Banco do Brasil SA

BOVESPA:BBAS3

Earnings Call Transcript 2020-Q2

[Operator]

Good morning, ladies and gentlemen, and thank you for waiting. Welcome to Banco do Brasil's Second Quarter of 2020 Earnings Conference Call. This event is being recorded. [Operator Instructions] This conference call is also being broadcasted live via webcast through the Banco do Brasil website at www.bb.com.br/ir while the presentation is also available. The replay of the conference call will be available through the phone number [phone] until August 14, 2020, in English and also in Portuguese. [Operator Instructions]

Participants may view these slides in any order they wish. With us today, we have Mr. Daniel Maria, Head of Investor Relations and Sustainability. Mr. Daniel Maria, you may begin now.

[Daniel Maria, executive]

Thank you. Good morning, everyone. Thank you for attending this call. Let's start with presentation on Page 4, let me bring some highlights of the results. First of all, the adjusted net income for the first half was 6.5 -- BRL 6.7 billion. This represented a decrease of 22.7% when we compare to the same period last year. This performance was mainly influenced by the increase in the ALL expenses. The credit provisions grew by 51.8% in the same period, showing a quite conservative approach that period we are -- as we are going to describe later. The NII showed resilience in the moment that we have decreased in the base rate, reaching BRL 28.5 billion, an increase of 9% when we compare the first half '20 to the first half '19. Fee income decreases by 1.4% and the administrative expenses grew in line with inflation reaching BRL 15.6 billion.

Moving to the next slide, Slide 5. We bring the net income. The net income, probably a good way to look at this is to see the -- what we call the PPOP, the pretax and pre-provision earnings. And excluding the credit provisions, we see a growth in the structural results generated by the bank by 11.7% compared to semester-to-semester and 8.3% when we compare the second quarter -- second half to -- sorry, second quarter to the second quarter of last year.

Moving to the next slide, Slide 6. We bring here the behavior of NII. As I said, quite resilient. We had a large decrease in the base rate. And we have a growth in the NII by 9% in the period. This can be explained mainly by the structural position that we have in asset liabilities. Our liabilities repriced that are floating rates, repricing quickly. And we see that the funding expenses decreased by 36.9%. Treasury contributed to this half of the year in BRL 6.7 billion, a decrease of BRL 4.4 billion -- 4.4% when we compare to last year.

Moving to the next slide, Slide 7. We bring the dynamics for NIM. First of all, starting on the left-hand part of the slide, we bring the spread by portfolio. Spread is quite stable. The changes that we have is basically due to the change in mix. In the case of individuals, the decrease that we observed here compared to last year is mainly explained by the cap in interest rates that started the year for overdraft facilities. When we go to the NIM, we see that the behavior of NIM is completely dependent on the liquid assets. And this quarter, we saw an increase in the liquid assets, moving from BRL 1.5 billion to BRL 1.7 billion, as you can see in the bottom part of the slide. And the higher participation of liquid assets expand the reduction. If we normalize the liquid assets, our NIMs would be in the region of 4.33, higher than last quarter.

Slide 8, we go into the ALL expenses, bringing some breakdown of provisions. The expanded field for credit provisions, we see the prudential anticipation. So the expanded field approach to the provisions is basically the way we are behaving. Since we see the NPLs behave quite well, and part of this can be explained by rollovers. And we know that there will be a delay in the NPLs. Basically, what we're doing is creating a cushion exactly to prepare for when these NPL comes. The -- another aspect that you can observe here is a higher impairment that happened in the private bonds. Yes, basically coming from some transactions in large corporates.

Moving to the loan portfolio related to Slide 9, we show the behavior of the credit portfolio. We had an increase of 5.1% when we compare to June last year. Comparing the credit portfolio to the last quarter, we saw a reduction of 0.5%. So that mainly can be explained by the movement of the large corporate. So that's what we're going to describe later. Some of the highlights of this -- of the credit portfolio is the growth in the SMEs by 10% year-on-year and individuals by 6.6%. So that is completely aligned with the approach of the bank of concentrating the business into the retail portion of the book and using for the wholesale mainly capital market solutions.

On the next slide, Slide 10. We bring -- we magnified here the individual loan portfolio. We see a reduction of the loan portfolio comparing to March. However, when we see -- we look at the side, the payroll portfolio grew from BRL 84 billion to BRL 86 billion.

And here, on the right-hand side of the slide, we give some more colors about the composition of this loan portfolio, favorable loan portfolio. 86%, 87% is comprised by Civil Servants. We have also adding up to this portion the retirees. Yes, we reached almost 98% of this portfolio with segment that is more protected in terms of unemployment.

Moving to the next slide, Slide 18 -- Slide 11, we bring the company's loan portfolio. And here, as I said, the main driver for reduction in this portfolio is basically explained by the large corporates. And this is completely in line with the strategy of the bank to use more capital markets. So I would say that the synergies of origination of credits. So origination of mandates for capital markets, distribution to the markets and another lack of this strategy is distribution to the retail of the bank.

We grew a lot the AUM managed inside the bank in terms of customers. We increased the number of managers giving special attention and advisory for those customers. We increased the number of products, and we are very active in distributing corporate bonds and equity. This is a quite hot trend here in Brazil, and we are demonstrating good user -- behavior in this direction.

Moving to the next slide, we bring specifically the SME portfolio. SME portfolio, as I said, presented a growth in the -- comparing to the last year, up 10%. This growth is more concentrated in working capital. Yes. Comparing to the last quarter, it was a growth of 1.5%. The dynamics of the SME portfolio tends to change a little bit in the third quarter, just as an example, this Pronampe. Pronampe, it's a loan with some mitigators using a fund to guarantee that you have first loss for that fund. We were able to grant the BRL 5 billion for those loans at the beginning of the third quarter. And this tends to change a little bit the dynamics of this portfolio for the next quarter.

Going to the next slide, Slide 13, we go to the agribusiness portfolio. The agribusiness portfolio, the performance remains positive. We have a growth of 1.1% comparing to the last year. We see that movement. So that dynamics of decrease in the agroindustrial and the reason is exactly the same as the large corporates. We see more instruments like the CRA that is an instrument linked to agribusiness being distributed to retail and to institutional investors. And the bank is quite active in this. And the growth is more based on the rural loans and mainly in individuals.

On the right-hand side, we bring some highlights. The participation of the bank in the market share, almost 2/3 of the market share. The new harvest plan that was launched in the quarter. We have BRL 103 billion channel for -- to finance harvest plan, comparing to the amount that was disbursed last year or the last harvest we see increase. And one important aspect that highlights the innovation of the banking commitment of the bank to the sustainability is that this year, the low carbon program for agriculture is reaching the 10th year. And we have roughly 2/3 of the -- all those instruments in the Brazilian markets that was developed by the bank. And we've reached BRL 15.4 billion of transactions done in those characteristics.

Moving to the next slide. We go to Slide 14, that we show the asset quality of the portfolio. We see decrease in the NPL and increase in the coverage ratio because it is exactly that movement as I mentioned. NPLs with the rollovers, they tend to lag the effect and lagging the effect in a more conservative approach, we are being conservative and we are making preemptive provisions and growing the coverage of the bank.

The next slide, we bring the credit quality separate by segment. And we see for the 3 segments: individuals, companies and agribusiness. We observed decrease in the NPL and growth in the coverage ratios.

Now moving to the new NPL. New NPL, Slide 16. We saw a decrease in the new NPL for the total portfolio. The coverage of the new NPL, higher than 100% and actually 149%, almost 150%. Looking at the new NPL by segment. We saw decrease for individuals. We saw a decrease for agribusiness. We saw a slight -- some increase in companies. That is completely explainable because this segment is more affected by the challenges we see with the COVID situation.

The next slide, Slide 17. We bring the rollover -- characteristics of rollover. Let's start on the right-hand side that we bring the disbursements in the period. And those disbursements will include new transactions, renegotiations, rollovers, and basically, it was distributed this way and bringing light to the rollover specifically, we had BRL 71.8 billion in rollovers. And the distribution was roughly 43% for individuals; 53% for companies and amongst this 53%, almost 2/3 of this represents SME portfolio and the other part of the larger companies; and 4% for agribusiness.

Just some highlights. These rollovers represent 11.6% of the credit portfolio. We had more than 1.7 million customers or 1.7 million transactions that were -- they were extended in certain way. And what we did for those customers is basically customers that were paying accordingly the installments. 99%, rounding up, they were in regular situation. And this portfolio, 98.4%, the rating of those customers are in the region of AA-C. In terms of guarantees, 69% of those transactions we have guarantees and mitigators. And relationship with those customers, we have more than 14 years on average relationship.

Next to Slide 18, we bring to the fee income and the behavior of fee income. Certainly, there are 2 reasons that explains this decrease in fee income. One is structural. At the moment, we have -- decreasing the base rate naturally. We repriced some of the products and the asset management, I think that is the best example. And this brings some pressure to the fee business. And secondly, it's more to the situation. You have a different stance of the consumers preserving income, reducing consumption. Certainly, this decreases the potential for cross-selling of products. But although we had the situation, the performance was quite well. Asset management, for instance, we had abrupt and large -- decrease in the fee business. However, volume compensated this in a certain way that we saw an increase of 3 point -- 3% in the period. Other lines, this is much clear, has good credit and insurance.

Moving to the next slide, we bring the administrative expenses. Administrative expenses, they were in line with inflation. And the bank is committed to control costs. In terms of efficiency ratio and the fee income to administrative expenses, we saw worsening, but this basically can be explained by the reduction in the fees, much faster compared to the costs. However, the bank has some measures to drag the business. And here in the upper part, we just show some of the measures that we did in the past to control costs and so on.

The next slide, we bring a little bit of what we are doing for the future in terms of costs. And those are just 3 initiatives. We have more. And just reminding some of them, as we discussed, we have the opportunity to discuss in the past. The first one is what we call the performa. Performa is basically redefining, redesigning the compensation plan for the employees, giving more attention to a variable component based on performance in reducing the fixed portion. This was announced in February this year. We had the opportunity to discuss. Here just putting some numbers to this. And basically, we are going to capture the benefits along the years, and certainly completely define the turnover of the workforce.

The second aspect that we have the opportunity to discuss also was efficiency, eco-efficiency initiatives. We just -- we mentioned about the solar energy farm that we inaugurated last quarter. There is another one that will start operations in this quarter. And there are orders in this process. In addition to buying energy, clean energy in the wholesale market and also using technology to reduce consumption. And another aspect here is at the center that we call FlexyBB. Actually, this project, we have been studying even before all that story. Actually, the concept is to bring a more collaborative environment in the office, moving from the cubicles and going to open space and so on, and stimulating and using the home office more frequently. Yes. Actually, from 1 day to the other due to the pandemic, we had more than 1/3 of our employees working in home office. Then this project actually was tested in the -- in an acid test, it works quite well. What is the idea to extend this concept of remote work? And also reviewing all the corporate space. In this process, we have a space to reduce the space or we have a possibility to reduce this space and also to sell some buildings that are owned by the bank. All those 3 initiatives that actually they were contracted, and we are executing them. They do show a liquid savings in costs of BRL 3.3 billion accumulated in the next 5 years. This shows actually, how we are addressing the cost structure of the bank. And as I said, this is one of the initiatives. And certainly, we are going to have more things to say in the future.

The next slide, Slide 21, we show the capitalization of the bank, growing organically. We've reached 10.56% of CET1. We continue committed with our targets of reaching minimum 11% by January '22. And finally, going some aspects of innovation. The bank has been working and investing a lot in the last years in terms of innovation. And all those investments that we made were able to have the bank prepare, including to face the social distance in this process. Just bringing some numbers, some highlights. For instance, we have currently more than 19 million people using our app. And on a daily basis, we have more than 6 million people accessing our app every day. And these concepts thinking about new ways of monetizing the customer base is quite relevant because we want to have people accessing recurrently and in a way that we can offer products and services through those instruments. Certainly, the pandemic or the social distance accelerated this process as we show here the number of users that grew quarter-on-quarter.

Another initiative I would like to highlight here is the WhatsApp. Yes. WhatsApp is basically -- we had this last year, is a new way of interacting with the bank using artificial intelligence, and you can access and discuss about products, including paying bills and so on. And the number grew exponentially in this process and with the high percentage of resolution. And just reminding that the system learns as we have more movement on this. And this shows innovation in the bank in this way that we changed the interaction with customers and opens new channels of communication. And the digital wallet that we have here. This is an MVP. We tested this through the payment of benefits. In those steps, we had 1 million people using those products with more than BRL 1.5 billion in payments. And this product is being launched, and we have potential to grow in this product.

And saying that we can move to the next slide that we just give some color of things that we are thinking, things that we are analyzing and shows a lot of innovation. First of all, it's what we call broto. Broto is a platform for agribusiness that you can access, just check broto.com.br. Through this platform you have the agribusiness customer interest. We have information about the productivity and so on. We can advise that person about ways to increase the productivity. We can sell products and services based on that. We can sell insurance. We can -- including link nonbanking products machinery and so on. Then this shows a little bit of new ways of monetizing the customer base. And for that reason, it's important to have the app and the instrument and having people accessing the system. Then we have ways, again, of creating value for the customers and creating value for the shareholders as well.

The second aspect that is quite relevant. We are doing a great revolution in the company's relationship. The same thing that was done for the individuals, and it's quite well developed. The access to apps and Internet to do services. We are doing in the company's front. And we are using API to do this. This is quite fast to implement, and we can have levels of customization. Just reminding that Banco do Brasil used API for the first time in 2017 in some solutions for credit. Then this -- we have 72 customers -- sorry, 71 customers that are using solutions, integrating their systems. One example is that the necessary clicks that we have for collections. We have BRL 12 million -- BRL 12.7 million of those is generated through the app. And we have more -- we have 400 customers that are in process of implementation. And this shows changed completely transformation in the way to interact with this segment. And we launched it this week, the new platform for the digital for companies. This is basically bringing user experience to these formats and giving some level of customization. And again, making much easier to do this. The other aspect I would like to highlight is venture capital. We just -- we are investing the first tranche in the venture capital. And now in the third quarter, this is BRL 100 million. The idea is to partner with fintechs. This is important for co-creation of new solutions and products.

And finally, in the payments front. This is the greatest transformation in the system. Banco do Brasil was the first bank to be -- to meet all the requirements of regulator. We are prepared to start pix, the instant payment systems as it will be defined by Central Bank. As a complementary approach, we have announced also Facebook Pay. Actually, we are waiting for authorization of -- the regulator authorization for this.

But moving to the next slide, it's just to mention that innovation is not only in the technology and the cultural aspects. There is one aspect of that probably. So probably we hear a lot in the last weeks or in the last year -- in the last year is about ESG and social responsibility. This is something that the bank has a lot of this. That is part of the strategy of the bank. And just had brought some landmarks that show why the bank is well recognized in terms of awards and the index in terms of ESG. Just some examples in terms of voluntary programs, since 2001, we have problems in the social aspects. We have more than 25 initiatives that were done in this period and 25,000 initiatives in those periods.

In BBDTVM, our asset management, currently has 8 ESG funds. The first fund that was more driven to governance was launched in 2002. And currently, we have BRL 141 billion in assets under management in this category -- characteristics of funds.

What we call Agenda 30, those are the strategic plans of the bank to meet -- to grow in terms of social responsibility. This started in 2005. We are in the seventh version of this instrument, this planning. We have -- we realized -- we do not realize, we implemented more than 500 actions along those years. As I said, the low-carbon agriculture is celebrating the 10th year, and this started in 2010. The bank was the first bank to implement socially -- in Brazil to implement social environmental guidelines for credits having very specific, which are the restricted and excluded -- exclusion list. The Agro Energia Program, we started in 2016, bringing -- or working with an implementation of renewable energy for agribusiness. And more recently, we replicated these 4 companies also and those 2 initiatives together, they reached almost BRL 2.1 billion.

And one thing that we got -- we enhanced was the Geo Socioenvironmental Diagnostics. This is basically the geo-localization that we have been using to finance working capital to the business, adding a compliance model that basically we capture using geo-localization if that area is not in a protection area or it's not in a reserve and so on. Then in addition to the technical information that we have about production and so on, weather, we have these aspects that is quite relevant in terms of compliance and meeting all those standards. And one example, and more recent is the carbon-free certificate that we launched for 1 customer that is completely aligned to the field protocol.

Saying that in ending the presentation, I would like just to highlight that what we are showing here that we are delivering consistent results in the last years. We are working a lot in terms of innovation. We understand that the banking world will be completely different, and we are bringing innovation new ways to interact with customers and creating new business models, working -- approaching efficiency, new ways to bring efficiency and to adapt to the cost structure of the institution. And certainly, taking very seriously the aspect of ESG. Thanks a lot, and we are -- we can move to the Q&A.

[Operator]

[Operator Instructions] Our first question is from Marcos Assumpção from Itaú BBA.

[Marcos Assumpção, analyst]

2 questions. The first one, comparing a little bit the extended portfolio of BRL 72 billion. With the additional prudential provisions that you made of around BRL 4 billion. When we compare that to the other banks, the additional provisions were a bit higher and the extended portfolio were a bit lower. Can we say that your extended portfolio probably has a lower risk than the peers in terms of the profile of the clients that are there? As you mentioned also, the high level of guarantees around 70%?

So that's my first question. And the second question is on the venture capital initiative that you just announced. What is the strategy there? Is it to acquire partnerships, acquire stakes in fintech, as you mentioned, with the idea of making some money or with the idea of bringing solutions and also more service to the bank, right, helping the bank to offer new products and solutions for their own clients?

[Daniel Maria, executive]

Okay. Thank you, Marcos, for the question. First of all, going to the rollovers and the extended portfolio. Actually, our portfolio, we understand that it is less risky compared to the system. And some of the reasons for this is, first of all, the agribusiness portfolio that represents 1/3 of our portfolio. Secondly, when we look at the individuals portfolio, we have a higher participation relatively to the system to the payroll. Then this gives a different risk profile of the portfolio compared to the system.

The second aspect is the -- what we are doing in terms of provision, basically, what we're doing is when we have a customer that has any situation of past due, we are aggravating or downgrading the risk and downgrading those risks, including sometimes much faster than defined by the regulators. And certainly for those ones that we see more -- much weaker. In doing this, we accelerate the provision that we're doing. The second aspect is, although Central Bank gave some provisions, regulatory provisions to freeze the rating of the customers when we roll over those loans. We are not using it. Then this expense also this movement that we're doing, okay?

The third aspect is basically even transactions that we are comfortable with the level of provisions, we are reinforcing -- we're increasing provisions exactly to prepare to those times. And these expense and loss, how we are driving the provision. Probably, your question is quite interesting because probably those numbers when you compare, the first aspect is the profile of the portfolio. The second aspect is how the other banks are doing those additional provisions. Probably -- I don't assume that all of them are using the same standards.

And then this is for the first question. About the venture capital. The third one, actually, we have several formats for this. We have co-participation companies. There are some funds that we are only participation -- participants in those funds. The idea is basically co-creation of solutions and certainly entering the capital of those with the participation through the funds, exactly to implement and to bring those solutions to the company, including to test some of this inside the company to bring to the customers. It's less that in a perspective of investing a company to sell later. It's much more in terms of creating innovation, bringing a different dynamics for the origination of products, services and also innovation.

[Marcos Assumpção, analyst]

Perfect. Just a follow-up here, Daniel. I know it's early because you just launched this venture. But do you think that this could be growing in terms of size in the future for the bank?

[Daniel Maria, executive]

Yes. Yes. Yes, this was the first tranche, and we see space for sure to grow.

[Operator]

Our next question is from Nicolas Riva from Bank of America.

[Nicolas Riva, analyst]

I have 2 questions. The first one, if you can provide us with an update on your pipeline of asset sales, one of the assets that you had mentioned in the past was your stake in Banco Votorantim. If you can also talk about your views on your stake in CLO, that's part of your core assets or not? And then my second question, so I understand that yesterday, the senate in Brazil approved a bill implementing a capital interest rates on both credit cards and overdraft loans, a 30% interest rate cap, and it will be temporary until the end of this year. If you can talk about, in your view, what's the likelihood of this bill being also passed -- been approved also in the lower house and passed into law. And if it is passed into law, what will be the impact on your financials this year?

[Daniel Maria, executive]

Okay, Nicolas. Thanks a lot. Let's start in terms of divestments. As we have been mentioning, the bank start revisiting all the investments we have and what is the driver for this is basically let us understand what will beat the market in the future? What is the relevance of this participation, if there is any way of tapping these markets? And certainly, based on that, taking decisions to make those movements.

Nicolas, so far, we have no definition about those cases. We are just -- we continue to analyze, but we have no definition about those cases, specifically to bring to the market. By the way, yesterday, we released it, actually answering some of requests coming from the regulator about the cards business. Yes. Basically, this is the -- one flag that we have in the market. We just mentioned that we are -- certainly, we are analyzing possibilities, but there is no conclusion. There is no approval in the corporate governance of the bank about those issues. And this is very similar to although the other case, there is nothing to finance. There is no -- nothing approved. As soon as we have something, and certainly, we are going to come to the market and we're going to communicate to the market, giving more color about it.

[Nicolas Riva, analyst]

Okay. And then as for my second question about the bill to put a cap on interest rates on credit cards and overdrafts?

[Daniel Maria, executive]

Okay. Okay. The cap of interest rate certainly would affect the system as a whole. Yes. And Banco do Brasil into it because of the size of the cap that we observed in the overdraft represented a reduction in our spreads for the system as a whole, but for our spread. In our case, impact was a little bit lower, mainly due to the competition. Let me give you some numbers, and those are public numbers that we have. The total system has in terms of overdraft, BRL 29 billion. We have BRL 1.7 billion, including -- I mentioned in the previous conference call, 0.5%, but actually it's 5% that we have in the system.

When we compare this to the system -- our participation is lower to the system. When we go to the revolving credit cards, the participation of the bank is even lower compared to this. The system has BRL 42 billion. In total, the bank spend, you have less than BRL 3 billion in the system. Then there will be some impact, certainly, into the size of the reduction or the size of the cap that is being established. However, we tend to have a low impact compared to the system, exactly due to the approach we have.

Just reminding, overdraft and revolving. When the customer starts to use it very often, what we do, we channel the customer to other lines of credit because the -- if they use very often those lines of credit, we could have higher NPLs, and mainly and generally to those lines that have different rates and different formats. We can manage the cash flow of the customer. This is basically due to the financial education of the population that sometimes doesn't understand all these effects of interest rates.

And as to the main point, Nicolas, I think that is important. And this is what makes it more difficult, the second part of your question, what is the likelihood of test this because rates they are at those levels, how because the next big ones, but mainly because there are structural reasons for that. Probably the best way of addressing this is exactly addressing the structural reasons. I personally -- I don't believe in capping interest rates here is going to solve a problem. Probably capping interest rates here is going to create some externalities that you're not expecting, then it's hard to think -- it's hard to predict how will be the behavior of the congress, the lower house about this. Certainly, the association of banks is exactly approaching and showing all those effects to enrich that discussion. But this is a follow-up that we need to have.

But certainly, there will be some impact. And to estimate these impacts to the system, probably you can cross some numbers. You have public information about the rates that the banks charge in the Central Bank web page. For instance, Banco do Brasil is not the -- we are in the rank in the 20s position then in terms of rates, then you can compare the rates. And the same thing for the revolving credit. Then you can estimate a little bit how much would be the impact for the system for that event. But certainly, there will be some. Did I answer your question?

[Nicolas Riva, analyst]

Yes, you did.

[Operator]

Our next question is from Henrique Navarro from Santander.

[Henrique Navarro, analyst]

So my first question is on provision. The second quarter earnings season is pretty much over. And we already believe that in the second semester, the amount of provisions is going to be lower than in the first semester. But let's say that for the case of Banco do Brasil, because you have a higher exposure to agricultural loans and, let's say, lower exposure to SMEs. Can we say that for Banco do Brasil, maybe in the third quarter, we could see cost of risk going back to normalized levels? That's the first question. And the second question is that on rollover. First, we have the 60 days of credits being rolled it over. So it's already about the time for the clients to pay for the first installment after the COVID-19. So how was the behavior of this first payment after this first rollover? That's it.

[Daniel Maria, executive]

Thanks for the question, Navarro. Let's start with the cost of risk. And to be very frank, there is a likelihood that the second half would be better in terms of provisions than the first half. We -- it's hard to have a full visibility of this because there are some other dependents on this because we have so far the benefits that are being paid by the government when those benefits reduce what's going to happen in terms of NPLs, it's unclear, how it's going to work in terms of services since we have the reopening, the behavior of the customers will go to the same levels or not, and this is another aspect that's quite interesting to serve.

The economic growth, I would say that you see this based on focus that every week, the perspective for the GDP is getting better. Yes, it's negative. It's still negative, but better compared to the past. If those variables, the confirmed and the benign scenario, I completely agree the deal that the likelihood is that we have better cost of risk. But there are unclear cases, exactly because things are so dynamic. That we need to find to every week what is happening. And basically, if we are going to have any larger case coming, we don't foresee this. But again, those things happen so fast that is important to report. But what you can expect from our side is to continue to be conservative and continue to have those preemptive provisions exactly to create cushion to all those scenarios. And we understand that this is the right way to do it.

The second aspect is about the rollovers. It's -- your question is quite interesting because certainly, the rollover is lagging the effect in NPLs. And the way we're approaching rollovers for companies is basically for 60 days, and we made the first wave. We made the second wave. We are entering in the third wave. But when you look at the customers individually, you have a little bit of everything. People that adopted -- requested the rollover in the first wave and paid in full. People that paid parts and roll it over for the additional periods, people that didn't enter into the first wave. Now they are requesting, then you have different behaviors on that. And -- but we understand that so far, the way we are looking, the level of provisions that we have is quite sufficient to absorb the impact. Okay. Did I cover everything?

[Henrique Navarro, analyst]

Yes, that's perfect.

[Operator]

Our next question, it is from Neha Agarwala from HSBC.

[Neha Agarwala, analyst]

Just wanted to follow up on the previous question on CLO. I understand that you have not -- you're evaluating what you could do with your holdings in different sectors. But with -- I see another issue is Cateno because you have a JV for your card processing business, which is the CLO. So how would you separate the 2 businesses? And what are the options that you could probably explore if you decide to -- that CLO is no more a core asset for the business?

[Daniel Maria, executive]

Okay, Neha. Thank you. Thanks for the question. I -- it's -- I would say that it's too early to say. Certainly, those questions that you're raising. Since we are exactly in the process of discussion, and we are looking for the value of those companies nowadays and looking at the trends of the market and what would be the market in the future. And you know that predicting the future is not an easy thing and mainly to try to wrap everything. And we do not have a definition. Then it's too early to mention about that. But certainly, as soon as we have decision taken and we go to the market, we are going to communicate, we can elaborate more about whichever is the decision that the bank announce.

[Neha Agarwala, analyst]

And another question on pix. I mean you're already ready to integrate your assessment on pix? What do you think will be the short-term impact of the bank and the medium-term impact as well from the implementation of pix?

[Daniel Maria, executive]

This is a great question, Neha. First of all, pix will change a lot of system, not only the banking system, the payment systems. But also the e-commerce, yes, the relationship of people and e-commerce, probably, we have instant payments in several parts of the world, but the way it's being designed and here probably is unique in some aspects. This, as always in life, brings you to 2 sites. Opportunities, a lot of opportunities in our view and challenges. They use these challenges to see is in the fee business. And some of the lines, and probably the most clear example is 3% of our current account fees, our checking accounts fees are transfers. And this tends to reduce or disappear. It's -- certainly, it will not from 1 day to the other, but tends to gradually reduce.

And there are other effects that all banks, all the system will have. On the other hand, this opens a lot of opportunities of creation of new products and new interactions. For that reason, we have been working in the last 2 years in integrating companies to the system through APIs that I mentioned, then cash management, how the collection process, how we can advise the companies in this -- in the cash management, these will change a lot. I gave an example in the last conference call that is e-commerce. Here in Brazil, it's very common that you go to a web page. You have to sell in the e-commerce to buy some product, and you choose a collection process that you received the slip, then you pay.

And what happens? Usually, this takes a lot of time between you receive the -- actually, you make the payments, the company identifies the payments and so on. At the moment, you integrate this and the financial institutions helping the customers to make the process fast. This challenge, including logistics, these challenges, including the process of the managing the lag of the company. And this is basically the way we want to position on this. And those are the opportunities we're seeing.

At the same time, when we talk about the expansion in this ecosystem, we see a lot of space that we can develop products and solutions. And this is completely linked to the issue of working on co-creating products through the venture capital solutions that we have internally, for instance, in the payment systems and in the companies, including for individuals. This is the other side of the coin, and we believe that we are well positioned to these new worlds. Did I answer your question, Neha?

[Neha Agarwala, analyst]

Yes, you did. One last quick follow-up. Apart from the transfer fees that you mentioned. Another source of fees which could come under this is the collection services. Right? It can be done directly through pix with the government. The commissions that you earn on collection services might go down eventually. Am I right to think about that?

[Daniel Maria, executive]

You're right, you're right. But inside collections, actually, there are 2 kinds of collections. One collection that is basically payments. That you issue the slip and you make the payment. And the other, that is linked at your process that if the person doesn't pay you have a collection system that goes to the notary to enforce the payment. I would say that this second one continues to be active in the bank. Currently, in a different way, but it will continue to happen. The first one, certainly, will disappear or will tend to disappear and move to the other part.

[Neha Agarwala, analyst]

Could you please tell us how much of the total collection revenues are from the first part, which could be under this? A rough estimate would be good.

[Daniel Maria, executive]

I don't have the number on the top of my mind. I don't have this number to give to you. But probably, I can give you a follow-up. Let me just check here. No, I don't have. But I can check this and come back to you.

[Operator]

That does conclude today's question-and-answer session. Mr. Daniel Maria will proceed with his closing remarks. Please go ahead, sir.

[Daniel Maria, executive]

First of all, thanks a lot for the attention, for the questions and for the support that you all give to the bank as shareholders. We are available here for any additional questions, and have a nice weekend. Thank you.

[Operator]

That does concludes Banco do Brasil conference call for today. As a reminder, the material used in the conference call is available on the Banco do Brasil Investor Relations website. Thank you very much for your participation, and have all a nice day. You may now disconnect.