Q3 2022 Banco Bradesco SA Earnings Call - Afternoon Session
Good afternoon, ladies and gentlemen, and thank you for waiting we would like to welcome everyone. So about <unk> third quarter 2022 earnings Conference call. This call is being broadcast simultaneously through the Internet <unk> Investor Relations website.
<unk> Dot com BR slashy en in that address you can also find the presentation available for download we inform that all participants will only be able to listen to the conference call during the Companys presentation.
After the presentation, there will be a question and answer session. When further instructions will be given should any participant need assistance. During this call. Please press star zero to reach the operator before proceeding let me mention that forward looking statements are based on the beliefs and assumptions of Banco Bradesco <unk> management and on information currently available to the company.
They involve risks uncertainties and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future investors should understand that general economic conditions industry conditions and other operating factors could also affect the future results of Banco Bradesco and could cause results to differ materially from those.
Expressed in such forward looking statements now I'll turn the conference over to Mr. Carlos <unk> business controller and market Relations Director. Please go ahead Sir.
Thank you good afternoon, everyone welcome to our conference call for the discussion of our third quarter 2022 results. We have today with us in the conference call, our CEO will positively loves that junior.
Andre.
Colonel Executive Vice President and CFO Cassian, Scott Bailey Executive Vice President.
It would equal poverty executive Vice President.
And more skewed knock, but executive vice president of Bradesco.
Also we have with US was wildly fernandez.
Executive director.
<unk>.
Bradesco Seguros Chief Executive Officer.
Of course, the DRAM Zimmerman bulk lenexa and beats.
Chief Executive Officer, and Carlos <unk> with Banca <unk>.
Active officer.
Turn now the floor to lender Miranda executive director and IRR for this call. Thank you for that thank you all once again for taking part in our earnings conference call. The third Q earnings reflect the current economic performance in a market that goes through cycles.
Have to reverse at various points through the credit cycle.
The pandemic began bringing a longer known threats and the expectation of a worsening economy, we made significant strides provisions.
As the economy improves in 2021 and the beginning of 2022.
We're able to release part of the excess provisions, especially in the leading large companies industry.
Right now we are moving into a cycle of increasing provisions is expected to continue throughout 2023 due to the loans that have been granted in the mass market.
We are now at full speed interest forming the bank as of today, we are undoubtedly one of the largest digital bank in Brazil, while maintaining the greatest physical presence among the peers.
With risk for our way of serving clients according to their preferences and needs.
Customer Centricity is behind our moat between US you always come first we hold a unique positioning we'd be a largest and best insurance company in Brazil, and in Latin America, our capillarity that unites the physical to digital.
Certainly the finance financial products software in Brazil from individuals to coffee.
As you know with physical has extensive operations, serving all segments of clients either individuals or companies and that team all over Brazil.
As a result of this strategy with our broad position in the market our activities at launch and banking are correlated with the performance of the Brazilian economy and disposable income.
Economic scenario high inflation and interest rates led to a deterioration in declines payload capacity and the consequent increase in nonperforming loans, making necessary grid provision expenses above our initial expectations. The delinquency ratio grew in the low income math Mark.
<unk> segment for individuals and micro and small companies.
Serving the delinquency of recent harvest, which already indicate improvements and all the adjustments. We made in 2022, we projected delinquent should stabilize and improve in the course of 2023.
In the last two quarters, we have made provisions of both the NPL formation, which should continue into the fourth Q2 thousand 22.
The brisk hike in the Selic versus the natural speed of renew.
Our <unk> loan portfolio has also affect the results of the market NII as we pointed out in the previous quarter. This effect will probably continue in the fourth SKU and throughout the first six months of 2023.
Our profit is expected to remain under pressure for a few quarters, but this should change more consistently in the second half of 2023.
We believe that the bank will continue to be able to operate with an improved level of return we will pursue this and continue making the immediate adjustments to return to the level of profitability.
The drivers of a recovery in the performance includes.
Improved delinquency ratio, which should peak between first quarter 'twenty, three and second quarters of 'twenty, three and improve thereafter.
Each will allow us for a gradual reductions in credit provisions.
A significant improvement in market NII, meaning from the second half of 2023.
The evolution of the income from insurance group.
Maintaining a strict cost control and the continuation of the good results in the wholesale bank with a high return level and that even record the lowest historical delinquency rates over 90 days.
With respect to this quarter earnings we saw a drop in the recurring net income of 25, 8% compared to the previous quarter.
Primarily due to credit provision expenses markets NII and income from insurance.
The loan portfolio rose by 13, 6% and an annual comparison, which association with associated with the original mix benefiting the client NII, which grew 24, 7% over the same periods.
Finally, we closed the quarter with a 13, 6% tier one capital level that points to the strength of our balance sheets.
Now we move to slide three.
We compare the net income accumulated over the first nine months of the year with the same period from last year.
Items that made a positive contribution to the product to the profit work.
Turning to NII, which presents an increase of $9 5 billion reais, reflecting the growth in the loan portfolio and spreads. In addition to the origination mix that has been more concentrated in the short term lines that have higher margins.
Income from insurance, which grew $2 5 billion reais benefited by higher premiums and increased financial income. Despite the increase in the claims ratio.
We also have two items that reduce it profits by nearly the same magnitudes market NII, which posted a reduction of $6 8 billion Reais as a result of the impact of the accelerated increase in high level maintenance of the selic rate on our ALLL and.
Six 6 billion Reais higher credit provisions, reflecting the portfolio growth origination mix and increase in delinquencies.
Mt includes one <unk> that we made make as a supplementary provision this quarter.
Now, we turn to slide four.
Let's talk about loan portfolio, which grew two 7% compared to the previous quarter and 13, 6% compared to last year.
Originations for individuals is 10% lower than last year.
But with the superior credit quality.
The adjustment was made mainly to the low income mass market's which presents more credit risk.
As we speak to their criteria for approval given the scenario for high delinquency and.
An example of this is that today, we have proved 48% of credit proposals compare to 58% a year ago and 668% in the pre <unk> period in 2019.
The 38, 8% growth in credit card reflects the increased penetration of carts among our.
High income clients.
In addition to the increase in average expenses after the pandemic and inflation over the periods. Here. We also we are also very restrictive with the low income segments.
In aggregate the three 5% search is due to our focus on agribusiness through our <unk> platforms. The crew.
Pierre began over the third quarter and this portfolio should expand even further.
The renegotiated portfolio remained stable as a proportion of the loan portfolio.
Turning now to slide five as we set the delinquency over 90 days was affected by the economic cycle.
The ratio grew <unk> four percentage points with an increase concentrated in the mass market the lines individuals and micro and small companies segments that were most affected by inflation.
The early delinquency has remained stable for two quarters, reflecting the adjustments we made in origination.
This quarter the gross credit provision was once again higher than the NPL formation and as a result, the cost of risk reached three 3%.
The coverage ratio for the NPL 90 days remained at a very strong level of 201%.
Now we go to slide six to talk about NII.
Overall NII has reason by five 7% in the accumulated nine month.
Client NII continues to expand benefiting from portfolio growth and favorable spreads given the product mix. In addition to the positive impact on the deposit margins due to the increase in the silicon rates the increase over the year is 23, 4% the charge at the bar.
All of this slide we highlight the client NII net of credit provision, which is 10% higher compared to 2021 and 25% higher than what we had in 2019 pre COVID-19.
Client NIM also continues to evolve.
10 bps in the quarter, while the net NIM impacted by the higher provisioning posted a reduction.
In market to NII.
Portion continues under pressure.
We can say that the performance in the fourth quarter should be better than the third quarter, although still negative.
The recovery of this line should be gradual during 2023 with the second half better than the first one.
Considering the current expectations of interest rates and portfolio with pricing.
Now, let's move to slide seven.
Let's talk about insurance group results.
Accumulated net income expanded by more than 20, 28% with a major contribution from the operation operating results, which offset the financial results influenced by the dynamics or the financial indexes, we highlight the growth in revenues across all business lines 18, 9%.
And the third Q and 17% higher in the year overall, therefore, the income from insurance our guidance continues with a very positive performance growing 32% in the year with an emphasis on operational performance.
The volume of claims directly related to Covid in the third Q reached 280 to 90 million Reais the lowest in the series and $1 1 billion reais in the year around 73% less than the same period last year.
Our loss ratio you saw red showing a reduction from the previous quarter and from the third Q2 thousand one.
<unk> group continues to grow and improve its operating performance with an expansion of the number of insurance clients and items, thus reinforcing our strategy and confidence in this segment.
Turning now to slide eight.
Fees grew four 8% for the year.
Card income increased by three 8% in the quarterly comparison and 22, 2% for the year.
It reflected volume has demonstrated a progressive growth and it's worth mentioning we have increased the dollar base, especially in the high income segments, which reached 39% share of group with lower risk and higher return, we reach at $76 8 million clients amino growth.
$4 3 million clients, which contributed in maintaining the level and the checking accounts line offset a substantial part of the drop in revenue from surface service packages and from the use of peaks.
Continuing to service items and slide nine outlines our performance and growth in the private banking segment. We are currently the second largest private bank in Brazil with around 22% share in the local markets and a notable growth in recent years.
Since 2019, we have grown the volume of managing resources by 52% are rising at $308 9 billion Reais.
We have also continued to advance our specialization and increase our bankers and consultants him with a solid value proposition, which was reinforced it with the acquisition of the disc bank formerly.
Bradesco back Florida will.
We will continue with our strategy of observing acquisition opportunities and signing agreements and partnerships such as those with JP Morgan being people, who bought in the independent wealth management, both busy with a view towards increasing our share in the industry by providing the best offer to our call.
Thanks.
We will now take a look at slide 10.
Operating expenses posted a four 6% growth in the year.
Below inflation for the periods.
PCA at seven 2% and a GPM at eight 3%.
The personal lines grew by 11, 6% impacted by the collective bargaining agreements of 'twenty, one 'twenty two.
We also continue to invest in reinforcing and improving our investment advisory Tech knowledge that our science teams in an effort to enhance our processes and provide a better experience to our clients.
We continue our focus on optimizing the physical presence and investments in digitalization of client services. This action in France have helped us to contain the increase in the administrative expenses at six 2% for the year.
But at this wish but absent our banking correspondents network complements our physical presence with great capillarity and convenience for customers in a structured based on variable costs.
We announced <unk> capital and liquidity on slide 11.
Profit generation and deposits positive mark to market on securities over the quarter more than offset the distribution the form of interest on shareholders' equity and the consumption by weight of assets, increasing our tier one capital by 30, Bips, which continues in a very strong level.
Our estimates for the fourth quarter suggests that we will finish the year with a level closer to the current one even with the impact of nearly 40 bps in December with the completion of the application of the rule for handling tax credits were originating from the head of investments abroad.
We closed out the quarter with a high level of LCR.
Turning now to slide 12.
Making sure our clients each store experience is always improving we are committed to keeping them at the heart of our decisions.
This is a strategy that provides increased autonomy and a better experience for them and results in a lot more business currently 71% of our account holders are now digital and 98% of all transactions take place via digital channels and in annual comparison the open.
<unk> of accounts directly food, yet grew by 62% for new visuals and by 66%.
For.
Micro interpreter mirrors, the frigate upgrades that we performed yet which introduced new features and experiences based on data and align with the needs of our clients has been an enormous success with clients evidenced by the 90% level of overall satisfaction with our app with officials.
<unk> NPS.
Turning now to slide 13.
With respect to the sustainable business agenda, we remain committed to carrying out our activities with our positive social environment impacts and we have already achieved 63% of the grille, we have over 20 products that boast social environmental benefits in our portfolio and tissue loosens.
Should be highlighted for the growth within the last few years.
First of all financing for the purchase of solar panels.
Each reached $1 2 billion reais and financing for hybrid and electric vehicles, which rose four five times.
For environmental issues, we would like to point out the importance of our historical partnership with the Sos market launch the foundation and initiatives that we are proud of.
We have supported Sos since 1989 and over 34 million native trees have been planned to be mined Brazilian states over in spirits and finally at this time the 27th UN Conference on climate change is taking place in Egypt, which we are participating in.
Include the climate agenda, and our sustainability strategy and follow all major tranche to ensure that bradesco is maintaining its pioneering spirit and deserves significant and relevant issue.
With that we'll move on to slide 14.
Our last slide today, considering our performance up to the third Q, we believe that you'd be able to lower part of the range for loan growth in fees at the top of the range for costs insurance and client NII.
With regards to credit provisions, we decided to revise the guidance. According to our projections the credit provisions for 2022 will be in the range from $25 5 billion Reais to $27 5 billion Reais.
This performance reflects the points, we covered on the credit cycle and the mass markets. Despite a further strong performance in loan quality and the wholesale markets.
When market NII as we mentioned earlier, we should return to positive levels in 2023.
In the fourth quarter. This launch will remain negative, but better than the level of the third quarter. Thank you very much for attention and now we will begin the Q&A session.
Thank you we will now begin the question and answer session. If you would like to ask a question. Please press star one.
At any point. Your question has been answered you may remove your question from the queue by pressing star too. Please.
Please hold while we assemble our roster.
Thank you. Our first question comes from Jason <unk> with Scotiabank.
Hello, everyone. Thanks for the opportunity to ask questions.
Just wanted to clarify some comments you were making previously on the conference call in Portuguese.
You talked about a material change in your outlook.
For provisions and loan loss allowances now versus the second quarter.
I just wonder if you can clarify and you talked about the outlook has changed and when we look at the macro forecast from Bradesco at the end of the second quarter.
Versus today.
It doesn't you are seeing something that we don't see in the top down numbers just the.
The inflation looks better than you were expecting in the second quarter.
The general price index looks better.
So I'm just trying to understand I mean, clearly you're you're telling us and we saw it in delinquency that there would be a.
A worsening and I'm just trying to understand how the provisioning outlook changed so much.
And one quarter to the next.
And then my second question is related to loan sales that <unk> been doing but we calculate that that you sold more loans $2 8 billion in the third quarter up from $2 billion in the second and we wanted to understand how that impacts you.
Sure.
Asset quality metrics were those loans.
90 day past due or what can you tell us about how if we consider those loan sales how that would impact asset quality. Thank you.
Hi, Jason Thank you for the question diseases. So that's.
Regarding your first question on the outlook.
Basically I would say more than the change in the outlook what changed was kind of the impact.
We saw.
In.
And our loan book and also in the evolution.
In terms of.
Credit credit quality in the second quarter results.
Basically we advised that we were we were seeing.
Provision expediting expenses, probably coming a little bit.
Above our guide us already and the trend actually.
<unk> materialize in our view it.
Is.
The more fair to provide revised guidance that brings our best view for the momentum on that line. So basically.
Im not sure why you would say that was what drove us to do this revision.
In terms of credit quality, we're seeing more than that.
A big change.
The outlook.
But actually the outlook for the high inflation and.
Yes.
One of the things that he did.
And that is really the driver for this deterioration considering our position in the market, even though there wasn't a big change.
In the outlook numbers itself.
I don't know.
Okay.
Okay.
Considering the sale of <unk>.
Loans or Npls basically.
These loans.
Or basically in our book.
Then more.
We're mostly loans that were renegotiated portfolio.
Retail retail loans base.
Basically in the kind of segments, we worth pointing out there was.
That would have been more affected by.
The increase in delinquency and credit cards.
Personnel loans.
And the impact of this sale is something around 30.
30 bps in terms of 90 days Npls.
Hi, Jay.
Our radio.
Just to clarify I apologize.
Four months I think it's important to highlight that if you went that dire performing and much better than <unk>.
And thats before especially the impact before.
2019, 2018 in 2017, especially due to the fact that Andrew highlighted about the approval rates and all the adjustment that we proceed in the portfolio after December .
2021, so we start at.
Tightening the policies.
Since then and we continue with base tightening process.
So our approval rate before the crisis in 2019, Richard the level of 68%.
During the pandemic it went up to 58% and then after December 2021 has decreased gradually.
88% so it means at Granny at points percentage points below what we experienced before to Greg.
And according to that our through the door profile has improved a lot. So just to mention you one big size portfolio.
Cards portfolio.
You have as low and very low risk and through the door and average 60% of the new acquisitions and today, we are above 80% and but we're going to end up the year with more than 90% between very low risk and low risk through.
Through the acquisition.
Dave kind of indicators also highlight a better performance in the first Buck of collection.
That we see that we are performing below why do we have in the in the first bucket in 2019 and highlight in 2019, because it leads before the crisis. So and we also experienced a decrease in be indicated during the last few months of course, when you talk about port.
Volume over 30 days they are.
The ROE rates are higher than it used to be before and Thats. The reason why we still believe that delinquent is going to go up a little bit.
In the first quarter.
<unk> 2023, Andrew stabilize in the second quarter, and then gradually decrease in the second half of 2023.
Regarding to your question about Opex.
Asset sales strategy is important to say that our assets sales strategy.
Of course, all the clients.
Oh, probably off recovery. So what do we do we analyzed every quarter the clients with low probability of recovery and retrenching and focused our collection Chang.
All the new delinquent because there we can.
Recover declines.
These sports or all of the excitement that we identify a low probability of recovery then we use that for our new sales at the asset sales. The strategy. It's important to say that most of this portfolio is already written off and the portion of this portfolio that is nonperforming.
Other work before written off 90% of this portfolio is fully.
At best buy provisions and the average delinquency our beef pork quarters over 230 days. So you are talking about really.
Specific portion of the portfolio and its part of our strategy, we're going to continue to do that in order to release, our collection team to focus on what makes sense from a recovering relationship with customers and protecting our assets on the new delinquent that is the most important for us.
And those delinquencies that we don't see any.
Hi, probably to a very low probability of recovery, we're going to continue with our strategy.
That's very helpful and I do appreciate that when you see.
The risk rising that you are acting appropriately and making the provisions. Thank you I appreciate the answers and color.
Thank you. Our next question comes from Chuck <unk> with UBS.
Yes, hi, guys.
We already discussed.
On the call.
So that's most of the deterioration of the quality whats can see traded in the low income segment.
I have a couple of questions on this point.
The first one.
Yes.
<unk> already any impact of the higher checks that have been paid in the last months.
The viewpoint.
Difficult one issuer in kind of if you believe in any kind of a diverse selection of the low income clients. So maybe that will give you. The good loans and clients are going to the feedbacks and but if you stay with the bed to low income clients.
One.
The final one.
If you see any difference in the profile.
The quality of that discourse traditional clients or traditional low income clients and next.
Low income clients.
We declined.
When to buy vehicles or political or <unk>.
Any difference in these two.
Outperformance for drilling coming back.
Sean.
Well first of all.
Nex has its own clients.
There is a.
Overlap of 25% of clients.
Therefore.
The strategies are pretty much difference and we just have our lion's share as we would have in any digital banks or other incumbent banks.
Regarding to a diverse selection, we don't think so basically we at.
At times like that we try to work the more we can with existing clients with clients that we know the most with clients that.
We do understand their profile their track records of payments and we have increased it by more than 60% our penetration in the high income segments. So we do not think that there was some adverse selection.
Terms of choosy.
Those clients and by the end of the day as <unk> said in our first conference call.
It's natural that the delinquencies came from the low income segments pretty much rate a rate <unk>.
Because basically we have the highest beta in Brazil, we are the only bank in that we're seeing I'm going to spend it.
Pretty much.
Different from those banks that have clients basically main feeders in capital.
So.
Think thats much more like a profile of the bank.
That has its.
Deadlines in good times than anything else and of course, we are talking to is small and micro companies as well because basically they share the profile of the low income.
Individual clients.
Juggle these a repo agreement.
I agree with you Andrew I don't see any kind of adverse selection.
Great.
That's a good way to see that.
Through the door application profile hasn't changed.
During and before that before it was damaged during different navigate an accurate pandemic. So we see clearly that is the safety profile, we used to have but of course based profile any solar profile is linked to.
Due to the fact.
That has been affected by inflation and high interest rate. So that's why we see an increase.
In the late in the liquids rates, we are seeing right now so that's a new terminal.
<unk> I don't see any.
Any indication of that yes, maybe.
If you could share with him.
<unk> in the origination how much they have improve it.
For all time.
Okay.
In terms of acquisition.
As I mentioned before FERC generics portfolio, we used to have around 60% of <unk>.
Low rate of inherited no brand new products and now you're closer.
Both actually 80% from.
Low rates and very low and we made that we are going to close the year over 90% of new customers.
Customers on these profile so by the end of the day basically when you see the proportion we are working with better clients than before.
But there is a theory ration their financial situations hesitant weighted heavily that's pretty the much the point because very good.
So you will have in our portfolio that has a greater array and had a performance before but with the <unk>.
Severity of the crisis.
Deteriorated so within the existing portfolio can do something.
It is an existing portfolio anyway.
Yes.
Okay.
Okay. Okay.
Any background checks for your review.
Actually we haven't.
Any impact.
Brief across an analysis on that.
See if there was any impact in terms of collections and recovery and even credit performance, but to be honest with you. We havent seen any anything that would be significant.
Very clear thanks.
Thank you.
Thank you. Our next question comes from Josh <unk> with Morgan Stanley .
Hi, good morning, everyone.
I wanted to clarify something that was said.
Did I understand correctly that the portfolio sales were on loans that have already been written off.
Is that a 100% of the board.
<unk>.
Loans hold were written off or just a portion because then I believe.
He said that the impact on Npls was 30 basis points from the sales, but we really didn't know about.
On why there was there would be an impact.
Just clarify.
There were $2 9 billion in loans that had already been written off and to have them be them.
<unk> been involved Thats were still on our books.
The impact of the Npls come from the $2 seven.
Got it and the impact is 30 basis points about the exact number yes, yes, roughly yes.
Yes.
But.
If you.
Just a minute alright it.
It is important to highlight highlights both portfolios that they have the same profile. So very very low probability of recovery and that's the reason why there has been sold.
Our strategy is really to understand the population that has a low probability of recovery that we sell lease portfolio regarding at least at this stage of the England companies people, even though we know that the EBIT. The free brake written off portfolio is up very high delinquency rate as I pointed.
A few minutes ago.
Thank you.
Can you comment on what percentage of that portfolio was individuals versus amines versus.
I'm guessing not corporate but.
Provision of what you've sold.
Yes.
Hi, Jared.
B groh.
And is there a particular product, but your but youre seeing more defaults if it isn't.
You've been talking about credit cards credit cards is that is that sort of like the Achilles heel of the credit card book.
Yes. They are concentrated on the products that are concentrated on the low income segment, so basically installment loans and card.
Personal loans, that's on the low end of guidance.
Okay got it thank you.
Thank you.
Yeah.
Thank you. Our next question comes from <unk> with Goldman Sachs.
Taking my questions also.
One follow up on tablets earlier question.
Deterioration universe.
Digital bank, we saw them pick it up.
Thanks.
Someone holding up a bit better in terms of npls.
Any color you can give within those lower income clients, where you're seeing the deterioration in terms of buying that came from digital channels versus clients coming from from the branches and.
Thank you your growth there was maybe too aggressive to some extent that now it's hurting you on the NPL side or why do you think your npls are looking worse than what we've seen from some other peers and from the industry. Thank you.
No.
Okay.
No.
Thank you chip demand. We're speaking Daniel vehicle is going to have <unk> here, well basically we do not see any sort of difference between the group of clients that came through digital channels.
Well it's from.
Compared to the group of clients that came from the traditional channels there was no.
Difference among the groups.
As far as what the statistics are concerned.
When you make reference to the digital business.
And then we are referring to Max the issue.
Not bradesco itself has a different strategy.
<unk> grew.
As a.
Our strategy at the base of clients and now as you point out the morning, we are focus on.
Monetizing those clients and trying to select.
The best one of them and focus on.
Getting better results from them. So we are talking about two different worlds with regarding to Bradesco. There was no difference between digital and physical.
Channels.
Okay.
Just to complement the point, Jeff made a.
Martin would you say that even though.
The performance within the portfolio.
There is not much difference between the channels the mix of the profile.
The channels are different so what happened when we have a digital channel, which not only attract more aircraft.
We are.
Barry I thought that.
In Asia.
So it's very different from all of our rigs for instance, you can work through different channels. So we.
<unk> channel check unlock even though the profile itself.
It changed much between your different channels just to be clear.
Got it in England offered checkpoint.
It seems to be.
R J.
Okay.
Our Fisher brand channel, mainly because of the mix inside the channel and a different weighting the profile.
Okay.
Okay, Great no. That's helpful. Thank you and maybe I guess.
Follow up question.
More in terms of we've seen sort of loan growth in these unsecured segment pretty strong not just at bradesco, but for the system.
In General I guess, the two point question I mean, given that growth you think how systemic get this issue essentially become and do you expect to slow down the growth significantly in those segment from.
From here I mean, we've already seen some deceleration, but you could say that.
Significantly or are you still seeing opportunities to go there.
Yeah.
Okay.
First of all I guess when you compare our sales among the other banks, we are new ones.
With.
Most DRAM.
As far as the geographies concern. So we are we.
We have the largest.
<unk>.
A rated clients profile.
<unk> other banks are more core.
Concentrated in main cities in the capital.
When you compare.
And pitch.
The second thing is that we do book too.
To slowdown.
And we are reducing.
On an ongoing basis.
Our origination and has been more and more conservative regarding to the approval process.
To those clients.
Okay perfect. Thank you very much.
<unk>.
Okay.
Even though it's going to be.
Yes.
And does that.
We have reduced appetite for those portfolios to be portfolio concentrated with gvhd.
We are working with you.
The broker market and continued activity growth and try to reach out to that better as discrimination.
Constantly work on that if there is any new information or something that could upgrade the separation between moving back into the model.
The leverage on the October rates.
General thinking that we're going to use that resides.
In general terms.
Makes sense great. Thank you.
Yeah.
Thank you, ladies and gentlemen, as a reminder, if you wish to ask a question. Please press star one.
Our next question comes from Geoffrey Elliott Autonomous.
Hello, Thanks, very much for taking the question really wanted to follow up on one of the questions on the Portuguese call earlier, where you were asked about why now in terms of this big change in the outlook.
Provisions.
On that call you mentioned inflation is being an issue but inflation.
Over the last few months has actually been bid Lois just struggling to understand.
The context of inflation coming down a bit fuel tax cuts and more support to low income people through the obviously over so program.
Employment falling.
What's happened over the last three months to make the outlook now so different from the outlook back in August .
Okay.
Josh This is Phil.
<unk>.
S as I said.
And then in a question in the English call.
Sorry.
A continued trend.
In terms of increasing npls, especially in the segments, we have already mentioned.
I'd say in the.
Our second quarter call, we had hopes that the.
Provisions in the year may be wouldn't be much higher than the top range of the call but.
Land became clear to us that actually the difference was material we.
I thought it would be.
The more transparent really to change the guidance instead of just guiding for.
A range above the top of the range of the former call farmer guidance.
Okay. So it sounds like maybe that was a bit of upsides to the old range.
As of <unk>, but you're kind of left those numbers hopes it improved and then it went the other way. So that's why we've got the adjustment now.
Yes, that's correct right, Okay, alright, thanks very much.
Thank you.
Thank you. Our next question comes from Jason <unk> with Scotiabank.
Hi, Thanks for allowing me to ask another question I also wanted to follow up on a question from the prior call about the other income.
There seems to be a provision that was if you can explain what the movements were in the other income line that would be helpful.
They were large.
Okay.
It.
Is related to.
The.
Sure.
Tax.
Discussion we had.
In the administrative body.
<unk>.
The Brazilian.
IRS we.
<unk> that discussion.
Our recent fleet and.
Due to that we had to reverse the provisions we have made.
Yes.
So that was the reversal of <unk>.
Provisions to pay a tax dispute what was the size of that reversal.
800, 800 meter highs.
Thank you very much.
Got that.
Yes. It was a definitive decision. So we really had to revert that we treated that as a recurrent expense plan it happened.
And kept it as a recurrent plan we reflect it.
Okay.
I appreciate that.
Thank you excuse.
Excuse me, ladies and gentlemen, since there are no further questions I would like to invite Leandro Miranda for his closing remarks. Please go ahead Sir.
Well, thank you all for making the time to be with us.
Our IR team is ready to.
To clarify any.
Additional questions you may have and you can stand it by email all of US we are ready to answer it any time. Thank you. So much have a great week.
That does conclude this conference call for today. Thank you very much for your participation have a good day.
Okay.
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Yeah.
Okay.
Sure.
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Okay.
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Right.
Yes.
Okay.
Okay.
Yes.
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