I am Janaína Studart, Head of Investor Relations at Banco do Brasil. Thank you for joining us for another Banco do Brasil earnings live stream. As usual, our event will be conducted in Portuguese with simultaneous translation into English. You can choose between three audio options available: original, Portuguese or English. Well, to speak about the numbers for the quarter, joining me today are our CFO, Giovanni Tobias, our CRO, Felipe Prince, and our VP of agribusiness and family farming, Gilson Bittencourt. Now, to begin, I will turn the floor to Giovanni so that he can start with the initial remarks.
Thank you, Janaína. Good morning, ladies and gentlemen. Before we begin, I would like to let you know that our CEO, Tarciana, just had a back surgery, and so she's still being, you know, in recovery.
Because of her recovery, she's not able to join us today, but she's with us online. I would like to begin saying that a few weeks ago, during our BB Day, we told you that transparency at Banco do Brasil is not protocol, but rather respect. It's our commitment to give you the more up-to-date information. It is with that commitment that I would like to initiate our conversation today. In general, I believe that BRL 3.4 billion in results for the first quarter still reflects the worsening credit risk environment. On the other hand, it was clearly possible to see the strength of our operations, complemented by the business generated by the companies within our conglomerate.
We have been deepening these discussions with you around our strengths, which are grounded in customer centrality and primacy, strategic execution focus, and our commitment to delivery, delivering long-term results. I would like to highlight that the evolution of our NII, up nearly 15% year-over-year, was driven by credit growth, diversification of funding sources, and the appropriate allocation of our liquidity. Fee income was up by 5.5%, and here I would like to highlight asset management, you know, insurance and consortium. Reflecting, I mean, the full synergy among the businesses within the conglomerate. Our admin expenses remain under control without compromising our investments in technology and also without compromising our investments in people who make results a reality. We continue paving the way of our digital strategy. Business generation at Banco do Brasil continues to gain traction despite all of the difficulties.
Our loan portfolio was BRL 1.3 trillion, with minimal evolution of the mix toward lines with a better risk-return relationship, especially when it comes to the individuals' portfolio. In order to support the growth of our business, our CET1 remains at an adequate level. The growing relevance of the individuals' portfolio is a crucial vertical of our strategy, and we will continue at this pace, emphasizing on, you know, payroll clients. In this regard, private payroll loans are still a big growth driver. We have reached BRL 17 billion in disbursements, while also maintaining our leadership in public payroll loans. We've made consistent progress in lending to SMEs with growth in lines backed by settlement guaranteed funds as FAMPE, CEAC, and FGI, which reached 60% of working capital balance for these ones.
In agribusiness, we just concluded the BB Regulariza Agro operation within the context of Provisional Measure 1314, totaling nearly BRL 38 billion, enabling 25,000 growers to adjust their cash flow. This was done with a lot of responsibility, with 92%, you know, real state-backed loans. We believe in the strength and relevance of this sector for Brazil and for Brazilians, I reinstate that we will remain side by side with our rural growers. Proof of this is that under this crop plan through March, we disbursed more than BRL 150 billion. Since last year, we have shared with you in details all the measures adopted to address the worsening delinquency cycle, such as, you know, revisiting our credit underwriting framework, the adoption of a resilience matrix with new risk and collateral criteria.
In that context, in the 25/26 crop year, 63% of operations with large growers have already been contracted with fiduciary lien structures. We review our collection workflows, we reinforce our teams, and in the 1st quarter of this year alone, we have already carried out more than half of our, you know, judicial collections completed throughout the whole year of 2025. This is not just something simple, but rather it reflects our commitment to recovering our assets. All of these levers were built intentionally, and they reinforce Banco do Brasil's strategic credit management. In the 1st quarter, the cost of risk reached nearly BRL 19 billion. When we project the scenario ahead. It is impossible to ignore that today there are more uncertainties and challenges than when we started the year.
The geopolitical environment has impacted the macroeconomic landscape, directly affecting households, debt servicing for companies and the agribusiness supply chains. As we incorporate this background and its impacts, our risk models pointed to a worsening expected in loss dynamics for the remainder of the year. When we gave you the guidance in February, the expectation was to end 2026 with a terminal Selic rate of 12%. Today, our estimate stands at 13.5%. This certainly affects our clients and the risk environment, while also requiring greater caution in business management. It is precisely by recognizing the depth of the cycle that we are acting with the responsibility that the moment requires. I repeat, the current landscape demands prudence. Prudence for this management team does not mean hesitation.
It means having clarity about what needs to be done, and we are doing it with disciplined execution, rigorous capital allocation, and a long-term vision. Where the cycle required caution, we were cautious. Where we saw opportunity, we accelerated. The example is in private payroll loan for workers, in . This is reflected in the revision to the guidance ranges for, you know, cost of risk and NII. It is also worth highlighting that giving all these factors, the launch of a new program such as Novo Desenrola is extremely important for Brazil and Brazilians. Restoring the financial health of families, in our view, is crucial to normalize the credit cycle. Banco do Brasil has been engaged in this agenda since day one.
We have already renegotiated more than BRL 1 billion in debt, benefiting more than 100,000 clients and more than 6,700 companies considering the programs for PRODS. I would also like to highlight that we have already completed 90,000 renegotiations with individuals outside the program, totaling an additional BRL 508 million. This would be the extended Desenrola of BB. This leadership reinforces our role in financial inclusion and in the economic recovery of Brazilian families. I will conclude by reinstating that we have the resilience necessary to face this moment with discipline and responsibility. We are convinced that those who do not recognize the scenario, but act firmly in response to it, we face the present with courage, we build solutions to face challenges, and we pave the way towards a sustainable future.
We continue strengthening the foundations of our long-term sustainability through a continuous agenda of evolution and modernization. Now, I would like to hand the floor back to Janaína so that we can start the Q&A session. Thank you very much.
Thank you, Geovanne. Well, we will now start our Q&A session. As usual, questions may be asked either in Portuguese or English. In order for us to organize ourselves, I would like to ask analysts to ask just one question at a time. With that, we will give everybody a chance to participate. To start, I would like to call Antonio Ruette with Bank of America. Hello, Antonio.
Good morning, and thank you for taking my question. Thank you for your time. My question is about your guidance for provisions.
Even when I look at the top of the new guidance, it is understood that provisions should become more stable now after you had a sudden drop in the second quarter. When we look at the short-term KPIs, as you said it yourself, it seems like the situation is not really improving. We see still some pressure points. There is the El Niño risk. The war also brings important pressure to prices of fertilizers. We see, you know, NPL of individuals going up. Even with the guidance review, it seems like provisions should be flat and then go down. What makes you so sure to come up with this guidance at this point?
Thank you, Antonio Ruette. Good morning. Good morning, everyone. Well, first of all, I think we have to understand that the dynamics of our provisions have changed.
With all of the models performing, you know, in line with expected losses, what we do, we just anticipate the future risk. This is what explains the increase of our cost of risk when compared to the cost of risk from the previous quarter, which was what led us to review our guidance. We already notice a lower level of, you know, on-time payments. We were monitoring that on a regular basis and every day. I mean, in April, where maturities were beginning to emerge, I mean, payments were below the levels that we mentioned to you before. It's important to highlight that
You know, delayed payments is not delinquency, but it indicates the customer behavior. We have then to make an additional effort to seek for better collections, and then you make our provisions. Moreover, we also saw a contaminate- For the industry scenario to have a buildup of provision for this second quarter. I know that agro provision is a bit more loaded or has a higher weight. I would like to see what are the other lines of provisions that you are envisioning in the future.
Thank you very much, Mizani, for your question. It is a pleasure to have you here with us. Well, this is exactly the dynamic we're referring to.
The individuals portfolio already brings this anticipation, and this is why we are able to see a greater movement or transaction in the expected loss for the first quarter. For companies, the portfolio is standardized, normalized. There is the effect of a credit session that we already commented with you that we would do in the fourth quarter with the impact for this one. The indicator of NPL that you saw, especially with regards to micro and small companies, is since the gross market follows in the normal standard. We have been already sowing, we have been gathering what we have sowed, what we have, whatever I've given you since the beginning of last year. We continue more selective in terms of granting for SMEs.
The portfolio has been channeling a very positive balance into guaranteed or collateral lines of credit, governmental lines of credit, you know, with collateral funds that will reach 60% of the SME portfolio. This will have an impact in the stabilization of our provisions. Agribusiness is a bit what we were referring to previously. We have a scenario beyond a regularization of loans in April that is lower than what we had before and what we had presented previously, and this will impact our credit risk. From this moment on, it's truly to understand the dynamic with a lower stabilization in provisioning for individuals. Since the anticipation of this worsening, especially in our credit card lines, which is a re-reflection of what we have done for the same rural producers, we have anticipated this for the first quarter.
The more specific cases that we see in the media and you are aware of are already adjusted and provisioned for, and they follow the first quarter as expected.
Thank you, Mizani. Our next question is from Tito Labarta from Goldman Sachs.
Great. Thank you, Janaína. Good morning, everyone. Thanks for the call, and thank you my question. I have another follow-up on provisions, because if you look and you have a nice breakdown on the provisions, right, by individual companies in agribusiness. Part of what drove the increase in provisions was actually the discounts granted, right? If you take out those discounts granted, you would be sort of running in line with the full year guidance. I guess a couple of questions related to that. One, do you expect any more discounts granted going forward, or is this just one time given the renegotiation with the one specific corporate?
Two, within individuals, is it mostly because of private payroll that you're seeing this big jump, or are you seeing this, and you mentioned a little bit because of farmers and other, you know, rural sort of related individuals impacting that? Like, how much of it is this say mix because of private payroll, where we're seeing a lot of deterioration and underlying deterioration given everything going on? On the companies specifically, there was a big drop there. Is that because of the discounts granted? We did see an improvement in agribusiness provisions in the quarter. Should this lower trend, right, it went from, I think, 10.5 to 7.4. Just to think on each of those lines that drove the provisions because there were big jumps from one quarter to the next.
We can understand each of those a little bit better. Thank you.
Thank you, Tito. Good morning. Let's try to establish the specific case of yours. We had delinquency or NPL in the fourth quarter, and it was fully provisioned for. We also said so here that we would grant this credit in the first quarter of 2025. We don't have to talk about differences in our provision or oscillation because this flow was already constituted in the past. Therefore, asset that was fully provisioned for was given, was granted, and then you have the impact and discounts. This is why, answering the previous question, I said that the provisioning in this specific case for companies is standardized, normalized. For the future, in the future, we do not have on our radar any case of any kind of discounts or granting of this magnitude.
Of course, we will assess our portfolio on a daily basis. Any decisions might be made on specific cases we are discussing. It has nothing in our radar for the close future, the near future.
Before we talk about individuals, to make this very clear, the same magnitude that was for the expected loss happened in the granted discount. They offset one another. There was no impact in our bottom line. This is a resolution of what was considered as NPL as we heard, and now it's going out. There is a compensation there. There's offsetting. It's 0 impact on the bottom line. Maybe we can talk about fiscal entity. It doesn't have any direct credit for the, our workers.
I hope it is clear to you, Tito.
It's just seven. We of course are available if you have any, if you need for more details. With regards to individuals, I guess you can also observe what is the market behavior. In our country, we have a concentration of delinquency in short term, especially credit cards and what we call a special withdrawal in Banco do Brasil, so especially with credit cards. At the same time, we are at the top of the level of indebtedness of the families in Brazil. This of course will impact into the launch of the so-called Desenrola project that we have already talked about in the beginning of our call. We were already preparing ourselves to react to this scenario during our last call.
We also said that we had adjusted on just the product in terms of payment and installments of our credit card, credit card payments in order to deal or to grant more flexibility for our individuals, our clients, so they could pay their credit. You can see that there is a movement in this portfolio as we have already. We want to give you full transparency. It happens that due to this scenario and adding to the contamination effect of our rural producer clients who are also clients in the individuals lines as clients, our assessment and the assessment of our models will indicate a worsening the performance of this portfolio.
Therefore, since we work in the concept of expected losses, we're always trying to anticipate the risks we see ahead and that might show up in the future, we chose to do the protection of this portfolio and therefore to ease any kind of credit costs or cost of risk in the future. However, the impact in NPL, yes, we are expecting a worsening mainly due to the credit card product. It is important to link this to the idea that we have the portfolio adequately provide provision for trying to anticipate any risk we see in the future.
Just to add to this answer, you can see the increase of this short NPL. In the above 30, we had an increase of almost 80 BPS. Is that it? Yes.
We can see this will go through to the 90. We will see this coming to fruition. We have already anticipated.
Well, actually, Janaína, we believe that part of this short-term NPL will go down to the 90 days. We anticipated. We did the separate loan of BRL 2.2 billion for this specific portfolio with the payment of credit card in installments, and they will pay in different installments. We don't know how we will be this during the period. Therefore, it is a prudential way of preparing ourselves for an eventual issue of delinquency. In the middle of the process, we have the Desenrola program, and maybe this anticipation will come fully to the 90-days delinquency.
We will have to wait and see how this client will behave, how this individual will behave. Of course, at the same time, we are very close to this client. We're talking about solutions, talking about loan regulation, and we have a very prudential way of acting in reinforcing our provisions. This might not happen depending on the performance of the Desenrola program and the macroeconomic stance and the impact on families and also in individuals.
Our next question is from Renato Meloni with Autonomy.
Good morning. Good morning, and thank you for taking my question. Still on provision, can you tell me a little bit about that increase in provision between segments? Then I would like to focus more on the individual portfolio. I think the message you are conveying so far has to do with the de-deterioration in the credit card line. I just wanna understand whether this is still related to agribusiness or whether it's something more generalized. Thank you.
We have more than 40%, I believe.
Credit card, you know, non-payroll. There is part of it coming from growers and their own credit cards. Basically, this additional provision in the individual's portfolio, which was close to BRL 2 billion. As for agribusiness, we are still looking to increase the payment, you know, the on-time payment rate. I mean, the average was 74%, you still have new vintages or new cohorts, which was 25, 26, that was close to, you know, 96%. The ones before are still around 70%. The ideal situation would be to bring the level of this portfolio to what would be something before all this problem, close to 95%-96%. This doesn't mean that, you know, default payment will not lead to NPL because you can still execute all of the guarantees, collaterals, et cetera.
Assuming that 60% or 75% is equivalent to 25% of delinquency, that is not a correct assumption. Now, trying to give you some forward-looking perspective, this increase in provision contemplates this negative scenario. I mean, more negative scenario that we see when it comes to on-time payments coming from agribusiness. Expected loss provisions are here to cover this difference of about 25%. A difference between the expectation, which was our target, and it was contemplated in the previous guidance, and the current reality that was more noticeable in early April. This already incorporates the scenario, and we are working diligently not to get it materialized. I mean, when I talk about, you know, fail to pay on the maturity date, that's what I mean.
I mean, there is 20% that are paid 15 days later, in addition to 30%-35% after 30 days. It's important to say that this review already contemplates this lower number of on-time payments. We understood that once we look at payments and the current scenario, I think we have to be a bit more realistic. Therefore, that led us to incorporate this new projection into our guidance. The guidance shows stability in provisions for companies. This also contemplates some events that we are seeing in mid to large companies that are in, you know, in court reorganization. This also contemplates this new dynamics coming from the individual's portfolio. Above all, it contemplates a tougher scenario that we are anticipating in the agribusiness segment. That's why yesterday we released this additional losses contemplated in our scenario.
Renato, this is a reminder.
This is not nothing new. We are just telling you about the progress on the same story. We've been telling you about the worsening of the agribusiness scenario. Of last year's provision, half of it was dedicated to agribusiness. It still remains a segment that requires a lot of attention. There is this contamination coming from individuals, already mentioned. There is the issue of on-time payments or non-payments. Well, we talked about the war. We also have to understand how this will impact producers' costs, how does that impact price. All of that brings an additional volatility when compared to what was expected early on the year when we released the guidance. It's just some progress. We are also, you know, being more transparent in our disclosure.
You can see, I mean, vintages since last year, you know, now we have more guarantees of fiduciary lien or sale. This new profile will also impact the overall portfolio, but this takes time. Our sensitivity today, considering all of these aspects, is what Prince said. We still see some pressure coming from the agribusiness segment. Now, moving on, I would like to invite Daniel Vaz at Safra for his questions.
Good morning, Geovanne, Prince, Gilson. Thank you for taking my question. I would like to talk about capital.
In my discussions with investors, the bank solvency was no longer a frequent subject because of the 13, 14 resolution. Looking at, you know, the first quarter, the level of prudential adjustments was slightly above expectation. Looking at more carefully, you know, the BRL 4.5 billion in tax credits, and I think this reflects a lower level of fiscal adjustment in your books. I mean, I know that you're gradually recovering, but with this new re-guidance, this may probably take a bit more time. What is the bank's estimate when it comes to capital, and how much do you believe you will have in terms of tax credits in 2026? I think this topic should emerge again. I'm just trying to anticipate what would be the best or the bank's best capital expectation for the year.
If you could also talk to us a little bit about tax credits, that would be greatly appreciated.
Thank you. Well, Daniel, thank you for your question. It's important that it becomes clear that we guide ourselves to a long-term overview. We are managing the bank, looking forward towards the next 5 years. We've been telling you that the strength stemming from MP 1314 would be enough for us to grow or strengthen our capital base to be able to cope with regulatory regulations and the consequences stemming from a, you know, lower performance. Things didn't change. The perspective remains the same. Capital I mean, CET1 should be around 11 in 2026 in this more, you know, expanded series. This reflects the breakdown that we showed you. This leads to CET1 of 11.29.
The 13, 14, you know, gets us in tune with that CGPE. This helps our capital base for the next 5 years, and this is enough time for us to reorganize our results. Even then, I think it's important to say that the machine is still being fed. I mean, the results are compensating the risk-weighted adjustments. I mean, RWA because of the provision. There is the point that you mentioned. It is not just a consequence stemming from fiscal losses. In the 14, 6, 7, you had 2 options to solve the fiscal treatment vis-à-vis the accounting treatment. The 4, 6, 7 gave us 10 years to get things up to speed. We have to pay BRL 120 every month to rebalance things.
From 2026 onwards, there is no mismatch anymore because after the 14, 4, 6, 7, things changed, and now we have a new effect that is now materialized through the prudentials that we brought forward in the first quarter. Due to the incurred loss that is quite high, this is leading to fiscal losses. There is a weighted average difference. This didn't come as a surprise to us. This was already implicit and contemplated in our provisions. The numbers that I can give you is that in the next coming quarters, this number should range around 20 to 25 basis points.
On the other hand, we have the management process to generate a capital base, and the best estimate we have is that we will run at approximately between 11%-11.5% until the end of the year, and this is what we should deliver to you. Daniel Vaz, it's very important to bear in mind that when we adjusted the guidance, we adjusted provisions, but at the same time, we reflected adjustments in our net income. When we look at the capital composition, we made clear that at the end of CGPE was supposed to end. The 1314 had the main purpose to neutralize that impact, and we managed to accomplish that. What we promised, we are delivering to our promise.
There was no reinforcement in our capital coming from net income because the net income, you know, ended up being BRL 3.4 billion. RWA was 0.09, we already had the prudential impact that was already expected. Going forward in our net income estimate, we expect to increase that profit. My taxable income will be higher, and we will be capable of
Absorbing these tax credits stemming from the losses, and at the same time, we will be able to reduce the tax credit coming from losses that consumes more capital. That's why we are confident that we will have enough capital because our focus right now, and it's important that you remember, the last year was a year of adjustment. We were adjusting our entire structure, all of our processes to face that cycle. Now we have everything working as expected. We gave you information about all of the collaterals. Now we're focusing on generating businesses. In the first quarter, you clearly saw that we grew NII, we grew the business of affiliated companies, and our conglomerate strategy is indeed helping the results of the bank in order for us to face these scenarios.
I guess now regarding capital, it's just to remind you that we already been sharing with you all the impacts we expected since last year. We were talking about how much will come from the CGPE drop. We talked about the impact of the MP. This was important mechanism for us to work in leveraging on our producers with the deferment and make it possible to have a more adjusted cash flow. On the other hand, this will bring us a capital benefit. We also talk to you about this. We also referred to adjustments we would have thanks to 466, and it's 33 BPS in total. There was no surprise in capital. Everything is as expected, including the prudential adjustment that is part of our projections. Okay. Let us continue. I'd like to invite Henrique Navarro from Santander.
Good morning. Thank you for the opportunity. The amount that was renegotiated, almost BRL 38 million, the great impact is that a volume of credit that could have migrated from 1 to 2 or 2 to 3 did not migrate. It stayed where it was because of renegotiation aspects. Geovanne explained to us already and during the last call that the fact that the investor or the agriculture have 1 year to pay doesn't mean that Banco do Brasil is not keeping track of the payment capacity of this producer. The relationship will continue.
My question is, given the worsening of the agribusiness we are seeing, the El Niño risks, the cost issues and everything else, is there a reasonable chance that that was renegotiated won't be paid at the due date, maybe in one year, in the beginning of 2027, that is. My question is, this increase in the provision that could happen when a volume such as this is not paid in 2027, and then you have to increase the stage in which it finds itself. Will this happen? Are you going to find out as value that is an increased risk in 2027, or will Banco do Brasil proactively during 2026 will understand that the payment ability of that producer isn't good and they could start some type of anticipated provisioning? How does this work? Thank you very much.
Good morning. Henrique, here, one important thing to highlight is even though there are difficulties we forecast in agro, we had in this last crop a record production in terms of productivity. The income for the rural sector continues to increase. What we were able to verify, therefore we have a need of 13, 14, is that there was a tightening of cash flow. When we did the new hirings or the new negotiation, we involved not only operations that were due in 2025, 2026, but also with future due dates in the new renegotiation. We didn't do this for everyone.
The focus was to find the producers, which in our understanding, our risk analysis and our payment analysis, with an extended deadline of 8, 9, 10 years, we would be able to allow this producer to regulate or organize this cash flow in a better way. Our expectation for these operations, the receivables for these operations are good. In this new negotiation, in many cases, we offset an operation that did not have actual collateral for actual collaterals. One important part of 13, 14 was with fiduciary alienation, with sales, with a greater part of additional guarantees. It was not just churning or delaying. We saw the payment ability and the expected flow, we were always backed by more collateral.
We have a positive expectation for these operations so that we can have a receivables throughout the next few years. There might be a certain level of delinquency, yes, but our expectation looking the set of the portfolio is very positive, and this is why our expectations in terms of provisions will depend on how it will behave in the future. One important thing we heard before, in April, only 1/4 of our portfolio that was due in April was already with this new methodology, the same one in terms of credit analysis used for the Plano Safra, the crop plan, and also for PND. Only in September, more than 1/2 of our receivables portfolio, the receivables in September will already have this new methodology.
We feel that operations done under this new credit methodology with a new resilience matrix, especially when we advance and increase collaterals, we will have delinquency. As we can see here in terms of the timely payment, it is also the trend to be greater, which already shows us that MP 1314 will only have a good result. Also have a good result. To show you the dynamics of our provisions, we are not looking at a specific operation. However solid it might be, we will have all the contracts of 13 to 14. 75% of our balance was renegotiated with a fiduciary sale. We are not looking at the product itself. There is a granular assessment for each client.
Of course, if we see that there is a deterioration, the ability of payment due to other payment issues that they might have with us, with the bank, we will proactively establish a provision based on the expected loss. The message is, we do not expect any kind of changes in 13/14. Management is done in a very granular, focused manner. If eventually, some risks materialize for certain clients that are in that portfolio, we might have the expected loss and not an incurred loss. This is very important to highlight, Henrique, that it's a two-way street. When we did 13/14, we did not change the provisions just because we had a new operation. We maintained it at the same level. It is whether it applies backwards as also forward-looking.
Eventually, as since they brought more guarantees, especially fiduciary sale, we have more collateral for this type of thing. For the aviculturers, for the producer himself, there is a greater motivation to pay on time. 75% with fiduciary sale. There's more than 90%, you know, based on sales. This is pretty high.
Thank you, Navarro. Now we will continue with Gustavo Schroden from Citi.
Good morning. Good morning, everyone. Thank you for the opportunity. I would like to go back to the capital issues. I guess Vaz question was already addressed, especially accounting questions or issues. I would like to talk to you about a part of the process, which is the capital ratio adjustment. There is a lack of organic capital generation. Geovanne even referred to profits.
We talk about profit or earnings here. If we look at the nominal figures with the asset dropping, and if we excluded the MP effect, capital will be around 11%. CET1 will be around 11%. If considering the profit, the bottom line projection you have from this point forward, and also the capital level that you are considering around 11%, is there any type of consideration referring to the level of dividends? Anything is being negotiated? If eventually there is a higher provision and the bottom line or the profit generation does not answer as expected, what will be the level of capital that you will rethink in terms of dividends? You, if you drop from 11%, will you go back to the level of dividends?
I'd like to understand how this debate is going internally in terms of dividends, the evolution of the level of capital and profit generation. Also if there's any other type of measure, interim measure that might, similar to MP, that is already being used, any kind of renewal for any eventual need in terms of capital release.
Thank you. Let me start with the dividends. This debate on dividends started last year. We went to the market, we explained we have a projection for the next 3 years, from that point forward, we establish what is above our credential level and what is above the regulation. We always said that our optimal level would be between 11 and 12. You know, 11-ish, so to speak.
Well, considering what we generated in the first quarter, even with our bottom line based on the lower one, we generated 15 organic CET1. That was more than enough to support the year RWA, which was 9. We have 6. Of course we want more. If we look at our projection in terms of profit expectation for the year, I will be generating the second quarter, not a BRL 3 billion, but something about BRL 5 billion-BRL 6 billion, of course, depending on how the recovery will happen. At the back, we didn't know if it would be a recovery 1, 2, or W, but now we can see that we have BRL 5.6 billion on the 4T, and we go back to BRL 3.4 billion. It seems to have a recovery in W.
We see that an organic result by itself isn't enough to deal with this. The incurred loss is also being reduced. This prudential adjustment will minimize in time, and it is of course within what was expected. We hope until the end of the year, we'll have around capital around 11. With regards to dividends for CT around 11. We had at least 30% in order to help us in this process. As I said in the past, this was a year of adjustment and we did all the measures and we thought about a number of initiatives, and some of them were already in the media. We asked for the phasing of the payments of HCD, which was forecasted to pay now in July.
Now we already requested, we haven't had the answer yet in order to minimize this. The 13, 14 MP is developed in order to neutralize that. If we didn't have 13, 14, I would be already at 11 because CGPE would be already known that in January we will not include this. CGPE would be the working capital program for business preservation. These are different expectations we have. There are things that do not make sense to talk about this now because in our estimate, they will not be necessary to adopt. However, we have a number of measures that were already presented internally in case of. In the worst-case scenario, eventually, we might need to sustain our capital level at 11.
For now, we are comfortable and what really matters is to know your business, and this is what we're doing. It was very clear. All the adjustments continue. However, it's to now move forward with all the portfolios that have a better risk return for the bank, and that will allow a better bottom line.
Yes. Not only that, the projection is a conservative one, I guess. Of course, we work with different scenarios with lower and higher provision, lower profit. Everything is worked with models. We have all the modeling, all the forecast for the next five years. It's very clear to us, we are looking at the 11 level, CET1 11. This is what you might hold us accountable for. Measures might be adjusted, not as you said, and then Geovanne was very emphatic in this way.
We do not expect a need in 2026. It's important to mention that there is a prudential component. Certainly, of course, we adopt, and it is exactly to avoid any type of volatility with regards to MP 1314. There is a very solid framework for capital management. However, the idea of having the capital is to sponsor a driving force behind businesses. This is what we are working for, to react fast and to allow our the capital incorporated. It will be greater than what we consume, what we use with our operations. Regardless of the fact that profit will be financing RWA, it is also financing. RWA is low because there's a lot of provision. This is not a scenario we want.
We want more profits, but and RWA that is higher, but as a result of healthier businesses. This is what we use as a bar in order to feed the driving force of the bank, but making it very clear, the scenario we are considering does not include these optimistic assumptions. It is a very downward scenario, and we will reach 11 at the end of 2026 without any type of exogenous measure.
Thank you, Schroden. To our next question from Eduardo Nishio with Genial.
Good morning. Good morning to you all, Janaína, Prince, and Gilson. I would like to revisit the question on the quality of assets and agribusiness and the issues related to in-court reorganization. It seems like there has been some structural changes to that segment, and I would like you to comment on the April figures that you just published. Apparently, there seems to be a worsening, both in terms of the flow of legal procedures and actual numbers. If you could also comment on the numbers for May. Given that this is a different context because NPL was below 1% and it's now up to 6%, if you could probably, you know, give us some light to that reorganization issue and whether we should expect a higher cost of risk going forward.
Maybe in your guidance, you said that that would be a lot better. Also due to your resilience matrix, and then, you know, that contemplates better collection process and whether this is enough to take that NPL to a more reasonable level or maybe lower structural delinquency. Maybe not at 1%, but what would be the most adequate level for that segment? Because I think there has been a significant change there.
Thank you. I think there is an important aspect here. Well, first of all, the in-court reorganizations are still in course. I mean, you saw the numbers, BRL 650 million. This is still a very high number for a single month. Our expectation in terms of the reorganization, I mean, the majority of them have been already provisioned.
The second aspect is that there was a provision on March 9 that came up with a set of rules that should be looked at by the judiciary once they analyze the reorganization cases. I mean, they have to define what kind of operations can be contemplated by the reorganization process. There are many other aspects that are now being discussed by the judiciary before it's fully adopted. We hope that this helps in the process of reducing the number of in-court reorganizations, especially in cases that do not comply with the legislation and the cases that were contemplated in terms of, you know, agribusiness cases. We will still see some new reorganizations throughout the year. As that is adopted, I think there will be further regulation.
The second point is that it's important to highlight that there are cases of farmers that resorted to a court reorganization. Then they regretted that. In April, we saw cases, you know, at the bank of farmers working and asking the bank to leave that reorganization because all of the benefits they were supposed to get, they did not get it. As the processes or as the reorganization cases evolve, I think we will see some of them ending. In terms of agribusiness reorganization, it does not only affect Banco do Brasil because it affects almost all financial organizations. In percentage terms, we don't have as many as other banks have in terms of agribusiness reorganization cases.
In the past few months, it's also hitting other segments of the productive agribusiness chain, be it in terms of input providers, trading companies. This is affecting the whole chain. Therefore, we should expect to see changes in the legislation. Even Congress said that they will probably revisit some issues related to in-court reorganization cases.
Nishio, just to give you some light, I would say that our challenge is to anticipate the risk, and this is what we've been doing. This has been proven by numbers. We already managed to have a lower stake in judicial reorganization vis-à-vis the market. We have a metric that can prove internally that our models and the way we operate is paying out. I mean, things are working, meaning that I do have a market share when it comes to funding agribusiness.
In terms of reorganization cases, that number is down by 30%. It shows that the risk mitigation process that we are adopting is proving to be right. I mean, since we are market leaders, of course, we are working hard to control or properly prevent new cases in agribusiness. The issue of farmers wanting to get out of reorganization is also taking place because they are now paying things on time. Because in June and July, we have to fund the next crop season. You know that if you want to fund your next crop season, you have to be, you know, in good standing in terms of your payment, your payment maturities. It's important to say that this is not contemplated in our scenario, but we seek for that bonus so that we can deliver a lower cost of credit.
I mean, the implicit credit risk in the guidance review of agribusiness often grows in the second quarter. I mean, total credit risk will fall a bit, but mostly in the second quarter. Finally, delinquency or NPL. We work based on risk-adjusted return. We not only look at the agribusiness and the business we have with our clients, but all of the other businesses we do. These clients have primacy at the bank. They have risk-adjusted return, which is quite high. What we want is that it should be even higher. To increase it, I have to do more business and while at the same time, I reduce the credit risk.
In 2027, we want to deliver, I mean, cost of risk around 4, normalizing it in a range of 2 and 2.5 in the long range, which we believe to be a very healthy NPL level for that portfolio. I would like to mention 2 other aspects. Our resilience metric is focused on the guarantees or collaterals, but not only that, we analyzed all the payments, and we enhanced all credit limits, so much so that some farmers that were operating with us, but in view of this new matrix, they didn't have any allowed limits, even with collateral. This is a broader view in our granting process.
In terms of the import reorganization, I mean, this new provision has made it clearer that fiduciary sale is not part of the reorganization process because the more we use fiduciary sale in our operations, the reorganizations will not affect our execution.
Great. Thank you, Nishio. Our next question is from Eduardo Rosman with BTG.
Good morning. Good morning, everyone. Well, I'm sorry for insisting on the asset issue. I think the agribusiness topic has been well explained. I just want more details when it comes to the worsening we saw in credit card and individual. I just want to understand whether this worsening is across the board and whether we should expect that same thing happening to the entire market, or how much of it is more specific to Banco do Brasil because of contamination coming from agribusiness.
I would just like to understand how this affects the industry as a whole in the coming quarters.
Rosman, thank you. I think we already mentioned that, but I can reinstate that because the Central Bank data also mentioned high household indebtedness and the concentration of Brazilian debt in short-term loans, mainly credit card, overdraft, not short-term, but with an important stake. I mean, with important stake, personal loan or consumer finance. As you know, our portfolio is based on payroll loans. We believe that we are strong enough to face the scenario, and this has been backed by specific numbers from that portfolio. Now, overdraft, bank overdraft check is not something that we work too much in that line because we understand that we have better options to offer our clients. Credit card, well, yes. We have the strategy focused on growing this segment.
We did grow from the third quarter of 2025 onwards, but certainly a portion of these clients are low-income clients or mid-income clients, and it was more difficult for them to renegotiate their statements. We launched a product to mitigate that risk. We had some expectations, but the expectation was not in line with what we expected. Since it was below expectations, we chose to come up with a higher expected loss that you saw in the first quarter. By the same token, and I think this applies more to Banco do Brasil, there is the contamination coming from agribusiness clients. We kept saying to you that this happened.
Once I look at not a delinquency, but lower payment levels of these clients that had maturities in April, it is just natural that this is carried over to the other products that we have with that same client. It does not mean that that product is necessarily delinquent. As I said, we look at the client as a whole and the landscape as a whole. When we feed our credit engine, all of that indicates that we should increase, you know, provisions, specifically in credit cards. That's why you saw a preventive, you know, higher expected losses in the first quarter.
Thank you, Rosman. Our next question is from Pedro Leduc from Itaú BBA.
Good morning, everyone. Thank you very much for the opportunity. A question regarding guidance. However, in NII, on the upward revised 3 percentage points upwards. It's not as intuitive as the revision of the portfolio didn't change, and you expect a lower amount of receivables, so it should be different in terms of interest rates. Could you help me understand what was this positive review of the financial margin or maybe for CDI for the NII? And also to clarify that the guidance will have almost a 0, the yard close to 0.
Yes, certainly, you have a new scenario. All the economists are reviewing upwards all the estimates. We started the year, started our budget with a CDI of 12 and an average around 13%.
We have reviewed to 13.5 and an average around 14. Certainly, this will also give us an opportunity, especially given our liquidity and our treasury. This is a result of the macro environment and also changes in NII. We have some changes in appetite. We have a lower appetite for agro, and this is something we will maintain, but also for companies, be it a smaller or larger companies, given the level of the easy cycle that was forecasted for the Central Bank. There were changes. The focus will be continuous growth individual. We have already 7.8, but we are expediting this process. The adjustments will continue, but the motto now is to grow businesses. For individuals, our margin has already grow above 15%.
With interest rates higher, we hope to have a positive impact on liquidity, also a NII, positive impact. This, of course, will reflect in our NII. Leduc, with regards to the tax, we will have maybe a low single digit or maybe a smaller positive. It will be lower than we had last year. We still have a provision and for that fiscal, but it's also an impact of the result, a small result. What are the lines that have a tax shield and also JCP. This is what we have a low single digit for the year, but on the positive side.
Okay. Thank you. Our next analyst for question will be Carlos Gomez-Lopez from HSBC.
Hello, Janaína. I will turn to English. I'm going to return to the capital question. I want the technical clarification. Measure one, three, one, four, you show an impact of 45 basis points this quarter. That is the flow, right? Because in the previous quarter, you already had 144. I wanted to understand if that is correct. The total impact so far is 189 basis points. If so, should we expect further increases in coming quarters? Is there a limit to that? That will be my first question. Second, can you remind us what the total impact of CGPE is, which is being offset by measure one, three, one, four? Thank you.
The benefit of 1314 is already fully incorporated to our capital first because we no longer have operations with regards to the MP, and also because we already reached the limit of appropriation for these resources. Therefore, you can consider 140 basis points in benefits, capital benefits as a result of MP 1314. What happened in the first quarter is that it netted a benefit that we had until 2025, and that fell in 2026. 140 total plus 45 will offset the 46 of 2026. I guess that's quite clear. Of course, if you still have any doubts, let us know. We can add to your question.
It was 144, 45 net zero total for me would be 189 BPS or the MP. Is that correct or not? 189. This 89, you take out the CGPE because these are similar mechanisms. In the net, it will be 140 that we convey to you. However, you can see it another way. It will be 189, but it fell 46 from the CGPE. If you maybe don't remember this, the CGPE was a benefit that was given for the Brazilian market in order for the banks to have an incentive in terms of granting credit for companies during the pandemic. It was a working capital program for business preservation. It's just a way of doing the math. The result is the same, Carlos. Thank you.
The program also has ended, Carlos. We had a volume that we did a negotiation up to December that was around BRL 20 billion approximately. Now the difference between December and February, which totaled BRL 37 plus the pi-- that is offsetting capital, is the one that put the our own resources, our own capital. It falls within this number of the BRL 45 that Prince mentioned. Okay. The program itself ended, and we used all the limit that we had or we're entitled to for this type of deduction.
Okay, perfect. This is in prudential adjustments, is that it? It's a reduction of prudential adjustments.
Yes, that is correct. It will be reduced by that. Reduced there.
Thank you.
Moving on. Now I'd like to call Matheus Guimarães with XP.
Hello, Janaína, Prince, and Geovanne. Thank you for taking my question. I have a follow-up to Guy's and Schroden's question about capital. I think the topic has reemerged. In parallel, we see some of your competitors doing some operations, not only to unleash value, but also to improve CET1. I mean, this topic has been revisited constantly. Even, I mean, in the past, Geovanne showed a solar system of Banco do Brasil in a previous occasion, and in the past it was VLBB, and now I think you gave it a different name. This topic has regained momentum at some point in terms of remonetization of assets. I think it's important that you give us some more light about the topic.
Matheus, thank you for your question. We are constantly looking at our affiliated companies aiming at generating value.
As I said before, the focus this year is to grow businesses, not only limited to the banking area, but related to our entire solar system. I talked about, you know, consortium, about insurance. We have, you know, our business of means of payment. In fact, when we were looking back then at possible taking possible measures to stabilize our, you know, CET1 level, I mean, we had several possibilities to unleash value, as you said, at the moment, we are not really looking at that. On the contrary, that is crucial to help us go through this more aggravated credit cycle. Part of the results that we are looking at it today comes from these companies. That's why they are very important in solving the equation.
I mean, generating a one-off result or talking about sales, it doesn't seem to us very sustainable in the long run because it doesn't make sense. It would only make sense in an extreme case where it would probably eventually need to think about some measure like that. In the short run, we will not look at these companies as something that can add value. I mean, detached from the solar system, we need them, you know, in the conglomerate because they retrofeed business generation and it helps in gaining primacy among our clients. Even though you may think that it's very legit to evaluate our capital, I mean, MP 1314, the enforcement of this mechanism will proceed for the next 5 years, very similar to the timeline to where we manage our capital.
Upper measures like those Geovanne mentioned, they were all taken last year. What we want is that capital is bold enough to strengthen our business generation. In parallel, if we see any opportunity to create value, I mean, and Geovanne is leading this conversation, it is disconnected because we are managing capital, looking at all the numbers that we delivered, organic generation and optimal capital consumption has to do with RWA and as a result, when it comes to LLP or ALL due to, you know, higher losses. Everything has been contemplated in our projections, and I would like to reinstate that our CET1 will be around 11 at the end of 2026.
Thank you, Matheus. Our next question is from Judith Fernandes of Jornal.
Thank you, Janaína, Giovanni, Prince, and Giovanni, and everyone else. I have two questions related to one another. The first question is to grow credit to individuals. I know there is the issue of agribusiness contamination and restructuring debt on some products, but credit card is growing well. I know that you just had a recent auto card event. The question is, how do you combine this credit appetite? I have a follow-up to Leduc's question about NII. I know that you, the products with higher margins will help you and the quarter was, you know, performed well. There was, you know, a market NII that was better than client NII. When it comes to client NII, there was a pressure. Looking at NII, again, theoretically, you would have a lower accrual book in terms of things like credit.
What some analysts mention, we keep discussing ratios, the tangible book of the bank is worth. In terms of growing, you know, tax credit, this will generate lower NII. DTA is growing BRL 3 billion-4 billion every quarter, DTA is like BRL 4 billion-5 billion a year. Do you think this NII is feasible? I mean, it is feasible looking at the quarter, don't you think that this will, I mean, everything else will impact your NII?
Good question, Ludy. When you look at a quarter, when you look at client NII, you have the calendar effect. It's very comfortable because when you look at the yearly view and when you compare the first quarter vis-à-vis the last year's first quarter, we see a positive growth.
This strategy to grow the individual's portfolio, this is the best way we have to improve the bank's profitability and with the returns. We have to be careful but not too focused on risk return operations that have to be better adjusted. Credit cards, certainly, once you compare Banco do Brasil with its peers, we are lagging behind. Our market share is lower. We don't want to grow for the mere sake of growing like, you know, in the past that led to increase of NPL. We reached two digits delinquency. This provision anticipation was precisely to help us be more robust so that, in fact, we will be able to face that situation. There is the new Desenrola program, Desenrola 2, which brings a bonus of expected, you know, payment.
It allows families to extend their debt, and we are taking advantage of this opportunity. Private loan or private payroll loan, we showed that we are capable of accelerating. There are some one-off issues related to the system. I mean, Dataprev is solving this issue, especially in the case of, you know, private employees that change jobs. That has to be transferred to the new employer. Sometimes this is done manually. At times, we push on the brakes to reduce the risk of that portfolio. We also believe that our focus being in public payroll loans that we are leaders and also private payroll loans will help us to adjust risk and return. In the case of credit cards, our focus is in the high end. I mean, we just launched an Estilo and another one.
We reduced the appetite for lower income individuals where risk is more aggravated. Now, with secured loans, for us, it's a good opportunity. Certainly, when it comes to our retentable book, we have to reduce the bank's profitability. It's almost like, you know, juggling with lots of plates or a dog chasing its own tail. I need very strong capital to support this growth so that I can in turn have a more robust net income and reduce the DTAs.
Therefore, I will say that this is a very challenging moment, but we are also very excited with the challenge we have at hand. The best way to deal with that is by being transparent with you. You know where the pain is, and you know what we are doing.
If we are not successful in one or another line, we will say, "Well, unfortunately, we didn't succeed." We wouldn't like to review the guidance now. Given that we approved the guidance and we have the budget estimate, it's totally different than the world we are living today. If there is more to come, we don't know. We don't know, you know, if the war will stop now. We don't know what will happen between Trump and China. At the moment, we've heard cases of farmers that want to go to court because they're alleging that they will be impacted by the war with Iran. Well, we will have, you know, things popping up all the time. We have to learn how to deal with it.
I mean, taking this opportunity that you're all here, and I know that you have your own, you know, private financial investments, but I would like to invite you to try out our Estilo segment. We have beautiful service offices to provide excellent service to our high income clients. We have our VIP room in Guarulhos recently inaugurated. You are all invited to pay it a visit. This strategy also reflects what we are aiming for. Less secured lines, and so we will also operate in the high income segment. Our payroll lines, I think that the engine of this risk-adjusted return is well adjusted any place. With everything else that Geovanne just said, we believe that we'll be able to deliver better numbers for you from now on. If you have a chance, so you're invited to visit our Estilo facility.
Well, that was our last question. Thank you so much for joining us today. We are certainly here, always available to answer any further questions that you may have. I hope to see you-