Q1 2022 Banco Bradesco SA Earnings Call
Good afternoon, ladies and gentlemen, and thank you for waiting we would've liked to outcome ever wants to Bradesco first quarter 2022 earnings conference call.
This call is being broadcast simultaneously through the Internet in the Investor Relations Web site <unk> Dot Com BR is lash and.
In that address you can also find the presentation available for download.
The firm that all participants, we only be able to listen to the conference call. During the Companys presentation. After the presentation. There will be 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 that forward looking statements are based on the beliefs and assumptions.
<unk> management and on information currently available to the company they involve risks uncertainties and assumptions because they relate to future events and therefore, the pad or circumstances that may or may not occur in the future investors should understand that general economic conditions industry.
<unk> and other operating factors could also affect the future results of book Bradesco and could cause results to differ materially from those expressed such Forwardlooking statements now I would turn the conference over to Mr. Carlos Godaddy business controller and market Relations director. Please proceed.
Hello, everybody welcome to our conference call for a discussion of our first Q <unk>.
22 results, we have today with us our CEO will target Lazard junior.
Our executive Vice President and CFO and Rhett kernel.
Leandro Miranda Executive Director and Investor Relations Officer was volatile Fernandez Executive director <unk> Bradesco <unk>.
Effective officer.
<unk> Bank <unk>, Chief Executive Officer.
Zimmerman.
Chief Executive Officer Carlos <unk>.
<unk> <unk> Chief Executive Officer.
I turn the floor now to leather.
Thank you for the answer good morning, everyone. Thank you for joining us on our first Q 'twenty two earnings conference call.
The economic landscape in the first quarter made us like advance with GDP forecast picking up a bit and the creation of additional jobs.
Inflation remains a worrying global phenomenon.
A significant challenge for all economies, including Brazil.
Rewarding great created pressure on the oil and other commodity prices and there are no expectations of any restraining price trends over the near term.
The Central Bank of Brazil is moving forwards with monetary policy and we expect to see a slowdown in inflation. During the year. However interest rates are likely to remain high for a long periods, which should impact GDP growth given the scenario bradesco performed well this quarter.
Net income of $6 8 billion Reais.
And this represents.
A row 80.
2%, an increase of three 1% in relation to our previous quarter.
The highlight of the period was in net interest income, which grew nine 5% compared to the same period of 2021.
Glad to NII Rose 19, 6%.
With the same we did the same comparison periods, resulting from an increase in spreads a repricing of the portfolio and an increase of <unk> on our margin on deposits.
The loan portfolio also posted a good performance expanding by two 7% compared to our <unk> 'twenty, one and 18, 3% compared to our first year 'twenty one.
The most significant movement took place in the portfolio for individuals.
Which grew three 3% in the quarter and 22% year on year.
Particularly in the lines with the highest margin.
There was an expected slowdown of growth in mortgage financing due to the rise in interest rates. However, this aligned that we will continue to smoothly evolve and adds value to our business due to the cross selling generates.
Fees and commissions income performed well up six 7% year on year.
Total cost of our controls, especially considering inflation pressures.
There was a growth of four 4% compared to the previous year.
And a nine 1% drop compared to the previous quarter.
In line with our expectations delinquencies rose in this quarter, we already expected to syndicate or to return to pre pandemic levels. It.
It should be pointed out.
That the growth in higher marketing higher margin business also carries a controlled growth of these indicators.
We are always ready to make the right adjustments of cost and returns.
Insurance operating income, reaching <unk>, three 3 billion reais in the quarter.
Growth of four 7% over 12 months.
The result indicates that there is a continued recovery in the insurance area and it should be even greater over future quarters with movement in premiums the control of the pandemic and improvements of the financial results due to all of these factors, we revise our guidance and we will take men will talk about about it.
On the last slide.
Moving on to slide three we note that there are some events this quarter.
Classified as a nonrecurring due to its nature and it was a net income of 231 million Reais that it has from the demutualization process of seat that's our entire banking payments chamber.
Now, we turn to slide four.
Through our expanded loan portfolio that grew 18, 3% compared to the same period last year with double digit growth in all lines demand for credit remains although at a lower level, but with recovery in our teams. This performance is a consequence of our commercial position.
And based on the extensive use of data and analytics in our risk analysis, which allow us to be more assertively defining price limits and credit approvals.
One highlight was credit cards.
With a growth of 45, 6% compared to the first SKU of 'twenty one.
This was the result of structured efforts aimed at increasing the presence and use of cards by more slices of our 74 medium client base.
One of the core points for the success of New work. This work was the creation of new products targeting digital friends in the audience.
Real estate financing line posted a growth of 23, 3% in one year is.
As expected this performance is not likely to be repeated in 2022.
The growth will continue but at a pace that is more compatible with the new context of higher interest rates.
Credit for our company's inquiries at 15, 7% in 12 months.
The main categories were working capital Chinnery vehicles financing and agribusiness loans.
Digital channels contributed 24 billion reais of our origination in the quarter an increase of 44%.
The role of digital channels in the production of the portfolio is growing and our expectation is for increased client engagement.
Credit for this chance.
It's a natural trend and we are committed to offer a more user friendly journeys to boost our digital origination.
However, you can see that originations are red lower down the first the fourth quarter of <unk>, one as a result of higher interest rates and increase in level and risk analysis.
Turning now to slide five.
You can see that we are a stage where credit conditions are returning to normal as delinquency rates were at historical low levels.
This risk adjusted returns on credit.
Alright at appropriate levels, given the greater repricing movement provision expenses grew this quarter, reaching two 3% of the portfolio total previous represents seven 6% over the portfolio and expansion from the previous quarter.
Nevertheless, we continue to make to maintain a comfortable level of reserve on our balance sheet with a coverage ratio of 235% and 105%, including a full renegotiated portfolio duration.
Sure.
Now, let me turn to slide six.
The renegotiated portfolio amounted to four 9% of the loan portfolio.
Third to March 'twenty to 'twenty, one it posted a growth of three 1% below the 17, 1% growth of the loan portfolio the spirits.
Given the growth we've seen the loan portfolio, we believe that this increase in the renegotiated portfolio as normal and controls.
Our provisions for the renegotiated portfolio represents 62, 3% of the total.
The delinquency rate for the portfolio was 18, 7%, which is still below the historical levels.
Now we move to slide seven.
The total delinquency ratio came to three 2% an increase of 40 bps compared to the previous periods.
This is primarily due to the normalization process of delinquencies, which we had predicted would occur and the effect of growth credit growth mix in the second quarter. We are expecting a smaller growth I would say 10 to 20 bps and a relatively stability throughout the second half of the year.
For individuals the acceleration this quarter came with the expansion of our portfolio with higher spreads, especially credit cards.
We understand that the grille from the delinquency indicator from 15 to 90 days is seasonal without any exceptionality.
Gross provision expenses accounted for 96% of the NPL creation.
Lastly, we'd like to reinforce that and continue with our own management process and sale of nonperforming and active portfolios, but just weren't ever such a transaction is economic like region.
However, this quarter, we did not sale active portfolios in a material way. The total amount was only 120 billion reais.
We now turn to slide eight.
The total net interest income performance solidly in the first quarter.
Growing zero, 0.6% compared to four scheme and nine 5% in the 12 months.
The main driver was the client NII.
Which rose 7% in the quarter and 19, 6% over the year.
The growth in deposits income is pushing the rising the client's NII other the impact of a higher <unk> than in 'twenty one.
Additionally, credit NII did better than our initial expectations due to better spreads the speed of the forest photo turnover and expansion in higher return operations.
Gross client NIM grew this quarter by 60 bps and the net NIM. Despite an increase in provisions by 30 bps.
For the market to NII, we posted a reduction of 43, 1% during the quarter, resulting in $1 2 billion Reais reflected increase in CDI on our A&M positions.
Now we go to slide nine.
That illustrates the fee and commission income, which grew six 7% in the annual comparison there.
There was a seasonal decrease in this quarter.
<unk> had the greatest contribution with 19, 1% growth.
We saw boosting the number of cards, mainly through sales in digital channels, which grew 206% compared to a year ago.
At the end of the pandemic brought an increasingly amount from executive cards interestingly the amount was higher this quarter than the fourth quarter, which seasonally is usually highest.
The consortia segment is also notable.
We are leaders in the market and to 87% of sales have been made through digital channels.
We will now take a look at slide 10.
Cost discipline is a constant and on our management practices.
Operating expenses advance at four 4% compared to the our first Q 'twenty one well.
Well below inflation accurate in the periods, even with investments in client acquisition and digital evolution.
Personal expenses grew eight 5% in the annual comparison, despite the collective agreements of 10, 9% 10, 97% that occurred in September 2021.
We will continue to promote growth.
That engineers and business teams such as the investment in specialist.
Even with all the investments we are making the bank. The total number of staff has been brought down by one 3% in one year.
Administrative expenses grew five 6% in the annual comparison, demonstrating that we absorbed much of the accumulated inflation 11, 3% of the IPC eight and 14, 7% of HPN.
In addition to the increase in business volumes, which has an impact on our variable expenses.
Somewhat of the factors that played a role in this solid performance over the misfit administrative expenses included activity such as the optimization of the ATM network, which was reduced by 4200 machines or 13, 9% in one year.
We have also continued to review our physical presence in an effort to integrate our Costar service borrowers and increasingly consulted and less transactional model.
This year the optimization.
491 branches, all of which 269 conversions two business units and.
134 conversions to Ta and 88 will be in theory closed or margins.
It should also be pointed out that our personnel and administrative expenses include investments related to the expansion of our digital initiatives such as next operator beats indigent.
Without these investments the growth of our total expenses would have been half.
It's also worth noting that in our digital initiatives for the year, we are making a tradeoff and growth by favoring client activation.
Tension and loyalty.
The other expenses line shrank by 15, 5%, mainly due to higher level of provisions. We did last year. Our expectation is that this line will bolster our reduction in 'twenty two.
Turning now to slide 11.
We can see that the <unk> group experienced a revenue increase of 13, 2% seen in all lines of business due to the increase in number of contracts as well as number of vehicles and the residences in the annual comparison, all distribution channels and business partners contributed to these results in <unk>.
Particularly in particular, the digital channels had an expansion of 56% in the first quarter of 2002.
Income from insurance operations posted an annual improvements and its performance in the first Q 'twenty two due to the growth in revenue and improvement in financial income over the periods.
The volume of Covid related claims in the first SKU of 22 was 512 million reais the lowest since the beginning of 2021 and $54, 7% lower than the same period last year.
Despite the recent the recent increase in demand due to the new omicron variance, we did not see the same severity in this in the previous spirits hospitalization phase are much less frequent frequent and recovery has taken place in a shorter time.
Turning now to slide 12.
The tier one remained at the same level as in the previous periods well have over their local authorities minimal.
The profit for the periods was enough to absorb a distribution to shareholders in the form of interest on shareholders' equity.
Prudential adjustments in the gross loan portfolio.
Indicators for our liquidity also remain at comfortable levels.
Moving now to slide 13, let's talk about our digital growth.
Over the last two years, we have spoken quite a bit of our auto our movement towards technological acceleration and this and this has been intensified by the pandemic.
To date <unk>.
Life gets closer to normal we want to talk to you about another stage that after the loyalty for experiences and autonomy.
If before particularly in the financial system. Many people were fearful or preferred to use physical channels to make transactions and purchase products and services. This situation is entirely different today.
Many of our clients now prioritize a digital experience.
Proof of this is that of our total transactions, 98% our performance through Bradesco digital channels.
This total 92% are concentrating our mobile app and Internet banking.
And the growth continues to accelerate.
Looking solely at the comparison of the first few months of the year with the same period last year, we saw significant growth of 92% and mobile financial transactions.
This boost in the digital experience is also reflecting the number of digital checking accounts clients, which stands at 70% of total clients.
The number that keeps rising and must continue to evolve.
The number of accounts opened through the App has also been trending upward.
And we ended the first quarter of this year with a growth that was five times higher than in the same period in 'twenty one.
We're going to highlight a 72% growth in MDI account openings.
Demonstrating the strength of our positioning in the micro intrapreneur segments.
Turning now to slide 14.
The relationship with a more digital customer has led us to a landscape of new and greater business opportunities that we are continually focused on sustainable developments.
Over this quarter, we saw digital channels, leading the way in the supply of credits a multimedia visuals. The number of loan operations granted through Bradesco as digital channels now sits at 73% of the total.
We have also seen a lot of movement from Intrapreneur heirs focused on resuming business after the pandemic.
We are confident.
Evolving our platforms oriented towards companies, including partnering with startups in the annual comparison, the authorization of corporate digital credits evolving by 48%, reaching standpoint 1 billion Reais.
Turning now to slide 15.
In addition to the indicators on digital developments.
Have presented in the previous lives. These slides we would like to also show that is not only loan products that we are making significant progress full sourcing investments insurance products and others posted a consistent growth.
Another contributing factor to the bump in sales was the introduction of <unk>.
This included the issuance of credit cards in dates.
<unk> zero and the opportunity for clients to add the new car to their phones wallets immediately after approval without the need to wait for any fiscal issues.
We are going now to slide 16.
When we can discuss our digital initiatives.
Agua grew its net funding by 50% in one year and reached <unk> 785000 clients next grew its client base by 153% in one year and reaching 11 million clients. The volume traded practically doubled in the same periods net.
Coming to this year more focus on clients monetization.
Peter the $9 5 million downloads and 6 million accounts Mark It has become the gateway for clients in the banking space.
This quarter, we completed the digital transaction, which already fully embedded in our numbers. It has $3 9 million accounts and posted the TPB of $2 5 billion Reais in the first quarter.
Our digital initiatives, we will continue to grow this year in an effort to deepen the relationship with the customer but focus on profitability.
We now go on to slide 17.
Talk about sustainability.
We have updated our sustainability strategy, which is now based on three strategic pillars sustainable business.
Climate agenda and financial citizenship as these segments and teams require an agenda, Fiji featuring more active change in greater strategic focus.
For each of these three pillars, we made public commitments to leverage our contribution towards sustainable development.
In the pillar of financial season ship. For example, we have just signed on to the commitment to education financial inclusion of the United station.
United Nations and are the only bank Brazilian bank to be part of this select group of 28 28, Sanatory banks on our public declaration space that we are driven to increasingly contribute to financial inclusion and to promote the financial health of clients and society as a whole.
We remain committed to the target of channel.
<unk> hundred 50 billion reais sectors and assets with a positive social environmental impact by 'twenty five as of March 22, we have already stop at 107 billion or 43% of the globe.
In terms of the climate agenda, we have been active in both the United Nations through the net zero banking alliance and in the GFS AMC, a global alliance at least institution in the financial sector accelerated the transition to a cleaner economy.
Sustainability is one of our four pillars in the corporate strategy.
It's aligned with ours.
The opportunities for people to achieve their goals and for the sustainable development of companies and so sites and we want to continue as leaders in <unk> of this agenda at a global level.
Moving now to page 18, that's our last flight.
And we are going to discuss here a little bit of the guidance and we can move onto the questions. Afterwards, if you which.
Given the significant changes in the dynamics of the markets. We are active in we haven't revised our guidance to reflect current performance and expectations.
Spreads have remained at or above the levels, we were expecting and we don't see any additional pressure in 'twenty two.
This has favored a faster repricing of our loan portfolio.
Also we have seen growth in products with higher spreads in the mix.
We have also captured a great benefit in estimating the income with deposits, which makes up the client NII.
As such we have significantly up to date with our client NII guidance to $18, 22% growth versus 8% to 12% previously.
For our credit provisions given the specification of growth in higher return portfolio, we shifted our expectations from 15 to 19 beyond <unk> to a new to a new range of 17 to 21 billion reais due to the change of mix.
For fee and commission income considering the performance seen at the beginning of the year and our expectations for the rest of the year. We have updated the range of this line to a growth of four 8%.
Regarding operating expenses as we continue to focus on efficient and full control of expenses, even as we consider investments in our digital initiatives and the technological growth of our business. We have updated our previous guidance to a new range between one and 5% for the.
The reasons mentioned earlier when discussing results.
We maintained the guidance for the insurance and expanded loan portfolio lines.
In insurance, we shall move towards the center to the top of the guidance income is expected to benefit from growth in premiums more favorable financial ratios and a lower a lower comparison base in some quarters of 'twenty, one which were impacted by the pandemic in March for example, the insurance group.
The performance of 16% or read very close of the guidance.
The expanded loan portfolio, we are seeing a growth of compatible with the range presented from film to 14% due to the elevated growth in the previous year, but featuring a more favorable mix.
For now we continue to follow our policy of not providing official guidance for the market to NII. This is something that we are about to change next year and I would say that for the sake of transparency. We reported we do not expect this line to pulse and incremental income over the next quarters of 2022.
Thank you for your time and we will now proceed to the questions and answer section.
Thank you we will now begin the question and answer session. You still have a question. Please press star one and we remove yourself. Please press star two and our first question comes from Mario <unk> Bank of America.
Hi, everybody congratulations on the results and thank you for taking my question.
Hey, Andrew I wanted to focus on the guidance.
Here I was looking at your macro assumptions for the year and how they have changed right.
From three months ago.
Basically you are expecting a higher to meet.
Higher inflation and higher GDP growth than before.
<unk>.
What caught my attention.
We expect inflation to be much higher than before.
Are you expecting the <unk> to go up to 12% versus 7% before.
I wanted to understand how does this tie in of our lower operating expense guidance.
Because when we look at your personnel expenses. They are about 40% of your expenses. So you just increased salaries by about 11% last year I would imagine that the negotiations this year are going to be tough again.
And we should be thinking about double digit growth again, so so again help me understand a little bit better why.
We're expecting higher inflation, but more expenses.
Same thing.
We found the provision charges.
As you mentioned right you're seeing it.
Shift in your loan mix towards riskier loans.
And that is helping your net interest margin.
But you continue to stay the Npls are only expected to go up another 10 to 20 basis points and then remained stable throughout the year. So it seems to me like your expectations for Npls have not changed.
But you are expecting.
Higher provisions that before so just trying to understand here like.
The thinking behind the new assumptions. Thank you.
Mario Thank you very much for the questions.
You are right, we do see a much higher inflation.
And.
Much higher interest rates, especially in the pace.
Of initial expected and besides that we also see.
The GPM in IPC.
And we can see that from now on.
<unk> seems to perform better than the GPM.
What benefits our insurance business.
Correct me right so basically.
What's happening to regarding to our previous expectations is that everything happens much much faster.
Inflation, Brazil occurred much much faster than initially expected the central bank.
Decided to be very hawkish and according to the less signals that we have this Mike as you go along and this helps in all of the lines that we have revised the guidance regarding to expenses.
We are extremely conservative on our cost and expenses.
Have been reducing it on a monthly basis, despite of inflation and although we shall have.
Are you sort of labor agreements.
By September October .
We understand that closing branches transforming branches into.
Units of services or <unk>.
And that will help us to grow.
<unk> costs, besides that we have a natural.
Reduction in hours.
Steph, although we are increasing.
Personnel in it.
And all kinds of.
Digitalization efforts.
Can see that we have been.
Reducing our labor force.
<unk> space and <unk>.
Besides that when you compare the.
The expenses that we had last year with digital with this one you shall see that there is a line that we named others. In this line of others. There are several provisions in significant amounts that we shall not have this year that's.
That's a key element to understand how we shall we decreased expenses.
Just to give you a flavor.
We believe that we shall be.
From the bottom to the center in the guidance for expenses. So we are even more.
Confident that we shall keep it on a very good control.
Regarding to provision and our guidance is first of all it's call regarding its all related to the expected losses are.
Our models of expected losses, given the scenario, we are leaving and of course, we are living in a volatile one.
World the scenarios can change dramatically as we have seen award that no one was expecting and so the oil prices going even higher.
One of the points that also affect the deflation.
Together with the prices in foods.
And so it can happen, but according to the situation that we see now.
We see that we have already provisioned in the past much more than the other banks therefore.
I don't have to make revisions for just the adjustments in our mix is the $2 billion range that we have.
Better have put extra to that so it's pretty much aligned to begin NPL. According to our calculations. It represents around 96% of the NPL and it's.
It's a result of the mix and more important to us is not the level of provisions.
How is the results in our spread so when we compare our gross spreads minus the provisions that we have to have according to our models.
We do see an increase in the growth of net spreads so it make us comfortable that the level that we are working on is accretive.
Okay.
Remember what I was trying to get here is the incremental news that we've had since three months ago.
MISO on operating expenses it seems to me the incremental news that we had is higher inflation.
The other line I think you already expected that to be coming down because your original guidance was already for expenses to grow below inflation.
No.
The only thing that I still don't get it like the incremental news is higher inflation, but at the same time, you're reducing your expense.
Is there something else like structurally that you think that you werent seeing three months ago that youre seeing now.
Two two.
Make you more comfortable with your new range.
Yes, a couple of other things model first of all we have a speed up.
The closures and transformation of our branches. So we see we see now more rule that initially.
By the beginning of the year regarding to <unk>.
Savings dollars. This these measures in our branch network and the second thing is that we have been able to to signed much better agreements with our suppliers extending scanners and it's bringing a significant reduction in our expenses.
Okay and then on the.
I see.
Same question with regards to the provisions like you said, maybe provision based on expected losses.
And now you expect losses to be higher which is expected.
Makes sense to me.
But if you're thinking that our expected losses are going higher why not forecast higher npls.
And I'm trying to say <unk> bin.
Too optimistic by seeing the Npls are only going to go up another 20 basis points and then they stay flat because like you said youll models that the early new debt expected losses should be rising.
Well excellent question.
Basically all of our portfolio is not only comprises the binding visuals.
Also comprises by Smes and especially large corporates.
We have seen a reduction in the NPL awful large corporates, if you take a look at the our whole portfolio and its breakdown.
Youre going to see that a significant part the vast majority is off.
Large corporate names therefore, we are able to.
Make gains.
Regarding to the lower delinquency ratios in the large corporates and compensate the mix in each of visuals and.
Smes, we do expect this.
Level two grille.
Grill with this second quarters as we have discussed it but received stable.
In our models for the second half of the year.
Okay.
Alright last question also related to guidance is on the NII with clients right you are pretty much now.
Double the growth expectations for NII clients.
I understood from your comments that you are improving the.
The loan mix is better than what you thought in your ability to reprice is also better. So it means I think less competition in the system.
But at the same time also youre forecasting <unk> to be up.
To be higher by 150 basis points than what you expected at the beginning of the year can you help me understand.
The impact of the highest elite on your new guidance for client NII.
So what I'm trying to get is how much of this.
Higher growth is related to the higher sandeep.
<unk>.
And how much of the higher growth is related to better spreads and better mix.
Well.
Very good question first of all when.
When you will see the deposits that we get from clients.
A higher <unk>.
Bring us higher income from that.
The second thing is that in order to cope.
In order to compensate.
The reduction.
We naturally shall see in line of business that we have lower spreads such as mortgage financing. So this shall be shall represent a reduction in terms of growth as you would see in the previous years. So we are focusing on more credit cards.
And similar lines of credits what give us higher spreads.
Have a very.
Selection.
Back into by our models, our experience artificial intelligence and analytics. So so far we.
Have perceived that the lower.
The problem that the average industry is getting from that.
Remember that.
We are the leaders in payroll financing and we use.
So he can discuss payrolls from companies. So these bring us more individual clients, but with a better collateral than the rest of the industry. That's the reason why we are able to keep the NPL levels low.
As the rest of the market, we expect <unk> to remain.
Grill it a bit and then remained stable by the second by the end of the second semester. The second half so according to our models.
We are comfortable with.
The clients margin just to give you a flavor nowadays we are running at 19, 6%. So it's very likely that we shall be.
By 'twenty, one or 'twenty two.
Guidance.
If this is something that.
Our care result to the next year. So this is this really positive caused by the end of the day, we are renewing our portfolio.
So you shall see a much healthier and with higher margin portfolios for next year.
No no that's okay.
It just surprises me ranked them three months ago, you thought that your client NII is going to grow on average, 10% now you're talking closer to 20%.
So Brian just made that so much has changed from three months yes.
Is implicit in our comments, we're also conservative in our guidance.
And we provide that.
Okay guys. Thank you for your questions.
Our next question comes from Thiago Batista UBS.
Hi, guys.
Only to a very small question the first one about the guidance.
You guys raised.
The brokerage space.
Between 2008.
Comment, which type of products should lead these higher growth.
Or can you elaborate a.
A little bit more what are the main call.
Helping this growth.
101.
A question about the accounting you book it this quarter.
From or differently.
The intangible assets.
So to see that the difficult couple of lines at a higher amount of software expense.
If I'm not wrong, one 4 billion this quarter and last year full year was $1 seven.
You've kind of inclination report the hike in this.
<unk> expenses.
Expenses that was capitalized.
This is related to did you or any other explanation to this slide.
In this line.
Hi, Thiago.
<unk> the second one the capitalization.
But basically it's related to.
The.
Two years.
Service contract.
For which we paid in advance so basically this.
Counting procedure is free standards, we say now we're going to take the service over the next two years and we recognize the expenses over this two years is mostly.
Software related service contracts.
Let me get the first question here regarding to our guidance.
On fees right.
Basically we see the benefit of credit cards.
You have a red mention here.
Spiking and.
We understand that we have even a.
Deeper route to go basically we have been growing the base of credit cards, among our clients existing clients.
So therefore, it's a profile that we know very well.
We also see growth in checking accounts, we have added more than $2 5 million.
New checking accounts.
When you take.
Taking into consideration the high interest rates that we are leaving.
We also see a rule in our asset management to Grill <unk> breath.
It has an excellent grade of fixed income funds.
The investment bank shall suffer on the IPO and M&A side, but it has a very good sticks at income practice. So those would be I would say that our the.
The alliance to benefit the most.
Okay.
Currently I think Randall and connection.
Thank you. Our next question comes from <unk> Goldman Sachs.
Hi, good afternoon, thanks for taking my questions.
A couple of questions also.
First on your asset quality, just can you give some color on the increase in individual mpls and how much of that was driven by just underlying deterioration in some of it how much of it was just simply the mix because you grew so much faster in unsecured credit like credit cards and personal loans and then my second.
Question is kind of on the back of that right I mean, you're going unsecured credit at a very strong pace credit cards in particular, 8% quarter over quarter, 45% year over year, how sustainable is this growth or maybe or how quickly should this decelerate, particularly as you kind.
Kind of expect the expected losses.
Our increasing so just help us think about that growth in the context of the current macro environment.
How we should think about it going forward. Thank you.
Thank you Tito.
Regarding asset quality.
The increase Npl's comes mostly from mix, especially the <unk>.
Very.
Strong growth in.
In credit car.
Our revolving loans.
That is actually not growing.
More than it is.
As a percentage of the.
Transactions in the past, but since we had this big increase.
In the.
Actually the revolving goes goes together I would say credit cards respond for the bulk of the.
The growth in the quarter followed by other.
Risk.
Yes.
Credit lines, where we had also.
Higher growth.
<unk> changed the mix regarding.
Credit cards.
The growth.
As a result of our strong performance, adding new clients and we're growing mostly.
With clients coming from Bradesco <unk> client base is not that we are going to the open market to to get new clients are clients. We know we are we have been able to offer new products at <unk>.
Good conditions, and we have being able to bring new clients and also activate.
New cards.
And source for a part of it.
There.
Part responsible for this strong growth is the normalization of the economy.
The travel and leisure expenses are growing.
<unk> strongly with the reopening people starting to travel again on top of that you have inflation on these lines.
Tickets as you know have went up a lot and other.
Travel and.
In laser.
Related.
Expenses.
Say inflation as a whole.
Yeah.
It is responsible for some of this.
Growth on top of our own growth due to the addition of <unk>.
New new clients and as I said, the reopening of the economy I would say this is kind of the.
The main point that explain this this is strong growth, but just.
Just highlighting that we believe we are doing also a really good job, adding new clients to our base.
Thanks for that that's helpful. If I can ask a couple of follow ups on that actually.
So.
That you expect Npls to increase only like 20 bps next quarter, and then kind of flat is that an indication also that.
The shift in mix is going to slow down so the.
The growth will be more even issue is that how we should read into that.
And then second just on.
The clients the new clients, how much of that coming from our digital channels like Max is that providing a big benefit yet or just to understand these new clients that you are giving credit card loans.
In.
The credit card business I.
I would say.
Virtually all the.
Revenues are volumes come from Banco Bradesco at this point really next is doing a good job in terms of growth and the base of clients, but in credit cards specifically.
They're growing but the bulk of the volume comes from Bradesco itself and also we'd like to that's what I mean.
I mean, we're growing in.
Both the number of clients and number of claims that have credit card, we're growing or a portfolio of credit.
We grew our in terms of total clients, 153% year on year and we grew in.
The loan portfolio, 250%, but remember that in our case.
Because we actually changed the number of things in the collection process and obviously, even in our the communication process.
Our clients that have credit cards before they received their statements I mean, we.
Didn't use to send notices so maybe change the entire communication.
Methodology with the clients, we actually had a decrease in in India.
In delinquencies.
Obviously, we're monitoring and seeing how much of this new scenario impacts our clients, but in our case I mean considering that.
I would expect that Thats, what youre trying to get at.
We're definitely a smaller loan portfolio compared to Bradesco <unk>.
Increasing at a pretty good rate faster than the rate of increase of clients, but again I mean this.
Behavior that we're seeing kind of on a macro level I mean, it's been somehow mixed with an improvement in our own processes.
Alright, Thank you and just on the growth.
Like how that should evolve from here do you expect a slowdown.
The NPL guidance are reflection of that youll be growing less than the unsecured segment yet.
I think considering that a lot of the normalization.
The economy reopening and as the big jumps in volume strong, let's say lower active it affected by the pandemic to a more normal scenario has already played out in the second half.
Of 2021, as we go through 'twenty, two probably we will see is low down in this growth rate. Despite the fact that we still remain at very strong levels.
Alright, thank you.
Excuse me once again, if you have a question. Please press star one.
Since there are no further questions I would like to invite the speakers for the closing remarks.
Well.
Once again just to thank you all for making the time to be discussing with us.
If for any reason, we did not have the time to discuss.
An additional topic or you want to get more information on any specific data our investor relations team is going to be more than happy to address any.
Any issues you may have thank you very much and have a great weekend.
That does conclude Bradesco conference call for today. Thank you very much for your participation have a good day.
Okay.
Yes.
Sure.
Sure.
[music].
Yes.
Yes.
Yes.
Yes.
<unk>.
Sure.
Yes.