Good morning, ladies and gentlemen, and thank you for waiting. Welcome to Banco do Brasil third quarter of 2020 earnings conference call. This event is being recorded, and all participants will be in listen-only mode during the company's presentation. After this, there will be a question-and-answer session. At that time, further instructions will be given. Should any participant need assistance during this call, please dial star zero to reach the operator. This conference call is also being broadcast live via webcast through the Banco do Brasil website at www.bb.com.br/ir, where the presentation is also available. A replay of the conference will be available through the phone number 551121880400 until November 13, 2020, in English and in Portuguese. To access the replay, please ask the operator to listen to this conference call. Identification will be required. Participants may view the slides in the order of their wish.
With us today, we have Mr. André Brandão, CEO, Mr. Carlos Hamilton, CFO, and Mr. Daniel Maria, Head of Investor Relations and Sustainability. Mr. André Brandão, you may now begin.
Hello, good morning, all. I'd like to first welcome you to this call. I'd like to thank you for participating in the call, and also very nice to meet you virtually, which actually is the way we are meeting people today, but you are very welcome to this call. I'm very pleased to have this first interaction with you, and I would first make a statement that I really would like to emphasize that both myself and the team here will be trying to connect as much as possible with you and build the bridges and make sure that we are all ready to answer your questions and attentively trying to explain our narrative as soon as possible.
So, as I said, I'm very pleased to be here today with my first meeting with you, share the numbers, which for me is just a month and a half, but specifically share my first impressions and some perspectives that we have in terms of future and some dialogue, strategically dialogue, that we are having with the team here going forward. I'm trying to make this very brief. We are trying to leave room for your questions, but I'd like to emphasize three quick slides, and then Daniel will cover the presentation in a very fast mode. We're trying to focus on areas that other analysts and investors have been highlighted as questions, so we're trying to emphasize that as well, but attempting to try to go very fast and leave you for you to make questions.
Turning to the first page, it's just an acknowledgment of the year we are facing. The pandemic has been affecting all of us. Us means us, people, our employees, our society, and our clients. I'm very pleased to say that Banco do Brasil has been acting tremendously to support both our own employees, to support our society through government programs and being the agent, but also the structure of some of those programs and supporting our clients on a large scale, which I will make some mentions on that. The first thing to - as a side effect of this pandemic situation we face - is that we all learn how to do home office. You probably are still there. We are still most of the time here, but Banco do Brasil managed to have at the peak 65,000 employees at the home office.
So, this is a tremendous effort from our technology area, but again, it's a good lesson learned and an open precedent for us to rethink about the model. So, I think it's quite important if it's probably one of those positive side effects, there are not many, but one of those. I'd like to emphasize the support to our customers. So, during this pandemic situation, we have support, 4.2 million customers, through this lending, either first disbursement of a credit lending, but also from transactions to, can you say that?
Rollovers.
Rollovers, yes. Thank you, Daniel. Rollovers of existing transactions we have. So, I would like to spend more time on these rollovers, but I'd like to just call your attention that BRL 292 billion were in total between rollovers and disbursements that we support our clients. The common side effects, or probably the second positive side effect of this pandemic, is the acceleration of the digital transformation that our banks have went through. And just doing this since March this year, we have added 3.8 million clients on our digital platform, and we are now close to 20 million and growing. We have also sought alternatives to support client interactions, and using WhatsApp, we have reached in excess of 100 million interactions with clients during this pandemic. So, very good lessons learned and very good, let's say, acting on behalf of Banco do Brasil to our clients and society.
Turning to this next page quickly, again, as I mentioned, Daniel is going to cover the big numbers, but things that I got here, I'd like to call your attention for a couple of things. One is the Pre-Provision Operating Profit, which this year I call these numbers because provisions are being massive because of that worldwide, and there are so many differences in terms of modeling. So, I tried to look at the core of the business, how much they have been behaving, and the reason why I call your attention for the number, which is the BRL 32 billion in profit before provision and a growth compared to last year of 9.5%.
The second point to call your attention is our Core Equity T1, which has been substantially increased, but the most important point for me to highlight, and Daniel is going to cover how we get to that number, but we have a very solid Core Equity T1. I just want to make sure that that allows us to have a solid balance sheet. We can continue to grow and pursue for new business. The third point to call is a loan portfolio. Again, the substantial amount of loans, a growth of 6.4% compared to last year, with a very high quality. So, in excess of 90% of our portfolio, it's AA to C. So, quite important. On the portfolio as well, I was extremely surprised to see that 23% of such portfolio is ESG related. I'm not planning to expand that desire.
It's probably a big discussion with you, but it's a very interesting thing, and I think I'm very proud of the progress, and I think we should continue to do that. Last comment, as I already said, the digital transformation has been substantial. Those almost 20 million clients we have today, digital clients, is a growth of 33% compared to last year. So, substantial growth. And lastly, our mobile app is a fantastic tool and is the best ranked in the industry. And with our learning from this, has led us to be now expanding to digital transformation to the wholesale ops as well. So, that's all for numbers. I move on to some highlights of our strategy that we have been discussing at the core level, and then I leave Daniel to cover the numbers.
So, we use this as a circle because there is a huge dependency of those initiatives and those quadrants, and it's very important. But probably the most important piece to mention is client experience, and this is on the center of that. I do believe, and we do believe, that providing a proper experience to our client is the best instrument to retain clients and provide a proper return coming because of this centrality of our clients. And on the back of that, we announced yesterday some changes on the structure. One of those is how we have an area of client solutions, which we are putting together this area to get synergies between what is credit lending, what is payments, and something related to payments and cards and everything. So, there are two main areas.
Also, in terms of providing further visibility to myself and to the board and to the ExCo of Banco do Brasil, I'm changing and creating a new unit reported directly to me to assess client experience. That area is also where we look into the external client complaints in a more deeper way. I think this is an important transformation for us, and I think, again, starting with that is the most important piece to retain our clients. I mentioned ESG, so again, I will not expand on that, but this is core of our activity. The only two aspects I would like to mention. I mentioned a portfolio, so it's already substantially we are growing, and we are trying to keep supporting our clients on the transition to high to low carbon environment.
But also, we have our commitment that Banco do Brasil will reduce or actually neutralize its carbon emissions next year. There are more things we are doing on that basis, like solar units to provide energy to our branches. So, we're going to that direction. So, a very important one. The other one I'd like to really call to your attention, and efficiency, evidently, is to keep very important to us, but we are committed to continuous on the cost reduction basis going forward. We have already, in the last part, mentioned some ambitions to our cost reductions going forward. I think the number was 3.2 billion BRL until 2025. We, at the exco level, are looking to go further on that direction. So, it's something that we still don't have a number.
We're still working on our strategy exercise, but I'd like just to share our and my commitment to keep reducing our cost base. Lastly, just share some initiatives that we have to increase our revenues. I'll start with the most obvious one, which are our core strengths. One is the agribusiness. We are a powerhouse on that, but there are more to be done on that sector, I would say. I was extremely impressed with our client data we have in the bank. If I may be a little bit going even further, our data lake for the agribusiness is probably the best in Brazil. We can use that to enhance and to extract more value from this sector, and not only from the traditional rural lending, but doing further things and adding other products.
I will highlight a couple like consortiums or insurance, and specifically starting to get into the supply chain of our main clients. Eventually, government, we have a very well-positioned. It's more and more providing further services for them. It's quite important. Payroll loans, we are leader on that market. We will continue to be leader, and I think it's a very good on the mix. It's a very conservative portfolio with a very positive return on equity. So, we will keep that and we'll keep strengthening that. Two aspects I'd like to cover before we finish. One is I mentioned supply chains, but there are more to be extracting from the business on putting together and creating collaboration through targets across our main retail, wholesale, and the agri and government portfolios.
It's making sure the ExCo related to those businesses has a target to enhance the other business on a joint basis. And as I said, I think if you think about the example I just said about the agribusiness, if you can work with the large wholesale clients we have and their total supply chain, we're going to have the large corporates, the middle market corporates, the small corporates, and the retail clients altogether, and supporting our clients and their overall supply chain and financing that, and even supporting our clients to take this balance sheet out of their business and bring to ours. So, a lot to be done here and a lot to be done not only on the lending side, but also adding fee-based products on that as well.
A lot of discussions, and as you probably know, we can have payroll agreements with our corporate clients. More and more, I have been incentivized that client relationships have to be a large wholesale client relationship, so we have to really pursue other streams of revenues, and retail payroll are one of these alternatives. Lastly, I think, as I mentioned, we have a substantially weighted on our portfolio of payroll loans, which provides a very resilient and robust balance sheet and portfolio. When we compare ourselves to some of our peers, there are some other products which we are not as aggressive as our peers that we should be pursuing.
Just giving one example or two examples, one of those is payroll loans to non-clients of Banco do Brasil, but also tackling non-clients in general through credit cards and other transactions, through directly approaching them or through using partnerships. So, again, here, I'm just sharing that in the very, very initial stages. I don't have much details to comment, but I'd like to just give you a hint that where we are going to with the combination of a commitment of cost reduction and some areas that we can extract more value from our existing customer base and pursuing a new customer base. I will pause here, ask Daniel to walk you through briefly on the presentation, then we open for questions. Thank you.
Let's start then on page seven, and we go through the major numbers of the bank, and then we concentrate in the major aspects that certainly is the concern or you want to go through. The adjusted net income that we reached was BRL 3.5 billion this quarter. This was an increase of 5.2% related to the last quarter. On the nine-month deal, we reached BRL 10.2 billion, a decrease of 22%. Our return on equity is in the region of 12%. , and one thing that André highlighted just come back here is our pre-provision operating profits. We had an increase of 5.3% when we compared to the third quarter 2019, and we had 9.5% growth when we compared to the nine months 2019, then this shows that operationally, the bank is improving. On the next page, we bring the NII behavior. NII is quite, I'm going to say, is balanced. Yeah.
We had some reduction in the last quarter of 3.8%. That can be explained mainly by the treasury results. Yeah. Going to the next page, we go to NIM and how this was reflected in NIM. We had a reduction in NIM from 4% to 3.7%, but NIM is very correlated to the liquid assets. We had an increase. We have been observing an increase in the liquid assets. We've reached 49.4% in the last quarter. If we exclude these effects, our NIM should be 3.9%. Another way to look at this is looking at the managerial spread on the right-hand side. You see that the managerial spread in the region is flattish in the region of 7.9%. We had some reduction in the individuals' portfolio, but this was compensated by agribusiness and individuals and companies.
Moving to the next page, page 10, I would like to explore a little bit the OpEx expenses. In the extended concept, we had OpEx expenses of BRL 5.5 billion, and this was a reduction in relation to the last quarter. We can explain this movement by more preemptive provisions that we had in the gross credit risk. We reached BRL 6.6 billion in credit risks. BRL 2 billion inside this BRL 6.6 billion can be explained by the preemptive provisions that we made to the forbearance portfolio. We had some good results for credit recovery. Part of this was, in a certain way, compensated by larger impairments. Those impairments can be explained mainly by some adjustments that we made to some cases that were in judicial recovery. Moving to the next page, we bring the loan portfolio and how it's behaving. As André said, we reached BRL 703 billion.
The growth in this credit portfolio is driven by the retail part, individuals. We had a growth on an annual basis of 6.2%. We had a decrease in the large corporates, and those loans are being driven mainly to capital markets. We had a growth in the SME portfolio, 17.9% on an annual basis. Moving to the next page, page 12, I would like to spend more time here. Here is basically the loan portfolio under forbearance that we have. The current balance we have is BRL 109 billion. In those forborne portfolio, we have 1.7 million transactions. Customers that were affected. These represented 2.4 million transactions. These represent roughly 7% of the portfolio. We bring a granular view in terms of products here, and I would like to share some thoughts about this. First of all, the payroll portfolio represents BRL 27 billion.
This is approximately 25% of the total forbearance portfolio. Just reminding that the payroll we have low risk since we have 90% of this portfolio comprised by civil servants and the retirees. We have BRL 15 billion. That is approximately 13% of this portfolio. This is for governments. Governments, we have a guarantee for almost 100% of this portfolio issued by the federal government. That is a very low-risk portfolio for us. For the other portion that we don't have the direct guarantee, we have as a guarantee the flow of the transfers of taxes that are paid by the federal government to the local governments. Yeah. And when we look at the SME portfolio, we have BRL 26 billion. In this BRL 26 billion, we use a methodology that we developed here internally using non-restricted data, using analytics to rate those customers.
This is quite relevant to the bank to take the decisions for the forbearances for the rollovers and also to make the preemptive provisions. Yeah. 81% of this portfolio, according to this methodology, are with the customers with better resilience. Just highlight some other metrics. 95% of this portfolio is concentrated in the rating AA and C. Almost 28% of this portfolio, the rollovers happened when the transaction was being paid and 64/65 rounding up of this portfolio have guarantees and credit enhancements. Moving to the next slide, slide 13, we bring more color about how we make those deferrals. We make in different waves. Yeah. The first cycle happened in March and April this year, and this was concentrated, as you can see, in individuals and companies, mainly the SME portfolio. We had another cycle that happened in May, June, and July.
As you can see, it's lower compared to the first cycle. It's concentrated more in the individuals' portfolio. Just reminding that individuals, we have almost 50% that is comprised by payroll loan. We have the third cycle that happened in September. This is more concentrated in the government portfolio. Government represents almost half of this portfolio. Yeah. In the bottom part on the left, we bring the breakdown of this forbearance portfolio and how is the performance. We have BRL 49 billion that is performing the exposures. We have BRL 59 billion that is in the grace period, and we have BRL 0.6 billion that there is some sort of delay. This represents the number that you can see on the right-hand side. This is 0.65% of NPL between 15 and 90 days and 0.17 NPL more than 90 days.
Here on the right-hand side, we bring just a color about the distribution at the end of the grace periods. Yeah. As you can see, those numbers are as of September. October, we have participation of SMEs and individuals mostly in October and September. And what is the strategy? When we made those forbearance, we made in different terms depending on the segments. For instance, when we go to payroll loan, we went straight to 180 days or 120 days. Governments, we went straight to 180 days. For companies and mainly SMEs, that is important to take the temperature to understand how is the business. We made for 60 days. Yeah. And we start to unwind this process for individuals. For SMEs, probably there will be a third wave that we are analyzing, but concentrating in the high resilience customers.
The reason for this is because there is more demand for working capital at the end of the year. Yeah. For those customers that we feel that the business is going well and that we are comfortable with the risk to our risk appetite, we can do this. Again, for short term, as you can see. The next slide is slide 14. We bring the asset quality as NPLs going down. The coverage, excluding the cases in restructuring, we have 303%. The new NPL and the coverage, we are covering the new NPL that we are generating. The next slide, we bring the fee income. Fee income, as Andrea said, there are challenges. We understand this. We are showing some resilience. We are aware of the challenges, and we are taking measures exactly to drive this. We have good news. Yeah.
For instance, insurance, pension plans, and premium bonds are showing a good performance. We stay the same for group credit consortiums. We start to see the movements in credits, and this is one aspect that certainly we are driving. We are not driving. We are addressing those aspects. Next page. We go to the administrative expenses and efficiency. Yeah. Just reminding the number I brought in the last release of 3.3 billion savings accumulated in the next five years in those three measures that we are managing. The personnel expenses that you tend to see the results starting this year. You start to see because they are flattish. Yeah, and you have the trend to see more benefits coming in the fourth quarter. The flex budget that will allow the optimization, and we are executing this, and we just inaugurated the second farm of solar energy.
In the right-hand side, just as we show and what André said, our initiatives are not limited to this. We have other prompts. For instance, for the properties not in use, we expedite the process of auctions. Yeah. Just as a reference, to sell those properties, we used to take more than 500 days. We made a partnership with a startup that we reduced these to 200 days, 230 days. This is a huge efficiency, yeah, and shows all the prompts that we're working. The same story for sales of our own properties. Yeah. As I said, this is completely linked to the optimization. We sold in those nine months using virtual auctions that were quite efficient, and we have more to do in this front. The process automation.
Looking at the WhatsApp, it's a good example, ways that we can service customers, reducing the marginal costs, and certainly being more efficient in this process. The next page, we bring the core capital. We reached 13.11% in CET1. This movement can be explained mainly by two actions. Certainly, the actuarial position, the mark-to-market of the actuarial position, contributed positively with 120 basis points. Yeah. And something that is new is there are the prudential adjustments. This is mainly a regulation that the Central Bank issued that is called CGPE, the acronym for this. And the concept is basically you drive credit, you grow credits in a certain segment in SME. You can use those lines with credit enhancements up to 3%, and you have a breakdown for those lines. And based on that, you can apply to reduce the tax credits. Yeah.
The benefit of reducing those tax credits that, by the way, they weigh more than 100% is benefit to the capital. This is sustainable, yeah, because this is applied for the capital for longer. This represented an addition to capital to 100 basis points. The next page, and the last one, just reminds some aspects of digital transformation. I think that André tackled most of the metrics, how we are evolving, and so on. But I would like to concentrate in the cloud investments we are doing for companies. Yeah. This is important because we have been working on this project in the last three years, preparing the infrastructure, and now you are going to see acceleration in the deliveries. This is important because we bring the company, we make it easier, the cash management of the company using APIs.
Just some numbers related to those developments. Currently, we have 177 customers, 177 customers integrated using cash APIs. We have 10 partners, ERPs, companies that are integrating this. This is an increase of 149% in relation to the last quarter. One example of how this is important, for instance, the collections. Yeah. We had in this quarter 26 million collections, slips that were done through those APIs. This was in the growth of 100%, 105% relative to the last quarter. And this is exactly what André said, ways to address this. Another way to show the benefits are the reduction or the lag time to make those transactions. A working capital that we used to do in one day in the branch is possible to do through the app in seven minutes. A finance that it's used to take even 14 days, you can do in one day.
And including linking the guarantees and so on, that's quite a complex aspect. And the discount of receivables that is anticipação de recebíveis, we moved it from 48 minutes to just one minute. And that's all. Thank you for the attention.
Ladies and gentlemen, we will now begin the question and answer session. If you have a question, please dial star one now. Our first question is from Mario Pierry for the Bank of America. Mr. Mario, you may proceed.
Good morning, everybody, and thank you for holding this call. I have two questions, primarily to André. The first one is, you have had a career at a global bank, so I was wondering, what are some of the best practices that you would like to bring to Banco do Brasil? The second question is related to the technology of the bank, right?
This is an industry that is undergoing a lot of transformation, a lot of competition. How do you see the technology of Banco do Brasil so far? I know you haven't been there that long yet, but I'd like to hear your views on how you see technology. And the final question is, when you were chosen to be the CEO, what was the mandate? What's your mandate for the bank? What are you planning on accomplishing over the next few years? Thank you.
Good morning, Mario. Thank you for the questions. And so I would try to, I think, best practices, I think, of my experience. I would say that in a nutshell, when working on Europe and the U.S., one of the key things the bank has done well are two. One is customer experience. So the agenda on customer experience has been way added.
So, there and that includes overall experience plus conduct, which has to be deployed. I would say that this is here as well. I haven't found anything different. The team has been well embedded in those circumstances, that we should be really having the client at the center, etc. But I feel that there are some practices that have been done elsewhere that I would help to keep implementing here. The other thing, and I think it comes back to something that is also already being discussed here at Banco do Brasil. It's about return on equity or return on assets by every disbursement we do. Despite the fact that they may have some enhancements on the model, I think it's a very good discipline they have here.
The only thing I'm adding on that, on my experience, is having difficult questions to our customers, specifically the wholesale customers, which has been where I came from, which is having a very candid discussion about the relationship. If returns are low, we need to really reassess that. I think there are two levers to get into that. It's lower capital deployed and higher cross-sell. I started at that already, so I selected the top customers we have as a relationship or as capital deployed in Banco do Brasil, and I'm sitting with them one by one and starting engaging on that discussion, which is not simple because it means that we have to give up certain things. That is probably my experience, which is hard. It's having those difficult conversations.
But just overall, looking to the wholesale aspect, I think a very good platform and there are areas to be strengthened. And one of those is investment banking, reason why we have engaged on our partnership to try to expedite that process. The partnership I meant is the creation of the UBS BB. On technology, I think I always heard that we have a very strong technology of Banco do Brasil. I was even further surprised when I got here. And a very good platform, and this is not simple. And I know that having said that, it's not about where we are. It's about the continuous investments required on that front. So by no means that we have to be comfortable where we are. But I'll give you one example, which I think I was extremely impressed, is the data information we have for the systems we have.
Our data lake is impressively well positioned. We centralize our client files. I don't know how many years ago, but more than 10 years ago. We have a single client file, which has information for millions of clients. Not only the current clients, but the clients that already went through us, or clients who have been using us on the branches. We have the information. It's, as you know well, I think data is very important, and I think we do have the data. I will add on the aspects of the agribusiness. I already said that, but I will re-emphasize that the data lake for agribusiness in Banco do Brasil. It's a tremendous edge we have. I think we have to use that much better, and we will, in terms of more origination.
Part of those origination will be to enhance and increase our portfolio, and hopefully part of that will be to originate it and distribute it. The mandate was very simple. When I was called to this position, of course, it took me probably the first call with the first person who called me was, it took 10 minutes to say, "Yes, I'd like to pursue." The second call with the minister of finance, it took me probably an hour, where he spoke about 90 minutes, and then he spoke about 40 minutes, and I said, "Yes," just after that, so easy to accept to be part of this tremendous bank and hopefully helping on their process to get where we are. The mandate itself was very clear. It's about continuously improving the profitability of the bank.
I will just complement the way to get into this profitability. It's using customer as a center. As I said, I think this is what I already get here. We have to do further there. Thank you for the question.
Very clear. Thank you for that. If I can follow up, when you mentioned that you engaged on this partnership investment banking to accelerate the process, do you think there are other businesses where you could pursue partnerships as well? Being more specific here about the asset management business.
The answer is yes. Yeah, absolutely. Not only on that area you just described. Again, in order to expedite the best or the better experience for our clients, either on manufacturing of products or advising of our clients, yes, we could take some shortcuts and work in partnerships.
Okay. No, thank you very much, and I wish you best of luck on your new role. Congratulations.
Thank you very much.
Ladies and gentlemen, as a reminder, if you would like to pose a question, please dial star one. Our next question is from Juan Govalde from Scotiabank. Juan, you may proceed.
Hi, good morning, André. Thank you for the opportunity to ask questions. So I have two questions. One on capital and dividends, and the second one on provisions. So in terms of capital and dividends, you're seeing that your CT1 is around 13% now, and I see that you have a target minimum of 11% for January 2022. And also you end up with the restrictions on dividends. I think that's expiring at the end of the year. How should we think about the dividend payout for 2021? And then the second question related to provisions.
We have seen increasingly correcting payment behavior of the portfolio that was out of the grace period. Also, Banco do Brasil showed a smaller increase in provisions in the first half of the year than some private peers. Can we expect you to make additional provisions or more prudential provisions in the near term? I know that it's hard to tell, but any color would be appreciated.
Thank you for the questions, Juan. I'll be brief on those two. And Daniel, if you want to comment further on provisions. On capital resilience and on the capital side, I think we are in the process of building our 2021 plan, which, as I briefly commented, we have an increased risk appetite. So part of the capital that we will keep is to accommodate further risk appetite. In respect to dividends, we're still discussing that.
Again, that will be presented when we finalize our plan to the board for assessing our dividend payout. On provisions, I think Daniel covered that. I just want to make a brief comment, and Daniel, you can complement. But our model and the way we structure in the waves of the rollovers plus the way we are disbursing, I think the model has been indicated provisions. I really like to emphasize that there are very different models. We have peers in Brazil which have been substantially increased their provisions at once. And that happened in the case of this year during March or April. There are ones which are doing not in the same pace. We are more cautious, and we are really following our model, and we are doing proportionally additional provisions when required by the model and on the rollovers and the transactions we have.
We have no concern of anything today, and as Daniel has shown the numbers, so the delinquency figures have been quite positive so far, but we all know that this trend not necessarily represents much due to the characteristics of the rollovers we have done with a grace period. Being very brief, we don't have yet any views, but I don't discharge any further provisions when the model comes. Again, it's simply not necessarily a view that the market is deteriorating because it isn't, and there are no errors on that and not our portfolio. However, I think we felt that the way that we are disbursing and etc., it might or potentially could bring further provisions for the next quarter or for this quarter.
And having some thoughts about this, Juan, as André said, we have a quite robust provision or methodology for provisioning.
Certainly, our portfolio is different when you compare it to the peers. Those are the main reasons why you have different approaches, because you have different methodologies and different portfolios. Coming to our methodology, something that I would like to highlight, how we build those preemptive provisions. We use non-structured data. We use analytics. We weight the segments of the company. We weight the leverage of the company. We get information about the investments of the company with us in the system. Based on that, we classify different levels of resilience. We do something similar for individuals when we estimate how much income they lost or how this is behaving. Based on that, we have the input for the provisions. It's likely that we are going to have more provisions. Yeah, it's difficult to precise at this point. Yeah.
Thank you, André. Thank you, Daniel.
You're welcome.
You're welcome. Bye-bye.
Our next question is from Nicolas Riva from Bank of America. Nicolas, you may proceed.
Thanks, André and Daniel, for taking my questions. I have two questions. The first one on capital. If you can explain to us what drove this increase in the CT1 ratio to 13.1%. It seems that it was lower prudential adjustments from tax credits. So I wanted to ask if there was any change in regulation in the treatment of tax credits in this quarter. And also now, I mean, you talked about your strong capital position. Right now, the CT1 is even above your internal target of 11% by January 2022.
It also seems, based on what you have said about potential partnerships in some businesses, that you could even have more capital coming in if you were to sell some equity stakes in those businesses. So I wanted to know your thoughts in general about your capital position right now. And then my second question about potential bond issuance. You have a number of global bonds that are going to be maturing in the next few years. I count in the next three years, you have $5.5 billion in global bonds maturing in the next three years between senior bonds and some subordinated bonds. And I wanted to ask how you plan to finance these maturities. You recently had 8.5% perp maturing, which you already had pre-funded.
And also specifically, in the case of the old-style tier two bonds, you would be looking to potentially replace some of that with buffer-free tier twos. Thank you.
Okay. Nicolas, thank you for the question. Let me start with the first question about the CT1 and the dynamics of this. Certainly, there is one regulation that is important to keep an eye on. It's the MP 992 and the Central Bank Resolution 4838 that creates the CGPE. This is the acronym, CGPE. The concept is basically you have a credit portfolio for the SME segment. As you grow this segment, you can deduct the equivalent amount in the tax credits, actually reducing the reduction, yeah, of the impact that you're going to have.
Just to give you some numbers, if you grow just hypothetical numbers, if I can have 10 billion BRL in a credit portfolio, and this portfolio can be comprised by the CGPE for 30% and the other 70% with other credits using our own lines, we go to Central Bank and say, "Okay, we have 10 billion BRL with this profile that applies to CGP." Then Central Bank allows the banks that does this to reduce the negative impact so that you have the deduction that you have of those tax credits to capital. Then you make positive adjustments in the prudential adjustments. It's not linear. For that reason, the calculation is quite complex. But in a nutshell, this represented, again, for us, of 100 basis points, and our portfolio grew about 6.3 billion BRL in this period. And this is maintained for this is sustainable. This is one important aspect.
About the funding structure that you said, as I said, in the next five years, certainly, the bank is looking at this. We have opportunities for liability management. We are aware of this. The bank is liquid. It's quite liquid. And then we are observing the opportunities and the dynamics of the market to make those adjustments. This is the bread and butter of the treasury and of the finance division. Yeah?
Yeah. Yeah, I think so. Again, on the liquidity management, I think, as Daniel just pointed out, we have extremely solid liquidity positions. Our liquidity ratio, as you probably have been paying attention, they are massively high. So what we are paying attention now, and it's to calibrate that further. And so we are in the middle of the exercise with myself and the CFO and the team.
But it's too early, but potentially we will discuss about some liquidity management structure in the future.
Thank you very much for that. One follow-up on the first question then. This change in regulation, this was a one-time effect. We shouldn't see more of this in the fourth quarter then.
Okay. Just one aspect that is important. This regulation, there is a window that you can apply for this portfolio. It was from June to December. Then in the fourth quarter, we could have some positive effects, but it tends not to be in the same magnitude of this one. But again, it's premature to talk about this, but the window is open for more transactions like that.
Okay. Thanks very much, Daniel.
And welcome.
Our next question, it is from Marcos Assumpção from Itaú BBA. Marcos, you may proceed.
Hi. Good morning, everyone.
Andrea, first of all, I wish you a lot of success in your next endeavor. To start with, our work inception, based on your initial assessment of the bank, okay, I would like to first understand what do you see as the main strengths of the bank? What are the areas that you'd like to focus in order to improve the current competitive environment of the bank, competitive advantage of the bank? And the second one is also, given the size and scope of the bank, it seems there are a lot of opportunities to divest from most assets or even make quantitative shifts, as you just mentioned. So what do you see as the low-hanging fruit in this front? You have been mentioning selling real assets, so on and so forth. But what do you see as the most likely hanging fruits in the short term? Thank you.
Thank you, Marcos, for the comments and the wishes and the questions. I think I commented briefly earlier. First impression has been very positive. I was expecting a positive impression when I got here, but you've given a good impression. I think, as you know, being close to us, quality of the team, and I think if you could bring what is the most important thing on the Banco do Brasil aspect, it is the client base. So it's a massive and a very positive client base. We have a very good relation, very solid, very resilient clients, which we are the principal or the major bank in most of the cases. So this is very strong. If I make this, and again, you probably have saw on this slide, I have been introduced of my looking ahead.
There are areas which we are our core strengths and sectors of core strength, and first is the government relationship we have, which we need to keep enhancing services to retain those relationships we have. And the agribusiness, which, as I said, I mean, by far, we are the lead bank on that sector, and we need to do more on that. So I think those are the key strengths, I would say. And moving to the low-hanging fruits, there are two low-hanging fruits, and I'll get to the questions about the areas of the investments or reducing investments. But the low-hanging fruits, and again, I highlighted on the pie I have introduced in the presentation, is that we can extract more value from our customers by integrating ourselves more. And I think that that can be done. And I'm very positive we are working on that as a team.
The ExCo has been very engaged in how to do that and further exercise of collaboration between the business. It is being put in place. There are other assets we have, and I don't see. I mean, there are very small low-hanging fruits here, and there are obvious ones, which I'm not planning to share names, etc. But there are obvious low-hanging fruits, and they are very important core assets, which, as I commented before, we need to see how can we enhance our customer experience on those relationships we have and on those partnerships or investments we have, which are outside the, s o I think there are areas to pay attention. There are small areas which are non-core. But again, I will preserve my time here to keep analyzing them before taking any decision.
All right. Thank you very much, André. And good luck again. Thank you.
You're welcome.
Our last question is from Natalia Corfield from JPMorgan. Ms. Natalia, you may proceed.
Good morning, everybody. And thank you for taking my question. I'll go back to your capitalization. So Daniel said, I think you repeated several times, that the impact of this is sustainable. I am just a little bit confused because you said that there was a window that's from June to December. So I'm trying to understand how sustainable this is, particularly because you kept the target of the CT1 at 11%. So I think my fear is that we got 13% now, and then we go to, I don't know, to 2021, and we see your capitalization, your CT1, going down 10.5% again. So I don't know if you could explain why you keep saying this is sustainable. Is the capitalization going to stay at this 13% level, or?
Natalia, sure.
I understood the question. Thank you for the question. And there is André here . Two comments on that. First, for you to apply to this benefit, you have to this window to apply is up to the end of this year. So transactions that we have done this year that related to these programs can be applied to these programs. This is the first thing. So this is why the window will close. This is the first thing of the application of those requirements to be adjusted on our capital base. The second point, it's how sustainable that is. Probably the word sustainable, it's not a right one. That benefit will be staying from this year. We're starting applying as we saw now and until the end of this year. And we will keep applying this until 2025.
And again, so the sustainability of that is actually the gap between now and 2025. They are not forever. The reason why a portion of this will be kept at our level is because we know that this will be reduced by 2025. The question is how can we generate self-capitalization between now and there to be able to keep going, increasing further, and then paying this back? There is a component of this 13, which, as you rightly said, is an action of our 11 target, which we need to also keep in mind that part of these adjustments, potential adjustments, 1%, 1 point in our capital will be reducing by 2025.
And just some addition. Sorry. No, no. I said that this goes by the end of 2025. Then the decrease will happen in the first day of 2026. Just to be more precise.
Understood.
For next year, do you have an idea? I know it's too early, and you're still doing your budgets right now, but do you have an idea of where your core CT1 is going to be? Is it going to be at least closer to the 10.6% that you had before or more to the 13% that you have now?
Yes, as you comment, our budget exercise is still ongoing. The only things that we still have to decide is the level of the dividend payout we're going to make. But despite of that, we keep the cushion reduced by whatever dividend payout we agree with the board by December and the plan. Then we'll keep the capital for accommodating our risk appetite.
We'll preserve a cushion of that during those years to make sure that potentially we are prepared for getting to the end of 2025 and 2026 to be prepared.
Just to make some observation, inside this session, certainly we're taking into consideration the actuarial position since this is linked to the market variables. This is part of our capital management to project several scenarios, and certainly we preserve the cushion exactly to absorb in market movement.
Okay. Thank you. Very clear. I have to say that as a credit analyst, I was very happy to see your Core at 13%, and I am sure that the holders of your AT1 were very happy as well. Thank you.
Thank you.
This concludes today's question and answer session. Mr. André, we proceed with his closing remarks. Please go ahead, sir.
Okay.
Once more, I'd like to thank you for your participation, and I'd like also to comment again that our connection with you will be enhanced, and any comments, how you prefer that to be enhanced, please send to Daniel, and we'll keep working together. I will be here in all the quarter results, but I really like to emphasize our proximity will be enhanced going forward, so thank you for your time, and thank you for participating. Bye-bye.
That does conclude the Banco do Brasil conference call for today. As a reminder, the material used in this conference call is not available on the Banco do Brasil investor relations website. Thank you very much for your participation, and have a nice day. You may now disconnect.