Good morning, ladies and gentlemen. Welcome to Banrisul video conference to discuss results relative to the first quarter of 2023. This video conference is being recorded and the replay may be accessed in the company's website at ri.banrisul.com.br/en. The presentation will also be available for download at this platform chat. Initially, we will have a presentation with the highlights and financial information for the quarter, and after that, we'll have a Q&A session with interaction between analysts and investors with Banrisul management. In case you want to submit questions, use the Q&A button. In case you'd like to ask a question in audio, please select the button React and click Raise Your Hand. If your question has been answered, you can leave the queue by clicking on Drop Hand.
We have here Mr. Claudio Coutinho, CEO of the company, Mr. Irany Sant’Anna, Deputy CEO and Risk Officer, Mr. Marcos Staffen, CFO and IRO, and Mr. Osvaldo Lobo, Credit Officer. I would like to turn the floor over to Mr. Coutinho, CEO, Banrisul, who will start the presentation. Please, Mr. Coutinho, you may carry on.
Thank you very much. Well, good morning, everyone. I would like to thank your participation at this presentation of our results for the first quarter of 2023 of Banrisul. Well, first of all, let's talk about our highlights. Let me tell you that Banrisul has an extensive agenda regarding environment, social governance, ESG. Let me talk about a change in our statutes to contemplate diversity in our board, the board of the company. The top management, we plan to have at least 30% of senior management role for women, black or brown people, or LGBTQIA+ people, or people with disabilities.
This is one to do starting now. We'll reach 30% at least by the year 2030. Sorry, 20, yeah, 2030. Regarding our impact businesses, we thought about innovation public notice with a line of BRL 50 million for companies that bring projects supported by Banrisul. They will have credit for that. We made a change which will be in force to the end of the year. We'll open Banricompras. It will be accepted at vending machines across the country. It will be a nationwide card, not only at Vero machines, but it can be used in other machines, all vending machines. By the end of this year, this will be available. Let me talk about the renewal of staff.
By looking here since March 2020 to March 2023, we had 1,433 collaborators, employees who left us, and we are now renewing our staff. In the 1st quarter, we had more than 218 IT professionals in training, and we'll be replenishing this lack, this gap after they are tested. Those who opted for the agreement, the dismissal agreement, will leave the company this year. Let me talk about the loan portfolio that we have. It continues to grow at robust changes. In 12 months, quarter-on-quarter, it grew 18.2%. Let me also remind you that this portfolio is collateralized, and it has robust guarantees. 80% of our portfolio has collaterals for individuals. It is like payroll loans.
Our portfolio is very, very safe in terms of credit risk. Looking at the growth vectors, let me talk about the rural credit, rural loans portfolio with 69%, reaching BRL 8.4 billion. This is a portfolio that is growing in an accelerated and healthy fashion, as you can see here in terms of risk and default. We want to talk about the increase of working capital and debt accounts. They have a small base. This total of the portfolio in this area is not so big, but these are very robust growth. 21% in credit, in working capital and debt accounts in 18%. In rural and real estate, we have growth year on year. In rural, we grew 69%. In real estate, we grew 14.7%.
This is according to the several products the bank offers. In terms of rural loans, we have BRL 8.4 billion in March 2023, with a 69% growth. In the Safra Plan, in the crop plan, we had BRL 7 billion in credit, 88% have been already granted. The quality of credit is exceptional. In the 90 days period, we reach 0.50% of our portfolio for 2023. This is an excellent portfolio, and this portfolio is predominantly has to do with costs and financing, which are renewed every year.
In terms of our default, in terms of our asset quality, these slides clearly shows the excellent quality of our portfolio and how important it is to maintain the principles in terms of diversification and characterization and the discipline of our bank in terms of continuing to operate in a diversified way with its clients. We can see that our 90 days default ratio is very low, 1.7%, very low. We also have a portfolio with AA and C ratings. I mean, 93% of this portfolio are within this interval of ratings, which is very good. In terms of portfolio concentration, I would say that the 50 largest debtors only have or only account for 6.5%.
This shows how diversified and guaranteed low risk portfolio, it is also with a low default rate. In terms of loan loss provisions, we continue to be conservative in terms of provisions. If you exclude the recovered credit low risk. The portfolio growth in low risk aligns with solid guarantees, mitigates potential risks of credit deterioration. Also, we can see the numbers and percentage here. We continue with credit costing 2% and pro-provisioning 5%. Once again, this is a new look showing our portfolio has solid guarantees, and this gives us safety, so we can expand the credit portfolio, given that we are safe in terms of risk. Now let me talk about our highlights in this quarter. Our net income in the first quarter of 2023 reached BRL 213 million.
In 12 months, it grew around 30%. Regarding the previous quarter, we had a drop of 15%. It's important to notice here that we cannot disconsider the season. We have to consider the 30% of growth because the last quarter of the year is very significant. The economy is heated, the companies are producing to sell, to sell over Christmas, the use of our equipment and means of payment like Vero increase. It's intense during the end of the year and from January, February and March, and there is this vacation period. Most people are on vacation during the months of January or February. The day is longer here, if compared to the rest of the country, the temperature is high.
People love going to the beach or they travel, the economical activity decreases as a whole. We try to make some activities to move to the beach areas to have a presence in these beach areas to counter that. Anyway, the level of business decreases. I am making this statement because we must consider the season, the seasonality, which is very important and has a special impact here in the south of Brazil. It makes us consider that the prognosis for the rest of the year is good. Our loan portfolio reached BRL 50 billion with 18% growth in 12 months. In the payroll loans area, it didn't grow so much compared to the end of last year.
We had seasonality and also the INSS, which changed its rate and led to a paralysis in the system. It still didn't stop working, even with a 1.7% rate in its business. There was a certain turbulence in the market, and we didn't produce so much over this period in which the rate is 1.7%. We expect a growth around 6.5% in 12 months. Rural loans grew 69% with a BRL 8.5 billion portfolio. In 2019, this was BRL 2 billion. This portfolio was BRL 2 billion. We multiplied this number by four. As we have said in other calls, our portfolio has been recovering, and we in credit net interest income.
Our prognosis is that it continues recovering out of here, and we maintain in real levels our fees and service revenues in a field that has a lot of competition with institutions like digital banks that do not charge fees. Even so, we managed to keep these levels in terms of fees with good growth of almost 6% in 12 months. Very good. Digger. In terms of default ratio, very, very low percentage, 1.73%. This encourages us to keep on with this behavior, with this attitude, I mean, of being conservative, granting credit with guarantee and diversified credit. The cost of risk is around 2%.
In terms of profitability of our bank, in 12 months, as mentioned before, net income grew 29.8% with the result of BRL 213 million in the first quarter. Adjusted ROAE is 9.0%. We need to consider seasonality. We expect to have good results for the year. The main growth is the financial margin, which accounts for the growth in our profit. We hope this financial margin recovers more and more. As we have a drop of Selic rate, the Selic rate, we don't know when, but when the Selic rate drops, this will certainly benefit our financial margins, our income. Here, we are looking at net interest income. Specifically, it grew 11% in 12 months. It's for legal people, legal for companies and also rural credits.
Also in treasury, the interest rate that is higher, and it makes you have a value, a figure that is important and relevant. In terms of funding, it shows one of the main points of strength of Banrisul. This is extremely diversified with a very low cost. The average cost of funding, the average funding cost, only funding cost for CDBs, our average cost is 85.8%. This is very important. We have a funding that is very cheap, and at the same time, it is diversified. You can see here in terms of the concentration. You can see the bar showing that the sum of the 100 largest large companies account for 6.3%. We have a large number of individuals, 65.3%.
This is one of the main points for Banrisul. Looking in a more general way, I would say that Banrisul has a funding structure that is cheap, diversified, and with a lot of individuals and small and medium companies investing. You have a portfolio that is diversified and guaranteed. This is our structure, and this is our basis to have a pulverized, diversified and cheap funding and low risk. This is a slide showing our expenses and banking fees. From the adjusted administrative expenses, we grew 12%. We had the collective wage agreement of 8% in wage and 10% in benefits. The difference of this 12% has to do with the IT professionals' admittance and who entered the company in the first quarter.
Until this first quarter, there was no professionals who left the company due to agreement, dismissal agreement. Probably in the future, in the near future, we'll have a result based on these professionals who make a lot of money in terms of wage. They are in the superior layer of the payment pyramid. Those who are joining the company now, who they have a lower income if compared to people who have a larger experience. The IT professionals have a slightly higher wage as they enter the company. In this quarter, we have this 12% figure, which is a little higher than our collective wage agreement. Throughout the year, this figure is expected to change as more professionals decide to leave the company.
Another item that 11% is this, the promoter of sales that generates payroll loans. This number, the higher it is, the better because it's a variable cost, it's not a fixed cost, and the higher it grows, more business are being made. We had some expenses with IT in terms of cards and consulting, and it reached 7.2%, which is close to the inflation for the past 12 months. We have the revenue from business services. We maintain this around inflation in spite of all the competition there is today with digital banks and fintechs that generally do not charge any fees. Finally, this shows that we have a lot of room and safety in terms of infrastructure to keep on growing in terms of credit. We have our base ratio around 17%.
Even if you consider the 12-month period, it's the same. 17, almost the same, coming from 17.61%, going to 17.13%. This shows that we have a lot of safety and capital, we can continue growing in our credit portfolio. This is our very well done capital provision and plan to move forward. I'd like to thank you very much for your participation in this event once again. Now let's move on to the Q&A, including the other members of the board. Thank you very much.
Thank you. Initial, we will start the Q&A session for investors and analysts. If you want to submit a written question, please check the button Q&A. If you want to make a question in audio, please raise your hand in the button. If your question is answered, you can leave the queue by clicking once again on the same button. Let's start our Q&A session now with the participation of Mr. Natan Meneguzzi, Superintendent of Investor Relations. Once again, if you want to submit questions, please use the Q&A button. If you want to make a question in audio, please use the button Raise Hand. I'd like to invite Mr. Natan Meneguzzi to run the Q&A session.
Hello, good morning, everyone. Thank you so much for your participation in our video conference to talk about the results of the first quarter of 2023. We are ready for the Q&A session. I would like to start opening the floor to Eric Ito from Bradesco. Eric, please. Please go ahead and make your question.
Good morning, everyone. Thank you, Natan. Thank you all for this opportunity. I have some questions. First of all, I'd like to understand a little what you expect to evolve, the bank evolves. The financial margin, 11% is a little below because it's from 19 to 23. How do you expect this need structure, this need relationship throughout the year? Looking at your ROA, in terms of guidance, we expect 11%-15% in this quarter, and we ended up seeing our ROA of 9%. I'd like to understand that if you maybe will be more in the bottom range in the ROA guidance and how do you expect the bank to evolve throughout the year? Thank you. Thank you very much.
Thank you, Eric, for your question. This is a fundamental topic. The first part of your question, I believe it explains the evolution of the second part of your question, right?
Well, as expected, the recovery of the margin will happen throughout the year. If we separate, I mean, if we Maybe you could discuss the credit margin because it expands to 3.8% against the previous, if compared to the previous quarter. Given that the final quarter is stronger, is more intense, and considering the whole seasonality of the first quarter. As Coutinho mentioned before, we need to consider the INSS market issue that caused some trouble during the previous period. This could put pressure on the credit financial margin. There are some considerations we can make. Let me give you an example. If you triple this growth throughout the year, and if you keep the treasury margin and the recovery margin, credit recovery margin stable.
Let me tell you that the constant maintenance of these two were the lowest level of the past few quarters. Only then we would have an expansion, only considering that we would have an expansion of 15% in the financial margin around the year. Need to consider that maybe 20, I mean, 19%-23% wouldn't be so out of reach. Then we had some premium in the financial letters of the treasury, not dramatic, but it compresses the margin. In a treasury portfolio, which in our case is 100% in public deeds and public bonds are close to that. When we think about the future, I believe the repricing process will go on.
Moving to 58% of the portfolio in this quarter, there is a space, a good space for that. Another important thing to share with you that the payroll loan average will evolve 12 in terms of annual terms throughout 2022. In the first quarter, this inventory rate evolved 5 basis points. If you annualize that, you would have a robust growth regarding the previous year. I believe that the main driver, or the main drive, and now connecting to the second part of your question, the main driver result is the recovery of the margin. If we achieve the financial margin guidance, naturally we'll get to this margin of the guidance set by the guidance. I try to explain this and answer your question. I don't know if you have anything to add.
Nice, Eric. Thank you.
Thank you very much. Thank you, Marcos and Coutinho.
Thank you. Let's move on to another question coming from Flavio Yoshida from Bank of America. Flavio, can you hear us?
Yes. Thank you. Well, my question has to do with the credit portfolio growth. I would like to understand a little more from you, how is the dynamic of growth divided between product lines? We have default that is still low, but growth has been found in more conservative lines, I mean, in terms of risks. I would like to understand if this dynamic will go on or if you expect to see the portfolio grow in more risky lines throughout the year. Thank you.
Hi. Well, in our board, we decided to maintain the strategy of diversification of risks and maintenance of guarantees. This applies especially to real estate operations, payroll loans operations, and for general credit operations. We have used the credit products. I believe this will be maintained, this structure will be maintained. We have competitors who have different results in terms of default ratio, and we believe this strategy is the best strategy to be maintained or to be followed by the bank. I just wanted to add something to what you said, to what Osvaldo said. Claudio called your attention to the growth in agro, this agro lines, and along with this growth, we will have a much stronger capacity to aggregate other products, other services to this new basis of clients.
We have a possibility of growing the profitability in this area, and this has been shown in profitability per client, followed for some time now. Perfect. I think the strategy for these new clients is to have the best sales and upsells and bringing more and more clients, making them loyal clients, helping them grow and making them clients of the bank. Just to add something to translate this, considering or taking into account the guidance, the agro side, the agro business is very strong. There is a guidance closer to 30%. I think it's too early to think in any review, given that in the crop plan that you have ahead. Regarding the other lines, there's no doubt that the guidance was created in a different time.
In the next few months, I believe we can think or maybe review it, given that growth rates were in a different environment. But it's still early to think about reviewing it, especially in individuals. Individuals in reasonable performance, but with significant space for growth.
Thank you very much.
Thank you, Flavio. Now, we are getting some question regarding dividends, repurchase plans. Let me make this question. Can you talk a little bit about the policy for dividends or bonus for investors?
Well, as mentioned before, and as approved in our general assembly, the dividends policy was maintained. The distribution percentage is 50%, the same as, of, last year, 25% according to the legislation, and 25% additional. We have already set the dates for payment. This helps having a predictability. So this is the idea, dividends.
It's clear to us that we are trying to work and leave it more and more predictable for the market. Regarding repurchase, we have an open repurchase, a share repurchase program. We have public data. We have covered 2% of this program for the quarter.
Perfect, Marcos. Moving on to a question from Luis. He says, "Good morning. Initially, I'd like to congratulate management for its transparency regarding dividend payment dates. Does management see real possibilities for increasing ROE in the short and medium terms? Also, what was the savings verified in the recent staff renewal? What is the expected target for the total number of bank employees? Is there a forecast or an estimate to reduce the number of branches?" Several questions regarding costs and efficiency. Now I open the floor if you want to answer this.
Regarding the number of branches, we have a permanent program to streamline our network of bank branches, then we evaluate return, we evaluate the size of the market, where this branch is located. We've made some concentrations of branches, there is no expressive program ahead.
There's no specific program ahead, but there will be an occasional stream, streamline in some points, but there is no estimate to have a significant change in this program. Perfect. Several questions in one, but let me try and answer them. Now, talking about the goal for the total number of bank employees. No. No goal, no target for the total number of bank employees. We have the current number. We have some people who are expected to leave, some people who are expected to join the bank. This is not a target, this is not a goal, but yeah, we will believe we'll get to this number considering these people who leave and these people who enter.
We also have a vegetative leave due to retirement or other reasons why people decide to leave the company, there's no target, no goal for the total number of bank employees. Regarding an estimate on the economy verified in the staff. Maybe it's connected to PDV, the dismissal agreement program. We have some employees who leave. The employment leave was not verified in the first quarter. It will be verified in the year.
In the last quarter of last year, the economy around BRL 20 million with these people who leave the company, similar to the increase, you know, of expenses as we admit new employees who joined into the IT department through or around the first quarter, and also employees who are expected to join the bank in the second and third quarters. I have a question regarding recovery of short-term and short and medium-term ROA increase. Just let me say that while we mentioned how strong the bank is, you have a 80% CVI- danger Percentage. As the interest rate goes down, this will represent a significant gain with good recovery. We are very optimistic Because our credit is very well precified, it's safe. We have much to develop in terms of relationships with credit clients.
I believe the bank is positioned to face even more complicated, more adverse situations than the ones we are facing or maybe the ones which are being which other competitors are facing. Perfect. Yes, we have a return guidance. It was expected that the first quarter, with all the things that were mentioned here, with all the things that we faced, would be a weaker, not so strong quarter. Possibly, we will get to the guidance and maybe get to even higher levels for 2024.
Thank you. I would like to remind you, so please write your questions in the chat. We have also the raise hand button if you want to open your mic. Next question is related to the agro business. In Rio Grande do Sul, we had a recent drought. Has it harmed the results related to rural credit? I add another question to it regarding the price of soy. If the reduction in the soy price may lead to an impact regarding the credits given or granted by the bank.
It's a pretty encompassing question, I know. Regarding. Let's talk about the drought in the state. We hope that 30%-35% of loss, in crop loss, this was anticipated. There was the La Niña phenomenon, so it was sort of expected. We obviously, in some regions, there are more at risk.
Considering our guarantee structure, we had already considered this input and these risks. A great part of our operations are small and medium-sized producers. Either they have a private insurance or government-based insurance, so we can deal with this, with this because these types of insurance can help. In the first, May is the first month to look towards the crop. It's a little slower in Rio Grande do Sul if compared to other states in Brazil. We are following it closely, just like we had an excellent performance in the previous year when the crop loss was much higher than the one that we expect for this year. Even then, we didn't have problems. Especially based on the guarantee structure, we don't expect to have relevant problems and issues.
Regarding prices, I believe these are the two main variables, always the quantity and the expected price. Looking into the future, we have a good part of it, which is this is the third year of La Niña, probably will not be repeated, and there is possibility to improvement. In terms of price, we had an adjustment due to the super crop in Brazil. This price of BRL 120, BRL 125 was a price we didn't want or didn't expect, we believe, we think there will be some adjustments. Once again, even considering this scenario, we are still comfortable and obviously following closely the development of our portfolio.
Thank you, Osvaldo. Now we have a question by , Matheus Raffaelli from Itaú BBA. Mateus, can you hear us?
Yes, I can. Can you hear me?
Yes, we can. Go ahead, please, Matheus.
Good morning, everyone. I would like to change gears a little bit, going back to the payroll loans and INSS. It's important in your portfolio. You thought about 1.7% to continue operating your product. We know that you wouldn't do above that. Moving forward, we need to consider the economics of the product, how it was rebalanced in terms for rate, in grantings with the new ceiling. What is the commercial strategy of the bank for these products, considering the next few quarters? Thank you.
Well, that's an excellent point, Matheus. I believe that initially, which led to an imbalance in the market, we saw this as an important opportunity in our network of bank branches, and it's important to highlight that.
In the banking correspondence of 1.70 rate, we've interrupted the operation and continued in the branches for 2 weeks, 2 weeks and a half. Today, considering data from the central bank, our granting rate is close to 1.90, getting closer to the ceiling, to the top rate. There is a certain level of balance in this level. This has been going on for the past 3 weeks in this pattern. Considering the corresponding, this market is still adapting. We are still testing this. It's not clear on how this market will be given that not only there was a change in the ceiling, but there was lack of certainty regarding monetary policy. Given that this is a pretty sensitive market, we need to be careful in terms of going forward.
I would say that in the next, the next few months, we'll balance this, not only for Banrisul, but also to other banks which work with the corresponding, pattern. In the network of bank branches, this keeps on strong. The portfolio performance is already back to normal when it terms, when you talk about INSS and payroll loans. Thank you very much.
Thank you, Matheus. Thank you for your participation. Well, I think these were the questions we could answer during this time for this call. We got other questions. They will be answered by the RI, the investors' relationships team, the RI team later on. Now I would like to ask Mr. Coutinho for his closing remarks, please.
Thank you. I would like to thank you all so much for participating in this event. I would like to once again state that Banrisul will follow with discipline its business plan principles to operate with a diversified collateralized with guarantees credit portfolio, giving privilege to a diversified book-risen granting. This is the backbone of the company, of our philosophy, the philosophy of Banrisul, which is a winning philosophy. We'll keep on working towards that, increasing our portfolio and maintaining the quality we managed to achieve.
Certainly in the future, this will keep on going on. Thank you very much for your participation. Now I'll give the floor to my colleague here. Well, President, Mr. Chairman, I truly believe the structure of the bank in our the fundamentals. We did our homework, the things that we needed to do. The balance of the bank is very safe, and we have several opportunities ahead with generation results, recovery of financial margin, counting on the partnership of our clients and the expansion of our credibility for working in a very firm way, following the principles of safety and focusing on profitability, which makes sense, and not only looking for things that would expose us. We know that we have a commitment towards the state, and we will fulfill that, and also a commitment towards the towards our shareholders.
Thank you very much. Banrisul video conference is ended. Thank you very much, and we hope you have a wonderful day.