Good morning, ladies and gentlemen, and thank you for waiting. Welcome to Bradesco's 3rd quarter 2020 earnings conference call. This call is being broadcast simultaneously over the web for Bradesco Investors at the website, Bradesco. Bradesco EN where the presentation is also available for download. We will have Sanitel's translation in English.
We would like to inform you that all participants will be in listen only mode during the company's presentation. After the presentation, there will be a 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 They involve risks, uncertainties and assumptions because they relate to future events and therefore, We can't answer any questions 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 to 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 Andre Camo, Executive, Chief and Investor Relations Officer.
Good morning, everyone, and welcome to our Q3 earnings release conference to the Q3 of 2020. Here with us are Mr. Otavio de Lazari, Jr, our Director, President Andre Rodrigo Cano, Vice President and CFO Dimitris Aldonar, CEO for Bradesco Seguros, Marcra, Executive Director and Carlos Ferretti, Director and Head of IR. Now I'll give the floor to Mr. Okabe Jovazavi Jones.
Good morning, ladies and gentlemen. It's always a pleasure to to meet you again. I hope that you are all well. To initiate our conversation throughout the Q3, we have seen an evolution to the reopening process of the economy and the return certainly with many restrictions in various day to day activities, a number of reasons in Brazil. At Bradesco, almost all of us are to working from home.
Almost 95% of our employees from departments and affiliates are still Working remotely 50% on our patient team. And as we stated in previous quarters, we are working well and we have 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, 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 them navigate their way through this crisis. The search for loan extension is almost over. In April alone, we extended on the BRL 32,000,000,000 in contracts and in September of December fell to BRL 1,000,000,000.
And we will give you more details of what's ahead. We also intensify the restructuring of loans in order to provide our customers with loans Due to their payment capacity and in addition, we are also offering a large volume of new credit lines related to emergency programs. During the Q3, we see a continued recovery of the economy, which to just an acceleration of DBC. 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.
Furthermore, we see exports and agricultural playing a beneficial role on 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 the fall and will partially offset the end of the emergency. The emergency aid of families without income was essential, But we need to recognize that Brazil has spent more on this pandemic than our emerging countries.
So such management of this account will be to ensure recovery in 2021 in Southeast Asia. Now moving to Slide 3 and going straight to our results. Our net income in Q3 was BRL5 1,000,000,000, an increase of 30% in the quarter in an annual comparison, but it's to 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 We'll 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 past quarters recovery.
Our loan portfolio rose by 25% in the quarter with good performance on SMEs and individual borrowers and a reduction in large companies. Tier 1 capital shoulder, solid growth of 40 EPS reaching 4.9%, closely approaching the levels of Q4 'nineteen. Now moving to Slide 4. Here, we show the evolution of some lines of our equity. Here, we present the performance of some income and asset I would like to highlight the evolution of margin with a growth of 3.5% year on year despite the reduction in interest on overdraft Compared with previous quarter in lines that were put available to SMEs, which have lower spreads that again has a good coverage for 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 another 8% of the net interest income in Q2 was quite strong due to the margin with market which was above average. It's also worth mentioning the loan loss provision expenses have decreased by BRL3.3 billion in the quarter. Now moving to Page 5, here we show that our funding continue to progress quite strong. 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 accounted for 81% of total funding, which is a very comfortable position. And this positive performance and funding can be explained by the high quality of clients due to the positive of the pandemic and also the migration of investment in DI funds to deposit or other kinds of investments.
On Page 6, We show you the expanded loan portfolio that grew 11% and 3.5% in the quarter and 11% in the
last 12 months. And when we look at
the composition of growth, we see a strong performance coming from SME line, driven by the lines of emergency A, which had from the government, as I said, most part of the SME growth came from the emergency aid. And there was Also solid growth coming from individuals where we grew impact to all ones that have personal loans, which was Expected on the onset of the economy, we tied up some of our credit model. Revolving lines and overdraft in credit cards have also been last year. Overdraft In the past, it was much higher and so today, clients are not using their credit as much, Both in terms of revolving lines and installment payments, all of those lines were reduced. Now large companies, I will call it, narrowed significantly this quarter, which was expected with clients.
Most clients now prepaying part of the excess working capital in part The working capital that we took at the beginning and we also have continued exposure and that's why We were trying to improve our spread when it comes to operations with large companies. Now moving to Page Kevin. We would like to point out that the bank has already disbursed almost BRL 20,000,000,000, BRL 19,300,000,000 in lines of emergency presence created by the government, And this is where we concentrate the bulk of volume like FGI, investing in guarantees, and they are lines that use compulsory from to Stations account and credit. On Page 8, you're talking about provisions. We have continued to bolster our provision in lower levels as OdeQ naturally making provisions well above the pre pandemic levels because this amount has been already reduced, Reaching the lowest level of the year 11.4 percent.
Just for that calculation for provisioning requirements Still based on our modeling of expected losses and our expenses with extended loan loss provision reached BRL5.6 billion in the quarter or 3.4 percent of the loan profile. After the 9 months of 2020, we totaled BRL21.1 BRL 1,000,000,000 in provision expenses compared to BRL 14,400,000,000 in 20.19. The total provisions in our balance sheet reached to R44.9 billion or R9.2 billion of the loan portfolio, which is a sign of to the resilience and the robustness of our portfolio. Even though we are more conservative, if all of the to the third attention parliamentary. We should also show a further reduction in provision expenses in Q4.
Page 9, we continue to show important improvements in the 90 days recently indicated as well as stability in the short term delinquency. We are seeing most of our loan portfolios performing well in terms of quality. We must also acknowledge that The NPL indicators are also affected by non renegotiations and we now believe that the peak of this call in the current crisis will occur in part of Q2 'twenty one and Q3 'twenty one. Our expectations In terms of load quality, we have improved substantially, and which is why we believe that the speed may be lower than the ones seen in 2015 2016 during this crisis. But this depends, of course, on our current expectations and we hope that the economy remains resilient and does not go through any further no doubt.
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 stockholder provisions, the 90 day NPL coverage ratio continues to grow to 15% mostly. Considering the breakdown by segment, we saw an expansion of coverage in all of them to the expansion of the portfolio of large companies. And coverage remains virtually stable in an expanded coverage concept to our improved cost of renegotiated with Nantibay NPL. On Slide 12, Considering transparency, we share important information for you.
And 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 to talk in Q1. The total expansion in Q2 came to $61,000,000,000 out of which $39,000,000,000 was back to normal to scheduled payments after the grace period ended. BRL21 1,000,000,000 was still within the grace period And those in arrears amounted to only BRL 1,000,000,000. At the end of September, out of the BRL 72,700,000,000 of extended loans, $24,000,000,000 had already returned to normal unscheduled payments and $18,300,000,000 was still in a grace period And BRL 1,100,000,000 was in arrears, so a small volume of arrears compared to extension. For October, We have BRL 6,700,000,000 in November BRL 2,400,000,000 in December onwards.
For the information we have available today And considering the behavior of payments that happened in the past, we're confident that the loan quality of clients We're still coming out of the grace period and also be good. So we have to highlight that
out of the
BRL74 1,000,000,000 Standard, EUR 54,000,000,000 already back on schedule and we only have another EUR 18,300,000,000 grace period, We'd please expect to have the same behavior of the remaining €54,000,000,000 We have some comfort for to provisions that are more than enough to face this adverse scenario, supported by an extended portfolio It's a very good quality. As you can see, 93% of customers that are not delinquent, 70% And 934% from ATC. And these customers on average have less than 3 years of relationship with the bank. To the information. Now we have the renegotiated portfolio on Page 13, the As our renegotiated loan portfolio grew by BRL4 1,000,000,000 in the quarter, mainly due to customers that prefer to renegotiate to their loans with longer tenure instead of extending the due dates.
Well, the customers decided not to extend any longer. And now we renegotiated with a grace period with collaterals, but it's important to highlight that this renegotiated portfolio has a high level of provisions. ALL accounts for 60 2 percent of the portfolio In 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. So 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? It was a drop of 8.4% in the quarter. This was primarily due to the reduction in the market portion. As 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 mines.
Companies and individuals and the growth of lines from emergency programs. On an annual comparison, NII grew 3.5% with 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. You'll see the market portion remaining with good performance over the next few quarters. The client portion is expected to react to volume growth with a more favorable mix. So I usually 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, the balance of overdraft. To credit cards of 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.
So 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 to important contracting fee, particularly the corporations. This is more explained by The emergency lines grow with no tariffs or fee unlike revolving credit and corporations, But certainly, this will be recovered. In the annual comparison, we further highlight Investment Bank and Brokerage.
And despite the 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. And 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 the growth in Equity Funds, Multi Markets, to funds and bureau funds by independent managers. Now on Slide 16, we continue to deliver to an outstanding great cost performance, and we expect them to get even better over 2021. In the annual comparison, we can see the size of the cost adjustments.
We saw a drop in administrative expenses of 7.9% for the quarter alone and 3.3% over 9 months. Personnel expenses dropped 15.3% in the quarter and 7.6% over 9 months. With regards to sort of expenses already including others, we recorded a 5.7% decrease in the quarter comparison and a 3.9% decrease over 9 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 to nominal terms already in the last quarter of 2020 2021 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 nonrecurring provision of BRL 879,000,000 in the quarter involving rent, restructuring and personnel. Now on Slide 17, I show some of the details on the adjustments that we are already making in our branch network. We are already performing to an essential adjustment since the beginning of the year. This adjustment was intensified by the acceleration to our client digitalization trend and the reduction in the use of branch pillars with people working from home. We will be reducing our total number of branches by 11 in 20 20, 700 of which We'll be converted into satellite or business units and 400 will be closed this year.
Yesterday 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 7. And these branches known as business units, they are linked to these agencies They don't have treasury costs or surveillance costs, armored costs, 100% focus on business and not their coffers. So we can see that cost reduction for these business units Amounting 30% to 40% of the conventional unit, so far we have reduced 683 branches, 163 were closed and 520 were already converted. Now on Slide 18, We address part of our acceleration business. At PDUFA, we have a number of business That should be highlighted to their strategic importance.
For instance, next, we have 700,000 accounts opened with a very small churn, more than 1,000,000 accounts this year. And in addition to that, NEX already achieved 3,200,000 customers. And certainly by year end, we were going to have 3.7 agora, already 490,000 customers ongoing to brokerage. Recently, we launched this, which is a strategic important business, particularly for customers We have a hard time or restrictions to have a conventional account. They can have the digital portfolio, which complements our product and service offering.
And now we already acquired a company, which is Bingdian, And we have other acquisitions down the road. In addition, we highlight a series of businesses, specialist banks such as Los Ango with rural credit or personal credit, payroll loan, Bradesco Financiamentos more than R34 billion credit portfolios and Bradesco Consultues, which is a very lean Company has EUR 800,000,000,000 generating more than EUR 1,000,000,000 results, exceeding EUR 1,000,000,000 This brings a lot to Bradesco. And we just completed the acquisition or will complete the acquisition to our Bank of the U. S, DAC. We are just working on the agreement.
Our team is already there and certainly this will bring equivalency to Bradesco. And finally, our recently announced agreement with JPMorgan to transfer its private bank activities in Brazil to Bradesco. We already hired nearly everyone, dollars 20,000,000,000 in AUM and a considerable share will certainly come to the business. We are maintaining the great talents dear bankers, experts who also join us bringing comfort to our Private Banking Prodisco. Now the Insurance business, Page 19.
The performance of insurance continues to be to the impact, particularly by the financial results owing to low interest rates, low ITCA, to our extended consumer price index. I mean, the operating result, we had a reduction in the quarter owing to our increased claims. We expected to see some growth, but despite this, we saw a 3.8% growth over last year. Claims ratio increased in life because we provided coverage for to pandemic cases owing to humanitarian reasons. And for health insurance, also an increase in loss ratio, but below the levels Year on year, EUR 84.6 billion back in the 3rd quarter and 20 vis a vis €87.29 in the Q3 of 2019.
This quarter, we had Provisions, BRL 151,000,000 in provision for adverse scenario, amounting to more than BRL 1,000,000,000 BRL200 in provisions, so we are very comfortable with provisions at the insurance company. But we shall also highlight that despite all these constraints imposed by the pandemic and more challenging to target customers With fewer headcount, our premium is 53 in 9 months 2020, to the BRL56 1,000,000,000 in 2019. Therefore, the same billing, a reduction on BRL1.9 billion, which gives us comfort to Recover Well, our billing hub insurance company. Now on Slide 20, about liquidity and capital. Our capital ratio continues to increase.
We had an increase of 30 bps in the common equity and 40 bps in Tier 1. The main source of capital generation was the retained in Q2. And 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 expectation 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. But it should be noted that the credit portfolio will grow more than we expected. Feed and services will continue to be pressured by the economic scenario that should grow seasonal growth in Q4.
Insurance results will continue to be pressured by the lower financial results as a result of low interest rates and the behavior of inflation index to the Haynes Saab Recovery Billing. So like we said, we are having a structural adjustment in costs. As we said in the previous quarter, we expect to see a drop in nominal costs in 2020 2021. And in addition, we will continue to pursue opportunities for the future. With regards to physician expenses, We expect to see an additional in numbers lower than for 2021 compared to 2020 Because our models are showing this, to the good performance of the expanded portfolio also give us this conviction.
Now for 2021, Obviously, we are seeing the process of completing our budget. But 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 angle that afflicts us all, but today we have a more constructive view. So 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 to 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 We are expected to have a similar magnitude to what we had in 2019. And according to our modeling, We won't be the decision in 2020. The total cost naturally will go down. We will go down in nominal terms vis a vis 2020, along with portfolio growth above the market. The current projection for the market in 20 21, we expect to grow above what we posted as to the NII.
Like we said before, as I made a point in sizing. 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. So certainly, it will be somehow offset the lower use of overdraft, check, cap in the natural history and the low use of credit cards with lower volumes of use and also lower volume of resolving credit and payments. So like you said, WAFO will go back to normal. It is going back to normal.
So the trend for all indicators is in the upturn. There is pressure on fees for the gains of scale that we are implementing like I said, to the next investment in the customer base in Agora The equivalence that comes from insurance operations, pension funds And also gains of equivalency from our consortium and DAC coming now and also the corporate banking clients. So if we put it all together, we are confident that we'll have gains of scale to new products to offset it all. And 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. And we move now to the question and answer session. Thank you very much. Thank you. We'll begin now the Q and A session.
To all the employees you can ask your questions. I'll kindly ask other attendees to remain in listen only mode. The first question is from Joerg Freedman 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 to a drop not only in the next quarter but also next year. Now 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 2,600,000,000 as additional provision for to adverse scenarios this quarter and we should expect to see a reversal of provisions starting next quarters coming quarters. And my second question has to do with the level of dividends.
Pabang already has 12.9%, 11.2% of common equity. And during this call, we are speaking of 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 payout for the coming year? Thank you.
Thank you for your question. With regards to provision levels, We complemented a lower level now provisions according to our Expected loss models are pointing to. Since despite good news that even surprised all of us, including you as well, to the good performance of extended operations payments. We thought it would be wise to address some one off events. So we're clearly 100% positioned.
I'm very comfortable with the level of provisions that we have today and what our expected models point to. So that's why we said that we expect to see lower levels in Q4. Naturally, it will all depend in scenarios for the future. With regards to dividends, York, there are some constraints imposed by the Central Bank. But over the next year, you can actually see signs of improved scenario.
There is an anxiety now about higher number of cases in the U. S. But 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. So certainly, we will see dividend payout at a much higher percentage, Huawei shareholders and perhaps even with to provisions. It will all depend on the future scenarios.
Provisions, like you said, Since the very beginning, we said that there 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're always very careful to have a robust balance sheet at the bank. Certainly, we are going to keep that into account with our dividend payout to our shareholders.
Thank you.
Our next question Santiago Batista from UBS. You may proceed, sir. Good morning, everyone. I have two questions. My first question, I mean, when you look at your revenue dynamics versus delinquency, So do you have an idea of what comes from NII, from insurance?
I know that you will see some important changes looking forward when you break down to the bank's revenue. And my second question is about COpEx. When fixed is introduced, I mean, you have the fees on the one hand, on the other hand, you have the process of Holding cost volume with both lines together, do you think that the cost drop will be enough to offset some possible Define in revenue and fees not only in 2021, but in the mid range. I mean, you also talked about dividends. Is there any possibility of a buyback?
I know that you do not envision any buyback, But it's possible to see some buyback in 2021. So 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 Yes, it's good. But 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. So first of all, as the insurance company, that's just an obvious Thanks, because as I said, even in a very, very, very difficult landscape that we are going through now, In 2019, the insurance company had the same level of revenue and this level of revenue will certainly increase the ball of verticals that we have in terms of health care insurance, auto insurance, because the penetration index to other like life at Silver's very small, then we have the Compurgia company that is moving quite well, Hosting more than 1,000,000 BRLs in Brazil. And we have next to our kicks that is coming now as well. So NEXT should reach maturity and once it reaches maturity, it will pass further results. We will I mean, 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 all the products. Therefore, there will be another additional fee that will come through these other lines of businesses. So 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. Maybe a tracking factor In terms of fee income, I do believe, honestly believe that this may happen, but in a much marginal way because Not everybody will use PIX to transfer money.
Companies may not do that through PIX. So fixed as STV was in the past, you might recall, requires a learning curve until everybody our peers to it. So as we become more utilized, other businesses and other activities from the bank We'll start communicating among themselves. Now in terms of OpEx and all of the fees, it is absolutely necessary. And let me give you a number, Thiago, that I think is important.
The number is posted in our balance sheet. So I would like to highlight, if you take the recurring P and L of Bradesco right now, you will see that to our NII in the 1st 9 months was BRL46.5 billion, meaning that this is Quite relevant and robust, we had BRL46,500,000,000 against BRL43 1,000,000,000 in 2019. So despite this very dire Landscape, we were able to grow our revenue by 7.3%. And when we look at the expense side, In 2019, there was BRL 36,500,000,000 against BRL 35,000,000,000 in the 1st 9 months of 2020. So there was a 4 with that reduction, BRL 1,500,000,000 less in expenses.
But when you look at the nominal figures, BRL 46,500,000,000 of revenue against BRL 35,000,000,000 of expenses. Our cost structure is very large, like that a large corporation. And as Thiago said, we have to have a cost structure and achieving cost of goods is suitable to the new reality that large corporations will face, 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 Currently, you increase in the second half of the year or in the 3 final months of the year, and then we see that when we post the results for the Q4. We already gave you a small sign because we already saw our news reductions coming being posted this quarter, but it will be further captured throughout the end of 2020.
Let me give you a clear example, which illustrates this point. In Chiba, When we acquired HSBC, we had 11 administrative facilities and buildings. It's also very complex to make production. How can you adapt the 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 Benitiba. There are only 2 remaining 9 buildings We are now inactive. With that, we were to reduce taxes, reduce property tax, reduce to cleaning expenses. We reduced overhead.
We reduced rental payments. And Also, we put some buildings for sale. I mean, those that belong to us, they are now in the market to be sold. And this accounted for a reduction of BRL 30,000,000 in rental and R40 $1,000,000 reduction in admin expenses. And we wouldn't be able to do that if we're not for that pandemic period.
So out of the 11 buildings, we only have 2 now. In addition to that, we will Sell all of the remaining buildings and this will probably generate between BRL80 1,000,000 to BRL100 1,000,000. We also have efficiency based for working from home. A building to accommodate 2,000 people have one service center. But once people are working from home or remotely, I don't need one entire building just to allocate 2,000 people anymore.
Therefore, it's certainly cost will be important not only to us, but any other company if they want to maintain the profitability level. So for us, this has become like a religion. Really. In the Q4, we just trained the graph to use the magnifying land to go deep in every segment in every business of the day in order to be more efficient. So all of that was just to give you some more light about the importance of OpEx.
Now in terms of providing, since that was your last question, this is not a traditional move by the bank. But we are constantly looking at good opportunities. It certainly depends on the market conditions. We will We will look at it. But we never discard that possibility.
We are always looking at the possibilities. Thank you. That was very clear. Thank you very much. Next question from Gustavo Schroeden from Goldman
Sachs. Good morning. Thank you
for taking my question. I have 2 questions. My first question, I would just like to revisit the issue of provisions. Otavio 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 3rd quarter, the credit cost would be then below to what it was prior to the pandemic.
So Your loan credit is good. So is it possible to identify a lower credit level, lower than the pre pandemic period, if you exclude that additional provision. And the second question is about ROE, you had a significant recovery of ROE 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 level. Gustavo, we lost the final part of your question.
Connection was not very good. Thank you, Gustavo, for your question. I think that it will be more Conservatives would say that cost of credit would resume to levels prior to the pandemic. I say that because we don't know what will happen to the interest trade or if inflation will grow once the big rate goes up or 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.
And 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 to operations 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 BRL12.8 billion in 2019 And in the 1st 9 months, 16.5%, meaning 29% in operating alone. If you include treasury, which was better by almost $3,000,000,000 We are talking about a 39% growth.
It's an improvement vis a vis the previous year. Therefore, we will aim at our ROE that we had in 2019. That's our target. Well, certainly, of course, everything depends on us not having any further problem or not having any tax issues or the country doesn't go through any further economic or tax Pablo. But hey, we cannot work in the budget considering all of that, but we have to think about This is as usual next year.
Okay. So in terms of your last answer, if we 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 portfolio quality, we are very comfortable with the loan portfolio quality we have And we had some very positive we had a positive performance in terms of the renegotiations of the loans. In terms of loan quality, what we have to do is to preserve that portfolio because even because we have a very robust to 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 So no matter where you look, so for us, next year is a year where we will seek for improvement and better margins and certainly to focus 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 Haza with Bank of America. Good morning, everyone. Thank you for the opportunity to ask my question. I have two questions. The first question is about renegotiation.
You provided information about what happened. However, I'd like to understand the percentage of renegotiations that were performed. It seems to me that the drop of NPL 'nineteen was owing from the renegotiation. And to NPL, I would like to know if the expectation for the Q1 of 2021. And then I'll ask my second question.
Our credit reconciliation portfolio, Olivier, 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% in 1980% overdue. What is the percentage of on schedule operations. 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 re profile.
Usually, we do not renegotiate on schedule loan. The renegotiation in our process is when there is delinquencies and we have collection usually up to date 60 and that's when we have the recovery team involved and they start renegotiation. What may have come from loan, well, this is when we have the expiry of expansion. Maybe you can compare the size of the growth of the renegotiation loan with what was overdue and then paid again in the to the portfolio. It's a small percentage.
The variation of the extension portfolio from the 2nd to the 3rd quarter, but usually we do not really proceed on Schedule 1. There's another important detail, Giovanna. Others are renegotiating portfolio more than 50 to the individuals. So when do individuals renegotiate or they simply cannot pay an extension? This is already overdue.
So 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 total volume. So there is always a small delay of a couple of days, but as a percentage of delays are renegotiated operations. Okay. What about the performance of NPL?
We have to admit, Joanna, by the way, that's an important question you're asking. Every bank worldwide In force, we are positioned concerned with the adverse economic scenario. If they didn't do it, they certainly will have to do it because this pilot delinquency, we have to admit that today, we have a better expectation to the Q1. When we first talked about trends for the Q1, our expectation today is better than in the past. But certainly, part of it will come in the Q1 of 2021.
And next of The Q2 we also have it and maybe even in the Q3 2021. So 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 EUR 1,600,000,000. I understand you have a very high level of provision And you wanted to anticipate yourselves, but what is the rationale? Maybe it's too early because the NPL is not so clear and we still have to wait and see all the aid by the government. Giovanna. That's not consumption.
What happens is we're allocating additional provisions to specific loan. To the ladies on the modeling. And right now, we are beginning to allocate provisions. To our individuals. It's my presumption.
All we're doing is allocating to the provisions of specific names. They are not supplementary, but the volume is the same. By the way, into check. The generic and specific generation, these are very low, And this is due to this scenario. This generation, which depends on credit rating, which is to L'Oreal.
What we do here is analyzing on a case by case basis What I first did is a surplus position now. Now we're allocating to specific credit based on our risk assessment. Great. Thank you. The next question is from Daniel Rhee with Baird.
Good morning. Thank you for the call. My question is about investments abroad. This will increase a lot investments abroad this year. Is it right to assume that you are at a comfortable level right now abroad?
And the second question is, Assuming we had a change in legislation and there will be a reduction in overhead vis a vis these investments by year end, And all banks, by the way, 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. To today, our level is adequate to comply. If we have a margin, it is not material, We already have the adequate level. So based on this adequate level, we don't see any need to have a certain change in treasury or heads or overhead.
Quite the opposite. We are pretty comfortable with the current numbers. Just 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. So my question is, will all banks have to do it to reduce the overhead in the tax accounts That will bring a high flow of purchase in December.
Anything you can share about the strategy or anything that makes sense? Good afternoon, speaking. Obviously, we do have our strategies as that's something we can close.
As there are no further questions, We will turn the floor back to the speakers for their final remarks. Well, 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 while provisioning our expectations for The next quarter and next year are also very good because we understand that we Did our homework. The homework is done and well done. And we also See our bank with very robust numbers and ready to face a market and go through so many changes, and we'll go through changes in 2021. Thank you very much, and have a good day.