Banco Bradesco Sa American Depositary Shares

Good morning, ladies and gentlemen, and thank you for waiting. We would like to welcome everyone to Bradesco's first quarter 2021 earnings conference call. This call is being broadcasted simultaneously through the Internet and Investor Relations website, bradescori.com.br.em. At that address, you can also find the presentation available for download. Inform that all participants will only be able to listen to the conference call during the company's presentation. After the presentation, there will be a question and answer session when further instructions will be given. Should any participant need assistance during this call, please press star zero to reach the operator. Before proceeding, let me mention that forward-looking statements are based on the beliefs and assumptions of Banco Bradesco's management and on information currently available to the company. It involves risks, uncertainties, and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions, and other operating factors could also affect the future results of Banco Bradesco and could cause results to differ materially from those expressed in such forward-looking statements. Now, I'll turn the conference over to Mr. Carlos Fioretti, Business Controller and Market Relations Director. Mr. Carlos, you may proceed.

Hello, everybody. Welcome to our conference call for the discussion of our first Q2021 results. We have today with us our Chief Executive Officer, Otavio de Lazari, our Executive Vice President, André Rodrigues Cano, our Executive Director and Investor Relations Officer, Leandro Miranda, Osvaldo Tadeu Fernandes, our Executive Director and CFO, and Bradesco Seguros Chief Executive Officer, Ivan Gontijo. For starting the presentation, I turn the floor to Leandro.

Thank you very much, Firet. Good morning, everyone, and welcome to our first Q21 earnings conference call. As we all know, the first quarter was marked by the worsening of the COVID-19 pandemic situation, with the second wave unfortunately leading to a new peak in cases and victims, much as what we have witnessed in 2020. We believe that restrictive measures adopted in March in most states somewhat controlled the spread of the virus and thereby reduced cases and hospitalizations, despite levels remaining high. We believe that we will see an improvement in this statistic over the course of May, the worst case scenario we believe is going to be June, and even greater reduction in restrictions, especially as vaccination progress. We sympathize with all those impacted by the disease and thank our employees for the full efforts during this difficult time. The impact on the economy in 2021 appears to be lower than it was in 2020, probably due to the fact that people in business are better prepared to conduct business in the midst of the restrictions. Our performance was solid in the first quarter, and the second wave of the pandemic had no significant bearing on business dynamics. with the exception of a natural deceleration and origination of some crit lines. We now see signs that appear to indicate an improvement in the scenario of the pandemic. We believe that this improvement should continue throughout May, as some of the restrictions have already been relaxed in a number of states. With vaccination efforts continuing, we expect that risk groups will be vaccinated at the end of the first half of the year which will allow the economy to see a more pronounced recovery, starting mid-May or June. We now move on to slide three. We have revamped our corporate strategy to further reflect our ambition, viewing our clients as our inspiration. A practical example of this is the 100% Client Program, which establishes applied best market practices available to transform our business model and make sure that our clients are always at the center of our attention. Another pillar of our strategy is digital transformation. Improving the way we do things with an active, connected, and innovative mindset. We have a solid foundation in the people pillar, our team. They are top performing professionals who are totally committed to ethics, transparency, and respect. They are really awesome. And of course, we can't leave out sustainability. After all, we are a company built to last and to provide value to all stakeholders. Our purpose is at the center. It's what drives us. It's the impact we strive to create and change. We want to bring about people, companies, and society as a whole. Turning now to slide four, We have our financial highlights for the first Q. We posted a very strong result in the first Q with a profit of 6.5 billion reais, an increase of more than 70% compared to a year ago, and a quarterly ROE of 18.7%. Our operating income was 9.7 billion reais, rising both in a yearly and quarterly comparison. which is the highest in our historical series. The loan portfolio grew 2.6% in the quarter and 7.6% when compared to first Q20. Our Basel Tier 1 ratio remains at a fairly comfortable level of 13.6%, a substantial recovery of 220 bps compared to a year ago. Operating expenses dipped 4.7% in an annual comparison and 2.4% compared to the previous quarter, an extraordinary performance resulting from the optimization we promoted in our structures in 2020. The 12-month efficiency ratio reached 45.3%, down by 3.8 percentage points in the annual comparison. Let's now move to slide five in which we can present our P&L. As we mentioned before, we posted good results in the quarter. Net interest income rose 7.4% annually with growth in the client portion and are still strong performance in the market portion as well. Our expanded ALL expenses dropped once again this quarter. Insurance operations reported a healthy recovery with emphasis on premiums as well as in its financial income. In costs, as I mentioned before, we maintained an excellent performance. The next slide will show details on all of our lines. Turning now to slide six, we can see that funding shows a positive evolution in the annual comparison. Deposits from clients, net of compulsory deposits grew 18.2%, and the total fund, 12.8% in the annual comparison. Our loan funding ratio and the quarter at 87.5%, which shows our high degree of liquidity in relation to loan operations. Turning now to slide seven, As mentioned before, the total portfolio grew by 7.6% in 12 months. The growth for individuals was 13%, with an emphasis on real estate financing, which grew 38.1%, and payroll deductible loans, which grew 11.5%. We have a strong focus on real estate, with a very competitive origination process and channels. Our real estate financing is offered digitally, and even the contract is now signed through digital methods with some notaries. Growth in SMEs was 18.6%, mainly due to the lines of the emergency programs and the consolidation of BAC. Just to let you know, nine represents 5% out of the 18.6%. For large companies, the annual comparison was somewhat hampered by the solid growth of working capital lines at the start of the pandemic and greater access to capital markets. Loan origination remains at a pace that we consider to be very good, and we believe it will intensify as the economy begins to reopen. Turning now to slide eight, our expanded ALL expenses fell to 3.9 billion reais in the quarter. consistent with our expectations for the year. We carried out a one billion reais in supplementary provision over the quarter, reinforcing our stock of provisions, giving the expectation of worsening ratings and the consequent provisions for those clients who extended their debts but did not pay the first instalment. However, the performance in this quarter is fully in line with the center of the guidance for The coverage ratio over 90 days, and including renegotiation, remained at very comfortable levels. We will now take you to take a look at slide nine. We'd like to point out that we provided a chart with an extended historic information back to December 2008. As we had expected, the delinquency ratio over 90 days registered slight increase, shifting from 2.2% in the previous quarter to 2.5% in this quarter. The rise was seen in individuals and SMEs. This increase is in line with expectations and occurs as a consequence of seasonality in the beginning of the year, as well as a consequence of reduction in the pace of renegotiations and the end of grace periods. We provisioned less than the formation as a significant portion of delinquencies came from renegotiated portfolio. Therefore, from operations that already had a high level of provisioning. We believe that delinquencies will continue to rise gradually and reach an even higher level at the end of the year. This level will probably not be much different from pre-pandemic levels. We are comfortable with that. We think that the good quality of credit is due to the quality of origination during the periods prior to the pandemic and to the solid financial health of clients overall, as households have accumulated savings throughout these periods. Slide 10 details the extended portfolio. The balance of extensions continued to shrink. totaling 44.1 billion reais as amortizations continued. As of March 31st, this balance was composed of 37.4 billion reais on time, meaning that they came out of the grace period of payment of at least one instrument, 2.9 billion reais was still within the grace period at the end of March, And I would like to point out that 55% of this amount has already came out of the grace period in April and are up to date. They are on time. And finally, 3.9 billion reais in overdue loans, which are operations that came out of the grace period and are overdue for more than 30 days. This represents only 0.7% of the bank's total loan portfolios. We continue to permit extensions during the first quarter. We believe that we may see a moderate increase in the second quarter, but definitely not the intensity witnessed in 2020. We now proceed to slide 11. Our renegotiated portfolio was stable compared to the previous quarter, which halted the growth cycle. This was due to a gradual return to the renegotiation conditions in place before the pandemic. We witnessed an increase in delinquencies within this portfolio, which reached 14.4%. However, this level is still well below the historical average. We believe that delinquencies in this portfolio continue to add slightly higher, and we can state that the renegotiated portfolio will be one of the drivers for the rise in our delinquencies over the upcoming quarters. which is totally in line with our expectations. On the other hand, we emphasize that this portfolio contains high-level provisions, 64%. As a consequence of this, deriving delinquencies will not lead to significant pressures in terms of new provisions. We are very well covered. Now, let's take a look at slide 12. The total financial margin performed well in the year-on-year comparison, posting a growth of 7.4%. The client portion remained stable over the quarter and grew 2% annually, mainly due to the growth in volume and the mix favored by the solid growth in individuals. These factors more than offset the fall in spreads and the fewer number of days. We expect a recovery in the client portion throughout 2021. in line with our guidance. The market portion performed well in the quarter, despite the decline relative to the fourth quarter, when we posted a rather strong performance. As we indicated before, we expect a drop in the market portion for 2021 in relation to 2020, but in levels around 2019. Turning now to slide 13, We had a drop in fee and commission income in both quarterly and annual comparison. In annual terms, due mainly to the baseline comparison effect, the first quarter of 2020 still did not fully reflect the impact of the pandemic. Despite the drop in the annual comparison, the fee income result was in line with our budget, which forecasts a better performance in the second half, allowing the guidance to be fully achieved. This is due to the days of comparison and the reopening of the economy in the second half. Important lines have been pressured by specific factors. The current line suffers the most in co-branded and private label, as many retailers had restrictions on operation due to the lockdowns. The fund management line, as we had a strong migration of resources to fixed income, and reduced management fees in the first half of 2020. And last but not least, checking account line, due to the lower volume of transactions in the network of bank correspondence, due to the restrictions of the operation of commerce, as I have said before, due to the lockdown. We now turn to slide 14, where we have the operating expenses. Our performance in cost remains a strong point. The fallen expenses reflects our strict discipline in costs, managing the adjustments we made last year when we revised our cost of serving, including the closing of branches and converting branches into sourcing points, taking advantage of the opportunities created by the change in our clients' behavior. We'll continue our cost reduction efforts in 2021 and over the next years. Turning now to slide 15. Our insurance operations posted a solid recovery net income, which grew 40.6% as well as the operating income, which grew 7%, both in the annual comparison. The performance is above guidance and should converge on guidance throughout the year. The highlight of the quarter was the 3% growth in premiums compared to the pre-pandemic first quarter of 2020, driven by auto and insurance, which grew 7.3% and 6.5% respectively. The financial income also registered a positive performance, primarily due to the income on positions in equities, multi-market funds, and IPCA indexed securities. Insurance claims were impacted by the health and life segments which were affected by higher frequency related to the pandemic. We now move on to slide 16. Our Tier 1 capital ended the quarter at 13.6%, an increase of 2.2 percentage points compared to the start of the pandemic in March of last year. The fall of 20 basis points over the previous quarter was due to mainly market-to-market of securities available for sale, and the growth in loan operations. Our capital positions have settled to rather comfortable levels, with the common equity at 12.6%. We recently announced a share-by-back program that complements our practice of distributing capital through dividends and interest on shareholders' equities. Turning now to slide 17, where we can see that we continue to make advances in digital with an ongoing focus on clients' needs. In this quarter, BIA had 130 million client interactions, almost five times more than in first quarter 2019. In the month of March alone, there were 5.16 million client interactions. and it was not just data, since B is a transaction. As we have already mentioned, in the earnings reports, for example, you deliver 2.5 million reports to clients in March. The CRM 2.0 that we provided you in 2019 already results in five times more active contacts with clients and with a high degree of personalization. Now we turn to slide 18. Digital continues to widen its share of total transactions, as traditional and hybrid clients are increasingly adapting online methods to conduct transactions and business. Around 98% of our total transactions are now done digitally. Annually, we saw a 21% growth in our mobile clients and 16% in digital clients. which also accounts for internet banking. The volume of cash transactions is 83% lower than it was in the first quarter of 2020, and the volume in mobile financial transactions increased by 75% over these periods. We now go to slide 19 to discuss our three digital businesses. Agoda reached 632,000 clients. a growth of 52% in one year, while AUC grew 55%. Agora has one of the most comprehensive offers on the market and will continue to grow. NEXT has further accelerated its growth curve and is now at 4.4 million clients, almost double its base a year ago. The goal for this year is to reach 7 million clients. BIT, our digital wallet, was introduced in September 2020 and has already exceeded half a million accounts. It's expected to grow significantly throughout the year. And we would like to remind you that Beats offers clients a complementary product to Next and Bradesco. The marketplace and cashback features offered at Next are now becoming available to Bradesco's clients. We introduced a pilot for Prime segment this quarter with a marketplace that includes 70 partners. We will soon expand this pilot with more partners, and we are working on combining the vision of Viva Prime, Cashback, and Livelo Points into one place within the Prime app. Ultimately, we want to offer clients a clear overview of the benefits they can take advantage of. We plan to expand these clients in other segments in the near future. Turning now to slide 20, regarding to our ESG agenda. We are very, very proud to announce that for the third consecutive year, we have won the silver category in the S&P Global Sustainability Year. We are among the top five banks in the whole world and the only Brazilian bank there. These are results of our commitment and continued progress in implementing the best ESG practice at Bradesco. Speaking of commitment, we are taking a new step today in Bradesco's mission to promote social economic development and encourage the initiatives needed to transition to an increasingly sustainable economy. We would like to announce our goal of allocating 250 billion reais in corporate credit lines, providing advice on capital market operations, and financial solutions with a focus on promoting a positive social environment impact by 2025. By doing this, we expand our business scope to support the target sectors while helping clients transition to best practice from any sector. We now move on to slide 21, our last slide today. Despite the intensification of the pandemic in Brazil during the first quarter, we were able to post a solid performance in line with, in some case, above our budget for the quarter. We are performing at the top or even better than the guidance when it comes to expenses and insurance. In annualized terms, we have performed at the center of our guidance for ALL, at the bottom of our client for NII, and below of our guidance in the loan portfolio and fee and commission income. In terms of these two weaker performing lines, we can see an accelerated growth in client NII primarily in the second half due to the reopening of the company, the economy, and a growth in lines with higher spreads. The annual growth in the loan portfolio has been hindered momentarily by a baseline comparison effect in large companies. which will lead to a natural acceleration of the second half of the year with a more beneficial base and a pickup in business, gradually increasing towards the center of the guidance. We also see a potential acceleration in growth in individuals and medium-sized enterprises. Finally, we believe that there will be a natural increase in fee and commission income as the economy begins to reopen with an impact on Card's income, collections and payments with increased volumes. Investment funds through a shift in the mix and potential growth end. DI funds with an increase in the Selic rates, as well as a more favorable baseline comparison. As we previously mentioned, this line went through some adjustments in the first half of 2020. In summary, we expect our performance to improve over the upcoming quarters. As such, We believe that our guidance remains consistent, and there is no reason for any changes at all. I would like to thank everyone for your time and attention so far. We will now move on to the question session.

We will now initiate the question and answer session. If you would like to ask a question, please dial star 1. At any point your question has been answered, you may remove your question from the queue by pressing the star 2 key. Our first question comes from George Curry of Morgan Stanley. George, your line is open. You may proceed. Hi. Good afternoon, everyone, and congrats on the numbers. Corey, I'm not sure you mentioned this a bit, talking about the guidance in that last line. Maybe you did, but it was a bit difficult to hear. But I wanted to ask you about the – Guidance range for expenses, you're evidently in the area, of course, but you're at minus 4.7% for the first quarter. If I look at your last 12-month performance, you're minus 6%. Do you think it's possible that you'll end up at the better part of your guidance for expenses, which is minus 5%? And same question for provisions. You did $4 billion, $3.9 billion, but I'm assuming that includes the $1 billion in original provisions. So is it possible that you end up excluding that $1 billion in provisions at the low end of the guidance of $14 billion? Thank you.

Jorge, thank you very much for your questions. I'm going to go straightforward here to the points. Operating expenses, we expect them to go, in the worst-case scenario, in the middle of the guidance. So we shall continue to perform very, very well in operating expenses. Of course, we shall see some adjustments regarding to the compensation of the employees, but we shall never exceed the center of the guidance there. Regarding to expanded ALL, we shall see the provisions going to the mid of the guidance. It shall be in a range, I would say, between 15 billion reais or 16 billion reais. This is our base case. But if the economy really recovers as we believe, we shall even be lower than that.

All right. Thank you very much.

Thank you.

Our next question is coming from Mario Pierre of Bank of America. Mario, your line is open. You may proceed. Hi, everybody. Congratulations on your results. Let me ask you two questions, and also related to your guidance. When you talked about the outlook for NII clients, and how the growth rate should accelerate the second half of the year. You talked about better NICs, income in the opening. But can you talk about the impact of a higher rate environment in Brazil and how that could have a negative impact on your funding costs in the short term? So if you could give us a little bit more detail of your expectations of rates and the impact that it could have on NII growth this year. And second question also related to fees. As you mentioned, might you be expecting better volumes in cards? Are you expecting a better mix in the asset management to support your fees? What concerns me on your fees is that when we look at your checking account fees, they're down 2% year-on-year, while your client base grew 8%. So we seem to need some pressure on current accounts. Can you be a little bit more specific about your views on the outlook for current account fees? Thank you.

Thank you, Mario. Basically, in the very beginning of the year, when we released this guidance, we were very conservative and we are keeping this sense. The client portion shall go to the center of the guidance naturally, pretty much because as we are reopening the economy, you shall have more transactions, and you shall be able to change the mix of products as well as the mix of clients into a riskier standard. Just to give you a flavor, when you have the retail closets, you are not able to work so much in SMEs. And the individuals portion, as we were conservative, we decreased the amount of credit cards, personal loans, and we increased the focus on mortgage financing and compulsory loans, which are less risky. lines of products. Besides that, it's important to mention that when you compare to the first quarter of 2020, during two months, pretty much, you have the large companies raising a lot of liquidity here, and they have lower margins than SMEs and individuals. Therefore, from now on, we do not expect to have such a base of comparison. There's a third one, And so we shall see an increase in this client portion. So better mix and better of products and clients shall be the answer together with the reopening of the economy. And of course, as Otavio has pointed out earlier, it pretty much depends on the vaccination process. So we are confident that by May or June, we shall see this improvement in the economy. Regarding to fees and commissions here into services, well, we have here, again, a very conservative guidance from 1% to 5%. We believe that we shall go to the lower portion of the guidance to the center. So we shall be in the first half here of our guidance. And we can give you some overviews regarding to our lines. And, of course, my colleagues here will be more than happy to help me out to complement anything. First of all, credit cards. With the reopening of the economy, suspension of the restrictions due to the lockdown, you shall see the retail and, of course, our base of private labels and white-branded credit cards shall have a much better performance than the previous year. Retail through Bradesco Expresso also is important for our tariffs. Regarding to asset management, we made significant adjustments in management fees. And now we see a growth of migration to better paid management fees and performance fees into our funds. Besides that, there was a lot of withdraw from fixed income funds to buy CDs from the banks, and we benefit from that in our liquidity. Capital markets, investment banking has performed extremely well. We are positive for the year, but it pretty much depends on the opportunities, the windows that we see, and the macro has a significant impact on that. And on insurance, the premiums were very good, and we intend to keep on doing that. If my colleagues want to complement anything more than that.

Just one point on the funding side you asked. The higher rates actually have a positive impact in the funding results that go in the client margin. So this should be positive. When you look to the client NII, we have there, apart from these funding results, mostly spreads. So basically, the increasing rates don't impact that. Any rate variation actually is managed by our treasury, and this is in the market NII app.

Thank you.

Thank you, Mario.

Our next question is coming from Jason Mullen of Scotch Bank. Jason, your line's open. You may proceed. Thank you very much. My first question is a follow-up on the sensitivity of the client portion and the treasury portion to rates. Maybe if you can just give us an idea, all else equal, and obviously that's not the way you manage the balance sheet, but if all else equal at the end of the first quarter, let's say 100 basis point increase in the SELIC, what does that do for your client portion and your treasury portion? I just want to try and clarify that. And then secondly, on the fees line, It sounds like, apart from what you said about adjusting management fees and asset management, that it was – the reduction in the fees from cards and current accounts was related to activity. But can you give us some sense of what's going on on the pricing there, competition? Are you seeing a free checking account? You know, everyone has their version of a free checking and other fees. What's going on with the pricing side, not just the activity? Thanks.

Okay, Jason, let's start from the beginning here. You're pretty much asking for sensitivity in 1% SELIC rate, right? We believe that there is no negative impact on the client's portion. It's pretty much dependable on economic conditions and competition. So we do not believe it shall create us any problem. We have a benefit. in our deposits, since because of the floating, we can invest more. So it's 1% of our deposits. And besides that, assuming that we wouldn't hedge, we wouldn't come along with any market strategy, what is totally unusual with a bank, if we are just stopping and we fire everyone there in the Treasury Department, for a 1% SELIC change, we shall have a 900 million reais impact.

Yeah, just complementing that this exercise is based on 2020 figures, and also things keep changing, as Leon said.

Yeah, but we are active, we are dynamic, and so it should never happen. It's just a theoretical to stress your model.

On fees?

Yeah, on fees, basically, as I have just... answered Mario, it pretty much depends on scale and the recovery of the economy. Because basically we see competition there. But credit cards, you have seasonality in the first quarter, and you have the retail pretty much shut down. So as the economy reopens, the barriers end for lockdowns. we shall see it coming strong, especially because we have a significant part in white label and private label ones.

Yeah, I think it's important to emphasize the base of comparison effect. We are comparing an almost normal quarter last year with a quarter that actually is impacted by the pandemic. It's impacted in the credit cards. There was also, in the beginning of last year, a very important change in terms of volumes of fixed income mutual funds that went to deposits, also a revision of management fees in asset management. And we believe as we go through the year, as Leandro said, we go to a different base of comparisons and our performance in fees will naturally improve.

But we are confident that we shall reach the center of the guidance. We shall have two years. Great. Thank you very much. The first half and the second half. Two different years.

Thank you, and congrats on the strong first quarter.

Yes.

Our next question is coming from Tito Labata of Goldman Sachs. Tito, your line is open, and you may proceed. Hi, good afternoon. Thanks for the call. I'm taking a question also. My question is looking at the digital initiative that you're doing and taking the data around from the quantum and the reactions of the digital between the next.

Sorry. We can't hear you. I can't hear you. Can you maybe... Pick up the phone or talk slower.

Sorry. Yeah, I'm picking up the phone. I'll try to speak louder. I don't know if that helps. Can you hear me there?

Hello? Not really.

I can hear you.

Yeah, try to speak slower.

I'll try to speak even louder. Is that better? Yeah, I know it's better. Okay. Can you hear me there?

Yeah.

Yeah. All right. Yeah. My question is just on the digital initiatives. You've got some good data there. How do we think about the impact on this? If you look at some of the syntax, the gaming clients don't necessarily have revenues at your level. And given some of the revenue pressures that we're seeing, I understand that should improve as the economy recovers. But as you become more and more digital, do you think that should not necessarily boost your revenues? And do you continue to see pressure there between clients? Conversely, perhaps offset by continued cost control. Just to kind of think about how that competitive environment and digital initiatives should impact the revenue growth and expense growth and where you see the benefits from that.

Thank you. No, I got it, Tito. Thanks. Let's start from the end this time regarding to costs. You're totally right. As the clients get into more and more in digital channels, we are able, as Otavio has emphasized earlier, we are able to either close or transform our branches into point of services, increasing the level of business. We can also reduce the space in the branch and give it back to the lessors. So therefore, there is a significant reduction in costs for us as the clients got more digital, as we have seen in 2020. So it pretty much shall see the continuation of this trend. Regarding to pressures on fees, we have to take a look into scale. and we have to consider the costs associated with that. But as the economy grows, you have all kinds of clients, and they also need important products such as credits, and they also need to have the whole combo of banking services and products. Therefore, we believe we have an agenda there. We have a very strengthened that shall be seized. Of course, the open banking, it reduces our market share initially. If you just consider that we are stopped, but we are not. We are active. We are being proactively discussing end-of-growth projects. with this enhanced competition as you can get market share from the other banks. So if the newcomers shall get market share from the incumbents, we are in a position, as we are the most advanced digital bank in Brazil, to get market share from the other competitors as well.

If I can add, this is Renato Enisman from Max, you know, on the... Big data and analytics fronts, I mean, I can tell you a little bit about our experience in Max and the same I know is happening at other areas, including Bratisco itself. But the use of big data, I mean, it helps on the two fronts that you mentioned. On the expense front, We have models to calculate and try to quantify the propensity to churn. We also have models to calculate the propensity to default. Obviously, you know, these are algorithms that we are developing and hopefully soon introducing machine learning aspects so that it improves over time by itself. without a further manual or for the human input. So that's something that significantly reduces expenses. And on the revenue side, we also have models to see what is the capacity to consume some products at the same rate that I mentioned. I mean, the next step will be to introduce machine learning aspect so that, you know, over time you don't have to have any human input and they just, you know, get more and more efficient over time.

Okay, thank you. Our next question is coming from Thiago Batista of UBS. Thiago, your line is open. You may proceed. Hi, guys. Thanks for the call, for the opportunity. I have one question about the insurance business. We saw this quarter a good improvement in the profitability of the insurance business. It achieved about 20% this year versus mid-teens in the previous quarters. This level of possibility or results of insurance business, if it is recurring, we can see this level or even some additional improvement going forward. So how do you guys see the results of insurance business?

Tiago, basically we – performed this quarter a little bit above our guidance. Our guidance has a growth, considers a growth of 4% for the insurance line. I think there was some good news this quarter related to premiums. I think we performed better. I think it's a good sign and it's the base for actually keeping constant in the evolution of this this results we should see uh going forward uh a continued pressure in some claims due to kovid on life insurance health insurance but as you guys know we have constituted uh provisions i think uh we are uh well prepared to face this this uh environmental higher uh higher claims. On the financial results, an environment of higher interest rates actually somehow helps. So I would say I think we are very comfortable with our guidance of 4% growth for the line. Maybe we could do better. That, I think, at this point is the best I can tell.

And just to confirm one point, there is no reversion of the provisions that the bank or the insurance has booked in the previous quarter. So there's no reversion, correct?

No, we didn't revert anything this quarter.

Perfect. Thanks so much. Our next question is coming from Carlos Gomez of AJFBC. Carlos, your line is open. You may proceed. Good morning. Congratulations on the show. Do you have any questions? First, can you comment on the bank in Florida that you have recently acquired? What are your plans there? Is this the first step? Do you want to take it to Florida in the expansion approach? Second, the central bank has recently published a report relating the influence of the positive credit bill and explaining how it reduces the cost of credit for all the accounts. Is that starting to be the based on the margins of the products that you offer and how you respect the content that you reach.

Thank you. Carlos, we had some difficulties to understand you, especially on the second question. We understood that the first one is about backfloating, but if you could repeat maybe the second one. The second question, please.

Yes, my apologies. The second question is about the influence of the positive credit growth in Brazil in terms of pricing the products. Is that making the market more competitive for you? And is that reducing the margin that you can charge on consumer credit?

Carlos Leonard speaking. I'm going to address Baki and then your Carlos Figueiredo will address the second one regarding the credit bureau. Pretty much at Bach, we have a wealth management strategy. It's key for our clients to have the ability to have a checking account, credit cards, mortgage financing at a bank in the U.S. It has been a long-term demand from them. and the appetite and the willingness of clients to participate has been outstanding. Besides of that, PACI also have a brokerage house in which we can help clients to invest their money throughout investment funds and securities, either that or equity there. So the point is we shall be able from now on to provide a full array of alternatives regarding to banking and investment products there in Florida. Regarding to expansion, we want to feel the American market, we want to feel how clients feel this experience, but initially our focus is to stay in Florida. We do not want to expand throughout other states. It's important to mention that Bach has eBank, that is an app in which Bach is pretty much able to raise funding in almost all over U.S. states. They have local licenses in almost all U.S. states, and therefore, BAC's ability to raise funding on a very cost-effective way is outstanding. And BAC, of course, will keep on its original strategy of financing banks throughout Latin America and Brazil and support any Brazilian company that is a multinational and its services there. Fantastic.

Carlos, regarding the credit bureau, I think this is a very important development for Brazil, for the Brazilian market as a whole. In our case, as you know, we have a lot of information and we have experience. We have been investing a lot, and especially over the last few years, in credit models, in data. So we believe our models and the information we have, it has allowed us to originate more and more loans and very good credit quality. The credit bureau, in our case, allow us to bring new information that eventually complement the data we have and allow us to to actually eventually approve loans for clients that with our own models eventually we wouldn't concede credit given this complement of information. As you know, we are shareholders of Quad, a credit bureau on which we have as partners the other banks. It's another credit bureau that provides also information and for which we consume data. I think for the market as a whole, it really helps other banks other players that don't have as much information as us to have access to client information. But we believe that considering our experience, our models and everything we have invested in these models, we continue with an advantage and we also have a very good access for originating OMS. That also is something very important in this process.

Thank you very much for your answer. Excuse me, ladies and gentlemen. If there are no further questions, I would like to invite the speakers for the closing remarks.

Well, first of all, once more, thank you very much for making the time to be with us. We are very proud of the results we are presenting, and we are even more confident in our performance from now on as we see advancements in logistics of the health situation, and we are confident on the recovery of the economy. Thank you once more. Have a great day.

That does conclude the disc. Thank you very much for your participation. Have a good day.