Banco Bradesco SA (BBD) 2022 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen, and thank you for waiting. We would like to welcome everyone to Bradesco's Third Quarter 2022 Earnings Conference Call. This call is being broadcast simultaneously through the Internet in Investor Relations website. bradescori.com.br/en. In that address, you can also find the presentation 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. 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 that 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'll turn the conference over to Mr. Carlos Firetti, Business Controller and Market Relations Director. Please go ahead, sir.

Thank you. Good afternoon, everyone. Welcome to our conference call for the discussion of our third quarter 2022 results. We have today with us in the conference call, our CEO, Octavio de Lazari Jr.; André Rodrigues Cano, Executive Vice President and CFO; Cassiano Scarpelli, Executive Vice President; Eurico Fabri, Executive Vice President; and Moacir Nachbar, Executive Vice President of Bradesco. Also, we have with us Oswaldo Fernandes, Executive Director; Ivan Gontijo, Bradesco Seguros Chief Executive Officer; Curtis Zimmermann, Banco [next] and Bitz, Chief Executive Officer; and Carlos Giovane Neves, Banco Digio, Chief Executive Officer.

I turn now the floor to Leandro de Miranda, Executive Director and IRO of Bradesco.

Thank you, Firetti. Thank you all once again for taking part in our earnings conference call. The third Q earnings reflect the current economic comments in a market that goes through cycles. We have traversed various points in the credit cycle. When the pandemic began bringing along unknown threats and the expectation of a worsening economy, we made significant credit provisions. As the economy improved in 2021 and the beginning of 2022, we were able to release part of the excess provisions, especially in the medium-large companies industry. Right now, we are moving to a cycle of increasing provisions that is expected to continue throughout 2023 due to the loans that have been granted in the mass market. We are now at full speed in transforming the bank.

As of today, we are undoubtedly one of the largest digital bank in Brazil, while maintaining the greatest physical presence among the peers. We transform our way of serving clients according to their preferences and needs. Customer centricity is behind our mode. Between us, you always come first. We hold a unique positioning with the largest invest insurance company in Brazil and in Latin America, a capillarity that unites the fiscal and the digital. Certainly, the finance financial products offer in Brazil from individuals to corporates.

As you know, Bradesco has extensive operations serving all segments of clients, either individuals or companies, enacting all over Brazil. As a result of this strategy with a broad position in the market, our activities in loans and banking are correlated with the performance of the Brazilian economy and disposable income. The economic scenario, high inflation and interest rates led to a deterioration in the clients' payment capacity and in the consequent increase in non-performing loans, making necessary credit provision expenses above our initial expectations. The delinquency ratio grew in the low-income mass market segment for individuals and micro and small companies. Observing the delinquency of recent harvest, which already indicate improvements and all the adjustments we made in 2022, we project that delinquent should stabilize and improve in the course of 2023. In the last 2 quarters, we have made provisions above the NPL formation which should continue into the 4Q 2022. The brisk hike in the Selic versus the natural speed of renewal in our prefixed loan portfolio has also affected results of the market NII. As we pointed out in the previous quarter. This effect will probably continue in the fourth Q and throughout the first 6 months of 2023.

Our profit is expected to remain under pressure for a few quarters, but this should change more consistently in the second half of 2023. We believe that the bank will continue to be able to operate with an improved level of return. We will pursue this and continue making the immediate adjustments to return to the level of profitability. The drivers of our recovery in the performance includes improved delinquency ratio, which should peak between first quarter 23% and second quarter 23 and improved thereafter, which will allow us for a gradual reductions in credit provisions. A significant improvement in market NII, mainly from the second half of 2023. The evolution of the income from insurance group, maintaining strict cost control and the continuity of the good results in the wholesale bank with a high return level and that even record the lowest historical delinquency rates over 90 days.

With respect to this quarter earnings, we saw a drop in the recurring net income of 25.8% compared to the previous quarter, primarily due to credit provision expenses, market NII and income from insurance. The loan portfolio rose by 13.6% in an annual comparison, with associated with original mix, benefiting the client NII, which grew 24.7% over the same period. Finally, we closed out the quarter with a 13.6% Tier 1 capital, a level that points to the strength of our balance sheet.

Now we move to Slide 3. We compare the net income accumulated over the first 9 months of the year with the same period from last year. The main items that made the positive contribution to the profit were Client NII, which presents an increase of BRL 9.5 billion, reflecting the growth in the loan portfolio and spreads in addition to the origination mix that has been more concentrated in the short-term lines that have higher margins. Income from insurance, which grew BRL 2.5 billion, benefited by higher premiums and increased financial income despite the increase in the claims ratio. We also have 2 items that reduced profit by nearly the same magnitude. Market NII, which posted a reduction of BRL 6.8 billion as a result of the impact of the accelerated increase in high-level maintenance of the Selic rates on our ALM and BRL 6.6 billion higher credit provisions reflecting the portfolio growth, origination mix and increase in delinquents. This amount includes BRL 1 billion that we made as a supplementary provision this quarter.

Now we turn to Slide 4. Let's talk about loan portfolio, which grew 2.7% compared to the previous quarter and 13.6% compared to last year. Origination for individuals is 10% lower than last year but with a superior credit quality. The adjustment was made mainly to the low-income mass markets, which presents more credit risk as we restricted the criteria for approval, given the scenario for high delinquency. An example of this is that today, we approved 48% of credit proposals compared to 58% a year ago and 68% in the pre-pandemic periods in 2019. The 38.8% growth in credit card reflects the increased penetration of cards among our high-income clients. In addition to the increase in average expenses after the pandemic and inflation over the period. Here, we are also very restricted with the low-income segments. In agri credit, the 3.5% search is due to our focus on agribusiness through our 14 agro platforms. The crop year began over the third quarter, and this portfolio should expand even further. The renegotiated portfolio remains stable as a proportion of the loan portfolio.

Turning now to Slide 5. As we said, the delinquent over 90 days was affected by the economic cycle. The ratio grew 0.4 percentage points with an increase concentrated in the mass market lines, individuals and micro small companies, segments that were most affected by inflation. The early delinquency has remained stable for 2 quarters, reflecting the adjustments we made in origination. This quarter, the gross credit provision was once again higher than the NPL formation. And as a result, the cost of risk reached 3.3%. The coverage ratio for the NPL 90 days remained at a very strong level of 201%. Now we go to Slide 6 to talk about NII.

Overall, NII has risen by 5.7% in the accumulated 9 months. Client NII continues to expand, benefiting from portfolio growth and favorable spreads given the product mix, in addition to the positive impact on the deposit margins due to the increase in the Selic rates. The increase over the year is 23.4%. In the chart at the bottom of the slide, we highlight the Client NII net of credit provision, which is 10% higher compared to 2021 and 25% higher than what we had in 2019 pre-COVID. Client NIM also continues to evolve, up 10 bps in the quarter, while the net NIM impacted by the higher provisioning post the reduction. In market NII, the ALM portion continues under preference. We can say that the performance in the fourth quarter should be better than the third quarter, although it's still negative. The recovery of this line should be gradual during 2023 with the second half better than the first one, considering the current expectations of interest rates and portfolio repricing.

Now let's move to Slide 7. Let's talk about the insurance group results. Accumulated net income expanded by more than 28% with a major contribution from the operating results, which offset the financial results influenced by the dynamics of the financial indexes. We highlight the growth in revenues across all business lines, 18.9% in the third Q and 17% higher in the year overall. Therefore, the income from insurance our guidance continues with a very positive performance, growing 32% in the year, with an emphasis on operational performance. The volume of claims directly related to COVID in the third Q reached BRL 289 million, the lowest in the series and BRL 1.1 billion in the year, around 73% less in the same period last year. Our loss ratio is already showing a reduction from the previous quarter and from the third Q '21. The insurance group continues to grow and improve its operating performance with an expansion in the number of insurance clients and items, thus reinforcing our strategy and confidence in the segments.

Turning now to Slide 8. Fees grew 4.8% for the year. Card income increased by 3.8% in the [Q3, 4] quarterly comparison and 22.2% for the year. The transacted volume has demonstrated a progressive growth, and it's worth mentioning, we have increased our base, especially in the high-income segments, which reached 39% share, a group with lower risk and higher return. We reached 76.8 million clients, an annual growth of 4.3 million clients, which contributed to maintaining the level in the checking account line offset a substantial part of the drop in revenue from service packages and from the use of [PIC].

Continuing the service items, Slide 9 outlines our performance and growth in the private banking segment. We are currently the second largest private bank in Brazil with around 22% share in the local market and a notable growth in recent years. Since 2019, we have grown the volume of managed resources by 52%, arising at BRL 389 billion. We have also continued to advance our specialization and increase our bankers and consulted SIM with a solid value proposition, which was reinforced with the acquisition of BAC Bank, formerly Bradesco Bank Florida. We will continue with our strategy of observing acquisition opportunities and signing agreements and partnerships such as those with JPMorgan, BNP Paribas and the independent wealth management with Banco BV with a view towards increasing our share in the industry by providing the best offer to our clients.

We will now take a look at Slide 10. Operating expenses posted a 4.6% growth in the year, a marked below inflation for the period. IPCA at 7.2% and IGP-M at 8.3%. The personnel line grew by 11.6%, impacted by the collective browning agreements of ‘21 and ‘22. We also continue to invest in enforcing and improving our investment advisory, technology, data science teams in an effort to enhance our processes and provide a better experience to our clients. We continue our focus on optimizing the physical presence and investments in digitalization of client services. These excellent trends have helped to contain the increase in the administrative expenses at 6.2% for the year. Bradesco Expresso, our banking correspondent network complements our physical presence with great capillarity and convenience for customers in a structured based on variable costs.

We will now discuss capital and liquidity on Slide 11. Profit generation and the positive mark-to-market on secured over the quarter more than offset the distribution in the form of interest on shareholders' equity and the consumption by weighted assets, increasing our Tier 1 capital by 30 bps, which continues in a very strong level. Our estimates for the fourth quarter suggests that we will finish the year with a level closer to the current one, even with the impact of nearly 40 bps in December with the completion of the application of the room for handling tax credits originating from the hedge of investments of [BUs]. We closed down the quarter with a high level of LCR.

Turning now to Slide 12, making sure our clients' digital experience is always improving. We are committed to keeping them at the heart of our decisions. This is a strategy that provides increased autonomy and a better experience for them and results in a lot more business. Currently, 71% of our account holders are now digital, and 98% of all transactions take place via digital channels. In an annual comparison, the opening of accounts directly through the app grew by 62% for individuals and by 66% for microentrepreneurs. The frequent upgrades that we're performing yet, which introduce new features and experiences based on data and aligned with the needs of our clients have been an enormous success with clients, evidenced by the 90% level of overall satisfaction with our app with official stores NPS.

Turning now to Slide 13. With respect to the sustainable business agenda, we remain committed to carrying out our activities with a positive social environment impact, and we have already achieved 63% of the growth. We have over 20 products that boast social environmental benefits in our portfolio. And 2 solutions should be highlighted for the growth within the last 2 years. First of all, financing for the purchase of solar panels, which reached BRL 1.2 billion, and financing for hybrid and electric vehicles, which rose 4.5x. For environmental issues, we would like to point out the importance of our historical partnership with the SOS Mata Atlântica Foundation, an initiative that we are proud of. We have supported SOS since 1989, and over 34 million native trees have been planted in 9 Brazilian states over the periods. And finally, at this time, the 27th UN conference on climate change is taking place in Egypt, which we are participating in. We include the climate agenda and sustainability strategy and follow all major trends to ensure that Bradesco is maintaining its pioneer spirit in the very significant and relevant issue.

We now move on to Slide 14, our last slide today. Considering our performance up to the third Q, we believe that we'll be able the lower part of the range for loan growth and fees. At the top of the range for costs, insurance and Client NII. With regards to credit provisions, we decided to revise the guidance. According to our projections, the credit provisions for 2022 will be in the range from BRL 25.5 billion to BRL 27.5 billion. This performance reflects the point recovered on the credit cycle in the mass markets despite a further strong performance in loan quality in the wholesale markets. On market NII, as we mentioned earlier, we should return to positive levels in 2023. In the fourth quarter, this line shall remain negative, but better than the level of the third quarter.

Thank you very much for your attention, and now we'll begin the Q&A session.

(Operator Instructions). Our first question comes from Jason Mollin with Scotiabank.

I just wanted to clarify some comments you were making previously on the conference call in Portuguese. You talked about a material change in your outlook for provisions and loan loss allowances now versus the second quarter. I just wonder if you can clarify and you talked about the outlook has changed. And when we look at the macro forecast from Bradesco at the end of the second quarter versus today, it doesn't -- you're seeing something that we don't see in the top-down numbers, just the inflation looks better than you were expecting in the second quarter. The general price index looks better. So I'm just trying to understand, clearly, you're telling us and we saw it in delinquency that there was a worsening. And I'm just trying to understand how the provisioning outlook changed so much in one quarter to the next. And then my second question is related to loan sales that you've been doing, but we calculate that you sold more loans, $2.8 billion in the third quarter, up from $2 billion in the second. And we wanted to understand how that impacts your asset quality metrics. Were those loans 90 days past due? Or what could you tell us about how we consider those loan sales, how that would impact asset quality?

Thank you for the question. This is Firetti. Regarding your first question on the outlook, basically, I would say, more than the change in the outlook, what changed was the impact we saw in our loan book in -- and also in the evolution in terms of credit card. In the second quarter results, basically, we advised that we were seeing provision expenses probably coming a little bit above our guidance already. And the trend actually materialized in our view, it is more fair to provide revised guidance that brings our best view for the moment on that line. So basically, in a nutshell, I would say that was what drove us to do this revision, the evolution in terms of credit quality, we were seeing more than a big change in the outlook. But actually, the outlook, the high inflation and is one of the things that hit the clients, and that is really the driver for the situation considering our position in the market, even though there wasn't a big change in the outlook numbers itself. I don't know, would you like to say something?

(inaudible).

Yes, considering the sale of loans or NPLs basically, these loans were basically in our book, then were mostly loans that were in the renegotiated portfolio. It's retail, retail loans. Basically, in the segment, we were pointing as the ones that have been more affected by the increase in delinquency as said credit cards, personal loans, and the impact of the sale is something around 30 bps in terms of 90 days NPLs.

So Jason, this is [Rodrigues]. Sorry. Just to clarify about the credit performance, I think it's important to highlight that the [new Ventas] are performing much better than the [fintech] before, especially the fintech before 2019, 2018, and 2017, especially due to the fact that Leandro highlighted about the approval rates and all the adjustments that we proceed in the portfolio after December 2021. So we start tightening the policies since then, and we continue with this tightening process. So our approval rate before the crisis in 2019 reached the level of 68%. During the pandemic, it went up to 58%. And then after December 2021, it has decreased gradually to 48%. So it's being a 20 point -- percentage points below what we experienced before the crisis. And according to that, our through-the-door profile has improved a lot. So just to mention (technical difficulty) you're going to a more than 90% between very low risk and low risk through the door acquisition. These kinds of indicators also highlight a better performance in the first box of collection that we see that we are performing below what we have in the first bucket in 2019.

I'm highlighting (technical difficulty) before the quarter. So (technical difficulty) and we this indicator in the last few months. Of course, when you talk about portfolio over 30 days, there -- the roll rates are higher than it used to be before, and that's the reason why we still believe that delinquent is going to go up a little bit in the first quarter of 2023, and we stabilized in the second quarter and then gradually will decrease in the second half of 2023. Regarding to your question about the asset saving strategy, it's important to say that our asset sales strategy is focused on the client with low probability of recovery. So what do we do? We analyze every quarter, the clients with low profit of recovery, and we trying to focus our collection chain on the new delinquents because there, we can recover the clients and with this portfolio base segment that we identify a low probability of recovery, then we use that for the sales -- the asset sales strategy. It's important to say that most of this portfolio is already written off.

And the portion of this portfolio that is nonperforming in other words, before written off, 90% of this portfolio is fully backed by provisions. And the average delinquency of this portfolio is over 230 days. So we are talking about really a specific portion of the portfolio, and it's part of our strategy. We're going to continue to do that in order to release our collection team to focus on what makes sense for us on recovering relationship with customers and protecting our assets on the new delinquent that is the most important for us. And those delinquencies that we don't see any high probability or a very low profit of recovery, we are going to continue with our sales strategy.

That's very helpful. And I do appreciate that when you see the risk rising that you are acting appropriately and making the provisions I appreciate the answers and color.

Our next question comes from Thiago Batista with UBS.

Yes. We were discussed in the portioning call or in the [portion of the] call that most of the deterioration after quality was concentrated in the low-income segment. I have a couple of questions on this point. The first one, if Bradesco saw already an impact of the higher checks that have been paid in the last month, the Oil Brazil, for instance. The second one, if you are seeing any – if you believe any a diverse election of the low-income clients, so maybe the good loans in clients are going to be in tax and Bradesco is staying with the bad low-income clients. And the third one, the final one, if you see any difference in the profile on asset quality of the Bradesco’s traditional clients or traditional low-income clients in next low-income clients. If the way the client went Bradesco or (inaudible) explain any difference in this performance for [towing].

André speaking. Well, first of all, NEX has its own clients. And there is an overlap of 25% of clients. Therefore, the strategies are pretty much different. And we just have our lion's share as we would have in any digital banks or other incumbent banks. Regarding to adverse selection, we don't think so. Basically, we -- at times like that, we try to work, the more we can with existing clients, with clients that we know the most with clients that we do understand their profile, their track record of payments, and we have increased it by more than 60%, our penetration in the high-income segments. So we do not think that there was an adverse selection in terms of choosing those clients.

And by the end of the day, as Octavio said in our first conference call, it's natural that the delinquency came from the low-income segments, pretty much rating CD&E because basically, we have the highest bit in Brazil. We are the only bank in every single municipal. That's pretty much different from those banks that have clients basically main cities and capital. So I think that's much more like a profile of the bank that has its bad times and good times than anything else. And of course, we are talking to small and micro companies as well because basically, they share the profile of the low-income individual clients.

Thiago, is [Firetti], I agree with André. I don't see any adverse selection that the good way to see that is that through the door application profile that hasn't changed before pandemic, during the pandemic and after the pandemic. So we see clearly that it's the same profile we used to have. But of course, base profile and the [tower] profile is linked to the [clan] that has been affected by inflation and high-interest rates. So that's why we see the increase in the liquid rates that we are seeing right now. But in terms of adverse selection, I don't see any indication of that.

Yes. Maybe, [to] share with him the rate is in the origination, how much they have improved it through our time.

Okay. You mean in terms of acquisition. As I mentioned before, for current portfolio, we usually have around 60% of low-risk and current long-risk new card. And now I'll turn over to almost actually 80% from low risk and very low rate, and we believe that we're going to close the year over 90% of new card customers on this profile. So by the end of the day, basically, when you see the proportion, we are working with better clients than before, but their deterioration, their financial situation has deteriorated heavily. That's pretty much the point.

Because there is an existing portfolio. So you have a portfolio that has the credit already and had a performance before, but with the severity of the crisis, the performance has deteriorated. So with this existing portfolio, you can do something, but it's an existing portfolio anyway.

Okay. And any impact from the checks of Brazil?

Actually, Thiago, we haven't seen any impact. We did perform an analysis on that and to see if there was any impact in terms of collections and recoveries and even credit performance. But to be honest, we haven't seen anything that would be significant.

Our next question comes from Jorge Kuri with Morgan Stanley.

I wanted to clarify something that was said. Did I understand correctly that the portfolio sales were on loans that have already been written off, is that 100% of the loans sold were written off or just a portion? Because then I believe Firetti said that the impact on NPLs was 30 basis points from the sales, but if they were written up, I don't understand why there was -- there would be an impact. Just clarify...

Basically, there were BRL 2.9 billion in loans that had already been written off and 2.7 billion in bonds that were still on our books. The impact in NPLs come from the 2.7 bit.

Got it. And the impact is 30 basis points. Is that the exact number?

Yes. Roughly.

But – Sorry. It's important to highlight that both portfolios, they have the same profile. So there are very low probability of recovery, and that's the reason why they have been sold. So our strategy is really to understand the population that has a low probability of recovery, and then we sell this portfolio, regardless of at the stage of delinquent of the people, even though we know that even the prewritten of portfolio is a very high delinquent rate, as I pointed out a few minutes ago.

And can you comment on what percentage of that portfolio was individuals versus SMEs versus I'm guessing not corporate, but and what is the composition of what you've sold?

Yes, that majority is individuals.

And is there a particular product that you're seeing more defaults? Is it -- you've been talking about credit cards, credit cards. Is that the Achilles heel, the credit card book?

They are concentrated on the products, they are concentrated on the low-income segment. So basically, in personal loans and cards.

Personal loans.

Personal loans and card.

Our next question comes from Tito Labarta with Goldman Sachs.

So I guess one follow-up on Thiago's earlier question about the deterioration versus some of the digital banks. We saw digital banks somewhat holding up a bit better in terms of NPLs. Any color you can give within those lower-income clients were you seeing the deterioration in terms of clients that came from digital channels versus clients coming from the branches? And do you think your growth there was maybe too aggressive to some extent that now it's hurting you on the NPL side? Or why do you think your NPLs are looking worse than what we've seen from some other peers and from the industry?

Thank you, Leandro speaking, then [Rico] is going to add to [sense] here. Well, basically, we do not see any difference between the group of clients that came through digital channels as well as from -- when compared to the group of clients that came from the traditional channels. There was no difference among the groups as far as statistics are concerned. When you make reference to the digital business and then we are referring to [MAX BUs], not Bradesco itself is a different strategy we grew as a strategy, the base of clients. And now as Octavio pointed out, the morning, we are focused on monetizing those clients and trying to select the best ones of them and focus on gaining better results from them. So we are talking about 2 different worlds. But regarding to Bradesco, there was no difference between digital and fiscal channels.

Just to complement this point that Leandro just made, and it's important to say that even though the performance within the profile is not much different between the channels. The mix of the profiles within the channels are different. So what happened? When we have a digital channel, we normally attract more effective DME, we very attract an A and B in general. So it's very different to longer rents, for instance, to compare 2 different channels. So the needs we need the channel change a lot even though the profile itself, it doesn't change much between 2 different channels, just to be clear. So when you come for the delinquency of the channel itself, it seems to be worse digital channel than a traditional brand channel mainly because of the mix inside the channel and in different within profile.

Okay. Great. No, that's helpful. And maybe, I guess, a follow-up question. More in terms of -- we've seen loan growth in these unsecured segments, pretty strong, not just that for Bradesco but for the system in general. I guess the 2-point question. Given that growth, do you think -- how systemic could this issue potentially become? And do you expect to slow down the growth significantly in those segments from here? We've already seen some deceleration, but should that slow significantly? Or are you still seeing opportunities to grow there?

Okay. Well, first of all, I guess, when you compare our sales among the other banks, we are the ones with most difference as far as the geography is concerned. So we are -- we have the largest CD&E-rated client profile by far. Other banks are more concentrated in main cities and capital when you compare as a percentage. The second thing is that we do want to slow down, and we are reducing on an ongoing basis, our origination and have been more and more conservative regarding to the approval process to those clients.

When [there to try to cost] even though it's going to be what [Leandro] said, we're -- we had reduced the appetite for close working portfolio and concentrated to CDN passes. We are working to improve the model and continue to improve and try to reach that effort at [discrimination], we constantly work on that. If there is any new information or something that could upgrade the separation between good and bad in the model could have a 0 leverage on the approval rates, but the general thinking is that we're going to reduce that with price in general terms.

Our next question comes from Geoffrey Elliott from Autonomous.

I really wanted to follow up on one of the questions on the Portuguese call earlier where you were asked about why now in terms of this big change in the outlook for provisions. And on that call, you mentioned inflation as being an issue, but inflation over the last few months has actually been lower. So just struggling to understand in the context of inflation coming down a bit, fuel tax, cuts, some more support to low-income people through the Auxilio Brasil program. unemployment falling. What happened over the last 3 months to make the outlook now so different from the outlook back in August?

Geoff. This is Firetti. As I said, even in a question in the English call, we saw a continued trend in terms of increasing NPLs, especially in the segments we have already mentioned. I'd say in the second quarter call, we had hoped that the provisions in the year may be -- wouldn't be much higher than the top range of the call, but when it became clear to us that actually the difference was material we thought it would be more transparent really to change the guidance instead of just guiding for a range above the top of the range of the former call -- former guidance.

Okay. So it sounds like maybe that was a bit of upside to the old range as of 2Q, but you left those numbers and it improved and then it won't be the way. So that's why we've got the adjustment now. Yes.

That's correct.

Our next question comes from Jason Mollin with Scotiabank.

I also wanted to follow up on a question from the prior call about the other income, and there seems to be a provision that was -- if you can explain what the movements were in the other income line, that would be helpful. They were large.

Okay. It is related to a tax discussion. We had in the administrative body of the Brazilian IRS, we won that discussion recently. And due to that, we had to revert to the provisions we have made.

So there was a reversal of provisions to pay a tax dispute? What was the size of that reversal?

BRL 800 million. Yes, it was a definitive decision. So we really had to revert that. We treated that as a recurrent expense when it happened and kept it as a recurrent plan we reverted.

Excuse me, ladies and gentlemen, since there are no further questions, I would like to invite Leandro Miranda for his closing remarks. Please go ahead, sir.

Well, thank you all for making the time to be with us. Our IR team is ready to clarify any additional questions you may have, and you can send it by e-mail or call us, we are ready to answer at any time. Thank you so much. Have a great week.

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