Good morning, everyone. I'm Janaína Storti, General Manager of Investor Relations at Banco do Brasil. Welcome to our live event to discuss the results of Q3 2022. Our event is bilingual and has simultaneous translation into English. To choose the language, click on the button on the right corner of the screen and select the desired audio. To begin, our CEO, Fausto Ribeiro, and CFO, Ricardo Forni, will give a brief presentation of the performance of the bank. We will have a Q&A session. We remind analysts that it is only possible to ask questions through the webcast link. Also with us are Paula Teixeira, Vice President of Internal Controls and Risk Management, João Carlos Pecego, VP of Wholesale Business, Renato Naegele, VP of Agribusiness, and Daniel Maria, Director of Finance and Investor Relations.
I now turn the floor to CEO Fausto so we can begin.
Good morning, everyone. Good morning to all of you joining us today. It is a huge pleasure to be with you today to talk about our Q3 2022 results. Today, we celebrate yet another record result. It was a performance based on delivering value to customers. Also based on accelerating our digital transformation, business sustainability, and continuing our strong performance on our new agenda, the ESG agenda. Focused on our strategy, we went from an ROE below 15%- 21.8%, with an adjusted net income of BRL 8.4 billion. In more than a strong result, we delivered to society an added value of BRL 57.8 billion, up 34.8% compared to the same period of the previous year.
This is a consistent delivery, which makes us very proud, and is the result of the dedication of the employees of Banco do Brasil, spread from north to south. Since the beginning of this management, we have become even closer to our workforce. I have been personally to practically all Brazilian states, visiting our teams and also visiting our clients with us, putting into practice what I advocate the most, proximity in practice. Today, the engagement of our team is clearly reflected in our numbers. One of the levers of our result is the growth of credit with a mix that brings a better risk-adjusted return. For example, in Q3 2022, our expanded loan portfolio exceeded BRL 969 billion, up 19% year-on-year, compared to the market that grew 16.8%, almost 17%.
We're in line with the market and a little above. We maintained our delinquency level under control, another very important point for us to achieve these wonderful results, at 2.3% below the Brazilian financial system, as you can see on the screen, and with a coverage ratio of 234.9% above the average of the Brazilian financial system. It is worth pointing out that the growth of our portfolio with quality is the result of the good origination of operations and the accuracy of our credit risk models, which are in permanent evolution. Over the last few quarters, we implemented a series of initiatives to improve our relationship with our clients, being closer and closer to them and promoting a comprehensive human and specialized experience in both our online and offline channels. As a result, we have more engaged and satisfied clients.
We see that we increased the number of engaged clients, in other words, those clients who have a frequent relationship with us with recurring business generation. Engaged clients increased by 17% in the yearly comparison. We realized that when the client is engaged, we generate more results and have lower churn, paving the way for a long-lasting, sustainable relationship. We observed that the evaluation of services provided remains at a high level with a score of 4.81 on a 5-point scale. Good service also translates into a lower rate of complaints. We exceeded a historical mark. Our best, we achieved the top rank among incumbent banks and surpassed our best position in our history in the central bank ranking. It's a historical mark that we have to celebrate.
All these moves support the increase of more than 10 NPS points in one year, ratifying the assertiveness of our proximity-based strategy. All of that shows that the Banco do Brasil strategy is a right one to achieve a level of quality and excellence in the eyes of our clients, showing that it is possible to achieve results, earnings, on one hand, and on the other hand, having satisfied clients with us. We strengthen our leading position in a number of loan lines. For example, in individuals, our payroll loan portfolio has already reached more than BRL 113 billion with a 20% market share. It is a safe loan line with a good percentage of return with low delinquency.
At the same time, we advanced in the strategy that we talked about in the last call of diversification in non-payroll loan lines, trying to improve the mix of our portfolio to bring a higher NII. We remain committed to supporting the country's micro and small entrepreneurs. We were the first bank to reach the mark of BRL 10 billion, releasing the latest Pronampe tranche. We did that with quality, benefiting more than 103,000 micro and small companies all over the country. 41,000 of which are headed by women. That's an important observation. Well, the resources released generated positive impacts across all sectors of the economy. In foreign trade, we increased our relevance. The ACC/ACE portfolio grew 36.6% year-on-year in here.
It's important to pause, 'cause again, we are ranked number one in the ranking of the Brazilian Central Bank in foreign trade. That is important because we offer a closed cycle of service to our clients, particularly agro, agribusiness clients that export their crops abroad. It is important that we have competitive rates so that we can fully serve our clients, particularly those that are creating added value for the bank, and agribusiness clients are part of that group. As the biggest partner of Brazilian agribusiness, as we said before, by September, we had disbursed BRL 63.5 billion in the 2022-2023 crop plan. I can tell you that today, disbursements already exceeded BRL 84 billion if we get the latest numbers.
Agribusiness is strong, growing, being supported by Banco do Brasil, and we'll continue to lend a hand to the agribusiness. It is a segment that is very capitalized with favorable commodities price, delinquency rates way below the average of the market comparing with other industries. Banco do Brasil is stronger and stronger in supporting these transactions. I must highlight our ESG performance, which is present, which pervades all of our company's decisions. We have constantly expanded our portfolio of sustainable solutions and are attentive to new businesses that generate financial results, as well as a positive social environmental impact. The highlight goes to our sustainable portfolio, which totaled BRL 321 billion in September 2022. Reinforcing our leading role in the sector, Banco do Brasil is the biggest partner of the Brazilian agribusiness. As mentioned before, we are present in the entire value chain.
Agriculture credit is the product with the highest NPS at BB. It's more than offering credit, the bank works side by side with farmers, getting to know the reality of the field, the client's needs and potential, and thus offering solutions with assertiveness and agility. With the Circuito Agro, we have already visited more than 350 municipalities and will reach the mark of more than 500 by year-end, offering training for family agriculture throughout the country. We take the best production and harvest practices. The idea is to take to them more than just credit, to take to them training, skill building. We have partnership with Embrapa and our experts to train more than 6,000 small growers. We're also working to develop new sources of financing for the sector.
The objective is to create a permanent line with an ESG bias at an attractive cost, and that little by little will help the sector reduce its dependence on public resources, what we call the agricultural subsidy or equalizable resource. I would also like to highlight the balance of the sustainable agriculture portfolio, which posted a total of BRL 140 billion in September 2022, reaching 112% of the goal that BB had defined in the beginning of 2021 in its 10 long-term commitments to sustainability. In addition, we have the low carbon agriculture program. In addition, BB is digital out in the field as well. We have advanced our partnerships to bring innovation to the field.
One example is FieldPRO, a climate intelligence startup in the innovation hubs, research and development and sustainability with AgNest, the partnership with Embrapa and Bayer in AgTech Garage. Over there, we have a lab seeking to develop innovations that can be taken to the rural areas. Banco do Brasil wants to offer a lot more than just credit and loans. We want to offer technology solutions, so that we can be more engaged and generate more business, so that the Brazilian agriculture can continue to do the wonderful work of transforming society, involving technology in record after record of grain production, generating more and more exchange reserves to Brazil. In addition, we are exploring three ecosystems. We have invested in the development of new technologies to enhance client experience, generate value for all those involved in our relationship chain, and create new business models going beyond traditional banking.
For the agribusiness segment, from small to large farmers, we have been scaling up the digital platform called Broto, which has already achieved more than BRL 2 billion in business in two years, facilitating farmers' access to banking and non-banking products and services. We have incorporated the Broto company, preparing ourselves to monetize and boost the results of this platform. For individuals, we have Loja BB Store, bringing even more relevance to our app and increasing the offer of products to our clients. With a relevant audience, the super app BB has already achieved a daily peak of more than 10 million users. Year to date, Loja BB Store, has already posted BRL 680 million in sales of products and services. That brings to BB commissions that range from 5%-12%.
To give you updated numbers, close to BRL 900 million in sales of products and services. Today, we have more than 50 brands offering cashback directly to the client's account. Our next step is to evolve to an end-to-end model to have a checkout of the operations. Also offering the possibility of clients buying using payment slips to complement our banking activity, which is to fund trade. For SMEs, we created the Liga PJ platform. The solution has reached more than 530,000 users and has already referred more than 4,000 users to the pages of our 21 partners. This is a space for the exchange of information, experiences, and business connections between entrepreneurs and partners in this market. We seek to expand our strategic partnership to strengthen and complement our business.
Well, now speaking a little about our core business, strategic partnerships, we are celebrating two years of our partnership with UBS. We have achieved robust results. Since the beginning, we have participated in the structuring of around 345 deals. Aiming to expand this successful partnership to other businesses, we recently signed a binding memorandum of understanding for specialized wealth management services in the U.S. It's not gonna be an exclusive partnership with UBS in the U.S., but since we've been successful in our own market, we'll extend to the United States the possibility of broadening our private wealth management, offering our clients a wider range of products and the famous advisory, which is so important in wealth management. Last week, BB Asset announced its first partnership with an independent fund manager called Occam.
This partnership seeks to expand our operations in the management of products with more sophisticated strategies to meet the growing client demand for diversification and to join the ecosystem of independent wealth managers. After recently announcing the investment we made in the startup called Yours Bank, we now announce a new investment from our Venture Capital Program, Bitfy, a startup that connects a large financial ecosystem that increases our ability to build blockchain solutions and opens possibilities for us to work with crypto activities, crypto assets, actually, and tokenization. Again, the bank looking for partners in venture capital with direct partnerships, trying to modernize the company to bring it to a whole new level of management and the digital world. In addition, part of our strategic agenda is to divest non-core assets. The example is Banco Digio, which we sold to Bradesco, and they were our partner.
We sold it to Bradesco for BRL 645 million in February of this year. The screen shows our strategy of strategic partnerships and the sale of non-core assets. The strategy remains, it is in force, and it is showing positive effects, helping the bank enhance our results. Okay. Expanding the engagement with young people is fundamental to guarantee the company's sustainability. The offering of products and services customized to this moment of life is one of our priorities to rejuvenate our client base. In view of this, we have carried out a series of actions to get even closer to this audience, both in language and channels used, with the goal objective of promoting an experience connected to the behavior of young people in their moment in life. Here, we highlight our recent launch called BB Cash.
This is a 100% digital account developed for 13 to 17-year-olds with gamified content with a focus on financial education. BB Cash brings a card for online purchases, access to Pix investments, among other customized functions. There's more. Just this week, we started a campaign where when opening a BB Cash account, our young clients will receive a toy art from Squad BB. You can see these, figure actions, action figures. They were designed in partnership with our sponsored Rayssa Leal, with Ítalo Ferreira, our star from surfing, and others, just like your imaginary friends. The idea is that our young clients will be interested and more engaged. When they open a BB Cash account, they will get a toy art. They can choose, and they can continue to get other action figures so that they can have the whole collection. Very well.
Cultural transformation with employee engagement. We continue to work hard to transform the capabilities of our company to engage our employees towards the new. After all, transformation is brought about by people. With the evolution movement on the left, we focused on upskilling and reskilling actions to develop the digital competencies of our employees. In addition, the second block, we have advanced on internal innovation fronts with experimentation labs for new technologies and the development of data and analytics solutions. We have four labs. We spoke about this in the past. The idea is to create a perfect environment for innovation. We are also continuously enhancing and developing new programs and initiatives related to talent attraction, career development, succession, and talent retention. The application of people analytics to identify talents has allowed us to reduce traditional selection process times by 75%.
We're also modernizing more and more our senior management succession program. We have internal missions for our executives and managers so that they can be open to adopt new market trends, so that they can get to know different markets. They have online immersions in major innovation centers such as the Silicon Valley, China, Israel, London, and this is a continued education program so that our executives can have access to different views. In addition, we have evolved with new work models enabling more flexible alternatives, remote working, and so on and so forth. The idea is that cultural transformation will be one of the basic pillars for this transformation that we need to have at the bank.
Everything that we did, all these levers for client proximity, a leading role in those loan lines, foreign trade, SMEs, individuals, agribusiness, innovation, partnerships, and people, so that all of these pillars will sustain BB to boost us forward in a scenario of increasing competition. As part of the digital acceleration strategy to generate value to clients, we have a digital strategy well-designed at the bank to have an end-to-end process. We are selecting three sectors, talking about investors, the youth, micro and small companies. We are investing strongly in technology in our cloud environment, reinforcing our whole technology complex. We're investing a lot in cyber, in an agile operating model, so that we can have the whole organization with a fast and effective way of promoting transformations.
We are betting a lot on automation and analytics so that we can be more efficient in the offering of services and products to our clients. In other words, talent and culture, because it's people that do things, that make things happen. These are the key pillars in this digital acceleration strategy for perennial value generation at the bank. For the digital ambition to become a reality, we have seven main levers that will be subdivided into KPIs that are being followed by the whole management of the bank. We imagine that this is a three to five-year journey for the process to be complete, so that we can materialize the wishes we have for digital transformation at the bank.
Lastly, a take-home message is that we have a corporate strategy that was reviewed this year with a number of basic pillars, such as sustainable result, ESG agenda, digital transformation, and innovation to be accelerated. We want to be a benchmark in the market with engaged professionals focused on innovation. Meritocracy as being one of the main pillars for a high-quality management, so that we can have better and better results. We also reviewed our purpose based on our practice and our values. Our new purpose is to be close and relevant in people's lives at all times.
Proximity, the proximity strategy has been proven to be effective in solving the issues, the problems of our clients to have a qualified and more customized offering of products and services to our clients, and at all times, in all moments of their life. It's nice when we hear our clients saying that they've been with us for 50, 60 years, and to know that, yes, we played an important role in their management of their business, that we were present in the beginning of their business, and that we were present when they were generating more results when their company was consolidated into large economic groups. Our values are proximity, efficiency, innovation, commitment to society, and integrity.
`These values are building blocks. So that we could have a solid, strong, consistent corporate strategy that would be a guide for what's coming in the future. Now, I turn the floor to Ricardo Forni, who will speak about the numbers.
Thank you very much, CEO Fausto. Good morning to all. Let me start the presentation with some highlights, but I would like to underscore that the points expressed by our CEO show us how this approach of maintaining close ties with our customers, the digital strategy, and also our clear strategy and engagement of the team. The how it's done is very important. We were very happy to produce the numbers that we've reached. In the last nine months, we can report expressive earnings of BRL 22.8 billion, up 50.9% in comparison to the nine months of 2021. This performance reflects the levers that will continue to sustain our positive results. Healthy growth in the loan portfolio, reaching BRL 969 billion.
Diversification of lines of revenue, elevating our net interest margin by 16.7%, and fee income revenue by 11%. Cost management discipline, which coupled to the new business generated, enabled us to attain a cost-to-income ratio of 31.6%, the best in the historical series. A solid capital position with Common Equity Tier 1 amounting to 11.77%. Next slide, please. Here we report our quarterly adjusted net income in a total of BRL 8.4 billion, an increase of 62.7% vis-à-vis 3Q 2021. Our return on equity reached 21.8% and ranks among the best in the comparison with our peers. Our extended loan portfolio exceeded BRL 969 billion, an increase of 19% compared to September 2021.
Our sustainable business portfolio reached BRL 321 billion, that is approximately 1/3 of the expanded loan portfolio. The individual's loan portfolio grew 10.9% compared to September 2021 and 2.7% in the quarter as a consequence of the good performance in payroll loans, consumer finance and credit cards. Following our origination strategy focused on lines with better risk-adjusted returns. The SME portfolio surpassed the mark of BRL 106 billion, up 18.4% in 12 months, resulting from the release of the new Pronampe tranche. The high demand observed in the agricultural sector and our close ties with the segment pushed our agriculture loan portfolio to a level of BRL 286 billion, and almost half of this portfolio is made up of loans for sustainable agriculture.
In the corporate segment, our loan portfolio reached BRL 190 billion with annual growth of 29% and quarterly growth of 3.2%. In the next slide, as previously announced, the expanded ALLL climbed 53.8% in the quarter-over-quarter comparison and 15.1% if compared to the same period last year. We would like to emphasize our performance in write-off recovery with growth of 10.5% in the year-to-date, and in the quarter increasing 4.1%. Delinquency longer than 90 days reached 2.34% under control and below the Brazilian financial system indicator. In the quarter, we observed an expansion of non-payroll loans individual segment, while the corporate and agriculture segments show the behavior near stability.
The coverage ratio closed the quarter at 234.9%, and the new NPL over portfolio is reported at 0.85% with a coverage of 91%. In 3Q 2022, NII totaled BRL 19.6 billion, up 14.7% in the quarterly comparison and 25% in the 12-month comparison. Year to date, NII grew by 16.7%, totaling BRL 51.9 billion. The strong 10.2% quarterly increase in revenue from credit operations can be explained by the growth and repricing of our loan portfolio. The 36.3% quarterly increase in treasury income reflects our growth in the securities portfolio, which has more than 80% of assets linked to the CDI rate and benefited from a higher average CDI rate.
Service fees totaled BRL 23.9 billion in the first nine months, up 11% in the yearly comparison, mainly influenced by the performance of fund management, pensions and credit operations. In the accumulated view, administrative expenses grew 6% in the year below inflation in the period, as a consequence of the bank's discipline in cost control. On the next slide, yes, we present the common equity tier one, which stood at 11.77% in September, mainly impacted by the increase in RWA credits, driven by growing portfolio and partially offset by higher earnings withholdings in the quarter. Considering the performance shown up to now and also in order to express the management's expectations for the year, Banco do Brasil revised its corporate projections.
In the loan portfolio, we increased the estimates for the company segment to the range of 15%-17%, mainly reflecting the strong disbursement of Pronampe in 3Q 2022. We brought down to 13% the high end of the guidance on the individuals, reflecting greater selectivity in the growth of non-payment roll credit lines. Considering the agribusiness, we revised the range for growth between 15% and 17%. We re-reviewed the NII range to a range of 19.5% and 21.5% with the purpose of reflecting the above expectations performance in the loan portfolio caused by the repricing move, treasury income, and also greater volume of securities and higher Selic rate. Fee income was reviewed to a range between 9% and 11% as a result of the sound management in funds, pensions, loan operations, and guarantees.
The numbers expected for the extended ALLL and administrative expenses were maintained. Finally, the adjusted net income was reviewed to a range between BRL 30.5 billion and BRL 32.5 billion to account for the changes in the other lines. We can now start the Q&A.
T`hank you. We will now begin the Q&A session. I'd like to remind you that this is going to be a bilingual session. You can ask questions in both English or Portuguese. Our first question comes from Gustavo Schroden with Bradesco. Gustavo.
`Good day, everyone. Congratulations on the results. Fausto, Forni, Daniel, Janaína, indeed, very strong earnings. I have two questions. First, I'd like to understand a little what we can expect from this NII line for 2023, 'cause I think the 2022 is a given. More specifically, this combination between market NII and client NII. Market NII was BRL 10 billion, a very strong result. I'd like to have two explanations. What can we expect looking forward? And the composition of this market NII. Sometimes there's a confusion of client NII, market NII. I think BB accounts for this slightly differently than the rest of the peers.
I'd like to understand the market NII so that we can have a comparative base with the private peers. Still on NII, can we imagine 2023 evolving these levels? Of course, considering the current information that we have, particularly regarding interest rates. The second question has to do with the quality of the portfolio. I think that we had a normalization to BRL 4.5 billion. NPL increased 30 basis points, but NPL individuals increased 90 basis points. I'd like to understand where are we in the cycle of NPL, particularly at Banco do Brasil, more specifically in individuals, because I was looking at the charts that you show by cohort. If we look particularly consumer finance and the 2022 cohort, I think that this is worse than the historical series.
I would like to understand where are we in this delinquency rate, particularly in consumer finance? What could we expect and when should we achieve the delinquency or default peak?
Excellent questions, Gustavo. We will all share the answers. Forni will start talking about NII, and then Ana Paula Teixeira, our VP of Risks and Internal Controls, will speak a little about the quality of the portfolio. Forni, let's start with you.
Thank you, Gustavo, for the question. I think that NII, well, for example, the division between treasury and client, we don't have the same breakdown. We have a different view of that. A view that is very similar to what our peers have been informing, and the IR team can give you more on that. The treasury result includes the composition of the portfolio. The treasury result has been benefiting from growth of the portfolio and higher Selic interest rate. This is a reflection that we see quarter after quarter. Growth of the loan portfolio coupled with the whole set of revenues minus expenses on the funding side, that's what drives our NII to be robust and growing, and at a higher pace of the growth of the loan portfolio. On the side of assets, we've been repricing.
Because the portfolio takes some time for repricing, and it incorporates this higher rate over time in what we have signaled and expected for 2023, is that NII as a whole will reflect growth greater than the portfolio growth that we're expecting for next year. The benefit of this repricing move and of diligence in managing liabilities cost will continue to evolve above the growth of the loan portfolio. That's a movement that we clearly see in our forecasts for 2023, and this is kind of consolidated. Now, when we try to break it down similarly to our peers, this probably is client NII because after all, we are talking about a funding cost compared to market rates and the credit spread. This dynamic is positive and we see 2023 evolving even more.
I don't think that we expect such a strong growth as we had in 2022, but a stabilization at a high level and some residual growth in 2023. If I may add to that, Schroden, I think the one chart that helps us understand the dynamic of portfolio repricing shows our MD&A. I think it's figure 25%, where we show contracts by cohort, and we can see how much of that applies to 2022. It should be something between 25%-30%. That shows the process of portfolio repricing. This is an important dynamic contained in the assumption mentioned by Forni. Also, it is important to remember that we have active management of our assets and liability positions. We do that considering the several scenarios. Let me add something about 2023. This was asked in the press conference.
The expected Selic interest rate reduction in 2023 will contribute to repricing the liabilities faster than the assets. That's another contribution, a contribution that is minor as a whole, but in 2023, it will also be felt.
Well, from the standpoint of cohorts, it's important to remember that this is a reflection of our mix of assets. If we are positioning ourselves, and when we compare with our prior quarters, when we implemented the strategy very prudently, cautiously, to have a mix with more profitable lines in our portfolio, and if we compare with the previous period when we weren't at the current status in terms of more profitable lines, of course, they will be shown to be a little different. The new cohort brings a little bit of this reflection, this change. It reflects the change in the mix.
What we monitor here, what we've been seeing in monitoring all of the risks, is that all of those measures that we put into practice will start having an effect in Q4. When you look and you say, "Oh, but I still see a cohort that would be more aggravated." If you compare, you have to remember that the change in the mix is more present in the more current cohorts compared to the previous ones.
Next question by Eduardo Rosman with BTG.
Hello, everyone. Congratulations on the results. I have two questions, and I think that they kind of address the same topic. The earnings were record marks, spectacular. The shares are very, very cheap, being traded at almost three times the earnings this year. I have a lot of concern.
Perhaps you could elaborate on governance, sustainability of results, if you think that this year's earnings are recurring or can grow next year. Perhaps you can remind us all of the dividend payout policy of the bank, if there's any reason for this policy to change in the short term. In the last 10-15 years, it's been close to 40%. Could you elaborate on that? i.e., sustainability of earnings and results for the coming years, dividends, and perhaps you could remind us of the strength of the governance of Banco do Brasil.
Eduardo, this question was also asked in the press conference, and what we have been seeing and talking about regarding governance, and then we'll speak about the dividend payout policy. Let me start with governance. Number one, Banco do Brasil is regulated by a regulatory environment which is different from other state-owned companies.
We are a listed company in the stock exchange. We are subject to CVM rules. That's the first stage of the process. We also have the oversight of the Court of Accounts of the federal government. We have a very solid corporate governance, which has been improving for at least 25 years. As part of this governance, we have minority shareholders in the board of directors of Banco do Brasil, and they have a seat in many other boards linked to our board of directors, such as Corem, which is the remuneration committee. It is the one that gives us a thumb up or down for the executives appointed for key roles in the organization. Our decision-making process is a collegiate one.
At the several levels of administration, we have compliance and control policies for capital risk management, and we have a corporate strategy, which I showed you in the last slide, which was revisited this year. It was approved by the highest board of the bank. The role of the management looking forward is to execute on the strategy so that we can guarantee that the strategic goals and targets will be attained. We also have a process to choose our executives for the bank, and this is based on good practices with nine-box methodologies to identify the leaders that are the most skilled to take on leading roles in the organization.
In a nutshell, we have a number of good practices implemented at the bank and supervised by the highest boards of the bank, also with the presence of minority shareholders, and they give us some comfort so that Banco do Brasil can perpetuate its action. I'd like to remind you that Banco do Brasil is 214 years old. We've been learning with different situations that we have faced, and more and more, Banco do Brasil is a benchmark in terms of governance, both in Brasília and in the eyes of the market as a whole. Okay, that was the first topic. I don't know if I said everything. If my colleagues want to add anything, please feel free to do so. As we go to the other topic, what was it really?
Dividend policy and sustainability of results.
Okay. Sustainability of results.
That is also one of the pillars of this management. I showed you in the chart that our results have been increasing and not a lot of magic. This is actually a strong strategy, very well disseminated at the company. We have an engaged team, a team with highly skilled and qualified professionals, and we have a cohesive team that understood the corporate strategy of the bank and then have moved hand in hand so that we can execute on that strategy. In addition, we have robust credit models. We have a system of checks and balances at Banco do Brasil so that our decisions will be more and more sustained by purely technical criteria.
What you can expect is that the results of the bank should continue in this ascending curve because there is a strong governance process in-house, and our decisions tend to be made purely based on technical parameters, aiming or seeking the best for our shareholders. We say that the government is not the only shareholders. We have a shareholders base of almost 1 million shareholders, and they're represented here one way or another, and this is good for balanced decisions so that we can have more and more positive results. As for the payout policy, I'll turn the floor to Forni. That's another question that was asked during the press conference today. We think that the current 40% dividend payout policy, we believe it is fair. It's just.
Of course, it is revised annually, and it is subject to other variables in terms of our aspirations for growth, how much capital we need to face the challenges, to achieve the goals. What I can tell you is that right now, as we speak, this policy seems to be the most adequate, the most attractive in the market in terms of dividend payout, and it can support the growth that Banco do Brasil desires for 2023.
I would like to just make a comment and perhaps add a few points to what CEO Fausto has mentioned regarding governance. This was a long process of improving our governance, a continuous process.
Banco do Brasil is the only bank in Novo Mercado, and this places us in a level of corporate governance which is differentiated. So we follow a number of rules, and over the years, we have been adding to this. The law of state-owned companies was approved, and we have to reinforce the rules for the executive committee. The board of directors is very active, and we have several specialized committees, particularly the Corem committee. So this governance is robust and it contributes decisively to the quality and intensity of our results. I think that this is a value of the company, and it is not personified in one or a couple of people. It's cross-cutting in the company. The second question regarding sustainability of results, I think that we spoke about the pillars of our result when-
At the end of the day, we are delivering Q3 earnings. We refined our corporate forecasts for Q4, and as Eduardo mentioned, this is practically a given. It's just about executing the strategy. We are actually reducing the range with a lot more assertiveness regarding the numbers for Q4. Looking at 2023, we have just approved at the board of directors just this week our risk appetite. Risk appetite is a fundamental element when we think about results, sustainability and dividend payout policy. Translating that, looking at the economic landscape and to businesses, we also approved our budget for 2023. We have a very clear view of what we can produce in terms of results in 2023. The results are consistent with what we've seen so far.
Of course, the role of the management and the role of the 90,000 employees in our day-to-day is to execute on the strategy and with a lot of quality. We have to adapt because the scenario is not fixed, so we forecast a scenario. We'll have to deal with the evolution in terms of delinquency, interest rates, and so on and so forth. This is not an exact science, but we will be diligently working as we have been diligently working throughout the year, and we have clarity regarding our budget that was reviewed. It is one of the points mentioned by CEO Fausto . That is very important because in terms of governance, this management continued the planning that existed before us, and this is diligently reviewed in a very structured process.
All new information, all new demands will be analyzed by this governance structure. Lastly, dividend policy. The dividend payout policy is attractive for investors. We pay a payout above what is set forth in the law, and it is appropriate to some determining factors from the technical standpoint to remunerate our shareholders, all of them, and also to retain capital to sustain the expected growth of the business. We did this very diligently in 2022. We followed all moves in that direction, and I believe that this past quarter we had a capital consumption which was strong because we had a strong loan portfolio growth. This is totally aligned with our strategy.
Now that we have this piece of risk appetite and the budget approved, now in the last two months of the year, we will be discussing this, reviewing this in light of all of the information available. In a timely basis, we'll announce payout in 2023, the guidance for 2023, as Banco do Brasil periodically does every year. Nothing changes.
Thank you very much. Our next question is from Rafael Frade, Citi.
Good morning to all. Congratulations on the results. I have two questions. One about the fees and the current accounts. We have seen that this is a line that has been suffering and at the same time you have 10% growth year-on-year. I would like to understand what exactly you're doing that is still driving growth in this line. The second question is about, well, you have been underscoring the fact that delinquency individuals is now being driven by a move towards more risky lines where you have higher net interest income and with a net benefit. When I look at the cards issuance business, considering, for example, payment means using cards, the result in the previous quarter was negative and in this quarter as well.
I would like to find out what's coming next in that regard because this is something that does not really match the discourse, and I would like to understand why.
Thank you very much, Rafael. To talk about the current account fee, this is a business line that is under a lot of pressure, and especially in a longer horizon. It should go down, and we are doing everything we can to create new sources of revenue and income to replace the current account fee. I think that in the past, we took more heat because of this more accelerated slowdown in that line. Now, this line is a little more flat. I think that the growth was small.
We had the effect of new accounts being created by new customers and repricing of packages contributed to the recent performance. Overall, this is a line that is tending to more stability or a slight decrease, and also it will be replaced by other lines. We don't have a specific strategy in that regard, but we just want to keep it stable and flat while we work at other strategies and services. Other services are added to our services portfolio. Now, on the riskier lines for individuals, we are now, well, we've been talking about this change of mix for quite a long time, for at least a few years, and it's something that's being done structurally.
Because especially considering the non-account holder clients, well, Banco do Brasil served as a paradigm for the entire market because it took us longer than the competition to enter this market. We start originating in this market, and perhaps this could explain the fact that we see a worsening of credit risk in the individual segment as a whole. Depending on the comparison, we're still below our peers, probably because we stepped into this market a little later than our peers. Soon we realized, wow, we need to refine our models in order to incorporate more information, more granular information, so that we can keep in line with what we expected. We really had to spend a lot of energy and a lot of dedication in that.
As a result of this, our growth is slightly below what we expected initially. We still expect that this line will grow as we adjust credit risk. This is a constant effort that's being led by our loan risk team, led by Paula. Now, speaking of cards issued, I think that the numbers picked up in the second half of 2021. This is now reflected in this year. The results are seeing this worsening of credit, and this is what is being shown. That's why we're working on enhancing our models and combining the issuance of cards and energy and loans, addressing all the three of them at once to make loans more sustainable.
The only thing I would like to add in relation to the cards strategy is that this, y ou know, growing our clients in this open market and selling higher quality products with higher spend is what we are betting on to maintain a healthy portfolio position. This has been one of our beliefs that's been guiding our actions. We continue to work on our models, perfecting them, monitoring them, doing continuous revisions, but always with a growth perspective because there are clients that can give us great results, and we can monitor and track them. This is where we believe that the positive spend is going to take place, and the next cohorts will be better because of that.
Okay, let's take the next question, please.
The next question is from Marcelo Telles, Credit Suisse.
Good afternoon to all. Congratulations once again on the earnings.
I think that my question is more of a follow-up on the previous question. When we try to analyze the bank's risk appetite in relation to growth in retail banking, in spite of the increase in delinquency, there is an appetite to grow in retail. For example, in SMEs, growth amounted to eleven percent in the quarterly comparison, and we also observed substantial growth in loans to individuals. If we look only to unsecured loans, we'll see actually that growth represented almost 4% quarter-over-quarter. Well, you've talked about the credit cards already, but do you believe that the economics proposition to continue growing in retail banking, especially considering unsecured lending, makes sense? Or is it a market in which you can make money, or do you think that you have to pull back, you'll have to pull back eventually?
Because clearly there is a market concern that the retail segment might be saturated. When we look at the bank's earnings in the first half, we see that retail is still growing. I believe maybe that it's still possible to profit from retail banking. If you could take, you know, give us a little flavor on retail banking, we would appreciate it.
Well, thank you very much. Let's talk a little bit about our retail strategy. Well, we grew in both secured and unsecured loans. The growth amounted to 8.3% in payroll loans, where risk is lower, but also margins are smaller.
What we said to you for at least the last two earnings conference calls is that we would make progress, but steady progress step by step, performing any necessary modeling adjustments on the so-called open credit, non-payroll loans. Just to show you how cautious we're being, and perhaps our Vice President Paula could shed some light on this. On every 100 applications for credit cards, well, firstly, we use a model in which 30% were approved of those applications. Now that we have boosted our robustness through the performing of several checks, approval is now at most 7%. There is room for growth, definitely. We want to take a cautious approach so that we can grow consistently and profitably.
If we do that, it's always going to be plain sailing, smooth sailing for us, and our profitability will outstrip any potential losses that we might incur in. It's still. You know, when you look at the whole portfolio, this is also, you know, very small, and especially in the open credit, well, our experience has been very restricted. But we are able, through this, to adjust our credit risk models. We make readouts of the markets, we analyze each of the cohorts, then we recalibrate our models. Yes, we believe that there's still room to enjoy the benefits of this market, provided that you act cautiously and have very stringent modeling.
Thank you very much, CEO Fausto. I just wanted to add a comment, summarizing what has been said by you.
If we were to request a formal guidance, we can expect that the retail banking portfolio will continue to grow next year. Do you think this is correct?
Yes, I think it's possible, provided that we move forward step by step with very stringent criteria, and it's going to be an equation that's positive on the balance, provided that we act in this way. I think that the focus is in growing the portfolio in line with the market. However, something that we have very clear in our minds is that, you know, you should grow but with quality in origination.
What we see very visibly is that SME, w hich is the bulk of retail banking as well. There are several other institutions that are suffering in this segment, but we are very happy about the credit quality of this portfolio because of the sound origination we have used. Now in non-pay roll loans, we are in exactly the same condition as other peers. We are working hard to reach the credit risk quality that will be equivalent to the remuneration we seek. Obviously, there's greater risk involved and remuneration should reflect that because this is how we'll build our portfolio for 2023.
I think that the key message here is that we monitor this all the time. If there are any deviations, they will be addressed immediately.
The important thing is to have control mechanisms and to keep track all the time and so that you can make the necessary course adjustments timely, well.
Specifically about the individual's retail banking portfolio, we continue to grow with some lines that act as mitigators. For example, in payroll loans, there were changes in margins that we have now longer terms, 120 months. This gives us some wiggle room in those lines, with some room to grow that, you know, because we are changing the mix in quality and risk indicators and always to maintain return that is adjusted to risk. There's a lot of money on the table, especially in the payroll loan products.
I'd like to ask the analysts to please ask just one question because we have a limitation of time. One question each. I'd like to bring Jason Mollin from Scotiabank.
Hello. Can you hear me?
Yes.
Buongiorno. Parabéns pela forte.
Congratulations on the strong profitability and earnings in the quarter.
I'm gonna switch to English. Vou mudar pra inglês, if that's okay. As has been brought up on asset quality, that's what I'd like to ask about. Maybe you can provide some color on what kind of clients you're targeting, what income segments. Are there differences in the asset quality by the origination channel, digital or physical? What can you tell us about the dynamic that's shifting the increase or driving the increase in non-performing loans over 90 days for individuals? Thank you.
Jason, I can start just to make some comments. Yes, there are differences. For instance, let me give you the example of credit card. We have several doors to underwrite this product. For instance, we see a higher delinquency in a certain way for the low-income segment and some of those doors and, probably, some of the digital doors. Exactly, we saw the delinquents coming earlier. All those adjustments that we made were exactly to address those aspects. Certainly the credit portfolio of the bank is quite big, and we have different profiles, and we take this into consideration in our credit models, and we take this into consideration when we design the strategies.
Are there any comment on digital versus physical origination or the types of client, anything outside of low income where you've seen some signs that kind of client could be riskier?
Jason, I think that what we have, like a digital origination, is much more than what we call here the open credit. We have our directed, open credit transactions for, let's say, new credit card holders that we are doing this, and this is the one that I say has a higher NPLs. Also, we have the partnerships with retailers that is also origination. Originating this, it's like a digital channel as well. These are the higher profiles in terms of the NPLs. This is quite different from the, let's say, the traditional account holder client of the bank.
We are, for example, in the credit cards, they clearly have different profiles in terms of NPLs, and we are working on, let's say, stimulating the spending on the good parts of the portfolio that it's performing well and this is bringing the balance for our portfolio. When you see as a whole what Banco do Brasil has different from peers is a much more diversified and like this defensive portfolio when you put agribusiness portfolio, SME in a very good quality originated, and you have b ig companies and the corporate companies that are performing really well in Brazil right now.
That's why, as a whole, we have a very good, very well-behaved portfolio, and we see this addition of risk as, let's say, we are spicing up a little bit but still very, very conservative. As our CEO said on the interview, I believe that the conservative risk model taking and the risk models of Banco do Brasil are really the magic that we have on the credit portfolio as a whole.
Has the portion of low income clients increased, decreased, or what do you expect the strategy will be there going forward?
Jason, I would not say that decreased or increased, yeah. Certainly, as I said, Banco do Brasil has a big credit portfolio, and we have services and products for the different segments, and we take this into consideration. Let me give an example. We have proprietary model that reads how mature is that customer to use the digital channels. We use ways of reaching this customer, taking this into consideration. When we go to the non-account holder, yeah, certainly in mainly when we talk about credit card, certainly there is a segment of low income because this is the entry products, yeah, not only for us, but for the entire product for the entire system. Yeah.
We have services for the different segments and probably, when you consider the characteristics of the bank, we are quite diverse bank in terms of the portfolio. We take those differences into consideration in our credit models, in the way we approach, in the marketing process, and so on.
Thank you very much.
Thank you.
Our next question comes from Flavio Yoshida with Bank of America.
Hello, everyone. Congratulations on the results. They came really strong. I have a question regarding agribusiness. That ends up being a very important portfolio for you, and we haven't discussed it yet. Looking at the spread, it's showing a downward trend. I'd like to understand, do you think that this trend, it will reverse? I would like to understand competition in agribusiness. When we talk with the private competitors of Banco do Brasil, we feel that they have a little more appetite. Given that you have a market share which is quite relevant, should we expect a drop in market share? Also, there's competition for the co-ops. There are some tax benefits, tax advantages. So how is this competition playing out in agribusiness?
Thank you, Flavio, for the question. I will answer, and Renato will add. Okay, agribusiness.
It's a dream moment, right? We see that when we talk about the Brazilian agribusiness, everybody gets excited because the commodity prices are high, the business cycle is very capitalized. There's a lot of technology in the field. If you look at agribusiness, if you look at one transaction individually, perhaps initially, many banks in the past, given the spreads at the time, well, they didn't seem to be very attractive. We don't look at one thing, we look at the whole. Agribusiness, well, if the first deal with the client is just the first, then many more will come. Financing, loans, insurance, financial investments. This is a very special moment, and of course, it triggered the interest of many players. That to compete with equivalent resources with the federal government, we had a lot of openings in recent years.
Banco do Brasil was practically the single player in agribusiness, but we have been learning with the business. We have a strong portfolio of products and services, a portfolio which is well-structured with several lines and facilities, and that's what brought us this far in terms of financial volumes in our portfolio. Now of course, there is a lot of pressure with the reduction of spreads because now we have new entrants in this operation. We now have 22 banks operating. Of course, each one operating with not so significant volumes as ours. As I mentioned that for this crop that began in June the first to now, we have BRL 84 billion disbursed. The numbers in the quarter's balance sheet are restricted to September. It was a significant increment of almost 30% compared to the same period before.
Of course, we have to discount inflation of costs, and there was inflation given the increase in prices of fertilizers. This brought along a certain inflation for the agribusiness, but the volume is strong. We've been growing our volume. Of course, margins are a little tighter, but it's what I said. We believe that every business is just an entry door for more businesses with the client exploring the whole business chain and the whole agribusiness chain. This reduced spread is offset by other businesses that are generated. Renato, you can add.
Hello, Flavio. Thank you for the question. I believe that the first point is to highlight the size, the robustness, and the resilience of this economic agribusiness system. We are talking about a GDP of BRL 2.5 trillion.
A very overheated demand, as our CEO said, in this cohort, June first to last week, BRL 84 billion disbursed. In the past crop, we had BRL 153 billion in the twelve months. It's a very overheated demand. This competition is healthy because agribusiness requires a lot of resources. The bank continues with a market share in individuals in agri of about 59%-60%. We maintain our market share for individuals. Individuals account for 96% of our agribusiness portfolio. The remaining 4% would be companies. Our position is really solid. We're leaders in the agribusiness market. The portfolio grew 26%. Our guidance was 22% towards year-end. We had increased share of contracting.
In talking specifically about the impact of greater competition and the share of contracting, farm loans has grown from 42%- 48%, despite the entry of new players in new segments. Specifically about co-ops, the two main co-ops, Sicoob and Sicredi. Without a doubt, you spoke about some tax differences, but I believe that the most relevant from the standpoint of competition is that the action of these co-op systems is regional. It's localized in six, seven states of Brazil that account for 70% of the credit. Three states in the south, the three main states in the Midwest, and Minas Gerais. They generate a Pareto of 80% of placement and their own loan portfolio.
While the bank acts in all municipalities, in 97.8% of municipalities that have a loan portfolio, meeting all sizes of clients and all needs of clients. We have diversity and quality in our portfolio. Our delinquency is 0.47%. It was 0.71% last year, so it was low already, and we grew the loan portfolio, but with a lot of quality. That gives us peace of mind that the bank, just like in the other line items, is growing in agribusiness in a sustainable and high-quality fashion.
I would like to add something objectively regarding the spread. Looking at Q3 with the start of the new cohort, it reflects competition, but we only reported the spread of the loan operation, and we have a holistic approach to clients.
We look at the chain as a whole, and we consider cross-selling. At the end of the day, looking forward, the spread should continue to reduce. Although this is kind of defined cohort by cohort. We'll have to see in 2023 what would be the crop plan for 2023, 2024. We'll have to analyze the different crops and we'll have to assess everything. But agribusiness revenues are disseminated to many other places in addition to the simple spread of credit.
Thank you.
Thank you, Flavio. Our next question is from Pedro Leduc, Itaú. Pedro, you're on.
Good afternoon to everybody, and thank you for taking my question. First of all, I would like to congratulate CEO Fausto and his team, management and consistent results. This is a very admired team in the market and also among shareholders, current and future shareholders. I have a question about expenses. We saw that there was an increase in efficiency.
Pedro, I think we lost you, unfortunately. Your image is frozen on the screen.
I think his connection dropped. Okay, let's do the following. Can you hear us, Pedro? Okay, I'll move on, and we'll have a second question, and then we'll go back to you. Your connection was dropped. Natalia Corfield, JP Morgan. Natalia, can you hear us?
Did you hear me?
Oh, okay, Pedro's back online. Now we hear you, Pedro.
Should I repeat my question?
Yes, we couldn't get it.
Okay, very quickly about staff expenses. There was an increase 1% quarter-on-quarter, and then we saw that there was a decrease in the provision line. Well, I would like to know about this line, whether we should expect a slowdown in future quarters.
Well, in relation to overhead, I'm not sure if Pedro's following us, but we didn't have any significant changes in relation to expenses with staffing. If you look at the dynamic, well, in starting with the first half of 2021, we had the voluntary dismissal plan and then we had the new recruits that were approved in the admission exam and started working this year at a lower cost. There were no changes in that aspect. Later, we could also talk a little bit about the numbers to check if any other clarifications are needed.
I think that the best way for you to analyze this line is together with provisions, because sometimes there is a variation. In that quarter, overhead dropped but provision increased.
The best way of modeling is looking at the two lines in combination. Really nothing very substantial or significant.
Thank you very much, Pedro. Now, Natalia Corfield, JP Morgan. I think we have a connection problem. Natalia, we can see you. Thank you. Please go ahead. Thank you.
Thank you very much. My question is about capitalization and your CET1, your premium bonds. I would like to know if the market is still rough like it is now, what are the options to call those two premium bonds? And also, speaking of your capitalization, it has been decreasing in recent quarters, and I would like to ask, what is the comfortable level for you in Tier 1 and CET1?
Well, I'll start with this, and if Daniel wants to complement.
We are really attentive to the maturities in 2023 and 2024. We have been looking to the market to see if any prepayments would be a choice, but the market dynamics did not favor that. We have been working on the capital issue by making issuances in the local markets. I think that we have to look at this from two points of view, liquidity in U.S. dollars and capital. In our perspective, we're very proactive about this. We are in 2022, looking ahead to 2024. We have already reinforced our capital requirements through those local issuances, and we'll keep track of this to detect any emerging opportunities.
We are very price sensitive, by the way, so we'll be looking to the domestic market, to the overseas market, to really seize the best opportunities and roll out in the best possible way.
Just a comment, Natalia. The calls and the dynamics of the market are seen by us as an opportunity to optimize our capital structure. This is one of our premises. Now, looking at the past behavior of the bank, we always took several stakeholders in consideration. We're not going to do any unexpected actions. This is what is important. Prepayment, of course, management, and also optimization. Those are the keywords. From our side.
In relation to our Basel level capital, level, in our understanding and our CFO, Ricardo, has said this, our risk appetite and risk tolerance has been approved in a document.
In this document, we always take heed of the regulatory limits, prudential rules, also confronted with our growth expectations for a horizon of three years to understand what will be the capital level that's robust and strong enough to meet all of this and demand so that we can make an optimal allocation of capital. This is what I can say to you. We monitor this very closely. We run stress tests every month. This is something that's part of our capital management instruments, considering regulatory limits, prudential limits, and our targets, as I explained.
Thank you. I'm not really sure if I can follow up. Now, about capitalization, isn't there a number? For example, I don't want our CET1 below X%. Is there a number like that?
As I said, our targets may change also depending on our ambition. Please note that we have to comply with the regulation. There are some regulatory requirements that we have to meet. As we renew our credit portfolio, we saw, for example, and all of this is fed back and monitored. I cannot really give you a set number. What I can say is that we are always above regulatory limits in order to provide comfort and to optimize our growth strategy as a corporation.
Just a detail that I would like to underscore in relation to our capital management strategy, we have projections for the next three years. This is also linked to our budget, our business budget. We monitor the variables.
It's very important to act diligently in relation to this process because this is what enabled us to grow our capital recently, including with purging of capital. This is very important for the reputation and track record of a bank.
Thank you.
We are getting to the end of our conference call, and I would like to invite for the last question, Tiago Binsfeld with Goldman Sachs.
Thank you, Janaína. Good afternoon. I have a quick straight-to-the-point question regarding the quality of the portfolio. It has been discussed, but in which quarter do you expect delinquency to reach a peak point? And also talking about coverage, there was a consumption of coverage. What level would you be comfortable to getting with the coverage ratio given the mix of your portfolio? Thank you.
Well, we kind of answered that question before. In terms of our coverage ratio, we believe that it should stabilize at the current number, 234%. This is our expectation. This is our feeling that it should stabilize around that level. As for delinquency, of course, we have discussed this a lot, and we understand that particularly when we look at individuals, there's been some pressure. We understand that this is a level in which we will start seeing an inflection of this pressure that we felt in recent quarters in terms of delinquency for individuals, for the individuals segments. We spoke about this consumer credit, non-payroll, deductible loan, and credit card.
I'd like to remind you that coverage is a result, it's not a target. It's, at the end of the day, the model in practice working.
That is why we understand that looking forward, there will be a certain stability at the level that we presented here.
Yes. Perfect, Ricardo. It will always result from the assessment of our risk models.
Thank you. Thank you. We will now end the Q&A session. We would like to say that all of us in the investor relations team will be available to answer questions that we did not have time to answer here. Now I would like to turn the floor to our CEO, Fausto, for his final statements.
Well, I would like to thank each and every one of you who participated in this happy moment of the history of Banco do Brasil. We posted really positive earnings, 21.8%. That puts us in the game of the incumbent banks of Brazil with profitability, with ROE, with dynamism. We have a presence, a footprint all over Brazil. The bank privileges a consistent growth strategy.
The bank has proximity as a north for our actions, and we wanna be close to our shareholders, to our peers, to society in general, and above all, with our clients, so that we can identify their needs and wishes and choose the right product for every client. Lastly, our team is very skilled and engaged. The team of employees, they are admitted to the company after they sit a public examination, so that's a big filter. We already hire highly qualified professionals. The bank invests a lot of resources to improve the technical expertise and the academic knowledge of these young employees, so that we can have a highly qualified and highly prepared staff to cope with the challenge. Which is to always keep this bank abreast society, so that Banco do Brasil can provide a higher and higher quality service to the Brazilian population.
That's our magic. These three factors that have been driving us forward so that more and more we can achieve sustainable results. Meeting the expectations of all of our shareholders, 'cause this is also our mission, to provide quality service and to give you dividends comparable with the investments that you made when you bought shares of Banco do Brasil. Other than that, I hope that we continue to have a technical team, and so that Banco do Brasil will continue to post strong results so that we can record even more spectacular results. You can be sure that as long as we are here, we will be working firmly and strongly for Banco do Brasil to continue to be, well, big, providing high quality services to the Brazilian society. Thank you very much.