Banco Bradesco Sa American Depositary Shares

Good day, everyone. I'm Marcelo Noronha, CEO of Bradesco.

I am here to present the earnings of the third quarter of 2024.

I'm speaking at Cidade de Deus. It's a little over 10.30, 10.31. It's a pleasure to be with you again. Thank you for joining us. and we'll speak about the balance sheet of the third quarter, and then I'll sit with my colleagues to answer some of the questions from our colleagues of the sell side. I'll start with the earnings of Q3 24, which we received. We had a recurring net income of 5.2 billion barrels, growing almost the second quarter of 24. In the past quarter, as a reminder, we grew more than 12% quarter on quarter. So we have been delivering what we committed to do. We don't promise things, we deliver things. And we are growing step by step, consistently. And here we have a snapshot of everything we are going to present to you. Today, during this video conference call, our profitability is growing. It's a solid and safe profitability growth. Our NII evolves driven by client NII and reduction of loan loss provision expense.

We'll speak more about that.

Productivity gains with rising revenues.

Risk of collapse.

Our credit risk are controlled and the footprint adjustment balanced the credit portfolio growth and improving the liquidity ratios, operating expenses evolving as expected, and the insurance group delivering an ROE that was very relevant, almost 24%, growing And we'll speak about the increased stake in Cielo as a result of the tender offer we had and with the closing in the month of September. So moving forward, let's speak about total revenue in the quarter, 30.6 billion BRLs. And I'm always comparing quarter on quarter more than year on year. So 3.7% quarter on quarter. And we wanted to break it down for you.

Fee and commission income. So we have three blocks here.

Total net interest income growing 2.7% quarter on quarter. In the insurance group, 8.7% growth.

And we have this performance of growth comparing quarter on quarter.

So increasing 3.7% in terms of total revenue. Our loan book, almost 944 billion. Again, growing 3.5% quarter on quarter. We bring you some data of average daily origination. loan granting through digital channels, but what matters is to show you the whole set. We're growing in all segments of clients. 7.6% in total, but in individuals, we're growing 10%. Large corporates, of course, it follows its natural trend, again with a positive growth of 0.7%, and small and medium-sized enterprises, up almost 17%.

And I'll speak more about that momentarily when we speak about the loan book.

The first conclusion when we look at this is that we see big traction in the bank. We're growing practically 100% of the credit modalities in all segments of the bank. Individuals, large corporates, SMEs, but let's look at the whole macro picture because it gives us a lot of information.

First, individuals growing 3.9%, quarter on quarter.

Now let's look at the mix. Payroll deductible loans. I think that the Brazilian Central Bank communicated their September statistics. We grew a little bit above the market, but please note, We grew 0.25% more than the market. So we are growing in line with the market, perhaps with a little more traction. But let's see where we are going. Payroll loans, we grew 2%. The market grew 1.9%. And we have an important portfolio, collateralized portfolio. The same goes to vehicle, 4%. Real estate finance, which brings a lot of client disability and long-term relationship of 3.3% and 11.2% year-on-year. And this applies to rural loans with 16.5% growth. So when we look at the whole mix, we are talking about growing loans to individuals, but in very safe lines of credit with collaterals. In the case of credit card, quarter on quarter, we grew 2.2%.

However, When we break down the portfolio and look at high net worth clients, we're growing 4.5%.

So when we speak about NII, you will note that in the case of credit card, it's losing share in our NII because the lower income clients, they are more prone to pay in installment, paying interest and having more revolving credit. The high income is a transactional. They pay their state funds fully every month. So we gain based on interchange of fees and not based on intermediation fees. When I look at consumer credit growing 5.9% quarter on quarter, when we look at this accounting line item, That's growth of personal loans at very high margins. But what I mean to say is that we are doing our homework so we can have a good quality of assets. What we are originating here is half of personal loans we are originating is with collateral guarantees.

Secondly, the other half of this is

personal loans to high net worth individuals. And only a small part is going to lower income individuals with a slightly higher margin. And it requires more provisions. But overall, it is not going to change our curve of losses and delinquency. What does this mean? It means we're working with smaller spreads. When I look at payroll deductible loans, the INS loan is The spread we're working with is 30% lower than the spread we used to work with with the NIM that we used to have before for INSS. That's why external channels find it hard to make new INSS operations more difficult because 100% of what we originated is sold through our own channels. So we have a much safer portfolio requiring much less provisions and with an NII

Growing, but growing steadily because we're working with better quality.

With companies, we are growing 3.2% quarter on quarter. When we speak about micro and SMEs, we're talking about a 5% increase. Please note that our big growth comes from the middle market. with companies earning more than 50 million BRL per annum.

They're the ones growing more, but in the other segments.

In retail, the SMEs making between 3 to 50 million BRLs. They're also growing.

We're growing all of them, but we're growing even more in the middle market.

Now let's look at the portfolio.

Real estate.

5.5% with collateral guarantees. In foreign trade finance, we have a lot of traction with large companies and with the middle market. With a cost of risk, that is very good. And the same applies to CDC and vehicle leasing, growing 2.3%. When we break down working capital, you will see in the full income statement that we have

securities with adventures and working capital.

So, none of the large companies. And if we focus on the middle market and small businesses, these two segments, up to 3 million and 3 to 50 million euros, what do we find? For your information, number one, In some segments, our whole origination, or 80% of origination, is cholesterolized.

Real guarantees, or we can ensure good quality receivables. Or we work with government programs, such as PROCRED, PRONEMP, and FGI.

Depending on these, we go to 4.8 million. turnover year in the case of FTI with companies of up to 300 million bureaus. So we're growing quite well here. So what is the decision? What was our decision in the beginning with all of the modeling? Our guiding star for decision-making regarding risk appetite and growth, it's called RAR, Risk Adjusted Return. We ran a lot of simulations in terms of growing working capital for small businesses, and we realized that even with a much higher rate, we had an RAR much higher, a 60% when we operate with FDI and Pronap.

This is what is guiding us.

NII is lower, but the level of cost of risk and provisions is much lower. And this gives us stability with this portfolio mix. And this gives us a peace of mind looking at the future, considering everything that we are doing.

Lower NII.

When we grant loan for working capital with PRONEP or FGI, the margin is 5%, 5.5%. perhaps one line with a slightly higher. But this is more geared to high and middle and large companies than for SMEs. On the other hand, losses are almost zero here.

So we have good modeling, good models, good traction.

This is what we've been doing. And I can tell you, Produsco is one of the leaders in granting these types of loans in the Brazilian market. Now talking about credit vintages, base 100 average of 2019. This is our level of origination.

I'm speaking about mass market individuals. So we continue with a very good balance in our vintages. Over 30 mob for growing production, but based on those modalities I mentioned.

Origination was very good in Q3. We're always looking at the mix and the rating of clients. I remember that in the prior quarter I mentioned this. In the case of individuals in 2019, we had 50, 51% individuals with a rating between A and B, 74%, 75%, in addition to having this mix. And that's why delinquency is dropping.

And we obviously need fewer provisions for these vintages. And this is what we're seeing in our cost of risk.

Now, looking at mass market companies, I'm looking at SMEs, same base, 100, 2019 average. We have very good vintages. The past quarter, you asked about this, growing way below 100, but note with the bars that the level of origination is not so leveraged as it is with individuals. There are marked differences in the market. Individuals are growing real income, growing more than 6%. Level of unemployment in Brazil is 6.7%, but companies are different. And we want to operate safely with our portfolio mix. And we can see over 90 days delinquency reducing, requiring fewer provisions.

So, net interest income is here. Let's look at credit cards.

It used to have a share in the past year ago, 8%, dropping to 7.5%. That's what I mean. I'm working with the transactors with a better risk.

Market and AI.

We have been talking about this with our investor relations team, and our focus is on the NII net of provisions based on risk-adjusted returns growing 6.8% and growing consistently. And what we need to look at here is that, well, an NII of 809, it depends on the mix. We have to know how much will deliver in terms of cost of provision. To have the best combinations.

Eight or nine? No problem. But how much will it cost for us to deliver constant growth in our NIR?

That's when we look at RER. for our decision-making. And I can tell you, in payroll deductible loans, the level of RAR is good. It's high with traction. But in the case of INS loans, the spread is 30% lower compared to what we are originating now, compared to what used to be originated before the prices were controlled.

RAR, in working capital, again, it is a high RAR, sometimes 60% in the programs with guarantees. Then we get accredited indicators. All one indicator is dropping more.

Delinquency, of course, will start dropping at a lower pace, but we have stable coverage ratios and NPL creation as well.

You can see it on the slide.

Our expenses with expended long-loss provisions, of course, are dropping, and we'll have fewer long-loss provisions in the new vintages because we have better quality vintages in what the portfolio makes. And, of course, improved efficiency, not only with modeling, with our credit policies, portfolio management, and also improved efficiency in the collection.

work of our credit team.

And I'm speaking about fee and commission income.

I'll speak about CLO.

Here we have the normalization of this consolidation. We closed the tender offer of CLO in September. Excluding this was 2.8%, excluding the three-stake in CLO. And 4.3%, comparing nine months of 24 with nine months of 23. And CLO, in this case, did not produce any quarterly gain. Actually, we had a negative consolidation. Our earnings would have been a little higher if we had not had the negative consolidation of CLO. And I'm speaking directly about CLO.

carried income. Draw your attention to the fact that growth net of sale would be 0.3% quarter on quarter.

But we have an important comparison when we look at high income. 15% against 1.5% year on year. I talked about the transactors.

Well, this is what is moving us.

And please note that we are growing practically all Revenue streams, whatever the period you look at, and I draw your attention to our asset increase of our AUM, increasing 55 billion euros at BRAM.

BRAM and TIVIO will have an AUM close to 1 trillion euro.

and this is reflected in an increase in fee and conditions income of 11% for asset management. Bradesco Asset won very important awards in the sector.

Next, looking at operating expenses, the same thing I said about Cielo.

When we normalize the consolidation of Cielo, we're talking about a 2% growth quarter-on-quarter, And in the nine months, which is what goes into the guidance, 9.1%.

But look at the red box now.

If we look at personnel plus administrative expenses, our growth in the organization is 0.6% quarter on quarter. And in nine months, 4.6%. perfectly controlled. When we have a trend upwards in this indicator, we may have tax expenses, labor expenses, without considering the consolidation of Cielo, the card business. However, we have been investing in Elo, Livelo, and the growth of operating expenses there has been a high two-digit. And even Cielo is now investing in their transformation. But if we exclude that, if we look at the banking business plus the insurance group, then the growth would not have been 8.4, it would have been 7.2% in line with our plan, even with the investment we've made. Now, it's also important to look at our footprint revision, another 450 15 transactions. So we come to the third quarter. with a change in 1,041 points of sale. We had an expectation of 1,000 points of sale, 250 transformations. The number we delivered is higher, but we're still accelerating now in the fourth quarter of 2024, although our client base has grown now, additional 1.8 million clients.

If we look at the insurance group, we had a great performance with this level of growth in premium revenue with a net income of 2.4 billion and ROA of 23.7%. a growth of 8.1% quarter-on-quarter.

And if we look at insurance operations, we had 8.7% quarter-on-quarter and 4.2% compared to the same period last year, the ninth month. And look at the combined ratio also coming down to 86.6%. You will have all of these figures in our presentation. Our Tier 1 Basel Ratio, growing 0.1 quarter on quarter.

It's now 12.7%.

Stable capital. This is what we're showing coming to our guidance. We've had the normalization of CLO in the mid-column. And when we look at the expanded loan portfolio, we've announced earlier this year that we were in line with the guidance, and that's it.

We're delivering as planned.

When we look at... net interest income and expended loan loss provisions and we always talk about these two indicators hand in hand.

You can see the NII which is important because it impacts our bottom line. You look at our fee and commissions income including and excluding Cielo operating expenses and the income from insurance where you have a combination with the baseline in the previous quarter

It was excluded from the guidance, but it is now included, and we will deliver the guidance as planned.

Now, a few topics about the change to the bank.

This is a balance of what we delivered in this quarter. We now have a new IT colleague. We have made progress in our culture. We conducted a survey with 74% responses, a great level of engagement, and we're still growing. We have hired not only IT professionals, and of course that increases operating expenses, but we've hired senior professionals. who have joined our team at the bank. We invested in our business unit for credit, also in middle market with eight units, eight new branches last quarter.

We've also invested in fixed income so that we have more resources to be able to meet the demand. We are also continuing our efforts in footprint adjustment.

Two inorganic items are here. I told you we have completed Cielo tender offer, and that did not really impact our result. I mean, it had a slight negative impact. Our result could have been a little better. And the John Deere bank acquisition had an approval by CADI. We're expecting the Brazilian Central Bank approval. to close the deal this year. So eight months after we launched the plan, we are now launching a new segment of clients for high net worth individuals. And I'll speak more about that.

That's our expectation for the last quarter. More investment in digital channels. We will have more hires in technology.

We will continue to review our footprint.

We will also expand SMEs in that segment, but we

Between 3 and 50 million a year, we are also accelerating our gains in cash management. As I mentioned last quarter about Bradesco Expresso, we delivered two platforms. We were going to do the rollout until the end of November, but yesterday we concluded the branch rollout, bringing a better experience to our service centers and also to all users of Bradesco Expresso. And in the next quarter, I'll bring more news about this. Now coming to the conclusions, we have been able to grow profitability with a solid and safe position. Our top line is growing. We have traction in all segments and products, but focusing on the risk-adjusted return, the RAR, because that will determine our net income. We have a new segmentation for individuals. We will talk about that in our transformation efforts.

We are accelerating the execution of our plan.

And now that's the reason why we're all wearing the red vest. This is Bradesco's color, but it's a brand new tone. Because we now have a new segment for high net worth individuals. It is here under the wealth management vertical with a different value proposition for high net worth individual clients. I will now show you a video. It's a three minute video because we could not give you a longer presentation. But this video will be talking about the new segment. And the video is presented by the project leader, the person in charge of implementing the new segment, Andressa Augie. So let us now watch the video, and I will come here for the Q&A session we will have immediately after the video. We also have our colleagues to... talk to you, to talk to the buy side and to the sell side. So let's watch the video and then we will be here with Cassiano and André to answer your questions. Thank you for being with us. Let us now look at our new segment. Thank you. Listening to our clients has made us built eight decades of a solid, one of the largest financial groups in the world, and one of the best market wealth managers. This close relationship with clients has inspired us to launch a new segment, a new proposal in our strategy of wealth management, considering different surveys, international benchmarks, extensive data analysis, and technology advance, we now have extended these resources to the whole organization. With all of this information, we built a new value proposition with a new concept of service closer to clients, exclusive credit card, international full banking connecting the excellence of our functions also in the United States. In addition to a unique experience and benefits to value work lines, This segment has high relevance for Bradesco, and now we want to improve our relationship and gain principality among these clients, improving also our profitability, customer satisfaction, and the NPS. So now I will invite you to come and learn more about this new concept, new solutions in a unique experience. Come and see our new segment for high net worth individuals. For some, red is the color of sophistication. Some other believe red is the color of emotion. However, we know for certain Red has a highlight. It is different. It brings focus to what is principle. Welcome to Bradesco Principle, the new Bradesco segment. If we must have time, you can count on your relationship officer. and our new offices that provide services and extended working hours. If you're looking for performance, you now have the excellence of the best bank to invest, aligned to the expertise of our brokerage coming well planning to offer you a unique experience in a single place. If we want to be international, you now have a full experience also in the United States with your current account, U.S. issued credit cards and many more benefits. If you are a person who travels, you will now have a credit card with points that will never expire in the main launches of the airports and a fast pass. in Brazilian airports. This is the new segment, Bradesco Principles, the same Bradesco you already know, but at a higher level of sophistication you cannot even imagine.

That's great.

So this was the summary of our new segment we saw on the video. I must tell you, we feel great pride in this team that worked to launch the new segment.

We have three flagships, which you can actually see on the ladder.

One will be here on Faria Lima and Juscelino Kubitschek, another one in Rio, in the neighborhood of Leblon, and one more unit in Campinas. As of tomorrow, our team will be there. We have been trained, and we will begin to invite our clients to enjoy this new experience. By late January 25, we will have between 45,000 and 50,000 clients in the new segment, which we will continue to expand until 2026. We will also have geographical expansion throughout Brazil in the main locations that have been selected for this new segment for high net worth individuals with a new value proposition for these clients. And I believe we will have more opportunity to talk about that in the future with you. And now, André, over to you. Thank you, Marcelo. Thank you, Cassiano. It's a pleasure to be here with you. Good morning, everyone. I'd like to tell you that Ivan Gontijo, CEO of our insurance group, is here with us today. Remotely, he is with us online. You can ask your questions either in Portuguese or English. You just have to send your questions by email to investidoresaparadesco.com.br or you can use this WhatsApp number 1197-443-8238 or you can use this QR code. The first question comes from Eduardo Rosman from BTG. Rosman, please.

Hello, good morning, everyone. I have a question. Hello, good morning.

I apologize, my camera is not working, so I only have the picture today.

But my question is about the loan portfolio growth. You are again opening the doors of the bank for clients looking for loans.

You will try and recover That loss of market share and the loss of principality with these loans. But when we look at the loan portfolio, the profitability is lower, not only in corporate, but also in payroll deducted loans. Ivan Noronha spoke about that in his presentation. So I'd like to hear from you about growth and the prospect of growth. And what is your number one concern? If inflation, unemployment, or maybe the price, you would have to be more prudent with that. I'd like to understand the speed of this recovery.

Thank you, Rosman, for the question.

It is a deep question, and it certainly relates back to what I said. Yes, we are conducting this movement based on data. We want to have the right mix and the right ratings. Because let's think about it. Think about an individual who went through financial stress in the last three years. Have they recovered completely? They may have a job. The real individual income is growing more than 6% a year. But have these people truly been able to pay back their liabilities? Well, if you look at banks' models, you will see many of them have not. So we do not want to play the game of financial stress. We want to have a safe portfolio with the right risk adjusted return because that has an impact on the bottom line so for example you say well I had an expectation of a higher NII oh well

Some time ago, we prepared a new plan, a 60-day plan. We conducted, we've executed the plan, and we were looking at a certain level of risk. I mean, we have a very high penetration in all client segments.

Otherwise, we wouldn't have so much traction as we do. However, as we built this new business unit and with the integrated work we are conducting, what have we seen? Well, we realized that if we could use FGI and PRONAMP more, we would have a much better risk-adjusted return because although the NII can be lower, you need much less provisions. And so that is a more attractive kind of business for us. If you look at a ranking,

of these different collateral projects, PRONAMP, FGI, you will see that.

But Adesco has a great traction, and we have a very attractive risk-adjusted return. So looking at our channels, we're always looking for the best RAR, because that's the name of the game.

We may not have a quick growth of NII, but we have a significant growth of our profit. of our net income. So don't be surprised.

Our provisions are now lower than in the past. Why? Well, because the quality of risk is much better. And also, the mix has a much better quality. And when we look at the current economic scenario, I can tell you that

Looking at our strategy, we feel very confident about what we've been doing.

I've just had a meeting with journalists, and one of the journalists asked about the economic scenario. He said, well, the economic scenario has worsened. What is that? What do we mean by a worsened economic scenario? First, if we look at the current scenario, we may have a deterioration, but I think this is less probable. This is less probable than the second option.

AB9 outlaw, we are not really considering. So we may have a change in the exchange rate. Yes, we may. And inflation will certainly grow more, grow faster.

I mean, this would be a more stressed scenario, but I don't really believe in it. Let's wait for the new measures to be taken by the finance minister, Minister Haddad, because yesterday we had important statements that we will have more expenses, which means that we will need more expense control. And we believe this is good news. However, what do I view as the most probable scenario? Interest rates growing up to 13%, maybe closing the year at 11.75%. And the unemployment in Brazil is currently 6.7%. However, there are regional variations. For example, Sao Paulo has a higher unemployment and also Central West that has 5.2 unemployment rate. You see, so we have regional differences in Brazil. And the GDP will be growing 3% this year, inflating about 4.5%. If this is the scenario we expect, well, what will we have next year? And real income is growing this year 6.3% with this level of unemployment.

And if we project this scenario towards the future, Rossman, what will we see?

I mean, I'm sharing more information with you using your question, Rossman. We will see the GDP will probably grow slower, about 2%, 2.1%, but there will be growth. The expected unemployment level will not be very different from 8%. And the conclusion, I'll come to the conclusion in a minute, and what about real income? It may grow between 2% and 2.5% next year. So look here, the market for individuals will possibly be good. We have great traction. That's what we want because this is risk we consider good. We actively participated in the auction of the INSS because we want to have a clear strategy to operate in this line of business. So we will continue to monitor this scenario.

If we had a financial stress, we feel safe because of our current mix.

Now, for individuals, what we are truly looking at is the risk-adjusted return. This is what really moves the needle. Now, looking at the company clients, because of these programs that provide collaterals, And because of the specific credit lines we're offering, we feel confident about what we've been doing. And we're growing in cross-sell. We are attracting new clients. We are attracting companies payroll. So my... answer to that journalist was, what is the scenario?

Will it deteriorate? But what does it mean?

It means this. But is this probable? Well, it depends. And depending on what happens, we'll make a decision.

I fear for the country.

Nobody wants to see high unemployment. Nobody wants to see the economy growing slower. We don't want financial stress. So I hope the most probable scenario will materialize.

And it's not bad.

It's not a bad scenario at all. for our country. And also, it's not bad for our business because the next question is, and what will happen to me? Maybe for different industries you will have different consequences. But for us here, we are very much aware of the current scenario.

We see a good correlation in terms of interest rate increase. We continue to monitor our risk models.

and also NPL.

However, we have two important variables here, especially one, which is when the population loses income.

And how may that happen? Well, if you have a very high inflation, if you look at the current deviation, that would be the price of beef today. But the other prices seem to be under control. And the other issue would be if the unemployment rate were sore, because that would end up reducing individuals' income. But this is what we project. I believe we will have a controlled expected loss and lower provisions for the new vintages and a growing NII. We will be growing in fee and commission income. We will be also growing in the insurance group. That's where we place our expectations. I'm sorry for such a long answer. I just wanted to add more information about the current economic scenario. Thank you very much.

Thank you, Marcelo and Rosman. A positive macro scenario, portfolio growth, and client NIA growing looking forward. Next question from Renato Meloni with Autonomous. Hi, Renato.

Hi, good morning.

Thank you for taking my questions. I'd like to understand the dynamic of client and IIN at the provision, because in your presentation, it seems clear that there is some difficulty in going back to accelerating growth in mass retail, both for SMEs and individuals.

You justified that with the cost of risk. Good.

Are there other challenges, for example, regaining principality of these clients? And the second part of the question is how important is the change bank strategy depending on this acceleration? And will you have to review the plans for next year? Thank you for the question, but let me clarify. Perhaps I was not clear. We are not decelerating the mass market, neither in SMEs. Let me give you some data. There is a public ranking.

Do access it if you're curious.

That's PRONAP, PRONAP ranking. You will see which bank is ranking first or second in distribution to SMEs.

We're talking about companies making less money. And the client base. So we have principalities. We are leaders in small businesses in Brazil. We're accelerating this.

And if you access that ranking, you will see that the most operations happen with the disco. And I don't want to be transparent. I don't want to mention competitors, but Banco do Brasil is fighting for the number one position So we have client principality. We are growing. We are growing with clients who have a good rating, with loans that will ensure constant and perennial growth. So change, the bank helps in our growth. strategy, because we will deliver a number of better initiatives for our organization, which will make our organization more competitive. One of them is the new segment, the principal segment that we were calling the affluent one. And the credit BU, which is super important for us, with a number of quick wins. And then later, Renato, In a future opportunity, we can explore this in more detail. The SME segments with 122 branches increasing to 150, that increased markedly our penetration and quality of risk.

Our portfolio management quality improved.

You will remember that in the credit business unit, we created a new unit of portfolio management. They have delivered models to us

with a prediction of default in the middle market, with companies with a turnover up to 300 million barrels. So we have very important deliveries in portfolio management, in granting loans to clients.

In our timeframe for approval of loans in the wholesale bank, dropped by 40% for a loan. So we have good traction in large corporates, middle market, SMEs, and also individuals that I want, together with my team, to grant high-quality credit and deliver perennial deliveries. And I don't want to have a good margin and then have a trough, a pick and a trough. And also cost management is under control. We are reducing the footprint. And we are managing our personnel and administrative expenses, which are very much under control. And our cost to serve is under control for the whole organization, also in terms of internal processes.

But another interesting element to mention is that Procred program was launched, providing collateral for

Micro companies, micro enterprises in October. Very few banks started operating with this. Bradesco was the first one. And you can do it all via our app. So we have good traction. But we are now going to deliver an NII that will peak and then get to a trough. And let me add to that, Marcelo, there are two slides in the presentation that Marcelo just made showing the new credit vintages. The first slide shows our origination in mass retail individuals and then mass market for companies. And we show significant growth in both in Q3 against Q2, even stronger performance in mass market individuals. So we don't see any difficulties in growing these two segments, but we're growing carefully because we're looking at the long run. We want to continue to grow quarter after quarter.

Thank you, Renato.

Next question by Yuri Fernandes with JP Morgan.

Good morning to all. I'd like to have an update.

And are we converging to cost of capital? We get that question almost every call. I'd like to get an update from you. Last time this was asked, Noronha, I think that your answer was that this was going to be a gradual process, that it was doing slightly better than expected, but that would be aligned with loan loss provision and then improvement of the top line and NIO. But I'd like to Focus on the cost of capital, because in Brazil we have a higher cost of capital.

So my question, for 2026, are we going to see a higher ROE, or will the plane be delayed? Because the ROE is improving, but QE doesn't seem to be improving in Brazil.

So how to balance these two?

Thank you, Yuri, for your question. In fact, you always touch on this point. Thank you for the question.

You always mention that.

That's our mission and our target, our goal, regardless of the cost of capital being a little higher or not, we'll pursue it.

And our expectation is to deliver better returns quarter after quarter and growing absolute results. This is our expectation and growing more safety. And with the reduction in footprint, we had a reduction in our headcount. But we also hired for the credit business unit and for technology people with greater seniority. And we have to pay them four or five times more. And that will hit the operating expenses. But still, that's where we are going.

We will pursue this balance. And, Yuri, what matters is that we pursue this with quality.

This gives us some predictability and gives some predictability for the market. Cassiano, do you want to add? No, not really. I think you said it all in all of the initiatives you mentioned.

And we have spoken with Yuri about that.

The matter is how much more we want to bring this forward.

We're working for it, but we have our internal problems in Brazil. But we have the dynamic of our balance sheet.

that we're very serious about 2025 and in the future to continue to change the bank and the transformation process led by Marcelo and under my responsibility. The outcome of that will be a solid bank, as we have always been, more profitable every quarter, and with clear consistency in how to serve our clients, how they want, so we can get that principality.

and improving our competitiveness in all segments.

That's very important because that's all the transformation is about. Thank you.

Thank you, Yuri.

The next question comes from Tiago Batista from BS. Tiago, please.

Hello.

Hello. Hello, everyone. Good morning.

My question is about investment in technology.

Seems like the bank is investing more in technology to close the gap compared to peers. But how much can this process become easier now with artificial intelligence? How will that help close the gap? And if you do this now, I mean, is it easier to do it now than it would have been a few years ago? And also a follow-up about the SELIC basic interest rate. You spoke about 13% or around 13% next year. What would be the impact if the basic interest rate really confirms at this level?

What would be the impact in a few years?

Well, thank you, Tiago, for participating.

Thank you for your question. It's a pleasure to have you with us. About technology, we do not see a technology gap. Our diagnosis

shows we have an opportunity to increase significantly our productivity because we have more third parties than our own employees and that changes our productivity. We also want to have a more senior team and then we want to roll out this initiative to the whole organization using our enterprise agility. whose use was more restricted to now. So we are investing in line with the large players on the market. Sometimes we press the gas pedal a little bit more, but the fact is that artificial intelligence has been with us for some time now.

BIA has evolved. It's now moving into Gen AI, but BIA has been with us for quite some time.

We have been using artificial intelligence, machine learning to develop models in our business units, but we're using that very strongly also in our pricing efforts, regardless of the value proposition we have in each business unit. So we do have a lot of use of artificial intelligence.

even in pricing so that we can price in microclusters even at coming down to the client level.

And that will support our digital channels, which we call business experience.

So we continue to work hard on this and also on other fronts.

If you think about technology development, And using GenAI, we are also using that in our daily work. And that will expand even further. However, we want to translate that into a better experience for clients and operating efficiency gains. About the interest rate, maybe you'd like to answer. Well, I believe the interest rate curve here is still in distress. We'll have to wait and see. However, at first sight, I believe the effect is neutral. I mean, from our point of view and looking at 2025, there will be higher floating gains, but then I will have perhaps a lower result in asset and liability management. So even if it is at this level of 13%, I do not see a great impact. But, of course, there will be other consequences. I mean, if we have such a high interest rate, the inflation will be different, and then we will have... a different scenario altogether. Yes, let us wait for the U.S. elections, which will also have an influence on this, on the foreign exchange rate and other variables on the Brazilian market. Thank you, Tiago, for the question.

Thank you, Tiago.

Daniel Vaz from Safra, do you have a question?

Thank you, André.

Good morning, Noronha. Good morning, Cassiano. Noronha, as I was listening to your presentation, we believe you are focusing on risk-adjusted return and also on the mass market with collateralized credit lines. But if you think about other lines, I mean, how was the result of the testing you did in the last few months? What was the return you had in the vintages that you tried and then you stepped back? And now you are advancing in collateralized loans. Because if we think about fintechs, many of them are providing clean loans without collateral sense. Can you tell us more about this market where you played or did not play in the last three to six months?

Thank you, Daniel, for the question.

I can tell you... that we always look at the risk-adjusted return, even at the wholesale bank. If you talk to any one of our regional managers, they will say, I have a dynamic curve of the risk-adjusted return for every client, and that's omni-channel. The officers can have that information on the mobile phone, on the tablet, and they also have a risk-adjusted return simulator, so you can work on the margin only if you have the right level of risk-adjusted return because that is the target that our officers have to meet. And if we look at small businesses, individuals, and even high-net-worth individuals, When we do pricing, when we look at the price of risk, when we always consider that in every opportunity we have. In SMEs, we may have an RAR as high as 60%, but when we had clean loans, you could never reach such a high RAR. We were at the lower quartile. However, yes, we do provide clean loans. in some selected clusters. Remember, we are a large payroll payer for four companies, and so I know our clients' cash flow. We also provide payroll deductible loans, and then you can have other types of relationships that come out of these transactions. So we do have clean loans, but only for... very good credit rating clients. And obviously, we always work within a certain range of expected losses compared to the price that is the margin provided by each client.

And when we provide clean loans, that is the case. However, we have to be realistic, Daniel.

Individuals of lower income who had delinquency issues in the past, have they fully recovered? Have they been able to repay all of their liabilities? Do they have a higher risk? I mean, we conduct a battery of tests. We are testing all the time. And I'll tell you, Brazil is a blue ocean. There is risk everywhere you look, so you have to take care of your own portfolio. Of course, I respect the strategy of other players, but we feel very confident about what we've been doing to deliver results that can be sustainable. We do provide clean loans, however, that cannot hurt our results. I mean, unless you have a specific situation, a very large company, but it's not the case. Thank you for the question, Daniel. And please continue to observe. We work case by case.

Next question from Mario Pieri with Bank of America.

Good morning, everyone.

Thank you for the opportunity. I'd like to focus on the insurance group. 45% of the earnings come from insurance. And we see increased profit in health insurance.

In the nine months, it's grown 66% year-on-year. So, Noronha, I'd like to understand, what are the drivers here?

And can you maintain this level of growth next year? Also in the insurance business, the PNC profit grew 76% quarter on quarter. I imagine that this might have been some effect of the state of Rio Grande do Sul and everything that happened there.

Perhaps you could explain the PNC phenomenon.

I'd like to invite our colleague, Ivan, to answer your questions. Ivan? Thank you, Marcelo. I'd like to thank Mario with Bank of America for the question. So here's your answer. The insurance group growth, if you look at the line items, it happened in all of the revenue streams, all companies, products. In segments, savings bonds, health, pension, growing very in a robust way, and P&C, as you well observed. In the combined durations, we can see substantial improvement in this quarter in all line items, in all companies. in terms of the claims ratio. Of course, that gives us more robust results, as well as we improve the operational part of the business. And that's why Marcelo mentioned And our reserves had two-thirds coming from the operational part and one-third from the financial part. To answer your question about health insurance, we started adopting some practices over the year that started reading the fruits now in Q3, but these are things that have been implemented since the start of the year, with some adjustments made regarding some excessive use of the health plans and also tackling frauds. And, of course, that led to a decrease in claims ratio for veterans with a better operating result. Perspectively, to answer your question, we are comfortable, we'll continue to do this work, which I insist. We started at the beginning of the year, and the results are only showing now. But this improvement should continue in the next quarter. Regarding PNC, that's a business that has been growing.

With an ROE which is extremely solid, showing the robustness of the business and of the transactions. Other in terms of auto insurance and homeowner's insurance. And the growth, you probably saw this.

Well, we have to compare Q3 to Q2. In Q3 and Q2, you show events related to the south of Brazil. Those events were observed in the balance sheet of Q2 with coverage. And now, in Q3, without these events in the South, we were able to grow the P&C business with more comfort, low claims ratio, and with a commercialization and administrative ratios which were extremely positive. This is how we can explain this positive result for both of the companies that you mentioned. Excellent, Mario. Thank you for the question. I can add saying that we have good traction in all segments of clients. And distribution at the bank is very strong also for the insurance business.

Thank you. Thank you, Mario. Thank you, Ivan.

Next question from Pedro Leduc with Itaú BBA.

Good morning. Thank you for taking my question.

I want to know about NIM. And I guess that the years unfolding as planned in February, the first stage of our recovery came from loss provision. You got that. And then you grow in the portfolio. You get in there, too. And the next would be NII. And that's starting. Finally, SG&A in the future. So, Noronha, I'd like to get your take on this. If there's a sequence to improve ROE, first, long-last provision, then portfolio, then NII, if this is still valid, now that you have the new vintages, you have pricing, you have funding, and gross NII can increase in the next 12 months? So that's what I would like to know.

Well, thank you for the question and for participating in the call. I believe so.

I think that we can continue in the trend that you mentioned and that you mentioned so well. NIAM will grow depending on the scenario that we mentioned, the portfolio mix.

What you can promise.

I don't like to promise. I like to deliver. And I've been saying this over and over.

But what we have in mind is

If we deliver an NIM, which is stable, I spoke about 8%, 9%, it doesn't matter, higher or lower. If we deliver this with an adequate cost of provision, this is what we need to do. Because that's our NIM of provisions.

And that's why we use... The risk-adjusted return will continue to grow, and the NIN behavior will depend on the mix, because if I can originate more payroll deductible loans, the INSS deductible loan

Well, it lost share, but it is good.

It gives me RAR for our channels. For external production, that commercialization cost is more complicated. I can't produce more, originate more.

I will. And this will bring us up somewhat lower NIM than other companies.

but it will bring us more NII and will require very little provision. So this is the promise that we continue to have and our expectation is to grow our NII over time.

and deliver a more consistent ROE for the bank.

And we should not forget the liabilities.

And it's part of this NII that we've been working with. Where do we work?

Not only with SMEs, with our cash tools, and also now with our principal segment, because we want to have a greater principality in the high net worth individuals. So it's a mix of things.

And we'll have the right trend, and this will allow us to take the next stride along 2025. Thank you for the question, Pedro.

Thank you, Pedro. Now, may I ask about the LMM of the current portfolio? I mean, do you have more hedging, especially for the prefixed or the non-variable stocks?

products. Well, there is not a big change, but I believe it is more neutral.

Now, when I look at the portfolio and look at the prospective curve compared to our funding in our own capital, today it is more neutral. Now, we do not have more hedging, but we're monitoring the risk.

If the rates go up, you have an opportunity to have gains on the liability side.

But when you have volatility on the market, you also have opportunities in the trading portfolio and also in other business lines. So our policy of not doing hedging continues. However, we have also reduced the risk of using other levers.

Perfect. Thank you. Thanks for the question.

The next question is from Eduardo Nishio from Genial.

Nishio? Hello.

Good morning. Thanks for this opportunity.

Good morning, Noronha, André, Cassiano. I'd like to go back to Leduc's question about the transformation plan.

You have conducted a number of changes. I'd like to hear from you about where you stand in the new compensation plan, both for executives and also at the branch level. I'd like to understand, you know, the number of branches that will continue to change.

I think you had 5,300 branches in 2016, and now 250.

So you've had a dramatic reduction in the number of branches. Also about digital banking, if you could provide an update about the future of your digital banking. And also the rollout of new platforms. You have just rolled out a platform for individuals. And what are your plans for the next quarters?

Now, my second question is about delinquency and loan loss provisions.

Delinquency seems to be quite well-behaved.

coming down quarter after quarter. But do you expect to go back to the same level before the pandemic? Will that happen now that we see a different situation in terms of credit?

Look, Michio, about loan loss provisions, as I said,

We are attracting better ratings, a safer mix, and so we will continue to see delinquency coming down. And this is something we believe we will be able to control.

Unless, I mean, we have a surprise coming from large corporations, which we don't really expect.

So I believe it may go back to the previous levels. Now, about compensation, this is the first six months when our compensation is based on individual evaluation.

Of course, we have different weights. The level of responsibility of each executive is considered. All client segments are receiving incentives depending on what they can deliver. This is what we call extrinsic motivation because we also have the engagement of our teams and our professionals. And we will see that at year-end. Our compensation plan at all levels, you know, both at the branches and here for executives, each person is being evaluated according to the deliveries.

I will now hand it over to Andrei and Cassiano because they will speak about our footprint.

Now, about digital banking, I can come back to provide an answer to you because we have been working with Tulio. Tulio has just joined the company. He came from the market. He will be responsible for a few products and the digital mass segment. So we have been working. We will soon be able to provide more information.

Now, I will begin talking about our branches.

Oh, yes, I'd like to add, you spoke about the number of branches, but we don't really look at branches alone.

We look also at our service centers because these are branches. They are businesses. I mean, although they may have a different size, they're still business units.

Yes, we are now at the level of 5,000 points of sale or points of service.

We did see an evolution in the cost to serve.

1,041 points of sale is a big number. But we have not only a qualitative and quantitative analysis, but we also look at the behavior of clients.

We also have our ears at the branch level to look at the behavior of clients to see if we have any kind of attrition. and how our Bradesco Espresso is serving clients in each region. We analyzed all of these points.

Actually, for us to participate in the INSS auction, we had to provide this data. And we've been testing new models.

Bradesco Espresso has gained principality.

Marcelo spoke about how the platforms of Bradesco Expresso have improved, so that's part of the vertical channel of client service, even non-account holders. So we continue to monitor and we still have adjustments to make to improve our cost to serve in the mass market. So I believe we are in a comfortable position to attract the best profitability for the mass market. Would you like to speak about the loan loss provision? Well, when we look at our points of sale, we are advancing at a quick speed and We have actually anticipated future adjustments in 2024 and 2025. We have temporary expenses to conduct the adjustment. However, this will not be present in our operating expenses, so the impact will be seen. As of 2026, we are still in a vicious circle because the virtuous circle will begin in 2026 when we will have our efficiency level closer to the target of 40%.

But it's interesting to say that our... Our plan is being executed.

I mean, do we have perfect numbers? Not yet, but we will see a great impact as of 2026.

Now, about loan loss provisions, we're always based on credit risk. As Marcelo said, we now have a vintage of higher quality, so we have lower needs. for loan loss provisions.

Every time we have a new portfolio, we calculate a new loan loss provision. The credit risk has come down to 3% now, which is very close to what we consider normal. It may even go up slightly, but still controlled. So we see a portfolio expansion with controlled credit risk so that we will have a better NII. And that is what truly moves the needle at the bottom line.

And this is what Marcelo said.

Thank you, Michio, for your questions.

The next question comes from Tito Labarta from Goldman Sachs. Tito, the floor is yours.

okay uh good morning everyone thank you for the call i'm taking my question i have two brief questions uh hopefully if i can um just first on your deposit uh growth we saw a nice pickup on your demand deposits but savings and time uh were down a bit on the quarter and still haven't really grown much on a year-over-year basis just understand the drivers of the deposit growth in the you know demand savings and time is competition impacting that at all or what's the the driver behind that and the somewhat muted growth overall. And then the second question was on your fee income, because we saw, you know, good growth in asset management, up 11% on the quarter, even though the investment funds and managed portfolios didn't grow as fast. And also the loan fees were up 9% on the quarter. Loan growth was good, but didn't grow that fast. So just to understand the drivers of those two fee income lines, if you can. Thank you.

Andrea, I have a question for you. Now, André Tito was asking about deposits, demand deposits. Yes, it has grown. But we can look at it in different combinations, you know, because with some clients we even pay, I mean, because it's good for us to have these demand deposits.

So this number is growing. We can provide further information to you after the call. We can provide more details on this, but we are growing in demand deposit. We have a good level of traction in terms of our relationship with these clients. Now, savings accounts. I mean, it is only natural. This is something very Brazilian, and it is, in fact, a challenge for the real estate market.

market. But we feel very comfortable vis-a-vis the competition.

We have shown we are competitive, otherwise we would not be growing on these lines. But yes, we have things coming out of one line and into another line. But we are looking at all of this, trying to do better every day, delivering a non-friction experience to clients. be them micro companies, high net worth individuals, different lines using different channels, we're always looking at providing the best possible experience. And let me open for you to add, yes, if I could add, Marcelo, I think it is important to say, and I mean, even Tito spoke about competition, demand deposit and savings account,

You always have market competition. That's clear.

I mean, looking for attracting clients using FGC in brokerage firms and investment companies are also doing that.

And there's a high demand for CDB, Certificates of Deposit. But I can talk to you, Tito, about our demand deposits.

So demand deposits and savings account, although they are growing slightly, that is always connected to the principality of the relationship. You know, when we open an account, we continue to grow 1.8 million accounts, even though we have adjusted our footprint. And the other element is improving our cash.

The insertion, the introduction of our cash management, we now... have client centricity in all of these lines.

So we have a positive number in demand deposit and we also have new transactions from FTC. So we see this migration and a higher demand for certificates of deposit. Abraham has received a number of awards as a wealth manager. Abraham has received a number of awards and $55 billion in assets under management. That's also an important number. Yes, about asset management. We said that we have a 33 billion increase in AUM, now 55 billion, and now we have a performance fee because we had a great performance in some of our funds. So assets under management have been growing quarter after quarter. That's helping us a lot. In terms of loans and services, that is something... I mean, in a number of lines, we may have a lower spread in a few credit lines, but we are having more cross-selling, and we have developed skills to work with that. That's why when you look at the top line, you are adding the revenues coming from insurance, and also NII. And if you look at company clients, we charge fees. We have a monthly fee. And also, he asked about the capital market. You know that variable income, the equity market is at a standstill right now in Brazil. And that's a pity for the market. However, Fixed income is certainly growing. That is why we have more colleagues. We've expanded the team because we see a lot of opportunity here, and we are adding value. We believe we will grow this quarter and also next year. This is the expectation we have in the investment bank. Perfect.

Thank you. Thank you, Tito. Now turning to Carlos Gomez-López from HSBC. Carlos, please.

Hello. Hi, Carlos. How are you? Very well, thank you. So two questions on other segments. You mentioned the investments that you are doing in credit cards. You mentioned the investments that you are doing with ELO, an ELO investment in debit cards. Does it make sense to continue to push the debit cards when perhaps they're going to be replaced by PICs? How do you see that market evolving? And the second would be on your new segment, principal. How does it relate with Prime? Thank you.

Okay, thank you.

Cassiano, you can speak about this dynamic of debit cards because there's an initiative in the change bank regarding that. Yes.

Yes, Carlos, thank you for the question.

We have been working exactly to understand this dynamic of debit cards vis-à-vis picks.

And the trend is that we'll work more and more with one channel, more digital, with less plastic.

and this is part of these news that Marcelo mentioned we will be communicating particularly in the mass market but investments are made to clearly maintain our status quo

But we have been doing a lot of work so that we won't have any cannibalization and so that we can have a direct, effective digital channel for our clients with less plastic.

But Carlos, let me say something. This cannibalization by PIX is natural, but the volume captured through debit cards is still significant.

We see this in the bank, in the market, and we see that at Elo. So to us, this is an economically better business.

Now, with the interchange being fixed and with this obvious cannibalization, it doesn't make sense to send out plastic, as Cassiano mentioned.

But they can use virtual cards. That's what we're working with. Virtual cards to be distributed to clients.

So as long as we can maintain that, as long as clients want to use them, fine.

And, of course, we'll be prepared for a natural evolution of that regard with PIX and debit cards. Now, the new segment compared to Prime, as you mentioned, we're also working primarily with the clients because they are there.

It's not like we're opening a new market front to gain new clients. Of course, new clients are always welcome. They want to open checking accounts with us.

That's great.

are inviting our own clients. But as of January, Carlos, you were invited to visit our new business office. And, of course, new clients will be very, very welcome. But we already have the clients. They are with Prime.

They're being worked on.

And the managers will be sitting side by side so clients will have no discontinuity when they migrate to the new affluent segment. And we have been working with a remodeling and we're working on the value proposition of Prime. That means working with different account loads for the managers of Prime and with a much more objective value proposition for also the Prime clients. Clients want to have self-service, but they still want to have contact with their manager, their investment advisors, our colleague mentioned in the video. So it all speaks together. They work this new segment, but we're also working to deliver an even better value proposition to our individual clients. And let me add to that, Marcelo, because I think that was also asked The new segment is above the prime. A superior quartile, 300,000 investments, up to 10 million BRLs. It is between prime and private. It is a qualified high net worth individual segment.

Thank you.

And it is to maintain both? Yes, we'll maintain both. Prime for all of the category up to 25 BRLs. We must mark it.

And then prime, principal, and private.

That's all for individuals. Okay, thank you very much.

Next question from Bernardo Gutmann with XP.

Good morning, everyone. Thank you for taking my question. I have one specific question about the behavior of the agribusiness portfolio. Looking at the rural portfolio, there's a relevant delta between the growth of rural loans for individuals, which was the strong growth of 16% quarter-on-quarter, against the reduction in loans for From companies, what is the strategy of the bank for this segment, also considering the slightly more challenging scenario with delinquency in the sector?

Thank you, Bernardo.

Well, actually, this was the only company's portfolio that showed a drop quarter on quarter, because we had some settlements and some companies closing down, bigger companies.

that went to the capital market, given the offering with good custody.

And since we have a good penetration in individuals, and they're kind of mixed with legal companies in agribusiness, so we have a lot of collateralized business with these groups. So we posit growth for rural individuals, but for the companies that fall into bigger companies that accessed the capital market because they had an attractive cost. But we stand strong in that sector. We have our distribution across the agribusiness belt of Brazil and we have our support team reinforcing this.

We have agronomists for the different segments. We have

And very soon we'll bring you some news about that.

This business we have with John Deere,

is something we want to close this year, so we'll start next year full steam with them. So that's kind of the phenomenon that explains the difference between the two portfolios, but we also have a very good quality of risk.

Our delinquency rate in the agribusiness portfolio is absolutely stable. Thank you, Bernardo.

Next question from Henrique Navarro from Santander. Navarro, please. Thank you. Thank you for this opportunity. Now, I'm sorry, I'd like to go back to a topic that has created some more noise in the interactions I've had. Not only it was very good to hear from you that maybe we should not look at client and IIN sheer growth, but maybe look at NII net of provisions. When you look at this number, 27%, it would be fine. So my question is about the future. You have already shed light about the fourth quarter. You said you will continue to have accelerated growth, but what about 2027? You will look at client and I, net of provisions, right? And Looking at 2025, I know the guidance will come only closer to year-end, but how much growth is based on Bradesco recovery market share? Market share that has always been yours, you know, in terms of principality, continue to have your previous share of wallet, and how much of that depends on gaining market share in the competition with other players? You know, just so that we have an idea

about 2025. thank you navajo for the question and thank you for your comments thanks for being with us i will tell you that i feel extremely confident we're growing client base and mass individuals

high net worth individuals.

I mean, we are growing.

We already have a huge base, but we are growing in the prime segment. Look at the private. I'm sure we have also been gaining market share. Our value proposition has become increasingly more robust, and we now have the new segment, the principal between prime and private. So we have a great penetration in all of these segments. I believe that there will be a natural principality in line with our fair market share. If we did not have that, we would not have such a high level of traction. I mean, our portfolios are growing, and the portfolios that we want to see growing, delivering what we want to deliver to clients, we are growing in fee and commission income. I showed you how our credit card holders are transactional. And this segment of transactors is growing. So we want to gain market share. We have gained a little bit, but not much. I mean, we gained share in this quarter, and we will certainly be well positioned. This is our expectation. But with the right portfolio, also in insurance, I believe we have great traction. We have been reviewing our footprint and growing the client base. Of course, many of these new clients are payroll deductible loan clients. But we also do cross-selling with these clients. So we see that we have a great penetration in the client base. And with our fair share, we have everything needed for 2025 to be even better than 2024. As I said, we have a lot of traction. That's why I feel so confident in all client segments and verticals.

I mean, when we have monoline, for example, auto loans.

But if you look at heavy vehicle loans, trucks and heavy vehicles. We have a very significant share, which we will further accelerate now with our business with John Deere. So we have a great penetration in all business lines where we operate. The insurance group, as Ivan mentioned, I mean, and even I told you, we have a lot of traction also in the insurance group. I mean, look at our penetration. Look at our share, our risk appetite. has decreased a little bit, but we are now pursuing the right quality. This is our expectation, and we expect to deliver a higher top line and have a credit cost under control in 2025. Looking at client NII, there are three main drivers. First, portfolio growth. Marcelo and Cassiano were clear telling you that we continue to grow this portfolio.

Next,

Our cost of funding is below 5% of the CDI, and we are taking action to lower that even further, which will help us improve our client and I. And again, look at our spread, which is the risk-adjusted return. We don't want to have more spread with a higher load-loss provision. We're always looking at the AR, so these drivers will help us. The first two will certainly help us, and the third one, too. So thank you, Navajo, for your question. Now the last question with Brian Flores from Citi. Hello, thank you for taking my questions. It's a brief question about the impact of the interest rate, thinking about the market in AI now. I think we are now closer to $2 billion in 2024. And looking at the scenario you described with a higher basic interest rate, do you believe that in 2025 could we dream of having an NII similar to this one? Similar to the one in 24?

Thank you, Brian.

Obviously, we're not talking about 2025 yet, but I can tell you that we have a more neutral view.

I mean, we...

We do not have our structure hedged, but we do have important action that make our liability management more neutral. For 2025, we still don't have a clear view of what will happen to the market, so I prefer to talk about that when we publish our guidance. But I believe we have a more neutral position now. for this new higher interest rate cycle. Thank you.

Well, we are closing the question and answer session. Those questions we were not able to answer here will be answered by our investor relations team. I'd like to turn the floor to Marcelo for his final statement. And I'd like to let you know on your website, you can find the whole package of our results.

Thank you, André.

Thank you, Cassiano. I'd like to thank all of you for joining us today. Our team is always available. Myself and Cassiano also are available to answer any more questions you might have. We'll be meeting soon, and I expect you to join in the next earnings conference call. Thank you very much.