Q3 2021 Banco Bradesco SA Earnings Call (English Simultaneous Translation)
Good day.
Ladies and gentlemen.
And thank you for waiting.
We would like to welcome everyone to bunker costs.
Third quarter 2021.
Earnings Conference call.
This call is being broadcast simultaneously over the web.
Relations website.
At Banco Bradesco Slash, Iowa.
And that address you can also find the presentation available for download.
We found that there is simultaneous interpreting into English.
All participants will be in listen only mode during the company's presentation.
There will be then a question and answer session. When further instructions will be given.
Should any participant need assistance during this call. Please press star zero to reach the operator.
Before proceeding let me mention but forward looking statements that might be made during this conference call relative to the business expectations.
Operating and financial goals projections are based on the beliefs and assumptions of Banco <unk> management and on information currently available to the company.
Forward looking statements are not a guarantee of performance they involve risks uncertainties and assumptions because they relate to future events and therefore depends on circumstances that may or may not occur.
Investors should understand that general economic conditions industry conditions and other operating factors could also affect the future results of Banco Bradesco and could cause results to differ materially from those expressed in such forward looking statements.
Now I will turn the conference over to Bradesco.
Good morning, everyone. Thank you for joining us in our conference call.
With us we have.
Mr. What that deleverage under CEO, Andrei <unk> executive VP.
<unk> <unk> <unk> executive director and CFO, Carlos theoretically control the end market relations director coupon continues you'll see Yo Bradesco Seguros, Hey, Matt <unk> CEO next and credits Zimmerman CEO bits.
If you have the floor.
Thank you very much Leandro good morning, My Dear friends I hope, you're all well and thank you for your interest and participating in our conference call to discuss Q3 <unk>.
Yeah.
We present the highlights of this Q3 in which we had good news regarding the COVID-19 pandemic vaccination has advanced significantly with strong engagement of the Brazilian population as a result, the disease is showing a downward trend, indicating that we are on the right path.
This scenario, we initiated our return to in person work following very strict health protocols. We have returned 100% to imprison work at our branches because they play an essential role for the Brazilian population.
Administrative areas, we have established a gradual return scheme evolving as health conditions allow.
The way we work in the post pandemic era is different that's true based on a hybrid model all of our teams are combining in person work with home office has it offers benefits.
Workforce productivity and cost reduction.
Improvements in infection and death rates have put Brazil, along the path to a full reopening of the economy with an increase in economic activity. However, the scenario is still not entirely favorable the agenda of reforms has not progressed and inflation remains with high and persistent represent central bank.
Raised interest rates and have shown the termination and trying to control inflation. However, this should have negative effects on the growth rate, especially in 2022.
With respect to our 2021 operations with very positive results. Our net income recovered totaling $6 8 billion to BRL up seven 1%.
Quarter on quarter and 34, 5%.
Compared to 2020, among the positive indicators, we highlight the recovery of insurance results.
Good performance in fee and commission income and a L. L. A expenses remaining under control as a result, our OE for the quarter reached 18, 6% in the efficiency ratio also improved and important indicator, reaching 40 45, 4% in the 12 month period the loan portfolio grew six five.
<unk> in the quarter and 16, 4% in one year.
<unk> already seen a good growth rate constraining individual clients, but this quarter. The extinction also benefited from small and medium enterprise segment.
And this quarter, we have about a third of our credit originated on digital channels corresponding to a 30 billion BRL, providing the client with autonomy and security to use our self service offering individuals' account for 50% of the total and evolution up 58% in 12 months.
With 80% of credit requests coming from the mobile channel.
Leslie I can highlight the excellent recovery income from insurance, which grew 104% in the quarter and two 6% in the year with the evolution of written premiums and a consistent improvement in both the claims ratio and the financial income.
Good indicators have allowed us to conduct a positive review.
Some of the lines of our guidance as you will see later on in the presentation.
Let's look at slide three please where we present the main items of this result.
In addition to net income of which grew seven 1% in the quarter. We can highlight the strong performance of operating income up 11, 3% compared to Q2, 21% and 15, 8% compared to third quarter of 2019.
Number show a stronger growth of rhythm rent in the pre pandemic period, the biggest contribution city evolution of results in the quarter came from insurance client NII and fee and commission income, partially offset by the reduction in market NII as expected and higher expenses.
The main factor of which being the collective bargaining agreement of bank employees, which impacted September.
Annual variations are explained in part by the fact that Q3 'twenty reflects the impacts of the pandemic more broadly.
I believe it is important to highlight the dynamics of our results for the ESCO has a diversified and good quality and mix of results with banking and insurance operations that complement each other in.
In the last quarter, the insurance group absorb the impacts of the COVID-19 did factor, reflecting the worst period of the pandemic in Q3. However, it has resumed its significant contribution accounted for 23% of consolidated income.
And when we look at the table on the bottom right, we see growth in total revenues.
Even in this complex scenario and a reduction in total expenses, which requires discipline, resulting in a robust and growing EBIT. We will go into detail about these lines in the next slides.
Now on slide four slide four highlights the evolution of our loan portfolio, we saw significant six 5% growth in the quarter and 16, 4% in the annual variation. This significant growth reached the all lines, mainly driven by SME.
Up 27% and individuals up 24, 7% in the 12 month period in real estate financing mortgage we have a comprehensive position with proprietary and partner origination channels origination grew 62% compared to the same quarter in 2020.
In 2021, we have financed approximately 100000 units to date, an increase of 85% compared to the same period last year. In addition, we have a more agile process for approving and formalizing proposals. This is a true benchmark credit card growth reflects the increasing reopening of the economy with <unk>.
More transactions and greater use of credit limits.
In small and medium enterprises growth also points to the normalization of the economy with a greater demand for working capital.
Other words, we have robust growth both in the lines of low delinquency in the lines of greater spreads, which have resulted in will result in a better net interest income.
We decided to revise our loan portfolio guidance as we have already exceeded the limit stablish than the previous guidance this quarter.
Move to slide five to talk about our provisions.
<unk> expenses in the quarter totaled $3 4 billion BRL, an improvement of three 7% compared to the previous quarter.
As you can see in the chart. This is the same level achieved in Q3 dollars 19.
Even considering the significant increase of more than 100 billion BRL, we had in the loan portfolio.
<unk> expenses in the quarter.
Represented one 7% of the portfolio that drop reflects the anticipation of credit provisioning. We did aperture of these started of the pandemic as indicated by our expected loss models.
In addition, structurally it reflects the growth in low risk portfolios that could quality of recent yields and the great evolution, we have seen in credit modeling over the past few years.
We continue with very comfortable provisioning provisioning ratios.
NPL coverage ratio over 90 days was 297%, so well above the pre COVID-19 level, considering the entire renegotiation portfolio. This ratio was 115%.
Average ratio should continue to fluctuate over the next few quarters as part of the process of normalizing credit conditions.
<unk> performance that we're seeing in <unk> expenses also led us to revise guidance downwards.
Moving on to slide six.
The renegotiation of portfolio. So another quarter of decline a trend that should continue for the upcoming period.
Although we would have shown a small increase delinquency in this portfolio was below historical levels. We can highlight the high level of provisions, which anticipate effective delinquency.
The current level of provisions in this portfolio represents almost four times the observed delinquency moving on to slide seven please.
Over 90 days delinquency ratio rose 10 bps within our expectations. There was growth among both individuals and Smes, mainly coming from the renegotiated portfolio as I explained in the previous slide it is important to emphasize that we still have ratios were well below the pre pandemic.
Right.
In line with our active portfolio management practice this quarter, we also sold portfolios, which in our view.
You didn't really pay for the collection efforts of our teams.
These sales had until Kurt the over 90 day index or would have gone up an additional 10.
Bps NPL creation in the quarter was 5 billion BRL.
Level of provisions below NPL creation is mainly due to the anticipation of provisions after the onset of the crisis.
According to the expected loss models as I mentioned earlier.
On slide eight eight clients NII benefited from a higher volume of operations and higher spreads interrupting a sequence of reductions.
This spread pickup is very important when we think about the next two quarters.
In the quarterly variation in the client NII grew by four 3% and nine 8% in the annual variation we see in.
Import and improvement in production spreads in our loan operations. We believe this will certainly benefit client NII over 2022, the reduction in market <unk> due to the impact of the increase in the CDI on the ALLL positions as expected.
Really offset by the higher beauty folks of our own working capital.
Let's move on to slide nine we saw excellent evolution in fee and commission income.
Up four 1% in relation to the previous quarter and seven 8% in the annual variation the volume of credit card transactions was approximately $60 billion this quarter, surpassing periods that preceded the pandemic and even seasonal end of year quarters.
This performance is also both will be strong growth presented in this line of revenue up approximately eight 2% in Q3 'twenty one over Q3, 'twenty and 10, 1% comparing nine months up 21.
And with the similar period last year, our checking account holders base increased by $1 7 million and 12 months being one of the factors driving the increase in the checking accounts line, which posted growth of two 7% in the annual comparison upsetting the revenue losses from fixed in addition, with ecosystem client growth and a related companies on this.
Scoring our ability to diversify both physical and digital revenue sources.
In asset management growth is due to weigh net capital increase of 23 billion BRL in 2021, and a more favorable mix with growth in multi market and equity funds.
And loan operations. The eight 5% growth is related to the expansion of the portfolio. We decided to review the fee and commission income guidance since with the performance of this quarter. We have already reached the maximum point of the guidance that we have released let's move to slide 10.
Our operating expenses decreased by two 5% in the first nine months of the year compared to the same period last year.
Personnel expenses increased compared to the previous year due to the higher provision for profit sharing in view of the significantly higher income and also the consolidation of back Florida as of Q4 2020. However, the most relevant in this quarter as of September was the.
Impact of the collective bargaining agreement with bank employees administrative expenses have decreased 2%.
<unk> year to date, despite high inflation in this period <unk> of 24, 9% and IPC of 10, 2%, reflecting disciplined cost control the evolution of digital channels and the optimization of our physical presence and processes the growth in the quarter is mainly due to the.
Higher business volume and higher client acquisition expenses, I would say invest demand with acquisition of clients, particularly next enbridge.
The variation of the line of other income and expenses is explained mainly by the change in the non technical insurance provision the high inflation scenario implies challenges for managing expenses as many of them are indexed to price variations, we will continue to act with discipline.
To keep costs under control she can grow below inflation.
We will end 2021 with the closure of 179 branches and transformation of 377 branches into business units.
The result in 556 branches closed or notified in their service and business model.
Another highlight is bradesco expresso, which has more than 40000 partners our network structure around variable costs, which starts operating in a fully digital manner. This quarter with a number of products such as checking accounts loans payroll deductible loans.
Credit cards and insurance in addition to our <unk> digital wallet.
Moving on to Slide 11. This is good news about our insurance operation once again with significant growth in revenues more than 9% and excellent recovery in Brazil, even with the events related to the pandemic. We can highlight the expansion of operations there.
Increase in the number of policyholders in all of the business lines of insurance group.
Costs related to COVID-19 were approximately $1 4 billion.
<unk> in third quarter 'twenty, one at $4 4 billion Reals as for year to date. It is worth noting that COVID-19 events in the third quarter were 26% lower than the previous quarter, reflecting the impact of vaccination and a reduction in the number of cases, the financial income was very positive reflecting.
The facts that economic financial ratios in the period had on our financial investments our net income present, a robust performance in line with last year. Despite the five percentage point increase in the S. C. S. L. L rate if we exclude this effect, we would have seen a 2% expansion.
Compared to 2020, even with all the facts of COVID-19 in 2021.
Like in the previous quarter, the scenarios to challenging but based on what we have observed we are reviewing the guidance again as we look ahead for the insurance company.
On Slide 12, we show examples of the strong growth in revenues of our insurance segments confirming our perception that this is an essential critical service in our core business for Bradesco.
Traditional insurance was always a solid product and I would say that after the pandemic insurance now is purchased so we can see the progress and install mens and.
Home insurance life and held all growing very significantly we manage to capture this opportunity based on our wide offering diversity of products and channels for each profile and moment of life of our clients and Thats, a very important point in our bottom line.
Slide 13, just to be more transparent just as we did in the previous quarter here. We show the history of pandemic related hospitalizations on a weekly basis in our health care operation as you can see we are at the lowest level of hospitalization since the beginning of.
The pandemic and please bear in mind that in the past it used to be more problematic and severe and long stay hospitalizations, owing to the impact of their disease.
Now not only do we have fewer cases, but they are also not as severe owing to the successful level off.
Vaccination in the Brazilian Society, So Bradesco insurance.
Did it homework.
Insurance in addition to buying insurance.
In order to.
To prevent problems and claims at the end of the day people want to feel they're safe and sound at Bradesco is fulfilling its mission of taken care of house.
Life.
The welfare and the future of our clients, which is the core mission of insurance group.
On Slide 14, we show the same chart, but rather than a per week evolution. We show on a monthly view and this trend for the better is expected to continue.
We can see the number of hospitalizations on a monthly view as we can see on slide 14.
Now on slide 15, let us talk about our capital ratio.
Our tier one ratio was 13, 7% this quarter very robust and well above the regulatory minimum.
At the same applies for our liquidity coverage ratio and our net stable funding ratio. We saw a 40 bps drop compared to the previous quarter caused naturally by the growth of the loan portfolio, which is good and also owing to the mark to market of securities.
Now on slide 16, let's talk about the use of digital channels.
Had a significant increase in the use of digital channels, which offer unique convenience to our clients the volume of mobile financial transactions increased 92% compared to the previous year. The number of accounts open on this channel also grew 84% in the same period exceeding $1 2 million of cash.
<unk>.
This year, we already have $62 5 billion BRL in loans from digital channels. This accounts for 29% of the total originating from the bank.
If we focus only on the performance of the individuals segment digital already accounts for 53%.
The numbers show, the evolution and diversification of our distribution channels and business sources.
Digital Bradesco.
It shows a reduction in reliance of the branch for a transaction of activities the future of branches fundamentally depends on the evolution towards a more consultative role for clients.
Moving on to slide 17 as.
As we know we have been for a while now we had a pioneering launch it is the application of technology to support and assist clients depending on their questions and needs concerning products and services.
Gradually adds new information in the interaction with a client that's become more robust and authorities.
The total number of interactions with clients reached the remarkable mark of $396 million. This year alone, which accounts for an increase of 25% compared to last year on Whatsapp. We had 39 billion interactions currently accounts for 100% of the first level.
Support of Bradesco 48, fast Youll help line. It is also responsible for the first level support in the employee call Center.
<unk> is currently able to shared knowledge on more than 90 products and services and we have a squad.
Dedicated <unk> squad and soon it will be connected to CRM and we will start making proactive offers always according to the needs and expectations of our clients and their journey.
On slide 18, let's address digital transformation.
Following our client centric digital transformation strategy and taken into account our pillars of people technology and business, we created that Bradesco experience, our department that integrates experience digital channels and platforms for the creation of intuitive at customer.
<unk> journeys are financial services, and non financial services leveraged by partnerships all of this using data intelligence and the voice of the client, which helps us to understand their behavior regarding the use of each channel and their respective transactions. This enables us to provide more.
Fluid experiences within and between channels.
The department has professionals highly skewed in digital strategy platforms, New design disciplines journey analytics and already has an agile mindset, which means that our professionals are positioned in the various clause of the bank and multi functional groups.
Just to give you an idea.
Our B E predictable experience already has more than a thousand professionals involved in the whole relationship journey with our clients.
In total our squads and tribes already add up to more than 3000 professionals in other words. In addition to acquiring some startups like didn't dean and forward and invest to match of our private equity fund. We also have created and developed our whole digital environment.
Moving on to Slide 19, let's talk about <unk> I'll go to reach 706000 clients and increased 17% in net funding compared to the previous year. The small drop in the volume under custody in the quarter reflects only the mark to market due to the increased volatility in.
The markets this quarter.
Next reached $7 7 billion clients.
Above the 7 million target for the year and the new target is $10 billion client.
December 2021, we want to have 10 million clients. This represents a 141% growth in the annual comparison next is a comprehensive bank and its mission is to provide clients with innovative solutions. It is increasingly a platform for products and services and now.
Also with a marketplace, which is launched this week.
Bitch, the digital wallet, we launched at the end of last year has reached $2 1 million accounts and this week. It surpassed 4 million downloads. It has become the entry level solutions for those who want to be in the banking market and thus plays an important role in client banking.
And it counts with an extensive network of bank correspondent <unk> espresso with more than 40000 service points bits and Max are totally separate from Bradesco bank and to have autonomy in the decision making.
Processes Ceos.
And that in <unk>, we have had now too.
Moving on to slide 20, and this quarter, we made a purchase offer to obtain 100% of <unk> shares and we are awaiting regulatory approval <unk> was created as a credit card operation and has since expanded to become a bank that offers accounts personal.
Loans and Cashback solutions. It has 2 million cards, and our loan portfolio of $2 5 billion BRL.
<unk> adds to our portfolio of digital companies and will remain separate as it is in a moment of significant expansion and we do not want to change this.
Moving on to slide 21.
About sustainability and ESG.
In Bradesco sustainability has always been embedded in our purpose you all know well what we do with our Bradesco Foundation for many decades now.
And we are committed with a positive impact agenda in ESG in the context of the cop 26 discussions we're present in Glasgow following the agenda present at meetings and also strengthening our commitment to mitigating climate change.
As a financial institution, we took a leading role engaging our clients and supporting them in their transition to a greener and more inclusive economy.
Climate change is part of our sustainability strategy, we comply with net zero as the first Brazilian bank, taking part of this commitment.
We also highlight our recent partnership with Enel X, which should reach a reduction of 12.
140 tons of Cotwo equivalent per year, our actions have been confirmed through the recognition of the main ESG ratings and indexes and which we have been evaluated as being above the market average.
Let's look at slide 22 now.
And this is where we show our guidance.
As we said before we've made changes to four lines.
Loan portfolio fee and commission income insurance and ALLL in the loan portfolio.
We had a guidance from 9% to 13.
And now we have 16, four 4% growth compared to last year, and we decided to change this range.
14, 5% to 16, 5% in NII client portion we are at four 7% and we believe that we will end the year between the middle and top of the range.
Fee and commission income we used to have a guidance from one to five and now we are at five already at the maximum point of the guidance that we published at the beginning of the year and this is why we decided to change the guidance from two to six in operating expenses. We are at minus two five and <unk>.
We believe that we will end the year close to minus 1%.
Income from insurance operations.
Our guidance is minus 15 to minus 20 and currently we are at minus 19, five and we decided to review the guidance as the evolution proved to be better than expected vis vis COVID-19 and financial income now the guidance for this line is from zero to minus 10 finally inexpensive.
<unk> a L. L. The guidance was zero to 2017, we have $10 8 billion as for ear to date and we revised our guidance from 13 to 16, and we believe we'll be between and the top of.
The guidance.
Now on slide 23, we just want to extend invitation to all of you to participate in our Bradesco day, which will take place on November 10.
We hope you can all join us it will be a pleasure and honor having you with us.
And before we begin the question and answer session.
Very briefly I would just like to give.
To make a slight comment about our expectations for 2022.
We all know.
And by the way this is part of our outlook.
Our economies and the comments of the marketing Jan or about a challenging picture in 2022.
We have all these challenges ahead.
And we take it all into account however.
We're doing everything we can so that year 2022 becomes ear of growth at Bradesco Bank.
That's.
A condition that we really commit to every year in the eve of the earnings conference call. We have a need to involve in the whole management of the bank the board of directors to address results and expectations.
We are working on our numbers for next year.
And we're very confident that this budget is based on net zero base expense. So every penny is evaluated starting from significant gains of scale that the bank has been achieving and that's something to that.
Witness you can see this in the presentation that we are delivering our ability to have gains of scale within the organization and at the end of the day, we believe that despite.
Despite the outlook for next year, our job is to work in vision in growth for 2022, and this is phase on a couple of points, which is worth mentioning to you ladies and gentlemen.
For next year. Despite all this outlook agribusiness and Caddo raising that GDP is expected to grow a lot in 2020, you and Bradesco has a very important state theyre only second to Banco do Brasil, because you know the funding broker dealer.
<unk> has an agribusiness, but we expanded.
Our regional offices for farm credit.
Throughout the country. So our outlook is great. When it comes to agribusiness. In addition, we are having a resumption of the company and certainly it expect it to be full in 2022, Unlike what's happening in the current year, which is only partial.
So with full activity and full resumption of the economy. This certainly will bring more job opportunities.
More job positions informal and formal but at the end of the day, they issued foster grow and bring more business opportunities. We also bear in mind that stays have one of the highest cash and cash equivalents of the history and because its election.
Ear, everybody, we invest our bank has a massive footprint in states and municipalities with payroll from many municipalities managed state administrations, the ability to generate business and grow and also high in our agenda.
Brazilian companies also have lower indebtedness for a decade. If you think about 10 years. This is the lowest level and the impact of select high rate should not be expected in company's balance sheets.
So there are opportunities for growth in the future of this quarter. The wholesale bank increased very well. So I believe that's also a significant indicator.
When it comes to next year's growth.
Yes.
One hand.
My bet this outlook on the other hand.
We envision opportunities that should bring growth to our organization. If we think only about the pre resilient GDP. This year it should grow five 2% 5%.
Just the carryover effect of the GDP growth this year.
Statistical carryover for 2020 do this alone.
B another 75.
So these are some indicators some assumptions.
That should bring us a better business.
We understand that Bradesco has visibility visibility to growth, we are not going to create difficulties to create a way to overcome them. We are working thinking about growth for next year in terms of our loan portfolio our margins.
Number of clients and we.
<unk> remember.
And if we look at the bids plus next plus visual you talked about 12 million clients.
So practically.
Have no relationship with Bradesco, 75% of them are not a traditional clients.
So huge capacity to generate.
Listeners.
With this kind of growth in our client base.
So this is just some some information some extra data.
That leads us to think that in 2022.
Despite the economist expectations.
The 2022.
Is the year, where we.
We have to work to grow our business and this is what we are going to do in 2022.
So very much for your attention and now we will start the Q&A session.
Thank you we will now begin the question and answers section for.
For investors and analysts if you want to ask a question. Please dial star one if you want to remove your question from the question in queue. Please dial start two questions will be answered in the order in which they are received for an excellent sound quality. Please.
Heska question slowly.
Start with York Friedman.
Thank you very much can you hear me.
Hi, This is <unk> I can hear you.
Okay perfect. Thank you congratulations on the results.
Thank you for the presentation and for the additional information I have just one question.
But it's divided into some sub questions.
And I think it's going to be.
Kind of long building on what you mentioned at the end of the presentation regarding the 2022 outlook.
If possible if you would like you to elaborate a little more I knew.
Purpose is Phil.
The bank is still in the process of putting together the budget, but if you could elaborate.
Your expectations regarding the main lines for next year for example.
How do you see the profitability of the bank.
Delivering.
A cost number that would be in line with or below inflation.
Cost is really not only the inflation rate for this year, which is very high.
But also salary adjustments of 1%. That's the first sub question. The second part of the question has to do with provisions.
Do you believe that next year, you can increase your provisions less than the portfolio and why am I asking this.
Im looking at these additional provisions you still have additional provisions.
Return.
Way above.
The historical level in 2017, 18, 19 additional provisions were at $6 9 million.
And youre still at $10 billion.
So could you convert to those historical levels.
And to grow provisions less than the portfolio next year and the last part of the question.
Would be.
Regarding insurance.
Insurance.
And there is.
Here within our OE below the <unk> of the bank of which historically didn't happen for a long time.
So with a better outlook in <unk>.
<unk> understood.
With the new guidance, even in the lowest range that implies.
And our ROE year of around 20% for Q4, so for next year can we.
Expect insurance or are we also above 20%. Thank you very much.
Thank you for the comments and the questions I will turn the floor to Eva to answer about insurance and then I'll answer the first two questions.
If I'm going to issue can you comment on insurance or for Europe.
Of course your Erika. Thank you for the question regarding insurance.
We spent 2021.
Well.
So this was a hard year with a pandemic.
Pandemic happens in the World Historically every 100 years.
If somebody says that they could expect what would happen in Brazil when the world.
With all the effects not only related to health, but also related to.
Social and economic effects, if they said that they could envision this they would be line no one could predict Tibet.
We have to live with a totally different world.
With some negative side and also some upsides, particularly from the social and humanitarian.
Way because people started looking at one another differently.
No.
To answer your question directly.
In addition to make regular payment of the claims that we would normally have and which were priced.
We were able to pay $4 5 billion of BRL.
Several companies and Bradesco health with this go live and savings bonds and body.
Only a claims related to COVID-19 not to mention.
The claims.
February obviously priced already and which are part of our day to day operation now.
That shows.
The solidity of our balance sheet, the strength of our numbers kind of our assets that they give us comfort to above anything.
<unk> new to provide the best health care and hospital care in Bradesco Bradesco health.
And continue to provide the best service to life insurance holders into loan insurance policyholders.
And on the economic side, we had a positive reality, a 9% growth in the first nine months of 'twenty, one and if we were to lift the byproduct we can see growth in the nine months of 2021 of 34% in home owners insurance.
Because.
Home.
Became a fundamental element for people, so having homeowners insurance.
And people say most of their time at home.
Working remotely that makes a huge difference if they want to have protection for their home.
We grew 24% in loan insurance, we grew auto insurance by 20%, we grew health insurance by 5%.
In health, our health product is.
On everyone's wish list in Brazil, and in life, we grew 18% in the nine months of 2021 year to date.
So looking at all of that and considering as that.
Society now understands that insurance is needed.
We're looking at 2022 with a positive outlook.
We should have sustainable growth.
And we still have eight teo.
For Q4.
But growth in Q4.
Will be posted with a reduction of Covid related claims and looking at 2022, our prognosis is extremely positive.
I don't know if I answered your question.
This is perfect.
And York I think Youll because.
You helped me give everyone a target for next year. So thank you very much.
Okay above 20% return on equity.
Given target then we will pursue that.
And we are quite convinced that the insurance company will give us an ROE above 20% next year I, just would like to add something.
You asked the question, which was a very smart question actually.
If you got the insurance company.
The health insurance get paid more than $6 billion worth of claims.
Because of the COVID-19, and this wasn't no one's later as <unk> mentioned it wasn't something that we budgeted for but issuance had the ability resilience our balance sheet robustness and enough provision too.
Accept these extra payments that we have to make totally out of the curve and this is the burden of having an insurance company well what are all of the upside of having an insurance company there are many.
So this was important to we were able to overcome with still have a tail of effect, but much smaller from what we can see with the progress of vaccination in the engagement of the population and lower cases, so the outlook for the insurance is very good so like I said not only in Brazil.
We will see use of insurance companies worldwide that we have been talking with.
Our same but there has been a structural change for insurance in the world people are not buying insurance.
We don't have to sell insurance now people are coming to us to buy insurance.
Particularly in our country, where insurance penetration is.
Very very small around 4% to 5% the Brazilian GDP.
So we have a huge avenue ahead of us for growth.
So insurance will continue to be fundamental and.
To grow twin partner, if the results are perfect.
As regards costs York.
Our mindset is well I spoke a little about this.
More than 550 branches.
We are restructuring.
Not to mention the 1000 branches that we migrated in 2020, you will remember that in Q4 2020, we reduced our expenses substantially we are adjusting the structure 'twenty to 'twenty two.
We will still have some structures to be adjusted around 300 branches that will be tackled in 2022, so despite inflation rate.
Spite of all that we should be below inflation.
We will work on costs to keep them below inflation.
Saying that that bradesco cost discipline.
This translated in our earnings so far even with a 10% salary adjustment and you know how heavy pay.
Payroll is in a financial institutional equities with almost 90000 head.
Head count that's huge so despite the 10% salary increase for R&D head count we are reducing expenses by two 5%.
We still have room to adjust the structure what I can tell you is.
I'm quite convinced that the costs will be below inflation as regards provisions you said it well.
If we observe and we included that in the presentation.
The provisions that we have now.
In Q3 2021 were exactly the same provisions we had in Q3 2019.
Oh, so we have a portfolio of 100 billion greater than in 2019.
And we have a coverage ratio.
207%, which was the biggest in the world.
Market, so we have enough provisions.
Over time, along 2022, this should be reduced a little.
A lot due to end effect of the loan portfolio increase.
And then it might be asking about what can it be I'm not going to give you a guidance for the loan portfolio, but I can tell you what's going to grow two digits York.
So along 2022.
We are going to consume some of the provisions then.
And delinquency.
Europe.
If we look at our delinquency ratio it is at its lowest historical level.
It's not five 5% as it was in 2016.
That was an all time high and now it's down to two six half well that's got the average.
Around 443, we're at two 6% so have a lot of room.
We should grow delinquency should grow a little but I think that we have learned to be more disciplined.
To have the right balance between risk and price.
The evolution of our credit modeling.
Sure Paula.
The granting of Vodafone indicators, so I should say that our provisions.
We will be in line with the loan portfolio growth and our client NII will be in keeping with the portfolio was slightly higher.
No.
We are quite okay regarding our provisions and the ability to grow next year.
Can I add something you're this is andre talking that I kind of.
In addition to weather that you mentioned.
This process of digital transformation of greater Digitization and all of that.
Leads to a lower cost to serve to serve all of these clients.
Also investments we've made in recent years in technology also bring us greater productivity.
Additionally.
All the management of the bank is focused on restricting cost we'll look at that every day and focus on how to reduce costs. So I think that adds to what you said.
Regarding next year, having costs below inflation.
Thank you very much.
For your comments and for very comprehensive answers. Thank you York.
Yeah.
The next question is from Jason <unk> with Scotiabank.
Thank you and good morning, everyone.
I have two questions.
My first question I.
I would like produce code to address client growth.
Particularly the strategy for growth.
You show the total number of clients business clients, improving by one 3 million this quarter.
The $72 5 million and next post growth of two 3 million clients this quarter.
Bradesco also announced that it acquired the remaining part of digital.
<unk> has 2 million credit cards for instance.
How do you see the acquisition costs.
Four new clients in different segments.
Compared to the past.
And what should we expect to see in the future.
And my second question is.
What is the outlook at Bradesco for market interest rates.
More specifically <unk>.
And so 10 year bonds government bonds, what are the interest rates.
And could you also comment on how produced go is considering.
Capital costs or IOC for every segment. Thank you.
Thank you Jason.
Jason.
The growth and the customer base client base was very significant both at the bank level and also with our digital business like maxed and bits.
Actually the <unk>.
Cost of acquisition of customers is an increasingly.
Strongly challenge for US it's important to say we have a couple of.
Sources at.
There are very significant to grow our client base.
And we're focusing on our ability to reduce the cost of acquisition of customers I consider this to be investments.
At the end of the day becomes a profitable client.
<unk> income to the bank. If you think about the base of the insurance company, we have millions of customers who are not bradesco customers. So we are working on this space to acquire more customers. If you think about the credit card base. There are a lot of partner credit cards that they do have these customers don't have.
Current account. So there is very low acquisition cost because it's directly operated by our raw war rooms, our squads for customer acquisition. If you think about bradesco consortia or bradesco financing, which works within dealers for new cars for answers, which is a different.