Banco Bradesco S.A. Q4 FY2024 earnings call

• Transformation progress: They have reduced layers and span of control, hired C-level executives, and established a transformation office with over 800 people. They have been working on management culture, decentralizing decisions, and implementing enterprise agility. - Digital initiatives: They delivered a new experience in their app, introduced GenAI BIA with a 90% resolution, migrated 79% of their applications to the cloud, and acquired Kunumi to gain productivity improvements. - Insurance and SME initiatives: The insurance business is performing well, they launched segments for small and medium enterprises (SMEs) and the agro sector, and expanded Bradesco Expresso to provide a better customer experience for correspondents.

The net income for the fourth quarter was BRL5.4 billion, showing a 37% growth year-on-year, and for the full year 2024, it reached BRL19.6 billion with a 20% growth. Total revenue surpassed BRL32 billion, registering a 7.9% year-on-year increase. The total loan portfolio exceeded BRL980 billion, growing nearly 12% year-on-year. In terms of individual loans, there was growth in high-income segments, and payroll loans saw a 5.8% growth. Fee and commissions income stood at BRL10.3 billion, marking a 13.7% year-on-year rise. The insurance company's revenue was BRL121 billion, up by 13.6% year-on-year, with a net income of BRL2.5 billion for the quarter and BRL9.1 billion for the entire year, achieving an ROAE of 21%. The BRAM (Bradesco Asset Management) had assets under management (AUM) reaching BRL122 billion. Credit cards saw a 5.1% year-on-year growth, driven by a 14.5% growth in high-income segments. For payroll deductible loans, Bradesco holds a 14.3% share. The corporate loan portfolio grew by 28% in collateralized and secured segments, and the working capital increased from BRL130 billion to BRL147 billion.

• The 2025 guidance is more cautious considering the macroeconomic scenario and the 4,966 stake at Cielo. The NII net of provisions is expected to grow. The portfolio growth guidance ranges from 4% to 8%, but a more positive macroeconomic situation could push it towards the upper end of this range. The NII net of provisions is close to the top of the guidance, and the fee and commission income is also near the top of the guidance. Operating expenses are close to the top of the guidance. It is expected that the NII net of provisions will grow even with the cautious scenario, thanks to the carryover from 2024 and productivity gains from technology and transformation efforts.

• Macroeconomic risks: Uncertainties in monetary policy and interest rates can affect loan margins and portfolio growth. - Credit risk: There is a need to carefully manage risk appetite to ensure controlled portfolios and risk-adjusted returns. - Operational risks: Potential challenges in executing transformation plans and integrating new acquisitions such as Cielo and Kunumi.

Q: Regarding market NII and hedge policy?

A: Cassiano stated that arbitration was significant in the fourth quarter, and they are working with NII close to neutrality in 2025. Marcelo added that there are lessons learned with a good team and there could be a better year ahead.

Q: About capital CET1 and strategy?

A: Marcelo said they are comfortable with the capital, the CET1 has a buffer, and they will increase profitability and the CET over time. Cassiano explained the adjustments related to 4,966 and mark-to-market, and that the capital will be stable in 2025.

Q: About provisions and margins?

A: Marcelo said they will continue to grow, with the cost of risk expected to be around 3%, and the growth in client NII due to efficiency measures and better spreads. Cassiano added that client NII grows more than the portfolio with efficiency and funding factors.

Q: About the expense line and trade-off?

A: Cassiano said it depends on the scenario, but they are committed to investments, with expenses under control due to efficiency gains, and they will capture further benefits over the years.

Q: About IFRS impact and normalized return?

A: Cassiano explained the IFRS movement related to operational risk and reclassification, and they will reach an ROE higher than the cost of capital through under promising and over delivering. The market NII is neutral between zero and BRL1 billion, and they are working on achieving gains.

Q: About restructuring charges and capital?

A: Joao Carlos said that restructuring charges are focused on footprint review, and the transformation will continue. Cassiano explained the 60 basis points capital increase from security reclassification related to 4,966 and IFRS