Logo of jester cap with thought bubble.

Image source: The Motley Fool.

Bank Bradesco SA (BBD)
Q4 2020 Earnings Call
Feb 4, 2021, 11:30 a.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Greetings, ladies and gentlemen, and thank you for waiting. We would like to welcome everyone to Bradesco's Fourth Quarter 2020 Earnings Conference Call. This call is being broadcasted simultaneously through the Internet in the Investor Relations website at bradescori.com.br/en. In the 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 this will materially from those expressed in such forward-looking statements.

Now, I'll turn the conference over to Mr. Carlos Firetti, Market Relations Director and Head of IR.

10 stocks we like better than Banco Bradesco
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.* 

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Banco Bradesco wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of November 20, 2020

Carlos Firetti -- Market Relations Director and Head of IR

Hi everyone, welcome to our conference call for the discussion of the fourth quarter results. We have today with us our CEO, Octavio de Lazari; our Executive Vice President and CFO, Andre Rodrigues Cano; Bradesco Seguros' Chief Executive Officer, Ivan Gontijo; and our Executive Director, Investor Relations Officer, Nianda Miranda.

For starting the call, I turn the floor to Leandro.

Leandro de Miranda Araujo -- Executive Deputy Officer, and Investor Relations Officer

Thank you, Firetti. Greetings everyone, welcome to our conference call. We look to describe 2020, it's widely known how challenging that year was and the impact it had in our lives, families, communities on the global economy as a whole. Bradesco's performance was naturally below what we expected a year ago. By the time that we present our guidance during the fourth quarter 2019 earnings conference. But it certainly was by far much, much better than we imagined that it would be soon after the beginning of the pandemic. We are proud to deliver our best results ever. We'd like to thank all of the Bradesco's team for its commitment, resilience, and [Technical Issues] very good cost control with the total cost reduction in the fourth quarter with a reduction of 9.3% in this quarter in comparison to the previous year. ER close to 44.6% in the quarter and an accumulating drop of 7% for service points, 3.7 for services points.

On page 4, we present our income statement. We had a well-balanced the income in the quarter with a number of lines showing solid performance. The net interest income grew by 9% in the quarter and 8% in the annual comparison. Supported by strong performance of the market portion, including quarterly growth of the client portion. Our ALL expenses dropped once again in the quarter and had it normal average. Fee and commission income grew by 7.3% in the quarter with the aim of decline slowing to 1.3%. As mentioned, we saw an excellent performance in terms of costs resulting from the adjustments we made throughout 2020.

The next slide, we will explore the lines into more in -- turning to Slide 5. The funding continued in our network. The deposits from clients, net of compulsory deposits grew 3.3% in the fourth quarter and 38% in the annual comparison. We have net funding of approximately has a BRL158 billion in 2020. With visible motion, our loan to deposit ratio close the year at 82%, which indicates our high liquidity.

In Slide 6, we present our expanded credit portfolio, which grew by 10.3% over 12 months. Annual growth was 5.6% in large companies and 18.7% in SMEs. Individuals grew 11.7%. One of the growth highlights in 2020 was the real estate financing line with an increase of 33.6%. The SME line grew by 18.7% and the payroll deductible loans line grew by 10.6%. Credit origination continue to grow in the quarter in a tariffs in the individual segment presented growth. We entered 2021 with an increase in the appetite for credit with adjustments in our models that should allow for great origination without significant increase in risk. So we expect a good growth of the portfolio in 2021. [Technical Issues] now is like 7, our expenses with expanded ALL came down to BRL25.8 billion in 2012, which is BRL11.4 billion higher than 2019. In the quarter, we saw further reduction reaching BRL4.6 billion or 2.7% of our loan portfolio compared to [Technical Issues] or 3.4% of the portfolio in the third quarter. This reduction took place despite an increase in impairments to BRL1.44 billion [Phonetic], BRL87.1 million more than in the third quarter, due to the specific range of a large company that's well known. We consider our provisions to be very comparable considering the expected losses.

Moving now to Slide 8. The delinquency ratio over 90 days remained well controlled, showing a reduction of 10 days, in the quarter due to the drop in individuals, while medial and large companies remain pretty much stable. This positive performance is a result of the high cost of pre-pandemic weightages, the solid trend of our customer financial health with extensions and renegotiations during 2020.

The 15 to 90 ratio already shows signs of rising defaults. As we expected, the total ratio rose 50 bps. We believe that the increase in the 15 to 90-day ratio will be deemed to have an impact on the over 90 days ratio in the upcoming quarters. However, we are optimistic about the scale of this increase. Then we think that our provisions are more than sufficient for expected losses. We understand that it will probably take between the second and third quarter of the year. Those levels that are not much higher than the pre-pandemic ones and we are prepared for that.

Slide 9, we saw an increase in the level of NPL creation over the quarters, settling at BRL3.7 billion. Our gross ALL for the quarter represented the 111% of the NPL creation, which shows that we are not consuming provisions. On Slide 10, we can see the 90-day NPL coverage ratio, which further increases to a very comfortable 403%.

With respect to the segments, we have coverage of 268% for individuals, 1167% for large companies, and 566% for SMEs. The coverage ratio, which includes the renegotiated portfolio is slightly to 118%. We'd like to remind you that loan provisions in the renegotiated portfolio represents 62% of its total, which is higher than the historical losses that we verified in this portfolio.

Now, let's turn to Slide 11. End of this quarter, we began to publish the extended portfolio with a new concept shown the accounting balances of net of amortizations. We believe that this methodology allows the balanced realization of the evolution of the expansions. The extended portfolio, totaled the Group balance at BRL48 billion at the end of the fourth quarter, a reduction of 13% compared to the third quarter 2020. This value was pretty much compared to the BRL41.4 billion on time, which means that we are no longer in the grace period with the payment of at least one instrument.

BRL3.8 billion is still in the grace period at the end of December and then we must highlight that, of this amount, BRL1.9 billion are no longer in the grace period in January. And finally, BRL2.9 billion of transactions that we're expanding at anytime, this expansion and these transactions are in arrears for more than 30 days. This represents only 0.6% of the total of the bank's loan portfolio. We believe that the behavior of the extended portfolio was very good. Exceeding our initial expectations. This proves of our good credit quality, which led to a high quality paying consumer period prior to the crisis.

Moving now to Slide 12. Our renegotiated portfolio in the fourth quarter grew BRL1.9 billion, BRL1.7 billion on accounting for active credits. This is a significant deceleration comparison to previous quarter. The renegotiation growth in the quarter is primarily made up of loans that are less than 90 days in arrears, meaning that they have a better quality and a greater chance of collections success. Loan provisions in the renegotiated portfolio represents 61.5% of the total portfolio. The delinquency ratio for the renegotiated portfolio was 7.4% in December.

In Slide 13, we see that the net interest income grew 9% in the quarterly variation and 8% in the annual comparison. The client portion grew 3.3% in the quarter, mainly due to the increase in volume with a stable NIM. The market portion showed a very strong performance in this quarter. The total volume grew to 6.4% in the fourth quarter compared to 5.9% in the previous quarter. NIM with clients remained stable at 9.2% after three quarters of loss. We do expect a recovery of the NIM with clients in the quarterly comparison throughout 2021.

Now turning to Slide 14, we can see the fee and commission income represented a 7.3% quarterly growth and a 1.3% growth in any comparison, reducing the fall in relation to the previous quarters. For the quarter, some highlights included the solid performance of card, checking accounts, loan operations and consortium. Looking at the Asset Management line, we are still being negatively affected by immigration of funds from fixed income funds to deposits as well as reduction in the management fees for the response. We have seen an improvement in our product mix, part of our adjustment process that should lead to an improved performance, particularly in the second half of 2021. There was also a positive trend in the number of account holders in 2020.

We'll now turn to Slide 15. Our performance in terms of costs and expenses was one of the highlights of 2020 and the fourth quarter of 2020. Our personnel and administrative expenses decreased by 6.9% in the fourth quarter, and in comparison and 5.9% for 2020 as a whole.

The growth compared to the previous quarters due to the resumption of activity and the seasonality of the fourth quarter itself. Given the total cost including other expenses, a decrease of 9.3% was seen in the quarterly variation with 5.3% in 2020. This performance is due to the solid cost management measures that we adopted throughout the year by adjusting our structure, our cost to serve, and especially our branch network, taking advantage of the opportunities created by the change in our client's behavior. We will continue to explore cost management opportunity in 2021 and beyond.

Now moving to Slide 16. 2020 witnessed an acceleration of digital trends. There was a dramatic increase in the number of users and transactions on the mobile channel. This dynamic comprises new clients in the interesting movement of traditional clients, who have most recent mobile and now have become users, some of them even heavy users. We saw a 23% growth in our mobile clients and 15% in digital clients in 2020, which also includes internet banking, coupled with the users, there was also a market increase in the form of transactions. Same time, we have seen a significant reduction in the number of sales transactions, which dropped almost 62% in 2020, a trend that shall remain. This recent move in particular allowed us in -- streamline efforts for our network consolidating branches and use more intensively of formats, such as business units.

On Slide 17, we present our performance insurance, which showed the recovering the financial income in the fourth quarter related to the increase in the IPCA in the result of the change in the durable income strategies. The accumulated view the 31% reduction in profits is related to the fall in the financial results that reflects the economic indexes, especially the IGPM and by the prudential provisions for another. Insurance Group's revenue fell only 5.1% in 2020 despite the pandemic and partial functioning of some distribution channels. The operational results decreased in the quarter due to the higher loss ratio. This effect as we expected is related to the increase in the frequency of claims caused by the resumption of the activity and health, and the currencies due to the relaxation of social isolation managers. Also we have in the fourth quarter, we reclassified BRL632 million on technical provision for adverse economic scenario to the technical long-term provision, which positively affects the other expense line of the bank and negatively affects the operational results of insurance company. We present these adjustments in the chart as you can see here below. Our provided index annual yield despite the effects of the pandemic achieved a very consistent performance in the period, reaching 85%.

We now change to Slide 18. Our capital did very well in the fourth quarter with common equity ratio in Tier-1 increasing by 90 bps. Our capital position has set up rather comfortable levels with a common equity at 12.7% in Tier-1 at 13.8%. Our capital will continue to grow in 2021 based on the recovery for ROE and our expectations for credit growth. This provides us with flexibility in our capital management performance for 2021.

Turning to Slide 19, we bring on digital and on the next slide, one of the main strategic movements we have in the bank at the moment. Strategically focused, we sampled on the pursuit to Bradesco's clients with proposals for customer service aligned to their needs and expectations in order to consequently retain the loyalty in a confident and sustainable manner. Thus in 2020, we have reviewed the corporate strategy of customer relationships, creating initiatives aimed at meeting their expectations in line with their lifecycle and providing an increase in their level of satisfaction for the excellence achieved during their entire relationship with our organization as a whole.

In this sense, we highlight two important initiatives. The first one is the structuring of the corporate program called 100% Client, which aims to organize our business model to ensure that the client is always at the center of our attention and monitored through NPS. To create second, the creation of the position of our Chief Customer Officer, we want to ensure that the policy of customer satisfaction is effective in the whole organization.

Going on, we switch to Page 20, a fundamental part of the customer strategy at the center is our digital transformation. We created the various areas of the bank, culture of the intensive data use which support us in business that is speeder is in process. The better understanding of customers by the use of data allowed us to create contextualized offers based on personalized customer journeys. An example of this is the case of the credit losses for fix, which would have been offering since the launch. We also continue to evolve in the construction of digital journeys with an omnichannel creation, supported by modern real-time decision and communication platforms. With our brain and CRM 2.0 projects, continues to evolve play an important role in client's transition to the digital world and in serving our branch network with agility and efficiencies.

Most of our team is already working on HR model, in most of the agile teams, but we entered the client's journey. We have evolved rapidly in partnerships, has been services and products from third parties, now we're trying the proposition. This is the case of partnerships such as Disney and OLX for the sale of real estate loans, which will be accelerated this year with open bank.

Now we change to Slide 21. We continue to show progress in our three digital initiatives, AGORA, next, and Bitz. After AGORA, we closed the year with high 547,000 customers, an increase of 49% in 2020, while the AUC of customers grew 23% in the year. We are holding in the offer of products throughout 2020, placing AGORA as one of the most complete offers in the market. Next, a voltage, a niche project to segregated from Bradesco, gain operational has moved on. We closed the year with 3.7 million customers, an addition of 1.9 million in 2020. Next will continue to evolve expanding software to customers, including acting as a marketplace. Finally, Bitz, our digital wallet was launched in September 2020 and already has perhaps 218,000 customers. We expect to grow quicker in 2021. We have ambitious plan for Bitz, which offers customer a product complimentary to that of Next and digital.

Moving to Slide 22. Here's too something we take very seriously in Bradesco, placing new -- as a priority, and this has positively reflected in our performance in the current ESG Indexes, as you may see. Bradesco performed above average in the main national international ESG indexes and ratings. We have the best performance among Brazilian banks and the future tax position of more than 250 banks worldwide, with Dow Jones Sustainability Index. We have also made progress at MSCI and CDP being among the leaders in these assessments. We are aligned with important practice and results following International frameworks.

Going on, on Slide 23, you can see that in 2020, we had several important initiatives in the field of ESG. We made the largest issuance on an ESG bonds by Brazilian Bank in 2020, a 100% of our operations are over supplied with renewable energy, making us one of the first major financial institutions in the whole world to complete their energy transition. We are the first major Brazilian bank to announce the neutralization of carbon emissions scopes 1, 2 and 3, which includes indirect emissions. We participate in PCA, a global collaboration program of financial institutions to develop metabonds for measuring and reporting greenhouse emissions in loans and investments. In addition, we participate with other large part of banks in the Amazon Plan, a very important program that we have in plan previously.

Moving now to Slide 24. Final one we are returning with the formal guidance for 2021. Despite the worsening of the pandemic at the moment, an increase of restrictions, our scenario envisage are more and more less impact on the economy, which even so has grown 3.6%, so a few contemplate in providing the guidance. In general, the guidance maintains consistent with the guidelines for 2021 that we presented in the disclosure of the third quarter. We expect the growth of the loan portfolio between 9% and 13%; the client portion shall grow between 2% and 6%; the fee income shall grow between 1% and 5%; our costs shall be between minus 5% and minus 1%; the insurance line which includes the operational and financial income shall have a growth between 2% and 6%. We expect expenses with the expanded ALL to be between BRL14 million and BRL17 billion. That's a compliment we can say that we expect a slightly lower market portion for the NII in 2021 than in 2020. For the income tax rate, we suggest something in the range between, 32% to 34%.

And that's it. Thank you very much for your attention. And we move now to the Q&A session.

Questions and Answers:


We will now initiate the question-and-answer session. [Operator Instructions] Our first question is coming from Mario Pierry of Bank of America. Mario, your line is open. You can proceed.

Mario Pierry -- Bank of America -- Analyst

Okay. Thank you very much. Good afternoon everybody and congratulations on the excellent results. I have two questions. And I wanted to focus, one on your fee income guidance, right 1% to 5%. It just seems too conservative to ask considering that you had easy comps range -- exceeds with down like 3%. You're forecasting strong volume growth of more than 10% on average, you're introducing a bunch of new products, as you highlighted. So I want to get them a little bit more better understanding why is the growth, so I mean if you can break down between the major lines, if you talk about cards, checking accounts, asset management and loans that will be helpful.

And then my second question is related to your branches, right. As you showed on Slide 15, you've reduced almost 1100 branches in the last one year that's 25% of your branch network. So I wanted to understand what happened to your NPS score during this period? What do you think is the right signs of your branch network? So how much more do you think you can reduce? And also related to the branches, right, if we could do a simple math here, one year ago about 50% of your distribution network was through branches, today is above 40%. So, I was trying to understand also, does this have an impact on the revenue generation? Does it impact your especially with your insurance operations? Thank you.

Leandro de Miranda Araujo -- Executive Deputy Officer, and Investor Relations Officer

Hi, Mario. Leandro speaking. Well, basically regarding to the guidance of fees from 1% to 5%, you're are right, it's pretty much conservative but we are living in a world with a second wave of COVID, we do not know how much the economy will suffer from that. We do expect to have a big drop of 3.5% and an increase in competition.

So, we believe that if you take a look at the mid of the guidance 3% shall be something that is very doable. Regarding the branches, at least 300 branches we shall close or transform this year, but we are still in advance of the studies to see how much we can go beyond that. Our clients have been using more and more digital channels and we can see that the transformation at least of branches can be a very good way to reduce costs due to security reasons. We do not need three secured vaults there and we do not needed to transport money from one side to the other. And those branches shall become more and more business relative than anything else.

The digital channel therefore have been a very good replacement of the branches as a way to make business. The NPS continue to be growing and we believe that our new initiatives to have the customer in the center of our attention, shall make this NPS to continue to grow more and more.

Carlos Firetti -- Market Relations Director and Head of IR

Let me just complement some points, you asked about the growth in volumes. This is something that's not necessarily has loan volumes is not necessarily has direct strong correlation with this, I remind you that the fees for credit operations, this is part of the credit operation line that is one of the -- one of our fees, certainly does that represent the bulk of the fees.

With the credit cards, we'll do very well. We should have positive performance in checking accounts, but certainly it's not a very strong growth in this line, mostly driven by the increasing number of accounts, we had over the last few years and probably -- and we will continue to have. In the Asset Management, basically we are doing a very good job in terms of changing the mix. We think it will, this effect we will appear soon, but especially in the first-half of next year, we still have on a comparable basis, the comparison basis the effect on the fixed income funds that actually had a reduction in management fees and resources in the first-half '21.

In terms of branches, basically we can say that most of what is going to happen in 2021 are going to be transformation of branches in business units, we can say some 300 branches in 2021. We don't know the timing for that, but up to a 100 branches could be definitely. Yeah. And 100 branches could be closed.

Mario Pierry -- Bank of America -- Analyst

Okay. Thank you. Just to extend a little bit on the fees, like one a nation, we're talking about loan growth at 10%, it means that you expect activity to go back up in Brazil. When we look at your GDP forecast of about 3.5% and then we're talking about inflation again, another 3.5%, 4% we're talking about nominal growth of our seven markets.

And then when we look at your fees, it's growing half of nominal GDP. So that's why it was a bit surprising to me just since too conservative, I think what you mentioned your credit card should do well checking account, OK, but maybe the pressure is more on the Asset Management line is that right?

Leandro de Miranda Araujo -- Executive Deputy Officer, and Investor Relations Officer

Mario. We hope you are right. We hope you are right and it's too conservative. We never know we shall expect competition and that's the number that if you're comfortable to indicate to the rest of the industry with a lot of responsibility.

Carlos Firetti -- Market Relations Director and Head of IR

And yes, you remind, it's pretty much in line with our speed since the third quarter when we gave that open guidance.

Mario Pierry -- Bank of America -- Analyst

And so, my final follow-up question is on the importance of your branch network for the sale of insurance, is there -- should there be a big correlation between the number of branches and insurance revenues? Thank you.

Leandro de Miranda Araujo -- Executive Deputy Officer, and Investor Relations Officer

Well, as you may be aware, we have been expanding our channels in order to distribute insurance next for instances a very good example, next has no branch and is more and more distributing insurance plans. So as we transform those branches into Rep Offices such as I've mentioned previously, we shall expect the number of insurance policies to grow. So, we are centering our efforts on the clients and we want lower managers regardless of where they are to be focus more and more on client's needs. And we do you believe that insurance is something extremely important to all our clients. There's a whole new shall be back even stronger in 2021. So, we do not see the situation being drop or guided by the closure of branches, but on the other hand, we see it increasing as we transform it into a Rep Offices, we're more focused.

Mario Pierry -- Bank of America -- Analyst

Okay, nice. Thank you very much. Congratulations again.

Carlos Firetti -- Market Relations Director and Head of IR

Thank you, Mario. Take care.


Our next question is coming from Jorge Kuri from Morgan Stanley. Jorge, your line is open, you can proceed.

Jorge Kuri -- Morgan Stanley -- Analyst

Thank you. I hope everyone is doing well and congrats on the numbers. Two questions if I may. First one on your operating expense guidance, minus 5% to minus 1%, evidently of all of these guidance items, that's where you have most control of and the range seems quite high that is the one thing on the slide. What are the assumptions for you on both sides of that guidance. So how did you get to minus 5%, what are the things that you know for sure today that could potentially happen to get to the minus 5% and we are around on the minus 1%. So as the year goes by, we're able to understand whether you're getting closer to one or the other end of the guidance.

The second question is on the loan book. In 2020, you grew 10% and I guess this is similar to the previous question. Loan book, you grew 10% in 2020 and your guidance for this year, it's not that different, 9% to 13% so the midpoint is around that. Considering that the -- I mean hopefully, you'll be in a completely different dynamic this year growing 4%, 5% maybe versus shrinking 4%, 5% last year. What's holding that expansion of credit this year? Why would it be the same as last year? Why would you have this like significantly easier comps to grow the credit book this year more? Thank you.

Leandro de Miranda Araujo -- Executive Deputy Officer, and Investor Relations Officer

Hi, Jorge. Leandro speaking. Well, basically regarding to our expenses as a whole, we continue to reduce them. We are confident that this is not something that you make on a one-shot. It's a process, it's a cultural matter, this is our first priority. So we are going to keep on reducing them as much as we can, as much as technology allow us to do so. The transformation of the habits of our clients into getting more and more digital has helped us to close and as well as transform the physical branches into rep offices or to business units and therefore it allows us to reduce costs.

Well, Octavio was previously mentioning that one-third of our physical branch cost is regarding, is related to security. So by the funding transformed them into units, you do not need these extra cost anymore. And we are going to keep on doing that even further. We are still gaining to more detail on a new plan to transfer more branches. We also shall benefit from the reduction of branches and personnel that we have done last year. So basically, as you have the reasons for that, they shall be reflected on our monthly expenses.

So we believe that we have room to do that. We do not believe that minus 1% to minus 5% or 1% to 5% reduction is challenging, it's according to our pace, when we look at our current figures. And the loan book going from 9% to 13%, that is pretty much 11% and ahead of the guidance, although it is slightly above the extended loan portfolio that we have been following to any -- and although we have an economy that shall grow by 3.5%.

Well, basically, it is still an economy recovery, there is still a second wave there, there is still a lot of stay coming from the portfolio for next year. So we believe it's a decent guidance and again, we hope you're right and the portfolio show growth even more. The point here is that we should be able to grow the portfolio even bigger if we were taking additional risk. But we want to be -- we want to keep the conservativeness that we have so far. So we want to reduce cost, have a very healthy portfolio, so we shall have less cost and less provision. That's our focus by now. So we do not want to accelerate the growth that much and we prefer to have a maximum weeks in terms of NIM.

Jorge Kuri -- Morgan Stanley -- Analyst

All right. Thank you. So just to make sure I understood the question about expenses. So ultimately, it's really about the velocity at which you closed last transformed branches. If we see that in the first half of the year, you have already gone to do those 300 branches, then the likelihood that will get to the minus 5% including, is that right, is that really desirable?

Leandro de Miranda Araujo -- Executive Deputy Officer, and Investor Relations Officer

That's correct. A significant part of this come from the branch transformation, that not only did -- we are always renegotiating the contracts with our suppliers, we are reducing travels, it's a cultural matter. We are reducing rentals, because of the IGPM that came very high last year and still not observing level for our show. We are always reducing this matter and we see that there is strength of -- going to do it. But it takes time. You cannot -- you are not able to renegotiate and to make all the transformations, all the closure that you wish at once. So it takes time.

Carlos Firetti -- Market Relations Director and Head of IR

Only a compliment on the opex question, to remind you something that Leandro said, we reduced 7% of the staff in the fourth quarter. So basically this 7% on something that is roughly half of the costs, we were ready to lead us to a very good reduction in expenses in 2021. We also closed the last transform -- something like 900 branches in the second half of 2020, with some concentration in the fourth quarter. This also adds 2 percentage points in this reduction in expenses. As we mentioned, we expect to transform 300 branches, we have a benefit of roughly one-third of the cost of our regional brands and we downsized it to a point of service or our business units.

We should probably close 100. So this is something that will happen. The transformation, probably in the first half, the closures more throughout the year. The -- on the negative side, there is the salary adjustments for this half that would happen only September, where inflation probably will be a little bit -- will be higher than the one we had last year, maybe around 3.5 or so. I think that -- these are the drivers. I think that's how we get this minus 1% to minus 5% and we think the middle of this range, that is our budget is pretty much achievable.

Jorge Kuri -- Morgan Stanley -- Analyst

Great. Thanks, Leandro. Thanks, Carlos. Be well. Thank you.

Carlos Firetti -- Market Relations Director and Head of IR

Thank you, Jorge.


Our next question is coming from Geoffrey Elliott, Autonomous. Geoffrey, your line is open, you may proceed.

Geoffrey Elliott -- Autonomous Research -- Analyst

Carlos, thank you for taking the questions. There has been a lot of capital coming into the digital banks over the last few months, new bank obviously completed the Series G pretty recently, but also into ASC 6 and a number of others all raising equity. What do you think that does for the competitive environment, how is the behavior at digital bank shifting and how are you going to respond to that?

Leandro de Miranda Araujo -- Executive Deputy Officer, and Investor Relations Officer

Well, basically -- well, first of all, thank you very much for your question, Geoffrey, Leandro speaking. I mean we have been transforming ourselves deeply into a digital bank. We have three pillars to transform the e-commerce bank to have to explore more and more on our native digital bank and the open bank and itself. So we do not see FinTech's as major competitors, we see them as someone that is accelerating the environment in which we are, it's just accelerating a trend of investment in digitalization and we see them as very often as partners. We have seen that we have been able to grow our base of clients in next, especially in Bradesco and we do not expect to see new bank as you have pointed out, as someone that is going to be just driving out of here.

You have to consider that most of those clients, they have accounts in multiple banks and what is important to us is to be their principal -- their main bank, so principality is something extremely important in this business and being a full bank with all of the services, knowing our clients very well, using AI, using all the information we have to provide them with the best products that they have especially -- in their financing needs is unique competitive advantage that we have and that has been reflected in our financial status in our results. We have been there for a couple of years and therefore, we have been able to try to alter this process.

Geoffrey Elliott -- Autonomous Research -- Analyst

Great. Thank you very much.

Leandro de Miranda Araujo -- Executive Deputy Officer, and Investor Relations Officer

Thank you. Have a nice day.

Geoffrey Elliott -- Autonomous Research -- Analyst

You too.

Carlos Firetti -- Market Relations Director and Head of IR

Well, gentlemen. I would like to thank you all for your time and wish you a healthy and great week. Take care.


[Operator Closing Remarks]

Duration: 50 minutes

Call participants:

Carlos Firetti -- Market Relations Director and Head of IR

Leandro de Miranda Araujo -- Executive Deputy Officer, and Investor Relations Officer

Mario Pierry -- Bank of America -- Analyst

Jorge Kuri -- Morgan Stanley -- Analyst

Geoffrey Elliott -- Autonomous Research -- Analyst

More BBD analysis

All earnings call transcripts

AlphaStreet Logo