Good morning, ladies and gentlemen, and thank you for waiting. We'd like to welcome everyone to Banco Bradesco's first quarter 2018 earnings results conference call. This call is being broadcasted simultaneously through the Internet on the website banco.bradesco/ri. In the address, you can also find the presentation available for download. We inform that all participants will be only able to listen to the conference during the company's presentation. After the presentation, there will be a question and answer session when further instructions will be given. Should any participant need assistance during this call, please press star zero to reach the operator. Before proceeding, let me mention that forward-looking statements are based on the beliefs and assumptions of Banco Bradesco's management and on information currently available to the company.
They involve risks, uncertainties, and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions, and other operating factors could also affect the future results of Banco Bradesco and could cause results to differ materially from those expressed in such forward-looking statements. I'll turn the conference over to Mr. Carlos Firetti, Market Relations Director. You may proceed.
Hi. Welcome to our conference call for the discussion of our first quarter results of 2018. We have today making the call with us our Executive Vice President, Andre Carvalho, our Executive Managing Director and Investor Relations Officer, Denise Pavarina, our Executive Managing Director, Moacir Nachbar Jr., Vinicius Albernaz, the CEO of Bradesco Seguros. Now I turn the presentation to Denise.
Hi, everyone. Thank you again for joining our conference call. I'll start with the main highlights in slide number two. We have net earnings of R$54.1 billion, an increase of 9.8% year-on-year and 4.9% quarter-on-quarter, representing a return on equity over 18%. Our operating income grew 16.4% quarter-on-quarter. As you know, it's an extensive adjustment in our structure in the previous years, capturing synergies of the acquired operation of HSBC. We also adjusted our credit origination models and collection practices. The impact of these adjustments are being captured this year, 2018. In our results, significant improvement. The good trend in credit quality and cost of risk continues, as you can see by the delinquency rate. Both individuals and SME segments present continued improvement in delinquencies, bringing the overall delinquency ratio down 20 basis points.
This led to a new reduction of cost of risk, which dropped, as you can see, 20% in the quarter. We understand that for the year, cost of risk may be around the bottom of our guidance, and this of course, has to be confirmed, but that's our expectation. Operating expenses show the reduction of points quarter-on-year as a consequence of our tight cost control and adjustments made last year, which more than offset the inflation and the collective salary adjustment that we had in the period. Going to the loan book, it grew 6.4% year-on-year in retail, while the total extended loan portfolio shrank 3.2%, mainly driven by the contraction in the corporate segment.
This has to do with the level of credit and also the debentures, because capital markets is already, and bonds, of course, they are good alternatives for the companies those days. The corporate portfolio trends should reverse as investments pick up. We are, of course, waiting for the more clear scenario. Companies are slowing down their investment, this may change as long as we have a more clear scenario. As anticipated, the average loan volume contraction and some reduction in margin put pressure in our net earnings. I'm sorry, our net interest income, which reduced 2.6% year-on-year. Considering that we will be growing in the retail and SME segment this year, as we saw in the first quarter, the change in mix should help us to offset part of this effect. Not totally, but part of the effect.
Going to the insurance business, we had a reduction in premiums this quarter. We have to say that the reduction of insurance premiums varies during the year. It's not the same quarter-by-quarter. Therefore, this performance doesn't change our expectations for the full year. In fact, we expect a good contribution to our results in the coming quarters. As we see already signs of improvement in the health insurance business and overall claims. Going to the end there, I would like to summarize some of our few priorities we have. We keep our cost control very tightly. We'll continue to do that. Adjustment will continue, but now more gradually because, as I said, our business adjustments were done during last year and basically are concluded. We have just a few things to do here.
This year we expect to close or convert to point of services nearly 200 branches. This is a way to see our standard clients reducing costs. The other thing we want to do is to deepen our segmentation strategy, especially in the high-income segment. To which the initiatives implemented in 2017 related to wealth management and financial advisory already show meaningful results here. We have established a new platform that is providing advisory to our clients, and we see very good results of this. Other things very important for us is the focus on innovation. Innovation of processes, innovation of products and sales channels. Improving the amount of credit products available through digital channels and reducing the paperwork. Not only credit, but also all the financial products that we can sell.
We sold 500,000 products of our insurance last year after we included in our mobile bank that we have in Brazil. Additionally, we will continue leveraging our improved CRM. We have a CRM tool which increases sales effectively. We intend also to enhance customer experience continuously through more agile processes. In conclusion, we understand that our quarterly results show that we are in the right direction with cost structure already adjusted, controlled delinquency, and appetite to expand our loan portfolio. The quality of the new loans that we are conceding are much better. They have improved, and this gives us confidence to even expand our loan portfolio. Thank you. Carlos Firetti now will tell you the numbers.
Okay. Thank you, Denise. Going to slide number three, we have the adjustments of our recurring net income. Basically, the major adjustment this quarter, as usual, is the goodwill amortization, BRL 607 million. We expect to amortize for full year 2018, BRL 2 billion. On slide four, we have our recurring income statement. A few observations here. First, we regrouped our provisions, expenses or allowance for loan losses, moving down the impairment from the margin as on the accounting terms it is the way it should be to a managerial adjustment on the provision expenses. Also break down the former net provision expenses in its three components. Basically, these three first lines are composed of net provision expenses. Expanded allowance for loan losses had a quite good performance as already pointed by Denise, reaching BRL 3.9 billion in the first quarter.
We understand this level is closer to what we call a normalized level for the time being. We think over time, over the year, it should continue evolving positively, we think. It's more normalized level comparing to the fourth quarter where we had some extraordinary impact. We also had a quite important reduction on the impairment itself, reaching BRL 255 million. We believe this level is also closer to what we could see as a reference for the year. Could be a little bit up, but we're not going to see again the same levels we had the end of last year, unless we have something extraordinary happening. This put the provision for expenses close to the bottom of our guidance. That is a reference we have been saying is probably a good level for the year.
In terms of insurance, the income from insurance that you see in the P&L had a reduction this quarter, mostly related to lower premium growth or reduction premiums in the First quarter compared to the fourth quarter, a seasonal reduction, but year-on-year, based on a weaker market and also a higher comparison base last year. Also, we had a revision of the present value of our liability with a reduction in the discount rate applied for this calculation. That also caused an expense this quarter that is responsible for most of this variation this quarter. Our tax rate in the first Q was 32.4%. We believe our guidance or signalization for the full year, between 28% and 30%, continues a good reference, we believe we're going to be in that range. Slide number five, we have the evolution of our net income.
As I just said, 9.8% growth year-on-year for the quarter. On slide six, our net interest income, the earning portion of our net interest income dropped 2.6% in the quarter year-on-year. This is consistent with our guidance, close to the middle of the guidance. The main driver for this reduction is the credit intermediation that reduced 8.5%, mostly due to volumes, but also some reduction in the credit margin. Insurance did well, as we have been saying since the end of last year, given that even if insurance is affected by lower interest rates, actually our asset liability retard this impact. In asset liability management, again, that is related to the fact that part of our balance sheet has a fixed rate exposure, so this brings a positive impact on these positions. Our NIM in the quarter has a reduction of about 20 basis points, reaching 6.6%. Slide seven.
Our loan book, considering the central bank classification that involves only loans, has increased 0.4% in the quarter, driven mostly by a 1.3% growth in individuals on that classification. On our traditional breakdown, the expanded portfolio, we had a reduction of 1.3%, basically driven by the corporate and middle market operations, especially in the corporate segment, sureties and guarantees. There were a couple of letters of credit that expired, and also the payment of some bonds that also reduced the portfolio in the quarter. The big highlight here is that our retail and mid-high income operations, including individuals and companies, grew at a rate of 6.4% year-on-year for this segment, where we have mass credit products for our own clients. In slide eight, we have our breakdown of the expanded portfolio. 1.3% growth for individuals is the big highlight.
Payrolls are growing at a 13.4% rate year-on-year, real estate 5.5%, and car loans 10.5%. In real estate financing or mortgage, basically, we had a very good beginning of the year with a very strong level of origination. Keeping that, considering we are operating very competitively, we should continue with a very good performance in this line. In slide nine, we have our loan origination per business day for earmarked and non-earmarked loans. This represents roughly, probably 80% of our total loan book. We had, for individuals, an increase year-on-year in the quarter of 35%, for companies, 31%, showing that our origination is really picking up, and we believe that can continue allowing us to continue accelerating in the individuals' portfolio. In terms of delinquency ratio, also a very good performance, especially in SMEs and individuals, where we have been seeing improvements since the fourth quarter 2016.
We think there are more improvements to happen, considering the performance of our more recent vintage. Considering also that the current NPL levels are still high. We should continuously see these NPLs improving. In the corporate segment, NPLs are still high, remembering that in 2014, 2013, when they operated on what we consider more normalized, they were around 50 basis points. We believe the corporate NPL should continue on a relatively high level until the end of this year. We don't see really big tickets moving this ratio to much higher levels, but we don't see actually an improvement in the short term. In slide 11, we have our NPL formation that is also a very good highlight for the quarter. NPL formation dropped to BRL 4.4 billion. It's the lowest level we had for a long time. Our provisions were consistent to the NPL formation.
We continue providing for the new formation. In terms of provision expenses, including impairments, they represented 3.2% of our loan book this quarter. In slide 12, in the NPL creation per segment, we had quite good performance in SMEs and also a continued improvement in individuals. We think NPL formation for both segments and also the total NPL formation can still continue improving. The corporate NPL formation increased a bit this quarter, but its participation in the total NPL formation is relatively small. In slide 13, our coverage ratios, we reached 219% coverage on 90-day NPL, a very strong level. We believe our coverage probably will continue increasing a bit more. We don't manage our provisions through coverage. For the time being, we don't have any plans to reduce the excess provisions.
We can eventually reevaluate that in the near future if necessary, but we shouldn't be doing that in the short-medium term. Renegotiated portfolio evolved positively with a reduction in the total renegotiated loans, and also the renegotiated loans that are still in our loan book. That is the gray line. The difference between the two are renegotiated loans that were in our off-balance book, coming from write-offs. The coverage for this renegotiated portfolio is quite high, and it has been performing quite well in terms of credit quality. Slide 15, fees and commissions. We have fees growing 5.4% year-on-year. The highlights are for checking accounts, where we have the impact of synergies from our acquisitions. We have been able to capture more fees on the client base, mostly selling services with higher value added.
Asset management, we continue doing well as a result of our efforts in the wealth management with our investment consultancy for our clients. This is in line with our guidance. Operating expenses, we also had a good performance. Total expenses dropped 0.4% year-on-year. The administrative expenses dropped 0.9% year-on-year. A highlight here for personnel that grew 0.1% year-on-year, a good performance, but if looking to the structural part of it, there are salaries and benefits. We had a reduction of 1.7% despite the 2.7% increase in salaries last year. That reflects the results of our voluntary dismissal program. What is holding a better performance for total personnel expenses is the non-structural part, and the main responsible are the expenses with labor lawsuits.
What happened is with the increase in the number of people leaving the bank last year, we have more people getting with lawsuits against us. In the first quarter, reached BRL 407 million. A more normalized level is something probably below BRL 200 million, and we believe over this year, we should reach those normalized levels that we go to a more normalized situation in terms of labor lawsuits. In slide 17, we have our efficiency ratio. We had improvement of 100 basis points in our efficiency ratio this quarter. In slide 18, our insurance operations, our premiums year-on-year had a reduction of 2.1%, affected by the high and strong base of comparison last year, but also our weaker market. We believe that despite this relatively weaker performance year-on-year, we, considering that other periods in the year are more important, we can, without much problems, be in our guidance range.
Capital, page 19, reminding you that this quarter we have Brazil already operating with 100% implementation of Basel III in terms of capital deductions. Our ratio in the quarter was 12.4% Tier 1, 11.6 CET1, reminding that the fully loaded calculated in the fourth quarter was 12 Tier 1, 11.2 CET1, we had a organic expansion of capital this quarter based on comparing to that fully loaded. Finally, our guidance and the realized numbers, basically, for the loan book, we are below it, but we believe we can still be in the range, especially in the mid-low portion of it. More important than being the range, let me remind, we are growing more in retail and SMEs, especially small-sized SMEs, and this is mix accretive.
For our margins, growing those segments can be as important and offset the fact that we don't grow that much, or eventually will not grow that much in corporate. Net interest income, we are tracking our guidance. We believe we can improve a bit over the year, being closer to the center of the guidance, that is 2% or a little bit better than it. Fees, 5.4%, in line with the guidance. Operating expenses, we will be probably in the mid-low portion of the guidance. Insurance premiums, we are running below, but we believe we can go back to the guidance range, and we are doing quite well in provision expenses. With that, I conclude our presentation and open for the Q&A session.
Ladies and gentlemen, we will now initiate the question and answer session. If you would like to ask a question, please dial star 1. If at any point your question has been answered, you may remove your question from the queue by pressing star 2. Our first question is coming from Mr. Carlos de Macedo of Goldman Sachs. Mr. Carlos, you may proceed.
Thank you. Good morning, everyone. Good afternoon, everyone. I have a couple of questions. First question is on margins. We saw that your margins were up largely because you had some stronger results in ALM and other things. The credit margins were lower sequentially, despite a slight change in mix in the portfolio with consumer loans growing faster. I'm trying to get an idea of what you expect through the end of the year. More importantly, if you think that the process of passing through the lowest SELIC is done and if you think that the competition, now that everybody's trying to grow loans, particularly the consumer side, will have any impact on margins, maybe not this year, but down the road. Second question on asset quality. How much more do you think, I mean, you talked about potentially improving and NPL ratios getting lower.
The cost of risk is already much lower. Where do you think the NPL ratio can go to, and does that mean that, with NPL creation being low, you can actually have the cost of risk getting even lower? Thanks.
Okay. In terms of margins and starting with competition, the answer is we are seeing some impact in spread in some lines due to the competitive scenario. Basically everybody is there because actually the demand is there. We have seen spreads going down in some lines, still remaining in health levels, but we have already seen some reductions in some lines. In corporate, for instance, where the competition is more capital market. Actually, the other banks spreads are already meaningfully lower than the peaks we have seen, and in some cases, getting closer to the pre-crisis levels. We believe our margins during the year, our credit margin can stabilize due to mix. We have been growing in a richer mix loans with higher margins, especially since the fourth quarter last year. We only have roughly two quarters growing there.
We think over the following quarters as the participation of these loans grow, we can have some sort of offsetting margins due to this mix effect. Our expectation for NII for the year being minus 2%, basically it implies that margin probably will go down somehow this year as they are, but it's implicit that we don't see going down a lot. On the cost of risk, we used to have a longer spot on NPLs where the total NPL in the past cycle, reached something like 3.5%. Considering the mix, the fact that actually new vintage are doing quite well, we can go below that level. We are reducing, retreating as a percentage of the loan book.
Looking not only this year but longer term, we believe we can also operate in levels below what we have seen historically, given the mix effect and the fact that actually new loans are doing quite well.
Okay. Thanks, Firetti. One follow-up question, if I may. The question I think on competition, there's still a lot of room to expand because the potential in the borrower is still low, given that nobody was borrowing. At some point, you start bumping heads with your competitors. Everybody's trying to go in auto and payroll and these mortgages and these loan lines that have lower risk. Do you expect the competition to intensify this year, or is it something that there's still enough room for everyone to grow so that it will become more of an issue next year?
Competition is quite strong this year already. If you look to mortgage, to car loans, everybody wants to grow. I think the difference could be that demand probably will pick up even more as the economy improves and as people start to get jobs. At some point, we can have a differentiation that is our position. In our case, this differentiation didn't help us with full impact because as you know, regions where we have a stronger position than our peers, were the ones that suffered most and probably will take a little bit longer to be running at full potential. We also have some differentiation in some lines. One example are the payroll loans. We have invested in the past and because actually we can, because we have a strong distribution network to get retirees receiving salaries in our branches.
We have an access to these clients that few other banks have, maybe only the public sector. This is a very good channel, where we can grow. Also, in terms of mortgage, the position in terms of clients, relationships, and agreements also can give some differentiations. We cannot avoid that in normal conditions with the expectations of risk in a lower level, competition actually will be stronger. It's natural, we don't see that as a major problem.
Okay, perfect. Thanks, Firetti.
Our next question comes from Mr. Jorge Kuri of Morgan Stanley. Mr. Jorge, you may proceed.
Hi, good morning, everyone. Can I ask about competition from the fintech space? We are seeing a lot of new companies are offering free checking accounts on digital accounts, and payment companies offering significantly lower MDRs, companies that are able to go into your systems, see who your best clients are, and try to offer them better rates. How do you think this is going to play out? What is Bradesco doing to defend its market share, and to create also a digital world that is appealing to the younger crowd that is rapidly adopting these new platforms? Thank you. I am sorry, if I may add, particularly, in what products or segments do you think there is more risk? And what are you doing specifically about those products or segments? Thank you.
Sorry. Can you repeat your last question? Sorry. Okay. I will answer the first part. You are right, Jorge Kuri. The competition is strong, we are basically fighting back. As a strong bank, we saw some players growing in areas that are very important for us and areas on which we want to be. One of them is, for instance, in the digital accounts and also the acquiring business for individual small merchants. We are ramping up the operation with Cielo to offer cheaper products and selling the machines at very competitive prices. We are going to offer digital accounts. We have tools to fight back and really, we believe that with access, with our capacity and technological capacity, we can really remain as a very competitive and strong player in this segment as we are in most of the market segments.
Specifically, in the digital operation, I remind you of our operation with Next. That is our digital bank focused on younger clients. Basically, it is a platform totally separated from ours and very innovative, very flexible, already prepared to open on an open bank concept. We already have more than 100,000 clients, we are ramping up. We launched it only two months ago, the free accounts. In the first stage of the launching, we were operating only with paid accounts, the rate of growth after the launching increased a lot. This platform gives us a lot of leverage in the sense that we can experience, we can try different products, different formats, and it is working. We should keep investing on Next.
It gets new profile of clients that are normally younger and have a full digital profile for our part of the clients that want the digital accounts. We will play with digital accounts, and we have more. We have the complete portfolio of products that we can offer them when they need. We think other fintechs not necessarily have that. We are a very traditional bank in small companies operation. Probably, we have one of the largest portfolios. We have more than 2 million clients in the company segment, where we can offer acquiring, we can offer digital products. I think we are prepared, and you will hear a lot from us playing in this new world.
Just to add, the number of clients that grew within companies such as PagSeguro and others, were clients that we are not actually accepting because of the level of credit, the score of credits that we had inside Bradesco. It doesn't mean that we are losing our own clients. Those are clients that we were trading with products or no credit. This is something that now with this new strategy that we have, where we are selling the Bradesinha, which is the new machine for clients to commercialize their product. We sold in 40 days, 14,000 equipment and this is POS, and we want to end the year with around 100,000 equipment. I think we are there as we were in other situations where we had to compete. Basically, we changed some metrics. We create new products.
We also created a prepaid card for certain types of clients that have different needs. We are there to face the competition as we have done now.
Jorge, I didn't get the second part of your question. Can you repeat it?
Well, you partly answered it. I was asking, specifically where did you see more risk? What products and services do you see more risk on coming from fintech? Is it payments? Is it credit? Is it spreads? Is it in acquiring and insurance and so on? Wanted to know on a product basis, where do you see the more risk and what are you doing about it? You partly answered it, but if you just can expand a little bit on the credit side, because that's obviously where there is excessive pricing in the market, and we are seeing fintech companies that are originating credit cards at much lower rates that are offering clients better rates. Just if you can, you alluded to the payment space, but if you can talk about the credit market and what are you doing to defend yourself from fintechs. Thank you.
To be honest, Jorge, what really concerns us more than the competition is
It's really very hard to hear. Sorry.
Okay. I'll say again. What I'm saying that what concerns us more is the growth of the economy is delayed always because if the economy is growing, the other things we are ready to
We are prepared.
We are very prepared to face.
All right. Thank you.
Our next question comes from Mr. Jason Mollin of Scotiabank. Mr. Jason, you may proceed.
Hi. Thank you for the opportunity to ask questions. My question is a bit of a follow-up on what was being discussed. I'm just looking at the number of clients or customers that you show as going down. I'm looking at definitely a little bit lower number of branches. You did mention, I guess these Next customers are there, these 100,000 clients I think that you mentioned. Are these in those new customers? It looks like you lost quite a bit more than that. If you can talk about that, if that is a migration to competitors or to these kind, it's hard to tell where they're going, I'm guessing. Are these clients weren't profitable and you're actually trying to push them out?
Basically the main reason for the reduction in clients is unemployment. Brazil faced a very strong crisis over the last two years, as you know. A lot of clients lost their jobs, closed their accounts. We have a lot of accounts that are payroll relationships. This is the main driver, I would say. In terms of an account numbers, current account numbers, this quarter it was stable. As I said, the main reason for the reduction comes from that. When you look, for instance, on healthcare plans, unemployment. We play mostly with corporate healthcare plans and, with unemployment, we had a reduction in the base of clients. We believe our position and our strategy, focusing all segments of clients from the top to the bottom.
Since we have more than our private sector competitors in the bottom where unemployment grew more than anything else, it's naturally that we got affected.
Just to add, Jason. Our focus is much more now on total clients rather than cash accounts than so, because our strategy now is to include those clients in many segments that we have to use the CRM to cross-selling with clients over insurance to sell our products or to sell investments that we have done. Our focus is now much more on total clients, considering that all of them that buy any product of Bradesco are our clients.
The competition
A cash account is one of the products, we shouldn't look at those as the main driver.
Yeah, it's interesting because I see. It's interesting in the total customers, it looks like quarter-on-quarter, there's a small increase. If I look at the breakdown you give, it looks like that the only numbers show a reduction in all types of customers in all of the line items here, except there's 100,000 increase in account holders. The total customers is increasing by 700,000. I'm not exactly sure where they're coming from, but that makes sense. What about on the branch
Jason, just one thing.
Yeah.
In savings accounts, if you look every year, there's an interesting phenomenon that we have a big increase in the number of savings account clients at the end of the year and a big reduction in the first quarter. There are some seasonality. Probably people receive their Christmas bonus or have more money, open the account, and we have sequentially a big reduction. You can see every year the same thing happens in savings accounts statistics.
All right. Year-over-year, I guess that you were explaining that could be the economy.
No.
What about branch?
Yes.
What about the branch network? Can you continue to rationalize that? The number of branches was down 8% over the last year, almost 1%, just a few, I guess 40 branches in the quarter were closed, if you can talk about that.
Yes. We plan this year to reduce about 200 branches. Last year, we closed about 565 branches. In the first quarter, we already closed something like 44 branches, if I'm not wrong. Part of what we say closed is conversion points of service. That is a small format, only with ATMs, one or two account managers focused on relationships. Two managers per branch and focus on relationships. We think this is a way to serve the clients with a much lower cost structure. Especially this conversion will happen a lot, but the reduction from now on is lower than it was last year.
We are analyzing region by region, city by city, and see the model that fits the best in that place. This is the number that we have now, but those are evaluated all the time to have new looks that we make.
Every day we look at.
Yeah, every day we look at the model that fits the better for that region, place, city situation, and change to a more efficient opening.
Thank you.
You're welcome.
Our next question comes from Mr. Jorg Friedemann of Citibank. Mr. George, you may proceed.
Yes. Thank you very much for taking the question. Just a point that I noted on your capital position. I understand that most of the effect on Common Equity Tier 1 in this quarter comes from the agenda of the prudential adjustments that goes towards 100%. However, I also got a bit surprised with the impact on the Common Equity Tier 1 coming from higher risk-weighted assets. Just wondering if you could give a bit more color why the credit risk increased more than 2% despite the, I know it's sluggish, credit performance and also the operating risk went up more than 10%. Just a bit more color on that. Thank you very much.
Okay. Part of it comes from credit. It also has a little bit to do maybe with Just a second. Jorg, sorry, simple answer. There was some changes in the weight, in risk-weighted assets.
Sorry, could you repeat that? I couldn't hear you, Firetti.
There were some changes in some weight for assets determined by the central bank.
Okay. Both in credit risk and operational risk as well?
Yes.
Okay, perfect. Thank you.
I'll follow up more on details on that with you, but that's the answer.
Okay, perfect. I appreciate it. Thank you.
Our next question comes from Mr. Mario Pierry of Bank of America. Mr. Mario, you may proceed.
Hi, everybody. Let me ask three follow-up questions here if I may. The first one on the cost of risk, BRL 3.9 billion this quarter. If we annualize, we come slightly below your 16 billion forecast for the year. I just want to clarify that. Are you still comfortable with your guidance range of BRL 16 billion-BRL 19 billion? Or do you think it can come below your guidance? Because the way that things are trending in terms of asset quality, it's showing that things continue to improve. That's the first question. Second question is going back to all of these questions on fees. When you bought HSBC, I remember that the revenues that you were getting out of the HSBC clients were roughly 20% lower than what you had at Bradesco.
If you can try to discuss, do you think that the profitability or the revenues that you're deriving from the HSBC clients are already at the same level that you had from the traditional Bradesco clients? Because I think what is catching the attention here is that your fee is only growing 5% year-on-year, right? We understand all the dynamics there, but it seems low because you recently, roughly 2 years ago, incorporated a big franchise. The third and final question has to do with costs. Just wondering here if we have seen all of the benefits of your early retirement plan. Is that already fully reflected on your results? If you can comment on that'd be great.
Okay. First, the guidance. Analyzing the first Q, really, it goes below the guidance, early to review. We think, as I said, this new level is kind of a reference. We don't see big increases as the most likely scenario. Probably even impairments also have reached a more normalized level. It seems we have said we expected more the bottom of the guidance, so the first Q makes sense with this statement. For now, let's wait, but we are comfortable. We are doing quite well on that, even if we prefer not change the guidance.
About the revenues per client, as you have asked, when you have a retail and corporate client, they are about the same already. When you go to high-income clients, we have a few ways to go. We are not there yet and working hard to reach the same level.
Yeah. One thing that happens is in the agreement with the antitrust regulators, basically, we cannot increase the fees at once. It's kind of a commercial relationship, and we have to sell better products, and the customers have to allow to charge rates. It's a gradual process. As Denise said, the mid-high income segment is where we have probably a little bit longer way to go. In terms of the voluntary dismissal program, some people left only in February. It's a smaller part of the program. Possibly the first quarter is not really fully reflecting all the adjustments, but maybe almost fully reflecting on the personnel. What is impacting the personnel expenses and kind of hide parts of the benefit is the fact that we had very high expenses with labor lawsuits in the fourth quarter, but especially in the first quarter, something like BRL 407 million.
These expenses normally run below BRL 200 million. The reason for that is the fact that a lot of people left the bank last year. It takes a while until we receive the notice for the lawsuit. A lot of people anticipated the moment they would get with the lawsuit compared to what we had before the labor reform. We believe, in the coming quarters, we have a big improvement from that. As I said, maybe going from BRL 400 million to something around BRL 200 million or below it. This is not a benefit from the voluntary dismissal program, but is important benefit we still have to capture.
Now that's very clear, Firetti. Thank you very much.
Our next question comes from Mr. Thiago Batista of Itaú BBA. Mr. Thiago, you may proceed.
Yeah. Hi, guys. Hi, Carlos Firetti. You had a comment during the call, at the beginning of the call, that the insurance company results were impacted by a kind of one-off expenses related to the change in the assumptions of the technical reserves. Can you comment in which segment this was impacted? I believe it's pension, but not totally sure. Also the magnitude of this impact, how big was this impact in the central results?
Basically, it's related to revaluation of our liability in the insurance company. It's related to the revision of the discount rate from 4.3%-4%. The impact is roughly BRL 20 million-BRL 150 million after tax in the insurance company.
Okay, perfect. This was in the pension business itself or in the life or in other things?
Across the board.
Okay. Thanks a lot for the clarification, Carlos Firetti.
Excuse me, ladies and gentlemen. Since there are no further questions, I would like to invite the speakers for the closing remarks.
Thank you, everybody, for participating in our call. The investor relations department is available for any further questions you may have. Thank you very much.
Thank you.
That does conclude the Banco Bradesco's conference call for today. Thank you very much for your participation. Have a good day.