Marcelo Noronha: Good morning. I am Marcelo Noronha, and I'm here once again from Cidade de Deus, the headquarter of Bradesco, just to present another quarter of results for the first quarter of 2026.
Cassiano Scarpelli: Today is Thursday, May 7th.
Marcelo Noronha: It's 1031, so we are here live from our studios. My presentation will be briefer when compared to our last earnings release presentation.
Cassiano Scarpelli: And after the presentation, we will go straight into the Q&A session.
Andre Carvalho: It's a great pleasure to be with you once again, and thank you for joining us today.
Cassiano Scarpelli: I'll start by presenting the numbers, and then I will also mention a few issues that have raised questions from colleagues on the sell side and also buy side.
Andre Carvalho: questions that were posted to our IR team.
Cassiano Scarpelli: So I'll start from what you saw since yesterday, because the presentation was available to all of you. Our recurring net income in the first quarter of 26 was 6.8 billion BRLs, UP BY 16.1% YEAR ON YEAR, AND 4.5% QUARTER ON QUARTER DELIVERING ROAE OF 15.8%.
Marcelo Noronha: JUST AS A REMINDER, IN THE LAST QUARTER OF 2025, OUR ROAE WAS 15.2%, SO THAT MEANS THAT WE WERE UP BY .6 PERCENTAGE POINTS. vis-à-vis our recurring net income.
Cassiano Scarpelli: So what drove this recurring net income? I mean, total revenues grew 14 percent year over year, and this is the main driver of profitability and cost-to-income ratio improvement, not only this quarter, but certainly this will. lead to improved results throughout the year. I've been talking about moderate appetite, and I've been referring to that for several quarters with a more conservative bias. But that doesn't mean that our appetite will decrease when it comes to growing our, you know. loan portfolio.
Marcelo Noronha: We will continue to grow, but with certain ratings. I mean, maybe we will not do certain ratings, or maybe we may not want to go to certain segments or crops. And we want to have more secure And then I will show you later on our restructured operations. I will talk about the market and so on.
Cassiano Scarpelli: I mean, cost of risk has increased. I'll certainly mention that further on. But there was a very specific wholesale case because this is what led to that portfolio.
Marcelo Noronha: We decided to be even more conservative.
Cassiano Scarpelli: And I will talk a little bit about agribusiness.
Marcelo Noronha: old cohorts. Some of them may be on stage three or stage two. So that's what we saw here.
Cassiano Scarpelli: We've been operating heavily on agribusiness, but with more secured loans. Our insurance segment delivered consistent results, reaching almost 22 percent of ROE.
Marcelo Noronha: And last week, on the 30th, we launched Brad Saúde, consolidating all of our health care assets with a positive impact on our capital ratios.
Cassiano Scarpelli: But above all, this unleashed value to our shareholders.
Marcelo Noronha: This is a very important operation. I think if you look at the capital market, the market cap was 42 billion BRLs, which means to say that it brought higher goodwill, surpassing 30 billion in our organization.
Cassiano Scarpelli: So this was quite an important move. But in my view, my personal view, this has upside going for it. And our transformation continue at an accelerated pace with
Andre Carvalho: increased use of Gen-AI and high technology.
Cassiano Scarpelli: We continue to gain productivity and delivering even more.
Marcelo Noronha: I will always begin with my discourse of cause and effect.
Cassiano Scarpelli: So I would like to say that this is our recurring net income, but There was also $1.8 billion in non-recurring expenses related to one fiscal contingency. And according to the legislation, it could have been negotiated. So what happened is that our contingency was around $5 billion. But we decided to pay for that contingency, and we paid in full with DTAs. This is a very exciting and positive piece of news. Because, again, I mean, cause and effect. The cause was the opportunity to make a move like that. And the effect was that now our balance sheet has even superior quality. And in the past few years, we paid for fiscal contingencies amounting to 20 percent. So that was a good opportunity to do it. That gives us better quality because it reduces the risk in our balance sheet, and that affects all of our shareholders. So this doesn't change by no means our recurring net income.
Marcelo Noronha: but improves the quality of our P&L. So as I was saying, total revenue almost 37 billion, up by 14% year-over-year.
Cassiano Scarpelli: And I would like to highlight the entire revenue line. I start with insurance, pension plans, and savings bonds.
Marcelo Noronha: The indicator is 20.4% growth year-on-year, even surpassing the guidance. But the guidance, as you recall, is annual.
Cassiano Scarpelli: So I'm not going to go over that again. But we reiterate our guidance. And moreover, I must say that my expectation is that we will be in the middle and upwards in terms of the guidance. Like I said last quarter, I mean, our confidence level remains the same. We are in the right track. And again, I'm talking about cause and effect. I mean, fee and commissions income was up 6.2 year over year in a quarter that is usually the worst quarter for the financial industry. I mean, the bulk of the volume is in the fourth quarter, so in the first quarter, volume is down, and fee income is down as well. But despite all that, we continue to grow. And our NII
Marcelo Noronha: is the highlight, of course, that, you know, we have – all of the other lines are growing.
Cassiano Scarpelli: But the main highlight is NII.
Marcelo Noronha: We grew 16.4 percent year over year, quarter on quarter 4.2 percent, and this should continue to drive our growth over time.
Cassiano Scarpelli: And you also notice that we have perennial performance, and our discourses are also perennial. There is no change in the discourse, I mean, except for, you know, Brady Saoudi's recent announcement.
Marcelo Noronha: And I'll elaborate a bit more on every single topic. I mean, cause and effect again. Client NII, market NII stems from our activity.
Cassiano Scarpelli: Our activity is quite robust. Our origination capacity is robust. Why is it that we are originating loans?
Marcelo Noronha: Well, it starts with our credit business unit with a very robust loan portfolio management, a new pricing area, working with client segments and pricing in accordance.
Cassiano Scarpelli: And we look at all of the cohorts to see, to look at pricing intervals.
Marcelo Noronha: And we are also delivering better experiences for every client segment and be able approach is very individual through our channels, very personalized.
Cassiano Scarpelli: And this has made a difference in our distribution. And that's why we are growing significantly on the asset side, on the liability side, on the side of fee income and distribution of insurance products and consortia.
Marcelo Noronha: And this certainly
Cassiano Scarpelli: leads to this margin that was up 16.4, as I said before, and expanded.
Marcelo Noronha: We increased, I mean, our expended LOP, cost of risk was 3.5%, and our total NII net of provisions was 10.4 billion. When we look at client NII, our... And NII was up a 4.1.
Cassiano Scarpelli: Our expectation is to have NIM around 9 percent, very stable NIM. But in addition to growing 16.3 year-on-year, without the calendar effect that
Marcelo Noronha: impact at this quarter, instead of growing 3% quarter-on-quarter, we would have grown 5% quarter-on-quarter instead of 2% growth. We believe that our NII will continue to grow.
Cassiano Scarpelli: I mean, this is the line that we expect to see going forward. And I would also like to draw your attention to market NII that reached 600 million. Again, cause and effect. It was not by chance. It grew because of all of the origination from the client desk. And this is also something that comes from trading, energy, and ALM. So we have a very good team of professionals that take advantage of all the opportunities. all the opportunities. But our ALM is here. These are not like one-off situations.
Marcelo Noronha: But in fact, we are maintaining steady deliveries and good treasury deliveries throughout the year.
Cassiano Scarpelli: And then I was talking about the calendar effect.
Marcelo Noronha: And the same thing applies to
Cassiano Scarpelli: client NII net of provision. And this impacts the bottom line.
Marcelo Noronha: It was down by 4.5, I mean, 10.6 billion.
Cassiano Scarpelli: It went down to 9.8. But excluding the calendar effect that we would have around 1 percent quarter-on-quarter, the number would go to 10.3 billion.
Marcelo Noronha: But now I'll give you another effect. I mean, we have here
Cassiano Scarpelli: We broke down our provision costs for wholesale, LRM, LOP, and mass market LOP.
Marcelo Noronha: There was a higher growth. There were some provisions here, but there was one case that represented the bulk of the volume. So if we exclude that... The NII – I mean, the NII NATO provisions will be higher. It doesn't mean that this is a recurring thing. I mean, the numbers show the fact that we are more conservative, even though there is a negotiation on the way, and then we see that we have a – stand a good chance of collecting. But also here, I mentioned mass market LLP, but also this includes other segments.
Cassiano Scarpelli: But look at the indicators.
Marcelo Noronha: We are growing 500, 300, 400 million.
Cassiano Scarpelli: quarter on quarter.
Marcelo Noronha: And we drop provisions as the portfolio grows.
Cassiano Scarpelli: Our portfolio grows, and then we put on more provisions. And this is the effect of the 4966. I mean, we have a portfolio, and this applies to the entire market, because in the past, in the 2682, in N plus 1, we were at breakeven. vis-a-vis LLP or the provisions in place. But with 4966, we have portfolios that only reach breakeven at M plus 5 or M plus 6. And this is the case of credit cards. We are growing well in auto funding, in payroll, deductible loan, in micro and SMEs. Therefore, our portfolio is growing. And we will certainly hope for It doesn't mean to say that, okay, you are provisioning just because the NPL portfolio is increasing. But look at the numbers in these boxes down below, 1.3, 1.4, 1.3, 1.4. This is what we monitor quarter on quarter. If you look at the full earnings release, there you have a presentation very much like this, with annual numbers for this indicator. Quarter on quarter, these are the figures. So we should grow cost of risk here. So it will continue to perform like this. It may grow 500 or 300 million, but we are putting on provisions when we are stacking up portfolios. And this certainly leads us to this
Marcelo Noronha: This is the picture we see.
Cassiano Scarpelli: But we are very confident about everything we are doing. And I will also talk about the quality of credit. I mean, our portfolio reached almost 1.1 billion BRLs, growing 8.4 year over year. However, the FX effect of the depreciation of the BRL had a significant impact as well, especially you know, large corporates and SMEs.
Marcelo Noronha: But, net of this effect, we would be growing 9.5% year on year, even if we look at the entire market.
Cassiano Scarpelli: looking at moderate risk appetite. I mean, individuals, 9 and 1 half. I mean, cause and effect, once again. And this stems from very good work with clients and penetration and new experiences.
Marcelo Noronha: SMEs, 14.4% growth year on year. And again, here I will just elaborate further in a moment. And large corporates, it really fluctuates
Cassiano Scarpelli: 10 billion up or down, because we have short-term portfolios. And I will draw your attention to some highlights that are part of our plan. And again, I repeat, cause and effect. We are not growing in auto loans for mere chance. We are growing in auto loans because we had a careful planning. We drew up a
Marcelo Noronha: very detailed diagnosis of the market where we operate in new quadrants, like new vehicles, heavy vehicles.
Cassiano Scarpelli: We have a very small stake in new vehicles and semi-new and used cars. I mean, used would be much older cars. And semi-new vehicles is the largest market in Brazil in absolute terms.
Marcelo Noronha: Therefore, we looked at all market possibilities.
Cassiano Scarpelli: And we also looked at the experience of our managers, dealers, and clients. And we realized we had to change because we had two platforms, one for account holders and non-account holders with the dealers. So we changed the platform.
Marcelo Noronha: And this was part of our transformation process.
Cassiano Scarpelli: We now have a single platform that brings much, much better experience to our dealers and our managers and, above all, to our clients.
Marcelo Noronha: It's much more efficient in operating terms. And it's also much more efficient when it comes to pricing and very quick decision in terms of using the loan machine and pricing.
Cassiano Scarpelli: And within this interval of RAR, that ranges between 20 to 28 percent, which is satisfactory to us. Therefore, growth comes because we have commercial capacity, we have a good penetration base throughout our customer base and also with the dealers, but now with a much more competitive platform where we can choose our risk more assertively. That's why we're growing So if we keep on growing at this pace, and the same thing with other portfolios, I mean, then we have more provisions, according to 4966, because we have to stack up this intermediation margin, you know, over time.
Marcelo Noronha: time. And credit cards is no different from what we showed before.
Cassiano Scarpelli: It is growing 10.6% year-on-year, above all with high income, with 18.6% growth. Our payroll deductible loans, if you look at the history, you will notice that here in payroll deductible loans, we were growing around 5% year-on-year. Now we posted 8.3% growth year-on-year, 3.2% quarter-on-quarter, and the portfolio reached a
Marcelo Noronha: 470 billion BRLs. And I'll talk about the private sector in a moment.
Cassiano Scarpelli: But INSS made different changes and pushed the market down. slightly lower, like at 40 percent. So the market started to resume production just like we did. That's why here we're not posting growth in this portfolio. And why? Because we have a very broad portfolio, and all of the settlements occur on a monthly basis. But overall, we are growing, and we will grow in INSS. But on the private sector, we were almost 43 percent year-on-year.
Marcelo Noronha: And in the past quarter, 31 percent approximately.
Cassiano Scarpelli: You should recall that we said that we will accelerate on the private sector once we have – we are totally certain that all of the agreements have been made between the banks and DataPrev, and that's what we did. Also, being more selective in terms of selecting clients that are more in tune with our risk I mean, our portfolio adjusted to risk. In our case, we are talking about slightly over 4% of NPL overnight. So we are performing quite well in these portfolios. And in the general payroll deductible loan portfolio, the market posts around 2.97%. seven percent growth, if I'm not mistaken, whereas we have 2.4 in the overall NPL portfolio. So everything is under control.
Marcelo Noronha: And also working capital that grew 16.3 percent year on year.
Cassiano Scarpelli: I mean, it's here, large corporates and SMEs. But look at this one, government back to lines, FGI and FGO. We had 26 percent of the entire production, and I showed you that number last quarter, of the entire FGI and FGO production. But by the end of the year, by December 31st, we start counting our production numbers again.
Marcelo Noronha: By the end of March, we ended up the month with 20.6 percent of production share.
Cassiano Scarpelli: So we are market leaders right now. Obviously, we have very good competitors in the market. And competition is good because it pushes you further.
Marcelo Noronha: So the competition comes.
Cassiano Scarpelli: And one bank is putting pressure on the other one. And it's a very good dispute. And it's positive for the entire market and also for the companies. But here, we show you the growth of our portfolio.
Marcelo Noronha: We grew almost 81% year-on-year, which means that here, we didn't grow.
Cassiano Scarpelli: grow too much because these are portfolios with less guarantees or not too secure. We are not obsessed to be leaders, but what we want and what I tell my team – and, you know, a few days ago I reiterated that, that what we want is risk-adjusted return. This is what we want, risk-adjusted return, certainly with scale, scale based on these lines.
Marcelo Noronha: But we also want to expand the relationship we have with these clients, you know, micro and small, medium-sized companies.
Cassiano Scarpelli: So we are very confident about everything we're doing. We are keeping our appetite with agribusiness. And, again, our agribusiness cohorts in 2025, you know, have lost. lot more guarantees. And the same thing goes for 2024. They are much better.
Marcelo Noronha: We are seeing a bit more stress in previous cohorts, especially in the south of Brazil because of the rain and then drought.
Cassiano Scarpelli: And, you know, large companies, small, mid-sized companies, and also individuals
Marcelo Noronha: They renegotiated their debts, and the banks gave them a grace period in general of two years. And this grace period is now over.
Cassiano Scarpelli: And then what happens is that once that grace period is over, certain crops are not yet ready or mature enough to pay the debt. That's why I'm saying that in the regular business, things are still not back to normal.
Marcelo Noronha: Still speaking about...
Cassiano Scarpelli: The portfolio are over 90. NPL is flat.
Marcelo Noronha: And now I'll bring you another fact here.
Cassiano Scarpelli: Our Stage 3 goes down to 7.6%.
Marcelo Noronha: Our restructured portfolio between December 23 and March of 26 was down to 14 billion. by 14 billion.
Cassiano Scarpelli: But when we look at this problematic asset, it was down by 15.7 billion, so reaching 3.1 percent. You may ask, so how big do you think this portfolio would be? I think that a portfolio around 2.9 and 3.1 would be just a good size for us. Certainly, it will start to be more stable going forward. But down below, we are showing this chart every quarter. We've talked about our secure portfolio. So we went from 59.3 in December at the end of last quarter to almost 61 percent of our entire secure loan portfolio. But if you look at individuals, it's almost 70 percent. That means that we are operating quite well, and we are very confident about the quality of our portfolio. And look at stage two. Stage two is growing slightly. And why? NPO over 90 is flat, but the gray line refers to micro and SMEs. And where is it growing? It's growing in government-backed lines, FGI and FGO. And why is it growing? Because most companies are... you know, paying their debt. But there is a chunk that the gray spirit is over, and so they're not paying. So even until that gray spirit ends, and for those who are growing the portfolio at the pace I showed you before, 80% growth, it puts pressure, naturally, puts pressure over, you know, NPO over 90. So even though with 49.66, even though the expected loss is lower, it's still moving on stage two. So what happens here? I mean, FGO, I mean, when you have to start paying, is 190 days. of grace period and an additional five days. So the FGI period is after 90 days, you have to start paying, and then you have 30 days, and so another 90 days. So there is nothing different. And it's flat individuals and large corporates performing quite well. Another interesting thing is that the coverage ratio of Stage 3 is growing.
Marcelo Noronha: I mean, you have a mismatch between stage three and stage one, stage two to stage three.
Cassiano Scarpelli: So there is a transfer between stages.
Marcelo Noronha: So I was referring to the former rural portfolio
Cassiano Scarpelli: could be here as well. They are in cured operations, and it could be – it could just migrate to restructured operations with a bit more guarantee. So you have some movements in the 4966 that we believe are absolutely in line with what it should be. And there is another Down note here in the footnote, it talks about write-offs. The write-off was up in absolute terms. It was also up in all the quarters.
Marcelo Noronha: It goes up or down depending on the cohort they write and the mix of the cohort. But there is only 1 percent relative terms.
Cassiano Scarpelli: I mean, you can challenge me quarter on quarter because when you have a better cohort, it's 0.9. When it's a bit worse, it's 1.1. And when it's flat, Here, and I've told you that before when we adopted the 4966, we adopted the same write-off criteria we had in the previous system. So we didn't change anything. So we are very much confident about everything we are doing in our portfolio. And I've been... monitoring this very closely. I'm looking at all the cohorts and I'm looking at that with our team of our credit business unit, with the risk team and the teams for every customer segment. We have a price rating and also a rating that measures stress level over 3094, which is our best proxy. And all of them are within the foreseen interval.
Marcelo Noronha: Well, but you could have had in October like one issue that escaped a little bit.
Cassiano Scarpelli: But we immediately look at all the models, and we make adjustments and policies accordingly, if need be. Therefore, we are very confident in terms of the quality of our assets.
Marcelo Noronha: And again, I see growth in credit risk. But nothing apart from that. And then fee income, it was up 6.2 year over year.
Cassiano Scarpelli: And this is a quarter that is not only weak for banks and the financial system, but we are leaders in the consortia business.
Bradesco IR Team: And that is a very important line. We had almost a full... billion in assets delivered in Q1 2006. And our growth of these fees amounted to almost 20% year on year in custody. And brokerage services, 15.5% growth. And this is recurring.
Marcelo Noronha: This is the result of our activity.
Bradesco IR Team: It's not random that this happens. It's a lot of hard work, new experiences that we're offering to our clients and in capital markets.
Marcelo Noronha: And we've just had a press conference and a journalist asked about market expectations for the capital markets and they claimed
Bradesco IR Team: or you grew more than 60% your investment banking activity. But I'll give you more information on that.
Marcelo Noronha: We have rankings for investment banking. Our fixed income team grew.
Bradesco IR Team: We have been originating or producing a lot more. And this is not growing by chance. It's growing because there was a lot more origination and more ability of placement in a very demanding market. Last year, we were the second bank in origination of fixed income securities in the Brazilian market, according to Anbima. Last year, we had 14.1% market share.
Marcelo Noronha: We ended Q126, boasting 69% growth. Still ranking second, but with 22% of market share, takes the income origination.
Bradesco IR Team: So we have a lot of traction across the organization in different segments of climate.
Marcelo Noronha: operating expenses absolutely under control, 7.8% growth year-on-year, a 4.6% decrease quarter-on-quarter, and I draw your attention, as we always do, to personnel and administrative expenses.
Bradesco IR Team: up 5.4% a year, minus 8.8% quarter on quarter. And of course, we have profit sharing and payment of variable compensation. And that's very positive.
Marcelo Noronha: If you go to the earnings release, you'll see the personnel expenses. the negative purchase flat except for variable compensation, which is good, right?
Bradesco IR Team: And in administrative expenses, if you look at the detail, you'll see that transactional expenses, which result in processing because we have high activity, that is growing. Now, rent, transportation of money bills, etc., all of these expenses are decreasing quarter on quarter and year on year. We continue with our discipline of reviewing our footprint.
Marcelo Noronha: In this quarter, 238 more service points reduced.
Bradesco IR Team: the insurance group. Like I said in the beginning, our insurance business is delivering an ROE of almost 22 percent, 2.8 billion in net income, 13 percent increase year on year, with 29 billion of insurance premiums.
Marcelo Noronha: And the result of the insurance operation includes the whole insurance activity plus Brad Saoudi, Redisco Healthcare. The whole insurance group brought us this result, operations growing 20.4% year over year. And the highlight goes to the increase in the operational results, 22.1%, practically two-thirds of the result presented in Q1, which is very, very positive for us.
Bradesco IR Team: And our technical provisions continue to grow almost 10%, reaching 455 billion BRL.
Marcelo Noronha: So we're happy and pleased with everything that is happening in the insurance group, in other affiliates, in payment organizations, and what they're bringing to us.
Bradesco IR Team: Now talking about capital, representing our pro forma capital. Tier 1 growing to 14.5%.
Marcelo Noronha: Income and equity, 12.7%. So everything is informed.
Bradesco IR Team: So you can see the movement of Brad Saudi, the healthcare business. It brought a positive result, a positive impact. If you have questions, our team is available. The IR and the finance teams are available to explain all of the details regarding this movement.
Marcelo Noronha: we took that put us in a great comfort zone regarding our capital. We did not change our expectation with it or without it. We would continue down our path.
Bradesco IR Team: Always in Q1, there is a slightly greater capital reduction. This was expected.
Marcelo Noronha: And after that, we would stabilize.
Bradesco IR Team: Interest on capital for the year. And here our transformation movement.
Marcelo Noronha: Like I said in the beginning, I did a big analysis about transformation in the past quarter. I won't repeat a lot, but I'll just bring you some more information.
Bradesco IR Team: I spoke about the new auto financing platform. I'm not going to repeat that.
Marcelo Noronha: There are a number of innovations deployed with intensive AI use. I don't need to go over all of them.
Bradesco IR Team: What I mean to stress is that we accelerated in this path and we're investing a lot. This is another tool. We have a treasury, easy trade for SMEs, small clients.
Marcelo Noronha: They can connect directly into their operations using the app. And I draw your attention to three more characteristics. You will recall that I showed BIA for private in the past quarter with a very high accuracy level.
Bradesco IR Team: Well, that increased to 94% first contact resolution. So we gain experience, we gain productivity, and we improve customer experience.
Marcelo Noronha: We continue to have upgrades for prime and principal clients. You can check and compare it with the previous earnings release.
Bradesco IR Team: In the first quarter, we upgraded more than 500,000 clients and we continue to open offices for principal and for prime and digital retail.
Marcelo Noronha: Last year, we
Bradesco IR Team: closed with 19 million fully digital clients in Q1 26, 28 million.
Marcelo Noronha: And we were pointing to this increasing trend. So we're very confident and we're accelerated in the transformation movement. bringing productivity and important gains to the organization on all sides.
Bradesco IR Team: On the side of efficiency and on the side of customer experience.
Marcelo Noronha: So my conclusions. A strong operating result in Q126.
Bradesco IR Team: This is what we're seeing. We're very pleased with the results. We're growing almost 8% quarter over quarter. And growing consistently, almost 15% year on year.
Marcelo Noronha: Technology.
Bradesco IR Team: I spoke about it. I will not repeat this. The new client segmentation always bringing NPS up and offering good experiences. Of course, this supports traction in run for bank.
Marcelo Noronha: Risk appetite, like I said in the beginning, with a more conservative approach.
Bradesco IR Team: We continue to have a more moderate risk appetite.
Marcelo Noronha: But we continue to have traction. We will deliver our expectations in the guidance.
Bradesco IR Team: We are competitive. We remain competitive in those lines where we feel this risk appetite.
Marcelo Noronha: So I'm very convinced of all this. Another thing I'd like to stress is our net income. Not only the bank, but the affiliates and the insurance group in general.
Bradesco IR Team: Posting consistent growth with our commitment to gradual and sustained net income growth step by step will continue to improve our competitiveness in the short and long term.
Marcelo Noronha: And our bright Saúde de Healthcare business has the most complete and comprehensive healthcare ecosystem in Brazil, like I said in the beginning, bringing us an important goodwill It is a brilliant company, a lot more diversified now, and we'll speak more about that. And just for your information, we were very proud with the Debanker Awards.
Bradesco IR Team: in machine learning, mobile, AI.
Marcelo Noronha: So we got some important awards that, normally awards that are given and offered to international banks that value technology. So I will conclude my presentation, the formal presentation, and I will be available for the Q&A.
Bradesco IR Team: I have Cassiano Scarpelli, our CFO, CTO, and our dear friend, Andre Carvalho, our IRO.
Marcelo Noronha: But we also have Brad Saudi. We don't ring a bell anymore.
Bradesco IR Team: We just press a button at B3. But I have my two colleagues online. Carlos Marinelli, CEO of Broad Saúde. And he was the one who pressed the button at B3. He introduced a new listed company.
Marcelo Noronha: That happened on Tuesday. I had a press call, and Ney Ferraz Dias, CEO of Bradsec Bradesco Insurance, replacing Ivan, who moved to the board of directors of the bank.
Bradesco IR Team: And, of course, he's supporting the transition of our colleagues Marinelli and Ney Ferraz Dias. Thank you both for joining us.
Carlos Marinelli: Thank you, Marcelo. Thank you, Cassiano.
Bradesco IR Team: Thank you, Marinelli and Ney. Good day, everyone. And I would like to say that if you want to ask questions, send your questions via email, at pedesco.com.br or via WhatsApp, 11974438238, or just scan the QR code on the screen. First question from Mario Pierre with Bank of America.
Mario Pierre: Good morning.
Bradesco IR Team: Congratulations on the earnings results. You have been delivering very predictable results and in keeping with the guidance you provided. Congrats on the listing of Bright Saúde. Of course, it improved capital quite a lot.
Carlos Marinelli: I don't think it's...
Bradesco IR Team: It's no longer an issue for the market, given its level of capital. But, Noronha, I would like to focus more on NII. The presentation you showed is a big highlight, the growth of NII. But how do you see this growth continuing, given a more moderate risk appetite? And we don't disagree with you. Indeed, the macroeconomic scenario is more uncertain, given the Middle East war. But I'd like to understand how do you see NII evolving with a more moderate appetite, and what are the most concerning segments when you look at credit in the next few months? Mario, thank you for the question, and thank you for joining us.
Marcelo Noronha: Here's what I can tell you.
Bradesco IR Team: Like I said during the presentation, our risk appetite is more conservative because we have some models for some segments of clients.
Marcelo Noronha: We adjust the model. In our credit policy, we can be more conservative in some credit policies.
Bradesco IR Team: For example, for agribusiness. Agribusiness is a very important segment in Brazil. We maintain our risk appetite for the agribusiness, but maintaining this risk appetite with a policy directed to And we are looking at certain props and at certain much traditional clients, but also for others that are potential clients.
Marcelo Noronha: And we have to see what kind of loan we can offer them and what kind of guarantee we can have.
Bradesco IR Team: It doesn't mean we have less appetite to grow.
Marcelo Noronha: On the contrary, we have a lot of traction, as I showed you. And the NII net of provisions will drive our top line. We are piling up credit, but high-quality credit.
Bradesco IR Team: government back lines, payroll deductible loans.
Marcelo Noronha: I also spoke about credit cards with slightly more restrictions to some client segments, as we showed when we presented credit, the credit portfolio.
Bradesco IR Team: But we accelerated, and we want to do business and post significant growth.
Marcelo Noronha: It was not by chance that we grew almost 81 percent in our government-backed lines year over year.
Bradesco IR Team: This shows that we have an ability to deliver. And this has been piling up NII, so I see NII growing with NIM around 9 percent.
Marcelo Noronha: as I showed you. And with greater growth, we'll have a little more cost of risk.
Bradesco IR Team: That's not important. What matters is to have controlled cohorts. And for each modality, we can have the expected loss. And this is our focus.
Marcelo Noronha: And also, grow auto loans.
Bradesco IR Team: This is another growth driver, because there's a market, and risk-adjusted return is good. And there are some markets that are not delivering this. We don't want to be there. So we are very aware of what we are doing to increase our competitiveness.
Marcelo Noronha: Okay, Mario? Now, of course, in the middle market segment, in the wholesale segment.
Bradesco IR Team: Yesterday, Milton spoke about a de-concentration. And also here, we de-concentrated our shareholding or our share in the large companies. I think that the top 10 have 13% of our total number.
Marcelo Noronha: So we have to look at this with a magnifying glass. This is our path.
Bradesco IR Team: We are all focused on this so that we can continue to make things happen. I'd like to remind you that our portfolio management department works with a living portfolio. And it points out potential default risks for all sizes of companies, full-time comparing with client segment. Thank you, Mário. Next question from Daniel Vaz with Safra.
Carlos Marinelli: Thank you, André. Good morning.
Bradesco IR Team: Marcelo Cassiano, thank you for taking my question.
Carlos Marinelli: Marcelo, I think that that step-by-step message, and I'd like to second Mario's words, this has given us a good expectation regarding ROE. You're close to 16%. with the cost of equity.
Bradesco IR Team: So the bank is not destroying value, as was the case in past years. But your message is a step-by-step approach and being more conservative in terms of risk appetite. You mentioned a more conservative approach, more conservative buyers after observing a degradation in some areas.
Carlos Marinelli: some of the credit lines.
Bradesco IR Team: So what could be better than expected beyond credit? Because credit is receiving more attention so that you can again accelerate ROE step by step. In costs, you're above your peers. And I'd like to understand how And when can you converge to the level of your peers, Santander, Itaú, when we think about costs? In your cost trajectory, it is under more pressure in the short term. When could we expect costs converging? to an average close to inflation or less than inflation. What could surprise us in the short term? And could it be costs in 2026, 2027? Thank you, Daniel. Thank you for joining us.
Marcelo Noronha: One more time.
Bradesco IR Team: Well, while you were asking the question, I regretted mentioning that we are more conservative because it's just moderate risk.
Andre Carvalho: I meant conservative because in certain models, we are shutting down the faucet.
Bradesco IR Team: with some policies, we have less risk.
Marcelo Noronha: And this is the work we do at the Credit Business Unit.
Bradesco IR Team: This is what we are looking at all the time.
Marcelo Noronha: So we continue to be accelerated on the side of asset.
Bradesco IR Team: But please remember, we build our NII also addressing our liabilities. We reduced our liabilities cost at the bank quite a lot.
Marcelo Noronha: I also mentioned our treasury that has been very important, delivering even more than expected. So I feel much more certain regarding what we are doing also there. The flip side of the story of growth or reduction of expenses is that I think that we are doing our homework really well in terms of cost to income ratio. But some line items of administrative expenses have been posting negative growth, a decrease quarter-on-quarter and year-on-year.
Bradesco IR Team: So in terms of technology costs and transactional activity, you see we have very high activity, so these will grow. The cost of the financial system, we have to pay a couple of things, and that increases.
Marcelo Noronha: If you look at the complete presentation on this, you'll see that we are doing quite well.
Bradesco IR Team: Of course, we still have some labor claims, some civil claims, and these are contingencies that eventually will converge to a lower number. I don't have an expectation that this will happen now, but for 2027, 2028, we will definitely see the impacts of the actions we're taking now.
Marcelo Noronha: So I see that the top line will drive us. Last quarter, we mentioned that our investment in technology is non-negotiable.
Bradesco IR Team: Close to OPEX and CAPEX, we grew 26% in 2025. investing in technology, so we continue to invest to improve our competitiveness, focusing on different fronts, but primarily on technology, including cybersecurity, but also to improve customer experience, improve our internal controls, delivering a new auto loan platform.
Ney Ferraz Dias: Cassiano, anything to add? I guess that you talked about everything.
Bradesco IR Team: But I'd like to remind you that we're in the middle of the transformation process. It's adjusting the footprint. It started two years ago. We still have a footprint adjustment that is still weighing on our expenses, although we have a lot of control. So we also had a change
Ney Ferraz Dias: and our procurement with guardrails, so we control expenses.
Bradesco IR Team: So there's also the footprint adjustment, and that is important. You mentioned two offenders that will decrease, which are civil and labour claims. They are the result of the footprint adjustment. and the adjustments made across the banks. So I believe that we have costs that are adequate for the moment because we are not giving up on investing in technology and in formatting all of the segments and in training our managers so that we can have different value propositions for different segments, and also technological transformation for us to become a digital bank. That's another important side of our transformation.
Ney Ferraz Dias: So I think it's all very adequate to the moment we're living now.
Bradesco IR Team: Improvements will come. They're part of the plan. We want to achieve a low cost to income ratio at the end of our transformation process. We've been talking about that, and I continue to say we're in the right
Carlos Marinelli: direction. One last point. And also our effort to consume DTAs.
Bradesco IR Team: This is very important. We took a stride forward this year. The expected stock of DTAs at the end will be close to the end of 2025 in nominal terms, which increases the tangible assets and improves our profitability expectation. That's also very important. Oh, absolutely. I think you raise an important point. Daniel, it is important that you know that regardless of this event, which actually unlocked the value for our shareholders, like I said, that goodwill, but every month we study
Marcelo Noronha: our DTAs and the opportunities related to that. For us, the greater the capital, the greater is the growth expectation. And we can bring forward the profits. And we're always provoked to increase our profits and consume DTAs faster.
Bradesco IR Team: And we've been doing this with discipline, and we are looking at all of the opportunities. Thank you very much. Thank you, Daniel.
Cassiano Scarpelli: Next question from Pedro Leduque with Itaú BBA. It's a pleasure to see you, Pedro. Thank you, André, Noronha, Cristiano. Good morning. I have two questions. My first question is more like a clarification in terms of the capital source that you said you opened, 250 BP.
Pedro Leduque: BPS, is this net of tax that you have to pay, or he needs any other event?
Cassiano Scarpelli: That's my first question. My second question is whether you could tell me what is part of that, you know, 50 billion is no less prudential adjustments. This is just... related to capital. I'd just like to understand a bit more about that 250 if it is net of taxes. Well, thank you for your question. Well, the first answer is yes. The closing was April 30th, but Cassiano can certainly elaborate more on the answer. But the answer is yes. Well, there is nothing else happening. I mean, it became a reality on April 30th, and this consists of two major pillars.
Ney Ferraz Dias: One is the fact that – I mean, it's the concept of the company.
Cassiano Scarpelli: It's a pure holding company versus an insurance holding, so that capital is part of the 250.
Ney Ferraz Dias: dollar refers to generating tax credits, and this generated DTAs.
Cassiano Scarpelli: And so you have that effect in the sequence. You pay taxes and you offset that with DTAs. These are the two basic things we do. I mean, we register the operation. market value. This is not accounting.
Bradesco IR Team: It's just fiscal.
Cassiano Scarpelli: You generate payment through DTAs. And the second part has to do with the potential adjustment, because this is a pure holding company. So these are the two elements related to the 250. Is that clear? Yes, excellent. Thank you. And my second question is more like BAU. It refers to LLP. I'm getting some inquiries from investors.
Ney Ferraz Dias: In mass market, I mean, seasonally speaking, the cost of risk increases a bit.
Cassiano Scarpelli: And then there is the corporate case, which is very specific, but we have a lot of news about that.
Ney Ferraz Dias: And then investors may ask whether this net 9.7 LOP would be up in the coming quarters, or you would have any kinds of gains.
Cassiano Scarpelli: stemming from seasonality in the mass market, or whether this is not going to be present in the second quarter, and whether we could see this lighter in the coming quarters. Well, in terms of wholesale, in terms of the wholesale LLP,
Marcelo Noronha: I'm not seeing provisions like that, but eventually it could happen. I mean, wholesale is like this.
Cassiano Scarpelli: It's very fluctuating.
Marcelo Noronha: You could also experience... the reverse scenario.
Cassiano Scarpelli: But now, in terms of the other portfolios, we showed great consistency – 1.3, 1.4, 1.3, 1.4 – consistently, and with nominal growth between 300 and 500 million per quarter. But we are growing the asset. We grew the asset a lot. So with the 4966, you call in provisions.
Marcelo Noronha: I remember that I said that we have some portfolios that with the 2682, what we used to call initial provision for a new loan,
Cassiano Scarpelli: Our breakeven was N plus 1, but now it's M plus 5, M plus 6, depending on the portfolio. It used to be M plus 1. So the 4966 brings in additional challenges, because you stack up a little bit more in your portfolio so that, in fact, you can start getting the due remuneration along a timeline.
Marcelo Noronha: Therefore, I believe that we will continue to grow. that cost of risk, but following the line that I mentioned to you before, and certainly it depends on the growth level of our portfolio.
Cassiano Scarpelli: If we continue to grow
Marcelo Noronha: as much, excluding FX.
Cassiano Scarpelli: And we grew 9% year-on-year. If we continue to grow, we might grow more, and then the cost may increase a bit more. And the reverse is also true. It holds to be true, because if we thought that we would not grow as much, maybe we would need all of these provisions right on the onset, according to 4966. So the cost of provision for the year should be higher, but I do not let go of the quality of the portfolio. The quality is good. The portfolio is well managed. I've been looking at all the cohorts, so we are very confident about what we are doing.
Marcelo Noronha: But when I am more present in the auto loans,
Cassiano Scarpelli: There is an expected loss, and this is natural. I mean, for a credit card, even for a high-income and low-income, there is some expected loss. And everything has been factored in. So we are growing. We will continue to grow. But at the same time, we will bring more NII, as I said before, going forward. And we are very consistent in that regard.
Marcelo Noronha: And the same thing like the emergency line. I mean, when you... When you have the pressure from FGI and FGO on top of the NPL over 90, according to the 4966, even though expected loss is lower, but between the maturity process and the grace period, maybe the provision cost will increase.
Cassiano Scarpelli: We will grow the portfolio, and this tends to grow, but once it becomes flat,
Carlos Marinelli: then it's just business as usual. I mean, the cost of risk for the year, if it is 3.3, it starts higher, and then it will converge to 3.3.
Cassiano Scarpelli: It's a natural move. Next question comes from Henrique Navarro with Santander. Go on, Navarro.
Pedro Leduque: Good morning. Congrats on the results.
Cassiano Scarpelli: My question is on sustainable return on equity. Every time we talk to you, and it's always a very pleasant event, the message that you convey and that we believe in is that the step-by-step, the famous Noronha's step-by-step is a process that goes into 2028. It goes on gradually until 2028, and it's backed on all of the things that we know, cost-to-income ratio, better operating performance, cost of risk, et cetera, et cetera. But as it improves, there is the issue that the effective tax rate tends to increase, and there is also the issue of provisions. It's a pushback that we get from investors. It's not that Bradescu needs to reinforce provisions, but it would be healthier probably to have higher provisions when compared to its peers. So as Bradescu improves, maybe you should be increasing provisions. The question is, what would be a sustainable return on equity? And I don't want to guide us. I just want your help to to understand it better. What would be the optimum level?
Mario Pierre: If I run a weighted average, I mean, the number would come to 18%.
Cassiano Scarpelli: So my question to you, Noronha, is whether 18% is a number that bothers you or whether that could be a sustainable level for return on equity. Well, thank you, Navajo, and thank you for joining us.
Marcelo Noronha: It's always a pleasure to talk to you.
Cassiano Scarpelli: have the same discourse. You know that I make no promises regarding ROE. I mean, 18% ROE in Brazil, you know that's absolutely feasible.
Marcelo Noronha: I mean, having higher ROEs is also feasible, and we will pursue growth.
Cassiano Scarpelli: I do not I promise you when, but we are moving in this direction, again, step by step, building our path to increase competitiveness and achieving the goal and being sustainable over time. But our plan, as Cristiano was saying, is only two years old.
Marcelo Noronha: We started the implementation process only two years ago, meaning that we still have some ground to cover.
Cassiano Scarpelli: And I often say that until 2028 is not just now or maybe at the end, but during that period. Therefore, we continue to pursue that goal, and we continue to pursue better deliveries for all of our shareholders.
Marcelo Noronha: much better environments to our own employees, better experience and better relationship with our clients.
Cassiano Scarpelli: So this is what we are seeking to achieve to build the bank's competitiveness. But please feel free to to add to what I said, because I know you are constantly talking to our colleagues on the buy side and the sell side. I mean, Navarro's question answered part of the question. We are talking about better efficiency. We are talking about consuming DTAs, I mean, at the same tangible asset, reinforcing our P&L. meaning that we increase profitability and we reinforce our P&L at the same time. When you say that it will be probably desirable to have better or higher provisions, last year we increased provisions both on the labor side, civil side, credit side. And this year we are doing the same thing. We are reducing the restructured portfolio. We are reducing the number of civil and labor lawsuits. We are doing... Everything at the same time. We are juggling with everything at the same time. So we are certainly looking at all of these topics.
Carlos Marinelli: Thank you, Navarro.
Bradesco IR Team: Next question from Tiago Batista with UBS.
Pedro Leduque: Hello. Congratulations on the results and on Brady Saúdi.
Bradesco IR Team: I'd like to have a follow-up to Leduc's question regarding impact on capital.
Pedro Leduque: There was a positive impact.
Bradesco IR Team: But we had negative 80 basis points for prudential adjustments and others. What are the important components of these 80 basis points, and should we expect something similar in the next quarters? My next question is something that I've asked. to other banks regarding the new Desenrola program. Could you give us your view on the new Desenrola program? Will there be an impact on Bradesco? Will the impact be small? Given the size of your business, I'd like to have your first impressions about the new Desenrola program. Thank you, Tiago, for joining us.
Marcelo Noronha: It's a pleasure talking to you.
Bradesco IR Team: I think Asenu can answer the first part, and then I'll speak about Desenrola.
Andre Carvalho: Tiago, good morning.
Bradesco IR Team: Thank you. It's always a pleasure to welcome you. There will be no impact, okay? There will be no more impact at this amount in the next quarters. This happened specifically in Q1.
Ney Ferraz Dias: But as part of this 0.804 would be fiscal losses.
Bradesco IR Team: as part of the Brad Saudi operation.
Ney Ferraz Dias: So there's kind of a match.
Bradesco IR Team: In practice, it's 0.4 as part of the 0.8 as traditional prudential adjustments and 0.4 related to the operation as a whole of Brad Saudi. So they balance each other. And Cassiano, let me add to that and remind Tiago and everyone joining us, You see, always in Q1 there is a slightly greater pressure on capital because there are some adjustments already contracted by the central bank, for example, in terms of operational risk.
Marcelo Noronha: When we pay variable compensation at the beginning of the year, and we've been provisioning 112 along the previous exercise, in our provisions,
Bradesco IR Team: We do not have any type of fiscal impact, but when we pay, that fiscal impact is created, and that's why Q1 is kind of unique, but in our view, independent of broad Saudi. the health care business, we would recover the capital as well. So I'm mentioning just one event, but there are other events causing this, and this happens to all banks, not just to our organization. Now, to your point on Disney Hall, a journalist asked me about this.
Marcelo Noronha: We are prepared. I think we had about 18,000 clients until last night who had applied to Desenrola.
Bradesco IR Team: But we, just like other organizations, committed to facilitate this movement with the scouts, with a lower rate, with FTO guarantee to make people delinquent.
Marcelo Noronha: Or actually, not delinquent.
Bradesco IR Team: So we are moving in that direction. Now, in terms of impact, if we look at what is past due for much longer, the impact could be greater. But for short term,
Marcelo Noronha: in past years, the impact does not tend to be very significant. That's my expectation, Tiago. So we start with over 90-day NPL.
Bradesco IR Team: If it were close to two years, then it would be more significant than because we have a very controlled portfolio with more guarantees, so there are fewer opportunities in the short term. And the only comment regarding capital, what were we seeing in the previous quarter? The base scenario is CTE at around 11 in 2026, dropping a little bit and returning to around 11%. At the end of the year, what is the new scenario? 12.7% performer in March, ending the year close to 12.7%, perhaps a little higher. So a much more comfortable scenario. Right. That's why it's important to say that we have to deduct that 0.4% because that's consumed and readjusted. It is created and it is consumed in April. It is exactly what you said. at 11.2, navigated at 10.6, and we would go back to 12.7 in the operation as well, so that is important. Thank you, Tiago. Next question from Gustavo Schroeder with CEDIC.
Mario Pierre: Good morning. Good morning, all of you, and congrats on an ROE above cost of capital.
Cassiano Scarpelli: I would just like to congratulate you on the Brad Saugi transaction. Well, still on the Duke's question.
Bradesco IR Team: but more focused now on light corporate.
Cassiano Scarpelli: I think we understand that, as Marcelo said, there is always the risk of one or another particular case or one-off case.
Mario Pierre: But I always get questions from investors because This was a known case, very specific case.
Cassiano Scarpelli: But usually you make provisions if it is a known case. If Marcelo can share with us some information about the coverage ratio for large corporates that you have, because we've heard many news of maybe other possible cases of court reorganization. And the second question is about balance sheet efficiency, that operation with Brad Saoud. I mean, in our reading, the members speak for themselves. It was a very successful operation. And then given the number of investees or companies that Bradesco has in the conglomerate, My question is whether this is a path that could be further explored to increase efficiency, such as in the case of Brad Saude. Not only that had an effect on the capital, but also in terms of the value. Well, thank you again for joining this conference call. It's always a pleasure to talk to you. We are always looking at other opportunities in terms of our balance sheet. We discussed that extensively among us and with the board. It's also important to remember that it's the ninth quarter that I am here presenting the results. But since day one, I mean, I keep saying that the entire organization of Bradesco It's very rich, and there is a lot of wealth to be allocated. But everything has its right moment. We have to look whether it's economically feasible or not. We often talk about this. Rest assured that this is part of our homework.
Marcelo Noronha: And as I said earlier, we are very disciplined in terms of capital allocation and everything that we can do in terms of DTAs.
Cassiano Scarpelli: I also – I wish I could expedite its consumption, but it is our net income that allows you to accelerate things and we will do everything we can.
Marcelo Noronha: But I would like to remind you that the calculation of expected loss doesn't have anything to do with knowing or not knowing the case.
Cassiano Scarpelli: I said that I just aggravated.
Marcelo Noronha: And for us, we are very well covered.
Cassiano Scarpelli: But you may have a very specific case that you probably thought that the level of expected loss was X.
Marcelo Noronha: And then he realized that the company was deteriorating and it could have been X plus Y. And you could also see that expected loss was X, but it was minus X. So recovery comes in full. We work with technical elements, expected loss for cases of other portfolios. of civil or labor lawsuits, we use that. That's a mathematical and technical evaluation. But very specific cases also involve some technical analysis and sensitivity analysis in terms of what can be recovered.
Cassiano Scarpelli: And there is another variable.
Marcelo Noronha: What is the level of guarantees that you have? What is the type of line that is involved? But a known case has nothing to do with expected loss, because it doesn't matter that your provision was X and then you had to aggravate a provision and added a Y to that X. That's why I said we decided to increase it, to increase provisions.
Cassiano Scarpelli: And you talked about some other reorganizations.
Marcelo Noronha: I mean, take a look at it.
Cassiano Scarpelli: I'm not going to give an example of a court reorganization, but I saw two examples.
Marcelo Noronha: I think it was last week. I will see.
Cassiano Scarpelli: Maybe André has that information, and I can bring it to you. I mean, I cannot refer to any specific cases, so I can talk to you later.
Marcelo Noronha: But take a look at that.
Cassiano Scarpelli: We are not in any of these court reorganizations.
Marcelo Noronha: So we are out of the majority of them.
Cassiano Scarpelli: So we are very confident in terms of what we are doing, in terms of our coverage ratio for very one-off cases, and also in the wholesale bank.
Carlos Marinelli: Thank you, Gustavo.
Cassiano Scarpelli: Our LLP budget for a large corporate remains the same, but sometimes you shift LLP when there is the aggravation of a particular case. I mean, the next question comes from with JP Morgan. Thank you, André, and good morning, Marcelo, Cassiano, and also congrats on your improved capital situation.
Pedro Leduque: I mean, 12.7, or even
Cassiano Scarpelli: higher than that that was a very important message i would like to go back to large corporate cases and exploit that a little bit more because looking at the stages and and the way you assign things i mean stage three three improved by 20 bps but when we look at expanded portfolio that also includes you know real estate
Mario Pierre: Stage 3 is worse.
Cassiano Scarpelli: So that expanded view of Stage 3 worsening has to do with some corporate cases. And then when we look at a proxy of Stage 3 formation coming from the expanded portfolio, your provision that was high enough was not even enough to face that formation.
Carlos Marinelli: So my question is, Do you think we should look at provisions or whether, you know, cost of risk is higher?
Cassiano Scarpelli: And because of higher cost of risk, you would probably increase provisions, but maybe not, because you would say, okay, we have more secure loans, and so probably... The first quarter, I mean, I'm not going to say that there was a peak, because you never know with, you know, in Brazil. Maybe we should see better levels of provision.
Marcelo Noronha: I just want to get a better understanding on Stage 3 and your provisions in this first quarter. Yuri, thank you.
Cassiano Scarpelli: for joining us once again.
Marcelo Noronha: And before I start answering, you've always provoked us when it comes to capital, having higher capital than maybe we would be able to use up DTAs much faster.
Cassiano Scarpelli: And your provocation has always been in our minds.
Marcelo Noronha: It's interesting because we look at that every single month.
Cassiano Scarpelli: But thank you for your provocations once again. André, over to you, and then I will add if need be.
Carlos Marinelli: Speaking about provisions, the idea is that the cost of risk in a year should be close to 3.3 percent, starting higher and then converging to that number.
Cassiano Scarpelli: The issue is that, in fact, we have more LLP right in the onset, and this is a characteristic of a landscape of monetary tightening. And, you know, agribusiness, the fact that the grace period is over, but this is part of our plan, so nothing has changed.
Carlos Marinelli: This still remains the same. But as for large corporate, during the presentation, we mentioned stage three of that Bassem portfolio, central bank portfolio, which is more restricted. In the historical series, we mentioned stage three of the expanded portfolio.
Cassiano Scarpelli: And looking at that, you see the aggravation of what would be sureties, DTM, and that's where we find that. Why is it that our provision is not higher because there are more secured loans and a lower number of restructured loans. So when we reduce our restructured portfolio to 3.1 percent out of the total one, we are writing off debts that were heavily provisioned. So here you have the reversal at this point. And there is also one other point in terms of guarantees, which reached 61 percent. So when you calculate the necessary LLP for a total portfolio of 61 percent of secured loans, certainly there's does not require heavy provisions.
Marcelo Noronha: I would just like to add, saying that when it comes to Stage 3, you notice that we increase our coverage ratio. I think it was about 105, and it went to 118 percent, right? When we look at the older agribusiness cohorts, our provision level is quite significant.
Cassiano Scarpelli: It's very high. We are covered for higher-risk operations.
Marcelo Noronha: When we look at lower-risk operations, there is an expected loss, which is much lower. very comfortable about that. And we've had good performance even in large corporates because we had good guarantees, the structure was well orchestrated.
Cassiano Scarpelli: The decision to increase provisions was a correct decision.
Marcelo Noronha: It was even more conservative when you look at our current stage.
Cassiano Scarpelli: I don't know whether everyone else would do the same thing.
Marcelo Noronha: I didn't look at it.
Cassiano Scarpelli: This was merely our decision, and certainly we are very confident when it comes to our coverage level in all portfolios, and we are growing on stage three as well. Thank you, Yuri. And again, thank you for all your provocations in terms of capital.
Bradesco IR Team: Thank you, Yuri. Next question from Matheus Guimarães with XP. Good morning, André, Noronha, Cassiano. Congratulations on the results, and thank you for taking my question. I have actually two. First, about the social security. INSS deductible loan, in which you have a 15% market share in this product, is going through a number of changes since the publication of TCU decision, and now under Desenrola, with a potential reduction of limits. If you could comment on how you're seeing this product evolving in the future. I think Noronha kind of touched on it during the presentation. Origination, he said, has been reduced given a number of changes implemented by the Social Security System, INSS. But it would be good to have an idea of what you're thinking for the future. My second question is on insurance. Guidance mentions growth between six and eight. You ended last year growing 16, and you started the year growing 20. So way above the upper range of the guidance. So if you could comment about the performance, was it well above what you expected or did you expect a Q1 that would be very strong? Do you expect that this number will accommodate throughout the year? Well, Matheus, it's always a pleasure talking to you. Thank you for the question.
Marcelo Noronha: So I'll start with the second one and I'll ask my friend Ney. to answer the question about the guidance.
Bradesco IR Team: Ney, over to you, and then I'll speak about the INSS deductible loan. Thank you, Marcelo, and my dear colleagues. Indeed, we posted a fantastic result in Q1, but for the full year, we envision some challenges. In the coming quarters, well, we came from a results base in the previous year that was higher. So, in our opinion, we believe the guidance remains adequate for the full year.
Marcelo Noronha: Despite Q1, for Q1, we expected greater growth.
Andre Carvalho: And that was factored in for the guidance for the full year.
Bradesco IR Team: So, of course, we'll continue working, paying attention to... loss ratio and opportunities in the market. But we're very comfortable with the guidance that we have, Matheus, for the full year.
Marcelo Noronha: Right, Matheus, regarding INS as deductible loans.
Bradesco IR Team: Indeed, many changes. The process of contracting the loan and also portability, the modus operandi suggested, created a huge risk for those using portability. And there was a message from FEBRABAN asking for a change, and it seems that they accepted that suggestion. now in our case i'll be very candid with you things are positive because we had the inss card but we don't work with benefit cards and and the card itself has a low penetration we work with lower rates and this additional margin that we can have in the traditional products
Marcelo Noronha: It is positive for us, at least.
Bradesco IR Team: And we have gone back to growing, even with a market pie that was smaller in terms of origination. But, yes, we got that resolution yesterday suspending some modalities. And as of May 19th, everything will be released for us to operate with the new modalities. But, Mateus, I... maintain a positive expectation regarding all three lines of deductible loans, private payroll loans, public payroll loans, and INSS deductible loans. And thank you for the question. Thank you, Matheus. Next question from Eduardo Rosman with BTG.
Ney Ferraz Dias: Rosman?
Bradesco IR Team: Right. Good day, everyone. I'd like to go back to tangible capital, which I believe is a super relevant topic. This discussion has intensified in the last few months, and it became more clear with the Brad Saudi deal. So, Noranha, how did the change in mindset happen at the level of the board and the controlling shareholders? I know it's not a new topic, but I'd like to understand How did the mindset change and how did it mature?
Marcelo Noronha: Thank you, Rosamund. It was a pleasure to have you. Look, what I can say is that the big sponsor and the one who put this on the table is Trabuco, the chairman of the board.
Bradesco IR Team: Trabuco and Samuel, who was a board member up until recently, Ivan, Now, and also the Bradesco Saúde teams together with our finance team, the finance department of the insurance group, the finance team of the bank, you know, all of these people participated in a lot of debates. always focusing on the possibility to unlock value in an asset that is very substantial and relevant to us.
Marcelo Noronha: And things matured over time with us building other pillars.
Bradesco IR Team: And I'll ask Marinelli to give us more color on this, not just regarding the health business plan, but also OdontoPrev, and also talking about hospitals and how many clients we have. So Rosamund, I would say that we are at a very positive level of maturity at the organization. Redisco was always a very dynamic organization.
Marcelo Noronha: as it relates to acquisitions and always aiming to create value. It will not change.
Bradesco IR Team: This will not change.
Marcelo Noronha: And I think that our debates have been very fruitful debates, open debates, discussing different topics.
Bradesco IR Team: So I am very pleased with the debate yesterday in a meeting with our team, a meeting we always hold in the eve of an earnings call. I had to thank them. You know, I had to thank Trabuco and the rest of the board members because they have fully supported all the initiatives we put on the table. Just look at the transformation we're carrying out in the organization.
Marcelo Noronha: I mean, for that to happen, you need to have support from the board, and you need to have full engagement of our employees to do it. Without them, you can't do it.
Bradesco IR Team: And, of course, you have to have consistent plans to engage everyone. Marinelli, can you give us more color regarding the value unlocked at Brat Saúde?
Ney Ferraz Dias: Perfect, Noronha.
Bradesco IR Team: Thank you, Rosman, for the question. As we normally say, this is something that started more than 40 years ago. We got into health insurance back in the 1980s, and we developed that market in Brazil. Our presence in the health care business has been coherent and consistent. So we started with health insurance, and then we evolved for dental insurance. It evolved to investments we make in other areas. Now we have a shareholding at three for diagnostics and also technology with investments we have in Horizon. We have primary care clinics serving more than 1.2 million people. And more recently, with Atlantica Hospitais and Participações, which in a short period of time achieved a mark of 20 hospitals, considering operational hospitals and ones in development. It would be one of the top four hospital networks in the country. So it's a coherent story that was developed over time. and that led us to an important presence in the Brazilian health care market.
Ney Ferraz Dias: Two days ago, we disclosed the managerial numbers of Brat Saúde for Q1.
Bradesco IR Team: Together with that, information from OdontoPrev and Bradesco Saúde. And of course, that provides us with the most complete ecosystem in healthcare in Brazil. This is a new chapter for the British organization in healthcare, now with Bright Saúde. And we have a lot of business synergies to capture, but always. taking care, paying attention, and with all the knowledge and experience and expertise that we have developed over more than 40 years in healthcare.
Marcelo Noronha: Thank you, Marinelli. And I'd like to remind you of an additional detail.
Bradesco IR Team: I have a big partner with Atlantica. And we have Red Door Center Group. I mean, these are partners, and I see a potential upside that is very important. Thank you, Marinelli. Rosemond, thank you for the question.
Carlos Marinelli: It's been a pleasure. I would like to emphasize that in terms of growing tangible assets, it's just like Marcelo said, we are constantly looking at it.
Cassiano Scarpelli: The next question comes from Eduardo Nishio with Genio.
Carlos Marinelli: We can't hear you. Good morning.
Cassiano Scarpelli: Good morning, everyone. Good morning, and Andre.
Mario Pierre: Congrats on the results and congrats on the operation of Brat Saúde.
Cassiano Scarpelli: That's excellent news. I have two questions. The first is on your evolutionary strategic plan, which has been very relevant in terms of the footprint. The service network was down by 25 percent year on year. However, I would just like to get a better understanding about the trajectory for this year and next year. I know that this is a longer process. I don't know whether you have room for further reductions.
Carlos Marinelli: And the headcount, which is a bit lower – I mean, over 6 percent year on year. So how do you see this line performing?
Cassiano Scarpelli: in the coming quarters and years, and also the impact of efficiency. And the second question is just to get a better understanding about the impact of the deferred tax assets that have to do with the previous question from Rosamund on, you know,
Marcelo Noronha: intangible assets.
Cassiano Scarpelli: Looking at your DTAs this quarter, there was a drop of $1.1 billion, more or less.
Andre Carvalho: And this was the same amount
Cassiano Scarpelli: when you look at the full integration program of 1.8 billion. Was there any other impact that we should monitor here? Did transition or the transaction of Brat Saúde, did it generate any impact this quarter or maybe next? And if it will, whether Don't you think that it would be too conservative on your maintenance of guidance in terms of maintaining this balance? Thank you for your question. It's also a pleasure to talk to you again.
Marcelo Noronha: I would like Cassiano to answer the question, and then if Andrea wants to add.
Cassiano Scarpelli: He would do so. Good morning, Ixiu, and it's nice to see you again. There was no other impact.
Ney Ferraz Dias: What you said in the beginning is not PTI, but in fact is a bilateral negotiation, is a direct negotiation with the IRS. I mean, we improved the quality of the banks. There was a reduction of a lawsuit that was 5.8 billion, and that was down to 1.8 billion, and it was paid within DTAs.
Cassiano Scarpelli: It's important to highlight that so that there is no other effect except for this one.
Ney Ferraz Dias: It's a positive impact, and so we showed things.
Cassiano Scarpelli: I mean, one of the colleagues asked about the 0.80 and the 2.5.
Ney Ferraz Dias: These are the two positive effects coming from Brat Saúde as a whole. Therefore, we do not have any other further impact.
Cassiano Scarpelli: It became effective on April 30th. This is our capital, 12.7, CT1.
Ney Ferraz Dias: And we understand that from now on, it's just a matter of maintaining it or even improving it further. So this is the major goal. And what about footprint? I mean, it's been four years. I think that the initial two years, we kept saying that this is where we would have the bulk of the volume and maybe the bulk of the adjustment would happen in the initial years because we still had to migrate clients to our digital bank.
Cassiano Scarpelli: Marcelo talked about that at the beginning of the presentation. 28 to 29 million clients are already digital.
Ney Ferraz Dias: We expect to reach 50 million clients. already migrating to Bradesco Digital.
Cassiano Scarpelli: And this will give us the opportunity to make other adjustments.
Ney Ferraz Dias: But now these adjustments are of lower amounts and just sporadic. But then, when you look at headcount, you have to remember that we are hiring a lot of people.
Cassiano Scarpelli: Therefore, the impact is not so visible because we are doing reskilling, upskilling, both in the loan side, technology as well, bringing developers to the bank. We are reviewing the architecture of the bank.
Ney Ferraz Dias: We are bringing in people to work in data and pricing. So all in all,
Cassiano Scarpelli: I mean, there was this difference in headcount, but in our case, we are moving in the right direction towards improving our cost-to-income ratio, especially in the future. Great. I think you said it all.
Marcelo Noronha: In terms of hiring, we already said that we increased our team.
Cassiano Scarpelli: Thank you, Nishiu. Next question from Carlos Gomes Lopes with HSBC.
Pedro Leduque: Hello. Well, thank you. I have two questions. My first question is about that extraordinary liability you mentioned you had in the quarter. The original was 5.4.
Cassiano Scarpelli: I just want to confirm, you didn't have any provisions for that now that you made an agreement? So what are you doing?
Pedro Leduque: You have extraordinary cash that you're using DTA. Can you give me a bit more information about your agreement with the IRS and whether you anticipate further cases like that in the future? And about DTAs, I mean, the level up to the end of the year is 119 billion gross and 112 net.
Cassiano Scarpelli: Is this the percentage of capital? Thank you, Gomes, and thank you for joining us.
Marcelo Noronha: It's always a pleasure to talk to you.
Cassiano Scarpelli: Cassiano and Andrea will answer your second question.
Marcelo Noronha: But your first question, in fact, this is a goodwill we had in the past, and since there A debate in the Council that decides that and that they benefited us with the reduction of the fines, the decision, even though it was possible, again, possible, they also suggested that we settle that using DTAs. He was a possible contingency. That's why the provisions were not so high. When you have large cases, the lawyers tend to express their opinion. That's why we had an...
Cassiano Scarpelli: probable expected loss.
Carlos Marinelli: The second question, I mean, that is Law 14-689, specific cases analyzed individually.
Cassiano Scarpelli: So we can't talk about what Melea had because that's the future. I mean, it's possible. When it's possible, so it does not require provisions. when we see a possibility of bilateral agreements, you may reduce that potential from 5.4 hundred using DTAs, and that is quite important to us, in addition to improving our balance sheet.
Marcelo Noronha: We should celebrate that. It was a win-win for both parties.
Cassiano Scarpelli: And the balance sheet's quality is even improved because you remove future risk of contingencies. And about DTAs, at the end of 2026, the inventory nominal amounts to that $116 billion from the end of 2026.
Carlos Marinelli: It will be almost the same in 2026.
Cassiano Scarpelli: Therefore, the inventory of DTAs in nominal figures will be flat. Since the shareholders' equity should increase, that should increase as well.
Marcelo Noronha: Just to add now, Gomes, again, we never lose sight of our DTA inventory. We are constantly looking at the stock of DTA. And now we are – we started paying that amount related to that 1467.
Cassiano Scarpelli: Next question from Renato Meloni with Autonomous. Renato, over to you.
Ney Ferraz Dias: Good morning.
Cassiano Scarpelli: It's always a pleasure to see you. Thank you for taking my question. I just have a follow-up question, Marcelo, on your comment about provisioning and 4966. You have provisioning in your mouth, but how do you combine that with your coverage ratio that it ended at 161% in the quarter? And the second question is related to that. Speaking about ROAE, when we look at the balance sheet of the bank, the improvement of that sequential ROAE came mostly from increasing leverage, whereas provisions consume this improvement in efficiencies. Are you comfortable with this leverage level? And next question is, where do you think the other levers will come to increase ROAE, assuming that provisioning will remain the same, at least in the mid-range? Renato, first of all, thank you for joining us today. It's always a pleasure to talk to you again.
Marcelo Noronha: So, first of all, leverage is part of our business. We remain comfortable with our level of leverage.
Cassiano Scarpelli: We have capital to do it, and it's important to have enough capital to continue on your growth trajectory and stacking up intermediation margin.
Marcelo Noronha: while at the same time we expand distribution from other lines like consortia, as I mentioned. But the growth of the insurance group matters too.
Cassiano Scarpelli: So once we added the auto platform, we also added to the customer experience the possibility of choosing to engage in auto insurance. So we increase penetration of selling auto insurance through our channel.
Marcelo Noronha: We are also growing here in terms of cross-selling when we talk about all of our business in general. So the levers are the ones that you already know.
Cassiano Scarpelli: growing intermediation margin the continuity of our activity level growing different lines of fee income etc growing the insurance group and all of the other subsidiaries we have so we have a business diversification that is unparalleled and this is also what distinguishes us from other players so we will continue to grow in all these lines with
Marcelo Noronha: a portfolio set that is of very good quality.
Cassiano Scarpelli: There is no comparison to what we had in the past, so we are very confident about our portfolio.
Marcelo Noronha: Cost of risk may grow, but we are growing in other credit lines.
Cassiano Scarpelli: It doesn't mean that our provision level is low, and as André was saying, there are some moves in the restructured portfolio that It puts down provisions, so you have ups and downs the entire time, depending on the stages, and particularly for the restructured portfolio. But as I was saying, we dropped that portfolio from December 23 until March of this year by 14 million, and if you look at the restructured portfolio in red, you see that there was a drop
Marcelo Noronha: of 15 million, meaning that the provisioning level was also down.
Cassiano Scarpelli: So this is what I see. I don't know if you want to add anything else. Oh, there are more secured loans. 60%, I think almost 61% of secured loans in individuals, almost 70%. So our portfolio now is much healthier, so much so that we are not posting extraordinary margins. That's why we are growing gradually, but at the same time growing NII and other revenue streams. So thank you again for joining us, and all the best. Thank you, Renato. And to conclude our last question with Tito Labarta with Goldman Sachs.
Tito Labarta: Great. Thank you, Andre. Nice to see you, Marcelo Casiano. Thanks for taking my question as well. Just one follow-up question on capital, and I'll also echo the congratulations on the healthcare spin-off. Definitely good to see that boost in capital there and the banks in a good capital position. But I guess one lingering concern, talking to some investors this morning, you know, when do you think the bank, in and of itself, aside from, you know, you have the healthcare and some of the other subsidiaries, the bank can generate capital organically on its own, right? Because, Andre, you mentioned by year-end, you'll also be around this 12.7 percent. And, you know, I know there will be a function of ROE continuing to improve, which you continue to deliver on. But just when do you think you'll be at that point? Is it 2027 or 2028 or what else needs to happen so that the bank on a standalone basis is organically generating that capital?
Andre Carvalho: Thank you.
Marcelo Noronha: Thank you, Tito. Good to see you again. André, it's up to you first. I can comment something.
Carlos Marinelli: We are already generating capital in American terms. And this is important to say because every quarter we show the contribution of our net income.
Cassiano Scarpelli: And this will continue to occur. And we are gradually increasing and improving net income. And you see a higher contribution coming from organic capital generation. So this is point one.
Andre Carvalho: Point two.
Cassiano Scarpelli: It's important to highlight that here we have some government regulatory measures that were enforced in 2025, but it will last until 2028, and they consume a bit more capital, especially in the beginning of the year, and this will end in 2028. So you will add up a higher organic capacity to grow. And with the end of the regulatory measures, our capital position will be even more robust, with 12.7 percent of CET1. If this level remains the same by the end of the year, we will build a bridge to cross all of the regulatory – to go over all the regulatory changes, and we will be able to grow and also transform the company.
Marcelo Noronha: Yeah, you said it all, André.
Cassiano Scarpelli: You already answered, but there is another point, Tito, here, because in fact it goes beyond that 13 percent if you look at it individually.
Marcelo Noronha: We have a very complex conglomerate.
Cassiano Scarpelli: Here we have a large insurance group and there are other financial institutions that are connected to the conglomerate, and there are different distribution agreements that they are also more efficient to us one way or another.
Marcelo Noronha: So if I put everything together, this ROE would also be higher. But we have to look at the organization as a whole, and then we can guarantee this return of 15.8 percent against a cost of capital that should range close to 18 percent.
Cassiano Scarpelli: So thank you for your question. We are moving on very confident in terms of what we are building, not only in the present but also in the future. Thank you, Tito, and have a good – very good week. Thank you, Tito. And with that, we conclude the Q&A session. Before turning the floor over to Marcelo and Cassiano for their final remarks, I would like to say that all questions that could not be answered today will be answered by our IR team.
Carlos Marinelli: And in our IR website, we have
Cassiano Scarpelli: all the material related to this presentation.
Carlos Marinelli: Everything is there for your analysis.
Cassiano Scarpelli: And we are certainly available to answer any further questions. So thank you, André. Thank you, Cassiano.
Marcelo Noronha: Thank you, Marinelli and Ney, who are also engaged here with us. Thank you, all the teams that made this event possible.
Cassiano Scarpelli: I would like just to emphasize something that André said before.
Marcelo Noronha: Our IR team and our colleagues on the financial area are available to answer all your questions about capital or about any other item of our balance sheet.
Cassiano Scarpelli: So thank you so much for being so patient, for joining us today, and we will see you soon or in our next earnings review presentation. Thank you very much.
