Banco Bradesco S.A. (BBD) Q2 2015 Earnings Report, Transcript and Summary

Welcome everyone to Banco Bradesco's second quarter 2015 earnings results conference call. This call is being broadcasted simultaneously through the Internet, in the website www.bradesco.com.br/ir. In that address, you can also find a banner through which the presentation will be available for download. [Operator Instructions]. Before proceeding, let me mention that forward-looking statements are based on the beliefs and assumptions of Banco Bradesco's Management and on information currently available to the company. These involve risks, uncertainties and assumptions because they relate to future events and therefore depend on circumstance 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 the results to differ materially from those expressed in such forward-looking statements. Now, I will turn the conference over to Mr. Carlos Firetti, Market Relations Department Director. Mr. Carlos, you may proceed.

Okay. Good morning, everybody. Welcome to our conference for discussing our Q2 2015 results. We have today with us Luiz Carlos Angelotti, Executive Managing Director and Investor Relations Officer of Banco Bradesco and Roberto Chamberlain, Director of Bradesco Seguros. I will turn now the presentation to Mr. Angelotti.

Good morning, everyone. It's our pleasure to stay with you now our - Bradesco's second quarter conference. We'll start in the slide 2, with the highlights of the periods. Our adjusted net income in the first half reached at BRL8.778 billion, increasing 20.6% when compared to the same period the year before and BRL4.5 billion in the quarter - in the second quarter. ROAE reached at 21.9%. Our NII earnings portions increased 17.8% in this quarter and this helps - this has helped - our efficiency ratio reached at 37.9%. It's the best level ever in our organization. And the - our operating coveraging ratio reached at 78.7%. This index represents our - how our fees - how much our fees covered our fixed costs - our operational costs. Our fees and commissions increased 11.8% in this first half, just by the cards evolution and the - our client segmentation improvements that we're implementing new segment start to have the benefit this helped us to improve the number of products per client. Our bank operating expenses grew 6.1%, below level of inflation in the periods. Our total assets reached at the BRL1.030 trillion and our expanded loan portfolio reached at the BRL463 billion, and the - our net income from the insurance business, that is around one-third of our the risk diversification that we have in our portfolio - this net income in this first half reached at BRL2.566 billion. And the total insurance in written premiums grew 19.4% above the year ago. And now, Carlos Firetti continues with the details in our presentation.

Okay. Going on, the slide 3 - we have the adjustments in our net income. Basically, we had a thin quarter with no major adjustments. Our adjusted net income in the quarter grew 18.4% year on year, reaching an ROAE in the quarter of 22.7%. In the first half, our net income grew 20.6% year on year, with ROAE reaching 21.9%. In slide 4, the adjusted net income growth - focusing specifically on the Q-on-Q variation, earnings grew 5.4%. In terms of the major drivers, we still had a good performance in terms of NII from interest, benefited by our strat and also strats in the funding side, where we have been able to get improvements. Banking fees benefiting from our segmentation and good performance in the card segment, where we also had impact of the consolidation in - of Cateno through Cielo and good performance in insurance and lower net operating expenses, since we didn't have the same level of provisions as in the first Q. This was partially compensated by lower non-interest NII and higher operating expenses Q-on-Q, despite we're still having a very good performance in terms of expenses. Going to the slide 5, our net income breakdown - that shows our diversification in terms of sources of income. Our insurance business represents 29% of our total earnings, while banking operations 71%. On that credit intermediation, 34%, fees, 28%, and securities and others, 9%. Interesting to note that the non-credit-related activities represent 66% of our net income. Going to slide 6, our efficiency and operating coverage ratios - we reached, this quarter, again, our best efficiency ratio ever, with 37.9%, with strong control of expenses, the maturity of our investments in technology positively impacting our efficiency, and also, good performance in terms of revenue. Our operating coverage ratio that is - reached 78.7%, also our best level ever. In slide 7 we show some numbers related to our NII. Basically, our total NII grew 12.2% year on year, while our NII from interest grew 13.9%. This numbers are above our guidance for this line which we have revised, as we will show at the end of this presentation. Our NIM increased in the 12 months - accumulated 10 bps Q-on-Q. NII from interest - basically we had, in the first half compared to the first half 2014, an increase of 17.8%. Credit intermediation grew 11.7% - as I said, benefited by good performance in terms of funding and also expressed on the corporate loans. In terms of insurance, we have a year-on-year growth of 31.3%, benefited by the tax in the first half of the BCA inflation, but also benefited by the strong performance in terms of premiums that increase our reserves. And also a good performance in securities and others, growing 58.9% in the comparison of the first half. That benefits from our management and the investment of our equities. In slide 9, basically our net credit intermediation margin - basically, the gross margin grew 10 bps and after provisions also 10 bps Q-on-Q. The total margin from credit grew 10.2% year on year in the second Q and net of provisions 8.8%. In slide 10, our BIS ratio - basically, considering the schedule of implementation of BIS in Brazil, our common equity ratio increased from 12.1% to 12.8%. That is due basically to the reduction in our risk-weighted assets by the relatively slow growth in terms of credit and also reduction in the market risk component. The index was also benefited by our accumulated profits in the quarter. In terms of our fully-loaded BIS ratio, we have 12.6% which we consider very comfortable for the moment. And, as we have been saying, this number should be growing over the coming years as frankly we should be accumulated more capital than the necessary for the pace of growth of our loan book. In slide 11, the evolution of our total assets and shareholders' equity. Our total assets grew 10.6% year on year with our return on assets at 1.7%. Our shareholders' equity grew 13.2% year on year, with our ROAE reaching 21.9%. In slide 12, we have an analysis of our expanded loan portfolio. Basically, we grew our total loans 6.5% year on year. Without the impact of the fact it would be 3.3%. In terms of drivers for growth in the year-on-year comparison, we have the corporate portfolio, with an increase of 10.7%, benefited by the impact of FX. We have been growing less in our SME portfolio as in the previous quarters, considering the economic moment we're facing. And in the individuals portfolio, we continue to have as the main drivers for growth, the payroll loan portfolio, with an increase of 17.2% year on year and the real estate financing portfolio increasing 26.4% year on year. In slide 13, we have a slide with our delinquency ratio numbers. The 90 days delinquency increased 14 bps in the quarter with individuals increasing 13 bps, SMEs 15 bps and corporates 23 bps. We have this quarter the impact of some specific cases in the corporate portfolio impacting this NPL for corporate. Clearly, these numbers are slightly worse than we expected, but we believe our portfolio is very sound and we don't expect any major trend of increases - increasing NPLs in the coming quarters. Our 15 to 90 days delinquency ratio didn't return to the levels we expected, since we have been saying we believe it was mostly seasonal. We still have some growth in this ratios this quarter. But we have seen some improvements in shorter-term delinquency and we expect we could still see improvements going forward. Let's see how that behaves, going forward. Served here in slide 14, we have our provisioning and coverage ratios. We still have a very comfortable level of NPLs coverage, with 90 days coverage reaching 180.4% and 60 days NPLs coverage reaching 146.5%. We're always very consistent in terms of our provisioning and you don't expect this to change. We will continue with this - our provisioning policy going forward. In terms of effective coverage ratio, it reached 223.3% - very comfortable level. This coverage ratio is basically for - how provisions cover effective losses. We like to focus on this index and it shows also the consistency of our provisionings. In slide 15 we have our fees and commissions income. Basically, in the first-half comparison we had an increase of 11.8%, going to the top of our guidance, as we have promised - as we had said in the first Q, we expected. This good performance is driven by a good performance in cards. That was partially benefited by the consolidation of Cateno in Cielo that we capture in our fees for our cards, but also, I can tell you that the performance in the card segment is by itself doing very well in all lines. Checking accounts - we benefit from the segmentation we have been implementing. We mentioned we expected this line to show improvement throughout the year and it started to show it in the second Q. The year-on-year growth in checking account fees is 18.8%. As we said, we have created new classes of services for our clients, the exclusive classic. We have been incorporating them in this class of services and this results in a - the new level of service and the fees on that. Also, highlight for the consortium management. That is an operation that is showing very sound growth, 20.8% year on year. In slide 16, our operating expenses - we keep our focus in controlling expenses. Our investments in technology continue - are maturing and benefiting our efficiency. Our total expenses year on year in the first half grew 6.1%. Personnel grew 5%, administrative expense, 7.1%. We believe it's better to focus on the half-year comparisons, as we can have some variations, comparing quarter to quarter. But we have, at this moment, a lot of confidence in the control of expenses. This is something the banks is totally focused and we have confidence in this guidance between 5% and 7% which should fit close to the middle of it for the year, as we expected. In terms of insurance premiums, pension contributions and capitalization bonds in slide 17, basically, our total premiums grew 19.4% year on year, driven by a very strong performance in the first half, of life and pension plans contributions that - which grew 26.1% and health insurance growing 21.5%. The ROAE in the second Q in the insurance business extended to 26.7% and in the first half we had an ROAE of 25.8%. In slide 17 we have our combined ratios and other indexes for the insurance business. Basically, our combined ratio showed a slight improvement, going to 6.5% compared to 6.8% in the first Q. And you can see our technical reserves continue to grow for more - all segments and - as well as our financial assets which are the base of our future results. Now, I turn the presentation to Luiz Angelotti which will comment on the guidance and conclusions.

In slide 19 we have the guidance for the full year of 2015. This quarter, we decide to move - to change our guidance for the NIIs. We moved from 6% to 10% - for the new guidance it's 10% to 14% growth, is our expectations. This movement, we did because the benefits that we had from the cost - the funding cost reduction that we had, expectation for the next half. The expense increased, but we have - at the moment, we the contribution for the future and results of our asset liability management that we have in our total portfolio. For the other guidances, I think I have - the loan portfolio growth, our expectations - the guidance is 5% to 9%. Probably we will finish the year remaining a bit more in the lower level of the guidance. For fees and commission, with the benefits of the segmentation that we start now, improves this year to each segments, the - this quarter, you can see the benefits that we start to receive. And probably this benefits will continue during the year and the growth that we have - the contribution from cards and the investments channels we expect to finish the year in the multiples of the top of the level of the guidance - multiples of 12% is for the remainder of the year. Operating expense - despite the higher level , they finished the growth probably we will finish the year around 9%. We decide to maintain our guidance between 5% to 7%. Probably we will finish more the - around the center of the guidance. And for insurance premiums, we have a new in the insurance, with more efficiency and probably we will finish the year - close up to the top of the guidance - further 15% growth in premiums. Closing the presentation, we actually had a good performance, even with the challenging scenario that we faced. We managed to reach very solid ratios, such as the efficiency ratio which reached at the best level ever in our organization and the ROAE that finished the quarter was 21.9%. Our main have posted double-digit growth and our costs are running below the inflation. Our performance was which provides for consistent and sustainable results, aiming at maximizing shareholders' value. Thank you for your time and we would now be glad to take your questions in the next part of our presentation.

[Operator Instructions]. The first question comes from Thiago Batista with Itau BBA.

I have two questions, one about asset quality, another one about Cateno and Cielo. The first one on asset quality - there is really very comfortable with the evolution of asset quality going forward. But recently, we're receiving questions from analysts comparing the spike in provisions we saw in 2008, 2009, when the cost of loans achieved something close to 6%, to the new cycle where the provisions is still around 4% of your loan book. In your opinion, what changed in your book and your that will prevent a - really, a big increase in the provisions going forward, as we saw in the last crisis? The second one, I think a much easier question, is about Cateno and Cielo. In our calculation, how much of the increasing in your share in Cielo and also the consolidation of Cateno, has impacted in your fees and also your expenses? So, how much of the expenses you posted in the fees and also in the expenses, came from Cielo and Cateno?

Thiago, first part of your question - basically, I think we shouldn't really compare the cycles. 2008, 2009 - it was a totally different moment. Basically, we had a sudden stop in terms of credit growth in 2008 and 2009 and we were growing very strongly. The system was growing very strongly at that moment. And this time, we have been growing more moderately over the last few years. Also, when you compare the portfolios, we had a major change in mix in terms of the types of loans and have migrated to lower-risk. Also, we have had improvements in terms of credit scoring and our systems, incorporating actually how the evolution in the perception of credit in Brazil and also having systemic improvements. And also, there are major improvements in size of each line. Actually, when you look our loans today, it's better than it was in the past. When you look each line, you can see sounder - a sounder portfolio. So, in our view, as we had said in the presentation, credit card came a little bit worse than we expected. We have been slightly more positive. There were some specific cases in the corporate portfolio. The seasonality expected to be the fact of increasing the short-term NPLs, didn't materialize as we expected, but, as I said, we're seeing improvements in the short-term credit quality ratios and maybe we'll revert that in the future. So, with this scenario, it's a portfolio that is different from past cycles, that has been formed in a much more cautious way and with more moderate growth, that gives some comfort even considering the economic conditions that we see as very tough. One important thing, I think, with this question about the asset quality, is that our NPL increased, but when we look for decreased the short starts to decrease, then we believe that the effect of the seasonality that we had in the first quarter continues a little more during the second quarter. But now, that shows that the decreases ratio because the NPL start to decrease. About Cateno and Cielo, this quarter, the number the effect of Cateno the net increase that we have indicated, the first quarter and the second quarter, is around BRL120 million. The majority of this increase came from the Cateno services increased the participation that we improved during the quarter. It has very small effect, when you talk about these revenues.

Just one follow-up, in the capital expenses, are you comfortable that expenses will be in the guidance confirm?

Our expectation with the P&L extensive provisions.

No, I'm talking about operating expenses.

Operating expenses. We're comfortable with the guidance of 5% to 7%. Probably will finish the year closer to the center of the guidance. This quarter, we have some increase in some expenses. more we're doing investment in our branches and on the maintenance costs increased costs we're considering our expectations for the full year, then we probably will finish the year, with this guidance that we have, more close of the center of the guidance.

Our next question comes from the line of Mario Pierry with Bank of America.

Let me ask you two questions, first one is related to your outlook for the economy. I was looking at your slide from the first-quarter presentation. Your GDP forecasts have declined quite a bit, you were originally expecting GDP to expand 0.5% this year and now you have a contraction of 2.1%. However, at the same time, you have maintained your asset quality guidance for modest deterioration. So, what I was trying to understand here is, why isn't the economy having a bigger impact on your asset quality? And how long can this last? I think, right, this has been the biggest surprise for the market, is how well you have managed your deterioration in asset quality. So, just wanted to understand why the disconnect between weak economy and asset quality trends for the bank. And then I'll ask the second question as well. Thank you.

Mario, basically, as you know, we basically increased our soft guidance on provision expenses. We were even more confident in terms of credit cards. What we had been saying in the past is, given the quality of our origination and the performance of our portfolios, if everything was okay, actually NPLs should be trending down. It all comes from the change in mix and the change in quality deep inside of each credit line. So, I think that's what probably the market is missing. We have a quite a big change in the profile of the portfolio. If we were actually in a better environment, probably our ratios would be better. And actually, this worsening comes out of the first matter. We know our portfolio. We're seeing the trends. As we admitted, the NPLs came a little bit worse than expected, but we see some indications that we're not going to see NPLs moving up so strongly for the rest of the year.

Okay. Let me rephrase, then. When I look at page 13, the delinquency for large corporates, it has more than doubled, right, since the beginning of 2014? It went from 0.4% to about 1% now. When I look at the delinquency for individuals, it has pretty much stayed stable. It's up on the - about 30 basis points, in the same period. Part of this, I do understand. It reflects a change in the mix of your portfolio. But eventually it seems like unemployment figures are going up. How concerned are you that we could see significant deterioration in the individual portfolio specifically?

There are some lines in the individuals portfolio that are more directed - are more sensitive to the economy. The lines that are more clean. And we may have some impact there. The reason we're saying that actually credit cards is coming slightly worse than our expectations - in the corporate portfolio, actually, we had a few cases in 2014 that led the NPL in corporates to this levels, that are actually higher than the average NPL in this portfolio. We also had a few cases this quarter that led to this increase. But overall, this portfolio is totally mapped out. We have basically this knowledge of the groups and we believe we're in a position that is relatively comfortable, considering the environment. We need to consider now that in the individuals portfolio we have the effect of the mix for the future that we're increasing the participation in the portfolio and the mortgage. They are more sensitive for the environment - the economy. And the end of the year. And about these corporate , we have very high knowledge about all of our guidance about our expectations for the future, analyzing our total portfolio, we understand close the year with a reasonable stability in the total ratio probably could grow a little more - 0.1% more. But this is what we expected, analyzing the total portfolio.

Okay. Now, that's very clear. My second question, then, is related also to your ability to continue to grow your operating expenses below inflation. I do understand, right, you're seeing the benefits of all the investments you have made in technology over the last few years, but also, we've seen a head count reduction. I think your head count is down roughly 5% in the last 12 months. Is this something we should expect more going forward? Also, we know that you have - the salary negotiations will begin and starting now. If you can give us some type of our expectations - what is being demanded by the union and how do you see, then, your ability to continue to grow below inflation? Thank you.

Okay. When we talk about all this guidance, you will consider for the future all of , including the negotiation with the unions, the - considering the new level of the inflation and the - we're now - have many benefits of the investment that we did in technology. We have this is something that is helping us induce movement . But another thing is about huge immigration channels in the operations now of the total transactions are doing through this channel. these channels the branches most important channel 25%. When we're improving the volume of transactions with less costs, then that is helping us to - with expenses. And we have internally another initiative that is our efficiency committee, that the bank, then we're how much for the future years have to continue the present course. probably the next two years, we'll continue having new benefits for the new systems that will be implemented movement the IT reorganization. We changed 2014, 50% of the systems, and now, in 2015, 2016 and during 2017, probably, we will finalize the implementation of the - another 50% of the total system. we expect could - continues collecting benefits of these implementations, because we're changing internally process that will help us to reduce costs. We're improving the quality of the information, I think. We're improving the quality of the service, because many of these better - to offer better services in our branches or it's helping ours managers in the branches in sales and not only in . This movement is helping us in the costs and it helps us in - sometimes in the sales - improving sales. This is why we're will continuously continue growing expense - operational expense inflation for the next years.

Your next question comes from the line of Philip Finch with UBS.

So, I also have two questions, please. The first is, in regard to slide 7 of your presentation, we saw margins improve, I think, 50 basis points over the last 12 months to 7.4% which is a great achievement. Given that the Selic has continued to rise over this period and we have loan repricing ongoing, how much higher do you think this could go, say, in one year's time? Could we see another 50 basis points improvement in margins over the next 12 months? And my second question is regarding taxes. So, back in May we saw the social contribution rise by 5 percentage points to 20%. What is your analysis on the implications this will have, going forward, on your profitability? Thank you.

Okay, Philip. Our expectations for the - probably we finish this quarter with 7.4%. Probably until the end of the year, we'll continue increasing a little more, probably with the benefits of the contribution in the growth - the better spreads in the probably will - our - mean we'll finish the year closer to 7.5% and 7.6%, is probably what we expect, considering that - this new guidance that we give. About the social contribution increasing in the ratio, we need to wait it out for the approval of the law. It probably will happen until the finish of the first quarter. And then, according to the new law, we have the new ratio , probably the - we will new the ratio without probably the effect register. We will do some accounting procedures internally don't expect any relevant effect in the final results in our with the future quarters.

Your next question comes from the line of Tito Labarta with Deutsche Bank.

A couple of questions also. First, follow up on the asset quality, more on the provisioning side, you mentioned, if I remember correctly, in the first quarter, that provisions could possibly go - grow around 8% to 12% for the year. And given that asset quality was a little bit worse than expected this quarter, do you think that's still reasonable to assume? I guess that would imply that provisioning levels remain around 4% or maybe even a little bit lower. But given that asset quality's a little bit weaker, do you think maybe there's some risk to that - provisioning levels being a bit higher this year? If you could give some more color on that. And then second question, just following up on net interest margins. I understand you expect it to increase a little bit more through the end of the year. But, for 2016, you do expect rates to come down. So, do you think maybe in 2016 you could see a trend where your margin contracts somewhat, as Selic comes down? If you can maybe color on, kind of, the longer-term outlook for net interest margin as rates come down. Thank you.

Tito, first, in terms of credit provisions, basically our - we still think our - the top of our guidance, 12%, is a good reference. It could be around that level. But we - looking to the dynamics of provisioning, we don't think this level is not achievable. Regarding your second questions, in terms of margins, remember that even if Selic rate goes up - goes down next year, the average Selic rate will be still relatively high. So, we still have the benefit on that. Also, we also talk about our fixed rate exposures that in our view should be something defending, a little bit, the performance of our margins in an environment of interest rates trending down. So, this is our - the main views on this item. You have -

Your next question comes from the line of Boris Molina with Santander.

I have a question regarding the evolution of spreads in the corporate segment. The Central Bank data is telling us that already delinquency for the system for corporates in the free market is reaching record levels and continues to increase. And - however, we've seen that the expansion in spreads for corporates in the free market has basically stalled over the last month. So, what are the dynamics that we're seeing in spreads and the behavior in the system and what could we expect for margins? Because, if we look at the level of spread that we saw in Brazil in the aftermath of the crisis, had recovered from - after they bottomed out in late 2013, but they've only recovered maybe 23% or less of the ground that they lost. So, it appears to me that there is a significant room for corporate spreads to increase, given that the deterioration that we've seen, both in Badesco's SME non-performing loans and corporate non-performing loans, is very close to the levels of peak that we saw in the aftermath of the . So, it appears to me that there is something here that - a dynamic - maybe it's the public sector banks, or you don't see this system-wide deterioration in asset quality that is apparently - is apparent and it's pretty obvious in the Central Bank data for company loans - early delinquency in the free market. So, in terms of spreads?

Okay. I think in terms of spreads, basically, you shouldn't compare with 2008 and 2009. That was kind of a totally different condition, where the spreads basically went - shot - went up so strongly because demand for credit was quite high at that point, the liquidity basically dried out. So, we had a situation where demand was high and liquidity lower. And the perception of risk in the system - remember the derivative crisis . This time, we have an environment where there is some perception of risk, but the demand for credit has also reduced. So, this is, kind of, the environment now, comparing to 2009. I think this kind of increase in 2009 was driven by, kind of, a special condition.

My second question is related to the - to efficiency in your insurance operations. And we were expecting the insurance results, at least net income, to improve and in the second quarter we saw a jump in operating expenses. expenses actually helped - led to deterioration in your combined ratio. So, what can you tell us about the evolution of efficiency and profitability in insurance? It's - this year in particular seemed to be a very good year, and second quarter, this was kind of stalled.

In the insurance business, we restructure our sales structure, then we have now less costs with the structure and the other efficiencies in sales we could reduce the - our commercial costs. We decreased the costs with smaller structures. We have in the insurance business a structure that we have in the bank - the efficiency committee. They are committed of costs internally in the company. Then the benefits that we're having now, is because these investments that we're doing improving in the efficiency and in the of insurance.

Your next question comes from the line of Victor Galliano with Barclays.

Just a quick follow-up. My main questions have been answered. But just looking at the renegotiated credit portfolio, we did see quite a big increase and it's running well ahead of loan growth, both year on year and quarter on quarter. I don't know if you could give us a little bit of color here, in terms of what you're seeing there. Is this primarily driven by consumers and individuals renegotiating? Is it - is the jump more driven by big corporates in the renegotiation space? It would be good to get some color. Or, is it a spread of SMEs or is it all three? Just to get a better sense, really, of where that credit quality deterioration is coming from. Thank you.

About the renegotiation portfolio, normally the growth of this portfolio is very similar of the growth of the loan portfolio. Now, because of the environment of the economy , we have a little more growth - a better growth in this portfolio compared - when we compare it with the loan portfolio. We understand that's very normal negotiations - we do renegotiations only when we understand it is possible to recover something. negotiation can have success in the future, then provisions for this portfolio that the normal delinquency ratio. It's - the provisions for this portfolio is running around the 60% - 62%. very normal growth, because of the environment that we have now. But not too much, then our loan portfolio growth is having now.

If I could just follow up there, did you say that you would only do a renegotiation when you get some of the principal back, of the original loan? Is that right?

Normally, no. Our renegotiation that we do - normally, we try to recover the principal with the additional interest rates. the situation the debtor, then probably we try to use the best to have success in the renegotiation. But we only do renegotiation when we understand possible to recover something. And in our accounting policy, our position is that we do renegotiation, we maintain in the same rating, when we the renegotiation. If the corporation was overdue, the renegotiation whether D or whether E, we maintain in this level until we recover - until the credit recover the operation that was write-off, we maintain until the total the debt - the credit. Then - this is our accounting policy and they - we're having - I understand some improvements in our policy that we could improve our readiness to we have been more successful because we did I think we have now more efficiency in our process of recover of debt.

Your next question comes from the line of Eduardo Nishio with Banco Plural.

It's just a follow-up. One, on delinquency, page 13 of your presentation, I just would like to know your outlook for the SME portfolio and the large corps. If I remember correctly, previously you indicated that from second half of the year you would see improvement on the large corp book, and on the SME, I - if I remember correctly, you were looking for stability. But this quarter you had a 10-bps - almost 20 bps increase in that specific loan book. So, I was wondering if you could give us an update. The environment, I understand, has deteriorated faster than most expected. So, if you could give us an outlook on those specific loan books, I appreciate it. Thank you.

We talked about the segment - the expectations of the delinquency. Our expectations for the quarter's portfolio is more probably that we consider the that we have now. Probably we will finish the year end of the year, is our expectations. When we talk about SMEs, okay, we had a little more pressures in corporate environment. Probably could increase a little more expect that we will have a huge increase in this segment. We - in the last - during the year, we had an increase around 0.3% on this segment. And then probably we will finish the year with a little more increase, but not something that is probably in the total relation of the portfolio. What we expect with the between the whole segment, that we'll finish the year with a little more increase in this ratio, probably 0.1% more until the end of the year. The - that we expect reasonable stability until the end of the year delinquency ratio - the total delinquency ratio.

Excuse me, ladies and gentlemen. Since there are no further questions, I'd like to invite Mr. Carlos for the closing remarks.

Okay. In the name of Bradesco's Management, I want to thank you for participating in the call. And the Investor Relations Department is available for any other doubts you may know. So, thank you, everybody.

That does conclude the Banco Bradesco conference for today. Thank you very much for your participation and have a good day.