Banco Bradesco SA Q3 FY2026 earnings call

• Strategic Growth & Risk Appetite: Bradesco is selectively growing in segments with defined risk appetite, notably accelerating in private payroll loans (+102% YoY), vehicles (+27%), and mortgages (+15.2%). Conversely, the bank is reducing exposure to unsecured personal loans and stressed credit card portfolios, focusing instead on high-income segments.
• Portfolio Mix Impact on NIM: The decline in Net Interest Margin (NIM) is attributed to a shift in portfolio mix toward large corporate clients, which have lower margins but higher volume. Excluding this segment, the NIM would be approximately 9.3%. Management prioritizes top-line revenue growth over margin compression in these short-duration wholesale transactions.
• Asset Quality & Provisions: Over 90-day NPLs increased from 4.3% to 4.6%. This rise is largely structural, driven by the rapid growth (31% YoY) of FGI/FGO guaranteed SME loans and seasonality in the John Deere Bank auto portfolio. Despite the rise, Bradesco’s delinquency rates remain below the national financial system average, indicating controlled risk.
• Operational Efficiency & Transformation: The bank is achieving significant productivity gains through Gen AI and its 'Bridge' tool, tripling delivery capacity without headcount increases. The digital transformation has migrated 45 million clients to digital channels. Operational expenses are being optimized through footprint adjustments and procurement reforms, targeting further efficiency gains.
• Insurance & Fee Income: Insurance premiums and revenues are growing resiliently, supported by internal distribution and Bradsaúde. Fee and commission income is rising, driven by custody, brokerage, and investment banking services, although checking account fees remain flat.

The transcript does not provide a detailed breakdown of financial performance by specific product segment (e.g., Retail vs. Wholesale) in terms of absolute revenue contribution percentages or distinct profit figures for each line item. Management highlights that Total Net Interest Income (NII) grew 14% year-over-year and 2.4% quarter-on-quarter, driven by growth across liabilities, fee income, and insurance premiums. The loan portfolio totaled BRL 1.15 trillion, growing 11.1% year-over-year. While specific segment revenue contributions are not quantified, the presentation emphasizes strong traction in individuals (payroll loans up 7.4%, private payroll up 102%) and legal entities (large corporates up 14.8%), with Insurance Group ROE at 22%.

• Net Interest Income (NII): Management expects continued growth in total NII, with expectations for Q4 to show improvement compared to previous quarters due to favorable mix shifts and treasury performance.
• NII Net of Provisions: The full-year guidance range is maintained at BRL 42 billion to BRL 48 billion. Current performance is in the lower half of this range. Management anticipates a potential inflection point in cost of risk towards late 2027 or 2028 as the macroeconomic environment improves.
• Efficiency: Continued improvement in operational efficiency is expected over the next two to three years, driven by the completion of branch footprint optimization and technology-driven productivity gains.
• Interest Rate Environment: Lower interest rates are viewed positively for the bank’s overall health and client repayment capacity, though management notes that cost of risk improvements will be gradual.

• Cost of Credit Pressure: The cost of risk remains under pressure due to the rapid origination of FGI/FGO guaranteed loans and older client cohorts in clean retail lines (personal loans, credit cards) showing signs of payment delays.
• Macroeconomic Sensitivity: High real interest rates in Brazil impact individual disposable income and corporate debt servicing. A sustained high-rate environment continues to strain the broader market, affecting asset quality.
• Regulatory Changes: Potential reductions in government guarantee programs (FGI/FGO) could impact SME lending growth and require strategic pivots to alternative collateralized or unsecured products.
• Market Volatility: Treasury operations expose the bank to dynamic interest rate fluctuations, requiring active hedging and ALM strategies to manage sensitivity.

Q: Daniel Vaz asked if the negative impact of large corporate portfolios on NIM is a persistent trend and when cost of risk will offset NIM pressure to improve risk-adjusted returns. / A: Marcelo Noronha explained that the wholesale bank now focuses on short-duration portfolios (60 days), while long-duration assets are in retail (payroll, mortgages). He stated that despite the mix effect lowering NIM, the top-line revenue growth justifies the strategy. He expects NIM to recover in Q4 as the mix shifts, noting that cost of risk pressures are systemic, not unique to Bradesco, and will improve gradually as the macro environment eases in 2027-2028. André Carvalho added that wholesale business drives cross-selling in treasury and IB, enhancing overall value.

Q: Pedro Leduc requested color on cost of risk trends, specifically regarding stable LLP in wholesale amidst court reorganizations and growth in risky retail lines like auto loans. / A: Noronha highlighted that auto loan rollovers are performing well due to strong credit policies and customer experience. However, cost of risk is pressured by FGI/FGO guarantees and older clients in clean personal loans/credit cards delaying payments. He noted that while over 90-day NPLs are rising, they are concentrated in collateralized SME loans and seasonal auto books, keeping Bradesco’s delinquency rates below the national average. LLP in wholesale remains stable.

Q: Anahy Rios asked for the magnitude of FGI/FGO’s impact on NPL growth and estimates for future NPL increases in these lines. / A: Noronha confirmed that half of the 30 basis point increase in over 90-day NPLs came from FGI/FGO portfolios. As this segment grows rapidly (31% YoY), it naturally influences the aggregate NPL ratio until the cure period (180-185 days) passes, likely causing a curve inflection in Q2/Q3 next year. Carvalho added that John Deere Bank seasonality accounts for another ~10 bps, while other portfolios show minimal impact.

Q: Antonio Hoefi inquired about Bradesco’s reaction if FGI/FGO volumes are reduced next year and expectations for macroprudential measures on individuals. / A: Noronha described FGI/FGO as a valuable program for SMEs and stated that if resources shrink, the bank will seek alternative revenue streams and maintain relationships with good clients, though growth may slow. He does not expect hard macroprudential measures from the Central Bank, viewing current conditions as manageable speculation rather than imminent regulation.

Q: Gustavo Schroden asked about the strategy behind DCM originations and whether declining interest rates would boost investment banking results. / A: Noronha clarified that Bradesco aims for a fair share of the market rather than leadership, focusing on close client relationships and assertive origination. He noted that wholesale banking involves circulating portfolios (OPB), leading to quarterly fluctuations. Carvalho added that Bradesco executed fewer firm offers than peers in 2026 and is expanding mid-market DCM origination, positioning itself to benefit from market recovery.