Good morning, ladies and gentlemen, and thank you for waiting. We would like to welcome everyone to Bradesco's Q1 of 2020 Earnings Conference Call. This call is being broadcast simultaneously on the Internet and Investor Relations website of Bradesco at vancudotradescoir. Tm, where you can find the presentation to download as well. We would like to inform you that Santis will be in listen only mode during the company's presentation.
After the presentation, there will be a question and answer session. When further instructions will be At this time, during the call, please press star zebra to reach the operator. Before proceeding, we would like to mention that all of these statements are currently made during the call in relation to the company's business objectives, operating and financial projections and targets, the simple functions of Bradesco's management as well as information currently available to the company. Other business statements are not guarantees of performance. Based on risks, uncertainties and assumptions as they relate to future events, and 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 Now I'd like to turn the conference over to Mr. Michel Niedemirando, Investor Relations Officer. Good morning, everybody. Welcome to all about the Q1 2020 report. And today, The presentation will be made by the CEO of Bradesco, Ricardo de los Abisounis.
Our Executive Vice President, Chief of Directors and the leaders of the staff will be participating as well. And I'm sorry, sir, Cebreci, Head of Investor Relations. After the presentation, we will have a Q and A session, and we will be available to answer your questions. Thank you very much, Leandro. My friend, good morning.
I thank you and your family is available, and welcome to our call about the results of the Q1 of 2020. And once again, we will be talking about your 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 And the growth performance is very strong in a number of lines, especially given about guidance. This scenario was radically altered by the worsening of the COVID prices in the second half of March. Nonetheless, we highlighted our balance sheet to meet very robust.
From the moment the crisis rose to the tale that it is today, our priorities have totally changed. It goes on maintaining services to our customers and keeping the bank truly operational along with the well-being of our employees. And 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 impact, we continue to operate in such extreme conditions, while all the accounting is dedicated to our People, as our clients, as primary parameters, just to give you a reference today, over 90% of our staff but normally working offices are now working from home and 50% of the teams from our branch network This was considered an essential service. We are also striving to resolve any liquidity issues of our clients and clients may be experienced by initiating the process We will do that and open a red line with large companies together with other banks of the Central Bank.
We are attracting lending to finance small businesses as favor and we have already with Central Bank and Petrobrasco as well. As I mentioned before, Bradesco has all the interest and duties to help customers emerge from this very difficult predicament, which is asking them to fulfill their commitment and continue their lives without stating financial gain. And also as we mentioned in our previous call, This has become biggest crisis with which the financial sector was the main responsible for the crisis. This time, in particular, we are an important part of the situation. In view of the uncertainty in hearings and any projection at this time, especially considering that we don't know for sure when the shutdown will end and how the pace of the 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 I think that we will return fundamentally out as an indication to the return of revenue as a result of loan issuance, which will take place with the recovery of the economy and the return to the analysis. One of the ways to recover returning to an Actual adjustment costs have already performed quite well in quarter, thanks to the initiatives we expect at the beginning of this year with control costs in 2020 as well as in March due to the success of the prices in Q1. This should allow us to accelerates our cost adjustment.
We see an even greater opportunity for adjustment with the branch network, with the use of smaller format and lower costs. We will take advantage of this government to train our talents and new services as another key focus The risk management and model provides support to the country at this time and making the bank liquid and capitalized. We had increased prices with a strong capital position and high liquidity levels, and we ended 2020 which already reflects the material that market spreads with a comparable 11.4% to 15% year run ratio. Furthermore, we saw an increase of 6% from deposits and continued to £5, This showed already our extended loan portfolio had a strong growth, an increase of 5.1% over the quarter and 17% for 12 months. And part of the expansion can be explained by the effect of the exchange rate in part to the strong increase in demand, mainly from large companies at the beginning of the crisis, as I anticipated by the support of this year.
We believe that we are preparing ourselves quite well in terms of our credit position to face the impact on these deposits will be triggered by the crisis. We have increased our excess position with both existing acquisition of €5,100,000,000 in our balance sheet to face the consequence of the pandemic. Our For the full year, we reported $3,800,000 from 11.7 percent of the quarter and ROE in the quarter 11.7 percent. Income and return for the quarter was adversely impacted by the excess contribution and along with other effects related to market conditions. That will return as the situation improves.
Now let's go to Slide 4. Of course, not usual, in order to be more transparent, we have included in the table A column of our performance in the month of January February. Going back to 2018, there's an update by 2 months, about January February. We don't have our full capacity. As 60% of our general managers and account managers and investment consultants and bankers are on location, which you can see that we have been The average revenue for Soli was growing 14.4%.
NII The corresponding rate, it was 11.7 percent fee income. The rate was 37.3.6 and costs were roughly 0.1 and the result of the insurance operation, the expenses and the expenses, we continue to decline the expanded AOL, more or less in the middle of the guidance. And is it time to suspend the guidance? This scenario is still rather uncertain and about the resumption of the economy as well. As soon as we have a better visibility, we will give you guidance.
Now going to Slide number 5, When you explained why we decided to have this additional position, when the scenario between no stress mainly in the second month of March, we made progress into a study of the possible and certain scenarios for the future. This was when we decided to set up 2 extra teams in order to evaluate this scenario because of this year at the pace of growth and credit. Except in May of the Large companies are preparing to us that it will be dropping and delinquency will be going up. A higher denominator effect and a lower denominator effect, one combined credit and Pricing coverage is very well on rates and economics, studying the cases in the past and the prices that we have already lived and probable impact On delinquency and revenues, we are in the math, including the corporate of large company owned net sales. In spite of using different methodologies, those areas reached very similar results.
Now going to Slide number 6. We can see the effect of delinquency in net credit in the 2008 Global Crisis and 2018 in 2016 crisis, and we made a projection for a totally uncertain scenario in this COVID crisis that impact not specific sectors such as in the business and business sectors, but all sectors with higher or lower expense affecting every sector. Our perception of making additional dividends for losses. It was not going to be necessary and materialized in a more important fashion. And those are globally by the balance sheet of American Bank that have published recently, not really, as well as profitability of over 50% ROE going from 16% to 4%.
I'll just show this very clearly that we needed to make supplementary provisions already in the Q1 of 2020. Now let's go to Slide 7. We talk about the for cash for adverse economic scenarios to 3rd in this study. And in order to cope with the effect of Again, on our credit portfolio, we have already supplemented additional €4,900,000,000 and total charge of EUR 1,000,000,000 that is a view to the enterprises and this is clear that this provision is profitable for the current moment and it reflects information that we have at this moment in time, but we will be continually accepting the need for new provisions for this crisis For the 2nd, for the 3rd or the 4th quarter, this position is made up of BRL 2,400,000,000 referring to what we internally called a provision for adverse economic scenario, which is part of our supplementary provision, and we will be using this to enterprises. A new supplementary provision for adverse scenario of BRL 2,500,000,000 carried out this quarter and EUR 200,000,000 of provisions that is required and that was carried out this quarter already due to the effects of the crisis.
The clients that have extended their installments by Central Bank. Well, we have the date of February 29. We decided to keep February 2019 and kept a hedge that already existed through BRL200 1,000,000,000 in this division. Now let's go to Slide 8. And talking about the credit operations, We very quickly made available top line to the holders and SMEs the extension of payment of the installments.
And we have already extended over BRL 1,000,000,000 in operations with balance of BRL1.1 billion, and we are consistently evaluating the financial situation of our clients and trying to offer them the best solution for each one of them, not only the extension of the installment. And I would like to mention that In respect of measures announced by the Central Bank, we have the last column. Just to give you an idea, The milestone from the reduction of reserve requirements to Bradesco was over BRL24 1,000,000 that were released in between March 16 April 22. We originally sold R57 1,000,000,000 in new operations, more than twice the reserve requirement. So we have no interest whatsoever in holding on to liquidity.
Now going to Slide 9. We have already talked about the synergies to overcome the crisis and attack the crisis, but we have already talked about our priorities, With that the new scenario has dropped out, keeping the bank capitalized and liquid. I can say that we were successful with 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 2 war operation to turn the key to fundamentally based on whole market operation. We have a small sector already set up.
But overnight, we had to increase it very quickly. And 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 are working in ventures as this is an essential service. So all our branches are open. We are working with reduced For 2 hours and 50% work during 1 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 with the branches and so on and so forth.
And I would like to express our deepest thanks to all the teams involved for the excellent work that we have been really especially our IT and systems teams and all the teams that work in our network in order to continue to have our clients with this essential where we had the impact of the adverse scenario over this. Our net income was BRL 3,800,000,000 for the year 12 months. And among the effects were the AOL addition, the supplementary one of BRL 2,500,000,000 For this period, we said $200,000,000 in position required due to the price reduction in our margin. This market leads to the effect of any sales to market reduction as a result of our insurance company, mainly due to the lower financial results, positions in shares and ITCA, lower tax benefit because of this position and our interest on equity. And now let's move to Slide 12.
Now turning to Slide 12. Our ROE in the quarter posted a significant reduction, settling at 11.7 3.1% in the quarter due to the negative impact of mark to market divestments. So it is mark to market. And now we have volatility that becomes more stable. And total assets increased by 5.5%.
Now we turn to Slide 13, talking about loan portfolio. We have shown an expected growth of 2% year over year and 5.1% in the quarter, 2.6% in individual, 7.6% in large companies and 2.4% in SMEs. That's an impact of the liquidity here that I mentioned To you, ladies and gentlemen, South Felix S. A. Since March 15, 2019.
Productive growth will 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 variation, portfolio have grown by 2.4%. In addition, the strong increase in demand for loans by large companies in March, the balance is back to normal.
For individuals in SMEs, the growth in the quarter largely reflects the strong performance we have been facing after February, We expect a slowdown of growth in the coming quarters, but it's still difficult to predict the size of the reduction in demand for loan. Now on Slide 14. Toyota NII decreased 6% for the quarter 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 decline increased 8.4% over 12 months, primarily as a result of the increase in loan volume, which more than offset the negative impact of regulatory tax on overdraft unit interest rate at 8%.
Margin to market decreased 30 7% quarter on quarter due to the impact of market volatility in the trading portfolio Slide 24, 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 in the end of March and specificities in the corporate segment. In addition, such increase in creation reflects the growth of the loan portfolio and the shift in the mix. It is worth mentioning that the NPL creation in 3rd quarter and Q4 were affected by the large corporate credit that between you and the later renegotiated, which we were already fully provisioned. Our Standard loan provision amounted to R6.7 billion dollars including the impact of the supplementary provision of R2.5 billion and a required provision of $200,000,000 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 R40 bps 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 The LCO coverage ratio was 2 28 percent in the Q1. As we mentioned before, we have a provision of BRL5.1 billion. We shall consume this provision throughout the crisis, which may reduce our covered pension in the following quarters.
In addition to the consumption of the provision already booked, we will constantly adjust Our scenario is to evaluate the necessity of new provisions. Now on Slide 18, With income, we saw an increase in the quarter of 6.2% and an increase of 2.6% over 12 months. We have experienced negative impact on card income. It reduced 2.4% quarter on quarter You are now very impacted by Cielo and interchange fees. The check and count lines performed well growing 7% year on year, mainly due to the increase on the customer base last year, increased our customer base in 1,900,000 customers.
Activity and Brokerage Services Line were positively impacted by the growth in volume of both institutional and individual trading through Hagolence, our investment in house that is doing fine. A lot of demand from our customers and in the Q1, we already have 416,000 investors growing by 13.7 percent, an increase of 246% with a number of deals performed in the equity market. Moving now to Slide 19. Pension of expenses, a reduction of 0.4% over the last 12 months. As we know, as we said before, our goal to 0 base growth and we managed to achieve a reduction there.
We had a sharp slowdown in annual growth related to the penetrated and personnel expenses and strong reduction in the decline 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% to 4%, our goal was 0 growth. We expect to see a reduction. Additionally, the reduction in operation volumes in March has already had an impact on lowering our administrative expenses.
We reduced 78 branches in the Q1 with fluctuations of closing more than 300 branches in 2020 and a reduction in the number of employees OCG sees a voluntary severance program, an exception of nearly 2,000 employees. As I mentioned earlier, the experience with Lyft in the environment of the COVID crisis with this home office, based on the use of self-service by Customer as a note, customer service has opened a phase for a profound restructuring in the way we operate. With Q1, we expedite the conversion of branches into customer service points and set 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 sales without impact costs. Moving on Slide 20, we now discuss Cabesto Insurance.
We saw a major impact on the financial performance due to the impact of market volatility, particularly equity portfolios, multi market investment funds. In addition, we had the effect of the lower select and negative impact due to the mismatch of ICTA and IGTM, which is our IRM. 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 loss ratio compared to Q4 2019, which we noted in the improvement of the combined ratio.
Insurance Group has been monitoring the economy and with the effects caused by the new coronavirus. We understand the importance of our products as an instrument to help and support the retention of our customers and families that may eventually minimize 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 in emergency care. With the beginning of social distancing measures, we began to see changes in the behavior of events.
At Bradesco in Saudi, For example, if on the one hand, we saw the first signs of reduction in elective procedures, which is only an effort, people don't see the doctors in London Core elective procedures that will possibly be postponed to the Q4 or even next year. On the other hand, there was a gradual 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, To our relative 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. This auto insurance, as you can see in other Congratulations for the momentary change in the frequency of claim notices, driven by the closing of the theater workshop as well as the beginning of the growth in the sales of new vehicles, impacting the sales of new insurance, shifting the focus towards other revenues.
Now turning to Slide 21. Our ratio fell by 190 EPS in the quarter, mainly driven by higher weighted assets due to an increase in loan portfolio and tax credits generated by the healthy assets abroad, Absolutely normal. In addition, this is the impact from a reduction in mark to market gains, other securities or trading. Which was already explained before, we have a volatility involved. We see the Tier one ratio of 11.4% And common equity of core capital of 10.3 percent at very comfortable levels, including the requirement of 2.25% for Tier 1 and 6.75 percent 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 allocation further throughout the year. That's all we have. Thank you very much for your attention. I think it was important to explain the reason why we have with provision for this comparable year, for the Q1 and explain how we study and envisage important measures about provision, considering the future scenario, which is still very confusing, very uncertain for the sake. We don't know exactly what the dimension or extension of this problem will be.
And that's why we consider that despite The reduction in the 5th ROE from 2021 going down to 11.7 We understand that it is very prudent and necessary to treat this complementary requirement and supplementary requirements to preserve the balance sheet of the bank to a good care of our customers and therefore We resume our operations back to normal, so we can have an upturn Thank you very much. And we open the questions now. Thank you very much. Now we would like to start with our Good morning, everybody. I have two questions about the quality of your portfolio.
In my view, it was the main surprise in the results. The first one has to do with the strong increase that we had in NPL and Transformation. And how much of that is due to the COVID crisis? I think COVID was stronger in the 1st weeks of the quarter. Has there been any change, anything different that might To explain this steep increase in NPL formation NPL, this is one question.
As the other one has to do with the acquisition of EUR 2.50 billion, you have already talked about it, But that does not mean expected loss, but it is close to an expected loss. So what is the scenario But in both, we just position NPL levels or because of the long queue crisis, that is to say, what was the rationale for the cost of the price? How much of these divisions have already been built for the uncertain future that we have ahead of us. Thank you for the question, Mr. Mercado.
I will start by the second. With relation to this provision of 2.7 which has been in contrast with the 2.5% compared to a supplementary The reason for this could be scenario and the 2 days, Jada, on the studies that we So that was done by our 2 teams that I have described. It could be many assumptions and many variables that you see on Page 5. In order to be respect that happened in 2008 and 2016. And we cannot see the whole picture yet, but we estimate that the crisis scenario that we believe will be within the context of this year will tend to be worse and the peak of the 2 business prices of 20.8 and 20.16.
This is the reason why we did keep on charging now. While we do not know the length of this crisis, There will probably have additional provisions depending on the science, whether the science We're able to solve this problem, whether isolation, the liquidity gradually, the company resume work Because we have a scenario of an environment increase of 2.5 per day and the 200 We emphasize investors in the first scenario that we've seen. February and this is why we were in March and this is I would say that the growth of the international automation can be explained by a few factors. 1st, with the corporate portfolio, In the last quarter, there was a recognition of periods of delinquency that started in the Q3. And because of that, we had a lower effect where there is a high tax on NPL formation.
In the Q1, We had some cases amounted to BRL500 BRL 1,000,000 give or take already provisions And then we have to have the NPL that they were already positioned for. So there was a reason to make an additional decision there. But for SMEs, We don't break the sound that we can say that is a mass Also, we are not having debt variations. SMEs is formed by mass and the part of the portfolio up to BRL500 1,000,000 in revenues. In the corporate portfolio, I also have some disclosed to BRL 500,000,000 and one of them about BRL300 1,000,000 that have already become NPL, which we were already provisioned for.
The credit cycle of these companies and what happened to these Credits, this doesn't have a lot to do with the crisis, which 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, net credit would be more in rate your operations with higher margin. So you have a little bit of cash effect. But I would say that Overall, so my question is there is another important aspect, which is the following. If you look at the NPLs 50 days past due and compare this to 90 days past due NPLs, Horizon base is €4,000,000,000 lower than 50 days because we are making a major investor in terms of renegotiating and with these clients.
And this was hindered by the quarantine in the 2nd week of March because we had military public offices that were closed and many other things. Corporate was only almost €1,000,000,000 already positioned and this was sustained in part. Although we have more provisions coverage, it didn't improve a lot because we had a 1,000,000,000 NPL coming in without being matched by its vision. So I think these are the most important points that I can raise Thank you for the opportunity. I would like to continue with the ratio of portfolio quality.
How do you intend to give us transparency about your portfolio? You know that you will have the prerogative of maintaining this portfolio as the Central Bank is allowed without any downgrade. Given 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 and how Your ability to work with renegotiation portfolio regarding the AOL capital employed levels around with 67%. So I would like to do the dynamic involved in order for me to Okay. And if the excess IOL was enough to know whether this When we expanded the installment, well, this was an attitude that we 2, in order to protect and to help people.
And we did this for April May and what we see But we are almost in May. And there is no solution in the horizon. There is no Medication or drug or vaccine, yes. Have you said that? It seems that these people might have lost their jobs And maybe these people are working from home and the Entrepreneurs can legally decrease their salaries and cut their salaries.
And this is why we are going to extend this further for an additional 60 days of June July. Besides we Thank you, our branch network, I think that if the person has serious problem, is it very useful to do only this Because the person has lost his or her job and 60 days is not going to solve this problem. So it only prolong the avenues. So another solution for these people, let's say, give a grace period of 6 months or something like that. Having said that, The impact of BRL200 1,000,000 is because of these cases, so in these BRL200 1,000,000, you have a part A batch 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 position for you at GEOs. We know the time of this call is today, RUB 1,400,000,000 overall so far. We do not mean that this will all become delinquency. Part will be delinquency, Felicity and Part will not be, Let's say, 30% of the income and the other will take their loans. So the liquidity should be much better than We do have to evaluate this on a monthly basis.
And to inform any of these people that have already extended for Today, we'll be extending into June 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. So There is no way you can have a more thorough valuation at the end of the Q2 of EBITDA that you have more concrete figures to convey to you regarding What we've said and what we've not disclosed, credit risk We're really going to change it before becoming delinquent. They are not shown in the really appreciated portfolio. But especially, We do not have this yet regarding the renegotiated portfolio.
Our really attractive portfolio has a part that has to do with recovery credit. We started both with 100% position into this portfolio and this position will only reduce when we receive this credit. Okay. Thank you very much. Good afternoon, everyone.
Thank you for taking my question. I may ask 2 questions. A follow-up actually of questions on credit quality. So the current NPL was very high this quarter. We already had 15 days of lockdown.
So the worst is yet to come. Do you expect to see a potential in the community at 100% of NPL formation? Or should we Glad to see an additional provision consumption in the coming quarters. The second question And about the risk appetite of the bank, we will turn in a strong portfolio growth trajectory. So how do you expect the portfolio to behave down the road?
Do you think there will be the same growth pace? All should expect to see an important slowdown in the coming quarters. And how do you imagine That the margin is expected to be in the current environment that has a part of interest It is in the historical low historical rate, but at the same time, the risk is going up. Thank you, Giovanna. Gustavo 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 in this snapshot. And according to our studies, The idea is to start 2.5000000 now. 2.4 that were around society. So we are maintaining the teams. We are working on it.
Yesterday, we issued a report of the Central Bank mentioning BRL495,000,000,000 as additional provisional requirements in the Brazilian as a whole. So that's the additional credit card necessary. So we keep on working. We keep on doing our job. We don't know what the extension will be and how long which will take place to happen.
So we're working on additional provisions for even a second, 3rd or 4th quarter, Zustein and how will we end? We cannot say this is not going to continue. We expect it to continue, maybe at a lower stage depending on the economic upturn. But if you keep on Leading additional investment, as per the loan portfolio, we have one thing, which is customers already have the risk For these people, as you can, expanding the installments, Financial reorganization, whatever we need is to continue the same interest rates of the agreement of the contracts that's committed by banks in order not to change the interest base of these operations. But for new operations, Eurburne, naturally, There is a change in the scenario as a whole.
There is a reduction in international lines, for instance, from U. S. Banks For us, as we missed an increase on spreads, we have to consider The FX and for instance, so for new acquisitions, certainly, the investment risk is much higher. And therefore, We have to consider the additional risk or better collateral in the operation, This might lead to a better loan margin credit margin macroly, but certainly, Jazana, the loan portfolios will not grow again in the near future. Just to give an example, we saw a growth in the Individual loan growth was 36%, nearly 37% for personal loans, which had a very good margin.
So are you not going to grow more during the COVID for payroll loan? So which one will be working on it? It has been under control. Mortgage loan, we also tried to maintain the growth guidance that is expected to grow less naturally owing to the market. Credit card also slower growth.
Auto is also going down. So it's not going to grow more at the same pace because that's natural market circumstance coming from lower People demand also because we have a higher credit risk. And therefore, people are being more conservative, so just and credit rating as well as how we work on our guarantees and backlog for fiscal year. Thank you. The next question is from Thomas from BTG.
Good afternoon, everyone. I'd like to ask 2 questions. But this question is more focused on insurance. Could you help us to margin what we expect to see for coming quarters? Maybe seasonality is going to be slightly lower and therefore, health insurance company profit.
But the financial performance was heavily impacted this quarter. So what did you envisage down the road What about the flow coming back in the second quarter or inventory effect that maybe are at a lower level. And others continue to think about the bank. You had a high level of provision additional provision. So what about the future?
Maybe imagining that 11% ROE as a whole is something that makes sense Thank you, Thomas. Vinicius, the CEO of With regards to the insurance group results and to know the results of insurance operations We're heavily affected. We saw a number of factors, Very low ITCA, which hits a significant part of our portfolio, lower silic rate and the impact Equity income that happened in March, a drop of almost 47%, affecting part of our positions for equity that is mark to market. Down below, we have a risk allocation that is very appropriate vis a vis our AOM. We are still assessing different scenarios.
When it comes to the operating income, This team is very adequate for the Q1 in our opinion. Despite the more challenging scenario that became more intense in the second half of March, this Positive results is maintained at a very proper level. Like Otavio said, we are going to a moment in which we have limited visibility. And we are working on an assessment of the prospective scenario owing to the very important event. If you think about our positions, we already see an impact in the Q1 According to the model of technical positions we have based on some Strengthening operations, but when you 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, but 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 And at the same time, we see a gradual displacement by ER and additions to Mexico 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 seems too early to give out the magnitude. We never checked that in March, but in our analysis and model, We are trying to analyze the impact. And like Otavio said for auto, we also see a short term effect of Central Distance Enrolls and Optimum, the number of car crashes, thefts, trains.
And down the road from the moment we have a scenario of easing of social sequencing, Chances are that the number of claims will grow very fast Considering some positive indicators, and the scenario for new sales will be It will depend on the economic recovery. Today, the auto segment is really surviving from renewals. So this scenario is fully visible. We have been very careful with our analysis already reflecting Our models doing prep tests to fine tune our modeling with visibility is very low. What's very strong in my opinion is the migration, like Otavio said, the migration the company did into home office.
We have a feeling that we are getting we are improving, so to speak, our digital channels, providing operational improvements so you and adapt business channels in our channels. Thank you. So just to summarize, operationally, the insurance part is very good. Operating numbers are good. Claims ratio going down.
In electing to balance medical procedures, while they don't see a doctor 4 times in the same day, The claims ratio will not be there and will come back later, so we have the same. But with the insurance company, all the conditions or the strategies of volatility on the market, equity, income, stocks and multi market. So once volatility is over, we will be total benefit insurance company. So it's only a matter of considering the volatility moment and consider the long term because the assets we have there for pension plans. So it's macro because the changing scenario was too certain and volatility was very intense.
So that's food insurance company and answering your first question for provisions, We did what was reasonable and what the moment asked us to do. But certainly, considering this scenario, We have to do some work down the road. Because you have the guidance, it doesn't make sense Talking too much about the ROE, whether it will improve or not. Mostly depends on the behavior of the economy and how significant the line of delinquency will happen With drop in GDP or higher unemployment, there are too many variables involved, and it's too hard to tell any numbers of 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. Good morning, I have 2 questions. 1, I would like to speak with the NPL. And short term delinquency and long term delinquency as well.
And 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 investors should go? Right now, we would rather not 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 on real data that we have canceled guidance because we are waiting for a more predictable scenario so that you can go back to the new guidance.
As you said, We will be evaluating the position on an ongoing basis, and we will probably have to build a position in position. That's all I can say for us. I have another question. We saw the loan payroll loans being discussed Do you believe there will be new forms of risk sharing in order to further incentivize credit, how we've been working along these lines. This is Antalco.
We continue these banks continue to talk with the government And the strategy and the Central Bank, because we're able to This is the good alternative for company from That was lower than €260,000,000 or higher than €10,000,000 we are discussing. And we are thinking about increasing the range from 0 to 30. So you will get a Ryder's scope of companies will cover a Ryder's scope of company. If this is possible, I believe it will be possible We do have a wider range of companies, and We have the guaranteed credit guarantee income of the BNPF from BNPF30 1,000,000 to BNPF 760,000,000 and we are in advanced talks Please talk about the new line. Airlines 3 to 10, the companies that are suffering the most So You don't have one size fits all.
You don't have one size of solution that may cover all these companies. It will keep you all the company's faces. We already have very advanced work with many of them so that we may reach a good solution that will move to places for everybody for this range of companies. Okay? Thank you.
Good afternoon, everybody. If you compare with the areas that doesn't have the kind of delinquency. This 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-nineteen so far and looking ahead This wouldn't be a correct snapshot, I would say, because you will be postponing this.
The information is very strong. Could you explain a little bit about the dynamic involved? In relation to the extension, which shows to extend And the strength of our clients at the moment when we This is like a blanket situation in place to follow in the strategy for everybody. So this is a different strategy that exists among banks. This year, we had 6,000,000 installments that matured and 1,000,000 asked or extension in the other stage.
So you have to look at the flip side of the coin. Anything I can say to you about the field in terms of provision 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 Besides the magnitude of the COVID-nineteen problem in terms of engagement and delinquency and whatever, Just in other countries, the integration over, if I'm not mistaken, about $8,000,000 And this is what we are doing as well. Although we are not capable of In a catastrophic scenario, we know that the competitive scenario This has a bigger impact on delinquencies until April 2016 because all the sectors are being hit. We do not know how much is slow will happen in the future. So any theory is too premature because we only have about 15 days.
We know that the curves go up in terms of delinquency as 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 Q2, we will We've come ahead of us in terms of delinquency problems. So revenue generation capacity, Look after our call, it will be stricter than BBB for instance. And our need to grow revenues. So, we'll come 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, on the data screen. The extended contracts represent how much of your overall portfolio?
Can you talk about the So portfolio or maturities? So let's see, BRL 6,000,000 maturity, BRL 1,000,000 expanded With an average of 13 months, 6 times 30, 180. So I would say 100 basis In terms of the empowerment, if any, this is just a quick recap. Visibility is very low and we do not know what will happen And a solution has to be found in the future. But with all these uncertainties that this one is true that Bradesco has to take some time to play The goal that it has to play and our goal is to serve Our people, our workers' liquidity, our clients, our balance sheet, As it is possible to have a more precise forecast, It has not been necessary.
What we are doing, that's been necessary and will continue to be necessary from now on. And we are taking the right attitude to preserve and to maintain our history and taking all the necessary measures they have to be taken. The Brazilian economy is very diversified. Because of that, we have to think about tapping into all these advantages. But right now, These attitudes were necessary, and we keep them.
We wish you all a very good afternoon, a very good holiday. Thank you very much. Bradesco's conference call is closed. We thank you for participating and we wish you all of this afternoon. Thank you.