Banco Bradesco S.A. (BBD) Q1 2018 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen, and thank you for waiting. We would like to welcome everyone to Banco Bradesco’s First Quarter 2018 Earnings Results Conference Call. This call is being broadcasted simultaneously through the Internet in the website, banco.bradesco/ir. In the address, you can also find the presentation available for downloads. We inform that all participants will be only able to listen-only the company’s presentation. After the presentation, there will be a question-and-answer session, when further instructions will be given. [Operator Instructions] Before proceeding, let me mention that forward-looking statements are based on the beliefs and assumptions of Banco Bradesco management and known 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 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 will turn the conference over to Mr. Carlos Firetti, Market Relations Director. You may proceed.

Hi. Welcome to our conference call for discussing of our first quarter results of 2018. We have today participating the call with us our Executive Vice President, André Cano; our Executive Managing Director and Investor Relations Officer, Denise Pavarina; our Executive Managing Director, Moacir Nachbar Jr.; Denise Alvarez, CEO of the Bradesco Fundacao [ph]. So now I turn the presentation to Denise.

Hi, everyone. Thank you again for joining our conference call. I will start with the main highlight on slide number two. Recurring revenues of R$5.1 billion, an increase of 9.8% year-on-year and 4.9% quarter-on-quarter, representing return on equity of 18.6%. Our operating income grew 16.4% quarter-on-quarter. As you know, if you know the charge in our structure in present day capturing images of the prior operation adjustment. We also adjusted our credit origination models and correction strategies. In fact of those adjustments our structure, I think, in 2018 and our results significantly show this improvement, the good credit quality and cost of structure credit issue by the federation those in our [inaudible] segment. In delinquency, the overall delinquency ratio down 0.3 basis points. This led to a new municipal deduction of cost increases which dropped. As you can see 28% in quarter, [inaudible] for the year, cost of risk this year on the bottom of our guidance and it is our process to confirm but it is our expectation. Operating expenses showed a reduction of 0.4% year-on-year, as a consequence of tight costs and the adjustments made last year, which more than offset the inflation and [inaudible] adjustments that we have in this period. Then going to the loan book improved 6.4% year-on-year retail. However, 4% of this portion 3.2% mainly driven by the contraction of corporate segment. We have to give the letters of credit and also debentures which is capital markets we already have and bond, of course, they are good complimentary for the company. The corporate portfolio change in February and that will pick up. We have of course waiting for the more scenario company drawing down their investment and with no change where we have more scenarios. Average savings, the average loan volume contraction and some reduction in margin, but structure in our net earnings also our net interest margin, which reduced 2.6% year-on-year. I think that we maybe growing in the big in SME segment this year as we saw in the first quarter. This change in move should help us to expect 500 now totaled at 506 [ph]. It is greater insurance business we had a reduction improvement this quarter and we have to say that the production of insurance premium varies during the year not the same quarter-by-quarter. Therefore, the performance currently we have decision for the full year. In fact we expect a good contribution to our results in the coming quarter, as we still already sign of improvement that we should think and overall credit. Going to then I would like to summarize of our new [inaudible] we have. To keep our cost control very tight we continue to divest, adjustment is continue with no much gradual, because as I said, just beginning and give you the adjustment with for next year and that we are reported, we have [inaudible] do yet. And this year we expected loan are convert to point of turn is really 200 relationship. This is our very few payment client business important. The other thing I want to give in our segment inflation strategy especially in the high income segment in which the initiative implemented in 2017 where as related throughout management and the financial advisory already showing improvement. Here we haven’t published new platform that are providing advisory to our client and receive their good results of that. Obviously very important for us is the process of innovation, innovation of processes, innovation of products and sales channel, including the amount of credit available to digital change and legal to the paper work, not all credit but also -- all the financial problem that we can [inaudible] we sold 500,000 product all branch into this year after included in our mobile bank that we have in Brazil. Additionally, we will continue leverage our [inaudible]. We have a plan two which in previous effecting. We can also chose exit customer experience continually to more agile purposes. In conclusion, [inaudible] that quarterly results show that we are in the right direction with cost structure already adjusted, control delinquency and not expense earning performance. The quality of these new loans that we are considering are much better. We have improved and this is constant to even expand our loan portfolio. Thank you. I would like to now turn to André. André Cano: Okay. Thank you, Denise. So going to slide three, we have the adjustment for our recurring net income, basically the major adjustment this quarter as usual with the goodwill amortization R$607 million. We expect to amortize for full year R$18.2 billion. On slide four, we have recurring income statement there are basically our few observation here. First, we regroup our provisions expenses, our allowance for loan losses, moving down the impairment from the margin and on the accounting terms it is the way it should be to a minor few adjustments on the provision expenses and also breakdown the former [inaudible] provision expenses in these three components. So basically these three first line are composed the net provision expenses. So expanded our offer on losses had a quite good performance as already pointed by Denise reaching R$3.9 billion in the first quarter. We understand this level is close to what we call a normalized level for the time being. We think overtime over the year it should continue evolving positively. We think but it’s a more normalized level comparing to the fourth quarter where we had some extraordinary impacts. We also had quite important reduction on the impairment itself reaching R$255 million. We believe this level is also closer to what we could see as a reference for this year could be a little bit higher amount but we are not going to see again the same level as we had at the end of last year unless we have something extraordinary happen. Basically this -- the provision for expenses close to the bottom of our guidance that is reference we have been think is probably a good level for the year. In terms of insurance, the insurance -- the income from insurance that you see in the P&L has a reduction this year -- this quarter, mostly related to lower premium growth or reduction premium in the first quarter compared to the fourth quarter seasonal reduction but on year-on-year based on weaker market and also higher comparison base last year. Also we had a revision of the private value of our liability with the reduction in the discount rate apply for this calculation, so that also caused a expense this quarter that is responsible for most of this variation this quarter. Our tax rate in the first Q was 32.4%. We believe our guidance optimization for the full year between 28% and 38% continues a good reference we believe we are going to in that range. In slide number five we have the evolution of our net income, as it is said 9.8% growth year-on-year for the quarter. On slide six, our net interest income, our -- the earning portion of our net interest income dropped 2.6% in the quarter year-on-year. This is consistent with our guidance close to the middle of the guidance. The main driver for this reduction is credit intermediation that reduced 8.5%, mostly due to volumes but also some reduction in the credit margin. Insurance is well as we have been saying since the end of last year given that even if insurance is affected by lower interest rates actually our asset liability we saw this impact. In asset liability management is again that is related to tax that is part of our balance sheet has a fixed rate exposure, so this brings the positive impact on this position. Our main index has reduction of about 20 bps reaching 6.6%. In slide seven, our loan book consider -- our loan book considering the Central Bank classification that is what only launched has increased 0.4% in the quarter driven mostly by 1.3% growth in the individuals on that classification. On our traditional breakdown the expanded portfolio, we have the reduction of 1.3% basically driven by the corporate and middle-market operations, especially in the corporate segment ensures guarantees there were a couple value-added [ph] that expired and also the payment of accounts that also in the portfolio in the quarter. The big highlight here is that our retail and mid-high term operations including in the retail and corporate grew at the rate of 6% -- 6.4% year-over-year for this segment where we have net credit products for our own client. In slide eight, we have our breakdown of extended portfolio, 1.3% growth for individual this is the big highlight, payrolls are growing at 13.4% rate year-on-year, real estate 5.5% and car loans 10.5%. In real estate financing or mortgage basically we had a very good beginning of the year with a very strong level of origination and keeping that considering we are operating very competitively. We should continue with a very good performance in this line. On slide nine, we have our lower origination per business day, big part per business day. For earmarked and non-earmarked loans this represents roughly probably 80% of our total loan book. We have for individuals are increased year-on-year in the quarter of 35% for corporate 31% showing that our origination is really picking up and we believe that can continue allowing us to continue accelerating in the individual’s portfolio. In terms of delinquency ratio, also a very good performance, especially in SMEs and individuals where we have been seeing improvements since the fourth quarter ’16, we think there are more improvements to happen considering the performance of our recent research and then considering also that the current NPL level as to are still high, so we should continue see these NPLs improve. In the corporate segment NPLs are still high, remembering that in 2014, ’13 when they operated on what we consider more normalized they were about 50 bps. We believe the corporate NPL should continue on relatively high level NPL the end of this year. We don’t see really big tickets moving these ratio too much higher levels, but we don’t see actually an improvement in the short-term. In slide 11 we have our NPL formation that is also a very good highlight for the quarter. NPL formation dropped to R$4.4 billion. It’s the lowest level we had for a long time. We -- our provisions were consistent to the NPL formation. We continue providing for the new formation. In terms of provision expenses including impairment, they represented 3.2% of our loan book this quarter. In the slide 12, in the NPL creation per segment, we had quite a good performance in SMEs and also continued improvement in individuals. We think NPL formation for both segments and also the total NPL formation, I mean, still continuously. The corporate NPL formation increase a bit this quarter but it’s participation in the total NPL formation is relatively small. In the slide 13, our coverage ratios we reached the 219% coverage on 90 days NPLs, a very strong level. We believe our coverage will -- probably will continue increasing a bit more. We don’t manage our provisions to coverage with for the time being we don’t have any clients move reduced the fast provision, we can eventually reevaluate that in the near future if necessary, but we shouldn’t be doing that the short-term. Renegotiated portfolio grow positively, we have reduction in the total renegotiated loans and also the renegotiated loans that are still in our loan book that is the grey line. The difference between the two are renegotiated loans that were in our off balance book coming from write-offs. The coverage for this renegotiated portfolio is quite high and it’s being -- it has been performing quite well in terms of credit quality. Slide 15, fee and commissions, we had fees growing 5.4% year-on-year. The highlights are for checking accounts, where we have the impact of synergies from acquisition. We have been able to capital markets on the client base, mostly having services with higher value-added. Asset management, the management are continue doing well as a result of our efforts in the wealth management with our investment consultancy for our clients and this is in line with our guidance. Operating expenses we also had a good performance, total expense has dropped 0.4% year-on-year. The administrative expenses dropped 0.9% year-on-year. A highlight here for personnel that grew 0.1% year-on-year, a good performance but it’s looking to the structural part of this there are salaries and benefits, we have the reduction of 1.7% despite the 2.7% increase in salaries last year, that reflects the results of our voluntary dismissal program. What is holding a better performance for total personnel expenses is the non-structural part and the main responsible are the expenses with the labor lawsuits. What happen is with the increase in the number of people leaving the bank last year. We have more people getting with lawsuits against us. The provisions in the first quarter reaches R$407 million, a normalized level is something probably below R$200 million and we believe over this year we should reach those normalized level that we go to a more normalized situation in terms of labor losses. Slide 17, we have efficiency ratio. We have improvement in -- of 100 bps in our efficiency ratio this quarter. In slide 18, the -- our insurance operations, our premiums year-on-year had a reduction of 2.1%. We have affected by the high strong base of comparison last year, but also while weaker market. We believe that despite this relatively weaker performance year-on-year we considering that other periods in the year are more important we can without much problems being on the -- in our guidance range. We shift to page 19, reminding you that this quarter we have Brazil already operating with 100% implementation of BIS III in terms of capital deductions. Our ratio in the quarter was 12.4% Tier 1, less than 0.6 Tier 1. Reminding that the full loaded operated in the fourth quarter was 12 Tier 1, 11.6 Tier 1, so we had organic expansion of capital this quarter based on comparison to that fully loaded. And finally, our guidance in the realized numbers, basically for the loan book we are below it, but we believe we can still be in the range, especially in the middle portion of it, but more important than in the range, let’s remind, we are growing more in retail and SMEs, especially small tight SMEs and this is mix accretive, so for our margin growing those segment can be as important and offset the fact that we don’t grow that much or eventually we will not grow that much in corporate. Net interest income, again we are tracking our guidance. We believe we can improve a bit over the year. We improve to the center of the guidance that is 2% or a little bit better than it. Fees 5.4% in line with guidance we expect operating expense will be probably in the mid-low portion of the guidance. Insurance premiums we are running below, but we believe we can go back to the guidance range and we are doing quite well in provision expenses. With that, I conclude our presentation and open for the Q&A session. Operator?

[Operator Instructions] Our first question is coming from Mr. Carlos Macedo of Goldman Sachs. Mr. Carlos, you may proceed.

Okay. Good morning, good afternoon, everyone. I have a couple of questions. First question is on margins. We saw that your margins were not largely because you had some strong results in the alignment of other banks, but the credit margins were lower sequentially, despite a slight change in mix in the portfolio with consumer loans growing faster. I am trying to get an idea of what you expect in the end of the year. But more importantly, if you take the process of passing through last four week is gone and if you think the competition of that everybody is trying grow loans particularly in the consumer side will have any impact on margins, no, maybe not this year, but down next year? Second question on asset quality, how much more do you think, I mean, you talk about potentially improving, your NPL ratio is getting lower, the cost of risk is already much lower, what do you think the NPL ratio grow to what end [Technical Difficulty] NPL operation being low, you can actually have the cost of risk even lower? Thanks. André Cano: Okay. In terms of margin and starting with competition, the answer is we are seeing some impact in spreads in some line, this is the competition and basically everybody is there because actually the demand is there. The -- we have -- so we have seen spreads going down somewhat, still remaining in held levels but it’s a -- we already have seen some reduction in some lines. In corporate for instance where the competition is more capital market and then actually the other banks, spreads are already meaningfully lower than the peaks we have seen and in some cases getting closer to the big crisis levels. We believe our margins during the year can start to our credit margin can stabilize due to mix, it’s only, we have been growing in richer mix loans with higher margins, especially since the fourth quarter last year, we only have roughly two quarters growing there. We think over the falling quarters as the participation of these loans grow, we can have some sort of obsessing margins due this mix affect. Our expectation for NII for the year being minus 2%, basically it implies that margin growing new go down somehow this year. I -- they are but it seems that we don’t see margins going down a lot. On -- the -- on the cost of risk, we use to have a loan effect on NPLs where the NPL and the total NPL in the past cycle reaching something like 3.5%, considering the mix it can go below that level. We are -- we’ve already seen provision expenses reducing retrieving as a percentage of the loan book. Looking not only the year but longer term we believe we can also operating levels below what we have seen historically given the mix effect and the fact that actually new loans are doing quite well.

Okay. Thanks, André. One follow-up question, if I may and the question I think on competition, there is still a lot of royalty expense because the potential borrow is very low given that nobody would borrow it. At the same point you started bumping head with your competitors, everybody trying to go in auto and payroll and these mortgages and the loan line that have no risk. Do you expect the competition to intensify this year or is it something that there is still enough room for anyone to go, so that will -- it will become more of an issue next year? André Cano: Competition is quite strong this year already. If you look to the mortgage, to car loans, everybody wants to grow. A lot -- I think the difference could be that demand probably will pick up even more as the economy improves and as people start to get jobs. At some point we can have a differentiation that is our position. In our case the differentiation has even helped us with full impact because as you know regions where we have stronger position than our peers was the ones that suffered most and probably we will take a little bit longer to be running at full potential. We also have some differentiations in some lines, one example with are the payrolls. We have invested in the past and because actually we can because we have a strong distribution, therefore to get retirees with certain salaries in our branches so we have an access to this client that no other -- few other banks have with the deposit sector and this is a very good channel where we can grow. Also in terms of mortgage the position in terms of client relationship and agreement also can give some differentiations but we can’t avoid that in normal conditions with the expectations of risk in a lower levels competition actually will be stronger actual but that we don’t see that else a major problem.

Okay. Thanks, André.

Our next question comes from Mr. George Cooley of Morgan Stanley. Mr. George, you may proceed.

Hi. Good morning, everyone. Can I ask about competition from the syntax, we are seeing a lot of new companies offering free checking account on digital accounts and payment companies offering significantly lower MDRs, companies are able to going to assistance particularly your best clients are and try to offer them better rate. How do you think this is going to play out? What is Bradesco doing to defend its market share and to create also digital world that is appealing to the younger crowd that is rapidly accepting, adopting digital platforms? Thank you. I am sorry, if I may, particularly in what products or segments do you think there is more risk and what are you doing specifically about those product segments? Thank you. André Cano: Okay. Can you repeat your last question, sorry.

[Inaudible] André Cano: Okay. I will answer the first part. You are right, the competition is strong and we are basically fighting back as a strong bank we saw some players growing areas that are very important for us and areas that are on which we want to be. One of them is for instance in the digital accounts and also the acquiring business for individual small merchants. We have launched -- we are ramping up the operation with CLO to offer cheaper products, selling machines at competitive prices. We are -- we offer -- we are going to offer digital accounts. So we have chose to fight back and really we believe that with the presence with our capacity -- technology capacity we can really remain as a very competitive and strong player in this segment as we are in most of the market segments. And specifically in the digital operation, I remind you of our operation with Max that is our digital bank focus on younger clients, basically it is a platform totally separated from ours and very innovative, very flexible, already prepare to open bank concept and we are already have more than 100,000 clients and we are ramping up. We allow it only two months ago the free accounts. We are in the first stage of the launching, we were operating only with paid accounts and the rate of growth after the launching increase a lot and this platform give us a lot of leverage in the sense that we can experience, we can try different product with different formats and it’s work, but we should keep investing on Max. It’s get new profile client that are normally younger and have full digital profile for our part of the clients that want the digital accounts, which should allow play with digital accounts and we have more, we have the complete portfolio of products that we can offer them when they need. We think -- other think that’s not necessarily have that. We are a very traditional bank in the company’s operation, probably, we have one of the largest portfolio. We have more than 2 million clients in the company’s segment where we can offer -- acquiring we can offer digital product. So I think we are prepared and you will hear a lot of -- a lot from us playing in this new world.

Just to add that, we look our clients to grew between companies such as Bradesco and others. Were clients get here, we are not actually set into the level of creditors’ poor credit that we have inside Bradesco. It doesn’t mean that we are using our own clients, those are clients that we have in the saving product or no credit and so. This is something that now with the new strategy that we have where we are selling our Bradesco customers which is the new machines for clients to commercialize their products, we still in 40 day -- 40,000 equipment and business units and few years and we went to during the year with around 100,000 equipment, so I think, we are there as we were in other situations where we have to compete and basically we change from metrics, we create products, we also created a prepaid card for certain types of clients that have different needs. So we have benefit the competition that we have done. André Cano: I forget here again, the second part of your question, can you repeat it?

Well, it was -- it part of answer I was asking specifically where did you see more risk, what product conservative you see more risk on comment on syntax, is it payment, is it credit, is it spread, is it acquiring and insurance and so wanted know on a product-by-product basis what do you see the more risk on and what are you doing about it, you partly answer it, but if you just can expand a little bit on the credit side, because that’s obviously where there is excessive pricing in the market and we are seeing syntax companies that are originating credit cards almost lower rates that are offering client that are rate and so just you alluded to the payment base, but if you can talk about the credit market and what are you doing to [inaudible]? Thank you.

To be honest, what was really considered more than competition…

Sorry to interrupt, it’s really very hard to hear, sorry, it’s very hard hear, sorry.

Okay. Okay. Then, what I am saying that, what concern is more is the growth of economy is delaying always. If economy is growing relative to… André Cano: Yeah.

… we are very depressed to decrease.

Okay. All right. Thank you.

Our next question comes from Mr. Jason Mollin of Scotiabank. Mr. Jason, you may proceed.

Hi. Thank you for the opportunity to ask question. My question is a bit of follow-up what was being discussed. I am just looking at the number of clients or customers that you show as going down. I am looking at definitely a little bit lower number of branches and you did mention, I guess, with that customers or with 100,000 clients, I think, that you mentioned, are these in those few customers it’s looks like you loss quite a bit more than that? If you can talk about that, if that was a -- if that is a migration to competitors or to this kind, it’s hard to tell whether going, I am guessing, or are these clients weren’t profitable and you are actually trying to push them out? André Cano: No. Basically the main reason for the reduction in clients is an important. We had -- Brazil faced very, very crisis over the last two years as you know and they -- and a lot of clients lost of their job, closed their accounts. We have a lot of accounts that are payroll relationship. So this is one of the -- this is the main driver I would say. It’s a -- so -- it’s a -- in terms of an account numbers, current account numbers, this quarter it was stable and the fact, the main reason for the reductions come from that. When you look for instance on healthcare plans, unemployment, it play mostly with corporate healthcare plans and with unemployment we had a reduction in the base of clients. We believe our position and our strategy focus in all segments of clients, from the top to the bottom. Since we have more than our product sector compared those in bottom where an unemployment grew more than anything else, it’s naturally that we got affected.

And just to add, Jason, we -- our focus is much more now on total clients rather cash accounts and so, because our strategy now is to sell, I think, those clients main segments that we have to use this year and to grow selling with clients of our insurance to sell our products or to sell investments that we have done, so our focus is now much more on total clients considering that all of that buy any product of Bradesco are our clients. André Cano: [Inaudible]

Cash account is one of the product. So we shouldn’t look at those as the main drivers.

Yeah. It’s interesting because I see, I see that, I mean, it’s interesting in the total customers it looks like quarter-on-quarter there is a small increase but if I look at the breakdown you gave it looks like the only, the number show reduction in all types of customers in all of the line items here except with the 100,000 increase accountholders, total customers is increasing by 700,000, I am not exactly sure where they are coming from, but that makes sense. What about on the branch net… André Cano: Jason, just one thing…

Yeah. André Cano: In saving accounts, if you look every year there is a interesting phenomenon that we have big increase in saving -- number of saving clients at the end of the year the big result occur in the first quarter. There are some seasonality, lot of people receive their Christmas bonus or have more money, open the accounts and we have this sequentially a big results. You can see every year this same thing happens in saving accounts we expect this thing.

All right. Year-on-year, but I guess, that you were explaining that that could be the economy? About branch… André Cano: No. I mean…

Yeah. What about the branch network, can you continue to rationalize that the number of branches was down 8% over the last year, almost a percent, I guess, 40 branches in the quarter were closed, if you can talk about that? André Cano: Yes. We plan this year to reduce about 200 branches. Last year we closed about 565 branches. In the first quarter we already closed something like 44 branches, if I am not wrong, part of what we say close is conversion point of service that is more formal, only with ATMs, one or two account managers focus on relationships, two managers per branch and focus on relationship. We think this is a way of keep the presence -- keeping the -- our way to serve the client with much lower cost surplus. So especially this conversion will happen a lot, but the reduction from now on should be is over that it was last year.

We are analyzing region by region, city by city and see the model that fits better in that place and this the number that we have now, but those are evaluated all the time to have new groups that we… André Cano: Different…

Yeah. Every day we look at the lot of that fit better for that region or place so see the situation and change few or more efficient both often.

Thank you.

Yeah.

Our next question comes from Mr. Jorg Friedemann of Citibank. Mr. Jorg, you may proceed.

Yes. Thank you very much for taking the question. Just a point that I noted on your capitalization, I understand that most of the effect on common equity Tier 1 in this quarter comes from the agenda of the product adjustment that goes towards 100%. However, I also got a little advised with the impact on the common equity Tier 1 coming from higher risk-weighting assets. So just wonder if you could give a bit more color, why the credit risk increased more than 2% despite the, I know, is sluggish credit performance and also operating risk went up more than 10% just a bit more color on that? Thank you very much. André Cano: Okay. It’s a -- part of it comes from credit. It also has a little bit maybe…

The risk-weighted asset, on the risk. André Cano: Just a second, Jorg, sorry, simple answer, there was some changes in the weight in risk-weighted assets.

Sorry, could you repeat that, I couldn’t hear your… André Cano: There were some changes in some weight in for assets done by the Central Bank.

Okay. Both in credit risk and operational risk as well? André Cano: Yes. Yes.

Okay. Perfect. Thank you. André Cano: I’ll follow-up more details on that if you might, that’s -- but that’s the answer.

Okay. Perfect. Appreciate. Thank you.

Our next question comes from Mr. Mario Pierry of Bank of America. Mr. Mario, you may proceed.

Hi, everybody. Let me ask three follow-up questions here if I may. The first one on the cost of risk, R$3.9 billion this quarter, if we annualized we come slightly below your R$16 billion forecast for the year, I just want to clarify then this -- you are still comfortable with your guidance range of R$16 billion to R$19 billion or do you think you can come below your guidance, because the way -- the things are trending in terms of asset quality, it’s showing that things continue to improve? So that’s the first question. Second question is going back to all these questions on fees, when you bought HSBC every member that the revenues that you are getting out of the HSBC clients are roughly 20% lower than what you had at Bradesco. So you can try to discuss, do you think that the profitability or the revenues you are driving from the HSBC clients are already the same level that you had now come from the traditional Bradesco clients, because, I think, what is catching the attention here is that your fees only growing 5% year-on-year, right, and we understand all the dynamics there. But it’s seems low because you recently roughly two years ago incorporated big franchise? And the third and final question has to do with costs, just wondering here, if you have seen all the benefits of your early retirement plan, if that already fully reflected on your results, if you can comment on that that would be great? André Cano: Okay. First, the guidance, annualizing the first Q really it’s goes below the guidance, I think, it’s too early to review. We think, as I said, this new level with kind of a reference with only -- we don’t see big increases in our single quarter as most like scenario, probably, even beverage also have reached a more normalized level. So it’s a -- we have said we expected more the bottom of the guidance, so the first Q make sense with this. There is a statement for now, let’s wait, but we are comfortable, we are doing quite well on that, isn’t it we prefer not change the guidance.

About revenues per client that you have asked, when you have retail in corporate clients, they are about the same already, and when you go to income -- high income clients we have still way to go, so we are not there yet and working hard to reach the same level. André Cano: Yeah. One thing that happens is, in the agreement with DS Cyprus related [ph] basically we cannot increase the fees at once. It’s kind of a commercial relationship and we have to sell better product and the customers have to allow to charge rates, so it’s a gradual process, and as Denise said, the mid-high income segment where we have probably a little bit longer way to go. In terms of the loan tariff initial program [ph] some people left only in February. It’s a -- smaller part of the program. So possibility first Q is not really fully reflecting all the adjustments but midyear we will fully reflecting on the personnel. What is impacting the personnel expenses is kind of high part of the benefit is the fact that we had very high expenses with labor lawsuits in the fourth quarter, but especially in the first quarter, something like R$500 million and R$1,000 million. This expense is not only ramping up all 200. The reason for that is the fact that a lot of people lack the bank last year. It’s takes a while until we receive the notices on the lawsuits, a lot of people anticipated the moment they will get with the lawsuit compared what we had before the Labor Reform. We believe in the coming quarters we have the big improvement on that. As I said, I mean, going from that 500 million to something around 200 are below. So this is not a benefit from the [inaudible] program but is important benefit we still have to capture.

Okay. Now that’s very clear. Thank you. Thank you very much.

Our next question comes from Mr. Thiago Batista of Itaú BBA. Mr. Thiago, you may proceed.

Yeah. Hi. Actually you had comment during the call, in the call, that the results this is compared that were impacted by a kind of one-off expenses related to the change in sense of technical events, can you comment in which segment this was impact, I believe expense but not this year and also the magnitude of this impact, how big was this impact in the financial results? André Cano: Basically it is related to the regulation of our liability in the insurance company. It’s related to the revision of the discount rates and -- from 4.3% to 4%. The impact is roughly prevalent to R$150 million after-tax in the insurance company.

Okay. And this is in the pension or business or in the life or… André Cano: Across the Board.

Okay. Thanks a lot for the clarification, André.

Excuse me, ladies and gentlemen, since there are no further question, I would like to invite the speakers for the closing remarks.

Hello. André Cano: Thank you everybody for participating our call. The Investor Relations department is available for any further questions you may have. Thank you very much.

Thank you.

That does conclude the Banco Bradesco's conference call for today. Thank you very much for your participation. Have a good day.