Banco Bradesco S.A. Q1 FY2024 earnings call

• Loan portfolio growth: All segments showing growth with improved NPL and ALL. Inflection in the loan portfolio curve with resumption of growth.
• Insurance performance: Solid in all lines with net income increase and strong premium contributions.
• Operating expenses: Grew 4.4% but controlled.
• Strategic initiatives: New organizational structure, reduction of layers, external hires (e.g., credit director Julio Cardoso), footprint revision with ~300 movements, expansion of 122 branches for companies, and growth of Bradesco Expresso with 89% increase in insurance sales and 361% increase in payroll deductible loans origination.
• Technology and AI: Intensive use of machine learning in credit models, reskilling and hiring of tech personnel to drive digital transformation.

Bradesco's loan portfolio reached almost BRL890 billion, growing 1.2% year-on-year and 1.4% quarter-on-quarter. In retail, payroll loans grew 4%, mortgage loans 5.8% year-on-year, personal loans 10.1% quarter-on-quarter. Wholesale segments: large companies grew 1.6%, SMEs 2.3% quarter-on-quarter. The insurance group had net income of €2 billion, a 10% increase, with ROAE near 20%, premium income and pension plan contributions up, and technical provisions growing almost 12% to €380 billion.

• Loan book growth expected to drive net interest income improvement.
• Fee and commission income within guidance, with growth in line with expectations.
• Operating expenses growth within expectations.
• Insurance income expected to be within guidance.
• NII guidance focused on 1.2% growth, with loan portfolio growth anticipated to improve the margin over time.

• Client NII challenge due to market trends and mix of products.
• Competitive pressure on funding costs, potentially impacting net interest income.
• Credit risk in SMEs and mass market segments, requiring careful management of provisions and risk appetite.

Q: About transformation plan and ROE expectations?

A: Transformation plan is well structured with over 800 people engaged in initiatives. ROE expectations will be delivered as time goes by, with focus on growing loan portfolio to expedite client NII.

Q: On market NII and funding?

A: Market NII expected to be positive with interest rates projected to decline, and funding cost managed though competitive environment impacts demand deposits.

Q: On bank's coverage ratio and capital?

A: Coverage ratio fluctuates with credit cycle and is adequate, CET1 ratio position is comfortable and not a limiting factor for growth or dividend policy.

Q: On insurance technical provisions and capital arrangement?

A: Technical provisions increase proportional to insurance and pension fund revenues, capital position projected to remain stable with no immediate need for arrangement.

Q: On funding and NEXT platform?

A: Funding mix adjusted with demand deposits shifting to time deposits, and NEXT platform decision-making ongoing as part of strategic review.

Q: On cost and guidance?

A: Operating expenses controlled with strategic initiatives, guidance maintained with focus on balancing expenses and investments, and collective bargaining agreement under review.