Good morning, ladies and gentlemen. Thank you for waiting. We would like to welcome everyone to Bradesco first quarter of 2020 earnings conference call. This call is being broadcast simultaneously on the internet at investor relations website of Bradesco at banco.bradesco/ri, where you can find the presentation for download as well. We would like to inform you that the system will be in listen-only mode during the company presentation. After the presentation, there will be a question-and-answer session. Further instructions will be given. If you need assistance during the call, please press star zero to reach the operator. Before proceeding, we would like to mention that all the statements that might be made during the call in relation to the company's business prospects, operating and financial projections and targets are based on assumptions of the business management, as well as information currently available to the company.
Forward-looking statements are not guarantees of performance. They involve risks, uncertainties, and assumptions as they relate to future events, therefore they depend on circumstances that may or may not occur. Investors should understand that general economic conditions, industry conditions, and other operating factors may also affect the future results of Bradesco, these results could differ materially from those expressed in such forward-looking statements. I'd like to turn the conference over to Leandro, the investor relations officer.
Good morning, everybody. Welcome to our call about the first quarter 2020 results. Today, the presentation will be made by the CEO of Bradesco, Octávio de Lazari Júnior . Our Executive Vice President here for the business management, André Rodrigues Cano , will be participating as well. He's Bradesco's CFO. Our participation has our Investor Relations Officer , Carlos Firetti.
After Octávio's presentation, we will have a Q&A session. We will be available to answer your questions.
Thank you very much, Leandro. My friends, good morning. I hope you and your families are well. Welcome to our call about the results of the first quarter of 2020. Once again, we will be talking about our position in this very special moment, a very sensitive moment. This quarter has wound up quite differently from what was taking place in mid-March, when the group was performing very strongly in a number of lines, especially even above guidance. This scenario was radically altered by the worsening of the COVID crisis in the second half of March. Nonetheless, we highlight that our balance sheet remains very robust. From the moment the crisis rose to the state that it is today, our priorities have totally changed.
It focused on maintaining services to our customers and keeping the bank fully operational, along with the well-being of our employees. We are committed to supporting society in overcoming this crisis. I am proud to state that through the efforts of our entire team, the bank adapted quickly, above expectations, in fact, and continues to operate in such extreme conditions while always accounting for the safety of our people and our clients as the primary parameters. Just as a reference today, over 90% of our staff that normally work in offices are now working from home, and 50% of the teams from our branch network, which were considered an essential service. We are also striving to resolve any liquidity issues of our clients and clients may be experiencing by initiating the process for rolling over the debt and opening a red line with large companies.
Together with other banks and the Central Bank, we are structuring lending to finance small businesses of favors, and we have already discussed other measures with the Central Bank as well. As I mentioned before, Bradesco has all the interest and duty to help customers emerge from this very difficult predicament with the capacity to fulfill their commitments and continue their lives without facing financial chaos. Also, as we mentioned in our previous call, differently from previous crises in which the financial sector was the main responsible for the crisis, this time in particular, we are an important part of the solution. In view of the uncertainty inherent in any projection at this time, especially considering that we still don't know for sure when the shutdown will end and how the pace of resumption will be, we have decided to suspend our guidance for 2020.
We will outline a new guidance when we have sufficient visibility. Meanwhile, we should stress that we do not see our ability to generate sustainable returns fundamentally altered, and in addition to the return of revenue and resulting loan issuance, which will take place with the recovery of the economy and the return to normality. One of the ways we recoup our return is through an essential adjustment, for we have already performed quite well before this, thanks to the initiatives we took at the beginning of this year with simple costs in 2020, as well as a marginal contributor effect of the wages and some rents. This should allow us to accelerate our cost adjustments. We see an even greater opportunity for adjustments in the branch network through the use of smaller formats and lower costs.
We will take advantage of this moment to train our talent in new services. Another key focus is risk management in order to provide support to the country at this time in maintaining the bank liquid and capitalized. We headed into the crisis with a strong capital position and high liquidity levels. We ended 1Q 2020, which already reflects the period of market stress with a comfortable 11.4 common Tier 1 ratio. Furthermore, we saw an increase of 6% in deposits and credits to BRL 20. Which show already our extended loan portfolio had a strong growth, an increase of 5.1% over the end 17% of 12 months. Part of the expansion can be explained by the effect of mixing rates, in part to the strong increase in demand, mainly from large companies at the beginning of the crisis that are linked to the very strong B2B.
We believe that we are preparing ourselves quite well in terms of credit provisions to face the impacts of the default that will be triggered by the crisis. We have increased our excess provision with more specific provision of BRL 5.1 billion of allowances to face the consequence of the pandemic. Our objective is to preserve our balance sheet. By basis, with a drop of 40% compared to the previous, BRL 3.8 billion from 44% in the quarter, and our RE in the quarter, 11.7% income and returns for the quarter were adversely impacted by the excess loan provisions and along with other effects related to market conditions. That will return as the situation improves. Let's go to slide number four. Although it's not usual, in order to be more transparent, we have included in the table a column about performance in the months of January and February.
If we go back, you may see those numbers are divided by two, minded by January and February. We don't have our full capacity. At 60% of our general managers and account managers and investment consultants and bankers are on vacation. You can see that we have been delivering robust numbers this quarter. The guidance is kept for the ensuing company releases and financial results as February credit portfolio was growing 14.4%. NII, which was quite late, it was 11.7%. Fee income rate was 27.3%. Costs were dropping, 0.1%. The result of the insurance operation is 15% and expanded. You can see they're on decline, the expanded ALL, more or less in the middle of the guidance. We decided to sustain the guidance. The scenario is still rather uncertain.
About the resumption of the economy as soon as we have a better visibility, we will give you a guidance. Now going to slide number five. Here we explain why we decided to have this additional provision. When the scenario became more stressed, maybe in the second half of March, we went in-depth into a study of the possible and certain scenarios for the future. This was when we decided to set up two expert teams in order to evaluate the scenarios because it was clear that the pace of growth in credit. Except the need of the large companies, it was very clear for us that it would be dropping and delinquency would be going up. A higher denominator effect and a lower denominator effect.
One on by credit and credit recovery and the other one rate and economic, studying the cases in the past and the crisis that we had already lived and probable impacts on delinquency and revenues, be it in the mass, it was on the corpus of large companies or mass. In spite of using different methodologies, those areas reached very similar results. Going to slide number six. We can see the effect of delinquency in mass credit in the 2008 global crisis and the Brazilian 2016 crisis. We made a projection. We're totally uncertain scenario in this post-COVID crisis that impacts not specific sectors such as one that we had in the previous crisis, but all sectors to higher or lower extent. Affecting every sector.
Our perception of making additional provisions for losses was certainly necessary and materialized in a more important fashion, and they were endorsed and corroborated by the balance sheet of American banks that we published recently, not we. The drop in profitability of over 20%, or even from 16% to 4%. All this showed us very clearly that we needed to make supplementary provisions already in the first quarter of 2020. Let's go to slide number seven and talk about the forecast for adverse economic scenarios. Continuing the study in order to cope with the effects of the pandemic on our credit portfolio, we have already made a supplementary provision of BRL 4.9 billion and total charge of BRL 5.1 billion that we will be using during the crisis.
This figure, that is provision, is comfortable for the current moment, and it reflects the information that we have at this moment in time. We will be continually assessing the need for new provision for this crisis, for the second quarter, third, or the fourth quarter. This provision is made up of BRL 2.4 billion, referring to what we internally call a provision for adverse economic scenario, which is part of our supplementary provision, and we will be using this during the crisis. A new supplementary provision for adverse scenario of BRL 2.5 billion carried out this quarter, and BRL 200 million of provision that is required and that was carried out this quarter already due to the effect of the crisis.
The clients that have extended their installments at the Central Bank, where we have the date of February 29th, and we decided to keep February 29th and kept the hedge that already existed. BRL 200 million in this provision. Let's go to slide number eight and talk about the credit operations. We very quickly made available to our clients and users an easy extension of payment of the installments, and we have already extended over BRL 1 billion in operations with installments of BRL 1.2 billion. We are consistently evaluating the financial situation of our clients and trying to offer them the best solutions for each one of them, not only the extension of the installments. I would like to mention that in the scope of measures announced by the Central Bank, we had, in the last column.
Just to give you an idea, the amount coming from the reduction of reserve requirements to Bradesco was over BRL 24 .1 billion that were released in between March 16 and April 30. We were releasing BRL 57 billion in new operations, more than twice the reserve requirement. We had many resources that have been holding on to liquidity. Going to slide number nine. We have already talked about the measures to overcome the crisis, to tackle the crisis. We haven't really talked about our priorities at the beginning of the crisis. We kept our people, keeping our services, our free services, achieving liquidity, overcoming the crisis, and managing the new risk that the new scenario has brought us, keeping the bank capitalized and liquid.
I can say that we were successful in all these items in this initial phase, mainly, and we continue to work hands-on in order to maintain this condition. We set up a true war operation to turn the key to a fundamentally based on home office operation. We had a small structure already set up. Overnight, we had to increase it very quickly. As we said, over 90% of our teams that do not work in the branches are already working from their homes, and 50% of our teams that work in branches as this is an essential service. All our branches are open. We are working with reduced working hours, and 50% work during one week, and then they go home, and then the other team comes and replaces them.
On Monday, we have a new team that takes over and comes to work in the branches and so on and so forth. I would like to express our deepest thanks to all the teams involved for the excellent work that they have been doing, especially our IT and systems teams and all the teams that work in our network in order to continue to serve our clients with this essential service.
Where we had the impact of the adverse scenario already. Our net income of BRL 3.8 billion, a drop of 19.8% in 12 months. Among the effects were the ALL provision, the supplementary one of BRL 2.5 billion for the COVID effect. BRL 200 million in provision required due to the price reduction of our margin. This market due to the effect of retail, mark-to-market reduction as a result of our insurance company, mainly due to the lower financial results, provisions in shares and ICA, lower PBI-GPM, a lower tax benefit because of this provision and our interest on equity. Now let's go to slide number 12. Now turning to slide 12, our ROE in the quarter goes to the significant reduction, settling at 11.7% and has the same graph in history in our ROE. 3.1% in the quarter due to the negative impact of mark-to-market of assets.
It is mark-to-market. Now we have volatility that becomes more stable. Total assets increased by 5.5%. Now we turn to slide 13, talking about loan portfolio that showed an expected growth of 17% year-over-year and 5.1% in the quarter, 2.6% in individual, 7.6% in large companies and 4.4% in SMEs. That's an impact of the liquidity fear that I mentioned to you, ladies and gentlemen, about two weeks ago, since March 15 to 19. Part of this growth can be explained by the impact of exchange rate fluctuations on the loan portfolio in U.S. dollars, mainly in the large companies portfolio. Excluding the effect of exchange rate variations, portfolio would have grown by 6.4%. In addition, a strong increase in demand for loans by large companies in March. Now things are back to normal.
For individuals and SMEs, the growth in the quarter largely reflects the strong performance we had been facing up to February. We expect a slowdown of growth in the coming quarters, but it's still difficult to predict the size of the reduction demand for loans. Now on slide 14, total NII decreased 60% for the quarter and increased 2.9% year-over-year. The reduction in the quarter is mostly related to the performance of the margin with the market. The margin declines increased 8.4% over 12 months, primarily as a result of the increase in loan volume, which more than offsets the negative impact of regulatory caps on overdraft limits interest rate at 8%. Margin with market increased 37% quarter-on-quarter due to the impact of market volatility in the trading portfolio, like I said before, with mark-to-market.
Now on slide 15, we had an increase in NPL creation this quarter, already reflecting the impact of the pandemic on the loan portfolio at the end of March and specifically within the corporate segment. In addition to increase in creation reflects the growth of the loan portfolio and the shift in the mix. It is worth mentioning that the NPL creation increase for quarter and Q4 were affected by the large corporate credit that became due and was later renegotiated, for which we were already fully provisioned. Our expanded loan provision amounted to BRL 6.7 billion, including the impact of the supplementary provision of BRL 2.5 billion and a required provision of BRL 200 million. The provision in relation to the portfolio cost of risk stood at 4.1%. Turning to slide 16, our delinquency ratio this quarter increased by 40 basis points, like I explained before.
The reasons are the same as the one we gave for the progression of NPL creation. On slide 17, the 90-day NPL covered ratio was 228% in the first quarter. As mentioned before, we have a provision of BRL 5.1 billion. We shall consume this provision throughout the crisis, which may reduce our covered ratio in the following quarters. In addition to the consumption of the provision already booked, we will constantly adjust our scenarios to evaluate the necessity of new provisions. Now on slide 18, net income, we saw an increase in the quarter of 6.2% and an increase of 2.6% over 12 months. We have experienced negative impacts on card income, which reduced 2.4% quarter-on-quarter year-on-year, mainly impacted by Cielo and interchange fees. The checking account line performed well, growing 7% year-on-year, mainly due to the increase on the customer base last year.
We increased our customer base in 1.9 million or nearly two million customers. Custody and brokerage services line were positively impacted by the growth in volume of both institutional and individual trading through Ágora, our investment in-house that is doing fine. A lot of demand from our customers. In the first quarter, we already have 416,000 investors growing by 13.7% and an increase of 246% in the number of deals performed in the equity market. Moving now to slide 19. Reduction of expenses, a reduction of 24% over the last 12 months. As we know, as we said before, our goal is zero-based growth. We managed to achieve a reduction year. We had a sharp slowdown annual growth related to administrative and personal expenses and some reduction in both lines for the quarter.
This performance is mainly due to the measures that we have taken to reduce costs at the beginning of the year and although our guidance for 2020 is 0%-4%, our goal was zero growth. We expect to see a reduction. Additionally, the reduction in operation volume in March has already had an impact on lowering our administrative expenses. We reduced 78 branches in the first quarter, with expectations of closing more than 300 branches in 2020 and a reduction in the number of employees. Also due to the voluntary severance program, a reduction of more or nearly 2,000 employees. As I mentioned earlier, the experience we've lived in the environment of the COVID crisis, with this home office, a boost in the use of self-service by customer and remote customer service, has opened a phase for a profound restructuring in the way we operate.
This will room to expedite the conversion of branches into customer service points and cut back on traditional branches. For our staff that does not work in branches, we see an opportunity to continue using home office and reducing the amount of occupied space. We also have costs. Moving on to slide 20. We now discuss the Bradesco Seguros, which saw a major impact on the financial performance due to the effect of market volatility, particularly equity portfolio, multi-market investment funds. In addition, we had the effect of the lower Selic and negative impact due to the mismatch of IPCA and IGP-M, which hit hard our ALM. On the one hand, we know that the financial result will be a challenge. On the other hand, we continue to see an important improvement in operating performance.
The reduction in the large balance sheet compared to the fourth quarter 2019 was reflected in the improvement of the combined ratio. Bradesco Seguros has been monitoring the economy and the impact caused by the new coronavirus. We understand the importance of our products as an instrument to help and support the reduction of our customers and families that may eventually be victimized by this virus. Several actions were taken to ensure the best service and security and adjusted to the reality presented through an exclusive call center, adjustment of the operations of primary care clinics that since the beginning of the pandemic have been operating at extended hours from Sunday to Sunday. This initiative also serves to relieve the demand for ER and emergency care. With the beginning of social distancing measures, we begin to see changes in the behavior of events.
At the base in São Luís, for example, if on the one hand we saw the first signs of reduction in elective procedures, which is only natural, people don't see the doctors as often for elective procedures that will possibly be postponed to the fourth quarter or even next year. On the other hand, there was a greater growth in emergency and hospital admissions due to the new coronavirus. It is worth mentioning that these elective procedures should be resumed ahead once isolation, social isolation is eased. Although it is premature to make any kind of projection regarding more specifically the future behavior of these events, it is estimated that those effects tend to worsen in the coming periods.
In auto insurance, a decrease in urban circulation caused a momentary change in the frequency of claim notices, driven by the closing of repair workshops, as well as the beginning of the drop in the sales of new insurance, shifting the focus towards policy reviews. Now turning to slide 21. The ratios fell by 190 basis points in the quarter, mainly driven by higher-rated assets due to an increase in loan portfolio and tax credits generated by the held assets abroad. Absolutely normal. In addition, we saw the impact from a reduction in mark-to-market gains on the securities portfolio, which was already explained before. We had a volatility involved. We see the Tier 1 ratio of 11.4% and common equity or core capital of 10.3% at very comfortable levels, exceeding the requirement of 2.25% for Tier 1 and 6.25% for common equity.
We experienced a lower consumption of capital with loan growth throughout the year, given the downturn in the economy and we must consume at least a portion of the tax credit, raising the capital position further throughout the year. Well, that's all we have. Thank you very much for your attention. I think it was important to explain the reason why we have this provision for this half of the year, for the first quarter, and explain how we studied and envisaged important measures about provision, considering the future scenario, which is still very confusing, very uncertain, frankly. We don't know exactly what the dimension or extension of this problem will be.
That's why we consider that despite the reduction of either ROE from 20%, 21% going down to 11.7%, we understood it to be very prudent and necessary to do this complementary requirement and supplementary requirement to preserve the balance sheet of the bank, take good care of our customers, and therefore resume our operations back to normal so we can have an upturn again in the Brazilian economy with the profitability of the bank. Thank you very much. We open for questions now.
Thank you very much. Now we would like to start with any questions. Operators, would you please may ask a question to our participants? We'll be listening only now. To ask a question, please press star one. In order to remove your question from the queue, please press star two. Thiago Batista with UBS .
Good morning, everybody. I have two questions about the quality of your portfolio. In my view, it was mainly surprising, the results, because one had to do with the strong increase that we had in NPL and NPL formation and how much of that is due to the COVID crisis. I think COVID was stronger in the first weeks of the quarter. Has there been any change, anything different that might explain this steep increase in NPL formation, NPL? This is one question.
The other one has to do with the provision of BRL 2.7 billion, which I've already talked about with Octávio, but it was not an expected loss, but it is close to an expected loss. What is the scenario that is inbuilt in this provision? NPL levels or because of the last few crises? That is to say, what was the rationale to provide this much? These provisions have already been built for the uncertain future that we have ahead of us.
Thiago, thank you for the question. This is Octávio. I will start by the second. With relation to this provision of BRL 2.7 billion, it has a strong character of the 2.5 . That's actually a supplementary provision for the COVID scenario, and it is based, Thiago, on the studies that we showed and that were done by our two teams that I have described. It could be many assumptions and many variables that you see on page number five in order to be strict that happened in 2008 and 2016. We cannot see the whole picture yet, but we estimated that the crisis scenario that we've been living because of this group would tend to be worse than the peak of the two biggest crisis of 2008 and 2016. This is the reason why we did BRL 2.5 billion now. We do not know the length of this crisis.
There will probably have additional provisions depending on the science, whether the science is able to solve this COVID problem, whether isolation will be created gradually as companies resume work, because we have the scenario of unemployment increasing to 2.5 for this and 200 million. We emphasize that this is the first scenario that we've seen with COVID. We thought we shouldn't work only with the
Now, February. This is why we were smart and this is why we have an additional provision of 200 million.
Regarding NPL, I would say that the growth of the NPL formation can be explained by a few factors. First, in the corporate portfolio, the NPL formation, BRL 900 million. In the last quarter, there was a regulation of a series of delinquencies that started in the third quarter, because of that, we had a lower effect. There is a high effect on NPL formation, total NPL formation. In the first quarter, we had some cases amounting to BRL 400 million we will take already provisioned and ended up becoming NPL. They were already provisioned for. There was no reason to make an additional provision there.
For SMEs, we don't break it down, but we can say that in the mass portfolio, we are not having big variations. SMEs are sold by mass and they're part of the portfolio up to BRL 500 million in revenues. In the corporate portfolio, we also have something close to BRL 500 million, and one of them amounts to BRL 300 million that have already become NPL and they were already provisioned for. The credit cycles of these companies or what happened to these credits, this doesn't have a lot to do with the crisis. It is not related to the big crisis in relation to individuals. I would say that this growth has to do with growth in the portfolio, mass credit review, more in retail operations with higher margins, so to say. You have a little bit of this effect.
I would say that overall, for mass credit, there is another important aspect, which is the following. If you look at the NPL 60 days past due and compare this to 90 days past due NPL, the 90 days is BRL 4 billion lower than 60 days because we are making a major endeavor in terms of renegotiating and with these clients. This was hindered by the quarantine in the second week of March because we had notary public offices that were closed and many other things. We see these two effects. Corporate portfolio, almost BRL 1 billion already provisioned, and this helps explain, in part, although we have more provision coverage didn't improve a lot because we had a BRL 1 billion NPL coming in without being matched by provisions. I think these are the most important points that I can raise about your question.
Thank you.
Next question comes from Jörg Friedman from Citi.
Thank you for the opportunity. I would like to continue with this issue of portfolio quality. How do you intend to give us transparency about your portfolios? We know that you will have the prerogative of maintaining this portfolio as the Central Bank of Brazil has allowed this without any downgrade. Some downgrades have already been given to the portfolio as it is at the end of March. I would like to know if there will be an impact on the renegotiation portfolio, how you're going to work with the renegotiation portfolio regarding the ALL, because it was leveled around 66%, 67%. I would like to know the dynamic involved in order for me to understand if the effort, ALL, was enough or not, and whether this has reached another level of magnitude.
Thank you for the question. We extended the installment.
Well, this was an attitude that we took in order to protect and to help people. We did this for April and May. What we see is that we are almost in May, and there is no solution at the horizon. There is no medication or drug or vaccine yet. Have you said that? It seems that these people might have lost their jobs. Maybe these people are working from home, and the entrepreneurs can legally decrease their salaries and cut their salaries. This is why we are going to extend this further for an additional 60 days, for June and July. Besides, we said to our branch network that if the person has a serious problem, it would be useless to do only this because the person has lost his or her job, and 60 days is not going to solve the problem.
It only prolongs the agony. Another solution for these people, let's say, giving a grace period of six months or something like that. Have you said that? The impact of BRL 200 million is because of these cases. In these BRL 200 million, you have a part of that, of people who have the 60 days that will pay and some others who will not pay. This is why you need to have a provision for ALL. We know the kinds of requests are with today. BRL 1 .4 billion, overall so far. We do not mean that this will all become delinquency. Part will be delinquency, and part will not be. Let's say 30% are delinquent, and the other will pay their loans.
We will have to evaluate this on a monthly basis and see how many of these people that have already extended for 60 days will be extending into June and July, for instance. At the end of the next quarter, we believe we will be able to give you much more concrete data because we only have 15 days of this extension, there is no way we can have a more thorough evaluation at the end of the second quarter. We believe that we will have more concrete figures to convey to you regarding what will be paid and what will not be paid.
Credits that were renegotiated before becoming delinquent, they are not shown in the renegotiated portfolio because, as we said, we have already booked here what has been renegotiated so far.
Officially, we do not have this yet regarding the renegotiated portfolio, before maturity or because of the pandemic. Because of the Central Bank, we have not downgraded the credit. That is the current contingency of provisions. Our renegotiated portfolio has a part that has to do with recovered credits. These credits go with 100% provision into this portfolio, and the provision will only reduce when we receive these credits.
All right. Thank you very much.
Our next question is from Giovanna Pimentel of Bank of America. Over to you, Giovanna.
Good afternoon, everyone. Thank you for taking my question. I have two questions, a follow-up, actually, of questions on credit quality. The current NPL was very high this quarter. We already have 15 days of lockdown, so the worst is yet to come. Do you expect to see a provision continuing at 100% of NPL formation, or should we expect to see an additional provision consumption in the coming quarters? The second question is about the risk appetite of the bank. You are coming in a strong portfolio growth trajectory. How do you expect the portfolio to behave down the road? Do you think there'll be the same growth pace, or should we expect to see an important slowdown in the coming quarters? How do you imagine that the margin is expected to behave in the current environment?
We have a part of interest that is in the historical, low historical rates, but at the same time, the risk is going up. Could you give a word more color about this? Thank you.
Thank you, Giovanna. Octávio speaking. With regards to the quality of the loan portfolio, like I said, we don't know the extension of the problem that we're tackling. It is a mass shock, and according to our studies, the ideal is to start 2.5 or one now. 2.4, that we're well decided. We are maintaining the teams. We are working on it. Yesterday, we issued a report of the Central Bank mentioning BRL 495 billion as additional provision requirement in the Brazilian as a whole. That's the additional capital necessary. We keep on working, we keep on doing our job.
We don't know what the extension will be and how long this will take things to happen. We'll be working on additional provisions for even a second, third, or fourth quarter, depending on how it will end. We cannot say this is not going to continue. We expect it to continue maybe at a lower value, depending on the economic upturn. We still keep on needing additional assessment. As for the loan portfolio, we have one thing, which is customers who already have the risk. For these people, we keep on expanding the installments, financial reorganization, whatever they need to still continue the same interest rates of the agreement of the contract. That's a commitment by banks in order not to change the interest rates for these operations. For new operations, Giovanna, naturally, there is a change in the scenario as a whole.
There is a reduction in international loans, for instance, from U.S. banks to us, or a significant increase on spreads. We have to consider the FX end, for instance. For new positions, certainly the embed risk is much higher and therefore we have to consider the additional risk or better collaterals in the operation, which might lead to a better loan margin, credit margin, naturally. Certainly, Giovanna, the loan portfolio will not grow again in the near future. To give an example, we saw a growth in the individual loans. The growth was 36%, nearly 37% for personal loans, which have a very good margin. It is not going to grow more during the COVID. For payroll loans, this one we'll be working on it to have things under control.
Mortgage loans, we also try to maintain the growth guidance. It's expected to grow less naturally owing to the market. Credit cards, also lower growth. Auto is also going down. It's not going to grow more at the same pace because that's a natural market circumstance coming from lower people demand, also because you have a higher credit risk and therefore people are being more conservative. Just the credit rating as also how we work on our guarantees and collaterals is still clear.
Thank you.
The next question is from Thomas Peredo from BTG Pactual.
Good afternoon, everyone. I'd like to ask two questions. The first question is more focused on insurance. Could you help us imagine what we expect to see for coming quarters? Maybe seasonality is going to be slightly lower and therefore help insurance company profit. The financial performance was heavily impacted this quarter.
What's the new business down the road about the flow coming back in the second quarter or inventory effects that maybe are at a lower level? Other institution, if you think about the bank, you had a high level of additional provisions. What about the future? Maybe imagining that 11% ROE as a whole is something that makes sense for the coming quarters or not. Could you tell us more about it, about these points? Thank you.
Thank you so much. Vinicius is the CEO of insurance company. Are you there? Would you like to tell us more about it?
Thank you, Octávio. Thank you so much for your question. With regards to the insurance group results, as you know, the results of insurance operations were heavily affected.
We saw a number of factors there in the IPCA, which hits a significant part of our portfolio, lower Selic rate, impact of equity income that happened in March, a drop of almost 37%, affecting part of our positions for equity that is not mark-to-market. Down the road, we have a risk allocation that is very appropriate vis-à-vis our ALM. We ask to assess in different scenarios. When it comes to the operating income, this income is very adequate for the first quarter, in our opinion. Despite the more challenging scenario that became more intense in the second half of March, this positive result was maintained at a very proper level. Like Octávio said, we're going through a moment in which we have limited visibility, and we are working on an assessment of the prospective scenario owing to the very atypical event.
If you think about our provisions, we already see an impact in the first quarter according to the models of technical provisions we have based on some strengthening our provisions. When we check the context based on the first half of March with the pandemic, what we see is a drop, a natural drop of production, which is related to sales and revenues. We also see an apparent offset considering the claims owing to the drop of elective procedures in healthcare, for instance, or maybe postponing the procedures. At the same time, we see the gradual displacement by ER and admissions to hospital associated to COVID. As for life insurance, we believe that in the future, we expect to see an increase of indemnification or compensation owing to the pandemic. It's still too early to see how the magnitude.
We never checked that in March, in our analysis and model, we are trying to analyze the impact. Like Octávio said, for auto, we also see a short-term effect of social distancing rules affecting the number of car crashes, deaths, claims. Down the road, from the moment we have a scenario of easing of social distancing, chances are that the number of claims will grow very fast considering some social indicators. The scenario for new sales will depend on the economic recovery. Today, the auto segment is really surviving from renewals. The scenario is fully visible. We're being very careful with our analysis, already reflecting our models, doing stress tests to fine-tune our modeling. The visibility is still very low. What's very strong, in my opinion, is the migration, like Octávio said, the migration the company did into home office.
We have the feeling that we are improving, so to speak, our digital channels, providing operational improvements so we can adapt business sales in our channels. I guess that's the main thing.
Thank you. Just to summarize, operationally, the insurance part is very good. Operating numbers are good. Claims ratio is going down. Elective events, medical procedures. Well, they don't see a doctor four times in the same day. The claims ratio will not be there and will come back later. We have this gain. What really hits the insurance companies are the conditions or the strategies of volatility on the market for equity income, stocks, multi-market. Once volatility is over, which will benefit the insurance company. It's only a matter of considering the volatility moment and consider the long term, because the assets we have there are for pension plans.
It's natural because the changing scenario was too sudden and volatility was very intense. That's for the insurance company and answering your first question, for provisions, we did what was reasonable and what the moment asked us to do. Certainly, considering the scenario, we have to do some work down the road. We have the guidance, it doesn't make sense talking too much about the ROE, whether it will improve or not. It will mostly depend on the behavior of the economy and how significant the line of delinquency will happen with dropping GDP or higher unemployment. There are too many variables involved, and it's too hard to tell you numbers or figures now. Certainly, we are using the right tools and doing the right job to preserve the company's numbers.
Perfect. Thank you very much.
Thank you. The next question comes from Marcos Assumpção of Itaú BBA. Please go ahead .
Good morning. I have two questions. One has to do with the NPL. Come to the same color about what you have canceled for April and the second question on short-term delinquency and long-term delinquency as well. The second has to do with portfolio positioning.
As the delinquency will probably be worse than in 2008 and 2016. Do you know where the indicator should go in order for you to keep a comfortable level considering the impact of the crisis classes?
Right now, we would rather know about the evolution of the NPL from now on because we never talk about this and regarding positioning. We just can't give you a guidance or a new date. You know that we have canceled guidance because we are waiting for a more predictable scenario so that we can go back to give new guidance. As we said, we will be evaluating the provision on an ongoing basis, and we will probably have to do positioning provisions. That's all I can say so far.
I have another question. We saw several loans being discussed. Do you believe there will be new forms of risk sharing in order to further incentivize credit? Have you been working along these lines?
This is what I'll tell you. These banks continue to talk with the government and the treasury and the Central Bank. We were able to build a good alternative for companies from BRL 360 million. Are those lower than BRL 360 million or higher than BRL 10 million we are discussing, and we are thinking about increasing the range from BRL 0-BRL 30 million. You will get a wider scope of companies. We cover a wider scope of companies. If this is possible, as I believe it will be possible, we will have a wider range of companies. We have the credit guarantee from BNDES from BRL 30 million-BRL 360 million, and we are in advanced talks to talk about a new line. Airlines, for instance, and the companies that are suffering the most and others.
You don't have one size fits all. You don't have one single solution that may cover all these companies. It will take a lot of companies to make it. We already have very advanced talks with many of them so that we may be a good solution, a win-win situation for everybody, for these range of companies. Okay?
Thank you.
Our next question comes from Eduardo Nishio of Brasil Plural. Go ahead .
Good afternoon, everybody. The quality of access. I think 2.7 is very valid considering this moment, but in a way. Delinquency. If you compare with the areas that didn't have this kind of delinquency. This is the information being put, I do apologize, but it's almost impossible to hear the analyst. I apologize. It is not really an additional in terms of accretion or something like that. I would like to understand this. These were the lines that were really impacted by COVID so far and looking ahead. The 1 million contracts are in process of extension. This wouldn't be a correct snapshot, I would say. You would be postponing this. Information is very strong. Could you explain a little bit about the dynamics involved?
It's very difficult to draw comparisons. In relation to the extension. We chose to extend the extent of our clients at the moment when we studied this. At the moment that we are talking with the client, it's different from other banks that did this like a blanket situation and tried to solve this credit for everybody.
This is a different strategy that exists among banks. In this period, we had 6 million installments that matured and 1 million asked for extension and we are at this stage. You have to look at the flip side of the coin. Anything I can say to you about the future in terms of provisions would be very bad. It wouldn't be honest if I did that because none of us, of any Brazilian market or world market, no one can estimate the size, the magnitude of the provisioning problem in terms of provisions and delinquency and whatever. With JP Morgan going to direct the provision over, if I am not mistaken, about $8 billion.
This was a decision that we made, and this is what we are doing as well. Although we are not capable of seeing a catastrophic scenario, we know that the COVID scenario does have a bigger impact on delinquency than until April 2016 because all the sectors are being hit. It is completely impossible to have this kind of visibility, we cannot tell you. We do not know how much is still to happen in the future. Any theory is too premature because we only have about 15 days. We know that the curves go up in terms of delinquency, they continue to go up.
What we have to do is monitor this on a weekly basis so that we can see what is going on and to make decisions about what to do in the second quarter. What will come ahead of us in terms of delinquency problems with revenue generation capacity. We have huge competitive advantages. I've been receiving many new clients coming on board. Of course, there are problems. It's very important to look after our costs, and it will be even stricter than we did, for instance, and our need for provisions and the need to grow revenue. This comes together.
Thank you. In terms of portfolio, what would be the amount of the loan book? Can you quantify that? I don't understand what you say, sir. Could you please repeat? The extended contracts represent how much of your overall portfolio?
Are you talking about the total portfolio or maturities? Well, let's see. 6 million maturities, 1 million extended. With an average of 30 months, 6 times 30, 180 million. I would say 180 million in terms of installments.
Okay, this is just to say to that. Visibility is very low, and we do not know what will happen, and a solution has to be found in the future. With all these uncertainties, Bradesco is true that Bradesco has to take some attitudes and play the role that it has to play. Our role is to preserve our people, our workers, liquidity, our clients, our balance sheets. It is certainly possible to have a more precise forecast. It is absolutely necessary. What we are doing is absolutely necessary and will continue to be necessary from now on.
We are taking the right attitudes to preserve and to maintain our history and taking all the necessary measures that have to be taken. The Brazilian economy is very diversified. Because of that, we have to think also about tapping into all these advantages. Right now, these attitudes were necessary, and we took them. We wish you all a very good afternoon, a very good holiday.
Thank you very much. That is the conference call is closed. We thank you for participating, and we wish you all a good afternoon. Thank you.