Banco Bradesco Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
July 31, 2025

Key Takeaways

  • Positive Sentiment: Bradesco reported a recurring net income of BRL 6.1 billion in Q2 2025 with an annualized ROAAE of 14.6%, up 3.2 pp year-on-year.
  • Positive Sentiment: Total revenues reached BRL 34 billion, rising 15.1% year-on-year and driven by growth in net interest income, fee and commission income, and insurance contributions.
  • Positive Sentiment: The loan book expanded 11.3% year-on-year to BRL 1.18 trillion across all segments while 15- and 90-day NPL ratios remained flat, demonstrating credit quality control.
  • Positive Sentiment: Generative AI initiatives delivered a 58% efficiency gain in customer interactions and a 94% productivity improvement in technology delivery, accelerating transformation.
  • Neutral Sentiment: Operating expenses grew 5.8% year-on-year—roughly in line with inflation—reflecting investments in technology and the bank’s ongoing footprint optimization.
AI Generated. May Contain Errors.
Earnings Conference Call
Banco Bradesco Q2 2025
00:00 / 00:00

Transcript Sections

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Moderator

Good morning, everyone. I am Marcelo Morojin. I'm speaking directly from the headquarters of Bradesco at Cibadesi deals to present our earnings results referring to the 2025. We are speaking live. It is now 10:31AM in Brazil.

Moderator

Thank you very much to all of you for joining us in another earnings conference call. I'll move straight to the point to what matters. We disclosed yesterday our earnings. We reached a recurring net income of BRL6.1 billion, posting a significant in ROAAE 14.6%, plus up 3.2 percentage points year on year. So what is the summary of our earnings in this quarter?

Moderator

Firstly, we believe that our operating results showed consistency in all of the line items, particularly in the top line in the main revenue streams. And I mentioned NII, net of provisions, fee income, fee and commissions, income especially fees and another good quarterly result of the insurance group. Operating expenses are under control. The loan book is absolutely under control over ninety day NPL as indicated, over fifteen day NPL, all under control Stage three as well as I will be showing you momentarily. So the organization has a lot of traction and matching the plan that we presented in February.

Moderator

So we have changed the bank and runs the bank very well connected with a lot of intersections between the two, a lot of deliveries and the use of Gen AI to help us gain productivity and efficiency across the organization. So this is the summary. And based on that, we are delivering consistent results in our view. Our attempt is to present cost and effect because net income, the operating result, is the result of all of the seeds that have been planted and everything that is being done in the organization. So here we have total revenue of 34,000,000,000, up 15.1% year on year and in the quarter, 5.2% quarter on quarter.

Moderator

Here we have the bar chart showing the level of revenue growing. Of course, the first quarter is always less accelerated in our industry, but we can see coherent perennial growth. And since we presented our plan, we said that we were going to do things step by step with consistency. Total net interest income growing a lot in the quarter and year on year. Fee and commission income above 10% increase year on year and more than 5% quarter on quarter.

Moderator

Insurance, special plans and saving bonds, growing 6.5% quarter on quarter, 21.7% year on year. And this is the effect of our activities, very strong activities across the organization and related companies. Now speaking about the expanded loan book. So it leads to the financial revenue, of which I will speak momentarily. Our portfolio reached 1,180,000,000,000.00, growing 1.3% quarter on quarter and 11.3% year on year. And here, we can see three main points: In large corporates, we are growing for two reasons.

Moderator

We normally say that in large corporates, we can grow 10,000,000,000 in one quarter and in the next, settle the same amount. We had some settlements due to the iOS in May and June. And the number of phenomenon is that we've been using our origination for distribution, OPD. When we have debentures in the capital markets, we carry part of it for the secondary market later and to improve gross adjusted return. But if we look at all of the line items, are growing practically all of them in the quarter, and we are growing significantly in the year, mainly in individuals, micro and SMEs.

Moderator

We are growing in lines which are backed by collateral. So we have here the growth in total revenue, I spoke about in large corporates. The big highlight, individuals growing almost 16% year over year. Again, important growth in more in safer collateralized portfolios with good ratings. Micro, small and medium sized enterprises, a big highlight here, growing 25.2%.

Moderator

At the end of the presentation, I will again speak about cause and effect. This fact of this growth is that it results in NII, fee income And all of this is the result of all of the decisions made in our change and run the bank in all of the segments, individuals, enterprises and companies. I'll speak about this later on, but let me give you a preview. If we leave behind the segmentation and targeting of each bank, if we look at the segmentation by the Central Bank of Brazil, SMEs for them are companies making up to 300,000,000 a year. All banks have to inform this regardless of how they call the segments. And we see that Credesco is a leader, and we have been growing our assets in this segment of companies earning or making up to 300,000,000.

Moderator

Moving on, we see here the traction of credit resulting in growth of net interest income growing almost 16% year on year, 4.7% up quarter on quarter, with credit provisions growing NII net of provisions, 9,900,000,000.0. And here, I will explain the numbers. I can tell you that we are quite flat here. We integrated John Deere Bank into one. And of course, our overall loans have the highest expected loss in the month of May.

Moderator

In June, this is already dropping. So we have a cost here which is slightly higher because of that. If we were not having this consolidation, our cost of risk would be between three and three point one. Since we've been growing large companies, we have a numerator denominator effect. So I can tell you that we have expenses with LLP are flat.

Moderator

In market 300,000,000. We were expecting it to be zero negative, and keeping the pressure of interest rates of almost 15% on ALM. And this is not happening by chance. It's happening because of the level of activity we have. In our customers' desk combined with loan production, loan origination in the Wholesale Bank and all of that results and in trading positions and with our new energy desk that also creates revenues in ALM, trading, energy, operating really well and bringing us the results.

Moderator

And when we'll look at client NII, growing almost BRL 18,000,000,000, 8.8% spread, a nominal growth superior to the growth that we saw in RMB1 billion here and also growing consistently. And more importantly, client NII net of provisions growing 20.7% year on year, billion. That's really important to us.

Moderator

And the result combined with market NII. And this is important because it has an effect on the bottom line. NII net of provisions, almost KRW 10,000,000,000, 19.4% year on year, growing in the quarter as well but with consistency and balance in several line items and in lines. Credit quality, over ninety day NPL quite balanced and flat. And here, there's a note fifteen to ninety is no longer the indicator.

Moderator

And so fifteen to ninety day NPL also flat and representation of share by stage, Stage three growing, growing more than 10 basis points in the last quarter at 7.9%. Stage two is slightly higher here. It doesn't mean it's a bad portfolio classification by expected loss. And consolidated mix with John Deere influenced that indicator. If it weren't for that, this indicator would be flat as well.

Moderator

Important data, restructured portfolio is dropping. Last year, we reduced by JPY 4,500,000,000.0 in this portfolio. If we look at our not secured portfolio, in this year alone, we can see there was a reduction of 5.4 basis points, reaching a total of BRL30 billion. And here we see the evolution of the secured portfolio reaching 58.5%, up from 57. So origination is growing a lot more in secured loans vis a vis unsecured portfolio.

Moderator

Fee and commission income, again speaking about constant effect. Fee and commission income grows because of activity. And we show here with a highlight, 10,300,000,000.0, growing 10.6% year on year, 5.5% quarter on quarter. And three highlights here in this quarter. Credit income, almost 20% growth year on year Private and especially in high income.

Moderator

And not in the other markets, open market poses a greater risk, 4,500,000,000.0 in the quarter, 3.3% quarter on quarter. And also, consortium led another strong quarter, almost 21% growth year on year, and we regained leadership in movable assets. In our investment banking, capital on record, surprising business number. We have strong M and A activity, number one position on M and A ranking. But what draws my attention is this growth, almost 34% growth year on year and almost 76% growth quarter on quarter.

Moderator

And this is the result of our activities, a well balanced supply line. Our team, I'll speak about this at the end of the presentation, good origination and good activity considering wholesale bank, retail bank, treasury, everything gave us traction and led to even more gains in these activities. We are very confident of our investment banking and global markets activities. Operating expenses were reached billion this year over year growth and quarter on quarter growth. Now let's zoom in our operating When we break it down, personnel and administrative, we see the growth was 4.9%.

Moderator

You look at the complete earnings, you will see that administrative expenses have a negative growth and that's the result of several actions to gain efficiency. And these will continue along 2026, 2027, '28. One of them is the adjustment in our footprint. Compared with June 2024, we are talking about more than 1,500 service points reduced until now. And personal growth is linked to greater result, profit profit sharing, variable compensation.

Moderator

Even with these adjustments, we grew our client base by more than 1,000,000. And when we look at an indicator that I showed you in the last two quarter calls, All of our payment companies, Elopar, Libelo, Cielo, All of them have been making important investments. Cielo has been going through a strong transformation with good investments. OpEx and CapEx. Excluding this, when I compare some figures, when we look at all operating expenses directly under our control, our year over year growth was 5.8%.

Moderator

In other words, expenses are controlled despite our robust transformation plan. We are hiring a lot of technology people, people working with data and also in our credit BU, so regardless of the adjustment in our footprint. Indo Insurance Group was seeing another strong quarter with this level of net income, 2,300,000,000, 4.4% up year on year and ROAE of almost 22%. That's another highlight. So robust revenues and the results of insurance operations.

Moderator

And that's included in our guidance. And we can see that the result is primarily operational 31.1% growth year over year in all line items. Although the insurance group is very much down to earth in their provisions, they have very balanced provisions, but we see growth in the level of activity. And this is a result of management. This is the result of commercialization through our internal channels, selling to all client segments in the organization and all external channels that work with the Insurance Group, resulting in technical provisions that are robust, $425,000,000,000 in the quarter, growing 11.2% year on year, 2.6% quarter on quarter. So now let's talk about our capital. We continue to see a lot of consistency as we've announced. We've been talking about this since late last year that we would have stable capital. So Tier one is 13%, now going up common equity to 11.1%, although we've paid out all the dividends as the market knows. Now looking at our guidance, most all of the indicators now converge to our guidance because of a few facts.

Moderator

First, the economy in the second half of the year tends to be slower. The demand will be slower in the second half of the year because we are now at the peak in terms of interest rate. We have heard comments by the National Monetary Council telling us the economic activity is strong but slower than in the last quarter. That as we see a slower, it doesn't mean we will stop growing what is good. We want to continue to grow in everything that is good. Next, you know our baseline. If you look at the insurance group, we had very strong numbers in Q3 and Q4 twenty twenty four. So that's a higher baseline. If you look at the expanded loan portfolio, the same thing happened. In the last Q last year, we had a strong growth. So but now, closing the year 2025, we will converge towards the guidance. As you've seen, we made two changes because these two indicators had more traction, so they could grow higher fee and commission income up to five to 9% and insurance from 6% to 10%, now from 9% to 13%. These were the adjustments we made. Now let me give you a brief summary of our initiatives, change the bank and run the bank, both coordinated and connected to show you that we have a lot of traction. We had great deliveries. So this is a summary.

Moderator

I will also make a few comments about technology. We had a reduction in the lead time. We've improved productivity. I also want to talk about our Wholesale Bank and SMEs and tell you that in this quarter, we've expanded the number of Bradesco principal offices. We have seven new offices now.

Moderator

We have been working on our culture and our cultural evolution with Saul Blandesco in training the team, and we continue to hire employees. These were colleagues that were outsourced, and they are now our employees. And we're also hiring from the market so that we will have our own team of employees working intact. So let me break down a few of these line items to provide more qualitative information to you. First, let me go back here to talk about GenAI again and how much it means to our organization and also where we stand. So here, we have three blocks to try and make it easier to understand. We had a debate with the Brazilian Federation of Banks, and there was a lot of talk about GenAI. And I also talked about this with you in previous presentations, speaking about some of our initiatives. In the first block, we are looking at technology efficiency.

Moderator

So now we have IT closer to the business. Last year, we've implemented the enterprise agents. So now they're fully operational, and we've expanded that quite quickly. And together with ID and technology and also credit recovery and collections. They worked together and using a lot of Genais, building scripts with clients.

Moderator

Every day, we're making changes, making modifications to the script, depending on the level of success. Also, we have two multi agent projects. It is important to say that we had a test. We worked with two large consulting companies to include multi agent projects and large legacy systems. One of them is in COBOL language on the mainframe.

Moderator

Now we went on to the second stage, and we're now beginning a third stage of this project. These two legacy systems will be delivered in the cloud using new technology by year end using multi agents or virtual squads combined with squads including human colleagues. And that will be done also in other projects. We've been using GenAI also in the chat with customers.

Moderator

More than 5,000,000 customers are already using. And here, you can see a combination of indicators to show how much our productivity has improved. So making a comparison between 2024 and 2025, we've had an improvement of 58% in terms of efficiency. Looking at productivity gain in virtual squats using multi agent AI plus other technology, some important tools that we are using. Now with Copilot supporting our developers, our product developers and storytellers, we've improved our productivity all in all by 94.

Moderator

I mean, if you look at our capacity, I mean, we are gaining productivity, but not because we want to reduce costs. No, because we want to optimize our resources and deliver more, remove legacy systems to deliver a better experience and have more efficiency in our processes. And different teams in different departments in building legal. So if I look at December 2023 and compared to now, our delivery capacity is 3x greater. And this efficiency gains, so now we have a lower cost per application, and we will see that in the bottom line, but also providing a better experience to customers, more productivity, higher personalization, using a lot of intelligence behind the relationship with customers and proprietary tools to gain productivity. I told you about our developers. I also spoke about BEATAC in the meeting at Fibroacci. We're also here talking to you.

Moderator

This tool supports our developers, our squads, bringing 58% more efficiency. And the environment is fully organized and prepared for the developers working in our squads. And BHN AI and the new BIA will now be available for 100% of our customers. Compared to the first BIA, the first BIA was based on a different technology. This one now has 50% more accuracy.

Moderator

It's really impressive, the Bradesco artificial Artificial intelligence, Intelligence, our our BIA. And let me also speak about Bridge. Bridge is a technology to help us use GenAI, and we have more than 200 initiatives across the board in the organization using BRIDGE, Radesco Intelligence of Generative Data Uniso Ecino with the acronym stands for. And in terms of education and technological development, we are now using new technology, new technological processes. We acquired 100% of Kunomi, we've already announced.

Moderator

And here, we have very specific deliveries in credit, in portfolio management, using multi agent squads to develop our models. So these are really important deliverables developed by approximately 100 employees who hold a PhD who are true experts. We already have an institute with 12 labs plus 15 in final negotiation because our goal is to have one lab in each state of Brazil in time so that we will spread our tech culture through our tech academy providing training. We now have the co pilot Premium A5 to 100% of our associates logged here in the bank, including our trainee personnel. So some using that for development and many using GenAI to learn about that so that we have our true tech culture because the final result is higher productivity, as I've mentioned.

Moderator

Now I have three more slides to conclude my presentation. We have been the applications used by individual customers and companies. That's why I have two slides to speak about our company customers. So large companies and SMEs, we have a high penetration rate in all segments. Our Wholesale Bank is now even more sophisticated.

Moderator

We have six business segments. All of these segments, in addition to the investment bank and global markets operating in Brazil and abroad. And with this segmentation, I mean, we need critical mass. But if we have expert service, because here, we have further segmentation by industry, by geography, So it is a high level of operating complexity, but it helps us be closer to customers. So we have a stronger team now, especially in corporate but also in agribusiness corporate and in global corporate as well.

Moderator

So we have a stronger team also in the Investment Bank, both for variable income and fixed assets. And in Global Market, we also have a stronger team. And the result was that we had improved numbers coming from the Investment Bank because we have much more origination capacity with a stronger team. Our distribution is also stronger and very much connected to wealth management now. We've delivered global solutions, and it's a very interesting solution for cash unit of large companies.

Moderator

We have our new energy trading desk in treasury working with the wholesale banks, and that has led to new income streams for us. That's why I'm always talking about cost and effects. First, you set up the energy trading desk, and that begins to generate result and income for the bank. In corporate, here, we added 10 platforms. You remember, we launched the agribusiness segment.

Moderator

It is now fully operational this year. So the wholesale bank, we are doing our homework, and we are very active generating lots of fees commissions and business for treasury desks. Now in the retail business, looking at SMEs, we have companies up to €50,000,000 a year, between €3,000,000 and €50,000,000 a year then small business up to €3,000,000 a year and the micro businesses, which is also part of this segment. And we have platforms in the main regions of Brazil where we have agricultural activities also to support customers in this segment and individuals as well. Now let us talk a bit more about companies and businesses. So we have a new digital platform with great deliveries in these segments. As I mentioned, this is the largest segment in our retail bank.

Moderator

As you know, we've delivered 150 branches in 2024, and we can see a significant growth, a new value proposition for these clients, improving the level of service in these branches. Now in terms of small business, we now have a new segmentation. So because here, we have I mean, businesses, they are spread geographically. So we need an account officer to manage these accounts and the micro business or MEI, offering digital support and also human support backed by GenAI. All of this, we had enough traction to deliver all of this because we now have a very different time to market.

Moderator

So we can provide a new experience for clients. They can open accounts using the app. We launched this new service for companies in March and then we expanded in April and in May. So we are now able to provide this new experience to very small businesses. MPI, 90% of the customers have already migrated to the new application.

Moderator

They are active using the app seven to 10 times a week. Now in August, we have 50,000 new very small businesses or micro businesses draining the app. So we provide a higher level of services, solutions for collections, payments and loans using proNAV, pro cred, government programs, and they can use self-service using the app, but also with human support if needed. And this is the digital transformation. We have a reduced time to market, more functionalities using multidisciplinary squads, backed by GenAI again, focusing on the best customer experience.

Moderator

And the integration, I mean, I spoke about our app. It has been delivered for Android. We now have a new version for iOS launched now in August. We are one of the very few organizations that have the app for both systems for Android and iOS. And we are using APIs to have a full integration.

Moderator

So we're ready for banking as a service. We even have the integration with BIX, Agility and corporate account openings and Cielo integration. Cielo had a great first quarter. But looking at our customer base with Cielo, we gained share in the first quarter because of all these things we've implemented and the integration by APIs. So this is the information I have.

Moderator

Now we come to the conclusion. This is a summary of my presentation. As I said earlier on, we can see I mean, our team can see that we have been able to deliver consistent operating results, a very consistent balance sheet, growing more than our net income. The operating result is growing above 30% year over year, and we feel very certain our delinquency is under control. We can answer questions if you would like to have more information about that, but we believe delinquency will continue under control so that we can continue to grow.

Moderator

We know the market will grow slower, so we have to make the most of all opportunities we have, knowing that the bank is has a lot of traction in running the bank, changing the bank and all the segments of customers. So this is the information I prepared for you. Thank you very much for joining us. And let me now sit here with Andre Garvalho, our Investor Relations Officer, and Scarpelli. Thank you.

Moderator

Thank you, Marcelo, Cacciano. Good morning, everyone. Like to let you know that Ivan Contigio, CEO of the Insurance Group, is joining us remotely. Questions can be sent in Portuguese or English. You can send your questions via e mail to investadoresradisco dot com.

Moderator

Br using our WhatsApp channel 11974438 or just scanning the QR code that is on your screen. First question from Thiago Batista. Hi everyone. Good morning, Andre, Noruna, Pocciano and Eva. Congratulations on the results.

Moderator

I think you have strong points in the top line. That's the positive highlight. My question is regarding the positioning of the bank regarding low income segment or mass REIT in mass markets. When we look at that sector, it is perhaps one And how Digital Next will be positioned?

Moderator

Will they be used in this segment? Thank you for joining us for the question. And the answer is yes. This is what we believe in, and we have working have been working strongly in the mass market with the transformation of the bank. I mean digital mass market.

Moderator

We have some million clients being served remotely and having different experiences with high personalization. And eventually, we will be talking more about that. Next, we should be close to this. Did you that was a completely separate operation? Well, not yet.

Moderator

They continue on their own track, and we'll speak about that strategy when the time comes. But yes, that segment can be profitable. The super important channel for these clients, for service and for client acquisition is called Radisco Express. As I mentioned in the past, we have been trying different models, models of service.

Moderator

Remember that we all have variable costs. We have about 39,000 banking correspondents across Brazil. And we had a relationship platform B2B2C. Now we have a B2C. And now we have we offer a much better experience connected to CRM and the intelligence behind the offering for the clients offered by the banking correspondence.

Moderator

And all the transactions are done with the merchants and with a very high penetration in our acquiring business so that these merchants can offer clients alternatives or services and products. So this is a strategic important channel. And in due time, we will give you detailed information of everything we are doing on that channel. But we are convinced that we are accelerating and that we will get to very different levels with those combinations, reviewing the footprint, reducing some points of service, growing in principal, growing in corporate, growing in SMEs, growing in businesses and in banking correspondents as well. And it is this balance that we will be showing you in due time, Thiago.

Moderator

But we are very excited with everything that we're doing at the bank. Second question from Daniel Vas with Safra. I'd like to slow two points about your presentation, Marcelo. You mentioned signs of the slowdown in economic activity and demand. And looking at the business segment, there's a new segmentation.

Moderator

So exploring this segment, SME is making up to BRL3 million in revenue per year. Could you elaborate on the slowdown of economic activity in this segment? It would be reasonable to think that these SMEs would be the first impacted by this economic slowdown. And I'd like to understand the opportunities you're seeing in this segment to understand this new segmentation. What will be the position of Cielo?

Moderator

Because we have seen some campaigns geared to this segment by Cielo. So I'd like to hear about Cielo's risks and opportunities. Thank you, Vaz. Thank you for the kind words, and thank you for joining us. Here's what I can tell you.

Moderator

In this segment, up to BRL 3,000,000 a year. And you know about the level of mortality and risk of these companies across Brazil. We have another segment that we call MEI, the micro enterprises. And there are a large number of companies spread all over Brazil that have been in the market for many, many years, and they are really small. And they present a slightly lower risk, but we see see an opportunity to manage these clients because they bring us interesting profitability.

Moderator

They still require contacts and service by a human. They use a lot of the digital channels. We talked about the app that we delivered, but what have we been doing? I mean, this does not apply only to small business. This applies to individuals, legal entities of different sizes in the middle market.

Moderator

The work that we are doing with the Credit BU to which we implemented many new models and also portfolio management, permanently monitoring and kind of with an early identification of possible losses in some sectors, in some companies, in some ratings. So all of this gives us a different complexity level in our modeling. We have credit policies adjusted by the modeling periodically and all the time. And so we have this ability to execute that we didn't used to have. And all this credit monitoring with solar signs automated by machine learning models, it's all connected to the segments, and we've been doing this very successfully.

Moderator

So we have the enterprises segment, and this is happening in the business segment. And also, we are choosing the modalities in which we want to operate. We are operating with a mode of secured loans, programs by the government, FGO, FGI, or government programs. In this half year produced almost the volume that we originated throughout last year for all companies. And that's positive for the companies because they have long term credit with lower spreads, more time to bring. But we have to have the right and well oiled models so that we can accept the range of losses. Here the spread is lower but risk adjusted return is different. So we are operating with government programs with highly liquid receivables such as card receivables and other receivables or sales. So we have been prioritizing those modalities that bring us lower margin but that bring us long term relationship and service for these companies. So we're seeing cost opportunities for growth. We believe that in any economy that will grow in the future, we'll have small businesses growing more than other segments as usual. So we have a 15% interest rate in Brazil.

Moderator

Now, but we are looking at a time horizon of 2028, 'nine and 02/1930. And we're going to have these small businesses having a greater share in the financials. And to answer the last part of your question about XIAO, we created a connection via APIs for targeted services. We have been increasing the penetration rate and our share mainly in the last few quarters when we delivered in house solutions and solutions via Cielo. So we see us growing with good combinations and offering better and better services to our clients, micro enterprises, businesses, enterprises, middle market, corporate up to 300,000,000 and also for large corporates.

Moderator

Thank you, Daniel. Just one final point, Daniel. Very candidly, and I'm speaking about this now, and I spoke about this in the press conference. We are very confident about the quality of our loan book. We are not taking risks here.

Moderator

Andre and his whole team have a clear guidance regarding our risk appetite. My colleagues heading each segment are very well aware, and we are very confident about 2025 in terms of our loan book in all segments, individuals and legal entities.

Moderator

Thank you, Daniel. Now Pedro LeDuc from Itau BBA. Pedro, hello. Good morning, Andre. Good morning, everyone.

Moderator

Congratulations on the deliveries. You're making solid tests when you speak about step by step. Now two brief questions. One, as I look at operating expenses, twothree of the increase came from the line named other. When you look at administrative and that cost, is under control. But when you look at the line other, then you see they increase. So have there been adjustments? And when you look at personnel and administrative, you already have a higher level of efficiency.

Moderator

So next year, other will also be under control. I mean, it drew my attention that this line item other has all the expense increase. So this was my first question. The second question, we've seen you reviewed a few indicators in the guidance, services and insurance. But when we look at the NII net of provisions, if we compare that to the midpoint of the guidance, it seems like the loan loss provision will remain the same in the second half of the year. Is that right? Or I mean, did not change the guidance because the high range is already including some growth. So I'd like to hear more on why you kept this guidance equal.

Moderator

Well, you. Thank you for participating. It's a pleasure to see you. I think that maybe REPRESENTATIVE:] Andre could Cacciano, all right. Yes, well, it already includes the loan loss provision.

Moderator

We had a large number now compared to what we want to have in the future. And also, you have gains from the reduction we made. But the when you look at personnel and administrative, yes, we already have the adjustment. So

Moderator

I believe we have an interconnection there. But yes, this line item other is helping us accommodate to make the changes we have in the Change the Bank initiative. But and then when you look at personnel and administrative, it has already been optimized. Andre? Yes, let me add that operating expense, as Marcelo said, grew 5.8% in the 2025 compared to last year, and the inflation was 5.4% in the same period.

Moderator

So even considering what Caciano mentioned, operating expenses grew at the same pace as inflation with all the investments we've made in the transformation of the bank.

Moderator

And that shows that cost is under control. And even we are preparing for a slower growth in the second half of the year. Now we can see a growth in the OpEx. And as we already have some of that in the numbers of the last quarter last year, I believe that now the line item other will be adjusted. Yes, about the guidance.

Moderator

Oh, yes, the NII guidance remains the same. Our NII net of provisions will be BRL 39,000,000,000, which is the midpoint of our guidance between BRL 37,000,000 and 41,000,000. So our guidance, as Marcelo mentioned, we are at the top range of the guidance. So our NII net of provisions can still grow in the second half of the year compared to the first half of the year. But always cautiously because we are building our portfolio with full collaterals. But every half year, we have seen a growth. Let me add to what my colleague said. When we look at all the expenses, personnel, administrative and other expenses under our control because under our management, all of this has been approved, obviously, but we are growing 5.8% in operating expenses even with all the investments made in consulting, in technology. And we are growing in some important areas of the bank, for example, technology, data scientists, data engineers, developers.

Moderator

We have a bigger team now. And in time, we see that it will trend towards a normalized curve. But in relation to the NII guidance, I mean, is our target, but always net of provisions. And that is perhaps more important than the net income margin, which could be a bit higher or lower. But I mean, what is really important is the number we see at the bottom line.

Moderator

And that is the number we look at with a lot of discipline and risk adjusted returns. So we will not stop doing business. I mean, I hope I will be favorably surprised because I want to do more. And when I say I want to do more, I speak on behalf of my team. We want to do more. But always looking at risk and our current risk appetite that we've imposed to ourselves because we want to grow, but we want to grow perennially, reaching a higher level of both profitability and return. Thank you, Pedro, for the questions. The next question comes from Gustavo Schroeder from the Citi Bank. Gustavo, you, Andre, good morning, Marcelo, Cacciano.

Moderator

I will agree with my colleagues and give you congratulations on the earnings. We see. The bank is back and credit in terms of revenue and the loan book. I'd like to go back to Leduc's question on expenses. We can see I mean, on the one hand, we see a reduction and adjustment in the bank's footprint in this initiative to prepare for the future.

Moderator

But still, I mean, it still has not translated into numbers, so to say. I mean, you still have high numbers. I mean, so do we believe we can continue to improve efficiency? Or are we going to see a slower efficiency improvement? Is that going to happen this year or next year?

Moderator

Because I think this is important for us to calculate the ROI. I mean, because when we look at revenue, it seems to me that everything is on track. Next, looking at trading and market NII, the soft guidance was €800,000,000 and it's already at €700,000,000 So can we exceed €1,000,000,000 Because we already have two quarters ahead of us this year. You, Gustavo. You have a nice background behind you.

Moderator

Great. But, Cassiano, would you like to answer the Yes, let me begin talking about treasury. I think it's really important. Our guidance was from 0 to €1,000,000,000 Today, we believe the soft guidance would be BRL 700,000,000 and BRL 1,000,000,000. We don't expect a drop in the second two quarters of the year, but this is a mix, as Marcelo said.

Moderator

It is our asset and liability management, our trading desk. And but there's also a lot of work that we do on ALM, which is part of our structure. It's not something we do isolatedly as setting up a trading desk. So I mean we're working between BRL 700,000,000 and BRL 1,000,000,000. This would be a reasonable number until the end of the year.

Moderator

The next two quarters will be more challenging, but we have a good strategy. Now from the viewpoint of AUO, I mean, we said that we would have 52% already in 2025. So that will have more improvement as of 2026. So that still applies. But we've had an improvement of three percentage points already this year with very rigorous cost control.

Moderator

5.8% operating expense growth is not a trivial number, especially if you consider the investments we are making in the Change the Bank initiative. 5.8, I mean, and if you look at administrative and personnel, 4.9 So I think these are important numbers because we are executing according to the plan, even better, three percentage points better. We believe we will keep that guidance, but maybe in 2026, we'll have better results as well as in 2027, then we'll see more efficiency Good to see you, Gustavo. Let me also add, Caciano Gustavo, thanks for the question.

Moderator

EIO is not a paradigm. We the efficiency ratio is not a paradigm. But we told you that we have a target in the long run. However, this I mean, the efficiency ratio is not a paradigm for us. If we believe that we need more expense to gain competitiveness, then we will do that because the keyword for us here is competitiveness in the short run and also in the long run.

Moderator

So if we can gain competitiveness, then we will do it. Remember, when we disclosed the guidance by year end in 2024, a few said it was conservative. But we said, look, we will not stop any investment initiatives. We will continue the bank transformation in agriculture, in corporate platforms and in all of the initiatives. We continue to invest in technology and growing the team.

Moderator

So of course, that adds to our expenses, and we are talking about this. It also generates pressure in terms of labor, but we are on the right track in executing our plan. The plan is a straight line. I mean, you make adjustments, but we follow a straight line. And we are following all the steps in our plan with great deliveries according to our expectations.

Moderator

And Caciano mentioned that we have a more favorable expectation looking at our origination in the Wholesale Bank, in the treasury deals and in all other teams, the energy trading desk, I mean, we see great opportunities to do more business. And let me tell you, I mean, sometimes you may ask, is that nonrecurring net income? I mean, don't stop originating. We continue to originate. You close a deal with a customer, and then you're thinking about the next.

Moderator

Right. That's recurring net income. And this is what we mean when we say step by step. Next question from Mario Pierry with Bank of America. Again, on my side, congratulations on the results. I'd like to focus on growth that you're talking about. You expect a slowdown of the portfolio, with the portfolio growing close to 12% and in your guidance, 6% to 8%. I'd like to understand.

Moderator

In what line items do you see this kind of slowdown? And why are you so comfortable in terms of delinquency? Loranger, you said over and over that you're comfortable, that you're not seeing a worsened delinquency. The economy is slowing down. You're becoming more cautious, but at the same time, you're keeping provisions and delinquency under control.

Moderator

What metrics concern you when you look at the economy? And what metrics do you see that give you comfort that delinquency will remain under control? Thank you, Mario. For starters, there is a second variable here, which is the baseline of the last quarter. It is higher.

Moderator

So variation or relative variation can be lower. In addition, we have a lower demand for credit and the market. This is what we observed in the recent data published by the Brazilian Central Bank. It is only natural. With a high real interest rate and a 15% yield rate, it is only natural that there will be lower demand for credit.

Moderator

What makes me comfortable though is what I said during the presentation of our earnings. First, metrics, vintage by vintage, line by line, product by product, modality by modality with the repricing, risk adjusted return, adjustment of the models and dynamic policies. And the choice of those segments represent low spreads, NII but a much higher risk adjusted return, which is the case of FGO, FGI programs and other secured lines such as payroll deductible loans. So let me give you one example, one piece of data. If you look at our payroll deductible loans portfolio, you will see that we grew by 4% quarter on quarter, slightly above 5% year on year.

Moderator

But please note what happened in payroll loans. The banks had agreements with the companies, and there was a change in the private payroll loan via CTPS. We prepared for that. There are some people operating at much higher volumes. But we kind of had a reduction. We did not operate with that change because we had two payments here.

Moderator

The first was in May, the second one in June of the amounts of the companies. And secondly, Fibrabant published a delinquency rate observed by the market was higher than 16%. So we prefer to be down to earth because the bookkeeping was not very robust. So when the payments were made, we had a lot of problems of reconciliating the numbers, in our case, with small amounts. We preferred not to run risks.

Moderator

In our case, it was above 5%. And these cases have been practically solved. And why? Because we operated with a restrictive policy. We only wanted to operate initially with the companies that we knew that had agreements with us.

Moderator

And we only operated with employees who had been with the companies for at least one year. So a restrictive policy. Now that we're gaining confidence in the process, the trend in Bradesco is that we'll gain share because we have a lower market share. But with a much safer credit because I have to grant credit. Looking at large companies and their employees, it's a certain risk.

Moderator

By looking at a small company, for an employee who has been with the company for a little time, it's a different risk profile. And that's why we are leaders among the private banks. We have significant high NSF deductible loan, which decelerated in the last quarter because of biometrics, but this is expected to resume growth. So the metrics are rigorous risk adjusted return, monitoring vintage by vintage, choosing those segments with lower risk. But the demand tends to be lower and the baseline is different.

Moderator

So again, we are stacking these loans, FTO, FTI, more long term payroll deductible loans and the secured loans that we trust more. Next question comes from Jorge Curie from Morgan Stanley. Jorge, floor is yours.

Jorge Kuri
Jorge Kuri
Analyst at Morgan Stanley

Thank you. Congrats on the numbers.

Jorge Kuri
Jorge Kuri
Analyst at Morgan Stanley

I wanted to ask about net interest margin. Your margins were close to around 5% in the past. They're at a little bit below 4%. And that seems to be what's dragging your ROE down. Like, you've done a relatively good job on the expense side.

Jorge Kuri
Jorge Kuri
Analyst at Morgan Stanley

However, your efficiency ratio continues to be quite high because of that margin pressure that you've seen over time. So how do you think about the path for normalizing net interest margins to level closer to 5% so that your ROE can really tick off to the high teens? And to what extent it's your balance sheet sensitivity to rates? So if rates are 12%, 11%, twelve, twenty four months from today, how does that help your margin or not? How does continuing to grow, particularly on the lower income segment where you can generate higher spreads, contributes to that?

Jorge Kuri
Jorge Kuri
Analyst at Morgan Stanley

So walk us through your, I would say, your next twenty four months of net interest margins, what are the puts and takes? And where should that normalize? Corey. Andre.

Moderator

I'll start answering that. The expectation for NIM is that it will grow safely. Here at Bradesco, we focus on risk adjusted return of our operations. If we find a good opportunity with low spread and very high RAR, we do grant the loan and we expand our portfolio. Objective.

Moderator

Our NIM is growing because we are finding good opportunities in those lines with a slightly higher spread but with adequate AR. That's the first point. Second point is because we are pricing the macro risk that we see coming with a decelerating economy. So there's a macro moment favorable for banking spreads, Central Bank data reflect that. This is reflected in our NIM and in flat of the other banks.

Moderator

It is not by coincidence that other banks are also posting increasing NIMs. In our client NIM, it was 8.8%. It was 8.4% in December. And the trend is that this will gradually get close to 9% by year end. But we don't have an explicit target for that, but it is though a trend that we are observing in our analysis.

Moderator

It seems to be a trend of recovery. And then you asked about the sensitivity of our earnings to the interest rates. And here I'm going to focus on two aspects, market NII. As you know mentioned that our market NII increased from 2,200,000,000.0 yen last year to between $7.00 1,000,000,000 yen this year. So higher interest rates do have a negative impact on our ALM.

Moderator

Next year, if the scenario is confirmed of a declining interest rate, we would normally see a recovery of this line item. Our Chief Economist of the DISCO expects the SILIB rate to be at 11.75% by the end of next year. So we have to do our best to work internally and see if the scenario will be confirmed. Second aspect about interest rate is the impact it has on the economy. That's what Marcelo mentioned, a gradual slowdown of the economy.

Moderator

What we expect in terms of economic slowdown is a gradual deceleration more than we expected six months ago. So the macro risk reduced in the last six months, High interest rates, but showing a labor market that is very robust and a very gradual slowdown of the economy, which allows the banks to adjust their NII to face this deceleration with a match being positive or neutral in terms of profitability and for the system. And could you let me answer that? That's a good question actually. You asked about the expectations regarding NII and NIM.

Moderator

And I answered that before. NIM, of course, we wanted to grow, but it is not the most important indicator. We have to continue to grow our NII. And that growth came from better liability management, reducing the cost of funding. It came from this stacking of portfolios that have a much higher risk adjusted return.

Moderator

So this is adding NII with longer maturities. And I think that we have room to continue to grow. Yes. We have room to grow our NII with our client credit operations. And I'll take your question and speak about because I spoke about the quality of the portfolio overall.

Moderator

So our rural loans are very much under control, auto loans very much under control. But we have been renting more auto loans for new vehicles and heavy vehicles with a better credit quality and delinquency is under control, overnight, NPL under control. But we see an opportunity. There is a positive RER for a part of used vehicles until a certain age of the vehicle. So we do have an expectation of growth, just like this expectation of growth in private payroll loan.

Moderator

As long as it is well adjusted, and we can gain market share. So I see an evolution of NII is very important. In the ER, the efficiency ratio that we talked about in the previous question, we tend to grow, but we are very convinced about the growth of our NII with good efficiency ratio and good quality of the portfolio, okay? Great. Thank you very much. The next question comes from Enrique Navarro from Santander. Enrique, thank you. Thank you, Andre. Congratulations on the earnings. Congratulations, Andre, also for the communication. It's very good. So it helps reduce volatility My as question, the second quarter showed that Bradesco is on the track to deliver the right equity, a bit higher than the cost of capital. So now I keep thinking about the next step.

Moderator

And taking back from Bundi's question is we have a better if we have better market conditions, if Salix begins to fall as of January 2026 and delinquency delinquency also under control. And when we look at Bradesco transformation, we will begin to see more tailwinds in 2026. So what could be a possible number? I mean, what's the size of this expansion in terms of quality and profitability, which will naturally happen in 2026? Can we think about 2017 or 2018, ROE or I mean, just a number we'd like to have so that the market can align if I mean, what would be the structure of Bradesco ROI?

Moderator

Thank you, Navarro, for the question. Well, as we've said, we do not promise what the ROI would be or what the ROE will be. But we will do everything in our reach to deliver higher profitability, higher net income, higher revenue, expense control, higher quality of the loan portfolio. And we'll do that quarter after quarter, I mean, step by step, and that has not changed. So we will keep our promise.

Moderator

Of course, we do have the expectation to be able to continue to evolve. But if we would now go back to February 8, we expected the interest rate to be 13%. So the cost of capital would be lower. I mean we would already be delivering the right numbers now. But I mean we don't promise anything about that.

Moderator

But I believe the balance sheet already has consistent results, as I mentioned earlier on. I mean if you look at the operating result, I think it's the best snapshot we have looking at our balance sheet. Now how much that will be? I mean we expect to continue to grow with good deliveries, stacking our portfolios. And there's something I didn't mention when I answered Curie's question, but I'll do it now. I mean, in addition to stacking our portfolios and controlling liabilities and having the right segments and good credit policies, I mean, when you have a segment where the delinquency, the expected delinquency is lower, you do face more competition in those segments. Well, we launched a five year plan only eighteen months ago, so we still have a long time ahead of us to execute the plan. And what we want to do is to improve profitability quarter after quarter, step by step continually. Now talking about the ROE, the idea would be to come to the cost of capital. Mean, we have a double target in the short term, the cost of capital.

Moderator

And in the long run, we have to continue to work in the long run. That's why Marcelo said we will continue to invest in the bank transformation because that will ensure competitiveness in the long term. And then I mean, if you want to calculate where we want to get, we have to continue to work to improve efficiency. And for 80% would be a good number, good ambition. Ambition.

Moderator

Let me add, Navarro, and tell you, I said the same thing in the interview with the media. We feel highly excited at everything we're doing at the bank. It's a straight line. We just make dynamic adjustments, but we feel highly confident. A few deliveries are better and then we make adjustments.

Moderator

I believe we have a lot of traction in the organization, high engagement and all teams in the organization, all areas and in all customer segments. Thanks for the question. Thank you, Navarro. The next question comes from Eduardo Rosman from BTG. Rosman, good morning.

Moderator

I'd like to hear more about collateralized portfolios, those that are backed by the government, either by SGI, FGO, ProNam and other government programs. I'd like to understand the magnitude of this market, size of this market. I mean, the impact on our AR has been good. But what about the future? Can we have an even higher return growing the portfolios?

Moderator

Or are we going to have to find new ways to monetize these customers or maybe have less cyclical, less cyclically faked? So I'd like to hear more about that from you. Thank you, Rosman. Thanks for the question, and thank you for joining us. It's a pleasure to see you.

Moderator

My answer is that this portfolio, I mean, I don't know the exact number. But looking at all of these government programs, FGI, PRONAV, PROCRED, I mean, this year, up until June, the amount released on the market is the same as we did in the full year 2024, the whole market. So the volume has grown. We I mean, last year, we said we ranked second with 18.3% share. Now we've gained market share in this business.

Moderator

But however, this portfolio have a risk adjusted return only if you follow your models because you have different models for different ranges and also depending on the program providing collateral. So Andre and the teams and even myself are always talking about this. But obviously, when you do that, you are building a long term relationship with customers. And then you begin to know these customers, and you have more fees from that customer because that's a long term customer. So we're not doing just that.

Moderator

If you look at direct credit or personal credit, our margins are lower. Why? Because we do have restrictions. But who do we provide these loans to? We have a few people, high income, that will take will accept personal loans.

Moderator

However, there will be a lower return, a lower rate. But if I grow, if I increase the rate, I am not going to have this high quality customer. So we want to attract the best customers, customers that will pay on due date. So maybe the spread will be lower. But when you look at personal credit or individual credit, the rates are usually very high.

Moderator

So we're looking for a point of balance. And what you see here is also a reflection of the work done in different areas. For example, credit cards growing about 20%. The consortium is also bringing a lot of traction, fees and commissions. Again, we're doing real estate.

Moderator

Our growth with companies in the investment banks, growth in the distribution, generating business for our treasury desk. So I mean it is work done on all different fronts. I mean, you look at the insurance group with all the distribution because you have external channels, but also we still have our own internal channels. So I see growth with diversification on different lines of business. As I mentioned earlier, another line of business that can be important for us with a very interesting RAR and a higher spread would be to increase our share in used vehicle loans. I mean not all kinds of used cars, but I think we can have more participation in this market because the RAR is attractive.

Moderator

And so I believe it is this balance that will continue to bring growth with profitability to us and perpetual relationship with these customers, building long term relationships as with mortgage or real estate financing, which is a relationship with individuals but also with companies, even though the rate can be a bit lower. Thank you. Thank

Moderator

The you, next question comes from Carlos Gomez Lopez from HSBC. Carlos, good to see you.

Carlos Gomez-Lopez
Carlos Gomez-Lopez
Head - LatAm Financial Institutions at HSBC

Thank you very much, and thank you for and again, congratulations for your next positive step. I think you have six, and these are typically 12 step programs. So you have another six to go. I have two questions. The first one to Ivan, who has been there all along, and he's responsible for almost 40% of the company.

Carlos Gomez-Lopez
Carlos Gomez-Lopez
Head - LatAm Financial Institutions at HSBC

So the insurance business continues to do very well. I wanted to but you imply lower growth for the next of the year. So I wanted to ask you what the evolution is going to be in the second half, in particular, in health care, which, in my account, has had very high profitability. How sustainable is that? And what leads you to maintain the guidance for Insurance?

Carlos Gomez-Lopez
Carlos Gomez-Lopez
Head - LatAm Financial Institutions at HSBC

And second, could you define once again what your cost of equity

Moderator

Okay. If I if I'm correct, Carlos.

Moderator

Thank you very much. Thank you very much. For your for your question.

Moderator

Carlos, thank you very much for your question. What I can tell you is that we are very optimistic. I just talked to the press, Very optimistic regarding the new guidance of the insurance group as a whole. Secondly, regarding health care. We have been seeing in Brazil a consolidation trend in the private health insurance segment.

Moderator

The number of MCOs, the regulatory challenges, they are all components of our interpretation of this consolidation. What we are seeing is that this market of private health insurance received very positively, particularly with the basic needs for protection in this area by the Brazilian middle class, approximately 100,000,000 people, people who need health care protection. At the same time, we do not see nothing very incremental, nothing very different in the segment of public health care, which leads us to believe that private health insurance will be the big solution for the Brazilian people. So we have a positive look of the private health insurance and maintenance to take part in this growth in the several phases such of our chain of action. So we operate with Bradesco Saudi and OdontoPrav, which ensure the lives of about 13,000,000 beneficiaries.

Moderator

If we look at the two operations together, they benefit Brazilians with high quality solutions all over Brazil. We also execute a robust program of investments, investing primarily in our network of hospitals through a recently created arm called Atlantica Hospital. So we have a very positive approach to this market. We will continue to invest in it, Carlos. And we see this market very positively.

Moderator

I don't know if I answered your question and I remain available if you need any

Carlos Gomez-Lopez
Carlos Gomez-Lopez
Head - LatAm Financial Institutions at HSBC

was going to say you have made about BRL900 million in Health every quarter in the last two quarters. Is that a sustainable level or this is a peculiar period and we should go back to something like the historical returns?

Moderator

Would you like to answer that? Of course, we cannot really give you any numbers at this point. In the first half of the year, our company is operating in the Private Health Insurance segment, published a very robust earnings, and this is published in our results. For the second half of the year, we do envision some difficulties but more related to the investors. Of course, people will be using the health care services, and we will be prepared for that.

Moderator

The point of attention will be the financial indexers because given the macroeconomics, they might change either because of IPCA index or even the select rate. So these are points of attention. But in structural and operational terms, reducing medical loss ratio and in terms of gaining new lives in the several regions of Brazil. Earlier today in the press conference, I mentioned the new health product that we have just launched in the region of Goias. And we will follow through in Mato Grosso and Mato Grosso do Sul to bring a new understanding of private health insurance in the Midwest of Brazil.

Moderator

South And Southeast regions of Brazil are very well covered, and we are growing strongly in the Northeast region. The region close to Fortaleza gives us a lot of potential. And more recently, we were in Minas Gerais state where we intend to increase private health insurance bringing new clients, new customers, new lives to our portfolio. The trend in the next six months is to increase the net balance of lives under the scope of private health insurance, adding to this number of 13,000,000 beneficiaries that I mentioned earlier. So regarding the cost of equity, Carlos, what we have observed is that cost of equity in the last eighteen months has been oscillating between 1416%, depending on market and economic conditions.

Moderator

Our last survey with sell side analysts indicated a median estimated median by the analysts of 15.6% already dropping a little vis a vis the previous service. So it seems that there is a trend for slight reduction looking forward. But of course, we don't control this number. We pursue this number, we monitor it, and we intend to get to that number as quickly as possible preferably. And thank you for the questions.

Moderator

Next question from Bernardo Gutmann with Thank you, Andre. Good morning, everyone. Thank you for taking my questions and congrats on the improvement of the results My of the question is about the equity business portfolio, which continues to grow significantly with delinquencies still under control even in a moment where we have seen clear signs of deterioration in this segment. How can you explain your more resilient portfolios? Is it a more structural profile of the portfolio concentration in mid sized and large clients, greater guarantees, a lower exposure to subsidized lines?

Moderator

Or is it linked to an active risk management that avoided the worsening? And looking forward, does the bank remain comfortable in maintaining this pace of expansion in the Thank agribusiness you, Goodwin. Thank you for joining us. It's always a pleasure to have you on board. Well, it's actually those three factors that you mentioned.

Moderator

It's all on the table. Of course, we have models to operate with certain ratings. Look at some crops, for example, we have some traditional clients with us in the agribusiness. The bank has an important share of this sector. We're very active in several regions of Brazil, but it is what you also mentioned.

Moderator

There are crops that have a slightly higher risk. There are crops that have a positive margin. They've had a positive margin over the years. I see the Brazilian agribusiness as centers of wealth. And of course, there are some exceptions, some sectoral exceptions or some exception companies, either geographically speaking or by crop.

Moderator

We do have an effective market share, and we have a dedicated team to analyze that. Those platforms that I mentioned in the presentation, Gutman, with that specialized team, we have agronomists working together with our managers in the conversations with our clients to understand details about their farms, crops, and we have all the technological support to monitor. We have a credit team specialized in agribusiness and specialized in different crops also supporting us. We have a group that analyzes periodically the risks, and this group helps the managers understand the risks. So yes, we are comfortable in expanding this, but expanding for what?

Moderator

Certain crops for which we have a controlled expected loss. And we intend to expand to companies that have acceptable ratings for us. And thirdly And this is 100% of what we do in rural loans, all of them are secured loans. Most of them are with a trust deed. There are other guarantees.

Moderator

You might have strong or weaker guarantees, yes, that happens. But we are very confident about what we see regarding our NPL. In order to highlight, in the month of May, we saw a slightly greater deviation, but then it returned to the expected level even with the John Deere Bank. And in year after year, we can see in the month of May, it increases a little bit then it drops again. So there are some characteristics in the agribusiness that you have to know about.

Moderator

And yes, we are comfortable to continue to expand. But considering our criteria in our business unit, we have portfolio management. AI backed model to monitor together with our economy group to analyze expected laws. And I'm not talking about past due loans. Okay, Gutman?

Moderator

I'm talking about the live portfolio. When we see signs of potential expected loss, we do active management. Operationally speaking, and actually on a daily basis, we see alert signs and we observe them for the whole set of companies from small business to middle market. And thank you for the question.

Moderator

Thank you, Bernardo. Next question from Eduardo Michivo from Genial Investors. I have a question about strategy. If you could provide an update and because a few things we can see, a few we don't see. Now in this quarter, you reduced to further reduce the footprint. We can see some relevant numbers, 14% fewer bridges, only in this quarter a 5% reduction in the number of branches. The overall footprint is down 23% year over year if we also add many branches or points of sale. Now in addition to the footprint reduction, what other initiatives will we have that will release value in the next few months? And looking at the numbers, the guidance update and other numbers, I can see you are a bit more optimistic in terms of the plan. So can you please let us know what is working well, what not? What can you tell us about that? Thank you.

Moderator

Yes, Ms. Shio, it is true. We feel optimistic about the outlook for the bank. Of course, we remain cautious regarding the economy, but we do feel optimistic. Maybe Caciana could begin to answer, and I can add something else in the end.

Moderator

Hello, Michio. It's a pleasure to see you. Yes. So I think Marcelo spoke about that. And you mentioned the footprint reduction.

Moderator

But I mean, what we're looking at is return and efficiency. So controlling expenses is part of the equation. We're always looking at the cost to serve. And that's really important. Again, productivity, you know that we've improved using technology.

Moderator

And today, Marcelo provided a few more details. That's one of the foundations of our plan. The massive use of GenAI, up killing of the whole team, especially in technology and the principal segments growing. We will have 40 new units and a significant number of new customers. Now further penetration rate in terms of technology, the new app and the Internet banking services for companies. All of these are important business levers. The concentration the liquidity optimization is, again, a very important element. We're also reengineering our legal processes, and that's something we do every day as part of our daily activities, looking at labor lawsuits and other lawsuits and also the new concept of the digital mass market, so having the right resources for the right customers.

Moderator

So we already have a number of customers, a few million customers served by the digital platform. And that is something we're growing. I mean, it's a profitable segment when you provide the correct level of service. So these are the pillars. These are the fronts where we will be working in 2025, and you will see the evolution in many of these aspects, especially technology.

Moderator

So we now have a quicker time to market. We've had a 94% efficiency improvement. Marcelo mentioned that today, we're doing 4x more in technology than we used to do in 2023. So these are the levers that will help us accelerate. The Sobradesco culture has engaged all employees of the organization to do differently, to bring ideas, to bring new solutions so that we can continue to develop the bank.

Moderator

I believe this is our future. Let me also add, Cassiano, and tell you that about what we have been doing, what we have been delivering can be seen in operating numbers. We have consistent operating numbers. But he mentioned a few points that can help us release more value and continue execute our plan. We'll close the year with more than 50 principal offices and about 400,000 customers, and that will grow even more.

Moderator

Also, our segment of companies will continue to grow, especially now that we have a new segmentation. Small businesses will also grow. I spoke about our initiatives in the Wholesale Bank, including new cash services for large companies and also for SMEs. We have a large number of initiatives that have come out really strong with a lot of support of technology to improve productivity, always backed by GenAI. So we will have more news, and we will be talking about that in the next meeting.

Moderator

Thank you. Thank you, Michel. The next question comes from Renato Meloni from Congratulations on the results. First, about the payroll deductible loans for private companies. You said that in June and July, you would be able to begin to grow with this product, looking at the better collateral conditions.

Moderator

And you also said that you would be growing also outside your customer base. Is that happening? Have the problems been solved? And also, I'd like to understand what we need to do to protect the customer base. And does that have any impact in terms of personal loss?

Moderator

And if I may, talking about agribusiness, I think you have a clear intent to grow there. Although the moment is not really very favorable in terms of agribusiness loans, but this is a winning industry. And so I'd like to understand about the capacity to grow agribusiness loans in the next few years. Thank you. Great.

Moderator

Thank you, Renato, and thank you for participating. I'm happy to see you here again. Now in terms of payroll deductible loans for private employees or employees in private companies, we prepared for that. Until we had the new regulation, the new rules for that, we had agreements with companies. And so we would do the transaction directly with the company.

Moderator

Now after the new regulations, we begin to use CTBS, not really using our channels, but you have to use CTBS to sign these loans.

Moderator

And we had a lot of work to do, to do the paperwork. I mean, I provided the loan, I disbursed the amount, and then I need the approval by the company, and then the funds are transferred from Caixa to the bank and then to the customer. So what we could see was that the process was not really well oiled. I mean, we had two payments, as I mentioned, recently. The second was a bit better than the first one.

Moderator

But looking at the market, the delinquency was higher than 16%, which is very high for this type of loan. When we talk about protecting the customer base, I mean, we already have deductible payroll deductible loans provided to the companies that are our customers. And we want to protect that business. But I mean, first, we did that according to our own criteria. So the answer is yes, we will continue to grow.

Moderator

We will begin to accelerate. And now we will trend towards gaining more market share. Why? Because we are a market leader. If you look at the public sector payroll deductible loans plus private, plus FGTS, which are usually separate, I mean, but if you look at all these three buckets, we are market leaders.

Moderator

We are ranking behind two public banks only. However, in payroll deductible loans in private companies, we do not have a big share because we only provided these loans to the clients that have their payroll with us. So but I believe we will now begin to grow because now we have the new regulation. I mean, I said the market had 16% delinquency. We had 5%, which is high for us.

Moderator

But we will be able to solve that. Why? Because we have a small customer base. We know the companies. We know the customers.

Moderator

So that's my expectation. And then you asked a second question about agribusiness. Maybe Andre can answer. Yes, as Marcelo mentioned, agribusiness is one of the most vibrant industries in the economy. And then we see a favorable outlook for the second half of this year and for the next year as well.

Moderator

And we also have good opportunities to grow our agribusiness portfolio. We just have to find the right customers, the right credit lines and the right collectibles. But yes, of course, is possible to grow our portfolio in agribusiness. Right. With the right crops, the right geographies, the right rates, the right loan rates and the right collectors according to our criteria.

Moderator

That's what we will do, Renato, always looking at our risk appetite and still continue to grow, doing good business with our customers, providing loans for equipment purchase, including John Deere transactions.

Moderator

Next question from Yuri Fernandes with JPMorgan. Another person congratulating you on good earnings. Most of the questions have been asked. So be more technical in my question. Something regarding the DTAs.

Moderator

We consider the consumption of DTA. There was an increase, a slight increase in DTA. So I'd like to understand why DTA has increased because look at the bank, everything is better. I know it depends on which unit generates credit. And I understand that with 04/1966, something's changed, and you should stop generating so many DTAs.

Moderator

So what happened in this quarter? And what is the trajectory of use of these DTAs? Because it has an impact on your CET1 and it could be a good driver for market NII. So I'd like to understand a little bit about the DTAs. You.

Moderator

It's good to see you again. I'd like to ask Kasiano to answer your question. Yuri. Good to see you. Well, Max, a simple answer.

Moderator

In this quarter, there was an increase in DTA related to the provision we made to neutralize gains coming from the comprehensive transaction program Because so so that generated more DTAs. That was a one off case, a specific case. And for the more we grow step by step, we will consume more And there was no deviation. This has nothing to do with 4966 and nothing to do with credit origination itself. This is just due to PTI, the comprehensive transaction program and the provisions we made for labor the provision for fiscal claims and labor claims.

Moderator

And regarding the expectation of using the DTAs, our in our report of economic and financial analysis, we present a scenario to consume the DTAs in the next ten years considering full IOC payment, growth of the loan book. And we can see that the expectation is that there will be no capital consumption. The loans will be a taxable base and to consume the DTs. It's all in the report. Thank you, Yuri.

Moderator

The next question comes from Tito Labarta from Goldman Sachs. Tito?

Tito Labarta
Tito Labarta
Vice President at Goldman Sachs

Hi. Thanks, Andre. Hi, Marcelo, Casiano. Thank you for the call and taking my questions. And yes, congratulations on the continued improvements in the quality of results.

Tito Labarta
Tito Labarta
Vice President at Goldman Sachs

Yes, my question is, I guess, your capital base. Your core Tier 11.1%. We did start to see shareholders' equities increasing a little bit, particularly as ROE is improving. And you're paying around 60% payout. I know you're maximizing interest on capital to take advantage of the tax rate.

Tito Labarta
Tito Labarta
Vice President at Goldman Sachs

Just how do you think about your capital base? Would you want to increase that at some point, particularly as profitability should continue to improve from here? Where should we think is the sustainable core Tier one? I mean, we look at the midpoint of your guidance, you get net income BRL23 billion, BRL24 billion implies about a dividend of maybe BRL13 billion, BRL14 billion. Is that sort of the right assumption?

Tito Labarta
Tito Labarta
Vice President at Goldman Sachs

And would that lead to maybe could you increase capital in that perspective? Or should we stay around 11.1% or so? Thank you.

Moderator

Our core Tier one had an index of 11.1% in Q2, exactly the same as Q1 with an expectation of stability in this indicator until the end of the year. In other words, everything we need to pay IOC to enjoy the benefit the most in the world of portfolio will find funding sources internally, organically based on our profit generation, stabilizing this indicator. This is a very adequate level in our opinion and well above the minimum regulatory requirement and according to our internal requirements. So we have a buffer to take advantage of all opportunities that arise without an evident capital restriction. And as I mentioned in the previous question, in our report of economic and financial analysis, we consider a scenario in which we absorb our stock of TTAs without impacting our capital base.

Moderator

So that is a very realistic and stable scenario for our capital base.

Moderator

Thank you. So we now close the Q and A session. The questions that were not answered today, our Investor Relations team will answer them immediately after the meeting. Before I hand the floor back to Marcelo to close the meeting, let me tell you on our Investor Relations website, we have the full presentation plus more details about our results. Marcello, thank you, Andre, thank you, Castellanos.

Moderator

Thank you all for joining us this morning. Thank you, all the analysts and investors who contributed with your questions. You can come and talk to us, the whole sell side and buy side, if you have questions about our quarterly balance sheet. Thank you all very much. Have a great week. Thank you. Bye bye.

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