Banco Bradesco SA
BOVESPA:BBDC4
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
12.23
17.55
|
| Price Target |
|
We'll email you a reminder when the closing price reaches BRL.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Banco Bradesco SA
You don't have any saved screeners yet
Good morning, ladies and gentlemen. Thank you for waiting, and we would like to welcome everyone to Bradesco's Fourth Quarter of 2021 Earnings Conference Call. This call is being broadcast simultaneously on the Internet at the Investor Relations website, bradescori.com.br/english where you can also find the presentation for download. [Operator Instructions]
Before proceeding, let me mention that forward-looking statements that might be made during this call in relation to the company's business perspectives, operating and financial projections and targets, our beliefs and assumptions of Bradesco's management as well as information currently available to the company. Forward-looking statements are no guarantee of performance. They involve risks, uncertainties and the assumptions, and they relate to future events and therefore, depend on circumstances that may or may not occur. Investors should understand that general economic conditions, industry conditions and other operating factors may also affect the future results of Bradesco. It may cause results to differ materially from those expressed in such forward-looking statements.
Now I will turn the conference over to Mr. Leandro de Miranda, Executive Director and Investor Relations Officer.
Good morning, everyone. Welcome to our conference call about the results of the fourth quarter 2021. Today, with us, we will have the following participants: Octavio de Lazari Junior, CEO; André Cano, Executive VP and CFO; myself, Leandro de Miranda, Executive Director and IRO; Oswaldo Fernandes, Executive Director; Carlos Firetti Business Controller and Market Relations Director; Ivan Gontijo, CEO of Bradesco Seguros; Renato Ejnisman CEO of banco next; Curt Zimmermann, CEO of Bitz. Octavio?
Thank you, Leandro. Good morning, everybody. My friends, I hope you're all very well. Thank you very much for joining our 4Q '21 earnings conference call. 2021 was even more complex than we anticipated. But on the other hand, it was a year of record net income, BRL 26.2 million in recurring net income, 34%, 34% increase. Insurance, pension plan and capitalization operations also going up, bouncing back, expanded loan portfolio, almost BRL 813 billion accumulated ROAE, 18.1%. Client NII, 6.5% increase with over BRL 55 billion in revenues. Operating efficiency ratio 46%. Fee income, BRL 34.1 billion growing 4.1%. And with all that, it was possible for us to pay BRL 9.2 billion between interest on equity and dividends, a payout of 44% in 2021.
We went through 2 more waves of the pandemic, which had a significant impact on the economy and our business, but the rapid rollout of vaccinations as of the middle of the year allow businesses to resume. Unfortunately, high inflation, a global phenomenon along with some local flavor led to a dramatic rise in interest rates. The tightening of monetary policy was a factor in '21, and it will affect the recovery of the economy in '22 as well.
For 2022, we anticipate a continued return to normalcy despite the current increase in COVID cases as a result of the Omicron variant which we believe to be temporary. Nevertheless, 2022 looks to be year-on-year with modest growth due to the impact of the monetary policy and fiscal uncertainties, which will certainly have an impact on our businesses. In this landscape, we see consistent credit growth over the year, and the quality of originator remains quite good, and there is demand from customers. We'll talk more specifically about that during the guidance.
Regarding our earnings, we saw a sound performance in 2021. Net income came up to BRL 26.2 billion, the highest annual recurring net income in our history -- our current history, we performed well in client NII, growing 6.5%. And in fees, we grew 4.1%, also an all-time record. The Insurance segment was a solid contributor to the results even after absorbing about BRL 5 billion in claims related to the pandemic. Loan portfolio growing by 18.3% with BRL 112.7 billion credit origination to digital channels came up to BRL 88 billion, representing 30% of the total origination. Cumulative ROAE jumped to 18.1% on the way to recovery to a higher recurring level, and the efficiency ratio also improved, coming down to 46%.
Finally, I would like to point out the distribution of BRL 9.2 billion in the form of interest on equity and dividends, resulting in a payout of 44%.
Now going to Slide #4. Over the last few years, we have seen growing concerns about climate change and its risks and opportunities for both companies and economies. And this is the reason why this is one of the pillars of our sustainability strategy, ESG. In 2021, we were the first Brazilian bank to sign on to net zero. It's a major commitment because it involves working even closer to our clients doing the transition towards a low-carbon economy, once again placing the client at the center of our strategies.
Today, we are already carbon neutral in terms of the emissions generated by our own proprietary operations, including indirect Scope 3 emissions, which, for instance, involve the -- our employees community between the homes and workplace. In 2020, we were the first Brazilian bank to join PCAF, Partner for Carbon Accounting Financials, aiming at measuring and publishing of financed emissions.
And from this point on, our challenge will be even greater because it is no longer related to our own operations only, but it is about engaging and helping our customers doing this transition so that they may be able to better manage their risk and take advantage of the opportunities that will come out of the new economy becoming more and more resilient to climate change.
We now go on to Slide 5 to discuss sustainable businesses. We also announced in 2021, the goal of targeting BRL 250 billion by 2025 to sectors and assets with a positive social environmental impact as part of the commitments and strategies related to the transition to the new economy. We have already channeled BRL 83.6 billion, accounting for 33% of the target as a result of the growing demand for credit in these sectors. And the greater momentum in the investment banking area, the solid performance may lead us to revise this goal.
Further evidence of our commitment to finance a sustainable business and serving as an agent of positive change in society. This was the mission of our first bond linked to social environmental criteria in the international market announced in January at $500 million. As a result of this continuous development of ESG aspects of our business, we've been recognized by major indexes and specialized agencies, and have received a rating above the market average. We would like to point out that for the full year in a row, we are among the 10 top banks in the world in the Dow Jones Sustainability Index. We have also been part of the B3 ISE since its creation in 2005, and we are now part of the first IGPTW portfolio, which is the new index from the B3 ESG family in partnership with replace to work.
Turning now to Slide 6. respect and care for our people have always been an integral part of the Bradesco culture. And we speak about our people, we refer not to 90,000 employees but to 90,000 families. We believe in the strength of diversity, reinforcing the company's culture with the interaction between employees. We employ a diverse staff with solid attitudes and actions related to inclusion and have focused our efforts to continually evolve through training and development. We adopted measures during the pandemic to ensure that customer service continued on, along with the safety of our employees through unconditional support, including a 24/7 of health professionals.
The return to on-site activities has taken place gradually in the administrative areas with a bit more caution in this place this time and will implement a hybrid model in which we combine the best of both worlds, thereby benefiting growth productivity and the quality of our teams and environmental aspects.
Turning now to Slide 7. With technology advancing quickly, the client has increasingly become the main player of their own choices, which is at the center of our decisions. Clients are more digital and demanding each day. They are engaged and intensively apply new technologies to the daily routine. Our policy is one of alignment with what drives the client, and we are continually devoted to the search for new solutions to make our clients' life more uncomplicated. Bradesco' experience uses data intelligence to build customized solutions, improving financial and nonfinancial products and services according to customer expectations.
On Slide 8, we outline some of the innovations in the clients' experience with the bank, which are quickly developed in systems that run on cloud. We have implemented a financial manager tool, which facilitates management of Bradesco accounts and soon other institutions, plus promoting personalized insights, everything in a single place. The Bradesco app offers access to exclusive cashback in addition to nonfinancial products as a partnership with Disney, transferring money abroad just got easier with the [ me-to-me ] currency exchange from Bradesco to BAC Florida, an instant transfer from one account to another. And through Bradesco Invest US, our digital investment platform in Miami, clients now have a simplified and 100% digital journey to investments in international assets through portfolios managed in a partnership between Bradesco and BlackRock that is based on their investment profile and objectives.
Turning now on Page 9. The digital experience with Bradesco is constantly evolving, and it ensures that the client has autonomy in their financial management. Proof can be found in the total amount of transactions in which 98% are carried out via digital channels, 91% of which are concentrated in mobile and internet banking. We posted a surge of 5.3 million digital account holders compared to 2019, and the number of accounts opened via the app grew by 5x. We also saw a significant boost in the number of products, both individuals and companies have applied for.
Turning now to Slide 10. The volume of credit that we originated through our digital channels was BRL 88 billion in 2021, a 36% growth compared to 2020. This amount now represents 30% of all credit produced by the bank. It should be pointed out that this number is greater than the sum of the credit portfolios of all fintechs in Brazil. We even made progress in digital renegotiation, which was 43% higher than 2020. These results illustrate the quick progress of our cloud systems such as BRAIN, and CRM, and the evolution of our business platforms that are centered on the client.
Moving on to Slide 11. We show the growth in the number of our cards. We revised the product portfolio and introduce cards that complement our offer, allowing clients to choose the card that best suits their usage profile. The sale of cards through digital channels grew 5.8x this year and now accounts for 20% of total sales.
Slide 12 outlines our performance in vehicle financing. We took the lead in origination with a production that was 25% higher than a year ago. This performance is due to our continued focus on the needs of customers and partner channels, which has made the journey to contract our products, a digital experience, where it is possible to finance along with the vehicle, accessories, IPVA and other expenses plus the ability to take out insurance coverage.
On Slide 13. And closing this block of solutions focused on client experience, we show be BIA. BIA also runs in the cloud, and it has allowed us to become the pioneer bank in artificial intelligence. It's a solution that already total 1.2 billion client interactions, multi-platform, BIA is found in branches, Fone Fácil or WhatsApp, one of the primary communication channels in the market, accounting for over 60% of BIA's mobile interactions. And the most intriguing thing is that BIA is also a pioneer in linking artificial intelligence with voice command. It not only listens to the customer, but also performs requested actions, such as sharing a fixed receipt.
On Slide 14, we feature some of the progress we've made in our digital initiatives that also made great use of the cloud. Next, Agora and Bitz. We have already had the regulatory approval. And as soon as we have Digio acquisition will also post the figures. We are increasing and diversified Agora's product offering, doubling its net funding in 2021, and set at 743,000 customers, a growth of 35.7% over 12 months.
Next, which had a target of doubling its client base in 2021 is close to 10 million at the end of last year with 170% increase. This greater scale has led to significant strides in the total volume transacted and in the revenue base. The November release of our marketplace nextShop is another step in the move towards an increasingly better and more complete platform and digital experience. Bitz ,the digital wallet we introduced in September 2020, doubled its amount of accumulated accounts and downloads in the last quarter, more than 4.2 million accounts and 6.2 million downloads. Just looking at these digital initiatives, there are already nearly 15 million customers. As soon as we conclude some of our strategic brands, now we post our numbers as well.
On Slide 16, operating income increased 6.3% year-on-year net income, BRL 6.6 billion. The Insurance business grew 54.6% year-on-year with a solid evolution of premiums and financial results. Client NII grew 11.8%, helped by the growth of the portfolio, and we will be talking about that on the next slide. Before we continue, it's important to point out that the comparison of our operation in 2021 with '19. Before the pandemic began, we saw revenue growth despite partial restrictions on mobility during the past year. And we managed to reduce expenses in an environment of rising inflation, which resulted in a 9.6% increase in our operating income.
Now on Slide 17, which contains data on the reconciliation of managerial and accounting profit. By looking at the annual consolidated column, you can see that the adjustments are very similar to those of the previous year, except for the reclassification and realization of financial instruments made in this quarter with an extraordinary impact of [ BRL 1.8 billion ] on the result, and this movement realigned part of the securities portfolio to the new reality of interest rates that we see in the market. They went up practically 900 points. And we also underline the constitution of our restructuring provision of BRL 441 million net of taxes as we will continue to make adjustments to our physical presence with the conversion of branches into business units in 2022.
On Page 18, where we show the growth of our loan portfolio. In December, the total volume exceeded BRL 812 billion, a growth of 5.1% in the quarter, 18.3% in the year, above the guidance ceiling that we had revised already upwards in the last quarter. There was a significant growth in all groups and types, highlighted by the expansion of operations with SMEs, which represents an increase of 24.5% a year for the year as well as individuals with an increase of 23.2% of performance reflected recovery of businesses and the relaxation of restrictions of pandemic. As we pointed out at the beginning, cards and vehicles were lines that saw a relevant growth of 30.5% and 11.7%, respectively. The real estate financing portfolio, 23.4% year-on-year increase. The volume of operations with individual 31.2% increase. And we broke a record in 2021. origination was to BRL 37 million, 5.6% higher year-on-year, and the number of finance units exceeded 125,000 homes, 48% more year-on-year.
The expectation is for continued growth in the real estate loans, but at a slightly lower rate than in 2021 due to the higher interest rates. In rural loans, we posted a significant growth of [ 14.6% ] reflecting our historical support to agribusiness. We are the leader among private banks in this segment, and we operate through 14 regional platforms, including agricultural engineers, and we distribute credit product services, that support the modernization of the sector. And we are making massive investments this year to deliver a fully digital ecosystem to our clients, complementing our performance more broadly in a pioneering partnership with one of the world's largest players in the technology sector. The 2022 credit outlook is for double-digit growth with acceleration of the light with higher spreads, which will lead to an improvement in client NII.
On Slide 19, now talking about provisions. Credit provision expenses totaled BRL 15 billion, 41.6% lower than in 2020 when there was an impact from the strong increase in provision that anticipated the effect of the pandemic on delinquency. The major growth in higher spread loan operation in 4Q '21, such as credit cards, personal loans, and working capital had a slight impact on the amount of provision in the quarter and on the cost of risk. And this is a good cholesterol, so to say, because it comes from the portfolio growth. Even so the indicator remained below historical levels.
Our NPL coverage ratio over 90 days remained at a very comfortable level and above the pre-COVID level at 261% and when including the entire renegotiated portfolio, 111%. The covered indicator over 90 days, excluding 100% provision remained stable. Our coverage is the highest in the market. Provisions should continue to adjust over the next 2 quarters following natural trend in the process of normalization of credit situation.
Now on Slide 20, the renegotiated portfolio totaled BRL 28.6 billion. It is important to point out that volumes continue to decline in comparison with the total portfolio. The indicator reached 4.7%. And the quarter already approaching the pre-pandemic level. The provision volume is 62.3%, representing 3.5x we observed delinquency, which continues to return to normal and is approaching pre-pandemic levels.
Slide 21. Delinquency rates remained well under control and at levels that are lower than the pre-pandemic period due to the solid portfolio management, evolution of credit models, and client-centric procurement, and renegotiation journeys. In line with our expectations, total delinquency over 90 days, rose 20 bps, indices for individuals and SMEs were the most impacted, absorbing the effect of the renegotiated portfolio referred to on the previous slide.
Gross credit provision expenses were BRL 5.1 billion in the quarter, representing 88% of the NPL creation because the operation of the renegotiated portfolio that became delinquent had a high provision level already that required less of a supplement.
And finally, I would like to point out that in this quarter as in previous quarters, we sold both performing and active portfolios -- nonperforming and active portfolios with the rationale of our credit management process. We use this mechanism whenever we believe there is more value creation in the sale then the using of our team to collect overdue loans.
On Slide 22, the total NII presented a strong growth in the quarter with an increase of 8%. Year-to-date, the evolution was 1.3%. Client NII for the year topped 6.5%, exceeding the upper levels of the guidance as a result of the higher average volume of operations, better spread in the product mix. The recomposition of spreads as of 3Q '21 was a great important to offset part of the negative variation in 1 half '21 and will continue to be significant in the coming periods. The reduction in the market NII, which posted a record result in 2020 is due to the impact of the higher CDI on ALM positions, partially offset by the higher result from our own working capital.
Slide 23. Fee income surpassed BRL 8.8 billion in the quarter, an all-time high and the amount was BRL 34 billion for the year, a growth of 4.1%, above the center of the guidance. The volume transacted on our credit card. This quarter once again performed very well, exceeding BRL 66 billion, exceeding even the prepandemic period. And this growth has allowed this line to develop by about 10% in both the quarterly and annual comparison.
The year-to-date 0.7% increase in the checking account revenue line is related to the growth of our account holder client base by [ 1.8 ] million over 12 months on top of the higher business volume of correspondent banking, given the overall resumption of commerce. These movements compensated for the revenue losses due to the picks on the right side of the slide, we can see the total number of clients reaching 74.1 million as well as the number of Bradesco account holders 32.6 million, not including next, and Bitz, in this number of checking accounts. The annual growth of 3.9% in income from credit operations related to the expansion of the portfolio and the consortium management, custody and broker services, and financial advisory services, contributed significantly to the annual growth in fees despite posting a decline in the quarter due to the lower number of working days.
Now Slide 24. Our operating expenses, even in an environment of high inflation with IPCA of 10.1% and IGPM of 17.8% along with a collective bargaining agreement of 11%. Total operating expenses increased only 1.1%, a clear sign of efficient cost management. The 6% increase in personnel expenses for the year is due to the higher provision for profit sharing and the collective bargaining agreement started in September.
Administrative expenses, the increased use of digital channels and the optimization of our physical presence and the processes offset in the inflationary pressure, and also the higher cost associated with technology investment, and customer and acquisition for next and Bitz. And the increase for the year was 1.3%. The variance of other income of expenses is primarily explained by the change in the supplementary provision of insurance. We will see a reduction in the number of branches and increase in the number of business units in 2022. In 2022, we will see a reduction in the number of branches and other transformed in business units.
Now Slide 25. Data of -- about our Insurance business. Net income posted an annual growth of 4%, and it would have been around 8%. If it were not for the increase in social contribution. Growth of approximately 11% in revenue. The sound performance observed in all business areas was followed by an increase in the number of lives insured, vehicles, and homes, as the insurance group was able to take advantage of opportunities in various distribution channels and business partners, particularly with performance in digital channels.
Income from Insurance operations saw an improved performance in the second half and was in the middle of the guidance. This performance is related to the improvement of the claims ratio due to the reduced effect of the pandemic as well as improvement in the financial results for the period. The volume of COVID-related claims in the 4Q '21 was the lowest since the beginning of the pandemic, despite the more recent increase in demand due to the Omicron variant, we did not see the same severity as in previous periods. Hospitalization cases are much less frequent and recovery has taken place in a shorter time. We provide our policyholders with antigen test at Meu Doutor Novamed Clinics to support diagnosis. And it should be noted that in 2021, we had more than BRL 5 billion in claims posted because of the pandemic. This volume emphasizes the strength of our balance sheet and the importance of ensuring to mitigate the effect of losses on families.
On Slide 26. Our Tier 1 capital closed the year at 13.7%, remaining rather robust and well above regulatory limits, even with the significant annual increase in risk-weighted assets, given the robust growth of our loan portfolio, mark-to-market of securities, and payment of interest on equity, and dividends. Indicators for liquidity also remain at rather comfortable levels.
Now Slide 27. The final one before we move on to questions. As we mentioned at the beginning of the presentation, uncertainties will remain in 2022, but we continue to believe there is room for growth, chiefly due to our business model, and technological innovations in recent years. The loan portfolio grew 18.3% in 2021, above the top of the guidance, and we see growth in this line for 2022 between 10% and 14% and client NII growth was 6.5% in '21, also higher than our previous estimate. For 2022, we expect to grow this line between 8% to 12%.
In fees, we grew 4.1%. Our expectation is for an expansion of 2% to 6%. Total expenses grew by 1.1% despite the rise in inflation, and guidance for 2022 ranges from 3% to 7%, including our optimization initiatives to mitigate the effect of inflationary pressure and also to preserve room for important investments in technology and growth of the customer base. We saw a 5.5% tightening in income for Insurance in 2021 due to the impact of claims from COVID, and in the middle of the guidance that we revised and we talked about that with you and our forecast for 2022 is 18% to 23% growth with the growth in premiums and reduction in claims.
So we believe that the worst phase of the pandemic is water under the bridge, expanded credit provisions ended 2021 at BRL 15 billion, still at a very low level and for '22, we expect a range from BRL 15 billion to BRL 19 billion in this line, mainly due to the growth of the loan portfolio. We expect market NII to post a further reduction in 2022.
Thank you for your time, and we are now available for questions. Thank you very much.
[Operator Instructions] The first question is from Ricardo [indiscernible] with BTG Pactual. Over to you, sir.
Firstly, I would like to understand about delinquency over the year? Do you expect it to be a little bit more stable? Or if we think about an increase in delinquency, does it make sense to consider normalcy this year? And on top of that, could you please make some comments on which segments of the bank are expected to have growth in credit over 2022.
Ricardo, your question has to do with credit growth. Is that correct?
The first has to do with credit growth, if there is expectation to grow even more. And the second is to understand delinquency behavior this year. And does it make sense to consider normal levels equivalent to the pre-pandemic levels?
Ricardo, for year 2022, we have a guidance of around 10% to 14% of credit growth, slightly below, which was our previous guidance. The effective growth last year, which was 18.3. Why do we envisage lower growth? Naturally, this is related to macroeconomics, and also growth in interest rates or select rate, which is very steep, strong growth, and also growth in inflation rates and expected growth in inflation and IGPM. If we put it all together in this scenario, if you consider future rates in 5 to 10 years, we are considering 12% to 13%. So if we consider a spread 2% or 3%, it goes to 15% to 16%. Out of intuition and based on our conversations with the business communities, particularly corporate bank and big companies, which work with us, we don't envisage any possibility or it's not right to say that there's going to be massive investments in infrastructure, new business and new plants because money is very expensive nowadays. And in order to be in capital markets, the price charged is also very high.
So we understand the corporate bank, which holds 40% of our loan assets. This growth will be marginal. Out of intuition, we should expect that the business community or big corporations will be in 2022 with short-term loan use in cash in order to meet specific needs, but no investment in fixed assets. Very few cases owing to all the macroeconomic scenario in Brazil, in the world, and additionally, with the elections in Brazil. So that's why you understand that we shouldn't see a strong growth in the corporate bank.
As for SMEs, this is more resilient because these companies necessarily have credits and loans as part of the daily operations. They needed to go month by month, anticipating receivables, discounting checks. So it's only natural that these operations will keep on growing.
As for individuals, to some extent, people need to borrow, for instance, in real estate financing, we expect volume to be lower owing to the interest rate, 20 or 30 years with an interest rate of 10% is unfeasible unless you finance a tiny amount of the property amount. So real estate is expected to grow less. As for other individuals loan like credit card, personnel loan, and payroll deductible loan. This is more resilient. Even vehicle financing, people are expected to keep on using these loans.
And we also expect to be a solution to this pandemic and people are expected to go back to work more often and then increase their expenses with credit cards with their daily activities for food and other expenses. So we expect it to be more resilient.
So to summarize, for big companies, we believe that credit will be more modest, only for specific needs. And for SMEs and also individuals, this is going to be more resilient in some portfolios or less depending on the credit. So that's the trend. And what we can see answering your question about credit quality, we already had delinquency rate, historical rates that hit 5.5% over 90 days. But on average, we speak of 3.5 or 4 delinquency of 2.1. It increased 0.2. We mentioned that in our previous meeting with you. It was only natural that delinquency would go slightly up. We all know it cannot be at the levels they were. We expect rates to go back to normal. In 2020, we had several reprofiling operations, financial reorganization, extending our operations, and the portfolio is overdue, but delinquency overtime was also there.
So it's out of intuition to assume delinquency expected to keep on growing in a very controlled manner, that's what we see in our credit models and in the new harvests that are being generated. There is not a peak but a more moderate modest growth of delinquency, but also with a good quality of credit. And coverage ratios, both for the renegotiated portfolio and delinquent portfolio sticking to a very high and comfortable levels that we presently have.
Jorg Friedemann, Citi Bank.
I have two questions. The first one. I know that you're not going to give a guidance on that. With the size of the security reclassification that was carried out in this quarter, do you believe this could contribute to the evolution of the market vis-a-vis 2022. Could you give us some color on this evolution, please?
And I have a second question as well, and it has to do with Insurance. We saw that some lines are already bouncing back to a claims ratio close to the pre-pandemic levels such as life and P&C.
And then your guidance you give us a significant growth vis-a-vis 2021. And you said that you believe that there will be a reduction in claims. So could you give us some color about the levels or give us some figures, especially about life and health because of the recent development of the Omicron variant.
Thank you for the question. When we have a very fast growth in interest rates, 10.75 in a very short time, 7, 8 months, this is what happened here in terms of interest rates. And the opposite is usually very positive. So that was a one-off situation that we did regarding the securities with the lower interest rate, so that in 2022, we could have -- we could go back to normal in our securities portfolio. So this was a one-off situation. And we believe that in 2022, it will be lower than what we had in 2021.
In terms of Insurance, your second question, you are correct. Claims ratio was much better in life and in P&C. And so you see this so in Bradesco health because -- of course, the results always a health issue, but this doesn't point to a growth as far as we can observe. We have been hearing this and reading about this that the degree of immunization of the Brazilian population led to the fact that the new variant is -- it is more contagious. However, it is less aggressive. And -- because of that, hospitalizations are shorter and the cases are not as serious or as grave as we had in the previous variants. But I would like to ask the CEO of our Insurance company to add to what I said.
Good morning. Octavio, I think you said it very well, and you have already mentioned all the points that were mentioned in Jorg's questions. We see a higher degree of contagion. However, it is mitigated by the vaccine, and the cases are less severe than the previous variant, and you talked about the reduction in claims ratio in the third and the fourth quarters and in life, from 60.9% to 34.9%, you can see the impact on the third quarter. And this severity, we also see in P&C and in home insurance, and we see this in health with a lower cost.
However, we do not expect to find in 2022 the same BRL 5 billion that we paid because of COVID in 2021. So the reduction for health where we have more primary care and -- it is more in primary care than in long hospitalizations that are much more expensive. And because of that, we can have a better visibility for 2021.
Just a follow-up here. Given the severity of Omicron that we have been seeing and even with record death the highest number since August 26. So we should see an increase in claims ratio in life in the third quarter, and this would only be natural.
It is only natural to expect an increase, but not as intense and not as high, and the death cases that we have just mentioned tend to be reduced, a significant reduction in deaths. So this is our visibility right now as we speak.
And I would like to have one follow-up to the other question, Octavio. I don't quite understand the following. Are you working with a scenario of compression vis-a-vis 2021? Or is it more constructive? And about the adjustment.
We already had visibility in terms of inflation, it was much more visible and at least in August and September. So I would like to ask why haven't you carried out this adjustment in the third quarter when we already had this visibility? Why did you postpone it to the fourth quarter?
Jorg, for 2022, we expect a compression vis-a-vis '21 because the interest rate is going up, and there are signals about the growth -- consistent growth up to May. So we do not give a market guidance because of that because of this volatility that we see. In relation to what you said, this is regulatory. Either I do it until June 30 or I have to postpone it. I cannot do it because of regulations. So we do not have this kind of option.
The next question is from Flavio Yoshida, Bank of America.
I would like to go deeper into guidance. My first question has to do with client NII. You project growth for 2022 below the growth of the portfolio. At the same time, Octavio, you made comments on the slides that credit cards and the SME segment with larger spreads, this is growing faster, whereas real estate, and payroll deductible low, we can see a slowdown, even though growth remains good. So what about the mix? Could we assume a growth in the client NII more quickly than the portfolio? This is not what the guidance shows us. So can you see some pressure on funding or this transfer of higher funding costs at the end of the day, doesn't happen at the same pace?
And my second question has to do with fees in the guidance, fee growth in the guidance. 2021 was already challenging, growing 4%. And growth for 2022 to some extent is shy. If we think about the expansion of the portfolio at 10 and 14, it gives signs of opportunities for growth and a strong growth of the client base, but fee revenue doesn't follow the same rate. So I'd like to know if you think it has to do with competition or why would we have this shyer growth compared to the rest?
Thank you for the question. It's a pleasure to hear you. When it comes to client NII. If you think about the average of the guidance, both in client NII and also credit portfolio, we are in the same bracket, so to speak, same range. However, we have a challenge. When you think about growth in credit cards and these portfolios are mentioned, the first impact is ALL, and then you start to work on revenue over time. So this is not immediate. There is appropriation of revenues over time. So this may be the first important item, we have expected growth. But for instance, if you think about credit cards, the impact of ALL is from 3% to 4%. And then you start working on revenue appropriation over time. It's not immediate, like I said.
So this somehow explains the growth in the client NII. And we also have a number of other items. We should always bear in mind that every constituted portfolio has to run over time. We make up a credit portfolio that is extremely high for a financial institution as big as Bradesco with [ selic rate ] at 2% a year. And now you have to run the whole portfolio again with a higher interest rate in order to capture a best NII. And it takes time. The average time of maturity of our operations is around 8 to 13 months -- 18 months. So it takes a while. Our teams naturally work in order to renew and to make the portfolio run even faster. So this might explain the slight difference we see between growth in the credit portfolio and growth in the client NII.
Naturally, we'll be pursuing growth as quickly as possible and the best we can. When it comes to fees, and fees and commissions, this is going to be tackled by regulations by the Central Bank by new entrant, start-up companies, fintechs. also brings a reduction, a dramatic reduction in fees. We noticed this last year. So our challenge and the beauty of our challenge is to create new profit pools, new revenue sources, origins, so we can have a balance here. Considering PIX or credit cards or more fierce competition pertaining fees, and also open banking that is expected to accelerate over 2022.
So in 2021, to some extent, we offset this context. And that's why we can see this growth in fees, which is a revenue that tends to be more challenging to speed up because it also depends on the competition, not only on ourselves, the price is set by competition, the client, the market. So that's the challenge behind growth and the ability to improve client NII.
How can we do that by effectively improving the number of clients we have in your organization. And that's why you put it very well. The growth in the number of clients at the bank. So these new clients can bring new fees, new revenues, new credit operations. So we managed to run in this area. So it's always a challenging growth line owing to the size it has and the financial volume, which is very big, but we have good options and good levers to touch upon this line of revenue.
Got it. Now you also mentioned in your last part of your answer, you talked about regulation and new entrants. Do you see any news in this area?
No, Flavio. I guess the new topic is over banking. PIX is already here, already deployed. It turned out to be a success. It's no way coming back. It has come to stay and this is good to the Brazilian market and the Brazilian population. So the hot topic right now has to do with open financing and the implementation of open financing, the speed of implementation, which adds a new structure in terms of mobility for everyone in order to change their account, their credit operations upwards and downwards, bring in agility. A while ago, remember, if you wanted to open a bank account, a company, for instance, financial institution, you physically have to be at the branch to do that. And now the population, even low-income population, it is a lot easier because Brazilians are very familiar with mobile phone operations. So it's very easy to open new accounts in different companies. So that's why it's important to focus the efforts on a pleasant customer journey. So we can really have everything at the core, the preferences on your side.
Regarding your guidance about AOL, you have -- I would like to consolidate the 14% information with the guidance that you gave. Is it going to grow almost twice the market? Will you be able to grow the line with a bigger spread? I would like you to consolidate the growth in your ALL with your loan portfolio. And the comfortable coverage ratio that you foresee for the end of the year.
We tried to give you a guidance, with growth in some credit lines that will bring about a higher spread, as we said, and what we have been seeing in the [indiscernible] originated is that we have comfortable levels of delinquency. We know that the year is going to be quite challenging, even in terms of the growth of our portfolios, but aligned with the operations that I referred to. Corporate bank should grow less with large corporations not generating a specific ALL.
And we talked about it when the pandemic was very strong in 2020. And this is why we gave you this guidance. And I think you are correct in your remarks, 10% to 14% sounds quite aggressive, but the growth in our client base gives us a level of comfort in the sense that we will be able to grow credit with quality, and this is what we are seeking.
In this last quarter, the growth was 0.12, and the operations that we carried out together with you with -- regarding the reprofiling and renegotiation of debt, they have already come to an end. We just have a small balance that is already provisioned for. And the renegotiated operations with clients. Sometimes you really need one letter to provision. So the level of provisioning is lower because of that. And I think we will be able to balance the growth in our portfolio and to consolidate the 2 sites that you referred to.
Just to end the coverage ratio. At the end of the year, could you expand on that?
Pedro, I think it would be even more than that 262. We have a lot of room there. It would go back to historical levels.
Next question, [indiscernible] Santander.
My question is about loan portfolio. I'm sorry to go back to this. Febraban launched a survey showing the market posting growth of [ 6.5% ] loan for 2022. I know this is downwards owing to public banks, government banks, but 6.2% is about 50%, the middle of the guidance of Bradesco.
So my question is, what about this growth in the middle of the range? It sounds strong to me. Is it because Bradesco has a different reading from the macro scenario? Maybe a more benevolent reading for 2022? Or is it the same reading and Bradesco is highlighted as a more aggressive portfolio growth. Basically, this is it.
Thank you for your question. I guess there is an agreement in the market when it comes to year 2022. Growth in credit operations, Febraban mentioned 6.5%. Here at the bank, we consider -- no, no, no. Our economist, 7.58%. So based on our ability to grow, and based on Bradesco's business model and performance countrywide, you can see that rural credit last year increased by 40%. Real estate increased by 50%. Vehicle financing, we had the market lead. So we understand that we brought 15 million new clients via next, Bitz and now we have Digio, which also has around 2.5 million customers. So we understand that we have conditions to grow beyond the market even though we understand the market is right. The assessment is correct. And I even said, we don't consider to have significant growth at big or large companies. It has to do with the natural cost of money. But as for other business, bringing 15 million new clients as we did with Bitz, next, and Agora and another 2.5 million new clients via Digio. So we also have a natural growth, nearly 2 million new clients last year.
So by the end of the day, we feel comfortable to understand that we can grow slightly beyond the market estimate. So this is how we assessed last year and that's how it happened so much so that we revisited our credit growth forecast for last year, and we were above the top of the guidance for 2020 and 2019 so the speed in which we're managing to add new clients.
And above all, the fact that we managed to have a mix of different conditions, Agora, Bitz, next, consortium, so many businesses and particularly because today we have a digital journal that is very simple, online, real time in order to serve our customers. So if you put it all together, it's also or nearly mandatory for us to challenge ourselves to go beyond the market rate.
Excellent. Now still along the same lines about credit and provisions. When I checked the guidance, the middle of the provision guidance, it grows more than the portfolio. You already mentioned the provisioning and the credit mix. So if I think about the top of the guidance and considering that you reduced the coverage this year, my reading and I ask you to comment on it. I assume Bradesco looks at 2022, and doesn't see any problem about delinquency. It might go up, but nothing to be a problem. Is my assumption correct?
That's correct. I cannot refer to it as a problem because it's ALL or normal delinquency that we see. We've been seeing over the years our loss models that were even considering a worse scenario, they already take it all into account. So we don't have any specific problem like I said, that might require higher additional provisions. We have provisioned -- significant provisions over 2020. So that's why I agree with your assumption. We don't see any serious problem.
Right. Firetti is reminding me it's a normal scenario. What we had pre-pandemic and not necessarily a problem.
Domingos Falavina, JPMorgan.
I would like to ask a question about reclassification. And two questions, in fact. Are that tax implications regarding this reclassification, the recognition of this loss in this year would carry out the mandatory payment of higher taxes?
And the second part of my question. The BRL 2 billion one-off loss would mean again additional gain on financial revenue. So I would like to know the duration of that. You have about 2 years of a collective result? Or is it going to be deferred?
Thank you for the question. First, I would like to clarify this and then [indiscernible] will add to what I say. The movement that we carried out was exactly to mitigate or to improve 2022 because the interest rate was 12%. And it went to 12. And this will be reflected over the next 3 years, '22, '23 and '24. This has no tax effect whatsoever.
Yes, there is no tax effect neither in 2021 or in the following years. We had no benefit regarding the margin that referred to in 2021 because we can only do this at the end of the half year balance sheet. So this was done on December 30. And when we carried out this operation, the result that would be negative for 3 years, we brought this forward to 2021.
But what about any tax rates from now on?
The tax rate was 5% higher of social contribution, but we do have a tax credit on the other hand. So we can activate this tax credit at the same amount so one offsets the other.
Next question. Daniel Vaz, Credit Suisse.
My question has to do with Insurance. I was doing some quick math. So if we think the level of not only remains but technical provisions, they are at the same level in Q4, the same level of the fourth quarter, so to be at the top of the guidance at 14 billion if we consider a more constant insurance result. So except for the fourth quarter, where can we have this leap to come to a more reduced guidance?
So if you think about the fourth quarter, and we know we might see an increase or an improvement in claims ratio owing to COVID. So what should happen in order to have a lower guidance? If we take into account the fourth quarter, would it have to be with premium or financial return? Where is it?
Daniel, Ivan Gontijo is with us, and our finance department also can answer your question. Ivan, over to you.
Thank you, Octavio. Hello, Daniel. Our outlook for 2022 considers growth in our revenues. In 2021, we launched about 15 new products in several areas in all kinds of segments in the Insurance group. And we believe this is going to make a difference decisively in our revenues and sales.
If we look at 2021, the growth in sales of BRL 70 billion to BRL 82 billion already shows how it can happen. And considering all the complexities of 2021. As for provisions, I'm not saying we are only conservative. We were more than that, we were realistic. And this reality also has to do with the vibrancy of the Bradesco brand.
When it comes to provisions, we will keep on working them, complying not only with the regulations, our commitments, what is mandatory, but above all, keeping an eye on compliance with our agreements with our insurance holders and clients. If we think about the growth of premium around 10% compared to 2021, and also finance benefits from CDI, which is higher and the financial performance is an important part of an insurance company in Brazil, the U.S., and in Europe.
So comparatively speaking, we could say that we expect to have something around 65% of operating growth of the Insurance group, and that's what we envisage. And growth also back to the financial performance, something around 35%. So our guidance between 18% and 23% for all these reasons, give us some comfort, a lot of comfort.
And naturally, as I said before, this is all linked to a slowdown of claims ratio which has to do with COVID. Claims ratio of the elective normal process at a health care company, and claims for P&C and auto. We are all ready to tackle this, and we understand that we are comfortable within the guidance between 18% and 23% considering 2022.
Our Q&A session has come to an end. We would like to turn the floor over to the company for their closing remarks.
My friends, thank you very much for your attention. It was a great pleasure to be with you today and clarify your doubts. Anyway, our whole team will be available to you should you have any additional doubts. Thank you very much for your attention, and we wish you a good day.
Bradesco's conference call has come to an end. Thank you very much for participating, and we wish you a very good day. Thank you.