do not necessarily represent a potential accounting loss for the Organization:

          • Because a portion of loan operations held in the Banking Portfolio is financed by time and/or savings deposits, which are “natural hedges” for future variations in interest rates,

          • Moreover, interest rate variations do not represent a material impact on the institution’s result, as loan operations are held to maturity.

             
          182 Report on Economic and Financial Analysis – March 2011   

           

           

             
            Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

          Sensitivity Analysis –Trading and Banking Portfolios

                               
          Period  Scenario (*)  Sensitivity Analysis CVM Rule 475/08 –Trading and Banking Portfolio
          Risk Factors R$ thousand 
          Interest Rate in Reais  Price Indexes  Exchange Coupon  Foreign Currency   Equities   Sovereign/ Eurobonds and Treasuries  Other  Total without correlation Total with correlation
            1  (4,588)  (12,669)  (134)  (4,085)  (15,725)  (600)  (55)  (37,856)  (23,826) 
          Mar 11  2  (1,369,728)  (1,638,667)  (10,555)  (102,114)  (393,113)  (31,648)  (1,383)  (3,547,208)  (2,800,667) 
            3  (2,631,091)  (2,904,244)  (20,870)  (204,228)  (786,226)  (65,492)  (2,765)  (6,614,916)  (5,165,722) 
            1  (4,559)  (11,338)  (76)  (3,061)  (16,610)  (383)  (10)  (36,037)  (24,371) 
          Dec 10  2  (1,333,759)  (1,440,641)  (5,223)  (76,533)  (415,241)  (7,411)  (246)  (3,279,054)  (2,721,192) 
            3  (2,552,669)  (2,578,706)  (10,283)  (153,066)  (830,483)  (17,556)  (492)  (6,143,255)  (5,058,152) 
            1  (3,102)  (10,469)  (81)  (2,753)  (15,182)  (311)  (15)  (31,913)  (17,562) 
          Sept 10  2  (860,938)  (1,375,770)  (4,008)  (68,826)  (379,542)  (16,579)  (373)  (2,706,036)  (1,953,978) 
            3  (1,664,177)  (2,449,167)  (7,986)  (137,653)  (759,085)  (30,860)  (745)  (5,049,673)  (3,585,011) 
            1  (2,786)  (9,339)  (108)  (43)  (14,026)  (445)  -  (26,747)  (17,480) 
          Jun 10  2  (821,984)  (1,288,063)  (7,667)  (1,069)  (350,658)  (14,411)  (1)  (2,483,853)  (1,672,997) 
            3  (1,578,689)  (2,287,844)  (15,214)  (2,137)  (701,315)  (28,648)  (2)  (4,613,849)  (3,067,224) 
            1  (2,397)  (8,202)  (73)  (4,940)  (14,300)  (764)  -  (30,676)  (15,392) 
          Mar 10  2  (703,021)  (1,121,631)  (2,490)  (123,510)  (357,497)  (41,823)  (1)  (2,349,973)  (1,510,989) 
            3  (1,352,400)  (1,999,521)  (4,927)  (247,021)  (714,994)  (81,213)  (2)  (4,400,078)  (2,787,843) 

           

                             
          Definition Exposure subject  to variations in  fixed interest rates  and interest rate  coupons Exposure subject  to variations in  price index coupon  rates Exposure subject  to variations in  foreign currency  coupon rates Exposure subject  to exchange  variations Exposure subject  to variation in  stock prices Exposure subject  to variations in the  interest rate of  securities traded  on the  international market Exposure not  classified in  previous  definitions    
          (*) Amounts net of tax effects    

           

               
            Bradesco  183 

           

           

             
          Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report   

           

           
          Notes to the Consolidated Financial Statements 

           

          The sensitivity analysis of the Trading Portfolio, which represents exposures that may cause material impacts on the Organization’s results, is presented below. It is worth mentioning that results show the impacts for each scenario for a static portfolio position. The market dynamism results in continuous changes in these positions and does not necessarily reflect the current position. Moreover, as previously mentioned, the Organization has an ongoing process of market risk management, which continuously seeks, through market dynamics, to mitigate related risks according to the strategy determined by Senior Management. Therefore, in cases of signs of deterioration in a certain position, proactive measures are taken to minimize potential negative impacts, aiming at maximizing the risk/return ratio for the Organization.

           
          Sensitivity Analysis – Trading Portfolio 

           

                               
          Period Scenario Análise Sensitivity Analysis CVM Rule 475/08 –Trading Portfolio
          Risk Factors R$ thousand 
          Interest Rate in Reais Price Indexes Exchange Coupon Foreign Currency Equities  Sovereign/ Eurobonds and Treasuries Other Total without correlation Total with correlation
            1  (281)  (112)  (34)  (4,140)  (1,378)  (275)  -  (6,220)  (4,201) 
          Mar 11  2  (85,271)  (17,771)  (3,617)  (103,498)  (34,450)  (15,540)  (1)  (260,148)  (147,141) 
            3  (164,173)  (34,765)  (7,019)  (206,996)  (68,899)  (30,660)  (1)  (512,513)  (289,775) 
            1  (439)  (374)  (40)  (3,707)  (322)  (154)  -  (5,036)  (2,669) 
          Dec 10  2  (130,396)  (55,064)  (3,924)  (92,673)  (8,054)  (4,570)  (1)  (294,682)  (155,665) 
            3  (251,911)  (106,444)  (7,650)  (185,345)  (16,109)  (8,927)  (1)  (576,387)  (301,866) 
            1  (284)  (117)  (15)  (297)  (613)  (168)  -  (1,494)  (776) 
          Sept 10  2  (78,051)  (16,801)  (865)  (7,427)  (15,324)  (861)  -  (119,329)  (91,207) 
            3  (152,110)  (31,858)  (1,711)  (14,854)  (30,648)  (1,620)  (1)  (232,802)  (177,470) 
            1  (215)  (41)  (35)  (43)  (583)  (211)  -  (1,128)  (588) 
          Jun 10  2  (57,019)  (6,240)  (2,865)  (1,069)  (14,563)  (6,611)  (1)  (88,368)  (59,627) 
            3  (112,008)  (11,794)  (5,650)  (2,137)  (29,125)  (13,066)  (2)  (173,782)  (117,213) 
            1  (162)  (64)  (29)  (4,940)  (939)  (211)  -  (6,345)  (4,720) 
          Mar 10  2  (33,868)  (9,377)  (1,856)  (123,510)  (23,478)  (7,019)  (1)  (199,109)  (130,565) 
            3  (67,095)  (18,435)  (3,666)  (247,021)  (46,956)  (13,692)  (2)  (396,867)  (260,596) 

           

                             
          Definition  Exposure subject
          to variations in
          fixed interest rates
          and interest rate
          coupons           		 Exposure subject
          to variations in
          price index coupon
          rates           		 Exposure subject
          to variations in
          foreign currency
          coupon rates           		 Exposure subject
          to exchange
          variations           		 Exposure subject
          to variation in
          stock prices           		 Exposure subject
          to variations in the
          interest rate of
          securities traded
          on the
          international
          market           		 Exposure not
          classified in
          previous
          definitions           		    
          (*)  Amounts net of tax effects.    

           

             
          184 Report on Economic and Financial Analysis – March 2011   

           

           

             
            Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

          Sensitivity analyses were carried out based on scenarios prepared for the respective dates, always considering market data on the time and scenarios they would adversely affect our positions, according to the examples below:

          Scenario 1: Based on market information (BM&FBovespa, Anbima, etc), base point stresses were applied for interest rates and 1% variation for prices. For instance, in the scenario applied to positions on March 31, 2011, the exchange rate of Real/Dollar was R$1.65. For the interest rate scenario, the 1-year fixed interest rate applied on the positions on March 31, 2011 was 12.30% p.a.

          Scenario 2: 25% stresses were determined based the market. For instance, in the scenario applied to positions on March 31, 2011, the exchange rate of Real/Dollar was R$2.04. For the interest rate scenario, the 1-year fixed interest rate applied to positions on March 31, 2011 was 15.37% p.a. Scenarios for other risk factors also represented a 25% stress on the respective curves or prices; and

          Scenario 3: 50% stresses were determined based on the market. For instance, in the scenario applied to positions on March 31, 2011, the exchange rate of Real/Dollar was R$2.45. For the interest rate scenario, the 1-year fixed interest rate applied to positions on March 31, 2011 was 18.44% p.a. Scenarios for other risk factors also represented a 50% stress on the respective curves or prices.

          Liquidity Risk

          The Liquidity Risk is the possibility of the Organization not having enough financial funds to honor its commitments due to the mismatch between payments and deposits, taking in consideration different currencies and the settlement terms of its rights and obligations.

          In addition to defining minimum levels to be complied with, the Organization’s liquidity policy also considers stress situations, the type of financial instruments in which funds should remain invested and the operating strategy for cases of need.

          The liquidity risk management process includes the daily monitoring of the composition of available resources, compliance with the minimum level of liquidity and contingency plans for stress situations. The controlling and monitoring of positions are conducted in a centralized manner.

               
            Bradesco  185 

           

           

             
          Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report   

           

           
          Notes to the Consolidated Financial Statements 

           

          We present the Balance Sheet by maturity in the chart below

                       
            R$ thousand 
          1 to 30 days 31 to 180 days 181 to 360 days More than 360 days Not stated maturity Total 
          Assets             
          Current and long-term assets  365,784,162  109,678,937  43,437,980  144,697,875  -  663,598,954 
          Funds available  6,785,081  -  -  -  -  6,785,081 
          Interbank investments  51,999,094  45,043,794  1,473,328  1,643,153  -  100,159,369 
          Securities and derivative financial instruments (1) (2)  184,705,926  4,667,492  4,567,668  23,540,515  -  217,481,601 
          Interbank and interdepartmental accounts  66,783,661  438  364  507,003  -  67,291,466 
          Loan and leasing operations  24,205,086  51,881,485  32,574,488  97,617,429  -  206,278,488 
          Other receivables and assets  31,305,314  8,085,728  4,822,132  21,389,775  -  65,602,949 
          Permanent assets  219,731  996,744  901,763  7,240,828  2,428,592  11,787,658 
          Investments  -  -  -  -  1,674,688  1,674,688 
          Premises and equipment and leased assets  51,551  257,765  309,318  2,701,246  345,890  3,665,770 
          Intangible assets  168,180  738,979  592,445  4,539,582  408,014  6,447,200 
          Total on March 31, 2011  366,003,893  110,675,681  44,339,743  151,938,703  2,428,592  675,386,612 
          Total on December 31, 2010  332,462,072  107,361,975  44,902,926  150,427,483  2,330,274  637,484,730 
          Total on March 31, 2010  273,314,225  80,703,635  38,559,657  138,165,642  1,882,901  532,626,060 
          Liabilities             
          Current and long-term liabilities  325,359,703  43,164,552  45,092,467  209,451,827  -  623,068,549 
          Deposits (2)  95,562,421  10,695,214  21,542,930  76,021,874  -  203,822,439 
          Federal funds purchased and securities sold under agreements to repurchase  122,313,854  14,239,721  6,010,479  36,424,727  -  178,988,781 
          Funds from issuance of securities  350,710  2,751,735  2,211,697  16,386,857  -  21,700,999 
          Interbank and interdepartmental accounts  2,647,135  -  -  -  -  2,647,135 
          Borrowing and onlending  2,193,125  8,930,196  7,452,469  22,924,848  -  41,500,638 
          Derivative financial instruments  1,898,599  174,470  115,973  168,655  -  2,357,697 
          Technical provisions for insurance, private pension plans and savings bonds (3)  65,841,833  2,127,156  1,320,930  20,689,616  -  89,979,535 
          Other liabilities:             
          - Subordinated debts  66,964  2,732,395  2,090,045  19,518,745  -  24,408,149 
          - Other  34,485,062  1,513,665  4,347,944  17,316,505  -  57,663,176 
          Deferred income  447,122  -  -  -  -  447,122 
          Minority interest in subsidiaries  -  -  -  -  573,978  573,978 
          Shareholders’ equity  -  -  -  -  51,296,963  51,296,963 
          Total on March 31, 2011  325,806,825  43,164,552  45,092,467  209,451,827  51,870,941  675,386,612 
          Total on December 31, 2010  314,477,505  40,862,788  42,254,168  191,375,883  48,514,386  637,484,730 
          Total on March 31, 2010  258,462,052  29,094,014  33,902,414  166,729,367  44,438,213  532,626,060 
          Accumulated net assets on March 31, 2011  40,197,068  107,708,197  106,955,473  49,442,349  -  - 
          Accumulated net assets on December 31, 2010  17,984,567  84,483,754  87,132,512  46,184,112  -  - 
          Accumulated net assets on March 31, 2010  14,852,173  66,461,794  71,119,037  42,555,312  -  - 


          (1)           Investments in investment funds are classified as up to 30 days;
          (2) Sale and purchase agreements are classified according to the maturity of the operation; and
          (3) Demand and savings deposits and technical provisions for insurance, private pension plans and savings bonds comprising VGBL and PGBL products are classified as up to 30 days, without considering average historical turnover.

             
          186 Report on Economic and Financial Analysis – March 2011   
           

             
            Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

          Operating Risk

          Operating risk is represented by losses from internal processes, personnel and inadequate systems or failures and external events. This definition includes legal risk, but excludes strategic and image risk.

          The Organization considers operational risk management to be essential to the generation of added value. Risk control is conducted in a centralized manner through identification, measurement, mitigation plans and administration of operating risks, on a consolidated basis and by company.

          Among plans for mitigating operating risk, the most important is business continuity management, which is made up of formal plans to be adopted during moments of crisis in order to guarantee the recovery and continuation of business, thereby preventing or mitigating losses.

          Capital Management

          The Capital management process is conducted in order to provide the conditions necessary to meet the Organization’s strategic objectives, considering the economic and commercial environment in which it operates. This process is compatible with the nature of operations, complexity of service and products and dimension of the Organization's exposure to risks.

          Under Bacen regulations, financial institutions are required to permanently maintain capital (Reference Shareholders’ Equity) compatible with the risks of their activities, represented by Required Reference Shareholders’ Equity (PRE). PRE is calculated considering, at least, the sum of credit risk, market risk and operating risk.

          The process of adjustment to Reference Shareholders' Equity is daily followed up and aims to ensure that the Organization have a solid capital base in order to support development of activities and face risks incurred, whether in normal situations or in extreme market conditions, in addition to meeting capital regulatory requirements.

               
            Bradesco  187 

           

           

             
          Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report   

           

           
          Notes to the Consolidated Financial Statements 

           

          We present the Capital Adequacy Ratio (Basel II) in the chart below

                       
          Calculation basis – Capital Adequacy Ratio (Basel II) R$ thousand 
          2011  2010
          March 31  December 31  March 31 
           Financial  Economic-financial  Financial  Economic-financial  Financial  Economic-financial
          Shareholders’ equity  51,296,963  51,296,963  48,042,850  48,042,850  43,087,366  43,087,366 
          Reduction of deferred assets – CMN Resolution 3,444/07  (209,214)  (290,645)  (206,257)  (296,018)  (315,872)  (433,638) 
          Decrease in gains/losses of mark-to-market adjustments in DPV and derivatives – CMN  Resolution 3,444/07 1,660,228  1,660,228  1,677,537  1,677,537  1,346,716  1,346,716 
          Additional provision to the minimum required by Bacen Resolution 2,682/99  -  -  -  -  3,004,207  3,004,968 
          Minority interest/other  180,533  573,978  175,671  471,536  168,787  816,547 
          Reference shareholders’ equity - Tier I  52,928,510  53,240,524  49,689,801  49,895,905  47,291,204  47,821,959 
          Total of gains/losses of adjustments to market value in Available for Sale (DPV) and  derivatives – CMN Resolution 3,444/07 (1,660,228)  (1,660,228)  (1,677,537)  (1,677,537)  (1,346,716)  (1,346,716) 
          Subordinated debt  8,468,720  8,468,720  8,050,760  8,050,760  9,816,056  9,816,056 
          Reference shareholders’ equity – Tier II  6,808,492  6,808,492  6,373,223  6,373,223  8,469,340  8,469,340 
          Total reference shareholders’ equity (Tier I + Tier II)  59,737,002  60,049,016  56,063,024  56,269,128  55,760,544  56,291,299 
          Deduction of instruments for funding - CMN Resolution 3,444/07  (96,553)  (126,433)  (94,657)  (123,100)  (84,931)  (228,458) 
          Reference shareholders’ equity (a)  59,640,449  59,922,583  55,968,367  56,146,028  55,675,613  56,062,841 
          Capital allocation (by risk)             
          - Credit risk  40,554,561  40,774,901  38,738,750  38,938,440  34,655,230  34,871,767 
          - Market risk  363,758  363,758  380,236  380,236  202,277  202,277 
          - Operational risk (1)  1,883,392  2,690,028  1,758,568  2,574,130  1,677,756  1,677,756 
          Required reference shareholders’ equity (b)  42,801,711  43,828,687  40,877,554  41,892,806  36,535,263  36,751,800 
          Margin (a – b)  16,838,738  16,093,896  15,090,813  14,253,222  19,140,350  19,311,041 
          Risk-weighted assets (2) (c)  389,106,466  398,442,608  371,614,123  380,843,686  332,138,752  334,107,270 
          Capital adequacy ratio (a/c)  15.33%  15.04%  15.06%  14.74%  16.76%  16.78% 


          (1) As set forth by Bacen           Circular Letters 3,383/08 and 3,476/09, we point out that, as of July 2010, the calculation of capital allocation for Operating Risk for the Economic -Financial Consolidated includes non-financial companies.

             
          188 Report on Economic and Financial Analysis – March 2011   

           

           

             
            Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

          b) Market value

          The book value, net of provisions for loss of the main financial instruments is as follows:

                           
          Portfolios R$ thousand 
          Unrealized gain (loss) without tax effects
          Book value  Market value  In the result In shareholders’ equity 
          2011  2011  2010  2011  2010 
          March 31  1st Quarter  4th Quarter  1st Quarter  March 31  December 31 March 31 
          Securities and derivative financial instruments (Notes 3e, 3f and 8)  217,481,601  221,348,349  3,913,921  4,632,351  4,167,360  3,866,748  4,607,874  3,602,028 
          - Adjustment of available-for-sale securities (Note 8 cII)      47,173  24,477  565,332  -  -  - 
          - Adjustment of held-to-maturity securities (Note 8d item 6)      3,866,748  4,607,874  3,602,028  3,866,748  4,607,874  3,602,028 
          Loan and leasing operations (Notes 2, 3g and 10) (1)  239,911,765  238,893,319  (1,018,446)  53,933  494,029  (1,018,446)  53,933  494,029 
          Investments (Notes 3j, 4 and 13) (2)  1,674,688  8,633,739  6,959,051  6,734,856  7,120,175  6,959,051  6,734,856  7,120,175 
          Treasury shares (Note 23d)  63,091  69,338  -  -  -  6,247  110  - 
          Time deposits (Notes 3n and 16a)  116,054,512  115,827,862  226,650  168,129  150,144  226,650  168,129  150,144 
          Funds from issuance of securities (Note 16c)  21,700,999  21,824,120  (123,121)  (71,833)  6,423  (123,121)  (71,833)  6,423 
          Borrowing and onlending (Notes 17a and 17b)  41,500,638  40,986,901  513,737  128,201  95,866  513,737  128,201  95,866 
          Subordinated debts (Note 19)  24,408,149  25,289,554  (881,405)  (1,089,321)  (1,123,197)  (881,405)  (1,089,321)  (1,123,197) 
          Unrealized gains without tax effects      9,590,387  10,556,316  10,910,800  9,549,461  10,531,949  10,345,468 


          (1)           Includes advances on foreign exchange contracts, leasing operations and other receivables with credit features; and
          (2) Basically includes the surplus of interest in subsidiaries and affiliated companies (Cielo, Odontoprev and Fleury) and other investments (BM&FBovespa and Cetip).

               
            Bradesco  189 

           

           

             
          Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report   

           

           
          Notes to the Consolidated Financial Statements 

           

             
            Determination of market value of financial instruments: 
           
           

          • Securities and derivative financial instruments, investments, subordinated debts and treasury shares are based on the market price on the balance sheet date. Should there be no available market price quotations, amounts are estimated based on the prices quoted by dealers, on pricing models, quotation models or quotations for instruments with similar characteristics;

           
           

          • Fixed rate loan operations were determined by discounting estimated cash flows, using interest rates applied by the Bradesco Organization for new contracts with similar features. These rates are compatible with prices practiced in the market on the balance sheet date; and

           
           

          • Time deposits, funds from issuance of securities, borrowing and onlending were calculated by discounting the difference between the cash flows under the contract terms and the rates practiced in the market on the balance sheet date.

           
          33)  EMPLOYEE BENEFITS 
           
           

          Bradesco and its subsidiaries sponsor a supplementary private pension plan for employees and directors, in the PGBL modality, which is a private defined contribution pension plan that allows the accumulation of financial resources by participants over their professional careers through contributions paid by the professional and the sponsoring company. The related resources are invested in an Exclusive Investment Fund (FIE).

           
           

          PGBL is managed by Bradesco Vida e Previdência S.A. and Bradesco Asset Management (BRAM). The Securities Dealer company (DTVM) is responsible for the financial management of FIE funds.

           
           

          Contributions paid by employees and directors of Bradesco and its subsidiaries are equivalent to 4% of salary, except for participants who, in 2001, opted to migrate to the defined contribution plan (PGBL) plan from the defined benefit plan, whose contributions to the PGBL plan were maintained at the levels in force for the defined benefits plan at the time of migration, nonetheless respecting the 4% minimum.

           
           

          The actuarial liabilities of defined contribution plan (PGBL) are fully covered by the net assets of the corresponding FIE.

           
           

          In addition to the aforementioned plan (PGBL), former participants who chose to migrate from the defined benefit plan are guaranteed a proportional deferred benefit, corresponding to their accumulated rights in this plan. For participants of the defined benefit plan, whether they migrated or not to the PGBL plan, retired participants and pensioners, the present value of the plan’s actuarial liabilities is fully covered by plan assets.

           
           

          Banco Alvorada S.A. (merging company of Banco Baneb S.A.) maintains supplementary retirement plans of defined contribution and defined benefit, through Fundação Baneb de Seguridade Social - Bases (related to former employees of Baneb). The actuarial liabilities of defined contribution and defined benefit plans are fully covered by assets of the plans.

           
           

          Banco Bradesco BBI S.A. (current name of Banco BEM S.A.) sponsors supplementary retirement plans of both defined benefit and defined contribution types, through the Assistance and Retirement Pension Fund for the Employees of the Bank of the State of Maranhão (Capof).

           
           

          Alvorada Cartões, Crédito, Financiamento e Investimento S.A. (Alvorada CCFI) (merging company of Banco BEC S.A.) sponsors a defined benefit plan by means of the Private Pension Plan Fund of the Bank of the State of Ceará (Cabec).

           

             
          190 Report on Economic and Financial Analysis – March 2011   

           

           

             
            Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

          The assets of private pension plans are invested in compliance with the applicable legislation (government securities and private securities, listed company shares and real estate properties).

          Bradesco’s facilities abroad provide their employees and directors with a private pension plan in compliance with the rules set forth by local authorities, which authorize to accumulate funds during the participant’s professional career.

          Expenses with contributions made in the first quarter of 2011 amounted to R$89,035 thousand (R$128,231 thousand in the fourth quarter of 2010 and R$73,269 thousand in the first quarter of 2010).

          In addition to this benefit, Bradesco and its subsidiaries offer their employees and management several other benefits including: health insurance, dental care, life and personal accident insurance, as well as professional training. These expenses, including the aforementioned contributions, amounted to R$514,726 thousand in the first quarter of 2011 (R$562,772 thousand in the fourth quarter of 2010 and R$428,911 thousand in the first quarter of 2010).

          34) INCOME TAX AND SOCIAL CONTRIBUTION

               a) Calculation of income tax and social contribution charges

                 
            R$ thousand 
          2011  2010
          1st Quarter  4th Quarter  1st Quarter 
          Income before income tax and social contribution  4,073,480  4,214,067  2,689,696 
          Total income tax and social contribution at rates of 25% and 15%, respectively (1)   (1,629,392)   (1,685,627)   (1,075,878) 
          Effect on the tax calculation:       
          Equity in the earnings of unconsolidated companies  13,675  24,225  11,502 
          Exchange (loss)/gain  (107,423)  (108,261)  30,540 
          Non-deductible expenses, net of non-taxable income  (95,793)  (86,160)  (56,769) 
          Tax credits recorded from previous periods  -  76,754  241,732 
          Interest on shareholders’ equity (paid and payable)  286,320  245,436  243,210 
          Effect of the difference of the social contribution rate (2)  226,711  259,040  152,209 
          Other amounts  8,125  71,009  (115,864) 
          Income tax and social contribution for the period  (1,297,777)  (1,203,584)  (569,318) 

           

          (1) The social contribution rate for companies of the financial and insurance sectors was increased to 15%, according to Law 11,727/08, remaining at 9% for other companies (Note 3h); and
          (2) Refers to the adjustment of the effective rate of social contribution in relation to the rate (40%) shown.

           

               
            Bradesco  191 

           

           

             
          Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report   

           

           
          Notes to the Consolidated Financial Statements 

           

          b) Breakdown of income tax and social contribution in the result

                 
            R$ thousand 
          2011  2010
          1st Quarter  4th Quarter  1st Quarter 
          Current taxes:       
          Income tax and social contribution payable  (2,278,691)  (1,468,729)  (1,486,130) 
          Deferred taxes:       
          Amount recorded/realized for the period on temporary additions  1,155,816  224,280  661,483 
          Use of opening balances of:       
          Negative basis of social contribution  (85,833)  (5,516)  (55,047) 
          Tax loss  (155,307)  (32,979)  (153,724) 
          Tax credits recorded from previous periods:       
          Negative basis of social contribution  -  27,158  12,102 
          Tax loss  -  2,067  33,617 
          Temporary additions  -  47,529  196,013 
          Recording/utilization in the period on:       
          Negative basis of social contribution  23,168  3,272  11,117 
          Tax loss  43,070  (666)  211,251 
          Total deferred taxes  980,914  265,145  916,812 
          Income tax and social contribution for the period  (1,297,777)  (1,203,584)  (569,318) 

           

          c) Origin of tax credits of deferred income tax and social contribution

                     
            R$ thousand 
          Balance on
          12.31.2010           		 Amount
          recorded (3)           		 Amount
          realized           		 Balance on
          3.31.2011           		 Balance on
          3.31.2010 
          Allowance for loan losses  8,797,082  1,336,620  1,044,441  9,089,261  7,920,438 
          Provision for civil contingencies  1,025,560  115,542  60,799  1,080,303  895,348 
          Provision for tax contingencies  2,770,672  499,912  8,131  3,262,453  2,265,948 
          Labor provisions  627,215  72,726  59,103  640,838  605,162 
          Provision for devaluation of securities and investments  100,554  3,984  1,458  103,080  120,732 
          Provision for devaluation of foreclosed assets  105,913  22,426  28,218  100,121  107,140 
          Adjustment to market value of trading securities  58,546  59,191  547  117,190  14,251 
          Amortized goodwill  906,512  5,341  67,125  844,728  992,003 
          Provision for interest on shareholders’ equity (1)  -  286,320  -  286,320  208,948 
          Law 11,638/07 adjustments  77,458  1,395  1,598  77,255  106,308 
          Other  1,864,356  351,937  328,158  1,888,135  1,872,468 
          Total tax credits over temporary differences  16,333,868  2,755,394  1,599,578  17,489,684  15,108,746 
          Tax losses and negative basis of social contribution in Brazil           
          and abroad  739,453  66,238  241,140  564,551  1,178,597 
          Subtotal  17,073,321  2,821,632  1,840,718  18,054,235  16,287,343 
          Adjustment to market value of available-for-sale securities  215,881  35,847  38,303  213,425  22,455 
          Social contribution – Provisional Measure 2,158-35 of August 24, 2001 (2)   157,813   -   6,074   151,739   247,247 
          Total tax credits (Note 11b)  17,447,015  2,857,479  1,885,095  18,419,399  16,557,045 
          Deferred tax liabilities (Note 34f)  4,791,462  230,510  61,373  4,960,599  4,455,906 
          Tax credits net of deferred tax liabilities  12,655,553  2,626,969  1,823,722  13,458,800  12,101,139 
          - Percentage of net tax credits over reference shareholders’ equity (Note 32a)   22.5%       22.5%   21.6% 
          - Percentage of net tax credits over total assets  2.0%      2.0%  2.3% 

          (1) Tax credit on interest on shareholders’ equity is recorded up to the authorized tax limit;
          (2) Up to the end of the fiscal year, we expect to realize R$31,427 thousand, to be recorded upon effective use (item d); and
          (3) Includes tax credit related to the increase in the social contribution rate for companies in the financial and insurance sectors, established by Law 11,727/08, equivalent to R$226,711 thousand (Note 3h).

           

               
          192 Report on Economic and Financial Analysis – March 2011  

           

           

             
            Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

              d) Expected realization of tax credits over temporary differences, tax loss and negative basis of social contribution and social contribution tax credit – Provisional Measure 2,158-35

           

                     
            R$ thousand 
          Temporary differences  Tax loss and negative basis  Total
          Income
          tax           		 Social
          contribution           		 Income
          tax           		 Social
          contribution 
          2011  2,741,359  1,488,744  150,327  26,906  4,407,336 
          2012  3,420,999  1,946,456  119,553  50,013  5,537,021 
          2013  3,385,906  1,913,761  47,227  25,243  5,372,137 
          2014  849,410  551,019  47,936  28,101  1,476,466 
          2015  688,085  461,785  43,059  25,135  1,218,064 
          2016 (1st quarter)  22,702  19,458  520  531  43,211 
          Total  11,108,461  6,381,223  408,622  155,929  18,054,235 

           

                     
            R$ thousand 
          Social contribution tax credit - Provisional Measure 2,158–35   
          2011  2012  2013  2014  Total 
          Total  31,427  109,883  9,261  1,168  151,739 

           

          The projected realization of tax credits is an estimate and it is not directly related to the expected accounting income.

          The present value of tax credits, calculated based on the average funding rate, net of tax effects, amounts to R$16,835,224 thousand (December 31, 2010 – R$16,044,175 thousand and March 31, 2010 – R$14,809,989 thousand), of which R$16,169,728 thousand (December 31, 2010 –R$15,200,956 thousand and March 31, 2010 – R$13,519,605 thousand) is relative to temporary differences, R$521,920 thousand (December 31, 2010 – R$693,909 thousand and March 31, 2010 – R$1,071,383 thousand) to tax losses and negative basis of social contribution and R$143,576 thousand (December 31, 2010 – R$149,310 thousand and March 31, 2010 – R$219,001 thousand) comprises tax credit over social contribution – Provisional Measure 2,158-35.

          e) Unrecorded tax credits

          Tax credits of R$2,511 thousand (December 31, 2010 – R$2,414 thousand and March 31, 2010 –R$74,152 thousand) have not been recorded in the financial statements, and will be recorded when prospects of realization are probable according to studies and analyses prepared by the Management and in accordance with Bacen rules.

          Due to the Direct Action of the Declaration of Inconstitutionality filed by CONSIF against articles 17 and 41 of Law 11,727/08, tax credits from periods prior to the increase in the Social Cotnribution rate from 9% to 15% were recorded up to the limit of the correspopnding consolidated tax obligations. In the quarter, the remaining balance of December 31, 2010 in the moaunt of R$226,711 thousand, was fully provisioned (Note 3h).

               
            Bradesco  193 

           

           

             
          Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report   

           

           
          Notes to the Consolidated Financial Statements 

           

          f) Deferred tax liabilities

                 
            R$ thousand 
          2011  2010 
          March 31  December 31  March 31 
          Mark-to-market adjustment of derivative financial instruments  240,984  238,016  393,891 
          Difference in depreciation  3,917,264  3,925,102  3,427,393 
          Judicial deposit update and others  802,351  628,344  634,622 
          Total  4,960,599  4,791,462  4,455,906 

           

          The deferred tax liabilities of financial and insurance sector companies were established considering the increase of the social contribution rate, determined by Law 11,727/08 (Note 3h).

          35) OTHER INFORMATION

          a) The Bradesco Organization manages investment funds and portfolios with net assets on March 31, 2011 of R$303,319,123 thousand (December 31, 2010 - R$288,907,041 thousand and March 31, 2010 - R$258,562,728 thousand).

          b) As part of the process of convergence with international accounting standards, certain accounting pronouncements and their interpretations were issued by the Brazilian Accounting Pronouncements Committee (CPC), which are applicable to financial institutions only after approval by CMN.

          The accounting standards which have been approved by CMN include the following:

          • Resolution 3,566/08 – Impairment of Assets (CPC 01);
          • Resolution 3,604/08 – Statement of Cash Flow (CPC 03);
          • Resolution 3,750/09 – Related-Party Disclosures (CPC 05); and
          • Resolution 3,823/09 – Provisions, Contingent Liabilities and Contingent Assets (CPC 25).

          At present, it is not practicable to estimate when CMN will approve the other CPC accounting standards or whether their adoption, subsequent to approval, will be effective for future periods, or applicable retroactively. As a result, it is not yet possible to estimate the accounting effects of these standards on Bradesco’s financial statements.

          CMN Resolution 3,786/09 and Circular Letters 3,472/09 and 3,516/10 established that financial institutions and other entities authorized to operate by Bacen, which are listed companies or which are required to maintain an Audit Committee shall, as from December 31, 2010, prepare annually and publish in up to 90 days from the base date December 31, their consolidated financial statements, prepared in accordance with International Financial Reporting Standards (IFRS), in compliance with standards issued by the International Accounting Standards Board. (IASB). Bacen’s Circular 3,516/10 increased from 90 to 120 days the disclosure term of Financial Statements according to IFRS as of December 31, 2010.

          On April 15, 2011, Bradesco made its financial statements for December 31, 2010 and 2009 prepared in accordance with IFRS standards available on its website, www.bradesco.com.br/ri, and on CVM’s website (www.cvm.com.br). On the opinion of the Management, reconciliations between net income and shareholders' equity on March 31, 2011 are in line with the values presented in the reconciliations dated December 31, 2010.

          c) On January 2011, Bradesco acquired shares issued by Companhia Brasileira de Soluções e Serviços – CBSS (“CBSS”) then held by Visa International Service Association (“Visa International”) corresponding to 5.01% of the capital stock of CBSS for R$85.8 million. With this operation,

               
          194 Report on Economic and Financial Analysis – March 2011  

           

           

             
            Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report 

           

           
          Notes to the Consolidated Financial Statements 

           

          Bradesco Organization’s interest in CBSS increased from 45% to 50.01%, strengthening its interest in the capital of companies operating in the credit card segment.

          d)  On March 2011, following the Memorandum of Understanding disclosed in April 2010, Bradesco executed a new binding Memorandum of Understanding with Banco do Brasil S.A. (“Banco do Brasil”) to develop and integrate joint businesses through the creation of a Holding named Elo Participações to launch the Elo card brand.

          Bradesco will hold 50.01% interest in Elo Participações, with Banco do Brasil holding 49.99%. The new company will be involved in business related to electronic means of payment, which includes:

          • Elo Serviços S.A., owner and manager of the Elo brand of credit, debit and pre-paid cards;

          • Integration of Companhia Brasileira de Soluções e Serviços (“CBSS”), directly or indirectly, in the business of Elo Participações;

          • Sale to CBSS of 100% of quotas held by Bradesco and/or its affiliates in IBI Promotora de Vendas Ltda., including customer base and business related to the business channel, for a total of R$419.0 million. This operation is subject to: (i) negotiation of definitive documents by the parties involved; and (ii) compliance with applicable legislation; and

          • Sale to CBSS of 100% of stock held by Bradesco and/or its affiliates in Fidelity Processadora e Serviços S.A. (“FPS”), representing 49% of FPS’s capital stock, for a total of R$557.9 million, R$328.9 million of which to paid based on performance.

          The operation will be finalized after the completion of definitive documents and compliance with applicable legal and regulatory formalities. Bradesco and Banco do Brasil are taking the final steps towards integrating Caixa Econômica Federal to the launch of the Elo brand.

               
            Bradesco  195 

           

             
          Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report   

           

           
          Management Bodies 

           

          Reference Date: March 31, 2011

          Board of Directors

          Chairman
          Lázaro de Mello Brandão

          Vice-Chairman
          Antônio Bornia

          Members
          Mário da Silveira Teixeira Júnior
          João Aguiar Alvarez
          Denise Aguiar Alvarez
          Luiz Carlos Trabuco Cappi
          Carlos Alberto Rodrigues Guilherme
          * Milton Matsumoto
          Ricardo Espírito Santo Silva Salgado

          Board of Executive Officers

          Executive Officers

          Chief Executive Officer
          Luiz Carlos Trabuco Cappi

          Executive Vice-Presidents
          Laércio Albino Cezar
          Julio de Siqueira Carvalho de Araujo
          Norberto Pinto Barbedo
          Domingos Figueiredo de Abreu

          Managing Directors
          José Alcides Munhoz
          Aurélio Conrado Boni
          Ademir Cossiello
          Sérgio Alexandre Figueiredo Clemente
          Candido Leonelli
          Maurício Machado de Minas

          Deputy Directors
          Alexandre da Silva Glüher
          Alfredo Antônio Lima de Menezes
          André Rodrigues Cano
          Josué Augusto Pancini
          Luiz Carlos Angelotti
          Marcelo de Araújo Noronha
          Nilton Pelegrino Nogueira
          Department Directors Compensation Committees
          Adineu Santesso Lázaro de Mello Brandão - Coordinator
          Altair Antônio de Souza Antônio Bornia
          Amilton Nieto Mário da Silveira Teixeira Júnior
          André Bernardino da Cruz Filho Luiz Carlos Trabuco Cappi
          André Marcelo da Silva Prado Carlos Alberto Rodrigues Guilherme
          Antonio de Jesus Mendes * Milton Matsumoto
          Antonio José da Barbara  
          Arnaldo Nissental Audit Committee
          Aurélio Guido Pagani Carlos Alberto Rodrigues Guilherme - Coordinator
          Cassiano Ricardo Scarpelli José Lucas Ferreira de Melo
          Clayton Camacho Romulo Nagib Lasmar
          Denise Pauli Pavarina Osvaldo Watanabe
          Douglas Tevis Francisco  
          Fernando Roncolato Pinho Compliance and Internal Control Committee
          Jair Delgado Scalco Mário da Silveira Teixeira Júnior – Coordinator
          Jean Philippe Leroy Carlos Alberto Rodrigues Guilherme
          João Albino Winkelmann Milton Matsumoto
          Jorge Pohlmann Nasser Domingos Figueiredo de Abreu
          José Luiz Rodrigues Bueno Alexandre da Silva Glüher
          José Maria Soares Nunes Marco Antonio Rossi
          Júlio Alves Marques Clayton Camacho
          Laércio Carlos de Araújo Filho Moacir Nachbar Junior
          Lúcio Rideki Takahama Roberto Sobral Hollander
          Luiz Alves dos Santos Frederico William Wolf
          Luiz Carlos Brandão Cavalcanti Junior  
          Luiz Fernando Peres Executive Disclosure Committee (Non-Statutory)
          Marcos Bader Domingos Figueiredo de Abreu - Coordinator
          Marcos Daré Julio de Siqueira Carvalho de Araujo
          Mario Helio de Souza Ramos Luiz Carlos Angelotti
          Marlene Morán Millan Alexandre da Silva Glüher
          Moacir Nachbar Junior Marco Antonio Rossi
          Nobuo Yamazaki Haydewaldo Roberto Chamberlain da Costa
          Octávio de Lazari Júnior Antonio José da Barbara
          Octavio Manoel Rodrigues de Barros José Maria Soares Nunes
          Paulo Aparecido dos Santos Paulo Faustino da Costa
          Paulo Faustino da Costa Marcos Aparecido Galende
          Roberto Sobral Hollander
          * Waldemar Ruggiero Júnior Ethical Conduct Committee
          Walkiria Schirrmeister Marquetti Milton Matsumoto - Coordinator
          Carlos Alberto Rodrigues Guilherme
          Directors Julio de Siqueira Carvalho de Araujo
          Antonio Carlos Melhado Domingos Figueiredo de Abreu
          Antonio Chinellato Neto Alexandre da Silva Glüher
          Cláudio Borges Cassemiro André Rodrigues Cano
          Cláudio Fernando Manzato Josué Augusto Pancini
          Edilson Wiggers Marco Antonio Rossi
          Eurico Ramos Fabri Clayton Camacho
          Guilherme Muller Leal José Luiz Rodrigues Bueno
          José Luis Elias Júlio Alves Marques
          José Ramos Rocha Neto Moacir Nachbar Junior
          Marcos Aparecido Galende Glaucimar Peticov
            Osmar Roncolato Pinho Frederico William Wolf
            Renan Mascarenhas Carmo  
              Integrated Risk Management and Capital Allocation Committee
            Regional Officers Luiz Carlos Trabuco Cappi - Coordinator
            Alex Silva Braga Laércio Albino Cezar
            Almir Rocha Julio de Siqueira Carvalho de Araujo
            Antonio Gualberto Diniz Norberto Pinto Barbedo
            Antonio Piovesan Domingos Figueiredo de Abreu
            Delvair Fidencio de Lima Alexandre da Silva Glüher
            Diaulas Morize Vieira Marcondes Junior Marco Antonio Rossi
            Francisco Aquilino Pontes Gadelha Roberto Sobral Hollander
            Francisco Assis da Silveira Junior  
            Geraldo Dias Pacheco Fiscal Council
            João Alexandre Silva Members
            João Carlos Gomes da Silva Nelson Lopes de Oliveira - Coordinator
            José Sergio Bordin Domingos Aparecido Maia
            Mauricio Gomes Maciel Ricardo Abecassis Espírito Santo Silva
            Volnei Wulff  
            Wilson Reginaldo Martins Substitute Members
              Jorge Tadeu Pinto de Figueiredo
              João Batistela Biazon
              Renaud Roberto Teixeira
              Ombudsman Department

          * Undergoing ratification by the Brazilian Central Bank

          		 Júlio Alves Marques – Ombudsman

                     		  

                     		  
          General Accounting Committee
          Marcos Aparecido Galende
          Accountant -CRC 1SP201309/O-6

           

               
          196 Report on Economic and Financial Analysis – March 2011  

           

           

             
            Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report 

           

           
          Report on Limited Review of Interim Consolidated Financial Information 

           

          To the Board of Directors of Banco Bradesco S.A. Osasco - SP

          Introduction

          We have reviewed the consolidated balance sheet of Banco Bradesco S.A., as of March 31, 2011 and the related consolidated statements of income, consolidated statement of changes in shareholders' equity and the consolidated statement of cash flows for the quarter then ended, as well as the summary of significant accounting policies and other explanatory notes.

          Management is responsible for the preparation and fair presentation of this interim consolidated financial information in accordance with accounting practices adopted in Brazil, applicable to financial institutions authorized to operate by the Brazilian Central Bank (BACEN). Our responsibility is to express an opinion on this interim consolidated financial information based on our limited review.

          Scope of review

          We conducted our limited review in accordance with approved Brazilian auditing standards and International Standards on Auditing (NBC TR 2410 – NBC TR 2410 – Revisão de Informações Intermediárias Executada pelo Auditor da Entidade and ISRE 2410 – Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters and applying analytical and other review procedures. The scope of a review is significantly lower than an audit conducted in accordance with auditing standards and therefore does not allow us to obtain assurance that we become aware of all significant matters that might be identified in an audit. Therefore, we do not express an audit opinion.

          Conclusion

          Based on our review, we are not aware of any facts that would lead us to believe that the consolidated interim information does not present fairly, in all material aspects, the consolidated financial position of Banco Bradesco S.A., as of March 31, 2011, the consolidated results of their operations and their consolidated cash flows for the quarter then ended, in accordance with accounting practices adopted in Brazil applicable to financial institutions authorized to operate by the Brazilian Central Bank.

          Other matters

          Statement of interim value added

          We also reviewed the interim consolidated statements of value added for the quarter ended March 31, 2011, presented as supplemental information. This statement was subjected to the same review procedures described above and based on our review, we are not aware of any facts that would lead us to believe that they are not presented fairly, in all material respects, in relation to other interim consolidated financial information taken as a whole

               
            Bradesco  197 

           

           

             
          Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report   

           

           
          Report on Limited Review of Interim Consolidated Financial Information 

           

          Audit of corresponding values of prior year and prior quarters.

          The corresponding values relating year ended December 31, 2010 and the quarters ended December 31 and March 31, 2010, presented for comparative purposes, have been previously audited and reviewed by other independent auditors who issued their reports dated January 28, 2011 and April 27, 2010, respectively, which did not contain any modification.

          São Paulo, April 26, 2011


           
               
          198 Report on Economic and Financial Analysis – March 2011  

           

           

             
            Financial Statements, Independent Auditors’ Report and Fiscal Council’s Report 

           

           
          Fiscal Council Report 

           

          The undersigned members of the Fiscal Council of Banco Bradesco S.A., in the exercise of their legal and statutory duties, having examined the Management Report and the Financial Statements related to the first quarter of 2011, and the technical feasibility study of taxable income generation, brought at present value, which has the purpose of recording the Deferred Tax Assets pursuant to the CVM Rule 371/02, CMN Resolution 3,059/02, and Bacen Circular Letter 3,171/02, and in view of the report prepared by KPMG Auditores independentes, are of the opinion that the aforementioned documents, based on the Brazilian accounting practices adopted and applicable to entities that the Brazilian Central Bank authorizes to operate, fairly reflect the Company’s equity and financial position.

          Cidade de Deus, Osasco, São Paulo, April 26, 2011.

               Nelson Lopes de Oliveira
          Domingos Aparecido Maia
          Ricardo Abecassis E. Santo Silva

           

           

               
            Bradesco  199 

           

           

          For further information:

          Board of Executive Officers

               Domingos Figueiredo de Abreu Executive Vice-President and Executive IRO

               Phone: (#55 11) 3681-4011 4000.abreu@bradesco.com.br

          Market Relations Department

          Paulo Faustino da Costa

          Phone: (#55 11) 2178-6201 Fax: (#55 11) 2178-6215

          Avenida Paulista, 1.450 – 1º andar CEP 01310-917 – São Paulo-SP

               Brazil www.bradesco.com.br/ir

           

           
          SIGNATURES
           
           
          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: May 05, 2011
           
          BANCO BRADESCO S.A.
          By:
          		  
          /S/ Domingos Figueiredo de Abreu
              Domingos Figueiredo de Abreu
          Executive Vice President and
          Investor Relations Officer
           
           
           
          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.