Good afternoon, everyone. Thank you for joining us today. Welcome to Bradesco Day 2019. First of all, I'd like to thank you all for being with us in this room and also investors and clients who are also via webcast, investor and clients in Brazil and abroad. The purpose of our presentation is to show our positioning in the market and allow you to interact with our main us.
Our management, this is our traditional format, and we have the privilege of having Mr. Brandao with the opening remarks and also Mr. Trabuco welcoming you all. Next, we'll hear from Otavio and open for a 1 hour Q and A. We'll also have a break and after that, a panel session with our Vice Presidents, Andre Acunno, Eureco Fabry, Casiano, Marcelo Noronia and us.
Vinicius, CEO of Bradesco Seguros. You can use the microphone to ask your questions and via webcast, Feretti will be here taking questions and sending them to our management to answer the questions. So I have the honor to officially to open this meeting, inviting Mr. Lazaro Gimello, Brandao, Chairman of the Board of Controlling Societies of Bradesco. Us.
Good afternoon. Thank you very much for your interest in taking part in our meeting. I'll be very brief so you can have more time to discuss us during the debate session. This meeting brings us opportunities us to strengthen our zeal for transparency. Over this afternoon, we are going to have candid dialogues about our relationship in the market.
Us.
This afternoon in which our CEO, Otaku, is going to open an opening session with the Vice President, so we can to discuss the organization of the performance of this year.
In the Q1.
The Bradesco organization aspires to be constantly ready for different economic cycles in Brazil. We know that economic cycles, us. Loan cycles, financial cycles have not been revoked. And therefore, our strategic us. Our concern as part of our culture is to be always ahead or anticipating on any cycle that may be set.
This is why the balance sheet last year
It showed
not only the strength of our positioning and the strength on returns, making the net worth to have a margin ready for credit for expansion. Solvency ratios, solvency ratios or BIS, [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Have already been included
in the balance sheet.
So therefore, we have a mature cycle as far as loan growth is concerned. Therefore, the structure of the balance sheet also reflects us. A vision that the best moments for private banks in Brazil are still to come. When credit and loan exceeded 50% of GDP or reached 54% of the Brazilian GDP, it mostly came from the loan credit earmarked also the credit from the public sector. We all know that regardless of the performance, achievement of reforms and macro or micro reforms that will take place in Brazil, they will all require a lot from the Private Bank System with a leading role, and we are ready to play that role.
Us. At the
end of the day, we are going to get into more detail. So all I have to do is to welcome you all. We have full respect for each and every one of you. You are all friends of this house and perform very accurate and a strong job breaking down The analysis of our numbers, our figures. So we constantly like to honor your attention to this organization.
Thank you very much. I welcome you all. Us. Next in our agenda, I invite Otavio de Lazari, Jr, our CEO, to join us upstage Carlos Piretti, in charge of Market Relations and I'll also be here so we can start the Q and A session. Good afternoon, everyone.
It's always very nice to see you again. Thank you for being with us. Welcome to our home, your home, Bradesco, so we can really have an informal chat and talk with the bank. This opportunity is also unique because in the quarterly statements, we focus very heavily on the balance sheet. And today, we'll have an opportunity to have a closer talk to you to talk about our bank's strategies.
And then the 4 Vice Presidents will also join us to give you more detail on each one of their areas. So it's a key moment. So you can also have a better knowledge on what you know about our bank already. So just very briefly, earlier this year, we made some important changes with these 4 Vice Presidents that will be joining you today. 2 of these Vice Presidents, Mauricio Minas, he went to the Board and also Paseo.
So we do [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Emphasize the quality of this board members with different skills as members. And as you all know, Bradesco Board works every day and is very much alive in the operation, giving us advice and doing coaching to the whole management, so all decisions can be made in a timely manner, Particularly when we are now in the current economic moment, PASINI knows everything about retail. Mauricio is one of the greatest experts in IT and innovation. And therefore, we have now 4 VPs, Four vice presidencies, 1 with Wholesale Bank, Marcello Noroia with a vertical operation the Secondly, high income with Caciano and also with a brokerage, investment, treasury. A third is retail bank with Eurico, where we have our correspondence, distribution and the product area and particularly digital channel as well.
And a 5th area with personnel and technology given full support so the Other three areas can really grow more exponentially as we expect to see And Andre Kurno as well. So the 4 of them will be with you. So I think we have a very clear Framework for each one of these areas, so we can meet the guidance for year 2019, but also to constantly I think we made a lot of headway with the consolidation with HSBC. Clear synergy The gains were captured as you can see in the balance sheet and we expect to keep on having more synergy gains. So now I think we are all here for you to take your questions.
So feel free to ask your questions now. So thank you very much again for being with us, ladies and gentlemen. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Thank
you, Otavio. Let us begin
and open our Q and A session. First, we are going to take questions from the people in this room. And I'll also include some questions that come via webcast.
Could you
tell us more about Bradesco's strategy to face traditional competitors and also new digital competitors in this moment of so many changes in the financial market. I believe the strategy is crystal clear in our bank, in our corporation. That's something we've been working on for many years now with a very strong focus. We have very clear pillars. The first pillar is our incumbent bank Bradesco, 5,000 branches, points of service, payrolls, The whole commercial area of this great bank, we increasingly need to add in better technology in this area, in this segment, in this big arm of the bank, so we can us.
Act in a timely manner for clients, so we can serve with the convenience he needs. So that's one of the pillars to take care of the incumbent bank, So it becomes increasingly more agile, delivering convenience to our clients and therefore become more profitable. A second pillar in my opinion is our FinTech. I call it as FinTech, which is next, our digital bank. Us.
I'd rather call it FinTech is a better name. It's a bank developed by digital natives
and
very good prospects, bringing 7,000 or 8,000 accounts per day over 800,000 us. We will soon reach 1,000,000 accounts. At the end of the day, we will have a whole structure ready to meet the needs of digital natives or even our clients who want to have a different experience, different from a traditional bank. A third pillar It is also the Open Bank. In other words, being ready so that via partnerships with Fintechs and our partners, We can embed all IT items in different lines of business at the bank, payments, us.
Cards, loans, you name it, all the areas, including payment means, cash management, So we can fastly meet the needs of customers with the convenience they expect to see and also the journey with the relationship with the bank. So this is how I believe we'll manage to tackle challenges faced by the bank Without putting aside or without neglecting quite the opposite given a lot of attention to all these pillars, They are all critical to the industry that is going through a very deep and clear transformation process. Questions from the audience. Joerg Friedman, Citibank. I would I'd like to ask something different, but because the question was very appropriate, I'll just add to the same topic.
I would like to better understand why do you actually what is your true ambition As far as Nxt is concerned, what about the incumbent bank and Nxt evolving in parallel? We all know that most of the accounts that are open at NEXX are new accounts. However, our value they should leverage a lot based on the platform of the incumbent bank. So in your mind, what is The strategy in the future, so you can split both banks because naturally there is going to be some conflict, including the collection of services, billing, a bank that is more agile and should be more open in a digital innovative Welcome to the Like I said before, we have an incumbent bank, which is this greatest network over 5,000 branches, but we needed A different aspect with this new audience on the rise. Next is getting ready to do that, to keep on growing as it has been growing.
And that's what I said. I wished it Didn't have the same regulation as an incumbent bank has. I wish it worked more like a fintech. So our mindset is to have it working in this other direction, partnering with other companies, which may deliver innovation to this bank that should not be the incumbent bank. It should be a fully digital bank and truly not a real bank because if it turns out to be a bank, what you said will Certainly happened there will be conflict between both business and our mindset is not to have so and maybe even opening to partnership with other companies, banks or other big tax.
Why not? It all depends on opportunities that arise. It might be a good alternative. So Bradesco is especially open to negotiate for new deals and any discussions and partnerships that may happen in the future. So this native digital bank known as NEX Doesn't turn out to be an incumbent bank like Bradesco, but seen not only by the market, but also by the regulating authority as a fintech.
Us. He was just saying that 80% of the people who open an account at Nxt us. I think you said that, right? That's an important piece of data for us. At the end of the day, you are capturing clients who will grow over time in the growth curve, Growth curve in terms of income, professional positioning, professional performance and you Capture more synergies and having these people in house can be a great asset for us.
So from the moment they are part of us, You have possibilities of cross selling with other products and services. It's part of human nature. Over time, People will need more products and services from banks in order to grow their business, But it should happen in a different manner with a totally unique experience compared to a traditional bank. Just highlighting something Otavio said before, The traditional bank is still very strong in its transformation process, constantly focusing on customer experience, adding IT And also AI, artificial intelligence, in our mind, we believe it can be a breakthrough, particularly in traditional banks with a high volume of clients and AI is a new way to meet the needs of these customers. Murielo speaking.
I would like to better understand starting from the very beginning, Could you please help us understand the profile of customers that go to Nxt? And how different is he from Bradesco's clients. 80% were non Bradesco account holders. What is the stage of life of this audience and do you think there is some monetization? Us.
One thing is to make a proposal that is free of cost and then you have transactions that are charged. So you have A higher appeal of capture compared to Bradesco in which right off the bat you have a lot of fees to remunerate the whole Bradesco base. I'd like to understand the difference between both audiences and the stage of life of NEXX customers. The vast majority of NEX clients, we cannot generalize, but the vast majority us. Our 25 to 30 year olds, they are just beginning, starting a career or in the intermediate Phase of their professional career and they don't walk into a bank branch.
They want everything to be sold via mobile, us on and managing to do everything he needs. These people like to have a different journey. It's amazing to see, for instance, the gifts that we see in NEX, how much they have been more valued. Recently, we have another cash back partnership with Apple, for instance. Apple mentioned the Apple Card.
I think you saw it yesterday, right? [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] So these are people who are searching for a unique or a different relationship with a bank. And you addressed an interesting point by the way, This bank doesn't have fees. How we would survive over time? Let me tell you something.
The more important most important thing right now is not the fee. And maybe it won't be something important in the future. The fact that we managed to capture clients that were not with Bradesco, Well, they come from all backgrounds. Basically, guys who are not account holders or a significant part of them, Nearly 30% of them come precisely from existing digital banks. Digital banks or fintechs, which own a digital product.
And these people come to Bradesco because they are enjoying the experience. And over time, these accounts will become mature. So Fii is not critical. We want to know him better. We want to bring this client to our database, to our client platform.
And from then on, as we know more this client, we can offer products and services that NACS has available in order to deliver. This is the most important thing for us because the big fight today, our biggest challenge is to understand how we can bring more oxygen. The bank's client base in the incumbent bank to keep on growing the number of clients. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Well, that's precisely my question. You see, you have this challenge ahead, which is a generation thing.
Your incumbent bank Maybe he's the guy who likes to have a face to face contact, likes to have an individualized us. [SPEAKER UNIDENTIFIED COMPANY
REPRESENTATIVE:] Treatment
and there is
a lot of fixed cost behind it. In addition, you have something very complex, which is regulation, which forced you to work with cross subsidies, us. Making you very vulnerable for FinTechs, for instance, cross subsidies. Let's just get the bad the good part and leave the bad part for incumbents. That's not a conversation for now.
It's very complex, I know. But how do you feel about the incumbent bank and say, well, maybe you're going to have revenue generation for another 10 or 15 years and then you have to get a new format. And I repeat, there is this discussion of cross subsidies. Isn't it a huge challenge, Lazaridis? It's outrageous.
I mean, it's really big. We are in the world of transformation. This incumbent bank as it is today, We know it's not going to remain the same. My generation, I'm slightly older than you are, but My generation and this guy who is next to me generation, this generation makes a point of going to the branch, talking to people having a current account, but my son's generation couldn't care less. So this bank will keep on being profitable for quite a long time.
It goes as follows. Tomorrow, you'll be my age and possibly you need you want to have your You want to have a branch because you have your own home, but your son possibly will want to have a different journey. So we don't have a single answer. The thing is I'll have to take the best care of my incumbent bank so we can embed technology, so we can be attractive to the new generation or even past generations.
Us.
So it's something that we never imagined a couple of us years before. So taking care of this bank, this FinTech that is coming cross subsidies, so it has It's on life, so that's why I have this mind. So starting the second half of the year, NEX should not only Shouldn't depend on this bank anymore, including results. Just adding to what you said, I think you talked about the client base. Here have 23,000,000 Bradesco account holders, 750,000 in next and 38,000,000 us.
Clients who are part of the organization, but are non account holders. Either they have Card as a product or insurance as a product or other products that we can work on tomorrow. We even open a department for non account holder clients, So we can turn them into account holders. If you look at the business model of all these companies related to e commerce, you see that the first Proxy is revenue. And oftentimes prior to revenue, you're talking about flow.
So it's important to have experience, Provide experience to customers so they know our products, services, feel comfortable and have a positive interaction. And once you understand the profile better, you can be more tailor made and then you can become more profitable. So by and large, the strategy in the Internet sector It goes this way. Our major focus is creating flow and then we can go for revenues.
Us.
It's a huge challenge. Are you already discussing self cannibalization in order to prevent this to go into the fintech and going back to us. What is your criteria to tell that this customer is lawyer? Does he have an account at another bank, 700,000 clients for instance. Well, that's because they are working.
I mean, they are making transactions in the account. We don't fear cannibalization at all. What we need is having a customer in. Us. Any of the fintechs that were outstanding, at no time am I worried if they are delivering or not.
They have wonderful multiples, but it's not the final result that is making it happen. In the end, it is the ability to generate more business. So what about cannibalization? This is 0 problem, no problem at all. This will happen.
Fees will go down. Us. Spread and interest rates will go down. We're absolutely cognizant of that. It's unavoidable, But what I need is to retain clients here.
Maybe I won't be so profitable. It could happen. However, we need scale. The name of the game is us. Scale in the current market, be it ourselves in current banks or fintechs, whoever player us.
If there is no SKU, you never win the game. Think about China, for example. Look at what PTM does or India or Alipay or Echat in China. If there is no scale, you won't win the game. How many unicorns do you have in Europe?
How many credit card companies Do you see in Europe? 0. Europe is too little. It doesn't bring scale. So what brings scale today?
Countries with a much bigger population like China, India, the U. S. So we're absolutely cognizant in our discussions with the Board of Directors that there will be cannibalization. We are going to lose fee income spread will go down. So that was the mantra in our workshops with our managers.
If we don't gain scale, then we cannot be profitable. The bank needs to grow and retain clients.
Us.
Hello, Eduardo Huisman from BTG Pactual. Along the same lines, I have two questions. So if I understand you correctly, the bank intends to transform and become more a hub of financial services, right? Or us. Is it possible to become an ecosystem or a general hub?
If the client wants to buy a bicycle, for instance, us. The bank had find him a way to buy it, just to have a better understanding of how far we can go. And the second question is about the speed. From the moment the bank stopped needing to invest so much in the physical world, We have to think about the labor reform and so many things taking place. So I wonder if expense reduction might come even faster than price reduction until the bank benefits from that and has us.
Opportunities to invest and cannibalize more. So I have to understand the pace better. Good point, Eduardo. It's a trade off. One thing will offset the other.
So we
won't need investment so much in physical branches, but we have to invest more in IT, training, hiring people, people more specialized like engineers, technologists, so we can really deliver our aspiration to our clients. So we cannot fight against it, but we have to be both ways. Cost reduction as much as possible, but not spare or not for the detriment of the other side. And like you said before,
We are
eminently a financial company, but we already considered To what extent a prime high income branch also offers the sale of a BMW or a Mercedes us. Why not? So like I said when I answered before, we are not we don't fear partnerships quite It's quite the opposite. We want to establish firm partnerships, maybe a partnership with a big OEM us. So we can have it in my mobile app, my Internet and once the client clicks on it, There will be a special condition because he is a next Bradesco client or high income client.
You have a different condition And maybe he wants to finance and then I can work on my loans. So that's the way to go. It's already being discussed.
I may just add regarding the question about brick and mortar branches. In addition to cost reduction, we believe that us. We can offer in the right conditions, we can be starting a good credit cycle that may last many, many years with Very attractive loan growth. In this environment, while we have a lot of room to gain efficiency And where credit resumes growth, that's an environment where we see traditional banking still remaining sustainable for a long time. So these discussions, of course, we understand that there is a lot of focus on disruption and everything that is happening around us.
But we are placing a lot of bets us. Teago Karpowski of BTG Pactual. I'm on the other side of the room. Hello. I would also like to ask a question regarding competition in Fintechs, but more considering the big tax.
In other countries, we have seen these players, particularly retail players, somehow getting into payments in trying to provide other financial services. Amazon is doing this perhaps at a more advanced level. In China, as you yourself mentioned, there is Alibaba and Alipay. So how do you see these possible players coming to Brazil? Us.
Would these be a threat to some of your businesses in addition to payments? How can Bradesco defend itself, Perhaps join forces with these players or perhaps doing something totally different. What do you think about Remember I talked about partnership? It is exactly that. This is the biggest danger that we face, not [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] FinTech is a partner.
FinTech will help us do a lot of things. Our major challenge
[SPEAKER UNIDENTIFIED
COMPANY REPRESENTATIVE:] It's the big tax because these companies, well, firstly, they have a processing capacity, which is undescribable. Then they have A volume of data to work with that they've been working with, which is absurd. During the weekend, I was chatting with my son And he has a Google phone. We were talking about trips
us. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] And in 4 minutes, you got a
push notification. Now you think I'm joking, I'm not joking. You might be saying that you're crazy. No, I'm telling you that smartphone hears us because it was a huge coincidence. So This is our competitor.
This is somebody who can disrupt us because for now they're limited to payments. Google in India grew incredibly. Probably they have about 100,000,000 clients there. In Brazil, it would be a little more difficult because you don't have an installed base. So perhaps [SPEAKER UNIDENTIFIED
COMPANY REPRESENTATIVE:] It would
be better to partner with someone. So it would be a good idea actually. So I think that the major challenge for us, The major competitor would be these big techs, Google, Amazon, These players, they're really big. And I'm going to give you an example. I was joking about this.
If Amazon But GEA BOSO, for example, GEA BOSO, all banks We authorize them to consolidate the statements and then GEA also comes to you every 2 minutes. He comes to Brazil [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Any consults your balance in your statement. The same thing happens in Itau, Banco DO Brasil, all of the banks. They probably have 500,000 clients. Now imagine if Amazon, every 2 minutes, decided to get into our bank system to check the balance of clients.
Can you imagine what would happen to the banking system? It's a terrible threat from all points of view. So this is the big risk that we run and that we need to mitigate. Let me ask you a question that came via webcast by Giovanna Rosa with IBS. Given the comfortable level of capital that you have, can we expect an increase in dividend payout?
If so, Do you have any idea of when this would happen? Giovanna. Well, we have a BIS of 17.8%, almost 18%, right? 13.7 percent of Tier 1 in the Q4 of 'eighteen. So we Prepared ourselves for a country that will work for a loan book that will improve because you see capital serves two purposes.
First, so we can get ready to grow, to improve lending, to get leverage and the other way around. In hard times, capital serves to absorb the losses that we might incur given delinquency. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] So we prepared for that. We prepared to grow. Of course, depending on what happens to the country and how much the country will grow, how much Credit will grant perhaps we won't need all of this capital.
And if this happens, Perhaps the payout will increase, but it's not what we are thinking right now. Right now we have a bank which is ready fit for growth. What we want is to have a bank that will less than another 7,500 years, we don't exist just to pay dividends next year. We're thinking about the bank for the long run. And for this, we need to grow our loan book, the number of clients, the assets of the bank.
And this is our Daily quest to make this bankrupt. Would you like to add anything? No. Perfect answer. I'm Thiago Batista with Itau BBA.
In this discussion of Next, Google, WhatsApp, how do you see Open Bank? Is Open Banking really going to change things or not? Where does Open Banking fix this equation? Well, this is already a reality, Thiago. If you get a website of small and medium sized enterprises, We have the chassis of this page and the main chassis
Lists,
the bank products, checking account, cash management, collection, etcetera, but all additional services. Let's say I need somebody to handle my accounting. It's in the website. You click
on it.
You're going to see Bradesco, but it's Not actually Bradesco, it is a partnering company, a fintech that is there to handle that. If you say, oh, I need a system to control my inventory, It's another FinTech linked to us. So open banking is reality already. We can't Avoided Europe has done that. They are quite advanced in that front.
We have some concerns. Among them, what I have just mentioned, us. The one about Amazon, but this is a reality and it is good. We will need that. If we develop systems and considering the size of this with incumbent bank, that can be very complicated.
So for some solutions, we'll need to Bring on board a FinTech based on open banking to help us develop new products and services and the other way around also applies. We have financial products that can be consumed by FintechX that will not necessarily want to develop this product. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] So the bank
is getting ready for that as well.
I'd like to remind you that at our brokerage house, we sell 3rd party funds. So So we've been doing a lot of things in private as well. A lot is happening. I'm Francisco. It was mentioned that we are perhaps seeing a new credit cycle.
I think that all banks Seem to be very optimistic for this coming cycle, but to me, it's kind of difficult to differentiate the banks. Apparently, all of the banks have a robust balance sheet to be leading this new credit cycle. The products in my opinion are very, very similar candidly speaking. I think that There are some differences in distribution, but capillarity, all of the mainstream banks have it. So I'd like to understand your commercial strategy.
Where do you think Bradesco can be different? Bradesco used to have more than 100,000 employees. I Must admit, I don't know what is your headcount now. Do you think it's another good number? Do you think that your sales force should increase?
Do you think that compensation of your employees, variable payers fitting your commercial strategy? In other words, I want to understand How Bradesco can be differentiated? How can Bradesco become a leader in this new credit cycle? Francisco is starting from the end. We currently have 98,000 employees give or take, 98,000.
And we are working so that more and more Our back office will be more automated. So we want to move People from back office and put these people in commercial sales. So almost 70,000 are in our sales force. So most of our employees are going to commercial. And as of January, we implemented variable pay for the whole commercial department, which we didn't have.
Until then, we were the only one among the big players that didn't have variable pay. So I think that this It's going to support our efforts to grow the organization. So our headcount will be adjusted according to the demand that we have. What we are doing today is basically a trade off. We want to have fewer people in back and middle office and more people in the front line.
So it would remain with 98,000. We had a substantial reduction in headcount in recent years, Well, we are currently at 98,000 employees. Like I said, with variable pay for the whole sales team. Now credit growth, how are we positioned to serve the wave of
[SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Credit growth, if it comes and
we do have a positive expectation regarding that. Well, we don't have one Single strategy, it will depend on a number of factors. We may have different strategies accordingly. So what I'm going to speak a little bit about retail banks. So what are the loan facilities that we can grow in retail?
Basically payroll deductible loans, mortgages, [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Auto
loans and
consumer credit. So these are the basic growth pillars.
When we
talk about payroll deductible loan or pension deductible loans, we have a clear strategy of having partnerships for with companies for their payroll. We are leaders. 78% last year of all of the bidding processes, Bradesco 1 because we have adequate remuneration because of our loans. And Where do I need to do that? Not at the branches.
We have to have loans granted over the phone. Last year, 55% of consumer credit was our consumer credit operations were granted via smartphone. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] So I need to have the guys on board, my clients on board and know them so that I can have an adequate credit scoring, Having the right loan limit and offer loans at the right timing when they need it, when they're buying. So So I need to have consistent offerings. So this is pure CRM and a simple and adequate client journal, 2 clicks And they can have a loan on the same way the operation, the money kicks in their banking account and they don't even need to go to a branch.
So I need to have good information about clients so that I can have the right credit scoring and offer a good journey. Mortgages, Well, we have a partnership with real estate companies. So we are leaders in granting mortgages, even Ranking before Kaisha. So I talked about payroll deductible loans, mortgages, auto loans us. Our loans are part of the budget that the managers have to deliver and so that they can get variable pay.
So one thing leads to another. So as for the retail bank, I think it's rather well Regulated in those pillars where we can grow. If we think about a BNDES or rural loans, There are limitations for rural loans and limitations for BNDES loans because the PSI facilities are almost over. In the wholesale bank, we adjusted the structure with corporate, Corporate 1, Global Markets and us. So now we are able to have operations and deals which were unimaginable with the Investment Bank.
These were unimaginable a few years ago. This is the latest acquisition we had in Brazil, one of the largest pulp companies. We got a loan in the market and Bradesco was victorious because we were able to have a deal with funding in Brazil and abroad because of securities, global markets, we were able to get loans abroad to offer a good deal here. So I think that for every business line we are going to have a very well defined strategy. It's not like there is a silver bullet that will make us be successful in all of them.
We need to be focused. The same VP in the retail of Retail Banking handles digital channels because Our client opens a checking account, but digital channels will be used to grant loans. So these are the guidelines that we are following. I think it's worthwhile to say when we asked about differentiation of the banks to understand the geographic position us. And we have to understand delinquency and unemployment in the different income brackets And think about how this will improve as Brazil resumes growth.
We're the only bank present in 100% of Brazilian municipalities. In more than 2,000, we are the only one there. So when the economy resumes growth, Income brackets B, C and D will get employed, will have income and will be able to Assum Financial Products and Services and we are the leading bank that can serve these clients and the branches as Otavio mentioned. As they are supplemented by the digital environment, we'll allow us to use them for other purposes, [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Including
our work with legal entities,
we have teams of legal entities. It is the Espacao Impreza's Corporate spaces, we have it in all of our branches. So we have a manager at the branch, but not passively working as we see happening off us. But with an active role to play, there is a question asked today. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Via webcast by
Mario Pierry with Merrill Lynch.
The financial system still has inefficiencies that lead to a high spread compared to the rest of the world, high reserve requirements, high taxes, little efficiency of the positive roster. How do you see these factors evolving and how can we evolve from the regulatory standpoint? Well, That spread will grow will be reduced its effect. There's no fighting this. We had a meeting in February with more than 10,000 managers coming to Sao Paulo to participate in a 3 day meeting.
[SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] And one of the points that we discussed at length was the spread. I mean we can't think that we are going to maintain or increase the spread. The spread will be reduced And the only remedy against a reduced spread is gaining more scale. That's why I have been saying scale, scale, [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Scale all the time we need scale to maintain the profitability
of the bank. But there
are a number of factors that can help us. The positive roster is one of them. I mean, it's not progressing as we expected. There is an opt in If clients don't want their data to be seen, they have to opt out. But Solidarity responsibility is something that doesn't make any sense.
So it can be a hindrance for the positive
[SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:]
To operate efficiently at 100% efficiency, which is what we would like. So let's see if that is going to improve. But regardless of that, [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Other things are happening, making competition, competition from Fintechs, all of that is reducing the spread. If we do the math, well, credit cards are kind of resolved because clients can no longer be in revolving credit. They need to pay.
The only portfolio that has a spread which is totally out of the normal, All of the other portfolios have a normal spread is the overdrawn portfolio. Us. I've been speaking about this for a long time. Witness Central Bank, we cannot have overdraft at 14%, 15% interest rates. So we have to adopt to overdraft just like it is in the rest of the world.
We can charge a fee and we can have A much lower interest rate. If it weren't for this limitation, we could reduce over Draft interest rates to 4% or 3% a month and no longer 14%, 15% as it has happened. And for fee, it will vary from client to client. If the client has a good relationship with the bank, they might be exempt of paying that fee. So there are alternatives and they've been presented by the Central Bank so that We can change this portfolio that has an exacerbated spread.
And all in all of the rest, there's going to be a fierce fight, and there's no avoiding it.
Us.
I'm Navarro with Santander. Going back to the tech theme, two questions. Number 1, it's a question that is frequently asked by foreign investors. Which of the mainstream Brazilian banks us. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Is there a bank that has an advantage over the others?
And if it is Bradesco, who is your second player? When we talk about digital, is banking becoming a commodity? Are all of the players at the same level? And my second question has to do with the cloud. There are 100% digital banks that do 100% of their processing in the cloud.
Why is it that that cannot happen in a mainstream large Brazilian bank? I get that the volume could crash across our board. What are the barriers we hear about? Legacy, the big Brazilian banks created a platform that Cannot be changed overnight and you yourself said that you're thinking about Bradesco for the next 70 years. So
[SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Looking ahead, I think it's better to look ahead than look
at the now. What is the future? Can the big Brazilian banks migrate to the cloud us. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Well, there is a security issue there. Well, we operate in the cloud.
We have a private Cloud, obviously, but we operate with a number of things in the cloud. We have Watson and we do operate in the cloud. So this It's not a hurdle for us. It's not a barrier as long as we can maintain the security levels. The number of cyber attacks We serve here at Bradesco, not just Bradesco, Bradesco, Itau, Santander, all of the big banks, well, it's a huge number of cyber attacks.
So we need to take a step forward, see how security will be to know that we can move forward. So there are things that are in the public cloud. There are less subject to security issues, so they are there. There are things that are in the private cloud that we have greater control over and [SPEAKER UNIDENTIFIED COMPANY
REPRESENTATIVE:] There are things that we need to keep in house. For example,
checking account. If tomorrow morning, I do not have your updated statement. I know that you're Santander employed, but you do have a Bradesco account. So you're going to kill me if I don't offer you a statement updated. So Valkyria, she is our Technology Director.
So we are operating in all three pillars, traditional, private cloud and public cloud, because we know that, that is fundamental. As regards the first point that you mentioned, who us. Leading the way, everything is a commodity. It's hard to say which market segment is not at the core segment that has a huge competitive edge. It's hard to say who's leading the way, but we have BIA, our artificial intelligence.
It is a competitive advantage, and I'm sure that other banks would like to have BIA Operational, as we have had with the volume of operations happening over BIA, we have a digital bank, we have a fintech, next us. And whether you like it or not, it has an advantage vis a vis the competitors, they'll have to catch up with us. So I wouldn't say that we are leading the way, But if we get mobile banking of all banks, they are kind of
similar with
a slightly different journey here and there. One that will be More or less colored, but they're basically the same. So I wouldn't say that we are ahead of everyone else, but we are betting our chips so that we can have embedded technology, both in the incumbent bank and on next to serve the needs of our clients. Us with agility and quality of service that they would like to have. I wouldn't say that we are ahead of everyone else, but I would say that we have good positives that we have tapped in.
Us. BIA is implemented. It's up and running. It's live. You click on mobile, It's up to BIA.
You go. You access the Internet with your computer. You can access BIA. So [SPEAKER
UNIDENTIFIED COMPANY REPRESENTATIVE:] We have a we are ahead.
No, we don't have a digital well, having or not having a fintech like Next, I prefer to have it because I'm capturing 8,000 clients a day, 80% of them are not account holders. Worst case scenario, 40% of these accounts will survive, 30% of these Accounts will survive. So 3 new checking accounts a day, 60,000 In a month, a 1000000 new accounts a year, it's great to work with these extra 1,000,000 checking accounts. So I think we have an advantage, not that we are ahead of everyone else, but we do have an advantage. And it's worthwhile reminding you that BIA is the biggest Watson deployment in the financial market worldwide.
IBM recognized that. So the advantage, it's an AI advantage that we developed, but we are leaders there not only in Brazil, but worldwide. There's a webcast question by Marcelo Taz with Credit Suisse. What is the potential threat that a launch A product like Apple Card could mean to banks. No one liked that, today.
Well, considering the information that we have so far, they're going to launch it in July Apple Card, so I haven't got all the particulars yet, but everything I could read last night, from From what I understood, it's a white label card together with Goldman Sachs. Goldman will not appear and it delivers a very nice journey On Apple, so the way it organizes your bills, how much you want to pay, [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] It's
quite nice. It's quite
a pleasant journey, but it's nothing but a digital wallet, which is something we have.
And I
think it's interesting to say that in the Brazilian market, Apple has a very low percentage. Us. The biggest player here is not Apple, it's Android, it's Google. So it is an interesting journey, but it is a digital wallet and they added a card, which is the same card that I have on my mobile phone. I have a Visa, A Bradesco Visa card, it's in my wallet.
When I go to stores, I just get the card closer to the POS terminal in Ipay, but it is one more competitor. Is it going to steal thousands of cards from other players? It's possible, but they're doing cash back, and we give you mileage. So you get 4 points for every dollar spent. And I think that the feeling That you're being rewarded is when you get mileage.
Cashback didn't work anywhere in the world, didn't work in the United us. Today, it's not in Europe, but people don't recognize cash back, just getting money back. Mileage, when you need to buy us. A flight, you're going on holidays, you get into your account and you see you have enough mileage to buy a ticket for yourself, your wife and Pat's kids. I think that gives you that perception of rewards.
I didn't see cash back working well anywhere in the world. So comparatively, I would prefer to continue with my card that gives me mileage than with a card that gives me cash back. But Undoubtedly, it's a nice journey, pleasant, so it is one more competitor that is going to get some cards from us. So talking about cross subsidies from another standpoint, I have the impression that the banks that works in silences [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] It's a product, little vision over CPF or taxpayer number. I know that this is changing, [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] But that's
a concern because when you have technology legacy
that still cannot give us a holistic view of how things happen, This is going to be more and more drawback compared to the new big tax that are born and look at clients from beginning to end. For example, silly example, you can give credits to employers. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] If you could link employers to employees, while the fintechs are in the second derivative when somebody loses their job, [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] You could scan and say for this kind of sector, we have to be more restrictive because some companies are facing difficulties and I don't think you can do that today. Us. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] That's a question, okay.
It's an impression I have. I'm being provocative here. So my question is, you're still working in silences, You still focus on product and not on the individual. Do you disagree?
That's my mission. You've known me for a while since the retail time. So this is my mission. The thing is, I simply cannot look behind and say, well, this legacy is only a challenge. It's a bank, 75 years.
It delivered 40,000,000 accounts, 50,000,000 clients from Bradesco Seguros. This huge legacy to work with. However, the bank was built. In the past, this was easier to start from scratch. I'll start a Fintech today, and I can open the system the way I want.
Look at this big bank, 70,000,000 client. I have to run the database overnight. And let's see if what will be what the balance will be the next day. So it's not a burden, you see. It's It's a joy to have this.
However, I also know I have to be more agile. I have to be faster. So first thing, this thing you said about the silo silo vision, what I said was to destroy this wall. Either you put the wall down or you never build 1. In this case, we put it down.
When I said we have 4 verticals, Caciano, EuRico, Andre Kurnau and Marcelo Noroia is precisely for this reason. We no longer have silos. These verticals Have the whole client journey from beginning to end. Urico, he is responsible for account opening, account maintenance, The CRM guy who is going to analyze the data and the guy in charge of selling through the digital channel. So the product guy In the bank today is not only focused on the product, but on the client, the individual taxpayer number.
So that's what you have in our CRM. Does it change over 9? No, it's a process and it's coming very fast. I'm sorry, we didn't hear you. I apologize.
So what about this thing about using information to turn into credit benefit? Is that a reality? You know that I worked for 12 years at a loan manager. I did that in that department at the bank. So when we run this loan model, I remember when I started, I had 3 models of credit score.
Now we have about 700. So when I run today your loan model to tell whether I'll give you a loan or not, I'm thinking 1 year ahead. What about your company? Can it afford to be better down the road? Or are you going to lose your job?
So We can measure we can take measure of the credit score models and group clients Check-in not only that, but also social networking. I can check you on Facebook. Naturally information that be public available, but this is already running in our credit score model. Now just more to the point. Today, if you were to rate a scale from 0 to 10, to what extent is already individual tax Player number, not only product and what how important is to assess an individual.
Well, for corporations
[SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] To individuals,
it's 10. I have to check it. It's critical. Otherwise, I have a wrong assessment. Just to give an idea, Think about the reduction curve of delinquency of the bank for individuals.
Look at what happened for the last year. You see how the credit models improved, the chaos of the banks. I wouldn't say I'm the best in the market, but I can bet you I'm among the top 5 in the market and not only the Brazilian market, the world market. Today, I have this team of statisticians Only for credit, I have about 300 guide just with statistics. Us.
I have no concern about this. Our models are amazing. Now what about product or individual taxpayer number or CPF? I have to migrate 98,000 little heads that were only thinking about product until yesterday. So this is how we would run the bank's operations, but not today.
I would say that today in High Income Bank, it is 10 for CPF. For Wholesale, 10 For corporations and retail, the total is 7%. I do understand something about your answer. Us. If corporations are already an input for individual assessment, it's a fact and it's been so for over a year now.
So today, you said that home equity, for instance, having a high is low because you bet a lot in 2,009 or 'ten us for car, I mean, auto. So replicating an experience in which you had a lot of value for the product and not so much for Individual taxpayer number, do you think that Bradesco is far from this mistake? Everybody I was impaired at that time. We have zero chance of happening today, not even in Homeowner Insurance. Well, we have to close this panel session now.
We will be back at 10 with a panel with Vice President. And now I give the floor to Otavio. Or are you going just to mention the final remarks at the end? Yes, we have a break now. Yes, we don't want to we want you to have a break.
Okay. Thank you for your questions. It's always a joy to be here. So just as a recap, the bank is currently organized into 4 vice presidency areas primarily focused on clients. We have a 1st Vice Presidency for Retail, Eureko Fabri is in charge of that A second Vice Presidency for High Income.
Cassiano Scarpelli is the Executive VP. Thirdly is wholesale and last but not least, another one that supports the whole client area. And in this case, we have administrative affairs, human resources, IT, accounting compliance. So now I'm going to invite each one of our Vice Presidents to join us upstage. Each one of them will speak for 5 minutes about their us.
And then we will move to the question and answer session. And this is open to everyone. You can ask your questions if you are in this room or also via web. Firdetti is going to moderate this panel with me, So we can also check questions that come via webcast. So by the way, I forgot to mention Vinicius.
Vinicius is in charge for Bradesco Seguro. So we have the 4 VPs plus Vinicius. Thank you, Cassiano. So I invite Andre Kano to join us now. Good afternoon, everyone.
It's a pleasure to be here with you. And I'm here at your service for this interaction, which is so important to interact with the market. So just very briefly, I'm going to show you some slides just to give you a better idea of our areas. The most important thing is to interact and take your questions. On the screen, you can see the areas that are my responsibility in a very summarized manner.
We're speaking of IT, IT parts, human resources, finance, risk and a couple of other support areas and also operations, which is another area that is my responsibility and also to provide support to our colleagues in the business area who are here with me now. A very important pillar within my structure is personnel, human resources. Bradesco today, in my opinion, is very well prepared when it comes to attracting new talents. Recently, according to a poll with Brazil Junior, we were among the top 5 companies as good place to work at. According to university students, the only bank in these 5 companies, our in house research us.
Also showed a high level of engagement of our employees. As for development, employee development, that's a constant topic. We have our corporate university and for 2 years chosen as the best corporate university in the world and also acknowledgement of career, another very important aspect in Brazil, in Bradesco. And today, we have an additional aspect since we launched it to all our network of branches, The extraordinary performance payment, this is what we are going to offer to investment areas and this is going to boost morale. And diversity is also a very important topic at the organization.
What about technology? We all know the scenario is very tough right now. New technologies are disruptive today. Regulating authorities have also brought a lot of points that to some extent also affect our business and the competitive environment. And this competitive atmosphere is very fast now owing to Fintechs and Big Tex.
So we're really focused on the digital transformation aspect of the bank in all areas. We are also very active in a unique us. Motto, which is next targeted to millennials, a fully digital structure. And it brings a lot of benefits to the bank's legacy. And we're also looking at the future, open banking.
The bank is very well prepared for open banking technology. Our platforms have been developed over time in order to allow us to be in a very comfortable position to face competition that will certainly happen once Open Banking us. [SPEAKER UNIDENTIFIED
COMPANY REPRESENTATIVE:] Our next question is
up and running or with a broader reach in the country and naturally also taking great care of the legacy of the bank. Investment in technology remain us. So we can have a robust network very well prepared for cybersecurity and with very agile development. Now we are adopting the agile technology, enabling the bank to lower its time to market when it comes to launches of new products and services. Innovation is another topic that is very important to the bank.
This is our innovation ecosystem. In various fronts, I highlight startup companies, Habitat, a space for co innovation, which really helps us to work on new technologies that are coming around. AI Brazil is a reference in AI. We are an IBM case study in the world, not to mention Open Banking, Big Data, API, Big chain, biometrics and the outcome is very successful in the bank. As for back office and operations, today we are already using robotics in the area.
Our goal is to have 0 back office And it goes throughout the digitization of our processes, Digitalization, Improving Processes, BPO. And with that, we understand our efficiency It has been greatly improved, and there is still more room to improve in the mid- and long run. So basically, this is my take home message. On the guidance about figures, I think you all know these numbers already. To some extent, this guidance was very ambitious, but in house, we take it as fully doable.
And the first numbers point to that direction, showing that we're just about to meet the guidance. So that's what I have. Now I give the floor to Cassiano. Good afternoon, everyone. How are you doing?
Thank you for joining us today. It's always a pleasure to meet you and to share our strategies for our shareholders and investors. Let us tell us more about the high income vertical. In addition to high income context, We also have economic studies and brokerage us and Treasury. These are all critical areas for the strategy of the bank, particularly us.
For high income, I guess the main challenge like Octavio said, A new vertical, which is very important to achieve our goals in the future, which is Our client that is still strong, but a little bit underpriced. So here we have this context as you can see. I'm kind of blind, so if I have to watch it more deeply, I apologize. But Later on, we can talk more about it. But basically, we have to treat these clients with a new specific approach, Focusing more on people as individuals, products fully dedicated to them.
This is our DNA. To some extent, this is what we want to convert into our high income and prime operations with full integrated product convergence. We also have full convergence of family and pension analysis of the Customer life cycle, this is critical to us and we should always remember along this journey the API. We are very bothered with offers that don't preserve the client. We have to be very careful.
Us. But to some extent, we see competitors not always preserving The characteristics of suitability of each customer. We shouldn't forget when it comes to non account holders, us. That's another vertical in high income. It's almost a bank.
We have almost 40,000,000 non account holder clients. They have products from different banks, and they are also very important to us. Our brokerage, Bradesco, Cohedura and Alcarra are also part of high income. They add to one another and will be working more and more together, delivering a full investment platform and also the foundation of our whole high income concept. And naturally, It moves into the customer life cycle.
It starts with Classic, our exclusive retail up to private banking with Prime. Later on, you have a chance to talk more about them all. What about high income? Particularly for prime, We have prime income, minimum BRL10,000 and BRL300 to BRL1 1,000,000 is prime invest. And finally, top tier with EUR 1,000,000 above before access to Private Banking.
It's very important to bear that in mind. It's our initiative to do this whole segmentation in order to be more focused on individuals. And like I said, our code of conduct, our reach is to focus on clients with their peculiarities and being as open as possible, trying to deliver Good afternoon, everyone. I'm delighted to have you with us. Let's see if it works.
So let me tell you a little bit about my duties and responsibilities. First is retail Service network, we have Bradesco Espresso, PAs and digital channel credit cycle with credit recovery, suitees and guarantees Product areas with financing and loans, cards, consortium, cash management and custody of the bank and us. With payroll loans, Bradescarg with non account holder cars and Los Angos CDC and Analytics and Algorithms, CRM and data management, which is also important. So for the first time in the history of the bank, we have the structure which puts together Everything about products, long cycle and the whole distribution with a unique opportunity to gain us. Synergy, so we can all move into the same direction.
So we're really focusing on delivery, customer satisfaction, linking customer experience with a Positive experience on the channels. So we see this as a very favorable organization, [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] So we can
really be
on the same page and gain synergy from the current structure that we're showing right now. Next, we show a little bit about our distribution. On my left hand side and also your left hand side, we have the distribution of the bank. In Blue, we have our own distribution, the summation of our branches and how they are broken down. Natural concentration in the Southeast owing to the economic cycle and market share by region, approximately for the branches, 20% ranging between 19% in the South and 25% in the Northeast.
On the right hand side, There is a problem with the microphone. On the right hand side, we have our distribution strategy. It's important to show now what are we trying to show, the adequate cost on the call. For every circumstance, there is a cost. We have small, mid
us. And large
branches and connected to them, we have our PAs and then our Bradesco espresso. And then we have more than 39,000 almost 40,000 Bradesco Espresso and we can reach every little corner of the country unlike anyone else. Fintechs cannot reach them. No competitors won't reach because they don't communicate with this us. So we are the only bank which competes with everyone in Brazil.
Us. Not everybody competes with everybody. Sometimes discussions are very much based in the media like South and Southeast, but Brazil is huge, diverse at heterogeneous. We built a model so we can reach every corner of the country with adequate service, adequate cost in each one of these business models in different regions of the country, in different states of the union. We have a footprint in our municipalities in 2019.
We are the only private banks in 2,400 and 43 of them, we are the only bank in the region. So it's very important to point that out. This is our model, our strategy. We have a geographical issue, but not only that, when I think about adequate cost of service, if you think about Bradesco Espresso, we're talking about variable costs only, us. No fixed cost.
Fixed cost doesn't exist. It's only variable. With our partners. What about products? What is our current focus?
Expanding the coverage of channels, us. So to complete any gaps in the channel and focus on the client journal, which has to be positive, in 2018, we [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Gain market share for corporations and individuals. We became leader for the first time for homeowner insurance for Individuals and corporations alone, it was something pioneering. We bet the main competitors and became leaders in both segments, quite an achievement and also leaders in payroll deductible loan protection and also leaders among private banks in rural loan and also BNTS disbursement. On the right hand side, you show you that we have some gaps to be filled and they will be covered over the next 6 months.
So all these channels with the square, The red square, these gaps will be filled. So anticipation of Christmas bonus and income tax rebate, We also have a journey for Carlos with Omnichannel, the customer being visualized by the manager in all channels, working capital with ATMs and Open Banking, working capital also with Open Banking and shorty account and finally, rural loans. On top of that, there is another important us. We want to take paper out of the branch. So in addition to this journey, we want to improve client experience, Over 50% NPS 60 6 points, which is a reference in the market and full fledged digital SPIRIN since opening account with more than 69 services.
In net interest, cash management, investment, foreign exchange, corporate cards, 94% of the company's total transaction is in volume, mobility to make transactions anywhere, convenience with digital deposit checks and a full portfolio in net increases. Auto Ategente Miento is the most democratic Channel with over 30,000,000 users will have 57,000 ATMs, 35 hours, immediate deposit, Online credit as the only bank, this is very important for small companies. It makes a lot of difference. We also have Bill Auto Feed, Convenience and Operational Efficiency And also lower the cost of transactions of currency in the country and ATM 3.0 bringing convenience and more intuitive us. For Fonifacio, 1,000,000 calls per day, 93% is electronic at the IVR Interactive Voice Response, which is low cost and BIA in electronic assistance.
Us. So BIA, electronic assistance with a natural speech. In other words, more people being served. What is not in the IVR moves into BIA and finally voice biometrics to make sure the customer is really the person he claims us. So we have 2 pioneering efforts in the Brazilian market and I would dare to say even in the world market.
Next on innovations, still about innovations, also using BIA, Bradesco's virtual assistant, we already have over a 1000000 interactions right now with BIA, 75% Happen over 2018. It's the only bank in the world with this scale using IBM Watson, 9,000,000 users Have an adoption current that is really fast and a huge opportunity to generate business. We see a lot of value behind it. Next, Bradesco Simplifica, a simple way to look after your money and it brings financial management of customer expenses. This is just in the oven to be launched with a lot of convenience in services to our clients.
And Bradesco LINK, The branch in the palm of your hand. We have 50,000 smartphones with our managers in the network, Selling products, using CRM, using smart, everything about intelligence in data management in the managers' us. And finally, Corporate WhatsApp connected to this 50,000 smartphones, we have 13,500,000 interactions by now. It's something new. Us.
Relationship via BIA or manager. It's a corporate tool. The customer talks to BIA And solves his problems with the OR talks to his manager in an easy straightforward manner with us. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] At all, he is familiar with. So this is a glimpse of the physical
and digital world. Thank you.
Good afternoon. It is a pleasure to be here. I will try to be brief so that we can have more time for the Q and A. So I'm not going to go over every little detail about us. During the Q and A, we'll use my colleagues and my colleague Mauricio So we can answer all of your questions.
So let's speak a little bit about wholesale. This is the set of the areas you know them very well. As you need to get into details, Speak a little about targeting or segmentation. This is a structure of wholesale and we have some subsidiaries for payments And we speak a lot about our positioning. I made a presentation at APIMAC 2 years ago.
And we don't reinvented the wheel every year. We don't change things overnight all the time. So we have our positioning. We want to be a complete platform, a one stop shop where your clients can find everything us. I think it's worthwhile noting Ms.
Taipei on Capital Remuneration. It's worthwhile mentioning that all of our decisions are made based on that. A lot of people ask about wholesale loan operations and but I don't discuss RA just with my team. We look at the RA risk assessment of the client and everything that we can improve in our relationship with clients. And there are 2 things that are important here.
Regardless of the flat position of the loan book for SMEs or even possible reductions. Look what happened from December 'sixteen to December 'eighteen On the left hand corner, our fee revenue grew by from 42% to us. The 1% and in the middle what we call Corporate 1, it grew from 37% to 45%. Regardless of this phenomenon of financial of revenues coming from credits [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] In segmentation or targeting, I'd like to say that we didn't just redo our segmentation, we didn't just create one more segment. We have a number of segments, many of them on the 3 areas that have 3 heads.
For example, corporate, We have a multinationals segment to mention just one example of our targeting. So we centralized to the whole relationship there. In Corporate One, companies with revenues between BRL30 1,000,000 and BRL500 million that have kind of a standard credit profile. So there are not 3 segments. What we have is a set of segment broken down into 3 areas.
With this geographic distribution characterized by Bradesco's positioning of being Of having proximity with our clients and SMEs and our international activity, we can answer questions about that if you're interested. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] And there are some other highlights here that I will not be detailing and I will finish talking about some topics that are On our agenda in terms of positioning, firstly, we have a broad and differentiated portfolio complementing what Enrico said. I have a different competition depending on the geographic area, the client and the channel. In products, I look at Rodrigo of OdontoPrev. How many similar competitors sell OdontoPrev?
OdontoPrev is a Product in a portfolio differential that we have, for example, to approach all of our wholesale clients. A second topic that I'd like To draw your attention to is this orientation to digital future. This is very, very important for us. We've been working on it. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] And so that we won't get into every single detail, I'd like you to mention rigorous I'd like you to notice rigorous attention to the level Capital remuneration, growth on noncredit revenues and growing the whole wholesale And in the column on the right, you can see our expectations, moderate expansion of loan book, a focus on the middle market, Corporate One and us.
Large corporate, in large corporate, it is a little different, but there are some challenges in a good expectation for 2019. So with that, I end, thank you very much and I will be around to answer your questions. And I will use the knowledge of my colleagues if I am not able to answer your us. [SPEAKER UNIDENTIFIED COMPANY
REPRESENTATIVE:] Thank you, Marcelo.
In addition to Dental, we offer complete insurance companies to our clients. Very quickly, Let me quickly remind you the main numbers of our insurance group. I'll go over some themes and projects that permeate all of our business units and then we'll move to the Q and A. So just to remind you, these are our main figures, Almost BRL 73,000,000,000 of revenue of premiums and contributions in 2018, a market share of about 24.5%, Almost EUR260,000,000,000 in technical provisions and reserves. This includes PGBL us.
Funds, shareholders and return on equity 20 8 percent ROAE us. And net income of €6,400,000,000 representing a 15.4 us. And shareholders' equity, €33,100,000,000 and our claims ratio, 70.4% in the Q4 2018, a ratio that was 72.9%, Drop of 200 basis points in the consolidated number for 2018 combined ratio grew even more Combined ratio that has been dropping for the 6th consecutive quarter down to 80.8%. Our combined ratio for 2018 was 83.7. Very quickly over going over our health topics, we continue to develop strategies that are more and more focused on Customer retention, increasing the competitiveness of our products.
We want to offer new products with a regional We have Saudi Rio, for example, with our own network of providers and we're thinking about regional solutions to Make Bradesco Health more competitive. One of the fundamental topics is the review of our compensation models For our providers, leaving the traditional fee for service and getting more and more into standardized to procedures and our initiatives geared to primary care such as MyDotour program, MyDoctor. We have a specific provider's network with high resolution indices for our patients and lower cost of care, Such as the new clinics, mild.or and Novamed focusing on primary care is one of our health Strategist to improve our results in the long term. We have 9 clinics, Modotura and Novamed. Along 2019, we'll have another 13 clinics opening And we should have by the end of the year 'twenty two to 'twenty five clinics.
This is an important [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Experiment at Purdue School Health. In order alone, we continue to have discipline of proposals acceptance. Overall, we totally revamped [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] We are acceptance governance particularly for fleet and other products that require great focus to grow in a profitable manner, always focusing on pricing models. We are investing a lot in technology to more and more at a price. Our products and to improve our time to market.
Products mix revision in 2018, We focused very much on working on our mix of products, seeking greater profitability, never losing sight of scale, of course, But we are very much focused on Bari. And along 2018, we were able to resume the double digit returns And obviously focus on processes automation. Pension to end, I think that we had a 2018 year that was Hard for the market as a whole. We are investing a lot in reviewing everything, [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Product revision, we did work with our asset area and investments area to have a new mix us. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Our new set of patient products, we believe that we have a very competitive set of products, It is a lot more flexible, and we're very much focused on evolving on the integration into evolving our pension products on the integration into Banc's Complete Investment Platform.
This is one of the major focuses that we have on pension. I will end here. I think that we can move to the Well, thank you very much for your brief presentations. And now we begin the question and answer session. Could you speak more about your new structure?
Under the credit umbrella, AI and channels, what has changed? When was this new structure created? Could you give us some concrete examples Eduardo, thank you for the question. Well, to begin, I think that the whole structure in every big company, it is only natural We'll have some communication issues across the company. When you put all of the structures together, credit cycle, distribution, product, channels and everything else that creates a lot of synergy.
We did this in the latest restructuring of the bank [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] And this opens up an opportunity for us to be sure that we have one single agenda because everything that happens in a bank, people say that God made earth in 6 days and then he rested on the 7th day because he didn't have legacy us. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Structures, he started from scratch. If he had legacy structures, God will still be trying to fix everything. It would all be complicated. So everything ends up in IT.
And in IT, we have legacy systems. So when we put all of these structures together to give us an opportunity to build alignment because The credit department priority will not necessarily be the same as the retail department, therefore areas the area of products Might have a different priority, but the departments need to talk to one another. Sometimes when we are developing a new product that involves distribution, us. Credit, credit recovery, data management somewhere along the way. So we need this dialogue.
We need to be all on the same page. And the first initiative was to have all of these areas sit together, my direct reports sitting around the table to make sure that we have an aligned agenda [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] And
that we
can work on a model so that we will list the 3 priorities and so that the 3 priorities [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:]
Will be reflected in all of the
business units. We'll be cascading down and get to IT as one single priority with all of the departments on board and on the same page. So we see a great advantage of operating in this way because we can derive a lot of synergies, But this
is recent.
And just to add, if I may, Well, this change happened recently. It was decided by the CEO of the bank. We had Bonsini and Mauricio Minas. They were VPs and they were members of the Board as well. So now they're exclusively at the board.
They are no longer executives of the bank. And with this, The VPs were organized in that model that we quickly explained here. The business area has 3 verticals: Hi. Income with Casciano, Investment in Treasury Products and Wholesale under Marcelino Arroyo in my areas in a way supporting all of them. So what matters is what's behind this move.
[SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] We had some colleagues moving into the management team, but all of these moves aim at Assigning more agility to the bank so that the officers of the bank can have more freedom to make their decisions. And I think that this is the biggest motto behind this big change. Georg Friedman with Citi. I have two questions. The first, I don't know if it goes to Rico or maybe Andre.
With this new organization of the bank, What about distribution of costs across subsidies to the many companies of the group? I'll give you an example. Otavio I said that by the end of the next year, NEX to be a bank that can stand on its own. We have digital models of banks that have a great deal of their variable costs pegged us. To distribution, ATMs, for example, they are high cost.
So how will you leverage this? Will there be subsidies Next, in another part regarding cross subsidies, the bank has evolved significantly In the operational side with efficiency at the insurance group, so what about cost allocation and bank assurance? So that is my first question. My second question is more directed to Vinicius. You mentioned something very interesting, which is the in an attempt to be more efficient in negotiations with health providers.
Of course, this tends to be the future to reduce claims ratio, [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] And we can see the first effects of that. But my question is, okay, how far along is Bradesco in this process? We've seen a significant reduction in claims ratio. How much of that is cyclical? How much of that is the result of this process?
If you could give us a percentage, How much have you been able to migrate from fee for service to bundling? And how much you can still derive in terms of synergies? Okay. Starting with the first question, York. We do internal work led by our budget department.
We work with a full cost structure, which is Totally transparent across the organization. So all of the areas get their costs. We are absolutely transparent and we analyze the results of each and every one of our business units, If they are companies or simply the use of the bank, we always analyze them in the light of these results [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] So what you are calling cross subsidy, we don't have any business that if they don't go forward [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] With all of
the costs allotted to
it, if there is no expectation of improvement, the bank will abandon that unit. We will invest in what brings return and return to our shareholders. Now obviously, there are some areas where we need to invest. So you're investing. You know that the result is not exactly the expected standard return for the bank and its shareholders, but you're looking at the future and NEXT is a good example of that.
Next is still a work in progress. It has a business plan that was prepared with returns expected over time, and it is moving forward totally a pace And in alignment with what we expected, we can also mention the case of Agra, one of our brokerage houses. So we're making investments, but to reap the fruits in the future. Now we don't see cross subsidies. We each get a bill to pay.
But for example, some numbers are transparent. For example, the insurance companies reports its results, Ipsen's literies. So how do you look after location? Do you get a market reference, a market benchmark? How [SPEAKER UNIDENTIFIED COMPANY
REPRESENTATIVE:] Can you price the cost of distribution
of Bradesco? And we've been working on building this model for many, many years. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] This is a model that we built internally with cost allocation, but 100% of the costs are allocated. There is no hidden cost or there is no cost that is not allocated to 1 business unit. Munezus, would you like to comment?
[SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] I think that you answered the question. Well, let me move to another topic, Jorgen. I don't think that it is a South American model. I think that this is a journey, a global journey. I think the United States is the biggest example of that in the last 10 years.
I think that fee for service has some negative aspects for the insured patients, for the system and sustainability of the business. But moving straight to the point, we believe looking at hospital and medical Our claims ratio, which is most of the claims that we can move to standardized procedures, we think that we have moved halfway. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] We believe that we have 50% of the claims, which we think are bundable. They are bundled already 50 us. We have a long journey ahead of us because we are permanently considering new procedures and analyzing our health models, trying to standardize more and more procedures.
But it is important to make it clear that We observed in terms of a reduction in the claims ratio for DSCO Health. In the Q4 'seventeen to the Q4 'eighteen, almost 500 basis points reduction in claims ratio. There are number of factors explaining that. There is a cyclic aspects, of course. When we end the cycle of employment destruction, that will be helpful.
Like I said, our competitiveness is important. We need to be competitive. And together with the bundled claims, the company is sparing no efforts to control our care costs, Fighting fraud, investing in technology so that we can have strong monitoring of fraud. And finally, we have been investing heavily in our ability to add value to our clients, bringing with that opportunities of lower costs by analyzing populations and complex cases, working closely with our corporate clients. You said 50% of what could be bundled is already bundled.
How much would that represent out of the total of Fradesco Health? Can you tell us that? Well, we don't disclose this number, but I can tell you it's a significant amount of our hospital claims. But we don't inform, We don't disclose these numbers. We're working to improve it even further, but we believe that we still have 50% on the journey to standardize other bundles.
There is
a question to Cassiano related To the strategy of the bank for high net worth clients. The question is What we are doing in terms of improving our offers to that segment and how the brokerage houses play a role in this Raju
Jin.
Thank you. I think that the main role of the high income bank is to provide the best consulting service possible. We have an important focus on people in high net worth In the high net worth segment, we need to revisit and retrain our employees. We need to have them as much trained as possible. The motto for us in high income is communication.
We need to be closer to our clients at the branch or through digital communication and we want to do us. And we are doing it. We're addressing a number of things, technology related and also Unibrad. The brokerage house has come to make up a complete investment platform started last year. Agora, As Andre mentioned, he is going through a setup period.
He was invested in last year to have a new technology configuration. So we now have an update for our services both Related to Internet and mobile, with great integration with our platform, integration with the bank's Checking account holders and non checking account holders. So we are also dealing with pensions, It was important as Vinicius mentioned, pension is distributed in such a way that We have more completeness in terms of our message to our clients. We do have some important challenges.
Us. We
want to bring in younger people to our prime bank. That is important. We need to work on that idea of the children of our clients. That's something we want to work on in terms of how to approach them and to offer them the right technology. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] And our focus not only to win more clients, but more than that.
We want to better serve our clients. We show that our clients have a lot more to interact with us. There's a lot more for us to sell and to get from them in terms of resources, platform, activity in a general understanding of their life. And this is what we are going to try and do in 2019 with more focus and dedication of our with the line employees. Thank you, Fred, for the question.
Eduardo Roseman with BTG Pactual. Well, I'd like to ask Marcello Moronian, whoever else wants to answer the question. The question is on payments. We saw a rally of the Stenstar, MercadoLibre getting into this segment. They raised some $1,000,000,000 in just 24 hours and very easily with very low cost of capital.
So I'd like to understand how do you see competition with these players and others? And do you think that you will need to act faster And more strongly, either to show to the market that these players are not sufficiently prepared to offer more services to their clients and to bring down the value of these companies. And so that competition can be a little more fair. So how do you see this valuation? And is it something us.
[SPEAKER UNIDENTIFIED
COMPANY REPRESENTATIVE:] That concerns you
and is it something that requires a more abrupt reaction by the bank? Okay. Let me try to break this down into pieces because I could spend half an hour to try to answer this question, which is very complex. The fact is, I've been discussing this. In the first place, we respect all competitors And we don't we recognize the merits of our competitors.
Every competitor is looking for their own way and the market is paying for it. 2nd comment, I have had an opportunity to talk to some colleagues who are present here and I've been asking them a similar question. What I can tell you is entry barriers have not been knocked down because of the regulator, nothing of that sort. What we saw is cheaper technology and technology availability and accessibility for everyone In all sectors, not just financial services, and there is the software side and the hardware side. In the past, to do an acquiring activity or to create a bank.
We needed to host this with specialized 3rd parties, it cost a fortune and we needed to put money from our CapEx. Now people develop a platform Based on a basic platform, from a basic platform, they choose the language, they get their programmers, They designed a totally different client experience and they don't need to invest 1 single cent of their CapEx to process all that. Scale is almost infinite. We can do that with a lower and lower unit cost us. As long as you grow the scale of your business, so the world has changed and it opened up space to competitors that are not only in Brazil, but abroad as well.
3rd comment, I think that Bradesco On its own in some areas might even make some isolated moves. For example, Rico mentioned low income In some regions of Brazil, there are some specific characteristics. In acquiring, we have 20 acquiring businesses. The barriers have been knocked down. The margins tend to be compressed.
CLO alone cannot make the market. What we have to do, and this is our belief, We need to be competitive as competitive as the other players. 4th comment, another phenomenon in the market In addition to knocking down entry barriers is available capital. Few years ago, capital was available for some investments in Brazil. Us.
It was in the Silicon Valley, but not to run credit risks here in high amounts. But today, Jose, I want to open a bank. In the past, you would need to do a fidget of a certain size. If I want to create a bank and I want to have 5,000,000,000, Now resources available in the market for that. So the world has changed also in that regard.
And the market is saying, well, Perhaps we are not seeing, so I acknowledge the merits of all of the players, but if we get the last quarter of Cielo, Cielo has challenges just like all other incumbents, but the fact is when you look at the line item Financial revenue, Stone is worth more than PagSeguro today. I respect them both. We have 2 different business models, us. 1 with 300,000 clients, the other one with 4,000,000 clients and distinct criteria. Okay.
So what? When you look At the net interest income, how much does Cielo have including prepayments of receivables, 18%, 19%, how much do they have more than 50%. What about Stone? How much did they put in the pocket when they went public in October? 2,000,000,000, 2,500,000,000, how much does that represent?
I'm just I haven't got precise numbers, but they got 9.5 1,000,000,000, they put 9,500,000,000 in their pockets without prepayment And capital at basic cost, so they have a gross interest income of about EUR 650,000,000 [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] You're badly investing the resources if they have cash. So if we get net income of 127,000,000, that net income would not be 127,000,000, it would be us. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] So I'm applying a totally different multiplier here. Sometimes we don't analyze that. I've heard analysts saying, oh, the financial result was sensational.
Then I do the math And I don't understand, but everyone thinks in their own way and I respect everyone. And I'm not saying that TELO Has no room for improvement. They have a lot to do. MercadoLibre has a different business model. They have a marketplace leveraging their payments model.
That is another business
us. Just as a follow on comment, thank you for the clear response, Noronya. You mentioned prepayment business. In reality, it is to some extent a cross subsidy with a profit us. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Paul that is higher to the acquiring business vis a vis the bank.
It is a competitive edge concerning some new entrants that increase penetration with this product. In the past, us. We had a risk of having a regulatory change. It never happened, but my personal perception is that the Central Bank Apparently, he's not interested in changing this right now. So at the end of the day, it is a commercial fight.
So do you think incumbents have a commercial disadvantage? So why don't to try to change the way this business works today. I don't want to waste too much time answering. I just wanted to say Santo, Octavio is very vocal about D plus 2. Well, you changed visavis the past.
You also believed in this migration of Payment terms, installment plus interest, but in the past, we had banks controlling acquiring business and we're very responsible. Today, you have a market in which people can get into a website of some retailers, and you are shocked.
Us.
So I think we got out of control when it comes to the consumer. The market used to respect consumers and also merchants. Us. How can you have installments with and without interest? What is the cost of capital of banks?
We have to change the rules of the game. That's why Otavio says, and we agree, it makes no sense. No interest installment and then adding interest to it. I apologize, but this is crazy now. Cielo has a lot of advance from receivables revenue.
The absolute revenue was lower, but obviously, we are going to improve competitions. Measures are in progress in retail and also business people. This is where you have Pagisiguro. It is at the bottom. It does It performs well in this small business niche, but we're working in order to grow in this area, and we've been growing into our retail network and our middle market as well in the acquiring business, and we will maintain retain the market.
We will fight for it. Thiago Batista from Itau BBA. Two follow-up questions, one to Noroyen Cassiano. Noroyen, what do you imagine what will happen in payment us. Terms in 3 or 4 years once the instantaneous payment system of the bank Central Bank is ready.
Is it going to be WhatsApp, QR code? What do you think the future payment means will be once the system is up and running? Casiano, what about Agora? How do you envisage the competitive positioning of Agora down the road? Let's ask Google to answer the question.
Agarden comes to add to the brokerage products portfolio, 3rd party products that we didn't have at Bradesco Cohetora in our full investment
for.
And it has to be in our framework in order to meet the needs, particularly of high income clients. Retail doesn't have so many prospects in this kind of platform, but exclusive and prime clients do need this approach. Agora is very light with a new technology. This is what we wanted to have since last year. We are heavily invested on this.
It comes
as a
boutique consulting center and having access to all kinds of products us. Investment products in house via our suggested portfolios and also the mix of some specific products that the customer might be interested in, in the market of capital markets or even bank securities. So Agora turns out to be our natural channel of consultancy and service in our full investment platform. We firmly bet on this brand. It's a key brand working on its own.
In addition to our Bradesco logo and our solidity, it doesn't bring the branch along. It's just a means for clients to invest, And that's our main focus. So as soon as Agora is ready, we want it to go to market strongly and very competitive visavis other digital banks, brokerage firms and companies in the market. Us. Answering your question, we could have a specific panel just to discuss the future of payment terms.
[SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Not only EuRICO by the way, I'm talking to EuRICO at lunchtime talking about this. And then we can bring Mauricio, Watsini and so many Colleagues who have a lot of input on this, we believe this market is still being transformed. There will be a lot of transformation Still to come, we may see significant changes in the device. We saw the launch of Apple Card yesterday, But we also envisage our payment means proliferating. The Central Bank already announced a real time us.
Theoretical cannibalizing debit far more than credit. And we also have something about the big tax with credit leverage. This has to be answered over time. So having a 5 to 10 year horizon forecast is like trying to get something from a crystal ball. I think we are making headway, and we expect to see significant changes.
On our part, we are not resting on our laurels. The bank has been investing a lot in alternatives, different payment us. Even with NACCS, which can provide further experience with partnerships in business that we never mentioned today, Whenever it shows the market, when the time arrives, we'll do that, not only at the bank, but we are also open. By the way, Eurico I told you that we are ready to partner with Fintechs. Indeed, for instance, we are discussing with some us.
Fin tax, we are providing loans via Fin tax. We are selling via Fin tax. We also use GEA BOSU. So we are doing very different things compared to what we do in our routine and there are many other investments that we are testing right now, testing new alternatives and new business. We expect to see a significant progress.
There might be a disruption in the market. And in the future, we might see one player or another exiting or leaving the network. That's only natural, but it's important to be ready to face the challenge with new business models. And that's what we're trying to do right now, thinking and envisaging day by day. A question to Andre Kurnau about greatest opportunities for cost Reduction in the bank in the future.
Is it still possible to keep on showing such a good cost performance as you've shown in recent years? We tend to say in our track record, we are obsessed by cutting down costs. We follow this very carefully. All areas keep an eye on this and the reflex is shown in what we delivered last year. We managed to have our costs below the inflation rate.
There is no doubt this is owing to a lot of focus, investment in IT, a number of things that allow the bank to perform so well. I was very brief in my presentation, but we keep on looking for opportunities for further cost reduction in the bank. This whole process of digital transformation includes and embeds very great productivity gains As you bring back office activities to an end, at the end of the day, you can have a more rational use of all these processes. Particularly when you focus on digital transformation, I would say we still have plenty of room to continue with cost reduction and its current focus as a company by all areas. There is a question to Vinicius.
It's about pension. Last year, pension funds premium had a reduction. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] The scenario was not among the most favorable in this segment. So how do you see the competitive scenario [SPEAKER UNIDENTIFIED
COMPANY REPRESENTATIVE:] In pension,
you already mentioned the insurance company and the bank's measure for this specific segment. Could you tell us more about it? In the past, we were impacted in the market. The macro scenario, well, we have a procyclic market and we were affected just as the market was. Now this market is far more competitive today.
Today, competition is fierce at a platform level. Pension Offers are fully integrated to investment offers. At the end of the day, you have a product that migrated from something that was involving a lot of risk. And by the way, that's a challenge we have. We have to Go back, I mean to address this better, now we have this challenge of working on other things.
But the thing is, it's very important to focus on this approach, having or being very Customer centric in order to give the right pension offer considering the time of life and what drove that investment. So I think Asciano can add to my answer. We have this high income journey about investments and I guess we have no other option. Pension has to be part of this distribution and what we're working very heavily is integrating these teams of Bradesco on sales generation in charge of commercial management of managers and also the investment department in order to bring this offer into the single vision of the customer's asset management. In addition, What we do is to provide competitive products.
Increasingly, Their capacity to delight customers, we launched a fund of funds with 3rd parties. It's a novelty in the market. We also have single names involving 3rd parties already available for private. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] That's something we do. It's business as usual.
So we launched a family of products, which is a multi portfolio with automatic rebalancing And it has a mission for those who want to invest on a monthly basis long term. So what we're doing is Well, we are focusing our efforts with the investment area, so we can have a very competitive us. Andre Martins, a question to Ulrico. You showed the omnichannel implementation for Agribusiness and the new administration is talking about public banks in this segment. Capital Markets, Private Banks are also protagonists.
Us. So what are the greatest opportunities and bottlenecks in rural loans in this new credit cycle? For rural loan, [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Well, we see a lot of opportunities in this fund. In this segment, Brazil is a world reference, a benchmark. When the economy slows down, this sector keeps on growing.
Despite the crisis we face in the Last 3 or 4 years, there was a lot of growth. So we are working on regional rural platforms in the country. We already have 15 by now. We're getting close to 15 platforms with agricultural farmers in order to provide them with special service and really add value not only with credit as a product, but specialized consulting services And we also created a department, a rural department in our product department focused on the rural areas, Working with co ops, big farmers, segmenting the business in order to provide unique treatment in each one of the segments. Us.
Corporate, Corporate 1, Large Corporate, we have clients all over the chain throughout the chain. So all we see are opportunities in agro us. We keep on investing and we believe specialization, service plus credit is A unique model that will allow us to have a higher penetration. This is at our very origin. That's where the bank came from.
So we see a lot of opportunities, and we want to increase our penetration in this model. Thank you. A question to Noronia. It's about the corporate segment. How can we align corporate with the right capital remuneration?
And how does the bank see Remuneration at corporate, is it the total remuneration or a specific focus on credit? Thank you, Feretti. Like I said in my presentation, This is our guidance, RA. So we have a very clear view of Risk adjusted remuneration and if there is no capital remuneration, we don't do business. We don't close the deal.
Now we don't check Operation per operation alone, we also checked with LION and we have this ability to bet on a multinational that is arriving in Brazil [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Because they know our potential relationship, we
emphasize Bradesco is a retail bank.
It starts with large corporate, with big corporations us. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] We have committees making decisions on this. We do have this appetite to have different posts in these companies and not only having employees working for these business, but also high income clients. So this is critical to us and it also helps to increase capital remuneration. So I have a privilege [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Position to get into a relationship without any burden depending on this exchange of business.
So the CFO Brings this up, not necessarily ourselves. And the second item, Bradesco Has a full portfolio of products and services and also unique items. You asked about cross subsidies. If you think about a corporate manager, if I don't sell with DontoPrev, I'm not going to turn off any lights. And all I will do is not to have one line of revenue related to the insurance company.
And once again, The same goes for corporate. So we have unique products in addition to the full portfolio like OdontoPrevi, Alelo, Bradesco, Saudi. We are the only ones who sell. We have no other competitive around. So that's what we do.
Revenue not coming for credit, so we can have a good credit remuneration. Now Marcelo mentioned this integrated customer luck. So it starts with our commercial strategy, our service, How we will approach the pyramid or the pyramid of the customer, how we will be profitable until the credit committee in which the product areas issue their opinion. So we focus on the client from beginning to end. Corporate relationship should not be based on credit alone at a specific time and the return of that specific credit.
We need to have a look on the whole. Perfect, Eureko. And not only that, our business model and the management model has some subtleties. Think about RM, CIB from large corporate. This guy is going to talk about OdontoPrev.
We just mentioned that, right? In other organizations, all he does is to talk to IB, very sophisticated and structured operations, but not here. Structured nodes, for instance, for financing for acquisition together with the IB people. But he sells insurance, he talks about cash, He sells other business. He sells Alelo because he is acknowledged and assessed as such.
So this is what makes a difference in our remuneration business. Rafael from Safari Capital. I had two questions. First question, how do you see competition with CRADI co ops In other countries like Germany, co ops have a heavier rate in the loan market, Whereas in Brazil, co ops have some regulatory advantages and have been growing a lot. So until we open agriculture more broadly, How do you see competitive with co ops?
And do you think Brazil can get closer to the position of these countries who are more focused on co ops? My second question is about scale. How do you see the risk of a positive data archive in the credit reporting system. So it also applies to the financial system. Us.
So we have channel 1A. Marketing is increasingly more guided by IT. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] So you can bid the client better. At the end of the day, you enroll, but you don't generate business necessarily. Let me start with the co ops.
Thank you for your question. Cooperatives, well, we compete, like we said, with all. We are the only bank which competes with all market players. Co ops are seen in different ways as our partners and customers, All big sales co ops are our big corporate clients. Sometimes they distribute our products.
They have these on the shelf. So in this open bank strategy, it can happen in the digital world, but also in the physical one. And agricultural co ops are big Partners of ours and they run business on a regular basis. We don't see a problem. Competition happens in different regions in different means.
When we go to the South, we find more co ops. When you go to the Northeast, you find more public banks. And Brazil is very diverse. And we have us. Our strategy per region according to peculiarities and positioning of our clients in that specific region.
As for the positive data archive, we see it as something very good. If you think about the midterm of the economy, Brazil is one of the few countries which doesn't have such an archive. So That's a headway. And by the way, social responsibility is a problem that we have to fix somehow. But we are given significant steps to complete and conclude us.
Those jigsaw puzzles because with some gaps, you cannot see the picture clearly. So the positive archive is important. We launched an action with the main market banks in order to boost this burden and gain opportunities. What about the midterm? We see filling this gap and delinquency in the market will go down and loan will go up.
It's important to have information to expand loan. The more assertive I have I am, the more information, The more flexible you can be, if you have little information, you are more conservative. It applies to individuals, loan, corporate loan, Any bank regardless of the credit diligence, when you have more information, credit expands. So we compete for other reasons. Anybody who wants to have access and can get to the client, providing a good experience, a good offer will be No problem about that.
We need to have our own skills, our own competence to be competitive. It's not by restricting for hiding information that we will be competitive. Just adding to what you said, that's the number we're not absolutely certain, but Close to EUR100 1,000,000,000 as assets. So you cannot say we don't have a competitive retail bank and there are only 5. There is a group of There is a question addressed to Cassiano.
This one is about Funding availability in this faster credit growth phase, how do you see funding evolving? I don't see any funding problems. I believe big banks, including ourselves, are very ready for this [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:]
Credit expansion,
what we foresee and is in our guidance and we can see in our other competitors, funding is here. It is in the market. All banks have a very similar positioning, particularly the big ones. We have to keep our eyes open in order not to increase our costs. No bank needs, particularly the big ones to have increasing or an increase in their cost, particularly those who have a network similar to ours.
I don't have any concerns in terms of lack of funding to withstand credit Quite the opposite, we want loans and credit to grow. This is the good side of the equation, but all banks have a very vibrant liquidity reserve in order to face a more virtuous growth. So I see that very calmly. I'm very comfortable with that. A question addressed to Vinicius about distribution channels.
Bradesco Seguro's relationship with the bank channel via bank assurance us. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Brokers and what about the progress of digital channels and insurance distribution channels? In our case, in our guidance, well, we are multichannel per se. We operate with our branch managers for pension, us. Savings bonds, we have brokers at the branch level in the market, large corporate brokers as well.
And our vision is that the more we go deeper into this customer driven focus, By the way, I think it's important to be in different areas. We're fully convinced that this is the future, [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] So we can provide full insurance offerings, that's very positive. If you think about Our distribution in terms of number of products per customer, think about our account holders. Today it's about 1.5 or 1.6 products for client. However, when we break down some products, for instance, like pension, savings bond, Loan insurance that are very typical of bank insurance will get to 1.2, which is very similar to our non account holder client.
We have approximately 1.2 products. So our current understanding is that our account holder
[SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:]
That we should know very well, we do have information on him. Well, this is a big source for risk products of the insurance company in order to expand it. So having good knowledge on the client, providing The right offer at the right time, this is critical. Now we are focused on customers, So I believe this possibility is really leveraged. We've been doing a lot of progress with digital channels to provide Internet Banking products.
In addition to dental, we also have Car insurance, homeowner insurance, now we have travel insurance, pension, savings, bonds, all provided by Internet Banking. We also firmly believe in our bank channel in this journey of customer knowledge And we are focusing our efforts to create products to our account holders because they are our best clients in terms of Results, income and loss ratio. So we need to have flexible coverage, flexible products, different segments of the bank and always focus on account holder clients and eliminating breaking down barriers, so we can distribute great products in the network us. Like health insurance for small groups, SPG, we are making it stronger also to be distributed by our bank network. So I think we have a lot of room to evolve.
So just one last question before we close the panel. May I just ask the last question? Us. Thiago Capoza from BTG Pactual. I'd like to ask a question about reinsurance.
We can see IBI profitability very high, great improvement in recent years. How do you see this business of reinsurance? Did you expect IBI to be so profitable? What's your opinion on this? Do you consider this as something core to the bank?
And adding to high risk as well, Like you said, having multiproduct is important. So do you think you might put it aside? How do you see this? Let me start from the end. I think that with high risk, we don't have it as a core action, but we have it as a JV with Swiss Re Corp.
Solution and we can offer products that are important in the portfolio like Noronia mentioned. They are important to our corporate as my clients, and we also have this offer of rural loan and also Equipment Insurance.
And I don't think it's corporate investment, but a good investment and we're very happy about it. And we believe that this is a good management And I have two questions. Since the whole panel is here, I would like to understand credit. There was a certain disappointment with the GDP of Brazil recently. I would like To understand to what extent does this change your expectations for the year or your loan book guidance?
Us. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] And perhaps you can break it down into legal entities and individuals. And the second question related to the first, do you think We can say that delinquency looking forward will be structurally low. Anything in your credit model and of the banks in general [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Or your leverage level would allow you to work with a structurally lower level of delinquency? Let me start answering about credit individuals, SMEs and then Rossello will talk about corporate.
Us. We maintain our guidance. We see a lot of domestic opportunities. We can connect products in our channels. Of course, a good GDP can help or bad GDP can get in the way, We believe that we will fulfill the guidance regardless of the scenario, because we think that the situation will be What we already know, so we'll try to connect products across the channels to improve customer experience.
We have a lot of opportunities to capture synergies considering our current client base. It is important to say that we have a growth target for clients, which is high and We're doing quite well. We started the year very well in January, February, March is doing good, and we understand we're going to grow our client base. Unemployment is reducing gradually and we understand that these models will contribute positively to grow the loan book In our main products, considering 2 months, the first two months, Vis a vis the prior 2 months, we are growing. Second question was about delinquency, right?
In delinquency, we us. Our delinquency is the lowest in the last 10 years. If we look at the two crisis moments, 2009, which was a 0 GDP. And if we look at the latest crisis that we've been going through, Almost 3 years of negative GDP. And if we look at individuals' delinquency and net of HSBC, there was a reduction in delinquency.
So in terms of massive loan that is decided by models, it's really good. Our modeling [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Has improved really well since 2009. And during this crisis, we learned a lot because you see every crisis has a positive. If you're able to cross the bridge, We get to the other side a lot more experienced. So we are coming out of this crisis with process improvements for mortgages, improved and scoring our loan recovery system.
So we advanced a lot. In this way, I see that our delinquency should continue with a slight reduction over the year, but it should remain structurally lower Then what we have seen in prior years with a caveat that we had an unexpected If we have an unexpected crisis, but we are not counting on that, it's not in our radar. We see a positive outlook, Origination, the water that we're adding to the pole has a better performance than what we had before, which leads us to think that this is a structural us. Lower delinquency that we can expect and we continue firm on our guidance for the year. When we disclosed for the guidance.
I was really at ease about it. After the 1st 2 months, we're even more confident. So we are fine. We have some peace of mind. The boss has arrived.
The boss arrived very quietly. So he's giving you a tip of the quarter, but I'm not going to dwell on this. I just want to add I second to Eureka's words, of course, in large corporate, this growth is opportunistic given capital remuneration. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] What
we had said
that today we have a circuit of issuance of securities where we can bring part of it to our portfolio so that we can have adequate remuneration and leave aside risks to recycle assets. That will require more dynamics on our part, But on the other side on the other hand, we can remunerate capital. So we are very well oiled for that and we continue to work In line with our guidance, particularly for corporate, but kind of flat with large corporate And with this expectation of a lower delinquency rate as mentioned before, in the Q3, you saw delinquency of large corporates and SMEs, [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] But the
fact is that
delinquency is growing. Our expectation is positive that we are going Our expectation is that we're going to have the portfolio under control. Very well, we are closing the spin off. I would like to thank the Presidents of Andre Well, hello again. I would like to thank you for joining us today.
I hope we were able to clarify some questions you had. I think that In the past, we've had crisis. We always say that Bradesco was not just a survivor. We were winners in this process of stabilization that we had in the last 20 years. And now to face the new models and the new challenges that are arising, particularly regarding in the digital world.
We are sure that we are moving in the right direction. We are not moving as a cruise. We are moving as a destroyer fast with agility so that we can implement all of the Necessary improvements for our bank. We're very confident regarding our results. Our VPs, I think, To give you a clear idea of to what extent the bank is well aligned, all of the executives are very much on the same page regarding what we need to do.
So we have no doubt [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] About our success, we just don't know how successful we'll be, but we know we are going to be successful. Thank you very much for joining us today and we remain available. Our VPs are here, Feretti and Leandro and Everyone is available to you. If you have questions, if you need further clarification, you can call me as well. It is a great pleasure always to speak with you.
Thank you very much and I hope we have a great year ahead of us.