Good day, everyone. I am Marcelo Noronha and I am here at the headquarters of Banco Bradesco Cidade de Deus, on a Thursday, May 8, 2025. It is now precisely 10:31. It is a pleasure to be here with you to disclose Bradesco earnings in the first quarter of 2025. So thank you very much for all of you who are joining us. So I'll start speaking about our net income. You probably all had an opportunity to read the earnings release last night. Almost BRL5.9 billion recurring net income, growing more than 39% year-on-year and 8.6% quarter-on-quarter, with this level of ROAE of 14.4%. It is obvious that this result, the net income, is vertical surplus. I will speak about the causes. The main one driver -- the main driver being a revenue in three different pillars, which I will comment on momentarily, and with a very safe portfolio, intensive use of technology helping to increase our productivity and, of course, with a strong result from the insurance group. So these are the pillars of revenue, which are also a consequence. In a moment, I will speak about what's driving each one of these pillars. But total revenue was BRL32 billion and growing 15% year-on-year. We have this absolute growth seen on the chart below. So total net interest, 13.7 increase year-on-year, 1.4% increase quarter-on-quarter. Fee and commission income increasing 10.3%, and insurance growing 32.7% year-on-year. So we get to the first item or topic, which is driving our NII, net of provisions. So expanded loan portfolio totaled BRL1 billion bureaus to grow 4.9% year-on-year and 2.4% quarter-on-quarter, excluding John Deere Bank. The growth would be still significant, 11%. And we can see in the charts the level of growth that we had in each one of these segments…

Thank you. [Operator Instructions] First question from Thiago Batista with UBS. Thiago?

Hi. How are you doing? Good morning. Congratulations on the results. I think it was very strong across the board. My question is about the ROI of the bank. Not only you mentioned an ROAE of 14.4%, and you said that you naturally aim for a much more robust return for the bank. At the beginning, two or three years ago, you had said that the initial metric was to achieve the cost of capital. But now you said you want to fly even higher. So my question is, when we look at it by segments, we see the insurance group and ROAE of 20%, which means that the banking operation has returned close to 10% or slightly under 10%. So what's what do you still have to normalize? What are the main segments? Is it retail, wholesale, SMEs? I mean, what are the big boxes that you have where you still see some room to bring the ROAE to a higher level?

I'll ask Cassiano to answer, but I'll start. Thiago, thank you for the question. It's a pleasure to have you on board. Well, it's basically mass retail. This cost to serve is something we've been correcting. Over time, this will bring us a different level of return. For example, the wholesale bank. The level of RER is high in all client segments that we have. I'm not talking about IB or global markets because that requires much loss capital. Global private is high 30s to 40s. High income segment, the same. The principal clients, I mean, they are impressive in terms of level of return we have. And that applies to prime as well. With SMEs, we reversed the trend, and it's increasing. So that's what we are working on. And, of course, we're investing to gain productivity. As I mentioned, Cassiano, you can compliment.

No. That's exactly it. These are the levers. Productivity is one of them. And, of course, the effect of our cost to serve in our mass retail. This is what's going to give us the final leap to improve our ROE.

Next question from Daniel Vaz with Safra. Daniel?

Good morning, Andre, Noronha, Cassiano. Congratulations on the excellent result. It's clear that the bank has traction with good indicators. I'd like to take this moment with you to hear a bit about what we didn't read in the release, which is the part on private payroll deductible loan. A lot of people are discussing products. I'd like to get your take on this because you have a big market share, about 15% in the traditional payroll deductible loan. So what will be the position of the bank? Would you have portability of everything? Or how are you planning to operate in this segment?

Thank you for the question. Well, I'm going to give you some of my own perspectives. Sorry, Daniel. I called you Thiago again. Sorry, Daniel. It's a pleasure to have you. Anyway, here are some points in our review regarding that. Number one, we believe that here lies a great opportunity for Bradesco. You see, we have 14.3% market share of payroll deductible loans in the public setting at different levels of government, INSS, and private. But with private deductible loans our share is lower. Our share is much lower there, and private payroll deductible loans take up small space just about 6% of the whole 14.3%. So among the private payroll deductible loans, we are the biggest in terms of share. So we understand that here, there's a lot of growth coming from this. Perhaps the question should be, why is it that private banks or perhaps the mainstream banks, incumbents have not yet presented a great origination here? There are some important variables here. Number one, the client base that already had a payroll deductible loan increased between 16 April and 21 April according to that. Until then, there was an origination of BRL8 billion. So from our standpoint, what we did was we had an initially defensive strategy. Other more active organizations might have operated with their agreements in force but using a new channel. And others did not see -- I mean, did not see these clients that are -- or did not look at these clients that already had a payroll deductible loan. So let's suppose you had an agreement with me. Bradesco had an agreement with your company, and then you applied for a loan, and perhaps an organization offered this loan to you. But when that base increases, there is no more margin.…

The next question comes from Mario Pierry from BofA Securities. Mario?

Good morning. Congratulations on the earnings. Now I'd like to hear a bit more from you about the insurance group. I believe the market does not yet appreciate the value of the insurance company, growing 25% year-on-year and accounting for almost 40% of the net income. We've seen lots of improvements. The level of claims has fallen. The claim ratio has fallen. So I'd like to hear from you whether you believe you can keep the same level of growth and the same level of claim rate. So, I mean, to what extent are these results sustainable?

Yes. Ivan is also here, but when we look at the insurance earnings, 2/3rd came from production and 1/3rd came from the financial portion. But production had a bigger weight, and that's what provides us more confidence that this is sustainable. So, also, you spoke about the improvement in the claim rate. So, of course, you have some seasonal effects and a bit of volatility, but it's trending down because of investments we've been making for a number of years to improve the claim rate. And we are now harvesting the benefits of this initiative, especially in health insurance. So we trend toward a lower claim rate. Actually, the first quarter was not even so favorable, and we do have noise along the path. But there is a very good trend down the claim rate. And because we have a lot of traction in sales, again, that is good for the insurance group because that will drive sales, that will drive the premium, and bringing the claim rate down. So that's the improvement we expect both in production and also in the financial portion with a higher basic interest rate. So we believe the performance will remain consistent. So we could see the ROAE 2.6% above the first quarter last year. After many years of improvement, we continue to improve. So insurance is one of the lines that Marcelo highlighted. We want to be closer to the top of the guidance, at least above the midpoint.

Mario, let me add. And, also, Ivan is here, and he can also add if he wants. But here, we see also our strategy, you know, the associations we now have with hospitals to improve the efficiency of our health insurance. We're growing our network of health care providers, and that also helps us control the claim rate and the cost. So the combination of these figures give us excellent earnings. And our concern in each one of the verticals, we want to always work to improve our operation and a very strong distribution. I mean, if you look at the future, we do see room for more improvement. Also, look at the penetration of insurance in the Brazilian GDP. We have a lot of room for growth, and I do believe we can have a higher penetration of insurance products. And of course, we will continue to work hard to improve this rate of insurance over the GDP. And all our colleagues are working towards the same goal. Now, Ivan, do you want to add to this answer?

Thank you, Marcelo. No. I believe Andre provided a very thorough answer to Mario. But if Mario has any further questions, I shall be available to help.

the next question comes from Gustavo Schroden from the Citigroup.

Hello. Good morning. Congratulations on the earnings. It's very good to see this traction that the bank currently has. Now, Marcelo, what is the level of comfort that you feel in terms of more growth in your loan portfolio? We can see the bank clearly has capacity to manage risk. And as you mentioned, delinquency is lower. The quality of the loans is a mantra for you as you as you said. But I'm also looking at the country's economy. Inflation up, a high interest rate. So what do you expect in the next 12 months looking outside the bank's borders? Because that may lead to a slower growth in in the bank. So how do you view these aspects so that we can also feel confident that the macroeconomic factors will not go against your very well-done work?

Thank you, Gustavo, for your question. I'll be very candid. Loan portfolio growth, as I said, our risk appetite remains moderate since the last quarter of last year, we said that. So one thing is risk appetite. The other thing is model adjustment, credit policy adjustment. So if you look at the concentration of loans, it is down. In the in the largest customers, the concentration has fallen. So although we have a moderate risk appetite, we see great opportunities because we have a large customer base, because of our penetration capacity, but we want to grow in secured loans. In payroll deductible loans, we have 14% market share, so we have an opportunity to continue to grow regardless of macroeconomic factors. So private payroll deductible loans are also an opportunity. But in public payroll deductible loans, we still have lots of opportunities to grow. Let me remind you, our book is now about a BRL100 billion in payroll deductible loans. The second front would be working with agribusiness, always customers with good credit ratings. I mean, in this segment of the economy, either cattle breeding or agriculture, when you look at the different segments, for example, corn, corn prices went up. They are now down closer to 50, but farmers are well compensated. As well, sometimes we do see issues, but not now. We don't see any problems in terms of these prices now. So this market can bring us a lot of opportunity to grow, to grow our relationships with the current customer base. Even the Zhuang Diaz Bank, we are now you know, the two teams are now working together. We're reviewing the guidance for this year. And in terms of small companies, Gustavo, in fact, I've shown you a ranking while this information is open to…

Next question from Pedro Leduc with Itau.

Thank you. Good morning. Congrats on the results. My question is about LLP. LLP in the quarter increased at the same level of the quarter about 2% quarter-on-quarter with a very stable cost of credit. The question is that the pace of LPs, compared to NPL formation was much smaller, but it's not easy to get this conclusion. So I'd like your help on this because some things changed and the NPL formation is not in the release, 15 to 90 NPL is no longer in the release. So I'd like you to elaborate and to help us consolidate this because these slight changes or perhaps doesn't make any sense to look at NPL formation the way we used to because 15 to 90 day change then perhaps that's why you're not communicating this. But I just want to understand the pace of loan loss provision versus NPL formation Stage 3, what is more relevant, what should we be looking at looking forward?

Pedro, thank you for the question and I'll ask my colleagues to answer that. But I'd like to stress one thing that you mentioned which is important. Indeed, we were not going to mention NPL creation in the 15-to-90-day NPL, but we did include it in the presentation. NPL formation or NPL creation went from 109 to 98. And our 15 to 90 day in bill, which was 3.4% last quarter, continued flat 3.4%. And a year ago, I think it was a little over 4%, 4.1% down to 3.4%. So, indeed, this doesn't have a lot of sense. It doesn't make a lot of sense. So I'll let Cassiano and Andre complement the answer.

It is exactly what you said, Marcelo. With Resolution 4966, we will have to adapt and look at this new concept. So Stage 3 is super important. I liked Andreas' explanation of Stage 3. He will mention this. But Stage 3 is our main topic to pay attention to. There's not much comparability with 109 against 98 in the last quarter. That shows the robustness of our loan book. The Legacy WO Model can no longer be done. So this leads to a new way of looking at our loan book. So we have to look at Stage 3 quality. Our LLP compared to the portfolio, which has remained stable around 3%. So that attest to our ability to grant loans. Andre will comment on this. I just want to add something. You see, Pedro, I think that in the complete publication, there is a table where they reconcile what were Stages 1, 2, 3, what was included, what was excluded. And I think that this reconciliation is crucial for me, and I think that you should monitor that from now on. So what was done with 4966 regarding write offs? Because we can have a more lengthened term. We can change over 90. We don't lose portfolio because we are no longer writing it off, which did not happen to us, by the way. Okay, Pedro. We kept exactly the same concept we had with 2682, same write off period. So you can compare apples to apples. Andre?

Okay. So what changed in the accounting regime in terms of quality of assets is that until Q4, we looked at the operations in areas more than 90 days, over 90-day NPL. That's what we announced. 98% coverage in Q4 provisions compared to the over 90 provision. Before 966, we changed this to Stage 3. Stage 3 is a broader look and has almost double the value of operations classified as more problematic. So we have over 90 and the problematic ones, over 90 increases. And in Q1, problematic ones drops -- the problematic assets drops. So what in the economic financial analysis report, page 18, we have a table of Stage 3 moves, and we see what was included from Stages 1, 2, 3, the cured operations, and what was originated. Because the total put the provision in the numerator, we get to a 109% coverage. So in in a broader concept of quality of assets, we had a 9% provision in Q1 2025, which to us seems more than adequate. And if we get expected LLP BRL8 billion, give or take, we'll get to this a 109% coverage, and that's how we have to look at this. It's good to read explanatory notes because since last year, we made these movements very, very clear. So it's expected loss and divided by Stage 3. That's what we should look at. And during the presentation, in the explanatory notes, we have all of the criteria used with Resolution 4966 in detail. So thank you for the question, Pedro.

The next question comes from Jorge Kuri from Morgan Stanley. Jorge floor is yours.

Thank you. Good morning, everyone. Thanks for the presentation. Congrats on the number. Can you hear me?

Yes.

Yeah. Thank you. So I wanted to, explore part of the answer that Noronha gave, at the beginning of the presentation. Why you don't think you can get closer to the top end of the guidance, which was basically on the market NII. Noronha, I believe you said that with rates now peaking, you think that the next few quarters are going to be more challenging. So could you please maybe elaborate on what that means exactly in terms of numbers? You're expecting a negative result of market NII for the next couple of quarters because if it's just a bit smaller than the first quarter, which was BRL462 million. It's just really hard to see how your net income is not going to continue to grow from the first quarter number because of operating leverage, it said that much better seasonality as we move forward. And then that gets you to BRL24 billion BRL25 billion in net income, which is not far from that BRL26 billion which I believe is the upper part of the guidance. So maybe drill down a little bit of that, if you will. Thank you.

Okay. So let's speak about market NII, which is super important. Marcelo kind of touched on this, on the work that we do with our treasury. It is very focused, strong work. We were seeking the best opportunities and it was not different in this Q1. It was very important to consolidate our ALM, a market that was very volatile in the last six months, but we could work strongly on this concept of protecting our ALM or prefix portfolio. Indeed, we see Q2 being tighter. We talk about market NII between BRL0 and BRL1 billion which we confirm. We think it's very feasible throughout the year and this will lead us to have a certain robustness in managing the ALM. Treasury, as Marcelo mentioned, trading, there are a number of opportunities. So we understand that the soft guidance is valid. It is sufficiently well protected by this protection work that we did, work to create value in our prefixed portfolios. And this has worked on by our treasury. So I think that in that regard, we are doing very well. And looking our guidance, we normally are at the middle of the guidance. And that's how you evaluate us. Marcelo is talking about the upper range. So when we look at both ends of the guidance, it includes the potential of looking above the middle of the guidance. I think that this is fundamental to keep us attractive. We consider this as a very positive trend for the next nine months. And Marcelo mentioned, if there is a need for adjustments, we'll make adjustments to the guidance and we'll communicate that. Would you like to add Andre?

And also the income tax rate to do the implicit calculation in our guidance. We were talking about a rate between 19% and 23% for this year. But in the March, the National Monetary Council increased TJLP, potentializing the payment of interest on capital. We understand that for our stakeholders, we have to enjoy this benefit to the most. Increasing the benefit, we reduce the rate. The most probable range would be between 1821%. So at the mid portion, it would fall from 21% to 19.5% and with that we kind of adjust the opt implicit income in the guidance that you can calculate. But I would like to stress what Cassiano said. Jorge, we are more optimistic. Okay? Looking at client NII, the expectation was to grow 14% in the full year, right? Yes, to be in the middle of the guidance.

The next question comes from Rosman.

Hello. Good morning, everyone. Congratulations on the earnings. My question is about the profitability or the income growth. You said the recovery will happen, but it's gradual. So sometimes when you look at just one quarter, it's difficult to have a general view because maybe in this quarter, you are building the foundation. And on the following quarter, you may have a higher net income. But we saw a leap between the Q4 2024 and Q1 2025. Today, I feel you are more optimistic. So was there any surprise internally? I mean, did you have a better reaction to change? Did the loan book grow more profitable? Or maybe you were talking about lower income customers that are more active again, or was it funding? I mean, can you help us understand this leap between Q4 and Q1?

Thank you, Rosman, for the question. No. These are not customers that have become more active. No. This is our penetration in the customer base. Without that, we wouldn't have so much traction. Even though we could have new investment groups, new processes, I mean, if you don't have the right level of origination, if you don't have a good penetration level in the customer base, then it's more difficult to sell. For us, we see growth in sales, and that is the plan we have, growing with quality -- growing with quality in credit lines, quality of our credit models, quality of our credit policies, whether you're talking about automated loan approvals or otherwise. I mean, we have our criteria to make loan decisions. So when we prepared our budget for 2025, that was back in October or November 2024. So by then, we looked at 2025. We prepared the guidance. We had a discussion about volatility on the Brazilian market. We also had a discussion about changes in the U.S. market, a higher interest rate. So then the market NII could have been a bit a bit lower. But so then in October, November last year, we made a decision not to stop our transformation initiative because we believe in the short term and also in the long term. And, yes, we had a few good surprises. First, productivity gain with our technology squads. Rosman, we expected that already, but it was better than expected. So these deliveries are extremely relevant because sometimes it is not a new application. But we continue to have developments in in the company. We're reviewing our KPIs so that we can monitor each business very closely. We have reviewed our legacy systems, which would provide an experience to customers, which was not…

The next question comes from Enrique Navarro from Santander. Enrique?

Hello. Good morning, everyone. Noronha, congratulations on the earnings. My question is about capital. In the last few months, we've received a number of questions about Bradesco Capital. I'm sure you've also received questions about this. Actually, two questions. The quality of common equity, the quality of the capital, and the other question from investors is that in a new moment of growth, maybe Bradesco will be more fragile in terms of capital compared to other competitors. From everything we heard, we could see that in the first quarter, Bradesco is at a higher level of income with quality, and that should continue in the second and third quarters, maybe not with an expansion but with stability. But then in the second half of the year, we may have tailwinds. And then so maybe Bradesco will have another leap in terms of quality and income. But now do you have the right capital structure to face a growing demand that may happen in 2026 in in Brazil? So I'd like to hear from you because this has been a frequent question from investors. But now, of course, looking at the great results that you are presenting, this concern is not so present. But I'd like to hear a bit more from you. Thank you.

Thank you for the question. I think Cassiano can answer your question. But let me tell you, I would love to have a problem of, you know, having to face such a relevant growth because the fact is that we feel very comfortable looking at the plans we have. In terms of capital structure, I mean but we're growing our revenue so quickly that that maybe we have questions about the capital structure, which we don't, really

Well, we started a project last year with a firm belief, and we cannot forget that. The project, you know, when we were in 2024 and looking at 2025, we would have a better cost of capital. And this is very relevant, and it makes us feel optimistic to continue following our plan step by step. So the plan has four years -- four important years. And the level of capital is at the level we planned, and that's important. If you look at the level of Bradesco Capital historically, this is the level, you know, working with the dividends, paying out the dividends to our investors as we've historically done. So there's no deviation from our plan. So in 2025 and '26, Navarro, we want to continue to be very close to this new market and be even stronger and attractive for customers. Our customers have not left us. We continue to work with the bankers' share. But we feel very comfortable when we think about 2026. And we all hope you're right so that Brazil will truly grow macroeconomically in 2026, and we feel we have a comfortable level of capital. As Marcelo said, this could be a good problem. Right? But our capital will continue to grow. Yes. He also spoke about tax credits. Yes. Of course, if we have a higher income, that helps in everything because our main capital comes from the net income. Or maybe a specific capital call, but we don't see that in the horizon. Now in terms of tax credit, the higher the NII, then the more we can use our tax credit, and we'll continue to do that. That's also included in our four-year plan. Thank you, Navarro.

Let me also add. So we are talking about a growing capital in the first quarter when many questioned whether we could do that. And the main source of this growth was the net income. So and in 2026, we may have a higher number, but also in 2025, continuing to follow our plan step by step and generating more net income. So that's going to help us. We will continue to pay out our dividends, and the level of capital shall remain stable until year end. We are not really concerned about that. Thank you, Navarro.

Next question from Eduardo Nishio with Genial.

Good morning, everyone. Congratulations on the results. My question is more linked to retail. According to you, this is still the detractor of profitability. So how are you executing the strategy, unifying the brands, systems, the timing for launch. For the launch I have basically four verticals to work with, Classic, Next and DigiU and Bits. So if you could talk about your expectations regarding profitability, growth, and with this focus on digital transformation in mass retail. If you can comment on the size of your network. At the beginning of the year, you said that you intended to reduce points of service by 1,000. You did 222 in Q1 alone. So perhaps you could speak a little about that linked to costs and the size of your workforce. Because in terms of headcount, the headcount has not changed a lot. So if you could speak about these two perspectives, network cost and mass retail. Thank you very much.

I'll ask Cassiano to start answering. But I before that, Nishio, thank you for the question. Thank you for joining us in this call. And you spoke about different brands, and you're talking about Next and DigiU. So bits well, bits is something that was absorbed. It does not exist as a business unit any longer. So it was absorbed. But DigiU, DigiU is a separate unit. It continues to operate. But we'll speak later about the movement for next over time. And, Cassiano, you can comment on retail, mass retail. A - Cassiano Ricardo Scarpelli Thank you, Nishio. Good to see you here. Well, I think an important part, throughout the year, we'll be bringing a new value proposition for the mass retail. That's a value proposition. We'll touch these three brands that you mentioned. So this will be important in the future. Marcelo and I will be communicating this value proposition to the market, and we'll be speaking to you about this. It will be an interesting one. So I think that that is the take home message. This is clear to us and this is added to our cost to serve, which is one of the main points of action in retail. The cost to serve these 30 million clients are very good clients, but we have to adapt them to the best cost to serve. So this will entail some adjustments. On the other hand, the footprint adjustment is linked to this. Adjusting the footprint is fully linked to the way in which we will serve the mass retail tale in a more digital way, in a user-friendly way, in almost a tailor-made way to serve. So this is our vocation. We have a reduction of the footprint, but this is going to be done carefully and cautiously, testing possible attrition because we'll spread all over this continental country that Brazil is. So we cannot lose our presence there. So this is important. We are growing clients even closing 1,400 branches because we have Bradesco, Espresso that is very strong in the front line, 30,000 offices of Bradesco Express, almost 39,000 banking correspondents. So we have to make all of these connections. Bradesco Expresso, reduction of the footprint, bringing clients to a new value proposition in digital retail. With this, we will rebuild our profitability because this is the detractor segment in the sector of our ROAE. So that's why it is important to move in that direction. In regarding costs, it is important to look at the efficiency ratio. Our efficiency ratio was 49.7% in Q1. This year, we shouldn't expect a significant change from that level because there is a lot of investments to be made in the transformation plan. But we should see more significant reduction in the efficiency ratio starting in 2026, moving towards 40% which is our ambition by 2028. So the impact will happen starting in 2026.

Next question from Yuri Fernandes from JPMorgan.

Thank you, Andre. Well, congratulations to all of you. Noronha, Ivan, Casiano, congratulations on the earnings because they were really strong. I would like to explore a point that you kind of touched on, Noronha. I'm talking about NIM and Joe's spread that increased 20 bps, and that was a very good result. And I think that the message is that it should continue to expand. I'd like to understand the order of magnitude that you're seeing because in this quarter, you had some help from funding. It helps, but I don't know whether this should be helping in the coming quarters. And my question is about the mix. Noronha, you said it over and over that the bank is growing, that there is risk appetite but following safer lines FGO, FGI, Pronamp. So I don't understand, should this margin remain at the same level we saw in this quarter? Will it expand a little less or perhaps a little more? I just want to think about the spread. NII NIM?

You can start, Andre. Yuri, I think that there are two points to highlight here. First, the funding NII. In terms of positive contribution from funding NII in Q1 will increase over time along 2025. This is a cumulative process of efficiency gains in managing clients' resources. And this is underway in the bank at an accelerated pace. So this should contribute even more in the coming quarters. The benefit is not done. There will be additional benefits to be captured. And we are seeing in this happen in Q2. The expectation is that it will continue throughout the year. Second point, bringing the focus to the macro economy. When we have a monetary tightening, normally, there's increasing the spreads. It's not that the banks aim to increase the spreads, but we look at the RAR of the operations. The bank wants to have NIA and other provisions. And the spreads tend to widen when we have moments of monetary tightening, and this is what's happening in the Brazilian economy. This will be another driver that will help us increase BRL8.6 billion towards the end of the year. I don't want to give you a specific target, but what I can tell you is that there is an upward trend.

Andre, let me add to what you said. Thank you for the question, Yuri. We had a cost of funding that was the lowest that we saw in recent years, and this is a fact. And Andre mentioned this. The biggest dry ever came from the growth of assets. And from the growth of our relationship with micro, small, medium sized enterprises because here we have better margins, a better NII. We reduced the loan book of the wholesale bank. So if you look at the complete publication, there is the TVM line item. Year-over-year, first quarter 2025 over first quarter 2024, there was BRL7 billion drop in TVM, in securities actually. TVMs are the securities. So I'm convinced of what we are doing with individuals and micro and SMEs. That's where the biggest opportunities lie. One of the colleagues asked about growth and drivers. And what I see, Yuri, is that will continue to grow, mainly our NII. The NII is growing steadily. If you look at the bar chart that I showed, it's there. It's piling up. We are offering loans with guarantees, collateralized, longer maturities with a very high RAR and very low losses. So we see NII growing and NII net of provisions also growing. And I guess that this is the main point explaining this growth, not just of NIM, but I would like to stress NII.

The next question comes from Carlos Gomez-Lopez from HSBC. Carlos, the floor is yours.

Thank you, Andre. And congratulations to all for the results and for the market reaction. So two specific questions. One is long term in terms of credit cost in the corporate sector, in the [Indecipherable]. We have had record low cost of credit, I would say, since COVID. It has never quite increased. At some point, the bank was guiding for higher provisions from that, but they have never quite materialized. Do you think that even with these higher interest rates, we should continue to have this benign scenario of credit cost again in the corporate segment in the coming years? And my second question refers to insurance again, following up on Mario's question. Health insurance has given you BRL900 million this quarter. That's about three times as much as it has typically given you. What has changed there, and how sustainable is that for the coming quarters and years? Thank you.

Would you like to start? Alright. Carlos, I will begin to answer your second question about health care insurance. What we've noted, as Marcelo mentioned, is a lower claim rate. But that lower claim rate is the consequence of many years of investment plans. And after the COVID pandemic, we see a more normal curve in terms of the claim rate. These two factors are helping us push down the claim rate in the health insurance product, and we expect that to continue. And that's very relevant. Also, as Marcelo mentioned, in health care, we have our strategy in terms of Atlantica d'Or, and that will bring benefits in the midterm or in the long term. But the new hospitals, we've had incredible benefits, a high level of occupation, and they already bring benefits to our earnings. So that's a promising kind of investment. Maybe not now, but more in the mid and long term. So that is a very healthy movement.

Carlos, look, about the cost of risk, your rate, the margins are tight. We had funds stepping out from variable income and even multi market. They're they are moving to fixed income securities. And that's what we see. So regardless of the corporate ratings, but especially companies that have a higher credit rating, they are being able to obtain funding much at a much lower cost. So this is a very favorable moment. So that's why I spoke about our origination strategy. I'm looking at low cap with a small share, but then I can work on the secondary market on over the counter, and there is a big demand. So while we have high interest rates and a weaker capital market with more volatility and without new money coming into Brazilian funds, that is funds in BRL, towards variable income securities. We will continue to see the same, circumstances. Maybe further on, maybe closer to year end 2025, when the Monetary Committee begins to plan for 2027 and the interest rate would be around 15%, 14.75%, I mean, where is the center of the inflation? What is the inflation target? We may see our inflation very close to the inflation target. Right? So that's what we expect. As you see interest rates coming down, you see more expectations in the variable income market, in the equity market. That would be later on in 2026 or in the beginning of 2027. That's when we expect to see a change. Maybe you'd like to add.

Yes. I'd like to add two, comments. Bank credit for large corporations and the capital market as a funding source for these large companies. Because the margins are lower, then you can see a higher demand for loans by large corporations. And at the same time, this helps improve the quality of our loans because large corporations, they have different sources of funding. Today, we see a high level of liquidity for large corporations. So that helps us keep delinquency down. As the economy grows slower, there that will be a risk to be closely monitored. And the quicker the interest rate begins to fall, then the better will be the outlook. Right. And it is important to remember that if you look at the largest Brazilian companies, Brazil has more than 400 companies in the open market listed in the stock exchange. Most of them have the right level of leverage. Of course, with a high cost of funding, that is pressure for the EBITDA margin, you know, to pay for the debt or for liability management. However, we all know that looking at this group of large corporations, some are in a more complicated situation, but that's not true for most of the large Brazilian corporations. So looking at that, I expect we will not have any surprises in terms of delinquency because that's more concentrated in the middle market and in specific industries, not really in large corporations. Yes. That's what I was going to say.

Our next question comes from Bernardo Guttmann - XP Investimentos. Bernardo?

Hello. Good afternoon. Noronha, Andre, Cassiano, thank you for taking my questions. Congratulations on your deliveries. Now looking at the NII improvement, that comes from higher efficiency in the bank's funding strategy. I'd like to hear more about your funding strategy in retail. Do you expect to continue to improve? What about the marginal cost of funding considering the current level of the interest rate and the concern about liabilities? We see a few neo banks that are more aggressive, more active in this. Well, we'd like to hear more from you about that, please.

Thank you, Bernardo. What I usually say is that here, we're always looking at liquidity management, trying to reach the best level of cash. And so you see, we now have a 136%. And so that has helped us reduce our cost of funding. And here, two levers are important. Our customers are closer to us. We have more principality in the relationship, not only in low income but also mid income and high-income customers. And so that helps us keep the cost of funding down. And the second lever, which is also relevant, is how we compensate customers when they bring, deposits -- when they bring demand deposits to us. We have improved the way we compensate these customers, and that has been very helpful. Now when Marcelo spoke about the whole year, this is something that we are doing in our cash management in the middle market that has made us become -- that has made us gain in terms of principality. So now we no longer need higher cost funding. So when I have a plan and I can execute the plan, engaging results and keeping a balance in terms of lower funding cost from small companies and even from lower income individuals, that certainly helps us reach this optimum cost of funding. Will this last forever? Well, I don't believe anything will last forever. However, we still have our plan, which we are executing step by step. The more principality we have in our customer base, then the easier it will be for us to keep this balance. And this year, I believe we will be able to maintain this optimum level of cash and funding. Right? We have increased our origination also at BRAM in the asset management. Our BRAM has grown very healthily in this, last year, you know, in our BRAMB, the asset management. And that's because of our strategy. Right? And so we trend towards the optimum level of cash, and the liability level is possibly the lowest in the last few years because of this strategy. And at the same time, we are harvesting benefits from a few investments. We see there is a demand on the market. So we have maybe our lowest historical cost. So thank you, Bernardo. Thank you for the question.

Next question from Renato Meloni with Autonomous.

Hello, good afternoon. Congratulations on the results and thank you for taking my questions. I would like to focus on client NII and focus on this message of being conservative. At the same time, you're growing more than the industry and with a reasonably high yield. I know we spoke a lot about loans with guarantees, the payroll deductible loan, but that's a segment which is the most competitive. And your CTC is also growing. So I'd like to understand, perhaps you found a niche which is being underserved by the other banks and that's where you're growing? In the beginning, you said that these are not new clients. You are just using your network. And looking forward, can you continue to grow with the current mix or would you need to get into more risk lines to continue to expand your NIM?

Thank you very much. But I can answer that quite objectively. In personal loans, we had some movements that were interesting. For example, with higher net worth clients. They normally get personal loans but with lower rates. Because if I offer conventional rates, I will do an adverse selection. And these higher income clients and have the payroll with us and they ask for a loan, they have a good credit rating. So that's number one. And regarding payroll deductible loans, part of that personal loan line item and I mentioned that in the presentation, you might remember that. A part of that is a loan which is guaranteed by FTTS. If I included that in payroll deductible loan instead of seeing a BRL5 billion increase year-over-year, perhaps we would see an increase of BRL10 billion to BRL11 billion considering FTTS and the other set of payroll deductible loans, which means that we are quite well tractioned in the INSS deductible loan. And while we also have a great penetration, we are big payers of INSS. We have a high capability of distribution. So there's distribution, which is done by competitors, not just digitally, but also using external distribution. We access that, but the bulk of our distribution is done through our own channels, our digital channels, other channels that we use, the ATMs themselves, and also in our service units -- our points of service. So we have a great distribution of payroll deductible loans. So I don't see the bank entering into riskier lines because we have great opportunities. And I mentioned micro and small and midsize enterprises. Look at this. Last year, the set of origination of alliance FGO, FGI was about BRL89 billion, and that continues to have traction. And we have penetration here, but in order to have penetration, you have to have a client base, and you have to have an ability to deliver. And we do have that. This is what we're showing. So I don't see riskier lines in the horizon. I might offer more personal loans in the prime segment. Yes. It's possible as long as the pricing is adequate, if we have the right risk adjusted return. And this is our target. This is the way to go. And I stress what I've said before. This is an important focus for us. It is the quality of our assets. We don't give that up. We prefer to advance more slowly towards the future than moving in the future too quickly and making mistakes.

Comes from Tito Labarta from Goldman Sachs. Tito? We cannot hear you. It's on mute.

Yes, sorry about that. Thank you. Thanks, Andre. Hi, Marcelo, Cassiano, thank you for the call and taking my question. And congratulations on the strong results and the stock reaction. Just one final question, I guess, on my end. Just I saw John Deere contributed BRL17 billion to your loan book. Did that contribute at all to the earnings, particularly, I guess, on the client NII? Just did you see any benefit from that? And just to think going forward, the if you see any contribution from John Deere in terms of the business, the potential improvements in profitability, just to quantify if that had any impact in the quarter and expectations for the year? Thank you.

John Deere was much more important strategically with a stronger share in the agribusiness. The BRL17.3 billion that was added to our portfolio at the very end of Q1 is broken down to individuals, legal entities. Without that, our portfolio would have grown 11% in Q1 2025 year-on-year. But the contribution to the net income is very close to zero. It's actually immaterial, and that's why we didn't highlight that. If you consider that we have a cash outlay with the with the cash not being remunerated, that contribution becomes even less important to our net income. So for that criterion, we shouldn't be thinking so much about John Deere. I think that John Deere will come much later. And this is a moment when we are discussing the strategy of including John Deere in our operation and how we can work better together to better serve the agribusiness industry, which is very strategic with a good outlook and an industry that is very resilient to the macroeconomic scenario. So the strategy is much more important right now than any contribution to the net income or client NII or any other line item. Thank you, Tito.

Thank you. So we are now closing our Q&A session. I want to thank you all for contributing with your questions. Before I give the floor back to Marcelo, let me tell you the questions that we did not have time to answer will be answered by our IR team, and the press release is available on our website. Marcelo, your final comments?

Thank you, Andre. Thank you, Cassiano. I want to thank you all who've joined us this morning for this earnings call, the earnings of the first quarter of 2025. I am certain we will continue to work hard to deliver more and better during the year. Thank you all for your time. Have a great day.

[Operator Closing Remarks]