Banco Bradesco Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 5, 2023

There are 3 speakers on the call.

Operator

We posted a net profit of €4,300,000,000, a 10.6% ROE such as insurance operations and market NII. This first quarter was marked by volatility in the markets, including discussions on insurance and tax However, the quarter ended better with a positive expectation brought on by the new And last call framework. As we mentioned previously, we see our 2nd quarter performance still under pressure, mainly due to credit provisions. We reinforce the message to the whole that we see our earnings evolving over 2020 with superior performance in the second half. We believe that our structural return management has not changed significantly.

Operator

For this, management is focused on delivering returns Before we talk about numbers, let's talk about strategy. There are a number of initiatives taking place simultaneously, such as in retail bank, Our operations in high income, the purchase of Frudesco Bank, the Invest U. S, which is a partnership with BlackRock for the management of the investment funds abroad, the official opening of the new headquarters in Coral Gables that took placed last week, the capital increased the TESSCO bank now exceeding 2,000,000,000 euros because we understand that this is fundamental, And we are allocating our efforts in this endeavor with a dedicated team. And we also want to make clear that this But this is part of the economic cycle. The opportunities and potential of the retail operation are huge and It is clearly imperative that we adjust our structure to our cost to serve that is more and more profitable.

Operator

We will talk a bit about this With outstanding performance in all segments and individuals, there are over 1,500,000 high income clients, 35,000,000 retail Your clients have more than 50,000,000 non account holder clients who consume some type of product such as insurance, Consortium cards and others. In companies, there are 15,500 corporate clients and 1,700,000 small And to invest in areas we want to hear, in the high income segment, we seek to increase our participation in the relationship With the 1,500,000 clients we have, this year, we are growing our investment By 40%, that is more than 2,000 advisers, specialists spread all over Brazil, and we are not going to stop there. This is a broad and continuous project that extends to our customers' experience also in the United States. The focus of our teams on customer service has produced tangible results. The NPS acquired for this segment declined 16 percentage points.

Operator

And in investments, we rose 25 points. In private, we reached a local market share of 22 And based on BIMA data, a bump of 4 percentage points. Our bank in the United States, Badesco Bank, already from its prime clients to open account in dollars. We integrated with our app in Brazil, And the transfer of funds is completely digital, done online in real time. Furthermore, we have also We currently have 3 strategic fronts that we consider of great importance for our future: the review of the cost To serve the next broadest sense, technology and digital transformation and customer centricity, we will highlight the themes of And yes, in Principality, we'll go over the details on the upcoming slides.

Operator

Optimization and cost We'll continue to make adjustments, fully mindful that the need for a fiscal branch structure was greater in the past Since there's been a migration of transactions to South Australia's channel, just to give you an idea of the change in people's performance. Before the pandemic, we had almost 1,000,000 tower transactions per day, every day. And today, this number has reduced to less than 10% of our government. So because of this change in behavior, our focus In other words, with last paperwork, we have more time for the commercial team. Thus, we achieved an increase of 11 percentage Pointing the share of business teams in this snapshot.

Operator

We are transforming our presence and therefore, they are focused on providing advice to clients Moreover, we are also expanding our network of banking correspondence for this scope of expression, which will reach 46,000 locations and points of service by the end of the year. This is an important channel of at inadequate costs. Talking about digital transformation, our teams are working in a structured way. This is a process that began long ago and makes a positive evolution year after year with the technological transformations that take place, the changing behavior of our clients, regulatory changes and the natural evolution of our business. As a result, 80% of the developments we made today adhere to the agile methodology with a 40% reduction In the delivery time of solutions, currently, 35% of business transactions already run-in the cloud, And our goal is to reach 75% by 2025.

Operator

This year, we are going to invest BRL 6,000,000,000 In technology and innovation, modernizing the bank with a continuous focus on customer centricity. In our digital native Solutions, it is worth noting the simplification we made this quarter. We integrated next into Banco Bradesco now is a new segment in an effort to make its cost structure much lighter. DGO absorbed BITS clients and will continue as a separate structure from Bradesco. It is a digital bank in essence With a sound credit card business, it was chosen as a strategic partner by Uber in Brazil, and it has seen positive results, an interesting opportunity which is worth deepening.

Operator

On Slide 9, talking about NPS, all these initiatives listed so far have a firm purpose. We've been talking for a while about our performance focused on customer centricity. For some time, we've talked about this. And today, we're going to show you some numbers that illustrate the relevance of this theme. We saw a boost in NPS in all segments, 20 points in retail individuals, 12 points in retail companies, 18 points in prime and 28 points in cards.

Operator

Clearly, the improvement of NPS It's not only important for the number itself, but also for the reflection it brings to the business As our promoter clients have significantly better numbers, you can see here 72% more profitability, 17% more funding invested and 57% less friction or inactivation of accounts. And this is one of the main goals of our teams, which are reflected in their goals program. And that has led to a significant improvement in the quality of our services. Now talking about operational performance. Let's take a look at the figures for the Q1.

Operator

This graph depicts the development, Excluding the wholesale client event in Q4, recurring net income is in line with the previous quarter. Market NII variation contributed positively. Client NII and insurance, less in the case of insurance, The effect is absolutely seasonal. And we have to bear in mind that in the quarterly variation, we also saw a negative impact from the lower number of calendar days and the higher number of working days. Loan portfolio.

Operator

The loan portfolio posted an annual growth of 5.4%, down 1.4% in the quarter. Contraction in corporate segment origination in Q1 was the main pressure and is due in part to the high interest rates that To reduce the appetite, the demand by medium and large companies for new operations, in addition, of course, to prudence in credit policies in the portfolios of Small micro companies and individuals. For individuals, we saw an evolution of 1.2% in the quarter and 10.2% in 12 months. High income cards and real estate financing stand out. As for our guidance, we remain below the floor.

Operator

Throughout the year though, we believe that we can return to the indicated range of our guidance. I'd like to speak a little about credit policies. In credit policies, as we talked about in the previous slide, we have reassessed our risk appetite to making material changes Throughout 2022 and therefore slowing the approval rate, this significantly decreased production in the high risk portfolios, and this was a necessary measure, but we continue to experience Expansion in lower risk lines. With this effect, it is natural that credit will grow less, but the moment is for caution. We believe that we are on the right track because 95% of loans initiated over the last 12 months are in the better rating ranges, and we already see improvements in newer vintages NPLs.

Operator

Expenses with expanded ALL. We had indicated that credit provisions would remain high in this first as well as in the Q2 due to the effect of the change in the ratings of stressed credits. However, the cost of credit was 4.3% With credit provision expenses of €9,500,000,000 in line with guidance in annualized terms. The credit provision balance reached €60,000,000,000 representing 9.3% of the loan portfolio. Note that Our provisions in BORGAP have historically remained in line with the expected loss under IFRS 9, Which is the metric adopted by the bank regardless of whether it is mandatory only in January 2025.

Operator

Over the quarter, we have seen a lower level of credit provision expenses for IFRS as a result of new loans with a better risk profile and an improved risk landscape.

Speaker 1

In coverage here in this graph, We show the consistency of our provisioning, which maintains the strong and suitable level of provisioning For riskier credits in Ratings D through H. And therefore, I point out that the reduction in credit Provisions occur in lower risk credits, which are performing well. Additionally, with the changes we have made to credit policies, We are bringing clients with a better risk profile into the portfolio, which naturally allows us to have a lower level of provisioning. The NPL creation increased in the quarter, still driven by the default of older vintages and as explained by deteriorating ratings. And also part of the growth in the quarter can be attributed to the non realization of sales of active loan portfolios.

Speaker 1

Adjusting for this factor, The new NPL still grows, but to a lesser extent. For 90 day NPL coverage, we consider its reduction to be natural Given the delinquency cycle, we are approaching the peak when the provisions predicted by the expected loss model are being consumed. On Slide 17, looking at the NPL The NPL over 90 days rose in the quarter, mainly in the mass market, both for individuals and small and medium sized Companies and also due to the denominator effect due to lower credit growth, as I said. If we considered a constant base of credit growth, This percentage would be a 0.5 percentage points lower. Delinquency should still grow in the next quarter, But we believe that we are approaching the end of the cycle.

Speaker 1

We did not have relevant sales of active credit portfolios over the quarter. As we said, Andy indicated 15 to 90 days ahead of 50 BPPs increased, promised by the seasonality at the start of the year and by fully provisioned cases of corporate clients. And the renegotiated portfolio reached BRL 36,000,000,000 however, 55 percent of the renegotiations are less than 90 days past due, which are operations with a higher probability of recovery because they are newer delays. Even so, our provisions for these credits represent 63% of the total volume, while the delinquency Fee of this portfolio is 23%, meaning onethree of the total provisions. Now on net interest income.

Speaker 1

As I said, it's good news, as we said last quarter. Market NII continued trending towards a recovery despite the still negative result at the beginning of this year. This line will continue to gradually improve over the upcoming quarters through the repricing of our ALM positions and may become positive in the second half of Total net interest income compared on an annual basis fell by 2.4%. Despite being off guidance, This has been anticipated due to the market NII comparison with a much stronger number at the beginning of last year. Over the coming quarters, we will see a recovery with better market NII in the second half of twenty twenty three.

Speaker 1

Total NIM posted quarterly growth of 20 bps. And lastly, we're going to move on to the interest rate sensitivity. For a 100 bps reduction in the yield curve, we expect a positive impact of BRL 1,400,000,000 on the total NII over 12 months. And fees and commissions income, some challenges for this year as stated in the guidance. We closed the quarter with an annual growth of 1.6%, just below the floor of the guidance, but we expect to move into the range along the year.

Speaker 1

Card income remains the main positive driver due to a healthy growth on high income. Checking account line is affected by True issues and regulatory issues that have impacted the entire market as well as us, and we will recover this in the medium term. Hence, the need for scale gains, improvements in NPS and client perception. In Asset Management, the signs of improvement are clear With the adjustments we've made in our structure, so our funds are already showing significant improvements in returns appearing in the best Partiles of profitability. We reinforced the focus on high income segment growth, both onshore and offshore.

Speaker 1

Now on operating expenses. We've in costs, we've seen a solid performance despite the collective agreement that occurred in September 2022 and the adjustment of various contracts due to accumulated inflation. Overall, growth is 9.3% at Bottom of our guidance. Personnel expenses for the quarter grew 9.6% over 12 months and 6.6% for administrative expenses. As we had outlined when the 2023 guidance was released, The most significant pressure on expenses come from the other expenses and revenues line, which posted a lower basis of comparison in 2022.

Speaker 1

As we said in previous slides, we're making further adjustments in our cost to serve and service structures without reducing our ability to provide services to clients, and we expect to deliver better results than the guidance. Moreover, through the strategic review of digital initiatives, we'll adjust even further the cost of serving in 2023. Now on our insurance company. The annual growth in net income was 10.6%. Income from operations expanded 11.7% compared to the same period in 2022, a growth that's above guidance Despite, of course, the high increase in care costs, especially in health insurance, the quarter posted a good growth in premiums of Around 13%, reaching BRL

Operator

25,000,000,000

Speaker 1

Financial income also had a good evolution in the annual comparison, resulting in an ROE of 18.2%. Basel and IOC, there was an increase of 20 bps Yes. And Tier 1 capital, even with the full IOC provisioning, we remain in a very comfortable liquidity position with the LCR reaching 166 percent despite the seasonal effects of the Q1. Now talking about our people, 86,000 employees. So far, we've talked about our numbers.

Speaker 1

But now it's time to talk about our people who are always encouraged to seek development and training. Our purpose is that inclusion is genuine and permanent. It's rewarding to work with such a diverse staff, To believe and invest in diversity and inclusion, in addition to being an The co imperative is also a business strategy that produces values and results. The outcome of our practices can be seen in our significant acknowledgments and employee satisfaction. When we talk of sustainability, for the 5th Consecutive year, we've been recognized in the S and P yearbook among the top 5% evaluated in the group containing the most sustainable companies in the global banking sector.

Speaker 1

In the sustainable business agenda, we remain committed to generating operations with a positive social environmental impact. We have allocated 100% of the funds from our first sustainable bond earlier than expected. And we should also point out the financing for the purchase of solar panels, which has now topped BRL1.2 billion, an initiative with huge social and environmental benefits. As for the climate agenda, We announced earlier this year intermediate factorial targets in line with the net zero compromise. In financial citizenship, We remain at the forefront of these actions and are pioneers in taking the commitment to health and financial inclusion of the principles of for responsible banking.

Speaker 1

Finally, before we move on to the questions and answer session, we are going to highlight some Acknowledgments on this slide that we received over the period, 2 of these acknowledgments stand out. Our Private segment was honored by the international magazine Global Finance, reflecting the advancements we've made in this area. In addition, we were also recognized by our employees through the Great Place to Work 2022. I'm going to wrap up this first part of the meeting, and I'll join Feretti now at the other studio to proceed to the questions and answer session.

Operator

Hello. We are back now with our CEO, Otavio. We also have The CEO of our insurance group, Ivancon Tiche. So we'll start now the Q and A session for analysts. Shall we begin, Octavio?

Operator

Yes. Our first question comes from Eduardo Rosman with BTG. Rosman, go ahead. Hello, good morning, everyone. Otavio, Ferreri.

Operator

My question is about the recovery of profitability. I think we can say that the worst part is behind us. I think that the bank has taken measures to improve profitability. But Otavio mentioned That this recovery should be gradual. So I'd like to know, maybe you could give us more color on this gradual recovery.

Operator

The bank is taking little risk. It's focusing on Perhaps higher income clients, maybe that can explain why this recovery will be gradual. I want to understand whether the bank is being positioned for a more difficult economic Scenario ahead. Well, there are a lot of nuances there, but I'd like Otavio to explain how he sees this recovery, how long it would take. Could you quantify things a little bit?

Operator

Hello, Rosemarie. Thank you very much for your question. Yes, indeed, Of course, we are somewhat cautious because of NPL that needs to be totally under control. And we already see positive signs, As you observed, but we have been reaffirming since the last quarter, the whole year we have to worry and we have to be Careful about delinquency. It should be present also in Q2, perhaps still in Q3.

Operator

But All signs point to a very good recovery. The new vintages, the new cohorts have come with a better NPL level. And of course, we were more selective in credit In loan granting, of course, those worse risk profile loans need more But the good operations, the good clients with good credit ratings, well, we are Giving them loans in an accelerated fashion. The highlight in Q1 is that there was a contraction. Legal entities did not ask for loans.

Operator

And also because the interest rates are somewhat higher, so people tend to be Waiting to see what's going to happen in fiscal terms, the tax reform, the fiscal framework. So mid to large corporation loan portfolio did not grow a lot in Q1. Coupled with that, the capital market in Q1 had very few deals happening. A lot of things And that's why we're talking about a gradual recovery. We built a first quarter within our expectations, And we mentioned that to you.

Operator

In Q2, we'll try to do and we're already doing it because in May so we're in May. So We want to have a better Q2, build a better Q2 in recovering the earnings of the organization month after month to be able to deliver 2023. Overall, That is better than our initial expectations. I think that these are some of the Challenges regarding gradual recovery. Now we have seen signs of a better GDP growth outlook for 2023, Eduardo.

Operator

So even if this does not happen, even if the GDP does not grow as much as we would like, I believe that the bank is prepared. We have prepared for all the scenarios and all of our lines are prepared. So even If the GDP grows more than expected or less than expected, the bank is well positioned to enjoy the good sense that we have. We did all the work in high income, as I mentioned. We did some work in retail banking, in investments, in other words, in all lines that make up the bank and also the insurance group that has posted An important result in Q1.

Operator

Thank you, Otavio. Thank you, Roseman. 2nd question from Thiago Batiste with UBS. Thiago? Hello.

Operator

Can you hear me? Yes, Thiago. We can hear you well. Go ahead. Well, I have a follow-up question to Rosemarie's question.

Operator

You talked about ROE. And if With a focus on the insurance company, the ROE is 18%, if I'm not mistaken. How do you imagine the dynamics will be In terms of recovery for the insurance group and in terms of asset quality provisions and looking at the short term, the dynamic Of Q1 was slightly different. I had the impression that Q1 would be a lot heavier in provisions than the second one. When we look at Q1 numbers, They are very much in the middle of the range of the guidance, and it's below capital formation.

Operator

So I'd like to And the cost of risk of the bank for 2023. And also I'd like to know about the profitability of the insurance group. Thiago, okay. Ivan Gonteiju, who's our CEO of the insurance group, will answer Your question about the insurance company, and then I will address your question regarding provisions. Ivan Goncicchio, hi.

Operator

Good morning, Otavio. Thank you, Thiago, for the question. We see an insurance company in Q1 posting BRL 1,800,000,000 net income, BRL 25,000,000,000 in sales, up 13% As highlighted by Otavio, I'm very comfortable with the result of our operations, Insurance operations, pension plans and savings bonds, they're all growing above The guidance that we communicated of 12% and predictability for the future, which is what you asked about, is positive. But of course, it will always depend on the economy of the country, the moment that The country is going through. The higher the job ability, the higher the GDP growth.

Operator

In terms of the economy, Of course, that will have a positive impact on the market of insurance, pension plans and savings bonds. We want to keep to the guidance in terms of ROE at 18%. This reflects our estimates, our forecasting. And I'd like to remind you that we do see some challenges in some segments. And we also envision challenges in the Brazilian economy, but we are confident that the insurance group will achieve its Targets along 2023, always contributing with an incremental return That is requested from us by the bank.

Operator

Thiago, the insurance company is an important piece In the results of the bank, the insurance company is behaving really well. It's performing well, as Contijo has mentioned. They have been posting constant growth and ROE that is important of 18%. In Q1, They make €25,000,000,000 I joke with Ivan that our goal is to have €100,000,000,000 In revenues of insurance premiums at the insurance company. And the fact that we have an insurance company that Has all of its companies, Bradesco RE, Bradesco Savings Bonds, Bradesco's private plans.

Operator

And you know that, Thiago, although we have higher costs of service As we have in the insurance health, the insurance company, together with the team of the bank, we can all grow results, Grow revenues of the insurance companies. So we always have very positive expectations regarding the insurance group. And as regards The ALL that you mentioned regarding the volume of first half, second half In Q1 over Q4 of 2022, what we can observe And quite clearly is that, 1st, the volume of the loan portfolio grew less credit, grew 5% year over year Naturally, because we kind of held back in those higher risk loans. And of course, We had a lower need for provision. And legal entity credit grew less because of all of the factors that I mentioned with Rosman When he asked about this.

Operator

Still, if you observe the overall percentage of ALL As a percentage of our total loan portfolio is 9.3. So it is the highest index in our historical series of provisions vis a vis the loan portfolio that we have. So This level of provision, of course, now we have 2 situations. We have BR GAAP 2,682, which is the regulation in effect that we have to abide by. And the expected loss, IFRS 9, which will be in effect as of January 2025.

Operator

So although it will only be mandatory as of January 2025, obviously, All of our modeling already looks and considers This kind of provision due to expected loss. Of course, we make adjustments between BR GAAP and IFRS So that they'll move in parallel so that there will not be differences among the 2 or between the 2 unless there is a benefit in volume of provisions. So for these characteristics, with operations, with a lower credit risk, All lower growth in the loan book and the provisions that have been made in the past, all of that explains the scenario that you mentioned. Just one additional point mentioned by Otavio. We had a deceleration in credit origination in Q1.

Operator

And in terms of reduction of provisions, we provision for expected loss. This deceleration in credit Origination kind of explains this lower volume of provisions. And then as regards to provisioning below the formation, It is related to the fact that we brought forward some provisions by expected laws. And in this moment of the cycle, we are naturally Consuming these anticipated provisions. It's very clear.

Operator

Thank you very much.

Speaker 1

Next question, Domingos Falavigne from JPMorgan. Domingos, you may go ahead. Good morning, everyone. Thank you. It'd be interesting for us if you could share a little bit more about the evolution Either of the NPL formation and delinquency or the data from now.

Speaker 1

And I apologize if I missed a comment that you may have made. But I think that the new formation was around €12,000,000,000 If you can explain a little bit more if it was Spread out EUR 3,000,000,000 per quarter equally or if there was any improvement, any indication? Or if you can detail us the formation in April, That would be an indication for us. If you don't have about formation, you can just tell me about NPL, 90 days. How temporary it is, that would give us an indication.

Speaker 1

So throughout the quarter, We saw a slowdown of this formation. In terms of the evolution of the formation, we are probably Maybe at the peak of formation this quarter, we're going to see whether it will be confirmed. It will still remain high in the second quarter. And we expect the beginning of a reduction in NPL formation as of the 3rd quarter, But we'll have to see the actual trends. What we actually see when we look at the new vintages or cohorts, what's been happening at least on EBIT 34.

Speaker 1

And when I talk about new cohorts, I'm talking about August, July through October of last year, When we look at the delinquency NPL condition, but now we see very positive signs of a much more controlled NPL. And I said in my presentation that the new vintages, the new categories show that 95% are Formed by clients who have better ratings. So that already gives us good indication of how it should behave Over time or throughout the year of 2023, but it's natural and we've been saying it that this first quarter NPL would still be a little high. In the Q2 as well, we've been telling you that it would also be a little bit higher, but This movement of the ratings that decrease over time as credit becomes stressed, We see that already happening. It's normal that it should happen.

Speaker 1

And that's why there's more consumption of the allowance, as Fereci mentioned. So it's almost intuitive and natural. At a time of a more positive cycle, you set aside more allowance so that at a time Of a more restrictive scenario, you can consume those provisions. But as I said, I don't know if you were listening yet, but we have 9.3 of total provisions for the total credit loan portfolio. So if you consider Portfolio with credit for more than 90 days is at 58% coverage.

Speaker 1

So we see first a very adequate level of provision And the NPL has been improving. We haven't closed April yet, but it is already better than March was, than February was and so on. Next question? Titola Barta from Goldman Sachs. This

Speaker 2

Tito? Hi. Yes. Go ahead. Hi.

Speaker 2

So good morning. Can you hear me? Yes. Yes. Hello.

Speaker 2

Hello. You can. Okay, great. Thank you. Yes, sorry, I'm on the phone line here.

Speaker 2

Thank you for the call and the presentation. I guess my question is on revenues, right? And we saw net interest income down In the quarter, pressure particularly on the client NII, you're slowing down loan growth, right, some pressure on spreads As well. How do you think about your ability to deliver on the revenue guidance, both I guess on the net interest income And then fees as well. But on the net interest income also, the client NII looks a bit weaker, partly offset Market NII, which seems to be doing a little bit better than expected, although still negative.

Speaker 2

If you could just help us think about those dynamics in the current environment with still high rates, Slowing loan growth. And what does that mean for both the client NII and the market NII from here? And then certainly fees, I mean, I know there's some seasonality, but most lines were down in the quarter. Do you think this 2% growth is what we should Anything that you can do there to improve that fee income growth from here?

Speaker 1

So Tito, about the loan portfolio, that was better. You're right. There was an increase of 5.4%. But as I said, mostly due to the caution that we had with those clients with the poorest Credit profile credit risk profile, but it's we see the growth that we're getting in the personal loan and Real estate financing, even in payroll deductible loans that ended up growing less because it was impacted by that issue that we had at the cap of the interest rate. We were almost for 2 weeks unable to operate, but all of those portfolios have been growing well.

Speaker 1

Where we saw lower growth, it was an involution of 4.5% or 5% was Operations with larger corporates or medium sized companies, mostly due to the lack of demand, maybe because they were standing by and waiting before they start taking loans again. Large corporate basically making or taking loans For that moment, working capital mainly, but credit operations for longer terms, for investment or for Other purposes that have a longer maturity, even due to the interest rate of nearly 14%, there's a sense From the companies that it's time to wait a little. The tax framework was already disclosed I added there's good expectations for the tax reform. It seems that the good signs that we're starting to see in terms of inflation In the country as well, maybe the profits have not yet reached the desired level, but we can already see A sign or an indication of improvement, even the statement of the Central Bank with the last COPO meeting already mentioned a scenario that doesn't show as much Pressure for interest rate increase. So the scenario seems to be improving and everybody seems to be standing by Before growing, we have a portfolio in the retail bank, a loan portfolio in the retail bank.

Speaker 1

That's one of the largest in the market. So I believe that everything becoming or materializing and it will and even the appetite for risk That changes and improves for us as people begin to accommodate, we see a scenario for Loan increase within that range of the guidance that we mentioned. Now as for The fees that you mentioned, it is really very close to the bottom of the guidance, and we have huge Challenges, regulatory challenges in terms of fees, challenges with the competition because today you're able to open Checking account to the digital bank, even our own digital without any fees. So We must work and that's why we have that concern of the customer centricity, NPS, of generating a positive perception of our service with our clients so that we can replace those fees that you lose With other fees, Investment Bank as well that hasn't really moved this This Q1, we had very little, almost no operations. So there's no fee of those operations.

Speaker 1

So those are challenges that we need to Go after and this fee income depends on your growth as well. What I mean by that is Spending customer base expanding the base of customers that you negotiate with so that you can recover it. But I understand that this line, Considering the bank's strategic position throughout Brazil and all regions as well with Bradesco Espresso, I believe we have a good expectation to recover the fees line over the year. Just an addition about net income NII, one of the good news that we had this quarter was the improvement of market NII. As we said, This has been following a trend of gradual recovery.

Speaker 1

It's improved this quarter. We believe it will continue improving over the next quarters, Possibly closing the year at a positive point even in the second half of the year as a whole being positive. So in terms of driver for total margin, for Total NII, that's the base of our guidance. The dynamic of the NII and the market NII is very important.

Speaker 2

Thanks, Otavio and Cinepi. If I could just one follow-up just to understand on the net interest income. Because the other pressure we saw there was On the funding mix, right, the demand deposits down quite a bit in the quarter. Your time deposit is kind of flattish. I mean, we're seeing this kind of globally Where people shifting to higher yielding type funding, do you think that continues to pressure your net interest margin Also, and how long before that can begin to stabilize or anything that you can do there to boost those demand deposits from here?

Speaker 2

Thank you.

Speaker 1

So Tito, the population really did need to consume To the savings that they had that we see a drop not only in Bradesco But in all financial institutions, I think that total deposits also a reflection of the growth of the country's GDP, the volume of business, the Volume of money circulating. And people are also trying to protect themselves by making other investments, especially to make the most of an interest rate that We have a 14%. So it's a migration even from investment funds, not fixed income, but From multi market funds to this operations of fixed income because they're paying high With the interest rates at 14%, even with an expectation that economic agents may have in mind that this interest rate

Operator

Our next question comes from Rafael Fradi with Citibank. I have two questions. 1 is a Follow-up question regarding NII. Just want to understand. You're making a move towards lower risk Clients, one of the effects of that is an eventual reduction of NIM.

Operator

There was a slight reduction in this quarter. And I'd like to understand how do you see this looking forward? Are we getting close to stability? Or should we expect another marginal drop in NIM? And I think, what have you spoke about origination of clients in the last 12 months with rating A, 95% credit rating.

Operator

You have an interesting table on Page 15 of the release. This shows the evolution of Rating for clients originated in the last 12 months. And there was a big improvement vis a vis Q222, but then it kind of flattened out, perhaps Above the previous levels. So we've had a great improvement. That will translate into results, but we don't see additional improvement.

Operator

Perhaps this is The new level, I just want to understand that table. Well, Freddie, yes, it is a little bit of what you said. We were more selective in higher risk operations. In other words, operations with No collaterals, consumer credit, operations with limits that are made available in the mobile app. That was Operations that are going on in the app.

Operator

But then you get to a cap Because we have to acknowledge that we operate in the Brazilian market in Brazil, and Bradesco reflects the Brazilian population and the economic agents. So we can have an improvement because we've reduced the acceptance of those loans that have a Higher risk because the population, Freddie, I mean, we have to acknowledge that the Brazilian population has more debt now. On one hand, it is easier now to have checking accounts in 1 to 5 banks. So Clients now don't have to go to a bank branch. They can open a checking account over an app in 4 to 5 minutes with just a few clicks.

Operator

It's a very attractive journey. We understand that. But it makes things easier. In Brazil, in Verisko, we opened 12,000 checking accounts. We open 12,000 tracking accounts every day in the mobile channel.

Operator

So that makes it very easy. But it's also easier for these clients to get credit. Either using their credit cards, it doesn't matter the limit They have 100, 500 PRLs, but it's easy for them to get credit in 1, 2, 5, 6 digital banks. The whole context made it easier for people to get more credit and to have more debt. So there are these two aspects.

Operator

So we reached a cap in terms of what was possible to select Clients with a better credit rating, of course, we need to operate. We'll continue to operate with lower risk clients. We've been accelerating our loan book, and we're talking with our whole team about this, that we need to continue to grow the loan book. But again, the main factor has been the low growth of corporate operations, as I mentioned, to Tito. So I think then the improvement from now on will be marginal in credit ratings.

Operator

And we'll have to adequately Price operations for those clients that do not have such a good credit rating, such a good Credit score. But if we press the operation correctly so that we can cover possible delinquency, well, We can do that in consumer credit. We can do it in our digital operations and transactions as well. And even in credit cards, So we can have a more adequate balance of allowing a little bit more risk, but at an adequate pricing So that we can cover an eventual delinquency and so that we can have positive results in that operation as well. In this origination mix that we started doing, Freddie, it naturally affects spreads Because these are operations with better clients, with associated collaterals.

Operator

So of course, these operations have a lower spread So I think the wisdom lies in having a balance of these 2 legs. We'll open the door a little wider So that we can improve our result formation over time and client in a year. And I think the growth was 7.4% in Q1, but we tend to pursue a better result and also because we understand that There will be an expected loan book growth in the coming quarters. Next question from Henrique Nabajo with Santander. Henrique?

Operator

Hello, good morning. Thank you for the opportunity to ask questions. Freddie, Lazari. It's kind of a follow-up question to Tito's question That to me was not very clear. You're talking about portfolio growth and NII growth were negative in the quarter, materially below the guidance.

Operator

So my question is, when you released the guidance, was this kind of performance expected? Will these two numbers eventually converge to at least the bottom of the guidance range? Or Should we consider that there is a real risk of guidance review in the second half of the year? No, no, you're correct in what you said, Henrique. The portfolio growth, as I said in the presentation, has a trend To convert to the guidance, and we are working on it, converting not only towards the bottom of the guidance, but at least In the middle of the guidance, the middle of the range.

Operator

You see, this is something that we already had in mind Because we knew that Q4 of 'twenty two and consequently Q1 of 'twenty three, because of delinquency, would have an impact on credit. It was in our mind. We knew. We expected this to happen. Our expectation is that things would be a little Better in Q1 in terms of growth in operations of corporates, which did not happen For a number of factors that we talked about, even in the capital market, we could see a very weak performance.

Operator

But we understand that given the expectations that we have observed and also the Communicated by the Brazilian Central Bank recently, all of that is favorable for us to post A greater growth of the loan book in 2023. So yes, we had it in mind that Q1 would not be that good Because of the restrictions that we Adopted in credit granting, and our expectation is to seek the middle of the guidance or the top of the guidance range. And I think it is important to mention that when we speak about NII, our guidance is for total NII. Market NII performed a little better than expected with this gradual improvement trend. So considering the total NII guidance, in addition to this dynamic that Otavio explained so well, The dynamic of market NII seems to be contributing as well.

Speaker 1

Next question, Mario Pierry, Bank of America. Mario, you may go ahead. Mario, hello. Good morning. Okay.

Speaker 1

We'll move to Pedro first then, and then we'll go back to Mario, okay? So we'll continue with Pedro Leduci Itau BBA. Pedro? Thank you, Ferretti. Thank you, everyone, for the call and the question.

Speaker 1

In Told us and the moving pieces of these two sides of the guidance. On one hand, you're saying you're seeing Loan cohorts already performing better, and that's why you had the confidence to reduce Coverage and so on. But on the other hand, the portfolio was very slow. And you said yourselves that NPL formation on the 2nd quarter is too high. If we follow the same pace of ALL and NPL formation in the 2nd quarter, the coverage will drop even further.

Speaker 1

It's below 100%. And if the portfolio accelerates to meet the guidance, it should attract more ALL because of the Model, the expected model. So I'm having a hard time conciliate a scenario where the portfolio increase It's getting into the guidance and ALL remains in the guidance without the greater drop in coverage. I'd like your help to Put these pieces together, the loan portfolio growing without dragging ALL further And whatever you have in terms of ALL visavis coverage to the end of the year, that'd be good. It's a pleasure to talk to you.

Speaker 1

Look, whenever we look at the Provisions or ALL, I'd like to comment that quickly with you. We're looking at it within expected losses In IFRS 9 on one side where you have the provisions, considering everything that could happen to your Loan portfolio observing the concept of expected loss. But what we've done over time in a more positive cycle, We started to make additional provisions or extraordinary provisions. Those provisions that we make and at the time that the cycle is not Quite as positive. When it becomes more challenging, you start to consume part of those provisions, but always observing This movement of expected loss, of course, we also expect an increase in our Loan book and we're working to increase it.

Speaker 1

It increased 5%. Our guidance is from 7% to 11%. So there's still some ways to go for us Should be able to meet it. If we took the middle of the guidance, for example, as a reference, it's this is only an example, but an increase of around 9% of loans, It's not that far from 5%, 5.4% that we grew now. And of course, that, that increase should occur Through operations that have a better rating level, a better credit score And therefore, require less ALL.

Speaker 1

And when you put that into the model of expected losses, you have a Lower consumption of ALL because of the improvement of the assets you're working with, because you have guarantees associated to that operation. So it Seems to me that this balance is quite adequate, an increase a quality increase in portfolio with A smaller need for provision. So it doesn't seem that the fact of we increasing credit could somehow consume Such a level of the allowance that would lead our provisions to decrease more drastically. Also, it's important to note The volume of provisions that we have in our credit portfolio was 9.3 this quarter. That's The highest in our historical series, so the volume of provision is quite satisfactory.

Speaker 1

So we also need

Operator

to consider that when we look at

Speaker 1

the provisions, Excluding the portfolio that's entirely provisioned for that's Phase 1, as I said, if you only take The loan to NPL over 90 days, our coverage level is 2 78%. So with better cohorts, we're looking at the cohorts that We originated in July, August up to December, 9.3, 9.4. These cohorts have a need a lower need for provision because delinquency is higher. So ALL grows at a slower pace than it grows today because of the rollout of those operations that stressed it. So when we look at expected loss, but also at the rule in place to 682 of the Central Bank, as credit becomes more stressed With a greater delay, it calls for a much higher ALL.

Speaker 1

From C to D, it goes from 3 to 10, 10 to 30, 30 to 50, 50 to 70. So it calls for a higher ALL. So the new operations with a better risk quality, with a better Repayment quality calls for less ALL. That's why we understand it is possible, it is feasible to get to this balance between the growth of credit Our loan portfolio that should be around it's a single digit. If it's double digits, it will be low double digits.

Speaker 1

And we don't see anything that could not be managed in such a way as we can have the growth of these Two lines, both loans and ALL without stress on ALL that it goes too far From what we have on the guidance, so observing the guidance. Excellent. Thank you. Thank you, Pedro. Is Mario back?

Speaker 1

Okay. We'll turn back to Mario Pierry. Can you hear us now? Yes, good morning. Can you all hear me?

Speaker 1

Yes, we can hear you. Good morning. Thank you. I apologize for the technical problems. I have three quick questions.

Speaker 1

First, Otavio, you asked about Or actually, you said that market NII should be positive in the second half of the year. I'd like to understand a little bit The visibility that you have about market NII, does this depend on the interest curve or If there's a select rate decrease before, could that have a more positive impact on market NII? So I'd like to understand in your mind with what you can see considering what you said that market NII would improve in the second half of the year. 2nd question about delinquency. You said we're close to the peak, but you still expect it to Be worse in the Q2 and maybe the 3rd.

Speaker 1

So it's going to take us 6 months to see the peak of NPL. What are the lines that On individuals NPL, so if you can detail other products, which products are Getting worse NPL. Nobody asked yet, but the other is question is about the tax rate to pay the tax rate closer to 10%. I understand that was the IOC benefit, but the soft guidance you released in the beginning of the year had a tax rate of 16% to 20%. I'd like To understand whether the guidance still stands from 16 to 20.

Speaker 1

Well, Mario, good morning. It's good you came back. About your first question on market NII, that's exactly it. Market NII will improve. The Q1 was a lot better than the last quarter of last year.

Speaker 1

If you look at the book, If you can have a look or maybe our guys can send it to you later, but it was 800 in the last quarter of the year, there was 300 now, so In the Q1, so it is improving quarter on quarter. So our visibility is very clear, very transparent that this will improve irrespective of what happens to the select rate. Of course, that movements to bring down interest rates, the select rates, may make this scenario even better, but it will be a marginal improvement because We did what we had to do. So what we're going to see quarter on quarter will be an improvement on market NII. In the last quarter, it will be positive.

Speaker 1

That is regardless of what happens with the interest rates today. Of course, as I said, If the Selic interest rate goes down, interest rate goes down, it improves, but it's a marginal improvement. As for NPL, let me make this very clear. We told you 2 quarters back The NPL would remain high in the Q1 and in the Q2 of this year. The Q3, Our expectation is that this will already be controlled.

Speaker 1

So first and second quarters for sure. And then of course, we expect To have greater control. And then on the Q3, we expect it to be at a stable level. That's what we're seeking. That's what we're Working for and that's what the signs tell us.

Speaker 1

You talked about the worsening of the Delinquency, the lines that brought more NPL issues were the lines of Credit cards, credit for small and medium sized enterprises, basically their working capital. And a good portion of that on those lines where we help the customers in the past and during the pandemic, which were lines With grace periods, with a longer term of operations, so when they start delaying, they have double the Time to make the provision. So those were the lines that are generating more provision. But basically, the biggest It's credit cards and working capital for small and micro businesses. That's the central point of attention in working capital lines and credit cards.

Speaker 1

And that's why what we see the growth that we see in the credit card line basically is 4, credit cards of higher or medium and high income people, individuals who have a Greater spending on the credit card. So that's why there's a little bit of change of reducing approval For people with lower incomes, as for the tax rate that this quarter was up 10%. You know well, Mario, that The formation of this tax rate on one hand is depending on the organization's operating results. On the other hand, with the IOC And the insurance company's results that are extremely important for us, and the insurance company has a lower rate than the bank. So The combination, so to speak, of these three aspects, not only the insurance company, but all of the other companies that are Linked to the banks, Cielo, Alelo, Grupo ELLO, consortiums and insurance company, insurance brokerage, all of them.

Speaker 1

At the end of the day, when you combine these three indicators, It ended up getting to around 10%. But throughout the year, as we appropriate it month by month, We tend to move towards a tax rate that will be higher with the guidance of 16% to 20%, which is what we had mentioned In our earnings release in January, so it should move towards this range of 16% to 20%, which is what we had Talked about. Yes, Mario, what's implied in this 16% to 20% is that we really do expect to get better results in the half of the year, as we have been saying, and therefore, the benefit of the IOC that remains somewhat fixed Makes up for less in terms of taxes. So that brings the tax rate up. That's the dynamic.

Speaker 1

Excellent. Thank you.

Operator

Next question by Daniel Rovas with Credit Suisse. Daniel, go ahead. My question, I'd like to insist on portfolio growth. We heard that write offs accelerated a little. It was It dropped a little.

Operator

So we need a little bit more Virtually, we're having the sound chopped. So I'd like to understand, you have less appetite in More aggressive, the graph on base 100 of credit approval in retail in a more difficult scenario in corporate. Where will the growth be coming from? In what lines? So we can achieve the guidance.

Operator

In the last quarter call, we talked about this, and growth was expected in more collateralized lines. Credit card in retail also grew. So what are the priorities in terms of portfolio growth? And will you have to accelerate loan granting? Daniel, good morning.

Operator

Well, On work growth, we spoke a little about this. The write off has been greater than origination, as you mentioned. But if you observe personal credit growth is 6%, rural loans 7%, 8%. Mortgage is performing better. So I believe that for the year 2023, we are going to have better growth of these Credit lines, personal credit, collateralized personal credit or the rural loan portfolio that should grow.

Operator

We are taking part in all Agricultural trade shows. So if we get just a trade show that is happening as we speak, address show the business volume. We already have business contracted at the fair, 3x more than in last Here's ag ratio. So I think that rural alone is an important growth portfolio. So we've been seeing growth for corporate In the business plan and for end consumer, for individuals, obviously, the interest rates, they got in the way a little, but Brazilians And paying in installments less, but they do get mortgages To buy their own home, so that is expected to grow.

Operator

Foreign exchange deals and operations should have a better dynamic now, Starting in Q2, Q3, Q4 particularly, Q2 should post a better growth dynamic, Considering the dollar rate that we currently see. And for corporate, the corporate line will grow. So Micro and Small Enterprises have been suffering more, Daniel. It is true, but there are good companies out there in the market. So just one detail here, story to tell you.

Operator

A month ago, We visited all capital cities of Brazil where we have our regional offices of the bank, 17 Capital cities. So we visited them in 9 business days. So we visited and met with the whole managers of the bank, Conveying to them the same message, criteria, preserving credit quality, that we need to give loans to good Clients but that we cannot stop operating. We need to operate without a good pricing, credit operations without a good pricing. And that was the message For the whole team, not only for the retail bank, but for the wholesale team as well.

Operator

So I think that in essence, to answer your question, I think that the main lines that are expected to grow more where we can have better growth with the personal credit line because it has pricing to withstand a perhaps higher delinquency. Credit cards, easy higher spending by higher income clients, real estate, operations, mortgages, rural loans and exchange. And of course, these portfolios will take us to a growth that is close to 2 digits. One technical aspect about your question, the increase in write offs is also related to the fact that we did not sell portfolios in Q1. The write off had been a little lower because part of what would be excluded via write off It is clear.

Operator

Thank you. Let's move on. Next question. Renato Meloni of Autonomous. I just want to speak a little about growth.

Operator

The acceleration expectation comes from a less restrictive Obviously of credit or does it come from market recovery? That's my first question. And I'm looking at Slide 17 of the presentation. And there was a big increase in delinquency, 15 to 90 day NPL of large Corporates, even excluding Americanas. So could you give us some color on what led to that?

Operator

Well, the growth of the loan book, Well, the credit market is growing because economy of the country is doing better because the GDP growth expectation is higher. Economic agents, companies, business people, entrepreneurs, they are all more prone to on a little more risk because we envision a better outlook looking forward. Of course, if the economic situation improves As we expect to happen, given the fiscal framework, the tax reform and the possible reduction of interest rates, All of that would help and would drive the loan book to improve as well. But regardless of that, regardless of Economic growth that we expect to happen because it is important. It's good for all companies and for all Brazilians and also for us In particular, but regardless of that, we do see room for greater growth for our portfolios because We made a decision because we are cautious of reducing credit granting so that we could Control delinquency better because delinquency is happening in lower income groups and SMEs.

Operator

So regardless of the economic scenario, our risk appetite for those operations that have spread, that have interest rates That can cover a possible loss, will be adjusted over time. So that's point number 1. Point number 2 that you raised regarding that increase in 15 to 90 day NPL. That's the specific case of the retail bank clients, of corporates That drove this indicator. So it's a specific case.

Operator

There was that case that we talked about In Q4, we provisioned 100% for and there was another case now in Q1, but that is a case that was 100% provisioned for. And it is a case that was already in the bank, and it came through a specific dynamic of maturity. They renegotiated. And of course, this matured, it is 100% provision for it. But of Of course, it does have an impact on delinquency because the renegotiation matured.

Operator

Understood. Thank you very much.

Speaker 1

Next question, Gilberto Garcia, Barclays. Guberto, good morning. Thank you for your question. Guberto, The trend, let's understand this. The ecosystem of credit cards in Brazil is amazing.

Speaker 1

40% of deals or transactions that the Brazilian people make Of consumption is through credit cards. It's even higher than in the United States. United States, I think, it's 38%, In Brazil, it's 40%. So 40% of the Brazilian population also has their credit cards in hand. And credit cards move 21% of The Brazilian GDP, it's something close to BRL 2,000,000,000,000.

Speaker 1

So the credit card industry, the credit card Ecosystem in Brazil is very important, very intensive with multiple players. So credit cards And just to add, credit cards, as I said before, also made people to Get more indebted because they were able to get credit cards either with their banks or digital banks because of how easy it is for them to open a So yes, we did step on the brakes. We decreased loan or credit concessions to lower income people, not only Bradesco, but if you look at the industry, Due to the level of indebtedness of the Brazilian population that really did reach historical levels, Everybody started to hold back on loan concession or loan granting for this lower income population, either by not giving them credit cards But there's a share of the population with a medium income or high income that really do consume a lot on credit cards, have a much higher Spending level on credit cards, which result in fees and exchange rates that help in the formation of results, But also on client NII, it forms the NII, the NIM rather with the clients. This work on the higher income and this availability with the High levels of higher income with the volumes, it is a strategy.

Speaker 1

It's part of the bank. It's something we are adopting. I'm sure that it will Results or bring a difference in the NII, but already risk adjusted. So There is also an appetite for growth on credit cards for that population of a higher income level. And this population also bring a very strong benefits and fees Special especially, yes, as I said, there's higher fees involved as well.

Speaker 1

Next question, Carlos Gounis, HSBC. Carlos?

Operator

I have two questions. The first one is on Capital, you finished the quarter with 11.1 percent CET1. Has your goal for capital level change given the current uncertainty in the world and what we have seen in other markets? And the second one is more in the Medium term, what do you expect for growth for the business, for credit for 2014, 2015, 2016 for the coming years?

Speaker 1

So in terms of the capital Goals, Carlos, we didn't have any significant difference or change. We have a very comfortable capital base. We believe that our capital will continue to grow throughout the year with the interest and In interest rates. And after this moment, especially in the second half, when the results will get better, this also tends to bring benefits in terms of Capital through earnings retention. So I don't think there's been any significant change In terms of our capital objective, we see capital evolution as a continuous process that comes from the bank's operations And our profitability and accumulation of profits.

Speaker 1

As for our growth objectives for coming years, we believe that after this phase wherein We're strongly focused on controlling NPL. We will go back to a more important credit origination. We have a strong focus has important opportunities for growth after this more delicate moment of the cycle. So we see Bradesco as a player Who will be growing together with the market's growth or even growing more than the market at some points Whenever we're comfortable. Yes, Carlos, capital, as we had said, ended up growing now in this quarter.

Speaker 1

There's no target. There's no guidance for that. But our expectation is for generation of results of profits even at the Bank's own operation, as we showed you on the presentation. So it's the continuity of maintaining capital level At a robust point, as we have always maintained at the organization and the bank's growth, Irrespective of this moment of being at a more unfavorable point of the cycle in terms of delinquency, this is something that is addressed by the bank's Risk department, the bank's loan department, but it points managers, bankers, Our relationship managers at the end have that clear purpose. They have that clear purpose for Continuous growth either in the bank or product services at our insurance products as well that have been growing Soundly, either in terms of the loan book growth or results generation.

Speaker 1

They all have a target, a budget and NPL to meet in the year 'twenty three, 'twenty four, 'twenty five. So this view, the strategic plan of the corporation, not only the bank, but the corporation itself With our older companies of the Bradesco conglomerate have this goal and this very clear plan to continue to grow With quality, with profitability, but with a clear purpose of continuous growth. Yes, but do you mean growth of 8%, 10%, 12%, 15%? What's the realistic objective for Brazil in the coming years?

Operator

Any growth of any company is very much linked to the ability of the country to grow. The more the country grows, the more the Brazilian GDP grows, the more companies will grow. So it's kind of hard to give you a number, Carlos, that yes, We are going to grow 4%, 5%, 10%. It's hard to do it. We'll grow what is possible to grow with quality, with profitability.

Operator

But it really depends on the scenarios, not just in Brazil but also globally, so that we can grow safely and delivering results to our shareholders and always maintaining the robustness and health of the bank's balance sheet. It's hard to give you a number at this point. And I think that it depends on a number of factors. Thank you, Carlos. We are moving now to our last question by Eduardo Rifio With Brazil Plurau.

Operator

Nishio? Hello. Good morning, I also have two questions. First, they're both related to the bank's performance In this cycle, we had a slightly worse performance than your So starting with market NII that drove a lot of revenues in the past. And in this cycle, it was a detractor.

Operator

In your evaluation, do you think you need to redraft your ALM Strategy for the next cycles, are you thinking of something different to avoid this kind of volatility in your results? 2nd question, regarding the quality of assets. You have a large exposure to individuals and low income segments. I don't think that this should change in the positioning of the bank. So I'd like to know from you, do you consider any other strategy to try to Quickly anticipate and identify these cycles.

Operator

And perhaps since I have the mic, So the changes that you're making in retail, Is this related to this exposure to low income and individuals? You're Reformulating perhaps your digital platforms and the change in the profile of clients. Do you see a correlation between These changes that you're implementing and a better positioning in individuals? Hello, Nishio. Good morning.

Operator

So it's good to speak with you. Indeed, the market NII this year last year and this year, Just in the beginning, it was worse. But we always have to remember that in the last 7 years, the market net interest income Has been very good for Bradesco, better than our peers. Now of course, a very abrupt change that happened in Brazil, the interest rates increasing Very quickly, in a very short period of time, of course, that ended up impacting us. But this has been corrected.

Operator

Obviously, we are a big bank in funding, in retail operations. So we have actually, we have to capture more clients for demand deposits, for savings, for funds, for In all capturing lines, so that in a moment of high interest rate cycle, we can have a more adequate balance. If I don't gain a lot in market NII, I can make more in fee income given the interest rate differential between what I invest and what I put out in the market. So it is always important To grow your capturing levels. So if I should say that we changed the ALM strategy in the bank, no, It did not change.

Operator

It is more conservative, with the only different factor being a high Increase in interest rates that cannot be expected by any economic agents. We cannot imagine that interest rates would grow As powerfully and as quickly as it did, but it's part of economic cycles, it's part of managing the treasury of a bank like Bradesco. And like I said, in prior years, the strategies were always winning strategies. So I think that the bank's strategy, the OIM strategy is preserved so that we can enjoy the moment. And as regards exposure to low income, you said it yourself, Nishio, we are a retail bank.

Operator

We Have retail banking in our DNA? We'll continue to be in retail banking. Of course, We'll, of course, care for high income segments because of the fees that we can get from these clients, Because we because of the Principality, because these people are in a stage of life where They invest more than borrow more. They invest more than they borrow. So We can increase the relationship, the investment relationships with these clients.

Operator

And that is why we are caring for them. That's why we structured the high income segment banking. We have prime with our branches and our regional offices working with these higher income clients. That is why we acquired Bradesco Bank in the United States, Miami, Coral Gables, to serve Brazilian clients When they are abroad, when they are there because a good part of Brazilian clients, they want to have a portion of their investments in dollars or pegged to the U. S.

Operator

Currency. And that's why we bought Bradesco Bank. And that's why This year, we capitalized in Bradesco Bank. It will have more than €2,000,000,000 of shareholders' equity. And that's why we partnered with BlackRock to manage investment funds in the United States.

Operator

So you see A number of work fronts and strategies that have been implemented So that we can have a very close relationship with these high income clients because they're important. They're profitable. They have a more long lasting relationship with our organization. So that's an important focus. But you see, retail, That's our DNA.

Operator

And we'll continue to work, especially in retail, making the necessary adjustments, of course, because people have changed. Their relationship with the bank has changed. I even mentioned in the presentation that in December 2019, before the pandemic, We would have 1,000,000 authentications at the tellers in the branches every day, now 95,000. So about 10% of what we had before the pandemic. So people are no longer going to bank branches to pay a bill, Pay a tax, pay a payment slip, and they go to the bank basically When they need to perhaps do business or get advice regarding investments.

Operator

And that's why we increased our headcount of investment advisers. We increased to 2,000 investment advisers and specialists All over Brazil. People go to a branch to perhaps hire a life insurance. After the COVID-nineteen pandemic, People started valuing life insurance more because they are worried about what can happen to them and what's going to happen to their families if they go. So that's interesting.

Operator

Oh, when they're going to get mortgage, they need more advice. But you see the day to day of people and their relationship with the bank, It's practically online. 96% of transactions that take place every day at Bradesco, and you know there are many, They happen digitally online. People are no longer going to the branches. So adjustments need to be made.

Operator

We don't need to have a bank branch that has 2,000 square meters or 3,000 square meters. We can serve clients better with a smaller branch, with advisers, specialized managers And bankers working at the branches to meet the needs of the population. We can also serve them well Online with digital platforms. We have digital platforms that serve millions and millions of clients who do not want to go to a branch. They want to be served via WhatsApp, via chat, via videoconferencing.

Operator

They are not keen to go to the branches anymore. So over time, Changes have been happening in the way that people relate with the bank, and that has accelerated with the pandemic. And Bradesco needs To adapt to the new times and to what clients want because at the end of the day, we want to delight our clients. We want them to be happy and to be promoters of our bank So that we can have better and better results with long lasting relationships. So it's not a strategic repositioning, but it is a repositioning in terms of How people, how clients want to be served with the changes we are seeing and changes that were accelerated also because of the COVID-nineteen pandemic.

Operator

Perfect. Thank you very much, Otavio. Thank you, Nishio. Very well, and thank you very much To all, we are now closing the Q and A session. Questions that were not answered during this call will be answered By our Investor Relations team, I'd like to remind you that the release is available in our Investor Relations website What are your final remarks?

Speaker 1

I'd just like to thank all of you For being here with us, participating in this earnings conference or video conference call, it's always a pleasure to be To talk more and in more detail about the bank to you, certainly now the IR area will start to schedule meetings that we're going to have closer to you. We remain available. But in any case, our Investor Relations department is available to all of you to take any doubts or

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Earnings Conference Call
Banco Bradesco Q1 2023
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