Good morning, ladies and gentlemen, and thank you for waiting. Welcome to Bradesco's third quarter 2020 earnings conference call. This call is being broadcast simultaneously for Bradesco investors at the website bradesco.bradesco/ir/en, where the presentation is also available for download. We will have simultaneous translation into English. We would like to inform you that all participants will be listening in remote during the company's presentation. After the presentation, there will be a Q&A session when further instructions will be provided. Should any participant need assistance during this call, please press star zero to reach the operator.
Before proceeding, we would like to mention that any forward-looking statements that are made during this conference call related to the company's currently available information and financial information, may involve risks, uncertainties and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future. Investors should also understand that general economic conditions, industry conditions, and other operating factors could also affect the future results of Banco Bradesco and therefore could cause results to differ materially from those expressed in such forward-looking statements. Now, I would like to turn the floor over to Leandro de Miranda Araujo, Executive VP and Investor Relations Officer.
Good morning, everyone, and welcome to our third quarter earnings release conference call related to the third quarter of 2020.
Here with us are Mr. Octavio de Lazari Junior, our Director and President, André Rodrigues Cano, Vice President and CFO, Vinicius Albernaz, CEO for Bradesco Seguros, Marta, Executive Director, and Carlos Firetti, Director and Head of IR. I'll give the floor to Mr. Octavio de Lazari Junior.
Good morning, ladies and gentlemen. It's always a pleasure to be with you again. I hope that you are all well. To initiate our conversation, throughout the third quarter, we have seen an evolution in the reopening process of the economy and the return, certainly, with many restrictions in various day-to-day activities in a number of regions in Brazil. At Bradesco, almost all of us are still working from home. Almost 95% of our employees from departments and affiliates are still working remotely, 50% on our operations team.
As we stated in previous quarters, we are working well, and we have prioritized the health of our personnel and clients because this is our number one concern. Since the beginning of the pandemic, we have made great strides, and we have introduced new solutions that are almost unbelievable considering the current situation, and we are able to offer a very encompassing basket of services to our clients. In addition, we've been focusing on providing our clients with financial solutions to help navigate their way through this crisis. The search for loan extension is almost over. In April alone, we extended almost BRL 32 billion in contracts, and in September, this number fell to BRL 1 billion. We will give you more details about this ahead. We also intensify the restructuring of loans in order to provide our customers with loans suited to their payment capacity.
In addition, we are also offering a large volume of new credit lines related to emergency programs. In the third quarter, we see a continued recovery of the economy, which suggests an acceleration of GDP. We expect that in 2020, there will be a 4.5% decline, which is far better than what we saw at the time of the Q1 2020 disclosure. Despite the anticipated reduction in emergency aid, interest rates will remain low, and loan will underpin the economy. We see exports and agriculture playing a beneficial role in the performance of the economy. We believe the economy will fully reopen in 2021, and this will certainly help in the recovery path. There was a significant amount of money put away into savings during the pandemic, which also helped our collecting of deposits.
We believe that this will mitigate the risk of default and will partially offset the end of the emergency aid. The emergency aid to families without income was essential, we need to recognize that Brazil has spent more on this pandemic than other emerging countries. As such, management of this account will be crucial to ensure that the recovery in 2021 is not disrupted. Moving to slide three and going straight to our results. The net income in Q3 was BRL 5 billion, an increase of 30% in the quarter in an annual comparison, but it's still 22% below the same period of 2019. ROE in the quarter was 15.2%, a positive trend compared to Q2, which was 11.9%, but it's still well below the pre-pandemic level.
We believe that our ROE will continue to improve, assuming that we do not have any significant worsening in the course of the pandemic and that the economy continues on its path towards recovery. Our loan portfolio rose by 45% in the quarter with good performance on SMEs and individual borrowers and a reduction in large companies. Tier 1 capital showed a solid growth of 40 basis points, reaching 12.9, closely approaching the levels of Q4 2019. Moving to slide four. Here we show the evolution of some lines of our equity. Here we present the performance of some income and assets slides. We would like to highlight the evolution of margin with a growth of 3.5% year-over-year, despite the reduction in interest on overdrafts compared with previous quarters in lines that were put available to SMEs, which have lower spreads.
That, again, has a good coverage for the delinquency, which tends to suggest that we shouldn't expect any losses due to these lines, but they in turn affect our margin. When compared with the previous quarter, we saw a reduction of 8% of the net interest income in Q2 was quite strong due to the margin with market, which was favorable. It's also worth mentioning the loan loss provision expenses decreased by BRL 3.3 billion in the quarter. Moving to page five. Here we show that our funding continued to progress quite strongly. We had a 3.6% growth in total funds raised from clients in the quarter and a 35% growth in the last 12 months. Our loan portfolio today accounts for 81% of total funding, which is a very comfortable position.
This positive performance in funding can be explained by the high quality of clients who redirect to deposits at the beginning of the pandemic, also the migration of investments in FI funds to deposits or other kinds of investments. On page six, we show you the expanded loan portfolio that grew 0.5% in the quarter and 11% in the last 12 months. When we look at the composition of growth, we see a strong performance coming from SME lines driven by the lines of emergency aid, which had come the government. Most part of the SME growth came from the emergency aid. There was also solid growth coming from individuals, where we grew, in fact, in all lines except for personal loans, which was expected on the onset of the economy, as we tied up some of our credit models.
Revolving lines and overdraft and credit cards have also been less used. Overdraft in the past was much higher than today because clients are not using their credit as much. Both in terms of revolving lines and installment payments, all of those lines were reduced. Large companies' portfolios narrowed significantly this quarter, which was expected with most clients now prepaying part of the excess working capital in part, the working capital that we took at the beginning. We also have reduced exposure, and that's why we were trying to improve our spreads when it comes to operations with large companies. Moving to page seven, we would like to point out that the bank has already dispersed almost BRL 20 billion, BRL 19.3 billion in lines of emergency programs created by the government.
This is where we concentrate the bulk of volume like FGI, investing guarantees, guarantee lines that use compulsory from savings accounts and credits. On page eight, still talking about provisions, we have continued to bolster our provisioning in lower levels this quarter. Still naturally making provisions well above the pre-pandemic levels. This amount has been already reduced, reaching the lowest level of the year, 11.4, just for that. The calculation for provisioning requirements still based on our modeling of expected losses and our expenses with extended loan loss provision reached BRL 5.6 billion in the quarter, or 3.4% of the loan portfolio. After the nine months of 2020, we totaled BRL 21.1 billion in provision expenses compared to BRL 14.4 billion in 2019.
The total provisions in our balance sheet reached BRL 44.9 billion, or 9.2% of the loan portfolio, which is a sign of the resilience and the robustness of our portfolio. Even though we are more conservative, if all of the current assumptions are maintained, we should also show a further reduction in provision expenses in Q4. Page nine, we continue to show important improvements in the 90-day delinquency indicator as well as stability in short terms of delinquencies. We are seeing most of our loan portfolio performing well in terms of quality. We must also acknowledge that the NPL indicators are also affected by non-renegotiations. We now believe that the peak of defaults in the current crisis will occur in part of Q2 2021 and Q3 2021. Our expectations in terms of loan quality have improved substantially.
Which is why we believe that this peak may be lower than the one in 2015 and 2016, during these crises. This depends, of course, on our current expectations, and we hope that the economy remains resilient and does not go through any further slowdowns. Going to page 10. NPL this quarter was well impacted also by loan extensions and renegotiations, but we have good news that we are going to present ahead. On page 11, we show the coverage ratio. With a further decline in the NPL ratio and a growth in the stock of provisions, the 90-day NPL coverage ratio continues to grow, 60% mostly. Considering the breakdown by segment, we saw an extension of coverage in all of them, with the exception of the portfolio of large companies.
Coverage remains virtually stable in an expanded coverage concept, where we include the portfolio renegotiated with 90-day NPL. On slide 12, considering transparency, we share important information for you. It seems to be very timely because it shows a very positive performance of extended loans, way better than we could have imagined in the beginning of the pandemic when we talked in Q1. The total extension in Q2 came to BRL 61 billion, out of which BRL 39 billion was back to normal on-schedule payments after the grace period ended. BRL 21 billion was still within the grace period, and those in arrears amounted to only BRL 1 billion. At the end of September, out of the BRL 72.7 billion of extended loans, BRL 54 billion had already returned to normal on-schedule payments and BRL 18.3 billion were still in a grace period, and BRL 1.1 billion was in arrears.
A small volume of arrears compared to the extension. For October, we have BRL 6.7 billion, in November, BRL 2.4 billion, in December onwards. With the information we have available today and considering the behavior of payments that happened in the past, we are confident that the loan quality of clients who are still coming out of their grace period will also be good. We have to highlight that out of the BRL 74 billion extended, BRL 54 billion already back on schedule, and we only have another BRL 18.3 billion grace period, which at least expect to have the same behavior of the remaining BRL 54 billion. We have some comfort for provisions that are more than enough to face this adverse scenario, supported by an extended portfolio with a very good quality.
As you can see, 93% of customers that are not delinquent, 70% and 94% from A to C, and these customers, on average, have less than three years of relationship with the bank. According to this information, now we have the renegotiated portfolio on page 13, the strategy to support clients during this challenging time. Our renegotiated loan portfolio grew by BRL 4 billion in the quarter, mainly due to customers that prefer to renegotiate their loans with longer tenure instead of extending the due dates. The customers decided not to extend any longer. Now we renegotiated with a grace period with collaterals. It's important to highlight that this renegotiated portfolio has a high level of provisions. The ALL accounts for 62% of the portfolio.
Our renegotiated portfolio, particularly the last one, 63% of renegotiations in the quarter have fewer than 90 days overdue because things are back to normal, and therefore, overdue 90 days is now for 5.9%. The portfolio is comprised of good quality customers, and therefore, we expect to have lower losses this time compared to the traditional renegotiated portfolio. What about NII on slide 14? There was a drop of 8.4% in the quarter. This was primarily due to the reduction in the market portion. Like I said, it's well above the average in Q2, and also a reduction in the client portion due to the still low use of revolving lines. Companies and individuals and the growth of lines from emergency programs.
On an annual comparison, NII grew 3.5% with a 2.3% increase in the client portion, despite, like I said, the cap in overdraft that began in January 2020, and also the use of credit cards. We see the market portion remaining with a good performance over the next two quarters. The client portion is expected to react to volume growth with a more favorable mix. I'm here to highlight that this lower level of NII is very much related to these lines of government with lower spread. Like I said, there is a good level of coverage, and we expect to see a very tiny loss. In addition, the use of overdraft, the non-use of customers, like I said before, went down from 4.2 to 3.2 in the balance of overdraft. Credit cards are lower volume, revolving credit, installments, but that's just a momentary thing.
Things will go back to normal. It is already going back to normal. The trend of these indicators is to have full recovery. The income, now on slide 15, showed a recovery this quarter owing to the economic upturn. We still see a negative quarterly performance in the line of loan operations impacted by the reduction in loan origination and portions and contracting fee, particularly in corporations. This is more explained by the emergency lines growth with no tariff or fee, unlike revolving credit and corporations. Certainly, this will be recovered. In the annual comparison, we positively highlight investment bank and brokerage. Despite a recovery in the quarter, significant lines such as credit cards and asset management are still decreasing. Like I said, in credit cards, the reduction occurs due to the drop in the volume transaction.
In asset management, due to the reduction in the management fee of fixed income funds, as well as the migration of resources from these funds to deposits. This effect obscures the solid improvement we have seen in the mix with a growth in equity funds, mostly markets, tender funds, and mirror funds by independent managers. On slide 16, we continue to deliver an outstanding great cost performance, and we expect them to get even better over 2021. In the annual comparison, we can see the signs of the cost adjustments. We saw a drop in administrative expenses of 7.9% for the quarter alone and 3.3% over nine months. Personnel expenses dropped 18.3% in the quarter and 7.6% over nine months. With regards to total expenses already including others, we reported a 5.7% decrease in the quarter comparison and a 3.9% decrease over nine months.
We are in the process of making a major cost adjustment within the bank right now, which should allow for a reduction in cost in nominal terms already in the last quarter of 2020 and 2021 and beyond to capture this full reduction. In order to address the expected costs of implementing this adjustment that we put into practice, this quarter we carried out a restructuring non-recurring provision of BRL 879 million in the quarter, involving rent restructuring and personnel. Now on slide 17, we show some of the details of the adjustments that we're already making in our branch network. We're already performing an essential adjustment since the beginning of the year, but this adjustment was intensified by the acceleration of client digitalization trend and a reduction in the use of branch tellers with people working from home.
We will be reducing our total number of branches by 1,100 in 2020, 700 of which will be converted into satellite or business units, and 400 will be closed this year. We estimate that we can attain costs, as you can see on the left-hand side. We have a hub supplying service to our customers and several satellite branches, up to seven. These branches, known as business units, they are linked to these agencies where they don't have treasury costs or surveillance costs, armor costs, 100% focused on business and not back office. We can see that cost reduction for these business units amount to 30%-40% of a conventional unit. So far, we have reduced 683 branches, 163 were closed and 520 were already converted. On slide 18, we address part of our acceleration business.
At Bradesco, we have a number of business that should be highlighted due to their strategic importance. For instance, Next, we have 700,000 accounts opened with a very small churn, more than one million accounts this year. In addition to that, Next already achieved 3.2 million customers. Certainly by year-end, we are going to have 3.7 million. Ágora, already 490,000 customers ongoing in the brokerage. Recently we launched this, which is a strategic important business, particularly for customers who have a hard time or restrictions to have a conventional account. They can have the digital portfolio, which complements our product and service offering. Now we already acquired a company, which is DinDin, and we have other acquisitions down the road.
In addition, we highlight a series of businesses with specialist banks such as Losango with rural credit or personal credit, payroll loan and Bradesco Financiamentos, with more than BRL 34 billion credit portfolios and Bradesco Consórcios, which is a very lean company, but BRL 800 billion, generating more than BRL 1 billion results, exceeding BRL 1 billion. This brings a lot to Bradesco. We just completed the acquisition or will complete the acquisition of our bank in the U.S., BAC. We are just working on the agreement. Our team is already there and certainly this will bring equivalency to Bradesco. Finally, our recently announced agreement with JPMorgan to transfer its private bank activities in Brazil to Bradesco. We already hired nearly everyone, BRL 20 billion in AUM and a considerable share will certainly come to Bradesco.
We're maintaining the great talents there, bankers, experts who will also join us, bringing comfort to our private banking at Bradesco. The insurance business, page 19. The performance of insurance continues to be adversely impacted, particularly by the financial results owing to low interest rates, low IPCA or extended consumer price index. In the operating result, we had a reduction in the quarter owing to our increased claims. We expected to see some growth, despite this, we show a 3.8% growth over last year. Claims ratio increased in life because we provided coverage for pandemic cases owing to humanitarian reasons and for health insurance, also an increase in loss ratio, but below the levels year-on-year, 84.6 back in the third quarter and 20 vis-a-vis 87.9 in the third quarter of 2019.
This quarter, we had more provisions, BRL 151 million in provision for adverse scenario, amounting to more than BRL 1.2 billion in provisions. We are very comfortable with provisions at the insurance company. We should also highlight that despite all these constraints imposed by the pandemic and more challenging to contact customers and with fewer headcounts, our premium is BRL 53 billion in nine months 2020 vis-a-vis BRL 56 billion in 2019. Therefore, the same billion, a reduction on BRL 1.9 billion, which gives us comfort to recover well our BRL billion of insurance company. On slide 20, about liquidity and capital. Our capital ratio continues to increase. We had an increase of 30 basis points in the common equity and 40 basis points in Tier 1. The main source of capital generation was the retain in current quarter.
As final remarks, I would like to share with you, ladies and gentlemen, on slide 21, obviously, we prefer not to give an official guidance. It doesn't make sense. We are now in November, but just as in the previous quarter, we'd like to share some expectations about the remaining part of the year. We believe our credit portfolio will grow a little more than in 2020. The NII, we believe it will grow in line, but it will grow a little bit less. It should be noted that the credit portfolio will grow more than we expected. Fees and services will continue to be pressured by the economic scenario, should grow seasonal growth in Q4. The insurance result will continue to be pressured by the lower financial results as a result of low interest rates and the behavior of inflation index.
Like I said, recovering BRL billion. Like we said, we are having a structural, deep adjustment in costs at the end of the previous quarter. We expect to see a drop in nominal costs in 2020 and 2021. In addition, we will continue to pursue opportunities for the future. With regards to provision expenses, we expect to see an additional in numbers lower for 2021 compared to 2020 because our models are showing this and the good performance of the expanded portfolio also gives us this conviction. For 2021, obviously, we are still in the process of completing our budget. Considering that we do not have a significant worsening of the pandemic, I think we are in the last mile to have a final vaccine to this evil that afflicts us all. Today we have a more constructive view.
Even though we haven't closed the budget, but considering expectations for 2021 and assuming a scenario in which our projections for the economy actually comes through with a drop of 4.5% in GDP in 2020 and growth for GDP in 2021, generally speaking, we can see that the levels of result of the bank in 2021 tend to go back to levels close to what we posted in 2019. Expenses are expected to have a similar magnitude to what we had in 2019, and according to our modeling, we won't need this provision in 2020. The total cost naturally will go down. They will go down in nominal terms vis-a-vis 2020. The loan portfolio grows above the market. The current projection for the market in 2021, we expect to grow above what we posted.
As to the NII, like we said before, that I made a point in emphasizing, it was affected by lower spreads in lines from the government. Particularly because we had these lines in which we have lower margins, lower spreads, lower losses. Certainly it will be somehow offset in lower use of overdraft, check, CAP, and the natural history, and the low use of credit cards with lower volumes of use and also lower volume of revolving credit and payments. Like we said, life will go back to normal. It is going back to normal. The trend for all indicators is in the upturn.
There is pressure on fees, the gains of scale that we're implementing, like we said, investments, Next investment in the customer base in Ágora and the equivalence that comes from insurance operations, pension funds, and also gains of equivalency from our consórcio and BAC coming now, and also the corporate banking clients. If you put it all together, we are confident that we'll have gains of scale and new products to offset it all. Before concluding this expectation, I would like to once again invite you to Bradesco Day, which will take place on virtual basis on November 10. Please check the details on our IR website. Thank you very much, you ladies and gentlemen. We move now to the question and answer session. Thank you very much. Thank you. We will begin now the Q&A session.
If you are an audio participant, you can ask your questions. I kindly ask other attendees to remain in listen only mode. If you want to ask questions, please press star one. To remove your question from the queue, please press star two. The first question is from Yuri Fernandes with Citibank. Thank you for the opportunity to ask a question. I have two questions. The first question is I want to have a better understanding of the level of provision that you're working with. It is crystal clear, according to the message, that we expect to see a drop not only in the next quarter, but also next year. I would also like to understand, considering this level of comfort and particularly the extended portfolio and the level of provisioning, 9.2% reserve for the total portfolio.
Why is it the bank also has BRL 2.6 billion as additional provisions for adverse scenarios this quarter? We should expect to see a reversal of provisions starting next quarters, coming quarters. My second question has to do with the level of dividends. The bank already has 12.9%, 11.8% of common equity. During this call, we have taken off an improvement in the expected scenario. After the end of this dividend payout by the Central Bank, what should we expect to see as payout in 2021 or extraordinary payouts for the coming year? Thank you. Thank you for your question. With regards to provision levels, we contemplated a lower level now, and provisions according to our expected loss models are pointing to.
Despite good news that even surprised all of us, including you as well, about the good performance of extended operations payments, we thought it would be wise to address some one-off events. We took 100% provision, and we are very comfortable with the level of provisions that we have today and what our expected loss models point to. That is why we said that we expect to see lower levels in Q4. Naturally, it will all depend on the scenarios for the future. With regards to dividends, Yuri, there are some constraints imposed by the Central Bank. Over the next year, if we actually see signs of improved scenario. There is some anxiety now about higher number of cases in the U.S.
Like I said, if we have the vaccine and people more comfortable and the economy coming back to normal and good expectations of the economy next year, certainly we will see dividend payout at a much higher % to our shareholders. Perhaps even with more provisions. It will all depend on the future scenarios. Provisions, like we said, since the very beginning, we said that they are provisions for an adverse scenario. If we no longer see an adverse scenario and there are signs that provisions are enough or adequate, naturally, we always try to be conservative. We are always very careful to have a robust balance sheet at the bank. Certainly, we are going to keep that into account when there are dividend payout to our shareholders. Thank you. Our next question from Thiago Batista from UBS. The line is open, sir.
Good morning, everyone. I have 2 questions. My first question, when you look at your revenue dynamics versus the lending fees, do you have an idea of what comes from NIR, from insurance? I know that we will see some important changes looking forward when you break down the bank's revenue. My second question is about fee/OpEx. When Pix is introduced, you have the fees on the one hand, and on the other hand, you have the process of holding costs. When you look at both lines put together, do you think that the cost drop will be enough to offset some possible decline in revenue and fees, not only in 2021, but in the mid-range? You also talked about dividends. Is there any possibility of a buyback? I know that you do not envision any buyback, but is it possible to see some buyback in 2021?
Thank you so much for your question. In fact, it was very good that you asked that. If I could answer in a single word, I would say that the cost reduction and OpEx reduction, could it offset Pix? Yes, it could. Let me give you some light. The revenue dynamics, for the near future, I'd say, it goes through an increase of revenue coming from the equivalent of these businesses that are growing in the bank right now. First of all, the insurance company, that's an obvious thing, because as I said, even in a very difficult landscape that we are going through now, in 2019, the insurance company had the same level of revenue.
This level of revenue will certainly increase because of all of the verticals we have in terms of healthcare insurance, auto insurance, because the penetration index for other, like life, is still very small. We have the consórcio company that is moving quite well, posting more than BRL 1 million in results. We have Next. Pix that is coming now as well. Next should reach maturity, and once it reaches maturity, it will post further results. The equivalent of these customers that we are bringing on board denominated in dollars is still very small, but it will grow. We have an incoming new portfolio of clients that not only make their own investments, but they can buy other products. Therefore, there will be another additional fee that will come through these other lines of businesses.
What I can say is that in a very short period of time, in terms of the fees and the new dynamic coming from all of the other businesses, this is what will evolve in time. Pix maybe is a attracting factor in terms of fee income. I honestly believe that this may happen, but in a very marginal way, because not everybody will use Pix to transfer money. Companies may not do that through Pix. Pix, as TED was in the past, you might recall, requires a learning curve until everybody-
Adheres to it. As it becomes more utilized, other businesses and other activities from the bank will start communicating among themselves. In terms of OpEx and all of the fees, it is absolutely necessary. And let me give you a number, Tiazal, that I think is important. The number is posted in our balance sheet, but I would like to highlight. If you take the recurring P&L of Bradesco right now, you will see that our NII in the first nine months was BRL 46.5 billion, meaning that this is quite relevant and robust. We had BRL 46.5 billion against BRL 43 billion in 2019. Despite the very dire landscape, we were able to grow our revenue by 7.3%.
When we look at the expense side, in 2019, there was BRL 36.5 billion against BRL 35 billion now in the first nine months of 2020. There was a 4% reduction, BRL 1.5 billion less in expenses. When you look at the nominal figures, BRL 46.5 billion of revenue against BRL 35 billion of expenses. Our cost structure is very large, like that of large corporations. As Chaubuko said, we have to have a cost structure and a serving cost which is suitable to the new reality that large corporations will face, be it in terms of the digitalization of our clients, lower number of branches, and our employees now focusing on doing business with our clients.
For all of these reasons, we can say that the percentage of expense reductions that we are able to post in 2020, that will certainly increase in the second half of the year or in the three final months of the year. You will see that when we post the results for the fourth quarter. We already gave you a small sign because we already saw these reductions coming, being posted this quarter. It will be further captured throughout the end of 2020. Let me give you a clear example which illustrates this point. In Curitiba, when we acquired HSBC, we had 11 administrative facilities or buildings. It's also very complex to make reductions because how can you adapt a building when everybody is still working in that building?
With the pandemic, everybody went to work from home, therefore, we were able to do that. Out of the 11 admin buildings we have in Curitiba, there are only two remaining. Nine buildings are now inactive. With that, we were able to reduce taxes, reduce property tax, reduce cleaning expenses, reduce overhead, we reduced rental payments. We also put some buildings for sale. Those that belong to us, they are now in the market to be sold. This accounted for a reduction of BRL 30 million in rental and BRL 40 million reduction in admin expenses. We wouldn't be able to do that if were not for that pandemic period. Out of the 11 buildings, we only have two now. In addition to that, we will sell all of the remaining buildings, and this will probably generate between BRL 80 million-BRL 100 million.
We also have efficiency gains because people are working from home. A building to accommodate 2,000 people have one service center. Once people are working from home or remotely, I don't need one entire building just to allocate 2,000 people anymore. Therefore, certainly, costs will be involved not only to us but any other company if they want to maintain the profitability level. Because for us, this has become like a religion. In the fourth quarter, we just trimmed the grass to use a magnet island to go deep in every segment, in every business of the bank in order to be more efficient. All of that was just to give you some more light about the importance of OpEx. Now, in terms of provisions, I think that was your last question. This is not a traditional move by the bank.
We are constantly looking at good opportunities. It certainly depends on the market conditions. We will look at it. We never discard that possibility. We are always looking at new possibilities. Okay, thank you. That was very clear. Thank you very much. Next question from Gustavo Schroden from Goldman Sachs. Good morning. Thank you for taking my question. I have two questions. My first question, I would just like to revisit the issue of provisions. Octavio indicated that considering all the information we have so far and the expectation of economic recovery, the economy should resume levels of pre-pandemic. Let's say if we exclude the additional provision of the whole quarter, the credit cost would be then below what it was prior to the pandemic.
Your loan credit is good, so is it possible to identify a lower credit level, lower than the pre-pandemic period if you exclude the additional provision? The second question is about ROE. You had a significant recovery of ROE in this quarter, and considering the current situation, do you believe that next year or by the end of 2021, we will be able to see ROE returning to normal levels? Guilherme, we lost the final part of your question. The connection was not very good. Thank you, Guilherme, for your question. I think that it will be more conservative to say that cost of credit would redeem to levels prior to the pandemic. I say that because we don't know what will happen to interest rate or if inflation will grow once Selic rate goes up, I think we could say something about pre-pandemic levels.
In terms of ROE levels, well, certainly ROE was impacted because of this adverse landscape. When we work to on our next year's budget, we have to consider a better landscape. Now, if you look at our balance sheet and you look at the operation of the bank or the operating performance of the bank vis-a-vis 2019, our operating area, I'm only talking about the bank's operating scenario. We had BRL 12.8 billion in 2019, and in the first nine months, BRL 16.5, meaning 29% in operating alone. If you include treasury, which was better by almost BRL 3 billion, we are talking about a 39% growth. It's an improvement vis-a-vis the previous year. Therefore, we will aim at a ROE that we had in 2019. That's our target.
Certainly, of course, everything depends on us not having any further problems or not having any tax issues or if the country doesn't go through any further economic or tax problems. Hey, we cannot work in the budget considering all of that, but we have to think about business as usual next year. Okay. In terms of your last answer, if you look at 2021, your challenge will be more like a margin challenge, or do you think it would be more related to a portfolio challenge if you want to resume to pre-pandemic levels? In terms of our portfolio quality, we are very comfortable with the loan portfolio quality we have, and we had a positive performance in terms of the renegotiations of the loans portfolio.
In terms of loan quality, what we had to do is to preserve that portfolio even because we have a very robust provision level. I think that the major challenge for next year will be margin recovery. We have to bring more fees and greater margin to our loan portfolio. With large corporates, we are trying to operate a better margin, no matter where you look. For us, next year is a year where we will seek for improvements and better margins, and certainly to focus very diligently on cost, because this will be important when it comes to cost performance at the end. Okay. Thank you very much.
The next question is from Giovanna Rosa with Bank of America. Good morning, everyone. Thank you for the opportunity to ask some questions. I have two questions. The first question is about renegotiation. You provided information about what happened. I'd like to understand the % of renegotiation that were performed. It seems to me that the drop of NPL:90 was owing to the renegotiation. Two, about NPL, I would like to know if the expectation for the first quarter of 2021 Then I'll ask my second question.
Of the renegotiation portfolio, 63% has to do with operations that were less than over 90 days overdue, if I understood your question well.
Actually, I would like to know the percentage of the negotiation that was on-schedule. 63% was lower than 90% overdue. What is the percentage of on-schedule operations? Giovanna, I would say that on-schedule operations, the renegotiation, whatever comes, is part of the extensions that were pending in maturity and depending on the customer's condition, we do a reprofile. Usually, we do not renegotiate on-schedule loans. A renegotiation in our process is when there is delinquency, then we have collection usually after day 60, and that's when we have the recovery team involved and they start renegotiation. What may have come from Well, this is when we have the expiry of extension. Maybe you can compare the size of the growth of the renegotiation loan with what was overdue and then paid again in the extended portfolio.
It's a small percentage, the variation of the extension portfolio from the second to the third quarter, but usually we do not renegotiate on-schedule loans. There is another important detail, Giovanna. Out of the renegotiation portfolio, more than 50% is individuals. When these individuals renegotiate, then they simply cannot pay an extension. These people were already overdue. That share in which people renegotiated when people had nothing pending, this part is very little. I would say it's not even 10% of the total volume. There is always a small delay of a couple of days, but the percentage of delay in the renegotiated operations. Okay, now what about the performance of NPL? We have to admit, Giovanna. By the way, that's an important question you're asking. Every bank worldwide reinforced their provisions concerned with the adverse economic scenario.
If they didn't do it, they certainly will have to do it because there's higher delinquency. We have to admit that today we have a better expectation than what we had in the first quarter. When we first talked about trends for the first quarter, our expectation today is better than in the past. Certainly, part of it will come in the first quarter of 2021, and naturally, the second quarter, we also have it. Maybe even in the third quarter 2021. We will see an increase in NPL in the coming quarters in 2021. That's clear. Thank you. My second question is still with regards to credit quality. This quarter, you already had an additional fund of BRL 1.6 billion. I understand you have a very high level of provision, and you wanted to anticipate yourselves, but what is the rationale?
Doesn't it seem too early because the NPL is not so clear and we still have to wait and see of the aid by the government? Giovanna, that's not consumption. What happens is we're allocating additional provision to specific loans. We work with this provision as an anticipated provision for expected losses based on the modeling. Right now, we are beginning to allocate provisions. Provision for adverse scenarios for individuals. It's not consumption. All we are doing is allocating the provision to specific names. They are not supplementary, but the volume is the same. By the way, if you check the generic and specific generation, these are very low, and this is due to this scenario. This generation, which depends on the credit rating, this is very low.
What we do here is analyzing on a case-by-case basis what at first we did a surplus additional, now we're allocating to specific credit based on our risk assessment. Great. Thank you. The next question is from Danielle Garde. Good morning. Thank you for the call. My question is about investments abroad. Bradesco increased a lot investments abroad this year. Is it right to assume that you are at a comfortable level right now abroad? The second question is, assuming you had a change in legislation and there will be a reduction in overhead vis-à-vis these investments by year-end, and all banks, by the way, will do it at the turn of the year, is that a strategy at Bradesco on how to address not only the flow of purchase but also other banks by the end of the year? Thank you.
Thank you for the question, Daniel. We had a substantial reduction in overhead. You're right. We brought it to the necessary mandatory level to be compliant with our business abroad. Today, our level is adequate to comply. If we have a margin, it is not material, we already have the adequate level. Based on this adequate level, we don't feel any need to have a sudden change in treasury or heads or overhead. Quite the opposite, we are pretty comfortable with the current numbers.
I have a follow-up question. Considering there will be an amendment to the legislation, the overhead will have to be out by half by year-end. My question is, will all banks have to do it to reduce the overhead in the tax account that will bring a high flow of purchase in December? Anything you can share about the strategy or anything that makes sense?
Yes, it's active speaking. We do have our strategies. That's something we don't disclose.
Okay, thank you.
As there are no further questions, we will turn the floor back to the speakers for their final remarks. Thank you so much for joining us today. It was a pleasure to talk to you. I wish you a very good day, very good long weekend with the holiday. We are very comfortable with the number of figures. I think that the balance sheet is very robust, well provisioned. Our expectations for the next quarter and next year are also very good because we understand that we made our homework. The homework is done and well done. We also see our bank with very robust numbers and ready to face a market that goes through so many changes and will go through changes in 2021. Thank you very much, and have a good day.