Hello, ladies and gentlemen. We hope all of you are safe and well. Welcome to Banrisul Video Conference to discuss the Results for the First Quarter of 2024. This video conference is being broadcast and recorded directly from our data center in the south area of the city of Porto Alegre, given the unprecedented flooding in the city center, where our head office is located, a flood which also affected several cities. Thank you for your presence, despite the difficult times the state is going through due to the severity of this climatic event. Let me share some comments. It's being recorded, and replay can be accessed in our IR website. Today's event will be divided into two parts. In the first, our Chairman, Fernando Lemos, will give a presentation with the main highlights and figures and performance for the quarter.
We will have a Q&A session, during which analysts and investors will be able to interact with us here. This broadcast will be simultaneously translated into English. If this is your preference, please click on the button you find on the bottom of your screen. If you wish to ask a question via audio, please press the Reaction button and then raise your hand. If your question is answered, you can leave the queue by clicking on the Hand Down button. This presentation is available for download in our IR website. Now, I give the floor to our Chairman and CEO, Mr. Fernando Lemos, who will begin the presentation. Please, Mr. Lemos, you may proceed.
Thank you, Nathan. Good afternoon, everyone. Before anything else, I would like to tell you that we are all safe, not so well, given the situation we are facing here in Rio Grande do Sul. It was an enormous tragedy of unparalleled events, losses of lives, losses of property. We have compromised infrastructure, including the airport of Porto Alegre, so we are in the situation of contingency here in our data center, which has supported the work of Banrisul. On the positive side, we can tell you that this bank, Banrisul, is fully operational, 100% operational. All customer relationships, channels are available, our data are protected. Obviously, some bank branches have been affected due to the flooding, and some other branches have been affected due to the lack of communication due to the infrastructure problems relating optical fibers.
But clients have been provided services through our apps, through our other accesses, through computer. Our network is 100% operational, serving our clients, which gives us a lot of satisfaction and shows the capacity and the ability of Banrisul and the strength of the ability to protect data, which has been tested in the utmost test, and this brings us satisfaction. Well, let me also thank you for the solidarity that Brazil and the world have shown towards the state of Rio Grande do Sul, and the understanding you have shown to us. We have worked really hard. The world and Brazil have helped us so much with all types of services, messages, donations, making part of the reconstruction of Rio Grande do Sul. As you know, we are a people that has grit, and we will rebuild the state as soon as possible.
The waters are lowering, are being reduced, I'm sorry. And then in the next few weeks, we'll be able to work to start the reconstruction. So thank you on behalf of all the people of Rio Grande do Sul. So, again, Banrisul is 100% operational, and we are working to implement several measures in our bank for our clients. For some, we have postponed credits and other support measures. And we have checked that for this reconstruction, above all, small and medium-sized companies will need working capital. And we have prepared the line, which is already available in our branches, in our app services, so small and medium-sized companies can start programming themselves for the reconstruction soon.
So we have BRL 7 billion in credit and relief for this year for small and medium-sized companies, especially regarding working capital. We are a commercial bank, as you know. We do not have special lines from government or budget. We work according to our funding, and we will continue to do so, but we have effectively worked really hard so we can restart as before, to work as before. So regarding results, you have seen our performance already. Yes, that's it. You've had access to this, as Nathan said, these are results, net income of BRL 187 million, a little lower than the first quarter of last year, but with a net income, net interest income that is expressive, showing that we are on the right track.
We had somewhat increased default, which is explained by the change the state has made regarding payroll credits, payroll portfolio, which had one model of operation, which was a source of concern to us, because it was leading to debt of the civil servant employees. So the department, the state department, has reformulated payroll loans, being very conservative at this moment, and I think they were right to do so. So only 35% of the net income of the civil servant can be allocated to these loans. And at most 84 months, before it was more than that, or sometimes 150 months, which is not compatible with the nature of this product, of this service. So this change has helped us, because this portfolio will take a different direction from now on.
So there was a certain level of readjustment, which will detain the portfolio for a while. It won't show a great advance for this portfolio, and the default will still show a period of readjustment. We also had companies' default, which was expected, but considering everything, we are satisfied with our bank figures. Next, please. Our numbers, we've had you had access to it. Our net profit has been reduced a little, as you know, but our financial margin, our net interest income, is consistent, pretty consistent, making us feel confident to go ahead. So the profitability of this bank needs to consider that the first quarter, traditionally in Rio Grande do Sul, is always weaker. It has always been and always will be.
This is the, this is the truth here in Rio Grande do Sul and in the market, because the vacation, they are taken in January or February here, in summer vacation. So this quarter is a little weaker. It's not like in other places in which vacation times are less concentrated, and we have less business days. But if you look at the history, it has always been like that. So it shows we've been advancing, our financial margins, our net income are pretty sustainable. Next, please. So, there is an expressive growth, BRL 1.536 billion in the first quarter of 2024, regarding net interest income, with a growth of 22%. So this is extremely positive for the next few months regarding our bank, and we hope this will continue.
The balance of our portfolio, you have our are stabilized for the loan portfolio. I talked about the positive changes in the payroll portfolio made by the state. And regarding the commercial portfolio, we believe can start growing. We don't know yet how much Rio Grande do Sul will or how long the state will need to reconstruct. Facing this tragedy, we know that there are a lot of problems, but also opportunities regarding the reconstruction of this state, a lot of investment regarding infrastructure. So we will be looking at the real estate industry, as well as the industry of furniture, construction materials, appliances for homes, because they will be in demand. We need to realize that, and we don't know yet when the timing for these investments will be done.
It depends on how things go, but we realize there will be a second semester that will be much more leveraged in Rio Grande do Sul regarding these industries. Some of them are pretty crucial for Rio Grande do Sul. For example, the industry of furniture. There is a tradition here, especially in the mountains area, in the Serra region. The main furniture companies are located in the Serra region. And also, we have some very important steelmaking companies that will be in demand. We hope then we'll have a second semester, which will be different from what we had imagined before this, this climatic event. Well, our portfolio, as you know, basically, we have individuals' portfolio. Which is based, I mean, 90% of this portfolio has to do with civil servants. There will be no losses of income, no losses of jobs in this area.
So this portfolio is protected. There will be no difficulty regarding this portfolio. Then, for rural loans, which is also expressive in our portfolio, we have already checked, and CONAB and other sources have confirmed that there will be some losses, but especially in soy and rice, 80% had already been harvested. Less in corn, but most of it had been already harvested, so there won't be major losses regarding the previous harvest of the crop. So with this crop that has a lot of productivity, it was expected, we were expected to have the biggest crop of all times, but this, it won't be possible due to the floodings and the rains. So producers couldn't get into the crops and take the rest of their crops.
But the Central Bank and the Ministry of Agriculture have been dealing with these issues, so we won't have a lot of default in these rural loans, which is also an activity that, on the contrary of supermarket stores and other plants, they are more affected. This doesn't happen for the rural producers, because they are demanding credit, they are demanding loans to restructure themselves. So companies, sometimes they will vanish, but not rural producers, not municipalities, they will continue. And traditionally, Rio Grande do Sul is used to dealing with droughts or floods, so our producers know they have a know-how on how to deal with these problems, and our central government has already established the guidelines regarding that. And we do not have a lot of exposure regarding companies.
We believe we won't have a lot of problems in this area. Yes, we'll have some issues, obviously, but, there won't be major blows to our portfolios. Right now, considering the situation, we feel, safe. As soon as the reconstruction starts, we can start rebuilding the state, and we'll continue working the way we work, conservatively, increasing our provisions a little bit, because this board of directors is more conservative. So we are concerned with the bank portfolio, but our funding is very positive. Later, our VP, our financial VP, can talk about that. But, let me tell you, our funding is pretty good. This also has to do with this moment in which people are a little afraid, so they run to public banks.
In the case of Rio Grande do Sul, people see the safety of Banrisul, so our portfolio already shows this in the increase of funding, which is extremely positive in this sense. Our asset quality, as you can see, there was a slight growth, which was expected, due to what I have explained before in regarding the payroll changes and changes in our commercial portfolio, which has also grown. But things are as expected. We have a satisfactory provision that can cover any subsequent event. So we are still very satisfied regarding these figures. Our administrative expenses and service fees are within the expected, with some growth because of collective labor agreements and wage agreements, and this voluntary dismissal programs, which is being completed now. There was some renewal of staff, which is now closed.
Our staff is renewed by now. So we feel comfortable regarding the provision of services and the maintenance of our administrative expenses. Our service fees has grown because of this performance in acquiring and banking services, expressive areas, and let's hope for the best in the next few weeks and months. We have increase in the consumption through the anticipation of purchase because people were afraid that they wouldn't be able to buy water, fuel, and other items. So people started collecting items because of these events, which will also reflect in our results. Regarding now our funding, I will ask my colleague to talk about our bank's operation. But again, it's 100% with what we expected. Gonzaga, please.
Well, our funding portfolio, just to give you an idea, in this first ten business days of this month, there was an increase of BRL 4 billion both cash deposit time deposit to demand deposits, and time deposits for the private sectors is also growing in the beginning of the month of May, and also there was a growth in April. I'm talking about the floods in the states, but anyhow, there was a performance of 12.1% regarding the first quarter of 2023. And up until now, we have the fifth largest clients of the bank represent or account for 15% of our portfolio, which is a diversified funding. So, this is an extremely diversified funding, and this is the scenario for time deposits. We had LC, LCI, and LCA bonds with PPRs of the municipalities have shown a good performance.
Demand deposit is stagnant; it's due to the small or residual amounts in current accounts, a portfolio with 53 billion BRL in time deposits, 14 billion BRL. We have changed the direction of this portfolio, which was previously corrected by Selic, reaching 113% per year, but now we have prefixed this rate. This changed the funding; it changes costs, and at the same time, we have a prefixed funding for... So that this funding is allocated and balances our assets and liabilities, and also helping our loans for the prefixed assets, which provides the bank with a more comfortable situation, even if the Selic interest rate grows. So this is what we have for funding. LCI is a little stagnated, and time deposits grow a little, as well as savings accounts. I think that's it.
Yeah. Next, please. This is our Basel ratio, which is pretty comfortable, too. No problems regarding this. We know these figures, historical figures of this bank, always balanced. Next, please. Thank you very much. Now, Nathan, back to you.
Thank you, President and Mr. Gonzaga. Now, let's open the floor for our Q&A session. We have the first question coming from Flávio, from Bank of America. Flávio, please, you can go ahead.
Hello, everyone. Can you hear me?
Yes, yes, loud and clear.
It's good to see you all and well, I hope your family and friends are doing well. I'm sure the state will go out of this situation even stronger than before. I have a question regarding what you said regarding payroll changes. I would like to understand how these changes impacted the results of the quarter. I understand there was an impact regarding provision, especially, so I'd like to understand if you can give us some more details on this impact. Talking about the quality of assets, quality of portfolio, the level of a company's default has increased a lot. What happened here? What can we expect from now on? This led to a significant decrease in coverage. You had a previously comfortable level. Are you going to recover that? These are my questions. Thank you very much.
I will first answer, and then Ivanor can answer that, too. Well, regarding this portfolio, let me share some things with you. Our INSS payroll loan is very good, 1.20, 1.30, most 1.50, so this is very, very flat. Our municipal loan, the payroll for municipal civil servants has a very low default rate, also very flat. And the state loan, at some points, there were some issues regarding the state, the state, loan.
We extended the amount 4% of the payroll, sometimes a little more, 5% of the payroll in the past, during the pandemic, I mean. So this portfolio were being loaded, and with this emergence of the law, the law regarding over debt, there was a client base who questioned us about this over debt issue. So we had to realign these clients regarding some of the fees and rates, placing them into a level that would be healthy regarding the payroll, loan. This is why we changed it, and we have solved this equation already.
The state took this measure, which we already were asking for. So they set 84 months for a payroll loan. We have differentiated rates for those who prefer 72 months. The interest rates is a little lower. This is very important. And also, the payroll loan is of 35%. Before, there was no predefined rule. And also, we have the same rates as we use for the INSS. This is 35% of the net income. For example, if it's BRL 1,000, it's 35 over the 700, which is the net income. So there was a reduction of the credit base, which is available for this loan, for this payroll loan. Of course, there won't be growing.
It will take some time to generate margin, but on the other hand, this will be a pretty healthy portfolio, which is already adjusted. On the other hand, in the months of January and February, and also December, in Rio Grande do Sul, it's natural to realize, to see an increase in default rates, especially concerning small and medium-sized companies. This is a normal and expected situation in this period. So we need to understand this default rate. We really work hard, but we always expect a small level of default rate. So this is a sort of residual default rate. So these two portfolio, the small medium-sized companies portfolio and the state civil servants payroll loan, are very well adjusted.
So the first quarter of the last year, the BRL 285 million PDP, and this year, it's over BRL 400 million. But our portfolio is pretty conservative and healthy. We are very conservative regarding the voluntary dismissal program, or PDV, to maintain a healthy portfolio ahead, considering the levels of default, maintaining PDD reserves. In the portfolio, regarding state payroll loan from now on, there will be a default of less than 1%, a level that we had in the past.
Hello, good afternoon, everyone. Let me just complement and tell you that this change since April, that the state has implemented, it changed the system for the payroll loan, automating it through our web service, and this gives us safety, the security that the payroll loans are secured till the end of the agreement.
The decrease in the margin, which was 45%, went down to 35% now, which allows us, or allows civil servants to have more available resources, and on the other hand, has an impact on the reduction of default in other lines of credit in the bank. The state payroll loan is very similar now to the INSS system, which provides us with a lot of safety in terms of lowering our indicators, the levels of default, especially in terms of provision. So I can tell you that we are pretty confident. We know that we are not going to grow for some time because of the expected time of this portfolio and the margin of the loan now.
But this safety will allow us to improve in terms of net income or net interest income through rethink, for those who have some available margin, especially reducing PDD of the loan as a whole.
Just to complement, BRL 19.3 billion, BRL 6 billion are from the state. I mean, BRL 5.9 billion. For the public sector, I mean, the executive, legislative, and judiciary. So six out of 19.
Just. Well, just let me say that given that this payroll will have a lower growth, how can you reconcile with the guidance that you gave us in the beginning of the year? Are you going to compensate this in another way? How do you see the guidance considering this change, which was not programmed when you published the guidance?
Well, yes, it was already estimated in our accounts. We already knew that was going to happen. We knew that the state would publish a law, an order to change this. So our guidance has already considered that. We are accelerating INSS loans for the prospection because it's very safe. We also have some space to grow in the municipal loans, and our numbers and figures are focused on the growth of companies, corporate clients. As we understand, it can be increased regarding the proportionality of credit and to be part of our portfolio as a whole.
Thank you so much.
Thank you, Flávio, for your question. Now, second question coming from Yuri Fernandes from JP Morgan.
Hello, Nathan. Or, I would like to say that I hope that you are well and become stronger after this event. Well, the bank has been doing a lot of work, BRL 7 billion in working capital, several lines, and two months for credit cards. Are you thinking about exemption of fees? You have payroll for four months. You are not charging some fees. So you have several measures which are needed in this time of need, I mean. But do you have any studies so far to understand how this will affect your short-term results, your guidance? Because when you there is, you continue paying employees, you continue paying the expenses. So help me understand what these measures will or how they will impact the bank.
Okay, I will start answering this. Well, in terms of the fee, it can be pro postponed. We will have to replace our base. There were some clients, many clients, whose stores have been affected. And infrastructure that were affected, and especially in the devastated areas. So the impact will be BRL 2.5 million regarding the fees. In our credit loans portfolio, as I said before, the state payroll loan was postponed for four months, which will be taken to the end of the agreement for 40 months. We'll add four months. And later... They will have 48 months to pay the agreement. The same applies to credit cards, three months for credit card and the refinance of the debt. The same applies to credit cards, same procedure, three months or installments of 12. 12 installments. Rural loans, three months, too. But we also have some credit lines for individuals.
We are trying to give our clients more time and to capitalize on interest rate and our portfolios in this period. If we had an individual who has a debt with the bank, this will be paid later on, and the portfolio will have to wait until the clients start paying. In terms of the rural loan, this will be until August, where we'll postpone, probably, till August the 15th. This is according to the rules of the Central Bank, and from now on, we will follow the Central Bank rules. In terms of rural loans, it's safe. In terms of postponement, losses will not be major in this field. They will lose money, but not so much. They already have 80% of their crops. Most of the rice is already done in terms of crop and soy too.
The loan portfolio is BRL 2.6 billion. Most of the soy areas are planted in high areas, so they are not affected. Maybe some grains will be affected. Maybe the soy will not have the same quality, the grain may be affected. So we can lose 5% or 10% out of this 80%, which were already harvested. But we will have many, like PRONAF, PRONAMP, we have many credit lines for these producers, provided they have insurance too. Small producers have insurance, and they will have the safety net, let's say, in general.
Just to let you know, in terms of fees, 1.5-2, and the other fees for credit emission.
Well, regarding our fees, the other fees, they, they are residual fees that we can charge. We have already informed... I mean, if a client open a current account and has six months to start paying the fee, you know, we'll, we will, provide him with a little more time. So most of the fees are for new clients. They have some, a time of grace period to start the, paying their, their banking fees. So this are- this is kind of residual.
Regarding NII, you are not going to collect interest, but maybe you will collect interest by the end of the, agreement regarding the income of the bank. You're going to reconcile the income, and we'll continue, provisioning this?
Yes, Dr. Irany can talk about that. This is on the debt balance. This client will not take a loan in this period because there's no margin. So in cash flow, there won't be no effect. The bank has BRL 30 billion in cash, so this operation will make no difference regarding the bank's cash flow. So we have a safe portfolio. Now, let's talk about the risk of the bank.
Good afternoon, everyone. There is one issue that is very important to highlight. We are not actively collecting now because our concern is to have to understand the readjustment of our clients now in terms of the fees they have to pay. So this time we are giving them; we'll provide them with the right time, so they can have some relief. So we'll reduce collecting these fees for the moment, for the time being, but it should not have an impact on our revenues. Because our concession of timelines and schedules allows us to do that, and we will provide them with this relief time for the time being.
Thank you very much. Second question on capital. The bank is very well capitalized, and recently, by the end of April, I believe, you changed or you approved the policy for this year in 40%, if I'm not mistaken. Well, any changes?
No, no. No changes in sight.
What happened in financial adjustments? Y ou had slighter changes. What helped to improve the capital?
Well, this has to do with capital requirement. We had some improvement or a reduction of capital requirement regarding some important issues. I do not have the details here with me, but I can forward them to you later.
No problem. I can talk to Nathan later. Thank you so much. And again, I wish you all the best for... I wish all the best to Rio Grande do Sul and you all.
We will check the prudential adjustments every semester.
Let's maintain this microphone, which is working a little better. The second one is having some issues. Now, Ricardo Buchpiguel from BTG Pactual. Ricardo, can you hear us?
Hello, Nathan. Good afternoon. I hope you and your families are well and safe. I have two questions here on two topics. First, well, we have seen that this week, the Central Bank relaxed the provision fees and compulsory needs for banks which are exposed, such as Banrisul.
So do you plan to adhere to these changes, and do you have any estimates to improve NII regarding these adjustments? The second topic is that in the presentation, you said that 75% of the individuals is collateralized. I understand that most of them is in payroll loans, which will not be affected by the floodings due to guarantees. But regarding the rest of the portfolio, which is the percentage that was collateralized, if it makes sense to count on that? For a company's portfolio, I believe there are some guarantees that may be damaged. In the case of rural loans, they have some insurance, insurances that may not be covered by this type of climatic events, such as floods. So let me help understand more about the collateralization of the loan.
Regarding compulsory, well, this comes from the savings. Right now, we have collected from the Central Bank around BRL 2.1 billion, with the profitability of the savings resources, and this resource will be released to the cash flow for the period of one year. After this 20% of the compulsory rate of the savings will go from five to five from next year on. This will go into the bank's cash flow, and based on Selic interest rate. If we maintain this level of Selic interest rate, we'll have 4% of difference, and this will be BRL 80 million of growth revenue. Now, regarding the second PDD, we've been talking about the risk analysts and risk manager.
We will analyze the new rules, provisions given by the Central Bank, and we'll calibrate the PDD according to the risk of operation. We will manage according to what we know from the Central Bank. Regarding the bank's portfolio, we have 78.8% in individuals and 22% in companies. So individuals has 42, 52 billion, I mean, 53 billion of this portfolio. 42.4 is for individuals, and the commercial portfolio is 25.9. 19.3 is payroll loan, and the other individual loans will give you this difference of 6 billion and something. And rural loans has 10.9 billion and 7 billion of costs. Soy is 2.6, and cattle around that. Rice is BRL 400 million, and soy, the same. So for the payroll, we have 19.3.
Most of them are civil servants, state and municipal civil servants, and also INSS, which are protected, are retirees and civil servants, so this portfolio is protected. Eighty percent of this individual payroll loan is the biggest mass of clients in terms of individuals for commercial credits is employed. As I said, INSS, retirees, and civil servants, and also other individuals who are lawyers or dentists, and also we have the rural loans we all know about. In terms of corporate, we have the small and medium-sized companies, BRL 2.6 million, medium-sized, BRL 3.2 million, and big companies, BRL 4.5 billion. Food, beverage, and education, health and education, with very, very low default rate in healthcare connected with FUNAFIR, which is a SUS credit, a SUS payroll loan.
So this payroll loan has, it's, this money is safe. It will be received from the Ministry of Health, from the federal government. In terms of real estate, and we have BRL 900 million in civil construction, too. And, foods, BRL 700 million, and real estate, BRL 5.3 billion in individuals, most of them in public servants. So our credit is very healthy. We'll not have, maybe we'll have some problems with small retailers, but we have remedies for that, like the Single Account, to provide working capital to these companies. We have some lines, like the guarantee fund with the new rules that are coming. We can deal with that and adjust this with companies that face some problems. So the individuals' portfolio is very healthy, and for the corporate ones, we have remedies to deal with that.
I just want to highlight one point: We see no problem regarding expected losses. What we see is the need to provide short-term relief for these people who are in debt, because they will need to reconstruct. Individuals will need to buy furniture to rebuild their houses, but we are not giving discount. We are giving a relief time so the people can readjust their lives, can get their lives back to normal. So what we have in payroll loans is guaranteed, our revenue is guaranteed due to the way of how the operation works. We have partnerships with these public entities, and now we need to give this relief to these clients, and the Central Bank rule will help us, will help us in establishing this provision without increasing our risk.
I would like to compliment that regarding small and medium-sized companies, we have launched a product that has a different characteristic, focused on working capital to help companies to reorganize in terms of their cash flow, trying to look for receivables and also, payable accounts. With this, we will increase our level of banking fees, our fees, our relationships with companies. We will provide them with the opportunities so they can reorganize in this time, in this, this time of hardship, by connecting receivables to the operation.
So there will be a liquidity assurance and guarantee, providing them with the conditions and the deadlines and the necessary flow to return. Interest will be paid after the grace period, and the main part will be in the flow availability of the company or by the end of the agreement. We believe with that, with this product, that will help us both to provide new resources and also to reorganize the cash flow and operations, which are already with us.
Okay, Ricardo.
Follow up [Foreign language] ? Just a follow-up. Everything is clear, but you maybe, I understand that there will be a need for relief, but the main risk will be in small, medium-sized companies, around BRL 7 billion. Could you talk about the BRL 7 billion, considering the most affected regions or the most affected industries, and which will be the exposure for the bank or the areas of risk for the bank?
Small and medium-sized companies. Well, we have a portfolio for small and medium-sized companies of BRL 5.5 billion. The basin of the Guaíba River covers the regions of the Serra, the mountain regions, the regions around Porto Alegre, São Leopoldo, Novo Hamburgo, the metropolitan area. They are very strong regions, so we do not know exactly how this will be. We don't have the full picture yet, but we have the products that will help adjust the lives of these clients. Probably, there will be some lines coming from BNDES, lines. There are different investment lines for remodeling, reconstruction.
FINEP will play a strong role in this world of purchase of machinery and also work with working capital and refinance public job sites. But we don't have a clear picture yet. This is a big, major blow to the economy. It was a tragedy, but we do have the right tools to collaborate and adjust, and help these companies to adjust. And you have to study case by case. Each company will have their own problems in their own segments, and you have to, together, find the right solution.
Just to reinforce what Gonzaga said, we have looked at the measures being mentioned by the federal government, and they will help this part. They have lines guaranteed by the federal government, which will allow for new agreements, which will also help improve our current situation. We believe that the federal government will provide us with better solutions than what we had, have, what we had up until now.
Another comment: by the end of any war, there is a time for reconstruction. There will be a major drop in the GDP in our state. It will be a larger GDP drop, more than what we experienced after the pandemic, after 2015 too. But in June, in July, and from June and from July on, there will be a lot of money from the federal government with the reconstruction of infrastructure, of bridges, of highways, then the GDP will increase. There will be a lot of investment coming towards the state. More employment will be generated.
After this tragedy, there will be a time for reconstruction, and the federal government is poised to provide a major effort, major relief to reconstruct the state. This will generate a rebirth, let's say, for the GDP of the state. We expect that the GDP for the next year is around 15%. So there will be money for working capital, for fostering investments, and also to rebuild the infrastructure. In terms of Wi-Fi, telecommunications, and also bridges, highways, and civil constructions, all sorts of reconstructions. There will be some highlights, some industries that will grow dramatically. And there, this is the law of development. If we have one investing, we'll generate more, four other in development.
Very clear. Thank you. Thank you so much.
We have some other questions. Hello, Eduardo. Eduardo from Genial Investimentos.
Hello, our solidarity towards the people of Rio Grande do Sul. Two questions: regarding the guidance, you... I know it's too early to measure the impacts of this tragedy, and, there, there are questions regarding the situation, but given the guidance only has four lines, I would like to ask you, concerning the information we've had so far and the information you shared with us in this call, regarding the guidance, as far as I understand, the reconstruction will demand capital, so the guidance regarding credits and loans will be around on the top of this guidance, with a net, with financial margin or net interest income, maybe in the top range of the guidance, expenses regarding provision will probably come to the top tier of the, the guidance as well as administrative expenses. Can we expect this scenario?
Well, as you all know, every semester, the bank reviews the guidance. This is done every year. In the past few years, the bank has done that. Let's hope, let's hope and the floods stop in Rio Grande do Sul by the end of May, and life gets back to what is normal, what can be normal. Let's understand the scenario and the lines of credits and loans from reconstruction and the appetite of company owners for the reconstruction. And if we need to readjust the guidance, we will do that. No problem. But I wouldn't risk to say the guidance is within that or outside that because we will review this concept. Maybe credits and loans, maybe will be on the top, top tier, but this is a fully controllable guidance, and then PDD will be evaluating this.
So this, in these items, we expect to maintain a close look, and if you need, we will readjust them. But we are still waiting for the to understand the current scenario. We were taken by surprise, and Porto Alegre is fully, I mean, in the central area of this Porto Alegre, it is flooded. There are five meters of flooding in the central part of the Porto Alegre, so we still need for the next chapters of the situation, let's say, to better understand the market and adjust the guidance for the second semester.
Thank you so much. Yeah, yeah, I fully understand your position. My second question has to do the equalization of the federal government regarding rural loan. How will this equalization work? Will postpone the payment? How will this mechanism work, this mechanism of equalization?
Well, this, the equalization that we had in the past, to the end of the semester. What will be postponed will be equalized to the end of this postponement period. But the federal government, from July 1 on, will have some changes for 2024 and 2025 for the new agricultural year. We still need to understand how the government will manage this in terms of resources for the industry, the level of interest rate. We have many producers who do not want to take to take loans at 12%, because they believe they will obtain a loan with a lower interest rate in the next few weeks.
So they are protecting, their grains, they are keeping their grains in the silo, they are not taking loans, they are keeping their stocks, to wait for the next few months, to check if the interest rate will be reduced, and also if conditions will change. If the interest rate will increase, everyone would run and get 12%, but everyone expects the interest rates to go down, so everyone is expectant. Everyone is waiting for this, interest rate to be reduced and then decide to take loans.
Thank you. Thank you so much.
Well, we are, approaching the end of, the session, but let's open the floor for Mateus from Itaú BBA.
Hi, hello. First of all, I'd like to say that we are sorry for what happened, Rio Grande do Sul, and we hope you all stay well and safe. Well, my question has to do with Yuri's question. I'd like to explore a little more the NII of Banrisul. We had repricing in the past few semesters, the level of portfolio has some pressure. This net interest income increases, but gradually.
And now looking forward, considering where you hope to grow in terms of renegotiations- Yes. -and re-agreements for real estate, for the reconstruction efforts, how can you see- how do you expect the margin of Banrisul, considering this changing in the mix for the near future? Do you expect more pressure to the mix? I know it's hard to tell right now, and that you can adjust the guidance and the mix, but can you sustain a solid growth of NII? It would be nice to understand these dynamics, if possible.
Well, my dear, in terms of NII, the Selic was expected to drop 0.5%, 0.5%, but it was 0.25%, so you can understand that NII has some pre-fixed assets. Most of them are pre-fixed assets. So the NII will not give us... Will not provide us with what we expected. We wanted a Selic of 9% by the end of the year. So obviously, if the Selic's interest rate is 9.5, today is 10.5. So if it's 9.5, the NII will not result or will not be as we expected. But the margin is, well, we have better NII, better spread now, in spite of the market being compressed. Major companies, they started with a rate or a reduced spread.
But even so, we work to improve the spread little by little. We launched the loan line for civil servants, which is called a fidelity line or loyalty line, which is pretty careful, from BRL 2,000 to BRL 100,000, with a reasonable margin, and with a healthy individual's portfolio, this margin will be helped. This is what we have around NII. If Selic goes down more, the margin will increase, NII will increase, but if not, it will be increased more gradually.
Thank you very much.
Thank you, Mateus. I would like to open the floor for the final question by JP Morgan, Natalia. Hello, Natalia. How are you?
Hello. Can you hear me?
Yes, yes. Loud and clear.
Well, first of all, I'm very happy, I'm glad to know that you are all doing well, as everybody has already said. I hope the state leaves the situation even stronger, and that things improve in an accelerated fashion. Let's hope the waters go down quickly and reconstruction can begin. I have two questions. First, around fixed income, regarding your international bond. This bond, it's Basel III. According to the Basel rules, it may have total loss of the main income three ways... If your CET1 goes below 4.5, second, Point of Non-Viability, and also public injection of funds. So you are very well capitalized.
You won't need capitalization, but a recurrent question would be: in case you need a capitalization from the state or from the federal government, would it lead to the loss of the bond, to the losses in the bond?
No, it was not in our accounts. It's not the case. The bank is very well capitalized, high Basel ratio. I don't know if the decision is made yet. If we're going to renew the operation in January 2026, the operation was remodeled with a new hedge, with a very good price, pure Selic, pure CDI, with a reduction of over BRL 12 million expenses per month.
We'll wait by the end of this year, in 2025, we'll decide if we're going to the market for a new operation or not, because we have enough Basel to maintain this operation. Or if you have a new operation in the national market in a subordinated bond subordinated national bond. So we don't see the need to ask for capital from the state or from the federal government. We have BRL 30 billion in cash. We have loyal clients for over 30 years, exceptional image in the state and in Brazil. We have an abundant market for funding, also for rural loans. The main clients in this area are with us, so it's very healthy.
If you look at the Banrisul liquidity and the treasury, and the treasury bonds of Banrisul, Santander, Banrisul, Bradesco, and Itaú, Banrisul is in the center, 36 of treasury. Itaú also has 36. So we have the same level of capitalization if compared to these big banks, which are our competing players here in Rio Grande do Sul.
Well, nothing that has happened recently will lead us to a change in risk. We are far from any trigger that can change the bond situation. It's still a healthy and comfortable situation.
Thank you.
Maybe the national market is very favorable for bonds, and maybe we will count on you to provide us with information on that.
Natalia, another question?
Yes, that is a follow-up regarding this one. Just to make it clear, I agree with what you said. I don't see any need of the bank to have capitalization. I just wanted to understand the effect of the rule per se, because the rule says that the public money injection leads to the loss of this capital. But as I see it, let's suppose that... It's not what's on my mind, and not in the minds of anybody, I guess. But in a situation in which you need capital, I believe you could have from the state, or it's mainly from the state, because the state is your main shareholder. Maybe this will lead to the triggering of this bond, but I know you don't need capital right now.
Well, I wouldn't—I would never sign such a contract, such an agreement. So no, that's not possible. Yeah, this is the conditions of the agreements of our hedges. This is what she's talking about. I wouldn't sign an agreement if there was a clause like that.
Thank you. So, about my second issue, just reviewing everything that you mentioned regarding postponement of loans. So summarizing everything, in terms of NII, probably in terms of competence, regime, there will be no impact. In terms of provision, you may or may not follow the new rules set by the Central Bank, but not necessarily the grace period of this loan will lead to increased risk. Your NPL will not be impacted, so the effect will be on the cash flow of the bank. But as you have a high cash flow and you have compulsory loans, too, this also will help you to save you from problems in the short term, as I see it. Yes.
Well, the postponement of loans in four months, this is very good for the bank, in terms of maintaining the operation and capitalizing on this operation, and you have a paying client. If a client didn't have this postponement, could incur in a default. So postponing the loan is good for the bank. We have cash flow that goes out and it goes in every day. We will continue providing our customers with loans. If they couldn't pay this operation, there will be a provision for that. And these new lines are options for the clients. But the client can say, "Well, I want to pay my installment normally, I want to adhere to this new line." These new lines, these new operations are for customers who need that.
So we will continue to loan money at the rate that we have. But the idea is to provide the client with a new possibility of operation if there is margin. So the postponement in this situation is a good sign, and in rural loan, as said before, the producers are professionals. They will pay their agreements, they will take loans in the beginning of the crop, they will make a new operation, pay the loans, sell their production, and will continue in the same cycle. Life or business as usual, we will increase funding, as is natural. From March on, funding in Banrisul and in other banks, we have funding coming from crops. The second quarter of each years, we have a very good moment for funding.
And then, a reinforcement of this funding for the fourth quarter, which has to do with more volatile incomes and also bonus payment for civil servants, and also some lines that increase year by year, some products that increase year by year.
Okay, thank you very much.
Thank you, thank you, Natalia. Well, we have several other questions we have received in our chat, in our Q&A. This question will be answered along with our investor relations team. I would like to thank you all for attending this video conference. Our CEO will have his closing remarks.
Thank you very much for your participation. Thank you for the solidarity everyone is showing. I'd like to tell you that Banrisul is fully operational. We are safe in our operations. We will continue helping Rio Grande do Sul.
I am, I am absolutely sure about that. We will continue helping Banrisul to reconstruct the state according to the rules, so the solidity of the bank is maintained. We have no doubts about that. We will advance a lot. I am absolutely sure that our results will advance. And let me tell you that our bank is 100% operational, and will continue so, being managed technically without the interference of what happened in the state in terms of trying to flexibilize things. This is not what we do. We are controlled by the state, yes, but we are apart from this, this reconstruction from the public standpoint. We will help in the reconstruction efforts as a bank, with the quality and the prestige the bank holds among the community, advancing more and more.
Thank you very much for your solidarity, and please keep on looking to Rio Grande do Sul. If God allows us, we will leave this situation better than before. Thank you very much, and take care.