So we do some business for us to move around. So this goes to serve mass retail, low and middle-income clients that can potentialize our business with multi-brand, this is not totally defined yet. We can take on path. We’re different path. Secondly, regarding market NII, they’ve talked about this. We have good expectation of a normalization along 2024. Thirdly, ALL allows for loan losses, we could have a higher cost in 2024, which I consider to be a transition year because we have a substantial growth of the loan portfolio. To expected loss. This is called ALL. If we were flat in growth, we would have less ALL. But we are putting efforts to have client NII with adequate losses in the new cohort vintages. Next question from Rafael Frade with Citi.
Rafael Frade: Wish you a lot of success to all of you in your new roles. I wanted to tap into [indiscernible]. We have a lot of discussions in the market in terms of how the low profitability of Patisaran the last two years was linked to a structural issue or related to the context. But this has more exposure to smaller companies and lower income segments. But I think there’s also a market element, but you’re also saying that you have a lot of opportunities to improve your operations. We talk a lot about lower-income segments. I’d like to understand more about SMEs. Marcelo, at the beginning, you said that Bradesco is a leader in the SME segment. It is an important part of your profitability, it’s a part that had an important portion of the NPL formation in 2023. So what have you identified in neurodiagnostics that could be quickly improved, something that could be deficient? Perhaps you could elaborate on the diagnosis for this segment of SMEs.
Marcelo Noronha: Thank you, Frade. Good to see you again. All right. SMEs. As I mentioned, we are leaders in the SME segment. We have a significant share, but Frade, we have to admit. I think we had a credit policy, which was perhaps a little more open is red, perhaps we stopped granting credits a little later than we should have, have to admit these things. But Bradesco despite of the Brazilian social pyramid in lower income and SMEs, we’re very present in these segments. So when there’s a delinquency issue, we tend to suffer more proportionally or in absolute trends than peers regardless of having higher leverage as we should have stopped before earlier. That’s a given. This bill is being paid. But when I look at the segment, it has the right size, it is profitable.
And I’ll tell you, most clients and SMEs are paying their loans. They are not the language. Most of them are okay. They have been paying off their loans, and they have been making doing business with us. So we are leaders. We have new credit moves. We have new credit policies, these credit policies. Are they more restrictive somewhat more restrictive than in the past? Yes. We are a little more conservative than that we got less conservative in the transformation of the bank, but more conservative in managing credit risks based on the new modeling. But we have a new opportunity of quickly reversing because NPLs dropped, delinquency is dropping. That’s under control. We went back to growing. Like I said, we had an inflection point in Q4. So the number is under control.
Yes. What are we doing in this segment? We are creating 122 platforms in as I mentioned in a presentation. We have delivered some on the end of the year. We’ll deliver 122 platforms in 2024 as quickly as possible with the team fully dedicated to this target of clients, Tier 1 between 3 and 5 million in the main cities. But you see, we started working with some radius, but we are increasing this segmentation as to putting this client base when we have a complete network of platforms. For the target from 0 to BRL3 million, we improved the whole work on remote service. Also for micro-entrepreneurs in terms of digital, physical service, and remote online service. So we increased the first of sales or sales cores in the segment of seaway because we see this opportunity.
Besides in order to get more traction and more safety, we brought in some credit analysts to work more specifically close with these platforms. We have been doing some good testing which ensures to us most… Because part of this credit rent is judgmental. And we have a different management model different than what we had implemented in our client management or we started with that segment of 50 million with a different way of managing the performance, now we are trying to educate and train managers. We’ll have to be monitoring this in the central line fashion so that we can do all time management and monitoring of the portfolio, so we can make decisions regarding risk management regardless of centralized portfolio management. These are operational details.
So I do risk assessment. The contracts? And how do I monitor… Because if you get their first enjoy benefits. So we have models and indicators to manage this, just like we do in other segments. So here, we are improving this management model so we can be a lot more competitive here in terms of delivering good customer service and experience and in terms of managing our credit risk regardless of other people and other tools managing the portfolio. Added to that, we have the public acquisition offering of Cielo, what we call OPA. We want to bring payments and other synergies with this SME segment, which is highly profitable and should double in size in the next five: years as mentioned. Thank you. Next question, Arnon Shirazi, Santander.
Arnon Shirazi: [indiscernible], welcome to this position. My question is more related to 2024 to talk about your guidance. You gave an expectation of the increase in the loan portfolio, but I’d like to understand where this growth is coming from. If it’s more individuals, more companies, and also about the rate for ’24, I think it changes the perspective that the analysts have for the year.
Marcelo Noronha: I can answer in terms of growth, I believe I can say that we’re going to be growing in our main lines very closely. As we’ve been saying, we’re accelerating credit origination in retail. This origination has been significantly growing. It’s still not overflowing to lead to portfolio growth as the portfolio hasn’t responded yet. But the main driver for growth includes personal lines, on wholesale, retail, and small and mid-sized companies where we’re also accelerating. This growth will accelerate during the year as the guidance includes 7 to 11, we have significant growth in in line or above the market, of course, the average portfolio grows less, and that’s what translates into the margin guidance that’s slightly lower.
In terms of the rates, you can consider between ’16 and ’18 as a reference, the tax rate. Yes, the idea is to grow the entire portfolio with the expanded portfolio as Firetti mentioned. Thank you, Arnon. Next question Yuri Fernandes, JPMorgan.
Yuri Fernandes: Good morning, good luck with the management of the company and the plan. My first question is about the bank’s capital generation. I believe Bradesco has good capital [indiscernible] it’s not a matter of funding. But when we think about ROE, as you mentioned, no, maybe in 2026, it will exceed the cost of capital. And we look at the 2024 guidance, it should be a rate of 10%, 11%, maybe slightly higher, but with the portfolio accelerating, as Firetti mentioned. And in the past years, we’re looking at you maximizing the benefits of IOC. And the bank has been paying relatively good dividends, but that implies a smaller capital growth. My doubt is how should think about this choice between growth and capital and how to fund growth.
Considering it may take until 2026 to improve profitability a little bit. The capital cost may be broad in this plan for you to get to that 15% to 19% market share. So if you can talk a little bit more how to think about the payout and this dilemma between investment growth and capital would be my first question. And the second, very quickly, Norona, about Cielo. If you can give us more details about the strategy behind it, if there’s any discussion and about this public acquisition if there’s any discussion about the select rate around the price of the software. Dividends was very clear. You have a relevant focus on Cielo, but there is no — it’s not clear whether there’s a correction for the Selic rate.
Marcelo Noronha: Thank you for the question. Cassiano, I believe if you could begin and I’ll add and talk about Cielo.
Cassiano Scarpelli: Thank you, Yuri. It’s a pleasure to see you here again. On the capital side, we understand here that our projections are all considering sufficient capital to maintain the credit growth. Of course, in our strategic plan and even for the new approach for the Central Bank’s operating risk that we’ve been discussing in some of the brands, and we can talk about it in person. And to grow, and it also makes capital more robust. So the strategy, as Marcelo said, our transformation pattern is to seek growth of our profitability growth in our net income that are also a significant part of our capital composition. And we see it as natural to continue to work the basic benefit of IOC for as long as it exists. And this year is no difference for the moment from everything we’re seeing with our business cases and the planning and the budget process.
We understand that at least over the next few years, we will be comfortable in terms of capital to support the transformation process and the bank’s growth.
