Banco Bradesco SA
BOVESPA:BBDC4
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Banco Bradesco SA
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Good morning, ladies and gentlemen. Thank you for waiting. Welcome to Bradesco's conference call about the first quarter of 2022 results. This call is being broadcast on the Internet at Bradesco's Investor Relations website, banco.bradesco/investorrelations, where you can find the presentation for download. [Operator Instructions]
Before proceeding, we wish to clarify that forward-looking statements that might be made during this call in relation to the company's business perspectives, operating and financial projections and targets are beliefs and assumptions of the company's management as well as information currently available to the company. Forward-looking statements are no guarantee of performance. They involve risks, uncertainties and assumptions as they refer to future events, and therefore, they depend on circumstances that may or may not occur. Investors should understand that general economic conditions, industry conditions and other operating factors may affect the future performance of the company and may lead to results that differ materially from those expressed in these forward-looking statements.
Now I would like to turn the floor over to Mr. Leandro Miranda, Executive Director and Investor Relations Officer.
Good morning, everyone. Welcome to our call about the results of the first quarter of 2022, and we will have the participation of Octavio de Lazari Jr., our CEO; André Rodrigues Cano, our Executive Vice President and CFO; myself, Executive Director and IRO,; Oswaldo Tadeu Fernandes, Executive Director; Carlos Wagner Firetti, Business Controller and Market Relations Director; Ivan Gontijo, Bradesco Seguros CEO; Renato Ejnisman, Banco Next CEO; Curt Zimmermann, Bitz CEO; and Carlos Giovane Neves, Banco Digio CEO.
Now I give the floor to Octavio.
Thank you, Leandro. Good morning, everybody. Thank you for joining in our 1Q '22 earnings conference call. The economic landscape in the first quarter made a slight advance with GDP forecast picking up a little bit and the creation of additional jobs. Inflation remains a worrying global phenomenon. It's a significant challenge for all economies, especially Brazil. The war in Ukraine created pressure on the oil and other commodity prices, and there are no expectation of any restraining price trends over the near term.
The Central Bank of Brazil has moved forward with its monetary policy, and we expect to see a slowdown in inflation during the year. However, interest rates are likely to remain high for a long period, which should impact GDP growth. Given this scenario, Bradesco performed well this quarter with a net income of BRL 6.8 billion, and this represents an ROE of 18%, an increase of 3.1% quarter-on-quarter.
The highlight of the period was the net interest income, which grew 9.5% compared to 2021. The client NII rose 19.6% within the same comparison, resulting from an increase in spread and repricing of the portfolio and increase of the Selic rate on our margin on deposits.
The loan portfolio also posted a good performance, expanding by 2.7% vis-Ã -vis the fourth quarter of '21 and 18.3% year-on-year. The most significant movement took place in the portfolio for individuals, which grew 3.3% in the quarter and 22.6% year-on-year, particularly in the lines with the highest margin.
There was an expected slowdown of growth in mortgage financing due to the rise in interest rates. Nevertheless, this is a line that will continue to smoothly evolve and adding value to our businesses.
Fee and commissions income performed well, up 6.7% year-on-year, practically 7%. And total costs were controlled, especially considering inflationary pressures. There was a growth of 4.4% compared to the previous year and a 9.1% drop quarter-on-quarter.
In line with our expectations, delinquency rose this quarter, and we already expected this indicator to return to prepandemic levels. It should be pointed out that the growth in higher-margin businesses also carries a controlled growth of this indicator, and we are always ready to make the right adjustments of costs and returns.
Insurance operating income reached BRL 3.3 billion in the quarter, a growth of 4.7% over 12 months. And the result shows that there is a continued recovery in the insurance area, and it should be even greater in the future quarters with the move in premiums and the control of pandemic and improvement in financial results. Due to all these factors, we revised our guidance and also associated to exogenous factors, factors of the economy and geopolitical factors. We have revised our guidance, and we'll be talking about that on the last slide.
Moving on to Slide #3. Just as a highlight, we know that there was an event in this quarter that we classified as nonrecurring due to its nature. And it was a net income of BRL 231 million that we had with the demutualization process of CIP, the Interbank Payment Chamber.
Slide #4, talking about the expanded loan portfolio growing 18.3% year-on-year with double-digit growth in all lines. Demand for credit remains, although at a lower level, but with recovery in NIMs. This performance is a consequence of our commercial positioning based on the intensive use of data and analytics in risk analysis, which allows us to be more assertive in defining price, limits and credit approvals.
One highlight was credit cards with a 45.6% growth compared to 1Q '21. This came from a structured effort aiming at increasing the presence and the use of cards by more slices of our 74 million client base. One of the core points for the success of this work was the creation of new products targeting a digital-friendly audience.
And real estate financing posted a growth of 23.3% for the year. And expected, the performance is not likely to be repeated in 2022. The growth will continue but at a pace that is more compatible with the new context of higher interest rates.
Credit for companies increased 15 -- this continues to be one of our priorities. Credit for companies increased 15.7% in 12 months. And the main categories were working capital, machinery and vehicles financing and agribusiness loan.
Digital channels contributed BRL 24 billion of origination in the quarter, an increase of 44%. And the role of digital channels in the production of the portfolio is growing, and our expectation is for increasing client engagement in the consumption of credit through these channels. It's a natural trend, and we are committed to offer a more user-friendly journey to boost our digital origination always. Nevertheless, as you may very well see on the right -- on the upper right of the slide, origination is already lower than in the fourth quarter of '21 as a result of the higher interest rates and increased level in risk analysis.
Now let's go to Slide #5, talking about provisions. We are at a stage where credit conditions are going back to normal as delinquency rates were at historically low levels. And the risk-adjusted returns on credit are at the appropriate level given the credit repricing movements and the turnover of the portfolio.
Provision expenses grew this year, reaching 2.3% of the portfolio. This quarter, total provisions represent 7.6% of the portfolio, an expansion from the previous quarter. Nevertheless, we continue to maintain a comfortable level of reserve on our balance sheet with a coverage ratio of 235% and 105%, including the full renegotiated portfolio in the ratio.
On Slide 6, talking about the renegotiated portfolio, which amounted to 4.9% of the loan portfolio. Comparing to March 2021, it posted a growth of 3.1%, below 17.1% growth of the loan portfolio in this period. Given the growth that we see in the loan portfolio, we believe that this increase in the renegotiated portfolio is normal and under control. Our provisions for renegotiated portfolio represent over 62% of the total, and the delinquency rate for this portfolio was 18.7%, still below historical levels.
Talking about delinquency on Slide #7. The total delinquency ratio came to 3.2%, an increase of 40 bps compared to the previous period. And this is primarily due to the normalization process of delinquency, which we had already predicted would occur, and the effect of the credit growth mix as well. We believe that in the second quarter, we will have a smaller growth, still around 10 to 20 bps. And after the second quarter, a relative stability. For individuals, the acceleration in this quarter came with the expansion of the portfolios with higher spread, especially credit cards. And we consider that the growth of the delinquency indicator from 15 to 90 days is seasonal without anything exceptional.
Gross provision expenses accounted for 96% of the NPL creation. And lastly, we would like to reinforce that we continue with our loan management process and sale of nonperforming and active portfolios whenever such a transaction is economically accretive. However, in this quarter, we did not sell active portfolios in a material way. The amount was only BRL 120 million.
Talking about the NIIs, Slide 8. The total NII performed solidly in the first quarter, growing 0.6% compared to the fourth quarter and going up 9.5% in 12 months. The main driver for the client NII was the client NII, which rose 7% in the quarter and 19.6% over the year. The growth in the deposits' income is pushing the rise in the client NII under the impact of the higher Selic rate than in 2021.
Additionally, credit NII did better than our initial expectations due to the better spreads, also the speed of the portfolio turnover and expansion in higher-return operations. In this quarter, gross client NIM grew 60 bps and the net NIM, despite the increase in provisions, by 30 bps. For the market NII, we posted a reduction of 43.1% during the quarter, resulting in BRL 1.2 billion, reflecting the increase of the CDI in our ALM positions.
Now on Slide 9, talking about fee and commissions income. We saw a growth of 6.7% year-on-year and there was a seasonal decrease in the quarter. Cards had the greatest contribution with 19.1% growth. And we saw a boost in the number of cards, mainly through sales in digital channels, which grew 260%, as I said before, compared to a year ago. And the end of the pandemic brought an increase in the amount of transactions on cards, and interestingly, the amount was higher in this quarter than in the fourth quarter, which is seasonally -- it's usually the highest because of the end of year celebrations. The consortia segment is also notable. We are leaders in the market. 27% of the sales of consortium have been made through digital channels as well.
Now Slide #10, talking about operating expenses. This cost discipline is a constant in our management practices. Operating expenses advanced 4.4% compared to 1Q '21, well below the inflation accrued in the period in spite of investments in client acquisition and digital evolution that we have been doing.
Payroll expenses grew 8.5% year-on-year despite the collective agreement of 11% that occurred in September '21. We will continue to promote growth in IT, data engineers and business teams such as investment specialists. And even with all the investments that we are making in the bank, the total number of our headcount has been brought down by 1.3% in 1 year. Administrative expenses grew 5.6% in the annual comparison, showing that we absorbed much of the accumulated inflation, 11.3% of the IPCA and 15% IGPM, in addition to the increase in the business volumes, which has an impact on our variable expenses.
Some of the factors that played a role in the solid performance of administrative expenses, we have activities such as we have been mentioning, the optimization of the ATM network, a reduction of our own machines by over 4,000, and we continue to revise looking the evolution towards a better number, less transaction number. The total optimization will be 491 branches, but most of them are being converted into business units. And the effective closing are 88 branches, but the total movement is of almost 500 branches. And I think it should be pointed out that our personnel and administrative expenses already include investments related to the expansion of our digital initiatives.
Next, Ãgora, Bitz, Digio. And without these investments, the growth of our total expenses would have been half of 4.4% of the total expenses. They represent basically half of this percentage of this indicator. These are investments that we will continue to make in our digital initiatives. And of course, they consume as you can see in the line of expenses. However, they are very important investments to be made by the corporation.
I think we should also mention that in our digital initiatives, especially this year, 2022, we are having a trade-off between growth, favoring client activation, retention and loyalty, making them more profitable. The other expenses line shrank by 15.5%, mainly due to higher levels of provision last year. Our expectation is that this line will post a reduction in 2022.
Turning now to Slide 11. The insurance group experienced a revenue increase of 13.2%, seen in all lines of business due to increased number of contracts as well as number of vehicles and residences in the annual comparison. This performance was seen in all distribution channels and business partners, but we also highlight the digital channels with an expansion of 56% in the first quarter of 2022. Income from insurance operations posted an annual improvement in its performance in first quarter '22 due to the growth in revenue, an improvement in financial income over the period.
The volume of COVID-related claims in the first quarter of 2022 was BRL 512 million, the lowest since the beginning of 2021 and 54% lower than the same period of last year. Despite the recent increase in demands due to the new Omicron variant, we did not see the same severity as in previous periods. Hospitalization cases are much less frequent and recovery has taken place in a shorter time.
Now turning to Slide 12 about capital and liquidity. The Tier 1 remained at the same level as in the previous period, well above the regulatory minimum. The profit for the period was enough to absorb a distribution to shareholders in the form of interest on shareholders' equity, prudential adjustments and the growth of the loan portfolio. Indicators for liquidity also remain at rather comfortable levels. RCR around 160%.
Moving to Slide 13. Let's talk about our digital expansion. Over the last 2 years, we have spoken quite a bit about our movement towards technological acceleration. And this has been intensified by the pandemic. Today, as life gets closer to normal, we want to talk to you about another stage, that of loyalty through experience and autonomy. If before, and particularly in the financial system, many people were fearful or prefer to use physical channels to make transactions and purchase products and services, today, the situation is completely different.
Many of our clients now prioritize the digital experience. Evidence of that is, of our total transactions, 98% are performed through digital channels. Out of the total, 93% are concentrated in mobile and Internet. And the growth continues to accelerate. Looking solely at a comparison for the first 3 months of this year with the same period last year, we saw a significant growth of 92% in mobile financial transactions.
This boost in the digital experience is also reflected in the number of digital checking account clients, which stands at 70% of total clients. It's a number that keeps rising and must continue to evolve. The number of accounts opened through the app has also been trending upwards. We ended the first quarter of the year with a growth that was 5x higher than in the same period of 2021. It's worthy to highlight a 72% growth in May account openings, demonstrating the strength of our positioning in the micro-entrepreneurs segment.
On Slide 14 about digital credit. The relationship with a more digital customer has led to a landscape of new and greater business opportunities that are continually focused on sustainable development. Over this quarter, we saw digital channels leading the way in the supply of credit. Among individuals, the number of loan operations granted through digital channels at Bradesco now sits at 73% of the total.
We have also seen a lot of move from entrepreneurs focused on resuming business after the pandemic. We are constantly evolving our platforms oriented toward companies including partners with start-ups. In the annual comparison, the authorization of corporate digital credit evolved by 48%, reaching more than BRL 10 billion.
Now on Slide 15, a little bit about our figures. The indicators of digital development, we've presented in the previous slides. In this slide, we can see it is not only in loan products that we're making significant progress. Consortia, investments, insurance products and others posted a consistent growth via mobile. Another contributing factor to the bump in sale was the introduction of new features. This included the issuance of credit cards in day plus 0 and the opportunity for clients to add a new card to their phone's wallet immediately after approval without the need to wait for the physical issuance.
On Slide 16, our digital initiatives. Ãgora grew its net funding by 50% in 1 year and reached 785,000 clients. next grew its client base by 153% in 1 year and reached 11 million clients. Already exceeded this number actually in April. The volume traded nearly doubled in the same period. next is coming this -- into this year more focused on client monetization. Bitz hit the 9.5 million downloads and 6 million accounts mark. It has become the gateway for clients in the banking phase.
This quarter, we also completed the digital transaction which is already fully embedded in our numbers, 4 million accounts and posted a TPV of BRL 2.5 billion in the first quarter. And our digital initiatives will continue to grow this year in an effort to deepen very significantly the relationship with customers focusing on their profitability, adding more results to the organization with the inclusion of the results brought by these companies. But that's a significant investment, like I said, accounting for 50% of the 4.4% growth in expense ratio.
Now on Slide 17, sustainability. We have updated our sustainability strategy which is now based on 3 strategic pillars: sustainable business, climate agenda and financial citizenship, as these themes require an agenda featuring more active change and greater strategic focus. For each of these 3 pillars, we made public commitments to leverage our contribution to sustainable development. In the pillar of financial citizenship, for example, we have just signed on to the commitment to education and financial inclusion of the UN and are the only Brazilian bank to be part of the select group of 28 signatory banks.
Our public declaration states that we're driven to increasingly contribute to financial inclusion and promote financial health of clients and society. We remain committed to the target of channeling BRL 250 billion to sectors and assets with a positive social environmental impact by 2025. As of March 2022, we have already topped BRL 107 billion or 43% of the goal.
In terms of the climate agenda, we have been active in both the UN through the Net-Zero Banking Alliance and in the GFANZ, a global alliance that leads institutions in the financial sector to accelerate the transition to a cleaner economy. Sustainability is one of our 4 pillars in the corporate strategy. It is aligned with our mission to creating opportunities for people to achieve their goals and for the sustainable development of companies and society. And we want to continue as leaders and pioneers of this agenda at a global level.
On Slide 18, speaking of our guidance. Given the significant changes, like I said before, in the dynamics of the markets we are active in, we have decided to revise our guidance to reflect our current performance and expectations. Spreads have remained above the levels we were expecting, and we don't see any additional pressure in 2022. This has favored a faster repricing of our loan portfolio. Also, we have seen growth in products with higher spreads in the mix.
We have also captured a greater benefit than expected in the income with deposits, which makes up the client NII. As such, we have significantly updated our client NII guidance to 18% to 22% growth versus 8% to 12% previously. For credit provisions, given the intensification of growth in higher-return portfolios, we shifted our expectations from BRL 15 billion to BRL 19 billion to a new range of BRL 17 billion to BRL 21 billion. For fee and commission income, considering the performance seen in the beginning of the year and our expectations for the rest of the year, we have updated the range of this line to a growth of 4% to 8%.
Regarding operating expenses, we continue to focus on efficiency and full control of expenses even as we consider investments in our digital initiatives and in the technology growth of our business. We have updated the previous guidance to a new range between 1% and 5% for the reasons mentioned earlier, and we maintain the guidance for the insurance and expanded loan portfolio lines. It communicates well with what we are changing in the client NII.
In insurance, we shall move forward towards the center of the guidance. The income is expected to benefit from a growth in premiums, the most favorable financial ratios and a lower comparison days in some quarters of 2021 which were impacted by the pandemic. In March, for example, just to give an idea, in March 2022, the insurance group already had a performance of 16%, already very close to the guidance.
In the expanded loan portfolio, we are seeing a growth compatible with a range presented from 10% to 14%, like I said before, due to the elevated growth in the previous year but featuring a more favorable mix. For now, we continue to follow our policy of not providing official guidance for the market NII. However, for the sake of transparency, we report that we do not expect this line to post an incremental income over the next quarters of 2022.
Thank you for your time. And now we move to the Q&A section.
[Operator Instructions] Our first question is from Eduardo Rosman, BTG.
My question is about the guidance. We saw a major change in a few lines. And it seems to me that the core, the client NII is getting better. I know it's a little bit too early to talk about 2023. We are at the beginning of 2022, and lots of things are going on. But the composition of this new guidance seems to have a positive carryover for 2023. Would that be correct?
Eduardo, it's a pleasure to talk to you. We revised our guidance. We thought it was necessary because of transparency that we always expect to have with you. And the turnover of the portfolio, the resilience of inflation that will keep interest rates higher for some time and the perspective that we had at the end of last year, that there could be a reduction in interest rates and the SELIC rate still within 2022. And then '23, there is no doubt whatsoever that this is not going to happen. The interest rates are going to continue high over 2022. And maybe in the second half of 2023, this trend could change.
And the exogenous factors changed very quickly over the first quarter of this year. The war and the U.S. inflation, the European inflation of dollar, the exchange rate. So many things happened during the first quarter. And this is the reason why we felt very comfortable with this review.
And you are quite right in our remarks, yes, this is going to bring about a positive carryover for 2023. The loan portfolio that we are turning over and that was originated of over BRL 800 billion. That was originated way back then. We have been growing at 2 digit and it was originated with 2 and Selic. And now it is 12.65 and the Selic could go further up.
So our expectation for 2023 is that there will be a positive carryover of what we are planting today. And a little bit more of ALL, okay, but on the other hand, the spread is better. So the operations that we're carrying out, well, it's only natural. For instance, real estate credit, Eduardo, you reduce production not because you want to reduce, but this is only natural.
If you have an operation of real estate 20, 30 years with a 12%, 13% rate, the production will be different. We're producing BRL 2.5 billion to BRL 3 billion. And now we're doing BRL 1.2 billion, BRL 1.5 billion because people do not want to have this kind of commitment during 20 years and the companies also need more working capital for the short run. So they don't want to make very big long-term investments because of the high interest rates. So we are very well sure -- very sure that we will have a positive carryover for 2023. And this is the reason why we revised our guidance.
Octavio, very good. One question more. Once again, we were surprised with the costs. And you have many initiatives in this area. They are not new. You have Ãgora. You have next. You have Bitz. What about the investment in these initiatives in the environment of much higher interest rates? Will you continue to invest very heavily in these initiatives? Or with higher interest rates, these initiatives will not bring you a very good result in the short run? And their contribution in the short run will not be very big and also because of cost control?
Thank you, Eduardo. Yes, you are correct. We have to be very rigorous in our cost control. Renato and Curt and Giovane, they have very strict cost control. This is why I said before that in 2022, there is a little bit of a trade-off. We are going to focus less accelerated growth and more retention, loyalty and profitability of these clients. If you look at our 3 companies, we are talking about 20 million clients. And here, we are not including Ãgora, okay? A little bit more than that. And this is a very important number of clients that we have to make profitable. So we are doing this trade-off because we see what is happening in growth companies vis-Ã -vis value companies.
Eduardo, can you hear me? Okay. Okay. Well, there was a red light blinking here, so I thought there was a problem. Okay. So we see what is going on in the market regarding growth companies vis-Ã -vis value companies. And we will continue to invest in them because they are victorious though we have a very win-win situation there. And these companies will quickly -- well, either doing businesses or doing an IPO but bringing advantages to the company. They still require investment. This is why I talked about the total of the expenses and how much of this total is investments in the digital initiatives. But they are very important to maintain and to bring about the loyalty of these clients.
[Operator Instructions] The next is Jason Mollin from Scotiabank.
My question is about guidance, but it was already answered. So my other question is, could you tell us more about the competitive scenario today compared to the prepandemic level, particularly for checking accounts, credit cards and mortgage loans? In which segments does Bradesco believe there is -- or there are new entrants coming in? Where does Bradesco see more pressure, pricing and fees of accounts and assets and credit spreads, payments, et cetera? And if I may ask a second question, I can do that later. Okay.
Yes, you can ask right now, Jason. Please go ahead.
So my second question has to do with the regulatory and political environment. Firstly, about projects that would increase taxes for financial institutions. Could you give us an update about what is being discussed? And secondly, we can also hear in the media, Bolsonaro statement, in which he said that there will be a fantastic announcement that would be a revolution in Brazil. Does Bradesco know what it's all about? So in other words, should we expect to see a short-term digital currency introduced by the Central Bank in Brazil?
Thank you, Jason. Nice to talk to you. Jason, the growth in loan portfolios has been going on in a very significant manner. And competition is more fierce, particularly when we think about new banks. And this is more related to credit card lines. This is the main competition right now, but it also has to do with individual loan.
As for mortgage loans, basically, owing to the need to fund these operations, competition is concentrated in the 5 key market banks. Usually, these top 5, which hold 98% of production, and competition is natural.
As you can see, there is not so much difference between interest rates from one bank to another except for a state-owned bank, which is oriented to lower brackets of the society, but for the rest is normal competition. And that's why we have about the same production level.
So I don't see an attack by new banks in these mortgage loan lines. And we had to be fast with our credit card in order to be on equal footing. The neo-banks today are working with credit cards that don't require an annual payment fee. So just as we invest significantly in our digital business, we want to turn our big Bradesco Bank or the incumbent bank, so to speak, as digital as other digital initiatives.
You can see the growth that happened in the number of credit cards. Billings from credit cards also happening at the big bank. So 45%, so new products, more adequate journey. Once the card is approved, it can already be in the customer's wallet and can be used immediately, electronic wallet. So we believe we are in a very good competitive condition similar to neo-banks.
As for checking accounts, like I said before, you saw the number of accounts that we've been opening, not only at Bradesco, but also in our digital initiatives. Our digital initiatives already account from 18 million to 20 million customers to our corporation, not to mention Bradesco Bank's customers. So the strongest pressure would be related to credit card and personal loan at a lower scale.
With regards to an increase in taxes, we already had CLL. And unfortunately, we don't have much to do about it. To some extent, we try to contribute to have that need mapped when it comes to fees of micro and small companies.
Anyway, we don't expect to see anything new this year. There are many projects at the government level when it comes to dividend, taxes, et cetera, but nothing has been decided yet. And let's keep on watching very closely to see what will happen.
As for new products or any revolutionary scenario in the market, the only thing we have is and how we have BBDC and the digital currency. But this process still needs to become more mature. Tests have to be run because it is a thorough process. It takes a thorough process to test it fully because we are addressing millions of people in the country.
And it takes a lot of security pertaining to fraud and money laundering, everything we deem to be important and required by all of us, not only incumbent banks, but now also applicable to neo-banks with a regulatory requirement that is much higher, not only capital wise, but also by money laundering laws and number of clients on the regulatory scope that the bank -- Central Bank has been working with.
I think the regulatory symmetry has been going down based on the Central Bank directions. It will start only from 2023 and expected to end by the end of 2025. But these will have the first step given -- taken. So we consider capital and risks that might be represented by each one of the banks to the financial market by product or overall speaking.
So for a couple of years now, we are in a more competitive market. But I believe that incumbent banks, so to speak, know how to be positioned in order to be in a good competition stream.
[Operator Instructions] Marcelo Fedato Telles, Crédit Suisse.
My question has to do with the credit origination pace. And there is appetite on your part. Looking at the presentation, you have shown in the presentation that credit origination for individuals has dropped 14% year-on-year. And in the fourth quarter -- well, 14% up year-on-year. And looking at the Central Bank up to February and daily originations, we see that there has been an increase in the retail credit to individuals of 13%. In your case, there is a drop year-on-year vis-Ã -vis the numbers of the Central Bank -- reported by the Central Bank.
So are you adopting a more careful position or cautious position in terms of credit assignment? And what about the performance of your credit card portfolio with Bradesco clients and Banco net clients? Is the performance different between these 2 groups of clients?
Thank you, Marcelo. It's a pleasure to talk to you. Marcelo, the pace of origination has slowed down, but it has not to do with the fact that 80%, 90% is reflected in the individuals because we were originating BRL 3 billion and now BRL 1.2 billion, BRL 1.5 billion in real estate loans and not because of our appetite, but because the interest rate. The higher interest rates lead people to be more cautious about assuming this kind of commitment. And this brings about the lower volume. The client tries to give a bigger down payment and finance a smaller part of the payment.
And I believe that the pace of origination will be going down, Marcello, and it is only natural because of the increase in interest rates. So there isn't a lot we can do about that. You have to keep in mind that the comparison base, we have been growing for 3 years at double-digit -- to that double-digit range. So this is the comparison.
The risk appetite, well, not -- we have not decreased our risk appetite, but when we include the interest rates in our analytics and our models, of course, some people are removed because you have a higher interest rate. So the cut -- the line has to be brought down.
And the client has to be approved by our credit model. This is a natural consequence when you have an increase. If you have 2 in Selic and you have 1,275, of course, the difference is very big. So this is a little bit of what is going on. And you have to look at the investment side on the part of company's major projects and bigger investments, investments that the companies are making for the long run.
They are a little bit hindered because everybody wants to wait and see what is going on and what will happen with the interest rates and volatility, as you know very well, Marcelo is the big problem. Sometimes the interest rate is higher, but you don't have a lot of volatility. But a very high volatility and this very strong growth, a steep slope and inflation volatility of the dollar that went up and down, up and down in the world scenario.
All this leads companies to be more cautious in their bigger investments. And of course, this has an impact on your credit performance or credit origination because people give their preference or turn their eyes to their needs of working capital, for instance. And companies just sit and wait and see what will happen with the remainder of our 2022 in order to position themselves in 2023. This is more or less the scenario.
We have not lost our risk appetite. We do have the same risk appetite, provided we have the spread to pay for the risk of capital. And this has to be taken into account.
And regarding credit cards, growth was followed by the return of people to the streets. And they're going to shopping centers, they are shopping. And this is the reason why you have this change because of the lower restrictions because of the pandemic. In the first quarter of 2022, the revenue from credit card transaction was higher than in the last quarter of '21, which is usually much higher because of Christmas, et cetera.
Of course, you have delinquency going up a little bit because we know that delinquency in credit cards is higher. However, the revenues brought by credit cards is much bigger. And it really covers all the delinquency that we might have. So we understand that delinquency has gone back to historical levels of 2019, but it should go up 10 to 20 bps over the second quarter. And then it's not going to go down, but it's going to stabilize at a higher level, which is the level that we had before the pandemic, and then it will be maintained at this level.
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NII. Nobody expected at this level, 0. So what about the market NII dynamics? And what about normal conditions when Selic doesn't have such an impact? What should we expect to see the level for the market?
And second question, just a follow-up. You said delinquency going down then 10 bps and become more stable in the second very little. So should we assume that you will go back to sell BRL 1 billion along these lines, which is the normal level of '21 from 10 to 20 bps and more stable with the second half of the year?
Thank you, Thiago. Thank you for your questions. Thiago, when it comes to market NII, that's a onetime event. You're all aware of that. Brazil -- Bradesco has a lot of assets alone. And we never stop working on loan over the years. Even in the pandemic, we set up a loan. If you think about the last 3 years, we had double-digit growth, very high in the loan portfolio for companies, large companies, small and midsized companies and personal loan. So we never stopped stepping on the gas.
At that time, when we generated the portfolio, Selic was 2% and then there was a rise, an extremely certain fast and violent rise in interest rates in the country, not like in the U.S., from 1.5% or 0.5% to 1%. In our case, it was 2% to 2.75%. So it takes a while to generate the portfolio.
We can do it faster now. So this fact of the market NII is not recurring, it's very specific of the current moment. And that's why I answered a question, if I'm not mistaken, to Marcelo or to Eduardo about the positive cash call -- Eduardo, the positive cash call for 2023.
Because this fact of the market NII will be resolved over time with the creation and generation of a new portfolio with a new Selic rate and you can solve it and then you can have a positive market NII, which already happens over 2023 with the pace that we have to renew our portfolio, so that's a one-off event. It happens at a time in which volatility is very strong. We saw it happening in previous years. There were moments in the history of our country in which it already happened. But it was a fast recovery, you generate portfolio, bringing new operations, and you can go back to a positive performance.
As for the delinquency you mentioned, actually we have this expectation to grow 10 or 20 bps, and then it gets stable at a higher level similar to what we had pre-pandemic. And in the current quarter, like you said, we do not sell active portfolios or nonactive portfolios. We'll do that once we envisage important opportunities, which are profitable and that makes sense for us. One of them is being analyzed and is expected to happen in the second quarter, but we're still working on this.
And whenever we have the chance because you work on delinquency, NPL, portfolio and you compare whether it's better to sell or buy a specific portfolio. We can see it is more adequate right now to sell portfolios. Naturally, depending on the interest rates, we have to see how it happens. But answering your question, yes, we keep on studying this. And certainly, we'll have a portfolio sale over 2022.
Flavio Yoshida, Bank of America.
I would like to talk about the quality of the portfolio. You said that delinquency should go up a little bit. And you said that it should go back to pre-pandemic levels. When we look at the segment separately, the individual segment is already at the pre-pandemic level.
So I would like to know if this additional deterioration that you are expecting would be more from corporations that have a lower delinquency now. And why are you so confident to say that delinquency should be stabilizing over the second half of this year? So why do you have this level of confidence?
Flavio, you are correct. Individual has already gone to pre-pandemic levels and corporations are at a lower level of delinquency. This is exactly what you said.
The mix has changed, Flavio. Large corporations are seeking less credit, maybe going more to the markets to finance their activities. So we have less credit for corporations, less credit for real estate and payroll continues to grow and mix has changed towards higher spread operations. So it's only natural to have a higher AOL. This is what happens when you have a change in mix.
You had a big growth in real estate loans and less in the others. And when you have this change in the mix, this brings about a higher delinquency. However, the spreads are better. So it's like a trade-off. This is a little bit of the scenario that we will be seeing over 2022, a change in the mix, more towards profitable or more profitable portfolios. And this is why we understand that delinquency should not go down but keep the pre-pandemic levels and with a slight increase of 10 to 20 bps, as I said over -- during my presentation.
This is Leandro. When we look at each one of the product lines, we see that relative delinquency has not changed. So you do not see a further deterioration in the product. As Octavio said, you only have a bigger weight per client in this change of mix and still about the same thing.
Something draws our attention, which is credit card. I think 46% in the year. And this is a line that brings some concern to the market because of what has been happening in the last year.
So what about the risk in that specific portfolio if you have -- can you make a better selection of clients and offer the card to the client that shows a lower risk? Or do you believe that this line as a whole could bring about a deterioration in delinquency over the year?
Flavio, the growth in credit card that we have been seeing here at the bank is very much focused on the Bradesco clients, those people who already have transactions with Bradesco. So we do have the credit history of these people. And of course, you could have a slightly higher delinquency. However, we already know these clients.
This is not the growth of credit card in the red ocean. This is under our control. And this is also valid for [indiscernible], for [indiscernible], et cetera. The growth in the volume of credit cards issued. So we already know these clients better.
Besides, I think it's important to say that we see this growth in our client base, as Octavio said. However, the growth in volume has to do with the reopening of the economy and people traveling and activity and corporate cards and people traveling and activities, leisure activities.
And it has to do with inflation as well. When you have like air tickets, airline tickets and fuel, they are growing a lot. And these are -- we have a very big concentration of these areas. And it does have to do with the very good performance that we see, but also with the factors that I have just mentioned.
Jorg Friedemann with Citibank has the next question.
I would like to talk about something nobody mentioned before, insurance. You are working again on this guidance from growth from 18% to 20%. But in the first quarter -- and it is way below it. Claims ratio, for instance, is too high, owing to some factors may be one-off events. Another factor has to do with inflation ratios that have an impact on pension plans.
Could you elaborate more on that, please, about how comfortable you feel in order to go to the insurance guidance? I think it would help us to fine-tune our models.
Jorg, thank you for your question. Ivan Gontijo, the CEO of the Insurance Group, is here with us. Ivan, could you answer Jorg's question, please?
Thank you, Octavio. Jorg, it's a great pleasure to talk to you. Let me tell you something, we feel comfortable and did not change our guidance because we're already looking at the second quarter in a very different manner. Claims ratio is low. Financial revenue goes up, and we feel very comfortable. If you think about March, like Octavio mentioned, we will see that compared to March 2021, we posted growth of 16%. So the financial part is doing well. It's very well under control.
The second point to consider -- important to tell you has to do with the increase of 2 digits, 2-digit growth in the net premium. Not the gains that have an impact from last year, but I'm addressing business closed in the first quarter, totaling something around BRL 22 billion. This shows growth of 2 digits, around 13%. If you look at billings by sale, auto P&C, 24%; capitalization, 19%; life and pension, 16%; and health and dental, something close to 8%. So in all our business lines, we are comfortable to look at the second quarter and maintain our guidance and have the comfort required to meet our goals.
Another point that I consider important is the ER of 3.7%, which is one of the best results achieved by the insurance group in recent years.
As for the claims ratio, for health, life or homes, there was a strong decrease this quarter like Octavio already said. However, in the second quarter, we already feel it in a more latent manner. So low claims ratio combined to new business and increase in revenues that are consistent, growing month after month, this makes us comfortable to achieve the guidance already in the second quarter.
And for this reason, we do not change the guidance for the insurance group. I don't know if I fully answered your question, but I'll be here for any other clarification.
That's perfect. And just a follow-up question. You talked a lot about portfolio quality, Octavio. But just to underscore our understanding about what you envisage in terms of convergence coverage for the end of the year, just to make sure we are working with the right figures?
Jorg, it's a pleasure to talk to you, dear friend. Our indicator is BRL 225 million and is slightly higher than pre-pandemic levels. If we think about the last 10 years, you see that we always maintain -- well, I will say, Jorg, I believe this indicator will be between BRL 210 million or BRL 200 million within this range, BRL 200 million and BRL 210 million, perfect. I saw you still maintain that additional provision at very high levels, and it also provides comfort.
Pedro Leduc, Itaú BBA.
It has to do with the update of your guidance regarding AOL expenses, a lot changed since the last quarter. So you revised the NII app and also your provisions, but I would like to talk about the comfort that you have in terms of having this mix of BRL 19 billion. It seems to be very similar to the that we had in the last quarter, the NPL line as well as NII seem to go up faster. We are already near the pre-pandemic levels. Indicators for 90 days of Bradesco seem to be worse than the industries, and this has been happening for quite a few quarters. And it seems to me that we are comfortable with our level of AOL.
You mentioned 20 bps in the second quarter. And specifically, this -- are you making some adjustments in origination in order to have this degree of comfort with the control of the AOL expenses?
Pedro, this is Leandro. Basically, what we have been seeing is that the NPL creation should be going up 10 to 20 bps in the next quarter. And this stabilizes in the second half. In relation to each one of the segments, this is -- the large corporation segment has been improving in quality, and we expect this to continue.
The level of delinquency has dropped in this segment. So this is an extra comfort that we have in provisioning. We should have about BRL 20 billion that we mentioned regarding expected losses that points to the scenario and based on the assumptions of the Department of Economics.
So we're comfortable saying that we are going back to the levels of 2019. And after that, the coefficient will be maintained delinquency large corporations. When there is a problem, everybody learned about it because the newspapers bring the news, et cetera. So you can see that there is no large corporation that might be having problems.
So I don't believe that we will be having any surprises coming from large corps. This is the reason why we have a relative degree of comfort to give you this new guidance. Regarding AOL vis-Ã -vis the size of the portfolio, we have the highest provision.
When you look at the other banks, you see that they have to reinforce in order to get to levels close to ours. And we have the largest corporate portfolio in Brazil. Even in spite of the change in mix and in terms of volume, it is much smaller in individuals and in large core. So this is the reason why we have this balance individuals, okay, but for a large corporation, this gives you this level of comfort.
In individuals, some adjustments being made in origination because it seems to be -- it is slightly higher than the overall system. As Octavio said, we have a mix of more profitable products such as is the case of credit cards and revolving loan and installments and a decrease in products where we have been the leaders always low risk such as the real estate that has a lower spread.
So you will see that relatively this portfolio brings more return and also it drives a higher AOL. But what you have to see is the net spread and the net spread has been growing only in this quarter 30 bps. When you include the new Selic in the credit model in the analytics, it's only natural to see a change. It's not that we are pressing the rig, but we have to require other things from the clients in order to accept the operation.
Carlos Gomez with HSBC.
My question is about capital. This quarter, 2.5. So what is the goal for the end of the year? And what about the consequences on the company's payout?
Second question. Would you consider consolidating fintech and having more investments in this area?
Carlos, I'm sorry, I did not understand the second question. Would you repeat it, please?
Would it make more sense to acquire one of these fintech companies?
With regards to capital, Carlos, we have a very comfortable position. Our operation will continue to generate capital until the end of the year. Our capital position today seems to be adequate for the moment.
In terms of dividends, we expect to maintain our dividends, our dividend payout policy, paying interest on equity and maintaining the payout at the current levels. So to date, no changes expected in the policy.
Carlos, when it comes to acquisition of fintechs, there are 2-point aspects here. Firstly, it is on our radar, both the [indiscernible]. We keep an eye on companies that might make sense for us and add value to our companies or anticipating movements in technological progress. So many companies are being considered and if it makes sense, we might acquire them. Like Bitz, for instance. Bitz acquired 2 companies, right? [indiscernible] we brought the management competence and increasing with those companies.
On the other hand, we also have -- by the way, there are 2 other aspects. One is private equity, which is our investment fund. We have several companies that we invest in, never as a controlling party, but always as investors, a 10% or 15% or 50% -- or 20% stake. 18 companies invested in total. And we also keep an eye on them and acquiring some companies could also has another initiative, which is an investment company in other business that makes sense to the organization so we can speed up our technological progress.
And Bradesco Seguros also has an important arm of IT innovation, not only in IT, but also in additional business. [indiscernible] several companies involved in the insurance group. So when it comes to acquisitions or investing in fintechs, this is something that's permanently on our radar.
And next, just to add, we announced the acquisition of [indiscernible], working on fixed services and checkout. And this will help us to have better control of our cash back in next ecosystem. And we had already previously announced not the acquisition of the portfolio, but the individual portion.
The Q&A session has come to an end. And Bradesco will make the closing remarks.
Thank you very much for participating. So our conference has come to an end. And should you have any additional questions, any further clarification that you might need, our Investor Relations department will be available to you at all times. Thank you very much.
Thank you very much. Good afternoon. Thank you very much for participating.
Thank you. Bradesco's conference call has come to an end. We thank you very much for participating and wish you a very good day.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]