Banco Do Brasil Sa S/Adr

Good morning, I am Janaina Stotti, Head of Investor Relations of Banco do Brasil. Thank you for joining us for another live streaming on the results of the first quarter. Our live streaming will be in Portuguese with simultaneous translation into English. You can choose three audio options, original, English, or Portuguese. And to talk about the members of the first quarter, we have here with us today our CEO, Tarcela Medeiros, our CFO, Giovanni Tobias, and our CRO, Felipe Prince. Now, just to start off, I would like to turn the floor over to Tarsi to start with her initial remarks. Good morning, everyone. Thank you for joining us in another earnings release presentation. I just landed from an official mission to China, where I had a very intense institutional and business prospecting agenda. Right now, I'm talking from our New York office, where we will also be holding important meetings with clients and partners. Over the last two years, we have built up a very close relationship with the market, and I really wanted to be here with you today. This quarter, It's even more important that I provide you with a diagnosis of the bank's results and its strategic direction, and I'm going to address all of the issues that have impacted the beginning of the year and what we are doing to get through this moment. Since the beginning of our administration, just over two years, we have delivered 73.5 billion BRLs in adjusted net income. We added value to our shareholders and added a further 171.5 billion BRLs to the whole Brazilian society by means of the demonstration of the added value, which is an important sustainability concept that goes beyond profit. The return was above 20% in every quarter during our administration, reflecting the disciplined execution of our corporate strategy as I have always told you. Throughout the first quarter of 2025, we continue to deliver important milestones in line with the direction we set for managing the trillion-dollar business. growing the loan portfolio at an adequate pace despite a cautious scenario with our fee income dynamics moving in the right direction, specially boosted for the conglomerate's business and without losing sight of expense control, which is a constant effort by the bank. I am very proud to see all these strategic fronts we presented to you in February moving forward. And of course, I can't fail to mention something we've worked very hard on over the last few months, which is a significant and historic delivery this quarter. A new point, a new product, a product that changes the conditions and the way that Brazilians access credit. Crédito do Trabalhador was a major turning point. We connected our more than 20 years of expertise in payroll loans with the best in CRM, artificial intelligence and credit analysis, both for individuals and companies to confirm our leadership positions. Until the launch of the solution, we had just over 20,000 agreements with companies to operate with payroll loans in a portfolio with 1.5 billion BRLs. which took us about a decade to achieve, and we achieved that in under two months. In the short period, disbursements exceeded 3 billion BRLs with employees from 68,000 companies, and there's still portability to come. Whenever we refer to net income itself, we deliver 7.4 billion BRLs in the quarter with a return of around 16.7%. Below what I believe is the Banco do Brasil's size and potential. We had already said that the first quarter would be a period of transition, especially because of the new accounting regulations. What we saw was an increase in delinquency in the agribusiness segment that was worse than expected, even with all the measures that we have adopted. This, combined with the implementation of Resolution 4966, which changes the way you calculate expected losses and interest accruals, had an even greater impact on this portfolio at the moment. The combination of these factors had led us to revise these two lines of the guidance and consequently the profit line as well. It wasn't an easy decision, but I believe it's the most prudent decision and one that reinforces the commitment to honesty and transparency with the market, something I've been honoring since the beginning of my tenure. With more visibility of the scenario and the end of the 24-25 crop plan cycle and the strategic measures we are pursuing, we will be able to bring you a new predictability of these projections for the coming periods. Now, when I look at the results for the first quarter, I can certainly say that none of the events surprised us in terms of where they were heading, but rather in terms of the magnitude of their impact once they were combined. I met with some analysts less than a month ago, and we talked about the dynamics we could anticipate given structure issues, performance by segment, and the seasonality of the first quarter. I would like also to take this opportunity to discuss some important aspects of the current moment, and then I'll present the direction of our strategy, you know, trusting our capacity to generate results. The first factor is related to the effect that the interest rate environment has on the balance sheet, especially with regard to the rise in the SILIC rate and intense and accelerated cycles, such as the one we saw between December and March of this year, when SILIC rate went up three consecutive times by 100 basis points. This immediately impacts around half of our commercial funding and institutional funding as well, both of which are post-fixed and are immediately remunerated at the new rates. The increase in the reference rate in the same period, which practically doubled, affects the other half of commercial funding, with savings and judicial deposits. In addition, liquidity in the first quarter of the year is lower, and that's why it was impossible to offset the increase in funding expenses with the Treasury results. We are therefore working on new disbursements and the turnover of the loan portfolio. However, in the short term, the impact of the SILIC rate is greater on funding expenses, and this influences the net income interest. We have a strong balance sheet to cushion the variations over the quarter, so in the annual view, this tends to be smoothed out. is of a regulatory nature, and I'm referring to the entry into force of Resolution 4966 from the National Monetary Council, and I would like to comment on the changes of this resolution to Banco do Brasil's business. This transition has required a recalibration not only of risk modelling, but also our commercial flows and practices to context focus on expected loss for the flow of interest received here at bb we continue to improve our practices in face of the new resolution which brings new information internal intelligence statistics and modeling to our business in this first quarter we decided to maintain a conservative analysis of risk and provisioning, and I've had interesting conversations about various points of our origination strategy and business conduct. The main impact of this change is in agribusiness, which has its own particularities and is very specific in terms of annual flow of receivables and guarantees and its planting, harvesting and marketing cycles. And certainly this impacts the entire agribusiness change. So by the same token, it impacts the portfolios of individuals and companies. With the 4966, the provisioning flow tends to be brought forward compared to previous rules of Resolution 2682. The interest accrual changes from accrual basis to a cash basis for assets considered to be problematic, even if they are not in default during the cure period. Here was 1 billion BRLs of credit income that no longer impact at the margin in the quarter and around 400 million BRLs in income from credit services which are now also deferred in the margin. The third factor is the unfavorable timing of AgroSegment's credit quality as we go through this change in accounting rules. The timing of this transaction was negative for Banco do Brasil and so far as Agribusiness accounts for more than 400 billion BRLs in the portfolio and is going through a cycle pressure on the faults above the historical average. This has pushed the provision for the segment, which was already at high levels, to more than 5 billion barrels in just one quarter. Moreover, this context is aggravated by the in-core reorganization of rural producers, which we have been discussing with you for some quarters. The in-court reorganization assets are immediately considered problematic and, as such, their expected loss dynamics are accelerating. I would like to point out that our efforts to sit down and renegotiate have had an effect with a reduction in the pace of new supervised reorganization entries. In view of this, Banco do Brasil, which has a historically strategic presence in the sector, is naturally affected in a different way when compared to other organizations because there is an intersection of this portfolio with individuals and corporate clients.

None of these factors alone would have brought the result to the level we delivered, given the bank's business diversification. However, the combined effect of the accelerated increase in the select interest rate and the still deteriorating credit quality of the agri-segment during the adoption of Resolution 4966 impacted our result. Thank you. Having understood the challenges we face in the short term, I want to draw your attention now to the drivers that are the basis of our commitment to creating sustainable value looking beyond this quarter. I've been telling you that our relationship with more than 86 million clients is our competitive edge. The great beauty of our relationship is the closeness and human connection we build. We are the only omnichannel bank in practice. I say this with the confidence of knowing our new interactions platform, NCRM360, and seeing what it is capable of. It has recently been integrated with WhatsApp, and arrange higher channel architecture in a way that is unprecedented in the market. This solution was developed by Banco do Brasil and has become a worldwide case. Given its success, I have no doubt that it will be sold to other companies very soon. Since we connected the CRM to WANTS, we've seen the average number of contacts and interactions via text message grow 417% in March. That's valuable, powerful, and promising. Each of these records help us to get to know our clients more deeply. And by applying AI, we use the rich information from each contact to generate increasingly accurate insights. Personalizing interactions, our offers, and really delivering a BB Bank for each of our clients. Currently, more than 17,300 colleagues work with access to the CRM360 platform, and we should extend that to our entire managed service structure by year-end. The new platform drives the evolution of relationship and service models with the best combination of digital and human, as well as more efficient allocation of our professionals, providing the best interaction with clients on the ideal channel and at the most appropriate time in a scalable way and with a high potential for capturing results. We are also continuing to reframe the concept of the bank branch with Ponto Bebe, of which we celebrated one year at the beginning of April. The new model integrates the spaces, explores strategies beyond banking and proposes new service journeys in a more welcoming environment and with the physical presence of market partners. This new model is part of the changes we are promoting in our structure, making them more consultative, advising and efficient, offering the best of both physical and digital.

We will not stop here.