Financial Analysis Of Bradesco Finance Essay - Free Essay Example

Sample details Pages: 21 Words: 6224 Downloads: 1 Date added: 2017/06/26 Category Finance Essay Type Analytical essay Did you like this example? The term refers to the basis statement of Balance sheet, Income Statement and other calculated information about the Company Bradesco (Brazil). The Financial analysis is the process to identify the financial strength and weakness of the firm from the available accounting data and financial statement. The financial report is created by selecting different relating information and evaluating to find out the situation of the Bank. Here we are going to see the different Ratio Analysis of the Bradesco Bank and its position for 3- 4 years. Objective of the Study The basic objective of studying the ratios of the company is to know the financial position of the company. Don’t waste time! Our writers will create an original "Financial Analysis Of Bradesco Finance Essay" essay for you Create order To know the borrowings of the company as well as the liquidity position of the company. Get to know about the current assets and current liabilities so as to know whether the shareholder could invest in Bradesco Bank or not. To study the profits of the Business and net sales of the business and to know the stock reserve for sales of the business. To know the solvency of the business and the capacity to give interest to the long term loan lenders (debenture holders) and divided to the share holders. To study the balance of cash and credit in the organization. Source of financial information The Financial data needed in the financial analysis come from many sources. Primary source is the data provided by the company itself in its annual report and required disclosures. The annual report comprises of Balance sheet, Income statement, Capital Adequacy information, Income breakdown, detailed level of Provision for Bad debts, Percentage of market share of Bank, structured details of income and expenses incurred by Bank, statement of cash flows etc. The other information contains various risk factors of the bank and other relevant information of the bank. Tools of Financial Analysis In the analysis of financial statements, the analyst has a variety of tools available to choose the best suits for specific purpose. In this report I confine to Ratio analysis based on information provided from financial statements such as Balance sheet and Income statement which is priority information provider. About the Bank Bradesco Banco Bradesco was founded in 1943 as a commercial bank under the name Banco Brasileiro de Descontos S.A.. In 1948, we entered a period of intense expansion, which made us becoming Brazils largest commercial bank in the private sector at the end of the 1960s. We expanded our activities nationwide during the 1970s, conquering Brazilian urban and rural markets. In 1988, we incorporated our housing loan subsidiaries, our investment bank, and our finance company, making us a multiple bank and then we changed our name to Banco Bradesco S.A. We are one of Brazils largest private banks (non controlled by government) in terms of total assets. We provide a wide range of banking and financial products and services in Brazil and abroad to individuals, small to mid-sized companies and major local and international corporations and institutions. We have the most extensive private-sector branch and service network in Brazil, which permits us to reach a diverse customer base. Our services and products encompass banking operations such as lending and deposit-taking, credit card issuance, consortiums, insurance, leasing, payment collection and processing, pension plans, asset management and brokerage services. It was considered the best company in customer services in 2009, according to a survey, the first of its kind, conducted by Exame magazine together with the Brazilian Institute of Customer Services Relationship (IBRC). It is the leading bank of the seventh edition of the survey Companies that Respect Customers the Most, conducted by Consumidor Moderno magazine in partnership with Shopper Experience. Ratio Analysis Ratio analysis is the widely used tool for the financial analysis. The term ratio is calculated by logical and mathematical relationship between two individual groups of values selected from the financial statement. We can see a different kind of ratios here which can allow the investor to analyze about the situation of the Bank to invest more or less and gives the bank a opportunity to attract the investors to fulfill the capital requirements in future for expansion of its business. Classification of Ratios: Profitability Ratios Liquidity Ratios Capital Adequacy Ratios Asset Quality Ratios Market Risk Ratios Solvency Ratios Credit Risk Ratios Efficiency Ratio Income-expense Ratios Non-performing assets Ratios Investment Ratios We are going to analyze the various general values of the bank by seeing the Balance sheet of the Bank to evaluate the financial condition of the bank whether increasing or decreasing which means a good indication or bad with respective to the bank. The Bank Bradesco Financial Health analysis report is developed using the CAMELS framework of the Bank. With rapid growth in the financial markets and instruments banks became the important set of investors in the world. As profitability of the bank became a highly exposed to risks arising out of fluctuations in market pieces of a variety of financial instruments. There is no more changes in most of the portfolio of the Banks from 2005 2007 were all the ratios and other indicators remains increasing every year which is positive outlook for the bank. But there is more changes happened in bank portfolios and profitability ratio indicators from 2007 which is described precisely with graphs and why is it so happened and what are the measure the bank has to take to tackle this situation from 2006-2010 year. Total Assets: The total assets of the bank are increasing for every year which means a good indication for the bank. Bank has increased 63% of its assets in 2009 from 2007.When we look at the Table the Total assets gives the two quarter indication for the year 2010 but when compared with year 2009 it seems at the end of 2010 the bank is in position to get good assets backed on its portfolio. Even though the Assets of the bank are increasing the bank investments has to be minimal to get the liquidity whenever required. This again depends on whether bank has invested in Long term or short-term investments which we will be seeing in the next coming ratios. Year Total Assets In Millions $ 2005 208683 2006 265547 2007 341144 2008 454413 2009 506223 Total Loans: The Banks total Loans percentage is increased from 2007 to 2008 drastically. Bank has increased 55.6 % of loan in the year 2008 when compared to 2007 and again the percentage is dropped with 5-8% in the year 2009 and we can expect in the year 2010 it may again drop due to increase in Bad debts. The Loans given to the public corporate depends on the profitability of the bank. Loans are the highest-Yield assets for the Bank when compared to securities. Year Total Loans In Millions $ 2005 81130 2006 116225 2007 137112 2008 179995 2009 190989 2010(two-Qtr) 478336 Total Securities Invested in government: The below table shows that the percentage of the government securities invested with Total securities is Decreasing from 2007 tom 2009. Normally banks percentage of investment is more in government securities where those securities returns are Guaranteed and very less attractive in interest rates. So, Bradesco has done some changes in its investments by contributing less in government securities year on year to attain some good return by some other way. Year Total Securities Govt Securities % of govt sec. investment decreasing yr by yr 2005 204875 123691 63.7 2006 235985 143367 57.3 2007 423661 208332 49.1 2008 488093 226942 46.4 2009 571269 251854 44.0 Total Securities Invested in Private: When we look at the below graph of Percentage of Investment in the private securities it is getting increasing every year. Bank has decided to take some risk on its returns to increase its portfolio by investing more in the private securities where it will get good percentage of returns in the short-term Long term. When compared to Securities, Loans are the Higher yield of earnings for the Bank. Bradesco is investing in Short-term securities more than in Long-term securities because Long-term securities tend to carry greater market risk due to change in interest rates. Since Bradesco investing both in Long-term also which is Non-guaranteed private securities usually face credit risk than short-term securities. Year Total Private % of Private securities increasing 2005 204875 81184 8.47 2006 235985 92618 9.29 2007 423661 66828 15.77 2008 488093 91092 18.66 2009 571269 113967 19.949 Total Deposit: When we look at the Bank Balance sheet the different kind of Deposits like Demand deposit, Savings Deposit, Interbank, Time and others. All these different kind of deposits have increased every year from 2007 to 2010 when we look at the below table of total deposit. When the deposits increased it internally means the Liability of the bank is increasing every year where the bank to look out for the more short-term investments rather than Long-term investment because when a situation of contingency raised the banks needs an expected liquidity to face the contingent events. For example Due to any bad event on the bank when depositors felt to withdraw the amounts from the bank then the bank will be in trouble if no proper liquidity is maintained. Year Total Deposit In Millions $ 2005 75406 2006 83905 2007 98323 2008 164493 2009 171073 2010(Two-Qtr) 249175 Total Non-Performing Assets: The Non-Performing Assets are the Bad Debts for the Bank where no Interest or earnings are returned to the bank. So banks write off these kinds of assets in its balance sheet as Non-performing assets. For Bradesco the Non-performing assets is increasing every year which is not a good indication for a bank. Where the increase in the Bad debts of the bank lead to decrease in the earnings of the bank. So management of the bank has to look at this factor to tighten the Loan policies. When we look at the table nearly 50% increases in bad debts from year 2007 to 2009. Year Total NPA In Millions $ 2005 17753 2006 23543 2007 29,062 2008 36155 2009 56561 2010(Two-Qtr) 31618 Net Income After Tax: The below table shows the small percentage of increases every year in the Net income after tax. Even though the Net income of the bank increases every year it seems the bank is not performing as expected. The net income is getting decreased every year due to income tax breaks as one of the factor followed by bank. Bank has to concentrate to invest more in Tax-exempt investment tools to decrease the income tax breaks calculated every year. When we look at the Income statement in the company Financial statement the income tax paid by company increases every year from 2007 -2010 which reduces the Net income. Year Net Income after Tax In Millions $ 2005 5513 2006 6363 2007 7210 2008 7625 2009 8012 2010(Two-Qtr) 4562 Total Loans and Leases: The Bank Total Loans and Leases is increasing every year which is one of the good earning asset of the bank. The Loans can have a provision to become as Bad debts but the more assets of the Leases will be giving high earnings to the bank every year. Year Total Loans and Leases In Millions $ 2005 81130 2006 116225 2007 137112 2008 179955 2009 190989 2010(Two-Qtr) 156695 Income Tax Paid: When we look at the below Graph the income tax paid by the bradesco is increasing year on year which is not a good indication for the bank earnings. The income tax of the bank is squeezing the earnings of the bank every year.So bank has to derive some ideas to decrease the income tax paid by increasing the Tax-exempt securities which should give good returns with low-high risk depends on the bank portfolio expansion. Year Income Tax Paid In Millions $ 2005 2224 2006 2212 2007 2432 2008 2729 2009 2566 2010(Two-Qtr) 2171 Credit Risk-I: The Credit risk-I is calculated by dividing the Total Loans by Total Deposit where it shows the default by a borrower to whom the bank has extended credit.When we look at the table of values every year the Credit Risk is gettting decreased only a relatively small percentage of total loans turns bad to push the bank to decrease the earnings.The bank examiners representing the regulatory community may become mmore concerned because loans are usually among the riskiest of all banks assets and therfore deposits may be carefully protected. A rise in the bad loans or declining market values of otherwise good loans relative to the amount of a banks deposits creates greater depositor risk. Year Total Loans Total Deposit Credit Risk-I 2005 170392 211525 0.80 2006 210204 221759 0.94 2007 478366 351822 1.36 2008 644708 533125 1.21 2009 731383 675676 1.08 2010(Two-Qtr) 406,695 349175 1.16 Credit Risk-II: Year NPA Total Loans Leases Credit Risk in Ratio Credit Risk in % 2005 17753 170392 0.104 10.4 2006 23543 210204 0.112 11.2 2007 29062 478366 0.06 6.07 2008 36155 644708 0.06 5.6 2009 56561 731383 0.08 7.73 2010(Two-Qtr) 31618 406695 0.08 7.77 The Credit Risk-II is calculated by diving the Non-performing assets with the total Loans and Leases. The credit Risk is increasing every year. When we look at the Provision for doubtful debts in the financial statements of Bradesco the Net charge off values which is declared as worthless and written off in the books is increasing. Bank has to take some measure to look back the values of Charge off to make the earnings stable by decreasing the percentage of NPA Values. Liquid Ratio-I: The values of the table below shows that the Liquidity risk for the Bank is very high where the values are in decreasing mode from year 2007-2009. The bank moves ahead to meet the danger of having insufficient cash to meet a banks obligations when due. This ratio is calculated by dividing the Cash investment in Government securities with the total assets. The securities taken as short-term securities which can be easily converted as Cash when need arises. Bankers should take as immediate decision on to improve the Liquidity to meet the deposit withdrawals, Loan demand, and other cash needs. Year Cash+Govt sec Total Asset Liquid Ratio-I 2005 155469 796454 0.19 2006 138574 958065 0.14 2007 227079 1231305 0.18 2008 254333 1635777 0.16 2009 283905 1956526 0.15 2010(Two-Qtr) 152872 1090726 0.14 Liquid Ratio-II: This ratio is calculated by dividing the Net Loans to Total Assets which seems to be decreasing every year from 2007-2010. If this position continues the bank shoule be forced to borrow emergency funds at excessive cost to cover its immediate cash needs which inturn reduces its earnings. A significant decline in the bank liquidity position oftern forces to pay higher interest rates to attract negotiable Money market CDs. Banks should reduce the heavier use to purchased funds where the chances of making the bank in liquidity crunch in the event of heavy deposits happen. Year Net loans Total Assets Liquid Ratio-2 2005 152638 796454 0.19 2006 186660 958065 0.21 2007 423266 1231305 0.34 2008 576151 1635777 0.35 2009 627673 1956526 0.32 2010(Two-Qtr) 348910 1090726 0.32 Solvency Ratio:: Debt-equity Ratio-I: Bank must be directly consier the risk to the long-run survival where the ratio below shows that there is a danger for a bank may fail due to negative profitability and erosion of its capital in long-run where the Debt-equity ratio is increasing every year. This can be calculated using Total Liability to Total Owner equity. Wher Total Liability is increasing every year where the large portion of its security portfolio declines in market value, generating seriour capital loss when sold, then its capital account which is designed to absorb such losses. Year Total Liability total Owners equity Debt-Equity Ratio-I 2005 796454 71874 11.08 2006 958065 88359 10.84 2007 1117033 113116 9.88 2008 1498565 135045 11.1 2009 1800303 153215 11.75 2010(Two-Qtr) 1001221 87382 11.46 Debt -Equity Ratio-II: The Debt-equity ratio is calculated using the Long-term debt to total Liability equity. This seems to be increasing year on year which is bad indication to the bank. When Long-term debts increasing the interest in turn increases where the income of the bank decreases. Depends on the decrease of ratio if investor believes that a bank has an increased chance of failing in future then the market value of the stock begins to fall and it must pose higher interest rates to attract funds needed. Risk assets consist mainly of loans securities Year Long term debt Total Liability equity Debt-Equity Ratio-II 2005 229570 796454 0.28 2006 307569 958065 0.32 2007 327130 1230149 0.27 2008 434114 1633610 0.24 2009 525479 1953518 0.27 2010(Two-Qtr) 327511 1088603 0.30excluding cash, plant and equipment and other bank assets. Exposure to Banks Financial Institution Ratio: The Bank bradesco has a good exposure to other banks and financial institutions where the value of the Investment to total assets is increasing from 2007 to 2010. This means to bank is good indicative of the additional resources it can raise in event of a future requirement of reserve balances. The increasing in the ratio also shows us to some extent a banks fortunes are dependent upon the solvency of other banks and financial institution. Since bradesco has some higher percentage of the exposures to other banks and Financial institution its returns risk is also dependent on the performance of other banks also. This seems to be good for time being for Bank but for long run bank has to have carefull watch on other bank and institutions before investing on heavy assets. Year Investments Total Assets Ex-Bnk-Fn-ratio 2005 375387 796454 0.47 2006 411540 958065 0.42 2007 647920 1231305 0.52 2008 837064 1635777 0.51 2009 1036984 1956526 0.53 2010(Two-Qtr) 597898 1090726 0.55 Operating Efficiency Ratio: As a Bank it takes various efforts to maximize profitability and to increase the value of stockholders investment. To achieve this every bank need to recognize the need for greater efficiency in their operations. Higher operating efficiency is achieved by reducing operating expenses and increasing the productivity of their employees through use of automated equipment and improved employment training. Bradesco as a bank followed to pay high interest rates for their funds and encouraged management to reduce non interest costs for employee salaries and benefits and overhead costs. Bradesco is performing well in the Operating efficiency where it seems to be increasing every year. Year Tot-operating expense Operating Income Operating-eff-ratio 2005 18926 33701 0.56 2006 22239 38221 0.58 2007 21960 31544 0.7 2008 26153 36278 0.72 2009 33427 43493 0.77 2010(Two-Qtr) 16713 23530 0.71 Profitability Ratios Return on Equity: As a Bank bradesco has to give some good returns to its shareholders at the end of the year by increasing its stock value resulting in increasing the net income for every year. With respect to net worth of share holders equity. The value of ROE decides the rate of return flowing to the banks shareholders. The results of the bradesco approximate the net benefit that the shareholders received from investing their capital in the bank. The Return on equity is calculated using the Net income after tax to Total Equity capital is shown in table. This seems to be increasing for every year with little variation in 2009. So we assume the bank post same kind of increasing curve in the year 2010. Year Net income Net worth ROE 2005 5513 19409 28.4 2006 6363 24636 25.8 2007 7210 30357 23.8 2008 7625 34257 22.3 2009 8012 41754 19.2 Return on Assets: The return on assets is the primary indicator for the Managerial efficiency of the bank. It indicates how capable the management of the bank has been converting the institutions assets into net earnings. Return on Assets is calculated by dividing the Profit after tax or Net income to the Total assets. The ratio seems to be unstable for the bank where management has to look out for changes in the operations to increase and get it stable. when we look at the table values it seems to be increasing ROA for the year 2010 when compared to last two years till second quarter results. So we hope the bank has already taken some measure to increase the ROA for coming years. Year Profit after tax Total Asset Return on Assets 2005 5513 208683 2.6 ÂÂ  2006 6363 265547 2.4 2007 7210 341144 2.1 2008 7625 454413 1.7 2009 8012 506223 1.6 Interest Income Ratio: This Ratio is the driver of net interest margin. This ratio is calculated by dividing the Interest income to total assets. When we look at the table values below it clearly indicates that Bradesco Interest income ratio is decreasing for every year indicates that the bank faces greatest competition and lesser avenues for growing assets more profitably. The lesser the interest income shows that the bank investments in other banks and financial institutions gives the lower returns and the bank has to plan for long run to gain more interest income investments. Year Interest income Total Assets % Interst-Inc ratio 2007 19225 1231305 1.56 2008 22938 1635777 1.4 2009 27228 1956526 1.39 2010(Two-Qtr) 15069 1090726 1.38 Non-Interest Income Ratio: This ratio is complementary of Off-balance sheet exposure ratio and gives us the proportion of income coming from off-balance sheet items to Interest bearing assets. The trend seems to be decreasing after year 2007 where it is calculated by dividing the Non-interest income to Net-interest income. Based on the two quarter values of year 2010 the value of Non-interest income will be increasing for 2010. Year Non-int income Net-Int income Non-Int Income Ratio 2007 11566 20375 0.57 2008 11271 23143 0.49 2009 14142 29754 0.48 2010(Two-Qtr) 7044 15736 0.45 Non-Interest Income Margin: Year Non-Int Income Contingent Liability Non-Int Inc Margin 2007 11566 33889 0.34 2008 11271 40167 0.28 2009 14142 45507 0.31 2010(Two-Qtr) 7044 24244 0.29 The Non-interest income margin measure the amount of noninterest revenues stemming from the deposit service charges and other service fees the bank has been able to collect which is called the fee income relative to the amount of non interest costs incurred includes Salaries, wages, repairs, Maintenance costs, and loan-loss expense. For Bradesco the non interest income is negative and this situation arises for most of the banks. Even though the bank has raised its fee income the non-interest costs generally outstrip fee income. This ratio is calculated by dividing the Non-Interest income to Contingent liability which seems to be decreasing. Non-Performing Assets Provision Ratio: This ratio tells us the extent of provisions made for loan losses against the income earned on interest earning assets. A higher or increasing value of this ratio suggests that provisions are typically eating into the profits earned on interest bearing assets. When we look at the values below the values for NPA is increasing every year from 2007-2009. We can see that at the end of second quarter of 2010 shows NPA as 2.01 where whole year of 2009 contributed to value of 1.9. So based on this there is chance of further increasing in value can be seen at the end of year 2010. This trend of increasing in NPA is not good indication for Bradesco and its earnings. Year Provision NPA Net-Int. Income NPA Provision Ratio 2007 29062 20375 1.43 2008 36155 23143 1.56 2009 56561 29754 1.9 2010(Two-Qtr) 31618 15736 2.01 Operating Expense Ratio: The operating expense ratio of the Bradesco is being increasing form 2007-2009. As per the value below for two quarter of 2010 it is assumed that I will cross the mark of 2009. The ratio gives us the proportion of Operating expense to Net-interest and Non-interest income. So far these many years the operating expense ratio is getting increase for many banks and also for Bradesco. This can be reduced when more banking services available through home, office or shopping center, computer terminals, there is less need for elaborate to expand physical facilities in turn will lower the operating expense. Year Operating Expense Net-Int+Non-Int income % Operating-Expense Ratio 2007 21960 31941 68.75 2008 26153 34414 75.99 2009 33427 43896 76.15 2010(Two-Qtr) 16713 22780 73.36 Capital Adequacy Ratios Capital Asset Ratio: The Value of Capital Asset Ratio is calculated with Ratio of Owners equity to Total assets. This ratio tells us extent of shareholders funds maintained against the total assets owned by the bank. It also gives us an indication of the maximum extent of losses in the value of assets that the bank can withstand. Banks experiencing declining earnings usually find their CAR is weakened because less earnings are available to retain in the business. Since there is decrease in CAR banks are refused to give dividends to shareholders. CAR value drastically comes down in year 2009 were based on two quarter values of 2010 we assume bradesco can able to achieve a increased value for CAR for the year 2010 compared to last two years. Years Net worth Total Asset % of Capital Asset Ratio 2005 35476 208683 17.3 2006 47798 265547 18.8 2007 51171 341144 15.6 2008 72706 454413 16.9 2009 86057 506223 17.8 Basel Risk Weighted Ratio: This ratio tells us the extent of Capital (as per the regulatory definitions) maintained against the Total risk weighted assets. The bank has relatively high ratio of Equity Capital to Risk weighted assets. Equity capital gives the bank protection against declining income and grants management time to correct the banks earnings problem. These problems addressed quickly before continuing earnings losses erode the banks remaining capital and threaten its survival. Based on the two quarter value of 2010 the Bank can get the increased value of Basel risk weighted Ratio when compared to previous years. Year Tier-I-II-III Capital Tot Risk Wt. Asset % of Basel-Risk weighted 2007 154676 918671 16.83 2008 181006 1150797 15.72 2009 207738 1186522 17.5 2010(Two-Qtr) 108295 665205 16.27 Tier-I Capital Ratio: This gives us the proportion of equity held against the amount of risk weighted assets. Risk weighted assets are a measure of the amount of risk involved with each asset. The values of the Risk are getting increased year by year showing the bank is getting into more risk. When we look into two quarter values of 2010 the bank is getting more riskier after the values evolved out at the end of the year. This shows the management the bank is entering at high risk in year 2010 to take measure on this to decrease the Risk weighted assets. Year Tier-I Capital Tot Risk Wt. Asset % of Tier-I capital 2007 113115 918671 12.31 2008 153045 1150797 11.73 2009 153214 1186522 12.91 2010(Two-Qtr) 87382 665205 13.13 Net Capital Asset Ratio: Net Non-performing asset is an expected loss that is not provided for, the true amount of capital available to withstand losses in total asset value is lower than the net worth. This ratio captures the true amount of such capital available. The ratio is Net worth minus Net NPA to total asset. The values of the NCA is decreasing every year which tends to show that the Capital amount where the bank can able to withstand the losses is decreasing every year. Year Net worth-NetNPA Total Asset % of NCA 2005 54120 796454 6.71 2006 64815 958065 6.78 2007 84053 1231305 6.82 2008 98890 1635777 6.05 2009 96653 1956526 4.94 2010(Two-Qtr) 55764 1090726 5.11 Net Non-Performing Coverage Ratio: The Net NPA coverage ratio is calculated by dividing the Provision for NPA to Net worth. Percentage reduction in net worth if provisions made against entire amount of Net NPAs. The below table shows the increasing values of the Net NPA coverage ratio values which is one of the negative way of operation of a Bank. The increasing in this value will troubles the bank earnings. Year Provision NPA Net worth % of Net NPA coverage Ratio 2005 17753 71874 24.7 2006 23543 88359 26.66 2007 29062 113115 25.69 2008 36155 135045 26.77 2009 56561 153214 36.91 2010(Two-Qtr) 31618 87382 36.18 Equity Risk Weighted Ratio: This gives us the proportion of equity held against the amount of risk weighted assets. Risk weighted assets are a measure of the amount of risk involved with each asset. The values of the Risk are getting increased year by year showing the bank is getting into more risk. When we look into two quarter values of 2010 the bank is getting more risky after the values evolved out at the end of the year. This shows the management the bank is entering at high risk in year 2010 to take measure on this to decrease the Risk weighted assets. Year Tier-I Capital Tot Risk Wt. Asset % of Tier-I capital 2007 113115 918671 12.31 2008 153045 1150797 11.73 2009 153214 1186522 12.91 2010(Two-Qtr) 87382 665205 13.13 Short Term Leverage Ratio: Short term borrowed funds are typically a very volatile source of funds for banks.A higher value of this ratio is indicativeof aggressive behaviour on the part of banks. This ratio has to be carefully tracked as high and increasing values of this ratio have typically been associated with subsequent financial problems for banks. The values in the table shows that it is unstable and not aggressively moving up or down. From this we can assume that bradesco bank is not more concern about the short-term borrow funds when compared to other factors. Year short-term Borrowed Total Asset % Short-term leverage 2005 25428 796454 3.1 2006 21744 958065 2.2 2007 28865 1231305 2.34 2008 44441 1635777 2.71 2009 39981 1956526 2.04 2010(Two-Qtr) 17985 1090726 2 Gross NPA Ratio: Gross NPA is the total assets that are not generating any income for the bank. This ratio is not of much value because this is not only the non-income generating assets for the bank. When we look at the calculated values it has been increasing year on year where the percentage of Gross NPA is increasing causing the more number of assets of the bank as non-income generating assets. Gross NPA is calculated on the Gross NPA divided by total Assets. Year GrossNPA Total Asset % of Gross NPA 2005 17754 796454 2.23 2006 23543 958065 2.45 2007 33380 1231305 2.71 2008 41602 1635777 2.54 2009 63449 1956526 3.24 2010(Two-Qtr) 36627 1090726 3.35 Net NPA Ratio: Net NPA is calculated by dividing the Net NPA value by Total Assets. The proportion of Total assets that are to be written off. As with gross NPA ratio this ratio is not much value but is very widely used in financial press. As like Gross NPA the value of Net NPA is also increasing every year for the bank. Year Net NPA Total Asset % of Net NPA 2007 29062 1231305 2.36 2008 36155 1635777 2.21 2009 56561 1956526 2.89 2010(Two-Qtr) 31618 1090726 2.89 Equity Multiplier: The equity Multiplier is calculated using Total assets divided by Total equity Capital. The equity multiplier leverage or financing policies. The sources chosen to fund the bank is equity or debt. Out of the few other ratios the Equity Multiplier is largest, averaging about 12* or larger for most banks. The value of the Equity multiplier is increasing every year the projected value of the two quarters of 2010 seems to be getting more than 13* at the end of the year 2010. The equity Multiplier is the direct measure of the banks degree of financial leverage show how many dollars must be supported y each dollar of equity capital and how much of bank resource would rest on debts. Due to the large value of equity multiplier, the bradesco bank is more exposed to failure risk. In the same way the larger the value will give the greater banks potential for higher returns for its stockholders. Year Total Assets Equity Capital Equity Multiplier 2005 796454 71874 11.08 2006 958065 88359 10.84 2007 1231305 113115 10.89 2008 1635777 135045 12.11 2009 1956526 153214 12.77 2010(Two-Qtr) 1090726 87382 12.48 Net Profit Margin: Net profit margin is calculated by dividing the Net profit after tax to total operating income. The value of this ratio tells us the effectiveness of expense management (cost control) and service pricing policies. This value tells that banks can increase their earnings and their returns to their stockholders by successfully controlling expenses and maximizing revenues. Similarly allocating banks assets to the highest-yielding loans and investment while avoiding excessive risk, Management can rise the average yields on its assets. The values of the ratio is decreasing in the year 2009 tells that the bank have incurred higher expense and lower revenue wherere in the year 2010 the value of ratio seems to be greater than all the three years tells that higher revenues and lower expense. Year Net income Tot-ope-income Net Profit Margin 2005 5513 33701 0.16 2006 5054 38221 0.13 2007 7210 31544 0.23 2008 7625 36278 0.21 2009 7586 43493 0.17 2010(Two-Qtr) 4602 23530 0.2 Earning Per Share of Stock: Year Net income Equity outstanding % of EPS 2005 5513 108356 5.06 2006 5054 126941 3.98 2007 7210 154421 4.66 2008 7625 180659 4.22 2009 7586 207635 3.65 2010(Two-Qtr) 4602 108244 4.25 The earning per share is calculated by net income after tax to Common equity shares outstanding. The values seems to be drastic decrease in the year 2009 but when compared to previous two years of 2008 and 2009. The EPS value in the year 2010 seems to be higher for investors. If there is more decline in the value of EPS have a bigger impact for the entire bank performance which reduces the deposits, Loan demands, good will etc. Bradesco maintains the positive way of Earning per share of stock to its investors which channels the growth prospects by its stockholders. Credit Risk -3: The Credit Risk is calculated by dividing the Annual provision to Total Loans lease. These ratio values seem to be worrisome for bank because banks hold little owners capital relative to the aggregate value of their assets. So only a relative small percentage of total loans need to turn bad to push any bank to the brink of failure. The below values in the table shows that the banks exposure to credit risk grows and the bank cannot able to withstand the more losses coming on it way in long-run. The bank has to look out these values and take necessary immediate measures for the coming years for loan losses. Year Annual provision loan losses Total Loan leases % of Credit Risk-3 2005 17372 270392 6.42 2006 22992 310204 7.31 2007 24609 478366 5.14 2008 31005 644708 4.80 2009 45886 731383 6.27 2010(Two-Qtr) 25605 406695 6.29 Credit Risk -4: The credit risk ratio is calculated using the value of Allowance for Loan losses and the total Loans and Leases. This is also one of the way banks performance can be measured to undertake some necessary actions on its credit risk. When we look at the both Ratios of Credit Risk-3 and Credit risk-4 which reveals the extent to which a bank is preparing for loan losses by building up its loan-loss reserves which is the allowance of loan losses through annual charges against current income which is the provision for loan losses. When we look the values every year the percentage of Risk values is increasing and even in year 2010 it is assumed to be increasing one compared to other four years based on values of two quarters indicated. So, Bradesco Management has to minimize giving up more loans until the losses on loan are recovered and bank has to look for Liquidity risk also. When the credit risk increases which in turn posses the Liquidity risk to the bank by creating a cash crunch for d eposit withdrawals. Year Allowance for Loan losses Total Loan leases % of Credit Risk-4 2005 15115 270392 5.54 2006 22815 310204 7.32 2007 30491 478366 6.37 2008 37552 644708 5.82 2009 57824 731383 7.90 2010(Two-Qtr) 32180 406695 7.91 Asset Utilization Ratio: The asset utilization tells that what is the ability of the bank to convert its assets into the revenues. When the value of this Ratio is increasing then the bank has hold good ability to convert its assets into generated revenues for its shareholders. This can achieve by dividing the Total Operating revenues of the bank to Total assets. This value also tells us about the management efficiency of the operation of the bank. Management decisions of mix of funds raised and invested, depending on the value of Asset utilization we can judge about the banks portfolio whether the bank has big or small portfolios. The pricing of services can also be knows from this value and based on the asset utilization the bank can reduce its tax liability to increase the net income of the bank. By carefully allocating the banks assets to the highest yielding loans and investments while avoiding excessive risk, management can raise the banks average yield on its assets. The value seems to be decreasing fo r Bradesco every year so as per the shareholder point of view the ability of management of the bank has reduced converting of the assets into revenues for past 2-3 years. Year Operating income Total Asset % Asset utilisation 2005 33701 796454 4.23 2006 38221 958065 3.98 2007 31544 1231305 2.56 2008 36278 1635777 2.21 2009 43493 1956526 2.22 2010(Two-Qtr) 23530 1090726 2.15 Net Bank Operating Margin: The Income expense is calculated by subtracting the Total Operating expense from the total Operating income. The calculated Income-expense ratio is used to calculate the Net bank operating Margin by dividing the income expense to total assets. The Net bank operating margin in increasing every year which seems to be decrease in the income yielding of the bank. The more the expense incurred by the bank the more the income will be reducing and therefore increasing in the operating margin by increasing the operating expense. So the banks has to take up some strategies to lower down this expense the bank has made. The Bank management has to introduced some different ways to lower the income expense values which brings the positive look for the shareholders of the bank. Year Income-expense Total Assets % of Net Bank operating Margin 2005 14774 796454 1.85 2006 15982 958065 1.68 2007 9584 1231305 0.77 2008 10125 1635777 0.61 2009 10066 1956526 0.51 2010(Two-Qtr) 6817 1090726 0.62 Conclusion: Here we come to the conclusion part of the financial analysis of the Bank Bradesco where we have seen many ratio calculations and its impacts on the bank using the Table values and graphs. Now we can look on certain key factors where the bank management has to look seriously to improve the performance of the bank in the coming years. The Liability of the bank is increasing every year which is a threat to company portfolio. The Capital adequacy ratio is weaken every year in turn resulting in less earnings whereby bank has to decide not to give dividends to shareholders which results in no profits for the shareholders of the stock. Credit risk is increasing every year due to loan losses and doubtful debts are increasing. Liquidity risk is also increasing every year where the bank has to take measure to provide the provisions for contingencies happening suddenly like high Loan demands, more deposit withdrawal etc. Non-performing assets ratio is increasing by which bank is losing its earnings of its assets every year due to this bank can erode its capital in a long term basis is one of the key point to look by management. Should concentrate on improving the net income after tax by investing more profit before tax money into the Tax exempt investment bonds which should be secured returns. Bank is increasing its private securities investments aggressively when compared to government securities investment so that it has to be cautious while investing it in the private about the market values of the assets which is not guaranteed returns as expected. The bank returns on the stockholder value is good which can be seen using the equity multiplier even though is looks positive prospects but still the concern about the high value of equity multiplier will give a way for the banks failure. Bradesco investment in other banks and financial institution is becoming very high percentage every year so as to yield higher returns on its assets. While doing so the bank has to watch closely the other banks and financial institution performance and its liability to its market value before investing. The returns on the banks investment depends on the interest rates which tends to change over time is unpredictable. So bank should reduce the investment of Long-term investments and invest more in short term so as to increase the liquidity ratio whenever required. When we look at the last 6 years information the bank is very well performed in the year 2005-2007 but the bank is dropping down its income and increasing its expense, non performing assets are the real negative indications for the bank to take a look at its operations. The profit margin of the company is also seems to be decreasing because the operating expense increasing with respect to income so that net income is decreasing. The bank should think other some other new services to introduce in the bank to increase the non-interest income for the coming years. Bank has to look out for various investment plans for the Profit before tax income to give the increased income for the shareholders with the profits instead of paying it as Tax. Primary source of information: The links of the Banks where the financial statements for the 4-6 years are given in the site itself is given below https://www.bradescori.com.br/site/conteudo/home/default.aspx?idiomaId=2 The above link contains the Financial statements, Earnings release, Historical information for 4 years information in spreadsheet which is used to calculated the ratios in the Report. The spreadsheet is attached below which is the reference and historical financial information for Bradesco. Based on the information the Ratio calculations are made. The Link give below is for the source of information for every quarter and yearly from 2005-2007 is calculated using the spreadsheet given in the company site given below https://www.bradescori.com.br/site/conteudo/informacoes-financeiras/demonstracoes-financeiras.aspx?secaoId=721 The source of information is the financial statements from 2007-2010 each quarters of the company which is in the below link is available.