Q4 2021 Banco Bradesco SA Earnings Call
Speaker 2: only for specific needs and for S&Es and also individuals this is going to be more resilient in some port soldiers or less depending on the credit so that's the trend.
Speaker 2: And what we can see answering your question about credit quality.
Speaker 2: We already had delinquency rate, historical rates that hit.
Speaker 2: 5.5% over 90 days. But on average, we speak of 3.5 or 4, delinquency of 2.1. It increased 0.2. We mentioned that in our previous meeting with you. It was only natural, and that delinquency would go slightly up. We all know it cannot.
Speaker 2: rates to go back to normal. In 2020, we had several reprofiling operations, financial reorganization, extending our operations, and the portfolio is overdue but delinquency over time was also there. So it's out of intuition to assume delinquency expected to keep on growing.
Speaker 2: In a very controlled manner, that's what we see in our credit models and in the new harvests that are being generated. But there's not a peak.
Speaker 2: but a more moderate, modest growth of delinquency, but also with a good quality of credit and coverage ratios, both for the renegotiated portfolio and delinquent portfolio, sticking to very high and comfortable levels that we presently have. Very clear. Thank you.
Speaker 1: Thank you for the opportunity. Can you hear me loud and clear? Yes. Okay. Thank you. Good morning.
Speaker 1: I know that you're not going to give a guidance on that.
Speaker 1: with the size of the security reclassification that was carried out in this quarter.
Speaker 1: Do you believe this could contribute to the evolution of the market vis-à-vis 2022?
Speaker 1: Could you give us some color on this evolution, please? And I have a second question as well. And it has
Speaker 1: We saw that some lines are already bouncing back.
Speaker 1: to a claims ratio close to the pre-pandemic.
Speaker 1: such as life and P.H.C.
Speaker 1: You give us a significant growth vis-à-vis 2021, and you said that you believe that there will be a reduction in claims.
Speaker 1: So could you give us some color about the levels or give us some figures, especially about life and health because of the recent development of the omicron variant?
Speaker 1: Thank you for the question. When we have a very fast growth in interest rates...
Speaker 1: a very short time, seven, eight months. This is what happened here in terms of interest rates.
Speaker 1: So that was a one-off situation.
Speaker 1: that we did regarding the securities with the lower interest rate so that in 2022, we could have, we could go back to normal in our securities portfolio. So this was a one-off situation. And we believe that in 2022.
Speaker 1: It will be lower than what we had in 2021. In terms of insurance, your second question, you are correct.
Speaker 1: was much better in life and in PhD.
Speaker 1: And so you see this issue in British school health because there, of course, there is always a health issue, but this doesn't point to a growth as far as we can observe.
Speaker 1: We have been hearing this and reading about this.
Speaker 1: the degree of immunization of the Brazilian population led to the fact that the new variant is it is more contagious however it is less aggressive.
Speaker 1: Because of that, hospitalizations are shorter and the cases are not as serious or as grave as we had in the previous variant.
Speaker 1: But I would like to ask the CEO of our insurance company to add to what I said.
Speaker 1: I think you said it very well and you have already mentioned all the points that were mentioned in your these questions.
Speaker 1: we see a higher degree of contagion. However, it is mitigated by the vaccine and the cases are less severe than the previous variant in Europe .
Speaker 1: talked about the reduction in claims ratio in the third and the fourth quarters and in life from 60.9 to 34.9%. You can see the impact on the third quarter and the severity we also see in PNC and in home insurance and we see this in health.
Speaker 1: However, we do not expect to find in 2022.
Speaker 1: the same five billion reals that we paid.
Speaker 1: because of COVID in 2021, so the reduction for health.
Speaker 1: where we have more primary care and then
Speaker 1: it is more in primary care than in long hospitalizations that are much more expensive. And because of that, we can have a better visibility for 2021. Just to follow up here.
Speaker 1: the highest number since August 26th. So we should see an increase in claims ratio in life in the first quarter and this would only be net through.
Speaker 1: It is only natural to expect an increase but not as intense and not as high. And the best cases that we have just mentioned tend to be reduced.
Speaker 1: a significant reduction in deaths. So this is our visibility right now as we speak.
Speaker 1: And I would like to have one follow up to the other question without you.
Speaker 1: The following, are you working with a scenario of compression vis-a-vis 2021? Or is it more constructive and about the adjustment?
Speaker 1: We already had visibility in terms of inflation, it was much more visible.
Speaker 1: Haven't you carried out this adjustment in the third quarter when we already had this visibility? Why did you postpone it to the fourth quarter?
Speaker 1: we expect a compression vis-a-vis 21.
Speaker 1: And there are signals about the growth, consistent growth up to me.
Speaker 1: So we do not give a market guidance because of that, because of this volatility that we see.
Speaker 1: this is regulatory, either I do it until June 30 or I have to postpone it. I cannot do it because of regulations. So we do not have this kind of option.
Speaker 2: The next question is from Slavio Iosche, the Bank of America.
Speaker 2: Hello, good morning everyone. Good morning, Otavio. Thank you for the opportunity to ask questions. I would like to go deeper into guidance.
Speaker 2: My first question has to do with client NII.
Speaker 2: you project growth for 2022 below the growth of the portfolio. At the same time, Mottagio, you made comments on the slides that credit cards...
Speaker 2: and this SME segment with larger spreads, this is growing faster. Whereas real estate and payroll deductible low, we can see a slowdown even though growth remains good. So what about the mix?
Speaker 2: Could we assume a growth in the client NII more quickly than the portfolio? This is not what the guidance shows us.
Speaker 2: So can you see some pressure on funding or this transfer of higher funding costs at the end of the day doesn't happen at the same pace? And my second question has to do with fees in the guidance, fee growth in the guidance. 2021 was already challenging, growing 4%. What Shia will do for me is missionary award money is coming out to Go Developers,
Speaker 2: to some extent is shy. If we think about the expansion of the portfolio at 10 and 14, it gives signs of opportunities for growth and a strong growth of the client base, but fee revenue doesn't follow the same rate. So I'd like to know if you think it has to do with competition, or why would we have this shyer growth compared to the rest? Thank you.
Speaker 2: Thank you for the question. It's a pleasure to hear you. When it comes to client NII, if you think about the average of the guidance, both in client NII and also credit portfolio, we are in the same bracket, so to speak, same range. However, we have a challenge.
Speaker 2: When you think about growth in credit cards and these portfolio's are mentioned, the first impact is a L.L. and then it starts to work on a revenue over time. So this is not immediate. There is appropriation of revenue over time.
Speaker 2: So this may be the first important item. We have expected growth, but for instance, if you think about credit cards, the impact of ALL is from three to 4%, and then you start working on revenue appropriation over time, it's not immediate, like I said. So this somehow explains the growth in the client NII.
Speaker 2: And we also have a number of our items.
Speaker 2: we should always bear in mind that every constituted portfolio has to run over time.
Speaker 2: We make up a credit portfolio that is extremely high for a financial institution, as big as Prodisco, with a lag rate of 2% a year. And now you have to run the whole portfolio again with a higher interest rate in order to capture a best NII. And it takes time. The average time of maturity of our operations is around 8 to 13 months.
Speaker 2: 18 months. So it takes a while. Our teams naturally work in order to renew and to make the portfolio run even faster. So this might explain the slight difference we see between growth in the credit portfolio and growth in the client NII. Naturally, we'll be pursuing growth as quickly as possible and the best we can. When it comes to fees and fees and commissions,
Speaker 2: This is going to be tackled by regulations by the central bank, by new entrant startup companies, FinTech.
Speaker 2: FEDS also brings a reduction, a dramatic reduction in fees we noticed this last year. So our challenge and the beauty of our challenge is to create new profit pools, new revenue sources, origins so we can...
Speaker 2: have a balance here considering pigs or credit cards or more fierce competition pertaining fees and also open banking that is expected to accelerate over 2022. So in 2021 to some extent we offset this context and that's why we can see this growth in fees which is a revenue that tends to be more challenging.
Speaker 2: because it also depends on the competition, not only on ourselves. The price is set by competition, the client, the market. So that's the challenge behind growth and the ability to improve client NII. How can we do that by effectively improving the number of clients we have in your organization? And that's why you put it very well, the growth in the number of clients at the bank. So these new clients can bring new fees, new revenues, new credit operations. So we manage to run in this area. So it's always.
Speaker 2: a challenging growth line owing to the size it has and the financial volume which is very big. But we have good options and good levers to touch upon this line of revenue.
Speaker 2: Got it. Thank you. Now, you also mentioned in your last part of your answer, you talked about regulation in new entrants. Do you see any news in this area?
Speaker 2: No, Flavio, I guess the new topic is over banking.
Speaker 2: Tix is already here, already deployed. It turned out to be a
Speaker 2: There's no way coming back. It has come to stay and this is good to the Brazilian market and the Brazilian population. ThisCoinc historic figure is just an authoritative hot topic right now.
Speaker 2: has to do with open financing and the implementation of open financing, the speed of implementation, which adds a new structure in terms of mobility for everyone in order to change their account, their credit operations upwards and downwards, bringing agility.
Speaker 2: A while ago, remember, if you wanted to open a bank account, a company for instance, a financial institution, you physically had to be at the branch to do that. And now the population, even low-income population, it is a lot easier.
Speaker 2: because Brazilians are very familiar with mobile phone operations, so it's very easy to open new accounts in different companies. So that's why it's important to focus the efforts on a pleasant customer journey.
Speaker 2: So we can really have everything at the core, the preferences on your side. It's clear. Thank you, It's clear. Thank you,
Speaker 1: regarding your guidance about AOL.
Speaker 1: I would like to conciliate the 14% information with the guidance that you gave. Is it going to...
Speaker 1: I would like you to consolidate the growth in your AOL with your.
Speaker 1: and the comfortable coverage ratio for the end of the year. We try to give you a guide...
Speaker 1: That will bring about a higher spread, as we said, and what we have been seeing.
Speaker 1: in the Harvard originated is that we have comfortable levels of delinquency. We know that the year is going to be quite challenging even in terms of the growth of our portfolios.
Speaker 1: with the operations that I referred to.
Speaker 1: large corporations not generating.
Speaker 1: And we talked about it when the pandemic was very strong in 2020. And this is why we gave you this guidance.
Speaker 1: 10% to 14% sounds quite aggressive, but the growth in our client base gives us
Speaker 1: in the sense that we will be able to grow credit with quality, and this is what we are seeking.
Speaker 1: In this last quarter, the growth was 0.12.
So is the 37 billion, 56% higher year on year and the number of finance units exceeded 125000 homes, 48% more your own ear. The expectation is for continued growth in the real estate loans.
Speaker 1: And the operations that we carried out together with you with regarding the.
Speaker 1: reprofiling and renegotiation of that they have already come to an end.
But at a slightly lower rate than in 'twenty to 'twenty, one due to the higher interest rates.
Speaker 1: We just have a small balance that is already provisioned for.
<unk> posted a significant growth of 46%, reflecting our historical support to agribusiness. We are the leader among private banks in this segment and we operate through 14 regional platforms, including Agriculture Engineers, and we distribute credit product services that support the modernize.
Speaker 1: and the renegotiated operations with clients.
Speaker 1: So the level of provisioning is lower because of that.
<unk> of the sector and we are making massive investments this year to deliver a fully digital ecosystem to our clients complementing our performance more broadly in a fiery neighboring partnership with one of the worlds largest plays in the technology sector.
Speaker 1: And I think we will be able to balance the growth in our portfolio and to conciliate the two sides that you referred to.
2022 credit outlook is for double digit growth with acceleration of their lives with higher spreads, which will lead to an improvement in client NII.
On slide 19, now talking about provisions.
Speaker 1: At the end of the year, could you expand on that?
Credit provision expenses totaled 15 billion 41, 6% lower than in 2020, when there was an impact from the strong increase in positions that anticipate that the effect of the pandemic on delinquency.
Major growth in higher spread loan operation and four 221, such as credit cards personal loans at working capital had a slight impact on the amount of provision in the quarter and on the cost of risk and this is the good cholesterol so to say because it come from the portfolio growth.
Speaker 1: We have a lot of room there. It would go back to historical levels.
Speaker 2: question. Henrique Novajo, Chant under.
Even so the indicator remained below historical levels.
Speaker 2: Hello, good morning. Thank you for taking my question. My question is about loan portfolio. I'm sorry to go back to this. Fébrile Bon launched a survey showing the market posting growth of 6.5% loan for 2022. I know this is downwards owing to public banks, government banks, but 6.2% is about 50%, the middle of the guidance of Bratisco. So my question is, what about this growth in the middle of the range? It sounds strong to me.
Our npls coverage ratio over 90 days remained at a very comfortable level and above the pre COVID-19 level at $2, six 1% and when including the entire renegotiated portfolio 111%.
The coverage indicator over 90 days, excluding 100% provisions remained stable our coverage is the highest in the market provisions should continue to adjust over the next few quarter fall in FY 'twenty the process the normalization of credit.
Speaker 2: Is it because Bradesco has a different reading from the macro scenario?
Speaker 2: maybe a more benevolent reading for 2022 or is it the same reading and a Braddisto is highlighted as a more aggressive portfolio growth? Basically, this is it. Thank you. Henrique, thank you for your question.
The situation now on slide 20, the renegotiated portfolio totaled $28 6 billion. It is important to point out the volumes continue to decline in comparison with the total portfolio. The indicator reached four 7% at the port already approaching the pre pandemic level the.
Speaker 2: I guess there is an agreement in the market when it comes to year 2022.
The proficient volume was 62, 3% representing three five times the observed delinquency, which continues to return to normal and is approaching pre pandemic levels.
Speaker 2: growth in credit operations, February mentions 6.5. Here at the bank, we consider our economist 7.58.
Slide 21.
Delinquency rates remained well under control and at levels that are lower than the pre pandemic period due to the solid portfolio management evolution of credit models and client centric procurements had renegotiation journey.
Speaker 2: And based on Bradesco's business model and performance countrywide, you can see their rural credit last year increased by 40%, real estate increased by 50%. And then, vehicle financing, we had the market lead.
In line with our expectations total delinquency over 90 days Rose 20 bps indices for individuals and Smes worthy most impacted absorbing the effect of the renegotiated portfolio referred to on the previous slide gross credit provision expenses were $5 1 billion in the quarter.
Speaker 2: So we understand that we brought 15 million new clients via Next, Bits and Agora.
Speaker 2: And now we have DGO which also has around 2.5 million customers.
Representing 88% of the NCL NPL creation, because the operation of the renegotiated portfolio that became delinquent had a higher professional level ready that required less of a supplement and finally I would like to point out that in this quarter as in previous quarters, we showed both performing and active.
Speaker 2: So we understand that we have conditions to grow beyond the market even though we understand the market is right.
Speaker 2: The assessment is correct. And I even said, we don't consider to have significant growth at big or large companies. It has to do with a natural cost of money. But as for other business, bringing 15 million new clients as we did with BITS, Next, and Agora, and another 2.5 million new clients via digital. So we also have a natural growth, nearly 2 million new clients last year.
Portfolio nonperforming adaptive portfolios with the rationale of our credit management process. We use. This method is whenever we believe there is more value creation in the sales ended the using of our teams to collect overdue loans.
On slide 22, the total NII presented the strong growth in the quarter with an increase of 8% year to date. The evolution was one 3% client NII for the ear topped six 5% exceeding the upper levels of the.
Speaker 2: So at the end of the day, we feel comfortable to understand that we can grow slightly beyond the market estimate. So this is how we assessed last year and that's how it happened, so much so that we revisited our credit growth.
Guidance as a result of the higher average volume of operations better spreads in the product mix. The re competition of spread as a <unk> 21 was of great importance to offset part of the negative variation in one half 'twenty, one and we will continue to be significant in the coming periods.
Speaker 2: forecast for last year and we were above the top of the guidance.
Speaker 2: for 2020 and 2019. So there's these in which we're managing to add new clients. And above all,
The reduction to market NII, which posted a record results in 2020 is due to the impact of the higher CDI on the MLR.
Speaker 2: the fact that we managed to have
Speaker 2: a mix of different conditions, Agora, Bitch, Next, Source and so many businesses. And particularly because today we have a digital journal that is very simple, online, real time in order to serve our customers. So she put it all together.
M positions, partially offset by the higher result from our own working capital.
Slide 23.
Fee income surpassed eight 8 billion in the quarter, an all time high and the amount was 34 billion for the year a growth of four 1% above the center of the guidance the volume transacted on our credit cards. This quarter once again performed very well exceeding.
Speaker 2: It's also or nearly mandatory for us to challenge ourselves to go beyond the market rate. Excellent. Now, still along the same lines about credit and provisions. When I check the guidance, the middle of the provision guidance, it grows more than the portfolio already mentioned that provisioning.
66 billion exceeding even the pre pandemic period and this growth has allowed this line to develop by about 10% in both the quarterly and annual comparison.
Speaker 2: and the credit next. So if I think about the top of the guidance.
Speaker 2: and considering that you reduced the coverage this year, my reading, and I ask you to comment on it, I assume Bradesco looks at 2022 and doesn't see any problem about delinquency. It might go up, but nothing to be a problem. Is my assumption correct? That's correct. I could
The ear to date, 7% increase in the checking account revenue aligned as related to the growth of our account holder client base by one 8 million over 12 months on top of the higher business volume of correspondent banking gaping. They overall resumption of commerce.
These movements upset compensated for the revenue losses due to the picture on the right side of the slide we can see the total number of clients, reaching $74 1 billion as well as a number of Bradesco householders $32 6 million not including net 10 bits and this number of checking accounts.
Speaker 2: Because it's A-L-L or normal delinquency that we see, we've been seeing over the years, our love.
Speaker 2: that were even considering a worse scenario, they already take it all into account. So we don't have any specific problem, like I said, that might require higher additional provisions. We have provisions, significant provisions over 2020. So that's why I agree with your assumption. We don't see any serious problems.
The annual growth of three 9% and income from credit operations as it related to the expansion of the portfolio and the consortium management caused study and brokerage services and financial Advisory services contributed significantly to the annual growth in fees, despite posting a decline in the <unk>.
Due to the lower number of working days.
Speaker 2: Right, Sireki is reminding me it's a normal scenario.
Now on slide 24, our operating expenses, even in an environment of high inflation with IPA of 10, 1% and our GPM up 17, 8% along with a collective bargaining agreement up 11% total operating expenses increased only.
Speaker 2: what we had pre-pandemic and not necessarily a problem. Excellent. Thank you.
One, 1% a clear sign of efficient cost management.
Speaker 1: Good morning everybody, I would like to ask a question about the reclassification and two questions in fact.
The 6% increase in personnel expenses for the ear is due to the higher provision for profit sharing and the collective bargaining agreement started in September at.
Administrative expenses increased use of digital channels and the optimization of our physical presence center processes offset any inflationary pressure and also the higher cost associated with technology investment and customer acquisition for Nexgen.
Speaker 1: regarding this reclassification.
Speaker 1: in this ear would carry out.
Speaker 1: the mandatory payment of higher taxes? The second part of my question...
And the increase for the year was 1.3.
3% variance up other income or expenses primarily explained.
Yeah.
By the change in the supplementary proficient of insurance, we will see a reduction in the number of branches and increase in the number of business units in 2022.
Speaker 1: would mean additional gain of financial revenue. So I would like to know the duration of that.
In 2022, we will see a reduction in the number of branches.
And the other transformed in business unit now.
Speaker 1: You have about two years of a collective result or is it going to be deferred?
Now on slide 25.
Data of.
About our insurance business net income posted an annual growth of 4% and it would have been around eight if it were not for the increase in social contribution growth of approximately 11% in revenue. The sound performance observed in all business areas was followed by an increase in the number of lives insured vehicles then.
Speaker 1: First, I would like to clarify this and then this will add to what I see.
Homes as the insurance group was able to take advantage of opportunities in various distribution channels and business partners.
Speaker 1: Was exactly to mitigate or to improve 2022, because the interest rate was 12%.
<unk> performance in digital channels.
Income from.
Insurance operations saw an improved performance in the second half and was in the middle of the guidance is for how much is related to the improvement of the claims ratio due to the reduced effect of the pandemic as well as improvements in the financial results for the period.
Speaker 1: And this will be reflected over the next three years, 22, 23, and 24.
Speaker 1: This has no tax effect whatsoever.
The volume of Covid related claims in the four to 'twenty one was the lowest since the beginning of the pandemic. Despite the more recent increase in demand due to the army CRO variant, we did not see the same severity as in previous periods.
Speaker 1: Yes, there is no tax effect neither in 2021 or in the following year.
Speaker 1: We had no benefit regarding the margin that referred to in 2021.
Hospitalization cases.
Such less frequent and recovery has taken place in a shorter time, we provide our policyholders with entergy debt at mill goes toward North America land to support a diagnosis.
Speaker 1: because we can only do this at the end of the half year balance sheet. So this was done on December 30th. And when we carried out this operation, and the result that would be negative for three years, we brought this forward to 2021.
And it should be noted that in 2021, we had more more than 5 billion in claims posted because of the pandemic. This volume emphasizes the strength of our balance sheet and the importance of insurers to mitigate the effect of losses on families on slide 26.
Speaker 1: But what about any tax rates from now on?
Our tier one capital closed the year at 13, 7% remaining rather robust and well above regulatory limit even with a significant annual increase in risk weighted assets given the robust growth of our loan portfolio Mark to market of securities and payment of interest on equity and dividend indicate.
Speaker 1: that tax rate was 5% higher of social contribution, but we do have a tax credit.
Speaker 1: So we can activate the stocks credit at the same amount. So one offset the other. Thank you very much. Very clear. Next question. Daniel Vad, Credit Suisse.
For liquidity also remain at rather comfortable levels.
Now slide 27.
The final one before we move on to questions.
As we mentioned at the beginning of the presentation uncertainties will remain in 2022, but we continue to believe there is room for growth chiefly due to our business model and technological innovations in recent years.
Speaker 2: Three minutes, but technical provisions, they are at the same level in Q4. The same level.
The loan portfolio grew 18, 3% in 2018 to run above the top of the guidance and we see growth in this line for 2022 between 10, and 14% and tried NII growth was six 5% in 'twenty, one also higher than our previous estimate for 2022 we expect.
Speaker 2: She will be at the top of the guidance at 14 billion.
Speaker 2: if we consider a more constant insurance result.
Speaker 2: Where can we have this leap to come to a more reduced guidance if you think about the fourth quarter?
To grow this line between 8% to 12%.
In fees, we grew four 1%.
Speaker 2: and we know we might see an increase or an improvement in claims ratio owing to COVID.
Our expectation is for an expansion of 226.
Total expenses grew by one 1% despite the rise in inflation and guidance for 2022 ranges from 3% to 7%, including our optimization initiatives to mitigate the effects of inflationary pressure and also to preserve room for important investments in technology and growth of the <unk>.
Speaker 2: So what should happen in order to have a lower guidance?
Speaker 2: If we take into account the fourth quarter, would it have to be with premium or financial return? Where is it? Hi, Danielle. The Starship Holly Van Gogh.
Estimate base.
Speaker 2: and our financial department also can answer your question. Yvonne, over to you. Thank you, Octavio. Hello, Danielle. Good morning.
We saw a five.
For five 5% and tightening in income for insurance in 2008 was due to the impact of claims from Covid.
Speaker 2: Our outlook for 2022 considers growth in our revenues. In 2021, we launched about 15 new products in several areas in all kinds of segments in the insurance group.
In the middle of the guidance that we revised and we talked about that did you and our forecast for 2022 is 18% to 23% growth with the growth in premiums and reduction in claims. So we believe that the worst phase of the pandemic is water under the bridge expands.
Speaker 2: decisively in our revenues and sales. If we look at 2021, the growth in sales of 70 billion to 82 billion reals already shows.
The credit provisions ended 2021 that 15 billion to at a very low level went for 'twenty. Two we expect a range from 15 to 19 billion and declined mainly due to the growth of the loan portfolio.
Speaker 2: how it can happen and considering all the complexities of 2021. As for provisions, I'm not saying we are only conservatives. We were more than that. We were realistic.
We expect market NII to foster further reduction in 2022. Thank you for your time and we are now available.
Four questions.
Speaker 2: And this reality also has to do with a vibrancy of the Bradesco brand.
Thank you very much.
Speaker 2: When it comes to provisions, we'll keep on working them, compliant not only with the regulation,
We'll begin now the question and answer session.
Speaker 2: our commitments, what is mandatory, but above all, keeping an eye on compliance with our agreements, with our insurance holders and clients. If you think about the growth of premium around 10% compared to 2021 and also finance benefits from CDI.
Participants in the Portuguese order you can ask questions. Other participants will be in listen only mode. If you want to ask questions. Please press star one if you want to remove your question from the queue. Please press star.
To the.
The first question is from he can't do Bush Bible with BTG Pactual over to you Sir.
Good morning, everyone.
Speaker 2: and the financial performance is an important part.
Thank you for taking my question.
Firstly, I would like to understand that about delinquency over the year.
Speaker 2: of any insurance company in Brazil, the US and in Europe . So comparatively speaking we could say
The unit expected to be a little bit more stable or if we think about an increase in delinquency does it make sense to consider normalcy this year and on top of that could you. Please make some comments.
Speaker 2: that we expect to have something around 65% of operating growth of the insurance group.
On which segments of the bank are expected to have growth in crowded over 2022 thank you.
Speaker 2: and growth also back to this financial performance something around 35%.
Speaker 2: So our guidance between 18 and 23%, for all these reasons, give us some comfort, a lot of comfort. And naturally, and naturally, and naturally, and naturally,
He called the.
If your question has to do with credit growth is that correct.
The first has to do with credit growth. If there is expectation to grow even more and the second is to understand delinquency behavior. This year and does it make sense to consider.
Speaker 2: This is all linked to a slow down.
Speaker 2: of claims ratio, which has to do with COVID.
Normal levels.
Equivalent to pre pandemic levels.
Speaker 2: claims ratio of the elective normal process at a healthcare company.
Chicago for year 2022.
We'll have a <unk>.
Guidance of around 10% to 14% of credit growth slightly below.
Speaker 2: for T&C and auto
Speaker 2: We are all ready to tackle this and we understand that we are comfortable and within the guidance between 18 and 23% considering 2022.
Which was our previous guidance the effect of growth last year, which was 18 point III.
Why do you envisage lower growth naturally this is related to macro economics.
And also growth in interest rates or select rate, which is very steep.
Strong growth.
And also growth in infection rates and expected growth in inflation and I G. P. M. If you put it altogether. This scenario if you consider future rates.
Speaker 1: We would like to turn the floor over to the company for their closing remarks.
Speaker 1: My friends, thank you very much for your attention. It was a great pleasure to be with you today.
Five to 10 years, we're considering 12% to 13%. So we should consider as Brad two or 3%. It goes to 15% to 16% out of intuition and based on our conversations with the business communities, particularly corporate bank.
Speaker 1: and clarify your doubts. Anyway, our whole team will be available to you should you have any additional doubts. Thank you very much for your attention and we wish you a good day.
And big companies, which work with us.
We don't envisage any profitability.
Speaker 1: But at this conference call has come to an end. Thank you very much for participating. And we wish you a very good day. Thank you.
Or it's not right to say that there's going to be massive investments in infrastructure and new business in new plants because <unk>.
Money is very expensive nowadays and in order to be in capital markets. The price charged is also very high so we understand the corporate bank, which holds 40% of our loan assets this growth with the marginal.
Speaker 3: ["The Star-Spangled Banner"] ["The Star-Spangled Banner"]
Out of intuition, we should expect that the business community of big corporations.
We'll be in 2022 with short term out loan using cash in order to meet specific needs, but no investment in fixed assets.
Very few cases, oh into all of the macroeconomic scenario in Brazil in the world and Additionally, with the elections in Brazil. So that's why you'll understand that we shouldn't see a strong growth in the corporate bank.
As for S and knees.
This is more resilient because these companies necessarily have credits and loan as part of the daily operations. They needed to go month by month anticipating receivables discounting checks. So is only natural that these operations will keep on growing as for individuals to <unk>.
Some extent people need to borrow for instance in real estate financing, we expect volume to be lower owing to the interest rate 20, or 30 years with.
An interest rate of 10 is a seasonable unless you financed a tiny amount of the property amounts. So real estate is expected to grow lash as for other individuals loan like credit card over Oh personnel alone and.
Payroll deductible loan this is more resilient even vehicle financing people are expected to keep on using these loans.
And we also expect to be a solution to this pandemic and people are expected to go back to work more often and then increase their expenses with credit cards with their daily activities for food and other expenses. So we expect it to be more resilience so to summarize.
For Big companies, we believe that credit will be more modest only for specific needs and for Smes and household individuals. This is going to be more resilience in some portfolios or less depending on the credit. So that's the trend.
And what we can see answering your question about credit quality.
We already had delinquency rates historical rates that hit.
Five 5% over 90 days, but on average we speak of three five or four delinquency of $2. One increase 0.2, we mentioned that in our previous meeting with you.
It was only natural and.
That delinquency would go slightly up.
We all know it cannot be at the levels they were.
We expect.
Rates to go back to normal by 'twenty 'twenty, we had several re profiling operations financial reorganization, extending our operations and the portfolio is overdue, but delinquency overtime.
But also there so it's out of intuition to assume delinquency expected to keep on growing.
In a very controlled manner, that's what we see in our credit models any of the new harvest that are being generated there is not a peak.
But a more moderate modest growth of delinquency, but also with a good quality of crowded and coverage ratios both for the renegotiated portfolio and delinquent portfolio sneak into very high and comfortable levels that we presently have.
Very clear thank you.
Yoga Friedman's Citibank.
Thank you for the opportunity can you hear me loud and clear yes, okay.
Thank you good morning.
I have two questions the first one.
I know that you're not going to give a guidance on that.
With the size of the security Reclassifications that was carried out in this quarter.
Do you believe this could contribute to the evolution of the market without the 2022 .
Could you give us some color on this evolution, please and I have a second question as well.
And it has to do with insurance.
We saw that some lines are already bouncing back.
Two our claims ratio close to the pre pandemic.
Pre pandemic levels.
Such as life and P&C.
And then your guidance.
You gave us a significant groceries or be 2021 and you said that you believe that there will be a reduction in claims.
So could you give us some color about the levels or give us some figure, especially about life and health because of the recent developments of the army Crown variant.
Thank you for the question when we have a very fast growth in interest rates.
10 point 75.
And a very short time.
Seven eight months.
If this is what happened here in terms of interest rates.
And the opposite is usually very positive.
Yeah.
So that was a one off situation.
That we did regarding the securities with lower interest rates. So that in 2022, we could have we could go back to normal in our securities portfolio. So this was a one off situation and we believe that in 2022.
It will be lower than what we had in 2021 in terms of insurance. Your second question you are correct.
Claims ratio.
Was much better in life and in P&C.
And so you see this is Sheridan bradesco held because there of course, there is always always a health issue, but this doesn't point to a growth as far as we can observe.
We have been hearing this in reading about this.
That the degree of immunization of the Brazilian population led to the fact that the new variant is it is more contagious. However, it is less aggressive and.
Because of the AD hospitalizations are shorter and the cases are not as serious or as great. As we had in the previous variance.
But I would like to answer a few of our insurance company to add to what I said.
Eva.
You're a good morning.
What have you I think you said it very well and you have already mentioned all the points that were mentioned in yard is questions.
We see a higher degree of contagion. However, it is mitigated by the vaccine and the cases are less severe than the previews very edge and York.
Talked about the reduction in claims ratio in the third and fourth quarters ended life from 69 to 34, 9% you can see the impact on the third quarter and the severity. We also see in P&C and in home <unk>.
And we see this in health.
With a lower cost.
However, we do not expect to find a 2022 .
The same 5 billion warehouse debt repaid.
Because of Covid in 2021 so the reduction for health.
Where we have more primary care.
And isn't it.
It is more in primary care then in long hospitalizations that are much more expensive and because of that we can have a better visibility for 2021.
Okay.
Just a follow up here.
Yeah.
Given the severity of army crop that we have been.
Seeing and even with record deaths.
The highest number since August 26, so we should see an increase in claims ratio in light in the first quarter and this would only be natural.
Okay.
It is only natural to expect a an increase but not as intense and not as high and the dead cases that we have just mentioned tend to be reduced.
A significant reduction in debt. So this is our visibility right now as we speak.
Thank you.
And I would like to have one follow up to the other question or talk to you.
I'm.
I don't quite understand.
The following are you working with the scenario of compression with Abbvie 2021 or is it more of a constructive and about the adjustment.
Yeah.
We already had visibility in terms of inflation it was much more.
Visible.
And at least in August and September .
So I would like to ask why.
Haven't you carried out as adjustments in the third quarter. When we already had this visibility widely to postpone it to the fourth quarter.
Yoga for 2022 .
We expect a compression.
These would be 'twenty one.
Because the interest rate is going up.
And there are signals about the growth consistent growth up to me.
So we do not give our market guidance because of that.
Because of this volatility that we see.
In relation to what you said.
This is regulatory.
There I go do it until June 30, or I have to postpone it I cannot do it because of regulation. So we do not have this kind of option.
Thank you very much very clear.
The next question is from Flavio Yoshida Bank of America.
Hello, Good morning, everyone. Good morning, a curfew. Thank you for the opportunity to ask questions I would like to go deeper into guidance.
My first question has to do with client NII.
You project growth for 2022 below the growth of the portfolio.
At the same time, a car view you made comments on the slides that credit cards.
And this SME segment, where larger spreads this is growing faster.
Whereas real state and payroll deductible low we can see a slowdown even though growth remains good.
So what about the mix.
Could we assume a growth in the client NII more quickly than the portfolio. This is not what the guidance shows us.
So.
Can you see some pressure on funding.
This transfer of higher funding costs at the end of the day does it happen at the same pace and my second question has to do with six in the guidance fee growth in the guidance 2021 was already challenging growing 4%.
And growth for 2022.
To some extent is shy if we think about the expansion of the portfolio at 10 and 14. It gives signs of opportunities for growth and a strong growth of the client base, but fee revenue doesn't follow the same rate. So I'd like to know if you think it has to do with competition.
Or why would we have this shire growth compared to the rest. Thank you.
Thank you for the question, it's a pleasure to hear you when it comes to client NII. If we think about the average off the guidance both in client NII and also credit portfolio. We are in the same bracket. So to speak same range. However, we have a challenge.
When do you think about growth in credit cards and these portfolios had mentioned the first impact is a L. L and Daniel starts do you work on a revenue over time. So this is not immediate.
There is appropriation of revenues over time.
So this may be the first important item, we have expected grow but for instance, if we think about credit cards. The impact of a O. L is from 3% to 4% and then you start work in our revenue appropriation over time, it's not immediate like I said so this somehow explains.
The growth in the client NII.
And we also have a number of our items.
You should always bear in mind that every constituted portfolio have to run over time.
We make up our credit portfolio that is extremely high for a financial institution as big as per desk or with Selic rate at 2% a year and now you have to run the whole portfolio again with a higher interest rate in order to capture our best NII and it.
Takes time, the average time of maturity of our operations is around eight to 13 months.
18 months, so it takes a while our teams naturally work in order to renew and to make the portfolio run even faster so that might explain the slight difference we see between growth in the credit portfolio and growth in the client NII naturally will be pursued.
Zero in growth as quickly as possible and the best we can.
When it comes to fees and fees and commissions.
Oh this is going to be tackled by regulations by the central bank by new entrants startup companies Fintech.
Thanks also brings a reduction a dramatic reduction in fees. We noticed this last year. So our challenge is the beauty of our challenge is to create new profit pools, new revenue sources origin. So we can.
Have a balance here, considering picks or credit cards or more fierce competition pertaining fees and also open banking that is expected to accelerate over 2022 so in 2021 one to some extent, we offset this contacts and that's why.
We can see this growth in fees, which is a revenue that tends to be more challenging to.
To speed up because it also depends on the competition not only on ourselves the prices set by competition the client the market. So that's the challenge behind growth and the ability to improve client NII. How can we do that very effectively improving the number of clients we have in the organization.
And that's why you put it very well the growth in the number of clients at the bank. So these new clients can bring new fees, new revenues new credit operations. So we manage to run in this area. So it's always.
A challenging growth lied owing to the size it has and the financial volume, which is very big but we have good options and good levers to touch upon this line of revenue.
Got it. Thank you now you also mentioned in your own last part of your answer you talked about regulation and you entrants do you see any news in this area.
No fly a few I guess, the new topic is.
Over banking.
<unk> is already here already deployed.
It turned out to be a success.
It's no way coming back it has come to stay and this is good to the Brazilian market and the Brazilian population to the hot topic right now.
It has to do with open financing and the implementation of open financing the speed of implementation, which adds a new structure in terms of mobility for everyone in order to change their account their credit operations upwards and downwards, bringing a.
Alrighty.
A while ago remember if you wanted to open a bank account a company for instance.
That show institution, you physically have to be at the branch to do that and.
And now the population even low income population it is a lot easier.
Because brazilians are very familiar with mobile phone operation. So it's very easy to open new accounts different companies. So that's why it's important to focus the efforts on a pleasant customer journey.
So we can really have everything at the core the preferences.
On your side.
It's clear thank you latanya.
Yeah, Okay Tobey.
Good morning, everybody. Thank you very much for other questions.
Regarding your guidance about a O L.
You have them.
Okay.
I would like to conciliate, the 14% information with the guidance of two gay.
Is it going to go almost twice the market.
Will you be able to grow the line with a bigger spread.
I would like Q2 conciliate the both AUR AUR well wait your.
Loan portfolio.
Okay.
And the comfortable coverage ratio that you foresee for the end of the ear.
Sure. The we tried to give you a guidance.
But growth in some credit lines.
That will bring about a higher spread as we said and what we have been seeing.
In the Harvard's originate it is that we have comfortable levels of delinquency. We know that the ear is going to be quite challenged challenging even in terms of the growth of our <unk>.
Portfolios.
But aligned.
With the operations that I referred to.
Yeah.
Corporate bank.
Should grow less.
Wait.
Large corporations not generating.
A specific.
L L.
And we talked about it.
When the pandemic was very strong in 2020.
And this is why we gave you this guidance.
And I think you are correct in your.
Remarks.
10% to 14% sounds quite aggressive with the growth in our client base.
Gives us a leg.
Level of comfort.
In the sense that we will be able to grow credit with quality and this is what we are seeking.
Yeah.
In this last quarter the growth was zero point 12.
And the operations that we carried out together with you with.
Regarding the.
Re profiling a renegotiation of that they have already come to an end.
We just have a small balance that is already present provisioned for.
And the renegotiated operations with clients.
Sometimes you really need one led to provision.
So the level of provisioning is lower because of that.
And I think we will be able to balance the growth in our portfolio.
To conciliate the two sides that you referred to.
Thank you very much.
Jeff.
And.
The coverage ratio.
At the end of the ear could you expand on that.
I think it would be even more than that.
Okay.
262.
Okay.
We have a lot of room there it would go back to historical levels.
Thank you very much.
Yes.
Thank you.
A question and he can Navarro Santander.
Hello. Good morning. Thank you for taking my question. My question is about loan portfolio I'm, sorry to go back to this favorable launched a survey.
So in the market posting growth of six 5% loans for 2020 tell I know this is downwards OE to public banks government banks, but $6. Two is about 50% the middle of the guidance of British co. So my question is what about this growth in the middle of the range. It sounds strong to me.
Is it because bradesco has a different reading from the macro scenario may.
Maybe a more benevolent reading for 2022 or is it the same reading and Bradesco higher is highlighted as a more aggressive portfolio grow basically this is it. Thank you and he can you. Thank you for your question.
I guess there is an agreement in the market when it comes to your 2022 grew.
Growth and credit operations favorable mentioned $6 five here at the bank we consider.
No no no.
Our economist.
7.58.
So.
Based on our ability to grow.
And based on Bradesco <unk> business model and performance Countrywide you can see their rural credit last year increased by 40% real estate increased by 50% vehicle financing we had the market lead.
So we understand that we brought 15 million new clients via next bits and Agra.
And now have D. G O, which also has around $2 5 million customers.
So we understand that we have conditions to grow beyond the market, even though we understand the market is right.
The assessment is correct and I, even said, we don't consider to have significant growth at big or large companies. It has to do with the natural cost of money, but as for other business Bragan 15 million new clients as we did with bit next in Agra and another $2 5 million new Clos.
The ads via digital share.
So we also have a natural grows nearly 2 million new clients last year some.
So by the end of the day.
We feel comfortable to understand that we can grow slightly beyond the market estimate.
So this is how we SaaS last year and that's how it happened so much so that we revisited our crowded grows.
Forecast for last year, and we were above the top of the guidance.
For 2020 in 2019, so the speed in which we're managing to add new clients and above all the.
The fact that we managed to have.
A mix of.
Different conditions Agra beds next consortium, so many businesses and particularly because today, we have a digital journey that is a very simple online real time in order to serve our customers. So if you put it all together.
It's.
Oh, so or nearly mandatory for us to challenge ourselves to go beyond the market rate excellent now still along the same lines about credit and provisions when I checked the guidance the middle of the provision guidance. It grows more than the portfolio already mentioned that provisioning.
And the credit mix, so if I think about the top of the guidance.
And considering that you reduced the coverage this year my reading and ask you to comment on it I assume bradesco looks at 2022 and doesn't see any problem about delinquency. It might go up but nothing to be a problem is my assumption correct.
That's correct.
I cannot refer to it as a problem.
Because it's a L. L of normal delinquency that we see we've been seen over the years.
Our loss models.
That we're even considering a worst scenario the already take it all into account. So we don't have any specific problem like I said that might require higher additional provisions we have provision significant provisions over 'twenty 'twenty. So that's why I agree with your assumption, we don't see any.
Serious problem.
Yes.
Right feed at T is reminded me, it's a normal scenario.
What we had pre.
Pandemic and not necessarily a problem excellent. Thank you.
And he can sell out Ina J P. Morgan.
Good morning, everybody I would like to ask a question about the classic reclassification.
And two questions in fact.
Are there.
Tax implications regarding this reclassification.
The recognition of this loss.
In this ear.
Would carryout.
The mandatory payment of higher taxes.
And the second part of my question.
The 2 billion.
One off loss.
Would mean, a gain additional gain or financial revenues. So I would like to know the duration of that.
You have about two years of a collective result, or is it going to be deferred.
Thank you for the question.
First I would like to clarify this and then those of all those will add to what I see.
The movement that we carried out.
Was exactly to mitigate tour to improve 2022, because the interest rate was 12%.
And it.
It went to 12.
And this will be reflected over the next three years 'twenty to 'twenty, three and 'twenty four.
This has no tax effect whatsoever.
Yes, there is no tax effect, neither in 2021 or in the following years.
We had no benefit regarding the margin that referred to in 2022 one.
Because we can only this do this at the end of the half year balance sheet. So this was done on December 30th and when we carried out those operations are resolved that would be negative for three years. We brought this forward to 2021.
And what.
But what about any tax rates from now on.
The tax rate was 5% higher of social contribution.
But we do have a tax credit on the other hand.
So we can activate this tax credit at the same amount so one offsets the other.
Thank you very much.
Very clear.
Next question, Danielle VAT credit Suisse.
Hello, everyone.
My question has to do with insurance.
I was doing some quick math, so if we're saying that.
Level Love.
Not only.
Remains but technical provisions they are at the same level in Q4.
The same level of the fourth quarter.
Should we be at the top of the guidance at 14 Lillian.
If we consider a more constant insurance resolved.
So.
Except for the fourth quarter.
We're kind of half this leap to come to a more reduced guidance or if you think about the fourth quarter.
And we know we might see an increase or an improvement in claims ratio owing to COVID-19 .
So what should happen in order to have a lower guidance.
If we take into account the fourth quarter would it have to be with premium or financial return where is it.
Hi, Danielle Evanko tissue is with us.
And our finance Department also can answer your question Ivano over to you. Thank you Latanya Hello, Daniela good morning.
Okay.
Our outlook for 2022 considers growth in our revenues in 2021, we launched about 15 new products in several areas.
In all kinds of segments.
In the insurance group.
And we believe this is going to make a difference.
Decisively in our revenues and sales if we look at 2021 the growth in sales of 70 billion to 82 billion Ryals.
Already shows.
How it can happen and considering all the complexities of 2021 as for provisions I'm not saying we are only conservatives, we were more than that we were realistic.
And this reality.
Also has to do with a vibrancy of the Bradesco brand.
When it comes to provisions will keep on working them comply not only with the regulations.
Our commitments what is mandatory but above all keeping an eye on compliance with our.
Agreements with our insurance holders and clients. If you think about the growth of our premium around 10%.
Compared to 2021, and also finance benefits from CDI.
Which is higher.
And the financial performance.
Is an important part.
Okay.
Of an insurance company in Brazil, the U S and in Europe .
So comparatively speaking we could say.
We expect to have something around 65% of operating growth of insurance group.
And that's what we envisage.
And growth also back to this financial performance something around 35%.
So our guidance between 18 and 23% for all these reasons gives us some comfort a lot of comfort and naturally.
As I said before.
This is all linked to a slowdown.
Of claims ratio.
Which has to do with Covid.
Claims ratio of the elective normal process at a health care company.
And claims.
Four P N C and auto.
We are all ready to tackle this and we understand that we are comfortable and within the guidance between 18 and 23% considering 2022.
Crystal clear thank you for the answer.
Our Q&A session has come to an end.
We would like to turn the floor over to the company for their closing remarks.
My friend, Thank you very much for your attention it was a great pleasure to be with you today.
And clarify your doubts anyway, our whole team will be available to us should you have any additional doubts. Thank you very much for your attention and we wish you a good day.
But are they as cruise conference call has come to a day and thank you very much for participating and we wish you a very good day. Thank you.
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