Banco Bradesco SA
BOVESPA:BBDC4
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Banco Bradesco SA
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Greetings, ladies and gentlemen, and thank you for waiting. We would like to welcome everyone to Bradesco's Fourth Quarter 2020 Earnings Conference Call. This call is being broadcasted simultaneously through the Internet in the Investor Relations website, bradescoir.com.br/en. In the address, you can also find the presentation available for download. [Operator Instructions]
Before proceeding, let me mention that forward-looking statements are based on the risks and assumptions of Banco Bradesco's management and on information currently available to the company. They involve risks, uncertainties and assumptions because they relate to future events and, therefore, depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of Banco Bradesco and could cause results to differ materially from those expressed in such forward-looking statements.
Now I'll turn the conference over to Mr. Carlos Firetti, Market Relations Director and Head of IR.
Hi, everyone. Welcome to our conference call for the discussion of the fourth quarter results. We have today with us our CEO, Octavio de Lazari; our Executive Vice President and CFO; Andre Rodrigues Cano; Bradesco Seguros Chief Executive Officer; Ivan Gontijo; and our Executive Director and Investor Relations Officer, Leandro Miranda.
To -- for starting the call, I turn the floor to Leandro.
Thank you for that. Greetings, everyone. Welcome to our conference call. Needless describe 2020. It's widely known how challenging that year was and the impact the pandemic had on our lives, families, communities and the global economy as a whole. Bradesco's performance was naturally below what we expected a year ago by the time that we present our guidance during the fourth quarter 2019 earnings conference. But it certainly was, by far, much, much better than we imagined that it would be soon after the beginning of the pandemic. We are proud to deliver our best results ever. We'd like to thank all of Bradesco's team for its commitment, resilience and creativity, our Board and especially Mr. Trabuco for his wisdom, guidance and trust.
2020 was a year of much learning of breaking paradox and of lessons that have changed the way in which we do business. Home office has come to stay. The digitization of our operations has deepened. The habits of clients have changed it. And once again, we were able to adapt to the new scenario and thrive as we have always done. Unfortunately, the pandemic is not over. It still has a terrible cost in terms of lives and suffering. But we believe that over the coming months, with the development of vaccination and logistics, we will see a significant reduction in the number of case and victims.
In relation to the economy, we can see during 2021 the consolidation of the economic conditions. The increase in the number of the COVID case has brought greater restrictions to the economic activity, but we expect minor impacts on the economy than we had at the beginning of the pandemic due to the learning curve experienced in the first wave. We believe that the next tax incentives will be smaller, preventing further deterioration of public expenditures and asset prices. With the acceleration of inflation, the Central Bank of Brazil should start raising interest rates in the coming months. Considering these factors, the strong upturn, the employment income, trade and industry has lost traction at the moment but with little impact on our expectation for GDP growth in 2021, an even better performance for Bradesco.
We now turn to Slide 3. We present a rather strong results in the fourth quarter with a net income of BRL 6.8 billion and an ROE of 20% for the quarter. The expanded loan portfolio grew by 3.4% in the quarter and 10.3% when compared to the last 12 months. We closed 2020 with the Basel I ratio of very comfortable 13.8% level, representing a 9 bps hike in the quarter and 50 bps compared to December 2019. We continue to have a very good cost control with a total cost reduction in the fourth quarter with a reduction of 9.3% in this quarter in comparison to the previous year, leading the ER to close to 44.6% in the quarter and an accumulating drop of 7% percentage points -- 3.7 percentage points.
On Page 4, we present our income statement. We had a well-balanced income in the quarter, with a number of lines showing solid performances. The net interest income grew by 9% in the quarter and 8% in the annual comparison, supported by a strong performance of the market portion, including a quarterly growth of the client portion. Our ALL expenses dropped once again in the quarter and heavy towards normal levels. Fee and commission income grew by 7.3% in the quarter with the annual decline slowing to 1.3%. As mentioned, we saw an excellent performance in terms of costs resulting from the adjustments we made throughout 2020.
The next slide will explore the lines into more detail. Turning now to Slide 5. The funding continues on a network trend. The deposits from clients, net of compulsory deposits, grew 3.3% in the fourth quarter and 38% in the annual comparison. We have net funding of approximately BRL 158 billion in 2020. With this evolution, our loan-to-deposit ratio closed the year at 82%, which indicates our high liquidity.
In Slide 6, we present our expanded credit portfolio, which grew by 10.3% over 12 months. Annual growth was 5.6% in large companies and 18.7% in SMEs. Individuals grew 11.7%. One of the growth highlights in 2020 was the real state financing line with an increase of 33.6%. The SME line grew by 18.7%, and the payroll deductible loans line grew by 10.6%. Credit origination continued to grow in the quarter. In an annual comparison, the individual segment presented growth. We entered 2021 with an increased appetite for credit with adjustments in our models that should allow for greater origination without significant increasing risk. So we expect a good growth of the portfolio in 2021. We'll be talking more about this into the discussion about the guidance we shall have by the end of the presentation..
Turning now to Slide 7. Our expenses with expanded ALL came down to BRL 25.8 billion in 2020, which is BRL 11.4 billion higher than 2019. In the quarter, we saw a further reduction, reaching BRL 4.6 billion or 2.7% of our loan portfolio compared to BRL 5.6 billion or 3.4% of the portfolio in the third quarter. This reduction took place despite an increase in impairments to BRL 1.44 billion, BRL 87.1 million more than in the third quarter due to the specific case of a large company that is well known. We continue our provisions to be very comfortable considering the expected losses.
Moving now to Slide 8. The delinquency ratio over 90 days remained well controlled, showing a reduction of 10 bps in the quarter due to the drop in individuals, while SMEs and large companies remain pretty much stable. This positive performance is a result of the high quality of pre-pandemic vintages, the solid trend of our customer financial health with credit extensions and renegotiations during 2020. The 15 to 90 ratio show signs of rising defaults. As we expected, the total ratio rose 50 bps. We believe that the increase in the 15 and 90 day ratio will begin to have an impact on the over 90 ratio in the upcoming quarters. However, we are optimistic about the scale of this increase, and we think that our provisions are more than sufficient for expected losses. We understand that it will probably peak between the second and third quarters of the year but in levels that are not much higher than the pre-pandemic ones, and we are prepared for that.
Turning now to Slide 9. We saw an increase in the level of NPL creation over the quarter, settling at BRL 3.7 billion. Our gross ALL for the quarter represents 111% of the NPL creation, which shows that we are not consuming provisions.
On Slide 10, we can see the 90-day NPL coverage ratio, which further increased to a very comfortable 403%. With respect to the segments, we have coverage for -- of 268% for individuals, 1,167% for large companies and 566% for SMEs. The coverage ratio, which includes the renegotiated portfolio, slips lightly into 118%. We'd like to remind you that loan provisions in the renegotiated portfolio represents 62% of its total, which is higher than the historical losses that we verified in this portfolio.
Now we turn to Slide 11. As of this quarter, we've begun to publish -- we began to publish the portfolio with a new concept, showing the accounting balances already net of amortizations. We believe that this methodology allows a better visualization of the evolution of the extensions. The extended portfolio totaled a book balance of BRL 48 billion at the end of the fourth quarter, a reduction of 13% compared to the third quarter of 2020. This value was pretty much composed of BRL 41.4 billion on time, which means that they are no longer in the grace period with the payment of at least one instrument. BRL 3.8 billion is still in the grace period at the end of December. And we must highlight that of this amount, BRL 1.9 billion are no longer in the grace period in January. And finally, BRL 2.9 billion of transactions that were extended at any time. This extension ended, and these transactions are in arrears for more than 30 days. This represents only 0.6% of the total of the bank's loan portfolio. We believe that the behavior of the extended portfolio was very good, exceeding our initial expectations. This fruit of our good credit policy, which led to a high-quality vintage prior to the crisis.
Moving now to Slide 12. Our renegotiated portfolio in the fourth quarter grew BRL 1.9 billion. BRL 1.7 billion unaccounted for active credits. This is a significant acceleration in comparison to previous quarter. The renegotiation growth in the quarter is primarily made of loans that are less than 90 days in arrears, meaning that they have a better quality and a greater chance of collection success. Loan provisions in the renegotiated portfolio represents 61.5% of the total portfolio. The delinquency ratio for the renegotiated portfolio was 7.4% in December.
In Slide 13, we see that the net interest income grew 9% in the quarterly variation and 8% in the annual comparison. The client portion grew 3.3% in the quarter, mainly due to the increase in volume with a stable NIM. The market portion showed a very strong performance in this quarter. The total NIM grew to 6.4% in the fourth quarter compared to 5.9% in the previous quarter. NIM with clients remained stable at 9.2% after 3 quarters of drop. We do expect a recovery of the NIM with clients in the quarterly comparison throughout 2021.
Now turning to Slide 14. We can see that fee and commission income presented a 7.3% quarterly growth and a 1.3% drop in annual comparison, reducing the fall in relation to the previous quarter. For the quarter, some highlights include the solid performance of credit cards, checking accounts, loan operations and consortium. Looking at the asset management line, we are still being negatively affected by immigration of funds from fixed income funds to deposits as well as reduction in the management fees for these funds. We have seen an improvement in our product mix, part of an adjustment process that should lead to an improved performance, particularly in the second half of 2021. There was also deposit trends in the number of account holders in 2020.
We now turn to Slide 15. Our performance in terms of costs and expenses was one of the highlights of 2020 and the fourth quarter of 2020. Our personnel and administrative expenses dipped by 6.9% in the third quarter. In annual comparison, 5.9% for 2020 as a whole. The growth compared to the previous quarter is due to the resumption of activity and the seasonality of the fourth quarter itself. Given the total cost, including other expenses, a decrease of 9.3% was seen in the quarterly variation with 5.3% in 2020. This performance is due to the solid cost management managers that we adopted throughout the year by adjusting our structure, our cost to serve and especially our branch network, taking advantage of the opportunities it create by the change in our client's behavior. We will continue to explore cost management opportunity in 2021 and beyond.
Now moving to Slide 16. 2020 witnessed an acceleration of digital trends. There was a dramatic increase in the number of users and transactions on the mobile channel. This dynamic comprises new clients in an interesting movement of traditional clients who had once resisted mobile and now had become users, some of them even heavy users. We saw a 23% growth in our mobile clients and 15% in digital clients in 2020, which also includes internet banking. Coupled with a boost in users, there was also a marked increase in the volume of transactions. Same time, we have seen a significant reduction in the number of teller transactions, which dropped almost 62% in 2020, a trend that shall remain. This recent movement in particular allowed us to intensify our streamline efforts for our network, consolidating branches and using more intensively alternative formats such as business units.
On Slide 17, we present our performance in insurance, which shows the recovery in the financial income in the fourth quarter related to the increase in the IPCA in the period and the result we've attained in the variable income strategies. In the accumulated view, the 31% reduction in profits is related to the fall in the financial results that reflects the economic indexes, especially the IGPM and by the prudential provisions for an adverse scenario. Insurance group's revenue fell only 5.1% in 2020 despite the pandemic and partial functioning of some distribution channels. The provision results increased in the quarter due to the higher loss ratio. This effect, as we expected, is related to the increase in the frequency of claims caused by the resumption of elective events in health and occurrences due to relaxation of social isolation measures. Also, in health, in the fourth quarter, we reclassified BRL 632 million from the non-technical provision for adverse economic scenario to the technical long-term provision, which positively reflects the other expense line in the bank and negatively affects the operational result on the insurance company. We present these adjustments in the charts as you can see here above. Our combined index in the annual view, despite the effects of the pandemic, achieved a very consistent performance in the period, reaching 85%.
We now change to Slide 18. Our capital did very well in the fourth quarter with the common equity ratio in Tier 1 increasing by 90 bps. Our capital position has settled to rather comfortable levels with a common equity at 12.7% and Tier 1 at 13.8%. Our capital will continue to grow in 2021 based on the recovery for ROE and our expectations for credit growth. This provide us with flexibility in our capital management policy for 2021.
Turning to Slide 19. We bring on this on the next slide, one of the main strategic movements we have in the bank at the moment. Our strategic focus is centered onto pursue to dazzle clients with a proposal for customer service aligned to their needs and expectations in order to consequently obtain their loyalty in a confident and sustainable manner. Thus in 2020, we have reviewed the corporate strategy of customer relationships creating initiatives aimed at meeting their expectations, in line with their life cycle and providing an increasing their level of satisfaction for the excellence achieved during their entire relationship with our organization as a whole. In this sense, we highlight 2 important initiatives. The first one is restructuring of the corporate program called 100% Client or which aims to organize our business model to ensure that the client is always at the center of our attention, and it's monitored through NPS. The -- second, the creation of the position of a Chief Customer Officer in order to ensure that the quality of customer satisfaction is affecting size the whole organization.
Going on, we switch to Page 20. A fundamental part of the customer strategy at the center is our digital transformation. We create the various areas of the bank culture of intensive data use, which support us in the various business decisions and process. The better understanding of customers about the use of data allowed us to create conceptualized offers based on personalized customer journey. An example of this is the case of the credit offered through PIX, which you have been offered since the launch. We also continue to evolve in the construction of digital journeys with an omnichannel vision supported by modern real-time decision and communication platforms, with our BRAIN and CRM 2.0 projects. BIA continues to evolve, playing an important role in client transition to the digital world and in serving our branch network with agility and efficiency. Most of our team is already working in an agile model in multidisciplinary teams oriented to clients' journey. We have evolved rapidly partnerships, adding sources and products from third parties in our value proposition. This is the case of partnerships such as Disney and OLX for the sale of real estate loans, which will be accelerated this year with open banking.
Now we change to Slide 21. We continue to show progress in our 3 digital initiatives: Agora, next and Bitz. At Agora, we closed the year with 547,000 customers, an increase of 49% in 2020. While the AUC of customers grew 33% in the year. We evolved in the offer products throughout 2020, placing Agora as one of the most complete offers in the market. next evolved in its project to be segregated from Bradesco, gained operational, has moved on. We closed the year with 3.7 million customers, an addition of 1.9 million in 2020. Next, we continue to resolve expanding software to customers, including actually as a marketplace. Finally, Bitz, our digital wallet was launched in September 2020 and already has 218,000 customers. We expect to grow quickly in 2021. We have ambitious plan for Bitz, which offers customers a product complementary to that of next and Bradesco.
Moving to Slide 22. ESG is something we take very seriously in Bradesco, place initiatives as a priority, and this has positively reflected in our performance in the various ESG indexes as you may see. Bradesco performed above average in the main national and international ESG indexes and ratings. We have the best performance among the Brazilian banks and the 5th best position among more than 250 banks worldwide in the Dow Jones Sustainability Index. We have also made progress at MSCI and CDP, being among the leaders in these assessments. We are aligned in the reporting practice and results following international frameworks.
Going on, on Slide 23, you can see that in 2020, we had several important initiatives in the field of ESG. We made the largest issuance on an ESG bond by a Brazilian private bank in 2020. 100% of our operations are already supplied with renewable energy, making us one of the first major financial institutions in the whole world to complete their energy transition. We are the first major Brazilian bank to announce the neutralization of carbon emission scopes 1, 2 and 3, which includes indirect emissions. We participate in PCAF, a global collaboration program of financial institutions to develop methodologies for measuring and reporting greenhouse emissions in loans and investments. In addition, we participate with other large private banks in the Amazon Plan, a very important program that we have talked previously.
Moving now to Slide 24, final one. We are returning with the formal guidance for 2021. Despite the worsening of the pandemic at the moment, an increase of restrictions, our scenario visits, a more moderate impact on the economy, which even so is growing 3.6%. So we feel comfortable in providing the guidance.
In general, the guidance maintains consistency with the guidelines for 2021 that we presented in the disclosure of the third quarter. We expect the growth of the loan portfolio between 9% and 13%. The client portion shall grow between 2% and 6%. The fee income shall grow between 1% and 5%. Our costs shall be between minus 5% and minus 1%. The insurance line, which includes the operating and financial income, shall have a growth between 2% and 6%. We expect expenses with expanded ALL to be between BRL 14 billion and BRL 17 billion. As a complement, we can say that we expect a slightly lower market portion for the NII in 2021 than in 2020. For the income tax rate, we suggest something in the range between 32% and 34%.
And that's it. Thank you very much for your attention, and we move now to the Q&A session.
[Operator Instructions] Our first question is coming from Mario Pierry of Bank of America.
Okay. Congratulations on the excellent results. I have two questions, and I wanted to focus, one, on your fee income guidance in light of 1% to 5%. It just seems too conservative to us considering that you have easy comps, right? In 2020, your fees were down like 3%. You're forecasting strong volume growth of more than 10% on average. You're introducing a bunch of new products, as you highlighted. So I wanted to get then a little bit more better understanding why is the growth so anemic and maybe if you can break down between the major lines. If you talk about cards, checking accounts, asset management and loans, that will be helpful.
And then my second question is related to your branches, right? As you showed on Slide 15, you reduced almost 1,100 branches in the last 1 year. That's 25% of your branch network. So I wanted to understand what happened to your NPS score during this period. What do you think is the right size of your branch network? So how much more do you think you can reduce?
And also related to the branches, right, if we do a simple math here, 1 year ago, about 50% of your distribution network was through branches. Today, it's about 40%. So I was trying to understand also, does this have an impact on your revenue generation? Does it impact your -- especially your insurance operations?
Leandro speaking. Well, basically, regarding to the guidance of fees from 1% to 5%, you are right. It's pretty much conservative, but we are living in a world with the second wave of COVID. We do not know how much the economy will suffer from that. We do expect to have a GDP growth of 3.5% and an increase in competition. So we believe that if you take a look at the mid of the guidance, 3% shall be something that is very doable.
Regarding to branches, at least 300 branches, we shall close or transform this year, but we are still in advance of the studies to see how much we can go beyond that. Our clients have been using more and more digital channels, and we can see that the transformation at least of branches can be a very good way to reduce costs due to security reasons. We do not need 3 security guards there, and we not need to transport money from one site to the other. And those branch shall become more and more business offices than anything else. The digital channel, therefore, have been a very good replacement of the branches as a way to make business.
The NPS continues to be growing, and we believe that our new initiative to have the customer in the center of our attention shall make this NPS to continue to grow more and more.
Let me just complement some points. You asked about the growth in volumes. This is something that not necessarily has -- in low volumes, not necessarily has a direct, strong correlation with fees. I remind you that the fees for credit operations is part of the credit operation line. That is one of the -- one of our fees, certainly doesn't represent the bulk of the fees.
We think credit cards will do very well. We should have a positive performance in checking account fees. But certainly, it's not a very strong growth in this line, mostly driven by the increasing number of accounts we had over the last few years the -- and probably we will continue to have.
In the asset management, basically, we are doing a very good job in terms of changing the mix. We thank it to you that the fact we're up here soon. But especially in the first half of next year, we still have on a comparable basis -- on a comparison basis the effect on the fixed income funds that actually had a reduction in a management fees and resources in the first half '21.
In terms of branches, basically, we can say that most of what is going to happen in 2021 are going to be transformation of branches in business units. We can say some 300 branches in 2021. We don't know the timing for that, but up to 100 branches could be definitely...
in first semester, 100.
Yes, 100 branches could be closed.
Okay. Just then to expand a little bit on the fees. Like when I mentioned, you're talking about loan growth of 10%, it means that you expect activity to go back up in Brazil. When we look at your GDP forecast, about 3.5 and then we're talking about inflation, may be another 3.5%, 4%, we're talking about nominal growth of 7 million. And then when we look at your fees, it's growing half of nominal GDP. So that's why it was a bit surprising to me. It just seems too conservative. I think what you mentioned here, credit card should do well, checking account okay. But maybe the pressure is more on the asset management line. Is that right?
Mario, we hope you are right. We hope you are right that it's too conservative. We never know. We shall expect competition, and that's the number that we feel comfortable to indicate to the rest of the industry with a lot of responsibility.
Yes. And if you remind, it's pretty much in line with our speech since the third quarter when we gave that guidance.
Right. And my final follow-up question is on the importance of your branch network for the sale of insurance. Is that -- is there -- should there be a big correlation between the number of branches and insurance revenues?
Well, as you may be aware, we have been expanding our channels in order to distribute insurance. next, for instance, is a very good example. next has no branch and is more and more distributing insurance plans. So as we transform those branches into rep offices, such as Octavio has mentioned previously, we shall expect the number of insurance policies to grow. So we are centering our efforts on the clients. And we wanted our managers, regardless of where they are, to be focused more and more on clients' needs. And we do believe that insurance is something extremely important to our client base as a whole and shall be back even stronger in 2021. So we do not see the situation being jeopardized by the closure of branches. But on the other hand, we see it increasing as we transform it into rep offices. There will be more focus.
Our next question is coming from Morgan from Jorge Kuri from Morgan Stanley.
Congrats on the numbers. Two questions, if I may. The first one on your operating expense guidance, minus 5 to minus 1. Evidently, of all of these guidance items, that's where you have most control of. And the range seems quite high, minus 1 to minus 5. What are the assumptions for you on both sides of that guidance? So how do you get to minus 5? What are the things that you don't know for sure today that could potentially happen to get to minus 5 and the other way around or the minus 1? So as the year goes by, we're able to understand whether you're getting closer to 1 or the other end of the guidance.
The second question is on the loan book. In 2020, you grew 10%. And I guess this is similar to the previous question. Loan book, you grew 10% in 2020. And your guidance for this year is not that different, 9% to 13%, so the midpoint is around that. Considering that the economy, hopefully, will be in a completely different dynamic this year, growing 4%, 5% maybe versus shrinking 4%, 5% last year, what's holding that expansion of credit this year? Why would it be the same as last year? Why would you have this like significantly easier comps to grow the credit book this year more?
Leandro speaking. Well, basically, regarding to our expenses as a whole, we continue to reduce them. We are confident that this is not something that you make on a one shot. It's a process. It's a cultural matter. This is our first priority. So we're going to keep on reducing them as much as we can, as much as technology allow us to do so.
The transformation of the habits of our clients into getting more and more digital has helped us to close and as well as transform the physical branches into rep offices or to business units, and therefore, it allows us to reduce costs. Octavio was previously mentioning that 1/3 of our physical branch costs is regarding -- is related to security. So by the time that you transform them into units, you do not need this extra cost anymore. And we are going to keep on doing that even further. We are still getting to more detail on a new plan to transform more branches.
We also shall benefit from the reduction of branches and personnel that we have done last year. So basically, as we had provisions for that, they shall be reflected on our monthly expenses. So we believe that we have room to do that. We do not believe that minus 1% to minus 5% or 1% to 5% reduction is challenging. It's according to our pace when we look at our current figures.
And the loan book going from 9% to 13%, that is pretty much 11% in the middle of the guidance, although it is slightly above the expanded loan portfolio that we have in 2020 and although we have an economy shot that shall grow by 3.5%, well, basically, it's still an economy in recovery. There's still a second wave there. There is still a lot of stale coming from the portfolio for next year. So we believe it's a decent guidance. And again, we hope you are right and the portfolio shall grow even more.
The point here is that we should be able to grow the portfolio even bigger if we were taking additional risk. But we want to be keep -- we want to keep the conservativeness that we have so far. So we want to reduce costs, have a very healthy portfolio so we shall have less costs and less provisions. That's our focus by now. So we do not want to accelerate the growth that much, and we prefer to have an excellent mix in terms of NIM.
All right. So just to make sure I understood the question about expenses. So ultimately, it's really about the velocity at which you close/transform branches. If we see that in the first half of the year, you've already gone to those 300 branches, then the likelihood that you'll get to the minus 5 increases. Is that right? Is that the environment?
That's correct. A significant part of this come from the branch transformation, but not only this. We are always renegotiating the contracts with our suppliers. We are adjusting travels. It's a cultural matter. We are reducing rentals because of the IGPM that came very high last year and still not in a very good level for us. So we are always revising this matter, and we see that there is plenty of room to do it. But it takes time. You cannot -- you are not able to renegotiate and to make all the transformations, all the closures that you wish at once. So it takes time.
Jorge, only a complement on this OpEx question. Remind you something that Leandro said, we reduced 7% of the staff in the fourth quarter. So basically, the 7% reduction on something that is roughly half of the costs will already lead us to a very good reduction in expenses in 2021. We also closed/transformed something like 900 branches in the second half 2020 with some concentration in the fourth quarter. This also adds a few percentage points in this reduction in expenses.
As we mentioned, we expect to transform 300 branches. We have a benefit of roughly 1/3 of the cost of our regional branch when we downsize it to a point of service or a business unit. We should close 100. So this is something that will happen. The transformation probably in the first half, the closures more throughout the year.
The -- on the negative side, there is the salary adjustment for the staff that should happen only September, where inflation probably will be a little bit -- will be higher than the one we had last year, maybe around 3.5 or so. I think that these are the drivers. I think that's how we get this minus 1 to minus 5. And we think the middle of this range that is our budget is pretty much achievable.
Our next question is coming from Geoffrey Elliott, Autonomous.
There's been a lot of capital coming into the digital banks over the last few months. New bank, obviously completed the Series G really recently, but also bank go into C6 and a number of others are raising equity. What do you think that does for the competitive environment? How is the behavior of the digital bank shift doing? And how are you going to respond to that?
Well, basically -- well, first of all, thank you very much for your question, Geoffrey. Leandro speaking. I mean we have been transforming ourselves deeply into a digital bank. We have 3 pillars to transform the incumbent bank to have -- to explore more and more our native digital bank and the open bank in itself. So we do not see fintechs as major competitors. We see them as someone that is accelerating the environment in which we are. It's just accelerating a trend of investment in digitalization. And we see them as very often as partners. We have seen that we have been able to grow our base of clients in next and especially in Bradesco. And we do not expect to see new bank, as you have pointed out, as someone that is going to be just driving out of here. You have to consider that most of those clients, they have accounts in multiple banks. And what is important to us is to be their principal -- their main bank.
So principality is something extremely important in this business. And being a full bank with all the services, knowing our clients very well, using AI, using all the information we have to provide them with the best products that they have, especially in their financing needs, is a unique competitive advantage that we have. And that has been reflected in our financial statements, in our results. They have been there for couple of years, and therefore, we have been able to thrive throughout this process.
Well, gentlemen, I would like to thank you all for your time and wish you a healthy and great week. Take care.
That does conclude Bradesco's conference call for today. Thank you very much for your participation. Have a good day.