Banco Bradesco S.A. Q1 FY2025 earnings call

• Revenue driven by NII, fee and commission, and insurance. Loan portfolio growth in various segments with focus on secured loans. - Productivity gains from technology, including GenAI use and transformation initiatives. - Insurance group ROAE 22.4%, with revenue from insurance premium, pension contributions, etc. - Reviewed footprint, closing branches, and invested in technology and CRM to control expenses while driving growth.

Net income was BRL5.9 billion, a recurring net income growing more than 39% year-on-year and 8.6% quarter-on-quarter, with ROAE of 14.4%. Total revenue was BRL32 billion, growing 15% year-on-year. Net interest income grew 13.7% year-on-year and 1.4% quarter-on-quarter. Fee and commission income increased 10.3% year-on-year. Insurance income grew 32.7% year-on-year. Expanded loan portfolio totaled BRL1 billion, growing 4.9% year-on-year (excluding John Deere Bank, 11% growth). Individuals: 16.2% year-on-year growth; micro, small, and medium enterprises: almost 30% year-on-year growth; wholesale bank: 1.2% growth year-on-year.

Annual guidance is trending above initial projections, may review guidance in H2 2025. Market NII expected between BRL0 and BRL1 billion in Q2. Tax rate impact on guidance, potential adjustment based on TJLP changes affecting interest on capital payments.

Macroeconomic factors could lead to slower growth in the second half of 2025. Market volatility may affect market NII. Credit risk in certain segments if the economy weakens.

Q: Hi. How are you doing? Good morning. Congratulations on the results. I think it was very strong across the board. My question is about the ROI of the bank. Not only you mentioned an ROAE of 14.4%, and you said that you naturally aim for a much more robust return for the bank. At the beginning, two or three years ago, you had said that the initial metric was to achieve the cost of capital. But now you said you want to fly even higher. So my question is, when we look at it by segments, we see the insurance group and ROAE of 20%, which means that the banking operation has returned close to 10% or slightly under 10%. So what's what do you still have to normalize? What are the main segments? Is it retail, wholesale, SMEs? I mean, what are the big boxes that you have where you still see some room to bring the ROAE to a higher level?

A: I'll ask Cassiano to answer, but I'll start. Thiago, thank you for the question. It's a pleasure to have you on board. Well, it's basically mass retail. This cost to serve is something we've been correcting. Over time, this will bring us a different level of return. For example, the wholesale bank. The level of RER is high in all client segments that we have. I'm not talking about IB or global markets because that requires much loss capital. Global private is high 30s to 40s. High income segment, the same. The principal clients, I mean, they are impressive in terms of level of return we have. And that applies to prime as well. With SMEs, we reversed the trend, and it's increasing. So that's what we are working on. And, of course, we're investing to gain productivity. As I mentioned, Cassiano, you can compliment.

Q: Good morning, Andre, Noronha, Cassiano. Congratulations on the excellent result. It's clear that the bank has traction with good indicators. I'd like to take this moment with you to hear a bit about what we didn't read in the release, which is the part on private payroll deductible loan. A lot of people are discussing products. I'd like to get your take on this because you have a big market share, about 15% in the traditional payroll deductible loan. So what will be the position of the bank? Would you have portability of everything? Or how are you planning to operate in this segment?

A: Thank you for the question. Well, I'm going to give you some of my own perspectives. Sorry, Daniel. I called you Thiago again. Sorry, Daniel. It's a pleasure to have you. Anyway, here are some points in our review regarding that. Number one, we believe that here lies a great opportunity for Bradesco. You see, we have 14.3% market share of payroll deductible loans in the public setting at different levels of government, INSS, and private. But with private deductible loans our share is lower. Our share is much lower there, and private payroll deductible loans take up small space just about 6% of the whole 14.3%. So among the private payroll deductible loans, we are the biggest in terms of share. So we understand that here, there's a lot of growth coming from this. Perhaps the question should be, why is it that private banks or perhaps the mainstream banks, incumbents have not yet presented a great origination here? There are some important variables here. Number one, the client base that already had a payroll deductible loan increased between 16 April and 21 April according to that. Until then, there was an origination of BRL8 billion. So from our standpoint, what we did was we had an initially defensive strategy. Other more active organizations might have operated with their agreements in force but using a new channel. And others did not see -- I mean, did not see these clients that are -- or did not look at these clients that already had a payroll deductible loan. So let's suppose you had an agreement with me. Bradesco had an agreement with your company, and then you applied for a loan, and perhaps an organization offered this loan to you. But when that base increases, there is no more margin. So this is a credit with a clean risk. And that's why some organizations, even smaller organizations, which are more focused, have offered a slightly higher price with smaller tickets. Yesterday, there was another meeting of the working group with a data prep, FEBRABAN Federation of Banks regarding portability of these loans. So there's an organization that is closing. And, of course, we will now move to a more aggressive, active strategy rather than a defensive strategy regarding our client base and regarding the market. So we see a good growth expectation perhaps starting June or July when everything is very well oiled. And I would like to add one element, Daniel, that I think I should remind you of. We continue to have room to grow in public payroll deductible loan, INSS, deductible loan. But the level of delinquency of these two-line items is a much lower delinquency level. I'm going to give you a general number. Okay? General market number. The over 90 NPO is probably 2%. In the case of private payroll deductible loans that we currently have, our delinquency is more than double that. So approval is not just of the individual. We take into account the individual and the company that pays the salary of this individual. But in the market, and this is market information, is that the existing private deductible loans, I don't see this in the large banks. I think that the large banks have also a very low delinquency level. But I guess it has a delinquency rate that is higher, close to 9%. So here we have to work with good models looking at the individual and the company they work for. So these are variables on the table so that we can have the right pricing. Okay? Daniel. But we will be fighting for our market share. Okay? Thank you very much.