Q3 2022 Banco Bradesco SA Earnings Call - Morning Session
Good morning, ladies and gentlemen, and thank you for waiting.
Welcome to <unk> third.
Quarter of 'twenty two earnings conference call. This call is things are continuously.
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Relation to <unk> business outlook, as well as operating and financial projections and targets I believe that there are some signs of bad news management, that's what everybody's information currently available to the company.
The statements are no guarantee of performance.
Risks and so I think he sends assumptions as they refer to future events and Singapore. They depend on circumstances that may or may not occur investors should understand that general economic conditions industry conditions and other operating factors.
What types of Q2, we sold two of the days booked and may cause results to differ materially from those expressed in such forward looking statements now I'd like to turn the conference over to Mr. Joseph <unk> Executive director and.
<unk>.
Good morning, everybody welcome to our call about the ear and yourself the third quarter of 2022, we have depression itself with capitalized.
Our sheet mill.
Yeah.
Yeah.
This president.
We can proudly also vice president.
Well, so I'll just start there Fred Mendes executive directors has that in fact, they finance controller and market condition directly by Gucci.
<unk> already has pursued gluten.
Exactly do the next leg in sandwiches.
Executive Officer.
Our new president of DG. After the presentations have been made by the stars group.
We will have a Q&A session, we'll talk to you.
Thank you Linda and welcome everybody.
And thank you once again for participating in our earnings conference call.
So stay tuned to earnings reflects the current economic moment in the market that goes through cycles.
We have different points of the credit.
Tycho with the beginning of the pandemic drinking a lot of unknown threats and expectation of a worsening economy.
And we made significant credit provision.
With the economy, improving 21, indicating a thank you to we were able to release part of Dx is perpetually, especially the medium and large companies.
Right now we're moving into a type of increase decision is expected to continue throughout Q3 due to the law that have already been granted that the mass market. We are now at full speed in transforming the bank heads up today, we are adults the ones with the largest digital bank in Brazil, while maintaining the wages.
Physical trades above the ear.
For them that way of servicing clients of course, each of their preference and needs customer centricity customer Centricity I know most of between that you always come first.
Have a unique position as the largest and best insurance company in Brazil, capillary, which together physically they're just so and certainly the finest financial products offer in Brazil for individuals and corporations as you know, but it has a broad operations had a big old segments of clients.
Companies and asking all over Brazil.
As a result of this strategy with the broad position in the market activities and knowns and banking are correlated with a problem.
Homeless of Brazilian economy, and disposable income he couldnt.
It's an area of high inflation and interest rates led to a deterioration defined statements capacity and the consequent increase in the nonperforming loans, making it necessary to have.
Higher than expected due to thinking delinquency grew up in the low income mass market segment for individuals and Mike would mol.
Most companies.
The delinquency at recent harvest, which already indicate improvement and all the adjustments that we made in 2022.
Project.
Centralized had to improve in the course of 2023.
The last two quarters, we have made provisions above the NPL formation.
It should continue.
The fourth quarter was 22.
The first hike he doesn't need to be versus the natural speed of renewal.
Prefect loan portfolio also affected the result of the margin and market NII as we pointed out in the previous quarter deferred probably fatigued with the fourth quarter and throughout the first four 6 million plus 23.
Ernie.
I would expect them to remain depressed for a few pockets theres nothing should change more consistency at the second half with 93.
Relieved that the bank will continue to be able to operate with an improved level of return and Bruce you tend to continue making the necessary adjustments to return to the level of profitability.
The drivers of our recovery of farmland.
Well they should peak at.
Around the middle of next year and as a.
The second part I would say C suite.
Now for the major reduction H mix.
Couldn't improvement.
Market NII, mainly the second half of.
The evolution of the income from the Neutrolin smooth.
The maintenance.
Strict cost control and the continuity of the good results in the wholesale bank and how we can lever even recorded the lowest historical delinquency range over 19, but just back to the pool.
So a drop in the recurring net income.
That'd be the quarter, mainly due to the present provision markets NII. It didn't come from instrument the loan portfolio Rose 13, 2% year on year associated with your origination mix.
Brought the benefit to the client NII, which grew 5% with the things we read and finally, we closed the quarter with low teens why stick with 10 tier one capital.
I love what that points to the strength of our.
Now, let's go to slide number three when we compare the net income accumulated over the first nine months of the year to last year.
The main items that made a positive contribution were the place and I I would have had an increase of $9 5 billion, all of which likely the growth of the loan portfolio and the spread.
I shouldn't use the origination makes more punch equated into sports some lines that have higher margins and <unk>.
He can call him insurance through $2 5 billion benefited from higher payments and financial income. Despite the increase in the claims ratio.
Can you help.
We also had two items that reduced profit by nearly the same magnitude Mark Mckenna Yoki was supposed to the reduction of <unk> 8 billion as every sale leaseback of the accelerated and high level of maintenance of the sandy great on the land and also credit provision six 1 billion higher.
I think the post totally road mix of origination increasing delinquency. This amount of things moved 1 billion route that we had the supplementary provision for the quarter.
Now, let's go to slide number four to talk about the loan portfolio, which grew two 7%. These that'd be the previous quarter and 13, 6% year on year.
Although integration for individuals is 10% lower than last year, but higher credit quality and the adjustment was made mainly in the low income mass market.
But then more credit risk as we restricted the quite to reaffirming provably visits scenario of hanger.
T S.
As an example.
In 2019 pre pandemic.
The approval was 68% of the proposal.
One year ago, It was 58% and now it is 48% of the present proposals.
Two 9% growth in credit card to reflect the increased penetration of cards.
Oh My God.
Net income climbed he knows it should.
The increase in average expenses up to the pandemic penetration. It appears that we have very restrictive here, we don't know income segment real.
A real credit to 35% increase due to our focus on agribusiness through 14 agro platform in Brazil.
In the third quarter.
<unk>.
And then the other.
They're really going to see the portfolio remains stable as a proportion of the loan portfolio.
Mexico was the slide number five as we've had delinquency was affected by because I'm excited.
Two.
0.4 percentage points over 90 days with an increased concentration in mass market lines individuals micro small companies tech tenants are more affected by inflation.
Short term delinquency has remained stable for two quarters, which I think the adjustments that we made in origination.
Let's go to the group.
Vision was higher than.
NPL formation and the costs.
Reached three three per cent covered ratio for NPL 90 day, we've been making that the robust level.
Oh, 201%.
Now slide number six talking about NII overall.
And I'm gonna hazards and five 7% of the accumulated nine months client NII continues to expand then is 15 pounds of portfolio growth.
The favorite.
Favorable spreads given the product mix. In addition to the positive impact on deposit margin due to the you said that you're right the increase over the years at 93, 4%.
Neither chocolate at the bottom of the slide we highlighted the client's NII net of credit provision, which is 10% higher because ive been 2021, 25% higher than.
And then 1019 pre COVID-19.
And then I am also continues to evolve.
Yeah, I'd say the board, while the net and I am affected by the higher provisioning posted a reduction in the margin market and that they I am portion could you use that debenture and we can say that the performance in the fourth with it should be better off.
Although still negative.
And the coverage.
The brands are doing.
<unk>.
With the second half better than the first because two things are current types of day, which ends up with interest rates and forward.
Repricing as well.
Moving now to slide seven.
Let us talk about the insurance group results.
Accumulated net income expanded by more than 20% with a major contribution from the operating result, which offset the financial result influenced by the dynamics of the financial indexes and three months of deflation, we highlight the growth in revenues across all business lines.
19% in Q3, 22, and 17% higher over the year. Therefore, the income from insurance our guidance continues with a very positive performance growing by 32% in the year with an emphasis on operating performance the volume of claims directly related to <unk>.
<unk> in the third quarter up 22 reached 289 million. The lowest this year is at 1.1 billion reals in the year around 73% less than the same period of last year. Our loss ratio is already showing a reduction from the previous quarter and from third quarter 'twenty one.
The insurance group continues to grow and improve its operating performance with an expansion in the number of insured clients and items.
Reinforcing our strategy and confidence in the segment.
Turning now to slide eight matched talk about fees growing 4.8% for the year card income increased by three 8% in a quarterly comparison and 22% for the year.
The transacted volume has demonstrated a progressive growth and it's worth mentioning that we increase our base, especially in the high income segment, which reached 39% share.
Total AR grew with lower risk and high return, we reached $76 8 million clients, an annual growth of $4 3 million, which contributed in maintaining the level in the checking account lines offsetting a substantial part of the drop in revenue from service packages and from the use of picks.
Container we in the same sales strategy, let us talk about.
On slide nine about for additional global private bank. We are currently the second largest private bank in Brazil with around 22% share in the local market and a notable growth in recent years. Since 2019, we have grown the volume of management resources by 52% arriving at 389.
We have also continued to advance our specialization and increase our bankers and consultants team with a solid value proposition, which has reinforced with the acquisition of park in Florida. We will continue with our strategy of observed in acquisition opportunities and signing agreements and partnerships such as those with J P. Mod.
Oregon, B M B, a rebel and independent wealth management with Banco busy with a view towards increasing our share in this sector.
Always providing the best offer to our clients.
Now on slide 10, addressing operating expenses they posted a four 6% growth in the year a marked below inflation for the period.
The personnel line grew by 11, 6% naturally impacted by the collective bargaining agreements of 'twenty, one and 'twenty. Two we also continue to invest in reinforcing and improving our investment advisory technology and data science teams in an effort to enhance our processes and provide a battery.
The rest of our clients, we continue with our food costs and optimizing the physical presence and investments in digitalization of client services. These actions in France have helped to contain the increase in administrative expenses at six 2% for the year.
Also below the inflation rate Bradesco expresso, our banker responded snapper complement our physical presence with great capillarity and convenience for customers in a structure based on variable costs.
Now on Slide 11, we will now discuss capital when liquidity profit generation of the positive mark to market on securities over the quarter more than offset the distribution in the form of interest on shareholders' equity and consumption by weighted assets, increasing our tier one capital to started beach, which continued in <unk>.
Bus level, our estimates for the fourth quarter suggests that we'll end 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 originated from the hedge of investments abroad. Therefore, a mandate.
Sorry regulation by the Central Bank, we closed the quarter with a high level of L. C. R.
On slide 12.
Maintaining our digital experience, we work with our clients.
Client centric approach, bringing in more autonomy and better experience for the customer 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 opening of accounts directly through the App.
<unk> grew 62% for individuals and 66% for micro entrepreneurs.
The frequent upgrades that we pro forma the App, 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 within official stores.
Now on Slide 13, we would talk about Bradesco sustainability agenda for sustainable sustainability business agenda, we remain committed to carrying out our activities with a positive social environmental impact and we have already achieved 63% of our ago will have more than 20 products that both doses.
Mental benefits in our portfolio and we have to highlight.
For their growth within the last two years financing for the purchase of solar panels, which reached 1.2 billion and financier for hybrid and electric vehicles, which increased four five times.
We also highlight the importance of our historical partnership where the actual last month Atlantica Foundation and right now we have the 27 UN conference on climate change and Egypt, and we are joining the conference. We also include the climate agenda in our sustainability strategy and for all.
Major trends to ensure that bradesco is maintaining its pioneering spirit and there's very significant and relevant.
Now on slide 14, the last slide today, we show our guidance considering our performance up to the third quarter. We believe that will be at the lower or mid part of the range for loan growth and fees.
And at the top of the range forecast.
And expenses insurance and client NII.
With regards to our client and I, we're going to be slightly better at the top and also in insurance operations.
With regards to credit provisions, we decided to revise the guidance. According to our projections the expanded credit provision for 2022 will be in the range of $25 5 billion Reals to $27 5 billion. This performance reflects the points we covered.
On the crush cycle in the credit mass market. Despite a further strong performance in loan quality and wholesale on market NII as we mentioned earlier, we should return to positive levels. In 2023 in Q4. This line shall remain negative but better than the level of the third.
Good quarter.
Thank you for your retention and now we begin the question and answer session.
So we can clarify your questions. Thank you.
No we wouldn't talk with Q&A session.
Participants as opposed to gaming little being able to ask questions and then the other one will remain in listen only mode.
I'll ask a question please press star one.
To remove your question comes with two please press star two.
Please turn but while we wait for questions.
Thiago Batista UBS.
Phoebe.
Good morning, everybody I have two questions.
In relation to the asset quality.
When I look at the double and we see a relevant in Queens.
It's counterintuitive vis vis the bank.
Have you made any can you just named the criteria.
Or is the origination better.
I would like to know the reason for this thing to the double a and when you look at what you call it to us.
Two of them, making an adjustment in the.
The nation.
It's just too much worst.
The average in the market what is the reason for that was that.
Because of the coupon.
Is this something temporary could.
Could you give us that.
Is this about the cheaper ration of.
Brady screws.
Loan portfolio.
With relation to your second question.
As I said before but basically has a nation wide.
Operation.
No region.
And basically you would have a very large number.
Number of clients at the low end category.
And this is very classic or a retail bank such as Red day at school and disposition of reduced group.
Wayne.
Another part of the cycle. This is very bad history too when you have inflation under control and lower into Rachel's displayed for the bank and things we're off the bank on the other hand, when you have a situation like the one that we're living now believe to go out.
But.
Very quick movement.
At this rate it is only natural for this to hinder us a little bit more and we have two things because we've seen.
A very big movements in the approval of credit cards for it.
And you're right.
When you talk about Kobe.
So this happened due to the characteristic of many low income clients such as is the case of Virginia School.
But we know that this is specifically the low income brackets of the population and personal loans and credit cards and the micro companies that also suffer with the increase in interest rates and higher.
The deterioration of the.
Disposable income.
So we took the necessary measures so that we could on some of the delinquency and its a little bit until it does I didn't fall.
So over the next four quarters.
There were making quotes or 'twenty to 'twenty. Two is the next one when he could tell with Olympic team will continue, but we will be able to stagnate.
You can see again after award you must remember that.
Mhm.
Yes.
You have those coming from the remainder of 90%.
I believe this is temporary when you pay a higher price for delinquency and this is why we have.
But that's what this comes under control.
He was a solid quarter taboo.
We had the perfect storm delinquency goes up.
A L M.
When he says to you that this was not what we expected it was negative in fact, but we also do that.
This will come to an end.
When you have a reduction in interest rates.
You can turn it over your portfolio, which cannot be done overnight because the.
We didn't mention was with the lower Sydney.
Higher now.
D.
It was about 18 months in order to earn over the whole portfolio.
The portfolio over which should happen at the end of the second quarter of next year.
And with the expectation of interest rates moving down you start having a bad thing.
Mark that NII.
And also deflation that we expect for the second quarter.
What could offset.
A little bit of the delinquency and fitness is to reposition it happened because of the fact that I just mentioned.
It should come back to normal over the first quarter of 2023, and then you have a much better condition regarding nitrogen.
Question.
He will talk about.
This happens because of our new rigid nation.
Which is already much better.
We have been adjusting the credit grade two logos.
And in May June July .
Okay.
We have not had the same.
<unk> policies that we have today.
And you can do that and it did.
And L L should be improving more in the queue.
You too.
It's just not cool.
I would like to bring in some element to answer your question in some cases as well.
If we look at how smoothly.
Thanks pandemic rates in 2019.
If you look at our approval rate has been badly.
Reminding you that neither posted in Denver.
Head and low delinquency had been newspaper.
No we.
Yep, that's already in our lives at the moment and so we went back.
We had 68% into the pre pandemic then it went back to 40% after a different dynamic because of the interest that you're seeing.
This scenario with a gradual improvement.
Market.
Flows ever level of delinquency.
8% 10 points below pandemic levels and also what that ends up.
November 21.
When we looked at.
Thanks, and then D rate higher than the Workmates expectation then.
Knowing that our portfolio has a concentration.
E glasses.
Makes me Crazy adult Minton adds up then we have been going that would be.
Throughput rates I did notice here in October .
That is to say 90 points lower.
The pre pandemic level.
19.
Brings about an improvement in the quality the nation.
Okay.
<unk> expenses.
In 2021.
We've had the proportion between very low.
Around 50% amongst our clients today is the only thing to say.
We can only see ear higher than 90%.
I'm, giving you. The example of this.
Is that it also.
All would be men's sportswear.
Income and the small companies.
Hey, Bill.
Got it.
The first name.
They've been placing is already improving.
Hey, Julien this hub, we are already but any lower than the percentage of 2019 with two suffering with the low ones.
And there's still right.
We are in each of the lower harvest that have the highest.
Turnover.
And also regarding the harvest.
All of them Indulges me Todd.
Below the language that we had been placing a 90.
So the trend is.
With that said we will follow.
Oh well.
In delinquencies they know it could grow.
Up to the first quarter of scientists.
Then it will remain stable and then it's a small drop in the second half why we're doing.
It is also important.
State.
And I I met all eight O L.
And if we look at first quarter.
With me to lead <unk>.
91.
You will see a comparison.
Clean comparison, we grew 25%.
We are absorbing all of the single aisle and we have a very strong group of credits made this pyramid.
No.
And I am that there'll be a L. L is a very important factor.
Thank you.
The next question comes from Hi, Fi on Friday with Citibank.
Please go ahead.
Good morning, everyone I would like to better understand what change in your expectations. If you think about two lines more specifically, if we speak about market NII in the second quarter, you stated that the market NII was closing the year close to zero.
And now on an accurate basis or at nine months, it's already negative.
Like you said, it's also expected to remain negative in Q4.
So I assume you have a good predictability of this line, but it was way.
Worse than the first expectation so what change in the dynamics vis vis the second quarter. The second question about credit or low there was an expansion in low income, but it drew my attention the increase in the worsening scenario vis vis what you expected or what you said in <unk>.
Q2.
So in the second quarter, you said you would be in the guidance and now you increased the guidance very significantly.
And I have this concern about the visibility of the operation.
And.
N P O for the first quarter so.
How can we be confident about there so what changed vis vis what you expected to see in.
The second quarter. Thank you how far out when it comes to market NII.
Your expectation too.
Do you have a faster portfolio turnover was not possible.
There is a time for this turnover to happen in the portfolio and considering the visibility down the road. So interest rates is expected to remain higher.
For some time now.
At least based on what we feel about the first half of 2023, maybe after.
Or in the beginning of the second half of 2023, it might expect to go down so our sensitivity is greater with a margin or the market NII as for delinquency Youre right delinquency and consequently.
A L L.
Well we.
We did not expect to be fast.
So fast, but considering the growth in inflation and the fast deterioration of consumer purchasing.
Purchasing power our income off the population.
We can see in the media the level of investment in the population that record pines.
So this brought additional concerns to us and these portfolios, particularly crowded.
Credit card and individual loan.
Delinquency is faster so we decided to be cautious.
And make adjustments because we can see this delinquency hedging ash, particularly if you think about the retail bank base have bradesco. So we understood that it would be important to revise the expanded a O L.
These are V. What we consider to be.
The scenario by being cautious and conservative so we can have more transparent information.
Just adding.
Hi, Fi or Todd, who put it so well.
I think it's important to say and to highlight one detail here what took us by surprise actually was resilient inflation and also the selic rate, which is a natural consequence of inflation, we had higher growth in inflation and intensity since 1986.
Yeah.
So inflation is very corrosive in the purchasing power of Brazilians, particularly low income brackets.
If we check our delinquency curves over crisis. There is a strong correlation with interest and inflation rates. If you think about the crisis in 2008 and nine we will see this growth. This is part of our strategy. If you think about the crisis in 2016, we can see this growth.
As we speak we also notice this growth and it's worth bringing another element now.
So what happened there is a significant reduction in budget available for nonessential items, if we consider day.
Of people with up to five minimum wage all the whole.
Classes D and E. In the 2009 crisis, they had available or disposable 17% of nonessential items and 11% in 2016 and today what is disposable was 5% I'm, referring to social brackets C D and E.
So this is in our statistics for classes D and E. They would be below the curve. So that's why we anticipated even though we knew the forecast did not show such a resilient inflation or something like over 2023, but we started to work on these cuts by the end of 2020.
One and would never came back to the level. We had in 2019, even when we had the lowest delinquency for the last 20 or 30 years, because we knew there was some adverse impacts related to all the moves that happened during the Covid pandemic.
Just a follow up question.
This is very clear when it comes to the dynamics and inflation and interest rates, but once again. My question is slightly more related to the second quarter. When we thought about the second quarter.
I believe expectations have not changed and maybe the slightly increase about inflation or other variables vis vis the second quarter. So once again if.
If you take a snapshot of our second quarter I would like to understand what got worse.
What took you by surprise.
This worsening loan portfolio.
Hi file.
I believe this worsening that we've found.
Over the third quarter.
Which might have signs.
Slow down was different from what we imagine. So this was the most important point and because there was a strong acceleration in July and August we understood. It was about time, we could correct our route and be more prudent with more provisions in order not to have.
Any surprises in the future.
We had a surprise from the second to the third quarter and now we're trying to make adjustments.
To the E L L and important adjustment to a L L.
It has to do with the dynamics that happen over the third quarter of 2022.
Just adding to what he said.
That's about at the moment when we started to realize.
This acceleration or worsening.
If you remember.
We have this we communicated it should be top of the guidance or above the top of the guidance at that time.
If we consider the scenario.
And which delinquency clearly exceeded our expectations.
We tried to reset the guidance.
In order to be very transparent at the level, we consider delinquency to be in the future and consequently, a L. L. S well. Thank you.
Having achieved the bank of America.
Love you.
Thank you for the opportunity.
When there is more structural in the sense of this good position.
You said.
That there is a higher penetration in the lower income brackets.
And you said that the segment suffers more when you have a high inflation and high interest rate titration.
Thinking about the country as a whole.
Very much indexed.
And.
Very frequently with high function high interest rates.
Do you cause it to change.
Changing this concentration.
Concentrating less.
On the segment.
And also I would like to ask a question about the income besides the good performance in cards.
So fee income dropped.
Percent year on year.
And I would like to understand what we can expect and what.
Planes, the strong drop exception made to the.
Card.
Segment.
Thank you.
Regarding these crews.
That's true.
Nation.
We do not intend and we are not going to change the way that we work with our retail bank because when you have this moment in the cycle of the country's economy.
2019.
And we should not consider the <unk>.
In years, but.
And so when you have low interest rates and inflation under control. This plays in our paper.
And we can tap into value.
With the client.
So there will be no change in the structural positioning as we described it.
And as I said regarding the private bank.
We have to increase our penetration to higher income brackets of the population because this will really bring a better balance when you have these moments in the cycle, where you have a higher delinquency because of your work in the retail bank, albeit the had to have a much higher.
Revenue from <unk> did the higher income brackets.
You have a higher NII.
And lower expenses.
So.
This is what we have been doing.
With our investment expertise, we already have 500 investments exited throughout Brazil.
Platforms, ending note, Brian and so the work that we have been doing with the high.
Hello.
In wealth management.
To increase the volume of assets under management.
And aiming at having almost a natural hedge to cope with these moments like the one that we're having today.
It's a little bit of what we are doing now of course it takes time.
We have quite a bit of 19 million.
Assets under management in the private bank, but.
This is a beta in the level of non ground work that we have we do so we have this trend.
We're in the moment of economy or the sniper economy changes.
When they know a bracket.
The population Arclight.
Have a better purchasing power and more disposable income.
And on the other hand.
We have all the kind of.
All kinds of assets under management until that we have the better.
Revenue coming from interest rates.
Management fees to offset these moments like the one to date.
We also have the park was saying if you look at the large corp. We have been in pretty close to zero and in these companies.
Delinquency zero 85.
And the corporate part is much higher than 22%.
No.
Yeah.
In large score higher than 'twenty, one 'twenty, two and medium higher than and so we expect a return on investment.
Tell me from these companies.
So these are the highest levels that we've had been terms of services delivered and there is one additional points out too.
Besides we work with it.
Our strategy for the low income is a proven strategy, but <unk> is the name that gives access to credit to C D and E classes and small.
<unk> already put Brazil benefiting.
All of these classes and we have always made money from the segment. What we are doing which is very important to us.
That's the path.
So we have the digital platform, where we have a lower court the higher efficiency ratio. We are advancing our business unit, we have almost 1000 business unit with.
With the higher income and a lower cost and to higher efficiency ratio as well and we got to digitalize the Bradesco expresso.
Which is to our banking correspondence with no fixed costs fixed costs.
No.
Oh of course, along with itself.
And this is the convenience model and this has been digital lives. So that we may have a pool of routed.
It's about.
And for our clients.
And also.
With peaks et cetera, without the convenient Socrates who expressed to me. This is a proven.
Margo.
The credit cycle.
We will continue to exist and we have to wait for the other parts of the cycle to come back.
Fee income.
When used according to our guidance.
I believe it will continue to be according to our guidance. So there are no major deviations regarding original expectation.
Of course, I think the line, where we expect it to have a better performance.
It continues to be so.
This quarter, specifically there was a negative impact from.
The controllers to cooperation.
Because of the new accounting rule.
Because of this specific operation.
Sure.
It is about this variation because of the sentiment that was necessary protecting itself is a line that we have been managing.
In terms of.
That's because there's also the adapting to the garden declined.
And it should continue to be under pressure for some time.
We have been doing a very good job in.
Assets under management.
At Bras and very soon we will have better so.
But overall outperformance is according to our expectation.
According to our guidance.
Thank you.
The next question comes from Pedro Leduc with <unk> BBA over to you Pedro.
Thank you for the call. Thank you for taking my question.
I. Thank you for your transparency and the banks prudish to navigate all this worsening scenario I have two questions. The first one is a brief question considering there's more adverse scenario that you identified how does this reflect on the client and I am.
Would it be reasonable to consider being more selective or maybe client NII growing closer to the portfolio in the following quarters with a less risky portfolio neighborhood, maybe a slightly lower average yield does it makes sense.
Hey, Andrew.
It makes sense, what you said makes sense. However, we also have another spectation this year and last year, we had a small growth of loan.
Two companies or corporate segment basically companies were more related to short term loan.
Operations for cash emergency or just to go through the year, but nothing with long term operations as investments.
We understand that starting 2023 with expected reduction in interest rates and inflation more under control that is good room to grow in a large company operations not only in the traditional back at valence operations, but also including <unk>.
Capital markets are structured loans.
So that's important to bear that in mind.
And it could be helpful.
The other hand Pedro this is the moment, it's a onetime thing certainly you've been through several peers like this in the past where there is slightly higher delinquency rate, but then you can adjust that control it it.
Disappear as fast and you keep on adjusting it.
Considering all the clients that joined Bradesco, which had the loan assigned over 2019 and along our over the pandemic in 2021. There is a portion of them that became delinquent is failing to pay.
Their duties, but the bulk of the patient of the clients who came in managed to pay and therefore, they will generate results on a monthly basis. So there is a base of clients that joined the bank part of it was not good and it takes adjustments. However, there is a significant share that is beginning to bring results.
So yes your statement is correct.
As we speak we are more selective, particularly for this lower income bracket, but we also expect to have other levers to move on and to improve the client NII excellent. Thank you and my second question is likely more related to management.
So lessons to learn.
Certainly the things that you bear in mind about making adjustments or make it differently like product design in different channels strengthening the team. So I'd like to explore this angle on things that don't have already pinpointed are acting on in order to prevent it from happening.
Getting into the future.
Pedro This is something ongoing that we have to do with the organization constantly learning.
From what wasn't show right.
If we can say this because this is circumstantial we know it but it does bring.
It has an impact on that target.
Audience, so the dynamics offsetting limits over time and having this moving.
Pattern, according to inflation rates interest rates and all the variables that we can see in the economy.
So this is part of the learning.
As we could be but this is a lesson learned from an ongoing process evolution. These are tough times and mature times that we go through but we always have to learn from them.
And I believe that the data scientist team is being strengthened at the same goes for the investment team.
The whole structure for credit assignment.
And information collection until we go to the customer's checking account. So it is constantly being assessed.
That's something we have to keep on doing so the bank keeps on growing and delivering results, which is what we always want to bring.
Thank you.
Domingos <unk> JP Morgan you May proceed.
Good morning, Thank you for the question.
I have adult regarding the others line.
I think the sense.
Current quarter that it comes below 1 billion 1 billion 0.3 and.
It seems to me that there is a part that has to do with the reversal of physicians going up 100% in the nine months, one 9 billion difference.
Maybe this is another reversal of provisions regarding taxes I would like to know.
The reason for that.
And what we could expect.
Reverse some of that may be accrued.
This is something that will continue.
Or did we have to a typical quarter as about the looming position towards mode too.
India does line we've had in this luxury.
Yeah.
Yeah.
We are in the process that we had the position.
About.
Deductibility of the discounts that we granted.
We won the slowest.
This group this was provisions.
No because of this gain we reversed this position this was the main reason.
For this change that you referred to.
It is I'll revert to directly.
Who may revert.
Because this is a judicial decision we have to comply with that truly so there is no further discussion about it.
They can vary thank you very much.
The next question with Hyndman Monday XP. Please go ahead.
Good morning. Thank you for the question you made some comments already about the reason why there is an impact on delinquency for individuals.
Particularly for lower income households, however, there is another line showing an increase a very significant increase which is for small companies and Smes I would like to better understand the dynamics the impacts and if this behavior.
Is expected to become more stable over the coming quarters, or perhaps even showing a reduction. Thank you.
Hello, Good morning.
What is sad about micro companies and Smes by the way. This is this can be confusing sometimes but it's the same dynamics.
Just as we were and we are being more selective in loan for low income individuals. The same goes for this micro and SME.
So we can better control them with a specific and long mine, but the dynamics is exactly the same for low income.
More specifically for companies or corporate we already have the new origination harvest, 50% lower compared to 2000 1918 in 17 and the first collection rollover.
We already begin to see that corporate is the same line as we had in 2019 and going down for the last four months, so going down at the level of the first rollout it's true that for greater rollout over 30 days it is to effect.
However, that's an important sign.
So whatever is being originated has better loan quality and the harvest give evidence that is 50% lower than what we had in pre pandemic ears and we also have the indicator of the first rollover, bringing a lot of signs of this gradual improvement which already.
We started like ottava shat small individuals and small companies have very similar behaviors.
And they.
Have to cope with the same problems like inflation and interest rates like we said before.
Perfect Crystal clear thank you.
Thank you Hannah.
And now to Maloney Autonomous research.
Good morning, everybody.
Thank you for the question.
This is the assumptions you are using.
For the improvement of the NPL or stabilization of the same.
Around the <unk>.
Half of 'twenty three given the credit restrictions that you are implementing.
What about the growth of the portfolio for 2023.
Hey, good morning.
The growth of the loan portfolio for next year.
Our expectation is better.
Because of a better condition.
In the market as a whole because we should see a higher demand for credit by the large companies and medium sized companies as well so there should be a demand for investments and long term operations.
Oh, so for the capital markets as I said that this year.
It was practically nonexistent, even because of the high interest rates that we're seeing now and with the expectation of reduction in the interest rate.
It is possible that we may see a growth in this portfolio I don't think the growth will be much different from what we see right now this year.
And the growth expectation for 2003 up to know.
It's small.
Yeah.
It depends on the GDP.
And we.
We expect it to be close to what we see today shouldn't.
Shouldn't be much different from that.
There are other factors coming into play.
The growth expectation for this year was five zero and we are going to close the year with over 2% and as these conditions may change during next year and we hope they do it would be very great for the country too.
Joe.
Or to have a better situation.
In this regard.
And those two net to your other question. We analyzed this difference in delinquency and many measures have been taken.
As we said before.
We have revised the credit models, both for individuals and corporations.
And we have already said that the approval rates for the proposals dropped from 68% to 48%.
And when you look at the new hardware into the project.
Delinquency for the new harvest and you look at what is going on now.
Have at least a good visibility of when the delinquency.
Then to stabilize.
Intend to reach.
Well point of inflection.
So this will be a consequence of both the measures that we have taken over 2022 to have a better control over delinquency and be able to mold.
This new scenario of more.
Or delinquency more.
Under control.
I don't know further questions, we give the floor back to the company's management for the closing remarks. Please go ahead.
I would like to thank you all for joining us today in this conference call.
Peter T. Andrew everybody will be here at your service for any pending questions.
We hope we've managed to explain what happened over the third quarter of 2022.
So we have more clarity about everything that happened and clarity. So we can work on your analysis and count on us for any pending questions have a great day. Thank you.
This concludes Bradesco conference call.
You all for joining us today have a great day.
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Yes.
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Thank you.
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