Q1 2022 Banco Bradesco SA Earnings Call
Okay.
Good morning, ladies and gentlemen, thank you for waiting welcome to but at the East Coast Conference call about the first quarter of 'twenty 'twenty. Two results. This call is being broadcast on the internet expertise because its investor relations website, Banco Delek Bradesco Slash Investor Relations.
Where you can find the presentation for download.
We have simultaneous interpretation into English adult participants will be in listen only mode. During the conference and later, we will have a Q&A session. When further instructions will be given.
Should you need assistance during the call. Please press star zero to reach the operator.
Before proceeding we wish to clarify that forward looking statements that might be made during this call in relation to the company's business perspectives operating and financial projections and targets are beliefs and assumptions of the company's management.
As well as information currently available to the company.
Forward looking statements are no guarantee of performance they vote risks uncertainties and assumptions as they refer to future events and therefore, they depend on circumstances that may or may not occur investors should understand that general economic conditions.
Sri conditions and other operating factors may affect the future performance of the company and May lead to results that differ materially from those expressed in these forward looking statements.
Now I would like to turn the floor over to Mr. Leandro Miranda Executive director and Investor Relations Officer.
Good morning, everyone.
Welcome to our call about the results of the first quarter of 2022.
And we will have the participation of capital luxury junior our CFO .
It gets kind of no.
Executive Vice President and CFO myself executive director of di arose out does it fit named executive director causes like Newfield actually business controller and market relations director, even going Chivu bad days placebo. This T O.
Hey, now two inches man they connect T O Cogs Zimmerman Big T O N.
And Carlos if I need Abbvie backwardation seal.
Now I give the floor to adapt thank you Linda good morning, everybody. Thank you for joining in on what to 'twenty Two earnings conference call.
The economic landscape.
In the third quarter made a slight advantage.
With GDP forecast picking up a little bit and the creation of additional jobs in place remains a worrying global phenomenon.
It's a significant challenge for all economies, Inc, and.
Especially Brazil the war in Ukraine created pressure on the oil and other commodity prices and there are no expectation of any re trading price trends over the near term.
The Central Bank of Brazil has moved forward with its monetary policy and we expect to see a slowdown in inflation theory. The year. However, interest rates are likely to remain high for a long period, which should impact GDP growth.
Given this scenario.
That does cause affirmed well this quarter.
With a net income of $6 8 billion vows and this represents a Roe.
Of 18% an increase of 3.1% corridor.
Quarter on quarter. The highlight of the period was a net interest income, which grew nine 5% compared to 2021.
The client NII rose, 19.6% within the same comparison, resulting from an increase in spreads and repricing of the portfolio and increase of the San D E rate or no margin on deposits.
The loan portfolio also posted a good performance expanded by 2.7% vis vis the fourth quarter was tied to one and 18 four 3% year on year. The most significant movement took place in the portfolio for individuals which grew three 3% in the quarter and 22, 6%.
Year on year, particularly the lines with the highest margin.
It was unexpected slowdown of growth in mortgage finance he due to the rise in interest rates.
Nevertheless, this is a line that will continue to smooth the evolve and adding value to our businesses.
Fee and commissions income performed well up 6.7% ear on Iraq will be 7% of total costs were controlled especially considering inflationary pressures.
There was a growth of four 4% compared to the previous year and eight 9.1% drop.
To onboard to in line with our expectations delinquency rose this quarter and we already expected the syndicated to return to pre pandemic levels. It should be pointed out that the growth in higher margin businesses also carry a controlled growth of this indicator and we are always ready.
To make the right adjustments of cost and return.
Insurance operating income reached 353 billion in the quarter a growth of four 7% over 12 months and the results showed that there is a continued recovery in the insurance area and it should be even greater in the future quarters with Duluth in premiums and control of the pandemic and improvement in financial results.
Due to all these factors, we revised our guidance and obviously the associated to exogenous factors factors of the economy and geopolitical factors, we have revised our guidance and we'll be talking about that on the last night.
Moving on to slide number three.
Just as a highlight we know that there was an event in this quarter that we classified as nonrecurring due to its nature.
And it was a net income of 210 to 1 million go out that we had with the demutualization process of CIP. The interbank payment chambers lighten up before talking about the expanded loan portfolio grew 18.3% each.
Year on year with double digit growth at no light.
Demand for credit remains although at a lower level, but with recovery in N I M.
This performance is a consequence of our commercial positioning based on the intensive use of data and analytics.
Risk analysis, which allows us to be more assertive in defining price limits and credit approvals.
One highlight was credit cards with a 45, 6% growth compared to one <unk> to 'twenty. One this game from a structured effort aimed at increasing the presence at the use of cards by more slices of our 74 million client base.
One of the core point for the success of this work was the creation of new products target T. A digital friendly audience.
And real estate for Nancy posted a growth of 23.3% to be ear and expected the pro forma does not likely to be repeated in 2022 the growth Lou.
Continue but at a pace that is more compatible with a new context of higher interest rates.
We added four companies increased 15.
This continues to be one of our priorities credit for companies increased 15, 7% in 12 months and the main categories, where working capital machinery and vehicles see Nancy and agribusiness low digit to Chinas contributed 24 billion of origination in the quarter an increase of 44%.
And the ROE of digital channels in the production of the portfolio is growing and our expectation is for increasing client engagement and consumptions of Greg to these channels. It's a natural trend and we are committed to offer a more user friendly journey to boost.
Our digital all origination alloys. Nevertheless.
As you may very well see on the right on the upper right of the slide origination is already lower than in the fourth quarter of 91 as a result of the higher interest rates and increased level in risk analysis.
Now, let's go to slide number five talking about division, we are at the stage, where credit conditions are going back to normal as delinquency rates were historically low levels.
And the risk adjusted returns on credit or at the appropriate level, given the credit re pricing movements.
And the turnover of the portfolio provision expenses grew this year, reaching 2.3% of the portfolio. This quarter total provisions represent 7.6% of the portfolio and expansion from the previous quarter. Nevertheless, we continue to maintain a comfortable level of reserve on our balance sheet with a coverage ratio of two.
235% and 105% included a pool renegotiated portfolio in the ratio.
On slide six talking about the renegotiated portfolio, which amounted to four 9% of the loan portfolio compared to March may to 'twenty, one it posted the brutal throughput, 1% below 17.1% growth of the loan portfolio in this period.
Given the growth that we see in the loan portfolio. We believe that this increase in the renegotiated portola as normal and under control our provisions for negotiated portfolio represents over 62% of the total and the delinquency rate towards this portfolio was 18 point, 70% still below.
Oracle levels.
Oh, Okay about delinquency on slide number seven.
The total delinquency ratio came to three.
0.2%, an increase of 40 bps compared to the previous period and this is primarily due to the normalization process of delinquency, which we had already predicted would occur and the effect of the credit growth makes us well.
We believe that in the second quarter, we will have a smaller growth.
Still around 10 to 20 bps.
And.
After the second quarter Irrelative stability for individuals the acceleration in this quarter. It came with the expansion of the portfolios.
With higher spread, especially credit card and we consider that the growth of the delinquency indicators from 15 to 90 days as Chifundo without anything exceptional gross provision expenses accounted for 96% of the net NPL creation and lastly, we would like to reinforce that we could change.
With our loan management process and sale of nonperforming adaptive portfolios whenever such a transaction is economically accretive. However in this quarter, we did not sell active portfolios in a material way.
The amount was only $120 million.
Talking about the NII.
Slide eight the total NII performed solidly in the first quarter growing 6% compared to the fourth quarter and going up nine 5% in 12 months. The main driver by the client NII. It was what the client NII, which rose 7% in the quarter and 19.6% over.
The ear the growth in the deposits income is pushing the rise.
And the client NII under the impact of the higher Selic rate then in 2021 Additionally credit NII.
Did better than our initial expectation due to the better spreads and also the speed of the portfolio turnover and expansion in higher return operation.
In this quarter gross glide N I M grew 60 bps and the net and I am despite the 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 hours, reflecting the increase of the CDI in all.
L M positions.
Now on slide nine talking about fee and commissions income we saw a growth of 6.7% ear on ear and there was a seasonal decrease in the portal card had the greatest contribution with 19, what 1% growth.
And we saw a boost in the number of cards, mainly through sales in digital channels, which grew 260% as I said before compared to a year ago.
At the end of the pandemic brought in increasing the amount.
Of transactions on cards, and interestingly the amount was higher than this quarter than in the fourth quarter, which is seasonally.
It's usually the highest.
Because at the end of year celebration. The consortia segment is also notable we are leaders in the market 27% of the sales of consortia have been made through digital channels as well now slide number 10 talking about operating expenses.
Yeah.
This cost discipline is a constant in our management practices operating expenses advanced 4.4% compared to one Q21, well below the inflation of crude in the period.
In spite of investments in client acquisition and digital evolution that we have been doing.
Payroll expenses grew eight 5% year on year. Despite the collective agreement of 11% that occurred in September 'twenty. One we will continue to promote growth in I T data engineers and business teams such as investment special.
And even with all of the investment that we're making in the bank. The total number of our head count has been brought down by 1.3% in one year administrative expenses grew five 6% in the annual comparison showing that we absorbed much of the accumulated inflation, Illinois, 3% of the IPG a M.
15% of J P. M. In addition to the increase in their business volumes, which has an impact on our variable expenses.
Some of the factors that played a role in the solid performance of a data set of expenses and we have activities such as we have been mentioning the optimization of the ATM network a reduction of our own machines.
By over 4000, Ed we continue to revise.
Yes.
Luke can be evolution.
Towards the better number less transactional November the total optimization will be 491.
Branches, but most of them are being converted into business units and the effect at closing.
Our a T eight branches, but the total movement is up almost 500 branches and I think it should be pointed out that our personnel and administrative expenses already include.
Investments related to the expansion of our digital initiatives.
Next add Barbara Beach D G O.
And without these investment.
The growth of our total expenses would have been half.
A 4.4 of the total expenses they represent basically half.
Of this percentage off this indicator. These are investments that we will continue to make in our digital initiatives and of course they consume.
As you can see the lineup expenses. However, they are very important investments to be made by the corporation.
I think we should also mention that you now have digital initiatives, especially this year 2022 we are having a trade off between growth.
Savory client activation retention and loyalty.
Making them more profitable the other expenses line shrank by 15.5%, mainly due to higher levels of provision last year.
Our expectation that this line will pose to reduction in 'twenty to 'twenty two.
Yes.
Now to slide 11, the insurance group experienced a revenue increase of 13, 2% seen in all lines of business due to increased number of contracts as well as number of vehicles and residences in the annual comparison.
This performance was seen in all distribution channels and business partners, but we also highlight the digital channels with an expansion of 56% in the first quarter of 2022.
Income from insurance operations posted an annual improvement its performance in first quarter 'twenty two due to the growth in revenue and improvement in financial income over the period.
The volume of Covid related claims in the first quarter of 2022 was 512 million the lowest since the beginning of 2021.
And 54% lower than the same period of last year. Despite the recent increase in demand due to the new almay Chrome Varian, we did not see the same severity as you previous periods hospitalization cases are much less frequent and recovery has taken place in a shorter.
Time.
Now turning to slide 12 about capital and liquidity the tier one remained at the same level as in the previous period, well above the regulatory minimum the profit for the period was enough to absorb a distribution to shareholders in the form of interest.
Our shareholders equity credential adjustments and the growth of the loan portfolio indicators for liquidity also remain at rather comfortable levels.
Our C are around 60%.
Moving to slide 13, let's talk about our digital expansion.
Over the last two weir's, we have spoken quite a bit about our movement towards technological with acceleration and this has been intensified by the pandemic today as life gets closer to normal who want to talk to you about our nose teach that of loyalty through experience and autonomy.
<unk>, if before and particularly in the financial system. Many people were fearful or prefer to use physical channels to make transactions and purchase products and services today the situation is completely different.
Many of our clients now prioritize the digital experience evidence of that is of our total transactions, 98% are perform through digital channels out of their total 93% are concentrated in mobile app and internet.
And the growth continues to accelerate locally solely at a comparison for the first three months of this year with the same period last year, we saw a significant growth of 92% at mobile financial transactions.
This boost in the digital expire experience is also reflected in the number of digital checking account clients, which stands at 70% of total clients. It's a number that keeps rising and must continue to evolve. The number of accounts opened through the App has also been training upwards. We ended the first quarter.
Of the year with the growth that was five times higher than in the same period of 2021.
It's worthy to highlight is 72% growth in may account openings, demonstrating the strength of our positioning in the micro entrepreneurs segment.
On slide 14 about digital credit the relationship with a more digital customer has led to a landscape of new and greater business opportunities that are continually focus on sustainable development over this quarter, we saw digital channels, leading the way in the supply of credit among individuals the.
Number of loan operations granted through digital channels at Bradesco now sits at 73% of the total.
We have also seen a lot of move from interpreters focus on resuming business. After the pandemic, we're constantly evolving our platform's oriented toward companies, including partners with start ups.
In the annual comparison, the authorization of corporate digital credit evolved by 48%, reaching more than 10 billion riyals now on slide 15, a little bit about our figures.
The indicators are digital development, we've presented in the previous slides in this slide we can see it is not only in loan products that we're making significant process progress consortia investments, ensuring products and others posted consistent growth via.
<unk> bye.
Another contributing factor to the bump in say was the introduction of new features. This included the issuance of credit cards, a day, plus zero and the opportunity for clients to add the neocart to their phones wallet immediately after approval without the need to wait for the physical issuance.
On slide 16, our digital initiatives.
<unk> grew its net funding by 50% in one year and reached 785000 clients next grew its client base by 153% in one year and reached 11 million clients already exceeded this number actually in April the volume trade it nearly doubled in the same period.
Next is common this into this year more focus on client monetization.
This is the $9 5 million downloads and 6 million accounts Mark It has become the gateway for clients in the banking phase.
This quarter. We also completed the digital transaction, which is already fully embedded in our numbers for me than accounts and posted a T. P Z off $2 5 billion in the first quarter and our digital initiatives will continue to grow this year Internet for two.
Deep and very significantly the relationship with customers focusing on their profitability, adding more results to the organization.
Yes.
With the inclusion of the results brought by these companies.
But that's a significant investment like I said accounting for 50% of the 4.4.
Growth in expense ratio now on slide 17 sustainability.
We have updated our sustainability strategy, which is now based on three strategic pillars sustainable business climate agenda and financial citizenship. As these themes require an agenda featuring more active change and greater strategic focus for each of these three pillars, we've made public commitments to <unk>.
Leverage our contribution to sustainable development and the pillar of financial citizenship. For example, we have just sign on to the commitment to education and financial inclusion of the U N and are the only Brazilian bank to be part of the select group of 20, a signatory banks a Republic declaration stays that were driven to increasingly come.
Tribute to financial inclusion and promote financial health of clients and society, we remain committed to the target of channeling 250 billion, two sectors and assets with a positive social and environmental impact by 2025.
As of March 2022 have already topped 107 billion or 43% of the globe in terms of the climate agenda. We have been active in both the U N through the net zero banking Alliance and he has a G fans a global alliance at these institutions in the financial sector to accelerate the transition to a cleaner.
Comedy.
Sustainability is one of our four pillars in our corporate strategy. It is aligned with our mission to creating opportunities for people to achieve their goals and for the sustainable development of companies and society and we want to continue as leaders and pioneers of this agenda at a global level.
On slide 18.
Speaking of our guidance.
Given the significant changes like I said before is the dynamics of the markets. We are active in we have decided to revise our guidance to reflect our current performance and expectations.
Spreads have remained above the levels, we were expecting and we don't see any additional pressure in 2022.
This has favored as fast a repricing of our loan portfolio also we have seen growth in products with highest spreads in the mix.
We have also captured a greater benefit than expected in the income with deposits, which makes up the client NII.
As such we have significantly updated our client NII guidance to 18% to 22% growth versus a 212% previously for credit provisions given the intensification of growth in higher return portfolios, we shifted our expectations from $15 billion to $19 billion.
To a new range of 17 to 21 billion.
For fee and commission income considering the performance seen in the beginning of the year and our expectations for the rest of the year. We have updated the range of this line to a group of 4% to 8% regarding operating expenses, we continue to focus on efficiency and full control of expenses, even as we.
Our investments in our digital initiatives any of the technology chip growth of our business.
We have updated the previous guidance to a new range between one and 5% for the reasons mentioned earlier and we maintain the guidance for the issuance and expanded loan portfolio lines.
It communicates well with what we're changing.
And the client NII and insurance, we shall move forward.
Towards the center of the guidance.
The income is expected to benefit from our growth in premiums.
The most favorable financial ratios and a lower comparison days in some quarters of 2021, which weren't impacted by the pandemic in March for example, just to give an idea in March 2022, the insurance group already had a performance up 16%.
Alrighty very close to the guidance.
In the expanded loan portfolio, we have seen a groove compatible with a range presented from 10% to 14% like I said before due to the elevated growth in a previous year, but featuring a more favorable mix for now we continue to follow our policy of not providing official guidance for the market NII. However.
Over for the sake of transparency, we report and would not expect this line to post an incremental income over the next quarters of 2022. Thank you for your time and now we move to the Q&A section.
Thank you very much now we will open for our Q&A session in order to ask a question. Please press star one in order to remove your question from the queue. Please press star two.
Our first question is from Eduardo Rosman BTG.
Good morning, good morning, everybody.
My question is about the guidance, we saw a major change.
In a few lines.
And it seems to me that the core the client NII is getting better.
I know, it's a little bit too early to talk about 'twenty. Two 'twenty three we are at the beginning of 2022 and lots of things are going on.
But the composition of this new guidance.
It seems to have a positive carryover for 2023 would that be correct.
It will have the good morning, it's a pleasure to talk to you.
We revised our guidance, we thought it was necessary.
Because of transparency that we always expect to have we do have the turnover of the portfolio. The resilience of inflation that glu cheap interest rates higher for some time and the perspective that we had at the end of last year that there could be a reduction in neutral rates indefinitely.
The rate still within 2022, and then 'twenty three.
There is no doubt whatsoever that this is not going to happen. The interest rates are going to continue high over 2022.
And may be in the second half of 2023 this trend could change.
The exogenous factors changed very quickly over the first quarter of this year the war and the U S inflation the European deflation of dollar.
The exchange rate.
So many things happened during the first quarter.
And this is the reason why we felt very comfortable with this review.
And do are quite right in our remarks, yes. This is going to bring about a positive carryover for 2023.
Yes.
The loan portfolio that we are turning over and that was originally.
Over 800 billion debt that was originated way back then would have been growing at two digits.
And it was originated with two and as a leaky and now it is 12 point 65, and they said he could go further up so our expectation for 2023 is that there will be a positive carryover of what we are planting today.
Ed.
A bit more of a O L. Okay, but on the other hand, the spread is better show the operations that we are carryout. It well, it's only natural for it as real estate credit to outdo you reduce production not because you want to reduce but this is only natural.
If youll have an operation of real estate to 2030 years with a 12, 13% rate.
The production will be different.
We're producing 2.5 dollars 3 billion and now we're doing one point to 1.5 billion because people do not want to have this kind of commitment Dewey 20 years and the company is also need more working capital for the short run so they don't want to make very big long term investment.
It's because of the high interest rates so.
We are very well sure very sure that we will have a positive carryover Berg for 'twenty two 'twenty three.
And this is the reason why we revised our guidance.
We have a very good one question more.
Once again, we were surprised with the Cogs.
And you have many initiatives in this area, they're not new.
You have acura you have nag debate.
What about the investment in these initiatives in the environment of much higher interest rates.
We do continue to invest very heavily in these initiatives or with higher interest rates. These initiatives will not bring you a very good result in the short run and their contribution in the short run we will not be very big and also because of the cost control.
Thank you we do have two yes, you are correct.
Yes.
We have to be very rigorous in our cost control.
We're now two and court edge of the knee.
Yeah.
They have very strict.
Cost control.
This is why I said before that's a 2022 there is a little bit of a trade off we're going to focus less accelerated growth and more retention loyalty and profitability of these clients.
If you look at our.
Three companies were talking about 20 million Clive said here, we are not including Agora. Okay.
A little bit more than that and this is a very important number of clients that we have.
To make profitable so we're doing this tradeoff.
Because we see.
What is happening in growth companies. These avi Val.
Value companies. It will have to can you hear me okay.
Okay.
There was a red light linking here. So I thought there was a problem okay. So.
So we see what is going on in the market regarding growth companies. These avi value companies.
And.
We will continue to invest.
And then because they are Victoria's though.
We have a very win win situation there and these companies will quickly well.
Either the OE businesses are doing an IPO, but bringing advantages to the company they still require investment.
This is why I talked about the total of the expenses and how much of this total is investment in these digital initiatives, but they are very important to maintain and to bring about the loyalty of these clients.
Thank you very much for therapy.
As a reminder, if you want to ask questions. Please press star one we kindly ask participants to ask one question only the next is Jason Mali from Scotia Bank.
Good morning, everyone. Thank you for taking my question.
My question is about guidance.
But it was already answered.
So my other question is could you tell us more about the competitive scenario today.
Compared to the pre pandemic level.
Particularly for checking accounts credit cards.
And mortgage loans, and which segments does bradesco.
Believe there is or there are new entrants coming in.
Where does bradesco sees more pressure pricing and.
CS of accounts and assets and credit spreads payments et cetera.
And if I may ask a second question.
I can do that later, okay. Thank you.
Yes, you can ask right now Jason. Please go ahead.
So my second question has to do with the regulatory and political environment.
Firstly.
About projects that would increase.
Taxes for financial institutions.
Could you give us an update about what is being discussed.
And secondly.
We can also hear in the media most arnatto statement in which he sat.
That there would be a fantastic announcement that would be a revolution.
In Brazil.
Those bradesco know what it's all about.
So in other words.
Should we expect to see a short term digital currency introduced by the Central Bank in Brazil.
Jason Nice to talk to you Jay said the growth in loan portfolios.
Has been going on.
In a very significant manner.
And competition is more fears, particularly.
What do we think about new banks and this is more related to credit car lines.
This is the main competition right now.
But it also has to do with individual loan.
As for mortgage loans.
Basically owing to the need to fund these operations competition is.
It is concentrated on the five key market banks, usually these top five which hold 98% of protection and competition is natural as you can see there is not so much difference between interest rates from one bank to another except for.
A state owned bank, which is oriented to lower brackets of the society, but for the rash is novel competition and that's why we have about the same production level. So I don't see an attack.
By new banks in these mortgage loan lines.
And we had to be fast with our credit card.
In order to be on equal footing. The neo banks today are working with credit cards that don't require an annual payment fee.
So just as we invest significantly in our digital business, we want to turn our big Bradesco bank or the incumbent bank so to speak as digital as other digital initiatives you can see the growth that happened in the number of credit cards.
Billings from credit cards also happening at the big banks, so 45%.
So new products more adequate journey.
Once the card is approved if can already be in the customers' wallet and can be used immediately electronic wallet. So we believe we are in a very good competitive conditions similar to neo banks as for checking accounts like I said before you saw the number of accounts that we've been or.
Could he not only at Bradesco, but also in our digital initiatives, our digital initiatives already account from 18 to 20 million customers through our corporation not to mention Bradesco banks customers.
So the strongest pressure.
Would be related to credit card and personal loan at a lower scale.
With regards to that increase in taxes.
We already had seen allow.
And Unfortunately, we don't have much to do about it.
To some extend we try to come creep it.
To have that need Matt when it comes to he sees of micro and small companies.
Anyway, we don't expect to see anything new this year.
There are many projects at.
At the government level when it comes to dividend taxes et cetera, but nothing has been decided yet and lets keep on watching very closely to see what will happen.
As for new products or any revolutionary scenario in the market. The only thing we have it sticks.
And our hour we have the C D D C and the digital currency, but this crosses still needs to become more mature test has to be run because.
It is a thorough process. It takes a thorough process to test it fully because we are addressing millions of people in the country and it takes a lot of security pertaining fraud and money laundering.
Everything we deemed to be imported and required by all of us.
Not only incumbent banks, but now also applicable to new banks with a regulatory requirement that is much higher not only capital wise, but also by money laundering laws and number of clients all the regulatory scoop that the bank Central Bank has been.
Working with.
I think the regulatory cemetery has been going down they are the central bank directions. It will start only from 'twenty two 'twenty three expected to and by the end of 'twenty 'twenty five but at least we have the first step given taken.
So we consider capital and risks that might be represented by each one of the banks to the financial market byproduct or overall speaking.
So for a couple of years now we are in a more competitive market, but I believe that incumbent banks, so to speak new how to be position in order to be in a good competition screen.
Thank you so much for your comments.
Thank you very much we would like to listen to all of you and this is the reason why we ask you to limit yourselves to one question each Marcellus that is could you switch.
Good morning, everybody. Thank you for the opportunity.
Good morning, Todd Orlando, everybody on the management of reduce group.
My question.
Has to do with the credit origination pace.
And their risk appetite on your part.
Looking at the presentation you have shown.
In the presentation that credit origination for individuals has dropped 14% year on year.
And in the fourth quarter.
Yes.
Well, 14% drop year on year and look at the Central Bank up to February and daily originations, we see that there has been an increase in the retail credit to individuals of 13%.
In your case, there is a drop year on year.
These would be the numbers of the central Bank reported by the Central Bank.
No.
Are you adult T a more careful position more cautious position.
In terms of credit assignment.
Yes.
And what about the performance of your credit card portfolio.
Quick Bradesco clients and Banca net client is the performance difference between these two groups of clients take a marcello it's a pleasure to talk to you.
And with the pace of origination has slowed down but it has a lot to do.
With the fact that 18, 92% as reflected in the <unk>.
Individuals because of we were originating 3 billion and now one point to one 5 billion in real estate loans, it not because of our appetite, but because the interest rate the higher interest rates lead people to be more cautious about.
Assuming this kind of commitment and this brings about the lower volume.
The client tries to give a bigger down payment and finance a smaller part of the payment.
And I believe that the pace of origination will be going down much tailwind. It is only natural because of the increase in interest rates. So there isn't a lot. We can do about that you have to keep in mind.
That the comparison base, we have been growing for three years.
At double digit.
Two.
The higher double digit.
Range. So this is the comparison.
The risk appetite well not.
We have not decreased our risk appetite, but when we include the.
Interest rates and our analytics and our models of course, some people are removed because you'll have a higher interest rate. So the cut the line.
Has to be brought down.
And.
The client has to be approved by our credit models. This is a natural.
Consequent to where you have an increase.
You'll have to and Sallie can you have 12 75.
Of course, the difference is very big.
So this is a little bit of what is going on and you have to look at the investment side.
The part of companies.
Major project, then bigger investment.
Investments that the companies are making for the long run they are a little bit hindered because everybody wants to wait and see what is going on what will happen with the interest rates and volatility as you would know very well Mattel is the big brother.
Sometimes the interest rate is higher but you don't have a lot of volatility, but the very high volatility and this very strong growth as cheap rope and inflation volatility of the dollar that.
Went up and down up and down at the World scenario Oh. This leads companies to be more cautious in their bigger investments and of course this has an impact.
Oh, and your credit performance or credit origination.
Because people.
Gave their preference or turned their eyes to their needs of working capital for instance, and companies just sit and wait and see what will happen with the remainder of our 2022 in order to position themselves. In 2023. This is more or less the scenario we have not lost.
Our risk appetite, we do have the same risk appetite provided we have the spread to pay for the risk of capital or this has to be taken into account and regarding credit cards.
Growth was followed by the return of people to the streets and Theyre going to shopping centers. They are.
Hoping and this is the reason why you have this change because of the lower restrictions because of the pandemic in the first quarter of two items related to the.
The revenue.
From credit card transactions was higher than in the last quarter of 31, which is usually much higher because of Christmas et cetera.
Of course, who have.
Delinquency going up a little bit because we know that delinquency and credit card. This higher however, the revenues brought by credit cards is much bigger.
And it really covers all the delinquency that we might have so we.
We understand that delinquency has gone back to historical levels of 22 2019, but.
It should go up 10 to 20 bps over the second quarter, and then get it's not going to go down, but it's going to stabilize at a higher level.
Which is the level that we had before the pandemic and then it will be maintained at this level.
Thank you very much.
The NII.
Nobody expected this level.
Zero, so what about the market NII dynamics and now what about normal conditions. When select is doesn't have such an impact what should I expect to see the level for the market and second question. Just a follow up you sat delinquency going down then 10 bps and become more stable in the second half of the year.
In this scenario do you believe you could be stronger in the active portfolio in the past you had four 5 billion. This quarter very little so should we assume that he will go back to sell 1 billion along these lines, which is the normal level of 'twenty one from 10 to 20.
D P S and more stable with the second half of the year.
Thank you Thiago. Thank you for your questions Thiago when it comes to market NII. That's a one time event, you're all aware of that Brazil, Bradesco has a lot of assets on LOE.
And we never stop working alone over the years.
Even in the pandemic, we sped up although if you think about the last three years, we had double digit grow very high in the loan portfolio for companies large companies small and mid sized companies and personal loan.
We never stopped stepping on the gas.
At that time when would generate of the portfolio select was 2%.
And then there was a rise in extremely certain fast and violent rise in interest rates in the country not liking the west from 1.5 or five to one in our case. It was two to 275. So it takes a while to generate a portfolio we can do it fast.
Or now.
So this fact of the market NII is not recurring is very specific of the current moment and that's why I answered a question if I'm not mistaken to Marcello.
Or to Eduardo about the positive Cashcall Eduardo the positive cash call for 'twenty two 'twenty three.
Because of this fact of the market NII will be resolved over time with the creation and generation of a new portfolio with the new Selic rate and you can solve it and then you can have a positive market NII, which already happens over 'twenty 'twenty three.
With a pace that we have to renew our portfolio. So that's a one off event. It happens at a time in which volatility is very strong we saw it happening in previous years.
There were moments in the history of our country.
In which it already happened, but it was a fast recovery you generate portfolio breaking new operations and you can go back to a positive performance.
As for their delinquency you mention actually we have this expectation to grow 10, or 20 bps and then it gets table at a higher level similar to what we had pre pandemic and in the current quarter like you said, we did not sell.
Active portfolios are non active portfolios, we will do that once we.
Envisage important opportunities.
Which are profitable and that makes sense for us one of them is being analyzed and is expected to happen.
In the second quarter, but was two working days and whenever we have the chance because you work on delinquency NPL portfolio and you compare whether it's better to sell of bi specific portfolio.
We can see it is more adequate right now to sell portfolios.
Naturally depending on the interest rates will have to see how it happens, but answering your question. Yes, we keep on studying this and certainly we will have a portfolio sale over 2022 thank you very much.
Okay.
Flavio Sheila Bank of America.
Yes.
Good morning, everybody. Good morning, Dottavio. Thank you for the question.
Sure.
I would like to talk about the quality of the portfolio you said the delinquency should go up a little bit.
And you said that it should go back to pre pandemic levels. When we look at the segment separately. The individuals segment is already at the pre pandemic level.
So I would like to know if this additional deterioration that you are expecting would be more from corporations that have a lower delinquency now.
And why are you so confident to say that delinquency should be stabilizing over the second half of this year.
So why do you have this level of confidence.
Love It.
You are correct individuals has already gone to pre pandemic levels and corporations are at a lower level of delinquency. This is exactly what you said the mix has changed Flavio Lodge.
Large corporations are seeking less credit maybe going more to the market to finance their activities.
No.
So we have less credit.
For corporations less credit.
For real estate and payroll continues to grow.
And the mix has changed.
Towards higher spread operation. So it's only natural to have a higher a O L.
This is what happens when you have a change in mix you had a big.
Growth in real estate loans and less than the others and where you have this change in the mix. This brings about.
A higher delinquency. However, the spreads are better so it's like a trade off.
This is a little bit of the scenario that we will be seen over 2020 two.
Changing the mix.
More.
Towards profitable or more profitable portfolios.
Okay.
And this is why we understand that delinquency should not go down, but keep the pre pandemic levels and with a slight increase of 10 to 20 bps as I said over during my presentation.
This is led.
When we look at each one of the product lines, we see that relative delinquency has not changed.
So you do not see a further deterioration in the broader desert Douglas said, you only has a bigger weight.
Per client.
This change of mix.
And still about the same team something draws our attention which is credit card.
I think 46% in the ear.
And this is a line that brings some concern to the market.
Because of what has been happening the last year, so what about the risk in that specific.
Portfolio, if you have a can.
Can you make a better selection of clients.
And offered the card to the client that chose the lower risk or do you believe that this line as a whole.
Could bring about the deterioration in delinquency over the ear.
So have you the growth in credit card debt, we have been seeing here at the bank.
It's very much focused on the blood based <unk> clients those people, who already have transactions weight per day at school. So we do have the credit history of these people.
And of course, you could have a slightly higher delinquency. However, we already know these clients.
Okay.
This is not the growth of.
Credit cards in the Red Ocean.
This is under our control.
And this is also valid for Nag for day, two et cetera, the growth in the volume of credit cards issued so we already know these clients better.
Besides I think it's important to say.
That we see this.
Growth in our client base as W said.
However, the growth in volume has to do with the reopening of the economy and people traveling and activity and corporate card then people traveling and activities leisure activities and it has to do with inflation as well when you have.
Like you know air tickets Airlines take kids and fuel.
We're growing a lot.
And these are of course, we have a very big concentration of these areas.
Yes.
And it does have to do with the very good performance that we see but also with the factors that I have just mentioned thank you very much. Thank you.
York Friedman with Citibank has the next question. Thank you very much I would like to talk about something nobody mentioned before insurance.
You are working again on this guidance from growth from 18% to 20%, but in the first quarter annualized it is.
Below it.
Yeah.
Claims ratio for instance is too high owing to some factors made the one off events.
Another factor has to do with inflation.
Ratios that have an impact on pension plans could you elaborate more on that please about how comfortable you feel in order to go to the issuance guidance I think it would help us to fine tune our models. Thank you.
Thank you for your question Ivankov tissue the CEO of the insurance group is here with Us Eva Kudu answer Yorks question. Please.
Thank you attach New York, it's a great pleasure to talk to you.
Let me tell you something we feel comfortable and did not change our guidance because we were ready.
Looking at the second quarter in a very different manner clay.
Claims ratio is low.
Financial revenue goes up and we feel very comfortable if you think about March like OTA, who mentioned, we will see that compared to March 2021, we posted growth of 16% So the financial part.
Is doing well its very well under control the second point that consider important to tell you has to do with the increase of two digits two digit growth.
In the net premium.
Oh, the gains that have an impact from last year, but I'm addressing business closed in the first quarter.
Totally something around 22 billion reals.
This shows growth of two digits around 13%.
So if you look at.
Billings by sale auto P&C, 24% capitalization, 19% life, and pension, 16% and health and dental something close to 8%.
So in all our business lines.
We are comfortable.
To look at the second quarter and maintain our guidance.
And have the comfort required to meet our goals.
Another point that I consider important.
He is the E. R. All 3.7, which is one of the best.
Results achieved by the insurance group in recent years as for the claims ratio for.
For health life or.
Holmes there was a strong decrease this quarter like ottava already sad how.
However, in the second quarter, we already see late.
In a more latent manner.
So low claims ratio combined to new business.
And new inquiries.
In revenues.
That are consistent grow in month after month.
This makes us comfortable.
To achieve the guidance already in the second quarter.
And for this reason, we did not change the guidance for the insurance group I don't know if I fully answered your question, but I'll be here for any other clarification. That's perfect. Thank you very much.
And just a follow up question you talked a lot about portfolio quality, our Tau you.
But just to underscore our understanding about why do you envisage in terms of convergence.
Coverage for the end of the year.
Just to make sure we are working with the right seekers.
York.
It's a pleasure to talk to you Dear friend, our indicator is 225 and is slightly higher than pre pandemic levels. If you think about the last 10 years, you see that we always maintain well I will say Europe I believe this indicator will be between 210.
10 or 200.
Within this range twin the 202 hundred 10, perfect I saw used to maintain.
That additional provision at very high levels.
And it also provides comfort. Thank you very much for clarifying this youre right Youre right York. Thank you. Thank you.
Okay.
Pedro Leduc Ito BBA.
Good morning, everybody. Thank you for the question.
It has to do with the update of your guidance regarding a O L. A expenses a law change since the last quarter. So you revised the NII up and also your provisions.
But I would like to talk about the comfort.
That you have in terms of having this mix of 19 billion.
It seems to be very similar to the grid.
With that we had in the last quarter.
The NPL line and so I was at I seem to go up faster.
Yes.
We are already near the PREPA dermic levels indicator for 90 days Sabra days group seem to be worse than the industries and this has been happening for quite a few quarters and it seems to me that youre comfortable with your level.
Of.
A O L.
You mentioned 20 bps in the second quarter.
And specifically.
This.
Are you, making some adjustments in origination in order to have this degree of comfort with the control of the oil expenses.
Okay.
They do this is Lee Andrew.
Basically what we have been seeing is that the NPL creation should be going up.
10 to 20 bps in the next quarter.
Yes.
And this stabilizes in the.
Second half.
In relation to each one of the segments.
This is.
The large corporation segment has been improved me improving in quality and we expect this to continue the level of delinquency has dropped in this segment.
So this is an extra comfort that we have in provisioning.
We should have about 20 billion that we mentioned.
Regarding expected losses that points to this scenario.
And based on the assumptions of the department of Economics.
So we're comfortable saying that we are going back to the levels of 2019 and after that.
The coefficient will be me paint.
Okay.
Delinquency large corporations, where there is a problem everybody learns about it because the newspapers break the news, etc. So you can see that there is no large corporation that might be having problems. So I don't believe that we will be heavy any.
Rise is coming from large Corp. This is the reason why it would have a relative degree of comfort to give you. This new guy guidance regarding a O L.
Vis vis the size of the portfolio, we have the highest provision.
When you look at the other banks.
You see that they have to reinforce in order to get to levels close to ours.
And we have the largest corporate portfolio in Brazil.
Even in spite of the change in mix in terms of volume it is.
Much smaller than individuals.
Then a loud cogs.
So this is the reason why we have this.
Balance.
NPL individuals.
Hey, Budd.
For large corporations is gives you this level of course with.
This is very clear.
In individuals some adjustments being made in origination.
Because it seems to be it is slightly higher than the overall system.
As you said.
We have a mix of more profitable.
Such as is the case of credit cards and revolving loan and installment.
And a decrease in products where.
We have been the leaders always.
Low risk such as the real estate that has the lowest spread so you will see that relatively this portfolio.
<unk> more return and also it drives a higher a O L. But what you have to see is that net spread and the net spread has been growing OLED. This quarter was 30 bps.
Where do you include the new say leaking the credit model in the analytics.
It's only natural to see a change it's not that we have.
Pressing the brake.
Yeah.
But we have to require other things from the client in order to accept the operation.
Very clear thank you very much.
Thank you.
Ex Catholic school knees with HSBC.
Good morning, Thank you.
My question is about capital.
This quarter 2.5.
So what is the goal for the end of the year and what about the consequences of the companies pay out second question.
Would you consider consolidated Fintech and having more investments in this area.
Thank you.
And it was I'm sorry, I did not understand the second question could you repeat it please.
Would it make more sense to acquire one of these fintech companies.
With regards to capital Carlos.
We have a very comfortable position.
Our operation will continue to generate capital.
Until the end of the year.
Our capital position today seems to be adequate for the moment.
In terms of dividends, we expect to maintain our dividends and our dividend payout policy they earn interest on equity and maintaining the payout at the current levels.
So to date no changes expected in the policy.
Corners, when it comes to acquisition of syntax that are two important aspects here firstly it is on our radar.
Both <unk> and.
Who does and giovanni's, we keeping an eye on companies that might make sense for us and add value to our companies or.
Anticipating movements in our technological progress. So many companies are being considered and if it makes sense, we might acquire them like bits for inches bits acquire two companies right.
Boarded and G G.
We brought the managed men.
Competence and increasing with those companies on the other hand, we also have oh by the way are there are two other aspects one is private equity.
Which is our investment fund we have several companies that we invest in.
Never has our controlling party, but always as investors at.
At 10, or 15, or 50 or 20% stake 18 companies invested in total and.
And we also keep an eye on them and acquiring some companies could also has another initiative.
Which is an investment company.
In other business that makes sense to the organization. So we can speed up our technological progress and Bradesco. Seguros also has an important arm of I T innovation not only in I T. But also in additional business.
<unk>.
Clearly our reserve several companies involved in the insurance group. So when it comes to acquisitions are invested in syntax. This is something that's permanently on our radar.
And next just to add we announced the <unk>.
The acquisition of Ari.
Working on Tex.
Services and checkout and this will help us to have better control of our.
Cashback in next ecosystem, and we had already previously announced not acquisition of the portfolio, but the individual portion.
Good point thank you.
The Q&A session has come to an end to end Bradesco will make the closing remarks.
Thank you very much for participating so our conference has come to an end.
And should you have any additional questions any further clarifications that you might need our investor relation department will be available to you at all times. Thank you very much.
Thank you very much good afternoon. Thank you very much for participating.
Thank you <unk> conference call has come to an end we thank you very much for participating and wish you a very good day.
Okay.