to our stockholders: we present the management report and
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BANCO ITAÚ BBA S.A.
MANAGEMENT REPORT
To our Stockholders: We present the Management Report and the financial statements of Banco Itaú BBA S.A. (ITAÚ BBA) for the periods from January 1 to June 30, 2015 and 2014, in accordance with the regulations established by the Central Bank of Brazil (BACEN) and the National Monetary Council (CMN). São Paulo, August 19, 2015. Executive Board
EXECUTIVE BOARD Directors
Alexsandro Broedel Lopes
André Carvalho Whyte Gailey
Carlos Henrique Donegá Aidar (*)
Cristiano Rogério Cagne
Chief Executive Officer Flávio Delfino Júnior
Candido Botelho Bracher Gabriel Amado de Moura(**)
Gilberto Frussa
Directors Vice-Presidents João Carlos de Gênova
Alberto Fernandes Marco Antônio Sudano
Jean-Marc Robert Nogueira Baptista Etlin Rodrigo Luís Rosa Couto(**)
Vanessa Lopes Reisner
Executive Directors
Álvaro de Alvarenga Freire Pimentel
Christian George Egan
Roderick Sinclair Greenless
(*) Elected ESM 04/30/2015, approved by the Central Bank on 06/11/2015
(**) Elected ESM 06/17/2015, in the Central Bank for approval phase
Accountant
Reginaldo José Camilo
CRC - 1SP - 114.497/O-9
Head Office: Av. Brigadeiro Faria Lima, 3,500 - 1° to 5° floors - Itaim Bibi - São Paulo - SP
3,538,732 1,640,686
3a 1,413 6,561
3a, 3b and 4 3,023,144 38,316
Money market 25,239 38,310
Interbank deposits 2,997,905 6
3c and 5 218,532 642,646
Own portfolio 218,532 642,646
2,795 2,760
Pending settlement 59 24
Central Bank deposits 3b 2,736 2,736
19,017 12,596
269,790 932,329
Income receivable 89,015 145,736
Sundry 7a 180,775 786,593
3h 4,041 5,478
1,175,419 109,196
3a, 3b and 4 1,030,790 -
Interbank deposits 1,030,790 -
7a 144,629 109,196
Sundry 144,629 109,196
1,857,038 4,218,793
3i 1,856,708 4,217,177
Investments in subsidiaries and affiliates 9 1,846,349 4,206,818
Domestic 1,838,996 4,183,970
Foreign 7,353 22,848
Other investments 13,513 13,513
(Allowance for loan losses) (3,154) (3,154)
3j 330 1,616
Real estate in use 896 1,946
(Accumulated depreciation) (566) (330)
6,571,189 5,968,675
06/30/2014
TOTAL ASSETS
The accompanying notes are an integral part of these financial statements.
PERMANENT ASSETS
INVESTMENTS
FIXED ASSETS
OTHER RECEIVABLES
INTERBANK ACCOUNTS
INTERBRANCH ACCOUNTS - Internal transfers of funds
OTHER RECEIVABLES
OTHER ASSETS - Prepaid expenses
LONG-TERM RECEIVABLES
INTERBANK INVESTMENTS
06/30/2015
CURRENT ASSETS
CASH AND CASH EQUIVALENTS
INTERBANK INVESTMENTS
NOTES
SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS
BANCO ITAÚ BBA S.A.
Balance Sheet
(In thousands of Reais)
ASSETS
1,063,940 603,758
3b - 295,653
Interbank deposits - 295,653
3b 4,934 -
1,059,006 308,105
Social and statutory 954,903 139,801
Tax and social security contributions 3l, 3m and 8c 68,492 83,621
Sundry 7b 35,611 84,683
38,556 62,163
38,556 62,163
Social and statutory 4,243 18,514
Tax and social security contributions 3l, 3m and 8c 30,460 28,952
Sundry 7b 3,853 14,697
10 5,468,693 5,302,754
Capital 3,574,844 3,574,844
Capital reserves 13,009 13,009
Revenue reserves 1,906,865 1,738,927
Asset valuation adjustment 3c and 5a (26,025) (24,026)
6,571,189 5,968,675
06/30/2014
BANCO ITAÚ BBA S.A.
Balance Sheet
(In thousands of Reais)
CURRENT LIABILITIES
LIABILITIES 06/30/2015
BORROWINGS - Foreign
DEPOSITS
OTHER LIABILITIES
LONG-TERM LIABILITIES
NOTES
OTHER LIABILITIES
The accompanying notes are an integral part of these financial statements.
STOCKHOLDERS’ EQUITY
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
166,024 2,054,337
3e - 805,177
3f - 5,796
3c 166,024 1,200,468
Compulsory deposits - 42,896
- (2,021,981)
- (1,286,764)
- (182,570)
- (57,716)
3d - (396,045)
3g - (98,886)
166,024 32,356
352,489 117,458
3e, 3f and 7c 244,236 306,053
(83,420) (180,805)
7d (41,796) (159,765)
3m and 8a II (32,862) (28,195)
3i and 9 252,577 261,126
15,551 11,720
7e (1,797) (92,676)
518,513 149,814
3,173 (11)
521,686 149,803
3m and 8a I (112,552) 181,043
(26,576) (60,490)
(85,976) 241,533
11b 19,091 (25,482)
428,225 305,364
10a 8,948,873 8,948,873
47,85 34,12
01/01 to
06/30/2014NOTES
BANCO ITAÚ BBA S.A.
(In thousands of Reais)
Statement of income
Lease operations
Securities
INCOME FROM FINANCIAL OPERATIONS
Loans
01/01 to
06/30/2015
Borrowings and onlending
Money market
GROSS INCOME FROM FINANCIAL OPERATIONS
NON-OPERATING INCOME
OPERATING INCOME
Other administrative expenses
Personnel expenses
PROFIT SHARING
INCOME TAX AND SOCIAL CONTRIBUTION
INCOME BEFORE TAXES ON INCOME AND PROFIT SHARING
Related to temporary differences
Due on operations for the period
Allowance for loan losses
OTHER OPERATING REVENUES (EXPENSES)
Banking service fees
EXPENSES ON FINANCIAL OPERATIONS
The accompanying notes are an integral part of these financial statements.
Other operating expenses
Derivative financial instruments
NET INCOME PER SHARE - R$
NUMBER OF SHARES
NET INCOME
Other operating revenues
Equity in earnings of subsidiaries and affiliates
Tax expenses
Foreign exchange operations
BANCO ITAÚ BBA S.A.
Legal reserve Statutory reserve
BALANCES AT 01/01/2014 4,224,086 15,372 737,829 956,090 (3,386) - 5,929,991
Split (649,242) (2,363) (71,537) (188,819) 2,924 - (909,037)
Remeasurements in Post Employment Benefit Obligation 151 151
Change in adjustment to market value - - - (23,715) - (23,715)
Net Income - - - - 305,364 305,364
Appropriations:
Reservations - - 15,268 290,096 - (305,364) -
BALANCES AT 06/30/2014 3,574,844 13,009 681,560 1,057,367 (24,026) - 5,302,754
CHANGES IN THE PERIOD (649,242) (2,363) (56,269) 101,277 (20,640) - (627,237)
BALANCES AT 01/01/2015 3,574,844 13,009 712,090 1,408,890 (23,650) - 5,685,183
Remeasurements in Post Employment Benefit Obligation - - - - (45) - (45)
Change in adjustment to market value - - - - (2,330) - (2,330)
Dividends - - - (642,340) - - (642,340)
Net Income - - - - 428,225 428,225
Appropriations:
Reservations - - 2,878 425,347 - (428,225) -
BALANCES AT 06/30/2015 3,574,844 13,009 714,968 1,191,897 (26,025) - 5,468,693
CHANGES IN THE PERIOD - - 2,878 (216,993) (2,375) - (216,490)
Asset valuation
adjustmentRetained earnings Total
Statement of Changes in Stockholders’ Equity (Note 10)(In thousands of Reais)
Revenue reservesCapital Capital reserves
Statement of Cash Flows
(In thousands of Reais)
01/01 a
06/30//2015
01/01 a
06/30//2014
ADJUSTED NET INCOME 261,579 (598,006)
Net Income 428,225 305,364
Adjustments to net income: (166,646) (903,370)
Adjustment to market value of securities and derivative financial instruments (assets/liabilities) - (557,840)
Allowance for loan losses - 98,886
Depreciation and amortization - 63,454
Deferred taxes 85,976 (241,533)
Equity in earnings of subsidiaries and affiliates (252,577) (261,126)
Others (45) (5,211)
CHANGE IN ASSETS AND LIABILITIES (3,180,742) (19,192,293)
(Increase) decrease in interbank investments (3,955,287) (17,825,221)
(Increase) decrease in securities and derivative financial instruments (assets/liabilities) 926,128 (7,672,999)
(Increase) decrease in compulsory deposits with the BACEN of Brazil - (2,736)
(Increase) decrease in interbank and interbranch accounts (assets/liabilities) 242 (12,620)
(Increase) decrease in loan and lease operations - (4,396,787)
(Increase) decrease in other receivables and other assets 20,830 (1,072,262)
(Increase) decrease in foreign exchange portfolio and negotiation and intermediation of securities (assets/liabilities) - (1,863,743)
(Decrease) increase in deposits - 75,351
(Decrease) increase in funds from issuance of securities - (139,590)
(Decrease) increase in borrowings and onlending 4,934 10,644,037
(Decrease) increase in other liabilities (130,324) 3,075,319
Changes in deferred income - (1,042)
Payment of income tax and social security contribution (47,265) -
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (2,919,163) (19,790,299)
Dividends and interest on capital received 676,414 601,988
Disposal of investments in unconsolidated companies - 70,642
Reduction in the capital of subsidiaries 2,271,490 1,456,092
Cash and cash equivalents of assets and liabilities split - (551,402)
Disposal of fixed assets 763 -
(Purchase) disposal of intangible assets - 181,250
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 2,948,667 1,758,570
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (Note 3a) 29,504 (18,031,729)
At the beginning of the períod 14,523 18,076,600
At the end of the períod 44,027 44,871
Cash and Cash Equivalents 1,413 6,561
Securities Purchased under Agreements to Resell – Funded Position 25,239 38,310
Interbank Deposits 17,375 -
BANCO ITAÚ BBA S.A.
The accompanying notes are an integral part of these financial statements.
BANCO ITAÚ BBA S.A.
NOTES TO THE FINANCIAL STATEMENTS
FROM JANUARY 1 TO JUNE 30, 2015 AND 2014
(In thousands of Reais)
NOTE 1 - OPERATIONS The purpose of Banco Itaú BBA S.A. (ITAÚ BBA) is to explore banking activities, including foreign exchange operations that are authorized for full service banks, with commercial, investment, leasing, real estate loan, financing and investment portfolios. ITAÚ BBA’s operations are conducted in the context of a set of institutions operating in the financial market, led by Itaú Unibanco Holding S.A. The benefits of services between these institutions and the corresponding costs are absorbed according to the practicality and reasonableness of the allocation. The financial statements prepared for the periods ended June 30, 2015 and 2014 were approved by the Board on August 19, 2015.
NOTE 2 - PRESENTATION OF THE FINANCIAL STATEMENTS The financial statements of ITAÚ BBA have been prepared in accordance with accounting principles established by the Brazilian Corporate Law, in conformity, when applicable, with instructions issued by the Central Bank of Brazil (BACEN) and the National Monetary Council (CMN), which include the use of estimates necessary to calculate accounting provisions. As a consequence of the process of convergence with international accounting standards, some standards and interpretations were issued by the Accounting Pronouncements Committee (CPC), which will be applicable to financial institutions only when approved by the Central Bank, assuming that these standards do not contradict the standards already issued previously by the Central Bank. The accounting standards already approved by the Resolution of the CMN, have been fully applied in the preparation of these Financial Statements. As set forth in the sole paragraph of article 7 of BACEN Circular No. 3,068, of November 8, 2001, securities classified as trading securities (Note 5a) are presented on the Balance Sheet under Current Assets regardless of their maturity dates.
NOTE 3 - SUMMARY OF THE MAIN PRINCIPLE ACCOUNTING PRACTICES a) Cash and Cash Equivalents – ITAÚ BBA defines as cash and cash equivalents cash and current accounts
in banks (considered in the heading cash and cash equivalents), Interbank Deposits and Securities Purchased under Agreements to Resell – Funded Position that have original maturities of up to 90 days or less.
b) Interbank Investments, Remunerated Restricted Credits – Brazilian Central Bank, Remunerated
Deposits, Borrowings and Onlending and Other Receivables and Payables – Transactions subject to
monetary / currency adjustment clause and operations with fixed charges are recorded at present value, net of incurred transaction costs, calculated pro rata based on the effective rate of transactions
c) Securities – Recorded at cost of acquisition restated by the index and/or effective interest rate and presented in the Balance Sheet, according to BACEN Circular No. 3,068, of November 8, 2001. Securities are classified into the following categories:
Trading Securities – Acquired to be actively and frequently traded, adjusted to market value, with a contra-entry to the results for the period;
Available-for-Sale Financial assets – Securities that can be negotiated, but are not acquired to be actively and frequently traded. They are adjusted to their market value with a contra-entry to an account disclosed in Stockholders’ Equity;
Gains and losses on Available-for-Sale Financial assets, when realized, are recognized on the trading date in the Statement of Income, with a contra-entry to a specific Stockholders’ Equity account.
Decreases in the market value of available-for-sale and held-to-maturity securities below their related cost, resulting from other than temporary reasons, are recorded in results as realized losses. The effects of the application of the procedures described above in the affiliated and subsidiary companies of ITAÚ BBA, reflected in their respective Stockholders’ Equity or income and expense accounts, were likewise recorded in Stockholders’ Equity or in the Equity in Earnings of the parent company in proportion to ITAÚ BBA’s ownership percentage.
d) Derivative Financial Instruments - Classified on the date of their acquisition, according to management's
intention of using them either as a hedge or not, according to BACEN Circular No. 3,082, of January 30, 2002. Transactions involving financial instruments, carried out upon the client's request, for their own account, or which do not comply with the hedging criteria (mainly derivatives used to manage the overall risk exposure), are stated at market value, including realized and unrealized gains and losses, which are recorded directly in the Statement of Income.
e) Loan, Lease and Other Credit Operations (Operations with Credit Granting Characteristics) -
Recorded at present value and calculated pro rata die based on the change in the contracted index and interest rate and are recorded on an accrual basis until the 60th day overdue. After the 60th day, income is recognized upon the effective receipt of installments. The income arising from the recovery of operations that had been previously written off is classified as Income From Financial Operations – Loans and fees earned in these operations are classified as Banking Service Fees.
f) Lease Receivable and Guaranteed Residual Value (VRG) - Recorded at the contractual amount with a
contra-entry to Unearned lease income and residual value, both contracted conditions. The VRG received in advance is recorded in Other Liabilities - Anticipation of residual value until the maturity date of the contract. The present value of the payments and VRG receivable from leases is recognized as excess / insufficient depreciation in property leasing. The leases are updated for accrued interest up to 60 days overdue. After the 60th day, the recognition in interest income occurs when the effective receipt of installments and the income from the recovery of transactions initiated prior to delays (write-offs) is classified as Income from Financial Operations – Leasing Operations, tariffs on contracting these operations are classified as income from bank charges and appropriated to income from operating lease transactions on the date of receipt of payment.
g) Allowance for Loan Losses – Recorded based on a credit risk analysis, at an amount considered sufficient
to cover loan losses according to the rules determined by CMN Resolution No. 2,682 of December 21, 1999, amended by article 2 of Resolution No. 2,697 of February 24, 2000, among which are:
Provisions are recorded from the date loans are granted, based on the client’s risk rating and on the periodic quality evaluation of clients and industries, and not only in the event of default;
Based exclusively on delinquency, write-offs may be carried out 360 days after the due date of the loan operation or 540 days for operations that mature after a period of 36 months.
h) Other Assets – Comprised prepaid expenses, corresponding to disbursements for which the benefit will
occur in future periods.
i) Investments - In subsidiaries and affiliates are valued by the equity method, and the financial statements of
overseas subsidiaries adapted to the prevailing accounting standards in Brazil and converted into Reais. Other investments are recorded at cost and are adjusted to fair value through the recognition of a provision, in accordance with current standards.
j) Fixed Assets – Are stated at cost of acquisition or construction, less accumulated depreciation. They
correspond to rights related to tangible assets intended for maintenance of the company's operations or exercised for such purposes, including assets arising from transactions that transfer to the company their benefits, risks and control. Depreciation is calculated using the straight-line method, based on monetarily restated cost, at the following annual rates:
Leasehold Improvements From 10%
EDP Systems 20% to 50%
k) Impairment of Assets – The losses due to reduction of recoverable value are recognized by the amount of the assets (or asset groups) carrying values that exceeds its recoverable amount and are recognized in the Statement of Income. This procedure is performed every six months. There was no indication of impairment of assets during the periods ended June 30, 2015 and June 30, 2014.
l) Contingent Assets and Liabilities and Legal Liabilities – Tax and Social Security - Assessed, recognized
and disclosed according to the CMN and BACEN Circular Letter No. 3,429 of February 11, 2010.
I - Contingent Assets and Liabilities Refer to potential rights and obligations arising from past events, the occurrence of which is dependent upon future events.
Contingent Assets - Not recognized, except upon evidence ensuring a high level of reliability as to its realization, usually represented by claims awarded at a final and unappealable judgment and confirmation of the recoverability of the claim through receipt of amounts or offset against another liability;
Contingent Liabilities - Basically arise from administrative proceedings and lawsuits, inherent in the normal course of business, filed by third parties, former employees and governmental bodies, in connection with civil, labor, tax and social security lawsuits and other risks. These contingencies are calculated based on conservative practices, being usually recorded based on the opinion of legal advisors and considering the probability that financial resources shall be required for settling the obligation, the amount of which may be estimated with sufficient certainty. Contingencies are classified either as probable, for which provisions are recognized; possible, which are disclosed but not recognized; and remote, for which recognition and disclosure are not required. Any contingent amounts are measured through the use of models and criteria which allow for their adequate measurement, in spite of the uncertainty of their term and amounts.
Escrow deposits are restated in accordance with the current legislation. Contingencies guaranteed by indemnity clauses in privatization processes supported by valid assets are only recognized upon judicial notification by the creditor with simultaneous recognition of the receivable, without any effect on results.
II - Legal Liabilities - Tax and Social Security - Represented by amounts payable related to tax liabilities,
the legality or constitutionality of which are subject to judicial defense, recognized at the full amount under discussion.
Liabilities and related escrow deposits are adjusted in accordance with the current legislation.
m) Taxes - Calculated according to current legislation at the rates shown below, using the related calculation
bases.
Income Tax 15.00%
Additional Income Tax 10.00%
Social Contribution (*) 15.00%
PIS 0.65%
COFINS 4.00%
ISS up to 5.00%
(*) The Provisional Measure No. 675 of May 21, 2015 ("MP"), effective as of September 1, 2015, increased the rate of social
contribution to 20%. No effect was recognized by said raising the tax rate on deferred tax assets on June 30, 2015, as the MP is still
in the process of consideration and approval by the National Congress, with the possibility of further amendments to the bill, which
would alter the rate at different levels of proposed by the Executive.
NOTE 4 - INTERBANK INVESTMENTS
0 - 30 31 - 180 Over 365 Total % Total %
25,239 - - 25,239 0,62 38,310 100,0
Funded Position(*) 25,239 - - 25,239 0,62 38,310 100,0
17,375 2,980,530 1,030,790 4,028,695 99,38 6 -
42,614 2,980,530 1,030,790 4,053,934 100,0 38,316 100,0
1,1 73,5 25,4
38,316 - - 38,316 100,0
100,0 - - (*) There were no securities pledged to guarantee transactions in securities, Commodities and Futures Exchange - BM&F Bovespa and Bank on 06/30/2015 relating to money market with free movement
06/30/2014
% per maturity term
TOTAL - 06/30/2014
% per maturity term
06/30/2015
Money Market
Interbank Deposits
TOTAL
NOTE 5 - SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS (ASSETS AND LIABILITIES)
a)
06/30/2014
Results Stockholders’ equity
CORPORATE SECURITIES 265,021 - (46,489) 218,532 100,0 218,532 - 642,646
Shares 54,171 - (46,489) 7,682 3,5 7,682 - 10,196
Debentures - - - - - - - 1,883
Funds Quotas - Fixed Income 210,850 - - 210,850 96,5 210,850 - 630,567
SUBTOTAL - SECURITIES 265,021 - (46,489) 218,532 100,0 218,532 - 642,646
Trading Securities 210,850 - - 210,850 96,5 210,850 - 632,450
Available-for-Sale Securities 54,171 - (46,489) 7,682 3,5 7,682 - 10,196
265,021 - (46,489) 218,532 100,0 218,532 - 642,646
% BY MATURITY 100,0 -
18,595
1,763
106
ADJUSTMENT TO MARKET VALUE - SECURITIES (26,025)
686,553 68 (43,975) 642,646 100,0 640,763 1,883
% BY MATURITY 99,7 0,3
17,590
2,208
151
ADJUSTMENT TO MARKET VALUE - 06/30/2014 (24,026)
b) Derivative Financial Instruments - On 06/30/2015 and 06/30/2014 there were no open positions in the derivatives market.
Over 720
days
See below the composition by Securities and Derivatives type and maturity, already adjusted to their respective market values.
Summary per Maturity
Market Value
06/30/2015
Cost
Provision for adjustments to market value reflected
in:Market Value % 0 - 30
TOTAL SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS
Deferred Taxes (Note 8b)
Beneficial Post-Employment
Beneficial Post-Employment
TOTAL SECURITIES AND DERIVATIVE FINANCIAL INSTRUMENTS
Deferred Taxes (Note 8b)
Adjustment of Subsidiaries and Affiliates
Adjustment of Subsidiaries and Affiliates
NOTE 6 - CONTINGENT ASSETS AND LIABILITIES AND LEGAL LIABILITIES – TAX AND SOCIAL SECURITY
In the ordinary course of its businesses, ITAÚ BBA is involved in contingencies that may be classified as follows: a) Contingent Assets: There are no contingent assets recorded. b) Contingent Liabilities: Are calculated and classified as follows:
Calculation criteria:
- Civil Lawsuits, Labor Claims and Tax and Social Security: Are analyzed and calculated individually, case by case, at the claimed indemnity amount, adjusted monthly, based on the evidence presented and on the evaluation of legal advisors which considers case law, legal opinions raised, evidence produced in the records and the judicial decisions to be issued. This dataset is used to indicate the financial value at risk of lawsuits and also to define the probability of loss of lawsuits by ITAÚ BBA, which can be: Probable, Possible and Remote.
I - Contingencies classified as probable: Are recognized in the accounting books and mainly comprise
Civil Lawsuits, Labor Claims and Tax and Social Security lawsuits.
The table below shows the changes in the respective provisions for contingent liabilities and the respective escrow deposits balances:
01/01 to 06/30/2015 01/01 to 06/30/2014
Labor Total
Opening Balance 664 82,146
Restatement/Charges 7 -
Changes in the Period Reflected in Results (620) 118
Increase (620) 166
Write-offs through Reversal - (48)
Payments (38) (287)
Spin-Off Balance in Socitária Reorganization - (81,038)
Closing Balance (Note 7b) 13 939
Escrow Deposits at 06/30/2015 42
Escrow Deposits at 06/30/2014 40
II - There are no contingencies with possible loss.Contingencies classified as possible: These are accounted for and represented by Labor Claims in the amount of R$
21,501 and Civil Proceeding of R$ 25,544.
01/01 to
06/30/2015
01/01 to
06/30/2014
Total Total
Opening Balance 34,345 212,768
Restatement/Charges 581 2,656
Changes in the Period Reflected in Results - Increase 115 -
Subtotal 35,041 215,424
Spin-Off Balance in Corporate Reorganization - (181,614)
Closing Balance (Note 8c) 35,041 33,810
Legal Liabilities
Legal Liabilities-Tax and Social Security and Escrow Deposits for Filing Legal Processes:
Recognized at the full amount being questioned and respective escrow deposits, as follows:
01/01 to
06/30/2014
Opening Balance 40,510 483,272
Appropriation of Income 1,619 3,301
Subtotal 42,129 486,573
Spin-Off Balance in Corporate Reorganization - (447,580)
Closing Balance (Note 7a) 42,129 38,993
-
The main legal liabilities are described below:
PIS – Principles of anteriority over 90 days and Non-Retroactivity - R$ 29,864 - We request the rejection of
constitutional Amendments No. 10/96 and No. 17/97 in view of the principles of anteriority and
nonretroactivity,seeking authorization to make payment based on Supplementary Law No. 07/70. The
corresponding escrow deposit balance totals R$ 29,864.
In the opinion of the legal advisors, ITAÚ BBA is not party to any other administrative proceedings or legal lawsuits
that could significantly impact the results of its operations.
Escrow deposits and Contingencies Legal 01/01 to
06/30/2015
NOTE 7 – BREAKDOWN OF ACCOUNTS
a) Other sundry receivables
06/30/2015 06/30/2014
Deferred tax assets (Note 8b I) 156,533 289,708
Taxes and contributions for offset 113,502 132,144
Escrow deposits (Note 6b) 42,129 38,993
Debtors abroad 8,366 48,010
Advance for Future Capital Increase - 354,317
Others 4,874 32,617
TOTAL 325,404 895,789
b) Other sundry liabilities 4% 4%
06/30/2015 06/30/2014
Provision for Personnel Expenses 30,207 79,892
Provision for payments 4,867 12,470
Provision for Labour Action (Note 6b) 13 939
Others 4,377 6,079
TOTAL 39,464 99,380
c) Banking service fees
01/01 to
06/30/2015
01/01 to
06/30/2014
Income from economic and financial advisory 156,904 142,519
Collection fees 61,849 56,254
Brokerage commission 25,483 30,680
Guarantees provided - 72,702
Others - 3,898
TOTAL 244,236 306,053
d) Other administrative expenses
01/01 to
06/30/2015
01/01 to
06/30/2014
Installations (13,233) (42,293)
Third-party services (11,360) (44,342)
Travel expenses (3,848) (6,315)
Cost sharing (Note 11a) (1,895) (12,792)
Data processing and telecommunications (140) (27,790)
Depreciation and amortization - (3,799)
Others (11,320) (22,434)
TOTAL (41,796) (159,765)
e) Others operating expenses - Totaling R$ (92,676) from 01/01 to 06/30/2014) and is basically comprised of amortization
of Merger Goodwill R$ (47,134) Provision for losses on notes receivable without Characteristic of Credit Granting R$
(18,928) expenses Vendor Operations R$ (6,930) Provision for Tax and Social Security Civil Actions R$ 5,073.
NOTE 8 - TAXES
a) Composition of expenses for taxes and contributions
I -
Due on operations for the period01/01 to
06/30/2015
01/01 to
06/30/2014
Income before income tax and social contribution 521,686 149,803
Charges (Income tax and social contribution) at the rates in effect (Note 3m) (208,674) (59,921)
Increase/decrease to income tax and social contribution charges arising from:
Participation in Subsidiaries and Affiliates* 101,031 270,587
Taxation of Foreign Income (537) (56,370)
Dividends and interest on external debt bonds - 11,849
Others nondeductible expenses net of non taxable income (4,372) 14,898
Total income tax and social contribution (112,552) 181,043
(*) On 06/30/2014 includes the equity value abroad
II - Tax expenses are represented mainly by PIS, COFINS and ISS.
Statement of calculation of income tax and social contribution
b) Deferred taxes
I -
Reflected in Results 227,684 (151,149) 61,403 137,938 272,118
Income tax and social contribution loss carryforwards 132,828 (61,371) - 71,457 210,241
Legal liabilities - tax and social security and provisions 5,339 (261) 3,040 8,118 5,373
Provisions for Profit Sharing 89,505 (89,505) 58,363 58,363 56,504
Other non-deductible provisions 12 (12) - - -
Reflected in stockholders equity accounts - adjustment to market value of
available-for-sale securities (Note 5a) 17,173 - 1,422 18,595 17,590 TOTAL 244,857 (151,149) 62,825 156,533 289,708
II -
Reflected in Results 4,244 (4,244) 473 473 3,801
Revision of escrow deposits Legal liabilities - tax and social security and
provisions 4,244 (4,244) 473 473 3,801
TOTAL - Reflected in Results (Note 8c) 4,244 (4,244) 473 473 3,801 Total Net (Assets - Liabilities) 240,613 (146,905) 62,352 156,060 285,907
06/30/2014
06/30/2014
The deferred tax asset balance and its changes, segregated based on its origin and disbursements incurred, are represented as
follows:
Provision for deferred income tax and Social Contribuition balance and its changes are shown as follows:
12/31/2014 Realization Increase 06/30/2015
12/31/2014 Realization Increase 06/30/2015
III-
2015 58,362 69% 22,548 32% 80,910 52%
2016 1 0% 48,909 68% 48,910 31%
2017 1,480 2% - 0% 1,480 1%
2018 3 0% - 0% 3 0%
2019 6,634 8% - 0% 6,634 4%
After 2019 18,596 21% - 0% 18,596 12%
TOTAL 85,076 100% 71,457 100% 156,533 100%
Present value (1) 72,960 65,145 138,105
The estimate of realization and present value of deferred tax assets existing at June 30, 2015, in accordance with the expected generation
of future taxable income, based on historical profitability and a technical feasibility study, are:
The projections of future taxable income include estimates related to macroeconomic variables, exchange rates, interest
rates, volume of financial operations and services fees and others, which can vary in relation to actual data and amounts.
Realization year %
(1) The average funding rate was used to determine the present value.
Temporary
differencesTOTAL% %
Income tax and loss
carryforwards
IV- At June 30, 2015 and June 30, 2014, there are no unrecorded deferred taxes.
Net income in the financial statements is not directly related to taxable income for income tax and social
contribution, due to differences between accounting criteria and tax legislation, besides corporate aspects.
Accordingly, we recommend that the trend of the realization of deferred tax assets arising from temporary
differences, income tax and social contribution loss carryforwards not to be used as an indication of future
net income.
c)
06/30/2015 06/30/2014
Taxes and contributions on income payable 42,687 46,877
Legal Liabilities - tax and social security (Nota 6b) 35,041 33,810
Taxes and contributions payable 20,751 28,085
Provision for deferred income tax and social contribution (Note 8b II) 473 3,801
TOTAL 98,952 112,573
The balance of taxes and social security contributions is composed as follows:
Tax and social security contributions
NOTE 9 - INVESTMENTS
Investments in subsidiaries and affiliates
CompaniesBalances at
12/31/2014Dividends paid (1) Net income (loss) Exchange Variation Total
Adjustments to market
value of securitiesCorporate Events (2) Balances at 06/30/2015
Balances at
06/30/2014
Equity in earnings
of subsidiaries
from 01/01 to
06/30/2014
Domestic 4,304,939 (445,663) 251,458 - 251,458 (248) (2,271,490) 1,838,996 4,183,970 269,154
Itaú-BBA Trading S.A 93,008 - 6,894 - 6,894 - - 99,902 88,006 (1,867)
Itauseg Participações S.A. 751,818 (109,294) 131,642 - 131,642 (248) - 773,918 794,406 106,481
Intrag - Part Administração e Participações Ltda. 3,460,113 (336,369) 112,922 - 112,922 - (2,271,490) 965,176 3,301,558 164,540
Foreign 6,225 - 637 482 1,119 9 - 7,353 22,848 (8,028)
Banco Itaú Argentina S.A. 5,981 - 639 464 1,103 9 - 7,093 4,466 (401)
Itaú-BBA SAS. 244 - (2) 18 16 - - 260 18,382 (713)
Itau BBA Colombia S.A. Corporación Financiera - - - - - - - - - (6,914) Total 4,311,164 (445,663) 252,095 482 252,577 (239) (2,271,490) 1,846,349 4,206,818 261,126
(1) The deliberate and unpaid dividends are recorded in Dividends
Receivable;
Number of common shares owned by ITAÚ BBA
Equity share in voting capital (%)
Domestic
Itaú-BBA Trading S.A 47,292 99,902 6,894 3.938.518.832 - 100,00 100,00
Itauseg Participações S.A. 5,874,116 7,072,831 1,203,076 554.902.067 - 10,94 10,94
Intrag - Part Administração e Participações Ltda. 1,337,627 1,321,995 154,669 - 60.816.478 73,01 73,01
Foreign
Banco Itaú Argentina S.A. 253,984 706,231 63,590 7.469.046 - 1,00 1,00 Itaú-BBA SAS. 4,060 260 (2) 1.880.288 - 100,00 100,00
Equity share in Capital (%)Ordinary Quotas
Equity in earnings of subsidiaries and affiliates
Net income (loss)
for the period
Stockholders’
equity
(2) Corporate Events arising from acquisitions, spin-offs, merges, takeovers, and increases or decreases of capital.
Companies Capital
NOTE 10 - STOCKHOLDERS' EQUITY
a) Capital - Comprises 8.948.873 book-entry shares with no par value, of which 4.474.436 are common class A shares, 1 is common class B share and 4.474.436 are preferred shares.
b) Dividends and interest on capital - Stockholders are entitled to a mandatory dividend of not less than 25% of annual net income, which is adjusted according to the rules set forth under Brazilian Corporate Law. In the Extraordinary General Meeting of 04/30/2015, a provision amounting to R$ 642,340 at a rate of R$ 71,77 per share, equal to the mandatory extraordinary dividend, recorded in Other Liabilities - Social and Statutory.
NOTE 11 - RELATED PARTIES
a) Transactions between related parties are done at amounts, terms and average rates in accordance with normal
market practices during the period, and under reciprocal conditions. These operations include:
06/30/2015 06/30/201401/01 to
06/30/2015
01/01 to
06/30/2014
Interbank Investments 4,053,934 38,310 144,862 26,298
- Itaú Unibanco S.A. 4,053,934 38,310 144,862 26,001
- Others - - - 297
Securities - - - 288,363
- Dibens Leasing S.A. Arrendamento Mercantil - - - 287,930
- Banco Itaú BBA International PLC. - - - 433
Derivative financial instruments – Asset Position - - - 686,359
- Itaú Unibanco S.A. - - - 573,139
- Itau Bank Ltd. - - - 93,911
- Others - - - 19,309
Foreign exchange portfolio – Asset Position - - - 27,277
- Itaú Unibanco S.A. - Grand Cayman Branch - - - 22,747
- Itau Bank Ltd. - - - 4,530
Amounts receivable from related companies 2,924 384,988 - 21,427
- Itaúseg Part 354,317 - -
- Itaú Unibanco S.A. 2,924 30,671 - -
- Itaú Grand Cayman - Agência - - - 9,289
- Itaú Unibanco S.A. - Agência New York - - - 12,124
- Others - - - 14
Interbank deposits - (295,653) - (557,476)
- Itaú Unibanco S.A. - (295,653) - (421,516)
- Dibens Leasing S.A. Arrendamento Mercantil - - - (135,074)
- Others - - - (886)
Time deposits - - - (8,922)
- Itau Bank Ltd. - - - (7,255)
- Others - - - (1,667)
Derivative financial instruments – (Liability Position) - - - (1,065,529)
- Itaú Unibanco S.A. - - - (1,038,721)
- Others - - - (26,808)
Foreign exchange portfolio – (Liability Position) - - - (6,134)
- Itaú Unibanco S.A. - Grand Cayman Branch - - - (4,828)
- Itau Bank Ltd. - - - (1,306)
Securities sold under repurchase agreements – Own and third parties - - - (181,947)
- Dibens Leasing S.A. Arrendamento Mercantil - - - (109,799)
- Itaú Unibanco S.A. - - - (72,148)
Amounts payable to related companies (4,354) (6,047) (151) (2,201)
- Itaú Unibanco S.A. (4,354) (6,047) - -
- Others - - (151) (2,201)
Listed below are the rates applied to transactions between related parties 06/30/2015:
Assets/(Liabilities) Revenue/(Expenses)
100% of the Selic and
13,65% pre-fixed rateInterbank deposits
b) Compensation of the Management Key Personnel
The fees attributed in the period to ITAÚ BBA officers are as follows:
01/01 to
06/30/2015
01/01 to
06/30/2014Compensation – Board of Directors (18,204) (74,459)
Profit sharing* 19,091 (25,482)
Total 887 (99,941)
In addition to the aforementioned transactions, ITAÚ BBA, as an integral part of the Agreement for Apportionment of Common Costs of the
Itaú Unibanco Group, was reimbursed by the other group Companies in the amount of (R$ 20,861 of 01/01 a 06/30/2014) and recorded, in
Other Administrative Expenses, the amount of (1,895) R$ ((12,792) of 01/01 a 06/30/2014)) in view of the use of the common structure.
*Reversal of provision in the 1st half of 2015 due to the spin-off for Itaú Unibanco.
NOTE 12 – ADDITIONAL INFORMATION a) Risk management – ITAÚ BBA by means of the leading institution, Itaú Unibanco Holding S.A. (ITAÚ
UNIBANCO,) adopted the risk management structure in compliance with CMN Resolutions No. 3,380/06 - Operational Risk; No. 3,464/07 - Market Risk; No. 3,721/09 - Credit Risk and No. 4,090/12 - Liquidity Risk. The descriptions of these risk management structures and other business risks are available on the website of the leading institution (www.itau-unibanco.com.br/ri) in the area: Corporate Governance/Risk Management, which is not part of the financial statements.
b) Arrangements for clearing and settlement of obligations under the National Financial System - Certain agreements were signed for clearing and settlement of obligations under CMN Resolution No. 3,263 of February 24, 2005, through public instruments aimed at allowing for the cleaning of credits and debits held with a single counterparty, where the maturity of the receivables and obligations can be anticipated to the date of the event of default by either party or in the case of bankruptcy of the debtor.
c) Law No. 12.973: on May 14, 2014, Law No. 12.973/14 was published as a conversion of Provisional
Measure No. 627 to amend the federal tax legislation on IRPJ, CSLL, PIS and COFINS. Law No. 12.973 provides for the following, among other matters
• revocation of the Transition Tax Regime - RTT, established by Law No. 11.941, of May 27, 2009;
• taxation of legal entities domiciled in Brazil, regarding the equity increase arising from interest in income earned abroad by subsidiaries and affiliates, and income earned by individuals resident in Brazil by means of a legal entity controlled abroad. We estimate that said Law No. 12.973 does not have any significant accounting effect on the financial statements of ITAU BBA.
d) Single Audit Committee – In accordance with CMN Resolution No. 3,198 of May 27, 2004, ITAU BBA adopted the Single Audit Committee established by the Itaú Unibanco Financial Conglomerate by way of the leading institution Itaú Unibanco Holding S.A. The summary of the report of the Committee was disclosed together with the financial statements of the leading institution Itaú Unibanco Holding S.A.
Independent Auditor’s Report
To the Management and Stockholders
Banco Itaú BBA S.A. We have audited the accompanying financial statements of Banco Itaú BBA S.A. (the “Bank”), which comprise
the balance sheet as at June 30, 2015 and the statements of income, changes in equity and cash flows for the
six-month period then ended, and a summary of significant accounting policies and other explanatory
information.
Management’s responsibility for the financial statements of the Bank
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting practices adopted in Brazil, applicable to institutions authorized to operate by the Brazilian Central Bank (BACEN), and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Brazilian and International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Bank’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of Banco Itaú
BBA S.A. as at June 30, 2015, and its financial performance and cash flows for the six-month period then
ended, in accordance with accounting practices adopted in Brazil, applicable to institutions authorized to
operate by the Brazilian Central Bank (BACEN).
São Paulo, August 19, 2015
PricewaterhouseCoopers
Auditores Independentes
CRC 2SP000160/O-5
Washington Luiz Pereira Cavalcanti
Contador CRC 1SP172940/O-6
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