Bank Bradesco SA (BBD) Q1 2021 Earnings Call Transcript

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Bank Bradesco SA (BBD)
Q1 2021 Earnings Call
May 5, 2021, 12:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen and thank you for waiting. We would like to welcome everyone to Bradesco's First Quarter 2021 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. We affirm that all participants will be able to listen to the conference call during the Company's presentation. After the presentation, there will be question-and-answer session where further instructions will be given [Operator Instructions].

Before proceeding, let me mention that forward-looking statements are based on the beliefs and assumptions of Banco Bradesco'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, Business Controller and Market Relations, Director. Mr. Carlos, you may proceed.

Carlos Firetti -- Business Controller and Market Relations, Director

Hello everybody, welcome to our conference call for the discussion of the first Q 2021 results. We have today with us our Chief Executive Officer, Octavio de Lazari; our Executive Vice President, Andre Rodrigues Cano; our Executive Director and Investor Relations Officer, Leandro Miranda; Oswaldo Tadeo Fernandez, our Executive Director and CFO and Bradesco Seguros, Chief Executive Officer, Ivan Gontijo.

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

Leandro Miranda -- Executive Director of Investor Relations

Thank you very much. Good morning, everyone and welcome to our first Q 2021 earnings conference call. As we all know, the first quarter was marked by the worsening of the COVID-19 pandemic situation, with the second wave unfortunately leading to a new peak in case and victims, much as what we have witnessed in 2020. We believe that restricted measures adopted in March in both states, somewhat controlled the spread of the virus and thereby reduce it case and hospitalizations. Despite levels remaining high, we believe that we will see an improvement in this statistic over the course of May. The worst-case scenario we believe is going to be June, and even greater reduction in restrictions, especially as vaccination progress. We sympathize with all those impacted by the disease and take our employees for the full efforts during this difficult time. The impact on the economy in 2021 appears to be lower than it was in 2020, probably due to the fact that people in business are better prepared to conduct business in the midst of the restrictions. Our performance was solid in the first quarter. And the second wave of the pandemic had no significant vary on business dynamics with the exception of a natural deceleration in the origination of some credit lines. We now see signs that appear to indicate an improvement in the scenario of the pandemic. We believe that this improvement should continue throughout May, as some of the restrictions are already being relaxed in a number of states.

With vaccination efforts continuing, we expect that risk groups will be vaccinated at the end of the first half of the year, which will allow the economy to see a more pronounced recovery starting mid-May or June. We now move on to slide three. We have revamped our corporate strategy to further reflect our ambition, viewing our clients as our inspiration. A practical example of this is the 100% client program, which establishes to apply the best market practice available to transform our business model and make sure that our clients are always at the center of our patient. Another pillar of our strategy is digital transformation, improving the way we do things with an active connected and innovative mindset. We have a solid foundation in the people pillar, our team. They are for performing professionals who are totally committed to ethics, transparency and respect. They are really awesome. And of course, we can't leave out sustainability. After all, we are a company built select and to provide value to all stakeholders. Our purpose is at the center, it's all drivers. It's the impact we strive to create and change. We want to bring about people, companies and society as a whole. Turning now to slide four. We have our financial highlights for the first Q. We posted a very strong result in the first Q with a profit of BRL6.5 billion, an increase of more than 70% compared to a year ago, and a quarterly ROE of 18.7%. Our operating income was BRL9.7 billion rising both in a yearly and quarterly comparison, which is the highest in our historical series.

The loan portfolio grew 2.6% in the quarter, and 7.6% when compared to first Q 2020. Our Basel Tier I ratio remains at a fairly comfortable level of 13.6%, a substantial recovery of 220 bps compared to a year ago. Operating expenses dipped 4.7% in an annual comparison, and 2.4% compared to the previous quarter. An extraordinary performance resulting from the optimization we promoted in our structures in 2020. The 12-month efficiency ratio reached 45.3%, down by 3.8 percentage points in the annual comparison. Let's now move to slide five, in which we can present our P&L. As we mentioned before, we posted good results in the quarter. Net interest income rose 7.4% annually, with growth in the client portion and are still strong performance in the market portion as well. Our expanded ALL expenses dropped once again this quarter. Insurance operations reported a healthy recovery with emphasis on premiums, as well as in its financial income. In costs, as I mentioned before, we maintained an excellent performance. The next slide will show details on all of our lines. Turning now to slide six. We can see that funding shows a positive evolution in the annual comparison, deposits from clients net of compulsory deposits grew 18.2% and the total fund 12.8% in the annual comparison. Our loan funding ratio in the quarter at 87.5%, which shows our high degree of liquidity in relation to loan operations. Turning now to slide seven. As mentioned before, the total portfolio grew by 7.6% in 12 months. The growth for individuals was 13% with an emphasis on real estate financing, which grew 38.1%, and payroll deducted loans, which grew 11.5%. We have a strong focus on real estate, with a very competitive origination process and channels. Our real estate financing is offered digitally. And even the contract is now signed through digital methods with some markers.

Growth in SMEs was 18.6%, mainly due to the lines of the emergency programs and the consolidation of bulk. Just to let you know nine represents 5% out of the 18.6%. For large companies, the annual comparison was somewhat hampered by the solid growth of working capital lines at the start of the pandemic and greater access to capital markets. Loan origination remains at a pace that we consider to be very good. And we believe it will intensify as the economy begins to reopen. Turning now to slide eight. Our expanded ALL expenses fell to the BRL3.9 billion in the quarter, consistent with our expectations for the year. We carried out a BRL1 billion supplementary provision over the quarter, reinforcing our stock of provisions given the expectation of worsening ratings and the consequent provisions for those clients who extended their debts, but did not pay the first instrument. However the performance in this quarter is fully in line with the center of the guidance for 2021. The corporate ratio over 90 days and including renegotiation remain at a very comfortable level. We will now take you to -- take a look at slide nine. I would like to point out that we provided a charge with an extended historic information back to December 2008. As we had expected, the delinquency ratio over 90 days rather a slight increase shifting from 2.2% in the previous quarter to 2.5% in this quarter. The rise was seen in individuals and SMEs. This increase is in line with expectations and occurs as a consequence of seasonality in the beginning of the year, as well as a consequence of reduction in the pace of renegotiations and the end of crispers.

We provisioned less the formation as a significant portion of the delinquencies came from renegotiated portfolio. Therefore from operations that already had a high level of provisioning. We believe that delinquencies will continue to rise gradually and reach an even higher level at the end of the year. This level will probably not be much different from pre pandemic levels. We are comfortable with that. We think that the good quality of credit is due to the quality of origination during the period prior to the pandemic and to the solid financial health of clients overall, as households have accumulated savings throughout this period. Slide 10 details the extended portfolio. The balance of extensions continue to shrink. Totaling BRL44.1 billion as amortization continues. As of March 31, this balance was composed of BRL37.4 billion on time meaning that they came out of the grace period of payment or at least one instrument, BRL2.9 billion was still within the grace period at the end of March. And I would like to point out that 55% of this amount has already came out of the grace field in April and are up to date. They are on time. And finally BRL3.9 billion in overdue loans which are operations that came out of the gray spirit and overdue for more than 30 days. This represents only 0.7% of the bank's total loan portfolio. We continue to permit extensions during the first quarter. We believe that we may see a moderate increase in the second quarter, but definitely not the intensity witnessed in 2020. We now proceed to slide 11. Our renegotiated portfolio was stable compared to the previous quarter which halted the growth cycle. This was due to a gradual return to the renegotiation conditions in place before the pandemic. We witnessed an increase in delinquencies within this portfolio which reached 14.4%. However this level is still well below the historical average.

We believe that delinquencies in this portfolio will continue to add slightly higher and we can state that the renegotiated portfolio will be one of the drivers for the rise in our delinquencies over the upcoming quarters, which is totally in line with our expectations. On the other hand we emphasize that this portfolio contains high level of provisions 64%. As a consequence of this the rising delinquencies will lead -- will not lead to significant pressures in terms of new provisions. We are very well covered. Now let's take a look at slide 12. The total financial margin performed well in the year-on-year comparison posting a growth of 7.4%. The client portion remained stable over the quarter and grew 2% annually mainly due to the growth in volume and the mix favored by the solid growth in individuals. These factors more than offset the following spreads in the fewer number of days. We expect a recovery in the client portion throughout 2021 in line with our guidance. The market portion performed well in the quarter despite a decline relative to the fourth quarter when we reposted a rather strong performance. As indicated before, we expect a drop in the market portion for 2021 in relation to 2020 but in levels around 2019. Turning now to slide 13. We had a drop in fee and commission income in both a quarterly and annual comparison. In annual terms due mainly to the baseline comparison effect. The first quarter of 2020 it still did not fully reflect the impact of the pandemic. Despite the drop in the annual comparison, the fee income result was in line with our budgets, which forecasts a better performance in the second half, allowing the guidance to be fully achieved. This is due to the base of comparison and the reopening of the economy in the second half.

Important lines have been pressured by specific factors. The card line suffers the most in co-branded and private label as many retailers had restriction operation due to the lockdowns. The fund management line has had a strong migration on resources to fixed income and reduce IT management fees in the first half of 2020. And last but not least, checking account line due to the lower volume of transactions in the network of bank respondents due to the restrictions of the operation of commerce as I have said before could be locked down. We now turn to slide 14 where we have the operating expenses. Our performance in cost remains a strong point. The following expenses reflects our strict discipline in costs, managing the adjustments we made last year when we revised our cost of survey, including the closing of branches and converting branches into sourcing points, taking advantage of the opportunities created by the change in our client's behavior. We continue our cost reduction efforts in 2021 and over the next years. Turning now to slide 15. Our insurance operations posted a solid recovery net income, which grew 40.6% as well as the operating income, which grew 7% both in the annual comparison. The performance is above guidance and should convert on guidance throughout the year. The highlight of the quarter was a 3% growth in premiums, compared to the pre-pandemic first quarter 2020 driven by auto and insurance, which grew 7.3% and 6.5%, respectively.

The financial income also record a positive performance, primarily due to the income of positions in equities, multi-market funds and IPCA indexed securities. Insurance claims were impacted by the health and life segments, which were affected by higher frequency related to the pandemic. We now move on to slide 16. Our Tier I capital ended the quarter at 13.6%, an increase of 2.2 percentage points compared to the start of the pandemic in March of last year. The fall of 20 basis points over the previous quarter was due to mainly market, market of securities available for sale and the growth in loan operations. Our capital position has settled to rather comfortable levels with a common equity at 12.6%. We recently announced a share buyback program that complements our practice of distributing capital through dividends and interest on shareholders' equity. Turning now to slide 17, where we can see that we continue to make advances in digital with an ongoing focus on client's needs. In this quarter, we had 130 million client interactions almost five times more than first quarter 2019. In the month of March alone, there were 5.16 million client interactions and it was not just data, since these are transaction. As we have already mentioned, in the earnings reports, for example, we delivered 2.5 million reports to clients in March. The CRM 2.0 that we provided you in 2019 already results in five times more active contacts with clients and with a high degree of personalization.

Now we turn to slide 18. Digital continues to widen its share of total transaction, as traditional and hybrid clients are increasingly adapting online methods to conduct transactions and business. Around 98% of our total transactions are now done digitally. Annually, we saw a 21% growth in our mobile clients and 16% in digital clients, which also accounts for internet banking. The volume of cash transactions is 83% lower than it was in the first quarter of 2020 and the volume in mobile financial transactions increased by 75% over this period. We now go to slide 19, to discuss our three digital business. Agora reached 632,000 clients, a growth of 52% in year one -- in one year, while AUC grew 55%. Agora has one of the most comprehensive offers on the market and will continue to grow. Next has further accelerated its growth curve and is now at 4.4 million clients, almost double its base a year ago. The goal for this year is to reach 7 million clients. Bitz, our digital wallet was introduced in September 2020 and has already exceeded 0.5 million accounts. It's expected to grow significantly throughout the year. And we would like to remind you that Bitz offers clients a complementary product to Next and Bradesco. The marketplace and cash-back features offered at Next are now becoming available to Bradesco's clients. We introduced a pilot for prime segment this quarter, with a marketplace that includes seven partners. We will soon expand this pilot with more partners and we are working on combining the vision of Viva Prime, cash back and Livelo points into one place within the prime app. Ultimately, we want to offer clients a clear overview of the benefit they can take advantage of. We plan to expand these clients in other segments in the near future.

Turning now to slide 20, regarding to our ESG agenda. We are very, very proud to announce that for the third consecutive year, we have won the silver category in the S&P Global Sustainability. We are among the top five banks in the whole world and the only Brazilian bank there. These are a result of our commitment and continued progress in implementing the best CSG practice at Bradesco. Speaking of commitment, we are taking a new step today in Bradesco's mission, to promote social economic development and encourage the initiatives needed to transition to an increasingly sustainable economy. We would like to announce our goal of allocating BRL250 billion in corporate credit lines, providing advice on capital market operations and financial solutions, with a focus on promoting a positive social environment impact by 2025. By doing this, we expand our business scope to support the targeted sectors, while helping clients transition to best practice from any sector. We now move on to slide 21, our last slide today. Despite the intensification of the pandemic in Brazil during the first quarter, we were able to post a solid performance in line with, in some case above, our budget for the quarter. We are performing at the top or even better than the guidance when it comes to expenses and insurance. In annualized terms, we have performed at the center of our guidance for ALL at the bottom of our clients for NII and below of our guidance in the loan portfolio and fee and commission income. In terms of these two weaker performing lines, we can see an accelerated growth in client NII, primarily in the second half, due to the reopening of the company, the economy, and a growth in line with higher spreads. The annual growth in the loan portfolio has been hindered momentarily by a baseline comparison effect in large companies which will lead to a natural acceleration of the second half of the year with a more beneficial base and a pickup in business gradually increasing toward the center of the guidance. We also see a potential acceleration in growth in individuals and medium sized enterprise.

Finally, we believe that there will be a natural increase in fee and commission income as the economy begins to reopen with an impact on cards income, collections and payments with increased volumes, investment funds, through a shift in the mix and potential growth end, DI funds with an increase in the sale rates as well as a more favorable baseline comparison. As we previously mentioned, this line went through some adjustments in the first half of 2020. In summary, we expect our performance to improve over the upcoming quarters. As such, we believe that our guidance remains consistent and there is no reason for any changes at all.

I would like to thank everyone for your time and attention so far. We will now move on to the question session.

Questions and Answers:

Operator

We will now initiate the question-and-answer session. [Operator Instructions] Our first question comes from Jorge Kuri of Morgan Stanley. Jorge, your line is open, you may proceed.

Jorge Kuri -- Morgan Stanley -- Analyst

Hi, good afternoon everyone and congrats on the numbers. Sorry, I'm not sure you mentioned this at the -- talking about the guidance on that last slide maybe you did it, but it was a bit difficult to hear, but I wanted to ask you about the guidance range for expenses you're evidently in the area, of course, but you're at minus 5% minus 4.7% for the first quarter. If I look at your last 12 months performance, you're minus 6%.

Do you think it's possible that you'll end up at the better part of your guidance for expenses which is minus 5%? And same question for provisions. You did BRL4 billion -- BRL3.9 billion, but I'm assuming that includes the BRL1 billion in original provision. So, is it possible that you end up excluding that BRL1 billion in provisions at the low end of the guidance of BRL14 billion? Thank you.

Leandro Miranda -- Executive Director of Investor Relations

Hi Jorge. Thank you very much for your questions. I'm going to go straightforward here to the points. Operating expenses we expect them to go in the worst-case scenario in the mid of the guidance. So, we shall continue to perform very, very well in operating expenses. Of course we shall see some adjustments regarding to the compensation of the employees. But we shall never exceed the center of the guidance there.

Regarding to expanded ALL, we shall see the provisions going to the mid of the guidance. It shall be in a range I would say between BRL15 billion or BRL16 billion. This is our base case. But if the economy really recovers as we believe, we shall even be lower than that.

Jorge Kuri -- Morgan Stanley -- Analyst

All right. Thanks. All clear. Thank you very much.

Leandro Miranda -- Executive Director of Investor Relations

Thank you.

Operator

Our next question is coming from Mario Pierry of Bank of America. Mario, your line is open, you may proceed.

Mario Pierry -- Bank of America -- Analyst

Hi everybody, congratulations on your results. Let me ask you two questions. And also related to your guidance. When we talked about the outlook for NII client and how should the growth rate should accelerate second half of the year you've talked about better mix, economy is reopening. But can we talk about the impact of a higher rate environment in Brazil and how that could have a negative impact on your funding costs in the short-term? So, if you could give us a little bit more detail your expectations of rates and the impact that it could have on NII growth this year?

And second question also related to fees, as you mentioned, why you're expecting that our volume is in expecting a better mix in the asset management to support your fee. So what concerns you on your fees is that when we look at your checking accounts either down 2% year-on-year, while your client base grew to 8%. So what significant pressure on current accounts, can you be a little bit more specific about your views on the outlook for current account fees?

Leandro Miranda -- Executive Director of Investor Relations

Thank you, Mario. Basically in the very beginning of the year, when we released this guidance, we were very conservative and we are keeping in this sense. The client portion shall go to the center of the guidance naturally, pretty much because as we are reopening the economy, you shall have more transactions, and you shall be able to change the mix of products, as well as the mix of clients into a more -- into a riskier standards. Just to give you a flavor, when you have the retail closed, you are not able to work so much in SMEs. And the individuals portion as we were conservative, we decreased the amount of credit cards, personal loans, and we increased the focus on mortgage financing and compulsory loans, which are less risky lines of products.

Besides that, it's important to mention that, when you compare to the first quarter of 2020 during two months pretty much, you have the large companies raising a lot of liquidity here, and they have lower margins than SMEs and individuals. Therefore, from now on, we do not expect to have such a base of comparison. There is a, there are two one and so we shall see an increase in this client portion. So better mix, and better of products clients shall be the answer together with the reopening of the economy. And of course, as Octavio has pointed out earlier, it pretty much depends on the vaccination process. So we are confident that by May or June, we shall see this improvement in the economy.

Regarding to fees and commission into searches, well, we have here again a very conservative guidance from 1% to 5%. We believe that, we shall go to the lower portion of the guidance to the center. So we shall be in the first half here of our guidance. And we can give some overviews regarding to our lines. And of course, my colleagues here will be more than happy to help me out to complement anything. First of all, credit cards, with the reopening of the economy suspension of the restrictions, due to the lockdown, you shall see the retail. And of course, our base of private labels and light branded credit cards shall have a much better performance than the previous year. Retail through Bradesco Expresso also is important for our tariffs.

Regarding to asset management, we made significant adjustments in management fees. And now, we see a growth of migration to better paid management fees and performance fees into our funds. Besides of that, there was a lot of withdraw from fixed income funds buy CDs from the banks, and we benefit from that in our liquidity. Capital markets investable banking has performed extremely well. We are positive for the year. But it pretty much depends on the opportunities, the windows that we see and the macro has a significant impact on that. And on insurance, we -- the premiums were very good and we intend to keep on doing that. If my colleagues, want to complement anything more than happy to.

Octavio de Lazari -- Chief Executive Officer

Yeah. Just one point on the funding side US, the higher rates actually have a positive impact in the funding results that go in the client market. So, this should be positive. When you look to the client NII, we have there apart from these funding results mostly spreads. So basically the increase in rates don't impact that, any rate variation actually is managed by our treasury and this is in the market NII.

Mario Pierry -- Bank of America -- Analyst

Thank you.

Octavio de Lazari -- Chief Executive Officer

Thank you Mario.

Operator

Our next question is coming from Jason Mollin from Scotia Bank. Jason your line is open, you may proceed.

Jason Mollin -- Scotia Bank -- Analyst

Thank you very much. My first question is a follow-up on the sensitivity of the client portion and the treasury portion to rates. Maybe if you could just give us an idea all else equal, and obviously, that's not the way you manage the balance sheet. But if all else equal at the end of the first quarter let's say 100 basis point increase in the SELIC, what does that do for your client portion and your treasury portion? I just want to try and clarify that.

And then secondly, on the fees line, it sounds like apart from what you said about adjusting management fees and asset management that it was the reduction in the fees from cards and current accounts was related to activity. But can you give us some sense of what's going on, on the pricing there? Competition? You've seen a free checking account? You got -- everyone has their version of a free checking and other fees. What's going on with the pricing side not just the activity? Thanks.

Leandro Miranda -- Executive Director of Investor Relations

Okay Jason. Let's start from the beginning here. You're pretty much asking for sensitivity in 1% SELIC rate, right? We believe that there is no negative impact on the client's portion. It's pretty much dependable on economic conditions and competition. So we do not believe it shall create us any problem. We have a benefit in our deposits, since because of the floating we can invest more. So it's 1% of our deposits. And besides that assuming that we wouldn't hedge -- we wouldn't come along with any market strategy. What is totally unusual with the bank, if we are just stopping and we fire everyone there in the treasury department for a 1% SELIC change, we shall have a BRL900 million impact.

Octavio de Lazari -- Chief Executive Officer

Yeah. Just complementing that this exercise is based on 2020 figures and also things keep changing as Len said.

Leandro Miranda -- Executive Director of Investor Relations

Yeah. But we are active. We are dynamic and so it should never happen. It's just a theoretical to stress your model.

Octavio de Lazari -- Chief Executive Officer

On fees?

Leandro Miranda -- Executive Director of Investor Relations

Yeah. On fees, basically, as I have just answered Mario, it pretty much depends on scale and the recovery of the economy, because basically we see competition there. But credit cards you have seasonality in the first quarter and you have the retail pretty much shutdown. So as the economy reopens, the barriers and for lockdowns we shall see it coming strong especially because we have a significant part in white label and private label launch.

Octavio de Lazari -- Chief Executive Officer

Yeah. I think it's important to emphasize the base of comparison effect. We are comparing a very almost normal quarter last year with a quarter that actually is impacted by the pandemic, its impact in the credit cards. There was also in the beginning of last year a very important change in terms of volumes of fixed income mutual funds that went to deposits also a revision of management fees in asset management. And we believe as we go through the year as Leandro said, we go to a different base of comparisons and our performance and fees will naturally improve.

Leandro Miranda -- Executive Director of Investor Relations

But we are confident that we shall reach the center of the guidance. We shall have two years...

Jason Mollin -- Scotia Bank -- Analyst

Great. Thank you very much.

Leandro Miranda -- Executive Director of Investor Relations

...the first half and the second half. Two different years.

Jason Mollin -- Scotia Bank -- Analyst

Thank you, and congrats on the strong first quarter.

Leandro Miranda -- Executive Director of Investor Relations

Yes.

Operator

Our next question is coming from Tito Labarta of Goldman Sachs. Your line is open. You may proceed.

Tito Labarta -- Goldman Sachs -- Analyst

Hi good afternoon. And thanks for the call and taking the question also. My question is looking at the [Technical Issues]

Octavio de Lazari -- Chief Executive Officer

Sorry we can't hear you. I can't hear you. It's -- we can. Can you maybe pick up the phone or talk slower?

Tito Labarta -- Goldman Sachs -- Analyst

Yes. I'm taking on the phone. I'll try to speak louder. I don't know if that help, can you hear there? Hello.

Octavio de Lazari -- Chief Executive Officer

Not really. Try to speak slowly.

Tito Labarta -- Goldman Sachs -- Analyst

I try to speak little louder. Is that better?

Octavio de Lazari -- Chief Executive Officer

Yes. No it's better. Okay.

Tito Labarta -- Goldman Sachs -- Analyst

Did you hear me there?

Octavio de Lazari -- Chief Executive Officer

Yes.

Tito Labarta -- Goldman Sachs -- Analyst

Okay. My question is just on the digital initiatives. You did some good data there. How do we think about the impact on this? I mean if you look at some of the impact the gaming clients that don't necessarily have revenues at your level. And given some of the revenue pressures that we're seeing, I understand that should improve as the economy recovers.

But as it become more and more digital, do you think that should not necessarily boost your revenues and you continue to see pressure there, the game client conversely perhaps offset by continued cost control. Just to kind of think about how that competitive environment and digital initiatives should impact the revenue growth and expense growth and where you see the benefit from that? Thank you.

Leandro Miranda -- Executive Director of Investor Relations

No, I got it to. Tito, thanks. Let me start from the end this time, regarding to costs. You are totally right. As the clients get into more and more in digital channels, we are able as Otavio has emphasized earlier, we are able to either close or transform our branches into point of services increasing the level of business. We can also reduce the space in the branch and give it back to the lessors. So therefore there is a significant reduction in costs for us as the clients got more digital as we have seen in 2020. So it's pretty much -- shall see the continuation of this trend.

Regarding to pressures on fees, we have to take a look into scale and we have to consider the costs associated with that. But as the economy grows, you have all kind of clients. And they also need important products such as credit and they also need to have the whole combo of banking services and products. Therefore we believe we have an agenda there and we have a very strength that shall be seized.

Of course the open banking, it reduce our market share initially. If you just consider that we are stopped, but we are not. We are active. We are being proactively discussing and analyzing a lot of opportunities of growth with this enhanced competition as you can get market share from the other banks. So if the newcomers shall get market share from incumbents, we are in a position, as we are the most advanced digital bank in Brazil to get market share from the other competitors as well.

Octavio de Lazari -- Chief Executive Officer

If I can add, this is Renato Ejnisman [Phonetic] from Next. On the big data and analytics front. I mean I can tell you a little bit about our experience in Next and the same I know is happening at other areas including Bradesco itself, but the use of big data I mean it helps on the two fronts that you mentioned. On the expense front, we have models to calculate and try to quantify the propensity to churn. We also have malls to calculate the propensity to default.

Obviously, these are algorithms that we are developing and hopefully soon introducing machine learning aspect so that it improves over time by itself without further manual or further human input. So that something that significantly reduces expenses. And on the revenue side, we also have models to see what is the propensity to consume some products and the same rate that I mentioned. I mean the next step will be to introduce machine learning aspect so that over time you don't have to have any human input and they just get more and more efficient over time.

Tito Labarta -- Goldman Sachs -- Analyst

Okay. Thank you.

Operator

Our next question is coming from Thiago Batista of UBS. Thiago, your line is open. You may proceed.

Thiago Batista -- UBS -- Analyst

Hi, guys. Thanks for the call. I have one question about the insurance business. We saw this quarter a good improvement in the profitability of the insurance business. It achieved about 20% this year versus mid-teens in the previous quarters. This level of profitability or results of insurance business, I mean that this is recurring, we can see derive or even some additional improvement going forward. So how do you guys are seeing the result of insurance business?

Octavio de Lazari -- Chief Executive Officer

Thiago. Basically we performed this quarter a little bit above our guidance. Our guidance has a growth, considers a growth of 4% for the insurance line. I think the -- there was some good news this quarter related to premiums. I think we perform better. I think it's a good sign and it's the base for actually keeping constant and the evolution of these results.

We should see going forward a continued pressure in some claims due to COVID on life insurance, health insurance. But as you guys know, we have constituted provisions. I think we are well prepared to face this environmental higher -- higher claims. On the financial results an environment of higher interest rates, actually somehow helped. So I would say, I think we are very comfortable with our guidance of 4% growth for the line maybe we could do better. That, I think, at this point, is the best I can tell.

Thiago Batista -- UBS -- Analyst

Thanks, Octavio. Just to confirm one point. There is no reversion of the provision that the banks have insurance booked in the previous quarter. So there is no reversion, correct?

Octavio de Lazari -- Chief Executive Officer

No, we didn't revert anything this quarter.

Thiago Batista -- UBS -- Analyst

Appreciate it. Thanks so much.

Operator

Our next question is coming from Carlos Gomez of HSBC. Carlos, your line is open. You may proceed.

Carlos Gomez -- HSBC -- Analyst

Hello. Good morning. Congratulations on the results. Given that there -- first, could you comment on BAC, the bank in Florida in 2017 you acquired. What are your plans there? Is this the first step? Do you want to go to join Florida in the expansion offer? Second, the Central Bank has just currently published report regarding the increments of the positive credit go and explaining how it reduces the cost of credit for a lot of times. So is this starting to make a dent on the margins of the products that you offer? And how do you expect to counter margin [Phonetic] issues? Thank you.

Leandro Miranda -- Executive Director of Investor Relations

Carlos, we had some difficulties to understand you, especially on the second question. We understood that the first one is about BAC Florida, but if you could repeat maybe the second question at least.

Carlos Gomez -- HSBC -- Analyst

Yes. My apologies. The second question is about the influence of the positive credit growth in Brazil, in terms of pricing the products. Is that making the market more competitive for you, it means that reducing the margin that you can charge on consumer credit. Thank you.

Leandro Miranda -- Executive Director of Investor Relations

Carlos, Leandro speaking. I'm going to address BAC and then your -- Octavio, actually will address the second one regarding the Credit Bureau, OK? Pretty much at BAC we have a wealth management strategy. It's key for our clients to have the ability to have a checking account, credit cards, mortgage financing at a bank, US. It has been a long-term demand from them. And the appetite and the wellness of clients to participate has been outstanding.

Besides of that, BAC also have a brokerage house in which we can help clients to invest their money throughout investment funds and secure share in debt our equity there. So the point is, we shall be able from now on to provide a full array of alternatives regarding to banking and investment products there in Florida. Regarding to expansion, we want to feel the American market. We want to feel how clients feel this experience. But initially, our focus is to stay in Florida. We do not want to expand throughout other states.

It's important to mention that BAC has e-bank. There is an app in which BAC is pretty much able to raise funding in almost all over U.S. states. They have local licenses in almost of all US states. And therefore, BACs ability to raise funding on a very cost-effective way is outstanding. In BAC, of course, we will keep on its regional strategy of financing banks throughout Latin America and Brazil and support any Brazilian company that is a multinational. And it serves there.

Octavio de Lazari -- Chief Executive Officer

Carlos, regarding the Credit Bureau, I think this is a very important development for Brazil or the Brazilian market as a whole. In our case, as you know we have a lot of information and we have experience. We have been investing a lot and especially over the last few years in credit models in data. So we believe, our models and the information we have, it has allowed us to originate more-and-more loans and very good credit quality.

The Credit Bureau in our case, allow us to bring new information that potentially complement the data we have. And allow us to actually, eventually approve loans for clients that we now with our own models eventually, we wouldn't concentrate it given this complement of information. As you know, we are shareholders of Credit Bureau on which, we have as partners the other bank. It's another Credit Bureau that provides also the information and for which we consume data.

I think for the market as a whole, it really helps other players that don't have as much information as us to have access to client information. But we believe that, considering our experience, our models and all everything we have invested in these models, we continue with an advantage. And we also have a very good access for originating loans. That also is something very important in this process.

Carlos Gomez -- HSBC -- Analyst

Thank you very much, for your answer.

Operator

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

Leandro Miranda -- Executive Director of Investor Relations

Well, first of all, once more thank you very much for making the time to be with us. We are very proud of the results we are presenting. And we are even more confident in our performance from now on, as we see advancements in logistics of the health situation. And we are confident on the recovery of the economy. Thank you once more. Have a great day.

Operator

[Operator Closing Remarks]

Duration: 54 minutes

Call participants:

Carlos Firetti -- Business Controller and Market Relations, Director

Leandro Miranda -- Executive Director of Investor Relations

Octavio de Lazari -- Chief Executive Officer

Jorge Kuri -- Morgan Stanley -- Analyst

Mario Pierry -- Bank of America -- Analyst

Jason Mollin -- Scotia Bank -- Analyst

Tito Labarta -- Goldman Sachs -- Analyst

Thiago Batista -- UBS -- Analyst

Carlos Gomez -- HSBC -- Analyst

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