Good morning, and thank you for waiting. Welcome to Bradesco's conference call about the results of the Q4 of 2018. This call is being broadcast on the Internet at the Investor Relations website of bradesco, Banco DO BrascoIR. And there you will find the respective presentation as well for download. We would like to inform you that there is simultaneous translation into English, and all participants will be in listen only mode during the call.
Afterwards, we will have a Q and A session when further instructions will be given. Before proceeding, we would like to clarify that forward looking statements that might be made during this call In relation to the business perspectives of the company as well as financial and operating Projections and targets are assumptions and beliefs of the company's management as well as information currently available to the organization. Forward looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions as they refer to future events, And therefore, they depend on circumstances that may or may not occur. Investors should understand that General economic conditions, industry conditions and other operating factors may affect the future performance of the company and may lead to results that differ materially from those expressed in such forward looking statements.
Now I would like to give the floor to Mr. Carlos Ferrecci, Investor Relations Officer Market Relations Officer. Good morning, everyone. And welcome to our call to discuss the results of the Q4 of 2018. Today, we have the presence in the call of our CEO, Otavio de Lazari, Jr.
Our Executive Vice President, Derek Hernu And the CEO of Bradesco Seguro, Vinicius Overnas the Executive Deputy Officer and Investor Relations And we thank you very much for your participation. And now I give the floor to Tabula Lazari to start the presentation. Good morning, my friends. It's a great pleasure for me to have your presence, and I thank you for that. We are going to talk about the figures of Q4 of 2018 as well as the full year, I think we could start by saying that our figures are very robust ones And a very sound balance sheet.
Let's go to our presentation now. Let's go to Page number 3. This is where we have the financial highlights of 2018. And 2018 as well as everybody knows was very A very complex year with a great volatility and uncertainty due to the election scenario, And this ultimately affected the expectations of the economic agents. And in this scenario, economic growth and investments Did not happen exactly as we expected.
Even if we consider the fact that we were leaving The biggest recession, the biggest crisis that we have faced in the recent past of Brazil, And we should be tapping into the recovery of a cyclical recovery. And Although this has not happened and in spite of the challenging scenario, Bradesco had a robust performance in 2018. The bank was and is adjusted and prepared to grow, and this allows us to expand our loan portfolio, Increase our services revenue and with a strong decrease in our AOL expenses, operating costs The bank remained totally under control and we partially absorbed the impact of collective bargaining agreement resulting in costs growing below efficient. Net income was BRL21.6 billion in 2018, a 13.4 percent growth compared to 2017. And I would like to mention that the operating income grew 24.9% or almost 25% in 2018.
ROE, 90 DPS 19% in the 4th quarter, 19.7 One of the major highlights was the expenses of $7,800,000 in the loan portfolio delinquency Dropping 120 bps and we can talk about the better BIS ratio 150 points higher, 13.7 percent overall. Now let's go to Page number 4, where I would like to highlight Some important initiatives, and maybe the first one is the revamping of our brand, the brand becoming lighter and younger And allow us to have the better communication with our clients, be it over TV or Written, media or this is with a very important impact. Via is an important Point, we are evolving gradually with Bradesco artificial intelligence that we call BIA, BIA, Over 70,000,000 interactions already, and we will be getting into that afterwards. And next, as we had said, 500,000 clients, and our goal is to reach 1,500,000 by the end of this year. So this is a commitment on the part of our team to reach EUR 1,500,000 by the end of 2019.
On Page 5, it is worth mentioning the new segmentation structure of the bank at the beginning of 20 '19, and I had the we announced a redesigning of our management structure, reducing the number of executive vice presidency from 6 2 4. And this movement aims at speeding up the decision making process and increasing more Among the areas, furthermore, we improved our client segmentation seeking to provide And even more customer service to our customers, that is to say, the client is the core And the reason that of our organization and this is the reason why it is so important to have this As the core to have the customers as the core of our organization, just to explain this new structure, we have A wholesale bank with Marcello Noruna involving large corporate, corporate, Corporate 1, Which was the Bradesco Entreza, Bradesco Enterprise and the whole support structure to the business, Global Markets, Securities, Prime Brokerage here in the Exchange and International and Private Bank as well with total synergy with this area. Another important vertical axis is our high net worth bank, Caciano in charge of this area and this high net worth involves prime, prime events, top tier Brokerage houses both Agora and Bradesco Catura and Wealth Management, which is a new concept, which is here and is also in our private bank.
A third vertical axis is the retail bank headed by Enrico, our VP. And in this One, we have the branches. We have the digital branches platform, the Many branches, the Bradesco Express, digital channels and the cards structure and the 4th vertical axis, which is the control and business support structure that supports these three areas so that they can have a fundamentally commercial focus. And this is the Technology and Human Resources area headed by Andre Kurnu, who looks after technology and human resources as well as Risk and finance and some other areas of the organization. So the bank has a very lean structure now, And each one of the vertical axis has its challenges and their obligation in terms of delivering results.
On the next page, Page 6, When we talk about the customer experience and I say that the customers are the core of our organization, Our objective is to improve the customer experience with better products and services being distributed by through the digital Channel's better understanding the need on the part of each customer at that specific moment of their lives and also speed up The services and the convenience and the products and services portfolio becoming better tailored for our customer needs And so that this may be much more dynamic, and we are sure that we are already reaping results In our NPS that have improved around 20% in 2018 visavis 2017, On Page 7, we talk about BIA, BIA, Badescu Artificial Intelligence. This is a victorious And therefore, the parts of the bank so that we can deliver a better experience to our clients and this is a major investment made by The bank, we already have 8,300,000 customers that have already used BIA with over 70, that is to say 73,000,000 interactions and a major Advantage of Via is that it is multi platform. So it is indeed Bradesco App, Next, WhatsApp, Google And other apps as well in order to meet our client needs.
And this evolution has been very fast and the accuracy of response It's around 90% today and tends to enhance every time we interact with our clients. So This accuracy is gradually improved and BIA has a wide range of applications. BIA already assists our managers, our clients, our traders to clarify doubts and also To execute transactions, Sobea is already a transaction app within the bank. On Page number 8, Talking about NEX, as I said before, we have the commitment of reaching 1,500,000 Clients, we are opening about 5,000 accounts per day, 77 per day 77% of these clients who joined X are not or were not Bradesco clients. So we are bringing oxygen to our client base, And this is fundamental for us to continue in the long run.
And besides Over 70,000 accounts were opened in 2018. The number of interactions with BIA by means of WhatsApp alone keeps going fast, has already exceeded €5,200,000 interaction with the 4Q and the volume of loans released through mobile and Internet access Increases steadily and in 2018, we had an expansion of 63% Of credit, 4 individuals and 76% of credit assigned to companies. Just to give you an idea To you, of personal loans by the bank, 55% of origination already comes From the digital channels, fundamentally mobile, but also Internet Banking, and we have reached A total of digital clients who use mobile and or Internet banking of $15,300,000 represents 53% of our clients. On Page number 9, talking about efficiency, we have a commitment, which is very strict, Regarding optimizing our service network over the last 2 years, practically 3 years, We made an important adjustment. We because of the acquisition of HSBC, we closed Branches in 2017, 213, 2018, 220, Which were branches that still needed some adjustment because of overlapping?
But we are very pragmatic because branches have to Remunerate the shareholders' equity and help to deliver good services to our clients. And with the closing of these While the closing of branches will be smaller because of the process that we are living today and the perspective of economic growth Well, the point of sale are very important and We have to be very pragmatic as we are And keeping only the branches that give an adequate remuneration to our shareholders' equity. And the digital clients have been growing very fast and we created the digital platform. And a good example of digital branches are where we select clients that are heavy users of mobile and Internet banking, and we provide these clients to participate in a digital platform. So the growth in this platform Has already exceeded 25%, and we expect to triple the number of platforms in 2019 of branches, digital branches and A client that is served by a digital branch in comparison To the profitability of the brick and mortar branch, during 1 year, the growth is up 40%.
And besides, the efficiency is much higher because we have a manager in the digital branches and they are Very well prepared in order to serve these clients on a digital branch, so they can serve 3 times more clients, each one of the Managers, so 400 clients in a portfolio and up to 1200 clients in one platform or One portfolio. So now going to Page 10, talking about the insurance world In the insurance operations, the main highlight well, it represents onethree of our results, And the main highlight is the decrease in claims resulting from important measures that we took in the last few years and we redesigned many pricing models. And you have already seen in our balance sheet that the volume of premiums has gone down, but profitability has gone up Because of the pricing models that were revamped, very good work done by Vinicius and A regarding the Acceptance of risk and also at VARI and very important work done by them and Badescu Sao Ugi, for instance, Badescu Health Regarding risk acceptance, but mainly in cost control, we established Packages with hospitals, we know exactly how much some procedures, some hospitalization will Costs and this makes the operation much more streamlined.
And we have also invested in Primary Care. We have 9 units and we will have 22 by the end of the year. We have over 28 already contracted and Waiting for approval so that we may increase and expand this, and this will bring the better management of claims In the Bradesco Health area and also Bradesco Sigur does overall, we have just started to with this operation. But what I can tell you so far, absolutely sure about after 1 year of experimentation is that one client In Lille Dontour, at the same client In another hospital, the level of client satisfaction is much higher with Neu Do Tour and 42% to 48% Lower costs than if we have the same patient in the in a hospital. So We have 24,000,000,000 policyholders' private pension plan.
What I can say is that it is part of the investment portfolio or the long The investment portfolio of the Brazilian population. And we have other initiatives as well that are focused on the client to the offer of products by means of the digital channels. And as incredible as it may seem, Through mobile alone, we sold over EUR 500,000,000 last year. Now let's go to Bradesco Brokerage House and Agora, we concluded all the investment of platform for the brokerage houses both Agora and Adesco Corteora Working in the same environment now and the Agora platform has been completely redesigned And our brokerage houses have a potential market. Exciting 300,000 clients, the potential market is 1,300,000 clients for the Prime and Private segments In order and these clients will be looking for equity more and more, And we will continue to evolve our wealth management strategy that we started last year and bringing further news about that During the Q1 of 2019, vis a vis high wealth And finalizing this first look, I think we should mention again The contribution given to society by our organization, Last year, we invested over BRL 600,000,000 in basic education Of almost 100,000 students in Brazil, all over Brazil, and that is giving back to society Part of the trust that is invested by this population in Bradesco And this is what this country needs in order to get into a sustainable growth cycle.
And this year, we have already confirmed that we will be investing about BRL 650,000,000 In order to maintain these rules and everything that the issuer need, on the other hand, we can see BRL 61,000,000,000 Of added value by the bank, 34% paid in taxes, 30% of the compensation of our employees. So the distribution that you can see on the slide regarding the social work that is developed So I'll now go to Page 14, already talking about the 4th quarter results and going straight to the recurrent income statement. As of now Well, from now on, we will discuss the figures of the quarter. And I highlight BRL 5,000,000,000 BRL 830,000,000 of net income, which represents about 20% on a year on year comparison operating result growing 32.9% Year over year and with that, our ROE reached 19.7% in the quarter And ROA 1.7 percent and other figures will be discussed on the next few slides. Slide number 15 now.
Here we see our time line starting in the Q1 of 2017 and you can observe. FICO level has increased in the last 2 quarters. This is the result of the loan book increase and adjustments that we made in Santopah Inc. We believe that we have the right conditions to continue to deliver even higher levels of return. Our operational moment is very good.
We have been consistently expanding credit with absolute cost control that you will see Lower ALL levels and with a downward trend and a focus on expanding our NII. So we have a positive view for the economy this year and a positive view regarding the bank's ability to deliver even better results. On Page 16, another point to be highlighted and we've been emphasizing this for several quarters is the recurrent improvement on loan origination. In the annual comparison, loan origination grew 23% for individuals in the 4th quarter Since 37% for companies in the Q1, what is better when we analyze delinquency Of these new originations, these new operations, we see that delinquency is very much in line or even Below what we've seen recently. So the new vintages are healthier and healthier.
And this will be seen in the delinquency ratios that I will show you momentarily and also in the delinquency ratios for the future. Moving to Page 17, talking about our extended loan portfolio. The largest Origination for the larger origination contributed to the increase Our expanded portfolio, which was 7.8% in the year, above the guidance for 2018. The expansion fits the profile we have forecast. The largest increase occurred in individuals growing in those portfolios that should grow.
Even cards grew a little, but highlights consumed individuals growing 15.8% in payroll loans. We maintained the leadership in this market growing 13.6% in mortgages. And today, the ADC's ranking was published and This is the leader both in individuals and companies in 2018. And Outranking, Claija Economica Federal, which is a historical mark. And we are in the full condition to maintain that leading position.
We have phasing and we had a first Tranche of $450,000,000 We have a second trench of $450,000,000 And we have a 3rd trench expected for next So a year of BRL 450,000,000 totally allocated for net for high net worth clients of the bank. So we have a lot of room to improve. We have a 14% increase since you've seen vehicle leasing with very good quality of portfolio. Elizabeth coming from New Vehicle Homes, personal loans growing 18%. And like I said, 65% of origination of personal loans in the bank account from operations on the mobile platform.
That's how comfortable clients want to be. They want to do it at any time, anywhere, at their own convenience. And the results are being seen for individuals. And companies also showed a good growth of 10.1%, The two digit range. And when you talk about corporate credit, that increase is lower because the large corporate segment Have not fully taken the investment cycle yet, and we remain very pragmatic about this.
Our loan operations have to remunerate our equity. If not, we need to maximize our results. And so we can serve our clients using our balance sheet. If we can remunerate the capital adequately, or is in operations via The full market or even originating operations go into markets, motivating, Incrementing the secondary market when necessary. In a nutshell, we will serve our clients And certainly, we're always focusing on equity remuneration, which is a significant non condition
for us.
And this is something that was on Page 4 that I skipped and that it is important to highlight. What makes me confident is the operating results Of our cooperation, the operating results of the bank grew almost 33% in the 4th quarter. And Year over year, the operating results grew 24.9%, almost 25%. Please go to Page 18, talking about the net interest income, NII, we had a good performance. Insurance NII improved and AOM and others strongly grew in the 4th quarter As markets grew steadily by the end of the quarter and mainly with improvement in the interest of markets, Credit intermediation NII remained flat in the quarter despite volume increase.
This is due to Press compression. As you can see, it was 12.1 down to 11. We can see 6.8 to 6.4 in that sense. And we're totally aware that spread compression is a given. We cannot change that.
That will be compressed. And this is good, good for the country, good for the company, good for the population, and it will continue to happen. For the remedy for that, our response is to gain scale. And this is the focus of our service network, our branch network, our traders and all of our employees. We have to gain scale, Optimize the client base and gain sales.
So for 2019, we expect the average loan volume to increase and that the mix of the portfolio We partially offset the reduced spread allowing us to more significantly grow the NII. On Page 19, delinquency ratio over 90 days. Another good piece of news. Our delinquency ratio over 90 days continued To enhance improving by 12 bps, delinquency has been dropping 7 quarters in a row. The expectation is that it will continue to drop marginally.
Individual delinquency decreased 23 bps and SMEs delinquency 21 bps, while large corporates remained practically steady. In all large corporates, I understand the fact that we can bring delinquency of the large corporate segment down even further. Moving to Slide 20, talking about NPL creation and allowance for loan losses expenses, ALL, this was another good highlight in the quarter. We had an NPL creation increase of BRL467,000,000. The group happened mainly in SMEs.
We were concentrated in 20,000,000 sized companies. So this is nothing that can cause a concern. We don't see any systemic trend of increasing delinquencies. We see the higher level of NPL creation in the quarter for individuals, but everything is In line with expected, our extended ALL for 2018 remained in the center of the guidance after revised guidance Showing a slight increase in the 4th quarter. Moving to Page 21, coverage ratio over 90 days.
Like asset coverage ratio Head of stock increased reaching 2 45% in the 4th quarter. This will start to drop when the NPL index stabilizes. Regarding our excess provisions, which is a frequently asked question, we should use these provisions For the IFRS 9 adjustment, everything will happen as expected. All of the tests and trials have been done with our modeling systems and it is very likely The PFS division will not be used to comply fully with IFRS 9. On Page 22, we talk about fees and commission income.
This is a good highlight as well, Exceeding our expectation. This is now a view. This scenario was more challenging. Highlights are checking the accounts, asset management, Checking accounts growing almost 0.8 3% asset management growing 7%, consortium is growing more than 10%. In trading, the brokerage house operations with our structure, Bradesco Brokerage House and Agora Investments Representing a good growth.
On Page 23, talking about operating expenses, costs are totally contained. Ending 2018, Novendo Geyser, growing 1.7% below inflation. This represents a decrease in real terms in 2017. Costs fell 2.9% in nominal terms. Personal costs in the Q1 were impacted By 5% of the collective bargaining agreement for banking workers and our lower profit sharing Participation.
This improved the results of the bank. We ended the year growing costs And growing personnel costs below inflation. On Page 2425, Talking a little bit about the insurance company. In PagSeguro's percentage could result 15.4 percent net income increase and the ROE of the insurance company ended 2018 20% above the guidance. And in the Q1, it was 22.3%.
The insurance company was very good ratios. And with the clients that you can see improving, particularly Due to an operational improvement that affects the reduction in NII and the insurance NII combined ratio reached 88 The quarter mainly was 86% in the Q1 of 2017. And for the 6th quarter in a row, There was an improvement in the combined ratio. The main response for this performance is For the Fed reduction of claims in health, life and P and C. And we can see the numbers.
Insurance company claim ratio reaching 70.4% in the Q1, Comparisons 75 in the Q4. And moving on to BIS ratio on Page 26. The ASRISH in the 4th quarter showed a sound evolution growth in the quarter at 13.7%, an increase of BPS 150 bps From the Q3. Core Equity Tier 1 grew 90 bps reaching 12.3% as a result The retained earnings enhancement of the mark to market position and tax credits is a consequence of market recovery. In addition, in the Q1, we made a we had a fundraising in the Brazilian additional equity market with perpetual subordinated notes For private issuances through issuances for qualified investors, we raised BRL42 billion, which represents 60 bps of Tier 1 Capital.
And on Page 27, reclassification as of Q1 2019. We announced summary clarifications in our income statement, which starts having a new standard Starting in the Q1 of 2019, we're not going to get into details. If you have questions, we can talk about that. But the main change was the reclassification of insurance NII to the line of insurance results. Besides, we reclassified further the results that was previously allocated in Other successes and revenues mainly include the margin and a smaller portion to cost of risk and services revenue.
The main message is that the new guidance follows the new clarification. And finally, talking about our guidance. Thank you, Nathan. We delivered on almost every line from the reviewed second 2 geyser, noting that the main change at that time Was the decrease in the expected extended ALL? Regarding our new guidance for 2019, Our expectation is growth.
For the loan book, we expect a 9% to 13% growth. For the total NII 4% to 8% growth or a 3% to 7% increase. For operating expenses, 0% to 4% increase. For insurance results, But we're going to say the insurance NII now reflects the better performance, so 5% to 9%. This is an important point because until then, we only spoke about premiums of insurance.
But premiums, Depending on what you have, you can increase premiums a lot, but that would that could entail high claims. So what we think better reflects efficiency, efficacy and performance in the insurance business is to work with the results Of insurance operations. So we're giving you a guidance of 5% to 7% growth for insurance operations. And for extended cost difference, the guidance of €11,500,000,000 to €14,500,000,000 So these are the main figures that we wanted to share with you. And to end, we have good expectations in terms of what can happen to the economy.
Given the outlook because we have the reforms that should take place, but we are also absolutely convinced There is no sustainable economic adjustment without a financial system, which is efficient, profitable and healthy. The profitability of the bank is an assurance to the shareholders and to economic agents that the economic environment is safe, healthy and stable And therefore, favorable to new investments. We had many economic policies Along with the last 7 decades, because we always trust the future of Brazil, we bet on it, we bet on our economy and the ability to work of resilience. And we thank our employees. And we believe it's the greatest asset that Abisto has.
Our strategy of modernization is certainly client oriented. The recent changes have been made in January and our management structure is the result of our vision The clients have to be at the very top of our priorities. This is what brings financial health and robustness. Uncertainties generate opportunities as well and challenges while we're trying to invest in opportunities and treat uncertainties As a given, it is something that is out there. We have to cope with that with Bella.
To us, This is a benign situation. Results are solid, derived From increased business volumes in every line, as we could show you in our operational results, Increased competition, increased new market dynamic, it requires agility and responses with the arrival of new market entrants. It was important to reduce the vice presidency. So for this, we said that we could be more focused and have more agile decision making. We expect more growth for 2019, almost double of last year.
Some people consider the pace is too slow. For us, It is necessary to gradually recover a sound business environment for our clients. We are exchanging a recession cycle for a recovery cycle. Now we'll start the cycle of growth. Our Our first question comes from Georgi Friedman from Citibank.
Go ahead, sir. I have two questions. 1st, regarding One point that was mentioned during the presentation by Otavio. I might have missed part of the explanation maybe. I think you mentioned that if there is a reversal of additional ALL, 1st would be more related to IFRS 9.
But I feel from your viewpoint, Is IFRS 9 something that will come for 2019 in Brazil, right? How do you Thanks. This will be implemented. Comrade saw in the guidance. It is natural that we are going to have a reduction in coverage.
But it seems that you are going to provision a little less. This is Nina and A. L. Reversal. But for more than just sitting in this webcast, this reduction would be related only to the implementation of IFRS 9.
That's my first question. And the second question has to do with the guidance for fees. I think that the results were good. We had an Slide with the consensus, looking at all your guidance figures, it's obvious that we understand that there is some pressure in the market Because of the credit card business, not only in terms of the acquiring business, but also with the interchange Change that happened recently that impacts total fees showed that guidance of 3% to 7% of sales is even lower than the 2018 guidance. In an environment where we see economic recovery, Credit recovery and inflation that remains low, but perhaps increasing a little, that might help Pricing, so what do you see in terms of additional pressure?
Are there any other lines in addition to credit cards That could contribute to drive this down or is there room for a surprise that could be positive along the way? Thank you very much. Okay. Regarding migration to IFRS 9, Implementation compulsory implementation of IFRS 9 is in 2021, but banks are already converging gradually to it. The use of provisions To complete IFRS 9 requirements, that does not change the coverage because the total provision will not change.
There will be no reversal of these provisions along the process. What Osagio mentioned Reni made a comment on that. Was that there will be a gradual process Of migration to IFRS 9 and how eventually in the future With the expected implementation, it is possible that we'll have room To consume to use that provision, but we don't have that expectation. The guidance Is not considering for 2019 any reversal of additional provisions. Perfect.
Jorgen, this is Dovavio. We are working with the operating side. Regarding the guidance for fees, I think there is a pressure and the pressure is already here. You could look at the Cielo numbers. Cielo released the guidance which is BRL 1,000,000,000 Below the guidance that they had for 2018.
The damages to be BRL 3,000,000,000, now it's BRL 2,300,000,000 to BRL 2,500,000,000. But this is Transient, I think that as of 2020, Cielo will pick up again because the market has been totally deregulated. It has been opened By the monetary authorities and I was ending thanks. But this is the company of 52% cash generation. New entrants in the market are competent.
So we have an expectation that we'll resume the results of that company, Which will contribute a lot to
RFP. In addition,
This reaction with the sale of POS terminals, more than 400,000 POS terminals We're followed by Cielo. Now that we have a greater commercial And this started happening as of June, July of last year, maybe August. So this is one point. I believe another point we could mention here is that Fracture is natural. I met with clients, Amy, where you look, they maintain all loyal.
I don't know how the brokerage houses will live without broker fees, but there is a pressure out there. So much so that we gave you a guidance of 3% to 7%. But the greatest pressure, the results were from Cielo, nothing Nothing that hasn't started happening already. So we believe that we can gain in volume and sales to offset that. Perfect.
That was very helpful. Thank you.
Mr. Chakrabartista, Itau BBA. Good morning, everyone, and congratulations. A follow-up regarding your guidance about provisions, the assumptions. For the guidance, NPL formation, is it going to continue?
Is it because of the drop in impairment? Okay. So the question is, which are the drivers? And the second question is very simple. For the fiscal provision, BRL 180,000,000 this quarter, Is it non typical?
Or could we expect something similar to that in the next few quarters? Thiago, thank you for the question. In relation to our AOL guidance, The assumption subject
to that,
We have been talking about the credit originations with very good performance. We are With a track of improvement in our delinquency rate, NPL formation should be maintained at low levels Over 2018, in our provision for 14.5, we had some specific cases Higher ticket and when you look at your portfolio, we do not see Right now, and we do not believe there will be this kind of provision. There is some room for the Reduction of provisions for impairment, and we have already made long strides there. So it's already Of reasons and also our cost of risk and our delinquency, This has already happened in part, but the process has not been concluded yet. So the points that Are included in this guidance and how the area in charge has projected this Come from these items that I have just mentioned regarding provision under others.
This is a tax provision. This is a fiscal provision related mainly to 2 cases Of tax, we had a reclassification Of the risk probability from possible to probable. So because of that, we made this division. So this provision has a specific characteristic. You follow us and we do not see this kind of movement in very frequently.
So This is very specific. Thank you. Mr. Giovanna Haza, UBS. You may proceed, Mrs.
Harza. Good morning and thank you for the question. I have two questions In relation to your Tier 1, your have you already reached The target in this quarter, your target in this quarter is at 2.5%. And do you believe there will be A higher payout, are you considering a new acquisition? And I would like to explain this.
My second question has to do With your fee guidance, the Central Bank will be regulating open banking, as they have already said. And how are you positioning yourselves in this new competitive environment? And your Guidance, does it include anything regarding this new open banking situation in relation to Tier 1, The one that we talked about, 3.5, this is a target But we believe well, we consider this as a very comfortable level, equity level. We have never placed this as a cap. We are not going to manage based on this as a cap.
So the discussions regarding capital allocation, dividend, etcetera, this is an ongoing discussion. And this is In the hands of our Board of Directors, and right now, We would have nothing to add to that. Regarding Open Banking, which is your second question, this is a process that is already underway. There are some definitions already in terms of regulation. What we can say so far is that Bradesco, With our platform, we are prepared to operate in an open bank environment.
And we believe that the evolution will be a gradual process. And certainly, there is no impact Of the Open Banking, on your in our guidance, it has much more to do with payment than Other competitors move. This is Otavio. I would like to add to what we had said. In regard to our BIA duration, 13, 13.7 percent.
You said 13.5 percent, but we're reaching 13.7 percent. And this is a number that makes us comfortable because we are on the verge of seeing economic growth with you, Ming. And we believe this will happen. And we have to understand that there are 2 different moments. We have to have The necessary capital for the different cycles of the economy, we have over 5,000 Branches, etcetera, besides mobile and digital platforms, etcetera, so We need to grow and have the necessary capital to grow, but we know that economic cycles have not been done away with, which means that we have to have the necessary capital As we had the situation 2 years ago regarding delinquency, you know that delinquency was very high in all Brazilian banks at 2 BRL 450,000,000,000 were written off by the 5 main banks in Brazil.
So This equity management is fundamental for us and we have to take care of that every single day so that we may accompany the growth cycle and the Delinquency cycle, and we have to wait and see If the pension reform happens, this will be the most important trigger so that we may see economic growth. So Based on that, then we will check our capital needs visavis a resumption of investments and Also investments in infrastructure, energy, etcetera, everything that the country needs. And regarding the second item, This is what I said entering Thiago's question. It has to do much more with Cielo And the high net worth clients, the rates are lower and the brokerage houses Operations, and we do not see a big problem there Coming from Fintechs or whatever, if you take the website of the May, the Michael, individual entrepreneur, MEI, you can see that the companies that supply balance sheet and the Obtaining inventory control and many other things that are necessary for these MEI. These are fintechs that Are plugged in the open banking system of our platform and we are already doing that.
You are correct. There could be a little bit, but this is not what is reflected in our guidance. We do not see it this way. We believe that there is even more room for growth. Thank you very much.
If there are no more questions, I would like to turn the floor back to the Executive Officer Bank for their final remarks. My dear friends, I would like to thank you very much for your attention, for joining us in this web Cath, it's always important to speak with you to clarify some points about our balance sheet. And you know that the physical doors are always open. All of our executives, the reps and the IR team are all available. For any further clarification, you might need 3 available to have meetings with you.
I myself am available To speak with you, to discuss some points with you, to speak a little more about the future. So I just want to thank you for joining us. We'll continue in 2019 to work very focused On our clients, with capital discipline, we're focused on our clients. And so that we can have good shareholder return Good return on our shareholders' capital, which is what our shareholders and investors always speak. We remain available.
I wish you a good day and a great 2019 for all of you and all of us. Thank you very much. Bradesco Bank's conference call is closed. We would like to thank all of you for joining us.