Good morning ladies and gentlemen, and thank you for waiting. We are glad to welcome everyone to Banco Bradesco's Third Quarter 2015 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 that all participants will only be able to listen to the conference call during the conference presentation. After the presentation, there will be question-and-answer session when 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 circumstance that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of Banco Bradesco and could cause results to differ materially from those expressed in such forward-looking statements. Now, I will turn the conference over to Mr. Carlos Firetti, Market Relations Department Director.

Good morning, everybody. Welcome to our conference call for discussing our results for the 3Q ‘15 results. We have today with us Mr. Alexandre da Silva Gluher, Executive Vice President of Banco Bradesco; Luiz Carlos Angelotti, Executive Director and Investor Relations Officer of Banco Bradesco. I now turn the presentation to Mr. Angelotti to start with the main highlights.

Good morning everybody. Thank you for participating this conference call about the Bradesco’s results for the third quarter. In the Slide 2 we have the highlight and our adjusted net income reached 13.3 billion in the nine months of 2015, increasing 18.6% in the third quarter. Our adjusted net income which is actually R$ 4.5 billion. Our ROE rated 21.2%. The NII earning portion increased 16% in the nine months, mainly because of the increase in the average spread related to corporate portfolio. We started to have this year some increase in the rates and probably will continue during this year and probably the first half of next year, then expect to have some new benefits in this increase, other thing that helped to be NII grow with healthy management and the gains with asset liability management. Our efficiency ratio remains at 37.9%. This shows our higher commitment with the control of cost and efficiency and our operating coverage ratio, the relation between fees and the fixed cost reached at 79.1%, the best level that we have in our ratio. The fees and commissions term increases 12.3% in the nine months, they are growing at the double-digit. The main effect came from the segmentation progress that we are creating new segments in the [indiscernible] days applied. These segments we created in May of 2014 then this year restructured to capture the benefits. Probably this is growing in the regular -- mainly from the accounting revenues will continue during 2016, 2017 -- 2015 and 2016. We have got the benefits for May 13 from cards projects that are growing around 15%, [indiscernible] immigration of the products and they grow in the volumes of transactions and they grow in the client base. Our operating expense grew 7.8% below the inflation in the last 12 months and this shows the commitment of our group. The total OpEx amounted at the end of the quarter at R$1.51 trillion. Our extended loan portfolio reached at R$474 billion. And there is something that we need to highlight that the allowance for loan loss reached at R$28.6 billion in this quarter, and our coverage ratio for 90 days reached at around 206%, one of the highest level in the quarter. Also our insurance business, the net income for insurance amounted to R$3.9 billion in the nine months and the deals grew at 18.6%. Now Carlos Firetti continues with the next slide.

Okay, thank you, Luiz. Now we will go with more details in our numbers. In Slide 3, basically our [indiscernible] book net income and adjusted net income. We have some important events this quarter. Basically, we have an accounting gain of R$2.341 billion related to the revaluation of tax credits to be increased in the social contribution tax rate of 15% to 20%. We offset this gains with some provisions R$2.222 billion in the credit related provisions. Part of this additional provision and part of it related to generic provisions related to the revision ratings in some specific credits that clearly do not belong to this quarter. Additionally, we have expenses with contingent liabilities, basically related to provisions for law-suits that are in our view one-off effects. With this adjustment, the adjusted net income was R$4.533 billion with funds ROE for the quarter of 22.1%. In Slide 4, adjusted net income growth. For the quarter our net income increased 0.6%, for the nine months 18.6%. For the quarter, the main drivers for the performance came from the NII, the interest earning portion of NII that was R$294 million higher. Fee and commissions, that contributed with R$262 million, and others the R$228 million, mostly related to our lower tax rate in the quarter. On the negative side, we had a lower contribution from NII from the non-interest, a negative contribution from higher provision expenses, and also from operating expenses which we will detail in the next slide. In the Slide 5, we have a breakdown of our net income. Basically, insurance represents 29% of our earnings, the banking business 71%, credit contributes with 34% and Phoenix 29%. Non-credit related revenue sources represent 66% of our total market. In the Slide 5, we have our efficiency ratio. Our efficiency ratio in the…

In closing, we will say that we have a good performance using the scenario we faced in the first nine months of 2015, we managed to keep the solid ratio such as the efficiency ratio remaining at 37.9% and the ROAE of 21.2%. We -- this is the provisioning level for the loan loss and we have now at R$28.6 billion in provisions. The coverage ratio reached around 206% our main sources of income have posted double digit growth and our cost keep running below the inflation then we have seen that we have also maintained good remuneration for our shareholders. Thank you for your time and we would now be glad to take your questions.

Ladies and gentlemen we will now initiate the questions and answer section. [Operator Instructions] Our first question from Mr. George Cooley from Morgan Stanley, you may proceed.

Hi, good morning everyone. I have two questions if I may, the first one is from GSBC. Can you explain to us how you hedge the $5.2 billion that you're supposed to pay at the close of the transaction, exactly how is that hedge fund percentage, which is actually hedged, what is the carry cost of that hedge, and what does that imply in terms of your expectation for accretion of the transaction or impact on your capital given the currency has moved a lot from where you [indiscernible]. And then my second question is on asset quality, again certainly things have gone worse and you disclosed early this year, between renegotiated loans and NPLs we've seen a bigger jump that you were expecting early on this year. The amount of provisions that you've created in obviously make very clear what your concerns are, I get the level of your concerns are. What lies ahead, at what point do you think the NPL cycle will peak. Your GDP expectation of 1.5% negative for next year looks optimistic at this point I guess in a consensus result, moving closer to 2 and beyond. To what extent a repeat of 2015 will make when the current contractor 3% or around that changes your view on asset quality what is the sensitivity around that, thank you.

Thank you. Thank you George for the questions. About the hedge with GSBC, given in the market the normal operation that we do, the amount is a very higher but with the total hedge and the price that we finally - the R$18.16 we'll maintain with this hedge. [indiscernible] those affected the final price. Also the, when we probably expect to have the approvals of the regulators probably could happens in the end of this year or in the beginning of 2016. Then when we do the payment after the payment we expect to join [indiscernible] probably our ratio there, we did that simulation using multiple days and ratios are we understand absolutely, how to assume the bank in a normal way, we have a margins and off in the ratio [indiscernible] they can be our profitability in the next few years. We’ll be an offer to maintain the ratios along with the levels that we’ll [indiscernible], it will be an offer to maintain the resources along the levels that we need to have. But if we have the another way that is [indiscernible] show in the simulation that we have the option to issue a [indiscernible] year loan and we will maintain our dividend spent in normal doing, something that we can do that in the meantime in the past years and offer new shares for our shareholders to use [indiscernible] to subscribe with it advance payment. This is something that's possibility and we have for two month paying the ratios along the level that we understand that’s then lost for two months. [indiscernible] mostly asset is quality I think you talked about the renegotiated portfolio that is grow little more but the normal growth that we expect for this [indiscernible] is the correlation between the goal of our…

Our next question comes from Mr. Mario Pierry of Bank of America. You may proceed.

May I ask you two questions, the first one is, I’m going to stay on the asset quality topic, we’ve seen the NPLs they’ve been rising about 10 basis points per quarter for three consecutive quarters now? But we’re seeing when we look at the SME portfolio and the individuals’ portfolio the deterioration is starting to increase, individuals are growing close to 20 basis points and SMEs just increased 40 basis points this quarter. So, my question then is related why would you only expect that gradual deterioration. It almost seems to us listening is that, you expect the deterioration next year to be similar to this year, but we’re starting to see an acceleration. So just wanting to understand why would things start to decelerate going forward in terms of NPLs? And my second question is related to what you just said about your [indiscernible] pricing, your loan portfolio, especially your corporate loan book. What I wanted to hear from you is about your ability to continue to increase rates because looking at potential banking data most recently we saw the spreads at least in the last month, they have come. So just wanted to hear rather than just the good pricing on book is about your ability to continue to raise spreads going to next year? Thank you.

Mario related to the first question, the deterioration yes and in individuals, basically our field in terms of the gradual deterioration we expect is related to the -- is like a mix between the asset. We believe our portfolio now is much less riskier than it was at any time in the past. There is a large number or there are credit lines that are doing very well and are sizeable in the total portfolio. We had in the case of individuals an acceleration, but actually into this fourth quarter we may see some better performance. There is this seasonal impact coming from the salary and other things that helps. Going forward, we are growing zero in this portfolio, basically part of this because demand is low but also because we have the cautious far sometimes and there are mature improvements inside of the credit lines, it’s not that only the mix improved but each line is now better. We have the economy under pressure but our individuals’ portfolio is there. In the SME portfolio as I said good calculation, good 5% growth, we see the NPL evolution would be lower we have a portfolio that is not growing actually year-on-year, it’s shrinking a little bit. We see the portfolio, we see the cases of credit cards of course and we believe that the most likely outcome knowing deeply the companies it’s a gradual evolution. In terms of repricing, the repricing comes -- it’s more market driven and basically our point here we don’t want to make a point [indiscernible] continue increase, et cetera. But just by repricing what has happened it still has sizeable impact in our credit portion. So, basically the positive driver only from the repricing is already off to offset most of the pressure or the big portion of the pressure that comes from credit card policy in our earnings.

On the some premises are above the quality then it heals for 90 days and 60 days model they decreased this quarter, they’re not [indiscernible] the next quarter just to -- we don’t have increasing in the delinquency ratio they’re not, we see some below there is some stabilization could happen, but this is something that you need to consider into the formation.

Let me ask you then on specifically then on the individuals portfolio. What concerns you the most about potentially leading to higher NPLs, is it inflation, is it unemployment, what do you thinking has the biggest impact on your individuals NPLs?

Normally, probably tracing is the main thing that’s set to be the [indiscernible] ratio, but as we told you, we are good part of this portfolio, we have now the payroll loans and the mortgages that we have a very small interest ratio. More normally while we have some increase is [indiscernible] based on our loan and the cards, but as we told you, we are what -- we with these investments in our system in our models virtue, reduce the resource to have better controlled results and we are more effective in to charging the client for to be [indiscernible] and then began, we are working to reduce the risks and this is why we expect some increase, but not something that's in the rule and could hurt higher risk and the [indiscernible], what you see that [indiscernible] we expect that 2017 economy will recover the growth. And the [indiscernible] the second half of 2016, I think the environment will be a little better as we're expecting some stabilization in the delinquency ratio and maximum probably to.

Our next question comes from Mr. Saul Martinez from JPMorgan, you may proceed.

Hi, guys, two questions. First, on your capital position, and I want to gauge whether your comfort level depends on your ability to sustain pretty high levels of profitability. And by definition, you hold capital for unexpected losses, but you're talking about capital and capital generation based on the expectation that you don't have unexpected losses, that your profitability remained very high. So, I want to ask you, does your view on capital really depend on sustaining close to a 20% ROE? And if you are wrong, is there a level of profitability when your profitability comes in some? What you might expect, given the macro backdrop, how do you feel about your core tier one at that lower level of profitability and a lower level of capital generation? My second question is on renegotiation of credits. You guys give less disclosure than some of your peers. You've renegotiated credit only for delinquent loans as opposed to renegotiations for performing loans. And obviously that could mask some strain if you're renegotiating loans that haven't fallen into delinquent status. Is there a big difference in terms of the trend if we were to look at the whole performing loan portfolio? And I ask that because you obviously have a very sizable SME book, and I would guess there, like at some of your peers, you would be seeing more renegotiations. So, my question is, if we were to have a more expansive view on renegotiations, would that number change? And if you actually do have that number, it'd be great to disclose that.

Saul, I'm going to answer the first question. Basically on capital our view on capital doesn’t depend on our view on our profitability, basically first we would be generating and still a lot of capital even at lower level of total profitability and there is also the scenario that the risk weighted assets are not going to grow materially for some time. Maybe 2016 and '17. The increase the risk weighted assets this quarter came a lot due to tax credit and Fx, but tax credits are going to be recovered over the next two-three years, so we absorb that relatively fast. Our profit comes from basically the fact that remember the level we have, it's still enough, basically we have options as we, and perhaps we could issue subordinated VAT if you want we can do what we have done in the past like offering a subscription at a lower price and we pay the difference but basically this, all the options we have together with the fact that we will accumulate more capital is what gives us comfort. Not only was the capital issues, firstly they're maintained well we never [indiscernible], to have a small or usually increasing the profitability level, is only our opinion so it expected to have this. And about the asset quality, the assets grew. Probably in the next two years we will have a very small growth in the assets, then there is something that you need to consider that the consumer capital because assets grow in the next two years probably. About the renegotiated portfolio, it shows [indiscernible] our portfolio we have R$12 billion, this year grew a little more than the total portfolio. It’s more related to the environment that we have nowadays. This way that we’ve shown, we don’t pay for this portfolio, the provisions are all probably in the normally what we lose is only one-third percent of the delinquency ratio of this portfolio, that is a little more, the portfolio has a ratio. The rest of the portfolio we maintain according the sense of the tools is following the ranges and the -- our guarantees and risk evaluation that we maintain in a normal way and follow all bank rules what we have.

Okay. That’s helpful. And I am just curious for that, I am not might be -- not that your probability gets impaired dramatically but capital by definitions for scenarios that are worse than what the base case is and I guess my question is more along the lines, is if you are wrong and I don’t have a crystal ball and you don’t have a crystal ball, but if you are wrong and you are with 15% for example or 16%, it’s a pretty good ROE in this environment. Is it fair to say you will still be -- you will still generate capital, you will still complete the tax credit with that level of profitability?

You need to understand that we consider to maintain some margin to support any stress movement that happens and in our models, in our analysis when we talk about capital, the tier 1 ratios and tier 2 ratio, the total ratios for Basel III, we consider to maintain margins on buffers and capital buffer to support any surprises. But we don’t expect to have surprise, but the margins that I told you today is 25% to 30% that we expect to maintain, an additional above the minimum requirements. During the revision we see could be moments that we will be running closer to the minimum margins around but we don’t expect to have any surprise in the margins that we maintain, would be an offer to support any volatility.

Our next question comes from Mr. Thiago Batista of Itaú BBA. You may proceed.

Yes hi guys. Thanks for the conference. I have two simple questions. The first one about the NPL coverage ratio. The coverage ratio is now at a very high level, do you expect to see some construction in NPL coverage ratio going forward for some quarters, we should expect an increase in NPL coverage ratio? The second one, what you believe would be your normalized utilizes level of taxes for next three years?

Normalized level of what?

Of tax rate.

Tax rate. Okay. I will answer the first one. Basically in terms of NPL coverage, we don’t expect to consume this coverage basically in normal situation we should basically continue provisioning the formation. The coverage may go down because we have a fixed portion that is the exact provision and eventually will be dilutive on the total coverage. But unless we have specific event that we don’t foresee we don’t tend to consume this coverage provisioning unless necessary.

On the tax ratio, what we expect for the next three years, we see that we will have the social contribution of 5% more with a total ratio of 20%. Probably we will have an increase in the normal ratio and 4%, 5% is what we expect the normal level was around 34% and probably will running next year 38%. Probably will start more effecting in the last quarter, now until the end of 2018.

Our next question comes from Victor Galiano of Barclays. You may proceed.

Earliest my many questions have been answered. But just a follow up on capital here. When you first announced the HSBC acquisition you gave some fully loaded estimates there at 9.9%. And in this third quarter now you’re down to 9.1%. So is that 80 basis points of consumption? I just want to confirm here that there nothing that’s changed here in terms of the risk weighted assets that you’re expecting from HSBC. Is that down to what you said about the higher tax credits and also the depreciation of the real?

The HSBC, basically we are now using the second quarter financial statements with this the first analysis on the fourth quarter 2014.

So you’re using the lower base of Q3?

Yes.

Okay, thank you.

Our next question comes from Mr. Pedro Fonseca - Haitong. You may proceed.

Hello, everybody. I have a follow-up question on capital. Your capital ratios are now going down, particularly with this HSBC acquisition. What is your confidence level of capital? You have said it's 25% above minimum requirements, but I'm not so sure which one you're talking about. If we just focus on core capital, which is beyond the type of capital a lot of us care about, and if you focus on Basel III fully loaded, is this the minimum requirement right now you want to focus on, the 25% above? Is that the requirement in 2019 that you want to be 25% above? What is it? And also, when you answer, can you kindly let us know why you guys insist on this unorthodox way of presenting Basel III fully loaded? Because it's not standard. And while different countries have -- may have different versions of Basel III, the concept of fully loaded is fairly universal, which is you pick all the adjustments, all the deductions that you have to make by 2019. It has nothing to do with what the balances will be in 2019, such as goodwill. It's all about removing them all now, because if you did that, obviously you're core tier one is most definitely not 9.1 fully loaded. So, if you could just enlighten us a little bit, I think we'll all be very grateful. Thank you.

This is the way that we show [indiscernible] the normal way. We have started up for acquiring [indiscernible] HSBC and we wanted the margins for -- to be fully loaded when we reach in the industrial 2018. What is sure here is that stimulation of this fully load and we understand that we have had sold a capital opportunity to do the acquisition, to do the -- to maintain eventually in the higher level. And I think you need to consider that for the next period we have the profitability of the Bank that we have kept on, normally 100 bps per year of the NIM that we expect for each year that we have until 2018, then we are comfortable with this ratios.

I am sure you have answered the questions, so the 25% above minimum requirements. Is this I mean if you just think about quarter one, is it because to the ratio that’s required right now, is that ratio require in 2019, because the ratio are different. How should we think about these capital ratios please?

Today with the acquisition we have the Tier 1 and the additional of margin that we expected to have 25%, we are comfortable to do the acquisition to-date and to maintain the margins. And these margins will be maintained probably in 2018, then we will have the similar, we have now today margins and also to finish the acquisition -- conclude the acquisition and maintain around 25%-30% as we told that our internal limits for sure that we expect to maintain.

So what you say is basically looking at capital in terms of what direct relations are right now and now they’re going to be in the future, is that correct?

We have it today and we will have in 2018, this capital, the simulation that we have here shows that we have the capital on all part to do the acquisition.

I am not disputing that, I’ve agreeing to that point, I am just trying to think understand how you think about the capital on a rolling basis. From what you’re telling me you concentrate on what the regulation is right now and you add it to and you demand that 25% to 30% extra buffer. Is that correct or am I mistaken?

We have here but to do that initiative there you have the requirements that the level that we have today to have now and then we have the margins that we consider impaired, we have this at 10%-12% [ph] and this margins we will maintain after the acquisition on future dates 2018 as we expect to have them.

Okay, think what you're saying is that you look at the regulations as they are now and you want to make sure that you keep a 25% margin all the way through to this interest, that correct?

Yes, our internal regulation that we have, ours [indiscernible], in fact 25% is, 25%-30%. And we'll maintain this buffer, the minimum buffer, all time.

Okay, thank you very much. You realize most banks think several years ahead in terms of 2019 what the requirements will be then and then try to get a buffer. But alright thanks you very much for your answers.

Our next question comes from Mr. Boris Molina of Santander, you may proceed.

Yes, thank you. I'm going to back to the situation of capital again. When we look at your slide on page number 10, it's fully loaded by Basel III evolution, but [indiscernible] from your basic. Can you hear me?

Speak slowly and a little bit louder, we cannot hear you.

Is this better? Okay, wonderful. I want to go back to the situation of the capital position of the bank. If you look at your slide on page number 10, we see a fully loaded Basel III common equity of 9.7 before the consumption of tax credits. I mean, this is kind of like the number we used because we felt that process has been growing for the last couple of years, and execution is to be pretty concerning, no? If you do a [indiscernible] calculation just to see what would be the impact to this capital ratio if you didn't include the government guarantee, which is a very, I would say, toxic option to get government support in case of a crisis? We would have to come somewhere between 200 and 300 basis points. And then, maybe like the 200 basis points from the HSBC acquisition, and we are at somewhat closer to 5%, 6%. Now, in the [indiscernible] Central Bank has a history of allowing banks to operate, if I look into your capital ratios at dispensing the public sector banks, right? However, [indiscernible] Central Bank, you have to stand on your own two feet. They're a no-product bank. They don't make an [indiscernible] invest in other relation. And so, what I mentioned before, this capital is to take care of unforeseen situations. Now, my question for you is -- and obviously the Central Bank is not going to stop your acquisition. It's going to go ahead, and you're going to end up in the first quarter of a fully loaded true capital ratio of around 5%. Do you think that this is a comfortable level to take care of the financial tail risk that we think [indiscernible] nobody expected two years ago that we’re going to be…

Sorry, to be very honest, we got very little of what you said because the call we can’t hear you very well, [indiscernible] second question, speak slowly please.

Okay I'm sorry, the second question is related to asset quality. And if we look at your individual non-performing loans, stripping out that would be a nonperforming asset for the mortgage and payer loans recently completed. Do you view those -- consumer [indiscernible] and nonperforming loans [indiscernible] couple of quarters and you're heading to the levels we saw on the previous cycle. Do you have any expectation of how or when this thing below the asset quality is going to peak in relation to a moment when unemployment [indiscernible] in June 2016 but in the real non-performing loans continue to increase three, two, four quarters after that. Is there something like a euro fund that you have in your models? Thank you.

About the capital, we are comfortable with the acquisition -- with the level of acquisitions, okay, we are not -- we will looking what we can -- how we can improve the internal capital ratio. Then our possibilities we can use if we understand that it will be necessary, then subordinated debt tier 1 is something that we can do to internally to use some reorganization for to improve the or to have some gains with is the capital, then we are normalizing how to improve or how to have the debt, use our capital. Then we are not stopped or we are thinking and planning how to use the capital, how to maintain our internal requirements to have the margins as we require. Then we are not stopping. We are managing the capital of the bank and considering our risks and operational Fx with acquisitions and others Fx, then we are setting output tools and improving [indiscernible]. We will continuously de-risk normally but we can have times to pay dividend and to use the [indiscernible] business to issue new shares. That is one option of our shareholders if they want to buy or not, they can do but only using the dividend payment. We will maintain this advantage normally. We are comfortable with the capital levels and we are managing the capital ratios to maintain the banking and to buy GSSE after the approvals of the regulator.

I am sorry. If I can follow-on. Do you have any plan to address the deferred taxed assets from loan loss provisions? Because you have been growing pretty [indiscernible] your last year, there is an issue about collecting your tax benefit from the government and these numbers are hanging on the balance sheet. We would like to see bank’s portion of these non-performing loans that I have been looking for in order to collect 34% tax benefit on the face value that you lost, this is a huge amount, it’s R$23 billion 34% [indiscernible]. So is there something in the plan to deliver this?

We don’t have a non-definitive loans hanging on the balance sheet, basically we have [indiscernible] and we have loans that follow the normal evolution. You know the rules here. We do the provisioning after the wage rate engage, six months later we do the [indiscernible] it’s plain, it’s simple. And that’s what happened in Brazil, I think it’s straight forward and very conservative. Basically we have provisions and we have additional provisions and one thing even after we have the write-off, it still takes one year, one year and a half to have the tax credit tax deductible. That’s kind of the unique thing we have in Brazil and that’s why Brazilian banks carry so much tax credit.

Okay, okay. Wonderful. And on the consumer peak related to the internal rate, you haven’t adjustments, what we could use?

We have been saying we believe NPLs will peak for the second half, that’s our view on this, as long they keep together and the long road starts to pick up a little bit. So that’s.

Our view on the NPLs provisions actually.

Yes, NPL provision actually you see, NPL provision has already 0.8 down this quarter.

They both decreased this quarter. I think the increase [indiscernible] we expected. We actually see some -- could be some stabilization this quarter.

Okay, wonderful. Thank you so much.

Thank you.

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

Hi, okay. Thank you. Okay, thank you everybody for participating in our conference call. The investor relations department is available for any other questions you may have. Thank you all.

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