Good morning, ladies and gentlemen, and thank you for waiting. Welcome to Banco do Brasil Second Quarter 2021 Earnings Conference Call. This conference call is being broadcast live via webcast through Banco do Brasil website at www.bb.com.br/ir. The replay of the conference call will be available through the phone number +55-11-2188-0400 until August 2021 in English and Portuguese. To access the replay, please ask the operator to listen to BB’s conference call. Identification will be required. Before presentation without you detailing the main aspects of the second quarter 2021 results was made available yesterday and can be accessed at Banco do Brasil’s Investor Relations website. [Operator Instructions] With us today, we have Fausto De Ribeiro, CEO; Ricardo Forni, CFO; and Daniel Maria, Head of Investor Relations. First, Mr. Fausto De Ribeiro will make the opening remarks followed by Mr. Ricardo Forni for any considerations. After that, we will open the Q&A session. Mr. Fausto De Ribeiro, you may now begin.

Good morning, everyone. It’s a pleasure to be with you today to talk about the results of the second quarter and the first half of 2021. Ladies and gentlemen, I would like to speak slowly in order to guarantee that everybody is going to understand. Please let me know if you have any difficulty to understand the accent. And feel free to interrupt me at any time. Okay. For the second consecutive quarter, Banco do posts record results. In the first half of 2021, our adjusted net income reached BRL10 billion, a growth of 40%, 80% in one year. In the quarter, the adjusted net income was BRL5 billion, up 52.2% from the second quarter 2020, a higher level of profitability that we had before the pandemic. This result was supported by a robust credit growth with portfolio exceeding BRL766 billion, a growth of 6.1% in 12 months. Also, NPLs were totally under control, reducing in all portfolios. Credit expenses reduces 52% in the semester due to the anticipation of preemptive provisions made last year. With better customer steps and diversification of business, we increased the fee income. At the same time, the expenses were under control with a reduction of 7.2% compared to the first half 2020 as a result of the e-force in expenses management. The commitment to profitability and the construction of increasingly sustainable results, is one of the guidelines of my term as I head our admission when I was here with you last quarter. To conclude the triple of our strategic agenda in addition to focus on profitability, we have been investing in proximity in digital in practice. This proximity can be translated into knowledge of the customer, their profile and their needs. As a result, we have specialized our services models and in this sense, a relevant delivery this quarter was the conclusion of the cycle service specialization with over 1.5 million clients started to be served by a manager. In three months, we saw an 18% increase in the profitability of these clients. Another reflection of the success of customer proximity was 10-point increase in our NPS in one year. To consolidate the best service and efficiency, we are seeing a characteristic of our service network, migrating to the lighter structures. With the increase in customer preference for digital, it’s natural that our services network reflects this behavior. Another important shift is that we almost doubled our partnership with banking correspondents in one year. This model of service is another way to efficiently expand our capillarity. The live setup office bring a new model of service for heavy users. Within this model, we have a lower cost with specialized service in a greater quantity of customer served. We will offer human managers service with the use of digital solutions and with that, we improved scale and profitability. We have a setup – we have a set of ongoing initiatives in digital optimization to improve our business model, and in digital transformation which involves seeking new sorts of results, of being enabled by a deep cultural transformation through the intensification of the use of analytics, intelligence, new ways of patents and new technologies. We are optimizing our business models with the use of technology. In June, we reached 21.6 million digital customers. Of this 6.5 million were cited by our virtual systems towards artificial intelligence, both on Telecom, with the BB app as well on social media, expanding our digital capillarity and facilitating customers’ access in addition to our own channels. This quarter, we raised more than BRL21 billion completely digital through solutions that use analytics and data to recommend the best investment options based on the clients’ profiles and objectives. When we bring the business digital, we gained efficiency on the transaction. We worked with lower operational costs, we had a very positive experience. And at the same time, our sales force can be driven through relationship and advisory. When we talked about the transformation, we look especially at new service of results accelerated by open innovation and digital technologies. In the sense, we are expanding our operations as a platform within banking and non-banking products and service, brought to our agro-digital platform, we had achieved more than BRL756 million in business and is our innovation hub in this segment. We also expanded the availability of gift cards in our apps with sales of 420,000 new units in the last quarter. We have important competitive advantage in the open bank scenarios. Banco Do Brasil was the first bank to develop APIs credit solutions back in to 2017. And today is the financial institution the greatest number of available interface. For us, it’s very important to be ahead of the relevant segments that generate value, reinforce our leading growth and here I’d like to specially highlight our support to agribusiness. Our credit portfolio for the sector exceeded BRL205 billion, and we announced the biggest harvest plan in history with availability of BRL135 billion in resources. It means 18% higher than the previous progress. Another important milestone was the achievement of BRL100 billion in payroll loans, one of the most competitive markets in the financial industry. We also enforced our support for micro and small companies, disbursing BRL6.5 billion in the new phase of Pronampe, now in July. To conclude my initial remarks, I’d like to talk about sustainability. Obtained at as through of our activities. In the second quarter, we’re expanding the offer of ESG products with the launch of BB Carteira Inovagro line in which we disbursed BRL50 million in loans to individuals from May to July of this year, and the Green Group credits, which achieved more than BRL700 million in sales in just one month. These initiatives help our customers transition to a more sustainable economy. Also confirming our commitment to transparency, BB adherent to the recommendations of the task force related financial disclosures. TCFD had initiative that aims to develop a consistent format of disclosure of financial risks related to climate change. Well, with all that said. I will give it to the floor to our CFO, Ricardo Forni, who will talk more details about our numbers, and I will be available for questions after that. Thank you very much.

Okay thanks Fausto for your insights about the statutory initiatives moving forward at Banco do Brasil. Good morning everyone, I’m Ricardo Forni. It’s a pleasure to be here with you once again. You have all the material distributed by our investor relations team. So I’ll only highlight some of the numbers here. Our earnings came strong in the second quarter with the adjusted net income reaching BRL5 billion, the highest level in the historical data, up 2.6% compared to the first quarter and 52% compared to the second quarter 2020. On a quarterly basis, we saw an acceleration in fee income converging to the guidance, while administrative expenses remained under control. Provision expenses had an increase of 13.8%, but remained below pre-pandemic levels. As a result of the high quality of disbursements in addition to some residual effect of the preemtive provisions of 2020. The net interest income decreased in the quarter, reflecting an increase in the silica rates, which impacted the funding expenses. These effect was partially offset by the increase in interest income from lower operations in line with the strong growth of the loan portfolio. The net interest margin contracted lightly by 10 basis points to 3.6 impacted by the higher liquidity. If we have the same pre-pandemic liquidity level, the net interest margin would be around 4%. The expanded loan portfolio grew in all segments, reaching BRL766.5 billion. The individuals portfolio presented an evolution of 10.3% compared to June 2020 and 2.8% compared to March 2021. The highlights were: payroll loans with a growth of 16.4% in the year, surpassing the amount of BRL100 million. And also, the issuance of non-payroll lines, especially the personal loans and credit card. The agribusiness portfolio grew 9.7% compared to June 2020 and BRL3.7 million in the quarter. We reached historical micro of BRL205.9 billion in this portfolio, highlight also that 47.3% growth in agribusiness bills, which are new ways of financing the business that have shown a significant evolution, growing over 100% in the past couple of years, reaching a balance of almost BRL8 billion in June 2021. The small and medium enterprise segment grew 24.8% yearly and 0.6% in the quarter, influenced by disbursements in the [indiscerbible] lines made since last year. The portfolio under forebarance is keeping a downward trend as a result of amortization and settlements. At its peak, this portfolio reached BRL130 billion. In June, the balance was at BRL94 billion of which only BRL12 billion were receiving risk period in the approximately BRL9.4 billion or 78% should resume the payments in the third quarter of 2021. Delinquency improved in all portfolio this quarter. The NPL over 90 days in June at 1.86%, down from 1.90% in March 2021, reflecting the high quality of origination and robust methodologies for managing monitoring the loan portfolio. The coverage rate had a slight reduction in the quarter at 325.9% against 328.2% in first quarter 2021. The new NPL in the portfolio reached 0.74% and this coverage reached 76.6%. The CET1 ended the capital ended June 2021 at 13.49%. Finally, we made some adjustments to our 2021 guidance. We increased the range of growth for the real portfolio to 11% to 15% reflecting the many prospects for the segment. On the other hand, we reduced in the wholesale range to 3% to 7% growth and the impact of early settlements and the strategy of targeting revolvers to the aftermarket. Retail estimates remains unchanged as well expectation for the total portfolio. The provisions for loan losses expanded view, the good delinquency rates in all portfolios added to the granular management of portfolio quality, allowed us to reduce the proposal range to BRL13 billion to BRL15 billion. We reduced also the net interest income range to 1% to 4% due to the increase in the silica rate and the consequent impact in our funding expenses given the mismatch profile of our overall balance sheet. The range of fee income and administrative expenses remained unchanged. Finally, after incorporating the facts of [indiscerbible] board, in addition to the strong BRL10 billion earnings delivered in the first half of 2021, we are adjusting the range of the guidance for the net income to BRL17 billion to BRL20 billion. I appreciate everyone’s presence, and we can now move on to the Q&A Session.

Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Jason Mollin from Scotiabank. Your may proceed.

Hello. [Indiscernible] The first question is really if you can give us a sense of the strategy that you’re taking in different lines of credit. We’ve seen some different trends in the Banco do Brasil loan book versus some of your largest private sector peers. I mean mortgages is one that comes to mind. If you can just talk about the bank strategy in the consumer segment and what you see driving growth going forward. And my second question is an update, if you can provide an update on the plan and strategy you’ve talked about in the past of selling non-core assets. Thank you.

Hi Jason, here is Daniel. Let me start with the first question and I’ll pass to Fausto and Forni to give more color about the investment, divestments more specifically. What we expect in the strategy for the credit portfolio growth is reflected in our guidance. Certainly, the agribusiness segment is quite relevant. You see – when you see the percentage of the economy, how it represents and how it’s performing is one important aspect. And certainly, this drives a lot of collateral business for the bank. Just reminding that the customer from the agribusiness has more products consumed inside the bank. Now this is one aspect that is reflected in our guidance. By the way, we just revealed the guidance for this segment. In the case of the large corporates, we have one effect that we’ve seen in the guidance that is basically a base effect. Certainly we look at this segments, yes. We are close to the companies. This is linked to the strategy of investment banking originating views and doing and certainly servicing the companies do this. When you look at the performance in this first half of the year is basically explained by the strong performance in the last year. Just reminding that with the pandemic, some companies came here not only to Banco Do Brasil, but to the system to raise volumes to be cash-rich exactly to best through this spirits and along with second half we start to pay this back, yes. And actually, then we are comparing actually a very strong semester with a semester with more normalizes, yes. And we reviewed the guidance, yes, but we expect to converge to the guidance exactly because we’re going to have these effects. When we go to the individuals or retail business certainly. It’s one aspect that we have been growing, yes. This is helping also the mix, yes, because actually, we are moving more towards retail. This is important for the total mix of the plant portfolio. We have certainly the consumer can as one important driver for this. Payroll loan is in line more than that we have good participation in the grant money in the system, yes. It will continue to be this, but we are targeting also the non-payroll loan. You saw this the growth in the credit cards and that is an important product, mainly for – that we have a space to grow, including with the no account holders, yes. You see also growth in the other consumer credits. More specifically, the mortgage is quite different in our portfolio relatively to the system, yes. Certainly, you have a structural effect that is explained why we see a growth in the system, yes, because Central Bank changed some rules, and this stimulated the system to look for more to those loans. In our case, the funding that – or the savings accounts that usually support this portfolio in our case is for good business. Certainly, we have space to do it. But we’re targeting one segments in our – to grow that space, that segment that we have the best penetration, that’s the – that our customers that we have payroll for all the customers that we have all the credits, yes. And we have also an effect that is the reduction of the portfolio, of the low income portfolio. This can be explained mainly in case you have more write-offs on this. And this explains a little bit why the movement in terms of mortgage is slightly different from the system. But it doesn’t mean that we don’t have a business target. It’s much more due to the composition of our portfolio. Did I cover all the points of your question before passing to the next one?

Yes, thank you. That’s very helpful.

Okay. Let’s try to explain a little bit about this investment strategy. I can say that this is still the same. As we explained before, during our last meeting, when I tried to explain the results of the first quarter, it means that we are going to sell non-core assets. Of course, then we have to wait the best opportunities in terms of the market. Nowadays, we have a very comfort position in terms of capital index. This is the reason that we have to meet the best opportunities. The end of keep going. And of course, that will be want to maximize the return of those assets. We are discussing about Banco Patagonia, we are discussing about Banco Votorantim and other ones that we not consider core business.

Its clear. And then really I think maintaining the same strategy, maintaining the – that you’re maintaining the same strategy that you’ve been talking about and the similar types of non-core assets is something in your looking big-market opportunities.

Yes, yes. We are keeping the same structure strategy, only – we are – as I said before, we have a very comfort position in terms of capital. This is the reason that we don’t have to move so fast in this strategy. We want to maximize the returns of those assets that we have selected non-core business.

Thank you very much.

Okay.

Our next question comes from Nicolas Riva from Bank of America. You may proceed.

Thanks very much for the chance to ask a questions. I have two questions. The first one on your forbearance portfolio. You have a slide there on that. So I understand – clear understanding, just correct me, you have BRL94 billion in the outstanding balance of loans that were granted some sort of debt release since the beginning of the pandemic. And out of those BRL94 billion, BRL12 billion have not paying anything at all, they are under grace periods and we’re expecting those grace periods to finish by the end of this year 2021. Now wanted to follow-on to check if that’s correct, my understanding. And then the remaining BRL82 billion, right, which are not under grace period. Are you providing some sort of forbearance or that release for them, even though they are paying – are they paying less than they should be paid at this point. And then my second question, different topic. I wanted to get an update on the repayment of the hybrid, the BRL8.1 billion in terms of timing and the schedule to pay that. Thanks.

Hi Nicolas, here is Daniel. First of all, talking about the forbearance portfolio actually is behaving exactly the way we have expected, yes. You see that the total amount has been reducing, yes. The same story for the – what is in grace periods. We have remaining R$12 billion. And when you look at those R$12 billion about 2/3 of these is scheduled to end compared the grace periods in the third quarter. When you look at the slide, about 50% of these are regarding [indiscernible]. In these cases, we are up almost fully guaranteed by the federal government. That is very low risk. It’s a question of cash flow. And then the portfolio is behaving quite well. It’s growing the NPL over 90 days as we expected. But when you look at the NPL, it’s not far from what is a normal portfolio. Another that is thing coming to another point of your question, if you agree if we are granting new forbearance note, we’re not. And just as a reference reasons, the program those lines of credit with credit enhancements that we contracted last year. We had the possibility according to the program to grant some forbearance, which is some specific cases. Yes, we had demand less than 5% for those cases. Then the portfolio is behaving quite well. Performance is going okay. We expect that this portfolio, the person that is in grace periods will be residual in the next quarter. Those things are going well and moving to the hybrid instruments. What we have so far is the proposal that we made to pay in eight installments starting next year. So far, we have no definition about that, but we understand that it’s very likely this scenario. But we need to wait a little bit to have a final position about it.

Thanks very much, Daniel. One follow-up. So the – on the forbearance program, the R$82 billion, which is not under grace period. I don’t think making regular payments like payments as they were peaking before the beginning of the forbearance program or not?

Sorry, let me check if I understood well your question, you’re referring to what is the grace period or what ended the grace periods and if this portion has been paid. Did I correct – what was your question specifically?

You guys are saying that the outstanding balance of loans under forbearance is R$94 billion, and all of those R$12 billion are not making any payments if I understand correctly under the grace period. The other R$82 billion, are they net regular payments then?

Okay. Okay. No, actually, the way – this is an extract of our portfolio that we showed just won’t we granted any sort of forbearance. And by the way, this is total loan. Yes, let’s assume that I have a loan for R$1 million, and I granted the forbearance for R$10 million. I account or I consider for R$1 million, not for R$10 million. For that reason, the total loan is higher. And this portion that is in grace period actually is in the period that we granted to – for not paying. For that reason, this metric is quite relevant because they didn’t pay yet because the data didn’t arrive. But we expect it’s not new yet. But we expect that this will happen in the third quarter. You see that 2/3 of this and looking backwards, how this portfolio is behaving. We don’t expect major surprises on this.

Okay. Thanks very much, Daniel.

[Operator Instructions] Our next question comes from Carlos Gomez from HSBC. Please you may proceed.

Sure. Thank you for the call. My question is about your legal risk. Do you saw your strategy to clean cynical cases earlier and then that resulted in low medical costs last year, but we’re having a down they are substantial, can be R$5.5 billion, R$6 billion per year. And so these are pretty large amounts. Where do you see this going over the next few years? And is there anything that you or that Congress to reduce this legal risk going forward?

Okay, Carlos. Thank you for all the questions. Actually, the legal risk we gave soft guidance at the beginning of the year that we expect to reach R$6.5 billion for this year. Just reminding, last year, we had R$4.2 billion. And the reason why we expect higher legal risk is basically the approach that we are having to those cases. You know that previously, when Brazil had as a policy to go to any resorts to any – to the last resorts, to the last court to solve the case, but sometimes it’s very expensive to do it. And what is the idea. Exactly the test that we made in 2019, trying to anticipate some of those cases, making agreements. And this R$6.5 million can be explained by the stance of the bank to increase agreements. By the way, there is a quite interesting strategy because we increase efficiency, because we don’t need to have thousands of cases to follow at. And you can – and when you do the agreements, you get some benefits or reducing the final impacts – financial impact for this. For next year, probably, we need to fine-tune this number as we arrived to the end of the year. But probably the best ballpark I came over to you is to replicate $6.5 billion for next year, yes but certainly, this is an update that we are going to have ahead.

Sorry, I did not quite understand. So you said so for this year, you’re giving such guidance of R$6.5 billion, [ph] if I we understand you don’t cost certainty is how much it? Did you say that from this year, you would expect to litigate that or to again have R$6.5 billion?

No. What I said that for this year, the soft guidance from this line is R$6.5 billion that we expect for the full year. What we delivered so far is R$1.7 billion per quarter, yes, that is consistent with this soft guidance. As a comparison, last year was R$4 billion approximately, yes. And in this process, we expect that for next year, we are – we tend to continue in the region of R$6.5 million. Did I clarify your point?

Yes. So again, similar to this year. And again, in the long run, do you expect this to ease a strategy for some region pay more upfront, but you paid less later. Should we expect a reduction later on or for the time [indiscernible] cost?

Exactly. This is the idea. Yes. Just try to reduce the total cost of those cases because you have two impacts, you have the financial costs and you have the administrative costs that you have the entire group to follow-up all those cases at the moment, so that we reduce these, we have a lighter structure. Yes. And then this is – you got to the rationale for this.

Thank you so much.

Thanks.

Our next question comes from Gustavo Schroden from Bradesco BBI. You may proceed.

Hi, good morning. Thanks for taking my question again. Just one question on net interest internal evolution, your cost of fund increased this quarter and after the NII and the reason behind that is the increase in Selic [ph] rate, the question here is there Selic rates has been increasing and so how should we expect the cost of funding evolving in the coming quarters. And when should we see the benefits of this highest rate on the assets side? I mean, when they repriced one of its low portion mitigate or should offset this increase in the cost of funding? Thank you.

Hello. Gustavo, its Ricardo Forni here. I believe that what we have seen in the first semester and what we are seeing – happening in the second semester, because all the market is now projecting Selic to be at seven or even above seven at the year end. I believe that we will continue with this territory where we have the repricing of our cost of funds growing and the net interest margin being compressed by this, because the speed of the repricing on the asset side takes a little bit more. And on the asset side, you have all the – also the competition working that let’s say the repricing as – is occurring, but it’s limited to the competition forces over there. So this is something that we need to – we are considering, this is the reason we have just say readjusted our – the guidance for the net interest income. And we believe that the – let’s say this range from 1% to 4% is now let’s say fair to what we expect for the year end, considering this – say the speed of the repricing on the liability side, considering the ability to reprice the asset side.

And Gustavo, just to give some numbers to or these mismatches, by the way, you can find this in our MD&A there is a section that we show the mismatches of our balance sheet, basically what we have. We have assets, net assets at fixed rates against net liabilities. And two thirds of those net liabilities and net assets are financed by saving deposits. That is basically 70% of Selic rates. And one third is current accounts that they are not sensitive to the interest rates. Then in a certain way, this is smooth little bit impact. And this one third, this mismatch that we have in terms of assets about 50% so they reprice in one year, then this means that liabilities, they priced faster than they assets. And coming to your question, we made an exercise yes, that we shared with the market that we expect for any 100 basis points move in the interest rates, base rates. We should have an impact in the region of R$400 million on an annual basis for the NII. When you look at the impact in the NII is consistent with this number. Coming to the other part of your question, when this will be repriced? Yes. We tend to have this effect more towards the end of the year, and next year. Yes. In terms of the impact then should be more this year in terms of the liabilities. And so when we built the budgets for this year and the other formal guidance we had in the projections, a Selic rate reaching 3.5 by the end of the year, and now all the market is working with 7%. So then this comes towards foreign assets. The adjustment in the NII can be fully explained by this exogenous effect that is the interest rates.

No, no, that’s clear. Just to be sure if there is – so it would be fair to assume that first half of our next year, maybe repricing of asset should be – we could see these benefits of a better price on the asset side. Right.

It’s hard to say exactly which quarter, because actually we have optionality for parts of those assets, but for sure in 2022. Yes. But certainly somewhere in 2022, we tend to have these effects.

Okay. That’s clear. Thank you very much.

This concludes today’s question-and-answer session, Mr. Fausto Ribeiro to proceed with his closing statements. Please go ahead, sir.

Okay. I just want to say, thank you guys, everybody for this opportunity to glorify a little bit about the result of Banco Do Brasil in the second quarter, of course, and the first semesters also. And I’d like to say that this kind of result is a great – it’s a record in terms of results of Banco Do Brasil. And it was just possible because we have capillarity. We have strong people working together in order to guarantee that that the goals will be achieved. I hope that this pollinations here is help with you guys to understand a little bit better how was the results of the Banco Do Brasil and this I hope to that everybody was clear with the explanations that we did before. I hope to see you guys at the next meeting and the third quarter of this year. And thank you very much for this opportunity. See you bye-bye.

That does conclude Banco Do Brasil conference call for today. As a reminder, the material used in this conference call is available on Banco Do Brasil investor relations website. Thank you very much for your participation. And have a nice day. You may now disconnect.