Banco Do Brasil(US:BDORY)2020-05-09 14:51Financial Data and Key Metrics Changes - The adjusted net income for Q1 2020 was BRL 3.4 billion, a decrease of 20% compared to Q1 2019 [3][4] - Net interest income (NII) increased by 9.9% to BRL 14 billion [3][4] - Fee income reached BRL 7.1 billion, up 4% year-over-year [3][4] - Administrative expenses grew by 2.7%, reaching BRL 7.8 billion, which is below inflation [3][4] - The return on equity was 12.5%, and return on assets was 0.8% [4] Business Line Data and Key Metrics Changes - The loan portfolio increased by 5.8% year-over-year and 6.5% compared to December 2019, with a BRL 45 billion increase attributed to FX devaluation [9][10] - The individual loan portfolio grew by 9.6%, with payroll loans increasing by 16.4% and consumer finance loans rising by 36% [10][11] - The SME portfolio showed significant growth, with a focus on working capital [11][12] Market Data and Key Metrics Changes - The cost of risk increased from 3.15% to 3.41% due to credit provisions of BRL 2 billion [6][14] - The non-performing loans (NPL) ratio at 90 days was 3.17%, below the industry average of 3.20% [14] - The coverage ratio reached 200%, indicating strong provisions against potential losses [14] Company Strategy and Development Direction - The company is focusing on digital transformation, with significant investments in digital solutions and customer experience [18] - The strategy includes maintaining a strong relationship with customers, particularly in the SME and agribusiness sectors [45][46] - The bank aims to adapt to changing market conditions while ensuring liquidity and capital preservation [20][24] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the impact of COVID-19 on operations and expected further challenges in the coming quarters [3][24] - The bank is prepared for potential increases in NPLs but believes its portfolio is more defensive compared to previous crises [37][40] - The guidance for credit provisions was suspended until more clarity on market conditions is achieved [24] Other Important Information - The bank inaugurated its first solar plant, contributing to cost efficiency and sustainability [17] - The CET1 ratio remained stable, with a focus on maintaining capital adequacy [18] Q&A Session Summary Question: Impact of mark-to-market on equity - Management confirmed that mark-to-market impacts were primarily from public securities, with no major concerns regarding credit quality [26][27] Question: NIM and NII expectations - Management indicated that further benefits from funding costs are expected, with a gradual increase in NII anticipated [29][30] Question: Asset quality and provisions - Management noted that the current cost of risk is manageable, and the bank is well-prepared for potential increases in NPLs [36][39] Question: Loan growth outlook - Management expects loan growth to be consistent, particularly in the SME and individual segments, despite market challenges [44][46] Question: Participation in Central Bank bond purchase program - Management stated that it is too early to determine participation in the program, but liquidity measures are being closely monitored [48][49] Question: Future capital ratios and mark-to-market impacts - Management emphasized a conservative approach to capital management, with expectations of maintaining adequate capital ratios [55][56]