Banco Do Brasil Sa S/Adr

Good morning, everyone. I'm Jonaína Storti, Head of Investor Relations at Banco do Brasil. Welcome to our first quarter 2024 earnings live stream. Our event will be in Portuguese with simultaneous translation into English, and you can choose between three audio options, original, Portuguese, or English. Present here with us are our president, Tarsiana Medeiros, our CFO, Giovanni Tobias, and our CRO, Felipe Prince. Yesterday, at the end of the day, we released the numbers of these earnings, and along with it, we made available to everyone a video of our CFO commenting on its main components. This was done so that we can optimize the time here a little bit more. making better use of our space for the questions and answers session. So considering this new dynamic, I'm going to turn the floor to Tarsiana to make her initial considerations. And next, Giovanni will give a very brief speech with some highlights, and then we will move on to the Q&A. But before that, you will see here throughout our event a QR code on the screen. This QR code takes to a very brief survey with three questions so that we can hear your perception of this new model for our earnings conference call. I would now like to turn the floor to our CEO, Tarsiana Medeiros. Good morning to all. Bibi's purpose is to always be relevant to people's lives. And at a time when we are all in solidarity with the magnitude of the tragedy that is plaguing Rio Grande do Sul, I begin this live by saying that the residents of the regions affected by this disaster can once again count on the full support of Banco do Brasil. From the very beginning, last week, we announced actions to contribute to the recovery of the state, and we have updated this package of actions based on the development of several measures throughout our Banco do Brasil conglomerate. Today, through the Banco do Brasil Foundation, we allocate another R$ 50 million in support to the population of Rio Grande do Sul. This amount is in addition to the other $5 million that we had announced already last week and to the $3 million that we received through our solidarity campaign, which is still going on, published on all of our channels. But I emphasize that our actions go beyond donations in the millions of PRLs by Banco do Brasil and the companies in the conglomerate. They also involve humanitarian support in the region and relevant business measures for our customers. We have made credit lines more flexible, increased grace periods, postponed payments of credit card bills, in addition to other measures that can contribute to alleviating this moment of pain. We have also implemented a set of initiatives to support our employees who are in the impacted cities. We are in direct contact with all the 113 impacted employees, providing support and advice to each of them individually and according to the needs that afflict them. With this, we seek to ensure the comfort and dignity for our colleagues that are going through this difficult time. We continue to closely monitor the situation and will use all of our channels, capillarity, and whatever is in our power to help the state. We hope that Rio Grande do Sul can begin to rebuild itself as soon as possible with the support of the entire Brazilian society and international society. Continuing with our earnings presentation, I would like to thank you all for your participation. We are pleased to deliver the best first quarter in history for the second year in a row. Income of 9.3 billion BRLs in the first quarter of this year represents a growth of 8.8% over the same period of 2023. I always say that discipline in the execution of our strategy and our governance model are attributes that generate value for our shareholders and bring returns to society. Banco do Brasil's corporate strategy reflects its participatory and diverse management model, we bring together representatives of the controlling shareholder, minority shareholders, and employees in our deliberative bodies, and we give them voting power, all aligned with the same objective of building sustainable results. We are accountable to more than 1 million individual shareholders with whom we have a transparent relationship. We understand that the value of our shares does not yet reflect the fact that we are among the most profitable banks in the country that grows our portfolio sustainably and responsibly with robust capital. We have been working together with our partners to diversify the generation of business as we know that with this, we will be increasingly competitive, offering a complete value proposition in the different segments of the market. Fee income proves this. We closed March with 8.3 billion BRLs. And here, the performance of our conglomerate is very important. We foster innovation in our company's businesses, and I'll give you some examples here. In the case of BB Consortium, we have an initiative in the market, which are the green consortia. The strategy provides for an ecological counterpart with the planting of trees per quota sold. Green groups encourage the acquisition of green economic goods, such as electric or hybrid vehicles, solar energy, water reuse systems, among others. This initiative has already reached a volume of 3.7 billion BRLs, and quote us, quote, which made it possible for us to plant more than 435,000 trees. Another example, BB Assets structured its first real estate fund for shopping malls, BB Premium Malls, BBIG11. Launched on B3 last Friday, the fund has already consolidated itself as an absolute success in fundraising with almost 1 billion BRLs. This initiative reinforces our commitment to offering complete, sophisticated solutions. We have also intensified talks with Banco Votorantim with a focus on increasing the financing of new vehicles. This partnership aims to increase market share in the segment, combining BV's expertise in credit and risk and BV's distribution and vehicle financing.

Another important point that I would like to mention would be about Cielo. We believe that the listing will bring relevant conditions for the company to compete and better position itself in the quality, new reality of acquiring a means of payment. We do understand that it's possible, and we have a complete value proposition for corporate clients, integrating the main aspect of the relationship through payroll, collection, acquiring, and cash, amongst other problems, in a more dynamic, efficient, and increasingly innovative way. And, in fact, business innovation is fundamental, and it still fuels. loan growth. At the end of March this year, loan portfolio registered 1,138,000,000,000 BRLs. This is a growth of 10.2% vis-a-vis the same period last year. Amongst banks, we were the one with the highest portfolio growth with defaults below the average for the financial system and with a mix of risk and return that suited our business ambitions. For 2024, we intend to keep ahead of competition in expanding our portfolio considering our strengths and leadership such as payroll loans, loan facilities for companies and agribusiness. The results we're presenting today are quite significant in terms of figures with an NII of 25.6 BRLs, 22% higher than that registered during Q1 last year. This performance shows the relevance of our work and enables ideal conditions to prepare and deliver today the Bank of Brazil of the future. We are working to assure for BB to be able to reshape itself, adapt and be an agent of transformation in an economy and society that is reconfiguring themselves with impressive dynamics, the bank we already want For the future, operating on three fronts. The first concerns a new way of relating to our clients. We call this Ponto Bebe, which bears no relation to what we know as a traditional branch. We want to bring the best of the digital experience to our brick-and-mortar locations based on the complementary performances of these two worlds at the service of our customers. We presented this strategy to our market during our BB Day. Some of You joined us there and we opened the first BB.BB in March this year in Recife in a hub of new technologies in Marcosero region. And the initial results of our first BB.BB in Recife are very promising. In just two months since it opened, this lab of experience and innovation has already led to a 20% increase in the opening of bank accounts and over 43% increase in disbursement of payroll loans and other lines of loan for individuals. Figures like this reassure us that with Ponto Bebe we'll be able to relate even better to local communities and thus be able to offer our products and services for new perspectives to these clients. All of this efficiently since we will be offering partners the chance to host their brands in these spaces, sharing part of Punto Bebe's expenses with us. In brief, we will be launching Punto Bebe in new locations with this new way of relationship. There will be an even greater change in the roles and attributions of our employees. And here we come to the second aspect of preparing the bank for the future. We will increasingly train Our employees to be financial advisors and agents of transformation in customer relations. The third way for BBs to remain competitive is through data intelligence, which has increased its influence on the conglomerate's business generation. Data intelligence is behind the strategy to offer a bang for each client in a hyper-customized approach. As those of you who follow us closely already know, In addition, BB's experience in providing robust loan and risk models coupled with the exponential amount of transactional information generated historically has brought opportunities of hyper-customizations from the combination of structured and unstructured data. These actions have boosted the granting of loan with agility, innovation, and operational efficiency. This has allowed to accurately map clients connected to the various productive chains where we identify the link between companies and individuals, enabling an offer of sustainable loans. We have already implemented this solution for the agri-public with the potential to disperse 2.5 million clients. And speaking of agro, I'd like to use this opportunity to inform you that our disbursement under the crop plan have already exceeded this volume of the previous crop. 200 billion BRLs were dispersed in just 10 months' current harvest, which reinforces the strength in agriculture. and our partnership with the clients in the countryside. To give you an idea, we just burned $196.6 billion in the entire past crop. We participated in the country's main agribusiness trade shows in the beginning of the year. We achieved record business volumes in all of them. All in all, we totaled more than 13 billion BRL proposals received at these events. I would like to point out that we are the first bank to announce in our and ESG target, our sustainable loan portfolio reached 359 BRL in the period. This is a growth of 9.3% growth in 12 months, and this is one-third of our total portfolio. So to talk a bit about the highlights of our results, now I will hand it over to our CFO, Giovanni Tovias. Subsequently, we will have a Q&A session. Thank you very much, Giovanni. Thank you, Giovanni.

Thank you, Tarsi. Good morning, everyone. So here, briefly, so that we can skip to the questions, just a reminder for those who didn't have the opportunity. So we had adjusted net income of 9.3 billion BRLs, growth of 8.8%. Our growth, NII, expanded 21.6%, reaching 25.7 million BRLs. Fee income growing 2.6%. Our guidance is between 4 and 8, but we believe we will continue. We'll be able to deliver this fee income at those levels. Administrative expenses are under control, 8.9 billion reais. The growth of 4.9% in 12 months. And our expanded loan portfolio growing 10% in line with the guidance. NPL also under control, starting to stabilize at 2.9%. and our cost-to-income ratio of 25.9%. And finally, even with a payout of 45%, we've reached the CET1 at 11.9, coming from the levels of last quarter. Before we open for questions, it's important to note that this adjusted net income, we had two movements that a lot of analysts have been asking about, and so I'm getting ahead of the Q&A. One of them is about self-regulation, incentivized tax self-regulation. In November, Law 14740 was developed to allow companies as a whole to self-regulate like that. This was approved by the Federal Revenue Service. by rule 12-168 of December of last year. So within a routine verification, we had already foreseen when checking the profits of our external dependencies, especially Banco Patagonia, we were considering profit levels where the Brazilian accounting would not allow, especially when we're discussing hyper-inflectionary economies. Because of that, we already saw the need to correct the base of the tax calculation, the tax that was collected in previous periods. So we paid more and less. And with the definition of this self-regularization program, we've had the opportunity to offer this adjustment within the program that would already have been done normally within a spontaneous reporting. So we had the opportunity to adhere to the program and we were also benefited with the non-collection or charging of fines. So every time you need to make an adjustment from the past payments, tax payments. So that led to gains to Banco do Brasil. Due to that, the management has decided even to be able to be coherent, our tax rate with this gain would go to 6%. And in reality, we know that this is not a recurring tax rate. So we decided to anticipate the movement of a specific company, a specific case that was already under judicial recovery for some time. This process had already been addressed previously as an extraordinary event, but it was provisioned within our recoverability expectation for that asset. That asset from the telecom industry has recently started to ask questions. There was a change in governance, and that brought some serious doubt in this case, even considering extraordinarily this judicial recuperation that was being under development for some time with a second recovery. So a recovery from the recovery or a recuperation from the recuperation. So in face of that and considering this opportunity to adhere to the self-regularization with that gain and the tax correction for paying taxes that were paid in excess in previous periods, the management decided to end that and do the complete payment of this problem assets that had been with these legal issues. So with the fact that we addressed these two events as non-recurring events to allow for comparison and for a better projection of what actually is Banco do Brasil's earnings that we are delivering to our shareholders. With that said, I would like to turn the floor to Janaína so that we can go to the Q&A session. Thank you, Giovanni. So I'll begin our Q&A session here. You may ask your questions in Portuguese or English. And you have the button on your screen to raise your hand in order to ask a question. I'll ask you to kindly ask one question per analyst so that we are better able to bring everyone to this discussion. We already have a long list of people enrolling for questions, so I will call the first analyst, Renato Meloni from Autonomous. In relation to the first quarter, I apologize. The quality of his audio is impossible to understand. I'd like to understand the factors that influenced that. And what's your expectation for the coming quarters? Without a doubt, when we look at our NII, Renato, right? Thank you for the question. When we look at the NII, you can clearly see a growth of 21.6% in the annual view, reaching 25, 734 billion BRLs. When we exclude the Patagonia effect, this NII... would continue in the annualized view, presenting a growth of 20%, reaching R$3,666,000,000, and 25% in the quarterly view. What happens with Banco Patagonia has a direct effect of max. When we consolidated the results of Patagonia in the fourth quarter, by consolidating it, we used the average... exchange rate in the period of that quarter and that market inflation happened at the end of 2023. So when I brought Patagonia's earnings now in the first quarter of 24, the actual consolidation took into account the average exchange rate of the first quarter of 2024, which is already fully impacted by MOXIE. So the results went down, basically there's a reduction of one billion, so it's contributing to around two billion of my margin. Our expectation is to continue with that guidance that we set forth, that growth of around 11% for my NII, And we recognize that this 20% increase somehow tends to evolve as we have a readjustment of the indicators and TMS during the year. So we don't have a lot of concern. We're not greatly concerned. Quite the opposite. If you look at Patagonia's earnings now in pesos, in Argentinian pesos, it's been quite favorable. Because until last year, there was a cap that forced you to remunerate for fundraising. So it's a very – a bank with great liquidity, they have a network. It's a bank with a network. So they're very little exposed to credit. With the new measures of the Argentinian government, you were able to reprice that funding cost, improving the earnings of Banco Patagonia. So somehow, when we did our forecast – We had the conditions, and the maxi has impacted consolidation of results, but we believe that it is part of our business. It's a connected company. It's a business that is generating results. But if you look at our margin, our NIIX Patagonia, it continues to present growth, and growth of 20% in the annualized view and 6.5 in the quarterly view. So that's a result of our asset and liability structure, the repricing of our funding costs here was faster than the pricing of my asset portfolio, especially for loan operations. Of course, in the active end, I also have a drop on the private securities income because of the drop on the TMS, but nothing outside of that are estimates. I'd also like to point that Banco Patagonia is a bank that similarly to Banco do Brasil's corporate strategy, seeks new sources of revenue. It's a bank that's present in all of Argentina's provinces and managed by Banco do Brasil. The board of the Patagonia Bank is Banco do Brasil's board. It's colleagues from Banco do Brasil who manage it. The CEO has actually had 40 years of experience in the financial market, and he's been through all of the economic challenges conditions that Brazil has experienced. So we're talking about an operation that is very well managed. And I think it's important for us to emphasize this when we talk about Banco Patagonia. Thank you, Tarsi. If I may also add, when we brought our guidance and we already considered a reduction of Banco Patagonia's contribution. This reduction happened. It was slightly smaller than what we expected, considering everything that Giovanni mentioned, the deposits and the greater volume. And we'll continue to monitor this situation. We know that in Argentina, there's still some volatility in the market, and we'll continue to monitor it to understand this dynamic over time. over the quarters. Thank you, Renato. For our next question, I'll bring Danielle Vass from Safra. Please, Danielle. Good morning, everyone. My question is about a triple L. you're having the guidance up to 30 billion, but the level that we'd have an average per quarter. We see that the new NPL is running close to 9.5, but I'd like to understand from which segments do you expect this version of risk in NPL? Is it individuals, companies, corporate, agribusiness? And it's going to move to a lower... or if you can give us more details about this. You asked and answered your own question actually. What we saw in the first quarter, in addition to the complete stabilization of that risk management process that we had begun on the individual's portfolio, I think the provision for the individual's portfolio is normalized. compliant with the result generation that we seek in this market, we started to be more pressured in the first quarter due to the credit to companies, loans to companies. So you saw we had some cases of clients that were part of judicial or extrajudicial recuperation processes, and the SMEs market is growing. challenge to the entire market. It's a tailwind effect of the individual's NPL, and when that's stabilized, of course, there's less credits available for individuals in the market, and that impacts consumption, especially from micro and small businesses. In terms of agribusiness, it's still an effect mainly of the costing operations with producers who are with full inventories waiting for an improvement in the trading prices for their products. So what happens? These costing operations must be liquidated by the end of this harvest so that these farmers can justify new fundings, new loans for upcoming harvests. So we've been working very closely to these farmers so that we can regularize these operations, and of course, buffer this provision flow that came from agribusiness in the first quarter. So, there's no magic trick here. We will seek and deliver convergence to the guidance, optimizing provisions for companies. It's important to note as well that one-third of the SMEs portfolio is pegged to risk mitigators of governmental programs. So we have the course of delinquency, you have the course of provisioning, but once the operation is honored, this provision cost is reversed, the A-triple-L. So there's no other major case in our radar. SMEs, in addition to the risk management process, on the reindeer operations is guaranteed, and agribusiness, this intensification of regularizing costing operations so that we can have another beautiful crop plan in 2024-25. So these are the three components that we're working very strongly on to make NPL converge. We're working on the medium to high end for 2024.