Banco Bradesco S.A. (NYSE:BBD) Q3 2023 Earnings Call Transcript

Banco Bradesco S.A. (NYSE:BBD) Q3 2023 Earnings Call Transcript November 10, 2023

Carlos Firetti: Hello. Good day, everyone. Thank you for participating in our video conference call to discuss third quarter earnings results. It is a pleasure to have you on board. In the initial point of the event, Octavio will present the results of the bank. Then we are going to start the Q&A session. If you want to ask a question, you can send them via email or use WhatsApp in the address and phone number that you see on the screen. The presentation will be in Portuguese with simultaneously interpreting into English. And you can select the audio preference directly in the window that you’re watching. I’d like to remind you that the presentation and other materials are available for download in our Investor Relations website. I now turn the floor to Octavio who will start presenting the results. I’ll see you again momentarily in the Q&A session. See you later.

Octavio de Lazari: Thank you, Firetti. Good morning, everyone, and thank you for joining us on our earnings video conference call. We will start our presentation with the highlights slide with the main numbers of the third quarter. Then we will talk about some strategic initiatives that aim not only to control costs, but mainly the increase in revenue. And finally, we will talk about the quarter’s numbers. So Bradesco had a net income of BRL4.6 billion, up 2.3% compared to the previous quarter. With operating income growing 5%. ROE was 11.3% in the quarter, still below the level we would see as appropriate. As you will see during the presentation, we have made progress on several key points, but we are fully aware of the challenges ahead.

The portfolio of the book loan or the loan book grew 1% driven mainly by large corporates. Delinquency rates were down, which reflects an NPL creation, falling BRL1.6 billion and lower credit provision expenses by BRL1.1 billion. Our 90-day delinquency indicator improved by 10 bps with reduction in large corporate and individuals despite the portfolio shrinking, which has an important denominator effect on the ratio. In small- and mid-size enterprises, the indicator still grew. But we are now seeing an improvement in 15 to 90 day delinquency ratios and in the quality of the most recent credit vintages. Basel ratio Tier 1 rose 55 bps. Finally, the insurance group continued to show a good level of result, making a significant contribution to the bank’s performance.

I’d like to speak a little about BRADigital. We had an important addition in our innovation system, a new technology hub and innovation that we just implemented to more than 600 employees working at this hub in Helsinki with total connection with the universities, the academia, proximity of partnering companies, projects using emerging technologies as blockchain, cloud and gen AI. In addition we had important acquisitions in the world of payments analytics and in gen AI such as Aarin and Kunumi, companies specialized in these technologies. We also have excellent partnerships. We have more than 300 data scientists and around 500 models that use generative artificial intelligence Bradesco experience, which is an area in Bradesco which has a mandatory presence in all of the organization’s squads, has the objective of making the client’s journey always more current, fluid and enjoyable, and has been recognized by clients and from publications and awards specialized in this subject.

Now talking about focus on digital. This entire transformation leads us to a process of rapid evolution in our digital channels with very significant numbers. In individuals, for example, on average clients that access our individual account at 20 times a month and there are now over 60 million accesses per day. BIA Bradesco artificial intelligence is a pioneer among Brazilian banks capable of giving your transactions. And it continues to evolve with the slogan, make it easier with Bradesco, which is already in the media. In addition to all the products and services already running, it is now doing PIX instant transactions using WhatsApp and working to prevent fraud in case of suspicious transactions through messages to our clients. Everything we are doing in digital gives us certainty about the path we are following with our clients, allowing greater autonomy with a better experience and for us much more business and with a lower cost to serve.

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Q&A Session

Along those lines, we also developed Bradesco Global Solutions in this constant pursuit to enhance experience for our services and channels. We are reinventing and improving the way we connect to our clients by launching Global Solutions, a new open, connected, customized multi-channel platform. Our client journey is showing tangible digital transformation in wholesale banking, which began a few years ago. Our proposal is to offer a unique experience in the banking industry. Global Solutions is monitoring our clients’ needs so that we can always offer companies the best solutions for financial management, such as cash management, payroll, cards, insurance on a multilingual multicurrency and multi-bank platform, fully customizable for each company with the advantage of visualization across multiple companies in the same conglomerate.

In our high-income vertical in the slide, we show some numbers and details. A big key point for our strategy, something we have discussed a lot with you, i.e. our performance in the high-income segment, our goals to increase our share of wallet, gaining principality in the customer relationship. In Bradesco Prime we have more than 4,000 client relationship professionals and more than 2,000 investment specialists working to enhance services for this segment, constantly focusing on delivering a differentiated experience for our clients. Agora, our brokerage house currently has BRL81 billion in assets under custody and around 1 billion clients. In order to further enhance this experience and deliver advantages we are now charging — we are not charging any brokerage fee for trades made through Agora’s app and website.

On another area, Bradesco Asset is a key actor this year with over BRL700 billion assets under management, positive net funding for the year and outperforming the industry in terms of growth. Bradesco’s asset manager has earned recognition in the form of several financial industry awards. A highlight would be bond funds, which in addition to good returns posted material growth and funding totaling more than BRL240 billion under management. We cannot forget to mention our newest asset, Tivio, focused on alternative funds and which currently has BRL34 billion in asset under management. The bank that stands with you. These initiatives in our high-income vertical evolve in Brazil and also extend to our offer of international products and services.

A good example of this is the My Account, the international digital account that we launched in July of this year to ensure convenience to our clients. It has already reached more than 100,000 accounts at Bradesco Bank. And on the other hand the private bank operation also continues to expand with 45% increase in client assets and liabilities, reflecting the evolution on real estate loans, cards and investment portfolios. Bradesco Bank’s operation is also transforming its digital journey to add agility, autonomy and convenience for our clients. At Global Private Bank, which includes our operations in Miami, Luxembourg and Cayman our customer satisfaction indicator, NPS, stands out in the market. It is also worth mentioning the international awards that highlight our team’s quality.

For the fourth consecutive year, we have been named Brazil’s best wealth management advisor. I would also like to touch on the cards area. I should highlight two new novelties in the cards segment. For some time now we have focused on partnerships that create value and centrality for our clients with principality to the fore. We have recently announced an exclusive partnership with Amazon and we are the Amazon’s, the Amazon card’s issuers in Brazil. This partnership has already posted excellent numbers in its initial months. And it is part of our strategy of associating with companies and brands of great value for clients. We have a complete portfolio, the only one that covers all major card brands. We also have just launched Bradesco Centurion American Express, which boasts the best benefits and value a card can deliver for the most demanding clients.

Again, principality, followed by principality. We have focused on repositioning in the high income segment and these cards currently account for 64% of individual revenues first contributing to our two-digit growth in card revenues. Another important point is to speak about agri business. Farm loans are on the rise. We are a leading bank in this area. We continue to evolve in our offering and structures to deliver outstanding customer service. Last quarter I shared with you the launch of our e-agro platform with you. For this quarter, I highlight our BRL19.5 billion volume dispersed, which was 100% up compared to the previous quarter. Our structure focused on agri business has 1,000 points of services distributed across Brazil in addition to 14 agri business platforms.