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Banco Bradesco S.A. 10 July 2008

Update Report – 1Q 08 results

Strong outlook for NII and the Brazilian insurance sector to drive growth

Preferred BUY Fundamental research indicates a 25% upside in the preferred stock over the next 6–12 months. We
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Stock prices obtained using DCF and comparative valuation methodologies.
http://www.iirgroup.com/researchoracle/viewreport/show/20279
Ticker: BBDC4.SA
Target price: BRL40.56 We upgrade the preferred stock from a HOLD to a BUY on fundamental grounds, with a 6–12 month
Current price: BRL32.511 target price of BRL40.56.

ADR BUY The ADR is expected to appreciate approximately 55% over the next 6–12 months. In addition to the
25% fundamental upside, approximately 30 percentage points’ further upside are attributable purely
to the anticipated appreciation of the Brazilian real against the US dollar over the same period. We
are valuing the bank over a 6-12 month investment horizon in this report, as we now anticipate a
significant positive currency impact on the ADR over the medium term2.
Ticker: BBD
Target price: US$31.20
We upgrade the ADR (1 ADR = 1 preferred share) from a HOLD to a BUY with a 6–12 month target
Current price: US$20.111 price of US$31.20.

Supervisor: Somnath Banerjee

Analyst: Akhil A. Nair Investment horizon - short term actionable trading strategies
Editor: James Smithies This report addresses the needs of strategic investors with a long term investment horizon of 6-12 months. If this
Global Research Director: report is provided to you by your broker under the Global Settlement, you may now also access (free of charge) the
Satish Betadpur, CFA short term trading outlook that we publish from time to time for this issuer, looking at the coming 5-30 days for
readers with a shorter trading horizon. These are available on-line only at www.researchoracle.com.
Next news due:
2Q 08 results, 04 August 2008
Report summary
Although Banco Bradesco S.A. (Bradesco) reported healthy y-o-y growth in operating income and
earnings, the bottom-line fell short of market expectations. Strong y-o-y growth in the top-line was led
by rising Net Interest Income (NII), which reflects expansion in the loan portfolio during the period.
Moreover, despite the increase in lending, the bank was able to enhance its asset quality during the
quarter. Coupled with a robust performance from the bank’s insurance operations and improvement in
operating efficiency, this led to bottom-line expansion in 1Q 08. Going forward, although our
expectations for growth in the Brazilian economy stand moderated, we believe the bank will
nevertheless be able to achieve healthy growth in lending, as the economy remains robust, consumer
confidence remains high, unemployment remains low and corporate demand for credit is rising.
Moreover, the bank’s insurance business is expected to perform strongly over the next 2 years.
Although we anticipate marginal deterioration in asset quality, due to expansion of the loan portfolio,
we believe that improvement in operating efficiency will continue to boost the bottom-line. Therefore,
our outlook for the stock is positive.

Currency impact for US investors2

By itself, the impact of the anticipated currency movements on the ADR (now US$20.11), without
considering changes in the share price, is positive and is expected to be:

Over 6 months: US$20.32

Over 12 months: US$25.01

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