Bradesco (BVMF: BBDC4) maintained a net income of BRL 4.2 billion in the first quarter of 2024, matching the previous quarter’s results and marking a 46% improvement from the last quarter of 2023. The Brazilian bank attributed this performance to better asset quality, growth across loan segments, and controlled operating expenses.

Despite a flat quarter-over-quarter income, Bradesco is optimistic about meeting its annual guidance, with expectations for some metrics to hit the lower end and others the higher end of their projections. The insurance group, a subsidiary of Bradesco, also reported a positive quarter with a net income of €2 billion and significant growth in premium income and pension plan contributions.

Key Takeaways

  • Bradesco’s net income held steady at BRL 4.2 billion in Q1 2024, a 46% increase year-over-year.
  • Loan growth was observed in all segments, with a reduction in delinquency levels.
  • The insurance group posted a net income of €2 billion, up 10% from the previous year.
  • Bradesco is on track to meet its annual guidance, with some metrics at the lower end and others at the higher end.
  • The bank is focusing on technology and digital channels to enhance customer experience.
  • Analysts’ questions centered on the bank’s return on equity (ROE) and net interest income (NII) guidance.

Company Outlook

  • Bradesco is confident in achieving its annual guidance.
  • The bank aims for a 4.4% year-on-year growth and is optimizing its footprint, including reducing the number of service points.
  • A new segmentation has been implemented to better serve companies, leading to more branches catering to this segment.
  • The strategic plan includes a focus on becoming a more agile and digital bank, with an emphasis on technology and digital channels.
3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or
remove ads
.

Bearish Highlights

  • Challenges in interest income indicators were acknowledged.
  • The mass market segment is facing cost to serve and delinquency issues.
  • A drop in net interest income (NII) has been noted, with the bank focusing on economic value over growth in NII.

Bullish Highlights

  • Personnel and admin expenses grew below the inflation rate, indicating strong expense control.
  • The insurance group’s premium income and technical provisions have seen substantial increases.
  • Credit growth and improvements in both retail and wholesale segments were highlighted.
  • The bank is making progress in its transformation plan, which involves organizational structure changes and the opening of new branches.

Misses

  • Despite the positive results, the bank’s net income remained flat compared to the previous quarter.

Q&A Highlights

  • Analysts inquired about the bank’s ability to deliver ROE above the cost of capital and reach NII guidance.
  • The CFO explained that loan portfolio growth is expected to influence NII growth.
  • Questions on credit quality and risk management were addressed, with the bank detailing its use of machine learning and portfolio management to mitigate risks.

Bradesco’s earnings call for the first quarter of 2024 showcased a stable financial performance and a confident outlook for the year. With a strong start and a clear strategic focus on digital transformation and optimization, the bank is poised to navigate the challenges and capitalize on the opportunities ahead. Bradesco remains committed to its values and strategic goals, aiming to deliver improved results and maintain a competitive edge in the Brazilian banking sector.

InvestingPro Insights

Bradesco’s recent financial performance has been a mix of stability and cautious optimism, as indicated by their Q1 2024 earnings call. To provide a deeper understanding of the company’s financial health and market position, let’s delve into some key metrics and insights from InvestingPro.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or
remove ads
.

InvestingPro Data:

  • Market Cap (Adjusted): 26.99 billion USD, reflecting the company’s substantial presence in the financial market.
  • P/E Ratio (Adjusted) last twelve months as of Q1 2024: 7.78, suggesting that the company’s shares might be undervalued compared to earnings.
  • Revenue Growth last twelve months as of Q1 2024: -14.68%, indicating a decrease in revenue over the past year, which could be an area of focus for the bank moving forward.

InvestingPro Tips:

  • Bradesco’s Price / Book ratio last twelve months as of Q1 2024 stands at 0.84, potentially signaling that the stock is trading at less than the company’s book value, which might interest value investors.
  • The company’s Dividend Yield as of 2024-05-03 is 2.6%, coupled with a Dividend Growth of 13.12% in the last twelve months as of Q1 2024, highlighting Bradesco’s commitment to returning value to shareholders.

InvestingPro offers a range of additional tips to help investors make informed decisions. For those interested in a deeper analysis, there are 25 more InvestingPro Tips available for Bradesco. To access these insights and enhance your investment strategy, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.

Full transcript – Banco Bradesco S.A. (BBD) Q1 2024:

Marcelo Noronha: Hello. Good morning, everyone. I am Marcelo Noronha. I’m here to present the results for the First Quarter of 2024 of Bradesco. I’m here live speaking from Cidade De Deus, the City of God. It’s 10:31 AM. It’s a great pleasure to be with you once again. And before we start the presentation, I would like to say that unlike what we did in February when I started presenting the strategy in lengthier way. The idea here is not to present a strategy in so many details again, but we will summarize everything, and then we will revisit some of the topics as the questions pop-up. And so, I will talk throughout the presentation about what we delivered in addition to the numbers related to the first quarter. And I’m sure I think you have the opportunity to take a look at the members since we published we posted the presentations and the release after 6:00 AM. Our net income, recurring net income was BRL4.2 billion. It was flat in relation to the previous quarter, but 46% better than the last quarter of ’23. And there are some points of attention here that are highlights of our balance sheet. Some are challenging and some other topics relate to good deliveries that we’ve been doing. First, the improvement in ALL for both retail and wholesale. That also leads to an improvement of our NPL that is improving in all segments. We also increased loan in all segments. I think there is a colleague from the sales side the last quarter asked me a question. He said, do you think you would resume traction? And you will see through another charge that I’m about to show you that there is an inflection in that total loan portfolio and that’s what we will show you. We will show you growth in all loan segments with traction, and this is just to answer that question from the previous quarter. Well, the challenge is the gross client NII, but there is a justification for that and that justification is in our guidance. First, we have the loan book and then the margin follows suit and I will talk a little bit more about it when I talk about the loan book and the guidance. Another topic which is very satisfactory is the control of operating expenses, which grew 4.4%, as we will see, and a very sound performance of the Bradesco Insurance business. In all lines, we had a solid performance. So, the results for the first quarter was BRL4.2 billion, very much in line with what we intend to deliver this year. And as I said before, step-by-step we will gradually grow. And I know that my clients on the sales-side, in particular, those that have been analyzing as they, they can look at the presentation from the last quarter 2023 and then take a look at everything I’m about to tell you and run a comparison with what we talked about the previous quarter. Therefore, our loan portfolio reached almost BRL890 billion. We grew 1.2% year-on-year. And looking at the quarter alone and the quarter says that we are growing steadily, we grew 1.4% quarter-on-quarter, the inflection of the curve, saying that in the last two quarters, the portfolio was coming down, but now it was declining. Now we are resuming growth. If we look at the free portfolio, if we were to look at the presentation from the previous quarter, you will see that traction now is much better based on the KPIs that we showed you in the previous quarter. Looking at individual’s portfolio, we grew year-on-year 2% and 1.9% quarter-on-quarter, but this growth is well spread. Some portfolios give us a pretty good balance and there are other portfolios where we have to grow products with higher margins, but we are getting there. Payroll loans grew 4%, 2.1% growth quarter-on-quarter. Mortgage loan or real estate, I think we are probably the largest private bank to deliver growth 5.8% year-on-year and 1.8% quarter-on-quarter, credit card, we didn’t grow. The risk was higher, but where is it that we are not growing? We are not growing in non-account holders. When we look at prime banking, we posted 12, almost 12% growth when we look at the credit card in the high-income segment. Personal loan, 10.1% growth quarter-on-quarter and 1.8% year-on-year. Vehicles, also in rural credit, the lines that are more secured, these are lines that are long-term lines, but at the same time, they carry smaller margins. Now looking at SMEs or companies, in wholesale bank, large companies, we grew 1.6% and SME, micro, small and midsize companies. We are beginning to see more traction. So, we grew 2.3% quarter-on-quarter. But I will elaborate further on SMEs later on. Something new that I am now bringing to you is an example of the vintages. Vintages for mass individuals or individuals’ mass market. So, we started with 100 back in 2019 and look at the second quarter of 2022. The vintages that we have been acquiring, that’s still blue line starting with the base of a hundred, but the bar in way, means origination for 2019. So, origination for individuals’ mass market and this is again answering the question that you asked back in the third quarter. What about the mass market? This is proof of our principality, meaning that we are increasingly bringing better ratings even in mass market and this is proof of what we are saying. I’m talking about vintages over 30, et cetera. With time, we are not going to see vintages being right here. There will be slightly above, because we will get into products that carry did more risk, but they also lead to better margins. Here we have to the right payroll loans, installments, finance. Cards alone is the only line that is not growing. And I already explained and that was due to non-account holders, clients that come from OpenSea and from the digital segment. But delinquency is coming down, and this is due to the quality of the collection service we are now providing. And now let’s look at SMEs. I am exclusively talking about SMEs, starting with the ways of hundred. Now look at the quality of the vintages. In terms of SMEs, so companies, the borrowers have not yet reached the levels of 2019, because we’re being more conservative. Now I would like to highlight a few lines of growth, but there are some lines that we are not growing as much because of the risk involved. This today is a segment that presents the highest credit risk, but nonetheless, we continue to grow and this certainly explains why we haven’t yet increased in the total NII. Now you see delinquency levels falling. And soon I will talk about the net margin. So, this is NII. You already look at the KPIs, and this is a snapshot of our portfolio. When you look at this column that is available for you to look at, you look at how much we grow in terms of portfolios that are safer within our portfolio. And now we also leverage credit to these other two lines here. So, the loan portfolio comes first and then that’s followed by the margin. According to our expectation, this is what we expect to see throughout the year that the market NII goes down. So, client NII is coming down. But when we look at the net client NII, look at the relative numbers, where we were and where we stand today. So, risk appetite is different. Therefore, we have new credit models. We have new credit policy. We are using a lot of machine learning in our credit segment and with our team. Therefore, with the quality of the risk is being monitored very closely starting with FPD to control all of our portfolios. We are very much grounded and then you could see that we gained market share in February when compared to the Central Bank portfolio. It’s not the expanded portfolio because the Central Bank does not disclose that. But I can tell you with a very good degree of certainty that we gained shared in March alone as well. So, we grew more in February, March when compared to January what we produced in January, there was just one month when we increased our NII. And whatever was produced in March, this will be reflected in April. So, our overnight loan portfolio, everything is in the control in all lines, NPL, 100% of provisions. And our coverage ratio very flat and stable when compared to the previous quarter. Expanded ALL also brings important figures. I’m not going to look at the previous quarter, but we had almost 18% growth year-on-year. I mean, in terms of mass retail, there was a drop, but the quality of what we are bringing is much better. We are much more effective in terms of our collection in credit recovery. Whenever we talk about ALL, I mean this provision indicator versus the annualized portfolio, this is an index that we haven’t seen for quite some time. Therefore, the numbers are very important because it goes towards the NII that we presented in the previous quarter. Now speaking about fees and commission income, this is very much leverage on payment because of exchange and the companies that we have. So, it’s natural that it falls. I mean, this type of revenue is the lowest in terms of all the previous quarters. And the second quarter is better because we have Mother’s Day. And the last quarter, you know, you have Children’s Day, Black Friday and all of the holidays, the Christmas holidays. So, 1.3% a year growth is an indication that growth will be according to our guidance. So, it’s within our expectations. And in all of the other lines, I would like to highlight for Sao Paulo with this level of growth that you see. I mean, loan operations can present. That means that we are well on track. And checking account, we had been losing ground with checking account, but now we resume growth because of some of the intelligent packages that we are delivering and it’s capturing value. I think the most difficult part is equities and capital markets and expectation is low for this year. And all of the reasons are well known to all of you. But we are very pleased to see the level of growth in terms of fee and commissions income. When it comes for Bradesco to run comparisons, I mean, other incumbents say that within the fee and commission’s income, they also include insurance revenues. But in our case, that’s separate because that is included in the insurance operations, our operating expenses. For me, that is a highlight. That’s our goal, we talk about 4.4% year-on-year growth. We are delivering things with lot of seriousness and the optimization of our footprint with about 300 movements in the first quarter of 2024. Now when you look at the book, you will see a chart that shows branches and points of service. Within that point of service, we have what we call PA. We have small PAs and large PAs, which are points of service. This is another name used by the central bank, but it is a mini branch. In some municipalities, we shut down some of these PAs or points of service. But I will, later on, talk about the company segment. This is something that we’ve referred to at the beginning of the year. We said that we would do another segmentation with very specific service with specific branches to cater to companies and that’s what we did. So here you see a larger number of branches serving companies. In fact, there was a reduction significant reduction or maybe at a bigger pace than what was previously announced. And now later on, I will talk about this new — branches for companies and Bradesco Expresso. When we talk about personnel and admin expenses, the growth was even below inflation in the period.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or
remove ads
.

Unidentified Company Representative: Here the results of the insurance group that you’ve seen a net income of €2 billion, 10% increase. Here on near almost 20% ROAE, a substantial increase in premium income, pension plan contributions and the result of almost €4 billion showed a significant increase. And I’d like to highlight technical provisions, which grew almost 12%, reaching €380 billion, quite a significant amount for the insurance group, which is doing quite well, performing really well. We have a bezel, Tier 1 bezel ratio of 12.7%. We have BIS in the book, so you can look at the total. And we provisioned IOC for Q1 of about BRL2.6 billion. And this brings me to the guidance. Here’s what I can say. When you look at this indicator in the previous quarter, what did we happen? A declining, a negative number. But we’ve got traction now. We are within the guidance. No doubt about that. And of course, we have to move in this direction So we will have a reflection in the interest income. So, we have the loan book and then net interest income. This can be the indicator that is the most challenging for all of us, bullets, focus of 1.2%. And then net interest income will improve and we believe within the guidance. Fee and commissioning company was delivered with the whole year based can be expectations that I mentioned operating expense very. And again, the expectation is that it will be in the capital. Income from insurance operations, a little over, a little better, great. But we believe that it will be within the guidance. I’d like to remind you that the guidance is for the whole year, not just one quarter NAWL as you can see second point here. Eight times 432 billion, so I think will you be the [indiscernible] guidance that will be conservative? No. Well, the calculation is simple, if I’m going to grow here and mass retail and SMEs. More expected losses even with the better vintages. So, of course, I’m going to have more provisions down here. And that’s why we believe that we’ll be within the guidance one or other line item on the road more towards the bottom of the guidance and some others more towards the higher end of the guidance. We continue to believe and we continue to move forward step-by-step. As I mentioned in the previous quarter, I’ll make some comments about run the bank and change the bank. As I’ve seen in the past, we spoke about quick wins. No. It’s a plan. I said, we are not going to be delivering the next quarter. We will be delivering that along the next few years and we’ll have to wins in recoveries in collections and some segments. So, the reflection of all of us over time, there will be some innovating consensus within our balance sheet with the exception of some specific cases. For example, the delivery report that companies’ segment. You can go to the branches and you can speak with people over there. So, we’ll implement in your modeling, and this will be reflected in our credit increase, credit quality, etcetera. So, run and change are kind of mixed together because we do have quick wins. You remember the 10 topics like I said in the beginning. I’m not going to go over them again, but I would like to make a brief comment. And you can look at these indicators. It’s about the digital bank, 98% of transactions actually down from digital channels at Bradesco. So, I’m speaking about the app, mobile and Internet banking in the case of companies. And this is our timeline for our strategic plan. You will remember, that we presented a plan in detail back in February. And what have we delivered so far? A new organizational structure, reduction of layers and we are putting this into practice at the bank and a span of control reversion. So, we increased that span of control. The transformation of this today counts with more than 800 people, and this was only possible because of these reorg that we had. Or else we would not have the ability to allocate leaders here. So, we are in a process of execution, which is very daring and bold and accelerated, and it’s not easy. You know that. We spoke about diagnosis, applying, a structure and execution. And execution, of course, is the biggest challenge for any organization. But we are executing with determination, safety and control. External hires, we also spoke about this. You will remember that we had two heads of departments that would report directly to me, one in HR and the other one for the business the digital business unit, which will take mass market to digital. And I’d like to announce that we had a reinforcement of the being used with a whole reconfiguration and targeting with it and the creation of a portfolio management part. So, we hired in the market a new credit director who’s already joined us, Julio Cardoso. He came from Serraza, which has a track record in the banking industry. His background is in statistics. He’s worked with credit for a long time. He was an officer in his prior role, and he was already providing services to us. I think it was great to bring Julio to the company to reinforce our credit team. And regarding the C-level, we already hired those two officers. This is the paradigm we broke. Many people ask me, when will you be able to do it? Well, the colleague who is coming for the digital unit as head of digital, reporting directly to me. We made another company in our [indiscernible]. We will only disclose the person’s name on the [indiscernible] will disclose the name and will be starting to work on the 20th. So, we’ll use the price for that in our IR department. And we also hired a woman, a colleague will be in the same page [indiscernible]. She’s watching the school. And so, when it came from advent, she was talent manager at the year. So was also make them [indiscernible] for many years and because that’s Ukraine and Brazilian [indiscernible] in addition to having work for many banks. So, she is an asset horizon, she’s couple’s experience in dealing with culture and talents as well as her financial service knowledge so that she can be discussing any theme about the banking industry. And footprint revision, I mentioned about this, about 300 points. And this continues here. This will stretch until year-end with strong execution. In the opening of 122 branches dedicated to companies. I’d like to congratulate the team that worked strongly on this to put together the team. And here, I show you a picture of these branches dedicated to companies. We submitted 143,000 clients in these 3 million to 50 million bureaus with 2,000 professionals focused on customer with the specific vertical. This results for that work. We are working in this service model, which is the closes company with specialist and limitation to the experience here or managed risk. This is the name of the game here. Looking a lot closer. Just like we did with middle market, we are now doing with these SMEs without losing sight of everything we’re doing, but SMEs between. €8,003 million per year using remote service via the app, but we increased the team that serves these legal entities, these enterprises. And our expectation is that by the end of the year, we’ll have about 250,000 clients already targeted and allocated here. And after that expanding our radius of action for SMEs and ensure that we are going to have a lot of traction here. Looking forward, what are our expected deliveries until 2020? Looking at this timeline, then your efforts will continue to hire for technology and digital channels. We will have the footprint provision, as I mentioned, and we’ll expand Bradesco Expresso. And here, I’d like to comment on another [indiscernible]. That is a differential about Bradesco, Bradesco has about 38,000 merchants losing Bradesco Expresso. You can use this to sell banking products and services and also to have transactions with Bradesco Expresso. So, we delivered a new platform, as you can see here in this photograph into what — we already rolled out this to about 1,000 merchants. And these were heavily a totally different experience. I mentioned in the prior quarter that this is something that we’re developing and preparing. So, the moment that the merchants identify with their tax payer number, automatically our CRM engine uses intelligence. And even if they are not an checking account holder, the system identifies what we can sell to these consumers, what we can offer them according to their profile and risk [indiscernible] decent to grow significantly here. Bradesco Expresso has a 100% presence in Brazilian municipalities. And this quarter, look at insurance sales versus Q1 ’23, up 89% on this channel and origination of payroll deductible loans, 361% increase. So, we expect to give a lot more traction to Expresso. But there’s another detail here, which is a game changer. We have four providers of these solutions. Go to the merchants with the traditional POS machines and some functionalities in the futures in these machines. We’re unifying all that. Two have left and by the end of the year, we’ll have just one platform with a lot more versatility and the ability to deliver functionalities and features to operate with these merchants. So basically, let me move to [indiscernible] run the bank and change the bank. So, I’d like to just reinforce improvement of ALL in retail and wholesale. Expresso control and the robust credit growth in all segments in addition to the results of the disasurists and in change. The bank, I highlight our external hires. I’ve just mentioned one of the names. This was the first delivery and then the reinforcement of the credit BU with revision of processes. In the opening of the rentals for companies for SMEs, this has been delivered. Footprint revision, that’s strongly on the way and expansion of the distribution process I’ve just mentioned. So, we have deliveries. We are following the plan step-by-step so that we’ll offer better and better earnings every quarter. I thank you for your attention. And I now have my colleagues, Cassiano Scarpelli, our CFO and Andre Carvalho, our new IR officer, taking over from up to ready, and we’ll start the Q&A. Andre, over to you.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or
remove ads
.

A – Andre Carvalho: I think I already said a lot. Good morning, everyone. I would like to inform all participants that Ivan Gontijo, the CEO of our insurance company is also joining us during this Q&A session, and he’s with us remotely. But if you want to send in your questions, you can send them either in Portuguese or English. And please do so using our email, investors like, you see in the screen [indiscernible] or using the WhatsApp number. The information appears on the screen. The first question comes from Renato Meloni from Autonomous.

Renato Meloni: I have two questions. The first question is about your transformation plan. Now that three months have gone by and since the official launch of the program and you have more visibility, what is different when compared to the original plan? And given your current visibility, whether there has been any changes in terms of delivering ROE above the cost of capital, and you said that you would do that throughout 2026? My second question relates to the guidance. To reach the NII guidance, this means that you have to have better origination, better margin because I think this will come with the mix and this will improve provisioning. So how do you see these three levers performing throughout the year and what is the pace and where do you see the risk of not delivering what you expect, not delivering to plan?

Unidentified Company Representative: Well, thank you for your questions. I will ask Cassiano to start and then I will add, not only Cassiano is the CFO, but he’s the CPO. So Cassiano is the best person to talk about the KPIs of our transformation plan.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or
remove ads
.

Cassiano Scarpelli: Thank you, Renato. Thank you for your question. Our transformation plan I mean, what we did, we ratified what we envisioned in the diagnosis of our transformation process. As Marcelo put it quite well, we have over 800 people engaged, 2,600 initiatives and the KPIs are very apparent. I mean starting with the footprint all the way to the Rand the Bank and credit segments also that involves recovery, risk, hiring new people, technology, et cetera. So, we launched the plan on February 19. That’s when our new office started operating. But looking back today, we can say that this whole, the mapping was very important and we found more things which was quite interesting. We found other things that can lead us to have to us having a more agile bank, a more digital bank even more than what we are, rendering even better customer experience. It’s not way ahead in the future, but it’s throughout the journey. And I am certain that the plan is well structured and the deliveries are well in schedule, and we will improve performance.

Unidentified Company Representative: Just to add to what he said, in fact, we reinstate that number. You might call that I talk about the total number. You may have some small adjustments to the calendar. Okay, this was expected for December, but it may be earlier or later. I thought that SME would help, but would perform better further on, but we were able to deliver the numbers before schedule. So, we still have that expectation in terms of the numbers. You might recall that if our CAGR for loan book would materialize, if CAGR would be 1% a year growth, our loan portfolio total growth for the expanded portfolio will be BRL3.3 trillion in 5 years. I mean, we want to capture part of it and the expectation remains form and we see contraction that we do have the capacity to get. Secondly, in regards to that ROE expectations that you mentioned. I would just say it again, I want to just promise things. I want to deliver. As soon as I can deliver, we will deliver to expectations, and that’s what we intend to do, to deliver things as time goes by. And the other question was about client NII. How do we expedite that? I mean, we accelerate through growing our loan portfolio. And during my presentation, I said that, okay, we gained market share in February. In January, we did not gain share. So, we had to move faster in February, which we did. So, I’m firmly believe that we will gain share in March. In April, that’s when we will see what has been done. I mean that NII, things will not happen overnight. First, we will see a growth in the portfolio and then we will see an increase in our net margin because the bottom-line is that delinquency is under control. We are bringing good quality things to our portfolio, and that’s when we will see a growth in NII, an effective growth in NII. So, you might recall that I’m talking about two different types of portfolios and two different types of risk acceptance. This will require additional effort on the part of the bank. I don’t know whether you would like to mention it. I mean, the client NII will be better in the second quarter vis-a-vis the first quarter because there is a gradual evolution. First quarter lower ALL and then retrying the margin we grow with ALL because we will go through more risky segments. And our funding cost is coming down as well. This is what we are noticing. And this has an impact in the timeline.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or
remove ads
.

Operator: The next question comes from Brian Flores from Citi.

Brian Flores: Thank you, for taking my question. With a more restrictive Central Bank and you talked about funding, how does that change funding? And also talking about market NII. What is your view about market NII?

Unidentified Company Representative : Hi. It’s a pleasure to see you. In terms of market NII, I would say that we don’t see any major changes through this year. There was a light drop, you know, from one quarter to the next and the Central Bank with a more restrictive curve. But that tilted curve, as we say, it is very important for our prefixed portfolio because it brings a more interesting fee volume. And we believe that even though the landscape is more restrictive, it points to decline in interest rates because 9.5% or 10%. That is not very significant because it doesn’t change the landscape as much in terms of our treasury position. Therefore, we see this as something beneficial because on the one hand, we reinstate our loan portfolio with higher rates. So, in terms of the cycle as a whole, the cycle would indicate into 9.5% to 10%. Our economists points to 9.25%. I don’t believe in a cycle where interest rates will spike after that. So, this scenario will bring about good results and the market is performing well pretty much along the lines that we mentioned before, which is positive and we see a positive trend towards 2025. Just to reinstate what he said, the expectation is that the market is very bullish from now on. And the fact that the rate will come down 50 basis points or 25 basis points, nothing much will change.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or
remove ads
.

Operator: Jorge Kuri with Morgan Stanley.

Jorge Kuri: Possibility to ask questions. I think that the positive highlight that the quarter was improved credit quality since they are very confident to accelerate growth in those owns with higher spread. The question is, is the bank ready to some of it maintaining NTL under control protect the takeway in retail. Why we need the main adjustments Centrobank in terms of processes, credit [indiscernible], what were the main steps for [indiscernible]? If you can latest standpoint. That would be helpful. Thank you.

Unidentified Company Representative: Thank you for the question. As I mentioned during the presentation, we have been using a lot more machine learning than in the past exactly to improve our modeling. So, from a qualitative standpoint, if and then you were sitting here, people tell you exactly about it, so that’s number one. Number two, we work on all credit cards [indiscernible] credit ratings that are higher risks. Now, I have a policy in place, which is a lot more intuitive than in the past. When we talk about the proportion, of the income proportion of company or SME revenue. What kind of proportion that you want to have in legal entities. So what kind of quota do you want to have and what kind of loan. Improved to our policy or what and it will improve even more when you get this joints is make sure there is to manage the portfolio with pricing. With pricing, we have pricing for product. And now pricing is in the study department. improving our value proposition, that was an important structural change so that we could adequately price alone and adjust the levels of approval. But in mass market, I’d say that this is it. New credit policies, new credit models with a collection process which is very fine-tuned and a leaving portfolio management, which is what we do now. Then gives us greater safety regarding everything we are seeing. We define the indicators that we are measuring strictly. We are measuring them full time and also in the wholesale bank, we made some changes. We hired other people. It was not just one officer. We brought in teams for the credit department. We’re still hiring more people and we changed some processes so that we could have a lot more agility in serving legal entities. I’m talking about all the way from large corporates down to middle income and SMEs. So, with that, we have a much more productive organization than we had recently, and our managers feel that. If you speak with our regional managers [indiscernible] and these controls that are now in place, please remember that in the business unit, with this portfolio management department. We have to foreseen second line of defense. We have colleagues in charge of modeling and for colleague, whom check the modeling and validate the modeling, we’ve got [indiscernible] control department. So, what I can tell this, I mean of course, again not going to be within with that ratio for the vintages, but a little higher, which is the optimal point. Report dear management is the economic return of each holistic appliance, so that we can work with the bottom-line without a good pricing. If it doesn’t match what we’re expecting, we just won’t do it. We’re very safe about what we are doing, what we are delivering qualitatively dependency AI is not the main tool. The main tool is machine learning. And this is [indiscernible] for the meeting. Yes, I think is to be mentioned, the choice is very important. The concept of the municipality having the clients with us a lot of traction. We can see that and those cards that is [indiscernible]. And it is in our DNA. We know how to do this [indiscernible] and we have new [indiscernible] credit department. So, these all from mental pieces [indiscernible]. These will positive, with the positive changes. These were adjustment for it. I think credit card for non-checking account holders, that’s a modality where we are more restrictive. For high income clients, we have grown credit cards almost 12%. So, the open sea cards offer a little more risk today. But we have modeling to that. So, we have some piece of kind regarding where we’re doing one of the segments. We’re not working with just one segment. This is about [indiscernible] highly income, income is overall sizes including because of [indiscernible].

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or
remove ads
.

Unidentified Analyst: I’d like to ask a question about [indiscernible]. You showed a third origination for mass, companies mass market. Still a couple way from the other [indiscernible]. How [indiscernible] this get up? We have across 90-day [indiscernible] but why his origination are at the same level of [indiscernible] maintain is it a supply or demand issue? When should we expect this to grow? Number one.

Unidentified Company Representative : It’s about risk appetite. This is the highest risk segment. The t lily for those companies is zero to three. But in three to 50, I spoke about managing a living portfolio. So, there’s a management model that is being implemented in this segment. And that some house to flow on a living portfolio and act all [indiscernible]. It is automated, but at the same time, it counts on our colleagues, the managers, the regional managers to enter specific to use this. So, we’ll improve the holiday to treat effectly and there are but until BRL3 million. There is effectively more risk because the Brazilian market is like that for SMEs. So, I have a little appetite to get back. But we believe that we have started and we will continue to grow origination. And another reason to believe in that is that we totally change our offering, what we offer to our sales force for preapproved the way to approach clients with a commercial tool. It’s all changed. And it started now in the month of April with a different setup, different comp gearing. In our opinion, in the opinion of the colleagues responsible for that segment, this will give a lot more traction to have a better credit quality, better credit analysis, more specialists working that segment, a new commercial tool. I’m a sign new tool. It’s a new commercial format for this segment. In this new segment, BRL3 million to BRL50 million that we’ve verticalized, there’s a different traction compared to the segment of segment of up to BRL3 million year-over-year. So, it will increase loan origination with the right controls and, I’m sorry. In to it, when we look at the track record of delinquency, historical series shows that individuals drop first and then SMEs and then at small enterprises. So small enterprises are having their inflection, no, that’s the market risk Marcelo. That’s why on a appetite and only step-by-step was safety. And in the future, it should accelerate and in the segment of smaller companies that will require more provisions, but the margin will more than offset that. And the credit policy will be adjusted. We will commit all the time.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or
remove ads
.

Operator: Now Mario Pierry with Bank of America.

Mario Pierry: I have two questions. First question, when we look at the bank’s coverage ratio, we calculate a ratio close to 162%. I mean, it’s lower than your peers. But we also look at your complementary provision close to BRL6.2 billion and historically used to be around BRL89 billion. Do you intend to revisit those reserves? How do you feel the reserve level stands today? And the second question is about capital. There was a decline in your CTO ratio, a drop quarter-on-quarter. So how do you see this CET ratio impacting your dividend policy or even your capacity to grow?

Unidentified Company Representative: In terms of coverage ratio, we do not have a target for that coverage ratio, because it fluctuates according to the credit cycle. So, if the cycle aggravates delinquency as well. I mean, because we increase the amount of provisions. I mean, we provision for a 100% of our clients as the credit cycle begins to change when we saw that happening in the first quarter of the year. Certainly, the coverage ratio increases, because we originate credit that naturally at the beginning comes with higher provisions than delinquency coverage increases. Therefore, this is a very cyclical KPI. We are not very much concerned with it. We think it’s very adequate for the current moment and certainly it has a natural recovery. Now in terms of CET1, I mean, we continue to say that capital is well in place and in terms of the capacity to do all the traction that Marcelo talked about, we can say that it grew vis-a-vis the quarter three of ’23. There was a slight drop in this first quarter basically focused on mark-to-market bonds, but this also has to do with IOC. And so, we understand that it develops naturally. We don’t anticipate any changes in this capital throughout the year. It will be very close to what you see today and we believe that this could be a possible leverage to our credit increase. Therefore, our capital, it’s in a very comfortable position right now. Well, first of all, you know that we project capital going forward. Also, we project it for following years. We see capital standing flat even though the portfolio is growing. No problems here. Secondly, I don’t think this will be a limiting factor for growth or even the distribution, I mean interest on capital. And the coverage ratio, I think I told you in the first quarter I refer to how comfortable we are in terms of the wholesale banking. Our total coverage ratio is very good. And in particularly, in terms of the wholesale bank, because I was asked this question by journalist during our press conference. It is very much under control and I talk about that last quarter our coverage ratio is ideal. And even we have some room for other cases related to expected losses before, no problem at all in terms of our coverage ratio.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or
remove ads
.

Operator: Now we have Thiago Batista from UBS.

Thiago Bovolenta Batista: Good morning. Thank you for taking my question. I have two questions. One is I mean, it’s a follow-up question. My first question is about the insurance business. We could see an increase in technical provision, quite significant this quarter. But when you look at the details, you had BRL2.4 billion in additional coverage provision. Moreover, there are also other technical reasons. Last quarter, you used part of that technical provisions. I would just like to understand two things. If this was part of your income statement or there was something that was recurring and you wanted to reset, so what was the reason for that additional coverage? And now speaking about Mario’s question on capital, I understand that you said that maybe at the end of the year, your capital position will be similar that the one we have today. Does that include any kind of arrangement in terms of the capital for the insurance company? Or I think in 2015 or 2016, you will get capital together with IOC. Is there anything included in this line? Or maybe historically you think that you could keep capital very stable? Because the portfolio, I think, increased by BRL1.4 billion, and you consume BRL1.3 billion in capital. So, it doesn’t seem ideal to keep it stable and maintain the guidance without any sort of arrangement in terms of the insurance company or IOC.

Unidentified Company Representative : I mean, to answer your second question, I will say no. I mean, you’re saying that you have an additional flexibility. We won’t even need to use it because we could even think about using it, but I don’t think we will need to. Our projection leads us to say that with great degree of certainty. What changed from last quarter to this quarter? The main motivation evolved two things: payroll. We had the payment of two important payrolls. And also, NTNP, which is mark-to-market bonds, and this is due to the natural hedge of our funding. And also, this is related to private pension funds, which is an important part of this range. So, these were two big movements. So, this was an one-off event. And the difference is due to the payroll payment I mean, to the payment of payrolls. That’s why our projections and our growth curve is very much under control. I think we can also ask Ivan to answer the second question. But I would like to recall another point about the insurance company. This is something that we already saw in the past. Thiago said that himself, this is the part of the technical strategy. So, at some moments we had to do some improvements in the provisions. This was strictly technical and the provision has to do with all of the economics of the insurance business. Now, I would like to ask Ivan to edge to my comments. Ivan, I think you may recall the question. You talked about technical provisions. And whether that had any impact on our income statement and what would be that additional provision. So, Ivan, go ahead.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or
remove ads
.

Ivan Gontijo: I think Cassiano already explained the technical view. I would just say that that increasing provisions is linked to an increase in the revenue of insurance and pension funds, special pension funds, and savings bonds. So that link in that increase in provisions is proportional to increase in revenues. And secondly, this is also due to the so-called product mix that we have. We have insurance products, patient fund products, and certainly, they demand an adequate level of provisions, always having a very conservative approach. And, Marcelo, you mentioned our provisioning, which is close BRL380 million, especially products like pension funds that increased significantly during the period. I would just like to emphasize that there hasn’t been any kind of recurring gain that could probably lead us to have anything different in our structure. So, everything is business as usual and in compliance with the regulating agencies, because it’s important that we comply with our short, mid- and long-term agreements.

Operator: Next question from Tito Labarta with Goldman Sachs.

Tito Labarta: My question is on your funding. Looking at deposit based, providing this quarter and I know that we can see the narrowing related to that. We also have also seen a big shift from demand deposits to time deposits. Now that could be a function of rates. But just putting that in the context of the competitive environment that we’re seeing. Are you having to pay more to retain deposits than retain clients? And is that limit your ability to grow your NII, because you’re in order to fund the growth, you would need to pay more deposits? Is that how are you thinking about that? It’s about competitive [indiscernible].

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or
remove ads
.

Unidentified Company Representative: [indiscernible] actually got to liquidity ratio. It’s quite robust. And so, it’s been reducing a little because we have to balance with our credit granting. We have to optimize cash and cost. So, funding cost somehow continues to grow. It has a little bit to do with the reduction in LCR and credit consumption. Demand deposits continue to suffer, because as clients pay attention or their approach by our investment department or our platforms, they tend to look for products with more profitability. Our funds grew almost 20 billion and some of that comes from the movements of demand deposits and the savings accounts. Savings accounts have been dropping in the system as a whole. There’s always this discussion about savings, accounts, and CDI. And this comes from the discussion with the Fintechs. So, clients look at differentiated opportunities. We have Agora, our experts, onboarding the channels. The app or Internet banking. And they one way or another observe this and provide opportunities to clients. So, we see this as a natural moment in the industry, but we have products with different allocations to different clients. So, with savings accounts and demand deposits, they are enough to maintain our strategy for rural loans or mortgages, real estate finance. Would you like to add anything? But, you know, in savings accounts, we had a market share of 13% and that increased to 13.1%. This is kind of the DNA of our clients. We have a savings account DNA. So, savings accounts tend to remain flat, but the non-floating products with higher interest rates have a trend to capture more clients. So, we see this movement with the as being natural. And a lot of people have asked us about funding linked to changes in those what we call exempt securities. And the impact here is practically zero. First, because we have funding with exempt, securities that is being accelerated to purchase inventory, and then we have a natural replacement of these exempt securities by other bonds. So, the impact here is practically zero in our funding.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or
remove ads
.

Operator: Next question from Eduardo Rosman with BTG.

Eduardo Rosman: Good morning. I have a question about the results in the different segments of the bank because the earnings of the bank improved. The insurance company remains. Well, it lost a little bit of relevance as a whole in this quarter. And you don’t really disclose the results for high income, low income, retail, and wholesale. So, it would be interesting to hear from you where do you see easier improvements in the results. If in low income, if the reduced provision is already improving the result and whether there is any segment that is sufficient, if you could elaborate about the different segments of the bank? Thank you.

Unidentified Company Representative : Thank you, Rosman for the question. Well, we are doing more in the wholesale bank. In RAR, that is high for the different segments. And in this also for high-income segment, not to mention private. So that’s doing quite well. Our challenge as you know spoke about the insurance group but our challenge is you know comes from our mass market clients given the cost to serve and delinquency and we’ve been paying that bill. But indeed, things are starting to improve a lot. In SMEs in particular, though we see the delinquency curve dropping, but there’s some improvement. Month by month, we see improvement. So, our expectation is that we will drive the RAR of the mass market quarter after quarter. And I have to tell you, we don’t really disclose this breakdown, but I can’t tell you is that all business units have a lot of traction right now. An area demand has a small traction or a smaller attraction could be small and midsize enterprises, but it’s improving. And again, that OpenSea of a lower income client, because they have a higher risk. But they are all with a lot of traction. It’s not by chance that we are doing this. That we are growing. Credit general segments in important lines. So, we have the ability to deliver and to deliver more than we are delivering right now. And what I see and what I am living, because I’ve been going all over Brazil, I’ve been having breakfast with colleagues in the headquarters, in many locations in Rio de Janeiro, in Sao Paulo, in Salvador. And I see everyone motivated and excited and moving in the same direction. So, we are improving. They are the risk adjusted return for all of these segments. We are going to be delivering in the future quarters. That’s my expectation for all business units. And in the mass market, perhaps the biggest challenge is to accelerate credit maintaining NPL declining and adjusting the footprint. And the numbers we showed here, point exactly at that. The new vintage of mass market increasing accelerating with exceptional quality and footprint adjustment happening.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or
remove ads
.

Operator: Next question from Eduardo Nishio with Genial.

Eduardo Nishio: My question relates to your strategic plan. Part of the recovery that you anticipate comes from improvement in the cycle that impacted the mass market, but most of it comes from more structural changes that you are promoting. I would like you to elaborate further on your structural changes and everything else that is happening with your strategic planning, if you could list probably the main strategic structural changes that you have in mind for the next quarters or maybe years? And also, if you could give me more details about changes in management and cultural changes as well that you were trying to introduce in the bank, especially that cultural aspect, because this has been something so important in the DNA of the bank. How do you anticipate in terms of these changes? And what do you see going forward in 2028 after everything has been done?

Unidentified Company Representative: These are very open questions and I think we could spend days here just answering everything in more details. I’ll ask Cassiano to help me with the answers.

Cassiano Scarpelli: Well, number one, that delivery of that credit business unit, we unified processes that were separated in our organization. So, everything is now combined, integrated. I mean the separation of the teams that used to serve the mass market and the wholesale bank. We made also important process changes, first line of defense, second line of defense with the use of machine learning running in the background of our modeling. And we also introduced some credit policies because you put a certain appetite. Okay. You say, I want to give 50% of the company’s revenue. So that was one change. The second change was segmentation. That segment of SME is one of the things that we told you that we would launch early this year is already in place. We don’t have all the clients already in there because we’re still in the process of segmenting clients, but we will also deliver the affluent segment, the wealth segment in the second half. But we will also, we are also working on restructuring our prime segment for wealthier clients and that’s another important segmentation. In terms of the wholesale banking, I told you that we made some process changes on the loan book side. So, I’m saying that this is something that is already happening and this is generating results and in turn, this will improve our numbers with time. And obviously, I think the biggest challenge is in the cost to serve or more mass retail clients. Well, we have, we are reviewing the footprint because we are delivering above plan, but we will deliver numbers above the plan with costs under control and all of these deliveries will allow us to get that additional revenue that we talk about last year. But even today, I said that since the market is growing with the CAGR of 8% a year in terms of the credit volumes for the next five years it will bring an additional BRL3.3 billion to the Brazilian market in five years. And certainly, we want to capture part of that, so that when we go forward our revenue level will be much high and our return will be higher because the bottom line matters which has the profitability that we will have. And, Cassiano, I think you can add to what I’m saying because out of the 10 topics that we listed, we had over 2,600 initiatives, but I am just highlighting some of the main initiatives. And also, there was that movement of time to market that we are doing with the technology area and the very intensive use of Gen AI. I would also mention these two. Yes, I’ll talk about that management side as well. But there are two important points. Bradesco Expresso, it’s a very important link with this new concept of the new footprint and our cost to serve together with digital. Marcelo also mentioned that during the presentation, it’s a very strong digital bank. Bradesco Expresso is a very positive tool because we can be present in many municipalities. Technology, Marcelo mentioned that not only in terms of reskilling, but also, we are hiring new people. We are hiring people at all levels of technology and all-important processes are becoming more agile. It’s becoming more productive. It’s a new concept and this is across the board and culture management. I think you should also talk a little bit about that and what we are doing in terms of our culture. Regardless of the fact that we do not want to lose our Bradesco way of being, we also want to have new colleagues that can add important values. Here, we have colleagues from three different place. I even think that when we meet in person, I think we can also discuss things with the sales side. I would say that what we are seeing just trying to make an executive summary of everything, we are bringing 2C levels to the organization, people that are being brought from the market and this is an important culture change. The reduction of these layers brought about an enormous difference in terms of speed. As I was saying before, I’ve been going around the country and having breakfast and lunches with different people. I’m meeting with different segments of the industry. And it is amazing to see that once you shorten the layers, the communication becomes much faster. Things become a lot more agile. And our decision-making process in the bank, if you just start interviewing people from within, people will come and talk to you about it. That’s another relevant aspect once we talk about changes to our culture and management. Silvana is just arriving. She will work together with Giuliano in that transition. She will work with me as well. So, we are working on that new HR plan that I’ve been telling you that we will deliver, and we will go even beyond. We eliminated some positions, some layers and we want to continue to do changes within our organization with hierarchical levels maybe better so that throughout the end of this year and next year, we will have a leaner, a more lean company. We do not want to eliminate the values, because the values are important, because they support our culture, but that’s not all. In fact, we want to maintain values. What values?

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or
remove ads
.

Unidentified Company Representative: For example, we will stop offering promotions and career promotions. No, what on them this is a place where you can get promoted and improve professionally. But we are also willing to bring somebody from the market. If we need to have more skills in the organization, this is basically it. Secondly, our employees, our managers, they carry the banner of Bradesco. Why is it that we would think about ending this? On the contrary, we want to harness this even more, but we want to have a wider management in our organization with fewer layers. We want to have a different outlook, a different perspective, see the areas that are different differently, not being standardized with a much faster decision-making with a lot of technology integration, different skills directed to digital. And this is what you’re going to see in our organization. With these changes in cultural traits, with these additions that we’ll have that we will not really, that we have been the changes that we have been making in the organization. And with the span of control that is different, you have no idea, Nishio. It’s so different. So, I think this is it, because we even spoke about this in the prior quarter about the total volume of revenue available in the Brazilian market. I’m almost sure of that. I haven’t got the number from the top of my head, but please check the previous earnings conference call. And I’d like to take this moment to draw your attention. If you look at my presentation back then and my presentation today, please let me know if there is any difference. What we said back then is what we’re executing. And another important thing, there is nothing else in this bank that is not measured. Everything in run the bank or change the bank is measured. We have a new project. For example, we are going to expand our middle corporate segment. It will be expanded. This project has been approved. We’ll grow the team another 10 platforms around Brazil. What we call platform is actually having a branch dedicated to this middle corporate segment. But it all involves measurements and decisions are made quickly. But all suggestions need to be proven and it’s going to be a cheap branch, not a huge branch. It’s a platform as we call it when you look at total numbers but it’s registered as a branch at the Central Bank of Brazil. So initially, I think that this is kind of an overview. And one last comment on the result of the transformation process will be recorded in the operating result of the bank, and that’s fundamental. So, we have to focus on the operating result to see the transformation and the time line to organized the way of done already and what we will be doing in the future.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or
remove ads
.

Operator: Next question from Pedro Leduc with Itau BBA.

Pedro Leduc: Thank you for taking my question. I’d like you to elaborate on the NII dynamic, particularly client NII. The NII in this quarter had a relevant drop 14% year-on-year and the NII is still dropping in a similar speed to the past quarters. I know, Andre, you said, first, you grow the portfolio, and then we’re going to see a positive impact on NII. But thinking about this sequence, it seems to me that the current origination is coming with lower spreads. Perhaps because of the line or the mix. My rationale is I see payroll deductible loans increasing but with caps putting pressure on profitability. You also have the savings accounts deposits following corporate segment being very competitive. So as an outsider, it doesn’t seem that the portfolio construction is not helping to converge to the guidance. NII, historically, I know a lot has changed, but it was the line item that was always farthest further from the guidance. And I see you’re very comfortable maintaining the guidance, particularly for NII. So, I’d like to hear from you. Is my interpretation wrong? Are the spreads more pressure, demand of pressure? Is it about more mix or more volume? And perhaps a lower AWL will offset a less dynamic NII?

Unidentified Company Representative : Well, it’s a long question, but thank you for this question. I guess that at the very end of your question, you kind of gave us the answer because we look at economic value. So, we look at the NII, not the growth NII. So, in NII, you thought that it’s starting to grow, and we’ll see that. And if you look at the mix of products, you will see that we boosted those higher-risk products. But everyone here is very down to earth. We are not going to have that NPL, that delinquency in the future. On the contrary, and like I said and I stressed this during my presentation, in February, we gained market share. In March, most likely, this will be disclosed by the Brazilian Central Bank tomorrow. And we’ll say that most likely, we also gained market share. You’re also right when you say that payroll loans and mortgages have lower margins. That is a fact. The margin takes longer to come, but we are also offering products with a higher margin. We grew in February and more in March, and this will have a reflection in April, May, June, July and so on and so forth. As regards to wholesale, we talked about spread. Well, that doesn’t exist. That the spread in the wholesale bank is under pressure. It’s always been. Here we work with RAR, risk-adjusted return. So, our regional managers using their phone, the tablet or their managers, they see exactly the same thing. They see the RAR history of the client. They can simulate what they need to do to negotiate with the client online real time. So, we put pressure on them regarding RAR. They just don’t have a deal to add to their portfolio. Today, the market doesn’t give you a lot of room to bring those to your portfolio. We also have what we call OPCD for the secondary market, OPCD portfolio. So, you see the margin is not coming only from spread. We don’t address this operation by operation. We address it by client. So, when we have an adequate RAR and relationship, the deal goes through or else they don’t have the ability to approve the deal. So, there’s a rationale here. We implemented this when I was in the whole Seo Bank together with Bruno and our colleagues there. So, this is not new. The margin comes from the whole. We also have private payrolls. We are one of the largest banks. Managing payrolls means relationship with large corps, midsize enterprises, small enterprises. And we have other businesses that we do around the relationship with legal entities. So, revenue doesn’t come only from the margin. Now to make up the client NII will grow SMEs, because this is added to individuals for us to build up our margin over time. Is that line item challenging? It is. But rest assured, just wait, because we’ll get there. Look, we are looking at NII, net interest income. That is what is important. I have to have a balance between what I do and the potential loss with these clients. and this is our handbook for our day-to-day. But of course, the portfolio needs to come first and the NII will come later and we’ll keep looking at the mix over time and we’ll see a more balanced mix. But with delinquency under control, we have to have high-quality assets. Okay, Pedro? So, we won’t make a mistake.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or
remove ads
.

Unidentified Company Representative: If you want to add anything, just I just have two very brief comments. Pedro’s question was more directed to product mix and as Marcelo was saying, there is also the segment mix. Once we accelerate SME and individuals mass market, we bring on board more margin. The second comment is about guidance. When we look at the guidance, the guidance gives us an idea of, profit a year. That’s valid. This is what we work with. But in terms of a turnaround history, when we point the guidance towards the end of the year, the beginning of the year is different from the end of the year because you are churning the portfolio, so it’s a more classic case. It is more limited than it turns around and then it picks up again. So, it will be different, you know, if you compare one and another. I mean, it is valid but there are fluctuations in some possible lines within a turnaround perspective.

Operator: Now Carlos Gomez Lopez. Next question from HSBC.

Paulo Gomes: I have two questions. First is on funding. There was a drop of almost 13% on checking account year-on-year. When do you intend to change that in terms of cheap funding? The second question is about NEXT. We don’t have a lot of information about the future of NEXT or the digital platform.

Unidentified Company Representative : Thank you. Thank you, Carlos. So, you start first and then I’ll talk about next. Carlos, thanks. It’s a pleasure to see you. Marcelo just said now that one of the important indicators is our cash growth. We are doing some important work with companies and also working with some SMEs that are now coming into our offices. I think that the fair share path is important and this will strike a balance when it comes to mix or with that demand deposit. We must also remember that we have lots of CDBs, which are some instruments related to demand deposits and that’s not specifically in that same line. I mean, you have a remunerated line, but not to that client. You only see that when you look at the time deposit line. I mean, remuneration is a bit lower. I mean, it’s a bit lower in this business. That’s why you see this change. But it’s not loss, but gain because the line is not broken down for you to see it more clearly. Yes, I think you’re right. In terms of the clients, that is it. And again, the more the client helps itself, it looks for different alternatives and we keep, we will keep seeing these changes. I mean, the first quarter is more seasonal, but we understand that this is quite normal. And within the context of the year, this will be within the lines of what we often do. Now about NEXT. Now to answer your question about NEXT. With NEXT, you know that part of the investments are within Bradesco. Digital is totally outside Bradesco. We had decided that NEXT would be another segment for us here with a brand that is known in the market. But when we reviewed our strategy and the plan, we decided not to make that move before we would make all the decisions related to that mass segment because we have learnings with NEXT and learnings that come from digital. So, we are now in this decision-making process. We have some possible paths and you will see that in due time. Also, with this new colleague that is arriving, they will certainly help us in this process of execution and decision-making. But if you look at our playbook, you will also see some interesting figures about digital. Take a look at that. because we have some information about digital in our playbook. And thank you for your questions.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or
remove ads
.

Operator: The next question comes from Guilherme – from JPMorgan.

Unidentified Analyst: Our question is on cost. We already talked a lot about G&A, et cetera. I would just like to look at orders. This was a controlled, I would say, controlled quarter. And discussing the guidance with you early this year, I think there was a caution in terms of the total cost of the guidance, because of that line guidance was above inflation and part of the explanation was because you were very cautious about that line throughout the year. But looking at the run rate for the quarter, if the pace was to be maintained of about 1.5% throughout the year, we would see a drop when compared to 2023. The question is, how could we see this line going forward, if the pressure you were anticipating at the beginning of the year, is this still a base case for the rest of the year? And also, exactly what led you to see this more beneficial performance or behavior up the line?

Unidentified Company Representative: Andre, you start and then I will add.

Andre Rodrigues Cano: My first comment is that there was a very good performance in all the lines of the main operating expenses: personnel, admin and other expenses. Marcelo pointed out quite well that personnel and admin expenses grew 3.5% in the first quarter against an inflation in the first period of 4.3%, showing that our expenses are very much under control. So, we started off controlling our expenses and this is our objective for the rest of the year, but we have to bear in mind that the strategic plan that is started in February ’19 has a very small impact in the first quarter. So, it’s just natural that the impact will grow going forward and impact that will be felt in technologies, new hirings, contingencies, fiscal contingencies, et cetera. This will appear throughout the year. But this is what makes us certain that this line will go within the guidance, but we will certainly do all we can to lower that number. We have to also recall the collective bargaining agreement. I mean, of course, that we have our own impressions about the collective bargaining agreement, but the negotiation remains open. I mean, if you look at the line of others and compare it with the same line, it’s the same as other companies that consolidate with us and this line is going back to its traditional level from previous years without the effects that we had in the past two years. So, everything is under control and normal. I mean, the collective bargaining agreement could probably move the needle a bit, but everything is being looked at and treated very rigorously. As Marcelo was saying, all the lines should be within the guidance. Some lines are even above guidance, but we will see a balance between one and the other. Some will be closer to the bottom part of the guidance and the others will be more closer to the top of the guidance. But we are certainly controlling our expenses and costs. But at the same time, always investing in what needs to be invested on.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or
remove ads
.

Unidentified Company Representative: So, thank you. And with now, we conclude our Q&A session. Questions that couldn’t be answered in this occasion can be then sent to our IR department. And before I turn the floor to Marcelo to conclude this presentation, I would just like to say that in our IR website, you will be able to find this presentation and also all of the other materials related to this earnings release presentation. So, I just recommend that you take a look at that. So, what are your final remarks? Thank you. Thank you, Andrea. Thank you, Casiano. Thank you, all of you, for your interest and for joining us today in this quarterly earnings release. And we remain at your disposal. Sell side, all analysts, we are available to give you further information. But before I say farewell, I would just like to say something. Yesterday, Carlos Alberto Rodrigues Guilherme Caulca [ph] passed away. He was a Board member since last December when he retired. He was also Vice President of the board. He died yesterday, but for several decades, he worked for our organization. That’s why I thought it would be important for us to express our sorrow for the loss of our colleague that spent many years working with us. But I would like to remember him with joy rather than sadness. Thank you so much for joining us today, and I wish you all a very good month of May. Thank you.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or
remove ads
.





Source link