Banco Bradesco SA
BOVESPA:BBDC4
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Banco Bradesco SA
Earnings Call Analysis
Q3-2023 Analysis
Banco Bradesco SA
The company maintains a solid growth trajectory with annual revenues surpassing BRL 100 billion and an impressive return on equity (ROE) of over 23%. Corporate lending showed a modest rise, particularly from large corporations, while small and medium-sized enterprise (SME) lending saw a slight contraction due to stricter credit origination practices, in response to higher delinquency rates in this segment. Nonetheless, the company is poised to boost lending to SMEs moving into the fourth quarter.
The company has seen improvements in its portfolio, with a reduction in the Allowance for Loan and Lease Losses (ALL) by 10.9% compared to the previous quarter, which brought down the cost of risk to 4.2%. This indicates a strategic success in managing credit risks efficiently. The loan book remains robust with a stable total credit provision balance of BRL 59 billion, reflecting a proactive approach to credit management. Notably, non-performing loan (NPL) creation decreased significantly across all segments, with further improvements expected in the coming quarters.
The company's Net Interest Income (NII) reached BRL 15.9 billion for the quarter. Despite a 9.6% year-over-year decline in Client NII, driven by lower loan volume and a decrease in average spread, Market NII showed a positive trajectory. Fee and commission income remains a competitive area, impacted by regulatory challenges and pressure from new market entrants. Nonetheless, underwriting performance excelled with a growth rate greater than 100%. Operating expenses were up by 8.1%, with a significant portion attributed to other operating expenses, yet personnel and administrative expenses were well-contained, reflecting effective cost-control measures. The company continues to streamline its service model to improve efficiency, including digital transformation efforts with Bradesco Digital.
Insurance operations contributed significantly to the company's performance, with the income for the quarter at BRL 4.6 billion and a year-to-date growth of 25.6%, positioning the company at the top end of its guidance. The company's strong ROE is further evidenced by its capital position, with a Tier 1 Basel ratio of 13.4% and a total Basel ratio of 16%. The company continues to demonstrate strong shareholder commitment through consistent provisioning of interest on shareholder equity amounting to BRL 8.6 billion for the year.
Acknowledging the peak in delinquency levels, particularly from smaller businesses, the company has made prudent adjustments to its loan portfolio. Future growth is anticipated with a renewed focus on lower-risk segments such as mortgage, payroll, and rural loans. There has been a recent uptick in credit origination, suggesting a return to normal growth levels. This momentum is expected to continue into the fourth quarter of 2023 and carry through into the year 2024, marking a pivotal shift toward strategic and diversified growth.
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Hello. Good day, everyone. Thank you for participating in our video conference call to discuss third quarter earnings results. It is a pleasure to have you on board. In the initial point of the event Octavio will present the results of the bank. Then we are going to start the Q&A session. If you want to ask a question, you can send them via email or use WhatsApp in the address and phone number that you see on the screen. The presentation will be in Portuguese with simultaneously interpreting into English. And you can select the audio preference directly in the window that you're watching.I'd like to remind you that the presentation and other materials are available for download in our Investor Relations website. I now turn the floor to Octavio who will start presenting the results. I'll see you again momentarily in the Q&A session. See you later.
Thank you, Firetti. Good morning, everyone, and thank you for joining us on our earnings video conference call. We will start our presentation with the highlights slide with the main numbers of the third quarter. Then we will talk about some strategic initiatives that aim not only to control costs, but mainly the increase in revenue. And finally, we will talk about the quarter's numbers.So Bradesco had a net income of BRL 4.6 billion, up 2.3% compared to the previous quarter. With operating income growing 5%. ROE was 11.3% in the quarter, still below the level we would see as appropriate.As you will see during the presentation, we have made progress on several key points, but we are fully aware of the challenges ahead. The portfolio of the book loan or the loan book grew 1% driven mainly by large corporates. Delinquency rates were down, which reflects an NPL creation, falling BRL 1.6 billion and lower credit provision expenses by BRL 1.1 billion. Our 90-day delinquency indicator improved by 10 bps with reduction in large corporate and individuals despite the portfolio shrinking, which has an important denominator effect on the ratio. In small- and mid-size enterprises, the indicator still grew. But we are now seeing an improvement in 15 to 90 day delinquency ratios and in the quality of the most recent credit vintages. Basel ratio Tier 1 rose 55 bps.Finally, the insurance group continued to show a good level of result, making a significant contribution to the bank's performance.I'd like to speak a little about BRADigital. We had an important addition in our innovation system, a new technology hub and innovation that we just implemented to more than 600 employees working at this hub in Helsinki with total connection with the universities, the academia, proximity of partnering companies, projects using emerging technologies as blockchain, cloud and gen AI. In addition we had important acquisitions in the world of payments analytics and in gen AI such as hiring [indiscernible] companies specialized in these technologies. We also have excellent partnerships. We have more than 300 data scientists and around 500 models that use generative artificial intelligence Bradesco experience, which is an area in Bradesco which has a mandatory presence in all of the organization's squads, has the objective of making the client's journey always more current, fluid and enjoyable, and has been recognized by clients and from publications and awards specialized in this subject.Now talking about focus on digital. This entire transformation leads us to a process of rapid evolution in our digital channels with very significant numbers. In individuals, for example, on average clients that access our individual account at 20 times a month and there are now over 60 million accesses per day. BIA Bradesco artificial intelligence is a pioneer among Brazilian banks capable of giving your transactions. And it continues to evolve with the slogan, make it easier with Bradesco, which is already in the media.[indiscernible] to all the products and services already running, it is now doing PIX instant transactions using WhatsApp and working to prevent fraud in case of suspicious transactions through messages to our clients. Everything we are doing in digital gives us certainty about the path we are following with our clients, allowing greater autonomy with a better experience and for us much more business and with a lower cost to serve.Along those lines, we also developed Bradesco Global Solutions in this constant pursuit to enhance experience for our services and channels. We are reinventing and improving the way we connect to our clients by launching Global Solutions, a new open, connected, customized multi-channel platform. Our client journey is showing tangible digital transformation in wholesale banking, which began a few years ago. Our proposal is to offer a unique experience in the banking industry. Global Solutions is monitoring our clients' needs so that we can always offer companies the best solutions for financial management, such as cash management, payroll, cards, insurance on a multilingual multicurrency and multi-bank platform, fully customizable for each company with the advantage of visualization across multiple companies in the same conglomerate.In our high-income vertical in the slide, we show some numbers and details. A big key point for our strategy, something we have discussed a lot with you, i.e. our performance in the high-income segment, our goals to increase our share of wallet, gaining principality in the customer relationship. In Bradesco Prime we have more than 4,000 client relationship professionals and more than 2,000 investment specialists working to enhance services for this segment, constantly focusing on delivering a differentiated experience for our clients.Agora, our brokerage house currently has BRL 81 billion in assets under custody and around 1 billion clients. In order to further enhance this experience and deliver advantages we are now charging -- we are not charging any brokerage fee for trades made through Agora's [ Appen ] website.On another area, Bradesco Asset is a key actor this year with over BRL 700 billion assets under management, positive net funding for the year and outperforming the industry in terms of growth. Bradesco's asset manager has earned recognition in the form of several financial industry awards. A highlight would be bond funds, which in addition to good returns posted material growth and funding totaling more than BRL 240 billion under management.We cannot forget to mention our newest asset [indiscernible] focused on alternative funds and which currently has BRL 34 billion in asset under management. The bank that stands with you.These initiatives in our high income vertical evolve in Brazil and also extend to our offer of international products and services. A good example of this is the My Account, the international digital account that we launched in July of this year to ensure convenience to our clients. It has already reached more than 100,000 accounts at Bradesco Bank. And on the other hand the private bank operation also continues to expand with 45% increase in client assets and liabilities, reflecting the evolution on real estate loans, cards and investment portfolios.Bradesco Bank's operation is also transforming its digital journey to add agility, autonomy and convenience for our clients. At Global Private Bank, which includes our operations in Miami, Luxembourg and Cayman our customer satisfaction indicator, NPS, stands out in the market. It is also worth mentioning the international awards that highlight our team's quality. For the fourth consecutive year, we have been named Brazil's best wealth management advisor.I would also like to touch on the cards area. I should highlight two new novelties in the cards segment. For some time now we have focused on partnerships that create value and centrality for our clients with principality to the fore. We have recently announced an exclusive partnership with Amazon and we are the Amazon's, the Amazon card's issuers [indiscernible]. This partnership has already posted excellent numbers in its initial months. And it is part of our strategy of associating with companies and brands of great value for clients. We have a complete portfolio, the only one that covers all major card brands.We also have just launched Bradesco Centurion American Express, which boasts the best benefits and value a card can deliver for the most demanding clients. Again, principality, followed by principality. We have focused on repositioning in the high income segment and these cards currently account for 64% of individual revenues first contributing to our 2-digit growth in card revenues.Another important point is to speak about agri business. Farm loans are on the rise. We are a leading bank in this area. We continue to evolve in our offering and structures to deliver outstanding customer service. Last quarter I shared with you the launch of our e-agro platform with you. For this quarter I highlight our BRL 19.5 billion volume dispersed, which was 100% up compared to the previous quarter. Our structure focused on agri business has 1,000 points of services distributed across Brazil in addition to 14 agri business platforms. And we are hitting another 4. We have more than 100 specialists who help our clients with consultancy and advice. Due to the importance of this segment for the bank and for Brazil, we will continue to strengthen our structures and operations.Well then here are the details for our third quarter. Net income was up 2.3%, reaching BRL 4.6 billion for the quarter. On the annual comparison, we had an 11.5% decrease. Our credit provision expenses fell BRL 1.1 billion and delinquency ratios have already shown improvement. Client NII for the quarter was lower mainly due to the product mix effect. On the other hand, market NII has continued to show evolution. It was already positive in this quarter and will continue to improve and be positive in the fourth quarter and along the year 2024.Our insurance group continues to post excellent results and will be ending the year with revenues greater than BRL 100 billion and over 23% ROE, but will be showing more details in the next slides.Now let's talk about our loan portfolio. In corporate clients, it was a 1.8%, mainly driven by large corporate that was up by 3.2%. And SME segment posted a 1.1% contraction. But we are still very restricted for credit origination to small companies. Given the economic situation in this segment, which is experiencing higher delinquency ratios, we are set to increase origination in the segment in the fourth quarter. We are already increasing it. And due to the credit policy adjustments, our individuals portfolio were down by 0.1% even though credit origination was growing in the third quarter when compared to previous quarters. And we will continue to increase credit origination in the fourth quarter. As interest rates fall, we see demand for loans improving in the lower risk segments such as vehicles, payroll deductible loans and real estate loans. The daily average of total landing in this quarter was 14% higher than the previous quarter, being 26% higher in individuals and 11% higher in corporates. Even considering that we grew during the quarter and we have not yet recovered in all portfolios by the same pace.It is a fact that lower origination and lower rates mix are still squeezing the client NII. We believe that we will get to normalized origination levels throughout the third quarter and throughout the year '24. At this moment, we are operating below the guidance range.All our reviews and reevaluation of credit models and policies have shown important results. The new credit vintages are still performing 50% better than the 2021 vintages. And we continue to monitor these delinquency ratios in the short run and the volumes. The new vintages already account for 57% of the individual's portfolio in the retail banking segment.The quarter's ALL was BRL 9.2 billion. For credit provision expense it was 10.9% lower than the previous quarter, so this lowered the cost of risk to 4.2%. The year's guidance range goes from BRL 36.5 billion to BRL 39.5 billion. At this time we are expecting to end the year close to the top as we indicated previously. Despite the improvement, we are still operating with a high level of cost of risk because this is a long-tailed process.The total credit provision balance was basically stable and quite robust, standing at n 59 billion, accounting for 9.4% of the loan portfolio. Our coverage ratio for over 90 days fell to 155%. However, excluding 100% provisioned loans, this ratio remained practically flat at 239%. As we have been saying, we see the reduction in the level of coverage as something natural for the end of the credit cycle and at a moment when credit origination still low. Our cover coverage ratio is certainly starting to improve with lower NPL and increased credit origination.Speaking about NPL creation, that it was the highlight of the quarter. There was improvement across all segments. It reached BRL 10 billion, which was a significant drop when compared to the previous quarter. In terms of individuals, total BRL 6.5 billion and with companies accounted for BRL 3.5 billion. NPL creation is set to continue to improve over the next quarters.Our 90-day delinquency ratio was down by 10 basis points with the same level of improvement for individuals and large corporates. In the SME segment, there was still a worsening in the ratio, but less than in recent quarters despite an unfavorable denominator effect due to the declining in the portfolio. We believe that SME delinquency will at least stabilize in the fourth quarter since the vintages have been posting much better performance.Now, short-term delinquency, you can see that there was an improvement across all segments, 30 basis points in total delinquencies, 20 basis points in individuals, 40 in SMEs, and 80 basis points in large corporates. This performance should continue to benefit longer delinquency in the coming quarters, that's for sure.Total NII for this quarter stood at BRL 15.9 billion. Market NII has turned positive showing an improvement of BRL 1.3 billion in comparison to the same period of the previous year. And it will continue to evolve during the fourth quarter and also throughout 2024. Client NII fell by 9.6% in the annual comparison, reflecting lower volume of loans and a 0.6 percentage points decrease in average spread, which stood at 9.1% due to the mix of lower spread and therefore lower risk. We are below our total NII guidance range. Fee and commission income poses a challenge, reflecting regulatory aspects in the competition with new entrants that still have regulatory symmetries. As the capital market reopened, we posted excellent underwriting performance that grew more than 100%. In terms of asset management, the changes that we have made to our strategy are already beginning to produce effects.In cards, the trend is to continue to improve due to the expansion and new products in the high-income segment. In relation to guidance, we posted at improvement and got closer to the range we had previously indicated. Total operating expenses were up 8.1% in the annual comparison. However, personnel and admin expenses together grew by just 0.6%. The large contribution to higher total expenses came from other operating expenses line due to the low comparison base in 2022. In the fourth quarter other expenses comparison base will be normalized, thus reducing the total expenses line's annual growth.The collective bargaining agreement of 4.58% came into effect as of September, so it impacted our personnel expenses line at the end, the final part of the quarter. Compared to the third quarter of '22, this line showed a fall of 0.2%. Admin expenses in the same period only grew 1.4% as a result of our efficiency initiatives. We are promoting a far-reaching review of our service model with a focus on reducing the cost to serve. This involves adjusting our physical presence which will continue in the coming quarters and has the strategy of Bradesco Digital as one of its main levers.The income from insurance for the quarter was BRL 4.6 billion. Year-to-date growth is 25.6%, at the top of the guidance. The quarter's net income was steady at BRL 2.4 billion showing a almost 24% ROE. Premiums continue growing, reaching BRL 28.2 billion in the quarter and BRL 79 billion in the year-to-date numbers. The period's result also benefited from improved operating efficiency and acquisition cost ratio in addition to financial income.Now turning to capital, we posted a 55 bps increase in our tier 1 Basel ratio, reaching 13.4% and 50 bps in total base Basel, which achieved 16%. We continue to make full provisioning of interest on shareholders equity, which has now reached BRL 8.6 billion for the year. Our liquidity position remains quite comfortable with LCR closing at 183%. So this is the end of the presentation. Thank you so much. And once again, thank you for joining us. And now I will join Cassiano and Firetti for our Q&A session. See you soon.
Hello, I am back now. And now joining me is aa Octavio and Cassiano. We also have the CEO of the insurance company. We will initiate now the Q&A session. Questions can be asked in either Portuguese or English. Answers will always be in Portuguese. And you can also resort to the simultaneous translation feature that you find in the platform.Our first question is from Renato Meloni from Autonomous. You may proceed, sir.
Good morning. It's nice to see you again and thank you for taking my question. You had a very important de-risking of the book this quarter. I would just like to understand whether this already places the bank in a position where you can resume growth as soon as the market improves? And what does that mean in terms of client NII for next year and for the coming quarter?
Hello, Renato, good morning. Good morning, everyone. It's a pleasure to be with you. Thank you for your question. Yes, Renato, you're right, we had to make some adjustments to our loan portfolio due to the delinquency levels that we noticed, especially coming from small- and micro-size companies. But looking at the numbers, we may be sure that we already reached the peak of delinquency. And from now on, we will continue to grow. I mean, we never cease to operate. We continue to operate normally. But the fact is that we were trying to work with safer portfolios with lower delinquency levels. And we are now looking at the growth of mortgage loans and payroll loans and rural loans. But the more riskier portfolios had to be put on hold for a while. And mainly also transactions involving small- and micro-sized companies. But we've already experienced some growth, which you could notice from the presentation. There was an important origination growth both in terms of individuals and also companies. Therefore, from now on, I mean growth has been resumed, is returning to normal levels. Throughout the fourth quarter I think this should continue. And the same thing goes for the year 2024. It's also natural that as there hasn't been any strong growth in the loan portfolio, it was a very modest growth of our loan portfolio, and this is something that happened maybe across the board amongst all financial organizations. So client NII is a bit hurt and it takes a longer time to resume that margin. I mean, based on all the operations that we are generating. But as I was saying, we didn't stop to operate. We are still operating with clients with a better score, with a better risk profile. And this gives us a certain comfort in terms of the results. This will pick up with time. And in addition to that, there are also some other growth levers in terms of client NII. And it's important to mention the underwriting performance that we had this third quarter that has been performing well. It grew almost twice as much. Therefore the work we've been doing at Bradesco Asset is already showing some significant results, more than BRL 770 billion of assets under management. And this is also posting positive results to our company in addition to Bradesco Financiamentos, Consorcio and the insurance company which remains an important lever. And it is certainly contributing to the results of the bank. All of these different levers as we move them, they are here to improve our final results in addition to all of our work in terms of cost control. Therefore the expectation going forward is to see the growth of this portfolio. Thank you.
Our next question is from Mario Pierry with Bank of America. Good morning, Mario. You may proceed
I'd like to focus a little on the guidance. You had provided a guidance in August. And you are below the guidance in several lines, particularly margin, fees, the loan growth and revenue. And I would like to understand why is it that you're below the guidance, particularly regarding credit? Do you have the perception that the problems are greater than what you thought in August and you had to make a more dramatic adjustment, and whether you're going to maintain your guidance for the rest of the year?
Hello, Mario. Thank you. Good morning. Indeed in some lines of the guidance, we are below the expectation. We are in perhaps in the low range of the guidance. But it was absolutely to make an adjustment in loan granting, particularly for small and midsize enterprises, Mario, because like I said, these are the loans that give us the best margins with best rates and you can add new services. So that became a little tighter for us to pursue the guidance. But we have an expectation also given the growth of loans in the recent quarter. The evolution of credit, as I mentioned, our expectation is to grow. We should target, I have to tell you, for the lower range of the guidance, but we are working on it. Well, credit, I think we can talk about this. We had to adjust the market NII, as we mentioned, and this was solved, it's water under the bridge. And this will be solved in 2024. We still have a large delinquency in SMEs and also for individuals. This bothered us. We had to make some necessary adjustments for that. And when we make these adjustments, we reduce the speed of loan granting. We had to slow down. We continue to operate, yes, but with companies with a better risk rating and better guarantees. But we kind of hold back those operations that have no guarantee and that offer a credit NII that is better. So that's an ongoing work that we do to maintain the loan book at a normal acceleration. Q4 should show a credit acceleration in all lines, for large corporates, individuals or even SMEs. So it was necessary, it was responsible on our part to make that adjustment, Mario, so that we could control delinquency. In the 90-day delinquency we could see a reduction. When we look at shorter delinquency, we can also see a reduction in all lines, significant reductions in the shorter term delinquency in all lines. And when the shorter delinquency will become an over 90-day pass due delinquency, the expectation is that this will improve. And this will improve all the interest rate curves. That is the word that we tried to do. 2 days ago we ended the month of October and we can see SME's delinquency reducing it. We posted a lower delinquency than in Q3. So our expectation is to continue to work hard to achieve at least the lower range of the guidance.
Octavio, if I may, I'd like to add to your answer. Mario, as we have been saying it's something important. Our RPS insurance expenses guidance and even AAL -- ALL on guidance will achieve the guidance. Like you said, we do have a challenge. And as Octavio mentioned, it is important for credit and client NII as a whole. And Octavio mentioned about this transition. When we adjusted the guidance in the end of the first half, we had a better expectation for SMEs, but this improvement came in October Octavio mentioned. Then for SMEs [indiscernible] important for our margin. They had more items in our balance sheet such as insurance, revenues, fees, et cetera. So there's this movement. Perhaps it was somewhat more detached in Q3 compared to the guidance due to the SMEs. But all other lines overall are moving forward full, almost all of them full. And this is what we are pursuing to start 2024 in full speed in all lines to increase the credit NII in this new normal. We have to remember that we are starting with a smaller base, but our growth will be according to expectations in 2024. This is what we expect.
If I may ask a follow up question. What were the changes in the credit model that you have that would give you confidence to again start accelerating growth? Clearly I think there was a problem because delinquency was much higher than expected. But what were the internal changes that you promoted to contain the problem?
Well, Mario, we are a bank with a footprint all over Brazil. We are present in all states, in all municipalities of Brazil actually. And there are different situations in different municipalities in each one of these different cities where we have clients. Some are more impacted by a higher interest rate. Actually the whole country is impacted by a higher interest rate. Others are impacted by perhaps local issues. So the changes made were not just to the credit model. And I'm referring here to the mathematical model where we had some fine-tuning. But we had changes in our credit policy in terms of the appetite in which to operate, perhaps not operating with this client or operating with this client only if they can provide a guarantee of some sort. So there are a number of variables. I cannot really list them all here. But we basically had a more adequate adjustment in our risk appetite geographically speaking, also according to sector, so that we can -- we could have a greater accuracy in defining the models. It's hard to mention one variable or another, but the accuracy of the model now is very much directed to the right pricing, adequate guarantees, geo location so that we can be more correct with our model. In addition, we brought many of the operations. When we saw this detachment of the delinquency curve we brought many operations in to be analyzed in the traditional model. In other words, what is it that we need to adjust the model here and there, where do we need to adjust the model. And that's the work that we did to it, adjust the credit policy and the credit modeling. And this was solved.
And let me add to what Octavio said. And even the cohorts this year changed. We've been speaking about the cohorts. The cohorts already reflected these policies that Octavio mentioned. And the cohorts give us peace of mind that we are on the right track with the exception of SMEs that required more adjustment in Q3, improving in October. But the cohorts give us some peace of mind that now we have the policies coherent to the macroeconomic scenario that we are envisioning for the rest of the year and next year. Of course we have the high interest rates, we have to have the country growing again, credit origination again. And NPO creation is good news. When we had a reduction in almost BRL 2 billion in the quarter. This was very important to show that the right things we did. And these were quite big, both in origination and in credit policy. All of that gives us comfort so that since July we've been improving. And as mentioned, in addition to all these specific points mentioned by Octavio, if there is one point where perhaps we went wrong was perhaps maintaining our risk appetite perhaps a little longer during the cycle. I think that perhaps it was the wrong timing to adjust our risk appetite. And we reflected a lot on that. We adapted our processes and reviewed our policies.
Our next question coming from Tito Labarta with Goldman Sachs.
My question is your ability to improve profitability in sort of the current competitive environment, right? You've gotten a bit more cautious with lower -- in the lower-income segment and you also have digital competitors there with low cost to serve. And then now you're moving up to higher income. We incumbent competitors with historical advantages and other competitors with the strong investment platforms. So just want to think about how you will fit into this sort of new competitive environment. And when we look at the ROE, not on a consolidated basis, but your insurance ROE has been fairly healthy in the mid-20s banking ROE mid single digits sort of at best. How do you think about the ROE of those two segments in particular? You know, ability to improve the banking ROE and then with insurance next year perhaps some headwinds with lower rates, will that insurance ROE kind of normalize a bit? So that could also be a little bit of a challenge.
Thank you, Tito. And as regards profitability and the competitive environment, we are operating in growing on our growing lower income, difficulty to grant loans for this population and cost to serve. There are some important aspects to mention here. This ability of increasing the profitability of our clients in this competitive environment I think that Bradesco has an important geographic footprint present in all municipalities of Brazil as I mentioned before.We have to adjust this, and we've been doing this. In the last 2 to 3 years we've been working to reduce our cost to serve in the different geographic distribution of our branches. In this presentation, you could observe the size of the adjustment we made in our headcount and also in our physical structures, the physical branches of the bank, rethinking the structure of the branches, their size, whether they should remain open or not in the different locations, vis-a-vis their ability to create results, the GDP of that region, that municipality, that city we are operating in. So these variables we are assessing. Obviously we are Brazilian bank. We have a responsibility with all of these municipalities. But today people have changed their habits. The way clients relate with the banks has changed. There are some digital banks that don't even have branches, but these are banks that are well-positioned in the market. So it is necessary, it is absolutely necessary, Tito, that we make adjustments, adjustments we've been making and will continue to make in 2024 like them. And working hard on this because it is important, the physical cost serve is quite high in our bank and we have to make adjustments. In January, Bradesco Digital will be fully implemented together with Next, so that we can serve these clients that open checking accounts with Bradesco, that come to Bradesco, and we want to serve them 100% digitally as long as they want this without the need for the clients to go to the physical branch of the bank. Unless they need some kind of advice, consultancy or such things. So these branches will be complete of sale. They'll be a lot smaller without all the associated costs of armored cars, of guards, et cetera. All of the costs linked to a brick and mortar agency or branch. So that's number one. Now of course, we still have an appetite to continue to grow in all audiences and also in low-income because that's a characteristic of Bradesco Bank, it's a characteristic of our bank. We always operated. We are a retail bank and will continue to operate in this segment with the adequate risk appetite for each one of these audiences and with the right pricing. Prices defined according to geography, like I said, prices defined according to type of guarantee, prices defined according to profitability, relationship with the client, principality that the clients have with our bank, but always with the adequate price. So that's regarding low-income segment. For higher income, like I said, everyone wants to operate in higher income. But with Bradesco, we believe we have a competitive and competitive advantage. Firstly, because we can serve the higher-income audience in all places of the country. We have 1,300,000 clients that are in higher income. Bradesco Prime, not to mention private banking, which is going on growing. Now we have more than 250,000 high-income clients which are spread all over Brazil. And they do not have yet a manager serving them. And you all know that when we have a checking account with an exclusive bank manager for this client via this client becomes a lot more profitable. We can bring the client's principality to our management. And of course this client will be a lot more profitable. So you were right, this is an extremely competitive market, but we have a blue ocean to work with these higher income clients. Also the bank, the corporation itself enjoys a competitive advantage of being able to provide all products and services. We have an insurance company, a consortium with company and asset actually too now with Tivio. So 2 asset management companies. We have another financial company. So we have all products to serve the needs of these higher-income clients. In addition to cards, like I mentioned, we have a card geared to higher income, the Amazon card. So a lot of products in our shelf to offer to these clients. Always respecting a customer-centric approach, the right product at the right time in the moment, in the life moment of those clients. All of that will allow us to compete better in these competitive landscape. Like I said, the insurance company is coming strong, delivering a very adequate ROE, contributing sizably for the earnings of the bank. And of course the ROE of the bank will consequently be a lot greater. Of course, we're not happy with the ROE that we are recording. It is inadequate. This is explained by delinquency in market NII in the past. But we are recovering the ROE. The insurance company as well as all of the other companies of our organization are important in forming the result. So looking forward, our expectation is that with all the work we are doing, with verticals, with the higher-income segment, adjusting the structures and important adjustment, Tito, to our structures or with the related companies, Bradesco Insurance, Bradesco Asset, cards, all of the different levers that we can work with, with all this will bring better results to the organization, will improve our ROE, not only because of the increase in the loan book, but because of all of the products and services that we can offer to these clients. Thank you for the question, Tito.
Just 1 quick follow up. On the insurance ROE, is it fair to assume that there could be some pressure from a lower rate environment? Or how do you think about ROE versus interest rates for insurance in particular?
Tito, Bradesco Insurance posted and is posting a significant resolve this year. This is not new. You know the insurance company really well. The insurance group has been posting recurring results for Bradesco. And this year in particular this happened. Of course there were benefits of the interest rate, of the portfolio being managed by the insurance group, with interest rates and the [ GPM IPCA ] indicators. And that benefited even more the financial result of the insurance company. Although we do see declining interest rates by the Brazilian Central Bank, the insurance company will certainly end the year with more than BRL 100 billion in revenue. So it's all about working the claims ratio. We have to continue to work with the assets we have in the insurance group, the pension plans, and in the private -- healthcare insurance for the insurance group. So will this be challenging for the insurance company? Yes, as it is for any company. But I understand that the insurance company has important assets, managerial ability. Ivan conducted a beautiful reorganization of the insurance company with an update of systems, systems to interact with clients. The digital platform of the insurance group is doing really well this year. To give you an idea, the insurance company will end with about 3 million items sold only over mobile. So there's this whole framework in the insurance group. We believe that despite the lower interest rates, GPM IPCA insurance group will continue to deliver significant and sustainable ROEs over time.
Our next question from Rafael Frade with Citibank (sic) [ Citigroup ]. Good morning. You may proceed.
I would like to revisit the topic of your NIM. You had a significant reduction in NIM in the quarter. And you also showed how much of each component accounted for that drop. When we look at the mix, it was quite relevant in the half year, in 1 year I think it represented about BRL 1 million. In this half year alone BRL 700 million. I want to know whether this was just due to SME or there is any other element that impacted the quarter's result. And how should we expect the recovery maybe in the fourth quarter? Maybe this has been a very significant drop this quarter and maybe we could see some relevant recovery at NIM or maybe this would be more gradual.
Thank you, Rafael. It's good to hear from you. Rafael, in fact you described our results in terms of the NII or NIM. There was reduction in on the average spread that came down to 9.1%. And as you put it quite well, this was mainly due to the mix. This reduction in business, in loans to SMEs is quite relevant in terms of putting together the spread. Just to give you an idea, throughout the year you may notice that there was a drop of almost BRL 10 million in that portfolio. And this has a major impact in the overall result. But this matter has been solved. We have appetite to operate further. And you know that the formation of NII depends on your growth, therefore it doesn't happen in the immediate month after that or in the subsequent quarters. So the portfolio has to evolve so as to see any improvement in NII. And the mix of the portfolio had an impact, especially in terms of SMEs. But we already saw some growth in loans. We saw their numbers throughout this last quarter. And in October there has been further progress. We have to make adjustments all the time. We have to have the adequate pricing for every type of product so that at that margin we can see a significant recovery. But this is a gradual process, Rafael. We look at this every month, every operation to see the recovery on that line. But we know that it is possible for us to recover it because these transactions at this level of clients, it's just natural that spreads are naturally better. So what we have to do now is resume these operations, but certainly with a good degree of caution. And also having in mind the size of loan that we are giving to these clients, but we don't want to lose them. And all of these loan transactions usually come with other products and services in terms of the client principality, in terms of collection loans, credit cards. And all of that plays into having a more robust NII throughout the fourth quarter and also throughout 2024. Therefore we have just to go after the improvement of this financial of this NII or NIM.
Thank you, Rafael. Our next question is from Daniel Vaz from Safra. You may proceed, Daniel.
You already talked a lot about SMEs, but in fact this is a segment that is worth elaborating a bit more because usually there is volatility, but the margins are usually higher. And in 2020 and 2021 with the [indiscernible] recovery of credit is not so easy. You have to know how to operate in this universe of small and micro-size companies. And I think that NPL hasn't yet gone back to normal. Do you think that this is more related to a movement in the industry? Do you see other sectors with worse delinquency or some that have better delinquency numbers? How do you see the health of clients and how difficult it is to collect? And what is the behavior of the new vintages and what do you expect going forward to 2024?
Well, thank you, Daniel. Good morning and thank you for the question. In fact, this segment of small and micro-size companies, it's a good segment, but it's very complex to work with it. I mean, this is not a simple task, but we see that the industry has even higher delinquency depending on the segment and depending on the focus of every financial organization, or whether it's more located in the southeast or spread around the country. It's not very simple to operate in this segment. And this segment is also affected, as you well know, by the economic cycle, higher interest rates, issues related to growth. These companies face difficulties during the pandemic. Some recovered better than others. And some others even ceased to exist. And so this industry, as you put it yourself, it's a complex industry to work with. It's difficult for us to develop some work with them. That's why we are always very cautious. And that's why we are taking a very close look to small and micro-size companies. The managers are closer to the companies. Regional managers are being more selective as well. I don't see any specific industry being more or less affected. But when I look at mid-size companies that we call, that are with corporate one, we see stable NPL, delinquency is stable, and companies that gross more than BRL 30 million. So in these cases delinquency is more stable with no concern going forward. I think the cause for concern is with SMEs. Average-size companies, no concern. We will just do business as usual. And the focus indeed is more with small and micro-size companies without leaving aside individuals. That's always a very sensitive issue in terms of the loan book and the impact of interest rates, especially if you look at some portfolios like personal loans and credit cards. Therefore, when you add all of these factors together, you can then see our capacity to increase our loan grants. But we are becoming more stringent in terms of keeping the controls in place, but we are very certain that delinquency is under control. Thank you, Daniel.
Our next question is from Thiago Batista with UBS. Go ahead, Thiago.
My question is a follow up to Tito's question regarding the profitability of your retail business. When we look at the ROE in the last 2 to 3 quarters, about 11%, 12% in the consolidated number, insurance, 25. So doing a simplistic calculation, we think that the ROE of the banking business is between 5 and 10. We see other players in the wholesale having an ROE of 20% plus. So in the best-case scenario your would be 0. Other banks have done there, for example, mentioned that they lose money in low-income retail. And I'd like to understand from you what is availability of the retail business, particularly with a focus on low-income. Can you really have a return or not?
Thank you, Thiago, for the question. Actually it's a very good observation you made. When we work at the segments in the financial industry, the financial sector and in the bank, the profitability of the wholesale bank is doing quite well, above the cost of capital, the profitability of the high income bank here including Prime private, also doing well, above cost of capital. The insurance company, we don't even say it, you observed it yourself. But we have a challenge in retail bank. You see retail here at Bradesco or any other bank historically retail was always a segment providing good results. But this segment went through some processes, some challenges over time. Regulatory challenges, the fact that people are opening checking accounts with no tariffs, the cost to open a bank or branch, having a brick and mortar branch in a certain place in a certain city or region. So we face additional challenges in retail. But it is a very big volume of people. When we looked 2 years ago, the segment was given results ROE above the cost of capital. But we entered a phase, a cycle of very fast increase in interest rates. Social benefits provided by the pandemic ended, those government aids, and people got more indebted. And Thiago this is very common, you have probably observed this, low-income people today now have 2, 3, 4, 5, 6 credit cards in their wallet because it's very easy for them to have access to credit, either opening checking accounts in mobile phones or asking for a card digitally. They don't even have to go to a brick and mortar branch and speak to a manager to get a card. So it became very easy for them to get credit. And this is a determining factor for this longer delinquency cycle we've been observing in addition to the interest rates that we will want. Right, having said that, with that scenario in mind, we still aren't convinced, and this is based on studies, it's not my personal opinion, that retail is possible to be profitable with a profitability above the cost of capital. However, we have to have a more adequate cost and we have to select our audience to be served. Thus, digital is fundamental at this moment so that we can serve this client without the need to be physically present with a bank branch or even with a physical structure of people. And if we do have a physical structure, you should be very much geared to business than to just, to just have them pay your water bills, electricity bills or [indiscernible]. We cannot do that anymore. Indeed, we cannot be profitable if we have a bank branch just to serve this kind of transaction. So you in saw the presentation, on the right side of the screen you could see the size of the adjustment we've made in our physical structure and the size of adjustments in our personnel structure, in our headcount. This adjustment is all well planned out and it will continue, will continue much more vigorously along 2024 because we definitely have to adjust our costs to serve because the sense Thiago that this is the new normal as you observed yourself, Thiago. So this is the new normal in this cost to serve this adverse selection that existed. Well, we had to adjust to that. We and the whole market, that's the challenge for all incumbent banks, right? To make adjustments, eliminate the symmetries or mitigate symmetries so that also in the retail bank or we can have a return above the cost of capital. And this is possible because this population needs to be served. Brazil should be growing 3% it's GDP this year. We have an expectation that the country will be growing in the coming years given everything that has been happening, the tax reform that is coming. So if the country continues to grow for several consecutive years, we'll have higher income, more income, more people with income available for us to be more profitable, particularly in the retail segment. So there is an important challenge for all of us incumbent banks and especially for Bradesco.
Thank you, Thiago. Our next question comes from Bernardo Guttmann with XP. Bernardo, go ahead.
I have 1 question regarding credit quality. This reduced delinquency perhaps as the big positive highlight for the quarter. But it's still high. On the other hand, the coverage ratio posted another quarterly reduction, getting to a low historical level. So my question is, what is the space you see ahead of you to reduce provisions even with a lower NPL? If you, perhaps will have to rebalance that equation. And if you will allow me, is there any ideal value that you pursue in terms of coverage ratio?
Thank you, Bernardo. Indeed the coverage ratio is reduced to 155 now. Credit with 100% covered to the ratios at 240. It was a small reduction, but it is only natural, Bernardo, that at the end of a cycle of slightly higher delinquency that will consume provisions. Actually we provision exactly to use when we go through a different or tighter credit cycle in the company or in the country. And this is exactly what happened. At the moment that we resume our portfolio growth and improvement in the margin, it is only natural that the coverage percentage will be adjusted and will be increased. There's no magical number for us. I will say okay at this percentage, we cannot be below that magical number. No, with our provisions or according to what we expect because IFRS will kick in, in 2025. So we are very comfortable with the level of provisions. We have BRL 59 billion, almost BRL 60 billion in provisions, an excellent percentage of provisions for those operations that are 100% provisioned for, adequate provisioning above 90 days, delinquency rates dropping not as much as we would have liked. But when we observe short-term delinquency, these rates are falling in a robust fashion. And of course that will have a reflection in 90-day NPL. So everything that we are observing points to good direction, we don't have a magic number, a target to give you. There should be no more or no increase in ALL. The ALL, we have, there is a provision that we have, gives us confidence that we have the correct coverage for the portfolio that we have today. And this reflects the growth of the loan book. We are going to [indiscernible] the loan book. This will bring an increase in ALL. It's good ALL because it's good operations that are coming in. But with the IFRS, this aspect will change, which is the expected loss. It is with this model that we are working to define the provisions that we can make, to increase or even reduce ALL.
And one specific comment, we are one of the few banks that are treating specific clients as delinquency. If it went for this effect and the additional part of credit that is considered delinquent in Q3, if it weren't for that, the coverage ratio would have stayed stable. And the point that Octavio mentioned regarding the origination of new loans, this is what is going to lead to an improvement in the coverage ratio as we originate new loans that are performing well with no delinquency, we'll rebuild the coverage ratio during the cycle.Our next question is from Eduardo Rosman with BTG. Good morning, Rosman, you may proceed.
I have 2 questions. My first question is about dividend payout. The bank has maintained a very high dividend payout close to 70%. But assuming that the bank intends to expedite growth next year and profitability its still below anticipated levels. I mean you're not building a lot of new capital. So what could we expect in terms of the payout next year? This would be my first question. I would just like to understand these payout dynamics or whether you wouldn't be worth it to do some buyback. And the second question is about cost of capital. We've been talking a lot about cost of capital. I think one of your competitors usually publishes how much they believe their cost of capital is. So in your view, what is Bradesco cost of capital today, considering the dynamics of interest rates going forward?
In terms of dividend payout, this year we already provisioned for that. And I think the buyback is an important alternative, so much so that we just renewed our buyback program. That was just about a week ago. So that could be a good alternative. Even considering the value of the shares. So that buyback program is ready and renewed when the time comes. And for next year, even with lower results in comparison to what we would like to have, we will certainly try to remunerate our shareholders with a reasonable and adequate payout. Therefore, as I was saying, it does make sense to resort to buyback. In terms of cost of capital, maybe Firetti, you can say something.
Our cost of capital is very similar to what the analysts calculate, something ranging between 14% and 15%.
I just have another follow-up question now. Thinking about next year, do you think that the payout would be along the same levels? Do you think that you will remain having this high payout to have an additional benefit because I think this also has an impact on the tax rate.
Okay. If the benefit remains, continues, I think so, we would probably try to use it and then have the full benefit because this would serve our shareholders well. But there are still some steps that are necessary until we see what will happen. There was an important change in terms of interest on capital that was being discussed at the Senate level. And that was an important adjustment that happened because with that shareholders will be more comfortable. But regardless of what may happen, our intention is always to make full use of interest on capital. I understand that the minimum would be 30% according to the bylaws, right? Yes.
Our next question is from Yuri Fernandes with JPMorgan. Good morning, Yuri. The floor is yours.
I have a question related to your NII. Looking at liabilities, on the liability side, things were performing well. I mean you had good funding in the quarter. But don't you think this was a pushback in your margin? I mean, demand deposits were down. Savings deposits also down in this scenario of high interest rates. But I just want to look at that liability line, whether this does not affect [ II ]. And in terms of SME, you're constantly talking about this mix that the company is working at that very closely, but there was a drop of 1% when NII was down by 5%. So the mix of SMI is very, very tight. Could you share with us something related to that segment of companies below BRL 30 million? And I think that the mix of SMI should be a little bit different.
Hi, Yuri. Good morning. It's a pleasure to have you here with us. Thank you for your question. In fact, I mean, if you look at the market as a whole, Yuri, the funding cost of the incumbent banks, I mean, our funding cost increased due to the competition coming from new platforms, smaller banks and other things. There are a series of factors that at the end benefited some. And in other instances, it increased the funding cost even because today it's very easy for our clients to choose where they want to invest their money. And this increases our funding cost. But anyhow, the reduction in savings account or even demand deposits, it's quite natural. Given the current situation of people, I mean, savings deposits are dropping, not only at Bradesco but in any other incumbent bank, this drop in savings deposits is across the board, maybe also because people are now choosing to invest in other instruments rather than savings account. And also because families need to use that money because of high interest rates, inflation issues. This is a cyclical phenomenon and it's very hard to avoid it. And demand deposits is pretty much along the same lines. Demand deposits were kind of inflated due to many government programs and benefits that the government offered. That's why I talked a lot about principality, the share of wallet of our clients. We talked a lot about that during the presentation. Because in fact this is a challenge that we face every single day when we go to work. We have to work the centrality of the client, the share of wallet because that allows us to improve the liability margin. We made important investments to make that possible. I talked to you about wealth management, more than 4,000 Prime clients and a lot of investment experts. I mean there we also grant loans to these people. Of course they take credit as well. But it's important that we bring the principality of the clients to our organization. We did some relevant work extensively recognized at Bradesco Asset. So this growth has been quite significant. We had more than BRL 770 billion of assets under management. And even private banking, we increased the liabilities on the private banking side. I believe that we are moving in the right direction to bring more investments from our clients, even with Agora, our brokerage firm. There are several levers that can be worked on to bring principality. And in turn, we will increase the liability NII through funds management or CDB or any other kind of investments in our trading transactions with clients using our own brokerage firm. This is the first step, and it has proven to be right. We are evolving in terms of the liabilities, and we are also making important strides towards improving client NII. When we had interest rates of 2% a year like we had in the past, maybe that liability NII wouldn't make a lot of difference, but this is important if you want to grow your loan book. But with an interest rate that reached 14% and 12 point something today, that liability NII makes a lot of difference. So I think that's it in terms of the liabilities. Now speaking about SME portfolio, and we have been talking about that extensively. In fact, you should know Bradesco has a very big geographic footprint. I'm not talking about 30 million upwards, but I'm talking about companies whose revenue was way below that. When you work with secured accounts, with receivables discount, et cetera. These are very profitable transactions. Now when we look at the fee comparison at the Central Bank, you see the size of the spread of these portfolios vis-a-vis a portfolio from a midsize company. There is a huge difference, which is natural because of the risk that these companies represent. So the margin of this mix of types of clients with whom we've been working with in terms of small and micro-sized companies is what made that difference. I don't know exactly what the percentage is, but Firetti and -- they can give you more details on the numbers.
When we look at our SME portfolio, approximately 2/3s of that portfolio are clients below BRL 50 million. And this particular portfolio is a bit compensated by the midsized company portfolio.
That is very clear. I just have one last follow-up. Funding, Octavio. How much is it today? I don't know whether you can break it down. I mean, average funding or CDI.
I think all of the incumbent banks struggle with it. There was a worsening of the numbers. Well, we do not release specific numbers. Our comments are more generic. But clearly there was an increase in funding cost. Part of it due -- if you look at the movements in our portfolio, part of that has to do with a more focused work using some investment experts at first. They looked at funding that were there in demand deposits. These are investment funds. So that had some minor adjustments. This is probably something that is behind some of the moves.Thank you, Yuri. Next question from Anahy Rios with Santander.
My question goes back to the guidance. But speaking more about fees, you were somewhat distant from the guidance. I'd like to understand which fee lines will drive growth so that you can meet the guidance in Q4.
Anahy, good morning and thank you for joining us. All I know of fee income, it's improving quarter-on-quarter and quarter-by-quarter. This quarter we are still slightly below the guidance that we provided, but we have an expectation to increase this fee income line due to a number of aspects which I believe are important. We are having a substantial improvement as we showed you. In the wholesale bank, in underwriting operations, you saw the amount that grew, the percentage that grew. We have quite a good pipeline for Q4 and also for 2024 of these operations. We have a good expectation that companies will be renewing their debenture operations, the ones they have in the market and new operations that we're also doing. It is a natural movement by companies. They'll wait for a better market moment. The cost is still high, but operations are maturing and the companies will need to adjust. So there is a good outlook for the fees related to underwriting. There's a good expectation that is materializing regarding fees in Asset, in Bradesco Aset and now at Tivio, our new asset, that we have more geared to structured product performance. And there's good expectation there. Also a good expectation in Bradesco Financiamentos. Again, the loan lines are growing and also our loan book is improving. So it's again operating in a normal range. These are just some of the aspects, but I believe that there are a number of lines. Even the insurance company, the Bradesco consortium. So there are a number of companies, many businesses of the bank that will bring improvement to the fee income line item.
Thank you, Anahy. Very well. We are going to have our last question by Pedro Leduc with Itau BBA. Pedro, good morning. Go ahead.
Two quick questions. First, robust growth in the other business lines, if you could elaborate on that. Greater share in the crop plan. And my second question, going quickly back to SMEs, Firetti mentioned the concentration in small enterprises. Do you see acquiring as an important tool for you to have best cost to serve and to better manage delinquency in this segment? Is this well-oiled or would you have room for improvement?
Pedro, good morning. Thank you for joining us. Well, Pedro, you know this really well. You've been following us for many, many years. The agro business was always a flagship for Brazil. Also given the origin of our bank, 80 years ago, Bradesco grew following the growth of the agri business of Brazil, particularly in the countryside of Sao Paulo in the north of Parana state. So we were always focused on agro business. Among the private banks we are leaders in agro business. And if you get [ BNDS ], we are also leaders in disbursements for agribusiness operations via BNDS. In agri businesses a part of the Brazilian economy, which is an excellent growth driver for the Brazilian economy, not just today, it has been so for some years now. So more and more, we are giving special attention to the agro business industry in Brazil, particularly given the increase in the agricultural frontiers. There in the Midwest they are expanding. They are growing the Amazon biome and other Brazilian biomes [indiscernible] and competition is moving fast now because agri business is not a small business. Agri business is a big, big business in Brazil with the volume of resources which is huge. So we specialized our team. We had 955 branches that were trained specifically, the whole team of these branches was trained in the last 3 to 4 years to serve our agri business clients in any of their needs, for their position of machinery, for planting their crops, in talking with agronomist engineers. So 955 specialized bank branches all over Brazil. And we have all of the agricultural regions being served by specialized people to serve the needs of agri business clients. In addition, we have a constant presence in all the main agricultural trade shows in Brazil. This year the business volume that we captured was double that of last year. And delinquency in farm loans is very, very small. So there is a moment when the farmers, they need to exchange the machines, their equipment. And equipment is becoming more and more sophisticated, the combined machines and -- all driving the business. And another initiative we had, we had about 5 to 6 separate business platforms that was 2 to 3 years ago. And then we were located basically in the Midwest, in the countryside of the state of Sao Paulo. The platforms, few platforms that we had, we expanded those to about 14. And in the main agricultural production, [indiscernible] in Brazil, whatever the commodity they are growing, we have a platform there with a specialized team. And we grew this team of specialists. All of these platforms have agronomist engineers to give comfort to our farm clients. So this is a little bit of the growth we had in agri business. We'll continue to grow these platforms. Like I said, there are 14 platforms, will be opening another 4. Next year they should grow even more because there are other areas that are posting a lot of agri business growth. And with the change of the crops, they are moving from livestock to soybean to corn, and we're studying these moves so that we can provide the right advice to our clients. So agri business is a focus of Bradesco. We'll continue to focus on agri business. And the trend is that we'll grow this business even more. With regards to SMEs in the acquiring part of your question, we currently have an acquiring company, [ Cielo ], in a partnership with Banco do Brasil. It is working super well. Cielo, you will remember 3 to 4 years ago, had problems and difficulties in posting good results. But the adjusted CLO now has been posting good results. It's not just about the results. Most importantly is what Cielo means to the business, to the offering of products that a wholesale bank needs to have. It's Cielo, [ Livelo ], [ Olelo ]. All of the companies that we have in our ecosystem of benefits in the acquiring business. So today it is working really well. We have a good partnership with Banco do Brasil. Both banks use Cielo. And Cielo is just advantage of this Bradesco and Banco do Brasil desks. [Indiscernible] is perhaps losing some accounts that in the bottom line bring losses. But sometimes you can gain market share and not be profitable. So we had to make choices so that we could have profitability in our businesses with smaller companies. But you see, Pedro, it's all on the table. We have to look at Cielo, how important it is for our results, how we should look at that company in the portfolio of products and services that Bradesco has to offer to our clients. And acquiring is definitely very important for us to continue to grow. And again, maintaining the principality that we want to enjoy with our clients, cash management, [indiscernible] to grow assets and reaches liabilities. So it's all on the table for us to look at it.
With this, we conclude the Q&A session. All the questions that have not been answered will then be answered by our IR team. Before I turn the floor back to Octavio, I would like to remind you that in our Investor Relations website you will also find this presentation and all of the material related to this earnings release call in addition to other information. Octavio. Thank you. And let's move to your final remarks.
Thank you. Thank you, Cassiano. Thank you, Firetti. Thank you very much to the entire team that helped us put this together. Thank you so much for joining us. Thank you for your time. I think we talked about several aspects related to the P&L of the bank. There are still some challenges. And you're very precise in terms of your diagnosis. We will improve. We will make important improvements. And I hope I was able to clarify your issues. But in case you still have any pending issues in mind, please get in touch with us, get in touch with anyone from our team because we really want to clarify any issue that is still pending. Thank you so much for your attention and for your kindness to join us today. I wish you a very, very good weekend. Thank you.