Banco Do Brasil Sa S/Adr

Hello, welcome to another video of results from Banco do Brasil. I'm Janaine Stott, Head of Relations with Investors. I'm here with Marcelo Alexandre, our specialist in R&D, to have a chat with our CFO, Giovanni Tobias. In the next minutes we will talk about the highlights of the results of the second quarter of 2026. To start, I want to know a little about your reading about the delivery of this quarter. I remember that at the beginning of the year, when we recorded the first videocast, we talked a little about the rate of recovery of the result, right? You even commented if it would be a W, if it would be a U, and it seems that this trend of the W is confirmed in this quarter.

Without a doubt, Janaína, this result is very emblematic because we are facing a moment, perhaps historical, in the generation of results of Banco do Brasil. I remember, I think something similar happened there in the 94, 95, which was a heavy agro crisis and we are experiencing something very similar. So when we delivered that result there in December, maybe it already pointed to a A recovery return. And then when we saw the results of the first quarter, oops, I think it should be in W, not in U or V. At the time I used to say so. And looking at the numbers, there are good things. The number, although it is still a smaller number than what we know about the capacity of Banco do Brasil to generate results, it already brings some important signs here. So I would say to you that in fact the trend is for us to have a recovery in W, considering that the profit of the quarter of 3.9 billion reais, the adjusted profit, it already shows a growth of almost 14% compared to the previous quarter, so I think this is a positive data. But it still comes aggravated with the volume of provisions. We will be able to go into each of these issues in a little while to talk specifically, but I consider that it is a result that brings some important signs inside it. We look, for example, at this profit that has already grown 13.9% in the quarterly view, almost more than 3% in the annual view, it brings a robust financial margin, which is already a consequence of our strategy of reinforcing the mix, mainly in the physical person. The financial margin with clients, you will see a little bit there in the front, it came very good. In the quarter view, it is practically stable, but here we are carrying a weight here of inadimplency. The biggest inadimplency, an inadimplency that we already had in the physical person, is also appearing here and with that I have less accrual of revenue. You also have a question about the Selic itself, which also brings a little reduction in my earnings from the treasury. But in general, I consider it to be a result that demonstrates the capacity of Banco do Brasil to face this situation, especially in the agribusiness, and at the same time to deliver profit and a strong result and also as a result of all our strategy and execution at the top, in the agencies. When we look, for example, at revenue from services, I consider the result extremely positive. We grew 3.4% in the quarter, a growth of 4.2% in the year. A highlight that is worth it are the revenues with fund management, all growing in two digits, the revenue with consortia, We just didn't deliver more receipts here because of the security. And there we had a selic effect and also less hiring, a smaller volume because it is important to remember that a part of this gain that comes from the brokerage is from the hired insurers. And in rural insurance in particular, given the worsening of the sector, it also The credit rate, without a doubt, is still strong, but it already shows a stabilization. I think this is also a positive point. Of course, we will be able to detail this better later, but it still inspires care. Inadimplência na carteira rural e nós também vimos um crescimento da inadimplência na carteira pessoa física principalmente ali cartões de crédito e nos créditos que não são consignados é o crédito direto ao consumidor sem garantias mas temos aí um ponto muito positivo no controle das despesas We continue to keep our investments in our technological park. We have the IAEA as a new frontier to be explored and we continue to be firm on this purpose, but at the same time controlling our expenses as a whole. I think that, finally, the main capital is a positive data, because we continue to grow our portfolio, we had regular, punctual issues that we will talk about, but we ended the quarter with a level of capital that we consider extremely suitable to our perspective of expansion of our portfolio, looking at the year 2026.

Giovanni, you gave a general overview of the result, but I would like us to start to go into a little more detail in the composition, mainly what is the generation engine, which is the gross financial margin. I think that in the past TRI, we reviewed the perspective of this above this line, there is a dynamic that the market expects of performance throughout the year, and in the TRI to TRI, when we look at the comparison, it was flat. There is a quality issue that I know you have already tangenced in your initial comment, But I would like us to go a little deeper. Detail your vision of the dynamics of results by the generation engine, by the perspective of the margin. What does the CFO see of the financial margin of Banco do Brasil and the expectation for us over the year?

This is a good point, because we were very focused when we talked about facing The agribusiness would be very important for us to change the portfolio mix. And our focus was to grow in the physical person, mainly in the private sector. There was the opportunity to expand the private sector, which was the market we wanted to enter, and until then we had not entered, and today we are practically the vice-leaders. The driving force of our growth is the public sector. We have here almost 160 billion reais, We grew close to 6% in this portfolio, which is already a very large portfolio. On the other hand, we had, in this specific case, despite the growth of the portfolios as a whole, the effect of stop accrual, mainly from those operations that went into inadimplents, that went into inadimplents.

which was an advance that we made in the last year, especially in the rotating family, right, Giovanni?

All these credits without guarantee, right? Credit card, special check, direct credit to the consumer, given the level of interest rate that we've been going through for a long time, It was expected, yes, an increase in inadmissibility in these specific portfolios and with that you have... The loss of accrual. Exactly, the loss of accrual. On the other hand, adjusted to the risk, the return of these portfolios is very good, but we realize that we managed to grow the spread with customers.

And even stratifying, right, Giovanni, it is noteworthy that even with all these dynamics that you mentioned, in the revenue, when we cut the revenue of credit operations, we have nominal growth, including 2.6%, yes, it is close, let's say, to what the bank... No, if it weren't for the raw stock, it would be better.

It would be much bigger, of course. If we weren't in this situation of non-implementation. But I think the important thing is to realize the strength of our network. Because this is the growth strategy in volumetry. We are going to grow in these lines. So we have managed to deliver a strong customer base. 23.5 billion reais in the second quarter, 0.2 is practically flat as you said, but it has all the issues we talked about, but in the year-to-year vision, almost 10% growth. So, I consider these numbers extremely positive, the market margin is also strong, expressive. In general, I would say to you, even having a TMS in the second quarter, We are delivering a good margin, I consider it extremely good given all the context that we have faced.

Still above the top of the guidance at this moment, right?

Yes, exactly. Good point, Janaína. Remember that, we are even above the guidance. Of course, the guidance was valid, we will wait for this throughout the year to adjust within those ranges, that's where we are focusing, but I consider these numbers extremely positive.

Giovanni, the credit cost, let's talk a little bit about this item, right? It was still high this quarter and we close the semester with a house here of 37 billion. This presupposes that we should have some relief there in the second semester, considering the guidance. So I wanted to understand a little bit of the dynamics of what we saw now in the first semester of the year and our expectations for the future.

When we look at the volume of provisions of the first and second quarter, there has already been an increase in a sector that continues to have extremely attractive levels of productivity and margins. Of course, you have part of this segment that has divided a lot during the boom of commodities. So we need to go through this process And what we observe is that both the first and the second quarter of 2026 were marked by something also, let's say, unpredictable, which is the so-called moral cost, the waiting compass. There was the so-called moral risk here, because a discussion began within the Congress to have a package, a law that would produce the effects of renegotiation. We had done it in 2013 and 2014, which had already opened an opportunity for many to lengthen the profile of their debts, but we know that this discussion was very hot in Congress and many opted to wait, they simply did not pay, Marisa Reghini Ferreira Mattos And the provisional measure 1376 that came to address this broader program of debt restructuring for this sector was only approved there, it was only actually launched in mid-July. So we have the whole second quarter still being impacted by this waiting compass. But I consider this number, even though it is an aggravated number, and this justifies why our ROE is still suffering with this increase in the risk of credit, but I consider it a positive sign. So, looking ahead, directly addressing your point, Janaína, it is to be expected that as we start to operate what is foreseen in the provisional measure, the expectation is now for August, we can accelerate In the equationing of these debts, reducing the risk of this portfolio and, naturally, making provisions in a smaller volume. So, we are still expecting that, once operating the provisional measure, 1376, we will make, both in the third and fourth quarter, smaller volumes of provision. It will not be reduced by half, it is important to make this clear, but we believe that we will stay in the guidance range, probably there, touching the top of the range, which is the volume of production here between us, extremely A gente tá falando de realizar 70 bilhões de reais de provisão só em 2026 e mesmo assim continuar entregando lucro. Tudo bem, poderia ser uma rentabilidade maior? Poderia se não fosse o que estamos atravessando, né? Se eu puxar a memória aqui, a gente começou a mostrar um agravamento de provisão ali no segundo semestre de 2024. Começou com as recuperações judiciais, lembra? E aí daqui a pouco começou com esse movimento de So, we started to go to the market. To open the vision of the punctualizations. Exactly. We were transparent and showing that these are the punctualization volumes we have looking forward.

We even have this slide here, Giovanna. I think we can put it. It was a number that we started to give more transparency to the market with the punctualizations. And then you can see exactly How are these wins concentrated over the next few months? And we see that July, for example, 17.7 billion is our highest winning tower of agro, but we had during April, May and June, also relevant wins happening within this context The provisional measure for leaving the negotiation and that in fact it came out there in mid-July. So this also ends up contaminating this inadimplency in the rural portfolio and part of the inadimplency of the physical person portfolio as well. So I think we bringing this number here too, this evidence, the market can see how relevant the wins are in this period here, this quarter.

This sheet, I think it only shows, and this is a fact, you have a portfolio that the planting starts there in September, October, when the rains come. The harvest will happen in February, March, and then it is the commercialization deadline, and usually they are short-term lines, with wins every year. So, it is to be expected that the greater volume really happens in this period, post-harvest, April, May, June, July. And here it's cool that it shows that this yellow bar was already the Safra 25-26, where we brought other ways of guaranteeing the fiduciary alienation. We talked a lot about it. Along with that, we also had to restructure our entire collection area. There, I think there is also an important sign here because we had to redo our entire collection area. The bank, for example, did not notify this transjudicially. We had to change this ladder. We increased the volume of judicializations. In parallel, we also began to notice producers entering with these judicial recuperations.

That's what I was going to bring, Giovanni, because we even brought this data and the flow that we have here of income, it continues to be quite aggravated.

Yes, this is the quarterly flow. So, in the first quarter, 162, because in the first quarter you have access So I consider that, compared to the previous quarter, it was not so much. But then again, we had the expectation of the provisional measure, of the law, in reality, it was a law that was being debated in Congress, they did not reach an agreement and the government then launched the provisional measure. This provisional measure already brings many solutions We have an area of recovery that has already demonstrated greater efficiency Recuperamos 1,9 bilhões, quase 2 bilhões no segundo trimestre deste ano. A nossa meta é a gente querer entregar 2,5 bilhões por trimestre de recuperação, no mínimo, quando a gente desenhou aquele guidance. A gente ainda não chegou lá. Provavelmente, talvez na recuperação, vai depender do quanto que eles aceleram no segundo semestre. Mas aliado à medida provisória que está Now it's just a matter of operationalization, waiting for some specific regulations. We will put our network, we know about the commitment and dedication of them, they will deliver it. We have to look carefully here, it is also important to talk to the physical person. We already anticipated a little bit the risk increase in this portfolio, because you think like this, GDP growth, One of the lowest unemployment rates, how can unemployment increase? It's okay that you have a very high rate of interest, especially for those rotating lines and everything, that explains part of the unemployment, but in the private sector there is a lot of operational system there in the data prep, which is the government system, and you started to have, given the low unemployment rate, you started to have private initiative employees changing jobs. And then a matter of the system, that consign that he took at employment A, when he went to employment B, the employer B did not sign, he does not have this responsibility. The flow of transfer is not automated. Because the salary of the consignor has to be deducted from the contract of the private employee, right? So this obligation was with the first employer and the system was not made the automatic transfer. So this also partly explains the increase in unemployment there, because it was delayed, it is implacable, the rule is already established. Passou de 30 dias, vai pra estágio 2. Chegou 90 dias, estágio 3 de atraso e a carga de provisão é muito maior.

A gente tem aqui uma lâmina que traz essa dinâmica da carteira de pessoa física. Você até falou, né, que a gente já tinha feito alguns movimentos, inclusive de antecipação, tendo em vista a metodologia de perda esperada, ali no primeiro trimestre de 26. Vê que a gente fez 142% de cobertura do new NPL. So we already noticed this aggravation, we also noticed that point you mentioned about the credit card and the preceding indicators that showed that we would have a deterioration in the indicators, and then we went there and made the expected loss. If we normalize the first one with the second quarter now, we would be close to 90%, 100%, that is, the inadimplency came, André Almeida André Almeida

Many will question why It is noteworthy that you see a short inade, high, 11.42 in the physical person, being that most of our portfolio is consigned, it does not have this level of influence, an inade of 90, 18, 41, so we are even above the market. What I think is important to make clear here is that we are already adopting the measures to address this peak in the physical person's portfolio. You mentioned a very important point, that it is a little contaminated by the farmer, because he is also a physical client, so if he stopped paying, he did not stop paying only the agro operations, he also stopped paying his credit card. So we are also taking many initiatives to be more diligent in this charge. On the other hand, we also had a specific strategy I think we need to review this strategy because we improved our onboarding, the onboarding became 100% digital, and there you also had, despite all the care we had, in referring to credit limits, we also brought a component of a structure, let's say, a segment of physical people, D&E, that has more risk. So this requires us to adopt a resilience matrix for this portfolio in particular, because in the credit card we began to notice many of these clients doing a parceling of their credit in the invoice, even automatically, and this then lit some flags. And that's why we also increased the supply volume there in the first quarter of 2026, because it grew rapidly. So we had to close the portfolio, stepped on the brake, and now we're going to have to swallow this increase in risk there in the credit card, which is also the result As for the indebtedness, everyone is seeing the government's program that they just released, you have the roll-out for physical people, because it is a fact that at this level of interest rate, the risk ends up increasing even more. It is much more a family debt, In addition to the difficulty of available income, many families are also going to Betis. This has become a social problem. So we are now looking more carefully at this portfolio, the physical person, for these credits that are not... Lateralized. They are not collateralized.

And it is important, Giovanni, this nuance of context that you bring, it is important because it also impacts the legal person to some extent. If we can look at the dynamics of inadimplency, especially in small and medium-sized companies, it also shows a lot of the macro conjuncture of Selic, a little more pressured, which you put very well. So we are there with the inadimplency of the total legal person. In 3 and 18, it's important to look back, we have a context of big cases and specific cases of dissection in other semesters that kind of gives a very large volatility to the passing.

More there in the portfolio of large companies, right?

Of large companies, exactly. Which is well controlled.

Which is controlled, exactly. This quarter we didn't have any specific case. But I would like to look at it from another perspective, Marcelo, because MPME Demonstra claramente uma estratégia lá atrás de 4 para 25. Vamos dar uma segurada porque é importante lembrar, a gente passou de dois dígitos de inadimplência ali. Naquele momento era até um momento mais agravado na carteira de MPME. A gente conseguiu fazer o de-risking dessa carteira e aqui em junho ela demonstrou já um aumento. We put the strategies on the ground again to control this inadimplence. Because you can't just not serve the customer. You can't just close the wallet. After all, we are a bank.

Mas a gente muda o mix de concessão, né, Giovanni? E aí trabalha muito mais com as operações com linhas governamentais. E aí é importante o crescimento que a gente teve no Pronamp, no PA, que a gente até mostra aqui, né? 31% de crescimento no saldo da carteira em um ano. A nossa carteira aqui de 110 bilhões, então, pouco menos da metade dela já mais colateralizada. Então isso é importante também na perspectiva de risco.

Yes, this is a very important point. We have made a lot of progress in the credit concession for this segment with government guarantees. So, this helps a lot for you to then pass and equate this issue of inadimplency in this portfolio. And there is another point that is worth remembering, we do not adopt a portfolio selling policy. Banco do Brasil ends up carrying this inadimplency in its balance sheet in the face of the absence of a specific policy. O banco já tentou, mas a gente ainda não encontrou uma solução que nós consideramos adequada para o padrão Banco do Brasil de fazer sessão, que é uma coisa que é muito comum nos pares privados.

Bom, Geovanne, a gente encerra aqui então esse bloco de crédito, qualidade, e eu quero passar aqui para um outro tópico. Vamos discutir um pouco de receita de prestações de serviços e despesas administrativas. As duas linhas com comportamento bastante até parecido ali na casa dos 5% na visão acumulada, consideramos esse um ótimo comportamento. Então explica pra gente sobre a dinâmica nessas duas linhas da DRE.

Eu considero aqui como uma fortaleza nossa. A gente tem conseguido ampliar os negócios dos nossos clientes. Eu considero que um crescimento aí de 4% na visão anual, tanto trimestral quanto In the semester, almost 5% growth. It shows, without a doubt, the main thing we've been looking for from our clients, the quality of the services we offer. Fund administration, we've grown by more than 12%. This is very positive.

And it reinforces the relevance of the conglomerate, right, Geovane? We've been exploring it in many of the speeches, whether at Investor Day, BB Day, in the semesters. You yourself talked about the Galaxy issue, the conglomerate, the importance it has for the bank's result composition.

Yes, the different lines of business that involve the BB conglomerate is a good point. It's good to remember that, Marcelo. And consorts, which is another LBB, another company linked to ours, actually controlled by the bank, which also presented a growth of 14%. It was only not greater here because of security. And there in security we had a specific issue of Selic, which started to fall there, you have the reserves remunerated there by Selic, But on the other hand, in the volumetrics, especially in rural insurance, which hits the line of correction and in the face of what the sector has faced. So, if it weren't for that, we would even see better performance, but I consider it extremely positive.

And there is all the context that you have already discussed in the matter of quality, all the movements that affect it.

Ah, and another, it is also important to remember that with 4966, The receipts of credit operations that were accounted for here in this line migrated to the financial margin line. And differed, right? And they differed throughout the entire operation period. But regardless of that, we adopted strategies to grow in other businesses and I think we have had success here. And the important thing is that this growth is also following the maintenance of our structure to be able to face the growth of businesses. We continue to invest in people and technology. This is a very important point. We have always said that we do not see the future by replacing people with machines. On the contrary, it is a tool that people need. Aprenderam a usar e vão usar. Então eu considero que a gente conseguiu manter o crescimento da nossa estrutura em linha com a inflação, em torno aí de 4,8%, você vê na visão semestral, 4% ali na visão 25 para 26. You had a salary adjustment, which also explains part of this growth. So, we consider that the expansion of our revenue and also a controlled growth of our expenses has brought this quality, so much so that our efficiency of 28%, basically we have managed to keep it at this level. So, I consider these data extremely positive here and they show that we are on the right track.

Giovanni, I think that now walking here to the last topic that we haven't covered yet, but it is one of the most relevant that we discuss with the market, I would like us to discuss a little bit of capital, right? If we could bring here our current level of 11.27 and the dynamics of the quarter, I would like you to give a little of the vision and expectation that we have for this level. It is something that has been discussed a lot, not only for Banco do Brasil, but for the whole market. It is important to have the vision of CFO about our moment of capital.

We have always put to the market that our great level of capital would be in this region of 11%, being able to be slightly above or below. We have already had moments with the main capital level much above that and the market itself demanded that we distribute it, right? Why have so much capital like that? I consider that looking at the performance in the quarter, it is worth highlighting some points. We have prudent adjustments that were already foreseen, including the 4966 issue itself, which already foresees you to start demanding a little more capital from what we did in the turnaround, in the adjustment, right? But there is a specific point here that we put there, the actuarial, which was already an interpretation of the regulator. So that was a requirement, What he started to do at Banco do Brasil, he did not agree, he changed his opinion regarding the specific methodology that we used to discount the current passives that Banco do Brasil will have to face over time. So, because of this, we had to make, according to his determination, an adjustment to this methodology And so we went on to adopt according to what, in the regulator's understanding, should be the appropriate one. That's why there was a reduction of 18 base points in this quarter.

And within the prudent adjustments there is the issue of ETAs too, right, Giovanni? Given the time of provision...

Another important point, because in spite of our profit, even with the balance, with the volume of provisions, we have brought organically a gain of capital growth of 22 BPs, we had this demand from the Central Bank that consumed 18.

And within the prudential adjustments, we also have

The tax credit and given the volume of tax losses that we have recognized in the last few semesters as a result of the increase in the inflation rate, mainly in the rural portfolio, it also consumed more capital. So, our ability to generate capital organically is there. In the 22 BIPs, it is weak because the profit is the moment. But, passing this moment of increased risk of credit, it will return again to the puberty of organic capital generation. And, in parallel, I'm also having to increase my capital for prudent issues and regulatory demands. If it weren't for that, So I would tell you that I consider 11.27 to be positive. It fell, reduced from 11.59 to 11.27, but once we have overcome these issues, we will grow again. We maintained our 30% dividend policy. I think it is consistent with the moment we are living in. But we understand that at this level, it is a level that we consider appropriate. But we are always watching and looking, and if we understand that it is necessary to adopt some measure of reinforcement, we will be conducting this in a very transparent way with the market, Always looking for exactly that, creating conditions for the bank to continue to grow. Plus 11.27, it keeps up with what the administration expects. Maybe for those investors and shareholders who are anxious to see a bank payout of over 40%, It's not such a good news, but for those who are more concerned about the bank's capacity to grow, about the bank's sustainability, I think it's a good number, 11.27.

In other words, Giovanni, we ended June with a principal capital of R$ 11.27, quite adequate, close to that level that we consider great for the bank, of 11%, and enough and robust to sustain our growth strategy.

Agredo, é isso mesmo. A gente acredita que isso é fundamental para a gente manter todas essas nossas estratégias aí, não só no controle da inadimplência, mas também de crescimento dos nossos negócios.

Bom, então eu vou encerrar aqui esse nosso videocast. Obrigada, Marcelo. Obrigada, Giovanni. Lembrar a nossa audiência que todos os nossos materiais estão disponíveis no site de Relações com Investidores e eu acredito que essa nossa conversa, ela foi realmente um retrato Thank you for watching and see you soon!