Banco Bradesco Sa American Depositary Shares

Hello, good morning everyone. Welcome to our first quarter of 2023 results videoconference. Thank you very much for your interest and participation. In the initial part of the event, our president Otávio will present the results of the bank. Next, we will have the question and answer session. If you want to ask a question, you can send it through the chat available on the platform.

The presentation and other materials are available to download on our website.

Our presentation will be made in Portuguese and simultaneous translation into English. The audio language can be selected directly in the window in which you are watching. We'll meet again. Thank you very much.

Have a good night. Thank you very much. Good morning, everyone. Thank you for joining our video conference.

Today goes our earnings of the first quarter of the year.

In this first slide, we present some highlights. We posted a net profit of $4.3 billion in the first quarter. A 10.6% on the week of March, in line with the expectations. The first quarter was marked by volatility in the markets, including discussions on interest However, the quarter ended better with a positive expectation brought on by the new tax and fiscal framework. As mentioned previously, we see our second quarter performance still under pressure, mainly due to credit provisions.

We reinforce the message, though, that we see our earnings tripling over 2023, with strategic performance in the second half.

We believe that our structural return has not changed significantly.

Producer's management is focused on delivering returns compatible with working activities provided, but we do acknowledge that this is a recovery that will be gradual. Before we talk about paying numbers, let's talk about strategy. There are a number of initiatives taking place simultaneously, such as in retail banks, high-income digital assets, IT and others.

We've spoken at length about the planning, our operations in high income, the purchase of the digital bank, the investment of the U.S., which is a partnership with BlackRock for the management of investment funds abroad, the official opening of the new headquarters in Coral Gables that took place last week, the capital increase of the digital bank now exceeding $2 billion, because we understand

and that this is fundamental, and we are alerted about our efforts in this endeavor with a dedicated team. And we also want to make clear that this does not mean at all that we are reducing our activities in retail, because retail is a stronghold of the press. It is embedded in our DNA. Honestly, at times like this, individuals and small, medium-sized enterprises of the more.

But this part of the economic cycle, the opportunities and potential of the retail operation are huge and enormous.

It is clearly protectively judged our structure to a cost that is more and more profitable. We'll talk a bit about this A little later, Cognosco spotted a position in the Brazilian banking market with outstanding performance in all segments. In individuals, there are over 1.5 million high-income clients, 35 million retail clients, and more than 50 million non-stockholder clients who consume some type of product. 1,500 corporate clients in 1.7 million small and medium-sized entities.

With a presence in all regions, those who are economic classes in generation, the deal is a solid reflection of what Brazil is. The whole is in position to currently look at the end of the economic development of France. As I said, our positioning in the market is certainly a winner. and we are testing it to be more efficient and to invest in areas we are going to. In the high-income segment, we seek to increase our participation in the relationship with the 1.5 million clients we have. This year, we are growing our investment specialist team by 40%, that is more than 2,000 advisors, specialists, spread all over Brazil. This is a developed and continuous project that extends to our customers' experience also in the United States. The focus of our team on customer service clients 16 to 17 points. In investment, we were training our clients.

In private, we reached a local market share of 22% based on BIMA data, a bump of 4% points. Our bank in the United States, the Bank, already permits clients to open accounts in dollars. We integrated with our staff in Brazil, and the transfer of funds is completely digital, done online in real time. Furthermore, we have also created an investment solution that makes BlackRock funds available.

On a series of training, we currently have a chief strategic

future.

The review of the cost to serve in its broadest sense, technology and digital transformation and customer centricity.

We will highlight the themes of NPR and principality. We will go over the details on the upcoming slides.

Optimization and cost to serve.

We continue to make adjustments, holding mindful that the need for a physical brain to structure was greater in the past.

It's just been a migration of transactions to South Jersey Channel, just to give you an idea of the change in people's performance.

Before the pandemic, we had almost 1 million power transactions per day, every day. Today, this number has reduced to less than 10% of our volume. So, because of this change in behavior, our focus is on reducing the cost of service.

while promoting enhanced customer experience with a much more good management approach. In other words, with less paperwork, we have more time for the commercial team. And thus, we achieved an increase of 11 percentage points in the share of business teams. We are transforming our presence, and not simply closing them down. Obviously, when we have the light at the overlap, we need to adjust. But the truth is that we are expanding the number of different units of our image that makes more sense in each situation. a number of situations. This is me. Like strangers, their points of sale are much lower than the cost and no talent.

And therefore, they are focused on providing advice to Moreover, we are also extending our network of banking correspondents called Produsco Express, which will reach 46,000 locations and points of service by the end of the year. This is an important channel for originating business and services in various regions because this network is totally based on variable costs, allowing us to serve clients. at inadequate cost. Talking about digital transformation, our teams are working in a structured way. This is the problem. and positive evolution year after year with the technological transformations that take place, the change in behavior of our clients, regulatory changes and the natural evolution of our business. As a result, 80% of the developments we make today adhere to the agile methodology with a 40% reduction in the delivery time of the mission. Apparently, 35% of business transactions already run in the cloud and our goal is to reach 75% by 2025. in technology and innovation, modernizing the bank with a continuous focus on customer centricity. In our digital native solutions, it is worth noting the simplification we made this quarter. It is a digital bank in Athens with a sound credit card business. It was chosen as a strategic partner by Uber in Brazil, and it has seen positive results, an interesting opportunity which is worth deepening. On slide 9, talking about NPR, all these initiatives listed so far have a firm purpose. We've been talking for a while about our performance focused on a couple to show you some numbers that illustrate the relevance of this theme. We saw boost in NPS in all segments. 20 points in retail and digital, 12 points in retail companies, 18 points in crime, and 28 points in crime. Clearly, the improvement of NPS is not only important for the number itself, but also for the reflection it brings to the business. Our promoter clients have significantly better stability, 17% more funding invested, and 57% less friction or inequitation of accounts. And this is one of the main goals of our team, which are reflected in their goals program, and that has led to significant improvement in the quality of our services.

Now talking about operational performance.

Thank you very much. Plus, in the case of insurance, the effect is absolutely seasonal. And we have to bear in mind that in the quarterly variation, we also saw a negative impact from the lower number of calendar days and the higher number of working days. and annual growth of 5.4%, down 1.4% in the quarter. Contraction in corporate segment originations in Q1 was an impression, and is due in part to the high interest rates that reduce appetite to demand by medium and large companies for new operations, in addition, of course, to premiums. in credit policies in the portfolios of small micro-companies and individuals. For individuals, we saw an evolution of 1.2% in the quarter and 10.2% in 12 months. High income cards in real estate financing stand out. As for our guidance, we remain below the floor. Throughout the year, though, we believe that we can return to the indicated range of our guidance. Let's speak a little about credit policy. as we talked about in the previous slide, what we have reassessed our risk appetite to making material changes throughout 2022 and therefore slowing the approval rate. This significantly decreased production in the high-risk portfolios, and this was a necessary measure. But we continue to experience extinction in lower-risk lines. With this effect, it is natural that credit will grow less, but the moment is a caution. We believe that we are on the right track because 95% of loans initiated over the last 12 months are in the better rating ranges. and we already see improvements in newer vintages and PLs. Accesses with extended ALL. We had indicated that credit provisions would remain high in the first as well as in the second quarter due to the effect of the change in the ratings of stressed credit. However, the cost of credit was 4.3%, with credit provision expenses of $9.5 billion, barrels in line with guidance in annualized terms. The credit provision bonus reached $68 billion, representing 93% of the loan portfolio. Note that our provisions in B.O.I. Gap have historically remained in line with the expected laws under IFRS 9. which is the metric adopted by the bank regardless of whether it is mandatory only in January 2025. Over the quarter, we have seen a lower level of credit provision expenses for IFRS as a result of new loans with a better risk profile and an improved risk landscape.

In coverage here in this graph, we show the consistency of our provisioning, which maintains a strong and suitable level of provisioning for riskier credits in ratings D through 8. And therefore, I point out that the reduction in credit provisions occur in lower-risk credits, which are performing well. Additionally, with the changes we have made to credit policies, we are bringing clients with a better risk profile into the portfolio, which naturally allows us to have a lower level of provisioning. The MPL creation increased in the quarter, still driven by the default of older vintages and as explained by the three rating ratings. And also part of the growth in the quarter can be attributed to the non-realization of sales of active loan portfolios. Adjusting for this factor, the new MPL still grows but to a lesser extent. for 90-day NPL coverage, we consider its reduction to be natural given the delinquency cycle. We are approaching the peak when the positions predicted by the expected loss model are being consumed. On slide 17, looking at the NPL graph, the NPL over 90 days rose in the quarter, mainly in the mass market both for individuals and small and medium-sized companies, and also due to the denominator effects due to lower credit growth, as I said. If we considered a constant phase of credit growth, this percentage would be 0.5% points lower. The legacy should still grow in the next quarter, but we believe that we're approaching the end of the cycle. We did not have relevant sales of active credit portfolios over the quarter, as we said, and the indicator from 15 to 90 days had a 50 BPPs increase, prompted by the seasonality at the start of the year and by fully provisioned cases of corporate clients. And the renegotiated portfolio reached 36 billion BRLs. However, 55% of the renegotiations are less than 90 days past due. which are operations with a higher probability of recovery because they are newer delays. Even so, our provisions for these credits represent 63% of the total volume, while the delinquency of this portfolio is 23%, meaning one-third of the total provision. Now on net interest income, as I said, it's good news, as we said last quarter. Market NII continued trending towards a recovery despite a still negative result at the beginning of this year. This line will continue to gradually improve over the upcoming quarters through the repricing of our ALM positions and may become positive in the second half of 2023. Client NII fell 2.9% in the quarter, affected by seasonal effects, but year on year it increased 7.3%. Total net interest income compared on an annual basis fell by 2.4%. Despite being off guidance, this has been anticipated due to the market NII comparison with a much stronger number at the beginning of last year. Over the coming quarters, we will see a recovery rate with better market NII in the second half of 2023. Total NIM posted quarterly growth of 20 BPS. And lastly, we're going to move on to the interest rate sensitivity. For a 100 BPS reduction in the yield curve, we expect a positive impact of 1.4 billion BRLs on the total NII over 12 months. and fees and commissions income some challenges for this year as stated in the guidance. We've closed the quarter with an annual growth of 1.6%, just below the floor of the guidance, but we expect to move into the range along the year. Card income remains the main positive driver due to the health growth on high income. Check-in account line is affected by structural issues and regulatory issues that have impacted the entire market as well as us. and we will recover this in the medium term. Hence, the need for scale gains, improvements in NPS, and client perception. In asset management, the signs of improvement are clear with the adjustments we've made in our structure, so our funds are already showing significant improvement in returns, appearing in the best quartiles of profitability. We reinforce the focus on high-income segment growth, both onshore and offshore. Now on operating expenses, within costs, we've seen a solid performance despite the collective agreement that occurred in September 2022 and the adjustment of various contracts due to accumulated inflation. Overall, growth is 9.3% at the bottom of our guidance. Personnel expenses for the quarter grew 9.6% over 12 months and 6.6% for administrative expenses. As we had outlined earlier, When the 2023 guidance was released, the most significant pressure on expenses come from the other expenses and revenues line, which posted a lower basis of comparison in 2022. As we said in previous slides, we're making further adjustments in our cost-to-serve and service structures without reducing our ability to provide services to clients, and we expect to deliver better results than the guidance. Moreover, through the strategic review of digital initiatives, we'll adjust even further the cost of serving in 2023. Now on our insurance company, the annual growth in net income was 10.6%. Income from operations expanded 11.7% compared to the same period in 2022, a growth that's above guidance. despite, of course, the high increase in care costs, especially in health insurance. The quarter posted a good growth in premiums of around 13%, reaching 25 billion DRLs. Financial income also had a good evolution in the annual comparison, resulting in an ROE of 18.2%. Basel earned IOC. There was an increase of 20 BPS in Tier 1 capital even with the full IOC provisioning. We remain in a very comfortable liquidity position with the LCR reaching 166% despite the seasonal effects of the first quarter. Now talking about our people, 86,000 employees. So far we've talked about our numbers, but now it's time to talk about our people who are always encouraged to seek development and training. Our purpose is that inclusion is genuine and permanent. It's rewarding to work with such a diverse staff. To believe and invest in diversity and inclusion in addition to being an ethical imperative, is also a business strategy that produces values and results. The outcome of our practices can be seen in our significant acknowledgement and employee satisfaction. When we talk of sustainability, for the fifth consecutive year, we've been recognized in the S&P yearbook among the top 5% evaluated in the group containing the most sustainable companies in the global banking sector. In the Sustainable Business Agenda, we remain committed to generating operations with a positive social environmental impact. We have allocated 100% of the funds from our first sustainable bond earlier than expected. And we should also point out the financing for the purchase of solar panels, which has now topped 1.2 billion BRLs, an initiative with huge social and environmental benefits. As for the climate agenda, we announced earlier this year, intermediate sectoral targets in line with the net zero compromise. In financial citizenship, we remain at the forefront of these actions and are pioneers in taking the commitment to health and financial inclusion of the principles for responsible banking. Finally, before we move on to the questions in this session, we are going to highlight some acknowledgments on this slide. that we received over the period. Two of these acknowledgements stand out. Our private segment was honored by the international magazine Global Finance, reflecting the advancements we've made in this area. In addition, we were also recognized by our employees through the Great Place to Work 2022. I'm going to wrap up this first part of the meeting, and I'll join Firetti now at the other studio to proceed to the questions and answers session. See you in a bit.

Hello. We are back now with our CEO, Otadjo. We also have the CEO of our insurance group at Uncle Teach. So we'll start now with the Q&A session for analysts. Should we begin, Otadjo? Yes. Let's put the show on the road. Our first question comes from Eduardo Rosman with BTG. Rosman, go ahead. Hello. Good morning, everyone. Otadjo, Freddie. My question is about the recovery of profitability. I think we can say that the worst part is behind us. I think that the bank has taken measures to improve profitability, but what's the actual measurement that this recovery should be gradual? So I'd like to know, maybe you could give us more color on this gradual recovery. The bank is taking little risk, focusing on perhaps higher income coins. Maybe that can explain why this recovery will be gradual. I want to understand whether the bank is being positioned for a more difficult economic scenario ahead. Well, there are a lot of nuances there, but I'd like, I'll tell you to explain how he sees his recovery, how long it will take. Could you quantify things a little bit? Hello, Rosamond. Thank you very much for your question. Yes, indeed, of course, we are somewhat cautious because of NPL. They need to be totally under control, and we already see positive signs, as you observed. But we have been reaffirming since the last quarter that But we have to worry and we have to be careful about delinquency. It should be present also in Q2, perhaps still in Q3. But all signs point to a very good recovery. The new vintages, the new cohorts have come with a better NPR level. And, of course, we were more selective in credit activities. In loan granting, of course, those with risk profile loans need more attention. But the good operations, the good clients with good credit ratings, well, we are giving them loans in an accelerated fashion. The highlighting to one is that there was a contraction. Legal entities did not ask for loans. And also because the interest rates are somewhat higher. So people tend to be waiting to see what's going to happen in fiscal terms, the tax reform, the fiscal framework. So mid to large corporation loan portfolio did not grow a lot in Q1. Coupled with that, the capital market in Q1 had very, Few deals happening. A lot of things did not end up happening. So I think that all economic agents are in the wait-and-see approach. And that's why we're talking about a gradual recovery. We built a first quarter within our expectations. And we mentioned that to you in Q2. We'll try to do, and we're already doing it because we're in May, so we want to have a better Q2, build a better Q2 in recovering the earnings of the organization month after month to be able to deliver 2023 overall that is better than our initial expectations. I think that these are some of the challenges regarding gradual recovery. Now, we have seen signs of a better GDP growth outlook for 2023, Eduardo. So even if this does not happen, even if the GDP does not grow as much as we would like, I believe that the bank is prepared. We have prepared for all the scenarios and all of our lines are prepared. If the GDP grows more than expected or less than expected, the bank is well positioned to enjoy the good friends that we have. We did all the work in high income, as I mentioned. We did some work in retail banking, in investment, and otherwise in all lines that make up the bank, and also the insurance group that has posted an important result in Q1. Thank you, Otavio. Thank you, Rosamund. Second question from Tiago Batista with UBS. Tiago? Hello? Can you hear me? Yes, Tiago, we can hear you well. Go ahead. Well, I have a follow-up question to Rosamund's question. We talked about ROE. With a focus on the insurance company, the ROE is 18%, if I'm not mistaken. How do you imagine the dynamic in terms of asset quality provisions and looking at the short term, the dynamic of Q1 was slightly different. I had the impression that Q1 would be a lot heavier in provisions than the second one. When we look at Q1 numbers, they are very much in the middle of the range of a guidance in its low capital formations. I'd like to understand the cost of risk of the bank for 2023. And also, I'd like to know about the profitability of the insurance group. Tiago, okay. Ivan Gontiju, who's our CEO of the insurance group, will answer your question about the insurance company, and then I will address your question regarding provisions. Ivan Gontiju, hi. Good morning, Otavio. Thank you, Tiago, for the question. We see an insurance company in Q1 boasting a 1.8 billion of BRL net income, 25 billion BRLs in sales, up 13%, as highlighted by Otagio. And we're very comfortable with the result of our operations. Insurance, operations, pension plans, and savings funds, they're all growing. Of both, the guidance that we communicated of 12% and predictability for the future, which is what you asked about, is positive. which, of course, it will always depend on the economy of the country at the moment that the country is going through. The higher the job ability, the higher the GDP growth. In terms of the economy, of course, that will have a positive impact on the market of insurance, pension plans, and savings bonds. We want to keep to the guidance in terms of ROE at 18%. This reflects our estimate, our forecasting, and I'd like to remind you that we do see some challenges in some segments, and we also envision challenges in the Brazilian economy. but we are confident that the insurance group will achieve its target along 2023, always contributing with an incremental return that is requested from us by the bank. Thank you, Eva. Tiago, the insurance company is an important piece in the results of the bank. And the insurance company is behaving really well. It's performing well, as Contigio has mentioned. They have been posting constant growth, an ROE that is important, of 18% into one. They made 25 billion euros. I took with Ivan that our goal is to have 100 billion in revenues of insurance premiums at the insurance company. And the fact that we have an insurance company that has all of its companies, Redisco RE, Redisco Savings Funds, Redisco's private plans. And you know that, Tiago. Although we have higher costs of service than we have in the insurance health, the insurance companies together with the team of the banks we can all grow results, grow revenues of the insurance companies. So we always have very positive expectations regarding the insurance group. And as regards the ALL that you mentioned regarding the volume of first half, second half, and Q1 over Q4 of 2022, what we can observe is And quite clearly is that first, the volume of the loan portfolio grew less. Credit grew 5% year over year. Naturally, because we kind of held back in those higher risk loans. And of course, we had a very need for provision. And legal entity credit grew less because of all of the factors that I mentioned to Rich Rossman when he asked about this. So, if you observe the overall percentage of ALL, the percentage of our total loan portfolio is 9.3. So, it is the highest index in our historical series of provisions vis-à-vis the loan portfolio that we have. So, this level of provision, of course, now we have two situations. We have the gap. 2682, which is the regulation, in effect, that we have to abide by, and the expected loss, IEFRS 9, which will be, in effect, as of January 2025. So, although it will only be mandatory as of January 2025, obviously, all of our modeling already looks and considers this kind of provision due to expected loss Of course, we make adjustments between BRA gap and IFRS so that they'll move in parallel so that there will not be differences among the two or between the two. And last, there's a benefit in volume of provisions. So, So these statistics with operations with a lower credit risk, a lower growth in the loan book, and the provisions that have been made in the past, all of that explains the scenario that you mentioned. Just one additional point mentioned by Otavio. We had a defoliation in credit origination in Q1. We would provision for expected loss. This deceleration in credit origination kind of explains this lower volume of provisions. And as regards provisioning below the formation, it is related to the fact that we brought forward some provisions by expected loss. And in this moment of the cycle, we are naturally consuming these anticipated provisions. It's very clear. Thank you very much.

Next question. Good morning, everyone. Thank you. It would be interesting for us if you could share a little bit more about the evolution, either of the NPL formation and delinquency, or the data from now, and I apologize if I missed the comments that you may have made, but I think that the new formation was around $12 billion. If you can explain a little bit more, if it was spread out $3 billion per quarter equally, or if there was any improvement, any indication, or if you can detail us the formation in April, that would be an indication for us. If you don't have about formation, you can just tell me about NPL 90 days. how temporary it is, that would give us an indication. So throughout the quarter, we saw a slowdown of this formation in terms of the evolution of the formation. We are probably maybe at the peak of formation this quarter. We're going to see whether it will be confirmed. It will still remain high in the second quarter, and we expect... or the beginning of a reduction in NPL formation as of the third quarter. But we'll have to see the actual trend. Good morning, Domingos. What we actually see when we look at the new vintages or cohorts, what's been happening at least on a big three and four, and when I talk about new cohorts, I'm talking about August, July through October of last year, when we look at the delinquency NPL condition. But now we see very positive signs of a much more controlled NPL. And I said in my presentation that the new vintages, the new cohorts, categories show that 95% are formed by clients who have better ratings. So that already gives us good indication of how it should behave over time or throughout the year of 2023. But it's natural, and we've been saying it, that the first quarter NPL would still be a little high, and the second quarter as well. We've been telling you that it would also be a little bit higher, but This movement of the ratings that decrease over time as credit becomes stressed, we see that already happening. It's normal that it should happen. And that's why there's more consumption of the allowance, as Sireti mentioned. So it's almost intuitive and natural. At a time of a more positive cycle, you set aside more allowance so that at a time when of a more restrictive scenario, you can consume those provisions. But as I said, I don't know if you were listening yet, but we have a 9.3 of total provisions for the total credit loan portfolio. So if you consider the coverage level of our portfolio, excluding those operations that are 100% provisioned for, considering base one, all of the provision with the portfolio with credit for more than 90 days is at 58% coverage. So we see first a very adequate level of provision, and the NPL has been improving. We haven't closed April yet, but it is already better than March was, than February was, and so on. Excellent. Thank you. Next question. Tito Labarca from Goldman Sachs. This question will be asked in English. We'll maintain it. And Tito, go ahead, please.

Tito? Hi. Yes. Go ahead. Hi. Good morning. Can you hear me? Yeah. Yes. Hello. Hello. Hello? Okay, great, thank you. Yeah, sorry, I'm on the phone line here. Thank you for the call and the presentation. I guess my question is on revenues, right? And we saw net interest income down in the quarter, pressure particularly on the clients, NII, you're slowing down loan growth, right, some pressure on spreads as well. How do you think about your ability to deliver on the revenue values, both, I guess, on the net interest income And then, you know, fees as well. But on the net interest income also, the client and I look a bit weaker. Party offset by market and I, which seems to be doing a little bit better than expected, although still negative. If you could just help us think about those dynamics in the current environment, you know, we're still high rates, low in loan growth. And, you know, what does that mean for both the client and I and the market and I from here? And then certainly fees, I mean, I know there's some fees in the hourly, but most lines were down in the quarter. Do you think this 2% growth is what we should expect? Anything that you can do there to improve that fee income growth from here? Thank you.

So, Tito, about the loan portfolio, that was better, you're right. There was an increase of 5.4%. But as I said, mostly due to the caution that we had with those clients with a worse credit profile, credit risk profile. But we see the growth that we're getting in the personal loan and real estate financing, even in payroll deductible loans that ended up growing less because it was impacted by that issue that we had or the cap of the interest rates. We were almost for two weeks unable to operate, but all of those portfolios have been growing well. Where we saw lower growth, it was an involution of 4.5% or 5%, was operations with larger corporates or medium-sized companies, mostly due to the lack of demand, maybe because they were standing by and waiting before they start taking loans again. Large corporates basically making loans or taking loans for their moments working capital mainly, but credit operations for longer terms, for investment, or for other purposes that have a longer maturity, even due to the interest rate of nearly 14%, there's a sense from the companies that it's time to wait a little. The tax framework was already... disclosed by Adagi, there's good expectations for the tax reform. It seems that the good signs that we're starting to see in terms of inflation in the country as well, maybe the profits have not yet reached the desired level, but we can already see a sign or an indication of improvement. Even the statement of the central bank with the last COPOM meeting already mentions a scenario that doesn't show as much pressure for interest rate increase. So the scenario seems to be improving and everybody seems to be standing by before growing. We have a portfolio in the retail bank, a loan portfolio in the retail bank. That's one of the largest in the market. So I believe that everything becoming or materializing, and it will, and even the appetite for risk that changes and improves for us as people grow, begin to accommodate, we see a scenario for loan increase within that range of the guidance that we mentioned. Now, as for the fees that you mentioned, it is really very close to the bottom of the guidance, and we have huge challenges, regulatory challenges in terms of fees, challenges with the competition, because today you're able to open checking account to the digital bank, even our own digital, without any fees. So we must work, and that's why we have that concern of the customer centricity, NPS, of generating a positive perception of our service with our clients so that we can replace those fees that you lose with other fees investment bank as well that hasn't really moved this quarter. This first quarter we had very little, almost no operations, so there's no fee of those operations. So those are challenges that we need to go after, and this fee income depends on your growth as well. What I mean by that is expanding customer base, extending the base of customers that you negotiate with so that you can recover it. But I understand that this line, considering the bank's strategic position throughout Brazil and all regions, as well with Bradesco Espresso, I believe we have a good expectation to recover the fees line over the year. Just in addition about net income, NII, one of the good news that we had this quarter was was the improvement of market NII. As we said, this has been following a trend of gradual recovery. It's improved this quarter. We believe that it will continue improving over the next quarters, possibly closing the year at a positive point, even in the second half of the year as a whole being positive. So in terms of driver for total margin, for total NII, that's the base of our guidance. The dynamic of the NII and the market NII is very important.

Great. Thanks, Rosario and Siddak. If I could just one follow-up just to understand on the net interest income. The other pressure we saw there was on the funding mix, right? The demand deposits down quite a bit in the quarter. The time deposit is kind of flattish. I mean, we're seeing this kind of globally. where people are shifting to higher-yielding-type funding. Do you think that continues to pressure your net interest margin also? And how long before that can begin to stabilize? Is there anything that you can do there to boost those demand deposits from here? Thank you.

So, Tito, the population really did need to consume the savings that they had that we see a drop not only in Bradesco, but in all financial institutions. I think that total deposits are also a reflection of the growth of the country's GDP, the volume of business, the volume of money circulating. And people are also trying to protect themselves by making other investments, especially to make the most of an interest rate that we have of 14%. So it's a migration, even from investment funds, not fixed income, but from multi-market funds to those operations of fixed income because they're paying high with the interest rates at 14%, even with an expectation that economic agents may have in mind that this interest rate may go down. So they're making the most of this moment of a higher interest rate.

Thank you. Our next question comes from Rafael Freddy with Citibank. Hello. Good morning, everyone. I have two questions. One is a follow-up question regarding NII. I just want to understand. You're making a move towards a lower risk point. One of the effects of that is an eventual reduction of NIM. There was a slight reduction in this quarter, and I'd like to understand, how do you see this looking forward? Are we getting close to stability, or should we expect another marginal drop in NIM? And we think that you spoke about origination of coins in the last 12 months with rating 80. 95% credit rating. You have an interesting table on page 15 of the release that shows the evolution of ratings for clients originated in the last 12 months. And there was a big improvement vis-a-vis Q2 2022. But then it kind of flattened out. Perhaps above the previous levels. So we've had a great improvement. That will translate into results. But we don't see additional improvement. Perhaps this is the new level. I just want to understand that table. Well, Friday, yes, it is a little bit of what you said. We were more selective. in higher risk operations, in other words, operations with no collateral, consumer credit, operations with limits that are made available in the mobile app, operations that are going on in the app. But then you get to a cap because we have to acknowledge that we operate in the Brazilian market and Brazil and Bradesco reflects the Brazilian population and the economic agents. So we can have an improvement because we reduce the acceptance of those loans that have a higher risk because the population, I mean, we have to acknowledge that the Brazilian population has more debt now. On one hand, it is easier now to have tracking accounts in one, two, five banks. So clients now don't have to go to a bank branch. They can open a tracking account over an app in four to five minutes with just a few clicks. It's a very attractive journey. We understand that. But it makes things easier. In Brazil, we opened 12,000 tracking accounts over the every day in the mobile channel. So that makes it very easy. But it's also easier for these clients to get credit either using their credit card. It doesn't matter the limit that they have, 100, 500 PLLs, but it's easy for them to get credit in 1, 2, 5, 6 digital banks. The whole context made it easier for people to get more credit and to have more debt. So there are these two aspects. So we reached a cap in terms of what was possible to select clients with a better credit rating. Of course, we'll need to operate. We'll continue to operate with lower risk clients. We've been accelerating our loan book. And we're talking with our whole team about this, that we need to continue to grow the loan book. But again, the main factor has been the low growth of corporate operations, as I mentioned to Tito. So I think that the improvement from now on will be marginal, incredibly. to adequately price operations for those clients that do not have such a good credit rating, such a good credit score. But if we price the operation correctly so that we can cover possible delinquency, we can do that in consumer credit. We can do it in our typical operations and transactions as well, and even in credit cards. we can have a more adequate balance of allowing a little bit more risk but at an adequate pricing so that we can cover an eventual delinquency and so that we can have positive results in that operation as well. And this regeneration mix that we started doing Friday, it naturally affects spreads. Because these operations would set a client with associated collaterals. So, of course, these operations have a lower spread than those operations that are riskier in a way. So I think the wisdom lies in having a balance of these two legs. We'll open the door a little wider so that we can improve our results for Nathan over time and client. And I think the growth was 7.4 in Q1, but we tend to pursue a better result. And also because we understand that there will be an expected loan book growth in the coming quarters. Perfect. Thank you very much. Next question from Inhiki Navajo with Santander. Inhiki? Hello. Good morning. Thank you for the opportunity to ask questions. It's kind of a follow-up question to Tito's question, but to me it was not very clear. You're talking about portfolio growth and NII growth. So my question is, when you released the guidance, was this kind of performance expected? Will these two numbers eventually converge to at least the bottom of the guidance range? Or should we consider that there is a real risk of guidance review in the second half of the year? No, no, you're correct in what you're saying, Hickey. The portfolio growth, as I said in the presentation, has a trend to convert to the guidance, and we are working on it, converting not only towards the bottom of the guidance, but at least in the middle of the guidance, the middle of the range. You see, this is something that we already have in mind, because we knew that Q4 of 22 and consequently Q1 of 23, because of delinquency, would have an impact on credit. It was in our mind. We knew. We expected this to happen. Our expectation is that things will be a little better in 2021 in terms of growth in operations of corporates, which did not happen for a number of factors that we talked about. Even in the couple market, we could see a very weak performance. But we understand that given the expectations that we have observed and also the growth expected GDP growth communicated by the Brazilian Central Bank recently. All of that is favorable for us to post a greater growth of the loan book in 2023. So, yes, we had it in mind that Q1 would not be that good. Because of the restrictions that we adopted in credit granting. And our expectation is to seek the middle of the guidance or the top of the guidance range. And I think it is important to mention that when we speak about NII, our guidance is for total NII guidance. market NII performed a little better than expected with this gradual improvement trend. So considering the total NII guidance, in addition to this dynamic that Otavio explained so well, the dynamic of market NII seems to be contributing as well. Thank you.

Next question, Mario Pierre. Bank of America. Mario, you may go ahead. Mario, hello, good morning.

Okay, we'll move to Pedro first then, and then we'll go back to Mario, okay? So we'll continue with Pedro Leducchi, Itaú BBA. Pedro? Thank you, Fidetti. Thank you, everyone, for the call and the questions. In CALL and portfolio, they'll communicate. I'd like to conciliate a little bit more the messages that you've told us and the moving pieces of these two sides of the guidance. On one hand, you're saying you're seeing loan cohorts already performing better, and that's why you had the confidence to say, reduced coverage, and so on. But on the other hand, the portfolio was very slow, and you said yourself that NPL formation in the second quarter is still high. If we follow the same phase of ALL and NPL formation in the second quarter, the coverage will drop even further. It's below 100%. And if the portfolio accelerates to meet the guidance, it should attract more ALL because of the model, the expected model. So I'm having a hard time conciliating the scenario where the portfolio increase is getting into the guidance and ALL remains in the guidance without... a greater drop in coverage. I'd like your help to put these pieces together, the loan portfolio growing without dragging AOL further and whatever you have in terms of AOL vis-a-vis coverage to the end of the year, that'd be good. Thank you. Well, Pedro, good morning. It's a pleasure to talk to you. And look, Whenever we look at the provisions or ALL, I'd like to comment that quickly with you. We're looking at it within expected losses and IFRS 9 on one side where you have the provisions, considering everything that could happen to your loan portfolio, observing the concept of expected loss. But what we've done over time in a more positive cycle is we started to make additional provisions or extraordinary provisions. Those provisions that we make, and at the time that the cycle is not quite as positive, when it becomes more challenging, you start to consume part of those provisions, but always observing this movement of expected loss. Of course, we also expect an increase in our loan book, and we're working to increase it. It increased 5%. Our guidance is from 7 to 11. So there's still some ways to go for us to be able to meet it. If we took the middle of the guidance, for example, as a reference, this is only an example, but an increase of around 9% of loans, it's not that far from 5%. 5.4% that we grew now, and of course that that increase should occur through operations that have a better rating level, a better credit score, and therefore require less ALL. And when you put that into the model of expected losses, you have a lower consumption of ALL because of the improvement of the assets you're working with, because you have guarantees associated to that operation. So it seems to me that this balance is quite adequate, an increase, a quality increase in portfolio with a balance a smaller need for provision. So it doesn't seem that the fact of increasing credits could somehow consume such a level of the allowance that would lead our provisions to decrease more drastically. Also, it's important to note the volume of provisions that we have in our credit portfolio was 9.3 this quarter. That's the highest in our historical series. So the volume of provision is quite significant. satisfactory so we also need to consider that when we look at the provisions excluding the portfolio that's entirely provisioned for the phase one as i said to only take the loan to NPL over 90 days our coverage level is 278 percent so with better cohorts we're looking at the cohorts that We originated in July, August, up to December, 9-3, 9-4. These cohorts have a lower need for provision because the delinquency is higher. So ALL grows at a slower pace than it grows today because of the rollout of those operations that stressed it. So when we look at expected loss, but also at the rolling plays to 682 of the central bank, as credit becomes more stressed with a greater delay, it calls for a much higher ALL. From C to D goes from 3 to 10, 10 to 30, 30 to 50, 50 to 70. So it calls for a higher ALL. So the new operations. with a better risk quality, with a better repayment quality, it calls for less ALL. That's why we understand it is possible, it is feasible to get to this balance between the growth of credit portfolios or loan portfolio that should be around, it's a single digit. If it's double digits, it will be low double digits. And we don't see anything that could not be managed in such a way as we can have the growth of these two lines, both loans and ALL, without us stressing ALL or that it goes too far from what we have on the guidance, so observing the guidance. Excellent. Thank you. Thank you, Pedro. Is Mario back? Okay, we'll turn back to Mario Pieri. Can you hear us now? Yes, good morning. Good morning. Can you all hear me? Yes, we can hear you. Good morning. Thank you. I apologize for the technical problems. I have three quick questions. First, Otavio, you asked about or actually you said that market NII should be positive in the second half of the year. Let's understand a little bit the visibility that you have about market NII. Does this depend on the interest curve? Or if there's a selic rate decrease before, could that have a more positive impact on market NII? So I'd like to understand in your mind with what you can see, considering what you said, that market NII would improve in the second half of the year. Second question about delinquency. You said we're close to the peak, but you still expect it to... be worse in the second quarter, and maybe the third. So it's going to take us six months to see the peak of NPL. What are the lines that concern you the most within NPL? We saw a worsening on individuals' NPL. So if you can detail other products, which products are... getting worse, NPL. Nobody asked yet, but the other question is about the tax rate, to pay the tax rate closer to 10%. I understand that was the IOC benefit, but the sub-guidance you released at the beginning of the year had a tax rate of 16% to 20%. I'd like to understand whether the guidance still stands from 16% to 20%. Well, Maido, good morning. It's good you came back. About your first question on Market NII, that's exactly it. Market NII will improve. The first quarter was a lot better than the last quarter of last year. If you look at the book, if you can have a look, or maybe our guys can send it to you later, but it was 800 in the last quarter of the year. It was 300 now, so in the first quarter. So it is improving. quarter on quarter. So our visibility is very clear, very transparent, that this will improve irrespective of what happens to the SELIC rate. Of course, that movement to bring down interest rates, the SELIC rate, may make this scenario even better, but it will be a marginal improvement because we did what we had to do. So what we're going to see quarter on quarter will be an improvement On market NII, in the last quarter, it will be positive. That is regardless of what happens with the interest rates today. Of course, as I said, if the select interest rate goes down, interest rate goes down, it improves, but it's a marginal improvement. As for NPL, let me make this very clear. We told you two quarters back that that NPL would remain high in the first quarter and in the second quarter of this year. The third quarter, our expectation is that this will already be controlled. So first and second quarters for sure. And then, of course, we expect to have greater control. And then on the third quarter, we expect it to be at a stable level. That's what we're seeking. That's what we're working for. And that's what the signs tell us. You talked about the worsening of the delinquency. The lines that brought more NPL issues were the lines of credit cards, credit for small and medium-sized enterprises, basically their working capital, and a A good portion of that on those lines where we have the customers in the past and during the pandemic, which were lines with grace periods, with a longer term of operation. So when they start delaying, they have double the time to make the provision. So those were the lines that are generating more provision. But basically the biggest is credit cards and working capital for clients. small and micro businesses, that's the central point of attention in working capital lines and credit cards. And that's why what we see, the growth that we see in the credit card line basically is poor. credit cards of higher or medium and high income people, individuals who have a greater spending on the credit card. So that's why there's a little bit of change of reducing approval for people with lower incomes. As for the tax rate, that this quarter was of 10%, you know well, Mario, that The formation of this tax rate, on one hand, is depending on the organization's operating results. On the other hand, with the IOC and the insurance company's results that are extremely important for us, and the insurance company has a lower rate than the bank. So... The combination, so to speak, of these three aspects, not only the insurance company, but all the other companies that are linked to the banks, Cielo, Alelo, Grupo Elo, consortiums, and insurance companies, insurance brokerage, all of them, at the end of the day, when you combine these three indicators, it ended up getting to around 10%. But throughout the year, As we appropriate it month by month, we tend to move towards the tax rate that will be higher with the guidance of 16 to 20, which is what we had mentioned in our earnings release in January. So it should move towards this range of 16 to 20, which is what we had talked about. Yes, Mario, what's implied in this 16 to 20 percent is that we really do expect to get better results in the second half of the year, as we have been saying, and therefore the benefit of the IOC that remains somewhat fixed makes up for less in terms of taxes, so that brings the tax rate up. That's the dynamic. Excellent. Thank you.

Next question by Danielle Vaz with Credit Suisse. Danielle, go ahead. Hello, what can I do for you today? Good morning. My question, well, I'd like to insist on portfolio growth. We heard that write-offs accelerated a little. It was $400, $500. It dropped a little, so we need a little bit more. Unfortunately, we're having the sound chopped. So I'd like to understand, to have less appetite and more aggressive, the graph on base 100 of credit approval in retail, in a more difficult scenario in corporate, where will the growth be coming from, in what lines, so we can achieve the guidance? In the last quarter, Carl, we talked about this, and growth was expected in more collateralized lines. credit card in retail also grew. So what are the priorities in terms of portfolio growth? And will you have to accelerate loan granting? Hello, Danielle. Good morning. Well, loan book growth, we spoke a little about this. The write-off has been greater than origination, as you mentioned. But if you observe personal credit growth of 6%, rural loans 7%, 8%, mortgage is performing better. So I believe that for... The year 2023, we are going to have better growth of these credit lines, personal credit, collateralized personal credit, or the rural loan portfolio that should grow. We are taking part in all agricultural trade shows. So if you get to the trade show that is happening as we speak, every show, the business volume, We already have business contracted at the fair three times more than in last year's agri-show, so I think that rural alone is an important growth portfolio. So we've been seeing growth for corporate in the business plan and for end consumer, for individuals. Obviously, the interest rates did get in the way a little, but resilience and pension conformance last. get mortgages to buy their own home, so that is expected to grow. Foreign exchange deals and operations should have a better dynamic now, starting in Q2, Q3, Q4, particularly. Q2 should post a better growth dynamic, considering the dollar rate that we currently see. And for corporate, the corporate line will grow, so Micro and small enterprises have been suffering more than ill. It is true, but there are good companies out there in the market. So just one detail here. Sorry to tell you, a month ago, we visited all capital cities of Brazil where we have our regional offices of the Bank 17th. So we visited them in nine business days. So we visited and met with the home managers of the bank, conveying to them the same message, criteria, preserving credit quality, that we need to give loans to good clients, but that we cannot stop operating. We need to operate with adequate pricing. credit operations with adequate pricing. And that was the message for the whole team, not only for the retail bank, but for the wholesale team as well. So I think that in essence, to answer your question, I think that the main lines that are expected to grow more, where we can... personal credit line because it has pricing to withstand a perhaps higher delinquency. Credit cards, easy higher spending by higher income clients. Real estate, operations, mortgages, rural loans and exchange. And of course these portfolios will take us to a growth that is closer to digits. One technical aspect about your question, the increase in write-offs It's also related to the fact that we did not sell portfolios, anyone. The write-off had been a little lower because part of what would be excluded by a write-off was excluded by a sale. It's not that the level changed so much. There's also this aspect that explains the difference. It is clear. Thank you. Let's move on. Next question. Hello, guys.

Good morning.

I just want to speak a little about growth. The acceleration expectation comes from a less restricted policy of credit, or does it come from market recovery? That's my first question. And I'm looking at slide 17 of the presentation, and there was a big increase in delinquency, 16 to 90 day NPL of large corporates, even excluding Americanas. So could you give us some color on what led to that? Well... The credit market is growing because the economy of the country is doing better because the GDP growth expectation is higher. Economic agents, companies, business people, entrepreneurs, they're all more prone to taking a little more risk because they envision a better outlook looking forward. Of course, if the economic situation improves, as we expect to happen, given the fiscal framework, the tax reform, and the possible reduction of interest rates. All of that would help and would drive the loan book to improve as well. But regardless of that, regardless of economic growth that we expect to happen, because it is important, it's good for all companies and for all Brazilians, and also for us, in particular, but regardless of that, we do see room for greater growth for our portfolios because we made a decision because we are cautious of reducing credit granting so that we could control delinquency better because delinquency is happening in lower income groups and economies. So regardless of the economic scenario, our risk appetite For those operations that have spread, that have interest rates, that can cover a possible loss, will be adjusted over time. So that's point number one. Point number two that you raised, regarding that increase in 15 to 90 day NPLs. That's the specific case of the retail bank clients, of corporates, that's what the syndicator. So it's a specific case. There was that case that we talked about. In Q4, the group was provisioned 100% for, and there was another case now in Q1, but that is a case that was 100% provisioned for, and it is a case that was already in they came through a specific dynamic of maturity. They renegotiated and, of course, this matured. It is 100% provision for it, but, of course, it does have an impact on delinquency because the renegotiations matured. Understood. Thank you very much.

Next question, Gilberto Garcia Barclays.

Hi, good morning, and thank you for the call. I had a follow-up question on the trends, particularly in credit cards. I understand it's very difficult to hit the brakes hard and stop growing in the segments that you're trying to de-emphasize. But you also sounded very optimistic when you were talking about the opportunity in the higher income segment. So my question is, will the stronger growth in higher income allow you to continue to grow sequentially in credit cards? And whether this will lead to an improvement in the financial margins or only in the financial margin adjusted for risk?

Hello, Gilberto, good morning. Thank you for your question. Gilberto, the trend, let's understand this, the ecosystem of credit cards in Brazil is amazing. Forty percent of deals or transactions that the Brazilian people make of consumption is through credit cards. It's even higher than in the United States. The United States, I think it's 38%. In Brazil, it's 40%. So 40% of the Brazilian population also has their credit cards in hand. And credit cards move 21% of the Brazilian GDP. It's something close to 2 trillion BRLs. So the credit card industry, the credit card ecosystem in Brazil is very important, very intensive with multiple players. So credit cards. And just to add, credit cards, as I said before, also made people to get more indebted because they were able to get credit cards either with their banks or digital banks because of how easy it is for them to open a checking account through mobile banking, as I said earlier. So, yes, we did step on the brakes. We decreased loan or credit concessions to lower income people, not only Bradesco, but if you look at the industry alone, Due to the level of indebtedness of the Brazilian population that really did reach historical levels, everybody started to hold back on loan concession or loan granting for this lower income population, either by not giving them credit cards or working with very lower limits. than what we usually work with due to the indebtedness level of the population. But there's a share of the population with a medium income or high income that really do consume a lot on credit cards, have a much higher spending level on credit cards, which results in fees and exchange rates that help in the formation of results, but also on client NII. It forms the NII. the NIM rather, with the clients. This work on the higher income and this availability with the high levels of higher income with the volumes, it is a strategy. It's part of the bank. It's something we are adopting. I'm sure that it will result or bring a difference in the NII, but already risk-adjusted. So there's also an appetite for growth on credit cards for that population of a higher income level. And this population also brings a very strong benefit in fees, especially. Yes, as I said, there's higher fees involved as well. Next question, Carlos Gomes, HSBC.

Carlos?

Hello. Hello. Hello, Carlos. Hello. Thank you very much. I have two questions. The first one is on capital. You finished the quarter with 11.1%. Has your goal for capital... level change given the current uncertainty in the world and what we have seen in other markets. And the second one is more in the medium term. What do you expect for growth for the business, for credit, for 2014, 15, 16, for the coming years? Thank you so much.

So, in terms of the capital goals, Carlos We didn't have any significant difference or change. We have a very comfortable capital base. We believe that our capital will continue to grow throughout the year with the interest rates. And after this moment, especially in the second half when the results will get better, this also tends to bring benefits in terms of capital through growth. So I don't think there's been any significant change in terms of our capital objectives. We see capital evolution as a continuous process that comes from the banks' operations and our profitability and accumulation of profits. As for our growth objectives for coming years, We believe that after these days where we're strongly focused on controlling NPL, we will go back to a more important credit origination. We have a strong focus on retail, as Otavio said. So... We believe that this segment has important opportunities for growth after this more delicate moment of the cycle. So we see Bradesco as a player who will be growing together with the market's growth or even growing more than the market at some point whenever we're comfortable. Yes, Carlos, capital, as we had said, ended up growing now in this quarter. There's no target, there's no guidance for that, but our expectation is for generation of results of profits, even at the bank's own operation, as we showed you in the presentation. So it's the continuity of maintaining capital level at a robust point, as we have always maintained at the organization, and the bank's growth. Irrespective of this moment of being at a more unfavorable point of the cycle in terms of delinquency, this is something that is addressed by the bank's risk department, the bank's loan department, but it points managers, bankers. Our relationship managers at the end have that clear purpose. They have that clear purpose for continuous growth, either in the bank or product services and our insurance products as well that have been growing soundly, either in terms of the loan book growth or results generation. They all have a target, a budget, an NPL to meet in the year. 23, 24, 25. So this year, the strategic plan of the corporation, not only the bank, but the corporation itself, with all the companies of the Bradesco con Gomler, have this goal and this very clear plan to continue to grow with quality, with profitability, but with a clear purpose of continuous growth. Yes, but do you mean growth of 8%, 10%, 12%, 15%? What's the realistic objective for Brazil in the coming years?

Any growth of any company is very much linked to the ability of the country to grow. The more the country grows, the more the Brazilian GDP grows, the more companies will grow. So it's kind of hard to give you a number, Carlos, that, yes, we're going to grow 4%, 5%, 10%. It's hard to do it. We'll grow what is possible to grow with quality, with profitability. But it really depends on the scenarios, not just in Brazil, but also globally, so that we can grow safely in delivering results to our shareholders and always maintaining the robustness and health of the bank's balance sheet. It's hard to give you a number at this point, and I think that it depends on a number of factors. Thank you, Carlos. We're moving now to our last question by Eduardo Itil with Brasil Plural. Michio? Hello. Good morning, Seredi, Otavio. Thank you for the opportunity. I also have two questions. First, what are both related to the bank's performance in this cycle? had a slightly worse performance than your peers. So starting with market NII that drove a lot of revenues in the past. In this cycle, it was a detractor. In your evaluation, do you think you need to redraft your ALM? strategy for the next cycle? Are you thinking of something different to avoid this kind of volatility in your results? Second question, regarding the quantity of assets. You have a large exposure to individuals and lower income segments. I don't think that this should change in the positioning of the bank. So I'd like to know from you, do you consider Any other strategies to try to quickly anticipate and identify these cycles? And since I have the mic, since the changes that you're making in retail, Is this related to this exposure to low income and individuals? You're reformulating perhaps your digital platforms and the change in the profile of clients. Do you see a correlation between these changes that you're implementing and a better positioning in individuals? Thank you. Hello, Nishio. Good morning. It's always good to speak with you. Indeed, the market MII, this year, last year, and this year. Just in the beginning, it was worse, but we always have to remember that in the last seven years, the market net interest income has been very good for Bradesco, better than our peers. Now, of course, a very abrupt change that happened in Brazil, the interest rates increasing very quickly in a very short period of time. Of course, that ended up impacting us, but this has been corrected. Obviously, We are a big bank in funding and retail operations. So we have, actually, we have to capture more clients. for demand deposits, for savings, for funds, for in all capturing lines, so that in the moment of high interest rate cycle, we can have a more adequate balance. If I don't gain a lot in market and I can make more in fee income given the interest rate differential between what I invest and what I put out in the market. So it is always important to grow in your capturing levels. So if I should say that we changed the ALM strategy in the bank, no, it did not change. It is more conservative, with the only different factor being a high increase in interest rates that cannot be expected by any economic agent. We cannot imagine that interest rates would grow as powerfully and as quickly as they did. But it's part of economic cycles. It's part of managing the Treasury balance. of a bank like Redesco. And like I said, in prior years, the strategies were always winning strategies. So I think that the bank strategy, the LRM strategy, is preserved so that we can enjoy the moment. And as regards exposure to low income, you said it yourself, Michelle, we are a retail bank. We have retail banking in our DNA. We'll continue to be in retail banking. Of course. Will, of course, kids care for high-income segments because of the fees that we can get from these clients, because of the principality, because these people are in a stage of life where they invest more than borrow more. They invest more than they borrow. So we can increase the relationship, the investment relationships with these clients. And that is why we are caring for them. That's why we structured the high-income segment banking. We have prime with our branches and our regional offices working with these higher-income clients. That is why we acquired Bradesco Bank in the United States, Miami, Coral Gables, to serve Brazilian clients when they are abroad. When they are there because a good part of Brazilian clients, they want to have a portion of their investment in dollars or pegged to the U.S. currency. And that's why we bought Bradesco Bank. And that's why... This year, we're capitalizing the fiscal bank. We will have more than $2 billion of shareholders' equity, and that's why we partnered with BlackRock to manage investment funds in the United States. You see, a number of work trends and strategies that have been implemented. so that we can have a very close relationship with these high-income clients. Because they're important. They're profitable. They have a more long-lasting relationship with our organization. So that's an important focus. But you see, retail, that's our DNA. And we'll continue to work, especially in retail, making the necessary adjustments, of course, because people have changed. Their relationship with the bank has changed. I even mentioned in the presentation that in December 2019, before the pandemic, we would have one million authentications at the towers in the branches every day. Now, 95,000. So, about 10% of what we had before the pandemic. So, we are no longer going to bank branches to pay a bill, pay a tax. paying a payment slip, and they go to the bank basically when they need to perhaps do business or get advice regarding... And that's why we increased our headcount of investment advisors. We increased to 2,000 investment advisors and specialists all over Brazil. People go to a branch to perhaps hire a life insurance. After the COVID-19 pandemic, people started valuing life insurance more because they are worried about what can happen to them and what's going to happen to their families if they go. So that's interesting. Oh, when they're going to get mortgaged, they need more advice. But you see, the day-to-day of people and their relationship with the bank, it's practically online. 96% of transactions that take place every day at Podesta, and you know there are many, they happen digitally online. People are no longer going to the branches. So adjustments need to be made. We do need to have a bank branch that has 2,000 square meters or 3,000 square meters. We can serve clients better with a smaller branch, with advisors, specialized managers, and bankers working at the branches to meet the needs of the population. We can also serve them well online with digital platforms. We have digital platforms online. that serve millions and millions of clients who do not want to go to a branch. They want to be served via WhatsApp, via chat, via video conferencing. They're not keen to go to the branches anymore. So over time, changes have been happening in the way that people relate to the bank and bank has changed. accelerated the pandemic, and the disco needs to adapt to the new times and to what clients want, because at the end of the day, we want to delight our clients. We want them to be happy and to be promoters of our bank so that we can have better and better results with long-lasting relationships. So it's not a strategic repositioning, but it is a repositioning in terms of how people, how clients want to be served. With the changes we're seeing, the changes that were accelerated also because of the COVID-19 pandemic. Perfect. Thank you very much, Otavio. Thank you, Michelle. Thank you very much to all. We are now closing the Q&A session. Questions that were not answered during this call will be answered by our investor relations team. I'd like to remind you that the release is available in our investor relations website. Fatah, your final remarks.

I'd just like to thank all of you for being here with us, participating in this earnings conference or video conference call. It's always a pleasure to be able to talk more and in more detail about the bank to you. Certainly now the IR area will start to schedule meetings that we're going to have closer to you. We remain available, but in any case, our Investors Relations Department is available to all of you to take any doubts or provide additional information. I wish you all a great day, a great weekend, and thank you very much for your attention.