Banco Bradesco S.A. (BBDC4) Earnings Call Transcript & Summary

Good morning. I'm Marcelo Noronha. I'm over here once again from Cidade de Deus, the headquarter of Bradesco just to present another quarter of results for the first quarter of 2026. Today is Thursday, May 7, is 10:31. So we are here live from our studios. My presentation will be briefer when compared to our last earnings release presentation. And after the presentation, we will go straight into the Q&A session. It's a great pleasure to be with you once again, and thank you for joining us today. I'll start by presenting the numbers and then I will also mention a few issues that have raised questions from colleagues on the sell side and also buy side, questions that were posted to our IR team. So I'll start from what you saw since yesterday because the presentation was available to all of you. Our recurring net income in the first quarter of '26 was BRL 6.8 billion, up by 16.1% year-on-year and 4.5% quarter-on-quarter, delivering an ROAE of 15.8%. Just as a reminder, in the last quarter of 2025, our ROAE was 15.2%. So that means that we were up by 0.6 percentage points, vis-a-vis our recurring net income. So what drove this recurring net income? I mean total revenues grew 14% year-over-year, and this is the main driver of profitability and cost-to-income ratio improvement, not only this quarter, but certainly, this will lead to improved results throughout the year. We -- I've been talking about moderate appetite. And I've been referring to that for several quarters with a more conservative guidance. But that doesn't mean that our appetite will decrease when it comes to growing our loan portfolio. We will continue to grow, but with certain ratings. And maybe we will not do certain ratings or maybe we may not want to go to certain segments or crop. And we want to have more secure portfolio. And then I will show you later on our structure operations. I will talk about the market and so on. I mean cost of risk has increased. I'll certainly mention that further on. But there is a very specific wholesale case because this is what led to that portfolio. We decided to be even more conservative. And I will talk a little bit about agribusiness. I mean old cohorts that some of them may be on Stage 3 or Stage 2. So that's what we saw here. We've been operating heavily on agribusiness, but with more secured loans. Our insurance segment delivered consistent results, reaching almost 22% of ROE. And -- last week on the 30th, we launched Bradsaude, consolidating all of our healthcare assets with a positive impact on our capital ratios. But above all, this unleashed value to our shareholders. This is a very important operation. I think if you look at the capital market, the market cap was BRL 42 billion, which means to say that it brought higher goodwill surpassing BRL 30 billion in our organization. So this was quite an important move in my view, my personal view, this has upside going forward. And our transformation continue at an accelerated pace with increased use of GenAI and high technology. We continue to gain productivity and delivering even more. I will always begin with my discourse of cause and effect. So I would like to say that this is our recurring net income. But there was also BRL 1.8 billion in nonrecurring expenses related to one fiscal contingency. And according to the legislation, it could have been negotiated. So what happened is that our contingency was around BRL 5 billion. But we decided to pay for that contingency, and we paid in full DTA. This is a very exciting and positive piece of news because, again, I mean, cause and effect, because it was the opportunity to make a move like that. And the effect was that now our balance sheet has even superior quality. And in the past 2 years, we paid for fiscal contingencies amounting to 20%. So that was a good opportunity to do it that gives us better quality because it reduces the risk in our balance sheet and that affects all of our shareholders. So this doesn't change by no means our recurring net income, but improve the quality of our P&L. So as I was saying, total revenue, almost BRL 37 billion, up by 14% year-over-year. And I would like to highlight the entire revenue line. I start with insurance, pension plans and savings bonds. The indicator is 20.4% growth year-on-year, even surpassing the guidance. But the guidance, as you recall, is annual. So I'm not going to go over that again, but we reiterate our guidance. And moreover, I must say that my expectation is that we will be in the middle and upwards in terms of the guidance. Like I said last quarter, I mean, our confidence level remains the same. We are in the right track. And again, I'm talking about growth and FX. I mean, fee and commission income was up 6.2% year-over-year in a quarter that is usually the worst quarter for the financial industry. I mean the bulk of the volume is in the fourth quarter. So in the first quarter, volume is down, fee income is down as well. But despite all that, we continue to grow. And our NII is the highlight. Of course, that we have all of the other lines are growing. But the main highlight is NII. We grew 16.4% year-over-year, quarter-on-quarter, 4.2%, and this should continue to drive our growth over time. And you also noticed that we have perennial performance and our desk courses are also perennial. There is no change in the desk course, except for Bradsaude's recent announcement, and I'll elaborate a bit more on every single topic. I mean, cause an effect again. Client NII, market NII stems from our activity. Our activity is quite robust. Our origination capacity is robust. And why is it that we are originating loans? Well, starts with our credit business unit with a very robust loan portfolio management, a new pricing area working with client segments and pricing in accordance. And we look at all of the cohorts to see to look at pricing intervals. And we are also delivering better experiences for every client segment. And the approach is very individual through our channels, very personalized. And this has made a difference in our distribution. And that's why we are growing significantly on the asset side, on the liability side, on the side of fee income and distribution of insurance products and consortium. And this certainly leads to this margin that was up 16.4%, as I said before, and expanded -- we increased -- I mean, our expanded LLP, cost of risk was 3.5% and our total NII net of provisions was BRL 10.4 billion. When we look at client NII, our NII was up 4.1%. Our expectation is to have NIM around 9%, very stable NIM. But in addition to growing 16.3% year-on-year that without the calendar effect that impacted this quarter instead of growing 3% quarter-on-quarter, we would have grown 5% quarter-on-quarter instead of 2% growth. We believe that our NII will continue to grow. I mean this is the line that we expect to see going forward. And I would also like to draw your attention to market NII that reached BRL 600 million. Again, it was an effect. It was not by chance. It grew because of all of the origination from the client desk. And this is also something that comes from trading, energy and ALM. So we have a very good team of professionals that take advantage of all the opportunity. But our ALM is here. These are not like one-off situations. But in fact, we are maintaining steady deliveries and good treasury deliveries throughout the year. And then I was talking about the calendar effect. And the same thing applied to client NII net of provision. And this impacts the bottom line. It was down by BRL 4.5 billion and BRL 10.6 billion. It was down to BRL 9.8 billion. But excluding the calendar effect that we would have grown 1% quarter-on-quarter, the number would go to BRL 10.3 billion. But now I'll give you another effect. I mean we have here -- we broke down our provision costs for wholesale, ALM, LLP and mass-market LLP. There was a higher growth. There are some provisions here, but there was one case that represents the bulk of the volume. So if we exclude that, the NII -- I mean, the NII net of provisions will be higher. It doesn't mean that this is a recurring thing. I mean, the numbers show the fact that we are more conservative, even though there is a negotiation underway, and then we see that we have a good chance of collecting. But also here, I mentioned -- I mean, mass-market LLP, but also if this includes other segments. But look at the indicators. We are growing BRL 500 million -- BRL 300 million, BRL 400 million quarter-on-quarter. And we drop provisions as the portfolio grows. Our portfolio grows and then we put on more provisions. And this is the effect of the 4966. I mean we have a portfolio, and this applies to the entire market because in the past, in the 2682 in N+1, we were at breakeven. I mean vis-a-vis LLP or the provisions in place. But with 4966, we have portfolios that only reach breakeven at M+5 or M+6. And this is the case of credit cards. We are growing well in auto funding in payroll deductible loan in micro and SMEs. Therefore, our portfolio is growing, and we will certainly call for further provisions. It doesn't mean to say that, okay, you are provisioning just because the NPL portfolio is increasing. But look at the numbers in these boxes down below, 1.3%, 1.4%, 1.3%, 1.4%. This is what we monitor quarter-on-quarter. If you look at the full earnings release there, you have -- we have a presentation very much like this with the annual numbers for this indicator. But quarter-on-quarter, these are the figures. So we should grow cost of risk here. So it will continue to perform like this. It may grow BRL 500 million or BRL 300 million, but we are putting on provisions when we are setting up portfolios. And this certainly leads us to this NII. This is the picture we see. But we are very confident about everything we are doing, and I will also talk about the quality of credit. I mean, our portfolio reached almost BRL 1.1 billion, growing 8.4% year-over-year. However, the FX effect of the appreciation of the BRL had a significant impact as well, especially large corporates and SMEs. But net of this effect, we would be growing 9.5% year-on-year, even if we look at the entire market, looking at moderate risk appetite. I mean, individuals, 9.5%. I mean, cause an effect once again. And this stems from a very good work with clients and penetration and new experiences. SMEs, 14.4% growth year-on-year. And again, here, I will just elaborate further in a moment. And large corporates, it really fluctuates BRL 10 billion up or down because we have short-term portfolios, and I will draw your attention to some highlights that are part of our plan. And again, I repeat, cause an effect. We are not growing in auto loans for mere chance. We are growing in auto loans because we had a careful planning. We drew up a very detailed diagnosis of the market where we operate in new quadrants like new vehicles, heavy vehicles. We have a very small stake in new vehicles and semi new and used cars. I mean, used would be much older cars. And semi new vehicles is the largest market in Brazil in absolute terms. Therefore, we looked at all market possibilities. And we also looked at the experience of our managers, dealers and clients. And we realized we had to change because we had 2 platforms, one for account holders and non-account holders with the dealers. So we changed the platform. And this was part of our transformation process. We now have a single platform that brings a much, much better experience to our dealers and our managers and above all to our clients. It's much more efficient in operating terms. And it's also much more efficient when it comes to pricing and very quick decision in terms of using the loan machine and pricing. And within this interval of RAR that ranges between 20% to 28%, which is satisfactory to us. Therefore, growth comes because we have commercial capacity, we have a good penetration base throughout our customer base and also with the dealers, but now with a much more competitive platform, where we can choose our risk more assertively. That's why we are growing 7.3% quarter-on-quarter. So if we keep on growing at this pace and the same thing with other portfolios, I mean, then we have more provisions according to 4966 because we have to back up this intermediation margin over time. And credit cards is no different from what we showed before. It is growing 10.6% year-on-year above all with high income with 18.6% growth our payroll deductible loans. If you look at the history, you will notice that here in payroll deductible loans, we were growing around 5% year-on-year. Now we posted 8.3% growth year-on-year, 3.2% quarter-on-quarter. And the portfolio reached BRL 470 billion. And I'll talk about the private sector in a moment. But INSS made different changes and pushed the market down. So it's slightly lower, like at 40%. So the market started to resume production just like we did. That's why here, we're not posting growth in this portfolio. And why? Because we have a very broad portfolio and all of the settlements occur on a monthly basis. But overall, we are growing and we will grow in INSS. But on the private sector, we grew almost 43% year-on-year. And in the past quarter, 31% approximately. You should recall that we said that we will accelerate on the private sector once we have -- we are totally certain that all of the agreements have been made between the banks and other private. And that's what we did. Also being more selective in terms of selecting clients that are more in tune with our risk adjustment. I mean, our portfolio adjusted to risk. In our case, we are talking about slightly over 4% of NPL overnight. So we are performing quite well in these portfolios. And in the general payroll deductible loan portfolio, the market posts around 2.97% growth, if I'm not mistaken, whereas we have 2.4% in the overall NPL portfolio. So everything is under control. And also working capital that grew 16.3% year-on-year. I mean, it's here, large corporate and SMEs. But look at this one. Government backed lines, FGI and FGO. Last year, we had 26% of the entire production, and I showed you that number last quarter of the entire FGI and FGO production. But by the end of the year, by December 31, we start counting our production numbers again. By the end of March, we ended up the month with 20.6% of production share. So we are market leaders right now. Obviously, we have very big competitors in the market. And competition is good because it pushes further. So competition comes -- and they -- one bank is putting pressure on the other one. And it's a very good dispute. And it is positive for the entire market and also for the companies. But here, we show you the growth of our portfolio. We grew almost 81% year-over-year, which means that here, we didn't grow too much because these are portfolios with less guarantees or not too secure. We are not obsessed to be leaders. But what we want and what I tell my team and a few days ago, I reiterated that what we want is risk-adjusted return. This is what we want, risk-adjusted return, certainly with scale, scale based on these lines, but we also want to expand the relationship we have with these clients, micro and small and medium-sized companies. So we are very confident about everything we're doing. We are keeping our appetite with agribusiness. And again, our agribusiness cohorts in 2025 have a lot more guarantees. And the same thing goes for 2024. They are much better. We are seeing a bit more stress in previous cohorts, especially in the south of Brazil because of the rain and then drought in large companies, small, midsized companies and also individuals, they renegotiated their debt and the banks gave them a grace period in general of 2 years. And this grace period is now over. And then what happens is that once the grace period is over, certain crops are not yet ready or mature enough to pay the debt. That's why I'm saying that in the agribusiness, things are still not back to normal. Still speaking about the portfolio, our over 90, NPL is flat. And now I'll bring you another fact here. Our Stage 3 goes down to 7.6%. Our restructured portfolio between December '23 and March of '26 was down by BRL 14 billion. But when we look at this problematic asset was down by BRL 15.7 billion, so reaching 3.1%. You may ask, so how big do you think this portfolio would be? I think that a portfolio around 2.9% and 3.1% would be just a good size for us. So certainly, it will start to be more stable going forward. But down below, we are showing this chart every quarter. We talked about our secured portfolio. So we went from 59.3% in December at the end of last quarter to almost 61% of our entire secured loan portfolio. But look at -- if you look at individuals, it's almost 70%. That means that we are operating quite well, and we are very confident about the quality of our portfolio. And look at Stage 2. Stage 2 is growing slightly. And why? NPL over 90 is flat, but the gray line refers to micro and SMEs. And where is it growing? It's growing in government-backed lines, FGI and FGO. And why is it growing? Because most companies are paying their debt, but there is a chunk that the grace period is over, and so they are not paying. So even until the grace period ends and for those who are growing the portfolio at the pace I showed you before, 80% growth, it puts pressure naturally -- puts pressure over NPL over 90. So even though with 4966, even though the expected loss is lower, it's still moving on Stage 2. So what happens here? I mean, FGO, I mean, when you have to start paying is 190 days of grace period and an additional 5 days. So the FGI period is after 90 days, you have to start paying and then you have 30 days and so another 90 days. So there is nothing different and it's flat individuals and large corporates performing quite well. Another interesting thing is that the coverage ratio of Stage 3 is growing. I mean you have a mismatch between Stage 3 and Stage 1, Stage 2 to Stage 3. So there is a transfer between stages. So I was referring to the former rural portfolio that could be here as well. They are in cured operations. And it could be -- it could just migrate to restructured operations with a bit more guarantees. So you have some movement in the 4966 that we believe are absolutely in line with what it should be. And there's another download here in the footnote that talks about write-offs. The write-off was up in absolute terms. It was also up in all the quarters. It goes up or down depending on the cohorts that arrive and the mix of the cohort. But there is only 1% in relative terms. I mean, you can challenge quarter-on-quarter because when you have this a better cohort it's 0.9%. When it's a bit worse, it is 1.1%. And when it's flat, I mean, here, and I've told you that before when we adopted the 4966, we adopted the first -- the same write-off criteria we had in the previous system. So we didn't change anything. So we are very much confident about everything we are doing in our portfolio. And I've been monitoring this very closely. I'm looking at all the cohorts, and I'm looking at that with our team of our credit business unit, with the risk team, and the teams for every customer segment. We have a price rating and also a rating that measures stress level over 3094, which is our best proxy. And all of them are within the foreseen interval. Well, but you could have had in October like one issue that would escaped a little bit. But we immediately look at all the models, and we make adjustments and policies accordingly if need be. Therefore, we are very confident in terms of the quality of our assets. And again, I see growth in credit risk, but nothing apart from that. And then fee income, it was up 6.2% year-over-year. And this is a quarter that is not only weak for banks in the financial system, but we are leaders in the consortia business, and that is a very important line. We had almost BRL 4 billion in assets delivered in Q1 '26. And our growth of these fees amounted to almost 20% year-on-year in custody and brokerage services, 15.5% growth. And this is recurring. This is the result of our activity. It's not at random that this happens. It's a lot of hard work, new experiences that we're offering to our clients. And in capital markets. And we just had a press conference and a journalist asked about market expectations for the capital markets. And they claimed, oh, you grew more than 60% your investment banking activity. But I'll give you more information on that. We have rankings for investment banking. Our fixed income team grew. We have been originating or producing a lot more, and this is not growing by chance. It's growing because there was a lot more origination and more ability of placement in a very demanding market. Last year, we were the second bank in origination of fixed income securities in the Brazilian market according to ANBIMA. Last year, we had 14.1% market share. We ended Q1 '26 posting 69% still ranking second, but with 22% market share fixed income origination. So we have a lot of traction across the organization in different segments of clients. Operating expenses, absolutely under control, 7.8% growth year-on-year, 4.6% increase quarter-on-quarter, and I draw your attention, as we always do, to personnel and administrative expenses, up 5.4% year-on-year, minus 8.8% quarter-on-quarter. And of course, we have profit sharing and payment of variable compensation, and that's very positive. If you go to the earnings release, you'll see that personnel expenses, the negative bridge split except for variable compensation, which is good, right? And administrative expenses, if you look at the detail, you'll see that transactional expenses, which result in processing because we have high activity that is growing. Now, freight, transportation of money bills, et cetera, all of these expenses are decreasing quarter-on-quarter and year-on-year. We continue with our discipline of reviewing our footprint in this quarter, 238 new service points reduced. And then the insurance group. Like I said in the beginning, our insurance business is delivering an ROE of almost 22%, BRL 2.8 billion in net income, 13% increase year-on-year with BRL 29 billion of insurance premiums. And the result of the insurance operation includes the whole insurance activity plus Bradsaude. Bradesco healthcare. The whole insurance group brought us this result, operations growing 20.4% year-over-year. And the highlight goes to the increase in the operational results, 22.1%, practically 2/3 of the result presented in Q1, which is very, very positive for us. And our technical provisions continued to grow almost 10%, reaching BRL 455 billion. So we're happy and pleased with everything that is happening in the insurance group and other affiliates and payment organizations and what they bring into us. We are not talking about capital, we're representing our pro forma capital Tier 1 growing to 14.5% and common equity 12.7%. So everything is informed, so you can see the movement of Bradsaude, the healthcare business. It brought a positive result, a positive impact. If you have questions, our team is available. The IR and the finance teams are available to explain all the details regarding this movement we took that put us in a great comfort zone regarding our capital. It did not change our expectation with it or without it, we would continue down our path. As in Q1, there is a slightly greater capital reduction. This was expected. And after that, it will stabilize. And I have seen interest on capital for the year. And here, our transformation moment. Like I said in the beginning, I did a big analysis about transformation in the past quarter. I won't repeat a lot, but I'll just bring you some more information. I spoke about the new auto financing platform. I'm not going to repeat that. There are a number of innovations deployed with intensive AI use. I don't need to go over all of them. What I need to stress is that we accelerated in this path and we're investing a lot. This is another tool we have a treasury easy trade for SMEs clients they can connect directly and do their operations using the app. And I draw your attention to 2, 3 more characteristics. You may recall that I showed BIA for private in the past quarter with a very high accuracy level. Well, that increased to 94% first-contact resolution. So we gain experience, we gain productivity and we improve customer experience. We continue to have upgrades for prime and principal clients. You can check and compare it with the previous earnings release. In the first quarter, we upgraded more than 500,000 clients, and we continue to open offices for principal, and for prime and digital retail. Last year, we closed with 19 million fully digital clients in June '26, 28 million. And we were pointing to this increasing trend. So we're very confident and we accelerated in the transformation movement, bringing productivity and the important gains to the organization on all sides, on the side of efficiency and on the side of customer experience. So my conclusions, a strong operating results in Q1 '26. This is what we are seeing. We are very pleased with the results. We're growing almost 8% quarter-over-quarter and growing consistently almost 15% year-on-year. Technology, I spoke about it, I will not repeat this. The new client segmentation, always bringing NPS up and offering good experiences. Of course, this supports structuring run for bank, risk appetite, like I said in the beginning, with a more conservative approach. We continue to have a more moderate risk appetite. But we continue to have traction. We will deliver our expectations in the guidance. We are competitive. We remain competitive in those lines where we feel this risk appetite. So I'm very convinced about this. Another thing I'd like to stress is our net income. Not only the bank but the affiliates and the insurance group in general, posting consistent growth with our commitment to gradual and sustained net income growth step by step. We'll continue to improve our competitiveness in the short and long-term. And our Bradsaude healthcare business has the most complete and comprehensive healthcare ecosystem in Brazil, like I said at the beginning, bringing us an important goodwill. It is a brilliant company, a lot more diversified now. And we'll speak more about that. And just for information, we were very proud with the banker awards, in machine learning, mobile, AI. So we got some important awards that normally awards that are given and offered to international banks about technology. So I will conclude my presentation, the formal presentation and I will be available for the Q&A. I have Cassiano Scarpelli, our CFO, CTO; and our dear friend, Andre Carvalho, our IRO. We also have Bradsaude. We're now just -- we don't ring a bell anymore. We just press a button at B3. But I have my 2 colleagues online Carlos Marinelli, CEO of Bradsaude, and he was the one who pressed the button at B3. He introduced a new listed company that happened on Tuesday, he had a press call and Ney Ferraz Dias, CEO of Bradseg Bradesco Insurance, replacing Ivan, who moved to the Board of Directors of the bank. And of course, he is supporting the transition of our colleagues, Marinelli and Ney Ferraz Dias. Thank you both for joining us.

Thank you, Marcelo. Thank you, Cassiano. Thank you, Marinelli. and Ney. Good day, everyone. I would like to say that if you want to ask questions, send your questions by email to investidores@bradesco.com.br via WhatsApp (11)97443-8238, or just scan the QR code on the screen. First question from Mario Pierry with Bank of America.

Congratulations on the earnings results. You have been delivering very predictable results and in keeping with the guidance you provided. Congrats on the listing of Bradsaude. Of course, it improved capital quite a lot. I don't think it's no longer be an issue for the market given its level of capital. But Noronha, I would like to focus more on NII. In the presentation, you showed a big highlight, the growth of NII. But how do you see this growth continuing given a more moderate risk appetite, and we don't disagree with you. Indeed, the macroeconomic scenario is more uncertain, given the Middle East war. But I would like to understand how do you see NII evolving with a more moderate appetite? And what are the most concerning segments when you look at credit in the next few months?

Mario, thank you for the question, and thank you for joining us. Here's what I can tell you. Like I said during the presentation, our risk appetite is more conservative because we have some models for some segments of clients. We adjust the model. In our credit policy, we can be more conservative in some credit policies, for example, for agribusiness. Agribusiness is a very important segment in Brazil. We maintain our risk appetite for the agribusiness, but maintaining this risk appetite with a policy directed to agribusiness. And we are looking at certain crops and at certain more traditional clients, but also for others that are potential clients. And we have to see what kind of loan we can offer them and what kind of guarantee we can have. It doesn't mean we have less appetite to grow. On the contrary, we have a lot of traction, as I showed you in NII and the NII net of provisions will drive our top line. We are piling up credit, but high-quality credit, government-backed lines, payroll deductible loans. I also spoke about credit cards with slightly more restrictions to some client segments as we showed when we presented credit, the credit portfolio. But we accelerated, and we want to do business and post significant growth. It was not by chance that we grew almost 81% in our government-backed lines year-over-year. This shows that we have an ability to deliver. And this has been piling up NII. So I see NII growth with NIM around 9%, as I showed you. And with greater growth, we'll have a little more cost of risk. That's not important. What matters is to have controlled cohorts. And for each modality, we can have expected loss, and this is our focus and also grow auto loans. This is another growth driver because there's a market and risk-adjusted return is good. And there are some markets that are not delivering this. We don't want to be there. So we are very aware of what we are doing to increase our competitiveness. Okay, Mario. Now of course, in the middle market segment, in the wholesale segment, yesterday, Milton spoke about a deconcentration. And also here, we deconcentrated our shareholding or our share in the large companies. I think that the top 10 have 13% of our total number. So we have to look at this with a magnifying glass. This is our path. We are all focused on this so that we can continue to make things happen. I'd like to remind you that our portfolio management department works with a living portfolio. And it points out potential default risks for all sizes of companies, full-time comparing with client segments.

Next question from Daniel Vaz with Safra.

Marcelo, I think that that a step-by-step message. And I'd like to second Mario's words, this has given us a good expectation regarding. You are ROE close to 16% with the cost of equity. So the bank is not destroying value as was the case in the past year. But your messages of step-by-step approach and being more conservative in terms of risk appetite. You mentioned a more conservative approach, more conservative buyers after observing a degradation in some of the credit lines. So what could be better than expected beyond credit? Because credit is receiving more attention so that you can again accelerate ROE step-by-step. In costs, you're above your peers. And I'd like to understand how and when can you converge to the level of your peers, Santander, Itau, when we think about cost. In your cost trajectory, it is under more pressure in the short-term. When could we expect costs converging to an average close to inflation or less than inflation? What could surprise us in the short-term? And could it be cost in 2026, '27?

Thank you, Daniel. Thank you for joining us one more time. Well, while you were asking the question, I regretted mentioning that we are more conservative because it's just moderate risk. I meant conservative because in certain models, we are shutting down the faucet. With some policies, we have less risk. And this is work we do with the credit business unit. This is what we are looking at all the time. So we continue to be accelerated on the side of asset. But please remember, we build our NII also addressing our liabilities. We reduced our liabilities cost at the bank quite a lot. I also mentioned our treasury that has been very important, delivering even more than expected. So I feel much more certain regarding what we are doing also there. The flip side of the story of growth or reduction of expenses is that I think that we are doing our homework really well in terms of cost-to-income ratio. But some line items of administrative expenses have been posting negative growth, a decrease quarter-on-quarter and year-on-year. So in terms of technology costs and transactional activity, you see, we have very high activity. So these will grow. The cost of the financial system have to pay a couple of things, that increases. But if you look at the complete presentation of this, you will see that we're doing quite well. Of course, we still have some labor claims, civil claims. And these are contingencies that eventually will converge to a lower number. I don't have an expectation that this will happen now. But for 2027 and 2028, we will definitely see the impact of the actions we're taking now. So I see that the top line will drive us. Last quarter, we mentioned that our investment in technology is nonnegotiable. Positive OpEx and CapEx, we grew 26% in 2025, investing in technology. So we continue to invest to improve our competitiveness, focusing on different fronts, but primarily on technology, including cybersecurity, but also to improve customer experience, improve our internal controls, delivering our new auto loan platform. Cassiano, anything to add?

I guess that you talked about everything. But I'd like to remind you that we are in the middle of the transformation process, adjusting the footprint started 2 years ago. We still have a footprint adjustment that is still weighing on our expenses, although we are -- we have a lot of control. So we also had a change in our procurement with guardrails. So we control expenses. So there's also the footprint adjustment that is important. You mentioned 2 offenders that will decrease, which are civil and labor claims. There are the result of the footprint adjustment and the adjustments made across the bank. So I believe that we have costs that are adequate for the moment because we're not giving up on investing in technology and in formatting all of the segments and in training our managers, so that we can have different value propositions for different segments. And also technological transformation for us to become a digital bank. That's another important side of our transformation. So I think it's all very adequate to the moment we're living now. Improvements will come. They're part of the plan. We want to achieve a low cost-to-income ratio at the end of our transformation process. We've been talking about that. And I continue to say we are in the right direction.

One last point. And also our effort to consume DTAs. This is very important. We took a stride forward this year. The expected stock of DTAs at the end will be closed by the end of 2025 in nominal terms, which increases the tangible assets and improves our profitability expectation. That's also very important.

Absolutely. I think you raised an important point. Daniel, it is important that you know that regardless of this event, which actually unlocked the value for our shareholders. Like I said, that goodwill. But every month, we study our DTAs and the opportunities related to that. For us, the greater the capital, the greater is the growth expectation, and we can bring forward the profits. And we always provoked to increase our profits and consume DTAs faster. And we've been doing this with discipline, and we are looking at all of the opportunities we have.

Next question from Pedro Leduc with Itau BBA.

I have 2 questions. My first question is more like a clarification in terms of the capital source that you said you opened 250 bps. Is this net of tax that you have to pay, or you need any other event? That's my first question. My second question is whether you could tell me what is part of that BRL 50 billion, is no less potential adjustments. This is just related to capital. I'd just like to understand a bit more about that 250, if it is net of taxes.

Well, thank you for your question. The first answer is yes. The closing was April 30, but Cassiano can certainly elaborate more on the answer. But the answer is yes.

Well, there is nothing else happening. I mean, it became a reality on April 30, and this consists of 2 major pillars. One is the fact that -- I mean, it's the concept of the company. It's a pure holding company versus an insurance holding. So that capital is part of the 250. And the second pillar refers to generating tax credits and this generated DTAs. And so you have that effect in the sequence. You pay taxes and you offset that with DTAs. These are the 2 basic things we do. I mean we register the operation at market value. This is not accounting. It's just fiscal. You generate payment through DTAs. And the second part has to do with the potential adjustment because this is a pure holding company. So these are the 2 elements related to the 250. Is that clear?

Yes, excellent. And my second question is more like BAU. It refers to LLP. I'm getting some inquiries from investors. In mass-market, I mean, seasonally speaking, the cost of risk increases a bit. And then there is a corporate case, which is very specific, but we have a lot of news about that. Then investors may ask whether this net BRL 9.7 billion LLP would be up in the coming quarters or you would have any kinds of gains stemming from seasonality in the mass market or whether this is not going to be present in the second quarter if we -- and whether we could see this lighter in the coming quarters?

Well, in terms of wholesale, in terms of the wholesale LLP, I'm not seeing provisions like that. But eventually, it could happen. I mean, wholesale is like this. It's very -- it fluctuates. You could also experience the reverse scenario. But now in terms of the other portfolios, we showed great consistency, 1.3%, 1.4%, 1.3%, 1.4% consistently and with nominal growth between BRL 300 million and BRL 500 million per quarter, but we are growing the asset, grew the asset a lot. So with the 4966, you call them provisions. I remember that I said that we have some portfolios that with the 2682, what we used to call initial provision for a new loan, our breakeven was N+1, but now it's M+5, M+6, depending on the portfolio. It used to be N+1. So the 4966 brings in additional challenges because you set up a little bit more of your portfolio so that, in fact, you can start getting the due remuneration along a time line. Therefore, I believe that we will continue to grow that cost of risk, but following the line that I mentioned to you before, and certainly, it depends on the growth level of our portfolio. If we continue to grow as much, excluding FX, and we grew 9% year-on-year. If we continue to grow, we might grow more and then the cost may increase a bit more and the reverse is also true. It holds to be true because if we thought that we would not grow as much, maybe we would need all of these provisions right on the onset according to 4966. The cost of provision for the year should be higher. But I do not let go of the quality of the portfolio. The quality is good. The portfolio is well managed. I've been looking at all the cohorts. So we are very confident about what we are doing. But when I am more present in the auto loans, there is an expected loss, and this is natural. I mean for credit card, even for high income and low income, there is some expected loss. And everything has been factored in. So we are growing, we will continue to grow. But at the same time, we will bring more NII, as I said before, going forward, and we are very consistent in that regard. And the same thing like the emergency line. I mean when you have the pressure from FGI and FGO on top of the NPL over 90, when -- according to the 4966, even though expected loss is lower, but between the maturity process and the great spirit, maybe the provision cost will increase. We will grow the portfolio in the sense to grow. But once it becomes flat then it's just business as usual. I mean the cost of risk for the year, if it is 3.3%, it starts higher and then you will converge to 3.3%. It's a natural.

Next question comes from Henrique Navarro with Santander.

Congrats on the results. My question is on sustainable return on equity. Every time we talk to you, and it's always a very pleasant event, the message that you convey and that we believe is that the step by step, the famous not only the step by step, it's a process that goes into 2028. It goes on gradually until 2028, and it's backed on all of the things that we know, cost-to-income ratio, better operating performance, cost of risk, et cetera, et cetera. But as it improves, there is the issue that the effective tax rate tends to increase, and there is also the issue of provisions. It's a pushback that we get from investors. It's not that Bradesco needs to reinforce provisions, but it would be healthier probably to have higher provisions when compared to its peers. So as Bradesco improves, maybe you should be increasing provisions. The question is, what would be a sustainable return on equity? And I don't want a guidance, I just want your help to understand it better. What would be the optimum level? If I run a weighted average, I mean the number would come to 18%. So my question to you, Noronha, is whether 18% is a number that bothers you or whether that could be a sustainable level for return on equity?

Well, thank you, Navarro, and thank you for joining us. It's always a pleasure to talk to you. We still have the same discourse. You know that I make no promises regarding ROE. I mean, 18% ROE in Brazil, you know that's absolutely feasible. I mean having higher ROEs is also feasible, and we will pursue growth. I do not promise -- I promise you when, but we are moving in this direction, again, step by step, building our path to increase competitiveness and achieving the goal and being sustainable over time. But our plan, as Cassiano was saying, is only 2 years old. We started the implementation process only 2 years ago, meaning that we still have some ground to cover. And I often say that it's -- and until 2028 is not just now or maybe at the end, but during that period. Therefore, we continue to pursue that goal, and we continue to pursue better delivery for all of our shareholders, much better environment to our own employees, better experience and better relationship with our clients. So this is what we are seeking to achieve to build the bank's competitiveness. But Andre, please feel free to add to what I said because I know you are constantly talking to our colleagues on the buy side and sell side.

I mean Navarro's question answered part of the question. We are talking about better efficiency. We are talking about consuming DTAs, I mean, at the same tangible asset, reinforcing our P&L, meaning that we increase profitability and we reinforce our P&L at the same time. When you say that it will be probably desirable to have better or higher provisions, last year, we increased provisions, both on the labor side, civil side, credit side. And this year, we are doing the same thing. We are reducing our restructured portfolio. We are reducing the number of civil and labor losses. We are doing everything, at the same time, we are struggling with everything at the same time. So we are certainly looking at all of these topics.

Next question from Thiago Batista with UBS.

Congratulations on the results and on Bradsaude. I'd like to have a follow-up to Leduc's question regarding impact on capital. There was a positive impact. But we had negative 80 basis points for prudential adjustments and others. What are the important components of these 80 basis points? And should we expect something similar in the next quarters? And my next question, something that I've asked to other banks regarding the new Desenrola program. Could you give us your view on the new Desenrola program? And will there be an impact on Bradesco? Will the impact to be small given the size of your business? I'd like to have your first impressions about the new Desenrola program.

Thank you, Thiago, for joining us. It's a pleasure talking to you. I think, Cassiano, you can answer the first part, and then I'll speak about Desenrola.

It's always a pleasure to welcome you. There will be no impact, okay. There will be no more impact at this amount in the next quarters. This happened specifically in Q1. But as part of this 0.8, 0.4 would be fiscal losses, as part of the Bradsaude operation. So that's kind of a match. In practice, it's 0.4 as part of the 0.8 as traditional prudential adjustments and 0.4 related to the operation as a whole of Bradsaude. So they balance each other.

And Cassiano, let me add to that and remind Thiago and everyone joining us. You see always in Q1, there's a slightly greater pressure on capital because there are some adjustments already contracted by the Central Bank, for example, in terms of operational risk. But when we pay variable compensation at the beginning of the year, and we've been provisioning 1/12 along the previous exercise, in our provisions, we do not have any type of fiscal impact. But when we pay that fiscal impact is created and that's why Q1 is kind of unique. But in our view, independent of Bradsaude, the health care business, we would recover the capital as well. So I'm mentioning just one event but there are other events causing this. And this happens to all banks, not just to our organization. Now to your point on Desenrola, a journalist asked me about this. We are prepared. I think we had about 18,000 clients until last night who had applied to Desenrola. But we, just like other organizations, committed to facilitate this movement with the scouts, with lower rate, with FTO guarantee to make people delinquent -- or actually not delinquent. So we are moving in that direction. Now in terms of impact, if we look at what is past due for much longer, the impact could be greater. But for short-term past dues, the impact does not tend to be very significant. That's my expectation, Thiago. So we start with over 90 days NPL. If it were close to 2 years then it would be more significant than short-term NPL because we have a very controlled portfolio with more guarantees. So there are fewer opportunities in the short term. And the only comment regarding capital, what were we seeing in the previous quarter? The base scenario is at around 11% in 2026, dropping a little bit and returning to around 11% at the end of the year. What is the new scenario? 12.7% pro forma in March, ending the year close to 12.7%, perhaps a little higher. So much more comfortable scenario, right. That's why it's important to say that we have to deduct that 0.4% because that's consumed and we adjusted. It is created and it is consumed in April. It is exactly what you said, at 11.2%, navigated at 10.6%, and we will go back to 12.7% in the operational. That is important.

Next question from Gustavo Schroden with Citi.

Congrats on an ROE above cost of capital. I would just like to congratulate you on the Bradsaude transaction. Well, still on Leduc's question, but more focused now on large corporate. I think we understand that as Marcelo said, there is always the risk of one or another particular case or a one-off case, but I always get questions from investors because this was a known case, very specific case. But usually, you make provisions if it is a known case. If Marcelo can share with us some information about the coverage ratio for large corporates that you have? Because we've heard many news of maybe other possible cases of "reorganization". And the second question is about balance sheet efficiency. That operation with Bradsaude, I mean, in our reading, the numbers speak for themselves. It was a very successful operation. And then given the number of investees or controlled companies that Bradesco has in the conglomerate, my question is whether this is a path that could be further explored to increase efficiency, such as in the case of Bradsaude, not only that had an impact on the capital but also in terms of the value.

Well, thank you again for joining this conference call. It's always a pleasure to talk to you. We are always looking at other opportunities in terms of our balance sheet. We discussed that extensively among us and with the Board. It's also important to remember that it is the ninth quarter that I am here presenting the results. But since day 1, I mean, I keep saying that the entire organization of Bradesco is very rich, and there is a lot of wealth to be allocated. But everything has its right moment. We have to look whether it's economically feasible or not. We often talk about this. Rest assured that this is part of our homework. And as I said earlier, we are very disciplined in terms of capital allocation and everything that we can do in terms of DTAs. I also -- I wish I could expedite its consumption, but it is our net income that allows you to accelerate things, and we will do everything we can. But I would like to remind you that the calculation of expected loss doesn't have anything to do with knowing or not knowing the case. I said that I just aggravated. And for us, we are very well covered. But you may have a very specific case that you probably thought that the level of expected loss was X. And then we realized that the company was deteriorating and it could have been X plus Y. And you could also see that expected loss was X, but it was minus X also recovery comes in full. We work with technical elements, expected loss for cases of other portfolios, civil or labor law suits, we use that. That's the mathematical and technical evaluation. But very specific cases also involve some technical analysis and sensitivity analysis in terms of what can be recovered. And there is another variable. What is the level of guarantees that you have, what is the type of line that is involved. But in no case, it has nothing to do with expected loss because it doesn't matter that your provision was X and then you had to aggravate the provision and added a Y to that X. That's why I said we decided to increase it, to increase provision. And you talked about some other reorganizations. I mean, take a look at it. I'm not going to give an example of a court reorganization, but I saw 2 examples. I think it was last week. I'll see maybe Andre has that information, and I can bring it to you. I mean I cannot refer to any specific case, so I can talk to you later. But take a look at that. We are not in any of these court reorganizations. So we are out of the majority of them. So we are very confident in terms of what we are doing in terms of our coverage ratio for very one-off cases and also in the wholesale bank.

Our LLP budget for large corporate remains the same, but sometimes you shift LLP when there is the aggravation of a particular case.

The next question comes from Yuri Fernandes with JPMorgan.

And also congrats on your improved capital situation, 12.7% or even higher than that. That was a very important message that you conveyed today. I would like to go back to large corporate cases and exploit that a little bit more because looking at the status and the way you design things, I mean, Stage 3 improved by 20 bps. But when we look at expanded portfolio that also includes real estate, Stage 3 is worse. So that expanded view of Stage 3 worsening has to do with some corporate cases. And then when we look at a proxy of Stage 3 formation coming from the expanded portfolio, your provision that was high enough was not even enough to face that formation. So my question is, do you think we should look at provisions or whether cost of risk is higher. And because of higher cost of risk, you would probably increase provisions, but maybe no, not because you would say, okay, we have more secured loans. And so probably the first quarter -- and I'm not going to say that there was a peak because you never know in Brazil, maybe we should see better levels of provisions. I just want to get a better understanding on Stage 3 and your provisions in this first quarter.

Thank you for joining us once again. And before I start answering, you've always provoked us when it comes to capital, having higher capital than maybe we would be able to use up DPAs much faster and your provocation has always been in our mind. It's interesting because we look at that every single month. But thank you for your provocation once again. Andre, over to you, and then I will add if maybe.

Speaking about provisions, the idea is that the cost of risk in a year should be close to 3.3%, starting higher and then converging to that number. The issue is that, in fact, we have more LLP right in the onset, and this is a characteristic of a landscape of monetary tightening. And in our agribusiness, the fact that the grace period is over, but this is part of our plan. So nothing has changed. This still remains the same. But as for large corporate, during the presentation, we mentioned Stage 3 of that same portfolio, Central Bank portfolio, which is more restricted. In the historical series, we mentioned Stage 3 of the expanded portfolio. And looking at that, you see the aggravation of what would be sureties, the DTM and that's where we find it. Why is it that our provision is not higher because there are more secured loans and a lower number of restructured loans. So when we reduce our restructured portfolio to 3.1% out of the total one, we are writing off debt that were heavily provisioned. So here, you have the reversal of this point. And there is also one other point in terms of guarantees, which reached 61%. So when you calculate the necessary LLP for a total portfolio of 61% of secured loans, certainly, this does not require heavy provisions.