Banco Bradesco S.A. (BVMF:BBDC4)

Bradesco Day 2019

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Mar 26, 2019

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. 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 executives, our management. This is our traditional format. We have the privilege of having Mr. Brandão with the opening remarks. Also Mr. Trabuco welcoming you all. Next, we'll hear from Octavio and open for a one-hour Q&A. We'll also have a break. After that, a panel session with our Vice Presidents, Andre, Cano, Eurico, Fabio, Cassiano, Marcelo Noronha, and Vinicius, Chief Executive Officer of Bradesco Seguros. You can use the microphone to ask your questions. Via webcast, Firetti will be here taking questions and sending them to our management to answer the questions. I have the honor to officially open this meeting, inviting Mr. Lázaro de Mello Brandão, Chairman of the board of controlling societies of Bradesco. 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 during the debate session. This meeting brings us opportunities to strengthen our zeal for transparency. Over this afternoon, we are going to have candid dialogues about our relationship in the market. On behalf of the board of directors, I welcome you all today, ladies and gentlemen. Thank you for being with us this afternoon in which our Chief Executive Officer, Octavio, is going to lead an opening session with the Vice Presidents so we can all discuss and debate the organization and the performance of this year. We're just about to begin the first quarter. The Bradesco organization aspires to be constantly ready for different economic cycles in Brazil. We know that economic cycles, loan cycles, financial cycles have not been revoked. Therefore, our strategic concern as part of our culture is to be always ahead or anticipating any cycle that may be set. This is why the balance sheet last year showed not only the strength of our positioning and the strength of returns, making the net worth to have a margin ready for credit expansion. Solvency ratios, solvability ratios, or BIS, have already been included in the balance sheet. Therefore, we have a mature cycle as far as loan growth is concerned. Therefore, the structure of the balance sheet also reflects 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 or also the credit from the public sector. We all know that regardless of the performance, achievement of reforms at 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. We are ready to play that role. At the end of the day, we are going to get into more detail. 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. We constantly like to honor your attention to this organization. Thank you very much. I welcome you all. Next in our agenda, I invite Octavio de Lazari Jr., our CEO, to join us upstage. Carlos Firetti, in charge of market relations, and I will also be here so we can start the Q&A session. Good afternoon, everyone. It is always very nice to see you again. Thank you for being with us. Welcome to our home, your home, Bradesco, 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. Today we have an opportunity to have a closer talk to you to talk about our bank's strategies, and then the four vice presidents will also join us to give you more detail on each one of their areas. It is a key moment, you can also have a better knowledge on what you know about our bank already. Just very briefly, earlier this year, we made some important changes with these four vice presidents that will be joining you today. Two of these vice presidents, Mauricio Minas, he went to the board, and also Pancini. We do emphasize the quality of this board members with different skills as members. 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. Pancini knows everything about retail. Mauricio is one of the greatest experts in IT and innovation. Therefore, we have now four VPs, four vice presidencies. One with wholesale bank, Marcelo Noronha, with the vertical operation. The secondly high income with Cassiano, and also with the brokerage, investment treasury. A third is retail bank with Eurico, where we have our correspondents, distribution, and the product area, and particularly digital channel as well. A fifth area with personnel and technology given full support so the other three areas can really grow more exponentially as we expect to see. André Cano as well. The four of them will be with you. 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 improve the organizational metrics. I think we made a lot of headway with the consolidation what HSBC clear synergy gains were captured, as you can see in the balance sheet. We expect to keep on having more synergy gains. Now I think we are all here for you to take your questions. Feel free to ask your questions now. Thank you very much again for being with us, ladies and gentlemen. Thank you, Octavio. Let us begin and open our Q&A session. First, we are going to take questions from the people in this room. I'll also include some questions that come via webcast. Before we take questions from the audience, I would like to ask a first question which has already arrived. 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 of Bradesco, 5,000 branches, points of service, payrolls, the whole commercial area of this great bank. We increasingly need to add embedded technology in this area, in this segment, in this big arm of the bank, so we can act in a timely manner for clients, so we can serve with the convenience he needs. That's one of the pillars to take care of the incumbent bank, so it becomes increasingly more agile, delivering convenience to our clients. Therefore, become more profitable. A second pillar, in my opinion, is our fintech. I call it as fintech, which is Next, our digital bank. I'd rather call it fintech is a better name. It's a bank developed by digital natives. Very good prospects. Bring in 7,000 or 8,000 accounts per day, over 100,000 accounts. We will soon reach 1 million accounts. At the end of the day, we'll 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 is also the open banking. 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, 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. Also the journey with a relationship with a bank. This is how, I believe, we'll manage to tackle challenges faced by the bank without putting aside or without neglecting, quite the opposite, giving 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? Jorg Friedman, Citibank. I would like to ask something different. Because the question was very appropriate, I'll just add to the same topic. I would like to better understand, what is your true ambition as far as Next is concerned? What about the incumbent bank and Next evolving in parallel? We all know that most of the accounts that are open at Next are new accounts. However, obviously, they should leverage a lot based on the platform of the incumbent bank. In your mind, what is the strategy in the future so you can split both banks? 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 platform compared to the incumbent bank. I'd like to understand how you see the performance of both banks in the future. Like I said before, we have an incumbent bank, which is this greatest network, over 5,000 branches. 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. 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. 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 happen. There will be conflict between both business. Our mindset is not to have so, and maybe even opening to partnership with other companies, banks, or other big techs. Why not? It all depends on opportunities that arise. It might be a good alternative. Bradesco is specially open to negotiate for new deals and any discussions and partnerships that may happen in the future. This native digital bank known as Next 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. He was just saying that 80% of the people who open an account at Next are not Bradesco account holders. 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. Having these people in-house can be a great asset for us. 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. It should happen in a different manner, with a totally unique experience compared to a traditional bank. Just highlighting something Octavio 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, AI is a new way to meet the needs of these customers. Murilo speaking. I would like to better understand, starting from the very beginning, could you please help but understand the profile of customers that go to Next 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? One thing is to make a proposal that is free of cost, and then you have transactions that are charged. 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 would like to understand the difference between both audiences and the stage of life of Next customers. The vast majority of Next clients, we cannot generalize, but the vast majority are 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 phone and manage 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 Next, how much they have been more valued. Recently, we have another cashback partnership with Apple, for instance. Apple mentioned the Apple Card. I think you saw it yesterday, right? These are people who are searching for a unique or a different relationship with a bank. You addressed an interesting point, by the way, this bank doesn't have fees. How would survive over time? Let me tell you something. The 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. These people come to Bradesco because they are enjoying the experience, and over time, these accounts will become mature. Fee is not critical. We want to know him better. We want to bring this client to our database, to our client platform. From then on, as we know more this client, we can offer products and services that Next 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. Well, that's precisely my question. You see, you have this challenge ahead, which is a generation thing. Your incumbent bank, maybe it's the guy who likes to have a face-to-face contact, likes to have an individualized 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, making you very vulnerable for fintechs. For instance, cross subsidies. Let's just get the good part and leave the bad part for incumbents. Well, that's not a conversation for now. It's very complex, I know. 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." I repeat, there is this discussion of cross subsidies. Isn't it a huge challenge, Lazari? It's outrageous. 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's 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. 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 want to have a branch because you have your own home. Your son possibly will want to have a different journey. We don't have a single answer. The thing is, I 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. It's something that we never imagined a couple of years before. Taking care of this bank, this fintech that is coming, cross subsidies, so it has its own life. That's why I have this mind. Starting the second half of the year, Next shouldn't depend on this bank anymore, including results. Just adding to what you said, I think you talked about the client base. You have 23 million Bradesco account holders, 750,000 in Next, and 38 million 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. Oftentimes prior to revenue, you're talking about flow. It's important to have experience, provide experience to customers so they know our product services, feel comfortable, and have a positive interaction. Once you understand the profile better, you can be more tailor-made, and then you can become more profitable. By and large, the strategy in the internet sector goes this way. Our major focus is creating flow, and then we can go for revenues. 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 Next? What is your criteria to tell that this customer is loyal? Does he have an account at another bank? 700,000 clients, for instance. Well, that's because they are working. They are making transactions in the account. We don't fear cannibalization at all. What we need is having a customer in 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. What about cannibalization? This is zero problem. No problem at all. This will happen. Fees will go down, 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 scale. In the current market, be it ourselves in current banks or fintechs, whoever player is, if there is no scale, you never win the game. Think about China, for example. Look at what Paytm does or India or Alipay or WeChat 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? Zero. Europe is too little. It doesn't bring scale. Who brings scale today? Countries with a much bigger population like China, India, the U.S. 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. 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. Hello, Eduardo Rosman from BTG Pactual. Along the same lines, I have two questions. If I understand you correctly, the bank intends to transform and become more a hub of financial services, right? Is it possible to become an ecosystem or a general hub? If the client wants to buy a bicycle, for instance, the bank can find him a way to buy it, just to have a better understanding of how far we can go. The second question is about the speed. From the moment the bank stops needing to invest so much in the physical world, we have to think about the labor reform and so many things taking place. I wonder if expense reduction might come even faster than price reduction until the bank benefits from that and has opportunities to invest and cannibalize more. I have to understand the pace better. Good point, Eduardo. It's a trade-off. One thing will offset the other. We won't need investment so much in physical branches, but we have to invest more in IT, training, hiring people more specialized like engineers, technologists, so we can really deliver our aspiration to our clients. We cannot fight against it. We have to be both ways. Cost reduction as much as possible, but not spare or not for the detriment of the other side. 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 car or a trip. Why not? Like I said, when I answered before, we don't fear partnerships, quite the opposite. We want to establish firm partnerships, maybe a partnership with a big OEM. 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, or Bradesco client, or high income client. He'll have a different condition. Maybe he wants to finance, and then I can work on my loans. That's the way to go. It's already being discussed. Let me just add regarding the question about brick-and-mortar branches. In addition to cost reduction, we believe that we can offer, in the right conditions, we can be striding a good credit cycle that may last many years with very attractive loan growth. In this environment, where 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. These discussions, of course, we understand that there is a lot of focus on disruption and everything that is happening around us, but we're placing a lot of bets of our chips on the traditional bank. Thiago Kapowski 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 Techs. In other countries, we have seen these players, particularly retail players, somehow getting into payments and 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. How do you see these possible players coming to Brazil? 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 this? Remember I talked about partnership? It is exactly that. This is the biggest danger that we face, not FinTechs. A FinTech is a partner. A FinTech will help us do a lot of things. Our major challenge is the Big Techs. Because these companies, well, firstly, they have a processing capacity, which is indescribable. 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. He has a Google phone. We were talking about trips, in 4 minutes, he got a push notification. No, you think I'm joking? I'm not joking. You might be saying, "Oh, you're crazy." No, I'm telling you that smartphone hears us because it was a huge coincidence. This is our competitor. This is somebody who can disrupt us. Because for now, we're limited to payments. Google in India grew incredibly. Apparently, they have about 100 million clients there. In Brazil, it would be a little more difficult because they don't have an installed base. Perhaps for Google, it would be better to partner with someone. It would be a good idea, actually. I think that the major challenge for us, the major competitor, would be these Big Techs, Google, Amazon, these players, they're really big. I'm going to give you an example. I was joking about this. If Amazon bought GuiaBolso, for example, GuiaBolso, all banks have it. We authorize them to consolidate the statements, GuiaBolso comes here every 2 minutes. It comes to Brazil, it consults your balance and your statement. The same thing happens in Itaú, 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. 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 Giovana Rosa with UBS. 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? Giovana, we have a BIS of 17.8, almost 18, right? 13.7 of Tier 1 in the fourth quarter of 2018. We prepared ourselves for a country that will work for a loan book that will improve. Because you see, capital serves two purposes. First, 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. 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. 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 last another 7,500 years. We don't exist just to pay dividends next year. We're thinking about the bank for the long run. For this, we need to grow our loan book, the number of clients, the assets of the bank. This is our daily quest to make this bank grow. Would you like to add anything? No. Perfect answer. I'm Thiago Batista with Itaú BBA. In this discussion of Next, Google, WhatsApp, how do you see open banking? Is open banking really going to change things or not? Where does open banking fit 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. The main chassis lists the bank products, checking account, cash management, collection, et cetera. All additional services, let's say I need somebody to handle my accounting. It's on 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. Open banking is a reality already. We can't avoid it. Europe has done that. They are quite advanced in that front. We have some concerns. Among them, what I have just mentioned. The one about Amazon, this is a reality, and it is good. We will need that. If we develop systems and considering the size of Bradesco, the incumbent bank, that can be very complicated. For some solutions, we'll need to bring on board a fintech based on open banking to help us develop new products and services. The other way around also applies. We have financial products that can be consumed by fintechs that will not necessarily want to develop those products, the bank is getting ready for that as well. I'd like to remind you that at our brokerage house, we sell third-party funds. 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. 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 similar, candidly speaking. I think that there are some differences in distribution, but capillarity, all of the mainstream banks have it. 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 an adequate number? Do you think that your sales force should increase? Do you think the compensation of your employees' variable pay is 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, starting from the end. We currently have 98,000 employees, give or take, 98,000. We are working so that more and more our back office will be more automated. We want to move people from back office and put these people in commercial sales. Almost 70,000 are in our sales force. Most of our employees are going to commercial. 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. I think that this is going to support our efforts to grow the organization. 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. We would remain with 98,000. We had a substantial reduction in headcount in recent years, but we are currently at 98,000 employees. Like I said, with variable pay for the whole sales team. Credit growth, how are we positioned to surf the wave of credit growth if it comes? We do have a positive expectation regarding that. We don't have one single strategy. It will depend on a number of factors. We may have different strategies accordingly. I'm going to speak a little bit about retail banks. What are the loan facilities that we can grow in retail? Basically, payroll deductible loans, mortgages, auto loans, and consumer credit. 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 with companies for their payroll. We are leaders. 78% last year of all of the bidding processes, Bradesco won because we have adequate remuneration because of our loans. 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 operations were granted via smartphone. 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. I need to have consistent offerings. This is pure CRM and a simple and adequate client journal. Two clicks, and they can have a loan. They simulate the operation, the money kicks in their banking account, and they don't even need to go to a branch. I need to have good information about clients so that I can have the right credit scoring and offer a good journey. Mortgages, we have a partnership with real estate companies. We are leaders in granting mortgages, even ranking before Caixa. I talked about payroll-deductible loans, mortgages, auto loans is financial companies and the branches. Auto loans are part of the budget that the managers have to deliver so that they can get variable pay. One thing leads to another. 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 one, global market, and securities. Now we are able to have operations and deals which were unimaginable with the investment bank. These were unimaginable a few years ago. The latest acquisition made in Brazil, one of the largest pulp companies, it got a loan in the market. 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. I think that for every business line, we are going to have a very well-defined strategy. It's not like there's a silver bullet that will make us be successful in all of them. We need to be focused. The same VP of retail banking handles digital channels because a client opens a checking account, but digital channels will be used to grant loans. These are the guidelines that we are following. I think it's worthwhile to say, when asked about differentiation of the banks, to understand the geographic position. We have to understand delinquency and unemployment in the different income brackets and think about how this will improve as Brazil resumes growth. We are the only bank present in 100% of Brazilian municipalities. In more than 2,000, we are the only one there. When the economy resumes growth, income brackets B, C, and D will get employed, will have income, and will be able to consume financial products and services. We are the leading bank that can serve these clients. The branches, as Octavio mentioned, as they are supplemented by the digital environment, will allow us to use them for other purposes, including our work with legal entities. We have teams of legal entities. It is the Espaço Empresas, corporate spaces. We have it in all of our branches. We have a manager at the branch, but not passively working as we see happening often, but with an active role to play. There is a question asked 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 Cadastro Positivo. How do you see these factors evolving? How can we evolve from the regulatory standpoint? That spreads will be reduced. It's a factor. There's no fighting this. We had a meeting in February with more than 10,000 managers coming to São Paulo to participate in a three-day meeting. One of the points that we discussed at length was the spread. We can't think that we are going to maintain or increase the spread. The spread will be reduced, the only remedy against a reduced spread is gaining more scale. That's why I've been saying scale, scale all the time. We need scale to maintain the profitability of the bank. There are a number of factors that can help us. The Cadastro Positivo is one of them. It's not progressing as we expected. There's an opt-in. If clients don't want their data to be seen, they have to opt out. Solidarity and responsibility is something that doesn't make any sense, it can be a hindrance for the Cadastro Positivo to operate efficiently at 100% efficiency, which is what we would like. Let's see if that is going to improve. Regardless of that, other things are happening, making 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. I've been speaking about this for a long time with the central bank. We cannot have overdraft at 14%, 15% interest rates, we have to adopt overdraft just like it is in the rest of the world. We can charge a fee, we can have a much lower interest rate. If it weren't for this limitation, we could reduce overdraft interest rates to 4% or 3% a month and no longer 14%, 15% as it has happened. The fee will vary from client to client. If the client has a good relationship with the bank, they might be exempt of paying that fee. There are alternatives, they've been presented by the central bank so that we can change this portfolio that has an exacerbated spread. In all of the rest, there's going to be a fierce fight, there's no avoiding it. 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 is leading the technology race? Is there a bank that has an advantage over the others? 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? 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 a cloud server, what are the barriers? We hear about legacy, that big Brazilian banks created a platform that cannot be changed overnight, you yourself said that you're thinking about Bradesco for the next 70 years. 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 or this cannot happen? Well, there's 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, we do operate in the cloud. This is not a hurdle for us. It's not a barrier as long as we can maintain the security levels. The number of cyberattacks that we suffer here at Bradesco, not just Bradesco, Itaú, Santander, all of the big banks, well, it's a huge number of cyberattacks. We need to take a step forward, see how security will be to know whether we can move forward. There are things that are in the public cloud that 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 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 a Santander employee, but you do have a Bradesco account, you're going to kill me if I don't offer you a statement updated. Walkiria, she's our technology director. 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 is leading the way? Well, everything is a commodity. It's hard to say which market segment is not a commodity or a 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. Whether you like it or not, it has an advantage vis-à-vis the competitors. They'll have to catch up with us. I wouldn't say that we're leading the way, but if we get mobile banking of all banks, they're 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. I wouldn't say that we're 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 with agility and quality of service that they would like to have. I wouldn't say that we're ahead of everyone else, but I would say that we have good positives that we have tapped in. BIA is implemented, it's up and running, it's live. You click on mobile, it's up to BIA. You access the internet with your computer, you can access BIA, we are ahead. 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. Three new checking accounts a day, 60,000 in a month, a million new accounts a year. It's great to work with these extra one million checking accounts. I think we have an advantage, not that we are ahead of everyone else, but we do have an advantage. It's worthwhile reminding you that BIA is the biggest Watson deployment in the financial market worldwide. IBM recognized that. The advantage, it's an AI advantage that we developed, we are leaders there, not only in Brazil, but worldwide. There is a webcast question by Marcelo Telles with Credit Suisse. What is the potential threat that a launch of a product like Apple Card could mean to banks? No one liked that, right? Considering the information that we have so far, they're going to launch it in July, Apple Card. I haven't got all the particulars yet, but everything I could read last night, 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. The way it organizes your bills, how much you want to pay, it's quite nice. It's quite a pleasant journey, but it's nothing but a digital wallet, which is something we have. I think it's interesting to say that in the Brazilian market, Apple has a very low percentage. The biggest player here is not Apple, it's Android, it's Google. It is an interesting journey, but it is a digital wallet. They added a card, which is the same card that I have on my mobile phone. I have a Bradesco Visa card. It's in my wallet. When I go to stores, I just get the card closer to the POS terminal and I pay. It is one more competitor. Is it going to steal thousands of cards from other players? Possible, but they're doing cashback, and we give you mileage. You get four points for every dollar spent. 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 U.S. nor in Europe, but people don't recognize cashback, just getting money back. Mileage, when you need to buy 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 perhaps kids. I think that gives you that perception of rewards. I didn't see cashback working well anywhere in the world. Comparatively, I would prefer to continue with my card that gives me mileage than with a card that gives me cashback. Undoubtedly, it's a nice journey. Pleasant. It is one more competitor that is going to get some cards from us. Still talking about cross subsidies from another standpoint, I have the impression that the banks that works in silos as a product, little vision over CPF or taxpayer number. I know that this is changing, but that's a constraint 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 Techs that are born and look at clients from beginning to end. For example, silly example, okay? You can give credits to employers. If you could link employers to employees, the fintechs are in the second derivative. When somebody loses their job, you could scan and say, "For this kind of sector, we have to be more restrictive because some companies are facing difficulties." I don't think you can do that today. That's a question, okay? It's an impression I have. I'm being provocative here. My question is, you're still working in silos. You're still focused 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. 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 million accounts, 50 million clients from Bradesco Seguros, this huge legacy to work with. However, the bank was built. In the past, it was easier to start from scratch. I'll start a fintech today, and I can open the system the way I want. Now look at this big bank, 70 million clients. I have to run the database overnight, and let's see what the balance will be the next day. It's not a burden, you see? It's a joy to have this. However, I also know I have to be more agile. I have to be faster. First thing, this thing you said about the silo vision, what I said was to destroy this wall. Either you put the wall down, or you never build one. In this case, we put it down. When I said we have 4 verticals, Cassiano, Eurico, André Cano, and Marcelo Noronha, it's precisely for this reason. We no longer have silos. These verticals have the whole client journey from beginning to end. Eurico, he's responsible for account opening, account maintenance, the CRM guy who's going to analyze the data, and the guy in charge of selling through the digital channel. The product guy in the bank today is not only focused on the product, but on the client, the individual taxpayer number. That's what you have in our CRM. Does it change overnight? No, it's a process. It's coming very fast. I'm sorry, we didn't hear you. I apologize. What about this thing about using information to turn into credit benefit? Is that a reality? You know that I worked for 12 years as a loan manager. I did that in that department at the bank. When we run this loan model, I remember when I started, I had three models of credit score. Now we have about 700. When I run today your loan model to tell whether I'll give you a loan or not, I'm thinking one year ahead. What about your company? Can it afford to be better down the road, or are you going to lose your job? We can measure, we can take measure of the credit score models and group clients checking not only that, but also social networking. I can check you on Facebook, naturally, information that'd be public available. This is already running in our credit score model. Just more to the point. Today, if you were to rate a scale from 0 to 10, to what extent is already individual taxpayer number, not only product, and how important is to assess an individual? Well, for corporations to individuals, it's 10. I have to check it. It's critical, otherwise, I'll 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 cash 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. Not only the Brazilian market, the world market. Today, I have this team of statisticians. Only for credit, I have about 300 guys just with statistics. I have no concern about this. Our models are amazing. 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. 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. If corporations are already an input for individual assessment- It's a fact, and it's been so for over a year now. Today you said that home equity, for instance, having a high is low because you bet a lot in 2009 or 2010. For car, I mean auto. 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 was impaired at that time. We have 0 chance of happening today, not even in homeowner insurance. Well, we have to close this panel session now. We will be back at 10 to 4 with a panel with vice presidents. Now I give the floor to Otavio. Or are you going just to mention the final remarks at the end? Yeah, we have a break now. Yeah, we want you to have a break. Okay, thank you for your questions. It's always a joy to be here. Just as a recap, the bank is currently organized into 4 vice presidency areas, primarily focused on clients. We have a first vice presidency for retail, Eurico 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. In this case, we have administrative affairs, human resources, IT, accounting, compliance. Now I'm going to invite each one of our vice presidents to join us upstage. Each one of them will speak for five minutes about their respective areas, then we will move to the question and answer session. This is open to everyone. You can ask your questions if you are in this room or also via web. Firetti is going to moderate this panel with me. We can also check questions that come via webcast. By the way, I forgot to mention Vinicius. Vinicius is in charge for Bradesco Seguros. We have the four VPs plus Vinicius. Thank you, Cassiano. I invite André Cano to join us now. Andre, Cassiano. Cassiano. Eurico. Eurico. Marcelo Noronha. Marcelo Noronha. Our dear Vinicius. Firetti, please. Firetti. André. Good afternoon, everyone. It's a pleasure to be here with you, I'm here at your service for this interaction, which is so important, to interact with the market. 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 parts, human resources, finance, risk, and a couple of other support areas, and also operations, which is another area that is my responsibility. 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 Brasil Júnior, we were among the top five companies as good place to work at according to university students, the only bank in these five companies. Our in-house research 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, for two years chosen as the best corporate university in the world. Also acknowledgment of career, another very important aspect in Brazil, in Bradesco. 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, this is going to boost morale. 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. This competitive atmosphere is very fast now owing to fintechs and bigtechs. We're really focused on the digital transformation aspect of the bank in all areas. We are also very active in a unique model, which is Next, targeted to millennials, a fully digital structure. It brings a lot of benefits to the bank's legacy. 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 is up and running or with a broader reach in the country. Naturally, also taking great care of the legacy of the bank. Investment and technology remain high, so we can have a robust network, very well prepared for cybersecurity and with very agile development. 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, inovaBra 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, blockchain, biometrics, 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 zero back office. It goes throughout the digitization of our processes, digitalization, improving processes, BPO. With that, we understand our efficiency has been greatly improved, and there is still more room to improve in the mid and long run. Basically, this is my take-home message. The guidance about figures, I think you all know these numbers already. To some extent, this guidance was very ambitious. In-house, we take it as fully doable. The first numbers point to that direction, showing that we're just about to meet the guidance. That's what I have. 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 and treasury. These are all critical areas for the strategy of the bank, particularly ALM and all our area for buy side and sell side. 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 under price. Here we have this context, as you can see. If I have to watch it more deeply, I apologize. Later on, we can talk more about it. 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 a full integrated product convergence. We also have full convergence of family and pension, analysis of the customer life cycle. This is critical to us. We should always remember along this journey, the API. We're very bothered with offers that don't preserve the client. We have to be very careful. 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, that's another vertical in high income. It's almost a bank. We have almost 40 million non-account holder clients that have products from different banks. They're also very important to us. Our brokerage, Bradesco Corretora, Ágora are also part of high income. They add to one another. Will be working more and more together, delivering a full investment platform and also the foundation of our whole high-income concept. Naturally, it moves into the customer life cycle. It starts with Classic, our exclusive retail up to private banking with Prime. Later on, we have a chance to talk more about them all. What about high income? Particularly for Prime, we have prime income, minimum BRL 10,000. BRL 300 thousand to BRL 1 million is Prime Invest. Finally, top tier with BRL 1 million 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. 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 a life cycle for investments and service at large. That's what I had. Good afternoon, everyone. Let's see if it works. Let me tell you a little bit about my duties and responsibilities. First is retail service network. We have Bradesco Expresso, PAs, digital channel. Credit cycle with credit recovery, sureties and guarantees. Product areas with financing and loans, cards, consortium, cash management, custody of the bank. Specialized distribution, which are distribution areas, Bradesco Financiamentos, Promotora with payroll loans, Bradescard with non-account holder cards, Losango CDC. Analytics and algorithms, CRM and data management, which is also important. For the first time in the history of the bank, we have this structure which puts together everything about products, loan cycle, and the whole distribution with a unique opportunity to gain synergies so we can all move into the same direction. We're really focusing on delivery, customer satisfaction, linking customer experience with a positive experience on the channels. We see this as a very favorable organization 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, 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 of service by model. For every circumstance, there is a cost. We have small, mid, and large branches. Connected to them, we have our PAs and our Bradesco Expresso. We have more than 39,000, almost 40,000 Bradesco Expresso. 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 audience in the right corners. We are the only bank which competes with everyone in Brazil. Not everybody competes with everybody. Sometimes discussions are very much based in the media, like south and southeast, but Brazil is huge, diverse, 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 all municipalities. In 4,019, we are the only private banks. In 2,443 of them, we are the only bank in the region. 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 Expresso, we're talking about variable costs only, no fixed cost. Fixed cost doesn't exist, it's fully variable with our partners. What about products? What is our current focus? Expanding the coverage of channels, so to complete any gaps in the channel and focus on the client journey, which has to be positive. In 2018, we gained 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 beat the main competitors and became leaders in both segments. Quite an achievement. Also leaders in payroll deductible loan protection. Also leaders among private banks in rural loan. Also BNDES disbursement. On the right-hand side, you show that we have some gaps to be filled, and they will be covered over the next six months. All these channels with the square, the red square, these gaps will be filled. Anticipation of Christmas bonus and income tax rebate. We also have a journey for car loans with omni channel, the customer being visualized by the manager in all channels. Working capital with ATMs and open banking, working capital also with open banking and surety account. Finally, rural loans. On top of that, there is another important front. We want to take paper out of the branch. In addition to this journey, we want to improve client experience, improve the journey, and also dematerialize these branches. Now, this slide is about channels. We've already talked about the physical world, transactions, and links. Let's move into digital now. We're speaking of 18 million digital users. 96% of Bradesco's total transactions are digital. At the same time, we have a physical strategy with adequate cost of service. We also have a digital strategy to add to it. Bradesco Mobile with the largest penetration among banks, over 50%, NPS 66 points, which is a reference in the market, and full-fledged digital experience since opening account with more than 69 services. In that, it's 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, a full portfolio in Net Empresa. Autoatendimento is the most democratic channel with over 30 million users who have 57,000 ATMs, 35 are ours. 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, operational efficiency, lower the cost of transactions of currency in the country, and ATM 3.0, bringing convenience and more intuitive experience. Fone Fácil, 1 million calls per day, 93% is electronic at the IVR, interactive voice response, which is low cost, and BIA in electronic assistance. BIA, electronic assistance with a natural speech. In other words, more people being served. What is not in the IVR moves into BIA. Finally, voice biometrics to make sure the customer is really the person he claims to be. We have two pioneering efforts in the Brazilian market, I would dare to say even in the world market. On innovations, still about innovations, also using BIA, Bradesco's virtual assistant. We already have over 1 million interactions right now with BIA. 75% happened over 2018. It is the only bank in the world with this scale using IBM Watson. 9 million users have an adoption current that is really fast and a huge opportunity to generate business. We see a lot of value behind it. Bradesco Simplifica, a simple way to look after your money, 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. 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 manager's palm of hand. Paperless, seeing clients, putting together human, physical, and digital. Finally, corporate WhatsApp connected to these 50,000 smartphones. We have 13.5 million interactions by now. It's something new. Relationship via #BIA or #manager. It's a corporate tool. The customer talks to BIA and solves his problems with BIA or talks to his manager in an easy, straightforward manner with a tool he's familiar with. 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&A. I'm not going to go over every little detail about the slides, but during the Q&A, we'll use my colleagues and my colleague, Mauricio Possini, we can answer all of your questions. Let's speak a little bit about wholesale. This is the side of the areas you know them very well, so we need to get into details. Speak a little about targeting or segmentation. This is the structure of wholesale, we have some subsidiaries for payments. We speak a lot about them. Our positioning, I made a presentation at APIMEC two years ago, we don't reinvent the wheel every year. We don't change things overnight all the time. We have our positioning. We want to be a complete platform, a one-stop shop where your clients can find everything that they can find in terms of financial products and services. I think it's worthwhile noting this type of 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. 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. There are two 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 2016 to December 2018 on the left-hand corner. Our fee revenue grew from 42% to 61%. In the middle, what we call Corporate One, it grew from 37% to 45%, regardless of this phenomenon of revenues coming from credits. In segmentation or targeting, let's say that we didn't just redo our segmentation, and we didn't just create one more segment. We have a number of segments, many of them on the three areas that have three heads. For example, corporate. We have a multinationals segment to mention just one example of our targeting. We centralized the whole relationship there. In Corporate One, companies with revenues between BRL 30 million and BRL 500 million and that have kind of a standard credit profile. They're not three segments. What we have is a set of segments broken down into three areas. With this geographic distribution characterized by Bradesco's positioning of having proximity with our clients and SMEs in our international activity. We can answer questions about that if you're interested. 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 Eurico said. I have a different competition depending on the geographic area, the client and the channel, and products. I look at Rodrigo of OdontoPrev. How many similar competitors sell OdontoPrev? OdontoPrev is a product and 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 important for us. We've been working on it. That we won't get into every single detail, I'd like you to notice rigorous attention to the level of capital remuneration, growth on non-credit revenues, and growing the whole wholesale business. 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 large corporate. In large corporate, it is a little different, but there are some challenges and a good expectation for 2019. With that, I end. Thank you very much, and I'll be around to answer your questions. I will use the knowledge of my colleagues if I am not able to answer your questions myself. 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, then we'll move to the Q&A. Just to remind you, these are our main figures. Almost BRL 73 billion of revenue of premiums and contributions in 2018, a market share of about 24.5%, almost BRL 260 billion in technical provisions and reserves. This includes PGBL funds, shareholders, and a return on equity, 20% ROAE, and a net income of BRL 6.4 billion, representing a 15.4% increment vis-à-vis 2017, and shareholders' equity, BRL 33.1 billion. Our claims ratio, 70.4% in the fourth quarter 2018, a ratio that was 72.9%, a drop of 200 basis points in the consolidated number for 2018. Combined ratio grew even more. Combined ratio that has been dropping for the sixth consecutive quarter, down to 80.8%. Our combined ratio for 2018 was 83.7%. Very quickly, 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 focus. We have Saúde 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 procedures and our initiatives geared to primary care, such as Meu Doutor program, My Doctor. We have a specific providers network with high resolution indices for our patients and lower costs of care, such as the new clinics, Meu Doutor Novamed, focusing on primary care as one of our health strategies to improve our results in the long term. We have nine clinics, Meu Doutor Novamed. Along 2019, we'll have another 13 clinics opening, and we should have, by the end of the year, 22 to 25 clinics. This is an important experiment at Bradesco Health. In auto loan, we continue to have discipline of proposals acceptance. Overall, we totally revamped our acceptance governance, particularly for fleet and other products that require great focus to grow in a profitable manner. Always focusing on pricing models. We're investing a lot in technology to more and more better 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 BARRE. 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, product revision. We did work with our asset area and investments area to have a new mix of products, a new set of pension products. We believe that we have a very competitive set of products, which is a lot more flexible, and we're very much focused on evolving our pension products and integration into bank'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 Q&A now. Well, thank you very much for your brief presentations. Now we begin the question and answer session. Who would like to be first? Eduardo from Banco Rural. 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 of your strategy changes? Eduardo, thank you for the question. Well, to begin, I think that the whole structure, in every big company, it is only natural that 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, 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 six days, and then he rested on the seventh day because he didn't have legacy structures. He started from scratch. If he had legacy structures, God would still be trying to fix everything. It would all be complicated. Everything ends up in IT. In IT, we have legacy systems. When we put all of these structures together, they give us an opportunity to build alignment. The credit department priority will not necessarily be the same as the retail department. Or the area of products might have a different priority. The departments need to talk to one another. Sometimes when we are developing a new product, that involves distribution, credit recovery, data management somewhere along the way. We need this dialogue. We need to be all on the same page. The first initiative was to have all of these areas sit together, my direct reports, sitting around a table to make sure that we have an aligned agenda and that we can work on a model. That we listed the three priorities and that the three priorities will be reflected in all of the business units, will be cascading down and get to IT as one single priority with all of the departments on board and on the same page. We see a great advantage of operating in this way because we can derive a lot of synergies. This is recent. Just to add, if I may, while this change happened recently, it was decided by the CEO of the bank. We had Pancini and Mauricio Minas, they were VPs, and they were members of the board as well. Now they're exclusively at the board. They are no longer executives of the bank. With this, the VPs were reorganized in that model that we quickly explained here. The business area has three verticals: retail and retail related products, high income with Cassiano, investment and treasury products, and wholesale under Marcelo Noronha. My area's, in a way, supporting all of them. What matters is what's behind this move. We had some colleagues moving into the management team, 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. I think that this is the biggest motto behind this big change. Jorg 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. Octavio said that by the end of the next year, Next will 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 to distribution. ATMs, for example, they are high cost. How will you leverage this? Will there be subsidies to Next? Another part regarding cross subsidies. The bank has evolved significantly in the operational side with efficiency at the insurance group. What about cost allocation and bank insurance? That is my first question. My second question is more directed to Vinicius. You mentioned something very interesting, which is the South African model of migrating from fee for service to a package of services in an attempt to be more efficient in negotiations with health providers. Of course, this tends to be the future to reduce claims ratio, and we can see the first effects of that. 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, Jorg. We do internal work led by our budget department. We work with a full cost structure, which is totally transparent across the organization. All of the areas get their costs, they're absolutely transparent, and we analyze the results of each and every one of our business units, if they're companies or simply BUs of the bank. We always analyze them in the light of these results, considering a full cost, considering that at the end of the day, everyone has to foot the bill that the company has. What you are calling cross subsidy, we don't have any business that if they don't go forward with all of the costs allotted to it, if there's 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. 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 apace and in alignment with what we expected. We can also mention the case of Ágora, one of our brokerage houses. We're making investments, but to reap the fruits in the future. No, we don't see cross subsidies. We each get a bill to pay. For example, some numbers are transparent. For example, the insurance company reports its results, in full literally. How do you do cost allocation? Do you get a market reference, a market benchmark? How can you price the cost of distribution of Bradesco? We've been working on building this model for many, many years. This is a model that we built internally with cost allocation, but 100% of the costs are allocated. There's no hidden cost, or there's no cost that is not allocated to one business unit. Vinicius, would you like to comment? I think that you answered the question. Well, let me move to another topic, Jorg. 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. Moving straight to the point, we believe looking at hospital and medical claims ratio, which is most of the claims that we can move to standardized procedures, we think that we have moved halfway. We believe that we have 50% of the claims which we think are bundleable, they are bundled already, 50%. 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. It is important to make it clear that what we observed in terms of a reduction in the claims ratio of Bradesco Saúde, from the fourth quarter 2017 to the fourth quarter 2018, almost 500 basis points reduction in claims ratio. There are a number of factors explaining that. There is a cyclic aspect, 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. Together with the bundled claims, the company's sparing no efforts to control our care costs, fighting fraud, investing in technology so that we can have strong monitoring of fraud. 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 in 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 Bradesco Saúde? Can you tell us that? We don't disclose this number, but I can tell you it's a significant amount of our hospital claims. We don't inform, we don't disclose these numbers. We're working to improve it even further, we believe that we still have 50% of the journey to standardize other bundles. There's 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 strategy. 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 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 that. We are doing it. We are addressing a number of things, technology related and also Unibraes, the brokerage house has come to make up a complete investment platform. It started last year. Ágora, as André mentioned, is going through a setup period. It was invested in last year to have a new technology configuration. 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. We are also dealing with pensions, which 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. 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. We have a focus not only to win more clients, but more than that, we want to better serve our clients. We are sure 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, and a general understanding of their life. This is what we are going to try and do in 2019 with more focus and dedication of our frontline employees. Thank you, Fred, for the question. Eduardo Rosman with BTG Pactual. I'd like to ask Marcelo Noronha and whoever else wants to answer the question. The question is on payments. We saw a rally of the Stone stock, Mercado Livre getting into the segment. They raised some BRL billion in just 24 hours and very easily with very low cost of capital. I'd like to understand, how do you see competition with these players and others? 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, that competition can be a little more fair? How do you see this valuation, and is it something that concerns you? Is it something that requires a more abrupt reaction by the bank? 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, we recognize the merits of our competitors. Every competitor is looking for their own way, the market is paying for it. Second comment, I have had an opportunity to talk to some colleagues who are present here, 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. In technology availability and accessibility for everyone, in all sectors, not just financial services. There's 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 third 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 design a totally different client experience. They don't need to invest BRL 0.01 of their CapEx to process all that. Scale is almost infinite. We can do that with a lower and lower unit cost as long as you grow the scale of your business. The world has changed, and it opened up space to competitors that are not only in Brazil, but abroad as well. Third 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. Cielo 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. Fourth comment, another phenomenon in the market, in addition to knocking down entry barriers, is available capital. A few years ago, capital was available for some investments in Brazil. It was in the Silicon Valley, but not to run credit risks here in high amounts. Today, if you say, "I want to open a bank," in the past, you would need to do a FIDC of a certain size. If I want to create a bank and I want to have BRL 5 billion, there are resources available in the market for that. The world has changed also in that regard. The market is saying what perhaps we are not saying. I acknowledge the merits of all of the players, but if we look at the last quarter of Cielo has challenges, just like all other incumbents. The fact is, when you look at the line item, financial revenue, Stone is worth more than PagSeguro today. I respect them both. They have two different business models, one with 300,000 clients, the other one with 4 million clients and distinct criteria. Okay, what? When you look at the net interest income, how much does Cielo have, including prepayment of receivables? 18%-19%. How much do they have? More than 15%. What about Stone? How much did they put in the pocket when they went public in October? BRL 2 billion, BRL 2.5 billion. How much does that represent? I haven't got precise numbers, but they got BRL 9.5 billion. They put BRL 9.5 billion in their pockets without prepayment and capital at basic cost. They have a gross interest income of about BRL 650 million a year, badly investing their resources if they have cash. If I get net income of BRL 127 million, that net income would not be BRL 127 million, it would be a lot lower. 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." I do the math, and I don't understand. Everyone thinks in their own way, and I respect everyone. I'm not saying that Cielo has no room for improvement. They have a lot to do. Mercado Livre has a different business model. They have a marketplace leveraging their payments model. That is another business that we can even debate further later. Thank you. Just as a follow-on comment. Thank you for the clear response, Noronha. You mentioned prepayment business. In reality, it is to some extent a cross-subsidy with a profit pool that is higher to the acquiring business vis-à-vis the bank. It is a competitive edge concerning some new entrants that increase penetration with this product. In the past, we had a risk of having a regulatory change. It never happened, but my personal perception is that the Central Bank apparently is not interested in changing this right now. At the end of the day, it is a commercial fight. Do you think incumbents have a commercial disadvantage? Why don't you try to change the way this business works today? I don't want to waste too much time answering. Just wanted to say something. Octavio is very vocal about D+2. Well, you changed vis-à-vis the past. You also believed in this migration of payment terms, installment plus interest. In the past, you had banks controlling acquiring business and were very responsible. Today you have a market in which people can get into a website of some retailers, and you are shocked. Installments in 10 or 12 payments, no interest, or interest, I mean. I think we got out of control when it comes to the consumer. The market used to respect consumers and also merchants. Now, 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 Octavio 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. Their absolute revenue is lower, but obviously we are going to improve competitions. Measures are in progress in retail and also business people. This is where you have PagSeguro. It is at the bottom. It performs well in this small business niche. We're working in order to grow in this area, and we've been growing owing to 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 Itaú BBA. Two follow-up questions, one to Noronha and Cassiano. Noronha, what do you imagine what will happen in payment terms in three or four years once the instantaneous payment system of the 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? Cassiano, what about Ágora? How do you envisage the competitive positioning of Ágora down the road? Let's ask Google to answer the question. Ágora comes to add to the brokerage products portfolio, third-party products that we didn't have at Bradesco Corretora in our full investment platform. 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. Exclusive and Prime clients do need this approach. Ágora is very light with the 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, investment products, in-house via our suggested portfolios and also the mix of some specific products that a customer might be interested in the market of capital markets or even bank securities. Ágora 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. That's our main focus. As soon as Ágora is ready, we want it to go to market strongly and very competitive vis-a-vis other digital banks, brokerage firms, and companies in the market. Answering your question, we could have a specific panel just to discuss the future of payment terms. Not only Eurico, by the way, I was talking to Eurico at lunchtime talking about this. Then we can bring Mauricio and Cindy 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. We also envisage our payment means proliferating. The Central Bank already announced a real-time payment system, theoretically cannibalizing debit far more than credit. We also have something about the big tax with credit leverage. This has to be answered over time. Having a 5-10-year horizon forecast is like trying to get something from a crystal ball. I think we are making headway. 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 means with wallet, even with Next, which can provide further experience with partnerships in business that we never mentioned today. We never show the market. When the time arrives, we'll do that. Not only at the bank. We are also open. By the way, Eurico told you that we are ready to partner with fintechs. Enevo, for instance, we are discussing with some fintechs. We are providing loans via fintechs. We are selling via fintechs. We also use GuiaBolso. We are doing very different things compared to what we do in our routine. 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. That's what we're trying to do right now, thinking and envisaging day by day. A question to André Cano 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 on 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. It's a current focus at the company by all areas. There is a question to Vinicius. It's about pension. Last year, pension funds premium had a reduction. The scenario was not among the most favorable in this segment. How do you see the competitive scenario 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 pro-cyclic 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. 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. The thing is, it's very important to focus on this approach, being very customer centric in order to give the right pension offer, considering the time of life and what drove that investment. I think Cassiano 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, 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 third parties. It's a novelty in the market. We also have single names involving third parties already available for private. That's something we do. It's business as usual. 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. What we're doing is, well, we're focusing our efforts with the investment area so we can have a very competitive full grid to offer our bank's clients. Andre Martins: A question to Eurico. You showed the omni-channel implementation for agribusiness, and the new administration is talking about public banks in this segment. Capital markets, private banks are also protagonists. What are the greatest opportunities and bottlenecks in rural loans in this new credit cycle? For rural loan, 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 three or four years, there was a lot of growth. 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. We also created 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. Corporate, corporate one, large corporate. We have clients all over the chain, throughout the chain. All we see are opportunities in agribusiness. 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. We see a lot of opportunities, and we want to increase our penetration in this model. Thank you. A question to Noronha. It's about the corporate segment. How can we align corporate with the right capital remuneration? How does the bank see remuneration at corporate? Is it the total remuneration or a specific focus on credit? Thank you, Firetti. Like I said in my presentation, this is our guidance, RAROC. We have a very clear view of risk-adjusted remuneration. If there is no capital remuneration, we don't do business. We don't close the deal. We don't check operation per operation alone. We also check the client, and we have this ability to bet on a multinational that is arriving in Brazil because they know our potential relationship. We emphasize Bradesco is a retail bank. It starts with large corporate, with big corporations, and it gets to retail. We are interested in working on the payroll and having relationship with individuals from these companies. We have committees making decisions on this. We do have this appetite to have different posts in these companies. Not only having employees working for this business, but also high-income clients. This is critical to us, and it also helps to increase capital remuneration. I have a privileged position to get into a relationship without any burden depending on this exchange of business. The CFO brings this up, not necessarily ourselves. 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 OdontoPrev, I'm not going to turn off any lights. All I will do is not to have one line of revenue related to the insurance company. Once again, the same goes for corporate. We have unique products in addition to the full portfolio, like OdontoPrev, Alelo, Bradesco Saúde. We are the only ones who sell. We have no other competitive around. That's what we do, revenue not coming for credit, so we can have a good credit remuneration. Now, Marcelo mentioned this integrated customer look. It starts with our commercial strategy, our service, how we will approach the pyramid or the pyramid of the customer, how it will be profitable until the credit committee, in which the product areas issue their opinion. 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, Eurico. 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 notes, for instance, or financing for acquisition together with the IB people. He sells insurance, he talks about cash, he sells other business, he sell Alelo because he is acknowledged and assessed as such. This is what makes a difference in our remuneration business. Rafael from Safari Capital. I have 2 questions. 1st question, how do you see competition with credit 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. 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 2nd question is about scale. How do you see the risk of a positive data archive in the credit reporting system. It also applies to the financial system. We have Channel 1A, marketing is increasingly more guided by IT, 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. This open bank strategy, it can happen in the digital world, but also in the physical one. 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'll find more public banks, Brazil is very diverse, and we have a strategy per region according to peculiarities and positioning of our clients in that specific region. As for the Cadastro Positivo, 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, that's a headway. By the way, social responsibility is a problem that we have to fix somehow. We are giving significant steps to complete and conclude those jigsaw puzzles, because with some gaps, you cannot see the picture clearly. The Cadastro Positivo is important. We launched an action with the main market banks in order to boost this version and gain opportunities. What about the midterm? We see filling this gap, delinquency in the market will go down, loan will go up. It's important to have information to expand loan. The more assertive 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. 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 competitive. No problem about that. We need to have our own skills, our own competence to be competitive. It's not by restricting or hiding information that we'll be competitive. Just adding to what you said, that's the number. We're not absolutely certain, but close to BRL 100 billion as assets. You cannot say we don't have a competitive retail bank, there are only five. There is a group of co-ops in different regions with individuals as well, also in small business as well. 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 credit expansion. What we foresee and is in our guidance, we can see in 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 an increase in their costs, particularly those who have a network similar to ours. I don't have any concerns in terms of lack of funding to withstand credit growth. Quite the opposite. We want loans and credit to grow. This is the good side of the equation. All banks have a very vibrant liquidity reserve in order to face a more virtuous growth. I see that very calmly. I'm very comfortable with that. A question addressed to Vinicius about distribution channels. Bradesco Seguros' relationship with the bank channel via bancassurance brokers, what about the progress of digital channels and insurance distribution channels? In our case, in our guidance, we are multi-channel per se. We operate with our branch managers for pension, savings bonds. We have brokers at the branch level in the market, large corporate brokers as well. 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, so we can provide full insurance offerings. That's very positive. If we 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 per client. However, when we break down some products, for instance, like pension, savings bond, loan insurance, that are very typical of bank insurance, we'll get to 1.2, which is very similar to our non-account holder client. We have approximately 1.2 products. Our current understanding is that our account holder, 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. 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. 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, like health insurance for small groups, SPG. We are making it stronger also to be distributed by our bank network. I think we have a lot of room to evolve. Just one last question before we close the panel. May I just ask the last question? Thiago Caposa from BTG Pactual. I'd like to ask a question about reinsurance. We can see IRB profitability very high, great improvement in recent years. How do you see this business of reinsurance? Did you expect IRB 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 multi-product is important. 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 Corporate Solutions, and we can offer products that are important in the portfolio, like Noronha mentioned. They're important to our corporate SME clients, and we also have this offer of a rural loan and also equipment insurance. I don't think it's a corporate investment, but a good investment, and we're very happy about it. We believe that this is a good management of the company. Results are sustainable. We don't have any plans of doing anything. 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? Perhaps you can break it down into legal entities and individuals. The second question, related to the first. Do you think that we can say that delinquency looking forward will be structurally low? Anything in your credit model and of the banks in general or your leverage level would allow you to work with a structurally lower level of delinquency? Well, let me start answering about credit individuals, SMEs, and then Marcelo will talk about corporate. 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. 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, we understand we're going to grow our client base. Unemployment is reducing gradually, we understand that these models will contribute positively to grow the loan book in our main products. Considering the first two months, vis-a-vis the prior two months, we are growing. Second question was about delinquency, right? In delinquency, we see our delinquency is the lowest in the last 10 years. If we look at the two crisis moments, 2009, which was a zero GDP, and if we look the latest crisis that we've been going through, almost three years of negative GDP, and if we look at individual delinquency, in net of HSBC, there was a reduction in delinquency. In terms of massive loan that is decided by models, it's really good. Our modeling has improved really well since 2009. During this crisis, we learned a lot because you see every crisis has a positive. If you're able to cross the bridge, you get to the other side a lot more experienced. We're coming out of this crisis with process improvements for mortgages. We improved our credit scoring, our loan recovery system. 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 than what we have seen in prior years. With a caveat that if we have an unexpected crisis, we're not counting on that, it's not in our radar. We see a positive outlook. Origination. The water that we are adding to the pool has a better performance than what we had before, which leads us to think that this is a structural, lower delinquency that we can expect. We continue firm on our guidance for the year. Well, when we disclosed the guidance, I was really at ease about it. After the first two months, we're even more confident. We are fine. We have some peace of mind. The boss has arrived. The boss arrived very quietly. He's giving you a tip of the quarter. I'm not going to dwell on this. I just want to add that I second Eurico's words, of course, in large corporate, this growth is opportunistic given capital remuneration. 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 hand, we can remunerate capital. We're very well oiled for that, we continue to work in line with our guidance, particularly for corporate. Kind of flat with large corporate and with this expectation of a lower delinquency rate as mentioned before. In the third quarter, you saw delinquency of large corporates and SMEs, the fact is that delinquency is growing. Our expectation is that we're going to have the portfolio under control. Very well. We are closing this panel. I would like to thank the presence of Andre, Cassiano, Eurico, Marcelo, and Vinicius, I'd like to invite Octavio for his closing remarks. Thank you. 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. Now to face the new models and the new challenges that are arising, particularly regarding 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, 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. We have no doubt 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, Firetti 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.

Data Source: Quartr Last updated: Mar 26, 2019

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