Ladies and gentlemen, and thank you for waiting. We would like to welcome everyone to Bradesco's 4th Quarter 2020 Earnings Conference Call. This call is being broadcasted simultaneously through the Internet and Investor Relations website bradescori.com.br EN. In the address, you can also find the presentation available for download. We inform that all participants will only be able to listen to the conference call during the company's presentation.
After the presentation, there will be a question and answer session and further instructions will be given. Should any participants need assistance during this call, please press star 0 to reach the operator. Before proceeding, let me mention that forward looking statements are based on the beliefs and assumptions of Franco Bradesco's management and on information currently available to the company. They involve risks, uncertainties and assumptions because they relate to future events and therefore depend on circumstances expenses that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of Banco Bradesco and could cause results to differ materially from those expressed in such forward looking statements.
Now, I'll turn the conference over to Mr. Carlos Firetti, Market Relations Director and Head of IR.
Hi, everyone. Welcome to our conference call for the discussion of the 4th quarter Results, we have today with us our CEO, Otavio Delazzari Our Executive Vice President and CFO, Andrea Rodriguez Cano Bradesco Seguro's Chief Executive Officer, Ivan Bonterio and our Executive Director, Investor Relations Officer, Leandro Miranda. For starting the call, I turn the floor to Leandro.
Thank you, Fidesz. Greetings, everyone. Welcome to our conference call. Needless to describe 2020, it's widely known how challenging that year was and the impact the pandemic had on our lives, Families, communities and the global economy as a whole, Bradesco's performance was naturally below what we expected a year ago by the time that we present our guidance during the Q4 2019 earnings conference. But it certainly was by far much, much better than we imagined that it would be soon after the beginning of the pandemic.
We are proud to deliver our best results ever. We'd like to thank all of Bradesco's team for its commitment, resilience and creativity, our Board and especially Mr. Trabuco for his wisdom, guidance and trust. 2020 was a year of much learning, of breaking paradigms and of lessons that have changed the way in which we do business. Home office has come to stay.
The digitization of our operations has deepened. The habits of clients have changed, and once again, we were able to adapt to the new scenario and thrive as we have always done. Unfortunately, the pandemic is not over. It still has a terrible cost in terms of lives and suffering. But we believe That over the coming months, with the development of vaccination and logistics, we will see a significant reduction in the number of Ks and Vixens.
In relation to the economy, we can see during 2021 a consolidation of the economic conditions. The increase in the number of the COVID case has brought greater restrictions to the economic activity, but we expect minor impacts on the economy than we had at the beginning of the pandemic due to the learning curve experienced in the 1st wave. We believe that the next tax incentives will be smaller for advancing further deterioration of public expenditures and asset prices. With the acceleration of inflation, the Central Bank of Brazil should start raising interest rates in the coming months. Considering these factors, the strong upturn in the employment, income, trade and industry has lost traction at the moment, but with clear impact on our expectation for GDP growth in 2021, an even better performance for Bradesco.
We now turn to Slide 3. We presented a rather strong results in the 4th quarter with a net income of BRL6.8 billion and an ROE of 20% for the quarter. The expanded loan portfolio grew by 3 point 4% in the quarter and 10.3% when compared to the last 12 months. We closed 2020 with the Basel 1 ratio at a very comfortable 13.8 percent level, representing a 9 bps hike in the quarter and 50 bps compared to December 2019. We continue to have a very good cost control with the total cost reduction in the 4th quarter, with a reduction of 9.3% in this quarter in comparison to the previous year, leading the ER to close to 44.6% in the quarter and An accumulating drop of 7 percentage points, 3.7 percentage points.
On Page 4, We present our income statement. We had a well balanced income in the quarter with a number of lines showing solid performances. The net interest income grew by 9% in the quarter and 8% in the annual comparison, supported by a strong performance of the market portion, including a quarterly growth of the client portion. Our ALL expenses dropped once again in the quarter and headed towards Normal levels. Fee and commission income grew by 7.3% in the quarter with the annual decline slowing to 1.3%.
As mentioned, we saw an excellent performance in terms of costs resulting from the adjustments we made throughout 20 The next slide will explore the lines into more detail. Turning now to Slide 5. The funding continued on an upward trend. The deposits from clients net of compulsory deposits Grew 3.3% in the 4th quarter and 38% in the annual comparison. We had net funding of BRL 158,000,000,000 in 2020.
With this evolution, our loan to deposit ratio closed the year at 82%, which indicates our high liquidity. In Slide 6, we present our expanded credit portfolio, which grew by 10.3% over 12 months. Annual growth was 5.6% in large companies and 18.7% in SMEs. Individuals grew 11.7%. One of the growth highlights in 2020 was the real estate financing line with an increase of 33.6 percent.
The SME line grew by 18.7% and the payroll deductible loans Line grew by 10.6%. Credit origination continued to grow in the quarter. In an annual comparison, the individual Segment presented growth. We entered 2021 with an increased appetite for credit with adjustments in our models that should allow for a greater origination without significant increase in risk. So we expect a good growth of the portfolio in 2021.
We'll be talking more about this into the discussion about the guidance that you shall have by the end of the presentation. Turning now to Slide 7. Our expenses with expanded ALL came down to BRL25.8 billion in 2020, which is BRL11.4 billion higher than 2019. In the quarter, we saw a further reduction, reaching BRL4.6 billion or 2.7 percent of our loan portfolio compared to BRL 5.6 billion or 3.4 percent of the portfolio in the 3rd quarter. This reduction took place Despite an increase in impairments to BRL1.44 billion, BRL87.1 million more then in the Q3 due to the specific case of a large company that you shall well know.
We consider our provisions to be very comfortable Considering the expected losses. Moving now to Slide 8. The delinquency ratio Over 90 days, we remained well controlled, showing a reduction of 10 bps in the quarter due to the drop in individuals, While SMEs and large companies remain pretty much stable, this positive performance is a result of the high quality of pre pandemic vintages, The solid trend of our customer financial health with credit extensions and renegotiations during 2020. The 15 to 90 ratio already shows signs of rising defaults. As we expected, The total ratio rose 50 bps.
We believe that the increase in the 15 90 day ratio We'll begin to have an impact on the over 90 days ratio in the upcoming quarters. However, we are optimistic about the scale of this increase, And we think that our provisions are more than sufficient for expected losses. We understand that it will probably peak between the 2nd Q3 of the year, but in levels that are not much higher than the pre Pandemic was, and we are prepared for that. Turning now to Slide 9. We saw an increase in the level of NPL creation over the quarter, settling at BRL3.7 billion.
Our gross ALL for the quarter represented 111% of the NPL creation, which shows that we are not consuming provisions. On Slide 10, we can see the 90 day NPL coverage ratio, which further increased to a very comfortable 403%. With respect to the segments, we have coverage 4 of 268 percent for individuals, 1167 percent for large companies and 566 percent for SMEs. The coverage ratio, which includes the renegotiated portfolio, This leads slightly to 118%. We'd like to remind you that loan provisions in the renegotiated portfolio represents 62% of its total, which is higher than the historical losses that we verified in this portfolio.
Now we turn to Slide 11. As of this quarter, we've begun to publish We began to publish the extended portfolio with a new concept, showing the accounting balance is already met of amortizations. We believe that this methodology allows a better visualization of the evolution of the extensions. The extended portfolio Totaled a book balance of BRL48 1,000,000,000 at the end of the 4th quarter, a reduction of 13% compared to the Q3 of 2020. This value was pretty much composed of BRL41.4 billion on time, which means that they are no longer in the grace period with the payment of At least one instrument, BRL3.8 billion still in the grace period at the end of December, And we must highlight that of this amount, BRL1.9 billion are no longer in the grace period in January.
And finally, BRL2.9 billion of transactions that were extended at any time. This extension ended And these transactions are in arrears for more than 30 days. This represents only 0.6% of the total of the bank's Loan portfolio. We believe that the behavior of the extended portfolio was very good, exceeding our initial expectations. This is fruit of our good credit policy, which led to a high quality vintages in the periods prior to the crisis.
Moving now to Slide 12. Our renegotiated portfolio in the 4th quarter grew BRL1.9 billion, BRL1.7 billion when accounting for active credits. This is a significant deceleration in comparison to previous quarter. The renegotiation growth in the quarter is primarily made up of loans that are less than 90 days in our years, meaning that they have a better quality and a greater chance of collection success. Loan provisions in the Renegotiated portfolio represents 61.5 percent of the total portfolio.
The delinquency ratio for the renegotiated portfolio was 7.4% in December. In Slide 13, we see that the net interest Income grew 9% in the quarterly variation and 8% in the annual comparison. The client portion grew 3.3% in the quarter, mainly due to the increase in volume with a stable NIM. The market portion showed a very strong performance in this quarter. The total NIM grew to 6.4% in the 4th quarter compared to 5.9% in the previous quarter.
NIM with clients remained stable at 9.2% after 3 quarters of drop. We do expect a recovery of the NIM with clients in the quarterly comparison throughout 2021. Now turning to Slide 14. We can see that fee and commission income presented a 7.3% quarterly growth and a 1.3% drop in annual comparison, reducing the fall in relation to the previous quarters. For the quarter, some highlights included the solid performance of credit cards, checking accounts, loan operations and consortia.
Looking at the asset management line, we are still being negatively affected by the migration of funds from fixed income funds to deposits as well as reduction in the management fees for these funds. We have seen an improvement in our product mix, part of an adjustment process that should lead to an improvement performance, particularly in the second half of twenty twenty one. There was also a positive trend in the number of account holders in 2020. We now turn to Slide 15. Our performance in terms of costs and expenses was one of the highlights of 2020 and the Q4 of 2020.
Our personnel and administrative expenses dipped by 6.9% in the 4th quarter, A manual comparison and 5.9 percent for 2020 as a whole. The growth compared to The previous quarter is due to the resumption of activity and the seasonality of the 4th quarter itself. Given the total cost, Including other expenses, a decrease of 9.3% was seen in the quarterly variation with 5.3% in 2020. This performance is due to the solid cost management measures that we adopted throughout the year By adjusting our structure, our cost to serve and especially our branch network, taking advantage of the opportunity to floor cost management opportunity in 2021 and beyond. Into Slide 16.
2020 witnessed an acceleration of digital trends. There was a dramatic increase in the number of users and transactions on the mobile channel. This dynamic comprises new clients in an interesting movement of traditional clients Who had once resisted mobile and now have become users, some of them even heavy users. We saw a 23% growth In our mobile clients in 2020, which also includes Internet banking. Coupled with the boost in users, There was also a marked increase in the volume of transactions.
Same time, we have seen a significant reduction in the number of teletransactions, which dropped almost 62% in 2020, a trend that shall remain. This recent movement, in particular, allowed us to intensify streamline efforts for our network, consolidating branches and using more intensively Alternative formats such as business units. On Slide 17, we present our performance insurance, which show the recovery in the financial income in the 4th quarter related to the increase in the IPCA in the period and the result obtained in the variable income In the accumulated view, the 31% reduction in profits is related to the fall in the financial results that reflects the economic indexes, especially the IGPM and by the prudential provisions for an adverse scenario. Insurance Group's revenue fell only 5.1% in 2020 despite the pandemic and partial functioning of some distribution channels. The operational results decreased in the quarter due to the higher loss ratio.
This effect, as we expected, is related to the increase in the frequency of claims caused by the resumption of elective events in health and occurrences due to the relaxation of social isolation measures. Also in Health, in the 4th quarter, BRL632 million from the non technical provision for adverse economic scenario to the technical long term provision, which positively affects the other expense line in the bank and negatively affects the operational result in the insurance company. We present these adjustments in the chart as you can see here above. Our combined index in the annual view, despite the effects of the pandemic, Achieved a very consistent performance in the period, reaching 85%. We now change to Slide 18.
Our capital did very well in the 4th quarter with the common equity ratio and Tier 1 increasing by 90 bps. Our capital position has settled to rather comfortable levels with the common equities at 12.7% and Tier 1 at 13.8%. Our capital will continue to grow in 2021 based on the recovery for ROE and our expectations for credit growth. This provides us with flexibility in our Capital management policy. Turning to Slide 19.
We bring on This and on the next slide, one of the main strategic movements we have in the bank at the moment. Our strategic focus is centered on the pursuit to dazzle clients with proposals for customer service aligned to their needs and expectations in order to consequently obtain their loyalty in a confident and sustainable manner. Thus, in 2020, We have reviewed the corporate strategies of customer relationships, creating initiatives aimed at meeting their expectations, in line with their life cycle and providing an increase in their level of satisfaction for the excellence achieved during their entire relationship with our organization as a whole. In this sense, we highlight 2 important initiatives. The first one is the structuring of the corporate program called 100 Percent Client or which aims to organize our business model to ensure that the client is always at the Center of our attention and is monitored through NPS.
2nd, the creation of the position of a Chief Customer Officer, in order to ensure that the policy of customer satisfaction is effective inside the whole, we switch to Page 20. A fundamental part of the customer strategy at the center is our digital transformation. We created the various areas of the bank Culture of intensive data use, which support us in the various business decisions and process. The better understanding of customers by the use of data allowed us to create contextualized offers based on personalized customer journeys. An example of this It's the case of the credit offered through PIX, which we have been offering since the launch.
We also continue to evolve in Structural digital journeys with an omnichannel vision supported by modern real time decision and communication platforms with our BRAIN and CRM 2.0 projects. BIA continues to evolve, Play an important role in clients' transition to the digital world and in serving our branch network with agility and efficiency. Most of our team is already working in an HR model, in multidisciplinary teams oriented to clients' journey. We have evolved rapidly in partnerships, adding services and products from 3rd parties in our value proposition. This is the case of partnerships such as Disney and OLX for the sale of real estate loans, which will be accelerated this year with Open Banking.
Now we change to Slide 21. We continue to show progress in our 3 digital initiatives: Agora, Next and Bits. At Agora, we closed the year with 547,000 customers, an increase of 49% in 2020, while the AUC of customers grew 33% in the year. We evolved in the offer of products throughout 2020, placing Agora as one of the most complete offers in the market. Next, Evolvage and its project to be segregated from Bradesco, Gaining operational independence has moved on.
We closed the year with 3,700,000 customers, an addition of BRL 1,900,000 in 2020, next to connecting as a marketplace. Finally, BIDS, our digital wallet, was launched in September 2020 and already has 218,000 customers. We expect to grow quickly in 2021. We have ambitious plan for bids, which offers customer a product complementary to that of MAXX and Bradesco. Moving to Slide 22.
ESG is something we take very seriously in Bradesco, placing initiatives as a priority. And this has positively reflected in our performance in the various ESG indexes, as you may see. Bradesco performed above average The main national international ESG indexes and ratings. We have the best performance among Brazilian banks and the 5th best position among more than 250 banks worldwide in the Dow Jones Sustainability Index. We have also made progress at MSCI and CDP being among the leaders in these assessments.
We are aligning reporting practice and results following international frameworks. Going on, on Slide 23, You can see that in 2020, we had several important initiatives in the field of ESG. We made the largest Issued on an ESG bond by a Brazilian Private Bank in 2020. 100% of our operations are already supplied with renewable energy, making us one of the first major financial institutions in the whole world to complete their energy transition. We are the 1st major Brazilian bank to announce the neutralization of carbon emission scopes 1, 23, which includes indirect emissions.
We participate in PCAF, a global collaboration program of financial institutions to develop methodologies for measuring and reporting greenhouse emissions in loans and investments. In addition, we participate with other large private banks in the Amazon plan, a very important program that we have talked previously. Moving now to Slide 24, final one. We are returning with the formal guidance for 2021. Despite the worsening of the pandemic at the moment and increase of restrictions, our scenario envisaged a more moderate impact on the economy, which even so is growing 3.6%.
So we feel comfortable in providing the guidance. In general, the guidance maintains consistent with the guidelines for 2021 that we present in the disclosure of the Q3. We expect the growth of the loan portfolio between 9% 13%. Declined portion Shall grow between 2% 6%. The fee income shall grow between 1% 5%.
Our costs shall be between minus 5% and minus 1%. The insurance line, which includes the operating and financial income, shall have a growth between 2% 6%. We expect expenses with expanded ALL to be between BRL14 1,000,000,000 and BRL17 1,000,000,000. As a complement, we can say that we expect a slightly lower market portion for the NII in 2021 than in 2020. For the income tax rate, we suggest something in the range between 32% 34%.
And that's it. Thank you very much for your attention. And we move now to the Q and A session.
Our first question is coming from Mario Pierry of Bank of America. Mario Suarez, your line is open. You can proceed.
Okay. Thank you very much. Good afternoon, everybody, and congratulations on the excellent results. I guess, one on your fee 1% to 5%. It just seems too conservative to us.
Considering that we have easy comps, right, in 2020, your fees were down like 3%. You're forecasting Showing volume growth of more than 10% on average. You're introducing a bunch of new products, as you highlighted. So I wanted to get then a little bit more a better understanding why is the growth so unique. I mean, if you can break down between the major If you talk about cards, checking accounts, asset management and loans, that will be helpful.
And then my second question is related to your branches. As you showed on Slide 15, you've reduced almost 1100 branches in the last 1 year. That's 25% of your branch network. So I wanted to understand what happened to your NPS score during this period? What do you think is the right signs of your branch network?
So how much more do you think you can reduce? And also related to the branches, right, if we do a simple math here, 1 year ago, about 50% of your distribution at work was Through branches, today it's about 40%. So I was trying to understand also, does this have an impact on your revenue generation? Does it impact your especially your insurance operations? Thank you.
Mario, Leandro speaking. Well, basically, regarding to the guidance of fees from 1% to 5%, you are right. It's pretty much conservative. But We are living in a world with the 2nd wave of COVID. We do not know How much the economy will suffer from that?
We do expect to have a GDP growth of 3.5% and an increase in competition. So we believe that if you take a look at the mid of the guidance, 3% shall be something that is very doable. Regarding to branches, at least 300 branches, we shall Close or transformed this year, but we are still in advanced studies to see how much we can go beyond that. Our clients have been using more and more digital channels, and we can see that The transformation, at least, of branches can be a very good way to reduce costs Due to security reasons, we do not need 3 secured cards there, and we do not need to Transport money from one side to the other. And those branches shall become more and more Business offices than anything else.
The digital channel, therefore, have been a very good replacement of the branches as a way to make business. The NPS continue to be growing, And we believe that our new initiative to have the customer in the center Of our attention, shall make this NPS to continue grow more and more.
Let me just complement some points. You asked about the growth in volumes. This is something that not necessarily has in loan volumes, not necessarily has a direct strong correlation with this. I remind you that the fees for credit operations is part of the credit operation line That is one of the one of our fees, certainly doesn't represent the bulk of the fees. We think credit cards will do very well.
We should have a positive performance in checking account fees, but certainly it's not A very strong growth in this line, mostly driven by the increasing number of accounts we had Over the last few years on the fixed income funds that actually had a reduction in management fees and 21. In terms of branches, basically we can say that most of what is going to happen In 2021, there are going to be transformation of branches and business units. We can say Some 300 branches in 2021. We don't know the timing for that, but up to 100 branches could be
Okay. Thank you. Just then to expand a little bit on the fees. Like when I mentioned you're talking about Loan growth of 10%, it means that you expect activity to go back up in Brazil. When we look at Your GDP forecast about 1.5%, and then we're talking about inflation, maybe another 3.5%, 4%.
We're talking about nominal growth About 7.9. And then when we look at your fees, it's growing half of nominal. It's surprising To me, it just seems too conservative. I think what you mentioned here, credit cards should do well, checking accounts okay, But maybe the pressure is more on the asset management line. Is that right?
Mario, we hope you are right. We hope you are right that it's too conservative. We never know. We shall expect competition. And that's the number that we feel Comfortable to indicate to the rest of the industry with a lot of responsibility.
Yes. And if you remind, It's
pretty much in line with our speech since the Q3 when we gave that of the guidance.
And my final follow-up question is on the Importance of your branch network for the sale of insurance. Is that Is there should there be a big correlation between the number of branches and insurance revenues? Thank you.
Well, as you may be aware, we have been expanding our channels In order to distribute insurance, NEXX, for instance, is a very good example. NEXX has no branch and is more and more distributing Insurance plans. So as we transform those branches into rep offices, Such as Otavio has mentioned previously, we shall expect the number of insurance policies to grow. So we are centering our efforts on the clients, and we wanted our managers, regardless of where they are, To be focused more and more on clients' needs, and we do believe that insurance is something extremely important to our client base as a whole and shall be Back even stronger in 2021. So we do not see the situation being jeopardized by The closure of branches.
But on the other hand, we see it increasing as we transform it into reposses. There will be more focus.
Okay. Thank you very much and congratulations again.
Thank you, Mario. Take care.
Our next question is coming from George Curry from Morgan Stanley. George, your line is open. You can proceed.
Thank you. Good afternoon, everyone. Hope everyone is doing well. Congrats on the numbers. Two questions, if I may.
The first one on your operating expense guidance, minus 5 to minus 1. Evidently, Of all of the guidance items, that's where you have most control of. And the range seems quite high, minus 1 to minus 5. What are the assumptions for you on both sides of that guidance? So how do you get to minus 5?
Well, I think that you don't know for sure today that could potentially happen to get to the minus 5 and the other way around with a minus 1. So as the year goes by, we're able to understand whether you're getting closer to 1 or the other end of the guidance. The second question is on loan book. In 2020, you grew 10%. And I guess this is similar to the previous question.
In loan book, you grew 10% in 2020. And your guidance for this year is not that different, 9% to 13%, so the midpoint is around that. Considering that the economy, hopefully, will be in a completely different dynamic this year, growing 4%, 5% maybe versus shrinking 4%, 5% last year. What's holding that Expansion of credit this year, why would it be the same as last year? Why wouldn't you have this like significant easier comps to grow the credit book this year more?
Thank you.
Hi, Jorge. Leandro speaking. Well, basically, regarding to Our expenses as a whole, we continue to reduce them. We are confident that this is not something that you make on a one shot. It's a process.
It's a cultural matter. This is our first priority. So we're going to keep on reducing them as much as we can, as much Technology allow us to do so. The transformation of the habits of our clients into getting more and more digital has helped us to close and as well as transform the physical branches into repopses or to business units. And therefore, it allow us to reduce costs.
Otavio was previously mentioning that onethree Of our fiscal branch costs is regarding is related to security. So by the time that you transform them into units, You do not need this extra cost anymore, and we are going to keep on doing that even further. We are still getting into more detail on a new plan to transform more branches. We also shall benefit from the reduction of branches and personnel that we have done last year. So basically, as we have provisions for that, they shall be reflected On our monthly expenses.
So we believe that we have room to do that. We do not believe that minus 1% to minus 5% Our 1% to 5% reduction is challenging. It's according to our pace when we look at our current figures. And the loan book going from 9% to 13%, that is Pretty much 11% in the middle of the guidance, although it is slightly above the expanded loan portfolio that we have 2020, and although we have an economy that shall grow by 3.5%, Well, basically, it's still an economy recovery. It's still a second wave there.
There is still a lot of tail coming from the portfolio for next year. So we believe it's a decent guidance. And again, we hope you are right And the portfolio shall grow even more. The point here is that we should be able to grow the portfolio even bigger If we were taking additional risk, but we want to be keep we want to keep the conservativeness That we have so far. So we want to reduce costs, have a very healthy portfolio.
So we shall have less costs And last provision, that's our focus by now. So we do not want to accelerate the growth that much, And we prefer to have an excellent mix in terms of NIM.
All right. Thank you. So just to make sure I understood the question about expenses. So ultimately, it's really about the velocity at which you closed last transformed branches. If we see That in
the first half
of the year, you've already gone to those 300 branches, then the likelihood that you'll get to the minus 5% increases. Is that right? Is that really the variable?
That's correct. A significant part of this come from the Brains transformation, but not only this. We are always renegotiating the contracts with our suppliers. We are reducing travels. It's a cultural matter.
We are reducing rentals because of the IGM that came very high last year and still Not in a very good level for us. So we are always revisiting this matter, and we see that there is plenty of Room to do it. But it takes time. You cannot you are not able to renegotiate and to make all the transformations, all the closures that you wish at once. So it takes
time. Jorge, only a compliment on this OpEx question. Remind you something that Leandro said, we reduced 7% of the staff in the 4th quarter. So basically, this 7% reduction on something that is roughly half of the costs We already lead us to a very good reduction in expenses in 2021. We also closed, it's less transformed something like 900 branches In the
second half
twenty twenty, with some concentration in the 4th quarter. This also Adds a few percentage points in this reduction Expenses, as we mentioned, we expect to transform 300 branches. We have a benefit of roughly 1 third Of the cost of our regional branch when we downsize it to a point of service or a business unit, we should close 100. So this is something that will happen. The transformation probably in the first half, the closures more throughout the year.
On the negative side, there is the salary adjustment for the staff that should happen only September, where inflation probably will be a little bit will be higher than the one we had last year, maybe Around 3.5% or so. I think that these are the drivers. I think that's how we get this minus 1% to minus 5%. And we I think the middle of this range that is our budget is pretty much achievable.
Great. Thanks, Gendro. Thanks, Carlos. Be well. Thank you.
Take care, Jorge.
Our next question is coming from Geoffrey Elliott, Autonomous. Geoffrey, your line is open. You may proceed.
Okay. Well, thank you for taking the question. There's been a lot of capital
coming into the digital banks over the last few months. Newbank obviously completed the Series G pretty recently, but also Banco Inter C6, the number of others are raising
equity. What do you think that does for the
competitive environment? How is the behavior with the digital bank shifting and how you're going to respond to that?
Well, basically, well, first of all, thank you very much for your question, Jeffrey, Leandro speaking. I mean, we have been transforming ourselves deeply into a digital bank. We have 3 pillars to transform the incumbent bank to have to For more and more our native digital bank and the open banking itself. So we do not see fintechs as major competitors. We see them as someone that is accelerating the environment in which we are.
It's just accelerating a trend of investment in digitalization. And We see them as very often as partners. We have seen that we have been able to grow our Base of clients in MAX and especially in Bradesco. And we do not expect To see new bank, as you have pointed out, as someone that is going to be just driving out of here. You have to consider that most of those clients, they have accounts in multiple banks.
And what is important to us is to be their principal, Their main bank, so Principality is something extremely important in this business. And being a full bank with all the Knowing our clients very well, using AI, using all the information we have to provide them With the best products that they have, especially fulfilling their financing needs is a unique Competitive advantage that we have and that has been reflected in our financial statements and our results. They have been there for Couple of years, and therefore, we have been able to thrive throughout this process.
Great. Thank you very much.
Thank you. Have a nice day. Good day. Well, gentlemen, I would like to thank you all for your time, and wish you a healthy and great week. Take care.
That does conclude Bradesco's conference call for today. Thank you very much for your participation. Have a good day.