BANCO DO ESTADO DE SERGIPE S.A. - BANESE

2Q22 EARNINGS RELEASE

For immediate disclosure: Aracaju, August 15, 2022. Banco do Estado de Sergipe S.A. - BANESE ("Banese" or "Bank"), a mixed-capital corporation with shares traded on B3 under the tickers BGIP3 (registered common shares) and BGIP4 (registered preferred shares) and listed in the ITAG (Special Tag-Along Stock Index) index, announces its results for the 2Q22. For additional information, please access Banese's investor relations website at https://ri.banese.com.br/.

BANESE RECORDS R$8.2 BILLION IN ASSETS

VOLUMES CONTINUE GROWING

2Q22 Highlights

All comparisons in this section refer to 2Q21 (12M)

Net Equity - R$ Millions

573.3

579.3

  • Shareholders' Equity of R$579.3 million (+8.3%);
  • Total assets of R$8.2 billion (+12.7%);
  • Loan operations increased R$438.9 million (+14.3%);
  • Total Funding reached R$7.3 billion (+14.8%).

All comparisons in this section refer to 1Q22 (3M)

  • Financial investments registered a balance of R$3.9 billion (+3.8%);
  • Total revenue increased by R$37.6 million (+12.4%);
  • Revenues from Financial Investments totaled R$104.6 million (+30.6%);
  • Payroll Coverage Ratio increased 5.8 p.p.

556.9 561.3

535.1

2Q21

3Q21

4Q21

1Q22

2Q22

Funding - R$ Million

7,256.10

7,018.4

6,442.90 6,448.7

6,320.2

2Q21

3Q21

4Q21

1Q22

2Q22

Investor Relations Contact

Aléssio de Oliveira Rezende

Executive Officer

+55 (79) 3218-1200 ri@banese.com.br

2Q22 Earning Release Banco do Estado de Sergipe S.A. - BANESE

Equity Items - R$ million

2Q22

1Q22

V3M

1H22

1H21

V12M

Total Assets

8,171.9

7,935.2



+3.0%

8,171.9

7,250.8

+12.7%

Loan Operations

3,508.0

3,438.8



+2.0%

3,508.0

3,069.1

+14.3%

Financial Investments (1)

3,915.3

3,771.3



+3.8%

3,915.3

3,443.5

+13.7%

Total Funding

7,256.1

7,018.4



+3.4%

7,256.1

6,320.2

+14.8%

Shareholders' Equity

579.3

573.3



+1.0%

579.3

535.1

+8.3%

Income Statement Items - R$ million

2Q22

1Q22

V3M

1H22

1H21

V12M

Total Revenue

340.8

303.2



+12.4%

644.0

454.2

+41.8%

Gross Income from Financial

91.8

84.4



+8.8%

176.2

223.4

-21.1%

Intermediation

Operating Results (2)

13.4

10.3



+30.1%

23.8

84.9

-72.0%

Financial Margin (3)

130.0

118.9



+9.3%

248.9

235.6



+5.6%

EBITDA (4)

19.2

16.5



+16.4%

35.7

80.9

-55.9%

Net Income

4.6

12.0



-61.7%

16.5

50.8

-67.5%

Net Interest Income (NII) (5)

118.6

117.5



+0.9%

236.1

226.4

+4.3%

Service Revenue

32.3

28.7



+12.5%

61.0

62.0

-1.6%

Provision for Loan Losses

48.1

56.2



-14.4%

104.3

60.2

+73.3%

Administrative Expenses

98.1

93.5



+4.9%

191.6

173.5



+10.4%

Net Margin (6)

1.3%

3.9%



-2.6 p.p.

2.6%

11.2%

-8.6 p.p.

EBITDA Margin (7)

5.6%

5.4%

 +0.2 p.p.

6.0%

17.8%

-11.8 p.p.

Efficiency Ratios and Measures (%)

2Q22

1Q22

V3M

1H22

1H21

V12M

Delinquency (% of the portfolio)

1.39%

1.46%



-0.07 p.p.

1.39%

0.88%

+0.51 p.p.

Basel Ratio

12.89%

12.95%

-0.06 p.p.

12.89%

13.22%

-0.33 p.p.

Net Interest Margin (NIM) (8)

1.6%

1.6%



N/A

3.1%

3.4%

-0.3 p.p.

Profitability / Assets (ROAA) (9)

0.4%

0.6%



-0.2 p.p.

0.4%

1.4%

-1.0 p.p.

Return on Net Equity (ROE) (10)

5.9%

8.7%



-2.8 p.p.

5.9%

20.8%



-14.9 p.p.

Efficiency Ratio (11)

79.0%

82.7%



-3.7 p.p.

80.8%

60.8%

+20.0 p.p.

Provisioning Coverage Ratio

4.6%

4.3%



+0.3 p.p.

4.6%

3.5%

+1.1 p.p.

Administrative Coverage Ratio (12)

33.0%

30.7%



+2.3 p.p.

31.9%

35.7%



-3.8 p.p.

Payroll Coverage Ratio (13)

69.6%

63.8%



+5.8 p.p.

66.8%

75.1%



-8.3 p.p.

  1. Short-TermInterbank Investments and Marketable Securities + Remunerated Restricted Credits.
  2. Operating Revenue - Operating Expenses
  3. Gross Financial Intermediation Result + Allowance for Doubtful Accounts.
  4. Operational Result - Equity Income + Depreciation/Amortization.
  5. Interest Income (loan operations + financial investments) - Interest Expenses (funding, marketable securities, loans and equity interests).
  6. Net Income/Total Revenue.
  7. EBITDA/Total Revenue.
  8. Net Interest Income/Average Balance of Income-Generating Assets (loan operations + interbank investments + marketable securities + interbank accounts).
  9. Net Income over Average Total Assets (annualized rate).
  10. Net Income over Average Shareholders' Equity (annualized rate).
  11. Administrative Expenses/Gross Profit from Financial Intermediation + Revenue from Services) *.
  12. Revenue from Services/Administrative Expenses.
  13. Revenue from Services/Direct and Indirect Payroll Costs.

This report may contain forward-looking statements. Such statements reflect management's expectations that may not materialize for reasons both intrinsic and extrinsic to the Company. Words such as "believes", "anticipates", "wishes", "predicts", "expects" and similar expressions are intended to identify information that necessarily involves future risks, whether known or unknown.

Known risks include uncertainties and are not limited to the impact of competitive pricing and services, acceptance of services in the market, competitive market, internal or systemic macroeconomic aspects, regulatory and legal environment, currency fluctuations, inflation and interest rates, political risks, and other risks described in materials previously published by Banese.

This report is updated as of the date of its publication, and Banese may not be held liable for subsequent events that are not predicted or mentioned in this report. *Changes in methodology in 2Q21.

2

2Q22 Earning Release Banco do Estado de Sergipe S.A. - BANESE

MESSAGE FROM MANAGEMENT

Growth and inflation expectations for the global economy worsened in the first half of 2022. The insufficient availability of commodities and bottleneck in supply chains increased inflationary pressure, leading to tighter monetary policies in developed economies and, consequently, financial stress in certain emerging markets and developing economies. As a result, the World Bank revised its forecast for global GDP growth, reducing it to 2.9% in 2022.

In Brazil, we expect that the global recession will cause a smaller impact on the domestic economy due to improved indicators combined with the positive evolution of the labor market, which has intensified in recent months. With that, projections for the year of 2022 point a 1.5% growth in Gross Domestic Product (GDP), according to the last Focus bulletin of the semester. Accumulated inflation in the 12-month was 11.9%, with an inflation target of 3.5% for the year and a tolerance margin of 1.5 percentage points. As a result, the SELIC basic interest rate reached 13.25% at the end of 1H22, and the Focus bulletin projects that it will reach 13.75% by the end of the year.

However, we continue to invest in innovation and technology, employee development, and products and services that meet the needs of our customers. We maintain ongoing investments towards learning programs and to improve our corporate governance, risk management and transparency processes and structures. In the first six months of the year, we highlight the growing number of online transactions achieved, with 87.6% of total transactions carried out through self-service channels, being 81.1% through digital channels, as well as the launch of the Desty digital bank, which will enable Banese to conquer new markets and monitor changes in consumer behavior.

We take the opportunity to thank our employees for their efforts amidst such an adverse scenario, and our customers and shareholders for their trust in us.

ANALYSIS OF OPERATIONS

Assets

Total Assets by Type - R$ million

2Q22

1Q22

V3M

2Q21

V12M

Loan Assets

3,508.0

3,438.8



+2.0%

3,069.1

+14.3%

(-) Provisions

-161.0

-146.5



+9.9%

-107.4

+49.9%

Net Loan Assets

3,347.0

3,292.3



+1.7%

2,961.7

+13.0%

Financial Investments

3,562.2

3,404.6



+4.6%

3,076.7

+15.8%

Restricted Loans

459.0

454.3



+1.0%

467.5

-1.8%

Permanent Assets

173.2

174.5



-0.7%

180.8

-4.2%

Others

630.5

609.5



+3.4%

564.1

+11.8%

Total

8,171.9

7,935.2

+3.0%

7,250.8

+12.7%

Banese's total assets reached the mark of R$8.2 billion at the end of 2Q22, a growth of 3.0% in the last 3 months (R$+236.7 million), highlighting the positive variation of 4.6% in the balance of financial investments (R$+157.6 million). In 12 months, growth was by 12.7% (R$+921.1 million), with highlights to the 15.8% variation in financial investments (R$+485.5 million) and net credit assets, which increased by 13.0% (R$+385.3 million).

Provision volume increased by 9.9% (R$+14.5 million) in the quarter and by 49.9% (R$+53.6 thousand) in 12 months as a result of portfolio growth in the period and the migration of operating risk levels associated with the commercial, financing, and credit card portfolio.

At the end of 2Q22, net loans assets accounted for 41.0% of total assets and financial investments accounted for 43.6%. Compared to the previous quarter, net loan assets decreased their relative share by 0.5 p.p. while financial investments increased by 0.7 p.p. In 12 months, net loan assets decreased their relative share by 0.2 p.p. and financial investments increased by 1.2 p.p.

3

2Q22 Earning Release Banco do Estado de Sergipe S.A. - BANESE

Permanent Assets reduced in the 3-month period (R$-1.3 million) and also in the 12-month period (R$-7.6 million), due to the absorption of the results recorded in SEAC - Sergipe Administradora de Cartões S.A., a company belonging to the Banese conglomerate, and the revaluation of fixed assets in use (impairment), which were offset by the growth in intangible assets in the period.

Other Assets grew by 3.4% in the quarter (R$+21.0 million) and 11.8% in 12 months (R$+66.4 million), mainly due to tax benefits arising from the Lei do Bem, and the recovery of tax and social contribution, Escrow Deposits for labor, tax and social security lawsuits, and precatories filed to settle credit operations.

Funding

Funding by Product Line - R$ million

2Q22

1Q22

V3M

2Q21

V12M

Demand Deposits

1,170.8

1,144.4



+2.3%

1,069.1

+9.5%

Savings Deposit

1,940.8

1,892.3



+2.6%

1,902.1

+2.0%

Judicial Deposits

1,432.9

1,367.9



+4.8%

1,243.7

+15.2%

Certificate of Bank Deposit/RDB

2,276.3

2,144.1



+6.2%

1,625.1

+40.1%

CDI/DPGE

110.8

132.6



-16.4%

147.4



-24.8%

LF/LFS/LCI

175.1

182.2



-3.9%

179.7

-2.6%

Repurchase Transactions

15.4

13.5



+14.1%

11.3

+36.7%

Onlending Obligations

134.0

141.4



-5.2%

141.8

-5.5%

Total

7,256.1

7,018.4

+3.4%

6,320.2

+14.8%

At the end of 2Q22, total funds raised reached R$7.3 billion, up by 3.4% in 3 months, reflecting the growth in time deposits - CDB/RDB (R$+132.2 million), judicial deposits (R$+65.0 million), savings deposits (R$+48.5 million) and demand deposits (R$+26.4 million). In 12 months, funds raised increased by 14.8% (R$+935.9 million), resulting from the increase in time deposits (R$+651.2 million), remunerated judicial deposits (R$+189.2 million), demand deposits (R$+101.7 million), and savings deposits (R$+38.7 million).

Interbank deposits (CDI) reduced by R$21.8 million in 2Q22 (-16.4%), due to the maturing of Time Deposits with Special Guarantee which were not renewed, and in 12 months, the reduction was by R$36.6 million (-24.8%), arising from, in addition to the aforementioned factor, we also reduced funding with mutual benefits for investments in interbank deposits linked to rural credit.

The balance of Subordinated Financial Bills increased by 4.7% in 3 moths (R$+6.1 million) and by 17.0% in 12 months (R$+19.8 million), both due to inventory remuneration. Financial Bills decreased by 36.1% in 3 months (R$-11.3 million) and by 34.4% in 12 months (R$-10.5 million), due to maturities that were not renewed. Funding from Housing Loan Bills fell by 9.2% (R$-1.9 million) in the quarter, and by 42.8% (R$-14.0 million) in 12 months, also due to maturities that were not renewed.

4

Evolution of Time Deposits (Certificate of Bank Deposit/RDB)

2Q22 Earning Release Banco do Estado de Sergipe S.A. - BANESE

Time Deposits - R$ Million

2,144.1

1,625.1 1,659.8 1.568.3

2,276.3

Total funding in time deposits reached R$2.3 billion in June 2022, a growth of 6.2% (R$+132.2 million) in the quarter and up by 40.1% (R$+651.2 million) in 12 months, with both of these results due to higher funding from government and individuals.

The Company's funding structure is diversified, which helps it maintain comfortable liquidity levels, as well as offer loans during scenarios of economic recovery.

2Q21

3Q21

4Q21

1Q22

2Q22

Key Funding Sources (% of the Total)

1.8%

Individuals

1.8%

3.5%

0.2%

Judicial Deposits

State Government

15.3%

Legal Entities

Municipal Government

Financial Institutions

Onlending Obligations

Others

18.7%

39.0%

19.7%

Banese's key funding sources are individuals and legal entities, which account for approximately 54.3% of the total funding volume. Judicial deposits accounted for 19.7% of Banese's total funding.

The dilution of funding between individuals and legal entities mitigates liquidity risks.

Funding cost increased by 0.35 p.p. from 1Q22 to 2Q22, and by 1.31 p.p. compared to 2Q21, and both results were due to the rise in the SELIC rate, which remunerates most of the post-fixed funding instruments, and the increase in the National Consumer Price Index (INPC), which remunerates the largest volume raised in Subordinated Financial Bills (LFS).

Regarding CDI, the decrease in both periods, 2Q22 and in 12 months, was directly related to the increase in the SELIC rate and the relative cost of fixed-rate funding.

Funding costs (in absolute terms and as a % of the CDI)

4,50%

4,00%

126.1%

100.1%

200,0%

92.7%

80.5%

79.2%

3,50%

100,0%

3,00%

2.30%

0,0%

2,50%

1.95%

1.71%

2,00%

-100,0%

1,50%

0.99%

1.22%

-200,0%

1,00%

-300,0%

0,50%

0,00%

-400,0%

2Q21

3Q21

4Q21

1Q22

2Q22

5

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BANESE - Banco do Estado de Sergipe SA published this content on 15 August 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 15 August 2022 23:51:09 UTC.