Good morning, ladies and gentlemen, and thank you for waiting. We would like to welcome everyone to Banco Bradesco’s Second Quarter 2016 Earnings Results Conference Call. This call is being broadcasted simultaneously through the Internet, in the website, www.bradesco.com.br/ir. In that address, you can also find the presentation available for download. We inform you that all participants will only be able to listen to the conference call during the Company’s presentation. After the presentation, there will be a question-and-answer session. [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 the risks, uncertainties and assumptions because they relate to the future events and therefore depend on circumstances that may or may not appear in the future. Investors should understand that general economic conditions, industry conditions, and other operating factors could also affect the future results of Banco Bradesco and could cause results to differ materially from those expressed in such forward-looking statements. Now, I will turn the contracts over to Mr. Carlos Firetti, Market Relationship Director. Mr. Carlos, you have the floor.

Good morning everyone. Welcome to our 2Q 2016 conference call for discussing our results and strategy. We have today with us for this conference the following executives: Alexandre da Silva Gluher, Executive Vice President of Branco Bradesco; Randal Luiz Zanetti, General Director of Bradesco Seguros Group and Luiz Carlos Angelotti, Executive Director and our Investor Relations Officer. Before moving to the presentation, we would like to make some comments on yesterday’s news on the tax issues investigation. Branco Bradesco acknowledged the complaint offered by the federal public prosecutor and received by the federal judge from Brasilia concerning members of our management. This is preliminary [stock] based on arguments put forward exclusively by the Federal public prosecutor and it reiterates that no stock tariff or legal irregularities or breach was practiced by its director, which will be fully proved during the preliminary instructions for the prosecutor. We do not have any other comments to add on this subject today. So now for beginning our presentation, we’ll turn to Luiz Angelotti.

Good morning, everyone. Thank you for joining our conference call. I’ll start with Slide 2, which are the highlights. Our adjusted net income reached at BRL8.274 billion in the first half and during the quarter BRL4.161 billion, which have grown 1.2% over the first quarter and net income shows ROAE around the 17.4% for the half year. Our NII grew 10.6%, that shows a grow of around 9.8% of the segmentation movement that we are doing and the increasing our offers of service to our clients. The operating expense went up by 9.5%, reflecting the inflation of the test fees that is our objective is to finish the year with inflation around the inflation of 2016 [indiscernible] something around 6%. Our efficiency ratio is now went up to the best levels of 37.4% and the coverage ratio 80.2%, which showed the commitment of bolster the – our performance. The Tier 1 reached at 13.7%, that’s comfortable for two – the next steps that the incorporation of [indiscernible]. Our assets amounted to BRL1.106 trillion. The expanded loan portfolio reached at the BRL447 billion BRL447.5 billion. In this period it has a decreased by 3.4% due to the lower demands from the markets. Our delinquency over 90 days reaches 4.6% in effective coverage ratio reached at 233.9% [indiscernible] look for the environment. We had very important contribution that given for our insurance business – that the [indiscernible] had a net income amounted BRL2.544 billion, which grew insurance premiums 6.9%. Now I’ll turn to Carlos Firetti to give more details about the next slides.

Okay. Thank you, Luiz. So starting on Slide 3, we have the adjustments in our net income. Few adjustments this quarter, net earnings for the quarter was BRL4.161 billion in the first half BRL8.274 billion. In Slide 4, we have the evolution of all our adjusted net income, in the quarter net income grew 1.2% for the first half, there was a drop of 5.7% in the quarter. This also maybe actually helped by the reduction in provision expenses, we had less provisions on the specific case from the corporate sector, for which we have been making provisions. Since last quarter, we finished the provisions on this company with an additional provision this quarter of BRL365 million, this company is now in rating stage. Also we had in the quarter our contributions from fees and commissions that are performing very well based on the [indiscernible] of our segmentation and a negative contribution to our results from insurance, where a good quarter we have some pressures in the insurance operations, especially coming from claims in the health insurance segment and also we had an increase in the quarter operating expenses by BRL282 million. In the Slide 5, we have the sources of our net income. Basically we have a very diversified source of results 31% of our net earnings in the first half came from insurance, 30% from credit intermediation and 29% from fees. Highlighting that 70% of our earnings come from activities related to the credit business. The Slide 6, we’ll talk about our assets, equity and efficiency. Basically our total asset increased 7.3% in June compared to June last year with our return on assets reaching 1.5% in the period. Our shareholders equity grew 10.8% year-on-year despite the fact that our earnings – pressure in the period. Our ROAE…

In Slide 19, we show our guidance that we revised some lines. This guidance doesn’t reflect the HSBC incorporation for the – announce the new [indiscernible] the effect of the HSBC when we will announce the third quarter results. For the loan portfolio, the new guidance reflects the demand that we expect for this year, we had some effects of the – dollar effect in the portfolio about – around 15% of our portfolio, we had operations that we have the dollar investments [indiscernible] the end of the year $1 around R$3.2, then this is one part of the decrease of the portfolio and other parties – the lower demand that we had in the year, probably in the second half, we expect a little bit of demand in the loan portfolio, but we think that the new guidance that you expect for loan book. NII, we increased a little bit guidance, now we give 7% to 11% reflect the effects that you expect in the margin debt margin synergies and that we have one loan part of the portfolio that probably leaves the effect to be the pricing, because the new – that we have more long term. We have the effect of the [indiscernible] of the funding cost that we continue increasing dividends in the second half and the asset liability maintenance that we expect from the second half, some benefits that we think from our [indiscernible] portfolio. We maintained the fees guidance – the operating expense, we adjusted for the [indiscernible] around 6% the inflation, that we expect that will be the link for the dividend that will come from these expense. So during the year, the way of expense will continue decreasing and our expectations are that it will reach to around 6% at the end…

Ladies and gentlemen, we will now initiate the questions-and-answer section. [Operator Instructions] Jason Mollin, Scotiabank.

Thank you very much. My question is related to asset quality. We saw the 90-day delinquent loans increased 40 – approximately 40 basis points in the quarter. One of the higher increases we’ve seen, can you talk about your expectations for the evaluation of this line, you’ve talked a little bit in the past about expecting of weaken NPLs towards the end of the year, is that still – is that you still intact for this large increase?

Jason, basically the NPL – 90 days NPL, besides this fact that it’s suffering with the economic environment. And as everybody knows, it’s also impacted by volumes. I think that’s important to highlight. The portfolio this growth dropped 3.4% and that impacted the ratio. In terms of expectations, you can say that, we expect the NPL ratio to close the year around 4.9%. We believe the peak of NPL could be between – at the end of the fourth quarter or first quarter next year. And an additional point which, there is the specific case on the corporate client – segment that is already in the 15-90 days NPL. Next quarter it will grow to 90 days, but the thing is we already have these client image after six months image, we can do the write-offs. So this client impacted the quarter, but there are – the write-off of the cleaning that days of NPL in the fourth quarter.

I think the one important part of nature that in the short period ratio about BRL16.9 [indiscernible]. We start to see some stabilization meaning in [indiscernible] then some of these we’re sure that the movement that we had in the last quarter that we think that the situation is now start to show some build-up of relation or stabilization, then we can sure see this in the slides across, but when we look in the July, continue this movement. Then something that in the introduction part [indiscernible] now we start to have some better streamline above the stabilization.

Thank you. Let me just add a quick comment on the effective tax rate, which was low versus some expectations, is this related something specific in the quarter, the high level of provisions or what kind of color can you provide on where taxes were?

The investment we have – the rate in the quarter was lower there’s some impacts basically interest on capital – will remain being what this contribution for reducing interest rate since the TJLP is much higher. We also have in the quarter some tax exempted revenues that also help to make the tax rate lower, and an important point is given these higher TJLP and interest on capital, we can expect to be tax rate, the effective tax rate for the year to remain at 32%, 33%, I think it is – it was lower and it will remain at a lower level for the remaining of the year.

With that information about the month end that the [indiscernible] to do – month ended, the deferred tax we needed to solid percent for the new deferred tax rate. Then the tax that we did in September last year, now we are decreasing in 2018, we didn’t have any benefit in the tax rate with our [indiscernible] debt.

Tito Labarta, Deutsche Bank.

Hi. Good morning, and thanks for the call. A couple of questions, one, provisioning side – I know you increased the guidance to BRL18 billion to BRL20 billion, but to get to that BRL20 billion it does mean that provisions will have to come down from the first half of the year, I know you had some additional provisions related to the one specific corporate in the first and second quarter. But what gives you confidence that aside from that, that provisions will be able to come down, I know there’s a lot of corporates going through bankruptcy in Brazil, due to the weak economy. They had the big spike in NPLs, so just want to understand, where you get the confidence that provisioning level should start to come down next quarter. And then, just another question on the insurance, I know you had some additional provisions there, but would you be able to pick-up in the combined ratio, if you can maybe give a little bit more color there, what happens specifically and if you think that can improve in the second half of the year? Thank you.

Tito, about the guidance, in the first half of the year, one part of the expenses is related to the process of ratings, revision. Then our one part of the gross expense was impacted, because of this process, and a little bit confused doing the analysis of our portfolio booking, the major part of this process I think will be that. Then with the new information in the second half will have some things that they will be really need to do this process, but this is one effect that probably the reduction in the second half, then I did one part of expenses. One part of the higher growth that we had, in the first half all of the positive strategic [indiscernible]. Looking ahead, generally we see the expectation of now and to the end of the year, there’s probably [indiscernible] with interest ratio. During the analysis of our portfolio, and looking at the next three affects during the year, during the period of this [indiscernible] the expanse that we expect until at the end of the year. Then our [indiscernible] then we look to our portfolio and the information that we have about our client base. About the insurance we started really started [indiscernible]. About the additional provisioning we had to – this previous quarter. It’s about the interest rate curve that has experienced reduction about 100 basis points. And this basically two times a year, in December and June, and this could happen in the next [indiscernible] on the behavior of the interest rate curve in the period of time. So it’s a – could be considered one shot, given the current pattern of the interest rate curve. About the combined ratio, if I got it right, combined ratio was affected basically in the large ratio – basically by the large ratio of healthcare segment, that was affected – believes to be from reduction, these are – in Brazil. And because of that we experienced clearly [indiscernible] not very good buy by the expected premiums, and these increases the effect of the loss, the casualty of the [indiscernible] loss ratio in the period. And on the side of that, we continue to experience effect on inflation, not – and in the frequency of utilization of these services. So, those are the main effects on the – basically the loss ratio of this period of time. And this was the only real factor that impacted the combined ratio. It is going to be – become better in the next quarters, it will depend basically on the – our ability in terms of – in operation term, a reduced effect of the loss ratio in healthcare and better environment in terms of employment in order that could help reduce the impact of the macro effect on these segments.

Thanks, that’s helpful. Well, as unemployment keeps going up, does that mean the loss ratio could get worse in the second half or how dependent is that on better environment in employment?

We believe that most the threat is already there, we believe that we’ll have a good perspective in terms of at least release the phase of employment and maybe we will in the next quarter start to stabilize the level and most of that and more than this that we expected to gather institute the numbers that we release in the previous quarter from these segments such as small businesses that have been growing 30% a year. So because this is for those the extending in the client base and measuring from the corporate side, it was to trust it doesn’t pass that you compensate and to restore the number of clients as that I said that we sensing that. We resulting in more extended period of time and we will be able to do that.

So most of the losses that have been reflected you think and you can get season improvements in the second half. Is that’s correct?

Sorry, could you please repeat, the sound is not good?

Just to make sure I understood. Do you think that most of the losses have kind of been reflected and you think you begin to see some improvement in the loss ratio in the second half of the year.

Yes, improvement in the loss ratio I think the short term is effective that would come from some operational measure that we been taking and in terms of the better controlling the cost and the access of the numbers should that the service that we provide. But on the mid to long term, that is going to be more impact in terms of the result the stabilization and the membership deeds and better environment in general or personal.

Carlos Rivera, Citi.

Hi, good morning everyone and thanks for the opportunity to ask questions. So, my first question is related to NII, which is clearly growing above the loan growth, a part of it of course the relative spread from credit that continuous to work and also from the NII and securities. So just [indiscernible] how much room do you foresee for the spread to continue gowing up and for the NII and securities to continue very strong, and how does that [indiscernible] here? I just want get more color about how to think about this for the next year? And I’ll ask my second question after. Thanks.

Carlos, about the business item, I agree, we continues to having the effect of the spreads with pricing. Then the old equation that will have the modern approach in the quarters we had, roughly the new prices it continued increasing a little bit, the spreads in the EBITDA continuing in high level, comparing to other things [indiscernible] then this higher price continues immediately has actually – talked in the last call but we had some effects of the funding, we all saw funding is higher – then we have the opportunity now with the higher offer funding [indiscernible] then our operation that will lead to new part of our clients. We are targeting as the new tool is a semi [indiscernible] part of stability, this happens because when we continue having a higher orthodox funding. And we’ll have some degradations for new projects, other projects that we have [indiscernible] which this means in the funding that continues in the second half. We continue having some benefits in the asset liability management we have the – we are revising our numbers, our portfolio then, we will have more opportunities and the one part of the projects came from the credit portfolio that this portfolio continues where pricing would be more higher level spreads and this benefits in the second half, will continue to bring revenue in our NII. We understand that the new guidance reflect our expectations for the year and we have a good contribution for the insurance business, that in the second half probably will maintain a good growing in the NII.

Okay. And you feel initial thoughts if you could get benefited during the next year, at least in the first half of next year or is it too early to call out?

The margins especially the assets liability management portion, it continues somehow benefitting as interest rates in Brazil go down. So basically, we say the duration of our assets is – its kind of 18 months, after each cut you have some time, were the benefit is stronger and considering most analysts expect interest rates to go down now, more importantly next year actually – that gives in orders, where we have the asset liability management. We should expect still some remaining benefit next year.

And probably next year we will have some positive growing in the loan portfolio that’s really – contribution in the volume, then leaves negative goals for 2016, we don’t have the guidance for 2017, both considering the expectation of world economies probably we’ll see a positive growing in the loan portfolio in 2017.

And my second question is regarding generic provisions. If you could comment a little bit on the decline of about BRL630 million this first quarter, when we see a decline on generic provisions? Thank you.

Can you repeat the question?

Sure, its basically regarding the generic provision balance. I mean this is the first quarter when we see a decline, BRL630 million decline, so just wondering if you could give us little bit more color there?

About the decreasing generic provision, we had [indiscernible] about this – to switch clients that now is in this fiscal provision. During this quarter we had these valuable numbers a little more than BRL1 billion – more than BRL1 million. Then we [indiscernible] probably this time.

All right. Thank you very much.

Thiago Batista, Itau BBA.

Thanks for the opportunity. My first question is about the line other operating income and expenses that increased materially in this quarter. In the press release, you already discussed a bit the main changes we saw in this line, but I have two points to clarify. One in the – I think one of the tax contingency, what exactly this tax contingency is related? And also in the Item 3, you mentioned lower expenses on credit card and insurance, do you have any idea what caused this contraction and also the magnitude of this contraction? And it’s possible to say that those expenses could be lower in coming quarters?

Thiago, in this other expenses, about tax contingency, they are more a validation of our internal using our position. Then – on the – position [indiscernible] and mainly process – we had this effect. And we had one other effect that is provision around BRL200 million [indiscernible] that is one agreement that we did in the magnitude of, but now we are concluding these negotiations. Then this is one adjustment that we needed to do. The other question about the insurance – the second question?

No. In the same other operating line, you mentioned in the press release, there are three, you commented that the expenses on credit card and insurance were below the average or something like that. If you could explain what was the main cause of this contraction and the magnitude of this.

These are expected [indiscernible] really don’t see, I think the other factors are more relevant. Third part is [indiscernible] relative to the second – well I think we had some consolidation in the first part, then this expenses now we had a steep reduction in the second quarter then, but not too much realized on these effect. I think, the information we’re having in those has to speak.

Okay. Thank you so much.

Victor Galliano, Barclays.

Thank you. Couple of questions from me, just on the HSBC acquisition, appreciate information given us on Slide 21 there, but can you give us some idea there of what a pro forma NPL ratio and [indiscernible] in terms of percentage of total loans looks like, and also perhaps some coverage numbers?

We’ll have that information for sharing, as you know we closed the deal based on a preliminary balance sheet for closing. And we are still doing a detailed due diligence in the numbers, so actually we don’t have officially released second quarter results for HSBC. We will try to release as much information as possible once we have the audited full numbers for HSBC, but at this point I’m afraid we really cannot provide much more information.

Okay. Just a quick follow-up, I understand that. Thanks, Carlos. Just a quick follow-up from me, on vintages, can you give us any sort of color in terms of vintages that some of these loans, how they are performing, and whether you can really see at this point any light at the end of the tunnel right now, even on the corporate or retail portfolios?

We did well in our internal process of [indiscernible], we continue doing this process all time, then our model, our analysis, we are more criteria driven, you can see in the [indiscernible] we do better quality within the compared these for other, these are to give the guidance that you expect for the delinquency ratio that considering this effect that delinquency ratio by the end of year probably continues growing 0.1%, 0.2% and probably finish the year around 4.9%. Then we see a bad behavior last – in the new originations. That is why we are more comfortable with the guidance that we give about the provision – extensive provision.

Okay. You were saying just to make sure got that correct, it’s are in line. Was that you were expecting sort of year-end NPL ratio about 4.8% or 4.9%?

The delinquency ratio of 4.9%, the total delinquency ratio above 90 days, that we –. And we will see a healthy ratio – index for 2017, probably with some expectations that too big –. As I said in detail, you may see the NPLs in the third quarter to higher than that because of the effect of specific client, but that client should be most likely written off in the fourth quarter, so it gets out of the NPL base.

Any particular sector, you really worried about at the moment ,when you look at the corporate book?

No, we really don’t comment about the – segment, that we enjoy – because something that happened that [indiscernible] had little more difficult during the last year that we don’t comment about sectors.

[indiscernible]

Some very quick questions on early delinquency rates. I know it might be early to call it an inflection point, but from the Central Bank data, we see some continued stability over delinquency rates on the retail portfolios. And while the corporate portfolio show some improvement during June, and in your case, despite the one-off credit that you guys mentioned in the call, it looks like early delinquency rates might also be an inflection point. So, I just wanted to as if you could provide more color given that we are a little bit more advance in the year in terms of what you’re seeing in your early delinquency rates so far? And when would you expect the asset quality iteration to peak, if it is possible to assess that at this point? Thank you.

We don’t have information about – the specific information about the other [indiscernible] looking at our basics, firstly, we don’t sell any operation in the second part, then it could be that some institutions are normal to sell. It – some operations probably this effect he index. Looking, ahead for the second half, considering that our short delinquency ratio is 0.5%, the really impact – of this organization mainly in [indiscernible]. This was [indiscernible] our expectations through end of the year, probably [indiscernible] in the delinquency ratio, until for the SMEs segment, probably we’ll show an even more higher growth in the delinquency ratio. It can be in the corporate side – our delinquency ratio that we have now on [indiscernible]. We probably will continues visible, stable [indiscernible] in this part, we really had a peak in the third quarter because it’s specific fact, something around 0.3% or 0.4%, but looking for the end of the year, our expectation since we are in the quarter two, where the Company has a reasonable, stable and [indiscernible] considering, 1.70 something reasonable. I don’t know which part to see some movement or some signal with actually [indiscernible] the unit net of growing in delinquency ratio is now which leads [indiscernible] stabilization from [indiscernible]

Just a quick follow-up, upon the loan loss provision expenses, revised guidance for 2016, are you guys considering the use of some of the additional provisions?

No. Addition of provisions, we normally take as a non-recurrence expansion.

Carlos Gomez, HSBC.

My question refers to your volumes, do have any certain guidance for loan growth, [indiscernible] your loans in real have actually declined 6% year-on-year at this point. When do you expect to see any type of turnaround that would raise your fund in line with the guidance. Second, you mentioned that for next year, do you expect a recovery in this higher average volumes fall obviously, all you have taken around quick, so that the average for quarter around 2017, moving faster on 2016. Can you confirm that and don’t you expect any contraction following the integration with the other institutions that you have acquired? Thank you.

Carlos, basically volumes have been very weak, because we are cautious and demand is very low. We believe that this component coming from demand would be one thing that we all start to turn around, add scope that’s continuously improving as the economy starts to rebound. And [indiscernible] start who have [indiscernible] to achieve more. Our economies probably regards for the shift and expect loans to grow 7% next year. We don’t have a guidance as we said, but we expect for next year-end the loan growth for Bradesco to be on the positive territory to precisely say our brand [indiscernible] it’s difficult but maybe at the end of year we have the peak of NPL. We are starting to see already, according to our economist, the economy growing Q-on-Q in the margin, positive in the fourth quarter, may be around that.

If you compare on the positive – until the end of the year, we specifically had some positive growth. During the year – 2017, we expect to see a positive growth – annual growth.

Thank you, around the effect of integrating two banks, whether you have to reduce exposure to some vertical?

Both. Our expectation is to [indiscernible], but we need to analyze the client-by-client. We had the space – for maintaining the position, because normally we use –. We had margin now with limits, [indiscernible] we analyze case-by-case, if the client has potential – maintain the operations [indiscernible] case-by-case.

Okay. Thank you very much.

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

Thank you everybody for participating in our call, the Investor Relations department is open for receiving your doubts and answer anyone that is remaining. Thank you very much.

That does conclude the Banco Bradesco’s audio conference for today. Thank you very much for your participation. Have a good day.