Banco Do Brasil Sa S/Adr

Good morning, everyone, and thank you for joining us in another live streaming session on the results of Banco do Brasil. Our event 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 this second quarter, we have here with us our CEO, Tarciana Medeiros, our CFO, Giovanni Tobias, and our CRO, Felipe Prince. Now, to start the presentation, I would like to turn the floor to our CEO, Tarciana.

Good morning.

Good morning, everyone. Good morning to everyone who is joining us today for this live streaming on Brazil's results. This is the 10th one that we have together, but this one is quite special. It will be a bit different than all the previous ones because I think this moment requires a more straightforward conversation. So my presentation will be an executive presentation and shorter so that we have more time to talk and we can allow more time for the Q&A session. I would like to thank very much to all of the market analysts that are joining us today. Thank our shareholders, our clients, and all of our colleagues from the bank who built the results, and also our clients. And also, I would like to thank the members of the press for joining us today as well. So today, we will try to be very transparent as it has been a hallmark of our administration. We will talk about the results and what to expect for the rest of 2025 and the years ahead. I think you are very eager for this conversation. So with no further ado, let's look at the numbers. This first quarter, we had an adjusted net income of 11.2 million BRLs, a variation in the second quarter of 3.8 billion or minus 48% vis-à-vis the first quarter. Our cost of credit was up by 56% vis-à-vis the first quarter, and this increase was very much based on agro-divinquency in micro and SMEs, but very much pressured by this divinquency. NII. was up 4.9%, meaning that our capacity to generate results is still in line. We talk about that in the first quarter. This is a contribution margin that, in our view, was going to grow in the second quarter, but in that materialized, we also understand that this growth will be consolidated going forward. And when we talk about fee income, it was up by 4.7% vis-à-vis the first quarter. bringing a fee income of 8.8 billion when compared to 8.4 in Q1. That means that we have several different revenue sources, very much supported by the companies from our conglomerate. So that means fees in addition to the banking fees. When we look at admin expenses, here we post 9.7 of... 9.7 already realized of admin expenses in the second quarter, 1.9 in addition to what we posted in Q1, and expenses were very much in line with what we anticipated, both in terms of investments and expenses. I like to say that when we talk about admin expenses, this also contemplates our investment. provisions or forecasts, but expenses are very much in line with what we anticipated. Expended loan portfolio was 1,294 BRLs. This is growing strongly in very secure lines. We will talk about the growth of this portfolio for individuals. and also loans rented to workers. We will give you more details about that. And then when we look at CET1, our CET1 was 10.97 in the second quarter, very much the same as in Q1. That means that our balance sheet is strong, very robust, and at an adequate capital level. Now, Now, taking a deeper dive and speaking about the subject that I'm sure you're eager to hear about, here we have an agro portfolio and the perspective of the different cycles. But to talk about agro, the agro business, it's important that we tell you a story. You cannot look at a single snapshot and understand what is happening with the agribusiness portfolio. It's important that you have, you know, an analysis of what happened in the past five years. So when we look at our portfolio in December of 2020, the portfolio was 1.91 billion barrels. delinquency I mean 90-day NPL was 1% and at the time Salik was at 2% so we just took one of the commodities being soybeans just to give you an idea of what happened over time so in 2020 December of 2020 soybean was priced at at 90 193 per back and Salik was 2% then what happens after you know december 2021 going forward to 22 etc so there was a growth of that portfolio especially in terms of free resources that very much supported by the optimist from the market the market was very optimistic about you know the harvest season and so in 2021 and 22 Soybean bags reached a peak of 192 with a SILIC of 927, and then at the end of 22, SILIC was was higher, so what we see is that the portfolio grew, especially in terms of free resources. What is interesting to note is that this growth was not only, you know, a growth coming from Banco do Brasil, but it was across the market. We have 50% of the agro market, so not only Banco do Brasil, but the market as a whole grew in terms of the agribusiness. And in this optimistic environment, clients were not only taking loans from Banco do Brasil, they were also very leveraged in the capital markets and with partners. Therefore, in 2023, we noticed an interesting growth of this portfolio, going from 309 from 2022 to 355 in 2023, with delinquency at 0.96. In this period, going from the end of 2021 until December of 2023, that's when there was the start of the Ukraine war. And the market faced many challenges because of the cost of fertilizers. In 2023, right at the end of the period, there was a drought and a flood in Rio Grande do Sul. The crop season 23-24 did not perform as expected or in line with previous years, and that's when the challenge became more aggravated. So look at the SELIC rate. SELIC was 11.75, but the price of commodities were down by around 1.46%. And then when we look, December 24 and June 25, the portfolio grows in line with what we expected, but the scenario was deteriorated vis-à-vis the forecast so delinquency by the end of 24 was 2.4 45 this delinquency was above the plan this delinquency was already detached from the plan we were expecting by december 24 delinquency ranging around 1.90 we'll talk to you about that and then we look at what happened when the slick rate spiked so silly at the end of 24 was 12-25, reaching 15 in June of 25. But when you look at the production of that rate, the production anticipated a much lower CLE in that period, which was the forecast for the harvest plan when the plan was envisioned and was launched in the first half of the previous year. So the crop year goes from June of one year until June of the following year. So what is important here? It's important that You know that we know what clients are delinquent, and we know them, and we know that part of this portfolio is delinquent. But we want to be very transparent and give you details about it. So today, June 2025, the portfolio is 12.2%. billion of delinquency, you know, NPL 90, and so December 2024, delinquency was totally out of our expectations. But again, the portfolio was 8.97 with no expectation of growth of this delinquency. This is important that I highlight. We have never seen such high delinquency in agribusiness in our whole history. We've never face delinquency at this level in the history of the bank and why am i saying this because not even in our most pessimistic predictions in most stress scenarios we would project delinquency at the levels we see today in in the agro portfolio so It's important that we make a distinction about things that happen in this portfolio. This portfolio has more than 600,000 clients. Out of the 600,000, 20,000 clients are delinquent today. And then we make a specific set of this delinquency. We have 20,000 delinquent clients, of which 74% until December 2023 had never been delinquent. meaning that these were clients of an excellent history with the bank, an excellent track record. But when you look at delinquency, 62% of it is mostly concentrated in the Midwest region and the South region of the country. And also, 50% of them are already leveraged in three very specific crops. soybean, corn, and, you know, beef. And when we look at the curve of commodity prices, like we put the example of soybean, we can clearly understand what happened to the profitability of growers during this period. So we start with high yields and productivities with also good gains and high gains in December 2022 to a drop. in profitability and a much lower payment, paying capacity. So out of the total delinquency, we notice that here we have 2.27 billion of this delinquency stemming from import reorganization. Now, it comes from reorganization. Today, we have 808 customers in a reorganization process, so now we notice stability in terms of the number of new reorganizations. But these 808 customers account for 5.4 billion BRLs. Therefore, it's very important that we have a very deep understanding knowledge and understanding of these agribusiness scenarios so we understand what happens this quarter and throughout the year of 2025, because 2025 is a year of adjustments for us. So that will help us understand what comes next, what will happen going forward. Therefore, this agro-delinquency is putting pressure on our results. It is increasing, you know, the need for further provisions. Whenever we talk about resolution 4966, and I got many questions about that, when we talk about resolution 4966, I would like to emphasize that this resolution brought to the financial market more predictability in terms of revenues and results of banks. In the case of agribusiness, what happens is that we had a provision model for incurred losses, meaning that once the loss occurs, we would then make the provision according to the risk of the operation. Today, 4966, makes it mandatory to set provisions according to expected losses so we look at the time period of the delinquency therefore provisions have to accompany that and i i keep telling you that i would never sell the risk models from bank of the brazil and i'll say that again we will never sell bank of brazil's risk models because we have models that can predict exactly all of the expected losses and because of that we had to increase provisions and then we will continue to post necessary provisions as we become more aware and we run an evaluation of what happened so in 2025 in the third quarter you will still see a more stress scenario in the third quarter because July August and September are months where we still have of all of the operations in our portfolio that are yet to mature, and we have clients that are still in the NPL 90 days. Therefore, in the third quarter, you should expect still a stress scenario, and we expect an improvement starting in the fourth quarter, already supported by the growth of NII. Now, here I bring the landscape for micro and SMEs. I think it's important that we also explain to you these two factors that are detractors, the delinquency from agribusiness and delinquency from micro and SMEs. When we talk about, you know, PSMEs, this leak cycle really affects the capacity, of these companies to honor their payments. So when we look at MSMEs in December of 2024, and again, we look at the Selic cycle, our Selic forecast for December was nine, not 25, but the actual number was 12.25, and the future prediction was 10.9, but it is now 15. So what did it mean to us? we we we should put these micro smes in our customer base and then we made a move to to help this company and that led to this in holla program out of this total if you look at june 2025 14.9 billion of this portfolio refers to renegotiated that. So when we look at the liquidity from MSMEs, just, you know, to put your mind at peace, I mean, if you look at renegotiated portfolio that is 10.5%, it looks like it is growing and it looks like it is the tractor of our result because we have to make provisions for it. But what it is, what it's important for us to show you that for this new core heart of If we exclude the renegotiated portfolio, that number would be around, you know, 10.6. So out of this portfolio, 25% of it It is guaranteed with collateral funds, and we have 18% of them with guarantees that are secured, secured by real estate and also receivables. But for 2025, I mean, I'll talk about the review of that further on. But it's important that you understand how this delinquency is, you know, It is also important that you know that we know exactly the profile of these delinquent clients and who is delinquent and what part of that portfolio we know that will pay and is at risk. So I always say that Banco do Brasil will post results of the magnitude of the bank. Now, I learned one thing. It's only Banco do Brasil, of the magnitude of Banco do Brasil, can really support this level of delinquency, both from agro and both from MSME. And this is what we notice in 2025. But I would like to conclude this first part of the presentation by bringing you the review of our guidance for 2025. We made a very difficult decision in the first quarter, and I will repeat, because we always strive at being very transparent. I mean, the fact that we reviewed the guidance, I mean, that was a bold decision that we had to make, but it was also a responsible decision and a decision in line with the need to review the guidance that we had given the reality we faced. So here I have the review guidance in terms of our loan portfolio. You know, the interval used to be 5.5 and 9.5, so this review now reflects our actions and our... appetite to grow the loan portfolio for business and agribusiness for 2025 for a corporate. Their review was from 0 to 3 and the past was from 4 to 8. When we look at individuals, the review was 7 in 10, and here we understand that this is an avenue of growth. We will continue to grow with interesting spreads in this segment, and when we look at agribusiness, we had posted growth from 5 to 9, and now the reviewed interval is between 3 and 6. Okay, NII, that was under review. The review interval is 102 and 105. That means that we believe that NII will continue to grow. Therefore, we have the capacity to continue generating results. Now, cost of credit, one of the detractors of our results, and I already explained to you, is very much in line with what comes in terms of need for provisions from agro and smes when we look at fee income we maintain the guidance interval very much in line with with what we mentioned before that combines a very oh i'm sorry i'm already referring to admin expenses but seeing them we maintain the guidance because we know that we will continue to grow this is growing in line with what we expected and we are working to deliver that guidance Admin expenses, it was maintained very much in keeping with what we said before when we referred to a very responsible control of our expenses, and it is worth mentioning that Banco do Brasil is the bank that has the best cost-to-income ratio in the Brazilian system, and we cannot let go of structural investments which are crucial to the growth of the bank in the future. And adjusted net income, with an interval between 21 and 25 billion in 2025 so this is the guidance contemplating the best expectations for the year 2025 as i said before 25 is a year of adjustment is a year where we review many processes this situation of 2025 made us you know led to the anticipation of some measures but I must tell you something a result between 21 and 25 million means that we will deliver the fourth or fifth best result of Banco do Brasil this result is below our expectation and below the market expectation. We are aware of that, but this is a responsible result. This is a result that maintains our balance sheet robust and maintains the company in a very sustainable level so that from now on we will resume our profitability levels like we had in previous years.

And here now I'm going to bring to you the results levers, because now in this first half that we had, we released the first quarter, now we came to address the second quarter. We didn't stop and stand still. We acted like the test. So we needed to review our corporate strategy. I always tell you that we're disciplined in the execution of a strategy, and we don't leave it to the side. We anticipated some deliveries in advance, some deliveries that were expected for future years, so that we had the possibility to anticipate results and the return of the growth cycle. So now I'm going to bring to you three of the main pillars that we are basing our results levers for coming years. And then the coming years, you can understand, starting as of January 2026, innovation and artificial intelligence to strengthen the credit journey. We are taking care of the sustainable growth of our businesses, but without letting go of investments of structuring deliveries that will prepare the bank for the coming years and will deliver a better customer experience. We remain obsessed of delivering Banco do Brasil to each client. So breaking down some of these deliveries to you, the first major front is the non-delinquency front. Considering all of the 2025 scenario that we're talking about, we've realized that there's a need for a complete change in our structure for collection and credit recovery and adjustment in the recovery stream. So we combined the collection and credit recovery themes with the networks that provide customer service. So we have more than 800 experts focused on collection and credit recovery. In addition, through artificial intelligence models and analytics embarked models that allow us to deliver to our colleagues when they're talking to a client seeking to recover that debt with the customer. it delivers the best solution, it search for the best solution for that client. So with this, we'll gain synergy for collection, retail and wholesale, because these teams are integrated, they're together with the teams that grant credit. So in this process of unifying those teams, We'll get something that I can advance to you that you're going to ask in a minute, but it's individual delinquency that we did not address. Why didn't I bring you the details of individual delinquency as something to address? It's with the synergy gains with the networks for collection, we already realize that there's a surge and an improvement in individual delinquency. We're going to see more pressured NPL, but for individuals, a lot based on non-payroll credit, but this is very much under control in payroll loans, very much under control in public and private payroll loans, and I'll talk about that in a minute. And an NPL that we see slowing down and reducing in the second half of the year, so it was not necessary to bring this to you, because with this strategy, we already realized this flow. Now, when we talk about the materiality of these deliveries, to give you an idea, we gained a lot of agility in the collection of the agribusiness, because we are known as the bank that doesn't seek guarantees. But we have been claiming and judicializing operations, and we have been requesting these guarantees. But in the total of operations that we have been able to take to court and 38% has been regularized already, so this review with the strategic directioning to what must be done with analytics, intelligence, artificial intelligence, Embark, delivering to our colleagues exactly what solution should be presented to each case already brings interesting results. And we're going to intensify during the second half of the year and adjust everything necessary in this track So that we have, as of 2025, a track that delivers proper credit recovery for the coming years as well. So this work is not for 2025. It's a structuring work for the next earning cycle for the bank. When we talk about origination fronts, that's the second big pillar of our strategy. we address more secured lines with lower risks. And this is important here to show or to tell you about our strategy for the worker payroll loans. And here, in 2023, I think on the second earnings release, I told you that one of our strategies would be to increase the private sector payroll loans. And we were preparing for that. We had been preparing the tracks. We had been adjusting processes, looking at the journey of contracting that product. and in 2025 we grew from 23 to 24 about 30 percent in the private sector payroll loans and from 24 to 25 we grew about 30 percent again but where was the difficulty the difficulty was on the need to close an agreement or a partnership with each company starting in 2025 with a worker payroll loan that was launched in march this need for agreements with each company, this barrier was removed. And we were already prepared to work on that product. So what happened? With the resilience matrix, the matrix of customer analysis that is very robust, where we have the analysis of the employer and the analysis of the employee, we had the conditions to seek safe growth in the individual's portfolio. That's one of the examples. origination in more secured blinds has been happening from the moment that our colleagues are talking to clients and making offers to digital clients. So we have tools, integrated digital tools, the service network, noting that today our CRM makes a huge difference in the use of data. I'd say that Banco do Brasil has the largest database in the Brazilian financial system because it's 200 years of accumulated data. And all of this data, the embarked intelligence in its use, brings us a lot of confidence when making an offer, a lot of security to make an offer, so intensifying and adding guarantees, adding and identifying new risk mitigators for credit operations bring in this effort for origination, an origination of cohorts that have more secured lines, more profitable lines, at better risk. And in terms of the guaranteed portfolio, we adjusted it during this year, this half year, for the year in the guaranteed portfolio, and that in... MSMEs, it shows how it's working. When a colleague is offering credit to MSMEs, they already see which client to offer to, what is the best suited credit line for that client, and what guarantee is more important to mitigate the risk of that operation. So, the return adjusted to risk, in practice, converts into delivering what client to approach, with what credit line, at what moment, and what is the guarantee that should be added when granting credit. And we've been working constantly, looking at the customer's needs and what they come to seek at the bank, what moment they're in in their lives, and new negotiation conditions and new products have been developed and all the time we're talking to customers and co-creating solutions, and we'll also talk a little bit about that later on. In terms of CRM, there's an interesting point to mention that is 18.5% of effectiveness for points or renegotiation of that after communication with their digital channels. So omni-channels have been working in practice. So when we talk about regulation, regularizing through digital channels does not mean that the customer was only approached through the digital means. But once they were approached from digital with an adequate solution for them, they went there and accepted the bank's offer to renegotiate. 18.5% is the effectiveness index that is very interesting when speaking of debt renegotiation. And the normal index would be around 6.5%, 7%. So the 18.5% is almost three times more than the average index observed. So this is a successful index, and it's nice that you memorize this because we'll bring you updates in the next results. Now, when we talk about our activities with agribusiness, it is important to highlight that we are the Brazilian bank for agribusiness, and we will remain being the bank that supports agribusiness in the country. We have 50% of this market. Brazilian farmers trust Banco do Brasil. They have been with us for many years. I told you in the beginning that that... delinquency rates and 64 percent of clients had never been delinquent with the bank before so these are clients who have been with us their whole lives and we will continue to be next to them seeking solutions with them and here the proof is that the harvest plan for 2526 is 230 billion bi hours and what's important to note here is that this is already the new resilience matrix. To explain this resilience matrix, and I think Prince can talk a little bit more about this, it was developed by his department, but the resilience matrix is the combination of the analysis of all of our risk models, loan risk and knowledge of the cost of risk, that puts the client into a matrix and tells us what this client's credit moment is, how they're doing in terms of their ability to pay, and if that moment is the right moment to grant credit, and if at that moment we should grant a loan or not. So these 230 billion are considered for clients that are already plotted in the resilience matrix. And what's interesting is that we're going to focus on 2025-2026 with controlled resources, focusing on controlled resources because we already have the free resource portfolio that we need to work to recover. We're working on 2025 and we'll continue to work on it. But now, it's what I said, with diligence, but also being very close to them. close to them so that we can avoid or prevent clients going to ring court reorganization when this is not necessary. We've been working very strongly with the federal prosecutor's office with pnj when working with clients especially first working with them providing guidance explaining providing alternatives for renegotiation and those who seek in-court reorganization before talking to the bank unfortunately we've also been seeking the in-court pathways and it's interesting to tell you that this has been bringing results Recently, we've reached decisions where, in court, reorganization demands were not accepted, collective reorganization requests were not accepted. There was a recent ruling where the request for reorganization was considered as non-compliant. So what's important to say here in our work with the public prosecutor's office is that we've been working with them And we'll be seeking to promote removing it from end court and we'll seek to value negotiation methods because it's simpler, faster, it's better for the customer, better for the bank. And we're also seeking, along with this, to fight or combat abusive litigation. we do have in-court reorganization as a mechanism for reorganization, but for those who actually need this in-court renegotiation. We have been victims for a period of time of law firms that guide their clients and give information to our farmers that sterilized the client's credit life going forward in the whole financial system, not only with Banco do Brasil. So we have been talking to customers. We have been telling them the consequences of in-court reorganization. And what's interesting is that a lot of customers are seeking to negotiate directly with the bank, seeking resolution in the... agribusiness credit handbook, we have already renegotiation dash that is supported by this handbook, the agri-credit handbook. When we talk about service that's specialized in agribusiness, we remain and intensify that. We've been talking a lot with our colleagues every week. In the past, we talked to them every month, and now it's every week, but we have 300 experts focused on serving agribusiness clients. They are colleagues who work on agribusiness and have worked since forever, and Bakudo Brasil the executive permission came, the colleagues expertise was developed together along with the farmers that they serve today. So I think it's important to say that we have experts in all regions of the country. We have experts that are agribusiness correspondents with our own and also our own network that help our clients around the country. And we have agribusiness credits at 98% of Brazilian municipalities. we have also been talking to the regulator about some specificities of agribusiness with the resolution 4966 and i think it's important to address this especially the prolonged portfolio and the flow of operations operations and these operations have the extended portfolio of annual Jana says that it's the bullets, but I like to say it in a way that our small investors also understand. In agribusiness, we have installments that are due once a year. And what happens with these operations, with the resolution 4966? 4966 includes the cure of the operation that the bank passes on as revenue in that operation. From the moment the payments begin, so if I renegotiate the operation with agribusiness this year and the client's going to pay me next year, only next year, according to the current resolution, will I be able to have revenue. So we're talking to the regulating, taking the specificity of agribusiness to them. And an important piece of information is that we did a lot of research and went around the world to seek for a bank who's similar to Banco do Brasil with a similar agribusiness portfolio so that we could be able to talk to the regulator. And we realized that Resolution 4966 is actually a resolution that brings to brazil the best practices of what is already done around the world but the specificities of our agribusiness are rare in the world we saw a little bit in the dutch market and we're bringing this to talk about these specificities with our regulators so the dialogue the communication network is still open and this year for adjustments in agribusiness is also a year of adjustments that we're seeking also with the resolution especially with the the flow of pure of operations that's what we see that distorts things a little bit when compared to the other portfolios now talking about msmes we have been dispersing in 2025 lower risk credit lines with risk mitigators especially pro nap and piec fgi From 2020 onwards, with this first 57 billion BRLs, so to give you an idea, 8 billion were dispersed in the first half of 2025. So this new cohort of MSMEs, this new loan cohort we're building in 2025, we see that delinquency is very much under control. Things are done very carefully. then more than fostering credit, we've been seeking to provide specialized consulting to those companies, informing them about the moment that they're in in terms of taking loans or the retraction of loans and maintaining the credit that they have now so more than just collecting for micro and small businesses we have been providing very relevant consultancy and we're proud of doing that today we have 215 specialized agencies in companies nine high company offices, in addition to specialized service in 4,000 service points in Brazil. But we have 7,400 colleagues dedicated to service to micro and small businesses in Brazil. These colleagues are relationship managers, I like to say that, for these MSMEs. And for MSMEs, we also have that's the smart recommendation area. It's a solution that we provided a year ago. It's like an advisory in scale using generative AI to support our clients' financial and business management. More than 75,000 MSMEs are already embarked in this platform, receiving guidance on how to better manage their business. And we will intensify the dissemination of re and how to use re for all our clients in msmes and it's important to also talk about cielo we worked on delisting cielo in previous years and we've been able to address this with bradesco who's our partner in this company but now for 2025 we've been working very strongly on positioning this partnership And now we treat Cielo as a business ecosystem. It's possible for us now to integrate a Cielo strategy into our MSMEs growth strategy. So a series of solutions that go beyond simply providing a means of payment. We do have now a business ecosystem available for micro and small businesses. And it's important to note that at Cielo, addressing this strategy for Banco do Brasil, we have the executive that was in charge of micro SMEs, Ed, so it's someone who really knows this in depth, bringing very interesting aspects for us. Now, in the sustainable growth of business, we've been working on optimizing the credit mix and opportunities with individuals, here to bring to you, in addition to the worker loans, this is a work that we've done that is very secure and safe, that we were aware of the results that this would bring. From the first moment that the worker credit was launched, we knew what we had to do. We had in our hands the clients selected that we were going to send this to, and here I bring you the details of the evolution of the worker credit and the potential that this line of business has. The beginning of the program was in March, and we already started very strongly from the beginning of the program. In April, with a portfolio with 2.5 billion already, and we opened for hiring the bank's channels in May with 3.6 billion. Portability was enabled in June with 4.5 billion. We had the possibility of multiple contracts because in the beginning of the process, we could only contract one operation. Now we can go to up to nine. And now, in August, we're at a moment where the clients can already take loans to use the resources freely. So we continue to work in the bank with switching more expensive operations with worker credit operations because it's a secure line that in compliance with the client's capacity to pay. And I'm proud to say that we've reached 7 billion in this portfolio. And a very important concern that we had in the market and analysts, and I talked to a number of you about this, is how we're going to know whether this is being effective. Worker credit presented to us bookkeeping and payment of the first payment of 95%. And what does this mean? 95% of companies had the payroll deduction in the workers' payment. And this is very good. That's what we see in the public payroll deductible loans. In the client base that we're growing in worker credit, it's safe and interesting. 80% of these clients are the bank's clients. We have 640,000 operations with more than 115,000 employers already, and 80% of the clients are the bank's clients. But worker credit also bought 104,000. thousand new clients, 106 million in the pension insurance that's already contracted for the worker that already brings additional credit life insurance. And when we talk about high-income, we are working on repositioning the value proposition for high-income. This is about the Estilo brand. You will soon be invited to visit the Estilo house, Casa Estilo, which is a different model that was created with a lot of competition with the client. And the client will get to Banco do Brasil and they will feel at home. Our focus with the solution is is to grow at least 25% in our client base of high income in the next five years. So this is a long-term strategy. We continue loyal to the execution of our corporate strategy, and this is a repositioning of the value proposition for high income. That's one of the projects that would be for 2026, 2027, but we brought it forward because we understand that this already brings profitability and will help us in the resumption of growth and profitability. We expand the high-income model with the sustainable growth of a revenue that we already know. We know how this client behaves. And it's important to know that we have the largest network for the high-income service in the country. We're the only bank present in all capital cities with targeted service for that profile of clients with specific branches and specific clients. offices to serve this profile of client this year we grew in private aum more than twice what the market grew so that proves how much this client likes banco do brasil and they're with us and we have this intention to intensify growth of this customer base in the next five years The increase in balance of the credit portfolio comes because this is a client profile that takes loans and have a very much controlled NPL. The cost of risk is very low, and that's one of the reasons for us to bring this strategy forward. And we are about to launch a premium card for the private bank. client base with the opening of a different card for profile for the high Estilo clients at Banco do Brasil. So we have a lot of good news coming soon, also with good profitability with the bank and advantages and compliance with the client's needs. but we're going to do all of this without letting go of structuring investment and delivering the best customer experience i always say that we'll deliver one bank to each customer and that's the focus and an obsession that we have and we will continue to work to that end in line with the anticipation of what we need to do to deliver sustained results there is also the digital acceleration movement we've been talking about this for a few years about three years that we've been talking about this. In October 2023, we began this process of accelerating the bank's digital side, building the fundamentals. In May 2024, we extended the model, and we already had 2,000 colleagues working in the agile model in the strategic department of the bank. But we saw the need to bring this agile scale up Right now, we have 3,400 colleagues working in the bank's strategic areas in the Agile model, and when we look at 32 lines of business, 90 lines of business, in these 32 business lines that are already there, we have credit lines and credit card lines that are already in the Agile model, and profitability lines. added to the client's contribution margin is already a result of this work, developing of the agile developments that we adopted for these lines that are so important. But what's new here is we will bring it forward from the end of 28 to 2025, scaling this up to 100% of the bank's strategy, strategic areas, already in a digital acceleration model. Marisa, who is our... the VP of Digital Businesses, will give interviews and will detail to you. And you can talk to Janaína and Giovanni and call Marisa to address this in depth about the acceleration, because it will bring important profitability to Banco do Brasil. This is a structuring movement that prepares the bank for the next 10 years at least. We have not stopped investing in technology, so this year we invested 3.2 billion BRLs in technology, and we will not stop. We called on 1,000 colleagues from the competition evaluation for this semester. This investment is important for the future of the bank. We have more than 800 AI solutions and analytics running in our systems and delivering solutions that are more and more assertive, helping us be able to deliver one bank for each client. The Omnichannel CRM platform I talked a little bit about and here I bring you. that we have the first managed model that's 100% implemented. And in this managed model, we have two times more credit conversion. That's twice as much as we did before. This is very important. It's important to know this figure. It's a sophisticated engine of commercial intelligence. And when we look at commercial intelligence, we're also talking about the life moment or the business moment or the commercial moment our clients are experiencing. So we'll deliver the best solution when they need it, in the channel they need it, with the biggest assertiveness possible. So in this first half year, it was 145 million of effective contacts. And that means that the client received the contact and interacted with the bank. It's not just contact for the sake of contact. They interacted with Banco do Brasil, and this is very powerful. In the training programs, we are training our employee base. 62% of all of the bank's colleagues are involved in development actions, in technology. We have 53,000 colleagues engaged in learning and enhancement about digital acceleration. This is a considerable number. If we look at Banco do Brasil, the conglomerate has 125,000 employees and 53,000 of them are engaged in this learning and enhancement of digital acceleration. That's quite considerable. We have 5,000 colleagues certified by Academia, that's the AI Academy, who are trained in ai and data and 41 million brls invested in training programs people always ask me what's going to happen with the bank's physical network in 2023 we launched ponto bb which was a way to seek innovation in the physical service model. I told you in the past that it was a big laboratory. From this laboratory, we took a lot of good things. We worked in Espirito Santo in terms of how the relocation of branches would work and a service hub, a lot of different branches in the same space. or sharing the same space, generating more efficiency. And what I have to tell you about our physical network from now on is that we will adopt Fidgeto in practice for the entire network. We will deliver light service models, service models that are in agreement with the needs of that client and that point of service. So we will be present when, where, and however the client needs us. We have a physical network today, and we will continue with that physical network. We have a client base that seeks a physical branch. There are millions of clients who go to physical branches. branches or the physical network of the bank and will remain there. But it's important to tell you that we'll optimize them. We are working in a project to review our network and it will be in constant transformation. So how big will that be? It will be as big as the client demands it. It will be as big as Banco do Brasil needs to be able to serve the customers. So innovative models for customer service, lighter models whenever possible, service hubs whenever possible, and Ponto BB being extended to the country. Casa Estilo will be the meeting point for Estilo clients, for the high-income clients. This model was built together with our clients. I want to highlight that. They built it with us. And Ponto BB in Belém is the next one, and it is already in the Beyond Banking model, where the physical point has... the branches as a business ecosystem i have partners who share the cost of that point of service with me but that they also deliver a complete experience to the clients when they are being served when they go to a branch from ponto bb in the service hub and the partnerships we have an increase of at least 20% in the profitability of those clients who are today the target of our service models. So for the coming years, we will work in the efficiency of our network, and whenever this efficiency is installed, we'll see a cost reduction of at least 50%. And that's how we're going to work, optimize optimization and efficiency of our branch network. And for us to conclude, I'd like to tell you that we are not escaping the reality. We are bringing the results expected for 2025 that are beyond, below our expectations and the market's expectations, but this result reflects the strength of Banco do Brasil. These results reflect how robust our balance sheet is. This result reflects our possibility to generate value and generate results. So, we will deliver very proudly between 21 and 25 billion BRLs of adjusted net income in 2025, and I'll tell you that starting in 2026, we'll resume the growth of our profitability at the level seen in previous years. We'll remain firm in the purpose of generating new revenue, diversifying sources of earnings, bringing more security with risk mitigation for the concession of loans in our portfolios, but I think it's worth it to stress that we are acting quickly and in a structured way. We are seeking a very quick reversion of this situation. And we've done all of our homework. We revisited the collection tracks. We are extending dialogue with regulators, with the legal system. We are anticipating projects that help deliver our strategies significantly for the coming years. And all of the measures do not mitigate only the risk for this year. They prepare us for the resumption of growth starting in 2026. And I would like to close by saying that Banco do Brasil, just as our country, is done by overcoming cycles. We are already prepared to resume growing as of 2026, and I know that this conference call will be recorded. And since it remains recorded, I would like to give a message to our small investors, those who trusted their economies to the Banco do Brasil chairs. base yourselves on reports that are serious. Base yourself on reports from analysts who are here with us in this conference, who know Banco do Brasil and who follow Banco do Brasil over the years. Don't listen to fake news. Don't pay attention to sensationalist videos in social media. Don't base yourselves on information that is incomplete. Follow this conference. Look at the analysts who will be here asking questions now because they are the ones who have been with us for a long time. Thank you very much, and let's go to the Q&A session.

Thank you. So now let's initiate our Q&A session. I think you are very much aware of how that works. We already have some raised hands, so questions can come both in English and Portuguese, and we will answer them in Portuguese. And since we have a lot of people waiting, I will like analysts to ask only one question so that everybody will have a chance to participate. I will like to call Henrique Navarro from Centendier for the first question. Hello, Navarro. Good morning, everyone. And thank you for being so clear. You are very firm and very clear in your explanations. My question is about Core Exit 1. I mean, you said CT1. You always said that even with the payout reduction and also considering the new net income guidance. The earnings retention, if you have for 2025, there will be some capital impacts that will happen to the entire financial system until December in the growth of the portfolio. The calculation we have here is that Banco do Brasil will end up with about, you know, about 10% of common equity won or CEG won. Is this a comfort level for you? How do you envision the return to 11%? Would it be through a lower growth of portfolio in 26%, which is far-fetched, but maybe, you know, a higher payout or cut? for the minimum regulatory level for 2025. So this, what I'm saying, about 10% of CET1 for the Iran is correct, or whether you would like to go back to that figure of 11, which has been, you know, the common number. But once again, congratulations for the way that you explained everything.

Good morning.

Good morning, everyone, and thank you for your question. We've been talking about that, but it's important that you know the minimum regulatory number is 8%. We have a prudential figure where you put a cushion on top of that regulatory minimum. The ideal number would be around 11%. So in June, it was 10.97 for CT1. So we believe that the level of capital today is comfortable. When we decided to suggest the reduction of payout to the minimum level, And we are already at the minimum level because we also have the effect of interest and equity, and that's why we are setting that 30% payout. But looking forward, I mean, 2025 capital is not an issue. In 2026, yes, then there are several demands and regulatory adjustments that will tend to put that capital level downwards. And that's why we are now making the decision to improve the net income retention, our projection of capital. is in place for the next three years, and depending on how this capital will perform, and once it reaches that prudential level that we set up for ourselves, the admin committee through the risk committee sets up that number, and we have people from minority and controlling shareholders, that's when we start drawing up strategies to bring that back to the range of 11% as we consider to be adequate and ideal for us. The best way to get there is by resuming the bank's profitability. We do recognize provisions, and we are doing that. in a much faster pace because of the resolution 4966. But at the same time, we are working to grow the profitable assets. But it's important to mention that we do not have any capital restriction. So what we're looking for are things that have better returns and returns that are risk adjusted because this will improve retention. We had 18 basis points in this quarter that were added to our capital base organically, despite the excess provisions we had to make to face agribusiness delinquency and also delinquency from micro and SMEs. And we have other mechanisms, and it's also important to note that in case in this three-year projection we understand that we have to add more provisions, we will equalize it so that this capital level remains sound and sustainable. All right. Thank you very much. Thank you, Navarro. Next question from Bernardo Goodman from XP. Thank you, Zhanna. Good morning, and thank you for taking my question. My question is about origination in connection with the net income guidance that you released. To reach that result, I think you would need to strike a balance between origination and preservation of NIM. How do you see that? Because, you know, a stronger deceleration may, you know, lower the margin, and deceleration may increase credit risk. And given, you know, ALL and the starting point in the quarter, How challenging is C to comply with the net income guidance for the year? Well, Gutmann, thank you for your question. It's also important that you know that in our evaluation, I mean, the provision that is being put in place, and that the CRO can give you more details, we believe that the growth of our assets in Tarsi just talked about the amount of disbursements that we did in three months for private payroll, which is a much larger market when compared to what we have in our book today.

But once we can, you know,

serve the traditional portfolios within this resilience margin to get returns that are risk-adjusted. And growth with individuals, with the individual's portfolio, we believe that even with a higher provisions guidance and a guidance that contemplates a front-low acceleration given the 4966, because if it were not for that 4966, resolution and I would have saved about you know two billion in provision so today we are robust enough to absorb that 4966 we will have portfolios that you know we'll have control I mean the new portfolio has just a six percent And when you look at our NIM or the spread, you already see a gradual improvement of the spread that reflects this new landscape. I mean, the turnover of my loan portfolio in this first quarter has reached close to 20%, so 20% credit origination at higher spread levels, and this is reflected when you look at the adjusted NIM. And we believe that with this strategy, we will be able to repeat what we saw in the first quarter or even to deliver more to you if you look at the net income guidance i mean if i repeat the first quarter i will be delivering in the middle of the range but we want to deliver more than that but of course certainly we have to i mean we have to monitor our collection tracks we have to be able to improve you know, the non-delinquency spectrum and monitor collection. But at the same time, we cannot do that indenturement of our new businesses because this will bring new avenues of growth. Well, thank you. Thank you, Goodman, for the question. It's a pleasure to talk to you. Good morning, everyone. There is no secret. I think the guidance translates our strategy. We need to grow in lines that have better risk-adjusted returns, and that's why the growth coming from individuals is higher when compared to other portfolios, and this will allow us to absorb the credit risk. It's important also to say that our methodology already fits into models that take into account expected risks, and then we can anticipate future risks, and certainly since we are facing higher risk at the moment, this will naturally call for more provisions, so to pay for this, anticipated provisions, and so for us to get the expected results that are translated in the final line of the guidance. To do that, we have to grow margins, and with that, we have to increase our NIM. And that's why we are certainly that we will be able to deliver higher individual loans, and this is supported by the quality of the portfolio. We talked a lot about that. We have $7 billion for workers' loans, and we are originating this loan at very high levels of quality where we combine the workers' risk with the risk of individuals.

And moreover, we are... We are...

earmarking these operations for the bank's clients. When Tarciana talked about non-clients, these are people that we first attracted them to open an account with us, and then we can rent that worker's loan. Because we already had previous analysis, these clients were coming to the bank because it was important for us to open that new line, and the advantage is that despite our high volume, 95%, that's where do we control that additional 5% that is not in the bank? Well, in putting a debt in the account, I mean, collecting from the account. So, the provisions for individuals will be enough to cover for higher credit risk that appears in the guidance and with that we will be able to deliver between 21 and 25 as mentioned by giovanni it's always part of our strategy the continuity of growth in the line of credit cards this is a line that grew this order we intend to continue to grow sustainably and we learned in the past how to rent the credit card, and we are growing high. I think we posted 10% growth in client NII, and we intend to grow that further in the second quarter. There is one thing that I would like to emphasize. We have enough individual base to work with, and I think this has to be very clear. It's not just a strategy. We have a customer base, and through our resilience matrix, we have at least 20 million clients with a pre-calculated credit margin that is part of the resilience matrix. That's why we see room to seek for sustainable growth in individual loans with margins that are in keeping with what we intend to do by the end of the year. Thank you, Giovanni, Prince, and Tarsiana. Good morning.

Okay, so let's call Renato Meloni for the next question. Good morning. First, congratulations on the transparency. I think it's always good in moments of adjustments like this. My question is about agribusiness. I'd like you to detail a little bit more about the comment you mentioned on the cycle of for the next 18 months to try and understand how you see the leverage base of farmers and how it's still the NPLs are going to evolve, what's the maximum level and when it would be reached. And then after this moment of adjustment, at what level do you think delinquency at agribusiness is going to stabilize? I mean, there were a lot of structural movements and maybe the historical 2% level is no longer the structural level for this industry.

Thank you, Melanie, for the question.

I think an important point that we have to mention is that we saw an increase in delinquency, especially in what Tarsi mentioned, that those operations with the free resources, the large farmers, Controlled resources have an issue with delinquency, and with the free resources you saw, we showed the history, a lot of these farmers were leveraging starting in 2020, where you started to see an improvement on this margin. And we took the example of soybean, but there are other crops that this also goes And everyone here was leveraging and taking financing, expanding.

Recording in progress. They seem to have frozen and come back, but there's no audio.

So a lot due to the leverage in the next two quarters. So what do we expect? We expect there to be the productivity. Productivity is a given. All projections indicate that we'll have record production, even with extremely low adverse climate events. So we will have good productions. We will have high yield. The margins will gradually... be recomposed, and we expect this to help us fine-tune this portfolio that has been struggling more, while also, combined with the new originations that Giovanni mentioned, that we have been a lot more selective and rigorous in the vinculation of the risk mitigators. And our challenge is to accelerate the meeting of these curves of a better, more secure origination and recovery and resumption of credit that is delinquent today. And then what we aim at is this curve to meet as soon as possible in the beginning of 2026, close to this level of 2, 2.5, so that we can achieve the representative NIAM in this portfolio, and that contributes to the resumption of our profitability.

Excellent.

Thank you. I lost part of the answer here. So, the expectation is that beginning of 2026, the NPR will go back to this level. the beginning of 2026, we'll start to have the curbs, as I mentioned, with better disbursements going down and NPL going down. And 2.5 is when we want to deliver at the end of this harvest that is finished by June 2026. Excellent. Thank you. Our next question, Gustavo Schroden with Citi. Good morning, everyone. Thank you for this opportunity and congratulations on the transparency and honesty on Tarsi's presentation. Forgive me for being insistent in terms of guidance, especially provisions. I'll be a little bit strict here. calculate simply the average point of expectations with ALL expenses, we see or it implies a quarterly decrease in LLL expenses versus what you showed in the second quarter. So for us here, that would be around 14 billion BRLs for the third quarter and 14B BRLs in the fourth quarter, coming from 15 billion now in the second quarter. On the other hand, when we look at a lot of the indicators, the quality of the portfolio indicators, even especially in agribusiness, we still see the indicators worsening with CNPL going back. Formation maybe is more important here, getting worse. So I'd like to understand from you, and even President Tarsi mentioned an expectation of improvements for the fourth quarter. So I'd like to understand whether there's any change in terms of the pace of receiving payment, if you can share with us. the expected share of receiving the 30th of april may june july that you already have some of the formation just to give us more clarity on how to reconcile the guidance that you set forth which with what is implied and to the end and the two coming quarters Further, I'll begin, and then I'll turn the floor to Prince. Be careful with this simplification, because you must agree that we came from 10 billion of provisions in the first quarter to 15, almost 16 billion in the second quarter. So there is a worsening of the risk that required a growth in the volume of provision. The front load was a lot higher. considering this new system of accounting with the 4699. But there's some subliminary messages that were put here that I think is important for you to keep in mind, even to be able to ask or demand a performance from us. The first is the full review of our collection track. Tarsi talked about this. Tarsi mentioned the points granting index from the protest collection, The bank until last year didn't protest. The bank preferred to get some coffee with a client and avoid this animosity or this trap in the client relationship, knowing that it's a farmer. The farmer is not going to leave their farm behind. They will need to take the crop plan and continue with their production cycle. That's how they make a living. But there was a need for us to implement this, considering these new conditions. stage one stage two and stage three and the provision loads that we must have so this adjustment in our track that is a paradigm shift even because there was a specific collection department or recovery department and we basically put this together with origination when we have the wholesale market the and we have the individuals working directly in collections. So we expect to reap the results of this strategy and the methodology now, along with the credit risk area, the cost of risk, to have new products, to be able to renegotiate in the light of the provision requirements based on for And all of that we had to do very quickly due to this new scenario. Another point that I think is important to mention is that there is a record harvest that was confirmed yesterday, so there is a need from farmers to resolve their pending issues. You have the specific cases of the ones who are extremely levered and those who went to in-court renegotiation or restructuring. We are being able to face this and handle the number of people seeking this type of initiative. And we tell them, please come sit down and negotiate with us because that's the best solution. We have a new harvest to finance and we are selecting better, all of that. So we believe that with all the measures that we are implementing, we estimated the level of risk. I know some analysts are worried with individuals. We are not worried with individuals. We have very specific things here and there with very small portfolios, but the risk-adjusted return justifies that growth for us, and that will help us. so in our better view we will continue to be able to maintain this NPL within what we consider ideal. We began this year with my NPL consuming about 40% of my NII. And today, from what I delivered, it's close to 60%. This is not sustainable, and that's not what we expect. Quite the opposite. Of course, on one hand, we need to increase NII, and client NII shows that. But on the other hand, the new collection tracks and the initiatives that we did not have in the past, even the credit policy, the disbursement for clients who actually have the means to pay, combined with new protection categories, like no longer the real estate financing, but the fiduciary sale, if you want to take rural or agribusiness credit today, you will have to have this fiduciary back, otherwise you won't get it. Yes, and Shroden, I think that even for you to... just your model, where is the difference here? It's precisely in the expected loss execution, not incurred loss.

The issue is exactly on NPL formation.

You saw that we had a very high NPL formation in the second quarter, but it was covered even beyond its formation. So there's a a composition of a part of an anticipated provision that does not necessarily materialize into risk. So we have been very conservative and sticking to the execution of the expected loss models, and that obviously brings anticipated advanced provisions, and we've been seeking, as Giovanni said, to get this risk not to materialize. So we expect that we have been strengthening the balance sheets, but that our performance delivers risk that is slightly below what we may have provisions for, though it's in our hands. And maybe that's why you get this impression that the third quarter and the fourth quarter may point towards a breaking of the high end of the guidance, but that's not the case. We have been using very strongly and following very strictly what the expected loss models indicate to us. Excellent, thank you.

Now, next question is from Daniel Vaz from Safra. Thank you. Good morning. Thank you for taking my question. I would like to go back to NII. The new guidance talks about a sequential expansion in this half year, and I understand that in some level, origination is healthy, and the pricing of the portfolio can also help you. I would like to understand the drivers that play against those numbers. The delta in Q1 is positive. In the first quarter, the numbers helped you in the second quarter, but you may not have the same thing for the next two quarters, maybe in the fourth quarter a little bit. And so I would like to revisit the topic of SMEs because delinquency is over 20%. So you exchange the spread from the corporate line with the focus on wholesale because spreads are lower if you look at SMEs. So I would like to understand whether this would be, you know, a negative effect. And also with agro, I think that it would be even worse in Q3. So this delinquency may punish interest receivables. So I would like to look at some more aggravated cases. And in payroll, maybe we could see, you know, the increase in the bank's NIM. And if you could also focus in the agribusiness aspect because you said that you have to solve the cure issue in terms of bullet loans when you speak about receivables. How could we visualize the cure knowing that the collection will be at the end of the contract? How can we now know what in fact is being discussed with the central bank?

Bas, thank you for your question.

I understand your concern when you try to understand what could be a detracting factor in the strategy. The strategy is very clear, and we already start seeing very clear results when you look at the growth of our client in AI. It was better than the first quarter and better than the previous quarters.

Certainly.

I mean, you forgot to mention one point, the capillarity of Banco do Brasil and the trust that our clients have in the bank. So liquidity in the first quarter was based on seasonality. So we believe that we will continue to grow liquidity, and this liquidity will bring margins on the Treasury side, giving the current interest rate levels. Our capital level is very adequate, which allows us to focus on the growth of individuals, and our strategy is very clear. And payroll loans, even though it brings lower spreads when compared to credit cards, but at the same time, the risk-adjusted margins are much better. And Tarsi said that we are focusing on growth. Now, looking at future issues, I mean, we are not contemplating that in the budget, but we are working with CEDECO 15 until the end of the period, but we also have a bonus in terms of funding. when you look at the reduction in interest rates. So this can favor us when it comes to funding. There is a figure in our SG&A that despite the growth of Selic, the cost of funding, not only we improve liquidity, but at the same time, we are able to reduce funding costs. and this demonstrates the strength of our network and the trust that our clients have in the bank that allows to reduce the average cost of our funding despite a high SILIC rate. You also, I mean, you talked about so many things. Oh, you refer to micro and SMEs. You put that number from zero to three because, I mean, just like other banks, we are participating. We are present in the majority of large companies. So we are here to assist our clients, especially, you know, the good payers. In the micro and SMEs, we have a margin in two digits because we have the negotiated portfolio. And if you look at the new cohorts, the number is lower. But in an environment with a high SELIC rate, the situation is more serious. aggravated with these clients. There is a network effect, so we try to focus in markets that in our view will be less exposed to margin compressions or lines that have mitigating risks. and also the cash flow of our clients under control. This is also part of our strategy when decided to delist Cielo. Now we want to add Cielo Info. I think it's also important to say that we will not stop lending to small and micro companies. What we're doing now is just selecting these companies once we grant them credit. And we are educating the ones that are in our portfolio on how they should manage their companies to prevent delinquency. So there is a new cohort that already comes with controlled delinquency within that scenario of, you know, a 15% silly crate. We will continue to invest in the program called Agregita. We will continue to grant loans that have that have collaterals, we will try to get, you know, guarantees of receivables and together with Cielo, we will have, you know, further possibilities to seek for that and certainly we will never stop lending to micro and small companies, but we will be more selective and this is contemplated in our resilience When we say that we will grow from zero to three, probably you may have a reading that we will only work with large corporate, but we do have a flow of MSMEs that we have maturities every month. So, growing from zero to three means that we will grow, but at the same time, we will We will grow and we will continue to lend to these companies, but with a very strong consulting service. And we will be very selective in terms of when and how much loan we will grant to these companies. And Daniel, since you're looking at the June numbers, maybe you got the impression that we would be you know, changing our exposure to SMEs by wholesale portfolios. But there were just opportunities that appear at the end of the half year because our clients have to, you know, close their balance sheet. But opportunities pop up all the time. But we are taking this opportunity because we see a possibility of getting the spread once these companies become healthier. I mean, the balance of the portfolio is maintained. What changes is the origination quality for micro and SMEs. the security of the credit lines and credit facilities that we work with our clients still talking about cure and agro you talked about nii i have about approximately 37 billion brls in operations that are non-delinquent but because of the 4966 then they are seen as a problematic asset i'm not accruing i did not accrue 2 billion BRLs in the margin because of that. And, Tarsi, we are engaged in many conversations with Febraban. Febraban. We are also saying that there are other banks. I mean, there are issues that affect Banco do Brasil the most when compared to other banks. But we are talking to Febraban because this is not a situation that only affects Banco do Brasil. I mean, it affects us the most because we have the largest portfolio. We have the largest number of clients in our country. agro portfolio is very spread around and I know that whoever works with agro and has agro in the portfolio at any percentage maybe is not so meaningful in the final result but they are going through the same situation so we ran a study of the agribusiness cycle for us this is a year of adjustments because now we can see the end of the crop here in this delinquency cycle that we have never experienced before in september we the maturities of the 24-25 crop year. And then we will be able to have a much better reading about the phase of the clients. As I said, there are 20,000 clients right now. We still have maturities until the end of September. I just wanted to be very transparent when I said that maybe the third quarter will also be stressed. because i don't think you know it's up to us to bring you some expectations that will then be frustrated down the road because since we didn't have any reading of this delinquency right now we have to monitor things on a day-by-day basis to see what will happen on the third quarter so after the end of the crop year we will be able to give the regulators some more effective dates data of what happened in this cure period because this is a period where i'm also renegotiating several transactions we are working with a more conservative scenario we are working the way our risk models are are telling us to operate, but once the cycle is concluded and once we see what is the percentage of the portfolio was renegotiated and what revenues we are not getting and what we will be able to deliver to the regulators, I'm sure that we will deliver a database that takes into account the interest rate accrual that we are not receiving due to the cure period. In some situations, it doesn't mean that the client is not paying, but it's just a period that has to do with the agro-cycle. Like, I grant credit in the beginning of the year, but if they are delinquent, I will only know that at the end of the cycle or the crop year. With this level of delinquency, we will only be able to see that 36 months down the road. We already talked to the regulators about that. We show them this trust level that comes to my result when I do not accrue interest because we already have a negotiated base to take to the regulator, but we have to wait until the end of the harvest plan to have something more concrete to deliver to the regulators. So now we are in the process of taking the data and talking about a possible change in the regulation. Maybe not a change, but some adjustments to the regulation so that they can also contemplate this cure period in the agro-portfolio, taking into account the longer 36-month period. And to conclude, Tarsi, we do not contemplate this in our guidance. That's obvious. Perfect. Thank you for that very encompassing answer. Thank you. Our next question comes from Antonio from... Well, thank you for taking my question. I would like to go back to... Schroeder's question, which is a bit challenging for us to understand the provisions guidance in particular. I think one point that draws my attention, that drew my attention during Tashi's remarks is the potential worsening of delinquency and the collections that you still have to do until the end of September on the agro portfolio. I understand that it's not just what you will spend in provisions, but this is the reflection of the 449.66 and expected losses. I would just like to understand how you are seeing these receivables and what you think in terms of short-term results looking at, you know, June, July, and August. Because the challenge for us is, like, if we have a bottom line, So much under pressure like this, or even worse, as we've seen, maybe what is implicit, it's an impressive improvement in the fourth quarter. I would just like to get a better understanding of what is more comfortable for you in that provisions guidance, considering a possible deterioration in the agri-portfolio, and what would lead to the results to improve substantially in the fourth quarter. What really drew my attention, looking at the agri-portfolio, was the capacity of payment of farmers, They are very much leveraged, not only with you, but with other banks. And as Tarsey was saying, they are doing barters and they are looking for other types of funding. That's why it's difficult for us to have visibility in terms of the farmer's preference and, you know, who they would choose to pay first. And so maybe in terms of provision in the third and fourth quarter, we could probably be discussing something which would be above the guidance.

Perfect, Ruedi. I think you answer most part of your question.

I mean, the receivables in the agri-portfolio continue to be pressured. The different thing is that we are one of the very few players that have the conditions to give them another full support for the next crop year. A lot of the customers and all their other companies are hurt with the situation, but we have a very good relationship with our clients. It's a long-standing relationship, so we want them to take advantage of the resources available for the next crop year. And then I think that we will be able to look at delinquency in more detail. In terms of ALL, the worsening of the risk is already captured. in that evolution from 10 billion in the first quarter to 16 billion in the second quarter. So if you add those periods, we come to 26. If we look at the average part of the guidance, we will be delivering 28 in the second quarter. we are getting prepared to a forthcoming risk scenario. Our balance sheet is robust, and we are not denying that the risk still exists. That's why credit risk will remain under pressure, and it will probably be higher than the one that we delivered in the first half of the year. So provisions are no longer limited necessarily linked to late payments, but they reflect the management of the entire portfolio using, I mean, under the mechanism of expected loss. That's why I anticipate future risk, and the rest is performance. Performance that we must have to making improvements in the credit risk. So there's no secret. Anticipation of risk, better origination, and total focus on receivables, recovery, and collection. And there is probably a hidden information, but you can tell that this entire collection strategy is already reflected in the performance of the second quarter. We resumed our historical levels of $2 billion of lost recoveries and there is another interesting piece of information and this is very much in line with this new strategy because for the first time we surpassed by far half of that recovery in cash. In the past, we would recover half in cash and half in installment. And in the second quarter, not only we recovered that $2 billion, we also recovered 65% of it in cash. There is a lot of strategy that dialogues with the guidance of the government. credit risk. Prince, I think it's also important that we talk about proximity with our clients. Agro is a very unique thing because it is very different from the delinquency of individuals. I mean, the agribusiness client is not going to take their farm and take it someplace else. I mean, he is delinquent with the bank, but he continues to plant. We have a colleague that serves that client in the brand so that 20 000 when again i said 74 they never they were never delinquent until 2023 the fact that they didn't pay for that for that transaction it doesn't mean that they are not they are no longer productive because they are paying they we already announced a record crop year for 25 26 this current crop year So if this is materialized and with price improvements, you know, with better commodity prices, we have this forecast. And once we give the possibility for farmers to renegotiate, we see a very good possibility of payment recovery. We are working side by side with clients because we want to bring them back to this cycle when they will be able to pay their debt to the bank. So clients are still producing. They are still planting. He is just delinquent. We are just trying to recover that credit. to the breadth of their payment capacity. But for the end of 2025 and early 26, I think by then we will see an improvement in terms of receiving the transactions and increase in the renegotiated portfolio. I would just like to clarify one point. I think you mentioned during your remarks a potential probably worsening in the third quarter. So here, are you referring to the results for the bank or just the agri-portfolio? I just want to take a closer look at the guidance. From what you've seen so far, considering July and, you know, the first two weeks of August, did you see a worsening result? And this is all I have. Thank you. you always have this eagerness to look at you know the next quarter what we're saying that 2025 is a year of adjustments we are taking all necessary measures that on the one hand we want to react you know, in the business to cover delinquency and to control delinquency and to improve collections. So that's why I'm saying that you shouldn't expect an improvement in the third quarter because the situation is still very aggravated, but almost 97% of the clients are paying. You have to bear that in mind. 96.51% of the clients are paying on time. So what Prince is saying is that because of the delay of last year's crop, there are some maturities that are coming in July, August and September. Therefore, you should expect similar behavior when compared to the second half, and that's when the maturities happen. But we are not just sitting and waiting in the branch. We are going after every case. And so we have strategies out in the field, several initiatives in an attempt to control the situation. So we have to look at that first, and then we will talk about improvements. So, what do we mean by that? We mean that you will still see a third order that we carry over that behavior that we see today, but a new cycle is just beginning. Therefore, We are saying 25 is a year of adjustment, so we will resume things starting 2026. So you shouldn't expect profitability close to what we delivered in 2024. We are talking about low teens' profitability for 2025. So then starting... 26, we will aim at meat to high teens. This is what is being translated in our guidance. And just to conclude, we are being very explicit, not implicit. quarter we have an amount of maturities where we we notice an aggravation of delinquency so what we're anticipating for the third quarter is something similar to the second quarter so for the third quarter we have maturities that come from clients that presented the same delinquency characteristics. So, prudentially speaking, we are anticipating that. And in the guidance, we already contemplate that deterioration for the third quarter. But we are working hard, right? So, what is very different from the third and the second? Because now, in the third quarter, there will be the beginning of a new crop year, and we have to do disbursements, you know, and God doesn't wait, you know, the rain will come, you'll have to plant, so... I mean, the third quarter may be even better than the second because it's the beginning of a new crop year. And that's why now we see a better negotiation power in the third quarter when compared to the second. But we are now being more cautious, more conservative, even because, you know, that was a very bold decision. But we needed to review the guidance, to reanalyze it, and see exactly... What is our delivery capacity? Okay? Thank you. Thank you very much for your time.

Thank you, Luetti. Our next question, Marcelo Mizzari at Bradesco.

Hello, Mizzari. How are you?

Yes, thank you for the opportunity. So just one, I would have more, but I'll respect the limit. But if we look at the provisions, when the Agri portfolio, if you open that extended portfolio, I just wanted to zoom into it. This extended portfolio, Today, it sits at around 16% of the agribusiness portfolio is the extended portfolio, 54 to 58 billion PILs. Do you break down the provision of this extended portfolio? We see that delinquency there went from about 4% to close to 6%. and the provision of the extended portfolio went from 8% to 16% of the portfolio over the last two quarters. So the big driver in the increase of provision has been of this extended portfolio. If we look at the delta, the growth of the agribusiness portfolio, in addition to the delay, there's this aspect as well. So as we see the need to increase this growth, the ferment that you've been talking about. When you look at the dynamic of NPL creation, it seems that the provision of the next quarter is at a similar level. But when we look at the dynamics of the extended portfolio, with the maturity above 30 days of the agribusiness NPL that went from 4 something to 5.5, it seems that the provision for the extended portfolio may increase even further, and that really does give the impression that the provision guidance depends on a substantial improvement in the fourth quarter so what how comfortable are you with this extended portfolio i understand that this is done before the maturity i understand that it's not at stage two or three at stage one but it's a very large volume and any deterioration really does impact the indicators So I'd like to know what we can think about this extended portfolio and how you're comfortable with the reduction of the legacy and this extended portfolio so that we can see an improvement in the fourth quarter and get in the guidance ranges for the year. Thank you.

Great, Mizar.

I think comfortable is not the word I'd use for this moment. We're very bothered with the extended portfolio and we are working very strongly to mitigate risks. And it's important for us to know what this extended portfolio is. It's very different. from any other market. This is a portfolio where we extend it very rigorously with criteria, and it's related to the occurrence of weather events or incidents that generated material loss to the farmer. And when it's proven that by delaying this, by extending the portfolio, we realize that they have their ability to pay recomposed. So that's in the base. of the extended portfolio formation. But obviously, when you get into a scenario where, in addition to those effects of the weather events, you include, you add the leverage on the fields, either by the use of new instruments or the increase in interest rates, you add, you have an additional risk into this extended portfolio. And that's why we've been monitoring or provisioning ahead of time the risk that is becoming materialized in this portfolio, and then we can only understand the third and fourth quarter if you imagine that we've already done that in the second quarter. So the management will remain the same. If necessary, or if the risks continue to materialize at those levels, even in the extended portfolio, we will constitutes the expected loss of the same volume, and then its expense. So the expenses we had in the second quarter obviously composes an inventory that will start helping me raise the protection for the subsequent quarters. And at no time do we say that there will be an improvement. The guidance really translates that in our volume of expected losses. But the opposite, so there's 26 in the first quarter, So I'm looking at at least 28 in the second. So the dynamic is that. Where may we see an upside? It's precisely in the recovery and collection process, including with the maturities that we have in this portfolio. And everything that Giovanni mentioned earlier also goes for the maturities we have in the extended portfolio. it's not that the farmer today does not have the ability to pay anymore they didn't have that ability at the time that the extension occurred and for proven proven adverse effects now the challenge is to increase the specificity and that has been bothering us in the volume of people not complying with these portfolios, and that's why it even is higher for the NPL formation. But we're asking, we're demanding that. They have to pay.

Excellent.

So the idea is that this extended portfolio continue to grow in coming quarters?

It should continue to grow.

Also because there are ongoing measures that have been proven by the National Monetary Council that allows us to grant extensions, but always compliant. We're audited on that. We always have to comply with this effect. There must have been an adverse event and we must prove the recomposition of this client's ability to pay. And then, with the scenario helping, And as all projections indicate, the SELIC rate going down maybe in the second quarter of 2026, we may be able to get into, as we had in 2022, a spiral of a reduction of this extended portfolio. Thank you. For our next question, Eduardo Rosman with BTG.

Good afternoon, everyone.

Hello, good morning, everyone. My question is about the economic plans. These expenses have been occurring for years, and now, if it's not recurrent, it's relevant, representing 20% of adjusted net income. So I'd like to understand until when we should see these expenses of economic plans. Hello, Rosman. Thank you for the question. This is a move that was led by FEBRAPAN along with our legal counsel here. And we had recently the trial in the Supreme Court and the ruling recognizing the constitutionality of the economic plan. And this is crucial for us to be able to effectively put an end or a closing to all of these reimbursement processes of the saving clients that were complaining. So we believe that we receive a new term. We have an additional two years to conclude this, and we expect to effectively get to a good term in the next two years, right, Prince? Yes, Giovanni and Rosman. why does this expense go up? It's precisely because now is the time for us to definitively end, conclude this issue because it has been declared constitutional and in addition there was an extension for another two years and no longer subject to extensions. with the entities that represent those savers. So we have two years. It's a window that we have to definitively conclude this point. And you will continue to see an acceleration on those numbers because we want to deliver. with the bank already fully freed of this judicial aspect that's been ongoing for more than 40 years. So we will accelerate strongly the agreements so that all demands are concluded and we can release this balance line in May 2027 at the latest. But our strategy is to get this to happen before that time.

Thank you.

Thank you, Rosman. Next question, Pedro Leduc at Itaú.

Hello, good morning.

Thank you for the call and taking the question. So getting out of the agribusiness a little bit, talking about individuals and companies, we also see a little bit of a deterioration in the portfolio. And unlike agribusiness, here the provisions are not covering the NPL formation. if I'm not mistaken, 70% to 80%, and that has been for some quarters. So my question is, under this new ALL guidance that you provided, does it already include the provisions for companies and individuals complying a little bit more or adhering to the NPL formation? And the second side of this is a lot of the credits that are overdue. briefly should get into the stage three, now in the third quarter or fourth, and stage three has almost not moved. And are you also considering the impact of that on NII and the new guidance?

Thank you.

Well, Pedro, it's a pleasure to see you again here. Thank you for the question. So, first, the individual's portfolio, in our understanding, is in a very positive trajectory. delinquency there is very restricted to non-payroll credit lines where we already have been working quite strongly to fine-tune and taking the offer of worker credits there to regulate the delinquency of non-payroll loans. We are very confident that there will be a positive trajectory for these non-payroll credit lines that brings us the best risk-adjusted returns. And we've been working very strongly. And the other lines and... credit cards were the bank that has gained the most market share and with delinquency below the system's delinquency levels and payroll loans performing as you have seen at a very satisfactory level. So this fine-tuning process is ongoing and the majority of this portfolio is anchored in secured lines. You see a provisioning process that is based in expected loss models that bring a coverage that is lower than that one of delinquency that has been arising from non-payroll loans, but we've been able to regulate quickly. Now, on the company side, there's something you need to look at with more depth, because part of that expected loss is offset by the Pernambuco payment. So we've been getting at each quarter more or less 600 million paid by FTO. So delinquency runs in our balance sheet, but later or afterwards it is regulated by the payment of that fund, which explains the gap that you've been seeing. And all of that is already considered in our guidance, even in our SMEs and even in our guidance margin. I don't know if you want to add to it. No, I think that's it. Thank you, Pedro.

Now let's go to our next question from Yuri Fernandez with JP Morgan. Thank you and congratulations on your transparency. My question is on shareholders' equity, but less on the capital angle because that's understood, but also I wanted to know something about equity. There was a drop. I think you're paying less dividends. I think that the growth of shareholders' equity should have been higher. There was something like 3 million BRLs of adjustments and benefits, and I think, in my view, it should be pre-V. My question is whether this is in fact what happened and how should I have a reading for the impacts going forward? Because with a different discount rate, the impact should be maybe, you know, more challenging growth of the equity and maybe their results from Previ. I don't know whether you already have results for Previ, but Previ accounted for about 20% of the total number, so I would just like to know something around that concerning Previ. Okay, Yuri. In this next half year, we are already considering a higher discount rate. This is already reflected in the current value of liabilities. And the main element that led to this reduction in equity came from actuarial, mainly privy and some healthcare plans.

But...

we are already expecting a lower contribution. When we look at the effect on the P&L, we usually give you a sub-guidance for the next quarters, looking at the half-year recognition of that accrual. Maybe 880 million last quarter. I think it was 980, but for this one, 880. So that's very clear.

Thank you very much.

Our next question is from Natalia Corfield with JP Morgan. thank you for taking my question also i'm asking about capitalization and i think you already know what my question is i didn't see any announcement about your your perks so i would just like to know if you made any decision about i mean the the possible fall of this purpose in october Thank you. This is Giovanni. Thank you for your question. No, we haven't yet made a decision. We are still evaluating and we are also taking into account opportunities. One thing that is important to highlight is that if you look at it, if you look at our market and I.I., it was down mostly due to our institutional capitalization i have a market of you know financial notes or letters financiers that has allowed us to expand that funding that could possibly replace our perks so we are analyzing it and we are looking to see what would be the best model giving the current moment and where we could possibly make improvements to our NII. That's why we're taking that into account. We are checking the possibility of calling the perps, but we haven't made that decision yet. Because first of all, I have to be sure that I have a mechanism to replace these two levels of capital.

But Giovanni, you also have to ask the central bank for permission.

And then I thought that given the fact that you need permission, I thought, well, since the call is in October, yeah, we need a month before to announce it. So we are still within that timeframe. Okay, fine. Thank you. natalia thank you for for joining us well certainly i'm my pleasure well with that we conclude our q a session thank you so much for those who joined us today and i would like to invite you to take a look at our materials that are available in the ir website thank you so much and i hope to see you soon Thank you all and have a very good day.